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Peterson Petroleum, Inc. - Interim Order, May 27, 1994

Interim Order, May 27, 1994

STATE OF NEW YORK : DEPARTMENT OF ENVIRONMENTAL CONSERVATION

In the Matter

of

the Alleged Violations of Article 17 of the Environmental Conservation Law
and Article 12 of the Navigation Law and 6 NYCRR Parts 703 and 613 by:

INTERIM ORDER

R4-1315-92-03

PETERSON PETROLEUM INC.
and
DAVID WILLIAMSON,

Respondents

WHEREAS:

  1. Pursuant to a Notice of Hearing and Complaint issued on May 25, 1993, an administrative enforcement hearing was held before John H. Owen, Administrative Law Judge ("ALJ"), on August 10 and 11, 1993 at the Department's Region 4 Office located in Schenectady, New York. The Department Staff appeared by Ann Lapinski, Esq. The Respondent Peterson Petroleum Inc. ("Peterson") appeared by Richard P. Feirstein, Esq., and Respondent David Williamson appeared by Peter Williamson, Esq.
  2. Upon review of ALJ Owen's Hearing Report, a copy of which is attached, I concur with its Findings of Fact, Conclusions and Recommendations except as noted below.
  3. Respondent Peterson violated Navigation Law 173 which prohibits petroleum discharge, Navigation Law 176 which requires that any petroleum discharge be immediately contained, and ECL 17-0501 which prohibits the discharge of any matter into State waters that causes a condition in contravention of the Department's standards for water purity. The fact that Peterson voluntarily indicated that it was the owner of the tanks on the licensing documents submitted to the Department makes it principally responsible for care and maintenance of the tanks.
  4. With respect to the liability of Respondent Williamson, neither the arguments submitted by the parties nor the discussion in the Report adequately address all of the legal issues that are raised. Additional briefing is needed regarding (a) the legal effect of the lease terms requiring Williamson to obtain all permits and to install the gas tanks; (b) whether any liability arises from the terms of the 1952 and 1970 mortgages between Williamson and Shell Oil Company; and (c) whether a owner/landlord who knowingly leases his property to a tenant for a purpose which includes the bulk storage of petroleum has a duty to the public to ensure that the leased premises are operated in accordance with all applicable safety and environmental laws and standards, regardless of the allocation of responsibility under the lease.
  5. I concur with ALJ Owen's analysis of the factors that are relevant to assessing a civil penalty.

NOW, THEREFORE, having considered this matter and being duly advised it is ORDERED that:

  1. In respect to the aforesaid violations, a civil penalty is hereby assessed against Respondent Peterson in the amount of Ten Thousand One Hundred Twenty-Five Dollars ($10,125) to be paid within sixty (60) days after service of this Order upon said Respondent.
  2. Respondent Peterson is ordered to carry out the actions specified in the Schedule of Compliance as set forth in the attached Report and this Schedule of Compliance is incorporated as part of this Order.
  3. With respect to the liability of Respondent Williamson, this proceeding is remanded to ALJ Owen to require further briefing on the issues set forth above. After receipt of such briefs, he will prepare a supplemental report and forward it to me for a final decision.
  4. All communications between Respondent Peterson and the Department concerning this Order shall be made to the Department's Region 4 Director, New York State Department of Environmental Conservation, 1150 Westcott Road, Schenectady, New York 12306.
  5. The provisions, terms and conditions of this Order shall bind the Respondent Peterson, its officers, directors, agents, servants, employees, successors and assigns and all persons, firms and corporations acting for or on behalf of said Respondent.

NEW YORK STATE DEPARTMENT OF
ENVIRONMENTAL CONSERVATION
____________/s/____________
LANGDON MARSH, ACTING COMMISSIONER

Dated: May , 1994
Albany, New York

TO: Richard P. Feirstein, Esq.
74 Chapel Street
Albany, New York 12207

Peter Williamson, Esq.
Williamson & Hug
141 Parkway Road
Bronxville, New York 10708

Ann Lapinski, Esq.
Assistant Regional Attorney
NYS Department of
Environmental Conservation
1150 Westcott Road
Schenectady, New York 12306

STATE OF NEW YORK DEPARTMENT OF ENVIRONMENTAL CONSERVATION
50 Wolf Road
Albany, New York 12233-1550

In the Matter

of

the Alleged Violations of Articles 17 of the Environmental Conservation Law and
Article 12 of the Navigation Law of the State of New York and 6 NYCRR Parts 613 and 703 by

PETERSON PETROLEUM INC.
AND
DAVID WILLIAMSON

DEC File No. R4-1315-92-03

Hearing Report

- by-
_____________________
John H. Owen
Administrative Law Judge

PROCEEDINGS

This matter concerns a retail gasoline station site where each respondent is alleged to have allowed a petroleum discharge from a bulk storage tank at the site, failed to immediately contain the discharge, and is responsible for resulting contamination of groundwater in the area.

Pursuant to a duly served Notice of Hearing with Complaint attached, dated May 25, 1993, the New York State Department of Environmental Conservation (the "Department" or "DEC") Region 4 Staff (the "Department Staff" or "Staff") initiated a civil administrative enforcement proceeding conducted in accordance with the State Administrative Procedure Act ("SAPA") and Title 6 of the Official Compilation of Codes, Rules and Regulations of the State of New York ("6 NYCRR"), Parts 613 and 622, Articles 17 and 71 of the New York State Environmental Conservation Law ("ECL"), and Article 12 of the New York State Navigation Law, against Peterson Petroleum Inc. ("Peterson") and David Williamson ("Williamson").

Peterson served and filed an Answer dated June 21, 1993 and Williamson served and filed an Answer dated June 14, 1993.

(The Complaint as served dealt with alleged violations at a gas station at Latham, New York allegedly committed by both Peterson and Williamson as well as gas stations at other locations where the violations were charged solely against Peterson. With the consent of the parties, those portions of the proceeding which alleged violations solely by Peterson at sites other than the Latham site were by Ruling dated July 20, 1993 severed from the portion of the proceeding alleging violations by both Peterson and Williamson at the Latham site.)

The subject site was known as "Chick's Sunoco" station and is located on Route 9 in Latham. Peterson has its headquarters in Chatham, New York and leases the site from Williamson who resides in Albany, New York.

In accordance with the Notice of Hearing, an adjudicatory hearing concerning the Latham site was convened before Administrative Law Judge ("ALJ") John H. Owen on August 10, 1993 at the Department's Region 4 Headquarters at Schenectady, New York. Ann Lapinski, Esq., Assistant Regional Attorney, appeared on behalf of the Department Staff, Richard P. Feirstein, Esq. appeared on behalf of Peterson and Peter Williamson, Esq. (Williamson and Hug) appeared on behalf of (David) Williamson. The hearing was continued and concluded on August 11, 1993.

The Department Staff called as witnesses Thomas Sperbeck, an Environmental Engineering Technician II with the Department, Allen Geisendorfer, also an Engineering Technician II and Spill Response Supervisor with the Department, and Gary McCullough, an Environmental Engineer I with the Department; Peterson called John Simons, its Director of Operations; and Williamson called himself.

Some 49 documents were received in evidence.

The record closed upon receipt of the last of the parties' post-hearing memoranda on December 8, 1993.

UNDISPUTED FACTS

Some of the relevant facts were not in dispute, such as that at all relevant times Williamson owned the site, that the site was under lease from Williamson to Peterson, that there were a number of underground petroleum bulk storage tanks at the site as placed to service the retail gas sale needs of the gas station located there, that as early as December 29, 1987 Peterson filed with the Department Petroleum Bulk Storage Applications attesting to its ownership of the tanks and stating that each of the five (5) tanks were constructed of "Fiberglass reinforced plastic" ("FRP"), that as late as May 25, 1993 Peterson received from the Department a Petroleum Bulk Storage Regulation Certificate covering each of the five (5) tanks, describing "Peterson Petroleum Inc." as "owner" and describing each of the "tank types(s)" as "FRP", that Peterson had an arrangement with one Harry "Chick" Malone to sell gasoline at retail at the site, and that on March 9, 1990 Peterson notified the Department of a tank test failure at the site, meaning that a tank was determined by a certain type of test to be, or be capable of leaking petroleum.

THE CHARGES, THE APPLICABLE LAW AND THE FACTUAL PROOF REQUIRED

Each respondent is charged with violating Section 173 of Navigation Law (prohibiting discharge of petroleum), Section 176 of the Navigation Law (requiring immediate containment of any petroleum discharge), and ECL 17-0501 (prohibiting the discharge into State waters of any substance which raises the contamination level above the limits set in the Department's water purity standards).

Section 173 of the Navigation Law (which the Department is required to enforce) specifically provides in relevant part:

"1. The discharge of petroleum [except under a federal or State permit issued as provided at Section 173, Subdivision 3] is prohibited."

It follows then for the charge to be sustained the Department Staff must have proven three (3) elements of this charge: 1) that petroleum was in fact discharged; 2) that either or both Peterson and Williamson are responsible for the discharge; and 3) that neither Peterson nor Williamson had a permit issued by the DEC authorizing the discharge.

By admitting in its entirety at Paragraph 1 of its answer the following paragraph of the Department's complaint, Peterson, but not Williamson, has conceded that a petroleum discharge took place:

"On March 9, 1990, Respondent Peterson Petroleum properly notified the Department of a tank test failure at the facility which resulted in the leakage of petroleum from the tank." (Paragraph 4)

Hence, the only issue requiring proof as to discharge as against Peterson is its responsibility for the discharge, while as against Williamson both the discharge and Williamson's responsibility for it must have been proven.

Section 176 of the Navigation Law specifically provides in relevant part that

"1. Any person discharging petroleum...shall immediately undertake to contain such discharge."

Since both Peterson and Williamson have denied failure to immediately contain the alleged discharge, whether either or both so failed must have been proven.

Section 17-0501 of the ECL provides in relevant part:

"It shall be unlawful for any person, directly or indirectly to...discharge into [State] waters organic or inorganic matter that shall cause or contribute to a condition in contravention of the standards adopted by the Department pursuant to Section 17-0301."

Since each respondent has denied being responsible for contamination of the groundwater at the site, four (4) elements must have been proven: 1) that there was in fact an unlawful petroleum discharge at the site (conceded by Peterson); 2) that either or both Peterson and Williamson are responsible for the discharge; 3) that the discharged petroleum migrated into the groundwater; and 4) that this petroleum migration has resulted in contamination of the groundwater in contravention of the Department's standards.

DISCUSSION

Introduction

Logically, the order in which to deal with the liability proof provided by the parties would be to first address the discharge issue (discharge being a necessary element of all three charges), then the containment issue, then the contamination issue followed by the issue of the responsibility of either or both parties respondent.

Yet in view of the actual posture of the proof the seemingly most-logical order of discussion must be markedly altered. More specifically, the Department Staff has provided little if any direct evidence of discharge; that is, they produced no one who eye-witnessed the subject tank discharging petroleum; and, in any case, the hole in the tank is conceded to have been of only "pinhole" magnitude.

Moreover, although the report of the first (failed) "petrotight" test of the tank indicates that the tank was leaking or was capable of leaking an estimated .109 gallons of petroleum per hour, one of the Department's experts (Geisendorfer) testified to the effect that a tank test failure indicates only that the tank did not meet the testing criteria and does not necessarily mean that the petroleum product is actually escaping the tank.

Further, while on the one hand another Department expert (Sperbeck) testified that there was a "sheen" which he concluded to be from petroleum on the groundwater near the tank when it was uncovered and also a strong petroleum odor and vapors, on the other hand all conceded that the site had been the subject of an unknown degree of pre-Peterson petroleum contamination.

Lastly, Geisendorfer testified on cross-examination to the effect that the Department Staff's case on the issue of discharge was founded upon well testing data and not upon any observation or test of the tank or the groundwater near the tank. Thus, the indispensable element of discharge must have been proven to the required degree, if at all, by necessary or at least acceptable inference from relevant contamination.

It follows then that, while discharge is a more basic and pervasive element than contamination, contamination is the most significant element here since it alone carries the potentiality to establish both discharge and the failure to contain it.

Tank Testing and Groundwater Contamination

The Department Staff's effort to prove relevant contamination was grounded upon sampling from a series of test wells placed at various locations on and off site subsequent to Peterson calling in the tank test failure. The well sampling was carried out in two stages. In the first stage three wells were installed and in the second stage four more. Following each stage of well installation a report was prepared by the same apparently independent environmental experts, prepared the first time for Peterson and the second time for the Department Staff.

Neither respondent called any expert on its behalf at the hearing and each attempted to dilute the input from the Department's experts considered unfavorable to its or his interests solely by cross-examination, pointing to documents or parts of them considered favorable or at least less unfavorable, and so forth.

Peterson took over at the site from Shell Oil in March 1981. About this time the national switch-over from lead to methyclurpbutylether ("MTBB") in gasoline was about complete. There is no evidence whatever of any relevant spills, leaks or weepages at or near the site between the time of the Peterson takeover and an October 1987 testing of the tanks in which they all tested "tight." Nor is there any evidence of any relevant spills, leaks or weepages between that test and the March 1990 failed test of the subject tank.

The well installations and testing data showed that the wells were inserted well into groundwater and that it was groundwater which was tested.

The testing itself shows that the groundwater flow was from south to north across the site, that the contamination plume was flowing northerly as well and that, over six separate well testings between May 1990 and April 1993, there was increasing quantities of contaminants found in the wells to the north which were down-gradient from the subject tank, including MTBBs.

It thus can be safely inferred from this (largely uncontested) well sampling and related data that the primary contamination took place after the 1987 tank testing; that, especially with there being no proof of any relevant incidents after 1987 except the subject 1990 incident, the main source of the identified contamination was the subject tank leak.

Having found that the subject tank was the primary cause of the contaminants identified it follows: 1) that there was in fact petroleum discharge. Thus, having found as a fact that an unlawful petroleum discharge did in fact occur, this finding is made against Peterson apart from Peterson's pleading concession.; 2) that there was a failure to contain it; and 3) that the contamination migrated into the groundwater in the area.

Thus a violation of Section 173(1) of the Navigation Law (petroleum discharge) has been proven to the degree required, as has a violation of Section 176(1) of the Navigation Law (failure to contain the discharge), leaving only for purposes of ECL Section 17-0501 the question of whether the contamination caused by the tank leak introduced into the groundwater contamination greater than that permitted by the standards set by the Department.

The record contains uncontested proof of the standards set by the Commissioner for groundwater purity (6 NYCRR Part 703.5, groundwater, Class GA) in terms of the contaminants identified in the wells, such as benzene, ethybenzene, toluene, and various xylenes. All of these contaminants (including three xylenes: o, m and p) were shown by the well sampling data to be present in the area groundwater in concentrations greatly exceeding the applicable standards. Thus a violation of ECL 17-0501 has also been established.

Responsibility/Liability

The responsibility, if any, of the respective respondents for these three violations is of course another matter.

Central to any determination of responsibility is not only the relationship between Peterson and Williamson, but between Shell Oil and Williamson as well.

When the site was first converted into a retail gas station in 1951, Shell Oil while in form being a tenant substantially dominated every aspect of the property rights. It strictly controlled the construction by drawing the plans, maintaining a veto-power over the selection of contractors, and funding the entire project, and the same was true during a 1970 reconstruction. When all was said and done Shell Oil had even taken over not only the landlord's customary obligation to make at least major repairs but even the payment of real estate taxes. So total was Shell's control of the site that its engineers had directed Williamson off the site during the 1951 construction period, such that Williamson never again returned to the site except to obtain gas for his vehicles. The leases and related documents in evidence show that Shell Oil was attempting to attain the best of both worlds, that is to appear as a true tenant (and thereby income tax deduct its expenses at the site) while actually being in total control, having striped Williamson of virtually all indicia of ownership except his name on the deed and his right to be paid some "rent".

Peterson stepped totally into Shell Oil's shoes in 1981.

In 1987 Peterson in licensing documents submitted to the Department declared itself the owner of all of the underground tanks at the site. This was the information on file with the Department through the March 1990 tank test failure.

Having found that the tank leak caused the contamination, I hold further that the licensing documents end the inquiry of whether Peterson is responsible for the contamination.

As a matter of public policy, the Department cannot be subjected to investigating every tank license application in terms of all of the third-party arrangements that the applicant may have in effect, such as leases, sub-leases, hold-harmless agreements and so forth. This is not to say that Peterson or any other applicant is foreclosed from pursuing any rights they might have under such third-party arrangements, but this must be done in some other forum. For purposes of this proceeding, however, as noted, the licensing documents are dispositive of the question of whether Peterson is responsible.

By the same token, the nature and degree of Peterson's responsibility, that is where it falls on the scale running from nominal and insubstantial to egregious, must be the subject of further inquiry; and this inquiry will as well shed further light upon Williamson's posture.

Peterson claims that "Chick" Malone may well have actually been responsible for the contamination yet this claim is unavailing to Peterson in that even if Malone were actually responsible this would not save Peterson in view of the licensing documents.

Even so, this record shows Malone doing nothing more than dispensing Peterson's petroleum products at retail, stick-testing the tanks to determine the volume of product in them at various times, and keeping certain records as required by Shell Oil and then by Peterson.

Related to its attempts to fix blame upon Chick Malone, Peterson ascribes the current contamination to alleged pre-Peterson leaks; yet not only is this claim unavailing but it is factually withoumerit. Neitherer Respondent requested that the ALJ order Shell Oil, Malone or anyone else joined as additional respondents. See 6 NYCRR 622.9 and 622.12(c).

Not only is there the time sequence of the tank testing and direction of the contaminants' relatively recent migration, but there was, as noted, no proof offered at the hearing of any prior spills or leaks whatever at the site, areas adjoining the site or at any other relevant area. Peterson's suggestion that there might have been serious pre-Peterson leaks or spills but which were not reported to anyone or otherwise memorialized in document form is nothing but speculation.

The property immediately to the north of the site (purportedly owned by a Mr. Hakimian) is vacant, never-improved land and the evidentiary record provides no basis whatever for even an assumption that the Hess gas station immediately north of Hakimian's property is responsible for any of the contamination found to the south on Williamson's property and most notably at the northern boundary of that property, where it was necessary to construct a trench to protect Hakimian's property; and this conclusion is strongly reinforced by the fact that the groundwater flow is basically south to north.

Beyond attempting to ascribe the contamination to sources other than the subject tank, and attempting to ascribe the responsibility to persons other than itself, Peterson argues as well that it was actually Williamson's obligation to attend to the tank farm.

In support of this claim, Peterson cites certain terms of leases and supplements to leases between Shell Oil and Williamson which are in evidence.

These documents show that while Williamson was to arrange the 1951 construction and the 1970 re-construction (pursuant to Shell's plans and specifications, through contractors approved by Shell and as funded by Shell):

"Shell [was to] maintain the premises in as good condition and repair as they [were] upon completion of construction, excepting reasonable wear and tear" (Exhibit R-8, Agreement Supplementing and Amending Lease, 1/13/70, Paragraph 7).

In another portion of the same Paragraph 7 the time at which the condition of the property was to be fixed for purposes of the repair provision (described above as "...upon completion of the construction...") is alternately described as "...when Shell first received possession [of the 'premises'] hereunder."

The "premises" included, in both 1951 and 1970, the installed tank farm.

As Peterson would have it the repair provision indicates that Williamson not Shell (and not now Peterson) was to maintain, inspect, repair and replace tanks as needed in the tank farm, since all of these tasks arise out of "reasonable wear and tear".

It appears, however, that a far more reasonable interpretation of the provisions would be that Williamson was installed as a check-writer solely for Shell's income tax and other advantages and not to signify any type of ownership or control upon Williamson's part over the improvements to the property brought about by the construction and re-construction; that the repair provision was an assurance to Williamson that Shell would take care of its property, including the tanks, for which Shell had paid, so as to spare Williamson concern over repair and related costs, environmental liability and so forth; and that the "...excepting reasonable wear and tear " clause means simply that Williamson could not require Shell to make minor, unnecessary repairs to any part of the premises.

Relevant as well is another provision at the same Exhibit R-8, Paragraph 7:

"Shell shall be obligated (and exclusively entitled) to insure the premises to their full insurable value and with loss payable to Shell..."

There is also Paragraph 14 of the lease of November 14, 1951 (Exhibit R-1 unamended by 1/13/70 Agreement Supplementing and Amending Lease, R-8) which states in relevant part:

"14. All buildings, improvements, equipment and other property constructed, installed or placed on the premises by Shell or acquired by Shell, at any time during the term of this or any previous lease or any extension thereof or any tenancy thereafter, shall be and remain Shell's property, and Shell shall have the right to remove any or all of the same from the premises, at any time during, and within thirty (30) days after any termination of this lease or any tenancy thereafter..."

I find that "...property constructed, installed or placed on the premises by Shell or acquired by Shell..." refers to all property "constructed, installed or placed" at the site in Williamson's name but at Shell's expense and under Shell's control, including the tank farm. There simply was no showing in the record here that there was any other such property ever on or under the site and this record will admit of no conclusion other than that all of this property belonged to Shell who assigned it all to Peterson.

Moreover Peterson's actions are further evidence of Peterson's ownership and control. Among these relevant actions are the 1987 and 1990 tank tests by Peterson. Only the owner of the tanks is required to test them. 6 NYCRR Part 613.5., Peterson's notification to the Department of the 1990 tank test failure, Peterson's removal of that tank and the contaminated soil, Peterson's draining all tanks and closing down the entire operation following later tank testing failures, all at Peterson's expense, as well as Peterson's failure to advise Williamson of the first tank test failure and resulting problems until some two years after the fact.

Peterson's credibility is also adversely affected by another aspect of the licensing documents, namely, the representation of the tank types.

Peterson's only witness, Simons, its Director of Operations, testified that it is entirely possible to determine the composition of an underground tank without excavating the tank, by simply inserting an appropriate instrument into the ground in which the tank is buried.

When Peterson took over the lease from Shell Oil surely not only the number and volume capacity of the tanks were of financial interest to it, but their ages and the nature of the material(s) out of which they were constructed were as well; yet, as Peterson would have it, they thought they were receiving fiberglass tanks suggesting a later if unknown time of manufacture, but they actually received older steel tanks.

This purported imprudence by Peterson, suggests Peterson, led to the misrepresentation of the tank types as listed on the licensing documents submitted to the Department.

Peterson's attempt to shift responsibility for the tanks to Williamson is rejected. Peterson owned and was in total control of the underground tank farm at all relevant times and responsible for the maintenance, testing, and necessary replacement as well as every other aspect of tank farm ownership and control.

There is no question about Peterson's liability and exposure to a civil penalty and the costs of remediation. Williamson's liability, however, is another matter entirely. The Staff's complaint fails to show how Williamson is liable and neither the specific statutes nor the regulations under which Williamson is charged state how a landowner-landlord may become liable for a leak by a tenant. Navigation Law Section 181(1) provides for strict liability against any "person" to be classified as a "discharger" of petroleum; yet "discharger" is not defined. "Discharge" is defined at Navigation Law 172(8) as including an "unintentional" discharge and "person" is relevantly but unhelpfully defined at Section 172(14) as including an "individual".

The Third Department has observed that "...[l]iability may be placed upon those who are wholly blameless if the statutory scheme indicates an intention to hold those who discharge hazardous substances to strict liability..." Merrill Transport Co. v. State, 94 AD2d 39, 41 (1983) lv. to app. den. 60 NY2d 555 in which a tractor trailer full of oil (blameless in the accident) was struck by a car on the Northway and held liable nevertheless.

One round of memoranda that was requested had to do with the question of what was the basis of Williamson's liability, if any.

The Department cited White v. Regan, 171 AD2d 197 (3rd Dept. 1991)--failing to note that leave to appeal was denied: 79 NY2d 754; Williamson (the owner/landlord) cited State v. Wisser, 170 AD2d 918 (3rd Dept. 1991); and Peterson Petroleum declined to submit a memorandum on this particular subject.

In White (the Department's case) the dispute was between the then present owner and the owner at the time of the spill as to which was liable. There was no lease involved. The Department sets out a quote as if it came from White but in reality White is quoting Quaker State Corp. v. U.S. Coast Guard, 681 F.Supp. 280 (W.D. Penn. 1988) at page 285. In any case, the quote (holding the owner at the time of the spill discovery liable) is:

"...It is the owner or operator at the time of the spill is first discovered who has control of the site and the source of the discharge (p. 200; emphasis added).

In addition to Quaker State, White also cites Wisser (Williamson's case) and State v. New York Central Mut. Fire Ins. Co., 147 AD2d 77, 79 (3rd Dept. 1989) which held a homeowner (his insurance carrier) liable for a leak between the storage tank and the furnace, citing the "...control of the heating system..." (p. 79) and Damerouth Petro. Equip. and Maintenance Corp. v. Herzog & Hopkins, 111 AD2d 957, 958-959 (3rd Dept. 1985) in which an oil supplier who had recently serviced the homeowner's oil tank and which burst on a subsequent delivery, was held liable: "...as the deliverer of the oil and the repairer of the tank [the oil dealer] set in motion the events which resulted in the discharge..." (p. 969).

In Wisser (Williamson's case) Wisser was the landowner since 1976, Wisser leased to Shoemark in 1981, Shoemark subleased to Wehr (date not given), Wehr opened an AMTEC Service Station (date not given), and in 1982 there was a leak from underground tanks.

The State sued owner Wisser and Wisser brought in Shoemark, Wehr and AMTEC.

Holding that the owner of the system is liable, the Court noted that Wisser's lease with Shoemark provided that tank ownership was in Wisser and "...[D]efendant [Wisser] submitted no proof in evidentiary form which tended to show that it sold the tanks to Shoemark..." (p. 919)

Williamson had control of neither the site nor the source of the discharge (White, supra); nor of any part of the tank system (State v. New York Central Mut. Fire Ins. Co., supra; nor did Williamson set in motion the events which resulted in the discharge (Damerouth Petro. Equip. and Maintenance Corp., supra).

Williamson had no relevant right to enter the site (except the right enjoyed by the public as well to buy gas there); no right to inspect the site; and no right or obligation to test, maintain, repair or replace anything at the site (See Putnam v. Stout, 38 NY2D 607 (1976)); nor is there any requirement in the Williamson-Shell/Peterson lease documents which even suggests that Williamson would be obligated to cure violations charged by public authorities and caused solely by Peterson. See Gould v. Springer, 206 NY 641 (1912).

A comparison to somewhat analogous provisions of the federal Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") 42 U.S.C. 9601-75 seems helpful. Under CERCLA if an owner of a site at the time of the leak wishes to escape liability as such by claiming that his tenant was the sole cause of the leak the owner must also establish that:

"...[H]e exercised due care with respect to the hazardous substance concerned, taking into consideration the characteristics of such hazardous substance, in light of all relevant facts and circumstance, and...he took precautions against foreseeable acts or omissions of any such third party and the consequences that could foreseeably result from such acts of omissions..." 42 U.S.C. 9607(b)

Neither the Navigation Law nor the ECL impose such additional requirements and hence the relevant "statutory scheme" (Merrill Transport Co., supra) does not "indicate an intention to hold" (Ibid) Williamson liable here, that is to say, Williamson was not a "discharger" here.

Relief Requested

As to the relief requested by the Department Staff, the civil penalty sought is $37,000 as against Peterson, with no civil penalty sought as against Williamson, with each Respondent sought to be held responsible for remediation.

In calculating the $37,000 sought as against Peterson the Staff has employed "Petroleum Spills Penalty Guidelines" developed by the Region 4 Staff and stated to have been drawn "...within the framework established by [the Commissioner's] Civil Penalty Policy". Both these Guidelines and the Staff's written computations under them were received in evidence without objection by either respondent; however, each respondent did or does object to being assessed any civil penalty.

The maximum penalties are: for any violation of Article 12 of the Navigation Law $25,000 per day (Navigation Law, Section 192) and for any violation of Titles 1 through 11 of Article 17 of the ECL also $25,000 per day. (ECL 71-1929)

Under these guidelines the Staff computes a base amount which is or may be multiplied on the basis of various factors and I find this method to be consistent with the Commissioner's Civil Penalty policy.

Here the base amount is arrived at by adding up amounts for discharge, failure to report and failure to contain as calculated in terms of the estimate of the spill volume.

The Staff estimates a 432 gallon spill which results in $2,500 for the discharge, failure to report being inapplicable, and $5,000 for the failure to contain, for a total base amount of $7,500.

The spill volume estimate involves a spill rate and a time period, here 0.1 gallons per hour for 6 months or 0.1 x 24 x 180 = 432.

While the 0.1 gallons per hour rate estimate comes from the original DEC Spill Response Form dated March 9, 1990 (which actually estimated .109), there was no showing as to what the six month period was based upon.

Thus I do not feel that a 432 gallon estimate is reliable enough as a basis for a penalty; nor do I feel that the Staff's other spill volume estimate method, judging spill volume from looking at the groundwater sheen and so forth and concluding a 500 to 1,000 gallon spill, is any more reliable. This leaves me with three other choices to hold that: 1) there was no leak; 2) the leak was 0-506PH; or 3) the leak was 51-2506PH; however, the first choice is precluded by my finding that there was in fact a leak, the second is precluded by my finding that the leak was not only significant but serious, resulting in serious contamination of the groundwater, leaving only the 51-2506PH range. Accordingly, I recommend that the spill basis be reduced from 432 gallons (251-1000 gallons range) to 51-250 gallons range and that the base amount be accordingly reduced to $1,000 for the discharge and $2,000 for the failure to contain it, for a total base amount of $3,000.

As to the multipliers, as stated, I agree with the Staff that the environmental harm (multiplier of 1.0 to 4.0) is not "insignificant" (1.0) nor "minor" (1.25) but is not "major" (4.0). so that I recommend a multiplier here of 2.25 as requested by the Staff, especially since no drinking water or other public health concerns were adversely affected.

As to the culpability factor (1 to 2), I agree with the Staff, that even Peterson did nothing deliberate; that is, it did not intentionally cause contamination of the site but is rather guilty of negative acts, that is, omissions such as failure to test and properly maintain; so that I agree that this factor should be 1.2.

Concerning history of non-compliance, there was no showing of any prior violations by Peterson, except for some pending yet to be adjudicated non-pollution charges against Peterson alone, so that I find no basis for including this multiplier factor.

As to cooperation (0.75 to 1.5) Peterson not only reported the leak, pulled the tank, retained experts to produce a report, and ultimately drained the entire system and closed the operation, all at its expense, before aborting its remedial efforts, so that while the Department did have to take over the remediation and this litigation was made necessary, nevertheless the multiplier here should be 1.25 rather than the 1.5 maximum requested by the Staff. I feel that the 1.5 maximum should be reserved for respondents who offer little or no cooperation and that, by the same token, respondents who offer significant though not total cooperation should receive some credit.

Thus a total civil penalty of $10,125 instead of the $37,000 is recommended.

As to remediation, Peterson should be held fully responsible, not having contested the Schedule of Compliance as proposed by the Staff in its complaint.

FINDINGS OF FACT

  1. Respondent David Williamson owned the site.
  2. Respondent Peterson Petroleum Inc. succeeded Shell Oil as lessee of the entire site from Respondent David Williamson.
  3. Respondent Peterson Petroleum Inc. inherited ownership and control of the underground bulk storage tanks, including the subject tank, from Shell Oil.
  4. There occurred a petroleum discharge at the site beginning at an unknown time prior to March 9, 1990.
  5. Respondent Peterson Petroleum Inc. failed to immediately contain this discharge.
  6. The discharged petroleum released contaminants that migrated into the groundwater on and off the site.
  7. This migration of contaminants caused the contamination level of the groundwater to exceed the standards set by the Department.
  8. Respondent Peterson Petroleum Inc. was in full ownership and control of the tank farm at all relevant times; the discharge, the failure to contain it and the resulting contamination were caused by this Respondent's failure to properly administer the tank farm; this Respondent had the opportunity to promptly remediate, yet spurned it after engaging in remediation for a short time.
  9. Respondent David Williamson had no relevant control of the site nor the source of the discharge.
  10. Respondent David Williamson did nothing to cause the discharge.
  11. Respondent David Williamson had no relevant right to even enter the premises no less any right or obligation to maintain, test, repair or replace anything in the tank farm or elsewhere at the site.
  12. Respondent David Williamson was not required by the lease or by anything else to cure violations charged by public authorities and caused solely by Respondent Peterson Petroleum Inc.

CONCLUSIONS OF LAW

  1. Respondent Peterson but not Respondent Williamson violated Section 173 of the Navigation Law which prohibits petroleum discharge and Respondent Williamson did not.
  2. Respondent Peterson but not Respondent Williamson violated Section 176 of the Navigation Law which requires immediate containment of a petroleum discharge and Respondent Williamson did not.
  3. Respondent Peterson but not Respondent Williamson violated Section 17-0501 of the ECL which prohibits contamination in excess of the Department's standing order for groundwater purity and Respondent Williamson did not.
  4. Respondent Peterson but not Respondent Williamson is liable for each violation and as such is subject to a civil penalty and the costs of remediation.

RECOMMENDATIONS

  1. Respondent Peterson Petroleum Inc. should be assessed a total civil penalty in the amount of $10,125.
  2. The Commissioner should issue an order requiring that Respondent Peterson Petroleum Inc. strictly comply with the following Schedule of Compliance:
    1. Within 30 days of the Commissioner's Order, Peterson shall assume responsibility for the existing remediation system installed by the Department.
    2. Within 60 days of the Commissioner's Order, Peterson shall provide the Department with an acceptable plan to remediate off-site contamination.
    3. Within 30 days of approval of the off-site remediation proposal, Peterson shall commence measures implementing off-site remediation. (The commencement of measures refers to the start-up of any equipment used for remediation.)
    4. Peterson shall maintain the operation of its remediation system for at least one year after demonstrating through appropriate testing and sampling methods that the groundwater at wells MW #1 through MW #7 meet state groundwater standards in 6 NYCRR Part 703.5.
    5. To the extent that any measures undertaken pursuant to the Schedule of Compliance requires treatment and discharge of waste waters to ground waters of New York State, Peterson shall be authorized to undertake such treatment and discharge in accordance with the General Conditions attached as Appendix A to the Complaint, and the ground and surface water standards contained in Appendix B to the Complaint.
    6. To the extent that any measures undertaken pursuant to the Schedule of Compliance requires treatment and discharge of air pollution to the outdoor atmosphere, Peterson shall be authorized to undertake such treatment and emission in accordance with the standard contained in Appendix B to the Complaint and
    7. No discharge or emission as part of remediation of this facility shall exceed the air and water quality standards set out in Appendix B to the Complaint, and
  3. This proceeding as against Respondent David Williamson should be dismissed with prejudice.
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