Under article 12 of the New York State Navigation Law (Oil Spill Act), “dischargers” of petroleum are strictly liable for cleanup and removal of petroleum spills. To ensure that petroleum spills are promptly remediated, the Oil Spill Act created the State Environmental Protection and Spill Compensation Fund (Oil Spill Fund) to finance state cleanups when the discharger is unknown, unwilling or unable to pay these costs. When the Oil Spill Fund incurs cleanup costs, it can seek reimbursement from a party responsible for the discharge and impose a non-priority environmental lien on the property where the cleanup costs were incurred and the discharge took place.
In State of New York v Getty Petroleum Corporation, 2011 N.Y. App. Div. LEXIS 7604 (App. Div-3rd Dept 11/3/11), defendant M & A Realty (M&A) purchased property in 2002 where there had been petroleum discharges in 1979 and 1984. In 2003, the New York State Department of Environmental Conservation (NYSDEC) detected significant increases of petroleum products in monitoring wells at and near the property. NYSDEC concluded that this contamination was a result of a new discharge. In response, M & A excavated and replaced the USTs but NYSDEC continued to incur monitoring costs between 2003 and 2009 which were paid by the Oil Spill Fund.
The New York State Attorney General who has the responsibility for bringing cost recovery actions under the Oil Spill Act demanded payment for the post-2003 costs. The attorney general advised M & A that if it failed to reimburse the Oil Spill Fund, a civil action would be commenced and an environmental lien would be recorded against the property. M & A claimed that the costs were related to the old spills that occurred prior to its ownership of the property and therefore it had no obligation to pay.
In January 2010, the attorney general filed a complaint and a notice of an environmental lien was filed in February 2010. M & A moved for summary judgment, arguing that a judicial determination of liability was a prerequisite to filing an environmental lien because the phrase “potentially liable” was used in other sections of the Oil Spill Act but the lien section did not contain the word “potentially.” The trial court upheld denied the motion and M&A appealed. The appellate division for the Third Department affirmed.
In so holding, the court said that the statute makes no specific mention of a judicial determination as a prerequisite to filing a lien. When the entire statute is viewed in contect, the court went on, the absence of the word “potentially” in the lien provisions of the Oil Spill Act was simply insufficient to read such a requirement into the law. The court said that had the Legislature intended a pre-filing judicial determination of liability, it undoubtedly would have not only affirmatively so stated but also would have provided at least cursory guidance to pertinent procedural issues. For example, the court asked, who would make the determination-a judge, an administrative law judge, a hearing officer, or someone else? What level of proof would be required at this early procedural point-substantial evidence, preponderance of the evidence or something else? Would the hearing be akin to an administrative proceeding with its relaxed rules of evidence or would the evidentiary standards of a civil trial control?
Turning to the question of whether that lack of a pre-filing judicial determination ran afoul of due process, the court said that legislative enactments were presumed to be valid and that one who challenges a statute bears the burden of proving the legislation unconstitutional beyond a reasonable doubt. In attacking the environmental lien process, M & A pointed to Reardon v United States (947 F2d 1509 [1st Cir. 1991]) where the Court of Appeals for the First Circuit found due process violations in the lien procedures implemented by EPA under section 107(l) of CERCLA. However, the court said there were several important distinctions between the procedures in Reardon and the case at hand. The court noted that in Reardon, the lien was filed before the action was commenced and the Court noted that this could result in a delay of several years before the landowners received a hearing regarding the lien. In contrast, in the case at bar, the attorney general had commenced its action before the lien was filed. In addition, unlike Reardon, prior notice was given before the lien was filed and the amount of the lien was established. Moreover, the court observed that M&A had an opportunity to seek expedited review of the lien under the state Lien Law. As a result, the court held that M & A had not established as a matter of law that the Oil Spill Act violated due process.
The court did state that where a landowner contests the filing of an environmental lien, due process requires that the agency expeditiously present substantial evidence supporting each element necessary for the lien. The State argued that the statutory requirements including the availability of an order to show cause in which short deadlines can be judicially established demonstrate that quick review should be available for a landowner. The court found that M & A had failed to show that expeditious review was not available and, as the proponent of summary judgment, its failure to make such a showing precludes it at this procedural point in the case from the relief it sought.