Legal Environmental Assistance Foundation, Inc., Petitioner, v. United States Environmental Protection Agency, Respondent, 118 F.3d 1467 (11th Cir. 1997)

The issue in this petition for review is whether the United States Environmental Protection Agency ("EPA") is legally required to regulate hydraulic fracturing, a production enhancement technique used by the oil and gas industry, under the underground injection control ("UIC") programs established pursuant to Part C of the Safe Drinking Water Act ("SDWA"), 42 U.S.C. §§ 300h to 300h-8. EPA determined that hydraulic fracturing does not fall within the statutory or regulatory definition of "underground injection." Because we find EPA's interpretation inconsistent with the language of the statute, we grant the petition for review and remand for further proceedings.

The Legal Environmental Assistance Foundation, Inc. ("LEAF") filed this petition for review of an order of the EPA, in which the agency denied LEAF's petition to promulgate a rule withdrawing approval of the Alabama UIC program. As background for our analysis, we briefly describe the statutory and regulatory framework for the UIC program, the process of hydraulic fracturing, and the procedural history of this case.

Part C of the SDWA establishes a regulatory program for the protection of underground sources of drinking water. See 42 U.S.C. §§ 300h to 300h-8. This program requires EPA to promulgate regulations that set forth minimum requirements for state UIC programs. Id. § 300h. A state must submit to EPA a proposed UIC program that meets these minimum requirements, and receive EPA approval, in order to obtain primary regulatory and enforcement responsibility for underground injection activities within that state. Id. § 300h-1. The state retains primary responsibility until EPA determines, by rule, that the state UIC program no longer meets the minimum requirements established under the SDWA. Id. § 300h-1(b) (3).¹ 

The minimum requirements for state UIC programs are contained in 40 C.F.R. pt. 145. Among these requirements, the state must prohibit, in accordance with 40 C.F.R. § 144.11, any "underground injection" unless authorized by permit or rule. 40 C.F.R. § 145.11(a) (5). The statutory definition of "underground injection" is "the subsurface emplacement of fluids by well injection." 42 U.S.C. § 300h(d) (1).²  The state also must classify injection wells in conformance with the classification system promulgated by EPA in 40 C.F.R. § 144.6. 40 C.F.R. § 145.11(a) (2). Injection wells are thus classified for the purpose of permitting into five categories: Class I wells are wells used to dispose of hazardous, industrial, or municipal wastes beneath underground sources of drinking water. 40 C.F.R. § 144.6(a). Class II wells are " [w]ells which inject fluids: (1) [w]hich are brought to the surface in connection with ... conventional oil or natural gas production ...; (2) [f]or enhanced recovery of oil or natural gas; and (3) [f]or storage of hydrocarbons." Id. § 144.6(b). Class III wells are wells which inject for extraction of minerals. Class IV wells are wells used to dispose of hazardous or radioactive wastes into or above underground sources of drinking water. Id. § 144.6(c) and (d). Class V wells are " [i]njection wells not included in Classes I, II, III, or IV." Id. § 144.6(e). Technical criteria and standards for these various classes of wells are contained in 40 C.F.R. pt. 146.

The Alabama UIC program was approved by EPA in two parts. On August 2, 1982, EPA approved Alabama's UIC program for Class II wells, to be administered by the State Oil and Gas Board of Alabama. See 40 C.F.R. § 147.50. On August 23, 1983, EPA approved Alabama's UIC program for Class I, III, IV, and V wells, to be administered by the Alabama Department of Environmental Management. See id. § 147.51.

Hydraulic fracturing is a technique used by the oil and gas industry for enhancing the recovery of natural gas from underground formations. In Alabama, it is commonly used in connection with the extraction of natural methane gas from coal beds. Coal beds, as all underground formations, are formed of porous, sometimes fractured, materials. These coal beds contain natural gas, which can be extracted through production wells. Because of the tightness of coal bed formations and their very low permeability, the rate of production of natural gas is low in the absence of production enhancement.

Experience has shown that coal beds must be hydraulically fractured to induce or stimulate a significant flow of gas. "Hydraulic fracturing" involves the injection of fluids and a propping agent (usually sand) into a coal bed. The application of pressure injects fluids into the coal bed thereby widening natural fractures and inducing new ones that are held open by the propping agent after the pressure is released. As a result, these fractures provide paths for gas to migrate to the wellbore, thus stimulating gas flow. It has been demonstrated that the gas flow rate from a coal bed may be increased as much as twentyfold by hydraulic fracturing.

Thomas E. Sexton & Frank Hinkle, State Oil and Gas Board, Oil and Gas Report 8B: Alabama's Coalbed Gas Industry 12-15 (1985), appearing at R1-21-24.³ 

Hydraulic fracturing results in fractures that may extend several hundred feet. The fluids used in hydraulic fracturing may contain guar gel, nitrogen or carbon dioxide gases, gelled oil, diesel oil, sodium hydroxide, hydrochloric acid, sulfuric acid, fumeric acid, as well as other additives. These fluids are pumped into methane gas production wells after the wells are constructed in order to stimulate the flow of gas. Occasionally, fluids are reinjected into the well to further fracture the coal bed. More often, fluids are reinjected in order to maintain previously-induced fractures free of obstructions.⁴  After the coal beds are hydraulically fractured, the injected fluids and groundwater are pumped out of the production well before the flow of methane gas starts. A portion of the injected fluids, however, remains in the ground.⁵ 

Several thousand coal bed methane gas production wells have been constructed in Alabama since 1980. Due to the large number of these wells, EPA has recognized that "there is a growing potential for contamination of drinking water aquifers," resulting primarily from the hydraulic fracturing necessary to stimulate production. See United States Environmental Protection Agency, Ground Water Study Committee: Report G11--Study Well Contamination Problems; Particularly Problems Related to Coal Bed Methane 1 (1990), appearing at R3-211. Hydraulic fracturing associated with methane production currently is not regulated under the Alabama UIC program. The State Oil and Gas Board of Alabama does not consider wells used for such hydraulic fracturing as Class II injection wells; the Alabama Department of Environmental Management similarly does not consider these wells as Class I, III, IV, or V injection wells.

On March 4, 1994, LEAF petitioned EPA to initiate proceedings to withdraw approval of the Alabama UIC program.⁶  LEAF alleged that the Alabama program is deficient because it does not regulate hydraulic fracturing activities associated with methane gas production and such regulation is required under the SDWA. LEAF further asserted that hydraulic fracturing associated with methane gas production had resulted in a diminished quality of water drawn from a nearby drinking well owned and used by two of LEAF's members, Ruben DeVaughn and Cynthia Ann McMillian. On May 5, 1995, EPA denied the petition because it determined that hydraulic fracturing does not fall within the regulatory definition of "underground injection." EPA interprets that definition as encompassing only those wells whose "principal function" is the underground emplacement of fluids. EPA decided that methane gas production wells which are also used for hydraulic fracturing are not required to be regulated under the UIC programs because the principal function of these wells is not the underground emplacement of fluids; their principal function is methane gas production. EPA also disputed LEAF's assertion that the quality of water drawn from the McMillians' water well had diminished as a result of nearby hydraulic fracturing activity.⁷ 

LEAF brought this petition for review of EPA's order on June 19, 1995. LEAF contends that EPA's interpretation of the regulations must fall because this interpretation renders the regulations inconsistent with the statute.⁸ 

EPA's order denying LEAF's petition for withdrawing approval of the Alabama UIC program is final agency action. LEAF filed this petition for review within forty-five days of EPA's final action. We have jurisdiction to review EPA's order pursuant to 42 U.S.C. § 300j-7(a) (2).

EPA suggests that we have no jurisdiction to entertain LEAF's contention that the regulations are inconsistent with the statute because this contention constitutes a direct challenge to regulations promulgated several years before this petition for review was filed; EPA argues that such a direct challenge should have been brought within forty-five days of the promulgation of the regulations and is now time-barred pursuant to § 300j-7(a) (2). For this proposition, EPA cites Natural Resources Defense Council v. Nuclear Regulatory Commission, 666 F.2d 595 (D.C. Cir. 1981) ("NRDC v. NRC "), in which the D.C. Circuit held, according to EPA, that statutory time periods for filing petitions for review are "jurisdictional in nature, and may not be enlarged or altered by the courts," id. at 602.

EPA neglects to mention in its brief, however, that this partial holding in NRDC v. NRC was expressly limited to "untimely procedural challenges" to a regulation. See id. (emphasis added). In other words, the court held in NRDC v. NRC that a statutory time-bar provision, similar to the one raised by EPA in this case, precluded the petitioner from challenging a regulation on the basis that it was promulgated without notice and comment by later bringing a petition for rulemaking to rescind the regulation and then filing for review of the denial of that petition in the court of appeals. The court distinguished substantive challenges to the regulation, however, and in fact took jurisdiction over such a challenge in NRDC v. NRC. See id. at 602-03; cf. id. at 602 & n. 47 (collecting cases in which the court "scrutinized regulations immune from direct review by reviewing the denial of a subsequent rulemaking petition which challenged the regulations on demonstrable grounds for substantive invalidity"); see also NLRB Union v. Federal Labor Relations Auth., 834 F.2d 191, 194-97 (D.C. Cir. 1987) (discussing the jurisdiction of the court of appeals to entertain various types of regulatory challenges outside a statute's judicial review time-bar period); Advance Transp. Co. v. United States, 884 F.2d 303, 305 (7th Cir. 1989) (adopting the D.C. Circuit's analysis).

LEAF's contention that the regulations at issue in this case, as interpreted by EPA, are invalid because they are inconsistent with the SDWA constitutes a substantive challenge to these regulations. In essence, LEAF contends that EPA cannot rely on these regulations to deny LEAF's petition because EPA acted outside its statutory authority in promulgating the regulations. As the Supreme Court has admonished:

"The power of an administrative [agency] to administer a federal statute and to prescribe rules and regulations to that end is not the power to make law ... but the power to adopt regulations to carry into effect the will of Congress as expressed by the statute. A regulation which does not do this, but operates to create a rule out of harmony with the statute, is a mere nullity."

Dixon v. United States, 381 U.S. 68, 74, 85 S. Ct. 1301, 1305, 14 L. Ed. 2d 223 (1965) (quoting Manhattan Gen. Equip. Co. v. Commissioner, 297 U.S. 129, 134, 56 S. Ct. 397, 400, 80 L. Ed. 528 (1936)); see also United States v. Larionoff, 431 U.S. 864, 873, 97 S. Ct. 2150, 2156, 53 L. Ed. 2d 48 (1977) (" [R]egulations, in order to be valid must be consistent with the statute under which they are promulgated."). Therefore, if the UIC regulations are inconsistent with the statute, as LEAF contends, these regulations are void ab initio and cannot be relied upon by EPA to deny LEAF's petition for withdrawal of the Alabama program. Accordingly, we conclude--as the D.C. Circuit did in similar circumstances--that, in the course of reviewing EPA's order denying LEAF's petition, over which our jurisdiction is not questioned, we also have jurisdiction to entertain LEAF's contention that the regulations upon which EPA relies are contrary to statute and therefore invalid, regardless of the fact that LEAF's challenge is brought outside the statutory period for a direct challenge to the regulations. See NLRB Union, 834 F.2d at 196-97.

Our review of EPA's action in this case is governed by the scope and standard of review set forth in the Administrative Procedure Act ("APA"), 5 U.S.C. §§ 551-559, 701-706. Under the APA, we "hold unlawful and set aside agency action, findings, and conclusions found to be ... arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." Id. § 706(2). LEAF contends that EPA's denial of its petition in this case is "not in accordance with law" because it rests on an erroneous interpretation of the SDWA.

In reviewing an agency's interpretation of a statute, the administration of which is entrusted to the agency, we are guided by the framework of analysis set out by the Supreme Court in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S. Ct. 2778, 81 L. Ed. 2d 694 (1984). "First, always, is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress." Id. at 842-43, 104 S. Ct. at 2781. If Congress did not express its intent unambiguously, we defer to the agency's interpretation if it "is based on a permissible construction of the statute." Id. at 843, 104 S. Ct. at 2782.

EPA interprets the UIC regulations as covering only those wells whose "principal function" is the injection of fluids into the ground. EPA contends that the regulations, so interpreted, are consistent with Congress's intent, as expressed in the SDWA. EPA reaches this conclusion by asserting that (1) the statutory definition of "underground injection" is ambiguous, (2) Congress intended to exclude wells whose principal function is not the injection of fluids from the UIC regulatory scheme, and, therefore, (3) EPA's regulations are a permissible interpretation of the statutory language.

The first step in the Chevron framework requires that we ascertain whether Congress clearly expressed its intent in the statute. "In a statutory construction case, the beginning point must be the language of the statute, and when the statute speaks with clarity to an issue judicial inquiry into the statute's meaning, in all but the most extraordinary circumstance, is finished." Estate of Cowart v. Nicklos Drilling Co., 505 U.S. 469, 475, 112 S. Ct. 2589, 2594, 120 L. Ed. 2d 379 (1992) (citing Demarest v. Manspeaker, 498 U.S. 184, 190, 111 S. Ct. 599, 603, 112 L. Ed. 2d 608 (1991)). "In ascertaining the plain meaning of the statute, the court must look to the particular statutory language at issue, as well as the language and design of the statute as a whole." K Mart Corp. v. Cartier, Inc., 486 U.S. 281, 291, 108 S. Ct. 1811, 1818, 100 L. Ed. 2d 313 (1988).

To achieve the statutory purpose of "prevent [ing] underground injection which endangers drinking water sources," 42 U.S.C. § 300h(b) (1), Congress chose the regulatory strategy of requiring that state programs approved under the UIC regulations "shall prohibit ... any underground injection in such State which is not authorized by a permit issued by the State (except that the regulations may permit a State to authorize underground injection by rule)." Id. § 300h(b) (1) (A) (emphasis added). Thus, it is clear that Congress dictated that all underground injection be regulated under the UIC programs. An applicant may receive a permit to conduct underground injection activity if the applicant "satisf [ies] the State that the underground injection will not endanger drinking water sources." Id. § 300h(b) (1) (B). Whether a particular activity, such as hydraulic fracturing in this case, must be regulated under the UIC programs therefore turns solely on whether such activity falls within the statutory definition of "underground injection." This statutory definition is as follows: "The term 'underground injection' means the subsurface emplacement of fluids by well injection. Such term does not include the underground injection of natural gas for purposes of storage." 42 U.S.C. § 300h(d) (1). EPA contends that Congress's failure to further define the term "well injection," an ambiguous term according to EPA, means that Congress left EPA the discretion to define that term as it deems appropriate to accomplish the purpose of the SDWA. We disagree.

Contrary to EPA, " [w]e do not start from the premise that [the statutory] language is imprecise. Instead, we assume that in drafting legislation, Congress said what it meant." United States v. LaBonte, --- U.S. ----, ----, 117 S. Ct. 1673, 1677, 137 L. Ed. 2d 1001 (1997). It is only after we have determined that words used by Congress are ambiguous, or that Congress left a gap in the statutory language, that we turn to the agency's interpretation of these words to ascertain whether it deserves any deference. See K Mart, 486 U.S. at 291, 108 S. Ct. at 1817 ("The traditional deference courts pay to agency interpretation is not to be applied to alter the clearly expressed intent of Congress."). "Giving the words used their ordinary meaning," LaBonte, --- U.S. at ----, 117 S. Ct. at 1677 (internal quotation marks omitted), we readily find that the word "injection" means the act of "forc [ing] (a fluid) into a passage, cavity, or tissue." The Random House Dictionary of the English Language 983 (2d ed. unabridged 1987). Sensibly, therefore, "underground injection" means the subsurface emplacement of fluids by forcing them into cavities and passages in the ground through a well.⁹  The process of hydraulic fracturing obviously falls within this definition, as it involves the subsurface emplacement¹⁰  of fluids by forcing them into cracks in the ground through a well. Nothing in the statutory definition suggests that EPA has the authority to exclude from the reach of the regulations an activity (i.e., hydraulic fracturing) which unquestionably falls within the plain meaning of the definition, on the basis that the well that is used to achieve that activity is also used--even primarily used--for another activity (i.e., methane gas production) that does not constitute underground injection. EPA's argument that a methane gas production well is not an "injection well" because it is used primarily for gas extraction is spurious. Congress directed EPA to regulate "underground injection" activities, not "injection wells." In view of clear statutory language requiring the regulation of all such activities, they must be regulated, regardless of the other uses of the well in which these activities occur.¹¹ 

Perceiving that its statutory construction argument is weak, EPA relies heavily on the legislative history in defending its decision to exclude hydraulic fracturing from the reach of the UIC regulations. "Given the straightforward statutory command, [however,] there is no reason to resort to legislative history." United States v. Gonzales, --- U.S. ----, ----, 117 S. Ct. 1032, 1035, 137 L. Ed. 2d 132 (1997). Moreover, far from evidencing a legislative intent contrary to the plain meaning of the statute, the legislative history supports it. Cf. United States v. James, 478 U.S. 597, 606, 106 S. Ct. 3116, 3121, 92 L. Ed. 2d 483 (1986).

EPA concedes that Congress intended to cast a wide regulatory net in enacting the UIC program. The House Report accompanying the bill that eventually became the SDWA states:

The definition of "underground injection" is intended to be broad enough to cover any contaminant which may be put below ground level and which flows or moves, whether the contaminant is in semi-solid, liquid, sludge, or any other form or state.

This definition is not limited to the injection of wastes or to injection for disposal purposes; it is intended also to cover, among other contaminants, the injection of brines and the injection of contaminants for extraction or other purposes.

H.R.Rep. No. 93-1185, at 31 (1974), reprinted in 1974 U.S.C.C.A.N. 6454, 6483 (emphasis added). Despite this broad language, EPA contends that Congress did not intend the scope of the UIC program to extend beyond the range of specific underground injection problems identified in the House Report:

Municipalities are increasingly engaging in underground injection of sewage, sludge, and other wastes. Industries are injecting chemicals, byproduct, and wastes. Energy production companies are using injection techniques to increase production and to dispose of unwanted brines brought to the surface during production. Even government agencies, including the military, are getting rid of difficult to manage waste problems by underground disposal methods. Part C is intended to deal with all of the foregoing situations insofar as they may endanger underground drinking water sources.

Id. at 29, reprinted in 1974 U.S.C.C.A.N. at 6481. According to EPA, all of these problems involve wells whose principal function is underground injection, not gas production.¹² 

EPA argues that a colloquy during the House debate supports its reading of congressional intent. In this colloquy, Representative Pickle asked Representative Rogers, the chairman of the House Subcommittee on Public Health and the Environment, which originally reported the bill that became the SDWA, "whether it was the intent of the Congress that the Administrator propose such regulations that will require every person, whether he is drilling for an oil well or a water well, to obtain certification from the EPA that he is not guilty of pollution." 120 Cong.Rec. 36,380 (1974). Representative Rogers responded that the regulations "are not concerned so much with drilling as with the injection of waste into the ground." Id. EPA gleans from this brief exchange that Congress was aware that certain drilling techniques may have the potential of adversely affecting groundwater but chose not to regulate the drilling of wells under the UIC program. According to EPA, hydraulic fracturing is one of those "drilling techniques," which Congress did not intend to regulate. We are unpersuaded for the rather simple reason that hydraulic fracturing is not a "drilling technique." As we have described in part I.B of this opinion, hydraulic fracturing involves the injection of fluids into the ground after the well has been constructed for the purpose of inducing cracks in the ground, cracks which sometimes extend hundreds of feet away from the well. Although hydraulic fracturing is often conducted once immediately after the well is constructed and before gas production commences, it is occasionally repeated later. Moreover, maintenance fluids are sometimes injected into the previously-induced fractures after initial gas production has commenced to maintain these fractures in good condition and to stimulate gas flow further. EPA cannot remove these processes which plainly involve "underground injection" out of the reach of the statute by arbitrarily labeling them "drilling techniques" and then pointing to the Pickle/Rogers colloquy on the House floor as support for its action.¹³ 

Finally, EPA contends that its interpretation of the statutory language as excluding hydraulic fracturing from the reach of the regulations is entitled to special deference because it has been consistent over a long time period. See, e.g., Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 515, 114 S. Ct. 2381, 2388, 129 L. Ed. 2d 405 (1994) (noting that an agency interpretation of a statute or regulations that conflicts with a prior interpretation is entitled to considerably less deference than consistent interpretations). Moreover, EPA asserts that Congress ratified that interpretation because Congress amended the SDWA in 1986, several years after EPA promulgated its definition of "well injection." See United States v. Hill, 506 U.S. 546, 553-54, 113 S. Ct. 941, 947, 122 L. Ed. 2d 330 (1993) (where regulatory definitions of the terms "mineral deposit" and "mineral enterprise" were well established at the time Congress amended the statute, it was reasonable to assume that Congress relied on the accepted distinction between the two terms when it referenced "mineral deposit" in the statute). We reject both arguments. " [N]o deference is due to agency interpretations at odds with the plain language of the statute itself. Even contemporaneous and longstanding agency interpretations must fall to the extent they conflict with statutory language." Public Employees Retirement Sys. v. Betts, 492 U.S. 158, 171, 109 S. Ct. 2854, 2863, 106 L. Ed. 2d 134 (1989). As to the ratification argument, EPA has made no showing that Congress was aware that EPA's interpretation of "well injection" excluded hydraulic fracturing from the reach of the UIC regulations when Congress reenacted the SDWA in 1986. Where "the record of congressional discussion preceding reenactment makes no reference to the ... regulation [at issue], and there is no other evidence to suggest that Congress was even aware of the [agency's] interpretive position [,] '... we consider the ... reenactment to be without significance.' " Brown v. Gardner, 513 U.S. 115, 121, 115 S. Ct. 552, 556-57, 130 L. Ed. 2d 462 (1994) (quoting United States v. Calamaro, 354 U.S. 351, 359, 77 S. Ct. 1138, 1144, 1 L. Ed. 2d 1394 (1957)) (last omission in original). Moreover, " ' [w]here the law is plain, subsequent reenactment does not constitute an adoption of a previous administrative construction.' " Id. at 121, 115 S. Ct. at 556 (quoting Demarest, 498 U.S. at 190, 111 S. Ct. at 603-04) (alteration in original).

In sum, we conclude that hydraulic fracturing activities constitute "underground injection" under Part C of the SDWA. EPA's contrary interpretation cannot be squared with the plain language of the statute and thus must fall. " [T]hat is the end of the matter." Chevron, 467 U.S. at 843, 104 S. Ct. at 2781. Broad as EPA's discretion in formulating regulatory policy within the framework of the SDWA may be, "it must bow to the specific directives of Congress." LaBonte, --- U.S. at ----, 117 S. Ct. at 1677.

LEAF petitioned EPA to initiate proceedings for the withdrawal of Alabama's UIC program because Alabama does not regulate hydraulic fracturing associated with methane gas production. EPA denied the petition on the ground that hydraulic fracturing does not fall within the regulatory definition of "underground injection." Because we find that EPA's interpretation of its regulations is inconsistent with the statute, we GRANT the petition for review and REMAND for further proceedings consistent with this opinion.