Arkansas Oklahoma Gas Corp. v. Arkansas Public Service Commission

John E. Jennings, Judge. This is an appeal from an order of the Arkansas Public Service Commission denying Arkansas Oklahoma Gas Company’s proposed surcharge under Ark. Code Ann. Sections 23-4-501 et seq. (1987) (Act 310 of 1981) for expenditures associated with asbestos removal from two of appellant’s buildings in Fort Smith, Arkansas. Appellant, AOG, filed an Interim Rate Schedule for a surcharge pursuant to Ark. Code Ann. Section 23-4-501 et seq. (1987) on September 30, 1987. The application sought permission to surcharge its Arkansas ratepayers a $106,869.00 jurisdictional share of asbestos removal and related costs1 for its main office building and a garage in Fort Smith, Arkansas. Appellant contends that it incurred those costs as a direct result of 40 C.F.R. Sections 61.140 through 61.153 and 29 C.F.R. Section 1926.58. Those federal regulations establish specific standards, procedures, and guidelines to be followed with regard to handling of asbestos materials. The Commission established Docket Number 87-149-U for the purpose of considering the application, and hearings were held in December of 1987. Appellant amended its application to increase the amount it desired to surcharge its customers, and the Commission in May entered Order Number 9, which denied the application entirely. This appeal followed. Arkansas Code Annotated Sections 23-4-501 through 23-4-509 (1987) were enacted for the following purposes, as stated in Section 23-4-501: (a) It is recognized that legislative or administrative regulations impose certain legal requirements upon public utilities relating to the protection of the public health, safety, or the environment; and that: (1) In order to comply with such legislative or regulatory requirements, utilities are required to make substantial additional investments or incur additional expenses with respect to existing facilities used and useful in providing service to the utility’s customers; and (2) Although such additional investments and expenses are necessary in order to provide service to the utility’s customers, such additional investments and expenses are not included in the utility’s rate and cannot be recovered in a prompt and timely fashion under existing regulatory procedures. (b) It is intended by the General Assembly that utilities be permitted to recover in a prompt and timely manner all such costs incurred by utilities in order to comply with such legislative or regulatory requirements through an interim surcharge which, if approved, shall be effective until the implementation of new rate schedules in connection with the next general rate filing of the utility wherein such additional investments or expenses can be included in the utility’s base rate schedules. However, the costs to be recovered through such interim surcharge shall not include increases in the cost for employment compensation or benefits as a result of legislative or regulatory action. It is undisputed that the insulation material appellant spent money to remove was asbestos as that term is defined in 40 C.F.R. 61 Subpart M, Section 61.141. The parties agree that the primary point of controversy in this case involves a dispute about whether the asbestos was “friable.” Section 61.141 provides the definition: “/fjriable asbestos material means any material containing more than 1 % asbestos by weight that hand pressure can crumble, pulverize, or reduce to powder when dry.” Section 61.147 provides that friable asbestos material must be removed during “demolition” or “renovation” work (defined at 61.141), or that other measures be taken to prevent the release of asbestos fibers into the outside air during the renovation or demolition. Appellant argues that the insulation material was friable and, therefore, federal regulations mandated the expenditures to remove it. The appellee contends that the asbestos was not in fact friable and, even if it were, removal was not the only alternative available under the law and other less costly abatement procedures may have been available. The Commission’s order, however, does not address whether removal, as opposed to other abatement procedures, was a reasonable course of action. Three witnesses for appellant testified at the hearing on the surcharge application. One witness testified for AOG as to the costs of the asbestos removal and the allocation of those costs based on customer class and jurisdiction. AOG’s attorney and risk manager, Michael J. Callan, testified as to the circumstances giving rise to the asbestos removal expenses. He said that AOG had employed an asbestos consulting firm to analyze insulating materials in its buildings and found that some of the materials contained up to thirty percent (30%) chrysotile, a form of asbestos. There was evidence that AOG needed to install a new chiller for its main office building in order to keep its air conditioning unit working, and this project might necessitate disturbing asbestos insulating material on pipes and ducts. When asbestos insulation is disturbed, its particles or fibers can become airborne and, when inhaled or ingested, can cause cancer and other serious diseases. Callen testified that the asbestos was not in good condition and that the insulation was “friable,” which means that it could be pulverized by hand pressure. He said the asbestos removal was accomplished over the Thanksgiving weekend of 1987. Thomas W. Rimmer, a consultant for AOG, also testified as to the necessity of removing the asbestos. He stated that the insulation was in “fair to good condition” in both buildings, but that it had been damaged in some locations and appeared to be coming loose and could fall in other spots. Rimmer testified in detail as to the various health hazards posed by exposure to asbestos fiber. He testified that removal of the asbestos material in conjunction with AOG’s renovation work was prudent and that it was his opinion that Section 61.147 of the National Emissions Standards for Hazardous Air Pollutants (NESHAPS)2 mandated removal. An accounting witness for the PSC staff testified as to the proposed allocation of costs if the Commission allowed recovery, but stated her testimony was limited only to that issue and was not to be construed as support for the recovery thereof. An engineer for the PSC staff, Ralph W. Sandage, testified in opposition to the application. He said that there was no detectable level of asbestos found in air samples taken by appellant and, consequently, no danger. He also testified, in essence, that it was the renovation and repair work which necessitated the asbestos removal and that the removal was not a direct result of legislative or regulatory mandate. Sandage testified that some of the asbestos removed by the Company was not necessary at all in connection with the work. He testified that he had visited the renovation sites and had personally observed that the ACM did not disintegrate when touched and that it seemed solid. The witness testified that he had no problem with AOG removing the asbestos but objected to the recovery of expenses therefor under Act 310. The PSC found in its order that the asbestos was not friable. The dispositive question before us in this appeal is whether that finding is supported by substantial evidence. Arkansas Code Annotated Section 23-2-423(c)(3), (4), and (5) (1987) defines and limits our review of actions of the Public Service Commission as follows: (3) The finding of the Commission as to the facts, if supported by substantial evidence, shall be conclusive. (4) The review shall not be extended further than to determine whether the Commission’s findings are supported by substantial evidence and whether the Commission has regularly pursued its authority, including a determination of whether the order or decision under review violated any right of the petitioner under the laws or Constitution of the United States or of the State of Arkansas. (5) All evidence before the Commission shall be considered by the court regardless of any technical rule which might have rendered the evidence inadmissible if originally offered in the trial of any action at law or in equity. On appeal, we give due regard to the expertise of the Commission, which derives its authority from the Arkansas General Assembly. City of Fort Smith v. Arkansas Public Service Commission, 278 Ark. 521, 648 S.W.2d 40 (1983). The Arkansas Public Service Commission has broad discretion in exercising its regulatory authority. Associated Natural Gas Co. v. Arkansas Public Service Commission, 25 Ark. App. 115, 752 S.W.2d 766 (1988); Southwestern Bell Telephone Co. v. Arkansas Public Service Commission, 19 Ark. App. 322, 720 S.W.2d 924 (1986); Southwestern Bell Telephone Co. v. Arkansas Public Service Commission, 18 Ark. App. 260, 715 S.W.2d 45 (1986); Walnut Hill Telephone Co. v. Arkansas Public Service Commission, 17 Ark. App. 259, 709 S.W.2d 96 (1986). Judicial inquiry terminates if the action of the Commission is supported by substantial evidence and its action is not unjust, unreasonable, unlawful or discriminatory. Southwestern Bell Telephone Co. v. Arkansas Public Service Commission, 24 Ark. App. 142, 751 S.W.2d 8 (1988). It is the province of the Commission as the trier of fact, to assess the credibility of the witnesses, the reliability of their testimony, and the weight to be accorded the evidence presented. Arkansas Public Service Commission v. Continental Telephone Co., 262 Ark. 821, 561 S.W.2d 645 (1978); Associated Natural Gas Co., supra; General Telephone Company of the Southwest v. Arkansas Public Service Commission, 23 Ark. App. 73, 744 S.W.2d 392 (1988). To establish an absence of substantial evidence to support the decision the appellant must demonstrate that the proof before the administrative tribunal was so nearly undisputed that fair-minded men could not reach its conclusion, [citation omitted] . . . [T]he question is not whether the testimony would have supported a contrary finding but whether it supports the finding that was made. Williams v. Scott, 278 Ark. 453, 455, 647 S.W.2d 115, 116 (1983). A decision of an administrative agency may be supported by substantial evidence even though this court might have reached a different conclusion had we heard the case de novo or sat as the trier of fact. Fouch v. State, Alcoholic Beverage Control Division, 10 Ark. App. 139, 662 S.W.2d 181 (1983). On the record before us, we cannot say the finding of the Commission that the asbestos material in appellant’s buildings was not friable is not supported by substantial evidence. Since this issue is dispositive and we affirm the Commission’s finding in this regard, the other issues before us need not be reached. Affirmed. Rogers, J., concurs. Cooper, J., and Corbin, C.J., dissent. Footnotes [1] Related costs include consultant fees, air monitoring, some special equipment purchases, reinsulating costs, and attorney’s fees and witness fees for the Commission hearings. [2] Promulgated pursuant to the Clean Air Act and codified at 40 C.F.R. 61(m).