JORDAN, Circuit Judge.
Wayne Land and Mineral Group, LLC, a company that wants to obtain natural
The Delaware River Basin (the "Basin") is an area of land surrounding and draining into the Delaware River that extends through parts of Delaware, New Jersey, New York, and Pennsylvania (the "Basin States"). In 1961, the Basin States and the United States entered into the Delaware River Basin Compact (the "Compact"), which is an interstate agreement aimed at ensuring a unified approach to the conservation, utilization, development, management, and control of the water and related resources of the Basin.
The Compact created the Delaware River Basin Commission, comprising the Governors of the Basin States, as well as a commissioner appointed by the President of the United States. By its terms, it gives the Commission a broad range of powers to protect water quantity and quality within the Basin. Most relevant to this case are the Commission's general powers and duties, which are detailed in Article 3 of the Compact. Article 3 charges the Commission with creating "[a] comprehensive plan ... for the immediate and long range development and uses of the water resources of the [B]asin[.]" (Joint App. at 366, § 3.2(a).) That plan must "include all public and private projects and facilities which are required, in the judgment of the [C]ommission, for the optimum planning, development, conservation, utilization, management and control of the water resources of the [B]asin to meet present and future needs[.]" (Joint App. at 386, § 13.1.)
Consistent with that planning responsibility, Article 3 gives the Commission the
(Joint App. at 370, § 3.8.)
The Compact defines many of its key terms, including the word "project," which is said to be
(Joint App. at 363, § 1.2(g).) The Compact then defines "water resources" to include: water and related natural resources in, on, under, or above the ground, including related uses of land, which are subject to beneficial use, ownership or control.
(Joint App. at 363, § 1.2(i).) Finally, in sweeping language, the Compact defines "facility" as:
(Joint App. at 363, § 1.2(e).)
The Compact also gives the Commission power to address pollution within the Basin. Under Article 5 of the Compact, "[t]he [C]ommission may undertake investigations and surveys, and acquire, construct, operate and maintain projects and facilities to control potential pollution and abate or dilute existing pollution of the water resources of the [B]asin." (Joint App. at 372, § 5.1.) Article 5 provides the following:
(Joint App. at 372, § 5.2.)
It is plain that the Commission has broad rulemaking and enforcement powers. Under Article 14 of the Compact, the Commission may "[m]ake and enforce reasonable rules and regulations for the effectuation, application and enforcement of this [C]ompact[.]" (Joint App. at 389, § 14.2(a).)
Natural gas reserves underlie at least some of the land within the Basin. To extract natural gas from shale rock formations, energy companies use a combination of horizontal drilling and hydraulic fracturing. From an area on the ground called a well pad, companies employ fracking technology to inject a fluid composed of water and various chemicals into the ground to force the release of trapped gas. It is estimated that the fracking process may require up to five million gallons of water per well. Some of the water in the fracking fluid is consumed and will remain underground, while the rest will flow back to the surface where it is recovered and either disposed of or recycled.
The extraction and sale of natural gas may be profitable for those involved, and it certainly provides benefits to energy consumers, but fracking is not without controversy — in particular, concerns that it may adversely affect the quality and quantity of water resources. As a result, the Commission has asserted authority over fracking-related activities in the Basin.
In 2009, the then-Executive Director of the Commission, Carol Collier, issued a moratorium banning most natural gas fracking projects located "within the drainage area of Special Protection Waters," unless there was prior Commission approval.
Collier expanded that moratorium in 2010 in a supplemental notice letter. She withdrew the exclusion for exploratory wells and stated that "all natural gas well project sponsors, including the sponsors of natural gas well projects intended solely for exploratory purposes, ... may not commence any natural gas well project for the production from or exploration of shale formations within the drainage area of Special Protection Waters without first" obtaining the approval of the Commission. (Joint App. at 113 (emphasis omitted).) Collier said that the inclusion of exploratory wells in the moratorium would "support the Commission's goal that exploratory wells do not serve as a source of degradation of the Commission's Special Protection Waters," by "remov[ing] any regulatory incentive" to engage in purportedly "exploratory" drilling before the Commission could implement final natural gas regulations. (Joint App. at 113.)
Since then, the Commission has not issued any final regulations with respect to the procedures and rules governing the review of fracking projects.
Wayne Land and Mineral Group, LLC is a Pennsylvania company that alleges it has been particularly harmed by the Commission's moratorium on fracking. It owns about 180 acres of land in Wayne County, Pennsylvania, and roughly 75 acres of that land are located within the Basin. That is the portion of Wayne's property that contains shale formations with natural gas reserves. Wayne wants to build a natural gas well pad and related infrastructure on its property, drill an exploratory well targeting the recoverable natural gas in the shale, and if viable, drill a horizontal well and use fracking to extract gas for sale. Wayne contends that the Commission's moratorium is wrongly impeding its investment-backed expectations.
Wayne filed suit against the Commission in the United States District Court for the Middle District of Pennsylvania. In its complaint, it said that the Commission lacks the authority under the Compact "to review and approve a natural gas well pad, a gas well and related facilities and associated activities on [Wayne's] property" within the Basin. (Joint App. at 62.) More particularly, Wayne alleged that the Commission overstepped its bounds by interpreting its power to review "projects" to include essentially "any activity, development or other human undertaking in the Basin that uses water[.]" (Joint App. at 63-64.) Wayne sought a declaratory judgment from the District Court that the Commission's jurisdiction extends only to matters fitting the Compact's definition of "project" and that the activities proposed by Wayne do "not constitute a `project' under Section 3.8 of the Compact." (Joint App. at 77-78.) By Wayne's reckoning, then, whether its activities "may have a substantial effect on water resources in the Basin" is irrelevant because those activities are not a "project" subject to the Commission's authority. (Joint App. at 77.)
The Commission responded by filing a motion to dismiss Wayne's complaint. It asserted that the District Court lacked subject matter jurisdiction under Rule 12(b)(1) because Wayne's claim was not ripe and Wayne lacked standing. It also said, in the alternative, that the District Court should dismiss the complaint under Rule 12(b)(6) for failure to state a claim upon which relief may be granted because there was no final agency action and Wayne did not exhaust available administrative remedies. The Commission did not, however, make arguments countering Wayne's reading of the Compact's text, including Wayne's assertion about the scope of the term "project."
The Delaware Riverkeeper Network and an individual named Maya K. van Rossum, who identifies herself as "the Delaware Riverkeeper," were granted permission by the District Court to intervene as defendants. The Court denied motions to intervene from Pennsylvania State Senators Joseph B. Scarnati, Lisa Baker, and Gene Yaw, as well as from Damascus Citizens for Sustainability, Inc. The Delaware Riverkeeper Network and Ms. van Rossum submitted a brief in support of the Commission's motion to dismiss Wayne's complaint, focusing largely on the terms of the Compact and the Commission's authority to review fracking activities as "projects" under that Compact.
At Wayne's request, the District Court held an evidentiary hearing and heard oral argument on the Commission's motion to dismiss. The new Executive Director of the
Tambini's testimony made plain the legal risks the Commission can impose on energy companies. He said that a company could be fined "not less than $90,000" if it failed to submit an application to the Commission before drilling a natural gas fracking well. (Joint App. at 212, 215-16.) And he agreed that, "if you were going to drill a well, construct a well pad, you had to file with the [C]ommission." (Joint App. at 216.) That was his understanding of the intent behind the 2009 and 2010 moratoriums.
His testimony also showed that the process for obtaining a jurisdictional determination, or even discovering the existence of that option, was hardly transparent. He said:
(Joint App. at 227.) Tambini stated that if the Commission has "information on the activities, the full scope of the [proposed drilling] activities, then the commissioners can make a jurisdictional determination." (Joint App. at 228.) He indicated that, at a minimum, an applicant must show "where the water is coming from, how much water is being used, how many wells, how many wells by when[,] ... how much [water] will stay in the formation, how much will be returned, when it does return, what is the water quality, how is it being stored, potentially how it's being treated, [and] where it's discharged," among other things. (Joint App. at 228.)
The District Court denied the Commission's motion to dismiss Wayne's complaint for lack of subject matter jurisdiction. Specifically, it determined that Wayne had standing because it adequately alleged that the Commission's assertion of jurisdiction over fracking activities within the Basin had caused it economic injury. Furthermore, the Court concluded that Wayne's claim was ripe because it sought a declaratory
The District Court also rejected the Commission's arguments in support of its motion to dismiss for failure to state a claim. The Court was unpersuaded that the supposed lack of final agency action was a problem, given that Wayne was seeking a declaratory judgment rather than judicial review of any specific action by the Commission. As for the Commission's argument that Wayne failed to exhaust administrative remedies, the District Court noted that declaratory judgments are available even when a plaintiff has other remedies. Nevertheless, the Court decided sua sponte to dismiss the complaint for failure to state a claim because, on the merits, the Court determined the Compact's definition of "project" plainly and unambiguously included Wayne's proposed fracking activities.
The Court gave two primary reasons for that conclusion. First, it stated that Wayne's complaint alleged that Wayne would use water to carry out natural gas drilling activities on its property located within the Basin. Second, the Court said that reading the definition of "project" in light of the Compact's definition of "water resources" conclusively resolved the matter because the definition of "water resources" includes any "related uses of land," which the Court believed clearly encompassed Wayne's proposed fracking activities.
Wayne timely appealed, and the parties have thoroughly briefed their positions.
Wayne argues that we must vacate the order dismissing its complaint because the District Court improperly ruled sua sponte on the merits, without providing Wayne notice and an opportunity to be heard, and because the Compact's text unambiguously does not cover fracking-related activities. The Commission, the Delaware Riverkeeper Network, and Ms. van Rossum collectively counter that we should affirm the order of dismissal either because we lack jurisdiction to hear Wayne's claim, because
Wayne cites 28 U.S.C. § 1331 and the terms of the Compact as the basis of the District Court's jurisdiction, and 28 U.S.C. § 1291 as our jurisdictional basis. The Commission, however, contends that we do not have jurisdiction to entertain Wayne's claim because it is not ripe and Wayne lacks standing. The District Court rejected those same arguments and asserted jurisdiction over the case.
Our jurisdiction extends only to claims that are ripe for resolution. Peachlum v. City of York, 333 F.3d 429, 433 (3d Cir. 2003). The Commission argues that Wayne's claim is not ripe because Wayne has not requested a jurisdictional determination from the Commission and there is thus no legally cognizable harm. In the Commission's view, Wayne has chosen not to proceed with its fracking project, instead of asking the Commission whether that project requires Commission approval. Wayne counters that the burden of obtaining a jurisdictional determination is itself a harm that Wayne can contest by seeking declaratory relief.
"The function of the ripeness doctrine is to determine whether a party has brought an action prematurely, and counsels abstention until such time as a dispute is sufficiently concrete to satisfy the constitutional and prudential requirements of the doctrine." Id. (citation omitted). The Supreme Court has stated that a claim is ripe for review if it is fit for judicial decision and withholding court consideration of the issue would constitute a hardship to the parties. Id. at 434 (citing Abbott Labs. v. Gardner, 387 U.S. 136, 149, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967), abrogated on other grounds by Califano v. Sanders, 430 U.S. 99, 105, 97 S.Ct. 980, 51 L.Ed.2d 192 (1977)).
"The contours of the ripeness doctrine are particularly difficult to define with precision when a party seeks a declaratory judgment." Marathon Petroleum Corp., 876 F.3d at 496 (alteration, internal quotation marks, and citation omitted). Yet we have stated that we are guided by three main considerations: the adversity of the parties' interests, the conclusiveness of the judgment, and the practical utility of that judgment. Id. Applying those factors here,
First, there is an adversity of legal interests. Adversity is assessed by asking "[w]hether the claim involves uncertain and contingent events, or presents a real and substantial threat of harm." Surrick v. Killion, 449 F.3d 520, 527 (3d Cir. 2006) (citation omitted). "It is not necessary for the party seeking review to have suffered a completed harm in order to establish adversity of interest so long as there is a substantial threat of real harm that remains throughout the course of the litigation." Id. Here, Wayne faces a real and substantial threat of harm. If Wayne must seek a jurisdictional determination or submit materials for project review — a process that, as Tambini testified, at a minimum requires showing "where the water is coming from, how much water is being used, how many wells, how many wells by when[,] ... how much [water] will stay in the formation, how much will be returned, when it does return, what is the water quality, how is it being stored, potentially how it's being treated, [and] where it's discharged," among other things, (Joint App. at 228) — it will necessarily incur significant expenses and legal risk in attempting to meet that burden. But if Wayne forgoes submitting anything to the Commission, it may well face substantial fines. The Commission previously fined another company $90,000 for commencing natural gas drilling activities in the Basin without the Commission's prior review and approval.
Second, Wayne's claim presents sufficiently concrete facts to allow for a conclusive legal judgment. A claim is fit for adjudication if a "declaratory judgment would in fact determine the parties' rights, as distinguished from an advisory opinion based on a hypothetical set of facts." Surrick, 449 F.3d at 528. "Cases presenting predominately legal questions are particularly amenable to a conclusive determination in a preenforcement context, and generally require less factual development." Id. (internal quotation marks and citation omitted). Here, Wayne's complaint presents an important legal question, which is whether constructing a well pad, drilling an exploratory well, and commencing fracking constitutes a "project" subject to the Commission's project review authority under the Compact. Wayne's claim turns on the proper interpretation of the Compact's terms. There does need to be some factual development in this case, as we explain in more detail herein, but granting or denying Wayne's requested declaratory relief will conclusively determine whether Wayne can forego the expense of applying to the Commission, either for a jurisdictional determination or for approval of its project.
The Commission cites an opinion by the United States Court of Appeals for the District of Columbia Circuit for the contention that a declaratory judgment here would not be conclusive but instead would lead to piecemeal litigation. In Reliable Automatic Sprinkler Co. v. Consumer Product Safety Commission, the plaintiff challenged an investigating agency's tentative assertion that automatic sprinkler heads manufactured by the plaintiff were "consumer products" within the meaning of a federal statute and thus subject to the agency's regulatory jurisdiction. 324 F.3d 726, 729-30 (D.C. Cir. 2003). The plaintiff sought a declaratory judgment to that effect. Id. at 730. It argued that its declaratory judgment claim was sufficiently ripe for decision because it was challenging "the agency's statutory authority to regulate, rather than ... the substance" of the agency's letter determination. Id. at 731. The D.C. Circuit rejected that argument and held that the agency's actions were
That decision is distinguishable. Whereas the agency in Reliable had not yet made a final decision about its regulatory jurisdiction, the Commission here has taken a definitive position that it has authority to review "well pads, exploratory wells, hydraulic fracturing and related activities" under the Compact. (Joint App. at 37 n.14.) That the Commission has thus asserted its jurisdiction is a finding of fact by the District Court based on the clear language of Collier's 2009 and 2010 executive letters, and the finding is well founded. Furthermore, unlike the agency in Reliable, which merely requested voluntary compliance from the plaintiff without threatening sanctions, Tambini's testimony indicates that the Commission has taken the position that anyone planning construction of facilities associated with fracking must submit an application to the Commission or face the threat of substantial fines. And while it is generally preferable to resolve a case all at once, the possibility that the Commission may be upheld in asserting jurisdiction and that this case may have a second phase does not outweigh Wayne's competing interest in a declaration of its rights. On the issue before us, Wayne's claim allows for a conclusive legal judgment.
Third and finally, a ruling on Wayne's request for declaratory relief would have particular utility. A judgment "will affect the parties' plans of actions by alleviating legal uncertainty." Surrick, 449 F.3d at 529. In the context of the Declaratory Judgment Act, utility exists when the judgment would "materially affect the parties and serve ... [to] clarify[] legal relationships so that plaintiffs ... [can] make responsible decisions about the future." Id. (last ellipses and last alteration in original) (internal quotation marks and citation omitted). Here, a grant or denial of the relief Wayne requests would clarify the legal relationship between Wayne (and other similarly situated natural gas companies) and the Commission so that fracking firms can operate with a better understanding of their legal constraints.
Based on those considerations of adversity, conclusiveness, and utility, Wayne's claim is ripe for judicial review.
In addition to having a ripe claim, a plaintiff must also have standing to invoke the jurisdiction of the federal courts under Article III of the United States Constitution. Lujan v. Defs. of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). As with ripeness, the test for standing has three elements. Id. First, the plaintiff must have suffered an injury in fact. Id. That requires "an invasion of a legally protected interest" which is "concrete and particularized" and "actual or imminent," rather than "conjectural or hypothetical." Id. (internal quotation marks and citations omitted). Second, there must be a causal link between the injury and the allegedly improper conduct. Id. "[T]he injury has to be `fairly ...
Here, Wayne has met that burden. It has shown concrete and particularized injury because the Commission's assertion of jurisdiction over well pad construction, exploratory well drilling, and fracking activities has prevented Wayne from realizing the market value of natural resources on its property, has caused Wayne to face a threat of sanctions, and has confronted Wayne with an extensive and expensive application process. The Commission's assertion of jurisdiction over and imposition of a moratorium on Wayne's activities is the cause of those injuries because it prevents Wayne from fracking on its property. And a decision in Wayne's favor would redress the alleged injury by removing, at least as to Wayne, the moratorium on fracking in the Basin. For those reasons, we are satisfied that Wayne has standing.
There is a strong presumption that judicial review of an agency action is only available after that action becomes final, Bell v. New Jersey, 461 U.S. 773, 778, 103 S.Ct. 2187, 76 L.Ed.2d 312 (1983), and the Commission thus contends that this suit should be dismissed because it has not made a final decision about Wayne's proposed activities.
Wayne is not asking for a review of an agency's action. Wayne's complaint does not seek to invalidate Collier's letters placing a moratorium on fracking activities in the Basin. Instead, Wayne seeks "a declaratory judgment that its proposed activities do not constitute a `project' subject to [the Commission's] project review under Section 3.8 of the Compact." (Joint App. at
The Commission also invokes the doctrine of exhaustion of administrative remedies in its effort to block this suit. While related to the finality requirement, exhaustion is conceptually distinct. Darby v. Cisneros, 509 U.S. 137, 144, 113 S.Ct. 2539, 125 L.Ed.2d 113 (1993). As just noted, however, we are dealing with interpretation of the Compact itself, not a question of administrative law, so exhaustion, like finality, is not an operative principle.
Wayne argues that the District Court erred by dismissing its complaint for failure to state a claim.
The District Court concluded that it was apparent from the face of Wayne's complaint that its proposed activities constituted a "project" subject to the Commission's project review authority under § 3.8 of the Compact. The Court determined that the text of the Compact, especially its definitions of "project," "facility," and "water resources," can be read only one way and plainly encompass Wayne's proposed activities. Wayne argues that the District Court erred because the Compact plainly excludes its proposed fracking-related activities from the scope of the Commission's project review authority, or at the very least, because the Compact is ambiguous on that point. The Commission counters that "the District Court correctly dismissed [Wayne's complaint] because the well pad and high volume hydraulic fracturing as customarily performed in the oil and gas industry clearly comprise a project." (Answering Br. at 32.) We conclude that the text of the Compact is ambiguous and, consequently, that a decision on the merits was premature.
The United States Constitution requires that interstate compacts be approved by Congress. U.S. Const. art. I, § 10, cl. 3. Such approval transforms compacts into federal law. Tarrant Reg'l Water Dist. v. Herrmann, 569 U.S. 614, 620, 133 S.Ct. 2120, 186 L.Ed.2d 153 (2013). Nonetheless, "[i]nterstate compacts are construed as contracts under the principles of contract law." Id. at 628, 133 S.Ct. 2120. As with any contract, the analysis begins with "the express terms of the Compact as the best indication of the intent of the parties[.]" Id. But, if the text of the Compact is ambiguous, we must then "turn to other interpretive tools to shed light on the intent of the Compact's drafters." Id. at 631, 133 S.Ct. 2120. One of those interpretative tools is the background notion "that States do not easily cede their sovereign powers, including their control over waters within their own territories[.]" Id. Other guideposts include the treatment of similar issues in other interstate water compacts, the parties' course of performance under the Compact, and the negotiation and legislative history of the Compact. Id.; Oklahoma v. New Mexico, 501 U.S. 221, 235 n.5, 111 S.Ct. 2281, 115 L.Ed.2d 207 (1991).
Since we construe the Compact using traditional contract principles, that must also inform the standard of review we apply to the District Court's reading of the Compact. Typically, our review of a lower court's understanding of congressional legislation is plenary because it is a matter of statutory interpretation. Susinno v. Work Out World Inc., 862 F.3d 346, 348 (3d Cir. 2017). That includes both an analysis of the statute's plain meaning and sometimes, to the extent the statute is ambiguous, a review of extrinsic evidence of Congressional intent. United States v. Williams, 675 F.3d 275, 277-78 (3d Cir.
Under our case law, contract interpretation is a question of fact reviewed for clear error and contract construction is a question of law reviewed de novo.
Thus, our analysis proceeds in the alternative. To begin, we review de novo the text of the Compact to determine whether we agree with the District Court that it is unambiguous. Next, if we agree that the text is unambiguous, then we also review de novo whether Wayne's proposed activities on the face of the complaint fall within the scope of the Compact's text. If, on the other hand, our review of the text of the Compact leads us to conclude that it is ambiguous, then we review for clear error the District Court's findings regarding the intent of the parties in crafting that text.
We turn to that analysis using the contract principles and interpretive tools endorsed by the Supreme Court.
In interpreting the terms of the Compact, the first step is to clearly define the issue in dispute. Wayne asked in its complaint for a declaration "that the Commission does not have jurisdiction over, or the authority to review and approve, or to require [Wayne] to seek prior approval from the Commission for, or to otherwise preclude the development of, [Wayne's] proposed well pad, appurtenant facilities or the related activities to be carried out on the [p]roperty."
The Compact itself tells us that its provisions are to be "reasonably and liberally construed." (Joint App. at 396, § 14.21.) In keeping with that, we've said "[t]he signatory governments [of the Compact] granted broad powers to the Commission, thereby offering the agency `a realistic opportunity to effectuate a comprehensive plan that concerned itself with water quality as well as water supply, hydroelectric power, recreational areas, wildlife conservation, and flood protection." Del. River Basin Comm'n v. Bucks Cty. Water & Sewer Auth., 641 F.2d 1087, 1089 n.3 (3d Cir. 1981) (citation omitted). But breadth does not equal clarity, at least not with respect to the issue here.
Interpreting the Compact according to its language and in light of Wayne's proposed activities, the term "project" is ambiguous for three reasons. First, the District Court's interpretation of the term "project" may read the word "for" out of the Compact and may give the Commission more power than the drafters intended. Second, although combining the definitions of "project" and "water resources" as the District Court did may not be unreasonable, it does not resolve the ambiguity. Finally, interpreting "project" in light of the Compact as a whole, the broad reading adopted by the District Court may be at odds with the use of that term in other provisions. We discuss each of those reasons in turn.
Reasonable arguments can be and have been made both in support of and against the District Court's conclusion that the word "project" includes Wayne's proposed activities.
(Joint App. at 363, § 1.2(g) (emphasis added).) The word "for" is commonly "used as a function word to indicate purpose" or "an intended goal." For, Merriam-Webster's Collegiate Dictionary (10th ed. 2002).
Wayne argues that its fracking-related activities are not "for the ... utilization... of water resources" and, if considered to be "facilities," as defined in the Compact, are not facilities "undertaken ... for the ... utilization ... of water resources[.]" (Joint App. at 363, § 1.2(g) (emphasis added).) Wayne asserts that it does not propose to frack for the purpose or intended goal of using water, but rather for the purpose and goal of capturing natural gas. Water just happens to be used in that process. From Wayne's perspective, the Commission's and the District Court's interpretation of "project" reads the word "for" out of the definition and replaces it
That has some persuasive force. No matter how "reasonably and liberally" we construe The Compact's terms (Joint App. at 396, § 14.21), we cannot ignore that the word "for" must have some purposive meaning and limiting function. Doing so would sweep nearly any activity that happens to use Basin water into the Compact's definition of "project," which could potentially include the construction of a new skyscraper in New York City or a small housing development in rural Pennsylvania. Even ignoring the word "for," however, there appears to be a boundary on the Commission's authority to review development in the Basin, since § 3.8 only allows the Commission to review projects "having a substantial effect on the water resources of the [B]asin[.]" (Joint App. at 370, § 3.8.) Furthermore, we question the assertion that fracking clearly constitutes a project subject to the Commission's authority, because it is not at all clear on this record how the five million gallons of water used in fracking a well compares with the quantity of water used to perform other activities that few if any people would say the Commission was intended to control.
The Commission counters that, even if it were true that an activity or facility had to be undertaken for the purpose of using water resources for the Commission to have power to review it as a "project," fracking activities satisfy that requirement. First, says the Commission, fracking purposefully uses water because it consumes it, leaving much of the fracking mixture buried and useless (or worse) in the ground. Deliberate, repetitive use of water is an essential part of fracking, and the Commission contends that is enough to conclude that the purpose of fracking is to utilize water resources. Second, the Commission says that, even if one well only uses a relatively minor amount of water, the collective quantity of water used by all the fracking wells that could be drilled in the Basin is so large that it cannot be allowed to escape the Commission's reach. Both of those are serious arguments and deserve careful attention, but they do not foreclose the possibility that Wayne's interpretation of the term "project" is correct.
The Commission also argues that adopting Wayne's understanding of the term "project" is too narrow and would improperly constrain the Commission's authority over other activities in the Basin. Specifically, the Commission contends that Wayne's interpretation of "project" would
We next consider the District Court's use of the defined term "water resources" to interpret the term "project." The Compact defines "water resources" as "water and related natural resources in, on, under, or above the ground, including related uses of land, which are subject to beneficial use, ownership or control."
Although the District Court's approach cannot be dismissed out of hand, the resulting interpretation is not the only reasonable one and is in fact subject to non-frivolous criticism. Wayne contends that the District Court's interpretation equates to saying a project is any activity for the use of "`land and related natural resources
Looking at the Compact as a whole, the use of the word "project" throughout the instrument exacerbates the ambiguity. Provisions in a compact should be interpreted in light of the document as a whole. Idaho v. Coeur d'Alene Tribe, 794 F.3d 1039, 1045 (9th Cir. 2015); see also Restatement (Second) of Contracts § 202(2) (1981) ("A writing is interpreted as a whole[.]"). Wayne argues that the term "project," read in the context of the entire Compact, demonstrates that it covers only water resource projects, or projects undertaken with the specific purpose of conserving, using, or managing water resources. The Commission, the Delaware Riverkeeper Network, and Ms. van Rossum counter that the Compact, read as a whole, shows that any activity or facility with major effects on water quantity or quality can be a "project." Once again, neither party plainly has the better of the argument concerning the meaning of "project" in § 3.8 and we are left to conclude that the term is ambiguous.
There are other provisions in the Compact that suggest that the drafters did not intend to define "project" as broadly as the Commission contends. For example, rules of contract interpretation advise us to interpret the meaning of a word by considering the words associated with it. See Post v. St. Paul Travelers Ins. Co., 691 F.3d 500, 520 (3d Cir. 2012) (observing that "[t]he ancient maxim `noscitur a sociis' summarizes the rule that the meaning of words may be indicated or controlled by those words with which they are associated. Words are known by the company they keep" (citation omitted)). Broadly defining "project" to include Wayne's proposed fracking-related activities would sweep in undertakings that could appear out of place among the (admittedly non-exhaustive) list of projects and facilities expressly set forth in the description of the Commission's general powers. That list includes:
(Joint App. at 369, § 3.6(b).) Those are arguably different in purpose and in kind than fracking operations.
(Joint App. at 364, § 1.3(e).) The Commission makes a forceful argument that exempting fracking activities from the scope of the term "project" would give natural gas producers preference over other industrial water users that are regulated. Furthermore, § 3.6 broadly states that the Commission has any powers "necessary or convenient to carry out its express powers or which may be reasonably implied therefrom."
In sum, interpreting the term "project" in light of the provisions in the whole Compact does not remove the ambiguity.
The parties have identified conflicting reasonable interpretations of the term "project," which counsels us to conclude that the District Court erred when it decided that the Commission's project review authority under the terms of the Compact unambiguously includes Wayne's proposed activities. To be clear, at this stage, we are not adopting or endorsing either Wayne's interpretation or the Commission's, or anyone else's. We are simply noting that the parties have posited potentially reasonable interpretations that bear their own strengths and weaknesses. On one side, Wayne's interpretation fails to explain how, at the very least, its proposed water storage tanks are not subject to the Commission's project review authority given that it agrees that "there can be components of an undertaking that can be a project." (Oral Arg. Tr., Nov. 7, 2017, at 8:23-24.) Wayne is bound by the allegations in its complaint, and those allegations include that water "will be managed and delivered to the [w]ell [p]ad" site and presumably stored until used, but, oddly, that none of "the appurtenant facilities to be constructed" will be for the "control ... or management of water resources." (Joint App. at 70-71.)
Because we interpret the Compact as a contract and we have determined that it is ambiguous as to whether Wayne's proposed activities are subject to the Commission's project review authority under § 3.8, we are left to use "other interpretive tools to shed light on the intent of the Compact's drafters." Tarrant, 569 U.S. at 631, 133 S.Ct. 2120. The problem, however, is that those interpretive tools require factual determinations to be made about the Compact drafters' intent. See Sumitomo Machinery Corp. of Am., Inc. v. AlliedSignal, Inc., 81 F.3d 328, 335 (3d Cir. 1996) (remanding a contractual dispute to the district court for further fact-finding because, "[w]hen a contract is ambiguous, the `fact-finder must attempt to discover what the contracting parties ... intended [the disputed provisions] to mean'" (alterations in original) (citation omitted)). The District Court must have the opportunity to evaluate in the first instance how other interstate compacts, the parties' course of performance, and the negotiation and legislative history of the Compact, among other evidence, bear on the question of intent. The interpretation that should prevail is the one that aligns best with the drafters' intent.
For the foregoing reasons, we will vacate the order of dismissal and remand the case for further proceedings consistent with this opinion.
SCIRICA, Circuit Judge, concurring.
I agree with my colleagues that the term "project," as used in Section 3.8 of the Delaware River Basin Compact, is ambiguous, and that the matter should be remanded to the District Court for fact-finding respecting the Compact drafters' intent. But I have a considerable concern — involving my colleagues' characterization and evaluation of some of the parties' arguments on the central issue in this case — that precludes me from joining in full their well crafted Opinion.
My colleagues have provided an assessment of the strengths and weaknesses of some of the parties' arguments. In light of our decision to remand, however, I see no need to characterize or evaluate the merits of the parties' contentions. I fully agree that, "[t]o be clear, at this stage, we are not adopting or endorsing either Wayne's interpretation or the Commission's, or anyone else's." Maj. Op. at 533. The parties have raised key arguments the District Court must evaluate in the first instance on remand, without consideration of our
Because I would not discuss the merits of the parties' arguments, I concur.
(Joint App. at 97.)
Nevertheless, the parties in this case agree that those proposed regulations do not prevent us from deciding Wayne's claim. Wayne contends that, unless the Commission is prepared to no longer assert project review authority over fracking projects within the Basin under § 3.8 of the Compact, the proposed regulations have "no bearing on [Wayne's] narrowly-tailored claim." (Wayne's Fed. R. App. P. 28(j) Letter, dated Oct. 18, 2017, at 4.) The Commission contends that the proposed regulations have "no direct effect on the issues raised in this appeal" because the Commission has "not purport[ed] to make a final decision on any issues" and its "authority to issue regulations under the Compact is not dependent on its Section 3.8 (project review) authority[.]" (Commission's Fed. R. App. P. 28(j) Letter, dated Oct. 18, 2017, at 2.) The Delaware Riverkeeper Network also stated that the Commission's "initiation of rulemaking does not affect the issues presented in this appeal." (Delaware Riverkeeper Network's Fed. R. App. P. 28(j) Letter, dated Oct. 18, 2017, at 2.)
Id. (quoting 3 Corbin, Corbin on Contracts § 534 (1960)).
(Joint App. at 363, § 1.2(g), (i).)
