In the Courts

Water Cases

Tex. Comm’n on Envtl. Quality v. Save Our Springs All., Inc., No. 08-20-00239-CV, 2022 WL 17659907 (Tex. App.—El Paso Dec. 13, 2022, no pet. h.).

This case involves an application for a Texas Pollution Discharge Elimination System permit. TCEQ issued the draft permit and after a hearing with Save our Springs Alliance, Inc. (“SOS”), the permit was issued. SOS challenged this decision in district court, claiming that TCEQ did not follow a proper antidegradation review, and the permit would allow a substantial increase in phosphorous and nitrogen which would result in a substantial decrease in water quality in the receiving waters.

An antidegradation review involves a nutrient screening to determine if the discharge will degrade the receiving waters, but there are no specific numeric standards for limiting certain nutrients. The standard instead looks at whether the amounts of nutrients in the discharge would lower the water quality in the receiving water or impact its existing uses. TCEQ approved of the draft permit under this standard, but the district court agreed with SOS, finding that TCEQ did not demonstrate enough supporting information to show that the water quality would not be substantially impacted. On appeal, the court found that TCEQ did rely on sufficient information, and that SOS was arguing for TCEQ to apply more stringent standards than were required but failed to show where TCEQ erred in applying the standards as written. The court further held that it was beyond their jurisdiction to require a more stringent standard, as that would amount to rewriting the existing standard.

City of Schertz v. Tex. Comm’n on Envtl. Quality, 653 S.W.3d 468, (Tex. App.—Amarillo 2022, no pet.).

At issue in this case is whether regulations designating a regional sewer authority as the entity responsible for developing a regional sewage system reserve the entirety of the watershed for the authority’s exclusive use. TCEQ issued an application authorizing a special utility district to build a wastewater treatment plant (“WWTP”), and a regional sewer authority challenged the issuance of this permit, arguing that the proposed WWTP would discharge in the Cibolo Creek regional area, defined as the area of the Cibolo Creek watershed that is “in the vicinity” of the named surrounding cities. In granting the permit, TCEQ found that while the discharge was in the Cibolo Creek watershed and the extraterritorial jurisdiction of the city, it was not in the vicinity of all of the cities listed in the definition of the regional area. Because TCEQ found no discharge within the regional area, it issued the permit.

The regional sewer authority appealed TCEQ’s decision to grant the permit in district court, and the district court found for TCEQ. On appeal, the court again affirmed TCEQ’s issuance of the permit, stating that TCEQ regionalization policies were not violated because the discharge was not “in the vicinity” of all of the named cities. The court based this decision on the fact that there was no existing WWTP within three miles of the proposed WWTP, no city had a WWTP in the area, and the proposed WWTP was more than five miles from an existing facility.

Litigation Cases

JDH Pac., Inc. v. Precision-Hayes Int’l, Inc., No. 14-21-00027-CV, 2021 WL 2656774, (Tex. App. June 29, 2021), review denied, No. 21-1032, 2022 WL 15527766 (Tex. Oct. 28, 2022).

In JDH Pacific, Inc. v. Precision-Hayes International, Inc., Texas Supreme Court Justice Evan Young, in a concurring opinion, determined that a ministerial error made at the trial court level should not result in a denial of jurisdiction where such a denial would prejudice the injured party.

In this case, Precision-Hayes International, Inc. (“PHI”) sued JDH Pacific, Inc. (“JDH”) for breach of contract. The case was originally filed in state court, but was removed to federal court where JDH successfully moved to compel arbitration. JDH then returned to state court seeking writs of garnishment from PHI’s bank to facilitate its claim in having to compel arbitration. JDH contended to the Texas Supreme Court that it attempted to apply for its writs of garnishment through a “new and independent action,” however the “new” application was filed under the same case number as PHI’s previously removed action. PHI argued that this jurisdictional mistake of filing under a case that was removed to federal court, and had undisputedly not been remanded to state court, meant that the court lacked jurisdiction over JDH’s application for writs of garnishment.

The Houston Court of Appeals concluded that the district court’s order granting JDH’s requested writs of garnishment was void for want of jurisdiction and dismissed the appeal for lack of jurisdiction. JDH sought review of that jurisdictional determination.

In a concurring opinion on denial for petition of review, Justice Young determined that if JDH’s applications for writs of garnishment were misfiled in a wrong or unavailable docket number, such a docketing error would not defeat jurisdiction on its own. In the words of the Justice Young: “[i]n short the age in which mere docketing errors carry fatal jurisdictional consequences has come to an end.” However, Justice Young determined that there was no irremediable harm that would prejudice JDH in the Court of Appeals decision, as JDH could simply refile in an unmistakably new docket number. Additionally, such action may be more appropriate after the presumably still pending arbitration was resolved.

Justice Young noted that, although the lack of prejudice makes this case an unsuitable vehicle for adding further clarity to our law, there may come another case in which such a jurisdictional mistake does prejudice a litigant and in which the underlying dispute is not bound up in the complexities of this case. In such a case, Justice Young noted that he would vote to grant the petition for review.

Hidalgo Cnty. Water Improvement Dist. No. 3 v. Hidalgo Cnty. Water Irrigation Dist. No. 1, 627 S.W.3d 529 (Tex. App.—Corpus Christi–Edinburg 2021, pet. granted).

The Supreme Court of Texas recently granted review of Hidalgo County Water Improvement District No. 3 v. Hidalgo County Water Irrigation District No. 1. The Court will hear oral arguments in January 2023. The ultimate decision will determine whether court-created common law immunity applies in eminent domain cases, displacing the longstanding paramount public purpose doctrine’s application to cases like this in which the Legislature has permitted two condemning authorities to use the same land. Hidalgo County Water Improvement District No. 3 (the “Improvement District”) sought to condemn an easement for a water pipeline across a canal owned by Hidalgo County Water Irrigation District No. 1 (the “Irrigation District”). The Improvement District filed a condemnation action, and the trial court appointed three special commissioners who awarded $1900 in compensation for the easement. The Irrigation District filed a plea to the jurisdiction, which the trial court denied. The Corpus Christi Court of Appeals affirmed the trial court’s decision.

In its petition to the Texas Supreme Court, the Improvement District argued that the Court of Appeals failed to apply the paramount public purpose doctrine. Under this doctrine, a first-in-time entity may prohibit the second use if it can demonstrate that that the second proposed use would destroy the first and that the first use is of paramount public purpose. The purpose of this doctrine is to maximize public benefit. Instead, the Court of Appeals only considered if the Irrigation District was immune from eminent domain actions and essentially concluding that immunity trumps the paramount public purpose doctrine.

With the Texas Supreme Court set to hear the case, the Court will be able to resolve widespread confusion among the lower courts about whether immunity applies in condemnation actions.

Transcript of Oral Argument Sackett v. Envtl. Prot. Agency, No. 21-454 (U.S. argued Oct. 3, 2022).

On October 3, 2022, the United States Supreme Court heard oral arguments in the case of Sackett v. EPA. The decision has yet to be announced, but the decision could dramatically reduce the number of wetlands and other waters across the United States that are protected under the Clean Water Act.

The dispute between the Sacketts and the EPA began in 2007 after the Sacketts purchased a parcel of land that was subject to the Clean Water Act protections. In 2012, the Court permitted the Sacketts to litigate their challenge to an EPA compliance order concerning the fill of wetlands on their land in federal court, during which EPA withdrew its compliance order. The U.S. Court of Appeals for the Ninth Circuit held that the EPA’s withdrawal of the compliance order did not render the Sacketts’ challenge moot and that EPA does have jurisdiction over their property under the Clean Water Act.

In hearing the case on appeal, the Ninth Circuit cited case precedent in determining jurisdiction over wetlands. A narrow interpretation of the Clean Water Act could reduce the number of waters that enjoy its protection. The issue now before the Court is whether the Ninth Circuit set forth the proper test for determining whether wetlands are “waters of the United States” under the Clean Water Act, 33 U.S.C. § 1362(7).

Utility Case

Brazos Electric Power Cooperative and ERCOT Settlement Update.

On November 14, 2022, Chief U.S. Bankruptcy Judge David Jones issued an order approving a settlement agreement between Brazos Electric Power Cooperative, Inc. (“Brazos”) and ERCOT regarding outstanding Winter Storm Uri related costs. This dispute has been ongoing since 2021 when ERCOT capped electricity prices at $9,000 per megawatt hour during Winter Storm Uri. As a result, Brazos incurred $2.1 billion in energy fees and subsequently filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of Texas on March 1, 2021. In its filing, Brazos alleged that ERCOT violated the terms of their market participant contract by charging $9,000 per megawatt hour and Brazos owed ERCOT $770 million rather than $2.1 billion. ERCOT responded that it did not violate Brazos’s market participant contract since it was following PUC’s emergency order to implement scarcity prices.

Brazos and ERCOT reached a settlement agreement whereby Brazos must pay ERCOT roughly $1.9 billion. Moreover, under the approved settlement agreement, ERCOT will reimburse eligible market participants in a manner of the participant’s choice: (1) an earlier discounted payment or (2) full payment over thirty years. Brazos will begin payments to ERCOT in January 2023.

“In the Courts” is prepared by Lora Naismith in the Firm’s Water Practice Group; Wyatt Conoly in the Firm’s Litigation Practice Group; and Samantha Miller and Rick Arnett in the Firm’s Energy and Utility Practice Group. If you would like additional information or have questions related to these cases or other matters, please contact Lora at 512.322.5850 or lnaismith@lglawfirm.com, or Wyatt at 512.322.5805 or wconoly@lglawfirm.com, or Samantha at 512.322.5808 or smiller@lglawfirm.com, or Rick at 512.322.5855 or rarnett@lglawfirm.com.