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NEW YORK ST. DEPT. OF ENV. CONS. v. D.O.E.

August 13, 1991

NEW YORK STATE DEPARTMENT OF ENVIRONMENTAL CONSERVATION, ET AL., PLAINTIFFS AND COUNTER-DEFENDANTS,
v.
UNITED STATES DEPARTMENT OF ENERGY, ET AL., DEFENDANTS AND COUNTER-PLAINTIFFS.



The opinion of the court was delivered by: McCURN, Chief Judge.

  MEMORANDUM — DECISION AND ORDER

BACKGROUND

In January, 1989, the New York State Department of Environmental Conservation ("NYDEC" or "EnCon") commenced these four consolidated actions in New York State Supreme Court against the United States Department of Energy ("United States"), as representative of ten federal facilities located in New York State which have been underpaying certain regulatory charges assessed against them by the NYDEC.*fn1

Plaintiff's action seeks a judgment declaring that the United States is required to pay the NYDEC certain past due fees totalling approximately $1,000,000.00, as well as accrued interest on this sum. Additionally, this action seeks a declaration that the United States may no longer withhold payment of such charges to the NYDEC. In its answer, the United States has asserted a counterclaim against EnCon which seeks a refund of approximately $400,000.00, plus interest, for payments made by the United States to the NYDEC regarding the regulatory fees charged by EnCon.

At all times relevant to the instant proceeding, the NYDEC has required the subject entities to secure and maintain various certificates, approvals and permits in order to operate such facilities. Both parties agree that the United States has obtained all of these required certificates, and paid the fees associated with these permits.*fn2 However, in addition to these permit fees, the NYDEC has also assessed certain regulatory charges against the United States which pertain to the physical operation of these entities. It is these regulatory charges, and not the permit fees, which are the subject of the present dispute.

Since April 1, 1983, operators of stationary combustion installations, process air combustion sources and incinerators which are subject to New York Environmental Conservation Law ("NYECL") Article 19, Titles 3 or 5, have been required by EnCon to pay annual fees as provided for in NYECL § 72-0302 ("air regulatory" charges). Hazardous waste generators, and the operators of such facilities which are subject to Titles 3, 7, 9 or 11 of NYECL Article 27, have been required to pay the fees set forth in NYECL § 72-0402. Waste transporters which are subject to the permit requirements detailed in Title 3 of NYECL, Article 27 have similarly been required to pay the annual charges set out in NYECL § 72-0502 since April 1, 1983 (these two fees will be collectively referred to by this court as "waste regulatory" charges). As of this same date, operators of waste water facilities subject to regulation under Titles 7 or 8 of NYECL, Article 17 have been required to pay the annual fees detailed in NYECL § 72-0602 ("water regulatory" charges).

The regulatory charges imposed by EnCon against facilities, including the subject entities, vary in relation to the particular size or quantity of such facility's operations (e.g. gallons, pounds, vehicles, etc.), rather than upon the particular services rendered to such facilities by the NYDEC. Over the past several years, these fees have increased in amount, and the receipts from these charges have been placed by the State in various funds.

Beginning in 1985, the rates for waste regulatory charges were statutorily doubled from the 1983 and 1984 levels. In 1989, the rates of the air regulatory charges were quintupled as compared to the 1983 through 1988 levels. In this same year, the water regulatory charges were more than doubled from the 1983 through 1988 levels. Turning to the State's use of these funds, in 1983 and 1984, all waste regulatory charges received were deposited into the New York's general revenue fund. From 1985 through 1988, half of the receipts collected by these fees were placed in the State's general revenue fund, while the other half were deposited into a special hazardous waste remedial fund — New York's environmental superfund. Since 1989, half of the waste regulatory charges have been deposited into the New York State superfund, with the balance being deposited into the State's special enforcement fund. EnCon's air and water regulatory charges were deposited into New York State's general revenue fund until 1989, at which time the State began depositing these particular assessments into a special environmental enforcement fund developed by the State.

Prior to the present action, the United States did not challenge EnCon's regulatory charges in a formal administrative or judicial proceeding. Rather, the subject facilities refused to pay the bulk of the regulatory fees charged by the State. Moreover, each year after it was billed for these charges, the United States protested the amount sought and noted that it had constitutional concerns and objections to the fees.

On February 17, 1989, the United States filed a notice of removal of these actions from the New York State Supreme Court in Albany County to the United States District Court in the Northern District of New York.

By the present motions, the plaintiff seeks summary judgment declaring that the United States must pay EnCon $1,011,539.82 in unpaid annual regulatory fees along with interest as provided for in NYECL § 72-0201(6). The United States has also moved for summary judgment concerning these regulatory charges, and by its motion seeks an order directing the NYDEC to refund previously paid waste and water regulatory charges in the amount of $420,863.95, plus interest.

DISCUSSION

(a) The Doctrine of Sovereign Immunity.

Under the doctrine of sovereign immunity, federal and state governments are immune from taxation by each other. National R.R. Passenger Corp. v. City of N.Y., 695 F. Supp. 1570 (S.D.N.Y. 1988), aff'd in mem. 882 F.2d 710 (2d Cir. 1989). As a result, neither the United States nor a state may impose a tax on the other absent the clear consent of the assessed entity. Davis v. Michigan Dep't of Treasury, 489 U.S. 803, 109 S.Ct. 1500, 103 L.Ed.2d 891 (1989). This well settled rule, first established by Chief Justice Marshall in M'Culloch v. Maryland, 17 U.S. (4 Wheat.) 316, 4 L.Ed. 579 (1819), is premised upon "an implied limitation on the taxing power of each, such as to forestall undue interference with the governmental activities of the other." Graves v. New York ex rel. O'Keefe, 306 U.S. 466, 477-78, 59 S.Ct. 595, 596-97, 83 L.Ed. 927 (1939); National R.R., 695 F. Supp. at 1573. Thus, absent its consent, the federal government and its instrumentalities are absolutely immune from direct taxation by a State. Mayo v. United States, 319 U.S. 441, 448, 63 S.Ct. 1137, 1141, 87 L.Ed. 1504 (1943), reh'g denied 320 U.S. 810, 88 L.Ed. 489 (1943); National R.R., 695 F. Supp. at 1573. However, whenever Congress affirmatively declares that the federal government's instrumentalities or property are subject to state regulation and taxation, and such declaration is made in a manner which is clear and unambiguous, then, and only then, will the federal government be subject to such regulation and taxation. Hancock v. Train, 426 U.S. 167, 178-179, 96 S.Ct. 2006, 2012-13, 48 L.Ed.2d 555 (1976). Applying these principles to the facts in the instant action, the federal government will only be liable to the NYDEC for the charges at issue if the United States has clearly and unambiguously consented, through federal statutes, to the payment of these fees.

(b) The Federal Statutes.

The NYDEC alleges that certain statutes passed by Congress constitute a blanket waiver of the defendant's sovereign immunity with respect to the claims involved in the present case. It contends that these statutes clearly and unambiguously subject the United States to all state requirements, including regulations relating to the payment of the regulatory fees at issue, which relate to the control and abatement of air and water pollution and the disposal of solid or hazardous wastes in the State. In light of this position, a review of the language contained in the subject statutes is warranted.

The Clean Air Act, 42 U.S.C. § 7418 ("CAA") provides, in part, that in controlling air pollution from federal facilities:

    (a) Each department, agency, and instrumentality
  of the executive, legislative, and judicial
  branches of the Federal Government . . . shall be
  subject to, and comply with, all Federal, State,
  interstate, and local requirements, administrative
  authority, and process and sanctions respecting
  the control and abatement of air pollution in the
  same manner, and to the same extent as any
  nongovernmental entity. The preceding sentence
  shall apply (A) to any requirement whether
  substantive or procedural (including any
  recordkeeping or reporting requirement, any
  requirement respecting permits and any other
  requirement whatsoever), (B) to the exercise of
  any Federal, State or local administrative
  authority, and (C) to any process and sanction,
  whether enforced in Federal, State, or local
  courts or in any other manner. This subsection
  shall apply notwithstanding any immunity of such
  agencies, officers, agents, or employees under any
  law or rule of law.
    (b) The President may exempt any emission source
  of any department, agency, or instrumentality in
  the executive branch from compliance with such a
  requirement if he determines it to be in the
  paramount interest of the United States to do
  so. . . .

The Clean Water Act, 33 U.S.C. § 1323 ("CWA"), states, in relevant part, that:

The third statute relied upon by the plaintiff in support of its motion, the Resource Conservation and Recovery Act ("RCRA"), provides, in salient part, that:

  Each department, agency, and instrumentality of
  the executive, legislative, and judicial branches
  of the Federal Government . . . shall be subject
  to, and comply with, all Federal, State,
  interstate, and local requirements, both
  substantive and procedural (including any
  requirement for permits or reporting or any
  provisions or injunctive relief and such sanctions
  as may be imposed by a court to enforce such
  relief), respecting control and abatement of solid
  waste or hazardous waste disposal in the same
  manner, and to the same extent, as any person is
  subject to such requirements, including the
  payment of reasonable service charges. Neither the
  United States, nor any agent, employee, or officer
  thereof, shall be immune or exempt from any
  process or sanction of any State or Federal Court
  with respect to the enforcement of any such
  injunctive relief. The President may exempt any
  ...

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