STATE DEPARTMENT OF ECOLOGY v. DOUMA MJD LLC (2008)

OPINION PUBLISHED IN PART

 ¶ 1 During the winter of 1998-99, the Doumas pumped dairy waste into an unlined trench on land they leased from the State.   Pursuant to RCW 90.48.144, the Department of Ecology (Ecology) assessed a $53,000 penalty against the Doumas for discharging pollutants into Washington State waters.   The Doumas appealed to the Pollution Control Hearings Board (PCHB), which reduced and partially suspended the penalty.   Both Ecology and the Doumas petitioned for review in Thurston County Superior Court, which affirmed the PCHB's decision in its entirety.   The Doumas argue that (1) the PCHB's decision was based on an error of law, and (2) the PCHB's decision regarding the penalty was arbitrary and capricious.   Ecology argues that (1) the PCHB erred in suspending a portion of the penalty's gravity component, and (2) the PCHB erred in reducing the penalty's economic benefit component.   The PCHB is a named party to this appeal, but does not advocate on the merits of the action.   We affirm the PCHB's conclusion that a violation occurred and its suspension of a portion of the gravity component of the penalty, but remand for further findings regarding its reduction of the economic benefit portion of the penalty.

FACTS

¶ 2 The Doumas operate a dairy and beef cattle ranch in Whatcom County, Washington.   Waste from dairy cows is collected and stored in manure lagoons until the Doumas apply it to field crops during the growing season.   During the end of 1998 and the beginning of 1999, the area surrounding the Doumas' dairy received higher than normal levels of precipitation.   This caused the Doumas' manure lagoons to fill more quickly than normal.¹  The Doumas felt that the  manure lagoons might overflow, causing dairy waste to enter nearby surface waters.²

¶ 3 On February 25, 1999, the Doumas hired an excavation company to construct an unlined trench on wooded land adjacent to the Doumas' dairy,³ which the Washington State Department of Natural Resources (DNR) managed and leased to the Doumas.⁴  The Doumas' lease with DNR did not authorize use of the wooded parcel.   Furthermore, the lease both prohibited the storage of harmful substances on the wooded parcel and required immediate notification to the State of any spill or release of a harmful substance that affected the leased land.   The Doumas' excavation contractor constructed a rectangular trench approximately 550 feet long.   The trench varied in width between five and ten feet wide, and was three to six feet deep.   After constructing the trench, the Doumas pumped approximately 500,000 gallons of dairy waste from the manure lagoons into the trench, a volume roughly equal to ten days of dairy waste production at the Doumas' dairy.   The Doumas did not contact Ecology before or after constructing and filling the trench.

¶ 4 In late April 1999, an anonymous third party informed DNR of the manure trench and DNR initiated an inspection.   On May 3, 1999, DNR contacted Ecology.   Ecology inspectors Mark Kaufman and Andrew Craig inspected the site on May 5, 1999.   With his boot, Craig dug a hole approximately six to twelve inches deep near the trench;  the hole  gradually filled with water.   Based on this, Craig concluded that the water table was at the level of the dairy waste in the trench, and that the dairy waste came in contact with groundwater.   Consistent with orders from Ecology, the Doumas had the dairy waste pumped out of the trench and applied to nearby fields on May 7 and 8, 1999.

¶ 5 On May 21, 1999, Ecology issued a notice of violation to the Doumas.   On June 21, the Doumas' attorney responded in a letter explaining the circumstances of the incident.   On August 20,1999, Ecology issued a notice of penalty for $53,000 for discharging pollutants into State waters without a discharge permit.⁵  On September 9, 1999, the Doumas submitted an application for relief from the penalty.   Ecology affirmed the $53,000 penalty in a notice of disposition dated November 29, 1999.

¶ 6 The Doumas appealed to the PCHB.⁶ The PCHB initially dismissed the appeal as untimely.   The Doumas then appealed the dismissal to Whatcom County Superior Court, arguing that Ecology violated their procedural due process rights when it failed to serve their attorney with a copy of the decision on their application for relief from the penalty.   The Whatcom County Superior Court reversed the dismissal and remanded the matter to the PCHB for a hearing on the merits.

¶ 7 On December 20, 2004, the PCHB held a hearing on the merits and on March 30, 2005, it issued its findings of fact, conclusions of law, and order.   In its decision, the PCHB stated:

 There is no dispute that some amount of dairy waste seeped into groundwater from the trench, and that groundwater more likely than not entered the trench.   Therefore, the actions at the Doumas' dairy constituted a discharge of pollutants into waters of the state under Chapter 90.48 RCW.

Clerk's Papers (CP) at 174-75.   The $53,000 penalty Ecology assessed had two components.   The gravity portion of the penalty totaled $40,000.   The economic benefit portion of the penalty totaled $13,000.⁷  Based on testimony regarding the costs of having the dairy waste pumped and removed from the Doumas' dairy, the PCHB concluded that the $13,000 economic benefit calculation was approximately twice as high as it should have been, and it reduced the economic benefit component of the penalty to $6,500.   The PCHB also suspended $10,000 of the $40,000 gravity component of the penalty on condition that the Doumas obtain technical assistance to review their dairy nutrient management practices and implement any recommendations and abstain from committing any water quality violations for a two-year period from the order date.

¶ 8 Ecology petitioned for review in Thurston County Superior Court.   The Doumas petitioned for review in Whatcom County Superior Court.   The two petitions were consolidated in Thurston County Superior Court.   The superior court affirmed the PCHB's decision in its entirety.   This appeal follows.

ANALYSIS

¶ 9 Our state legislature has acted to prevent water pollution:  “It is declared to be the public policy of the state of Washington to maintain the highest possible standards to insure the purity of all waters of the state ․ to prevent and control the pollution of the waters of the state of Washington ․” RCW 90.48.010.   To support this public  policy, the legislature has outlawed the discharge of pollution into State waters:

It shall be unlawful for any person to throw, drain, run, or otherwise discharge into any of the waters of this state, or to cause, permit or suffer to be thrown, run, drained, allowed to seep or otherwise discharged into such waters any organic or inorganic matter that shall cause or tend to cause pollution of such waters according to the determination of the department, as provided for in this chapter.

RCW 90.48.080.   This case involves the application of this public policy of preventing water pollution to the actions of the Doumas as dairy farmers.

¶ 10 The legislature has also determined:

[T]here is a need to establish a clear and understandable process that provides for the proper and effective management of dairy nutrients that affect the quality of surface or ground waters in the state of Washington.   The legislature finds that there is a need for a program that will provide a stable and predictable business climate upon which dairy farms may base future investment decisions.

RCW 90.64.005.   In fact, an entire RCW chapter is devoted to the treatment of dairy farm nutrients:  chapter 90.64 RCW. We must determine whether chapters 90.64 and 90.48 RCW have been correctly applied to the Doumas' actions.

¶ 11 RCW 90.48.080 prohibits the discharge of pollutants into State waters.   A dairy that is determined to be a significant contributor of pollution based on actual water quality tests, photographs, or other pertinent information is subject to the provisions of chapters 90.64 and 90.48 RCW, including civil penalties issued under RCW 90.48.144.   See RCW 90.64.030(6).   Therefore, a dairy may be subject to the general enforcement provisions of RCW 90.48.080 if it is determined to be a significant contributor of pollution under chapter 90.64 RCW. Thus, our task is to carefully review the law, the record, and the parties' arguments to determine if the record supports the finding  that the Doumas discharged pollution into State waters and whether the conditions that allow a chapter 90.48 RCW enforcement action to proceed against a dairy were established.

I. Standard and Scope of Review

 ¶ 12 “In reviewing an administrative action, [this] court sits in the same position as the superior court, applying the standards of the WAPA [Washington Administrative Procedure Act] directly to the record before the agency.”  Tapper v. Employment Sec. Dep't, 122 Wash.2d 397, 402, 858 P.2d 494 (1993).   The WAPA allows a reviewing court to reverse an administrative decision when:  (1) the administrative decision is based on an error of law;  (2) the decision is not based on substantial evidence;  or (3) the decision is arbitrary and capricious.  RCW 34.05.570(3).  “Arbitrary and capricious action has been defined as willful and unreasoning action, without consideration and in disregard of facts and circumstances.   Where there is room for two opinions, action is not arbitrary and capricious even though one may believe an erroneous conclusion has been reached.”  Heinmiller v. Dep't of Health, 127 Wash.2d 595, 609, 903 P.2d 433 (1995) (quoting Pierce County Sheriff v. Civil Serv. Comm'n, 98 Wash.2d 690, 695, 658 P.2d 648 (1983)).

 ¶ 13 We review questions of law de novo but accord substantial weight to the agency's interpretation of the statutes it administers.  Superior Asphalt and Concrete Co. v. Dep't of Labor & Indus., 112 Wash.App. 291, 296, 49 P.3d 135 (2002) (citing Everett Concrete Prods., Inc. v. Dep't of Labor & Indus., 109 Wash.2d 819, 823, 748 P.2d 1112 (1988)).   We review the PCHB's findings of fact for substantial evidence in light of the whole record.  RCW 34.05.570(3)(e).   Substantial evidence is evidence that is sufficient to persuade a fair-minded person of the truth or correctness of the matter.  King County v. Cent. Puget Sound Growth Mgmt. Hearings Bd., 142 Wash.2d 543, 553, 14 P.3d 133 (2000).   On mixed questions of law and fact, we independently determine the law, then apply it to the facts as found by the agency.  Hamel v. Employment Sec. Dep't, 93 Wash.App. 140, 145, 966 P.2d 1282 (1998).

¶ 14 The Doumas argue that the PCHB's decision erroneously applied and interpreted the law, was not supported by substantial evidence, and was arbitrary and capricious.   Ecology argues that we should defer to its interpretation of chapter 90.48 RCW ⁸ and that the PCHB cannot reduce or add new conditions to a penalty Ecology established unless the PCHB concludes that Ecology's penalty determination is incorrect in a particular respect.   Ecology contends that the PCHB's decision to reduce and suspend portions of the penalty is based on an erroneous interpretation and application of the law and is not based on substantial evidence.

¶ 15 In assessing these arguments, we apply the WAPA standards directly to the administrative record before the PCHB.

II. Chapter 90.48 RCW Violation

A. RCW 90.64.030(6)

¶ 16 The Doumas argue that Ecology bore the burden of proving by a preponderance of the evidence that the violation occurred and the penalty was reasonable under WAC 371-08-485.⁹  They argue that the PCHB wrongfully concluded that Ecology met its burden of proving that the Doumas violated chapter 90.48 RCW. The Doumas contend that the legislature has determined that dairies shall be treated differently than other entities and that the Doumas cannot be subject to chapter 90.48 RCW enforcement provisions without a finding that it was a “significant contributor of pollution” under RCW 90.64.030(6).   Ecology responds that RCW 90.64.030(6) does not shield the Doumas from enforcement under RCW 90.48.080.   Ecology asks us to “deny the Doumas' invitation to rewrite chapter 90.64 RCW to provide them with an enforcement shield for their deliberate and intentional violations of this state's environmental laws.”   Resp't/Cross-Appellant's Br. at 19.¹⁰  The law lies between the parties' positions.

¶ 17 The PCHB concluded that chapter 90.64 RCW does not establish a process for making a formal determination that a dairy is a “significant contributor of pollution” as a condition precedent to instituting an enforcement action.   CP at 176.   Rather, it noted, “[T]his phrase is consistent with the statutory purpose of the [Dairy Nutrient Management Act] to provide technical and compliance assistance, while retaining enforcement authority when necessary to address serious violations.”   CP at 176.   Furthermore, the PCHB noted that chapter 90.64 RCW “does include a limitation on what discharges from dairies constitute a violation of [chapter 90.48 RCW].” CP at 176.

 ¶ 18 RCW 90.48.080 makes it unlawful for any person to allow any organic or inorganic matter that shall cause or tend to cause pollution ¹¹ to seep into State waters.  RCW 90.64.030(6) specifically provides that a dairy that is a significant contributor of pollution is subject to the enforcement provisions of chapter 90.48 RCW, including civil penalties levied under RCW 90.48.144.¹²  Ecology argues, however, that RCW 90.64.120(1) provides that “nothing in this chapter shall affect the department of ecology's authority ․ to administer ․ the provisions of [c]hapter 90.48 RCW.” Resp't/Cross-Appellant's Br. at 11.   Although the Doumas fail to respond to this argument, we find that it is misplaced.   Ecology misinterprets the RCW 90.64.120(1)'s actual language.   The subsection, in its entirety, states:

Nothing in this chapter shall affect the department of ecology's authority or responsibility to administer or enforce the national pollution discharge elimination system permits for operators of concentrated dairy animal feeding operations, where required by federal regulations or to administer the provisions of chapter 90.48 RCW.

RCW 90.64.120(1) (emphasis added).   This statute highlights the interplay between federal and state laws as they relate to national pollution discharge elimination system (NPDES) permits.   Under section 510 of the Clean Water Act of 1987, states were authorized to impose stricter requirements under these permits than federal law required.   See Wash. PL100-4.   Thus, RCW 90.64.120(1) allows Ecology to impose stricter standards under chapter 90.48 RCW when administering one of these permits.   This interpretation of RCW 90.64.120(1) is consistent with the placement of the statute's single comma, which indicates that Ecology's ability to administer NPDES permits under both federal and state law was not affected by chapter 90.64 RCW. It is clear that the phrase “where required by federal regulations or to administer the provisions of chapter 90.48 RCW” modifies the language that appears before the comma, and does not exist independently of this language.  RCW 90.64.120(1).

 ¶ 19 RCW 90.64.120(1) does not, as Ecology argues, operate to shield chapter 90.48 RCW from the subsequently enacted RCW 90.64.030(6).   Chapter 90.64 RCW, which specifically addresses dairies, was intended to balance the need for clean water with the need for dairies.   If Ecology  were permitted to bring an enforcement action against a dairy without first establishing that it was a significant contributor of pollution under RCW 90.64.030(6), then the statute-which establishes a separate standard by which a dairy is assessed for potential water pollution violations-would be rendered meaningless.  RCW 90.64.030(6), then, may provide a potential defense for a dairy charged with violating chapter 90.48 RCW. In other words, a dairy that is not determined to be a significant contributor of pollution is not subject to. chapter 90.48 RCW penalties.   In the unpublished part of this opinion, we will examine the evidence to determine if it supports a finding that the Doumas were a significant contributor of pollution in this case.

¶ 20 A majority of the panel having determined that only the foregoing portion of this opinion will be printed in the Washington Appellate Reports and that the remainder shall be filed for public record pursuant to RCW 2.06.040, it is so ordered.

B. Finding of “Significant Contributor of Pollution”

¶ 21 The Doumas argue that Ecology presented no evidence regarding how much manure may have seeped into the ground water.   Furthermore, the Doumas argue that in order to determine whether a violation occurred, RCW 90.64.030(6) requires that there be actual water quality tests, photographs, or other pertinent information that the dairy is a significant contributor of pollution.   The lack of evidence exists here, they contend, because Ecology failed to conduct actual water quality tests of either ground water or nearby surface waters, and without such evidence, Ecology failed to show that the Doumas were a significant contributor of pollution and thus subject to chapter 90.48 RCW enforcement provisions.

¶ 22 In this case, Ecology did not make a finding that the Doumas were a significant contributor of pollution before proceeding with an enforcement action against them, as it did not believe that this was a prerequisite to holding the Doumas liable under chapter 90.48 RCW. In the future, however, Ecology must determine that a dairy is a significant contributor of pollution under RCW 90.64.030(6) before it can hold a dairy liable for a water quality violation under chapter 90.48 RCW. However, because overwhelming evidence in this case conclusively establishes significant contribution to pollution by the Doumas, we affirm the PCHB's decision holding the Doumas liable for discharging pollutants into State waters.

¶ 23 Ecology points to a letter dated February 17, 1999, in which it informed the Doumas that their dairy was being designated as a Concentrated Dairy Animal Feeding Operation (CDAFO) and was required to obtain coverage under the Dairy Farm National Pollutant Discharge Elimination System and State Waste Discharge General Permit.   Ecology explains that in order to designate a dairy operation as a CDAFO it must first determine that it is a significant contributor of pollution,13 therefore, its finding that the Doumas' dairy was a CDAFO constituted a finding that the Doumas were a significant contributor of pollution.   Ecology's argument regarding the February 1999 letter is unpersuasive.

¶ 24 Ecology's February 1999 letter to the Doumas stated:

On [December 31, 1998] Ecology inspected a portion of your facility after observing a contaminated ditch running along Enterprise Road, adjacent to your property.   A discharge of polluted runoff was observed leaving your property.   The discharge originated from a puddle of contaminated water in a low-lying area located on your pavement near one of your manure lagoons and adjacent to your silage bunker ․ Due to these water quality problems ․ your dairy [meets] the definition of a [CDAFO] and associated criteria.

Ex. R-21. Clearly, Ecology determined that the Doumas were a significant contributor of pollution in December 1998.   However, the letter said nothing about the violation in question.   Further, it cannot be said that the Doumas knowingly waived their right to invoke RCW 90.64.030(6) when they chose to forgo an appeal of Ecology's decision regarding the NPDES permits.

¶ 25 However, “other pertinent information” supports a finding that the Doumas were a significant contributor of pollution at the time in question.  RCW 90.64.030(6).   It is undisputed that the Doumas pumped 500,000 gallons of dairy waste into an unlined trench.   Although Ecology did not obtain groundwater samples during or after the May 5, 1999 inspection, it took samples of the manure and determined that the manure greatly exceeded the state's water quality standards for fecal coliform bacteria.14  During the May 5 inspection, Craig dug a hole in the soil near the unlined trench, about ten to fifteen feet from the trench area.   The hole filled with water.   Craig explained:

[D]igging a hole in the ground and seeing where the water comes in is one way we had been able to identify where the water table was, and that hole that we dug that day confirmed, from what we observed, to be the water table at or near the surface ․

Report of Proceedings (RP) at 65-66.   An expert hydrogeologist later described this type of water as “surficial perching.”   RP at 196.   The expert explained that surficially perched water is, essentially, water that is below the ground surface.   When asked whether it was possible that some of this water surrounding the trench entered the trench, the expert answered in the affirmative.   The PCHB found the surficially perched water to be groundwater.

¶ 26 Ecology supervisor David Garland testified as to why he recommended against groundwater monitoring when Ecology inspectors contacted him regarding this incident:

Because I felt that the violation of constructing the trench and placing manure in it was a de facto setup for groundwater contamination.   And my understanding was that [ ] the primary question being asked by the inspectors was:  Do you think this would contaminate groundwater?   I said unequivocally, “Yes.”

RP at 33.   Garland went on to explain that he based his assessment on the proximity of the water table to the ground surface and the permeability of the geologic material.   He also explained that, when one excavates below soil, the probability of infiltration is greater because resistant substances in the soil and plant life (which slow infiltration) are eliminated.   Finally, Garland testified that it was more likely than not that fecal coliform was discharged into the groundwater as a result of the trench construction.   An expert hydrogeologist later testified that he agreed with Garland's assessment.   Based on all of the evidence, the PCHB concluded that some amount of dairy waste seeped into groundwater from the trench and that groundwater more likely than not entered the trench.

¶ 27 Therefore, the information regarding the nature and quantity of the dairy waste pumped into the trench, and the testimony regarding the interaction between the dairy waste in the trench and groundwater, supports a finding that the Doumas were a significant contributor of pollution under RCW 90.64.030(6).15  We therefore affirm the PCHB's decision holding the Doumas liable for discharging pollutants into State waters.

III. Assessment of Reasonableness of Penalty

¶ 28 The Doumas argue that although reducing and suspending a portion of the penalty was “a step in the right direction,” the PCHB's decision regarding the reasonableness of the remainder of the penalty was arbitrary and capricious.   Appellant's Br. at 15.   We disagree.

¶ 29 RCW 90.48.144(3) provides, “The penalty amount shall be set in consideration of the previous history of the violator and the severity of the violation's impact on public health and/or the environment in addition to other relevant factors.”   The PCHB has three criteria it reviews in determining the reasonableness of a penalty:  (1) the nature of the violation;  (2) the prior history of violations;  and (3) remedial actions taken by the penalized party.   Drohman v. ORCAA, PCHB No. 04-120 (2005) (citing U.S. Army v. Puget Sound Clean Air Agency, PCHB No. 00-190, at 7 (2001)).

¶ 30 The PCHB concluded:

While Douma claims to have been acting in response to an emergency situation, the facts say otherwise.   In part, the situation was one of the Doumas' own making.   Recommendations in the farm plan to prevent barn roof water from filling up the manure lagoons were not fully implemented.   Second, even if the need to construct the trench and pump dairy waste into the trench were emergency situations at the outset, the failure to inform Ecology, DNR, or other agencies of the situation or take remedial measures for over two months undercuts the concept that only emergency action was taken ․ [This] all coincided with a time period when the Doumas and Ecology were in contact regarding permitting and compliance issues.   The Doumas could have worked with Ecology and other agencies, but chose not to.

CP at 180-81.   For the reasons stated below, we hold that the PCHB's decision regarding the reasonableness of the penalty was not arbitrary and capricious.

A. Nature of the Violation

¶ 31 The Doumas' argument that the PCHB failed to consider that they were acting in response to an emergency is unpersuasive.   Craig testified regarding Ecology's work with other farmers who also had concerns about potential overflows of manure lagoons during the winter and spring of 1998/1999.   Craig testified, “Some of [the farmers] ․ either contacted the conservation district or us directly, saying ‘․ [M]y lagoon is full, I don't want to get fined but I'm letting you guys know about this.   Is there some option that I have?   I want to play by the rules.’ ” RP at 74.   Craig also testified regarding Ecology's cooperative efforts with the Whatcom County Conservation District and local dairy farmers to “identify ways [the farmers] could safely [reduce the lagoons] to prevent the lagoon[s] from overflowing and reaching surface waters.”   RP at 75.   Craig then testified that he would have offered similar assistance to the Doumas had the Doumas contacted Ecology prior to pumping their dairy waste into the unlined trench.

¶ 32 The Doumas also contend that they were not required to notify Ecology, or any other state agency, in this type of situation. Thus, it was improper for the PCHB to consider the Doumas' failure to contact any state agency in evaluating the reasonableness of the penalty.   However, the Doumas' lease with DNR prohibited the storage of any substance subject to regulation as harmful by any federal, state, or local law, or regulation or ordinance.   Furthermore, the lease specifically required the Doumas to notify the state of any spill or release of any hazardous substance affecting the premises.  RCW 90.48.144(3) provides that penalties be set in consideration of “the previous history of the violator and the severity of the violation's impact on public health and/or the environment in addition to other relevant factors.”   (Emphasis added).   Thus, it was appropriate for PCHB to consider what other local farmers did to address manure storage problems and, consequently, the Doumas' failure to notify regulatory agencies in evaluating the reasonableness of the penalty.

¶ 33 Furthermore, the Doumas' argument that there was no evidence that fully implementing recommendations in their farm plan would have prevented the lagoon from being in danger of overflowing, is unpersuasive.   In a letter dated June 21, 1999, the Doumas responded to Ecology's request that they explain the circumstances surrounding construction of the unlined trench.   The Doumas wrote, “[T]he gutter system on most of the barns causes water to divert into the lagoon.   This is being changed presently.”   Ex. R-9 at 3. In light of the recommendation in their 1995 farm plan that the Doumas remove barn water from the manure lagoon, the Doumas' June 21, 1999 admission is revealing.   Craig later testified that the Doumas' failure to route their barn roof water away from the lagoon contributed to the storage problems they experienced in February 1999.   He also testified that, unlike the Doumas, most dairy farmers disconnected their roof gutters from their lagoons within three to six months of receiving a recommendation to do so.

¶ 34 Additionally, the Doumas argue that the PCHB should not have compared the actual penalty Ecology imposed with the maximum penalty it could have imposed.   The PCHB stated that the gravity portion of the penalty could have been higher, up to $10,000 per day for each of the 69 days the dairy waste remained in the trench.   Ecology responds that analogous federal cases, which evaluate penalties under the federal Clean Water Act, have held that an analysis of the appropriate penalty amount for a water pollution violation should begin with an analysis of the maximum authorized statutory penalty;  the court should then consider what, if any, deviations from that penalty is authorized by the specific facts of a particular case.

¶ 35 Both the Doumas and Ecology provide federal Clean Water Act cases to support their respective positions regarding whether the PCHB should have began with an analysis of the maximum authorized statutory penalty.   Although the court in Atlantic States Legal Foundation, Inc. v. Tyson Foods, Inc., 897 F.2d 1128, 1140 (11th Cir.1990) followed this “top down” approach,16 some federal courts have followed the “bottom up” approach of starting with the economic benefit to the violator.   See U.S. v. Mun. Auth. of Union Twp., 929 F.Supp. 800, 806 (M.D.Pa.1996), aff'd, 150 F.3d 259 (3rd Cir.1998);  see also U.S. v. Smithfield Foods, Inc., 191 F.3d 516, 528 n. 7 (4th Cir.1999).   Because federal courts have followed both approaches in assessing Clean Water Act violations, these cases provide little guidance as to the approach the PCHB should have followed in this case.   The Doumas have thus failed to demonstrate why the PCHB's decision to consider the maximum statutory penalty in assessing the reasonableness of the penalty was inappropriate.

¶ 36 The Doumas argue that the PCHB did not sufficiently consider “the importance of knowing the seriousness of the violation.”   Appellant's Br. at 18.   They contend that because Ecology conducted no water quality sampling, no one will ever know what the severity of the supposed violation's impact on public health, and/or the environment, was.   However, the facts indicate that Ecology considered its inability to establish the impact on public health and/or the environment when it initially set the penalty.

¶ 37 Craig testified regarding his preparation of a recommendation for enforcement.   Recommendations for enforcement include a penalty matrix, which helps inspectors make a more objective recommendation in weighing the severity of a violation.   Craig testified that in answering questions asking whether there was a public health risk or environmental damage as a result of the violation, he assigned a score of one to public health risk and a score of two to environmental damage.17  He stated, “We assigned a point value of one for the public health risk question, because we did not have definite or probable evidence ․ to make that determination ․” RP at 84.   Craig explained that he assigned a point value of two to environmental damage because it was “probable” that the nitrogen and bacteria contaminants in the dairy waste had damaged the aquifer that was in close proximity to the unlined trench.   RP at 85.   The PCHB considered these low scores and concluded that they were appropriate.   Thus, the PCHB did not err in refusing to further mitigate the penalty.

B. Prior History of Violations

¶ 38 The Doumas argue that they have never been penalized for violating any water quality rule, regulation, or standard.   They contend that the PCHB should have considered this and reduced the penalty accordingly.   Ecology responds that the Doumas failed “to inform the [c]ourt that they have an extensive history of failing to properly manage their dairy waste, dating back to 1995.”   Resp't/Cross-Appellant's Br. at 35.

¶ 39 “Evidence, including hearsay evidence, is admissible if in the judgment of the presiding officer it is the kind of evidence on which reasonably prudent persons are accustomed to rely in the conduct of their affairs.”  WAC 371-08-500(1).   Although the warning letters 18 Ecology offered were admitted over the Doumas' hearsay objection, the PCHB properly relied on these exhibits in evaluating the Doumas' history of problems with Ecology regarding its water quality and dairy waste management procedures.   Furthermore, Craig and Craig's supervisor, Richard Grout, both testified that the Doumas had dairy waste management issues in the past.   Grout stated, “[T]here's no way I could have construed [this violation] as a first offense.”   RP at 141.   Thus, the Doumas' argument that the PCHB failed to consider their prior history is unpersuasive.   The PCHB properly found that “[i]n the period prior to and during construction of the dairy waste trench, the Doumas had a number of dealings with Ecology, the [EPA], and [NRCS], and the Whatcom County Conservation District on water quality and farm management issues.”   CP at 167.   When PCHB asked whether Ecology considers non-penalty situations (such as warning letters) when assessing a penalty, Grout testified:

In terms of [RCW 90.48.144] ․ we're looking at the whole record of that operator to try to determine where we come down in terms of size of penalty.   In terms of application of the matrix, we only use that tripling thing if there's a prior penalty.

RP at 144 (emphasis added).   Therefore, that civil penalties were not issued for these incidences is irrelevant.

¶ 40 Even assuming the Doumas had no history of actual violations, the record reflects that the PCHB also considered the Doumas' prior history of problems with Ecology in determining that the penalty was reasonable.   That the Doumas may not have had a history of prior violations does not necessarily indicate that the PCHB's review was somehow insufficient.   The PCHB properly considered the Doumas' whole record in assessing the reasonableness of the penalty.

C. Penalized Party's Remedial Actions

¶ 41 The Doumas argue that the PCHB was required to consider the remedial actions they took in assessing the reasonableness of the penalty.   They contend that the PCHB's decision mischaracterizes the facts and fails to mention that the Doumas took remedial measures as soon as Ecology notified them of the violation.   However, the penalty matrix included in the recommendation for enforcement indicates that Ecology assigned a point value of zero to the question asking whether the Doumas were unresponsive in correcting the violation.   Craig testified that he felt the Doumas were responsive by removing the manure from the trench.   Because Ecology already recognized that the Doumas took remedial action in assessing the penalty, the PCHB did not err in refusing to further mitigate the penalty on this basis.

D. Waiver of Penalties Under RCW 90.64.030(8)

¶ 42 The Doumas argue that even if we uphold the violation, we should waive the penalties pursuant to RCW 90.64.030(8).   This statute states, “For a violation of water quality laws that is a first offense for a dairy producer, the penalty may be waived to allow the producer to come into compliance with water quality laws.”  RCW 90.64.030(8).   We disagree.

¶ 43 During the PCHB hearing, Ecology supervisor Grout explained why Ecology did not elect to waive the penalty against the Doumas pursuant to RCW 90.64.030(8).   Grout responded that this was because there was “no way [we] could have construed it as a first offense.”   RP at 141.   The statute's language gives Ecology discretion regarding waiver of penalties.   Clearly, the PCHB agreed with Grout when it chose not to waive the penalties in this case under RCW 90.64.030(8).   Also, both Ecology and the PCHB addressed compliance in assessing the penalty;  Ecology factored it into its penalty matrix equation and the PCHB acknowledged it by suspending a portion of the gravity component of the penalty.   Thus, the Doumas' argument that the PCHB failed to consider the statute in assessing the Doumas' penalty is without merit.

IV. Suspension of Gravity Portion of Penalty

¶ 44 On appeal, Ecology argued that the PCHB cannot reduce or add new conditions to a penalty unless it concludes that Ecology's determination is incorrect in a particular respect.   In their motion for reconsideration, the Doumas highlighted the “prosecutorial” role of Ecology and the “adjudicatory” role of the PCHB in penalty cases.   Unfortunately, the impact these distinctions should have on the PCHB's ability to suspend penalties was not highlighted until now.   In this case, the PCHB suspended a portion of the penalty based on compliance efforts.   While the PCHB did not specify which portion of Ecology's penalty determination was incorrect, it identified the reasons upon which it based the suspension and that was sufficient in the PCHB's role as an adjudicator.   We therefore affirm the PCHB's suspension of a portion of the gravity component of the penalty.

V. Reduction of Economic Benefit Portion of Penalty

¶ 45 The Doumas argue that the PCHB did not err in reducing the economic benefit portion of the penalty from $13,000 to $6,500 and that, in fact, the penalty should have been further reduced.19  We disagree.

¶ 46 Here, Ecology first determined the amount of manure the Doumas pumped into the unlined trench.   Then, it determined what it would cost to apply that manure to fields instead of pumping it into the trench.   After contacting two Whatcom County commercial pumping operators, Ecology concluded that it would have cost the Doumas $13,000 to apply the manure to fields rather than pumping it into the trench.   Thus, Ecology established that the Doumas saved $13,000 by pumping the manure into the trench rather than having it applied to the fields.   Craig testified that Ecology did not deduct from this total the amount the Doumas spent in constructing and pumping manure into the trench.

¶ 47 At the PCHB hearing, the Doumas submitted an exhibit that purported to show what the Doumas paid to construct the unlined trench, pump manure into the trench, and pump manure out of the trench.   They did not contest Ecology's conclusion that the economic benefit realized in this case totaled $13,000 or argue that it would have cost something other than $13,000 to apply the dairy waste to the fields.   The PCHB found:

The receipts provided by the Doumas do not clearly establish the type of work, date of work, and amount paid, though there is no dispute that the Doumas did pay for excavation and pumping services.

CP at 167.   Even Mike Douma could not provide an explanation for these discrepancies.   The PCHB then concluded that the $13,000 economic benefit portion of the penalty was about twice as high as it should have been, and reduced that portion of the penalty to $6,500.   It then stated, “The Doumas are not entitled to any credit for funds spent in constructing the trench and having the dairy waste pumped.”   CP at 181.   Despite the Doumas' failure to establish the type, date of, and amount paid for the work done, and despite the fact that the PCHB itself concluded that the Doumas were not entitled to any credit for funds spent, the PCHB proceeded to reduce the economic benefit portion of the penalty from $13,000 to $6,500.   It did not identify a specific basis for this reduction other than “testimony on the costs of having the dairy waste pumped and removed” from the Doumas' dairy.   CP at 181.

¶ 48 The PCHB's reliance on “testimony on the costs of having the dairy waste pumped and removed” from the dairy in making its decision directly conflicts with its statement that the Doumas “are not entitled to any credit for funds spent in constructing the trench or having the dairy waste pumped.”   CP at 181.   Therefore, we remand to the PCHB for further findings regarding its reduction of the economic benefit portion of the penalty.

¶ 49 We affirm the PCHB's conclusion that a violation occurred and its suspension of a portion of the gravity component of the penalty, but remand for further findings regarding its reduction of the economic benefit portion of the penalty.

FOOTNOTES

1.   The Doumas had four interlocking manure lagoons and a fifth lagoon separated from the other four during this time.   With the exception of the winter of 1998-99, the Doumas' five lagoons had never been full.

2.   During the spring of 1999, other dairies in the area contacted Ecology or the Natural Resource Conservation Service regarding possible manure lagoon overflows due to high precipitation.   The Doumas did not contact Ecology regarding any potential emergency or possible overflow of the manure lagoons.   Mike Douma testified that he did not contact Ecology because the Doumas and Ecology had a very adversarial relationship.

3.   The Doumas contend that they chose this site because it was the only land in the area not saturated with water at the time.   The notice of violation stated that the Doumas' placement of the trench on the wooded parcel was “an admitted attempt to conceal the illegal manure storage from aerial observation by the [EPA] and [Ecology] ․” Ex. R-8. The PCHB found it more likely than not that the Doumas did not make this admission.

4.   The lease became effective on August 16, 1996 and expired on December 31, 2005.

5.   The notice of penalty cited violations of RCW 90.48.080, RCW 90.48.160, RCW 90.48.144, and WAC 173-200-040.  RCW 90.46.160 makes it unlawful for any person conducting a commercial or industrial operation of any type to dispose of solid or liquid waste material into waters of the state without obtaining a waste discharge permit.  WAC 173-200-040 sets forth criteria in order to establish the maximum contaminant concentrations in the state's groundwater.   We discuss RCW 90.48.080 and RCW 90.48.144 below.

6.   The PCHB submitted a brief addressing the scope of its authority.   The PCHB is “concerned that the Court preserve the appropriate standard of review for the PCHB to apply in adjudication, but [ ][it] takes no position on the merits of this case.”   PCHB Br. at 1.

7.   The economic benefit portion of a penalty is calculated to recover any economic benefit the violator may have gained as a result of the violation.

8.   In 1945, the legislature passed the Water Pollution Control Act. It is currently codified at chapter 90.48 RCW.

9.   “The board shall make findings of fact based on the preponderance of the evidence unless otherwise required by law ․ The issuing agency shall have the initial burden of proof in cases involving penalties or regulatory orders.   In other cases, the appealing party shall have the initial burden of proof.”  WAC 371-08-485.

10.   The PCHB agrees with Ecology on this point:  “In the context of reviewing the interpretation of law, both the PCHB and then the courts should give appropriate consideration to Ecology's interpretation of a statute that it is charged with implementing.”   PCHB Br. at 8.

11.   Pollution “shall be construed to mean such contamination, or other alteration of the physical, chemical or biological properties, of any waters of the state, including change in temperature, taste, color, turbidity, or odor of the waters, or such discharge of any liquid, gaseous, solid, radioactive, or other substance into any waters of the state as will or is likely to create a nuisance or render such waters harmful․” RCW 90.48.020.

12.   RCW 90.48.144 governs the issuance of civil penalties for violations of water pollution laws.  “The penalty amount shall be set in consideration of the previous history of the violator and the severity of the violation's impact on public health and/or the environment in addition to other relevant factors.”  RCW 90.48.144(3).

FN13. RCW 90.64.020(1) states, “The director of the department of ecology may designate any dairy animal feeding operation as a concentrated dairy animal feeding operation upon determining that. it is a significant contributor of pollution to the surface or ground waters of the state.”.  FN13. RCW 90.64.020(1) states, “The director of the department of ecology may designate any dairy animal feeding operation as a concentrated dairy animal feeding operation upon determining that. it is a significant contributor of pollution to the surface or ground waters of the state.”

FN14.  The samples of dairy waste from the trench had fecal coliform values of 110,000 colonies per 100 ml.   The state standard for fecal coliform is 100 fecal coliform colonies per 100 ml of water..  FN14.  The samples of dairy waste from the trench had fecal coliform values of 110,000 colonies per 100 ml.   The state standard for fecal coliform is 100 fecal coliform colonies per 100 ml of water.

FN15.  We may also refer to RCW 90.64.020(1) for guidance.  RCW 90.64.020(1)(a)-(e) provides that the director of Ecology shall consider the following factors in determining whether a dairy farm is a significant contributor, for the purposes of designating it as a CDAFO:  “the size of the animal feeding operation and the amount of wastes reaching waters of the state;  ․ the location of the animal feeding operation relative to waters of the state;  ․ the means of conveyance of animal wastes and process waters into the waters of the state;  ․ the slope, vegetation, rainfall, and other factors affecting the likelihood or frequency of discharge of animal wastes and process waste waters into the waters of the state;  ․ and other relevant factors as established by the department by rule.”  (Emphasis added).   Ecology argues that the application of these factors to the instant case reveals that the Doumas were a significant contributor of pollution..  FN15.  We may also refer to RCW 90.64.020(1) for guidance.  RCW 90.64.020(1)(a)-(e) provides that the director of Ecology shall consider the following factors in determining whether a dairy farm is a significant contributor, for the purposes of designating it as a CDAFO:  “the size of the animal feeding operation and the amount of wastes reaching waters of the state;  ․ the location of the animal feeding operation relative to waters of the state;  ․ the means of conveyance of animal wastes and process waters into the waters of the state;  ․ the slope, vegetation, rainfall, and other factors affecting the likelihood or frequency of discharge of animal wastes and process waste waters into the waters of the state;  ․ and other relevant factors as established by the department by rule.”  (Emphasis added).   Ecology argues that the application of these factors to the instant case reveals that the Doumas were a significant contributor of pollution.

FN16.  See also Hawaii's Thousand Friends v. City and County of Honolulu, 821 F.Supp. 1368, 1395 (D.Hawai'i 1993) (“First, a court is to calculate the maximum penalties that can be awarded against a violator of the Act”)..  FN16.  See also Hawaii's Thousand Friends v. City and County of Honolulu, 821 F.Supp. 1368, 1395 (D.Hawai'i 1993) (“First, a court is to calculate the maximum penalties that can be awarded against a violator of the Act”).

FN17.  Each question included in the penalty matrix can be answered in one of four ways:  no, possible, probably, and definitely.   A point value is assessed for each one of these answers.   Based on the cumulative total of those points, the gravity and severity are determined..  FN17.  Each question included in the penalty matrix can be answered in one of four ways:  no, possible, probably, and definitely.   A point value is assessed for each one of these answers.   Based on the cumulative total of those points, the gravity and severity are determined.

FN18.  See Exs. R-16 (1997 warning letter from EPA);  R-18 (1995 warning letter from Ecology);  Ex. R-19 (1996 warning letter from Ecology)..  FN18.  See Exs. R-16 (1997 warning letter from EPA);  R-18 (1995 warning letter from Ecology);  Ex. R-19 (1996 warning letter from Ecology).

FN19.  The Doumas argue that Ecology based its estimate on “an $80 [per] hour pumping rate.”   Appellant's Reply Br. at 21 (citing Ex. R-10 at 5).   They contend that Ecology based its $13,000 figure, then, on an assumed time of 162.5 hours of pumping.   Because there was no evidence to contradict the Doumas' detailed invoice that it took only 68 hours to pump the same volume of material (totaling $5,440), they argue, the evidence actually supports reducing the economic benefit portion even further.   This receipt was part of Ex. A-4, to which the PCHB refers in Finding of Fact 8 (“The receipts ․ do not clearly establish ․ [the] amount paid ․”).  CP at 167..  FN19.  The Doumas argue that Ecology based its estimate on “an $80 [per] hour pumping rate.”   Appellant's Reply Br. at 21 (citing Ex. R-10 at 5).   They contend that Ecology based its $13,000 figure, then, on an assumed time of 162.5 hours of pumping.   Because there was no evidence to contradict the Doumas' detailed invoice that it took only 68 hours to pump the same volume of material (totaling $5,440), they argue, the evidence actually supports reducing the economic benefit portion even further.   This receipt was part of Ex. A-4, to which the PCHB refers in Finding of Fact 8 (“The receipts ․ do not clearly establish ․ [the] amount paid ․”).  CP at 167.

PENOYAR, A.C.J.