CURTISS SHEWMAKER and SHEWMAKER ENVIRONMENTAL, INC. v. OFFICE OF PETROLEUM STORAGE TANK ENVIRONMENTAL ASSURANCE FUND, PUBLIC PROTECTION & REGULATION CABINET
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RENDERED: December 10, 1999; 2:00 p.m.
NOT TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
NO.
1998-CA-002477-MR
CURTISS SHEWMAKER and
SHEWMAKER ENVIRONMENTAL, INC.
APPELLANTS
APPEAL FROM FRANKLIN CIRCUIT COURT
HONORABLE ROGER L. CRITTENDEN, JUDGE
ACTION NO. 98-CI-00362
v.
OFFICE OF PETROLEUM STORAGE TANK
ENVIRONMENTAL ASSURANCE FUND,
PUBLIC PROTECTION & REGULATION CABINET
APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
COMBS, JOHNSON, and McANULTY, Judges.
COMBS, JUDGE:
This court has reviewed the record presented to
us, including the proceedings before the Public Protection and
Regulation Cabinet and the Franklin Circuit Court.
We find that
the opinion of the circuit court fairly, completely, and
correctly sets out the operative facts and the applicable law of
this case.
We therefore adopt that opinion as our own.
This matter is before the Court on the Petitioner's,
Curtiss Shewmaker/Shewmaker Environmental, Inc.
("Shewmaker" and "SEI"), Complaint, which seeks review
of an administrative decision by the Office of
Petroleum Storage Tank Environmental Assurance Fund
("the Fund"), an agency of the Public Protection and
Regulation Cabinet ("the Cabinet"). The Court has
reviewed the record and, being duly advised, finds as follows:
FACTS
Shewmaker owns and operates SEI, a company which is a certified
contractor for the closure of underground petroleum storage tank
sites. This case involves services performed by SEI in the
closure of an underground storage tank site known as DC Tires, in
Campbellsburg, Kentucky. After another contractor had removed
the tanks and then been dismissed by the landowner, SEI was
retained to complete the closure of the site.
The activity with which this case is concerned is SEI's treatment
of water which had accumulated in the open tank pits, prior to
the pits having been backfilled. It appears that Shewmaker
treated pit water on two occasions, approximately October 21,
1994, and March 25, 1995. Both times, the water was treated by
pumping it through mobile airstripper/carbon treatment unit, with
the resulting effluent being pumped into a drainage ditch on or
near the site.
It is important to note at this point that the mobile treatment
unit used in this operation was, apparently, leased to SEI by a
company named Compliance Equipment, Inc. ("Compliance"). Like
SEI, Compliance is wholly owned by Curtiss Shewmaker. Though
Compliance holds this equipment out for lease to the public atlarge, Shewmaker readily admits that the great majority of its
transactions are leases to SEI.
As permitted by various regulations, Shewmaker ultimately sought
reimbursement for the expenses associated with treating the
water. On February 9, 1995, he submitted "Claim Payment Number
1" to the Fund, covering the costs for the October, 1994
services. The claim requested reimbursement of $4894.40, an
amount which represented the cost of the "lease" with Compliance
for treatment of 10,640 gallons, at a cost of $0.40 per gallon,
plus a 15% mark-up. Consistent with Fund regulations, which
permitted reimbursement at a rate of $0.10 per 1,000 gallons, SEI
was reimbursed $10.64 on April 4, 1996.
"Claim Payment Number 2" was submitted to the Fund on April 24,
1995, requesting reimbursement for $22,517.95 for the treatment
of 34,643 gallons of water on March 25, 1995. This request was
based on SEI's charge of $0.65 per gallon but SEI was reimbursed
nowhere near the amount requested. Rather, again consistent with
Fund regulations, SEI was reimbursed $34.64 on May 6, 1996.
Having been reimbursed the maximum allowable amount for the
treatment of the water, Shewmaker decided to seek reimbursement
for the disposal of the water. By filing "Claim Payment Number
4," he sought $31,199.99. This amount was based upon an invoice
from Compliance Equipment for disposal of 45,283 gallons of water
at $0.65 per gallon, plus tax. The invoice was created by
Shewmaker on September 22, 1996 -- nearly two years after the
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first treatment -- any payment was due the same day. Shewmaker
acknowledges that this invoice was for the alleged disposal of
the very same water which had been treated and discharged into
the drainage ditch on October 21, 1994, and March 25, 1995.
The Fund denied "Claim Payment Number 4" in a letter dated
January 13, 1997, which stated, "The cost you are requesting. .
.have [sic] previously been addressed by the Fund. By your
request, on September 6, 1996, your facility received final
payment. Therefore, this request is not eligible for review."
Thus, the claim was not reviewed for two reasons: first, SEI had
already been reimbursed for the activity covered by "Claim
Payment Number 4," and, second, the Fund had apparently
determined that the claim was not timely.
Shewmaker then sought an appeal before a hearing officer, and an
administrative hearing was conducted May 20, 1997. Shewmaker
testified, as did a claims reviewer with the Fund, and briefs
were filed subsequent to the hearing. The hearing officer
recommended that the claim for $31,199.99 be denied, based
essentially upon the fact that SEI had only treated and
discharged the water, and had not disposed of it as claimed by
Claim Payment Number 4.
Shewmaker filed exceptions, but the Cabinet nonetheless adopted
the hearing officer's Recommended Order and denied Shewmaker's
appeal. Following that decision, Shewmaker appealed to this
Court.
On appeal, Shewmaker argues exactly the same thing he argued
below: that he is entitled to reimbursement for treating the
water and for disposing of the water, both pursuant to 415 KAR
1:110 §1(1)(c).1 He asserts that the Cabinet has misconstrued
its own regulations by concluding that he is entitled to
reimbursement for either but not both, and supports his argument
by pointing to the fact that treatment and disposal are listed in
the regulation as separate line items. The Fund counters that,
regardless of whether the regulation allows recovery for both,
Shewmaker is not entitled to reimbursement on his claim because
the water was never disposed of.
JUDGMENT
In reviewing an agency decision, this Court may only overturn
that decision if the agency acted arbitrarily or outside its
scope of authority, if the decision itself is not supported by
substantial evidence on the record, or if the agency applied an
incorrect rule of law. Kentucky State Racing Comm'n v. Fuller,
Ky., 481 S.W.2d 298 (1972). When dealing with issues of law,
1
All references to regulation 415 KAR 1:110 will be to the
version which became effective on December 13, 1993, as the
parties agree that is the version which applies to this claim.
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this Court may review them de novo, without granting the agency
any deference. Mill Street Church of Christ v. Hogan, Ky. App.,
785 S.W.2d 263 (1990). In contrast, on questions of fact, this
Court's review is limited to an inquiry of "whether the agency's
decision was supported by substantial evidence or whether the
decision was arbitrary or unreasonable." Cabinet for Human
Resources v. Jewish Hospital Healthcare Services, Inc., Ky. App.,
932 S.W.2d 388 (1996). However, on mixed questions of law and
fact -- such question presented here -- this Court is given
greater latitude to determine whether the findings of the agency
were supported by substantial evidence of probative value.
Uninsured Employers' Fund v. Garland, Ky., 805 S.W.2d 116 (1991).
As noted, this appeal presents mixed questions of law and fact.
Simply stated, Shewmaker's eligibility for reimbursement is
evaluated by first interpreting the regulations to determine the
criteria, then examining the facts to judge whether those
criteria have been satisfied. On these questions, this Court may
examine the evidence anew, and is not required to grant any
deference to the agency's interpretation of the regulations at
issue. See Mill Street Church of Christ v. Hogan, Ky. App., 785
S.W.2d 263 (1990).
Shewmaker's "Claim Payment Number 4" was submitted under his
belief that 415 KAR 1:110§1(1)(c) permitted reimbursement for
both the treatment of contaminated pit water and for the disposal
of that same water. His primary argument is that the regulation
lists both activities as separate line items, and thus both
should therefore be reimbursable.
This Court is persuaded that the regulation does, by its terms,
permit recovery for both the treatment of contaminated water, and
for the disposal of contaminated water in [a] wastewater
treatment plant. While the Court is unable to determine
precisely whether the Cabinet employed a contrary construction,
if the Cabinet construed the regulation to, on its face, permit
recovery for only one or the other, that construction was
incorrect and cannot be sustained.
However, even assuming the Cabinet misconstrued the terms of the
regulation, this Court concludes that the regulation was applied
as its drafters intended. This conclusion is confirmed by
reference to the purpose and function of that section of the
regulation. 415 KAR 1:110§1, by it own terms, does nothing more
than provide the range of amounts to be paid by the Fund for the
cost of performing these services, if the Fund has first
determined that reimbursement is warranted. Thus, while the
terms of the regulation may allow reimbursement for both
treatment and disposal, recovery for either activity is
conditioned upon a determination that the activities are in fact
reimbursable.
This conclusion confirms that there can be a difference between
the terms of a regulation and its application --and that such a
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difference is illustrated by this case. As Shewmaker asserts, a
contractor could, under the regulation, recover both for
treatment of contaminated water and for disposal of contaminated
water. However, the Cabinet is correct when it concludes that,
due to what is actually involved in these two activities, it is
practically impossible for SEI to recover for both by simply
handling the same water.
In this case, SEI pumped contaminated water from the open pits,
processed that water through the mobile airstrippr/carbon
treatment unit, and discharged the uncontaminated effluent into a
drainage ditch on or near the site. Shewmaker claims that this
process both treated and disposed of the water, but logic does
not permit this conclusion. As this Court understands
Shewmaker's position, the alleged disposal occurred when the
water was pumped from the pits to the treatment machine, and the
treatment occurred when the water was processed through the
machine.
Even viewing this job as separate events for the sake of
argument, two things would still have to be true in order for
Shewmaker to recover. First, the mobile airstripper/carbon
treatment unit would have to be a wastewater treatment plant in
which contaminated [water] could be disposed. It is not, for the
well-articulated reasons the Cabinet asserts in its brief.
Second, the regulation would have to permit a contractor to
recover for operating the wastewater treatment plant which
treated the contaminated water. That is clearly not the case.
Rather, the regulation seems designed to permit the contractor to
recover as a contractor for treating the contaminated water -- as
Shewmaker did in this case -- or for disposing of it in a
separate wastewater treatment plant.
Finally, Shewmaker relies on a claim payment for a previous
closure site to argue that the Fund has previously paid him for
both treatment and disposal of the same water. The Cabinet
found, and this Court agrees, that the proffered claim payment
does not support this assertion. However, it does seem to
suggest that, at least for the payment of that single claim, the
Fund reimbursed Shewmaker something in excess of the $0.10 per
1,000 gallons which it reimbursed him for treating the DC Tires
water. Because the parties did not address the issue of
apparently inconsistent rates of payment, however, this Court
need not evaluate the merits of that claim.
Though the Cabinet misconstrued the regulation at issue, it
nonetheless reached the right result when the regulation was
applied. There is substantial evidence of record to support the
Cabinet's conclusion that this single series of activities
constituted, under the regulation, nothing more than treatment of
the contaminated water. Because the Fund had already paid
Shewmaker for the treatment of this water, its decision not to
review his request for reimbursement was not in error.
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The Petition's Complaint is therefore DISMISSED, and the relief
sought is DENIED.
The judgment of the Franklin Circuit Court is affirmed.
ALL CONCUR.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Mary Ann Kiwala
Louisville, KY
David B. Wicker
Frankfort, KY
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