ALJDEC decisions subject to certification as final

03A-Z022-DEQ · Department of Environmental Quality · 2004-11-29

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: September 13, 14, and 15, 2004 APPEARANCES: Appellant: Gallagher & Kennedy, David J. Armstrong, Esq., and Brad Glass, Esq., for Innovative Waste Utilization. Respondent: Mark Horlings, Assistant Attorney General, for the Arizona Department of Environmental Quality. Intervenor: Stephen Wetherell, Assistant City Attorney, for the City of Phoenix. ADMINISTRATIVE LAW JUDGE: Gary B. Strickland _____________________________________________________________________ Evidence and argument have been submitted at the hearing wherein testimony was received, and by briefs that have been filed in accordance with the schedule established by the Administrative Law Judge. The Arizona Department of Environmental Quality (hereinafter also “the Department” or “ADEQ”) has suspended Innovative Waste Utilization’s (hereinafter also “IWU”) hazardous waste permit (the “SUSPENSION ORDER”), has issued a COMPLIANCE ORDER directing the company to undertake measures to clean up and safeguard the site, and seeks to permanently revoke the permit (the “REVOCATION ORDER”). Having heard the testimony of the witnesses[1] and having read and considered the argument of Counsel and the documents found within the entire record,[2] Administrative Law Judge (“ALJ”) Gary B. Strickland submits this DECISION AND RECOMMENDED Order to the Director of the Arizona Department of Environmental Quality.

FINDINGS OF FACT

Background

1. On February 26, 2003, the Arizona Department of Environmental Quality issued three administrative orders to Innovative Waste Utilization.[3] The Department’s orders both suspended and revoked IWU’s hazardous waste treatment, storage and disposal facility permit[4] and further required that IWU promptly remove all of the hazardous waste from its facility. IWU has timely and contemporaneously appealed the three ADEQ orders. In doing so, IWU has asserted that the Department’s issuance of each order, respectively, was improper. IWU objects that the Department’s determinations concerning the hazardous waste violations allegedly committed and cited in the orders, along with the threat allegedly posed by the conditions at the IWU facility, were baseless, without evidentiary support, and that the orders themselves were issued arbitrarily and capriciously.[5] 2. A hearing of IWU’s appeal was conducted on September 14, 15 and 16, 2004. At issue in the hearing was whether the Department, based on the totality of circumstances that existed as of February 26, 2003, was justified in issuing the three subject administrative orders. The Department argues that, as of that date, it possessed sufficient information or evidence upon which to conclude that: (1) IWU had violated its hazardous waste permit and the Arizona Hazardous Waste Management Act (A.R.S. §§ 49-921 to 932); and (2) the conditions then existing at the IWU facility posed a threat to public health, safety or welfare and required that emergency action be undertaken by the Department. As such, the Department contends that all three of its orders were justified. At the hearing, the Department offered numerous exhibits and the testimony of Agency and law enforcement personnel in support of its position. IWU, in turn and in response thereto, offered several exhibits but no witnesses to support its challenge of the Department’s orders.

Applicable Law Governing IWU’s Permit

3. Where a civil penalty has not been assessed, the Department may suspend or revoke a facility’s hazardous waste permit should the Agency determine that the facility has violated Arizona’s Hazardous Waste Management Act or any rule, permit or order issued or adopted pursuant thereto.[6] 4. Arizona’s hazardous waste rules (A.A.C. R18-8-260 to 280) require that hazardous waste that is shipped from a treatment, storage or disposal facility be accompanied by and accurately documented in a hazardous waste manifest.[7] 5. IWU’s Permit required that IWU store and treat hazardous waste at its Phoenix site in accordance with the conditions of its Permit. Storage, treatment, and/or disposal of hazardous waste that had not specifically been authorized by the Permit were expressly prohibited.[8] 6. Further, IWU’s Permit required that IWU maintain all of its hazardous waste containers closed except as may be necessary to add or remove waste in accordance with the Permit.[9] 7. The Department may revoke or suspend a license previously issued by the Department if the Department first provides the licensee notice and an opportunity for a hearing in accordance with A.R.S. Title 41, Chapter 6, Article 10.[10] In any case where the Department finds that public health, safety or welfare imperatively requires an emergency action, and incorporates that finding in its order, the Department may direct summary suspension of a license pending proceedings for permanent revocation of the license.[11] . . . . . . . . . . . . 8. Arizona’s hazardous waste management program mirrors the federal hazardous waste management program in most respects, including the imposition of strict liability for civil violations of the hazardous waste laws, rules and permits.[12] 9. When a hearing is conducted on an Agency’s decision to suspend or terminate a license or permit previously issued, the Agency has the burden of persuasion and must prove by a preponderance of evidence that the Agency’s position is correct or justified.[13] 10. The Agency is required to present sufficient evidence from which the finder of fact or decision-maker can conclude that the Agency’s position is more likely true, or correct, than not.[14]

Facts & Evidence of Record 11. The Department issued an RCRA Part B Hazardous Waste Facility Permit to IWU on April 12, 2001. The Permit authorized IWU to store and to treat hazardous waste material at its site in the City of Phoenix for a ten- year period.[15] 12. IWU is a large quantity hazardous waste generator and an off- site commercial hazardous waste storage, treatment, recycling, consolidation, transfer and volume reduction facility that has routinely received waste containers from the California Department of Toxic Substances Control (hereinafter, “DTSC”) pursuant to a hazardous waste disposal contract with IWU’s parent company, California based Industrial Waste Utilization.[16] 13. DTSC shipped to IWU certain hazardous waste that had been confiscated by law enforcement personnel from clandestine or illegal methamphetamine manufacturing laboratories in California (hereinafter, “drug lab waste”). The drug lab waste shipped by DTSC to IWU generally consisted of both chemical and non-chemical waste materials, including methamphetamine, red phosphorous, hydrochloric and muriatic acids, acetone, ethyl ether, iodine, psuedoephedrine, glassware and other pieces of laboratory waste and debris.[17] Much, though not all, of the drug lab waste was hazardous waste and was used in the illegal methamphetamine manufacturing and distribution trade. 14. From July of 2001 to February 2003, DTSC shipped approximately 550 shipments of drug lab waste to IWU, with 200 of those shipments occurring in the final six months of that time period.[18] 15. Prior to and over that period, the Department conducted routine hazardous waste compliance inspections of IWU on February 2, 2001 and September 10, 2002. On both occasions, ADEQ inspectors observed items or conditions at the facility that constituted hazardous waste violations, including the presence of hazardous waste containers that were opened or unsealed despite the fact that no waste was then being added to or removed from the containers. On both occasions, ADEQ personnel reminded IWU of its compliance obligations and IWU promptly addressed the violations to the Department’s satisfaction.[19] 16. From early 2001 through early 2003, law enforcement personnel at the local, State and federal levels investigated and conducted surveillance on IWU and its employees, conducted undercover purchases of the chemicals used to manufacture methamphetamines from IWU’s current and former employees, received information concerning IWU and its past and present employees from confidential informants and IWU employees, and intercepted wire, oral and electronic pager communications involving IWU’s owners, management and employees.[20] 17. During the summer of 2002, law enforcement personnel informed ADEQ that IWU and its employees were being criminally investigated in connection with the illegal diversion of drug lab waste from IWU and other illegal drug trafficking and distribution activities. In this, ADEQ was specifically informed that a portion of the hazardous waste being shipped to IWU by DTSC was being removed from the hazardous waste containers and being diverted from the facility by employees in violation of Arizona’s hazardous waste management laws and IWU’s hazardous waste facility permit.[21] 18. Between the summer of 2002 and February 25, 2003, ADEQ was repeatedly contacted by law enforcement personnel, including individuals with the U.S. Environmental Protection Agency (EPA), concerning the ongoing criminal investigation of IWU and its employees and the unlawful diversion of hazardous waste from the IWU facility.[22] 19. On February 25, 2003, a multi-jurisdictional task force, in which ADEQ did not participate, executed search and arrest warrants on IWU and its employees. 20. Although the Department did not participate in the criminal investigation and arrest activities being conducted by law enforcement personnel at IWU on February 25, 2003, it did send an ADEQ “Emergency Response Specialist” to ensure the safety of law enforcement personnel and to assess the general conditions at the IWU facility.[23] 21. On February 26, 2003, ADEQ sent staff from its “Hazardous Waste Compliance and Inspection Unit” to investigate the substance and source of information that had been provided by law enforcement personnel indicating that IWU had violated its hazardous waste permit and Arizona’s hazardous waste management laws.[24] 22. As of February 26, 2003, ADEQ possessed and considered the contents of the following documents in its assessment of the situation:

(1) The IWU RCRA Part B TSD Hazardous Waste Permit (Exh. A); (2) The September 10, 2002 ADEQ Hazardous Waste Inspection Report on the IWU Facility (Exh. B), (3) The State of Arizona Indictment (Exh. C); (4) The United States Indictment (Exh. D); (5)The Affidavit for Search Warrant (Exh. E)

23. In addition to the documentary sources cited in the previous paragraph, ADEQ considered information collected and reported by various ADEQ personnel concerning activities occurring and the conditions then existing at IWU. 24. On February 26, 2003, ADEQ determined (1) that IWU had violated its hazardous waste permit and the Arizona Hazardous Waste Management Act (A.R.S. §§ 49-921 to 932), and (2) that the conditions then existing at the IWU facility posed a threat to public health, safety or welfare and, therefore, required emergency action by ADEQ. Accordingly, ADEQ issued the subject orders immediately terminating IWU’s authority to operate at the site. 25. The Department has alleged that the illegal diversion and removal by IWU employees of drug lab waste, including red phosphorous, from the manifested DTSC containers gives rise to the four hazardous waste violations cited in the Department’s Suspension Order and Revocation Order. 26. The Department further contends that its determination regarding the threat posed by the continued operation of IWU to public health, safety and welfare and the need for summary suspension of IWU’s operating authority was based on the following factors:

a. The occurrence of numerous fires and explosions at IWU and the reported absence of sufficient water pressure to combat fires that might there occur; b. The sloppy or unmanaged condition of the hazardous waste containers at IWU and reports suggesting that significant discrepancies might exist between the contents of the containers and what had been listed on the corresponding, but inaccurate and/or fraudulently manufactured, manifests; c. The attempts by transporters to continue delivering hazardous waste to the IWU; d. The absence of qualified personnel, including the designated RCRA Emergency Coordinator, to operate a large and heavily regulated hazardous waste treatment, storage and disposal facility; e. The potential impact to surrounding properties and the surrounding community if a significant fire or explosion should occur at IWU; f. The impact that inclement weather could have on improperly stored containers possessing water reactive wastes; and g. The severity and prevalence of significant criminal activity occurring over an extended period of time by employees at all levels of the company.

27. The evidence presented at the hearing established that ADEQ relied on the following information, evidence and factors in making its determination with respect to the hazardous waste violations and the threat posed by the conditions at the IWU facility: a. Drug lab waste shipped to IWU for storage and treatment had been confiscated by law enforcement personnel conducting a raid of a methamphetamine lab in California.[25] b. Reliable confidential informants related to law enforcement personnel that past and current IWU employees, including IWU’s then Day Shift Supervisor/Operations Manager, had been removing chemicals, including red phosphorous, iodine and pseudoephedrine or ephedrine, from DTSC hazardous waste containers shipped to IWU and had introduced the chemicals back into the methamphetamine manufacturing and distribution trade.[26] c. ADEQ inspectors had discovered and documented instances in which hazardous waste containers had not been kept closed or sealed despite that no hazardous waste had been added or removed during the past two inspections of the IWU facility.[27] d. Law enforcement personnel made numerous undercover buys of red phosphorous, iodine and psuedoephedrine from various past and current IWU employees, including its then Day Shift Supervisor/Operations Manager, Javier Robles Salazar.[28] e. Red phosphorous is a D001 hazardous waste because of its ignitable characteristics and can generate deadly phosphene gas. Pseudoephedrine and iodine are not typically considered hazardous waste, but may become hazardous waste if the generator determines that waste is hazardous due to contamination by other hazardous waste commonly present in illegal drug labs, or otherwise, and ships that material as a hazardous waste.[29] f. The multi-year investigation of IWU and its employees sufficiently persuaded law enforcement personnel that the evidence it had collected revealed on-going criminal activities.[30] g. Law enforcement discovered a number of containers on February 25, 2003, that should have contained red phosphorous, according to IWU’s records, but were found empty; the lids on those containers had been peeled back consistent with information that had been related by IWU employees involved in the diversion practice.[31] h. Grand juries that had been convened separately by the State and federal government found probable cause to conclude that the criminal activities alleged and being investigated by law enforcement personnel were actually occurring at IWU.[32] i. Presentation of evidence concerning the illegal diversion of drug lab waste from IWU by IWU employees persuaded a Maricopa County Superior Court Judge to issue numerous orders authorizing video, wire, oral and pager surveillance of IWU and its employees.[33] j. Numerous past and present IWU employees informed law enforcement personnel that drug lab waste had been removed from IWU for more than a year and that, in many instances, those employees had admitted their individual involvement and implicated co-workers in the illegal activities.[34] k. IWU had experienced fires, explosion and break-ins on-site that were not reported by IWU to fire safety or law enforcement personnel and that the IWU facility manager had instructed employees not to report those incidents due in part to the absence of sufficient water pressure with which to combat fires.[35] l. The conditions at the IWU facility and the unsafe and inappropriate manner in which the hazardous waste was stored at that facility on February 26, 2003 presented a genuine threat to human health, safety and welfare.[36] m. Hazardous waste transporters were still attempting to deliver hazardous waste to IWU on February 25 and 26, 2003.[37] n. ADEQ was required to dispatch a hazardous waste remediation contractor on February 25, 2003 to contain, collect and remove a green liquid hazardous waste found leaking from one of the 40 yard roll-off containers at IWU and that was then escaping from the site.[38] o. Law enforcement observed and recorded criminal activities by numerous IWU employees that, although unrelated to the illegal hazardous waste diversion activities, nonetheless establish the depth and scope of criminal activities occurring at IWU by IWU employees, and is consistent with and strongly corroborates the evidence and information received by law enforcement personnel regarding the illegal hazardous waste diversion activities.[39] p. The Affidavit for Search Warrant includes an overwhelming amount of detailed information and accounts that reveal that numerous past and present IWU employees, including those with management or personnel supervisory responsibilities, participated in diverting drug lab waste shipped by DTSC from the IWU facility back into the illegal drug manufacturing and distribution trade.[40] q. Law enforcement revealed to ADEQ that there was substantial evidence that employees of IWU were manufacturing methamphetamine at the IWU facility.[41] r. IWU employees were found concealing their diversion of drug lab waste from the DTSC containers by replacing the removed materials in some cases with sand, which would make detection of the diversion by ADEQ and other officials extremely difficult unless the containers were opened and inspected.[42] s. ADEQ understood that the highest ranking Arizona employee of IWU had knowledge of the illegal activities occurring at IWU by IWU employees and had himself been arrested in connection with those illegal activities.[43] t. IWU employees were reportedly taking advantage of the Permit requirement to sample 10% of the hazardous waste received to access and remove hazardous waste from the DTSC containers, which were known to contain drug lab waste and paraphernalia.[44] u. ADEQ understood that management and supervisory level employees at IWU participated in and/or recklessly tolerated the illegal hazardous waste diversions activities by fraudulently altering the records at IWU to conceal hazardous waste that was either (1) no longer at the facility although it was supposed to be there, or (2) that was present at the facility when IWU’s records revealed that hazardous waste had been reported as already destroyed or having been disposed.[45] v. That the containers of hazardous waste present at IWU purportedly did not match the records then maintained by IWU for its hazardous waste.[46] w. That the Arizona Attorney General’s Office was preparing to immediately issue criminal warrants seizing IWU’s assets, which would undoubtedly make it even more difficult for IWU to properly operate its facility and manage the hazardous waste that was then present.[47] x. ADEQ understood that IWU had on one or more occasions accepted waste at its facility although it had not been authorized to accept that waste.[48] y. Of the IWU employees that had been arrested at the facility were included all of IWU’s management and supervisory level employees.[49] z. That IWU was located adjacent to a furniture manufacturing facility, which contained large quantities of flammable materials, an elementary school, a mixed residential area, and the Salt River, all of which could be disastrously impacted by IWU should a significant fire or explosion occur at the facility.[50]

Factual Conclusions 28. During the hearing, IWU failed to present any evidence whatsoever that would permit a reasonable mind to conclude that the detailed information, accounts and statements revealed to ADEQ by law enforcement personnel were incorrect, inaccurate, incomplete, or fabricated.[51] 29. IWU also failed to present any evidence during the hearing tending to establish that the conclusions and observations developed by ADEQ during its own course of investigating the information that had been provided to it by law enforcement was in any way incorrect, inaccurate, incomplete or fabricated. 30. The testimony and exhibits presented during the hearing demonstrate overwhelmingly that ADEQ had ample and substantial evidence upon which to conclude that IWU had violated its hazardous waste Permit and the Arizona Hazardous Waste Management Act (A.R.S. §§ 49-921 to 932) when its employees repeatedly removed and diverted drug lab waste, including red phosphorous, from the manifested DTSC containers and reintroduced that material back into the illegal methamphetamine manufacturing and distribution trade. 31. The removal and diversion of the drug lab waste, including red phosphorous, from the IWU facility violated the IWU Permit requirement to keep all hazardous waste containers closed except as necessary to add or remove hazardous waste in accordance with the Permit and to store, treat and dispose of hazardous waste as required and in accordance with the terms of the Permit. 32. The removal and diversion of the drug lab waste, including red phosphorous, from the IWU facility also violated the hazardous waste manifest requirements set forth in A.A.C. R18-8-262 (40 CFR § 262.20). The violation occurred because hazardous waste had been removed from the facility undoubtedly without the removal of that hazardous waste being noted on the corresponding DTSC hazardous waste container manifest. Such failure to modify the DTSC hazardous waste container manifests further resulted in the use and submission to ADEQ of hazardous waste manifests that were incorrect and fraught with false information. 33. ADEQ’s determination regarding the threat to public health, safety and welfare that would result from a failure to summarily terminate IWU’s authority to operate, and the factors considered by the Agency in reaching that determination as set out above, are well grounded and supported by substantial evidence. 34. IWU claims that no emergency existed because, although sixty (60) percent (%) of IWU’s employees had originally been arrested, remand orders issued by Superior Court has resulted in only sixteen (16) employees being charged. 35. IWU further claims that the COMPLIANCE ORDER is now moot because the Department has proceeded sua sponte to pay for the clean-up.[52] The Department agrees that the COMPLIANCE ORDER is moot. 36. IWU’s arguments to the contrary, the weight and sufficiency of the evidence preponderates that the cited hazardous waste violations constituted a threat to public health, safety and welfare. The Department’s issuance of the SUSPENSION AND COMPLIANCE ORDERS have been demonstrated to have been appropriate, justified, and in accordance with A.R.S. Title 49. The question that is most problematic pertains to the current state of the Grand Jury inquiry into the potential criminal liability of the company itself and high-level management in particular.

CONCLUSIONS OF LAW 1. The Director of the Department of Environmental Quality has jurisdiction to issue a Final Decision in this matter under the authority of A.R.S. §§ 49-923 and 924, A.R.S. Title 49, Chapter 3, Article 2, generally, and 41-1092.08(B) and (F). 2. The burden of persuasion at an administrative hearing falls to the party asserting a claim, right or entitlement, or an Agency seeking to impose a penalty.[53] Further, the standard of proof is that of the “preponderance of the evidence”.[54] Proof by a preponderance means that the evidence is sufficient to persuade the finder of fact that the proposition is “. . . more likely true than not.”[55] 3. In this case, the evidence taken as a whole must persuade the decision- maker that the State of Arizona, by and through the Department of Environmental Quality, is more probably correct on the issue(s) in dispute. It is the Department’s burden to persuade, through the presentation of probative, competent and reliable evidence, that it has properly, within its delegated authority, suspended Innovative Waste Utilization’s hazardous waste Permit (the “SUSPENSION ORDER”), issued a COMPLIANCE ORDER directing the company to undertake measures to clean up and safeguard the site, and permanently revoked the Permit (the “REVOCATION ORDER”). 4. During the hearing, IWU failed to present any evidence whatsoever that would induce a reasonable mind to conclude that the detailed information, accounts and statements revealed to the Department by law enforcement personnel were incorrect, inaccurate, incomplete, or fabricated. IWU also failed to present any evidence during the hearing tending to establish that the conclusions, observations and information collected by the Department itself in the course of investigating the information provided by law enforcement was in any way incorrect, inaccurate, incomplete or fabricated. 5. In contrast, the testimony and exhibits presented by the Department during the hearing demonstrate overwhelmingly that the Department had ample and substantial evidence upon which to conclude that IWU had violated its hazardous waste permit and the Arizona Hazardous Waste Management Act (A.R.S. §§ 49-921 to 932) when its employees were discovered to have repeatedly removed and diverted drug lab waste, including red phosphorous, from the manifested DTSC containers and had reintroduced that material back into the illegal methamphetamine manufacturing and distribution trade. 6. The removal and diversion of the drug lab waste, including red phosphorous, from the IWU facility violated the IWU Permit requirement that it keep all hazardous waste containers closed except as necessary to add or remove hazardous waste in accordance with the Permit and to store, treat and dispose of hazardous waste as required and in accordance with the terms of the Permit. 7. The removal and diversion of the drug lab waste, including red phosphorous, from the IWU facility also violated the hazardous waste manifest requirements that are set forth in A.A.C. R18-8-262 and 264[56] (40 CFR § 262.20). The violation consisted in the probable removal of hazardous waste from the facility without the removal of that hazardous waste having been recorded on the corresponding DTSC hazardous waste container manifest. This failure to modify the DTSC hazardous waste container manifests further resulted in the use of and submission to the Department of hazardous waste manifests that were incorrect and that contained false information. 8. The Department’s considered opinion that to refrain from summarily terminating IWU’s authority to operate would allow a continuing threat to public health, safety and welfare, and the factors considered by the Department in reaching that determination as set out above, was demonstrated during the hearing to be well-grounded and supported by substantial evidence. 9. Because the Department has persuaded, by a preponderance of the evidence, that the alleged hazardous waste violations occurred and that the condition created thereby posed a threat to public health, safety and welfare, the Department’s issuance of the SUSPENSION AND COMPLIANCE ORDERS are determined appropriate and justified, in accordance with A.R.S. Title 49. The question that is most problematic pertains to the current state of the Grand Jury inquiry into the potential criminal liability of the company itself and high-level management in particular vis-à-vis permanent closure.

10. In its CLOSING MEMORANDUM, IWU raises numerous issues[57] that had been preliminarily denied a hearing in this matter by the Administrative Law Judge in his ruling on the various prehearing motions in limine. The Judge had ruled at the threshold that these issues were irrelevant to consideration whether the subject Agency orders were supported by substantial evidence or whether those orders (or, one or more of them) were issued arbitrarily or capriciously. Therefore, IWU’s arguments are not further addressed herein.[58] 11. Additionally, IWU is found to have misstated the record[59] in its CLOSING MEMORANDUM, a fact diminishing validity that might otherwise be accorded its arguments supported thereby. 12. The factually unsubstantiated arguments presented by IWU to the contrary, the record reveals evidence making IWU liable for the illegal activity at the site that has been uncovered by enforcement authorities. First, under RCRA, a strict liability statute,[60] civil crimes caused by employees are chargeable to the employer.[61] The company may not escape accountability based upon suggestion that only “rogue, backyard employees” were found to have engaged in the proscribed activity. Whether management officials were aware of the activity is itself irrelevant to consideration whether civil penalties may be assessed against the company.[62] Second, regardless any assumption of an application of strict liability, the Department acted on evidence that supervisory employees had, in fact, participated in the proscribed activity. This was more than sufficient to support issuance of the SUSPENSION and COMPLIANCE ORDERS.[63] And - as it turns out, guilty pleas by employees[64] have been entered in the criminal court to involvement in illegal activity, the kind of activity prohibited by the Permit and constituting hazardous waste offenses; those pleas bolster justification for the cancellation of the Permit, even absent a plea or conviction by one in management. 13. It is found that the Department reasonably and justifiably relied upon and accorded weight to the Indictments in its decision to summarily suspend the Permit and to require the company to comply with remedial directives.[65] After an administrative hearing whereat IWU has not offered any witness testimony, proof of a finding of probable cause (exemplified by the Superior Court Indictments and pleas entered pursuant thereto) is persuasive by a preponderance of the evidence. 14. The validity and viability of the COMPLIANCE ORDER at this juncture is essentially moot. 15. There is no question that the Department had cause to undertake emergency measures in the form of a summary suspension of the Permit on February 26, 2003. The criminal charges then pending against employees, including management personnel, required the Department to act decisively. Whether suspension may be made permanent is the further question. The Director certainly has been granted the authority to revoke a permit.[66] After all, the Director has been delegated or charged with the maintenance of health and safety in the field of hazardous wastes. The general responsibility of the Department of Environmental Quality in the administration of an environmental regulatory program in Arizona is set forth at A.R.S. § 49-104. Therein is noted, inter alia, that the Department is to protect the environment[67] and to encourage industrial, commercial, residential and community development that maximizes environmental benefits and minimizes the effects of less desirable environmental conditions.[68] 16. The evidence presented in this matter has established that A.R.S. §§ 49-925(A)(3) and (4)[69] have been violated by IWU’s acts and omissions uncovered in the various investigations. Removal and diversion of drug lab waste, including red phosphorus, from the IWU facility violated the IWU Permit requirement that the permittee keep all hazardous waste containers closed except as necessary to add or remove hazardous waste and further to store, treat, and dispose of the hazardous waste as required and in accordance with the terms of the Permit. The removal and diversion of the drug lab waste, including the red phosphorus, also violated the hazardous waste manifest requirements of A.A.C. R18-8-262 (40 C.F.R. § 262.20). The removal of the subject hazardous waste was undertaken without notation thereof on the DTSC hazardous waste container manifest. Therefore, the manifests that were submitted to the Department, not containing the proper notification of transference, were incorrect and manifested false information. 17. Moreover, the situation at IWU on February 26, 2003, as disclosed by enforcement investigations, revealed less than desirable environmental conditions – the movement of hazardous waste in violation of the safeguards required by rule. 18. In light of the facts that have been disclosed, revocation of the subject Permit is the compelling remedy.

RECOMMENDED ORDER IT IS RECOMMENDED that the Director of the Arizona Department of Environmental Quality deny Appellant’s attempt to have the Department rescind its previously issued February 26, 2003 SUSPENSION, REVOCATION, and COMPLIANCE ORDERS, based upon the Findings and Conclusions set forth in this DECISION. IT IS FURTHER RECOMMENDED that the Department’s issuance of the February 26, 2003 SUSPENSION, REVOCATION, and COMPLIANCE ORDERS be affirmed. IT IS FURTHER RECOMMENDED that this appeal be dismissed.

Done this 1st day of December 2004.

_______________________________ Gary B. Strickland Administrative Law Judge

Copy mailed this ____ day of ______________ 2004 to:

Stephen A. Owens, Director Department of Environmental Quality Attn: Judith Fought 1110 W. Washington, Sixth Floor Phoenix, AZ 85007

Courtesy copy to Counsel

Gallagher & Kennedy Attorneys at Law David J. Armstrong, Esq. 2575 East Camelback Road Phoenix, AZ 85016-9225 Fax No.: (602)530-8500

Office of the Attorney General Mark Horlings, Assistant Attorney General Environmental Enforcement Section 1275 West Washington Avenue Phoenix, AZ 85007 Fax No.: (602)542-7798

City of Phoenix Office of the City Attorney Stephen L. Wetherell, Assistant City Attorney 200 W. Washington, Ste. 1300 Phoenix, AZ 85003-1611 Fax No.: (602)534-9866

By ___________________________

----------------------- [1] Appellant IWU did not call any witnesses at the hearing but had been granted leave to preserve an option to move to have the hearing reopened for the purpose of calling certain identified witness(es) within the briefing period. See September 10, 2004 Minute Entry. IWU did not file a motion for leave to reopen the hearing. The following individuals testified on behalf of ADEQ: Robin Thomas, ADEQ Waste Permit Unit Manager; Barry Rhinehart, ADEQ Hazardous Waste Inspector; Steve Calderone, ADEQ Emergency Response Specialist; Carol Hibbard, ADEQ Hazardous Waste Compliance and Inspection Unit Manager; Laura Malone, former ADEQ Hazardous Waste Compliance and Inspection Unit Manager; Greg Workman, ADEQ Hazardous Waste Compliance and Inspection Section Manager; Shannon Davis, ADEQ Waste Programs Director; Detective Dan Toulouse, MESA POLICE DEPARTMENT; and Special Agent John Murhpy, DEA Supervisory Special Agent.

[2] The parties stipulated that the official record consists of the hearing digitally recorded, the exhibits that were offered at the hearing, documentation in the Department’s case file, and written argument. Appellant offered into the record the following exhibits: 6, 8, 9, 10, 15, 16, and 20. All but 20 (irrelevant) were received. The State, in turn, offered the following: A, B, C, D, E, M, N, O, P, Q, R, S, T, U, V, W, X, Y and Z. All but T (irrelevant) were received. Further, pursuant to Order, and upon leave, the parties have filed the following: Appellant IWU has entered into the record a CLOSING MEMORANDUM filed on October 29, 2004; Respondent ADEQ has filed 1) a CLOSING MEMORANDUM filed on October 4, 2004; and 2) a REPLY BRIEF on November 10, 2004; Intervenor City of Phoenix has filed 1) a CLOSING MEMORANDUM filed on October 7, 2004; and 2) a REBUTTEL CLOSING MEMORANDUM on November 10, 2004.

[3] See the Revocation of Hazardous Waste Facility Permit (Docket No. Z-22- 03)(hereinafter the “Revocation Order”), the Suspension of Hazardous Waste Facility Permit (Docket No. Z-23-03)(hereinafter the “Suspension Order”), and the Compliance Order (Docket No. Z-24-03). The violations alleged by the Department in both the Suspension Order and Revocation Order are identical and are as follows:

A. 40 C.F.R. § 262.20/A.A.C. R18-8-262: Failure to manifest the transportation of hazardous waste off-site. IWU has received hazardous waste from illegal meth labs. Rather than sending the waste to an authorized disposal facility, on more than one occasion IWU diverted the waste to an unauthorized recipient. In doing so, IWU failed to manifest the hazardous waste.

B. 40 C.F.R. § 262.20/A.A.C. R18-8-262: Falsification of hazardous waste manifest. When IWU removed hazardous waste from storage drums in order to divert it to unauthorized recipients, the manifests accompanying those drums of waste contained false information.

C. IWU Hazardous Waste Permit, Part I, Section A: Treatment, storage or disposal of a hazardous waste in a manner not authorized by the permit. On more than one occasion IWU treated, stored, or disposed of hazardous waste in a manner not authorized by permit. ADEQ has reason to believe that IWU removed meth lab waste that it had received as a hazardous waste from an authorized storage container prior to sending the waste off-site, in a manner not specifically authorized in the Hazardous Waste Permit.

D. IWU Hazardous Waste Permit, Part III, Section E: Failure to keep containers closed. On more than one occasion, IWU violated its permit by unnecessarily opening a container containing meth lab waste. ADEQ has reason to believe that on more than one occasion, IWU opened a container to remove meth lab waste that it had received as a hazardous waste and sent it off-site in an unauthorized manner.

[4] ADEQ had issued IWU an RCRA Part B Hazardous Waste TSD Permit for its facility on April 12, 2001 (hereinafter the “Permit” or “IWU’s Permit”); Exhibit (“Exh.”) A.

[5] See March 26, 2003 IWU Notices of Appeal for Docket Nos. Z-22-03, Z-23- 03, and Z-24-03.

[6] A.R.S § 49-924(C). The statute reads:

A.R.S. § 49-924. Violations; civil penalty

A. A person who violates this article or any permit, rule or order issued or adopted pursuant to this article is subject to a civil penalty not exceeding twenty-five thousand dollars for each day of violation.

B. The attorney general shall bring an action to recover penalties under this section in the name of this state in the superior court in the county in which the violation occurred or in a county in which the department maintains an office.

C. The director may suspend or revoke any permit issued to a person who violates this article or any permit, rule or order issued or adopted pursuant to this article, unless the director has previously assessed a civil penalty for the violation pursuant to section 49-923, subsection B.

[7] This is the case regardless whether a treatment, storage and/or disposal facility (“TSD”) manages the hazardous waste in a fashion that made it the generator of the hazardous waste or that it simply facilitated the transportation of the hazardous waste from the actual generator to its ultimate treatment or disposal destination. In the former case, the TSD facility is considered a generator and must comply with A.A.C. R18-8-262, which incorporates by reference 40 CFR § 262.20. In the latter case, the TSD facility is not considered the generator of the hazardous waste, but must nonetheless comply with 40 CFR § 262.20 to maintain the chain of possession documentation required by the manifest system of “cradle-to- grave” tracking. Section 262.20 is made applicable by A.A.C. R18-8-264, which incorporates by reference 40 CFR § 264.71(c). See also Exh. A, p. II- 5.

[8] Exh. A, p. I-1.

[9] Id at p. III-4.

[10] A.R.S. § 41-1092.11(B). The subsection reads:

B. Revocation, suspension, annulment or withdrawal of any license is not lawful unless, before the action, the agency provides the licensee with notice and an opportunity for a hearing in accordance with this article. If the agency finds that the public health, safety or welfare imperatively requires emergency action, and incorporates a finding to that effect in its order, the agency may order summary suspension of a license pending proceedings for revocation or other action. These proceedings shall be promptly instituted and determined.

[11] Id. The Department, erroneously but without prejudice to IWU, cited A.R.S. § 41-1064(C) (“No revocation, suspension, annulment or withdrawal of any license is lawful unless, prior to the action, the agency provides the licensee with notice and an opportunity for a hearing in accordance with this chapter. If the agency finds that the public health, safety or welfare imperatively requires emergency action, and incorporates a finding to that effect in its order, summary suspension of a license may be ordered pending proceedings for revocation or other action. These proceedings shall be promptly instituted and determined.”) in its “Suspension Order.” As noted above, the essentially identical and corresponding provision in article 10 that is applicable to and restricts Agency action is found at A.R.S. § 41- 1092.11(B).

[12] Both Arizona’s hazardous waste management program and the federal program under the Resource Conservation and Recovery Act (RCRA)(42 U.S.C. § 6901 et seq.) establish a framework for the management of hazardous waste that is designed to minimize threats to human health and the environment by requiring strict and specific compliance with regulations governing the characterization, handling, storage, transportation and disposal of hazardous waste.

[13] Minute Entry, September 10, 2004.

[14] See nt. 55, below.

[15] Exh. A.

[16] Id.; ADEQ Hazardous Waste Inspection Report for IWU, September 10, 2002 (Exh. B); Affidavit for Search Warrant (Exh. E).

[17] Exh. E.

[18] Id.

[19] Exh. B; 9/15/04 Audio Recording (hereinafter “A.R.”) at 1:41:00 and 1:55:00.

[20] Exh. E and Notes and Chronology Prepared by Laura Malone, February 26, 2003 (Exh. N).

[21] Exh. E; Exh. N; 9/14/04 A.R. at 4:51:00.

[22] Exh. N; 9/14/04 A.R. at 5:01:30.

[23] 9/14/04 A.R. at 3:10:00.

[24] Exh. N; 9/14/04 A.R. at 5:10:30. [25] Exh. E; 9/15/04 A.R. at 45:30.

[26] Exh. E; 9/14/04 A.R. at 5:15:00; 9/15/04 A.R. at 2:10:00, 2:45:00, 3:38:00, 4:16:00, and 5:07:00; 9/16/04 A.R. at 8:00

[27] Exh. B; 9/15/04 A.R. at 1:41:00 and 1:55:00.

[28] Exh. E; Handwritten Notes of Barry Rhinehart, February 26, 2003 (Exh. M); Exh. N; 9/14/04 A.R. at 1:54:00 and 5:15:00; 9/15/04 A.R. at 2:10:30 and 3:38:00.

[29] Exh. E; 9/14/04 A.R. at 3:49:00.

[30] Exh. E; Exh. C; Exh. D; Exh. N; 9/14/04 A.R. at 5:15:00; 9/15/04 at 2:34:00; 9/16/04 A.R. at 28:45.

[31] Exh. E; Exh. M, Exh. N; 9/14/04 A.R. at 1:54:00 and 5:15:00; 9/15/04 A.R. at 14:00, 3:25:00, 3:38:00, 4:58:00; 9/16/04 at 2:42:30, 3:02:00, and 3:06:00.

[32] Exh. C; Exh. D; 9/16/04 A.R. at 4:00:00.

[33] Exh. E.

[34] Exh. E; Exh. M; Exh. N; 9/14/04 A.R. at 5:15:00; 9/15/04 A.R. at 2:21:30, 2:45:00, 3:11:00, 3:15:30, and 3:37:30; 9/16/04 A.R. at 31:30, 37:00, 42:00, 48:00, 54:00, 2:12:00, 2:15:00 and 2:53:00.

[35] Exh. E; Exh. M, Exh. N; 9/14/04 A.R. at 2:06:00, 5:15:00, and 5:33:30: 9/15/04 A.R. at 3:48:00, 3:53:00, and 5:09:00; 9/16/04 A.R. at 56:30.

[36] Exh. M; Exh. N; 9/14/04 A.R. at 1:31:00, 1:34:00, 1:53:00, 2:24:30, 3:15:30, 3:16:30, and 3:19:00; 9/15/04 A.R. at 3:00, 3:45:00; and 9/16/04 A.R. at 2:57:30 and 4:19:00.

[37] 9/16/04 A.R. at 4:19:00.

[38] 9/16/04 A.R. at 2:57:30, 3:17:00, 4:21:30.

[39] Exh. E; Exh. M; and Exh. N.

[40] Exh. E.

[41] Exh. E; Exh. N; 9/14/04 A.R. at 5:15:00; 9/15/04 A.R. at 20:00, 2:28:00, 2:34:00, 3:25:30, 4:27:30, 4:42:00; and 9/16/04 A.R. at 2:31:30 and 2:55:30.

[42] Exh. M; Exh. N; 9/14/04 A.R. at 2:03:00 and 5:29:00; 9/15/04 A.R. at 22:00, 3:38:00; and 9/16/04 A.R. at 31:40.

[43] Exh. C; Exh. E; Exh. M; 9/16/04 at 54:00, 3:18:00, and 4:36:30.

[44] Exh. E; Exh. M; Exh. N, 9/14/04 A.R. at 1:57:30, 2:04:00; 9/15/04 A.R. at 15:00, 3:38:00, and 5:05:00; and 9/16/04 A.R. at 2:47:30.

[45] Exh. E; Exh. C; Exh. M; Exh. N; 9/14/04 A.R. at 5:15:00; 9/15/04 A.R. at 3:14:30, 3:20:30; 3:43:30, 4:39:30, and 4:42:00; 9/16/04 A.R. at 31:30, 37:00, 42:30, 54:00, 2:15:00, 2:31:30, and 2:47:30.

[46] Exh. E.

[47] 9/14/04 A.R. at 5:25:00; 9/16/04 A.R. at 3:49:30.

[48] Exh. E; Exh. M; 9/14/04 A.R. at 2:11:30.

[49] 9/14/04 A.R. at 3:11:00: 9/15/04 A.R. at 4:05:00 and 4:09:00; 9/16/04 A.R. at 3:19:00, 3:35:00, and 4:25:00.

[50] 9/14/04 A.R. at 2:13:00.

[51] The only exception to this conclusion arises from the evidence IWU presented regarding the remanded indictments of IWU and its facility manager, Robert Yorke, and the dismissal of the indictment against Juvi Remetio. However, persuasively countering that evidence is the criminal plea agreements introduced by ADEQ that reveal that numerous IWU employees have pled guilty to crimes arising out their individual involvement in the illegal diversions of drug lab waste, including hazardous waste, from the IWU facility.

[52] The Department has paid out over $700,000.00 in the clean-up effort.

[53] See A.R.S. § 41-1092.07(G)(2):

2. At a hearing on an agency action to suspend, revoke, terminate or modify on its own initiative material conditions of a license or permit, the agency has the burden of persuasion.

See also Ariz. Admin. Code R2-19-119 (B).

[54] Culpepper v. Arizona Board of Nursing, 187 Ariz. 431, 930 P.2d 508 (App. 1997); See also Ariz. Admin. Code R2-19-119 (A).

[55] In re Arnold and Baker Farms, 177 B.R. 648, 654 (9th Cir. BAP (Ariz.) 1994). See also J. LIVERMORE, R. BARTELS, & A. HAMEROFF, LAW OF EVIDENCE ( 301.1(4th ed. 2000) (One party bears the overall burden of persuasion on each fact material to the party’s claims and defenses. Further, the party with the burden of persuasion on a particular fact is required to satisfy the burden of production of enough qualitative evidence sufficient to support a finding of the existence of the fact, following a reasonable person standard.)

[56] The regulation provides, in part:

A.A.C. R18-8-264. Standards for Owners and Operators of Hazardous Waste Treatment, Storage, and Disposal Facilities

A. All of 40 CFR 264 and accompanying appendices, as amended as of July 1, 2000, (and no future editions), with the exception of §§ 264.1(d) and (f), 264.149, 264.150, and 264.301(l), are incorporated by reference and modified by the following subsections, and are on file with the DEQ and the Office of the Secretary of State.

B. § 264.1, titled "Purpose, scope and applicability," paragraph (g)(1) is amended as follows:

(1) The owner or operator of a facility [with operational approval from the Director] to manage [public, private,] municipal or industrial solid waste [pursuant to R18-8-512, A.R.S. §§ 49-104 and 49- 762], if the only hazardous waste the facility treats, stores, or disposes of is excluded from regulation under [R18-8-264] pursuant to § 261.5 [(as incorporated by R18-8-261)];

C. § 264.1, titled "Purpose, scope, and applicability," paragraph (g)(8)(i)(D) is amended as follows:

(D) An immediate threat to human health, public safety, property, or the environment, from the known or suspected presence of military munitions, other explosive material, or an explosive device, as determined by an explosive or munitions emergency response specialist as defined in 40 CFR 260.10. [The DEQ Emergency Response Unit shall be notified as soon as possible, using the 24-hour number (602) 771-2330 or (800) 234-5677.]

***

G. § 264.71, titled "Use of manifest system," paragraph (a)(4) is amended as follows:

Within 30 days after the delivery, send a copy of the manifest to the generator [and submit one copy of each manifest to the DEQ, in accordance with R18-8-264(I).]

***

I. Manifests required in 40 CFR 264, Subpart E, titled "Manifest System, Recordkeeping, and Reporting," (as incorporated by R18-8-264) shall be submitted to the DEQ in the following manner:

[1. The TSD facility receiving off-site shipments of hazardous wastes required to be manifested shall submit to the DEQ, no later than 30 days following the end of the month of shipment, one copy of each manifest with the signature, in accordance with § 264.71(a)(1) (as incorporated by R18-8-264), of the owner or operator of the facility, or agent, for any shipment of hazardous waste received within that month.

2. If a facility receiving hazardous waste from off-site is also a generator, the owner or operator shall also submit generator manifests as required by R18-8-262(H).]

[57] The issues are : 1) whether Ms. Malone or Mr. Tobin should have related to IWU information about the ongoing police investigation under A.R.S. § 13-2512; 2) whether the Department should have participated in the police investigation; 3) whether the Department should have accompanied police to serve the search warrant at IWU; 4) whether IWU worked hard to gain the permit in the face of irrational opposition from the City of Phoenix and the community in which the site is located; and 5) whether the Department should have selected a less severe penalty than suspension and revocation.

[58] Additionally, IWU’s Counsel expresses in the CLOSING MEMORANDUM disconcertion over the admissibility at the hearing of certain statements that Counsel argues constitute inadmissible hearsay. For a number of reasons addressed in prehearing rulings, some of them suggested by the Assistant Attorney General in the Department’s REPLY BRIEF at pp. 17-21, the rulings stand. The Administrative Law Judge is not persuaded by Counsel’s reiteration of argument on the issue.

[59] Examples of which misstatements are noted by the Assistant Attorney General in the Department’s REPLY BRIEF at pages 4 to 8. The alleged misstatements/overstatements have been verified as such through a review of pertinent portions of the record.

[60] Where violations of the federal hazardous waste management laws occur, courts have held that the principals of strict liability apply. See, e.g.,United States v. Northeastern Pharmaceutical & Chem. Co. Inc., 810 F.2d 726, 738, 745 (8th Cir. 1986), cert. denied 484 U.S. 848 (1987) (the court observed that Section 7003 of RCRA imposes strict liability upon past off-site generators of hazardous waste and upon past transporters of hazardous waste). As IWU notes in its CLOSING MEMORANDUM, the issue is one of first impression in Arizona.

[61] As such, a company need not intend that the violations occur or even know that its employees’ criminal activities are giving rising to hazardous waste violations in order to support imposition of civil liability. See United States v. Domestic Industries, Inc., 32 F.Supp.2d 855, 866, 867 (1999) (“[W]hether DIVI knew of the alleged illegal RCRA activities occurring at its facilities is immaterial based on many courts' rulings that RCRA provides for strict liability.”). In assessing civil violations against the company, the knowledge of executive or management level employees is irrelevant, as is the company’s lack of negligence, intention to comply, and good-faith efforts to avoid violations. (“As the Supreme Court noted in Liparota v. United States, 471 U.S. 419, 433, 105 S. Ct. 2084, 85 L. Ed. 2d 434 (1985), statutes designed to protect the public health and welfare are more likely candidates for diminished mens rea requirements. RCRA and other similar environmental protection statutes fall within this category.”). However, the court further noted that Domestic’s liability for its sales manager’s actions or their lack of knowledge thereof or other similar mitigating factors “may be relevant at the penalty stage of these proceedings.” See also Zands v. Nelson, 797 F. Supp. 805, 816 (S.D. Cal. 1992) (finding that the owner/operator "is no less culpable than that negligent actor under RCRA's strict liability scheme."); see further, Northeastern Pharmaceutical & Chem. Co. Inc., supra; United States EPA v. Environmental Waste Control, Inc. 917 F.2d 327 (7th Cir. 1990), cert. denied 499 U.S. 975 (1991); Federal-Hoffman, Inc. v. United States EPA, 753 F.Supp. 273 (1990).

[62] See United States v. Northern Pharmaceutical & Chem. Co. Inc.; see also United States EPA v. Environmental Waste Control, Inc., 917 F.2d 327 (7th Cir. 1990), cert. denied 499 U.S. 975 (1991); Federal-Hoffman, Inc. v. United States EPA, 753 F.Supp. 273 (1990).

[63] See the Indictments charging Salazar, Hague, Diaz, and Fijalkowski.

[64] John Fijalkowski pled guilty to a Class 2 felony (“Fraudulant Schemes”) (Exhibit V), a plea entered to Count 7 of the Indictment that alleged: “. . . these defendants participated in a scheme to manipulate the inventory records of INNOVATIVE WASTE UTILIZATION, LLC, to conceal the mishandling of hazardous waste materials, including precursor and regulated chemicals.” Mario Luis Bivens pled guilty to Count 2 of the Indictment, (“Illegally Conducting an Enterprise”) a Class 3 felony (Exhibit U). Lorenzo Del Sol pled guilty to Count 5, as amended, of the Indictment (“Facilitation of Possession or Sale of Precursor Drugs”) (Exhibit R); Count 5 was based upon an undercover buy of red phosphorus on June 7, 2002; the conviction confirms the statements made in ¶39 of the Affidavit. Cesar Carlos Noriega pled guilty to Count 6, as amended, (“Facilitation of Possession or Sale of Precursor Drugs”) (Exhibit Q), a Class 6 felony; Count 6 of the Indictment was based upon a separate undercover buy from that alleged in Count 5, also taking place on June 7, 2002; Noriega’s conviction on Count 6, as amended, confirms the statements in ¶40 of the Affidavit. And – Alfredo Josè David Sgaarnaga pled guilty to Count 2 of the Indictment (“Illegally Conducting an Enterprise”), a class 3 felony.

[65] The hearing record was left open to November 19, 2004 to enable IWU to move for leave to present further evidence regarding what may have occurred in the interim with the pending Grand Jury inquiries and, perhaps, to offer testimony by management personnel. See September 10, 2004 MINUTE ENTRY.

[66] See A.R.S. § 49-924(C).

[67] A.R.S. § 49-104(A)(1).

[68] A.R.S. § 49-104(A)(9).

[69] A.R.S. § 49-925(A)(3) and (4) provide:

3. Treats, stores, transports or disposes of hazardous waste without appropriate authority under this article or under the federal act.

4. Violates a material permit condition issued pursuant to this article or a material interim status standard adopted pursuant to this article.

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