Southern Union Company v. Rhode Island Department of Environmental Management, C.A. No. PC 07-2056 (R.I. Super 7/13/2007)

• Court: Rhode Island Superior Court
• Writing for the Court: Indeglia
• Decision Date: 13 July 2007
• Docket Number: C.A. No. PC 07-2056
• Citation: Southern Union Company v. Rhode Island Department of Environmental Management, C.A. No. PC 07-2056 (R.I. Super 7/13/2007), C.A. No. PC 07-2056 (R.I. Super. Jul 13, 2007)
• Parties: SOUTHERN UNION COMPANY v. RHODE ISLAND DEPARTMENT OF ENVIRONMENTAL MANAGEMENT

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SOUTHERN UNION COMPANY v. RHODE ISLAND DEPARTMENT OF ENVIRONMENTAL MANAGEMENT

C.A. No. PC 07-2056

Superior Court of Rhode Island,

Providence, S.C.

Filed: July 13, 2007.

DECISION

INDEGLIA, J.

Southern Union Company ("Southern" or "Plaintiff") has filed the herein matter praying this Court exercise jurisdiction pursuant to G.L. 1956 § 42-35-7 and § 9-301-. Southern, in its two-count complaint, seeks a declaratory judgment that, under the Department of Environmental Management's ("DEM" or "Defendant") rules and regulations, it is entitled to choose the method of remediation of a contaminated site, and that the DEM's hearing board, the Administrative Adjudication Division ("AAD"), does not have jurisdiction, pursuant to the Industrial Property Remediation and Reuse Act ("IPRRA"), § 23-19.14-1 et seq., to determine liability for the contamination of a site. DEM has moved for dismissal, pursuant to Rhode Island Superior Court Rules of Civil Procedure Rules 12(b)(1) and 12(b)(6), arguing that this Court does not have jurisdiction as alleged by Southern. Alternatively, Defendants argue, Southern has not exhausted all of its administrative remedies, and the matter properly belongs before the AAD on all issues. Jurisdiction is pursuant to § 42-35-7 and § 9-30-1 and Super. R. Civ. P. Rules 12(b)(1) and (6).

I Facts and Travel

Southern is a Delaware corporation with its principal offices in Houston, Texas. DEM is a Rhode Island state agency. The underlying facts of this case involve the long sought after cleanup of the residential area in and around Bay Street in Tiverton, Rhode Island. On or about September 30, 2002, as part of the Mount Hope Bay Sewer Project in Tiverton, Rhode Island, Starwood Tiverton LLC, a private residential developer, informed DEM of allegedly cyanide-based contaminated soil in the Bay Street area, identifiable by its blue color. Based on DEM's investigation of the contaminated site, including the sampling and testing of subsurface material, it concluded that the contamination occurred as a result of the dumping of manufactured gas plant waste. Further investigation led DEM to identify the Fall River Gas Plant, located within one mile of the Bay Street area, as the source of the contamination. The Town of Tiverton, Rhode Island, as owner of the contaminated site, and Starwood Tiverton LLC ("Starwood"), as operator of the construction project on the land, were each identified as a "Responsible Party." A "Responsible Party" is defined in both IPRRA and DEM's rules and regulations. See §§ 23-19.14-6 to 7; Rules and Regulations for the Investigation and Remediation of Hazardous Material Releases ("Remedial Regulations") § 3.60, 12 180 CRIR 001-15 to 17. According to both definitions, DEM holds responsible, among other parties, the title owner of the contaminated site, and "operator" of the contaminated site, where "operator" is defined as the entity "responsible for the operation of the activities" at the contaminated site. See id.; see also § 23-19.14-3(f) (definition of "operator" according to IPRRA); Remedial Regulations § 3.44, 12 180 CRIR 001-13 (definition of "operator" according to DEM's rules and regulations).

Pursuant to the Remedial Regulations, on October 8, 2002, DEM issued Letters of Responsibility ("LOR") to both the Town of Tiverton and Starwood, identifying their status as "Responsible Parties" for the compilation and stockpiling of contaminated soil in the Bay Street area, first noticed by area residents on or about August 16, 2002. As is customary in the LORs, "Responsible Parties" are required to conduct tests and submit plans in order to create an emergency, short-term resolution, as well as provide long-term remediation to the contaminated site, referred to as a "Site Investigation" within DEM's Remedial Regulations. The Town of Tiverton retained EA Engineering ("EA") to conduct a subsurface investigation of the allegedly contaminated site. EA uncovered widespread contamination, with the soil containing toxic levels of lead, arsenic, and cyanide, among other dangerous chemical compounds.

Following this discovery, a public meeting was held in Tiverton, Rhode Island. There, town officials, through resident testimony and the presentation of certain documents, concluded that the contamination was due in large part to the dumping of hazardous waste as landfill by the Fall River Gas Company during the 1960s and 1970s. Thereafter, on March 17, 2003, DEM sent a LOR to Southern (d/b/a New England Gas Co.), as alleged owner of the former Fall River Gas Company, identifying a duty to conduct an investigation and, if necessary, proper remediation of the land.

As it did with the Town of Tiverton and Starwood, DEM ordered Southern to then submit a Site Investigation Work Plan ("SIWP") by April 10, 2003 "outlining [Southern's] plans to further investigate" the contaminated site. See March 17 LOR to Southern at 2. Southern was then to obtain permission from land owners to enter and investigate the contaminated site, culminating in a Site Investigation Report ("SIR"). The SIR was required to contain a checklist created by DEM and proposed remedial alternatives. Id. Despite denying, as it does now, all liability for the Bay Street contamination, Southern retained an environmental consultant to investigate the contaminated site in order to create the required SIWP to investigate 68 private properties in the contaminated area. By June of 2003, Southern's investigation included 75 properties. On or about October 31, 2003, Southern submitted its first SIR to DEM. The report accounted for approximately 67¹ of the 92 separate properties within the contaminated site. Southern's engineering company stated that approximately 7 of the 75 property owners did not provide access for testing. Later that same year, on December 5, 2003, Southern submitted four individual SIRs for 9 (of the 67) properties where Southern concluded other past owners had contributed to the contamination. By August 25, 2004, Southern had submitted another SIR for the original 67 properties (Phase II), which also included an additional 25 new properties which were not in the first SIR in October 2003. The investigation of those properties and the Phase II SIR carried into 2005, culminating, after a request and grant of an extension by DEM, in a deadline of August 15, 2005 for Southern to have completed its SIR for all properties. Southern submitted an SIR, which DEM rejected.

On November 23, 2005, DEM sent a Notice of Intent to Enforce ("NOIE") to Southern, stating that the most recent SIR, along with its supplement, was insufficient, and could only be cured by completing three actions:

"1. Submit a minimum of three (3) Remedial Alternatives for remediating all soil contamination in the Bay Street Neighborhood Study area to meet RIDEM's Method 1 Residential Direct Exposure Criteria as outlined in the Remediation Regulations on or before January 4, 2006 2. Submit any outstanding investigation sampling results and laboratory analysis, completed after the August 15, 2005 SIR submittal, for the remaining properties by January 4, 2006;

3. Conduct Public Notice to all residents of the Bay Street Neighborhood Study Area within 14 days of receipt of RIDEM's Program Letter." November 23, 2005 NOIE to Southern at 4-5.

In fact, Southern had attached a letter to its August 15, 2005 SIR, informing DEM that there was not enough time to complete the report and that the submission of remedial alternatives was premature at that time. Thereafter, on December 14, 2005, Southern responded to the NOIE by alleging that Southern had still not been adjudged liable for any or all of the contamination; that DEM was disregarding its own rules and regulations; and that DEM had not provided Southern with enough time to comply with the LOR and create the SIR. Finally, in September 2006, DEM issued a Notice of Violation ("NOV"), later amended, to Southern for its failure to comply with DEM's requests allegedly pursuant to IPRRA and DEM's Remedial Regulations. The NOV assessed penalties of over $250,000, and $1,000 per day following the issuance of the NOV until full compliance. On October 16, 2006, as is its right pursuant to the Remedial Regulations, Southern filed a hearing request with the AAD, challenging the NOV issued against it. That case is currently in the discovery phase, pending before the AAD.

The underlying dispute in this matter concerns the most recent SIR submitted to DEM. In its August 15, 2005 SIR, Southern announced that it intended to perform a Method 3 process for determining remedial objectives for the contaminated site, which included performing a Method 3 Human Health Risk Assessment. DEM has, since the August 15, 2005 SIR, rejected all documents submitted by Southern relevant to a Method 3 plan, and ordered Southern to perform a Method 1 remedial process. Within the Remedial Regulations, DEM has provided three types of remedial processes, by which a responsible party determines the appropriate remedial action for a particular contaminated site. See Remedial Regulations § 2.02, 12 180 CRIR 001-6 to 7. The relevant portion of § 2.02 is as follows:

"The [DEM] has facilitated the remedial process by establishing three methods for determining protective remedial objectives for the hazardous substances found to exist in soil and/or groundwater at any given contaminated site. Method 1 is a series of tables establishing conservative risk-based cleanup levels for commonly encountered hazardous substances. Method 2 is a process by which the performing party can supplement or modify the Method 1 clean up levels to reflect site-specific circumstances. Method 3 corresponds to site-specific human health and/or ecological risk assessments which may be used to assessing baseline risk and subsequently determining appropriate remedial objectives for all impacted data." Id.

Essentially, Method 1 is carried out by a "Responsible Par...