Alternate Fuels, Inc. v. Director of the Illinois Environmental Protection Agency

Case Date: 03/11/2003
Court: 5th District Appellate
Docket No: 5-01-0140 Rel

Decision filed 03/11/03. The text of this decision may be changed or corrected prior to the filing of a Petition for Rehearing or the disposition of the same.

NO. 5-01-0140

IN THE

APPELLATE COURT OF ILLINOIS

FIFTH DISTRICT


ALTERNATE FUELS, INC., ) Appeal from the
) Circuit Court of
           Plaintiff-Appellant and Cross-Appellee, ) St. Clair County.
)
v. ) No. 98-MR-302
)
THE DIRECTOR OF THE ILLINOIS  )
ENVIRONMENTAL PROTECTION )
AGENCY and THE ILLINOIS )
ENVIRONMENTAL PROTECTION )
AGENCY, )
) Honorable
          Defendants-Appellees and Cross- ) John M. Goodwin, Jr.,
          Appellants.  ) Judge, presiding.

 

PRESIDING JUSTICE HOPKINS delivered the opinion of the court:

The plaintiff, Alternate Fuels, Inc. (AFI), appeals from the trial court's denial of asummary judgment on count II of its complaint against the defendants, the IllinoisEnvironmental Protection Agency and its director (collectively, the Agency). The trial courtgranted AFI's motion for a summary judgment on count I of the complaint, and it granteda "summary determination" on count II in favor of the Agency. AFI contends that the trialcourt's order denying a summary judgment on count II is inconsistent with its grant of asummary judgment on count I and that the summary determination on count II is in error asa matter of law. In its cross-appeal, the Agency argues just the opposite-that the trial courterred as a matter of law in granting a summary judgment in favor of AFI on count I. Thesubstantive issue presented by both sides is whether the materials AFI receives, stores, andmanufactures into an alternate fuel to be used by Illinois Power Company should beclassified as waste, such that AFI would require a permit to continue its recycling business. AFI additionally argues that the trial court erred in denying its request for the reasonablecosts and expenses of litigation. The Agency contends that the trial court should havedismissed the complaint for a lack of jurisdiction because the case was not ripe.

FACTS

AFI collects, separates, and processes plastic materials into alternate fuel at its plantin East St. Louis, Illinois. The plastic materials (polyethylene, polyolefin, and polyurethane,but not polyvinyl chloride (PVC)) come from approximately 12 suppliers. The plasticmaterials typically come from "triple rinsed" agricultural chemical containers from farmsupply stores. AFI places the plastic containers into a granulating machine that shreds theplastic into small pieces.

AFI has a contract to supply up to 100,000 tons of alternate fuel to Illinois PowerCompany (now known as Dynegy, Inc., but referred to hereinafter as Illinois Power) for useat its Baldwin power plant, which produces electricity by means of coal-fired boilers. BothAFI and Illinois Power have plans to begin adding scrap wood from construction anddemolition debris as an additional element of the alternate fuel.

AFI is required under its contract with Illinois Power to provide alternate fuel thatmeets certain specifications, the same specifications that Illinois Power is required to meetunder the operating permits issued by the Agency for the Baldwin power plant. AFI in turnrequires all of its suppliers of the components of the alternate fuel to sign a contract asevidence of their agreement to provide only materials free of nonconforming items, so thatthe wood delivered to AFI will contain only wood and the plastic will contain only plastic. Suppliers must certify that the materials delivered are not hazardous. Additionally, thesuppliers must perform a fuel analysis on the materials to show that they meet the requiredspecifications. These test results are reviewed by AFI before it accepts suppliers' bids.Before allowing materials into its facility, AFI also visually inspects the materials to checkfor compliance with the agreement.

The Illinois Pollution Control Board (the Board) reviewed the contract between AFIand Illinois Power in Illinois Power Co. v. Illinois Environmental Protection Agency, Ill.Pollution Control Bd. Op. 97-35, 97-36 (January 23, 1997). In that decision, the Boarddecided that the alternate fuel produced by AFI from the empty plastic containers was notwaste within the meaning of the Illinois Environmental Protection Act (the Act) (415 ILCS5/1 et seq. (West 2000)). This decision was based upon the Agency's denial of IllinoisPower's request to revise its air permits to allow for the combustion of AFI's alternate fuelat the Baldwin power plant. The Agency had denied Illinois Power's request. The Agencyhad claimed that AFI's alternate fuel constituted waste and that Illinois Power was requiredto obtain local siting approval pursuant to section 39.2 of the Act (415 ILCS 5/39.2 (West2000)).

The Board rejected the Agency's claim and held that AFI's alternate fuel was not waste within the meaning of the Act. The Board ruled that Illinois Power did not requirelocal siting approval, and the Board ordered the Agency to issue Illinois Power an operatingpermit to allow for the combustion of the alternate fuel.

Despite the Board's decision, the Agency continued to interpret the Act as requiringthe facilities manufacturing the alternate fuel to comply with solid-waste-permitting andlocal-siting-approval procedures. Essentially, the Agency took the position that althoughthe alternate fuel used by Illinois Power does not constitute waste, the materials used tomake that alternate fuel are waste subject to permitting rules. On July 8, 1998, the Agencyissued a violation notice to AFI pursuant to section 31(a)(1) of the Act (415 ILCS 5/31(a)(1)(West 2000)). The notice alleged that AFI had violated sections 21(d)(1) and 21(e) of theAct (415 ILCS 5/21(d)(1), (e) (West 2000)) because AFI was storing and treating waste atits facility without a permit from the Agency. The notice indicated that AFI might beprosecuted for the violation and that if AFI failed to respond to the notice, it would waiveits opportunity to meet with the Agency prior to any prosecution.

The violation notice required AFI to submit a permit application for a waste-storageand waste-treatment operation. The permit-application procedure additionally requires proofof local siting approval under section 39.2 of the Act (415 ILCS 5/39.2 (West 2000)).

The Agency contends in its brief to this court that the "record contains no indicationthat AFI responded to the Violation Notice" and that instead of responding or preparing todefend against potential prosecution, AFI filed its complaint for a declaratory judgment. The Agency is correct that on November 2, 1998, AFI filed a complaint for a declaratoryjudgment, but it is incorrect in its assertion that AFI did not respond to the violation notice. The record is clear that AFI responded to and met with Agency officials, and the Agencyadmitted that in its answer to AFI's complaint for a declaratory judgment.

On September 15, 1998, Agency representatives met with David Wieties, AFI'spresident, to discuss the allegations of the violation notice. The Agency advised Wieties thatit interprets the statutory term "discarded material" as the phrase is used in the definition ofwaste (415 ILCS 5/3.53 (West 2000)). In that definition, discarded material refers to anymaterial that is not being used for its original purpose. According to the Agency, since thecomponent materials used to manufacture the alternate fuel are not being used for theiroriginal purpose, they are discarded, and the process by which AFI recycles the materialsinto alternate fuel is a waste-treatment process requiring permits and local siting approval.

After its receipt of the violation notice, AFI halted production of alternate fuel forIllinois Power. AFI has lost financing from primary investors and has not been able tosecure new investors or suppliers due to its receipt of the violation notice.

On November 2, 1998, AFI filed its two-count complaint against the Agency. AFIsought a declaration that neither the material used to make the alternate fuel nor the fuelitself is waste within the meaning of the Act, based upon the argument that the Board'sdecision in Illinois Power Co. set forth the appropriate test for determining whethernonhazardous, fuel-grade material is properly classified as waste. AFI also asked the courtto award it all the reasonable costs it had incurred in bringing the action, including attorneyfees. AFI argued that the Agency's interpretation of discarded material amounts to anadministrative rule not authorized by the Act and contrary to the Board's holding in IllinoisPower Co. The request for costs and attorney fees was made pursuant to section 10-55 ofthe Illinois Administrative Procedure Act (5 ILCS 100/10-55 (West 2000)). Section 10-55provides in pertinent part as follows:

"(c) In any case in which a party has any administrative rule invalidated by acourt for any reason, including but not limited to the agency's exceeding its statutoryauthority or the agency's failure to follow statutory procedures in the adoption of therule, the court shall award the party bringing the action the reasonable expenses ofthe litigation, including reasonable attorney's fees." 5 ILCS 100/10-55(c) (West2000).

Agency employees admitted that the AFI facility was clean and orderly and posed nothreat to the environment. The Agency took the position, however, that other plants besidesAFI might choose to enter the alternate-fuel-production business and that they might notconduct their business in an environmentally safe manner. Hence, the Agency asserted thatthe violation notice it issued to AFI would serve as guidance to others in the regulatedcommunity that the materials used in the production of alternate fuel constitute waste subjectto permitting procedures and that requiring such plants to submit to the permit procedurewas necessary for the protection of the environment.

On July 12, 1999, AFI filed a motion for a summary judgment on count I. AFI askedthe trial court to rule that the materials used for alternate-fuel production do not constitutewaste. On September 1, 1999, the trial court ruled as a matter of law that no genuine issueof material fact existed regarding count I. Specifically, the trial court stated, "[A]nydetermination or interpretation by the [Agency] that the raw materials when provided to [the]AFI facility are waste is simply beyond reason and common sense[,] and specifically[,] thosematerials, once they are there, are not discarded; they are not intended to be discarded andconsequently are not waste."

On February 11, 2000, AFI filed a motion for a summary judgment on count II. AFI sought a declaration that the Agency's policy of regulating materials not being used for theiroriginal purposes as waste under the Act amounts to unauthorized rule-making and that, asa result, AFI was entitled to an award of all its reasonable costs and attorney fees for havingto file a declaratory judgment action against the Agency. On April 11, 2000, the Agencyfiled a motion for a summary determination, and AFI filed a response thereto on April 24,2000.

Also on April 24, 2000, the trial court denied AFI's motion for a summary judgmenton count II. The court's order did not include any explanation for the ruling. This order wasmailed to the parties at incorrect addresses, causing a delay in the proceedings untilNovember 1, 2000, when AFI finally learned of the court's ruling and filed a motion forleave to file an interlocutory appeal or for a clarification of the ruling. On December 14,2000, the court conducted a hearing on all pending motions.

On January 31, 2001, the court entered an order denying AFI's motion for a summaryjudgment on count II for the following reason:

"A genuine issue of material fact exists as to whether the material in question,'feedstock,' or material from which the alternate fuel is derived, is 'waste' within themeaning of the statute. (See sworn deposition testimony of Bakowski and Mensingof record.)"

In the same order, the court granted the Agency's motion for a summary determination,ruling (1) that the issuance of the violation notice was not an administrative rule under theIllinois Administrative Procedure Act, (2) that the issuance of the violation notice wasexplicitly authorized under section 31 of the Act (415 ILCS 5/31 (West 2000)), and (3) thatthe Agency's interpretation of the phrase "discarded material" as referencing any material notbeing used for its original purpose could not be considered an administrative rule under theIllinois Administrative Procedure Act. Accordingly, the court denied AFI's request forattorney fees and costs. This appeal followed.

ANALYSIS

1. Standard of Review

A trial court's grant or denial of a summary judgment presents a question of law andis subject to de novo review. Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154Ill. 2d 90 (1992). The review of a trial court's denial of fees under section 10-55 of theIllinois Administrative Procedure Act presents the question of whether the court abused itsdiscretion. Carson Pirie Scott & Co. v. Illinois Department of Employment Security, 131Ill. 2d 23, 48-49 (1989).

2. Agency's Claim That Trial Court Lacked Jurisdiction

The Agency contends that AFI's complaint for a declaratory judgment was premature,initiated at a time when it was unclear whether the Agency would ever act upon the violationnotice. According to the Agency, the mere notice of the potential for action against AFI didnot create a justiciable claim capable of resolution by the trial court. AFI counters thatIllinois case law does not require an actual injury before an actual controversy is ripe forconsideration.

Under the Illinois Constitution, the circuit courts have jurisdiction only over"justiciable matters." Ill. Const. 1970, art. VI,