Heartland Biogas, LLC v. Bd. of Cnty. Comm'rs of Weld Cnty.
| Decision Date | 30 August 2017 |
| Docket Number | Civil Action No. 16-cv-03183-RM-NYW |
| Parties | HEARTLAND BIOGAS, LLC, Plaintiff, v. BOARD OF COUNTY COMMISSIONERS OF WELD COUNTY, THE, DAVID KREUTZER, HEATHER BARBARE, MICHAEL BANKOFF, and DONALD SNAPP, Defendants. |
| Court | U.S. District Court — District of Colorado |
RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
This matter is before the court on two pending motions:
(1) Defendant Board of County Commissioners of Weld County's (the "Board") Motion to Dismiss the Seconded Amended Complaint and Jury Demand (the "Motion to Dismiss), [#73, filed May 16, 2017]; and
(2) Defendants David Kreutzer, Heather Barbare, Michael Bankoff, and Donald Snapp's (collectively, "Individual Defendants") Motion to Dismiss, [#90, filed June 30, 2017].
The undersigned considers the pending motions pursuant to 28 U.S.C. § 636(b), the Order Referring Case dated January 17, 2017 [#31], and the Memoranda dated May 17, 2017 [#75] and June 30, 2017 [#92]. Upon review of the Motions and related briefing, the entire case file, the applicable case law, and the comments offered at the August 8, 2017 Motions Hearing, this court respectfully RECOMMENDS that the Board's Motions to Dismiss be GRANTED IN PART and DENIED IN PART, and that the Individual Defendants' Motion to Dismiss be GRANTED.
Plaintiff Heartland Biogas, LLC ("Plaintiff" or "Heartland"), a Delaware limited liability company with its principal place of business in San Diego County, California,1 owns and operated a "4,700 MMBtu/day renewable natural gas facility that is roughly equivalent to a 20MW electric plant (the "Facility"), [] located in part of the SE 1/4 of Section 25, Township 4 North, Range 65 West of the 6th P.M. in Weld County, Colorado." [#64 at ¶ 18]. [Id. at ¶19]. The Facility's anaerobic digester also generated Liquid Soil Amendment ("LSA"), a fertilizer substitute, used by local farms, and compost, distributed by local businesses. [Id. at ¶¶ 2, 19]. Heartland contends that the Facility had positive effects on the environment by reducing greenhouse gas emissions and decreasing the amount of waste in landfills, and that it had positive impacts in the community. See [id. at ¶¶ 19-21].
In early 2009, Heartland's predecessor-in-interest, Heartland Renewable Energy, LLC ("Heartland Renewable"), began obtaining the necessary state and local permits and approvals to construct the Facility, submitting an application for a Certificate of Designation ("CD") for the proposed facility to Weld County as well as to the Colorado Department of Public Health and Environment ("CDPHE"). [Id. at ¶¶ 22-23]. The CDPHE recommended that the Board approve the CD in accordance with Colorado's Solid Waste Regulations, 6 Colo. Code Regs. § 1007-2:1.6. [Id. at ¶ 24]. On July 21, 2010, the Board issued a resolution approving the application for a Use by Special Review Permit ("USR-1704") in addition to Heartland Renewable's CD, but conditioned both on the preparation and the recordation of a plat for the Facility. [Id. at ¶¶ 25-26].
On May 1, 2013, the Board issued a Resolution approving a request to modify the original CD to reflect significant changes to the proposed layout of the Facility. [Id. at ¶ 27]. Around this same time, Heartland Renewable engaged in several discussions with the CDPHE and the Colorado Department of Agriculture ("CDA") regarding the Facility's production of "digestate liquor," a liquid containing various nutrients and minerals that could be beneficial to crop growth. [Id. at ¶¶ 28-29]. Allegedly, Heartland Renewable, the CDPHE, and the CDA reached an agreement whereby Heartland Renewable could freely market its digestate liquor as LSA, so long as it complied with the CDA's rules and regulations concerning the testing and labeling of the digestate liquor. See [id. at ¶¶ 30-38, 40-42]. The CDA eventually issued to Heartland Renewable (later issued and re-issued to Plaintiff) Energy Certificate of Registration 9931 for "Digestate Liquor," and approved Plaintiff's LSA labels. See [id. at ¶¶ 38-39, 41]. Plaintiff alleges that the CDA and CDPHE continually affirmed that it could distribute its digestate liquor as LSA, not as a regulated solid waste, and, thus, Plaintiff proceeded with the Facility's development in reliance on these affirmations. [Id. at ¶¶ 40, 42-43].
Between August and December 2013, Heartland Renewable transferred its ownership of the Facility to Plaintiff, and the Board and the CDPHE allegedly recognized Plaintiff as the owner and operator of the Facility for purposes of the CD and USR-1704. [Id. at ¶¶ 44-49]. Specifically, on December 19, 2013, the Board issued a resolution approving an Improvements Agreement (that the Board later entered with Heartland) and accepted collateral for USR-1704from Heartland—the resolution also recognized Plaintiff as Heartland Renewable's successor. [Id. at ¶ 50]. Then, in January 2014, the Board approved the plat for USR-1704, and issued Heartland a building permit for the Facility on March 31, 2014. [Id. at ¶¶ 51-53]. The Weld County Planning Director also approved Heartland's request for a "Minor Amendment to the Site Specific Development Plan MUSR 14-0030," and, because Plaintiff believed it had the requisite assurances to continue development of the Facility from the Board, CDPHE, and CDA, it constructed the Facility and distributed LSA to local farmers for the 2016 growing season. [Id. at ¶¶ 54-61].
However, on about April 27, 2016, during the Facility's incipiency, a Weld County inspector reported that the Facility emitted odor exceeding the "7:1 dilution standard for odor under the Special Review Permit." [Id. at ¶¶ 62-63]. Heartland allegedly undertook extensive measures to mitigate the odor issues, but nevertheless received a compliance advisory from the Air Pollution Control Division ("APCD") of the CDPHE on June 30, 2016. [Id. at ¶¶ 64-66]. Because of this odor violation, the Board held a probable cause hearing on July 11, 2016, to determine whether it had sufficient evidence to proceed with a show cause hearing regarding the April 2016 odor violation. [Id. at ¶ 67]. At the July 2016 probable cause hearing, Plaintiff alleges that the Board received testimony from the Department of Planning Services that the April 2016 violation was the only recorded odor violation, and that it was an abnormal weather day the day the inspector recorded the violation, "resulting in an abnormally high odor." [Id. at ¶¶ 68-69]. Nonetheless, the Board concluded that it had sufficient evidence to hold a show cause hearing regarding this sole violation. [Id. at ¶¶ 70-71]. From here, Heartland's relationship with the Board and the CDPHE began to deteriorate.
For example, Heartland alleges that it began experiencing issues relating to its distribution of LSA. Specifically, on September 8, 2016, Defendant Barbare emailed Heartland and informed it that its LSA was now considered a solid waste that required a discharge permit before Heartland could distribute it to third parties. [Id. at ¶ 72]. Plaintiff alleges that Defendant Barbare's email constituted the first change in the CDPHE's position in the three years since the CDA approved Heartland's distribution of LSA. [Id. at ¶¶ 72-73]. Similarly, Defendants Bankoff and Snapp sent Plaintiff a letter informing it that the CDPHE now considered the LSA regulated solid waste, requiring CDPHE approval prior to its distribution. See [id. at ¶¶ 86-88].
As to the odor violation, the Board held a show cause hearing to determine whether it should revoke USR-1704 on September 19, 2016. [Id. at ¶ 74]. At this hearing, the Board received testimony from the Weld County inspector who relayed that no other violations had occurred since April 2016; however, several community members testified to odors emanating from the Facility. [Id.]. Ultimately, the Board continued the hearing until November 14, 2016, to allow Heartland to pursue further mitigation measures—Heartland alleges that it complied with this directive, as well as the Board's "unauthorized" conditions that the Facility limit its gas production to 60% of its design capacity, limit its receipt of organic materials, and that it conduct at least two community meetings. [Id. at ¶¶ 75-80].
Prior to the November 14, 2016 show cause hearing, Heartland voluntarily entered into a Compliance Order with the APCD to abate the odor issues. [Id. at ¶ 89]. Heartland agreed to invest approximately $3 million in odor mitigation, capture, and control systems. [Id. at ¶¶ 90-91]. Heartland then presented the Compliance Order to the Board at the November 14 show cause hearing, and informed the Board that it had until 2017 to attain its obligations under the order and, if it succeeded, the APCD would take no further action on the April 2016 odorviolation. [Id. at ¶¶ 93-95]. According to Heartland, the Board then offered a myriad of "new alleged violations . . . [that] would be sufficient reason to revoke or suspend Heartland's Special Use Permit," but did so without proper notice. [Id. at ¶¶ 97, 99]. For example, the Board identified an alleged violation that Heartland was operating the Facility without a valid CD, based on Defendant Kreutzer's November 8 letter that Heartland Renewable did not transfer the CD to Plaintiff. See [id. at ¶¶ 81-85, 98]. The Board also raised potential violations of USR-1704's Conditions and Development Standards related to nuisance control. See [id. at ¶ 99]. At the conclusion of the November 14 show cause hearing, the Board re-imposed its September 19 conditions on the Facility, and then issued a resolution concluding that it had sufficient evidence to hold a further show cause hearing on the newly identified...
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