Service Oil, Inc. (Board decision, July 27, 2010)

Plain-English summary

The EAB had previously upheld findings that Service Oil, Inc. violated the Clean Water Act by failing to apply for a permit before construction, discharging a pollutant without the required permit, and failing to conduct or document stormwater inspections. The Eighth Circuit later vacated the Board's order in part, holding that failure to submit a timely permit application could not violate the cited record-keeping provision before a point source existed and that EPA lacked authority to impose administrative penalties on that basis. The EAB remanded the matter to the ALJ to amend the liability findings and recalculate the penalty.

Decision snapshot

• Cited authorities: 33 U.S.C. §§ 1311 and 1318(a); 40 C.F.R. §§ 22.27, 22.30, 122.21, and 122.26
• Outcome: The matter was remanded to the ALJ for further proceedings, amended liability findings, and penalty recalculation.
• Key point: An agency may not impose the challenged record-keeping liability or related penalty for a permit application failure occurring before a point source exists.

Full text (EPA EAB public release)

             BEFORE THE ENVIRONMENTAL APPEALS BOARD
         UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
                         WASHINGTON, D.C.                         JULY 27, 2010
                                 )
                                 (

In re: Service Oil, Inc. ) CWA Appeal No. 07-02
)
Docket No. CWA-08-2005-0010 )
)
--------)

                                     REMAND ORDER


   On July 23, 2008, the Environmental Appeals Board (the "Board"), issued a Final

Decision and Order in the above-captioned case upholding an Initial Decision issued by

Administrative Law Judge Susan L. Biro (the "ALJ") which found Respondent, Service Oil, Inc.,

liable for two counts of violations of the Clean Water Act ('~CWA") and assessed a total civil

penalty of $35,640. More specifically, the Board upheld the ALJ's determinations: (1) that

Service Oil violated section 308 of the CWA and 40 C.F.R. section 122.21 by failing to apply for

a permit prior to commencing construction activities, and section 30 I of the CWA, by failing to

obtain a permit for construction activities in which Respondent discharged a pollutant into waters

of the United States (Count 1); and (2) that Service Oil failed to conduct storm water inspections

and failed to record or maintain on-site inspection records in violation of its NPDES permit

(Count 2). In re Service Oil, Inc., Docket No. CWA·08·2005-00 I 0, at l2, 24, 51 (ALJ Aug. 3,

2007) (Initial Decision); In re Service Oil, Inc., CWA Appeal No. 07-02, slip op. at 34 (EAB July

23, 2008), 14 E.A.D. _ (affirming ALJ's decision in its entirety).
On August 13, 2008, Service Oil filed a Petition for Review of the Board's Final

Decision and Order with the United States Court of Appeals for the Eighth Circuit ("Eighth

Circuit") asserting that the Agency erred as a matter of law in holding Service Oil liable under

Section 308 of the CWA. On December 28, 2009, the Eighth Circuit issued its judgment

granting Service Oil's Petition, vacating the Board's Order and remanding the matter to the

Agency. See Service Oil, Inc. v. U.S. EPA, 590 F.3d 545 (8th Cir. 2009). Specifically, the

Eighth Circuit held that the failure to submit a timely permit application in accordance with 40

C.F.R. §§ 122.21(c)(1) and 122.26(c) "cannot be a violation of § 1318(a) [section 308(a)]

because the statute's record-keeping requirements are expressly limited to 'the O\'11er or operator

of any point source,' and [b]efore any discharge, there is no point source." Id. at 550. The court

also concluded that "EPA lacks statutory authority to assess administrative penalties for failure to

submit a timely permit application." Id. at 550-51. Noting that the penalty the Agency assessed

was "primarily [based] on Service Oil's 'complete failure to apply for its storm water permit

prior to starting construction,'" the Eighth Circuit remanded the matter to the Agency for penalty

recalculation. Id, at 551. The formal Mandate associated with the Eighth Circuit's decision was

issued on April 22, 2010, and filed with the Clerk of the Board on July 13, 2010.

   In light of the Eighth Circuit's opinion, and because the penalty the AU originally

assessed was based in part on Service Oil's failure to submit a timely permit application, see

Initial Decision at 56-57, it is appropriate to remand this matter to the ALJ to render a new initial

decision that is consistent with the Eighth Circuit's decision. Accordingly; the Board hereby

remands the above-captioned matter to the ALJ to conduct further proceedings as necessary to

amend the liability findings and redetermine the penalty amount. The ALJ's new initial decision

                                              2

shall have the effect described in 40 C.F.R. § 22.27. Either party may appeal from the new initial

decision as prescribed in 40 C.F.R. § 22.30.

     So ordered.'

                                               ENVIRONMENTAL APPEALS BOARD



         [signature]                              By    [signature]

Dated: July 27, 2010 Charles J. Sheehan
Environmental Appeals Judge

    The three-member panel deciding this matter is comprised of Environmental Appeals
     !

Judges Charles Sheehan, Kathie A. Stein, and Anna L Wolgast.

                                           3

•

                                CERTIFICATE OF SERVICE

       I hereby certify that copies of the foregoing Remand Order in the matter of Service Oil,
Inc., CWA Appeal No. 07-02, were sent to the following persons in the manner indicated:


First Class Mail             Michael D. Nelson
and facsimile:                John T. Shockley
                             OHNSTAD TWICHELL, P.C.
                             901 13th Avenue East
                             P.O. Box 458
                             West Fargo, ND 58078-0458
                             Fax: 701-282-0825

By Pouch Mail Wendy I. Silver, Esq.
and facsimile: Senior Enforcement Attorney
U.S. EPA Region 8
MC8ENF
1595 Wynkoop Street
Denver, CO 80202-1129
Fax: 303-312-6953

                             Tina Artemis
                             Regional Hearing Clerk
                             U.S. EPA Region 8
                             MC8RC
                             1595 Wynkoop Street
                             Denver, CO 80202-1129
                             Fax: 303-312-6859

By Inter-Office Mail
and facsimile: Judge Susan L. Biro
Office of Administrative Law Judges
U.S. EPA (Mail Code 1900L)
Fax:202-565-0044

                             Amanda Helwig
                             Office of Civil Enforcement, Water Enforcement Division
                             U.S. EPA (Mail Code 2243-A)
                             Fax: 202- 564-0018

Dated: July 28, 2010 [signature] Annette Duncan
Secretary