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Michigan Court of Appeals Affirms DEQ’s Large Penalties Against BP for Late LUST Reports

The Michigan Court of Appeals recently affirmed the circuit court order which approved the Department of Environmental Quality’s (DEQ) imposition of significant penalties against BP Products North America, Inc. (BP) for failure to submit complete leaking underground storage tank (LUST) reports in a timely manner as required by Part 213 of the Natural Resources and Environmental Protection Act (NREPA).

The case involved eight LUST sites, most of which BP owned or operated at the time of release.  BP implemented investigation and some remediation work and submitted Final Assessment Reports (FARs) for seven of the eight sites, as required by Part 213.  The DEQ audited the reports and notified BP of deficiencies in its FARs, requesting that BP address the deficiencies and submit amended FARs.  The BP FARs were never completed to the DEQ’s satisfaction.  As a result, the DEQ imposed penalties of $869,150.  BP appealed to the circuit court, arguing against DEQ’s authority under Part 213 on several fronts.  The court found that the DEQ did not exceed its authority and affirmed the imposition of penalties.  BP then appealed to the Court of Appeals, which affirmed the following:

The FAR requirements of the 1995 LUST Act are retroactive.  The DEQ has authority to impose penalties for failing to complete a FAR by the post-1995 deadline even where a release occurred prior to 1995.

• All statutory elements must be included in a FAR in order for it to be “complete”.  The fact that a report is submitted in a timely fashion does not address the issue of completeness.
• The Qualified Consultant (QC) is not the arbiter of FAR completeness.  The QC is an agent of the owner/operator, and the owner/operator may not avoid penalties simply because its QC determines its reports to be complete.
• The DEQ may audit a FAR to determine whether it is complete.  With the recent 2012 amendments to Part 213, DEQ now has 180 days to complete the audit and 14 additional days to inform the owner/operator of the audit results.
• The DEQ may notify the owner/operator of FAR deficiencies and demand compliance.
• BP’s liability cannot be excused for taking no action to gain access to neighboring property to define the extent of contamination.

There are some important take-aways from this case for UST Owners and Operators.  First, a timely report alone will not insulate an Owner or Operator if the report is inadequate.  Second, the person hiring the consultant bears ultimate responsibility for the content of the report.  Owners and operators should take care in retaining a competent QC with experience who adheres to the professional standards outlined in Section 21325 of Part 213, and fully understands the technical and regulatory requirements for proper development of “complete” reports, as required by Part 213.  Finally, many contracts or proposals in use by QCs do not address responsibility for failing to meet regulatory requirements.   Proposals, including standard terms and conditions, should be carefully reviewed by legal counsel to ensure that risks related to inadequate reports are shifted to the QC.

For access to the unpublished August 14, 2012 Court of Appeals opinion, click here:

http://coa.courts.mi.gov/documents/OPINIONS/FINAL/COA/20120814_C295279_49_295279.OPN.PDF

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