Petitioners Reply Brief — Chevron USA Inc. v. Natural Resources Defense Council, Inc.

NeR UT 1985

Nos. 82-1005, 82-1247 & 82-1599 ALEXANDER L. STEVAS

ee

In the Supreme Court

OF THE

United States

Ocroser Term 1982

Cuevron U.S.A. Inc., a corporation, et al.,

Petitioners,

vs.

Natura. Resounces Derense Councn., Inc.,

Crrizens For a Betrren Envinonment, [weo.,

Nortruwestern Ono Lune Association, Ino.,

Respondents.

BRIEF FOR PETITIONER

CHEVRON U.S.A. INC.

Mionmagt H, Satovsxy

COUNSEL OF RECORD

Kevin M. Fone

225 Bush Street

Mailing Address P.O. Box 7880

San Francisco, CA 94120

Telephone: (415) 983-1462

Counsel for Petitioner

Chevron U.S.A. Ine.

Prussury, Mapison & Sutro

225 Bush Street

Mailing Address P.O. Box 7880

San Francisco, CA 94120

Of Counsel

BOWNE OF GAN FRANCIECO, INC, + 180 HINTH @T + 6.F., CA 04108 © (418) 664-8800

Uh ry

QUESTIONS PR“SENTED

Did the court of appeals err in substituting its judgment

for that of the Environmental Protection Agency on basic

policy determinations, where the court below did not, and

could not, find the regulations to be unreasonable? In par-

ticular, was it unreasonable for the Environmental Protec-

tion Agency

(1) to promulgate regulations which simply con-

formed EPA’s regulatory definition of “stationary

source” to the definition set forth in the Clean Air

Act; and

(2) to promulgate regulations which the undisputed

record shows comply with the Congressional purpose

in enacting the Clean Air Act?

‘Petitioners in the proceeding below were Natural Resources

Defense Council, Inc., Citizens for a Better Environment, Inc.,

and Northwestern Ohio Lung Association, Inc.

Respondent in the proceedings below was Anne M. Gorsuch.

Administrator, U.S. Environmental Protection Agency.

Chevron U.S.A. Inc, was an intervenor-respondent in the pro-

ceedings below. Chevron U.S.A. Inc. is a wholly owned subsidiary

of Standard Oil Company of California, a publicly owned corpora-

tion. Standard Oil Company of California owns stock in the follow-

ing publicly owned corporations;

Huntington Beach Co.

AMAX, Inc.

Cetus Corp.

Intervenor-respondents in the proceedings below, other than

Chevron U.S.A. Ine., are listed in Appendix D to Chevron’s Petition

for a Writ of Certiorari, No, 82-1005,

ii

TABLE OF CONTENTS

IOS asniescdcreqetiidicteretiptrcvetnve tetbcomectscoreneneerts

Nec aaa cconceveqsecnsdvensnacetones

i OE ES a oo

Statutory Provisions Involved 2.....0..........00.cccccccccclee sence

a a . cccecccenvacsnentiesntbnereleneccesstonnce®

I dasa ensceteowatiinvécénevenedsteceecentbusconesooes

I, In Holding That EPA May Not Promulgate

Il.

Il,

Regulations Using the Bubble Concept in Non-

attainment Areas, the Court of Appeals Errone-

ously Substituted its Judgment for That of

EPA on Basic Policy Issues 2000.0.0...........ccceccceeeseee

The EPA Regulations in Question Simply Con-

form the Regulatory Definition of “Stationary

Source” to the Definition Set Forth in the Clean

fn IRL 2 I EE ee

The EPA Regulations in Question are in Accord

with the Legislative History and Purposes of

ge a ie RIS I TN OR

REE SS EY ARLES Da A OE

10

12

iii

TABLE OF AUTHORITIES CITED

Cases

Page

Alabama Power Co. v. Costle, 636 F.2d 328 .............. 8, 11, 12

ASARCO Ine. v. Environmental Protection Agey., 578

WT MNOEE sicthcimetcitcertatibeabsoag inact ubdnccadaieuetl 8, 11, 12

Train v. Natural Resources Def. Council, 421 U. S. 60

‘salcunaeastetigtideaddaldndetedlidagstediiatadD a tteactaidasan\isrssbcincllniee 9, 10, 16, 17

Statutes

Be CIDA De W MOEA) crteoeihvanasvipibliddachtisltiniceh ieensbecsaietadedes 2

Clean Air Act:

Section 109(b) (42 U.S.C. § 7409(b)) -..c.ccececeeee 2

Section 110 (42 U.S.C. § 7410) ou... .ccececeseeeeee 2

Section 110(a) (2) (1) (42 U.S.C. § 7410(a)(2)(I)) —.. 3

Section 111 (42 U.B.C. § 7411) ou... cecccceseeees 2

Section 1l1(a)(3) (42 U.S.C. § 7411(a)(3)) .......... 13

Section 111(a) (4) (42 U.S.C. § 7411(a)(4)) ........ 12, 13

Section 171 (42 U.S.C. § 7501) ou... ecccesccceseee 2

Section 171(4) (42 U.S.C. § 7501(4)) ................ 12

Section 172 (42 U.S.C. § 7502) ........eccccceseseee 2

Section 172(b)(6) (42 U.S.C. § 7502(b)(6)) .......... 2,12

Section 173 (42 U.S.C. § 7508) 000... cccssceeee 2

Rules and Regulations

40 Code of Federal Regulations § 51.18 2000.0... 3, 13

40 Code of Federal Regulations § 52.24 00000 3,17

40 Code of Federal Regulations § 52.24(f) .00000.. 3, 13, 20

45 Federal Register 52746 20...0..........ccccccccccccseseseseseseseseeeeecees 3,13

46 Federal Register 50771 2.....0.........cccccccccscesesesseeseseseseceneees 3, 13

46 Federal Register 50766 ..................cccssecescsssossscesesereceeeers 3,13

46 Federal Register 50768 ......00...ccccccc-cccsssssseeooee Pe ceed 3

iv

Taste or AvutTHorities CiTep

Other Authorities

Page

House of Representatives Report 294, 95tn Congress,

1st Session, p. 211 ........ Sn diishaiapsstieitihlbtatsenesoosals Whaieiclake 14

House of Representatives Report 564, 95th Congress,

1st Session, p. 157, 1977 U.S. Code Cong. & Admin.

I IIT ceils dsdisthicile get cei Sicieeta ebiaiedéintiightnpoteghaphtnbobtege 14

Landau, Alabama Power Co. v. Costle: An End to a

Decade of Controversy Over the Prevention of Sig-

nificant Deterioration of Air Quality? (1980) 10 En-

IIE, RINIO III oi icha ic ccdetciscacclbenecccnsblictincioonscececebiilaes 12

Note, An Overview of the Bubble Concept (1982) 8

Columbia Journal of Environmental Law 137 ............ 12

Rhinelander, The Bubble Concept: A Pragmatic Ap-

proach to Regulation Under the Clean Air Act

(1981) 1 Virginia Journal of Natural Resources

BET SRO tchetdeib cite ncenseasipnatalctisatiseenscnotasecseceeblipicacependdhiiis 12

Nos. 82-1005, 82-1247 & 82-1591

In the Supreme Court

OF THE

United States

Octoser Term 1982

Cuevron U.S.A. Inc., a corporation, et al.,

Petitioners,

vs.

Natura Resources Derense Councni, Inc.,

Crrizens For a Betrrer Environment, Inc.,

NortTHWESTERN Onto Luna Association, Inc.,

Respondents.

BRIEF FOR PETITIONER

CHEVRON U.S.A. INC.

OPINIONS BELOW

The opinion and the judgment of the court of appeals

for the District of Columbia Circuit ((D.C.Cir. 1982) 685

F.2d 718) is printed in Appendix A to Chevron’s Petition

for a Writ of Certiorari, No. 82-1005. The orders of denial

of rehearing en banc are printed in Appendix B to Chev-

ron’s Petition for a Writ of Certiorari.

JURISDICTION

The opinion and the judgment of the court of appeals

were filed and entered on August 17, 1982 (Chev.Pet.,

Appx. A), and its orders denying rehearing were filed and

entered October 27, 1982 (Chev.Pet., Appx. B). Petitioner

2

Chevron U.S.A. Ine. filed its petition for a writ of certiorari

on December 15, 1982. This Court has jurisdiction pursuant

to § 1254(1) of Title 28 of the United States Code.

STATUTORY PROVISIONS INVOLVED

This case involves §§ 110, 111, 171, 172 and 173 of the

Clean Air Act (42 U.S.C. §4 7410, 7411, 7501, 7502, 7503),

the pertinent provisions of which are set forth in Appendix

C to Chevron’s Petition for a Writ of Certiorari.

STATEMENT OF THE CASE

The Clean Air Act and EPA’s regulations

The Clean Air Act establishes a comprehensive Federal-

state-local program to control existing and new sources of

air pollution (Chev.Pet., Appx. A, p. A-4). Pursuant to the

Act, the Environmental Protection Agency (“EPA”) has

prescribed national ambient air quality standards sufficient

to protect the health and welfare of all citizens (42 U.S.C.

§ 7409(b)). The Act and elaborate EPA rules require all

states to adopt, and submit to EPA for approval, State

Implementation Plans for attaining those standards (Chev.

Pet., Appx. A, pp. A-4 to A-5).

The 1977 amendments to the Clean Air Act, among other

things, specifically mandated that the states establish per-

mit programs “for the construction and operation of new

or modified major stationary sources” in nonattainment

areas, that is, areas which have not yet met one or more of

the national ambient air quality standards (Chev.Pet.,

Appx. C, p. C-28; 42 U.S.C. § 7502(b)(6)). Under the 1977

amendments, no major stationary source may be con-

structed or major modification undertaken unless the state

has: demonstrated to EPA that its comprehensive imple-

mentation plan, of which the permit program is only one

3

part, assures reasonable further progress toward meeting

Federal standards in the nonattainment area involved

(Chev.Pet., App. A, p. A-8; 40 C.F.R. § 52.24). If the non-

attainment area has no EPA-approved plan, the Act

requires a construction moratorium—no major stationary

source may be constructed or major modification under-

taken in the area if it will emit the “nonattainment” pollu-

tant (Chev.Pet., App. A, p. A-8; 42 U.S.C. § 7410(a) (2) (I)).

On October 14, 1981, EPA adopted a plantwide definition

of “stationary source” for permit programs in nonattain-

ment areas (Chev.Pet., Appx. A, p. A-11; 46 Fed.Reg.

50766 (Oct. 14, 1981)). Under that definition, a “stationary

source” is defined as “any building, structure, facility, or

installation” (40 C.F.R. §§ 51.18(j), 52.24(f) ; 46 Fed.Reg.

50771 (Oct. 14, 1981)).

Previous EPA regulations, adopted in August, 1980 and

repealed on October 14, 1981, had defined “installation,”

and accordingly, “stationary source,” to include not only

a plant, but also each individual piece of equipment at a

plant (45 Fed.Reg. 52,746 (Aug. 7, 1980)). This “dual defi-

nition,” however, posed a problem for both regulators and

industry in determining what pieces of equipment consti-

tuted an “installation” or “stationary source” in a given

situation (46 Fed.Reg. 50768 (Oct. 14, 1981)). More seri-

ously, the dual definition discouraged replacement of older,

dirtier industrial processes with new, cleaner ones (46 Fed.

Reg. 50766 (Oct. 14, 1981)). In areas subject to the con-

struction moratorium, for example, a plant could not mod-

ernize if any of the new pieces of equipment involved in a

modernization would produce emissions above de minimis

levels, even if the modernization as a whole would actually

decrease emissions from the plant (46 Fed.Reg. 50768 (Oct.

—

4

14, 1981)). Accordingly, EPA decided to replace the dual

definition with a plantwide definition of “stationary source.”

Under the plantwide definition, a modification would be

subject to the construction moratorium or permit require-

ments applicable to “major modifications” of “stationary

sources” only if the net emission increase from the plant as

a whole would be above the statutory or regulatory triggers

(Chev.Pet., Appx. A, p. A-11, n. 26). Modifications which

did not increase plantwide emissions above statutory or

regulatory de minimis levels would not be treated as

“major modifications” (Chev.Pet., Appx. A, p. A-11, n. 26).

The EPA plantwide definition thus applied the “bubble

concept”—an entire plant and its emissions may be viewed

as if placed under one bubble (Chev.Pet., Appx. A, p. A-2,

n. 1). Under the bubble concept, air pollution regulations

focus on the net effect of changes in an entire plant, rather

than subjecting each individual unit or piece of equipment

within a plant to the entire permit process (Chev.Pet.,

Appx. A, p. A-2, n. 1).

The primary reason advanced by EPA for adopting the

plantwide definition is that the definition allows states

grewter flexibility in developing nonattainment programs,

and thus complies with Congress’ mandate that states

have the primary responsibility for pollution control (Chev.

Pet., Appx. A, pp. A-11 to A-12).*? The bubble concept af-

fords states flexibility by freeing the enormous time, money

and other regulatory resources which would otherwise be

required to conduct extensive permit proceedings for each

*EPA also reasoned that regulatory complexity would be reduced

because the plantwide definition of stationary source had previously

been held to lawfully apply in another permit program administered

by EPA under the Clean Air Act (Chev.Pet., Appx. A, p. A-11).

5

and every component of industrial plants (and perhaps

every piece of new or modified industrial equipment) in

the area. Those resources may then be reallocated to the

critical aspects of air pollution control, such as controlling

automobile emissions in certain states (J.A. 136-137, 165-

166).

Chevron’s project

Petitioner, CHEVRON U.S.A. INC. (“Chevron”), pro-

duces, refines and markets petroleum and petroleum prod-

ucts. Chevron has planned, designed and substantially con-

structed a large, high-technology modification to its refinery

in the San Francisco Bay Area (J.A. 157-160). Chevron’s

project, permitted under the plantwide definition of source,

will decrease emissions of all air pollutants from the re-

finery, and generate 1,200 construction jobs and 45 perma-

nent jobs (J.A. 158).

The Chevron project involves construction of new, state-

of-the-art equipment for producing lubricating oils. The

new equipment will replace old equipment formerly used by

Chevron for processing lubricating oils at the plant.’ The

various emissions from the new lube oil equipment will be

completely offset by, among other things, the shutdown of

the old equipment—which was installed in the late 1930’s—

and the accompanying increased pollution control efficiency

at Chevron’s plant (Feldstein Decl., Exh. B, p. 5). The Bay

Area Air Quality Management District (“District”)—the

local agency charged under the Act and California law with

regulation of emissions from industrial equipment in the

*Declaration of Milton Feldstein ir; Opposition to Petitioner's

Motion for a Stay and for other Relief Pending Review (hereinafter

“Feldstein Decl.”), Exh. B, p. 1.

6

Bay Area—has estimated that the Chevron project will

reduce sulfur dioxide emissions from the Richmond plant

by 45.54 pounds per hour, nitrogen oxide by 15.27 pounds

per hour, carbon monoxide by 10.85 pounds per hour,

hydrocarbons by 18.22 pounds per hour and particulate .

matter by 4.20 pounds per hour (J.A. 161). In light of the

offset of emissions from the new equipment by the

shutdown or modification of old equipment, the District

issued a permit for the Chevron project. The Hearing

Board of the District, after conducting some 9 months of

hearings on challenges to the propriety of issuing the

permit, determined that the permit is entirely valid.'

That decision is now final as to all parties.°

*A copy of that permit is attached as Exhibit B to the Declaration

of Milton Feldstein in Opposition to Petitioner's Motion for a Stay

and for Other Relief Pending Review.

*The Hearing Board's order stated, in pertinent part:

“[T]he evidence before us does not show the RLOP [Chev-

ron’s project], when constructed and operated according to

the limitations of the Authority, will have any adverse effect

on air quality. The emission increases associated with the

operation of the new units to be built in connection with

RLOP are to be offset by emission reductions due to the shut-

down of the old lube oil processing units, increased incinerator

temperatures at the phthalic anhydride plant at the refinery

and by using the emission credits currently accrued by Chev-

ron in its internal bank since December 20, 1977, in accordance

with District Rule 2-2-205. To guard against any potential,

increased emissions elsewhere in the refinery due to the opera-

tion of these new units, the District has limited the emissions

from the refinery on an annual and monthly basis” (In the

Matter of the Appeal of Citizens for a Better Environment,

et al., from the Grant of Authority to Construct, Application

No. 27797 (Hearing Board of the Bay Area Air Quality

Management District, California, Mar, 3, 1983) Order Deny-

ing Appeal, Docket No. 837, p. 12).

*In the proceedings before the Court of Appeals in the instant

case, respondents relied heavily upon a declaration of Jeff Gabe

The proceedings below

Respondents Natural Resources Defense Council, Inc.,

Citizens for a Better Environment, Inc., and Northwestern

Ohio Lung Association, Inc. filed a petition for review of

the October 14, 1981 EPA regulations (Chev.Pet., Appx. A,

p. A-12). Chevron and various other members of the indus-

trial community intervened in support of the regulations

(Chev.Pet., Appx. A, p. A-12).

The court of appeals vacated EPA’s revised regulations,

holding that the bubble concept is per se inconsistent with

the Clean Air Act’s nonattainment programs (Chev.Pet.,

Appx. A, pp. A-16 to A-18). The court of appeals an-

nounced a “bright line test”—based on two cases, Alabama

Power Co. v. Costle (D.C.Cir. 1979) 636 F.2d 323 and

ASARCO Inc. v. Environmental Protection Agcy. (D.C.

Cir. 1978) 578 F.2d 319—for determining the propriety of

IEPA’s use of the bubble concept: The concept would be

mandatory in programs designed to maintain existing air

quality, but per se inappropriate in programs to improve

air quality (Chev.Pet., Appx. A, p. A-16). The court of

appeals concluded that the bubble concept was per se in-

appropriate in the case at bar, and considered it unneces-

sary to determine whether the regulations in question

(J.A. 167-176). It is significant that Jeff Gabe, research director of

Citizens for a Better Environment (one of the respondents here),

was one of the parties in the proceedings before the Hearing Board,

as was Citizens for a Better Environment. The Board conducted

extensive hearings to consider the arguments raised by Gabe there

and repeated in his declaration filed in this case; the Board rejected

all assertions that the Richmond project would have any adverse

effect on air quality (supra, p. 6, n. 4). Neither Gabe nor any

of the other parties sought review of the Board's findings.

assertions, having been rejected by the Hearing Board, should

ignored by this Court.

rf

promoted the improvement of air quality or whether the

bubble concept was consistent with the language and

legislative history of the Clean Air Act (Chev.Pet., Appx.

A, p. A-19).

On October 27, 1982, the court of appeals denied a peti-

tion for rehearing; Judge MacKinnon voted to grant a

rehearing en bane (Chev.Pet., Appx. B).

On May 31, 1983, this Court granted the petitions for

writs of certiorari filed by Chevron (No. 83-1005), Amer-

ican Iron and Steel Institute, et al. (No. 82-1247) and

William D. Ruckelshaus, Administrator, Environmental

Protection Agency (No. 82-1591); the cases were con-

solidated (J.A. 5).

9

SUMMARY OF ARGUMENT

The court of appeals erroneously substituted its judg-

ment for that of EPA on basic policy issues, even though

the court below did not, and could not, find EPA's regula-

tions to be unreasonable, This Court has recognized that

where an agency's regulation adopts a “reasonable” statu-

tory construction, the courts are precluded from substitut-

ing their judgment for that of the agency (Train v. Natural

Resources Def. Council (1975) 421 U.S. 60, 87). The court

of appeals, however, prohibited EPA from using the bubble

concept in nonattainment areas solely because of the court's

policy judgment that the bubble concept would cause un-

acceptable harm to air quality. But this policy judgment of

the court below is contrary to the judgment of EPA and

the judgment of Congress.

The court of appeals barred EPA from using the bubble

concept in areas with air pollutant levels exceeding Federal

ambient standards, even though the court could not iden-

tify any provisions of the Clean Air Act which would sup-

port its decision. In fact, the EPA regulations implementing

the bubble concept are entirely consistent with the provi-

sions of the Act. The regulations in question here simply

conformed EPA’s definition of the term “stationary source”

to the statutory provisions of the Clean Air Act; EPA de-

fined stationary source as “any building, structure, facility,

or installation,” the precise definition in section 111(a) (3)

of the Act. In so conforming the definition, EPA acted ra-

tionally, reasonably, and well within both the terms of the

Act and its agency discretion.

The EPA regulations implementing the bubble concept

are also consistent with the purposes of the nonattain-

ment provisions of the Act. Those purposes may be ful-

10

filled with no adverse effect upon public health: The EPA

regulations allow growth where de minimus emissions are

involved and permit construction or modification of major

stationary sources only where the state has demonstrated

that its program meets the goals and air quality standards

of the Clean Air Act.

Consistent with the purposes of the nonattainment provi-

sions, the bubble concept affords the states flexibility by

allowing them to control stationary source emissions in the

most expeditious and cost-effective manner. In addition,

the bubble concept furthers Congress’ goals by encouraging

modernization and expansion of industrial plants. The

bubble concept provides an incentive for industry to modify

and retire old, poorly controlled facilities and to develop

effective and cost-efficient air pollution control (J.A. 128-

129, 136). Under the bubble concept and the EPA segue’

tions, for example, Chevron may replace its old lube oil

equipment with new equipment which will reduce emissions

from Chevron’s plant. Chevron’s project is an example of

the many beneficial projects which may be halted or not

initiated if the ruling below is not reversed.

lL IN HOLDING THAT EPA MAY NOT PROMULGATE REGU-

LATIONS USING THE BUBBLE CONCEPT IN NONATTAIN-

MENT AREAS, THE COURT OF APPEALS ERRONEOUSLY

SUBSTITUTED ITS JUDGMENT FOR THAT OF EPA ON

BASIC POLICY ISSUES.

This case presents a clear instence in which the court of

appeals exceeded its limited scope of judicial review of an

agency's administrative action. It is well settled that where

EPA, or any other administrative agency, adopts regula-

tions implementing a “sufficiently reasonable” construction

of a statute, a court of appeals is precluded “from substi-

tuting its judgment for that of the Agency” (Train v.

Natural Resources Def, Council (1975) 421 U.S. 60, 87).

11

In the case at bar, the court of appeals did not, and

could not, find EPA’s regulations ‘o be unreasonable. EPA

reasonably decided to adopt a plantwide definition of “sta-

tionary source” in nonattainment areas for two valid rea-

sons: (1) to allow states greater flexibility in developing

nonattainment programs, pursuant to Congress’ mandate

(Chev.Pet., Appx. A, pp. A-11 to A-12); and (2) to reduce

regulatory complexity by adopting the same plantwide defi-

nition previously applied in another permit program admin-

istered by EPA under the Clean Air Act (Chev.Pet., Appx,

A, p. 11). Yet the court of appeals vacated EPA’s regula-

tions, even though the court could not identify any provi-

sions of the Clean Air Act which would support its decision.

The only rationale offered by the court of appeals was

that its prior decisions in Alabama Power Co. v. Costle

(D.C.Cir, 1979) 636 F.2d 323 and ASARCO Ince, v. Environ-

mental Protection Agcy. (D.C.Cir 1978) 578 F.2d 319 “estab-

lish as the law of this Circuit a bright line test for deter-

mining the propriety of EPA's resort to a bubble concept”

(Chev.Pet., Appx. A, p. A-16). That bright line test, the

court asserts, is as follows:

“The bubble concept, Alabama Power declares, is man-

datory for Clean Air Act programs designed merely to

maintain existing air quality; it is inappropriate, both

ASARCO and Alabama Power plainly signal, in pro-

grams enacted to improve the quality of the ambient

air” (Chev.Pet., Appx. A, p. A-16; emphasis added).

In fact, there is no support in either the provisions of

the Clean Air Act, its legislative history, or the ASCARCO

and Alabama Power cases’ for such a bright line test.

"In fact, it is widely acknowledged, except by the court below,

that Asarco and Alabama Power are irreconcilably in conflict:

12

Il, THE EPA REGULATIONS IN QUESTION SIMPLY CON-

FORM THE REGULATORY DEFINITION OF “STATIONARY

SOURCE” TO THE DEFINITION SET FORTH IN THE

OLEAN AIR AOT.

The Clean Air Act provides no support for the ruling

below. The bubble concept, and the EPA regulations imple-

menting that concept in nonattainment areas, are entirely

consistent with the provisions of the Act. Section 172(b) (6)

of the Clean Air Act requires that the states establish

permit programs “for the construction and operation of

new or modified major stationary sources” (Chev.Pet.,

Appx. ©, p. C-28; 42 U.S.C. § 7502(b)(6)) in nonattain-

ment areas. For purposes of the nonattainment provisions

of the Act in issue here, “[t]he terms ‘modifications’ and

‘modified’ mean the same as the term ‘modification’ as used

in section 111(a)(4) of this Act” (91 Stat. 746; Chev.Pet.,

Appx. ©, p. C-28; 42 U.S.C. § 7501(4)). Section 111(a) (4)

of the Act defines “modification” as: “any physical change

in, or change in the method of operation of, a stationary

source which increases the amount of any air pollutant

emitted by such source or which results in the emission of

“*ASARCO and Alabama Power reach opposite conclusions,

interpreting an identical definition of source but coming to

completely different determinations about the validity of the

bubble concept. No clear reason emerges from the opinions

to explain the differences. Because the D.C. Circuit failed to

reexamine ASARCO in light of its conclusions in Alabama

Power, and instead tried to distinguish it, the two decisions

leave no clear holding on the validity of the bubble concept’”

(An Overview of the Bubble Concept (1982) 8 Colum.].

Envtl.L. 137, 151; emphasis added; see Rhinelander, The

Bubble Concept: A Pragmatic Approach to Regulation under

the Clean Air Act (1981) 1 Va.J.Nat.Resources L. 177, 215;

Landau, Alabama Power Co. v. Costle: An End to a Decade

of Controversy over the Prevention of Significant Deterioration

of Air Quality? (1980) 10 Envtl.L. 585, 626).

13

any air pollutant not previously emitted” (Chev.Pet.,

Appx. C, p. C-27; 42 U.S.C. § 7411(a) (4) ; emphasis added).

The term “stationary source” as used in §111(a)(4) is

itself defined in § 111(a)(3): “The term ‘stationary source’

means any building, structure, facility, or tstallation

which emits or may emit any air pollutant” (Chev.Pet.,

Appx. C, p. C-27; 42 U.S.C. § 7411(a) (3) ; emphasis added).

The 1981 regulations in question here simply conformed

EPA’s definition of stationary source to the statutory pro-

visions of the Clean Air Act by defining stationary source

as “any building, structure, facility, or installation,” the

precise definition in section 111(a)(3) of the Act (see 46

Fed.Reg. 50771 (Oct. 14, 1981); 40 C.F.R. §$§ 51.18(j),

52.24(f)). The prior, 1980 regulations had further defined

the term “installation” as “an identifiable piece of process

equipment’’—a definition which appears nowhere in the Act

(45 Fed.Reg. 52746 (Aug. 7, 1980)). In 1981, EPA simply

repealed its prior short-lived regulations defining “installa-

tion” as an identifiable piece of process equipment (46

Fed.Reg. 50766 (Oct. 14, 1981)).

Certainly, in so conforming the definition, EPA could

not have committed a per se violation of the Act as the

court of appeals held. In any event, EPA acted rationally,

reasonably, and well within both the terms of the Act and

its agency discretion in promulgating the 1981 regulations.

Nothing in the Clean Air Act suggests—much less requires

—that EPA should define “stationary source” so as to re-

quire permits for each individual piece of equipment in

a plant.

14

Ill. THE EPA REGULATIONS IN QUESTION ARE IN ACCORD

WITH THE LEGISLATIVE HISTORY AND PURPOSES OF

THE CLEAN AIR ACT.

The legislative history of the Clean Air Act does not

directly address the definition of stationary source or the

use of the bubble concept (Chev.Pet., Appx. A, p, A-17,

n. 39). The legislative history does establish, however, that

the bubble concept is consistent with the purposes of the

nonattainment provisions of the Act.

Congress clearly and unambiguously stated that the non-

attainment provisions of the Act have

«“e * * two main purposes: (1) to allow reasonavle

economic growth to continue in [a nonattainment] area

while making reasonable further progress to assure

attainment of the standards by a fixed date; and (2) to

allow States greater flexibility for the former purpose

than EPA’s present interpretative regulations afford”

(H.P..Rep.No. 294, 95th Cong., Ist Sess., p. {il

(1977)).°

*That this is the relevant legislative history is made clear by the

Conference Report; the permit program for new and modified

sources in nonattainment areas was taken from the House Bill

(H.R.Rep.No. 564, 95th Cong., Ist Sess., p. 157 (1977); 1977

U.S.Code Cong. & Admin. News, p. 1537).

Respondents misstate the relevance of the legislative history of

the House Bill (Respondents’ Br. in Opp. to Pets., p. 16, n. 31).

Chevron does not claim that the above-quoted passage “chang[es]

the basic ‘source’ definition” (ibid.); the legislative history is sig-

nificant, however, to establish that the bubble concept is consistent

with the purposes of the nonattainment provisions. The suggestion

that the purposes of allowing reasonable economic growth and

allowing states greater flexibility apply only to two specific aspects

of the nonattainment provisions is simply incorrect. Respondents’

reliance upon the “pages of the Report which follow” the above-

quoted statement of purposes is misplaced, as those pages similarly

state that a purpose of the nonattainment provisions “is to give the

States more flexibility in determining how to protect public health

while still permitting reasonable new growth” (H.R.Rep.No. 294,

95th Cong., Ist Sess., p. 213 (1977)).

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Had the court of appeals considered whether the bubble

concept is consistent with those purposes, the uncontro-

verted factual record before EPA and the court of appeals

would have shown that the bubble concept will not con-

travene or in any way impede those objectives.

The bubble concept affords the states flexibility: In some

states, where automobile emissions rather than stationary

source emissions prevent the state from meeting Federal

air quality standards, use of the plantwide bubble concept

is irrelevant to attainment of those standards.* The bubble

concept would enable these states to reallocate their re-

sources to automobile emission control, rather than waste

limited regulatory resources on inspection and the issuance

of permits for each and every piece of industrial equip-

ment in nonattainment areas under a “dual definition.”

States are anxious to demonstrate that use of the bubble

concept is fully consistent with timely attainment of air

quality standards in the most expeditious and cost-effective

manner.” But the ruling below precludes any state from

using the bubble concept, regardless of whether that con-

cept suits its needs.

In the San Francisco Bay Area, for example, control

of pollution from automobiles, rather than from industry,

is the key to effective air quality control (J.A. 165-166). The

Bay Area Air Quality Management District has promul-

gated permit rules which, while stringent (J.A. 163), are

*See e.g., comments of the Arizona Department of Health Services

(J.A. 136).

See, e.g., comments of the California Air Resources Board

(J.A. 154-155); Ohio Regional Air Pollution Control Agency (J.A.

120); New York State Department of Environmental Conservation

(J.A. 128-129); Missouri Department of Natural Resources (J.A.

130); Ohio EPA (J.A. 138).

16

easy to enforce because they allow industry to offset emis-

sion increases in one sector of a plant with decreases in

other sectors (Feldstein Decl., Exh. A, p. 2-2-6). Thus, the

District can ensure that a plant’s emissions are in com-

pliance with the Clean Air Act, without monitoring and

conducting permit proceedings for each and every indi-

vidual piece of equipment in the plant. Without the flexi-

bility of the bubble concept, for example, the District would

be forced to issue a separate permit for each individual

piece of process equipment in the Chevron project, which

involves construction or modification of scores of furnaces,

reactors, exchangers, filters, compressors and cooling tow-

ers (see Feldstein Decl., Exh. B, p. 2). The resulting drain

on the limited administrative resources of the District

would be enormous. Moreover, conducting permit proceed-

ings for individual pieces of equipment is simply unneces-

sary since local districts could, under the bubble concept,

fashion regulations which result in net reductions in emis-

sions from all plant modifications or expansions (J.A.

164).™

It should also be noted that the decision below, by

precluding state flexibility, violates the principles expressed

by this Court in Train v. Natural Resources Def. Council

(1975) 421 U.S. 60. In 7'rain, this Court recognized that the

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states have the primary role in determining the specific

emission limitations necessary to meet national standards

(421 U.S. 79).

“(S]o long as the ultimate effect of a State’s choice

of emission limitations is compliance with the national

standards for ambient air, the State is at liberty to

adopt whatever mix of emission limitations it deems

best suited to its particular situation” (421 U.S. 79).

But the decision below bars all use of a plantwide defini-

tion implementing the bubble concept, even where a state

demonstrates that use of the bubble concept will not impede

timely attainment of air quality standards.

Moreover, the bubble concept is consistent with Congress’

goal of allowing reasonable economic growth while the

states make reasonable further progress to attainment of

Federal air quality standards. The bubble concept encour-

ages modernization and expansion of industrial] plants, and

“reasonable further progress” is assured because the EPA

regulations in question allow construction of major sta-

tionary sources or major modifications only if the state has

demonstrated to EPA that its air quality plan assures

reasonable further progress toward meeting air quality

standards (Chev.Pet., App. C, p. C-29; 40 C.F.R. § 52.24).

The application of the bubble concept to Chevron’s Rich-

mond Lube Oil Project demonstrates the importance of

the concept to effective air pollution control. Chevron’s

project is being constructed in Richmond, California, an

area in which the air quality already meets all primary

Federal standards (J.A. 159). The Richmond Lube Oil

“The area remains classified a “nonattainment” area for two

pollutants because of past pollution levels.

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Project will- result in net decreases in emissions into

the air from Chevron’s refinery (J.A. 165). The de-

creases in emissions result from the construction of new

lube oil processing equipment which will totally replace

old, poorly controlled equipment which was installed in the

late 1930’s (Feldstein Decl., Exh. B, p. 5). The modification

and replacement of equipment in Chevron’s project will

reduce emissions by:

80 tons per year of organic compounds

(precursors to photochemical smog) ;

199 tons per year of sulfur dioxide;

67 tons per year of nitrogen oxides;

48 tons per year of carbon monoxide;

18 tons per year of particulate matter

(Feldstein Decl., Exh. B, p. 3).

The Richmond Lube Oil Project will also use the “best

available control technology” to minimize emissions (J.A.

158), and the Bay Area Quality Management District has

issued a permit with conditions imposing stringent sanc-

tions if the plant’s emissions ever exceed the limits set

forth in the permit (Feldstein Decl., Exh. B, p. 6).

Projects like the Richmond Lube Oil Project are essen-

tial to continued economic growth. Chevron’s project in the

Bay Area involves costs in excess of $500,000,000, will gen-

erate 1,200 construction jobs and 45 permanent jobs, and

‘will process 30,000 barrels of oil per day. In contrast to

the economic growth allowed by the bubble concept, the

ruling below results in a stifling of economic growth, con-

trary to the express goals of Congress. The Clean Air Act

requires a construction moratorium in nonattainment areas

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without EPA-approved plans, but the terms of the Act

apply that moratorium only to “major stationary sources”

with emissions increases above threshold levels established

by statute. The ruling below, however, will result in a mora-

torium on expansions or modifications of plants with net

emission increases below those threshold levels.“ By pro-

hibiting all use of the bubble concept in nonattainment

areas, the court of appeals has extended the construction

moratorium to projects in which a proposed piece of equip-

ment or unit within a plant would increase emissions, even

if the expansions or modifications to the plant as a whole

would not exceed statutory limits or would result in net

decreases in emissions. These industrial projects will simply

not be constructed if the ruling below is allowed to stand.

In holding that EPA may not promulgate regulations

using the bubble concept, the court of appeals has substi-

tuted its judgment for that of EPA on basic policy issues.

The court of appeals prohibited EPA from using the bubble

concept in nonattainment areas solely because of the court’s

policy judgment that the bubble concept would cause un-

acceptable harm to air quality. But this policy judgment of

the court below is contrary to the judgment of EPA and the

judgment of Congress: Under the plantwide definition of

“stationary source” in nonattainment areas adopted by

20

EPA a project would be allowed to proceed only if any net

emission increase from the plant as a whole is below the

maximum levels allowed by statute. Thus, any increase in

emissions from a plant using the bubble concept is, by defini-

tion, of a de minimis amount which Congress has found to

be acceptable and consonant with achievement of attainment

in nonattainment areas.** The court of appeals may not

second-guess the judgment of Congress in setting the ac-

ceptable levels of emissions, nor may the court usurp

EPA’s judgment in fashioning regulations to meet those

levels.”

“Contrary to respondents’ assertion (Respondents’ Br. in Opp.

to Pets, pp. 4-5, n. 9), EPA’s regulations allow modifications only

if the net cumulative emission increase is below de minimis levels

(40 C.F.R., Part 51, Appx. S, {I.A.6; 40 C.F.R. § 52.24(f)(6)).

Respondents’ suggestion that a refinery owner could build new stor-

age tanks increasing hydrocarbon pollution by 40 tons each year is

simply incorrect. The October 14, 1981 EPA regulations would only

allow a .total 40-ton increase for the entire refinery over a five-year

period (ibid. ).

Similarly, the permit rules of the Bay Area Air Quality Manage-

ment District require that all cumulative increases in emissions from

a given facility of more than 250 pounds per day over a specified

period of time must be offset in accordance with the permit rules

(J.A. 164).

There is no merit to respondents’ assertion that the EPA regu-

lations in question will adversely affect public health ( Respondents’

Br. in Opp. to Pets., pp. 24-26). Those regulations allow a major

stationary source to be constructed or major modification made

only if the state has demonstrated to EPA that its overall air qual-

ity plan for the state assures reasonable further progress toward

meeting air quality standards (supra, pp. 2-3). Moreover, under

the EPA regulations in question, a project in a state with an un-

approved plan would be allowed to proceed only if any net cumu-

lative emission increase from a plant is below the maximum levels

which Congress has found to be acceptable (supra, p. 4).

21

CONCLUSION

For the foregoing reasons, the judgment below should

be reversed.

Respectfully submitted,

Mica. H. Sauinsky

COUNSEL OF RECORD

Kevin M. Fone

Counsel for Petitioner

; Chevron U.S.A. Inc.

Pitissury, Mapison & Sutro

Of Counsel

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