Chicago City Hall and public health officials illegally denied a permit to a company seeking to open a metal recycling center on Chicago’s South Side, essentially making up new standards on the fly and bowing to pressure from activists and Washington, D.C., bureaucrats who wished to grind down the project amid endless proceedings, an administrative law judge has ruled.
The ruling from Chicago ALJ Mitchell C. Ex came as the latest step in a years-long legal fight between Chicago City Hall and the company formerly known as General Iron over the fate of an $80 million recycling facility.
While the legal conflict began under former Mayor Lori Lightfoot, new Mayor Brandon Johnson has promised to appeal the ruling into the courts.
Reserve Management Group (RMG) has sought since 2018 to develop and open the metal recycling center on 175 acres in Chicago’s South Deering neighborhood.
RMG, which was formerly known as General Iron, operated a recycling plant for decades on the city's North Side until the city pressed the company to close the plant, citing pollution concerns, court papers said. The closing of that facility prompted RMG's plan to build, what it has called a "state-of-the-art" facility in South Deering.
The company also now does business as South Side Recycling (SSR.)
Even though the company acted at the city’s direction, Chicago Public Health Commissioner Allison Arwady formally denied RMG’s permit application in February 2022. The decision, she said, was based on “potential adverse changes in air quality and quality of life that would be caused by operations, and health vulnerabilities in the surrounding communities.”
That conclusion was based on a so-called “health impact assessment” (HIA) conducted by the city as part of its review of the project.
However, in legal proceedings since, RMG argued the city lacked the authority to base its decision on the conclusions of that HIA or any other environmental analyses or other rules or regulations not explicitly allowed within city ordinance or by state or federal law.
Activists claimed the facility would have a negative impact on nearby, predominantly Black neighborhoods.
In its arguments, RMG asserted the city’s decision to deny the permit application was lawless, as RMG had “satisfied every measurable requirement” to obtain a permit, a fact known by Chicago city officials for months prior to denying the permit.
The city then turned around and made an “abrupt” and “purely subjective” decision, “not based on science or any objective measurable standards” to withhold the permit, RMG argued.
When the city suspended review of the permit application in May 2021 to conduct the HIA, the company filed suit in Cook County Circuit Court, demanding the city pay them $100 million, if the company is ultimately blocked from building and operating the recycling center.
That lawsuit has been on hold, as RMG has challenged the permit denial through the city’s administrative hearing process. If the permit is ultimately denied, RMG would then resume its suit demanding the big payout from the city.
Before ALJ Ex, the city argued its Public Health Department should be allowed to use the HIA and other “tools” to guide its review of such permit requests.
The administrative law judge, however, said Arwady’s reliance on the HIA in particular buttressed RMG’s contention that the city was essentially inventing new standards to justify its decision to deny the permit, under pressure from activists and federal officials, in public and behind the scenes.
“The City has referred to the HIA as simply a ‘tool’ to be used by the Commissioner (Arwady) to inform her decision,” ALJ Ex wrote. “This characterization greatly understates the critical effect that the HIA played in the decision to deny the permit.
“The HIA set new standards for an LRF permit – standards which were only known to the CDPH and were admittedly ‘subjective’ at best.”
While conceding CDPH has authority as a regulatory agency to interpret “its own rules and regulations,” Ex said Arwady and the city exceeded that authority in using the HIA as the basis of its denial of RMG’s permit.
“… Implementation of the HIA does not simply ‘interpret or clarify’ existing ordinances but creates new policy and requirements to be met by LRF permit applicants,” Ex wrote. “As such, it lacked any authority from the City Council, fails to reference any specific ordinance from which it derived its authority, and as minimally required for rules, was never formally disclosed by publication in any way.”
In his decision, Ex laid out in detail a record of the permit review process. The statement of facts included a citation to a May 7, 2021, letter from U.S. EPA Administrator Michael Regan, a Biden appointee, to Lightfoot. In that letter, Ex noted Regan urged the city to delay RMG’s permit application “in order to complete an environmental justice analysis, such as a Health Impact Assessment.”
Lightfoot responded immediately, indicating she had directed Arwady to conduct the additional analysis as requested by EPA, and “to delay a final decision” on the permit.
On May 10, 2021, Arwady notified RMG she had suspended review of their permit, pending the HIA.
Following that notification, RMG filed suit in Cook County Circuit Court, asserting the city was violating the law and its own ordinances in suspending the permit review.
The HIA was conducted from May 2021 to February 2022, at which time Arwady denied RMG’s permit.
In a statement released following ALJ Ex’s ruling, SSR said it would continue “pursuing all of our rights and remedies” to address the city’s conduct in the permit review, including its lawsuit and demand for $100 million.
“The ruling is a welcome victory after years of unforeseen obstacles and delays,” SSR said. “We will persist in our effort to operate the most environmentally conscious metal recycling facility in the country, which independent experts have repeatedly found fully satisfies state and federal benchmarks that protect public health and the environment.
“… By allowing politics to hijack the apolitical permitting process governed by laws and regulations, the city demonstrated that it is not a reliable business partner, regardless of the risk to taxpayers,” SSR said.
RMG has been represented by attorneys David J. Chizewer and Harleen Kaur, of the firm of Goldberg Kohn, of Chicago.