Underground Storage Tank Indemnification Fund; Payment of Registration Fees under Section 503; De Facto Regulation
Shrom v. Underground Storage Tank Indemnification Board, 261 A.3d 1082 (Pa. Cmwlth. 2021), allocatur granted Feb. 16, 2022, appeal docket 21 MAP 2022
In this case, the Supreme Court will consider whether owners of underground storage tanks (USTs) are eligible for the payment of remediation costs by the Underground Storage Tank Indemnification Fund (Fund) where the underground storage tanks were not registered, and the required registration fee was not paid, at the time of the fuel release that gave rise to their claim.
Dr. Timothy Shrom and Debra Shrom (collectively, the Shroms) inherited a property in Quarryville, Pennsylvania (Property). The Property included a convenience store with retail motor fuel sales that included USTs. Commonwealth Court summarized the relevant facts as follows:
The subject property is located at 435 West Fourth Street, Quarryville, Pennsylvania (the Property). Mrs. Shrom inherited the Property following the death of her mother in 2014. At that time, the Property was leased and operated as a convenience store, Subway franchise, and retail fuel sales facility. That lease was pursuant to an oral agreement between Mrs. Shrom and Edward Boornazian or his solely owned limited liability company, Quarryville Subway LLC (Tenant). When Mrs. Shrom inherited the Property, it contained five USTs situated side by side: three gasoline tanks, a diesel tank, and a kerosene tank. Prior to 2014, Jerome H. Rhoads, Inc., was registered with the Pennsylvania Department of Environmental Protection (DEP) as the owner and operator of the USTs, but on October 16, 2014, that corporation transferred its interest in the tanks to Tenant.
On February 3, 2015, Tenant submitted an amendment to the USTs’ registration to the DEP, reflecting Tenant’s ownership thereof. Approximately one year later, in early 2016, Tenant ceased pumping fuel at the Property, and on May 17, 2016, Tenant amended the USTs’ registration with the DEP to reflect an out-of-service status. In April 2017, Tenant vacated the Property, leaving the USTs behind. On June 4, 2017, the registration for the USTs expired because the registration fee was unpaid. The DEP sent letters to Tenant at the Property concerning the unpaid registration fee in July, August, and September of 2017. On October 13, 2017, the DEP referred the debt to the Pennsylvania Office of Attorney General (OAG). The OAG sent letters concerning the unpaid fees to the Property in October and November of 2017. . Neither the DEP’s nor the OAG’s letters were returned as undeliverable, but the Shroms did not reside at the Property and did not open mail addressed to Tenant. Thus, the Shroms did not read any of the notices concerning the unpaid registration fee. Neither the DEP nor the OAG directly notified the Shroms of the unpaid registration fee.
In 2017, the Shroms engaged a contractor to remove the USTs. On September 12, 2017, the Shroms’ contractor submitted a tank system closure notification form to the DEP, which called for a complete system closure and the removal of all five USTs.
Dr. Shrom signed the form as the tank system owner, although he later asserted that this was inadvertent because neither he nor Mrs. Shrom ever owned the USTs. Although the DEP permanent tank closure planning checklist calls for verification that the USTs are registered, no one registered the tanks at that time.
On December 28, 2017, during the removal of the USTs, a diesel fuel release was discovered. On January 5, 2018, additional gasoline contamination was discovered on the Property. The Shroms’ contractor proceeded to remove the USTs and the contaminated soil. At the time that the release was discovered, all tank capacity and per-gallon fees (section 705 fees) payable to the Fund were current, because no such fees were required while the tanks were in out-of-service status. However, the UST registration fee remained unpaid, and the tanks accordingly remained unregistered.
On January 5, 2018, the Shroms’ environmental consultant reported the release to the Fund. The Fund assigned the claim to its third-party claims administrator, ICF, to investigate the Shroms’ eligibility for coverage from the Fund. During that investigation, the Shroms’ environmental consultant informed them that the UST registration fees had not been paid for 2017. The following day, the Shroms paid the outstanding registration fees to the OAG’s collection agent.
Slip op. at 2-5 (internal citations and footnotes omitted). The relevant portion of the Storage Tank and Spill Prevention Act provides that in order to receive a payment from the Fund, “a claimant shall meet the following eligibility requirements […] The tank has been registered in accordance with the requirements of section 503.” 35 P.S. § 6021.706. Section 503(a) of the Act specifically provides that every owner of a UST to “register with the [DEP] each [UST] by completing and submitting the form provided by the [DEP] and by paying the registration fee prescribed by the [DEP] for each underground storage tank” and that “[i]t shall be unlawful for any owner or operator to operate or use, in any way, any [UST] that has not been registered as required by this section.” 35 P.S. § 6021.503(a).
The Fund determined that the Shroms were unable to establish their eligibility for the payment of remediation costs on the basis that the USTs located on their property were not registered, and the required registration fee was not paid, at the time of the fuel release that gave rise to their claim. The Shroms challenged the denial first to the Fund’s Executive Director and then to the Underground Storage Tank Indemnification Board, which upheld the Fund’s denial.
The Shroms appealed to Commonwealth Court, arguing that requiring the registration fees to be paid before the discovery of the release was enforcement of a de facto regulation and that failure to pay the UST registration fees would not affect the solvency of the Fund. The Board countered that the statutory eligibility requirements are unambiguous as to the registration of USTs, but to the extent the statute is ambiguous, the court should defer to the Board’s interpretation of the statute. In supporting its position that section 503 registration fees must be paid prior to the discovery of the release that triggers a claim to the Fund, the Board pointed to Luther P. Miller v. Underground Storage Tank Indemnification Bd., 965 A.2d 398 (Pa. Cmwlth. 2009), which Commonwealth Court summarized as follows:
The USTs at issue in Luther P. Miller were used to store gasoline from 1992 to 1999. Luther P. Miller, 965 A.2d at 400. The claimant stopped using the tanks in 1999 and removed as much gasoline from them as was practicable, but some fuel residue remained. Id. Although the tanks were out of service, the claimant did not file temporary closure paperwork with the DEP. Id. The USTs’ registration expired on October 4, 2002. Id. A release was discovered on January 13, 2006. Id. at 401. The tanks’ registration was expired and the tanks’ registration fees were delinquent at that time. Id. The claimant filed a claim with the Fund on January 19, 2006. Id. After filing the claim, and after receiving an enforcement letter from the OAG, the claimant paid the delinquent registration fees on April 18, 2006. Id. The Fund denied the claim on September 6, 2006, “because the tanks were not registered and the registration fees were not paid.” Id. The Board affirmed the denial of the claim on that basis. Id. at 402.
Slip op. at 12. As to the importance of the registration fees in maintaining solvency of the fund, the Board argued:
Although the registration fees are not deposited directly into the Fund, the Board asserts that the Fund relies upon the registration information that the DEP provides it, which is used to invoice UST owners so that they may comply with their financial responsibility requirements. Id. at 20. The Board argues that, “[i]f tank owners only had to register their tanks in the event of a release that gives rise to a claim, the DEP’s data would be skewed, leading to faulty fee revenue projections that could jeopardize [the Fund’s] ability to pay claims and maintain financial stability.” Id. at 20-21. This, in the Board’s view, merely underscores “why tank registration is important to the operation of the DEP and [the Fund], and why it is a requirement for eligibility” under the Act. Id. at 21 (emphasis in original).
Slip op. at 10-11.
Commonwealth Court reversed the Board’s denial of coverage on the basis that the Board’s registration fee requirement was not provided by statute or regulation. Therefore, because the Board did not promulgate the requirement as a regulation in accordance with the Pennsylvania Commonwealth Documents Law, the requirement was a void and unenforceable de facto regulation. In so holding, the court disagreed with the Board that Luther P. Miller was controlling precedent, reasoning that:
Importantly, unlike the Shroms, the claimant in Luther P. Miller did not argue that it was entitled to reimbursement because it ultimately paid the section 503 registration fee, albeit after the discovery of the release giving rise to the claim. Rather, the claimant in Luther P. Miller contended that it was eligible for payment from the Fund “because once the product was removed from the tanks and the tanks were taken out of service, they no longer needed to be registered under [s]ection 503 of the Act because the tanks were no longer ‘underground storage tanks’ as defined in the Act.” Id. at 403. We rejected the claimant’s “contorted interpretation of the Act.” Id. at 405. We concluded that the Act requires registration of USTs regardless of whether they are actively in use. This Court therefore “agree[d] with the Board that the tanks at issue … were required to be registered in accordance with [s]ection 503 of the Act,” and the claimant’s “failure to comply with the registration requirements” rendered it “ineligible to make a claim for reimbursement from the Fund.” Id.
The Board is correct that one fact in Luther P. Miller was similar to the instant matter—the section 503 registration fee was not paid until after the discovery of the release giving rise to the claim. However, this fact was not the basis of this Court’s decision. Rather, Luther P. Miller rejected the suggestion that inactive tanks are not subject to the Act’s registration requirements. The question of the timing of the payment of the section 503 registration fee relative to the discovery of the release was not analyzed or discussed. Accordingly, we disagree with the Board’s suggestion that Luther P. Miller controls the instant case. Because neither Luther P. Miller nor the cases concerning the payment of section 705 fees are dispositive, we thus differ with the Board’s view that the rule applied to the Shroms’ claim is necessitated by any existing precedent.
Slip op. at 12-13. Commonwealth Court additionally disagreed with the Board’s assertion that payment to the Shroms was detrimental to the Fund’s solvency, concluding that:
As the Shroms note, an additional distinction between section 705 fees and section 503 registration fees, beyond those discussed above, is that the former are used to pay claims, and the latter are not. The fees specified under section 705 are “set on an actuarial basis in order to provide an amount sufficient to pay outstanding and anticipated claims against the [Fund] in a timely manner” and “to meet all other financial requirements of the [B]oard.” Section 705(d)(1) of the Act, 35 P.S. § 6021.705(d)(1). By contrast, under section 503, tank registration fees are “collected by the [DEP]” and “shall be used to fund the development and operation of the storage tank programs established by this [A]ct,” but not directly to pay claims against the Fund. Section 503(c) of the Act, 35 P.S. § 6021.503(c). In light of this distinction, paying the Shroms’ claim would not appear to pose any imminent risk to the Fund’s solvency. The Board recognizes the distinction, but argues that the Fund uses data provided to it by the DEP to maintain the contact information of tank owners, and if those tank owners do not maintain the registration at all times, the “DEP’s data would be skewed, leading to faulty fee revenue projections that could jeopardize [the Fund’s] ability to pay claims and maintain financial stability.” (Board’s Br. at 21.) This may be true. However, if such consequences are likely to flow from the gap in the statute that we have discussed herein, then it would be a worthwhile endeavor to resolve the matter through a duly promulgated regulation, thereby placing the public on notice of the consequence that will follow from the failure to pay a UST registration fee within the time frame that the Fund prefers.
Slip op. at 24-25.
The Pennsylvania Supreme Court granted allocatur to consider the following issues, as stated by the Underground Storage Tank Indemnification Board:
a. In a matter of first impression before this Court and of substantial public importance, did the Commonwealth Court err in reversing the decision of the Underground Storage Tank Indemnification Board which correctly held that Respondents, Dr. Timothy and Debra Shrom failed to satisfy their heavy burden of establishing eligibility for the payment of remediation costs by the Underground Storage Tank Indemnification Fund where it is undisputed that the underground storage tanks on the Respondents’ property were not registered and the required registration fee was not paid at the time the release as discovered?
b. Did the Commonwealth Court’s Order conflict with other relevant appellate court authority, particularly Luther P. Miller v. Underground Storage Tank Indemnification Bd., 965 A.2d 398 (Pa. Commw. Ct. 2009), which is substantially factually identical to the instant case, and with other existing case, statutory, and regulatory law, in its characterization of the Board’s denial of the Shroms’ claim for remediation costs due to the failure to register the USTs as an unpromulgated, de facto regulation?
c. In a matter of substantial public importance due to its potential to result in the Fund’s insolvency, did the Commonwealth Court err in rejecting the Board’s finding that the Fund relies upon Pennsylvania Department of Environmental Protection registrations in billing the necessary fees to keep the Fund solvent?