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06/28/96 ESG WATTS v. ILLINOIS POLLUTION CONTROL

June 28, 1996

ESG WATTS, INC., PETITIONER,
v.
THE ILLINOIS POLLUTION CONTROL BOARD AND PEOPLE OF THE STATE OF ILLINOIS, RESPONDENTS.



Administrative Review of the Illinois Pollution Control Board. No. 94-127.

As Corrected August 30, 1996.

Honorable Robert W. Cook, P.j., Honorable Robert J. Steigmann, J., Honorable James A Knecht, J., Concurring. Presiding Justice Cook delivered the opinion of the court:

The opinion of the court was delivered by: Cook

PRESIDING JUSTICE COOK delivered the opinion of the court:

Petitioner ESG Watts, Inc., appeals the decision of the Pollution Control Board (Board) to impose a penalty of $60,000 for petitioner's failure to timely pay solid waste fees and to timely submit various reports required of landfill operators by the Environmental Protection Act (Act) (415 ILCS 5/1 et seq. (West 1992)) and regulations promulgated thereunder. People v. Watts, Ill. Pollution Control Bd. Op. 94-127 (May 4, 1995). Petitioner admits violating the Act, but contends the penalty was excessive because the violations caused no environmental harm and it is now in compliance with the Act. Petitioner further contends that the Board improperly considered its past violations when assessing the penalty. We disagree and affirm.

I. BACKGROUND

Petitioner is a wholly owned subsidiary of Watts Trucking Service, Inc. (Watts Trucking). James Watts is the sole shareholder of Watts Trucking and the president of both companies. Petitioner owns and operates the Sangamon Valley Landfill (Sangamon Valley), which serves the City of Springfield and surrounding communities, and the Taylor Ridge Landfill (Taylor Ridge), which serves the Rock Island area.

On April 20, 1994, the State, acting through the Attorney General's office, filed a complaint before the Board against petitioner, Watts Trucking, and James Watts, alleging that fees and reports required of landfill operators were not timely made. On October 14, 1994, the State filed an amended complaint, which alleged additional delinquencies that occurred after the filing of the original complaint.

Section 22.15(b) of the Act provides that landfill operators are to pay certain fees (see 415 ILCS 5/22.15(b) (West 1992)), and Board rules provide that "payment of the fee due under Section 22.15 of the Act shall be made on a quarterly basis with the submission of the Quarterly Solid Waste Summary" (35 Ill. Adm. Code § 858.401(a) (1994)). Count I of the amended complaint alleged that the quarterly solid waste reports from Taylor Ridge for the fourth quarter of 1993 and the first and second quarters of 1994 were filed late and the fees reported due had not been paid. It further alleged that Sangamon Valley had filed its reports and paid its fees late for each of these three quarters.

Count II alleged that both Taylor Ridge and Sangamon Valley filed their "significant modification applications" late. In September 1990, the Board adopted new landfill regulations. Those facilities that intended to remain open and be subject to the new more stringent regulations were required to submit an application for a significant modification to their permits; applications were due within four years of the effective date of the regulations or at such earlier time as the Illinois Environmental Protection Agency (Agency) specified. 35 Ill. Adm. Code §§ 814.104(a),(c) (1994). Facilities unwilling to comport with the new regulations were to close within two years. 35 Ill. Adm. Code § 814.104(a) (1994). The amended complaint alleged Taylor Ridge filed its significant modification application in September 1994, one year past its Agency-imposed deadline. Sangamon Valley's first application was also filed late, deemed incomplete by the Agency and withdrawn, and a second application was filed in September 1994.

Count III summarized past violations found in two circuit court enforcement actions against the landfills. Count IV alleged Sangamon Valley failed to file a biennial revision of its closure cost estimate, which had been due in March 1994. Landfill operators are required to regularly revise their estimates of the funds necessary to be held on deposit to cover closure costs. 35 Ill. Adm. Code § 807.623 (1994).

Petitioner admitted the allegations of the complaint, but contended that the permit revocations and monetary penalties sought by the State were inappropriate. On November 21, 1994, the Board conducted a hearing to determine the appropriate penalty.

II. THE ADMINISTRATIVE HEARING

A. Quarterly Reports and Fees

At the hearing, Melvin Henson, the Agency's manager of its waste accounting fees unit, testified that Sangamon Valley and Taylor Ridge had a history of delinquency when it came to filing solid waste reports and paying fees. Prior to the current violations, Sangamon Valley made four late payments, thrice paying with checks drawn on insufficient funds. From 1987 through 1993, Taylor Ridge submitted fees and reports late on 10 occasions. On one occasion, when a Taylor Ridge check did not clear, the Agency was forced to pursue an offset procedure, whereby collection was received through a setoff against State Comptroller's checks payable to the debtor. Henson testified that such untimely submissions, checks drawn on accounts with insufficient funds, and collection efforts increase the Agency's work load.

James Watts testified that quarterly fee payments were late for a variety of reasons, but primarily due to "cash flow problems." Petitioner's parent company, Watts Trucking, had gross revenues of approximately $60 million in 1993, with net profits of $500,000 for the last two years. For the two or three years prior to that, Watts described the net profits as "flat," by which he meant net profits in the $200,000 to $300,000 range.

Watts further testified that the Sangamon Valley and Taylor Ridge landfills were primarily used by Watts' hauling companies, and that payments between Watts' hauling companies and the landfills were "merely a paperwork transaction between companies." When asked where the money that Watts' haulers collect from their customers goes, Jerry Eilers, vice president of Watts Trucking, answered that they look at the parent company and its 17 subsidiaries as a "pool of money" from which capital expenditures and operating expenses are paid based on business decisions regarding priorities. The Watts companies do not set aside any funds specifically earmarked to pay the quarterly fees or other governmental obligations.

Watts further testified, with regard to cash flow, that the landfills had undercharged customers in the past and that income from the landfills varied from month to month. According to Watts, Sangamon Valley had to go through the City of Springfield to raise its rates and had "carried" one customer with an arrearage exceeding $1 million "for quite a period of time." During the period of late payments, the Watts companies had met other obligations, including Watts' own salary of $365,000, and had added staff and equipment. Watts stated the companies were "evolving" into a bigger, more sophisticated company with a larger, more competent management structure. Watts stated that he had never intended to avoid the fee requirements, and all quarterly fees and reports due had been submitted by the time of the hearing.

B. Significant Modification Applications

Edwin Bakowski, Jr., the solid waste branch manager in the Agency's permit section, testified regarding petitioner's failure to timely file significant modification applications. Bakowski explained that in 1990 the Agency adopted new landfill regulations; within six months of the September 1990 effective date, facilities were required to notify the Agency of their intent to cease operations or remain open subject to the new regulations. Those facilities that intended to remain open and be subject to the new rules were required to submit an application for a significant modification of their permits. By regulation, applications were due within four years of the effective date or such earlier time as the Agency specified. 35 Ill. Adm. Code § 814.104(c) (1994).

At the time of the new regulations, there were approximately 150 operating landfills in Illinois which the Agency would be dealing with either in the context of reviewing significant modification applications or permitting action on closure. Bakowski explained the Agency's "call-in" program whereby deadlines for significant modification applications were set. Because of the Agency's finite resources and personnel, as well as the finite number of private consulting firms that would be involved in aiding facilities to prepare their applications, it was important to stagger the deadlines in order to provide for a systematic review process.

With respect to Sangamon Valley, Bakowski testified that it reported its intention to remain open in March 1991, and in March 1992 the Agency issued a "call-in" letter, setting Sangamon Valley's application's due date as September 15, 1992. In the summer of 1992, Sangamon Valley requested a six-month extension which was granted to March 1, 1993. A partial second extension was also granted to May 1, 1993. Two days after its March 1, 1993, deadline, Sangamon Valley requested a third extension, which the Agency denied.

Sangamon Valley submitted a significant modification application on December 6, 1993, nine months after its extended due date. In January 1994, the Agency deemed the application incomplete. Sangamon Valley withdrew the application and submitted a second application in September 1994, which was also deemed incomplete.

With respect to Taylor Ridge, the Agency issued a call-in letter in April 1993, setting a deadline of September 1, 1993. Taylor Ridge apparently never sought or received an extension. Taylor Ridge submitted its application in September 1994. That application was deemed incomplete by the Agency. (The Sangamon Valley and Taylor Ridge applications were finally deemed ...


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