IN THE UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT No WAYNE LAND AND MINERAL GROUP, LLC, vs. DELAWARE RIVER BASIN COMMISSION, et al.

Transcription

1 IN THE UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT No WAYNE LAND AND MINERAL GROUP, LLC, vs. Appellant, DELAWARE RIVER BASIN COMMISSION, et al. Appellees, Appeal from the Final Order of the United States District Court for the Middle District of Pennsylvania dated March 23, 2017 BRIEF FOR APPELLANT AND VOLUME I OF THE JOINT APPENDIX (JA1 JA48) David R. Overstreet Christopher R. Nestor OVERSTREET & NESTOR, LLC 461 Cochran Road, Box 237 Pittsburgh, PA (717) Jeffrey Belardi BELARDI LAW OFFICES 410 Spruce Street, 4th Floor Scranton, PA (570) Attorneys for Appellant, Wayne Land and Mineral Group, LLC

2 CORPORATE DISCLOSURE STATEMENT Pursuant to Rule 26.1 and Third Circuit LAR 26.1, Appellant Wayne Land and Mineral Group, LLC makes the following disclosure: I. For non-governmental corporate parties please list all parent corporations: None. II. For non-governmental corporate parties please list all publicly held companies that hold 10% or more of the party s stock: None. III. If there is a publicly held corporation which is not a party to the proceeding before this Court but which has as a financial interest in the outcome of the proceeding, please identify all such parties and specify the nature of the financial interest or interests: None. IV. In all bankruptcy appeals counsel for the debtor or trustee of the bankruptcy estate must list: 1) the debtor, if not identified in the case caption; 2) the members of the creditors committee or the top 20 unsecured creditors; and, 3) any entity not named in the caption which is an active participant in the bankruptcy proceeding. If the debtor or trustee is not participating in the appeal, this information must be provided by appellant. N/A.

3 TABLE OF CONTENTS TABLE OF AUTHORITIES iii STATEMENT OF JURISDICTION 1 STATEMENT OF ISSUES PRESENTED FOR REVIEW 1 STATEMENT OF RELATED CASES 2 STATEMENT OF THE CASE 2 SUMMARY OF THE ARGUMENT 7 ARGUMENT 10 I. Standard Of Review 10 II. III. The District Court Committed A Threshold Error In Sua Sponte Dismissing WLMG s Complaint For Declaratory Relief Without Notice Or Opportunity To Be Heard 10 The District Court Erred In Dismissing WLMG s Complaint For Declaratory Relief With Prejudice 14 A. Introduction 14 B. The Express Terms Of The Compact Establish That The District Court Erred In Dismissing WLMG s Complaint The definition of project Section 1.5 (Existing Agencies; Construction) The term project as used throughout the Compact The District Court s erroneous application of the definition of water resources 34 i

4 C. Other Interpretative Tools Further Establish That The District Court Erred In Dismissing WLMG S Complaint Protecting state sovereignty The history of the Compact and the Commission s course of performance thereunder Usage of the trade 51 CONCLUSION 54 JOINT APPENDIX, VOLUME I (JA1 JA48) ii

5 TABLE OF AUTHORITIES Statutes and Rules Delaware River Basin Compact, Pub. L , 75 Stat. 688 (1981) passim 28 U.S.C U.S.C U.S.C U.S.C U.S.C U.S.C U.S.C U.S.C. 607a U.S.C Pa.C.S et seq. 5 Fed. R. Civ. P. 12(b)(6) 2 26 Fed. Reg (1964) 49 Cases Alabama v. North Carolina, 560 U.S. 330 (2010) 17, 51 Arizona v. California, 292 U.S. 341 (1934) 17 Arizona v. California, 373 U.S. 546 (1963) 15 Bell v. Cheswick Generating Station, 734 F.3d 188 (3d Cir. 2013) 3, 10 iii

6 Buchanan v. Manley, 145 F.3d 386 (D.C. Cir. 1998) 13 Cordero-Hernandez v. Hernandez-Ballesteros, 449 F.3d 240 (1st Cir. 2006) 11 Curley v. Perry, 246 F.3d 1278 (10th Cir. 2001) 13 Delaware River Basin Commission v. Bucks County Water & Sewer Auth., 545 F. Supp. 138 (E.D. Pa. 1982) 38, 42, 43 Delaware River Basin Commission v. Bucks County Water & Sewer Auth., 641 F.2d 1087 (3d Cir. 1981) 41 Delaware Water Emergency Group v. Hansler, 536 F. Supp. 26 (E.D. Pa. 1981) 37 Gen. Dynamics Land Sys., Inc. v. Cline, 540 U.S. 581 (2004) 17 Hawkins v. Supreme Court of New Jersey, 174 Fed. App x 683 (3d Cir. 2006) 10 Hawkins v. Supreme Court of New Jersey, 2005 WL (D.N.J. Aug. 31, 2005) 10 International Union of Operating Engineers v. Delaware River Joint Toll Bridge Comm n, 311 F.3d 273 (3d Cir. 2002) 15, 54 Jefferson Branch Bank v. Skelly, 66 U.S. 436 (1861) 15 Jones v. United States Dist. Court for the Dist. of Del., 649 Fed. App x. 132 (3d. Cir. 2016) 13 McCreary Cnty., Ky. v. Am. Civil Liberties Union of Ky., 545 U.S. 844 (2005) 17 New Jersey v. Delaware, 552 U.S. 597 (2008) 17 New Jersey v. New York, 283 U.S. 336 (1931) 38 New Jersey v. New York, 347 U.S. 995 (1954) 40 Oklahoma v. New Mexico, 501 U.S. 221 (1991) 15, 16, 17 iv

7 Pennhurst State School & Hosp. v. Haldermanm, 451 U.S. 1 (1981) 16 Rapanos v. United States, 547 U.S. 715 (2006) 16 Roman v. Jeffes, 904 F.2d 192 (3d Cir. 1990) 11 Tarrant Regional Water District v. Hermann, 133 S. Ct (2013) passim Texas v. New Mexico, 462 U.S. 554 (1983) 15, 17 Legislative Materials Hearings Before Subcommittee No. 1 of the Committee on the Judiciary, 87 th Cong., 1st Sess. (1961) 44 Hearings Before Senate Subcommittee of the Committee on Public Works, 87 th Cong., 1st Sess. (1961) 46, 47 H.R. Doc. No. 179, 73 Cong., 2d Sess. (1934) 39, 40 H.R. Rep. No. 310, 87 th Cong., 1 st Sess. (1961) 45 Report on the Comprehensive Survey of the Water Resources of the Delaware River Basin, U.S. Army Corps of Engineers (Dec. 1960, rev. May 1961) 41, 42 S. Rep. No. 854, 87 th Cong., 1 st Sess. (1961) 45 Other Authorities A Brief Report on the Study of Governmental Organization for the Water Resources of the Delaware River Basin, Maxwell Graduate School, Syracuse University (1959), in Report on the Comprehensive Survey of the Water Resources of the Delaware River Basin, U.S. Army Corps of Engineers (Dec. 1960, rev. May 1961) 42, 43 v

8 Interstate Compacts, An Overview of the Structure and Governance of Environmental and Natural Resource Compacts, Government Accountability Office (April 2007) 51, 52, 53 R. Timothy Weston, The Delaware River Basin: Courts, Compacts and Commissions, in Boundaries and Water: Allocation and Use of A Shared Resource, Natural. Res. Law Ctr., Univ. of Colo. Sch. of Law (1989) passim Water Resources, Delaware River Basin Commission s Management of Certain Water Activities, Government Accountability Office (Oct. 1986) 50 vi

9 STATEMENT OF JURISDICTION Wayne Land and Mineral Group, LLC ( WLMG ), by its complaint, seeks declaratory and other relief under 28 U.S.C and The District Court had subject matter jurisdiction over the action under 28 U.S.C because it raises a federal question and, under the Delaware River Basin Compact ( Compact ), Pub. L , 75 Stat. 688, 15.1(p) (1961), because it arises under the Compact. The District Court granted the Delaware River Basin Commission s ( Commission s ) motion to dismiss the complaint, with prejudice, on March 23, This Court has jurisdiction pursuant to 28 U.S.C STATEMENT OF ISSUES PRESENTED FOR REVIEW The Commission, exercising self-aggrandized authority that has not been delegated to it by the Compact, and seeking to placate those State governments and special interest groups opposed to natural gas development, has declared that all natural gas well pads, wells and related facilities targeting shale formations in the Delaware River Basin ( Basin ) are projects that it must review and approve under Section 3.8 of the Compact. JA63( 3). In addition to asserting that well pads and facilities are projects that it must first approve before they are constructed, the Commission has announced that it will not review applications for such projects until it adopts governing regulations. JA64( 5). This moratorium, which amounts to a ban on the lawful 1

10 use of land that cannot be remedied at the ballot box, has been in effect since Id. WLMG, by its complaint, sought relief from the Commission s ultra vires actions. JA The District Court, in response to a motion by the Commission raising threshold defenses such as finality, ripeness and exhaustion, dismissed WLMG s complaint on the merits pursuant to Fed. R. Civ. P. 12(b)(6), with prejudice, concluding that on the face of the complaint it is apparent that its proposed activities within the [Basin] constitute a project within the meaning of that term as defined in Sections 1.2(g) and 1.2(i) of the Compact. JA47. The District Court reached the merits without notice to, and without hearing from, WLMG. It was an error for the District Court to dismiss WLMG s complaint with prejudice. STATEMENT OF RELATED CASES This case has not previously been before this Court. WLMG is not aware of any other case or proceeding that is related to this case, whether completed, pending, or about to be presented, before this Court or any other court or agency. STATEMENT OF THE CASE Because this appeal arises in the context of a motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6), this Court must accept the truth of the well-pleaded 2

11 factual allegations in the complaint. See, e.g., Bell v. Cheswick Generating Station, 734 F.3d 188, 193 n.5 (3d Cir. 2013). A. Background. Under the Compact, the Commission has authority to review and approve projects to be constructed in the Basin. See Compact at A project under the Compact is: [A]ny work, service or activity which is separately planned, financed, or identified by the commission, or any separate facility undertaken or to be undertaken within a specified area, for the conservation, utilization, control, development or management of water resources which can be established and utilized independently or as an addition to an existing facility, and can be considered as a separate entity for purposes of evaluation. Compact 1.2. The Commission, in order to assert jurisdiction over and preclude natural gas development in the Basin, and after four decades of contrary conduct, interpreted the definition of project in the Compact as including all forms of human activity that use water. JA63-64, 68-69( 1-5,17-20). Because water is used in connection with the construction of well pads and the drilling of gas wells, the Commission determined that those activities are projects that cannot proceed without its approval. Id. The Commission then announced that it would not consider applications for such approval until it finalizes rules governing natural gas 1 A complete copy of the Compact is included in the Joint Appendix at JA

12 development. Id. The Commission has been pondering such rules for more than seven years, thus imposing a de facto moratorium on natural gas development in the Basin. Id. WLMG owns approximately 75 acres of land, with gas rights, in Wayne County, Pennsylvania and in the Basin (the Property ). JA66( 12). WLMG plans to construct a natural gas well pad and related infrastructure on the Property. JA64, 69-71( 5,21-30). Thereafter, WLMG will drill an exploratory well targeting the Marcellus Shale formation for the purpose of locating recoverable natural gas reserves. Id. The value of Property is directly tied to identification and estimation of recoverable natural gas reserves and will remain depressed until such reserves are identified. JA69, 76( 24,44). After it locates viable natural gas reserves, WLMG will drill, and hydraulically fracture, a horizontal well and, thereafter, will produce and sell its natural gas. Id. WLMG s well pad and the appurtenant facilities to be constructed on the Property, as well as all related activities to be carried out on the Property, will be designed, built, operated and carried out for the exploration, extraction and development of natural gas and not for the conservation, utilization, control, development or management of water resources. JA70( 27) (emphasis added). WLMG is not proposing to develop, construct, or operate a water withdrawal, dam, impoundment or reservoir, or to construct or operate a wastewater treatment 4

13 or discharge facility in connection with the development of the Property. JA71( 28). WLMG will secure all water necessary for its proposed development, including the drilling of the exploratory well, from a properly licensed and approved supplier. JA71( 29). As a result, WLMG need not, and will not, drill a groundwater well or operate a surface water withdrawal outtake in connection with the development of the Property. JA71( 28,29). Moreover, all wastewater generated in connection with the development of the Property will be removed from the Property and otherwise managed by a properly licensed and approved vendor. JA71( 30). Before undertaking regulated conduct, WLMG will obtain all necessary permits, licenses and approvals from the Pennsylvania Department of Environmental Protection, which administers a comprehensive regulatory program governing virtually all operational aspects of the development of natural gas wells in Pennsylvania. JA70( 25); see also 58 Pa.C.S et seq. WLMG will develop the Property in full compliance with all applicable laws and regulations. JA71( 31). WLMG intends to construct a well pad and drill an exploratory well on the Property as soon as the uncertainty and threat of fines, penalties and other sanctions resulting from the Commission s assertion of jurisdiction is resolved. JA71, 74( 31,38). WLMG, however, cannot proceed until the barrier of 5

14 Commission s assertion of project review authority (and the related moratorium on well pad construction in the Basin) is addressed. JA62-74( 4,8,17-18,31,32,36-38). B. Proceedings Below. On May 5, 2016 WLMG filed its complaint contending that, under no set of facts, do its natural gas development activities constitute a project as defined in the Compact. JA The Commission, on July 8, 2016, filed a motion to dismiss under Fed. R. Civ. P. 12(b)(1) for lack of ripeness and standing, and under Fed. R. Civ. P. 12(b)(6) for lack of final agency action, failure to exhaust administrative remedies or, in the alternative, because the statute of limitations has run. JA The Commission s motion did not contend that WLMG had not stated a claim on the merits. Id. On March 23, 2017, following briefing solely on the issues raised by the Commission s motion and a plenary hearing, 2 the District Court, sua sponte, considered and ruled on the merits of WLMG s complaint. JA The District Court rejected all of the threshold defenses asserted by the Commission s motion, but, without briefing by the parties, and based only upon cursory consideration of two provisions of the Compact, declared that all activities in the Basin that use 2 WLMG moved for a plenary hearing solely with respect to the Commission s motion to dismiss under Fed. R. Civ. P. 12(b)(1). JA6. 6

15 water are projects subject to Commission jurisdiction. JA4-48. It dismissed WLMG s complaint with prejudice, concluding that on the face of WLMG s complaint it is apparent that its proposed activities within the [Basin] constitute a project within the meaning of that term as defined in Sections 1.2(g) and 1.2(i) of the Compact. JA4, 47. WLMG s appeal to this Court followed. JA1. SUMMARY OF THE ARGUMENT This Court is being asked to interpret an interstate compact entered into by Pennsylvania, New Jersey, New York, Delaware and the United States in Substantial issues involving the construction and application of interstate compacts are implicated. See Tarrant Regional Water District v. Hermann, 133 S. Ct (2013). Also implicated are questions involving the extent to which an agency purporting to act under an interstate compact can preempt, and thereby displace, state and local land use and environmental regulation. In connection with a motion to dismiss raising solely finality, ripeness, standing and other threshold defenses, the District Court, sua sponte, ruled on the merits of WLMG s complaint. The District Court rejected all of the threshold defenses asserted by the Commission, but, without hearing from the parties, and based only upon cursory consideration of two provisions of the Compact, held that all activities in the Basin that use water are projects subject to Commission 7

16 jurisdiction. Having not afforded WLMG, or amici, including state and local officials, an opportunity to be heard, the District Court did not learn of, and therefore did not consider, the textual and contextual reasons why projects under the Compact are water resource development and management projects, such as dams, reservoirs and water supply and treatment systems and not all human activities that use water as the Commission contends. This was reversible error. This Court need not allow the District Court to correct its error and reconsider its interpretation of the Compact. Given that the legal question presented is almost certain to return to this Court, the more efficient route is for the Court to interpret the Compact in light of its plain meaning and, if ambiguity exists, using available interpretative tools. WLMG requests that this Court hold that the Commission does not have the power to compel landowners in Pennsylvania to submit to project review before developing natural gas resources on their properties. Jurisdiction over such activities is, in this case, vested in, and the activities are comprehensively regulated by, the Commonwealth of Pennsylvania and not the Commission. The District Court s decision, if affirmed, will transform the Commission into a regional land use and environmental regulatory body with authority over all activities in the Basin that happen to use water. Virtually all agricultural, residential, commercial, industrial and recreational uses of land in the Basin will 8

17 fall under the Commission s project review jurisdiction. Moreover, because the Commission operates under federal law, its decisions about when, where and how development will occur in the Basin are, under the Supremacy Clause, 3 likely to preempt conflicting decisions by the Basin States and local zoning boards and governing bodies. The Commission seeks to displace state and local control over the use of land and its asserted jurisdictional hook is water. Pressured and funded by antidevelopment activists, including the intervenors in this case, 4 the Commission seeks to be the ultimate decision maker on what forms of development may proceed in the Basin. While the current victim of this overreach are landowners like WLMG seeking to develop the abundant gas reserves in the Basin, the list of potential, future targets is endless. Private property rights, and State s rights, are at risk. 3 The Supremacy Clause... ensures that a congressionally approved compact, as a federal law, pre-empts any state law that conflicts with the Compact. Tarrant, 133 S. Ct. at 2130 n.8. 4 The Delaware Riverkeeper Network and Maya K. van Rossum, the Delaware Riverkeeper, intervened in this matter on the side of the Commission. JA52, 54. Intervenors did not file a motion to dismiss, nor did they join in the Commission s motion to dismiss. Intervenors, instead, answered WLMG s complaint. JA54. They lack standing to be heard, therefore, with respect to WLMG s appeal from the District Court s ruling on the Commission s motion to dismiss. 9

18 ARGUMENT I. Standard of Review. In reviewing a motion to dismiss, this Court must accept as true all wellpleaded facts and allegations, and must draw all reasonable inferences therefrom in favor of the plaintiff. See Bell, 734 F.3d at 193 n.5. An order granting a motion to dismiss is given plenary review. Id. II. The District Court Committed A Threshold Error In Sua Sponte Dismissing WLMG s Complaint For Declaratory Relief Without Notice Or Opportunity To Be Heard. The District Court, relying on this Court s decision in Hawkins v. Supreme Court of New Jersey, 174 Fed. App x 683, 685 (3d Cir. 2006), reasoned that dismissal of WLMG s declaratory judgment claim was appropriate pursuant to Rule 12(b)(6) because, on the face of the complaint, WLMG is not entitled to the declaratory relief [it] seeks. JA38. But the District Court s Rule 12(b)(6) dismissal of WLMG s complaint in this case stands in marked contrast to the dismissal in Hawkins, where the defendants actually moved to dismiss on grounds relied upon by the District Court and the plaintiff was afforded a full and fair opportunity to be heard on defendant s motion. See Hawkins v. Supreme Court of New Jersey, 2005 WL (D.N.J. Aug. 31, 2005), aff d, 174 Fed. App x. 683 (3d Cir. 2006). 10

19 Here, unlike in Hawkins, the District Court s rationale for the Rule 12(b)(6) dismissal with prejudice was on grounds not raised by the Commission s motion and was not briefed by the parties. The Commission moved to dismiss under Fed. R. Civ. P. 12(b)(1) for lack of ripeness and standing, and under Fed. R. Civ. P. 12(b)(6) exclusively for lack of final agency action, failure to exhaust administrative remedies or, in the alternative, because the statute of limitations has run on any appeal of actions. JA Not surprisingly, WLMG s opposition to the Commission s motion to dismiss focused exclusively on the grounds raised in the motion. The District Court, following a plenary hearing on the Commission s Rule 12(b)(1) motion, rejected each argument raised by the Commission s motion to dismiss. JA5-38. But rather than stop there, the District Court proceeded to sua sponte address the merits of WLMG s claim for declaratory relief and did so without any notice to WLMG or opportunity to be heard. JA [A] court may sua sponte raise the issue of the deficiency of a pleading under Rule 12(b)(6) provided that the litigant has the opportunity to address the issue either orally or in writing. Roman v. Jeffes, 904 F.2d 192, 196 (3d Cir. 1990). See also Cordero- Hernandez v. Hernandez-Ballesteros, 449 F.3d 240, 243 n.2 (1st Cir. 2006), cert. denied, 549 U.S (2007) ( if the district court had any doubt that plaintiffs understood that they were in danger of having their complaint dismissed on 11

20 grounds they had not had an opportunity to argue, the safest course would have been to give notice of the proposed grounds for dismissal and to take arguments on the question. ). WLMG should have been, but was not, afforded an opportunity to address orally or in writing dismissal of its claim for declaratory relief on the merits by the District Court. The alternative rationale adopted by the District Court for granting the Commission s Rule 12(b)(6) motion blindsided WLMG. The Commission s motion did not mention or challenge the merits of WLMG s claim for declaratory relief, but instead relied exclusively upon standing, ripeness, and finality arguments. JA Thus, endorsement of the District Court s rationale in this case implicitly would demand that WLMG s opposition to the Commission s motion to dismiss have contained refutation of every conceivable ground for dismissal, including those never raised in the Commission s motion. This is a wholly impractical standard. Moreover, had the District Court been concerned about the merits of WLMG s claim, at the very least it should have given WLMG notice and an opportunity to be heard on the issue prior to deciding to dismiss its complaint with prejudice. The Commission never moved for summary judgment, and the only grounds for dismissal were those stated in the Commission s motion to dismiss. JA38 (at 12

21 n.15). Thus, the District Court s sua sponte dismissal of WLMG s complaint can only be deemed harmless if, on appeal, this Court affords it the opportunity to present its arguments regarding the merits of its claim for declaratory relief (or, alternatively, arguments regarding its ability to amend its complaint to cure the purported deficiencies, which WLMG would have done had the District Court given it notice and an opportunity to be heard before dismissing the complaint on the merits). See, e.g., Jones v. United States Dist. Court for the Dist. of Del., 649 Fed. App x. 132, 133 (3d. Cir. 2016) (dismissal harmless error where appellant had opportunity to address the issue of sovereign immunity on appeal); Curley v. Perry, 246 F.3d 1278, 1284 (10th Cir. 2001) (lack of prior notice of sua sponte dismissal harmless when plaintiff has a reasonable opportunity to present his arguments to the appellate court); Buchanan v. Manley, 145 F.3d 386, 389 (D.C. Cir. 1998) (same). The arguments WLMG would have submitted to the District Court had it been afforded an opportunity to do so, as explained infra, establish that WLMG has stated a claim for which relief can be granted or, at a minimum, that WLMG should have been afforded leave to amend its complaint. The District Court s dismissal of WLMG s complaint, with prejudice, and without affording WLMG any opportunity to argue its position and fully address the grounds on which the District Court dismissed its complaint, is reversible error and remand for further 13

22 proceedings on the merits would be appropriate. In this case, however, remand for consideration of the merits would be inefficient and is unnecessary because, for the reasons set forth below, WLMG is entitled to an instruction that judgment be entered in its favor. III. The District Court Erred In Dismissing WLMG s Complaint For Declaratory Relief With Prejudice. A. Introduction. On the merits, the single, narrow issue presented by WLMG s complaint, and this appeal, is whether land cleared to accommodate a natural gas well, known as a well pad, and the natural gas well drilled on the pad, separately, or considered together, constitute a project subject to review by the Commission under Section 3.8 of the Compact. 5 The District Court concluded they are. The District Court, citing Sections 1.2(g) & (i) of the Compact, reasoned WLMG s complaint clearly describe[s] a facility undertaken for the utilization of water resources, since the well pad and related drilling, fracturing and operation of natural gas wells admittedly involve water resources, i.e., water in, or, under or 5 WLMG s appeal does not implicate, or seek a ruling with respect to the scope of, the Commission s authority under sections of the Compact other than Section 3.8. For example, because WLMG does not intend, or seek authorization, to operate a water withdrawal or wastewater treatment facility, JA70-17( 27-30), this appeal does not implicate the Commission s authority under Articles 5 or 10 of the Compact. 14

23 above the ground and related uses of land. JA46. That decision was clearly erroneous. Interstate compacts are construed as contracts under principles of contract law. So, as with any contract, we begin by examining the express terms of the Compact as the best indication of the intent of the parties. Tarrant, 133 S. Ct. at 2130 (citations omitted). Background and context are essential, however, because compacts do not exist in a vacuum but rather reflect the circumstances from which they sprung. See Tarrant, 133 S. Ct. at 2125; see also Oklahoma v. New Mexico, 501 U.S. 221, (1991); Texas v. New Mexico, 462 U.S. 554, (1983); Arizona v. California, 373 U.S. 546, 552 (1963). When a compact is reasonably susceptible to different interpretations, it is appropriate to turn to other interpretive tools to shed light on the intent of the Compact s drafters. Tarrant, 133 S. Ct. at The background notion that a State does not easily cede its sovereignty has informed our interpretation of interstate compacts. Id. In the absence of a clear statement to the contrary, the controlling inference is that each State was left to regulate the activities or her own citizens. Id. (citations omitted). That is, a surrender of state sovereignty should be treated with great care, and the Supreme Court has stated that courts should not find a surrender unless it has been expressed in terms too plain to be mistaken. International Union of Operating Engineers v. Delaware River Joint 15

24 Toll Bridge Comm n, 311 F.3d 273, 276 (3d Cir. 2002) (quoting Jefferson Branch Bank v. Skelly, 66 U.S. 436, 446 (1861)). Similarly, because compacts like the one before this Court are ratified by Congress and joined in by the United States, the Court must look for clear notice of an intent to empower the implementing agency (here, the Commission) to exercise jurisdiction. See Rapanos v. United States, 547 U.S. 715 (2006). In Rapanos, when the Supreme Court rejected the U.S. Army Corps of Engineers assertion of jurisdiction over certain wetlands, the plurality offered the following discerning observations: [T]he Government s expansive interpretation would result in a significant impingement of the State s traditional primary power over land and water use. Regulation of land use, as through the issuance of development permits... is a quintessential state and local power. The extensive federal jurisdiction urged by the Government would authorize the Corps to function as a de facto regulator of immense stretches of intrastate land an authority the agency has shown its willingness to exercise with the scope of discretion that would befit a local zoning board. We ordinarily expect a clear and manifest statement from Congress to authorize an unprecedented intrusion into traditional state authority. Rapanos, 547 U.S. at 738 (citations omitted). See also Pennhurst State School & Hosp. v. Haldermanm, 451 U.S. 1, 25 (1981) (existence of conditions in exchange for the receipt of federal funds must be explicitly obvious so that states can make informed choice). 16

25 In addition, it is appropriate to look[ ] to legislative history and other extrinsic material when required to interpret a statute which is ambiguous. Oklahoma, 501 U.S. at 235, n.5 (internal citations omitted). The Supreme Court has examined evidence regarding the negotiating history of other interstate compacts. Id. (citing Texas, 462 U.S. at 568, n.14; Arizona v. California, 292 U.S. 341, (1934)). Thus, resort to extrinsic evidence of the compact negotiations... is entirely appropriate here if the Compact language is ambiguous. Oklahoma, 501 U.S. at 235. Moreover, [e]xamination of purpose is a staple of statutory interpretation that makes up the daily fare of every appellate court in the country.... McCreary Cnty., Ky. v. Am. Civil Liberties Union of Ky., 545 U.S. 844, 865 (2005) (citing Gen. Dynamics Land Sys., Inc. v. Cline, 540 U.S. 581, 600 (2004) (interpreting federal statute in light of its text, structure, purpose, and history )). Evidence of course of performance, or conduct, under the Compact, can also be highly significant, as well as the usage of the trade, i.e., the terms of other interstate compacts. Tarrant, 133 S. Ct. at 2133 & 2135; New Jersey v. Delaware, 552 U.S. 597, (2008) (considering history of compact and course of conduct of signatory states); Alabama v. North Carolina, 560 U.S. 330, , 344 & 353 (2010) (considering terms of other compacts); see also Texas, 462 U.S. at 565 (compact lacked features of other compacts and court not free to rewrite it). 17

26 As explained in the sections that follow, the District Court s cursory analysis, and conclusion that WLMG s proposed well pad and gas well are a project under the Compact, JA45-46, cannot stand when the foregoing analytical framework is applied to it. The plain meaning of the Compact, whether the focus is on the definition of project or on the Compact as a whole, precludes a finding that the Commission has project review jurisdiction over well pads and gas wells. Projects are activities and facilities that are undertaken for the purpose of managing, developing or using water resources. Projects subject to the jurisdiction of the Commission under Section 3.8 of the Compact are, therefore, water resource development and management activities and undertakings, such as dams, reservoirs, flood controls, water treatment plants, water mains and hydroelectric plants. As the term is defined, and used throughout the Compact, projects are not industrial, commercial or residential developments that utilize water, even lots of water, in their construction or operation (including natural gas well pads and wells). Beyond its plain terms, the history and negotiation of the Compact evidence that Congress and the Basin States never intended for the Commission s project review jurisdiction to extend to industrial, commercial and residential uses of land that happen to use water or generate waste water. 18

27 In addition, and prior to caving to pressure from anti-industry groups spreading unfounded hysteria over fracking, the Commission understood the limited reach of its project review jurisdiction. That is why the Commission, since its creation in 1961, has not asserted jurisdiction over office towers, refineries, nuclear power plants, chemical plants, shopping malls, apartment complexes, commercial farms or, until recently, well pads and natural gas wells. B. The Express Terms Of The Compact Establish That The District Court Erred In Dismissing WLMG s Complaint. When the Compact is construed as a whole, it is evident that projects are water resource projects undertaken for the purpose of developing, protecting and utilizing the water resources in the Basin, such as dams and reservoirs. Projects, thus, are activities undertaken, or facilities constructed, to ensure that present and future water needs of residents and businesses in the Basin are met. 1. The definition of project. The feature that separates reviewable projects from other types of human undertakings that happen to use water is that projects are undertakings for the conservation, utilization, control, development or management of water resources. Compact at 1.2 (emphasis added). An undertaking that is not for one of the identified purposes is not a reviewable project. The ordinary meaning of for is with the aim or purpose of. New World Dictionary (2d College Ed. 1972); see also New Webster s Dictionary and Roget s 19

28 Thesaurus (HarperCollins 1992) at 156 (defining for as with the purpose of ). A project is therefore an activity that is conducted with the aim or purpose of conserving, utilizing, controlling, developing, or managing water resources. Consistent with the ordinary meaning of for as used in the definition of project, the phraseology employed in the definition of project, i.e., for followed by a list of goals, objectives, outcomes or results, appears in other sections of the Compact and in each case is intended to mean for the purpose of. See Compact at 3.1, 3.2(a), 4.1, 4.2(a), 6.1 and As the Compact provisions cited above illustrate, in order for an activity or undertaking to be for a purpose, result, goal or objective, the purpose, result, goal or objective must be the reason, or at least one of the principal reasons, why the activity or operation is undertaken. What follows for is the reason or motive or impetus for the activity or undertaking. It is why the thing is done. Incidentals do not count. For example, a landowner does not build a house for utilizing water by taking showers or washing dishes. Nor does a developer build an office tower in Philadelphia for using millions of gallons of water when mixing concrete for construction of the tower, or for utilizing water in the tower s lavatories once constructed. Likewise, a landowner does not construct a well pad and drill a gas well for the conservation, utilization, control, 20

29 development or management of water resources, but instead for the extraction of natural gas. The Commission is attempting to rewrite the definition of project in order to assume regulatory authority over natural gas development in the Basin. In order to preempt state statutes and regulations that allow, permit, and comprehensively regulate, natural gas development, the Commission proposes to rewrite the definition of project in Section 1.2 of the Compact to read: Project shall mean any work, service or activity which is separate planned, financed, or identified by the commission, or any separate facility undertaken or to be undertaken within a specified area, for the conservation, utilization, control, development or management of [that utilizes] water resources [and] which can be established and utilized independently or an as addition to an existing facility, and can be considered a separate entity for purposes of evaluation. What the Commission seeks, in effect, is to rewrite the Compact to adopt a more expansive definition of project like the one found in the Tahoe Regional Planning Compact ( Tahoe Compact ). See Tahoe Regional Planning Compact at Article II(h) (ADD4). 6 As discussed in detail in the final section of this brief, the Tahoe Compact confers expansive jurisdiction upon the Tahoe Regional Planning Agency ( TRPA ) by giving the agency jurisdiction over projects which, as that 6 Available at For the Court s ease of reference, in addition to the hyperlinks provided where available, pertinent excerpts of the public record materials cited herein are compiled in the Addendum to Brief for Appellant ( ADD ) filed concurrently with this brief. 21

30 term is defined in the Tahoe Compact, include any activity undertaken by any person, including any public agency, if the activity may substantially affect land, water, air, space or any other natural resources of the region. Id. (emphasis added). The Commission s attempt to rewrite the Compact so that it has authority comparable to that of the TRPA must be rejected. See, e.g., Alabama, 560 U.S. at 252; see also Texas, 462 U.S. at 565 (courts are not free to rewrite compacts to include features of other compacts). 2. Section 1.5 (Existing Agencies; Construction). The Compact, including the definition of project and the related limit on the Commission s project review authority under Section 3.8, must be interpreted and understood in light of Section 1.5 of the Compact, which provides: It is the purpose of this signatory parties to preserve and utilize the functions, powers and duties of existing offices and agencies of government to the extent not inconsistent with the compact, and the commission is authorized and directed to utilize and employ such offices and agencies for the purpose of this compact to the fullest extent it finds feasible and advantageous. Compact at 1.5. Consistent with Section 1.5, the Compact should not be construed to permit the Commission to displace (and, as a result of the Supremacy Clause, preempt) state regulatory programs absent clear and unmistakable text. See Tarrant, 133 S. Ct. at

31 The Commission s first Executive Director understood the inherent limits on the Commission s jurisdiction and the related importance of Section 1.5. In comments to an audience of state regulators made shortly after the Compact was adopted, the Executive Director observed: Some concern has been evidenced that the Commission might be trying to undertake work now properly regarded as the province of existing state agencies.... The framers of the compact were acutely aware of the situation and were forthright in establishing a policy that we must follow in our relations with public agencies with whom we have an identity of interest. Any apprehension that the Commission will be doing any jurisdictional poaching should be allayed by [Section 1.5] of the compact.... [Section 1.5] is a clear and direct order and there is no intent to depart from it. James F. Wright, Executive Director, Delaware River Basin Commission, The Interstate Commission on the Delaware River Basin, Organization and Programs of the Delaware River Basin Commission (Oct. 16, 1962) (emphasis added) (ADD25). In conflict with Section 1.5 of the Compact and the first Executive Director s statement quoted above, jurisdictional poaching is the inevitable byproduct of the Commission s attempt to expand the definition of project to include industrial, commercial and residential developments and operations that happen to utilize water. If the Commission has the power to review such developments and operations pursuant to Section 3.8 of the Compact, then it has 23

32 poached jurisdiction by displacing and preempting the state regulatory programs governing review and approval of such undertakings. 3. The term project as used throughout the Compact. The limited scope of the Commission s project review jurisdiction becomes even more apparent when the Compact is construed as a whole. The term project is used throughout the Compact and, in each instance, the context evidences that the intent of the Basin States in 1961 was that projects meant water resource projects i.e., activities or operations that are intended, and designed and built in order to develop or otherwise manage water within the Basin. See Tarrant, 133 S. Ct. at 2131 (construing compact as a whole). 7 a. Section 3.8 (Referral and Review). The term project appears throughout Article 3 (Powers and Duties of the Commission). Section 3.8 uses the term project to create, and limit, the authority of the Commission to review and approve certain types of facilities and activities to be carried out in the Basin: No project having a substantial effect on the water resources of the basin shall hereafter be undertaken by any person, corporation or governmental authority unless it shall have been first submitted and approved by the commission, subject to the provisions of Section 3.3 and 3.5. The commission shall approve a project whenever it finds 7 Throughout the following discussion of the Compact, the term project appears in boldface type whenever the term appears in a quoted provision of the Compact. 24

33 and determines that such project would not substantially impair or conflict with the comprehensive plan.... Compact at 3.8. The cross-references to Sections 3.3 and 3.5 in the first sentence of Section 3.8 are telling because those sections deal expressly, and exclusively, with water allocation and management, including by way of one or more projects. Section 3.3 (Allocations, Diversions and Releases) authorizes the Commission to allocate waters of the Basins, subject to certain limitations. Id. at 3.3. Section 3.5 (Supreme Court Decree; Specific Limitations on Commission) notes that the Compact should not be construed as adversely affecting rights established by the Supreme Court s 1954 decree regarding water allocation. It also expressly provides that the Commission shall neither construct or operate any project... which would impede or interfere those rights nor [e]xercise any jurisdiction, except upon consent of all parties to said decree, over the planning, design, construction, operation or control of any projects... constructed or used in connection with withdrawals, diversions and releases of waters of the basin authorized by said decree. Id. at 3.5. The second sentence of Section 3.8 similarly demonstrates that the Commission s authority to review projects is limited to typical water resource projects. That limitation is inherent in the requirement that projects are reviewed to determine if they will substantially impair or conflict with the comprehensive 25

34 plan. As discussed below, consideration of the scope and content of the Comprehensive Plan, as provided for in the Compact, evidences that projects under the Compact are water resource development or management projects. b. Section 13.1 (Comprehensive Plan). As required by Section 13.1 of the Compact, the Comprehensive Plan is a resources planning document that, among other things, evaluates how water needs in the Basin will be met. Central to the evaluation of how water needs in the Basin will be met, is the identification of projects undertaken, or to be undertaken, to meet identified and forecasted water needs. Section 13.1 thus expressly provides: The plan shall include all public and private projects and facilities which are required, in the judgment of the commission, for the optimum planning, development, conservation, utilization, management and control of the water resources of the basin to meet present and future needs. Compact at With this background, the concept embodied in Section 3.8 of reviewing proposed projects for consistency with the Comprehensive Plan makes sense. A proposed project is consistent with the Comprehensive Plan if it is expressly referenced in the plan or if it helps address an immediate or long-term need for water as identified in the plan. For example, a proposed reservoir would be consistent with the Comprehensive Plan if is identified in the plan as facility to be 26

35 developed in the future to meet increased need resulting from population growth. On the other hand, a proposed dam or related reservoir might conflict with the Comprehensive Plan if it would interfere with the operation of a downstream reservoir that is identified in the plan. What is not required to be identified in, or discussed and planned for, in the Comprehensive Plan are industrial, commercial and residential developments that happen to use water even lots of water. And, as discussed below, such developments do not appear in the Comprehensive Plan adopted by the Commission because the plan describes and provides for water resource development or management projects not other activities or developments that happen to use water. Because the Comprehensive Plan does not address, provide for, evaluate, study, identify or even mention industrial and commercial developments, it is simply nonsensical to suggest that such developments should be reviewed pursuant to Section 3.8 for consistency with the Comprehensive Plan. Thus, it is equally nonsensical to suggest that industrial and commercial developments (including well pads and gas wells) are projects. 27

36 c. Sections 3.2 (Comprehensive Plan, Program and Budgets), 3.6 (General Powers) and Section 13.2 (Water Resources Program). Sections 3.8 and 13.1 are only two of several provisions of the Compact that use the term project in a manner that demonstrates the projects under the Compact are water resource projects. Section 3.2(b) of the Compact provides that the Commission is to adopt a water resources program that is to be based on the Comprehensive Plan. The water resources program is to consist of a systematic presentation of the quantity and quality of water resources needs for the area... balanced by existing and proposed projects required to satisfy such needs. Compact at 3.2(b). The water resources must identify all public and private projects affecting the basin, together with a separate statement of the projects proposed to be undertaken by the commission. Id. A more detailed enumeration of the mandatory elements of the Commission s water resources program appears in Section 13.2 (Water Resources Program). Like in Section 13.1 (Comprehensive Plan), the term project is used throughout Section 13.2 in a manner that leaves no doubt regarding the meaning of the term. Elaborating on Section 3.2(b), Section 13.2 provides: The Commission shall annually adopt a water resources program, based upon the comprehensive plan, consisting of the projects and facilities which the commission proposed to be undertaken by the commission and by other authorized governmental and private 28

37 agencies, organizations and persons during the ensuing six years or such other reasonably forseeable period as the commission may determine. Compact at In addition to identifying the water needs for the planning period, the water resources program must identify the existing and proposed projects and facilities required to satisfy such needs, including all public and private projects to be anticipated. Id. The program must also contain a separate statement of the projects proposed to be undertaken by the commission. Id. Section 3.6 similarly uses the term project in a manner that evidences that projects are facilities or activities undertaken for the purpose of developing or managing water resources. Section 3.6(b) is particularly informative in that regard and provides useful examples of water resource projects subject to review and approval by the Commission. Section 3.6(b) authorizes the Commission to: [e]stablish standards for the planning, design and operation of all projects and facilities in the basin which affect its water resources, including without limitation thereto water and waste treatment plants, streams and lake recreational facilities, trunk mains for water distribution, local flood control protection works, small watershed management programs, and ground water recharging operations. Compact at 3.6(b). If the interpretation of the definition of project proffered by the Commission is inserted above, Section 3.6(b) is rendered patently absurd. It is simply inconceivable that the Basin States and Congress intended to authorize the 29

38 Commission to establish standards for the planning, design and operation or all activities and undertakings that happen to use water, i.e., affect water resources. The intent was not to empower the Commission to establish standards for the operation of all forms of land development, including golf courses, homes, summer camps, farms, factories, schools, shopping center, office parks, city skyscrapers and the dozens of industrial facilities along the banks for the Delaware River near Philadelphia. Rather, as the examples in Section 3.6(b) illustrate, the intent was to empower the Commission to establish standards for water resource management and development projects. See Compact at 3.6(b). d. Article 11 (Intergovernmental Relations) and Article 12 (Capital Financing). That projects under the Compact are water resource development and management projects undertaken for the purpose of conserving, developing and managing water resources is further evidenced by the use of the term project in Articles 11 and 12 of the Compact. Section 11.1 specifies prerequisites for projects undertaken by the federal government. See Compact at These requirements make sense when applied to water resource development projects, but are absurd if applied to federal activities and undertakings that use water generally (such as a military base in New Jersey, for example). 30