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In re General Motors Automotive—North America

06/20/2008

Case Number:RCRA (3008) Appeal No. 06-02
ELR Citation:38 ELR 41322

On May 19, 2006, General Motors Corporation (“GM”) appealed from an Initial Decision entered against it on April 14, 2006, by Administrative Law Judge
(“ALJ”) Barbara A. Gunning. In her Initial Decision, the ALJ determined that GM violated the Resource Conservation and Recovery Act (“RCRA”), 42 U.S.C. §§ 6901- 6992k, and the statute’s implementing regulations, by failing to comply with a variety of inspection, recordkeeping, equipment marking and monitoring, secondary containment, and related requirements regarding hazardous waste purportedly generated at three of its automobile assembly plants in the States of Michigan and Ohio. According to the ALJ, GM generates hazardous waste when it deploys organic solvents called “purge solvents” to remove paint from automated spray painting equipment that the company uses to prime, paint, and topcoat car and truck bodies in its assembly plant paint shops. Pursuant to RCRA section 3008(a)(3), 42 U.S.C. § 6928(a)(3), the ALJ assessed an administrative penalty of $568,116 against GM for these violations.

On appeal, GM contends that the ALJ erred on five primary grounds in analyzing the company’s liability for violating the solid/hazardous waste provisions of RCRA subtitle C and the implementing regulations. First, GM claims that the ALJ erred in her interpretation of the RCRA regulations that define a “solid waste” as, among many
other things, a “spent material” that has been used for “the purpose for which it was produced” and as a result of the use has become too contaminated to be used further for that purpose without reclamation. Second, GM contends that the ALJ erred in her interpretation of the statute by holding that purge solvent is “discarded” at the point it exits the spray paint applicators and therefore qualifies as a “waste” that must be managed in accordance with RCRA subtitle C. Third, GM argues that even if purge solvent were“spent” downstream of the paint applicators, it still is not regulated under subtitle C because it qualifies for two regulatory exemptions: (1) the “manufacturing process unit” exemption; and (2) the “totally enclosed treatment facility” exemption. Fourth, GM argues that EPA’s regulatory interpretation of “solid waste” is inconsistent with prior Agency interpretations of the term and that the new interpretation has been improperly imposed on the regulated community by means of enforcement proceedings rather than properly promulgated through notice-and-comment rulemaking. Fifth and finally, GM contends that when EPA is enforcing the State of Michigan’s laws, as it is in this casewith respect to two of the three facilities at issue, the Agency is bound by the State’s determination that purge solvent in purge mixture is not a solid waste until it reaches the purge mixture storage tanks.

Held: The Environmental Appeals Board affirms some of the ALJ’s rulings but concludes that the ALJ made several errors of law in her analysis of this legally and
factually complex matter. The Board reverses the ALJ’s finding of liability and remands this case to the ALJ for further proceedings consistent with this opinion, as follows:

(1) The Regulatory Argument: When Is Purge Solvent “Spent”? The Board holds that the ALJ committed clear error in certain aspects of her interpretation of the clause “the purpose for which [a material] was produced” in the definition of “spent material,” found at 40 C.F.R. § 261.1(c)(1). Upon review of the regulatory text, regulatory history, and EPA interpretive guidance documents, the Board holds that the Agency intended that the “purpose” clause have a singular character, not a multiple character, and that the ALJ clearly erred in adopting a “predominant purpose” test for determining when a material is “spent.”

The Board holds further that EPA intended a material’s “purpose” to be construed as follows. First, under ordinary circumstances, the initial deployment or application of a batch of material will serve as the touchstone for determining “the purpose for which [that batch of material] was produced,” and, at the end of the initial deployment or application, the material will be considered “spent” under the regulations. Second, in the 1985 preamble to the solid waste regulations, the Agency created the “continued use” policy, which acts as an exception (or “but for” test) to the ordinary “purpose”/”spent” analysis. If the conditions of the exception apply, the exception broadens “the
purpose for which [a material] was produced” to include not just the initial deployment or application but also certain continued uses of the material.

The Board finds that this continued use exception is comprised of two primary conditions. Condition number one provides that the continued use of the material must be similar to or consistent with the initial deployment or application of the material. Condition number two provides that the continued use of the material must be a legitimate further use of the previously used material rather than an improper or disguised means of disposing of a waste material. The latter condition, “legitimacy,” is evaluated by means of a threepart test EPA set forth in an applicability determination issued to Safety-Kleen Corporation in 1998. The test, grounded in the 1985 preamble, provides that a continuing use of a partially depleted material will be considered “legitimate” if it is: (1) effective; (2) necessary; and (3) not in excess of the quantity that
would normally be required to achieve the task. The Board holds that a continued use deemed to be similar/consistent and legitimate broadens the “purpose for which [the material] was produced” to include that continued use until the use is concluded. The burdens of pleading and proving the existenceof a qualifying continued use rest upon the party attempting to invoke the exception.

As to this specific case, the Board holds that the “purpose for which GM’s various purge solvents are produced” is to solubilize and suspend specific automotive paints/coatings in assembly plant paint manifolds and spray applicators. At the point purge solvent exits the spray applicators (or the minipurge pots at one facility), and absent a qualifying continuing use, it becomes a material that “has been used and as a result of contamination can no longer serve the purpose for which it was produced without processing.” The possible qualifying continuing uses at GM’s assembly plants include: (1) moving purge mixture downstream from the paint manifolds and applicators all the way through the purge pots, piping, and equipment of the purge solvent recovery system; and (2) keeping purge mixture sufficiently fluid in the purge mixture storage tanks. Whether either of these two purported continuing uses appropriately falls within the scope of “the purpose for which [purge solvent]
was produced” turns on whether they meet the similarity/consistency and legitimacy conditions for continued use.

With respect to the first purported continuing use, the Board’s analysis incorporates an assumption that this alleged further use of purge solvent is sufficiently similar to or consistent with the solvent’s initial deployment to fulfill the first condition of a continued use under EPA’s continued use policy. Region 5 acknowledges that purge solvent in purge mixture retains its ability to solubilize and suspend paint solids in the downstream purge solvent recovery systems and does so at GM’s three facilities. The Board notes, however, that nothing in its decision precludes the ALJ, on remand, from examining the question whether this purported further use of purge solvent is
sufficiently similar to or consistent with the solvent’s initial deployment as a painting equipment cleaner to qualify as a continued use under EPA’s policy. As to the second condition (i.e., legitimacy) for establishing a continuing use, the Board has questions about the ALJ’s findings that force alone is responsible for cleaning the downstream purge pots, equipment, and piping and properly transporting purge mixture to the storage tanks. The Board remands the questions of “effectiveness” and “necessity” to the ALJ for reconsideration of the evidence in the record, including witness testimony specifically highlighted in the Board’s analysis, along with further fact-finding as warranted. The Board also remands the question of what “quantity” of purge solvent in purge mixture is needed to move waste paint solids downstream, which is not
addressed in the existing record and thus will require new fact-finding by the ALJ. Upon completion of the factual record, the ALJ will be required to render
a decision on the “legitimacy” of GM’s alleged downstream continuing use.

With respect to the second purported continuing use, the Board’s analysis also assumes that this further purported use is sufficiently similar to or consistent with the solvent’s initial deployment as a painting equipment cleaner to fulfillthe first condition of a continued use under EPA’s continued use policy. The Board notes, however, that nothing in its decision precludes the ALJ, on remand, from examining the question whether this purported further use of purge solvent is sufficiently similar to or consistent with the solvent’s initial deployment as a painting equipment cleaner to qualify as a continued use under EPA’s policy. As to the second condition for establishing a continuing use, the Board again has questions pertaining to the three legitimacy prongs for this“use” and finds that they are not sufficiently answered by the evidence presently in the record. The Board directs the ALJ to conduct new fact-finding on the effectiveness, necessity, and quantity of purge solvent “used” in the
purge mixture storage tanks. The ALJ will then be obliged to employ the new facts to make a determination as to the legitimacy of this alleged continued use.

(2) The Statutory Argument: When Is Purge Solvent “Discarded”? The Board remands this issue to the ALJ for further consideration in light of the new facts collected for the continuing use analysis, as set forth above. The Board finds that a determination as to whether used purge solvent exiting the paint applicators is “discarded” – i.e., “disposed of,” “abandoned,” or “thrown away” – cannot be made, consistent with federal court precedent that interprets this statutory term, until the continuing use questions have been fully explored.

(3) Exemptions. The Board remands the “manufacturing process unit” exemption analysis to the ALJ for reconsideration in accordance with the existing record and any new facts that will be collected for the continuing use analysis. Furthermore, the Board affirms the ALJ’s holding that the “totally enclosed treatment facility” exemption is not available to GM for its downstream purge solvent recovery systems or its purge mixture storage tanks.

(4) Alleged Inconsistency in Agency Interpretation of “Spent Material.” The Board agrees with the ALJ that EPA was not obligated to engage in public notice-and-comment rulemaking prior to clarifying its interpretation of “spent material” in the context of automotive assembly plant uses of purge solvent. Once established in the 1997-1998 time frame, the Agency consistently hewed to the line that purge solvent in purge mixture is “spent” and thus a “waste” at the point it exits the paint applicators. The Board holds that the Agency’s applicability determinations, which conveyed the new interpretation to the public, qualify as “interpretative rules” that are excepted from the rulemaking process under the Administrative Procedure Act.

(5) State of Michigan Determination of Point of Generation of “Waste.” The Board affirms the ALJ’s ruling that the State of Michigan’s interpretation of RCRA – i.e., that the point of generation of a regulated “waste” occurs upon entrance of purge mixture into the purge mixture storage tanks – does not bar EPA from enforcing a contrary understanding within that State’s boundaries.