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Ten Mile River Holding, Ltd., MAC Sand and Gravel, Inc. and Aldo Colella - Order, September 28, 1992

Order, September 28, 1992

STATE OF NEW YORK : DEPARTMENT OF ENVIRONMENTAL CONSERVATION
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In the Matter of the Alleged Violations
of Articles 15, 17, 23 and 71 of the New York
State Environmental Conservation Law and ORDER
Parts 201, 422 and 423 of Title 6 of the
Official Compilation of Codes, Rules and
Regulations of the State of New York by

TEN MILE RIVER HOLDING, LTD.,
M.A.C. SAND AND GRAVEL, INC. AND
ALDO COLELLA,
Respondents

R3-1405/8704

ORDER
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WHEREAS:

  1. Pursuant to duly served Notices of Hearing and Complaints, dated March 1, 1991, and Amended Complaints dated April 17, 1991 an adjudicatory hearing was held before Administrative Law Judge ("ALJ") Judith Kaufman Bentley commencing on March 28, 1991 and pursuant to adjournments duly taken, continued on April 17, 1991, October 15, 1991, October 10, 1991, November 12, 1991, November 13, 1991, November 25, 1991, November 26, 1991, January 15, 1992 and January 16, 1992. The Department of Environmental Conservation (the "Department") appeared by Katherine Hudson, Esq., Assistant Regional Attorney. Respondent Ten Mile River Holding, Ltd. was represented by Elizabeth D. Hudak, Esq., of Adams, Smith and Berkman, Brewster, New York and Respondents M.A.C. Sand and Gravel, Inc. and Aldo Colella were represented by Michael Dennis, Esq. Garden City, New York.
  2. After review of the attached hearing report (the "Report") of ALJ Bentley, I concur with and adopt the Report as my decision in this matter except as noted below.
  3. The record shows that the Respondents have repeatedly, knowingly and willfully violated the laws, rules and regulations of the Department as well as the terms of the permit under which they were operating. These violations were shown to have continued over a period of several years.
  4. The violations have caused both actual and potential environmental damage. The mining activities have significantly reduced the value of prime agricultural soils. The Respondents' illegal activities have adversely impacted the Ten Mile River, causing turbidity which has adversely affected trout feeding and spawning as well as other aquatic biota. Further potential adverse impacts to the river may be anticipated due to sedimentation.
  5. As discussed in the Report, the Respondents have received significant economic gain as a result of the illegal mining.
  6. I find that Respondent Ten Mile River Holding, Ltd., as permittee, is fully responsible for all activities conducted by those operating under the color of authority of its permit.
  7. Respondents have not demonstrated any mitigating circumstances.

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

  1. The Respondents are found to have committed all of the violations as set forth in the complaints and amended complaints (excepting the allegations which Staff withdrew). Liability is joint and several except as to the violations of the bonding requirements and the those involving the reclamation of Pit 2, which are found against Ten Mile River Holding, Ltd. alone.
  2. Penalties are assessed in the amounts of One Million Dollars ($1,000,000) against all the Respondents jointly and severally, and an additional Five Hundred Thousand Dollars ($500,000) against Ten Mile River Holding Ltd., payable within ninety (90) days of the date of service of a conformed copy of this Order upon the Respondents.
  3. Within sixty (60) days, Respondent Ten Mile River Holding Ltd. must submit to the Department an approvable reclamation plan and schedule prepared in accordance with ECL § 23-2715 and 6 NYCRR 422.3. Such plan shall not include the twenty acre pond previously proposed by the Respondent. Upon Department approval, reclamation must be performed in accordance with the plan. All reclamation must be completed withing two years after approval of the plan.
  4. Respondent Ten Mile River Holding Ltd. must post a reclamation bond, or other form of financial security acceptable to the Department, in the amount of two hundred and eighty-five thousand dollars ($285,000) within sixty (60) days of service of a conformed copy of this Order. The Department may amend this amount based upon updated estimates of reclamation costs.
  5. All communications between the Respondents and the Department bearing on this Order shall be made to the Department's Region Three Office, Regional Director, 21 South Putt Corners Road, New Paltz, New York 12561-1696.
  6. The provisions, terms and conditions of this Order shall bind the Respondents, their officers, directors, agents, servants, employees, successors and assigns and all persons, firms, and corporations acting for or on behalf of the Respondents.

/s/
THOMAS C. JORLING
COMMISSIONER

Dated: Albany, New York
September 28, 1992

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

In the Matter

- of -

Alleged Violations of Articles 15, 17, 23
and 71 of the Environmental Conservation Law
and Parts 201, 422 and 423 of Title 6
of the Official Compilation of Codes, Rules
and Regulations of the State of New York by

TEN MILE RIVER HOLDING, LTD.,
M.A.C. SAND AND GRAVEL, INC. AND
ALDO COLELLA,

RESPONDENTS

DEC No. R3-1405/8704

HEARING REPORT

- by -

/s/
Judith Kaufman Bentley
Administrative Law Judge

PROCEEDINGS

Pursuant to Notices of Hearing and Complaints dated March 1, 1991 and Amended Complaints dated April 17, 1991 duly served upon Ten Mile River Holding, Ltd. ("TMR"), M.A.C. Sand and Gravel ("MAC") and Aldo Colella ("Colella"), (the "Respondents"), by the Department of Environmental Conservation (the "Department"), through its Region 3 Office, an Administrative Enforcement Hearing was opened before Judith Kaufman Bentley, Administrative Law Judge ("ALJ") in the Dover Town Hall on March 28, 1991 and continued in the Department's Region 3 Office, 21 South Putt Corners Road, New Paltz, New York upon adjournments duly taken, on April 17, 1991, October 10, 1991, October 15, 1991, November 12, 1991, November 13, 1991, November 25, 1991, November 26, 1991, January 15, 1992 and January 16, 1992.

The Department was represented by Katherine Hudson Esq., Region 3 Assistant Regional Attorney. The Respondent TMR was represented initially by Paul Morabito Esq., who withdrew as counsel for reasons related to conflicts of interest, and later by Elizabeth D. Hudak, Esq., of Adams, Smith and Berkman, Brewster, New York. The Respondents MAC and Colella were both represented by Michael Dennis, Esq., Garden City, New York.

After the transcripts were received and forwarded to the parties, the record closed on June 11, 1992 upon receipt of reply briefs from the parties.

Charges

The Department Staff alleges that the Respondent violated Environmental Conservation Law ("ECL") Articles 15, 17, 23, and 71 and Parts 201, 422 and 423 of Title 6 of the Official Compilation of Codes, Rules and Regulations of the State of New York ("6 NYCRR") by mining without a permit, failing to maintain a reclamation bond, abandoning the mine, violating the terms of its permit, disturbing the bed and banks of the Ten Mile River without a permit, and discharging pollutants to the Ten Mile River without a SPDES permit. The acts alleged occurred at the Ten Mile River mine site located on Sand Hill Road, in the Town of Dover, Dutchess County.

At the hearing, the Department withdrew charges related to peration of an air contaminant source without a permit as set forth in paragraphs 27, 28, 29, 50, 51 and 52 of the complaint.

Relief Sought

In its closing brief the Department requested that the violations be sustained (jointly and severally with the exception of the violations concerning the reclamation bond and abandonment of Pit 2 which involved TMR individually) and a penalty of $1,500,000.00 be ordered ($1,000,000 jointly and severally against all Respondents and $500,000 individually against Respondent TMR); that Respondent TMR submit an approvable Mined Land Reclamation Plan, which does not propose pond construction; that TMR be prohibited from conducting any mining or reclamation activities until Department approval is received; that TMR post a bond for the reclamation to be performed; and such other relief as the Commissioner finds just and reasonable.

Answer

The Respondents served Verified Answers denying the allegations of the complaints. The Answer of TMR made "objections in point of law" and asserted affirmative defenses including laches, merger, bar, estoppel and res judicata. These defenses were not presented at the hearing, and were not argued in the Closing Brief of TMR.

Written Testimony

The parties stipulated that certain evidence would be in the form of written affidavits, to be submitted after the last hearing date, but before the close of the record. The affidavit of Jordan Berkman is marked as Exhibit 91 and upon consent of the parties, is deemed received into evidence. The affidavit of Paul Morabito is marked Exhibit 92 and upon consent of the parties is deemed received into evidence.

Official Notice

Official notice is taken of: the Town of Dover Laws Chapter 81 "Flood Damage Prevention", the FEMA Floodway Flood Boundary and Floodway Map for the Town of Dover effective August 15, 1984, the Order of Judge Torraca dated January 9, 1990, my Ruling on Party Status and Issues dated August 29, 1991, the Interim Decision of the Commissioner dated October 8, 1991 issued in connection with TMR's permit renewal, and the Commissioner's Civil Penalty Policy dated June 20, 1990.

Reclamation

TMR failed to perfect its appeal of the ALJ's ruling and therefore failed to exhaust its administrative remedies. Therefore Respondent TMR's prior permit under SAPA terminated upon issuance of the Commissioner's Decision of October 8, 1991 upholding denial of the renewal application. Accordingly, the question of a reclamation plan arises. Normally, a permit holder who has been found to have committed violations and deviations from the approved mined land use plan would simply be ordered to effectuate the provisions of the approved plan. In this instance, however, the only plan in effect dates from 1982, and the deviation from it's terms has been substantial. TMR submitted a proposed reclamation plan, which the Department

Positions of the Parties

The Department contends the violations have been proven and the Respondents are jointly and severally liable for these acts, and supports this argument with numerous citations to primary and secondary authority. The Department requests a higher than normal reclamation bond based on Five thousand dollars ($5,000) per acre of affected area, because of the cost and difficulty of the reclamation necessary at the Site.

It is the position of TMR in its Brief that the Department has failed to prove by convincing evidence the violations of the complaint. TMR further argues that if any violations are found to have occurred, then the finding of liability should be made exclusively against MAC and Colella. It is argued that as the operator of the mine, MAC could not bind TMR or subject TMR to liability for any of its wrongful acts. TMR argues that it was an entity situated in Europe, who believed that its operator was performing in accordance with contractual obligations and within the bounds of the permit.

TMR proposes to reclaim by creating a twenty acre pond in Pit 3, with a maximum depth of twenty feet, and a total capacity of seventy million gallons. This would require the excavation of several hundred thousand cubic yards of material over a five year period. Of the excavated material, 51,600 cubic yards would be used for on-site reclamation. The remaining material would be sold. Construction of the pond would involve disturbances of areas which were not encompassed by the prior permits. Truck traffic estimated at twenty-five to thirty truck trips per day would be generated.

TMR also claims that there is a valid reclamation plan under the 1982 permit which it has the responsibility of performing. TMR indicates it will undertake it as soon as possible, when not estopped by this proceeding. It is argued that the two year period after cessation of mining in which reclamation must be completed, has not yet run because the mining renewal was not denied until October, 1991. Thus, reclamation need not be completed until two years after that date.

TMR argues it has a right to implement a reclamation plan that includes a farm pond, since this is consistent with reclamation to agricultural purposes, based on scientific analysis, and takes into account the desires and rights of the property owner, including the right to a fair return on its investment. TMR asserts to do otherwise would constitute a taking of TMR's property without due process of law.

TMR argues that an adequate reclamation bond was in place, in the form of the $12,000 and $90,000 bonds which it posted. TMR argues it was never notified by its bank or DEC that the $12,000 letter of credit had expired. It promptly secured the $90,000 security when required by the Department. If a reclamation bond is required, TMR argues that the amount of the bond should be calculated in accordance with normal guidelines of Two Thousand Dollars ($2000) per acre of affected land.

TMR asserts that should any violations be found, no penalties are warranted since there was no showing of economic benefit, and because TMR never reaped the benefits from the mining operation since it was not the operator, and can only be assessed penalties, if at all, for the violations involving the reclamation and bonding aspects.

Regarding reclamation, the Department's recommendations are as follows: In Pit 1, twenty four and a half affected acres must be graded to a slope of 1:3 or less for adequate drainage, exposed bedrock must be covered with a minimum of six inches of topsoil, fertilized to the recommendations of a soil test, seeded and mulched. A seventy five percent vegetative cover must be established. A vegetated buffer must be established between the reclamation activities and the classified stream located in Pit 1. Pit 2 must be reclaimed in the same manner as Pit 1.

In Pit 3, material must be brought in to raise the excavated area to grade, or at a minimum to provide a separation of five feet between the seasonal high water table and the grade. Pit 3 must be graded, covered with six inches of topsoil, limed and fertilized to the recommendations of a soil test, seeded or cultivated for agricultural use. Any exposed soils or stockpiles must be moved away from the Ten Mile River, graded to a slope of 3:1 or less, and seeded to establish a vegetative cover. Any connection between the Ten Mile River and Pit 3 must be eliminated. Reclamation must be completed within two years.

The Respondents MAC and Colella argued that the applicable laws are unconstitutional as they deny them their right to a trial by jury, and further, it is alleged that the evidence does not support the charges of the complaint. As to one of the alleged violations of discharging to the Ten Mile River without a permit, it is argued that any sediment laden waters were caused by an "act of God".

MAC and Colella further contend that if violations are found to have been committed, only TMR can be held liable since it was the sole owner of the land, the permittee and the operator of the mine, and since it designated Aldo Colella to be manager of mining operations and authorized him to deal with third parties on behalf of TMR. Colella, it is argued, was agent, servant or employee of TMR and MAC, but he did not act as, nor was he treated as, a separate party to the agreements between TMR and MAC, and accordingly he may not be held personally liable. If he is, then Colella maintains the principals of TMR must likewise be held personally liable.

In its Reply Brief, TMR avers that the contract between TMR and MAC establishes that there was no "agency" or "joint enterprise" between the Respondents, and MAC at all times acted on its own behalf and was not subject to the control of TMR. Accordingly, TMR argues that MAC should be held solely liable for the violations committed.

PROCEDURAL HISTORY

Because of the complexity of this case's background, and its significance to understanding the facts and certain of the parties arguments, it is set forth in detail as follows.

TMR was issued Mining Permit No. 1718 on May 28, 1982 which was to expire on May 6, 1985. TMR submitted a renewal application on May 14, 1985, which was determined by Staff to be incomplete on May 24, 1985.

On or about May 7, 1985, TMR temporarily ceased mining at the Site, but resumed mining on or about August 1987. Thereafter, the Department served TMR with a Notice of Hearing and Complaint (Case No. D3-1405/87) and Motion for Summary Order dated March 1, 1988. This proceeding was concluded by the issuance of a Commissioner's Order dated July 6, 1988 which mandated TMR to cease its mining operation located at Sand Hill Road, Dover, New York upon service of the Order.

This Order was based upon the Findings of Fact and Conclusions of Law of Administrative Law Judge Daniel E. Louis. He found, contrary to the assertions of TMR, that it had failed to file a timely renewal application, and accordingly was not entitled to continued operation.

The Order determined that TMR did not have authority under the State Administrative Procedures Act ("SAPA") for continued operation, since it did not submit a sufficient renewal application in a timely manner and, in fact, did not submit a renewal application until after the May 6, 1985 expiration date of the permit. The lack of a permit was the basis of the Order's prohibition against further mining at the Site.

TMR, on or about July 22, 1988, commenced a proceeding under Article 78 of the CPLR, seeking a judgment setting aside the determination of the Commissioner. By order dated June 28, 1989 the Hon. Joseph P. Torraca, Supreme Court, State of New York, issued a stay prohibiting the Department from taking any action toward the enforcement of the Commissioner's Order, pending determination of the Article 78 action.

Thereafter, Judge Torraca, in an Order dated January 9, 1990, found that TMR had submitted a renewal application to the Town of Dover on or about April 9, 1985, but that the Town had delayed in signing off on the local municipality's section (Section D 27) of the form until May 13, 1985. The next day, May 14, 1985, TMR submitted the mining renewal application to the DEC. Staff determined that the application was incomplete on May 24, 1985. Based on the foregoing facts, Judge Torraca found the efforts of TMR to meet the technical requirements of the rules and regulations governing issuance of mining permits sufficient to constitute substantial compliance therewith. Therefore, he ruled that "The application, under the circumstances, was timely and SAPA Section 401(2) served to extend the life of the license then existing." Given this finding, the Article 78 petition was granted and the injunction of the Commissioner dated July 6, 1988, barring any mining at the Site, was annulled and vacated.

On January 30, 1990 after a meeting with DEC Staff, TMR agreed to submit current maps and a narrative, identifying the actual amount of acreage affected by mining on the Site, and to submit an updated and revised Mined Land Use Plan, as required by the regulations, on or before April 30, 1990. On March 30, 1990 TMR posted a partial reclamation bond in the amount of $90,000.

On July 30, 1990 the Department again requested that TMR submit updated documents necessary to complete the review of the 1985 mining renewal application. The material was to be submitted by August 31, 1990.

A map of the TMR sand and gravel mine dated September 7, 1990 prepared by TMR's consultant, Kayler Geoscience Ltd. ("Kayler") was submitted to the Department. This map indicated that mining of 12.1 acres outside the permitted area had occurred. Based on this map, the Department requested an additional mined land reclamation bond in the amount of $104,200.

On October 23, 1990 the Department denied TMR's renewal permit, based on TMR's failure to provide the documents necessary to review and process the application, and failure to submit the additional reclamation bond determined to be required. A public hearing on the denial of the permit renewal application was requested on November 19, 1990.

After conducting a Legislative Hearing and an Issues Conference, I recommended denial of TMR's permit in an Issues Ruling dated August 29, 1991. The Commissioner, by Interim Decision dated October 8, 1991 upheld the denial upon appeal by TMR. The current charges span the period from 1982 to 1991.

FINDINGS OF FACT

Background

  1. Ten Mile River Holding, Ltd., a corporation, owns 1360 acres of land, previously known as Eight Bells Farm, in the Town of Dover, Dutchess County, New York (the "Site"), which it purchased in 1981 or 1982. On January 29, 1985 TMR entered into a five year contract whereby MAC Sand and Gravel, Inc. ("MAC"), a corporation, became the operator of mining at the Site under authority of the permit held by TMR. This contractual relationship ended on October 13, 1990. Aldo Colella was a shareholder and President of, as well as an employee of, MAC. As early as August 1984, Aldo Colella acted as the manager of mining for TMR. Aldo Colella was TMR's authorized representative, supervisor of other employees in the mining operation and a frequent operator of mining equipment.
  2. Mining at the Site was conducted in three areas. The Eight Bells Farm map dated April 25, 1975 and revised May 10, 1978 indicates that Pit One is located on the northern portion of the Site. Eight acres had been affected by mining, of which five acres had been reclaimed. Pit Two is southwest of Pit One, and adjacent to the Ten Mile River. The active area consisted of approximately one acre. Pit Three is to the south and is adjacent to the Ten Mile River at the southeast boundary of the pit. The active area consisted of approximately one acre.

Mining Violations

Deviations from the Mined Land Use Plan
  1. In May, 1982 TMR obtained a permit to mine sand and gravel at the Site, on which eighteen acres of land had previously been affected by mining, in areas denominated Pits 1, 2 and 3. The permit, which was issued to TMR, expired on May 6, 1985, and was extended under the provisions of SAPA. The extension under SAPA expired on October 8, 1991 with the issuance of the Commissioner's Decision, due to the failure of TMR to timely and properly appeal from the Ruling of the Administrative Law Judge. (See Procedural History above) At the time of the 1985 renewal application, an additional three and one half acres had been affected by mining. The 1982 permit stated that eight acres would be mined during the renewal term.
  2. The mined land use plan in effect for the Site from October 1984 through October 8, 1991 was based upon TMR's 1982 permit applications, the Eight Bells Farms mining plan map submitted with the 1982 application, the Negative Declaration issued for the 1982 permit, and correspondence between Aldo Colella and the Department dated October 22, 1984 and October 24, 1984, which resulted in modifications to the mining plan.
  3. The project upon which the Department issued a Negative Declaration in 1982 was the operation of a sand and gravel mine to level an area previously disturbed by mining in Pit 1, and return of the area to agricultural use. These documents required that mining be done progressively, with completed portions of each pit being tilled or cultivated for agricultural purposes. During mining and until reclamation is completed, berms and sedimentation collection areas were to be provided to avoid sedimentation. Haulage roads were restricted to the pit areas and leading directly to the highway.
  4. The mining plan was modified in 1984 such that Pits 1 and 2 were to be leveled and reclaimed with material from Pit 3, and Pit 3 was to be reclaimed in accordance with Department recommendations.
  5. On April 26, 1985 Aldo Colella was mining outside the permitted area near Pit 3. Approximately three and one half acres (3 1/2) had been mined adjacent to but outside of the permitted limits of Pit Three prior to April 26, 1985. Between January 1985 and October 1990 approximately twelve (12) more acres were mined, adjacent to the Ten Mile River in the one hundred year floodplain, and outside of any previously permitted areas. Such mining occurred over a period of approximately 94 days. Between 1985 and 1990, approximately fifty three (53) additional acres were affected by mining. Some of the mining in Pit 3 occurred below the watertable. As of September 1990 approximately 59 acres of land were affected by mining.
  6. On March 30, 1989 TMR and its employee Jack Harbold were found guilty in criminal proceedings of mining outside of the permitted area on September 20, 1988 and October 7, 1988.
  7. No reclamation was completed during the 1982-1985 permit term. Some grading and seeding occurred in Pit 1 commencing in September 1990 but reclamation was not complete or acceptable due to the absence of topsoil. No other reclamation occurred.
  8. Between 1985 and the date of the complaint, March 1991, no berms or sedimentation areas were constructed on the Site so as to avoid sedimentation into the Ten Mile River. Topsoil was stockpiled in the 100 year floodplain in June, 1988. The failure to place berms allowed topsoil to be eroded into the Ten Mile River, particularly in 1989 when Department Staff observed the River entering into Pit 3 and flowing out through a cleared area or swath cut into the River bank.
  9. A new haul road into Pit 3 was constructed in an area other than that depicted on the approved mining plan map in September 1987, without Department approval.
  10. Respondents never requested or received permission to deviate from the approved mined land use plan.
Abandonment
  1. No mining or reclamation occurred at the Site between May 7, 1985 and August, 1987. No mining or reclamation occurred in Pit 2 from May 1982 to August 1987.
  2. An eight acre portion of Pit 1 which had been affected by mining was neither mined nor reclaimed during the period from June 13, 1985 to January 1988.
Reclamation Bond
  1. A reclamation bond substitute dated March 17, 1982 posted by TMR expired by its terms on March 17, 1984. Although a reclamation bond was necessary, between March 17, 1984 and March 30, 1990, no reclamation bond or substitute was posted. On March 30, 1990 TMR posted a partial reclamation bond substitute in the amount of $90,000. This was deemed adequate by the Department for approximately six months, to guarantee reclamation of forty-five acres of affected land, pending a determination of the actual amount of affected acreage. In 1990, it was determined the amount of affected acreage was approximately ninety-seven acres. The Department requested a bond in the amount of $194,200. The additional $104,200 was never posted. The actual amount of affected acreage has now been determined to be approximately 75 acres. The current estimated cost for reclamation is $750,000.

Stream Disturbance (Article 15 Violations)

  1. The banks of the Ten Mile River include that area immediately adjacent to, and which slopes towards, the bed of the watercourse, and which is necessary to maintain the integrity of the watercourse. The banks include the area extending fifty feet horizontally from the mean high water line of the river. The bed of the Ten Mile River is that area which is covered by water at mean high water. (See 6 NYCRR ss 608.1(a) and (b))
  2. Between September 22, 1987 and October 5, 1987, Respondents constructed a drainage ditch in Pit 3. On October 5, 1987, October 15, 1987, and January 12, 1988, Department Staff observed that this ditch was cut through the banks of the Ten Mile River. The Ten Mile River always rises into the end of the ditch at times of high water. The photographs TMR has offered regarding the drainage ditch are inconclusive and do not contradict the observations of Department Staff.
  3. On December 18, 1987 an employee of TMR drove a piece of mining equipment through the bed and banks of the Ten Mile River without a permit. On February 17, 1988 the employee of TMR pled guilty in justice court to committing this act, a violation of ECL Section 15-0501.
  4. On April 19, 1988 and June 18, 1988 the bed and banks of the Ten Mile River were disturbed by Respondents' mining equipment, which had been driven across the river without a permit.
  5. On April 4, 1989, May 22, 1989 and June 20, 1989 a swath had been cleared across the banks of the River. The swath allowed ponded water in the mined area of Pit 3 to drain into the River. Water was moving from the mined area into the Ten Mile River on April 4, 1989. The swath appeared to have been cleared approximately six months to a year earlier.

Discharges into the Ten Mile River without SPDES Permit (Article 17 Violations)

  1. Between September 22, 1987 and October 5, 1987 Respondents constructed a drainage ditch in Pit 3, for the purpose of draining water out of the pit. On October 5, 1987 and October 15, 1987 the ditch described above was carrying turbid water, containing particles of mineral material, from Pit 3 into the Ten Mile River, causing turbidity and a distinct visible contrast from ambient water at that point in the River.
  2. The section of the Ten Mile River adjacent to the Site is a Class "C(T)" fresh surface water stream pursuant to 6 NYCRR § 825.6 (Table 1, Item 6a). Its best use is for fishing and the stream supports a trout population. The applicable water quality standard provides that there shall be no noticeable increase in turbidity above ambient levels. There was no Article 17 permit for the activity described in the previous paragraph.

Penalty Factors

  1. Environmental damage has occurred as a result of the actions of the Respondents, including sedimentation into the Ten Mile River which negatively affects trout spawning and other aquatic species. The Ten Mile River is known to be a good fishery and a recreational resource. The soils in Pit 3 were classified by the U.S. Department of Agriculture and the N.Y. State Soil Classification as "#1", denominating soil of the very best quality, well drained and capable of the highest level of agricultural productivity.
  2. Reclamation has been made more difficult by the removal of topsoils, and by mining into the watertable. The surface of Pit 3 is presently uneven and eroded. There are large areas of standing water. A five foot buffer of soil between grade and groundwater is considered necessary to promote crop growth. Since much of the native topsoil is gone due to lack of berming or removal by other means, it would have to be purchased and brought to the Site to support agricultural uses.
  3. The soil that has been lost is prime agricultural soil, of which there is only a limited amount in Dutchess County. The agricultural productivity of the Site has been reduced or eliminated as a result of the removal of this topsoil, while previously the site had supported crop production since the 1930's. It may take up to forty years to regain the quality of topsoil that had previously been present on the Site.
  4. Sedimentation into the Ten Mile River potentially may cause "back water conditions", increasing flooding upstream and causing degradation of water quality downstream.
  5. The acts committed by the Respondents were knowing and intentional. The explicit, and unambiguous terms of the permit were repeatedly disregarded. After being warned by numerous Department employees that violations were being committed, the Respondents persisted in their activities. As just one example, on April 19, 1988 Department Staff warned Aldo Colella that it was illegal to cross a classified stream with mining equipment without a permit. On February 17, 1988, a TMR employee had been convicted in criminal court of committing the same type of violation. Yet on June 18, 1988 fresh tracks were observed leading from a gravel loader through the Ten Mile River. Respondent TMR was on numerous occasions advised to submit a bond, to reclaim the affected acreage, to submit reclamation plans and to cease mining in the unpermitted area.
  6. Mining into the unpermitted area in the vicinity of Pit 3 was not a minor, non-recurring miscalculation, but an ongoing and intentional activity which occurred over a period of at least 94 days. Warnings by various Department staff occurred in 1985, 1987, 1988 and 1990. The disturbance of the banks of the Ten Mile River was continued in 1989 after DEC Staff warned Respondents of the violation in 1987. These violations occurred in the Spring of 1988 even after Jack Harbold had been found guilty of similar charges in February 1988. In 1990, the Department repeatedly discussed with TMR the required bond, which TMR never submitted.
  7. Respondents obtained an economic benefit from their acts, through both actual sales of sand, gravel, and top soil, and avoided costs. It is estimated that 136,000 cubic yards of material was removed from the unpermitted area adjacent to Pit 3. This material could have been sold off-site for approximately $476,000. No evidence was offered to rebut this figure. Avoided costs include but are not limited to those associated with delayed reclamation, failure to construct sedimentation collection areas and berms, and failure to prepare and submit plans and applications for Article 15 and 17 permits. Costs were also avoided through failing to post a full reclamation bond.
  8. While never actually hindering the Department Staff during inspections, Respondents did not in any substantial manner cooperate with the Department prior to or subsequent to the instant charges. TMR has continued to claim a right to continue mining by stating it will be performing reclamation, despite the fact that the Department advised TMR that it had no approved reclamation plan in effect. Moreover, even prior to that, TMR failed to cooperate with the Department Staff who had repeatedly requested information necessary to the processing of the renewal permit application after the conclusion of the Article 78 proceeding. Since TMR was permitted to mine under the SAPA permit extension, it was to TMR's benefit to delay indefinitely its submission of documents. The permit was ultimately denied for this reason. TMR also failed to voluntarily post the reclamation bond required for the amount of affected area at the Site.

Reclamation

  1. In Pit 1, twenty four and a half affected acres must be graded to a slope of 1:3 or less for adequate drainage, exposed bedrock must be covered with a minimum of six inches of topsoil, fertilized to the recommendations of a soil test, seeded and mulched. A seventy five percent vegetative cover must be established. A vegetated buffer must be established between the reclamation activities and the classified stream located in Pit 1. Pit 2 must be reclaimed in the same manner as Pit 1.
  2. In Pit 3, material must be brought in to raise the excavated area to grade, or at a minimum to provide a separation of five feet between the seasonal high water table and the grade. Pit 3 must be graded, covered with six inches of topsoil, limed and fertilized to the recommendations of a soil test, seeded or cultivated for agricultural use. Any exposed soils or stockpiles must be moved away from the Ten Mile River, graded to a slope of 3:1 or less, and seeded to establish a vegetative cover. Any connection between the Ten Mile River and Pit 3 must be eliminated. Reclamation must be completed within two years. The posting of a reclamation bond in the amount of Five Thousand Dollars ($5000) per acre is warranted based upon the condition of the Site. The inclusion of a twenty acre farm pond in the reclamation of the Site is not appropriate.

APPLICABLE LAW

For the sake of brevity, the applicable laws and regulations are cited in part as follows, but are not reproduced herein:

ECL §§ 15-0501, 17-0105, 17-0501, 17-0803, 23-2713(4), 23-2717(4), 71-1107, 71-1305(2), 71-1305(3), 71-1307(1), 71-1929.

6 NYCRR §§ 422.1(a), 422.3(e), 422.4, 423.1, 423.1(c), 423.2, 423.2(d), 608(a), 701.19, 751.1, 825.6 (Table 1, Item 6a).

DISCUSSION

Relationship between the Respondents

A major focus of this proceeding was the nature of the relationship between the Respondents, and their relative liability as a result. The conclusion reached below however, does not hinge on any contract between the Respondents, which would not be binding on the Department. It is immaterial whether MAC is characterized as an agent or as an independent contractor. Very simply put, TMR as the permittee is primarily responsible for assuring compliance with all applicable laws, regulations and permit conditions associated with its mining operation. It has delegated its authorization to mine under the permit to MAC. MAC, like any corporation, can operate only through the actions of its officers, directors or other authorized agents and employees. MAC acted, to a great extent, through its President, Aldo Colella.

The Department argues that TMR is liable, as both permittee and principal, for the acts of its agents and employees. MAC is liable through the acts of its officers and employees. Colella is personally liable because of his own unlawful conduct, but his liability is joint and several with that of TMR and MAC because all of the Respondents were operating with a joint purpose and a common goal. The Department is correct that the liability in such a situation is properly joint and several. (See, In the Matter of the Alleged Violations by Jackson's Marina, Inc. et al., Decision of the Commissioner, November 6, 1991) It is beyond the scope of an administrative enforcement proceeding, and is for the Respondents themselves, to determine how liability for penalties will be apportioned. Furthermore, the harm caused by the Respondents resulted from their common enterprise and in furtherance of a common goal, and not from discrete activities supporting some obvious and logical division of liability.

The contention in TMR's Brief that "TMR never reaped any financial benefits from the mining operations as it was not the operator." (p. 40) must be addressed. This statement is belied by the contract between TMR and MAC, which was offered into evidence as Exhibit No. 84 by TMR itself. Paragraph 4 evidences the fact that TMR was to receive royalties from MAC of $.65 per cubic yard commencing in 1985 and increasing to $1.15 per cubic yard in 1990. The evidence adduced gives no suggestion that TMR did not receive such payments, and if it did not, a cause of action for breach of contract has accrued. Given the fact that MAC operated the mine from 1985 until late 1990, the assertion that TMR reaped no financial benefits is not credible.

The evidence offered by the Department regarding the violations was clear, persuasive and unambiguous. Contrary to assertions in the Respondents' Briefs, the standard of proof in an administrative proceeding is not "clear and convincing". It is proper to base findings upon a preponderance of the evidence, which includes the drawing of reasonable inferences flowing from such evidence. As to the evidence introduced by the Respondents, it is best characterized as vague and unconvincing. In particular, the testimony concerning the photographic evidence (Ex. 85, 86 and 87) was, essentially, so confusing as to be unreliable, and I have been constrained to accord it no weight. Regarding the contention that the Department never determined the location of the mean high water level of the Ten Mile River, suffice it to say that since the ditch and swath actually entered the Ten Mile River, they also passed through the banks.

The other major area of dispute was regarding TMR's proposal for reclamation. TMR seeks to reclaim the Pit 3 area by excavation of a farm pond of 20 acres and a depth of 20 feet. The Department is opposed, because such a pond would prolong the period of reclamation beyond two years, would constitute a major mining operation without a permit, and the size of the pond far exceeds any agricultural needs of the farm. It would also allow TMR to realize substantial profits through the sale of the mineral resources excavated in order to create the pond. It has been estimated that excavation of 435,000 cubic yards of material will be required, of which over 380,000 cubic yards will be sold off-site.

Such a pond would also be a major deviation from TMR's prior approved reclamation plan, and not subjected to review under the State Environmental Quality Review Act ("SEQRA"). There is also no provision for public comment on this modification. For this reason alone, I would decline to recommend that the Commissioner overrule Staff's objections to this plan.

Another reason I concur with Staff's recommendation is the substantial economic gain accruing to TMR from the off-site sale of materials excavated from the pond. The very cornerstone of the Commissioner's Penalty Policy is the removal of economic benefit from non-compliance with the laws and regulations. Approval of the farm pond would not be consistent with the goals of this policy.

Finally, Staff submitted for consideration a draft of its Mined Land Reclamation Technical Guidance Memorandum MLR-91-4 dated October 29, 1991. This document indicates the policy of the Department regarding farm ponds. The memorandum deals with the question of when an exemption from the permitting requirement will be approved for excavation undertaken in connection with certain construction activities, one of which is excavation to create a farm pond. Since the mine no longer has a permit in effect, this Memorandum, while not binding, does offer some guidance to me and supports Staff's opposition to the proposed reclamation plan. This document indicates that in considering the proposed excavation, it should be determined whether there is a technical need for the pond, and the plan should include calculations of water storage required to adequately irrigate the amount of acreage controlled by the farmer if irrigation enhancement is the primary reason for the pond. The agricultural potential of the site must be proven to be increased through the creation of the pond. The size of the pond must be commensurate with the potential benefits to the farm.

Among other requirements, the farm must have been in active production for two out of the previous five years, the pond cannot exceed 10 acres of surface water when full, the height of the earth embankment to the lowest point of the pond must not exceed 15 feet, and the capacity of the pond must not exceed one million five hundred thousand gallons. Such an excavation must be completed within one calendar year. The proposal meets none of the guidelines outlined in the draft memorandum. Testimony shows that TMR only requires a one acre pond twenty feet deep to meet its agricultural and stock watering needs. Further, the TMR farming operation has previously met its needs using water from the Ten Mile River and other streams flowing on the Site.

PENALTIES

The Department seeks substantial civil penalties from the Respondents. The Department has calculated the requested penalty based upon the following:

MAXIMUM POSSIBLE PENALTIES

Article 17 violations $10,000 per day x 2 = $20,000
Article 15 violations $5,000 per violation x 4 = $20,000
Article 23 and Part 423 violations (reclamation bond) $1,000 per violation x 2 + $500 per day x 2344 = $ 1,174,000 (TMR)
Article 23 and Part 422 violations (mining in unpermitted areas) $1,000 x 2 + $500 per day x 92 = $48,000
Article 23 and Part 422 violations (others incl. failure to build berms, relocating haul road etc.) $1,000 x 3 + $500 per day
x 1931 = $968,500
Article 71 violations $1,000 + $500 per day x 821 = $411,500
Article 71 violations $1,000 + $500 per day x 1094 (Pit 2 abandonment)= $548,000 (TMR).

Total Maximum Possible Penalties: $3,190,000 ($1,468,000 against all the Respondents and $1,722,000 against TMR)

Total Requested Penalties: $1,500,000 or approximately 47% of the maximum ($1,000,000 or approximately 70% of the maximum against all the Respondents and $500,000 or approximately 30% against TMR)

The additional penalties sought against TMR alone represent acts for which MAC is not liable, specifically, the failure to post a reclamation bond and the failure to reclaim Pit 2 prior to the time MAC became operator at the Site.

The Department's Civil Penalty Policy issued June 20, 1990 lists factors to be considered in determining appropriate penalties, which includes among other factors level of culpability (used to increase penalties), the need to achieve deterrence, the relative importance of the type of violation to the regulatory scheme, the economic benefit to the violator from non-compliance, ability to pay, and potential and actual environmental harm. These factors are discussed below.

a. Culpability/ Level of knowledge or intent: The acts committed by the Respondents were knowing and intentional. While it is not necessary for the purpose of establishing liability to show intent, such is clearly a major aggravating factor in assessing penalties. The explicit, and unambiguous terms of the permit were repeatedly disregarded by the Respondents. In fact, even after being warned by numerous Department employees of the violations, the Respondents continued committing violations. For example, the evidence indicates that mining in the unpermitted area in the vicinity of Pit 3 was repeated, occurring on approximately 94 days. Warnings by various Department staff occurred in 1985, 1987, 1988 and 1990. The Article 15 violations were continued in 1989 after warnings were given in 1987. The Article 15 violations occurring in the spring of 1988 occurred after Jack Harbold had been convicted in February 1988 for the same violation which had occurred in 1987. Several letters notified TMR of the bond requirements, which it intentionally disregarded.

b. Gravity of the Violation: It is appropriate to look at how serious were Respondents' deviations from the requirements of the law and regulations and what environmental impact, if any, they caused. I find that all the violations were serious deviations from the intent of the law and regulations. In particular, because of the extent of mining below the water table, and the lack of berming, a great deal of topsoil has been lost, rendering the remaining soil less capable of supporting agricultural uses. The soil that has been lost is prime agricultural soil, of which there is only a limited amount in Dutchess County. The agricultural productivity of the site has been reduced or eliminated as a result of the removal of this topsoil, while previously the site had supported crop production since the 1930's. It may take up to forty years to regain the quality of topsoil that had previously been present on the Site.

Another potential impact is if sedimentation gives rise to "back water conditions", increasing flooding upstream and degradation of water quality downstream. This is serious given the fact that the Ten Mile River is a stream classified as C(t), and is a valuable recreational resource.

Further, actual harm occurred at various times when unprotected areas of topsoil, sand and gravel were washed into the Ten Mile River, thereby causing turbidity which affected trout feeding and habitat and had impacts on other aquatic biota. While no Department witness testified to seeing dead fish, such is not the method for determining impacts on trout spawning. It is reasonable to infer that turbidity in trout habitats has a negative impact. The Ten Mile River is known to be a good fishery, is stocked by the Department, and is a recreational resource.

The violations committed are regarded by the Department Staff as being relatively very important to the regulatory scheme. It is in fact clear that many of the acts committed violated one of the principal goals of the Mined Land Reclamation Law, that of ensuring that lands affected by mining are properly reclaimed. [ECL § 23-2703(1) ] Additionally, all the violations committed were more than minor paperwork violations. This case also illustrates why lack of a reclamation bond is of more than minor concern. While a bond in the amount of $90,000 is currently posted, the cost of reclaiming the affected acreage is estimated to be $750,000. Should reclamation not be completed, the State would be forced to commence legal action against TMR, in addition to attaching the bond. [ECL § 23-2715(6)] The Department has requested a penalty of approximately 30% of the maximum for TMR's failure to post an adequate reclamation bond and abandoning Pit 2. This reduction is appropriate to reflect the relative gravity of these violations.

c. Economic Benefit: The Department has shown there was potentially a large economic benefit to the Respondents during the periods of the violations, through both actual sales of sand, gravel, and top soil, and avoided costs. It is estimated that 136,000 cubic yards of material was removed from the unpermitted area adjacent to Pit 3. This material could have been sold off-site for approximately $476,000. The Respondents did not present any evidence to refute this estimate. Avoided costs include but are not limited to those associated with reclamation, construction of sedimentation collection area and berms, and preparing and submitting plans and applications for Article 15 and 17 permits.

d. Cooperation with the Department: There is uncontroverted evidence that Respondents did not in any way cooperate with the Department subsequent to the instant charges. TMR has continued to claim a right to continue mining by stating it will be performing reclamation, despite the fact that the Department advised TMR that it had no approved reclamation plan in effect. Moreover, even prior to that, TMR failed to cooperate with the Department Staff who had repeatedly requested information necessary to the processing of the renewal permit application after the conclusion of the Article 78 proceeding. Since TMR was permitted to mine under the SAPA permit extension, it was to TMR's benefit to delay indefinitely its submission of documents. The permit was ultimately denied for this reason. TMR also failed to voluntarily post the reclamation bond required for the amount of affected area at the Site.

The Department Staff warned Respondents countless times that they were mining into unpermitted areas, and committing other violations, yet Respondents persisted in asserting their right to continue mining and continued the other activities.

The Respondents offered no evidence to contradict the calculations of the Department as to the number of days of violation. It is clear that, given the number of years the Respondents have been derelict in their duties under the permit and the laws, rules and regulations, the violations now number in the thousands.

The arguments of the Respondents for mitigation, such as that their Bank and the Department should have notified them of the expiration of the reclamation bond, are without merit. The burden is upon the permit holder to insure that the bond or other surety remains in effect. (See 6 NYCRR § 423.2)

There is no evidence the Respondents lack the ability to pay penalties. The Department has shown justification for the assessment of penalties close to, if not at, the maximum allowable. The Respondents were shown to be jointly and severally liable for 2,850 days of serious and intentional violations, and TMR is individually liable for an additional 3,441 days of violation (2,346 for the bond violation and 1,095 for the abandonment of Pit 2.). However, since the Complaint and the Department's Closing Brief seek a total of $1,500,000.00, this is the maximum I can consider. A penalty of One Million Dollars ($1,000,000.00) is warranted, against the three Respondents jointly and severally. An additional penalty of Five Hundred Thousand ($500,000.00) against TMR is warranted based upon the violations involving TMR's reclamation bond and the abandonment of Pit 2.

OTHER ISSUES

Any remaining contentions of the Respondents not specifically discussed have been examined, and are found to be meritless. In particular, arguments relating to issues of constitutional law, such as MAC's claim that it was denied its right to a jury trial, must be brought in another forum competent to adjudicate them.

CONCLUSIONS

  1. Respondents unlawfully mined outside the permitted area over a period of approximately 94 days.
  2. Respondents discharged pollutants to a classified stream without a permit on October 5, 1987 and October 15, 1987, which contravened water quality standards for turbidity.
  3. Respondents disturbed the bed and banks of a classified stream without a permit on October 5, 1987, October 15, 1987, December 18, 1987, January 12, 1988, April 19, 1988, June 18, 1988, April 4, 1989 and May 25, 1989. The Department seeks penalties for only four of these days.
  4. From the end of March 1984 and continuing until the time of the hearing, with the exception of a six month period in 1990, Respondent TMR failed to maintain an adequate reclamation bond or acceptable substitute as required by ECL § 23-2717 (renumbered ECL § 23-2715 in Sept. 1991) and 6 NYCRR §§ 423.1, 423.2(c). This violation continued over 2346 days.
  5. The $90,000 letter of credit currently in effect is insufficient to guarantee reclamation of the site by TMR and is insufficient to cover the total cost to the State for completion of reclamation consistent with minimum statutory reclamation requirements. The estimated cost of reclamation is currently in excess of $750,000.
  6. Respondents relocated a haul road without approval from the Department in violation of ECL § 23-2713(4) and 6 NYCRR § 422.1(a). Respondents deviated from the approved mined land use plan by failing to reclaim pit areas progressively, and failing to construct sedimentation collection areas and berms. Respondents failed to reclaim Pit 1 in accordance with Department regulations. These violations continued over a period of 1933 days (the period from Staff's May 13, 1985 Site visit until September 1990, when some reclamation was begun.)
  7. Respondents abandoned the TMR mine in violation of ECL § 71-1305 without Department approval. The abandonment occurring before 1985 was committed by TMR and continued over a period of 1095 days. (May 1982 to May 1985). The abandonment for which TMR and MAC are both liable continued over 822 days (The date Staff gave notice to Respondents to reclaim, August 17, 1987 to September, 1990 when some reclamation was commenced.)
  8. The Department's request that a reclamation bond be posted in an amount higher than the usual $2000 per acre is justified upon the record herein. A bond of $5000 per acre is warranted.

RECOMMENDATIONS

  1. It is recommended that the Commissioner find that the Respondents committed all of the violations as set forth in the complaints and amended complaints (excepting the allegations which Staff withdrew). Liability should be joint and several except as to the violations of the reclamation bond requirements and the abandonment of Pit 2 occurring before 1985, which should be found against TMR individually.
  2. Penalties should be assessed in the amounts of One Million Dollars ($1,000,000) against the Respondents jointly and severally, and of Five Hundred Thousand Dollars ($500,000) against TMR, payable within 30 days of the date of service of a conformed copy of the Order upon the Respondents. The penalties assessed should be proportional to the number of days of violations shown, and as indicated in the Penalties section above.
  3. Within sixty (60) days, Respondent TMR should submit to the Department an approvable reclamation plan and implementation schedule prepared in accordance with applicable rules and regulations, and upon Department approval, reclamation should be performed in accordance with the plan. All reclamation should be completed within two years after approval of such plan.
  4. Respondent TMR should post a Reclamation Bond, or other form of financial security, in the amount of Two Hundred and Eighty Five Thousand Dollars ($285,000) in a form acceptable to the Department within sixty (60) days of service of the Order of the Commissioner.
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