South Carolina              
Administrative Law Court
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SC Administrative Law Court Decisions

CAPTION:
Kerr-McGee Chemical Corporation et al. vs. SCDHEC

AGENCY:
South Carolina Department of Health and Environmental Control

PARTIES:
Petitioner:
Kerr-McGee Chemical Corporation; Lucent Technologies, Inc.; Gaston Copper Recycling Corp.; Southwire Company; CP Chemicals, Inc.; Koch Sulfur Company; Clariant Corporation; and Blackman Uhler Chemical Corporation

Respondent:
 
DOCKET NUMBER:
99-ALJ-07-0290-CC

APPEARANCES:
Thomas F. Dougall, Esquire, for the Petitioner Kerr-McGee Chemical Corporation

James Lynn Werner, Esquire, for the Petitioners Gaston Copper Recycling Corp. and Southwire Company

Richard S. Rosen, Esquire, for the Petitioner Koch Sulfur Company

William A. Coates, Esquire, for the Petitioner Blackman Uhler Chemical Corporation

Jacquelyn S. Dickman, Esquire, Claron A. Robertson, Esquire, and Palmer J. Freeman, Esquire, for the Respondent South Carolina Department of Health and Environmental Control
 

ORDERS:

ORDER OF DISMISSAL

INTRODUCTION



This matter is before the Administrative Law Judge Division (ALJD or Division) upon the motion of the Respondent, South Carolina Department of Health and Environmental Control (DHEC), to dismiss this case on the grounds that the Division lacks subject matter jurisdiction over the issues presented. A hearing on the motion was held on August 12, 1999, at the offices of the Division in Columbia, South Carolina. For the following reasons, the motion is granted and this case is dismissed.



STATEMENT OF THE CASE

This case involves a former fertilizer manufacturing site in Jericho, South Carolina (Stoller Site), which has been designated a "State Superfund Site" by DHEC due to contamination of the soil and groundwater at the site. The site was formerly operated by the Petitioner, Kerr-McGee Chemical Corporation (Kerr-McGee), which later transferred the site to Stoller Chemical Company. The other Petitioners were among those parties who arranged for the disposal of hazardous substances at the site.

In early 1992, Stoller Chemical Company declared bankruptcy and ceased operations at the site. Thereafter, because of the contamination at the site, the United States Environmental Protection Agency (EPA) assumed jurisdiction over the site and issued a Unilateral Administrative Order, pursuant to Section 106 of the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C. § 9606. That Order required a number of potentially responsible parties (PRPs) to undertake a response action with respect to the contaminated soil at the site. DHEC was designated the lead agency and took primary responsibility for the groundwater cleanup.

Prior to taking any action with respect to the groundwater cleanup, DHEC entered into settlement negotiations with a number of PRPs (settling PRPs) other than the Petitioners in this case. On March 19, 1997, DHEC filed a "friendly" cost recovery action in the U.S. District Court for the District of South Carolina, pursuant to both Section 107 of CERCLA, 42 U.S.C. § 9607, and the South Carolina Hazardous Waste Management Act (SCHWMA), S.C. Code Ann. §§ 44-56-10 et seq. (1986 & Supp. 1998). See S.C. Dep't of Health and Envtl. Control v. Atlantic Steel Industries, et al., Civil Action No. 2:97-726-12 (D.S.C. August 5, 1999). In that action, DHEC sought approval by Chief U.S. District Judge C. Weston Houck of a settlement agreement it had entered into with the settling PRPs. The Petitioners in this case moved to intervene in that case, and their motion was granted. Petitioners claimed that DHEC improperly negotiated with the settling PRPs, capping their liability at an amount disproportionate to their responsibility for damage at the Stoller Site, and that DHEC improperly contracted with the attorneys for two of the settling PRPs, resulting in a tainted administrative record.

In his Order dated August 5, 1999, Judge Houck denied DHEC's motion for approval of the settlement agreement, specifically finding that the preparation of the administrative record by DHEC in conjunction with the attorneys for two of the settling PRPs raised serious questions about the trustworthiness of the administrative record. See Order of August 5, 1999 at 17.

In May of 1997, while the action before Judge Houck was pending, DHEC began conducting studies to determine the nature and extent of the groundwater contamination at the site and the appropriate method of remediation. On April 23, 1998, DHEC held a public meeting to present the results of its studies. It subsequently developed a "Proposed Plan" for the cleanup of the contaminants in the groundwater. Public notice of the availability of the Proposed Plan for review was provided, and DHEC held another public meeting concerning the Proposed Plan on October 22, 1998. At this public meeting, DHEC began accepting public comment on the Proposed Plan, and continued to accept comments for 60 days. The Petitioners, who had been identified as PRPs by DHEC, attended the public meeting and submitted comments to DHEC.

After consideration of the comments received, DHEC issued a "Remedial Action Record of Decision (Operable Unit 1)" (ROD), in April of 1999. The ROD sets forth DHEC's selection of the remedy for the groundwater cleanup at the Stoller Site. Petitioners then filed a request for a contested case hearing before the Administrative Law Judge Division, challenging the issuance of the ROD and DHEC's remedy selection for the site as unnecessarily expensive and raising allegations as to whether the remedy selection process was tainted by DHEC's interaction with the settling PRPs and their counsel. Thereafter, DHEC filed its Motion to Dismiss.



DISCUSSION

I. Contested Case

In its Motion to Dismiss, DHEC first asserts that the Administrative Law Judge Division lacks subject matter jurisdiction to hear this case because it is not a "contested case" under the Administrative Procedures Act (APA). "Contested case" is defined in S.C. Code Ann. § 1-23-310(3) (Supp. 1998) as "a proceeding including, but not restricted to, ratemaking, price fixing, and licensing, in which the legal rights, duties, or privileges of a party are required by law to be determined by an agency after an opportunity for hearing." DHEC argues that this matter is not a "contested case" because the ROD does not directly affect the legal rights, duties, or privileges of the Petitioners and because there is no statute or regulation which requires an administrative

evidentiary hearing in this instance. Contrary to DHEC's assertions, the selection of a remedy and the issuance of the ROD will ultimately affect the legal duties of the Petitioners. In fact, DHEC has already filed an action in federal court, which names these Petitioners as defendants, seeking to recover the costs incurred in implementing the remedy which is set forth in the ROD. See DHEC v. Kerr-McGee, et al., Civil Action No. 2:99-1610-12. However, for an APA contested case to arise, there must also be some statute or regulation which requires a hearing. Petitioners argue that the ROD constitutes an "order" as defined in S.C. Code Ann. Regs. 61-72, § 101(I) (Supp. 1998), and therefore an administrative hearing is required. An "order" is defined in the regulation as "[a] written document, other than a license, which embodies a final staff decision imposing sanctions or requirements. . . ." (Emphasis added). Although the ROD in this case embodies the final staff decision of DHEC concerning the selection of the groundwater remedy at the Stoller Site, it does not in and of itself impose any sanctions or requirements upon these Petitioners. It merely sets forth the remedy which DHEC will employ in cleaning up the site. Therefore, the ROD is not an "order" which would give rise to the requirement for a hearing under Regs. 61-72. Furthermore, there is no other South Carolina statute or regulation which requires an administrative hearing in this situation. See discussion infra pp. 5-6. Accordingly, this matter is not a "contested case" pursuant to the APA. See League of Women Voters v. Litchfield-by-the-Sea, 305 S.C. 424, 409 S.E.2d 378 (1991) (holding that an agency determination was not a "contested case" where no statute or regulation imposed the requirement for a hearing).

II. Preemption

DHEC argues that, since the issues in this case arise under CERCLA, this action is preempted by federal law. However, it is undisputed that in its pending cost recovery action against these Petitioners, DHEC has asserted claims under both CERCLA and SCHWMA. It is further undisputed that, in making its remedy selection, DHEC was acting under the auspices of South Carolina law. Although this Division is certainly foreclosed from hearing claims which arise under CERCLA, it is not similarly foreclosed from considering claims arising under South Carolina law. Therefore, DHEC's argument is without merit.

III. Availability of Pre-Enforcement Review

DHEC next contends that, pursuant to applicable law, the Petitioners are not entitled to review of its remedy decision outside the context of a cost recovery action. The Petitioners argue that such an action is permissible under South Carolina law. An examination of the procedures for remedy selection and cost recovery under South Carolina law is thus necessary.

a. Statutory Framework

In taking action to remedy the groundwater contamination at the Stoller Site, DHEC was acting under the authority of the South Carolina Hazardous Waste Management Act (SCHWMA), S.C. Code Ann. §§ 44-56-10 et seq. (1986 & Supp. 1998), specifically S.C. Code Ann. § 44-56-200 (Supp. 1998). That section, which is the only statute in SCHWMA dealing with the cleanup of hazardous waste, provides:

The Department of Health and Environmental Control is empowered to implement and enforce the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (Public Law 96-510), and subsequent amendments to Public Law 96-510 as of the effective date of the amendments. Subject to the provisions of Section 107 of Public Law 96-510 and its subsequent amendments which pursuant to this section are incorporated and adopted as the law of this State, the department is empowered to recover on behalf of the State all response costs expended from the Hazardous Waste Contingency Fund or from other sources, including specifically punitive damages in an amount at least equal to and not more than three times the amount of costs incurred by the State whether before or after the enactment of the Comprehensive Environmental Response, Compensation and Liability Act of 1980, and its subsequent amendments.



(Emphasis added). Since DHEC is specifically granted the power to enforce the provisions of CERCLA in South Carolina, one must refer to CERCLA in order to determine the procedures which DHEC must follow in cleaning up a hazardous waste site and in seeking cost recovery from PRPs. In addition, with respect to the recovery of costs for cleaning up a hazardous waste site, the provisions of Section 107 of CERCLA, 42 U.S.C. § 9607, have been incorporated into the law of South Carolina. That section imposes liability upon several classes of "covered persons," including the owners or operators of any facility at which hazardous substances were disposed of and at which a release or threatened release of a hazardous substance occurs; any person who arranged for the disposal or treatment of hazardous substances at such a facility; and any person who accepted hazardous substances for transport to such a facility, for, inter alia, "all costs of removal or remedial action incurred by the United States Government or a State . . . not inconsistent with the national contingency plan." 42 U.S.C. § 9607(a)(4)(A). Accordingly, in order to recover its response costs, regardless of whether the remedial action is taken pursuant to federal or state law, DHEC must follow the procedures set forth in the "National Contingency Plan," which is set forth in pertinent part at 40 C.F.R. § 300.430.

The National Contingency Plan sets forth in great detail the procedures which an agency must follow in selecting a remedy for the cleanup of a contaminated site. First, the agency must conduct a remedial investigation and feasibility study (RI/FS), during which it evaluates, among other things, the type and extent of contamination at the site, the criteria under state and federal law which must be attained, and the alternative remedies which may be employed. See 40 C.F.R. § 300.430(d) and (e). When the RI/FS is completed, the agency then proceeds to select a remedy for the site, first selecting a preferred alternative and then presenting that alternative to the public in a "proposed plan." 40 C.F.R. § 300.430(f)(1)(ii), (f)(2), and (f)(3). The preferred alternative must be selected using the evaluation criteria set forth in 40 C.F.R. § 300.430(e)(9)(iii), one of which is cost-effectiveness. After the opportunity for a public meeting and the receipt of public comments, the agency must then assess its initial determination based upon the comments received, and must then make its final remedy selection and document that decision in the ROD. 40 C.F.R. § 300.430(f)(4). The ROD must include all facts, analyses of facts, and site-specific policy determinations considered in the course of selecting the remedy, including an explanation of how the required evaluation criteria were used to select the remedy. 40 C.F.R. § 300.430(f)(5). Finally, the ROD must be published and made available to the public for inspection and copying. 40 C.F.R. § 300.430(f)(6). The procedures set forth in the National Contingency Plan do not specifically provide for either an administrative evidentiary hearing or judicial review during the remedy selection process. There is no South Carolina case which has addressed the question of whether such a hearing is necessary pursuant to state law. However, since South Carolina law incorporates the relevant provisions of CERCLA and the National Contingency Plan by reference, federal case law interpreting these provisions with respect to the availability of a hearing is instructive.

b. Federal Cases

A review of the federal cases interpreting the remedy selection and cost recovery provisions of CERCLA and the National Contingency Plan indicates, almost without exception, that neither an administrative evidentiary hearing nor judicial review is available to PRPs prior to the filing of a cost recovery action. See, e.g., Lone Pine Steering Committee v. U.S. Envtl. Protection Agency, 600 F. Supp. 1487 (D.N.J. 1985), aff'd, 777 F.2d 882 (3d Cir. 1985); J.V. Peters & Co., Inc. v. Administrator, Envtl. Protection Agency, 767 F.2d 263 (6th Cir. 1985); Barmet Aluminum Corp. v. Reilly, 927 F.2d 289 (6th Cir. 1991). See also 28 U.S.C. § 9613(h) (providing certain exceptions to CERCLA's general jurisdictional bar to the review of remedy decisions by federal courts). In many of these cases, the courts have noted that to allow "pre-enforcement review" of remedy selection decisions would halt the remediative process by involving the parties in protracted interim litigation, and would thus frustrate the intent of Congress in enacting CERCLA, which was to provide a method for expeditious cleanups of hazardous waste sites. See, e.g., Lone Pine, supra; United States v. Princeton Gamma-Tech, Inc., 31 F.3d 138 (3d Cir. 1994). "Pre-enforcement review" is defined as "judicial review of [an agency's] actions prior to the time that the [agency] or a third party undertakes a legal action to enforce an order or to seek recovery of costs for the cleanup of a hazardous waste site." Reardon v. United States, 947 F.2d 1509, 1512 (1st Cir. 1991). While DHEC is correct in its assertion that pre-enforcement review is ordinarily not available to a PRP, in this case DHEC has already filed a cost recovery action in the United States District Court for the District of South Carolina. Accordingly, review of DHEC's remedy decision does not constitute "pre-enforcement review" at this point, since DHEC has taken steps to enforce its remedy. The question remains whether this Division or the federal court should be the forum which reviews the ROD.

IV. Scope of the Cost Recovery Action

As discussed above, the unavailability of pre-enforcement review of an agency's remedy decision does not deprive potentially responsible parties of a remedy. Once the agency seeks enforcement of its response plan by filing a cost recovery action pursuant to 42 U.S.C. § 9607, a PRP has the right to challenge that action. As the court noted in Princeton Gamma-Tech, supra, "[i]t is the cost recovery suit that opens the door for alleged responsible parties to contest their liability as well as to challenge the [agency's] response action as being unnecessarily expensive or otherwise not in accordance with applicable law." 31 F.3d at 142.

Petitioners argue that there is no guarantee that the federal court will provide more than a cursory review of the agency's response action and that their rights can only be protected if the Division assumes jurisdiction of this case. However, I find the Petitioners' concerns in this regard to be unjustified. First of all, I have already determined that, regardless of whether this case proceeds under federal or state law, the applicable law and the analysis of DHEC's remedy decision are virtually identical. Secondly, Petitioners' primary concerns center around whether the remedy selected by DHEC is cost-effective. 42 U.S.C. § 9607 (incorporated by reference into SCHWMA) specifically provides that an agency may recover only those costs which are consistent with the National Contingency Plan. The NCP lists a number of specific criteria for the selection of a remedial action, one of which is that the remedy must be cost effective. See 40 C.F.R. § 300.430(e)(9)(iii). Accordingly, in a cost recovery action, a PRP may challenge the cost-efficiency of the remedy selected. If the PRP presents sufficient evidence that the remedy was not cost-effective, the costs incurred in implementing that remedy will be disallowed. See Lone Pine, supra, 600 F. Supp. at 1499. Finally, the cases decided under CERCLA indicate that federal courts will not hesitate to scrutinize agency actions in the context of a cost recovery suit. See, e.g., Barmet Aluminum Corp., supra, 927 F.2d at 295 ("The CERCLA statutory scheme . . . merely serves to effectuate a delay in a plaintiff's ability to have a full hearing on the issue of liability and does not substantively affect the adequacy of such a hearing."); United States v. Princeton Gamma-Tech, supra, 31 F.3d at 143-44 (PRPs may challenge remedy selection both on cost efficiency grounds and on the grounds that the agency's decision was arbitrary and capricious or otherwise not in accordance with law); United States v. United Nuclear Corp., 610 F. Supp. 527, 529 (D.N.M. 1985) (PRPs can raise as a defense in a cost recovery action "every objection which [they] could legitimately raise in a [pre-enforcement] judicial proceeding" and can also raise any procedural irregularities which have prejudiced the PRP).

Nor does the fact that this case involves a state agency, rather than the EPA, affect the degree to which a federal court will examine the remedy selection process. For example, in State of Minnesota v. Kalman W. Abrams Metals, Inc., 155 F.3d 1019 (8th Cir. 1998), the State of Minnesota filed a cost recovery action against a number of PRPs, under both CERCLA and state law, for the recovery of costs it incurred in cleaning up a contaminated site. The Eighth Circuit examined the method by which the state implemented its remedy selection and concluded that the state should be held to the National Contingency Plan standards for remedial action. In applying the standards of the NCP, the court further concluded that the State of Minnesota had conducted the site cleanup in an arbitrary and capricious manner by failing to undertake a feasibility study, as required by the NCP; by employing a "questionable" and "untried" remedy; by giving the public minimal notice of the proposed remedy; and by failing to monitor the contractor it employed to clean up the site. As a result, the court concluded that all the costs incurred in implementing that remedy were inconsistent with the NCP, and remanded the case for a district court determination of whether the costs incurred in implementing a subsequent, and ultimately successful, remedy could be awarded under the NCP. Significantly, in reaching its decision, the Eighth Circuit examined not only the costs themselves, but also the process by which the State of Minnesota selected the remedy and incurred the costs. There is no reason to believe that a federal district judge in South Carolina would not subject DHEC's remedy decision to similar scrutiny.

The Petitioners further assert that, because the process DHEC used in developing the ROD was allegedly tainted by DHEC's involvement with other PRPs, there is a compelling reason for this Division to assume jurisdiction in this case. Although a federal court ordinarily limits its review of an agency's remedy decision to the administrative record, CERCLA specifically allows a court to disallow costs or damages for "serious" procedural errors of "central relevance" to the action. 42 U.S.C. § 9613(j)(4). Moreover, the court may allow materials outside the administrative record to be introduced and considered. In making a decision whether such materials will be allowed, the court is guided by "otherwise applicable principles of administrative law." 42 U.S.C. § 9613(j)(1). See Cooper Industries, Inc. v. United States Envtl. Protection Agency, 775 F. Supp. 1027, 1039-40 (W.D. Mich. 1991) (PRP may challenge the administrative record in a cost recovery action). One particular justification for a court to examine evidence outside the administrative record is a showing by a PRP that the agency engaged in improper behavior or acted in bad faith. See Elf Atochem North America, Inc. v. United States, 882 F. Supp. 1499 (E.D. Pa. 1995) (referring to several "generally accepted exceptions" to the rule that a reviewing court is limited to the administrative record). Moreover, Judge Houck, before whom the cost recovery action is currently pending, has already applied some of these same principles in the previous case involving the Stoller Site. In the Order of August 5, 1999, he noted that, even where review of a case is confined to the administrative record, evidence of bad faith or improper behavior by the administrative agency in compiling the record justifies further inquiry. DHEC v. Atlantic Steel Industries, Inc., et al., Civil Action No. 2:97-726-12 (August 5, 1999), at 13. Furthermore, Judge Houck stated that the purpose of a court's reliance on the administrative record when reviewing a proposed settlement agreement is analogous to the court's reliance on that same record in a cost recovery action. Id. at 12. I therefore conclude that Petitioners' concerns regarding the administrative record will be adequately addressed in the cost recovery action.

V. Due Process

Finally, the Petitioners contend that considerations of due process under the South Carolina Constitution require that the Division hear this case. Under South Carolina law, the conclusion that this case is not an APA "contested case" does not automatically negate the necessity for an administrative hearing. Under certain circumstances, an administrative hearing may be mandated by Article I, Section 22 of the South Carolina Constitution, even where there is no statute or regulation providing for such a hearing. See Stono River Envtl. Protection Ass'n v. S.C. Dep't of Health and Envtl. Control, 305 S.C. 90, 406 S.E.2d 340 (1991); League of Women Voters v. Litchfield-by-the-Sea, supra; Ogburn-Matthews v. Loblolly Partners, 332 S.C. 551, 505 S.E.2d 598 (Ct. App. 1998). DHEC contends that the procedure it followed in issuing the ROD satisfies constitutional requirements without the necessity for an evidentiary hearing at the administrative level, and that the Petitioners will be afforded due process by being allowed to raise their concerns at the federal cost recovery action.

In Ogburn-Matthews, supra, the South Carolina Court of Appeals addressed the issue of whether DHEC's Office of Ocean and Coastal Resource Management (OCRM) was required under Article I, Section 22 to conduct an administrative adjudicatory hearing when issuing a certificate that filling a wetland was consistent with the Coastal Zone Management Program. The procedures used by OCRM in making their determination included the issuance of a proposed determination of consistency; the provision of public notice of the proposed determination; the receipt of objections to the proposed determination; and the review of those objections by OCRM. The Court of Appeals held that this procedure satisfied the requirements of Article I, Section 22, and that an evidentiary hearing was not necessary to comport with due process.

DHEC argues that the procedure set forth in the NCP, which it alleges that it followed in this case, is sufficient to meet the standards set forth in Ogburn-Matthews, because DHEC provided public notice of its proposed remedy; held a public hearing at which interested parties, including the Petitioners, submitted comments; considered those comments; and then selected its final remedy and documented it in the ROD. An argument could be made that the framework set forth in the NCP satisfies the requirements of Article I, Section 22 of the South Carolina Constitution. However, I decline to make such a finding in this case.

Under South Carolina law, "due process is flexible and calls for such procedural protections as the particular situation demands." Stono River Envtl. Protection Ass'n v. S.C. Dep't of Health and Envtl. Control, 305 S.C. 90, 94, 406 S.E.2d 340, 341 (1991). I am satisfied that, under the specific circumstances of this case, an administrative evidentiary hearing is not mandated in order to comport with due process. Although the facts of this case and the Petitioners' allegations of agency misconduct exemplify the need for scrutiny of DHEC's actions, I do not find this forum will provide any greater or more comprehensive review of Petitioners' claims than that which will be provided by Judge Houck in the cost recovery action. Indeed, I have concluded that the scope and timing of review of DHEC's remedy decision under state law, by virtue of South Carolina's incorporation of CERCLA, is coextensive with the review which will be provided in federal court. Moreover, considerations of judicial economy mandate that this entire action, including all issues relating to the propriety of the remedy selection process, be decided in a single forum. Because of his extensive familiarity with the issues and background of this case, Judge Houck is uniquely qualified to decide the issues raised by the Petitioners here. Furthermore, the review of DHEC's remedy decision by two different courts simultaneously runs the risk of inconsistent results and ultimately frustrates the prompt resolution of this matter. Therefore, I decline to assume jurisdiction in this case.



ORDER

For all the foregoing reasons, DHEC's Motion to Dismiss is hereby GRANTED.

AND IT IS SO ORDERED.







_____________________________

Ralph King Anderson, III

Administrative Law Judge





March 7, 2000

Columbia, South Carolina


Brown Bldg.

 

 

 

 

 

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