On whose authority? EPA asserts right to regulate DOT-governed activities

A district court last year ordered family-owned Multistar Industries to pay an $850,000 fine for seven total violations of requirements in the U.S. Environmental Protection Agency’s Clean Air Act Risk Management Program, and Emergency Planning and Community Right-to-know Act related to the “storage” of a customer’s chemical tank cars at Multistar’s rail-to-truck transload facility in Othello, Washington.

Multistar appealed the decision to the U.S. Court of Appeals for the Ninth Circuit on multiple grounds, including that the “storage” in question actually is “storage incidental to transportation,” and, most importantly, EPA holds no authority over its Department of Transportation-regulated transloading operation under the terms of a 1971 memorandum of understanding between DOT and EPA that establishes the policies and guidelines related to the definition of a transport facility.

Oral arguments in the appeal are set for Nov. 20 in Seattle.

“EPA’s interpretation is not reasonable because EPA lacks transportation expertise,” asserted Daniel Shelton, president of HazMat Resources—a hazardous materials transportation consultancy firm assisting Multistar—who spent 17 years with DOT, where he served as national hazmat cargo tank program manager.

“They are not the competent authority for transportation.

A ‘huge win’ for EPA

Multistar was not cited for a toxic release or chemical spill.

Instead, the violations all relate to Multistar’s “storage” of a hazardous chemical called trimethylamine (TMA) on its rail siding. The TMA was produced by Eastman Chemical Company, sold to Moses Lake Industries, and held in Eastman’s tank cars while awaiting delivery by truck to its final destination. The court mentions Multistar’s previous EPA compliance issues settled in 2005, 2016, 2019, and 2021; the amount of TMA held on Multistar’s rail siding; the length of time it was there; the lack of “motive power” attached to the tank cars; and the absence of shipping papers in justifying its decision. “The court once again rejects Multistar’s claim that the TMA was in transit while it was stored on Multistar’s rail siding,” the decision reads. “No facts support such a conclusion.

“The TMA sat on Multistar’s rail siding for weeks and months and had to be unloaded and reloaded to another vehicle for delivery. No motive power was attached to the storage rail cars and no bills of lading covered the contents of the rail cars.”

The court also found Multistar did not comply with EPA requirements for completing a compilation of written process safety information; performing a process hazard analysis; developing and implementing written operating procedures; establishing and implementing written procedures to maintain the on-going integrity of process equipment, inspection, and testing; and training employees. In its order, the court called Multistar’s violations “extremely serious” and stated the company’s conduct “places workers’ lives at risk, as well as the lives of the people in the community.”

“This ruling was a huge win for preventing chemical accidents,” said Ed Kowalski, EPA Region 10 Office of Enforcement and Compliance Assurance director. “EPA’s Risk Management Program and the Emergency Planning and Community Right-to-Know-Act both focus on planning for and preventing accidental releases of hazardous substances, especially where there are large vulnerable populations.”

An ‘outrageous’ finding

Multistar, and its regulatory compliance officer, Martin Crowley, called the resulting fine “outrageous” and said local agencies and first responders were aware of the TMA on their property, according to local reports. Crowley also argued, unsuccessfully, that DOT is responsible for overseeing TMA in transit, not EPA; and that’s the key distinction for tank truck industry stakeholders, especially regarding the length of time, and the absence of motive power and shipping papers.

“With the length of time in a facility, DOT holds jurisdiction, not the EPA, and DOT does not set a time limit for how long a material can be in transit” and “there’s no way you can have a locomotive attached to a rail car while it’s being transloaded,” Shelton maintained.

Emerson pointed out that legislators tried to establish a 48-hour “temporal component” in the Railway Safety Act before the wording was removed. “My impression is EPA will attempt, either via enforcement priorities or subsequent litigation, to reach a timeline,” he said, adding he would argue for at least a year but has heard EPA discuss a 14-day limit—and “neither of those make a ton of sense.” Emerson also agreed that complying with EPA’s SPCC requirements would be nearly impossible without “major infrastructure improvements” and “complete redesigns” of transload facilities. “Your SPCC plan needs to have a map that shows where the petroleum tanks are located,” he said. “But if you have a tank on site and you move it around, how do you update the map every day? You can’t.

“EPA’s regs are simply not designed to deal with in-transit containers.”

But if those regulations are applied to in-transit tank cars, then what’s to stop EPA from extending those requirements to ISO tanks at depots, or even loaded tank trailers parked at terminals without a tractor attached?

“Where do they draw the line?” David wondered.

“There really is a very fine line between DOT and EPA regulations regarding the storage of chemicals—and they’re trying to blur it.”

Multistar’s response

Multistar further addressed the court’s jurisdictional judgement in a lengthy response to its decision.

The following are excerpts from the document provided to Bulk Transporter:

EPA’s response brief fails to address that the regulations at issue are unambiguous. They do not contain a “motive power” or “active shipping paper” requirement and no time period after which something stored incidental to transportation becomes a stationary source.

The district court found the plain language of the regulations issued pursuant to EPA’s authority under the CAA to be clear and unambiguous. If the language of the regulations is unambiguous, as the district court found, then the language means what it says, and a court must simply apply the plain language.

The regulations have no temporal component, and EPA continues to decline to amend the regulations to create one.

EPA argues that storage is only “incidental to transportation” if it occurs contemporaneously, i.e., as a subsidiary part of the act of being transported. However, nothing in the CAA, EPCRA, or 40 C.F.R. § 68.3 definitions of “stationary source” says how long a railcar can be on a siding before it becomes a “stationary source.” EPA itself has never set forth how long a railcar can stay in one place before it becomes a stationary source.

The regulations have no “motive power” requirement.

EPA says, “to determine whether a transportation container is functioning as a stationary storage unit or providing storage only incidental to transportation, [it] consider[s] whether the container remains connected to ‘the motive power that delivered it to the site.’” The district court read into the regulation a requirement that a railcar must be connected to motive power. But the regulations do not say a railcar must be connected to motive power to be considered “storage incidental to transportation.” This appears nowhere in the CAA or EPCRA.

Neither the statutes nor the regulations contain an “active shipping papers” requirement.

Another reason the district court found shipments of TMA were not stored “incidental to transportation,” and therefore were subject to EPCRA and its implementing regulation, is because the shipments were supposedly not “always under active shipping papers, and therefore, [not] always in transportation.” Again, there is no “active shipping papers” requirement in either the applicable CAA regulations or EPCRA statute or regulations.

Alternatively, if this court finds the statutory or regulatory language is ambiguous, it should still reverse its decision because EPA’s interpretation is not entitled to deference.

The district court conceded “transportation” and “storage incidental to transportation” were not defined in the regulations, and that EPA and the regulated entities disputed how the language should be interpreted.

Given the court’s findings, it could have found the regulations ambiguous.

EPA’s interpretation is not reasonable because EPA lacks “transportation” expertise.

A court may defer to an agency’s interpretation of a genuinely ambiguous regulation if the interpretation, in pertinent part, “implicate[s] its substantive expertise,” for “when the agency has no comparative expertise in resolving a regulatory ambiguity, Congress presumably would not grant it that authority.”

EPA’s lack of expertise in “transportation” and “storage incidental to transportation/movement” is further demonstrated by its latest effort to amend the regulations at issue in this case.

EPA’s interpretation is not reasonable because it fails to achieve the purpose of the delegation of its authority.

Section 112(r) of the CAA requires the owners and operators of stationary sources producing, processing, handling, or storing such substances to identify hazards, prevent releases, and minimize consequences of such releases. Congress delegated authority to EPA to promulgate regulations under section 112(r) with the objective to “prevent the accidental release and to minimize the consequences of any such release of any substance listed pursuant to Paragraph 3 or any other extremely hazardous substance.” Section 112(r) defines “stationary sources” as buildings, structures, equipment, installations, or substance-emitting stationary activities that belong to the same industrial group.

EPA’s regulations under 112(r) and EPCRA are inconsistent.

EPA argues that the regulated entity “fails to appreciate … that EPA administers distinct programs—one under the Clean Air Act and one under EPCRA—or that the United States and the district court have considered ‘active shipping papers’ only in the EPCRA context.” But EPA has effectively created inconsistent and competing exemptions in its efforts to regulate “storage incidental to transportation.”

EPA should defer to DOT’s regulations.

EPA and the regulated entities agree that Congress enacted the Hazardous Materials Transportation Act (HMTA) and delegated enforcement of the statute to the DOT to ensure “the safe transportation … of … hazardous material in … commerce.” This makes sense given DOT’s expertise and regulatory oversight over transportation in the United States.

The Hazardous Materials Regulations (HMRs) govern the regulated entity’s conduct.

In its response, EPA argues the DOT HMRs do not apply to “private tracks” and “private sidings,” and because the regulated entity’s siding falls into these categories, the HMRs do not apply. So, it argues, the regulated entity’s siding would be unregulated without application of 112(r) and EPCRA regulations. The regulated entity concedes EPA is correct that certain parts of the HMRs do not apply to private rail sidings. But this does not mean either that the regulated entity is therefore automatically subject to EPA’s regulatory interpretation or that the regulated entity’s transloading operation would otherwise be unregulated.

If the absence of regulation exists, the fault lies with EPA.

The district court abused its discretion in assessing the penalty against the regulated entity.

At trial, the RMP coordinator for EPA Region 10, Javier Morales, testified at length about operating procedures for the safety of the community or environment. But Morales admitted that over a period of 6½ years he never inspected the regulated entity’s TMA transloading operation.

It is undisputed that before undertaking the TMA transloading operation, the regulated entity  invested in a top-of-the-line transloader at a cost of approximately $250,000; the fleet of semi-trailers that were to be used to transport the TMA from Othello to Moses Lake had to be outfitted with special hoses and fittings for the safe and exclusive transportation of TMA, and the rail siding was modernized at the request of the short line railroad delivering the rail cars at a cost exceeding $100,000.

For these reasons, “the regulated entity’s transloading operation should not be held to have violated the CAA and EPCRA because their operations are not subject to these EPA requirements,” the reply concludes. “These operations are subject to the HMR and the transloading facility is fully complaint with the HMR.

“The district court [decision] should be fully reversed—and the Administration should be prohibited from practicing lawfare on American citizens.”