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Getty Terminals Corp., Inc. (Catskill) - Ruling, November 4, 1993

Ruling, November 4, 1993

STATE OF NEW YORK : DEPARTMENT OF ENVIRONMENTAL CONSERVATION

In the Matter

of

Appeal from Special License Conditions of a Major Oil Storage Facility License issued
pursuant to Navigation Law Article 12 (Oil Spill Prevention, Control and Compensation),
Title 17 of the Official Compilation of Codes, Rules and Regulations of the State of New York,
Part 30 (Oil Spill Prevention and Control - Licensing of Major Facilities),
and Title 6 of the Official Compilation of Codes, Rules and Regulations of
the State of New York, Part 610 (Certification of Onshore Major Facilities),

- by -

KINGSTON OIL SUPPLY COMPANY
(Catskill Terminal),

Appellant.

ISSUES RULING

Summary of Rulings

This dispute concerns the validity of a special license condition requiring periodic inspection and periodic certification of a secondary containment system at Appellant's bulk petroleum storage facility. Appellant has argued that Staff exceeded its authority in imposing the special license condition and that the condition is, in essence, an unpromulgated rule. I find that Staff may properly exercise its authority in imposing the license condition because general statutory authority for special license conditions exists, and because Staff asserts the license condition is necessary to assure compliance with the regulatory standards of the Major Oil Storage Facility licensing program.

However, I find that Appellant has raised a factual issue which requires adjudication, regarding its contention that the in-depth integrity inspection requires disturbing the containment system in such a manner that it will thereby permanently compromise the effectiveness of the containment system.

Introduction

On July 15, 1993 at 10:00 a.m., a legislative hearing was held before Administrative Law Judge ("ALJ") Kevin J. Casutto, at Mike's Catskill Point, 7 Lower Main Street, Catskill, New York. On the same date and location, immediately following the legislative hearing, an issues conference was held. The stenographic record of the proceedings was received by the ALJ on August 18, 1993. Memoranda of Law and Replies were filed with this Office by the parties, by September 2, 1993.

Kingston Oil Supply Corp. ("KOSCO" or "Appellant") appeared by Law Offices of Robert G. Del Gadio, EAB Plaza, Uniondale, New York 11556-0150, David W. Denenberg, Esq., of counsel. Appearing with counsel were David Motzkin, Vice-President, KOSCO, and Michael Veretis, Operations Manager, KOSCO.

Department Staff ("Staff") appeared by David H. Keehn, Esq., Assistant Regional Attorney, New York State Department of Environmental Conservation ("NYSDEC") Region 4. Appearing with counsel were Mark Klotz, Chemical Engineer for the Region 4 Spill Response/Bulk Storage program.

One person appeared at the legislative hearing, but did not wish to make any statement. No written comments on this appeal were received by the Office of Hearings. The deadline for receipt of filings for party status was July 9, 1993. No applications for party status were received; therefore, Appellant and Staff are the only parties to this proceeding.

Background

Appellant has applied to the New York State Department of Environmental Conservation ("the Department" or "DEC") for renewal of a Major Oil Storage Facility License, pursuant to Navigation Law Article 12 (Oil Spill Prevention, Control and Compensation), Title 17 of the Official Compilation of Codes, Rules and Regulations of the State of New York, Part 30 (Oil Spill Prevention and Control - Licensing of Major Facilities) and Title 6 of the Official Compilation of Codes, Rules and Regulations of the State of New York (NYCRR), Part 610 (Certification of Onshore Major Facilities). Appellant's storage terminal facility, known as the Amos Post Catskill Terminal, is located at Lower Main Street, Catskill, New York, and accommodates an average daily throughput of 28,950 gallons, and has a total storage capacity of 2,364,460 gallons.

Regional Staff issued a license to Appellant for the 1993-1994 license year (commencing April 1, 1993). The license contains special license condition (3)(j) regarding the secondary containment system, summarized as follows:

In-Depth Integrity Inspection and Certification of the secondary containment systems, to be submitted by July 15, 1993, and thereafter every five years.

Appellant's Position

Appellant appeals Staff's imposition of the special license condition (3)(j) in the renewal license, pursuant to the provisions of Navigation Law, Article 12, 17 NYCRR 30.7 and 6 NYCRR 610.5(e). Appellant seeks to have the special condition deleted from the license, and has requested a hearing. Appellant's letter of April 20, 1993, seeking appeal (Exhibit 1), sets forth grounds for appeal as follows:

"1. The regulations provided for at 6 NYCRR 613.6(a) and (c) provide for monthly inspection and the contents of those inspection reports. [Appellant] is prepared to comply with 6 NYCRR 613.6(a) and (c), however, the regulations do not provide for "in-depth integrity inspection and certification to be submitted by July 15, 1993 and thereafter every five years." The phrase "in-depth integrity inspection" is not defined by the regulations and its use as a special condition is ambiguous. the DEC is without authority to impose such a condition upon the ground of the 1993-1994 MOSF license. Consequently, that condition is vague and ambiguous, the imposition of such a condition is arbitrary and capricious and the representatives of the DEC and the DEC in imposing such a condition have exceeded their jurisdiction and authority. Such actions are otherwise unreasonable and unnecessary to achieve the specific objective stated in the regulations."

At the issues conference, Appellant submitted an additional document which identified five proposed issues for adjudication (Exhibit 7). However, the two documents identify the same proposed issues, and merely group and enumerate the issues differently.

Staff's Position

Staff asserts that the regulation of MOSF's under Navigation Law (NL), Article 12, is a licensing program, and that NL 174(2) and 17 NYCRR 30.6(d) authorize license conditions. Staff further states it is imposing a special condition similar to the one at issue in this appeal, in all MOSF licenses, in order to effectuate the regulatory requirements of 6 NYCRR 613.3(c), which became effective in December, 1990. Essentially, since this secondary containment system consists of a clay liner covered by several inches of sand and gravel, Staff seeks to assure the continued efficacy, or "integrity" of the containment system, which it asserts will deteriorate with age.

Discussion

Appellant has confused the standard of proof at an issues conference with the standard of review in CPLR Article 78 proceedings (i.e., whether agency action was arbitrary and capricious).

Essentially, Appellant raises two types of issues:

1) Appellant raises issues of law, asserting that:

a) as a matter of law, Staff lacks authority to impose the contested, or any other, special license condition because every requirement imposed by Staff must be a law or promulgated rule; and

b) that the only function Staff performs in reviewing an MOSF license application, is to determine whether the applicant meets the standards set forth by law or rule; and

c) that Staff's license conditions are not intended to achieve compliance with the rules, but instead create additional standards.

2) Appellant also raises a factual issue, asserting that an in-depth integrity inspection will require disturbing the secondary containment system in a manner that will permanently compromise the effectiveness of the liner component of the secondary containment system.

1. Staff's Legal Authority for Requiring the Special License Conditions

a. Statutory and Regulatory Authority

The Major Oil Storage Facility (MOSF) regulatory program, created by Navigation Law (NL), Article 12 is a licensing program (see, also, 17 NYCRR Part 30 and 6 NYCRR Part 610). Navigation Law 174(2) provides general statutory authority to impose license conditions to carry out the purposes of NL Article 12 (see, NL 171, Purposes). It is because every detail of a regulatory program cannot be specified by statute or regulation, that license conditions specific to the circumstances of each license application are authorized and appropriate. The language of NL 174(2) suggests that the Department's role in licensing goes beyond mere review to ascertain compliance with license standards, but further, on an ad hoc basis, the Department may impose license conditions to assure a licensee meets the regulatory standards. Accordingly, I reject Appellant's argument that Staff's role in reviewing an MOSF license application is limited to determining whether an applicant meets the standards articulated in the rules. Staff's authority in review of an MOSF license application also includes authority to impose conditions reasonably necessary to ascertaining compliance with regulatory standards.

b. 6 NYCRR 613.3(c): The Regulatory Standard for Secondary Containment

The provisions of 6 NYCRR 613.3(c), became effective five years after the effective date of promulgation of that regulation - - i.e., the regulation became effective thirty days after its filing date of November 27, 1985, and the requirements of that subpart became effective December 27, 1990. 6 NYCRR 613.3(c)(6) requires installation of secondary containment system, and states, in part, that:

"[t]he secondary containment system must be constructed so that spills of petroleum and chemical components of petroleum will not permeate, drain, infiltrate or otherwise escape to the groundwaters or surface waters before cleanup occurs. The secondary containment system may consist of a combination of dikes, liners, pads, ponds, impoundments, curbs, ditches, sumps, receiving tanks or other equipment capable of containing the product stored. . .[emphasis supplied]."

6 NYCRR 613.3(c) sets forth performance standards for secondary containment systems, which can only be applied on a site specific basis. This regulatory provision provides authority for Staff to require installation of a secondary containment system, and also provides performance standards for such systems. Staff's authority to impose license conditions requiring inspection and certification to ascertain continued compliance with the standards articulated in 6 NYCRR 613.3(c), is based upon NL Article 12 (and NL 174[2]). 6 NYCRR 613.3(c) reasonably requires not only installation of a secondary containment system which is effective at the time of installation, but one of continued efficacy. Therefore, it follows that the licensing agency has authority to assure the continued effectiveness, or as Staff has termed it, "integrity", of that system.

I note that, had Staff promulgated a rule to require periodic inspection and certification at all MOSF's, it would not be required to defend its action on an ad hoc basis, as it may be required to do with respect to special license conditions. However, absent a rule requiring periodic in-depth integrity inspection and certification, these requirements may be imposed via license condition if the license condition is reasonably necessary to achieve the standards set forth in 6 NYCRR 613.3(c). The license conditions requiring periodic inspection and certification are not additional regulatory standards, as Appellant's argument appears to assume. Instead, the license conditions, enable Staff to accomplish its oversight function in assuring that the secondary containment system continues to meet the regulatory standards of 6 NYCRR 613.3(c).

This principle applies to Appellant's other challenges to Staff's authority to impose the contested license conditions, including authority to set dates for implementation of the special license condition requirements. However, as discussed below, such requirements must be reasonably necessary to assuring compliance with regulatory standards.

c. Inspection Requirements of 6 NYCRR 613.6 and 613.7

6 NYCRR 613.6 provides for inspections and inspection reports, and 6 NYCRR 613.7 provides for additional testing and inspection requirements. Appellant asserts that because 6 NYCRR 613.6 and 613.7 describe inspections to be performed at MOSF's, Staff is limited to the enumerated inspections and cannot require more. Since the in-depth integrity inspection is not specified in the regulation, Appellant asserts that Staff has no authority to impose such an inspection requirement; that the regulatory scheme has already provided for all the MOSF inspections which the agency deems necessary, and therefore the agency cannot now require additional inspections by special license conditions.

Pursuant to 6 NYCRR 610.5(a)(4), the requirements of 6 NYCRR 613.2 through 6 NYCRR 613.9 are applicable to MOSF licensees, including Appellant. It is fundamental that the regulations set minimum standards with which a licensee is required to comply. This is supported by the language of 6 NYCRR 613.6(a), which requires that licensees inspect the facility at least monthly. Therefore, 6 NYCRR 613.6 and 613.7 provide minimum inspection requirements for licensees. Staff may impose additional requirements, including additional inspection and certification requirements, if those additional requirements are reasonably necessary to ascertain compliance with the regulatory standards of the licensing program.

In light of the above discussion, Staff's alternative argument, that a strict interpretation of 6 NYCRR 613.6(a), which requires monthly inspection of the "facility", may be construed to require monthly inspection of secondary containment system integrity as well, (because the secondary containment system is part of the "facility"), need not be considered. Whether or not Subpart 613.6(a) provides specific authority for such inspection, Staff has authority to impose the in-depth integrity inspection and certification requirements as a matter of law, if those requirements are reasonably necessary to assure compliance with the regulatory standards set forth in Part 613.3(c)(6).

d. Consequences of Inspection on Liner Performance

Lastly, Staff asserts that the requirement of in-depth integrity inspection and certification of the secondary containment system assures the continued efficacy of the clay liner component which it requires to be installed at this facility, and more generally, assures the continued efficacy of the secondary containment system. According to Staff, the liner has been and will continue to be subjected to the stresses and weathering of the changing seasons. Staff asserts this weathering may result in desiccation, cracks, fissures or other aging defects which will compromise the continued effectiveness of the liner. Since the liner is covered by ballast and may not be readily visually inspected, the in-depth integrity inspection and certification requirements are intended to determine the condition of the liner. Staff thereby accomplishes its oversight role, by assuring that the secondary containment system continues to meet the standards of 6 NYCRR 613.3(c).

However, Appellant asserts that the in-depth integrity inspection requires disturbing the containment system in a manner that will permanently compromise the effectiveness of the clay liner. Therefore, Pursuant to 6 NYCRR 624.6(c), Appellant has raised an adjudicable factual issue - - i.e., whether the in-depth integrity inspection requires disturbing the containment system in a manner that will permanently compromise the effectiveness of the liner component of the secondary containment system.

Summary of Rulings

  1. The legislative intent in creating the Article 12 licensing program, was to authorize the licensing agency to impose special license conditions on license applicants to effect the purposes of Article 12. Every detail of a regulatory program cannot be specified by statute or regulation. Therefore, special license conditions specific to the circumstances of each license application are authorized and appropriate.
  2. Staff acted within its authority in imposing the special license conditions upon Appellant, because Staff asserts the special license conditions are necessary to its oversight role of assuring Appellant's present and continued compliance with the regulatory standards of 6 NYCRR 613.3(c).
  3. 6 NYCRR 613.6 and 613.7 set minimum standards with which an MOSF licensee is required to comply. Staff may properly impose additional requirements by special license condition, including additional inspections and certifications, if those additional requirements are reasonably necessary to assure compliance with the regulatory standards of 6 NYCRR 613.3(c). Staff has properly exercised its authority in imposing the special license condition requiring periodic inspection and periodic certification of the secondary containment system.
  4. An issue of fact requiring adjudicatory hearing has been raised concerning whether the in-depth integrity inspection requires disturbing the secondary containment system in a manner that will permanently compromise the effectiveness of the containment system.
  5. On or about November 22, 1993, Staff shall arrange a conference telephone call with Appellant and the ALJ to discuss scheduling for the adjudicatory hearing in this matter.

Appeals

Pursuant to 6 NYCRR 624.4(f) and 624.6(d), these Rulings on party status and issues may be appealed in writing to the Commissioner within three business days of receipt of the Rulings. However, I am extending the time period for filing such appeals to November 12, 1993. Reply briefs to any such appeals must be filed by November 19, 1993. Any appeals and replies must be addressed to the office of Commissioner Thomas C. Jorling, NYSDEC, Room 604, 50 Wolf Road, Albany, New York 12233-5500, and must be received by that office by the dates indicated herein. A copy of all such appeals, briefs and related filings must also be sent to the ALJ's attention at the Department's Office of Hearings, and to the other party at the address indicated below. Transmittal of documents shall be made in the same manner to all persons.

Kevin J. Casutto
Administrative Law Judge

Dated: Albany, New York
November 4, 1993

TO: David W. Denenberg, Esq.
Law Offices of Robert G. Del Gadio
EAB Plaza
Uniondale, New York 11556-0150

David H. Keehn
Assistant Regional Attorney
NYSDEC Region 4 Office
2176 Guilderland Avenue
Schenectady, New York 12306

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