State ex rel. Ohio Attorney Gen. v. Shelly Holding Co.

• Decision Date: 06 December 2012
• Docket Number: No. 2011–0252.,2011–0252.
• Citation: 984 N.E.2d 996,135 Ohio St.3d 65
• Parties: The STATE EX REL. OHIO ATTORNEY GENERAL, Appellee, v. SHELLY HOLDING COMPANY et al.; Shelly Materials, Inc., et al., Appellants.
• Court: Ohio Supreme Court

135 Ohio St.3d 65

984 N.E.2d 996

The STATE EX REL. OHIO ATTORNEY GENERAL, Appellee,

v.SHELLY HOLDING COMPANY et al.; Shelly Materials, Inc., et al., Appellants.

No. 2011–0252.

Supreme Court of Ohio.

Submitted Nov. 16, 2011.

Decided Dec. 6, 2012.

Michael DeWine, Attorney General, Alexandra T. Schimmer, Solicitor General, and Gregg H. Bachmann and Gary L. Pasheilich, Assistant Attorneys General, for appellee.

Bott Law Group, L.L.C., and April R. Bott; Chester, Wilcox & Saxbe, L.L.P., and Sarah Morrison, Columbus, for appellants Shelly Materials, Inc. and Allied Corporation.

Brady, Coyle & Schmidt, Ltd., and Brian P. Barger, Toledo, urging reversal for amici curiae Ohio Chamber of Commerce, Ohio Aggregates and Industrial Minerals Association, Flexible Pavements, Inc., Ohio Coal Association, Ohio Contractors Association, and Associated General Contractors of Ohio.

CUPP, J.

[Ohio St.3d 65]{¶ 1} This appeal asks us to determine the proper method of calculating the civil penalty to be levied against an industrial facility for noncompliance with the [Ohio St.3d 66]terms of its air-pollution-control permit. The appellate court concluded that according to the terms of the Shelly Materials, Inc., permits, the penalty is to be calculated from the initial date of noncompliance until the facility demonstrates that it no longer violates the permits.

{¶ 2} We conclude that the appellate court reached the proper conclusion in this matter, and therefore, we affirm the judgment of the court of appeals.

I. Factual and Procedural Background

a. Shelly Company

{¶ 3} The Shelly Company is an Ohio corporation engaged in the business of surfacing roads. It owns several subsidiaries, including appellants Shelly Materials, Inc., and Allied Corporation (collectively, “Shelly”).¹ Shelly owns multiple hot-mix asphalt facilities in Ohio that support its road-surfacing activities.

{¶ 4} The hot-mix asphalt facilities release pollutants into the air, such as particulate matter, carbon monoxide, nitrogen oxides, sulfur dioxide, and volatile organic compounds. The facilities are regulated by the Ohio Environmental Protection Agency (“Ohio EPA”) pursuant to air-pollution-control permits issued to Shelly.

b. The Air–Pollution–Control Permits

{¶ 5} The air-pollution-control permits issued to Shelly have a variety of requirements with which Shelly must comply, including terms that specify the emission limits for the applicable types of pollutants, set operational restrictions, and establish monitoring, recordkeeping, and reporting requirements.

{¶ 6} The permits also prescribe the testing method each Shelly facility must use to establish its compliance with the permit's emission limit for each pollutant. The prescribed testing method is set forth at Part II, Section (E) of the permits, and specifies:

E. Testing Requirements

1. Compliance with the emission limitations specified in Section A.I of these terms and conditions shall be determined in accordance with the following methods:

a. Emissions Limitation:

[Ohio St.3d 67]* * *

Applicable Compliance Method:

The permittee shall conduct, or have conducted, emission testing for this emissions unit in accordance with the following requirements:

* * *

iv. The test(s) shall be conducted while the emissions unit is operating at or near its maximum capacity, burning on-spec oil and using virgin materials, unless otherwise specified or approved by the Central District Office.

Each air-pollution-control permit further provides that the Shelly permit holder “shall remain in full compliance with all applicable State laws and regulations and the terms and conditions of this permit.”

{¶ 7} In 2002 and 2006, five of Shelly's hot-mix asphalt facilities performed the facility testing as required by their permits. During the facility testing, these five hot-mix asphalt facilities emitted pollutants in excess of the allowable emission limit set forth in the permits and, in doing so, failed to comply with the maximum-capacity stack-test (“stack-test”) requirement of the permit.²

c. Trial Court Decision

{¶ 8} In July 2007, the state of Ohio, by and through the attorney general, filed suit for injunctive relief and civil penalties. The complaint presented 20 claims for relief. In the complaint, the state alleged that the companies had violated state law and Ohio's federally approved plan for the implementation, maintenance, and enforcement of air-quality standards as required by the federal Clean Air Act, when it

installed and thereafter operated new sources of air pollution without obtaining appropriate permits, modified and thereafter operated existing sources of air pollution without obtaining appropriate permits, exceeded air pollutant emission limitations, burned fuel containing excessive levels of mercury, lead and other hazardous chemical constituents, and violated the terms and conditions of applicable air pollution permits.

[Ohio St.3d 68]The state did not allege any violations, or seek to enforce any provision, of the federal act.

{¶ 9} The state's seventh claim for relief alleged that in 2002 and 2006, the Shelly facilities emitted pollutants in excess of the allowable emission limit set forth in the permits and, in doing so, failed to comply with the stack-test requirement. The state alleged that the Shelly facilities violated R.C. 3704.05(C), which provides that “no person who is the holder of a permit * * * shall violate any of the permit's terms or conditions.”

{¶ 10} Shelly entered into stipulations with the state in which Shelly admitted liability to various claims in the complaint and acknowledged that when it conducted the stack testing, its facilities emitted pollutants in excess of the allowable amounts set forth in the permits and the facilities violated their respective permits. After a bench trial, the court issued a decision finding for the state on some, but not all, claims for relief. On the state's seventh claim for relief, the only claim relevant here, the court acknowledged that Shelly did not dispute that on the days of stack testing in which the emissions exceeded the limits set forth in the permits, the permits were violated. The court accepted Shelly's stipulations as findings of fact.

{¶ 11} In determining the appropriate penalty, the trial court acknowledged that the question remaining to be decided was whether, for purposes of calculating the penalty, the violation should be deemed to have occurred only on the day the facility failed the stack tests and emitted in excess of the permitted emission limitation or whether the violation should be presumed to be continuing until a new stack test demonstrated compliance with the permit.

{¶ 12} The trial court concluded that the violation occurred only on the day on which the facility failed the stack tests. The court accepted Shelly's argument that the conditions under which Shelly conducted the required stack tests did not represent the facilities' normal operating conditions and that it operated its facilities within the permitted emission limits. Therefore, the court concluded, it was not reasonable to infer that the violation continued for every day thereafter until a subsequentemission test demonstrated compliance. The court assessed a civil penalty of $4,500 on the seventh claim for relief and a total of $350,123.52 on all claims.

d. Appellate Court Decision

{¶ 13} The state appealed and challenged the manner in which the trial court had calculated the civil penalties. The state asserted that the penalty should be assessed for each day a facility was out of compliance with its permit, which would be from the day it failed the stack testing and continuing until the facility [Ohio St.3d 69]demonstrated that it no longer failed the stack test as required by the permit. Under the state's rationale, the time period for calculating the penalty commenced on the day that the stack test was conducted and showed that the facility exceeded the allowable emission limit of its permit. The last penalty day, according to the state, could be (1) the day on which the facility conducts a subsequent maximum-capacity test and the facility emissions are within the allowable limits of the permit, (2) the day on which the Ohio EPA issues a new permit for the facility with revised emission limits that are the same as or greater than the emission released on the day when the facility conducted its initial emission test, or (3) the day on which the facility could show that it would pass a subsequently conducted maximum-capacity test because intervening facility modifications were made.

{¶ 14} The appellate court sustained the state's assignment of error in this regard and remanded the matter to the trial court for recalculation of the fine, in its discretion. 191 Ohio App.3d 421, 2010-Ohio-6526, 946 N.E.2d 295, ¶ 66.³

{¶ 15} Thereafter, we accepted Shelly's appeal under our discretionary jurisdiction. 128 Ohio St.3d 1481, 2011-Ohio-2055, 946 N.E.2d 240.

II. Air–Pollution–Control Legislation

{¶ 16} The principal federal legislation in this matter is the Clean Air Act, 42 U.S.C. 7401 et seq., which is intended “to protect and enhance the quality of the Nation's air resources” and to encourage pollution prevention through reasonable federal, state, and local governmental actions. 42 U.S.C. 7401(b)(1) and (c). Pursuant to the authority of the Clean Air Act, the administrator of the United States Environmental Protection Agency (“EPA”) establishes national standards for air quality and certain types of air pollutants. 42 U.S.C. 7409(a)(2) and (b)(1); 40 C.F.R. 50.1 through 50.17. The act also requires that the states adopt and submit to the administrator a plan for specifying how these air-quality standards will be achieved and maintained. 42 U.S.C. 7407(a) and 7410(a). The act anticipates that states will achieve the air-quality standards through use permits, enforcement, and emission monitoring. 42 U.S.C. 7410(a). Enforcement and penalty-calculation...