McLouth Steel Products Corp. v. Thomas

• Citation: 267 U.S.App.D.C. 367,838 F.2d 1317
• Decision Date: 10 February 1988
• Docket Number: No. 87-1049,87-1049
• Parties: , 267 U.S.App.D.C. 367, 18 Envtl. L. Rep. 20,473 McLOUTH STEEL PRODUCTS CORPORATION, Petitioner, v. Lee M. THOMAS, Administrator, and U.S. Environmental Protection Agency, Respondents.
• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)

Page 1317

838 F.2d 1317

27 ERC 1288, 267 U.S.App.D.C. 367, 18

Envtl. L. Rep. 20,473

McLOUTH STEEL PRODUCTS CORPORATION, Petitioner, v. Lee M. THOMAS, Administrator, and U.S. Environmental Protection Agency, Respondents.

No. 87-1049.

United States Court of Appeals, District of Columbia Circuit.

Argued Oct. 26, 1987.

Decided Feb. 5, 1988.

As Amended Feb. 10, 1988.

Jay E. Brant, with whom William A. Wichers II, Detroit, Mich., and Peter D. Holmes, Lansing, Mich., were on the brief, for petitioner.

J. Carol Williams, Dept. of Justice, with whom Roger J. Marzulla, Acting Asst. Atty. Gen. and Robert L. Klarquist, Dept. of Justice, Washington, D.C., were on the brief for respondents. Lisa F. Ryan, Dept. of Justice, Washington, D.C., and Joshua Sarnoff, Counsel, U.S. E.P.A. also entered appearances for respondents.

David R. Case, Washington, D.C., was on the brief for amicus curiae, Hazardous Waste Treatment Council, urging affirmance.

Before WALD, Chief Judge, WILLIAMS, Circuit Judge, and HOGAN, ^* District Judge.

Opinion for the Court filed by Circuit Judge WILLIAMS.

WILLIAMS, Circuit Judge:

This case presents a challenge by McLouth Steel Products Corporation to the Environmental Protection Agency's denial of its petition to exclude waste generated at its steel-making facility from EPA's list of hazardous waste subject to regulation under the Resource Conservation and Recovery Act of 1976 ("RCRA"). 42 U.S.C. Sec. 6901 et seq. (1982). We believe that in so doing it gave the effect of a rule to its "VHS model"--a systematic approach to computing probable contamination levels--without having exposed the model to the comment opportunities required for rules by the Administrative Procedure Act, 5 U.S.C. Sec. 553 (1982). Accordingly, we remand the case to the EPA.

Subtitle C of RCRA requires EPA to promulgate regulations establishing a comprehensive federal management system to protect human health and the environment from hazardous wastes. 42 U.S.C. Secs. 6921-34. Section 3001 of RCRA, 42 U.S.C. Sec. 6921, directs EPA to identify those wastes that are hazardous and thus subject to regulation under Subtitle C. The air-pollution devices of McLouth's furnaces generate a type of sludge and dust (here referred to simply as sludge) that EPA included in its list of hazardous wastes. See 40 C.F.R. Sec. 261.32 (1985).

Once EPA lists a waste as hazardous, a party may petition EPA for delisting--exclusion of its specific waste from the generic listing. 42 U.S.C. Sec. 6921(f); 40 C.F.R. Sec. 260.22. EPA's regulations specify a two-pronged test for granting delisting. First, the petition must demonstrate that the particular facility's waste "does not meet any of the criteria under which the waste was listed as a hazardous waste." Id. Sec. 260.22(a)(1) (emphasis added). Second, if the Administrator "has a reasonable basis to believe that factors (including additional constituents) other than those for which the waste was listed could cause the waste to be a hazardous waste," then the Administrator must determine "that such factors do not warrant retaining the waste as a hazardous waste." 40 C.F.R. Sec. 260.22(a)(2). See also id. Sec. 260.22(d)(2). Unless such an exclusion is granted, any company that generates a listed waste must manage it in accordance with the system set forth in RCRA's Subtitle C.

On September 25, 1981, McLouth filed a petition requesting delisting for the sludge from its Trenton, Michigan plant. Joint Appendix at 57. On November 18, 1986, EPA denied the petition on the ground that McLouth had not substantiated its claim that the waste was non-hazardous. 51 Fed.Reg. 41,62 4 (Nov. 18, 1986).

In arriving at that conclusion, EPA used its VHS model (referring to "vertical and horizontal spread") to predict the "leachate" levels of the hazardous components of McLouth's waste. ¹ The model "estimates the ability of an aquifer to dilute the toxicants from a specific volume of waste, and predicts toxicant levels at a receptor well." 50 Fed.Reg. 48,886/3 (Nov. 27, 1985). It is not intended to predict contamination based on conditions at the specific site of disposal. Rather, it is based on certain "reasonable worst case assumptions," 50 Fed.Reg. 7,882, 7,883/2 (Feb. 26, 1985), because, EPA reasons, "it cannot be guaranteed that the site-specific circumstances will not change." 50 Fed.Reg. at 48,907/3. A user of the model feeds into it data as to the actual leachate concentrations of the constituents of a specific waste, and the amount of waste generated at the site, and the model predicts contamination levels. EPA then compares these predictions with health-based standards for each constituent to determine whether a waste should be delisted.

The VHS model predicted that significant levels of two hazardous constituents, lead and cadium, would leach from McLouth's waste and contaminate the groundwater. 51 Fed.Reg. 41,624-625 (Nov. 18, 1986). McLouth filed suit in this court under 42 U.S.C. Sec. 6976(a)(1) (1982), arguing that the model was in fact a legislative rule promulgated without adherence to Sec. 553's notice-and-comment requirements. EPA argues that the model is just a policy, not a rule, and that if a rule its adoption was in compliance with Sec. 553. We find that petitioner has the better of the argument. ²

I. THE VHS MODEL: A RULE OR A POLICY?

EPA argues that the VHS model is not subject to Sec. 553 because it falls under Sec. 553(b)(3)(A)'s exception for "general statements of policy." According to the EPA, the VHS model is merely a "non-binding statement of agency policy" that is "not solely determinative of EPA's action on a delisting petition," but rather is just "one of many tools" it uses in evaluating delisting petitions. Brief for Respondent at 20-22. McLouth disputes this characterization, arguing that EPA applies the model with the inflexibility of a rule.

This court recently confronted the rule/policy distinction in Community Nutrition Institute v. Young, 818 F.2d 943 (D.C.Cir.1987). In attempting to flesh out the "tenuous," "blurred," and "fuzzy" distinction between legislative rules and policy statements, id. at 946, we identified two criteria. A policy statement is one that first, does not have "a present-day binding effect," that is, it does not "impose any rights and obligations," and second, "genuinely leaves the agency and its decisionmakers free to exercise discretion." Id. at 946 & n. 4 (quoting American Bus Ass'n v. United States, 627 F.2d 525, 529 (D.C.Cir.1980)). See also Pickus v. United States Board of Parole, 507 F.2d 1107, 1112-13 (D.C.Cir.1974) (legislative rules "narrow [the decisionmaker's] field of vision" and are "of a kind calculated to have a substantial effect on ultimate [agency] decisions."); Guardian Federal Savings & Loan Ass'n v. FSLIC, 589 F.2d 658, 666-67 (D.C.Cir.1978) ("If it appears that a so-called policy statement is in purpose or likely effect one that narrowly limits administrative discretion, it will be taken for what it is--a binding rule of substantive law.") (quoted in Community Nutrition, 818 F.2d at 948 (emphasis in original)).

In practice, there appears some overlap in the Community Nutrition criteria; the second criterion may well swallow the first. If a statement denies the decisionmaker discretion in the area of its coverage, so that he, she or they will automatically decline to entertain challenges to the statement's position, then the statement is binding, and creates rights or obligations, in the sense those terms are used in Community Nutrition. The question for purposes of Sec. 553 is whether a statement is a rule of present binding effect; the answer depends on whether the statement constrains the agency's discretion.

We find that the VHS model meets the definition of a legislative rule under the Community Nutrition criteria. For openers, EPA's current claim that "it does not consider itself ... bound by [the VHS] model" (Br. at 20) is obviously of little weight. The agency's past characterizations, and more important, the nature of its past applications of the model, are what count. See Community Nutrition, 818 F.2d at 946 (noting that "courts are to give far greater weight to the language actually used by the agency" in the past than to its present characterization of the rule).

It is true that in the Federal Register notices announcing EPA's intent to employ the VHS model, EPA indicated that it retained discretion to deviate from its use. See, e.g., 50 Fed.Reg. at 7,883 (VHS model is "one factor to determine the potential impact of unregulated disposal of petitioned waste on human health and the environment"); id. at 7,886 (if waste fails VHS model "the waste could be considered non-hazardous"); id. at 48,910 ("the VHS model results, while providing important input to a delisting decision, are not necessarily the sole basis for such a decision"). Yet other language in that notice strongly suggests that EPA will treat the model as a binding norm. For example, in its first reference to the VHS model, EPA referred to it as "the quantitative approach" that "will be used to predict the level of the various toxicants which could migrate to environmental receptors." Id. at 7,882, 7,896 (emphasis added). The use of the word "will" suggests the rigor of a rule, not the pliancy of a policy. See Community Nutrition, 818 F.2d at 947; American Bus Ass'n, 627 F.2d at 532.

EPA has stated that factors not included in the model "may be considered in the delisting decision where the petitioner can make a compelling case that they are germane to a particular petition." 50 Fed.Reg. at 48,910/2. Though such a provision for exceptions obviously qualifies a rule--it's not "ironclad"--, it does not push it much in the direction of a policy statement.

More critically than EPA's language adopting the model, its later conduct applying it confirms its binding character. In its final decision on McLouth's delisting petition, it stated that "even if...