Commonwealth Oil Refining Co., Inc., Matter of

• Decision Date: 25 November 1986
• Docket Number: 85-2828,Nos. 85-2827,s. 85-2827
• Citation: 805 F.2d 1175
• Parties: , 15 Collier Bankr.Cas.2d 1387, 15 Bankr.Ct.Dec. 688, Bankr. L. Rep. P 71,542, 17 Envtl. L. Rep. 20,407 In the Matter of COMMONWEALTH OIL REFINING CO., INC., Debtor. COMMONWEALTH OIL REFINING COMPANY, INC., et al., Appellants, v. UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, Appellee. In the Matter of COMMONWEALTH OIL REFINING CO., INC., Debtor. OFFICIAL COMMITTEE OF UNSECURED CREDITORS, et al., Appellants, v. UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1175

805 F.2d 1175

25 ERC 1748, 15 Collier Bankr.Cas.2d 1387,

15 Bankr.Ct.Dec. 688,

Bankr. L. Rep. P 71,542, 17 Envtl. L. Rep. 20,407

In the Matter of COMMONWEALTH OIL REFINING CO., INC., Debtor.

COMMONWEALTH OIL REFINING COMPANY, INC., et al., Appellants, v. UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, Appellee.

In the Matter of COMMONWEALTH OIL REFINING CO., INC., Debtor.

OFFICIAL COMMITTEE OF UNSECURED CREDITORS, et al., Appellants, v. UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, Appellee.

Nos. 85-2827, 85-2828.

United States Court of Appeals Fifth Circuit.

Nov. 25, 1986.

John P. Campbell, Curtis, Mallet-Prevost, Colt & Mosle, New York City, Matthews & Branscomb, Patrick H. Autry, San Antonio, Tex., for Official Committee.

Robert T. Brousseau, Sander L. Esserman, Stutzman & Bromberg, Dallas, Tex., for Commonwealth.

J. Carol Williams, John Cermak, Land & Nat. Resources Div., U.S. Dept. of Justice, Margaret B. Silver, David C. Shilton, Washington, D.C., Carol A. Casazza, U.S. E.P.A., New York City, Helen M. Eversberg, U.S. Atty., San Antonio, Tex., for U.S. E.P.A.

Appeals from the United States District Court for the Western District of Texas.

Before GEE, RANDALL and DAVIS, Circuit Judges.

RANDALL, Circuit Judge:

Appellants, Commonwealth Oil Refining Company, Inc. (CORCO), the debtor-in-possession, the Committee of Unsecured Creditors, and the Indenture Trustee, appeal from the district court's order affirming the bankruptcy court's decision that the United States Environmental Protection Agency's (EPA) administrative action to bring CORCO into compliance with federal and state environmental laws is exempt from the automatic stay provision of the Bankruptcy Reform Act of 1978 (Bankruptcy Code), 11 U.S.C. Sec. 362(a), and should not be stayed under Sec. 105 of the Bankruptcy Code. We affirm.

I.

This case presents the question of whether a debtor, who has filed a petition under Chapter 11 of the Bankruptcy Code, can be forced to comply with federal and state environmental laws designed to protect the public health and safety, before that debtor has filed its plan of reorganization.

Congress enacted the Resource Conservation and Recovery Act of 1976 (RCRA), 42 U.S.C. Secs. 6901-6991, to regulate the treatment, storage, and disposal of hazardous wastes by monitoring wastes from their creation until their permanent disposal. The objective of the RCRA is "to promote the protection of health and the environment and to conserve valuable material and energy resources." 42 U.S.C. Sec. 6902. Section 3005 of the RCRA, 42 U.S.C. Sec. 6925, requires that facilities which treat, store, or dispose of hazardous waste obtain a permit from the EPA or from an authorized state. Such permits are to be issued only upon a determination that the facility is in compliance with the Sec. 3004 hazardous waste management standards, see 42 U.S.C. Sec. 6924 and 40 C.F.R. Part 264, and the Sec. 3005 hazardous waste permit requirements, see 42 U.S.C. Sec. 6925 and 40 C.F.R. Part 270.

Congress recognized that the EPA would not be able to issue permits to all hazardous waste management facilities before the permit program became effective. Therefore, it provided in Sec. 3005(e) of the RCRA, 42 U.S.C. Sec. 6925(e), that certain facilities would be treated as having been issued a permit until final administrative disposition of their permit application could be made. A facility obtains this "interim status" if it meets the following three requirements set out in Sec. 3005: (1) that the facility was in existence on November 19, 1980 or on the effective date of statutory or regulatory changes that render the facility subject to the permit requirement; (2) that the facility has complied with the preliminary notification requirements of RCRA Sec. 3010(a), 42 U.S.C. Sec. 6930(a); and (3) that the facility filed a permit application conforming with EPA regulations. ¹

The EPA has promulgated regulations setting out the requirements for the permit application which must be filed as a prerequisite to interim status. See 40 C.F.R. Secs. 270.1-.2, 270.10-.73. The regulations require that an existing facility first submit Part A of its permit application. See 40 C.F.R. Secs. 270.1(b), 270.10(e). Part A requires general descriptive information about the facility, such as its location and the processes the facility uses in the treatment, storage, and disposal of hazardous waste. See 40 C.F.R. Sec. 270.13.

For the interim status facilities, the actual permitting process begins when the EPA requests that the facility submit the second part of the permit application, known as "Part B." See 40 C.F.R. Secs. 270.1(b), 270.14. Part B consists of specific information concerning the individual site and the operation of the facility that will indicate compliance with the technical standards and form the basis of the decision to issue or deny the permit and establish site-specific permit conditions. See 40 C.F.R. Sec. 270.14. ² The EPA has the authority to call in Part B at any time. The facility owner has six months from the date of the EPA's request to submit the technical information required by Part B. 40 C.F.R. Sec. 270.1(b).

Failure to furnish the information necessary for final permitting within the time provided is grounds for the termination of interim status. 40 C.F.R. Sec. 270.10(e)(5). Additionally, under the 1984 amendments to the RCRA, each "land disposal facility" operating under interim status prior to November 8, 1984, must submit a Part B permit application and a certification of compliance with all applicable groundwater monitoring and financial responsibility requirements by November 8, 1985, in order to retain interim status after that date. 42 U.S.C. Sec. 6925(e)(2). Facilities that lose their eligibility to operate under interim status must cease acceptance of hazardous waste for treatment, storage, or disposal, and must commence closure activities. See generally 40 C.F.R. Secs. 265.112(c), 265.113. No later than 15 days after a facility loses its interim status, it must submit a closure plan to the Regional Administrator. 40 C.F.R. Sec. 265.112(c).

On October 14, 1982, the administrator of the EPA authorized Puerto Rico to operate Phase I of the hazardous waste program in lieu of the federal program, all as contemplated by Sec. 3006(b) of the RCRA, 42 U.S.C. Sec. 6926. ³ To implement Phase I, Puerto Rico has promulgated regulations. ⁴ Although Puerto Rico operates its own Phase I program, Sec. 3008 of the RCRA, 42 U.S.C. Sec. 6928, authorizes the EPA to enforce the provisions of Puerto Rico's program.

On August 13, 1980, CORCO advised the EPA that it conducts activities at the facility involving "hazardous waste," as defined in Sec. 1004(5) of the RCRA, 42 U.S.C. Sec. 6903. On November 18, 1980, CORCO submitted a completed Part A, thereby obtaining interim status. CORCO engaged in its refinery operations until March 3, 1982. Upon ceasing refinery operations, CORCO rented its storage tanks to various industrial companies for storage of fuel oil, gas, and liquified natural gas. On April 12, 1984, the EPA called in CORCO's Part B application and set October 12, 1984, as a deadline for filing. CORCO requested and received an extension to December 7, 1984. On July 11, 1984, CORCO filed a petition under Chapter 11 of the Bankruptcy Code. On December 11, 1984, CORCO informed the EPA that it would not submit its Part B application or a closure plan.

The instant law suit began when CORCO filed a motion for an order determining the applicability of the automatic stay provision of the Bankruptcy Code, 11 U.S.C. Sec. 362(a)(1), to an impending enforcement action by the EPA under Sec. 3008 of the RCRA, 42 U.S.C. Sec. 6928. In the alternative, CORCO moved for an order staying the EPA's enforcement action under 11 U.S.C. Sec. 105. The EPA opposed both motions.

After a hearing during which CORCO's vice-president acknowledged that CORCO had failed to install a groundwater monitoring system and had not conducted groundwater testing as required by Puerto Rico's regulations, and that CORCO had never filed a Part B application, the bankruptcy court, on May 17, 1985, determined that the EPA's impending enforcement action was not subject to the automatic stay provision of 11 U.S.C. Sec. 362(a)(1) and that no stay should issue under 11 U.S.C. Sec. 105(a) because CORCO had failed to show a likelihood of success on the merits. See 58 B.R. 608 (Bankr.W.D.Tex.1985).

On July 1, 1985, the EPA issued an administrative complaint against CORCO, citing it for violations of both the RCRA and the PRPPEA, and the regulations promulgated under both statutes. Among those violations cited were CORCO's failure to submit Part B or a closure plan and its failure to install, operate, and maintain a groundwater monitoring system and groundwater sampling and analysis. The EPA issued a compliance order against CORCO providing as follows: (1) that CORCO shall within ninety days from the date of the complaint make a decision to file either a closure plan within thirty calendar days from decision or a Part B permit application by November 8, 1985; and (2) that CORCO shall within thirty days from the date of the complaint cease to act as a treatment, storage, and disposal facility, unless CORCO elects to file a Part B permit application and complies with certain provisions of Puerto Rico's regulations.

The EPA then moved for leave to file an amended administrative complaint to reflect that CORCO had lost its interim status as of November 8, 1985, by operation of the 1984 amendment to the RCRA, 42 U.S.C. Sec. 6925(e)(2). Leave to file the amended administrative complaint was granted. The amended complaint alleged the same basic factual allegations as those alleged in the original administrative complaint, but added a cause of action. The amended complaint alleges that CORCO is in violation of Sec. 3005(e)(2) of the RCRA, 42 U.S.C. Sec. 6925(e)(2). The EPA...