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Saratoga Water Services, Inc. - Ruling, June 13, 1997

Ruling, June 13, 1997

STATE OF NEW YORK : DEPARTMENT OF ENVIRONMENTAL CONSERVATION

In the Matter of the Application of Saratoga Water Services, Inc.
for a Water Supply Permit pursuant to Environmental Conservation Law
Article 15 and Title 6 of the Official Compilation of Codes Rules and
Regulations of the State of New York, Part 601

ALJ RULINGS:
PARTY STATUS
and ISSUES;
SCHEDULING
ORDER

File No.
5-4152-00073/00001

THE PROPOSED PROJECT and PERMITS SOUGHT

Saratoga Water Services, Inc. , P.O. Box 2109, Malta, NY 12020 (the "Applicant") seeks a Water Supply Permit from the Department of Environmental Conservation (the "Department" or "DEC"). Statutory and regulatory provisions applicable to processing this type of application are: Environmental Conservation Law ("ECL") Article 3, Title 3 (General Functions), Article 70 (Uniform Procedures), Article 15 Title 15 (Water Supply), and Article 8 (State Environmental Quality Review); and 6 NYCRR Part 621 (Uniform Procedures); Part 624 (Permit Hearing Procedures); Part 601(Water Supply Applications); and Part 617 (State Environmental Quality Review).

The Applicant proposes to extend its existing service territory to provide potable water to 14 residential units, a golf course clubhouse and maintenance building, and for irrigation of the golf course. The new area to be served would be located near the intersection of Lake Road and NYS Route 9P, Town of Stillwater, Saratoga County, N.Y.

PROCEEDINGS

The appliction was initially filed June 20, 1996. Following the submission of other documents, DEC Region 5 Staff ("Staff") issued a Notice of Complete Application ("NOCA") on December 18, 1996. During the time the Applicant was submitting other documents, the Saratoga County Water Authority (the Water Authority) wrote August 1, 1996, to object to permit issuance.

On January 29, 1997, Staff denied Applicant's request for the permit, alleging that it failed to meet the rquirements of 6 NYCRR 601.6(b)(1), (2), and (3), based upon Staff's determinations (1) "that the use of 86,000 gallons per day of potable water for golf course irrigation is not justified by public necessity," (2) "that other sources of water supply for golf course irrigation have not been properly considered," and (3) "that the use of potable water for golf course irrigation is not just and equitable to the future needs of the Saratoga Water Authority whose Master Plan includes servicing this area." (See Exhibit 3B.) Applicant subsequently requested a hearing on the denial.

On April 11, 1997 the DEC Office of Hearings and Mediation Services received Staff's request to schedule a public hearing. On the same day, I was assigned to be the Administrative Law Judge ("ALJ") who would hear the matter.

A combined Notice of Complete Application and Notice of Public Hearing (the "Notice") was issued April 23, 1997, and was published April 30, 1997, in DEC's Environmental Notice Bulletin, and the (Schenectady) Daily Gazette. Notice was also directly mailed April 23, 1997, to the supervisor of theTown of Stillwater, the clerk of Saratoga County, the counsel for the Water Authority, as well as to other persons or entities deemed interested in this proceeding. The Notice scheduled a public hearing and issues conference, required that petitions to intervene be filed by May 22, 1997, and required that written comments be received by the ALJ prior to or at the hearing. The Notice also indicated Staff's tentative determination to deny the permit.

In response to the Notice, requests to intervene were received from the Water Authority, the City of Mechanicville and Town of Stillwater Industrial Development Agency (IDA), the Town of Stillwater (Stillwater), and the New York State Department of Public Service (DPS).

Public Statement Session (Legislative Hearing):

As advertised in the notice, the public hearing was convened at 7:00 PM on May 27, 1997, at the Stillwater Town Hall, 66 East Street, Mechanicville, NY 12118. Including representatives of Staff and Applicant, 12 persons commented on the proposed project. With the exception of Staff, which reiterated its reasons for denying the permit, all other statements were in favor of the proposed project.

Essentially, those who spoke viewed the proposed project as an integral part of establishing the golf course that would be served with water. Referring to the Applicant's study, it was concluded that the proposed water system extension was the most practicable way to irrigate the golf course. Concern was voiced over Staff appearing to draw a distinction between "acceptable" and "unacceptable" water uses without explaining why or how the determination was made, given no apparent lack of water in the region. It was questioned whether Staff was favoring one type of development over another (such as residential or industrial as opposed to a golf course), which was viewed as more appropriate for the community to determine.

The golf course is considered to be an important development, seen as a much needed commercial and recreational facility that will contribute to the area's tourist business, create jobs and economic growth beyond the golf course itself, and improve area residents' quality of life. A marketing study was cited as supporting the existence of such need.

Speakers indicated that Stillwater's Town Board and Planning Board have reviewed and approved of the golf course, and understood that the golf course would be irrigated with water from the proposed project. It was noted that to induce the golf course's creation, the IDA agreed to acquire the golf course and lease or sell it back to the developer, to issue bonds to finance its construction, and to arrange for the property involved to be assessed and taxed at a reduced level of taxation (with the developer making payments in-lieu-of taxes) for a period of ten years.

Given the local municipal effort to establish the golf course, and the understanding that using potable water to irrigate a golf course is not unusual in the region, Staff's decision to deny the permit based on the opinion that there is no "public necessity" to irrigate the golf course with potable water was perceived as infringing on Stillwater's right to govern itself. Commenters were particularly disturbed by the permit denial being based on the golf course being in conflict with the Water Authority's Master Plan. One person argued that the Water Authority was created to provide water to areas that did not have water service, not to "swallow up" water companies (such as the Applicant), nor to stop "positive" projects such as the golf course. Noting that the water source exists within Stillwater, concern was expressed that the water was being reallocated to foster continued commercial and residential growth in the adjoining Town of Malta at Stillwater's expense (Stillwater being relatively depressed). In essence, Staff's stance was viewed as giving the Water Authority veto power over local development efforts, and being unfair to the residents of Stillwater.

Issues Conference:

The Issues Conference was convened at 9:30 AM, May 28, 1997, at the same location as the public statement session. DEC Staff was represented by Steven L. Brewer, Esq., Assistant Region 5 Attorney. The Applicant was represented by Roland, Fogel, Koblenz and Carr, LLP; Usher Fogel, Esq., of counsel. The Water Authority appeared through Tabner, Ryan and Keniry; John W. Tabner, Esq., of counsel. The IDA appeared through George W. Cregg, Sr., Esq., Agency Counsel. Stillwater appeared by Andrea J. DiDomenico, Esq., Town Attorney. The DPS appeared by David R. Van Ort, Esq., Assistant Counsel.

The conference began with identifying and marking as exhibits the documents related to publication of the Notice, comprising the application, comprising the conference participants' respective positions, the NYS Department of Health's position (a non-participant that DEC relies upon for design considerations) and the prior permits for the resource in issue. (It was also agreed that certain other documents, such as the Water Authority's Master Plan and Updated Master Plan, would be submitted and added to the list post-conference because they had been referred to in discussion and were believed to be crucial to understanding the participants' positions.) This was followed by discussion of the environmental interest held by each participant, and the potential issues for adjudication (including the most appropriate manner for developing the record on same).

No one present challenged the environmental interest of anyone who filed for party status. Every participant had the requisite environmental interest for party status in this matter, specifically, a stake in the water resource itself, either as a perceived essential ingredient in the participant's plans (Applicant, Water Authority, IDA, Stillwater), or as an object of the participant's regulation (DEC Staff, DPS).

With the exception of DPS, the participants' discussion on the issues reflected the concerns raised in the legislative hearing, and two allignments of view: those in favor of permit issuance (Applicant, IDA, Stillwater), and those opposed (Water Authority, DEC Staff).

DPS was concerned that a denial could effectively eliminate a potential significant revenue stream to the Applicant that might be used to reduce the rates that system customers would have to pay, or at least delay the need to file for future rate increases. Staff's apparent conclusion that potable water should not be used for irrigation supply, absent a determination of inadequate ground water supply, was of particular concern to DPS due to the potential economic impact upon waterworks' customers and development in the state. DPS believed that DEC's distinction between "potable" and "non-potable" had implications for DPS' determination of rate structure since DPS currently treats everything as "potable." If the extension of Applicant's water service to permit the golf course irrigation would not adversely affect the level of service currently being provided to its customers, the DPS would not oppose issuance of the permit. At the close of the issues conference, DPS indicated that while it was interested in the proceeding, it did not see a role for itself on the specific issues that were identified.

Concern over "storage capacity" or other aspects of the extension's design was resolved by the NYS Department of Health's recommendation to DEC that there should be no hearing and that the application be approved with the following conditions:

"1. That final plans and specifications be submitted to the Glens Falls District Office [NYSDOH] for approval.

"2. That the Saratoga Lake Golf Course System cannot take water from Saratoga Water Services, Inc. during any time that water use restrictions are imposed by the supplier." [bracketed added, see Exhibit 7B].

All the conference participants agreed that the scope of these proceedings could be limited to the three bases of permit denial articulated by DEC Staff (restated here as three questions):

  1. Is the use of 86,000 gpd of potable water for irrigation of a golf course justified by public necessity?
  2. Were other sources of supply of water for the golf course properly considered?
  3. Is the use of the water on the golf course just and equitable with regard to the future needs of the Water Authority?

Regarding the first basis for denial, it was agreed that there are no disputed facts (e.g., the amount of irrigation water required, or that potable water is used to irrigate several regional golf courses as claimed by the Applicant), only questions of law. Staff acknowledged that a public need would be served by using the water on the golf course (although a "higher" public need would be to use it for "potable purposes"). Staff also acknowledged that currently there is adequate water to supply the amount that the golf course would use. Nevertheless, Staff interpreted the Commissioner's April 4, 1996 decision (to issue a permit to the Water Authority to acquire Applicant's water supply source and system) to require Staff's determination here.

Staff noted that the Commissioner found that it was in the public interest for the Water Authority to take over the Applicant's system along with that of Saratoga Glen Hollow, and found specifically that it was in the public interest for a county water authority to manage the water resources and have a long range plan to serve the county rather than a patchwork of smaller companies. Because of that decision, when Staff was confronted with an application by a smaller private company to use the same excess water resources that the Commissioner previously indicated should be used by the Water Authority, and to use same in a manner (golf course irrigation) that was not provided for in the Authority's Master Plan, Staff concluded that such a proposal was not in the public interest, because it could negatively impact the Water Authority's Master Plan. Staff stopped short of saying that the Commissioner adopted the Authority's Master Plan as a blueprint for exercising DEC's jurisdiction in allocating the state's water resources in Saratoga County, but felt that the proposed project could hurt the public interest if it precludes future use of the water for uses that are now identified in the Master Plan. Staff acknowledged that it relied on the Water Authority's Master Plan as the gauge of whether or not something is a public need.

Other conference participants disagreed with the effect Staff was giving to the prior decision, essentially not seeing it as a determination of specific needs. In light of the disagreement with Staff's interpretation of the prior decision, it was agreed that Staff's first basis for denial would be best addressed by exchanging briefs and replies on the following question:

"What is the effect of the Commissioner's April 1996 decision (to issue a permit to the Water Authority to acquire Applicant's water supply source and system) on this application's proposal to use potable water on a golf course, and does this application meet the test of public necessity?"

Regarding the second basis for denial (other sources of water for golf course use), there was discussion over the sufficiency of Applicant's examination of alternate sources -- Staff acknowledging that alternatives were examined, but contending that Applicant did not take a "hard enough look at some of the other alternatives." Applicant was disturbed that Staff did not ask for more information in this regard, but, rather, accepted the application as complete and denied the permit. Regardless, Staff now contends that on-site wells and Applicant's proposed storage pond could adequately supply the golf course. It was agreed that the following is a factual issue that needs to be resolved:

"Is it more reasonable to irrigate the golf course from on-site wells or from Saratoga Lake, as opposed to the Applicant's proposal?"

Applicant and Staff noted that they have engineers who will testify to opposing points of view on this question. Except for DPS, other participants (having already considered water to the golf course as part of their own decision making) indicated that they wanted to reserve the right to call witnesses on this issue depending on what other parties produced. In this regard it was agreed that pre-filing direct and rebuttal testimony, with an evidentiary hearing for cross-examination, was the most appropriate way to address this issue.

Regarding the third basis for denial (inconsistency with the Water Authority's needs) the participants viewed this as primarily a legal issue which overlaped the first issue, but one in which there could be factual disputes that might not be apparent until after the parties briefed the law to each other. It was questioned whether Staff properly applied the standard in ECL 15- 1503(2) (i.e., "whether the 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 determining whether affected municipalities' inhabitants have been treated in a just and equitable fashion. Noting that neither Stillwater nor Mechanicville were part of the Master Plan, Stillwater and the IDA indicated that Staff's decision to deny the permit was not just and equitable with regard to those municipalities and their inhabitants. Although the Water Authority questioned the propriety of considering this question here (contending that Staff's application of the law was a matter for the courts), the participants agreed to exchange briefs and replies on the following issue:

"Does the third ground articulated in the January 29, 1997 denial (Exhibit 3B) provide as a matter of fact and/or law sufficient basis to support denial of the permit?"

In their briefing, the parties will recite whatever facts are needed to support their position. If any such facts are contested, such may be raised in the replies.

The participants agreed that the initial round of briefs and pre-filed testimony would be mailed on or before July 8, 1997, and the round of replies and rebuttal testimony would be mailed on or before August 4, 1997.

Post Conference Occurrances:

The participants supplied each other with copies of their exhibits, and submitted certain additional exhibits, all as agreed upon or otherwise noted on the issues conference record. The Exhibits List at this stage of the proceedings is attached as Appendix A.

On June 11, 1997, I received a letter from DPS requesting permission to withdraw its petition for party status. DPS indicated that although it has an interest in the outcome of this proceeding, it did not appear that the issues to be litigated were ones for which the DPS would offer testimony, and that its continued participation was unnecessary.

The transcripts of the issues conference and legislative hearing were received June 10, 1997.

On June 12, 1997, I received a telephonic request from Staff and the Water Authority requesting that the parties be given additional time to make their initial round of filings.

Except where noted, the following rulings and scheduling order recapitulate what the participants agreed upon during the issues conference.

RULINGS

Ruling 1 -- Full party status is granted to all petitioners, except for the DPS whose request for permission to withdraw is granted.

Ruling 2 -- Regarding Staff's first basis for denial, an issue for briefs and replies is:

"What is the effect of the Commissioner's April 1996 decision (to issue a permit to the Water Authority to acquire Applicant's water supply source and system) on this application's proposal to use potable water on a golf course, and does this application meet the test of public necessity?"

Ruling 3 -- Regarding Staff's second basis for denial, an issue for pre-filed direct and pre-filed rebuttal testimony, and cross examination at an evidentiary hearing on a date to be scheduled is :

"Is it more reasonable to irrigate the golf course from on-site wells or from Saratoga Lake, as opposed to the Applicant's proposal?"

Ruling 4 -- Regarding Staff's third basis for denial, an issue for briefs and replies is:

"Does the third ground articulated in the January 29, 1997 denial (Exhibit 3B) provide as a matter of fact and/or law sufficient basis to support denial of the permit?"

SCHEDULING ORDER

Pursuant to the parties agreement, the initial round of briefs and pre-filed testimony were to be mailed on or before July 8, 1997, and the round of replies and rebuttal testimony would be mailed on or before August 4, 1997. I am hereby adjusting the due dates by one week (i.e., to July 15 and August 11 respectively) to accomodate the Staff's and the Water Authority's request for an extension.

I make this adjustment in expectation that there is no objection. During the conference when we discussed scheduling, it appeared that we would likely have cross-examination sometime in September due to people's schedules. This adjustment would not change that. If there is need for further adjustment, I would grant it provided that it would not significantly postpone the evidentiary hearing.

/s/
Frank Montecalvo
Administrative Law Judge

June 13, 1997
Albany, New York

Appendices:
Appendix A - Exhibits List

To: Official Service List via Fax and Mail

Rev. June 13, 1997

NAME OF HEARING: Saratoga Water Services,
Inc. (SWSI); Application No. 5-4152-00073/00001; Water Supply Permit

EXHIBITS LIST:

1 HEARING NOTICE DATED April 23, 1997

1A Office of Hearings Hearing Notice Distribution List

1B Copy of Hearing Notice published in April 30, 1997 ENB

1C Affidavit of publication of Hearing Notice in the Gazette on April 30, 1997

2 APPLICATION/APPLICANT'S POSITION DOCUMENTS (NO EXHIBIT 2)):

2A Application for a Public Water Supply Permit 6/20/96 WSA 9431 21.

2B Joint Application for Permit 21.

2C Short Environmental Assessment Form 6/20/96 21.

2D Engineering Report 6/19/96 19.

2E Project Justification 7/9/96 19.

2F SWSI Minutes of 6/12/96 16.

2G Municipal Consent and Acknowledgement 3/21/96 11.

2H Letter 12/1/96 - Benjamin Richards to Stephen Marshall (NYSDOH) - responding to August 21, 1996 comments. 11.

2I Letter 12/1/96 - Benjamin Richards to Walter Haynes - responding to July 22, 1996 Incomplete Notice.10.

2J "An Economic Analysis of Providing Irrigation Water ..." 11/4/96 7.

2K Letter 2/4/97 - Usher Fogel to Richard Wild - concerning permit denial and requesting clarification of status of 14 residential lots and maintenance building.3.

2L Letter 2/24/97 - Usher Fogel to Richard Wild - requesting an adjudicatory public heating in response to permit denial.2.

2M "Saratoga Lake Golf Course Town of Stillwater Title Site Utility Plan" compriseing 3 sheets U-1 through U-3. 11/10/94 [OHMS Rec. 5/23/97]

2N "Preliminary Plat Subdivision Plat Saratoga Lake Golf Course Golf Course P.D.D." 10/28/94 [OHMS Rec. 5/23/97]

3 DOCUMENTATION OF STAFF'S POSITION (NO EXHIBIT 3):

3A Notice of Complete Application 12/18/96. 8.

3B Letter 1/29/97 - Richard Wild to Alexander MacKay - informing Saratoga Water Services of permit denial. 4.

3C Hearing Request [OHMS Rec. 4/11/97]

3D "Denial - January 29, 1997" [OHMS Rec. 5/19/97]

EXHIBIT 4 SERIES - RELEVANT PRIOR NYSDEC DETERMINATIONS (No Exhibit 4)

4A Permit to SWSI, WSA No. 6918 11/16/78 [to be submitted by Staff]

4B Permit to SWSI, WSA No. 6918 Modification 6/29/92 [OHMS Rec. 5/19/97]

4C Permit to SWSI, WSA No. 7014 7/7/81 [to be submitted by Staff]

4D Permit to SWSI, WSA No. 8745 7/1/92 [OHMS Rec. 5/19/97]

4E Permit to SWSI, WSA No. 8944 9/30/94 [OHMS Rec. 5/19/97]

4F Permit to SWSI, WSA No. 9225 5/10/95 [OHMS Rec. 5/19/97]

4G Permit to SWSI, WSA No. 9356 2/28/96 [OHMS Rec. 5/19/97]

4H Commissioner's Decision and attached Hearing Report - Application of Saratoga County Water Authority (SCWA), WSA No. 8858 4/4/96 [OHMS Files]

4I Permit to SCWA, WSA No. 8858 7/16/96 [to be submitted by Staff]

4J Permit to SWSI, WSA No. 9408 2/18/97 [OHMS Rec. 5/19/97]

4K Permit to SWSI, WSA No. 9520 4/30/97 [OHMS Rec. 5/19/97]

EXHIBIT 5 SERIES - SARATOGA COUNTY WATER AUTHORITY POSITION (No Exhibit 5)

5A Letter 8/1/96 - John Tabner to NYSDEC - comments regarding SWS applicafion. 13.

5B Petition for Party Status [OHMS Rec. 5/19/97]

5C Master Plan [OHMS Rec. 6/4/97]

5D Updated Master Plan [OHMS Rec. 6/4/97]

EXHIBIT 6 SERIES - NYS DEPARTMENT OF PUBLIC SERVICE POSITION (No Exhibit 6)

6A Letter 7/18/96 - Jack Agansky (PSC) to Walter Haynes - comments regarding WSA application. . 18.

6B Letter 12/19/96 - Jack Agansky to Walter L. Haynes - responding to SWS submission of December 1, 1996.7.

6C Petition for Party Status [OHMS Rec. 5/22/97]

EXHIBIT 7 SERIES - NYS DEPARTMENT OF HEALTH POSITION (No Exhibit 7)

7A Letter 8/21/96 - Stephen Marshall to Benjamin Richards - comments regarding WSA. 12.

7B Letter 1/7/97 - Stephen Marshall to Walter Haynes - transmitting NYSDOH recommendation of no hearing and approval of application. 6.

EXHIBIT 8 SERIES - CITY OF MECHANICVILLE AND TOWN OF STILLWATER INDUSTRIAL DEVELOPMENT AGENCY (No Exhibit 8)

8A Petition for Party Status [OHMS Rec. 5/15/97]

8B "Regional Tourism Relationship ..." [OHMS Rec. 5/27/97]

8C Resolution of Inducement [OHMS Rec. 5/27/97]

EXHIBIT 9 SERIES - TOWN OF STILLWATER (No Exhibit 9)

9A Petition for Party Status [OHMS Rec. 5/21/97]

9B Local Law No. 1 of 1994 [OHMS Rec. 5/28/97]

9C March 21,1996 Minutes [OHMS Rec. 5/28/97]

9D Copy of Town Board Minutes 2/5/95,1/19/95, 8/18/94,6/30/94, 3/18/94, 3/31/94 [OHMS Rec. 6/5/97]

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