The opinion of the court was delivered by: SOFAER
The City of New York dumps approximately 260 dry tons of sewage sludge each day into an area of the ocean known as the New York Bight Apex. The material dumped is the product of primary and secondary treatment of the City's sewage at various municipal sewage treatment facilities. The dumping is authorized by an interim permit issued by the Environmental Protection Administration ("EPA"). That permit requires the City to devise and implement an alternative method of disposal by December 31, 1981.
At EPA's behest, the City has developed a two-stage plan for alternative disposal of sewage sludge. As a short-term alternative to ocean dumping, the City proposes to compost the sludge (together with bulking material) and to spread the materials as ground cover and fill on various landsites throughout the City.
The supply of such land is limited, however, and the City will therefore need to implement a long-term alternative by 1988 or 1989. No long-term alternative has yet been devised, although the City's consultants are now preparing recommendations.
The City contends that the adverse consequences and costs of the short-term land disposal scheme greatly exceed the effects of continued dumping in the heavily polluted Bight, and it has urged EPA to renew its interim permit. EPA, however, has refused to hear the City's contentions, and the City has brought this lawsuit to compel EPA to consider its evidence. The agency contends that, in a 1977 amendment of the Marine Protection, Research and Sanctuaries Act of 1972, 33 U.S.C. §§ 1401-1444 (the "Act"), Congress absolutely barred all ocean dumping after December 31, 1981 of sewage sludge found harmful to the marine environment. The City, on the other hand, argues that Congress has barred only that dumping which "unreasonably" degrades the marine environment, and that in determining whether particular dumping is unreasonable, EPA must evaluate the cost and potential hazards of land-based alternatives and the effects of the proposed dumping upon the particular dump site. The City has adduced considerable evidence that its dumping in the Bight has relatively inconsequential effects; that cessation of the dumping would result in no discernible improvement in the Bight in the foreseeable future; that the interim land disposal plan would be extremely costly (over $ 200 million) and could only be used for about eight years; and that the interim land-based plan poses its own environmental and health hazards, which might later prove to be far more deleterious than the known and potential hazards of the ocean dumping.
EPA concedes that, under the 1972 Act, it was required to consider the relative consequences of ocean and land-based disposal in formulating the criteria by which permits would be issued; but it contends that it was not required to consider those factors in evaluating individual permit applications. The Agency claims that, prior to 1977, it was free to adopt criteria pursuant to which a permit application was automatically denied -- irrespective of all other considerations -- if the particular sludge failed certain bioassay tests. Since 1977, EPA argues, it is required to apply the statute in this manner, because in adopting the 1977 amendment, Congress embodied EPA's approach in a statutory command.
The language and history of the 1972 Act, however, demonstrate that EPA's interpretation of the statute is wrong. The Act as originally adopted required EPA to consider, in connection with each application for dumping, whether that particular dumping would unreasonably degrade the marine environment in light of a number of factors, including those pressed by the City. EPA could not lawfully adopt a policy of denying all permits without examining and weighing an applicant's evidence that ocean dumping is the most reasonable alternative. The 1977 amendment to the Act provides little support for EPA's present position; it prohibits only unreasonable dumping, without providing any substitute for the definition of "unreasonable" provided in the original statute. Although Congress might be empowered to order an end to all ocean dumping, in this case the amendment is properly construed to prevent the issuance of permits only for dumping that EPA in fact finds is unreasonable. The Agency's conclusive presumption that materials that fail to satisfy the environmental impact criteria will unreasonably degrade the environment is arbitrary and capricious, and not in accordance with the governing statute.
I. JURISDICTION TO CHALLENGE EPA'S POLICY
A challenge to an agency's refusal to act, standing alone, could pose serious jurisdictional problems. In this case, however, EPA has made clear in its regulations and dealings with the City that it will not grant any type of permit for sludge dumping after December 31, 1981. In October 1979, the City asked EPA for an interim permit with a target date of sometime in the late 1980's for implementing a land-based alternative. Although the City was confident that it could meet the 1981 deadline, it feared the environmental consequences of the alternative disposal plan. It contended, moreover, that the 1981 deadline should not be applied to the City's sludge, because the volume being dumped did not unreasonably degrade the New York Bight. See Affidavit of J. Kevin Healy (General Counsel, New York City Department of Environmental Protection), Exhibit D, at 3-5. On November 1, 1979, the Hearing Officer recommended issuance of an interim permit until December 31, 1981 and suggested that, because the dumping appeared not to degrade the ocean environment unreasonably, a further extension should be granted if necessary. Id., Exhibit E. The EPA Staff objected to the Hearing Officer's recommendation, contending that the Act barred all dumping that failed to comply with the criteria. Id., Exhibit F. On March 13, 1980, without commenting on the City's request for an extension, the Regional Administrator issued an interim permit with a December 31, 1981 deadline.
The City again requested an extension of the 1981 deadline on March 24, 1980, in an application for certain technical modifications, and on June 27, 1980 the City petitioned the Administrator to commence proceedings to amend the ocean dumping criteria so that the City could dump beyond the deadline. No action has been taken on the application, and EPA has sought no delay in this litigation to enable it to pass upon the City's petition. At the same time that it brought this suit, the City filed a new application for permission to dump after 1981. EPA has not sought to defer a judicial ruling on the Agency's interpretation, indicating its resolve prior to January 1981 to deny the City's application. See id. P 6 ("[EPA] officials have been unanimous in their view that the EPA cannot legally issue an 'interim' ocean dumping permit" for dumping after 1981). Accordingly, the doctrines of primary jurisdiction and exhaustion of administrative remedies do not bar this lawsuit. See Diapulse Corp. v. FDA, 500 F.2d 75, 77 (2d Cir. 1974); Wolff v. Selective Service Local Board No. 16, 372 F.2d 817, 825 (2d Cir. 1967); Mobil Oil Corp. v. Department of Energy, 469 F. Supp. 1119, 1123-24 (S.D.N.Y. 1979). Here, as in Connecticut v. EPA, 656 F.2d 902, 905 (2d Cir. 1981), "to defer the exercise of our jurisdiction until such time as EPA renders its final decision on those petitions would thus effectively moot this entire dispute."
The only jurisdictional argument made by EPA is its rather casually advanced suggestion that the City should be estopped from challenging the regulations. The City, EPA contends, has had notice of the 1981 deadline since 1977 and has accepted EPA funds to achieve compliance. Furthermore, the City has filed the necessary plans and has indicated that it is ready to comply with the first stage of its planned alternative. This suit, the Agency claims, is a last-minute attempt to delay or thwart a long-term commitment. Defendant's Memorandum at 27 n. *.
No basis exists in this case for an estoppel. The City has made no misrepresentations. It has always opposed EPA's interpretation of the 1972 Act. The City did not attack the Agency's regulations prior to this lawsuit because, despite EPA's refusal to issue the City a special permit, the City annually received interim permits. Moreover, as counsel for the City explained at oral argument, the City did not file suit earlier because it genuinely expected to be able to develop acceptable alternatives before the 1981 deadline; the dangers of the composting scheme were not immediately evident and necessitated additional studies. The full cost of the City's first phase only recently became known with accuracy. Data concerning the relative safety with which the City could continue dumping in the near future have become available only within the last few years, and the City contends that the most recent evidence indicates that its dumping has a minimal adverse effect at the approved disposal site. Only recently has it become apparent that an acceptable long-term alternative may presently be unavailable.
EPA has long been aware of the City's opposition to the Agency's interpretation; it cannot claim to have detrimentally relied upon the City's forbearance from suit. The Agency's only suggestion of injury is that the City has accepted and spent federal funds to implement the disposal program that it now seeks to abandon. According to the responsible EPA official, however, only $ 6 million in federal grants have been spent for planning and design. Another $ 25 million have been contractually committed, but not irrevocably.
Nearly $ 180 million in grants are as yet uncommitted. Affidavit of Leonard J. Romino (Chief, Eastern Section, New York Water Programs Branch, EPA Region II). Under these circumstances, the City cannot be estopped on the ground that it has wasted federal funds. The funds already spent enabled the City to appraise its first-phase plan in detail. Although some funds had to be committed early in the planning process, the great bulk of the planned expenditures have not been made. EPA's position -- that it would be better to spend at least an additional $ 180 million, even if that expenditure would be environmentally unsound, than to sacrifice the relatively small amount (at most $ 31 million) already committed -- is untenable and irresponsible. Indeed, literally billions of dollars in public funds are at stake in this litigation, since Westchester and Nassau Counties have suits before this Court concerning the same basic issue presented by the City's complaint.
The combined cost, over time, of depriving these three entities of access to the ocean for sludge dumping renders insignificant the funds spent to date in studying alternatives to ocean disposal.
II. THE 1972 ACT'S PROHIBITION OF UNREASONABLE DUMPING
A. The Statutory Language
Prior to 1972, the United States had no law that comprehensively controlled the dumping of wastes into the ocean. A 1970 report by the Council on Environmental Quality focused public attention on the dangers of unregulated ocean dumping. In response to that concern, Congress adopted the Marine Protection, Research and Sanctuaries Act, Pub. L. 92-532, 86 Stat. 1052 (1972). The stated purpose of the Act is "to prevent or strictly limit the dumping into ocean waters of any material which would adversely affect human health, welfare, or amenities, or the marine environment, ecological systems, or economic potentialities." 33 U.S.C. § 1401(b).
Rather than proscribing all ocean dumping, the Act uses a permit system: dumping is prohibited except as authorized by permit. Id. § 1411. The Act authorizes the Administrator of EPA to issue permits for the dumping of nondredged materials "where the Administrator determines that such dumping will not unreasonably degrade or endanger human health, welfare, or amenities, or the marine environment, ecological systems, or economic potentialities." Id. § 1412(a).
The test for whether ocean dumping may continue or must cease, therefore, is whether it will unreasonably degrade the marine environment. The decision in individual cases is to be made by the Administrator, but Congress did not grant unfettered discretion in defining the statutory test. The Act requires applications for permits to be reviewed and evaluated in accordance with criteria based upon all relevant considerations:
The Administrator may issue permits . . . for the dumping of material into the waters described in section 1411(b) of this title, where the Administrator determines that such dumping will not unreasonably degrade or endanger human health, welfare, or amenities, or the marine environment, ecological systems, or economic potentialities. The Administrator shall establish and apply criteria for reviewing and evaluating such permit applications, and, in establishing or revising such criteria, shall consider, but not be limited in his consideration to, the following:
(A) The need for the proposed dumping.
(B) The effect of such dumping on human health and welfare, including economic, esthetic, and recreational values.
(C) The effect of such dumping on fisheries resources, plankton, fish, shellfish, wildlife, shore lines and beaches.
(D) The effect of such dumping on marine ecosystems, particularly with respect to --
(i) the transfer, concentration, and dispersion of such material and its byproducts through biological, physical, and chemical processes,
(ii) potential changes in marine ecosystem diversity, productivity, and stability, and
(iii) species and community population dynamics.
(E) The persistence and permanence of the effects of the dumping.
(F) The effect of dumping particular volumes and concentrations of such materials.
(G) Appropriate locations and methods of disposal or recycling, including land-based alternatives and the probable impact of requiring use of such alternate locations or methods upon considerations affecting the public interest.
(H) The effect on alternate uses of oceans, such as scientific study, fishing, and other living resource exploitation, and nonliving resource exploitation.
(I) In designating recommended sites, the Administrator shall utilize wherever feasible locations beyond the edge of the Continental Shelf.
Id. § 1412(a). The controlling language in this section is that, "in establishing or revising" criteria for evaluating permit applications, the Administrator "shall consider, but not be limited in his consideration to, the following [nine factors]." Id. This provision is mandatory: the Administrator "shall" -- not "may" -- consider the enumerated factors.
By its terms, section 1412(a) appears to impose upon EPA a balancing requirement. The section proscribes, not all dumping, but rather only such dumping as unreasonably endangers the environment. The term "reasonable" inherently connotes a weighing of all the relevant circumstances. By enumerating several factors that inevitably conflict -- such as the need for dumping and its effect upon the environment -- and requiring the Administrator to consider them, the Act forces EPA to balance the statutory factors. Cf. Industrial Union Department, AFL-CIO v. American Petroleum Institute, 448 U.S. 607, 667-71, 100 S. Ct. 2844, 65 L. Ed. 2d 1010 (1980) (Powell, J., concurring in part); Appalachian Power Co. v. Train, 620 F.2d 1040, 1046 (4th Cir. 1980); D.D. Bean & Sons Co. v. Consumer Product Safety Commission, 574 F.2d 643, 649 (1st Cir. 1978); Aqua Slide 'N' Dive Corp. v. Consumer Product Safety Commission, 569 F.2d 831, 844 (5th Cir. 1978); Appalachian Power Co. v. Train, 545 F.2d 1351, 1364 (4th Cir. 1976).
B. The Legislative History
The debate over the Act's adoption strongly supports the two propositions suggested by the statutory language: (1) that the Act banned, not all ocean dumping, but only such dumping as on balance is unreasonably harmful; and (2) that EPA must establish criteria that lead the Agency to consider the statutory factors on a case-by-case basis.
With respect to the first proposition, the Senate Report explained:
As emphasized by various professional witnesses from the waste management field, all ocean dumping need not be banned outright. Ocean dumping of selected types of wastes is permissible and may be quite desirable . . . . [As one consultant stated:] "If we can recognize the ocean's ability to accept enormous volumes of waste, then the key decision is simplified. It becomes what type of waste can we put into the sea safely and what must be disposed of elsewhere . . . . There is a need to recognize in the bill that . . . the wastes assimilative capacity of the sea is enormous."
Senate Report No. 92-451, 92d Cong., 1st Sess. (1971), reprinted in  U.S. Code Cong. & Ad. News 4234, 4239 [hereinafter cited as 1972 Senate Report].
The legislative history reflects a recognition that some areas of the ocean are well-suited for waste disposal,
and that in some cases no appropriate alternatives to ocean dumping would be available.
When Congress sought to ban certain types of dumping absolutely, it did so expressly.
With respect to other types of material, Congress conditioned the ban on an overall evaluation of the environmental consequences. As Representative Dingell (Chairman of the Subcommittee on Fisheries and Wildlife Conservation and a floor manager of the bill) stated: "Section 102 provides general authority to the Environmental Protection Agency to issue permits . . . where permit applicants show him that the environmental and economic impact of that dumping will not be unreasonably harmful." 117 Cong. Rec. 30,851-52 (1971) (emphasis added). Similarly, Representative Harrington had proposed that the bill ban absolutely "dumping of any material which would damage the environment"; but he conceded that Congress preferred the less stringent standard of "unreasonably degrades." 117 Cong. Rec. 31,155 (1971).
Key legislators viewed the bill as requiring a balancing of competing interests. Representative Garmatz, Chairman of the Committee on Merchant Marine and Fisheries, stated that the bill "attempts to guard against over-reaction to pollution problems by establishing a sensible and essential balance between the need to protect our environment and the need to maintain and promote industrial and economic development." 117 Cong. Rec. 30,856 (1971). Accord, id. at 36,045 (remarks of Rep. Downing). Representative Lennon, Chairman of the Subcommittee on Oceanography, after reviewing the statutory criteria in section 1412(a), concluded: "the result is a reasonable balance between the demonstrated needs to protect our marine environment, and the economic needs of our domestic and foreign water commerce." 117 Cong. Rec. 30,857 (1971).
The second proposition that emerges from the legislative history is that EPA must seek to achieve the requisite balance in establishing or revising the statutory criteria. The Agency itself explained in a section-by-section analysis of the legislation prior to adoption that:
In establishing or revising the criteria, the Administrator is required to consider the likely impact of the proposed dumping along with alternative locations and methods of disposal, including those based on land, the probable impact of using such alternatives on considerations affecting the public interest, and the probable impact of issuing or denying permits on such considerations.
1972 Senate Report at 4256; House Report No. 92-361, 92d Cong., 1st Sess. 33 (1971) [hereinafter cited as 1972 House Report]. The manner in which EPA phrased the factors that it would be "required to consider" indicates that these factors would be meaningfully incorporated into the criteria, not merely mentioned and then ignored. The factors referred to by EPA, moreover, could not meaningfully be applied in advance to all cases. The Interior Department's analysis of the legislation similarly reflected the Administration's view that the bill required consideration of these factors (when applicable) in the actual decision on permit applications, not merely in promulgating the regulations.
The final committee reports from both houses of Congress also adopted this understanding of section 1412. The Senate Commerce Committee stated:
In order to make the determination [as to whether the proposed dumping will unreasonably degrade the marine environment], the Administrator is required to establish and apply certain criteria for reviewing and evaluating permit applications . . . . The criteria as established or revised must take into account, but need not be limited to, the need for the proposed dumping, the effect of such dumping on human health and welfare, . . . and the effect of dumping on marine ecosystems (including marine plant life), as well as the persistence and permanence of the effects, the effect of particular volumes and concentrations of materials, an evaluation of appropriate alternative locations and methods of disposal or recycling, the effect on other uses of the oceans, and the possible effects of denying a requested permit.
1972 Senate Report at 4246 (emphasis added).
The House Committee on Merchant Marine and Fisheries similarly viewed the statutory factors as obligatory upon EPA: "In determining whether to approve a permit application, the Administrator would be required to consider (1) the impact of dumping on the marine environment and human welfare and (2) other possible locations and methods of disposal, including land-based alternatives . . . ." 1972 House Report at 10. "The criteria as established or revised must take into account [the factors enumerated in section 1412(a)] . . . ." Id. at 18.
Statements of the bill's sponsors during the respective debates are precisely in accord with the language of the committee reports. Senator Hollings, floor manager of the legislation in the Senate, stated:
Written into the bill in section 102 are stringent criteria which the administrator must meet in reviewing permit applications. Properly applied, these criteria will provide the Administrator with adequate information to minimize or eliminate any adverse impact that any given ocean dumping of materials might have. The Administrator must consider [the factors enumerated in section 1412(a)] . . . .
117 Cong. Rec. 43,068 (1971). In the House, Representative Lennon (Chairman of the Subcommittee on Oceanography) presented a series of questions and answers to clarify the bill:
Q. Is there a standard established under which permits are issued?
A. Yes. The standards for reviewing and evaluating permit applications are based upon criteria to be established by the Administrator which will take into account the need for the proposed dumping, its effect upon the area in which it is to take place, including the living resources and the marine ecosystem, as well as the permanence of those effects and the volume and concentration of the particular proposed dumping. The criteria also cover appropriate locations for the dumping and available alternative methods of disposal, including the availability of land based alternatives.
117 Cong. Rec. 31,156 (1971).
The remarks of other legislators were to the same effect.
EPA can point to nothing in the legislative history that contradicts this universal understanding of section 1412(a). Congress gave the agency leeway in enforcing section 1412; it did not foreclose EPA from considering additional factors, nor did it specify the particular balance that EPA must strike in weighing these factors or the procedure by which applications should be decided. But no legislator suggested that EPA could ignore the statutory factors in evaluating individual permit applications. On the contrary, the Congress clearly intended that EPA adopt and apply criteria that would lead the Agency to consider all relevant statutory factors in evaluating each proposed dumping.
EPA contests this construction. It contends that the Act requires the Agency to consider the statutory factors in formulating or revising the criteria, but not in applying the criteria in specific cases. In essence, EPA claims that it may adopt criteria that ignore the statutory factors, so long as it considered those factors in adopting the criteria. Of course, EPA need not build into its criteria consideration of factors that are unnecessary in particular cases. But neither the statutory language nor the legislative history supports the view that EPA may use its authority to develop criteria in such a manner as to allow it to exclude any factor whose consideration is necessary for rational decisionmaking. Nothing in Chief Judge J. Skelly Wright's recent opinion in ...