Earthworks' Oil & Gas Accountability Project v. New Mexico Oil Conservation Commission ( 2016 )

1 IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
2 Opinion Number: ___________
3 Filing Date: February 24, 2016
4 NO. 33,451
5 EARTHWORKS’ OIL & GAS ACCOUNTABILITY
6 PROJECT and NEW MEXICO WILDERNESS ALLIANCE,
7 Petitioners,
8 v.
9 NEW MEXICO OIL CONSERVATION
10 COMMISSION,
11 Respondent,
12 and
13 NEW MEXICO OIL & GAS ASSOCIATION,
14 Intervenor.
15 APPEAL FROM THE DISTRICT COURT OF SANTA FE COUNTY
16 Sheri A. Raphaelson, District Judge
17 New Mexico Environmental Law Center
18 Eric Jantz
19 R. Bruce Frederick
20 Douglas Meiklejohn
21 Jonathan Block
22 Santa Fe, NM
1 New Mexico Wilderness Alliance
2 Judith Calman
3 Albuquerque, NM
4 for Petitioners
5 Energy, Minerals & Natural Resources Department
6 William R. Brancard, Special Assistant Attorney General
7 Keith W. Herrmann, Special Assistant Attorney General
8 Santa Fe, NM
9 for Respondent
10 Holland & Hart LLP
11 Michael H. Feldewert
12 Santa Fe, NM
13 for Intervenor
1 OPINION
2 KENNEDY, Judge.
3 {1} Petitioners appeal the New Mexico Oil Conservation Commission’s (the
4 Commission) order promulgating a 2013 version of 19.15.17 NMAC (6/28/2013) (the
5 2013 Rule), which is commonly referred to as the “Pit Rule.” Petitioners make three
6 arguments. First, they contend that the Commission had no jurisdiction to create the
7 2013 Rule because a previous version of the rule was the subject of a pending appeal
8 in the courts at the time the 2013 Rule was adopted. Second, Petitioners argue that the
9 Commission’s decision to issue the 2013 Rule is arbitrary and capricious because it
10 was contrary to the evidence received and because the Commission did not
11 adequately set forth its reasons for changing the previous version of the Pit Rule.
12 Third, Petitioners assert that the notice the Commission gave of its proposed
13 rulemaking was inadequate. Petitioners request that we either vacate the
14 Commission’s order promulgating the 2013 Rule or reverse and remand the 2013
15 Rule to the Commission for further proceedings.
16 {2} We conclude that the pending appeals did not deprive the Commission of
17 jurisdiction to promulgate the 2013 Rule. We further conclude that the Commission
18 adequately explained its reasoning for the rule’s adoption in the final rule and
19 satisfied the statutory requirements for issuing notice. We affirm.
1 I. BACKGROUND
2 {3} In 2008, the Commission approved a version of the Pit Rule (the 2008 Rule).
3 In 2009, the Commission amended a portion of the 2008 Rule (the 2009
4 Amendment). Both the 2008 Rule and its 2009 Amendment were appealed to the First
5 Judicial District Court by entities affiliated with the oil and gas industry, and the
6 district court certified the appeals to this Court; we stayed our proceedings on these
7 cases. In January 2012, the Commission, acting on petitions from the New Mexico
8 Oil and Gas Association and Independent Petroleum Association of New Mexico,
9 announced its intention to hold hearings on the petitions. Parties who opposed the
10 proposed rule-making secured a writ of prohibition from the First Judicial District
11 Court in February 2012, ordering the Commission to cease proceedings to amend the
12 Pit Rule. That writ was quashed the following month. The Commission issued its
13 notice that it would have a public hearing on the applications, and took evidence,
14 heard argument, deliberated, adopted the rule, and filed an order promulgating the
15 2013 Rule. Earthworks’ Oil and Gas Accountability Project submitted a request for
16 rehearing in an effort to have the Commission reconsider the 2013 Rule. The
17 Commission did not act upon that request within ten days; it was deemed denied
18 pursuant to the New Mexico Oil and Gas Act (Oil and Gas Act), NMSA 1978,
19 Sections 70-2-1 to -38 (1935, as amended through 2015). See § 70-2-25(A).
2
1 Conceding that the Oil and Gas Act, Section 70-2-25 and NMSA 1978, Section 39-3-
2 1.1 (1999), do not provide for an appeal of Commission rulemaking, Petitioners
3 sought a writ of certiorari under Rule 1-075 NMRA in the district court, which the
4 district court granted. The district court subsequently certified the case to this Court.
5 See Rule 1-074(S) NMRA.
6 II. DISCUSSION
7 A. Commission’s Jurisdiction to Amend 2013 Pit Rule
8 {4} Petitioners assert that the Commission had no authority to amend the Pit Rule
9 because there had not yet been a final order issued in the appeals of the 2008 Rule or
10 the 2009 Amendment and that pending judicial appeals must stay ongoing rulemaking
11 on the particular issue concerned. However, Petitioners direct us to no authority
12 compelling any new rulemaking on a particular subject to be held in abeyance while
13 the appeal of a previous rule is pending. “We assume where arguments in briefs are
14 unsupported by cited authority, counsel after diligent search, was unable to find any
15 supporting authority.” In re Adoption of Doe, 1984-NMSC-024, ¶ 2, 100 N.M. 764,
16 676 P.2d 1329. In support of their argument, Petitioners urge us to instead apply the
17 rule that an appeal divests a lower adjudicatory tribunal of jurisdiction where it is
18 acting in an adjudicatory capacity. Petitioners also have not provided any authority
19 to relate a stay on appeal of agency adjudications to agency rulemaking activity. For
3
1 reasons that follow, we are unpersuaded by Petitioners’ argument.
2 1. Distinctions Between Rulemaking and Adjudication
3 {5} Throughout their argument that the Commission had no jurisdiction to issue the
4 2013 Rule, Petitioners repeatedly conflate an administrative agency’s adjudicatory
5 authority with an agency’s rulemaking authority. These two types of administrative
6 authority are quite distinct in their application and function. While rulemaking creates
7 generally applied standards to which an agency and individuals are held, adjudication
8 is the resolution of particular disputes involving specific parties and specific
9 problems, by applying such rules. See Uhden v. N.M. Oil Conservation Comm’n,
10 1991-NMSC-089, ¶ 7, 112 N.M. 528, 817 P.2d 721 (holding that acting on petition
11 to create an exception to the Oil Conservation Rule with statewide application that
12 will apply to limited situation and specific parties is “adjudicative rather than
13 rulemaking”); see Rauscher, Pierce, Fefsnes v. Taxation and Revenue Dep’t, 2002-
14 NMSC-013, ¶ 42, 132 N.M. 226, 46 P.3d 687 (quoting Yesler Terrace Cmty. Council
15 v. Cisneros, 37 F.3d 442, 448 (9th Cir. 1994));1 Rayellen Res., Inc. v. N.M. Cultural
1
16 Rauscher provides, “Two principal characteristics distinguish rulemaking from
17 adjudication. First, adjudications resolve disputes among specific individuals in
18 specific cases, whereas rulemaking affects the rights of broad classes of unspecified
19 individuals. Second, because adjudications involve concrete disputes, they have an
20 immediate effect on specific individuals (those involved in the dispute). Rulemaking,
21 in contrast, is prospective, and has a definitive effect on individuals only after the rule
22 subsequently is applied.”
4
1 Props. Review Comm’n, 2014-NMSC-006, ¶ 27, 319 P.3d 639 (citing In re
2 Application of Timberon Water Co., 1992-NMSC-047, ¶ 23, 114 N.M. 154, 836 P.2d
3 73 (categorizing administrative action as regulatory when it furthers the public
4 interest under the state’s police powers and adjudicatory when it is based on
5 adjudicating a private right rather than implementing public policy)).
6 {6} It is well established that the Legislature can properly delegate rulemaking
7 power to administrative agencies through an enabling statute. New Energy Econ., Inc.
8 v. Shoobridge, 2010-NMSC-049, ¶ 14, 149 N.M. 42, 243 P.3d 746 (per curiam). Our
9 Legislature delegated concurrent rulemaking authority under the Oil and Gas Act to
10 the Oil Conservation Division and the Commission. See Section 70-2-11(B); Section
11 70-2-12(B). Given this distinction, we hold that the Commission’s actions in
12 promulgating the 2013 Rule were regulatory rather than adjudicatory.
13 2. Judicial Action May Not Preemptively Stop Administrative Rulemaking
14 That is Otherwise Permissible
15 {7} We note that Petitioners’ action to obtain a writ of prohibition against the
16 Commission to prevent the proceedings that resulted in the 2013 Rule currently on
17 appeal was ultimately quashed, and Petitioners did not appeal the final order. Our
18 Supreme Court’s opinion in Shoobridge, 2010-NMSC-049, presents an instructive
19 view on nearly identical facts. In Shoobridge, parties opposing a rulemaking obtained
20 a preliminary injunction prohibiting the Environmental Improvement Board from
5
1 conducting the administrative proceedings necessary to adopt a regulation. Id. ¶¶ 2-3.
2 The Environmental Improvement Board petitioned our Supreme Court for a writ of
3 superintending control or prohibition to vacate the injunction. Id. ¶ 4. The Supreme
4 Court granted the writ, ordering the district court to dissolve the injunction and
5 remanding the case to the agency to conduct its rulemaking proceedings. Id. In doing
6 so, our Supreme Court rejected the idea that a court could enjoin the rulemaking
7 process, reasoning that the separation of powers doctrine did not permit such a result:
8 When the Legislature lawfully delegates authority to a state agency to
9 promulgate rules and regulations, may a court intervene to halt
10 proceedings before the agency adopts such rules or regulations? This
11 question is one of substantial public interest because court intervention
12 in administrative proceedings before the adoption of rules or regulations
13 may thwart the public’s right to participate in such proceedings. We
14 hold that a court may not intervene in administrative rule-making
15 proceedings before the adoption of a rule or regulation[.] . . . [T]he
16 separation of powers doctrine forbids a court from prematurely
17 interfering with the administrative processes created by the Legislature.
18 Id. ¶ 1.
19 {8} Petitioners’ contention that the Commission lacked authority to promulgate the
20 2013 Rule because of pending appeals related to the 2008 Rule and 2009 Amendment
21 is similar to the petitioner’s argument in Shoobridge. To forestall rulemaking in this
22 way would permit the courts to halt agency rulemaking proceedings prior to the
23 issuance of a new rule. See id. (“[A] court may not intervene in administrative rule-
24 making proceedings before the adoption of a rule or regulation.”). Administrative
6
1 agencies routinely promulgate superseding rules on various topics. See, e.g., State ex
2 rel. Stapleton v. Skandara, 2015-NMCA-044, ¶ 3, 346 P.3d 1191 (discussing 6.69.8
3 NMAC (08/30/2012), which governs teacher evaluations in public schools and
4 superseded 6.69.4 NMAC (09/30/2003, as amended through 06/15/2009)).2
5 {9} Thus, to the extent that the 2013 Rule changed the 2008 Rule and the 2009
6 Amendment, the previous rule(s) are repealed by implication. Because the
7 promulgation is final, Petitioners are free to challenge the rule on its merits. See Rule
8 1-075(A) (“This rule governs writs of certiorari to administrative officers and
9 agencies pursuant to the New Mexico Constitution when there is no statutory right
10 to an appeal or other statutory right of review.”). However, the doctrine of separation
11 of powers precludes the judicial branch from acting prior to promulgation.
12 Shoobridge, 2010-NMSC-049, ¶ 14 (“Because of the necessity to respect the separate
13 branches of government, courts should not intervene to halt administrative hearings
14 before rules or regulations are adopted.”). We therefore decline Petitioners’ invitation
15 to create a rule allowing an appeal to halt agency rulemaking action and conclude that
16 the preceding appeals of the 2008 Rule and 2009 Amendment did not preclude the
17 Commission from exercising its authority to promulgate the 2013 Rule, which will
2
18 Similar principles exist in the statutory arena. See State v. Valdez, 1955-
19 NMSC-011, ¶ 14, 59 N.M. 112, 279 P.2d 868 (“[W]here two statutes have the same
20 object and relate to the same subject, if the later act is repugnant to the former, the
21 former is repealed by implication to the extent of the repugnancy[.]”).
7
1 now be addressed on its merits.
2 B. The Commission’s Decision to Adopt the 2013 Pit Rule Was Not Arbitrary
3 or Capricious
4 {10} In reviewing an administrative order on its merits, we conduct the same review
5 as the district court sitting in its appellate capacity. Rio Grande Chapter of Sierra
6 Club v. N.M. Mining Comm’n, 2003-NMSC-005, ¶ 16, 133 N.M. 97, 61 P.3d 806.
7 Thus, we determine: “(1) whether the agency acted fraudulently, arbitrarily, or
8 capriciously; (2) whether based upon the whole record on review, the decision of the
9 agency is not supported by substantial evidence; (3) whether the action of the agency
10 was outside the scope of authority of the agency; or (4) whether the action of the
11 agency was otherwise not in accordance with law.” Rule 1-075(R). Petitioners assert
12 that the Commission’s actions in this instance were arbitrary and capricious. An
13 agency’s action is arbitrary and capricious if it is “unreasonable or without a rational
14 basis, when viewed in light of the whole record.” Archuleta v. Santa Fe Police Dep’t
15 ex rel. City of Santa Fe, 2005-NMSC-006, ¶ 17, 137 N.M. 161, 108 P.3d 1019
16 (internal quotation marks and citation omitted); McDaniel v. N.M. Bd. of Med.
17 Exam’rs, 1974-NMSC-062, ¶ 11, 86 N.M. 447, 525 P.2d 374 (describing agency
18 action as arbitrary and capricious when it is “willful and unreasonable . . . , without
19 consideration and in disregard of facts or circumstances” (internal quotation marks
20 and citation omitted)).
8
1 {11} The party challenging a rule adopted by an administrative agency carries the
2 burden of showing that the rule is arbitrary or capricious by demonstrating that “ ‘the
3 rule’s requirements are not reasonably related to the legislative purpose[.]’ ” Old Abe
4 Co. v. N.M. Mining Comm’n, 1995-NMCA-134, ¶ 10, 121 N.M. 83, 908 P.2d 776
5 (internal quotation marks and citation omitted); see also N.M. Att’y Gen. v. N.M. Pub.
6 Regulation Comm’n, 2013-NMSC-042, ¶ 9, 309 P.3d 89 (placing the burden on the
7 parties challenging the agency order). When reviewing an agency’s rulemaking
8 decision we use a deferential standard:
9 An agency’s rule-making function involves the exercise of discretion,
10 and a reviewing court will not substitute its judgment for that of the
11 agency on that issue where there is no showing of an abuse of that
12 discretion. Rules and regulations enacted by an agency are presumed
13 valid and will be upheld if reasonably consistent with the statutes that
14 they implement.
15 Wilcox v. N.M. Bd. of Acupuncture & Oriental Med., 2012-NMCA-106, ¶ 7, 288 P.3d
16 902 (internal quotation marks and citation omitted).
17 {12} In adopting a new rule, an administrative agency is required to provide a
18 statement of reasons for doing so. Although formal findings are not required, “the
19 record must indicate the reasoning of the Commission and the basis on which it
20 adopted the [rule].” City of Roswell v. N.M. Water Quality Control Comm’n, 1972-
21 NMCA-160, ¶ 16, 84 N.M. 561, 505 P.2d 1237. The Commission need not state its
22 reasons for adopting each provision in a rule or respond to all concerns raised in
9
1 testimony; such a requirement would be “unduly onerous . . . and unnecessary for the
2 purposes of appellate review.” Regents of Univ. of Cal. v. N.M. Water Quality Control
3 Comm’n, 2004-NMCA-073, ¶ 13, 136 N.M. 45, 94 P.3d 788. We require only that
4 “the public and the reviewing courts are informed as to the reasoning behind the
5 [rule.]” Pharm. Mfrs. Ass’n v. N.M. Bd. of Pharmacy, 1974-NMCA-038, ¶ 17, 86
6 N.M. 571, 525 P.2d 931.
7 {13} Petitioners contend the Commission’s decision to issue the 2013 Rule was
8 arbitrary and capricious for five reasons: (1) the 2013 Rule is radically different from
9 the 2008 Rule, despite being based on largely the same evidence; (2) the Commission
10 did not entirely explain its reason for departing from the 2008 Rule; (3) the
11 Commission did not explain why the 2013 Rule is performance-based, instead of
12 prescriptive; (4) the Commission gave no explanation of its lowered groundwater
13 contamination criteria, and (5) the Commission gave no explanation of how it was
14 able to accomplish more cost saving measures than the 2008 Rule while still
15 protecting water supplies, public health, and the environment. Petitioner’s assertions
16 all follow the same line of reasoning. The Commission heard the same evidence in
17 the hearings related to the 2013 Rule as it did in relation to the 2008 Rule, yet the
18 2013 Rule is so different from the 2008 Rule that it must be arbitrary and capricious.
19 As explained in detail below, Petitioners’ assertions of error are not stated in terms
10
1 of legal standards that indicate a need for reversal, but instead are groundless claims
2 of error based on differences between the old and new versions of the Pit Rule.
3 Petitioners supported the 2008 Rule and the 2009 Amendment; the first appeals of
4 those rules were filed by the entities whose petition then resulted in the 2013 Rule,
5 that Petitioners now appeal. Rules change. For a rule to be invalid, we apply the legal
6 standards enunciated below.
7 1. Differences Between 2008 Rule and 2013 Rule Do Not Automatically
8 Render the Latter Rule Arbitrary and Capricious
9 {14} Petitioners assert that the order issuing the 2013 Rule is arbitrary and
10 capricious because it represents a “radical departure” from the 2008 Rule and 2009
11 Amendment despite being based on “identical” evidence. We decline to follow this
12 interpretation. Petitioners also point out that the Commission took administrative
13 notice of the 2008 proceedings when considering the 2009 Amendment and argue that
14 we should follow suit because the 2013 Rule and 2008 Rule are so interrelated as to
15 require us to take judicial notice of the 2008 Rule proceedings and the 2009
16 Amendment proceedings. However, during the proceedings below, with which we are
17 presently concerned, the Commission denied Petitioners’ request that it take
18 administrative notice of the 2008 Rule and 2009 Amendment proceedings.
19 {15} Petitioners do not argue that the Commission erred when it refused to consider
20 the records from the 2008 and 2009 rulemaking hearings. Instead, Petitioners argue
11
1 that it is proper for this Court to take judicial notice of those records. Petitioners
2 direct us to nothing that suggests we should expand our review from the record
3 below, or why it would be meet to do so. To act as if a new rule that differs from an
4 old one requires review of more than the record generated by the new rulemaking
5 would be contrary to the well-established rules that “district courts engaged in
6 administrative appeals are limited to the record created at the agency level[,]”
7 Montano v. N.M. Real Estate Appraiser’s Bd., 2009-NMCA-009, ¶ 17, 145 N.M. 494,
8 200 P.3d 544, and “absent a specific statutory provision to the contrary, an appeal
9 from an administrative hearing will be based solely on the administrative record.”
10 Rowley v. Murray, 1987-NMCA-139, ¶ 16, 106 N.M. 676, 748 P.2d 973; see also
11 Swisher v. Darden, 1955-NMSC-071, ¶ 9, 59 N.M. 511, 287 P.2d 73 (stating that in
12 determining whether an agency’s decision is arbitrary, unlawful, unreasonable, or
13 capricious, “the court in its review, is limited to the record made before the
14 administrative tribunal”), superceded by statute on other grounds as stated in
15 Aguilera v. Bd. of Educ., 2006-NMSC-015, 139 N.M. 330, 132 P.3d 587. The Oil and
16 Gas Act limits appeals from rulemaking decisions to the record made by the
17 Commission. Section 70-2-12.2. It is not the function of a court acting in an appellate
18 capacity to admit new evidence or substitute its judgment for that of an administrative
19 agency. See Groendyke Transp., Inc. v. N.M. State Corp. Comm’n, 1984-NMSC-067,
12
1 ¶¶ 17-20, 101 N.M. 470, 684 P.2d 1135 (concluding that the district court acting in
2 appellate capacity was limited to reviewing evidence presented to an administrative
3 agency, and acknowledging that administrative appeals are generally limited to
4 evidence presented to an agency during an administrative hearing). Additionally, we
5 will not be put in the the position of reviewing the appeals of the 2008 Rule and 2009
6 Amendment; those appeals are not before us here.
7 {16} In light of Petitioners’ failure to provide authority to support their suggestion
8 that we take judicial notice of the record in previous administrative rulemaking
9 hearings, we decline to do so. See In re Adoption of Doe, 1984-NMSC-024, ¶ 2
10 (acknowledging that where a party cites no authority to support an argument, we may
11 assume no such authority exists). Our review is therefore limited to whether the
12 Commission’s order adopting the 2013 Rule was arbitrary or capricious in light of
13 only the evidence presented to it during the 2013 rulemaking hearing.
14 2. The Reasoning Behind the 2013 Rule Is Adequate
15 {17} After holding several hearings, the Commission adopted the 2013 Rule that is
16 now on appeal. The Commission enumerated its reasons for adopting the 2013 Rule
17 in a section of its order entitled “ultimate facts and conclusions of law.” The
18 Commission gave detailed explanations for the standards and requirements that it
19 created in the 2013 Rule, and we afford agency rules a presumption of validity.
13
1 Wilcox, 2012-NMCA-106, ¶ 7. Generally, the Commission explained that since its
2 issuance, the 2008 Rule has negatively impacted the growth of the oil and gas
3 industry in New Mexico, has been difficult to understand, has created unnecessary
4 paperwork, and has created a cumbersome process that does not promote
5 predictability in the system. In addition, the Commission listed encouraging reuse and
6 recycling of oilfield fluids and reducing surface impacts as additional bases for
7 adopting the 2013 Rule.
8 {18} The Commission is not required to respond to all concerns raised during
9 rulemaking hearings. For the purposes of appellate review, the reasons listed above,
10 although general, are adequate to support its decision to issue the 2013 Rule,
11 particularly in light of the detailed findings that the Commission provides for each
12 general reason. For example, the Commission’s order is divided into eight substantive
13 categories: pit waste constituents, vadose zone modeling, soil transport, construction
14 and design, operation and administration, closure and revegetation, siting, and multi-
15 well fluid management pits. Each section contains detailed summaries of the evidence
16 presented on the subject, including descriptions of the tests, studies, and models
17 presented, as well as the results of those tests, studies, and models. The Commission
18 then compiled that information in its conclusions section to reach results as to
19 acceptable constituent levels, necessary soil depths, revegetation requirements, siting
14
1 considerations, and tank integrity. In all, the Commission’s order spans fifty pages
2 and is replete with the bases for, and reasoning behind, the 2013 Rule. We therefore
3 conclude that the Commission sufficiently stated its reasons for adopting the 2013
4 Rule.
5 {19} Petitioners maintain that “[t]he Commission also failed to grapple with the facts
6 and circumstances that were the fundamental bases of the 2008 Rule, but which it
7 rejected without explanation in 2013.” Petitioners point to nothing in the statute or
8 regulations to support their assertion that the Commission is required to address the
9 facts giving rise to a previous rule when promulgating a new rule. Our review of the
10 record reveals that the Commission stated sufficient reasons for the creation of the
11 2013 Rule. Petitioners have not shown any deficiency in the evidence proffered
12 during the 2013 rulemaking to suggest that the Commission’s conclusions were
13 arbitrary and capricious. See Santa Fe Expl. Co. v. Oil Conservation Comm’n, 1992-
14 NMSC-044, ¶¶ 10-11, 114 N.M. 103, 835 P.2d 819 (assertions must be accompanied
15 by citations to the record); Rule 12-213(A)(4) NMRA (requiring that a brief in chief
16 contain an argument that contains citations to the “record proper, transcript of
17 proceedings or exhibits relied on”).
18 3. Performance-Based Rule vs. Prescriptive Rule
19 {20} Petitioners’ brief asserts that the Commission failed to explain its reason for
15
1 adopting a more performance-based rule, rather than the prescriptive rule that they
2 allege the 2008 Rule enacted. More specifically, Petitioners complain that the
3 Commission provided no explanation as to why a performance-based rule is required
4 as opposed to a prescriptive one.
5 {21} Petitioners’ insistence on a particular type of rule misstates the Commission’s
6 obligation. The Commission is required only to comply with its statutory duties and
7 provide an indication of the reasoning and basis that it used when adopting the rule.
8 Outside of those requirements, the Commission has no obligation to promulgate
9 prescriptive versus performance-based rules or give a detailed explanation of its
10 reasons for issuing a certain type of rule. Nowhere in our review of the Oil and Gas
11 Act, and its accompanying regulations, do we find any requirement that the rules
12 promulgated by the Commission be performance-based or prescriptive; they need
13 only satisfy the purposes set forth in Section 70-2-12(B).
14 {22} Rather than provide authority that binds the Commission to one type of rule
15 over any other, Petitioners base their challenge on a comparison between the 2008
16 Rule and the 2013 Rule, given their belief that the 2013 Rule is inferior. Because
17 Petitioners do not discharge their burden to demonstrate that the 2013 Rule is not
18 reasonably related to the Commission’s legislative purpose, as is required to
19 demonstrate arbitrary and capricious action, we defer to the Commission’s exercise
16
1 of discretion and presume the 2013 Rule is valid. Old Abe Co., 1995-NMCA-134, ¶
2 10 (stating requirements for proving action is arbitrary and capricious); Wilcox, 2012-
3 NMCA-106, ¶ 7 (presuming agency rule is valid unless not in accord with statutorily
4 prescribed purpose). As discussed below, the Commission has explained the
5 reasoning and bases it used, and how it has accomplished its statutorily proscribed
6 duties, while Petitioners have made no showing that the 2013 Rule is not reasonably
7 related to the Commission’s legislative purpose beyond their belief in its being a less
8 palatable rule to their needs than the one previously adopted.
9 4. Lowered Groundwater Contamination Standards
10 {23} Petitioners contend that the Commission failed to justify its departure from the
11 standards in the 2008 Rule that protected groundwater. As discussed above, the
12 Commission is not required to “justify its departure” from the 2008 Rule; it is only
13 required to explain its reasoning for adopting the 2013 Rule and how the 2013 Rule
14 accomplishes the Commission’s statutory duties. City of Roswell, 1972-NMCA-160,
15 ¶ 16.
16 {24} With regard to groundwater contamination, the Commission’s order identified
17 evidence detailing the depth and concentration of contamination levels, and how
18 things like soil density, weather, temperature, and moisture affect the speed at which
19 contaminants traveled certain distances. For instance, the Commission acknowledged
17
1 that, after hundreds of years, chloride, which is used as a non-toxic measurement of
2 contaminant movement, would reach depths at which groundwater generally exists.
3 The Commission then used that information to reach conclusions regarding
4 infiltration of fluids, desirable pit slope angles, and mobility of various compounds.
5 The Commission also considered evidence where samples taken from over thirty pits
6 around the state were analyzed according to EPA methodology, and the resultant
7 contaminant levels were compared to “published regulatory criteria.” The
8 Commission used that information to compile a list of contaminants that warranted
9 monitoring as well as their acceptable levels. The Commission then concluded that
10 the levels it specified in the 2013 Rule “provide reasonable protection of fresh water,
11 public health and the environment[,]” and it explained how it reached that conclusion.
12 It detailed the level of contamination permissible when groundwater is found at
13 varying depths, and reasoned that the evidence presented supported its conclusions.
14 In addition, the Commission’s order provides citations to portions of the record that
15 it relied on in making its findings and conclusions.
16 {25} For reasons detailed previously, we do not take up Petitioners’ argument that
17 the Commission’s adoption of the 2013 Rule is arbitrary and capricious because
18 Petitioners do not explain why the 2013 Rule is different from the 2008 Rule with
19 respect to groundwater standards. That is not the standard that we apply; we instead
18
1 look to whether the Commission’s actions are consistent with the statute it is charged
2 with implementing. Wilcox, 2012-NMCA-106, ¶ 7. The Commission is assigned the
3 task of regulating “the disposition of water produced or used in connection with the
4 drilling for or producing of oil or gas . . . in a manner that will afford reasonable
5 protection against contamination of fresh water supplies[.]” Section 70-2-12(B)(15).
6 Not only is the Commission’s order consistent with that mandate with regard to
7 groundwater, but the Commission also provided an adequate explanation based on
8 the evidence as to how it arrived at its decision to adopt the provisions that it did.
9 5. Economic Considerations
10 {26} Petitioners assert that the Commission acted improperly in promulgating the
11 2013 Rule because it did so in order to further economic development, and the
12 furtherance of economic development is not part of the Commission’s duties under
13 the Oil and Gas Act. The Commission asserts that economic considerations exist as
14 the very core of its statutory obligations. Petitioners’ argument is misconceived.
15 a. Economic Considerations Were Not the Commission’s Primary Purpose
16 in Promulgating the 2013 Rule
17 {27} The Oil and Gas Act intends that all oil fields be allowed to produce and
18 market a share of the oil produced and marketed in the state, “insofar as [that] can be
19 effected economically and without waste.” Section 70-2-19(B). The Oil and Gas Act
20 also vests the Oil Conservation Division with the duty to make whatever rules,
19
1 regulations, and orders that are necessary to carry out the provisions of the Oil and
2 Gas Act, and in so doing, “the division shall give due consideration to the economic
3 factors involved.” Section 70-2-19(C). In addition, the Oil Conservation Division
4 must allocate oil production efficiently and economically and must “consider the
5 economic loss caused by the drilling of unnecessary wells[.]” Section 70-2-17(B).
6 Finally, the Legislature empowered the Oil Conservation Division “to make and
7 enforce rules, regulations and orders, and to do whatever may be reasonably
8 necessary to carry out the purpose of [the Oil and Gas A]ct, whether or not indicated
9 or specified in any section[.]” Section 70-2-11(A) (emphasis added). Further, the
10 Commission is required to minimize the economic impact of its rules on small
11 businesses, and in doing so, consider the complexity of the rule, the complaints and
12 comments received from the public concerning the rule, and the degree to which
13 technology and economic conditions have changed in the area affected by the rules.
14 NMSA 1978, § 14-4A-6(A), (C)(1)-(5) (2005); NMSA 1978, § 14-4A-3(A) (2005)
15 (applying Small Business Regulatory Relief Act to “every department, agency, board,
16 commission, committee or institution of the executive branch of state government”).
17 {28} We do not regard the Commission’s mandate so broadly as to accept its
18 contention that economic considerations stand as the basis for its other duties under
19 the Oil and Gas Act. See § 70-2-12(B). We agree with Petitioners that economic
20
1 considerations cannot stand as the sole purpose for creating or amending a rule. Cf.
2 Pub. Serv. Co. of N.M. v. N.M. Envtl. Improvement Bd., 1976-NMCA-039, ¶ 10, 89
3 N.M. 223, 549 P.2d 638 (stating that agency authority should be construed to permit
4 the fullest accomplishment of legislative intent, but acknowledging that where it is
5 not included in the scope of authority delegated to an agency, industrial development
6 should occur as a consequence, not by design). However, the language of the Oil and
7 Gas Act allows for the Commission to include economic considerations in its
8 reasoning when promulgating rules. While economic considerations undoubtedly
9 played some role in the Commission’s decision to issue the 2013 Rule, we see no
10 indication that economic considerations were the primary purpose behind the rule.
11 {29} In its order, the Commission stated many reasons that the 2013 Rule was
12 necessary, including the Commission’s desire to encourage reuse and recycling of
13 oilfield fluids and reduce surface impacts, which was inspired by changes in oilfield
14 practices. These considerations were enacted to protect the environment and public
15 health in accordance with the Oil and Gas Act. See § 70-2-12(B)(21), (22).
16 Additionally, the Commission’s order points to its desire to clarify and alleviate the
17 cumbersome process and confusion that resulted from years of the 2008 Rule’s
18 application. To illustrate this, the Commission points to interpretations of the 2008
19 Rule that resulted in unnecessarily restrictive siting requirements and inappropriate
21
1 application of the rule to fresh water pits and surface features. Simplification of
2 compliance with the Pit Rule is a measure that is reasonably necessary to accomplish
3 the prevention of waste and protection of correlative rights. See § 70-2-11(A); see
4 also 19.15.2.7(C)(15) NMAC (defining “correlative rights”). These reasons are in
5 addition to the Commission’s finding that the 2013 Rule favorably impacts small
6 business by making compliance less costly.
7 {30} We conclude that the Commission acted within its statutory authority when
8 including economic considerations in its stated reasons for promulgating the 2013
9 Rule. Economic development was not the Commission’s primary purpose for
10 promulgating the rule, but rather, was properly one of many reasons for it. We further
11 conclude that the Commission’s order properly takes into consideration public
12 comments concerning the rule, the rule’s complexity, and technological and economic
13 changes. See § 14-4A-6.
14 b. The Commission’s Reasoning is Adequate
15 {31} Petitioners assert that the Commission gave no explanation of how it was able
16 to accomplish more cost saving measures than the 2008 Rule, yet still protect water
17 supplies, public health, and the environment. This argument is based on the order
18 adopting the 2008 Rule, which stated that the Commission made all changes it could
19 to lessen potential effects on small businesses while still protecting fresh water,
22
1 human health, and the environment. Petitioners argue that because the Commission
2 took all possible measures in 2008, it is implicit that there were no cost-saving
3 measures remaining to be made in the 2013 Rule. Thus, they argue, the decision to
4 include any changes related to cost-saving measures in the 2013 Rule must be
5 arbitrary and capricious. Petitioners state no factual basis for this, and the record does
6 not support their argument. Again, our standard of review does not contemplate a
7 comparison of the old and new rules, but rather requires that we consider whether the
8 Commission has provided an adequate explanation of its reasoning, see City of
9 Roswell, 1972-NMCA-160, ¶ 16, and whether its decision is unreasonable in light of
10 the whole record. See Archuleta, 2005-NMSC-006, ¶ 17.
11 {32} Relying on evidence presented during the 2013 proceeding, the Commission
12 made findings regarding misconceptions regarding tank requirements that underlie
13 the 2008 Rule and the 2009 Amendment and the unnecessary costs incurred through
14 compliance with that rule. In addition, the Commission made findings as to the
15 general decline of the oil business in recent years, including reduced number of wells
16 drilled, higher cost of drilling, businesses leaving the state due to increased cost, and
17 operator reluctance in attempting to obtain exceptions from the 2009 Amendment
18 owing to its language and complexity. Based on those findings, the Commission
19 reached the conclusion that the 2013 Rule was necessary to make compliance with
23
1 the Pit Rule less cumbersome and more understandable for the regulators and
2 regulated community. The Commission’s order promulgating the 2013 Rule lists ten
3 reasons for altering the Pit Rule, including making compliance with the rule less
4 costly, more efficient, more consistent, and more understandable. Findings as to
5 correlative rights and economic waste are sufficient to satisfy our requirement that
6 administrative agencies state their reasoning for issuing an order. Rutter & Wilbanks
7 Corp. v. Oil Conservation Comm’n, 1975-NMSC-006, ¶ 18, 87 N.M. 286, 532 P.2d
8 582 (stating that findings as to correlative rights and economic waste are sufficient
9 to satisfy the requirement that the Commission make basic conclusions of fact or
10 findings); see also 19.15.2.7(C)(15) NMAC (defining “correlative rights” as the
11 opportunity afforded to the owner of each property in a pool to produce without waste
12 the owner’s equitable share of the oil in the pool, so far as can be practicably obtained
13 without waste).
14 {33} We conclude that the explanation given was adequate to explain the
15 Commission’s reasoning in promulgating the 2013 Rule. In addition, we conclude
16 that Petitioners have not demonstrated that the Commission abused its discretion in
17 concluding that the 2013 Rule’s provisions are adequate to protect public health and
18 the environment. We therefore defer to the Commission’s discretion and uphold the
19 2013 Rule as reasonably consistent with the Oil and Gas Act. See Wilcox, 2012-
24
1 NMCA-106, ¶ 7.
2 C. Notice
3 {34} The Oil and Gas Act requires the Oil Conservation Division to create rules
4 governing the procedure to be followed in hearings and other proceedings before it.
5 Section 70-2-7. The Commission promulgated separate procedural rules for
6 rulemaking hearings and adjudicatory hearings. Compare 19.15.3.9 NMAC with
7 19.15.4.9 NMAC. Before any rule, regulation, or order is adopted, the Commission
8 must first hold a hearing on the matter. Section 70-2-23. The Commission must, no
9 less than ten days prior to the hearing, give “reasonable notice” that a hearing is
10 taking place.3 Id. The right to receive notice and a hearing before the adoption of a
11 rule is a statutory right. Livingston v. Ewing, 1982-NMSC-110, ¶ 14, 98 N.M. 685,
12 652 P.2d 235. The “ ‘reasonable notice’ mandate should circumscribe whatever . . .
13 rules are promulgated for the purpose of notifying interested persons.” Johnson v.
14 N.M. Oil Conservation Comm’n, 1999-NMSC-021, ¶ 23, 127 N.M. 120, 978 P.2d
15 327.
16 {35} Notice of rulemaking hearings must be published on behalf of the State of New
17 Mexico, be signed by the Commission’s chairman, and bear the Commission’s seal.
18 19.15.3.9(A) NMAC. In addition, it must state the hearing’s date, time, and place, as
3
19 The ten-day rule does not apply in cases of emergency. Section 70-2-23.
25
1 well as the date by which those commenting must submit their written comments.
2 19.15.3.9(A) NMAC. The notice must be published in four different ways: “(1) one
3 time in a newspaper of general circulation in the state, no less than 20 days prior to
4 the scheduled hearing date; (2) on the applicable docket for the commission
5 hearing . . ., which the commission clerk shall send by regular or electronic mail not
6 less than 20 days prior to the hearing to all who have requested such notice; (3) one
7 time in the New Mexico Register, with the publication date not less than 10 business
8 days prior to the scheduled hearing date; and (4) by posting on the division’s website
9 not less than 20 days prior to the scheduled hearing date.” 19.15.3.9(A)(1)-(4)
10 NMAC.
11 {36} The Commission’s notice was issued on behalf of the State of New Mexico,
12 was given under the Commission’s seal, and was signed by the chairman of the
13 Commission. It also stated the date, time, and place of the hearing, and it gave the
14 date by which written comments were required to be submitted. Notice was published
15 in the Albuquerque Journal, on the Commission docket, which was mailed
16 electronically to those who requested it, in the New Mexico Register, and on the Oil
17 Conservation Division’s website. All notices were timely. Given these facts, we
18 conclude that the Commission satisfied all notice requirements prescribed by statute
19 and regulation.
26
1 {37} Petitioners’ challenge to the adequacy of the Commission’s notice focuses on
2 one of the fifteen proposed amendments listed in the notice, namely, the one
3 pertaining to “multi-well fluid management pits.” Petitioners assert that the notice
4 was inadequate to reasonably inform the public of the substance of the proposed
5 rules. Petitioners point out that the notice did not describe the purpose of those multi-
6 well pits, their anticipated size, their anticipated operating duration, or their
7 anticipated impacts on air, water, and public health. Petitioners contend that, because
8 the notice was inadequate, they were deprived of an adequate opportunity to prepare
9 expert witnesses or prepare adequate cross examinations of witnesses.
10 {38} Petitioners cite to 19.15.3.8 NMAC and the New Mexico Administrative
11 Procedures Act (NMAPA) to support their assertion that the Commission’s notice
12 was inadequate. Neither authority cited supports Petitioners’ argument. First,
13 19.15.3.8(A)(1) NMAC governs orders initiating rulemaking, and requires that
14 applications to initiate rulemaking include “a brief summary of the proposed rule
15 change’s intended effect[.]” (Emphasis added.) Nowhere in the rule does it address
16 notice requirements, nor does it require a summary of the complexity that Petitioners
17 desire, and Petitioners provide no reason for us to apply such a requirement to the
18 notice procedure. Second, Petitioners suggest that we use the NMAPA as a general
19 guideline for resolving administrative law questions. Petitioners acknowledge that the
27
1 NMAPA does not apply to all administrative agencies. See E. Indem. Co. of Maryland
2 v. Heller, 1984-NMCA-125, ¶ 4, 102 N.M. 144, 692 P.2d 530 (stating that NMAPA
3 only applies to an agency that is specifically placed, by law, rule, or regulation, under
4 the Administrative Procedures Act). They do not cite to any authority applying the
5 NMAPA to the Commission. See In re Adoption of Doe, 1984-NMSC-024, ¶ 2
6 (stating that we will not review issues raised in appellate briefs which are
7 unsupported by cited authority). Nothing in the Oil and Gas Act applies the NMAPA
8 to the Commission’s actions. Thus, we conclude that the Commission complied with
9 the language of the Oil and Gas Act and its associated rules when it issued notice of
10 the rulemaking hearings.
11 {39} Despite the Commission’s compliance with its statutory obligation to issue
12 notice, Petitioners contend that the language in the notice referring to “multi-well”
13 pits was misleading or unintelligible. Notice may be inadequate to fulfill its statutory
14 purpose of notifying interested persons if it is insufficient, ambiguous, misleading,
15 or unintelligible to the average citizen. Nesbit v. City of Albuquerque, 1977-NMSC-
16 107, ¶ 9, 91 N.M. 455, 575 P.2d 1340; see also Johnson, 1999-NMSC-021, ¶ 23
17 (acknowledging that purpose of “reasonable notice” in the Oil and Gas Act is to
18 notify interested persons). Although it is conceivable that the average citizen might
19 not know what a requirement pertaining to multi-well pits might include, the notice
28
1 provides more information than simply a cursory reference to a cryptic term. The
2 notice indicates how copies of the proposed amendments to the Pit Rule can be
3 obtained: through the Oil Conservation Division’s Administrator—whose phone
4 number is included—or through the Oil Conservation Division’s website—which is
5 also included. The proposed amendments include a lengthy definition of what a
6 “multi-well fluid management pit” is, and detail what permit applications for multi-
7 well pits require, where multi-well pits may not be located, and what construction
8 requirements were for multi-well fluid management pits. If Petitioners were, indeed,
9 misled by, or unaware of, the Commission’s notice, they could have received
10 significantly more information about multi-well pits and what changes were being
11 considered by reaching out to the Division. We therefore reject Petitioners’ argument
12 that the Commission’s notice was inadequate. It not only satisfied the statutory and
13 regulatory requirements, but also provided additional information by making the
14 proposed amendments available upon request.
15 III. CONCLUSION
16 {40} Petitioners’ assertions of error must fail. They point to no legal basis for their
17 assertion that the Commission lacked jurisdiction to issue its order and create the
18 2013 Rule. In promulgating the 2013 Rule, the Commission satisfied its statutory
19 duties and gave adequate reasons for its actions. As such, we conclude that there was
29
1 no error, and affirm.
2 {41} IT IS SO ORDERED.
3 ______________________________
4 RODERICK T. KENNEDY, Judge
5 WE CONCUR:
6 __________________________________
7 MICHAEL E. VIGIL, Chief Judge
8 __________________________________
9 JAMES J. WECHSLER, Judge
30