By Molly Cagle & Carlos Romo, Baker Botts L.L.P.
On March 26, 2013, a panel of three judges from the United States Court of Appeals for the Fifth Circuit stayed the U.S. District Court ruling in The Aransas Project (TAP) v. Shaw. The lower court ruling had enjoined the Texas Commission on Environmental Quality (TCEQ) from issuing any water rights permits on the Guadalupe or San Antonio Rivers (except as required for public health and safety), which would seriously disrupt economic development in a growing part of Texas (including parts of the Eagle Ford Shale). The district court also required the TCEQ to seek an Incidental Take Permit under the Endangered Species Act (ESA) within 30 days.
The district court’s opinion and pending appeal involve several novel ESA theories with important implications for IPAA member companies.
First, the district court concluded that the Texas water-rights permitting scheme was preempted by the ESA and the Supremacy Clause of the U.S. constitution. This is a potentially far-reaching conclusion to the extent it suggests various state permitting programs, including oil and gas permitting by state agencies, must consider and enforce the ESA in policy areas traditionally reserved for state and local decision-making. The effect of the decision is a Section 7-type consultation process for TCEQ.
Second, the district court concluded that proximate causation can exist under the ESA when a defendant government agency indirectly authorizes an activity that does not inherently cause take. The court’s finding that TCEQ proximately caused take is significant precedent for groups challenging permitting schemes indirectly leading to take of endangered species, including state and federal agency programs that permit oil and gas projects.
Third, the district court’s 125-page opinion stretched statistical evidence to its limit to support its conclusion that TCEQ’s regulatory scheme for issuing water-rights permits caused the deaths of 23 whooping cranes. The court’s ultimate conclusion on causation involved several faulty scientific findings for each part of a multi-link causal chain leading from TCEQ’s water permitting scheme to the purported death of the birds. For example, there was significant doubt whether 23 birds had even died, let alone that they did not die from other natural causes such as drought. In this case, correlations were used to imply causation (despite the admonition in every statistics class to the contrary). And the district court’s findings on causation suggest even the most attenuated state regulatory decisions could be challenged for effects on endangered species.
Finally, by enjoining all new water rights permits (unless they meet certain court-supervised conditions) and ordering the TCEQ to seek out an Incidental Take Permit and associated Habitat Conservation Plan, the court ordered an extraordinary and expensive remedy for the alleged death of 23 cranes. Similar court-supervised injunctions and costly remedial actions could be ordered for other agencies regulating IPAA members implicated in a take suit.
Both the TCEQ and the Guadalupe-Blanco River Authority (GBRA) filed notices of appeal and requests to stay the district court order. GBRA’s motion specifically noted that the district court’s order would have irreparable harm on hydraulic fracturing operators in the Eagle Ford Shale needing new water rights permits. Plaintiff filed a response, but the Fifth Circuit granted the stay barely 24 hours later.
Appellants are pleased that the 5th Circuit agreed that appellants were likely to succeed on the appeal and they are confident that the Court will conclude both that the district court’s decision overstepped the bounds of the ESA and federal court jurisdiction. But IPAA members should closely follow the appeal because of its far-reaching implications.
Molly Cagle has been practicing environmental law in Texas for more than 30 years and is a Partner in the Austin office of Baker Botts L.L.P. Carlos Romo is an Associate in the Austin office and co-chairs client groups focused on ESA and upstream issues. They are part of a Baker Botts team enlisted to represent GBRA in the Fifth Circuit.
