Energy and Environment Monitor
Normally, It’s Best to Present Your Case Before the Penalties Are Imposed
September 22, 2017
By: Blair M. Gardner
The U.S. District Court in Springfield, Illinois issued an opinion yesterday that caught my eye. It was unusual for two reasons. First, it presented a citizens’ suit claim under the Resource Conservation and Recovery Act (RCRA) brought by two companies. RCRA citizen’s suits are rare; suits brought by businesses are almost unheard of. Second, the companies sued the Illinois EPA, and the court dismissed the case under the Eleventh Amendment. This is the provision of the Constitution which normally prohibits suits against a state in federal courts unless it falls into one of three narrow exceptions. The district judge wrote a thorough and clear opinion in dismissing the case. E.O.R Energy, LLC and AET Environmental, Inc. v. Messina, Director, IEPA, No. 3:16-CV-03122 (C.D. Ill., Sept. 20, 2017). The facts of the case as described in the opinion caused me to dig deeper, and it got even more interesting.
The two plaintiff companies are based in Denver. E.O.R. is engaged in oil and gas production and owns two fields in Sangamon and Christian Counties in Illinois. AET Environmental specializes in the logistics of transportation, storage, and disposal of hazardous waste generated by third-party companies. The companies share ownership. Their story begins in 2002 when AET was hired to collect transport and dispose of 1500 gallons of an industrial acid mixture after it began to overheat and fume (and after the local fire department was called to stabilize the acid). AET properly documented the material which it correctly identified as “hazardous waste”. After conferring with reputable disposal companies in Colorado, it concluded that deep well disposal was probably the best method to deal with the acid. E.O.R. decided it would dispose of the acid at its Illinois oil field. AET contracted with a carrier and the acid was delivered to a third party facility in August 2002. The acid remained on the premises for more than two years before E.O.R. ordered its disposal into salt brine and oil wells on its property. IEPA began its investigation in 2005 and referred a complaint before the Illinois Pollution Control Board in 2007.
Based on these facts, any experienced environmental engineer or lawyer can imagine numerous potential claims submitted by the agency that go to the improper identification, transportation, storage and disposal of the acid. Added to this is the fact that most of the acid was disposed of in the brine well, and not the oil well, and that neither was permitted for disposing of what the two companies had already identified as hazardous wastes. The fact that the two corporate owners first attempted to represent themselves before the Illinois Board before eventually hiring two attorneys, each of whom withdrew from representation, probably did not help their case. Eventually, the Board imposed civil penalties of $200,000 against E.O.R. and $60,000 against AET. The penalties, as well as a belated attempt to challenge the IEPA’s authority to undertake enforcement, were a confirmed by the Illinois Appellate Court. E.O.R. Energy, LLC v. Pollution Control Bd., 29 N.E. 3d 69 (App Ct. 4th Dist. 2015).
Anyone who has followed this saga may wonder how this case ended up in federal court. After losing the hearing before the state agency and the appeal in state court, the companies used a clever argument for the first time: the IEPA never had authority over the oil well in which it disposed some (but not all) of the acid. It is true that another Illinois agency has jurisdiction over oil and gas wells, and that a process commonly referred to as “acidizing” is well known as a method of enhancing oil production from old fields. Unfortunately for the companies, the facts did not support their claims, and the federal court relied properly on the findings and legal conclusions in dismissing their federal case.
The moral of this story: 1) recognize that facts matter; 2) don’t ignore a legal proceeding before an administrative agency; and 3) make your best arguments early and not on appeal.
The article was authored by Blair M. Gardner, Jackson Kelly PLLC.