Court Rejects EPA’s Narrow Interpretation of a Key RCRA Exemption, Undercutting a National Enforcement Initiative
On September 22, 2022, the Environmental Appeals Board (EAB) of the U.S. Environmental Protection Agency (EPA or the Agency) issued an Order finalizing a recent decision of an EPA Administrative Law Judge (ALJ) that rejected the Agency’s interpretation of the Manufacturing Process Unit (MPU) exemption under the Resource Conservation and Recovery Act (RCRA) regulations, which establishes the boundary where manufacturing ends and waste management – and thus EPA’s authority under RCRA – begins. EPA brought the case as part of its ongoing National Compliance Initiative on reducing air emissions from hazardous waste facilities under the RCRA “Subpart AA/BB/CC” rules. The ALJ’s decision could have major implications for other cases brought by the Agency under that Initiative.
EPA Region 1 initiated the case in 2018, alleging that certain "receiver" tanks used in distilling chemical products for use in health and beauty products were ignitable hazardous waste storage tanks and that the company did not operate the tanks in accordance with air emission and other requirements under RCRA. See In the Matter of: ISP Freetown Fine Chemicals, Inc., EPA Docket No. RCRA-01-2018-0062. The Respondent – represented by Beveridge & Diamond litigation and regulatory attorneys, headed by Principals Eric Klein (Boston), Aaron Goldberg (Washington, DC), and Karen Hansen (Austin) – countered that the receivers were an integral part of the facility’s manufacturing process, and thus exempt from RCRA regulation under the MPU exemption, which specifies that hazardous wastes generated within a manufacturing process unit are not subject to RCRA regulation until they exit the unit. See 40 C.F.R. § 261.4(c).
EPA argued that the ALJ should view the receivers in isolation from the rest of the distillation units of which they are a part. According to the Agency, when viewed in this light, the receivers did not qualify as manufacturing process units, because no products were produced inside the receivers and because the wastes were generated upstream of the receivers, in the associated "condensers." However, the ALJ strongly rejected the Agency’s cramped view of the MPU exemption and granted an “accelerated decision” (equivalent to summary judgment) in favor of the Respondent. The ALJ ruled that “[each of] Respondent’s batch distillation unit[s] is comprised of a ‘trio’ of elements – a reactor, condenser, and receiver tank. As each of those individual components are utilized to ‘carry out a specific task’ within the manufacturing process, the individual components that comprise this manufacturing process unit are exempt from RCRA regulation under the MPU exemption.”
The ALJ’s decision is likely to become a seminal ruling on the scope of the MPU exemption, and thus on the fundamental question of where RCRA jurisdiction begins. Since the promulgation of the exemption 40 years ago, only two other ALJ cases have addressed the scope of the exemption. Both of these cases upheld EPA's position that the specific units at issue were not exempt. The new decision is the first to reach the opposite result, and it did so in the context of distillation units similar to those used throughout the chemical and other industries.
The decision may also significantly affect EPA’s National Compliance Initiative on air emissions from hazardous waste facilities since many of the allegations in cases being brought under that Initiative are reportedly premised on the assumption that receivers and other tanks do not qualify as exempt MPUs. It is worth noting, however, that the ALJ cautioned that distillation receivers may not always qualify for the MPU exemption, and stressed that “[a] fact-intensive analysis is required in all other cases in which a respondent cites the MPU exemption as a defense to a RCRA violation.”
Beveridge & Diamond's Waste and Recycling practice group assists clients in a wide range of industrial sectors with solid and hazardous waste regulatory issues under RCRA, its state counterparts, international treaties, and the laws and regulations of countries around the world. We regularly help clients in classifying their wastes as hazardous or non-hazardous, as well as in determining whether materials are wastes in the first instance and in assessing the potential applicability of regulatory exclusions or exemptions. We have been lead counsel in many cases challenging key portions of EPA’s definition of solid and hazardous wastes under RCRA, and defend companies in related enforcement actions.