03-123w.v10.htm

[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:

SECOND MODIFIED ORDER On January 25, 2007, John H. Lloyd filed his "Motion for Leave to Withdraw Appearance" for the Respondents. The motion reported that the parties had resolved the underlying claims which were the subject of this proceeding. On January 29, 2007, the administrative law judge granted the motion to withdraw appearance and reflected that the parties had resolved their underlying claims. On March 2, 2007, the Department of Natural Resources reported that the Respondents may have resolved the underlying claims with Indiana Michigan Power Company, but the Respondents "still continue to have outstanding and unfulfilled obligations to Claimant DNR under the Notice of Final Order of the Natural Resources Commission in this matter dated February 13, 2006." On March 15, 2007, the administrative law judge entered a "Modified Order" in response to the report by the DNR. Later on March 15, a "Clarification Regarding Compliance Status of Respondents with Claimant Indiana Michigan Power Company" was filed in which I&M also claims the Respondents have unfulfilled obligations to I&M.

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 St. Joseph River, under IC 14-29-1, as a navigable river.

(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 Indiana basin of the St. Joseph River, that is the substantial equivalent to the plan submitted by Pheasant Ridge in the Agreed Order and described in Exhibit B.

(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 St. Joseph River at the mouth of the channel, complete a second mitigation plan that is substantially the equivalent of the plan required under paragraph (C). The requirement is in addition to all other requirements under the Agreed Order.

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easement over other real property along the St. Joseph River; or, if Pheasant Ridge cannot secure an equivalent easement, as otherwise approved by the AOPA Committee.

(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 Elkhart County, Indiana for which the DNR is the state regulatory authority.

3. The St. Joseph River in Elkhart County is a “navigable” river. Bissell Chilled Plow Works v. South Bend Manufacturing Co., 64 Ind. App. 1, 111 N.E. 932, 939 (Ind. 1916) and The Board of Commissioners v. Pidge, 5 Ind. 13 (Ind. 1854). As such, the St. Joseph River is subject to IC 14-29-1 (sometimes referred to as the “Navigable Waters Act”) for which the DNR is the state regulatory authority.

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 St. Joseph River, the DNR must apply the licensure requirements of the Navigable Waters Act, as well as those of the Flood Control Act. For activities within the ordinary high watermark of the St. Joseph River, Pheasant Ridge is responsible for compliance with the Flood Control Act and the Navigable Waters Act.

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.

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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.

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(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 Washington Township, Elkhart County. Section 29, Township 38 North, Range 6 East.

(2) [Pheasant Ridge] shall construct a channel at the project site to provide boat access to the St. Joseph River. The channel shall be constructed in accordance with the plans and specifications attached….

(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

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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.

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(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 St. Joseph River at the mouth of the channel.

(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.

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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. Indiana Dept. of Natural Resources v. United Refuse, 615 N.E.2d 100 (1993 Ind.) and Dowden v. Department of Natural Resources, 6 Caddnar 25 (2001).

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 Ind. App.).

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 Peru, Indiana as scheduled on October 25, 2005.

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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 St. Joseph River. Reece identified Claimant’s Exhibit A as Article 407 that is part of I&M’s FERC license. I&M’s license authority to engage in real estate transactions affecting project lands and waters is described in Article 407. Claimant’s Exhibit A was admitted into evidence without objection.

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 St. Joseph River that are here at issue.

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 South Bend, Chupp stated J. F. New and Associates completed in July 2002 the mitigation required under the Agreed Order. During the meeting

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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 St. Joseph River without FERC approval. The application also included the Exchange Agreement referenced in Finding 34 and Finding 35. The Application for Approval of Exchange Agreement and Revised Exhibit G was admitted into evidence, without objection, as Claimant’s Exhibit D.

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 South Bend, Chupp advised him J. F. New and Associates in July 2002 completed the mitigation required under the Agreed Order.

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.

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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 Indiana professional land surveyor.

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 Elkhart County, Indiana that was developed by Pheasant Ridge. His crew conducted field work on February 19, 2003. Applying survey procedures that are considered standard in the profession, Wilkinson testified he completed the survey in March 2003.

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

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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 St. Joseph River.

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 St. Joseph River. The purpose of the condition was to avoid wetlands in the mouth of the channel. Ledet testified that, to his knowledge, Pheasant Ridge did dredge into the St. Joseph River and did not avoid the wetlands located there.

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 Indiana and also has interests in a few more in southern Michigan.

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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.

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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 Elkhart County, and including channel construction and wetland mitigation, meant Pheasant Ridge would ultimately lose money on this project.

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:

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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.

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.

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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.

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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.

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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.

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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 Indiana, testified that the channel, as built, was “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. Wilkinson’s testimony was unrefuted.

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 St. Joseph River at the mouth of the channel. Ledet testified that, to his knowledge, Pheasant Ridge did dredge into the St. Joseph River and did not avoid the wetlands located there. Ledet’s testimony was unrefuted.

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 St. Joseph River. The conservation easement has not been provided, and with its transfer of title to Donna Lochmandy without a sufficient reservation of interests, Pheasant Ridge cannot now provide the agreed conservation easement to the DNR.

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.

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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 Indiana law, procedural changes contained in an amended statute are applied to proceedings pending at the time of, or brought subsequent to, their enactment. Rousseff v. Dean Witter & Co., Inc., 453 F. Supp. 774 (N.D. Ind. 1978).

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. Ind. 1962).

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 (Ind. 2000).

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.

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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 St. Joseph River at the mouth of the channel. The Agreed Order specifies that Pheasant Ridge was not to dredge the sediment bar located in the St. Joseph River at the mouth of the channel. The DNR testimony with respect to this violation was directed to a failed obligation to avoid the wetlands located there. A reasonable inference might be made that the sediment bar was a reference to wetlands, but the record is not unequivocal. For this violation, only a nominal civil penalty would properly be assessed against Pheasant Ridge. Indeed, if this violation were the only one supported by the evidence, the determination might be to assess no civil penalty.

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.

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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 St. Joseph River.

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 Elkhart County in association with a Pheasant Ridge subdivision.

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 Elkhart County of this intention.

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.

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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 St. Joseph River. The conservation easement has not been provided. The Agreed Order should have been otherwise fully executed by March 28, 2004. This violation is deemed to have commenced on April 28, 2004.

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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 St. Joseph River, $13,625.

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.

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(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 St. Joseph River at the mouth of the channel.

(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 St. Joseph River.

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 St. Joseph River, under IC 14-29-1, as a navigable river.

(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 Indiana basin of the St. Joseph River that is the substantial equivalent to the plan submitted by Pheasant Ridge in the Agreed Order and described in Exhibit B.

(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 St. Joseph River at the mouth of the channel, complete a second mitigation plan that is substantially the equivalent of the plan required under part (C) of this Finding. The requirement is in addition to all other requirements under the Agreed Order.

(F) Grant a conservation easement to the DNR over the real property along the southern edge of the real property adjacent to the St. Joseph River, as described in the Agreed Order. If performance of this action is no longer practicable, provide a substantially equivalent easement over other real property along the St. Joseph River, or, if Pheasant Ridge cannot secure an equivalent easement, as otherwise approved by the AOPA Committee.

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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 Indiana basin of the St. Joseph River and must be likely to result in positive effects for fish, wildlife, and botanical resources. The project shall provide for design, construction, and post-construction site maintenance that is performed or monitored by a qualified consultant.

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.

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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.