### T E X A S C O U R T O F A P P E A L S , T H I R D D I S T R I C T , A T A U S T I N

NO. 03-09-00005- CV

City of Waco, Appellan t

v. Texas Com m ission on En vironm ental Quali ty, Appellee

F ROM TH E DISTRI CT COURT O F TRAVIS CO UNTY, 201 ST JUDICI AL DISTRICT NO. D-1 -GV-0 8-0 0040 5, H ONO RAB LE DARLENE BY RNE, JUDGE P RESIDING

O P I N I O N

O-Ke e Dairy ap p l ied to the Texas Commi ssion on Environmental Quality (the C ommissi on) for a major amendment to its conce ntrated animal fee d opera tion (CAFO ) p er m i t
to allow it to expand its dairy head capa city , incre ase i t s re t en t ion control structure capa city , and incre ase the number of acr es used for land application of waste and wastew ater

. The City of Waco (the City ) soug ht a contested case hear ing to oppose the application. After co n d ucting a public meeting to c onsider the City ’s reque st f or a hear ing, the Commi ssion denied the reque st. The City
soug ht judicial revie w of the Commi ssion’s order in a Travis County district court. See Tex. Water Code Ann. §§ 5.351, .354 (West 2008). T h e d i s t ri ct court aff irmed the order

. Be cause we find substantial evidenc e in the rec ord to support the Commi ssion’s decision to deny the City ’s hear ing
reque st, we af

firm the district cour

t’s judgme nt.F ACTUAL AND P ROCEDURAL BACK GR OUND O-Ke e Dairy is one of a number o f dairies located in the North Bosque River
water shed. The Bosque Ri ver, a tributary of t he Brazos R i v er , is located northwest of the C ity of
Waco. The Nor

th Bosque River

is divided into two seg ments for purposes of administering water quality standards—Seg ment 1255 and Seg ment 1226. The O-Ke e Dairy is located in the water shed of Seg ment 1226, which extends from a point downstrea m of the City of Stephenville, throug h Erath, Hamilton, and Bosque counties, and int o M cLen n an C ounty to the poi nt wher e the North Bosque River flows into L ake Waco at its point of conflue nce with the Br azos River. L ake Waco provides the sole source of drinking water for approximately 160,000 people in and around the City of Waco. The lake is also used extensively for rec rea tional activities. The City owns al l ad judicated and permit t ed ri gh t s t o the water i mpounded i n L ake Waco and is authorized to divert water from the lake f or municipal use, including providing public drinking water

. Seg ment 1255 and S egm en t 1226 have been desig nated by the Commi ssion as “impaire d under narr ative water quality standards rela ted to nutrients and aquatic plant g rowth.” The impairment is due to high levels of nutrients, including phosphorus, in the water

. Once it desig nated these seg ments as “impaire d,” the Commi ssion was require d to develop a “t otal maxi mum daily load” (TMDL ) for those portions of the river. A TMDL is a plan for assimilation of the pollutants that are prese nt in the water

. See 33 U.S.C. § 1313(d)(1)( c) ( 2001). The Commission describes a
TMDL as:

a quantitative plan that deter mines the amou n t of a particula r pollutant that a water body can rec eive and still meet its applicable water quality standards. I n other words, TMDL s are the bes t p o ssible estimates of the assimilative capa city of the

2water body for a pollutant under consideration. A TMDL is commonly expressed as

a load, with units of mass per time period, but may be expressed in other way s also. TMDL s must also estimate how much t he poll utant load nee ds to be reduce d from curr ent levels in orde r to ac hieve water qua lity standards.
Phosphorus is one of the primary pollutants contributing to the impaired status of Seg ment 1255 and Seg ment 1226. L arg e amounts of phosphorus in the water cause excessive g rowth of alg ae and other aquatic plants, which in turn can cause taste and odor problems in drinking water and, under cer tain circ umstances, contribute to the depletion of dissolved ox y g en in the water

. One major controllable

source of phosphorus in the water is animal waste from dairy far ms that, over the y ear s, have become incre asing ly

conce ntrated in the w ater shed. Most dairies collect wastewater and manure from the fac iliti es in ponds called “re tention control structure s” (RCSs). The wastew ater and manure are then applied to near

by fields as fertiliz er. Phosphorus is primarily introduced into the watershed when the RCS ’s capa city to contain the waste is overc ome by heavy rainfa ll. Hea vy rains also cause runoff

o f m an u re an d wastew ater from application fields. Dairie s in the Bosque River water shed mus t obtain CAFO permits from the Commi ssion beca use t h e agr i cultural waste from their operations, includ i n g phosphorus which become s dissolved in runoff or is otherwise discharg ed, ultimately discharg es into t h e ri v er . I n 2002, the Commi ssion amende d the rules g overning CAFOs, which include medium (200 to 699 cows) and larg e (700 cows or more) dairies, to r equire them to obta in individual permits when their t h en -c u rr ent authorizations expired. See 27 Tex. Reg

. 1511-33 (Mar ch 1, 2002) (ame nding 30 Tex. Admin. Code §§ 321.32-.49). The amende d rules also imposed stricter require ments on the m anner in which C AFO s in the watershed di s p o s e o f wastewater and

manure by

apply ing it to fields.

3I n 2004, the Commi ssion ag ain rew rote its rules, imposing even more stringe nt

controls on CAFOs, espec ially those in the North Bosque River water shed. See 29 Tex. Reg

. 6652- 6723 (Jul y 9, 2004) (ame nding Tex. Admin. Code § § 3 2 1 .31-.49). The rules wer e adopted to confor m to chang es in fede ral rules, to further implement impairment-zone leg islation, and to further improve air a

nd water quality in the state. CAFOs wer e allowed to continue oper ating under the ir exis ting a uthorization so l ong as the ope rator a pplied for a

n individual permit by

J uly 17, 2004. O-Ke e Dairy orig inally obtained its CAFO permit fr o m the Commi ssion in 1999, prior to both the 2002 and 2004 revisions to the rules g overning CAFOs. The dairy ’s opera tors applied for a major amendment to the permit in Marc h 2004. The dairy reque sted the Commi ssion
to issue a permit authorizing it to expand its exis ting dairy fac ility from 6 9 0 co ws to a maxi mum of 999 cows. The dairy als o reque sted to incre ase the amount of land used for the application of
wastew ater and manure from 261 acr es to 285.4 ac res. The proposed permit require d the dairy to

come into compliance with the new rules by in cre asing its RCS capa city from 8.7 acr e fee t to 21.9 acr e fee t, and conducting land application of wastew ater and manure in acc ordanc e with a nutrient manag ement plan based on the crop’ s phosphorus, rathe r than nitrog en, require ments. The 1 dairy was permitted to c ontinue to ope rate under the terms of its old permit while the Commi ssion considere d the applica tion.

I n g ener al, a crop’ s phosphorus application rate is lower than its nitrog en application rate

. 1 Switching fro m t h e n itrog en application rate to the l ower phosphorus application rate reduces the amount of wastew ater and manure applied to fields, there by decr easing the potential for land-a pplied nutrients to enter sur fac e wa ter. 4Following a technica l revie w of the permit application, the executive direc tor issued

a preliminary decision that the permit, if issued, met all statutory and reg ulatory require ments. The preliminary decision trig g ere d a period of public notice an d co m m ent. The City submitt ed its public comments to the Commi ssion and reque sted a public meeting

. After the public meeting , the executive direc tor issued its response to the City ’s public comments. Afte r the c lose of the notice and comment period, “a ffected persons” wer e entitled to submit a reque st for a contested case hear ing. S

ee T ex . W at er Code Ann. § 5.115 (West 2008). The City reque sted a contested case 2 hear ing. The Commi ssion considere d the reque st at a public meeting

. The Commi ssion denied the City ’s reque st afte r deter

mining that the City was not an “af fec ted person” within the meaning of the
water code. See id. §§ 5.115 (def ining “af fec ted person” ), .556 (prohibiting hear ing unless reque sted by aff ecte d person a s defined in se ction 5.115) (West 2008). The City sou gh t judicial revie w of the Commi ssion’s decision in a Travis County district court. See i d

. § § 5

. 3 5 1, .354. The district court aff irmed the Commi ssion’s order

. This

The ter m “af fec ted per son” is define d as follows: 2
For the purpose of an administrative hear ing held by or for the commission involving a contested case , “af

fec ted person,” or “per son aff ecte d,” or “per son who may be aff ecte d” means a person who has a persona l justiciable interest rel at ed to the leg al rig ht, duty , privileg e, power , or economic interest aff ecte d by the administrative hear ing. A n interest common to member s of the g ener al public does not qualify as a persona l justiciable interest. The commission shall adopt rules specify ing fac tors which must be considere d in determining whether a per son is an aff

ecte d person in any contested case arising u n d er t h e air, waste, or water prog rams within the commission’s jurisdiction and whether an aff ecte d association is entitled to standing in contested c ase he aring s. See Tex. W ater

Code Ann. § 5.115(a ) (West 2008). 5appea l followed. By o n e i s s u e, t h e City claims that the Commi ssion err ed by deny ing the City ’s

reque st for a he aring afte r conc luding that it was not a n “af fec ted per son.”

STANDARD OF REVIEW We revie w order s of the Commi ssion und er the substantial evidenc e standard of revie w. See City of

San Antonio v. Texas W

ater Comm’n , 407 S.W .2d 752, 756 (Tex. 1966); Colli ns

v. Texas Natura l R es
. C o n servation Comm’n , 94 S.W .3d 876, 881-83 (Tex. App.—Austin 2002,

no pet.) (substantial evidenc e revie w o f commission order deny ing reque st for contested case hear ing)

. Under th i s s t an d ar d of revie w, the issue to be decide d is the rea sonablene ss of the Commi ssion’s order

. Id

. T h is is a question of l aw that require s the reviewing court to deter mine whether the Commi ssion order finds rea sonable support in the rec ord. See Texas Health Facilities Comm’n v. Charter Med.—Dallas, Inc. , 665 S.W .2d 446, 452-53 (Tex. 1984); City of San Antonio , 407 S.W .2d at 758. W e co nsider whether the evidenc e as a whole is such that rea sonable minds could have rea ched the same conclusion as t he age ncy in the disputed action. Colli ns , 94 S.W .3d
at 881 (citing Stratton v. Aust i n In d ep
. S ch. Dist. , 8 S.W .3d 26, 30 (Tex. App.—Austin 1999,

no pet.)). The issue is not whether the ag ency rea ched the corr ec t co n cl u s i o n, but rathe r whether there is some rea sonable basis in the rec ord for its a ction. City of El Paso v. Public Util. Comm’ n , 883 S.W .2d 179, 185 (Tex. 1994)

. We ma y not substitute our judgme nt for that of the ag ency and
may only consider the rec ord on which the ag ency based its decision. Stratton , 8 S.W .3d at 30. The finding s, infere nces, conclusions, and decisions of t h e administrative ag ency are presumed to be supported by substantial evidenc e, and the burden is on the contestant to prove otherwise. Colli ns , 94 S.W .3d at 881 (re viewing decision to deny reque st for conte sted ca se hea ring ).

6DISCUSSIO N Th e water code provides that the Commi ssion “shall adopt rules specify ing fac tors which must be considere d in deter mining whether a person is an aff ecte d p erson” in a contested case arising under its jurisdiction. See Tex. Water C o d e Ann. § 5.115(a)

. Title 30, Chapter 55, Subchapter F, of the Texas Administrative Code implements this provision by setting 3 forth substantive criter ia for the deter mination of who qualifies as an “af fec ted person.” See 30 Tex. Admin. Code § 55.203. The fa ctors include, but a re not limited to, the following:
(1) whether the interest claimed is one protec ted b y the law under which the application will be conside red; (2) distance restric tions or other limit ations imposed by law on the aff ecte d interest; (3) whether a rea sonable rela tionship exis ts betwee n the interest claimed and the activity reg ulated; (4) likely impact of the reg ulated activity on the health and safe ty of the person, and on the use of the prope rty of the pe rson; (5) likely impact of the reg ulated activity on use of the impacted natura l resour ce by the per son; and (6) for g overnme ntal entities, their statutory authority over or interest in the issues releva

nt to the application.

Id. After considering the request, response s filed by the executive direc tor, the Offic e of Public I ntere st Counsel, and O-Ke e Dairy , and a reply filed by the City , the Commi ssion denied the

Subchapter F applies to applications, like the one at issue in this case , that are filed under 3 Texas Water Code chapte r 26 and decla red administratively complete on or afte r September 1, 1999. See 30 Tex. Admin. C ode § 55.200 (2010) (Comm’n on Environmental Qua lity , Applicability ). 7hear ing reque st. The City appea led this decision to the district court, contending that, beca use it “will be potentially harme d by the ag ency action,” it meets the established definition and criter ia of

an “af fec ted person” and the Commi ssion err ed by finding otherwise. I n its order deny ing the City ’s hear ing reque s t , the Commi ssion stated that it evalua ted the reque st for a hear ing “under the require ments in the applicable s tatutes and C ommissi on rules, including 30 Tex as Administrative Code (TAC) Chapter 55.” We will aff irm the deter

mination if there is substantial evidenc e in the

rec ord to support the Commissi on’s conc lusion that the Cit y is not an “af

fec ted per son.” The City ’s arg umen t s ce nter primarily on the fifth in the list of fac tors the Commi ssion may consider—the likely impact of the reg ulated activity on use of the impacted natura l

resour ce by the person. I n its reque st for a contested case hear ing, t h e C i t y arg ued that it was an “a ffe cted person” beca

use it would be “sig nificantly and adver sely aff ecte d by the po l l u t an t s discharg ed by this dairy that flow downstrea m to L ake Waco.” The City claimed that “wa stewate r discharg es and runoff of pollutants from the O-Ke e Dairy ’s waste application fields

. . . that will be authorized by the [proposed permit] will contribute to the taste, odor, and public health problems” exis ting in the lake. T he basis for its claim t o “af fec ted person” s tatus was that L ake Waco would be “adve rsely aff

ecte d by

. . . [an] authorized incre ase in herd siz e from 690 to 999 cows, in that the
amounts of phosphorus and pathog ens transporte d from O-Ke e Dairy and its waste application fields (including third party fields down the North Bosque River to L ake Waco) will incre ase.” I n essenc e, the City arg ued that g ranting t h e p ermit to allow an incre ase in the number of cows at the dairy would incre ase the amount of phosphorus discharg ed into the Bosque River in a manner that would
neg atively impact the City ’s use of the water for rec rea tional activities and public drinking water

8once it enter s L ake Waco. The City also contende d that incre asing the amount of manure and

wastew ater that enter s the river incre ases the cost to the City of trea ting the water to reduc e taste and odor problems cause d by pollutants from the North Bosque River. The Commi ssion disag ree d with the City ’s claim that issuing the permit would have an adve rse a ffe ct on L ake Wac o or the City

.

The Commi ssion had befor e it competent evidenc e that modifications to the dairy ’s
manag ement of its wastew ater and manure require d by the proposed permit would actua lly reduc e, rathe r than incre ase, the likelihood that pollutants from the dairy would be d i s ch ar ged into the
water shed. There was also competent evidenc e that t h e m o re stringe nt waste application require ments imposed by the proposed permit would reduc e the amount of phosphorus runoff from

wa s t e application fields. I ndeed, these new reg ulations wer e promulg ated by the Commi ssion t o comply with Environmental Protection Ag ency rules and g uidelines g overning CAFOs. See 68 Fe d. Reg

. 7176-7274 (F eb. 12, 2003). The new require ments wer e cate g orized by their intended g oals: reduc e the potential for discharg es, minimi ze the nutrient loading to land and surfa ce water , and incre ase Commission oversight of the dairy ’s oper ational ac tiviti es. The proposed permit require s the dairy to bring its opera tions into co m p l i ance with the new rules reg ulating CAFOs. This includes incre asing its wastew ater and manure rete ntion control structure capa city by approximately 13 acr e fee t. The incre ased storag e capa city is desig ned
to reduc e the number of discharg es from the dairy during heavy rainf al l ev en t s , and ref

lects that, under the new rules, CAFOs may only discharg e during a 25 y ear /10 da y rainfa ll event as opposed
to a 25 y ear

/24 hour rainfa ll event. The exis ting rete ntion structure s we re d es i gn ed to captur e and reta in r

unoff from a 7.3 inch rainfa ll; the new structure s must c apture and reta in r unoff from a

912.2 inch rainfa ll. The dairy is also require d to implement a reta ined control structure manag ement

plan t o assure that it maintains wa s t ew at er volumes within the designed operating capa city of t he
structure s, except during chronic or cata strophic rainfa ll events, and maintain sludge at or below the desig n sludge volume. These manag ement tools re duce the likelihood of discharg e during smaller rainfa ll events and re duce ove rflows a ssociated with insuffic ient wastew ater storag e ca

pacity

. The proposed permit also require s chang es in the land application of manure and wastew ater from the dairy

. I n order to minimi ze nutrient loading and the potential for nutrients
to enter the water shed, the land application rate of manur e an d wastewater must be based on the crop’ s phosphorus require ments rathe r than its nitrog en require ments. For a coasta l bermuda crop, all other things being equal, the result is a 40% decr ease in the application rate

. Manure , sludge , or
wastew ater in e x cess of that permitted to be applied to the land must be delivere d to a composting fac ility , delivere d to a permitted landfill, benef icially used by land application outside the water shed,

o r p ro v i d ed to opera tors of third-par ty fields for benef

icial use in a manner consistent wit h Commi ssion rules. The reg ulations on manure disposal contained in the proposed permit limit the
unreg ulated disposal of manur e and w astewa ter in the wa tershed.

The executive direc tor’s response to the City ’s public comments summari z es its position:
Although the proposed permit authorizes an expansion from 690 head to 999 head, the conditi ons being proposed i n t his permit are anticipated to signific antly reduc e the potential for pollutants enter ing rec eiving water s. . . . These permit require ments, best manag ement prac tices, and incre ased manag ement and [C ommissi on] oversig ht will protect wa ter qua lity , when pr operly administered.

10The Commi ssion considere d the manag ement tools discussed above, and others require d by

the permit and descr ibed in the rec ord, and found that althoug h there will be more cows at the dairy , the overa ll impact of requiring the dairy to comply with curr ent Commi ssion rules will be to reduc e the likelihood that phosphorus from the dairy will enter the water shed. The Commi ssion conclude d that the overa ll result of g ranting the proposed permit would be to decr ease , rathe r than incre ase, the amount of phosphorus discharg ed into the water shed. I t there fore reje cted the City ’s arg ument that the C ity would be adversely aff ecte d by its gra

nting the pe rmit. This conclusion i s supported by substantial evidenc e in the rec ord. See Colli ns , 94 S.W .3d at 883 n.7 (deny ing “af fec ted person”
status when evidenc e befor e Commi ssion demonstrated environment would be positively impacted by reque sted permit and compliance with permit would likely re d u ce o dor emissions); United Copper Indus. v. Grissom , 1 7 S.W .3d 797, 799 (Tex. App—Austin 2000, pet. dism’d) (g ranting “af fec ted person” status when proposed permittee’ s d at a indicated that its permitted opera tions would cause incre ased le vels of lea d and coppe r in air)

.

The rec ord befor e the Commi ssion also included ev i d ence reg arding the 82-mile distance from the dairy ’s location on the river to L ake Waco. The executive direc tor’s response to the hear ing reque st conclude d that any discharg e from the dairy would, by the time it rea ched
L ake Waco, be so diluted and assimila t ed i n t o the water that it would not pose any dang er to the health and safe ty of the City or its reside n t s . T h e ex ecutive direc tor also conclude d that the

rec rea tional and drinking-wa t er i ntere sts rela ted t o L ake Waco’s water qualit y are common to the
g ener al public and are not a justiciable interest persona l to the City

. Moreove r, the C i t y d i d not establish either that g ranti n g t h i s permit would incre ase its water trea tment costs or that deny ing

11it would reduc e them. I nstead, substantial evidenc e in the rec ord demonstrates that L ake Waco’s

water quality i s aff

ecte d g ener ally by discharg e from a number of differ ent source s, including the City ’s own wa stewate r trea tment plants. The City vigor ously contends that it is an “af fec ted person” beca

use there i s no dispute that t h e d airy could potentially discharg e phosphorus into the water shed. The question befor e the Commi ssion, howeve r, was whether to g rant the City “af fec ted person” status with respe ct
to the particula

r permit at issue. The p er m i t u n d er consideration did not seek to authorize a

new dairy , but to modify the opera tio n s o f an exis ting one—one that presumably was alre ady discharg ing some amount of phosphorus in t o t he water shed. The Commi ssion deter mined that
g ranting this permit would have an overa ll benef icial environmenta l impact and there fore would not adver sely aff

ect the City

. This decision was within their discretion and was supported by substantial evidenc e. See Colli ns , 94 S.W .3d at 882-83. We find substantial evidenc e in the rec ord to support
t h e C o m mission’s deter

mination that the City is not an “af fec ted person” for purposes of thi s permit applica tion and there fore its decision to deny the City ’s hea

ring reque st. The City arg ues on appea l that the Co m m i s s i o n ’s decision violates notions of due p ro ce s s and fair play

. When analy zing a due proce ss claim, we first deter mine whether the complaining party has a liberty or proper ty interest that is entitled to pre- depriva tion proce dural protec tion. I f so, we mu s t t hen deter mine what proce ss is due. See University of Tex. Med. Sch.
v. T han , 901 S.W .2d 926, 929 (Tex

. 1995). Even assuming t he C ity has t he requisite interest, we hold the City rec eived all the proce ss i t wa s d u e. We measure the proce ss due using a flexibl e standard that depends on the prac tical require ments of the circ umstances. Id. at 930 (citing Mathews

12v. Eldridge , 424 U.S. 319 (1976))

. This involves balanc ing (1) the g overnme nt’s interest, including

the fiscal and ad m i n i s t rative burdens of additional or substitut e proce dural require ments, (2) the private interest that will be aff ecte d by the officia l action, and (3) the risk of an err oneous depriva tion of such interests by the actua l proce dures used. Id. T h e C i t y filed a reque st for a contested case hear ing with ev i dence and exhibi ts. I t participa ted in a public meeting to addre ss its reque st for

a hear ing. The Commi ssion considere d the reque st, the arg uments made in the Offic e of Public I ntere st Counsel’s response , and the execu t i v e d i re ctor’s response . After considering the
arg uments and evidenc e, and apply ing the pertinent statutes and reg ulations, the Commi ssion made a decision. Although the City disag ree s with that decision, it “wa s aff orded a mple opportunity

for [i ts] conce rns and r equest to be he ard.” See Collins , 94 S.W .3d at 884.

CONCLUSION
T h ere is substantial evidenc e in the rec ord supporting the Commi ssion’s decision
to deny the City ’s reque st for a contested case hear ing. We there fore aff irm the d i s t ri ct co u rt’s judgme nt affir

ming the Commission’s order.

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Bob Pembe rton, J ustice
Be fore J ustices Patterson, Pury ear and Pember

ton; Dissenting O pinion by J ustice Patterson Affir med Filed: September

17, 2010

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