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EQT Production Co. v. Department of Environmental Protection of Commonwealth of Pennsylvania

Commonwealth Court of Pennsylvania

January 11, 2017

EQT Production Company, Petitioner
Department of Environmental Protection of the Commonwealth of Pennsylvania, Respondent

          Argued: November 15, 2016



          P. KEVIN BROBSON, Judge


         Before the Court for disposition is an Application for Summary Relief in this original jurisdiction matter. Petitioner EQT Production Company (EQT) seeks relief under the Declaratory Judgments Act[1] with respect to the Department of Environmental Protection's (Department) interpretation of certain penalty provisions under The Clean Streams Law.[2] For the reasons set forth below, we grant EQT's Application for Summary Relief.[3]

          II. BACKGROUND

         For purposes of this Application for Summary Relief, the undisputed material facts are as follows. EQT owns and operates natural gas wells in Duncan Township on a gas well pad known as "Phoenix Pad S." EQT built a subgrade impoundment (Pad S Impoundment), which included an impervious synthetic membrane liner to contain the impaired water generated from hydraulic fracturing (i.e., fracking). EQT concluded that it was likely that the Pad S Impoundment was leaking into the subsurface beneath the impoundment.

         On May 30, 2012, EQT notified the Department of the leak. On June 11, 2012, within twelve days after notifying the Department, the Pad S Impoundment had been completely emptied of the impaired water and sludge. By June 15, 2012, EQT patched the liner and installed sumps and trenches at five locations downgradient from the Pad S Impoundment to collect and/or intercept groundwater that may be affected by the release. EQT also then entered into a formal cleanup process under the Land Recycling and Environmental Remediation Standards Act, [4] commonly referred to as Act 2. On September 27, 2012, EQT excavated the affected soils. EQT attained the Act 2 remediation standards for the soil beneath the Pad S Impoundment and continued its efforts to attain the Act 2 standards for the groundwater.

         On May 9, 2014, the Department proposed a Consent Assessment of Civil Penalty for the leak, alleging violations of Sections 301, 307, and 401 of The Clean Streams Law.[5] The majority of the Department's $1, 270, 871 proposed settlement offer was based on "new, continuing, and ongoing impacts to the multiple waters of the Commonwealth" after the initial discharge from the Pad S Impoundment.

         On September 19, 2014, EQT filed a Complaint in Action for Declaratory Judgment with this Court, seeking a declaration that the calculation of civil penalties under The Clean Streams Law by the Department was unlawful, to which the Department responded by filing preliminary objections. On

         October 7, 2014, the Department also filed a Complaint for Civil Penalties with the Environmental Hearing Board (Board). On February 20, 2015, this Court sustained preliminary objections by the Department and dismissed EQT's declaratory judgment action filed in this Court's original jurisdiction, reasoning that the harm was speculative because the Board had not yet made its penalty determination. EQT Prod. Co. v. Dep't of Envtl. Prot. of Com., 114 A.3d 438 (Pa. Cmwlth.) (EQT I), rev'd, 130 A.3d 752 (Pa. 2015).

         After this Court dismissed the Complaint in Action for Declaratory Judgment in EQT I, EQT appealed to the Supreme Court. On December 29, 2015, the Supreme Court reversed and remanded the matter for further proceedings. EQT Prod. Co. v. Dep't of Envtl. Prot., 130 A.3d 752 (Pa. 2015) (EQT II). The Supreme Court concluded that the potential exposure to EQT, particularly given the lack of an administrative remedy for challenging the Department's interpretation when EQT filed this action, "was sufficiently direct, immediate, and substantial to create a case or controversy justifying pre-enforcement judicial review via a declaratory judgment proceeding." Id. at 758-59.

         Following remand in this matter, on February 19, 2016, EQT filed with this Court an Application for Interim Relief in the Form of a Stay of the action before the Board for the penalty determination. EQT argued that the resolution of the pending legal question regarding the validity of the Department's interpretation of Sections 301, 307, and 401 of The Clean Streams Law bore directly on the Board's decision for EQT's penalty amount and required a stay.

         By order dated April 8, 2016, this Court denied the Application for Interim Relief. EQT Prod. Co. v. Dep't of Envtl. Prot. (Pa. Cmwlth., No. 485 M.D. 2014, filed April 8, 2016) (Colins, J.) (EQT III). The Court reasoned that a hearing before the Board was still necessary, because EQT will still be subject to penalties for the original discharge of fracking water and EQT had failed to show that a decision in this case would significantly alter the evidence at the Board hearing. The Court also reasoned that a stay in the Board's proceeding would seriously and indefinitely delay the Department's penalty complaint. Finally, this Court noted, "[i]f EQT wishes to obtain a resolution of the legal issue in this action from this Court prior to the [Board] hearing, it should file an application for summary relief in time to allow the [C]ourt to rule prior to the [Board] hearing and request that the matter be expedited." Id., slip op. at 5.

         On May 4, 2016, EQT filed with this Court its Application for Summary Relief, challenging the Department's interpretation of Sections 301, 307, and 401 of The Clean Streams Law. In support of its application, EQT attached as an exhibit a response by the Department to a discovery request by EQT filed in the matter before the Board, where the Department elaborated on the penalty amount that the Department is currently seeking from EQT. The Department provided the following answer regarding the calculation of the penalty for the leak by EQT:

Penalties for continuing violations were assessed under The Clean Streams Law for the continuing pollution to groundwater. Assuming the violations began on 4/30/2012 (the first date on which the Department has data showing the presence of pollution in groundwater), the continuing violations penalties began to accrue on the next day, 5/1/2012, up to and including the point at which the calculation was completed on 9/25/2014, a period of 878 days. The Department assessed continuing violations penalties at a rate of $5, 000.00 per day (half the statutory maximum rate) for 878 days, for a total of $4, 390, 000.00. When continuing violations penalties are calculated for all five of the existing discharges at the site, at $10, 000.00 per day, for Sections 301/307 and 401 of The Clean Streams Law, the proposed assessment through 9/25/2014 is $81, 760, 000.00. Note that while groundwater continues to be polluted, continuing violations penalties continue to accrue beyond 9/25/2014.

(Reproduced Record (R.R.) at 283a.)[6]


         Declaratory judgment actions within the Court's original jurisdiction fall within the scope of Chapter 15 of the Pennsylvania Rules of Appellate Procedure. See Pa. R.A.P. 1501(a)(3), 1532(b). "Summary relief under Pa. R.A.P. 1532(b) is similar to the relief envisioned by the rules of civil procedure governing summary judgment." Brittain v. Beard, 974 A.2d 479, 484 (Pa. 2009). "'An application for summary relief may be granted if a party's right to judgment is clear and no material issues of fact are in dispute.'" Jubelirer v. Rendell, 953 A.2d 514, 521 (Pa. 2008) (quoting Calloway v. Pa. Bd. of Prob. & Parole, 857 A.2d 218, 220 n.3 (Pa. Cmwlth. 2004)).

         The 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, and [the Declaratory Judgments Act] is to be liberally construed and administered." 42 Pa. C.S. § 7541(a). An action brought under the

         Declaratory Judgments Act "'must allege an interest by the party seeking relief which is direct, substantial and present, . . . and must demonstrate the existence of an actual controversy related to the invasion or threatened invasion of one's legal rights.'" Bowen v. Mount Joy Twp., 644 A.2d 818, 821 (Pa. Cmwlth.) (quoting Pa. Institutional Health Servs., Inc. v. Dep't of Corr., 631 A.2d 767, 771 (Pa. Cmwlth.), aff'd, 640 A.2d 413 (Pa. 1994)), appeal denied, 652 A.2d 1326 (Pa. 1994). Granting or denying an action for a declaratory judgment is committed to the sound discretion of a court of original jurisdiction. Gulnac by Gulnac v. S. Butler Cnty. Sch. Dist., 587 A.2d 699, 701 (Pa. 1991).


         EQT challenges the Department's interpretation of Sections 301, 307, and 401 of The Clean Streams Law.[7] The Department interprets the above sections of The Clean Streams Law as authorizing a penalty under a continuing violation theory for every day that industrial waste or a substance resulting in pollution remains in a water of the Commonwealth following the initial release of the waste or substance. EQT, by contrast, argues that a violation only occurs under Sections 301, 307, or 401 on the days that the industrial waste or substance resulting in pollution is discharged or enters from an area outside of the waters of the Commonwealth (e.g., a factory, industrial site, railcar, etc.) into a water of the Commonwealth. Once the discharge or entry stops, no additional violations occur even if the previously released regulated substance continues to be present in the water. EQT essentially argues that the Department is reading language into these provisions to support its position. EQT further argues that these sections must be construed narrowly as penalty provisions. EQT also argues that prior cases from this Court and prior adjudications by the Board support its interpretation. Finally, EQT argues that the Department's interpretations would nullify Pennsylvania's Act 2 program for remediation.

         In defense of its interpretation, the Department argues that under the statutory language of Sections 301, 307, and 401 of The Clean Streams Law, a violation occurs when industrial waste or a substance resulting in pollution flows from one water of the Commonwealth into another. The Department argues, alternatively, that if its interpretation is not supported by the clear language of the statute, then it is supported by the rules of statutory construction. Namely, the Department argues that these provisions are remedial, rather than punitive, and further the legislative intent of The Clean Streams Law. The Department also argues that the cases cited by EQT are distinguishable. The Department also avers that its interpretation is reasonable and, therefore, should be afforded deference. Finally, the Department argues that its interpretation is consistent with the Act 2 remediation scheme in that it only further incentivizes prompt cleanup after a violation of The Clean Streams Law.

         A. Statutory Framework

         1. The Clean Streams Law

         The General Assembly's overarching intent in The Clean Streams Law is to protect the waters of the Commonwealth from pollution. See Section 4 of The Clean Streams Law, 35 P.S. § 691.4. Section 1 of The Clean Streams Law, 35 P.S. § 691.1, defines "waters of the Commonwealth" as follows:

"Waters of the Commonwealth" shall be construed to include any and all rivers, streams, creeks, rivulets, impoundments, ditches, water courses, storm sewers, lakes, dammed water, ponds, springs and all other bodies or channels of conveyance of surface and underground water, or parts thereof, whether natural or artificial, within or on the boundaries of this Commonwealth.

         In furtherance of the overarching goal, The Clean Streams Law is organized to address particular types of ...

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