If the major substantive innovation of environmental policy in the 1990s was the Clean Air Act Amendments, spotlighted in last year's deskbook article, surely the major procedural innovation was the establishment of the Environmental Appeals Board, sometimes called EPA's Supreme Court. Almost four years after its creation, the time is ripe for a retrospective.
After introducing the tribunal's structure and procedures, this article focuses on two juridical tasks that the Board is called upon to perform in a variety of contexts: the calculation of civil penalties and the determination of due process. It concludes with a discussion of a few of the EAB's more significant decisions.[1]
Before March 1, 1992, cases that would now fall under the Board's jurisdiction were handled by judicial officers within the Office of the Administrator. The Board was designed to lend more visibility and prestige to the agency's appellate process, to better position the agency for anticipated docket growth, and to build a reputation for fairness.[2] The Board is comprised of three judges of equal rank, appointed by the Administrator and serving at her pleasure.
The parameters of the Board's jurisdiction are largely set by regulation.[3] Included are permit and civil penalty decisions under all the major environmental programs run by EPA. The four largest chunks of the docket are RCRA cases, appeals from NPDES permit rulings under the Clean Water Act, TSCA civil penalty decisions, and reimbursement petitions under 106 of CERCLA.
Procedurally, enforcement actions can reach the Board in three ways. By far the most common situation is for the Board to hear an appeal as of right from the trial level decision of a presiding officer (usually an ALJ) under the procedures outlined in 40 C.F.R. Part 22. In addition, the Board may review sua sponte, decisions made under the less formal Part 28 rules for Class I penalties; and has final approval authority over consent orders in enforcement actions brought by Headquarters offices. The Board has recently shown that it is willing to boldly invoke the less routine branches of its jurisdiction, in overturning a $732,000 consent agreement.[4]
Several limits on jurisdiction have developed through case law. The Board will not hear objections relating to permit implementation or compliance history, rather than to the terms of the permit itself.[5] Likewise, the Board lacks authority to review permit issues that relate strictly to provisions issued under state authority.[6] Lastly, it is accepted that duly promulgated regulations are ordinarily beyond the scope of administrative review.[7]
Pleading and procedure vary depending on the context. Although the experience of federal courts in applying the federal rules of civil procedure can in some cases offer an instructive example, those rules are not applicable to Agency proceedings. [8]
Like the federal courts under modern notice pleading principles, the Board adheres to the generally accepted legal principle that 'administrative pleadings are liberally construed and easily amended.' [9] In at least one respect, the Board is laxer than the federal courts: it generally does not require the factual basis of jurisdiction to be pled.[10] In another, more important respect, it is stricter. On at least three occasions, the Board has refused to consider arguments first raised in a reply brief, because the party had failed to timely file a cross-appeal.[11] This practice can be harsh, for in contrast to the federal courts,[12] litigants under 40 C.F.R. Part 22 must make a blind decision to appeal, without knowing what their opponents plan. EAB Judge Edward E. Reich suggests that litigants who have suffered a mixed decision, which could conceivably be appealed by the opposing party, should file a protective cross-appeal.[13]
Standards of review for appeals from permit decisions are regulated by 40 C.F.R. 124.19 & 124.91. With respect to enforcement actions, the Board technically has the power to review the ALJ's findings and conclusions de novo.[14] But in practice the Board generally defers to the presiding officer on findings of fact. Also out of deference, the Board prefers to remand permit decisions that it regards as dubious, to allow for more complete consideration or explanation.
Administrative summary judgment is one procedure that tracks federal court practice closely. It is well established that a motion for accelerated decision under 40 C.F.R. 22.20(a) is comparable to Rule 56 summary judgment. Similarly, Rule 56 standards should be applied in determining whether to grant an evidentiary hearing in NPDES permit proceedings.[15]
The Board's decision is final agency action subject to judicial review, either in federal circuit or district court depending on the statute.[16] The standard of judicial review is essentially the same as that provided under the Administrative Procedure Act, 5 U.S.C. 706(2), and traditional Chevron principles of deference are applicable.
One great practical advantage of litigation before the Board from the regulated entity's point of view is that, if the agency loses, it has no further recourse; whereas the losing regulated party may appeal. The Board has been overturned in the federal courts at least three times. One strategy on appeal is to paint the Board's decision as contrary to common sense. See Systech Environmental Corp. v. EPA, 55 F.3d 1466, 1467 (9th Cir. 1995) (finding EAB's interpretation of 40 C.F.R. 270.11 requiring applicant for RCRA management permit to certify that application is accurate and was prepared under his supervision to be arbitrary and capricious insofar as it required absentee site owners to lie); Puerto Rico Sun Oil Co. v. EPA, 8 F.3d 73 (1st Cir. 1993) (finding that EAB acted arbitrarily and capriciously in adopting the local Environmental Quality Board's set of Clean Water Act permit certification requirements, which lacked mixing zone analysis, despite knowledge that EQB was in process of reconsidering mixing zone policy). See also General Electric Co. v. EPA, 53 F.3d 1324 (D.C. Cir. 1995) (discussed infra in section on due process).
The EPA penalty guidelines have evolved at much the same time as the federal sentencing guidelines, but are in important respects less confining. Board members, like ALJs, are required by regulation to consider, though not to follow, any civil penalty guideline issued for a given statute.[17] Exactly what this means has been thrown into some question by late-breaking developments.[18] The traditional understanding is as follows. Decisionmakers are free to depart so long as they explain why.[19] In all cases, EPA retains the burden of proof by a preponderance of the evidence in the penalty phase of the appeal.[20] If the penalty assessed below falls within the guidelines range, and is accompanied by a reasonable explanation, the Board will not usually substitute its own judgment for that of the presiding officer,[21] but when a penalty deviates substantially, closer scrutiny is undertaken.[22] At the opposite extreme, the Board will not examine with a microscope appeals where relatively insignificant sums are at issue and no important legal or policy questions are at stake. [23] In the case of a statute that lacks a program-specific penalty policy, the Board has shown a readiness to make law taking the general EPA Policy and Framework, written to help each program craft its own statute-specific guidelines, as the starting point for its penalty analysis.[24]
Penalty policy is the only area where a discernible rift in the ranks has developed, with Judge Ronald L. McCallum possibly emerging as the court dove. In In re Pacific Refining Co., the majority increased the penalty under review from $25,000 to $111,762, through strict application of the guidelines. McCallum, in dissent, argued that a downward deviation from the guidelines was in order because the regulated party had already discovered its EPCRA reporting violation, was in the process of correcting it, and had an impeccable record of compliance. Legitimate retribution as a component of deterrence, Judge McCallum suggested, should be reserved for those instances where the violator's noncomplying behavior would have continued indefinitely. [25]
In at least four cases, the Board has deviated downward from the guidelines. See In re James C. Lin and Lin Cubing, Inc. (reducing penalty from $38,000 to 17,000); In re Mobil Oil Corp. (reducing penalty from $75,000 to $30,250); In re Ray Birnbaum Scrap Yard (reducing penalty from $16,236 to $1700); In re General Electric Co. (affirming reduction of penalty from guideline amount of $225,000 to $40,000). Each is worth examining in more detail.[26]
Fairness concerns undergird most of the downward deviations. Indeed, even in the rare program where fairness, equity, or justice are not cited by name as penalty factors, the Board has served notice that it will likely read them to be implicit in the statutory scheme.[27] In Birnbaum, the grounds for departure was sympathy for the little guy. The Court determined that the guidelines formula for measuring ability to pay produced too harsh a result where the resulting penalty would equal nearly half of the appellant's net annual profit, from which sum he needed to pay taxes and support a large family.[28]
In the same spirit, the Board has twice been shy to levy big fines for technicalities. Lin held that a technical violation, such as failure to obtain certification for an otherwise qualified pesticide applicator, which does not actually result in the harm that the infringed rule was designed to prevent, deserves only a small penalty.[29] Similarly, in GE, when a company used an alternative disposal method for PCBs which was effective albeit without obtaining approval under TSCA the Board affirmed the ALJ's decision to disregard penalty policy on the grounds that the risks underlying the policy's assumptions were not present.[30]
Finally, in Mobil, the Board displayed a willingness to probe more closely into scientific facts at the penalty stage than at the liability stage. EPCRA mandates that, when there is no minimal Reportable Quantity (RQ) set for a given substance, a company is liable for failing to report the release of even a single pound of that substance. Yet, faced with a case where the substance released had not been assigned an RQ, the Board refused to assume for penalty purposes that one pound was harmful. It decided instead to use the proposed RQ for the substance in question, as the best available gauge of the substance's danger. Some flexibility, the EAB noted, can and should be utilized in assessing a civil penalty to more closely approximate the actual threat posed by the violation. [31]
It is important to note, however, that the Board is willing to be only so flexible in tailoring the penalty to the violation. Indeed, in another case, the agency persuaded the Board to increase the penalty from $10,000 to $125,000, because the presiding officer was too flexible in that regard.[32] The Board declined to allow a de novo review of toxicity data, at the initiative of the regulated party, for the purposes of penalty assessment. Once the toxological effect of a substance has been determined by regulation, its potential for harm will be taken as minimally established. At the same time, the agency remains free to present evidence to the Board that the potential for harm is greater than assumed.[33] This case, taken together with Mobil, seems to suggest that the Board will entertain scientific evidence from the regulated party at the penalty stage only if the data has already been partly refined by the agency.
The EAB's case law on due process is firmly rooted in federal constitutional jurisprudence. The core concepts are that of notice, and a hearing. What process is due in a given situation is set by weighing the import of the interest at stake, the burden of the procedure, and the value of the procedure.[34] An intriguing corollary noted by the EAB is that, conceivably, the procedural protections that would satisfy due process in ordinary cases might not satisfy due process in a case involving extraordinarily high financial stakes. It is left to the Regions to determine on a case by case basis which cases warrant such special treatment. [35]
In re W.R. Grace & Co. established the baseline requirements for due process in the RCRA corrective action permit context. The permittee must be given an adequate opportunity to be informed of, and respond to, Regional revisions to the interim submissions before final Regional approval. The notice must detail the Region's reasons for the proposed revisions. The hearing (that is, the opportunity to present arguments) must take place before the permittee is expected to comply with the revision to interim submissions. And there must be a final decision based on the record, accompanied by a statement of reasons.[36]
Providing the occasion for the EAB's major statement on due process, the appealing company in In re General Electric Co., RCRA App. No. 91-7, tried to push the envelope in a few respects. First, GE claimed the right to pre-enforcement judicial review. This could be accomplished through designation of the Region's decision on a dispute over revisions of interim submissions as final agency action. On this issue, the appellant was rebuffed. The Board concluded: [T]he combination of a hearing before the Agency followed by the opportunity for judicial review at the enforcement stage of the proceedings is all that due process requires. [37]
Next, GE tried to argue that the guarantee of a hearing entailed the right to make an oral presentation to an impartial final decisionmaker. With regard to oral argument, the Board held that it was not required by due process, but encourage[d] the Regions to include this sound practice in their dispute resolution provisions. With regard to bias, the Board found that the official who had considered the interim permit revisions was not unduly influenced simply because he was involved in developing the policy enforced. That said, the Board reached out to make a related policy ruling. Because interim permit revisions can have large financial effects, the EAB suggested, fairness demands that they be evaluated by the person who is to issue the final permit decision itself.[38] GE and its progeny have effectively pushed the agency to develop uniform dispute resolution procedures for its permits across all regions.
A final due process argument raised by GE concerned notice. The company argued that a RCRA corrective action permit should give notice as to the particular procedures provided for dispute resolution. Again, GE's argument was rejected as a matter of constitutional law but approved as a matter of policy.[39] The GE case indicates that the Board is willing and able to impose its policy preferences on the agency even when positive principles of law (here, the Constitution) do not necessarily demand change.
An important variation on the notice concept is the hornbook rule that parties may not be punished under a regulation unless it is clear enough to give the parties fair warning of the conduct that is banned or required.[40] This tenet was invoked by the regulated party with spectacular results in In re CWM Chemical Services, Inc.[41] Region II had sought $3,425,000 in penalties against CWM for disposing of sludge containing concentrations of PCBs in excess of the limits imposed by TSCA. The Board upheld the presiding officer's accelerated decision in favor of CWM, on the grounds that the company was given no notice of the Region's intent to measure PCB concentrations on a dry weight basis.
The success of this sort of notice argument, of course, depends on the ability of the company to persuade the decisionmaker that the preexisting law on the subject in question was indeed so spotty or ambiguous as to fail to put the regulated community on notice, and that the company was not otherwise placed on notice by the agency's preenforcement efforts to secure compliance. The Board has ruled that regional letters written in response to specific questions, not published or otherwise made available to the regulated community at large, do not suffice to place the petitioner on notice as to the agency's interpretation of its general policies.[42]
In another PCB disposal case, the company was unable to persuade the EAB that notice was inadequate.[43][ The company prevailed in this argument, however, on appeal to the D.C. Circuit. See General Electric Co. v. EPA, 53 F.3d 1324, 1328-34 (D.C. Cir. 1995) (holding that, though EPA's interpretation of its own disposal regulations as precluding distillation of PCB solvent prior to incineration was permissible, the interpretation was not ascertainably certain from the regulations). The Circuit's GE decision is significant as the most recent and vigorous statement of the notice requirement in the administrative enforcement context.
One of the most commonly-asked questions about the Board, given its hybrid nature, is whether it has the independence characteristic of federal courts. The answer so far is a tentative yes. The EAB's growing body of case law contains its share of industry victories. Among industry victories, we have already discussed the CWM Chemical Services case, in which a liability exceeding three million dollars was wiped clean by EPA's failure to give clear notice of its methods for monitoring PCB violations. We have also reviewed the Board's foursome of downward deviations from the penalty guidelines. Two other regulated party triumphs merit mention.
The case of In re Hardin County has been singled out by former EAB Judge Nancy B. Firestone as an important exercise of the Board's independence within the agency. [44] The backdrop for Hardin was Shell Oil, the landmark D.C. Circuit decision successfully litigated by Morgan Lewis invalidating the RCRA mixture rule that made mixtures including non-hazardous waste regulable as hazardous waste. [45] The agency protested that to give this ruling retroactive effect would force an abandonment of several pending enforcement matters. Unmoved, the Board reached the natural legal conclusion that the mixture rule was void ab initio, and affirmed the dismissal of the complaint against Hardin County.
A second, much smaller industry victory indicative of the Board's independence within the agency is In re Outboard Marine Corp.[46] In that case, the Board dismissed an appeal by the Regional office as untimely through strict construction of its filing rules.
Other decisions are noteworthy less for their benefits to the regulated community or their reflection on the Board's independence than for their policy implications. In making arguments to the Board, one must keep in mind that though its opinions look, feel, and read like court decisions they occasionally take policy stands more akin to the pronouncements of the EPA Administrator.
Perhaps the most prominent issue on which the Board has seized the policy initiative is environmental justice. The Board found no merit in the environmental justice claims that came before it in 1993, in a decision dubbed by one scholar a declaration of independence from EPA's Office of General Counsel.[47] That decision, however, was soon superseded by President Clinton's executive order.[48] What concerns us here is the Board's seminal interpretation of Clinton's order, in In re Chemical Waste Management of Indiana Inc., RCRA App Nos. 95-2 & 95-3.
The Board stressed that the order did not change the substantive requirements for issuance of RCRA permits. Moreover, the permitting authority need only take into account threats to the health or environment of minority or low-income populations, not generalized social or economic effects. On the other hand, the Board held as a matter of policy that the Regions should exercise their discretion to facilitate more public participation in environmental justice decisions, and in the case of a superficially plausible claim of injustice to conduct a more refined analysis of the claim. A Region's conclusion as to the existence of the threat will be treated as a highly technical judgment entitled to great deference. That judgment may be appealed to the Board, but not to the federal courts. The result may be that environmental justice claims become a powerful tool for delay in the RCRA permitting process, with litte chance for ultimate success.[49]
Over its first four years, the Board has established a tradition of excellence, and a reputation for fairness. Only time will tell whether it can maintain its independence. In the meantime, this new forum offers unexplored opportunities for the alert advocate.
If you wish to obtain hard copies of this Deskbook, please e-mail your request to envinfo.com or forward a written request to: Director of Client Relations, Morgan, Lewis & Bockius LLP, 2000 One Logan Square, Philadelphia, PA 19103.
Copyright 1996 Morgan, Lewis & Bockius LLP. All rights reserved.