Before: Wald, Silberman, and Tatel, Circuit Judges.
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Petition for Review of an Order of the Environmental Protection Agency
Opinion of the Court filed by Circuit Judge Tatel.
The Environmental Protection Agency fined the General Electric Company $25,000 after concluding that it had processed polychlorinated biphenyls in a manner not authorized under EPA's interpretation of its regulations. We conclude that EPA's interpretation of those regulations is permissible, but because the regulations did not provide GE with fair warning of the agency's interpretation, we vacate the finding of liability and set aside the fine.
GE's Apparatus Service Shop in Chamblee, Georgia decommissioned large electric transformers. Inside these transformers was a "dielectric fluid" that contained high concentrations of polychlorinated biphenyls ("PCBs"), which are good conductors of electricity. PCBs are also dangerous pollutants. "[A]mong the most stable chemicals known," they are extremely persistent in the environment and have both acute and chronic affects on human health. 3 William H. Rodgers, Environmental Law Section(s) 6.9, at 461 (1988) (internal quotation marks and citations omitted). Recognizing the dangers of PCBs, Congress has required their regulation under the Toxic Substances Control Act. 15 U.S.C. Section(s) 2601-29 (1988 & Supp. V 1993) ("TSCA"); id. at Section(s) 2605(e). Pursuant to TSCA, the EPA promulgated detailed regulations governing the manufacture, use, and disposal of PCBs. See 40 C.F.R. pt. 761 (1994).
Because GE's transformers were contaminated with PCBs, the company had to comply with the disposal requirements of 40 C.F.R. Section(s) 761.60. Section 761.60(b)(1) requires the disposal of transformers by either incinerating the transformer, 40 C.F.R. Section(s) 761.60(b)(1)(i)(A), or by placing it into a chemical waste landfill after the PCB-laced dielectric fluid has been drained and the transformer rinsed with a PCB solvent, id. at (B). GE chose the "drain-and-landfill" option of section 761.60(b)(1)(i)(B).
The drain-and-landfill alternative required GE to dispose of the liquid drained from the transformer "in accordance with" the terms of section 761.60(a). Id. Since the dielectric fluid contained extremely high concentrations of PCBs, the relevant provision of section 761.60(a) was section (1), a catch-all section applicable to liquids contaminated with more than 500 parts per million ("ppm") of PCBs. This section required those disposing of these particularly dangerous materials to do so solely by incineration in an approved facility. 40 C.F.R. Section(s) 761.60(a). In accord with that requirement, GE incinerated the dielectric fluid after draining it from the transformers. It then soaked the transformers in a PCB solvent-in this case, freon-for 18 hours, drained the contaminated solvent, and immediately incinerated it as well. In March, 1987, GE changed these procedures, beginning a process that ultimately led to the EPA complaint in this case. While GE continued to incinerate the dielectric fluid, it began a recycling process that recovered a portion of the dirty solvent through distillation. After soaking the transformer, GE poured the dirty solvent into a still that heated the freon, boiling off about 90% of it. The 10% of the liquid that was left, which was highly contaminated with presumably all the PCBs that had been rinsed from the transformer, was immediately incinerated. Meanwhile, the vapor from the still was cooled, recondensing into nearly pure liquid freon that contained less than the regulatory threshold of 50 ppm PCBs and, as an administrative law judge later found, probably less than the detectable level of 2 ppm. See General Electric Co., EPA Docket No. TSCA-IV-89-0016, 1992 TSCA LEXIS 2, at *69 (Feb. 7, 1992) [hereinafter ALJ Decision]. GE then used this recycled solvent to rinse other transformers.
GE and EPA agree that the regulations require the incineration of the solvent. They disagree about whether the intervening distillation and recycling process violated the regulations. EPA argues that section 761.60(b)(1)(i)(B) required GE to dispose of all the dirty solvent "in accordance with the requirements of [section 761.60(a)(1) ]"-i.e., by immediate incineration. Section(s) 761.60(b)(1)(i)(B). GE did not think that section prohibited it from taking intermediate steps like distillation prior to incinerating the PCBs. To GE, distillation was permitted by section 761.20(c)(2), which allows the processing and distribution of PCBs "for purposes of disposal in accordance with the requirements of 761.60." 40 C.F.R. Section(s) 761.20(c)(2). GE believed that this section authorized intermediate processing "for purposes of disposal"-processing such as distillation-as long as it complied with the other requirements of the PCB regulations like those relating to the management of spills, storage, and labeling of PCB materials. EPA has not alleged that GE's distillation process failed to comply with those requirements. In fact, as the ALJ later concluded, distillation reduced the amount of contaminated materials, thus producing environmental benefits. See ALJ Decision, 1992 TSCA LEXIS 2, at *73.
Despite those benefits, EPA charged the company with violating the PCB disposal regulations. After a hearing, an ALJ agreed and assessed a $25,000 fine. On appeal, the Environmental Appeals Board modified the ALJ's reasoning, but agreed with the disposition of the complaint and upheld the $25,000 penalty. See General Electric Co., TSCA Appeal No. 92-2a, 1993 TSCA LEXIS 265 (Envtl. App. Bd., Nov. 1, 1993) [hereinafter Appeal Decision ]. In other proceedings, the agency found the company liable for ...