Laidlaw Environmental Services - Ruling and Order, November 15, 1993
Ruling and Order, November 15, 1993
STATE OF NEW YORK : DEPARTMENT OF ENVIRONMENTAL CONSERVATION
In the Matter of
the Application of Laidlaw Environmental Services, Inc., and BDT, Inc.,
for a Modification of Existing Hazardous Waste Facility and Air Permits; and Certificates to Operate;
and Approval of a Change of Operational Control pursuant to Environmental Conservation Law
Articles 19 and 27; and Title 6 of the Official Compilation of Codes Rules and Regulations of
the State of New York, Parts 201 et seq. (Air Pollution Control) and
Part 373 (Hazardous Waste Management Facilities)
ALJ RULINGS and ORDER
Laidlaw Environmental Services, Inc. ("LESI"), 220 Outlet Pointe Boulevard, Columbia, SC 29210; and BDT, Inc. ("BDT"), 4255 Research Parkway, Clarence, NY 14031, (collectively, the "Applicants") seek modification of existing Hazardous Waste Facility and Air Permits; and Certificates to Operate; and approval by the Department of Environmental Conservation (the "Department," "DEC," or "NYSDEC") of a change in the permitted facility's operational control. 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 19 (Air Pollution Control), Article 27 (Waste and Refuse); and Article 8 (Environmental Quality Review). Also, 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); Parts 201 et seq. (Air Pollution Control); Part 373 (Hazardous Waste Management Facilities); and Part 617 (SEQR).
The Applicants propose that LESI acquire operational control of BDT through a stock transfer. The Applicants seek modification of the permits listed below, previously issued to BDT, to reflect the transfer of stock ownership and operational control of the Permittee, and a change of name of the Permittee to Laidlaw Environmental Services (BDT), Inc. The Applicants seek the NYSDEC Commissioner's approval of the change in operational control pursuant to 6 NYCRR 373-1.7(a)(2). The proposed change in operational control and name change on the permit will hereinafter be called the "permit transfer." The permits to be transferred are as follows:
- 6 NYCRR Part 373 Hazardous Waste Facility Permit No. 9-1432-00004/00001-0, issued October 17, 1991, expiration date October 17, 1996;
- 6 NYCRR Part 201 et seq. Air Permit/ Certificate to Operate No. 143200 0007 0001A W I, issued March 1, 1991, expiration date March 1, 1996;
- 6 NYCRR Part 201 et seq. Air Permit/ Certificate to Operate No. 143200 0007 0002A W I, issued March 1, 1991, expiration date March 1, 1996. The permitted facility is located at 4255 Research Parkway, Town of Clarence, Erie County, NY. The facility receives, stores, and treats ignitable, reactive, corrosive and other characteristic hazardous wastes in bulk, some P and U code listed wastes in laboratory packings and containerized reactive gases in pressurized cylinders. Bulk wastes consists of waste lithium batteries, waste electrolytes, and reactive and ignitable elements like sodium, potassium and phosphorous. Treatment consists of either incineration or neutralization by hydrolysis. Packaged waste laboratory chemicals are treated when possible or are otherwise consolidated and stored on-site prior to ultimate shipment to other treatment/disposal facilities. The storage of hazardous wastes at the facility is in containers, and the treatment is either in a hydrolysis tank system or an incinerator. No disposal of hazardous wastes takes place at the site.
Pursuant to 6 NYCRR 617 (SEQR), NYSDEC Region 9 Staff, as Lead Agency, classified this action as "Type II," in accordance with 617.13(d)(16) (license, lease and permit renewals or transfer of ownership thereof, where there will be no material change in permit conditions or the scope of the permitted activities). Due to public interest in the proposed changes, Staff referred the application to the DEC Office of Hearings to schedule a public hearing. I was assigned to hear this matter on April 5, 1993.
The Notice of Public Hearing (the "Notice") was issued April 19, 1993, and was published in the DEC's Environmental Notice Bulletin, The Buffalo News, and The Clarence Bee on April 28, 1993, and in the Metro Community News on April 25, 1993. The Notice was also directly mailed on April 21, 1993 to the clerk or chief executive officer of the Town of Clarence and Erie County, as well as to other persons deemed interested in this proceeding. With regard to the application, the Notice indicated Staff's tentative determination to approve of the proposed transfer, subject to the addition of certain conditions to the permits; and that Draft Additional Permit Conditions had been prepared and were available for review.
The Draft Additional Permit Conditions and accompanying Fact Sheet were received by the Office of Hearings on April 29, 1993.
On May 6 and 7, 1993, the Town of Clarence (the "Town") and the Concerned Citizens of Clarence, Inc. ("CCC") requested that I adjourn the hearing due to an unavailability of documents that were advertised in the Notice as being available for public review. I denied this request, but indicated that problems caused by a delay in document availability would be isolated and accounted for at the Issues Conference.
In accordance with the Notice, I received two requests for Party Status by the May 26, 1993 filing deadline: one from the Town, the other from CCC.
On May 27, 1993, I received revised Draft Additional Permit Conditions and an accompanying Fact Sheet from DEC Staff, along with Staff's consent to an adjournment if any party requested one and I determined that an adjournment would be in the best interest of the parties and the public.
As advertised in the Notice, I convened the public hearing on Wednesday, June 2, 1993, at the Clarence Town Hall, One Town Place, Clarence NY 14031, with a public statement session which began at 2:00 PM. A second such session was held at 7:00 PM. Numerous members of the general public made unsworn statements on the application at these sessions. In addition, I accepted into the record a large number of written statements which had been received by the June 2, 1993 deadline. The public expressed overwhelming opposition to the permit transfer. These oral and written statements are summarized below in "Summary of Public Concerns."
An Issues Conference (the "Conference") was convened at 9:30 AM, Thursday, June 3, 1993, at the same location as the public statement session, to determine Party Status (and manner of participation) for any persons who had requested it, and to define which Issues required adjudication, if any. DEC Staff was represented by Annette Sansone, Esq., Assistant Regional Attorney. LESI was represented by Nixon, Hargrave, Devans & Doyle; G. Robert Witmer, Jr., Esq., of counsel. BDT was represented by Hodgson, Russ, Andrews, Woods & Goodyear; Jerrold S. Brown, Esq., of counsel. The Town was represented by Whiteman Osterman & Hanna; Alice J. Kryzan, Esq., of counsel. CCC was represented by the SUNY Buffalo Law School Legal Assistance Program; R. Nils Olsen, Jr., Esq., of counsel.
At the Conference, it was noted that the May 27, 1993 Draft Additional Permit Conditions and Fact Sheet were revisions that Staff made after Applicants pointed out the original draft was based on erroneous or outdated information. Also, it was revealed that a number of documents, advertised as being available for public review, were either missing, or the wrong documents had been supplied to the locations where the public was to have access to them. To ensure that the public had an opportunity to review all the relevant information before making comment, I directed that public notice be given of the additions to the file, and that written comments could be filed for an additional 30 days. To assist in this endeavor, I directed that an affidavit be provided specifying when particular documents were made available to the public at which locations.
Upon the agreement of the Applicants and DEC Staff, Party Status was granted to the Town and to CCC (collectively referred to as the "Intervenors").
Potential issues broached in the filings for Party Status were discussed at the Conference. There was disagreement among the parties on the standards and methodology to be applied to determine the suitability of LESI to receive BDT's permits. It was also indicated, apparently for the first time, that Applicants might not accept Staff's draft permit conditions. Since the application had been tentatively approved by Staff, subject to attachment of permit conditions, but was totally opposed by the Intervenors, I gave the Intervenors 45 days, or until the expiration of the extended public comment period, to brief me on the suitability standards and make an offer of proof to show why the standards would not be met. Staff and Applicants were given 30 days in which to make simultaneous replies. Due to the uncertainty surrounding the "suitability" standard, the parties agreed that consideration of issues on permit conditions addressing LESI's "suitability" be reserved until after the applicable standard was determined.
Following receipt of Staff's affidavit regarding document availability and my approval of the notice, Notice of the Extension of the Public Comment period was published in the DEC's Environmental Notice Bulletin, The Buffalo News, and The Clarence Bee on June 16, 1993, and in the Metro Community News on June 20, 1993. The public was given until July 20, 1993 to file additional written comments. A number of comments were received in response to this notice. Again, opposition to the proposed transfer was overwhelming. These comments also have been included in the "Summary of Public Concerns."
The Intervenors submitted a joint Memorandum under cover dated July 20, 1993, and requested 20 days within which to reply to any response from Applicants and DEC Staff. Receiving no objection from the other parties, I granted Intervenors' request. Applicants and Staff submitted responses on August 19, 1993. Because Applicants in their brief questioned DEC's jurisdiction and raised other issues, Staff later requested an opportunity to submit a reply to Applicants' response, to be due simultaneously with Intervenors' reply. I granted Staff's request without objection. On August 31, 1993, Intervenors moved to strike certain arguments in Applicants' submissions, to suspend the briefing schedule, and, alternatively, for a ten day extension of Intervenors' reply time. On September 1, 1993, I denied these requests, and advised Intervenors and Staff that their replies were to be sent by September 10, 1993. Staff's and Intervenors' replies were submitted under covers dated September 10, and received September 13, 1993.
By letter of September 27, 1993, the Intervenors requested that I issue an order on bifurcation, because of a divergence of opinion in the parties' briefs on how the case would come forward. By letter of September 28, 1993, I declined to issue an order, noting that the request would effectively be addressed when I made my rulings.
Under cover letter dated September 27, 1993, which indicated it was responding to a July 12, 1993 request from DEC Staff, LESI updated its application filing on its Record of Compliance ("ROC") with new information.
Except for consideration of potential issues related to permit conditions based on LESI's ROC, or arising out of matters that have not yet been noticed by Staff (if any, see Ruling X(B) below), this matter is ripe for determination herein.
Summary of Public Concerns
Each public statement session was attended by well over 150 people (estimate). Approximately 70 oral comments and 50 written comments were made for the record. A number of submissions were quite lengthy, containing newspaper articles and articles from computerized library searches.
Erie County, the Town of Amherst, and the Town of Newstead each filed resolutions voicing strong opposition to the proposed permit transfer. Various elected officials made or filed statements in opposition on behalf of their constituents.
In addition, copies of petitions under the "Concerned Citizens of Clarence, Inc." heading were submitted bearing approximately 1,800 signatures. Those petitions state "We, the undersigned, object in the strongest possible terms to the transfer of permit 373 from BDT, Inc. to Laidlaw Environmental Services.  We object to the cavalier manner in which our health, safety, and property values will be jeopardized by this transaction."
Persons commenting on the transfer were almost unanimous in opposing it, with many allegations that Laidlaw companies have not complied with environmental laws elsewhere in the United States and in Canada (specific incidents in both countries were mentioned). Hearing attendees presented an orderly "parade" of placards bearing names of locations of Laidlaw facilities and penalties assessed against same. Laidlaw was generally portrayed as having a "poor" compliance record, willing to pay fines as a substitute for good performance, and without regard for its host communities.
Several persons feared the transfer would result in the loss of their community's ability to influence facility operations, currently exerted through what can best be described as "peer pressure" on facility owners, who are community residents.
Many people said they could not understand how the facility, which they believed was originally intended to dispose of waste from the local production of pacemaker batteries, grew to the point where it is currently authorized to dispose of over 1,000 kinds of hazardous wastes, brought in from outside the area, without an Environmental Impact Statement having been produced. What was originally perceived to be a socially responsible venture (i.e., the community accepted the facility in order to dispose of locally produced hazardous waste) is now perceived otherwise. It was noted that "BDT" stood for "Battery Disposal Technology." A number of people felt the community had been misled or deceived as to the real intentions for the facility. One person called for the entire permitting process, going back to 1980, to be referred to the Attorney General for review. There was concern that Laidlaw will expand the facility even more.
Many people expressed concern over the facility's operations and the impacts to the community's health, safety, and property values. Some want to revisit the issuance of BDT's permits. It was noted that hazardous wastes must be transported through the community, and that the facility emits toxic fumes in close proximity to schools and homes. Some questioned the safety record of BDT, and various incidents were cited. People generally and genuinely feel their lives, health and safety are endangered. When health problems occur to individuals, they worry it might be related to the facility. Fear has been associated with odors. Many feel trapped in the situation (they won't be able to sell their homes to move away). Studies linking hazardous waste incineration to health problems were mentioned.
A number of people expressed concern that the Department has not been given adequate resources to perform all its various responsibilities and still be able to adequately monitor this facility. It was noted that a stack test made last year (which showed non-compliance) was the only such test performed during the last 10 years. This made several people concerned that non-compliance could have existed for an unknown period of time. One person noted that DEC responded to the non-compliance by cutting authorized feed rates in half, and wondered if the stack had been out of compliance since 1982. Another commenter noted that the revised draft additional permit conditions had eliminated the original draft's references to specified feed rates, wanted to know why, and noted that the applicant had been fined for not operating its Roebuck, SC incinerator in compliance with the permitted feed rate.
A number of persons felt that the Department did an inadequate job of reviewing Laidlaw's Record of Compliance. It was noted that the Concerned Citizens of Clarence compiled evidence of non-compliance. It was believed that if non-professionals could produce such information, there must be more to discover.
Concern was expressed over the financial assurances that would be provided. (One person noted South Carolina required a $100 million bond).
Overall, the community perceives it is losing the ability to control its own destiny. There is general distrust of the applicant, and of the Department's ability to protect the community's interests.
Summary of the Parties' Positions
The Intervenors' Party Status Filings:
The Town contended that BDT has no valid permits to transfer, thus no transfer should be approved. The Town alleged that NYSDEC did not perform a SEQRA review of the original BDT permit application, thus, consistent with the Commissioner's Decision and the Hearing Report in the Matter of Modern Landfill, 1988 W.L. 158336 [Commissioner's Decision/Order 7/20/88], the DEC permits to be transferred are void. Town's Proposed Issue I (in Exhibit 5 of this record).
Both Intervenors contended that DEC Staff failed to conduct an investigation into LESI's Record of Compliance ("ROC"), applied inappropriate standards to LESI's ROC submissions, and failed to comply with ECL 27-0913(3) and the Department's March 5, 1993, ROC "Enforcement Guidance Memorandum" ("EGM"). The Intervenors wish to question NYSDEC Staff on how its investigation of LESI was conducted, the standards Staff applied, etc.; want to introduce DEC documents in this regard; and want to show how DEC processed other applications on ROC matters. Town's Proposed Issue II; CCC's opposition ground 1, proposed Issue A (in Exhibit 4 of this record).
The Town contended that unknown effects of the facility on public health, and particular instances of non-compliance at the facility, require the permits to contain conditions in addition to those proposed by DEC Staff, and that conditions are needed regardless of the decision on the transfer. Town's Proposed Issue IV, and part A. See also Town's proposed modifications 1 -- 4.
CCC similarly contended that BDT's operational history requires that DEC Staff's Draft permit conditions be added to BDT's permits in the event LESI's applications are denied. CCC Opposition ground 3, Proposed Issue C. CCC also contended that BDT's operational record warrants certain permit conditions proposed by DEC (such as an on-site monitor and annual environmental audit) and contends that the conditions are unrelated to the proposed transfer and LESI's fitness. CCC indicated it wants to offer evidence to prove a partial list of incidents at the BDT facility, in support of DEC's proposed conditions. CCC Ground of opposition 3, Proposed Issue C.
Both Intervenors argued that the transfer should be denied, based on LESI's alleged history of non-compliance. Container management violations were noted at Bartow and Clearwater, FL facilities. The Roebuck, SC incinerator was alleged to have had violations of permit feed rate limits, openings in thermal relief vents, NPDES permits, Court-ordered operating requirements, and had structural integrity problems. The Pinewood, SC hazardous waste landfill was alleged to have had persistent continuing violations. Citing a statement from LESI that it "paid a civil penalty resolving all matters ... " it was argued that payment of a fine was considered to be a substitute for compliance. It was noted that after LESI stated simple corrections were required and action taken, it was conceded that more extensive corrections were required. The Town pointed to the GSX Cleveland, OH, and Crowley, LA facilities as inappropriately continuing certain activities while in a dispute with EPA over whether or not they were regulated.
The Intervenors argued that the environment or public health were threatened by a sulfuric acid cloud release into residential neighborhood in Antioch, TN; the collapse of a containment berm at the Pinewood, SC landfill; and the mining of wetlands without a federal permit. It was argued that LESI was denied permits for facilities at GSX Cleveland, OH, Bartow, FL, and at GSX Gas Recovery Systems, Orange County, CA. The Intervenors also claimed that LESI made material misrepresentations of its compliance history (such as characterizing Florida's notice of permit denial as an intent to deny).
The Town contended that if the permits are transferred, LESI's compliance history would require that certain permit conditions, not already proposed by DEC Staff, be imposed to act as severe disincentives to violations. The Town proposed a number of permit conditions to protect the Town's interest. The proposed conditions include permittee's funding of a Town inspector; providing the Town with notifications of violations; giving the Town opportunity to participate in any settlement; requiring that additional fines be paid to the Town; precluding permittee from objecting to the Town's standing to enforce permit conditions in court; required reimbursement of the Town's legal fees; and stipulated penalties of ten thousand dollars per day if Permittee continues activities over which there is a dispute during the period before the dispute is resolved, even if permittee is ultimately shown to be correct. Town's Proposed Issue IV, IV B, and Town's Proposed Permit Modifications 4 -- 12 (please note that in the official record there are no pages 7 and 8 of this portion of the Town's submission and an apparent discontinuity before Modification 7). CCC joined in the Town's request and proposed 3 additional modifications of its own. CCC Ground of opposition 4, Proposed Issue D.
Intervenors' Post Conference Brief:
The Intervenors contend that the permit transfer must be denied if there is "any doubt" about LESI's suitability. The Department must consider an applicant's suitability under two authorities: 1) explicit authority under ECL 27-0913 regarding Hazardous Waste Management Facility permits; and 2) inherent authority under the ECL. ECL 27-0913 states "the Commissioner shall assure that permits authorizing hazardous waste, treatment, storage, disposal or transportation are not issued to or held by unqualified or unsuitable persons ...", and goes on in subdivision (3) to suggest a list of factors for DEC to consider. The Commissioner's Record of Compliance Enforcement Guidance Memorandum (the "ROC EGM") also requires that an applicant be found suitable. Both the spirit and letter of the statute and EGM "mandate" a discretionary approach.
The Intervenors argue that the applicant must meet the "highest standards" for suitability, and that the facility should have a risk assessment because that is EPA's policy. The Intervenors complain about the "dubious distinction" of having been selected "[w]ithout their consent or knowledge" to be the hosts of the "only commercial hazardous waste facility in the State of New York," and argue that the local citizens quality of life should be receive a higher value than commercial interest. What Intervenors mean by "highest standards" is neither defined, nor related to a legal requirement or precedent. The connection between a risk assessment, the requirements of New York State law, and the proposed change in controlling entity is also not set forth.
Intervenors stated there were at least eight factors that should be considered in determining suitability:
- The nature and seriousness of all violations (without regard to the penalty imposed), requiring evaluations of potential threat to health and environment, and whether or not violation was part of a pattern of non-compliance. Citations to Matter of American Transfer Company, Decision and Hearing Report 12/24/91; ROC EGM p 4; Matter of Conover Transfer Station and Recycling Corp., Decision 8/21/92.
- Both pending violations and violations resolved through consent orders should be considered. American Transfer, supra; Matter of Seneca Meadows, Decision 2/12/93; CECOS, Interim Decision 7/19/88; Ohio and New Jersey statutes.
- Decisions to deny or revoke a permit must be given substantial weight. ECL 27-0913; REC EGM
- There can be "no doubt" about an Applicant's trustworthiness if they are to be considered suitable. Integrity on financial matters and dealings with authorities regulating other aspects of an enterprise should be considered.Conover Transfer Station and Recycling Corp.Interim Decision, 8/21/92; Berger v Leach 103 AD2d 1018 (1984); Green Cab and Brokerage Co v City of Rochester, 112 AD2d 802 (1985).
- A suitable applicant must have a demonstrated corporate philosophy of compliance in the first instance.
- Criminal convictions are "presumptive" evidence of unsuitability.
- The compliance history of Laidlaw's operations in Canada should be considered.
- The technical complexity of the facility is relevant in determining an applicant's suitability.CECOS, Decision, 1990 cited. [On this point, Intervenors questioned the Department's ability to adequately monitor the facility, and essentially argued that since DEC cannot adequately enforce the laws, Applicants should not be given a permit.]
Intervenors argue that several "Laidlaw" corporate entities must establish their suitability. CECOS, Decision 1988, supra; ECL 27-0913(3)(f)(iii) There is a financial interrelationship between Laidlaw, Inc. and LESI that cannot be disputed. Laidlaw, Inc. directed LESI's growth strategy in the hazardous waste area, and, in 1990 merged its hazardous waste operations under LESI. Since telephone calls to separate Canadian waste-related Laidlaw companies were answered by the same individual, Laidlaw, Inc. essentially markets its hazardous and solid waste services as a single entity.
Intervenors contend that on the "incomplete" record available, LESI or its parent Laidlaw, Inc. (a Canadian corporation), fails to meet any of the standards of a suitable applicant. The Intervenors submitted numerous documents for the record in their filings for Party Status and accompanying their brief to establish LESI's unsuitability. Such documentation included copies of consent orders, notices of violation, inspection reports, administrative determinations on applications, newspaper articles, and court decisions. The Intervenors argue that the seriousness of LESI's violations alone (including mining 50 acres of wetlands without permit, release of a sulfuric acid cloud over residential neighborhood, and collapse of containment wall in hazardous waste landfill; which resulted in a serious threat to health or the environment) warrant permit denial. The Intervenors argue that LESI has engaged in a "persistent pattern" of non-compliance, that many of the most numerous violations occurred at facilities which LESI or its parent owned for several years (citing violations at Roebuck and Pinewood, SC facilities). To be suitable, LESI "must be in compliance at all of its facilities". Violations at recently acquired facilities can be attributed to LESI's operation (citing facilities at Bartow, FL and Cleveland, OH). LESI has had permits denied or revoked at three separate facilities: in Cleveland, OH (steps to revoke a hazardous waste permit); and in FL and CA (denial of air permits). Under ECL Article 27 and the ROC EGM, these states' decisions must be given "substantial weight." LESI and its Parent have a demonstrated history of untrustworthiness. Intervenors noted that Florida officials opined in their Notice of Permit Denial that LESI had made materially false statements in a permit application, and claimed the same to have taken place in the current application. Intervenors noted that the parent corporation and a sibling corporation settled suits involving alleged misrepresentation financial conditions to stockholders and contracting fraud; and that a Canadian subsidiary was convicted of price fixing in its solid waste disposal operations. Intervenors claim that the parent corporation's corporate philosophy places profits above environmental compliance, that it "prefers" to continue to pay significant fines and penalties rather than come into compliance, and cites LESI's aggressive acquisition strategy as confirmation of the corporate attitude. Intervenors point out that parent company Laidlaw, Inc. was convicted of a criminal violation of Canada's environmental laws. Queen v Laidlaw Waste Systems, Ltd, Reasons for judgment 3/1/93. The criminal violation is sufficient to warrant permit denial. The record leads to a conclusion that LESI cannot be trusted.
Based on the information they have provided thus far which demonstrates the relevancy to this proceeding, Intervenors request that LESI be ordered to provide significant information pertaining to the parent and sibling corporations' operations in the US and Canada. Intervenors specifically request: (1) An organizational chart depicting the corporate structure of Laidlaw, Inc., identifying all entities in which it has a direct or indirect ownership interest of 10% or more; (2) identification of all such entities holding a permit (from federal, state, Canadian or provincial authorities) to treat, store, transport or dispose of solid, hazardous, or medical waste, or limit discharge of pollutants to air or water waste; (3) for each facility with such a permit, a completed compliance form such as that used by North Carolina identifying all violations of permit conditions for which a Notice of Violation was issued; (4) for each violation noted, all documents pertaining to the violation plus the name and number of the regulator who could verify the information; (5) production of any civil or criminal complaint which included an allegation of criminal or fraudulent conduct on the part of Laidlaw, Inc. or any subsidiary, and statement of the resolution of same.
Staff contends that in addition to the broad authority vested in the Commissioner by various provisions of the ECL, the factors for evaluating LESI's suitability are recited in ECL 27-0913 and the ROC EGM. Staff does not conclude that finding of any of the statutory factors is an automatic basis for permit denial without further consideration. Staff characterized Intervenors as trying to impose a "perfect compliance" standard, requiring permit denial upon the finding of any violation, no matter how minor and non-impactive, at any Laidlaw facility. Staff notes that the statute allows the commissioner to rely on the listed factors to modify (as opposed to revoke) an existing permit, and the EGM reflects this idea. The Intervenors would divest the Department of the discretion to weigh all relevant factors, and require the Department to act in an arbitrary and capricious manner.
Staff would not apply a "highest","perfect compliance", or "without any doubt" standard as proffered by the Intervenors. Staff would rather attempt to distinguish between those facilities who have with criminal intent or gross negligence operated outside the law (justifying a denial) from those who have had transgressions but have acted responsibly to correct them and prevent recurrences. Regarding the latter, a permit would not necessarily be denied, but special conditions might be imposed to ensure compliance with regulatory requirements. In addition, when appraising violations by related companies, the independence of the facility under examination should be considered. Matter of CECOS, Decision 3/12/90.
Staff submits that the $25,000 penalty threshold in the EGM is appropriate and procedurally useful in identifying the most serious violations which should be scrutinized.
Staff opined that the record thus far does not establish either criminal conduct or gross negligence by Laidlaw. Intervenor's reliance upon a Canadian criminal conviction is misplaced because the court there commented that the occurrence was not the result of a breach of an order or certificate of approval, nor was there evidence that the discharge was intentional. Furthermore, the court commented that "[t]here is no evidence that Laidlaw has the reputation nor the propensity for breaching environmental laws." A denial based on this incident would be without merit.
Staff found the fact that other regulators have not revoked permits for LESI facilities after violations occurred as persuasive evidence that the violations were properly remedied to the satisfaction of the respective regulators. Staff considered the three instances of proposed permit denial/revocation at the Bartow, FL, Cleveland, OH, and Orange County, CA facilities. Florida informed Staff that the Bartow facility has operated pursuant to an Order on Consent which required elimination of all violations, that in August LESI paid a $42,000 penalty in settlement, that the facility was recently reinspected and found to be in compliance, and that Florida will soon issue a Notice of Intent to Issue the air permit. LESI agreed to close the Cleveland, OH facility in a 1990 Consent Judgment. The facility had a history of compliance problems prior to LESI's acquisition, which was after the USEPA commenced its suit. The California action was concluded by a November 3, 1989 abatement order and payment of a $30,000 penalty. The Hearing Board there concluded that "[t]he adoption of the conditions hereinafter set forth is likely to result in compliant cooperation at the Orange County facility."
Staff noted that it has requested LESI to update its ROC submission including pending allegations, but opined that considerations of fundamental fairness and due process of law may prevent Staff from using pending allegations as a basis for permit denial, and that even where violations have been alleged by DEC, the prospective permittee still has a right to have the matters adjudicated before a permit is denied. A distinction must be made between an agency's intent to deny or revoke and the actual act of same.
Staff contended that its imposition of additional permit conditions is relevant to its suitability determination. The conditions, including Continuous Emission Monitoring, on-site environmental monitors and biennial stack testing, are intended to provide for enhanced regulatory oversight and control at the facility.
Staff supports Intervenor's request for additional information, particularly information about Laidlaw's corporate structure and Canadian holdings, believing the relevance of Laidlaw's Canadian facilities can only be understood after its corporate structure is identified. Staff indicated that via a July 12, 1993 letter, it has already requested Applicant to supply this information, and reserves its right to revise its determination pending review of this information.
Applicants argue that a stock purchase transaction is not a "transfer" requiring permit modification because the same person (BDT, Inc.) will own and operate the facility before and after the sale of stock. Citations to ECL 27-0913; and 6 NYCRR 373-1.7(a) and (a)(1); 370.2(b)(123),(124) and (128) [permit modification required when transferred to a new owner or operator; definitions of owner, operator and person]. Similar reference also made to the air regulations at 6 NYCRR 201.5(c); 200.1 (ss), (uu), (xx). The corporation owns the facility, not the shareholders. Thus, Departmental approval of the stock sale is unneeded.
Applicants contend the ROC EGM does not apply in this proceeding. The ROC EGM is based on implied authority to deny permits based on character of applicant. Olsen v Town Saugerties 161 AD 2d 1077 (3d Dept. 1990) citing Matter of Barton Trucking v O'Connell 7 NY2d 299, 308-09 (1959). Power implicitly delegated to the DEC was superseded by ECL 27-0913 in 1982. The ROC EGM is invalid where it purports to apply different, non-statutory criteria. Explicit language of a later statute controls general language of an earlier enactment. Gwynne v Board of Education, 259 NY 191, 197 (1932). By adopting specific criteria, the Legislature has limited DEC's range of discretion to the specified criteria. Bologno v O'Connell 7 NY 2d 155 (1959). The ROC EGM goes beyond what the legislature intended (eg., "knowingly" false statements (in the statute) vs. "materially" false statements (in the EGM)). Even under the broadest and most open-ended of statutory mandates, an administrative agency may not use its authority as a license to correct whatever societal evils it perceives. Boreali v Axelrod, 71 NY2d 1, 9 (1987). The air permits are "incidental" to the hazardous waste permit and cannot be used to bootstrap the DEC's implied authority into this proceeding. The precedent for dealing with the issue of character and fitness in such cases was established by the Commissioner in Matter of CECOS Matter of CECOS International, Inc., Interim Decision 7/19/88. There the commissioner determined his authority to examine suitability with reference to 27-0913 even though air permits had been applied for. Allowing Intervenors to ignore the statutory criteria because air permits are also required would violate the plain intent of the Legislature.
The Applicants further argue that the ROC EGM is invalid because it is "an improperly promulgated regulation masquerading in the guise of a policy document," which "vastly exceeds the Department's implied authority to examine the fitness of an applicant." Numerous citations to the State Administrative Procedures Act and cases omitted here.
By 27-0913(3) the Legislature expressly delegated to the Commissioner the authority to assure that hazardous waste permits are not held by "unqualified or unsuitable persons." LESI is suitable and qualified to acquire BDT's stock. The Legislature voiced an objective to exclude "persons with known criminal records which would indicate dishonesty and untrustworthiness" and persons "who thought prior criminal, civil or administrative proceedings have been determined to be or have been in violation of any federal or state hazardous waste statute, regulation or permit condition and who have by such finding demonstrated deficiency in meeting those standards necessary for the protection of human health and the environment." Laws of 1982 c. 854, 1 (emphasis added by Applicants) Perfection is LESI's goal, but it is not the appropriate standard for an applicant. The straightforward purpose of 27-0913(3) is to prevent dishonest and dangerously incompetent persons from the hazardous waste industry. Permit denial based on an examination of character and fitness should occur only for "applicants who have intentionally or by management neglect operated outside the boundaries of the law and have done so criminally or with gross negligence." Matter of CECOS International, Decision 3/13/90. In CECOS, in finding the applicant fit, the Commissioner concentrated on its local operation, disregarding sibling and parent companies, because it appeared local management was responsible for day-to-day operations at the facility, notwithstanding the fact that CECOS had been denied renewal for a similar facility in another state and an employee had been found guilty of felonies involving hazardous waste. See Matter of CECOS International, Hearing Report and Recommended Decision 8/21/89.
Where the controlling or related entity is a business entity rather than an individual, the analysis to determine the relevancy of past non-compliance by the parent corporation "must focus on whether the compliance history at issue: 1) directly involved particular individuals in the controlling business entity; 2) whether those individuals now exercise control over the applicant; and 3) whether such individuals were directly responsible for the controlling business entity's history of non-compliance." Where no particular individuals in the parent corporation satisfy these criteria, adjudication of the parent's ROC would not be required absent a showing that the parent has a "corporate culture" of non-compliance and exercises close control over the subsidiaries. Matter of SES Brooklyn Company, L.P., Rulings on Issues and Party Status, 12/21/92 (ALJ O'Connor)
Therefore, the proper focus of an inquiry into character and fitness is on individuals and not the corporations. Violations occurring in other states have limited probative value absent a link between the individual managers in the other states and the applicant.
The criteria relevant to determining whether LESI is unqualified or unsuitable are set forth in ECL 27-0913, listed in subdivision (3). Applicants argue that the Legislature contemplated that the Commissioner would promulgate regulations under 27-0913(3) based on the wording of subparagraph (3)(f)(iii) (which indicates that what constitutes "substantial interest" in a business organization "shall be defined in regulations promulgated by the commissioner"), and that these regulations would have identified any additional "factors for review."
With regard to "substantial interest," even though DEC has not promulgated a regulation to define that term, LESI concedes it will have a "substantial interest" in BDT when it acquires 100% of BDT's stock, thus entitling DEC, under 27-0913(3)(f), to information regarding LESI's (and its existing subsidiaries') suitability. However, LESI contends DEC is not entitled under the statute to information about LESI's stockholders. It contends that inquiries further up the chain of ownership into records of corporations twice or more removed from BDT's ownership would be permissible only if DEC is entitled to pierce LESI's corporate veil by showing LESI's parent corporations violate the corporate form and exercise direct control over LESI's day-to-day operations and environmental compliance. Parent and subsidiary corporations are not presumed to be liable for each other's actions unless the subsidiary is merely an "alter ego" of the parent.
In support of its contention that inquiry should not proceed further up the corporate chain of ownership, LESI supplied the affidavit of Roger E. Davis, Vice President, Engineering and Regulatory Affairs of LESI. His affidavit explains that LESI operates under the "umbrella" of Laidlaw, Inc. and is ultimately responsible to Laidlaw, Inc.'s shareholders, as a subsidiary of corporations owned by Laidlaw, Inc. (with 3 intervening corporations between LESI and Laidlaw, Inc.). Mr. Davis affirms that management of LESI's hazardous waste facilities originates exclusively at LESI headquarters in Columbia, SC, and that neither Laidlaw, Inc. nor any other corporation within the Laidlaw corporate structure exercises any day-to-day management function with regard to LESI and its hazardous waste operations. Mr. Davis also indicated that as of October 20, 1992, the officers and management of LESI became responsible for the management of Canadian facilities owned and operated by Laidlaw Environmental Services, Ltd. and its subsidiaries, that since that date the President of LESI became responsible for all hazardous waste management operations in North America, and that LESI senior management have gradually assumed responsibility for the Canadian operations although some functions have not been integrated fully. LESI argues that the compliance histories of the Canadian corporations prior to October 20, 1992 are immaterial to this proceeding.
LESI argues that 27-0913(4) "limits the scope of the Department's inquiry" to an act or failure to act occurring within 2 years from the date on which the application for a permit, renewal or modification is submitted to the department. citation to Matter of CECOS International, Inc., Interim Decision 7/19/88. Since LESI submitted its application for transfer on December 22, 1992, investigation under 27-0913(3) is limited to an act or failure to act occurring on or after December 22, 1990 and which resulted in an administrative, civil or criminal determination that LESI or one of its subsidiaries has committed a violation. LESI contends that the Legislature determined that investigations spanning at least ten years and including allegations contained in consent orders and pending matters were unnecessary and/or unfairly prejudicial to applicants for hazardous waste permits and that the Legislature intended to limit inquiry to completed actions based on violations occurring no more than two years prior to the application.
LESI contends that the inquiry is whether or not it has, since December 1990, acted or failed to act in a manner which has resulted in a determination that it violated the hazardous waste laws of New York or any other state. It further contends that in order to deny the application, it must be established that it has intentionally or by management neglect operated outside the boundaries of the law and has done so criminally or with gross negligence. Furthermore, unless the evidence reveals a corporate culture of noncompliance, the focus should be on whether particular individuals responsible for the violations will have managerial responsibility for BDT. citations to 27-0913; Matter of CECOS International, Decision 3/13/90; Matter of SES Brooklyn Company, L.P., Rulings on Issues and party Status 12/22/92.
LESI contends that it (to cooperate with DEC), and the Intervenors, have already submitted information about LESI's subsidiaries that is beyond the scope of 27-0913 and which should not and cannot be considered. Nevertheless, although this information indicates problems at some LESI facilities, most LESI facilities operate in full compliance year in and out. LESI argues that the manner of DEC's ROC review, being concerned exclusively with noncompliance, presents a skewed representation of LESI. LESI contends it is a large and successful organization that emphasizes regulatory compliance by evaluating and compensating its facility managers in part based on their facility's ROC.
As reported in LESI's ROC submission, since December, 1990, LESI subsidiaries have been determined to have committed relevant violations at the following facilities:
- Laidlaw Environmental Services (TS), Inc., Greenbrier, TN
- Laidlaw Environmental Services (North East), Inc., North Andover, MA
- Laidlaw Environmental Services of South Carolina, Inc., Pinewood, SC
- Laidlaw Environmental Services (TOC), Inc., Roebuck, SC
- Laidlaw Environmental Services (Imperial Valley), Inc., Westmoreland, CA
Penalties ranged from $400 to $135,000. The relevance of these violations is a function of whether the management of these sites will have any substantial influence on the management of the BDT site. They should be accorded little weight when it appears that local management is responsible for day-to-day operations. LESI reported other violations which were resolved prior to December 1990. The most notable of these was its Cleveland, OH facility which was acquired in February 1988. Problems at that facility, which was poorly run prior to acquisition and could not be transformed in time to satisfy state officials, were resolved with a Consent Judgment for closure of the facility. LESI is in the process of resolving the pending matters identified by the Intervenors, matters which are outside the scope of 27-0913 and the ROC EGM.
LESI argues that when the violations are put into context, it is apparent that instances of non-compliance are infrequent isolated events. LESI and its subsidiaries are well-managed, environmentally safe operations. BDT, which has been a well-managed facility, will continue to be so.
LESI contends it is qualified under the expanded criteria of the ROC EGM. LESI also argues that DEC Staff should not impose conditions on the proposed transfer because the conditions have no reasonable basis, and requests that the transaction be approved without conditions.
LESI opposes the Intervenors' discovery request, contends that the department already has ample information to demonstrate LESI's suitability, and argues that (absent evidence that LESI's parent corporations exert any significant managerial control over its operation or environmental compliance) extending the scope of inquiry beyond LESI and its subsidiaries is immaterial and irrelevant. Neither the Intervenors nor Staff have raised an issue requiring further adjudication of LESI's suitability.
Intervenors argue that the validity of the ROC EGM may not be decided in these proceedings since administrative courts may not rule on constitutional challenges to legislation and administrative agency rules, and that this court must presume the validity of the ROC EGM. [cits om]. The Commissioner has the authority to apply the ROC EGM to an evaluation of LESI's suitability to hold BDT's permits. The ROC EGM is a valid exercise of the Commissioner's authority to establish guidelines to assist Staff in carrying out its responsibilities. It is not a rule, but, rather, is a clear explanation of DEC policy. The key inquiry in determining whether or not a policy is an impermissible regulation is whether or not the procedures adopted "foredooms the result." citation to Roman Catholic Diocese v Dept. of Health, 109 AD2d 140, 490 NYS2d 636, 641 (3rd Dept. 1985), rev'd 498 NYS2d 789 (1985). The ROC EGM does not "foredoom the results" because it only requires the Staff to balance the facts in each case, without mandatory decisional criteria or formula.
A statute's words must be given their plain meaning and effect. There is nothing in ECL 27-0913 or its history to indicate an intent to pre-empt the Commissioner from considering the Applicants' suitability to hold non-Part 373 permits. The statute expressly allows factors other than those listed therein to be considered when evaluating an applicant's suitability to hold hazardous waste permits. It does not prohibit the Commissioner from considering pending unresolved violations. It does not limit the information that the Commissioner may review in making his determination, but simply requires that if a decision is made to deny, the applicant must have committed a violation warranting the denial within the two-year window. There is nothing in the statute to prohibit DEC from considering acts or failures prior to the two year window when determining what permit modifications or conditions are appropriate to impose.
LESI is the applicant and will be the facility operator. The regulations define a facility's "operator" as a "person who is responsible for the overall operation of a hazardous waste management facility." An identical federal regulation has been interpreted by courts to confer operator status on persons who "play an active role in controlling waste management policies and practices." citations to 6 NYCRR 370.2(b)(123); U.S. v Production Plated Plastics, Inc., 742 F.Supp 956 (W.D. Mich. 1990); U.S. v Environmental Waste Control, Inc. 710 F.Supp 1172 (N.D. Ind. 1989), aff'd., 917 F2d 327 (7th Cir. 1990); U.S. v Northeastern Pharmaceutical & Chemical Co., Inc., 810 F2d 726 (8th Cir. 1986).; and 27-0913(3)(f). The affidavit of LESI's Vice President for Engineering and Regulatory Affairs details the centralized control that LESI will exercise over waste management practices and environmental compliance at the BDT facility.
The Intervenors argue that the compliance history of LESI's parent, Laidlaw, Inc., is subject to review under the statute and the ROC EGM. They contend that Laidlaw, Inc. exercises substantial control over LESI both financially and in terms of corporate philosophy, and, as shown by the affidavit supplied by LESI, is so intimately involved with LESI's management that it can direct its corporate reorganizations. This warrants additional discovery regarding the interrelationship between these corporations and the compliance history of Laidlaw, Inc.
The Intervenors argue that LESI is not suitable under any standards. They claim LESI relies on the compliance history of its least relevant facilities and that LESI is unsuitable even under a standard of "gross negligence." South Carolina's requirement of an on-site monitor proved wholly ineffective at LESI's Pinewood hazardous waste incinerator facility. LESI's mining of 50 wetland acres without a permit, exceeding air emissions at Bartow, FL and the July 1989 fire at Cleveland, OH would warrant permit denial on the basis of gross negligence. The Intervenors disagree with DEC Staff's $25,000 threshold for penalties and Staff's conclusion that a criminal conviction does not create a rebuttable presumption for permit denial.
Staff argues that the transaction between BDT and LESI requires a transfer of permits pursuant to 6 NYCRR 621.13 and 373-1.7 because the transfer will result in a change in ownership and operational control of the facility. Although Applicants argue that DEC approval is not required to transfer stock, Staff asserts DEC approval is required before permits can be transferred.
Staff does not seek to deny or revoke a permit here, thus the two year provision of ECL 27-0913(4) does not apply. Subdivision (3) recites, but does not limit, the factors the Commissioner may consider. The statute gives the Commissioner express authority to consider an applicant's suitability.
The ROC EGM and statute are complimentary. The EGM applies to all permits. The ROC EGM establishes policy and procedure and is authorized by ECL 3-0301. It guides Staff to review permit applicants using a case-by-case analysis, but does not fix a standard for determination -- therefore it is permissible. citation to Matter of Roman Catholic Diocese of Albany v NYS Dept. of Health, 109 AD2d 140 (1985). Nevertheless, the EGM's validity under the constitution is not a matter for the ALJ or the commissioner to decide.
Staff may recommend issuance of a permit with additional special conditions. Pursuant to 6 NYCRR 373-1.7(a)(1), "[a] permit may be transferred to a new owner or operator ... only if the permit has been modified to identify the new permittee and incorporate such other requirements as may be necessary." ECL 27-0913(3) empowers the Commissioner to modify any permit to protect the public health and safety. ECL 27-0917(4) explicitly empowers the Commissioner to require on-site environmental monitors at hazardous waste facilities. LESI does not enjoy such an unblemished and exemplary compliance record that Staff could blindly approve the transfer without additional conditions to enhance regulatory oversight and ensure compliance.
Staff argues that additional discovery should be permitted and reiterates its support for Intervenors' request for additional information. ECL 70-0117(2) and 6 NYCRR 621.15(b) provide that at any time during review of an application the Department may request additional information with regard to any matter contained in the application or request when such additional information is necessary for the Department to make any findings or determinations required by law. Per 6 NYCRR 624.7(b)(6) the ALJ shall "establish rules for and direct disclosure at the request of any party consistent with the general principals of Article 31 of the Civil Practice Law and Rules ... if ... such disclosure will aid in narrowing the issues and not unduly delay the proceedings." On July 12, 1993, Staff requested that LESI update its ROC by providing information regarding pending matters and Laidlaw's Canadian facilities. Staff renews its request that LESI submit a copy of the Sale and Purchase Agreement between the parties since Applicants' have challenged DEC's jurisdiction to review the permit transfer. Applicants have the burden of supporting their characterization of the transaction as something other than a permit transfer by making the Agreement part of this record.
LESI should not be permitted to decide its own suitability. The ALJ should determine from the record to date whether sufficient information has been provided to determine LESI's suitability. Staff opposes any determination that LESI is suitable without imposition of the additional special permit conditions that staff has proposed. If the record is inadequate, additional discovery or adjudication of this issue should be scheduled.
Rulings and Discussion
Jurisdiction, Scope of Proceeding:
Ruling I: (A) DEC has jurisdiction to maintain this proceeding. (B) There is no demonstrated need to make Applicants' Sale and Purchase Agreement part of this record.
(A) Although Applicants have objected to the Department's jurisdiction to maintain this proceeding, they subjected themselves to the Department's jurisdiction when they sought DEC approval of the change in operational control and the name change on the permit.
In a technical sense, Applicants are correct that a change of stock ownership does not require DEC approval, simply because DEC does not regulate stock transfers. Also, if one only looks at BDT as a corporate "shell," there will be no change in the owner or the operator of the facility, as those terms are defined in the regulations, and as argued by Applicants.
Nevertheless, DEC does have jurisdiction over activities that are regulated by the ECL, and has the authority and duty under both the ECL and common law to ensure that only "fit" entities hold a DEC permit (see below). As Staff and Intervenors point out, and as indicated by the affidavit of LESI's vice president, LESI exerts strong influence over the environmental policies of its subsidiaries -- meaning that if it acquires BDT's stock, LESI headquarters will exert significant control over BDT's operations at its Clarence, NY facility. This is clearly a change in "operational control," making the "fitness" of the new controlling entity subject to DEC's scrutiny (compare with C. Schmidt & Sons, Inc. v NYS Liquor Authority 73 AD2d 399 (1st Dept '80), aff'd 52 NY2d 751 (1980)) In C. Schmidt, all of the corporation's shares were purchased by an individual who was later found to be unfit, resulting in the Liquor Authority denying approval of the change in corporate control. The Liquor Authority's actions were upheld in court.. A change in "operational control" of a facility requires prior written approval of the Commissioner under 6 NYCRR 373-1.7(a)(2).
Assuming arguendo that prior approval was not required, we probably would still be having this proceeding because a change in operational control would be a new circumstance under 6 NYCRR 621.14 which might justify a permit change. It would make sense for the contracting parties to know what changes will be made to the permit before closing their deal.
(B) Since there is sufficient information on record to establish DEC's jurisdiction, there is no need, as requested by Staff and Intervenors, to make Applicants' Purchase and Sale Agreement part of the Record over Applicants' objection.
Ruling II: The validity of BDT's permits is beyond the scope of this proceeding and will not be considered.
Applicants propose that BDT's existing permits be transferred to a new controlling entity. Staff proposes that certain modifications be made to those permits upon such a transfer. The scope of this proceeding is therefore limited to issues arising out of the proposed transfer to a new controlling entity and/or Staff's proposed modifications. The Town's contention that BDT's permits are invalid arises out of neither. Entertaining the Town's attack on the validity of the existing permits would require reopening the prior final agency decisions to issue the permits.
In this regard, the Town's rights are limited to those provided in 6 NYCRR 621.14 (pertaining to permit modifications, suspensions or revocations by the Department). The Town must request such relief from the Regional Permit Administrator. It then becomes a matter of Staff's sole determination whether or not the modification request is justified. Matter of the Village of Garden City, Commissioner's Interim Decision 5/30/89. The regulation provides that denials of third-party requests for modification "are not subject to public notice, comment, or hearings." The regulations, thus, provide third parties with no right to initiate modification proceedings without Staff's cooperation. Therefore, since Staff has not adopted the Town's rationale to reopen prior matters, it cannot be addressed here.
This proceeding is distinguishable from that in Modern Landfill. In that case Staff cited SEQRA non-compliance as the basis for modifying the permit. Staff has not done so here.
Ruling III: Staff's procedures in reviewing the pending applications will not be examined.
The Intervenors want to conduct a review of Staff's job performance. That is a management function and is beyond the scope of this proceeding, which is limited to issues arising out of the proposed transfer and Staff's proposed modifications. It would divert the parties' resources from the task of examining LESI's ROC.
Ruling IV: (A) There must be a rational connection between LESI's compliance history, any DEC permitting action based thereon, and the responsibilities the Legislature has conferred on DEC. (B) The "validity" of the ROC EGM (as an unpromulgated rule) will not be decided in this proceeding.
(A) "[A]ll the relevant case law in this State expressly or impliedly holds that the licensing official has implicit discretion to pass upon the fitness of the applicant. ..." Barton Trucking, Inc. v O'Connel 7 NY2d 299, 308-09 (1959).
"Discretion" has been defined by courts to mean "[p]ower or privilege of the court to act unhampered by legal rule." Black's Law Dictionary, Rev. 4th Ed. Essentially, this means that there is no "litmus test" for determining "fitness."
Exercise of discretion is not unbridled. Administrative determinations must have a rational basis on the record as a whole. Matter of Pell v Board of Educ., 34 NY2d 222, 231. When a licensing official exercises his discretion on a license, the action must be within the scope of the official's legislatively delegated responsibilities and further the legislature's objectives. See Bologno v O'Connel 7 NY2d 155 (1959). In this case, the Commissioner of Licenses in N.Y.C. was found to have exceeded his discretion in basing a denial of a license to the Appellant on the alleged harm Appellant's junk business would work on a predominantly residential area. The court found that the Commissioner's discretion was limited to the prevention of distribution of stolen goods -- no general discretion to provide for public health, safety and general welfare. The court noted that other officials within the city were responsible for these areas and there was no evident legislative intent to confer conflicting jurisdiction. The Court decided that the ground for the denial was not within the gambit of legislatively delegated discretion.
In this proceeding, the idea of "fitness" or "suitability" is understood to be essentially a prediction of future behavior (i.e., compliance with requirements) based on past behavior or other substantive evidence. The courts have upheld licensing decisions based on such predictions. In considering an application for a license, a commissioner of licenses must of necessity take into consideration the possibility of infractions of his regulations. Playboy Club of New York v O'Connell (1st Dept. '63) 18 AD2d 339, aff'd 14 NY2d 503, remittitur amd. 14 NY2d 648. In this case, the N.Y.C. Commissioner of Licenses denied Playboy Club a cabaret license on the ground that waitresses therein, scantily clad as "bunnies" would mingle with patrons in violation of a specific regulation which prohibited female entertainers from mingling with guests. Evidence taken of this likelihood was the Bunny Manual, photos of their costumes, issues of Playboy magazine, and various materials indicating how waitresses were expected to interact with patrons to induce them to buy more drinks. The Commissioner's denial was held to be not arbitrary or capricious.
Prior violations of law have often been viewed as relevant on the issue of a license applicant's fitness. Barton Trucking, supra. However, any violation will not provide the basis to deny a license. New York Corrections Law Article 23-A, ("Licensure and Employment of Persons Previously Convicted of One or More Criminal Offenses" -- essentially, an anti-discrimination statute) prohibits license denials based on an applicant's having been convicted of one or more criminal offenses, or by a finding of a lack of "good moral character" when such finding is based on previous criminal convictions, unless "(1) there is a direct relationship between one or more of the previous criminal offenses and the specific license or employment sought; or  (2) the issuance of the license or the granting of the employment would involve an unreasonable risk to property or to the safety or welfare of specific individuals or the general public." Correction Law 752. The Corrections Law further specifies the factors to be considered in making the determinations thereunder -- essentially requiring a rational connection between the duties and responsibilities under the license and the nature of the prior violation; a taking into account the time elapsed since the prior violation; and consideration of evidence of rehabilitation, the seriousness of the offense, the interest of the agency and the safety and welfare of individuals or the general public (see 753).
(B) The ROC EGM does not dictate particular results for particular situations (i.e., it does not set standards), but, rather, shows how compliance history may be rationally connected to Departmental determinations. Whether a particular rationale stated in the ROC EGM actually applies in a specific case depends upon the particular facts of the case. But if the facts logically support a rationale for a particular determination, as long as DEC is acting consistently within its authority and applicable statutory requirements, DEC's determination is sanctioned by law and will be upheld in court. The ROC EGM provides a way of looking at the facts -- just like legal arguments do -- the success of which depends upon the facts themselves and the logic that ties them to a particular result. The EGM will not be treated as a rule, thus Applicants' concerns over its "validity" are moot. Nevertheless, the EGM's principles will be applied when the facts of the case make it proper and rational to do so.
In sum, there is no fixed "standard" for determining fitness, but the law requires a rational connection between an agency determination, any prior history the determination purports to be based upon, and the agency's role as expressed by the legislature.
Ruling V: The Department is not limited to the factors enumerated by ECL 27-0913 when evaluating LESI's ROC, and may consider factors in addition to those expressly listed therein.
Applicants essentially contend that whatever authority the Department may have had to pass on "fitness," it has now been limited by the Legislature to that provided by ECL 27-0913. As indicated above, it is common law that a licensing official has implicit discretion to pass upon the fitness of an applicant. It is noted that ECL 27-0913 provides express authority for the Commissioner to consider fitness as well. Statutes in derogation of the common law generally receive a strict construction. McKinney's Statutes, 301(a). The common law is never abrogated by implication, but on the contrary, it must be held no further changed than the clear import of the language used in a statute absolutely requires. Id., 301(b).
In pertinent part, subdivision (3) of ECL 27-0913 states "Some of the factors which the commissioner may consider in arriving at his determination include the following: ... [a list of factors follows]." (underline, brackets added). By express language, the legislature clearly was not limiting the Commissioner to the factors appearing on the list, but, instead was sanctioning the Commissioner's consideration of those factors. Under accepted rules of statutory construction (above), the provision's listing of certain factors cannot be construed as limiting by implication what would otherwise be available to the Commissioner at common law. "[T]he statute, by its terms, is not intended to present an exhaustive list of the considerations which the Department may take into account by way of fulfilling its obligations under the statute ..." Matter of CECOS International, Inc., Commissioner's Interim Decision 7/19/88. For a similar situation, see also Arroyo v Moss 269 AD 824 (1st Dept. 1945), aff'd 295 NY 754 (1946). In Arroyo, a statute which prohibited issuance or renewal of a barber's license to felons (unless otherwise determined by the commissioner), was found not to prevent that commissioner from legally revoking a license based on non-disclosure of misdemeanors. "Those provisions which prohibit the issuance or renewal of a license where the licensee has been found guilty of such acts may not be construed to limit the commissioner in the revocation of licenses under the general authority conferred upon him ... Many other infractions may occur which would justify the revocation of a license."
Scope of Record Under Consideration:
Ruling VI: (A) Except as noted herein and where the action would exceed bounds generally applicable to agency actions, the law places no limit on the age of the "fitness-related" information the agency may consider. Thus, LESI's ten-year Record of Compliance will be considered. (B) Pursuant to ECL 27-0913(4), if the Department decides to deny or revoke a hazardous waste permit based on an act or failure to act, such act or failure shall have occurred within 2 years from the date on which the application (or departmental notice of intent to revoke or modify) is submitted. Said provision, however, does not restrict DEC's review of an applicant's Record of Compliance to this time period.
(A) Obviously, an agency cannot consider information that is so stale that it would be unreasonable to base a determination thereon, since all administrative determinations must have a rational basis. Pell, supra. Since licensing officials are expected to pass upon the fitness of an applicant, it must be implied that the official has the right to consider information covering a broad enough scope to enable the determination to be made. A twenty year old conviction was found to provide a legitimate basis for denying a license in Barton Trucking, above. Therefore, consideration of a 10-year Record of Compliance such as that in issue here is not patently unreasonable. Of course, the information's age will have some bearing on the weight it will be accorded (see Corrections Law 753).
(B) Applicants contend that ECL 27-0913(4) restricts DEC's consideration of ROC information to situations occurring after December 1990 (2 years prior to the instant application's filing) not only for the hazardous waste permit, but also for the air permits to be transferred.
ECL 27-0913 relates only to hazardous waste permits. Subdivision (4) states:
"4. Any act or failure to act which serves as a basis for denial or revocation of a permit pursuant to this subdivision shall have occurred within two years from the date on which the application for a permit, renewal or modification is submitted to the department or from the date on which the department serves notice of intent to revoke or modify a permit issued by the department in relation to an existing permit." [italics added].
Clearly, subdivision (4) restricts those acts or failures upon which DEC may base a denial or revocation of an hazardous waste permit. It goes no further than that however.
Again, statutes in derogation of the common law are strictly construed, changing the law no more than the clear import of the language used in the statute absolutely requires. McKinney's Statutes, 301(a) and (b). ECL 27-0913(4) purports to limit only the basis for denying or revoking an hazardous waste permit -- it's silent on the scope of information the DEC may consider to assess fitness. "Fitness" information may be relevant to the determination of what conditions should be attached to the permit, or whether or not non-hazardous-waste permits should be issued -- or whether or not a particular act occurring within the 27-0913(4) "window" will rationally support a denial or revocation (see C. Schmidt & Sons, Inc. v NYS Liquor Authority, 73 AD2d 399 (1st Dept. '80), aff'd 52 NY2d 751 (1980) In C. Schmidt, the court contrasted its case (wherein there was a long history of violations) with another (wherein occurrences were isolated) in assessing the weight to be given to certain convictions. ).
Arguably it would be an abuse of discretion for the Department to base a decision on an act occurring within the "window," but taken out of context with an applicant's prior compliance history. There is nothing in subdivision (4), the statute, or its history, to indicate a legislative intent to put blinders on the Department.
Ruling VII: (A) The ten-year ROC of LESI, and the ROCs of its USA subsidiaries for the time periods after LESI acquisition (plus any pre-acquisition history necessary to place post-acquisition performance in context) are relevant to assessing LESI's fitness to hold a DEC permit and/or what conditions should be attached thereto, and may be considered. (B) The relevance of the ROCs of LESI's parent corporations up the chain to Laidlaw, Inc. of Canada, and of the Canadian corporations recently put under LESI's control, is too remote to justify the burden it would place on the process to examine them.
(A) The compliance records of LESI and its USA subsidiaries are relevant to consider. The affidavit of LESI's vice-president, Mr. Davis, makes clear that management of LESI's hazardous waste facilities originates at LESI headquarters in Columbia, SC, thus the compliance histories of the subsidiaries so-managed will be an indicator of the fitness of LESI itself. Compliance histories of subsidiaries for periods prior to LESI acquisition cannot reflect LESI's management, and thus are irrelevant to LESI's fitness except for the purposes of comparison (i.e., to determine if LESI's stewardship improved or worsened conditions).
(B) The relevancy of the compliance history of LESI's Canadian subsidiaries has not been demonstrated because, per Mr. Davis' affidavit, they have only recently been subjected to LESI's management (i.e., as of October 20, 1992).
While there is a financial and organizational relationship between LESI and the corporations standing in a parental relationship to LESI up to Laidlaw, Inc. of Canada (Laidlaw, Inc. is backing LESI's letter of credit to DEC and Laidlaw, Inc. recently determined that LESI will manage corporations previously managed by Laidlaw Environmental Services, Ltd. of Canada) there is nothing to indicate that Laidlaw, Inc. involves itself in management of the day-to-day hazardous waste activities of LESI or its subsidiaries. (Compare with Matter of CECOS International, Inc., Commissioner's Interim Decision 7/19/88, where such involvement was indicated.) Thus, the ROCs of the parent corporations have not been shown to be relevant, and need not be considered.
Ruling VIII: Matters which are unadjudicated or otherwise unresolved by agreement, that are not under DEC's jurisdiction, cannot be considered until they are resolved.
Consideration of an applicant's compliance history "cannot be based on mere allegations but must rely on findings that were reached after the applicant was afforded an appropriate opportunity to contest." Matter of Seaboard Contracting, Interim Decision 6/5/90. In Seaboard the Commissioner indicated it was appropriate to consider the alleged matters because there was "no procedural reason why the fact finding process cannot occur as a component of this proceeding"; i.e., the allegations were amenable to adjudication by DEC.
Intervenors have cited a number of alleged violations as a reason to deny the permit transfer. Unlike Seaboard, however, the alleged violations are violations of other states' laws, which are beyond DEC's authority to resolve. Applicant's opportunity to contest those allegations is governed by the other states' laws. Until such time as the other jurisdictions resolve the allegations (entitling them to full faith and credit by New York), the allegations can not be considered here without violating Applicant's due process rights.
Ruling IX: Except for a continuing obligation of Applicant to update its prior ROC submissions with new information as it becomes available, expansion of the ROC beyond the information already provided will not be required at this time. LESI's ROC submissions appear to provide sufficient information upon which DEC's permitting determinations may be rationally based.
The Intervenors have requested that LESI submit more information, specifying the exact pieces of information sought and how it should be presented (including specifying that it should be on a compliance form such as that used by North Carolina). Staff expressed support for this request.
The ROC, as submitted by LESI, is found in Exhibits 2A ("Request for Transfer of Permit Documents"), 2B ("Submission to Satisfy Record of Compliance Guidance"), and the recent update to Exhibit 2B submitted September 27, 1993. Exhibit 2A reports the compliance history of LESI and its subsidiaries covering the years under which each corporation was managed by the senior management team of LESI. It is noted that penalties of less than $25,000 were reported. Exhibit 2B provides detail and copies of relevant documents for what may be called the "major" compliance matters already noted in Exhibit 2A.
Once an application has been accepted as complete, there should be no reason to direct an applicant to make additional submittals unless they are demonstrated to be reasonably necessary to make findings or determinations required by law (6 NYCRR 621.15(b)). The submittals requested here would result in duplication of much of the information already submitted on Staff's previous requests. Where non-duplicated information would be submitted, it has not been shown to be necessary in light of the detail already provided.
If during the proceedings it appears that a piece of information critical to a particular finding is needed, it may be requested at that time.
Ruling X: (A) Whether or not the facility's effects on public health, and particular instances of facility non-compliance, require the permits to contain certain conditions in addition to those proposed by DEC Staff, and whether or not these conditions should be added to the permits absent a transfer, are not issues to be considered in this proceeding. (B) Whether or not instances of facility non-compliance (apart from the change in control) will justify Staff's proposed modifications, may potentially be a hearing issue, but only to the extent that Staff gives notice it is relying on same.
(A) Consideration of the facility's impact to public health and facility non-compliance, as requested by the Intervenors, would reopen the prior DEC determinations to issue permits to BDT. As indicated in Ruling II above, third parties cannot reopen prior determinations without Staff's concurrence. (6 NYCRR 621.14; Matter of Garden City, supra). Neither DEC nor BDT have requested modification of BDT's permits in the absence of a transfer.
(B) It is unknown which, if any, of Staff's revised Draft Additional Permit Conditions are based on matters unrelated to the prospective change in operational control at the facility (such as general public health concerns or BDT's operational record), since the Fact Sheet which accompanied the draft permit conditions did not address this question. To the extent that the proposed additional permit conditions are unrelated to the change in operational control, they would be Department-initiated modifications under 621.14, requiring a statement from Staff of the facts or conduct which appear to warrant them (621.14(b)). Interested third parties would not be permitted to allege additional grounds for such modifications. Matter of Garden City, supra. Thus, if any of the proposed permit conditions are unrelated to the change in operational control, any hearing issue on the need for such a condition must be within the scope of Staff's rationale.
Ruling XI: Permit conditions designed to create new rights for the Town, and conditions which purport to impose penalties not authorized by law, will not be considered in this proceeding.
Most of the Town's Proposed Permit Modifications would create new rights for the Town that would not otherwise exist -- rights that would allow the Town to assume the role of enforcer of the permits. Since the legislature, by requiring permits from DEC, has designated DEC as the primary enforcer of the ECL, the degree to which DEC may confer its rights or authority on others is questionable, absent clear statutory authorization and formal agreements with such other parties. Also questionable is even the existence of some of the rights the Town wants DEC to confer (e.g., the right to preclude the permittee from objecting in court to the Town's standing to maintain court actions, see Town's Proposed Modification 11). In addition, NYSDEC would have to take on the added burden of enforcing the Town's new rights.
Assuming existence of the legal authority to confer enforcement rights, and the existence of the particular rights sought to be conferred, whether or not they should be conferred is not an appropriate consideration for this proceeding. Such a determination is executive in nature (requiring assessment of DEC's manpower, capabilities, priorities, etc.), and would entangle the Office of Hearings in program administration matters. That involvement could compromise the Office of Hearings' quasi-judicial function. The executive determination would have to have been already made, to appropriately consider these kinds of matters further.
The Town has also proposed that under certain conditions the permittee should be required to pay penalties to the Town, including payment of "stipulated" penalties in situations where no violation of the law has taken place. Town's Proposed Modifications 7 and 13 Absent agreement from the permittee to do these things, legal authority to impose these requirements is unknown, thus they cannot be considered further. See Landmark Colony at Oyster Bay v Board of Supervisors of the County of Nassau, 121 Misc.2d 23, 26 (Sup. Ct. Nassau Co, '83), mod aff'd 113 AD2d 741. The court noted that "an administrative officer or board does not possess the power to impose a penalty in the absence of specific statutory authority to do so (Matter of New Jersey Fid. & Plate Glass Ins. Co. v Van Schaick, 236 App Div 223, aff'd 261 NY 521)."
Ruling XII: The remainder of these proceedings will focus on the need for and appropriateness of the additional permit conditions drafted by Staff (outlined below), the need for and appropriateness of certain modifications to same as suggested by the Intervenors and/or the public (summarized below), and whether or not the transfer should be denied in the absence of any or all of these possible conditions. A determination of whether or not LESI should be denied the permits altogether is reserved upon.
Summary of Staff's Proposed New Conditions:
- Funding of environmental monitoring compliance activities Note there are two different provisions: under Module III C "On-Site Monitors" ($122,000 initial funding); and under draft "AIR Permit conditions ... Hydrolysis Process..." at 9 ($15,000 initial funding).;
- Continuous emissions and process monitoring;
- Annual environmental audits;
- Various new "General Facility Operating Conditions" including periodic stack testing, prior DEC approval of additions of acceptable waste streams, reporting and data transmission requirements.
- The particular environmental auditor used should be of DEC's choosing (or alternatively employed by DEC at permittee's expense).
- Conduct of incineration, hydrolysis, testing and experimental procedures should be conditioned on the actual presence of an environmental monitor on site.
- At specified periods, DEC should be provided copies of all consent orders, legal memoranda or orders, decrees, judgments, stipulations, pending charges etc., pertaining to hazardous waste management by LESI or its subsidiaries (and any other companies it manages).
- Feed rates should be specified in the permits.
Determination of whether or not LESI's ROC will justify denial of the requested transfer is reserved upon until after arguments are heard on the need for and appropriateness of new permit conditions and whether or not the transfer should be denied in the absence of any or all of the above mentioned conditions.
Staff has said that LESI's ROC is not so "unblemished" that it would approve the transfer absent the conditions -- which means that Staff feels a denial of the transfer would be justified if the conditions were not imposed. Staff has not yet put on record its reasons for such a conclusion.
Please note that of all the permit conditions suggested by the Intervenors, most are effectively disposed of by the Rulings above for reasons unrelated to the suitability issue. That is why they are not mentioned here. Consideration is given to a "feed rate" provision because of the conspicuous changes between the first and second draft permits in this regard without documented explanation (as pointed out by a member of the public).
Whether or not the transfer should be denied all together, regardless of possible permit conditions, has already been extensively argued by the Intervenors, thus no further argument is needed. What is needed, however, is the discussion of whether or not specific permit conditions could solve the problems that are perceived in LESI's ROC. By knowing which problems the proposed permit conditions are addressed to, there will be a better understanding of whether or not LESI is suitable to hold the permits at all.
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..."
Because these Rulings are lengthy, additional time is hereby provided for filing appeals herein. All appeals must be received no later than 4:00 PM, Monday, November 29, 1993.
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).
Order of Further Proceedings
- The prehearing Conference is scheduled to reconvene at 10:00 AM Tuesday, December 7, 1993 at the Clarence Town Hall, One Town Place, Clarence, NY to identify and define any issues which may exist within the scope of Ruling XII above and the manner in which they will be resolved. Applicants will make the appropriate room and reporter arrangements.
- DEC Staff is directed to file a statement (to be received on or before December 1, 1993) identifying which, if any, of its draft additional permit conditions are unrelated to the proposed transfer.
Administrative Law Judge
Dated: November 15, 1993
Albany, New York
To: Official Service List attached Via Mail;
Pages 23 to end also to be sent via FAX.
SERVICE LIST - November 15, 1993
NAME OF HEARING: Laidlaw Environmental Services, Inc. & BDT, Inc.; Transfer of existing Hazardous Waste Facility and Air Permits; and Certificates to Operate
Department of Environmental Conservation,
Office of Hearings
50 Wolf Road, Room 409,
Albany, NY 12233-1550
FAX: 518 485-7714;
PHONE: 518 457-3468
DEC Region 9
c/o Annette Sansone, Esq., Assistant Regional Attorney
NYSDEC Region 9 Headquarters,
270 Michigan Avenue, Buffalo, NY 14203-2999
FAX: 716 851-7008 ;
PHONE: 716 851-7190
Laidlaw Environmental Services, Inc.
c/o Nixon, Hargrave, Devans & Doyle
P.O. Box 1051
Rochester, NY 14603
attn: G. Robert Witmer, Jr., Esq.
FAX: 716 263-1600 ; PHONE: 716 263-1000
c/o Hodgson, Russ, Andrews, Woods & Goodyear
1800 M&T Plaza, Buffalo, NY 14203
attn: Jerrold S. Brown, Esq.
FAX: 716 852-5185 or *518 465-1567;
PHONE: 716 856-4000 or
*518-465-2333 [* These numbers to be used first]
INTERVENOR 1 -
Town of Clarence, NY
c/o Whiteman Osterman & Hanna
1700 Liberty Building, Buffalo, NY 14202
attn: Alice J. Kryzan, Esq.
FAX: 716 854-4428;
PHONE: 716 854-4420
INTERVENOR 2 -
Concerned Citizens of Clarence, Inc.
c/o School of Law Legal Assistance Program;
University at Buffalo,SUNY;
P.O. Box 9,
Getzville, NY 14068-0009
attn: R. Nils Olsen, Jr., Esq., Dir. Clinical Education
FAX: 716 645-2900;
PHONE: 716 636-2167
DEC Press Office, attn: R.W. Groneman