STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

CONTAINER CORPORATION OF )

AMERICA, )

)

Petitioner, )

)

vs. ) CASE NO. 90-4301RX

) DEPARTMENT OF ENVIRONMENTAL ) REGULATION, )

)

Respondent. )

)

FINAL ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, Mary Clark, held a formal hearing in the above- styled case on August 16, 1990, in Tallahassee, Florida.

APPEARANCES

For Petitioner R. L. Caleen, Jr., Esquire and Intervenor: Oertel, Hoffman, Fernandez

& Cole, P.A.

P.O. Box 6507

Tallahassee, FL 32314-6507

For Respondent: David Schwartz, Esquire and

Jack Chisolm, Esquire

Department of Environmental Regulation 2600 Blair Stone Road

Tallahassee, FL 32399-2400 STATEMENT OF THE ISSUES

The parties appropriately describe these issues in their prehearing statement:

Rule 17-4.070(5), F.A.C., establishes the mandatory denial of a permit application when DER initiates a notice of violation or judicial action against an applicant, where the enforcement case involves the same activity or air pollution source for which a permit is being sought.

Container Corporation of America (CCA) filed a 120.56 rule challenge alleging that the first three sentences of Rule 17-4.070(5), F.A.C., are invalid as they exceed

the authority delegated by implementing legislation, contravene or expand Sections 403.087(4), 403.0876, 403.121, 403.131, 403.141,

403.151, 403.161, 120.57 and 120.60,

Florida Statutes; promulgate an irrebuttable evidentiary presumption; and are arbitrary and capricious.

The challengers, CCA and Florida Pulp and Paper Association (FPPA) are not challenging the rule on constitutional grounds or on grounds of failure to adopt the rule in accordance with rulemaking procedures.

PRELIMINARY STATEMENT

Container Corporation of America's Petition for Determination of Invalidity of Rule was filed on July 10, 1990; and on July 17, 1990, the petition was assigned for conduct of a hearing. A petition to intervene was filed on July 13, 1990, by Florida Pulp and Paper Association.

The hearing was scheduled for August 16, 1990, within the 30-day deadline established in Section 120.56(2), F.S.

Respondent filed its motion to dismiss on July 23, 1990. The motion was denied after a hearing held on July 26, 1990. See order entered July 27, 1990.

At the commencement of the final hearing on August 16, 1990, the hearing officer considered argument on the Department of Environmental Regulation's motions in limine and to compel discovery. The motion in limine sought to exclude evidence regarding the potential economic impact of the challenged rule on Petitioner and the industry in general, since the parties had stipulated that Petitioner and Intervenor were substantially affected by the rule. This motion also sought to exclude evidence related to the agency's application of the rule to persons other than the petitioner, as this is unrelated to the allegations of the petition.

The motion to compel discovery concerned the failure of Petitioner's witness to respond to questions at deposition relating to violations which are the subject of pending enforcement actions against Petitioner.

The motions were denied with the explanation that, while the facts did not appear material to the validity of the rule, Petitioner would be permitted to elicit some evidence to support its claim as to the draconian effect of the rule. On the other hand, Respondent could present its evidence that the rule is not impermissibly harsh.

The petition to intervene by Florida Pulp and Paper Association was granted without objection.

Petitioner and Intervenor presented the testimony of Ernest Edwin Frey, Deputy Assistant Secretary for the Northeast Division of the Department of Environmental Regulation; Roger Paul Hogan, Technical Director for the Container Corporation of America Mill in Fernandina Beach, Florida; and John Millican, an Environmental Engineering Consultant and Executive Director of the Florida Pulp and Paper Association.

Petitioner's Exhibits #1-7 were received in evidence, with the exception of #5(a), a copy of the notice of rule making, rejected as irrelevant; and #5(b), the prior rule, withdrawn by the party.

Respondent presented the testimony of Ernest Frey, and one exhibit, received without objection.

Transcript of the hearing was filed on August 22, 1990. The parties filed proposed orders on August 31, 1990; their proposed findings of fact are addressed in the attached appendix.

The parties have filed a joint motion to protect certain proprietary and confidential financial information, subject to Section 403.111, F.S. and 90.506, F.S. A separate order granting that motion is being entered.

FINDINGS OF FACT

In their Prehearing Stipulation, filed on August 14, 1990, the parties stipulate to the following:

1. Container Corporation of America (CCA) owns and operates a pulp and paper mill in Fernandina Beach, Nassau County, Florida.

   
   

2. The mill is authorized by various Department of Environmental Regulation (DER) permits to discharge industrial wastewater and emit air pollutants and is subject to DER's power to enforce such permits, as well as Chapter 403, F.S. and DER Rules.

   
   

3. DER issued an Administrative Notice of Violation charging CCA with various wastewater violations, an filed a judicial action alleging violation of air pollution standards at the mill. The Notice of Violation was issued on April 24, 1990, OGC Case NO. 90-0346; and the judicial action was filed in the Circuit Court of Nassau County in June of 1989, Civ Case NO. 89- 562-CA.

   
   

4. CCA has not yet requested a hearing on the merits of the Notice of Violation; it requested an informal conference on the charges, which tolls the time for requesting a hearing. A verbal settlement has been reached, but is not yet reduced to writing.

   
   

5. Neither DER nor CCA has requested a hearing on the merits in the judicial action. The allegations in the complaint are, however, at issue and, absent settlement, will be tried by the court.

   
   

6. On June 27, 1990, DER gave notice of its intent to deny an operating (renewal) permit for the No. 5 Recovery Boiler and Smelt Dissolving Tank because of the pending judicial action. Subsequent to the filing of this rule challenge petition, DER notified CCA that the Notice of Intent to Deny renewal of CCA's operating permits for the NO. 5 Recovery Boiler and the Smelt Dissolving Tank

   dated June 27, 1990 was issued erroneously and that the permits would be issued. [Issuance is based on expiration of the 90-day deadline for denial rather than the agency's interpretation of the rule under scrutiny.]

   
   

7. On June 28, 1990, DER notified. CCA that it may not be able to issue.. the requested construction permits [for a new batch digester and brown stock washer] due to the pending Department enforcement action ... CCA was notified that its applications for construction of the proposed new batch digester and brown stock washer were incomplete. If the judicial action is not resolved at the time action must be taken on the application for construction permits for the new batch digester and brown stock washer, the permits will be denied in reliance on Rule 17-4.070(5)(first three sentences).

   
   

8. By a separate letter on June 28 1990, DER also notified CCA that until the Notice of Violation was resolved the application for the construction permit for the new paper machine would be held in abeyance. CCA has been notified that its application for a construction permit for its new proposed paper machine is incomplete.

   
   

9. Subsequent to the filing of this rule challenge petition, DER has notified CCA it will not hold CCA's application for a construction permit for its proposed new paper machine in abeyance upon the submission of the requested material, or its request to process the application without the material, but will process the permit at that time and issue either an intent to issue or deny. If, however, the Notice of Violation is not resolved by the time action must be taken on the application the permit will be denied in reliance on Rule 17-4.070(5).

   
   

10. Until or unless the judicial action against CCA filed by DER in June 1989 is resolved, Rule 17-4.070(5)(first three sentences) requires DER to deny any permit applications filed by CCA relating to the Multiple Effect Evaporators (2), Nos. 5 and 7 Power Boilers, including electiostatic precipitators, Recovery Boilers (2) and Pulp Digester Systems (2) located at its Fernandina Beach mill.

    
    

11. Each of the foregoing sources operate by virtue of permits issued by DER. The permits periodically expire and must be renewed.

    
    

12. DER interprets the first sentence of Rule 17- 4.070(5) to mean that no permits for the sources listed in paragraph 10 above can be renewed unless and until the pending civil action against CCA is resolved, and the issue of reasonable assurance is not reached. [As to Intervenor Florida Pulp & Paper Association)

    
    

13. The Florida Pulp & Paper Association is a trade association representing the vital interests of its members -- the pulp and paper companies operating mills in Florida or discharging to state waters.

    
    

14. Rule 17-4.070(5), F.A.C., the rule which is the subject of this proceeding, regulates and affects the substantial interests of the members of the Association. Each of the mills operate [sic] under various environmental permits issued by DER. Permits must be obtained when existing permits expire or when sources are replaced or expanded. The rule at issue forbids the issuance of such permit to any source or for any activity against which the Department has filed a Notice of Violation or judicial enforcement action, which remain(s) pending.

15. The Association's scope of interest and activity includes participating in the development of rules proposed by DER membership. Here, a senior DER official has indicated that the rule at issue will henceforth be uniformly and strictly applied, industry-wide. Accordingly, a determination of invalidity of this rule is an appropriate remedy for the Association to seek on behalf of its members

    
    

    CONCLUSIONS OF LAW

    
    

16. The Division of Administrative Hearings has jurisdiction in this proceeding pursuant to Sections 120.56 and 120.57(1), F.S.

    
    

17. Section 120.56(1), F.S. provides that"...[a]ny person substantially affected by a rule may seek an administrative determination of the invalidity of the rule on the ground that the rule is an invalid exercise of delegated legislative authority."

    
    

    CCA and FPPA are substantially affected by Rule 17- 4.070(5), F.A.C.

    
    

    3.- Section 120.52(8), F.S. provides:

    1. "Invalid exercise of legislative authority" means action which goes beyond the powers, functions, and duties delegated by the Legislature. A proposed or

       existing rule is an invalid exercise of delegated legislative authority if any one or more of the following apply:

       1. The agency has materially failed to follow the applicable

          rulemaking procedures set forth in s. 120.54;

       2. The agency has exceeded its grant of rulemaking authority, citation to which is required by s. 120.54(7);

       3. The rule enlarges, modifies, or contravenes the specific provisions of law implemented,

          citation to which is required by s. 120.54(7);

       4. The rule is vague, fails to establish adequate standards-for agency decisions, or vests unbridled discretion in the agency; or

       5. The rule is arbitrary or capricious.

          The Challenged Rule

          
          

18. Rule 17-4.070, F.A.C., including the first three sentences of paragraph (5), at issue here, provides in full:

    
    

    17-4.070 Standards of Issuing or Denying Permits; Issuance; Denial.

    1. A permit shall be issued to

       the applicant upon such conditions as the Department may direct, only if the applicant affirmatively provides the Department with reasonable assurance based on plans, test results, installation of pollution control equipment, or other information, that the construction, expansion, modification, operation, or activity of the installation will not discharge, emit, or cause pollution in contravention of Department standards or rules.

       However, for discharges of wastes to water, the Department may issue temporary operation permits under the criteria set forth in Section 403.088(3), F.S.

    2. If, after review of the application and all the information, the Department determines that the applicant has not provided reasonable assurance that the construction, modification, expansion, or operation of the installation will be in accord with applicable laws or rules, including rules of approved local programs, the Department shall deny the permit.

    3. The Department may issue any permit with specific conditions necessary to provide reasonable assurance that Department rules can be met.

    4. No Department permits shall be issued for a term of more than five

    5. years unless otherwise specified by statute, rule, or order of the Department. However, construction permits for air pollution sources may be issued for a period of time as necessary.

    1. No permit shall be issued for an installation subject to a Department notice of violation or judicial action initiated by the Department. Upon resolution of the enforcement action by agreement, permit, final order, or judicial

       action a permit may be granted subject to the applicable requirements of Title 17. This prohibition shall only be applicable when the enforcement action involves the same activity or air pollution source as the activity or air pollution source for which a permit is being sought. The Department shall take into consideration a permit applicant's violation of any Department rules at any installation when determining whether the applicant has provided reasonable assurances that Department standards will be met.

    2. The applicant shall be

       promptly notified if the Department intends to deny the application and shall be informed of the reasons for the intended denial, and of the right to request an administrative hearing.

    3. The issuance of permit does not relieve any person from

    with the requirements of Chapter 403, F.S., or Department rules.

    
    

    [emphasis added]

    
    

    Specific Authority and Law Implemented

    
    

19. As required by Section 120.54(7), F.S., the rule cites the following sections of Chapter 403 F.S., relating to environmental control, for both specific authority and law implemented: 403.021, 403.031, 403.061, 403.087, and 403.088, F.S.

    
    

20. Section 403.021, F.S., sets out a lengthy legislative declaration and public policy regarding pollution of the air and waters of the state, stating generally that pollution is a menace and public nuisance, that it must be prevented, abated and controlled, and that the natural resources of the state should be preserved and the public health, safety, welfare and economic well- being should be protected.

    
    

21. Sections 403.021 and 403.031, F.S., establish that the DER has the power and duty to control and prohibit air and water pollution. The department is given authority to adopt rules to carry out the intent and purposes of the act and to exercise general supervision of the administration and enforcement of laws, rules and regulations pertaining to air and water pollution. The department is given the authority to establish air quality and water quality standards and to establish a permit system requiring permits for any installation that may be a source of air or water pollution.

22. Section 403.087, F.S., provides in pertinent part:

    
    

    403.087 Permits; general issuance; denial; revocation; prohibition; penalty. --

    1. No stationary installation

       which will reasonably be expected to be a source of air or water pollution shall be operated, maintained, constructed, expanded, or modified without an appropriate and currently valid permit issued by the department, unless exempted by department rule. In no event shall a permit for a water pollution source be valid for more than 5 years.

       However, upon expiration, a new permit may be issued by the

       department in accordance with thi act and the rules and regulations of the department. The renewal of a permit issued under S. 403.088 for the operation of a sanitary sewage system may be issued for periods of up to 10 years, provided:

       (a) The system is not currently under a temporary operating permit and does not have any enforcement action pending against it by the Environmental Protection Agency or the department.

    2. The department shall adopt, amend, or repeal rules, regulations, and standards for the issuance, denial, and revocation of permits.

    3. The department shall issue permits on such conditions as are necessary to effect the intent and purposes of this section.

    4. The department shall issue permits to construct, operate, maintain, expand, or modify an installation which may reasonably be expected to be a source of pollution only when it determines that the installation is provided or equipped with pollution control facilities that will abate or prevent pollution to the degree that will comply with the standards or rules promulgated by the department, except as provided in

    s. 403.088, and which will comply with the prohibitions in 40 C.F.R. s. 124.41.

    1. A permit issued pursuant to this section shall not become a vested right in the permittee. The

       department may revoke any permit issued by it if it finds that the permitholder:

       1. Has submitted false or inaccurate information in his application;

       2. Has violated law, department orders, rules, or regulations, or permit conditions;

       3. Has failed to submit operational reports or other information required by department rule or regulation; or

       4. Has refused lawful inspection under S. 403.091.

    
    

    [emphasis added]

    
    

23. Section 403.088, F.S., requires water pollution operation permits; allows temporary operation permits when the applicant does not qualify for, or has been denied an operation permit; and sets out standards for both types of permits.

    
    

    Authority Exceeded or Enlarged

    
    

24. At first reading, Rule 17-4.070(5), F.A.C. appears to provide a common sense administrative shortcut within the agency's broad enforcement authority. Why, indeed, should a permit be granted to a facility and for an activity already under the cloud of a notice of violation or judicial action?

    
    

25. Still, action on an application must be taken within the ninety-day deadline imposed by Sections 120.60(2), F.S. and 403.0876(2), F.S. These provisions, relating to licenses generally, and DER permits more specifically, require that an application be approved or denied, with reasons, within ninety days of receipt of the original application or receipt of timely requested additional information. Thus, as it now concedes, the agency does not have the option of placing the application in abeyance while the prior alleged violations are being resolved.

    
    

    Abeyance of action by the agency is not an option, even though this would allow an existing permit due for renewal to continue in effect if timely applied for, as provided in Rule 17-4.090, F.A.C.

    
    

26. The application must be denied as long as enforcement action is pending, even if all other statutory and rule criteria are met; even if the applicant provides the reasonable assurances addressed in Section 403.087(4),

    F.S. and Rule 17-4.070(1), F.A.C.; and even if those assurances are acceptable to the department after consideration of the applicant's violation of any department rules at and installation, as provided in the final (unchallenged) sentence of Rule 17-4.070(5), F.A.C.

    
    

    This means that the fact of a pending action alone disqualifies an applicant from a permit of any sort, including a renewal permit. There is an irrebuttable presumption that an unresolved enforcement action, notwithstanding the applicant's ability to meet all other criteria, renders the applicant's activity so environmentally suspect as to preclude a permit.

27. Evidentiary presumptions arise as a matter of law and the power to establish them is reserved solely to the courts and the legislature. An agency of the executive branch has no authority to formulate an evidentiary presumption. B.R. and W.C. v. Department of Health and Rehabilitative Services, 558 So. 2d 1027, (Fla. 2nd DCA 1989).

    
    

    In a limited circumstance the legislature has granted DER the authority to withhold a renewal permit when enforcement action is pending. See subsection 403.087(1)(a), F.S., cited in paragraph 8., above, regarding conditions for renewal of a sanitary sewage system operation permit. Rule 17- 4.070(5), F.A.C. applies to any permit, however, and expands this specific grant of authority.

    
    

28. A similar expansion of rule making authority was addressed in Grove Isle, Ltd. v. State Department of Environmental Regulation, 454 So. 2d 571 (Fla. 1st DCA 1984). In that case, Rule 17-4.242, F.A.C. established a "public interest" requirement as a precondition to the issuance of a construction permit, in addition to the duty of an applicant to demonstrate that its proposed activity would meet water quality standards. The legislature established "public interest" as a criteria for issuance of an operation permit to persons discharging waste into waters of the state, but did not specifically make this a criteria for issuance of a construction permit for an installation that would not discharge waste into state waters. The rule was invalidated by the court.

    
    

    Arbitrary or Capricious

    
    

29. To successfully challenge a rule promulgated by an agency in the exercise of its delegated legislative authority the Petitioner must make three showings: (1) that the agency adopting the rule has exceeded its authority, (2) that the requirements of the rule are inappropriate to the ends specified in the legislative act, and (3) that the requirements contained in the rule are not reasonably related to the purpose of the enabling legislation but are arbitrary and capricious. State, Marine Fisheries Commission v. Organized Fishermen, 503 So. 2d 935, 938 (Fla. 1st DCA 1987) citing Department of Professional Regulation

    v. Florida Society of Professional Land Surveyors, 475 So. 2d 939 (Fla. 1st DCA 1985).

    
    

30. As reflected in the various statutes and rules cited above, there is ample ground for DER to deny a permit when the applicant fails to affirmatively provide reasonable assurances that its installation or activity will not cause pollution in contravention of the department's standards and rules. The department also has authority to review the applicant's "track record" to test those assurances, according to the final sentence of Rule 17-4.070(5), F.A.A.

    
    

    The challenged portion of the rule goes further and prohibits the issuance of any permit upon the mere existence of unresolved allegations reflected in a notice of violation or complaint in circuit court. Thus, an applicant who has met all other permitting standards and has provided "reasonable assurances is prevented from engaging in the activity that is the subject of its application so long as the allegations are pending. This could mean a delay while the court finds time for a hearing or while the parties negotiate over the amount of an administrative fine or damages.

    
    

    Without the rule, a permit may be denied for the same violations that are the subject of an enforcement action; or conditions may be imposed in the permit to address those violations, as provided in Section 403.087(3), F.S. Thus, at best, the challenged portion of the rule is redundant. At worst, it is an instrument of administrative rapacity.

    As such, the rule is not reasonable related to the purpose of Chapter 403, F.S., and is arbitrary and capricious.

    
    

31. Parenthetically, the second sentence of Rule 17- 4.070(5), F.A.C. which acknowledges that enforcement action may be resolved with a permit, is a peculiar reverse of the first sentence which prohibits any permit for an installation subject to a notice of violation or judicial action.

This drafting quirk is not raised in the petitions at issue here, and deference is accorded the agency's interpretation that "permit" in the two separate sentences refers to distinct and different permits. That is, the second sentence merely acknowledges that enforcement actions may be brought against facilities operating without a permit and may be resolved with a grant of a permit.

FINAL ORDER

Based on the foregoing, it is hereby, ORDERED:

Rule 17-4.070(5), F.A.C., excepting the final sentence, is an invalid exercise of delegated legislative authority, pursuant to Sections 120.52(8) and 120.56(1), F.S.

DONE AND ORDERED this 7th day of September, 1990, in Tallahassee, Leon County, Florida.

MARY CLARK

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 7th day of September, 1990.

APPENDIX TO THE RECOMMENDED ORDER IN CASE NO. 90-4301RX

Findings of Fact Proposed by Petitioner and Intervenor

1. Adopted in paragraph 1.

2. Rejected as immaterial and unnecessary.

3. Adopted in paragraph 13, except for the number of employees and production rates and value, which are immaterial and unnecessary.

4. Adopted in paragraph 14.

5. Adopted in paragraph 15.

6. Rejected as immaterial and unnecessary. [Paragraphs 7-10 are not included.]

11. Included in paragraph 10 by implication. 12-14. Rejected as immaterial and unnecessary.

1. Adopted in paragraph 3.

2. Adopted in paragraph 4.

3. Adopted in paragraph 12.

18-21. Rejected as immaterial and unnecessary.

1. Adopted in paragraph 9.

2. Rejected as unnecessary.

3. Adopted in paragraph 12.

25-33. Rejected as unnecessary and immaterial, or argument rather than findings of fact.

Findings of Fact Proposed by Respondent

1. Adopted in paragraphs 1 and 2.

2. Adopted in paragraph 3.

3. Adopted in paragraph 5.

4. Adopted in paragraph 6.

5-6. Adopted in substance in paragraphs 7 and 8.

7-27. Rejected as unnecessary and immaterial, or argument rather than findings of fact.

COPIES FURNISHED:

R. L. Caleen, Jr., Esquire Oertel, Hoffman, Fernandez

& Cole, P.A.

P.O. Box 6507

Tallahassee, Florida 32314-6507

Jack Chisolm, Esquire David Schwartz, Esquire

Dept. of Environmental Regulation 2600 Blair Stone Road Tallahassee, FL 32399-2400

Dale H. Twachtmann, Secretary DER-Twin Towers Office Bldg. 2600 Blair Stone Road Tallahassee, FL 32399-2400

Daniel H. Thompson General Counsel

DER-Twin Towers Office Bldg. 2600 Blair Stone Road Tallahassee, FL 32399-2400

Carroll Webb, Executive Director Administrative Procedures Committee Holland Building, Room 120 Tallahassee, FL 32399-1300

Liz Cloud, Chief

Bureau of Administrative Code The Capitol, Room 1802 Tallahassee, FL 32399-0250

NOTICE OF RIGHT TO JUDICIAL REVIEW

PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL REVIEW PURSUANT TO SECTION 120.68, FLORIDA STATUTES. REVIEW PROCEEDINGS ARE GOVERNED BY THE FLORIDA RULES OF APPELLATE PROCEDURE. SUCH PROCEEDINGS ARE COMMENCED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF THE DIVISION OF ADMINISTRATIVE HEARINGS AND A SECOND COPY, ACCOMPANIED BY FILING FEES PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL, FIRST DISTRICT, OR WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE PARTY RESIDES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED.

Docket for Case No: 90-004301RX

Orders for Case No: 90-004301RX