MEMORANDUM
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT This memorandum has been prepared by counsel in anticipation of litigation and/or in connection with the rendering of legal advice. It is protected by the attorney-client privilege and the work product doctrine. Distribution is restricted to the individuals identified herein. Do not copy, forward, or disclose without prior authorization from Calderwood & Harkness LLP.
TO: Derek Huang, General Counsel, Crestline Packaging Solutions LLC Patricia Okonkwo, Vice President, Environmental Health & Safety, Crestline Packaging Solutions LLC
FROM: Rafael Dominguez, Calderwood & Harkness LLP Reviewed by Harrison Caldwell, Of Counsel, Calderwood & Harkness LLP
DATE: October 14, 2022
RE: EPCRA / TRI / Tier II Reporting Review — Allegheny Chemical Coatings, Inc. — McKeesport Main Plant, 2200 Iron Works Boulevard, McKeesport, PA 15132
MATTER NO.: 1006-00003
FACILITY: McKeesport Main Plant (Headquarters), Allegheny County, Pennsylvania
EPA ID No.: PAD-098-721-445
Parcel ID: 0383-M-00125-0000-00
I. Executive Summary
The purpose of this memorandum is to review and assess the community right-to-know reporting obligations of Allegheny Chemical Coatings, Inc. ("ACC" or the "Target") at the McKeesport Main Plant (the "Facility") under the Emergency Planning and Community Right-to-Know Act ("EPCRA"), 42 U.S.C. §§ 11001–11050, in connection with the proposed acquisition of ACC by Crestline Packaging Solutions LLC ("Crestline" or "CPS"). This memorandum forms a component of Calderwood & Harkness LLP's broader environmental due diligence review of the Target and its operations.
Crestline is an Ohio limited liability company headquartered at 4100 Riverside Commerce Drive, Suite 300, Dayton, OH 45402. Crestline is a portfolio company of Briarwood Capital Partners LP (Fund IV). Pursuant to the terms of the Letter of Intent executed on June 28, 2022, Crestline proposes to acquire 100% of the outstanding common stock of ACC for a purchase price of $94.5 million, representing a 7.0x EBITDA multiple on ACC's fiscal year 2021 EBITDA of approximately $13.5 million. Calderwood & Harkness LLP was engaged to conduct comprehensive environmental due diligence in connection with the proposed transaction. The engagement was formally opened on July 19, 2022, and this memorandum reflects our review and analysis through the date set forth above.
Based on our review, ACC's EPCRA reporting obligations at the McKeesport Main Plant appear to be current and substantively accurate. Specifically:
• Tier II Reports. Tier II Emergency and Hazardous Chemical Inventory Reports have been filed annually with the Allegheny County Local Emergency Planning Committee ("LEPC"), the Pennsylvania State Emergency Response Commission ("SERC"), and the McKeesport Fire Department for each of the five calendar years reviewed (CY 2017 through CY 2021). All filings were submitted by the applicable March 1 deadline, and reported chemical inventories are consistent with the Facility's operational profile.
• TRI Form R Reports. Toxic Release Inventory ("TRI") Form R reports have been filed for reportable chemicals, principally toluene and xylene (mixed isomers), for each of the five calendar years reviewed (CY 2017 through CY 2021). Reported release quantities are consistent with the Facility's production volumes, permitted emission levels under its Title V operating permit, and data reported in other regulatory filings.
• Enforcement. No EPCRA enforcement actions, administrative penalties, notices of violation, administrative orders, or citizen suit notices have been identified at any time during or prior to the review period.
• Emergency Planning and Notification. ACC has fulfilled its EPCRA Section 302–303 emergency planning obligations and appears to have made the required Section 304 emergency release notifications for the two reportable spill incidents identified during the review period (June 2017 and February 2020).
The Facility's EPCRA reporting profile is consistent with its status as a Large Quantity Generator of hazardous waste under the Resource Conservation and Recovery Act ("RCRA") and as a major source under the Clean Air Act, with combined hazardous air pollutant ("HAP") emissions of 38.2 tons per year, which exceeds the 25-ton major source threshold established under Section 112 of the Clean Air Act.
This memorandum should be read in conjunction with the following related work product prepared by Calderwood & Harkness LLP in connection with this engagement:
• Phase I ESA Review Memorandum — McKeesport
• Phase II Results Analysis Memorandum — McKeesport
• RCRA Compliance Review Memorandum
• Clean Air Act Compliance Review Memorandum
• Spill History and Enforcement Review Memorandum
• Comprehensive Environmental Diligence Summary Memorandum (draft dated October 22, 2022)
Each of these memoranda addresses a distinct component of the overall environmental diligence review and, together with this memorandum, is intended to provide Crestline's management and legal team with a comprehensive assessment of environmental conditions and regulatory compliance at the McKeesport Main Plant.
II. Scope and Methodology
A. Scope of Review
This review is limited to the McKeesport Main Plant, located at 2200 Iron Works Boulevard, McKeesport, PA 15132, Allegheny County, Pennsylvania (the "Facility"). The Facility serves as ACC's corporate headquarters and principal manufacturing site. It is the largest of ACC's four operating locations and is the site at which ACC conducts the predominant share of its specialty coating formulation, mixing, blending, and filling operations.
ACC's three other operating facilities — located in Charleroi, Pennsylvania; Clarksburg, West Virginia; and Weirton, West Virginia — are not addressed in this memorandum. Based on preliminary assessment of those facilities' operational profiles, chemical inventories, and regulatory filings, the Charleroi, Clarksburg, and Weirton facilities do not trigger the same level or complexity of EPCRA reporting obligations as the McKeesport Main Plant. This is attributable to their smaller scale of operations, comparatively lesser volumes of chemical usage and storage, and their non-major-source status under the Clean Air Act. EPCRA obligations at those facilities are either addressed in separate workstreams or have been determined to fall below applicable reporting thresholds based on available information.
The substantive focus areas of this review encompass the principal reporting and notification provisions of EPCRA:
• EPCRA Sections 302–303 — Emergency planning notification and coordination requirements, including the obligation to notify the LEPC of the presence of extremely hazardous substances ("EHS") at or above threshold planning quantities and to designate a facility emergency coordinator.
• EPCRA Section 304 — Emergency release notification requirements, obligating facilities to report releases of EHS or CERCLA hazardous substances exceeding reportable quantities ("RQs") to the LEPC and SERC.
• EPCRA Sections 311–312 — Material Safety Data Sheet ("MSDS") / Safety Data Sheet ("SDS") reporting and Tier II Emergency and Hazardous Chemical Inventory reporting, requiring annual submission of chemical inventory data to the LEPC, SERC, and local fire department.
• EPCRA Section 313 — Toxic Release Inventory ("TRI") reporting, requiring covered facilities to file annual Form R (or Form A certification) reports disclosing quantities of listed toxic chemicals released into the environment, transferred off-site, or otherwise managed.
B. Documents and Records Reviewed
Our review was based upon environmental records produced by Seller's counsel, Hargrove, Dalton & Speer LLP (Franklin Speer, Partner; Megan Trask, Associate), in response to Calderwood & Harkness's Environmental Document Request List dated July 25, 2022. The document request list was prepared by Grace Nakamura of our office and transmitted to Seller's counsel on the date indicated. Document production was received in three tranches: August 5, 2022 (initial production), August 19, 2022 (supplemental production), and September 8, 2022 (final supplemental production, addressing follow-up requests). All documents were produced via the Citrix ShareFile virtual data room established for this transaction (Room ID: CPS-ACC-2022).
The specific documents and records reviewed in connection with this memorandum include the following:
1. Tier II Emergency and Hazardous Chemical Inventory Reports for calendar years 2017 through 2021 (five years of filings), as filed with the Allegheny County LEPC, the Pennsylvania SERC (via the PA DEP electronic submission system), and the McKeesport Fire Department. These reports were produced as Bates-stamped documents ACC-ENV-001247 through ACC-ENV-001386.
2. TRI Form R Reports for calendar years 2017 through 2021 (five years of filings), as filed with the United States Environmental Protection Agency ("EPA") and the Pennsylvania Department of Environmental Protection ("PA DEP"). These reports were produced as Bates-stamped documents ACC-ENV-001387 through ACC-ENV-001502.
3. Safety Data Sheets ("SDS") for the principal chemicals used and stored at the Facility, including toluene, xylene (mixed isomers), methyl ethyl ketone ("MEK"), ethylbenzene, various epoxy resin formulations, chromium-containing pigments, and lead-containing pigments. SDS documents were produced as Bates-stamped documents ACC-ENV-001503 through ACC-ENV-001647.
4. Correspondence with the Allegheny County LEPC, EPA Region III, and PA DEP regarding EPCRA matters, including emergency planning notifications, Section 302 notifications, and any inquiries or requests for information. Produced as Bates-stamped documents ACC-ENV-001648 through ACC-ENV-001672.
5. Internal ACC environmental compliance records, including internal chemical inventory tracking spreadsheets, EHS compliance calendars, and internal audit checklists, provided by Carl Johannsen, EHS Manager, ACC. Produced as Bates-stamped documents ACC-ENV-001673 through ACC-ENV-001725.
6. TerraVerde Environmental Consulting LLC Phase I Environmental Site Assessment dated August 15, 2022 (the "Phase I ESA"), with particular attention to the regulatory database review section (Section 6.0 of the Phase I ESA), which includes results from Penrose Solutions ("EDR") database searches encompassing EPA TRI, RCRIS, CERCLIS, state spill, and related databases. Produced as Bates-stamped documents ACC-ENV-000001 through ACC-ENV-000187.
In addition to the documents described above, we reviewed publicly available records from the EPA Enforcement and Compliance History Online ("ECHO") database, the EPA TRI Explorer database, and the PA DEP eFACTS database to cross-reference and verify the information provided by Seller's counsel.
C. Applicable Regulatory Framework
The following federal and state statutory and regulatory authorities govern the EPCRA reporting and notification obligations applicable to the McKeesport Main Plant:
Federal Statutes and Regulations:
• Emergency Planning and Community Right-to-Know Act ("EPCRA"), 42 U.S.C. §§ 11001–11050, enacted as Title III of the Superfund Amendments and Reauthorization Act of 1986 ("SARA").
• EPA regulations implementing EPCRA:
• 40 C.F.R. Part 355 — Emergency Planning and Notification, implementing EPCRA Sections 302–304 and establishing the list of extremely hazardous substances, threshold planning quantities, and reportable quantities.
• 40 C.F.R. Part 370 — Hazardous Chemical Reporting: Community Right-to-Know, implementing EPCRA Sections 311–312 and establishing requirements for MSDS/SDS submission and Tier II inventory reporting.
• 40 C.F.R. Part 372 — Toxic Chemical Release Reporting: Community Right-to-Know, implementing EPCRA Section 313 and establishing TRI reporting requirements, covered NAICS codes, listed toxic chemicals, and reporting thresholds.
State Statutes and Regulations:
• Pennsylvania Hazardous Material Emergency Planning and Response Act ("PA Act 165"), 35 P.S. §§ 6022.101–6022.504, and implementing regulations promulgated by the Pennsylvania Emergency Management Agency ("PEMA") and PA DEP. PA Act 165 establishes Pennsylvania's framework for implementing the federal EPCRA requirements, including the designation of the PA SERC and county-level LEPCs.
Reporting Thresholds:
For purposes of this review, the applicable reporting thresholds are as follows:
• Tier II Reporting (EPCRA Section 312): The general threshold for Tier II reporting is 10,000 pounds for hazardous chemicals that are not extremely hazardous substances. For extremely hazardous substances, the threshold is 500 pounds or the threshold planning quantity ("TPQ"), whichever is lower. Facilities that have hazardous chemicals present at or above these thresholds at any time during the preceding calendar year must file an annual Tier II report.
• TRI Reporting (EPCRA Section 313): A facility is subject to TRI reporting if it meets all three of the following criteria: (i) the facility has 10 or more full-time employee equivalents (defined as 20,000 hours per year of combined employee work hours); (ii) the facility is classified under a covered NAICS code (NAICS code 325 — Chemical Manufacturing — applies to ACC's McKeesport operations); and (iii) the facility manufactures or processes more than 25,000 pounds of a listed toxic chemical during the calendar year, or otherwise uses more than 10,000 pounds of a listed toxic chemical during the calendar year. Separate thresholds apply to certain persistent, bioaccumulative, and toxic ("PBT") chemicals, but no PBT chemicals were identified in the scope of this review as requiring Form R reporting by ACC.
III. EPCRA Sections 302–303: Emergency Planning
A. Extremely Hazardous Substances (EHS) Present at the Facility
As an initial step in our review of the Facility's EPCRA obligations, we examined the chemical inventory at the McKeesport Main Plant — as reflected in the SDS library, Tier II reports, and internal chemical inventory records — against the EPA list of 355 Extremely Hazardous Substances set forth in Appendices A and B to 40 C.F.R. Part 355. The purpose of this comparison was to determine whether the Facility maintains on-site quantities of any EHS at or above the applicable threshold planning quantities, thereby triggering the emergency planning and notification requirements of EPCRA Sections 302 and 303.
ACC's McKeesport Facility is a specialty coatings manufacturer. Its principal operations at the Facility involve the formulation, mixing, blending, and packaging of solvent-based and epoxy coating products. These operations utilize substantial volumes of organic solvents as primary raw materials. Based on our review of the chemical inventory, the following chemicals constitute the primary solvents employed in the Facility's coating manufacturing processes:
• Toluene (CAS No. 108-88-3): Used as a primary solvent in solvent-based coating formulations. Toluene is listed as an EHS under EPCRA Section 302 with a threshold planning quantity of 500 pounds. ACC's McKeesport Facility stores toluene well in excess of this threshold, with a maximum daily amount on-site estimated at approximately 45,000 pounds (as reported on the CY 2021 Tier II filing). Toluene is stored in aboveground bulk storage tanks and in drums within the Building C mixing area.
• Xylene, mixed isomers (CAS No. 1330-20-7): Used as a solvent and diluent in coating formulations. Xylene is stored and used in quantities comparable to toluene. Although xylene is not itself listed as an EHS on the Section 302 list, it is a CERCLA hazardous substance and a listed toxic chemical under EPCRA Section 313.
• Methyl ethyl ketone ("MEK") (CAS No. 78-93-3): Used as a fast-evaporating solvent in certain specialty coating formulations. MEK is present in reportable quantities at the Facility.
• Ethylbenzene (CAS No. 100-41-4): Typically present at the Facility as a component of xylene mixtures rather than as a standalone raw material. Present in lesser quantities than the other primary solvents.
Because toluene, which is listed as an EHS with a 500-pound TPQ, is present at the Facility in quantities substantially exceeding its threshold planning quantity, the Facility is subject to the emergency planning requirements of EPCRA Sections 302 and 303.
B. Section 302 Notification and Emergency Coordinator Designation
Under EPCRA Section 302, a facility at which an EHS is present in an amount equal to or exceeding the applicable TPQ must notify the applicable LEPC and designate a facility emergency coordinator. ACC has designated Carl Johannsen, EHS Manager, as the facility emergency coordinator for the McKeesport Main Plant. Mr. Johannsen has served in this capacity since at least 2016 based on the records reviewed. ACC's records include the Section 302 notification submitted to the Allegheny County LEPC, confirming the presence of toluene at the Facility in excess of its TPQ and identifying Mr. Johannsen as the facility emergency coordinator, along with his contact information and 24-hour telephone number.
C. Emergency Response Plan
Pursuant to EPCRA Section 303, the LEPC is responsible for developing a comprehensive emergency response plan for the emergency planning district, which must include information regarding facilities within the district that are subject to Section 302. ACC has cooperated with the Allegheny County LEPC in this regard. The Facility's emergency response plan is on file with the LEPC. According to ACC's internal records, the plan was last updated in 2020. The plan includes identification of the EHS present at the Facility, emergency notification procedures, designated facility emergency coordinator contact information, and descriptions of emergency equipment and procedures. We note that the plan has not been updated since 2020, and we recommend that Crestline confirm with Mr. Johannsen whether any updates are warranted based on changes in operations, chemical inventories, or personnel since that time.
D. Assessment. Based on our review, ACC appears to be in compliance with EPCRA Sections 302 and 303 emergency planning requirements at the McKeesport Main Plant. The facility emergency coordinator has been designated, the Section 302 notification has been submitted to the Allegheny County LEPC, and the facility emergency response plan is on file with the LEPC. No deficiencies were identified in connection with these obligations.
IV. EPCRA Section 304: Emergency Release Notification
A. Reporting Obligations
EPCRA Section 304 requires the owner or operator of a facility to provide immediate notification to the applicable LEPC and the SERC in the event of a release of an EHS or a CERCLA hazardous substance in an amount equal to or exceeding the applicable reportable quantity ("RQ"). The notification must be provided as soon as practicable and must include, among other things, the identity and quantity of the chemical released, the time and duration of the release, the environmental media affected, known or anticipated health risks, and precautions to be taken. A written follow-up notice must be provided as soon as practicable after the initial emergency notification.
B. Reportable Releases Identified During the Review Period
Our review of ACC's spill history, environmental incident records, and regulatory correspondence — conducted in conjunction with the Spill History and Enforcement Review Memorandum — identified two incidents during the review period (CY 2017–2021) that are relevant to EPCRA Section 304:
1. June 14, 2017 — Xylene Release from Ruptured Transfer Hose.
Approximately 50 gallons of xylene were released from a ruptured transfer hose during a solvent transfer operation in the Building C mixing area. The release was contained within the secondary containment system (a concrete containment dike surrounding the bulk solvent transfer station), and no release to the external environment occurred. The incident was reported to PA DEP in accordance with the Pennsylvania Clean Streams Law and the Land Recycling and Environmental Remediation Standards Act. Upon review of LEPC notification records, ACC reported this incident to the Allegheny County LEPC as a precautionary measure, notwithstanding the fact that the release was fully contained within secondary containment and may not have constituted a "release" to the environment within the meaning of EPCRA Section 304. No further regulatory action was required or taken in connection with this incident.
2. February 3, 2020 — Epoxy Resin Hardener Release to Sanitary Sewer.
Approximately 120 gallons of epoxy resin hardener were released to the warehouse floor in Building B. The released material entered a floor drain connected to the municipal sanitary sewer system. The incident was reported to PA DEP and the Allegheny County Health Department. PA DEP assessed a civil penalty of $4,500 in connection with the unauthorized discharge. ACC completed corrective action, which included sealing the affected floor drain and installing secondary containment measures in the warehouse area to prevent recurrence. LEPC notification was made in connection with this incident.
This release may have triggered EPCRA Section 304 notification obligations depending on the specific chemical composition of the epoxy resin hardener and whether it contained EHS constituents or CERCLA hazardous substances in quantities exceeding reportable quantities. ACC's records indicate that the LEPC notification was made, which is consistent with a conservative interpretation of the Facility's reporting obligations. We note that the $4,500 penalty assessed by PA DEP was issued under state Clean Streams Law authority and was not specifically related to EPCRA notification requirements.
No other incidents during the review period (CY 2017–2021) were identified that would have triggered EPCRA Section 304 notification obligations.
C. Assessment. ACC appears to have fulfilled its EPCRA Section 304 notification obligations for both of the incidents described above. The documentation of LEPC notifications is consistent with the parallel reports made to PA DEP and the Allegheny County Health Department. We note that the June 2017 xylene incident, having been fully contained within secondary containment, may not have technically required EPCRA Section 304 notification, but ACC's decision to report the incident to the LEPC as a precautionary measure reflects a conservative and commendable approach to compliance. No deficiencies were identified in connection with Section 304 obligations.
V. EPCRA Sections 311–312: Tier II Reporting
A. Overview of Tier II Obligations
EPCRA Section 311 requires the owner or operator of a facility that is required to prepare or have available an SDS for a hazardous chemical under the Occupational Safety and Health Act ("OSHA") to submit the SDS (or a list of such chemicals) to the LEPC, SERC, and local fire department if the chemical is present at the facility at or above the applicable threshold. EPCRA Section 312 further requires such facilities to file annual Tier II Emergency and Hazardous Chemical Inventory Reports providing detailed information about the types, quantities, and locations of hazardous chemicals stored at the facility during the preceding calendar year. Tier II reports must be filed by March 1 of the year following the calendar year for which the report is prepared.
The McKeesport Main Plant, as a specialty coatings manufacturer handling significant quantities of organic solvents, resins, pigments, and coating intermediates, clearly meets the criteria for Tier II reporting. The volumes of toluene, xylene, MEK, and other chemicals stored and used at the Facility substantially exceed the applicable 10,000-pound threshold for non-EHS hazardous chemicals, and toluene — an EHS — exceeds both its 500-pound TPQ and any lower applicable threshold.
B. Chemicals Reported on Tier II Forms
The following summarizes the chemicals reported on the CY 2021 Tier II report, which is the most recent filing reviewed. This report is representative of the chemical inventory reported across the five-year review period, with year-over-year variations consistent with production levels and changes in product mix:
With respect to chromium and lead compounds, the Tier II reports reflect the legacy of ACC's historical pigment operations at the McKeesport Facility. While current on-site quantities of these materials have been substantially reduced from historical levels — consistent with ACC's shift away from chromium- and lead-based pigments in its product formulations — the quantities remain above the Tier II reporting thresholds and are properly reported on the Tier II forms.
C. Filing History and Consistency (CY 2017–2021)
We reviewed the Tier II reports filed by ACC for each of the five calendar years CY 2017, CY 2018, CY 2019, CY 2020, and CY 2021. For each year, the following observations apply:
• Recipients. Tier II reports were filed with the three required recipients: (i) the Allegheny County LEPC; (ii) the Pennsylvania SERC, submitted through the PA DEP electronic submission system; and (iii) the McKeesport Fire Department.
• Timeliness. All five annual filings were submitted by the March 1 statutory deadline. Specifically, based on the filing date stamps and electronic submission confirmations in the records produced, the CY 2021 report was filed on February 22, 2022; the CY 2020 report was filed on February 25, 2021; the CY 2019 report was filed on February 27, 2020; the CY 2018 report was filed on February 21, 2019; and the CY 2017 report was filed on February 26, 2018. None of the filings was late.
• Year-Over-Year Consistency. Review of the chemical inventory data reported across the five-year period shows quantities that are generally consistent with ACC's reported production levels and Facility operations. The solvents (toluene, xylene, MEK) exhibit modest year-over-year variation in maximum and average daily amounts, which correlates with fluctuations in production volume and product mix. There are no anomalous spikes or decreases in reported quantities that would suggest under-reporting, data manipulation, or inconsistency with known Facility operations. The slight reduction in chemical quantities reported for CY 2019 is consistent with the temporary production slowdown noted in ACC's operational records for that year (discussed further in Section VI.C below in the context of TRI release trends).
• Cross-Consistency with Other Regulatory Data. The chemical inventory data reported on the Tier II forms is generally consistent with ACC's RCRA Large Quantity Generator status (EPA ID: PAD-098-721-445) — the volumes of hazardous chemicals stored and used at the Facility are of a magnitude that supports the Facility's classification as a Large Quantity Generator generating more than 1,000 kilograms of hazardous waste per month. The Tier II data is also consistent with reported TRI data (discussed in Section VI below), in that the quantities of chemicals used and stored at the Facility are of a scale that would be expected to generate the release quantities reported on the TRI Form R filings.
D. Physical Hazard and Health Hazard Characterizations
Under the Tier II reporting requirements, facilities must characterize each reported chemical by its physical and health hazards, consistent with the hazard information provided on the chemical's SDS. We reviewed the hazard characterizations on the Tier II forms and compared them against the corresponding SDS information for the principal chemicals reported. The Tier II reports properly characterize the reported chemicals by hazard type, including fire hazard (applicable to the organic solvents such as toluene, xylene, and MEK, all of which are classified as flammable liquids), acute health hazard (applicable to solvents and certain other chemicals based on inhalation and dermal exposure risks), and chronic health hazard (applicable to certain chemicals, including toluene, xylene, ethylbenzene, and chromium and lead compounds, based on their long-term exposure profiles). The hazard characterizations are consistent with SDS information and with applicable GHS classification criteria.
E. Storage Location and Confidentiality Claims
The Tier II reports include storage location information for each reported chemical, as required under EPCRA Section 312. The reports identify storage locations by building number (Building B, Building C, Building D), tank identifiers (for aboveground bulk solvent tanks), and drum storage areas within the Facility. This information is consistent with the Facility layout described in the TerraVerde Phase I ESA and in ACC's internal site maps produced in the data room.
No confidentiality claims have been asserted by ACC on any Tier II filings reviewed for the five-year period. Under EPCRA Section 322 and 40 C.F.R. § 370.43, facility owners may claim certain categories of information on Tier II forms as trade secret information. ACC has not exercised this option with respect to any of its McKeesport filings. The absence of confidentiality claims is consistent with the nature of the chemicals reported — the primary solvents used by ACC (toluene, xylene, MEK) are common industrial chemicals, and there would be limited basis for trade secret protection of their identity or quantity.
F. Assessment. ACC's Tier II filings at the McKeesport Main Plant are current and appear substantively accurate and complete. Filing deadlines have been consistently met across all five years reviewed. Chemical inventory data is internally consistent across reporting years, consistent with Facility operations, and consistent with data reported in other regulatory filings, including TRI Form R reports and RCRA generator records. No deficiencies, omissions, or inconsistencies were identified in connection with the Facility's Tier II reporting obligations.
VI. EPCRA Section 313: Toxic Release Inventory (TRI) Reporting
A. Overview of TRI Obligations
EPCRA Section 313 requires covered facilities to file annual TRI Form R reports (or, where applicable, Form A certification statements for lower-quantity releases) with the EPA and the relevant state environmental agency. TRI reporting is intended to provide the public and government agencies with information about releases of toxic chemicals into the environment and off-site transfers of such chemicals for recycling, treatment, energy recovery, or disposal. Form R reports are due on July 1 of the year following the calendar year for which the report is filed.
A facility is subject to TRI reporting obligations if it satisfies all three of the following criteria:
(i) The facility has 10 or more full-time employee equivalents, defined as a total of 20,000 or more hours of combined employee work hours during the calendar year. ACC's McKeesport Facility employs approximately 145 full-time employees and additional contract workers, comfortably exceeding this threshold.
(ii) The facility is classified under a covered NAICS code. ACC's McKeesport operations are classified under NAICS code 325510 (Paint and Coating Manufacturing), which falls within the broader NAICS code 325 (Chemical Manufacturing) — a covered industry sector under 40 C.F.R. § 372.23.
(iii) The facility manufactures, processes, or otherwise uses a listed toxic chemical in quantities exceeding the applicable reporting thresholds: 25,000 pounds manufactured or processed, or 10,000 pounds otherwise used, during the calendar year. As discussed below, ACC's usage of toluene and xylene at the McKeesport Facility exceeds these thresholds.
ACC's McKeesport Facility clearly meets all three criteria and is subject to TRI reporting obligations.
B. Chemicals Reported on TRI Form R (CY 2021)
For calendar year 2021, the most recent reporting year reviewed, ACC filed TRI Form R reports for two chemicals:
Toluene (CAS No. 108-88-3):
ACC reported total on-site releases of toluene of 12,400 pounds for CY 2021. Based on the Form R breakdown, these releases are anticipated to include fugitive air emissions from solvent handling and transfer operations, stack air emissions from the Facility's coating manufacturing lines (a portion of which pass through the thermal oxidizer and VOC control equipment), and minor other releases to land or water (if any). The predominant release pathway for toluene at a specialty coatings manufacturing facility of this type is air emissions, which is consistent with the reported data.
The reported release quantity of 12,400 pounds is consistent with a major solvent-based coatings manufacturing operation and is aligned with the Facility's Title V operating permit (Permit No. TV-0383-0125). The Facility's combined HAP emissions are reported at 38.2 tons per year. Toluene, as a listed HAP, constitutes a significant component of these emissions. The TRI-reported air releases for toluene are within the Facility's permitted emission rates under the Title V permit, and no exceedances of permit limits were noted (as discussed in greater detail in the Clean Air Act Compliance Review Memorandum).
Xylene, mixed isomers (CAS No. 1330-20-7):
ACC reported total on-site releases of xylene (mixed isomers) of 8,700 pounds for CY 2021. The release profile is similar to that of toluene — primarily air emissions from coating manufacturing operations, with the predominant release pathway being stack and fugitive air emissions. The reported release quantity is consistent with the Facility's chemical usage patterns as reported on the Tier II inventory forms and with the Facility's permitted emission rates.
Other TRI-Listed Chemicals:
We reviewed whether other chemicals used at the Facility are listed on the TRI toxic chemical list (40 C.F.R. § 372.65) and whether their usage volumes would trigger Form R reporting obligations. In particular:
• Methyl ethyl ketone (MEK) (CAS No. 78-93-3): MEK is a TRI-listed chemical. However, ACC's records indicate that for CY 2021, MEK usage at the McKeesport Facility fell below the 25,000-pound threshold for chemicals manufactured or processed and below the 10,000-pound threshold for chemicals otherwise used. Accordingly, no TRI Form R report was required or filed for MEK in CY 2021. We note that MEK usage volumes may approach or cross reporting thresholds in certain years depending on product mix and production volume, and Crestline should monitor MEK usage going forward.
• Ethylbenzene (CAS No. 100-41-4): Ethylbenzene is a TRI-listed chemical and is typically present at the Facility as a component of commercial xylene mixtures (which typically contain 15–25% ethylbenzene by weight) rather than as a separately purchased or used raw material. For TRI reporting purposes, ethylbenzene present as a component of xylene mixtures may be reported under the xylene Form R or may require a separate Form R depending on whether the ethylbenzene quantity independently exceeds the applicable thresholds. ACC's records and Form R filings indicate that ethylbenzene quantities at the McKeesport Facility did not independently trigger a separate Form R filing for CY 2021. This treatment appears reasonable based on the quantities involved, although we recommend that Crestline's EHS team verify this determination for future reporting years.
• Chromium compounds and lead compounds: Both chromium and lead compounds are TRI-listed toxic chemicals. ACC's historical operations at the McKeesport Facility included the use of chromium- and lead-based pigments in certain coating formulations. ACC has substantially reduced its usage of these materials in recent years, consistent with industry trends and customer demand for lower-toxicity coating products. Current usage of chromium and lead compounds at the Facility appears to be below TRI reporting thresholds based on available records. Historical TRI filings (prior to CY 2017) were not within the scope of this review but may have included chromium and lead compound Form R filings when usage volumes were higher. We recommend that Crestline review pre-2017 TRI filings if historical chromium and lead usage is relevant to any ongoing remediation or legacy liability analysis.
C. Filing History and Trend Analysis (CY 2017–2021)
TRI Form R reports for toluene and xylene were filed by ACC for each of the five calendar years CY 2017 through CY 2021. All filings were submitted by the July 1 statutory deadline. No late filings were identified. The Form R reports were submitted to both EPA (via the TRI-MEweb electronic reporting system) and PA DEP, as required under federal and state law.
The following table summarizes the reported total on-site release quantities for toluene and xylene over the five-year review period:
Several observations arise from this trend data:
• Relative stability. Release quantities for both toluene and xylene are relatively stable across the five-year period, with modest year-over-year variation. Toluene releases range from approximately 10,800 pounds (CY 2019) to approximately 13,100 pounds (CY 2018), a range of approximately ±15% from the five-year mean. Xylene releases range from approximately 7,200 pounds (CY 2019) to approximately 9,400 pounds (CY 2018), a comparable range of variation.
• CY 2019 reduction. The slight reduction in reported releases for CY 2019 — with toluene releases approximately 17% below the five-year average and xylene releases approximately 15% below the five-year average — correlates with a temporary production slowdown at the McKeesport Facility noted in ACC's operational records. This slowdown was attributable to a combination of factors, including a plant-wide maintenance shutdown in the third quarter of 2019 and reduced customer demand in certain product lines. The reduced releases in CY 2019 are therefore consistent with reduced production activity and do not suggest any change in reporting methodology or under-reporting in other years.
• CY 2018 peak. The relatively higher release quantities in CY 2018 correspond to what appears to have been a peak production year for the Facility, consistent with ACC's reported revenues and production volumes for that year.
• No anomalies. The release trends do not exhibit any anomalous patterns, unexplained discontinuities, or sudden changes that would suggest under-reporting, changes in estimation methodology, or data quality issues.
D. Source Reduction and Waste Management Reporting
TRI Form R reports include a supplemental section (Section 8) requiring facilities to report source reduction and recycling activities for each reported chemical, as well as projected future release and waste management quantities. We reviewed the Section 8 data reported by ACC for toluene and xylene across the five-year review period.
ACC reports the following source reduction and waste management activities in connection with toluene and xylene:
• Solvent recycling. ACC recycles spent solvents (toluene and xylene) through both on-site and off-site processes. The Facility operates an on-site solvent recovery unit in Building C, which reclaims a portion of spent solvents for reuse in coating formulations. Spent solvents that cannot be reclaimed on-site are shipped off-site through a licensed solvent recycler. Solvent recycling is reported as a waste management technique on the Form R filings.
• Transfer equipment improvements. ACC has implemented improved solvent transfer equipment, including enclosed transfer systems and improved hose connections, to reduce fugitive emissions during solvent handling and transfer operations. These improvements are reported as source reduction activities on the Form R filings.
• Vapor recovery systems. ACC has installed vapor recovery systems on certain solvent storage tanks and transfer points to capture solvent vapors that would otherwise be released as fugitive emissions. These systems are reported as source reduction measures.
• Pending thermal oxidizer upgrade. ACC submitted a Title V permit modification application in March 2022 for the installation of a new thermal oxidizer on Line 4 of the coating manufacturing process. This thermal oxidizer, if approved and installed, would provide additional VOC and HAP destruction capacity, which would be expected to reduce toluene and xylene air emissions and correspondingly reduce TRI-reported release quantities in future years. The permit modification is pending before PA DEP as of the date of this memorandum. The projected impact of this upgrade on future releases is discussed in Section 8 of the most recent Form R filings.
E. Accuracy and Consistency Cross-Check
To assess the reliability and accuracy of ACC's TRI-reported release data, we cross-checked the reported toluene and xylene release quantities against data from other regulatory filings and operational records. The following cross-checks were performed:
1. Tier II inventory data. The quantities of toluene and xylene stored and used at the Facility, as reported on the Tier II forms, are consistent with the release quantities reported on the TRI Form R filings. The volume of solvents maintained in inventory (maximum daily amounts of approximately 45,000 pounds of toluene and 32,000 pounds of xylene) is of a magnitude that would be expected to generate annual releases in the range of 10,000–13,000 pounds of toluene and 7,000–9,500 pounds of xylene, given the nature of coating manufacturing operations and the Facility's emission control equipment.
2. Title V permit emission limits and compliance certifications. The TRI-reported air releases for toluene and xylene are within the Facility's permitted emission rates under Title V Operating Permit No. TV-0383-0125. Annual compliance certifications filed by ACC with PA DEP confirm that the Facility has operated within its permitted emission limits during the review period. No exceedances of permit limits have been reported. The consistency between TRI-reported air releases and permitted emission limits provides additional confidence in the accuracy of the TRI data.
3. RCRA hazardous waste manifests. Spent solvent quantities generated at the Facility and shipped off-site for recycling or disposal, as documented on RCRA hazardous waste manifests (reviewed in the RCRA Compliance Review Memorandum), are consistent with the usage volumes that would generate the reported TRI releases. The volumes of toluene- and xylene-bearing waste streams shipped off-site, combined with quantities recovered through the on-site solvent recovery unit, account for the solvent volumes that enter the Facility as raw materials but are not incorporated into finished coating products or released to the environment.
4. Combined HAP emissions. ACC's combined HAP emissions are reported at 38.2 tons per year. Toluene and xylene are both listed HAPs under Section 112 of the Clean Air Act. The TRI-reported total releases for these two chemicals (12,400 pounds of toluene + 8,700 pounds of xylene = 21,100 pounds, or approximately 10.55 tons) represent a substantial portion — approximately 27.6% — of the Facility's total combined HAP emissions. The remaining HAP emissions (approximately 27.65 tons) are attributable to other HAPs used at the Facility, including MEK, ethylbenzene, and other minor HAP constituents present in raw materials and coating formulations. This distribution is reasonable and consistent with the Facility's chemical usage profile.
F. Assessment. ACC's TRI Form R filings for toluene and xylene at the McKeesport Main Plant are current, timely filed, and substantively consistent with Facility operations and other regulatory data. The reported release quantities are reasonable given the nature and scale of the Facility's coating manufacturing operations, and the five-year trend data does not suggest under-reporting or data quality issues. Source reduction and recycling activities are appropriately reported. The pending Title V permit modification for the new thermal oxidizer on Line 4 may result in reduced TRI-reported releases in future years if the upgrade is approved and implemented. No deficiencies were identified in connection with the Facility's TRI reporting obligations.
VII. EPCRA Enforcement History
A. EPA and PA DEP Enforcement Review
We conducted a comprehensive review of EPCRA enforcement history at the McKeesport Main Plant using the following sources:
• EPA Enforcement and Compliance History Online ("ECHO") database, which compiles federal and state enforcement data for regulated facilities.
• PA DEP compliance and enforcement records available through the eFACTS database and through document production by Seller's counsel.
• ACC's internal files, including correspondence with regulatory agencies and internal compliance audit records.
• TerraVerde Environmental Consulting LLC Phase I ESA (regulatory database review section).
Based on this review, no EPCRA enforcement actions, notices of violation, administrative orders, civil penalties, consent agreements, or other adverse regulatory actions related to EPCRA Sections 302–304 or 311–313 have been identified at the McKeesport Facility during the review period (CY 2017–2021) or at any prior time based on available records. The EPA ECHO database does not reflect any EPCRA-specific enforcement actions against ACC or the McKeesport Facility. PA DEP records do not include any EPCRA-related enforcement entries for the Facility.
Additionally, no citizen suit notices under EPCRA Section 326 have been identified. EPCRA Section 326 authorizes citizen suits against facility owners or operators for violations of EPCRA reporting requirements, including failures to file Tier II or TRI reports. No such notices or lawsuits have been filed against ACC in connection with the McKeesport Facility based on available records.
We note that the $4,500 penalty assessed by PA DEP in connection with the February 2020 epoxy resin hardener release (discussed in Section IV.B above) was issued under state Clean Streams Law authority in connection with the unauthorized discharge to the sanitary sewer and was not an EPCRA enforcement action. That penalty is discussed in the Spill History and Enforcement Review Memorandum.
B. Assessment. ACC has a clean EPCRA enforcement history at the McKeesport Main Plant. No pending or threatened EPCRA enforcement proceedings have been identified. This favorable enforcement record, combined with the substantive accuracy and timeliness of the Facility's EPCRA filings as discussed in Sections III through VI above, supports the conclusion that ACC has maintained a robust EPCRA compliance posture at this Facility.
VIII. Implications for the Proposed Transaction
A. Stock Purchase Structure Considerations
The proposed transaction is structured as a stock purchase, pursuant to which Crestline will acquire 100% of the outstanding common stock of ACC. Because the transaction involves a change of ownership at the shareholder level rather than an asset purchase, ACC will remain the legal entity that owns and operates the McKeesport Main Plant following the closing. As such, Crestline will succeed to all of ACC's existing EPCRA reporting obligations at the Facility by virtue of its ownership of ACC's stock. There will be no change in the reporting entity — ACC's EPA ID number (PAD-098-721-445), LEPC registrations, and regulatory filings will continue under ACC's name.
Importantly, no new EPCRA notifications are required solely by virtue of the change in ownership. EPCRA does not contain a change-of-ownership notification requirement comparable to the requirements found in certain other environmental statutes (e.g., RCRA notification requirements for new generators). However, as a practical matter, the facility emergency coordinator designation should be reviewed and updated if Carl Johannsen's role changes post-closing or if Crestline intends to restructure the EHS management function at the Facility. Any change in the designated facility emergency coordinator should be promptly communicated to the Allegheny County LEPC in accordance with EPCRA Section 302.
B. Lender Considerations
Commonwealth National Bank, N.A. (Victoria Chen, Managing Director, Industrials Lending Group) requires satisfactory completion of environmental due diligence as a condition precedent to funding the $65 million senior secured term loan and $20 million revolving credit facility that will partially finance the acquisition. The bank's Environmental Risk Assessment Policy, a copy of which was provided to Calderwood & Harkness as part of the lending documentation, requires that the borrower demonstrate compliance with applicable environmental laws and the absence of material environmental liabilities at the target company's principal operating facilities.
EPCRA compliance is a component of the overall environmental compliance review that will be presented to the bank. Based on our review, no EPCRA-related issues have been identified at the McKeesport Main Plant that would impede lender satisfaction of the environmental due diligence condition. The Facility's clean EPCRA enforcement history, current filings, and consistent reporting data support a conclusion that EPCRA compliance does not present a material environmental risk or contingent liability.
C. Environmental Representations in Draft Stock Purchase Agreement
The environmental representations and warranties set forth in Article IV, Section 4.18 of the draft Stock Purchase Agreement (initial Seller's draft circulated August 12, 2022) include representations regarding the Target's compliance with applicable environmental laws and the status of the Target's environmental permits and filings. In connection with EPCRA compliance specifically, the following considerations apply:
• Calderwood & Harkness's initial draft of the environmental representations (the "Buyer's Initial Draft," circulated to Seller's counsel on September 5, 2022) includes a specific representation that the Target has complied in all material respects with all reporting and notification requirements under EPCRA, including Tier II and TRI filing obligations, and that all such filings are current, timely, and accurate.
• Seller's counsel (Hargrove, Dalton & Speer LLP, Franklin Speer) has proposed, in the Seller's Revised Draft dated September 28, 2022, the insertion of knowledge qualifiers (i.e., "to the knowledge of the Company") on certain environmental compliance representations, including the EPCRA compliance representation.
• We recommend that Crestline resist the imposition of knowledge qualifiers on the EPCRA compliance representation. EPCRA reporting obligations are objective, verifiable, and binary in nature — either the required reports have been filed or they have not, and the data reported is either accurate or it is not. Unlike certain environmental compliance matters that may involve subjective judgment or interpretation (e.g., whether a particular land use practice constitutes a "release" under CERCLA), EPCRA reporting compliance is readily determinable from the Facility's records. A knowledge qualifier would inappropriately shift the risk of inaccurate or incomplete EPCRA filings from the Seller (who has access to all relevant data and records) to the Buyer, and is not warranted by the nature of the obligation.
D. Post-Closing Integration
Following the closing of the transaction, Crestline should ensure continuity of EPCRA reporting obligations at the McKeesport Main Plant. The following post-closing integration steps are recommended:
1. Tier II filing continuity. The CY 2022 Tier II report will be due on March 1, 2023. Depending on the transaction timeline (currently anticipated closing in Q4 2022 or Q1 2023), responsibility for preparing and filing this report may fall to Crestline's management team. Patricia Okonkwo, VP of EHS, should coordinate with Carl Johannsen to ensure timely preparation and filing.
2. TRI Form R filing continuity. The CY 2022 TRI Form R reports for toluene and xylene will be due on July 1, 2023. Similar coordination between Crestline's EHS team and ACC's existing EHS staff will be required.
3. Thermal oxidizer upgrade. If the pending Title V permit modification for the new thermal oxidizer on Line 4 is approved by PA DEP and the oxidizer becomes operational during or after CY 2022, updated TRI reporting should reflect the resulting changes in release quantities. The installation of additional VOC control equipment is expected to reduce toluene and xylene air emissions, which would correspondingly reduce the quantities reported on future TRI Form R filings. Accurate quantification of the emission reductions attributable to the new thermal oxidizer will be important for TRI reporting accuracy.
4. Integration into Crestline EHS systems. The McKeesport Facility's EPCRA reporting obligations should be incorporated into Crestline's existing EHS compliance management systems, including compliance calendars, internal audit protocols, and reporting workflows. This integration will help ensure that reporting deadlines are not missed and that chemical inventory data continues to be accurately tracked and reported.
IX. Conclusions and Recommendations
A. Conclusions. Based on our review of the documents and records described in Section II above and our analysis set forth in Sections III through VIII of this memorandum, we reach the following conclusions:
1. ACC has filed Tier II Emergency and Hazardous Chemical Inventory Reports with the Allegheny County LEPC, the Pennsylvania SERC, and the McKeesport Fire Department for each of the five calendar years reviewed (CY 2017, CY 2018, CY 2019, CY 2020, and CY 2021). All filings appear to have been timely submitted by the March 1 statutory deadline. The chemical inventory data reported on the Tier II forms is substantively accurate and internally consistent across reporting years, and is consistent with the Facility's operational profile, production levels, and data reported in other regulatory filings.
2. ACC has filed TRI Form R reports for toluene (total releases of 12,400 pounds in CY 2021) and xylene (total releases of 8,700 pounds in CY 2021) for each of the five calendar years reviewed. All filings appear to have been timely submitted by the July 1 statutory deadline. Reported release quantities are consistent with Facility operations, Title V permit emission limits, RCRA hazardous waste generation data, and overall production volumes. Release trends over the five-year period are stable and do not suggest under-reporting or data quality issues.
3. No EPCRA enforcement actions, administrative penalties, notices of violation, administrative orders, consent agreements, or citizen suit notices under EPCRA Section 326 have been identified at any time during or prior to the review period at the McKeesport Main Plant. ACC has a clean EPCRA enforcement history at this Facility.
4. EPCRA compliance at the McKeesport Main Plant does not present a material risk or liability concern for the proposed acquisition of ACC by Crestline. The Facility's reporting obligations are current, substantively accurate, and consistently met. No conditions have been identified that would give rise to potential EPCRA penalties, remedial obligations, or third-party claims.
5. Section 304 emergency release notifications appear to have been made for both reportable spill incidents identified during the review period — the June 14, 2017 xylene release from a ruptured transfer hose (contained within secondary containment) and the February 3, 2020 epoxy resin hardener release to the sanitary sewer. Both incidents were reported to the Allegheny County LEPC, and the documentation is consistent with parallel reports made to PA DEP.
B. Recommendations. Based on the foregoing conclusions, we offer the following recommendations:
1. Stock Purchase Agreement representations. The final Stock Purchase Agreement should include a robust EPCRA compliance representation and warranty, without knowledge qualifiers, confirming that ACC has filed all required Tier II and TRI reports, that such filings are current, timely, and accurate in all material respects, and that ACC has not received any notice of violation, enforcement action, or citizen suit notice under EPCRA. We recommend that Crestline's negotiation team resist Seller's counsel's proposed knowledge qualifiers on this representation, given the objective and verifiable nature of EPCRA reporting obligations.
2. CY 2022 filing status. Crestline should confirm with Carl Johannsen, ACC's EHS Manager, that the CY 2022 Tier II report and TRI Form R reports are being prepared on a timely basis and are on track for filing by their respective deadlines (March 1, 2023 for Tier II; July 1, 2023 for TRI). This confirmation is particularly important given the anticipated transaction timeline, which may result in a change in management oversight during the period in which these reports are due.
3. Emergency coordinator designation. Post-closing, Crestline should update the facility emergency coordinator designation with the Allegheny County LEPC as appropriate, particularly if Mr. Johannsen's role or employment status changes in connection with the transaction or post-closing integration.
4. EHS compliance systems integration. Crestline should incorporate the McKeesport Facility's EPCRA reporting obligations — including Tier II reporting, TRI Form R reporting, Section 302 notifications, and Section 304 emergency release notification procedures — into Crestline's existing EHS compliance management systems. This integration should include addition of EPCRA filing deadlines to Crestline's corporate compliance calendar, designation of responsible personnel for report preparation and filing, and incorporation of the McKeesport Facility into Crestline's periodic internal environmental compliance audit program.
5. Incorporation into comprehensive diligence summary. This memorandum should be incorporated into the Comprehensive Environmental Diligence Summary Memorandum currently being prepared by Calderwood & Harkness (draft dated October 22, 2022, currently incomplete pending receipt and analysis of Phase II subsurface investigation results for the Clarksburg, West Virginia facility). The conclusions and recommendations of this memorandum should be reflected in the summary assessment of EPCRA compliance across all ACC operating facilities.
X. Limitations
This memorandum is subject to the following limitations and qualifications:
This review is based on records and information made available through Seller's counsel, Hargrove, Dalton & Speer LLP (Franklin Speer, Megan Trask), ACC's internal files as produced through the virtual data room, publicly available EPA and PA DEP databases (including the EPA ECHO database, TRI Explorer, and PA DEP eFACTS), and the TerraVerde Environmental Consulting LLC Phase I Environmental Site Assessment dated August 15, 2022. Calderwood & Harkness LLP has not independently verified the accuracy of the chemical quantity data reported on Tier II forms or the release quantity data reported on TRI Form R filings. We have relied upon the accuracy and completeness of the data as reported by ACC and as produced by Seller's counsel. To the extent that chemical usage data, production records, or emission calculations underlying the reported quantities are inaccurate or incomplete, the conclusions of this memorandum may be affected.
This memorandum is limited in scope to the McKeesport Main Plant (2200 Iron Works Boulevard, McKeesport, PA 15132). EPCRA obligations at ACC's three other operating facilities — the Charleroi, Pennsylvania facility; the Clarksburg, West Virginia facility; and the Weirton, West Virginia facility