ALJDEC decisions subject to certification as final

12F-14722-DWM · Department of Weights and Measures · 2012-08-20

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: July 30, 2012

APPEARANCES: Logan Oil, Inc. failed to appear; the State of Arizona, Department of Weights and Measures was represented by Assistant Attorney General Marc H. Harris, Esq.

WITNESSES: Duane Yantorno, DWM Investigator

ADMINISTRATIVE LAW JUDGE: Eric A. Bryant _____________________________________________________________________

Logan Oil, Inc. (“Appellant”) appeals from a Notice of Violation issued by the Arizona Department of Weights and Measures (“Department”) for failure to register as a supplier/importer of Arizona Cleaner Burning Gas (“CBG”) and for failing to certify reclaimed gasoline that it sold to gasoline retailers. The Department seeks a total of $28,500.00 in civil penalties. Appellant did not appear at the hearing. The Department presented evidence at the hearing, including Exhibits through 44 and testimony from the witness noted above. Based upon the evidence, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law, and Recommended Order finding violations and recommending civil penalties. FINDINGS OF FACT 1. During 2008, Appellant collected gasoline from damaged vehicles in junkyards in Maricopa County and sold this “reclaimed gasoline” to gasoline retailers within Maricopa County for resale. Appellant did not know the origin of the reclaimed gasoline and did not test it to determine the properties of the reclaimed gasoline. 2. The Department discovered Appellant’s sales to gasoline retailers when it inspected those retailers[1] and found documented deliveries of the reclaimed gasoline from Appellant to the retailers and invoices showing payments from the retailers to Appellant for the reclaimed gasoline. 3. The Department requested further documentation from Appellant, including certificates of analysis of the reclaimed gasoline, showing that the reclaimed gasoline Appellant delivered to the retailers was certified as Arizona CBG.[2] Appellant provided the transfer documentation and confirmed its business activities as described above, but stated that there were no certificates of analysis of the reclaimed gasoline because “[a]ll fuel that Logan Oil transferred was gathered from post-consumer sources that would have been certified prior to delivery to the consumer at the gas pump.”[3] 4. After reviewing the transfer documentation and other correspondence with Appellant as part of its investigation, the Department issued a Notice of Violation (“NOV”) to Appellant on December 9, 2011.[4] A detailed and clear Statement of Facts identified that a total of 64,096 gallons of reclaimed gasoline was delivered and sold by Appellant to the retailers;[5] however, the documentation for those deliveries does not show that the reclaimed gasoline was “CBG compliant.”[6] The Department found that the reclaimed gasoline had not been analyzed or certified as CBG, and that Appellant had not registered as a supplier of Arizona CBG in compliance with Departmental rules. 5. The NOV assessed civil penalties for each non-compliant delivery, which the Department numbered as 29 in total. The Department assessed a $500.00 penalty for the first violation and $1,000.00 for each violation afterward, for a total of $28,500.00 in civil penalties.[7] 6. Appellant filed a written appeal, asserting that it was not required to register because it was not an importer. Appellant also asserted in its written appeal that it was not in violation of Arizona law because the reclaimed gasoline had been certified when it was purchased by the consumer from who’s vehicle Appellant reclaimed it. Appellant submitted no proof of that statement.[8] 7. The Administrative Law Judge finds that Appellant was not registered in Arizona as an importer. However, Appellant assumed ownership of reclaimed gasoline from unregistered suppliers (the junkyards) and sold that gasoline to retailers without certifying that the reclaimed gasoline complied with applicable fuel reformulation laws. CONCLUSIONS OF LAW 1. The Department may impose a civil penalty for violation of any provision regulating the taxi business.[9] The Department has the burden of showing a violation that warrants a civil penalty. The standard of proof is “preponderance of the evidence,” meaning evidence showing that a particular fact is “more probable than not.”[10] Therefore, the Department bears the burden of showing, by a preponderance of evidence, that Appellant has violated the law regulating fuel reformulation. The Department has met that burden. 2. All gasoline produced and shipped to or within Arizona, and sold in certain counties including Maricopa County, must meet technical fuel reformulation standards as identified by statute and Departmental rule.[11] The Department has authority to regulate this area of commerce.[12] 3. Importers of Arizona CBG or AZRBOB[13] are required to register with the Department before “producing, importing, or obtaining custody of Arizona CBG or AZRBOB.”[14] An importer is one who “assumes title or ownership of Arizona CBG or AZRBOB produced by an unregistered supplier.”[15] 4. Because Appellant obtained ownership of gasoline from an unregistered supplier, the Administrative Law Judge concludes that Appellant is an importer and is required to be registered. Appellant failed to do so. 5. In addition, if an importer fails to register with the Department, all gasoline imported and transported to the CBG-covered area by that non-registered importer is presumed to be noncompliant.[16] 6. Because Appellant failed to register, all deliveries of reclaimed gasoline are presumed to be noncompliant. 7. The evidence supports a conclusion that Appellant violated the fuel reformulation laws, as noted above, each time it delivered reclaimed gasoline to retailers in Maricopa County. 8. the Department may impose a civil penalty for each violation up to $1,000.00 per violation.[17] The Department has treated each delivery as a separate violation. The evidence supports a conclusion that 29 deliveries as found by the Department are determined to be presumptively noncompliant. Appellant offered no evidence to rebut that presumption. Thus, civil penalties are warranted in the amount calculated by the Department: $500.00 for the first violation and $1,000.00 for each thereafter for a total of $28,500.00. RECOMMENDED ORDER Based on the above findings and conclusions, IT IS RECOMMENDED that the Director of the Arizona Department of Weights and Measures impose civil penalties in the total amount of $28,500.00 against Appellant Logan Oil, Inc.

In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order will be 5 days from the date of that certification.

Done this day, August 20, 2012.

/s/ Eric A. Bryant Administrative Law Judge

Transmitted electronically to:

Kevin Tyne , Director Arizona Department of Weights and Measures ----------------------- [1] Exhibits 1 and 2. [2] Exhibit 3. [3] Exhibit 4. [4] Exhibit 9. [5] This amount is verified by invoices from Appellant in Exhibits 13 through 41. [6] Id. [7] Id. [8] Appellant’s statement assumes that the gasoline in the wrecked vehicles was purchased in an area that sold Arizona CBG. That assumption, however, is not well-founded since it is likely that many of those vehicles could have come from outside the Arizona CBG-area and contained non-CBG gasoline in their gas tanks. [9] A.R.S. § 41-2115(A). [10] Culpepper v. State, 187 Ariz. 431, 437, 930 P.2d 508, 514 (Ct. App. 1996); In the Matter of the Appeal in Maricopa County Juvenile Action No. J- 84984, 138 Ariz. 282, 283, 674 P.2d 836, 837 (1983). [11] A.R.S. § 41-2124(A). [12] A.R.S. § 41-2128. [13] “AZRBOB” is Arizona Reformulated Blendstock for Oxygenated Blending. See A.A.C. R20-2-701. This is the CBG sold during the winter months. [14] A.A.C. R20-2-750(A). [15] A.A.C. R20-2-749. [16] A.A.C. R20-2-750(D). [17] A.R.S. § 41-2115(A).

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Office of Administrative Hearings 1400 West Washington, Suite 101 Phoenix, Arizona 85007 (602) 542-9826