DENR 2005-2006 Case Updates by bigmekahlo


									                    DENR 2005-2006 Case Updates
                                     By John C. Evans1
                                NC DOJ, Environmental Section

                                             Air Quality
United States v. Duke Energy Corp., 411 F.3d 539 (4th Cir. 2005)

The U.S. maintained that defendant's projects violated the Prevention of Significant
Deterioration (PSD) provisions of the Clean Air Act (“CAA”) because they constituted
"major modifications" of the power plants' boilers, and thus defendant had to obtain
permits for them. Defendant contended that its projects did not constitute modifications
subject to the PSD, and thus no permits were necessary.

The Middle District Court found for Duke Energy holding that the U.S. had failed to
demonstrate that the modifications resulted in emission increases. The Middle District
relied primarily on the language of the regulations stating that a change in the hours of
operation is not to be considered a modification and on EPA guidance stating that the
proper test for determining PSD applicability is an hourly emissions test. On appeal, the
4th Circuit upheld the Middle District‟s decision. However, the court arrived at its
decision based on slightly different reasoning. The 4th Circuit focused on the statutory
definition of “modification.” They found that Congress had expressly defined
"modification" in the New Source Performance Standards (NSPS) provisions of the
CAA, 42 U.S.C.S. § 7411(a), and then expressly directed, in 42 U.S.C.S. 7479(2)(c), that
the PSD provisions employ the same definition.

The Environmental Protection Agency (EPA) interpreted its PSD regulations differently,
however, excluding a much smaller group of projects from the definition of "major
modification." Because Congress mandated that the PSD definition of "modification" be
identical to the NSPS definition of "modification," the EPA was precluded from
interpreting "modification" under the PSD inconsistently with the way it interpreted that
term under the NSPS. Under the proper interpretation of "modification," defendant's
projects did not require permits.

New York v. United States EPA, 367 U.S. App. D.C. 3 (D.C. Cir. 2005)

On 31 December 2002 the EPA issued a final rule revising the applicability criteria for
New Source Review (“NSR”) applicability (67 Fed. Reg. 80187). The major provisions
of the rule included:

    1) Determining Emissions Increases Using Actual Emissions

  This case summary has not been reviewed by, and does not reflect the official position or opinion of the
North Carolina Attorney General‟s Office. This summary, and any opinions contained herein, are solely
those of the author.

   2) Plant-wide Applicability Limits (“PALs”)
   3) Clean Unit Exemptions
   4) Pollution Control Projects

Petitioners, members of industry, government, and environmental organizations,
challenged the 2002 rule. Industry petitioners argued that the 2002 rule interpreted
"modification" too broadly, while government and environmental petitioners argued that
the rule's interpretation was too narrow. The court found that EPA permissibly interpreted
the CAA and did not otherwise act arbitrarily and capriciously with respect to, among
other provisions, the use of past emissions and projected future actual emissions in
measuring emissions increases; the use of a ten-year lookback period in selecting the
baseline period for measuring past actual emissions; the use of a five-year lookback
period in certain circumstances; and the Plantwide Applicability Limitations (PAL)
program. However, the EPA erred in promulgating the Clean Unit applicability test,
which measured emissions increases by looking to whether "emissions limitations" had
changed, and it erred in exempting certain pollution control projects that collaterally
increased emissions of some pollutants. Moreover, the EPA acted arbitrarily and
capriciously in determining that sources making changes need not keep records of their
emissions if they see no reasonable possibility that these changes constitute modifications
for NSR purposes.

The court vacated the provisions of the 2002 rule regarding the Clean Unit applicability
test and Pollution Control Projects, as well as the 1992 rulemaking allowing electric
steam generating units to use the pollution control project exemption. Parties are
appealing this decision to the U.S. Supreme Court.

North Carolina‟ Environmental Management Commission passed many of the revisions
contained in the 2002 rule described above. The rules became effective in non-
attainment areas last year and the revisions are expected to become effective in
attainment areas in May/June 2006 contingent on General Assembly action.

Equipment Replacement Rule (68 Fed. Reg. 61248)

On 27 October 2003 the EPA issued a final rule providing an equipment replacement
provision in the New Source Review (“NSR”) air quality regulations. This rule was
intended to help clarify the exemption for routine maintenance, repair, and replacement
(“RMRR”). The rule provides that a source is exempt from New Source Review
provided the change at the source 1) involves the replacement of an existing component,
2) the fixed capital cost of the replacement does not exceed 20 percent of the current
replacement value of the process unit, and 3) the replacement does not alter the basic
design parameters of the process unit.

This rule was challenged and oral arguments were heard on 8 February 2006 in the D.C.
Cir. Court of Appeals. These provisions have not yet been adopted by the EMC. If the
Court upholds these revisions, no timetable has been set to adopt these provisions.

MW Clearing & Grading, Inc., v. North Carolina Department of Environment and
Natural Resources, Division of Air Quality, 614 S.E.2d 568, 2005 N.C. App. LEXIS

A contractor violated the open burning regulation, N.C. Admin. Code title 15A,
2D.1903(2)(b)(B), by having open burning piles that were not 1,000 feet from a dwelling.
DENR assessed a civil penalty of $ 4,000 for each of the nine piles. The appellate court
determined that the Commission's final decision was supported by substantial evidence
on the whole record as submitted and therefore the decision was not arbitrary or
capricious. Also, upon de novo review, the trial court correctly interpreted and applied
the relevant law. The contractor presented no evidence showing that the piles were
located on the same property as the nearby residence. Also, the trial court properly found
that testimony failed to overcome the presumption of regularity of official acts regarding
the accuracy of the measuring wheel that was used to measure the distance. DENR did
not exceed its discretion and authority in interpreting each pile to be one violation. Such
an interpretation did not violate the contractor's equal protection rights because the
imposition of multiple fines under N.C. Gen. Stat. § 143-215.114A(a)(1) was rationally
related to a legitimate government purpose.
The dissent in the case stated that given the agency's longstanding prior history of
interpreting violations of North Carolina General Statutes section 143-215.114A and 15A
North Carolina Administrative Code 2D.1900 with multiple burn piles as constituting one
violation of the statute and the code, that is the proper interpretation which should receive
deference, not an interpretation in which the Deputy Director essentially throws out the
rule book in order to assess a civil penalty inconsistent with the agency's previous
Because the agency acted in excess of its statutory authority by its actions in this instance
in that it employed wholly new guidelines never utilized before that were not a part of its
worksheet and it deviated from its penalty tree, it is unnecessary to determine at this time
whether, after implementation of "adequate guiding standards," imposition of such a
penalty would be appropriate.

This case is on appeal to the North Carolina Supreme Court and is scheduled to be argued
in March of 2006.

          Attorney Client Privilege – Attorney Work Product
McCormick V. Hanson Aggregates, 164 N.C. App. 459, 596 S.E. 2d 431 (2004)

In the McCormick decision, the North Carolina Court of Appeals found that there was no
protection for work product, or trial preparation materials, created or held by publicly
employed lawyers. The basis for the court‟s rulings was N.C. Gen. Stat. § 132-1(b): “it is
the policy of this State that the people may obtain copies of their public records and
public information free or at minimal cost unless otherwise specifically provided by law.”
According to the court there was no specific exemption for attorney work product.

In response to this decision, the General Assembly revised the Public Records Act to
provide a new provision – specific – for protection of attorney work product. The
specific exemption is for “trial preparation material.” This exemption provides protection
for trial preparation material prepared for litigation and extends that protection to material
prepared in anticipation of threatened litigation.

Note: The provision does not affect the protection for Attorney-Client communications,
which are protected under N.C. Gen. Stat. §132-1.1.

                     Inspections and Access to Property

“Getting Into a Site While Staying Out of Trouble” DENR Enforcement Training,
June 2005, Mary Penny Thompson, General Counsel DENR & David Roy Blackwell.

United States v. Hajduk, 396 F. Supp. 2d 1216 (D. Colo. 2005)

In order to assess compliance with effluent limits established as part of an NPDES
permit, a publicly owned treatment plant drew wastewater from a sampling box and
manhole on a permittee's property – without a search warrant. The sampling revealed
violations of the effluent standards and the defendants, the permittee and its manager,
were charged with violating the Clean Water Act (“CWA”).

The defendant‟s challenged the warrantless search as violating their 4th Amendment
rights. The court denied defendants' motion to suppress evidence obtained through the
manhole and box searches, which did not violate the permits or the city‟s code provisions
regarding credentials and reasonable hours and were justified by defendants' consent.

Several important findings included:

   1) The manhole sampling was not a search under the Fourth Amendment absent a
      reasonable expectation of privacy in wastewater headed irretrievably into a public
      sewer system.
   2) The open fields doctrine did not apply.
   3) The searches were not justified under the closely regulated industry exception to
      the warrant requirement.

Consent Through Permit Conditions – The permit included a condition requiring the
establishment of a sampling box. The source claimed they were forced to accept as a
condition of the permit the sampling box provision and therefore any samples taken from
that box were not voluntary and they did not consent to the “search.” The court
acknowledged that this was a “close one” but found that the source could have opted for a
more expensive option of sampling but did not.

Closely Regulated – There is an exception to the warrant requirement for commercial
premises of pervasively regulated industries. In Luxury Wheels, the court stated, “I am
unaware of any precedent for declaring that a business is subject to warrantless

administrative searches as “closely regulated” solely because it is subject to general
purpose environmental laws.” Note: North Carolina Court of Appeals found commercial
fishing industry pervasively regulated in State v. Nobles, 107 N.C. App. 627, 422 S.E.2d
78 (1992).

Open Fields – “The open fields doctrine does not apply when inspectors enter private
property to remove objects not immediately visible. I therefore conclude that this search
is not justified under the “open fields” doctrine.”

                   Civil Penalty Assessment to Schools
North Carolina School Boards Association v. Richard H. Moore, 359 N.C. 474

The main issue in this case was whether certain monetary payments to state agencies
should be remitted to the State General Fund or to the school boards in accordance with
Art. IX, § 7 of the North Carolina Constitution. The cases examines several types of
assessment and late fees imposed by agencies to determine if such payments fell under
Art IX, § 7 and therefore were required to be remitted to the local school boards.

Of particular interest are payments by environmental violators to fund “Supplemental
Environmental Projects” or SEPs. The court was not convinced that the payment to a
SEP was voluntary. (“To suggest that the payment was voluntary was euphemistic at
best.”) The court found the payments under SEPs to be punitive in nature and that fact
cannot be changed merely because the violator paid it pursuant to some settlement
agreement or to a 3rd party. As such the SEP payments are covered under art. IX, § 7 and
therefore must be remitted to the local schools.

                                 Water Resources
North Dakota v. U.S. Army Corps of Engineers, 418 F.3d 915 (2005) [Oral
arguments at U.S. Supreme Court spring 06]

North Dakota designated a reservoir as a fishery and established CWA standards under §
303 to support the growth of water life. The US Corps of Engineers wanted to release
water from the reservoir to manage “navigable waters‟ downstream.           The State
contended that the release of water from the reservoir by the Corps to support
downstream navigation precluded a viable fishery ecosystem.

The state took action to stop the release. In response, the Corps argued that it was
entitled to sovereign immunity under 33 U.S.C.S. § 1371(a) for its actions in maintaining
navigation. The court held that, while federal entities were generally required to comply
with State standards implementing the CWA, the express exemption of the Corps'
navigation activities from the CWA's waiver of sovereign immunity precluded the State's
action against the Corps. Further, the fact that the release of water could potentially be

accomplished by means that preserved the reservoir ecosystem did not require the Corps
to use such means in abrogation of its authority to maintain navigation. Also, the
reservoir system was established by the Flood Control Act of 1944 with the primary goals
of flood control and downstream navigation, with only secondary interests in other goals
such as ecosystems, and thus enforcement of the State's water quality standards was
federally preempted.

According to North Dakota, this decision deprives all states of authority to enforce their
water quality standards under §303(c) whenever, in the Corps‟ judgment, navigation by
be impacted. Because the Corps has jurisdiction over all navigable waters this exception
swallows the whole. The Corps is not required to look into other ways to affect
navigation so the technology forcing aspect of this program is also threatened.

U.S. v. Rapanos, 376 F.3d 629 (2004)[Oral Argument at U.S. Supreme Court on 21
February 2006]

This case is another in a line of cases defining the extent of federal jurisdiction over
wetlands. The 6th Cir. Court of Appeals affirmed the district court‟s decision finding that
the Rapanos filled 54 acres of wetlands on three different properties. The district court
held that the wetlands were “adjacent” to “tributaries” and therefore subject to CWA
because they are hydrologically connected to navigable waters.

In an appeal to the 6th Cir., Rapanos argued that the U.S. Supreme Court‟s ruling in Solid
Waste Agency of Northern Cook County v. United States Army Corps of Engineers, 531
U.S. 159, (“SWANCC”) prohibited federal regulation of non-navigable wetlands that are
not physically adjacent to a traditional navigable water. The 6th Cir. rejected this
argument finding

What is required for CWA jurisdiction over “adjacent waters,” however, is a “significant
nexus between the wetlands and „navigable waters,” which can be satisfied by the
presence of hydrological connection.

Rapanos appealed the decision to the U.S. Supreme Court. The circuit courts have been
split on the impact of the 2001 SWANCC decision. The 5th Cir. adopted a more
expansive reading of SWANCC thus limiting the reach of the CWA. This circuit
interpreted SWANCC to require wetland to be “truly adjacent to navigable waters” in
order for the Corps to assert jurisdiction. They disagreed that a non-adjacent wetland
exhibiting a hydrological connection to “navigable water” was enough to be considered
waters of the United States. Other circuits, including the 4th, 7th, and 9th have adopted a
more limited interpretation of SWANCC. These circuits hold that a hydrological
connection is sufficient to establish jurisdiction and there is no requirement that the
wetland directly abut navigable waters.

                                     Beach Access
Fabrikant, et al. v. Currituck County, et al., (No. COA04-250)

In 1998 several oceanfront property owners in the Whalehead Club subdivision near
Corolla filed a lawsuit against the State of North Carolina, DENR, Coastal Resources
Commission, the Director of the Division of Coastal Management, Currituck County and
the subdivision‟s original developers. In the part of the case concerning the State, the
property owners challenged the right of the public to use the dry sand beach – the area
between the wet sand and the dune line. Among other things, the plaintiffs asked the
court to quiet title to the dry sand beach, i.e., to declare that the plaintiffs have exclusive
ownership of the dry sand beach, and to enjoin the State from interfering with their
exclusive use and enjoyment of the dry sand beach. On July 22, 2003, the trial court
dismissed all of the plaintiff‟s claims against the State.

The Court of Appeals, in a unanimous decision issued October 18, 2005 affirmed the trial
court‟s dismissal of all claims against the State. The Court held, “Because we hold that
the quiet title and injunctive relief claims barred by sovereign immunity and that there is
no justiciable controversy with respect to the declaratory judgment claim, we affirm the
trial court‟s orders dismissing plaintiffs‟ claims against the State defendants.”

The oceanfront owners‟ allegations (1) that the members of the general public trespass
over the dry sand beach, and (2) that the Director of the Coastal Management had stated
in writing that the public trust doctrine allows public access to the dry sand beach, were
insufficient to give plaintiffs the right to sue the State. Those actions did not constitute a
waiver of the State‟s sovereign immunity. Similarly, plaintiff‟s disagreement with the
Director‟s opinion as to the extent of the public trust doctrine was not a controversy
within the Court‟s jurisdiction (i.e. not justiciable).


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