BEFORE THE ILLINOIS POLLUTION CONTROL BOARD
PEOPLE OF
THE STATE OF ILLINOIS,
Complainant,
v.
TOY AL AMERICA, Inc. formerly
known as ALCAN-TOY
AL AMERICA, INC.,
a foreign corporation,
Respondent.
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PCB No. 00-211
(Enforcement -Air)
NOTICE OF ELECTRONIC FILING
PLEASE TAKE NOTICE that on the 20
th
day of February, 2009, the Complainant filed
its Closing Argument and
Post-Hearing Brief, a true and correct copy of which is attached and
herewith served upon you.
PEOPLE OF THE STATE OF
ILLINOIS,
by
LISA MADIGAN
Attorney General
of
S te f Illinois
istopher Grant
ssistant Attorney General
69 W. Washington
Street, #1800
Chicago Illinois, 60602
(312)814-5388
Electronic Filing - Received, Clerk's Office, February 20, 2009
BEFORE THE ILLINOIS POLLUTION CONTROL BOARD
PEOPLE OF THE STATE OF ILLINOIS,
Complainant,
v.
TOY AL AMERICA, Inc. formerly
known as ALCAN-
TOY AL AMERICA, INC.,
a foreign corporation,
Respondent.
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)
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PCB No. 00-211
(Enforcement)
COMPLAINANT'S CLOSING ARGUMENT AND POST-HEARING BRIEF
NOW COMES Complainant, PEOPLE OF THE STATE OF ILLINOIS, by LISA
MADIGAN, Attorney General
of the State of IlIinois, and hereby presents its Closing Argument
and
Post-Hearing Brief.
I.
INTRODUCTION
On December 10
th
and
11
th , 2008, hearing was held to determine liability and the
appropriate penalty for the violations alleged by the State in Count I and
II of the Complaint filed
in this matter
l
.
Counts I and II relate to the alleged failure to control volatile organic material
emissions
("YOM") at Toyal America Inc. 's ("Toyal's") facility, located at 17401 South
Broadway, Lockport, Will County, Illinois
("facility or site"), in violation of Section 9(a) of the
Illinois Environmental
Protection Act ("Act"), 415 ILCS 5/9(a) (2006), and 35
Ill.
Adm. Code
218.986.
I
Counts III -VII, relating to alleged hazardous waste storage and handling violations, were
resolved through a Stipulation and
Proposal for Settlement accepted by the Board on August 9,
2001.
Electronic Filing - Received, Clerk's Office, February 20, 2009
II.
SUMMARY OF THE RELIEF SOUGHT BY COMPLAINANT
Complainant seeks a finding of liability on Counts I and II of the Complaint, and
assessment
of a civil penalty in the amount of $716,440.00. Complainant also requests that the
Board order Respondent to cease and desist from future violations
of the Act and Board
regulations.
III.
THE EVIDENCE ESTABLISHES THE VIOLATIONS ALLEGED IN COUNTS I
AND II
OF THE COMPLAINT
A.
Toyal Violated Section 9(a) of the Act and 35 III. Adm. Code 218.986
(Count II)
1.
The Regulation Applies to Toyal's Facility
. Part 218 of the Board Air Pollution Regulations, 35
Ill.
Adm. Code, Part 218, establishes
YOM emission standards and limitations for the Chicago area, which includes Will County,
Illinois, where
Toyal's facility is located
2
•
On January 6, 1994, the Board adopted amendments
to the
Part 218 regulations, as required by Section 182(b )(2) of the federal Clean Air Ace. The
amendments were required because the area had been designated as a severe ozone non-
attainment area. The
Board's Order required compliance with the amended regulations no later
than March 15,
1995
4
•
Subpart TT of the Part 218 regulations applies to "other emission units", which include
the aluminum flake and paste operations at
Toyal's facility. The YOM control requirements of
235
Ill.
Adm. Code 218.103
3R93-14,
Opinion and Order of the Board (January 6, 1994)
4Id., p.5
2
Subpart TT are applicable to Toyal's emission units because these units had the potential to emit
in excess of25 tons per year ofVOM
5
.
Toyal admits that it was subject to the requirements of
35 III. Adm. Code 218.986(a), Subpart TT, as of March 15, 19956. Toyal also admitted that, as
of April 18,2001, emission units in its A-Unit, B-Unit, C-Unit, D-Unit, Aluminum Flake
Process, FX Flake Process, and Sigma Mixer Process were subject to 81 % YOM control in
accordance
~ith
35 III. Adm. Code 218.986(a), but were not in compliance7.
2.
Toyal Operated in Violation
of 35 III. Adm. Code 218.986(a)
The evidence proves that Toyal operated in violation
of the Part 218 regulations for more
than eight years.
Part 218, Subpart TT, Section 218.986(a), provides, 'in pertinent part, as
follows:
Section 218.986
Control Requirements
Every owner or operator
of an emission unit subject to this Subpart shall comply with the
requirements
of subsection (a), (b), (c), (d), or (e) below.
a)
Emission capture and control equipment which achieves an overall reduction
in
uncontrolled VOM emissions of at least
81
percent from each emission unit, or
(Board Note: For the purpose
of this provision, an emission unit
is
any part or
activity at a source
of a type that by itself is subject to control requirements in
other Subparts
of this Part or 40 CFR 60, incorporated by reference in Section
218.112,
e.g., a coating line, a printing line, a process unit, a wastewater system,
or other equipment, or is otherwise any part or activity at a source.)
*
*
*
5S
ee
: 35
III. Adm. Code 218.280(b). Toyal admits that its emission units had the potential
to emit in excess
of 25 tons per year YOM from March 15, 1995 through April 30,2003.
Complainant's Exhibit 17, Admitted Fact No. II.
6Complainant's Exhibit 17, Admitted Fact No. 13
7Complainant's Exhibit 17, Admitted Facts No.'s 34-53.
3
Toyal was subject the YOM control regulations of Subpart TT from March 15, 1995
through April
30, 2003, because throughout that period its emission sources had the potential to
emit
in excess of25 tons ofVOM per years. Toyal opted to reach compliance with Subpart TT
by controlling
YOM emissions by 81% pursuant to 35 Ill. Adm. Code 218.986(at
Toyal's facility contains a large number ofVOM emission units which require 81 % YOM
control 10. On March 6, 1996, Toyal submitted a Clean Air Act Permit Program Permit
("CAAPP")
application to Illinois EPA. In its application, Toyal admitted that its emission units
were not in compliance with 35 Ill. Adm. Code 218.986(a)ll. At hearing, Toyal's Vice
President
of Operations also admitted that there was no question that Toyal was required to control
emissions pursuant to the regulation as
of March 15, 1995
12
. However, as admitted in its
CAAPP application, at the time Toyal was not in compliance.
Toyal's first attempts at controlling excess
YOM emissions was through the 1998
installation
of a Recuperative Catalytic Oxidizer ("RCO") control device, which began operation
on December
1, 199813. However, at that time, many of Toy aI's YOM emission units were not
sComplainant' s Exhibit 17, Admitted Fact No.
11
9Complainant's Exhibit 17, Admitted Fact No. 18
IOToyal's consultant testified that there were "well over 200 YOM emission units" at
Toyal's facility. Tr.,
12111108, p. 69
IIComplainant's Exhibit 17, Admitted Facts No. 15-16. At hearing, Barry Van Hoose,
Toyal's Vice
President of Operations, agreed that the 1996 permit application admitted violation
of the Subpart TT regulations. Tr., 12/10/08, p. 113.
12Ti'., 12/10/08, p. 182
13Tr., 1211 0/08, p. 163
4
connected to the YOM control device, and Toyal remained out of compliance with the control
requirements.
Toyal was still not in compliance on April 18,
2001, when it submitted a construction
permit application for a substitute
YOM control device
l4
. In this application, Toyal identified
seven major aluminum flake and past process units that were still not in compliance with
35 Ill.
Adm. Code 218.986(a). The seven process units contained 83 separate YOM emission
Pursuant to the Part 218 regulations, Toyal was required to demonstrate compliance upon
attaining the required
YOM emission reduction
l6
. Toyal did not demonstrate compliance until
April
30, 2003
17
.
Based on the evidence, it is indisputable that Toyal failed to control all YOM emissions
by 81
%
as required, and thereby violated 35 Ill. Adm. Code 218.986(a). Toyal also failed to
control all
YOM emissions from affected emission units subject to 35 Ill. Adm. Code 218.980.
By discharging a contaminant into the Air in violation
of the Board Air Pollution regulations,
Toyal thereby also violated Section 9(a)
of the Act; 415 ILCS 5/9(a)(2006). As shown by the
facts admitted by Toyal, these violations continued from March 15, 1995 until April 30, 2003.
B.
ToyaJ Caused, Threatened, or Allowed Air
Pollution
(Count I)
14The proposed replacement device was a Regenerative Thermal Oxidizer
15Complainant's Exhibit 17, Admitted Facts No. 34-53. The reported emission 'sources'
are emission
'units' for the purpose of35 Ill. Adm Code 218.986(a).
16
35 Ill. Adm. Code 218.991(a)
17Complainant's Exhibit 17, Admitted Fact No. 57
5
Electronic Filing - Received, Clerk's Office, February 20, 2009
In Count I, Complainant alleges that, by failing to control YOM emissions according to
the standards applicable to its industry, Toyal caused, allowed or threatened air pollution, in
violation
of Section 9(a) of the Ad
8
.
In this case, Toyal caused or allowed or threatened air
pollution by failing to control
YOM emissions in an ozone non-attainment area
l9
.
Pursuant to Section I 82(b)(2) of the federal Clean Air Act ("CAA"), the Board developed
regulations requiring
"major" YOM sources to control emissions using reasonably available
control technology
("RACT,,)20. In the Board Order adopting these standards, the Board noted
that Illinois
EPA had identified 88 sources in the Chicago non-attainment area which qualified as
'other
[YOM] emission sources' that would be considered 'major' YOM sources under the new
regulations
21
. Of these 88 sources, 45 had
actual
YOM emissions greater than 10 tons per year,
and the basis for achieving RACT was determined on the basis
of these 45 sources
22
. Toyal
reported
actual
YOM emissions of 33 tons in 1990 and 28 tons in 1992
23
. In its 1996 CAAPP
Permit application, Toyal reported YOM emissions in excess of 80 tons per year24. Clearly, the
18Complaint, Count
I, par. 18
19 At the time the regulations were promulgated, Will County was classified as 'severe
non-attainment' for ozone. R93-14 (January 6, 1994). Will County was still classified as an
ozone non-attainment area as
of the date of hearing. Tr., 12111108, p. 18.
2°R93-14
(January 6,1994 Order, slip op. at I)
21Id., slip op. at 4.
23Complainant's Exhibit 17, Admitted Fact No.9
24Complainant's Exhibit 17, Admitted Fact No. 19. This disclosure was made for the
purpose
of a CAAPP fee determination and likely only represents a possible range of YOM
emISSIOns.
6
Electronic Filing - Received, Clerk's Office, February 20, 2009
1994 amendments to the Part 218 regulations pertaining to 'other emission sources' were
directed specifically to companies such
as Toyal.
The Act prohibits causing, threatening or allowing emission
of contaminants " ... so as to
cause or tend to cause air pollution
in Illinois,
either alone or in combination with contaminants
from other sources
... "(emphasis
supplied)25.
Because Toyal had actual emissions in excess of
25 tons prior to the amendments to the regulations, Toyal's emission units were possibly one of
the 45 YOM sources for which the 81
%
control regulations were developed.
An ozone non-attainment area, by its very nature, is more susceptible to adverse impacts
from excess
YOM emissions due to existing ambient conditions. Additional uncontrolled YOM
emissions, such as Toyal's, threatened the existing non-attainment area as a whole by
threatening to worsen air quality. Toyal's failure to control
YOM emissions as required, while
continuing to operate in a severe ozone non-attainment area, ' tended to cause' air pollution. By
failing to control
YOM emissions at its facility as required by 35 Ill. Adm. Code 218.986(a),
Toyal, alone and in combination with other
YOM sources, caused, or tended to cause air
pollution from March 15, 1995 to April
30, 2003, and thereby violated Section 9(a) of the Act,
415
ILCS 5/9(a) (2006), as alleged in Count
I.
IV.
ANALYSIS OF THE 33(c) FACTORS DEMONSTRATES THAT THE BOARD
SHOULD ASSESS
A SIGNIFICANT CIVIL PENALTY
In making its orders, the Board is directed to consider matters of record concerning the
reasonableness
of the alleged pollution, including those factors identified in Section 33(c) of the
25
415 ILCS 5/9(a) (2006). Note.that the term 'contaminant' is defined in 415 ILCS
5/3.165 (2006) to include " ... any solid, liquid or gaseous matter. .. ". YOM is a 'contaminant'
under the Act.
7
Electronic Filing - Received, Clerk's Office, February 20, 2009
Act, 415 ILCS 5/33( c) (2006). The Board is also authorized by the Act to consider any matters
ofrecord concerning the mitigation or aggravation of penalty, including those matters specified
in
Section 42(h).
A.
Section 33(c) Factors
Section 33(c) of the Act, 415 ILCS 5/33(c) (2006), provides, as follows:
In making its orders and determinations, the Board shall take into consideration
all the facts and circumstances bearing upon the reasonableness
of the emissions,
discharges or deposits involved including, but not limited to:
(i)
the character and degree of injury to, or interference with the
protection
of the health, general welfare and physical property of
the people;
(ii)
the social and economic value of the pollution source;
(iii)
the suitability or unsuitability
of the pollution source to the area in
which it is located, including the question
of
priori~y
of location in
the area involved;
(iv)
the technical practicability and economic reasonableness
of
reducing or eliminating the emissions, discharges or deposits
resulting from such pollution source; and
(v)
any subsequent compliance.
1.
The evidence demonstrates that Toyal's excess YOM emissions
interfered with protection of the health and general welfare of the
people
During the documented period of noncompliance, Toyal failed to control 81
%
of YOM
from its emission sources, in violation of the Board's emission standards for major, YOM
sources, i.e. sources that have the potential to emit ("PTE") 25 tons of YOM per year.
Section 110 of the CAA required states to develop regulations and control strategies to
address air pollution within their jurisdictions, for approval by the
United States Environmental
8
Electronic Filing - Received, Clerk's Office, February 20, 2009
Protection Agency ("USEPA"). To be approved, the regulations needed to meet Federal
requirements, and could not adversely impact attainment of the National Ambient Air Quality
Standards
,
("NAAQS").
As part of its aluminum manufacturing operation, Toyal was operating equipment that
emitted
YOM without providing the environmental protections that the Board intended. YOM is
an air contaminant that can result in ozone formation, causing a threat to human health. The
Board adopted the amended
Part 218 regulations to improve ozone air quality in the greater
Chicago area, by expanding the existing requirement that major sources
of YOM "utilize
reasonably available control technology ("RACT") to all sources in the Chicago ozone
nonattainment area which emit or have a potential to emit 25 tons per year
YOM.,,26
Toyal operated a manufacturing plant that was located in a severe ozone nonattainment
area that was classified as
"severe." As required by Section 182 of the CAA, sources in ozone
nonattainment
areas classified as severe must have RACT if they have the potential to emit 25
tons of YOM annually. However, Toyal did not comply with the RACT control requirements,
and consequently allowed its
YOM emissions to exceed the 81
%
control requirement each year
for eight years.
These emissions adversely affected the ozone non-attainment area and air quality in Will
County. The greater the increase in excess emissions to the atmosphere in this area, the greater
potential threat is posed to the NAAQS. Toyal's increased
YOM emissions must be considered
in conjunction with the cumulative effects
of increased emissions elsewhere in the non-
26R93-14 ( January 6, 1994
Order, slip op. at 1)
9
Electronic Filing - Received, Clerk's Office, February 20, 2009
attainment area. The cumulative impacts on air quality could be severe if each source in the non-
attainment area violated these Board emission standards for
YOM.
Toyal's noncompliance for eight years impeded federal and state efforts to reduce the
sources
of YOM levels, and thereby seriously interfered with the
''protection
of the of the health,
general welfare and physical property
of the people." 415 ILCS 5/33(c)(i) (2006) (emphasis
added).
2.
Toyal's facility had a diminished social and/or economic value while it
operated
in violation of the Act
The Complainant does not dispute that Toyal's aluminum paste and flake manufacturing
facility has social and economic value since a business entity which employs people and supplies
products on the open market has a certain degree
of social and economic. However, a facility that
operates
in violation of regulations is a social and economic detriment.
The Board has previously found that a pollution source typically possesses a
"social and
economic
value" that is to be weighed against its actual or potential environmental impact.
People v. Waste Hauling Landfill, Inc., and Waste Hauling, Inc.,
PCB No. 95-91 (May 21,1998).
Toyal's failure to reduce its
YOM emissions in an area of severe non-attainment for ozone for an
extended period
of time was a detriment to the site and surrounding area, which therefore, would
diminish the social and economic value
of the source.
3.
Respondent's facility
is suitable for the area in which it is located
provided it operates
in compliance with the Act
Operation of Toy ai's facility is suitable for the site and surrounding area provided it is
operated
in compliance with the Act and Board Air Pollution Regulations. However, over a
period
of eight years, Toyal failed to demonstrate that its control equipment was reducing YOM
10
Electronic Filing - Received, Clerk's Office, February 20, 2009
emissions by at least 81% as required by Section 218.986(a) of the Board Air Pollution
Regulations.
23
By failing to comply with these requirements, Respondent's facility contributed
YOM to an area that is non-attainment of the NAAQS for ozone. Thus, during the time
Respondent was out
of compliance, its facility was not suitable to the area.
4.
The evidence proves that compliance was technically practicable and
economically reasonable
The evidence clearly shows that it was technically practical and economically reasonable
for Toyal to comply with the Act and Board Air
Pollution Regulations by reducing its YOM
emissions by at least 81 %.
In the Board's January 6, 1994 Order adopting the amendments to 35 Ill. Adm. Code 218,
Subparts AA,
PP, QQ, RR and TT, and concluding that RACT for a 25-ton PTE source was 81%
control at each emission unit, the Board also expressly concluded that
"these requirements are.
technically feasible and economically
reasonable.2
4
Also, the Board should take note that when
Toyal replaced its
YOM control system in 2005, it was able to arrange for permitting,
construction, and operation
of the new control device within one year5. Thus, the evidence
shows that it was both t.echnically feasible and economically reasonable to require Toyal to
implement the proper control equipment at its facility to come into compliance with the Act upon
the date the regulations came into effect.
5.
After eight years of violation, Toyal came into compliance
23 On April 17, 1995, Respondent submitted an application to Illinois EPA for a CAAPP
permit for the Regenerative Catalytic Oxidizer ("RCO"). Under its CAAPP permit, Toyal was
required to submit compliance certification that demonstrated the
RCO was reducing YOM
emissions by at least 81 %.
24R93-14 (January 6,1994 Order, slip op. at 4)
25Tr.
12/10108,
pp. 112-112
11
The Complainant acknowledges that Toyal is presently in compliance with its YOM
control requirements. However, Toyal achieved compliance after continuously violating the Act
for eight years. Toyal initially proposed to Illinois
EPA in 1996 that it would apply for a .
construction permit for control equipment to meet the
81 % control requirements by February
1998 and demonstrate compliance by November 1998.
26
However, after numerous requests for
extensions
of time, Toyal finally demonstrated compliance on April 30, 2003.
In addition, Toyal's efforts to implement measures to reduce its YOM emissions by 81%
should not be deemed a mitigating factor
if compliance is achieved only after enforcement
proceedings are initiated.
ESG Watts. Inc. v. IPCB,
282 Ill. App. 3d 43, 53-53 (4
th
Dist. 1996)
(,'Evidence ... presented regarding petitioner's failure to comply with many regulations until after
enforcement proceedings were initiated,
of the hardship imposed upon the Agency in collecting
monies due and the necessity
of deadlines to ensure the smooth operation of the Agency. The
Board's decision that a stiff penalty was warranted to deter future violations was neither arbitrary
nor
capricious."). Respondent first demonstrated compliance with the control requirements of 35
Ill. Adm. Code 218.986(a) on April 30, 2003, three (3) years after this case was filed.
27
6.
ConClusion
A review of the evidence shows that a significant civil penalty is both appropriate and
necessary to aid
in enforcement of the Act.
V.
AFTER CONSIDERATION OF THE 42(h) FACTORS, THE BOARD SHOULD
ASSESS
A CIVIL PENAL TV OF $716,440.00
A.
Statutory Maximum Civil Penalties
26Complainant's Exhibit 17, Admitted Fact No. 18
27
Complainant's Exhibit 17, Admitted Fact No.57
12
The evidence at hearing demonstrates that the Respondent has violated the Act and Board
Air
Pollution Regulations. Section 42(a) of the Act permits the Board to impose penalties
against those who violate any provision
of the Act or regulation adopted by the Board, 415 ILCS
5/42(a) (2006). The Board may impose a maximum penalty of$50,000.00 for each violation of
the Act, and an additional $10,000.00 penalty for each day the violation continues, 415 ILCS
5/42(a) (2006). In our case, the State has proved at least two violations of the Act, i.e. Section
.
9(a): Regulatory Violation (35 Ill. Adm. Code 218.986); and 9(a): Air Pollution.
Respondent violated Section 9(a) of the Act, 415 ILCS 5/9( a) (2006), by failing to
capture and control at least 81%
of its VOM emissions as required by Section 218.986(a) of the
Board Air
Pollution Regulations. Respondent admits that it exceeded this 81 % VOM emission
limit from 1995 to
2003.
28
This represents a period of2,986 days. Therefore, statutory daily
penalties for Count
II alone would amount to $29,860,000.00. With an additional $50,000.00
per violation, and the total statutory violations for Count I, the total penalty recoverable rises to
$59,820,000.00. Complainant requests at a minimum that the Board impose a total civil penalty
of $714,000
29
on Respondent for the violations.
B.
Section 42(b) Factors
Section 42(h) of the Act, 415 ILCS 5/42(h) (2006), authorizes the Board to consider the
impact
of any matter of record in determining an appropriate civil penalty.
Section 42(h) provides:
28 Complainant's Exhibit 17, Admitted Facts No. 15-16,21,26-28,35,38,41,44,47,50,
52,55 and 57
29 This amount reflects a total benefit of $314,000 that Respondent received from delaying
compliance, and
$400,000 for gravity, duration, lack of diligence, and deterrence.
13
Electronic Filing - Received, Clerk's Office, February 20, 2009
(h)
In determining the appropriate civil penalty to be imposed under subdivision[] (a)
...
of this Section, the Board is authorized to consider any matters of record in
mitigation or aggravation
of penalty, including but not limited to the following
factors:
(1)
the duration and gravity
of the violation;
(2)
the presence or absence
of due diligence on the part of the respondent in
attempting to comply with requirements
of this Act and regulations
thereunder or to secure relief therefrom as provided by this Act;
(3)
any economic benefits accrued by the respondent because
of delay in
compliance with requirements, ... ;
(4)
the amount
of monetary penalty which will serve to deter further violations
by the respondent and to otherwise aid in enhancing voluntary compliance
with this Act by the respondent and other persons similarly subject to the
Act;
(5)
the number, proximity in time, and gravity
of previously adjudicated
violations
of this Act by the respondent;
(6)
whether the respondent voluntarily self-disclosed, in accordance with
subsection (i)
of this Section, the non-compliance to the Agency; and
(7)
whether the respondent has agreed to undertake a
"supplemental
environmental project," ...
1.
Duration and
Gravity
A civil penalty imposed under the Act must "bear some relationship to the seriousness of
the infraction or conduct" of the polluter.
Southern Illinois Asphalt Company v. Pollution
Control Board,
60 Ill. 2d 104,326 N.E. 2d 406, 412 (1975);
Trilla Steel Drum Corp.
v.
Pollution
Control Board,
180 Ill. App. 3d 1010, 1013 (1989) (penalty should be "commensurate with the
seriousness
of the infraction"). The Act "authorizes the Board to assess civil penalties for
violations regardless
of whether these violations resulted in actual pollution."
ESG Watts,
282 Ill.
14
App. 3d at 51. Accordingly, the Board should consider both the seriousness and duration of the
YOM emissions violations committed by Toyal.
Toyal failed to control its affected YOM emissions as required under Subpart TT of the
Part 218 regulations for more than eight years. The violations began on the date the regulations
became effective, March 15, 1995. Although it was aware
of this effective date, Toyal admits
failing to comply with Subpart TT,
Part 218 standards every year after March 15, 1995, up to
April
30, 2003.
The extended period of violation should weigh heavily against Toyal.
See, People of the
Slate
of Illinois
v.
Panhandle Eastern Pipe Line Company,
PCB 99-191 (November 15, 2001,
slip op. at 29) (long period of violations was an aggravating factor for purpose of penalty);
United States v. Marine Shale Processors,
81 F3d 1329 (5
th
Cir. 1996) ($2,500,000 penalty for
twenty-nine unpermitted minor sources occurred over approximately eleven-year period).
Toyal's violations were also significant because they occurred in an ozone non-attainment
area and should be considered in conjunction with the cumulative effects
of increased emissions
elsewhere in the non-attainment area.
The greater the increase in excess emissions to the atmosphere, the greater potential threat
is posed to the NAAQS.
See, People of the State of Illinois
v.
Blue Ridge Construction Corp.,
PCB 02-115, 2004 WL 2347631, *15 (October 7, 2004) ("Because of asbestos' harmful nature
and because it risked contamination
of air, soil and water, the Board finds that the duration and
gravity
of these violations must be considered an aggravating factor in determining the amount of
a civil penalty.").
Toyal's violations should be considered to have a high degree of gravity.
15
2.
The Evidence Shows a Serious Lack of Due Diligence over Eight
Years
of Noncompliance
The evidence shows that Toyal demonstrated an absence of diligence in complying with
the Act, and that it never sought relief from the applicable provisions
of the Act. The evidence
also shows that Toyal placed very little value on environmental compliance during the relevant
period. Toyal's lack
of diligence must be considered as a serious aggravating factor in the
Board's consideration
of civil penalty.
Lack of Diligence in Identifying Violations
Toyal claims that it first learned of the control requirements of the Subpart TT regulations
in early 1995. Specifically, Toyal Vice
President Barry Van Hoose testified that they learned of
the regulations on or about February 27, 1995, which left them insufficient time to control
emissions
30
. If this claim is taken as true, it proves a serious absence of diligence in identifying
the major environmental regulations applicable to its facility.
Well before the March
15,1995 compliance deadline date for 35 III. Adm. Code 218.986,
Toyal had been in correspondence with Illinois
EPA regarding applicability of the Subpart
TT
regulations. As admitted by Toyal, in early 1992 Illinois EPA requested information specific to
,Subpart TT. Toyal provided the information in May, 1992
31
. Clearly, by that date, Toyal had
notice that their
VOM emissions were potentially subject to the Subpart
TT
regulations. The
amended regulations were promulgated on January 6, 1994. Toyal then had fourteen months to
learn
of the applicability of the 81
%
VOM control requirement, and to install controls before the
VOM emissions limitations of 35 III. Adm. Code 218.986 became effective on March 15, 1995.
30Tr., 1211 0/08, p.178
31Complainant's Exhibit 17, Admitted Facts 6, 7, 8
16
Electronic Filing - Received, Clerk's Office, February 20, 2009
Contrary to Respondent's assertions, Toyal clearly had sufficient time to install controls
by the compliance date. Moreover, Toyal's current control device, a Catalytic Recuperative
Oxidizer
("CRO"), was permitted, constructed, and began operation within one year32.
However, if Toyal believed that it did not have sufficient time to attain compliance, Toyal surely
had time within fourteen-month period to seek regulatory relief, either through variance or
adjusted standard. But at no time did Toyal ever seek regulatory
relief33.
There was no question that Toyal's facility was covered by the new regulations: it had
reported actual
YOM emissions of 28 and 33 tons to the Agency for the years 1990 and 1991
34
.
Furthermore, as a major
YOM source in an ozone non-attainment area, Toyal had an affirmative
duty to apprise itself
of the air pollution regulations applicable to its facility. If, in fact, it did not
learn
of the control requirements of the 35 Ill. Adm. Code 218.986 until late February, 1995,
Toyal demonstrated a serious lack
of diligence.
Lack
of Diligence In Installation of RCO
When Toyal submitted its CAAPP application on March 5, 1996, it admitted
noncompliance with the Subpart
TT regulations, and stated that it would install YOM control
equipment and demonstrate compliance by November, 1998
35
. In fact, it did not demonstrate
compliance
until 2003.
Toyal did not start its formal capital approval process for control equipment until
February 27, 1997, almost twenty three months after the
YOM control compliance date in 35 Ill.
32Tr., 12/10/08, pp. 111-112
33Tr., 12110/08, pp.130-13.1
34Complainant's Exhibit 17, Admitted Fact 9
35Complainant's Exhibit 17, Admitted Facts
17
&
18
17
Electronic Filing - Received, Clerk's Office, February 20, 2009
Adm Code 218.986
36
. Toyal did not submit a construction permit application for a YOM
control device until late May, 2008
37
. Construction began in September and the RCO unit
began operation on December
1, 2008
38
. As of that date, Toyal had operated out of compliance
with the regulations for 45 months. Toyal's snail-paced efforts toward compliance during this
period indicate a complete lack
of diligence in attempting to cOJ11ply with the regulations.
Lack of Diligence in Completing YOM Control
The installation of the RCO did not result ih compliance with the 81
%
control
requirements
of Subpart TT. Toyal cancelled the stack test which had been scheduled for
February
29,1999 to demonstrate compliance
39
. Toyal's lack of action in addressing the YOM
control problem thereafter (i.e. from the end of 1998 through April, 2003) is astonishing. Toyal
continued to operate in violation for more than fifty months after cancelling the 1999 stack test,
instead
of quickly and effectively addressing the YOM control problem40.
Toyal's supposed compliance 'efforts' at this point were confused and misdirected. In
early
2001, Toyal applied for and obtained a construction permit for a new YOM control device,
a Regenerative Thermal
Oxidizer ("RTO"), which was intended to replace the RC0
41
. However,
Toyal did not install the
RTO within the time frame required by the Construction Permit, and, on
February
19,2002, requested an extension of the RTO construction permit from Illinois EPA
42
.
36Id., Admitted Fact No. 20. Tr., 1211
0108,
p. 184
37Complainant's Exhibit 17, Admitted Fact No. 22.
38Tr., 1211
0108,
p. 163
39Complainant's Exhibit 17, Admitted Fact No. 25
4°Toyal never ceased operations to prevent continued violations. Tr.,
12/10108,
p.130.
Also, as previously noted, Toyal never sought regulatory relief from the Board.
41The RTO Permit Application was submitted on April 18,2001 and the Permit granted
on May
30, 200 I. See: Respondent's Exhibit 17: Complainant's Exhibit 17, Admitted Fact No.
3l.
42Tr., 1211
1/08,
pp. 94-95. Illinois EPA granted the extension on March 8, 2002.
18
Toyal did not meet the permit deadline. In fact, despite applying for and obtaining a permit for
the
RTO as a replacement YOM control device, and despite obtaining an extension for
installation of the RTO, Toyal never even purchased an RTO to install
43
. Instead, Toyal
requested an additional extension, which was granted on November
18,2002
44
. When it
requested this second extension, Toyal advised Illinois
EPA that it had abandoned the RTO
proposal, and stated it would control using a 'modified RCO,45. Eventually, Toyal hooked up all
emission sources and controlled the
YOM emissions at their facility using the same RCO that
had been in operation since 1998. Compliance was demonstrated on April
30, 2003, about 52
months after the
RCO was originally installed, and more than eight years after Toyal was
required to control all
YOM emission sources by at least 81 %.
Toyal's lax efforts toward obtaining compliance with 35 Ill. Adm. Code 218.986 were
likely due to misplaced priorities. Between
2000 and 2003, Toyal continued to upgrade
production equipment at its facility. During this period they performed an expansion
of 'B unit'
production costing
$5,000,000.00 to $6,000,000.00
46
. This expenditure should be compared
with the delayed
'Phase II' YOM compliance expenditures which only amounted to
$470,887.00.
During this same period, Toyal also expended time and resources on engineering work
performed to obtain a Federally Enforceable State Operating
Permit ("FESOP"). Toyal did not
need
to obtain a FESOP: it had already sought a CAAPP permit, and was operating under the
authority
of its earlier state operating permits. More importantly, nothing in 35 Ill. Adm. Code
43Tr., 1211
0108,
p. 193
44Respondent's Exhibit 14.
45Respondent's Exhibit
13
46Tr.,
12111/08,
p. 54
19
Electronic Filing - Received, Clerk's Office, February 20, 2009
218.986 required Toyal to obtain a FESOP: the regulation only requires 81 % control of YOM
emissions
47
. Therefore all of the work performed by Toyal in seeking a FESOP was voluntary.
Toyal should have applied all
of its resources to coming into compliance with 35 Ill. Adm. Code
. 218.986(a) during this period.
The evidence shows that from 1999 through
2003, Toyal made sporadic, half-hearted, and
ineffective attempts to comply with
YOM control requirements that had been in effect since
1995. At the same time, Toyal committed significant resources to expansion
of production
capacity and
FESOP engineering work. The failure of Toyal to seriously address its
responsibilities under 35 Ill. Adm. Code 218.986 during this period indicates a total indifference
to the requirements
of the Board regulations. The Board should consider this to be a serious
aggravating factor for purpose
of civil penalty.
3.
Economic Benefit
a.
An
Appropriate Civil Penalty Must Include Recovery of All
Economic Benefit from
Toyal's Violation of 3S III. Adm. Code
218.986(a)
The Act requires that absent the narrowest of circumstances a civil penalty must recover
all economic benefit accruing to a respondent as a result
of the violation. Specifically, Section
42
of the Act, 415 ILCS 5/42(2006) provides, in pertinent part:
*
*
*
In determining the appropriate civil penalty to be imposed. .. the Board shall
ensure, in all cases, that the penalty
is at least as great as the economic benefits,
if
any, accrued by the respondent as a result of the violation, unless the Board
finds that imposition
of such penalty would result in an arbitrary or unreasonable
.financial hardship.
*
*
*
47Tr., 12111108, p. 117
20
Toyal is owned by Toyo Aluminum KK, which also owns Toyal Europe SASU. Toyo
Aluminum
KK is in turn owned by Nippon Light Metals Group, which consists of 115
subsidiaries and
51 affiliates
48
. Nippon Light Metals Group reported 2007 sales of
$5,236,408,000.00 in its annual report for that year49. As part of a large international company
with sales in the billions
of dollars, it is neither arbitrary nor unreasonable to recover all of the
economic benefit accruing to Toyal over the eight-year period
of violation.
b.
The Economic Benefit Derived from the Violations
was
at
Least
$316,440.00
Mr. Gary Styzens testified on behalf ofthe State on the issue of Toy aI's accrued
economic benefit from the violations alleged in this case. Mr. Styzens is employed by Illinois
EPA ("Agency") with the title Economic Benefit Analyst and Manager, and is based in
Springfield, Illinois. Mr. Styzens' educational background includes extensive undergraduate
course work in business and accounting and a Masters Degree in Business Administration. He is
also a Certified Internal
Auditor
50
.
Mr. Styzens has extensive experience in estimating the economic benefit of
noncompliance in an environmental context. He has provided expert testimony on behalf of the
Agency in three Board matters, and in one case tried in Circuit Court5
!. He also has assisted the
Agency in developing economic benefit for settlement discussions in other cases
52
. Aside from
48Complainant's Exhibit 17, Admitted Facts Nos. 2-3. See also, testimony
of Barry Van
Hoose, Tr.,
12/11108,
p.ll.
49Id., Complainant's Exhibit 17, Admitted Fact No.4
50 A copy of Mr. Styzens resume is included with his written opinion as Complainant's
Exhibit
20.
5!Tr.~
12/10/08,
p. 41
52Id., pp. 66-67
21
his normal salary, he did not receive any additional compensation for his testimony at hearing
53
•
Mr. Styzens' testimony outlined the methodology that he employed to arrive at his
estimate
of economic benefit. The premise of Mr. Styzen's analysis derived from the concept of
the time value of money, which included an evaluation of on-time and delayed compliance. The
focus
of this analysis dealt with Toyal's failure to timely install a Regenerative Catalytic
Oxidizer ("RCO"), which was eventually to become the means by which the company achieved
compliance with the Subpart TT
regulations
54
•
Mr. Styzens prepared a report, which describes and memorializes his calculations and
opinions
55
. Based on information provided by Toyal, he found that the overall compliance
expenditures had been made in two phases, which he refers to in his report as
"Phase I" and
"Phase II". Phase I represented expenditures which were completed in 1998, and totaled
$781,129.00
56
. Phase 2 expenditures totaled $470,887.00 and were made between 2001 and
2003
57
. As reported by Toyal, the total costs for their control system amounted to
$1,252,016.00.
As described by Mr. Styzens, economic benefit accrues from both avoided costs and
delayed costs. Delayed costs include compliance expenditures delayed past the date
of required
compliance, but eventually made
58
. As delayed costs, Mr. Styzens considered the interest
benefit from delay in installation
of the RCO. Avoided costs include expenditures never made,
53Id., pp. 32-33
54Id., pp. 48-49. Mr. Styzens developed his opinion in accordance with the same method
which formed the basis
of his testimony in
People v. Panhandle Eastern Pipeline Company,
PCB
99-191.
55Complainant's Exhibit
20
56Complainant's Exhibit 20, p.5
57Id., p.9
58Id., p. 46
22
Electronic Filing - Received, Clerk's Office, February 20, 2009
such as additional utility costs, maintenance of equipment not actually purchased, etc. 59 Mr.
Styzens' report analyzes the effect .of both in determining the amount
of economic benefit by
Toyal.
Calculation
of the economic benefit from delayed expenditures requires choiCe of
an appropriate interest rate, which reflects the investment value of delayed and avoided
expenditures to the violator. In this case, Mr.
Styzens used Toyal's interest rate from an
industrial revenue bonds to calculate benefit during the period when Toyal was out
of
compliance. Use of the bond rate provides an accurate depiction of how Toyal would have
funded its compliance capital expenditures. Also, this conservative assumption runs to Toyal's
benefit, as the bond rate was significantly below the bank prime interest rate during the period,
and resulted in a lower estimate
of economic benefit
60
. To calculate interest on 'unpaid penalty'
(i.e. economic benefit derived from violations, but which had not yet been recovered through
civil penalty) which accrued after Toyal reached compliance, Mr.
Styzens used the published
bank prime interest rate
61
.
Mr. Styzens also made certain adjustments to cost information provided by Toyal. First,
the capital expenditure costs reported by Toyal were adjusted to estimated 1995 costs prior to
calculating interest to account for possible inflation
62. In addition, Mr. Styzens made further
adjustments to reflect tax benefits and depreciation. For example, the interest benefit from
delayed capital expenditures for
'Phase
l'
during the period from March 15, 1995 through
59Id.,
pp~
46-47
6°Plaintiff's Exhibit 20, p.l; Tr.,
1211
0/08, p.49
61Id, p. 50. Use of the bank prime rate is inherently reasonable.
It
would be
unreasonable to assume that a company would be able to access industrial revenue bond money
to finance an unpaid civil penalty.
62See, e.g.: Complainant's Exhibit 20, pp. 5
&
9
23
Electronic Filing - Received, Clerk's Office, February 20, 2009
December 31,1998 totaled $139,105.00. Mr. Styzens credited Toyal for possible depreciation
and tax benefits that reduced this expense by
$105,463.00, and only applied $33,642.00 in
calculating the total economic benefit
of Toy aI's noncompliance. Similarly, Toyal's benefit
from delayed
'Phase II' expenditures was reduced by $101,326.00
63
.
The required date for full compliance with the YOM control regulations was March 15,
1995. Toyal began operating the
RCO control device at the end of December, 1998, after
spending
$781,129.00
64
. Mr. Styzens stopped calculating interest for these expenditures as of
that date. However, the Phase
I
project did not result in compliance with the YOM control
requirements. Toyal needed to spend an additional
$470,887.00 between 2001 and 2003 to
. comply with 35
Ill. Adm. Code 218.986(a)65. The last of these expenditures was made on
February 28,
2003, and Mr. Styzens 'stopped the interest clock' on that date, even though Toyal
did not demonstrate compliance until several months later. Thus, the dates used in the delayed
cost estimates
ar~
also reasonable and highly conservative
66
.
Mr. Styzens used Toyal's own operating cost information in calculating the
"avoided
costs"
during the period of noncompliance
67
. He also added a small amount to reflect avoided
additional labor
and maintenance costs, which Toyal had not included, claiming that the RCO
63Complainant's Exhibit 20, p.9
64Reduced to $764,115 to account for possible inflation. Complainant's Exhibit
20, p.5
65Reduced to
$452,887.00 by Mr. Styzens to account for possible inflation.
66 Arguably, the State could have calculated interest on the entire $1,252,016.00 expense
from March 15, 1995 to April
30, 2003. All of these expenditures should have been made
between January 6, 1994 (when the regulation became applicable to Toyal) and March 15, 1995
(when they were required to have
YOM control in place). By 'stopping the clock' on partial
expenditures which eventually resulted in compliance, the State's economic benefit estimate
reduces the economic benefit calculation substantially, and is therefore highly conservative.
67 As previously noted, the avoided costs include utilities, maintenance and labor
expenditures which were never made, resulting in cost savings enjoyed by Toyal because
of the
noncompliance.
24.
Electronic Filing - Received, Clerk's Office, February 20, 2009
required no additional labor or maintenance. Mr. Styzens testified that because Toyal failed to
include additional labor costs for operation and maintenance
of the control system, its economic
benefit estimate was inaccurate. He stated that allocation
of cost for additional labor was a
basic financial assumption
68
. Mr. Styzens also pointed to information suggesting that Toyal's
VOM control system required a substantial amount of maintenance, indicating that additional
operating and maintenance costs should be included
69
.
There is substantial evidence in the record demonstrating that the
RCO control device did
in fact require extra attention and maintenance. Toyal Vice
President Barry Van Hoose testified
that it was a nuisance, caused outages which had to be reported to Illinois
EPA, and required at
least some maintenance to restart
70
. Environmental Health and Safety Manger Roy Mahlmgren
agreed that the
RCO was shutting down frequently, and a replacement control device (the CRO
installed in 2005) was installed because of mechanical shutdowns, permit exceedences, and
interruptions in production with the
RC0
71
. Toyal Engineering Manager Dennis Debrodt
testified that they were having trouble keeping the
ROC running due to overheating
72
•
Clearly,
allocating an additional cost for labor and maintenance was appropriate in calculating avoided
costs from failure to control
VOM emissions.
Mr. Styzens reduced his
"avoided cost" calculation by crediting tax benefits to Toyal for
the period when no control system was in place at all
(,Phase 1'). His estimate carries this
68Tr., 1211 0/08, p.62
69Id., p. 61
7°Tr., 12110/08, p.113. Despite this admission Mr. Van Hoose deriied that operation of
the RCO increased maintenance expenses. Considering that each outage had to be remedied and
reported to Illinois
EPA, this statement is hardly credible.
7ITr.,
12111108,
pp.7-8
.
72Tr.,
12111108,
p.31
25
Electronic Filing - Received, Clerk's Office, February 20, 2009
avoided cost forward to 2003 using the bank prime rate for a total of$162,911.00
73
. Additional
avoided benefits
of $19, 157.00, after credit for taxes, were attributable for avoided expenditures
after 1998
(,Phase
II"f4.
Mr. Styzens estimated the total economic benefit to Toyal from violation of 35 Ill. Adm.
Code 218.986(a) to be
$316,440.00 as of December 31, 2005
75
. This figure is the sum of
benefit from delayed Phase I expenditures, delayed Phase II expenditures, avoided operating and
maintenance costs from March 15, 1995 through February
23,2003, and bank prime rate interest
from that date until December
15,2005
76
.
c.
Toyal's Foregone Benefit Theory must be Rejected
Toyal's economic benefit analysis admits most of the benefit found in the State's
estimate. However, Toyal is asking the Board to credit opportunity costs from an unrelated
capital project against the acknowledged actual economic benefit, and thereby find that it had no
economic benefit whatsoever, despite delaying compliance for eight years.
If adopted, Toyal's
theory
of 'foregone benefit' would reverse Board precedent, and eviscerate the deterrent effect of
recovery of economic benefit. Toyal's 'foregone benefit' theory must be rejected.
Toyal Admits Economic Benefit from Delayed Compliance
Toyal retained Navigant Consulting to prepare its economic benefit analysis. Mr.
Christopher McClure testified on Toyal's behalf at hearing77.
Using essentially the same data as
73Complainant's Exhibit 20, p.3
74Id., p.7
75Mr. Styzens prepared this report in early 2006. At hearing he estimated that additional
interest on unrecovered economic benefit from December 31, 1995 to the date
of hearing would
be about
$30,000.00. Tr., 1211 0/08, p. 58.
76Complainant's Exhibit
20, p.2
77Mr. McClure is a paid expert with a billing rate of $450.00 per hour. He has worked on
this matter since
2004. Mr. McClure could not identify the total amount Toyal has paid to
26
Electronic Filing - Received, Clerk's Office, February 20, 2009
Complainant's expert Gary Styzens, Mr. McClure estimated the economic benefit from Toyal's
delayed capital expenditures at $153,986.00, and the economic benefit from Toyal's avoided
costs at
$138,385.00
78
•
Thus, Toyal's estimate of $292,371.00 is very close to Mr. Styzen's
estimate of $316,440.00. The difference is largely due to two factors: Toyal did not add any
additional labor cost to its avoided costs, and Mr.
McClure used a 'risk free' rate of interest (i.e.
the United States Treasury Bond rate).
As argued
above and as testified to by Mr. Styzens, some provision for labor cost should
included in the avoided costs calculation for
two reasons. First, because it is a principle of
incremental cost analysis, and second because the facts in this case indicate that difficulties with
the control system's operation would necessarily mean that additional labor and maintenance
would be required.
The Board should find that Mr. Styzens' estimate more accurately reflects
the avoided labor cost issue.
With regard to the appropriate interest rate to use, Mr. McClure's choice of the Treasury
Bond rate is without any support whatsoever.
As testified to by Gary Styzens, the 'risk free' rate
is not an appropriate
measurement of the time value of Toy aI's money. An appropriate interest
rate must reflect business risk: the only entity that operates
'risk free', and therefore should
borrow 'risk free', is the federal governmenf9. Recovery of economic benefit is,
inter alia,
intended to prevent a company from gaining a benefit over its competitors by 'leveling the
playing field'so.
It
is logical to assume that hypothetical competitors of Toyal would borrow at
business rates. Therefore, using the Treasury Bond rate in these calculations would actually
, Navigant for their work on this case. Tr.,
12/11108,
pp.130, 161, 163
78Respondent's Exhibit 22, report
"page 1 of 15"
79Tr., 1211
0108,
p.60
. SOld., p. 42
27
provide a noncompliant competitor such as Toyal with an
advantage.
Mr. Styzens used an industrial revenue bond rate actually obtained by Toyal for his
calculations related to equipment purchase, and the bank prime rate thereafter. Therefore, the
Board should also find that Mr. Styzens' estimate
of $316,440.00 for economic benefit from
delayed and avoided compliance costs is both conservative and accurate.
Toyal's Solvent Reclamation
Project has no Connection to Correcting the Violations
Toyal's claim
of 'foregone benefit', which was raised at hearing by Toyal's expert, is
based solely on a plant upgrade project which was commenced during the final
VOM compliance
work. This project was intended to increase the amount
of mineral spirit solvent which Toyal
could recover from its process
81
.
In 2003, Toyal upgraded its pre-existing solvent reclamation process to increase solvent
recovery, and therefore save money on a key raw material. Its 'foregone benefit' theory is based
solely on its argument that
if it had come into compliance earlier, it would have upgraded this
recovery
sys!em earlier, and therefore increased profitability. Incredibly, Toyal then attempts to
subtract the additional profit it
would have made
if it had installed its solvent reclamation project
earlier from its admitted economic benefit: money saved by violating the Act for eight years.
The Board must summarily reject this attempt as contrary to the policy behind recovery
of the
economic benefit
of noncompliance.
The solvent recovery system at the heart
of Toy ai's claim had no relationship whatsoever
to the violations, i.e.
Toyal's failure to control excess VOM emissions at its facility. In fact,
Toyal's solvent recovery system already met the requirements
of35 Ill. Adm. Code 218.986(a)
81Mineral spirits is a process solvent used at the plant. Tr.,
12111/08, p.30
28
before any compliance-related YOM control system was installed. In other words, while a large
number of Toyal's YOM emission sources were uncontrolled, as of March 5, 1996, Toyal's
solvent recovery system was
in compliance.
On March 5, 1996, Toyal submitted its CAAPP application to Illinois EPA. The
application was certified by Mr. Barry Van Hoose, then Toyal's Vice
President of Technologl
2
•
The application listed the compliance status for each emission unit at the facility. For the solvent
distillation unit, Toyal certified that the unit was regulated by
35 Ill. Adm. Code 218.986(a) and
required
81
%
YOM control
83
. On the next page, Toyal certified that the solvent distillation unit
was
in compliance with all applicable
requirementsli.J.
Therefore, as of March 5, 1996, the
solvent distillation system did not require additional
YOM control
85
. Since this emission unit
was in compliance, the connection
of the solvent distillation system to the RCO in 2003 could
not have been done for the purpose
of complying with the YOM standard. Obviously, the
solvent recovery upgrade was an independent and unrelated plant-efficiency project.
The regulations do not require companies to maximize profitability through raw material
savings; rather, they require regulated entities to control
YOM emissions in an ozone non-
attainment area. As noted, the solvent reclamation upgrade project was not undertaken for
compliance. Also, Mr. Van Hoose admitted at hearing that Toyal could have controlled all
YOM emissions by 81
%
(and thus come into compliance with 35 Ill. Adm. Code 218.986)
82Toyal CAAPP Application (excerpts), Complainant's Exhibit No. 21, p. 30 ("Toyal
02211 "). Mr. Van Hoose is now Toyal's Vice President of Operations.
83Complainant's Exhibit No. 21, p.
10 ("Toyal 1752")
84Id., p.ll C'Toyal 1753")
85Mr. Van Hoose also admitted at hearing that the solvent distillation system did not
require additional
YOM control in 1996. Tr., 12/10/08, p.126.
29
Electronic Filing - Received, Clerk's Office, February 20, 2009
whether or not a solvent distillation system had ever been installed
86
: Thus, there is no link
between Toyal's solvent reclamation upgrade and the delayed
VOM compliance expenditures.
Toyal is merely trying to confuse the issue in an attempt to avoid recoupment
of its economic
benefit from the violations.
Moreover, the facts prove that Toyal could have upgraded its solvent reclamation system
well before it finally came into compliance with the
VOM regulations. The system upgrade
involved installing an
'air stripping' system. This operation generated vapors, which needed to
be vented to make the upgraded system work properly
87. The technology was available to Toyal
for some time: similar processes had been in place at sister companies in France and Japan for
years88. Mr. Van Hoose testified that at the French aluminum facility the vapors were simply
vented to
the air89. However, Toyal never even sought a permit to discharge these emissions to
the atmosphere at the Lockport
facilitlo. Mr. Van Hoose also agreed that, in hindsight, nothing
would have prevented Toyal from merely installing a flare to allow for increasing solvent
recovery as early as 1995
91
. Clearly, Toyal's additional profit from the solvent recovery
upgrade could have been realized even before the Subpart
TT amendments took effect.
Most significantly, despite having begun operation
of the RCO in 1998, Toyal did not
upgrade the solvent recovery system until
2003. Once they did so, they directed the vapors to
the
RCO ... the same control device that had been operating at its facility for five years. Nothing
prevented Toyal from connecting the solvent recovery system to
RCO for this purpose in 1998.
86Tr.,
1211
0/08, p. 190
87The vapors contained fatty acid residues. Tr.,
1211
0/08, p. 170
88Tr.,
1211
0/08, p. 121
89Tr,
1211
0/08, p.122
90Tr,
1211
0/08, pp. 175-176
9ITr.,12110/08,p.124
30
Electronic Filing - Received, Clerk's Office, February 20, 2009
Yet Toyal' s estimate attempts to obtain a
credit
against economic benefit from 1998 through
2003.
It
was Toyal's business decision to upgrade its solvent recovery system
as
it
did,
and
when it did.
Prior to installation, Toyal sent the unrecovered product for disposal as waste,
which was a 'break even' situation
92
. Afterward, Toyal made more money: Mr. Van Hoose
estimated the difference at
$1 Million
93
. The facts prove that the solvent reclamation upgrade
was nothing but a separate capital project, which proved to be successful for Toyal. However,
because the pre-existing solvent reclamation was already in compliance, and because Toyal could
have obtained full compliance with 35 Ill. Adm. Code 218.986(a) without even reclaiming
solvents, the system upgrade has absolutely no nexus to the
VOM compliance efforts, and
therefore no relevance to this case. Again, Toyal simply attempts to confuse the issue
of its
admitted economic benefit from eight years
of noncompliance.
The Board has Rejected Similar Attempts to Reduce the Economic Benefit
of Noncompliance
Toyal's arguments are identical to those already considered and rejected by the Board in
other cases.
In
People v. Panhandle Eastern Pipeline Company,
PCB 99-191 (November 15,
2001), the Board rejected the Respondent's attempt to obtain a similar 'credit' against economic
benefit recovery. In that case, Respondent
Panhandle had failed to control NOx emissions for
ten years, and thereby violated the Act
94
. Panhandle argued that because the cost of installing
92Tr., 12/10/08, p. 171. Mr. Van Hoose admitted that the solvent had some value as fuel.
93Tr., 1211 0/08, p.I72. Mr. Van Hoose stated "We probably lost in the neighborhood of
about $1 million looking back". Because they had been in a 'break even' situation before, the
'lost
$1 MM' actually represents profit they would have made if they had chosen to upgrade the
recovery system in 1995.
94 The period of noncompliance was 1988-1998. Board Order in PCB 99-191
(November 15,
2001), slip op at 35-36.
31
controls ten years after the fact was much higher than the cost had been on the required date of
compliance, the increased costs totally eliminated any economic benefit derived from the
noncompl iance
95.
The Board rejected this attempt to obtain a 'credit' in its entirety. The
Board found that such an argument conflicted with the purpose
of Section 42(h)( 4) of the Act:
deterring violations. The Board noted that applying such a credit:
" .... could encourage companies to put off compliance or at least not be as diligent as they
should be in monitoring compliance-any penalty that a company might face
if its gets
caught in violation could be diminished because the company did not spend money to
comply when it should have. The deterrent effect
of civil penalties is compromised if the
violator gets
"credit" for ignoring its legal obligations. Panhandle's argument turns one
of the primary purposes served by civil penalties on its head and the Board rejects it
96
.
Toyal's 'foregone benefit' argument is,
if anything,
more
tenuous than that rejected by the
Board in
Panhandle.
At least in that case, the Respondent's 'credit for higher cost' argument
related to the
NOx control device. In our case, Toyal is seeking a credit for 'lost profits' from a
plant system with
no relation
to compliance with the applicable regulations. Obviously, Toyal
looked retroactively to modifications at its facility in an attempt to find
some
argument to
totally
avoid
recovery of economic benefit. Encouraging such conduct by companies who have been
caught in violation would totally eliminate the deterrent effect
of the recovery of the economic
benefit
of noncompliance, and be contrary to the purpose of civil penalties. In this case, the
Board must again reject such an obvious attempt to avoid responsibility. Toyal's 'foregone
benefit' argument must be denied as contrary to the purposes
of the Act.
4.
Dctcrrence
Deterrence is an important objective for the Board in establishing an appropriate civil
95Id., slip op. at 32
96Id.
<"
32
Electronic Filing - Received, Clerk's Office, February 20, 2009
penalty, even where a violator has already achieved compliance. See:
ESG Watts, Inc. v.
Pollution Control Board,
283 III. App. 3d 43,51 (4
th
Dist. 1996) (Respondent's compliance came
only after initiation
of enforcement, and associated hardships imposed on Illinois EPA warranted
a
"stiff' penalty to assure deterrence). Although Toyal did make half-hearted efforts to comply
with the Act, it did not cease operations after recognizing a violation, but in fact, continued to
operate for eight years.
Courts have found that the
Act's provisions for civil penalties is to "provide a method to
aid enforcement
of the Act".
Southern Asphalt Co. v. PCB,
60 III. 2d 204, 207, 326 N.E.2d 406,
408
(1975). In
l!eople of the State of Illinois
v.
State Oil Company,
PCB 97-103, 2003 WL
1785038 (March
20, 2003), the Board found that imposing a civil penalty on State Oil, who
continued to operate for another eight months after receipt
of a violation notice, served the
purpose
of having a "prospective deterrent effect on current and future Act violators."
State Oil
Company,
2003 WL 1785038,
*
13 ("Levying a civil penalty against State Oil and the Anests in
this case aids in the enforcement of the Act because it informs violators that they may not delay
efforts to comply with the Act while pursuing sale
of the offending property.").
Here, where Toyal continued violating the Act for eight years while it spent money on
other capital projects that allowed its facility to operate for profit while exceeding
YOM
emissions, the Board should place a high priority on assessing a penalty that is substantial enough
to encourage future compliance by Toyal and the regulated community.
See, ESG Watts Inc. v.
PCB,
282 Ill. App. 3d 43,52,668 N.E.2d 1015, 1021 (4
th
Dist. 1996) ("the deterrent effect of
penalties on the violator and potential violators is a legitimate goal for the Board to consider
when imposing
penalties.").
33
This deterrence is necessary especially in light of the knowing .conduct associated with
Respondent's violations. A substantial monetary penalty will serve to prevent corporate
management systems that may attempt to mirror Toyal's environmental programs that were in
place during the 1990's. Additionally, a high civil penalty will provide an incentive for major
source permittees to comply with their
VOM control requirements.
As a subsidiary
of a larger parent corporation, Toyal has vast financial resources at its
disposal.
97
This financial capability enables a company of Toy ai's size to absorb the costs
associated with environmental liability. A small penalty will not dissuade future noncompliance.
Toyal's parent company's financial strengths should therefore be a factor considered by the
Board in its determination of penalty that truly serves the goals of deterrence.
Complainant believes that a total civil penalty
of $716,440.00 will serve to deter future
violations by the Respondent and to otherwise aid in enhancing voluntary compliance with the
Act by the Respondent and other persons similarly situated
98
.
5.
Previously adjudicated violations of the Act
On August 9, 2001, the parties entered a Stipulation and Proposal for settlement on Count
•
III-VII in this case. Complainant had alleged violations of Sections 21(d)(l) and 21(d)(2) of the
Act, 415 ILCS 5/21 (d)( I) and 5/21 (d)(2)
(2000). Toyal did not admit the violations, but the
parties agreed that the Stipulation could be used as evidence
of a previous adjudication of
violation.
97 Toyal is a subsidiary of Toyal Aluminum KK, which is a subsidiary of Nippon Light
Metals. Nippon Light Metals is a large financially-sound company. Toyal admits that Nippon
Light Metals reported sales
of $5,236,408,000.00 in 2007.
98Complainant requests $316,000.00 for recovery of all economic benefit, and an
additional
$400,000.00 in response to the other penalty factors listed in Section 42(h).
34
_____________________________________________________ . ___ _
Electronic Filing - Received, Clerk's Office, February 20, 2009
6.
Voluntarily Self-Disclose
Respondent did not voluntarily self-disclose throughout its eight-year period of non-
compliance.
7.
Supplemental Environmental Project
This factor is not applicable to the present case as no supplemental environmental project
has been accepted by the Illinois
EPA.
VI.
REQUESTED PENAL TV
A significant civil penalty is necessary to aid in enforcement and accomplish the purposes
of the Act. The evidence indicates that Toyal virtually ignored compliance with regulations
implemented to protect the public welfare over an eight year period
of violation. As shown,
Toyal took three years to make its first half-hearted attempts at compliance. After learning that
it still was operating in violation of the Subpart TT regulations, it waited five more years to
complete the necessary engineering work. During this period, it continued to operate in
violation, and even expanded its production. Clearly, environmental compliance was way down
on Toyal's list
of priorities. The civil penalty assessed by the Board must reflect the gravity and
duration
of these violations.
It
must also address the complete lack of diligence by Toyal. Most
importantly,
it must also deter future violations by Toyal, and by other similarly situated entities.
Recovery
of 100% of the economic benefit of noncompliance should be only a first step
in calculating the appropriate penalty. Both the Act and the policies behind recovery of
economic benefit of noncompliance demand that this be recovered. But recovery of economic
benefit alone will not reflect the duration, gravity or lack
of diligence in this case. Nor will it
serve to deter such ongoing noncompliance, by Toyal or others.
35
Electronic Filing - Received, Clerk's Office, February 20, 2009
Complainant believes that, in addition to recovery of $316,440.00 for the economic
benefit
of noncompliance, an additional penalty of $400,000.00 must be assessed in this matter in
consideration
of the penalty factors, and a means of deterring future violations. This figure is
calculated by assessing a penalty
of $50,000.00 for each year of violation from March 15, 1995
until April
30, 2003. This additional penalty is fully justifiable, and well within the limits
provided for in the Act. In fact, it only recovers daily penalties for five days
of violation per year.
An additional penalty
of $400,000.00, resulting in a total assessed penalty of $716,440.00, is the
minimum necessary to reflect Toyal's serious violation over an eight year period, and provide
deterrence against future violations by Toyal and others.
VII.
A TTORNEY FEES AND COSTS
Although Complainant believes that Toyal's continued violations clearly satisfy the
"willful, knowing or repeated violation" standard contained in 415 ILCS 5/42(f) (2006),
Complainant does not request the assessment of attorney fees and costs. Complainant asks the
Board to take note
of this waiver in its assessment of an appropriate civil penalty.
VIII.
CONCLUSION
The evidence proves that Toyal is liable for the violations alleged in Counts I and II of the
Complaint. Toyal failed to control
YOM emissions according to the standards established by
the Board for its industry group. As a major
YOM source located in an ozone non-attainment
area, Toyal's uncontrolled emissions, alone
or in combination with other sources, caused, or
threatened to cause air pollution. Toyal thereby violated Section 9(a) of the Act, 415 ILCS
5/9(a) (2006),
as alleged in Count 1. Toyal also failed to control YOM emissions from the
numerous sources at its facility by at least
81
% ,
in violation of 35 Ill. Adm. Code 218.986(a),
36
Electronic Filing - Received, Clerk's Office, February 20, 2009
thereby also violating Section 9(a) of the Act, as alleged in Count II. The violations in Counts I
and
II continued for more than eight years.
An analysis
of the Board's penalty factors suggests the need for substantial penalty to
accomplish the purposes
of the Act, and aid in enforcement. Complainant believes that three
factors in particular are relevant
to this case. First, the civil penalty imposed must recover all of
the economic benefit accrued by Toyal through its violations. The evidence from hearing shows
this benefit to be at least
$316,440.00. Because mere recovery of the economic benefit alone
would not sufficiently deter violations by Toyal or others, or accurately reflect the absence
of
diligence shown by Toya} during the period of noncompliance, Complainant believes that a
significant additional penalty must also be recovered.
The evidence showed that Toyal failed to make environmental compliance a priority.
It
did not apprise itself of the major environmental regulations affecting its facility, despite
operating
in a severe ozone non-attainment area. The necessary compliance expenditures were
delayed, and, after an initial attempt at compliance, Toyal failed to complete projects necessary to
control emissions for an additional four years. During this period, Toyal continued to expand its
production capacity, while ignoring compliance expenditures. The civil penalty imposed by the
Board must send an appropriate message to the regulated community. The penalty must be large
enough to reflect the extreme duration
of the violations in this case, and also large enough to put
potential violators on notice that they defer compliance expenditures at great financial risk.
Based on the facts
of this case, Complainant believes that a total civil penalty of $716,440.00
will accurately reflect the gravity of Toyal's violations, and deter future violations by Toyal and
others.
37
Electronic Filing - Received, Clerk's Office, February 20, 2009
BY:
RESPECTFULL Y SUBMITTED
PEOPLE OF THE STATE OF ILLINOIS
by
LISA MADIGAN,
Attorney General
of the State of Illinois
MATTHEW
J. DUNN, Chief
Environmental Enforcement! Asbestos
Litigation Division
ROSEMARIE CAZEAU, Chief
VANESSA
A.
VAIL
Environmental Bureau
Assistant Attorneys General
69
W. Washington Street, # 1800
Chicago, IL 60602
(312) 814-5388
(312) 814-5361
38
CERTIFICATE OF SERVICE
I, CHRISTOPHER GRANT, an attorney, do certify that I caused to be served this 20th
day
of February, 2009, the foregoing Closing Argument and Post Hearing Brief and Notice of
Electronic Filing upon the persons listed below, by hand delivery, and by placing same in an
envelope bearing sufficient postage with
the United States Postal Service located at 100 W.
Randolph, Chicago, Illinois .
. Mr. Bradley P. Halloran
Hearing
Officer
Illinois Pollution Control Board
100 W. Randolph
Chicago, Illinois
60601 (By Hand Delivery)
Mr. Roy
M. Harsch
Drinker Biddle Gardner Carton
LLP
191 N. Wacker Drive, Suite 3700
Chicago, Illinois 60606-1698 (By First Class Mail)
Electronic Filing - Received, Clerk's Office, February 20, 2009
