15-2200-15437-2

 

STATE OF MINNESOTA

OFFICE OF ADMINISTRATIVE HEARINGS

 

FOR THE POLLUTION CONTROL AGENCY

 

In the Matter of Administrative Penalty Order Issued to Jerry’s Auto Specialties, Ltd.

FINDINGS OF FACT, CONCLUSIONS AND RECOMMENDATION

          The above-entitled matter came on for hearing before Administrative Law Judge Beverly Jones Heydinger (“ALJ”) on July 17, 2003, pursuant to a Notice of and Order for Hearing dated June 13, 2003.  The hearing was held at the Pollution Control Agency, 520 Lafayette Road, Saint Paul, MN.  There were no post-hearing submissions by the parties.

Beverly M. Conerton, Assistant Attorney General, Suite 900 NCL Tower, 445 Minnesota Street, St. Paul, MN 55155-4199, appeared on behalf of the Pollution Control Agency (“Agency” or “PCA”). Jerry Chapman, President and Chief Executive Officer, appeared on behalf of the Respondent, Jerry’s Auto Specialties, Ltd. (“Jerry’s Auto”), Respondent.

NOTICE

          This Report is a recommendation, not a final decision.  The Commissioner of the Pollution Control Agency will make the final decision after reviewing the record and may adopt, reject or modify these Findings of Fact, Conclusions, and Recommendations.  Under Minn. Stat. § 116.072, subd. 6(e), the Commissioner’s decision shall not be made until this Report has been available to the parties to the proceeding for at least five (5) days. Parties should contact Sheryl Corrigan, Commissioner, Minnesota Pollution Control Agency, 520 Lafayette Rd., St. Paul, MN 55155, telephone (651) 296-7301 to ascertain the procedure for filing exceptions.

          If the Commissioner fails to issue a final decision within 90 days of the close of the record, this report will constitute the final agency decision under Minn. Stat. § 14.62, subd. 2a.  The record closes upon the filing of exceptions to the report and the presentation of argument to the Commissioner, or upon the expiration of the deadline for doing so.  The Commissioner must notify the parties and the Administrative Law Judge of the date on which the record closes.

 

STATEMENT OF ISSUE

1.               Did the Respondent fail to remove or upgrade an existing underground petroleum storage tank by December 22, 1998?

2.               Did the Respondent fail to properly monitor an underground petroleum storage tank?

3.               Is the Agency’s determination of the penalty amount reasonable, in light of the statutory factors that apply?

Based upon all of the files, records and proceedings herein, the Administrative Law Judge makes the following:

FINDINGS OF FACT

1.               Jerry’s Auto provides auto specialty services at 3700 Highway 100 South, St. Louis Park, MN.  Jerry’s Auto does not own the property, but has leased the property and been in business at this location for 26 years.  As a service to its customers, Jerry’s Auto has occasionally changed the oil in its customers’ cars.  In those instances, it placed the used oil in an underground storage tank.  The tank held approximately 500 gallons.  When the tank was full, the oil was pumped out.[1]

 

2.               In 1989, the PCA began to regulate underground petroleum storage tanks, referred to as “UST’s.”  The PCA promulgated rules, and tank owners were given ten years, until December 22, 1999, to come into compliance with the rules.[2]  Also in 1989, the U.S. Environmental Protection Agency (EPA) initiated a hazardous waste monitoring program.  Jerry’s Auto applied for and was assigned an EPA Hazardous Waste Materials number.[3]

 

3.               The tank regulation program was enacted to minimize the chance of a petroleum tank leak. Two key components of the regulation are tank corrosion prevention and regular tank monitoring to detect leaks.[4]

 

4.            On at least two occasions in the 1990’s, Hennepin County Environmental Management Division inspected Jerry’s Auto.   The inspection was conducted to enforce a local ordinance regulating the proper management of hazardous waste.  On August 25, 1995, a county inspector inspected Jerry’s Auto and completed an inspection form.[5]  The form included several categories and the inspector’s notes about compliance with a range of requirements.  One category, “Storage Tank Requirements,” has subcategories including “Daily Inspections – Tank Level Monitoring/Discharge Equipment,” and “Weekly Inspections – Looking for Leaks and Corrosion.”  The inspector marked “N/A” over the storage tank requirements, apparently indicating that the category was not applicable to Jerry’s Auto.  Written notes on the form indicate that the inspector was aware that there was a “used oil UST” on the premises.  The inspector apparently found no violations.  He requested three years of manifests and “used oil and filter receipts.”  The inspector did not notify Jerry’s Auto that the used oil was not hazardous waste or that other rules required the registration and inspection of the UST by the PCA.[6]

 

5.            The reverse side of the inspection form lists the State Hazardous Waste Rules (Chapter 7045) and Hennepin County Waste Ordinance requirements that are reflected in the inspection categories on the front of the inspection form. [7]

 

6.            Hennepin County performed another hazardous waste inspection in 1998, including a check of the used oil.  It noted that an underground storage tank was present, but did not indicate to Jerry’s Auto that its tank was governed by UST rules.[8]

 

7.            Until 2000, the PCA conducted tank inspections.  Until that time, Hennepin County had no responsibility to inspect underground tanks.  It did not routinely notify the PCA when it observed an underground storage tank during a hazardous waste inspection.[9] 

 

8.            In December 2000, the PCA entered into a joint powers agreement with Hennepin County and delegated the inspection of underground storage tanks to the County.[10]  On February 8, 2002, Hennepin County conducted a Hazardous Waste inspection and noted the presence of the underground storage tank.[11]  The inspector directed Jerry’s Auto to contact the PCA to determine if its storage tank was registered, and, if not, to complete the registration form.[12]  In response, Jerome Chapman, the president of Jerry’s Auto, worked with Hennepin County to contact the PCA and check the status of the tank.[13]  On March 22, 2002, Shirley Smith, a Hennepin County inspector, went to Jerry’s Auto and inspected the underground storage tank.  She completed the “Underground Tank Facility Inspection Checklist”, noting that there was an unregistered 500-gallon tank on the property and no leak detection system in place.[14]

 

9.            Initially, Ms. Smith recommended that Jerry’s Auto receive a warning.[15]  She notified Jerry’s Auto on March 22, 2002 that it had to inform her by April 1 of its intent to comply with the proposed corrective actions within 90 days.[16]  On March 29, 2002, Jerry’s Auto notified Ms. Smith of its intent to comply.[17]

 

10.        Ms. Smith notified Jess Richards, the Compliance Coordinator for the PCA metropolitan region, that Jerry’s Auto had an unregistered underground storage tank.[18]  Mr. Richards convened a “forum,” a meeting of PCA staff and Ms. Smith, to review the facts surrounding her inspection and determine if Jerry’s Auto had violated the UST rules.  The facts were discussed at the forum, a consensus was reached, and Ms. Smith and Mr. Richards were directed to prepare a proposed administrative penalty order (APO).

 

11.        Two violations were proposed, failure to remove an existing tank or upgrade it with a corrosion protection system,[19] and failure to regularly monitor the tank for possible leaks.[20] 

 

12.        The PCA has demonstrated that the violations occurred.  Jerry’s Auto did not refute the Agency’s evidence.  However, it objects to the penalty.

 

13.        The applicable statute sets out six criteria for the PCA to use in calculating the penalty, including the willfulness of the violation, gravity, past violations, number of violations, economic benefit and other factors as justice may require.[21]

 

14.        The Administrative Penalty Order Penalty Calculation Worksheet and Guidance lays out the process the PCA followed to calculate the penalty.  First, the PCA assessed the seriousness of the violations.  In this instance, the PCA determined that the violations were serious because corrosion protection and tank monitoring are at the heart of tank regulation.  Because the violations were characterized as serious, the PCA decided that the penalty should be “nonforgivable.”[22]

 

15.        The Penalty Calculation Worksheet has a grid to determine the amount of the penalty.  The second step places each violation on the grid.  One axis of the grid reflects the potential for harm to the environment.  Because of the small size of the tank, the small amount of oil that was put into the tank each year (about 520 gallons), and piping by gravity without a pump, the PCA determined that the risk of harm to the environment from each violation was “minor.”  The second axis reflects the deviation from compliance.  In each instance the PCA determined that the deviation from compliance was “major” because of the length of time that the tank had been out of compliance.  For the first violation, failure to upgrade or remove the tank, the PCA believed the deviation was major because Jerry’s Auto had ten years, from 1988 to 1998, to take action, and it had not done so up to the date of inspection in 2002.  For the second violation, failure to conduct leak detection, the PCA determined that Jerry’s Auto had been out of compliance since 1989, when the leak detection requirement took effect.[23]

 

16.        The grid’s penalty range per violation for minor potential for harm and major deviation from compliance is $500 to $2000.  For the first violation, the PCA set a base penalty of $750; for the second violation, the PCA set a base penalty of $1,250.[24]

 

17.        The Administrative Penalty Order (APO) Penalty Calculation Guidance fully explains the process for calculating an appropriate penalty.  It restates and elaborates upon the statutory factors.  Specifically, it states:  If the adjustment of the base penalty is based in whole or part on “other factors as justice may require, then the factors must be specifically identified in the APO.”[25]

 

18.        The APO did not identify any additional factor that entered into the penalty calculation.

 

19.        Based on the statutory factors, the deviation from compliance was “minor.”  The PCA conceded that the violations were not willful and that the regulated party had no prior violations.  It determined that the gravity of the violation, as defined in the statute, was minor.  The penalty grid’s maximum penalty per violation with minor potential for harm and minor deviation from compliance is $500.

 

20.        The base penalty can be enhanced. The PCA considers the violator’s willfulness or culpability, the history of past violations and economic benefit. In this case, there was no evidence that the violations were willful, and no history of past violations.  The PCA did adjust the penalty to account for the economic benefit to Jerry’s Auto from failing to conduct regular monitoring of the tank.  It estimated that it would take one hour of time per month to conduct the weekly monitoring, at $15 per hour, for 36 months (1999-2002).  Thus, it increased the penalty by $540.[26]  The APO reflects that the required corrective actions had been taken before the APO was issued.[27]

 

21.        The Forum met a second time to consider Ms. Smith’s and Mr. Richards’ draft APO. The APO, dated April 14, 2003 was approved and issued to Jerry’s Auto.[28] 

 

22.           Jerry’s Auto was aware that there were rules in effect that governed underground storage tanks.[29]  Mr. Chapman did not understand that the Hennepin County hazardous waste inspection was entirely separate from the tank registration and inspection program.  He relied upon the county inspection forms that showed a used-oil UST, and indicated that the tank requirements were not applicable to the business.  Jerry’s Auto demonstrated that it made an effort to comply with environmental statutes and rules.[30]  Also, it promptly responded and complied when it learned of the applicable UST rules.[31]  The storage tank was removed in July 2002, many months prior to the date the APO was issued.[32]

23.           Underground storage tanks are governed by the UST rules, unless certain exceptions apply.[33]  There was no evidence that any exceptions apply in this instance.  Mr. Chapman maintained that, had he known of the requirements, he could have burned the used oil on the premises and been exempt from the UST rule.[34]  However, the used oil was periodically recycled.  It was not burned to heat the property where the tank was located.[35] 

24.           Jerry’s Auto challenged the calculation of economic benefit and submitted evidence that oil changes were not profitable.[36]  This does not address the avoided costs for testing.  The Department has demonstrated that its calculation of economic benefit is supported by the evidence.

Based upon the foregoing Findings of Fact, the Administrative Law Judge makes the following:

 

 

CONCLUSIONS

1.          The Administrative Law Judge and the Pollution Control Agency are authorized to consider the violations against Respondent under Minn. Stat. §§116.072 and 14.50 (2002).

2.          Respondent received due, proper and timely notice of the violations and of the time and place of the hearing.  This matter is, therefore, properly before the Agency and the Administrative Law Judge.

3.          The Agency has complied with all relevant substantive and procedural legal requirements.

4.          The PCA has shown by a preponderance of the evidence that Jerry’s Auto violated Minn. R. 7150.0110 by failing to upgrade or remove its underground storage tank by December 22, 1998.

5.          The PCA has shown by a preponderance of the evidence that Jerry’s Auto violated Minn. R. 7150.0310 by failing to monitor its tank for leak detection.

6.          Based on the factors set forth in Minn. Stat. § 116.072, subd. 2, the amount of the penalty is not reasonable because the deviation from compliance was minimal.  The maximum appropriate penalty for each violation with minor potential for harm and minor deviation from compliance is $500.  The PCA has demonstrated that the economic benefit calculation of $540 is reasonable.

          Based upon the foregoing Conclusions, the Administrative Law Judge makes the following:

RECOMMENDATION

IT IS HEREBY RECOMMENDED: that the Commissioner of the Pollution Control Agency reduce the penalty against Respondent, Jerry’s Auto Specialties, Inc. to $1540.00. 

Dated this 15^th  day of August, 2003.

 

                                                                

S/ Beverly Jones Heydinger

BEVERLY JONES HEYDINGER

Administrative Law Judge

 

Reported:  Tape-recorded (four tapes)

 

NOTICE

Under Minn. Stat. § 14.62, subd. 1, the agency is required to serve its final decision upon each party and the Administrative Law Judge by first class mail or as otherwise provided by law.

MEMORANDUM

The PCA has the burden of proving by a preponderance of the evidence that the violations occurred and the basis for the $2540 penalty assessed against Jerry’s Auto.[37]  At the hearing on April 1, 2003, the PCA clearly established a factual basis for each violation.However, under the facts of this case it is not reasonable to treat the offense as a “major” deviation from compliance, as described on the PCA’s penalty matrix. The “Penalty Calculation Guidance” describes deviation from compliance as follows:  “consideration should be given to the quantity or extent of the violation (i.e., how much, how far) or the extent to which the Regulated Party attempted to prevent the violation.”[38]     

There are six statutory factors included in the penalty calculation.[39] 

Willfulness of the violations.  Jerry’s Auto asserts, and the PCA concedes that the violations were not willful.

Gravity of the violation, including damage to humans, animals, air, water, land, or other natural resources of the state.  Jerry’s Auto asserts, and the PCA concedes that there was no environmental damage caused by the violations.  The PCA concluded that the “potential for harm” was minor.

History of past violations.  Jerry’s Auto asserts, and the PCA concedes that there were no past violations.

Number of violations.  There were two violations.

The economic benefit gained by the person allowing or committing the violation.  This was separately calculated at $540.

Other factors as justice may require, if the commissioner specifically identifies the additional factors in the commissioner’s order. 

The Administrative Penalty Order does not identify other factors that were considered.  It states:  “In determining the amount of the penalty, the Commissioner considered whether the violations were willful, whether the Regulated Party gained economic benefit, whether there is a history of past violations, the number of violations, and the gravity of violations, including the potential for damage to humans, animals, air, water, land, or other natural resources of the State.” 

Based on these factors, it is clear that the deviation from compliance was minor.

The Penalty Calculation Worksheet references the length of time that Jerry’s Auto was out of compliance in its determination that the violation was serious and unforgivable.  However that factor was not specifically included in the Order as a basis for the penalty amount, as required by statute.  The administrative law judge may not recommend a change in the amount of the proposed penalty unless, based on the statutory factors, the penalty is unreasonable.   In this case, the statutory factors do not reasonably support a conclusion that the deviation from compliance for either one of the two violations was “major.”

In addition, the PCA failed to consider the other factors presented by Jerry’s Auto, in particular, its mistaken reliance on the Hennepin County inspections, and its prompt action when it learned of the applicable rules. These additional factors further support a reduction of the penalty.

Ignorance of the law is not a defense and a penalty is warranted.  However, from the record it is clear that Jerry’s Auto had every intention of complying with the applicable regulations. Although it failed to do so, its mistaken reliance on the inspections conducted by Hennepin County should be taken into account.  In addition, Jerry’s auto had only one small tank and stored very little oil.

The Hennepin County inspector checked the storage of used oil, made reference to the UST on the inspection form, and indicated that the hazardous waste tank requirements did not apply. It is understandable that a small business owner with one small tank would not have understood that the UST requirements were separate and required additional action.  There is no suggestion that the Hennepin County inspector made any mention of the UST rules to Jerry’s Auto.  Jerry’s Auto immediately cooperated with the PCA and the County and corrected the violations when it learned that the UST rules did apply. 

The PCA calculated the economic benefit of noncompliance on the basis that Jerry’s Auto would have incurred costs to monitor the tanks.  This was not refuted.[40] Jerry’s Auto produced evidence that it lost money on oil changes.  However, that is not material.  Regardless of whether it made money or lost money on the oil changes, it saved money by failing to conduct the required tests.

The maximum penalty for each violation with minor potential for harm and minor deviation from compliance is $500.  Thus the appropriate penalty is $1540. 

                                                            B.J.H.