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New York City was hit Thursday with a $5.7 million civil penalty for polluting a major adjunct of its water supply in violation of the federal Clean Water Act — possibly the largest municipal sanction ever imposed in such a case. But the award was just a fraction of what the city might have faced for discharging pollutants into Esopus Creek. Northern District Chief U.S. District Judge Frederick J. Scullin Jr. of Syracuse said he could have awarded as much as $63.2 million. The judge, however, refused to sanction the city for its conduct prior to a judicial finding of fault. Scullin also accepted the city’s explanation that its belated response resulted from the Sept. 11, 2001, terrorist attacks. Additionally, Scullin refused to enjoin the city from operating the Shandaken Tunnel, which causes the pollution, until it obtains the required state permit. In all, Scullin’s ruling in Catskill Mountains Chapter of Trout Unlimited Inc. v. City of New York, 1:00-CV-511, was largely beneficial to the city. The damages, while substantial and possibly record-setting, are far less than they could have been. Further, it appears the city came out ahead by violating the Clean Water Act. Records show that the city saved roughly $13.7 million by not having a coagulation plant in operation between 2000 and 2002. The dispute, as well as 40 percent of the city’s water supply, has its source in the Catskill Mountains. Since the 1920s, the city has tapped into Schoharie Dam and Reservoir to provide drinking water for millions of people living in New York City and Westchester, Putnam and Rockland counties. Water that would normally flow north is diverted south through the 18-mile-long Shandaken Tunnel and eventually released into Esopus Creek, which flows in a southeasterly direction, or toward the city. Naturally, water from the Schoharie Reservoir would never reach the Esopus. The problem is that the Catskills are laden with salt and clay deposits, and the diversion of water through the tunnel results in a higher concentration of “suspended solids,” “turbidity” and heat in the Esopus, according to court records. That higher concentration, the plaintiffs claim, has undermined one of the prime trout fishing streams in the Catskills and amounts to pollution under the Clean Water Act. The plaintiffs claimed that the city could not operate the tunnel without a State Pollutant Discharge Elimination System (SPDES) permit, which would have required installation of a costly coagulation plant. In the fall of 2000, Judge Scullin dismissed the turbidity and thermal discharge claims, finding that siltation is a naturally occurring condition and therefore not pollution. But a year later, the 2nd U.S. Circuit Court of Appeals reversed, holding that Scullin erred in concluding that the tunnel did not discharge pollutants into the creek. The case then returned to the Northern District, resulting ultimately in Thursday’s ruling. TOP-DOWN APPROACH Judge Scullin found that the city operated Shandaken Tunnel without permission for 2,326 days, from Feb. 1, 1995, until Dec. 31, 2002, when it applied for a SPDES permit, and it is potentially susceptible to damages for every single day of violation. In assessing damages, Scullin said courts have used two different approaches: a “top-down” approach, where the court begins with the maximum penalty that could be imposed and then subtracts for mitigation, and a “bottom-up” approach, where the court begins with the minimum penalty and then adds on for aggravating factors. Since the 2nd Circuit has not expressed a preference, Scullin adopted the top-down protocol, which resulted in $63.2 million in damages. However, he then knocked off six years of potential liability prior to the 2nd Circuit’s finding. Judge Scullin found reasonable the city’s claim that until it was advised by the 2nd Circuit, New York operated under the belief that it did not need an SPDES permit. “Assessing a monetary penalty in this case would be tantamount to saying that if you believe in good faith that your activities are not subject to a [Clean Water Act] permit and neither the [federal or state government] has ever indicated that you needed a permit, you can be penalized if a citizen suit is commenced against you and the court finds that you are wrong,” Scullin said. Further, the judge said the city’s late response to the 2nd Circuit ruling was generally understandable given the events of Sept. 11, 2001, and the pressing need to ensure that the city’s water supply was safe. However, while Scullin found the 14-month delay in seeking an SPDES permit — the city applied for a permit on Dec. 31, eight days before the damages trial — a bit much, he said an eight-month delay would not have been unreasonable. Consequently, he limited civil penalties to the period after June 22, 2002, effectively slicing $57.5 million from the potential award. Further, Scullin refused to enjoin operation of the tunnel until a permit is secured. ATTORNEY FEES The court also ordered attorney fees at the rate of $175 per hour for experienced environmental counsel, $125 for other attorneys and $65 for law interns. Representing the plaintiffs was attorney Karl S. Coplan and legal interns Megan Brillault, Lisa Cox, Nicole Parisi-Smith and John Paul of the Pace Environmental Litigation Clinic in White Plains, N.Y. The city was defended by the Corporation Counsel’s Office through William Plache, Hilary Meltzer and Janet Siegel. Coplan said Thursday that he is “very pleased with the result” and did not expect to secure anywhere near the $63.2 million that could have been awarded. He also said the award is apparently the largest ever assessed against a municipal defendant under the Clean Water Act. First Assistant Corporation Counsel Jeffrey Friedlander said that while the city is pleased that the damages were limited, it disagrees with both Judge Scullin and the 2nd Circuit on the city’s liability. Friedlander disputes the finding that the city violated the Clean Water Act when all it really did was transfer water between reservoirs. He said an appeal is likely. Meltzer said a similar decision out of the 11th Circuit is before the U.S. Supreme Court on a certiorari petition. She said the Supreme Court, in considering whether to take the case, recently asked for the views of the solicitor general.

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