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In re Environmental Disposal Systems, Inc.

Case Number:UIC Appeal No. 07-03
ELR Citation:38 ELR 41323


The Police and Fire Retirement System of the City of Detroit, RDD Investment Corporation, and RDD Operations, LLC, (together, “PFRS/RDD”) petitioned the
Environmental Appeals Board (“EAB” or “Board”) to review the U.S. Environmental Protection Agency (“EPA” or “Agency”), Region 5 (“Region”) decision to terminate two Underground Injection Control (“UIC”) permits issued to Environmental Disposal Systems, Inc. (“EDS”). The Police and Fire Retirement System of the City of Detroit (“PFRS”) is an investor in the wells covered by the two permits. RDD Investment Corporation and RDD Operations, LLC (together, “RDD”) are wholly-owned subsidiaries of PFRS.

The permits authorized EDS to operate two existing Class I hazardous waste injection wells at a facility in Romulus, Michigan, through September 6, 2015. EDS
began operation of the wells in December 2005. Within a year, EDS ran into significant financial and operational difficulties, resulting in numerous permit violations, at which point it relinquished control and operation of the wells and divested its interest in the real property to RDD. In response to these permit violations, the Region sent two letters to EDS: (1) a Notice of Noncompliance, informing EDS of several permit violations and describing actions for EDS to undertake to return the facility to compliance, and (2) an information request to “determine whether cause exists for modifying, revoking and reissuing, or terminating [EDS’s] permits, or to determine compliance with [the] permits.”

After sending the letters to EDS, the Region received a request to transfer the permits from EDS to Environmental Geo-Technologies, LLC, (“EGT”), a potential
purchaser identified by PFRS/RDD. On April 12, 2007, the Region proposed termination of the permits under 40 C.F.R. § 144.40, and determined that, since termination would render the permit transfer moot, it would defer action on the requested transfer pending completion of the termination proceeding. The Region subsequently terminated the permits in October 2007. In explaining the basis for its termination decision, the Region cited numerous violations of the permits and EDS’s “level of irresponsible behavior,” primarily its “abandonment of all interest in the facility without informing [the Region] and with no intention of remaining in place to address compliance issues.”

PFRS/RDD raise six issues in their petition for review. First, PFRS/RDD assert that the Region’s termination decision inappropriately relied on a number of clearly erroneous conclusion of law that corrections of violations and responses to information requests by an entity other than the permittee were irrelevant to the decision to terminate the permits. Third, PFRS/RDD contend that the decision to terminate the permits was an inappropriate exercise of the Region’s discretion because “the violations identified in the Fact Sheet * * * had been corrected.” Fourth, PFRS/RDD allege that the Region’s decisionmaking process was deficient because it failed to seek or allow public comment on these alleged corrections. Fifth, PFRS/RDD allege that the Region’s “position that only EDS could have remedied the alleged violations” is inconsistent with the Region’s actions towards the facility’s new owner/operator, in this case RDD, “as if it were the ‘de facto’ permittee.” Finally, PFRS/RDD argue that the Region should have considered the permit transfer request prior to considering whether to terminate the permits.

Held: PFRS/RDD have not demonstrated that the Region based the termination decision on any clearly erroneous finding of fact or conclusion of law or exercise of
discretion warranting Board review. PFRS/RDD have failed to show any clearly erroneous findings of fact and, in fact, have conceded that a number of the violations did
occur. While PFRS/RDD assert compliance with the permits at the time the Region issued the notice of intent to terminate the permits, current compliance does not negate
or “correct” prior violations of the permits. Additionally, several of the statements in the Region’s response to comments that PFRS/RDD alleged to be clearly erroneous are not factual findings. They are, rather, merely the Region’s characterizations of the importance of regulatory provisions and permit conditions. The underlying regulations
and permit conditions cannot be challenged in the termination proceeding or this appeal. Accordingly, the Board declines to review this issue.

As to the alleged erroneous conclusion of law that corrections by RDD, rather than EDS, were irrelevant to the decision to terminate, the Board notes the following.
First, the Board observes that two of the regulatory causes for termination, including the one invoked in this matter, are based on a permittee’s – rather than another entity’s – actions or non-actions. The regulatory history of the UIC regulations also supports focus on the permittee’s behavior when determining whether cause to terminate exists. Thus, the Region properly focussed on what EDS did or did not do when determining whether cause for termination exists. As such, PFRS/RDD’s attempt to shift the focus to RDD’s actions is misplaced.

Further, the regulations that govern UIC permit termination, 40 C.F.R. §144.40, do not require consideration of corrected violations as part of the termination proceeding, regardless of the entity alleged to have instituted the corrections, though the record shows that the Region acknowledged the alleged corrections. PFRS/RDD failed
to substantiate its statements that corrected permit violations may not form the basis of a termination decision. Once the Region has established the factual predicate that a
permittee has violated a permit condition, the Region has the discretion to terminate an existing permit. Moreover, many of the violations described in this case are not those that can be truly cured or corrected. For example, submitting a required report or information after the deadline has passed does not reverse the fact that the deadline was initially missed, nor does it render the submission timely. Thus, the Region did not rely on a clearly erroneous conclusion of law when it terminated the permits for cause despite the alleged corrections of violations, and review of this issue is denied.

The Board finds that the Region did not exercise its discretion in an impermissible fashion by proceeding with the termination despite the alleged corrections, or in its decision not to reopen the public comment period to allow further public comment on the alleged corrections. The Board also declines to review the issue of whether it was an abuse of discretion to terminate the permits after allegedly granting the non-permittee facility owner “de facto permittee” status. Compliance with a UIC permit and the UIC regulations by a facility owner/operator that is not the permittee does not render the facility owner/operator a “de facto permittee,” even if the non-permittee’s actions are conducted with the federal regulator’s involvement to return the well operations and facility to compliance. Further, a “de facto permittee” concept contravenes the Agency’s regulatory intent for permits not to be inherently assignable and to limit permit privileges to the permittee.

Finally, the Board denies review of the issue of whether the Region improperly deferred consideration of the permit transfer request until it made a determination on whether to terminate the permits. The Board finds reasonable both the Region’s explanation that it determined that an appropriate response to the permit violations was to terminate the permits and the Region’s conclusion that “it no longer made logical sense” to consider a transfer request for permits it was intending to terminate. Termination does not preclude submission of a new application nor does it reflect any predetermination of the new owner’s ability or fitness to operate the existing wells.