Opinion

Hunter

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-94-00335-CV

Hunter Industrial Facilities, Inc., Appellant

v.

Texas Natural Resource Conservation Commission, et al., Appellees (1)

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 53RD JUDICIAL DISTRICT

NO. 93-03261, HONORABLE W. JEANNE MEURER, JUDGE PRESIDING

This case of first impression involves the interpretation and application of certain

statutory standards under the Solid Waste Disposal Act. (2) In 1989, appellant Hunter Industrial

Facilities, Inc. ("HIFI") filed applications with the Texas Natural Resource Conservation

Commission (3) ("the Commission") for fourteen permits to construct and operate an above-ground

waste storage and processing facility in the North Dayton Salt Dome. HIFI planned to use ten

solution-mined salt caverns for the disposal of hazardous waste (4) and three deep injection wells to

dispose of nonhazardous brine created by the solution-mining process. The type of facility that

HIFI proposed is highly experimental. Although salt domes have been used to store oil and gas,

they have not been used previously in the United States for the storage of hazardous waste. HIFI

proposed to irretrievably inject the waste into the ten salt caverns, a method that had not been

tested anywhere in the world. (5) The proposed site is located northeast of Houston and within a

few miles of the Evangeline Aquifer, which supplies water to many area residents.

A contested case hearing began on August 14, 1990. The Commission

subsequently imposed a moratorium on permitting and the hearing was delayed for two years.

The evidentiary hearing continued on June 29, 1992 and was completed on October 1, 1992. On

December 9, 1992, the two hearing examiners submitted a proposal for decision ("PFD")

recommending that HIFI receive ten of its fourteen requested permits, including permits for six

of the ten hazardous waste injection wells HIFI had proposed.

At a January 6, 1993 meeting to consider the applications and the PFD, the

Commission voted unanimously to deny all of HIFI's applications. HIFI sought judicial review

in district court, which affirmed the Commission's order. By one point of error HIFI appeals,

arguing that the district court erred in not overruling the Commission's order because it was

arbitrary and capricious and made in violation of the SWDA. We will affirm the trial-court

judgment.

POLICY CONSIDERATIONS

Hazardous waste includes any solid waste which may "cause, or significantly

contribute to an increase in mortality or . . . illness," or "pose a substantial present or potential

hazard to human health or the environment when improperly treated, stored, transported, or

disposed of, or otherwise managed." 42 U.S.C. § 6903 (5)(A)-(B) (1988); see SWDA

§ 361.003(15) (adopting federal definition of hazardous waste). HIFI concedes that if the

hazardous waste is improperly handled at its facility, it can have toxic, corrosive, and flammable

effects. The danger to the public health and the environment if HIFI's facility does not work as

proposed is undisputed.

The legislature was undoubtedly aware of these risks when it enacted the SWDA.

The state's policy is explicitly provided:

It is this state's policy and the purpose of this chapter to safeguard the health,

welfare, and physical property of the people and to protect the environment by

controlling the management of solid waste, including accounting for hazardous

waste that is generated.

SWDA § 361.002(a) (emphasis added). The SWDA further provides that the Commission may

adopt rules to establish minimum standards for the operation of solid waste facilities. SWDA §

361.024.

The Commission's duty under these statutes is critical--it is charged with protecting

the lives and health of Texas citizens. It has the ultimate responsibility to assure that facilities

satisfy strict safety criteria before permits are issued. Any failure to perform these functions

properly could have serious consequences for citizens and the environment. One need only

examine disasters such as Love Canal to understand the Commission's profound obligation. See

Marla J. Aspinwall, Note, The Applicability of General Liability Insurance to Hazardous Waste

Disposal , 57 S. Cal. L. Rev. 745 , 746-47 (1984) (discussing effects of improperly stored wastes

on health and property of Love Canal residents). As one commentator observed, disastrous

consequences may result from a failure to strictly adhere to regulations and guidelines for waste

permitting:

For decades American industry has generated and discarded hazardous wastes . . .

. Most of this waste is not destroyed but stored--sealed by commercial waste

facilities in 55-gallon drums and deposited in clay-lined dumps, injected deep

underground between layers of rock, or abandoned in vacant lots, lagoons, or

landfills. Over time, at varying rates, the storage methods fail: containers corrode,

plants or animals pierce protective linings, rain and melting snow wash wastes

from their storage sites. Sometimes these abandoned chemicals intermingle,

synergistically enhancing either their migratory or toxic potential. Eventually

hazardous wastes infuse lakes and streams, underground waters, soil, and air, and

from there come into contact with unprotected victims.

Exposure to hazardous wastes can cause cancer, genetic mutation, birth

defects, miscarriages, and damage to the lungs, liver, kidneys, or nervous system.

Even when leaking waste sites are detected before a significant number of humans

have been exposed, toxic wastes may already have contaminated water supplies.

Developments in the Law: Toxic Waste Litigation , 99 Harv. L. Rev. 1458 , 1462-63 (1986).

Because the Commission is charged with the ultimate duty to prevent damage to

public health and the environment, it carefully scrutinizes every aspect of any facility that seeks

a permit. To do otherwise would render the Commission derelict in its duty. The Commission

undoubtedly realized the significant health and environmental risks potentially posed by HIFI's

proposed experimental waste facility. Apparently, these risks played a prominent role in the

Commission's actions in the instant cause.

PROCEDURAL QUESTIONS

Standard of Review Under § 361.0832

Generally, agency heads have broad discretion to adopt or reject a hearing

examiner's findings and conclusions in a proposal for decision. See Ross v. Texas Catastrophe

Property Ins. Ass'n , 770 S.W.2d 641, 642 (Tex. App.--Austin 1989, no writ) ("A hearing

examiner has no power to bind an agency with a proposal for decision."). The SWDA, however,

curtailed the Commission's discretion to overturn the examiners' findings and conclusions. In this

regard, the Act provides:

(c) The commission may overturn an underlying finding of fact that serves as the

basis for a decision in a contested case only if the commission finds that the

finding was not supported by the great weight of the evidence.

(d) The commission may overturn a conclusion of law in a contested case only on

the grounds that the conclusion was clearly erroneous in light of precedent

and applicable rules.

(e) If a decision in a contested case involves an ultimate finding of compliance

with or satisfaction of a statutory standard the determination of which is

committed to the discretion or judgment of the commission by law, the

commission may reject a proposal for decision as to the ultimate finding for

reasons of policy only.

SWDA § 361.0832(c)-(e).

The crux of this appeal involves the extent to which these subsections of the Solid

Waste Disposal Act restrict the Commission's discretion to overturn a hearing examiner's

decision. We will therefore examine each of the subsections in some detail in order to make this

preliminary determination.

Subsection (c)--Underlying Findings of Fact

Under subsection (c), the Commission is permitted to overturn an underlying

finding of fact only if it is "not supported by the great weight of the evidence." SWDA

§ 361.0832(c). HIFI contends that this legislative mandate is essentially the same as the " against

the great weight of the evidence" standard of appellate evidentiary review. HIFI analogizes to this

standard in asserting that the Commission may overturn an examiner's finding only if it is against

the great weight of the evidence.

In determining a statute's meaning, we are guided by certain well-settled principles

of statutory construction. First and foremost, we must follow the plain language of the statute.

If a statute is clear and unambiguous it should be given its commonly understood meaning without

resort to extrinsic aids of statutory construction. Cail v. Service Motors, Inc. , 660 S.W.2d 814,

815 (Tex. 1983). If a statute is ambiguous, however, extrinsic aids, such as the interpretation of

the agency charged with the statute's enforcement, may be used to determine legislative intent.

Ex parte Roloff , 510 S.W.2d 913, 915 (Tex. 1974); Meno v. Kitchens , 873 S.W.2d 789, 791

(Tex. App.--Austin 1994, writ denied). In examining subsection (c), we agree with the

Commission that the term "not supported by the great weight of the evidence" contains no inherent

ambiguities that would require us to look beyond the statute for clarification.

HIFI argues that "against the great weight" and "not supported by the great weight"

are functionally equivalent standards. (6) Compare Meraz v. State , 785 S.W.2d 146, 154-56 (Tex.

Crim. App. 1990) (discussing use of the "against the great weight" standard for issues on which

criminal defendant bears burden of proof) with Brown v. State , 804 S.W.2d 566, 571 (Tex.

App.--Houston [14th Dist.] 1991, pet. ref'd) (citing Meraz for proposition that criminal defendant's

conviction may be reversed if "not supported by" great weight of evidence). We disagree with

HIFI's interpretation. The legislature undoubtedly was aware that "against the great weight" was

a standard used by appellate courts. It chose, however, not to incorporate this well-understood

language, and opted instead for a "not supported by the great weight" standard. The supreme

court has noted that, in construing statutes:

Courts must take statutes as they find them. . . . They should search out carefully

the intendment of a statute, giving full effect to all of its terms. But they must find

its intent in its language and not elsewhere . . . . They are not responsible for

omissions in legislation. They are responsible for a true and fair interpretation of

the written law.

Republicbank Dallas, N.A. v. Interkal, Inc. , 691 S.W.2d 605, 607 (Tex. 1985) (quoting Simmons

v. Arnim , 220 S.W. 66, 70 (Tex. 1920)) (emphasis added). Therefore, we must give effect to the

standard articulated in the statute, and we are not permitted to substitute an "against the great

weight" standard since it is not clear that the legislature intended to impose that standard on the

Commission.

However, we agree with HIFI's assertion that in enacting subsection (c), the

legislature intended to significantly restrict the Commission's discretion to reject an examiner's

underlying fact findings. Before the enactment of subsection (c), the Commission had broad

discretion to reject an examiner's underlying fact findings. See Ross , 770 S.W.2d at 642 (agency

may reject examiner's proposal for decision). This discretion was limited only by the requirement

that an agency's final decision be supported by substantial evidence in the record. See Texas

Health Facilities Comm'n v. Charter Medical--Dallas, Inc. , 665 S.W.2d 446, 452 (Tex. 1984).

Under the substantial evidence test, an agency's action will be sustained if reasonable minds could

reach the conclusion that the agency must have reached in order to justify its action. Id . at 453.

If the evidence supports either an affirmative or negative finding on a particular issue, the

agency's decision must be upheld. Auto Convoy Co. v. Railroad Comm'n , 507 S.W.2d 718, 722

(Tex. 1974). Indeed, the evidence in the record may actually preponderate against the agency's

decision, yet satisfy the substantial evidence standard. Lewis v. Metropolitan Sav. & Loan Ass'n ,

550 S.W.2d 11, 13 (Tex. 1977); see Charter Medical , 665 S.W.2d at 452 . Therefore, we

conclude that under subsection (c), the Commission is no longer permitted to overturn an

examiner's underlying finding of fact because it would have reached a contrary decision, but can

only exercise its discretion to reverse those findings that do not find support in the "great weight"

of the evidence in the record.

Subsection (d)--Conclusions of Law

Under subsection (d), the Commission is permitted to overturn a conclusion of law

if it is clearly erroneous in light of precedent or applicable rules. SWDA § 361.0832(d). HIFI

argues that in a case of first impression, the Commission must follow the legal interpretations, if

reasonable , of the hearing examiner. The Commission sharply criticizes HIFI's position,

contending that the agency's decision, and not the hearing examiner's recommendation, establishes

agency precedent and policy; consequently, the Commission is not bound by a hearing examiner's

conclusions of law.

A finding is considered clearly erroneous when the reviewing body "is left with the

definite and firm conviction that a mistake has been committed." United States v. United States

Gypsum Co. , 333 U.S. 364, 395 (1948). The "clearly erroneous" standard is generally considered

to give the reviewing body broader authority than is allowed under a "substantial evidence" review

because a decision may be overturned despite its theoretical reasonableness. See Watson v. Gulf

Stevedore Corp. , 400 F.2d 649, 653 (5th Cir. 1968), cert. denied , 394 U.S. 976 (1969) (noting

that "findings may be clearly erroneous without being unreasonable so as to be upset under the

substantial-evidence rule") (emphasis added); Bernard Schwartz, Administrative Law § 10.11, at

605 (2d ed. 1984).

HIFI contends that the hearing examiners' legal conclusions, if reasonable, bind

the Commission because section 361.0832(d) has not been construed previously. The Commission

correctly asserts that, although there is no precedent under section 361.0832(d), it may find a

conclusion clearly erroneous in light of its applicable rules. See SWDA § 361.0832(d). The

Commission is required to control all aspects of the management of industrial wastes and must

adopt any rules necessary to carry out its powers and duties. See SWDA § 361.017; Tex. Water

Code Ann. § 5.103 (a) (West 1988). The Commission is charged with the protection of the

environment, the public health, and the safety of Texas citizens. See SWDA § 361.114(b)(3).

Forcing the Commission to accept the hearing examiners' conclusions of law, if reasonable, would

destroy the Commission's discretion to interpret the rules that the Commission itself has

promulgated. We will apply the standard articulated in United States Gypsum , 333 U.S. at 395 ,

in determining whether the Commission correctly overturned the hearing examiners' conclusions

of law.

Subsection (e)--Ultimate Findings--Policy Considerations

The parties dispute the interpretation of subsection (e), which permits the

Commission to overturn an examiner's proposal for decision as to ultimate findings based on

policy reasons if the findings involve compliance with or satisfaction of a statutory standard the

determination of which is committed to the Commission's discretion. SWDA § 361.0832(e). The

parties' principal conflict concerns the construction of the phrase "may reject a proposal for

decision as to the ultimate finding for reasons of policy only ." Id . (emphasis added).

HIFI argues that ultimate findings can only be rejected on policy grounds, thereby

rendering the Commission's reliance on section 361.0832(e) improper because the Commission

relied on both policy and factual grounds to reject the hearing examiners' PFD. The Commission

responds that subsection (e) does not restrict its ability to reject a PFD, but rather provides an

additional means by which the Commission may act. According to the Commission, a PFD may

be rejected on the basis of an ultimate finding if the underlying findings of fact and conclusions of law do not support the finding; even if they support the PFD, however, the

Commission argues that it may reject the PFD for reasons of policy if any ultimate finding

concerns compliance with a statutory standard.

An ultimate finding usually involves "a conclusion of law or at least a determination

of a mixed question of law and fact." Helvering v. Tex-Penn Oil Co. , 300 U.S. 481, 491 (1937);

see Pedernales Elec. Coop., Inc. v. Public Util. Comm'n , 809 S.W.2d 332, 339 (Tex.

App.--Austin 1991, no writ); see also Bob E. Shannon & James B. Ewbank, II, The Texas

Administrative Procedure and Texas Register Act Since 1976--Selected Problems , 33 Baylor L.

Rev. 393 , 409 (1981). Therefore, an "ultimate finding of compliance with or satisfaction of a

statutory standard the determination of which is committed to the discretion or judgment of the

commission by law" has the same legal effect as a conclusion of law or a mixed question of law

or fact. See SWDA § 361.0832(e); Shannon & Ewbank, supra , at 409. Clearly, the legislature

did not intend that the PFD may be rejected as to an ultimate finding only on the basis of policy,

but rather that it could be rejected if the ultimate finding: (1) is not supported by the underlying

facts, (2) is clearly erroneous, or (3) contravenes the Commission's policies. See SWDA §

361.0832(c)-(e). Because ultimate findings invariably involve conclusions of law or mixed

questions of law and fact, it was not improper for the Commission to rely upon both policy and

factual grounds in concluding that the examiners' PFD should be rejected because it involved an

ultimate finding of compliance with a statutory standard.

Standard of Review for Appellate Courts

The parties also disagree about the appropriate standard for judicial review in this

cause. (7) HIFI contends that because SWDA section 361.0832 limits the Commission's discretion,

a reviewing court must perform a more rigorous examination to determine whether the

Commission has properly overturned the examiners' findings and conclusions. The Commission

responds that the APA requires only a substantial evidence review of its order because section

361.0832 does not provide a standard for judicial review. See APA §§ 2001.173(a),

2001.174(2)(E); Charter Medical , 665 S.W.2d at 452-53 (describing principles and presumptions

applicable to substantial evidence review). We agree with HIFI. Because SWDA section

361.0832 provides standards detailing when the Commission may properly overturn the findings,

conclusions, and ultimate findings of a hearing examiner, APA section 2001.174(2) governs our

review. That section provides that a reviewing court may reverse or remand an agency

determination when "the administrative findings, inferences, conclusions, or decisions are: (A)

in violation of a constitutional or statutory provision [or] (B) in excess of the agency's statutory

authority." APA § 2001.174(2)(A)-(B).

An agency may exercise only the authority "conferred upon it by law in clear and

unmistakable terms and the same will not be construed as being conferred by implication." Key

W. Life Ins. Co. v. State Bd. of Ins. , 350 S.W.2d 839, 848 (Tex. 1961); see Sexton v. Mount

Olivet Cemetery Ass'n , 720 S.W.2d 129, 137 (Tex. App.--Austin 1986, writ ref'd n.r.e.) (agencies

are statutory creations with no inherent authority). When an agency misapplies a statute it

commits an error of law or abuses its discretion. See APA § 2001.174(2)(A)-(D).

In our appellate review, we must examine whether the Commission committed legal

error in overturning a hearing examiner's PFD. Under SWDA section 361.0832, the Commission

is no longer permitted to merely substitute its judgment for that of the hearing examiner, but must

conform to certain prescribed statutory standards in overturning findings and conclusions.

Therefore, we must examine the Commission's findings and conclusions that reversed those of

the hearing examiner to determine whether the Commission violated the proscriptions of section

361.0832 in so doing.

DISCUSSION

In its order denying HIFI's applications for permits, the Commission focused on

four critical areas in which it rejected the hearing examiners' findings and conclusions:

1. The Commission rejects the Examiners' finding and conclusion that HIFI

adequately characterized the salt dome . . . .

2. The Commission rejects the Examiners' finding and conclusion that HIFI

adequately demonstrated how it intends to obtain financing to construct the

facility . . . .

3. The Commission rejects the Examiners' finding and conclusion that HIFI

adequately demonstrated that there exists an urgent public necessity for the

hazardous waste injection well . . . .

4. The Commission rejects the Examiners' finding and conclusion that HIFI

demonstrated that the underground injection wells are in the public interest

. . . .

The Commission concluded that these were "ultimate" statutory or regulatory issues

requiring affirmative findings as a condition to granting the permits. See Charter Medical , 665

S.W.2d at 449-50 . Because these are ultimate issues, a negative finding on any one is sufficient

to support the Commission's denial of HIFI's permits. Gerst v. Goldsbury , 434 S.W.2d 665, 667

(Tex. 1968) (order of disapproval is correct if substantial evidence supports any of agency's

negative findings). HIFI disputes the Commission's findings and conclusions on each of these

statutory and regulatory issues, arguing that the Commission impermissibly overturned findings

of fact and conclusions of law in violation of sections 361.0832(c) and (d), and improperly

overturned the PFD in violation of sections 361.0832(e) and (f). (8)

Geologic Characterization

HIFI initially challenges the Commission's findings and conclusions that HIFI failed

to adequately characterize the geology of the North Dayton salt dome. The examiners concluded

that HIFI's geologic data was imprecise; however, they attempted to overcome this imprecision

by blending two separate requirements under the Salt Dome Rules: (1) a thorough geologic

characterization of the salt dome; and (2) the minimum of 500 feet distance between the salt

cavern injection zone boundaries and the boundaries of the salt stock. See 30 Tex. Admin. Code

§§ 331.121 (d)(1)(A), 331.164(b)(1) (1995) (hereinafter "TAC"). (9) The examiners decided that

TAC sections 331.121 and 331.164 could be read together to require "the applicant to delineate

the edge of the salt stock sufficiently to establish that there would be at least 500 feet of salt

between the injection zone and the nearest possible edge of the salt stock." The examiners then

estimated a margin of error, and determined that permits should be issued for six of the ten

proposed injection wells. The examiners also concluded that HIFI could perform post-permit tests

to adequately characterize the dome. The Commission rejected the hearing examiners' blending

of the regulations and their allowance of post-permit testing:

The Examiners lack authority to relax those standards or to relax the amount of

evidence needed to meet that burden of proof. . . . [T]he Commission does not

concur with the Examiners that the proper remedy is to allow the applicant to

produce its proof after a final decision on the application. Nor is the proper

remedy to ignore uncertainties in evidence by substituting imprecise estimates for

proof of facts.

We believe that the Commission was well within its discretion in concluding that the examiners

erred in formulating remedies for HIFI's failure to thoroughly characterize the salt domes in

question.

The type of blending and estimating done by the examiners could be considered

inappropriate for the experimental facility proposed in the instant cause; the Commission was

entitled to require strict adherence to the SWDA and the Salt Dome Rules. The legislature, in

enacting the SWDA, evinced a clear policy that protection of the public and the environment

would constitute the top priority: "It is this state's policy and the purpose of this chapter to

safeguard the health, welfare, and physical property of the people and to protect the environment

by controlling the management of solid waste . . . ." SWDA § 361.002(a) (emphasis added).

Given the primacy of these legislative concerns, the Commission must ensure that every regulation

is satisfied. The failure to satisfy the standards is not, as HIFI argues, merely a technical

violation. Rather, such a failure can have a devastating effect on the principal water supply of

many Houston residents, on the health of Texas citizens, and on the environment. HIFI candidly

admits that if the waste it proposes to inject is stored improperly, it can have toxic, corrosive, and

flammable characteristics that threaten human health and the environment. Contrary to HIFI's

and the examiners' conclusion that the regulations can be blended so as to compensate for the

failure to satisfy some requirements, each regulation is a separate requirement with which an

applicant must comply in order to receive a permit.

The Commission did not err in concluding that the examiners lacked the authority

to blend regulations and allow post-permit testing because these variances violate the statutory and

regulatory tenets under which the Commission is empowered to act. This Court was confronted

with a similar situation in Flores v. Texas Dep't of Health , 835 S.W.2d 807 (Tex. App.--Austin

1992, writ denied). The waste permit controversy in Flores concerned the determination of the

groundwater level, with the possible consequence of error being groundwater contamination. Id .

at 808. The experts' opinions of the water level ranged from sixteen to sixty feet; the Department

averaged the various estimates, and then set the groundwater level for design purposes at thirty-three feet. In concluding that substantial evidence did not support the Department's decision, we

noted that although the Department is entitled to use its specialized skills in analyzing evidence,

it is bound by the requirements of its own substantive rules, the enabling statute, and the APA.

Id . at 811.

In a similar fashion, the examiners in the instant proceeding were required to

exercise their powers according to the Salt Dome Rules and the Solid Waste Disposal Act. They

were bound by those rules to the same degree as all other participants in the proceeding. First

Fed. Sav. & Loan Ass'n v. Vandygriff , 639 S.W.2d 492, 499 (Tex. App.--Austin 1982, writ

dism'd). The examiners chose to blend rules and to allow post-permit testing. The Commission,

relying on the Salt Dome Rules and the SWDA, had the discretion to determine that the examiners

erred in fashioning such remedies due to the imprecision in HIFI's characterization of the dome.

HIFI also argues that it was not required to perform certain tests before obtaining

a permit because, under SWDA section 331.164(b)(1), it could rely solely on available geologic

data to determine the salt stock's edge. 30 TAC § 331.164(b)(1). Section 331.121(d)(1)(A),

however, requires a permit applicant to utilize well logs, seismic reflection surveys, gravity

surveys, and any other appropriate geophysical methods necessary to characterize the salt dome .

SWDA § 331.121(d)(1)(A). Reliance on currently available data may be inadequate if newer

geophysical methods are available that provide a more thorough characterization.

HIFI nevertheless contends that the Commission incorrectly concluded that HIFI

was required to conduct a vertical seismic profile (VSP) (10) prepermit because the rules expressly

mandate that a VSP is to be conducted after a permit is issued. 31 TAC § 331.163(e)(1)(F). (11)

HIFI does not deny that VSP was an appropriate geophysical method to characterize the dome,

but argues that a second test would have been extremely costly. Although it is an expensive

undertaking to perform VSP tests twice, the Commission is permitted to so require under the Solid

Waste Disposal Act. See SWDA § 361.017(b); Tex. Water Code Ann. § 5.103 (a) (West 1988).

The margin of error without the test is 350 feet, while the use of VSP would have characterized

the edge of the dome to within twenty-five to seventy-five feet. Under SWDA section

331.121(d)(1)(A), the Commission did not err in determining that the characterization of the dome

was not thorough because another geophysical method existed that provided greater precision in

analyzing the data.

It is undisputed that HIFI's mapping of the dome was imprecise. A thorough

characterization of the edge of the salt stock is imperative to ensure that hazardous waste will not

escape from its protective storage environment. Unlike the examiners, however, the Commission

concluded that HIFI could not overcome this imprecision by blending different sections of the Salt

Dome Rules. Under subsection 361.0832(d), the Commission was not compelled to accept the

hearing examiners' conclusions if it was left "with the definite and firm conviction that a mistake

has been committed." United States Gypsum , 333 U.S. at 395 . The two regulations provide no

indication that they were intended to be read together. Indeed, each is concerned with different

points in the process: section 331.121(d)(1)(A) involves thorough characterization during the

application process, while section 331.164 specifically concerns the construction of the salt

caverns. See 30 TAC §§ 331.121(d)(1)(A), 331.164(b)(1). Although some overlap occurs

because both require delineation of the edge of the salt stock, section 331.121(d)(1)(A) requires

additional information from an applicant: imaging underneath of all overhangs, defining caverns

or other co-uses of the stock, and addressing any conditions that may result in potential adverse

impact on the salt stock. 30 TAC § 331.121(d)(1)(A). HIFI failed to adequately address these

issues.

The statutory standards restricting the Commission's power to overturn the

examiners' conclusions of law did not divest the Commission of its ability to interpret its own

rules. The Commission's interpretation of its own regulations is entitled to deference by

reviewing courts, and may not be overturned unless it is erroneous or inconsistent with the

regulation. Public Util. Comm'n v. Gulf States Utils. Co. , 809 S.W.2d 201, 207 (Tex. 1991);

see also North Alamo Water Supply Corp. v. Texas Dep't of Health , 839 S.W.2d 448, 455 (Tex.

App.--Austin 1992, writ denied). Finding no indication in the regulations that the Commission's

interpretation was erroneous, we conclude that the Commission did not violate the proscriptions

of SWDA section 361.0832 by overturning the examiners' findings of fact and conclusions of law

as they related to a "thorough geologic characterization" of the salt dome.

Financial Assurance

The Commission also denied the PFD because it rejected the examiners' finding

that HIFI had adequately demonstrated how it intended to obtain construction financing. The

SWDA specifies the financial assurances an applicant must provide. See SWDA § 361.085(a);

30 TAC § 305.50(4)(B)-(D) (offering non-exclusive list of categories of financial information that

applicants can provide). During the hearing, HIFI offered the testimony of Rohan Paul, a Vice

President at Chemical Bank, and Brian Hand, a financial analyst with First Analysis Corporation.

Both witnesses testified that HIFI could acquire the money to finance the construction through a

combination of equity and long-term debt financing. Although Hand testified that institutional

debt financing (12) could be used to finance construction, Paul opined that the institutional debt

market would probably not be used during the construction phase because this type of investor

"will be more interested . . . once the project is up and running and it has demonstrated formally

the ability to generate cash flow."

The examiners found that HIFI had adequately established its ability to obtain

sufficient funding through equity investors and the institutional debt market to construct its facility

in a safe manner. The Commission rejected this finding, concluding that a discrepancy existed

between Paul's and Hand's testimony on institutional financing that rendered the examiners'

finding not supported by the great weight of the evidence. See SWDA § 361.0832(c).

After reviewing the disputed testimony, we conclude that the Commission erred

in overturning the examiners' finding, because the testimony was not contradictory. Paul did not

testify that institutional debt financing could not be used during construction; he merely stated that

he did not anticipate the use of this type of investor during the construction phase. Because HIFI

provided at least one viable plan for construction financing, the Commission improperly applied

section 361.0832(c) to overturn the examiners' findings.

Public Necessity and Public Interest

As additional grounds for denying the permits, the Commission rejected the

examiners' findings and conclusions that an urgent public necessity for the hazardous waste

injection wells existed and that the wells would be in the public interest. Before the Commission

grants a permit, it must conclude that an urgent public necessity exists. SWDA § 361.114(b)

(specifying five criteria for determining "urgent public necessity"); Tex. Water Code Ann.

§ 27.051 (g)(2) (West Supp. 1995) (same). The Commission must also conclude that the injection

well would further the public interest. Tex. Water Code Ann. § 27.051 (a)(1) (West 1988).

The Commission focused on two issues in determining whether the urgent public

necessity and public interest requirements had been satisfied: need and safety. The Commission

found that the hearing examiners had incorrectly determined the weight of the evidence relative

to these two issues.

1. Need

To establish an urgent public necessity, an applicant must prove that there is a

"substantial or obvious public need for additional hazardous waste disposal capacity and the

hazardous waste injection well will contribute additional capacity toward servicing that need."

SWDA § 361.114(b)(2); Tex. Water Code Ann. § 27.051 (g)(2)(B) (West Supp. 1995). In

assessing whether the wells are in the public interest, the Commission is statutorily required to

examine need and consider whether practical, economic, and feasible alternatives to an injection

well are reasonably available to manage the various types of hazardous waste. Tex. Water Code

Ann. § 27.051 (d)(2) (West Supp. 1995). (13) In making this determination, the Commission must

consider the need for various technologies for hazardous waste disposal. SWDA § 361.0232(a).

In 1992, the Commission developed a Needs Assessment pursuant to the statutory directive that

the Commission assess the need for various technologies for hazardous waste disposal. Id .

As a prerequisite to obtaining a permit, HIFI had to show a need for its proposed

facility. HIFI apparently became concerned early in the process that the Commission's Needs

Assessment failed to establish a level of need that would justify HIFI's proposed facility. (14)

Therefore, HIFI presented Dr. Joel Hirschorn's testimony specifically to establish that the Needs

Assessment had grossly underestimated need. The Needs Assessment estimated a capacity

shortfall of 1.5 million tons by 1995. (15) Hirschorn testified that, based on his calculations, the

shortfall would be approximately 13.65 million tons. The substantial disparity between these two

calculations resulted from Hirschorn's use of different data and analyses to assess need. No

evidence was offered to dispute Hirschorn's testimony. The examiners concluded that there was

a substantial and obvious need for the facility. SWDA § 361.114(b)(2).

At the agenda meeting to discuss the PFD, the Commissioners heard argument from

the Commission staff, the examiners, and HIFI's attorney. HIFI argues that the Commissioners'

rejection of the examiners' PFD was improperly based upon a discussion between Commissioner

Hall and Kathy Ferland, a staff member who had not appeared as a witness at the examiners'

hearing. Hall questioned Ferland extensively about the differences between the Needs Assessment

and Hirschorn's testimony on need. HIFI contends that the Commissioners' reliance on Ferland's

analysis constituted a procedural irregularity that denied HIFI due process.

Examining the record, we conclude that Hall and Ferland's discussion was not

improper. HIFI's attorney was present and able to object whenever Ferland's analysis went

beyond the evidence in the record. The Commissioners repeatedly admonished the parties to limit

their comments to exhibits and testimony in the record. When the examiner indicated that

comments were outside the record, the Commissioners either discontinued their line of questioning

or indicated how the comments were derived from the record evidence.

The Commissioners understandably were interested in how Hirschorn estimated a

level of need 780% greater than that of the Commission's own Needs Assessment. The purpose

of the agenda meeting was for the parties to articulate their concerns about the reasoning and the

conclusions of the hearing examiners in the PFD. See APA § 2001.062(a)(2) (adversely affected

parties given opportunity to file exceptions and present briefs to the Commission explaining their

concerns); John Powers, Proposals for Decision 8 (1991) ("[T]he parties in the contested case are

able to place before the agency heads--the final decisionmakers--their contentions and arguments

concerning what facts or evidence the preparer of the [PFD] might have overlooked, or to which

he or she might have assigned an improper weight or meaning . . . ."). (16)

Similarly, the Commission's decision to disregard in large measure Hirschorn's

testimony was not improper. The Commission is required to allow parties to present evidence.

APA § 2001.051(2); Lewis , 550 S.W.2d at 15 . The Commission, however, has the discretion to

discount evidence that it does not consider credible. See Fuel Distribs., Inc. v. Railroad Comm'n ,

727 S.W.2d 56, 61 (Tex. App.--Austin 1987, writ ref'd n.r.e.) (Commission not required to assign

any weight to expert testimony); see also Firemen's & Policemen's Civil Serv. Comm'n v.

Brinkmeyer , 662 S.W.2d 953, 956 (Tex. 1984) (agency is primary fact-finding body and

resolution of factual conflicts and ambiguities is the province of the administrative body).

HIFI further contends that, even if Hirschorn's testimony is disregarded, the Needs

Assessment established a substantial and obvious need for the facility, or in the alternative, the

Commission failed to articulate a clear standard of the requisite degree of need. The Commission

concluded that although "some need exists for additional commercial waste management capacity

for Texas-generated wastes[,] . . . the [report] does not reflect that there is a substantial or

obvious public need to permit this facility." The Solid Waste Disposal Act authorizes the

Commission to make this type of determination. SWDA § 361.114(b)(2).

HIFI urges us to conclude that the Commission erred in determining that the

examiners' findings on need were not supported by the great weight of the evidence and that a 1.5

million capacity shortfall does not constitute a substantial and obvious need. This determination,

however, is specifically left to the Commission's discretion, with good reason. The Commission

possesses the technical knowledge and expertise to determine what constitutes a substantial and

obvious need; this Court does not possess the same type of expertise. See Allied Bank Marble

Falls v. State Banking Bd. , 739 S.W.2d 73, 79 (Tex. App.--Austin 1987), rev'd on other grounds ,

748 S.W.2d 447 (Tex. 1988) (agency, not reviewing court, has the responsibility to determine the

meaning of the evidence based on its technical and scientific expertise); 2 Am. Jur. 2d

Administrative Law § 535, at 524 (1994) ("When very technical areas of expertise are involved,

or when agencies are acting within their area of specialized knowledge, experience, and expertise,

courts generally defer to agency decisions.").

Construction of a statute by the administrative agency charged with its enforcement

is entitled to serious consideration if the construction is reasonable and does not contradict the

statute's plain language. Tarrant Appraisal Dist. v. Moore , 845 S.W.2d 820, 823 (Tex. 1993).

The legislature obviously intended that the Commission, a politically accountable body, be

responsible for assessing the need for different types of waste disposal technology. The

Commission, adhering to this mandate, concluded that the need was not sufficiently substantial

to justify HIFI's untested and experimental method of irretrievable waste injection.

Finally, HIFI contends that it was denied due process because the Commission

never articulated a clear standard for the requisite level of need and never communicated to HIFI

before the agenda meeting that it had failed to meet that evidentiary standard. Although HIFI

apparently wants the Commission to first develop guidelines of what constitutes a substantial or

obvious need, we disagree that the Commission is compelled to do so. "Substantial or obvious

need" is a sufficiently definite standard.

In concluding that HIFI had not met that standard, the Commission could have

considered many factors, such as the experimental nature of the facility, the adequacy of HIFI's

data, estimates of the waste capacity shortfall, the desire to develop innovative techniques for

disposal, and the proximity of the facility to water supplies for a major Texas city, in determining

the need for HIFI's proposed facility. The Commission is charged with balancing these various

competing considerations. It would be impracticable to require the Commission to determine in

advance the requisite level of need to satisfy the "substantial or obvious" requirement. See SWDA

§§ 361.114(b)(2), 361.0232(a) (Commission must evaluate need for different technologies for

waste disposal).

We conclude that the Commission did not err in overturning the underlying finding

on need because Hirschorn's assumptions regarding the Needs Assessment rendered the

examiners' finding unsupported by the great weight of the evidence. SWDA § 361.0832(c). (17)

Because the underlying finding of need is required in order to conclude that an urgent public

necessity exists, the Commission did not err in overturning the examiners' findings on the ultimate

finding of urgent public necessity. See Charter Medical , 665 S.W.2d at 453 (underlying findings

must support ultimate finding in order to uphold ultimate finding); Railroad Comm'n v. Graford

Oil Corp. , 557 S.W.2d 946, 950 (Tex. 1977) ("The findings should be such that a court, on

reading them, could fairly and reasonably say that they support the ultimate findings of fact . .

. .").

2. Safety

The Commission is required to make certain findings regarding the safety of the

proposed facility before a hazardous waste permit may be granted. SWDA § 361.114(b)(1), (3),

(4); Tex. Water Code Ann. § 27.051 (g)(2)(A), (C), (D) (West Supp. 1995). In its order, the

Commission agreed with the examiners that the overriding concern in assessing an application is

whether the proposed facility will comply with the 15,000 year no-escape standard of

performance. See 30 TAC § 331.162. The Commission, however, concluded that HIFI had

failed to show compliance with that performance standard.

HIFI intended to accept liquids containing hazardous waste and then solidify them

with cement and fly ash to make a solid waste before injection; the Commission determined that

this process must be proven to work over time in order to meet the no-escape standard. See id .

Ensuring that the waste is properly solidified is an overriding concern in this case. Because

HIFI's experimental technology involves the irretrievable disposal of waste, no means exist to

allow safe drainage of the caverns if the waste begins to leak. Coupled with potential disastrous

health and environmental effects, HIFI's use of an experimental method caused the Commission

justifiable concern.

The Commission, relying on test results included in HIFI's 1989 and 1992

applications, questioned the efficacy of the solidification process, the classification process, the

possibility that gas and pressure would build up in the caverns, and the chain-of-custody proof for

samples used in testing. Because of its concern in these four areas, the Commission concluded

that HIFI presented insufficient assurance that (1) the waste will not migrate; (2) the solidification

process will work on the full range of wastes and the wastes will remain solidified; (3) gas and

pressure will not build in the caverns; and (4) the caverns would be set a safe distance from the

edge of the salt stock.

After reviewing the evidence adduced during the hearing concerning these four

issues, we conclude that the Commission did not err in overturning the examiners' findings on the

solidification process, the possibility of gas and pressure build-up, and the importance of chain-of-custody evidence. We conclude, however, that the Commission erred in reversing the examiners'

findings on classification of waste and holding that they were not supported by the great weight

of the evidence. See 30 TAC § 331.166(a); see also 40 C.F.R. § 146.68 (a) (1994) (requiring that

all material injected into a well must be sampled and analyzed with an approved waste analysis

plan).

The 15,000 year no-escape standard is a high burden for any applicant to satisfy.

Although the Commission carefully scrutinized every aspect of HIFI's solidification process, we

do not believe that the Commission was unduly technical in its review. Rather, the Commission

was performing its statutorily mandated task: to protect public health and the environment by

controlling the management of hazardous waste. SWDA § 361.002(b). The stakes in the

hazardous waste permitting process are undeniably high, and the Commission has no choice but

to require applicants to specifically satisfy all criteria of the Salt Dome Rules and the Solid Waste

Disposal Act. In a different factual situation, the Commission perhaps could be more lenient in

applying standards; in the context of hazardous waste disposal, there is no margin for error. To

the extent that the evidence adduced at the hearing raised questions regarding need, the adequacy

of the solidification process, and the attainment of the no-escape standard, the Commission did

not err in denying the permits under the "urgent public necessity" and "public interest" criteria.

SWDA § 361.114(b); Tex. Water Code Ann. §§ 27.051 (a)(1), (g)(2) (West 1988 & Supp. 1995).

CONCLUSION

Because the permits at issue here involve an experimental approach to storage of

hazardous waste, HIFI was subjected to rigorous requirements in the application process. The

Commission did not err in reversing the examiners' findings on adequate characterization of the

salt dome, public necessity, and public interest. Finding no error in the Commission's decision

to deny the permits, we overrule HIFI's sole point of error, and affirm the judgment of the district

court.

Mack Kidd, Justice

Before Justices Aboussie, Kidd and B. A. Smith

Affirmed

Filed: October 11, 1995

Publish

1. Intervenor-Appellees include: City of Houston; Harris County; Harris County

Fresh Water Supply District No. 58; Harris County Utility District No. 5; Harris County

Municipal Utility District No. 132.; Friends Insist Stop Toxics; Families Against

Contaminated Environment; Honorable Bill Daniel; and Baylor University.

2. Tex. Health & Safety Code Ann. §§ 361.001 -.540 (West 1992 & Supp. 1995)

(hereinafter "SWDA").

3. Formerly the Texas Water Commission.

4. The wastes included industrial byproducts such as sludges, chemicals, ash, and

contaminated soil. HIFI did not apply for permits to dispose of radioactive wastes.

5. HIFI contended that salt dome technology was not an experimental method because it

had been used successfully in Germany for several years. Although HIFI presented evidence

that Germany has one salt dome cavern similar to those that HIFI proposed, an expert witness

noted that "it is a new technology in the respect that no one has put waste in a salt cavern and

sealed it up yet." The German method differs considerably from HIFI's, as Ben Knape,

supervisor of the Commission's underground injection control section, testified:

The projects that we are aware of . . . involve conventionally mined openings or

caverns inside a salt dome so that the salt is dug or excavated out and in contrast

to proposals such as Hunter and URR where it's solution mined. In those

conventionally mined sites, they're--by their very nature, people go down in the

mine and work the salt, and it is clearly easier to install instrumentation all

through the site of the facility.

6. Although HIFI argues that the two phrases are synonymous, they appear to have

opposite meanings.

7. Section 2001.174 of the Administrative Procedure Act defines the scope of judicial

review of administrative decisions and provides that the reviewing court shall reverse or

remand the case for further proceedings if the administrative findings, inferences, conclusions,

or decisions are:

(A) in violation of a constitutional or statutory provision;

(B) in excess of the agency's statutory authority;

(C) made through unlawful procedure;

(D) affected by other error of law;

(E) not reasonably supported by substantial evidence considering the reliable

and probative evidence in the record as a whole; or

(F) arbitrary or capricious or characterized by abuse of discretion or clearly

unwarranted exercise of discretion.

Tex. Gov't Code Ann. § 2001.174 (West 1995) (hereinafter "the APA").

8. Subsection (f) provides:

The commission shall issue written rulings, orders, or decisions in all contested

cases and shall fully explain in a ruling, order, or decision the reasoning and

grounds for overturning each finding of fact or conclusion of law or for rejecting

any proposal for decision on an ultimate finding.

SWDA § 361.0832(f) (emphasis added).

9. HIFI contends that section 331.121(d)(1)(A) does not mandate that the edge of the salt

dome be defined with absolute precision. See 17 Tex. Reg. 4097 , 4102 (1992) (substituting

the word "thorough" for the term "complete" in the regulation). HIFI repeatedly asserts that it

performed a well-studied characterization of the dome, and the Commission's imposition of a

"precise characterization" standard was unfair in that it required additional and unnecessary

testing. HIFI's assertion is controverted by the hearing examiners' PFD, which found that the

"applicant's evidence . . . is not precise," and that it is "uncontroverted that additional

information could have been developed to more precisely define the edge of the salt stock in

the vicinity of the proposed caverns." HIFI's contention that it performed a well-studied

characterization is also belied by its acquiescence to the examiners' request "to conduct the

additional testing . . . to confirm the edge of the salt if permits are issued."

10. VSP involves the recording of sound energy, such as reflections and echoes, which is

detected by a geophone lowered into a wellbore below the ground level.

11. Despite the parties' reliance on section 331.163(e)(1)(F), the Commission never

promulgated this section. Section 331.163(e)(1)(F) does not appear in either the original

proposed rule or the final order adopting the Salt Dome Rules. See 17 Tex. Reg. 2185 , 2194

(1992); 17 Tex. Reg. 4097 , 4110 (1992). Under the APA, the Commission must give thirty

days' notice of its intent to adopt a rule, and notice of the proposed rule must be filed with the

Secretary of State for publication in the Texas Register. APA § 2001.023. Because section

331.163(e)(1)(F) concerned postpermit procedures only, it is not germane to HIFI's appeal.

12. Institutional debt financing refers to raising funds through the sale of bonds, usually to

institutional investors such as insurance companies and pension funds.

13. 13 The statute provides three specific criteria that must be used to determine if the facility is

in the public interest, but notes that the Commission may consider other factors. Tex. Water

Code Ann. § 27.051 (d) (West Supp. 1995).

14. A letter from Dr. Joel Hirschorn to Keith Price, HIFI's president, indicates that

Hirschorn believed that the Needs Assessment did not establish the requisite need:

I have assembled considerable information and performed some analyses related

to the "needs" issue. I believe that I can make a strong point about the limits of

the work done by TWC. Although I recognize that you do not want to seem

overly critical of the TWC, it seems to me that the "urgency" requirement

necessitates some very different numerical conclusions regarding future capacity

needs.

(Emphasis added.)

15. HIFI initially argues that the Commission improperly applied the Needs Assessment to

its applications because a 1993 legislative amendment to SWDA mandated that the

Commission's Needs Assessment could not be applied to applications, such as HIFI's, that

were declared administratively complete and for which public hearings began before June 7,

1991. See Act of June 20, 1993, 73d Leg., R.S., ch. 1044, § 5, 1993 Tex. Gen. Laws 4459 ,

4461 ( Tex. Health & Safety Code Ann. § 361.0234 (c) (West Supp. 1995)). Although HIFI's

application was completed before June 7, 1991, the SWDA amendment is not applicable here.

The 1993 amendment did not become effective until after the Commission's January 8, 1993

Final Order. HIFI nonetheless argues that the amendments should be retroactively applied.

We disagree. Even a retroactive application of the amendment cannot alter the Commission's

Final Order, which was rendered before the effective date of the amendment. See Ex parte

Abell , 613 S.W.2d 255, 260 (Tex. 1981) (procedural change in law cannot be used to

invalidate steps previously taken in pending litigation, but will apply to any subsequent

proceedings after effective date); Bardwell v. Anderson , 325 S.W.2d 929, 939 (Tex. Civ.

App.--Houston 1959, writ ref'd n.r.e.) (past steps taken in litigation unaffected by procedural

changes in the rules).

16. We note that the APA specifically permits the Commissioners to engage in ex parte

communication with nonparticipating staff:

[A] member or employee of a state agency assigned to render a decision . . . in a

contested case may communicate ex parte with an agency employee who has not

participated in a hearing in the case for the purpose of using the special skills or

knowledge of the agency and its staff in evaluating the evidence.

APA § 2001.061(c). The instant cause, however, did not involve ex parte communications

because HIFI's attorney was present and able to object and to respond to Ferland's comments.

17. The Commission argues that need is an ultimate finding of compliance with a statutory

standard, which the Commission was permitted to overturn on the grounds of policy alone.

See SWDA § 361.0832(e). Although we agree with the Commission that the determination of

need is undoubtedly a policy question, the need issue is a statutory underlying finding used to

determine whether the ultimate statutory standard of "urgent public necessity" exists. See

SWDA §§ 361.0832(c), 361.114(b)(2). Therefore, we agree with HIFI that the Commission

could not overturn the PFD on policy grounds on the basis of need exclusively. Underlying

findings cannot be used to overturn the Examiners' PFD on the basis of policy. SWDA

§ 361.0832(e).