ITT Rayonier, Inc. v. State, Dept. of Ecology

• Decision Date: 22 November 1978
• Docket Number: No. 44957,44957
• Citation: 91 Wn.2d 682,586 P.2d 1155
• Parties: ITT RAYONIER INCORPORATED, a Delaware Corporation, Respondent, v. STATE of Washington, DEPARTMENT OF ECOLOGY, Appellant.
• Court: Washington Supreme Court

Page 682

91 Wn.2d 682

586 P.2d 1155

ITT RAYONIER INCORPORATED, a Delaware Corporation, Respondent, v. STATE of Washington, DEPARTMENT OF ECOLOGY, Appellant.

No. 44957.

Supreme Court of Washington, En Banc.

Nov. 22, 1978.

Slade Gorton, Atty. Gen., Charles B. Roe, Charles W. Lean, Asst. Attys. Gen., Olympia, for appellant.

Perkins, Coie, Stone, Olsen & Williams, Burroughs B. Anderson, John M. Cary, Seattle, Wald, Harkrader & Ross, Thomas H. Truitt, Washington D. C., for respondent.

UTTER, Justice.

The Department of Ecology (DOE) appeals from the superior court's reversal of the decision of the Pollution Control Hearings Board (PCHB) refusing to stay ITT Rayonier's schedule of compliance with the Federal Water Pollution Control Act (FWPCA), as contained in ITT's National Pollutant Discharge Elimination System (NPDES) permit. We hold that ITT is entitled to a stay of the compliance schedule contained in its permit, and affirm the superior court.

ITT operates a pulp mill in Port Angeles. Since 1970, DOE and its predecessor have overseen the discharge of pollutants by the mill. Under permits secured in 1970, ITT was required to reduce its discharges significantly. ITT spent over 35 million dollars building the required pollution control equipment and, with this equipment, met the permissible limits specified in the terms of the state-issued permits. ITT's agreement to undertake the requirements of the state permit also satisfied the Environmental Protection Agency (EPA) objections to ITT's discharges, and forestalled an action against ITT by EPA based upon 1899 federal legislation. ITT remains in compliance with the discharge limits agreed to by ITT, DOE's predecessor, and EPA.

New federal legislation, the FWPCA, was enacted in 1972. States were allowed to administer the NPDES permit process established under that legislation. On August 30, 1974, DOE issued a NPDES permit to ITT, covering its Port Angeles mill. The permit included a section condition S3 specifying the maximum permissible daily average discharge of effluents into the Straits of Juan de Fuca. Footnote f to that section reads:

The biochemical oxygen demand, suspended solids, and pH limitations will be modified to be consistent with the applicable final effluent guidelines when promulgated by the EPA in the Federal Register, or as thereafter modified by final action consequent upon any appeal from such guidelines.

Footnote f as part of condition S3 was the product of somewhat extended negotiation between ITT and DOE. DOE proposed use of standards from the older federal legislation unrelated to the FWPCA. ITT objected to any standards other than those promulgated specifically for the FWPCA, and indicated that it would prosecute a state appeal if other standards were used. The superior court judge found in an unchallenged finding of fact that both parties were concerned about problems inherent in a state appeal. The parties, seeking to avoid a state appeal, agreed upon footnote f. ITT agreed, in effect, not to conduct a state appeal on the guidelines themselves if EPA guidelines were incorporated into the permit under the conditions specified in footnote f The next section of the permit contains condition S4, which specifies the schedule which ITT is to follow in complying with the standards set out in condition S3. Final plans for installation of new, additional pollution control equipment were to be submitted and approved by October 1975, construction was to begin by July 1976, and actual operation in compliance with S3 standards was to occur by July 1, 1977. When this permit was issued in 1974, it was assumed by all parties that the federal EPA would establish the guidelines written into condition S3 by October 1974, as EPA was under court order to do so after failing to meet an earlier deadline established by statute. After failing to meet several other deadlines, EPA finally promulgated final guidelines in January 1977. These guidelines are currently being appealed by ITT in the federal Court of Appeals, District of Columbia Circuit.

ITT submitted plans for its pollution control facilities in September 1975 in accordance with the compliance schedule of condition S4. DOE refused to grant approval to these plans, citing their lack of finality.

DOE issued a compliance order to ITT on December 31, 1975, requiring ITT to submit a final plan. ITT appealed this order to PCHB. ITT also applied to DOE for a stay in the order requiring a final plan, a stay of the compliance schedule, and a modification of the compliance schedule to allow ITT to appeal the EPA guidelines in federal court. Each of these requests was denied, and ITT appealed to PCHB.

The PCHB upheld DOE's refusal to stay or modify the compliance schedule. Upon appeal the superior court judge held that the PCHB's decision was clearly erroneous, and that ITT was entitled to a stay in the compliance schedule until the guidelines were finalized and ITT's federal appeal was completed.

The decision of the PCHB ordering compliance prior to the finality of standards is reviewable under the standards set out in RCW 34.04.130(6). The trial court found that the action of the PCHB was clearly erroneous meaning that, despite some support in the record for the decision reached, the reviewing court is left with the firm and definite conviction that a mistake has been committed. Norway Hill Preservation & Protection Ass'n v. King County Council, 87 Wash.2d 267, 552 P.2d 674 (1976). This court does not review the decision of the trial court under these circumstances; instead, it is to apply the standards of RCW 34.04.130(6) directly to the administrative decision. Norway Hill Preservation & Protection Ass'n v. King County Council, supra. Thus, this court is to make an independent assessment of the agency's action under the statutory review standards.

The primary question which we must address is whether the final standards as established by condition S3 and the schedule of compliance set forth in condition S4 are separate and independent or related and interdependent. DOE asserts the unrelatedness of the two conditions, while ITT maintains that they are necessarily interrelated. Thus, DOE asserts that the compliance schedule may be enforced in the absence of final standards, while ITT urges that orders of compliance are improper until the standards which ITT must meet are finalized. Resolution of this disagreement must be sought in the permit terms itself and the purposes for which condition S3, including footnote f, and condition S4 were included in the permit. The PCHB found that the permit was ambiguous on this point and proceeded to examine the intent of DOE in issuing the permit.

We agree that the permit itself is ambiguous. However, it was error here for the PCHB to look only to DOE's intent to resolve this ambiguity. Although the general rule may be that construction of administrative orders depends only upon the intent or purpose of the issuing agency, See Airport Coach Serv., Inc. v. City of Fort Worth, 518 S.W.2d 566 (Tex.Civ.App.1974); Reddi-Wip Co. of Philadelphia, Inc. v. Hardin, 315 F.Supp. 1117 (E.D.Pa. 1970), under the circumstances here that rule does not apply. Because the portion of the permit at issue here footnote f was the product of negotiation and agreement between the parties, the intent of both parties, and not just the agency, is relevant. The footnote provision is in the nature of a consent decree or a negotiated settlement, and contract principles of construction are properly applied. United States v. ITT Continental Baking Co., 420 U.S. 223, 95 S.Ct. 926, 43 L.Ed.2d 148 (1975); United States v. Armour & Co., 402 U.S. 673, 91 S.Ct. 1752, 29 L.Ed.2d 256 (1971). This is in accord with a recent federal district court decision involving the precise permit provision under discussion here. United States v. ITT Rayonier, Inc., 10 E.R.C. 1869 (W.D.Wash.1977).

In this case, determining that the intent of both parties is relevant is far easier than divining that intent. The key event in the sequence leading to this case was unanticipated by either party EPA's default in the issuance of final guidelines, including failure to meet (1) the statutory command to promulgate guidelines in 1973, and (2) several court orders to promulgate them, the first of which ordered issuance by 1974. Only now, in the wake of that default, does the relationship between standards established in S3 and the compliance schedules set forth in S4 become vitally important. Because this issue had little apparent importance at the time the permit was issued, the parties apparently failed to address it specifically in their negotiations and there is therefore little evidence of intent on this issue.

Ironically, the most useful of the few clues to the intent and understanding of the parties are past communications by each party which could be construed to suggest understandings contrary to the positions they now assert. Memoranda written by DOE officials appear to recognize that the purpose of footnote f was to prevent ITT from being forced to meet standards other than the final ones promulgated by EPA. Two memoranda written by DOE's chief negotiator in this matter are relevant. The first, dated August 13, 1974, which reported on meetings among representatives of EPA, DOE, and ITT, contains the following paragraph:

I also would recommend that we accept the requested modification of footnote f on the bottom of page 5 to add the suggested words " . . . or if thereafter modified by final action consequent upon any appeals from such guidelines." If this is explained this would allow ITT to incorporate any limits that may come out of a court challenge of EPA guidelines, otherwise the mill would be committed to the levels that EPA provocated (sic) the way the footnote finally stands.

The second memorandum, dated August 22, 1974, includes:

Footnote f has been expanded to include the wording, "or as...