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Sep 2012
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September 11, 2012

Court of Appeals Affirms Assessment of Penalties Against BP for Incomplete Reports


The Michigan Court of Appeals has affirmed a case in which BP Products North America, Inc. was fined by the state for filing incomplete final assessment reports (FARs) at seven gas stations with leaking underground storage tanks (USTs).

The court affirmed a Michigan Circuit Court order holding that the Michigan Department of Environmental Quality (MDEQ) had the authority under Part 213 of the Michigan Natural Resources and Environmental Protection Act to impose penalties on BP for the incomplete reports. The case is significant because BP submitted the reports on a timely basis, but failed to satisfy the DEQ that the reports met all the requirements of Part 213.

The case involved eight Michigan gas stations at which USTs had leaked. BP was the owner/operator of seven of those sites. As required by Part 213, BP submitted FARs to the MDEQ detailing the efforts that BP would take at the seven sites to determine the vertical and horizontal extent of the contamination and to remediate the contamination. MDEQ eventually audited each of the seven sites and identified deficiencies in the FARs. It notified BP of those deficiencies and asked BP to submit amended FARs. BP never amended the FARs to MDEQ’s satisfaction. Under MDEQ’s authority under Part 213, MDEQ imposed administrative penalties on BP in a combined amount of $869,150.

BP appealed to the Michigan Circuit Court, arguing among other things that MDEQ did not have the authority to penalize it for submitting incomplete reports, as long as the reports were timely.  The Circuit Court disagreed. It held that MCL 324.21313a required BP to submit FARs that included each of the statutorily detailed requirements, and it found that BP’s FARs omitted many of the statutory elements. Accordingly, the Circuit Court held that MDEQ had the authority to impose a penalty on BP for submitting incomplete reports.

The Court of Appeals affirmed. As an initial matter, the court held that Part 213’s FAR requirements, including its penalty provisions, are retroactive and that the pre-2012-amendment provisions of Part 213 governed the question before it. The court agreed with MDEQ’s interpretation of MCL 324.21311a that to be “complete” a FAR must include each of the elements enumerated in MCL 324.21311a. The court held that when the MDEQ is confronted with a FAR that it deems deficient, it may require the owner/operator to bring the FAR into compliance or face penalties. And the court discerned no error in the MDEQ’s decision to penalize BP for submitting a FAR that, although timely, omitted statutorily required elements.

In dicta, the court also explained that MDEQ likely could have achieved the same result by issuing an administrative order under MCL 324.21319a(2) and imposing civil penalties if BP failed to comply with that order.

This case illustrates the need to make sure that consultants retained to prepare the reports understand all the statutory requirements of a report, and particularly FARs. The mere submission of a report on a timely basis may not be enough to avoid penalties.

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