Yesterday, Senior United States District Judge for the Northern District of Texas, Royal Ferguson, issued a sua sponte stay of EPA’s lawsuit against Range Resources, related to allegations of fracking contamination in the Fort Worth area of the Barnett shale.  The stay is in effect pending resolution of parallel proceedings before the 5th Circuit Court of Appeals. The June 20th Court order [PDF] is the first significant ruling by any court in this closely watched case, which is widely acknowledged as EPA’s test case for using its emergency authority under the Safe Drinking Water Act (SDWA) to put a halt to natural gas fracking operations.

While the Court dismissed Range’s Motion to Dismiss, it did so without prejudice (meaning Range can re-file the motion in the future).  The Court's Order makes several potentially positive findings for the company—which continues to face penalties of $16,500/day for non-compliance with the very broad December 7, 2010, SDWA emergency order. The fundamental issue in this litigation (both in the Northern District of Texas and before the 5th Circuit Court of Appeals) is whether and when EPA is required to show that Range caused the contamination in the private drinking water wells prior to seeking penalties. To this end, Judge Ferguson stated:

“[T]he Court is struggling with the concept that the EPA can enforce the Emergency Order and obtain civil penalties from Range without ever having to prove to this Court, or another neutral arbiter, that Range actually caused the contamination of the [private drinking wells], or without ever giving Range the opportunity to contest the EPA’s conclusions.

The Court recapitulated the Texas Railroad Commission's previous conclusion that Range had not caused or contributed to the contamination of the water wells at issue.  It also noted that an EPA official testified during a deposition that EPA could not be certain of Range’s role in the contamination of the water wells, and that the Agency did not investigate other possible causes of the contamination.

Based upon representations made by the parties during a June 14, 2011 hearing, the Order states that “there are no individuals or properties that are in immediate danger and [that would] require the Court’s immediate intervention.” This finding calls into serious question the necessity of EPA’s “emergency order” as well as the legitimacy of several of the broad remedial steps required under that order (these include an area-wide survey and sampling plan for nearby gas wells, extensive soil gas surveys and indoor air analysis, and the submission of a plan to identify gas flow pathways to the aquifer). These findings taken as a whole, and the fact the Court issued a stay despite the fact neither party requested one, make clear that the Court is very concerned about the lack of evidence regarding causation put forward to this point by EPA.

So the case will now head to the 5th Circuit Court of Appeals, where Range has sued EPA, claiming both that the SDWA’s judicial review provisions are unconstitutional, and that the Agency acted arbitrarily and capriciously in issuing Range the broad emergency order. The significant legal questions that the 5th Circuit will confront, include: (1) whether the arbitrary and capricious standard of review provides Range with a sufficient amount of due process to contest EPA’s actions; (2) if so, whether EPA acted arbitrarily and capriciously in issuing Range the December 7, 2010 emergency order; and (3) if the arbitrary and capricious standard of review is not sufficient to provide due process, what is the proper standard (i.e., does due process require a de novo proceeding before the District Court where evidence will be taken in addition to the administrative record that may currently exist).

For now, it appears likely that Range is going to force EPA to substantiate its claim that Range caused the contamination in the drinking wells at issue—the question is where, and under what standard. Given the importance of this matter to EPA’s ability to regulate fracking through the SDWA’s emergency authority, this blog will continue to report on this case as it evolves.