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The City of Morris, An Illinois v. Community Landfill Company

August 5, 2011

THE CITY OF MORRIS, AN ILLINOIS
CORPORATION,
PETITIONER-APPELLANT,
v.
COMMUNITY LANDFILL COMPANY, AN ILLINOIS CORPORATION, THE PEOPLE EX.
REL. LISA MADIGAN, ATTORNEY GENERAL
OF THE STATE OF ILLINOIS, THE ILLINOIS POLLUTION CONTROL BOARD, AND THE STATE OF ILLINOIS, RESPONDENTS-APPELLEES.
COMMUNITY LANDFILL COMPANY,
CORPORATION,
PETITIONER-APPELLANT,
v.
ILLINOIS POLLUTION CONTROL BOARD, THE PEOPLE EX REL. LISA MADIGAN, ATTORNEY GENERAL OF THE STATE OF ILLINOIS, THE CITY OF MORRIS, AN ILLINOIS MUNICIPAL CORPORATION, AND THE STATE OF ILLINOIS, RESPONDENTS-APPELLEES.



Appeal from the Illinois Municipal Pollution Control Board PCB No. 03-191

The opinion of the court was delivered by: Justice Lytton

Appeal from the Illinois an Illinois Pollution Control Board Appeal No. 3-09-0847 (cons. with No. 3-09-0864) PCB No. 03-191

JUSTICE LYTTON delivered the judgment of the court, with opinion.

Justices Schmidt and Wright concurred in the judgment and opinion.

OPINION

¶ 1 The State filed a complaint with the Illinois Pollution Control Board (Board) against Community Landfill Co. (CLC) and the City of Morris, alleging that CLC and the City were conducting disposal operations in violation of the financial assurance requirements of the Environmental Protection Act (Act) (415 ILCS 5/21 (West 2008)) and regulations promulgated thereunder by the Board. The State filed a motion for summary judgment, which the Board granted. The Board then entered an order (1) holding CLC and the City jointly and severally liable for posting financial assurance of $17,427,366, (2) prohibiting CLC and the City from accepting additional waste at the landfill, and (3) imposing penalties of $399,308.98 against the City and $1,059,534.70 against CLC. CLC and the City appeal the Board's rulings. We confirm in part and set aside in part.

¶ 2 In the 1970s, the City of Morris operated the Morris Community Landfill. The landfill consists of two parcels, A and B. In 1982, the City transferred its interest in the landfill to CLC, but retained ownership of the land on which the landfill was situated. CLC began operating the landfill. CLC paid the City dumping-related royalties for its use of the landfill.

¶ 3 In 1996, CLC secured financial assurance from bonds issued by Frontier Insurance for closure/postclosure care costs for the landfill. Prior to 1999, CLC carried $1.4 million in bonds from Frontier, the estimated closure costs at that time.

¶ 4 In 1999, the City and CLC entered into an agreement that required CLC to give leachate from the landfill to the City, which the City then treated at its publicly owned treatment works at no cost to CLC. The leachate from the landfill made up less than 1% of what was treated at the City's publicly owned treatment works.

¶ 5 In 1999, CLC submitted an application to the Illinois Environmental Protection Agency (IEPA) for a significant modification permit requesting the closure of parcel B and the continued operation of parcel A. The permit estimated that closure costs for CLC would be $7 million and the costs for the City would be $10 million for leachate treatment. CLC sought to post a $7 million bond, while the City would commit to leachate treatment costing $10 million. IEPA rejected CLC's application and required CLC to post a bond for the entire $17 million. CLC and the City appealed that decision to the Board and then to this court, both of which upheld the $17 million financial assurance amount. See Community Landfill Co., Ill. Pollution Control Bd. Op. 01-48, 01-49 (cons.) (April 5, 2001); Community Landfill Co. v. Pollution Control Board, No. 3--01--0552 (2001) (unpublished Order under Supreme Court Rule 23).

¶ 6 In 2000, IEPA issued a modification permit supported by financial assurance of $17,427,366, which was guaranteed by three bonds issued by Frontier. One of the bonds, with a value of $10,081,630, listed the City as principal. The remaining bonds listed CLC as the principal. CLC was responsible for the premiums on all of the bonds.

¶ 7 A few months later, IEPA notified CLC and the City that they were in violation of the Act because Frontier Insurance Company had been taken off the list of approved government sureties. Two weeks later, CLC filed its supplemental permit application for parcel A. IEPA denied the application because Board regulations required acceptable sureties to be listed in the United States Department of Treasury's Circular 570, and Frontier was stricken from the list. CLC and the City appealed IEPA's decision. The Board affirmed IEPA's denial of CLC's permit. Community Landfill Co., Ill. Pollution Control Bd. Op. 01--170, at 22 (Dec. 6, 2001). CLC and the City then appealed to this court. We confirmed, holding:

"[T]he supplemental permit application in this case was appropriately denied because the company failed to satisfy *** requirements of the Act and Code when seeking the permit. Although the parties do not dispute that the bonds were valid and enforceable or that the Agency accepted the company's bonds for a different permit after Frontier was removed from the Circular 570 list, Frontier did not meet the statutory financial assurance requirements for the supplemental permit here as it was not on the list of approved sureties when this application was submitted and ruled on." Community Landfill Co. v. Pollution Control Board, 331 Ill. App. 3d 1056, 1061 (2002).

¶ 8 In 2003, the State filed a complaint against CLC and the City, alleging that they were conducting disposal operations at the Morris Community Landfill without adequate financial assurance. The State filed a motion for summary judgment against CLC and the City. CLC filed a response arguing that there was an issue of fact as to whether it had adequate financial assurance in place. The City filed a cross-motion for summary judgment, arguing that it had no responsibility to post financial assurance because it did not conduct or manage operations at the landfill. In 2006, the Board issued an opinion and order granting the State's motion for summary judgment and denying the City's motion for summary judgment.

¶ 9 In September 2007, a penalty hearing was held. Evidence at the hearing established that CLC paid the City $399,208.98 in dumping royalties from 2001 to 2005. The evidence also showed that CLC's premium payment for the Frontier bonds was $217,842 in 2001, which amounted to $596.83 per day. CLC stopped making payments on the Frontier bonds in 2001. Neither CLC nor the City provided any financial assurance to IEPA for the landfill after 2001.

¶ 10 Brian White, IEPA Bureau of Land Compliance unit manager, testified that IEPA has made a claim on the Frontier bonds obtained by the City and CLC in 2000. Frontier offered to pay IEPA $400,000 on those bonds. At the time of the hearing, Frontier had paid nothing.

¶ 11 Christine Roque, IEPA Bureau of Land engineer, testified that financial assurance amounts may be reduced by seeking and obtaining a permit modification from IEPA. CLC and the City did not seek a permit modification for the Morris Community Landfill until July 2007. That permit modification was under review by IEPA at the time of the hearing.

¶ 12 Devin Moose, a licensed professional engineer, was hired by the City in 2005 to evaluate the landfill. Moose prepared revised cost estimates for closure/post-closure care and found them to be $10 million. The revised figures were submitted to IEPA in July 2007, but IEPA had not yet responded to them.

¶ 13 Edward Pruim, secretary/treasurer of CLC, testified that the cost of the Frontier bonds in 2000 was $200,000 in collateral and premium payments of slightly over $200,000 per year. CLC paid the premium on the Frontier bonds for two years. CLC then began looking for another bonding company and found that it did not have enough money to purchase other bonds.

ΒΆ 14 Following the hearing, each party filed posthearing briefs. In its brief, the State argued that the Board should impose a penalty against CLC in the amount of $1,059,534.70, reflecting the amount it saved on bond premiums by not paying for any bonds after 2001. The State argued that the penalty against the City should be $399,308.98, the amount of dumping royalties ...


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