2. The RCRA Penalty Policy The stated purpose of the RCRA Penalty Policy is to: ensure that RCRA civil penalties are assessed in a fair and RCRA Penalty Policy at 5. Echoing this sentiment, the Board has stated that the Agency developed its penalties policies, such as the RCRA Penalty Policy, "to assure that Regional enforcement personnel calculate civil penalties that are not only appropriate for the violations committed, but are assessed fairly and consistently." In re DIC Americas, 6 E.A.D. 184, 189 (EAB 1995); see also In re Allegheny Power Serv. Corp., 9 E.A.D. 636, 655 (EAB 2001) ("Agency-issued penalty policies provide a framework that allows a presiding officer to apply his or her discretion to statutory factors, thereby facilitating a uniform application of the factors."), aff'd No. 6:01-cv-241 (S.D. W.Va. Apr. 5, 2002). This being said, the Board has repeatedly explained that this regulatory requirement does not compel an ALJ to use a penalty policy in making his or her penalty determination. Rather, “a Presiding Officer, having considered any applicable civil penalty guidelines issued by the Agency, is nonetheless free not to apply them to the case at hand." In re Employers Ins. of Wausau., 6 E.A.D. 735, 758 (EAB 1997); accord Allegheny, 9 E.A.D. at 656. Nevertheless, an ALJ's departure from a penalty policy must be adequately explained. See In re Chem. Lab Prods., Inc., 10 E.A.D. 711, 725 (EAB 2002); see also In re EK Assocs. L.P., 8 E.A.D. 458, 473 (EAB 1999) ("We have generally held that, while the presiding officer must consider the Agency's penalty policy, in any particular instance the presiding officer may depart from the penalty policy as long as the reasons for the departure are adequately explained."); In re A.Y. McDonald Indus., Inc., 2 E.A.D. 402, 414 (CJO 1987) ("An ALJ's discretion in assessing a penalty is in no way curtailed by the Penalty Policy so long as he considers it and adequately explains his reasons for departing from it."). Although an ALJ may depart from a penalty policy, he or she may not depart from the statutory penalty criteria or any statutory cap limiting the size of the assessable penalty. See Employers Ins. of Wausau, 6 E.A.D. at 758-59 ("The [ALJ's] penalty assessment decision is ultimately constrained only by the statutory penalty criteria and by any statutory cap limiting the size of the assessable penalty, by the Agency's regulatory requirement (40 C.F.R. § 22.27(b)) to provide 'specific reasons' for rejecting the complainant's penalty proposal, and by the general Administrative Procedure Act(28) requirement that a sanction be rationally related to the offense committed (i.e., that the choice of sanction not be an 'abuse of discretion' or otherwise arbitrary and capricious)."). 3. Board Review of ALJ's Penalty Determination The Board generally reviews the ALJ's factual and legal conclusions on a de novo basis. See 40 C.F.R. § 22.30(f). Specifically, the Consolidated Rules of Procedure ("CROP") specify that the Board, on appeal, "shall adopt, modify, or set aside the findings of fact and conclusions of law or discretion contained in the decision or order being reviewed * * * and may assess a penalty that is higher or lower than the amount recommended to be assessed in the decision or order being reviewed or from the amount sought in the complaint." Id. With respect to an ALJ's penalty determination, the Board has stated that in cases where the penalty assessed by the ALJ "falls within the range of penalties provided in the penalty guidelines, the Board will not substitute its judgment for that of the [ALJ] absent a showing that the [ALJ] has committed an abuse of discretion or a clear error in assessing the penalty." In re Chem. Lab Prods., Inc., 10 E.A.D. 711, 725 (EAB 2002); In re Chempace, Corp., 9 E.A.D. 119, 131 (EAB 2000); In re Britton Constr. Co., 8 E.A.D. 261, 293 (EAB 1999) (citing In re Predex Corp., 7 E.A.D. 591, 597 (EAB 1998)); In re Johnson Pac., Inc., 5 E.A.D. 696, 702 (EAB 1995) ("[the Board] customarily defer[s] to the Presiding Officer if [he or she] has provided a reasonable explanation for the assessment, and if the penalty amount is within the range prescribed by any applicable guidelines"); In re Pac. Ref. Co., 5 E.A.D. 607, 613 (EAB 1994); see also In re Mobil Oil Corp., 5 E.A.D. 490, 515 (EAB 1994) (“[i]f the penalty assessed by a presiding officer falls within the range of penalties determined through proper application of a penalty policy, the Board will not usually substitute its judgment for that of the presiding officer"). Although the Board's precedents, as cited above, demonstrate that the Board will customarily defer to an ALJ's penalty assessment, the Board nonetheless reserves the right to closely scrutinize substantial deviations from the relevant penalty policy and may set aside the ALJ's penalty assessment and make its own de novo penalty calculation where the ALJ's reasons for deviating from the penalty policy are not persuasive or convincing. See Chem. Lab, 10 E.A.D. 711, 725 (EAB 2002) (rejecting ALJ's penalty assessment where ALJ's reason for departure was based on an impermissible comparison of penalties derived in a settlement context with the penalty to be assessed in a fully litigated case); In re M.A. Bruder & Sons, Inc., 10 E.A.D. 598, 613 (EAB 2002) (rejecting ALJ's penalty 28 5 U.S.C. § 706 (1994). assessment where ALJ's departure from penalty policy was based on ALJ's misunderstanding as to how the penalty policy would apply); In re Birnbaum Scrap Yard, 5 E.A.D. 120, 124 (EAB 1994).29 4. The ALJ's Penalty Determination We now turn to the Region's contention that the ALJ committed an abuse of discretion and/or clear error by failing to reasonably apply the RCRA statutory factors with respect to his penalty determinations for Counts I, III, IV, V, and VI, and in his departure from the RCRA Penalty Policy. a. The Penalty for Count I - Owning or Operating a a Permit i. Violation of RCRA Section 3005(a) Having determined that Capozzi operated a "hazardous waste management unit" within the meaning of the Ohio Administrative Code,30 and that Capozzi routinely disposed of hazardous waste by throwing it out the back door of the facility and onto the ground, the ALJ launched his penalty analysis with a recognition that RCRA provides for a civil penalty up to $25,000 per day for each violation of Subtitle C. See Init Dec. at 14. The ALJ also noted that RCRA Section 3008(a)(3) requires the seriousness of the violation and any good faith effort to comply to be considered. Id.31 Count I of the Region's Complaint alleged that Capozzi operated a hazardous waste management unit for disposal at the facility without a permit in violation of RCRA section 3005(a), which prohibits the disposal of hazardous waste "except in accordance with a permit," and OAC section 3745-50-45(A), which 29 In so doing, the Board may itself employ the guidance set forth in the penalty policy, although it is not bound to do so. For example, in In re Carroll Oil Co., 10 E.A.D. 635, 655 (EAB 2002), the Board, after rejecting the ALJ's penalty assessment, applied portions of the applicable penalty policy but rejected other portions. Thus, although the policy ranked one aspect of a violation as major, the Board lowered the ranking to moderate, concluding that a moderate ranking was "more appropriate." Id. at 47 n.34. 30 Specifically, the OAC defines "hazardous waste management unit" as a "contiguous area of land on or in which hazardous waste is placed, or the largest area in which there is significant likelihood of mixing hazardous waste constituents in the same area." OAC § 3745-50-10(A)(46). 31 RCRA § 3008(a)(3) provides that the seriousness, or gravity, of a violation must be taken into account in assessing a penalty for the violation. Under the RCRA Penalty Policy, the gravity-based component of the penalty is determined by examining two factors: (1) potential for harm; and (2) extent of deviation from a statutory or regulatory requirement. RCRA Penalty Policy at 2. requires that owners and operators of "hazardous waste management units" for the disposal of hazardous waste obtain a permit for the disposal activity. The ALJ, reading Count I as an allegation of a failure to obtain a permit, rather than an allegation of unlawful disposal, considered the Region's proffered evidence of the high probability of worker exposure to hazardous waste, the intentional and regular releases of hazardous wastes, and the moderate potential seriousness of contamination, as relevant to Count II rather than Count 1.32 See Init. Dec. at 14. Noting that Capozzi "is a small entity, employing approximately six workers, and generating relatively small amounts of hazardous waste," and crediting Capozzi for curing its violations of RCRA and OAC permitting requirements by engaging in proper offsite waste disposal practices, the ALJ assessed a civil penalty of $5,000 for Count I, rather than the $62,569 civil penalty proposed by the Region. Id. The Region argues that this was clear error because the gravamen of the violations in Count I is the unlawful disposal of hazardous waste, rather than the failure to obtain a permit, and the ALJ failed to consider the environmental implications of Capozzi's unlawful disposal in deriving a penalty. See Region's Appeal Brief at 31-36. We disagree with the Region's characterization of the ALJ's analysis. While it may be true that the ALJ did not address the environmental implications of Capozzi's dumping without a permit for purposes of Count I, he does give them serious consideration under Count II. Specifically, the ALJ determined that, as alleged in Count II of the Complaint, Capozzi violated OAC section 3745-59-40 by improperly land disposing of hazardous waste without prior treatment, for which he assessed a civil penalty of $30,000. See Init. Dec. at 15-18. In reaching that determination, the ALJ provided a detailed discussion of the Region's proffered evidence of the presence of VOCs as determined by Inspector Fodo's PID, John Capozzi's and Cindy Garris' statements to the OEPA inspectors, the testimony of the OEPA inspectors, the results of the soil and water samples, and the MSDS provided to OEPA by Capozzi for the lacquer thinner that showed the chemicals present in Capozzi's hazardous waste posed serious health risks. See id. It bears noting that the ALJ's reading of Count I as concerning the failure to obtain a permit is consistent with how it is styled in the Complaint, see Amended Complaint at 5 ("Count 1: Operation of Hazardous Waste Management Unit Without a Permit"). Given this framing in the Complaint, we do not regard as clearly erroneous the ALJ's decision to confine his analysis under Count I to process considerations and to consider the environmental significance of Capozzi's unpermitted disposal under Count II - a closely related Count. Thus, while we would agree with the Region's assertion that the ALJ should not ignore the envi 32 See supra note 13. ronmental implications of Capozzi's illegal behavior, we do not read his Initial Decision as having done so. Moreover, his combined penalty for Counts I and II, $35,000, does not strike us as inappropriate. Accordingly, we decline to disturb this aspect of the ALJ's ruling. ii. Economic Benefit Analysis The Region's appeal also challenges the ALJ's penalty assessment for Count I with respect to the ALJ's ruling on the Region's economic benefit analysis,33 on the basis that the ALJ rejected the Region's economic benefit analysis without explaining whether he calculated a smaller amount and, if so, whether he included that figure in his own penalty recommendation. See Region's Brief at 48-49. Capozzi argues that its ongoing cost of compliance is "approximately $30.00 per year" to test its waste and arrange for drum removal and disposal. See Capozzi Cross-Appeal at 15. At the outset we note that the goal of the economic benefit component of the RCRA Civil Penalty Policy is to eliminate any economic incentives for noncompliance by recapturing "any significant economic benefit of noncompliance that accrues to a violator." See RCRA Penalty Policy at 25. Although RCRA does not on its face reference economic benefit in its list of penalty factors, courts have recognized economic benefit as a relevant consideration in determining penalties under RCRA. See, e.g., United States v. WCI Steel, Inc., 72 F. Supp.2d 810, 828 (N.D. Ohio 1999) (citing United States v. Ekco Housewares, Inc., 62 F.3d 806, 814 (6th Cir. 1995) (“In imposing civil penalties [under RCRA], it is appropriate for the court to take into account the seriousness of the violation and any good faith efforts to comply. Numerous other factors are relevant, including *** economic benefit derived from noncompliance * * * .")); see also United States v. Bethlehem Steel Corp., 829 F. Supp. 1047, 1055 (N.D. Ind. 1993) (considering the statutory penalty criteria along with several other factors, including the economic benefit derived by defendant, in the determination of penalties under RCRA). 33 Under the RCRA Penalty Policy, the economic benefit component is calculated by evaluating the benefit from delayed costs and the benefit from avoided costs. RCRA Penalty Policy at 26. The benefit from delayed costs is a measure of the "expenditures deferred by the violator's failure to comply" with the statutory and/or regulatory requirements. Id. at 27. Avoided costs, on the other hand, are "expenditures nullified by the violator's failure to comply." Id. Specifically, delayed costs are measured as the accrued interest on deferred expenditures needed for compliance and avoided costs are calculated as the cost of complying with the requirements, adjusted to reflect anticipated rate of return and income tax effects on the company. See id. By using "Ben: A Model to Calculate the Economic Benefits of Noncompliance, User's Manual" the Agency may calculate a violator's economic benefit of noncompliance based on delayed and avoided costs by considering as many as eleven, and as few as seven, data items. See RCRA Penalty Policy at 28. |