AC Interests, L.P., Formerly American Coatings, L.P v. Texas Commission on Environmental Quality

CourtCourt of Appeals of Texas
DecidedDecember 17, 2020
Docket01-19-00387-CV
StatusPublished

This text of AC Interests, L.P., Formerly American Coatings, L.P v. Texas Commission on Environmental Quality (AC Interests, L.P., Formerly American Coatings, L.P v. Texas Commission on Environmental Quality) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
AC Interests, L.P., Formerly American Coatings, L.P v. Texas Commission on Environmental Quality, (Tex. Ct. App. 2020).

Opinion

Opinion issued December 17, 2020

In The

Court of Appeals For The

First District of Texas ———————————— NO. 01-19-00387-CV ——————————— AC INTERESTS, L.P., FORMERLY AMERICAN COATINGS, L.P, Appellant V. TEXAS COMMISSION ON ENVIRONMENTAL QUALITY, Appellee

On Appeal from the 345th District Court Travis County, Texas Trial Court Case No. D-1-GN-XX-XXXXXXX

1 The Texas Supreme Court transferred this appeal from the Third Court of Appeals in Austin to this Court, as a routine docket-equalization matter. See TEX. GOV’T CODE § 73.001. We are unaware of any conflict between the Third Court’s precedent and our own. See TEX. R. APP. P. 41.3. MEMORANDUM OPINION

The dispute in this case arises from the air-emission-credits program

established by the Texas Commission on Environmental Equality (the “TCEQ”).2

The purpose of the voluntary program “is to allow the owner or operator of a facility

. . . to generate emission credits by reducing emissions beyond the level required by

any applicable local, state, or federal requirement,” which the facility owner or

operator then may use in accordance with the program rules.3

Appellant AC Interests, L.P., formerly American Coatings, L.P. (“AC

Interests”), applied to the TCEQ for emission credits. After the TCEQ denied the

application, AC Interests sought judicial review but its appeal of the decision to the

district court was dismissed under Texas Rule of Civil Procedure 91a for lack of

proper statutory service. The Texas Supreme Court reversed and remanded.4

On remand, the TCEQ filed a plea to the jurisdiction, arguing the case became

moot when any emission credits AC Interests might have generated at its facility

expired and, thus, any judgment rendered by a court will be without any practical

legal effect. The district court granted the plea to the jurisdiction, and AC Interests

appealed the dismissal order.

2 See 30 TEX. ADMIN. CODE §§ 101.300–.311. 3 See id. § 101.301. 4 AC Interests, L.P. v. Tex. Comm’n on Envtl. Quality, 543 S.W.3d 703 (Tex. 2018).

2 In this appeal, AC Interests contends (1) the mootness doctrine does not apply,

(2) the TCEQ’s denial of emission credits is an unconstitutional taking, and (3) it is

entitled to a jury trial.

Based on the record and arguments presented to us, we conclude the

controversy is moot and affirm.

Background

The TCEQ administers the Texas Clean Air Act, which establishes a

regulatory framework to “safeguard the state’s air resources from pollution.”5 As

part of the Act’s implementation and to incentivize the voluntary reduction of

emissions, the TCEQ has adopted rules authorizing it to grant emission credits,

including emission reduction credits (“ERCs”).6 An ERC is a “certified emission

reduction . . . that is created by eliminating future emissions and quantified during

or before the period in which emission reductions are made from a facility.”7 They

do not constitute a property right; rather, they are a limited authorization to emit

5 See TEX. HEALTH & SAFETY CODE § 382.002(a); see also id. § 382.011(a)(1). 6 See 30 TEX. ADMIN. CODE §§ 101.300–.304. 7 Id. § 101.300(10).

3 pollutants.8 And the TCEQ retains authority to “terminate or limit such

authorization.”9

One way a company may generate emission credits is by permanently shutting

down a facility that lawfully emits certain pollutants.10 The emission reduction must

be certified, meaning the reduction must be “enforceable, permanent, quantifiable,

real, and surplus.”11 If the TCEQ certifies the reduction, the facility owner or

operator may use, trade, sell, or bank the emission credit for later use.12

Under this regulatory framework, AC Interests asked the TCEQ to certify

ERCs purportedly generated at an AC Interests facility that had ceased emissions.

But the TCEQ denied the application, prompting AC Interests to timely file a petition

for judicial review in December 2014.13

The petition alleged that the AC Interests facility was destroyed by fire in July

2010. Although it obtained a permit to reconstruct the facility from the TCEQ in

May 2013, AC Interests ultimately decided against rebuilding. Instead, AC Interests

8 See id. § 101.302(k). 9 See id. 10 See id. §§ 101.302(a)(1), .303(a)(1)(A). 11 See id. § 101.302(d)(1)(A). 12 See generally id. §§ 101.306(a), .309(d). 13 A person “affected by” a TCEQ decision may appeal by filing a petition in a Travis County district court. TEX. HEALTH & SAFETY CODE § 382.032(a).

4 applied for certification of ERCs in October 2013—and then revised its application

three times between November 2013 and July 2014—based on a

permanent-shutdown emissions reduction strategy.14 The TCEQ denied the

certification of ERCs, stating in its decision letter that AC Interests had provided

“contradictory emissions information” and that the TCEQ could not determine that

the emissions reduction was “quantifiable and real” or “surplus.”

According to AC Interests, the TCEQ’s refusal to certify ERCs violated

“statutory provisions, exceeded [TCEQ’s] statutory authority, and was arbitrary and

capricious.” AC Interests requested in its petition that, among other things, the

district court: (1) set aside the TCEQ’s decision; (2) remand to the TCEQ for further

administrative proceedings on AC Interests’s application for ERC certification; and

(3) order that the “TCEQ issue an Emission Banking Credit and Allowance

Certificate to AC Interests,” along with costs, attorney’s fees, and all other relief to

which AC Interests was entitled.

The district court initially dismissed AC Interests’s appeal in March 2015

because AC Interests did not timely serve the TCEQ with the petition for judicial

14 The regulatory framework for emission credit applications provides that an application may be revised upon written notice from TCEQ of its denial. See id. § 101.302(f)(3).

5 review. But the Texas Supreme Court reversed and remanded, concluding that the

late service did not require dismissal.15

On remand, the TCEQ again sought dismissal through a plea to the

jurisdiction. The TCEQ asserted for the first time that the appeal was moot because

any ERCs that could have been certified expired 60 months after the date of the

emissions reduction at AC Interests’s facility. By the TCEQ’s calculation, any ERC

that AC Interest might have generated expired 60 months after the facility shut down,

which was either the date of the facility fire, in July 2010, or the date AC Interests

decided not to reconstruct the facility, in October 2013.16

In other words, according to the TCEQ, a live controversy ceased to exist

between the parties on July 31, 2015, during the prior appeal, or, at the latest, by

October 2018, and thus any decision by the district court would be without “a

practical legal effect on the alleged controversy related to [the] TCEQ’s denial of

AC Interests’s ERC application.” The district court granted the TCEQ’s plea to the

jurisdiction.

15 AC Interests, L.P., 543 S.W.3d 714–15. 16 The TCEQ asserted its mootness contention for the first time in its jurisdictional plea filed with the district court in November 2018. See id.; AC Interests, L.P. v. Tex. Comm’n on Envtl. Quality, 521 S.W.3d 58 (Tex. App.—Houston [1st Dist.] 2016), rev’d by 543 S.W.3d at 707–15. 6 Standard of Review

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AC Interests, L.P., Formerly American Coatings, L.P v. Texas Commission on Environmental Quality, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ac-interests-lp-formerly-american-coatings-lp-v-texas-commission-on-texapp-2020.