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Borg-warner Corp. v. Mauzy

OPINION FILED OCTOBER 8, 1981.

BORG-WARNER CORPORATION, PLAINTIFF-APPELLEE,

v.

MICHAEL M. MAUZY, DIRECTOR, ILLINOIS ENVIRONMENTAL PROTECTION AGENCY, ET AL., DEFENDANTS-APPELLANTS.



APPEAL from the Circuit Court of La Salle County; the Hon. LEONARD HOFFMAN, Judge, presiding.

MR. JUSTICE ALLOY DELIVERED THE OPINION OF THE COURT:

This is an appeal by the Illinois Environmental Protection Agency (hereinafter the Illinois EPA) from the circuit court's action in granting injunctive relief and entering declaratory judgment for Borg-Warner Corporation. The court ordered the Illinois EPA to grant Borg-Warner an adjudicatory hearing on its application for renewal of National Pollution Discharge Elimination System Permit (hereinafter NPDES). It entered a permanent injunction forbidding the EPA from enforcing the 1980 permit until after the EPA had provided Borg-Warner with an adjudicatory hearing, in accordance with the procedures for contested cases set forth in the Illinois Administrative Procedure Act (Ill. Rev. Stat. 1977, ch. 127, par. 1001 et seq.). The Illinois EPA appeals from the circuit court's actions, arguing that no adjudicatory hearing is required prior to its determination on the issuance of a NPDES permit. The EPA asserts the court erred in concluding that a hearing was required at that time, and it asserts that error was committed in the granting of summary judgment in the declaratory action and in the imposition of temporary and mandatory injunctions against the EPA.

The record discloses the following pertinent facts. In October 1974 Borg-Warner was issued a NPDES permit from the United States EPA for its Linmar plant. The Linmar plant makes plastic pellets. Water used in the production process is thereafter treated in an activated sludge treatment plant, prior to discharge into the Illinois River. In order to discharge the water into the river, Borg-Warner was required, by Federal legislation, to obtain an NPDES permit. The permit, issued in 1974, set specified conditions concerning discharge points, quantities and concentrations of materials discharged, monitoring techniques, and reporting requirements. The permit was issued for a five-year period, with expiration set for October 31, 1979. It specified that application for reissuance would have to be made within 180 days preceding the date for expiration. Within the time limit for reapplication, as set in the original permit, Borg-Warner submitted its application for reissuance of the NPDES permit. The application, made on May 2, 1979, was submitted to the Illinois EPA, who by that time had been given authority to administer the NPDES permit system in Illinois. The Illinois EPA took over administration of the NPDES program in Illinois on October 23, 1977, after approval of its procedures was given by the U.S. EPA and after appropriate filing with the Secretary of State's office.

The Illinois EPA issued a permit to Borg-Warner on May 21, 1980, which by its terms was to become effective on June 21, 1980. Prior to issuance of the permit, the agency had submitted, via required public notice, three proposed draft permits. Borg-Warner had submitted objections and extensive comments to each of the proposed draft permits. The objections addressed certain changes in the conditions of the permit from the conditions attached to the original 1974 permit issued by the U.S. EPA. The changed conditions on the permit included new, different, and more stringent limitations on the quantity and concentration of certain materials discharged into the river. In addition to its objections filed in response to each submitted draft permit, Borg-Warner also each time requested an adjudicatory hearing, under provisions of the Illinois Administrative Procedure Act (Ill. Rev. Stat. 1977, ch. 127, par. 1016) (hereinafter APA), which they alleged to be applicable. No adjudicatory hearing was held by the Illinois EPA and the permit, with modified conditions, was issued, as indicated, on May 2, 1980.

Borg-Warner thereafter filed an appeal of the contested conditions of the permit with the Illinois Pollution Control Board, as provided for in the PCB's Rules and Regulations. An adjudicatory hearing was scheduled by the PCB to review the contested permit conditions pertaining to the NPDES permit issued by the EPA. Borg-Warner also sought a stay of any enforcement of the contested conditions, pending resolution of this circuit court action, filed at the same time, which sought a determination of the issue as to whether Borg-Warner was entitled to an adjudicatory hearing, under the Illinois APA, prior to any EPA action on the permit application. Pursuant to the request for a stay of the enforcement of those conditions, the PCB stayed the enforcement and effectiveness of the contested permit conditions until resolution of the case before the circuit court.

The circuit court action, now before us on this appeal, sought a declaratory judgment that the Illinois EPA was required to give Borg-Warner an adjudicatory hearing before making its determination to issue another permit, with modified conditions. Borg-Warner also sought injunctive relief preventing any enforcement of the contested conditions of the permit until after the circuit court had decided the issues. The circuit court eventually entered declaratory judgment for Borg-Warner, declaring that the Illinois EPA was required to give Borg-Warner an adjudicatory hearing before imposing the modified conditions of the NPDES permit. The court entered summary judgment in the case and granted Borg-Warner its request for a permanent injunction against any enforcement of the contested conditions, until after the Illinois EPA had granted Borg-Warner the required adjudicatory hearing. From these decisions and judgments the Illinois EPA appeals.

Before focusing upon section 16 of the Illinois APA (Ill. Rev. Stat. 1977, ch. 127, par. 1016) which is at the center of the dispute in this case, a preliminary issue is raised concerning application of the provisions of the Illinois APA to the NPDES permit process. Section 2 of the APA (Ill. Rev. Stat. 1977, ch. 127, par. 1002) states:

"Applicability. This Act applies to every agency as defined herein. Beginning January 1, 1978 in case of conflict between the provisions of this Act and the Act creating or conferring power on an agency, this Act shall control. However if an agency has existing procedures on July 1, 1977 specifically for contested cases or licensing those existing provisions control, except that this exception respecting contested cases and licensing does not apply if the Act creating or conferring power on the agency adopts by express reference the provision of this Act * * *."

The Illinois EPA argues that it had existing procedures for NPDES licensing and for contested cases on July 1, 1977, and therefore, under the above stated statutory exception, the APA's provisions do not apply. Specifically, the EPA asserts that the PCB's Rules and Regulations on Water Pollution, being Rules 901-916, provided for NPDES licensing and that they were applicable prior to July 1, 1977. We disagree.

While those rules, which govern the NPDES permit system, were adopted by the PCB in 1974, by their own terms they were not to become effective until "the date when the Board files with the Secretary of State a copy of the letter approving the Illinois NPDES program by the Administrator of the United States Environmental Protection Agency pursuant to Section 402(b) of the FWPCA." It is undisputed that the letter of approval, predicatory to effectiveness of the Rules, was not filed with the Secretary of State until October 1977. Thus, as of July 1, 1977, the pertinent date for exceptions to the applicability of the APA, there were no existing procedures for NPDES licensing. Until October of 1977, the U.S. EPA, not the Illinois EPA, made NPDES permit decisions. Since there existed no effective Illinois procedures for handling NPDES permits as of July 1, 1977, the provisions of the Illinois APA are applicable.

The next issue, and the central one on this appeal, is whether section 16 of the APA (Ill. Rev. Stat. 1977, ch. 127, par. 1016) requires that the EPA provide Borg-Warner with an adjudicatory hearing prior to its issuance of a renewed NPDES permit which contains significant changes in the conditions imposed upon permittee Borg-Warner. Section 16 states:

"Licenses. (a) When any licensing is required by law to be preceded by notice and opportunity for hearing, the provisions of this Act concerning contested cases shall apply.

(b) When a licensee has made timely and sufficient application for the renewal of a license or a new license with reference to any activity of a continuing nature, the existing license shall continue in full force and effect until the final agency decision on the application has been made unless a later date is fixed by order of a reviewing court.

(c) No agency shall revoke, suspend, annul, withdraw, amend materially, or refuse to renew any valid license without first giving written notice to the licensee of the facts or conduct upon which the agency will rely to support its proposed action, and an opportunity for hearing in accordance with the provisions of this Act concerning contested cases. At any such hearing, the licensee shall have the right to show compliance with all lawful requirements for the retention, or continuation or renewal of the license. If, however, the agency finds that the public interest, safety or welfare imperatively requires emergency action, and if the agency incorporates a finding to that effect ...


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