Locke Lord QuickStudy: Revised Memorandum of Understanding Brings Further TCEQ Oversight to the Texas Oil Patch

Background
In 1982 a Memorandum of Understanding (“MOU”) was crafted between the Texas Railroad Commission (“RRC”) and a predecessor to the Texas Commission on Environmental Quality (“TCEQ”) outlining the division of responsibility for waste management, wastewater discharge, and other environmentally related regulatory responsibilities of industry. The current MOU is described in regulations of both the RRC and TCEQ. The MOU will be amended effective July 15, 2020. The MOU’s current content includes, among other things, general divisions of jurisdiction between the TCEQ and the RRC regarding waste management and water quality, while drawing lines where jurisdiction may overlap. In addition to the current language, new regulatory amendments to the MOU entail the transfer of responsibilities from the RRC to the TCEQ relating to the regulation of produced water, hydrostatic test water, and gas plant effluent from various oil and gas activities, along with dual authorization of Class II and Class V injection wells. This amendment transfers responsibility for oil and gas wastewater discharge from the RRC to the TCEQ and addresses discharges to Class II and Class V injection wells. Upon approval by the US Environmental Protection Agency (“EPA”) to amend/supplement the TCEQ’s Texas Pollutant Discharge Elimination System (“TPDES”) program, this transfer of responsibilities will occur.

Legislative Enactment Necessitating Revisions to the MOU
The implementation of House Bill 2230 (enacted in 2015) and House Bill 2771 (enacted in 2019) required adjustments to the current MOU. HB 2771 became effective on September 9, 2019, amending the Texas Water Code. Among the changes were amendments to Section 26.131, which now authorizes the TCEQ to “issue permits for the discharge into water in this state of produced water, hydrostatic test water, and gas plant effluent…,” upon EPA’s NPDES delegation of these activities. HB 2230 became effective September 1, 2015. It enacted Water Code provision § 27.026, which created dual authorization of injection of brine from desalinization operations and non-hazardous drilling residuals into certain types of injection wells.

As a result of these legislative enactments, the MOU was repealed and restructured with amendments to certain sections. The MOU’s text will be codified in the RRC’s rules at 16 T.A.C. § 3.30 and the TCEQ’s rules at 30 T.A.C § 7.117.

Important Amendments to the MOU
The MOU has been amended in several important ways affecting industry. Section 7.117(b) will contain new subsections (b)(1)(B)(i) – (2)(B)(i). These provisions provide that following EPA’s approval, the TCEQ will assume all powers, duties, functions, programs, and activities from the RRC related to the regulation of discharges into state waters of produced water, hydrostatic test water, and gas plant effluent, including the sole authority to issue permits for these discharges. This will be a substantial “change” in jurisdiction. Based on available information, it appears the RRC issued about 529 permits for these discharges in calendar year 2018. The TCEQ will also assume any obligations, contracts, property, and records from the RRC related to these activities. 

Further, while the RRC will retain jurisdiction relating to injection wells for the disposal of oil and gas waste, the MOU amendments make clear that the TCEQ will have jurisdiction over Class V injection wells utilized for aquifer remediation, recharge, and storage, large capacity septic systems, storm water drainage and intrusion barrier wells, and closed loop geothermal wells. 

Other provisions to the MOU were amended. Certain provisions contained conforming changes consistent with the division of authority described above. Additional amendments addressed other issues. For example, Section 7.117(e)(1)(A) was amended to clarify that generators of both solid waste and oil and gas waste are encouraged to seek recycling options rather than disposal. 

Timing Considerations
HB 2771 directs the TCEQ to submit to EPA a request to amend and supplement its TPDES authority no later than September 1, 2021. Thus, it is likely the transfer of wastewater discharge authority may not occur in the short term. Issues will undoubtedly arise regarding enforcement and permitting of pending matters. The preamble to the new rule addresses this issue. Once EPA approves the TCEQ request regarding TPDES authority, jurisdiction over final orders related to the program issued by the RRC will become vested in the TCEQ, including tracking compliance within orders. As to pending enforcement actions, the RRC will retain jurisdiction until full resolution of a matter is reached. A pending enforcement action will generally be considered to exist where a RRC notice of violation was issued. Finally, upon EPA’s approval of the amendment to delegation, the TCEQ will assume responsibility for pending lawsuits at the Texas Attorney General’s Office concerning the transferred subject matter.

Conclusions
These amendments to the MOU allow for a broadening of TCEQ oversight of certain E&P operations. While the TCEQ has long had regulatory authority over air permitting and attendant compliance, it will now play a more prominent role in wastewater discharge authorization and compliance. It will be important for industry to develop a comprehensive understanding of relevant TCEQ rules and guidance concerning the impending oversight of these programs. It will also be important for industry to understand exactly where each agency’s jurisdiction begins and ends for affected media.