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“New Sources” When Relocating A Factory

Posted on - 08/29/2007
by JHP

Your company, Deep Dutch Metal Finishing Company ("Deep Dutch") operates an electroplating operation in Deep Dutch, Illinois. Deep Dutch's electroplating operation generates wastewater that is treated before discharging into the Publicly Owned Treatment Works, the "sewer system." Your company has operated at its current location since 1969. In 1995, your company learned that the factory across the street was closing. You learn that the closing factory's facility is for lease, and with its less expensive rent, you calculate that you can easily save about forty thousand dollars per year. The cost of moving will be made up in the reduction of the lease payments for the first year.

The move went smoothly, with only a minimal impact on production. You moved your electroplating lines one at a time so that your production was never shut down completely. After the move, you notify everyone that your address has changed from 1953 Industrial Boulevard to 1948 Industrial Boulevard. Your company disassembled and reassembled its pretreatment equipment for its wastewater and moved it across the street as well. Instead of watching the sunrise, you now watch the sunset, and instead of discharging pretreated wastewater on the east side of the street, you now discharge your pretreated wastewater on the west side of the street. Other than that, your operation is exactly as it was before the move. Everything was going according to plan, until yesterday. Yesterday, you received a notice in the mail that your local Water District expected you to upgrade your wastewater pretreatment equipment as a "new source" of pollution. You are stumped, and anticipate that a clerical error has occurred.

The day following receipt of the notice, you notify the Water District to determine why the Water District is demanding that you upgrade your pretreatment equipment. After a rather long and somewhat heated exchange with a technical staff employee of the Water District, you eventually learn that after Deep Dutch's move, the Water District is taking the position that Deep Dutch's operation is subject to more rigorous treatment standards now as a "new source" with respect to its discharges into the sewer system. According to the Water District, as a result of its move to a new location, Deep Dutch's operation became a "new source" under U.S. EPA's regulations rather than an "existing source," which it had been classified as prior to its move. The "new source" classification subjects your manufacturing operation to stricter waste treatment standards than the "existing source" classification. Just before telling the Water District employee exactly what you thought of his opinion, you explained that you believed Deep Dutch remained an "existing source" because it had merely moved its existing equipment from one building to another and this in your opinion should not be considered a "new source."

The Water District immediately initiated a series of administrative actions before the Water District's Board of Commissioners to determine whether Deep Dutch was subject to the Metal Finishing Point Source Category (a pretreatment standard for "new sources"), 40 C.F.R. § 433.17, or instead, as you maintain, to the less stringent Electroplating Point Source Category (a pretreatment standard for "existing sources"), 40 C.F.R. § 413.14. Because the Water District is required by law to enforce U.S. EPA's regulations, U.S. EPA's regional office, Region V, took an interest in the Water District's administrative actions relative to Deep Dutch's Operations and issued a letter in which Region V gave an informal interpretation of the applicable regulations (an "interpretative ruling"). The interpretative ruling indicated how Region V, as opposed to the Water District, would characterize your operation in the course of independent review, such as during an audit of the Water District's enforcement program. In its interpretative ruling, Region V concluded that Deep Dutch became a "new source" as defined by the Clean Water Act and 40 C.F.R § 403.3(k) once it moved across the street.

The Water District, not about to do anything contrary to an interpretive ruling from Region V, immediately concludes that Deep Dutch's new location is a new source and orders that Deep Dutch must meet the new source wastewater standards. This ruling could cost Deep Dutch over five hundred thousand dollars in equipment and operating costs over the next several years. In response, you immediately contact U.S. EPA's Region V headquarters seeking a hearing to reconsider the interpretive ruling from Region V. Region V responded by confirming its initial determination that Deep Dutch's operation at 1948 Industrial Boulevard constitutes a "new source" under the law. When Region V confirmed its interpretive ruling that your move from 1953 Industrial Boulevard to 1948 Industrial Boulevard constituted a "new source" under the law, you decide to hire an attorney and fight Region V's interpretation.

You arrive at your attorney's office and explain the problem. You want your attorney to file suit against U.S. EPA and get Region V's interpretative ruling reversed so that the Water District will allow your plant to be classified as an existing source. You emphatically explain to your lawyer that Deep Dutch is not a "new source" and should not be subject to the more stringent effluent limitations set forth in 40 C.F.R. § 433.17. Your attorney cringes when you tell him the facts and what you want.

Your attorney explains that Congress passed the Federal Water Pollution Control Act, 33 U.S.C. §§ 1251-1387, also known as the Clean Water Act, in order "to restore and maintain the chemical, physical, and biological integrity of the Nation's waters." 33 U.S.C. § 1251. To this end, Congress established a comprehensive regulatory scheme to control the direct and indirect discharge of waste and pollutants into navigable waters. To curtail indirect discharges into sewer systems and POTWs, U.S. EPA promulgated pretreatment standards for various industrial categories. 33 U.S.C. § 1317. These "categorical" pretreatment standards typically specify the maximum amounts of certain pollutants that a source in a particular industrial category may discharge into a sewer via its wastewater. Generally, "new sources" must adhere to more stringent pretreatment standards than "existing sources," e.g., compare 40 C.F.R § 433.17 (pretreatment standards for new sources) with 40 C.F.R § 433.15 (pretreatment standards for existing sources). According to U.S. EPA's logic, new sources are subject to more rigorous controls because, as a practical matter, it is much easier to design and build new equipment to meet the tougher standards than it is to upgrade existing equipment to meet those same standards.

Your attorney explains that the statute granting a court jurisdiction to review EPA's decisions, Section 509(b)(1) of the Clean Water Act, 33 U.S.C. § 1369(b)(1), does not afford the court jurisdiction to review the agency's informal interpretative rulings such as the one issued in your case. You are astounded, the Water District will not change its position regarding your status as a "new source" unless you can get Region V to change its position, and your attorney is telling you that you can't even sue U.S. EPA to determine the correctness of Region V's position. Your attorney explains that in determining if a court has jurisdiction, the question the court must address is whether Region V's interpretative ruling constitutes a reviewable issue under the law. If it does not, the courts have no jurisdiction. In American Paper Institute v. EPA, 882 F.2d 287 (7th Cir. 1989), Region V issued a policy statement concerning dioxin discharges from pulp and paper mills. The American Paper Institute sought review of Region V's policy statement, believing it to be too onerous. U.S. EPA argued that the court system had no jurisdiction over the matter since the policy statement was not reviewable under Section 509(b)(1)(E) of the Clean Water Act, which at the time provided: "Review of the Administrator's action . . . in approving or promulgating any effluent limitation or other limitation under section 1311, 1312, or 1316 of this title . . . may be had by any interested person in the Circuit Court of Appeals of the United States."

The court agreed that it had no jurisdiction to determine the matter and determined that Section 509(b)(1)(E) did not cover Region V's policy statement. The court reasoned that "promulgation" means issuing a document with legal effect. Region V's policy statements, while issued to warn, threaten and possibly harass, have no legal effect. The court in American Paper Institute went further to hold that Region V's policy statement was not a "limitation" within the meaning of Section 509(b)(1)(E) because it was advisory, and thus it had no independent legal effect. Id. at 289. Your attorney explains that the same reasoning that the court applied to Region V's "policy statement" in American Paper Institute applies with equal force in the present case to Region V's "interpretative ruling." Since Region V's interpretative ruling has not been adopted by U.S. EPA, the ruling cannot be considered the "Administrator's action." Second, like the policy statement at issue in American Paper Institute, Region V's interpretative ruling was not "promulgated." Third, the interpretative ruling is not an "effluent standard, prohibition, or pretreatment standard." Instead, the ruling is Region V's opinion concerning which pretreatment standard U.S. EPA would deem applicable to Deep Dutch based on whether Deep Dutch is a "new source" or an "existing source." Policy statements do not appear in the Federal Register and will not be codified in the Code of Federal Regulations. A policy statement simply tells the regulated community how U.S. EPA's Regional Office thought it might react to particular proposals. However, as stated by your attorney, "Telegraphing your punches is not the same as delivering them." A lawsuit against U.S. EPA to force it to withdraw Region V's interpretive ruling would clearly and quickly be thrown out of court.

You are furious. You tell your attorney that you intend to move your operation back across the street where you were an "existing source." Your attorney sighs and reminds you that after you left, any business relocating in your former location would be subject to the "new source" standards. Your attorney simply looks at you and says, "No matter where you go, there you are." After you moved, you will always be a "new source."

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