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Smithtown Water District - Decision, September 11, 1996

Decision, September 11, 1996

STATE OF NEW YORK
DEPARTMENT OF ENVIRONMENTAL CONSERVATION
50 Wolf Road
Albany, New York 12233-1010

In the Matter

- of the -

Application for a Water Supply Permit
Pursuant to Environmental Conservation
Law ("ECL") Article 15, Title 15 and
Title 6 of the New York State Codes, Rules
and Regulations ("NYCRR") Part 601 by

SMITHTOWN WATER DISTRICT

Water Supply Application No. 9318
Project No. 1-4734-00663/00001-0

DECISION

September 11, 1996

DECISION OF THE COMMISSIONER

This is the Decision of the Commissioner in the matter of the application of the Smithtown Water District (the "District") for a Water Supply Permit to serve a new housing development in the Town of Smithtown, but outside of the District's existing service area. The attached hearing report of Administrative Law Judge ("ALJ") John H. Owen recommends that the application be denied. I concur with the ALJ's recommendation and adopt the ALJ's report. The area in question can be and in fact now is provided with water by the Suffolk County Water Authority ("SCWA"). I add the following.

Background

The Villadom subdivision, consisting of thirteen new houses on 9.8 acres in the Town of Smithtown, Suffolk County is adjacent to, but outside of the District's existing assigned service area. In August 1995, the Town Board approved expansion of the District's service area to incorporate Villadom, subject to this Department's approval, which is required under Article 15 of the Environmental Conservation Law ("ECL"). The District then applied to the Department for approval on August 14, 1995. The Suffolk County Water Authority ("SCWA") objected to the District's application on the ground that Villadom is within SCWA's assigned service area, and that SCWA is willing to provide it with water service. However, prior to Department Staff's action on the application and without Department approval, the District connected its mains to Villadom. Thereafter, DEC Staff denied the District's application by letter dated December 19, 1995.

Department Staff's December 19, 1995 denial of the District's application was based on the following:

  1. The District obtains all of its water by purchase from SCWA.
  2. A new SCWA interconnection to the District through Villadom would add beneficial redundancy, fire fighting capacity and additional well fields to the existing Smithtown system, thereby enhancing service to the district.
  3. Villadom is within SCWA's existing service area. Service to the Villadom area by SCWA is authorized by SCWA's existing water supply permit.
  4. SCWA is in the best position to serve Villadom.

Upon denial of its application by Staff, the District in January 1996 availed itself of its right to request a hearing (6 NYCRR .621.7(f)). The hearing request was transmitted to the Office of Hearings and Mediation Services in February 1996, and ALJ Owen was then assigned to the case. In March 1996, pending action on the District's request for a hearing, SCWA connected its mains to Villadom, and commenced service to the area, displacing the District as the water service provider to the area. Department Staff then moved the ALJ to dismiss this appeal as "moot." Thereupon, briefs were filed by the District, SCWA and Staff. Following publication of a notice of hearing and a prehearing conference the matter became ripe for decision on the papers filed and the ALJ's attached report was then prepared.

Discussion

I accept the ALJ's recommendation and deny the District's application, based on the ALJ's Report and the entire record. I find that Staff's basis for denial of the application in December 1995 to have been rationally based and in accordance with ECL Article 15 and our related regulations. The District's authority to serve Villadom was never legally established because the Department's approval of the District's proposed service area expansion was never granted. There is no basis in this record for us to exercise our discretion and depart from the established premise that assigned water service areas should be maintained. Departures from existing assigned service areas should be allowed only for good cause, such as an inability of the assigned water supplier to provide service. Good cause is not shown on this record. See, Sunhill Water Corp. v. Water Resources Commission, 32 A.D. 2d 1006 (3d Dept., 1969).

Conclusion

For the foregoing reasons, the Smithtown Water District's application to provide water service to the Villadom subdivision is denied.

For the New York State Department
of Environmental Conservation
/s/
By: Michael D. Zagata, Commissioner

Albany, New York
September 11, 1996

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

In the Matter

- of the -

Application for a Water Supply Permit
Pursuant to Environmental Conservation
Law ("ECL") Article 15, Title 15 and
Title 6 of the New York State Codes,
Rules and Regulations ("NYCRR")
Part 601

DEC Project No. 1-4734-00663/00001-0
Water Supply Application No. 9318

by

SMITHTOWN WATER DISTRICT

HEARING REPORT

by

/s/
John H. Owen
Administrative Law Judge

PROCEEDINGS

On or about August 8, 1995 the Smithtown Water District ("the District") filed with the Region 1 Staff of the Department of Environmental Conservation ("the Department" or "DEC") and application for a Water Supply Permit to expand the District's service area in order to serve an area known as the Villadom Extension.

A Notice of Complete Application was published in the September 6, 1995 issue of the Environmental Notice Bulletin ("ENB") and on September 14, 1995 in the Smithtown Messenger & Review as shown by an affidavit of publication by the publisher.

On or about September 20, 1995 the Suffolk County Water Authority ("SCWA") filed objections to the issuance of the permit sought by the District. The District responded under date of September 26, 1995 and SCWA filed further objections under date of November 10, 1995.

On December 19, 1995 the Region 1 Staff issued a denial of the permit and advised the District that it was entitled to a hearing if it requests one pursuant to 6 NYCRR 621.7(f). Under date of January 17, 1996 the District requested such a hearing. A Hearing Request form was prepared, completed and signed by members of the Region 1 Staff and was received in the DEC's Office of Hearings and Mediation Services on February 14, 1996 and thereupon Administrative Law Judge ("ALJ") John H. Owen was assigned to the matter. Region 1 Staff counsel then served and filed a Motion for Summary Judgment contending that the ALJ had the authority to entertain and dispose of such a motion under 6 NYCRR Part 624.8(b)(i).

Both SCWA and the District served and filed responses to the motion. By letter of April 26, 1996 the ALJ allowed Staff counsel and SCWA ten days to reply to the District's submission.

Since the District has an absolute right to the hearing it had requested, instead of a ruling on the motion by the ALJ, the Chief Administrative Law Judge issued under date of May 23, 1996 a Notice of Public Hearing providing for a public hearing, applications for party status, and a possible adjudicatory hearing. This notice also granted party status to SCWA in addition to the Staff.

The Notice of Public Hearing was published in the Smithtown Messenger & Review on May 30, 1996 as shown by the publisher's affidavit. The Notice of Public Hearing also appeared in the June 5, 1996 issue of the ENB.

There were no other petitions for party status and in a telephone conference call on July 17, 1996 Staff, the District and SCWA stated that they wished to submit no further papers. Accordingly the record was closed on July 17, 1996.

There now remains only conceded facts and legal issues for consideration, as conceded by all parties.

Position of the Parties

The District, as applicant, and the Staff are automatically parties to the proceeding and, as noted, the Notice of Public Hearing granted party status to SCWA.

The District

As authorized by a vote of its Town Board, in August, 1995, the District applied for a permit to extend the district boundary to enable the District to extend its water main to supply 13 new single family dwellings (the "Villadom" subdivision) with public water, which area was previously unserved.

While the application was pending, the District's water main and the subdivision were connected.

The District contends that it satisfied the requirements for a DEC permit. The District points to language in SCWA's enabling statute, Public Authorities Law ("PAL") .1078, that provides "the authority shall not sell water in any area which is served by a water system owned or operated by a municipality unless the governing board of such municipality shall adopt a resolution requesting the authority to sell water in such area". It also points to a decision in Swan W. Corp. V. SCWA, 20NY2d81 (1967) where the Court favorably cited a prior decision of the Water Resources Commission which stated in part: "Provided however, that nothing in this decision contained shall be held *** to authorize said [Suffolk County Water] authority to enter into competition with or to parallel the distribution mains of any water works system, either publicly or privately owned, now legally established in this county or which hereafter legally may be established therein".

The District further notes that Town Law grants the Town the power to extend a water district (subject to DEC approval), that the Town did so here, and that water mains were later installed to connect the new development with the District's mains. The District contends that SCWA's subsequent disconnecting the development from the District's mains and connecting its own mains to Villadom, violated PAL .1078, was not authorized, and is competition with the District.

The District further claims that there was no rational basis for DEC to initially deny the permit. The District seeks a denial of the motion for summary judgment and the issuance of the permit.

SCWA

SCWA contends that based on ECL 15-1501(2) and the 1949 decision on Water Supply Application ("WSA") 1930, it does not need a permit to extend its mains within Suffolk County, except as otherwise provided for. SCWA agrees with DEC Staff's determination on the merits of the application, which would deny a permit to the District. SCWA notes that the water district was not "legally established" at the Villadom subdivision as part of its service area because it failed to obtain a DEC permit. Thus, SCWA argues, the District has no authority to serve Villadom. SCWA argues that because the District is not legally established in Villadom and was denied a DEC permit to serve Villadom, SCWA cannot be said to be competing with the District -- i.e., because the District had no authority to be there in the first instance. SCWA further contends that it is in compliance with PAL .1078, and, regardless, that such is beyond the ken of DEC to determine. SCWA requests that Staff's motion be granted.

As noted, SCWA subsequently (on March 1, 1996) connected to the subdivision, and shut off the valve at the District's connection.

Staff

Department Staff denied this application on December 19, 1995 because it believed that "SCWA (which is not required to obtain a permit to serve the area) is in the best position to provide service to Villadom ..." Among the items Staff cited to support this position, Staff noted that SCWA currently supplies all the water to the Smithtown Water District. Alleging that the District did not meet permit issuance standards, Staff cited two determinations that the regulations require DEC to make under 6 NYCRR 601.6(b)(2) and (6), i.e.,:

"(2) that the applicant properly considered other sources of water supply that are or may become available; ..."

"(6) that the proposed project is just and equitable to all affected municipalities and their inhabitants, and in particular with regard to their present and future needs for sources of water supply."

In its denial, Staff contended that when the "mandate of these provisions and the "factors involved" are considered, the application does not meet permit issuance standards and must be denied.

As seen, on April 1, 1996, Staff moved for summary judgment dismissing the District's hearing request, contending that SCWA's service to the subdivision and the District's failure to seek injunction against SCWA's action rendered all issues moot.

Staff Counsel contends that as of March 1, 1996 when SCWA connected to Villadom, the application became moot, essentially because once Villadom started receiving water from SCWA, the District no longer had a "stake" in the controversy. Staff notes that the District knew of SCWA's plans to connect, but failed to seek an injunction. Now that Villadom has service, Staff claims "there is no relief that can now be accorded Applicant." Staff views SCWA's connection as being within SCWA's authority, and not competing with the District, because the District was not "legally established" to serve Villadom.

Staff also seeks dismissal with the claim that no adjudicable issues exist. Staff indicates that when it issued its denial, it considered that SCWA was already in the process of installing water mains, noted the speed at which service could become available, the fact that SCWA presently supplies all water to the District, and that a new SCWA interconnection would add beneficial redundancy such as fire fighting capacity and additional well fields. It also considered the location of mains, timing of hook-up, cost estimates, and customer service.

Noting the facts and rationale in the above two paragraphs, Staff in essence argues that the ALJ "should not interfere or have need to further review the decision made by the DEC" because its determinations are not arbitrary or capricious.

Questions Presented

  1. Was the District "legally established" at the relevant time?
  2. By extending its mains and connecting them to Villadom is SCWA competing with the District?
  3. Does SCWA require a DEC permit?
  4. Was the District required to consider "other sources of water supply..."?
  5. Is "...the proposed project... just and equitable to all affected municipalities..."?
  6. Does SCWA's disconnection of the District and connecting itself render all issues moot?
  7. Is SCWA faster, less expensive, more competent and so forth?
  8. Must the ALJ defer to Staff expertise in denying the permit?

Discussion

Whether the District was "Legally Established"

ECL 15-1501(2) employs the terms both "legally established" and "competition" as follows:

"...provided, however, that nothing herein contained shall be held to authorize such county water authority to enter into competition with, for the purpose of service in the area served by the mains, the transmission or distribution mains of any other waterworks system, either publicly or privately owned, already legally established in said county for the sale of water at wholesale or retail, or which hereafter may legally be established for said purpose..."

While the District is a publicly owned waterworks system and it did have its mains, transmission or distribution mains connected to and supplying public water to Villadom, the District was never "legally established" at Villadom since it had no DEC permit. See Sunhill Water Corp. V. Water Resources Commission, 32AD2D1006 (3rd Dept. 1969).

Whether SCWA is Competing with the District

Under ECL 15-1501(2) before a county water authority may be said to be competing with another publicly owned water works system that system must be "legally established" at the point where both it and the county water authority propose to newly supply water.

Here, since the District was never "legally established" at Villadom, SCWA was not competing with the District when SCWA began supplying water to Villadom.

Whether SCWA Requires a DEC Permit

SCWA does not require a DEC permit provided it does not parallel the mains of or competes with another waterworks system legally established.

Other Sources of Public Water

The District need not have considered other sources of public water.

There is apparently only one source of public water in the area: SCWA's water wells. Moreover, by applying to merely extend the use of the existing source, the District employed the same choice of source that it did in its previously approved permit applications.

Just and Equitable to All Affected Municipalities

6 NYCRR 601.6(b)(6) provides:

"that the proposed project is just and equitable to all affected municipalities and their inhabitants, and in particular with regard to their present and future needs for sources of water supply..." (Italics , underline supplied).

The above provision, which is virtually identical with wording in ECL 15-1503(2), refers to DEC's role as allocator of the State's water resources. DEC must exercise just and fair supervision to the end that water supplies which are more available for use by one community are not absorbed by another. City of Syracuse v. Gibbs, 258 AD 405 (1940), rev'd on other grounds 283 NY 275. Staff suggests that the proposal is unjust or inequitable to Smithtown (and Villadom) because SCWA is "better able," however the connection between ability and what is a just and equitable allocation of the state's resources is not made. However, under the facts of their case, the source of supply is the same, because SCWA supplies all the District's water. Therefore, the just and equitable criteria of .601.6(b)(6) is inapplicable and there is nothing for DEC to resolve with respect to it in this case. This conclusion is consistent with ALJ Goldberger's recent ruling in Matter of the Application of the Town of Poughkeepsie, Water Supply Application No. 9325 dated August 21, 1996.

Whether All Issues are Moot

Staff's argument that SCWA's connection to Villadom renders the application moot is unclear. Contrary to Staff's position, the District's "stake" in the outcome of the controversy is obvious: DEC will determine whether the District will serve Villadom, and, as a consequence, whether the District will receive revenue from the sale of water therein. Staff's argument implies that SCWA's connection means that no dispute continues to exist. This is not so.

The application is not moot.

SCWA Faster, Less Expensive and So Forth

As to Staff's and SCWA's claim that SCWA is faster at providing water service, it is noted that the District was connected to Villadom some seven (7) months before SCWA.

As to which was capable of connecting at less expense, the District put estimated costs at $31,160 while SCWA put them at $20,196. There is no showing of either parties' actual costs. Assuming actual costs as estimated, yet it is the developer who must bear the cost and from all that appears he was more than willing to pay about one-third more to the District so as to obtain service to his thirteen new homes seven months earlier.

Staff and SCWA also point out that SCWA supplies all water to the District so that, in any case, it will be "SCWA's water" going into Villadom. While this is true, it does not appear that Villadom will have any less water available if the District supplies it rather than SCWA. Nor has there been any showing that the District's mains and connection will add any less beneficial redundancy or any less fire-fighting capacity than those of SCWA.

That said, SCWA's superior water supply system has long been recognized. See e.g. Swan Lake Water Corp. v. Water Resources Commission, 31 AD2D 44 (Third Dept. 1968) lv. to app. denied 24 NY2D 737 (1969) where the court referred to:

"...more than 20 wells in the Patchoque plant, vast elevated storage facilities of over 3,000,000 gallons, modern laboratory and quality control, and trained personnel in constant attendance, as compared with [the Swan Lake Water Corp.'s] supply system..." (Pp. 46-47)

SCWA's opposing papers represent, in effect, that SCWA is no less superior than it was at the time of the 1968 Swan Lake decision quoted above. Indeed, SCWA suggests that even the customers of the District's present service area will reap greater benefits from SCWA's connection to Villadom.

Finally, SCWA represents a regional approach to public water supplying and indicates that it is continually attempting to purchase (or condemn) smaller private waterworks systems in Suffolk County.

Whether an ALJ Must Defer to a Regional Permit Administrator's Decision

An ALJ need not defer to a Regional Permit Administrator's decision. Not only is such a decision only tentative but every applicant has a right to a hearing after a denial.

Although Regional Permit Administrators possess a certain amount of expertise in permit matters, it is not that expertise to which courts often defer; rather, it is the exercise of expertise by an agency as approved by the Commissioner or other head of the agency in final agency action that merits the deference of the courts.

FINDINGS OF FACT

  1. In August 1995 the Smithtown Town Board adopted a Resolution extending the Smithtown Water District's service area so as to include the Villadom extension, subject to DEC approval.
  2. For some unknown amount of time past, the District had a water main which terminated at the boundary of the Villadom subdivision.
  3. In or about August 1995 the District, at the developer's request, connected its mains, to the Villadom subdivision and began to supply water to the 13 new residences there.
  4. On March 1, 1996 SCWA shut off the valve at the District's connection and connected itself to Villadom's pipes and began to supply water to Villadom.
  5. The District was never "legally established" at the Villadom connection in that it lacked a DEC permit.
  6. Since the District was never legally established SCWA was not paralleling the District's mains or competing with the District when SCWA connected to Villadom.
  7. SCWA does not require a DEC permit as long as it abides by the terms of WSA 1930 (1949) and ECL 15-1501(2).
  8. The District need not have considered other sources of water.
  9. The proposed project is just and equitable to all affected municipalities and satisfies all other concerns expressed at 6 NYCRR 601.6(b)(6).
  10. The District's application is not moot.
  11. While SCWA was not faster in this instance, it is nevertheless far superior to the District in all areas of expertise, concerning water works systems equipment and operation.
  12. SCWA's connection to Villadom will provide beneficial redundancy and increase fire-fighting capacity.
  13. An ALJ need not refer to a Regional Permit Administrator's decision.

RECOMMENDATION

The water supply application (DEC Project No. 1-4734-00663/00001-0; Water Supply Application No. 9318) of the Smithtown Water District should be denied.

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