By: Matthew S. Tyree
On December 29, 2015, the Supreme Court of Pennsylvania ruled in favor of EQT Production Company (EQT) in a procedural challenge to a fine levied by the Department of Environmental Protection for the Commonwealth of Pennsylvania (PADEP). The ruling allows EQT to obtain pre-enforcement judicial review, via a declaratory judgment proceeding, of PADEP’s interpretation of “ongoing discharges” under the Pennsylvania Clean Streams Law.
In May 2012, EQT notified PADEP that it had discovered leaks in one of its subsurface impoundments containing water that had been affected by hydraulic fracturing operations. Pennsylvania’s Land Recycling and Environmental Remediation Standards Act, otherwise known as Act 2, contains a scheme for establishing cleanup standards applicable to voluntary efforts to remediate environmental contamination. Pursuant to Act 2, EQT cleared the site of impaired water and sludge after the leak and commenced a formal cleanup process. PADEP, however, took the position that the leak implicated civil penalties under the Clean Stream Laws.
In May 2014, PADEP tendered to EQT a proposed “Consent Assessment of Civil Penalty,” seeking $1,270,871 in civil penalties, $900,000 of which were assessed for alleged “ongoing violations.” PADEP took the position that each day in which contaminants remain in the subsurface soil and passively enter groundwater and/or surface water constitutes a separate violation of Clean Streams Law. Disagreeing with this interpretation of the Clean Streams Law, EQT sought a declaratory judgment in the Commonwealth Court.
Mere weeks after EQT sought declaratory judgment, PADEP lodged a complaint for civil penalties with the Pennsylvania Environmental Hearing Board (EHB) seeking more than $4,500,000 in civil penalties, supplemented by continuing fines for “ongoing violations” of up to $10,000 per day. PADEP also objected to the jurisdiction of the Commonwealth Court in the declaratory judgment action due to its complaint in front of the EHB.
In the declaratory judgment action, PADEP argued that: (1) an adequate administrative remedy was available to EQT before the EHB; (2) no issue had yet matured to the point of an actual controversy at the time EQT commenced the declaratory judgment proceedings; and (3) any controversy would cease if the EHB rejected the agency’s continuing-violation interpretation. The Commonwealth Court agreed with PADEP, ruling that no “actual controversy” existed because PADEP merely expresses legal opinions when it makes penalty recommendations; whereas, the EHB ultimately determines and imposes the appropriate penalties. Additionally, the court deemed EQT’s allegations of harm as merely speculative.
EQT appealed this decision to the Pennsylvania Supreme Court, arguing that PADEP’s continuing-violation interpretation was not merely speculative, as it imposed ongoing and indefinite civil penalty liability as long as any detectable amount of substance remains present in waters of the Commonwealth. Moreover, EQT, via a Chamber of Commerce of the United States amicus brief, argued that the case was justiciable as it was not about trying to avoid doing what the law requires but about knowing what the law requires.
The Pennsylvania Supreme Court ruled in favor of EQT, holding that its declaratory judgment action presented a sufficient, actual controversy falling within the class of disputes that are a proper subject of pre-enforcement judicial review. Focusing on EQT’s potential exposure to potent, ongoing civil penalties, the Court held that EQT can challenge PADEP’s continuing-violation interpretation in the Commonwealth Court.
The validity of PADEP’s continuing-violation interpretation of the Clean Streams Law will have a large impact on many industries operating in Pennsylvania. Stay tuned.
A link to the Supreme Court’s opinion can be found here.
This article was authored by Matthew S. Tyree, Jackson Kelly, PLLC.