P97179A.PDF

ILLINOIS POLLUTION CONTROL BOARD

August 21, 1997

PEOPLE OF THE STATE OF ILLINOIS,

Complainant,

MIDWEST GRAIN PRODUCTS OF

ILLINOIS, INC., an Illinois corporation,

Respondent.

)

PCB 97-179

(Enforcement - Air)

ORDER OF THE BOARD (by M. McFawn):

This case is before the Board on the “Motion to Strike Respondent’s Affirmative

Defenses” filed by the Attorney General on May 23, 1997. On April 7, 1997, the Attorney

General, on behalf of the people of the State of Illinois, filed a complaint against respondent

Midwest Grain Products of Illinois, Inc. (Midwest Grain), alleging violations of air pollution

provisions of the Environmental Protection Act, 415 ILCS 5/1

et seq.

(1996) (Act), as well as

the federal Clean Air Act and Prevention of Significant Deterioration (PSD) regulations.

Midwest Grain filed its “Answer” on May 7, 1997, interposing four affirmative defenses to

the Attorney General’s claims. The Attorney General asks that each affirmative defense be

stricken as substantially insufficient at law. The Board denies the Attorney General’s motion

with respect to Midwest Grain’s first and third affirmative defenses and grants the Attorney

General’s motion with respect to Midwest Grain’s second and fourth affirmative defenses.

ALLEGATIONS

At all times relevant to this case, Midwest Grain has operated a facility in Pekin,

Illinois, that produces ethyl alcohol, anhydrous fuel alcohol, wheat gluten and distiller’s feed.

In 1993, Midwest Grain applied to the Illinois Environmental Protection Agency (Agency) for

a construction permit in order to replace two existing feed dryers with new dryers (dryers 651

and 661). In May of 1993, the Agency issued construction permit number 93020061 to

Midwest Grain. In December of 1993, the Agency issued construction permit number

93080045 to Midwest Grain. Permit 93020061 limits particulate matter emissions from dryer

651 to 1.1 pounds per hour. Permit 93080045 limits total particulate matter emissions from

both dryers to 3.2 pounds per hour. Both permits require secondary scrubbers after both feed

dryers.

The information set forth here has been taken from the allegations in the Attorney General’s

complaint. Some of the allegations have been denied by Midwest Grain. The Board does not,

by setting forth this narrative, make any finding as to the truth of any allegation.

After receiving the permits, Midwest Grain commenced construction of the new dryers.

Stack testing conducted on one of the dryers in May of 1995 indicated actual emissions of 17.1

pounds per hour. On September 21, 1995, the Agency inspected Midwest Grain’s facility.

The Agency inspector determined that Midwest Grain operated the dryers unpermitted,

operated the dryers in excess of the particulate matter emission standards in the construction

permits, operated the dryers without secondary scrubbers, and constructed a major

modification without applying for and obtaining a PSD construction permit.

Application of the federal PSD regulations is triggered when a “major source”

undergoes a modification resulting in a “significant” net emissions increase. Midwest Grain’s

facility was considered a major source for particulate matter at the time it constructed a

fluidized bed boiler in 1982. A net particulate matter emissions increase is “significant” if it

results in an increase of 25 tons or more of particulate matter emissions per year. PSD

regulations require the use of the “best available control technology” (BACT) in any

modification to a major source.

The Attorney General claims, in count I of the complaint, that Midwest Grain violated

PSD regulations, specifically, 40 CFR 52.21(j), by constructing the dryers without conducting

a BACT analysis and obtaining a PSD permit, and consequently Section 9.1(d) of the Act,

which prohibits any person from violating regulations adopted under the federal Clean Air Act.

The Attorney General also claims that Midwest Grain has violated Section 9(a) of the Act and

35 Ill. Adm. Code 201.141 by causing or tending to cause air pollution (count II), Section

9(b) of the Act by operating in violation of construction permit conditions (count III), and

Section 9(b) of the Act and 35 Ill. Adm. Code 201.143 by operating without an operating

permit after expiration of the construction permits.

AFFIRMATIVE DEFENSES

Against the foregoing alleged violations, Midwest Grain asserts, at pages 6-7 of its

“Answer,” the following affirmative defenses:

Midwest Grain discontinued use of its fluidized bed coal boiler in 1994.

At the time the coal boiler use was discontinued, Midwest Grain ceased

its status as a “major stationary source” and the PSD program

requirements were no longer applicable to Midwest Grain.

Midwest Grain acted in good faith and built an emission control system

for its grain dryers which was designed to restrict emissions from the

dryers to a level below the level for a “major modification” subject to

PSD program requirements. This emission control system was reviewed

and approved by the [Agency] as part of Midwest Grain’s construction

permit application. Through no fault of Midwest Grain, the system did

not function as designed and has had difficulty in restricting the emission

of very small particles. Midwest Grain has worked steadily to improve

upon the emission control system. Midwest Grain has been in frequent

contact with [the Agency] regarding its difficulties with the system. To

the extent Midwest Grain is in violation of PSD regulations, the Act or

its permit terms, if at all, the violation is due to an unavoidable mistake

in that its emission control equipment has failed to live up to its design

specifications.

Pursuant to discussions with [the Agency], Midwest Grain has agreed to

purchase and install additional emission control equipment, at substantial

expense. Midwest Grain’s commitment to [the Agency] to install new

emission control equipment constitutes a Compliance Commitment

Agreement. Midwest Grain is in compliance with the Compliance

Commitment Agreement, therefore, these allegations should not have

been brought.

Midwest Grain filed an application for an operating permit on March 16,

1995. To date, [the Agency] has not acted upon the operating permit

application, although Midwest Grain has extended the review period for

the operating permit application three times (the last time for an

indefinite period). Midwest Grain has also filed an application for a

Clean Air Act Permit. Midwest Grain has been in frequent contact with

[the Agency] and [the Agency] has not alleged that an operating permit

is required at this time. At no time has Midwest Grain disregarded the

provisions of the Board’s air permit regulations and it has worked

steadily with [the Agency] to remedy the difficulties it has had as a result

of the unexpected difficult engineering for its emissions.

ANALYSIS

Affirmative Defenses Stating Legal Conclusions

The Attorney General has challenged all of Midwest Grain’s affirmative defenses on

the grounds that they state legal conclusions. The Attorney General has provided minimal

arguments in support of this assertion, and inasmuch as each of the defenses quoted above

includes factual assertions, the Board concludes that this objection is not valid. Many

affirmative defenses (i.e., waiver, estoppel, laches, statute of limitations) may involve,

ultimately, a conclusion of law. Any such conclusion, however, must be predicated on facts,

and as long as the requisite facts are set forth as required by 35 Ill. Adm. Code 103.122(d)

then the defense is properly pleaded, notwithstanding that the resolution of the defense may

involve a conclusion of law, and that the defense may be couched in terms of a legal theory.

35 Ill. Adm. Code 103.122(d) provides:

Respondent may file an answer within 30 days of receipt of the complaint. All material

allegations of the complaint shall be taken as denied if not specifically admitted by answer, or

if no answer is filed. Any facts constituting an affirmative defense which would be likely to

take the complainant by surprise must be plainly set forth prior to hearing in the answer or in a

supplemental answer filed pursuant to Section 103.210(b).

Although the provisions of the Code of Civil Procedure do not apply to proceedings

before the Board, parties may, in the absence of a specific provision in the Board’s procedural

rules to govern a specific situation, argue that a particular provision of the Code of Civil

Procedure provides guidance to the Board. 35 Ill. Adm. Code 101.100(b). Both the Attorney

General, in the “Motion to Strike Respondent’s Affirmative Defenses,” and Midwest Grain in

its response, have cited to the Board Section 2-613(d) of the Code of Civil Procedure (735

ILCS 5/2-613(d) (1997)), which provides:

The facts constituting any affirmative defense, . . . and any defense which by

other affirmative matter seeks to avoid the legal effect of or defeat the cause of

action set forth in the complaint, . . . in whole or in part, and any ground or

defense, whether affirmative or not, which, if not expressly stated in the

pleading, would be likely to take the opposite party by surprise, must be plainly

set forth in the answer or reply.

The Board believes that this section of the Code of Civil Procedure does provide guidance

regarding the pleading of defenses, but does not, contrary to the Attorney General’s

interpretation, preclude pleading of a defense which may include a legal conclusion. We note

the discussion of this section by the appellate court in Handelman v. London Time, Ltd., 124

Ill.App.3d 318, 320, 464 N.E.2d 710, 712 (1st Dist. 1984):

Clearly the purpose of the above-quoted language is to specify the disputed legal

issues before trial. The parties are to be informed of the legal theories which

will be presented by their respective opponents. This is a prime function of

pleading.

Allowing pleading of defenses which may include legal conclusions will serve to

inform parties of the legal theories to be presented by their opponents, as well as preventing

any confusion as to whether a defense has been waived by not having been raised. Given that

the line between assertions of fact and conclusions of law can be blurry and that consequently

it can be difficult to determine ahead of time whether a defense is grounded in facts or a

conclusion of law, and given that the penalty for failure to assert facts constituting a defense is

extreme, the Board believes the better route is to allow liberal pleading of defenses.

We turn then to the Attorney General’s specific objections to each affirmative defense

raised by Midwest Grain.

Specific Affirmative Defenses

First Affirmative Defense. The Attorney General has not raised any substantial

objection to Midwest Grain’s first affirmative defense other than that it states a legal

conclusion. Midwest Grain sets forth a fact in its defense which may have taken the Attorney

General by surprise at hearing, namely, that it discontinued use of its fluidized bed coal boiler

in 1994, and a theory of defense, i.e., that it is no longer a “major stationary source” subject

to the PSD program. Since this, if true, would at least partially defeat the cause of action

underlying count I of the Attorney General’s complaint, the Board concludes that Midwest

Grain’s first affirmative defense is properly pleaded, and it will not be stricken.

Third Affirmative Defense. The Attorney General objects to Midwest Grain’s third

affirmative defense, that it is in compliance with the terms of a Compliance Commitment

Agreement, on the grounds that Section 31(a) of the Act, which deals with Compliance

Commitment Agreements and which went into effect on August 1, 1996, applies only

prospectively; that this case is based on a Compliance Inquiry Letter issued by the Agency in

October of 1995; and that there can therefore be no Compliance Commitment Agreement

between the Agency and Midwest Grain.

Whether there is a Compliance Commitment Agreement between the Agency and

Midwest Grain involves questions of fact which cannot be answered with only the limited

information in the pleadings in this case. At the very least, with no allegations as to the date

on which the alleged Compliance Commitment Agreement was reached, the arguments of the

parties as to the prospective or retroactive effect of the new Section 31(a) are premature. The

Board concludes that Midwest Grain’s third affirmative defense is properly pleaded; the

validity of that affirmative defense cannot be tested without evidence not presently before the

Board. The Board will not strike Midwest Grain’s third affirmative defense.

Second and Fourth Affirmative Defenses. The Board concludes, however, that the

Attorney General’s objections to Midwest Grain’s second and fourth affirmative defenses, that

the defenses do not avoid the legal effect or defeat the causes of action set forth in the

complaint, are well taken. Midwest Grain’s second and fourth affirmative defenses set forth

facts which, if proven, would be relevant to the issue of an appropriate penalty rather than the

liability of Midwest Grain for the violations set forth in the complaint.

The Board disagrees with Midwest Grain’s characterization of mitigation as avoidance

in part of complainant’s cause of action. The appropriate penalty to be imposed for a violation

of the Act is a separate inquiry from whether a violation of the Act has occurred, and

mitigation issues are only considered once a violation of the Act has been found. An

affirmative defense is a response to a claim which attacks the complainant’s right to bring an

action. Farmers’ State Bank v. Phillips Petroleum Co. (Jan. 23, 1997), PCB 97-100, slip op.

at 2 n.1. Accordingly, as the Board recently ruled in People v. Douglas Furniture of

California, Inc. (May 1, 1997), PCB 97-133, slip op. at 6, a defense which speaks to

imposition of a penalty rather than the underlying cause of action is not an “affirmative

defense” to that cause of action. Midwest Grain’s second and fourth affirmative defenses set

forth mitigating factors which, if proven, would bear on the appropriate penalty to be

imposed, but do not impact the question of whether a violation of the Act has taken place.

The Board thus concludes that Midwest Grain's second and fourth defenses are not proper

affirmative defenses, and they will be stricken.

A corollary of this ruling, however, is that since defenses to imposition of a penalty are

not affirmative defenses, a respondent is not required to set forth in its answer facts relating

only to the issue of imposition of a penalty which may take the opponent by surprise at

hearing. Consequently, even though these defenses are stricken, Midwest Grain is not

precluded from introducing evidence supporting these defenses at hearing.

CONCLUSION

For the reasons set forth herein, the motion of the Attorney General to strike Midwest

Grain’s affirmative defenses is granted as to Midwest Grain’s second and fourth affirmative

defenses and denied as to Midwest Grain’s first and third affirmative defenses. Midwest

Grain’s second and fourth affirmative defenses are hereby stricken.

IT IS SO ORDERED.

I, Dorothy M. Gunn, Clerk of the Illinois Pollution Control Board, hereby certify that

the above order was adopted on the 21st day of August 1997, by a vote of 6-0.

Dorothy M. Gunn, Clerk

Illinois Pollution Control Board