§ 11023. The ALJ found that CWPI had committed five violations of EPCRA section 313 reporting requirements and, after an evidentiary hearing, imposed a civil penalty in the amount of $23,375. See Initial Decision at 35-36. For the reasons detailed below, we conclude that the site in Ukiah, California, on which both CWPI and a related corporation, Cal Coast Lumber (“CCL”),2 conduct business is a "facility" as that term is defined in EPCRA section 329 and its implementing regulations. In this regard, we reject CWPI's arguments that such a result is at odds with the U.S. Supreme Court's holding in United States v. Best Foods, 524 U.S. 51 (1998). We further conclude that the facility satisfies the statutory threshold for number of employees. However, because CWPI did not have fair notice of the U.S. Environmental Protection Agency, Region IX's (“Region") interpretation of 40 C.F.R. § 372.22(b)(3), which lays out the methodologies for determining whether a multi-establishment facility3 meets the Standard Industrial Classification (“SIC”) code requirement of EPCRA section 313, we reverse the finding of liability and vacate the civil penalty assessed by the ALJ.4 I. BACKGROUND A. Statutory and Regulatory Background EPCRA section 313 requires the owner or operators of certain facilities to submit annually, by no later than July 1 of each year, a Toxic Chemical Release Inventory Form ("Form R") for each toxic chemical listed under 40 C.F.R. § 372.65 that was manufactured, imported, processed, or otherwise used during the preceding calendar year in quantities exceeding established chemical thresholds. See In re Steeltech, Ltd., 8 E.A.D. 577, 578 (EAB 1999) (quoting In re Catalina Yachts, Inc., 8 E.A.D. 199, 201 (EAB 1999), aff'd, No. CV 99-07357 GHK (VAPX) (C.D. Cal. Feb. 18, 2000) (unpublished)). 1 CWPI filed its notice of appeal with the Board on March 28, 2002. See Notice of Appeal; Coast Wood Preserving, Inc.'s Appellate Brief ("CWPI Br.”) at 1. 2 In Part II.A.2 below, we explain in detail the basis for our conclusion that the corporations are related within the meaning of EPCRA. 3 A multi-establishment facility is one in which there is more than one economic unit on the same or contiguous sites. See infra Part I.A. 4 While the ALJ found liability and imposed a corresponding civil penalty, CWPI has not challenged on appeal the amount of the penalty. It has, however, challenged the finding of liability and asked that the enforcement action against CWPI be dismissed. See CWPI's Br. at 28. 5 Neither EPCRA nor its implementing regulations define "owner" or "operator.” The starting point for analyzing whether an owner or operator must report under EPCRA section 313 is a determination of what constitutes the facility. A facility is defined, in relevant part, as: [A]ll buildings, equipment, structures, and other station- EPCRA § 329(4), 42 U.S.C. § 11049(4). As will be discussed infra, the issue of common control in the statutory definition of "facility" is central to the issues in this case. The EPCRA section 313 reporting regulation includes the statutory definition of "facility," but also provides that "a facility may contain more than one establishment." 40 C.F.R. § 372.3. An "establishment" is defined in turn as "an economic unit, generally at a single physical location, where business is conducted or where services or industrial operations are performed." Id. Once the foregoing elements are satisfied, a facility must also meet the following additional criteria in order for owners and operators to become subject to the EPCRA section 313 reporting requirements: [H]ave 10 or more full-time employees and * * * [be] in EPCRA § 313(b)(1)(A), 42 U.S.C. § 11023(b)(1)(A); see also 40 C.F.R. § 372.22(a)-(c). EPA has interpreted "in Standard Industrial Classification Codes ❝ A person is defined as: [A]ny individual, trust, firm, joint stock company, corporation (including a government corporation), partnership, association, state, municipality, commission, political subdivision of a state, or interstate body. EPCRA § 329(7), 42 U.S.C. § 11049(7). 20 through 39" to relate to the primary SIC code of the facility. See 53 Fed. Reg. 4500, 4501 (Feb. 16, 1988). For multi-establishment facilities (i.e., those that have more than one economic unit on the same or contiguous sites) in which the establishments have different SIC codes, the controlling SIC code for EPCRA section 313 purposes is determined by one of two methodologies that identify the facility as a whole for SIC code purposes.8 See 40 C.F.R. § 372.22(b)(3). The first method determines whether the "sum of the value of services provided and/or products shipped from and/or produced" by those establishments with a primary SIC code listed in 40 C.F.R. § 372.22(b) is greater than fifty percent of the "total value of services provided and/or products shipped and/or produced by all establishments at the facility." Id. § 372.22(b)(3)(i). If the establishment with a primary SIC Code listed in 40 C.F.R. § 372.22(b) contributes more than fifty percent to the total value, the multi-establishment facility satisfies the EPCRA section 313 SIC code requirement and is a covered facility for reporting purposes. The second method evaluates one establishment with a primary SIC code listed in 40 C.F.R. § 372.22(b) against "any other establishment within the facility" to determine if it "contributes more in terms of value of services provided and/or products shipped from and/or produced at the facility." 40 C.F.R. § 372.22(b)(3)(ii). Again, if the establishment with a primary SIC code listed in 40 C.F.R. § 372.22(b) contributes more "value" than any other establishment, the multi-establishment facility satisfies the EPCRA section 313 SIC code requirement and is a covered facility for reporting purposes. The statute authorizes penalties of up to $25,000 for each violation of section 313. EPCRA § 325(c)(1), 42 U.S.C. § 11045(c)(1).9 ? The SIC code coverage has been expanded by regulation. See 40 C.F.R. § 372.22(b); see also 62 Fed. Reg. 23,834 (May 1, 1997). In this step of the analysis, the "facility" has already been defined as including more than one establishment. The issue of common ownership or control arises in the core definition of the facility, rather than in the determination of whether the facility, as measured against the predominant SIC Code, is a covered facility for reporting purposes. "The Debt Collection Improvement Act of 1996 directs the Agency to make periodic adjustments of maximum civil penalties to take inflation into account. See 31 U.S.C. § 3701. Inflation adjusted penalty amounts are published at 40 C.F.R. §§ 19.1-.4, and apply to violations occurring after January 30, 1997. The Agency has developed a penalty policy to assist in the determination of civil penalties for violations of EPCRA § 313. See U.S. Environmental Protection Agency, Enforcement Response Policy for Section 313 of the Emergency Planning and Community Right-to-Know Act and Section 6607 of the Pollution Prevention Act (Aug. 10, 1992) (“ERP”). B. Factual and Procedural Background 1. Factual Background On May 12, 1971, CWPI was incorporated under California law. CWPI's address is 3150 Taylor Drive, Ukiah, California, which is located at the intersection of Taylor Drive and Plant Road. See Initial Decision (“Init. Dec.") at 5. CCL was incorporated under California law on October 17, 1986, and is located adjacent to CWPI within the same fenced-in area. Id. At the time of the Region's inspection on May 26, 1998, a single sign posted at the entrance of the site read "Coast Wood Preserving, Inc." Id. CWPI is in the business of pressure-treating wood. CWPI's preservation of the lumber is accomplished through the use of a single-cylinder chromated copper arsenate ("CCA") pressure-treating process. 10 Id. CWPI stores chemicals at the facility in a chemical storage area. Id. This area consists of several above-ground liquid storage tanks. Id. These tanks are used to store sodium bichromate, copper sulfate, and arsenic acid. Id. CWPI's primary client is CCL." Id. at 7. CCL bids on untreated wood, purchases lumber, maintains an inventory of raw lumber and incises the wood. Id. CCL then transfers the untreated lumber to CWPI so that the wood can be treated with chemical compounds that serve as wood preservatives. Id. After the wood is treated, it is then transferred back to CCL for transportation and wholesale sale to third parties. Id. CWPI never takes ownership of the wood. Id. At all times relevant to the Complaint, CWPI had about five to nine full-time employees and CCL had approximately ten full-time employees. Id. at 6-7. CWPI's primary SIC code is 2491, placing it in the SIC major group code 20, which is listed as a regulated code for EPCRA toxic chemical release reporting purposes. Id. at 7; see 40 C.F.R. § 372.22(b). CCL's primary SIC code is 50, which is not a regulated code for EPCRA toxic chemical release reporting purposes. Init. Dec. at 7. 10 The preservation process typically begins with the conditioning of the wood via drying and incising, which permits the preservative to penetrate and to be retained by the wood. The next step is the treatment of the wood by placement into the treatment tank of the CCA cylinder. The tank contains preservative solution, which is replenished as needed until the desired level of retention is reached. Any unused preservative solution is drained off from the tank, and any excess solution present on the wood is vacuumed away. The wood is then removed from the cylinder and placed on a drip pad where it remains until the dripping ceases. Init. Dec. at 7. 11 At oral argument counsel stated that CWPI's "predominant" customer is CCL. Oral Argument Transcript ("Oral Arg. Tr.") at 16. The testimony at the hearing was that CCL was CWPI's "exclusive" customer. Hearing Transcript ("Hrg. Tr.") at 51. On May 26, 1998, Adam A. Browning and Greg Gholson, two employees of the Region, inspected the site. Id. at 5. During the inspection, Mr. Browning and Mr. Gholson toured the facility and observed its operations, 12 including CWPI's wood treatment operation, its storage area, and its wastewater treatment operation. Id. At the time of the inspection, Mr. Browning and Mr. Gholson also met with Gene Pietila, the plant manager for both CWPI and CCL. Id. at 5-6. Mr. Pietila performed these functions for both companies out of the same, on-site office building. Id. at 6. In fact, administrative operations for both CWPI and CCL are performed out of the same office building. Id. Both corporations use the same controller, Mr. Thomas Gatton, who testified at the evidentiary hearing. Hrg. Tr. at 172-73. Mr. Gatton's responsibilities include overseeing the companies' bookkeeping and presenting financial figures to the companies' certified public accountant. Hrg. Tr. at 138. Harold W. Logsdon is the President of both CWPI and CCL, a position he has held since the companies were formed. Init. Dec. at 6. Similarly, Cordes Langley has been the Vice President of both companies since they were founded. Id. Brenda Schmidt serves as the Secretary and the Treasurer of CWPI, but does not serve in any official capacity for CCL. Id. Messrs. Logsdon and Langley, and Ms. Schmidt are the only shareholders of CWPI and CCL.13 After the inspection, Mr. Browning and Mr. Gholson requested that CWPI submit, among other matters, its payroll records for all full-time, part-time, and contract workers; copies of its federal tax returns; and copies of any contracts between CWPI and any other individuals or firms working for the facility. Id. at 7-8. In response to an EPCRA section 313 information request, Thomas Gatton asserted, by letter dated July 13, 1998, that neither CCL nor CWPI is subject to the EPCRA Section 313 reporting requirements. See C Ex. 7. Mr. Gatton asserted that CCL does not have the requisite SIC code, that CWPI has less than ten employees, and that the value of services provided by CWPI is less than the value of services and products supplied by CCL. Id. 12 The observations that Mr. Browning and Mr. Gholson made during the inspection were later memorialized in an inspection report dated October 28, 1998. See Hrg. Tr., Complainant's (“C”) Ex. 2. 13 Messrs. Logsdon and Langley and Ms. Schmidt are all involved in other lumber-related companies. See Init. Dec. at 6 n.4. |