In re Environmental Protection Services, Inc.
Appellant Environmental Protection Services, Inc. (“EPS”) contests an Initial Decision by Administrative Law Judge Carl C. Charneski (“ALJ”) in which the ALJ determined, as alleged by U.S. EPA Region 3 (the “Region”), that EPS had violated section 15 of the Toxic Substances Control Act, 15 U.S.C. § 2614, by failing to comply with implementing regulations governing the storage, distribution, and disposal of polychlorinated biphenyls (“PCBs”) at its facility in Wheeling, West Virginia (“Facility”).
The regulations central to this proceeding are the PCB storage and disposal regulations at part 761, subpart D, of Title 40 of the Code of Federal Regulations. These regulations, require, among other things, that “commercial storers” of PCB wastes receive approval to store PCB wastes generated by others, and impose maximum storage capacities (“MSCs”) on the amount of waste stored. The regulations also specify disposal methods based on the types and concentrations of PCBs and PCB-containing waste equipment, such as transformers and capacitors. Specifically, the PCB regulations allow burning of drained “PCB-contaminated” transformers (containing PCB concentrations greater than or equal to 50 parts per million (“ppm”) but less than 500 ppm) in scrap metal recovery ovens (“SMROs”). The regulations also require commercial storers of PCBs to maintain financial assurance calibrated to the amount of PCB waste they store, as reflected by their MSCs.
This administrative action arises from EPS’s storage and disposal of used electrical equipment the company receives from utility companies. EPS disposes of drained PCB-contaminated electrical equipment (50 ppm - 499 ppm) in an on-site SMRO. In 1993, in accordance with the PCB regulations, the Region approved EPS’s application authorizing it to serve as a “commercial storer” of PCB waste, and, in 1998, approved the company’s application for a five-year renewal of its “commercial storer” status. EPA’s approval imposed on EPS an MSC of 5,000 pounds for PCB transformers and 1,000 pounds for PCB capacitors.
Following inspections of the Facility on July 15 and November 2, 1999, the Region, on June 29, 2001, filed a three-count administrative complaint against EPS. The Region was subsequently allowed to twice amend the complaint (the April 23, 2003 complaint is hereafter referred to as the “Second Amended Complaint.”). The Region’s Second Amended Complaint alleged that EPS violated the PCB regulations, as set forth below:
• Count I: EPS, on July 15, 1999, and November 2, 1999, stored PCB transformers at its Facility in excess of the applicable 5,000-pound MSC for PCB transformers, in violation of 40 C.F.R. § 761.65.
• Count II: EPS, on July 9, 1999, stored PCB capacitors in excess of the applicable 1,000-pound MSC for PCB capacitors, in violation of 40 C.F.R. § 761.65(d); and
• Count III: EPS failed to adhere to the time and temperature parameters of 40 C.F.R. § 761.72(a)(3) while burning PCB-contaminated transformers in its SMRO on eleven occasions in March, September, and October, 1999.
The Region proposed a penalty of $386,100 against EPS, but subsequently reduced the proposed penalty to $151,800. following a series of evidentiary hearings, the ALJ, on March 18, 2006, issued an Initial Decision in which he found EPS liable on all three counts in the Second Amended Complaint and imposed the $151,800 penalty proposed by the Region.
On May 12, 2006, EPS filed an appeal in which it challenged numerous aspects of the ALJ’s liability finding and penalty assessment. EPS’s chief arguments on appeal were as follows:
Regarding Counts I and II:
(1) The Region failed to establish a prima facie case that EPS violated the applicable MSCs for transformers and capacitors;
(2) EPS complied with its MSC limits for PCB transformers because it notified the Region by letter that it would be raising its MSCs to accommodate its storage of PCB transformers;
(3) The financial assurance instrument that EPS posted for its commercial storage approval was sufficient to cover the cost of closing EPS’s Facility;
(4) EPS was exempt from the requirement to obtain commercial storage approval for the transformers and capacitors pursuant to 40 C.F.R. § 761.20(c)(2) because EPS was processing the electrical equipment to “facilitate transportation for disposal;”
(5) EPS acted as a “transfer facility” with respect to the PCB capacitors in question and thus was exempt from the commercial storage approval requirement pursuant to 40 C.F.R. § 761.3; and
(6) The Region failed to provide the company with “fair notice” regarding how the Region would apply the 5,000-pound MSC for PCB transformers against EPS and how it would interpret the regulatory exemption at 40 C.F.R. § 761.20(c)(2).
Regarding Count III:
(1) By producing PCB concentration data on transformers shortly before the start of the hearing and by not clearly identifying which transformers were improperly burned in EPS’s SMRO, and on what dates and at what times, the Region deprived EPS of its Constitutional due process right to receive proper notice of the basis for the administrative action that the Region filed against EPS;
(2) The Region failed to establish a prima facie case for liability because the Region misrepresented PCB concentration data that the Region obtained by subpoena from EPS’s testing laboratory; (3) EPA failed to give EPS “fair warning” of its interpretation that the PCB regulations require SMRO operators to satisfy required temperature parameters continuouslyover 2.5 hours during a burn cycle, rather than allowing operators to satisfy the temperature parameters for a total duration of 2.5 hours, regardless of continuity.
EPS also asserted, as an affirmative defense to liability on the three counts, that EPA engaged in selective enforcement against the company by singling EPS out for enforcement while ignoring the actions of a similarly situated competitor in Region 2 – and that the Region, by taking enforcement against EPS, invidiously and unconstitutionally retaliated against EPS for complaining about EPA’s lack of enforcement against the competitor.
Finally, EPS opposes the ALJ’s imposition of a $ 151,800 penalty against the company as lacking a factual foundation.
Held: As described below, the Board affirms the ALJ’s liability findings and penalty assessment, except those related to the July 19, 1999 violation charged under Count I. Specifically, the Board concludes as follows:
Counts I and II
(1) The ALJ correctly found that the Region had established a prima facie case that EPS met the definitional test for a “commercial storer” because EPS was engaged in “storage activities involving PCB waste generated by others.” The Board bases its conclusion on such factors as the nature of EPS’s business operations, the company’s public statements regarding its business, and EPS’s utility clients’ self-identification as waste “generators” on waste manifests sent to EPS. Taking such considerations into account, EPS is appropriately viewed as a “commercial storer” pursuant to the PCB regulations.
(2) The ALJ erred by finding that the Region had established a prima facie case under Count I that EPS exceeded its MSC of 5,000 pounds for commercially stored PCB transformers on July 15, 1999. The documentary evidence the Region received from EPS regarding equipment stored by EPS on this date did not establish with sufficient specificity that the stored items constituted “PCB transformers” subject to the applicable MSC. However, the Board finds that the Region did adduce sufficient documentary information to identify commercially stored PCB transformers exceeding the applicable 5,000 pound MSC on November 2, 1999. With regard to Count II, the Board agrees with the ALJ that the Region’s evidence was sufficient to establish a prima facie case that EPS was commercially storing PCB capacitors in excess of the applicable 1,000-pound MSC.
(3) The ALJ correctly rejected EPS’s argument, with respect to Count I, that EPS unilaterally effected an upward revision of its MSC by notifying the Region by mail that it intended to raise its MSC for PCB transformers to 100,000 pounds. A change in MSC is appropriately viewed as a change in a facility’s operating plan, and, as such, requires the Region’s approval in accordance with the PCB regulations’ coverage of commercial storers at 40 C.F.R.§ 761.65. Moreover, EPS’s argument in favor of unilateral revision of the MSC contravenes the terms of EPS’s commercial storage approval.
(4) The ALJ correctly determined that the alleged sufficiency of EPS’s financial assurance was irrelevant to whether EPS exceeded its MSC pursuant to Counts I and II. The PCB regulations contain no mechanism that would allow a commercial storer of PCB waste to unilaterally raise its MSC due to an increase in the value of its closure trust fund.
(5) The Board upholds the ALJ’s determination, with respect to Counts I and II, that EPS failed to meet its burden of showing that it satisfied the conditions of 40 C.F.R. § 761.20(c)(2) for an exemption from commercial storage approval requirements, including MSCs. The language in section 761.20(c)(2) exempting “processing activities which are primarily associated with and facilitate storage or transportation for disposal” applies to a restricted set of activities preparatory to storage but not to regulated storage or transportation themselves. With respect to Count I, EPS failed to satisfy the exemption because it did not demonstrate that it engaged in any processing of the subject PCB transformers independent of actual storage. With regard to Count II, EPS failed to demonstrate that it processed the subject PCB capacitors to facilitate their off-site transportation and thereby came within the coverage of the exemption. Instead, the evidence in the record indicates that EPS was handling the subject PCB capacitors to facilitate their on-site disposal in the company’s SMRO.
(6) The Board upholds the ALJ’s determination that EPS failed to demonstrate that its activities fell within the “transfer facility” exemption from commercial storage approval with respect to the PCB capacitors under Count II. The record indicates that EPS handled the capacitors to facilitate on-site disposal, not transportation, and, as such, did not satisfy the definitional test of “transfer facility,” which includes “loading docks” and “parking areas” that “hold the waste during the normal course of transportation.”
(7) The Board affirms the ALJ’s rejection of EPS’s argument that the Region did not provide EPS with “fair warning” regarding EPA’s interpretation of the section 761.20(c)(2) regulatory exemption. The relevant regulatory language, together with explanations in the preamble to the final rule promulgating the exception, were sufficiently clear to have informed EPS with “ascertainable certainty” of the exception’s scope. As such, EPS had “fair warning” of EPA’s interpretation of section 761.20(c)(2) in a manner satisfying Constitutional due process.
In summary, with the exception of the Count I charge alleging the EPS exceeded its 5,000 pound MSC on July 15, 1999 – on which the Board reverses the ALJ’s finding – the Board otherwise affirms the ALJ’s liability findings under Counts I and II.
(1) The Board rejects EPS’s argument that the Region failed to accord the company adequate notice of the factual basis for the Count III SMRO burning violations as required by the Consolidated Rules of Procedure (“CROP”), 40 C.F.R. pt. 22, governing this proceeding, and Constitutional due process. The CROP’s directive to “include in its administrative complaint” a “concise statement of the factual basis for each violation alleged” did not obligate the Region to reference detailed and immutable evidence of illegal SMRO burning in its complaint. Consistent with Board case law adopting the liberal pleading policies of the Federal Rules of Civil Procedure, the Board finds the Second Amended Complaint “fairly informed” EPS of the Count III claims against it. The Board also finds that the Region satisfied due process requirements in this case. Specifically, the Region, during the discovery period, sufficiently alerted EPS to the nature and source of PCB concentration data and other evidence that the Region intended to use to prove Count III, and despite the late production of PCB concentration evidence, EPS was able to confront this evidence during the evidentiary hearing. Moreover, EPS failed to support its due process claims by showing that it suffered “prejudice” as a result any alleged inadequate notice provided by the Region.
(2) The Board affirms the ALJ’s finding that the Region established a prima facie case that EPS violated 40 C.F.R. § 761.72(a)(3) by burning PCB-contaminated transformers without adhering to the provision’s time and temperature burn parameters during dates in March, September, and October 1999. The ALJ correctly found that the PCB concentration data EPA presented at the evidentiary hearing, obtained by subpoena from EPS’s testing laboratory, constituted persuasive evidence that EPS burned PCB-contaminated transformers during times that EPS did not meet section 761.72(a)(3)’s burn parameters. The Board agrees with the ALJ that the striking correlation between EPS barcode numbers and EPS’s laboratory’s serial numbers warranted the Region’s reliance on the latter numbers to identify individual PCB-contaminated items that EPS burned in noncompliance with the SMRO burn parameters.
(3) The Board affirms the ALJ’s rejection of EPS’s argument that it did not receive fair warning from EPA regarding the latter’s interpretation of section 761.72(a)(3) to require continuous burning of electrical equipment in SMROs at a minimum temperature of 537 degrees Celsius (999 Fahrenheit) for two and one-half hours. Relevant language in the preamble to the final rule promulgating section 761.72(a)(3) was sufficient to allow EPS to identify with “ascertainable certainty” that EPS was required to satisfy the SMRO burn parameters on a “continuous basis.”
Affirmative Defense of Selective Prosecution
The Board affirms the ALJ’s determination that EPS failed to sustain its burden of proving that EPA engaged in selective enforcement against EPS, either under a theory of traditional selective enforcement or “vindictive” enforcement. The Board accords deference to the ALJ’s factual determination based on witness testimony that appropriate considerations motivated the Region’s enforcement action and that the Region’s asserted grounds for inspecting EPS and bringing the instant enforcement action were not motivated by retaliation.
The Board rules that, except for the July 15, 1999 charge under Count I, with respect to which the Board has determined that the ALJ erroneously found EPS to be liable, EPS has shown no abuse of discretion or clear error in the ALJ’s penalty assessment, which was properly informed by EPA’s PCB Penalty Policy. EPS is therefore ordered to pay a final penalty of $133,100 which the Board calculates by subtracting the penalty amount associated with the reversed portion of Count I –$18,700 – from the ALJ’s overall penalty assessment of $151,800.