Sierra Club v. Cedar Point Oil Company Inc.

73 F.3d 546 (1996)

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Nature of the Case

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Facts

Produced water originates as source water trapped in underground geological formations with oil and gas. When a well is drilled into a formation, the extraction of oil and gas also brings the water to the surface. During extraction, chemicals used in the drilling process become mixed with the water. The result is produced water. The available methods of disposal include reinjection into an underground reservoir, land disposal, evaporation, and discharge into surface waters. D began to discharge produced water into Galveston Bay at approximately the same time that it began production. This discharge continued through the trial of this action in May 1994. The average daily discharge ranged between 500 to 1200 barrels per day. D had applied for a permit but was given a long-term run around by the EPA. By letter dated December 16, 1992, P informed D that the discharge of produced water without a NPDES permit violated the CWA and that P planned to seek monetary penalties and an order enjoining Cedar Point's unpermitted discharges. D filed an action against P and EPA alleging that P had 'threatened' D with a citizen suit and, impliedly, that EPA and P were conspiring to deprive D of unspecified constitutional rights. The district court dismissed D's claims against P but not the EPA. P filed the present action against D on April 20, 1993. D alleged that P's lawsuits constituted an abuse of process. The district court ultimately entered an order granting P's motion to dismiss on the grounds that P's citizen suit was not frivolous, and it could not be the basis for a claim for abuse of process. The court found that D had violated the CWA. The issues of the penalties to be assessed against D for its past violations and P's request for injunctive relief were tried to the bench. The CWA states that violators 'shall be subject to a civil penalty not to exceed $ 25,000 per day for each violation.' In determining the amount of a civil penalty, the court shall consider the seriousness of the violation or violations, the economic benefit (if any) resulting from the violation, any history of such violations, any good-faith efforts to comply with the applicable requirements, the economic impact of the penalty on the violator, and such other matters as justice may require. The court multiplied the statutory figure of $25,000 per day by 809 days of unpermitted discharge to arrive at maximum penalty of $20,225,000. The court imposed a civil penalty of $186,070 based on the economic benefit that accrued to D because of its failure to comply with the CWA -- i.e., the money it saved by not constructing a disposal system that would have resulted in zero discharge. D appealed.