United States v. Atp Oil & Gas Corp.

955 F.Supp.2d 616

UNITED STATES of America

v.ATP OIL & GAS CORPORATION, et al.

Civil Action No. 13–0262.

United States District Court, E.D. Louisiana.

July 1, 2013.

Jason T. Barbeau, U.S. Department of Justice, Washington, DC, Sharon Denise Smith, U.S. Attorney's Office, New Orleans, LA, for United States of America.

Brit T. Brown, Joseph S. Cohen, Meagan P. Wilder, Beirne, Maynard & Parsons, LLP, Houston, TX, Hal Clayton Welch, Beirne, Maynard & Parsons, LLP, New Orleans, LA, John C. Martin, Chet M. Thompson, Sarah C. Bordelon, Crowell & Moring, LLP, Washington, DC, E. Stuart Ponder, Jon Wesley Wise, Fowler Rodriguez, New Orleans, LA, for ATP Oil & Gas Corporation, et al.

ORDER AND REASONS

NANNETTE JOLIVETTE BROWN, District Judge.

Before the Court is Defendant ATP Infrastructure Partners, LP's (hereinafter, “Infrastructure Partners”) Motion to Dismiss,¹ wherein it requests the dismissal of all claims against it (Claims 3, 4, and 5). After considering the complaint, the pending motion, the memorandum in support, the opposition, the reply, the presentations at oral argument, the record, and the applicable law, for the following reasons the Court will deny the pending motion.

I. Background

A. Factual Background

According to the United States, Defendant ATP Oil & Gas Corporation (hereinafter, “ATP”), is, and all relevant times has been, the operator of ATP Innovator, the facility at issue in this case. ATP was the owner of ATP Innovator from at least 2006 to March 6, 2009.² Defendant Infrastructure Partners is a limited partnership formed by ATP on March 6, 2009 to own and operate the ATP Innovator.³

The ATP Innovator is a floating production platform facility operating at Lease Block 711 of Mississippi Canyon in the Gulf of Mexico. The ATP Innovator is permanently moored to the sea floor at a location and is not operating as a vessel or other floating craft, and has been engaged in the production of oil and natural gas.⁴ ATP holds the lease interest in Lease Block 711 of Mississippi Canyon.⁵ Since at least April 2007, ATP has been allowed to discharge wastewater from the ATP Innovator into the Gulf of Mexico subject to a General Permit issued by the Environmental Protection Agency (“EPA”) under the Clear Water Act's (“CWA”) National Pollutant Discharge Elimination System (“NPDES”).⁶ Under this permit, ATP is allowed to discharge a limited amount of oil in its wastewater.⁷

In March 2012, the United States claims that Bureau of Safety and Environmental Enforcement (“B SEE”) inspectors aboard the ATP Innovator located a metal tube connected to the permitted NPDES outfall pipe used for overboard discharge of the facility's wastewater.⁸ The United States also contends that the “metal tube and connection to the outfall pipe was hidden in the rafters at a location downstream of the treatment units and the NPDES sampling point. Thus, injections from the tube into the outfall pipe are undetectable in NPDES samples.” ⁹

Further, the metal tubing was connected to a 550–gallon tank of Cleartron ZB–103, an “amide surfactant chemical blended with methanol that, as used, acts to break apart oil molecules into smaller, dispersed droplets.” ¹⁰ The United States believes that “the Cleartron ZB–103 dispersant was injected into the outfall pipe to mask oil sheen on the ocean surface resulting from ATP's discharge of wastewater containing quantities of oil in excess of its NPDES permit limit.” ¹¹ The United States notes that ATP's NPDES permit does not authorize it to use Cleartron ZB–103 and generally states that an operator should minimize the use of any dispersant, because dispersants emulsify oil, thereby increasing toxicity and making the detection of a discharge of oil more difficult.¹²

In response, the United States has brought six causes of action in this matter. First, it seeks civil penalties against ATP for violations of CWA Section 301(a), 33 U.S.C. § 1311(a), and other related sections, for dispersant discharges.¹³ Second, the United States brings a cause of action against ATP for permit violations pursuant to CWA Section 309(d). ¹⁴ Third, the United States seeks civil penalties against both defendants, ATP and Infrastructure Partners, for oil discharges in violation of CWA Section 311(b).¹⁵ In the United States fourth cause of action, it requests injunctive relief under the Outer Continental Shelf Lands Act (“OCSLA”), 43 U.S.C. § 1350(a), against both defendants to remedy the alleged violations of law.¹⁶ In the United States' fifth cause of action, it seeks similar injunctive relief against both defendants pursuant to the CWA Section 309(b).¹⁷

In the United States' sixth cause of action, it requests a declaratory judgment pursuant to 28 U.S.C. § 2201(a). The United States explains that in August of 2012, ATP filed for Chapter 11 bankruptcy and identified Infrastructure Partners as a “non-debtor entity.” The United States acknowledges that under Section 362(a)(1) of the Bankruptcy Code this would normally impose an automatic stay, but Section 362(b)(4) of the Bankruptcy Code expressly states that Section 362(a) will not apply to the “commencement or continuation of an action or proceeding by a governmental unit ... to enforce such governmental unit's ... police and regulatory power, including enforcement of a judgment other than a money judgment.” Therefore, the United States seeks a declaratory judgment that the police and regulatory exception to the automatic stay applies “to this environmental enforcement action brought pursuant to the enforcement provisions of the Clean Water Act and Outer Continental Shelf Lands Act.” ¹⁸

B. Procedural Background

The United States filed this action on February 11, 2013.¹⁹ On May 6, 2013, Infrastructure Partners filed the pending motion to dismiss Claims 3, 4, and 5.²⁰ On June 5, 2013, the United States filed an opposition to the motion to dismiss.²¹ With leave of court, Infrastructure Partners filed a reply on June 17, 2013.²² The Court held oral argument on the pending motion on June 19, 2013.

II. Parties' Arguments

A. Infrastructure Partners' Argument in Support

In support of the pending motion, Infrastructure Partners argues that Claim 3 should be dismissed because Section 311 of the CWA excludes discharges subject to NPDES permit conditions.²³ Infrastructure Partners notes that Section 311 prohibits the discharge of hazardous oil or substances in quantities that can be harmful, but provides several statutory exceptions to “discharge”:

(2) “discharge” includes, but is not limited to, any spilling, leaking, pumping, pouring, emitting, emptying or dumping, but excludes[:]

(A) discharges in compliance with a permit under section 1342 [CWA § 402] of this title,

(B) discharges resulting from circumstances identified and reviewed and made a part of the public record with respect to a permit issued or modified under section 1342 of this title, and subject to a condition in such permit,

(C) continuous or anticipated intermittent discharges from a point source, identified in a permit or permit application under section 1342 [CWA § 402] of this title, which are caused by events occurring within the scope of relevant operating or treatment systems, and

(D) discharges incidental to mechanical removal authorized by the President under subsection (c) of this section.²⁴

Infrastructure Partners avers that the allegations in the complaint pertaining to in Count 3 “fall squarely within Exclusions A and C.” ²⁵

Regarding Exclusion A, Infrastructure Partners states that Congress created this exclusion because it “is possible that an NPDES permit may authorize discharges that would otherwise be unlawful under Section 311 [of the CWA].” ²⁶ Therefore, Infrastructure Partners contends that Exclusion A “prevents a potential conflict between the NPDES permitting regime under Section 401 and the spill prevention and enforcement requirements of Section 311.” ²⁷

Turning to Exclusion C, Infrastructure Partners maintains that this exclusion applies if three conditions are met:

First, the discharges must be either continuous or anticipated, intermittent discharges. Second, the discharges must be from a point source that has been identified in an NPDES permit or permit application. Third, the discharge must be “caused by events occurring within the scope of the relevant operating or treatment system.” ²⁸

Infrastructure Partners highlights that Exclusion C differs from Exclusion A in that “Exclusion C is not limited to discharges in compliance with the NPDES permit.” ²⁹ Instead, Infrastructure Partners argues, Exclusion C is designed to exclude discharges from Section 311 liability even if those “discharges exceed NPDES permit limits.” ³⁰ Therefore, Infrastructure Partners maintains that “such permit exceedances [sic] would be subject to enforcement under Section 309,” and may not be duplicated for enforcement purposes under Section 311.³¹

Infrastructure Partners avers that the EPA has explained that Congress added these exclusions to the definition of “discharge” to “clarify the extent to which ‘discharges from facilities with NPDES permits were subject to the provisions of section 311.’ ” ³² Further, Infrastructure Partners argues that Section 311 is meant to govern “classic spill” situations, but that point source discharges permitted under Section 402 is to be regulated by the NPDES program.³³ Infrastructure Partners also cites the legislative history of Section 311, arguing that this explains “Congress's desire to differentiate between enforcement for violations of NPDES permits, on the one hand, and enforcement of spills on the other.” ³⁴

Infrastructure Partners also argues that the EPA's regulatory interpretation of Section 311's exclusions bolsters its position that “no section 311 claim can lie against Infrastructure Partners.” ³⁵ According to the EPA, a “discharge” falls within Exclusion A, “if the permit contains an effluent limitation specifically applicable to the substance discharged...