Summary

The Pennsylvania Commonwealth Court has ruled that once an unpermitted discharge ceases, violations under The Clean Streams Law cease, even when pollution continues to persist in waters of the Commonwealth.  While this places a significant cap on civil penalty assessment cases, it raises the potential for alternative enforcement methods.
    
The Pennsylvania Department of Environmental Protection frequently seeks to assess penalties under a “continuing violation theory,” with a separate penalty assessed for each day that a violation continues.  On January 11, 2017, the Commonwealth Court issued a groundbreaking decision limiting DEP’s use of the continuing violation theory in assessing civil penalties pursuant to Pennsylvania’s Clean Streams Law.

The Court’s decision in EQT Production Company v. Department of Environmental Protection,¹ available online here, centered around a subsurface leak from a subgrade impoundment used by EQT to contain water associated with a hydraulic fracturing operation. DEP asserted that it was authorized under The Clean Streams Law to assess a penalty not only for each day that pollution was released from the impoundment, but also for every day, post-release, that pollution remained in waters of the Commonwealth until such time as it was abated in accordance with a state-approved remediation standard.  Conversely, EQT argued that a violation only occurs on the days that pollution is discharged, and that once the discharge stops, no additional violation can occur, even if the pollution-causing substance continues to be present in waters of the Commonwealth.

The Court held that DEP’s interpretation was not supported by the law.  The Court found that DEP’s “interpretation would result in potentially limitless continuing violations for a single unpermitted release of industrial waste while any of the waste remained in any water of the Commonwealth ….”  (Emphasis in original.)   The Court stated that “[t]o rule otherwise would be tantamount to punishing a polluter indefinitely, or at least for as long as the initially-released industrial waste remains in the waters of the Commonwealth, for the same violation—i.e., the initial release.”  Importantly, the Court held that a violation occurs when there is an unpermitted release of waste into waters of the Commonwealth, and once that conduct ceases, “violations cease.”  The Court stated that the particular statutory provision at issue does not authorize “the imposition of ongoing penalties for the continuing presence of an industrial waste in a waterway of the Commonwealth following its initial entry into the waterways of the Commonwealth.”  

There are a number of significant takeaways from this decision:

• Many regulated entities are impacted. The Clean Streams Law has broad applicability across countless industries, including oil and gas, construction and mining, in addition to its application to municipal and private sewage facilities.  While the Court’s analysis was limited to the “industrial waste” provision of The Clean Streams Law, 35 P.S. § 691.301, the other provisions of the law that deal with other types of pollution contain the same or similar statutory language as that analyzed by the Court.
• There is a cap on DEP penalty demands.  While the Court’s decision is limited to instances where a discharge has ceased but pollution continues to persist, in such instances, the ruling deflates what has become an often gigantic portion of a penalty demand – and one that DEP has used to anchor high settlement offers.  It is not uncommon for DEP to inform an alleged violator about how high a penalty could be if it were to seek continuing violations. In fact, DEP did that here, asserting that its $4.5 million penalty complaint against EQT should be viewed relative to the possibility that it could have sought an assessment in excess of $81 million.
• DEP may take alternative enforcement approaches.  In the absence of being able to assess higher penalties, in the most extreme cases, DEP may elect to exercise its authority under The Clean Streams Law to impose a permit bar or other order under Section 610 of the Clean Streams Law, 35 P.S. § 691.610, pending the abatement of a pollution incident. DEP could also seek to assess penalties under other laws, such as the Solid Waste Management Act, that also prohibit pollution incidents. 
• A reality check on strict liability.  The Court held that in assessing penalties, violations “require some culpable action or inaction by the polluter.”  This provides a meaningful counterbalance to the strict cleanup liability that Pennsylvania courts have otherwise found to exist under The Clean Streams Law. 
• A limitation on regulatory deference. The Court noted that deference is not given to an agency’s interpretation of a statute when its interpretation would frustrate legislative intent or is used to justify a litigation position.

DEP has announced that it will appeal the ruling to the Pennsylvania Supreme Court.

1.   --- A.3d ---, No. 485 M.D. 2014 (Pa. Cmwlth. Jan. 11, 2017).