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04/22/83 Small Refiner Lead Phase v. United States

April 22, 1983

SMALL REFINER LEAD PHASE-DOWN TASK FORCE, PETITIONER

v.

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, ANNE M. GORSUCH, ADMINISTRATOR, UNITED STATES ENVIRONMENTAL

PHASE-DOWN TASK FORCE, PETITIONER

v.

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, ANNE M. GORSUCH, ADMINISTRATOR, UNITED STATES ENVIRONMENTAL PROTECTION

SMALL REFINER LEAD PHASE-DOWN TASK FORCE, PETITIONER

v.

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, ANNE M. GORSUCH, ADMINISTRATOR, UNITED STATES ENVIRONMENTAL



Before turning to the merits of EPA's use of an aggregate model, we address a procedural matter. EPA included Sobotka's methodology in the record at an early date and referred to that methodology in its notice of proposed rulemaking. See id. at 38,080/3 (Sobotka has calculated costs "using the Department of Energy's Refinery model"). SRTF, however, failed directly to attack that methodology. EPA argues that SRTF is barred from doing so now by § 307(d) (7) , 42 U.S.C. § 7607 (d) (7) , which provides:

UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT

PROTECTION AGENCY, Respondents, EXXON CORPORATION, ET AL.,

TEXAS CITY REFINING, INC., ENVIRONMENTAL DEFENSE FUND, ET

AL., TEXACO, INC., ET AL., Intervenors. SMALL REFINER LEAD

AGENCY, Respondents, EXXON CORPORATION, SUN REFINING AND

MARKETING COMPANY, TEXAS CITY REFINING, INC., ENVIRONMENTAL

DEFENSE FUND, ET AL., TEXACO, INC., ET AL., Intervenors.

PROTECTION AGENCY, Respondents, ENVIRONMENTAL DEFENSE FUND,

ET AL., UNITED REFINING COMPANY, TEXACO, INC., ET AL.,

EXXON CORPORATION, ET AL., TEXAS CITY REFINING, INC.,

NATURAL RESOURCES DEFENSE COUNCIL, INC., Intervenors.

PLATEAU, INC., PETITIONER, v. ANNE M. GORSUCH,

ADMINISTRATOR, UNITED STATES ENVIRONMENTAL PROTECTION

AGENCY and UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, Respondents, SIMMONS OIL COMPANY, Petitioner v. ANNE M.

GORSUCH, ADMINISTRATOR, UNITED STATES ENVIRONMENTAL

PROTECTION AGENCY and UNITED STATES ENVIRONMENTAL

PROTECTION AGENCY, Respondents

Nos. 82-2282, 82-2283, 82-2308, 82-2395, 82-2521

Petitions for Review of an Order of the Environmental Protection Agency. Orders issued January 26, 1983 and February 9, 1983. 1983.CDC.92

APPELLATE PANEL:

Wilkey, Wald and Mikva, Circuit Judges. Opinion for the Court filed by Circuit Judge Wald.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE WALD

Petitioners Small Refiner Lead Phase-Down Task Force , Plateau, Inc., and Simmons Oil Co. seek review of an Environmental Protection Agency regulation that sets lead-content limits for leaded gasoline produced by certain "small" refiners. 47 Fed. Reg. 49,322 (Oct. 29, 1982) (to be codified at 40 C.F.R. § 80.2,.4,.7,.20). In brief, the new rule: (1) narrows EPA's previous definition of "small refinery"; (2) requires small refiners to meet an interim standard of no more than 1.90 grams of lead per gallon of leaded gasoline (grams per leaded gallon or gplg) as of November 1, 1982; and (3) requires small refiners to meet a final standard (equal to the large refiner standard) of no more than 1.10 gplg as of July 1, 1983.

We vacate the interim 1.90 gplg standard because EPA promulgated it without adequate notice and the standard is not supported by the evidence in the record. We also vacate one clause in the definition of "small refinery" as promulgated without adequate notice and not supported by the evidence in the record. We uphold the remainder of the regulation, including the 1.10 gplg final standard, as within EPA's statutory authority, not arbitrary, capricious, or an abuse of discretion, and not procedurally flawed. I. BACKGROUND

Adding lead to gasoline is an inexpensive way to produce the high-octane gasoline needed by today's high-compression auto and truck engines. Other methods of producing high-octane gasoline require refiners to invest large sums in refining equipment and also involve higher operating costs. In particular, a refinery that uses less lead must use more crude oil to produce the same amount of gasoline. Use of lead in gasoline, however, has grave social costs. Lead is highly poisonous to people and gasoline lead emissions are a major contributor to lead poisoning, with small children at greatest risk. *fn1

Section 211(c) (1) of the Clean Air Act, 42 U.S.C. § 7545(c) (1) , authorizes EPA to regulate fuel additives which "may reasonably be anticipated to endanger the public health or welfare." At various times over the last decade, EPA has used this authority to regulate the lead content of gasoline. In this part, we first review EPA's early efforts to regulate gasoline lead and then summarizes the regulations that are challenged in this case.

A. Early Regulation of Gasoline Lead

EPA first issued lead content regulations in 1973. The regulations required refiners to limit the lead content of gasoline to 1.7 grams per gallon (gpg) beginning on January 1, 1975, steadily decreasing thereafter to 0.5 gpg on January 1, 1979. *fn2 In contrast to the grams per leaded gallon (gplg) standards at issue here, this earlier standard was a "pooled" average for all gasoline -- leaded and unleaded -- produced by a particular refiner. Thus, refiners that produced a high proportion of unleaded gasoline could use more lead per gallon of leaded gasoline than refiners that produced primarily leaded gasoline. *fn3 EPA exempted small refiners from the lead content rules until January 1, 1977, "in recognition of the special lead-time problems faced by this group." *fn4 We upheld this regulation in its entirety. Ethyl Corp. v. EPA, 176 U.S. App. D.C. 373, 541 F.2d 1 (D.C. Cir.) (en banc), cert. denied, 426 U.S. 941, 96 S. Ct. 2662, 49 L. Ed. 2d 394 (1976).

EPA later postponed the effective date of the 0.5 gpg standard until October 1, 1980, and large refiners have been obeying it since then. *fn5 However, in 1977, Congress granted small refiners partial relief from EPA's lead content rules until October 1, 1982. *fn6 To qualify as "small," a refinery had to: (1) have been in operation before October 1, 1976; (2) have crude oil capacity of 50,000 barrels per day (bpd) or less; and (3) be owned or controlled by a refiner with total crude oil capacity of 137,500 bpd or less. Clean Air Act § 211(g) (1) , 42 U.S.C. § 7545(g) (1) . Congress barred EPA from requiring a small refinery to reduce lead content below a "sliding-scale" standard that was linked to refinery size. Refineries producing gasoline at 5,000 bpd or less could use 2.65 gpg; 5,001 to 10,000 bpd refineries could use 2.15 gpg; and so on down to 0.80 gpg for 20,001 to 25,000 bpd refineries. Congress gave EPA broad discretion to regulate small refineries on and after October 1, 1982, "taking into account the experience under the [sliding-scale standard]." Id. § 211(g) (2), 42 U.S.C. § 7545(g) (2).

In 1979, EPA promulgated a new regulation requiring small refineries to meet the 0.5 gpg large refinery standard as of October 1, 1982. *fn7 We upheld the regulation by unpublished order. Coastal States Gas Corp. v. EPA, No. 79-2174 (D.C. Cir. Sept. 17, 1980).

In addition to these direct controls on the lead content of gasoline, EPA also promulgated a national ambient air quality standard for lead of 1.5 micrograms per cubic meter (ug/m). *fn8 We upheld the regulation on appeal. Lead Industries Association v. EPA, 208 U.S. App. D.C. 1, 647 F.2d 1130 (D.C. Cir.), cert. denied, 449 U.S. 1042, 66 L. Ed. 2d 503, 101 S. Ct. 621 (1980).

B. The Current Regulation

On February 22, 1982, roughly seven months before the 0.5 gpg small refinery standard was to take effect, EPA published a notice of proposed rulemaking in which it solicited comments on whether it should relax the 0.5 gpg standard either for all refiners or for small refiners only. EPA also solicited comments on how to define "small refinery." The rulemaking notice was short and obviously tentative; EPA did not even issue a proposed rule. 47 Fed. Reg. 7812 (Feb. 22, 1982). *fn9

In its notice of proposed rulemaking, EPA further proposed to suspend indefinitely the October 1, 1982 deadline for small refiners to meet the 0.5 gpg standard. The agency explained that the suspension would permit small refiners to delay making the capital investments needed to meet the 0.5 gpg standard. It promised small refiners that the final rule "will take into account the lead time required for construction of any processing equipment needed for compliance." Id. at 7814/2.

After receiving hundreds of comments from health specialists, industry, public interest groups, state and local governments, etc., EPA concluded that lead exposure was still a major health problem and that gasoline lead was "a significant contributor to this problem through its presence in the air, dirt and dust." Id. at 38,078/1 (Aug. 27, 1982). For large refiners, EPA therefore decided that instead of relaxing the 0.5 gpg standard, it would tighten that standard further in the future, and issued a proposed rule to accomplish that goal.

The proposed rule changed the lead content limit from 0.5 grams per gallon (gpg) to 1.10 grams per leaded gallon (gplg). Id. at 38,078/3. Since slightly less than half of all gasoline produced today is leaded, this change would not affect current lead emissions. However, in the future, as use of leaded gasoline declines (cars built in 1975 and later years use unleaded gasoline only), the "pooled" gpg standard would have permitted refiners to use more lead per leaded gallon, while the gplg standard will not. EPA now estimates that under a uniform 0.50 gpg pooled standard, 1990 lead use would have been 38.8 billion grams, while under a uniform 1.10 gplg leaded-only standard, 1990 lead use will be only 16.2 billion grams, a 58% reduction. *fn10

EPA proposed a looser 2.50 gplg standard for small refiners. Also, small refiners that used less than 2.50 gplg would be able to sell unused "lead credits" to other refiners under an inter-refiner averaging scheme. However, EPA proposed to define "small refinery" narrowly, to include only refineries that: (1) were in operation prior to October 1, 1976; (2) had average gasoline production of 10,000 bpd or less during the most recent calendar quarter; and (3) were not owned or controlled by a refiner with total average production during the most recent calendar quarter of more than 70,000 bpd. Id. at 38,088. EPA solicited comments on: whether a 2.50 gplg standard was too generous and "whether a standard such as 2.15 gp[l]g . . . may be more appropriate"; whether the special small refiner standard "should be limited to some definite time period"; and whether there were any loopholes in the definition of small refinery that might permit small refiners to "expand their production of leaded gasoline." Id. at 38,082/1, 38,085/3.

Finally, EPA suspended for one month the October 1, 1982 date for small refiners to meet the 0.5 gpg large refiner standard. EPA explained that it would take final action on the proposed 2.50 gplg small refiner standard before November 1, 1982, and stated again that the suspension would permit small refiners to defer the capital investments needed to comply with a strict standard. Id. at 38,091/1.

On October 29, 1982, only 2 days before the 0.5 gpg standard was to go into effect for small refiners, EPA promulgated a uniform 1.10 gplg standard for both large and small refiners, reasoning that permanent special treatment for small refiners would be "inequitable and inconsistent with the purposes of the Clean Air Act." Id. at 49,324/1 (Oct. 29, 1982). The agency required large refiners to meet the new standard beginning November 1, 1982. It recognized, however, that its February and August proposals gave small refiners "some reason to . . . delayprojects designed to meet a more stringent standard," and therefore gave small refiners until July 1, 1983 to meet the 1.10 gplg large refiner standard. Id. In the interim period from November 1, 1982 to July 1, 1983, EPA required small refiners to meet only a 1.90 gplg standard, explaining that this standard "should generally be achievable by [small] refineries through the use of the [inter-refinery] averaging provisions in the regulations." Id. at 49,324/2.

EPA also further tightened the definition of "small refinery" to include only refineries that: (1) were in operation before October 1, 1976; (2) had average gasoline production of 10,000 bpd or less during each calendar quarter since July 1, 1981; and (3) were not owned or controlled since July 1, 1981 by a refiner with total average production of more than 70,000 bpd. Id. at 49,331-32.

C. Issues Presented

No large refiner challenges EPA's change from a 0.5 gpg standard to a 1.10 gplg standard. SRTF, representing 13 small refiners, argues that EPA exceeded its statutory authority in promulgating a uniform 1.10 gplg final standard for small refiners, that the 1.10 gplg final standard is substantively flawed, and that the 1.90 gplg interim standard is procedurally and substantively flawed. Finally, SRTF argues that EPA did not give adequate notice that the final definition of "small refinery" might require a refiner to have produced no more than 10,000 bpd in any calendar quarter since July 1, 1981 ("past production requirement"). Plateau, Inc., a small refiner, presents procedural and substantive challenges to the interim standard and to the effective date of the final standard.

Simmons Oil Co., a small refiner that was owned by a large refiner until January 4, 1982, argues that EPA did not give adequate notice that it might require a refinery, to qualify as "small," not to have been owned or controlled by a large refiner after July 1, 1981 ("past ownership requirement"). Amicus Giant Industries supports Simmons' challenge to the past ownership requirement.

Several intervenors support the final rules: large refiners (Texaco, Gulf, Sun, and Exxon, on a joint brief); a mid-sized refiner (Texas City Refining); a refinery that was "small" under the old, but not under the new definition (United Refining); environmental organizations (Natural Resources Defense Council and Environmental Defense Fund); and a consumer organization (Consumers Union).

We denied SRTF's motion for stay pending appeal, but on January 12, 1983, granted Simmons' motion for stay of the past ownership requirement. After oral argument on January 17, we issued an order on January 26 (reprinted as an appendix to this opinion), in which we upheld the final 1.10 gplg standard and the past production requirement, but vacated the 1.90 gplg interim standard primarily for lack of notice. Our order gave a brief statement of reasons and noted that a full opinion would follow. On February 9, we issued a second short order (also reprinted as an appendix) vacating the past ownership requirement for lack of notice. *fn11 We chose this unusual course because our disposition made speed of the essence -- our decisions vacating the interim standard and the past ownership requirement will have practical effect only until the final standard takes effect on July 1.

This opinion explains more fully the reasoning that underlay our initial orders. In part II, we uphold EPA's statutory authority to set a small refiner standard stricter than the old sliding-scale standard. Part III discusses the standard for judicial review of EPA rulemaking under the Clean Air Act. Part IV concludes that the 1.10 gplg final standard is reasonable. Part V vacates the 1.90 gplg interim standard for lack of notice and lack of support in the record. Part VI upholds the past production requirement but vacates the past ownership requirement for lack of notice and lack of support in the record. II. EPA's STATUTORY AUTHORITY

The parties agree that EPA has authority under § 211(c)(1), 42 U.S.C. § 7545(c)(1), to regulate lead in gasoline, since lead is a fuel additive that "may reasonably be anticipated to endanger public health or welfare." See Ethyl Corp., 541 F.2d at 11-32. *fn12 SRTF argues, however, that § 211(g)(2), 42 U.S.C. § 7545(g)(2), prohibits EPA from requiring small refiners to reduce gasoline lead levels below the sliding-scale standard unless it makes specific findings concerning the need to do so. SRTF also argues that EPA cannot set a gasoline lead standard stricter than necessary to meet the ambient air quality standard for lead. *fn13 We reject both arguments.

A. Authority to Regulate Small Refiners

Section 211(g) (2) grants EPA broad authority to regulate small refiners on and after October 1, 1982, subject only to the condition that EPA must "tak[e] into account" experience under the sliding-scale standard:

The Administrator may promulgate such regulations as he deems appropriate with respect to the reduction of the average lead content of gasoline refined by small refineries on and after October 1, 1982, taking into account the experience under the [sliding-scale] provisions of this paragraph.

(Emphasis added.)

On its face, this condition is a mild one. It merely requires EPA in good faith to consider past experience, and does not require EPA to make specific findings concerning the need for a strict small refiner standard. Congress did require specific findings elsewhere in § 211 and elsewhere in the Act. In particular, § 211(c)(2), 42 U.S.C. 7545(c)(2), permits the Administrator to prohibit use of a fuel additive altogether only if "he finds, and publishes such finding" that the prohibition will not cause the use of another, equally dangerous additive. *fn14 As we noted in a related context, "this is the only conclusion the Administrator is expressly required to 'find' before regulating a fuel or fuel additive for health reasons." Ethyl Corp., 541 F.2d at 12 (emphasis in original). We must assume that Congress' use of the weaker phrase "take into account" in § 211(g) (2) was intentional. *fn15

The legislative history confirms this "plain language" reading of the statute. The House had granted permanent special treatment to small refiners. 123 Cong. Rec. 16,951-52 (1977), reprinted in 4 Leg. Hist., supra note 12, at 3320-24. The Senate, however, adopted a weaker version calling only for a five-year grace period, to last until October 1, 1982. Senator Muskie, the floor manager for the 1977 amendments, explained:

The amendment provides a temporary relaxation in the average lead requirement for small refineries . . . until October 1, 1982. This will allow time for them to install the necessary equipment to produce gasoline with lower lead content or to make alternate plans.

Id. at 18,474, 3 Leg. Hist. 1059 (emphasis added).

In conference, the House "concur[red] in the Senate provision" with several small changes. H.R. Rep. No. 564, 95th Cong., 1st Sess. 162 (1977) ("Conf. Rep."), 3 Leg. Hist. 381, 542, 1977 U.S. Code Cong. & Ad. News 1502, 1543. One of these changes was to add the "taking into account" requirement. The Conference Committee explained, however, that EPA would nevertheless have broad discretion to regulate small refiners after October 1, 1982:

On the basis of experience under this provision, the Administrator shall promulgate such standards as he sees fit for the period beyond October 1, 1982. . . .

Id. (emphasis added).

In short, the legislative history of § 211(g)(2) confirms EPA's broad discretion to regulate small refiners, and give no hint that the agency must make specific findings before doing so. Finally, EPA's interpretation is "entitled to deference." Federal Election Commission v. Democratic Senatorial Campaign Committee, 454 U.S. 27, 32, 70 L. Ed. 2d 23, 102 S. Ct. 38 (1981). *fn16

We conclude, then, that § 211(g)(2) requires EPA in good faith to take experience under the sliding-scale standard into account, but does not require specific findings concerning that experience. Accord Ethyl Corp., 541 F.2d at 32 n.66 (the requirement in § 211(c)(2)that EPA, before regulating a fuel additive must "consider" regulating auto emissions under § 202 instead, "means, of course, no more than it says: actual good faith consideration of the specified . . . options").17

The only remaining question is whether EPA adequately considered experience under the sliding-scale standard in selecting a lead-content limit for small refiners. As we held in construing similar language in the Clean Water Act, EPA must reach an "express and considered conclusion" about the bearing of experience under the sliding-scale standard, but need not give "any specific weight" to this factor. Weyerhaeuser Co. v. Costle, 191 U.S. App. D.C. 309, 590 F.2d 1011, 1045 (D.C. Cir. 1978); accord BASF Wyandotte Corp. v. Costle, 598 F.2d 637, 662 (1st Cir. 1979), cert. denied, 444 U.S. 1096, 100 S. Ct. 1063, 62 L. Ed. 2d 784 (1980). Here, EPA devoted an entire rulemaking to the issue of the appropriate lead standard for small refiners. It concluded that:

experience under the two-tiered approach has been that it fosters inequities, as small refineries are granted a competitive advantage over large refineries. . . . This two-tiered approach can no longer be justified, in light of the health effects of lead exposure and the scope and profitability of small refinery operations.

47 Fed. Reg. at 49,324/3. Thus, EPA has complied with the statutory command to take past experience into account.18

B. The Relationship Between the Gasoline Lead Standard and the Ambient Air Quality Standard for Lead

SRTF also argues that EPA lacks authority to control gasoline lead except to the extent necessary to meet the ambient air quality standard for lead, and that even under the sliding-scale standard, no areas that are served by small refineries would violate the ambient air standard. To prevail, SRTF must overcome the deference that we give to EPA's interpretation of its governing statute. It falls far short; indeed, we find no support for SRTF's construction in the statutory language, the legislative history, or sound policy.

Nothing in § 211 expressly prevents EPA from regulating fuel additives unless necessary to meet the ambient air quality standards established under sections 108 and 109. Indeed, § 211 does not even cross-refer to sections 108 and 109. In contrast, when Congress wanted EPA to consider other sections of the Act before regulating fuel additives, it said so. In particular, § 211(c)(2), 42 U.S.C. § 7545(c)(2), requires EPA, before regulating a fuel additive, to "consider" regulating auto emissions under § 202 instead. Thus, § 211 on its face permits EPA to regulate gasoline lead whether or not the ambient air standard for lead is being met. Cf. Ethyl Corp., 541 F.2d at 54 n.124 (finding "no basis in the statute" for the claim that EPA must establish an ambient air standard for lead under § 108 before regulating gasoline lead under 211).

SRTF points out that both § 108 (governing ambient air quality standards) and § 211 (governing fuel additives) allow EPA to regulate a pollutant only if it "may reasonably be anticipated to endanger public health or welfare." But the fact that the Clean Air Act establishes the same threshold standard for EPA's power to establish ambient air standards and its power to regulate fuel additives does not mean that the substantive standard that EPA sets for a fuel additive must be tied to the substantive standard it sets for ambient air quality. On the contrary, § 109(b) (1), 42 U.S.C. § 7409(b)(1), prescribes a specific substantive standard -- "requisite to protect the public health" allowing "an adequate margin of safety."19 Section 211(c), in contrast, broadly authorizes EPA to "control or prohibit" the sale of fuel additives.

Similarly, other sections of the Act have the same threshold standards as sections 108 and 211, yet each has its own substantive standard. See, e.g., §§ 111 (new source performance standards), 202 (motor vehicle emission standards).20 Thus, Congress' use of the same threshold standard in these disparate sections cannot imply that they share the same substantive standard.

The legislative history confirms the conclusion that EPA can set different substantive standards under sections 109 (ambient air quality) and 211 (fuel additives). Until 1977, different sections of the Act had different threshold standards. In particular, § 108(a)(1)had a different standard ("has an adverse effect on public health or welfare") than § 211(c)(1)("will endanger the public health or welfare").21 In 1977, Congress established a uniform formula ("may reasonably be anticipated to endanger public health or welfare") for the threshold decision whether "the Administrator may regulate a pollutant." H.R. Rep., supra note 12, at 50, 4 Leg. Hist. 2517, 1977 U.S. Code Cong. & Ad. News at 1128 (emphasis added).22 Nothing suggests that Congress also meant to establish a uniform substantive standard tied to the ambient air quality standards. The legislative history of the 1977 amendments mentions § 108 only as one of a list of sections to which the new threshold standard will apply.23 Moreover, Congress left the substantive standards in §§ 111 and 202 unchanged, and thus could not possibly have intended to set up a single overriding substantive standard.

SRTF's construction would also be foolish as a policy matter. First, sections 109 and 211 are designed to accomplish different goals. Section 109 establishes only ambient air standards. To meet the ambient standards, the states must develop emission limits for individual pollution sources. Necessarily, these individual source limits will be stricter in some geographic areas than in others. Section 211, in contrast, permits EPA to establish nationally uniform emission limits on fuel additives.24 Those limits may be more or less stringent than needed to meet the ambient air standards in any particular area. Thus, it would not make sense to force regulation under § 211 to move in lockstep with the ambient air standards promulgated under § 109.

Second, the ambient air standard for lead does not fully protect the public health against the adverse effects of gasoline lead. Lead is a heavy element that quickly settles out of the air onto the ground, where it can be ingested or inhaled along with dust and dirt. The ambient standard does not take full account of dirt and dust lead. See Environmental Protection Agency, Fuels and Fuel Additives: Denial of Petition to Repeal Lead Phasedown Regulations, 45 Fed. Reg. 54,090, 54,093/1 (1980) (ambient standard for lead was "not designed to protect against exposure from non-air sources, including those resulting from automobile emissions") (footnote omitted). Also, some of the lead used by rural refineries will make its way into the food chain to be eaten by urban children (who are at greatest risk of lead poisoning). We decline to read § 211 as precluding EPA from regulating these indirect sources of lead exposure.25

For the foregoing reasons, we hold that EPA may issue lead-content regulations under § 211(c) that are stricter than necessary to meet the ambient air quality standard for lead issued under § 109(b).26 Having disposed of SRTF's statutory objections to EPA's authority, we turn to the substantive and procedural validity of the lead-content regulations. We begin by reviewing the special statutory provisions for judicial review of EPA rulemaking under the Clean Air Act. III. JUDICIAL REVIEW UNDER CLEAN AIR ACT § 307(d)

In 1977, Congress -- concerned that the Administrative Procedure Act , 5 U.S.C. § 553, did not provide procedures adequate for the complex scientific issues involved in EPA rulemaking -- created new procedures for most rulemaking under the Clean Air Act, including rulemaking under § 211. Clean Air Act § 307(d), 42 U.S.C. § 7607(d). This part contains an overview of the § 307(d) procedures.

A. Notice of Rulemaking and Statement of Basis and Purpose

Under the APA, 5 U.S.C. § 553(b)(3), an agency must publish in the Federal Register a notice of proposed rulemaking which "shall include . . . either the terms or substance of the proposed rule or a description of the subjects and issues involved." Clean Air Act § 307(d)(3) requires a much more detailed notice of rulemaking. EPA must publish a notice of proposed rulemaking "as provided under section 553(b)." In addition, this notice "shall be accompanied by a statement of its basis and purpose," which:

shall include a summary of --

the factual data on which the proposed rule is based;

the methodology used in obtaining the data and in analyzing the data; and

the major legal interpretations and policy considerations underlying the proposed rule.

Thus, there are basically two major differences between APA § 553(b) and Clean Air Act § 307(d)(3). First, the Clean Air Act, unlike the APA, requires EPA to issue a "proposed rule." Although § 307(d)(3) does not explicitly require EPA to issue a proposed rule, it refers to the agency's duty to explain "the factual data on which the proposed rule is based" and "the major legal interpretations and policy considerations underlying the proposed rule." Also, at the final rule stage, 307(d)(6) requires EPA to explain "any major changes in the promulgated rule from the proposed rule." EPA cannot comply with these statutory requirements unless it issues a "proposed rule."27 Second, the APA requires an agency to explain its reasoning only when it issues a final rule. In contrast, Clean Air Act § 307(d)(3) requires EPA to give a detailed explanation of its reasoning at the "proposed rule" stage as well.

Turning to the notice of final rulemaking, APA § 553(c) requires an agency to provide only a " concise general statement of basis and purpose" (emphasis added). In contrast, § 307(d)(6) requires a more detailed explanation -- a "statement of basis and purpose" (without the qualifiers "concise" and "general"). In particular, the statement of basis and purpose must include the specific items required at the proposed rule stage and must also include "an explanation of the reasons for any major changes in the promulgated rule from the proposed rule" and "a response to each of the significant comments, criticisms, and new data submitted . . . during the comment period."

B. The Record for Judicial Review

The APA does not prescribe any procedures for assembling a "record" for judicial review of informal rulemaking. The Clean Air Act, in contrast, requires EPA to establish a "rulemaking docket" that is open to the public and must include: (1) the notice of proposed rulemaking and accompanying statement of basis and purpose; (2) "all data, information, and documents" on which EPA relies in its statement of basis and purpose; (3) other documents which become available after the proposed rule is published and which "the Administrator determines are of central relevance to the rulemaking"; (4) all written comments and documents submitted to EPA during the comment period; (5) a transcript of any public hearings; and (6) the notice of final rulemaking and accompanying EPA explanation.28 The final rule must be based entirely on material that has "been placed in the docket as of the date of . . . promulgation," and the material in the docket is the exclusive record for judicial review.29

C. Substantive Review

The standard for substantive judicial review of EPA action under the Clean Air Act is taken directly from the APA: The court may reverse only if EPA's action was "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." Clean Air Act § 307(d)(9), 42 U.S.C. § 7607(d)(9); see 5 U.S.C. § 706(2)(parallel APA provision).

Congress considered but ultimately rejected a proposal to establish a "substantial evidence" standard of review for the Clean Air Act. It did so to avoid any suggestion that EPA should be subject to a stricter standard of review than other agencies. See 123 Cong. Rec. 26,851 (1977), 3 Leg. Hist. 366 (statement of Sen. Muskie) ("the Environmental Protection Agency should [not] be singled out in this way").30 Congress was aware, however, that there may be "little practical difference" between substantial evidence review and arbitrary and capricious review. Conf. Rep. at 178, 3 Leg. Hist. 558, 1977 U.S. Code Cong. & Ad. News at 1559;31 see Sierra Club v. Costle, 211 U.S. App. D.C. 336, 657 F.2d 298, 323 n.67 (D.C. Cir. 1981); Lead Industries Association v. EPA, 208 U.S. App. D.C. 1, 647 F.2d 1130, 1146 n.30 (D.C. Cir. 1980), cert. denied, 449 U.S. 1042, 66 L. Ed. 2d 503, 101 S. Ct. 621 (1980) (both discussing substantive review under § 307(d)).32

The scope of review under the "arbitrary and capricious" formula is well established. We must engage in a "searching and careful" review of the record. Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 416, 28 L. Ed. 2d 136, 91 S. Ct. 814 (1971); see Ethyl Corp., 541 F.2d at 35. For its decision to be sustained, "the agency must consider all of the relevant factors and demonstrate a reasonable connection between the facts on the record and the resulting policy choice." Sierra Club v. Costle, 657 F.2d at 323 (footnote omitted). When the facts are uncertain, the Administrator "should so state and go on to identify the considerations he found persuasive." Industrial Union Department, AFL-CIO v. Hodgson, 162 U.S. App. D.C. 331, 499 F.2d 467, 476 (D.C. Cir. 1974); see Lead Industries Association, 647 F.2d at 1146-47. In short, we must, in Judge Leventhal's phrase, take a "hard look" at both the facts and the agency's reasoning.33

In taking this hard look, however, we have only limited power to second-guess the agency's reasoning. We can and do insist that the agency's reasons and policy choices do "'not deviate from or ignore the ascertainable legislative intent.'" Ethyl Corp., 541 F.2d at 36 (quoting Greater Boston Television Corp. v. FCC, 143 U.S. App. D.C. 383, 444 F.2d 841, 850 (D.C. Cir. 1970), cert. denied, 403 U.S. 923, 91 S. Ct. 2233, 29 L. Ed. 2d 701 (1971)). Beyond that, however, we can only require the agency's reasons and policy choices to conform to "certain minimal standards of rationality." Id. If so, the rule is reasonable and must be upheld.

D. Procedural Review

Under the APA, the reviewing court must reverse agency action taken "without observance of procedure required by law," 5 U.S.C. § 706(2), after taking "due account . . . of the rule of prejudicial error," id. 706 (last clause). Clean Air Act § 307(d), at least on its face, more narrowly circumscribes judicial power to reverse EPA action on procedural grounds. As under the APA, the court must reverse agency action taken "without observance of procedure required by law." Clean Air Act § 307(d)(9), 42 U.S.C. § 7607(d)(9). However, the court must also find that EPA's "failure to observe such procedure is arbitrary or capricious," id. § 307(d)(9)(i), 42 U.S.C. 7607(d)(9)(i), and that the procedural errors were "so serious and related to matters of such central relevance to the rule that there is a substantial likelihood that the rule would have been significantly changed if such errors had not been made," id. § 307(d)(8), 42 U.S.C. 7607(d)(8).34

Unfortunately, it is not clear what these restrictions on procedural reversal mean. "Arbitrary and capricious" review generally refers to the requirement that an agency "must consider all the relevant factors" and reach a "reasonable" conclusion. Sierra Club v. Costle, 657 F.2d at 323. Yet Congress could hardly have intended to leave EPA free to ignore the procedural requirements of § 307(d), so long as the agency gives a decent reason for doing so.

The requirement that the errors be "so serious and related to matters of such central relevance" that "there is a substantial likelihood that the rule would have been significantly changed if such errors had not been made" is also ambiguous. The first clause ("so serious and related to matters of such central relevance") has no independent force; it will automatically be satisfied by any error that creates "a substantial likelihood that the rule would have been significantly changed." This leaves the problem of interpreting the two key terms -- "substantial likelihood" and "significant change" -- neither of which has a precise meaning. These terms appear on their face to be stricter than the APA's "prejudicial error" rule, which requires only a possibility that the error would have resulted in some change in the final rule. See, e.g., Weyerhaeuser Co. v. Costle, 191 U.S. App. D.C. 309, 590 F.2d 1011, 1031 n.27 (D.C. Cir. 1978) ("we cannot be sure that under the correct procedures the Agency would have reached the same conclusion"). But it is hard to say how much stricter the Clean Air Act standard is.

The legislative history provides a partial answer to these puzzles, and leads us to conclude that there is less to § 307(d)'s requirements for procedural reversal than meets the eye. Section 307(d) derives from the House version of the 1977 Clean Air Act Amendments; the Senate bill had no comparable provision. The House bill provided for oral hearings and for limited cross-examination on "disputed issue[s] of material fact." Cross-examination could be conducted only "to such extent and in such manner as the Administrator considers necessary and appropriate in view of the nature of the issues involved, the number of participants and the nature of their interests, and any need for expedition." H.R. 6161, 95th Cong., 1st Sess. sec. 305(a), § 307(d)(5)(1977), 4 Leg. Hist. 2220, 2431. Moreover, the House report explains that the right to cross-examine on issues of "fact" refers only to "'adjudicative facts'" and further cautions that "in many cases, such facts may not be present, or. . . policy considerations [may be] so dominant as to reduce to insignificance the question whether one particular 'adjudicative' fact is true or not." H.R. Rep. at 321, 4 Leg. Hist. 2788, 1977 U.S. Code Cong. & Ad. News at 1400 (footnote omitted).

The House committee recognized that the various limits on the right to cross-examination were imprecise, so that questions could arise over, e.g., "whether a given question involves 'facts' or 'policy' or whether a given fact is 'legislative' or 'adjudicative.'" Id. at 322, 4 Leg. Hist. 2789, 1977 U.S.Code Cong. & Ad. News at 1401. It restricted procedural reversal to avoid disputes over the manner in which EPA structured cross-examination:

To prevent rulemaking from bogging down in arguments about such matters, and to underline that the agency is authorized to adapt rulemaking procedures to the individual case, the committee has limited the extent to which the Administrator's decisions on such procedural matters may be reversed during judicial review.

. . . The court is directed to consider two factors. The first is whether the Administrator's determination on the procedural point is "arbitrary or capricious."

The second is whether the procedural errors "were so serious and related to matters of such central relevance to the rule that there is a substantial likelihood that the rule would have been significantly changed if such errors had not been made."

Id. (citations to the bill omitted).

In the House bill, consistent with the committee explanation, the "arbitrary and capricious" requirement was contained not in 307(d)(9)(governing procedural review generally), but in 307(d)(5), the subsection that directed EPA to hold an oral hearing and allow cross-examination. H.R. 6161 (supra) sec. 305(a), § 307(d)(5), 4 Leg. Hist. 2432. Thus, the "arbitrary and capricious" test applied only to EPA decisions concerning the oral hearing and cross-examination and did not apply to procedural issues arising out of other subsections. Moreover, the provision did not authorize EPA to violate the procedural dictates of the Act; rather, it merely insured that EPA could take reasonable steps to implement the cross-examination procedures.

Less clear is the scope of the requirement that a procedural error create a "substantial likelihood that the rule would have been significantly changed." The House also directed this requirement primarily at procedures for cross-examination, but it applies on its face to all procedural determinations. The legislative history, unfortunately, provides no help on what "substantial likelihood" and "significant change" mean. We can say this much, though. The House did not intend to cut back on the procedural review provisions of the APA. Rather, the House was concerned that the APA procedures were "inadequate," H.R. Rep. at 318, 4 Leg. Hist. 2785, 1977 U.S. Code Cong. & Ad. News at 1397, and wanted to add new procedural protections, but also wanted to minimize disputes over EPA's compliance with the new procedures.

The Conference Committee deleted the cross-examination provisions in the House bill but retained the limits on procedural reversal (moving the "arbitrary and capricious" requirement from the truncated § 307(d)(5) to § 307(d)(9)). These limits are not mentioned in either the Conference Report or in the House and Senate debates on the Conference Committee bill. So far as appears, Congress never considered their residual meaning once the right to cross-examination was gone.35 It appears, however, that the Senate accepted the House understanding that § 307(d) did not cut back on existing APA procedural safeguards. Thus, Senator Muskie explained that he had opposed the House proposal for "substantial evidence" review because he believed that EPA ought to be subject to the same scrutiny as other agencies, no more, no less:

I am not suggesting that the courts should not discharge their duties with respect to EPA as they do with other agencies; at the same time, I want to emphasize . . . that nothing in the bill or its legislative history was meant to single out EPA for special scrutiny either.

123 Cong. Rec. 26, 851 (1977), 3 Leg. Hist. 366; see id. at 27,075, 3 Leg. Hist. 333 (statement of Rep. Broyhill) ("these new procedural requirements . . . will assure the opportunity for more extensive public participation in the rulemaking process").

In light of this history, we must interpret the final version of 307(d) to carry forward the House understanding of what the procedural restrictions meant, so far as that understanding makes sense in the context of the final bill. We therefore conclude that 307(d)(9)(i)'s requirement that EPA's procedural error be "arbitrary and capricious" means that we must affirm reasonable EPA decisions about how to implement the § 307(d) ...


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