81 F.3d 1371 (5th Cir. 1996), 95-60228, Marine Shale Processors, Inc. v. United States E.P.A.

Docket Nº:95-60228.
Citation:81 F.3d 1371
Case Date:April 18, 1996
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

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81 F.3d 1371 (5th Cir. 1996)




No. 95-60228.

United States Court of Appeals, Fifth Circuit

April 18, 1996

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Darren B. Bernhard, Christopher Howard Marraro, Jerrold Joseph Ganzfried, Thomas Jeffrey Horton, Douglas S. Grandstaff, Howrey & Simon, Washington, DC, K. Eric Gisleson, Chaffe, McCall, Phillips, Toler & Sarpy, New Orleans, LA, Sidney A. Cotlar, Russ M. Herman, Virginia T. Jordan, Herman, Herman, Katz & Cotlar, New Orleans, LA, for petitioner.

Robin Michele Richardson, Christopher Scott Vaden, Patricia McCubbin, Letitia Jane Grishaw, U.S. Department of Justice, Environment Division, Washington, DC, Carol Browner, Steven Ellis Silverman, U.S. Environmental Protection Agency, Washington, DC, for respondent.

Eli D. Eilbott, ETC, Washington, DC, for Environmental Technology Council, amicus curiae.

Petition for Review of Order of Environmental Protection Agency.



This case is an appeal of Marine Shale Processors, Inc. from final agency action of the Environmental Protection Agency. Specifically, MSP challenges EPA's decision to deny MSP's application for a Boiler and Industrial Furnace Permit required by the Resource Conservation and Recovery Act, 42 U.S.C. § 6901-92K. This case is one of the trio described in United States v. Marine Shale Processors, Inc., 81 F.3d 1329 (5th Cir.1996). We affirm.


In 1980, EPA promulgated regulations pursuant to RCRA governing the treatment, storage, and disposal of hazardous waste. See, e.g., Final Rule, Hazardous Waste Management: Overview and Definitions; Generator Regulations; Transporter Regulations, 45 Fed.Reg. 12,721 (1980); Final Rule, Interim Final Rule, and Request for Comments, Hazardous Waste Management System: Identification and Listing of Hazardous Waste, 45 Fed.Reg. 33,082 (1980). These regulations defined two methods of processing waste, incineration and recycling. The rules required facilities engaged in incineration to procure a permit called a Subpart O permit, a reference to 40 C.F.R. pt. 264 subpt. O. See Proposed Rule and Request for Comment, Identification and Listing of Hazardous Waste; Amendments to Definition of Solid Wastes, 53 Fed.Reg. 519, 522 (1988). Facilities engaged in recycling could operate without permits. See 45 Fed.Reg. at 33,120 (promulgating 40 C.F.R. § 261.6); see also Final Rule, Hazardous Waste Management System; Definition of Solid Waste, 50 Fed.Reg. 614, 626-27 (1985).

In 1985, EPA defined a new category of hazardous waste processing devices called "industrial furnaces," a term defined to include "aggregate kilns" having certain characteristics. 50 Fed.Reg. at 661. Industrial furnaces could engage in either incineration or burning for energy recovery. If the industrial furnace facility engaged in incineration, then it needed a Subpart O permit. If the industrial furnace engaged in recycling, no permit was necessary. 50 Fed.Reg. at 626-27. MSP began operations in 1985, claiming an exemption from the Subpart O permit requirement on the grounds that its kiln was an aggregate kiln and that its facility was an industrial furnace engaged in recycling.

On August 14, 1990, the United States sued MSP in United States District Court for the Eastern District of Louisiana in the action giving rise to Nos. 94-30419 and 94-30664, claiming among other things that

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MSP had incinerated hazardous waste without a Subpart O permit since it opened for business in 1985. In 1991, EPA promulgated new rules requiring that all devices using thermal combustion to treat hazardous wastes have either a Subpart O permit or a new form of permit for recycling facilities called a Boiler and Industrial Furnace permit. Final Rule, Burning of Hazardous Wastes in Boilers and Industrial Furnaces, 56 Fed.Reg. 7134, 7138 (1991). These regulations ended the exception from the permit requirement for facilities engaged in recycling. MSP submitted a BIF permit application and a Certification of Compliance with BIF regulations. On the basis of these filings and its contention that it fit within the previously existing recycling exemption, MSP claimed interim status to operate while EPA considered the permit application. EPA's internal consideration of MSP's application for a BIF permit proceeded simultaneously with litigation of the United States' action in Louisiana District Court.

On January 31, 1994, EPA issued a tentative decision denying MSP's BIF permit application. EPA rested its tentative denial upon its conclusions that MSP did not produce aggregate and that its system did not use thermal treatment to accomplish recovery of materials or energy within the meaning of 40 C.F.R. § 260.10. EPA opened its decision for public comment.

A jury trial on the United States' claim in district court that MSP had incinerated waste without a permit began in April, 1994. At the end of a five-week trial, the court submitted 13 interrogatories to the jury. In late May, the jury found itself able to agree to answers to only nine of the questions. The questions relevant to this appeal, together with the jury's answer if any, were as follows:

1. Was MSP entitled to a recycler exemption from the requirement of a permit as an operator of an incinerator of hazardous waste? (unable to answer)

2. Were all of the hazardous wastes accepted by MSP beneficially used or reused or legitimately recycled? (unable to answer)

2(a). Were all of the hazardous wastes accepted by MSP prior to August 21, 1991, beneficially used or reused or legitimately recycled? (unable to answer)

10. Is MSP's rotary kiln an aggregate kiln? (yes)

13. Are the rotary kiln, oxidizers Nos. 1 and 2, and slag box part of a kiln system that produces aggregate? (yes)

Because the jury failed to answer four of the interrogatories, the district court declared a mistrial.

In September, 1994, EPA issued a final decision denying MSP's application for a BIF permit. EPA rested upon its finding that MSP's rotary kiln system did "not meet the definition of aggregate kiln and, therefore, does not meet the definition of industrial furnace." EPA also cited MSP's poor history of compliance with the environmental laws, as well as its finding that MSP could not qualify as an aggregate kiln because it destroyed hazardous waste. MSP appealed to the Environmental Appeals Board, relying on principles of Article III, the seventh amendment, collateral estoppel, due process, and the Administrative Procedures Act, 5 U.S.C. §§ 701-06.

In March, 1995, after a review of the record, the EAB affirmed EPA's denial. In re Marine Shale Processors, Inc., Dkt. No. 06900009, RCRA Appeal No. 94-12, 1995 WL 135572 (EPA 1995). The EAB stated that MSP did not produce "commercial-grade aggregate" from its system and thus that its facility could not qualify as an aggregate kiln. The EAB questioned EPA's reliance on MSP's compliance history and on MSP's destruction of hazardous waste, but ultimately affirmed the decision in its entirety. In April, 1995, EPA finally denied MSP's BIF permit application on all grounds stated in its September, 1994 ruling. MSP appeals the denial of its permit application, invoking our authority under 5 U.S.C. § 706(2) to set aside final agency action. We affirm.


MSP invokes Article III, the Seventh Amendment, and collateral estoppel principles to attack EPA's permit denial.

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MSP begins its assault upon the permit denial with constitutional arguments based on Article III and the Seventh Amendment. Its first argument is that Article III and the Seventh Amendment prevent EPA from ruling on its permit application. Its second argument is that the United States, by filing its lawsuit and thus invoking the judicial power of an Article III court, could not continue to consider in an internal administrative proceeding issues identical to those being litigated in the Article III court. With cites to Montesquieu and Madison, MSP argues that the moment the United States filed suits the district court obtained exclusive power to decide any issue before it and that EPA's permitting staff could not resolve any legal question before the district court without running afoul of the constitutional prohibition forbidding Executive Branch review of Article III court decisions. In a similar vein, MSP invokes the Seventh Amendment, contending that once the Seventh Amendment is activated as to an issue, a party is entitled to have the issue resolved by a jury.

With regard to both MSP's Seventh Amendment and Article III arguments, we begin with the proposition that, in the absence of a simultaneous district court proceeding, Congress violated neither constitutional principle by providing that EPA should adjudicate MSP's permit application. See In re Texas General Petroleum Corp., 52 F.3d 1330, 1336 (5th Cir.1995) ("Whether an Article III court is necessary involves the same inquiry as whether a litigant has a Seventh Amendment right to a jury trial.") (citing Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 53-54, 109 S.Ct. 2782, 2796, 106 L.Ed.2d 26 (1989)). MSP's contention to the contrary comes decades, perhaps centuries, too late. Congress's choice to grant EPA authority over the permit proceeding represents a classic constitutional example of the public rights doctrine.

Viewing our inquiry as governed by "practical attention to substance rather than doctrinaire reliance on formal categories," Thomas v. Union Carbide Agricultural Products Co., 473 U.S. 568, 587, 105 S.Ct. 3325...

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