ELR Citation: ELR 20187
No(s). s. 89-CV-194 et al (N.D.N.Y. Aug 13, 1991)

The court rules that the federal environmental statutes that control U.S. Department of Energy (DOE) facilities in New York do not constitute a blanket waiver of sovereign immunity that subjects the United States to any and all taxes, charges, and fees assessed against it by a state as part of that state's environmental programs. Since 1983, operators of facilities that produce air pollution and waste water, and that are subject to New York's Environmental Conservation Law (ECL), as well as hazardous waste generators and transporters subject to ECL, have been assessed certain regulatory charges. The charges vary in relation to the particular size or quantity of a facility's operations, rather than on the particular services rendered to the facility by New York. After the United States refused to pay the bulk of the regulatory fees charged by New York, New York sought declaratory relief that the United States owed over $1 million in unpaid annual regulatory fees plus interest.

The court first holds that the Federal Water Pollution Control Act (FWPCA) and the Resource Conservation and Recovery Act (RCRA) are not blanket waivers of the United States' sovereign immunity from the imposition and assessment of taxes by a state. While both the FWPCA and RCRA explicitly provide that the federal government is subject to, and must comply with, all state requirements respecting the control and abatement of water pollution and solid and hazardous waste disposal, Congress did not intend to subject the federal government to any and all financial obligations imposed by a state that relate to the state's environmental programs. Rather, the "requirements" referred to in the FWPCA and RCRA relate only to pollution standards that a state might impose as part and parcel of its environmental programs. Moreover, courts have consistently held that the waivers provided by RCRA and the FWPCA are to be interpreted narrowly, rather than expansively. While Congress has specifically subjected the federal government to the payment of state taxes in prior statutes, the pertinent portions of the FWPCA and RCRA never mention the word "taxes" when referring to the obligations of the United States.

The court, in applying the three-prong test provided for by the U.S. Supreme Court in Massachusetts v. United States, 98 S. Ct. 1153 (1978), next holds that because it cannot find that the assessed charges are necessarily based on a fair approximation of the federal government's use of the New York system, the court cannot hold, as a matter of law, that the charges are either permissible fees or impermissible taxes. The charges assessed under the ECL meet the first prong of the Massachusetts test, because there is no evidence of any discrimination on the part of the New York Department of Conservation (NYDEC) concerning the enforcement of ECL regulations. Moreover, the third prong of the test is met because the evidence reveals that the fee schedule developed by New York is not structured in a manner such that the revenues received through assessing the charges will exceed the total cost to New York of the benefits to be supplied. As developed by New York, the revenues established for the air, water, and waste programs are to be less than each program's respective expenditures. The fact that New York commingled some revenue receipts from these regulatory charges with the state's general revenue fund, the state superfund, and the state environmental enforcement fund does not alter the fact that the charges clearly do not exceed the cost to New York of providing the environmental programs offered by the NYDEC. However, the defendant has failed to meet the second prong of the test because no evidence was presented that the fees charged by the NYDEC do not fairly approximate the overall benefits received by DOE facilities in New York. The United States has only submitted evidence that indicates that the dollar value of the specific services received by DOE facilities is less than the charges assessed by the NYDEC concerning those facilities. However, there is no evidence as to the value of the overall benefits the facilities receive in light of the programs and services made available to them by the NYDEC, should the need for such assistance ever arise. The assessed charges may be a fair approximation of the cost of the benefits received by the United States even though the fees are greater than the dollar value of the specific services provided, because every facility in New York has available to it the assistance and other special services supplied by New York relating to the protection of the environment. Thus, the court must deny both parties' motions for summary judgment on their theories regarding the application of the Massachusetts test.

The court next rules that as a matter of law it cannot hold that the charges assessed against DOE facilities are unreasonable or reasonable, and must deny both parties' motions for summary judgment on the reasonableness of the assessed regulatory charges. First, the fact that New York deposited the revenues from the regulatory charges into New York's general or special enforcement funds does not make the charges unreasonable per se. Second, the defendant's motion for summary judgment cannot be granted on its theory that the method used by New York in ascertaining a particular facility's regulatory charge is presumptively invalid because the fee is based on the facility's size and/or extent of operation. Case law has established that charges based on the size or quantity of an entity's operations may well be valid if there exists a reasonable relationship between the actual cost of rendering the service to the facility and the fee charged. Moreover, as previously noted, the mere fact that the dollar value of the specific services rendered to the subject facilities is less than the regulatory fees charged by New York is not dispositive of whether such fees are unreasonable. Because no evidence has been submitted that compares the value of the overall benefits received by the federal government to the total cost to New York of providing the services to the facilities, no determination of reasonableness is possible.

Finally, the court holds that the prejudgment interest sought by NYDEC as part of its action against the United States is not a "requirement" with which the defendant must comply under RCRA, the FWPCA, and the Clean Air Act. The word "requirements" only relates to state pollution standards that a state might impose as part of the state's environmental programs.

Counsel for Plaintiffs and Counter-Defendants
Robert Abrams, Attorney General; Douglas H. Ward, Joel F. Spitzer
State Capitol, Albany NY 12224
(518) 474-2121

Counsel for Defendants and Counter-Plaintiffs
Frederick J. Scullin Jr., U.S. Attorney; Paul D. Silver, Ass't U.S. Attorney
U.S. Courthouse & Post Office
445 Broadway, 2nd Fl., Albany NY 12207
(518) 472-5522

Richard A. Correa, Thomas R. Lotterman, David M. Thompson
Environment and Natural Resources Division
U.S. Department of Justice, Washington DC 20530
(202) 514-2000