18 ELR 21507 | Environmental Law Reporter | copyright © 1988 | All rights reserved


United States v. Chemical Resources, Inc.

No. 86-C-714-C (N.D. Okla. July 18, 1988)

The court holds that the Environmental Protection Agency may not enforce Resource Conservation and Recovery Act (RCRA) financial responsibility requirements against underground injection facilities. Such facilities are exempted from RCRA's financial responsibility requirements by 40 C.F.R. §§ 265.1(b) and 265.430. Oklahoma's requirement for liability insurance is a state requirement in excess of the federal minimum, and is not incorporated into federal law by RCRA § 3005(e)(3)(B)'s requirement that operators certify compliance with all applicable financial responsibility requirements.

Counsel for Plaintiff
Nancy Blevins, Ass't U.S. Attorney
3600 U.S. Courthouse, Tulsa OK 74103
(918) 581-7463

Counsel for Defendants
Burt C. McElroy
2520 Mid-Continent Tower, Tulsa OK 74103
(918) 583-7766

Roger R. Scott
1111 Parkcenter, 525 S. Main, Tulsa OK 74103
(918) 583-8201

[18 ELR 21508]

Cook, J.:

Order

Now before the Court for its consideration is the motion of defendants for judgment on the pleadings, said motion filed July 9, 1987, and the opposing motion of the plaintiff for partial summary judgment on the issue of liability under 42 U.S.C. § 6925(e)(2), said motion filed July 17, 1987.

Plaintiff United States of America on behalf of the United States Environmental Protection Agency (Government) filed suit August 6, 1986 and amended its complaint July 16, 1987 against defendants Chemical Resources, Inc., William J. Lamberton, and the William J. Lamberton revocable trust (CRI). The Government seeks to enjoin CRI from further underground waste disposal operations, to require CRI to submit and implement a proper closure plan, and to require compliance with regulations under the Resource Conservation and Recovery Act (RCRA), 42 U.S.C. §§ 6901, 6921 et seq. and amendments thereto under the Hazardous and Solid Waste Amendments of 1984 (HSWA), 42 U.S.C. § 6925(e)(2)(A) and (B) and § 6926(g)(2).

After the plaintiff and defendants filed their respective motions for partial summary judgment and judgment on the pleadings, the motions were referred to the Magistrate. A hearing was conducted March 28, 1988, followed by the Magistrate's recommendation of April 14, 1988, that 1) granted plaintiff's motion for partial summary judgment for the plaintiff's liability under 42 U.S.C. § 6925(e) for operating without interim status or a permit, 2) granted an injunction against further operation until a final permit is secured, allowing 30 days to comply, and 3) found a further hearing necessary to determine the amount of civil penalty, if any. CRI filed objections April 28, 1988 to the Magistrate's recommendations.

CRI commenced underground injection disposal of hazardous waste in 1973. The RCRA of 1976, 40 C.F.R. §§ 260-271 (1987), enacted a federal program of regulation of hazardous waste to supplement local efforts, with the caveat that solid waste disposal "should continue to be primarily the function of State, regional, and local agencies." 42 U.S.C. § 6901. Waste disposal facilities have to meet requirements for a permit to operate. 42 U.S.C. § 6925. Enforcement measures for the federal program include compliance orders, civil penalties, criminal penalties, and civil actions. 42 U.S.C. § 6928. The RCRA provides for interim status for facilities already in operation. 42 U.S.C. § 6925(e). States can receive authorization to administer and enforce their own regulation and permit program "in lieu of" the federal program if the state program is consistent with the federal program and provides adequate enforcement of compliance with the federal program. 42 U.S.C. § 6926(b). The State of Oklahoma's program received final authorization from the EPA effective January 10, 1985. 49 Fed. Reg. 50,362 (1984). The administrator of the State program is the Oklahoma State Department of Health (OSDH). Any action taken by a state under its authorized program shall have the same force and effect as a federal action. 42 U.S.C. § 6926(c). In an authorized program, state requirements can be more but not less stringent than federal requirements. 42 U.S.C. § 6929. Where an approved state program has a greater scope of coverage than that required by federal law, the additional coverage is not part of the federally approved program. 40 C.F.R. § 271.1 (1987). However, the federal government retains authority to enforce federal RCRA requirements by compliance orders or civil actions in states with authorized programs. 42 U.S.C. § 6928(a)(2).

In addition to technical engineering requirements, the RCRA imposed financial responsibility requirements on those facilities with final permits or interim status. 40 C.F.R. § 265. Subparts G and H. Financial responsibility requirements for interim status included, among other requirements, financial assurance for proper closure of the facility and liability insurance for sudden and non-sudden accidental occurrences of one million dollars per occurrence with an annual aggregate of at least two million dollars, exclusive of legal defense costs. 40 C.F.R. §§ 265.143, 265.147. An alternate means to meet the requirements was to demonstrate independent certified assets of at least ten million dollars and at least six times the amount of liability coverage. Id.

A section of the federal regulations on interim status dealing specifically with underground injection facilities states that "[e]xcept as § 265.1 provides otherwise" underground injection facilities are excluded from financial responsibility requirements. 40 C.F.R. § 265.430 (1987). All interim status regulations apply to underground injection facilities as provided in § 265.1(b). 40 C.F.R. § 265.1(c)(2) [Comment]. However, all standards on interim status apply except as specifically provided otherwise in § 265 or § 261. 40 C.F.R. § 265.1(b). (emphasis added).

The State of Oklahoma requires all types of waste facilities with interim status to secure and maintain liability insurance in amounts and under conditions provided in 40 C.F.R. § 265, Subpart H. Rules and Regulations of Industrial Waste Management, OSDH, Rule 7.1.15.1.1. The State of Oklahoma also requires financial mechanisms regarding closure in accordance with federal regulations. Id., at 7.1.15.2.1.

CRI applied for a permit in November 1980 as required by federal statutes and regulations and was granted interim status for existing and operating facilities pursuant to 42 U.S.C. § 6925(e)(1). It has continued to operate under interim status over the last eight years without yet having met final permit requirements. A letter from the OSDH dated June 13, 1987 indicated that upon successful completion of an "annular integrity" testing protocol, CRI and OSDH "may proceed with the permit process."

In 1984, the HSWA added a requirement that interim status "shall terminate" on November 8, 1985 unless the facility applies for a final determination regarding a permit by November 8, 1985 and certifies that the facility is in compliance "with all applicable groundwater monitoring and financial responsibility requirements." 42 U.S.C. § 6925(e)(2)(A) and (B). The 1984 amendments to the § 6926 state authorization provisions provide that the federal EPA administrator shall carry out the requirements imposed by the 1984 amendments even in states with authorized programs unless the state shows compliance with the new provisions and requests authorization to carry out the requirement. 42 U.S.C. § 6926(g)(2). The State of Oklahoma has not received this additional authorization.

CRI submitted a certification statement dated November 8, 1985 and a separate supplemental certification statement dated November 11, 1985. CRI's sudden and non-sudden liability insurance had lapsed October 1, 1985. CRI was unable to immediately find new coverage. CRI's statement certified it was in compliance with financial responsibility requirements of the state program and the financial responsibility requirements in 40 C.F.R. Part 265 Subparts F and H, except the requirements for sudden accidental occurrence coverage. In its supplemental certification, CRI submitted its general liability policy for lower amounts and a statement of pledged assets prepared by its in-house accountant, showing an alleged net worth of eleven million dollars. CRI procured sufficient liability insurance effective August 22, 1986, retroactive to claims made on or before July 8, 1986.

OSDH issued an Administrative Compliance Order May 7, 1986 stating CRI was in violation of several technical engineering requirements and of the financial responsibility requirements of the state program. OSDH gave CRI sixty days to comply with the insurance requirements. CRI requested administrative review of OSDH's Compliance Order on June 5, 1986. No hearing was held. OSDH's Status Report of August 5, 1987 stated that technically CRI had not complied with insurance requirements from the sixty-day deadline of July 7, 1986 to August 22, 1986, but OSDH would seek no assessment.

Plaintiff asserts that CRI has been operating without interim status or a final state permit in violation of federal laws and regulations, entitling plaintiff to an enforcement action. The Government first contends (and the Magistrate agreed) that the interaction of 40 C.F.R. § 265.430, 40 C.F.R. § 265.1(c)(2) [Comment] and 40 C.F.R. § 265.1 creates a federal requirement of liability insurance [18 ELR 21509] (or alternative), which CRI did not meet as of the required certification date of November 8, 1985. Secondly, even if the interaction of the federal regulations does not create a federal financial responsibility requirement for underground injection facilities on its face, the 1984 amendments to § 9625 on interim status calling for certification of compliance with "all applicable . . . financial responsibility requirements," whether the applicable financial responsibility requirements are federal or state, create a federal financial responsibility requirement for continued interim status after November 8, 1985. Additionally, plaintiff argues that only the Government can enforce the requirements of the 1984 amendments to the § 6925 interim status provision in the State of Oklahoma by virtue of the 1984 amendments to § 6926. Therefore, any enforcement action that OSDH may have taken with regard to noncompliance with financial responsibility certification by November 8, 1985 is ineffective. Finally, plaintiff contends that any attempted compliance by CRI after November 8, 1985 is ineffective. EPA's interpretation of the 1984 amendments to § 6925 on loss of interim status to require already-operating facilities to submit certification of compliance with financial responsibility requirements by November 8, 1985 is reasonable and the surface impoundment facility's post-deadline submissions of compliance were irrelevant. Vineland Chemical Co. v. United States E.P.A., 810 F.2d 402, 410 [17 ELR 20555] (3d Cir. 1987).

Defendant CRI contends that there is no federal question jurisdiction for this Court in that the alleged violation arises under state law, not federal law, by virtue of the exclusion of underground injection facilities by 40 C.F.R. § 265.30 and 40 C.F.R. § 265.1(b) from federal financial responsibility requirements. It also asserts that the Government has no standing under the § 6928 enforcement provisions and 40 C.F.R. § 271.1 to pursue a civil action for a possible violation of a state requirement. In addition, even if the financial responsibility requirements for underground injection facilities are federal as well as state, OSDH's Compliance Order precludes any subsequent federal enforcement. CRI asserts that its certification of alternate means of financial responsibility compliance (pledging of assets) during the period of lapse of insurance coverage and OSDH's Status Report decision not to seek assessment constitute a state ruling of no lack of compliance. In a determination on closure procedures under a denial of a final permit which took place before the 1984 amendments to § 6925, the EPA has no authority to commence independent enforcement action where a state's authorized program has taken enforcement action. Northside Sanitary Landfill, Inc. v. Thomas, 804 F.2d 371, 382 [17 ELR 20215] (7th Cir. 1986).

The Court has carefully reviewed the parties' respective positions and finds as follows. By virtue of 40 C.F.R. § 265.430 and § 265.1(b), underground injection facilities are exempted from federal financial responsibility requirements. The requirement by the OSDH of sudden and non-sudden accidental liability insurance (for up to one million dollars per occurrence with an annual aggregate of at least two million dollars for underground injection facilities) is a state requirement in excess of the federal minimum. Further, use of the phrase "all applicable . . . financial responsibility requirements" in the 1984 amendments to § 6925(e) does not make the OSDH insurance requirements for underground injection facilities, federal requirements.1 Therefore, the Court finds and concludes that the EPA is not entitled under § 6928, or the 1984 amendments to § 6926, or 40 C.F.R. § 271.1, to enforce financial responsibility requirements established by a State in excess of that proscribed by the federal government.

THEREFORE, IT IS THE ORDER OF THE COURT that the motion of the defendant for judgment on the pleadings is hereby GRANTED.

IT IS THE FURTHER ORDER OF THE COURT that the motion of the plaintiff for partial summary judgment on liability is hereby DENIED.

IT IS FURTHER ORDERED BY THE COURT that the Recommendation of the Magistrate entered on April 14, 1988 is hereby reversed and held for naught.

IT IS SO ORDERED this 18th day of July, 1988.

Judgment

This matter came before the Court on defendants' motion for summary judgment and on plaintiff's cross motion for summary judgment. The issues having been duly considered and an opinion having been duly rendered in accordance with the Order filed simultaneously herein,

IT IS ORDERED, ADJUDGED AND DECREED, that the defendants, Chemical Resources, Inc., William J. Lamberton, and the William J. Lamberton revocable trust, are entitled to judgment over and against the plaintiff, United States of America, as a matter of law.

IT IS SO ORDERED this 18th day of July, 1988.

1. The Court would parenthetically note, that if the 1984 amendment to § 6925(e) did make the financial responsibility requirement a federal enforcement matter, the EPA would be burdened with the task of monitoring and enforcing possibly fifty different financial responsibility requirements, representing potentially different standards set in each of the States in the Union.


18 ELR 21507 | Environmental Law Reporter | copyright © 1988 | All rights reserved