United States District Court, D. Colorado
UNITED STATES OF AMERICA, and THE STATE OF COLORADO, Plaintiffs,
K.P. KAUFFMAN COMPANY, INC., Defendant.
BROOKE JACKSON, UNITED STATES DISTRICT JUDGE
matter is before the Court on defendant K.P. Kauffman
Company, Inc.'s (“KPK”) motion to dismiss.
ECF No. 11. For the reasons discussed below, the motion is
plaintiffs in this civil lawsuit are the federal
Environmental Protection Agency (“EPA”) and the
Colorado Department of Public Health and Environment, Air
Pollution Control Division
(“CDPHE”). Both entities are acting through the
authority of their respective Attorneys General. Plaintiffs
allege illegal emissions of volatile organic compounds
(“VOCs”) from KPK's hydrocarbon liquid
storage tanks in violation of the following: (1) the federal
Clean Air Act (“CAA”), 42 U.S.C. § 7413(b);
(2) the Colorado Air Pollution Prevention and Control Act
(“APPCA”), Colo. Rev. Stat. § 25-7-101; (3)
Colorado's federally approved State Implementation Plan
(“SIP”); and (4) Colorado's Air Quality
Control Commission Regulation Number 7 (“Regulation
7”). Complaint, ECF No. 1 at ¶¶2-3.
a privately held company headquartered in Denver, Colorado.
Id. at ¶13. KPK specializes in hydrocarbon
liquid and natural oil and gas production and exploration in
the Denver-Julesburg (“D-J”) Basin, primarily in
the Wattenberg Field in Adams and Weld Counties. Id.
at ¶¶13-14. KPK owns and operates hundreds of oil
and gas facilities in the D-J Basin. Id. at
¶14. In 2016, in the D-J Basin alone, KPK produced
approximately 272, 643 barrels of hydrocarbon liquids and 1.9
billion cubic feet of natural gas. Id. at ¶14.
KPK stores its hydrocarbon liquids-better known as condensate
or crude oil-in storage tanks. Id. at ¶3. These
tanks are grouped in “tank batteries”; KPK owns
and operates 124 such batteries in the D-J Basin that the
company has certified as being controlled to comply with the
Colorado SIP and Regulation 7's system-wide VOC reduction
requirements. Id. at ¶¶4, 6.
September 2016 plaintiffs informed KPK of its noncompliance
with the CAA, APPCA, and Regulation 7 by issuing KPK a
Compliance Advisory. Id. at ¶11. The EPA and
CDPHE later filed formal Notices of Violation in March 2018.
Id. Following the issuance of the Compliance
Advisory and later the Notices of Violation, plaintiffs met
with KPK several times between September 2016 and October
2018. ECF No. 11 at 5. Then, in October 2018, without issuing
a final agency order, plaintiffs filed this lawsuit alleging
illegal emissions of VOCs from 41 specific tank batteries
owned or operated by KPK.
developed its factual basis for the complaint following a
five-year investigation, spanning from 2013 to 2018. Between
September 2013 and April 2015, CDPHE inspectors, using
infrared cameras, observed emissions at 18 tank batteries
located in the 8-hour Ozone Control Area. Id. at
¶58. Then, on December 9, 2015 CDPHE issued a Compliance
Advisory to KPK in which it identified violations of
Regulation 7 at those same 18 tank batteries. Id. at
¶59. The following year, on June 21, June 30, and July
22, 2016, EPA and CDPHE inspectors conducted three joint
inspections on 19 KPK tank batteries; those inspections
resulted in observed VOC emissions at 12 of the 19 tank
batteries. Id. at ¶62. In total, between
September 13, 2013 and February 22, 2018, federal and state
inspectors conducted inspections at 153 of KPK's tank
batteries, resulting in observations of VOC emissions 59
times at 41 unique tank batteries. Id. at ¶62.
These 41 tank batteries are listed by “AIRS ID”
and facility name in Appendix A to the complaint. App. A, ECF
No. 5. Moreover, in August 2015, EPA requested information
from KPK regarding its Vapor Control Systems at KPK's 124
tank batteries. Id. at ¶63. Based on KPK's
responses to EPA's requests, EPA and CDPHE concluded that
KPK's equipment and operations were in violation of
federal and state regulations. Id. at ¶63.
result of KPK's alleged wrongdoing, plaintiffs sued on
four counts. Claims one and two are joint federal-state
claims asserting violations of Regulation 7, §§
XII.C.1.b and XII.C.1.a, respectively. Id. at
¶¶67-78. Claims three and four are CDPHE-only
claims for alleged violations of numerous sections of
Regulation 7. Id. at ¶¶79-90. Shortly
after plaintiffs filed its complaint in October 2018,
defendant filed a motion to dismiss. ECF No. 11. Defendant
also requested hearing on the motion to dismiss, which I
granted. The Court heard oral arguments from all parties at
the March 12, 2019 hearing. My legal conclusions are set
forth in this order.
STANDARDS OF REVIEW
argues that the first three claims must be dismissed per
Fed.R.Civ.P. 8 and 12(b)(6). ECF No. 11 at 2. Under
defendant's theory, once the Court dismisses the federal
claims, claims three and four must be dismissed per Rule
Rules 8(a)(2) and 12(b)(6).
Civ. P. 8(a)(2) requires that a pleading stating a claim for
relief contain “a short and plain statement of the
claim showing that the pleader is entitled to relief.”
A plaintiff must set forth a plausible, not merely a
possible, claim. Bell Atlantic Corp. v. Twombly, 550
U.S. 544, 570 (2007). To survive a Fed.R.Civ.P. 12(b)(6)
motion to dismiss, the complaint must contain “enough
facts to state a claim to relief that is plausible on its
face.” Ridge at Red Hawk, L.L.C. v. Schneider,
493 F.3d 1174, 1177 (10th Cir. 2007) (quoting
Twombly, 550 U.S. at 570). A plausible claim is a
claim that “allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009). While the Court must accept the well-pleaded
allegations of the complaint as true and construe them in the
light most favorable to the plaintiff, Robbins v.
Wilkie, 300 F.3d 1208, 1210 (10th Cir. 2002), conclusory
allegations are not entitled to be presumed true.
Iqbal, 556 U.S. at 681. However, so long as the
plaintiff offers sufficient factual allegations such that the
right to relief is raised above the speculative level, the
plaintiff has met the threshold pleading standard. See,
e.g., Twombly, 550 U.S. at 556; Bryson v.
Gonzales, 534 F.3d 1282, 1286 (10th Cir. 2008).
Civ. P. 12(b)(1) “allows a court to dismiss a complaint
for lack of subject matter jurisdiction.” Pueblo of
Jemez v. United States, 790 F.3d 1143, 1151 (10th Cir.
2015). There is a presumption that a cause of action lies
outside a federal court's limited jurisdiction,
“and the burden of establishing the contrary rests upon
the party asserting jurisdiction.” Id.
(quoting Becker v. Ute Indian Tribe of the Uintah and
Ouray Reservation, 770 F.3d 944, 947 (10th Cir. 2014)).
A motion to dismiss under Rule 12(b)(1) can either:
“(1) facially attack the complaint's allegations as
to the existence of subject matter jurisdiction, or (2) go
beyond allegations contained in the complaint by presenting
evidence to challenge the factual basis upon which subject
matter jurisdiction rests.” Maestas v. Lujan,
351 F.3d 1001, 1013 (10th Cir. 2003).
Plaintiffs Have Satisfied the Pleading
argues that the first three claims must be dismissed because
they are based on mere speculation and do not satisfy the
pleading requirements. ECF No. 11 at 2. Defendant makes two
specific arguments applicable to all three claims. The first
is that the “general provisions” of Regulation 7
alleged to be violated in claims one, two, and three do not
ban VOC emissions. Id. at 7. Rather, Regulation 7
directs owners and operators to simply minimize leakage.
Id. The second is that defendant alleges that none
of the claims are accompanied by specific facts as required
by Rule 8. Defendant then addresses each claim individually.
Defendant takes issue with claim one because that claim
alleges, among other things, that defendant failed to conduct
a “design analysis” on its tank batteries.
See ECF No. 1 at ¶69. But defendant argues that
Regulation 7 does not require a discrete design analysis. ECF
No. 11 at 9. Thus, according to defendant, these allegations
fail to state a claim under Regulation 7. Id.
Concerning claim two, defendant takes issue with the
specificity of the facts accompanying the claim because
plaintiff fails to specify on which tank batteries the
violations allegedly occurred. Id. at 11. Defendant
then argues that the factual allegations supporting claim two
are found only in claim two and not in the factual
allegations portion of the complaint, which defendant alleges
is improper. Id. Lastly, defendant argues that
plaintiffs improperly shifted the burden to defendant because
the complaint alleges that defendant has not fully complied
with Regulation 7, such as failing to develop and implement a
STEM plan or failing to demonstrate to CDPHE that it
practiced good air pollution control. Id. at 13-14.
I address defendant's arguments in turn.
first claim for relief is a joint claim by the EPA and CDPHE
for violations of Regulation 7, § XII.C.1.b. That
section states that “[a]ll condensate collection,
storage, processing and handling operations, regardless of
size, shall be designed, operated and maintained so
as to minimize leakage of volatile organic compounds
to the atmosphere to the maximum extent practicable.” 5
Colo. Code Regs. § 1001-9:XII.C.1.b (2019) (emphasis
added). Specifically, plaintiffs allege that defendant failed
to conduct a design analysis to determine if the Vapor
Control Systems “at one or more of its tank
batteries” have the capacity to route all VOC emissions
appropriately to minimize leakage of VOCs to the atmosphere.
ECF No. 1 at ¶69. Plaintiffs then allege that
defendant's tanks were not designed to minimize ...