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ALBANY � The state has the power to regulate a company that stores liquid petroleum gas in caverns half a mile below ground, a federal judge has ruled in a case over federal preemption. Northern District Judge Lawrence E. Kahn upheld a dual enforcement scheme where the Steuben County firm Bath Petroleum faces regulation by both the federal and state governments. The case is Bath Petroleum v. Sovas, 98-cv-347. Judge Kahn said concurrent enforcement of state and federal statutes is permissible where, as is the case here, “enforcement of one statute cannot be said to be an obstacle to the other.” New York state has been attempting for several years to more closely monitor the activities of Bath Petroleum. Judge Kahn’s decision last week affords it that opportunity. Although the judge said the state may not enforce broader regulations addressing procedures regulated by the federal government, he said it can fully enforce regulations on matters where Washington has not taken the lead or has deferred to the states. For example, the state cannot regulate the per se expansion of underground storage caverns since that area is clearly preempted. But it can impose regulations on the caverns once they are expanded, the court found. Bath Petroleum Storage Inc., a subsidiary of E.I.L. Petroleum, Inc., operates a storage facility in Steuben County for liquid petroleum gas � a type of fuel that is ordinarily gas but becomes liquid under pressure and is easier to store and transport. At its facility, Bath stores the substance in subterranean salt caverns. Through a process called “solution-mining,” brine is pumped into the caverns while the gas is pushed out. Ultimately, the brine is pumped into two surface ponds, with the excess discharged into the Cohocton River. In the late 1990s, Bath obtained the necessary Environmental Protection Agency permits. That raised a question over the scope of those federal permissions and New York’s voice – if any � in monitoring activities potentially impacting its environment. The company claimed � correctly, according to Judge Kahn � that the state is preempted from imposing any regulation that interferes with the rights granted Bath Petroleum through federal permits. New York countered that it has a distinct interest since the federal regulations seek to protect underground sources of drinking water while the state rules cover all ground waters that could be compromised through the discharge of brine and other pollutants. Where there are different areas of concern, a company is subject to different regulatory schemes, the court found. Judge Kahn recognized three separate forms of preemptions: “express,” where Congress clearly and specifically takes regulatory control; “field,” where a federal regulatory scheme is so broad that there is no room left for supplementary state monitoring; and “conflict,” where a state law conflicts directly with, and is therefore preempted by, federal law. Judge Kahn applied an opinion of the U.S. Court of Appeals for the Third Circuit, NE Hub Partners v. CNG Transmission Corp., 239 F.3d 333 (2001). It held that even where field preemption is established, state regulations may apply if the federal regulation requires the applicant to secure relevant state permits. The Environmental Protection Agency had issued Bath two permits when the New York State Department of Environmental Conservation asserted its authority to regulate two other regulatory matters involving the same facility. Two Questions The dispute centered on basically two questions of preemption. One dealt with a Class III federal permit � which Bath has � and whether the state could piggyback on that regulation by additionally requiring sonar surveys for hydrocarbons. The other dealt with the state pollution discharge elimination system requirements, and whether they were preempted by the fact that Bath holds a Class II federal permit. Judge Kahn made clear that the question is not the scope of the federal regulations vis-a-vis the state regulations. Rather, he said the key issue is whether they ultimately regulate different activities. If so, the court said, preemption does not come into play. Judge Kahn found that the state is not preempted from requiring a state discharge elimination permit and one for the storage of hydrocarbons, even though the facility has federal underground injection control permits. “In areas where federal and state law are meant to be implemented together, then that state law does not frustrate the effectiveness of federal law,” Judge Kahn said. “Enforcement of one cannot be said to impede the other.” Appearing were John J. Privitera and William A. Hurst of McNamee, Lochner, Titus & Williams in Albany, local counsel for Bath Petroleum; and Assistant Attorneys General Joseph Koczaja and Lisa M. Burianek for the state defendants.

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