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E.O.R. Energy LLC v. Messina

United States District Court, C.D. Illinois, Springfield Division

March 31, 2017

E.O.R. ENERGY L.L.C., and AET ENVIRONMENTAL, INC., Plaintiffs,
v.
ALEC MESSINA, as Director of Illinois Environmental Protection Agency, and ILLINOIS ENVIRONMENTAL PROTECTION AGENCY, Defendants.

          OPINION

          SUE E. MYERSCOUGH, U.S. District Judge.

         This cause is before the Court on the Motion to Dismiss First Amended Complaint (d/e 18) filed by Defendants Lisa Bonnett, as the former Director of the Illinois Environmental Protection Agency (IEPA), and the IEPA. The suit was brought against Bonnett in her official capacity. Pursuant to Federal Rule of Civil Procedure 25(d), Bonnett's successor, Alec Messina, is automatically substituted as a party.

         The Motion to Dismiss First Amended Complaint is GRANTED. Plaintiffs have failed to allege an actual controversy and, therefore, the Court lacks jurisdiction over Plaintiffs' claims. Plaintiffs' First Amended Complaint is dismissed without prejudice and with leave to replead.

         I. BACKGROUND

         In September 2016, Plaintiffs E.O.R. Energy, L.L.C. (EOR) and AET Environmental, Inc. (AET) filed the First Amended Complaint. EOR is a small, independent oil and gas producer. First Am. Compl. ¶10. EOR conducts what is called “acidization, ” which EOR defines as the introduction of various acidic solutions into oilfields to enhance secondary and tertiary oil recovery. Id. ¶¶ 2, 3. AET is a material broker permitted under the U.S. Environmental Protection Agency to handle, transport, and store solid and hazardous wastes and permitted by the U.S. Department of Transportation to handle, transport, and store hazardous materials. Id. ¶ 11.

         The Illinois Department of Natural Resources (IDNR) issued Class II underground injection control permits to EOR under the Safe Drinking Water Act (42 U.S.C. § 300h). Id. ¶¶ 10, 15. These permits allowed EOR to operate oil and gas production wells and related underground injection and disposal wells on EOR oil leases located in Sangamon and Christian Counties in Illinois. Id. On March 23, 2007, the IEPA filed a complaint before the Illinois Pollution Control Board against EOR and AET alleging that EOR and AET violated 42 U.S.C. § 300h-1, as codified in Illinois by 40 C.F.R. 147.700, by arranging for the illegal transportation of hazardous waste from Colorado to Illinois and for injecting the hazardous waste without first obtaining an IEPA-issued Class I hazardous waste disposal underground injection permit. Id. ¶16.

         In September 2012, January 2013, and April 2013, the Pollution Control Board issued orders purporting to find that EOR and AET violated the state-authorized regulations implementing the federal Safe Drinking Water Act and Resource Conservation and Recovery Act (42 U.S.C. § 6901) injection bans by injecting or otherwise introducing acid into EOR's Class II and oil wells without a Class I permit. Id. ¶ 17. On December 15, 2015, IEPA issued demand letters to Plaintiffs demanding over $10 million in penalties. Id. ¶ 18.

         Plaintiffs do not mention in the First Amended Complaint that they appealed the Pollution Control Board's final orders to the Illinois Appellate Court, although that information is contained in one of the demand letters Plaintiffs attached as an exhibit to the complaint. See d/e 17-3. A court may take judicial notice of documents in the public record when ruling on a motion to dismiss under Rule 12(b)(6). Olson v. Champaign Cnty., Ill., 784 F.3d 1093, 1096 n.1 (7th Cir. 2015).

         On administrative review, Plaintiffs argued that the IEPA and the Pollution Control Board did not have jurisdiction because (1) the acid material shipped into Illinois was not “waste” or “hazardous waste” and (2) only IDNR had jurisdiction to regulate injections into Class II wells. The Fourth District Appellate Court rejected these arguments. E.O.R. Energy, LLC v. Pollution Control Bd., 2015 IL App (4th) 130443 (2015).

         Specifically, the appellate court agreed with the Pollution Control Board that the acid material at issue constituted waste or hazardous waste within the meaning of the Environmental Protection Act (415 ILCS 5/3.220). Id. ¶ 80. In addition, the court rejected Plaintiffs' argument that the acid material injected into the Class II wells fell within the exclusive regulatory jurisdiction of the IDNR under the Oil and Gas Act. Id. ¶ 91.

         The appellate court noted that the General Assembly created a comprehensive statutory structure-known as the Illinois underground injection control (UIC) program-for the regulation of underground injection of materials into wells. E.O.R. Energy, 2015 WL App (4th) 130443, ¶ 83. The Illinois UIC program was promulgated with federal approval pursuant to the federal UIC program, which allows states the option of implementing their own UIC programs that comply with federal standards. Id. The federal UIC program was promulgated under the Safe Drinking Water Act and, to the extent the program deals with hazardous waste, the Resource Conservation and Recovery Act. Id.

         The appellate court noted that the Illinois Environmental Protection Act designated the IEPA as the implementing agency for all purposes of the Safe Drinking Water Act, with the exception of section 300h-4 of the Safe Drinking Water Act, which provides the authority for federally approved state programs relating to “(1) the underground injection of brine or other fluids which are brought to the surface in connection with oil or natural gas production or natural gas storage operations, or (2) any underground injection for the secondary or tertiary recovery of oil or natural gas.” Id. ¶ 84. (quoting 42 U.S.C. § 300h-4 (2006)). “Illinois's package of UIC-related statutes and regulations submitted to the federal government for approval provided that Class II wells …be regulated by the IDNR under the Oil and Gas Act. E.O.R. Energy, 2015 WL App (4th) 130443, ¶ 84 (also noting that Class II wells are known as “oil-and-gas-related-injection wells”). The IEPA was given the authority over hazardous-waste injection wells. Id. (citing 35 Ill. Adm. Code 730.105 (2012).

         The appellate court found that the Oil and Gas Act provided the IDNR authority only over Class II injections into Class II injection wells, meaning that the IDNR's regulatory power under the UIC program was limited to the injection of fluids associated with oil and gas extraction. Id. ¶ 87. Because the material injected in the case was not a Class II fluid that the IDNR was authorized to regulate, and because the material was an acid material that fell within the Environmental Protection Act's definition of “hazardous waste, ” the IEPA and the Pollution Control Board had jurisdiction over the injection. Id. ¶ 88. The fact that the material was injected into a Class II well did not matter for jurisdictional purposes. Id.

         In the First Amended Complaint, Plaintiffs seek a declaratory judgment interpreting and declaring Plaintiffs' rights and obligations under the Safe Drinking Water Act and the Resource Conservation and Recovery Act as codified and applied in Illinois. Specifically, Plaintiffs ask this Court to declare and order that (1) under federal law, Class II injection wells in Illinois are subject only to IDNR regulation and permit requirements, per the express provisions of the Safe Drinking Water Act and Resource Conservation and Recovery Act, as codified at 40 C.F.R. § 147.700 and 701; and (2) under federal law, the IEPA and the ...


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