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Mkp Enterprises, Inc v. Underground Storage Tank Indemnification Board

February 9, 2012


The opinion of the court was delivered by: P. Kevin Brobson, Judge

Argued: December 13, 2011



Petitioner MKP Enterprises, Inc. (hereafter EPI)*fn1 petitions for review of an order of the Underground Storage Tank Indemnification Board (Board), which rejected exceptions EPI filed to a hearing officer's proposed report and recommendation and adopted the proposed report. The Board, in adopting the proposed report, rejected EPI's claim for benefits from the Underground Storage Tank Indemnification Fund (the Fund).*fn2 We affirm the order of the Board.


A. Triggering Event

EPI is in the business of buying, selling, storing, and distributing refined petroleum-based products, including gasoline and diesel fuel. (Stipulated Finding of Fact (S.F.F.) No. 2; Reproduced Record (R.R.) at 3a.) EPI has an underground storage tank (UST) system located at its main facility in the City of Erie. (S.F.F. No. 3; R.R. at 3a.) On November 6, 2007, EPI began to have three USTs, containing either unleaded gasoline or diesel gasoline, excavated. (S.F.F. No. 4-5; R.R. at 3a.) During the excavation process, "[s]oil [c]ontamination was found . . . [which] was believed to be [the] result of leaking around the spill buckets." (S.F.F. Exhibit A; R.R. at 18a.) The three USTs were removed and replaced on November 7, 2007. (S.F.F. No. 5; R.R. at 3a.)

B. Fund's Denial of EPI's Claim

On April 14, 2008, EPI's Operations Manager, Michael Callahan, reported the claim to the Fund by telephone call. (S.F.F. No. 6; R.R. at 4a; S.F.F. Exhibit A; R.R. at 14a.) On May 19, 2008, Ron Moore, of ICF International, the Fund's third-party administrator (Fund Administrator), advised EPI by letter that its claim was denied because EPI failed to notify the Fund within sixty (60) days after EPI had confirmed the release of the contaminating materials. (S.F.F. No. 9; R.R. at 4a; S.F.F. Exhibit C; R.R. at 156a.) Mr. Callahan, on behalf of EPI, sent a letter to the Fund on June 12, 2008, seeking to challenge the decision to deny EPI's claim. (S.F.F. No. 10; R.R. at 4a; S.F.F. Exhibit D; R.R. at 159a.) On August 25, 2008, Steven Harman, the Executive Director of the Fund, sent a letter to EPI, denying EPI's claim on the same grounds as the Fund Administrator. (S.F.F. No. 11; R.R. at 4a; S.F.F. Exhibit E; R.R. at 164a-66a.)

C. Proceedings Before the Board

1. Administrative Hearing Before the Presiding Officer

On October 1, 2008, EPI filed a request with the Board for an administrative hearing. (R.R. at 197a-98a.) The Board appointed James A.

Johnson as Presiding Officer (PO) for the hearing. (Record Item D.) Ultimately, the parties filed stipulations of fact and pre-hearing statements. The parties agreed that the PO could decide the merits of the case on the basis of the stipulated record. The PO issued factual findings and concluded that EPI was ineligible for coverage under the Act, because EPI failed to notify the Fund of the contamination within sixty (60) days of confirmation of the release of the contaminants.

2. Board's Adjudication and Order

EPI filed objections with the Board, seeking to challenge the PO's Recommended Report. The Board issued an adjudication and order, adopting the PO's Recommended Report. In that adjudication, the Board rendered the following narrative summary of the key factual elements of the case:

Michael Callahan . . . was present on November 6 when the excavation began, as was James Chestnut, the president of [Professional Petroleum Services, Inc. (PPI)], who supervised the tank removal for [PPI].

During the excavation, [PPI] personnel, including Mr. Chestnut, encountered what they believed to be extensive contamination. The contamination was evidenced by the following: (a) severe odor and staining of the soil; (b) very obvious pyramid-shaped staining from each of the spill buckets above the tanks that ran down the side of the tanks; (c) at least two of the spill buckets were broken and appeared to be leaking and in one of them, the bottom was broken out; (d) the company's vapor detection meter indicated petroleum contamination; and (e) impacted soil which appeared to extend beyond the limits of what was excavated.

Because of the discovered contamination, Mr. Callahan was called to the excavation pit and observed the condition of the tank pit. Mr. Callahan had a brief conversation with Mr. Chestnut about the contamination. According to Mr. Callahan, Mr. Chestnut "said that he did find some contamination" and told Mr. Callahan of his conclusion that a release had occurred. Mr. Chestnut also informed Mr. Callahan that [PPI] was required to report a release to the Pennsylvania Department of Environmental Protection ("DEP") and that [PPI] would get some confirmatory soil samples to determine the extent of impacted soil for the purpose of DEP's evaluation of whether to order a site assessment/characterization.

[PPI] reported the release to Susan Frey of DEP by telephone on the same day of the excavation, November 6, 2007. Consistent with her usual practice, Ms. Frey . . . documented the report on a form including information about who notified her of the claim, the owner and a description of what was reported. Ms. Frey distributed copies of the completed one-page storage system report form to appropriate DEP personnel and also faxed a copy to [the Fund], as was her usual practice. Transmitting a report form to [the Fund] is not required, and not all regional DEP offices send the forms; forms received by [the Fund] generally are retained for 60 days in the event a claim is reported corresponding to DEP's report form.

A Water Quality Specialist at DEP, Arthur Meade, received the storage system report form shortly after it was prepared, and on November 7, 2007, Mr. Meade visited the site. From his inspection, Mr. Meade observed what he considered to be a reportable release as defined by storage tank regulations. On November 27, 2007, DEP received a Notification of Reportable Release form ("NORR") from [EPI] and [PPI]. The NORR bore Mr. Callahan's original signature dated November 9, 2007 and an undated signature of [PPI]'s representative. Check marks on the second page of the NORR indicated that contamination by unleaded gasoline and diesel fuel products was confirmed for the site.

[PPI] obtained soil samples at the site on November 7 and November 28, 2007. [PPI] prepared DEP's Storage Tank Closure Report form ("Closure Report") for each tank on December 13 and 14, 2007, although the results from the sampling were not yet back from the laboratory. The Closure Report form noted obvious contamination attributable to each excavated tank appearing to be "from damage or malfunctioning spill buckets." [PPI] sent the signature page for section one of the Closure Report to Mr. Callahan via facsimile on December 26, 2007 and Mr. Callahan returned it via facsimile the following day after signing and certifying that the information in the completed Closure Report was true, accurate and complete. [PPI] sent the completed Closure Report to DEP on or about January 9, 2008 and [EPI] received the completed Closure Report the same day. (Board Adjudication and Order at 2-3 (emphasis added).) The Board rejected EPI's exceptions to the Proposed Report and adopted the PO's Proposed Report and Recommendation in full.

D. Petition for Review

EPI petitioned this Court for review of the Board's adjudication and order,*fn3 raising twelve issues. One issue EPI raises is whether certain factual findings are supported by substantial evidence. EPI also raises a number of issues relating to the regulatory notification requirement that is at the heart of this appeal, 25 Pa. Code § 977.34 (hereafter Section 977.34). That regulation provides, with regard to claim reporting, that "[t]he participant shall notify the Fund within 60 days after the confirmation of a release under [25 Pa. Code] §§ 245.304 and 245.305 (relating to investigation of suspected releases; and reporting releases)."*fn4

With regard to this regulation and the Board's decision, EPI asserts that the Board erred in concluding that EPI did not satisfy Section 977.34's reporting requirements either on November 6, 2007 (the date of the excavation of the USTs) or April 14, 2008 (the date Mr. Callahan telephoned the Fund regarding EPI's claim relating to the contamination). EPI also argues alternatively that its April 14, 2008 telephone claim satisfied the notification requirements of Section 977.34 in light of the reference in Section 977.34 to 25 Pa. Code § 245.304. Also, EPI contends that the Board applied an incorrect legal standard in determining the "notification accrual date" under Section 977.34. In the same vein, EPI asserts that the allegedly new legal standard the Board applied to determine the "notification accrual date" under Section 977.34 constitutes de facto rule making and thereby violates the law commonly known as the Commonwealth Documents Law.*fn5

Additionally, EPI argues that the notification requirement contained in Section 977.34 and the Board's construction of that regulation are not consistent with the enabling legislation of the Act. Also, with regard to Section 977.34, EPI contends that federal law preempts this regulation. EPI also argues that the application of Section 977.34 violated EPI's constitutional rights based upon the failure of the regulation to identify the office and/or agency an operator must notify regarding contamination.*fn6

EPI makes three additional arguments: (1) whether the Board erred by failing to consider the effect of regulations relating to mandatory sampling reflected in 25 Pa. Code § 245.304 and permanent tank closures addressed in 25 Pa. Code § 245.453; (2) whether the Board erred in not permitting EPI to submit its claim nunc pro tunc; and (3) whether the Board's decision and holding in In re Harrisburg Jet Center, UT04-08-025 (2005), applies in this case.


A. Relevant Statutory and Regulatory Provisions

The Act provides for the "establishment of a regulatory scheme for the storage of regulated substances in new and existing storage tanks and to provide liability for damages sustained . . . as a result of release and to require prompt cleanup and removal of such pollution and released regulated substance." Section 101 of the Act, 35 P.S. § 6021.101. Section 704 of the Act, 35 P.S. § 6021.704, provides for the creation of the Fund and that the purpose of the Fund is for "making payments to owners, operators and certified tank installers of underground storage tanks who incur liability for taking corrective action or for bodily injury or property damage caused by a sudden or nonsudden release from underground storage tanks."

Section 705(b) of the Act, 35 P.S. § 6021.705(b), relating to claims, provides the Board with the authority to "establish procedures by which owners, operators and certified tank installers may make claims for costs estimated or incurred in taking corrective action . . . caused by a sudden or nonsudden release from underground storage tanks." Of additional significance to this matter, Section 706 of the Act, 35 P.S. § 6021.706, relating to eligibility of claimants, provides that "in order to receive a payment from the Fund, a claimant shall meet the following eligibility requirements: (1) The claimant is the owner . . . of the tank which is the subject of the claim . . . [and] (6) [a]additional eligibility requirements which the [B]oard may adopt by regulation."

Pursuant to its authority under Section 705(b)(6) of the Act, the Board promulgated regulations relating to the procedure by which an owner or operator may obtain payment for "corrective action" in response to a release of regulated substances. As suggested above, one of the regulations the Board adopted is Section 977.34-the sixty (60)-day notification requirement. The eligibility regulation the Board promulgated, 25 Pa Code § 977.31(7), specifically requires "participants"*fn7 to meet the notification requirement of Section 977.34. Section 977.34 requires notification to the Fund within sixty (60) days of a "confirmation" of a release under regulations promulgated pursuant to the Act and the Clean Streams Law,*fn8 25 Pa Code §§ 245.304 and .305.

Chapter 245 of Title 25 of the Pennsylvania Code pertains to the administration of the storage tank and spill prevention program. Subchapter D of Chapter 245, in which Sections .304 and .305 are found, pertains to the "corrective action process for owners and operators of storage tanks and storage tank facilities and other responsible parties." 25 Pa. Code §§ 245.301-.314. As stated in Section 245.301, the purpose of Subchapter D is to establish "release reporting, release confirmation and corrective action requirements for owners and operators of storage tanks and storage tank facilities." (Emphasis added.)

Subsection 304 of Subchapter D specifically refers to the methods by which an owner or operator of a storage tank may confirm the release of a regulated substance. We quote that provision in pertinent part below:

Investigation of suspected releases.

(a) The owner or operator of storage tanks . . . shall initiate and complete an investigation of an indication of a release of a regulated substance as soon as practicable, but no later than 7 days after the indication of a release.

(b) The investigation required by subsection (a) shall include a sufficient number of the procedures outlined in this subsection and be sufficiently detailed to confirm whether a release of a regulated substance has occurred. The owner or operator shall investigate the indication of a release by one or more of the following procedures:

(1) A check of product dispensing or other similar equipment.

(2) A check of release detection monitoring devices.

(3) A check of inventory records to detect discrepancies.

(4) A visual inspection of the storage tank or the area immediately ...

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