The State Ex Rel. Ohio Attorney Gen. v. Shelly Holding Co.

• Decision Date: 30 December 2010
• Docket Number: No. 09AP–938.,09AP–938.
• Citation: 946 N.E.2d 295,191 Ohio App.3d 421
• Parties: The STATE ex rel. OHIO ATTORNEY GENERAL, Appellant,v.SHELLY HOLDING CO. et al., Appellees.
• Court: Ohio Court of Appeals

191 Ohio App.3d 421

946 N.E.2d 295

2010 -Ohio- 6526

The STATE ex rel. OHIO ATTORNEY GENERAL, Appellant,

v.SHELLY HOLDING CO. et al., Appellees.

No. 09AP–938.

Court of Appeals of Ohio, Tenth District, Franklin County.

Decided Dec. 30, 2010.

Richard Cordray, Attorney General, and Gregg H. Bachmann and Gary L. Pasheilich, Assistant Attorneys General, for appellant.Bott Law Group, L.L.C., April R. Bott, and Sarah H. Herbert; Chester, Willcox & Saxbe, L.L.P., and Sarah Morrison, Columbus, for appellees.PEGGY L. BRYANT, Judge.

[Ohio App.3d 423] {¶ 1} Plaintiff-appellant, the state of Ohio, through its attorney general, appeals from a judgment of the Franklin County Court of Common Pleas concluding, in four specific instances, that defendants-appellees did not violate provisions of Ohio's environmental laws and regulations, defendants were exempt from the relevant law, or defendants' violations were limited to the day of testing. [Ohio App.3d 424] Because the evidence and applicable law do not support the trial court's determinations in those four instances, we reverse in part.

I. Facts and Procedural History

{¶ 2} At the request of the Director of Environmental Protection, the state of Ohio, through its Attorney General, filed an action pursuant to R.C. 3704.06(B) and 3734.13(C) seeking injunctive relief and civil penalties against defendants-appellees, Shelly Holding Company, Shelly Company, Shelly Material, Inc., Allied Corporation, Inc., and Stoneco, Inc., for violations of Ohio's air-quality standards. The trial court dismissed Shelly Holding Company and Shelly Company as defendants; remaining as defendants are Shelly Materials, Inc., Allied Corporation, and Stoneco, Inc. (collectively, “Shelly”).

{¶ 3} Shelly operates businesses in approximately 75 of Ohio's 88 counties; its operations include limestone, concrete production, and rail and water sites, as well as 44 facilities for hot-mix asphalt. The state alleged that Shelly had violated Ohio's environmental laws as described in the complaint's 20 separate counts directed to 27 asphalt plants, 30 portable generators, and one liquid-asphalt terminal, all of which Shelly owned, operated, or both. Shelly stipulated to liability on 32 of the claims in 12 counts of the complaint. After a bench trial, the trial court found Shelly liable on 13 of the 20 counts and assessed a civil penalty in the amount of $350,123.52 against Shelly. The state appeals.

II. Assignments of Error

{¶ 4} The scope of the action in the trial court was huge, amounting to 2,100 pages of trial transcript. Of the myriad of issues determined in the trial court, Shelly assigns no error; the state assigns only four errors:

[1.] The trial court erred by interpreting “potential to emit” in a manner that fails to reflect applicable law, which, in the absence of a federally enforceable permit, requires a stationary source's potential emissions be calculated based on the source's maximum capacity to generate emissions.

[2.] The trial court erred in finding that fugitive emission sources of air pollution at plant # 24 were exempt from permit to install requirements even though those sources were installed at a time when they did not qualify for an exemption.

[3.] The trial court erred in finding that defendants did not violate Ohio's permit to install rules even though the defendants were “operators” of the fugitive emissions sources at plant # 40 as defined by Ohio Adm.Code 3745–15–01.

[4.] The trial court erred by limiting emissions violations to the date of the nonconforming emissions test results.

[Ohio App.3d 425] III. Standard of Review

{¶ 5} The state contends that more than one standard of review is involved on appeal, including error as a matter of law in some of the trial court's rulings and, in other instances, issues invoking the manifest weight of the evidence. Shelly similarly acknowledges that the issues involved are matters of fact and law. Accordingly, after determining the applicable law, we must assess whether the evidence before the trial court supports the trial court's decision under that law. In examining the facts, we will determine whether some competent, credible evidence going to all the essential elements of the case supports the trial court's decision. If so, we will not reverse the trial court's judgment as being against the manifest weight of the evidence. C.E. Morris Co. v. Foley Constr. Co. (1978), 54 Ohio St.2d 279, 8 O.O.3d 261, 376 N.E.2d 578, syllabus.IV. First Assignment of Error—Potential to Emit

{¶ 6} The state's first assignment of error contends that the trial court erred when it interpreted “potential to emit” in a manner that fails to reflect applicable law. The state's first assignment of error thus concerns the method of calculating an air-pollution source's potential emissions, a calculation that forms part of the permitting process.

A. The Law

{¶ 7} The primary purpose of the Clean Air Act is “to protect and enhance the quality of the Nation's air resources so as to promote the public health and welfare and the productive capacity of its population.” Section 7401(B)(1), Title 42, U.S.Code. To achieve these goals, Congress instructed the United States Environmental Protection Agency (“USEPA”) to develop limits on various pollutants, which limits are known as National Ambient Air–Quality Standards (“air-quality standards”). Section 7409, Title 42, U.S.Code. 7409. The Clean Air Act requires states to create plans, known as “state implementation plans” (“state plans”), to implement, maintain, and enhance the air-quality standards. Section 7410(a)(1). A state plan is charged with bringing areas into compliance with the air-quality standards. Once the USEPA has approved a state's plan, the state is authorized to administer it. The USEPA approves a state plan if it is both adopted after reasonable notice and hearing and is substantively adequate to attain and maintain air-quality standards. Section 7410(a)(2).

B. Types of Permits

{¶ 8} In accord with federal parameters, R.C. 3704.03(E) creates a system where regulated entities may apply for a permit to discharge air pollutants. [Ohio App.3d 426] Once a permit is received, the owners or operators of the air-pollution source are required to self-report on a regular schedule pursuant to the permit terms. Although the pertinent law changed beginning June 30, 2008, the law applicable to the facts here separated permits for air-emissions sources into two categories. One category requires an installation permit, referred to as a permit to install or “PTI,” before construction of an air-pollution source begins. A PTI contains emission restrictions based on a source's potential to emit. The other is an operating permit, either a Title V permit for larger sources or a permit to operate (“PTO”) for smaller sources, that allows operation of a source on an ongoing basis. A Title V permit covers an entire facility and all the air-pollution sources at the facility, while a PTO is needed for each individual air-pollution source.

C. The Trial Court's Decision

{¶ 9} The state alleged that Shelly violated applicable law when its facilities emitted air contaminants without Shelly's first obtaining the necessary PTIs. The trial court recognized that the central issue in resolving the state's contentions and determining the appropriate fine was how to define the term “potential to emit.” The court noted that Ohio Adm.Code 3745–31–01(VVVV) defines it as “the maximum capacity of an emissions unit or stationary source to emit an air pollutant under its physical and operational design.” (Emphasis added.) The trial court, however, aptly recognized that a plant may have “physical or operational limitation[s] on the capacity of the emissions unit or stationary source to emit an air pollutant, * * * including air pollution control equipment and restrictions on hours of operation or on the type or amount of material combusted, stored or processed.” (Emphasis added.)

{¶ 10} As the trial court noted, “[t]he State focuses on the language ‘maximum capacity,’ ” calculating the “emissions from a source by assuming that the source is being operated 24 hours a day, 365 days a year.” “Conversely,” the court stated, “Shelly makes the same calculation by using the number of hours that source is operating. These restrictions on hours of operation are included in the various permit applications, the purpose of which is to avoid the Title V threshold.” The trial court acknowledged that the state would respond that “until the operating permit with the restricted hours of operation is approved, the [potential to emit] must be calculated assuming operation is 24 hours per day, 365 days a year.” The trial court decided that “[i]f the State's conclusion regarding the formula for calculating [potential to emit] is correct, then by definition, most if not all of the Fifth Claim must be decided for the State.”

{¶ 11} Determining that the definition of “potential to emit” in Section 52.21(b)(4), Title 40, C.F.R. is the same as Ohio law, the trial court applied it to this case, noting that both parties used the same formula to calculate potential to [Ohio App.3d 427] emit. As the court recognized, resolution of the parties' differences lies in whether limitation in operations may be incorporated into the PTI formula or whether, absent limits that are only federally enforceable, potential to emit must be calculated at worst-case conditions, which is operating at 24 hours per day, 365 days per year, or 8,760 hours per year.

{¶ 12} Relying on Alabama Power Co. v. Costle (C.A.D.C., 1979), 636 F.2d 323, and United States v. Louisiana–Pacific Corp. (D.Colo.1988), 682 F.Supp. 1141, to interpret the phrase “potential to emit” under the Clean Air Act, the trial court determined that “potential to emit” contemplates the maximum emission that can be generated operating the source as it was intended to be operated. The trial court concluded that the state's...