[CITE: DNR and I & M v.
Pheasant Ridge Development. CO., Inc., 10 CADDNAR 187 (2006)]
[VOLUME 10, PAGE 187]
Cause #: 03-123W
Caption: DNR and I & M v. Pheasant Ridge Development Co., Inc.
Administrative Law Judge:
Lucas
Attorneys: Boyko; Schlegel;
Lloyd, IV
Date: February 8, 2006
[NOTE: ON MARCH 19, 2007, THE ADMINISTRATIVE LAW JUDGE ISSUED THE FOLLOWING:
Being duly advised, the approval of the withdrawal of appearance of John Lloyd is affirmed. As to the Respondents' responsibilities to the DNR under the Final Order of February 13, 2007, the Order of March 2, 2007 and the Modified Order of March 15, 2007 are modified to clarify the Department of Natural Resources and Indiana Michigan Power Company both may seek any appropriate relief against the Respondents.]
FINAL ORDER OF NATURAL RESOURCES COMMISSION
Consistent with these
Findings of Fact and Conclusions of Law, the Commission orders:
(1)
Except as
provided in paragraph (2), Pheasant Ridge shall pay a civil penalty under IC
14-28-1-36 of $189,225.
(2)
Pheasant
Ridge may elect to perform a supplemental environmental project to reduce the
civil penalty described in paragraph (1), as more particularly described in
Part F of the Findings of Fact and Conclusions of Law, but in no event shall
the amount of civil penalty be reduced to less than $20,000.
(3)
A notice of
violation under IC 14-10-2-6 is issued against Pheasant Ridge.
(4)
For the abatement
of the notice of violation described in paragraph (3), Pheasant Ridge shall do
each of the following:
(A)
Dedicate any water created by construction of the channel, as built, to public
use.
The
dedication must be consistent with the status of the
(B)
Revegetate all bare and disturbed upland areas at the project site with a
mixture of grasses (excluding all varieties of tall fescue), legumes and native
shrub and hardwood species.
(C)
Complete a mitigation plan at another site in the
(D)
Grant a conservation easement to the DNR over the mitigation area described in
part (C).
(E)
In compensation for the wetland destroyed by the improper placement of the
channel, and for dredging the sand bar located in the
(F)
Grant a conservation easement to the DNR over the real property along the
southern edge of the real property adjacent to the
[VOLUME
10, PAGE 188]
easement
over other real property along the
(5)
Pheasant Ridge
shall complete each of the activities required for abatement under paragraph
(4) by December 31, 2007, unless for good cause, the AOPA Committee grants an
extension of time.
(6)
If Pheasant Ridge
knowingly fails to perform abatement in a timely fashion, a daily charge of
$250 shall be assessed beginning on January 1, 2008. The daily charge shall continue to accrue for
a period not to exceed 500 days or a maximum total charge of $125,000.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
A. Statement of the Case
1.
On July 16, 2003,
the Department of Natural Resources (the “DNR”) filed its “Complaint for the
Issuance of a Notice of Violation and the Imposition of Penalties” (the “Complaint”) against Pheasant Ridge
Development Co, Inc. and Jeffrey Chupp in his official capacity as President of
Pheasant Ridge Development Co., Inc. (collectively “Pheasant Ridge”).
2.
The Complaint
alleged permit violations of IC 14-28-1 (sometimes referred to as the “Flood
Control Act”) within a portion of the floodway of the St. Joseph River in
3.
The St. Joseph
River in
4.
Where a permit is
required under the Flood Control Act, a separate permit is not required under
the Navigable Waters Act. A permit under
the Flood Control Act must, however, also apply the permitting requirements of
IC 14-29-1-8 with respect to an activity within a navigable river. IC 14-29-1-8(d).
5.
With respect to
an activity within the
6.
The Complaint
alleged that Pheasant Ridge failed to abide by the terms of an Agreed Order
(the “Agreed Order”) entered between the DNR and Pheasant Ridge.
7.
The Natural
Resources Commission (the “Commission”) approved the Agreed Order on March 28,
2001 in Pheasant Ridge Development Co.,
Inc. v. Department of Natural Resources, Administrative Cause Number
00-052W.
[VOLUME 10, PAGE 189]
8.
On January 19,
2005, the administrative law judge took official notice, under IC
4-21.5-3-26(f), of Pheasant Ridge
Development Co., Inc. v. Department of Natural Resources (Cause No.
00-052W), for purposes of the instant proceeding.
9.
On October 24,
2005, the DNR also moved in the instant proceeding for the administrative law
judge to take official notice of the entire record for Administrative Cause No.
00-052W. The administrative law judge
granted the motion and affirmed his January 19 action on October 25, 2005.
10.
In Administrative
Cause No. 00-052W, the DNR filed a “Motion to Correct Error in Final Order” on
February 21, 2003. The DNR sought to substitute a drawing of the “North River
Ridge Subdivision” for the drawing of the “North River Ridge Wetland Mitigation
Site at Lakewood Subdivision Site”, which was originally tendered to the
Commission as Exhibit A of the Agreed Order.
11.
On February 24,
2003 in Administrative Cause No. 00-052W, the administrative law judge made an
“Entry with Respect to Department’s 'Motion to Correct a Final Order'”. The administrative law judge observed the
motion was, in effect, a request to substitute an exhibit that the parties had
originally attached to the Agreed Order. In the entry, Pheasant Ridge was provided
until March 14, 2003 to file any objection to the DNR’s motion.
12.
Pheasant Ridge
filed no objection to this DNR motion.
13.
On March 17, 2004
in Administrative Cause No. 00-052W, the administrative law judge made an “Entry
Approving the Correction of a Clerical Error and Making Substitution to
'Exhibit A' as Previously Approved in the Parties’ Agreed Order”. Included in the entry was a notification to
the parties of their opportunity to seek judicial review.
14.
No party sought
judicial review of the “Entry Approving the Correction of a Clerical Error and
Making Substitution to 'Exhibit A' as Previously Approved in the Parties’
Agreed Order”.
15.
In the instant
action, the Agreed Order shall be construed to include “Exhibit A” as
referenced in the “Entry Approving the Correction of a Clerical Error and
Making Substitution to 'Exhibit A' as Previously Approved in the Parties’
Agreed Order” and entered in Administrative Cause No. 00-052W.
16.
The Agreed Order
provided in substantive part (with Attachments A and B omitted):
COMES
NOW the parties to this cause and being desirous of settling and compromising
this action without a hearing or adjudication of any issue of fact or law
hereby agree to the following Findings of Fact and Order:
FINDINGS OF FACT
(1)
The…Commission is the ultimate authority of the…[DNR], an agency of the State
of Indiana duly empowered, pursuant to Indiana Code 14-28-1, to require and
determine whether a permit for construction in a floodway should be issued and
to incorporate in and make a part of such order of authorization such
conditions and restrictions as it may deem necessary for the purpose of the
Flood Control Act, IC 14-28-1.
[VOLUME 10, PAGE 190]
(2) The
Commission has jurisdiction over both the subject matter and the parties to
this cause.
(3)
Indiana Code 14-28-1-22(c) and (e) provide that a person who desires to erect,
make, use, or maintain a structure, an obstruction, a deposit or an excavation,
or suffer or permit a structure, an obstruction, a deposit, or an excavation to
be erected, made, used, or maintained in or on a floodway must file an
application for a permit and must obtain approval from the Director of the
[DNR] before beginning construction.
(4) On
August 20, 1999, [Pheasant Ridge] electronically filed within the [DNR]
application FW-20.015 for, “A channel, approximately 50 ft. wide by 300 ft.
long and 10 ft. deep, [is proposed] to provide boat access to the St. Joseph
River.” On August 30, 1999, [Pheasant
Ridge] filed a paper copy of the application.
(5) On
or about February 14, 2000 (mailed February 18, 2000) the [DNR] denied
[Pheasant Ridge’s] floodway construction permit application citing that the
project would cause unreasonable direct and cumulative detrimental effects on fish,
wildlife, and botanical resources.
(6) On
March 6, 2000, [Pheasant Ridge] filed a Petition for Administrative Review of
the [DNR’s] denial of application FW-20,015.
(7) A
prehearing conference was held on April 25, 2000, and a telephone status conference
was held on May 8, 2000. In addition, a
mediation was undertaken in July, 2000.
(8) The
parties have engaged in settlement discussions and negotiations which resulted
in the agreement described herein.
(9)
[Pheasant Ridge] and the [DNR] now agree to the following terms and Order.
ORDER
IT IS
HEREBY AGREED AND ORDERED THAT:
(1) The
parties agree that the project site is located in the floodway of the St.
Joseph River in
(2)
[Pheasant Ridge] shall construct a channel at the project site to provide boat
access to the
(3) The
parties agree that the following General Conditions shall apply:
(A) If
any archaeological artifacts or human remains are uncovered during the
construction, federal law and regulations (16 USC 470 et seq.; 36 CFR 800.11,
et
[VOLUME 10, PAGE 191]
al.) and
State law (IC 14-21-1) require that work must stop and that the discovery must
be reported to the [DNR], Division of Historic Preservation and Archaeology
within two business days….
(B) This
Agreed Order, which serves as the permit, must be placed and maintained at the
project site until the project is completed.
(C) This
Agreed Order does not relieve [Pheasant Ridge] of the responsibility for
obtaining additional permits, approvals, easements, etc. as required by other
federal, state or local regulatory agencies.
(D) This
Agreed Order must not be construed as a waiver of any local ordinance or other
state or federal law.
(E) This
Agreed Order does not relieve [Pheasant Ridge] of any liability for the effects
which the project may have upon the safety of the life or property of others.
(F) This
Agreed Order may be revoked by the [DNR] for violation of any condition,
limitation, or applicable statute or rule.
(G) This
Agreed Order shall not be assignable or transferable without the prior written
consent of the [DNR]….
(H) The
[DNR] shall have the right to enter upon the site of the permitted activity for
the purpose of inspecting the authorized work.
(I) Any
water created as a result of the project shall be dedicated to general public
use.
The
parties agreed that the following Special Conditions shall apply:
(A)
Revegetate all bare and disturbed upland areas with a mixture of grasses
(excluding all varieties of tall fescue), legumes and native shrub and hardwood
species as soon as possible upon completion.
(B)
Minimize and contain within the project limits in-channel disturbance and the
clearing of trees and brush.
(C)
Implement appropriately designed measures for controlling erosion and sediment
to prevent sediment from entering the stream or leaving the construction
site. Stabilize all bare and disturbed
areas at the waterline with an erosion control blanket that is either
photodegradable or biodegradable. The
material must be stapled along the upper slopes to prevent movement. The blanket may include straw and may be
plugged with native wetland plants. The
mouth of the channel may be stabilized with rip rap or glacial stone to prevent
erosion. Maintain these until
construction is complete and all disturbed areas are stabilized.
[VOLUME 10, PAGE 192]
(D) Seed
and apply mulch on all disturbed areas not protected by other methods.
(E) Upon
completion of the project, remove all construction debris from the floodway.
(F) Do
not leave felled trees, brush, or other debris in the floodway.
(G) A
plan must be developed for the maintenance of aquatic plant growth and
siltation in channel.
(H) Do
not dredge the sediment bar located in the
(I)
Stabilize storm water drainage with rip rap or glacial stone underlain with
geotextile to prevent erosion.
(J)
Mitigation plan submitted by [Pheasant Ridge] attached hereto an incorporated
herein as Exhibit B must be completed within three years of the issuance of the
permit.
(K)
[Pheasant Ridge] must grant a conservation easement to the [DNR] over the
mitigation area described in (J) above and over the real property along the
southern edge of the real property adjacent to the St. Joseph river within
sixty (60) days of full execution of this Agreed Order.
(5) The
parties agree that, pursuant to IC 14-28-1-22(g), this permit is valid for a
time period of twenty-four (24) months from the date of full execution of this
Agree [sic. Agreed] Order. If work has not commenced by the end of said
time period, the permission granted herein will become void and a new permit
will be required in order to continue work on the project.
(6) This
permit becomes effective eighteen (18) days after the date of mailing a copy of
this Agreed Order signed by the…Commission.
(7) The
Commission shall retain jurisdiction over both the subject matter and the
parties to this action until the terms of this Agreed Order have been fully
performed by the parties.
(8) If
any dispute or disagreement arises between the parties concerning this Agreed
Order, the matter shall be determined by the [DNR], with both parties have all
rights under I.C. 4-21.5 and 312 IAC 3 to obtain administrative review of that
determination.
(9) The
terms contained in this document are the entire and complete agreement between
the parties in the resolution of this action.
17.
The DNR is an
“agency” as defined in IC 4-21.5-1-3.
[VOLUME 10, PAGE 193]
18.
The Complaint is
an agency action that seeks to impose sanctions against Pheasant Ridge. The
Complaint begins a proceeding that is governed by IC 4-21.5 (sometimes referred
to as the “Administrative Orders and Procedures Act” or “AOPA”).
19.
Pursuant to IC
14-10-2-3, the Natural Resources Commission (the “Commission”) is the “ultimate
authority” for the DNR under AOPA.
20.
The Commission
has adopted rules at 312 IAC 3-1 to assist with its implementation of AOPA.
21.
The Commission
established at 312 IAC 3-1-12(d) a committee (the “AOPA Committee”) to serve as
the “ultimate authority” under AOPA for many proceedings, including the instant
proceeding.
22.
Indiana Michigan
Power Company, doing business as American Electric Power, (“I&M”) filed a
“Petition to Intervene” on August 12, 2003.
The DNR and Pheasant Ridge were provided until August 21, 2003 to file
any objection to the intervention. No
objection was filed, and I&M was added as a party during a prehearing
conference held on August 25, 2003.
23.
The Commission
has jurisdiction over the subject matter and jurisdiction over the persons of
the parties.
24.
As provided in IC
4-21.5-3-32, an agency is required to index final orders. The agency may rely upon indexed orders as
precedent.
25.
In November 1988,
the Commission adopted “Caddnar” as the index of agency decisions anticipated
in AOPA. See now Establishment of Division of Hearings; Index of Final Adjudicative
Agency Decisions; Transcript Fees; Natural Resources Commission, 26 Ind. Reg.1375 (Jan. 1, 2003).
26.
A hearing under
AOPA is conducted de novo with an
administrative law judge weighing evidence and reaching conclusions, rather
than deferring to an initial determination by the DNR. The standard of review is by the
preponderance of the evidence.
27.
“At each stage of
the proceeding, the agency or other person requesting that an agency take
action…has the burden of persuasion and the burden of going forward with the
proof of the request.” IC
4-21.5-3-14. Where an agency or other
person seeks the imposition of a sanction, it has the burden of persuasion and
the burden of going forward (sometimes collective referred to as the “burden of
proof”). Peabody Coal Co. v. Ralston, 578 N.E.2d 751 (1992
28.
The DNR (and
I&M, as a second party claimant) have the burden of proof with respect to
any sanction they seek to impose against Pheasant Ridge under the Complaint.
B. Evidence at Hearing
29.
A hearing was
conducted in
[VOLUME 10, PAGE 194]
30.
The first witness
was Jeffery N. Reece, an employee of I&M.
He testified as to his educational background, employment with I&M,
and nature of I&M’s business as a generator and provider of electric power.
31.
Reece testified
that as a part of his duties with I&M, he is required to be familiar with
License No. 2651 under which I&M is granted authority from the Federal
Energy Regulatory Commission (“FERC”) to operate the Elkhart Hydroelectric
Project on the
32.
Reece further
testified that in 1998 he received a telephone call from Jeffrey Chupp who
wanted to access to the St. Joseph River for real estate he was developing that
adjoined I&M’s real estate. As a
result, I&M granted Pheasant Ridge a Right of Entry Permit. Reece identified Claimant’s Exhibit B as the
Right of Entry Permit granted to Pheasant Ridge on October 15, 1999. The exhibit was admitted into evidence
without objection.
33.
One of the
conditions of the Right of Entry Permit was that Pheasant Ridge was to “comply
with all state, federal and local laws and regulations applicable to” its
“work, including all environmental and health and safety laws and regulations.”
34.
Reece testified
that on February 16, 2000, Pheasant Ridge signed an Exchange Agreement. The purpose of the Exchange Agreement was to
provide a fee simple transfer to Pheasant Ridge of some of I&M’s flowage
lands for use by Pheasant Ridge in its channel construction project. In return, I&M would obtain a flowage
easement on real estate that Pheasant Ridge owned that, prior to entry of the
Exchange Agreement, were outside I&M’s project.
35.
Reece testified
I&M did not sign the Exchange Agreement in February 2000 because prior
approval from FERC was required but had not yet been received.
36.
On February 22,
2000, Reece was made aware that the DNR denied an application by Pheasant Ridge
for a Flood Control Act permit to perform construction activities in the
portion of the floodway of the
37.
As a consequence
of the DNR permit denial, Reece on March 10, 2000 sent a certified letter to
Pheasant Ridge directing that Pheasant Ridge cease all activities on I&M’s
real estate.
38.
Reece next
testified concerning meetings or conferences held with Jeffrey Chupp and his
attorneys on April 25, 2000; June 11, 2001; February
25, 2003; and
June 18, 2003. During an April
25, 2000 prehearing conference, he said the issues concerning the channel were
discussed. He said Chupp verbally agreed
not to sell any river frontage along the site in question until I&M
received FERC approval. The June 11,
2001 meeting followed the receipt of a DNR Flood Control Act permit, and
I&M agreed that Pheasant Ridge could initiate construction activities on
real estate controlled by Pheasant Ridge but not on real estate controlled by
I&M until approval was also received from FERC. Reece testified that, during the February 25,
2003 meeting in
[VOLUME 10, PAGE 195]
of June 18, 2003, I&M and Pheasant Ridge
agreed the mitigation site had not been built.
The purpose of the meeting was to develop a new mitigation site.
39.
Reece testified
that, in August 2001, I&M filed an Application for Approval of Exchange
Agreement and Revised Exhibit G with FERC.
The application sought retroactive approval from FERC since Pheasant
Ridge had already constructed a channel into the
40.
On November 27,
2002, FERC issued its Order Approving Application for Approval of Exchange
Agreement and Revised Exhibit G.
Included in the FERC Order was a requirement in Section 6.4 that I&M
provide one-year wetland monitoring with results to be filed with FERC by March
31, 2003. The results should include DNR
and Department of Interior, Fish and Wildlife Service, (“F&W Service”)
comments. Without objection, the Order
was admitted into evidence as Respondent’s Exhibit 1.
41.
The F&W
Service filed with FERC a timely request for rehearing of the Order Approving
Application for Approval of Exchange Agreement and Revised Exhibit G, and FERC
granted the request in part. The F&W
Service asserted that construction activities by Pheasant Ridge without a FERC
permit resulted in the loss of 0.2 acres of wetlands and other significant
habitat and would have a substantial cumulative impact on habitats.
42.
The U.S.
Environmental Protection Agency submitted comments to FERC that were supportive
of the position taken by the F&W Service.
43.
I&M responded
that Pheasant Ridge had obtained a DNR permit through entry of the Agreed
Order, and this permit included mitigation that would satisfy I&M’s
obligations to FERC.
44.
On June 5, 2003,
FERC ruled: “That is not the case. We
have no authority over Pheasant Ridge and cannot ensure compliance with its
mitigation obligations to the” DNR. FERC
reflected that I&M was in violation of 18 CFR 12.11 (2003) for failure to
report the unauthorized destruction by Pheasant Ridge of 0.2 acres of wetlands. Due to Pheasant Ridge’s channel excavation,
and the resulting loss of wetlands and other significant habitat, FERC ordered
that I&M create a one-acre mitigation site in addition to the mitigation
required in the Agreed Order. Order
Granting Rehearing (Issued June 5, 2003) admitted into evidence without objection
as Claimant’s Exhibit E.
45.
Reece testified
that FERC ordered I&M, as the FERC licensee, to take a direct and vested
interest in the mitigation location as set forth in the Agreed Order.
46.
As a result of
the FERC order, I&M instructed Reece to check on the mitigation site. Reece testified that, during a February 25,
2003 meeting in
47.
Reece testified
he viewed the mitigation site on March 26, 2003. Reece indicated he saw a house and he saw
trees planted in the area that had been designated as the mitigation site.
[VOLUME 10, PAGE 196]
48.
Reece testified
he spoke with the people who lived on the site, and they told him that Jeffrey
Chupp sold them the site in April 2001.
49.
Reece testified
he checked the records and determined the site was the same the Pheasant Ridge
had committed to mitigation in the Agreed Order entered in late March
2001.
50.
Reece further
testified, “Pheasant Ridge proceeded to sell the very same location for
construction of a house as a residential lot on April 19, 2001, four weeks
after the agreement with the NRC order.”A
51.
Reece testified
that, in addition to any violations of governmental requirements, the channel
construction by Pheasant Ridge violated its agreement with I&M. The construction activities were performed
contrary to the stop-work directive contained in I&M’s certified letter to
Pheasant Ridge of March 10, 2000.
52.
Reece estimated
costs to I&M, which result from the activities of Pheasant Ridge, exceed
$166,000. He indicated I&M intends
to seek reimbursement for these costs but has not yet brought a civil action
against Pheasant Ridge.
53.
The second
witness was Robert W. Wilkinson who is employed by the DNR’s Division of Water
as a land surveyor. Wilkinson testified
concerning his educational background and training required for licensing as an
54.
Wilkinson
testified he supervises a field crew of between four and seven persons to
support the programs of the Division of Water.
He said he has been employed with the DNR since May 1980 and had worked
in the field before promotion to his current position as a supervisor.
55.
Wilkinson
testified that, in his position with the Division of Water, he was directed to
perform a survey within the North Ridge Subdivision in
56.
Wilkinson
testified that he reviewed the Agreed Order and placed an overlay of the
channel, as built, on top of the channel as depicted on Exhibit A, which was attached
to the Agreed Order. The location of the
channel, as built, was indicated on Claimant’s Exhibit F with a light blue
border filled by light blue diagonal lines.
A bold red line indicated the channel as described in Exhibit A from the
Agreed Order. Claimant’s Exhibit F was
admitted into evidence without objection.
57.
Wilkinson further
testified that he generated a second map to more graphically demonstrate the
relationship between the channel, as anticipated in Exhibit A from the Agreed
Order, and the channel as actually built.
He removed the background images.
He testified the dimensions of the second map were identical to those of
Claimant’s Exhibit F, with the exception that background images had been
removed. The red line depicted the
channel that was to be built pursuant to the Agreed Order. The area shaded in blue depicted the channel
[VOLUME 10, PAGE 197]
that his crew surveyed on the ground. The second map, identified as Claimant’s
Exhibit G, was admitted without objection.
58.
Wilkinson testified
he concluded from the survey that the channel, as built, was “substantially
south of the channel that was on the Agreed Order.” He added that the deviation was rather small
in some areas, but for nearly two-thirds of the length of the channel, the
deviation was approximately 25 feet south of what was shown on the Agreed
Order.
59.
The third witness
was Neil Ledet who is a biologist with the DNR’s Division of Fish and
Wildlife. Ledet has special expertise in
matters of fisheries biology. He testified
his responsibilities include the review of applications for Flood Control Act
permits along the
60.
Ledet testified
he was one of the biologists who reviewed the project at issue, and he sought
to help develop the compromise that became the Agreed Order. A primary concern was to minimize the impacts
to wetlands on the property. He
testified he believed the terms of the Agreed Order would have satisfactorily
addressed this concern.
61.
Ledet testified
the channel construction did not fully comply with the Agreed Order. Revegetation of the site with a mixture of
grasses was not performed.
62.
Ledet testified
there was a condition in the Agreed Order that Pheasant Ridge would not dredge
into the
63.
Ledet testified
Pheasant Ridge was to have secured a conservation easement to restrict future
site use, but Pheasant Ridge did not implement this condition.
64.
Ledet further
testified that the location of the channel, as set forth in the Agreed Order,
was placed in an upland site. He explained, “That was a huge issue for us. Working with [Pheasant Ridge] we took a
considerable amount of time to try to place this channel in an upland situation
as much as possible to avoid that wetland.”
Instead, the channel, as built, encroached upon the wetland. He testified the location of the channel, as
built, was very close to the location that the Division of Fish and Wildlife
had opposed from the beginning of the permit review process.
65.
Ledet testified
that Jeffrey Chupp has subsequently outlined two possible alternate wetland mitigation
sites, but to the best of his knowledge, no formal engineering plan has been
received by the DNR regarding either site.
Ledet reflected Pheasant Ridge proposed an alternate mitigation plan to
the DNR in March 2005, and he agreed the alternate plan could be acceptable.
66.
The fourth
witness to testify was Jeffrey Chupp. He
indicated he was the sole owner and President of Pheasant Ridge and had been
employed with the company for approximately 18 years.
67.
Chupp testified
Pheasant Ridge is the owner of multiple subdivision developments in
[VOLUME 10, PAGE 198]
68.
Chupp testified
he contracted with Jared Yoder, proprietor of Jared’s Excavating, to construct
the channel. He provided Jared’s
Excavating with a construction plan, prepared by a consultant, and a copy of
Exhibit A as attached to the Agreed Order.
69.
Chupp testified
he did not supervise the channel construction activities of Jared’s
Excavating. Neither did he direct
Jared’s Excavating to place the channel in a location other than as specified
in the Agreed Order.
70.
On
cross-examination by DNR, Chupp testified Pheasant Ridge did not call a
representative of Jared’s Excavating as a witness, and Pheasant Ridge has not
brought suit against Jared’s Excavating for any wrongdoing at issue in this
proceeding. Neither did Pheasant Ridge
require Jared’s Excavating to post a performance bond.
71.
Chupp testified
he became aware the location of the channel was incorrect following completion
of the survey by Robert W. Wilkinson.
72.
Chupp testified
the mitigation site in the Agreed Order was located on real estate currently
owned by Donna Lochmandy. For a
subdivision that Pheasant Ridge was building, there was an area with a
retention easement. Chupp testified he
intended to have the mitigation overlap the retention easement. An area was excavated that retains water year
round, but it failed as a mitigation site because the area was excavated to too
great a depth.
73.
Chupp further
testified that the original mitigation area was planned for the northwest
portion of real estate owned by Donna Lochmandy where an elongated pond is now
located. The site is depicted on
Respondent’s Exhibit 2 that was admitted into evidence without objection.
74.
Chupp testified
he spoke with Donna Lochmandy to seek her approval to reduce the pond to a
shallower depth, in an effort to conform to the Agreed Order, as well as to
obtain a conservation easement over the area.
He indicated Lochmandy would not agree.
75.
On cross-examination
by DNR, Chupp was asked why he sold the real estate with the mitigation site
within 30 days of signing the Agreed Order.
Chupp testified it was always his intention to sell the mitigation site,
and he said the purchase agreement with Donna Lochmandy included a condition
allowing him to perform excavation following the sale. He acknowledged the purchase agreement did
not, however, include a term that would provide for a conservation easement.
76.
On
cross-examination by DNR, Chupp testified he made no effort to seek an
amendment or modification of the Agreed Order, even after learning he could not
accomplish performance of the mitigation anticipated by the Agreed Order.
77.
Chupp testified
he did not specifically recall telling any I&M representative that the
mitigation site on the Lochmandy real estate had been completed. He indicated Pheasant Ridge had worked on
site, and a pond was excavated.
[VOLUME 10, PAGE 199]
78.
Chupp testified
an alternate mitigation site was proposed to the DNR in March 2005. The site is one that Pheasant Ridge controls
and could develop according to specifications provided by the DNR, including
placing a conservation easement over the location.
79.
Chupp testified
that a variety of costs associated with the subdivision development, including
relocation of a roadway as required by
80.
On
cross-examination by I&M, Chupp acknowledged receipt of the March 10, 2000
certified letter described in Finding 37 which
directed Pheasant Ridge to cease all activities on I&M’s real estate. He testified that Pheasant Ridge at first
complied with the letter but later sought a new right of entry from I&M. Despite not receiving a new right of entry,
however, Pheasant Ridge later resumed its construction activities.
81.
The final witness
called was Donna Lochmandy who owns the lot on which the mitigation was to have
been performed according to the Agreed Order.
82.
Lochmandy
testified she purchased the lot from Jeffrey Chupp on April 11, 2001 for
$82,000.
83.
Lochmandy
testified that during her conversations with Chupp, leading to the purchase,
there were no references to use of a portion of the lot for wetland mitigation
or to the placement of a conservation easement on a portion of the lot. On cross-examination by I&M, Lochmandy
affirmed that she was unaware, when she purchased the lot from Pheasant Ridge,
the lot was intended for use as wetland mitigation.
84.
On cross-examination
by Pheasant Ridge, Lochmandy said she was aware that the purchase agreement
provided for a storm-water retention pond on her property. On cross-examination by I&M, Lochmandy
affirmed that the purchase agreement provided for a retention pond but that it
did not provide for a wetland mitigation site.
85.
Lochmandy
testified that the retention pond was originally planned to cover approximately
one acre, but the pond, as built, covers approximately 2 1/2 acres.
86.
Lochmandy
testified that Jeffery Reece spoke with her in 2003 and told her she could not
place fruit trees on the back of our lot, but fruit trees had already been
planted. Reece also told her there was a
proposed wetland area in her backyard.
87.
Lochmandy
testified that subsequent to her 2003 conversation with Reece, Jeffrey Chupp
contacted her and asked if she would entertain placing a wetland in her
backyard. She said she declined the
offer.
C. Legal Foundations of Count I and Count II of the
Complaint
88.
The Complaint
consists of Count I and Count II upon which the DNR has sought relief. The statutory foundations of the two counts
are separately considered.
89.
Count I cites to
IC 14-10-2-6 that provides in pertinent part:
[VOLUME 10, PAGE 200]
Sec. 6.
(a) The [C]ommission may issue a notice of violation to a person who violates a
law administered by the [DNR] for which a misdemeanor or an infraction penalty
is established. If the person:
(1)
receives the notice; and
(2) fails to abate the violation within
a period of not less than fifteen (15) days specified in the notice;
the
[C]ommission may impose a charge that does not exceed the maximum amount that
may be assessed by a court for committing the violation.
(b) IC 4-21.5 applies to proceedings by the
[C]ommission under this section. The
[DNR] has the burden of proving the alleged violation
by a preponderance of
the evidence.
(c) A separate notice of violation may be issued or a
separate charge imposed for
each day a violation occurs.
(d) ….
(e) The remedy provided by this section is supplemental
to other remedies.
90.
IC 14-10-2-6 was
originally codified as IC 14-3-3-2. P.L.
147-1985, SEC. 9. The section was
recodified to its current location in the Indiana Code by P.L. 1-1995, SEC. 3. This recodification made no substantive
changes. “The recodification act of the 1995 regular session of the general
assembly shall be construed as a recodification of prior natural resources
law. If the literal meaning of the
recodification act of the 1995 regular session of the general assembly would
result in a substantive change in the prior natural resources law, the
difference shall be construed as a typographical, spelling, or other clerical
error....” P.L. 1-1995, SEC. 1 as
codified at IC 14-8-3-6.
91.
IC 14-10-2-6 and
IC 14-3-3-2 are legal identities. For
convenience and clarity, no subsequent reference is made in these Findings to
IC 14-3-3-2.
92.
AOPA provides for
regular sanctions under either IC 4-21.5-3-6 or IC 4-21.5-3-8 and for emergency
sanctions under IC 4-21.5-4. The DNR did
not seek an emergency sanction in this proceeding, so IC 4-21.5-4 will not be
considered further.
93.
IC 4-21.5-3-6 is
made directly applicable to several statutory programs, but none of these are
here germane. In addition, IC
4-21.5-3-6(a)(2) provides the section applies to a sanction that “by statute
become effective without a proceeding under [IC 4-21.5-3] if there is no
request for a review of the order within a specified period after the order is
issued or served.”
94.
IC 4-21.5-3-8
governs a sanction unless a statute specifies that IC 4-21.5-3-6 applies. A sanction sought under IC 4-21.5-3-8 must be
described in a complaint and becomes effective only after conducting an AOPA
proceeding.
95.
IC 14-10-2-6 does
not provide that it becomes effective without a proceeding under AOPA if no
request for review is filed. As a
result, IC 4-21.5-3-8 governs IC 14-10-2-6.
A sanction under IC 14-10-2-6 is initiated with the filing of a
complaint and can become effective after the completion of an AOPA proceeding.
96.
The Commission
has delegated authority to the DNR to file a complaint, pursuant to AOPA and
312 IAC 3-1, which seeks relief under IC 14-10-2-6. 312 IAC 2-2-3.
[VOLUME 10, PAGE 201]
97.
IC 14-10-2-6 was
designed by the legislature to encourage abatement of a violation. Following a completed AOPA proceeding, the
Commission may issue the notice of violation.
The notice sets forth what action the Commission determines is
appropriate to abatement. The recipient
of the notice of violation must be provided a reasonable period, but not less
than 15 days, to accomplish abatement.
98.
Only if there is
a failure to timely abate a violation does the recipient of a notice of
violation become liable under IC 14-10-2-6 for the imposition of a “charge”.
99.
Relief under IC
14-10-2-6 is available only following a completed AOPA proceeding. If the preponderance of evidence is
supportive of the DNR complaint, a Commission notice of violation results. This statutory structure is illustrated by Department of Natural Resources v. Bardonner,
5 Caddnar 211 (1991). In that
proceeding, the Commission issued the following order on October 17, 1991:
(1)
A notice of
violation is issued by the Natural Resources Commission against Eugene
Bardonner pursuant to IC 14-3-3-22 for his failure to comply with the terms of
a permit (Docket Number D-5031) issued in 1977 under IC 13-2-22 to construct a
dam....
(2)
Eugene Bardonner
shall abate the violation by slowly breaching the dam and dewatering the lake
impounded by the dam, with the abatement to be completed by January 27, 1992.
(3)
If the dam is not
breached and the lake dewatered by January 27, 1992, a charge of $500…daily
shall be imposed beginning on January 28, 1992 and continuing until March 27,
1992 or until abatement is achieved, whichever date occurs earlier, for a total
amount not to exceed $30,000….
100.
Before issuance
of the October 17, 1991 NRC order in Bardonner,
the administrative law judge had conducted a completed AOPA proceeding. The proceeding included a hearing where the
DNR and Eugene Bardonner presented evidence.
Based upon the adjudication, the administrative law judge rendered a
nonfinal order, which was subject to and subsequently approved by the
Commission. The Commission then issued a
final order with findings and a notice of violation under IC 14-10-2-6.
101.
By the terms of
the Commission notice of violation under IC 14-10-2-6, Bardonner could still
avoid any charge by performing the requisite abatement by a date (identified in
the NRC order as being January 27, 1992) that was more than three months after
issuance of the order. Only if Bardonner
failed to timely perform abatement could a charge begin to accrue against
him.
102.
The notice of
violation the Commission issued in Bardonner
is consistent with the design of IC 14-10-2-6.
103.
Here, the DNR
alleged in Count I that Pheasant Ridge failed to obtain a permit as required
under the Flood Control Act because Pheasant Ridge did not construct a channel
project according to the Agreed Order.
By its terms, the Agreed Order constituted the permit that was required
under the Flood Control Act.
[VOLUME 10, PAGE 202]
104.
For notices of
violation issued under IC 14-10-2-6, the Commission has found “the maximum
charge should be reserved for the most serious violations. In considering the
seriousness of a violation, the Commission” shall determine “whether there is
posed an imminent danger to persons, property, or the environment.” Aggravating factors are that a person
committed a violation deliberately, that a violation was continuing, or that a
violation was of extended duration. A
mitigating factor is that a person sought in good faith to abate the violation.
Department of Natural Resources v. Bardonner at 214, also citing Department v. Banner, 5 Caddnar 176, 177
(1991) and DNR, Collins v. Hasenour, et
al., 5 Caddnar 180, 1881 (1991).
105.
In seeking to
implement the relief provided by IC 14-10-2-6, the Complaint alleged in
paragraph 11 of Count I:
IC
14-28-1-33 provides that a person who fails to obtain a permit under section 22
of this chapter commits a Class C infraction, and each day of continuing
violation constitutes a separate offense.
Pursuant to IC 34-28-5-4(c) a judgment of up to five hundred dollars
($500) may be entered for a violation constituting a Class C infraction.
106.
Effective July 1,
2004, the Indiana General Assembly amended IC 14-28-1-33. P.L. 71-2004, SEC. 21. With this amendment, the statutory section
provides:
Sec. 33.
(a) A person who knowingly fails to:
…
(2) obtain a permit under section 22 of this
chapter;
commits a Class B infraction.
(b) Each day a person violates section…22 of
this chapter constitutes a separate infraction.
107.
A person engages
in conduct knowingly, if when he engages in that conduct, he is aware of a high
probability that he is doing so. IC
35-41-2-2(b).
108.
The maximum
penalty for a Class B infraction is $1,000 a day.
109.
A Commission
notice of violation under IC 14-10-2-6 is effective only after the completion
of an AOPA proceeding. A notice of
violation under IC 14-10-2-6 cannot be issued against Pheasant Ridge earlier
than in 2006.
110.
Any charge that
might be directed to Pheasant Ridge, for failure to abate the violation as
specified in the notice of violation, cannot accrue before 2006. Because IC 14-10-2-6 is not yet effective, IC
14-28-1-33 must properly be applied as amended by P.L. 71-2004. The maximum charge is $1,000 a day, and that
charge can only be issued prospectively from issuance of a Commission notice of
violation for knowing violations.
111.
The violation
alleged in Count II is the same as in Count I.
The DNR alleged that Pheasant Ridge failed to abide by the terms of the
Agreed Order. As such, Pheasant Ridge
acted without the permit that is required by IC 14-28-1-22.
112.
The remedy sought
in Count II is, however, fundamentally different from the nature of the remedy
sought in Count I.
[VOLUME 10, PAGE 203]
113.
Alleging a
failure to abide by the terms of the Flood Control Act, the DNR in Count II
seeks to impose upon Pheasant Ridge a “civil penalty” under IC 14-28-1-36.
114.
At the time the
DNR filed its Complaint, IC 14-28-1-36 provided in pertinent part:
Sec. 36.
(a) In addition to other penalties proscribed by [the Flood Control Act], the
director [of the DNR] may impose a civil penalty under IC 4-21.5, not to exceed
one thousand dollars ($1,000), on a person who violates any of the following:
(1) Section…22…of [the Flood Control Act].
….
(b) Each day a violation continues after a civil
penalty is imposed under subsection (a) constitutes a separate violation.
….
115.
At the time DNR
filed its Complaint, IC 14-28-1-36 did not provide that it became effective
without a proceeding under AOPA if no request for review was filed. As a result, IC 4-21.5-3-8 governed IC
14-28-1-36. A sanction under IC 14-28-1-36
was initiated with the filing of a complaint and could become effective after
the completion of an AOPA proceeding.
116.
Effective July 1,
2004, the Indiana General Assembly amended IC 14-28-1-36 to provide: “In
addition to other penalties prescribed by this chapter, the director [of the
DNR] may impose a civil penalty under IC 14-25.5-4.” P.L. 71-2004, SEC. 23.
117.
As provided in IC
14-25.5-4-4, a “civil penalty” assessed under IC 25.5-4-3 “is subject to IC
4-21.5-3-6 and becomes effective without a proceeding under IC 4-21.5-3 unless
a person requests administrative review within thirty (30) days after receipt
of the notice of assessment.”
118.
As provided in IC
14-25.5-4-3 and applicable to this proceeding, the DNR “may assess a civil
penalty of not more than ten thousand dollars ($10,000) for a violation” of the
Flood Control Act. Each day during which
a violation continues may be considered a separate violation for purposes of
assessing a civil penalty.B
119.
The amendments
made by P.L. 71-2004, SEC. 23, changed IC 14-28-1-36 from a sanction that is
governed by IC 4-21.5-3-8 to one that is governed by IC 4-21.5-3-6. Additionally, the amendments increased the
potential civil penalty from $1,000 daily to $10,000 daily effective July 1,
2004.
120.
The Commission
considered the interaction between IC 14-28-1-36 and IC 14-10-2-6 in Department of Natural Resources v. Fortune,
8 Caddnar 110 (1999). For an
unaggravated violation of the Flood Control Act, where additionally the
recipient of a DNR complaint may have been mislead by a local governmental
entity, a modest civil penalty of $1,000 was assessed under IC 14-28-1-36. A prospective charge of $30,000 was assessed
under IC 14-10-2-6, however, if the recipient would fail to abate the violation
within 90 days of issuance of the Commission notice of violation.
[VOLUME 10, PAGE 204]
D. Application of a Civil Penalty under IC 14-28-1-36
121.
The evidence is
overwhelming that Pheasant Ridge is in violation of the conditions set forth in
the Agreed Order.
122.
Pheasant Ridge
was authorized to construct a channel in accordance with plans and
specifications set forth in Exhibit A, which was attached to the Agreed
Order. Robert W. Wilkinson, a
professional land surveyor licensed in
123.
Pheasant Ridge
was required to revegetate all bare and disturbed upland areas with a mixture
of grasses. Neil Ledet testified this
requirement was not satisfied. Ledet’s
testimony was unrefuted.
124.
Pheasant Ridge
was to avoid dredging the
125.
By March 28,
2004, Pheasant Ridge was to complete the mitigation plan described in Exhibit
B, which was attached to the Agreed Order.
Performance of the plan has not been commenced, and with its transfer of
title to Donna Lochmandy without a sufficient reservation of interests,
Pheasant Ridge cannot now perform the agreed mitigation plan.
126.
Within 60 days of
full execution of the Agreed Order, Pheasant Ridge was required to provide a
conservation easement to the DNR over the mitigation area and along the
southern edge of the real property adjacent to the
127.
As
set forth in Finding 122 through Finding 126, the
unrefuted evidence is that Pheasant Ridge is in violation of five different
requirements of the Agreed Order. Each
of these violations could individually support a civil penalty under IC
14-28-1-36.
128.
The
DNR frames the violation in its Complaint as action by Pheasant Ridge without
benefit of the permit required under the Flood Control Act. Indeed, the actions by Pheasant Ridge were in
such utter disregard of the terms of the Agreed Order as to be consistent with
those of a person acting without a permit.
The only activity by Pheasant Ridge in evidence, which might loosely be
seen as bearing a relationship to the Agreed Order, is the construction of the
channel. The channel was solely for the
benefit of Pheasant Ridge, and even it was placed in the wrong location. The channel was placed in a wetland that the
DNR sought to protect by entry of the Agreed Order.
129.
The
actions by Pheasant Ridge might alternatively be framed as being a breach or
other violation of the Agreed Order.
[VOLUME 10, PAGE 205]
130.
Whether
viewed as actions in the absence of a permit, or as actions in breach of a
permit, the civil penalty authorized by IC 14-28-1-36 is the same.
131.
The
question is not whether there is a sufficient basis for a civil penalty but
rather what should be the amount of the civil penalty against Pheasant
Ridge.
132.
In
considering what civil penalty to assess, the Commission must properly consider
the totality of the circumstances.
133.
The maximum civil
penalty must be reserved for the most serious violations.
134.
Pursuant to IC
14-28-1-36, $1,000 was the maximum daily civil penalty that could be assessed
for a violation through June 30, 2004.
Beginning on July 1, 2004, the maximum daily civil penalty that could be
assessed was increased to $10,000.
135.
Under
136.
At the same time,
changes in punitive statutes should generally be construed in favor of those
who would be penalized. Green v. Robertshaw-Fulton Controls Co.,
204 F. Supp 117 (S.D.
137.
When a question
arises over the imposition of a harsher penalty or a more lenient one, a “rule
of lenity” should be applied in favor of the person penalized. Ross v.
State, 729 N.E.2d 113 (
138.
Applying the
“rule of lenity” in favor of Pheasant Ridge, the maximum daily civil penalty of
$1,000 before the 2004 amendments should be applied, as opposed to the maximum
daily civil penalty of $10,000 that became effective with the 2004 amendments.
139.
The date on which
a civil penalty should commence is dependent upon the nature of the violations
set forth in Finding 122 through Finding 126
and will be considered beginning with Finding 168.
140.
Although an
impracticability, the administrative law judge could conceivably have rendered
findings of fact and conclusions of law with a nonfinal order as early as the
date of hearing. The hearing occurred in
this proceeding on October 25, 2005.
This date is set as the terminus for the calculation of any civil
penalty.
141.
In considering
the seriousness of a violation, the Commission shall determine whether there is
posed an imminent danger to persons, property, or the environment. Aggravating factors include that a person
committed a violation deliberately, that a violation was continuing, or that a
violation was of extended duration.
Mitigating factors include that a person sought in good faith to abate
the violation.
142.
The violations by
Pheasant Ridge have not been shown to pose danger to persons or property, but
they have caused significant harm to the environment. The amount of probable harm to the
environment differs for the five violations set forth
in Finding 122 through Findings 126.
[VOLUME 10, PAGE 206]
143.
The evidence is
not compelling with regard to failure to revegetate all bare and disturbed
upland areas. Although facts could be
presented where this failure would have been shown to have serious environmental
consequences, those facts were not presented here. For this violation, only a nominal civil
penalty would properly be assessed against Pheasant Ridge.
144.
The evidence is
not compelling with regard to dredging the
145.
The evidence is
compelling with regard to the failure by Pheasant Ridge to construct a channel
in accordance with plans and specifications set forth in Exhibit A, which was
attached to the Agreed Order. The
unrefuted testimony by a professional land surveyor was that the channel was
constructed “substantially south of the channel that was on the Agreed
Order.” Although the deviation was
rather small in some areas, for nearly two-thirds of the length of the channel,
the channel was approximately 25 feet south of what was approved in the Agreed
Order.
146.
A DNR fisheries
biologist testified that the erroneous location of the channel “was a huge
issue for us. Working with [Pheasant
Ridge] we took a considerable amount of time to try to place this channel in an
upland situation as much as possible to avoid that wetland.” Instead, the channel built by Pheasant Ridge
encroached upon the wetland. The
location of the channel was, as built, very close to the location that the
Division of Fish and Wildlife had opposed from the beginning of the permit
review process.
147.
The response by
Pheasant Ridge was that it contracted with Jared’s Excavating to construct the
channel. Jeffery Chupp testified he
provided Jared’s Excavating with a construction plan, prepared by a consultant,
and with a copy of Exhibit A as attached to the Agreed Order. Chupp never viewed the site during
construction activities, and the record is devoid of evidence that Pheasant
Ridge made any attempt to otherwise supervise construction to assure compliance
with the Agreed Order.
148.
Jared’s
Excavating was not a party to the Agreed Order.
Pheasant Ridge was. The
responsibility for compliance with the terms of the Agreed Order rests squarely
upon Pheasant Ridge. Jeffrey Chupp
contests the DNR contention that improper location of the channel was the
result intentional wrongdoing. At best,
however, the approach taken by Pheasant Ridge toward channel construction was
disdainful of its legal responsibilities under the Agreed Order.
149.
Protection of the
wetland was a target of the negotiations between the DNR and Pheasant
Ridge. These negotiations led to an
Agreed Order, to which the DNR and Pheasant Ridge were parties, and which the
Commission subsequently approved. The
consequences of the failure to properly locate the channel are the destruction
of a wetland that cannot be restored.
[VOLUME 10, PAGE 207]
150.
For the violation
resulting from improper construction and location of the channel, a significant
civil penalty must properly be assessed against Pheasant Ridge.
151.
The evidence is
compelling with regard to the failure by Pheasant Ridge to perform wetland
mitigation as required by the Agreed Order. By March 28, 2004, Pheasant Ridge
was to have completed the mitigation plan described in Exhibit B.
152.
The evidence is
also compelling with regard to the failure of Pheasant Ridge, within 60 days of
full execution of the Agreed Order, to provide a conservation easement to the
DNR over the mitigation area and along the southern edge of the real property
adjacent to the
153.
The requirement
to provide a wetland mitigation area and the requirement to provide a
conservation easement are closely related and are appropriately considered
together. In this regard, the failure to
provide a wetland mitigation is considered the more serious violation, and the
conservation easement partly a mechanism to support the purposes of the
mitigation area.
154.
Jeffery Chupp
indicated his intention was to cause the wetland mitigation site to overlap
with a storm-water retention easement that was required by
155.
Pheasant Ridge
did not inform the DNR of its intention to have the same land serve both as a
wetland mitigation site and as a retention pond. Similarly, there is no evidence that Pheasant
Ridge informed
156.
Pheasant Ridge
offered no evidence that having the same land function both as a wetland
mitigation site, and as a retention pond, was even technically feasible. Questions may be posed as to whether a
conservation easement is compatible with a storm-water retention pond, as well
as whether the same or associated water bodies could effectively serve both
functions.
157.
In any event,
within one month after entering the Agreed Order, Pheasant Ridge sold the
mitigation site to Donna Lochmandy.
Through the terms of a purchase agreement, Pheasant Ridge informed Lochmandy
that the property would be subject to the construction of a retention
pond. Pheasant Ridge did not inform
Lochmandy that the site would be the subject of a wetland mitigation area or
that a conservation easement would be granted to DNR to protect the mitigation
area.
158.
Pheasant Ridge
did construct a retention pond on the Lochmandy property, but the retention
pond exceeded the two-foot maximum depth specified in the Agreed Order for a
wetland mitigation site.
159.
Nearly two years
passed from entry of the Agreed Order.
Pheasant Ridge made no discernable progress toward developing a wetland
mitigation site as required in the Agreed Order. Neither did Pheasant Ridge provide the DNR
with a conservation easement to the site.
160.
Because Pheasant
Ridge’s conduct had also caused FERC to sanction I&M, Jeffrey Reece viewed
the mitigation site on March 26, 2003.
Reece testified he observed a house and trees planted in the area. Reece spoke with Lochmandy and informed her,
for the first time, that her land had been slated for wetland mitigation and
for a conservation easement.
[VOLUME 10, PAGE 208]
161.
Reece next
contacted Jeffrey Chupp. Only then did
Chupp contact Lochmandy and inquire whether she would agree to make the
retention pond shallower, so that it could serve as a wetland mitigation area,
and whether she would allow the placement of a conservation easement on the
area. Lochmandy declined both requests.
162.
Because of
Pheasant Ridge’s transfer of title to Donna Lochmandy without a sufficient
reservation of interests, Pheasant Ridge is legally foreclosed from either
constructing a wetland mitigation area, or from providing to the DNR a
conservation easement, as had been required in the Agreed Order.
163.
Due solely to the
conduct of Pheasant Ridge, the wetland mitigation area and the conservation
easement cannot now be achieved as formerly agreed with the DNR, and as
formerly approved by the Commission, in the Agreed Order.
164.
For the violation
resulting from the failure of Pheasant Ridge to properly develop the wetland
mitigation, and for its failure to provide a conservation easement (both
responsibilities now being legal impossibilities due to Pheasant Ridge’s
malfeasance or nonfeasance), a significant civil penalty must properly be
assessed against Pheasant Ridge.
165.
As aggravating
factors, the Commission shall properly consider whether the three major
violations were deliberate, were continuing in nature, or were of extended
duration.
166.
Pheasant Ridge
has engaged in a pattern of conduct that demonstrates little regard for meeting
its responsibilities. Pheasant Ridge
received correspondence from I&M directing it to cease all activities on
I&M’s property. Pheasant Ridge
complied with the directive for a period then resumed activities in violation
of the directive. Pheasant Ridge took no
discernable action to assure the channel was properly located or
constructed. Pheasant Ridge sold the
land, on which the wetland mitigation project was to be performed and which was
to be covered by a conservation easement, without informing the purchaser of
either. Only years later and after being
pressed by I&M did Pheasant Ridge even approach the buyer about performing
wetland mitigation or placing a conservation easement on her property. Even though this pattern of conduct is troubling,
however, the evidence is insufficient to establish Pheasant Ridge undertook
deliberate violations of the Agreed Order.
167.
Each of the
violations was of a continuing nature and for an extended duration.
168.
Pheasant Ridge’s
contractor completed construction of the channel, at a location that was in
violation of the Agreed Order, by the end of July 2002. This violation is deemed to have commenced on
August 1, 2002.
169.
By March 28,
2004, Pheasant Ridge was to have completed the mitigation plan described in Exhibit
B, which was attached to the Agreed Order.
Pheasant Ridge has never performed a mitigation plan. This violation is deemed to have commenced on
March 29, 2004.
170.
Within 60 days of
full execution of the Agreed Order, Pheasant Ridge was required to provide a
conservation easement to the DNR over the mitigation area and along the
southern edge of the real property adjacent to the
[VOLUME 10, PAGE 209]
171.
The record is
devoid of significant evidence that Pheasant Ridge should be credited for
seeking to mitigate the violations. The
placement of the channel was performed to serve the proprietary self-interest
of Pheasant Ridge. The construction of
the storm-water retention pond was accomplished to address the requirements of
a local regulatory authority. With
respect to the latter activity, there is no evidence that any effort was made
to construct the pond with a depth of less than two feet as required for the
Agreed Order. Proposals by Pheasant
Ridge to develop an alternate mitigation site may offer reason for hope, but
particularly with the lack of engineering specifications, their current status
is found to be no more than an illusory promise.
172.
Of a maximum
$1,000 daily civil penalty for violation of terms of the Agreed Order, the
totality of the circumstances supports the following civil penalties:
(A) For location of the channel contrary to and
significantly in violation of the Agreed Order, $100 daily from August 1, 2002
through October 25, 2005.
(B) For the failure to develop a wetland mitigation site
as required by the Agreed Order, $100 daily from March 29, 2004 through October
25, 2005.
(C) For the failure to provide a conservation easement
over the mitigation area and along the southern edge of the real property
adjacent to the St. Joseph River, $25 daily from April 28, 2004 through October
25, 2005.
173.
The totality of
the circumstances support the following civil penalties against Pheasant Ridge:
(A) For location of the channel contrary and significantly
in violation of the Agreed Order, the amount of $118,100.
(B) For the failure to develop a wetland mitigation site
as required by the Agreed Order, $57,500.
(C) For the failure to provide a conservation easement
over the mitigation area and along the southern edge of the real property
adjacent to the
174.
Under IC
14-28-1-36, a civil penalty of $189,225 should properly be assessed against Pheasant Ridge.
E. Application of a Commission Notice of Violation
under IC 14-10-2-6
175.
IC 14-10-2-6 must
properly be implemented to encourage Pheasant Ridge to abate of the elements of
the violation, or, if Pheasant Ridge knowingly fails to abate violation, to
impose a charge.
176.
The evidence is
that Pheasant Ridge is substantially in nonconformance with the Agreed Order in
that it has not or may not have completed the following elements:
(A) Construct the channel in accordance with the plans and
specifications attached to the Agreed Order as Exhibit A. A notable consequence of this breach was
that, rather than to construct the channel in an upland area, construction of
the channel resulted in a destruction of wetlands that the DNR sought to
protect in the Agreed Order.
[VOLUME 10, PAGE 210]
(B) Dedicate any water created as a result of the project
to public use.
(C) Revegetate all bare and disturbed upland areas at the
project site with a mixture of grasses (excluding all varieties of tall
fescue), legumes and native shrub and hardwood tree species.
(D) Forebear from dredging the sediment bar located in the
(E) Complete a mitigation plan as had been submitted by
Pheasant Ridge in the Agreed Order and described in Exhibit B.
(F) Grant a conservation easement to the DNR over the
mitigation area and over the real property along the southern edge of the real
property adjacent to the
177.
The Commission
should properly issue against Pheasant Ridge a notice of violation, under IC
14-10-2-6, as a result of the elements described in the previous Finding.
178.
Appropriate
actions to require of Pheasant Ridge in seeking to achieve abatement are as
follows:
(A)
Dedicate any
water created by construction of the channel, as built, to public use. The dedication must be consistent with the
status of the
(B) Revegetate all bare and disturbed upland areas at the
project site with a mixture of grasses (excluding all varieties of tall
fescue), legumes and native shrub and hardwood species.
(C) Complete a mitigation plan at another site in the
(D) Grant a conservation easement to the DNR over the
mitigation area described in part (C) of this Finding.
(E) In compensation for the wetland destroyed by the
improper placement of the channel, and for dredging the sand bar located in the
(F) Grant a conservation easement to the DNR over the real
property along the southern edge of the real property adjacent to the
[VOLUME 10, PAGE 211]
179.
Each of the activities
required for abatement under the previous Finding shall be completed by
December 31, 2007, unless the AOPA Committee grants an extension of time for
good cause shown by Pheasant Ridge.
180.
The AOPA
Committee may delegate to its administrative law judge the authority to enter a
nonfinal order under the previous Finding or otherwise under this Order where
the AOPA Committee retains jurisdiction.
The AOPA Committee retains exclusive authority to enter a final order,
however, and any final order is subject to judicial review under AOPA.
181.
The civil penalty
assessed under the facts against Pheasant Ridge was one quarter of the maximum
daily assessment. Because the factors
considered in determining the civil penalty assessment would be the same as
those applied to determining the charge for a Commission notice of violation
under IC 14-10-2-6, the same one-quarter of the maximum charge should
apply. A charge that is one-quarter of
the fine for a Class B infraction is in the amount of $250 daily.
182.
If Pheasant Ridge
knowingly fails to timely comply with the actions required in Finding 178 for abatement, a daily charge of $250 should be
assessed beginning on January 1, 2008.
183.
The daily charge
described in the previous Finding should continue to accrue for a period not to
exceed 500 days or a maximum total charge of $125,000.
F. Voluntary Supplemental Environmental Project
184.
Pheasant Ridge
may elect to perform a supplemental environmental project (“SEP”) to reduce the
amount of civil penalty described in Finding 174.
185.
The performance
of a SEP does not relieve or mitigate the responsibilities of Pheasant Ridge to
perform abatement as described in Finding 178, or, if abatement is not
completed in a timely fashion, for the satisfaction of the charge described in Finding 182 and Finding 183.
186.
In order for a
SEP to qualify, the project must be located in the
187.
Pheasant Ridge
shall be credited for 90% of qualified expenses in the performance of a SEP,
but the amount of the credit cannot exceed the total amount of $169,225. In other words, the amount of civil penalty
shall not be reduced to less than $20,000.
188.
Qualified
expenses are those reasonably incurred for the acquisition and transfer of
property or property rights, project design and construction, and to achieve
soil stability and plant viability following the completion of
construction. Salaries and overhead
expenses of Pheasant Ridge are not qualified expenses.
[VOLUME 10, PAGE 212]
189.
Pheasant Ridge
must obtain prior DNR approval for a SEP, but approval shall not be
unreasonably withheld.
190.
A project that
also has the effect of reducing the liability of Pheasant Ridge to I&M, or
of reducing the liability of I&M to FERC, is not disqualified as a SEP.
191.
If it intends to
perform a SEP, Pheasant Ridge shall provide written notice of the intention to
the other parties and to the Commission within thirty (30) days of entry of the
Commission’s final order. Notice to the
DNR must be accompanied by $20,000 in partial satisfaction of the civil
penalty. The requirement to satisfy the
remaining $169,225 of the civil penalty shall then be deferred for another
sixty (60) days to determine whether agreement on a SEP can be achieved between
Pheasant Ridge and the DNR. If an
agreement is achieved, payment of all or a portion of the remaining civil
penalty may be deferred pending successful and timely completion of the SEP.
192.
The AOPA
Committee shall retain jurisdiction to determine any dispute regarding approval
or performance of the SEP.
A The court reporter has not been requested to prepare a transcript of testimony at hearing. If a quotation is here attributed to a witness, the statement is as nearly verbatim as could be determined by the administrative law judge. If a transcript were subsequently prepared that indicated different wording, however, the transcript shall be considered the official record and a quotation here shall be considered merely as paraphrasing of witness testimony.
B IC 14-25.5-4-3 has application to more than a violation of the Flood Control Act. The section also applies to a violation of a rule adopted under the Flood Control Act and to three other statutory articles (IC 14-26, 14-27 and IC 14-29) administered by the DNR. The latter include what are commonly known as the “Lakes Preservation Act” (IC 14-26-2) and the “Navigable Waters Act” (IC 14-29-1). None of these are at issue here. Also, IC 14-25.5-4-3(c) addresses the enforcement of a civil penalty in a civil proceeding. Enforcement is not at issue in this administrative proceeding.