In the latest development in the ongoing dispute between EQT Production Company (“EQT”) and the Pennsylvania Department of Environmental Protection (“DEP”) over DEP’s calculation of continuing violations of the Clean Streams Law (“CSL”), the Pennsylvania Commonwealth Court held that Section 301 of the CSL prohibits acts or omissions resulting in the initial active discharge or entry of industrial waste into waters of the Commonwealth, and does not authorize ongoing penalties for the continuing presence of that industrial waste in waters of the Commonwealth after its initial entry. The Commonwealth Court’s decision in this case, EQT Production Co. v. Dept. of Envt’l Prot., No. 485 M.D. 2014 (Jan. 11, 2017), comes over one year after the Pennsylvania Supreme Court decided EQT Production Co. v. Dept. of Envt’l Prot., 130 A.3d 752 (Pa. 2015), which we reported on, holding that EQT may be permitted to challenge DEP’s continuing-violation interpretation in the Commonwealth Court before the Pennsylvania Environmental Hearing Board decides and imposes the ultimate penalty, given the threat of ballooning penalties under DEP’s ongoing-violation interpretation.

The underlying dispute in the case stems from a natural gas well pad leak of impaired water generated from hydraulic fracking. EQT emptied the well pad of the impaired water and sludge on June 11, 2012, twelve days after it notified DEP of the leak, but the impaired water remained in groundwater at locations downgradient from the leak. On May 9, 2014, DEP proposed in a Consent Assessment of Civil Penalty a civil penalty of $1,270,871 which DEP calculated based on “new, continuing, and ongoing impacts to the multiple waters of the Commonwealth” after the initial discharge. DEP derived its penalty calculation based on 878 days of continuing violations — starting from the date DEP first detected the impaired water’s presence in groundwater to the date DEP stopped the penalty calculation. Moreover, DEP noted that the violations would continue to accrue beyond the 878-day time period listed in the Consent Assessment, because the impaired water continued to impact local groundwater.

EQT argued that a violation of Sections 301, 307, or 401 of the CSL can only occur on the individual days that industrial waste is initially discharged or enters the waters of the Commonwealth from an area outside of the waters of the Commonwealth. Once the discharge ceases, no additional violation of the CSL occurs. The continued presence of the impaired water in the waters of the Commonwealth, or the migration of a discharged substance from one water of the Commonwealth into another water of the Commonwealth, does not amount to a continued violation or provide a basis for a separate penalty. In contrast, DEP argued that additional violations continue to accrue each day that the discharged substance remains in the waters of the Commonwealth.

The Commonwealth Court agreed with EQT, finding that DEP’s interpretation of Section 301 of the CSL ignores the discharger’s underlying culpable actions or omissions on which the CSL penalty provision is based. The Commonwealth Court noted that DEP’s focus on the passive movement of the industrial waste fails to account for Section 605(a) of the CSL, which directs DEP in its penalty assessment to consider a number of factors centering on the actions of the party that released the waste, such as the willfulness of the violation.

Furthermore, the Commonwealth Court reasoned that if it adopted DEP’s interpretation of Section 301, such an interpretation would result in the never-ending accrual of violations from the mere presence of waste in waters in the Commonwealth, which would expand the scope of the CSL to penalize parties who failed to immediately and fully remediate discharged wastes. Specifically, applying DEP’s interpretation of Section 301 of the CSL would require DEP to delineate all of the boundaries of each water of the Commonwealth and parts thereof in order to account for each new violation. Such a focus on the movement of waste through the boundaries of the waters of the Commonwealth could “result in potentially limitless continuing violations for a single unpermitted release of industrial waste while any of the waste remained in any water of the Commonwealth, or until Act 2 remediation is completed.” (emphasis in the original).

Ultimately, the Commonwealth Court concluded, by requiring the discharger to resolve a violation of the CSL by ceasing the discharge and remediating the discharged waste, DEP would expand the purpose of Section 301 from a law penalizing the discharge of industrial waste to a law that would also penalize the failure to accomplish the full and immediate remediation of the discharged industrial waste.

It remains to be seen whether the Commonwealth Court’s decision will finally resolve the dispute between EQT and DEP. Because the decision represents a major departure in DEP’s practice of calculating continuing violations of the CSL, it is likely that DEP will appeal the decision to the Pennsylvania Supreme Court.