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Bath Petroleum Storage, Inc. and EIL Petroleum, Inc. - Ruling, February 25, 1997

Ruling, February 25, 1997

STATE OF NEW YORK : DEPARTMENT OF ENVIRONMENTAL CONSERVATION
STATE OF NEW YORK: COUNTY OF STEUBEN

In the Matter of
the proposed permit modification of
the State Pollutant Discharge Elimination System ("SPDES") Permit No. NY-0004278 issued to
BATH PETROLEUM STORAGE, INC. a subsidiary of EIL PETROLEUM, INC.

ALJ RULINGS ON ISSUES and PARTY STATUS

DEC Project No.

8-4624-00008/00001

Introduction

These proceedings involve the Department staff's initiation of a modification of the existing SPDES permit of Bath Petroleum Storage, Inc./EIL Petroleum, Inc. (BPSI) to require (1) a change in administrative class from a [04] non-significant industrial discharger to a [01] significant minor industrial discharger, requiring the submission of monthly discharge monitoring reports (DMR's); (2) the submission of daily discharge results calculated using a mass balance formula and (3) the use of a certified laboratory for all testing analyses. The stated purpose of the modifications is to ensure that BPSI is meeting both permit limitations and applicable water quality standards. The permittee, BPSI, objects to the modifications, except to the extent it has agreed to the use of a certified laboratory for sample analysis.

History

BPSI maintains a facility for the underground storage of liquid petroleum gas (LPG) on Eagle Valley Road in Bath, Steuben County, New York. In 1982, BPSI took over this facility from Mobil Corporation and thereafter, the Department transferred the SPDES permit from Mobil to BPSI. In 1984, 1989 and 1994 the Department issued SPDES permit renewals to BPSI. In 1990, the permit was modified to change the permittee's name to EIL Petroleum, Inc., of which BPSI is a wholly-owned subsidiary. This permit allows BPSI to discharge brine that is displaced from the salt caverns used to store LPG to the Cohocton River (C). Part 701 of Title 6 of the New York Compilation of Codes, Rules and Regulations (6 NYCRR) sets forth the water classification system used by the Department to ensure that the discharge of sewage, industrial waste or other wastes do not impair the best usages of the receiving water as classified. Section 701.8 of 6 NYCRR provides that the best usage of Class C waters is fishing and that these waters shall be suitable for fish propagation and survival. Among other things, the permit restricts the flow from the facility to 440,000 gallons per day (gpd). Permit limitations are also included for total dissolved solids (TDS), total suspended solids (TSS), chlorides and pH. According to staff, the permit application dated June 20, 1984, provided that the brine discharge would be an intermittent one, up to 34 days per year, resulting from "product displacement and cavern development control only."

In 1992, BPSI altered its operation to include solutioning of caverns to provide additional storage capacity for LPG. BPSI represents that at that time, in addition to the Division of Mineral Resources, BPSI notified the Division of Water of this practice and the Water staff did not raise concerns or objections. However, the staff states that its concerns arose during 1996 when it became aware of BPSI's application to the Susquehanna River Basin Commission (SRBC) to pump groundwater for use in the solutioning process and of its further application to the Federal Energy Regulatory Commission (FERC) for a conversion of its facility from LPG to compressed natural gas (CNG) storage. In addition, a competitor of BPSI made allegations to the Department staff that BPSI was engaging in unpermitted activities.

Based upon these events, the staff is concerned that BPSI has exceeded its SPDES permit limitations, requiring the facility's submission of additional information to the Department and heightened scrutiny by staff. While the staff and BPSI personnel met in the fall of 1996 to discuss SPDES concerns, they were unable to reach an agreement. As a result, Department staff issued a letter to BPSI dated November 5, 1996 that expressed its intent to modify the SPDES permit and included a copy of the modified permit. By letter dated November 27, 1996, BPSI requested a hearing to contest the modifications stating that because the facility was meeting the existing permit limitations, they were unnecessary, burdensome and arbitrary.

Legislative Hearing

As noticed in the Notice of Public Hearing, published in the Environmental Notice Bulletin of January 8, 1997 and the Steuben-Courier Advocate of January 5, 1997, on February 13, 1997, I convened the public legislative session of the hearing at the DEC regional sub-office on Coon Road in Bath, New York. Approximately 50 people were in attendance; 13 individuals gave oral presentations while an additional 5 people provided written statements. The participants were about evenly divided on whether the modifications were appropriate. In addition, a number of citizens spoke to the effects of the storage facility on the Cohocton River and its planned expansion. BPSI personnel represented that the company had a 14-year history of safety and environmental compliance. In addition, these and other individuals spoke to the company's contributions to the local economy and the public's need for LPG. Company representatives stated that a competitor located in Tioga, Pennsylvania that seeks to situate a storage facility elsewhere, brought complaints to the Department, thus prompting the staff's increased attention to BPSI. In addition, BPSI personnel argued that the requirements contained in the proposed modifications would be burdensome to the company.

Other speakers, including consultants from Acres International, stated that the facility's discharges harmed the Cohocton River, causing damage to wildlife habitat, plants and drinking water supplies. Some of these individuals claimed that BPSI exceeds the parameters in the current SPDES permit and that the stressed receiving body of water deserves additional protection including a modification in the manner BPSI's discharged is evaluated. Stewart Thompson, a geologist with Acres, stressing the need for information, addressed concerns including geologic problems, potential leakage of LPG gas and past accidents leading to road closures and loss of life. Alan Knauf, an attorney representing the Coalition for Resources and Environment of the Southern Tier,Inc. (CREST), spoke to the need to consider the cumulative impacts of BPSI and the Avoca facility (a natural gas storage facility) and the need to expand the scope of this proceeding to address additional measures to protect the Cohocton River. Specifically, Mr. Knauf raised the possibility of permit suspension and a comprehensive review under the State Environmental Quality Review Act.

Staff represented that the focus of the proceedings was the modification of the BPSI permit to change the industrial status of the company's SPDES permit and to require that the company perform a different analysis of the discharge and submit additional monitoring information to DEC. Keith Silliman, Assistant Counsel representing staff, acknowledged that there were other matters of concern to the Department involving BPSI; however, this proceeding was limited to the SPDES modifications proposed by staff. Mr. Silliman represented that over the past year, the staff had become concerned about the facility's operation based upon BPSI's application to the Susquehanna River Basin Commission (SRBC) to solution underground salt storage caverns and discharge 432,000 gpd of brine, while deep well injecting another 1.568 mgd of groundwater. Staff learned that BPSI, in conjunction with another company, CNG Transmission, was considering an additional underground gas storage facility and had become involved in FERC proceedings as part of their permit review. Based upon its concerns regarding the change in operations at the Bath, New York facility, the staff initiated these permit modifications.

Issues Conference

As announced in the Notice of Public Hearing, immediately after the legislative hearing was adjourned, I convened the issues conference in this matter, also at the DEC Bath sub-office. The purpose of the conference was to determine what issues bearing on the permit modification would require adjudication and whether the petitioner for party status, CREST, would participate in an adjudicatory hearing, should one be required. Participants at the issues conference were DEC staff, BPSI representatives and CREST, a citizens group that had filed a timely petition for party status through its attorney Alan Knauf.

DEC was represented by Keith Silliman, Assistant Counsel, of DEC's Central office.

BPSI was represented by Christopher C. McGrath of New York Capitol Consultants, Inc. located in Albany, New York.

CREST was represented by Alan Knauf, Esq. of Rochester, New York.

Staff's Position

As stated at the legislative hearing and in prior discussions, the staff and BPSI agree that there are two relevant issues in dispute concerning the proposed permit modification. During his introductory comments at the issues conference, Mr. Silliman stated that while there were a lot of potential issues concerning the facility, by design, the staff limited the SPDES permit modification to ensure compliance with the current permit limitations and to ensure that the facility was meeting water quality standards. He further explained that the changes in processes at BPSI justified a change in industrial discharge classification as well as the need for a mass balance calculation to properly monitor discharges to the Cohocton River.

Mr. Pearson, the Regional Water Engineer, explained that the purpose of the mass balance formula is to address upstream and downstream concentrations of the applicable pollutants and flow and that the current sampling program at BPSI was inadequate to address current processes used in the BPSI operation. Mr. Silliman stated that this methodology had been applied at a number of other facilities in Region 8, including the now-closed Akzo salt mine.

Mr. Silliman reiterated in summary his comments at the legislative hearing regarding the history of the permit review. He explained that while SPDES issues came up during a previous mining permit review, they were not discussed with the appropriate Water Division staff. In addition, he argued that the 1994 review was administrative only and did not subject the facility to a full analysis. Mr. Silliman maintained that the staff viewed the 1992 solutioning of new caverns as beyond the scope of the current permit which allows an intermittent discharge of 4500 gallons per day on about 30-36 days of the year. Based upon certain events of the last year that were brought to staff's attention, it maintains that there is a change in status demanding a change in BPSI's industrial discharge classification and SPDES monitoring requirements.

Mr. Silliman also explained that while issues such as the company's compliance with permit conditions, environmental impacts related to the planned expansion and additional monitoring requirements may be relevant for future proceedings, this hearing was confined to the proposed SPDES permit modifications. Mr. Silliman stated that the staff's witnesses at a hearing would be: Tom Pearson and Nancy Rice of the Division of Water, Roger McDonough of Compliance Services, Randy Nemecek of Mineral Resources, Sandy Brennan of Natural Resources and Gary Neuderfer, an aquatic biologist.

BPSI's Position

In response, Mr. McGrath concurs that the issues of BPSI's industrial discharge classification and the application of the mass balance calculation to this facility are the proper subjects of this proceeding. BPSI opposes the change in classification because it has provided the monitoring information to DEC in the past, the discharge contains no priority pollutants, and there has been no change in discharge. Yet, the classification change from non-significant industrial to significant minor will, in the company's view, cause unnecessary heightened scrutiny by the agency and pose an incorrect image to the public. Moreover, Mr. McGrath argued that this classification change would allow too much discretion to the regional water staff. He also argued that the change is in conflict with DEC's Division of Water Technical and Operational Guidance Series (TOGS) 1.2.2.

With respect to the mass balance methodology, BPSI argued that staff had singled it out using this monitoring method. The company also maintained that to the extent DEC staff required other facilities to apply this method, those facilities discharged different pollutants than BPSI. In addition, the company maintained that this sampling method would result in a delayed analysis that could hinder business operations. Moreover, BPSI stated that the mass balance protocol would preclude any discharge in certain months, while allowing the company to triple its discharge in other periods. BPSI seeks to maintain what it is currently permitted. Mr. McGrath stressed that the facility has always complied with regulatory requirements and that an exhaustive review of their application to drill additional wells in 1992 resulted in a DEC staff determination that no new SPDES permit was needed. While Mr. McGrath acknowledged that the doctrine of laches would not preclude the State from reexamining these issues, he argued that it was not fair to the company to do so based upon its investment and reliance on DEC's past reviews. He further represented that the company has maintained contacts with the Elmira Water Board and Chemung Health Department and has not been informed of problems associated with its discharges.

At a hearing, Mr. McGrath stated that BPSI's witness would be Rensselaer Polytechnic Institute Professor Nicholas Clesceri.

CREST's Position

Mr. Knauf represented that CREST's members include individuals who live in Bath and either live on or near the Cohocton River or use its resources. The organization is seeking full party status. He referred to the regulations, specifically Part 757 of 6 NYCRR and 6 NYCRR 621.14(a)(2), (3), (4) in stating that the modifications proposed by staff were justifiable and necessary. As raised in CREST's petition, Mr. Knauf maintained that the modifications are insufficient to protect the River and the environment, requiring the Department to expand the scope of the hearing. In its petition, CREST raised matters concerning the facility's proposed expansion, the State Environmental Quality Review Act (SEQRA), permit suspension, subsidence, explosions, safety issues, downstream impacts to wildlife and plants, and noise. At the issues conference, I cited 621.14(a) regarding the appropriate procedure for interested parties to initiate permit modifications. I explained that a number of CREST's proposed issues went well beyond the scope of the proposed permit modifications and requested that CREST present its case regarding the related matters.

CREST's consultant, Mr. Tolman, explained that the mass balance methodology was the appropriate monitoring requirement for the facility's discharge. He also recommended that the sampling point be changed based upon his analysis of the mixing zone, where the discharged effluent is combined with the Cohocton River water. He also suggested that the drainage area under consideration should be altered. Additionally, Mr. Tolman argued that an analysis should be performed to evaluate whether the permit parameters should be expanded to include priority pollutants.

Mr. Knauf posited that no hearing was necessary on the permit modifications and that BPSI had not met its burden of proof with respect to its objections.

In response to Mr. Tolman's analysis, staff stated that among other matters, the issues of appropriate sampling location, expanding the targeted pollutants and drainage ratio would be appropriate subjects for review in any future facility expansion proceedings. In addition, staff posited that based upon information it received as a result of the proposed SPDES monitoring conditions, some of these issues may become relevant to examine in future modification proceedings. And, while staff expressed appreciation for the support of CREST with respect to the proposed modifications, Mr. Silliman stated that he thought much of the organization's materials might better be directed towards future proceedings on the facility expansion.

Mr. McGrath argued that CREST's consultant was misinformed as to the relevancy of the mass balance formula to BPSI's discharge and the applicable area of the Cohocton River. In his presentation, Mr. McGrath also stated that CREST's consultants were paid by BPSI's competitor, Market Hub Partners of Tioga, Pennsylvania implying that they should be given short shrift.

Issues for Adjudication

Section 621.14 of 6 NYCRR provides that permits may be modified at the request of an interested party or the staff. The grounds for modification include failure of a permittee to comply with the terms of a permit, exceeding the scope of the project as described in the permit application and newly discovered information. With respect to party status, the staff and BPSI are mandatory parties to this proceeding. Section 624.4(c)(1)(i) of 6 NYCRR provides that an issue is adjudicable if it relates to a dispute between the department staff and the applicant over a substantial term or condition of the draft permit. This is a permit modification hearing, however, these regulations apply. See, 6 NYCRR 624.1(a)(5). Thus, because the staff and BPSI disagree over the applicability of the proposed modifications -- specifically, the change in classification and the appropriate monitoring requirements -- these are adjudicable issues. The proposed permit conditions also require that BPSI submit its samples to a certified laboratory. The permittee does not dispute this condition, and staff and BPSI agree that it is not a subject for adjudication in this proceeding.

Change in Industrial Discharge Classification

Specifically, the necessity for the change in industrial discharge classification proposed by staff is disputed by BPSI. The staff argue that it is merely an administrative change that will allow the Department to provide the additional scrutiny required by the change in operations at the facility. BPSI argues that the new classification is unnecessary and inapplicable. The company represents that up to the time that staff requested that it cease to provide regular monitoring reports, it has always done so. In addition, BPSI states that the change in the facility's classification would mean that the discharge includes priority pollutants which BPSI maintains it does not.

Based upon these differences, with the burden of proof on Department staff, the hearing issue with respect to this modification will be whether the company's processes have changed to a degree mandating a change in classification. As to whether the classification means that the company discharges priority pollutants, that appears to be a matter of regulatory interpretation. As set forth below, the parties are requested to brief this issue.

Mass Balance Formula

The staff and BPSI also dispute whether the mass balance formula is the appropriate method to evaluate the discharge from the facility. With respect to this SPDES permit modification, the issues will be whether the company's current activities require the application of this formula; the applicability of the formula to BPSI taking into account the nature of the discharge and the nature of the receiving body of water; as well as the burdens, if any, on the company resulting from the use of the mass balance calculation.

CREST's Issues

With respect to the issues I have identified above as being appropriate for further adjudication, CREST disputed the need for a hearing. I disagree with CREST that BPSI failed to meet its burden at the issues conference. Pursuant to 6 NYCRR 624.9(b)(2), it is the staff that have the burden of proof to justify that the initiated modification is supported by the preponderance of the evidence. At the issues conference, BPSI presented a summary of its objections regarding the permit conditions and offered an expert witness who will testify to their alleged inapplicability. This is sufficient for the purposes of the issues conference.

Other interested individuals and organizations may obtain party status in a permit proceeding by filing a petition that sets forth their environmental interest and identifying a issues that are substantive and significant. CREST filed a timely petition that included information on members of the organization who live in Bath, on or near the Cohocton River and enjoy and use its resources. Moreover, at the legislative hearing, a number of individuals presented written statements, gave oral testimony and signed registration cards acknowledging their interest in these proceedings and their affiliation with CREST. Thus, while Mr. McGrath alluded to the possibility that a competing company is the real force behind CREST, it appears that the CREST is composed of members of the community who are concerned about the effects of this facility and I deem that adequate for the purposes of 6 NYCRR 624.5.

Section 624.5(d)(1)(ii) of 6 NYCRR provides that the ALJ's ruling of entitlement to party status will include a finding that the petitioner has raised a substantive and significant issue or can make a meaningful contribution to the record regarding a substantive and significant issued raised by another party. At the issues conference, I stated that the scope of these proceedings would be limited to those matters that were related to the staff's proposed SPDES permit modifications and that many of CREST's proposed issues went well beyond that territory.

In his presentation at the issues conference, Mr. Knauf stressed the matters concerning the water quality issues. CREST is concerned about the downstream impacts of the facility and maintains that BPSI exceeds its permit limitations on a regular basis resulting in harm to wildlife, plants, agriculture and drinking water. In addition, as stated above, CREST supports the proposed modifications but suggests that the sampling location, designated drainage area and listed parameters be altered and enhanced. At the issues conference, I cited 6 NYCRR 621.14 that provides for interested parties to petition the Department staff to modify a permit. Apparently, CREST has not made such a request to date.

As part of its petition, CREST offered the affidavits of a number of experts. The engineer, Rex Tolman of Acres International (Acres), addressed in his affidavit and at the issues conference matters concerning downstream impacts related to in-stream concentrations of brine, the proper sampling point, and the proposed mass balance formula. Peter S. Foote, a senior fisheries/environmental scientist with Acres addressed the issues of environmental effects of salt on wildlife. In addition, in his affidavit he discussed CNG's analyses of endangered and threatened species and wetlands delineation. In his affidavit, engineer Thomas Gwozdek, also of Acres, discusses the probability of accidental discharges of brine to surface waters and the resulting impacts. Mr. Knauf stated at the issues conference that the testimony of Mr. Roll and Mr. Thompson, two additional affiants, would most likely not relate to these proceedings.

Based upon the presentations of Mr. Tolman and Mr. Foote, I find that CREST could make a substantial contribution to the identified issues through their presentation of testimony and evidence concerning the application of the mass balance formula. Specifically, Mr. Tolman would testify to the purpose of the formula and why it is best suited to accurately analyze the discharge from the facility. In addition, the testimony of Mr. Tolman and Mr. Foote relating to downstream impacts stemming from BPSI's brine discharge would further relate to the applicability of the mass balance protocol and the proposed change in industrial discharge classification. In Mr. Gwozdek's affidavit, he raises concerns related to current and future brine discharges. I would allow his testimony as it relates to current discharges. This information is relevant to whether the monitoring and classification modifications are appropriate. However, I will not permit testimony by any witness that relates to future expansion of the facility as it is not relevant to these proceedings. By CREST's own admission, because the testimony of Mr. Thompson and Mr. Roll would not be relevant to these proceedings, these witnesses will not participate in the hearing.

CREST has also raised a number of issues related to the facility's SPDES permit and its discharges to the Cohocton River. With respect to alleged violations of the existing permit, to the extent that these are enforcement-related, they are inappropriate for these modification proceedings. The staff has stated that it is currently reviewing data to ascertain whether enforcement proceedings should be initiated. CREST has also maintained that the sampling point, drainage ratio and parameters should be re-examined. These issues are related to BPSI's SPDES permit; however, the staff has responded that it intends to address these concerns both in the expansion proceedings and upon its review of any additional data that it receives as a result of the proposed modifications. Thus, I conclude that these issues, while certainly related to the SPDES permit, would be better addressed in future proceedings and will not be subject to adjudication in these proceedings. In the event that SPDES issues that are of concern to CREST are not addressed in upcoming forums or in a timely fashion, it may decide it is appropriate to invoke the provision in 6 NYCRR 621.14 to petition for additional permit modification.

In addition to its concerns about the proposed modifications, CREST has raised a host of other issues such as subsidence, safety and health concerns including flooding, explosions, impacts to historic structures, cumulative impacts related to the Avoca Natural Gas Storage Project, SEQRA analysis, loss of habitat, degradation of wetlands, spills, and noise. Clearly, these issues relate to the proposed expansion of the facility and that is not a subject of these proceedings. That application has not progressed to the public comment stage however, at such time, CREST and other interested parties will have full opportunity to raise these and other relevant issues. With respect to SEQRA, because the proposed modifications do not alter the discharge from the facility, no further review is required in these proceedings. 6 NYCRR 617.4; 617.5; 617.7(c).

Based upon my review of the petition and the presentations of Mr. Knauf and Mr. Tolman at the issues conference, I find that the issues raised by CREST concerning non-SPDES matters are not appropriate for adjudication in this proceeding. Many of these issues appear to relate to issues raised by Department staff in the proceedings that are underway at FERC concerning the BPSI/CNG proposed expansion of the facility. However, because the proceedings before me are limited to specific proposed SPDES permit modifications, it would be inappropriate and a misuse of resources to address these concerns in this modification proceeding.

Summary of Rulings

The staff and BPSI have agreed that the issues in contest concern DEC staff's proposed modifications regarding: (1) the re-classification of the facility from an [04] nonsignificant industrial discharger to an [01] significant minor discharger and (2) the additional monitoring requirements, specifically, the application of the mass balance formula. The hearing issue with respect to the re-classification will be whether the company's processes have changed to a degree mandating a change in classification. As to the issue of whether the re-classification is applicable only if the company discharges priority pollutants, this is a legal issue and I request that the parties submit letter briefs on this subject, no longer than five pages by March 17, 1997. With respect to the mass balance formula modification, the issues will be whether the company's current activities require the application of this formula; the applicability of the formula to BPSI taking into account the nature of the discharge and the nature of the receiving body of water; as well as the burdens, if any, on the company resulting from the use of the mass balance calculation. These are issues for adjudication pursuant to 6 NYCRR 624.4(c)(1)(i). Because the staff and BPSI agree to the use of a certified lab, this is not an issue for adjudication.

Having filed an acceptable petition and demonstrated adequate environmental interest, CREST is granted full party status for an adjudicatory hearing to be held on the issues certified by this ruling. 6 NYCRR 624.5(d)(1). However, the matters raised by CREST concerning the appropriate sampling location, the drainage ratio and expansion of parameters will not be subject to hearing. Likewise, CREST's proposed issues relating to the proposed expansion of the facility as well as alleged SPDES violations at BPSI are beyond the scope of these permit modification proceedings and will not be considered.

Appeals

A ruling of the ALJ to include or exclude any issue for adjudication, a ruling on the merits of any legal issue made as part of an issues ruling, or a ruling affecting party status may be appealed to the Commissioner on an expedited basis. 6 NYCRR 624.8(d)(2). Ordinarily, expedited appeals must be filed with the DEC Commissioner in writing within five days of the disputed ruling. 6 NYCRR 624.6(e)(1). However, I provide that any appeals must be sent to Acting Commissioner John P. Cahill and received at the Office of the Commissioner (NYSDEC, 50 Wolf Road, Albany, New York 12233-1010) before 5 p.m. on March 10, 1997. Any responses to any appeals must be received before 5 p.m. on March 17, 1997. The parties shall ensure that transmittal of all papers is made to me and all others on the service list at the same time and in the same manner as transmittal is made to the Commissioner. Please send two copies of any appeal that is filed. No submissions by telecopier will be accepted. Appeals should address these rulings, rather than merely restate a party's contentions. Any request for an adjustment to the appeal schedule must be made to DEC's Chief Administrative Law Judge, Daniel E. Louis, at the Office of Hearings and Mediation Services.

The adjudicatory hearing will be scheduled once the deadline for appeals has passed or, if appeals are filed, once they are decided. DEC staff would have the burden of going forward and would present its case first. If possible, CREST should coordinate its presentation with DEC staff to eliminate redundancies in the record. BPSI would present its case once DEC staff and CREST have completed their direct presentations.

I anticipate that pre-filed testimony will be used in this matter with an opportunity for cross-examination at a scheduled hearing. The parties will be expected to confirm the names of their witnesses, as well as their availability, when the hearing is scheduled.

/s/
By: Helene G. Goldberger
Administrative Law Judge

Dated: Albany, New York
February 25, 1997

TO: Keith G. Silliman, Esq.
New York State Department
of Environmental Conservation
Division of Legal Affairs
50 Wolf Road
Albany, New York 12233-1500

Mr. Christopher C. McGrath
New York Capitol Consultant, Inc.
120 Washington Avenue
Albany, New York 12210

Alan Knauf, Esq.
Knauf & Craig
The Alliance Building
183 East Main Street, Suite 1250
Rochester, New York 14604

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