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Michaels, Robert - Order, May 19, 2003

Order, May 19, 2003

STATE OF NEW YORK : DEPARTMENT OF ENVIRONMENTAL CONSERVATION

In the Matter of the Alleged violations of Article 17 of the Environmental Conservation Law of the State of New York (ECL), and Title 6 of the Official Compilation of Codes, Rules and Regulations of the State of New York (6 NYCRR) Parts 612 and 613 by

ROBERT MICHAELS
Respondent

ORDER

DEC Case No. 3-505110

WHEREAS:

  1. Pursuant to a Notice of Hearing and Complaint dated March 12, 2002, an enforcement hearing was held before Administrative Law Judge (ALJ) Daniel P. O'Connell on December 4, 2002 at the Department's Region 3 Offices in New Paltz, New York. Scott A. Herron, Esq., Senior Attorney and Benjamin Conlon, Esq., Associate Attorney represented the Department Staff ("Staff"). Respondent, Robert Michaels, appeared at the hearing pro se.
  2. Upon review of the record and the attached Hearing Report, I hereby adopt the ALJ's Findings of Fact, and Conclusions subject to my comments below.
  3. Since September 1990, Respondent has owned a petroleum bulk storage ("PBS") facility at 484 North Street, Middletown, New York, which consists of four 4,000 gallon tanks (the "Facility").
  4. As required by 6 NYCRR §612.2, Respondent duly registered the Facility in 1990. However, he failed to renew the registration in 1995 in a timely manner. Subsequently, Respondent's renewal registration for 2000 was ten months late. These late renewal registrations constitute violations of §612.2.
  5. Respondent violated §613.5 by never filing any valid tightness testing results with the Department concerning the PBS tanks at the Facility. This violation has continued from 1990 to the date of the complaint.
  6. From September 1990 until April 2002, Respondent violated §613.4 by not maintaining inventory records for the underground PBS tanks at the Facility.
  7. For these three violations, the civil penalty requested by Staff is reasonable considering the high potential for environmental harm given the age of the unprotected steel tanks at the Facility.

THEREFORE, having considered this matter, it is ORDERED that:

  1. Respondent, Robert Michaels, is determined to have violated 6 NYCRR §§ 612.2, 613.4 and 613.5 and is assessed a total civil penalty of twenty thousand dollars ($20,000) which shall be due and payable by cashiers or certified check or money order payable to "NYSDEC" thirty (30) days after service of this Order upon Respondent or his designated representative. The assessed civil penalty shall be apportioned as follows: (a) $5,000 for violating §612.2 by not renewing the registration of the four tanks at the facility in a timely manner in 1995 and 2000; (b) $7,500 for violating §613.5 by not testing the tightness of the four tanks at the Facility from 1990 to the date of the complaint; and (c) $7,500 for violating §613.4 by not maintaining inventory records from September 1990 to April 2002.
  2. Within thirty (30) days of the service of this Order upon Respondent, he shall provide the Department Staff with plans and a schedule for the closure of the four permanently out-of-service underground PBS tanks consistent with the requirements of 6 NYCRR §613.9(b) and close the tanks in accordance with such plans and schedule as approved by Staff.
  3. Staff shall be authorized to enter and inspect the Facility for the purpose of ascertaining compliance with the ECL, the regulations promulgated thereunder, and the terms and conditions of this Order.
  4. All communications between Respondent and Staff concerning this Order, including the payment of the penalty, shall be made to the Department's Region 3 Director, NYS Department of Environmental Conservation, 21 South Putt Corners Road, New Paltz, New York 12561-1696.
  5. The provisions, terms and conditions of this Order shall bind Respondent, his officers, directors, agents, servants, employees, successors and assigns and all persons, firms and corporations acting for or on behalf of Respondent.

NEW YORK STATE DEPARTMENT OF ENVIRONMENTAL CONSERVATION

/s/
By: ERIN M. CROTTY,
COMMISSIONER
Dated: May 19, 2003
Albany, New York

To:
Robert Michaels
484 North Street
Middletown, New York 10940

Marc Moran
Region 3 Director
New York State Department of
Environmental Conservation
21 South Putt Corners Road
New Paltz, New York 12561-1696

Benjamin Conlon, Esq.
Associate Attorney
Scott A. Herron, Esq.
Senior Attorney
Division of Environmental Enforcement
New York State Department of
Environmental Conservation
625 Broadway, 14th Floor
Albany, New York 12233-5550

STATE OF NEW YORK : DEPARTMENT OF ENVIRONMENTAL CONSERVATION 625 Broadway, 1st Floor
Albany, New York 12233-1550

In the Matter of the Alleged violations of Article 17 of the Environmental Conservation Law of the State of New York (ECL), and Title 6 of the Official Compilation of Codes, Rules and Regulations of the State of New York (6 NYCRR) Parts 612 and 613 by:

ROBERT MICHAELS
Respondent

DEC Case No. 3-505110

Hearing Report

-by-

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

Proceedings

The Staff of the New York State Department of Environmental Conservation (the Department Staff or the Staff) initiated this enforcement action by duly serving a notice of hearing and complaint dated March 12, 2002 upon Robert Michaels (the Respondent). According to the complaint, the Respondent owns a petroleum bulk storage (PBS) facility located at 484 North Street, Middletown, New York (the Facility). The Respondent allegedly violated provisions of Environmental Conservation Law (ECL) Article 17, Titles 3 and 10, and implementing regulations, when the Respondent did not (1) register petroleum bulk storage tanks at the Facility; (2) test the tanks for tightness; and (3) maintain inventory records.

The notice advised the Respondent that he had to file an answer within 20 days after receiving the notice of hearing and complaint. The notice also scheduled a pre-hearing conference for April 10, 2002 at the Department's Region 3 Offices in New Paltz, New York. The notice further advised the Respondent that if he did not file an answer, or appear at the pre-hearing conference, he would waive his right to a hearing and could be found in default. Although the Respondent did not answer the Department's complaint, he appeared at the pre-hearing conference.

With a cover letter dated August 7, 2002, the Staff filed a statement of readiness pursuant to Title 6 of the Official Compilation of Codes, Rules and Regulations of the State of New York (6 NYCRR) §622.9. By letter dated September 4, 2002, Administrative Law Judge (ALJ) Daniel P. O'Connell from the Department's Office of Hearings and Mediation Services informed the parties that he was assigned to the case, and directed the parties to confer about a date for the hearing. Subsequently, in a letter dated November 12, 2002, ALJ O'Connell informed the parties of the date, time and place of the hearing. Pursuant to §622.9(e), the November 12, 2002 letter informed the Respondent that his failure to appear at the hearing would constitute a default and waiver of his right to a hearing.

As scheduled, the hearing convened on December 4, 2002 at 10:00 a.m. at the Department's Region 3 Offices in New Paltz, New York, and was held pursuant to the procedures outlined in Part 622. The Department appeared by Scott A. Herron, Esq., Senior Attorney, and Benjamin Conlon, Esq., Associate Attorney. Daniel Bendell, Supervisor of the Region 3 Petroleum Bulk Storage Unit, and Robert Smith, an Environmental Engineer Technician with the Region 3 Spill Response Unit, testified on behalf of the Department.

The Respondent, Robert Michaels, appeared pro se, and testified at the hearing.

The Office of Hearings and Mediation Services received the stenographic record of the hearing on January 10, 2003, whereupon the record of the hearing closed.

Department Staff's Position

The March 12, 2002 complaint alleges three violations. First, the Respondent did not register the underground PBS tanks at his Facility, as required by §612.2. According to the complaint, there are four 4,000 gallon tanks at the Facility located at 484 North Street, Middletown, New York. Second, the Respondent did not conduct tightness testing and submit the results of the tests to the Department in a timely manner, as required by §613.5. The complaint contends that the Respondent should have completed the tank testing by December 27, 1987. Third, based on an inspection of the Facility by the Department Staff on May 18, 2001, the Respondent allegedly violated §613.4 by not maintaining inventory records.

For these three alleged violations, the Department Staff initially requested a civil penalty of $30,000 dollars. In the closing statement, however, the Staff requested a total civil penalty of $20,000 due to mitigating circumstances. In addition, the Staff wants the Commissioner to order the Respondent to close and remove all underground PBS tanks at the Facility consistent with the requirements outlined in §613.9(b), and to submit a closure report.

Respondent's Position

As noted above, the Respondent did not answer the complaint. At the hearing, the Respondent explained that he did not know that the registration, tank tightness testing, and inventory requirements continued to apply to his Facility even though he was not storing or dispensing petroleum products. When the Respondent became aware of these requirements in March 2002, he began to maintain inventory records and obtained an estimate for removing the tanks.

Findings of Fact

  1. The Department Staff served the notice of hearing and complaint dated March 12, 2002 by certified mail, return receipt requested, upon Robert Michaels. The Department received the signed domestic return receipt from the US Postal Service on March 18, 2002.
  2. In 1990, the Respondent, Robert Michaels, purchased the petroleum bulk storage (PBS) facility located at 484 North Street, Middletown, New York (the Facility). The Facility consists of four 4,000 gallon underground storage tanks. All the tanks were installed at the Facility before 1985. At least one tank at the Facility dates from 1961.
  3. On August 31, 1990, Mr. Michaels filed a petroleum bulk storage registration application with the Department for the tanks at the Facility. Subsequently, the Department issued a registration certificate that was effective from September 28, 1990 to September 27, 1995.
  4. From 1994 until the end of 1998, the Respondent leased the retail gasoline sales operations at the Facility to the Mid-Valley Oil Company. During this period, Mr. Michaels continued to own the Facility and the tanks. Shortly after the lease between the Respondent and Mid-Valley Oil Company expired, the Respondent stopped selling petroleum products at the Facility. The date and the amount of any petroleum products last delivered to the Facility is not known.
  5. On October 26, 1995, Mr. Michaels filed a petroleum bulk storage registration application. The Department issued a registration certificate with effective dates from November 17, 1995 to September 27, 2000.
  6. On July 20, 2001, the Respondent filed a petroleum bulk storage registration application for the tanks at the Facility. The Department issued a registration certificate, with effective dates from April 10, 2002 to September 27, 2005.
  7. Tightness testing is used to determine whether underground PBS tanks leak. The testing requirements are outlined in §613.5. For the tanks at the Facility, the Respondent has never filed any tightness testing results with the Department that are consistent with the applicable regulations.
  8. Prior to March 2002, Mr. Michaels did not keep inventory records of the petroleum products stored in the four tanks at the Facility. After service of the notice of hearing and complaint, the Respondent started to keep inventory records beginning in April 2002, and has maintained records since then. To measure the contents of the tanks, the Respondent puts a long stick into each tank. Initially, the Respondent measured ½ inch of liquid in the bottom of each tank. The Respondent subsequently removed this liquid with a hand pump to a 55 gallon drum, and used it in his vehicle. Since April 15, 2002, the Respondent's inventory records show there is nothing in the four tanks.
  9. The total estimated cost to upgrade the Facility to meet all applicable state and federal standards is about $40,000. The costs are apportioned as follows. The estimated cost associated with testing the four tanks for tightness is about $3,200. Assuming that the results of the tightness test show that the tanks are sound, then the estimated cost for installing a cathodic protection system or a non-corrosive liner is $1,000 per tank ($4,000 total). The cost of replacing the piping system is about $4,000 per tank ($16,000 total). A gauge system required by federal regulations to detect leaks would cost about $15,000 for the Facility.
  10. It is very difficult to remove all the petroleum product from an underground storage tank. A minimum of 4 to 6 inches of product usually remains in the bottom of the tank. A layer of water from rain, condensation, and ground water accumulates in the tank. Since the residual oil and water do not mix, a rust line develops on the inside of the tank along the water line, and eventually penetrates the wall. Leaks develop. Subsequent fluctuations in groundwater cause water to infiltrate and then drain from the tank. The movement of water into and out of the tank flushes the tank and draws residual petroleum product out of the tank, which can contaminate the soil surrounding the tank.
  11. In 1998, the Luzon Corporation provided Mr. Michaels with a $30,000 estimate to remove the tanks and any contaminated soil from the Facility.
  12. In June 2002, Thomas Gruner Excavating provided Mr. Michaels with a $4,800 estimate to remove the tanks and to pile any contaminated soil on the site. This estimate reflects the fact that Messrs. Gruner and Michaels are good friends.

Discussion

I. Liability

Parts 612 and 613 apply to aboveground and underground petroleum storage facilities with a combined storage capacity over 1,100 gallons. The purpose of Parts 612 and 613 is to regulate how petroleum products are handled and stored so as to protect public health, and the land and waters of the state.

Definitions of the terms, "facility" or "storage facility" are provided at 6 NYCRR §612.1(c)(10) and mean one or more stationary tanks, with associated piping and fittings, which have a combined storage capacity of over 1,100 gallons of petroleum at the same site. A facility may include aboveground tanks, underground tanks, or a combination of both. An "existing facility" is one which has been constructed and is capable of being operated as of January 26, 1985 [6 NYCRR §612.1(c)(9)].

A. Registration

When Mr. Michaels testified at the hearing, he said that he did not dispute any of the violations alleged in the complaint. He offered no evidence to refute the testimony of the Department Staff witnesses or the exhibits received into evidence concerning his ownership of the Facility or the three violations alleged in the complaint. Therefore, the record establishes that Mr. Michaels has owned the petroleum bulk storage facility located at 484 North Street, Middletown, New York since 1990. The Respondent's facility consists of four 4,000 gallon underground storage tanks.

When he purchased the Facility in 1990, Mr. Michaels promptly registered it with the Department. The Respondent, however, has not renewed his registration for the Facility in a timely manner. In 1995, the Respondent filed his registration application about a month after the initial registration expired. According to Mr. Michaels, his lease agreement with the Mid-Valley Oil Company required Mid-Valley to register the tanks and to conduct tightness testing. Nevertheless, during the term of the lease agreement, Mr. Michaels continued to own the tanks and Facility. With respect to the current registration period, which will expire in September 2005, Mr. Michaels filed the renewal application in July 2001, which is 10 months after the previous registration period expired in September 2000. Therefore, for periods since 1995, the Respondent did not timely renew the registration for the underground petroleum bulk storage tanks at his Facility as required by §612.2.

B. Tightness Testing Requirements

Underground PBS tanks must be tested and monitored for leaks. The schedule for periodic tightness testing of the underground storage tanks is outlined in 6 NYCRR §613.5(a)(1)(ii). This regulation applies to the Respondent's facility and requires "an initial test within the first year of the effective date of these regulations," and goes on to state that, "any tank which is of unknown age must be tested within two years of the effective date of these regulations."

Additionally, Table 1 of §613.5(a) provides that an initial test for tightness for a Category A tank is required to be performed when the tank is 10 years old, and that the tank be retested every 5 years thereafter until permanently closed. A Category A tank is an underground steel tank that does not have any corrosion protection [§612.1(c)(30)]. The testing schedule further states that "if for any reason, testing or inspection is not performed as required in this section, the tank or piping system must be replaced . . . or taken out of service pursuant to the requirements of section 613.9 of this Part" [§613.5(a)(1)(v)].

For the tanks at the Facility, the Respondent has never filed any tightness testing results with the Department that are consistent with the requirements outlined in §613.5, according to Mr. Bendell's unrefuted testimony. In a letter dated March 17, 1998, the Department informed the Respondent that he had not filed any tank tightness test reports. Subsequently, the Respondent provided the Department with copies of a tank tightness test report dated July 1, 1994. During the hearing, Mr. Bendell testified that the results of the July 1, 1994 report were invalid because the report does not comply with the requirements outlined at §613.5(a)(4). For example, the report was not signed by the person who performed the test, and it does not include the technician's certification number. In addition, the report was not filed with the Department within 30 days from when the tests were performed. Finally, the tests do not include a ground water elevation.

Although the Department's evidence shows that the tanks at the Facility should have been initially tested in December 1987, the Respondent acquired the Facility in 1990, and therefore his liability extends from the latter date. This violation, however, has continued since the Respondent initially registered the tanks in September 1990. As explained by Mr. Bendell, tightness testing for underground tanks is essential because it is the only way to determine whether underground tanks are leaking, other than digging them up. Regardless of whether Mr. Michaels sold any petroleum products from his Facility since his lease with Mid-Valley Oil expired, compliance with the requirements outlined in Parts 612 and 613 continues until the Facility has been permanently closed [§612.2(a)(2)].

C. Inventory Records

The Department Staff's inspection of the Facility on May 18, 2001 shows that the Respondent violated §613.4 by not maintaining inventory records for the underground storage tanks. During his testimony, Mr. Michaels admitted this violation. Since April 2002, however, Mr. Michaels has been "stick testing" the tanks by putting a long stick into each tank to measure the level of any liquid at the bottom of the tank. Initially, the Respondent measured ½ inch of liquid in the bottom of each tank. The Respondent subsequently removed this liquid with a hand pump to a 55 gallon drum, and used it in his vehicle. Since April 15, 2002, Mr. Michaels' inventory records show there is nothing in the four tanks.

II. Relief

A. Civil Penalty

For violations of ECL Article 17, Title 10 and implementing regulations, ECL §71-1927 authorizes a maximum civil penalty of $25,000 per day for each violation. As explained above, the Department Staff demonstrated the three violations alleged in the complaint. Therefore, excluding the continuous nature of the violations, a civil penalty of $75,000 would be authorized pursuant to ECL §71-1927.

In the complaint, the Department Staff requested a total civil penalty of $30,000. At the close of the hearing, however, the Staff reduced the requested civil penalty by $10,000 to $20,000. Although the results of the July 1, 1994 tightness testing report are not valid, the Department Staff argued that the Respondent's efforts to file the report should be considered a mitigating factor. According to the Staff, the July 1, 1994 report demonstrates a willingness to comply with the applicable regulations, and to cooperate with the Department.

To calculate the requested civil penalty, the Department Staff relied on the guidance outlined in the Department's Civil Penalty Policy and in the draft Penalty Guidelines for Petroleum Bulk Storage Violations. According to the policy, the civil penalty should be the sum of the gravity component, and the benefit component. The final amount of the civil penalty is then adjusted based on any aggravating or mitigating factors.

The gravity component of the civil penalty reflects the seriousness of the violations. Factors that should be considered include the actual and potential environmental damage that has resulted, or may result from, the violations, as well as the significance of the violations, which is based on the Department's regulatory responsibilities.

Here, the potential for environmental harm is great. First, the Department has no reliable information about the tightness of the tanks at the Respondent's facility. Second, the Respondent's underground storage tanks are unprotected steel tanks that are over 15 years old. Based on Mr. Bendell's unrefuted testimony, it is very difficult to remove all the petroleum product from an underground storage tank completely. A minimum of 4 to 6 inches of product usually remains in the bottom of the tank. According to Mr Bendell, a layer of water from rain, condensation, and ground water accumulates in the tank. Since the residual oil and water do not mix, a rust line develops on the inside of the tank along the water line, and eventually penetrates the wall. Leaks develop. Subsequent fluctuations in groundwater cause water to infiltrate and then drain from the tank. The movement of water into and out of the tank flushes the tank and draws residual petroleum product out of the tank, which can contaminate the soil surrounding the tank.

The Department Staff also considers the violations to be significant based on the Department's regulatory responsibilities. The tightness testing requirements are necessary, particularly with respect to the PBS tanks at the Respondent's facility, to ensure that old, unprotected underground storage tanks have not corroded to the point where their continued use presents a threat to the environment. Inventory records are another way to monitor the integrity of underground storage tanks.

The benefit component of the civil penalty is an estimate of the economic gain accrued to the violator by not complying with the regulations. According to Department Staff witnesses, the Respondent has avoided significant costs by not testing the tanks for tightness, and by not maintaining inventory records.

The civil penalty requested by the Staff's is consistent with the amount authorized by ECL §71-1927, and is consistent with the guidance outlined in the Department's Civil Penalty Policy and the draft Penalty Guidelines for Petroleum Bulk Storage Violations. Therefore, the Commissioner should assess a total civil penalty of $20,000. The amount should be apportioned as follows: (a) $5,000 for violating §612.2 by not renewing the registration of the four tanks at the Facility in a timely manner; (b) $7,500 for violating §613.5 by not testing the tightness of the four tanks at the Facility; and (c) $7,500 for violating §613.4 from September 1990 to April 2002 by not maintaining inventory records.

B. Remediation

In addition to the requested civil penalty, the Department Staff wants the Respondent to close and remove all underground PBS tanks at the Facility consistent with the requirements outlined in §613.9(b)(1), and to submit a closure report required by §613.9(c). For any underground PBS tank that is permanently out of service, liquid and sludge must be removed from the tank and connecting lines. Any waste products removed must be disposed of in accordance with all applicable state and federal requirements. In addition, the tank must be rendered free of petroleum vapors. Provisions must be made for natural breathing of the tank to ensure that the tank remains vapor-free. Then, all connecting lines must be disconnected and removed or securely capped or plugged. Manways must be securely fastened in place. Finally, underground tanks must either be filled to capacity with a solid inert material (such as sand or concrete slurry) or removed. If an inert material is used, all voids within the tank must be filled. It is important to note that according to §613.9(b)(2), "[s]torage tanks or facilities which have not been closed pursuant to paragraph (1) of this subdivision are subject to all the requirements of this Part and Part 612 of this Title, including but not limited to periodic tightness testing, inspection, registration and reporting requirements."

Thirty days before the owner of a tank or facility permanently closes a tank or facility, the owner must notify the department pursuant to §613.9(c). The rule at §613.9(c) refers to the notification requirements set forth at §612.2(d). It states, in pertinent part, that "[w]ithin 30 days prior to substantially modifying a facility, the owner must notify the department of such modification on forms supplied by the department."

All the tanks were installed at the Facility before 1985. At least one tank at the Facility dates from 1961. During his testimony, Mr. Michaels stated that he wants to remove the tanks, but cannot afford to do so. Given the age of the tanks, and Mr. Michaels' business goals, permanent closure would eliminate the Respondent's continued obligation to comply with all the requirements outlined in Parts 612 and 613 [§613.9(b)(2)].

Closure costs can be high, as explained by the Department Staff. During the hearing, Mr. Michaels testified that he obtained an estimate in 1998 from the Luzon Corporation to remove the tanks from the Facility for about $30,000. In June 2002, Mr. Michaels obtained another estimate from an associate. The second estimate was $4,800, but this estimate does not include disposal of any contaminated soil that may exist at the Facility.

Mr. Michaels offered no evidence to substantiate his claim concerning his ability to pay closure costs. Given the potential environmental harm associated with leaving unprotected steel tanks in the ground, the Commissioner should issue an Order directing the Respondent to close the tanks in a manner consistent with the requirements outlined in §613.9(b), and the notice requirements set forth in §613.9(c) and §612.2(d).

Conclusions

  1. The Respondent has violated the registration requirement outlined in §612.2. When he purchased the PBS Facility, located at 484 North Street, Middletown, New York, in 1990, the Respondent promptly registered it with the Department. The Respondent, however, has not renewed his registration for the Facility in a timely manner. In 1995, the Respondent filed his registration application about a month after the initial registration expired. With respect to the current registration period, which will expire in September 2005, the Respondent filed the renewal application in July 2001, which is 10 months after the previous registration period expired on September 2000. Therefore, in 1995 and for a period from September 2000 to July 2001, the Respondent did not timely renew the registration for the underground PBS tanks at his Facility.
  2. The Respondent violated §613.5 by never filing any tightness testing results with the Department concerning the PBS tanks at the Facility. This violation has continued from when the Respondent initially registered the Facility in 1990 until the present.
  3. From September 1990 until April 2002, the Respondent violated §613.4 by not maintaining inventory records for the underground PBS tanks at the Facility.

Recommendations

The Commissioner should assess a civil penalty of $20,000, and direct the Respondent to close the underground PBS tanks at his Facility consistent with the requirements outlined in §613.9(b) and (c).

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