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Congaree Riverkeeper, Inc. v. Carolina Water Service, Inc.

United States District Court, D. South Carolina, Columbia Division

March 29, 2017

CONGAREE RIVERKEEPER, INC., Plaintiff,
v.
CAROLINA WATER SERVICE, INC. Defendant.

          ORDER AND OPINION

          The Honorable Margaret B. Seymour Senior United States District Court Judge

         On January 14, 2015, Plaintiff Congaree Riverkeeper, Inc. (“Plaintiff”) sued Defendant Carolina Water Service, Inc. (“Defendant”) for violations of the Clean Water Act (“CWA”), 33 U.S.C. §§ 1251 et seq. (2012). In Claim I, Plaintiff claims that Defendant violated its National Pollutant Discharge Elimination System (“NDPES”) permit by failing to connect its wastewater treatment plant (“WWTP”) to the regional system. In Claim III, Plaintiff asserts Defendant violated the effluent limitations allowed under Defendant's NDPES permit. Plaintiff moves for summary judgment on Claims I and III. ECF No. 57. Defendant moves for summary judgment on Claim I. ECF No. 58.[1]

         On August 1, 2016, the South Carolina Department of Health and Environmental Control (“DHEC”) denied Defendant's permit renewal request. ECF No. 64-1. On September 7, 2016, the court issued a text order requiring each party submit a supplemental brief on the impact of DHEC's decision to deny the permit renewal on the present case. Both parties asserted that DHEC's decision not to renew does not affect the current case. ECF No 64 at 5 (Plaintiff's supplemental brief); ECF No. 65 at 1 (Defendant's supplemental brief).

         For the reasons set for below, the court grants Plaintiff's motion for summary judgment and denies Defendant's motion for summary judgment. The court finds there is no genuine issue of material fact that Defendant violated the terms of its NDPES permit by failing to connect to the regional system. The court finds there is no genuine issue of material fact that Defendant exceeded its effluent limitations and Defendant cannot demonstrate the affirmative defense of “upset.”

         I. FACTUAL AND PROCEDURAL BACKGROUND

         Plaintiff is a § 501(c)(3) not-for-profit organization that works to protect and improve the environmental status and recreational uses of the Congaree, Lower Saluda, and Lower Broad Rivers in South Carolina. ECF No. 1 at ¶ 12. Plaintiff's board, staff, and members live near and regularly visit the Lower Saluda River and intend to visit that river in the future. ECF No. 1 at ¶ 14. Defendant owns and operates wastewater treatment plants (“WWTPs”) and other associated facilities as a public utility pursuant to South Carolina Code Annotated §§ 58-3-5(6), 58-3-10(4). ECF No. 58-1 at 5. The Public Service Commission of South Carolina (“PSC”) has exclusive jurisdiction to regulate public utilities in South Carolina, including the oversight and approval of any agreement or contract affecting a public utility's ability to provide sewer service to citizens. ECF No. 58-1 at 6 n.6. PSC issued Defendant's WWTPs operating certificates of public convenience and necessity. ECF No. 58-1 at 5.

         Central Midlands Counsel of Governments (“CMCOG”) is tasked with conducting water quality planning and management for the Midlands region of South Carolina. See ECF No. 58-1 at 3-4. The Town of Lexington (“Town”) falls within the Midlands region and was chosen as the Designated Management Agency (“DMA”) and regional provider of wastewater collection by the CMCOG, in consultation with the governor, pursuant to 33 U.S.C. § 1288(a). ECF No. 58-1 at 4 n.3. DHEC has the overarching responsibility of regulating activities affecting water quality and establishing classifications and standards. DHEC's issues NDPES permits. Any DHEC decision may be appealed to an administrative law court (“ALC”). The ALC decision may then be appealed to the South Carolina Board of Health and Environmental Control (“Board”). Finally, any Board decision may be appealed to a South Carolina circuit court.

         In 1979, pursuant to CWA § 208, 33 U.S.C. § 1288, CMCOG drafted The 208 Water Quality Management Plan for the Central Midlands Region (the “208 Plan”) a waste treatment and water quality plan for the region. The 208 Plan was most recently updated in 2004. In the 208 Plan, CMCOG states a general policy to consolidate smaller facilities into regional systems. ECF No. 58-1 at 4.[2] A 1993 revision of the 208 plan designated a facility owned by the City of Cayce, South Carolina, as the regional treatment facility (“RTF”) that would service the Midlands region. ECF No. 58-1 at 5.

         Defendant owns and operates a WWTP in Lexington County, South Carolina, known as the I-20 Plant. Id. DHEC issued NPDES Permit No. SC0035564 (“the Permit”) to Defendant on November 17, 1994, (effective January 1, 1995). ECF No. 57 at 4. The Permit was modified in April 1996 and was due to expire on September 30, 1999. ECF 57-1. The Permit authorizes Defendant to discharge wastewater from the I-20 Plant into the Lower Saluda River subject to effluent limitations and monitoring requirements. Importantly, the Permit provides that “[i]n accordance with the [208 Plan], the [I-20] facility is considered a temporary treatment facility that will be closed out when the regional sewer system is constructed and available.” ECF No. 57-1. Defendant's permit was to expire when the regional system received its permit to operate. Id.

         On April 7, 1999, Town completed construction on the regional sewer line and received a Permit to Operate from DHEC. ECF No. 58-1 at 6. On April 21, 1999, DHEC informed Defendant and Town that the regional system received its permit to operate and that Defendant's construction permit to connect to the regional system was approved. ECF Nos. 65-4, 65-5. Town and Defendant were unable to agree on the terms of a connection. ECF No. 65 at 2. Defendant never constructed the pipeline to connect to the regional system. Id. On July 16, 1999, and August 24, 1999, Defendant sought a major modification to the Permit that would allow the I-20 Plant to continue operating indefinitely as Defendant negotiated with Town and sought PSC approval to connect to the regional system. ECF 61-2 at 24-25. DHEC denied Defendant's major modification requests on the basis that Defendant did not provide good cause for its requests. ECF 61-4 at 2. In February 2000, DHEC found that Defendant was in violation of the Permit due to Defendant's failure to connect to the regional system and for exceeding permitted discharge levels. ECF No. 61-5. In February or March 2000, Defendant appealed denial of the modification, denial of permit reissuance, and issuance of violations to the ALC. See Carolina Water Service v. S.C. Dept. of Health and Environ. Control, No. 99-ALJ-07-0450, 2002 WL 385126 (S.C. Admin. L. Judge Div. Feb. 25, 2002) [hereinafter 2002 ALC Decision].

         In July 2000, DHEC and Town entered into an agreement that (1) noted Town's regional system had insufficient capacity to handle the wastewater from Defendant's system, (2) noted PSC must approve any agreement between Town and Defendant, and (3) required Town to offer Defendant a contract by August 5, 2000. ECF No. 65 at 3. Town and Defendant came to an agreement and submitted said agreement to PSC (Docket No. 2000-425-S); however, Defendant withdrew the agreement from consideration in January 2001 pending consideration of Defendant and Town's joint amendment to the 208 Plan. Id. The amendment from Defendant and Town proposed that the I-20 Plant be designated as a permanent treatment facility and not be required to connect to the regional facility. Id.

         On March 22, 2001, CMCOG approved the joint amendment to the 208 Plan. ECF No. 58-1 at 7. However, DHEC refused to certify the amendment. ECF No. 58-1 at 7. In August 2001 Defendant, Town, and CMCOG filed a petition in the ALC protesting DHEC's refusal to certify the proposed amendment. The Lexington County Joint Municipal Water and Sewer Commission intervened. See CMCOG v. DHEC, Nos. 01-ALJ-07-0363-CC, 01-ALJ-07-0364-CC, 01-ALJ-07-0365-CC, 01-ALJ-07-0433-CC, 2002 WL 31716469 (S.C. Admin. L. Judge. Div. Oct. 22, 2002).

         On February 25, 2002, the ALC issued a decision on Defendant's appeal of DHEC's denial of the modification, denial of permit reissuance, and issuance of violations. The ALC deferred to CMCOG's finding that Defendant was in conformance with the NDPES permit until February 24, 2000, because the regional system was not available for connection. Carolina Water Service, 2002 ALC Decision at *4, *6. Further, the ALC modified the permit compliance schedule requiring Defendant connect to the regional system. Id. at 9. Essentially, the ALC ordered that Defendant was under an “on-going obligation to negotiate an agreement and to continue to seek an agreement between [Defendant] and [Town] that will be approved by the PSC.” Id. at 10. The order then states specific timeframes if PSC approves of an agreement. Alternatively, the ALC held that if PSC denies the connection agreement, then the permit will expire after one hundred-eighty days of the final PSC Order. Id.

         Defendant and DHEC both appealed to the DHEC Board. Carolina Water Service v. S.C. Dep't of Health and Environ. Control, No. 99-ALJ-07-0450, ECF No. 16-3 (DHEC Board Order March 15, 2004) [hereinafter 2004 Board Order]. The DHEC Board reversed the ALC's holding that Defendant's permit would expire one hundred-eighty days after a PSC denial but otherwise affirmed the ALC's amended schedule to connect to the regional system-including Defendant's on-going obligation to negotiate with Town for an acceptable contract. Id. at 5.

         In 2002, Defendant submitted the 2000 interconnection agreement to PSC for approval, with modifications to the customer rate. PSC refused to approve the interconnection, finding the proposed agreement against the public interest. In re Application of Carolina Water Service, No. 2002-147-S, 2003 WL 26623818 at *5 (S.C.P.S.C. 2003). PSC found that Defendant agreed to pay too high a rate for the service received and Defendant's customers, in effect, would subsidize the regional system. Id. at 6. PSC denied Defendant and Town's alternative plan, which would sell one of Defendant's other facilities and designate the I-20 Plant as a permanent treatment facility. Id.

         In August 2009, the City of Cayce, Town, and the Lexington County Joint Municipal Water and Sewer Commission entered into a contract to expand the capacity of the Cayce regional treatment plant. See ECF No. 58-3. The construction of the expansion was financed through issuance of tax-exempt bonds with restrictive covenants designed to preserve the bonds' tax-exempt status.[3] ECF No. 58-3 at 38-39. One condition is a restriction on the amount of wastewater from “Private Business Use” that can be treated. Id. “Private Business Use” includes a private utility like the I-20 Plant. Id.; see also ECF No. 58-1 at 9. Town covenanted that it would not enter into any contract or agreement for sale of its wastewater services or allocated capacity that constitutes a “Private Business Use.” ECF No. 58-3 at 39. If Town contracted with another party for activity that constituting “Private Business Use, ” the contract “may cause the interest on [b]onds to be included in the gross income of the holders, ” thereby, extinguishing the bonds' tax-exempt status. See ECF No. 58-3 at 38.

         Defendant did not engage in negotiations with Town after the denial by PSC in 2003 until 2014, after Plaintiff served its notice of intent to sue under the CWA. See ECF No. 58-1 at 8. In July 2012, Defendant again inquired into making the 1-20 Plant into a permanent facility and stated to DHEC that it had not had “any recent discussions with [Town] about hooking up to [the regional] system.” ECF No. 57-4.

         On November 6, 2013, Plaintiff served on Defendant and DHEC notice of intent to sue under the CWA. ECF No. 58-1 at 10. Plaintiff asserted that Defendant was in violation of NPDES Permit SC0035564 since it has failed to eliminate its discharge into the Saluda River. ECF No. 58-1 at 10.

         On March 21, 2014, Defendant initiated negotiations with Town regarding a possible connection to the regional system. No. 58-5. On May 8, 2014, Town responded that it was not interested in an interconnection at the time. ECF No. 7-10.

         On July 31, 2014, Defendant and Town entered into a confidentiality agreement to negotiate a sale of the I-20 Plant. ECF No. 58-6. Town was interested in acquisition of the I-20 Plant only if it also acquired another facility owned by Defendant, the Watergate system. ECF No. 58-7. Before engaging in further negotiations Defendant requested a non-binding letter “indicating that a $13.5 Million price is within a reasonable range of value that the Town would be willing to consider paying.” Id. Town declined to enter into a non-binding letter of agreement, stating it was unable to determine if that price was within a reasonable range without other information. ECF No. 58-7. Defendant provided Town with maps of the system, as requested. ECF No. 58-7. In December 2014, Defendant provided Town with additional information on the number of customers, yearly revenue, yearly costs, and other data. ECF No. 58-8. Town did not respond to Defendant about the proposed price and did not make an offer for the systems. ECF No. 58-1 at 11.

         In July 2015, Defendant submitted a draft permit renewal to DHEC, which sought to add that “[t]o connect to the Town DHEC recognizes that [PSC] must approve an agreement related to connection to the regional sewer line.” ECF No. 65-8 at 34. DHEC issued a fact sheet noting that Defendant would need PSC approval and that DHEC does not have the authority to force Defendant and Town make a connection agreement. Id. at 41. On August 25, 2015, DHEC held a public hearing to elicit public feedback on Defendant's permit renewal request. ECF No. 65 at 7. Approximately 285 individuals attended the hearing, including numerous public officials. ECF No. 64 at 3. Almost all attendees advocated for denial of the renewal permit. Id.; ECF No. 58-18 at 4.

         On September 3, 2015, Defendant unilaterally filed an application with PSC seeking approval of an interconnection agreement at the wholesale treatment rate Town charged Defendant for another system. ECF No. 34-1 (PSC Docket No. 2015-327-S). Defendant did not seek Town's approval before submitting the application. ECF No. 58-10 at 2.

         On September 4, 2015, DHEC issued a notice of intent to deny the renewal permit. ECF No. 33-1 at 1. DHEC determined Defendant was ineligible for a permit renewal because Defendant's permit required Defendant to connect to the regional system once the system was operational and Defendant failed to do so. ECF No. 33-1 at 1.

         On September 9, 2015, Defendant sent Town a letter requesting interconnection on the terms set forth in the September 3, 2015, application. ECF No. 58-9. Town declined any interest in an interconnection agreement as the terms did not accurately reflect current costs. ECF No. 58-10 at 2-3. Town indicated a continued interest in acquisition of the I-20 Plant, but only if Defendant agreed to pay a portion of Town's due diligence. ECF No. 58-1 at 12-13. Defendant responded that it was not interested in such an agreement. ECF No. 58-1 at 12.

         On November 10, 2015, South Carolina Office of Regulatory Staff organized a meeting to facilitate negotiations between Defendant and Town. ECF No. 65 at 8. At this meeting, Town's limiting contractual and bond covenants were discussed. Id. In January 2016, Defendant's PSC application was dismissed without prejudice. See ECF No. 65-8 at 74. Between April 2016 and July 2016, DHEC conducted numerous mediation sessions between Defendant and Town. ECF No. 65 at 9.

         On August 1, 2016, DHEC formally denied Defendant's permit renewal request. ECF No. 64-1. As part of DHEC's denial, DHEC required Defendant and Town submit a coordinated plan for Defendant to connect to the regional treatment facility within sixty days. ECF No. 64-2 at 5. If DHEC did not approve that plan, an amended plan must be resubmitted within fifteen days. Id. Finally, Defendant's plant must be connected to the regional system and cease discharge within twelve months. Id. Defendant appealed denial of permit reissuance to ALC on September 21, 2016. ECF No. 65 at 10.

         To date, there has been no interconnection agreement or acquisition agreement for the I-20 Plant and Defendant continues to discharge water into the Saluda River. Defendant is permitted limited discharges into the Saluda River. Defendant has exceeded those discharge limits twenty-three times between 2009 and 2013. ECF No. 1-3.

         II. LEGAL STANDARD

         The court shall grant summary judgment if “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56. The judge does not weigh evidence but determines if there is a genuine issue for trial. Anderson v. Liberty Lobby, 477 U.S. 242, 249 (1986). The party seeking summary judgment bears the initial burden of coming forward and demonstrating an absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the moving party has met its burden, the nonmoving party must affirmatively demonstrate that there is a genuine issue of material fact for trial. Matsushita Elec. Indus. Co. Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). The court should grant summary judgment if a party fails to “establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” Celotex Corp., 477 U.S. at 322.

         III. ANALYSIS

         Plaintiff moves for summary judgment on Claims I and III. Plaintiff argues that there is no genuine issue of material that (1) Plaintiff has standing to sue, (2) Defendant was required to connect to the regional treatment facility under the 1994 Permit, and (3) Defendant violated the effluent limitations requirement on twenty-three occasions. Defendant moves for summary judgment on Claim I. Defendant claims there is no genuine issue of material fact that (1) Plaintiff lacks standing, (2) Plaintiff is barred by the statute of limitations, (3) the 2002 modifications to the permit apply and Defendant is in compliance with the modified terms, or if the 1994 Permit applies, Defendant is in compliance with the 1994 Permit as well. Defendant argues there is a genuine issue of material fact whether it has an “upset defense” to its effluent limitations violations.

         A. Claim I: Violation of Connection Requirement

         1. Plaintiff Not Barred by Statute of Limitations

         Defendant asserts that the alleged violation of failure to connect occurred more than five years prior to the filing of the complaint; therefore, Plaintiff's action is barred by the statute of limitations. At the motion to dismiss stage, the court held that the violation is ongoing, thus not barred by the statute of limitations.

Defendant also argued that Plaintiff's first cause of action was barred by the five-year statute of limitations contained in 28 U.S.C. § 2462. Plaintiff countered that the alleged violation was a continuing violation. Citizen-plaintiffs show an ongoing violation “either (1) by proving violations that continue on or after the date the complaint is filed, or (2) by adducing evidence from which a reasonable trier of fact could find a continuing likelihood of a recurrence in intermittent or sporadic violations. Intermittent or sporadic violations do not cease to be ongoing until the date when there is no real likelihood of repetition.” Chesapeake Bay Found., Inc. v. Gwaltney of Smithfield, Ltd., 844 F.2d 170, 171-72 (4th Cir. 1988). Assuming for the purposes of the motion to dismiss that Defendant's failure to connect its ...

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