Court Opinion

ID: 4459312
Source: CourtListenerOpinion
Date Created: 2019-11-26 21:07:05.193566+00
Date Added: 2024-06-11T14:51:44.263101
License: Public Domain

Filed 11/26/19 by Clerk of Supreme Court

                    IN THE SUPREME COURT
                    STATE OF NORTH DAKOTA

                               2019 ND 280

Continental Resources, Inc.,                       Plaintiff and Appellant
     v.
North Dakota Department of
Environmental Quality,                            Defendant and Appellee

                                No. 20190087

Appeal from the District Court of Burleigh County, South Central Judicial
District, the Honorable Bruce A. Romanick, Judge.

AFFIRMED.

Opinion of the Court by Jensen, Justice.

Jason B. Hutt (argued) and Kevin M. Voelkel (appeared), Washington, DC,
Lawrence Bender (appeared), Bismarck, ND, and Matthew G. Paulson (on
brief), Austin, TX, for plaintiff and appellant.

Margaret I. Olson (argued) and Jennifer L. Verleger (appeared), Assistant
Attorneys General, Bismarck, ND, for defendant and appellee.
    Continental Resources v. N.D. Dep’t of Environmental Quality
                           No. 20190087

Jensen, Justice.

[¶1] Continental Resources, Inc. (“Continental”) appeals from the judgment
of the district court dismissing its declaratory judgment action against the
North Dakota Department of Environmental Quality (“Department”). The
district court dismissed Continental’s declaratory judgment action after
finding the Environmental Protection Agency was an indispensable party, the
district court lacked subject matter jurisdiction, and the matter was not ripe
for judicial review. While this appeal was pending, the Department moved to
dismiss the appeal as moot. We affirm the judgment dismissing Continental’s
request for declaratory judgment as not ripe for judicial review.

                                        I

[¶2] Continental initiated its action for declaratory judgment pursuant to
N.D.C.C. ch. 32-23. Continental seeks to eliminate uncertainty it contends is
created by the Department’s enforcement of N.D. Admin. Code § 33-15-07-
02(1). Section 33-15-07-02(1) reads as follows:

      No person may cause or permit the emission of organic compounds,
      gases and vapors, except from an emergency vapor blowdown
      system or emergency relief system, unless these gases and vapors
      are burned by flares, or an equally effective control device as
      approved by the department.

Continental’s action for declaratory judgment requests the district court to find
“that if an approved control device is installed and operating at an oil and gas
production facility, the mere presence of an emission from a closed tank hatch
or control device does not, in and of itself, establish a violation of N.D. Admin.
Code § 33-15-07-2(1).”

[¶3] Section 33-15-07-2(1) prohibits uncontrolled emissions of organic
compounds, gases and vapors into the air. The Department’s rules require all
facilities with the potential to emit organic compounds, gases and vapors into
the air to have emission control devices installed unless the facility is exempt

                                        1
from the requirement by the Department. Continental argues current
technology cannot provide complete containment of all organic compounds,
gases and vapors. If N.D. Admin. Code § 33-15-07-2(1) is applied to require
complete containment of organic compounds, gases and vapors, Continental
asserts it would be impossible to meet the standard set by the rule.

[¶4] The Department has issued Notices of Violation to operators, including
Continental, asserting the Department “has reason to believe” Continental has
violated N.D. Admin. Code § 33-15-07-2(1). The Notices of Violation also note
the notice “is not a final action” and Continental would be notified if “a formal
enforcement action” is determined to be appropriate.

[¶5] Continental contends the Department, after decades of applying N.D.
Admin. Code § 33-15-07-2(1) consistent with other Department rules and not
requiring complete containment of organic compounds, gases and vapors, has
abruptly changed course in its enforcement of N.D. Admin. Code § 33-15-07-
2(1) by issuing Notices of Violation upon the observation of any level of organic
compounds, gases and vapors leaking into the air. The Department does not
agree with Continental’s assertion there has been a change to how N.D. Admin
Code § 33-15-07-2(1) is being enforced.

[¶6] The Department has not taken final administrative action on the Notices
of Violation. The lack of final administrative action prevents operators from
administratively challenging the Notices of Violation. Continental contends
the Department has used the significant potential liability represented by the
Notices of Violation as leverage to force operators to acquiesce to settlements.
Continental argues a refusal to settle with the objective of forcing the
Department to initiate final action on the Notices of Violation would place the
operators in an untenable position because the delay would cause a significant
potential liability to accumulate.

[¶7] The Department moved to dismiss Continental’s action asserting three
arguments: (1) the EPA was an indispensable party; (2) the district court
lacked subject matter jurisdiction to hear the case; and (3) Continental’s
argument was not ripe for judicial review. The district court dismissed

                                       2
Continental’s declaratory judgment action after finding in favor of the
Department on all three arguments.

                                       II

[¶8] The district court dismissed Continental’s action, in part, pursuant to
N.D.R.Civ.P. 12(b)(6) for failing to state a claim upon which relief can be
granted after finding the claim was not ripe for judicial review. This Court
reviews the dismissal of a complaint for failure to state a claim de novo.
Brandvold v. Lewis & Clark Pub. Sch. Dist. No. 161, 2011 ND 185, ¶ 6, 803
N.W.2d 827. Under Rule 12(b)(6), a complaint should not be dismissed unless
it is disclosed with certainty the impossibility of proving a claim upon which
relief can be granted. Moseng v. Frey, 2012 ND 220, ¶ 5, 822 N.W.2d 464.

[¶9] “[A] necessary prerequisite to a proper declaratory judgment action is
that there be a justiciable controversy underlying the declaration sought.”
Brandvold, at ¶ 8. The absence of a justiciable controversy results in a claim
which is not ripe for judicial review, is a claim upon which relief cannot be
granted, and requires the action to be dismissed. See Saefke v. Stenehjem, 2003
ND 202, ¶ 11, 673 N.W.2d 41.

                                       III

[¶10] Ripeness is a corollary to the exhaustion of administrative remedies.
Medcenter One, Inc. v. North Dakota State Bd. of Pharmacy, 1997 ND 54, ¶ 10,
561 N.W.2d 634. The exhaustion of administrative remedies is a prerequisite
to seeking declaratory relief. Id. at ¶ 11. (citing Tooley v. Alm, 515 N.W.2d 137
(N.D. 1994)). We noted the following in Medcenter One:

            Before someone may sue for declaratory relief, generally, the
      exhaustion of administrative remedies is required. E.g., Tooley v.
      Alm, 515 N.W.2d 137 (N.D. 1994). The exhaustion requirement
      serves the dual objectives of preserving agency authority and
      promoting judicial efficiency. See 5 Stein, Mitchell, Mezines,
      Administrative Law § 49.01 (1997). The doctrine preserves agency
      authority by recognizing the agency’s initial decision making
      responsibility. Id. The requirement for exhaustion is particularly
      weighty when the agency’s decision involves factual issues or

                                       3
      administrative expertise. See Medical Arts Clinic, P.C. v.
      Franciscan Initiatives, Inc., 531 N.W.2d 289 (N.D. 1995). The
      exhaustion prerequisite establishes an efficient method for dispute
      resolution by giving the agency a chance to correct its mistakes
      before being sued. Id. If the agency has an opportunity to correct
      its own errors, a judicial controversy may be mooted or, at a
      minimum, piecemeal appeals may be avoided. See 5 Stein,
      Mitchell, Mezines at § 49.01. And, where the dispute is not
      resolved at the administrative level, the exhaustion of remedies
      will generally develop a complete record for judicial review,
      especially in technical or complex factual situations. See Medical
      Arts. These factors recognize a vital role for exhaustion of
      administrative remedies in the relationship between the executive
      and the judicial branches of government.

            Notwithstanding these institutional justifications, the
      exhaustion doctrine has several well-recognized exceptions,
      including when a legal question simply involves statutory
      interpretation and does not need the exercise of an agency's
      expertise in making factual decisions. See generally 2 Am.Jur.2d
      Administrative Law at § 511; 5 Stein, Mitchell, Mezines at § 49.02.
      In Shark Brothers, Inc. v. Cass County, 256 N.W.2d 701
      (N.D.1977), we explained that application of the exhaustion
      doctrine depends upon a bundle of considerations, including
      whether the issues need the expertise of an administrative body,
      the interpretation of a statute, or the resolution of a pure question
      of law. See also Kessler v. Board of Educ. of City of Fessenden, 87
N.W.2d 743 (N.D.1958) (no requirement for exhaustion of
      administrative remedies where construction of statute involved
      pure legal question customarily decided by courts). Shark Brothers
      acknowledges that exhaustion of administrative remedies is not a
      rigid prerequisite for a statutory interpretation that does not
      infringe on an agency's factual decisionmaking process.

Id. at ¶¶ 11-12.

[¶11] The district court found Continental had not exhausted its
administrative remedies. Continental does not contend the Department has
taken final administrative action on the Notices of Violation. The Department
asserts Continental, although claiming to be seeking declaratory judgment on

                                       4
an unambiguous rule, is actually attempting to change the rule and has not
exhausted its administrative remedies by either seeking review and revision
of the rule under N.D.C.C. § 23.1-01-04(3), or seeking reconsideration and
amendment of the rule under N.D.C.C. § 28-32-16. “[T]he exhaustion of
remedies will generally develop a complete record for judicial review, especially
in technical or complex factual situations.” Medcenter One, at ¶ 11. We
conclude the district court did not err finding Continental has not exhausted
its administrative remedies.

[¶12] Although Continental has not exhausted its administrative remedies, an
action for declaratory judgment may still be appropriate if the exhaustion of
administrative remedies would be futile or the request involves purely a
question of law. Medcenter One, at ¶ 12. Relying on our decision in Medcenter
One, Continental contends its request for declaratory judgment involves a pure
question of law, the resolution of which would eliminate the uncertainty
created by the Department’s enforcement of N.D. Admin. Code § 33-15-07-2(1).

                                       IV

[¶13] In Medcenter One, this Court considered whether the failure to exhaust
administrative remedies precluded an action for declaratory judgment. Id. at
¶ 1. In Medcenter One, the declaratory judgment action sought interpretation
of the unambiguous language of a statute providing exemptions from the
pharmacist-ownership requirements of N.D.C.C. § 43-15-35(5). Id. We held
“the doctrine of exhaustion of administrative remedies does not require
deferring a decision on the interpretation of the unambiguous language of
N.D.C.C. § 43-15-35 until after the administrative process has been
completed.” Id. at ¶ 21.

[¶14] This case is distinguishable from the circumstances presented in
Medcenter One. In Medcenter One, we recognized an exception to the
exhaustion doctrine when a legal question involves statutory interpretation
and does not need the exercise of an agency’s expertise in making factual
decisions. Medcenter One, at ¶ 12. In the present case, Continental argues
N.D. Admin. Code § 33-15-07-2(1) doesn’t mean what the words clearly express
because “technology does not exist and compliance with such a legal standard

                                       5
would be impossible.” Continental wants the district court to read ambiguity
into the Rule where it doesn’t otherwise exist and apply other provisions in the
Administrative Code to interpret the rule differently than the express words.
The Agency is the appropriate venue to determine if the technology exists to
comply under the rule, to determine if the presence of an emission from a closed
tank hatch or control device establishes a violation of the rule, and whether
other provisions of the Administrative Code addressing “fugitive emissions”
include the same emissions addressed in N.D. Admin. Code § 33-15-07-2(1).
We agree with the Department and conclude Continental is not seeking a
declaratory judgment on an unambiguous rule, but is attempting to change the
rule without exhausting its administrative remedies.

[¶15] The requirement to exhaust administrative remedies before seeking
declaratory judgment is particularly weighty when the agency’s decision
involves factual issues or administrative expertise. Medcenter One, at ¶ 12.
We conclude, where a party seeks to modify an existing statute or agency rule,
the “purely legal question” exception to the exhaustion of administrative
remedies does not apply.

                                       V

[¶16] We conclude Continental’s action for declaratory judgment of the
Department’s administrative rule is not ripe for judicial review and we affirm
the district court’s judgment dismissing Continental’s action. Having
concluded the matter is not ripe for review the remaining arguments and
pending motion to dismiss the appeal as moot are unnecessary to our
decision.
¶17] Jon J. Jensen
     Daniel S. El-Dweek, D.J.
     Dale V. Sandstrom, S.J.
     Daniel J. Crothers
     Lisa Fair McEvers

                                       6
[¶18] The Honorable Dale V. Sandstrom, Surrogate Judge, and the Honorable
Daniel S. El-Dweek, D.J., sitting in place of VandeWalle, C.J., and Tufte, J.,
disqualified.

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