Federal Court Upholds Hazardous Waste Penalty Based on EPA Interpretation of "Spent Material" Definition

December 8, 2009
Client Alert Newsletter December 2009

On September 23, 2009, a federal court upheld a significant penalty against a manufacturer that failed to follow Resource Conservation and Recovery Act ("RCRA") hazardous waste requirements for shipments of a used industrial cleaning solution, based on the U.S. Environmental Protection Agency's ("EPA's") interpretation of the RCRA “spent material” definition. The manufacturer, Howmet Corp., utilized liquid potassium hydroxide ("KOH") to clean metal turbine casings. When the KOH became too contaminated for continued use as a cleaner, Howmet would send some of the used KOH for disposal at a hazardous waste facility, and would ship other used KOH to a fertilizer manufacturer for use as a fertilizer ingredient. EPA brought an enforcement action against Howmet in 2003, asserting that the used KOH shipped as a fertilizer ingredient was a "spent material" that when recycled falls within the RCRA definition of "solid waste" and therefore is a hazardous waste (under the corrosivity characteristic) subject to hazardous waste transportation requirements.

Pursuant to 40 C.F.R. § 261.2(c), a 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." Howmet argued that "the purpose for which [the used material] was produced" is ambiguous. The company contended that KOH is manufactured for multiple uses, including both as a cleaning solution and as a fertilizer ingredient, and that under the regulation the "purpose" for which a used material can no longer serve should be interpreted to encompass all purposes for which the material may have been produced. By contrast, EPA asserted that the correct interpretation centers on whether the material can still serve the initial use to which the material was put in the particular case at issue. Therefore, in EPA's view because Howmet's KOH was initially used as a cleaning solution, it became a spent material when contamination prevented it from continuing to be used as a cleaning solution, even though it could later be used for a different purpose, i.e., as a fertilizer ingredient.

EPA supported its position by referring to the regulatory history of the spent material definition, as well as various EPA rulings and guidance documents, to demonstrate that the agency has consistently interpreted the word "purpose" with reference to the initial use of the material. EPA's position, and a $309,000 penalty, was upheld by an administrative law judge and the agency's Environmental Appeals Board ("EAB"). Applying the traditional judicial deference given to an agency’s interpretation of its own regulations, the U.S. District Court for the District of Columbia found that EPA's interpretation was not "arbitrary, capricious, or an abuse of discretion," and therefore upheld the EAB's decision that Howmet’s shipments of used KOH to the fertilizer manufacturer were subject to RCRA hazardous waste regulation. In addition, the court found that while the spent material definition is somewhat ambiguous, Howmet could have ascertained EPA's interpretation of "purpose" as equating to "initial use" by analyzing the 1980s regulatory preambles, rulings, and guidance documents evaluated by the court. Thus, the court rejected Howmet's due process claim that it had not been given "fair notice" that EPA would treat the used KOH as a spent material.