Opinion ID: 478048
Heading Depth: 1
Heading Rank: 5

Heading: the osage regulation

Text: 65 A. Standard of Review. 66 We examine Phillips' contentions regarding the Osage regulation pursuant to established standards of review. The arbitrary and capricious standard of review provided by section 706(2)(A) of the APA, 5 U.S.C. Sec. 706(2)(A) (1977), applies to informal rulemaking proceedings such as those provided in the SDWA. American Mining Congress v. Marshall, 671 F.2d 1251, 1255 (10th Cir.1982). The United States Supreme Court has explained the arbitrary and capricious standard as follows: 67 To make this finding the court must consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment. Although this inquiry into the facts is to be searching and careful, the ultimate standard is a narrow one. The court is not empowered to substitute its judgment for that of the agency. 68 Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 823-24, 28 L.Ed.2d 136 (1971) (citations omitted). In reviewing the Osage regulation, we must be aware that Congress delegated broad authority to the Administrator. Because Congress has conferred such sweeping authority on the Administrator, courts afford considerable deference to the EPA's construction of the statutory scheme that it is entrusted to administer. See Chemical Manufacturers Association v. Natural Resources Defense Council, Inc., 470 U.S. 116, 105 S.Ct. 1102, 84 L.Ed.2d 90 (1985); Chevron v. Natural Resources Defenses Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984); Emery Mining Corp. v. Secretary of Labor, 744 F.2d 1411, 1415 (10th Cir.1984); Hoover and Bracken Energies, 723 F.2d at 1489; American Mining Congress, 671 F.2d at 1255. We need not find that the EPA's interpretation is the only permissible construction but only that the EPA's understanding of the statute is a sufficiently rational one to preclude a court from substituting its judgment for that of the EPA. See Chemical Manufacturers, 105 S.Ct. at 1108. The need for judicial restraint is further heightened by the realization that courts do not share the [Administrator's] expertise in this highly technical area. American Mining Congress, 671 F.2d at 1255. 69 B. Extension of Comment Period. 70 Phillips argues that the Administrator acted arbitrarily and capriciously in refusing to extend the 45 day Osage regulation comment period 30 days. Phillips further contends that the EPA's refusal to extend the comment period deprived them of the opportunity to fully develop a record before the agency. We find those arguments to be without merit. 71 The SDWA provides for an informal rulemaking process when the EPA promulgates rules under statutory authority. 18 Section 1421(a)(2), 42 U.S.C. Sec. 300h(a)(2). As mentioned, the procedures necessary in informal rulemaking are set forth in Sec. 553 of the APA. 5 U.S.C. Sec. 553 (1982). The agency must provide notice of the proposed rulemaking, and give interested persons an opportunity to participate in the rulemaking through submission of written data, views, or arguments with or without opportunity for oral presentation. 5 U.S.C. Sec. 553(c). This opportunity to participate is all that the APA requires. There is no requirement concerning how many days the EPA must allow for comment or that the EPA must re-open the comment period at the request of one of the participants. Absent constitutional constraints or extremely compelling circumstances the 'administrative agencies should be free to fashion their own rules of procedure and methods of inquiry permitting them to discharge their multitudinous duties.'  Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council, 435 U.S. 519, 543, 98 S.Ct. 1197, 1211, 55 L.Ed.2d 460 (1978) (quoting FCC v. Schreiber, 381 U.S. 279, 290, 85 S.Ct. 1459, 1467-68, 14 L.Ed.2d 383 (1965) ). Congress intended that the discretion of the agencies and not that of the courts be exercised in determining when extra procedural devices should be employed. Vermont Yankee, 435 U.S. at 546, 98 S.Ct. at 1213 (emphasis in original). To impose upon the agency more stringent procedural requirements, absent extraordinary circumstances, would clearly violate the Supreme Court's holding in Vermont Yankee that the formulation of procedure is to be basically left within the discretion of the agencies to which Congress has confined the responsibility for substantive judgments. Id. at 524, 98 S.Ct. at 1202. 72 It is evident to us that Phillips was given a full and fair opportunity to comment on all significant issues in the rulemaking proceeding. The EPA informed Phillips of its intent to adopt an underground injection control program for the Osage Mineral Reserve in 1980, four years prior to the actual proposal of the Osage program. Doc. E-1078. The EPA sent Phillips a draft of the Osage program, and met with Phillips to discuss that draft, in December 1982, almost one and a half years prior to the agency's formal publication of the rule in the Federal Register. See Fed.Reg. 20,238 (May 11, 1984); see also Doc. E-1048. The EPA also held a public hearing in October 1983, on the Indian lands program for Oklahoma. See 48 Fed.Reg. 40,098-99 (Sept. 2, 1983). The EPA formally proposed the Osage rule in May 1984. See 49 Fed.Reg. 20, 238 (May 11, 1984). The EPA held a public hearing on the Osage program on June 14, 1984, at which Phillips actively participated. Doc. E-1572. Phillips also commented in detail on the proposed rule. Doc. D-1013. 73 We further note that Phillips has presented no evidence that they were prejudiced by the EPA's refusal to extend the comment period. Nor does the record indicate that the 45 day comment period was inherently short or inadequate. Courts have uniformly upheld comment periods of 45 days or less. Connecticut Light & Power Co. v. NRC, 673 F.2d 525, 534 (D.C.Cir.), cert. denied, 459 U.S. 835, 103 S.Ct. 79, 74 L.Ed.2d 76 (1982) (denying petitioner's claim that a 30 day comment period was unreasonable, notwithstanding petitioner's complaint that the rule was a novel proposition); North American Van Lines v. ICC, 666 F.2d 1087, 1092 (7th Cir.1981) (claim that 45 day comment period was insufficient rejected as without merit.) The administrative record demonstrates that Phillips was consistently involved from 1980 to the promulgation of the Osage rule in final form, and that it had ample opportunity to comment. We cannot find that the EPA's refusal to extend the comment period 30 days is arbitrary, capricious or an abuse of discretion. 74 C. EPA's Mechanical Integrity Test. 75 Phillips next asks us to review the mechanical integrity requirement of the Osage rule. Under the mechanical integrity test, every well is required to demonstrate mechanical integrity by successful completion of an annulus pressure test which demonstrates that there is not a significant leak in the casing, tubing, or packer. 19 40 C.F.R. Sec. 147.2912 (1985). Phillips maintains that the no significant leak rule violates the SDWA's requirement that an underground injection program may not interfere with or impede the underground injection of brine in natural gas production or any underground injection for the enhanced recovery of oil, unless such requirements are essential to assure that underground sources of drinking water will not be endangered by such injection. Section 1422(c), 42 U.S.C. Sec. 300h-1(c). 20 The thrust of Phillips' argument is that there are a number of old injection wells on the Osage Mineral Reserve with casings of questionable integrity, but which pose no threat to underground drinking water sources since they are being operated in accordance with Bureau of Indian Affairs (BIA) requirements that require the installation of injection tubing set on a packer. Brief for Petitioners at 3. The cost of installing new cement casings or performing cement squeeze jobs, Phillips alleges, may cause many marginally producing wells to be shut down. Id. 76 The principle basis for rejecting Phillips' argument is the wording of the statute. Section 1422(c), 42 U.S.C. Sec. 300h-1(c), directs the EPA to guard against the contamination of underground sources of drinking water. If a requirement is essential to assure that underground sources of drinking water will not be endangered, then it is of no import whether underground injections are impeded. Id. Indeed, the clear overriding concern of Congress was that of assuring the safety of present and potential sources of drinking water. H.R.Report No. 1185, 93d Cong., 2d Sess. at 31, U.S.Code Cong. & Admin.News 1974, p. 6484. Section 1422(c), 42 U.S.C. Sec. 300h-1(c), was not intended to require ... EPA to bear an impossible burden of proof as a condition of promulgation of any such regulation. Id. Moreover, the phrase  'underground injection which endangers drinking water sources' is to be liberally construed so as to effectuate the preventative and public health protective purposes of the [SDWA]. H.R.Rep. No. 1185, 93d Cong., 2d Sess. 32 (1974), U.S.Code Cong. & Admin.News 1974, pp. 6484. 21 77 We simply cannot conclude that the EPA's mechanical integrity requirement violates the strictures of the SDWA. The EPA, in its expert judgment, concluded after extensive and detailed studies that the protection of a cement casing with mechanical integrity is essential to protect underground sources of drinking water. Docs. D-1532, E-1035, E-1064; see also Fed.Reg. 45,292, 45,303 (November 15, 1985). 22 Phillips, in essence, asks this court to substitute its judgment for that of the Administrator, although there is substantial evidence to justify the Administrator's conclusion that the mechanical integrity test is essential to protect underground sources of drinking water. This we cannot do. Citizens to Preserve Overton Park, 401 U.S. at 416, 91 S.Ct. at 823-24. 78 Phillips has also failed to produce any demonstrable evidence that the no significant leak requirement interferes with or impedes oil production. The legislative history suggests that absent a prior showing that a rule stop[s] or substantially delay[s] oil production, no inquiry need be made into whether the rule is essential to protection of underground sources of drinking water. H.R.Rep. No. 1185, 93d Cong., 2d Sess. at 31, U.S.Code Cong. & Admin.News 1974, p. 6484. In using the words interefere with or impede, Congress did not intend to include every regulatory requirement which would necessitate the expenditure of time, money, or effort. H.R.Rep. No. 1185, 93d Cong., 2d Sess. at 31, U.S.Code Cong. & Admin.News 1974, p. 6484. Rather, the Committee intended to refer to those requirements which could stop or substantially delay production of oil or natural gas. Id. Phillips, however, has produced no such evidence. To the contrary, even after repeated requests by the EPA for input and data regarding the effect of the mechanical integrity requirement, Docs. E-1073, E-1078, E-1048, Phillips produced no demonstrable support for its proposition. As such, Phillips cannot attack the Administrator's conclusion, that while some costs and production losses were likely, no substantial impediment to oil and gas production would result from implementation of the mechanical integrity requirements. See 45 Fed.Reg. 42,472, 42,487-500 (June 24, 1980). 79 D. Consideration of Geologic, Hydrological, or Historical Conditions. 80 Phillips also argues that the Osage mechanical integrity test violates Section 1421's mandate that regulations ... under this section shall permit or provide for consideration of varying geologic, hydrological, or historical conditions in different States and in different areas within a State. Section 1421(b)(3)(A), 42 U.S.C. Sec. 300h(b)(3)(A). Phillips suggests that the EPA did not consider these factors because it dismissed Phillips' evidence of the very large number of very old injection wells [on the Osage reserve] with questionable integrity. Brief of Petitioners at 24. 81 Phillips misinterprets the import of Section 1421(b)(3)(A). Section 1421(b)(3)(A) was intended to insure that national rules would be sufficiently flexible to allow for consideration of local factors. It was not intended to allow increased risk or endangerment of underground sources of drinking water. H.R. No. 338, 95th Cong., 1st Sess. at 9 (1977). The provision should not be interpreted as requiring the Administrator to subordinate the concern for protection of underground water sources to that of energy production. H.R.Rep. No. 338, 95th Cong., 1st Sess. at 10. 82 The Record is replete with evidence that the EPA considered the local geologic, hydrological, and historical conditions of the Osage reserve prior to the adoption of the Osage underground injection control program. Doc. E-1035 (analysis of injection well integrity); Doc. E-1064 (analysis of the types of wells used at the Osage reserve and of the underground sources of drinking water on the reserve); Doc. E-1034 (study regarding the prevention of contamination of underground drinking water); and Doc. E-1034 (inventory of the geology of the Osage reserve). The agency also considered tribal preferences, underground injection control programs of adjacent states, and the BIA requirements for the Osage reserve in drafting the final Osage rule. See 49 Fed.Reg. at 45,300-301 (Nov. 15, 1984). As such, we cannot say that the EPA abused its discretion. 83 E. Case-By-Case Review. 84 Finally, Phillips argues that the EPA unlawfully failed to include in the underground injection program a mechanism for a case-by-case review of whether the mechanical integrity test would cause a loss of oil and gas production without being essential to insure that underground sources of drinking water will not be endangered. Phillips suggests that the regulation precludes any alternate mechanical integrity test that would permit a well to operate with holes in the casing although the tubing, packer, and cement job were sufficient to insure that contaminated fluid is not allowed to enter sources of drinking water. 85 Phillips' argument is simply a restatement of its earlier argument that the mechanical integrity test violates the SDWA's mandate that no regulations may adversely affect oil production unless essential to protect underground sources of drinking water. The EPA has made a determination that in the Osage reserve, a significant leak in the casing, tubing, or packer is per se an endangerment to the sources of drinking water underlying the Osage reserve. See 49 Fed.Reg. at 45,303 (Nov. 15, 1984). In its expert judgment, the EPA decided to consider no options which would allow wells to operate if there are significant leaks in the casing. Id. Therefore, the EPA concluded that the prevention of substantial leaks is essential to assure the protection of underground sources of drinking water. 86 Phillips now suggests, however, that it should be permitted to contest the necessity of the mechanical integrity test on a case-by-case basis, even though the EPA has already determined that the mechanical integrity test is essential. We have already determined that the EPA's decision to adopt the mechanical integrity test was not arbitrary or capricious and we need not redirect our attention to that issue here. 87 There are approximately 3,600 injection wells in Osage County. About 1,250 of those wells utilize salt water disposal techniques, while the other 2,350 are enhanced recovery wells. Doc. D-1572 at 10-11. To require the EPA to undertake a case-by-case determination of whether the mechanical integrity test should apply for each well would severely handicap the implementation of the act the EPA was entrusted by Congress to administer. The EPA was well within its discretion to utilize a generic streamlined approach or procedure where the conventional course, typically case-by-case determinations, would, as a practical matter, prevent the agency from carrying out the mission assigned to it by Congress. Alabama Power Co. v. Costle, 636 F.2d 323, 358 (D.C.Cir.1979). As the Supreme Court has recognized,  'considerations of feasibility and practicality are certainly germane' to the issues before us. Bowles v. Willingham [321 U.S. 503, 517, 64 S.Ct. 641, 648-49, 88 L.Ed. 892 (1944) ].... We cannot, in these circumstances, conclude that Congress has given authority inadequate to achieve with reasonable effectiveness the purpose for which it has acted. Permian Basin Area Rate Cases, 390 U.S. 747, 777, 88 S.Ct. 1344, 1365, 20 L.Ed.2d 312 (1968); accord E.I. du Pont de Nemours & Co. v. Train, 430 U.S. 112, 132, 97 S.Ct. 965, 977, 51 L.Ed.2d 204 (1977); Environmental Defense Fund v. EPA, 598 F.2d 62, 84-85 (D.C.Cir.1978). Furthermore, we note that the Osage rule does not prevent each well from receiving a case-by-case review if it has a significant leak. Moreover, the Osage rule provides that alternate [t]esting and monitoring programs [may be] approved by the Regional Administrator on a case-by-case basis to demonstrate the absence of a significant leak. 40 C.F.R. Sec. 147.2912(a)(1)(v).