In re Service Oil, Inc.
Respondent, Service Oil, Inc., challenges an Initial Decision issued by Administrative Law Judge, Susan L. Biro (the “ALJ”), finding Respondent liable for two counts of alleged violations of the Clean Water Act (“CWA” or “Act”). Region 8 of the U.S. Environmental Protection Agency (the “Region” or “Complainant”) filed the two count
complaint and amended complaint, alleging: (1) that Respondent violated sections 308, 301(a) and 402(p) of the CWA, and their implementing regulations, 40 C.F.R. §§ 122.21, 122.26, by failing to apply for, and obtain, on or before the date it commenced construction activities at its Stamart site located in Fargo, North Dakota, a North Dakota Pollutant Discharge Elimination System (“NDPDES”) permit authorizing storm water discharges from the site (Count 1); and (2) that after Respondent obtained the required NDPDES permit, it failed to conduct storm water inspections at the requisite frequency and/or to record or maintain inspection records on-site, in violation of the permit (Count 2).
The ALJ found Respondent liable on both counts and imposed a total civil penalty of $35,640. Respondent challenges certain aspects of the Initial Decision on appeal. Specifically, Respondent challenges the Count 1 liability determination pertaining to CWA section 308(a) and 40 C.F.R. section 122.21 arguing, inter alia, that the failure to apply for a permit cannot be deemed a violation of section 308 because a “precondition” of section 308 liability is an “individualized” request or order by EPA. In addition, Respondent questions the final penalty amount by challenging particular components of the penalty (i.e., culpability determination, “deterrence,” and circumstances of the violations), and arguing that the penalty in this case should reflect only the uncontested economic benefit of its noncompliance (i.e., $2,700).
Held: The Environmental Appeals Board (“Board”) affirms the Initial Decision in its entirety and upholds the total assessed penalty. The Board’s holdings with respect
to Respondent’s main arguments are summarized below:
A. Challenges to Liability Determination
1. Section 308(a) Liability: The Board rejects Respondent’s argument that CWA section 308 requires an “individualized” request or order by the Administrator as a precondition to finding a violation under section 308. Section 308(a) authorizes the Administrator to require information from point source owners or operators to carry out the objectives of the Act. On its face, section 308 contains no threshold that such information be preceded by a particular, targeted request or order from the Agency, either identifying the regulated entity or spelling out the information sought. While individualized Agency requests or orders to produce particular records, reports or
sampling results are common uses of section 308(a) authority, nothing in this section precludes an equally common Agency practice: rulemaking of general applicability, as the Agency undertook in section 122.21. With section 308(a)(3) explicitly contemplating implementing regulations and section 308(a)(4) giving particular emphasis to “carrying out” the NPDES permit program, Respondent’s view finds no support. This conclusion is reinforced by the harm to water permit program implementation and
enforcement that would occur were Respondent’s arguments to prevail. In sum, nothing in the statute supports Respondent’s view that an “individualized” Agency request or order is required by section 308.
2. Section 122.21 Liability: The Board rejects Respondent’s attempt to challenge the validity of 40 C.F.R. § 122.21(c). The CWA (i.e., §§ 509(b)(1)(E), 509(b)(2)) and an implementing regulation (i.e., 40 C.F.R. § 22.38(c)) preclude Respondent from challenging section 122.21(c) in this enforcement proceeding.
B. Challenges to Penalty Assessment
1. Culpability: The Board rejects Respondent’s argument that the ALJ should not have increased the penalty because Respondent was “unsophisticated,” relying on others to fulfill its construction storm water obligations and part of an industry culture in the area of Fargo, North Dakota, allegedly unfamiliar with construction storm water
requirements. The record refutes the portrayal of Respondent as an innocent, non-culpable site owner and of Fargo as a regulatory backwater. It shows, rather, that Respondent retained authority over its regulatory affairs (not ceding them to others) and that information about its regulatory responsibilities flowed to it from multiple
channels, to which Respondent should have been alert. Thus, measured against the clear error standard, Respondent’s culpability arguments fail to undermine the soundness of the ALJ’s culpability determination.
2. Deterrence: Noting at the outset that deterrence is not a penalty factor, the Board rejects Respondent’s argument that the ALJ should have given more weight to the fact that “general” deterrence is unnecessary in this case because recent City of Fargo (“City”) rules condition issuance of building permits on an applicant first obtaining any required storm water permit. First, deterrence is not merely local, as Respondent suggests. Penalties reach beyond the particular claim or place; they have a nation wide character. Second, as any local ordinance, this City rule may be revoked at any moment. Finally, even if a permanent regulation, the City rule would only
address Count 1 violations (obtaining a permit). Failure to comply with the permit and conduct necessary inspections (i.e., Count 2) is not covered under the City rule.
3. Circumstances of the Violations: The Board rejects Respondent’s argument that the ALJ failed to properly consider the “circumstances of the violation.” Respondent tries under this rubric to advance its earlier no-culpability “unsophistication” arguments by pressing City of Fargo and North Dakota-wide “unfamiliarity” with CWA
regulatory requirements, an argument the Board has rejected. Moreover, when placed in the proper statutory framework, the circumstances of the violations in this case (i.e., over half a year of unpermitted activity and sixty-five of eighty required inspections not conducted) yield a conclusion amply supported by the ALJ’s analysis.