May Dept. Store Co v. CW, DEQ, etc ( 2002 )

COURT OF APPEALS OF VIRGINIA
Present: Judges Willis, Bray and Annunziata
Argued at Alexandria, Virginia
MAY DEPARTMENT STORES COMPANY
MEMORANDUM OPINION * BY
v. Record No. 3356-01-2 JUDGE JERE M. H. WILLIS, JR.
AUGUST 6, 2002
COMMONWEALTH OF VIRGINIA,
DEPARTMENT OF ENVIRONMENTAL QUALITY
AND THOMAS L. HOPKINS (NOW
ROBERT G. BURNLEY), DIRECTOR
FROM THE CIRCUIT COURT OF HENRICO COUNTY
George F. Tidey, Judge
John S. Hahn (Julie Anna Potts; William C.
Wood; Michael Ewing; Mayer, Brown, Rowe &
Maw; Rawlings & Wood, on briefs), for
appellant.
(Jerry W. Kilgore, Attorney General; Roger L.
Chaffe, Senior Assistant Attorney General;
John K. Byrum, Jr., Assistant Attorney
General, on brief), for appellee.
May Department Stores Company ("May") appeals the judgment of
the trial court affirming a Department of Environmental Quality
("DEQ") denial of reimbursement for soil removal undertaken as a
result of a petroleum release. May contends that the trial court
erred in affirming the decision because (1) DEQ relied on post hoc
rationales on appeal, and (2) DEQ's decision was arbitrary and
capricious and not supported by substantial evidence. For the
* Pursuant to Code § 17.1-413, this opinion is not
designated for publication.
following reasons, we reverse the judgment of the trial court and
order the case remanded to DEQ for further consideration.
I. BACKGROUND
On March 30 and April 5, 1993, May reported to DEQ the
discovery of petroleum releases at the Hecht's Distribution
Center in Henrico County, where May's contractors were removing
underground storage tanks. Two tanks had been removed and were
intact. However, the surrounding soil was visibly contaminated,
apparently from the release of fuel oil.
By letter dated April 2, 1993, DEQ directed May to submit
an initial abatement measure report ("IAR") and a site
characterization report ("SCR"). The letter explained that
DEQ's review of the SCR would determine whether "further actions
and/or a Corrective Action Plan" would be required. On April 5,
1993, May's contractor sought guidance from DEQ as to the extent
of the necessary cleanup. Without receiving a directive or site
visit by DEQ, May's contractor began removing visibly
contaminated soil for offsite disposal.
On April 21, 1993, in a teleconference with May's
consultant, DEQ directed May to remove visibly contaminated
soil. This directive was unqualified as to volume or scope, and
made no reference to the water table. May's IAR and SCR
documented the removal of visibly contaminated soils.
Photographs of the site excavation confirmed such. In response
to May's IAR and SCR, DEQ approved closure of the site, noting,
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"this investigation is considered closed" and that "corrective
action is not required." Thus, May's efforts satisfied all
cleanup requirements and no Corrective Action Plan was required.
May applied for reimbursement from the Virginia Petroleum
Storage Tank Fund ("Tank Fund") of approximately $600,000 in
costs expended on the site cleanup. See Code § 62.1-44.34:11; 9
VAC 25-590-210. DEQ authorized reimbursement of $76,706.30 and
denied reimbursement of $525,592.30. Its reasons for the denial
included: (1) May's incorrect application of DEQ's "usual and
customary rates"; (2) DEQ's need for additional documentation
for certain costs; and (3) May's failure to justify the
necessity of certain actions.
May sought reconsideration. It reduced its claim to comply
with DEQ's uniform customary rates and sought reimbursement of
$420,979.63 of the $525,592.30 denied in the initial decision.
A reconsideration panel awarded May reimbursement of an
additional $61,891.04. The panel based its denial of further
reimbursement on May's failure to obtain written approval for
soil removal before April 21, 1993, and on May's excavation
below the water table, which DEQ asserted was at 5.5 feet below
grade. The reconsideration panel gave May credit for
considering as sufficient the oral authorization that it
received in the April 21, 1993 teleconference, and it allowed
May reimbursement, in part, for the cost of excavation pursuant
to that oral authorization.
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The reconsideration panel determined that May had excavated
3,374 tons of soil prior to the April 21, 1993 authorization.
Holding that excavation to be unauthorized, it denied
reimbursement for its cost. It found that pursuant to the April
21, 1993 authorization, May excavated an additional 1,675 tons
of soil, but that this included excavating to a depth of 13.5
feet, whereas the water table was encountered at 5.5 feet below
grade. It disallowed reimbursement for the cost of excavation
below the water table. It found that May had excavated 683 tons
of soil, pursuant to authorization, down to the 5.5 foot water
table level. It allowed reimbursement for that amount of
excavation.
The trial court affirmed DEQ's reconsideration panel
decision.
II. ANALYSIS
Separate standards of review determine the degree of
deference, if any, to be given on appeal to an administrative
agency's decision. Holtzman Oil Corp. v. Commonwealth, 32
Va. App. 532, 539, 529 S.E.2d 333, 337 (2000).
Where the issue is whether there is
substantial evidence to support findings of
fact, great deference is to be accorded the
agency decision. Where the issue falls
outside the specialized competence of the
agency, such as constitutional and statutory
interpretation issues, little deference is
required to be accorded the agency decision.
Where, however, the issue concerns an agency
decision based on the proper application of
its expert discretion, the reviewing court
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will not substitute its own independent
judgment for that of the agency but rather
will reverse the agency decision only if
that decision was arbitrary and capricious.
Finally, in reviewing an agency decision,
the courts are required to consider the
experience and specialized competence of the
agency and the purposes of the basic law
under which the agency acted.
Id. (quoting Johnston-Willis Ltd. v. Kenley, 6 Va. App. 231,
246, 369 S.E.2d 1, 9 (1988)). Agency decisions must be in
writing and become part of the record. See Code §§ 2.2-4020
and -4023.
When the decision on review is to be made on
the agency record, the duty of the court
with respect to issues of fact shall be
limited to ascertaining whether there was
substantial evidence in the agency record
upon which the agency . . . could reasonably
find them to be as it did.
Code § 2.2-4027.
A. POST HOC RATIONALE
May first argues that the trial court erroneously
considered, as grounds for affirmance, reasons not underlying
DEQ's decision. "Under well-established principles of
administrative law, the Court may not accept counsel's post hoc
rationalizations for agency action. Rather, the Court must
determine the validity of agency rules solely on the basis
articulated by the agency itself in the administrative record
made in connection with the rulemaking." Jordan v. Lyng, 659
F. Supp. 1403, 1416 (E.D. Va. 1987).
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The DEQ reconsideration panel based its denials of
reimbursement on two holdings: First, that its regulation
VR 680-13-02 authorized soil removal only upon written
pre-approval by DEQ and non-compliant soil removal was not
reimbursable; and second, that excavation below the ground water
table was not standard practice and was not reimbursable.
DEQ argued before the trial court that May's excavation
prior to April 21, 1993, was neither an "initial response,"
VR 680-13-02 § 6.2, 1 nor an "initial abatement," VR 680-13-02
§ 6.3. 2 It argued that the excavation for which reimbursement
was sought was a "corrective action plan," VR 680-13-02 § 6.6, 3
which required prior written authorization by DEQ. It argued
further that excavation below the ground water table contravened
standard industry practice and prudent cleanup management and
thus was ineligible for reimbursement.
We hold that the position taken by DEQ before the trial
court was in support of its reconsideration panel's
determination and lay along the same lines. Thus, that position
was not a post hoc rationale.
1
Recodified as 9 VAC 25-580-240.
2
Recodified as VAC 25-580-250.
3
Recodified as VAC 25-580-280.
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B. MERITS OF THE DEQ DETERMINATION
1. REQUIREMENT OF WRITTEN AUTHORIZATION
The Tank Fund, Code § 62.1-44.34:11, provides reimbursement
for "reasonable and necessary costs incurred by 'owners and
operators' of underground petroleum storage tanks 'in taking
corrective action for any release of petroleum into the
environment . . . .'" Holtzman, 32 Va. App. at 540, 529 S.E.2d
at 337 (quoting Code § 62.1-44.34:11(A)(2)(a)). The Tank Fund
provides reimbursement for three types of corrective action:
(1) initial response pursuant to VR 680-13-02 § 6.2, (2) initial
abatement pursuant to VR 680-13-02 § 6.3, and (3) activity
pursuant to an approved corrective action plan pursuant to VR
680-13-02 § 6.6. Id. at 541, 529 S.E.2d at 338.
VR 680-13-02 § 6.2 "initial response" requires an owner or
operator, upon discovering a petroleum release, (1) to report
the release, (2) to take immediate action to prevent further
release into the environment, and (3) to identify and mitigate
fire, explosion and vapor hazards. "The DEQ has interpreted VR
680-13-02 § 6.2 to include those activities involving 'hazards'
to 'human health, safety, and the environment,' which 'must be
initiated immediately.'" Holtzman, 32 Va. App. at 541, 529
S.E.2d at 338.
May reported discovering the release. No other
circumstances contemplated by VR 680-13-02 § 6.2 obtained, and
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May performed no activity pursuant to VR 680-13.02 § 6.2 for
which it sought reimbursement.
On June 8, 1993, May submitted to DEQ a report, which
stated:
No vapors or free product were observed in
the site storm sewers or basements of the
site buildings. Sanitary sewers were not
observed in the vicinity of the UST
[underground storage tank] areas. Ambient
air was monitored in the UST removal work
areas using an HNu PID [photo-ionization
detector]. There was no instrument response
during ambient air monitoring.
This site characterization report stated that the petroleum
remaining in the soils was "immobile and not volatile." With no
fire, explosion, or vapor hazard present, May's actions were not
performed as an initial response activity pursuant to VR
680-13-02 § 6.2. See Holtzman, 32 Va. App. at 542, 529 S.E.2d
at 338.
A corrective action plan developed under VR 680-13-02 § 6.6
is a detailed strategy for responding to contaminated soil and
ground water. It is designed to provide direction, with agency
specifications, in the cleanup process and to ensure the
protection of human health, safety, and the environment. A
corrective action plan must be approved by DEQ. See
VR 680-13-02 § 6.6. May submitted no corrective action report,
and DEQ approved no corrective action plan. Thus, May's
activities were not pursuant to VR 680-13-02 § 6.6 and do not
qualify for reimbursement under that section.
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Because May's actions fell within the ambit of neither
Section 6.2 nor Section 6.6, the issue is whether its actions
constituted initial abatement pursuant to Section 6.3.
Under Section 6.3, owners and operators, unless otherwise
directed, must, among other things:
(1) remove as much of the regulated
substance from the [excavated] system as is
necessary to prevent further release to the
environment;
(2) visually inspect any above ground
releases or exposed below ground releases
and prevent further migration of the
released substance into surrounding soils
and ground water;
(3) [not applicable;]
(4) remedy hazards posed by contaminated
soils that are excavated or exposed as a
result of release confirmation, site
investigation, abatement, or corrective
action activities;
(5) [not applicable;]
(6) investigate to determine the possible
presence of free product, and begin free
product removal as soon as practicable and
in accordance with 9 VAC 25-580-270
[relating to the matter of handling and
disposing of free petroleum product].
VR 680-13-02 § 6.3 (emphasis added). The measures required of
owners and operators under VR 680-13-02 § 6.3 are not
conditioned upon prior written authorization and must be
accomplished absent contrary direction by DEQ.
The excavations performed by May fell within its
obligations under VR 680-13-02 § 6.3. May promptly reported its
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discovery of the petroleum leakage and undertook diligently and
efficiently to perform and satisfy its obligations under the
regulation. It removed the escaped regulated substance and
contaminated soil and water. It forestalled further migration
of the regulated substance. DEQ never directed it to do
otherwise. Indeed, on April 21, 1993, DEQ directed May to
continue the operation in progress. DEQ misconstrued its
regulation when it held that VR 680-13-02 § 6.3 required prior
written authorization for May's activity. Furthermore, it makes
no sense to approve and permit reimbursement for excavation
subsequent to the April 21, 1993 telephone conference while
denying reimbursement for identical and equally necessary
excavation prior to that date. Thus, we hold that DEQ committed
an error of law in misconstruing its regulation and that the
trial court erred in affirming that error.
2. EXCAVATION BELOW THE WATER TABLE
DEQ justified its denial of reimbursement upon a finding
that May had excavated below the water table level, which it
stated was located at 5.5 feet below grade. No evidence
supports this finding. DEQ attributed its ascertainment of the
water table depth to May's site characterization report.
However, that report did not identify the water table level.
Rather, it referred to "[a]n apparent perched ground water at
the site occurs at a depth between approximately 5.5 and 9.0
feet as measured in ground water monitoring wells . . . ."
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Perched water is a containment or pooling of water not connected
to the water table. Thus, DEQ's determination that May
excavated below the water table level is unsupported by
evidence, and the trial court erred in affirming that finding.
We reverse the judgment of the trial court and direct that
the case be remanded to DEQ for determination whether May's
excavation and cleanup efforts accorded with the requirements of
VR 680-13-02 § 6.3 and whether May is entitled to reimbursement
for its attendant expenses.
Reversed and remanded.
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