In California, and in other parts of the country, when oil is produced, water is produced with it. This “produced” water is an oil and water mix that is typically also briny and brackish. It is unsuitable for drinking or other beneficial uses and so the most expedient way to dispose of it is to reinject it right back into the formation from where it came. This process has a number of benefits—it maintains pressure in the formation and can act as a form of enhanced oil recovery, it avoids off-site disposal costs, and it is regulated under the Class II Underground Injection Control Program, which is not subject to citizen enforcement under the federal Clean Water Act (CWA). A recent U.S. Court of Appeals for the Ninth Circuit decision, however, would potentially undermine that last benefit for oil and gas operators.

On Feb. 1, the Ninth Circuit upheld the Hawaii district court's decision finding that the County of Maui (county) violated the CWA when it discharged treated effluent into underground injection wells, which then allowed the effluent to seep into the Pacific Ocean. The Ninth Circuit panel held that the wells were required to obtain a national pollutant discharge elimination system (NPDES) permit coverage because the discharge from the wells was “fairly traceable” from the discharge point (point source) to a navigable water.

Factual Background

The county owns and operates four disposal wells at its Lahaina Wastewater Reclamation Facility, the primary municipal wastewater treatment plant for West Maui. The four wells dispose of approximately 3 to 5 million gallons of treated sewage wastewater per day, into groundwater aquifers. The county has operated Wells 1 and 2 since 1979, and Wells 3 and 4 since 1985. The plaintiffs, including the Hawaii Wildlife Fund and other associations (jointly the plaintiffs), and the county agree that effluent from all four wells eventually reaches the Pacific Ocean—indirectly—through the injection wells.

Plaintiffs filed suit in federal district court alleging that the county was in violation of the CWA. The district court held in favor of the plaintiffs, finding that the county was indeed in violation of the CWA at all four wells because the county was operating injection wells without an NPDES permit. The county appealed the district court's ruling, arguing that the wells were not subject to the CWA permitting scheme.

Ninth Circuit Holding and Legal Reasoning

The CWA prohibits the “discharge of any pollutant by any person” without an NPDES permit. The statute, and a wealth of case law, requires an NPDES permit for discharge of a pollutant from a point source into a navigable water.

Based on the above legal requirements, the Ninth Circuit found that each of the county's four wells constituted a “point source” because the wells were “discernible, confined and discrete conveyances, from which pollutants are discharged.”

Next, the court held that the wells “discharged.” The county argued that the “point source itself must convey the pollutants directly into the navigable water under the CWA.” In contrast, the county's wells “discharge into groundwater, and then indirectly into the Pacific Ocean.” The court rejected this logic, finding that the CWA governs indirect discharges as well as direct discharges into navigable waters. The Ninth Circuit stated there was an “undeniable connection between the wells and the Pacific Ocean.” Effluent from the wells traveled into the Pacific Ocean only a half-mile away from the injection sites.

The court found that the county's effluent injections were discharges into navigable waters because they were fairly traceable from the point source. The county contended that the injections constituted mere “disposal of pollutants into wells,” which should not be subject to the CWA. The court rejected this, finding that well disposals constitute point source pollution when pollutants are discharged into a navigable water from a discrete source—even indirectly—and are fairly traceable to the point source, as was the case here. An NPDES permit is required when pollutants discharged from a point source are “fairly traceable from the point source to a navigable water such that the discharge is the functional equivalent of a discharge into the navigable water.”

For further proof that the injection wells discharged (indirectly) to a “navigable water,” the plaintiffs pointed to a University of Hawaii study that concluded “a hydrogeologic connection exists between Wells 3 and 4 and the nearby coastal waters of West Maui.” The court also highlighted that “water derived in association with oil or gas production and disposed of in a well” that “alters the water quality of surface waters[,] [is] subject to NPDES permitting requirements.”

Finally, the district court had dismissed the county's claim that its due process rights had been violated, because the county had fair notice of the CWA requirements through the plain language of the statute. The Ninth Circuit also affirmed this holding.

Conclusion and Implications

The Ninth Circuit's holding in this case is significant because it establishes that injection wells are subject to the CWA's NPDES permit scheme if the discharge is “fairly traceable” from the point source to a navigable water. While we cannot imagine many instances where this would be the case for oil and gas operations, undoubtedly environmental activists will seek to test potential scenarios wherever possible. Even though groundwater is not expressly subject to regulation under the CWA, groundwater can be an indirect transmission line to oceans, as well as a whole host of other navigable waterways. Therefore, injection into groundwater may be subject to regulation. However, note that the decision does not address “when, if ever, the connection between a point source and a navigable water is too tenuous to support liability under the CWA.” The Ninth Circuit left this determination for “another day.”

The case is Hawaii Wildlife Fund v. County of Maui, Case No. 15-17447 (9th Cir. Feb. 1, 2018).

County of Maui's Appeal

On March 1, the county filed a petition for an en banc rehearing (petition) before the Ninth Circuit. The county argues that NPDES permitting does not apply to groundwater because groundwater is not a “navigable water.” Further, the county asserts that the Ninth Circuit's “fairly traceable test” is inconsistent with the CWA, and cannot be used as the test to determine what constitutes a navigable water.

A lot of developments in this area of law will take place this year, and operators should stay informed about further developments as they unfold.

Michael N. Mills is an environmental lawyer in Stoel Rives' Sacramento, California office. He represents industrial clients in complex regulatory, compliance and litigation matters. He is the chair of the firm's oil & gas, pipelines and mining industries team and in that capacity works with and helps lead more than 70 of the firm's lawyers who counsel and represent oil and gas companies, mining companies, energy companies, pipeline operators, gas storage, and LNG project companies in various practice areas across the United States and Canada.

Shannon Morrissey is an associate in Stoel Rives' Environmental practice group. She has experience with permitting, transactional and natural resources matters.