Panoche Energy Center, LLC v. United States Environmental Protection Agency

• Court: Court of Appeals for the Ninth Circuit
• Decided: June 18, 2024
• Docket: 23-1268
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS JUN 18 2024 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

PANOCHE ENERGY CENTER, LLC, No. 23-1268

Petitioner, MEMORANDUM* v.

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY; MICHAEL S. REGAN, Administrator of the United States Environmental Protection Agency; MARTHA GUZMAN ACEVES, Regional Administrator of Region 9 of U.S.,

Respondents.

On Petition for Review of an Order of the Environmental Protection Agency

Argued and Submitted May 22, 2024 Anchorage, Alaska

Before: BYBEE, FRIEDLAND, and MILLER, Circuit Judges.

Panoche Energy Center petitions for review of an underground injection

control permit issued by the Environmental Protection Agency. We have

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. jurisdiction under 42 U.S.C. § 300j-7(a)(2), and we deny the petition.

Under the Administrative Procedure Act, we “set aside” agency action that

is “arbitrary, capricious,” “not in accordance with law,” or “in excess of statutory

jurisdiction, authority, or limitations.” 5 U.S.C. § 706(2)(A), (C). Agency action is

arbitrary and capricious if “the agency has relied on factors which Congress has

not intended it to consider, entirely failed to consider an important aspect of the

problem, offered an explanation for its decision that runs counter to the evidence

before the agency, or is so implausible that it could not be ascribed to a difference

in view or the product of agency expertise.” Food & Water Watch v. EPA, 20 F.4th

506, 514 (9th Cir. 2021) (quoting Motor Vehicle Mfrs. Ass’n of U.S. v. State Farm

Mut. Auto. Ins., 463 U.S. 29, 43 (1983)).

1. Panoche argues that the EPA violated the Safe Drinking Water Act by

requiring ambient monitoring on property Panoche does not own. But the

monitoring condition was within the EPA’s broad statutory discretion to prevent

the potential endangerment of drinking water by underground injection. The statute

mandates that the EPA require monitoring “wherever appropriate, at locations and

in such a manner as to provide the earliest possible detection of fluid migration”

that could adversely affect human health. 42 U.S.C. § 300h-5; see also 42 U.S.C. §

300h(b)(1), (d)(2). It does not require the EPA to consider property ownership

before determining where to require monitoring.

2 23-1268 Panoche argues that because the Act does not expressly authorize offsite

monitoring, the EPA must lack the authority to require it. However, Panoche

identifies nothing in the language or structure of the statute limiting the broad grant

of authority to the EPA. Nor does the offsite monitoring condition implicate

federalism concerns. The permit does not interfere with state regulation of private

property; it merely requires Panoche to contract for access to the necessary land.

Whether the EPA may require offsite monitoring is also not a “major question”:

The EPA is not asserting the power to regulate “a significant portion of the

American economy,” FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120,

159 (2000), and it is far from “implausible” that Congress contemplated offsite

monitoring as a means of achieving its clear directive, Whitman v. American

Trucking Ass’ns, 531 U.S. 457, 468 (2001).

Finally, the EPA’s reading of the statute does not implicate the eminent

domain power or otherwise interfere with property rights. By its terms, the permit

“does not convey property rights of any sort or any exclusive privilege” or

“authorize . . . any invasion of other private rights.” And the EPA has consistently

maintained that ensuring “access to private property to meet the requirements of

the permit conditions” is “outside the scope of [underground injection control]

permitting authority.”

2. Panoche also argues that the EPA failed to consider the cost of monitoring

3 23-1268 on property it does not own, in contravention of the Safe Drinking Water Act, the

agency’s implementing regulations, and agency precedent. Assuming without

deciding that some degree of cost consideration is appropriate, we conclude that

the EPA’s consideration of costs was adequate. The EPA determined that

“monitoring is not particularly expensive when compared to the information

received,” and it responded to Panoche’s cost concerns by reducing the number of

locations and the depth at which the permit required monitoring. The EPA

explained that the permit’s monitoring requirement “would provide the empirical

data needed about subsurface pressures, while limiting the burden and cost” of

monitoring. Panoche also appears to have made no effort to determine the cost of

accessing the relevant land. If, after negotiating with the neighboring landowner,

Panoche is unable to secure access to the necessary land, the permit allows

Panoche to request changes to the monitoring condition. See 40 C.F.R.

§ 144.39(a)(2).

3. The EPA’s decision to require an ambient monitoring well near

abandoned well Silver Creek #18 was not arbitrary and capricious. The EPA did

not “entirely fail[] to consider an important aspect of the problem,” State Farm,

463 U.S. at 43, by rejecting Panoche’s concerns about its property rights. As noted

above, the EPA adequately considered the costs associated with offsite monitoring.

Nor did the EPA treat Panoche differently from similarly situated permittees by

4 23-1268 requiring offsite monitoring in this case. Panoche identifies no case in which the

agency declined to require offsite monitoring when the area of review contained

several abandoned wells penetrating the injection zone and the permittee had not

yet attempted to access the necessary property.

The EPA’s decision to require ambient monitoring near Silver Creek #18

also evinced a rational connection between the facts found and the choice made.

Panoche bears the burden of showing that its injection activities pose no risk of

endangerment. See 40 C.F.R. § 144.12(a). The EPA conducted a site-specific

analysis—considering, for example, the fact that the abandoned wells penetrate an

over-pressurized injection zone and lack adequate long-string casing and cement

plugs—to determine that the abandoned wells pose a risk of endangerment

necessitating monitoring. The EPA reasonably refused to credit Panoche’s

argument that there is no current risk of endangerment because the mud used to

plug Silver Creek #18 was legally adequate under state law in 1974.

Contrary to Panoche’s representation, the EPA’s decision to require ambient

monitoring did not depend on an irrational assumption that Panoche would operate

at maximum capacity. Instead, the agency reasoned that because the Panoche

Formation is already over-pressurized, any additional fluids injected could result in

pressure or water quality changes in the underground source of drinking water,

which monitoring could help detect.

5 23-1268 The EPA also did not irrationally fail to consider how the region’s sandstone

and natural confining layers could reduce fluid migration from the injection zone.

The monitoring requirement was based on the EPA’s concern regarding fluids

migrating through abandoned wells that pierce those layers.

Finally, it was not irrational for the EPA to require ambient monitoring even

though fluid migration from the injection zone might not worsen water quality. The

EPA’s observation that the effect of fluid migration on water quality depends on

the concentration of contaminants in the fluid is consistent with its statutory and

regulatory authority to require monitoring to prevent potential endangerment. See

42 U.S.C. §§ 300h(d)(2), 300h-5; 40 C.F.R. § 146.13(d)(1).

PETITION DENIED.

6 23-1268