ELR Citation: ELR 21301
No(s). 92-4111 (10th Cir. Aug 24, 1993)

The court holds that natural gas condensate that was destined to be burned for energy recovery was not hazardous waste under the Resource Conservation and Recovery Act (RCRA) in 1987, reversing criminal convictions based on the hazardous status of natural gas condensate and affirming other convictions. The defendant, the co-founder, majority shareholder, and president of a corporation engaged in treatment, storage, disposal, and recycling of hazardous waste, had entered into a contract to incinerate a customer's natural gas condensate. The natural gas condensate exhibited RCRA's ignitability characteristic. In 1987, the defendant arranged to have the condensate blended with gasoline and sold to the public as automotive fuel and to have the hazardous waste manifest that accompanied the condensate, and the corporation's treatment facility's operating log, falsified to indicate that the treatment facility had received the waste. A copy of the manifest was mailed to the customer. The facility stored other waste in a location where the corporation's RCRA permit proscribed hazardous waste storage. The defendant observed this storage and discussed it with a colleague. The defendant appealed his conviction on one count of conspiracy to violate RCRA, the Clean Air Act, and the Federal Water Pollution Control Act (FWPCA) (count 1), four counts of violating RCRA's criminal provisions (counts 2, 3, 4, and 8), and one count of mail fraud (count 7). Three of the RCRA charges—counts 2, 3, and 4—and the mail fraud charge—count 7—related to the defendant's handling of natural gas condensate. Count 2 was based on transportation of the natural gas condensate to an unpermitted facility, count 3 addressed falsification of the manifest accompanying the condensate, and count 4 was based on falsification of the treatment facility's operating log. Count 8 was based on the defendant's alleged storage of other hazardous waste in violation of a RCRA permit.

The court first holds that the natural gas condensate at issue was not hazardous waste under RCRA. To meet RCRA's definition of hazardous waste, a material must qualify as RCRA solid waste. The court notes that only certain types of materials that are recycled by being burned for energy recovery are solid wastes. Natural gas condensate would qualify if it were a byproduct exhibiting a characteristic of hazardous waste, but, the court notes, the U.S. Environmental Protection Agency (EPA) announced in a 1985 comment that natural gas pipeline condensate is not a byproduct. The court rejects the government's attempt to distinguish the 1985 comment based on the distinction between legitimate and sham recycling and on regulations applicable to listed commercial chemical products. Addressing the government's argument that natural gas condensate is hazardous waste if used in a manner other than the originally intended manner or normally intended use within the industry, the court rules that EPA has never distinguished legitimate from sham burning for energy recovery based on the originally intended use or normal manner of use for a material. The court notes that natural gas condensate has a relatively high energy value and that the government had conceded that it could have been burned for legitimate energy recovery at the facility. EPA statements, relied on by the government, that certain materials are solid wastes when burned for energy recovery in a manner that differs from their normal manner of use, address commercial chemical products and do not relate to sham burning for energy recovery. Addressing the government's argument that natural gas condensate is an unlisted commercial chemical product, the court holds that only listed commercial chemical products are considered solid wastes when burned to recover energy. Natural gas condensate is not listed. Although EPA has stated that it is implicit that unlisted commercial chemical products would be considered solid wastes when recycled in ways that differ from their normal manner of use, the court holds that such a construction is not clear from the regulations themselves. Additionally, the government's contention that natural gas condensate is an unlisted commercial chemical product is inconsistent with the government's position that the condensate is a byproduct and is inconsistent with an EPA interpretation published in 1985. Because the defendant's conduct occurred in 1987, the court holds that a 1991 amendment to EPA's 1985 interpretation does not bring the defendant's conduct within RCRA's regulatory scheme. The court holds that under EPA's interpretation of the regulations in effect in 1987, natural gas condensate is not a hazardous waste subject to RCRA regulation when burned for energy recovery, which includes burning as automotive fuel.

The court next rules that it was not error for the district court to deny the defendant's motion to dismiss various counts of the indictment before trial, since the issue of whether the natural gas condensate was a hazardous waste depended on a factual question. Next, the court reverses the defendant's convictions for knowingly transporting a hazardous waste to an unpermitted facility (count 2) and for knowingly making a false material statement on a document used to comply with RCRA regulations (count 3). The natural gas condensate was not hazardous waste and, thus, a manifest was not required to comply with RCRA regulations. Next, the court affirms the defendant's conviction for falsifying the treatment facility's operating log (count 4), since the log was a document maintained for purposes of compliance with RCRA regulations regardless of whether the natural gas condensate was hazardous waste. The log's falsification was "material" because it would tend to influence agency action. The court next reverses the defendant's mail fraud conviction (count 7) because the government's theory, as charged in the indictment, depended on proof that the natural gas condensate was hazardous waste. The court next rules that an erroneous district court jury instruction and evidentiary ruling relating to whether the natural gas condensate was hazardous waste did not prejudice the defendant, since count 4 did not require the government to prove that the natural gas condensate was hazardous waste.

Next, the court affirms the defendant's conviction for illegal storage of hazardous waste (count 8), holding that the government need not employ an EPA-approved test to prove the waste's flash point and, thus, prove that the waste displayed the characteristic of ignitability. Regardless of the flash point, there was evidence that the waste contained listed hazardous waste. The government's evidence, including testimony and Material Safety Data Sheets about the waste, was sufficient for a reasonable jury to find that the material was RCRA hazardous waste. The fact that there may have been other conflicting evidence does not render the evidence insufficient. Addressing RCRA's §3008(d)(2)(B) requirement that violations be "knowing," the court ruled that there was substantial evidence, including direct and circumstantial evidence, that the defendant knew the facility was storing hazardous waste in violation of its permit. The evidence was also sufficient to prove that the defendant aided and abetted illegal storage. The court holds that a presumption that persons handling RCRA-regulated materials know of the materials' regulatory status applies to every RCRA criminal provision. Accordingly, the district court was not required to instruct the jury that it must find that the defendant knew that material was listed or identified as a RCRA hazardous waste.

The court next reviews the district court's jury instruction that the defendant "need . . . [know] that [the waste] was hazardous waste and not a benign or innocuous material such as water." Because the defendant did not object at trial to the instruction's failure to define "hazardous waste" as having the potential to harm other persons or the environment, the court reviews this aspect of the instruction only for plain error. The court rules that although another instruction would have been preferable, the district court's instruction did not contain an omission that was so obvious as to rise to the level of plain error.

Finally, the court reverses the defendant's conspiracy conviction (count 1). A general verdict on a conspiracy count charging disjunctive objectives must be reversed if the jury could have based its verdict on a legally infirm objective; however, factual insufficiency of one or more objectives does not require reversal. The court rules that, because the district court made a "legal error" in instructing the jury that the natural gas condensate was hazardous waste, two of the three "RCRA objectives" of the conspiracy are legally insufficient and the conviction must be reversed.

Counsel for Plaintiff-Appellee
J. Carol Williams
Environment and Natural Resources Division
U.S. Department of Justice, Washington DC 20530
(202) 514-2000

Gordon W. Campbell, Ass't U.S. Attorney
U.S. Attorney's Office
476 U.S. CtHse., 350 S. Main St., Salt Lake City UT 84101
(801) 524-5682

Counsel for Defendant-Appellant
Christopher Harris
McCutchen, Doyle, Brown & Enersen
The Evening Star Bldg.
1101 Pennsylvania Ave. NW, Ste. 800, Washington DC 20004
(202) 628-4900