Fulton Fuel Company (Board decision, September 9, 2010)
In re Fulton Fuel Company (EAB CWA Appeal No. 10-03): default and $32,176 penalty affirmed
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Plain-English summary
Fulton Fuel Company was charged after an oil spill from its facility reached Fred and George Creek in Montana and after the company failed to maintain an SPCC Plan. Fulton did not timely answer the complaint and did not give good cause for its repeated missed deadlines. The Environmental Appeals Board held that the Regional Judicial Officer properly entered and refused to set aside the default, and that Fulton had not shown a strong probability of prevailing on its jurisdiction and liability arguments. The Board affirmed the default decisions and assessed a $32,176 civil penalty.
Decision snapshot
- Cited authorities: 40 C.F.R. §§ 22.15, 22.17, 22.24, 22.30, 22.31, 22.38, 110.1, 112.2, and 112.9; 33 U.S.C. § 1321; 31 U.S.C. § 3717
- Outcome: The default decisions were affirmed, and Fulton Fuel Company was ordered to pay a $32,176 civil penalty.
- Key point: A respondent that repeatedly misses answer and show-cause deadlines must show good cause and a strong probability of a meritorious defense to set aside a default.
Full text (EPA EAB public release)
BEFORE THE ENVIRONMENTAL APPEALS BOA
UNITED STATES ENVIRONMENTAL PROTECTION A y
WASHINGTON, D.C. SEP 9 2010
Clerk, EnvironmentAl ADIleals Iioard
) INITIALS ~
Inre: )
)
Fulton Fuel Company ) CWA Appeal No. 10-03
)
Docket No. CWA-08-2009-0006 )
FINAL DECISION AND ORDER
1. Statement of the Case
On February 19,2009, U.S. Environmental Protection Agency ("EPA") Region 8 (the
"Region") filed a complaint against Fulton Fuel Company ("Fulton") requesting a civil
administrative penalty for Fulton's discharge of approximately six to ten barrels of oil from
Fulton's facility into the Fred and George Creek in Toole County, Montana and for Fulton's
failure to have a Spill Prevention Control and Countermeasure ("SPCC") Plan for its facility in
violation of Clean Water Act ("CWA") section 311 (b), 33 U.S.c. § 1321(b) and 40 C.F.R.
§§ 110.3, 112.3, 112.7, 112.9, and 112.10. On March 8, 2010, more than eight months after the
complaint was hand delivered by the Toole County Sheriff to Fulton's registered agent for
service of process and after several deadlines passed for Fulton to show cause for its defaults,
Fulton filed an answer to the complaint. 1
1 Because Fulton filed its answer after the RJO's last deadline for Fulton to explain its
conduct, the RJO did not accept the answer and excluded it from the record due to its untimely filing. Default Initial Decision and Order at 2-3 (Apr. 8,2010).
Page 2
Before the Environmental Appeals Board at this time is Fulton's notice of appeal and
supporting brief filed on May 10, 2010, from two Default Initial Decision and Orders issued by
Regional Judicial Officer Elyana R. Sutin ("RJO"). In the first Default Initial Decision and
Order, dated March 17,2010 ("First Default Decision"), the RJO found Fulton in default for its
failure to timely file an answer to the complaint. The RJO found that "[a] cogent and reasoned
response has never been given," and that "[t]o date, no document has been filed on time * * *
oilier than the first Notice of Appearance." First Default Decision at 5. The RJO also found
Fulton liable for the discharge of oil into the Fred and George Creek and for failure to have an
SPCC Plan, and the RJO assessed a civil administrative penalty against Fulton in the amount of
$32,176. In the second Default Initial Decision and Order, dated April 8, 2010 ("Second Default
Decision"), the RJO denied Fulton's motion to set aside the First Default Decision. The RJO
found that Fulton's statements in its motion and supporting documents "do not comport with the
record." Second Default Decision at 2.
Fulton argues in its appeal that: (1) the RJO's finding of default should be "set aside;"
and (2) "EPA has no jurisdiction in thls case." Respondent's/Appellant's Brief in support of
Notice of Appeal at 5-6. The Region has filed a response brief contending that the Board should
uphold the RJO's First and Second Default Decisions.
II. Issue on Appeal
Did the RJO err in finding Fulton in Default and in concluding that Fulton failed to show
good cause for setting aside the default?
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Ill. Summary ofDecision
As explained below, Fulton's four-sentence appellate argument for setting aside the
RJO's finding of default is unpersuasive and must be rejected. Fulton has made no attempt in its
appellate brief to address the reasons the RJO gave for finding that Fulton's explanations for its
more than eight-month delay in filing an answer to the complaint "do not comport with the
Record." Second Default Decision at 2. Fulton also has not shown error in the RJO's conclusion
that Fulton's January, 2010 response to the RJO's order to show cause "provided no infonnation
as to why [Fulton] had failed to respond to the Complaint, Motion for Default, or the Orders to
Show Cause." First pefault Decision at 3. And, Fulton has not addressed its continued failure to
meet deadlines once counsel belatedly entered appearance on Fulton's behalf. First Default
Decision at 5. Fulton also has not demonstrated that there is a strong probability it would prevail
on any defenses to the violations and penalty and, in particular, the Board concludes that Fulton's
untimely challenge to EPA's jurisdiction over this matter is not an alternative basis for relieving
Fulton of the consequences of its default and its failure to show good cause.
N. Governing Law and Standard ofReview
This proceeding is governed by EPA's Consolidated Rules of Practice, 40 C.F.R. part 22.
40 C.F.R. § 22.38(a) ("This section shall apply, in conjunction with §§ 22.1 through 22.32.and
§ 22.45, in administrative proceedings for the assessment of any civil penalty under * * * section
311 (b)(6) of the Clean Water Act."). Under the part 22 rules, a party's failure to adhere to
procedural requirements may be grounds for a finding of default. Specifically, a "party may be
found to be in default: after motion, upon failure to file a timely answer to the complaint," and
"[ d]efault by respondent constitutes, for purposes of the pending proceeding only, an admission
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of all facts alleged in the complaint and a waiver of respondent's right to contest such factual
allegations." 40 C.F.R. § 22. 17(a).
The regulations direct that "[w]hen the Presiding Officer [the RJO here] finds that default
has occurred, [she] shall issue a default order against the defaulting party as to any or all parts of
the proceeding unless the record shows good cause why a default order should not be issued."
Id.§ 22.17(c) (emphasis added). Further, after default has been entered, "[f]or good cause
shown, the Presiding Officer may set aside a default order." !d. (emphasis added). Thus, the
issue of "good cause" informs both the inquiry whether a default order should be entered in the
first place and whether, once entered, a default order should be set aside. See In re Pyramid
Chem. Co., 11 E.A.D. 657, 661-62 (EAB 2004). In applying the good cause standard, the Board
has endorsed the general principle disfavoring default and observed that "when fairness and
balance of the equities so dictate, a default order will be set aside." In re Thermal Reduction Co.,
4 E.A.D. 128, 131 (EAB 1992); accord In re Las Delicias Cmty., SDWA Appeal No. 08-07, slip
op. at 8 n.7 (EAB Aug. 17,2009), 14 E.A.D. _; In re Four Strong Builders, Inc., 12 E.A.D. 762,
766 (EAB 2006); In re Rybond, Inc., 6 E.A.D. 614, 616 (EAB 1996).
On appeal, the Board has traditionally applied a "totality of the circumstances" test to
determine whether a default order was appropriate, or whether a motion to set aside a default
order has been properly denied. See In re JHNY, Inc., 12 E.A.D. 372,384 (EAB 2005); Pyramid
Chem., 11 E.A.D. at 661; Rybond, 6 E.A.D. at 624-25; Thermal Reduction, 4 E.A.D. at 131.
Factors considered under the "totality of the circumstances" may include whether a
procedural requirement was indeed violated, whether that violation is proper grounds for a
default order, and whether there is a valid excuse or justification for not complying with the
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procedural requirement. See JHNY, 12 E.A.D. at 384; Pyramid Chem., 11 E.A.D. at 661-62;
In re Jiffy Builders, Inc., 8 E.A.D. 315, 319-20 & n.8 (EAB 1999); Rybond, 6 E.A.D. at 625. The
Board has also considered whether the defaulting party would likely succeed on the substantive
merits if a hearing were held. See JHNY, 12 E.A.D. at 384; Pyramid Chem., 11 E.A.D. at Q62;
Jiffy Builders, 8 E.A.D. at 319; Rybond, 6 E.A.D. at 628 & n.20. In other words, as explained in
Rybond, the Board may consider whether the administrative action in question "would have had a
different outcome had there been a hearing." 6 E.A.D. at 625. It is the defaulting party's burden
in this context ''to demonstrate that there is more than the mere possibility of a defense, but rather
a 'strong probability' that litigating the defense will produce a favorable outcome." Pyramid
Chern., 11 E.A.D. at 662; Jiffy Builders, 8 E.A.D. at 322.
In close cases, doubts are typically resolved in favor of the defaulting party so that
adjudications on the merits, the preferred option, can be pursued. Thermal Reduction, 4 E.A.D.
at 131 (citing treatise on federal practice and procedure); see In re Neman, 5 E.A.D. 450, 454-60
(EAB 1994) (vacating default order where amended complaint not properly served on defaulting
party). Nevertheless, the Board has not hesitated to affirm default orders in cases where
circumstances clearly indicate that the imposition of default is warranted. See, e.g., JHNY,
12 E.A.D. at 385-93; Pyramid Chem., 11 E.A.D. at 664-68, 675-82; B&L Plating, Inc., 11
E.A.D. at 191-92; Jiffy Builders, Inc., 8 E.A.D. at 320-21; Rybond, 6 E.A.D. at 625-38. In
particular, the Board accords substantial deference to the presiding officer in managing the trial
proceedings and, in so doing, to take appropriate action to prevent abuse of process. '''Our rules
depend on the presiding officer to exercise discretion throughout an administrative penalty
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proceeding.'" JHNY, 12 E.A.D. at 385 (quoting In re Lazarus, Inc., 7 E.A.D. 318,334 (EAB
1997)); accord In re Carroll Oil Co., 10 E.A.D. 635,650 (EAB 2002).
V. Analysis
The Board concludes that Fulton's appeal does not establish grounds for reversing the
RJO's entry of default against Fulton. The RJO correctly found that Fulton defaulted by its
extensive delay in filing an answer to the complaint and by its failure to timely file any
substantive pleading. Specifically, Fulton filed an answer to the complaint more than eight
months after the answer first became due and after the expiration ofthe RJO's last deadline for
Fulton to show good cause for its default. Fulton also failed to respond to the Region's motion
for default judgment; Fulton failed to respond to the RJO's first and second orders to show cause
and to supplement the record; and Fulton also filed a late response to the fmal opportunity the
RJO granted Fulton to provide a reason or justification for its numerous defaults. Although
Fulton did ultimately file an answer to the complaint after the RJO's fmal deadline for Fulton to
explain its conduct, Fulton has provided no adequate explanation for its untimeliness. Moreover,
the record also includes information suggesting that Fulton sought to avoid service of the RJO's
orders in this case. Specifically, two envelopes the RJO sent by certified mail to Fulton were
returned marked with the notation "refused."
More specifically, the record shows the following chronology of document service and
response in this case:
• The Region filed the complaint on February 19,2009.
• On February 20, 2009, the Region attempted to serve the complaint on Fulton by
certified mail sent to William M. Fulton, Jr. ("Mr. Fulton") at the address on file
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with the Montana Secretary of State for Mr. Fulton as Fulton's agent for service of
process. That envelope was returned with a stamp indicating that it was
unclaimed and with a handwritten alternate address.
• On February 20,2009, the Region also attempted to serve Fulton by mailing the
complaint by certified mail to Mr. Richard L. Beatty, one ofthe attorneys who
represented Fulton when Fulton complied with orders predating this
administrative penalty action that required Fulton to clean up the spilled oi1. 2 On
February 23,2009, Mr. Beatty signed for, and accepted, the envelope containing
the complaint. However, subsequently, Mr. Beatty filed a letter in this case
stating that he was not retained to represent Fulton in this matter. Mr. Beatty also
stated that he had "delivered the Complaint to William Fulton, President of Fulton
Fuel Company and briefly discussed its contents" and "was advised at that time
that [Mr. Fulton] intended to retain an attorney more knowledgeable in
environmental matters." Letter from Richard L. Beatty to the RJO (filed Jan. 5,
2010).
• On March 23,2009, the Region made a second attempt to serve the complaint on
Fulton by certified mail sent to Mr. Fulton at both the address used for the first
attempt and at the address hand-written on the returned envelope. These
March 23 mailings were also returned stamped as unclaimed.
2 In 2004, the Montana Department of Environmental Quality issued an order requiring
Fulton to clean up the oil Fulton had spilled into the Fred and George Creek. In 2006, the U.S. EPA issued to Fulton a request for information concerning the oil spill, which Fulton responded to in 2007, nearly two years before this administrative penalty action was commenced by the filing of the complaint in February, 2009.
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• On May 22,2009, the complaint was hand delivered to Mr. Fulton by Patrick T.
Kellegher of the Toole County Sheriffs office. Based on this service date,
Fulton's answer became due on Monday, June 22,2009. 40 C.F.R. § 22.15(a).
• When Fulton did not timely file an answer to the compliant, the Region filed, on
July 9,2009, a Motion for Default Judgment and Order. The Region initially
attempted to serve the Motion for Default Judgment and Order on Fulton by
certified mail sent to Mr. Fulton, but that envelope was returned as "unclaimed."
As a result, the Region requested service by the Toole County Sheriffs office,
which hand delivered the Motion for Default Judgment and Order to Mr. Fulton
on August 18,2009. Fulton never filed a response to the Region's motion.
• On August 20, 2009, the RJO issued an Order to Show Cause and Order to
Supplement the Record. The RJO set September 30, 2009 as a deadline for
Fulton to show cause why it should not be held in default. The order warned that
a failure by Fulton to respond to the order could result in Fulton being held liable
for the full amount ofthe proposed civil penalty of $32,500. The order also
directed the Region to provide additional information on how it calculated the
proposed penalty. The RJO served this first order to show cause on Mr. Fulton by
certified mail, return receipt requested. The mailing was returned marked
"unclaimed."
• Fulton never filed a response to the RJO's first order to show cause. On
September 9, 2009, the Region filed the Declaration of Jane Nakad as its response
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to the RJO's request for additional infonnation regarding the Region's penalty
analysis. The Region served a copy on Mr. Fulton by first class mail.
• On November 20,2009, the RJO issued her Second Order to Supplement the
Record. Among other things, this Order requested that Mr. Beatty confinn
whether he represented Fulton Fuel Company in the administrative penalty action.
The Order set December 21, 2009, as a deadline for responses. The RJ 0 served
the second order on Mr. Fulton by certified mail, return receipt requested. The
mailing was returned marked "refused."
• On December 21,2009, an unsigned notice of appearance and motion for
additional time was filed by Douglas C. Allen on behalf of Fulton. The motion
requested that Fulton be granted an extension of time through December 30, 2009,
to supplement the record and show cause why it should not be held in default.
• On December 23,2009, the RJO issued an Order granting an extension oftime
through December 30, 2009, for Fulton to respond to the motion for default and
the order to show cause. Fulton did not file a response by December 30,2009.
• On January 4,2010, Fulton filed its Response to Order to Supplement the Record
and to Show Cause. Fulton's January 4 response included a number of arguments
explaining why Fulton believed it should not be held liable, but the response did
not include an answer to the complaint, or provide an explanation for Fulton's
failure to file an answer or respond to the motion for default or explain Fulton's
delay in responding to the order to show cause.
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• On January 14,2010, the RJO held a status conference by telephone and
instructed the parties to file status reports regarding any settlement discussions no
later than January 29,2010. On January 28,2009, the Region filed a status report.
On January 29,2010, Fulton faxed a status report (which was subsequently filed
on February I, 2010), and Fulton requested that the RJO allow at least 30 more
days for the filing of "a motion or further response."
• On February 2,2010, in response to Fulton's request for 30 additional days to file
"a motion or further response," the RJO entered an order setting a deadline of
March 3, 2010, for Fulton to show cause why a default order should not be issued.
Fulton did not file any response to the February 2,2010 Order before the March 3,
2010 deadline.
• On March 8,2010, Fulton finally filed its answer to the complaint, along with an
affidavit of William M. Fulton, Jr. and a motion opposing issuance of default.
That motion was styled a "Motion to Set Aside Default and to Set Hearing on the
Merits."
By the time Fulton finally filed its answer on March 8, 2010, five days after the last
deadline the RJO set, and without a thorough and candid explanation for its extensive delay, the
RJO clearly had become weary of Fulton's conduct. In its March 8, 2010 filing, Fulton offered
only a cursory explanation for its more than eight-month delay in filing an answer to the
complaint. Fulton did not provide a full, candid explanation - Fulton asserted, without much
factual support or detail, that it "hired counsel, other than its present counsel and reasonably
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believed such hired counsel was meeting EPA claims and complaints." Fulton's Motion to Set
Aside Default at 3.
In her March 17,2010 First Default Decision, the RJO stated "[t]he Respondent's lack of
consideration in addressing court documents and not taking seriously court deadlines partially
forms the basis for ruling on the motion [for default] at this juncture." First Default Decision
at 4 n.10. The RJO found that a "default has occurred." Id. at S. The RJO explained that
"[0Jnce Respondent retained an attorney to represent it in this matter, the court provided ample
time and opportunity to allow Respondent and its attorney to explain why the Complainant and
the court were ignored," but a "cogent and reasoned response has never been given." Id. at S.
The Board finds no error in these determinations the record clearly supports the RJO's
findings.
Following the initial finding of default, the RJO treated Fulton's March 8 filing as a
pleading to set aside the default. 3 The RJO considered Fulton's rationale for why the company
had engaged in extensive delay and repeatedly missed ordered deadlines. The RJO rejected
Fulton's assertion concluding that Fulton's "statements do not comport with the Record."
Second Default Decision at 2. On appeal, Fulton does not dispute the untimeliness of its answer,
or offer an explanation for its untimeliness that specifically addresses Fulton's failure to respond
3 The RJO observed that Fulton's "Motion to Set Aside Default" was an untimely
response to the show cause orders because Fulton filed it after the RJO's last deadline for Fulton to show good cause for its defaults. First Default Decision at 4; Second Default Decision at 2. The RJO also observed that Fulton's "Motion to Set Aside Default" was premature when filed because the RJO had not yet issued her First Default Decision. Second Default Decision at 2. After receiving Fulton's motion on March 8,2010, the RJO proceeded to issue her First Default Decision on March 17,2010, stating that the Region would be allowed through March 23,2010, to respond to Fulton's motion to set aside.
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earlier when Mr. Fulton received two separate hand-deliveries ofthe complaint and motion for
default by the Toole County Sheriffs office, or that addresses Mr. Fulton's refusal to take
certified mail delivery from the RJO in November, 2009. Instead, Fulton merely asserts to this
Board, like it did to the RJO, that it hired an attorney, Renee Coppock, "who indeed filed a
response to the EPA, but inexplicably did not file a formal response to the EPA's complaint, and
did not notify Fulton Fuel Company she was not defending the motion." Fulton's Appellate
Brief at 6.
Although Fulton's submissions to the RJO did demonstrate that Fulton was represented
by Renee Coppock during the cleanup process ordered in' 2004 by the Montana Department of
Environmental Quality and that Ms. Coppock had a role in providing Fulton's response in 2007
to EPA's request for information concerning the oil spill, Fulton's submissions provided no
evidence that Fulton had in fact retained Renee Coppock to represent Fulton in this penalty
proceeding. What is unexplained by Fulton's appellate brief, and the briefs and affidavit it
submitted to the RJO, is why Fulton believed it was represented in this administrative penalty
matter by any attorney before Mr. Allen filed an unsigned notice of appearance on December 21 ,
- No attorney filed a notice of appearance in this proceeding before· that date. Fulton has.
provided no specific details identifying when it discussed this case with Renee Coppock. Fulton
has not identified any communication between Fulton and Ms. Coppock (or any other attorney)
regarding this case generally, nor specifically that Fulton delivered the complaint to counsel and
requested representation after Mr. Fulton received hand delivery of the complaint from the Toole·
County Sheriff's office. Fulton's pleadings also do not explain what Fulton did, after Mr. Fulton
was personally served with the Region's Motion for Default, to ensure that its counsel was aware
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of the motion and would respond and correct the default. Fulton's assertion that it believed it
was represented by counsel, without supporting details regarding its communication with
counsel, is simply insufficient and unpersuasive at this stage of the proceeding to establish good
cause for setting aside Fulton's default. 4
In addition, at this stage of the proceeding, Fulton cannot be relieved of its default by the
scant information Fulton submitted as allegedly demonstrating that it has "meritorious defenses."
Fulton's Appellate Brief at 6. In this context, Fulton's burden is to demonstrate it has "more than
the mere possibility of a defense, but rather a 'strong probability' that litigating the defense will
produce a favorable outcome." Pyramid Chem., 11 E.A.D. at 662.
From Fulton's pleading filed on January 4,2010, it is apparent that Fulton admits it was
the owner of property that included an oil storage facility with associated "flow lines," one of
which passed under the Fred and George Creek, and that, on February 29, 2004, an oil leak was
detected from that flow line, which discharged between six to ten barrels of oil into the Fred and
George Creek and surrounding area. See Fulton Fuel Company's Response to Order to
4 The Board has on several occasions held that "under our case law governing default
determinations, the neglect of a party [by that] party's attorney does not excuse an untimely filing"; instead, "an attorney stands in the shoes of his or her client, and ultimately, the client takes responsibility for the attorney's failings." Pyramid Chem., 11 E.A.D. at 667; accord Four Strong Builders,12 E.A.D. at 770; JHNY, 12 E.A.D. at 382-83 & n.15; Jiffy Builders, 8 E.A.D. at 320-21; In re Detroit Plastic Molding Co., 3 E.A.D. 103, 105-06 (CJO 1990). Disputes between lawyers and clients generally provide no basis for the requisite good cause showing to reverse a default, as the administrative litigation process cannot reasonably be "held hostage" to such disputes. JHNY, 12 E.A.D. at 382 & n.15 (good cause for default not established by unsupported claim of financial difficulties affecting respondent's ability to continue to retain counsel). In the present case, however, Fulton has not even established that it retained counsel to represent it in this case, much less shown that the defaults are the fault of counsel rather than Fulton. A failure to retain counselor otherwise respond in this case, where Fulton's agent for service of process received two hand deliveries - of the complaint and the motion for default - is inexcusable.
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Supplement the Record and to Show Cause. Thus, the essential facts that give rise to Fulton's
liability that an oil spill occurred from a facility Fulton owned and that the spill discharged into
the Fred and George Creek - is undisputed. Fulton also has never asserted that it had an SPCC
.Plan for its facility.
Fulton's late-filed answer, which the RJO ultimately did not accept, alleges that Fulton
should not be found liable because the flow line was constructed by Fulton's predecessor and that
the flow line does not fall within the definition of a "facility" under the applicable statute and
regulations. See Answer at 1-2; see also Fulton's Motion to Set Aside Default at 2-3 (citing
33 U.S.C. § 1321 (f). These contentions do not sustain Fulton's burden to demonstrate a "strong
probability" that litigating the defense will produce a favorable outcome." Pyramid
Chem.,ll E.A.D. at 662. Liability is imposed on the "owner, operator, or person in charge,"
33 U.S.c. § 1321(b)(6)(A), and as noted above, Fulton has admitted it is the owner ofthe
property and flow line. Fulton's reference to the prior owner's construction of the flow line and
to 33 U.S.C. § 1321(f), which limits liability for cleaning up of a spill caused "solely" by the acts
of a third party, does not establish a potentially meritorious defense because Fulton had a duty as
owner and operator to perform "flowline maintenance to prevent discharges from each flowline."
40 C.F.R. § 112.9(d)(3) (2004).5 Fulton has provided no information explaining why it believes
the leak was caused "solely" by the initial installation of the flow line, rather than by Fulton's
failure to adequately maintain the flow line. In addition, Fulton's contention that the flow line is
5 This provision, which was applicable at the time of the spill in 2004, was subsequently
amended to make the flowline maintenance requirements more detailed. See Oil Pollution Prevention; Spill Prevention, Control, and Countermeasure Rule Requirements - Amendments, 73 Fed. Reg. 74,236,74,304 (Dec. 5, 2008).
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not within the defmition of a "facility" is wholly without merit the regulations unambiguously
state that "an oil production facility means all structures * * * piping (including but not limited to
flowlines or gathering lines), or equipment * * * located in a single geographic oil or gas field."
40 C.F.R. § 112.2 (emphasis added).6
Fulton's late-filed answer also alleges that EPA does not have jurisdiction. Answer at 1.
Fulton amplified this contention in its Motion to Set Aside Default and in its appellate brief
where Fulton argues that EPA lacks jurisdiction because the Fred and George Creek is not
"navigable waters ofthe United States." See Motion to Set Aside Default at 2; Fulton's
Appellate Brief at 5. This contention also is insufficient to sustain Fulton's burden to
demonstrate there is "more than the mere possibility of a defense, but rather a 'strong probability'
that litigating the defense will produce a favorable outcome." Pyramid Chem., 11 E.A.D. at 662.
The regulations define "navigable waters" as including "(a) [a]ll waters that are currently used,
were used in the past, or may be susceptible to use in interstate or foreign commerce * * *
(c) [a]ll other waters such as intrastate lakes, rivers, streams (including intermittent streams),
mudflats, sandflats, and wetlands, the use, degradation, or destruction of which would affect or
could affect interstate or foreign commerce * * * (d) [a]l1 impoundments of waters otherwise
defmed as navigable waters under this section; [and] (e) [tJ ributaries ofwaters identified in
paragraphs (a) through (d) ofthis section * * *." 40 C.F.R. § 110.1 (emphasis addedV
6 Minor wording changes were made to this definition in 2008. See 73 Fed. Reg.
at 74,299
7The statute defines the term "navigable waters" as "waters ofthe United States,
including the territorial seas." CWA § 502(7),33 U.S.C. § 1362(7).
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The complaint alleges that "Fred and George Creek is a tributary to Miners Coulee,
which flows into Canada and into the Milk River, a perennial international water. The Milk
River flows into the United States and into the Missouri River, a perennial interstate water."
Complaint at,r 12. Although Fulton's late-filed answer generally denies this allegation and
Fulton argues on appeal that it has a meritorious defense, Fulton has provided few factual details
supporting its contention. Fulton has provided no references to geological maps or records that
would show that the Fred and George Creek is not a tributary to Miners Coulee, the Milk River
and ultimately the Missouri River. Moreover, Fulton has, itself, described the Fred and George
Creek as a "small seasonal stream which runs dry each year about one mile below the site of the
spill." Fulton Fuel Company's Response to Order to Supplement the Record at 2-3. Because the
regulatory definition specifically mentions"intermittent streams," and "tributaries" of otherwise
included waters, Fulton's own description of the Fred and George Creek augurs against its own
argument, rather than sustaining its burden of showing a strong probability that, if allowed to
litigate the issue, Fulton would prevail in arguing that the Fred and George Creek is not an
intermittent stream within the meaning of § 110.1(c) and is not a tributary of Miners Coulee, a
tributary of the Milk River, a tributary of the Missouri River.
Fulton''s appellate arguments regarding the Supreme Court's opinions in Rapanos v.
United States, 547 U.S. 715 (2006), also do not establish that Fulton has a strong probability of
establishing a meritorious defense challenging EPA's jurisdiction to regulate Fulton's oil
discharge or Fulton's failure to have an SPCC Plan. Rapanos dealt with a dispute regarding
whether four ''wetlands'' were sufficiently connected to "waters of the United States" to fall
within Congress' grant of regulatory authority to EPA. It did not deal with an "intermittent
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stream" of the type specifically mentioned in the regulatory definition applicable here.
Moreover, Fulton fails to acknowledge that the plurality opinion authored by Justice Scalia, upon
which Fulton relies, expressly states ''we do not necessarily exclude [from EPA's regulatory
jurisdiction] seasonal rivers, which contain continuous flow during some months of the year but
no flow during dry months." Id. at 732 n.S. 8 As noted above, Fulton has itself described the Fred
and George Creek as a "seasonal stream" and, accordingly, Fulton has not demonstrated that it
has a strong probability of prevailing under the test articulated in the plurality opinion authored
by Justice Scalia.
Moreover, Fulton has not identified any facts it would rely on to establish that the Fred
and George Creek does not meet Justice Kennedy's "significant nexus" test for EPA's regulatory
authority. Id. at 759, 780. The Court of Appeals for the Ninth Circuit, which has jurisdiction
over Montana, has concluded that Justice Kennedy's concurring opinion "provides the
controlling rule oflaw." Northern Cal. River Watch v. City ofHealdsburg, 496 F.3d 993,999
1000 (9 th Cir. 2007). Thus, Fulton simply has not brought forward information, facts, or
evidence sufficient to establish "more than a mere possibility of a defense, but rather a 'strong
probability' that litigating the defense will produce a favorable outcome" on its contention that
EPA does not have regulatory jurisdiction. Pyramid Chem., 11 B.A.D. at 662.
8Justice Scalia stated further ''we have no occasion in this litigation to decide exactly
when the drying-up of a streambed is continuous and frequent enough to disqualify the channel as a 'wate[r] of the United States." 547 U.S. 732 n.s. In addition, the Rapanos case involved the addition of dredge or fill to a wetland, rather than the addition of a pollutant, in this case oil, to a seasonal stream. In Rapanos, Justice Scalia drew a distinction between the addition to a wetland of dredge or fill that is intended to stay put and the "discharge into intermittent channels of any pollutant that naturally washes downstream" and expressed the view that the plurality opinion would not likely affect enforcement cases involving pollutants that flow downstream. Rapanos, 547 U.S. at 743.
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In addition, as noted above, the Board gives deference to presiding officers in managing
trial-level proceedings to prevent abuse of process. JHNY, 12 E.A.D. at 384-85. Here, the record
not only evidences a clear pattern of failure to comply with the RJO's deadlines, it also evidences
Mr. Fulton's rejection ofthe RJO's certified mail deliveries in November, 2009. The RJO, thus,
had substantial reason to state that "[t]he Respondent's lack of consideration in addressing court
documents and not taking seriously court deadlines partially fonns the basis for ruling on the
motion [for default] at this juncture." First Default Decision at 4 n.1 O. Fulton's pleadings and
appellate brief do not address the RJO's concern. Fulton does not explain why Mr. Fulton,who
is designated Fulton's Registered Agent, failed to pick up, and refused, numerous certified mail
deliveries of pleadings and orders in this case. Fulton's failure to provide any adequate
explanation for its conduct is further reason for the Board to sustain the RJO's default decision as
an appropriate step in managing the RJO's docket.
Finally, the Board rejects any suggestion that the RJO did not have subject matter
jurisdiction to decide this case (or that the RJO was required to fully consider the jurisdictional
issue Fulton raised at whatever stage Fulton raised it). In In re Adams, 13 E.A.D. 310, 319 (EAB
2007), the Board observed that "the authority to regulate under the CWA is distinct from the
subject matter jurisdiction that defines a tribunal's authority to adjudicate a claim." Jurisdiction
to adjudicate this matter is not dependent upon a finding of discharge into navigable waters (or
proximity to navigable waters for purposes of an SPCC plan) as required for EPA to regulate the
specific activity. Instead, the subject matter jurisdiction of the RJO and the Board for this
proceeding is provided by CWA section 311(b)(6), 33 U.S.C. § 1321(b)(6), which establishes
administrative penalty assessment authority for violations of section 311, and by the
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Consolidated Rules of Practice, promulgated at 40 C.F.R. part 22, which specify the
administrative adjudicatory process for the assessment of any penalty under CWA section
311(b)(6). See, e.g., Adams, 13 E.A.D. at 320 (discussing subject matter jurisdiction for
violations of CWA section 404).
The Board's distinction between, on the one hand, the Board's and the RJO's subject
matter jurisdiction to decide administrative penalty matters arising under the CWA and, on the
other hand, EPA's jurisdiction to regulate specific activity impacting navigable waters, is
consistent with the Supreme Court's treatment of "the subject-matter jurisdiction/ingredient-of
claim-for-relief dichotomy" in the federal courts. Arbaugh v. Y & H Corp., 546 U.S. 500,511
(2006). The Supreme Court has held that federal court subject matter jurisdiction is primarily
defined by 28 U.S.C. §§ 1331 and 1332 and that the provisions of other law applicable to specific
claims are generally treated as elements of the claim for relief, rather than defining the tribunal's
jurisdiction. Id" at 513-14.
VI. Conclusion and Order
For the foregoing reasons, the Board concludes, based on the totality ofthe circumstances
discussed above, that Fulton failed to demonstrate why the Board should set aside the RJO's
finding of default, and'the Board hereby affirms the RJO's First and Second Default Decisions.
The RJO's First Default Decision provides a full analysis ofthe liability findings and penalty
determination,
Accordingly, Fulton Fuel Company is assessed a penalty of$32,176. Fulton Fuel
Company shall, within 30 days of the service ofthis Final Decision and Order, pay the entire
amount of the civil penalty by cashier's check or certified check payable to the Treasurer, United
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States of America (unless the Region agrees to a different payment schedule). The check should
contain a notation of the name and docket number of this case. 40 C.F.R. §22.31(c). Fulton
shall remit payment to:
U.S. Environmental Protection Agency
Fines and Penalties
Cincinnati Finance Center
P.O. Box 979077
St. Louis, MO 63197-9000
Failure to pay the penalty within the prescribed time may result in assessment of interest on the
civil penalty. See 31 U.S.C. § 3717; 40 C.F.R. § 22.31(c).
So ordered. 9
Dated:
0r'~6v-1;
9 The three-member panel deciding this matter is comprised of Environmental Appeals
Judges Charles J. Sheehan, Kathie A. Stein, and Anna L. Wolgast. See 40 C.F.R. § 1.25(e)(1).
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CERTIFICATE OF SERVICE
I hereby certify that copies ofthe forgoing Final Decision and Order in the matter of
Fulton Fuel Company, CWA Appeal No.1 0-03, were sent to the following persons in the manner indicated:
U.S. First Class Mail: William C. Allen
153 Main Street
P.O. Box 873
Shelby, MT 59474
William Lowrence
1320 Old Chain Bridge Road
Suite 200
McLean, VA 22101
U.S. EPA Pouch Mail: Marc D. Weiner (MC- 8ENF-L)
Enforcement Attorney
U.S. EPA Region 8
1595 Wynkoop Street
Denver, CO 80202
Tina Artemis (MC-8RC)
Regional Hearing Clerk
U.S. EPA Region 8
1595 Wynkoop Street
Denver, CO 80202
U.S. EPA Interoffice Mail: Jim Vinch (MC-2243A)
Water Enforcement Division
U.S. EPA
1200 Pennsylvania Ave, N.W.
Washington, D.C. 20460-0001
Dated: SEP - 9 2010
~ ~tte Dunea«'
Secretary
21
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