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Mississippi Comm'n on Envtl. Quality v. Bell Utils. of Miss., LLC

Supreme Court of Mississippi

April 10, 2014

MISSISSIPPI COMMISSION ON ENVIRONMENTAL QUALITY, MISSISSIPPI DEPARTMENT OF ENVIRONMENTAL QUALITY AND MISSISSIPPI ENVIRONMENTAL QUALITY PERMIT BOARD
v.
BELL UTILITIES OF MISSISSIPPI, LLC

Page 869

DATE OF JUDGMENT: 01/08/2013. TRIAL JUDGE: HON. DEBORAH J. GAMBRELL.

FOR APPELLANTS: LISA THOMPSON OUZTS, ROY FURRH.

FOR APPELLEE: KATHRYN H. HESTER.

BEFORE RANDOLPH, P.J., PIERCE AND KING, JJ. WALLER, C.J., RANDOLPH, P.J., LAMAR, KITCHENS, CHANDLER AND PIERCE, JJ., CONCUR. DICKINSON, P.J., CONCURS IN PART AND IN RESULT WITH SEPARATE WRITTEN OPINION JOINED BY COLEMAN, J.

OPINION

Page 870

NATURE OF THE CASE: CIVIL - STATE BOARDS AND AGENCIES

KING, JUSTICE:

¶1. Lawrence Elliott owned and operated the Black Creek Water and Wastewater systems in Forrest County from the 1990s until 2005. The systems are a few miles upstream of an area of Black Creek that is designated as a National Wild and Scenic River. Under Elliott's ownership and operation, the systems suffered numerous violations of environmental regulations, including multiple illegal sewage discharges. Bell Utilities purchased the systems from Elliott in 2005 and vastly improved the situation, expending its own money in an attempt to bring the system into compliance. In this vein, Bell entered into an Agreed Order with the Mississippi Department of Environmental Quality in which compliance issues were addressed, and in which Bell agreed to put up a $20,000 financial assurance that would be returned to Bell after two years of adequate compliance. In 2010, Bell sought to sell the Black Creek systems to Utility One, LLC, and to transfer the attendant permits to it. MDEQ refused to transfer Bell's wastewater permit to Utility One unless Utility One put up a $20,000 financial assurance. Bell appealed the denial of the permit transfer to the chancery court. The chancery court reversed the Permit Board, finding that its actions were arbitrary and capricious because it has not promulgated regulations on how to conduct a regulatory hearing and on when and whether to demand financial assurances prior to permit transfer. It ordered MDEQ and the Permit Board to promulgate such regulations. MDEQ appeals to this Court. Because this Court finds that the Permit Board's demand of $20,000 from Utility One to transfer the permit was beyond its power, this Court reverses and renders the Permit Board's denial of the permit transfer, thus affirming the portion of the chancery court judgment that reverses the Permit

Page 871

Board. However, because the agencies are not required under the APA to promulgate rules and regulations for formal Permit Board hearings, we vacate the portion of the trial court's judgment that requires them to do so.

FACTS AND PROCEDURAL HISTORY

¶2. Several state agencies are involved in this case. The Mississippi Commission on Environmental Quality (" Commission" ) is the agency tasked with carrying out the state's policies preventing, controlling, and abating pollution of the State's air and waters by enforcing pollution control laws and regulations and any permits issued by the Permit Board. The Mississippi Environmental Quality Permit Board (" Permit Board" ) has the power to take action on permits administered through MDEQ. The Mississippi Department of Environmental Quality (" MDEQ" ) is tasked with providing technical assistance and support to the Commission and Permit Board, and its duties include conserving, managing, developing, and protecting the State's natural resources. The duties of the Mississippi Department of Health (" MSDH" ) include regulating drinking water systems. The Mississippi Public Service Commission (" PSC" ) regulates water and sewer utilities, specifically rates, service, and whether the facilities are required for the convenience and necessity of the public.

¶3. The " Black Creek System" consists of a water treatment system and a wastewater system, and is located in Forrest County [1] on the Black Creek. Black Creek is a state scenic stream, and a portion downstream from the Black Creek System is designated as a National Wild and Scenic Stream. 16 U.S.C. § 1274(a)(59); Miss. Code Ann. § 51-4-23.4 (Rev. 2003). Lawrence Elliott constructed the Black Creek System to service developments in the area.

¶4. During his ownership, Elliott committed many compliance violations. MDEQ also received an " inordinate" number of citizen complaints for the Black Creek System under Elliott's ownership. All in all, Elliott's numerous violations and pervasive non-compliance resulted in poor to nonexistent service to residents and numerous illegal sewage discharges. Because Elliott refused to make needed repairs, MDEQ was forced to expend over $63,000 from the Pollution Emergency Fund to keep the system operable and to protect the citizens and the environment.

¶5. Because of the dire situation at Black Creek caused by Elliott, the PSC began looking for someone to purchase the Black Creek System. The PSC approached Bell and asked Bell to consider purchasing the system. Bell ultimately agreed and purchased the Black Creek System.

¶6. In late 2004, the Commission, MSDH, and Bell entered into an Agreed Order regarding the Black Creek System in anticipation of Bell's impending purchase of the Black Creek System from Elliott. The Agreed Order noted that the system was " not in compliance with applicable permits, certificates, and federal and state laws and regulations" and that " Bell has committed to operate the . . . System and cause . . . [it] to achieve compliance with all federal and state laws and regulations, and permits." The purpose of the Agreed Order was to bring the Black Creek System into compliance, by giving Bell time and help to bring the extremely

Page 872

troubled system into compliance. It also outlined some of Bell's specific obligations to the end of achieving compliance.

¶7. The Agreed Order provided that any sale or conveyance of the Black Creek System would not relieve Bell of its obligations under the order:

[n]o change in ownership, corporate, and/or partnership status relating to the [Black Creek] System that is covered by this Agreed Order will in any way alter the responsibilities of Bell under this Agreed Order. In the event of any conveyance of easement, or other interest in the [Black Creek System], . . . all of Bell's obligations under the Agreed Order shall remain in full force and effect and shall continue to be met.

However, the agreement did provide that if a private party acquired the Black Creek System, " and the acquisition is approved by the appropriate regulatory authority(s) ", then Bell's responsibilities under the Agreed Order would be relieved upon the transfer of all necessary permits to the new owner. (Emphasis added). Later in the same paragraph, the Agreed Order provided merely that " Bell shall notify the Agencies in the event of any such conveyance." (Emphasis added). The Agreed Order further provided that " [a]ny deed, title, or other instrument of conveyance executed by Bell that transfers title to any part of the [Black Creek System] shall contain a notice that the [Black Creek System] is the subject of this Agreed Order." The financial assurance provision of the Agreed Order stated that " Bell shall provide financial assurance of $20,000 . . . The financial assurance shall be secured within thirty days from obtaining all necessary permits from the Permit Board. Bell shall continue to provide this financial assurance for a period of two years at which time the requirement shall cease if Bell demonstrates an adequate compliance for the duration of the two-year period." The Agreed Order noted that if Bell and MDEQ do not agree on the adequacy of the compliance record, the matter should be taken before the Commission for a determination. The adequacy of the compliance was to be determined by the forfeiture provisions of Mississippi Code Section 49-17-44(2).[2]

¶8. Bell ultimately took control of the Black Creek System on January 7, 2005. MDEQ inspected the system fairly regularly. While early inspections in 2005 indicate some significant problems, ostensibly due to the state of disrepair the system was in when Bell acquired it, inspections by 2006 indicated that the system was much improved regarding compliance. Moreover, one 2005 inspection noted that erosion seemed to be a continuing issue for the site, and that an entirely new system could be constructed at a different location for what it would cost to permanently fix the erosion issue. It indicated that erosion should continue to be fixed if and when it occurred.

¶9. In 2008, Bell Utilities entered into negotiations with ...


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