The state’s second highest court rejected attempts by the N.C. Department of Environmental and Natural Resources and the Environmental Management Commission to fine a Nash County property owner $7,500 for failure to submit a comprehensive site assessment for a property he had inherited.

In reaching its decision, the N.C. Court of Appeals found the landowner was not responsible for the contamination on the property and questioned the department’s handling of the matter.

A.J. Lancaster Sr. owned and operated a convenience store in Nash County. As part of his business, he sold gasoline, which was kept, as is customary, in underground storage tanks. Groundwater contamination at nearby well sites was detected in tests conducted by Nash County and DENR officials in 1989 and 1991. DENR officials suspected the leak was coming from Lancaster’s tanks and in early 1991 demanded that Lancaster immediately correct the situation. He did not respond to the agency before he died in November 1991.

A.J. Lancaster Jr. inherited the property and continued to use the tanks. In 1993, he was informed of new technical requirements for underground storage tanks. After studying the cost of upgrading the tanks, he decided it made more financial sense to have them removed. This was done in late December 1993. Contamination was discovered at that time and 225 cubic yards of soil near the tanks was removed and properly disposed of. He was not alerted by DENR to the possibility of groundwater contamination at the time.

DENR was notified of the tank removal. It demanded that Lancaster obtain a comprehensive site assessment from a licensed geologist or a qualified professional engineer.

When Lancaster did not submit an adequate one, the DENR issued a notice of violation. The department continued to issue notices of violation through 2003. Lancaster argued to the department that he was not responsible for the contamination from the tanks and should not be required to file a site assessment.

In 2001, how much of the cost of removing the storage tanks the state’s Leaking Petroleum Underground Storage Tank Cleanup Fund would pay came up for a hearing. If the leaks were discovered or reported in 1992 or 1993, a $20,000 deductible applied. If, however, they had been detected between June 30, 1988 and Dec. 31, 1991, state law set the deductible at $50,000.

An administrative law judge ruled that the leaks had been detected in 1989 and 1991. The DENR adopted this determination. Lancaster challenged the ruling in court. Before the issue could come up for trial, the two sides agreed to a $20,000 deductible. This agreement did not, however, resolve any other issues.

In 2006, DENR pursued enforcement action for Lancaster’s failure to file a comprehensive site assessment. It ultimately imposed a fine of $7,563.38.

Superior Court Judge Quentin T. Sumner overturned the agency’s penalties, finding Lancaster to be an innocent landowner. DENR brought the case before the state’s second highest court.

Before the Court of Appeals, the DENR argued that Lancaster was responsible for the storage tanks and was obligated to file a comprehensive site assessment. It also argued that he legally did not qualify as an innocent landowner.

The appeals court rejected the arguments. “We are bound by the finding in the 2001 final agency decision that the only discharges on petitioner’s land occurred in 1989 and 1991,” Judge Rick Elmore wrote for the Court of Appeals.

“Only ‘responsible parties’ who conduct and control the activity leading to the discharge must file a CSA. Petitioner cannot be a ‘responsible party’ under 2L .0115(f) or a ‘person conducting or controlling’ the discharge under 2L .0106(c) because the discharges occurred before he acquired the property. As such, he had no obligation to file a CSA and did not violate 2L .0115(f).”

The appeals court also noted that Environmental Management Commission itself had previously ruled that Lancaster was an innocent landowner, who had no previous knowledge of the 1989 and 1991 discharges.

The appeals court also chided the DENR for its emphasis in arguments that the site was on the agency’s “Top Ten Worst UST Discharges” list and attempts to blame Lancaster’s lack of responsiveness for the contamination.

“This is an untenable position,” Elmore wrote. “DENR had knowledge of a possible discharge on this property as early as 1989 and by 1991 believed that a discharge from Lancaster, Sr.’s USTs was the cause of the contaminated groundwater on the property. DENR failed to follow up with Lancaster Sr., regarding this belief or to notify petitioner or petitioner’s neighbors that such a discharge may have occurred or may be ongoing.

“Petitioner was in frequent contact with DENR in 1993 and 1994 regarding the tanks prior to their removal, and DENR said nothing about the contamination. DENR did not notify petitioner of the 1989 and 1991 contamination until 1998, in response to petitioner’s application for coverage under the Trust Fund. The letter stated that the release ‘was discovered in September 1989 when Nash County Health Department sampled the site water supply well.’ Petitioner is hardly the only party to blame for the detrimental impact of the discharge.” (Emphasis in decision)

N.C. Court of Appeal rulings are binding interpretations of state law unless over-ruled by the N.C. Supreme Court. Because the ruling by the three-judge panel of the Court of Appeals was unanimous, the high court is not obligated to hear the case even should DENR further appeal.

The case is Lancaster v. N.C. Department of Environmental and Natural Resources, (07-149).

Michael Lowrey is associate editor of Carolina Journal.