In re Howmet Corp., Inc.
Howmet Corporation (“Howmet”) appeals an Initial Decision in which Administrative Law Judge William B. Moran (the “ALJ”) assessed a $309,091 penalty for violations of the Resource Conservation and Recovery Act and the Hazardous and Solid Waste Amendments of 1984 (collectively, “RCRA”), relating to Howmet’s shipment of used potassium hydroxide (“KOH”) to a fertilizer manufacturer.
Howmet employed KOH as a cleaning agent for metal castings at its facilities. When the KOH became too contaminated for this use without reclamation or reprocessing, Howmet would ship the used KOH either to a permitted hazardous waste treatment, storage or disposal facility, or to a fertilizer manufacturer for use as a fertilizer ingredient. Howmet did not handle the used KOH that it sent to the fertilizer manufacturer according to RCRA’s hazardous waste regulations.
As a result, the ALJ found Howmet to be in violation of RCRA and its implementing regulations as to the KOH sent to the fertilizer manufacturer because Howmet (1) sent hazardous waste to facilities without United States Environmental Protection Agency (“EPA”) identification numbers, (2) failed to prepare hazardous waste manifests for these shipments, (3) failed to notify the receiving facilities that the waste did not meet a treatment standard and was subject to land disposal restrictions, and (4) used a transporter that was not authorized to transport hazardous waste. The ALJ based his conclusions on a finding that the used KOH sent to the fertilizer manufacturer was a “spent material” and therefore was subject to RCRA’s regulations for the management of hazardous waste.
Howmet appeals the Initial Decision, arguing that, contrary to the ALJ’s findings, the used KOH in question was not “spent material,” and therefore was not hazardous waste subject to the RCRA regulations. In the alternative, Howmet argues that it was denied due process because it was not given fair notice of an interpretation of the RCRA regulations that would treat the used KOH as “spent material.” The parties have stipulated to the facts of this case and as to the penalty should Howmet be found to be liable. As such, only the legal issues of the definition of “spent material” and whether Howmet had fair notice are at issue.
Held: The Board upholds the ALJ’s decision.
1. Liability. The Board affirms the ALJ’s finding that the used KOH that Howmet sent to the fertilizer manufacturer was “spent material.” “Spent material” is defined as “any material that has been used and as a result of contamination can no longer serve the purpose for which it was produced without processing.” 40 C.F.R. § 261.1(c)(1). When a hazardous “spent material” is recycled, or “[u]sed to produce products that are applied to or placed on the land or otherwise contained in products that are applied to or placed on the land * * *,” id. § 261.1(c)(1)(B), it must be managed as a hazardous waste under RCRA. The parties’ arguments focus on the interpretation of the phrase “the purpose for which it was produced.” Howmet argues that “purpose” implies a fundamental purpose. Howmet’s interpretation would allow a multi-use product, such as KOH, to be used first as a cleaning agent and then as a fertilizer ingredient without being “spent,” because both uses allegedly are consistent with KOH’s broad fundamental purpose as a concentrated source of hydroxide ions and of potassium. The Regions, in contrast, argue that a product’s purpose for production (i.e., “the purpose for which it was produced”) must be related to its original use, such that a product first used as a cleaning agent becomes a “spent material” when it becomes too contaminated for that use and then is sent to a fertilizer manufacturer to be used in a fundamentally different manner.
To determine whether the used KOH sent to the fertilizer manufacturer is a “spent material,” the Board first reviews RCRA’s general approach to recyclable materials and the more specific question of the use of secondary materials as ingredients in fertilizers. The Board next reviews the regulatory definition of “spent material,” the regulations as a whole, and the rule-making history. Finally, the Board considers prior Agency interpretations of the “spent material” definition. The Board concludes that Howmet’s argument, if accepted, would drive a wedge into the regulatory framework that is irreconcilable with other elements of the regulation and RCRA’s overall thrust. Consistent with the Regions’ position, the Board instead reads “the purpose for which it was produced” as contemplating a relational inquiry informed by a product’s initial use. Under such a framework, reuse of used KOH consistent with its original particularized purpose as a cleanser would not give rise to coverage as a spent material, but when the used KOH is deployed in a manner substantially dissimilar from this purpose—in this case as an ingredient for fertilizer—it must be treated as a spent material under the regulations. Such an approach is not only consistent with the regulatory text and RCRA and EPA’s overall approach to recyclable materials, but it also takes into account Congress’ concern that activities that are part of “the waste disposal problem” are regulated.
2. Fair notice. The Board also affirms the ALJ’s finding that Howmet failed to prove that it had not received fair notice of the regulations. To be absolved of liability on the basis of lack of fair notice of an agency’s regulatory interpretation, a party must demonstrate that the interpretation was not ascertainable by the regulated community. In determining whether Howmet had fair notice of the Regions’ interpretation of the definition of “spent material,” the Board first examines the text of the regulation itself, and then considers the regulatory history and past Agency statements with regard to the subject. Finally, the Board considers whether Howmet inquired about the meaning of the regulation. Even if the text of the regulations may be subject to more than one interpretation, this ambiguity alone is not enough to support a finding that Howmet lacked fair notice. As discussed in the section relating to liability, the interpretation of the definition of “spent materials” advanced by the Regions represents the better and more harmonious reading. In addition, the Board notes that the Regions’ interpretation of “spent material” reflects the interpretation held by EPA consistently over time–an interpretation that was discernable by members of the regulated community like Howmet. Accordingly, the Board also finds that the interpretation was ascertainable by Howmet. Finally, the Board notes that Howmet must assume the consequences for apparently choosing to pursue a risky course of action without inquiring of EPA whether its activities complied with RCRA.