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Alternate Fuels, Inc. v. Director of the Illinois Environmental Protection Agency

October 21, 2004

ALTERNATE FUELS, INC., APPELLEE,
v.
DIRECTOR OF THE ILLINOIS ENVIRONMENTAL PROTECTION AGENCY ET AL., APPELLANTS.



The opinion of the court was delivered by: Justice Fitzgerald

Docket No. 96071BAgenda 11BMay 2004.

Opinion filed October 21, 2004 - Modified on denial of rehearing June 16, 2005.

The primary question in this appeal is whether a business which has been issued a violation notice under section 31(a) of the Illinois Environmental Protection Act (Act) (415 ILCS 5/1 et seq. (West 2002)) for failure to secure a permit as allegedly required by the Act, and then ceases operations, may bring a declaratory action to test the validity of the alleged violation. Alternate Fuels, Inc. (AFI), filed such an action against the Director of the Illinois Environmental Protection Agency (Agency) and the Agency itself. The circuit court of St. Clair County determined that the declaratory action was justiciable, found that the Act did not require AFI to secure a permit, and rejected AFI=s claim for attorney fees; the appellate court affirmed. 337 Ill. App. 3d 857 (2003). For the following reasons, we affirm the appellate court.

BACKGROUND

David Wieties, a former Agency employee, was president of Resourceful Environmental Ideas, Inc. (REI), a company located in East St. Louis, Illinois, with the principal objective to produce and sell Aalternate fuel.* REI was the predecessor company to AFI. On June 14, 1994, Wieties sent a letter to the Agency to determine if AFI=s product constituted waste under the Act and therefore required an Agency permit. The subject material consisted of various types of plastics generated by the shredding of empty agricultural chemical containers into chips approximately one inch in size. Prior to shredding, a company named Tri-Rinse, Inc., Atriple rinsed* the containers according to United States Environmental Protection Agency and Department of Agriculture guidelines to remove residual agricultural chemicals. AFI would transport the resulting chips to Illinois Power for use as fuel at its Baldwin Power Station. On August 31, 1994, the Agency responded that all materials burned for energy recovery retained their classification as waste under the Act and that a facility receiving this material would require a permit from the Agency.

Following this response, REI filed an appeal with the Illinois Pollution Control Board (Board) on September 29, 1994. The Agency filed a motion to dismiss before the Board arguing that the letter was not a Afinal determination.* On November 9, 1994, REI filed a motion to withdraw the appeal and the Board granted REI=s motion.

Illinois Power subsequently requested a revision to its operating permit to burn the alternate fuel at the Baldwin plant. The Agency denied Illinois Power=s application, contending that the alternate fuel was a Awaste* pursuant to section 3.53 of the Act (415 ILCS 5/3.53 (West 1994)). According to the Agency, because the material was a Awaste,* Illinois Power would be functioning as a Apollution control facility* under section 3.32 of the Act (415 ILCS 5/3.32 (West 1994)). As a Apollution control facility,* Illinois Power faced significant hurdles to secure a permit.

As part of the permitting process, a pollution control facility must obtain local siting approval. 415 ILCS 5/39.2(a) (West 1994). To obtain local siting approval, the county board or the governing body of the municipality must approve of the facility according to various criteria listed in section 39.2(a) of the Act (415 ILCS 5/39.2(a) (West 1994)). The governing body must hold at least one public hearing within 120 days of the application (415 ILCS 5/39.2(d) (West 1994)) and must generally take final action on the application within 180 days (415 ILCS 5/39.2(e) (West 1994)). Local siting approval expires at the end of two calendar years from the date upon which it was granted. 415 ILCS 5/39.2(f) (West 1994).

Illinois Power appealed the Agency=s rejection of its permit application to the Board. The Board=s decision, published January 23, 1997, noted that the subject materials are Aempty pesticide containers [which] present landfill problems due to their non-degradability* and that Athe Illinois EPA has determined that the combustion of the subject material, pursuant to the above-listed conditions specified in the permit applications, will not result in a violation of the Illinois Pollution Control Board rules and regulations.* Illinois Power Co. v. Illinois Environmental Protection Agency, PCB Nos. 97B37, 97B36 (January 23, 1997). The Board held, AHere, Illinois Power is simply receiving the alternate fuel after it has been processed and transformed by Tri-Rinse and using it in its boilers.* Illinois Power, PCB Nos. 97B37, 97B36. The Board noted that the material was Ano longer* waste within the meaning of the Act. Illinois Power, PCB Nos. 97B37, 97B36. Therefore, Illinois Power was not a Apollution control facility,* as defined by section 3.32(a) of the Act, and therefore not required to obtain local siting approval. Illinois Power, PCB Nos. 97B37, 97B36.

Soon after the Board=s decision, Edwin Bakowski, a manager of an Agency permit section, prepared a memorandum concerning solid waste *fn1 permitting requirements for alternative fuel processing facilities. The memorandum noted that the Board=s decision did not address the regulatory status of the alternate fuel prior to receipt by Illinois Power. The memorandum raised concerns about Athe nuisances and speculative accumulation which may occur at alternative fuel processing facilities. The market for waste plastics is not very well established and in some instances these materials could even have a negative market value. The acceptance of unrinsed plastics could also result in the manufacture of unacceptable alternative fuel, onsite nuisances or contamination.* The memorandum then noted that the Aalternative fuel processing facilities do not appear to be recycling centers* and that the burning of alternative fuel was not recycling. The Aproposed options* were to Arequire permits for alternative fuel processing facilities as solid waste treatment and transfer station facilities* or Arequire no [Bureau of Land] permits for facilities that only process alternative fuels and address problems with these facilities through enforcement.*

The memorandum recommended the first option because Athe permit requirements will provide a proactive approach to eliminate environmental problems before they occur by prescribing operating conditions for the facility. It should also be noted that it is difficult to enforce against permit exempt facilities that have nuisance or speculative accumulation problems.*

Also after the Board=s decision, Illinois Power and AFI, formerly REI, entered into a contract for the sale of alternate fuel, which consisted of the chips from the plastic containers with scrap wood as an additional component. AFI also began contracting with suppliers. Included in the record is an unsigned, undated form contract between AFI and a generic supplier. Under the agreement, the suppliers would make arrangements and bear all costs of transporting non-hazardous fuel-grade material, including wood and plastic, to AFI=s facility. AFI would bill the supplier for receipt of the materials based on varying unit prices for the differing materials. Additionally, AFI warranted that it would comply with all laws and regulations and Ain the event that the regulatory conditions under which any of the aforesaid requirements or permits change during the terms of this Agreement, and are beyond the control of AFI, AFI shall be released from its obligation to receive the volumes of Supplier=s material *** [and] that AFI shall rigorously pursue the necessary modifications to its permit status so that it may continue to perform its obligations under this Agreement.*

Four agency representatives inspected AFI=s facility on May 7, 1998, and May 22, 1998, including Bakowski and Kenneth Mensing, an Agency manager who formerly supervised Wieties at the Agency. According to Bakowski, the facility was Anot a nuisance* and Wieties Aappeared to have done his homework. He related a lot of this to hazardous waste and what he thought U.S.E.P.A. meant and things like that.* A May 8, 1998, inspection report described the facility as Aclean and orderly* and Amainly an area to store plastic materials before and after granulation.* An additional inspection on May 22, 1998, yielded similar results.

In his deposition, Mensing described AFI=s facility as a Abig metal warehouse building* with a Arelatively small piece of equipment that was a granulator or a shredder which was the only piece of equipment there to process the incoming material.* The facility was a Aclean looking area* with various piles or boxes of materials segregated by supplier or plastic type. Mensing prepared a memorandum of the visit, but his observations Adidn=t quite fit into, you know, a prepared type of checklist that we had.* Mensing explained, AWe don=t really have a non-hazardous waste storage checklist.* He did not mention any permitting violation in his memo. According to Mensing=s memorandum, Wieties was Anot opposed to a >recycling permit= and would like to work with the Agency to develop and implement a new recycling permit system.* Mensing stated, AIf the health and safety *** were a non-issue, that a permit would still be required simply by the verbiage of the statute, that if this is a facility that=s storingByou know, treating, storing, or disposing of it, then, you know, a permit should be obtained* regardless of whether the facility poses any sort of environmental threat. Mensing stated that he did not see Aanything operationally that caused me any problem.*

On July 8, 1998, the Agency issued a violation notice to AFI pursuant to section 31(a)(1) of the Act (415 ILCS 5/31(a)(1) (West 1998)). Under section 31 of the Act, an alleged violator may work with the Agency to correct violations without the involvement of a prosecuting authority such as the Attorney General or a State=s Attorney. 415 ILCS 5/31 et seq. (West 1998). Within 180 days of discovery of an alleged violation, the Agency shall serve a violation notice upon the alleged violator and a written response shall be required. 415 ILCS 5/31(a) (West 1998). This notice of violation initiates a series of opportunities for the alleged violator to meet with the Agency and resolve the issue. 415 ILCS 5/31(a) (West 1998). If the parties do not resolve the issue, section 31(b) requires that the Agency provide the alleged violator with notice of its intention to pursue legal action and an opportunity to meet prior to referral to the Attorney General or a State=s Attorney. 415 ILCS 5/31(b) (West 1998). If disagreements remain, the Attorney General or a State=s Attorney shall serve a formal complaint upon the alleged violator. 415 ILCS 5/31(c) (West 1998).

The instant section 31(a) notice alleged a violation of section 21(d)(1) of the Act (415 ILCS 5/21(d)(1) (West 1998)) because A[w]aste was stored and treated without a permit granted by the Illinois EPA.* It also alleged a violation of section 21(e) of the Act (415 ILCS 5/21(e) (West 1998)) because A[w]aste was stored and treated at [AFI=s] facility which does not meet the requirements of the Act and regulations thereunder.* The notice stated, ADue to the nature and seriousness of the violations cited, please be advised that resolution of the violations may require the involvement of a prosecutorial authority for purposes that may include, among others, the imposition of statutory penalties.* The suggested resolution was the submission of a permit application for a waste storage and waste treatment operation to the Agency=s Bureau of Land Permit Section by September 30, 1998. To obtain a permit, AFI was required to obtain local siting approval pursuant to the Act. 415 ILCS 5/39.2 (West 1998).

According to Wieties= affidavit, due to the issuance of the violation notice, AFI=s primary investors withdrew their support, and its primary supplier withdrew from the agreement in July 1998. AFI thereafter halted its manufacturing operations.

The parties subsequently met on September 15, 1998. The Agency advised Wieties it deemed the alternate fuel materials as Awaste* under section 3.53 of the Act (415 ILCS 5/3.53 (West 1998)). The Act defines Awaste,* in pertinent part, as follows: A >Waste= means any garbage, sludge from a waste treatment plant, water supply treatment plant, or air pollution control facility or other discarded material ***.* 415 ILCS 5/3.53 (West 1998). The Agency interpreted Adiscarded material* to refer to any material Awhich is not being utilized for its original purpose.* As AFI was not utilizing the alternate fuel material in a manner which was consistent with its original use by the supplier, it was the Agency=s position that such material had been Adiscarded* and was, therefore, a Awaste.* Wieties and the Agency were not able to resolve the matter.

AFI filed a two-count complaint on November 2, 1998, naming as defendants Mary A. Gade, Director of the Agency, and the Agency. *fn2 In count I, plaintiff requested a declaration that the materials used by AFI in its manufacturing process were not Awastes* because the materials were not discarded. Count II alleged that AFI was statutorily entitled to recoup all reasonable costs, including attorney fees, because the Agency=s interpretation of Adiscarded material* constituted unauthorized rulemaking under the Illinois Administrative Procedure Act (5 ILCS 100/1B1 et seq. (West 1998)). The complaint also alleged that an actual controversy existed and that the declaratory judgment statute vested the court with the power to hear the dispute. 735 ILCS 5/2B701 (West 1998). The Agency moved to dismiss, arguing that there was no actual controversy ripe for determination because AFI failed to exhaust all administrative remedies. The circuit court denied the motion to dismiss. The Agency then filed an answer, along with affirmative defenses in which it denied that the trial court had jurisdiction to hear the claim and that the complaint failed to state a claim upon which relief could be granted.

AFI filed a motion for summary judgment against the Director and the Agency on count I. The trial court ruled that there were no genuine issues of material fact and granted AFI=s motion, finding that the materials were not Awastes* because they were not discarded. Thereafter, the parties filed cross-motions for summary judgment on count II. The trial court granted the Agency=s motion as to count II and denied plaintiff=s motion. Both parties appealed, and the appellate court affirmed the rulings of the trial court. 337 Ill. App. 3d 857 (2003). We granted the Agency=s petition for leave to appeal on count I. 177 Ill. 2d R. 315. In its brief, AFI requested cross-relief, requesting that we reverse the appellate court and the trial court on count II. 155 Ill. 2d Rs. 315(g), 318(a). Because this appeal from a summary judgment ruling solely presents issues of law, our review is de novo. First Bank of America, Rockford, N.A. v. Netsch, 166 Ill. 2d 165, 176 (1995).

ANALYSIS

The Agency raises two issues on appeal: (1) this case was not justiciable because the declaratory judgment action was not ripe for review until the Agency had concluded its investigatory process, and (2) the Agency properly defined the materials processed by AFI as Adiscarded materials* which constituted Awaste,* thus requiring AFI to secure a permit before producing the alternate fuel. In its cross-appeal, AFI contends that the Agency=s interpretation of Awaste* and its subsequent application of the Act constituted impermissible rulemaking, thus making the state liable for AFI=s reasonable costs in the instant action, including attorney fees.

Justiciability

The Agency argues that AFI=s claim for declaratory judgment is not justiciable. The Agency specifically contends that because the Agency had not yet finished its investigative process under section 31 of the Act (415 ILCS 5/31 (West 2002)) the matter was not ripe for review. AFI responds that the matter is ripe for review because the Agency had completed its investigation, while AFI was forced to halt its operations and was left with no other avenue to resolve the dispute. We agree with AFI.

A >Concepts of justiciability have been developed to identify appropriate occasions for judicial action. *** The central concepts often are elaborated into more specific categories of justiciabilityBadvisory opinions, feigned and collusive cases, standing, ripeness, mootness, political questions, and administrative questions.= * Black=s Law Dictionary 882 (8th ed. 2004), quoting 13 C. Wright, Federal Practice & Procedure *3529, at 278-79 (2d ed. 1984). Section 2B701 of the Code of Civil Procedure (735 ILCS 5/2B701 (West 2002)) sets forth the general requirements of a justiciable declaratory action under Illinois law. This section provides that a court

Amay, in cases of actual controversy, making binding declarations of rights, having the force of final judgments, whether or not any consequential relief is or could be claimed, including the determination, at the instance of anyone interested in the controversy, of the construction of any statute *** or other governmental regulation *** and a declaration of the rights of the parties interested. *** The court shall refuse to enter a declaratory judgment or order, if it appears that the judgment or order, would not terminate the controversy or some part thereof, giving rise to the proceeding.* 735 ILCS 5/2B701(a) (West 2002).

The declaratory judgment statute must be liberally construed and should not be restricted by unduly technical interpretations. Netsch, 166 Ill. 2d at 174. This remedy is used to afford security and relief to the parties so as to avoid potential litigation. See, e.g., Netsch, 166 Ill. 2d at 174. AOur courts have recognized that >[t]he mere existence of a claim, assertion or challenge to plaintiff=s legal interests, *** which cast[s] doubt, insecurity, and uncertainty upon plaintiff=s rights or status, damages plaintiff=s pecuniary or material interests and establishes a condition of justiciability.= * Netsch, 166 Ill. 2d at 175, quoting Roberts v. Roberts, 90 Ill. App. 2d 184, 187 (1967).

Here, in the context of a challenge to an administrative action, we specifically consider ripeness, a component of justiciability. The ripeness doctrine is designed A > Ato prevent the courts, through avoidance of premature adjudication, from entangling themselves in arbitrary disagreements over administrative policies, and also to protect the agencies from judicial interference until an administrative decision has been formalized and its effects felt in a concrete way by the challenging parties.* = * National Marine, Inc. v. Illinois Environmental Protection Agency, 159 Ill. 2d 381, 388 (1994), quoting Bio-Medical Laboratories, Inc. v. Trainor, 68 Ill. 2d 540, 546 (1977), quoting Abbott Laboratories v. Gardner, 387 U.S. 136, 148-49, 18 L. Ed. 2d 681, 691, 87 S. Ct. 1507, 1515 (1967); see also National Park Hospitality Ass=n v. Department of the Interior, 538 U.S. 803, 808, 155 L. Ed. 2d 1017, 1024, 123 S. Ct. 2026, 2030 (2003). It is well settled that A >[t]he problem is best seen in a twofold aspect, requiring us to evaluate both the fitness of the issues for judicial decision and the hardship to the parties of withholding court consideration.= * National Marine, 159 Ill. 2d at 389, quoting Abbott Laboratories, 387 U.S. at 149, 18 L. Ed. 2d at 691, 87 S. Ct. at 1515; see also National Park Hospitality Ass=n, 538 U.S. at 808, 155 L. Ed. 2d at 1024, 123 S. Ct. at 2030.

As to the first factor, the issue presented is fit for a judicial decision at this time. In contention is the correct interpretation of Adiscarded material* in section 3.535 of the Act (415 ILCS 5/3.535 (West 2002)). Both sides have approached this matter in terms of statutory construction, and there is no dispute over the facts. Wieties= discussions with the Agency began in 1994 and involved a number of Agency employees over time. The record clearly demonstrates that the Agency had finished its investigation and had decided AFI stored and treated waste, requiring local siting approval and a waste permit, a stance that has not changed. The Agency performed two inspections of the facility in May 1998. Agency personnel continued their internal discussions regarding AFI and the waste issue, which then culminated in a violation notice. After the Agency issued the violation notice, Wieties responded to and met with the Agency in an unsuccessful attempt at resolving the stalemate concerning the definition of waste. As applied specifically to AFI, the Agency has little incentive to change its definition of Awaste* as AFI has closed shop, obviating the need for a permit and potential prosecution. Thus, there is no prospect for further factual development to aid judicial resolution.

As to the second factor, the hardship upon AFI is more than sufficient to render judicial review appropriate at this stage. On June 14, 1994, Wieties, on behalf of REI, sent a letter to the Agency for a waste determination. The Agency responded that REI was treating Awaste.* After Wieties= company filed an appeal before the Board, the Agency filed a motion to dismiss contending that the response letter was not a Afinal* decision. Thereafter, Wieties= company filed a motion to withdraw. The legal question with regard to Wieties= company, now named AFI, remained unanswered through 1998, when Wieties= meetings with the Agency continued unsuccessfully. The Agency=s interpretation put AFI into a dilemma: secure an allegedly unnecessary permit with the requisite local siting approval, take a potentially more costly alternative of risking serious penalties by continuing and waiting for the ax of Agency prosecution to fall, or discontinue operations. When AFI chose the third option, the Agency had no incentive to refer the matter for prosecution because there was no longer a continuing violation. Indeed, the Agency has given no indication that it wished to issue a section 31(b) notice, much less prosecute the matter. We also note that AFI has not sought relief in this action to prevent the Agency from doing so.

The practical effect upon AFI of failing to allow judicial review at this time would be to foreclose all access to the courts for a determination of the legal question of whether AFI was processing Awaste* under the ActBa question which Wieties has been pursuing for over 10 years. The parties do not dispute that AFI is a viable business entity which was directly affected by Agency action. The Agency=s decision affected AFI in a concrete way; the notice of violation caused AFI to lose financing, lose its suppliers, and halt operations, thereby ending AFI=s agreement with Illinois Power. Thus, AFI has already felt a direct and palpable injury and has an immediate financial stake in the resolution of the instant action.

We find the primary authority proffered by the Agency, National Marine, Inc. v. Illinois Environmental Protection Agency, 159 Ill. 2d 381 (1994), distinguishable. In National Marine, the Agency issued a notice informing the plaintiff that it could be potentially liable for a Arelease or a substantial threat of a release of a hazardous substance on the property* pursuant to section 4(q) of the Act. National Marine, 159 Ill. 2d at 383; Ill. Rev. Stat. 1991, ch. 1112, par. 1004(q). This notice was based on the Agency finding Aburied drums filled with unknown materials, buried tires and wood which had apparently been used as fill material, black-stained soil near an underground storage tank riser *** and an abandoned well house.* National Marine, 159 Ill. 2d at 384. Plaintiff sought a declaration that section 4(q) of the Act was unconstitutional, an injunction enjoining the Agency from enforcement arising from the section 4(q) notice or relying on the factual findings found in the notice, and the issuance of a writ of certiorari to review the Agency=s record and reverse and quash the section 4(q) notice. National Marine, 159 Ill. 2d at 384.

This court noted that Athe complaint, in essence, sought to obtain judicial review of the Agency=s issuance of the 4(q) notice prior to the Agency=s initiation of cost-recovery/enforcement proceedings before the Pollution Control Board (Board) or the circuit court.* National Marine, 159 Ill. 2d at 385. We found, Aat this preliminary stage in the administrative process, it is not clear whether the Agency will even initiate a cost-recovery/enforcement proceeding against plaintiff before one of these ...


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