UNITED STATES BANKRUPTCY COURT

IN RE:

CANNONSBURG ENVIRONMENTAL

ASSOCIATES, LTD. CASE NO. 92-10146

CHAPTER 11

DEBTOR IN POSSESSION REORGANIZATION

CANNONSBURG ENVIRONMENTAL

ASSOCIATES, LTD. PLAINTIFF

VS: ADV. NO. 93-1004

COMMONWEALTH OF KENTUCKY

NATURAL RESOURCES AND

ENVIRONMENTAL PROTECTION CABINET DEFENDANT

FINDINGS OF FACT, CONCLUSIONS OF LAW

This matter coming on for hearing upon the Motion of the Plaintiff and the Defendant having objected and requesting a continuance of the hearing and said objection being overruled by separate Order and the Court finding that sufficient notice was provided to the Defendant and the Court after argument of counsel, testimony of numerous witnesses, by the Natural Resources and Environmental Cabinet (hereinafter "Cabinet") and Cannonsburg Environmental Associates, Ltd. (hereinafter "CEA") and the Court being otherwise sufficiently advised hereby enters the following Findings of Fact, Conclusions of Law and Order of Preliminary Injunction:

FINDINGS OF FACT AND CONCLUSIONS OF LAW

1. That CEA's sole business activity consists of the management and selling of air space of a solid waste disposal facility located in Cannonsburg, Kentucky.

2. That CEA in furtherance of its proposed reorganization plan, submitted to the Cabinet on January 21, 1993, a proposed permit modification (hereinafter "Add/Delete Application") to add additional out-of-state waste streams. As was the case in Fort Gratiot Sanitary Landfill v. Michigan Department of Natural Resources, et al., 112 S.Ct. 2019 (1992), no issue relating to hazardous waste is presented and there is no claim that plaintiff's operation violated any health, safety, or sanitation requirement. At page 2023.

3. That CEA entered into three contracts for additional out-of-state waste streams contingent upon the Cabinet's approval of the Add/Delete Application.

4. That the Cabinet on April 1, 1993, refused to consider the Add/Delete Application until the Plaintiff submitted additional financial assurance.

5. That the substantive review to be conducted by the Cabinet for the Add/Delete Application consisted of finding whether the Add/Delete Application was consistent with the Boyd County solid waste management plan.

6. That the testimony was clear and convincing that the Add/Delete Application was consistent with the Boyd County solid waste management plan.

7. That without the issuance of the Add/Delete Application, CEA will be forced to convert to a Chapter 7 liquidation proceeding.

8. That the Cabinet delayed consideration of the Add/Delete Application for several months and the Cabinet has not shown by the testimony of its witnesses any justification for its failure to review and issue the Add/Delete Application. The Plaintiff, through credible evidence, demonstrated that the Add/Delete Application met the substantive requirements of review.

9. That the Cabinet on January 25, 1993, informed the Plaintiff that additional financial assurance was required to be posted.

10. That after a request for variance was submitted by the Plaintiff, the Cabinet acknowledged it had the discretion to allow CEA to post financial assurance as it requested but denied such request.

11. That the Plaintiff filed with the Cabinet on May 20, 1993, a Petition for Administrative Hearing to adjudicate the Cabinet's authority to require additional financial assurance, the amount, if any, of additional financial assurance to be posted and the final denial of CEA's proposed method of posting and financial assurance.

12. That the mechanism proposed by CEA for financial assurance would require CEA to contribute monthly installments to a trust fund, the trust fund method being one of the Cabinet's approved methods for satisfying financial assurance requirements. The Cabinet would require that CEA contribute annually to a trust fund although it has adopted no rule or regulation so providing. It appears that the Cabinet found it administratively inconvenient to receive monthly payments instead of annual payments and this appears to be the sum and substance of the Cabinet's reason for rejecting the CEA proposal for financial assurance despite the fact that it appears to serve both the public's and the debtor's interest as herein found.

13. That if the Court did not issue the injunctions requested by the Plaintiff the estate of the debtor would have little or no value.

14. That if the estate of the debtor had no value the creditors' rights would be harmed.

15. That a state may not discriminate against out-of-state waste based solely on its origin since to do so would violate the Commerce Clause of the United States Constitution. City of Philadelphia v. State of New Jersey, et al., 98 S.Ct. 2531 (1978); Fort Gratiot Sanitary Landfill, Inc. v. Michigan Department of Natural Resources, et al., supra.

16. That the precedent set forth in the case styled In Re Metro Transportation Company, 64 B.R. 968 (Bkrtcy. E.D. Pa. 1986) is applicable to the case before this Court.

17. That the Plaintiff has established irreparable injury to itself and the creditors. The testimony was clear that without the issuance of the injunctions requested, the Plaintiff would have to close the landfill because it could not accept the waste from those counties contained in the Add/Delete Application and that if it did not post financial assurance the Cabinet would close the landfill.

18. That the Plaintiff has established a substantial likelihood of success on the merits. The Plaintiff has established that the Federal Regulation which the Cabinet relied upon to exercise its discretionary powers does not become effective until April 9, 1994. Additionally, the Cabinet did not present clear and convincing evidence that its discretionary powers were properly exercised or that financial assurance is required at this time.

19. That the Plaintiff established the threatened injury to the Plaintiff outweighed any possible injury to the Defendant. The testimony was clear and convincing that the injury to the Plaintiff and its creditors was real and immediate. The Plaintiff, without the issuance of the injunctions, would be ruined as a business. The Defendant is not injured since the testimony was clear and convincing that the Add/Delete Application is consistent with the Boyd County solid waste management plan. Additionally, the injunction issued herein required the debtor to post monies for closure and post-closure activities which will result in less of a cost to the state if it should become responsible for closure.

20. That the issuance of the injunctions will not be a disservice to the public interest. The testimony of the witnesses established that the public interest is served by the issuance of the injunctions. If the landfill is shut down without the necessary funds to properly close the landfill, as the situation exists today, the citizens of the Commonwealth would be injured since the amount presently posted for closure of the landfill according to prior practice of the Cabinet appears woefully inadequate to properly close the landfill. With each additional month of operation of the landfill, the closure costs go down while the amount of money posted by the debtor to close the landfill goes up. The cost of closure is reduced by continued operation by achieving the contours necessary for closure through normal operations without the added cost of purchase and transportation of soil to achieve the necessary contours.

21. That there has been no proof or likelihood of harm to the Cabinet by the issuance of this injunction; therefore, pursuant to International Controls Corp. vs. Vesco, 490 F.2d 1334 (N.Y., 1974) no security is required to be posted by the Plaintiff.

1. The Cabinet is affirmatively required to immediately issue the Permit Modification (Add/Delete) Application submitted by CEA on January 21, 1993. The Plaintiff, CEA, is allowed to dispose of waste at the landfill for those counties listed in the aforementioned Application in accordance with applicable law and regulations governing such disposal.

2. That, the Cabinet, its agents, representative, employees and any and all persons acting in concert with the Cabinet are enjoined from closing the landfill for failure to post financial assurance unless and until there has been a final and unappealable order issued by the Administrative Agency or, if judicial review is sought, from a court of competent jurisdiction. The Plaintiff during the term of this injunction shall post financial assurance as set forth in its Request for Variance dated February 25, 1993. If the Plaintiff fails to post financial assurance as set forth in the Request for Variance, the Cabinet may at its discretion file a Motion for Contempt, seek dissolution of this preliminary injunction and/or petition this Court for such other appropriate relief. The Plaintiff shall begin payments to the trust within thirty (30) days of this Order and monthly thereafter file a report with this Court and copy to the Cabinet of each payment to the trust agreement.

This is a final and appealable Order.

So Ordered effective the 28th day of May, 1993, at 5:05 p.m.

BY THE COURT

________________________________

JUDGE

COPIES TO:

W. Thomas Bunch, Esq.

Bunch & Bunch

805 Security Trust Bldg.

Lexington, Kentucky 40507

Martin J. Cunningham, III, Esq.

Breeding, McIntyre and Cunningham, P.S.C.

333 West Vine Street

Suite 900

Lexington, Kentucky 40507

Joyce Albro, Esq.

Department of Law

5th Floor, Capital Plaza Tower

Frankfort, Kentucky 40601