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Bath Petroleum Storage, Inc. and EIL Petroleum, Inc. - Ruling 2, December 21, 1998

Ruling 2, December 21, 1998

STATE OF NEW YORK : DEPARTMENT OF ENVIRONMENTAL CONSERVATION

In the Matter of

Alleged Violations of the Environmental Conservation Law Articles 3, 17, and 23,
Title 6 of the Official Compilation of Codes, Rules and Regulations of
the State of New York and Permits issued pursuant to
ECL Article 17, Title 8, and Article 23, Title 13

- by -

E.I.L. Petroleum, Inc.
and
Bath Petroleum Storage,Inc.

Respondents

December 21, 1998

RULING:

1. Respondent's Motion to Dismiss
2. Respondent's Affirmative Defenses
DEC No.: R8-1088-97-01

Proceedings

The captioned matter commenced with service upon the Respondents of a Notice of Hearing and Complaint dated March 14, 1997. On April 7, 1997, the Department amended the March 14, 1997 Complaint to include additional information about the origin and status of E.I.L. Petroleum, Inc., and to correct a typographical error in the March 1997 Complaint.

On August 10, 1998, the Department moved to amend the Complaint further. In their reply dated August 31, 1998, the Respondents objected to the Department's motion. In a ruling dated August 31, 1998, I granted the Department's motion.

With a cover letter dated September 25, 1998, the Department served upon the Respondents a copy of the Amended Complaint dated September 10, 1998. With a cover letter dated October 23, 1998, the Respondents filed an Answer to the Amended Complaint, and a motion to dismiss the Amended Complaint.

The Department replied to the Respondents' motion on November 3, 1998, and cross-moved for clarification of the Respondents' affirmative defenses. I received Ms. Schwartz' affirmation in support of the Department's cross-motion on November 9, 1998.

With a cover letter dated December 1, 1998, the Respondent replied to the Department's cross-motion consistent with the schedule set forth in my memorandum to the Parties dated November 16, 1998. The Respondents did not oppose the Department's motion for clarification. Consequently, with a cover letter dated December 7, 1998, the Respondents provided additional information to clarify their affirmative defenses. In their clarification, the Respondents renewed their motion to dismiss.

The following discussion and ruling addresses the Respondents' motion to dismiss the charges alleged in the September 1998 Amended Complaint. For the reasons provided below, I deny the Respondents' motion. The following also discusses the Respondents' affirmative defenses and explains how the Respondents may develop them during the hearing.

Discussion and Ruling

  1. Respondents' Motion to Dismiss

    Presently, the record concerning the captioned matter is not sufficiently developed to determine whether any of the charges alleged in the Amended Complaint should be dismissed. In other words, the Parties dispute the facts. Therefore, I deny the Respondents motion without prejudice. At the conclusion of the hearing, the Respondents may renew their motion.

    The Respondents' motion and subsequent clarification of their affirmative defenses, however, raise a number of factual and legal issues that should be developed during the hearing. The following identifies those issues and provides instructions for how they will be addressed at the hearing.

    The Respondents want me to dismiss the Amended Complaint, in whole or in part, for the following reasons. First, the Respondents contend that I should dismiss the entire Amended Complaint because the Department did not provide a civil penalty calculation as I directed in my ruling dated August 31, 1998.

    The Department, however, did comply with my August 31, 1998 ruling. With a cover letter dated September 25, 1998, the Department included two tables that provide a breakdown of the civil penalties sought for each charge alleged in the Amended Complaint. Although the Respondents object to the Department's request for the maximum civil penalty for some of the alleged violations, this objection is not a basis on which to dismiss charges.

    The Respondents' objection does raise an issue about what the appropriate civil penalty should be if the Department proves the violations alleged in the Amended Complaint. Accordingly, the Parties are encouraged to develop the record about this question. The Parties may offer evidence and argument on the criteria identified in the Civil Penalty Policy (June 20, 1990) and any other related Enforcement Guidance Memoranda.

    Second, the Respondents want me to dismiss causes of action 1, 2 and 3 because they contend that the basis for the alleged violations is the application of a "mass balance" formula. According to the Respondents, the "mass balance" formula was not a condition of the Respondents' SPDES permit at the time the violations allegedly occurred. The Respondents conclude that the Department cannot use the "mass balance" formula to prove the violations alleged in the Amended Complaint. The Department denies the Respondents' contention. According to the Department, the basis for the alleged violations are the laboratory analysis of samples taken from the receiving waters.

    The Parties dispute the factual basis for the violations alleged in causes of action 1, 2 and 3. This dispute will be resolved at the hearing. Consequently, I deny the Respondents request to dismiss causes of action 1, 2 and 3.

    The Respondents alternatively request that if I do not dismiss causes of action 1, 2 and 3, then I should combine the charges into one cause of action. The consolidation would reduce the maximum potential civil penalty that could be assessed by combining three separate causes of action into one. I deny the Respondents' alternate request for relief because it relates to determining the appropriate civil penalty, which will be taken up at the hearing.

    The Respondents want the 7th and 8th causes of action dismissed. The 7th cause of action relates to the Respondents' alleged failure to submit a Form 2C State Pollutant Discharge Elimination System (SPDES) application package within a period set by the Department. The 8th cause of action relates to the Respondents' alleged failure to use a certified laboratory to analyze samples of the Respondents' discharges. The Respondents argue that these causes of action should be dismissed because there are no prescribed daily penalties for these types of alleged violations. The Department argued, however, that daily civil penalties could be assessed for these types of alleged violations.

    The Respondents' concerns about the 7th and 8th causes of action also relate to determining the appropriate civil penalty. As explained above, the Parties will have an opportunity at the hearing to develop the record on this issue.

    Finally, the Respondents want causes of action 9 - 14 dismissed. These causes of action relate to the alleged increase in the size of the caverns used by the Respondents to store liquid petroleum gas (LPG). The Respondents argue that the Department lacks subject matter jurisdiction over the storage caverns because they are regulated by the US Environmental Protection Agency (EPA).

    Citing the Declaratory Ruling concerning Bath Petroleum Storage, Inc., [DEC 23-08 (1996)], the Department argued that the Respondents were required to obtain permission from the Department before they expanded the caverns. Consequently, the Department included causes of action 9 - 14 in the Amended Complaint.

    This dispute raises a legal question about subject matter jurisdiction, which is a threshold question that should be resolved before the hearing begins. Accordingly, a briefing schedule is provided below.

  2. The Respondents' Affirmative Defenses

    The Respondents' first affirmative defense is that the Amended Complaint does not state a claim upon which relief can be granted. In support of this defense, the Respondents refer to arguments presented in their motion to dismiss. As explained above, a complete record about these allegations has not yet been developed. At the hearing, the Parties will have an opportunity to develop the record about the allegations as well as the appropriate relief.

    Citing 28 USC §2468, the Respondents asserted as their second affirmative defense that the Department's claims are barred by a statute of limitations. According to the Respondents, this limitation of action applies when states enforce federal programs.

    The Respondents, however, did not identify any particular administrative or court cases to support their claim concerning the applicability of 28 USC §2468 here. Respondents are required to provide a statement of the facts which constitute the grounds of each affirmative defense [§622.4(c)]. Therefore, I dismiss this affirmative defense.

    The Respondents assert, as their third affirmative defense, that the Department lacks subject matter jurisdiction over the allegations concerning any changes to the dimensions of the caverns. As explained above, this issue of law is a threshold question. The Parties may brief this issue as set forth below.

    As their fourth affirmative defense, the Respondents claim that the requested civil penalties are excessive and in violation of appropriate Technical and Operational Guidance Series (TOGS). This affirmative defense relates to the civil penalty calculation. As explained above, the Parties at the hearing will have an opportunity to develop the record about what the appropriate civil penalty should be if the Department proves the violations alleged in the Amended Complaint.

    The Respondents asserted as their fifth affirmative defense that the doctrine of laches applies to the civil penalties sought by the Department because the Department has known about these alleged violations for a long time, but chose not to initiate any enforcement action until March 1997.

    It is well established that laches may not be interposed as a defense against the state when acting in a governmental capacity to enforce a public right or to protect a public interest [Cortlandt Nursing Home v. Axelrod, 66 NY2d 169, at 177 (n.2) (1985)]. However, the Cortlandt matter refers to the provision in the State Administrative Procedures Act (SAPA) §301(1) that "requires an agency to commence a hearing within a reasonable time of the date of the commencement of the adjudicatory proceeding" [66 NY2d 169, at 179].

    In their response to the Department's motion to amend the Complaint, the Respondents objected to the proposed amendment due to the length of time between service of the initial Complaint in March 1997 and the date of the Department's motion (August 10, 1998). The basis for the Respondents' fifth affirmative defense, however, is about the period from when the violations allegedly occurred in 1992 and 1993 to the time the Department initiated this action in March 1997 and the subsequent addition of causes of action in August 1998. This fact pattern distinguishes this matter from Cortlandt.

    The present matter involves a fact pattern closer to that in Liberty Lines Express, Inc. v. New York City Environmental Control Board, 160 AD2d 295 (1st Dept., 1990). In that case, the Appellate Division, citing Cortlandt, appeared to measure the time between the city's receipt of citizen-initiated complaints and the city's action to enforce the city's air pollution code. The period measured by the court was the period prior to the commencement of the enforcement action, unlike in Cortlandt, where the period measured began with the initiation of the proceeding.

    With respect to the captioned matter, a fair application of SAPA §301(1) must include the period between when some of the violations allegedly occurred in 1992 and 1993 to when the Department initiated the enforcement action with service of the Complaint (March 1997) and the Amended Complaint (August 1998), as well as the period from service of the Complaint and Amended Complaint to when the hearing in the captioned matter begins. At this point, it is not known when the Department became aware of the alleged violations. In addition, it is unclear whether the Parties have attempted to resolve this matter without a hearing since it was initiated in March 1997.

    Cortlandt provides that in determining whether a period of delay is reasonable within the meaning of SAPA §301(1), "an administrative body in the first instance, and the judiciary sitting in review, must weigh ... (1) the nature of the private interest allegedly compromised by delay;(2) the actual prejudice to the private party; (3) the causal connection between the conduct of the parties and the delay; and (4) the underlying public policy advanced by governmental regulation" [66 NY2d 169, at 178].

    Therefore, I am dismissing the Respondents' fifth affirmative defense concerning laches, but will allow the Respondents to substitute the laches pleading for whether the Respondents were afforded an opportunity for a hearing within a reasonable time [SAPA §301(1)]. At the hearing, the Parties will have an opportunity to address this question in a manner consistent with the criteria outlined in Cortlandt.

    The Respondents' sixth affirmative defense is that SAPA bars the Department from attempting to enforce regulations that have not yet been promulgated. Here, the Respondents incorporated their arguments from their motion to dismiss. The Respondents, however, did not identify what the proposed regulations are. Further clarification at this point is not necessary now. However, I will expect the Respondents to clarify this affirmative defense in their opening statement before they attempt to prove it.

    The Respondents' seventh affirmative defense is that to the extent this action is based upon formulae and methodologies not contained in the Respondents' SPDES permit, the alleged violations are improper and must be dismissed. This affirmative defense relates to the Respondents' argument that the basis for some of the alleged SPDES violations is the Department's application of a "mass balance" formula. According to the Respondents, neither this formula nor its application was a condition of the SPDES permit at the time of the alleged violations. As explained above, there are questions about what is the factual basis for these allegations. At the hearing, the Parties will have an opportunity to develop the record about whether the Department inappropriately applied a "mass balance" formula.

    The eighth affirmative defense is that the violations alleged in the Amended Complaint have not resulted in any environmental harm, and none is alleged by the Department. As explained above, questions relating to environmental harm relate to the civil penalty calculation.

Summary of Rulings

  1. The Respondents' motion to dismiss is denied without prejudice.
  2. The Respondents' alternative request to consolidate the charges alleged in causes of action 1, 2 and 3 is denied.
  3. There is a question of subject matter jurisdiction with respect to the charges alleged in causes of action 9 - 14. A briefing schedule is set forth below.
  4. The Respondents' second affirmative defense is dismissed.
  5. The Respondent's fifth affirmative defense concerning laches is dismissed. However, the Respondents may substitute the laches pleading for whether the Respondents were afforded an opportunity for a hearing within a reasonable time [SAPA §301(1)]. At the hearing, the Parties will have an opportunity to address this question in a manner consistent with the criteria outlined in Cortlandt supra.

Briefing Schedule

Causes of action 9 - 14 of the Amended Complaint relate to the alleged increase in the size of caverns used by the Respondents to store liquid petroleum gas (LPG). In their papers which clarify their affirmative defenses, the Respondents argue that the Department lacks subject matter jurisdiction over the storage caverns because the caverns are regulated by the EPA. Citing the Declaratory Ruling concerning this facility [Bath Petroleum Storage, Inc., DEC 23-08 (1996)], the Department argued that the Respondents are required to obtain permission from the Department before expanding their caverns. This dispute raises a legal question about subject matter jurisdiction.

The Parties may brief this issue. Briefs are due by January 19, 1999. The Parties may also file replies, which are due by February 2, 1999. The Parties must provide opposing counsel with copies of their respective briefs and replies at the same time and in the same manner as service is made upon me. I will accept service by fax only if the transmission is 15 pages or less, including any attachments or exhibits.

/s/
Daniel P. O'Connell
Administrative Law Judge

Dated: Albany, New York
December 21, 1998

To: Attached Service List dated November 16, 1998

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