Service Oil, Inc. v. U.S. EPA

Dec 28: In the U.S. Court of Appeals, Eighth Circuit, Case No. 08-2819. In this administrative enforcement proceeding, U.S. EPA imposed a substantial monetary penalty on Service Oil, Inc., the owner of a construction site that did not timely obtain a storm water discharge permit. According to the Appeals Court, EPA based the amount of the penalty not on unlawful discharges, but on Service Oil’s failure to comply with the Agency’s permit application regulations. The Appeals Court concluded that "this is an expansion of EPA’s remedial power not authorized by the governing statutes," and reversed and remanded the decision for redetermination of the penalty.

The Eighth Circuit said in part, "As the Second Circuit held in invalidating a portion of EPA’s regulations governing concentrated animal feeding operations, 'unless there is a "discharge of any pollutant," there is no violation of the Act, and point sources are, accordingly, neither statutorily obligated to comply with EPA regulations for point source discharges, nor are they statutorily obligated to seek or obtain an NPDES permit.'" [citing Waterkeeper Alliance, Inc. v. E.P.A., 399 F.3d 486, 504 (2d Cir. 2005).

The Appeals Court said further, "While acknowledging 'the policy considerations underlying the EPA’s approach,' the court [2nd Circuit] concluded that 'it contravenes the regulatory scheme enacted by Congress; the Clean Water Act gives the EPA jurisdiction to regulate and control only actual discharges -- not potential discharges, and certainly not point sources themselves.'”

The Appeals Court rules, "Our conclusion that EPA lacks statutory authority to assess administrative penalties for failure to submit a timely permit application does not mean, as the EAB [Environmental Appeals Board] posited, that the agency must either guess the identities of potential new point sources, or allow unpermitted discharges to ensue. Prudent builders know that permits do not issue overnight and that storm water discharges can happen any time after the start of construction makes the site a point source. They will apply and obtain permits before starting construction to avoid penalties for unlawful discharge that may prove to be severe. That is the regulatory regime Congress crafted. By contrast, under the EAB’s interpretation of § 1318(a), a person about to commence construction could apply to EPA for a storm water discharge permit less than the ninety days “before the date on which construction is to commence” prescribed in 40 C.F.R. § 122.21(c)(1); obtain the permit before construction commences and any discharge occurs; and still face a costly administrative enforcement proceeding and potential monetary penalties for failing to comply with the regulation. The statute is to the contrary.

"The decision of the EAB based the amount of monetary penalty assessed primarily on Service Oil’s 'complete failure to apply for its storm water permit prior to starting construction.' As a violation of the permit application regulations is not within the purview of 33 U.S.C. § 1319(g)(1)(A), this was a statutorily impermissible factor. Accordingly, we grant the petition for review, vacate the order assessing a civil penalty of $35,640, and remand to the agency for redetermination of the amount of the penalty in accordance with § 1319(g)(3) and this opinion."

Access the complete opinion (click here).