Title: Agency of Natural Resources v. Deso

State: vermont

Issuer: Vermont Supreme Court

Document:

Agency of Natural Resources v. Deso (2001-532); 175 Vt. 513; 824 A.2d 558

2003 VT 36

[Filed 27-Mar-2003]

                                 ENTRY ORDER

                                 2003 VT 36

                      SUPREME COURT DOCKET NO. 2001-532

                             JANUARY TERM, 2003

  Agency of Natural Resources	       }	APPEALED FROM:
                                       }
                                       }
       v.	                       }	Environmental Court
                                       }	
  Richard Deso	                       }
                                       }	DOCKET NO. 204-9-00 Vtec

                                                Trial Judge: Merideth Wright

             In the above-entitled cause, the Clerk will enter:

       ¶  1.  Respondent Richard Deso appeals an order of the environmental
  court fining him $200,474 (reduced to $100,000 pursuant to 10 V.S.A. §
  8010(c)) for operating a gas station for eighteen months without installing
  a Stage II vapor recovery system as required by Vermont's Air Pollution
  Control Act, 10 V.S.A. §§ 551-576, and Air Pollution Control Regulations,
  Stage II Vapor Recovery Controls at Gasoline Dispensing Facilities §
  5-253.7.  Deso argues that in calculating the penalty, the court erred by
  (1) improperly counting as an economic benefit of his misconduct $161,264
  in profits earned from the sale of gasoline without an approved emission
  control system; (2) incorrectly determining that the violation, which
  ceased in 1999, was a "continuing violation" and thus subject to a $100,000
  fine instead of $25,000 maximum penalty; and (3) including $5,000 to
  replace underground pipes as part of Deso's avoided costs despite the
  State's failure to produce evidence at trial that the pipes had failed
  while Deso owned the gas station.  We affirm in part and reverse in part.

       ¶  2.  Vermont regulations require all gasoline dispensing
  facilities with an annual throughput of 400,000 or more gallons per year to
  install a Stage II vapor recovery system to capture harmful volatile
  organic compounds that would otherwise escape into the atmosphere when
  vehicle gas tanks are filled.  See Air Pollution Control Regulations, Stage
  II Vapor Recovery Controls at Gasoline Dispensing Facilities, 7 Code of Vt.
  Rules § 5-253.7(a)-(d), at 12 031 001 - 36.1-36.2.  Under the regulatory
  schedule, any gas station that sells 1,200,000 or more gallons per year
  must cease all gasoline transfers after Dec. 31, 1997 unless and until an
  approved Stage II system is installed.  Id. § 5-253.7(c)(1),(g)(1), at 12
  031 001 - 36.1, 36.5. 

       ¶  3.  Deso owned and operated a self-service gas station in St.
  Albans from August 31, 1990 until he sold the station to Bradford Oil on
  June 30, 1999.  During that time, he installed underground return piping
  for a gravity-feed Stage II vapor recovery system, but never installed the
  above ground components.  Shortly after the sale, tests by the new owner
  showed that the underground pipes had malfunctioned and needed to be
  replaced. 
        
       ¶  4.  A year later, the Secretary of the Agency of Natural
  Resources (ANR) issued an administrative order and imposed a $27,050
  penalty pursuant to the state's Uniform Environmental Law Enforcement Act
  (UELEA), 10 V.S.A. §§ 8001-8018, finding that Deso had (1) submitted false
  written reports to the Air Pollution Control Division regarding gasoline
  sales, (2) failed to pay the proper petroleum assessment fees, and (3)
  failed to install a Stage II vapor recovery system.  After Deso requested a
  hearing before the environmental court pursuant to § 8012(a), the Secretary
  amended the administrative order by raising the assessed penalty to $44,000
  and reserving the right to augment the penalty based on evidence to be
  presented at the hearing regarding the amount of economic benefit Deso
  gained from the violations.

       ¶  5.  Based on the evidence at the hearing, the environmental court
  found that Deso had substantially underreported his actual gasoline sales,
  failed to pay the petroleum assessment fee on the actual sales volume, and
  knowingly operated his gas station without a Stage II vapor recovery system
  from January 1, 1998 until June 30, 1999.  The court determined that during
  those eighteen months, approximately 14,627 pounds of volatile organic
  compounds were released into the air.  The court also found that the
  original underground piping was either not installed properly in 1994, or
  had failed by the time Deso sold the station in the summer of 1999.

       ¶  6.  Pursuant to 10 V.S.A. § 8012(b)(4), the environmental court
  reviewed anew the penalty to be assessed against Deso, using the eight
  criteria set forth at § 8010(b).  Regarding Deso's failure to install the
  required Stage II vapor recovery system, the court determined that Deso
  gained two types of economic benefits.  First, the court held that Deso
  gained ten cents per gallon profit, or $161,264, by illegally selling
  gasoline between January 1, 1998 and June 30, 1999.  Second, the court
  determined that Deso benefitted by avoiding the costs of installing and
  maintaining the vapor recovery system, including $8,070 to install the
  above ground components and $5,000 to dig up and replace the faulty
  underground piping.  Pursuant to § 8010(b)(6), the court assessed $26,140,
  or twice the avoided costs.  The court further determined that Deso knew or
  had reason to know the violation existed, and that it caused an actual
  impact on the environment and a potential for harm to the health of users
  and neighbors of the facility, but assessed no penalty for these factors. 
  In total, the court fined Deso $200,474 for selling gasoline without a
  Stage II vapor recovery system, $5,000 for submitting false written
  reports, and $4,800 for underpaying the proper petroleum assessment fee. 
  Pursuant to § 8010(c), the court reduced the total penalty to $100,000. 
  Deso now appeals the penalty imposed for his violation of the Stage II
  regulation.

                                     I.
   
       ¶  7.   Deso's first contention is that the court erred by
  determining that his so-called "wrongful profits" - $161,264 earned from
  the sale of gasoline without an approved emission control system - was an
  economic benefit gained from the violation.  We agree.  In calculating the
  amount of a penalty under UELEA, the environmental court must consider all
  of the statutory criteria set forth in § 8010(b), including "the economic
  benefit gained from the violation." 10 V.S.A. § 8010(b)(5); Agency of
  Natural Res. v. Godnick, 162 Vt. 588, 598,