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EQT Production Co. v. Wender

United States Court of Appeals, Fourth Circuit

August 30, 2017

EQT PRODUCTION COMPANY, Plaintiff-Appellee,
v.
MATTHEW D. WENDER, in his official capacity as President of the County Commission of Fayette County, West Virginia; DENISE A. SCALPH, in her official capacity as a Commissioner of the County Commission of Fayette County, West Virginia; JOHN H. LOPEZ, in his official capacity as a Commissioner of the County Commission of Fayette County, West Virginia, Defendants-Appellants. THE WEST VIRGINIA INDEPENDENT OIL AND GAS ASSOCIATION, INC.; THE WEST VIRGINIA OIL AND NATURAL GAS ASSOCIATION, INC., Amici Supporting Appellee.

          Argued: May 9, 2017

         Appeal from the United States District Court for the Southern District of West Virginia, at Charleston. John T. Copenhaver, Jr., District Judge. (2:16-cv-00290)

         ARGUED:

          Derek Owen Teaney, APPALACHIAN MOUNTAIN ADVOCATES, INC., Lewisburg, West Virginia, for Appellants.

          Timothy M. Miller, BABST, CALLAND, CLEMENTS & ZOMNIR, P.C., Charleston, West Virginia, for Appellee.

         ON BRIEF:

          Thomas A. Rist, HUMPHREY & RIST, LLP, Fayetteville, West Virginia, for Appellants.

          Christopher B. Power, BABST, CALLAND, CLEMENTS & ZOMNIR, P.C., Charleston, West Virginia, for Appellee.

          Roger G. Hanshaw, BOWLES RICE LLP, Charleston, West Virginia, for Amici Curiae.

          Before NIEMEYER, WYNN, and HARRIS, Circuit Judges.

          PAMELA HARRIS, CIRCUIT JUDGE.

         EQT Production Company operates multiple oil and natural gas wells in Fayette County, West Virginia. It also operates one injection well, used to dispose of wastewater generated by its extraction wells by "injecting" the fluid underground. Although EQT's injection well is regulated by the state and authorized by a state-issued permit, Fayette County, concerned about potential health effects, sought to bar its operation, passing an ordinance that prohibits the disposal of wastewater anywhere within the County.

         The question in this case is whether the County's ordinance is preempted, as EQT argues, by the web of state and federal laws comprehensively regulating oil and gas production and wastewater disposal in West Virginia. Emphasizing the limited power of West Virginia's counties vis-à-vis the state, the district court granted summary judgment to EQT, holding that the County's ban on wastewater disposal is preempted by the state and federal laws under which West Virginia issues injection well permits.

         We agree with the district court that the West Virginia legislature, in enacting its complex regulatory program for injection wells, did not leave counties with the authority to nullify permits issued by the state. Accordingly, we hold that this central aspect of the County ordinance is preempted by state law. And because we find related aspects of the ordinance to be preempted as well, we affirm the judgment of the district court in all respects.

         I.

         A.

         We begin by setting out the complex statutory framework that governs the disposal of wastewater in West Virginia. Under two distinct but overlapping regulatory regimes, the West Virginia legislature has vested in its Department of Environmental Protection ("DEP") the authority to protect the state's water resources against contamination from oil and gas production. Although those two regimes differ in certain respects, they share the overarching purpose of ensuring that wastewater disposal does not affect West Virginia's water sources in a way that could threaten human health or the environment.

         First, under the West Virginia Oil and Gas Act, W.Va. Code § 22-6-1 et seq., the DEP is broadly responsible for regulating and permitting oil and gas wells in West Virginia. The Oil and Gas Act gives the DEP authority over the "production, storage and recovery" of oil and gas resources. Id. § 22-6-2(c)(12). In exercising that authority, the DEP issues permits for the drilling of conventional oil and gas wells, id. § 22-6-6, and monitors wells in operation, see, e.g., W.Va. Code R. § 35-4-11.

         The extraction process at conventional wells generates "wastewater" as a byproduct, [1] which may contain dissolved waste materials - including carcinogenic chemicals and heavy metals like arsenic and mercury - that are harmful to human health. The storage and disposal of that wastewater also is regulated under the Oil and Gas Act, which charges the DEP specifically with protecting against water pollution arising from oil and gas production. W.Va. Code § 22-6-7. In order to operate a "disposal well for the injection or reinjection underground of any pollutant" - like EQT's injection well - a separate DEP water-pollution control permit is required. Id. § 22-6-7(b)(6). Disposal well permits come with regulatory conditions that protect against the contamination of water sources, including monitoring and testing requirements to ensure against leaks. W.Va. Code R. § 35-4-7. Regulations under the Oil and Gas Act provide that disposal wells also are subject to the permit requirements of "applicable federal and state laws." Id. § 35-4-7.2.

         Chief among those other "applicable" laws is the West Virginia Water Pollution Control Act, W.Va. Code § 22-11-1 et seq., under which West Virginia has enacted a permit program for underground injection control wells ("UIC wells"). And federal law, too, plays a role: To protect underground sources of drinking water, the federal Safe Drinking Water Act, 42 U.S.C. § 300f et seq., establishes national standards for regulating injection wells, with which the states must comply. See id. §§ 300h, 300h-1(b). West Virginia's UIC permit program meets those federal standards, see W.Va. Code R. § 47-13-1 et seq., and as a result, West Virginia has been granted primary enforcement authority over regulation of UIC wells within the state, see 42 U.S.C. § 300h-1(b)(3).

         Pursuant to the state Water Pollution Control Act, the DEP has promulgated comprehensive regulations for the UIC permit program, designed to ensure that injection wells will not present a significant risk of harm to the public or to the environment. Underground injection is prohibited if "the presence of [a] contaminant may . . . adversely affect the health of persons, " W.Va. Code R. § 47-13-13.1.b, and if "water quality monitoring . . . indicates the movement of any contaminant" into an underground drinking water source, then the DEP must prescribe "corrective action" that may include closure of the well, id. § 47-13-13.1.c.

         The state Water Pollution Control Act covers a number of different kinds of injection wells, including wells associated with mineral extraction and hazardous materials disposal. See id. § 47-13-4. Directly relevant here, "Class 2" UIC wells - like EQT's - dispose of oil and gas wastewater, or fluids "brought to the surface in connection with conventional oil or natural gas production" and "commingled with waste waters." Id. § 47-13-4.2.a. Those Class 2 injection wells, as noted above, also are regulated and permitted under the Oil and Gas Act. And the UIC regulations promulgated under the Water Pollution Control Act recognize that overlapping jurisdiction, cross-referencing the Oil and Gas Act as a source of "criteria and standards" for Class 2 UIC wells. See id. § 47-13-9. As a result, EQT's Class 2 UIC permit references both Oil and Gas Act regulations and Water Pollution Control Act regulations, and is managed by the two corresponding sections of the DEP - the Office of Oil and Gas and the Division of Water and Waste Management.

         In conjunction with this elaborate state permitting scheme, the Water Pollution Control Act - but not the Oil and Gas Act - includes a "savings clause, " preserving certain "[e]xisting rights and remedies." W.Va. Code § 22-11-27. The savings clause clarifies that it is the intent of the Act to provide "additional and cumulative remedies to abate [water] pollution, " and that the Act does not estop municipalities - or the state, or private persons - from exercising existing rights "to suppress nuisances or to abate any pollution." Id.

         B.

         EQT operates approximately 200 oil and natural gas wells in Fayette County, West Virginia. All are "conventional" wells, meaning that they are drilled vertically into the ground. And all were drilled under the authority of permits issued by the state DEP under the state Oil and Gas Act.

         The process by which EQT disposes of the wastewater generated by these wells begins on site, at the wells themselves. During production, wastewater is separated from the fuel product and stored initially in tanks located at each conventional well site. When those short-term storage tanks reach capacity, the wastewater is transferred by truck to EQT's separate UIC well. There, it is injected into a confined, underground formation for permanent disposal. EQT's single UIC well in Fayette County serves as the permanent disposal location for the wastewater from hundreds of conventional wells, both within and outside the county.

         The injection of wastewater into EQT's UIC well is separately authorized by the state. Since 1986, EQT has held a permit for a Class 2 UIC well, issued by the DEP under the state UIC permit program. And under the Oil and Gas Act, as part of the process by which EQT applies for conventional well permits, the DEP reviews and approves EQT's plans for disposal of wastewater generated by its wells, with EQT providing the location and permit number for its licensed injection well. See W.Va. Code R. § 35-4-5.2.a.4.[2]

         Notwithstanding this extensive state regulatory apparatus, the Commissioners of Fayette County - Matthew D. Wender, Denise A. Scalph, and John H. Lopez (collectively, "the County") - became concerned that two UIC wells, operated not by EQT but by a third party, were leaking wastewater into local waterways. And although there was no concern about contamination from EQT's UIC well, the County responded with a blanket ban on all permanent disposal of wastewater within County lines.

         On January 12, 2016, the County enacted an "Ordinance Banning the Storage, Disposal, or Use of Oil and Natural Gas Waste in Fayette County, West Virginia" ("Ordinance"). J.A. 27; see J.A. 95. Section 1 of the Ordinance broadly prohibits the "storage, treatment, injection, processing or permanent disposal" of wastewater "onto or into the land, air or waters within Fayette County[.]" J.A. 97.[3] And although it seems clear enough that a ban on "injection" and "permanent disposal" of wastewater would cover the operation of UIC wells, the next sentence of Section 1 spells it out: "This prohibition shall specifically ...


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