[NOTE: WARRICK CIRCUIT COURT SET ASIDE FINAL ORDER OF ALJ AND REMANDED FOR EVIDENTIARY HEARING - FINDINGS AND CONCLUSIONS FOLLOWING.]
For Notice of Violation N20424-B-216 part 1 of 2, Peabody Coal Company is assessed the following points:
Total History - 4
Total Seriousness - 23
Negligence - 12
Good Faith - 0
for a total of 39 points.
A total of 39 points carries a penalty of $1,900.00. Since Peabody previously paid $2,000 it is entitled to a $100.00 refund.
FINDINGS OF FACT
1. On June 22, 1992, Peabody Coal Company filed a Petition for administrative review of assessment of civil penalty (CPA) #20424-S-216 the ("Petition").
2. Enclosed with the petition was a check number 335324 which was payment of the $2,000 penalty assessed.
3. IC 4-21.5, IC 13-4.1, 310 IAC 0.6 and 310 IAC 12 apply to this proceeding.
4. The Department of Natural Resources (the "Department") is an agency as defined in IC 4-21.5-1-3.
5. As defined in IC 4-21.5-1-15 "ultimate authority" means the individual or panel in whom the final authority of an agency is vested.
6. Pursuant to IC 13-4.1-21(c), the administrative law judge (ALJ) is the ultimate authority for the Department in this proceeding.
7. The points awarded which lead to this CPA follows: (See 310 IAC 12-6-12; the "Rule") History of Violation (30) - 4 points; Seriousness (30) - 23 points; Negligence (25) - 13 points; Good Faith (30) - 0 points. Total - 40 points.
8. Peabody objects to the Seriousness points and the Negligence points.
9. Specifically the objection to the Seriousness points is the assessment of 15 out of 15 points for "Probability of occurrence".
10. Specifically the objection to the Negligence points is that the award of 13 points identifies the degree of Negligence as "Recklessness".
11. Even though they are not in dispute, the facts of the violation must be established so as to determine the appropriate penalty points.
12. Notice of Violation (NOV) N20424-S-216, part 1 of 2, was written for "failure to operate and maintain a siltation structure to achieve federal and state effluent limitations for suspended solids."
13. Peabody's NPDES permit sets an outflow limit for suspended solids of 70mg/l.
14. This suspended solids limit is a blanket federally mandated limit for a coal mine.
15. The area in question here is a series of ponds referred to as the E8/E9 diversion complex.
16. Only the E8 portion is relevant here.
17. The E8 consists of three ponds (A, B, C) and an outfall structure (016) which drains into a wetland area and subsequently into Pigeon Creek.
18. The ES system direction of flow is pond A, B, C, 016 outfall, wetland, and then Pigeon Creek.
19. Peabody had placed pumps in each of the ponds to facilitate movement of water through the system.
20. Apparently the pumps were to be utilized primarily during major rain events.
21. On April 23, 1992, Christine Gerace, the division of reclamation (DOR) inspector for this mine, noted that water was being pumped from Pond A into a ditch to Pond B.
22. The problem Ms. Gerace noted was that the water level in Pond A was very low.
23. One purpose of a pond is to retain water while the suspended solids drop to the bottom.
24. The water moving through the system must be retained long enough to allow it to be cleansed of said suspended solids.
25. Ms. Gerace determined that the pumping of the water out of Pond A might be causing suspended solids to move through the system rather than to settle in the bottom of the pond(s) .
26. Ms. Gerace went to outfall 016 and took a sample of the water as it left the permit area.
27. This sample was tested the next day (April 24, 1992) by Standard Laboratories.
28. The sample contained a suspended solid content of 142 mg/l.
29. Since 70 mg/l is the
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maximum allowable content for suspended solids the NOV was written.
30. Ms. Gerace testified that, in her opinion, Peabody's conduct was "reckless" because she had warned Mr. Spaulding, Peabody's mine engineer, in the past that water was being pumped too low.
31. Ms. Gerace felt that water should have been allowed to flow naturally through the system.
32. Ms. Gerace testified that Peabody had taken a "known risk" after she had expressed her concerns.
33. In addressing Peabody's objection to the award of negligence points in the recklessness category the ALJ must examine what "recklessness" means in connection with Peabody's conduct.
34. The conduct to be examined is Peabody's operating the pumps when the water in Pond A was at a very low level and after receiving a warning from the inspector that suspended solids might be pumped.
35. 310 IAC 12-6-12(c)(2)(iii) reads as follows: "recklessness means evidence of a plain, conscious and unjustifiable disregard of harm that might result from the conduct."
36. Since the operator must have "consciously" pumped the suspended solids off the permit area the characterization of its conduct as "recklessness" must fail for two reasons:
a. Evidence did not show that the pumping caused the suspended solids violation.
b. Even if the pumping did cause the violation, it is not evident that the operator consciously allowed the result.
37. Mr. Spaulding, the mine engineer and a professional engineer, felt that the pumping system was sound from a hydrologic point of view and evidently did not agree with Ms. Gerace in regard to the present danger of pumping suspended solids.
38. Obviously the problem here was not the system, but Peabody's allowing the pumps to operate when the water in the system was at a low level.
39. This conduct was careless to a high degree, but certainly not reckless.
40. Therefore, the points awarded for "negligence" must be reduced from 13 (recklessness) to 12 (highest degree of carelessness).
41. As previously stated in Finding 9, Peabody's other objection is to being assessed 15 out of 15 points for "Probability of occurrence".
42. In reviewing this assessment, the "Seriousness" category needs to be examined as a whole.
43. Subparagraph (b) of the Rule deals with "Seriousness".
44. Seriousness is divided into two categories: (1) Probability of occurrence and (2) Extent of potential or actual damage, each worth up to 15 points.
45. Peabody was assessed 15 points for (1) above and eight points for (2) above. Only the 15 point assessment is under review.
46. The Rule reads as follows in regard to Probability of Occurrence: "The director shall assign up to 15 points based on the probability of occurrence of the event which a violated standard is designed to prevent.... "
47. Peabody takes the position that the "Probability of Occurrence" section should be assessed on the basis of the harm that flowed from the event and not the occurrence of the event itself.
48 . The Department maintains that the seriousness of the damage is examined in (2) extent of potential or actual damage and that (1) Probability of occurrence simply goes to the occurrence of the prohibited event.
49. The Department's position is obviously the correct one.
50. The Seriousness category contains two elements: did the violation occur (paragraph (1)) and what harm was caused by the violation (paragraph (2)).
51. If the violation (event) actually occurred, the Department may assess 15 points under (1) probability of occurrence. Since a preventative NOV may be written in cases where the event did not occur but the inspector feels it will occur if the operator neglects to correct a situation about which it has knowledge, there are paragraph (1) situations where less than 15 points will be assessed.
52. In addition, some violations (eq. blasting over limits) are of a paper variety and in those type cases the event could be the harm the standard is designed to prevent.
53. The damage or harm caused by the event will always be considered in paragraph (2).
54. In the instant case, the event was suspended solids leaving the permit area in excess of 70 mg/l.
55. The violation had to do with a failure of the siltation structures, such failure causing the prohibited event to actually occur.
56. Since the prohibited event did occur, 15 points were properly assessed under paragraph (1).
57. Since only eight points were assessed under paragraph (2) it is obvious that the Department considered the fact that the suspended solid violation did not cause a great deal of environmental harm.
58. It would not be sensible to consider the damage or harm as a rating factor in both of the "Seriousness" subcategories in this case.
WARRICK CIRCUIT COURT'S FINDINGS OF FACT AND CONCLUSIONS OF LAW AND JUDGMENT
FINDINGS OF FACT
1. Respondent Indiana Department of Natural Resources (the "DNR") is an administrative agency of the State of Indiana with responsibility for the administration and enforcement of a program for the regulation of surface coal mining known as "Indiana Surface Mining Control and Reclamation Act ("ISMCRA") and consisting of a statute, IC 13-4.1 and implementing regulations, 310 IAC 12. This Indiana Act is part of our compliance with the Surface Mining Control and Reclamation Act (SMCRA), 30 U.S.C. Section 1201 et seq. This Federal legislation is designed to provide a uniform national program for the reclamation of land affected by surface coal mining operations.
2. Petitioner Peabody Coal Company ("PCC") is a corporation which operates surface coal mining operations in the State of Indiana under ISMCRA permits issued by DNR. PCC operates the Lynnville mine in Warrick County, Indiana, under a surface coal mining reclamation operation permit issued by DNR under ISMCRA.
3. On April 9, 1992, a DNR representative issued notice of violation number N204240S-216 (the "NOV'') to PCC for "failure to operate and maintain a siltation structure to achieve Federal and State effluent limitations for suspended solids.
4. On May 27, 1992, DNR served a notice of proposed civil penalty assessment on PCC, proposing to assess a civil penalty of Two Thousand Dollars ($2,000) for the NOV.
5. On June 22, 1992, PCC timely filed a request for administrative review of the civil penalty assessment. A hearing on the request for administrative review was held in Jasonville, Indiana on October 8, 1992, before Administrative Law Judge Tim Rider.
6. On January 26, 1993, the Administrative Law Judge issued his "Report, Findings of Fact and order of the Administrative Law Judge" reducing the civil penalty assessment by One Hundred Dollars because the degree of fault should have been "negligence" rather than "recklessness", but otherwise affirming the civil penalty assessment. Specifically, the Administrative Law Judge rejected PCC's position that the portion of the civil penalty assessment related to "seriousness" was excessive.
7. The Administrative Law Judge's order holds as follows in relevant part:
"44. Seriousness is divided into two categories: (1) Probability of Occurrence and (2) Extent of potential or actual damage, each worth up to 15 points.
45. Peabody was assessed 15 points for (1) above and eight points for (2) above. Only 15 point assessment is under review.
46. The Rule reads as follows in regard to Probability of occurrence: "The director shall assign up to 15 points based on the probability of occurrence of the event which a violated standard is designed to prevent ...
47. Peabody takes the position that the "Probability of occurrence" section should be assessed on the basis of the harm that flowed from the event and not the occurrence of the event itself.
48. The Department maintains that the seriousness of the damage is examined in (2) extent of potential or actual damage and that (1) Probability of occurrence simply goes to the occurrence of the prohibited event.
49. The Department's position is obviously the correct one.
50. The Seriousness category contains two elements -- did the violation occur (paragraph (1)) and what harm was caused by the violation (paragraph (2)).
51. If the violation (event) actually occurred the Department may assess 15 points under (1) Probability of Occurrence. Since a preventative NOV may be written in cases where the event did not occur but the inspector feels it will occur if the operator neglects to correct a situation about which it has knowledge, there are paragraph (1) situation where less than 15 points will be assessed.
52. In addition, some violation (eg. blasting over limits) are of a paper variety and in those type cases the event could be the harm the standard is designed to prevent.
53. The damage or harm caused by the event will always be considered in paragraph (2).
54. In the instant case the event was suspended solids leaving the permit area in excess of 70 mg/l.
55. The violation had to do with a failure of the siltation structures, such failure causing the prohibited event to actually occur.
56. Since the prohibited event did occur 15 points were properly assessed under paragraph (1).
57. Since only eight points were assessed under paragraph (2) it is obvious that the Department considered the fact that the suspended solid violation did not cause a great deal of environmental harm.
58. It would not be sensible to consider the damage or harm as a rating factor in both of the "Seriousness" subcategories in this case."
8. on February 24, 1993, PCC filed it verified petition for judicial review.
9. There was evidence in the administration record that water containing suspended solids in excess of applicable effluent limitations was discharged from the permit area. The record does not contain evidence of any environmental harm resulting from the discharge.
10. As it is the function of DNR to enforce the oversight and penalization of operators under ISMCRA, the agency is bound to do so under the applicable statute by appropriate regulations. I.C. 13-4.1-12-1(b) provides for the assessment of a civil penalty for an ISMCRA violation of up to Five Thousand Dollars, and requires DNR to consider four factors in assessing this penalty:
(1) Permittee's history of previous violations at that surface coal mining and reclamation operation;
(2) seriousness of the violation, including any irreparable harm to the environment and hazard to the health and safety of the public;
(3) Permittee's negligence; and
(4) Demonstrated good faith of the permittee to achieve rapid compliance after notification of the violation.
11. DNR has adopted two regulations to implement this statutory provision. 310 IAC 12-6-12 sets forth a "point system" which assigns a number of points to each statutory penalty factor. 310 IAC 12-6-12.5 sets forth a schedule converting point totals into penalty amounts.
12. 310 IAC 12-6-12(b)(1) requires " ... the director ... " to assign 0 to 15 points for " ... probability of occurrence of the event which a violated standard is designed to prevent," and 0 to 15 points for "extent of damage." Under "probability of occurrence" Respondent is to assign points as follows:
"Points shall be assessed according to the following schedule:
Probability of Occurrence Points
None 0
Insignificant 1 to 4
Unlikely 5 to 9
Likely 10 to 14
occurred 15"
13. The question to be resolved by this Court is the review of the administrative hearing determination of the meaning of the term, "event", as used by these regulations. If DNR is correct, the violation or " ... failure to operate and maintain a siltation structure to achieve federal and state effluent limitations for suspended solids" is the "event". If PCC is correct, the "event" is actual or potential damage to the environment which the legislation seeks to prevent. As noted above, the Administrative Law Judge determined that
"49. The Department's position is obviously the correct one." No one questions but what the violation occurred. If DNR is correct in its interpretation, it correctly assessed 15 points under 12-6-12(b)(1) as the "event" had undoubtedly "occurred". This would be the case every time a violation is determined, however.[FOOTNOTE 1]
14. The Administrative Law Judge has erred in his determination (Finding No. 54) that a violation equates with "occurred", justifying the assessment of 15 points. He appears to do so by making the assumption that a preventative NOV could issue, prior to the actual occurrence of a violation, which would allow the weighing by the DNR that is implicit in the above table. PCC argues, and DNR concedes, that this is not true.
15. DNR then argues that the error of the Administrative Law Judge is harmless, in that the environmental harm sought to be prevented did in fact occur. This argument ignores the basic purpose of the principle of Administrative review. While the Administrative Law Judge might, indeed, find that the position of the DNR is correct in that the damage to the environment has occurred, this does not change the fact that the hearing below did not consider that issue in order that the Administrative Law Judge could determine for himself whether the assessment of 15 points was correct, after considering and weighing appropriate evidence. Here, the net effect is for DNR to have assessed 15 points under the category, "Probability of Occurrence", without administrative review. This is not harmless error.
CONCLUSIONS OF LAW
1. DNR is an administrative agency whose orders and determinations are subject to administrative and judicial review under IC 4- 21.5.
2. IC 4-21.5-5 governs judicial review of administrative agency decisions. IC 4-21.5-5-14(c) provides: "(d) The Court shall grant relief under Section 15 (IC 4-21.5-5-15) of this chapter only if it determines that a person seeking judicial relief has been prejudiced by an agency action that is:
(1) Arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;
(2) Contrary to constitutional right, power, privilege, or immunity;
(3) In excess of statutory jurisdiction, authority, or limitations, or short of statutory right;
(4) Without observance of procedure required by law; or
(5) Unsupported by substantial evidence."
3. In reviewing the Administrative Law Judge's legal conclusions to determine whether the Administrative Law Judge correctly interpreted and applied legal requirements, this Court is not required to give the same deference to the Administrative Law Judge's conclusions as would be required in reviewing his factual findings. That is, if the Administrative Law Judge errs in interpretation of a statute, this Court is not required to give such an interpretation any weight at all, Board of Trustees v. Miller (1988) 450 N.E.2d 95.
4. Where the Administrative Law Judge has misconstrued the statutes and regulations in question, or misapplied them, the Court may reverse it as arbitrary and capricious.
5. The Administrative Law Judge erred in holding that "preventative NOV" can be written where no violation has occurred. IC 13-4.1-11-4 authorizes DNR to issue an NOV where a violation has occurred. There is no provision of ISMCRA or the DNR regulations which authorizes the issuance of an NOV for a violation which has not yet occurred. This is conceded as correct by DNR.
6. DNR had the burden of proof at the administrative hearing and will continue to have the burden at the re-hearing.
7. The Final order of the Administrative Law Judge shall be set aside and remanded for evidentiary hearing, using the proper standard, which is that the "event" . . . [the] violated standard is designed to prevent" is not the violation itself but the resulting environmental harm, as well as such other issues as the Administrative Law Judge may appropriately determine are needed. a. If any of the foregoing Findings of Fact should have been denominated as a Conclusion of Law, it is hereby adopted as such. If any of these Conclusions of Law should have been denominated a Finding of Fact, it is hereby adopted as much. So ordered this 24th day of August, 1994.
FOOTNOTE
1. As the Petitioner notes in its Brief, the Federal Office of Surface Mining Reclamation has noted that the violation is not the event which the penalty point system is designed to prevent, rather that the event is the resultant environmental harm. 43 Fed. Reg. 41932 (September 18, 1978)