EQT Prod. Co. v. Dep't of Envtl. Prot. of Pa.

• Decision Date: 29 December 2015
• Docket Number: No. 15 MAP 2015,15 MAP 2015
• Citation: 130 A.3d 752
• Parties: EQT PRODUCTION COMPANY, Appellant v. DEPARTMENT OF ENVIRONMENTAL PROTECTION of the Commonwealth of Pennsylvania, Appellee.
• Court: Pennsylvania Supreme Court

130 A.3d 752

EQT PRODUCTION COMPANY, Appellant

v.DEPARTMENT OF ENVIRONMENTAL PROTECTION of the Commonwealth of Pennsylvania, Appellee.

No. 15 MAP 2015

Supreme Court of Pennsylvania.

Argued Nov. 17, 2015.

Decided Dec. 29, 2015.

Robert C. Heim, Esq., Philadelphia, Dechert LLP, for Chamber of Commerce of the United States of America, Amicus Curiae.

Robert L. Byer, Esq., Duane Morris LLP, Leonard Fornella, Esq., Kevin J. Garber, Esq., Pittsburgh, Babst, Calland, Clements & Zomnir, P.C., for EQT Production Company.

Geoffrey James Ayers, Esq., Pennsylvania Department of Environmental Protection, for Department of Environmental Protection of the Commonwealth of Pennsylvania.

BEFORE: SAYLOR, C.J., EAKIN, BAER, TODD, STEVENS, JJ.

OPINION

Chief Justice SAYLOR.

In this direct appeal, we consider whether a company threatened by an administrative agency with ongoing, multi-million-dollar penalties per such agency's interpretation of a statutory regime has the right, immediately, to seek a judicial declaration that the agency's interpretation is erroneous.

Via Pennsylvania's Land Recycling and Environmental Remediation Standards Act,¹ otherwise known as Act 2, the General Assembly has created a scheme for establishing "cleanup standards" applicable to voluntary efforts to remediate environmental contamination for which a person or entity may bear legal responsibility. 35 P.S. § 6026.102(4). Act 2, however, specifies that it does not obviate penalties otherwise authorized by law for pollution of the land, air, or water in the Commonwealth. See id. §§ 6026.102(5), 6026.106(b), 6026.905(b).

Various penalties associated with pollution pertain under the Clean Streams Law.² Substantively, the enactment requires, among other things, that no person or municipality "shall place or permit to be placed, or discharged or permit to flow, or continue to discharge or permit to flow, into any waters of the Commonwealth any industrial wastes," except as otherwise provided in the enactment. 35 P.S. § 691.301 ; see also id. §§ 691.307 (also regulating industrial waste relative to Commonwealth waters), 691.401 (pertaining to "other pollutions"), 691.611 (specifying that it is unlawful, inter alia, to cause water pollution and subjecting offending persons and municipalities to the law's penalty provisions). The penalties include civil assessments of up to $10,000 per day for each separate violation. See 35 P.S. § 691.605(a).

Appellant EQT Production Company ("EPC"), owns and operates natural gas wells in the Commonwealth. In May 2012, the company notified Appellee, the Department of Environmental Protection (the "Department" or "DEP"), that it had discovered leaks in one of its subsurface impoundments containing water that had been contaminated during hydraulic fracturing operations. Subsequently, EPC cleared the site of impaired water and sludge and commenced a formal cleanup process pursuant to Act 2.

The Department took the position that the discharge of contaminated water implicated civil penalties under the Clean Streams Law. In May 2014, the agency tendered to EPC a proposed "Consent Assessment of Civil Penalty," seeking to settle the penalty question via a payment demand of $1,270,871, subsuming approximately $900,000 attending asserted ongoing violations. The claim of continuing violations was based on DEP's position that each day in which contaminants remain in the subsurface soil and passively enter groundwater and/or surface water constitutes a violation, thus implicating serial, aggregating penalties. See, e.g., Complaint for Civil Penalties in DEP v. EQT Prod. Co., No. 2014–140–CP–L, at ¶ 60 ("To the extent that flowback water from Marcellus drilling operations, and/or its constituents, continues to be present in any water of the Commonwealth after the date that this Complaint is filed with the [EHB], the pollution continues, and [EPC] continues to incur liability for additional penalties.").

EPC disputed the Department's approach to the Clean Streams Law, maintaining that: penalties cannot exceed those accruing during the time period in which contaminants actually were discharged from the company's impoundment; all such actual discharges ended in June 2012; and the Act 2 regime controlled the extent of the essential remediation efforts. In an effort to vindicate this position, EPC commenced an original-jurisdiction proceeding in the Commonwealth Court,³ per the Declaratory Judgments Act.⁴ The company asserted that it lacked any viable administrative remedy, while observing that the Department recently also had advanced its continuing-violation interpretation in DEP v. Sunoco Logistics Partners, LP, EHB Dkt. No. 2014–020–CP–R. Additionally, EPC averred that the legal question that it posed was adequately developed and ripe for judicial review; it would suffer direct, immediate, and substantial hardship if review was delayed; and the action would settle controversies otherwise indicative of immediate and inevitable litigation. See generally Commonwealth, Office of the Governor v. Donahue, 626 Pa. 437, 448, 98 A.3d 1223, 1229 (2014) (discussing such prerequisites to judicial redress under the Declaratory Judgments Act).

A few weeks later, the Department lodged a "Complaint for Civil Penalties" in the Environmental Hearing Board (the "Hearing Board" or the "EHB"), seeking more than $4,500,000 from EPC, supplemented by continuing levies of up to $10,000 per day. See Complaint for Civil Penalties in DEP v. EQT Prod. Co., No. 2014–140–CP–L, at 18. DEP also interposed preliminary objections in the declaratory judgment proceeding initiated by EPC, asserting that the Commonwealth Court lacked jurisdiction to entertain the action.

In its preliminary objections, the Department asserted that an adequate administrative remedy was available to EPC before the Hearing Board; indeed, the agency stressed that the subject matter of the company's declaratory judgment action had been put squarely before the EHB both in the proceedings commenced by DEP against EPC and in the Sunoco litigation. In this regard, the Department highlighted that the Declaratory Judgments Act specifically prescribes that declaratory relief is unavailable with respect to proceedings within the exclusive jurisdiction of administrative tribunals. See 42 Pa.C.S. § 7541(c)(2). Furthermore, the agency contended, at the time EPC commenced the declaratory judgment proceedings, no issue had yet matured to the point of an actual controversy. See, e.g., Preliminary Objections in EQT Prod. Co. v. DEP, No. 485 M.D. 2014, at 7 ("As alleged in the Complaint, with respect to [EPC], the status of events between [EPC] and the Department is a rejected settlement offer."). More generally, DEP characterized the declaratory judgment action as an inappropriate "pre-emptive strike." Id. Indeed, according to the Department, any controversy would cease if the EHB decided to reject the agency's continuing-violation interpretation.

In a single-judge opinion and order, the Commonwealth Court sustained DEP's preliminary objections on the basis that exclusive authority to determine the appropriate penalty was reposited in the Hearing Board. See EQT Prod. Co. v. DEP, 114 A.3d 438 (Pa.Cmwlth.2015) (Friedman, S.J.). Initially, the court recognized that the express purpose of the Declaratory Judgments Act is "to settle and to afford relief from uncertainty and insecurity with respect to rights, status, and other legal relations." Id. at 441 (quoting 42 Pa.C.S. § 7541(a) ). Nevertheless, the court explained that the judiciary has interposed prudential prerequisites, including the need to demonstrate an interest that is direct, immediate, and substantial, as well as to establish the existence of an actual controversy related to invasion or threatened invasion of the petitioner's legal rights. See id. (quoting Waslow v. DOE, 984 A.2d 575, 580 (Pa.Cmwlth.2009) ); accord Donahue, 626 Pa. at 448, 98 A.3d at 1229. The court found this controversy threshold to be lacking, given that DEP merely expresses legal opinions when it makes penalty recommendations; whereas, it is the Hearing Board that ultimately determines and imposes the appropriate penalties. See EQT Prod. Co., 114 A.3d at 441 (citing Westinghouse Elec. Corp. v. DEP, 705 A.2d 1349, 1353 (Pa.Cmwlth.1998) ).

The Commonwealth Court also distinguished Donahue, in which this Court found a declaratory judgment action to have been proper, as an instance in which an agency had actually imposed its interpretation of a statute upon other government agencies. See id. In this regard, the court again stressed that DEP is powerless to impose its interpretation of the Clean Streams Law upon EPC. See id. As such, the court deemed EPC's allegation of harm to be "merely speculative." Id.

In its present direct appeal, EPC characterizes the Department's reading of the Clean Streams Law as "unlawful and unprecedented," Brief for Appellant at 10, and maintains that it has direct, substantial, and immediate consequences for the company. In this regard, EPC asserts that the continuing-violation interpretation:

(i) imposes ongoing, indefinite civil penalty liability for the mere presence of constituents in waters of the Commonwealth, and (ii) forces EPC to continue to spend significant additional money to clean up the site, well beyond what is legally required under Act 2, or face massive civil penalties for an indefinite period of time as long as any detectable amount of a substance remains present in waters of the Commonwealth.

Brief for Appellant at 9; see also id. ("Regardless of any remediation efforts, the Department's interpretation places EPC in a world of constantly accumulating penalties with no legal or administrative remedy."). As such, EPC strongly differs with the Commonwealth Court's characterization of the harm that it faces as speculative. The company also explains that its complaint is centered on discrete legal questions, primarily, whether the mere presence of contaminants in the...