Pacific Refining Company

Plain-English summary

EPA Region IX appealed the penalty assessed against Pacific Refining Company for failing to mark the fence enclosing a PCB transformer. The Environmental Appeals Board held that marking the transformer itself did not satisfy the separate requirement to mark the enclosure, because a fire could obscure or destroy the transformer marking and emergency responders might not know that PCBs were present. The Board classified the violation as a major marking violation, set a gravity-based penalty of $13,000, and applied a 15 percent reduction because Pacific corrected the violation promptly. The final penalty for the count was $11,050.

Decision snapshot

• Cited authorities: 40 C.F.R. §§ 22.27(b), 22.31(a), 761.40(a)(2), 761.40(j), 761.40(j)(1), 761.40(j)(3), and 761.45; 15 U.S.C. §§ 2614 and 2615(a)(2)(B).
• Outcome: The count XI penalty was increased from the amount assessed below to $13,000 before a 15 percent downward adjustment, resulting in a final count XI penalty of $11,050.
• Key point: A PCB transformer enclosure must carry its own warning mark so emergency responders can identify the PCB hazard even if a fire obscures the marking on the transformer.

Full text (EPA EAB public release)

520 ENVIRONMENTAL ADMINISTRATIVE DECISIONS

IN RE PACIFIC REFINING COMPANY

TSCA Appeal No. 94-1
FINAL DECISION AND ORDER

Decided October 19, 1994

Syllabus

U.S. EPA Region IX appeals the Presiding Officer's civil penalty assessment for one
count of a multi-count complaint filed against Pacific Refining Company (Pacific) under § 15
of the Toxic Substances Control Act (TSCA), 15 U.S.C. § 2614. The Region contends that the
$2850 penalty assessed against Pacific for violating a regulation pertaining to the marking of
electrical transformers containing polychlorinated biphenyls (PCBs) is insufficient. It is un-
disputed that Pacific failed to mark the fence enclosing one of its PCB transformers, as
required by 40 C.F.R. § 761.40(j). The Presiding Officer classified the violation as a “minor”
marking violation under the Agency’s 1990 PCB Penalty Policy, because the transformer
itself was marked, and the transformer marking was visible through the fence. The Region
contends that the violation should have been classified as a “major” marking violation,
carrying a $13,000 penalty, because Pacific did not comply with the enclosure marking
regulation, and a mark on the transformer itself might not warn of the presence of PCBs in
the event of a transformer fire.

Held: The Board concludes that the Presiding Officer erred in determining the amount
of the penalty for the violation. It is undisputed that Pacific fulfilled none of the require-
ments of § 761.40(j), and under the fire emergency conditions envisioned by the Agency in
promulgating § 761.40(j), a mark on the transformer itself would not provide sufficient
notice to emergency responders of the presence of PCBs. The Board determines that the
violation is properly classified as a “major” marking violation, and assesses a gravity-based
penalty of $13,000 against Pacific. However, because Pacific acted promptly to remedy the
violation, the Board concludes that a 15% downward adjustment in the penalty is appropri-
ate, and therefore assesses a total civil penalty of $11,050 against Pacific.

Before Environmental Appeals Judges Nancy B. Firestone,
Ronald L. McCallum, and Edward E. Reich.

Opinion of the Board by Judge McCallum:

U.S. EPA Region IX appeals an order of the Presiding Officer as-
sessing a civil penalty against Pacific Refining Company (Pacific) for
alleged violations of § 15 of the Toxic Substances Control Act (TSCA),
15 U.S.C. § 2614, and the rules implementing TSCA relating to the
marking of polychlorinated biphenyls (PCBs), 40 C.F.R. Part 761, Sub-

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PACIFIC REFINING COMPANY 521

part C. In April 1991, Region IX filed a 17-count complaint against
Pacific alleging various violations of the PCB regulations, and propos-
ing civil penalties totalling $200,000. The complaint stemmed from an
inspection of Pacific’s petroleum feedstock refining facility in March
1990 that disclosed alleged violations of the PCB regulations relating
to the inspection, registration, marking, documentation, and disposal
of PCBs. Following an evidentiary hearing, the Presiding Officer found
Pacific liable on eight of the 17 counts, and assessed a total civil
penalty of $62,938. Region IX appeals the assessment of a $2850 pen-
alty for one of these eight counts.

In his Initial Decision, the Presiding Officer determined that Pa-
cific was liable on Count XI of the complaint, which charged Pacific
with a violation of 40 C.F.R. § 761.40(j). That section requires appropri-
ate marking of the means of access to a PCB transformer. The Presid-
ing Officer assessed a civil penalty of $3000 for Count XI.’ On appeal,
Region IX contends that the Presiding Officer erred in determining the
amount of the penalty assessed for Count XI, and that proper applica-
tion of the TSCA PCB penalty guidelines would result in a penalty of
$13,000 for Count XI. The amount of the penalty imposed for Count XI
is the sole issue on appeal. For the reasons set forth below, we con-
clude that the penalty guidelines were not correctly applied with re-
spect to Count XI. We instead assess a civil penalty against Pacific in
the amount of $11,050 for violation of 40 C.F.R. § 761.40(j).?

I. BACKGROUND

The facts underlying the charge in Count XI of the complaint are
not in dispute. Region IX’s inspection of Pacific’s facility included the
inspection of PCB Transformer 2375/480. The transformer was en-
closed by a chain-link fence, through which the transformer was readily
visible. The parties agree that the transformer was subject to two rel-
evant PCB marking requirements. First, in accordance with 40 C.F.R. §
761.40(a)(2), the transformer itself was required to be marked with
“M,” indicating that it was, in fact, a PCB transformer.’ Second, in
accordance with 40 C.F.R. § 761.40(j), the fence enclosing the trans-

' The Presiding Officer assessed gravity-based penalties totalling $66,250 for all eight counts
upon which Pacific was found liable, then allowed a 5% penalty reduction for “attitude,” thus result-
ing in a total penalty of $62,938. In light of the 5% adjustment, the total penalty attributable to Count
XI is $2850 ($3000 less 5%).

2? Because neither party has appealed the penalties assessed for the other seven counts, our
opinion does not address the remainder of the Presiding Officer's penalty assessment.

3In accordance with the regulations, the mark itself must conform to the distinctive PCB cau-
tion notice illustrated at Figure 1 of 40 C.F.R. § 761.45; “M,” is simply the regulatory shorthand method
for referring to the complete mark.

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522 ENVIRONMENTAL ADMINISTRATIVE DECISIONS

former was also required to be marked with “M,.”* Transformer 2375/
480 was properly marked, but no mark of any kind suggesting the
presence of PCBs was placed on the fence surrounding the trans-
former. Region IX therefore charged Pacific with a violation of 40
C.F.R. § 761.40(j) for failure to mark the means of access to a PCB
transformer.

In his Initial Decision, the Presiding Officer agreed that Pacific
was liable for a violation of § 761.40(j). In assessing a penalty for the
violation, the Presiding Officer looked to the framework established in
the Guidelines for Assessment of Civil Penalties Under Section 16 of
the Toxic Substances Control Act; PCB Penalty Policy, 45 Fed. Reg.
59,770 (Sept. 10, 1980) (1980 Guidelines), and in the Agency’s 1990
revised PCB Penalty Policy (1990 Penalty Policy).> The Presiding Of-
ficer rejected Region IX’s contention that the violation constituted a
“major marking violation” within “circumstance level 2” of the 1990
Penalty Policy's Gravity Based Penalty Matrix. The Policy defines a
circumstance level 2 major marking violation as:

40 C.F.R. § 761.40(j) provides that:

(1) [A]s of December 1, 1985, the vault door, machinery room
door, fence, hallway, or means of access, other than grates and
manhole covers, to a PCB Transformer must be marked with
the mark M, as required by paragraph (a) of this section [relat-
ing to marking of PCB Transformers].

(3) Any mark placed in accordance with the requirements of
this section must be placed in the locations described in para-
graph G)(1) of this section and in a manner that can be easily
read by emergency response personnel fighting a fire involving
this equipment.

‘TSCA provides that in assessing a civil penalty, the Presiding Officer shall take into account:

[T]he nature, circumstances, extent and gravity of the violation
or violations and with respect to the violator, ability to pay, ef-
fect on ability to continue to do business, any history of prior
such violations, the degree of culpability, and such other mat-
ters as justice may require.

TSCA § 16(a)(2)(B). TSCA penalties are usually determined in two stages in accordance with the
1980 Guidelines and the 1990 Penalty Policy. First, a “gravity based penalty” is calculated from a
matrix which takes into account both the probability of harm caused by the violation and the extent
of potential damage from the violation. Second, upward or downward adjustments may be made to
the penalty based on the other statutory factors: ability to pay and effect on ability to continue in
business (which are considered as one factor), prior violations; culpability; and “such other matters
as justice may require.” 45 Fed. Reg. 59,770.

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PACIFIC REFINING COMPANY 523

[A] situation where there is no indication to someone
unfamiliar with PCBs that PCBs are present, such as
failure to label the access to a PCB Transformer or fail-
ure to label the transformer.

1990 Penalty Policy at 11. For circumstance level 2 major marking
violations of “significant” extent, the Penalty Policy suggests a penalty
of $13,000. Id.®

The Presiding Officer instead agreed with Pacific that the evi-
dence suggested only a “circumstance level 5” “minor marking viola-
tion” of significant extent under the matrix. The 1990 Penalty Policy
defines circumstance level 5 minor marking violations as:

[S]ituations in which some requirements of the rule have
not been followed, but there is sufficient indication that
PCBs are present and the PCB Items can be identified.

1990 Penalty Policy at 12. For such violations, the Penalty Policy suggests
a penalty of $3000.”

The Presiding Officer’s rationale for imposing the lower penalty was
that the PCB M, mark located on the transformer was visible through the
fence surrounding the transformer, and that the mark was visible from the
point of access to the transformer enclosure. He concluded that “there is
a reasonable likelihood that someone entering the enclosure would see
the marking on the transformer.” Initial Decision at 15.

On appeal, the Region contends that the Presiding Officer erred in
assessing a circumstance level 5 minor marking violation penalty for
Count XI because Pacific did not comply with any of the requirements
of 40 C.F.R. § 761.40(j), and there was no other sufficient indication
that PCBs were present inside the transformer enclosure. Pacific con-

°The determination of the “extent” of the violation is based on the quantity of PCBs involved;
that aspect of the penalty determination is not at issue.

’ The Penalty Policy sets forth only two circumstance levels for violation of the PCB marking
regulations. “Major” violations are considered in the “high range” with respect to probability of
damages from the violation, and placed in “circumstance level 2,” the second-highest circumstance
level on the matrix. “Minor” violations are considered in the “low range” with respect to probability
of damages, and placed in “circumstance level 5,” the second-lowest circumstance level on the
matrix. Penalty Policy at 11-12. No marking violations are included within the “medium range” of
the matrix. This omission is logical in light of the way the Agency defined marking violations: the
violation is either “major,” i.e. a failure to mark, or “minor,” i.e. partial compliance with marking
requirements that satisfies the regulations in the most important respects, by indicating the presence
of PCBs and identifying the PCB items (for example, by using a mark that conveys the necessary
information, but does not conform exactly to regulatory requirements). See id.

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524 ENVIRONMENTAL ADMINISTRATIVE DECISIONS

tends that the Presiding Officer's penalty assessment was well within
the discretion afforded to him under the applicable regulations. While
Pacific acknowledges that it violated the PCB marking regulations to
some degree, it contends that the presence of the M, mark on the
transformer itself removed the violation from the ambit of circum-
stance level 2 under the Penalty Policy, because the mark on the
transformer was, in this instance, sufficient indication that PCBs were

present.

II. DISCUSSION

The regulations governing this proceeding give the Presiding Of-
ficer the discretion “to assess a penalty different in amount from the
penalty recommended to be assessed in the complaint, [so long as he]
set[s] forth in the initial decision the specific reasons for the increase
or decrease.” 40 C.F.R. § 22.27(b). Although the Presiding Officer must
“consider” any penalty guidelines, he is not bound by them. Id. The
regulations also give the Board the discretion to increase or decrease
the penalty assessed in the initial decision. Id. § 22.31(a). When the
penalty assessed by the Presiding Officer falls within the range of
penalties provided in the penalty guidelines, the Board will generally
not substitute its judgment for that of the Presiding Officer absent a
showing that the Presiding Officer has committed an abuse of discre-
tion or a clear error in assessing the penalty. In re Ray Birnbaum
Scrap Yard, TSCA Appeal No. 92-5 at 5 (EAB, Mar. 7, 1994); Bell & Howell
Co., TSCA Appeal No. TSCA-V-C-033, 034, 035 at 19 (JO, Dec. 2, 1983). We
find such error in the Presiding Officer’s rationale in this case.

As noted above, the Presiding Officer did not impose the penalty
suggested for a circumstance level 2 violation because, in his view, the
marking on the transformer was adequate to alert someone entering
the enclosure to the presence of PCBs. Initial Decision at 15. This
reasoning is flawed in light of the plain language of § 761.40(j) and the
purpose underlying the promulgation of the regulation.

Subsection (j) was added to the existing PCB marking regulations
in 1985 as part of a comprehensive effort to reduce the environmental
and human health risks posed by fires in electrical transformers con-
taining PCBs. Polychlorinated Biphenyls in Electrical Transformers,
Final Rule, 50 Fed. Reg. 29,170 (July 17, 1985). At that time, the PCB
regulations already required marking of the PCB transformer itself. See
44 Fed. Reg. 31,542 (May 31, 1979). In 1985 the Agency determined
that marking of the access to PCB transformers, in addition to the
marking of the transformer, would help protect fire responders from
potential exposure to PCBs. In that regard, the Agency determined that

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PACIFIC REFINING COMPANY 525

“the labeling of the exterior of transformer locations is necessary to
insure that emergency response personnel arriving at the scene of a
fire know that the fire involves a transformer that contains PCBs.” Id.
at 29,189. Thus, the Agency stated that:

EPA has required the labeling of the exterior of all PCB
Transformers with the mark M,. This means that doors,
fences, hallways, and other easily markable means of
access to PCB Transformer locations must be marked with
PCB identification labels. These labels must be promi-
nently displayed and visible to emergency response per-
sonnel in the event of a fire involving this equipment.

Id. at 29,196.

In promulgating § 761.40(j), the Agency did not distinguish be-
tween transformer enclosures that provide a clear view of the trans-
former and those that do not. All “means of access” (including, specifi-
cally, “fences”) must be marked. 40 C.F.R. § 761.40(j). Further, the mark
required by § 761.40(j) must be placed “in a manner that can be easily
read by emergency response personnel fighting a fire involving this
equipment.” id. § 761.40(j)(3). As the Region points out, a fire in a PCB
transformer could obscure or destroy the mark placed on the trans-
former itself. Region’s Brief at 6. It is obvious that the Agency contem-
plated such a scenario when it determined that marking the trans-
former enclosure would reduce the risk of PCB exposure to emer-
gency response personnel, by insuring that responders were aware
that the involved transformer contained PCBs. See 50 Fed. Reg. at
29,189 (exterior labeling insures that responders know transformer fire
involves PCBs), 49 Fed. Reg. 39,966, at 39,981 (Proposed Rule, exterior
labeling may reduce exposure to firemen and others in vicinity of fire).
An exterior labeling requirement would have been unnecessary if the
Agency had believed that a mark on the burning transformer itself
provided adequate notice of the presence of PCBs. In the case of a
transformer fire, the relative opacity of the enclosure is irrelevant if the
fire obscures or destroys the mark placed on the transformer itself. We
thus conclude that a mark on the transformer itself does nothing to
further the purposes for adopting a separate enclosure marking re-
quirement, and cannot be viewed as serving as partial compliance
with the very explicit requirements of § 761.40(j).*

*In this regard, we find no merit in Pacific’s claim that § 761.40(j) is part of one “rule” that
includes the transformer marking requirement, and that Pacific met “some requirements of the rule”
by marking the transformer. Pacific's Brief at 6-7. As noted, § 761.40(j) establishes a specific marking
requirement that is independent of the regulation requiring marking of the transformer; compliance
with one regulation does not negate or mitigate failure to comply with the other.

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526 ENVIRONMENTAL ADMINISTRATIVE DECISIONS

Further, we cannot agree with Pacific’s contention that the Presid-
ing Officer’s penalty assessment was correct in view of the fact that the
primary fire response personnel in this case were Pacific’s employees
who had been trained in the location of PCB transformers. See Pacific’s
Brief at 6. As the Agency explained in the preamble to § 761.40(j), the risk
of PCB exposure is not limited to a facility’s PCB-trained personnel:

An industrial PCB Transformer fire during off-hours
would be more likely to expose volunteer and munici-
pal salaried firefighters than fires during normal oper-
ating hours, when company fire brigades would have
primary responsibility for initial emergency response.

50 Fed. Reg. at 29,184. The Agency plainly considered that off-site fire
brigades might be required to respond to a PCB-related fire, despite
the existence of a company fire brigade. Thus, the presence of a trained,
on-site fire brigade is not a circumstance that mitigates complete fail-
ure to comply with the § 761.40(j) marking requirement.

Based on the foregoing, we conclude that the Presiding Officer
erred in his penalty assessment by basing his consideration of the
“circumstance level” on factors that do not impact whether there has
been any compliance with the specific and independent enclosure
marking requirement of § 761.40(j): Pacific’s compliance with the trans-
former marking requirement, and the visibility of the transformer’s
mark through the enclosure under normal conditions. Because it is
undisputed that the transformer enclosure bore no mark suggesting
the presence of PCBs, as required by 40 C.F.R. § 761.40(j), we find that
the violation should be classified as a circumstance level 2 major
marking violation, in accordance with the 1990 Penalty Policy (“there
is no indication to someone unfamiliar with PCBs that PCBs are present,
such as failure to label the access to a PCB Transformer or failure to
label the transformer.”). The fact that it is undisputed that under nor-
mal, non-emergency conditions, someone standing outside the enclo-
sure could have seen the PCB mark on the transformer and would
have had “sufficient indication that PCBs are present” (consistent with
a circumstance level 5 violation) does not alter our analysis. Section
761.40(j) was intended to provide notice of the presence of PCBs in
the event the PCB transformer was involved in a fire. See § 761.40(j)(3);
50 Fed. Reg. at 29,189. In such an instance, with no mark on the
enclosure, there would be “no indication” to someone unfamiliar with
the facility (such as an off-site emergency responder) that PCBs were
present. In that event, conditions consistent with a circumstance level
2 violation would exist with respect to the kind of harm § 761.40(j) was
intended to prevent. Therefore, in accordance with the penalty matrix,

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PACIFIC REFINING COMPANY 527

we assess a gravity-based penalty in the amount of $13,000 against
Pacific for violation of § 761.40(j).

We next turn to the consideration of penalty factors relating to the
violator to see if any adjustment in the base penalty is appropriate. See
1990 Penalty Policy at 14-19. Although the Region has not addressed
the propriety of an adjustment in the base penalty, it is within the
Board’s authority to make adjustments to the gravity-based penalty in
appropriate circumstances. See 40 C.F.R. § 22.31(a). For the reasons
explained below, we agree with Pacific that a downward adjustment in
the base penalty is appropriate.

One adjustment factor described in the Penalty Policy is “attitude”
of the violator, including “whether the violator is making good faith
efforts to comply with the appropriate regulations; the promptness of
the violator’s corrective actions; and any actions taken to minimize
harm to the environment.” 1990 Penalty Policy at 17. The Penalty
Policy suggests a maximum downward adjustment of 15% for good
“attitude.” Id. Pacific contends that several factors support a down-
ward reduction on this basis: Pacific's compliance with the enclosure
marking requirement within one day of the inspection; its “coopera-
tive and compliant” attitude during the inspection; and its efforts to
implement better internal controls to ensure compliance with environ-
mental laws. Pacific’s Brief at 8.

As explained supra, n. 1, the Presiding Officer applied a flat 5%
downward adjustment to all counts of the complaint in light of Pacific’s
“attitude and conduct,” but did not explain whether individual counts
might have merited greater reductions. Initial Decision at 22. The Pre-
siding Officer stated only that he declined to apply a 15% adjustment
because of Pacific’s actions respecting counts unrelated to Count XI,
specifically Pacific’s delays in making certain wipe tests following the
inspection. Initial Decision at 22-23. There is no dispute, however,
(and the Presiding Officer acknowledged) that Pacific marked the
enclosure surrounding Transformer 2375/480 the day after the inspec-
tion. The Penalty Policy suggests that “[a] company would generally
qualify for a downward adjustment of a maximum of 15% if it imme-
diately halts the violative activity and takes steps to rectify the situa-
tion.” 1990 Penalty Policy at 17. Because of Pacific’s immediate action
in remedying its violation of § 761.40(j), we conclude that a 15% reduc-
tion in the gravity-based penalty is appropriate. Accordingly, we as-
sess a total civil penalty of $11,050 against Pacific.

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528 ENVIRONMENTAL ADMINISTRATIVE DECISIONS

III. CONCLUSION

For the foregoing reasons, a civil penalty of $11,050 is assessed
against Pacific Refining Company in accordance with § 16(a) of the
Toxic Substances Control Act for violation of 40 C.F.R. § 761.40(j), as
described in Count XI of the complaint. Payment of the entire amount
of the civil penalty shall be made within sixty (60) days of service of
this final order (unless otherwise agreed to by the parties), by cashier’s
check or certified check payable to the Treasurer, United States of
America, and forwarded to:

EPA—Region IX
Regional Hearing Clerk
P.O. Box 360863M
Pittsburgh, PA 15251

So ordered.9

9 This order does not affect Pacific’s obligation to pay the remaining $60,088 civil penalty
assessed by the Presiding Officer, and not appealed to the Board, in accordance with the order set
forth in the Initial Decision.

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