U.S.A v. Southern Union Co., No. 09-2403

CourtUnited States Courts of Appeals. United States Court of Appeals (1st Circuit)
Writing for the CourtLYNCH, Chief.
PartiesUNITED STATES OF AMERICA, Appellee, v. SOUTHERN UNION COMPANY, Defendant, Appellant.
Docket NumberNo. 09-2403
Decision Date22 December 2010

SOUTHERN UNION COMPANY, Defendant, Appellant.

No. 09-2403

United States Court of Appeals
For the First Circuit

Date: December 22, 2010

[Hon. William E. Smith, U.S. District Judge]


Lynch, Chief Judge, Selya and Thompson, Circuit Judges.

Gerald J. Petros, with whom Hinckley, Allen & Snyder LLP, John A. Tarantino, Patricia K. Rocha, Adler, Pollock & Sheehan, David E. Ross, Seth B. Davis, and Kasowitz, Benson, Torres & Friedman LLP were on brief, for appellant.

Donald C. Lockhart, Assistant United States Attorney, with whom Peter F. Neronha, United States Attorney, Terrence P. Donnelly, Assistant United States Attorney, Dianne G. Chabot, Attorney, U.S. Environmental Protection Agency, and Kevin M. Cassidy, Attorney, Environment & Natural Resources Division, U.S. Department of Justice, were on brief for appellee.

LYNCH, Chief Judge. This appeal by Southern Union, a natural gas company convicted by a jury of storing hazardous waste without a permit, raises two issues of initial impression. First, the case tests whether federal criminal enforcement may be used under the Resource Conservation and Recovery Act (RCRA), 42 U.S.C. § 6928(d), where certain federally approved state regulations as to hazardous waste storage have been violated. Second, the case also raises the important question of whether a criminal fine must be vacated under Apprendi v. New Jersey, 530 U.S. 466 (2000), where a judge, and not a jury, determined the facts as to the number of days of violation under a schedule of fines.

The hazardous waste at issue in this case is mercury, which can poison and kill those exposed to it. See 40 C.F.R. § 261.33(f) tbl. (listing mercury as hazardous waste due to toxicity). Here, 140 pounds of mercury became the play toy of young vandals who spread it about, including at their homes in a local apartment complex, after they spilled it around Southern Union's largely abandoned and ill-guarded Tidewater site in Pawtucket, Rhode Island.

We affirm the district court's rulings on Southern Union's conviction, as set forth in United States v. Southern Union, 643 F. Supp. 2d 201 (D.R.I. 2009) (Southern Union I). We conclude that:

(1) Southern Union is precluded by 42 U.S.C. § 6976(b) from challenging the EPA's 2002 Immediate Final Rule authorizing Rhode Island's RCRA regulations. Having failed to use the statutory procedure for judicial review, Southern Union may not raise the issue by collateral attack;
(2) the 2002 Rule, in any event, is valid and was within the EPA's authority to adopt; and
(3) the conviction does not violate Southern Union's right to fair notice under the Due Process Clause.

We also affirm the fine imposed. The Apprendi issue is close but the Supreme Court's recent decision in Oregon v. Ice, 129 S. Ct. 711 (2009), leads us to hold thatthe Apprendi rule does not apply to the imposition of statutorily prescribed fines. If, however, we were wrong in our assessment of the Apprendi issue, we would find that any error under Apprendi was not harmless and that the issue of the fine would need to be remanded. Finally, we also hold that the financial penalties imposed did not constitute an abuse of the district court's discretion.


Southern Union, a Texas-based natural gas distributor, began supplying natural gas to Rhode Island and Massachusetts customers in 2000 through a subsidiary, New England Gas Company, that it formed after acquiring several local gas companies. It stopped serving Rhode Island customers in 2006.

As part of the transactions in 2000, Southern Union acquired a twelve-acre complex, once used as a gas manufacturing plant, on Tidewater Street in Pawtucket, Rhode Island. Most of the complex sat unused, but Southern Union used a few buildings for automated monitoring and used outdoor spaces to store construction supplies and waste.

The Tidewater property was not maintained and had fallen into disrepair. The perimeter fence was rusted, with gaps that were left unrepaired. There were no security cameras, and Southern Union had removed the single part-time security guard from the site by September 2004. Southern Union was aware that homeless people were staying in a tin shed on the property, and that the property was frequently vandalized.

In June 2001, Southern Union began removing outdated mercury-sealed gas regulators (MSRs) from customers' homes and replacing them with updated regulators. The old MSRs were taken to a brick building at the Tidewater facility. There, for about five months, an environmental firm removed the mercury from the regulators and shipped it to a recycling facility, leaving the regulators to be cleaned and scrapped. Southern Union stopped removing MSRs as a matter of course in November 2001, and its arrangement with the environmental firm ended in December 2001. However, Southern Union continued to remove MSRs whenever they malfunctioned, bringing them to Tidewater, where they were "stored" in doubled plastic bags placed in plastic kiddie pools on the floor of the brick building.

Employees were also encouraged to bring any loose mercury they found in their departments to Tidewater, where it was placed in the same building as the gas regulators. The loose mercury was stored in the various containers in which it arrived, including a milk jug, a paint can, glass jars, and plastic containers. Southern Union kept the containers in a locked wooden cabinet that was not designed for mercury storage. The brick building was in poor condition and had suffered break-in attempts and vandalism. It had many broken windows and its walls were covered in graffiti. Neither the cabinet nor the building itself contained any warning notice that hazardous substances were inside.

Southern Union had no use for any of the mercury it accumulated. By July 2004, when a Southern Union employee catalogued the contents of the brick building, it held 165 MSRs and approximately 1.25 gallons, or more than 140 pounds, of loose mercury (two tablespoons of mercury weigh just under one pound). That cataloguing did not lead the company to arrange for recycling, to secure the building, or to secure a storage permit from the state.

Southern Union was well aware that the mercury was piling up and that it was kept in unsafe conditions. The Environmental Services Manager for its New England Gas Company division, who testified that he was concerned about the safety risk the mercury posed to the company's employees, drafted proposed Requests for Proposals (RFPs) in 2002, 2003, and 2004 to solicit bids to remove and dispose of or recycle the regulators "and associated wastes."

The 2002 draft was sent to Southern Union's Texas corporate headquarters for review by the Director of Environmental Services, where it died. Not only was the RFP not issued, but the New England Gas Company engineer who oversaw the environmental department became angry when he was repeatedly asked about it. The 2003 proposed RFP met the same fate, even though it specified the contents of a number of different containers of mercury. The draft, titled "Request for Proposals for Waste Segregation, Packaging, Transportation, and Disposal," sought a bid to "[r]emove liquid mercury from several small containers" and "[t]ransport and dispose (or recycle) of all waste generated" by this work (emphasis added). Nor did anything come of the 2004 proposed RFP, even though the environmental manager went outside his chain of command trying to get the RFP issued to vendors.

The safety risk posed by the conditions under which the mercury was stored was discussed at joint employee-management safety committee meetings in May, June, and September 2004. Indeed, the employee who brought a regulator in on September 20, 2004 was so concerned about the accumulating mercury that he raised the issue with his supervisor. No action was taken.

In late September 2004, youths from a nearby apartment complex broke into the brick building, broke open the wooden cabinet, found the mercury, and, playing with it, spilled some of it in and around the building. They also took some of the mercury back to their apartment complex, where they spilled more on the ground, dipped cigarettes in it, and tossed some in the air. Mercury was tracked into the residences when people walked through it and was found in several homes.

Southern Union discovered the break-in and spills on October 19, roughly three weeks later, when a worker found pancake-sized puddles of mercury around the brick building. Southern Union immediately called in a contractor to begin cleaning up the spills at Tidewater and the apartment complex.

A Southern Union employee also left a voicemail message that day for Jim Ball, the Emergency Response Coordinator at the state Department of Environmental Management. However, Southern Union did not contact the Pawtucket Fire Department or the state Fire Marshal, the designated points of contact for a release of more than a pound of mercury. The Fire Department did not arrive at Tidewater until the next day, after having found out about the spill from the Department of Environmental Management. By that time, the contractor had already removed the remaining mercury from the building and begun to ship it offsite.

Altogether, the company spent more than $6 million remediating the two spill sites. All five...

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