ALJDEC

01A-C026-DEQ · Department of Environmental Quality · 2001-04-17

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: April 16, 2001 APPEARANCES: Appellant : Dan Blaes, President, appeared for Blaes Environmental Management, the Officer appearing pro se. State : Sonia Overholser, Assistant Attorney General, represented the Arizona Department of Environmental Quality (“ADEQ“); Witness Balaji Vaidyanathan, Manager of the Air Quality Permits Division of ADEQ; Witness Mike Clark, Chief Financial Officer ADEQ. ADMINISTRATIVE LAW JUDGE: Gary B. Strickland _____________________________________________________________________ This matter convened for the purpose of affording Appellant Blaes Environmental Management, by and through its President Dan Blaes, the opportunity to present competent, reliable, probative and substantial evidence in support of the Appellant’s contention that the Arizona Department of Environmental Quality has inappropriately assessed the company permit fees inferentially in violation of Arizona Statute, Department regulation, or general principle of law. Having heard the testimony of the witnesses, having examined the proffered exhibits[1], and having read and considered the entire record[2], the undersigned Administrative Law Judge makes Findings of Fact, renders Conclusions of Law, and issues the following Recommended Decision to the Director of the Arizona Department of Environmental Quality.

APPLICABLE LAW 1. The Director is required to establish by rule the requirements that must be met to support a permit application.[3] The Department has promulgated regulations for the permitting of complex and non-complex sources. The regulations establish an assessment of permit fees depending upon the type of source assessed.[4] 2. Prior to the year 2001, the five year permit fee for a non- complex source was $3,040., payable in five installments, commencing prior to issuance and payable thereafter as one installment each successive year over the next four years.[5] As of January 1, 2001, the fee for a one year “General Permit” is $540.[6] 3. Non Title V[7] permit fees (state permit fees) are assessed in an effort to recoup permit processing costs.[8] 4. Unpaid permit fees are subject to an assessment of an interest penalty.[9]Interest is to be calculated in accordance with the provisions of the United States Internal Revenue Code, following the “short-term rate” plus three (3) percentage points.[10]

FINDINGS OF FACT 1. Blaes Environmental Management is a company involved in the business of soil vapor extraction. The company owns equipment that extracts gasoline from the soil upon call from consulting and major oil companies. Because the process produces air pollutants, the equipment is required to be permitted and monitored for conformity with state and federal pollution standards. 2. Until the year 2000, each soil vapor extraction machine was required to be individually permitted (“Individual Permits”). Blaes Environmental Management owns and operates ten (10) such pieces of equipment in the State of Arizona. 3. During the year 2000, the Department developed an alternative simplified system for the permitting of these machines (“General Permits”). 4. The Individual Permit system allowed a company to obtain a permit for each piece of equipment used in soil vapor extraction by making application and paying a fee of $3,040., payable in equal installments over a five (5) year period. The General Permit scheme requires a one time only fee, due to the simplification of the application processing requirements. 5. By law, the application fee that is charged by the Department must account for time expended by Department employees in the processing of the application. The General Permit fee has reduced considerably the assessment burden on the owner/operator of the equipment. A General Permit fee is currently $540. 6. The problem presented was created by Blaes Environmental Management when it determined to apply for a General Permit for three (3) pieces of its soil vapor extraction equipment during tenure of the Individual Permits previously acquired for the same equipment. Thinking that the previous assessed fees would be subsumed or replaced by the General Permit fee, Blaes has found itself owing both the General fee as well as the outstanding balance on the previously obtained Individual Permit fees. 7. There are three permit fees at issue in this appeal, each related to issuance of an Individual Permit numbered 1000374, 1001036, and 1001038, respectively.[11]The principal balance owed for two of the permits is $2,432. each, representing a remaining four (4) installments, and $608. for a sole remaining installment on the other. 8. The system of General Permits was intended by the Department to replace the former system of Individual Permits. 9. In support of its argument that it should not be required to satisfy any outstanding obligation relative the Individual Permits that had previously been issued to it, Blaes Environmental Management asserts that Dan Blaes was assured by three (3) former employees[12] of the Department’s Air Quality Division that General Permits “would supersede” the former system and that if the company found itself needing a General Permit immediately upon implementation of the crossover, “it will all switch to that.” From this language, Dan Blaes inferred that outstanding Individual Permit fees would be waived. The former employees were involved in discussions concerning the development of the General Permit system, development discussions in which Mr. Blaes participated.[13] 10. Dan Blaes asserts that he relied upon the statements made to him by the three (3) former employees when he decided to apply for the three (3) General Permits at issue. 11. Blaes Environmental Management acknowledges that it could not have operated the equipment at issue had it not obtained the Individual Permits for the equipment at the time that it did obtain those permits. 12. The Department contends that the processing fees are non- waivable, authorized and required by state and federal law. 13. The principal currently due and owing on the respective Individual Permit fees at issue, along with the amount of interest assessed to date, is as follows:[14] Permit No. Principal Owing Interest Owed

1000374 $608. $22.57 1001036 $2,432. $134.11 1001038 $2,432. $134.11

The total amount owed, principal and interest to date, is $5,762.79. 14. The assessment of an interest penalty on unpaid fees is authorized by A.R.S. ( 49-113(B). 15. The weight and sufficiency of the evidence overwhelmingly preponderates that the Department has assessed the soil vapor extraction equipment permit processing fees at issue in accordance with the requirements of law, that the fees once assessed may not be waived, that Dan Blaes did not reasonably rely on the asserted ostensible assurances of the former employees’ hearsay statements quoted, that the hearsay offered by Mr. Blaes is of such a quality not to be accorded value and weight, that the statements were ambiguous as related allowing for inference based purely upon perception, and that the ostensible assurances could not, in any event, be authoritative. The evidence further demonstrates that the interest charged represents a proper and fair calculation of the late penalty assessment required by statute and regulation.

CONCLUSIONS OF LAW 1. The Director of the Arizona Department of Environmental Quality has jurisdiction over the issues presented by this appeal[15] and authority to issue a Final Administrative Order in the matter.[16] 2. The burden of proof generally at an administrative hearing falls to the party asserting a claim, right or entitlement or seeking to impose a penalty.[17] Further, the standard of proof is that of the “preponderance of the evidence”.[18] Proof by a preponderance means that the evidence is sufficient to persuade the finder of fact that the proposition is “…more likely true than not.”[19] The evidence taken as a whole must convince the decision maker that the party who bears the overall burden of persuasion, in this case the Appellant,[20] is more probably correct on the issue(s) in dispute. Observing these standards, Appellant has failed to carry its burden of demonstration, by a preponderance of the evidence, that the Department has violated statute, regulation or general principle of law by demanding payment of the fees at issue, with interest added thereto. 3. The statutory scheme governing the issuance of permits for the operation of soil vapor extraction equipment in Arizona, and the promulgated regulatory glosses thereon, support the Department’s assessment of the permit fees at issue. It is apparent that Appellant made a conscious decision to apply for all of the permits, both Individual and General, that have created the Appellant’s present dilemma. There is no plausibly reliable evidence in the record that Appellant Blaes made its decision based upon assurance by Department employees that Appellant would be relieved of its obligation for the Individual Permit processing fees once it had successfully applied for the new General Permits. Any reliance was unreasonable at best. Further, the Department has assessed an interest penalty in accordance with its statutory obligation, at the rate established by law.

RECOMMENDED DECISION Based upon the foregoing, the undersigned Administrative Law Judge recommends that the Director of the Arizona Department of Environmental Quality issue a Final Order directing Appellant to reimburse the Department for permit application costs, plus accrued interest, as identified in Findings of Fact paragraph 13 herein. Set forth this 18th day of April in the year 2001. OFFICE OF ADMINISTRATIVE HEARINGS

______________________________________ Gary B. Strickland Administrative Law Judge

Original transmitted by mail this ____ day of ____________, 2001, to:

Department of Environmental Quality Jacqueline E. Schafer ATTN: Lavonne Watkins 3033 North Central Avenue Phoenix, AZ 85012

By ___________________________

----------------------- [1] The Department offered seventeen (numbered 1 through 17) exhibits. Each of the exhibits was received into evidence without objection on relevancy grounds.

[2] Administrative notice is taken of the documents within the Department’s hearing file, without objection. [3] A.R.S. ( 49-426(C). [4] A.A.C. R18-2-326. [5] A.A.C. R18-2-326(H). [6] A.A.C. R18-2-511(C). [7] ( 502 of the Clean Air Act; 42 U.S.C. (( 7401 et seq. [8] A.R.S. ( 49-426(E)(2) [9] A.R.S. ( 49-113(B). [10] A.R.S. ( 42-1123(A). [11] Hearing Exhibit 11. [12] The former employees names are Mohan, Misra and Sexton. [13] As an issue not noticed in this appeal, Mr. Blaes further asserts that he should be compensated for time expended by him (25 hrs. attendance at meetings and 16 hrs. preparation time), as a spirited public citizen in the development discussions that resulted in implementation of the General Permit system. [14] Based on the figures that the Department placed into evidence at the hearing. Exhibit 12. The calculations were received into evidence uncontested. [15] A.R.S. (( 49-104 and 49-1014. [16] A.R.S. ( 41-1092.08 (the Director is authorized to adopt, modify, or reject any or all of the Administrative Law Judge’s Findings or Conclusions, or to allow certification of the Recommended Decision by silence). [17] Culpepper v. Arizona Board of Nursing, 187 Ariz. 431, 930 P.2d 508 (App. 1997); See also Ariz. Admin. Code R2-19-119 (B). [18] Smith v. Arizona Department of Transportation, 146 Ariz. 430, 706 P.2d 756 (App. 1985); See also Ariz. Admin. Code R2-19-119 (A). [19] In re Arnold and Baker Farms, 177 B.R. 648, 654 (9th Cir. BAP (Ariz.) 1994). See also, J. Livermore, R. Bartels, & A. Hameroff, LAW OF EVIDENCE ( 301.1(4th ed. 2000) (One party bears the overall burden of persuasion on each fact material to the party’s claims and defenses. Further, the party with the burden of persuasion on a particular fact is required to satisfy the burden of production of enough qualitative evidence sufficient to support a finding of the existence of the fact, following a reasonable person standard.) [20] See, A.R.S. ( 41-1092.07(G) (placing the burden on the party challenging a permit denial)

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