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Howmet Corp. v. Environmental Protection Agency

August 6, 2010

HOWMET CORPORATION, APPELLANT
v.
ENVIRONMENTAL PROTECTION AGENCY AND LISA PEREZ JACKSON, ADMINISTRATOR, UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, APPELLEES



Appeal from the United States District Court for the District of Columbia (No. 1:07-cv-01306-EGS).

The opinion of the court was delivered by: Brown, Circuit Judge

Argued May 7, 2010

Before: SENTELLE, Chief Judge, BROWN and KAVANAUGH, Circuit Judges.

Dissenting opinion filed by Circuit Judge KAVANAUGH.

The Environmental Protection Agency (EPA or the Agency) says Howmet Corporation (Howmet) violated the Resource Conservation and Recovery Act and the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. §§ 6901 et seq. (collectively RCRA), and its implementing regulations. Howmet says its actions were permitted by the regulations. Whether viewed as a syntactical ambiguity or a semantic squabble, the dispute focuses on one question: when is a material no longer serving "the purpose for which it was produced?" The EPA insists the initial use of the material is determinative; Howmet contends the initial use is irrelevant. The question matters because "spent material" is subject to RCRA's hazardous waste regulations, but material that has not been spent is not. Howmet insisted that used KOH (liquid potassium hydroxide) sent to a fertilizer manufacturer for use as a fertilizer ingredient was not "spent material" and thus not subject to RCRA regulations. After Howmet lost this argument before an administrative law judge (ALJ) and the Environmental Appeals Board (EAB), the district court rejected Howmet's Administrative Procedure Act claim and granted the EPA's cross-motion for summary judgment, holding the EPA's interpretation of its "spent material" regulation was not arbitrary and capricious and that Howmet had fair notice of the Agency's interpretation. See Howmet Corp. v. EPA, 656 F. Supp. 2d 167 (D.D.C. 2009). We affirm.

I.

Subtitle C of RCRA, 42 U.S.C. §§ 6921-34, establishes a "stringent 'cradle-to-grave' regulatory structure for overseeing the safe treatment, storage and disposal of hazardous waste." Sierra Club v. EPA, 292 F.3d 895, 896 (D.C. Cir. 2001). The statute defines "hazardous waste" as a "solid waste [that] may pose a substantial present or potential hazard to human health or the environment when improperly treated, stored, transported, or disposed of, or otherwise managed." 42 U.S.C. § 6903(5). The EPA has broad investigatory and enforcement authority under RCRA. See Gen. Motors Corp. v. EPA, 363 F.3d 442, 444 (D.C. Cir. 2004). Pursuant to this authority, the EPA has imposed numerous requirements and restrictions on the generators and transporters of hazardous waste, including requiring EPA identification numbers, 40 C.F.R. § 262.12(c), the use of hazardous waste manifests identifying contaminants, id. § 262.20(a), and written notification of land disposal restrictions, id. § 268.7(a).

Hazardous wastes are a subset of solid wastes. See 42 U.S.C. § 6903(5); 40 C.F.R. § 261.3(a). Since a substance cannot be a "hazardous waste" or subject to the EPA's hazardous waste regulations unless it satisfies the threshold definition of "solid waste," our analysis begins with the definition of solid waste. "Solid waste" is "discarded material, including solid, liquid, semisolid, or contained gaseous material resulting from industrial, commercial, mining, and agricultural operations." 42 U.S.C. § 6903(27).

Discarded material includes recycled materials (materials that have been "used, reused, or reclaimed," 40 C.F.R. § 261.1(c)(7)) and spent materials (any material so contaminated by use it can no longer serve "the purpose for which it was produced without processing," id. § 261.1(c)(1)). Under the EPA's regulations, when a spent material is recycled, it must be managed as a solid waste. Moreover, if the material also exhibits a hazardous characteristic, such as corrosivity,*fn1 see id. §§ 261.3(a), 261.20-.24, it must be managed as a hazardous waste subject to the RCRA requirements. Thus, as the EAB noted, when a hazardous "spent material" is recycled, or "[u]sed to produce products that are applied to or placed on the land or are otherwise contained in products that are applied to or placed on the land," id. § 261.2(c)(1)(i)(B), it must be managed as hazardous waste. The resolution of this appeal rests on whether the materials in question were "spent" and should be deemed solid waste. Since "spent material" is 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 central issue in this case is the interpretation of the phrase "the purpose for which it was produced."

The EAB's syllabus succinctly summarizes the dueling interpretations: "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 Agency argues] that a product's purpose for production (i.e., 'the purpose for which it was produced') must be related to its original use, [so] 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."

II.

The facts in this case are not in dispute. Howmet manufactures precision investment castings for aerospace and industrial gas turbine applications. To clean the ceramic core from the metal castings, Howmet uses an aqueous KOH solution. During the cleaning process the KOH is contaminated. Howmet uses the KOH solution until it becomes so contaminated it can no longer effectively clean the castings. The used KOH is corrosive. Thus, under the EPA's regulations, the used KOH would be regulated as hazardous waste. See 40 C.F.R. § 261.22.

Typically, Howmet accumulates the used KOH in storage tanks at an authorized hazardous waste disposal facility. However, between August 1999 and September 2000, Howmet sent some of the used KOH to Royster, an independent fertilizer manufacturing company that, without processing or otherwise reclaiming it, added the KOH to its fertilizer to control pH and provide a source of potassium. Howmet did not prepare any hazardous waste manifest for the shipments to Royster or otherwise treat the KOH as a hazardous waste under RCRA, 42 U.S.C. §§ 6901-91.

In 2003, the EPA brought enforcement actions against Howmet, alleging the used KOH sent to Royster was a solid and characteristic hazardous waste, in that it was corrosive and potentially contaminated with chromium, and therefore subject to RCRA jurisdiction. The EPA alleged Howmet violated RCRA and its implementing regulations by (1) shipping hazardous waste to facilities that did not have an EPA identification number; (2) sending hazardous waste offsite using transporters without EPA identification numbers; (3) failing to prepare hazardous waste manifests for the KOH shipments to Royster; and (4) failing to send and maintain on file appropriate land disposal restriction notifications for the KOH shipments informing Royster whether the KOH was too contaminated for land application without prior treatment.

Howmet contested the allegations and requested a hearing. An ALJ found Howmet liable under RCRA, concluding the used KOH sent to Royster was a hazardous "spent material" and therefore a solid waste that must be managed as a hazardous waste and that Howmet had failed to manage the KOH in accordance with EPA regulations. The ALJ also concluded Howmet had not proved it was denied due process because it had not received fair notice of the EPA's interpretation of its spent material regulation. The ALJ assessed a civil fine of $309,091 against Howmet. Howmet appealed to the EAB, which upheld the ALJ's finding in a lengthy decision detailing RCRA's statutory and regulatory framework. Howmet filed a complaint in the district court claiming the EAB's decision was arbitrary and capricious, but the district court awarded summary ...


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