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New Jersey Department of Environmental Protection v. Atlantic States Cast Iron Pipe Co.

Decided: June 19, 1990.


On appeal from the Superior Court of New Jersey, Law Division, Warren County.

Shebell, Baime and Keefe. The opinion of the court was delivered by Shebell, J.A.D.


This appeal involves a dispute between defendant Atlantic States Cast Iron Pipe Company (Atlantic States) and plaintiff Department of Environmental Protection (DEP) as to whether a certificate issued by DEP to Atlantic States on August 4, 1989, entitled "PERMIT TO CONSTRUCT, INSTALL OR ALTER CONTROL APPARATUS OR EQUIPMENT," may be revoked, or its renewal denied by DEP without an adjudicatory administrative hearing pursuant to the Administrative Procedure Act (APA), N.J.S.A. 52:14B-11. DEP argues that the permit is no more than a temporary operating certificate, valid for 90 days, issued for the purpose of pre-license testing of Atlantic States' air pollution control equipment under N.J.S.A. 26:2C-9.2(c)(3) and is not a license for which there is a right to renewal. Therefore, DEP contends that Atlantic States has no right to an administrative hearing upon the running-out of its temporary operating certificate, or upon the DEP's decision not to renew the certificate for an additional 90 days.

Defendant Atlantic States, a Delaware corporation wholly-owned by McWane Inc., operates a foundry in a residential area of Phillipsburg. The foundry has been in operation for approximately 150 years and currently employs 300 people. Atlantic

States is primarily engaged in the business of manufacturing iron pipes by melting down raw materials. According to DEP, "plant ownership has changed several times and as a result of DEP and United States Environmental Protection Agency enforcement actions, the plant has been altered several times . . . . Thus the plant does not enjoy grandfathered status under APCA [Air Pollution Control Act]."

As part of its production process the defendant is required to use several pollution control devices. Exhaust gases are filtered through several of these devices such as afterburners and scrubbers, and are then discharged through smokestacks into the surrounding atmosphere. As described by DEP, these pollution control devices are part of three separately approved systems which:

include a scrap iron cupola with afterburners, wet scrubber and smoke stack which operates pursuant to permit and certificate number 074039; a pretreatment ladle, small baghouse (fabric filter) and baghouse vent which operates pursuant to permit and certificate number 66840; and a ductile ladle and large baghouse which operates pursuant to permit and certificate number 66839.

It is permit and certificate number 074039 which is the subject of this current dispute. Since about 1986, the DEP has permitted the operation of a new cupola which melts down scrap iron, steel and silicon carbide. A temporary-conditional certificate was issued and according to the agency's own statement, "[o]ver the next . . . three years, the Department regularly extended Atlantic States' cupola temporary certificate in 90-day increments . . . ." Each permit stated that it was temporary and was "BEING EXTENDED TO ALLOW FOR FURTHER FIELD/OFFICE EVALUATION."

The DEP was initially satisfied with the operation of the new cupola and the reduction in fugitive emissions, but it claims by "April, 1986, fugitive emissions and odors began again." According to DEP, this problem became progressively worse, resulting in DEP and defendant negotiating over certain modifications in the manufacturing process that could be made in order to mitigate the problem.

Defendant made several changes in its production process attempting to bring its plant into compliance with DEP regulations and orders. The defendant installed a device known as a pretreatment ladle which received molten iron from the cupola. Once in the ladle, the molten iron was treated with calcium carbide which removed sulfur from the molten iron. This design change was approved by DEP, and it issued a permit and certificate allowing operation using the modified process. However, in September 1987, DEP issued an administrative order revoking the permit that allowed defendant to operate using the modified procedure claiming that the pretreatment ladle had serious "fugitive emissions" problems. According to DEP, during 1987 and 1988, it issued defendant four administrative orders and notices of civil administrative penalties for operating beyond the scope of its permits.

On July 11, 1989, the DEP filed a civil enforcement complaint pursuant to the Air Pollution Control Act (APCA), N.J.S.A. 26:2C-1, et seq., in the Chancery Division, Warren County, charging Atlantic States with violating the APCA and with noncompliance with permit requirements under which its air pollution control systems were operating. The complaint sought to restrain Atlantic States from operating until the DEP was satisfied that Atlantic States was in compliance with all statutory and regulatory requirements. In addition, DEP requested the payment of maximum civil enforcement penalties. The chancery judge did not impose temporary or permanent restraints on Atlantic States after being assured defendant would immediately remedy the situation. The judge then transferred the matter to the Law Division so that DEP's claim for civil penalties could be litigated.

On August 10, 1989, Atlantic States received a 90-day permit pursuant to N.J.S.A. 26:2C-9.2, denominated a "conditional-temporary" certificate, which contained a variety of special conditions. The permit listed Atlantic States' cupola scrubber stack as the equipment to be constructed, installed or altered subject to the permit. In particular, the permit contained as a special

condition that "[t]here shall be no fugitive emissions from any of the equipment, including the cupola enclosure, described in the Application and approved by this Permit." Additionally, the permit required that defendant submit a stack testing protocol "[w]ithin 45 calendar days of the effective date of the Permit . . ." and that within 180 days after installment of the new equipment it be tested.

On August 18, 1989, Atlantic States sent a letter to DEP objecting to several conditions of the permit, including the zero fugitive emissions condition. Defendant requested an immediate stay of the objectionable conditions and a hearing pursuant to the APCA and the APA, N.J.S.A. 52:14B-1, et seq. Despite defendant's request, no hearing has yet been scheduled.

On November 2, 1989, defendant received a letter from DEP notifying it that its temporary permit was not being renewed as Atlantic States allegedly was "not operating equipment without causing a violation of the [APCA] . . . or the rules promulgated thereunder." Defendant responded to DEP's notice not to renew its permit by telecopied letter requesting a hearing under the APA. Defendant's letter stated "that N.J.S.A. 52:14B-11 provides that you may not refuse to renew any permit or license unless we first have an administrative hearing."

On November 3, 1989, defendant moved in the Law Division, Warren County, for an order restraining the DEP from taking any enforcement actions against Atlantic States for operating without a permit. Enforcement actions were still pending in that court against Atlantic States stemming from earlier incidents; but nonetheless, the court extended Atlantic States temporary operating permit and certificate for 30 days.

The parties then negotiated over the terms for continuance of the temporary operating certificate. DEP asserts that a stack protocol was submitted by Atlantic States, but was deficient. In any event, the parties came to an agreement concerning stack testing and continuance of Atlantic States' ...

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