Foster v. United States Environmental Protection Agency

          MEMORANDUM OPINION AND ORDER AND FINDINGS OF FACT AND CONCLUSIONS OF LAW

          JOHN T. COPENHAVER, JR. SENIOR UNITED STATES DISTRICT JUDGE

         The court conducted a bench trial on the counterclaim of the defendants (EPA group) against the plaintiffs (Foster group) on August 14 through 18, 2017.^[1]

         The defendants claim that the plaintiffs filled “waters of the United States” without a Section 404 Clean Water Permit to do so when they filled four headwater streams in 2010 on their real estate acquired by them in 2009, known as the “Neal Run Crossing property, ” near Parkersburg, West Virginia.

         I. FINDINGS OF FACT

         The following discussion represents the court's findings of fact, made by a preponderance of the evidence.

         A. Neal Run Crossing Property

         Ron Foster is a citizen of West Virginia who resides in Putnam County, West Virginia. Jt. Stip. ¶ 1. Foster Farms, LLC. is a Kentucky limited liability company. Id. at ¶ 2. Marketing & Planning Specialists (“M&P”) is a Nevada limited partnership authorized to do business in West Virginia. Id. at ¶ 3.

         Prior to its purchase by Foster, the Neal Run Crossing property was owned by Endurance Group, LLP (“Endurance”). Id. at ¶ 6. While Endurance owned the property, it filled and altered a stream in an area of the property known as “Pad 1” without a Clean Water Act section 404 permit. Id. at ¶ 7. The Pad 1 area and this CWA violation is unrelated to the one at issue in this matter. Before the EPA could begin an enforcement action related to the Pad 1 CWA violations, Endurance was forced into bankruptcy on March 3, 2009, for reasons unrelated to the CWA violation. Id. at ¶ 9; Aug. 18, 2017 Trial., Tr. at 80-82.

         On October 19, 2009, the bankruptcy court issued an order that permitted the sale of the 90-acre Neal Run Crossing property to Foster free of all pre-bankruptcy liability, with the exception that $50, 000 be set aside in a trust to fund restoration work to address the Endurance Group's CWA violations. Id. at ¶ 10. The bankruptcy court's order limited the remediation sought by EPA and the U.S. Army Corps of Engineers (“Corps”) to an area within 30 feet of the toe of the fill made by Endurance. Jt. Stip. ¶ 10. The restoration work was completed in 2011.

         On October 29, 2009, Foster assigned ownership of approximately 40.5 acres of the Neal Run Crossing property to M&P, of which he is the general partner and manager. Id. at ¶ 11. Foster assigned ownership of the near 50-acre balance of the Neal Run Crossing property to Foster Farms, LLC, of which he is the 80% owner. Id. As a practical matter, Foster is the decision maker for both entities with respect to all matters at issue herein.

         The Neal Run Crossing property has been divided into five “pads” for development purposes. Id. at ¶ 15. The alleged CWA section 404 violations at issue in this litigation occurred on the portion of the Neal Run Crossing property known as “Pad 4” or “the Site.” Id. at ¶ 4. The Pad 4 area is owned in part by M&P and in part by Foster Farms. Id. at ¶ 16.

         Before plaintiffs conducted development work on Pad 4, four streams, identified as “relevant reaches” RR1, RR2, RR3 and RR4, existed on the Site. U.S. Ex. 25; U.S. Ex. 20 at ¶ 0000483-484; U.S. Ex 284. RR1, RR2, and RR3 flowed into RR4 prior to their fill. U.S. Ex. 20 at ¶ 0000483; U.S. Ex. 284. RR4 exited the western boundary of the Site, crossed a neighbor's hayfield, and joined Blackwell Creek (also known as the First Unnamed Tributary to Neal Run). Stokely Test., Tr. at 128-129, 132-133, 137-138; 145; Andreescu Trial Tr. 59-60 (Aug, 15, 2017); U.S. Exs. 279 & 303B.

         Blackwell Creek joins the Second Unnamed Tributary to Neal Run. Jt. Stip. ¶ 25. Blackwell Creek is mapped as having intermittent-seasonal flow by the United States Geological Survey. U.S. Ex. 5B at ¶ 0000660. Multiple photographs depict flowing water in Blackwell Creek at various times of year. Lutte Test., Tr. at 45-46; 47-48 (Aug. 16, 2017); U.S. Ex 187 at USEPA0001244, U.S. Ex. 246.

         The Second Unnamed Tributary to Neal Run is a relatively permanent water, which flows into Neal Run. Jt. Stip. ¶ 26. Neal Run is a relatively permanent water, which flows into the Little Kanawha River. Id. at ¶ 27. The Little Kanawha River flows into the Ohio River at Parkersburg. Id. A portion of Neal Run, extending 2.4 miles from its confluence with the Little Kanawha River, has been identified by the Corps as a “navigable water of the United States” for purposes of Section 10 of the Rivers and Harbors Act of 1899. Id.

         The Little Kanawha River is navigable-in-fact, and has been identified by the Corps as a “navigable water of the United States” for purposes of Section 10 of the Rivers and Harbors Act of 1899. Id. at ¶ 28. The approximate distance (in terms of river/stream miles) from the confluence of RR4 and Blackwell Creek to the designated navigable portion of Neal Run is 3.1 miles. See U.S. Ex. 275; Jt. Stip. ¶ 27.

         B. EPA's September 9, 2010 Site Visit

         On September 9, 2010, EPA inspectors Stephanie Andreescu and Todd Lutte were in West Virginia visiting other sites unrelated to this case when they decided to visit the Neal Run Crossing property to inspect the Pad 1 violations, which were not yet remedied at the time. Andreescu Trial Tr. 35-36. The visit was due, in part, to complaints the EPA received from Mr. and Mrs. Blackwell, who owned the neighboring property, about flooding on their property that they believed was caused by the rerouted stream. Id. at 34-35.

         While at the property, the EPA inspectors observed a billboard advertising the property for sale by Foster Farms and depicting a development plan superimposed on a topographic map. Id. at 43; 46-48; U.S. Ex. 7 at USEPA001237. Because the billboard showed proposed development in the Pad 4 area where streams appeared to be located, the EPA inspectors went to examine Pad 4. Andreescu Trial Tr. 48. The EPA inspectors did not call the phone number listed on the billboard or otherwise attempt to obtain permission from plaintiffs prior to entering the Pad 4 area. Andreescu Trial Tr. at 48-49.

         To reach Pad 4, the EPA inspectors followed Blackwell Creek upstream and then crossed the adjoining hayfield. Id. at 49-50; U.S. Ex. 5A. When they reached the Pad 4 area, the inspectors observed that the Site had been cleared and grubbed of vegetation. Andreescu Trial Tr. 50. The inspectors photographed a stream channel that was later identified as RR4 that had been partially filled with dirt, rocks, and uprooted vegetation. Andreescu Trial. Tr. 50-55; Lutte Test., Tr. at 10-13, 14-15 (Aug. 15, 2017); U.S. Ex. 7 at USEPA001248, 1249, 1250, 1252. Upstream from the disturbance, the inspectors observed the stream channel where Mr. Lutte observed water. Andreescu Trial Tr. 55-56; Lutte Test., Tr. at 15-16 (Aug. 15, 2017); U.S. Ex. 7 at USEPA 001253.

         While investigating the stream channel above the disturbance, the EPA inspectors encountered Bryon Scott Moore, a neighbor who represented that he had permission to be on the property to collect firewood and berries. Andreescu Trial Tr. 57; Moore Dep. Tr. at 19. Moore did not actually have permission to be on the property. Moore Trial Tr. 29. Moore offered to show the EPA inspectors where the partially filled streams started, but they were unable to find them due to dense vegetation. Moore Dep. Tr. at 29, 33-34; Andreescu Trial Tr. 57-58; Lutte Test., Tr. at 16.

         The EPA inspectors also encountered plaintiffs' contractor, Dave Walters from Walters Excavating while at the Site. Andreescu Trial Tr. 58-59; Lutte Test., Tr. at 17-18 (Aug. 15, 2017). Foster hired Walters Excavating to clear, fill, and level the Site and hired Fox Engineering to design the plans for pad construction on the Site. Foster Test., Tr. at 66-67, 74. The EPA inspectors asked Walters if a section 404 permit had been obtained for the Pad 4 work and advised him that one was likely required. Andreescu Trial Tr. at 59; Lutte Test., Tr. at 17, 53-54 (Aug. 15, 2017); David Walters Test., Tr. at 113-114 (Aug. 15, 2017). They also gave Walters their contact information and then exited the Site. Lutte Test., Tr. at 17-18 (Aug. 15, 2017).

         As the EPA inspectors left the Site, they observed the stream channel as it exited the Site and continued into the neighboring hayfield. Andreescu Trial Tr. 59-61; Lutte Test., Tr. at 18-19 (Aug. 15, 2017). The EPA inspectors observed that the bed, bank, and ordinary high water mark (sometimes, “OHWM”) vanished in the center of the hayfield, but that there still existed a concave pathway in the landscape through which water would flow. Andreescu Trial Tr. at 60; Lutte Test., Tr. at 18-22 (Aug. 15, 2017). The pathway reformed a more distinct channel with bed, bank and ordinary high water mark at the end of the hayfield and then joined Blackwell Creek. Andreescu Trial Tr. at 60; Lutte Test., Tr. at 18-22 (Aug. 15, 2017).

         C. Events Following the 2010 Site Visit

         After the EPA inspectors left the Site, Mr. Walters called Dan Metheny, a professional engineer who worked for Fox Engineering, which was the firm Foster retained to draw up plans for construction on the Site. David Walters Test., Tr. at 113-114 (Aug. 15, 2017). Walters advised Metheny that the EPA had been at the Site and told him that a permit might be needed for the work that Walters Excavating was conducting on Pad 4. Id.; Metheny Test., Tr. at 144 (Aug. 18, 2017). That day, Metheny emailed Foster, informing him of the conversation Walters had with the EPA and providing him with some information about CWA section 404 permits. U.S. Ex. 157; Foster Test., Tr. 88-89 (Aug. 16, 2017).

         Neither plaintiffs nor Metheny contacted the Corps or the EPA to ask whether a permit was required. U.S. Ex. 14 at ¶ 0000374; U.S. Ex. 15 at ¶ 0000384; U.S. Ex. 17 at ¶ 0000365-66; Lutte Test., Tr. at 71-72 (Aug. 15, 2017). Foster did not ask Metheny about his qualifications for determining whether a CWA section 404 permit was required. Foster Test., Tr. at 89 (Aug. 16, 2017); Metheny Test., Tr. at 167 (Aug. 18, 2017). Foster was aware that Metheny and Fox Engineering had been involved with the CWA violations on Pad 1 of the Neal Run Crossing property. Foster Test., Tr. at 89 (Aug. 16, 2017); Metheny Test., Tr. at 167 (Aug. 18, 2017). Although Metheny had worked with CWA section 404 permits through his work on bridges, he had never performed a stream and wetland delineation. Metheny Test., Tr. at 167 (Aug. 18, 2017). A few days later, Metheny advised Foster that a section 404 permit was not needed for the Pad 4 work. Foster Test., Tr. at 89 (Aug. 15, 2017).

         Walters Excavating conducted mechanized land clearing, including using earth moving equipment to clear, fill, and level portions of Pad 4 and constructed a sediment pond on Pad 4. Jt. Stip. ¶ 17. Using heavy machinery, Walters Excavating cleared brush, dug out tree stumps, constructed a sediment pond, and placed excavated dirt and rocks on Pad 4. Id. at ¶ 18. Prior to filling Pad 4, Walters observed a stream channel that forked off to the left and right upgradient. David Walters Test., Tr. at 99-101; 121.

         Walters Excavating continued working in Pad 4 after the EPA's visit. Each Walters Excavating invoices listed a description of the work they performed each day. Seth Walters Test., Tr. at 56-57 (Aug. 18, 2017). During the three days following the EPA's Site visit, September 10 through September 12, 2010, Walters Excavating “[c]leared brush and cleaned off for new haul road leading to outlet 3.” U.S. Ex. 16 at ¶ 0000410. Outlet 3 references the location where the sediment pond is now located and the haul road would permit access for the machinery to build the sediment pond and to eventually bring fill down to the Site. Seth Walters Test., Tr. at 58 (Aug. 18, 2017). The sediment pond was then constructed. U.S. Ex. 16 at ¶ 0000410; Metheny Test., Tr. at 168 (Aug. 18, 2017); David Walters Test., Tr. at 111-112. Walters Excavating's work filling the Pad 4 area was completed in November 2010. U.S. Ex. 16 at ¶ 0000402-408. M&P paid Walters Excavating $352, 053.73 for the work they performed. Id.

         After the Site visit, Andreescu confirmed that plaintiffs had not obtained a section 404 permit for the work on Pad 4. Andreescu Trial Tr. at 86. She then completed an inspection report and a photograph log from the Site visit. U.S. Ex. 9; Andreescu Trial Tr. at 68-70, 86. Andreescu reviewed geographic information system (“GIS”) data for the Site, which included historic aerial images, topographic contour lines, digital elevation data, and United States Geological Survey mapping. Andreescu Trial Tr. at 70-71; U.S. Exs. 5A, 5B. She also reviewed scientific literature on the ecological importance of headwater streams to downstream waters. Andreescu Trial Tr. at 82-86; U.S. Exs. 10-12. From this evidence Andreescu concluded that the stream channel on the Site was a headwater stream that flowed from Pad 4, through the hayfield and connected to Blackwell Creek. Id. at 86; U.S. Ex. 9.

         In December 2010, the EPA sent CWA section 308 information requests to Foster Farms and Fox Engineering. Andreescu Trial Tr. at 87; U.S. Exs. 13-14. Fox Engineering, Foster Farms, and Walters Excavating responded to the information requests in December 2010. U.S. Ex. 24-26.

         In February 2010, Ron Foster hired Jacob White of Randolph Engineering to conduct a wetland and stream delineation for Pads 4 and 5. Jt. Stip. ¶ 20; U.S. Ex. 20. Randolph Engineering identified eleven “stream assessment reaches” or “SARs” on Pads 4 and 5. Jt. Stip. ¶ 22. On Pad 4, Randolph Engineering delineated SAR 3 (“RR4”), SAR3(a)(1) and (a)(2) (collectively “RR3”), SAR3(b)(1) and (b)(2) (collectively “RR2”), and SAR3(c) (“RR1”).^[2] Jt. Stip. ¶¶ 23, 24. RR1 and RR4 were completely filled on the Site and portions of RR2 and RR3 were filled on the Site. U.S. Ex. 20. Randolph Engineering classified RR4 as an intermittent stream and RR 1, 2, and 3 as ephemeral streams. Id. at ¶ 0000475. White has reaffirmed his delineation of RR1, RR2, RR3, and RR4. White Test., Tr. at 104 (Aug. 18, 2017). Randolph Engineering concluded that all of the stream assessment reaches were likely jurisdictional under the CWA. U.S. Ex. 20 at ¶ 0000475-76. At trial, White indicated that his conclusion about whether the streams were jurisdictional changed after reading the GAI Report obtained by Foster, which indicated that there was no hydrological connection across the hayfield. White Test., Tr. at 101-102. White was not made aware that Dana Pehrman, an expert engaged by Foster, visited the Site in July, 2015, when water was flowing across the hayfield and into Blackwell Creek. Id. at 118.

         Randolph Engineering submitted a wetland and stream delineation report (“Randolph Report”) dated March 10, 2011 to the Corps for verification and a jurisdictional determination. Jt. Stip. ¶ 22; U.S. Ex. 20; Hemann Test., Tr. at 155 (Aug. 15, 2017).

         In addition to delineating and identifying the streams on the Pad 4 site (now RR 1, 2, 3 and 4), Mr. White filled out and included in the Randolph Report forms providing information used in connection with the Corps of Engineers Functional Calculator for High Gradient Headwater Streams in Eastern Kentucky and Western West Virginia HGM Guidebook. These forms provided the Corps with information regarding certain features of the streams being assessed that correlate with functions being performed by those streams. U.S. Ex. 20 at ¶ 0000515-0563; White Test., Tr. at 114:15-115:3, 125:5-12.

         Rick Hemann, of the Corps, sent the Randolph Report to Andreescu for the EPA to review in April 2011. Andreescu Trial Tr. at 99-103; U.S. Ex. 19. Andreescu reviewed the Randolph Report, which made her aware that plaintiffs had placed a substantial amount of fill in the Pad 4 streams since her September 9, 2010 Site visit. Andreescu Trial Tr. at 107-108.

         In May 2011, Andreescu and Pam Lazos, counsel for the EPA, visited the Site with Foster. Id. at 110-111. Andreescu observed that plaintiffs had placed a large quantity of fill on the Site, and had constructed a sediment pond. Id. at 114-118; U.S. Ex. 22. Andreescu concluded that the additional filled streams were jurisdictional based upon her observations during the two Site visits, review of Geographic Information System (“GIS”) data, scientific literature, and the Randolph Report. Andrescu Trial Tr. at 149-50.

         Hemann verified the Randolph Report by reviewing aerial photographs, topographic maps, wetland inventory maps, and by conducting two site visits; and in June 2011, he inspected the Pad 4 area and in July 2011, he inspected the Pad 5 area. Hemann Test., Tr. at 157-58; 158-162 (Aug. 15, 2017). Hemann concluded that the filled streams, RR1, 2, 3, and 4, were jurisdictional under the CWA. U.S. Ex. 25. Hemann determined that RR4 was an intermittent-seasonal stream based on the watershed's 30-acre size, and the characteristics of RR5 and RR10, which were streams in Pad 5 that had not been filled. Hemann Test., Tr. 167-68 (Aug. 15, 2017); U.S. Ex. 173 at MPS001242; U.S. Ex. 25. Hemann also concluded that RR1, 2, 3, and 4 have a significant nexus to downstream traditional navigable waters. U.S. Ex. 25.

         In September 2011, Andreescu and Lutte visited the Neal Run Crossing property with Foster to review the Pad 1 restoration work and again inspected the Pad 4 area. Andreescu Trial Tr. at 123.

         In October 2011, Foster submitted an after-the-fact permit application to the Corps. U.S. Ex. 152; Hemann Test., Tr. at 171-72 (Aug. 15, 2017). The application stated that 1, 970 linear feet of stream had been filled with 100, 000 cubic yards of fill material. Id.

         From October 2011 to December 2011, the EPA and the Corps conducted internal discussions to determine which agency would take the lead in addressing the Site violations. Hemann Test., Tr. at 173-74. In December 2011, the EPA and the Corps had a telephone conference and it was decided that EPA would be the lead agency in addressing the Pad 4 violations. Andreescu Trial Tr. at 135-36; U.S. Ex. 26.

         On January 3, 2012, Lazos emailed Foster and notified him that the EPA had assumed the lead and would be seeking penalties for the violations. U.S. Ex. 103. On January 24, 2012, the EPA issued an Administrative Compliance Order (“ACO”) to Foster Farms for the Pad 4 violations. U.S. Ex. 28.

         In February 2012, Foster notified Andureescu by telephone and letter that the ACO should have been issued to M&P instead of Foster Farms. Andreescu Trial Tr. at 143-45; U.S. Ex. 29. That same month, Foster contacted the Corps and requested that they complete the verification of the Randolph Report and provide him with a jurisdictional determination. U.S. Ex. 153. On February 22, 2012, the Corps sent Foster a letter notifying him that it had determined that the Pad 4 streams were covered by the CWA. U.S. Ex. 30.

         On March 30, 2012, Foster sent the EPA a letter attaching a proposed mitigation plan for the Site and requesting information supporting the EPA's jurisdictional determination. U.S. Ex. 31. On April 5, 2012, Andreescu responded to Foster's letter again stating that the EPA was the lead agency and summarized the EPA's previous findings that the filled streams were jurisdictional. U.S. Ex. 32; Andreescu Trial Tr. 153-157.

         In April 2012, Foster attempted to appeal the Corps' jurisdictional determination. Foster Trial, Tr. at 7-8 (Aug. 18, 2017). However, because the EPA had assumed the lead on the case, the Corps could not accept an appeal. See 33 C.F.R. § 331.11. At Foster's request, the EPA provided additional information about the basis for the jurisdictional determination in a May 30, 2012 letter. U.S. Ex. 194. Foster thereafter submitted written information from Randolph Engineering and Fox Engineering to support his assertion that the streams were not covered by the CWA. U.S. Ex. 227. Andreescu considered the materials provided by Foster but determined that they did not alter the conclusion that the Pad 4 streams were within CWA jurisdiction. Andreescu Trial Tr. at 157-159, 167-169.

         In September 2012, the EPA provided comments on plaintiffs' proposed mitigation plan and requested a revised plan based on those comments. Id. at 173-75; U.S. Ex. 35.

         D. Streams' Physical Contributions

         1. The Pad 4 Streams

         Dane Pehrman, Foster's expert, identified “a number of different tributaries” existed that flowed into where the sediment pond now exists prior to its construction. Pehrman, Test. Tr. 157-58 (Aug. 17, 2017). Based upon his review of aerial photographs, he concluded that RR4 flowed intermittently on the Site prior to its fill. Id. at 160-61.

         Peter Stokely, the EPA's expert in aerial photographic interpretation, viewed pre-disturbance aerial photographs of the Pad 4 area and identified RR2 and RR3, which were shown flowing into RR4 prior to the construction of the sediment pond. Stokely Test., Tr. at 128-136 (Aug. 16, 2017); see e.g., U.S. Exs. 317-320 (aerial photographs of the Site). Stokely also viewed low-altitude oblique images from which the stream channels of RR2 and RR3 were visible and water can be seen flowing from the undisturbed sections of RR2 and RR3 onto the filled sections of those same streams. Stokely Test., Tr. at 140-42 (Aug. 16, 2017); U.S. Exs. 220, 222, 224. From this evidence, Stokely opined that RR2 and RR3 were tributaries to RR4. Stokely Test., Tr. at 144-45 (Aug. 16, 2017).

         During the September 9, 2010 Site visit, EPA inspectors Andreescu and Lutte observed and photographed the partially disturbed RR4. Andreescu Trial Tr. at 53-54; U.S. Ex. 7 at USEPA001248-1249; Lutte Test., Tr. at 10-13, 14-24 (Aug. 15, 2017). The undisturbed portion of RR4's channel was visible on the Site, identifiable by a lack of vegetation and substrate on the bottom of the channel, which is “debris, rocks, cobble, stone, [and] sediment, ” and an ordinary high water mark. Lutte Test., Tr. at 11-12, 80 (Aug. 15, 2017); U.S. Ex. 7 at USEPA001248. Upstream of the disturbance, Lutte observed RR4's channel, an ordinary high water mark, and also observed water in the channel. Id. at 15-16, 80; U.S. Ex. 7 at USEPA001252-53.

         Stokely visited the Site on May 12, 2015 and was able to observe the unfilled portions of RR2 and RR3. Stokely Test., Tr. at 138 (Aug. 16, 2017). Although he did not see RR1 when he was mapping the Pad 4 streams by viewing aerial photography, he observed RR1 when he visited the Pad 4 area. Id. at 138-39.

         The United States' experts on stream ecology and hydrology, Drs. Arscott and Dow visited the Neal Run Crossing property on May 12, 2015. They observed and photographed the portions of RR2 and RR3 that had not been filled on the Site and observed bed, banks, and water in those streams. Arscott Test., Tr. at 196-199 (Aug. 16, 2017); U.S. Exs. 261-263. They also observed water coming from the fill where RR1 and RR4 were located on the Site as it flowed into the sediment pond and they took in-situ water chemistry of the water emerging into the fill. Arscott Test., Tr. at 209-11; U.S. Exs. 254, 261.

         Dr. Dow also used software called “Terrain Analysis Using Digital Elevation Model” (“TauDEM”) to map the Pad 4 streams prior to his visit to the Site. Dow Test., Tr. at 77-79, 82-83 (Aug. 17, 2017); U.S. Ex. 303C. When he arrived on the Site, the unburied portions of RR2 and RR3 were located in the places TauDEM predicted they would be. Dow Test., Tr. at 119-20 (Aug. 17, 2017). TauDEM also mapped RR1 and RR4 as flowing prior to their fill. Id. at 99-100. Dr. Dow was able to confirm the locations that TauDEM mapped RR1 and ...