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Black Hills Trucking, Inc. v. North Dakota Industrial Commission

Supreme Court of North Dakota

December 7, 2017

Black Hills Trucking, Inc., Appellant
North Dakota Industrial Commission, Appellee

         Appeal from the District Court of Williams County, Northwest Judicial District, the Honorable Paul W. Jacobson, Judge.


          John W. Morrison Jr. (argued) and Anthony J. Ford (appeared), Bismarck, ND, for appellant.

          Hope L. Hogan (argued) and David P. Garner (appeared), Office of the Attorney General, Bismarck, ND, for appellee.



         [¶ 1] Black Hills Trucking, Inc., appeals from a judgment affirming an Industrial Commission order assessing a $950, 000 civil penalty and costs and expenses against it for illegally dumping saltwater on roads in Williams County. We conclude the Commission regularly pursued its authority and its findings and conclusions are sustained by the law and by substantial and credible evidence. We affirm.


         [¶ 2] Black Hills is a Wyoming corporation that is in the business of transporting crude oil, produced saltwater, petroleum products, oilfield equipment and other materials. During 2014 Black Hills owned and operated trucks in North Dakota for the purpose of transporting oilfield waste. On February 11, 2014, the Commission received a report from a security officer for Continental Resources, Inc., that he had photos and video of a Black Hills truck dumping substantial amounts of fluids onto roads near a saltwater disposal well in Williams County. Commission staff examined the affected roads and collected a soil sample. The Commission also collected logs from the well which indicated a Black Hills driver had transported saltwater to the well on February 8, 2014.

         [¶ 3] On February 14, 2014, a Commission field technician observed a Black Hills truck leave the same well site and stop on the road. The driver opened the valves on the tractor trailer and drove away discharging produced fluids on the road. The technician followed the truck until it pulled off of the highway and into a truck yard where it continued to discharge fluids on the ground that pooled under the open valves. The technician took a sample directly from the discharging fluids and took soil samples from the road. Commission staff then requested a meeting with Black Hills to discuss the incident, and a meeting was held on February 28, 2014.

         [¶ 4] At the meeting, Commission staff discussed Black Hills' understanding of the February 14 incident and the company's response to it. The February 8 incident was not discussed because the Commission was continuing to investigate what occurred. Black Hills placed the truck driver on probation and reprimanded him through the loss of his safety award and bonus.

         [¶ 5] On March 3, 2014, the Commission confirmed through lab analysis that the soil sample from the February 8 incident contained elevated levels of electrical conductivity and chlorides consistent with saltwater. On the same day the Commission received another report of a Black Hills truck improperly dumping fluids. Employees at the same well site observed the truck unloading saltwater and exiting, leaving a trail of saltwater from the disposal well, continuing off the well site and onto a county road until it intersected a highway. One of the employees confirmed that the discharged fluids contained saltwater. On March 6, 2014, the Commission received the lab analysis of the samples related to the February 14 incident which also indicated high levels of electrical conductivity and chlorides consistent with saltwater. Black Hills did not file a spill report, test to determine the extent of contamination, develop a remediation plan or take any further actions to clean up or remediate the areas affected by the improper discharge of saltwater from the three incidents.

         [¶ 6] On March 13, 2014, the Commission issued an administrative complaint against Black Hills for the three incidents and requested penalties in the amount of $950, 000 and costs and expenses of $1, 526. Counts one through three of the complaint claimed violations of N.D. Admin. Code § 43-02-03-19.2 for dumping the produced fluids on three occasions. Counts four through six alleged violations of N.D. Admin. Code § 43-02-03-30.1 for allowing the fluids to infiltrate the soils on three occasions. Counts seven through nine alleged violations of N.D. Admin. Code § 43-02-03-30.1 for failing to properly remove the discharged fluids from the roads. Count 10 sought the Commission's investigative costs and expenses under N.D.C.C. § 28-32-26. The Commission sought fines of $12, 500 per day for each violation. The vast majority of the Commission's proposed fine related to the violations alleged in counts seven through nine.

         [¶ 7] On March 19, 2014, the Department of Health issued a notice of violation against Black Hills concerning the three incidents and its failure to report them, as well as its failure to have a valid waste transporter's permit for the previous six years. The Department alleged Black Hills "placed wastes where they may cause pollution of waters of the state" in violation of N.D.C.C. § 61-28-06(1). To resolve that proceeding, Black Hills entered into an administrative consent agreement with the Department under which Black Hills admitted responsibility for the oilfield waste illegally discharged during the three incidents. Black Hills agreed to an administrative penalty of $459, 000, with $259, 000 of that amount suspended.

         [¶ 8] An evidentiary hearing on the Commission's administrative complaint was held in December 2015 before an administrative law judge ("ALJ"). In February 2016, the ALJ recommended that the complaint against Black Hills be dismissed with prejudice. The ALJ's decision was presented to the Commission at its March 2016 meeting, and after an executive session with its legal counsel, the Commission rejected most of the ALJ's recommendations and directed its legal counsel to draft an alternative order for consideration. At its April 2016 meeting, the Commission approved an alternative decision by unanimous vote finding Black Hills violated the regulations and assessing against it a $950, 000 civil penalty and $1, 526 in costs and expenses. The district court affirmed the Commission's order.


         [¶ 9] On appeal, Black Hills challenges the Commission's order on numerous grounds.

         [¶ 10] Our standard of review of Commission orders is very limited. In Langved v. Cont'l Res., Inc., 2017 ND 179, ¶ 8, 899 N.W.2d 267, we explained:

The standard of judicial review of Commission orders is set forth in N.D.C.C. § 38-08-14(3), which provides that "[o]rders of the commission must be sustained by the district court if the commission has regularly pursued its authority and its findings and conclusions are sustained by the law and by substantial and credible evidence." This Court applies the same standard of review in appeals from district court involving orders of the Commission. See Amoco Prod. Co. v. North Dakota Indus. Comm'n, 307 N.W.2d 839, 842 (N.D. 1981). The "substantial evidence" test "is something less" than the greater weight of the evidence and the preponderance of the evidence tests, and differs from the usual standard of review for administrative decisions under N.D.C.C. § 28-32-46. Hanson v. Industrial Comm'n, 466 N.W.2d 587, 590 (N.D. 1991). "Substantial evidence is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion, " and we "accord greater deference to Industrial Commission findings of fact than we ordinarily accord to other administrative agencies' findings of fact." Id. The Commission's decisions on questions of law are fully reviewable on appeal. See Imperial Oil of North Dakota, Inc. v. Industrial Comm'n, 406 N.W.2d 700, 702 (N.D. 1987).

(quoting Gadeco, LLC v. Indus. Comm'n, 2012 ND 33, ¶ 15, 812 N.W.2d 405).


         [¶ 11] Black Hills argues the Commission lacks jurisdiction over a discharge of produced saltwater on a public road occurring away from an oil and gas well site, disposal site, treatment plant, or other facility.

         [¶ 12] "Under N.D.C.C. ch. 38-08, the Commission has extremely broad and comprehensive powers to regulate oil and gas development in the state." Langved, 2017 ND 179, ¶ 12, 899 N.W.2d 267; see also Envtl. Driven Solutions, LLC v. Dunn Cty., 2017 ND 45, ¶ 9, 890 N.W.2d 841; GEM Razorback, LLC v. Zenergy, Inc., 2017 ND 33, ¶ 10, 890 N.W.2d 544. "'The Commission's powers are continuous... and are exclusive.'" Dunn Cty., at ¶ 9 (quoting Egeland v. Cont'l Res., Inc., 2000 ND 169, ¶ 11, 616 N.W.2d 861). Section 38-08-04, N.D.C.C., provides in relevant part:

The commission has continuing jurisdiction and authority over all persons and property, public and private, necessary to enforce effectively the provisions of this chapter. The commission has authority, and it is its duty, to make such investigations as it deems proper to determine whether waste exists or is imminent or whether other facts exist which justify action by the commission. The commission has the authority:
2. To regulate:
a. The drilling, producing, and plugging of wells, the restoration of drilling and production sites, and all other operations for the production of oil or gas.
e. Disposal of saltwater and oilfield wastes.
(1) The commission shall give all affected counties written notice of hearings in such matters at least fifteen days before the hearing.
(2) The commission may consider, in addition to other authority granted under this section, safety of the location and road access to saltwater disposal wells, treating plants, and all associated facilities.

         [¶ 13] Section 38-08-04(2)(a) and (e), N.D.C.C., unambiguously give the Commission authority to regulate "all other operations for the production of oil or gas" including "[d]isposal of saltwater and oilfield wastes." We have interpreted these provisions broadly in recognizing the Commission's statutory authority to regulate "the disposal of saltwater and oilfield wastes." Dunn Cty., 2017 ND 45, ¶ 13, 890 N.W.2d 841. The Commission has promulgated a regulation governing disposal of waste material which provides "[a]ll waste material associated with exploration or production of oil and gas must be properly disposed of in an authorized facility in accord with all applicable local, state, and federal laws and regulations, " and "[a]ll waste material recovered from spills, leaks, and other such events shall immediately be disposed of in an authorized facility, although the remediation of such material may be allowed onsite if approved by the director." N.D. Admin. Code § 43-02-03-19.2. Although Black Hills suggests on appeal that saltwater does not qualify as oilfield waste, Black Hills admitted in the administrative proceedings that "produced water is included within either 'saltwater and oilfield wastes' [under N.D.C.C. § 38-08-04(2)(e)] or 'waste material associated with the exploration or production of oil and gas' [under N.D. Admin. Code § 43-02-03-19.2]." See also N.D. Admin. Code § 43-02-03-19.3 ("no saltwater, drilling mud, crude oil, waste oil, or other waste shall be stored in earthen pits or open receptacles").

         [¶ 14] Black Hills argues that N.D.C.C. § 38-08-04(2)(e) does not support the Commission's assertion of jurisdiction because Williams County was not provided written notice of the hearing in this case and because its jurisdiction is limited to saltwater disposal wells, treating plants, and facilities. First, Williams County is the entity entitled to complain about lack of notice in this case, and it has not done so. Black Hills has not alleged prejudice from the county's lack of notice. A party "must assert his own legal rights and interests, and cannot rest his claim to relief on the legal rights and interests of third parties." Flatt ex rel. Flatt v. Kantak, 2004 ND 173, ¶ 38, 687 N.W.2d 208 (internal citation omitted). Second, Black Hills' narrow interpretation of N.D.C.C. § 38-08-04(2)(a) and (e) conflicts with our recognition of the broad and unambiguous authority the legislature has given the Commission to "regulat[e] the disposal of saltwater and oilfield wastes." Dunn Cty., 2017 ND 45, ¶ 13, 890 N.W.2d 841. Black Hills' argument limiting the Commission's jurisdiction over saltwater or other oilfield waste disposal to only the physical location of the facilities themselves, and not to any property between the site the waste is generated and the site the waste is disposed, ignores the plain language of the statute and reality. Saltwater and other oilfield wastes by necessity must often be transported to a disposal site. The Commission has the authority to regulate the disposal of saltwater and oilfield waste and has continuing jurisdiction "over all persons and property, public and private, necessary to enforce effectively the provisions" of N.D.C.C. ch. 38-08. N.D.C.C. § 38-08-04; see also Dunn Cty., at ¶ 13.

         [¶ 15] Black Hills contends the Commission's jurisdictional claims over the cleanup of a produced water spill occurring away from a well site or disposal facility are contradicted by ...

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