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BCF Oil Refining, Inc. - Ruling, October 27, 1993

Ruling, October 27, 1993

STATE OF NEW YORK : DEPARTMENT OF ENVIRONMENTAL CONSERVATION

In the Matter of

the Application of BCF Oil Refining, Inc. for Solid Waste Management and SPDES permits
pursuant to Environmental Conservation Law Article 27 Title 7
(Solid Waste Management and Resource Recovery Facilities)
and Article 17 (Water Pollution Control)
Titles 7 and 8 and Title 6 of the Official Compilation of Codes Rules and Regulations of
the State of New York Part 360 (Solid Waste Management), and Parts 750 et seq.
(State Pollutant Discharge Elimination System (SPDES))

ISSUES RULING
and
ORDER of DISPOSITION

File No. 2-6101-00075

PROCEEDINGS

BCF Oil Refining, Inc., 360 Maspeth Avenue, Brooklyn, NY 11211 (the "Applicant") seeks Solid Waste Management and SPDES Permits from the Department of Environmental Conservation (the "Department" or "DEC"), in order to construct and operate a waste oil storage and reprocessing facility handling an average of 50,000 gallons per day of waste fuel oil, motor oil, and oil-contaminated water (the "Proposed Project"). The facility currently exists, located at 360 Maspeth Avenue, Brooklyn (Kings County), New York City, NY, and is operating under the terms of DEC Order on Consent, File Nos. R2-3307-90-11, R2-2653-89-11, R2-2855-90-03, and R2-3028-90-05. The facility's maximum storage capacity is 800,000 gallons in 15 tanks. Reprocessing consists of screening, dewatering, and blending. Reprocessed oil will be sold as fuel oil to be burned in industrial, commercial, or apartment building boilers, as prescribed by law. Process residue will be transported by licensed waste haulers to an authorized hazardous waste disposal facility. Process wastewater will be treated in an oil-water separator and discharged to Newtown Creek.

Statutory and regulatory provisions applicable to processing this type of application are: Environmental Conservation Law ("ECL") Article 3, Title 3 (General Functions); Article 70 (Uniform Procedures); Article 27 Title 7 (Solid Waste Management and Resource Recovery Facilities) and Article 17 (Water Pollution Control) Titles 7 and 8; and Article 8 (Environmental Quality Review). Also applicable are Title 6 of the Official Compilation of Codes, Rules and Regulations of the State of New York ("6 NYCRR") Part 621 (Uniform Procedures); Part 624 (Permit Hearing Procedures); 6 NYCRR Part 360 (Solid Waste Management), Parts 750 et seq. (State Pollutant Discharge Elimination System (SPDES)); and Part 617 (SEQR).

DEC Region 2 Staff ("Staff") issued a Notice of Complete Application ("NOCA") for the Proposed Project, which was published on March 25, 1992 in Newsday and DEC's Environmental Notice Bulletin ("ENB"). Staff issued permits dated August 21, 1992 which contained a number of conditions that Applicant challenged. By letter dated February 23, 1993, Staff modified these permits, essentially adopting all but two of the changes requested by Applicant. By March 8, 1993 letter from its counsel, Applicant continued to dispute the propriety of the permits' conditions in two respects, (A) the funding of an environmental monitor, and (B) a stated PCB detection limit.

On May 3, 1993 the DEC Office of Hearings received from Staff a request to schedule a public hearing to resolve the dispute. On May 4, 1993, the undersigned, Frank Montecalvo, was assigned to be the Administrative Law Judge (the "ALJ") who would hear the matter.

DEC Staff was represented at all stages of these proceedings by Paul A. Gallay, Esq., Regional Attorney.

The Applicant was represented at all stages of these proceedings by Stillman, Friedman & Shaw, PC; Julian W. Friedman, Esq., of counsel.

In a conference call on May 21, 1993 between the undersigned and counsel for Staff and the Applicant, it was indicated that the parties viewed the proceeding as arising out of a 6 NYCRR 621.13 permit modification request to change the two disputed conditions, rather than an initial application for the permits themselves (even though Applicant had challenged the two conditions, among others, upon the permits' initial issuance). With regard to the dispute over the environmental monitor, both parties indicated that the facts were essentially recited in Mr. Friedman's March 8, 1993 letter, and that the issue is essentially a legal one. The parties agreed that the issue would be addressed "on papers" (briefs and affidavits of involved persons) rather than at a hearing, and would be determined employing an "arbitrary and capricious" standard to the permits' requirement. In this regard, the appropriateness of an "estoppel" against the Department, arising from the terms of a prior Consent Order, would be considered. The parties further agreed to a hearing date of August 26, 1993.

Upon review of this matter with Hearings Counsel, the undersigned concluded that this matter must be heard and advertised as an initial permit application rather than a modification, since the disputed matters arose on issuance of the permit, and not as a result of later circumstances. The parties were informed of this by letter dated May 29, 1993.

The Notice of Public Hearing (the "Notice") was issued July 1, 1993, and was published in New York Newsday and the ENB on July 14, 1993. Notice was also directly mailed on July 12, 1993 to the clerk or chief executive officer of Brooklyn (Kings County), New York City, as well as to other persons deemed interested in this proceeding.

The Notice deemed Staff's August 21, 1992 permits as drafts, and stated Staff's tentative determination that the Proposed Project, if carried out in accordance with the conditions of the permits, as modified by Staff's February 23, 1993 letter, would meet all applicable statutory and regulatory requirements, and, therefore, Staff would issue the requested permits. It was also noted that the Applicant had agreed to all terms and conditions of the draft permits, as modified, except for two disputed conditions which were to be resolved by the hearing:

  1. Applicant wanted the environmental monitor fund requirements (Special Condition 18, draft SWMF permits) to be waived; and
  2. Applicant wanted the PCB detection limit in its SPDES Permit (Condition found in draft SPDES Permit Part 1, p 7 of 7 (a) Action code 19 outfall 001) raised from 0.065 ug/l to 0.5 ug/l.

The Notice indicated that the parties believed dispute (A) was purely a legal issue, and that dispute (A) was to be addressed by briefs due on the filing date for Party Status requests, August 16, 1993.

By letter dated August 9, 1993, Applicant withdrew its challenge to the PCB testing condition (item (B) above), indicating that in the course of preparing for the hearing, Applicant discovered that EPA testing Method 608 could be modified to test for the 0.065 ug/l PCB detection limit that Staff had proposed to require.

No one requested Party Status to intervene in the proceeding.

On August 16, 1993, the undersigned received Staff's and Applicant's briefs and supporting affidavits on the environmental monitor dispute. Staff requested an opportunity to respond to Applicant's brief. Applicant later made a similar request. By letter of August 19, 1993, I told the parties they could make their responses via oral argument at the hearing, since the hearing still had to be convened to receive public comment in spite of the resolution of the PCB detection limit dispute.

As advertised, I convened the public hearing on Thursday, August 26, 1993, at the NYSDEC Region 2 Headquarters, 47-40 21st Street, Long Island City, NY, with a public statement session beginning at 10:00 AM. No one wanted to make a statement for the record. Also, I received no written comments, in spite of the Notice's invitation to file comments through the hearing date. Therefore, no summary of the public's comments is attached to this ruling. The proceedings moved directly to the Issues Conference, at which oral argument on the environmental monitor dispute was taken.

The stenographic transcript of the August 26, 1993 proceedings was received September 29, 1993. This matter is now ready for review.

THE ENVIRONMENTAL MONITOR DISPUTE

The Contested Permit Condition

Special Condition No. 18 provides (in part) as follows:

"Within thirty (30) days after the effective date of this permit, permittee shall pay to the New York State Department of Environmental Conservation ... a sum of $25,000 (in the form of a certified check or money order) to be placed in an account for DEC's compliance and monitoring activities for this permitted facility. Monies from said sum shall be applied for payment of the first-year costs of said compliance and monitoring activities, and shall be subject to quarterly revision by DEC. Subsequent quarterly payments shall be made by permittee for the duration of the permit, to provide an account balance sufficient to maintain the annual cost assessment for compliance and monitoring activities by DEC at the facility. ..."

Summary of Applicant's Position:

Applicant contends that prior to completion of the pending permit application, and following intensive negotiations, it had entered into an Order on Consent (the "Consent Order", copy attached hereto as Appendix A) with DEC on April 15, 1991 to settle certain claimed violations of the ECL. Applicant contends that when viewed in context with the Consent Order and negotiating history, DEC's attempt to impose Special Condition 18 is arbitrary and capricious, and offends basic fairness and due process. Applicant does not, however, contest DEC's general authority to impose a monitoring fund contribution as a permit condition, but, rather, submits that it would be wrong for DEC to impose the requirement here.

Applicant contends that the Consent Order imposed "total monetary penalties" in the amount of $50,000, $10,000 of which was to fund the environmental compliance monitor program. Although Applicant expressly agreed to "pursue diligently" its permit application, the Consent Order was silent regarding any obligation of Applicant to make additional contributions toward funding monitoring activities. Moreover, at no time in the negotiations leading to the Consent Order did DEC ever refer to the monitoring fund described in Special Condition 18 or otherwise indicate that DEC would demand more than the Consent Order's $10,000 for a monitoring contribution.

In essence, Applicant argues that DEC is now reneging on its agreement as embodied in the Consent Order, which represented a "global settlement" of a number of matters DEC raised regarding application of the ECL and regulations to Applicant's Brooklyn facility. Applicant points out that the settlement agreement is a contract, governed by the ordinary rules of contract interpretation. The $10,000 contribution was bargained for. Applicant was led to believe that such contribution was its sole obligation in connection with a monitoring fund. As explained in the affidavit of its President, Applicant would not have entered into the Consent Order had it known that instead of $10,000, $35,000 would be required for monitoring costs, with the latter figure subject to quarterly replenishment as directed by DEC. Applicant contends it could not and cannot afford this burden.

Applicant points to the language in the Consent Order imposing the $10,000 payment (under "1. Monetary Penalties," IV) which states that all monitors hired under the program "shall be responsible for the oversight of solid waste management facilities operating with permits or under consent orders in New York City" and argues that it contradicts the notion that the $10,000 payment was only intended to monitor Applicant itself during the interim between consent decree and the permit. Applicant also argues, in essence, that the Consent Order's use of the word "fees" (where it states that nothing in the order will relieve the respondent of the obligation to pay fees, etc.) should not be construed to encompass quarterly payments to be determined because "fees" is commonly understood to be a "fixed charge."

Applicant contends the DEC should not now be permitted to ignore either its own conduct or the consequence thereof. DEC's attempt to inflate the monitoring contribution by the device of special permit conditions is "shocking to one's sense of fairness," thus not within the realm of administrative discretion. An agency may not require an applicant to submit to a licensing process and later unilaterally change its terms pursuant to a vague, catchall regulatory provision. Such action is arbitrary and capricious. Special Condition 18 should be waived.

Summary of Staff's Position

Staff contends that Applicant's facility operated from April 1991 until February 1993 "(when the challenged permit was issued)" pursuant to the April 1991 Consent Order. The Consent Order cited Applicant for violations of NY environmental law including: (a) operating the facility from May 1986 until April 1991 without solid waste management permits; (b) operating the facility so as to discharge waste water exceeding the limits of certain parameters specified its SPDES permit; and (c) operating the facility as a Major On-Shore Storage Facility without obtaining the required licenses, filing needed safety plans and reports, or paying the requisite fee. Staff argues that for these violations, it imposed the following remedies: (a) payment of $10,000 to the NY Oil Spill Compensation Fund; (b) payment of $30,000 to the NY State Environmental Enforcement Account; and (c) payment of $10,000 for use in a DEC-managed environmental compliance monitor program.

Staff contends that the Order stated these remedies were strictly to compensate DEC for prior violations; and further stated that it was not a permit, but only "temporary authorization" for the Applicant herein to continue operating the facility. Staff argues that as a "temporary" authorization, the Consent Order's terms control only during the period prior to permit issuance, with the provisions of the permit superseding the Consent Order. In the Consent Order DEC explicitly retained the right to impose additional conditions including additional fees and environmental protection measures.

Staff contends that Applicant's argument ignores the distinction between consent orders (designed to resolved past violations) and permits (designed to ensure environmentally sound future operation). Applicant's past violations were resolved through the payments which included the $10,000 monitoring fee. Applicant was never told that it could "insure" itself from imposition of reasonable costs as part of the permits that would be issued to replace the Consent Order, nor that the $10,000 payment was the only monitoring requirement that would be imposed. The right to impose further fees was expressly reserved in the Consent Order.

Staff essentially argues that even if it had not expressly reserved its right to impose additional fees, it did nothing to mislead Applicant into thinking there would be no more monitoring fees; and that if Applicant assumed this was the case, the assumption was unilateral on Applicant's part and without regard to DEC's reservation of rights.

RULINGS and DISCUSSION

Rulings: (A) No substantive and significant issues exist which require an evidentiary hearing to resolve. (B) Applicant has not shown sufficient cause to warrant disturbing Staff's initial determination to issue the permits with Special Condition 18 attached. (C) Therefore, the hearing may be cancelled and the matter remanded to Staff to complete processing of the application.

Discussion

There are clearly no facts that have been placed in dispute. Neither party disputed the other's version of the facts. Applicant did not contest the Department's need for an environmental monitor (conceding the monitoring will be whatever Staff determines is appropriate; see Transcript p. 40). Rather, the dispute is solely over what the facts mean legally -- whether the circumstances involving the Consent Order now make it wrong for DEC to impose Special Condition 18.

The scope of the Consent Order must be discerned within its four corners, and not by reference to what might satisfy the purposes of one of the parties to it. See Alliance to End Repression v City of Chicago, 742 F2d 1007, 1012 (7th Cir. 1984).

Review of the Consent Order reveals that it was intended to (a) settle pending charges, and (b) provide authority for the Respondent (the Applicant) to operate its facility on a temporary basis (i.e., 120 days and any renewal periods DEC may, in writing, agree to) while it applied for the requisite permits. The Consent Order expressly states that it is not a permit ("2. Solid Waste Permit Compliance," V), and that it constitutes the entire agreement of the parties (last paragraph thereof).

There is nothing in the Consent Order to indicate that any of its provisions were intended to govern after its expiration. If there is any implication from the language of the Consent Order that the $10,000 monitor payment also applies to Applicant's future operations (I do not contend that it does), the implication would only apply to the period of time that Applicant operates under the Consent Order's temporary authority. Given the Consent Order's purpose, as indicated by its language, the fact that Staff did not indicate in negotiations that it would impose a monitoring payment requirement in its permit is not surprising -- nor does it afford basis for relief. The Consent Order only purports to settle prior charges and provide temporary operating authority -- nothing more. Permit conditions were not addressed by the Consent Order.

If Applicant somehow came to believe that it was also settling all future requirements regarding monitoring funding, it was a mistake on its part since that is not the way the Consent Order is written, and Staff had not discussed the subject. A unilateral mistake under circumstances similar to those here would not afford a basis for relief from a contract. See American Law Institute Restatement of the Law, Second; Contracts 2d 151 and 153.

Applicant has shown no basis to disturb Staff's determination to impose Special Condition 18.

Since no substantive and significant issues exist which require an evidentiary hearing to resolve, the hearing may be cancelled.

APPEALS

Pursuant to 6 NYCRR 624.6 (d), "The ruling of the ALJ setting forth the issues for the hearing may, within three days of the ruling, be appealed in writing to the commissioner, who will decide the appeal within five days of receipt. Other parties may submit briefs in support of or in opposition to the ALJ's ruling. Notice of the appeal and a copy of all briefs submitted in support thereof shall be given to the ALJ and all parties to the hearing..."

Appeals to the Commissioner are to be sent to the following address: Commissioner Thomas Jorling, c/o Robert Feller, Assistant Commissioner; NYS Dept. of Environmental Conservation; 50 Wolf Road; Albany, NY 12233-1550. (See Service List attached for other addresses).

Any appeal herein must be received at the above address no later than close of business November 3, 1993. Replies are due one week later.

ORDER OF DISPOSITION

Subject to the Commissioner's determination of any appeals which might be filed herein, absent the existence of issues requiring adjudication, the record is closed, the adjudicatory hearing is cancelled pursuant to 6 NYCRR 624.6(c), and the matter is remanded to Department Staff to complete processing of the application in accordance with the Rulings herein.

/s/
By: Frank Montecalvo,
Administrative Law Judge

Dated: October 27, 1993
Albany, New York

Attachment (on Mailed copy only): Appendix A - Consent Order

To: Official Service List attached via Mail and Fax

OFFICIAL SERVICE LIST - October 27, 1993

NAME OF HEARING: BCF Oil Refining, Inc.; Application No. 2-6101-00075

Solid Waste Management and SPDES Permits
STAFF: DEC Region 2
c/o Paul A. Gallay, Esq., Regional Attorney
NYSDEC Region 2 Division of Legal Affairs
47-40 21st Street
Long Island City, NY 11101
FAX 718 482-4962; PHONE: 718 482-4965

APPLICANT: BCF Oil Refining, Inc.
c/o Stillman, Friedman & Shaw, PC
425 Park Avenue
New York, NY 10022
attn: Julian W. Friedman, Esq.
FAX 212 223-1942; PHONE: 212 223-0200

ALJ:
Frank Montecalvo
Department of Environmental Conservation
Office of Hearings
50 Wolf Road, Room 409
Albany, NY 12233-1550
FAX 518 485-7714; PHONE 518 457-3468

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