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

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OCT 28 1903

Nos. 82-1005, abt 82-1591 | ALEXANOER L. STEVAQ,

In THE G

Supreme Court of the United States

OcToser Term, 1983

CHEVRON U.S.A., INC.,

Petitioner, yi

v. '

Natura Resources Derense CounciL, INC., e/ al., BS

Respondents;

AMERICAN IRON AND STEEL INsTITUTE, et al., i

’ Petitioners, ;

, Vv. ,

NATURAL Resources Derense Counc, INC., ef al., Pe

| Respondents; “

4 ADMINISTRATOR, ENVIRONMENTAL PROTECTION AGENCY, f

y Petitioner, *

. | ’. e

eae NATURAL Resources Derense CounciL, INC., ef al., :

all Respondents. )

x On Writs of Certiorari to the United States Court |

at of Appeals for the District of Columbia Creat Ie.

‘ NATURAL RESOURCES DEFENSE COUNCIL, INC.

QUESTION PRESENTED

Whether the Clean Air Act permits the Environmental

Protection Agency to redefine the term ‘‘stationary source"’

to mean whole industrial plants only, and thereby to exempt

major new units built within plants (such as boilers and blast

iurnaces) from pollution control requirements established by

the Act.

TABLE OF CONTENTS

QUESTION PRESENTED. .............ceeseeees

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DEAL EMeIeE OF THE CASE 2... cc ccccccccccees

A. The Statutory Framework ..............

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2. The 1977 Amendments.............

3. The 1981 Amendments.............

B. The Regulatory History ................

1. The 1971 and 1973 Regulations......

2. The 1976 Offset Ruling.............

3. The Regulations From 1977 to 1979..

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5. The 1980 Regulations ..............

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D, The Court of Appeals Decision..........

SUMMARY OF THE ARGUMENT ..............

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THE CLEAN AIR ACT REQUIRES EACH

NEW OR MODIFIED INDUSTRIAL UNIT

WHICH EMITS 100 TONS OF POLLUTION

PER YEAR TO OBTAIN A PERMIT, RE-

GARDLESS WHETHER IT IS LOCATED BY

ITSELF OR WITHIN A PLANT ............

i ae tie? Soenaincinens

Amendments..................05..

. amen hi 34.4444464556534

The Offset Ruling ..............

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2. The 1981 Steel Amendments........

The Statutory Purposes Are Incompatible

With The Plant-Wide ‘‘Source’’ Definition

There Is No Conflict With Train or Union

BROGES aces éclbde deds’ t debhbent¥adet ve

EPA'S NEW CONSTRUCTION IS A SHARP

BREAK WITH THE LONG-STANDING PRIOR

RULE, INTERNALLY INCONSISTENT, AND

THE PRODUCT OF FAILING TO CONSIDER

AN IMPORTANT ASPECT OF THE

PROBLEM ‘650. ccccvcccccvccccicccvccccces

The 1981 Rules Reversed the Long-Stand-

ing Prior Interpretation .................

The Rationale for the 1981 Change Is In-

ternally Inconsistent ..............6000:

EPA Failed to Consider Whether The Plant-

Wide Definition Increases Pollution in the

Aggregate

THE REPEAL OF THE “RECONSTRUC-

TION” RULE HAD NO BASIS INDEPEND-

ENT OF THE REDEFINITION OF “SOURCE”

AND MUST FALL AS WELL ..............

CORI Wkcca wocnbdccvcdsauecdcctereiies

es sei

TABLE OF AUTHORITIES

Pages

CASES:

Alabama Power Co. v. Costle, 636 F.2d 323 (D.C.

EE SI I St oe ee 19,28,29

ASARCO v. EPA, 578 F.2d 319 (D.C. Cir. 1978).. 8,16

Burlington Truck Lines v. United States, 371 U.S.

ET ravldged shuns cbnddUSre snes cnte ox

Espinoza v. Farah Manufacturing Co., 414 U.S. 86

SE Gh uhh Padedews oNAs Use tue vedcekWhedeces 27,43

FMC vy. Seatrain Lines, 411 U.S. 726 (1973)...... 33,43

Gulf States Util. Corp. v. FPC, 441 U.S. 747

DS CCsL Leah donc ichunkbdsbadeseseesoce 23

Hancock v. Train, 426 U.S. 167 (1976)........... 7

International Brotherhood of Teamsters v. Daniel,

is Se os bbnn dkbss SUN sédcccccccce 43

Miller v. Youakim, 440 U.S. 125 (1979) .......... 43

Morton v. Ruiz, 415 U.S. 199 (1974)............. 43

Motor Vehicle Mfrs Ass'n v. State Farm Mut. Auto

Ins. Co., 103 S.Ct. 2856 (1983)... ..ccccccccces 26,42,46,

47,48

Natural Resources Defense Council v. Gorsuch,

68S F.2d 718 (D.C. Cir. 1982)......ccccccccees 21,22,38,

45 ,46,48

Power Reactor Development Co. v. International

Union of Electrical, Radio & Machine Workers,

ER nuh ucbae bhi so cabinees Koes e4 43

Seatrain Shipbuilding Corp. v. Shell Oil Corp. 444

ESS ducveckehosbecbleseesteces 33

Securities & Exchange Comm'n v. Chenery, 332

CNIS ob acbabavcceciccewecdadacncce 23

Securities & Exchange Comm'n v. Sloan, 436 U.S.

PPE An onessesebbdncecbebsade eeiedesces 27,48

Seutheastern Community College v. Davis, 442 U.S.

hs oihdeoeceee ss ssubedtvudeeebeses 26

State Farm Mut. Auto. Ins. Co. v. Dep't of Trans-

portation, 680 F.2d 206 (D.C. Cir. 1982) ....... 46

Train v. Natural Resources Defense Council, 421

ED ihakctbuncsh6 ius sktlée¥ be sotes 41,42

Udall v. Tallman, 380 U.S. 1 (1965)

Union Electric Co. v. EPA, 427 U.S. 246 (1976) ..

United States v. An Article of Drug . . . Bacto-

Unidisk, 394 U.S. 784 (1969)

United States v. Dotterweich, 320 U.S. 277 (1943)

United States v. Vogel Fertilizer Co., 455 U.S. 16

(1982)

Volkswagenwerk Aktiengeseilschaft v. FMC, 390

U.S. 261 (1968)

Whirlpool Corp. v. Marshall, 445 U.S. 1 (1980)...

Zuber v. Allen, 396 U.S. 168 (1969) ........... rs

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STATUTES:

Clean Air Act (1970 provisions, amended 1977)

Section 110(a)(2)(A)-(H), 84 Stat. 1680-81 ....

Section 110(a)(2)(D), 84 Stat. 1680

Section 110(a)(4), 84 Stat. 1681

Section 110(e), 84 Stat. 1682

Clean Air Act (as amended 1977)

Section 10%a) & (b); 42 U.S.C. §740%a) &

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Section 110, 42 U.S.C. §7410

Section 110(a(2)(D), 42 U.S.C.

§7410(a(2D)

Section 110(a(2)(I), 42 U.S.C.

$7410 aX(2\1)

Section 110(a)(5), 42 U.S.C. §7410(a)(5)

Section 111, 42 U.S.C. §7411

Section 111(a)(3), 42 U.S.C. §7411(a)(3)

Section 171-178, 42 U.S.C. §7501-08

Section 171(1), 42 U.S.C. §7501(1)

Section 171(2), 42 U.S.C. §7501(2)

Section 171(3), 42 U.S.C. §7501(3)

Section 171(4), 42 U.S.C. §7501(4)

Section 172, 42 U.S.C. §7502

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vii

Section 172(a), 42 U.S.C. §7502(a) ..........

Section 172(b)(3), 42 U.S.C. §7502(b\(3) .....

Section 172(b)(5), 42 U.S.C. §7502(bX(5) .....

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

Section 172(b)(11), 42 U.S.C. §7502(bM 11) ...

Section 173, 42 U.S.C. $7503 ..........eeeee

Section 173(1)(A), 42 U.S.C. §7503(1MA).....

Section 173(1)(B), 42 U.S.C. §7503(aX(B).....

Section 173(2), 42 U.S.C. §7503(2) ..........

Section 173(3), 42 U.S.C. §7503(3) ..........

Section 173(4), 42 U.S.C. §7503(4) ..........

Section 302, 42 U.S.C. $76.2 ....ccccccceees

Section 302(j), 42 U.S.C. §7602(j) ...........

Section 323, 42 U.S.C. $7623 ............55:

Pub. L. No. 95-95, 12%a), codified as a note to

eR Pk Kaa ao dudis 6 bond nbeegere

Steel Industry Compliance Extension Act of 1981,

Pub. L. No. 97-23, 95 Stat. 191 (1981) .........

Section 113(e), 42 U.S.C. §741Ke) ..........

LEGISLATIVE HIsTORY:

A Legislative History of the Clean Air Act Amend-

ments of 1977 (Sen. Comm. on Environment and

Public Works, Ser. No. 95-16, 1978)...........

Committee Reports

S. Rep. No. 717, 94th Cong., 2d Sess. (1976)

H.R. Rep. No. 1742, 94th Cong., 2d Sess.

SUES bawesie'od 4a se chavatateke ihe se'enee

S.Rep. No. 127, 95th Cong., Ist Sess.

Se Rac cabbe cében sosiuhthasareWevenmis

Page

3,10

10,11

3,12

2,11,23,

28,41

2,3,13,23

2,11,13,

14,23,41

3,11,12

3,12,23,

32,37

3,12

30,31

2,11,23,

28,31

13,37

14,38

12,31,33,

35,36,37,

H.R. Rep. No. 294, 95th Cong., Ist Sess.

(1977)

| PATS EPEC LINT TE TTT

Bills

S. 3219, 94th Cong., 2d Sess. (1976)

H.R. 10498, 94th Cong., 2d Sess. (1976)

S. 252, 95th Cong., Ist Sess. (1977)

H.R. 6161, 95th Cong., Ist Sess. (1977)

Congressional Record

127 Cong. Rec. H2449 (May 28, 1981)

ADMINISTRATIVE MATERIALS:

Federal Register Notices

36 Fed. . 15,486 (1971)

36 Fed. . 22,398 (1971)

38 Fed. . 9599 (1973)

38 Fed. . 15,836 (1973)

40 Fed. . 58,417 (1975)

41 Fed. . 55,524 (1976)

44 Fed.

45 Fed.

46 Fed.

. 3274 (1979)

. 20,372 (1979)

. 51,924 (1979)

. 52,676 (1980)

. 16,280 (1981)

. 50,766 (1981)

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REGULATIONS:

40 C.F.R. $51.18 (1971)

40 C.F.R. $51.18 (1973)

40 C.F.R. $51.18 (1976)

40 C.F.R. $51.18 (1979)

40 C.F.R. §51.18 (1980)

40 C.F.R. $51.18 (1981)

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13,14

9,10,33

31,35

31,35,36

40 C.F.R. $52.24 (1980) ...... cece cece eeeees

GO CPD: FIO) veivceccvcccccccsecs

40 C.F.R. Part 51, App. S, (1976) ...........

40 C.F.R. Part 51, App. S, (1979) ...........

40 C.F.R. Part 51, App. S, (1980) ...........

40 C.F.R. Part 51, App. S, (1981) ...........

MISCELLANEOUS:

Declaration of Jeff Gabe, Research Director, Citi-

zens for a Better Environment (San Francisco)

(Jan. 1982) (on file with the court of appeals) ...

EPA, Brief in the Court of Appeals .............

EPA, ‘Emission Offset, Banking, and Trading Up-

Ge ovo ec vebe carerececcensesess

National Commission on Air Quality, ‘‘To Breathe

Ct sr CEE chso ie uctvsvéeenessetdebees

Page

11,19,22

16,17

11,19,22

22,38,45

IN THE

Supreme Court of the United States

OCTOBER TERM, 1983

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

CHEVRON U.S.A., INC.,

AMERICAN IRON AND STEEL INSTITUTE, ef al.,

ADMINISTRATOR, ENVIRONMENTAL PROTECTION AGENCY,

Petitioners,

Vv.

NATURAL RESOURCES DEFENSE COUNCIL, INC.,

CivTiZENS For A BETTER ENVIRONMENT, INC.,

AMERICAN LUNG ASSOCIATION OF NORTHWESTERN OHIO,

INC.,

Respondents.

‘stationary sources’’ to undergo a special locational review

prior to construction in areas with unhealthy air.? The Act

defined ‘‘stationary source’’ to include any discrete unit of

production, regardless whether located on its own or within

a larger industrial plant: ‘‘any building, structure, facility or

installation’ which emits pollution.’ In 1977, Congress amended

the preconstruction review program to impose additional

specific pollution control requirements on new or modified

‘major stationary sources"’ (defined as sources emitting more

than 100 tons of pollution per year) locating in such areas.

These requirements are implemented through a permit process

known as new source review.‘

The issue presented by this case is whether Congress

granted the Environmental Protection Agency (EPA) authority

to change the long-established definition of ‘‘stationary source,"

and thereby to greatly narrow the scope of the Clean Air

Act's new source review requirements.

The issue may be crystallized as follows. All of the parties

agree that if a company wishes to build a new industrial

structure or unit which will emit more than 100 tons of

pollution per year (e.g., a large boiler, a blast furnace, or the

like) at a new site in an area violating the health standards,

this project is a ‘‘major stationary source."’ All parties agree

that as such, the project is subject to five statutory require-

ments:

First, he ate mis havea completa polation ona

§7410a)(2)(1).° This condition spurs industry and state coop-

eration to adopt complete SIPs.

Second, the company must offset the new source's

pollution by reducing pollution from an existing source by a

greater amount. Section 173(1)(A), 42 U.S.C. §7503(1)(A).’

The offset assures that all major new sources reduce pollution

rather than increase it.

Third, the company must assure that the new source

complies with the ‘‘/owest achievable emission rate,’’ a state-

of-the-art pollution control requirement intended to maximize

the number of new sources that may be built consistent with

protecting public health. Section 173(2), 42 U.S.C. §7503(2).*

Fourth, the company must demonstrate company-wide

compliance: that all commonly-owned existing sources in the

the same state are complying with the emission limits appli-

cable to them. Section 173(3), 42 U.S.C. §7503(3). This

requirement gives firms a clear incentive to comply with the

law at their existing sources.

Fifth, in areas granted an additional five year extension

to meet the standards,’ the company must demonstrate (after

considering alternative sites, sizes, production processes, and

emission controls) that the benefits of the source exceed its

environmental and social costs. Section 172(b)\(11), 42 U.S.C.

;

THT

§7502(b\(11). This most intense scrutiny of new sources is in

exchange for the extra time for attainment.

As stated above, all parties agree that all five conditions

must be met before the new unit emitting 100 tons of pollution

per year may be constructed at a new site. Our disagreement

is whether the Clean Air Act treats this project any differently

if it happens to be built not at a new site, but within a pre-

existing plant.

Respondents contend that exactly the same rules apply

to the 100-ton-per-year unit built within a plant. For 10 years,

until the October 1981 rules change here under review, the

regulations of the Environmental Protection Agency agreed.'°

Now, however, EPA and the industrial petitioners con-

tend that completely different rules apply to such a unit. The

petitioners assert that upon partial fulfillment of only one of

the five conditions on construction of a ‘‘major stationary

source," the unit built within a plant is no longer a ‘‘major

stationary source”’ at all. It may then be built without any

regard for the four other conditions.

Under the new EPA rules, the unit built within an existing

plant completely avoids being a ‘‘major stationary source"’

merely by securing a partial emissions offset from other

sources in the plant. The intra-plant reduction does not even

have to equal the pollution increase from the new unit. Where

the statutory offset condition requires a net decrease in

pollution, the new EPA rules allow total pollution to increase.

Net increases of 25 to 100 tons per year are treated as though

they simply did not occur."

* See pages 15-19, infra.

" 40 C.F.R. Part 51, App. S, IM AX(13), 40 C.F.R. $951. 181 (xiii),

$2.24(f13). These plant-wide emission increases may be repeated every

five years or less. See 40 C.F.R. Part 51, App. S, I(AX7Xii), 40 C.F.R.

0851. 1OGH IM ViNCK/), 52.240 7Xii).

The petitioners frequently claim that the substance of the first condition

(a complete SIP) is also being observed. They claim that EPA allows use

of the plant-wide ‘source’ definition only when a SIP is in place which

assures timely attainment of the standards and reasonable further progress

(footnote continues)

The exemption of units built within plants is not an

academic issue, for in areas with unhealthy air more than 90

percent of the new projects that themselves emit 100 tons or

more per year are built within existing plants.'? Nearly all

such projects can obtaim an intra-plant emission reduction

sufficient to keep the plant's net emissions from growing by

more than 25-100 tons per year.’ Previously these projects

were covered by all five statutory conditions on construction

or modification of *‘major stationary sources.'’ Now they are

all exempt.'*

(footnote continued)

in the interim. This is not so, however. The EPA rules allow use of the

plant-wide definition even in areas which have failed to adopt any SIP.

Such areas are supposed to be subject to a moratorium on construction of

‘major stationary sources."’ Section 110(aX21), 42 U.S.C. $7410(a)\2Xx1).

But since a unit within a plant is no longer considered a “‘major stationary

source’’ so long as it has a partial offset, the moratorium is evaded.

" For example, in the San Francisco Bay Area, there were 46 major

What statutory support do the petitioners offer for treating

new major-emitting units built within plants differently from

new major-emitting units built on their own? What support

do they offer for allowing units built within plants to evade

four of the five statutory conditions merely by partially

complying with one of them? The petitioners do not claim the

Clean Air Act mandates this result; they cannot even point

to any provisions authorizing it. All they claim is that the Act

does not specifically preclude their construction.

_ The petitioners are wrong even in this, however. We will!

show that the plant-wide ‘‘source’’ definition is prohibited by

the provisions, legislative history, and purposes of the Clean

Air Act. We will show that Congress specifically intended

‘major stationary source’’ to cover discrete major-emitting

units regardless whether located on their own or within plants.

We will show that for 10 years, until the 1981 rules change,

EPA agreed. Because the plant-wide ‘‘source’’ definition is

contrary to law and a sharp, unjustified break with long-

standing regulations, the decision of the Court of Appeals

should be affirmed.

STATEMENT OF THE CASE

The petitioners’ statements of the case seriously misrep-

resent the legal provisions and regulatory history bearing on

the Clean Air Act's new source review requirements. Ac-

cording to their version of the story, the curtain rises only

with the 1977 amendments, which they assert to be indefinite,

In fact, the story of the Act's new source review require-

ments begins with the Clean Air Act of 1970 and with

regulations dating from 1971. From 1970 to the present, the

Act has mandated a specific state program for review of new

and modified ‘‘stationary sources,’’ and this term has always

included discrete units of industrial production and pollution

such as boilers and blast furnaces. From 1971 until the 1981

rules change at issue here, EPA's regulations faithfully trackea

the provisions of the Act. Only in 1981 did EPA change

course.

A. THE STATUTORY FRAMEWORK

1. The 1970 Act

New source review requirements covering discrete in-

dustrial facilities were first adopted in the 1970 Clean Air

Act.'® The Act directed each state to adopt a ‘State Imple-

mentation Plan’’ (SIP) to achieve National Ambient Air

Quality Standards set at levels necessary to protect public

health and the environment by 1975.'* Certain specific ele-

ments, including a new source review procedure, were man-

datory in each SIP. Under Sections 110(aX2D) and 110(aX4),"”

each SIP had to contain a procedure for reviewing the location

of ‘‘any new source to which a standard of performance under

section 111 will apply,’’ and for blocking construction at any

site where the source would prevent attainment or mainte-

nance of the National Ambient Air Quality Standards."*

" Pub. L. No. 91-604, 84 Stat. 1676. Citations to provisions subse-

quently amended are given to Statutes at Large; citations to sections which

have not been changed are to the current codification.

The National Ambient Air Quality Standards were to be set by EPA

pursuant to Section 10%a) & (b), 84 Stat. 1679-80. ‘Primary’ standards

are to profect public health; “secondary” standards are to protect the

The term ‘‘source’’ was explicitly defined in Section 111.

Under Section 111(a)(3), a ‘‘source’’ was, and still is, ‘‘any

building, structure, facility, or installation’’ which emits or

may emit air pollution.'® These terms denote discrete industrial

units of production and operation,

After a New Source Performance Standard (NSPS) is set

for a category of such sources under Section 111, they become

subject to the locational review under Section 110(a)(2)(D)

and (a)(4). Neither the NSPSs nor the locational review may

be avoided through a plant-wide source definition. See ASARCO

'V. EPA, 578 F.2d 319 (D.C. Cir. 1978).”

Although significant progress was made under the 1970

Act, its requirements proved insufficient to protect the public

health. The limited specific elements then required in each

SIP, including the locational review for new sources, had

turned out to be inadequate.”' Nearly all the SIPs had projected

that the health standards would be met on time. When the

1975 deadline passed, however, areas of the country containing

"42 U.S.C. $741 1(aX3).

* The only deviation from this rule was struck down in ASARCO. In

New Source Performance Standards issued in 1974 for the nonferrous

smelting industry, EPA partially adopted the plantwide ‘‘source’’ definition.

The plantwide definition allowed modifications of the major smelting units

(furnaces, copper converttrs, roasters, and the like) to evade the NSPSs

by offsetting their emissions elsewhere in the plant. Wholly new units,

however, remained subject to the standards. In ASARCO, this regulation

was held contrary to the terms of Section 111(a3) and to the pollution-

reducing purpose Congress had established for the NSPSs. ASARCO was

not appealed, and no party to this case disputes the decision.

* As the 1977 Senate Report stated:

A major weakness in the implementation of the 1970 Act has

been the failure to assess the impact of emissions from new sources

of pollution on State plans to attain air quality standards by

statutory deadlines States have permitted growth on the assump

ton that a deadline was sufficiently distant so that future emissions

reductions could be made to compensate for initial increases It

can now be seen that these assumptions were wrong

S.Rep. No. 127, 95th Cong., tet Sess. 55 (1977), 3 A Legislative Mistory

of the Clean Air Act Amendments of 1977 \429 (Sen. Comm. on Environment

and Public Works, Ser Mo 95-16, 1978) (hereinafter cited as Leg Mist.).

more than two-thirds of the U.S. population still suffered air

pollution in violation of one or more of the health standards.”

2. The 1977 Amendments

Work on comprehensive amendments to address the

shortcomings of the 1970 Act began in 1975. One of the central

problems before Congress was on what conditions to allow

the construction of new or modified sources in areas where

the 1975 deadline for attainment had passed unmet. A bill

addressing this problem passed both the Senate and House

and their conference committee in 1976,” but was killed by

a post-conference filibuster on another issue.™ To fill the gap

until Congress could take final action, in December 1976 EPA

adopted an interpretative regulation governing new sources,

known as the ‘Emission Offset Interpretative Ruling.’’*

Legislation closely patterned on the 1976 bill and the Offset

Ruling was enacted in 1977.”

The 1976 bill contained a general bar on construction or

modification of any ‘‘major emitting facility’’ (defined as any

“stationary source’’ emitting more than 100 tons of pollution

per year*’) in an area with unhealthy air. The bill provided a

narrow exception, however, for ‘‘a facility proposed for

construction or modification at an existing site or plant.”

Such a facility could go forward if the firm met three condi-

tions. The firm had to use the best technology, demonstrate

® Report of the National Commission on Air Quality, pp. 3.3-20 through

3.3-33 (Preliminary Staff Draft, Jan. 15, 1981) (The Commission was

established in 1977 under Section 323 of the Clean Air Act, 42 U.S.C.

$7623, to report on progress under the Act.)

H.R. Rep. 1742, 94th Cong., 2d Sess. (1976).

standards See the floor debate.‘ Leg 4411-4500.

" 41 Ped. Reg. 95,524 (1976), 1.4. 8.

* Pub. L. No, 95-95, 91 Stat. 685,

" S. 3219, 059 (adding $902(k) & (m)), 94th Cong., 2d Sess. (1976), 6

that its other sources are in compliance with applicable

requirements, and offset the new facility's emissions by

reducing pollution at other facilities by a greater amount.”

The bill distinguished between ‘Macilities,’’ on the one hand,

and ‘‘sites,"’ ‘‘plants,’’ and ‘‘facility locations,’ on the other

hand.”

When this bill failed to pass, EPA adopted the Emission

Offset Interpretative Ruling. 41 Fed. Reg. 55,524, J.A. 8. The

ruling closely followed the 1976 bill. It allowed construction

of major new and modified sources on conditions virtually

identical to the 1976 bill. The Offset Ruling is discussed further

at pages 16-17, infra.

Amendments to the Clean Air Act were enacted in 1977.

Congress extended the deadlines for meeting standards to

1982 for most areas, 1987 for others.’' At the same time,

Congress substantially strengthened the specific elements

*S. 3219, 611, 6 Leg. Hist. at 4652-53. The provision required the

proponent of such a facility to demonstrate (A) that ‘the best available

technology .. . applicable to such proposed facility’’ will be used, (B) that

“all existing facilities owned or controlled’ by the same firm “‘are in

compliance with an approved schedule and timetable for compliance,"' (C)

that ‘total cumulative emissions from the facility location and the proposed

facility will at no time increase,"’ and (D) that ‘‘total allowable emissions

sufficiently less than the total allowable emissions from the existing sources

. » » & a8 to represent reasonable further progress toward attainment of

the applicable national ambient air quality standard."

"Id.

* Pub. L. No. 95-95, 91 Stat. 685. Its ‘‘nonattainment™ provisions

were contained in Sections 108 & 129, 91 Stat. 693-97, 745-50, codified at

U.S.C. $47410; 7501-08.

" Section 172(a), 42 U.S.C. §7502(a). The extension to 1987 was limited

inl

Hit

required in each SIP." Foremost among these were expanded

requirements for major new and modified sources. Amalgam-

ating the provisions of the 1976 bill and the EPA Offset Ruling,

Congress enacted the review and permit provisions of the

current law. See Section 110(a)(2)(D), as amended, and new

Sections 172(b)(6), 173, 42 U.S.C, §§7410(a)(2)(D), 7502(6)(6),

7503.

Each state was required to revise its SIP by 1979. In

addition to the locational review mandated by the 1970 Act,

Section 110(a)(2)(D) noW requires each SIP to include a

program for

regulation of the modification, construction, and

operation of any stationary source, including a permit

program as required in parts C and D of this sub-

chapter....

42 U.S.C. §7410(a)(2)(D) (emphasis added). The permit pro-

gram required by Part D is set forth in Section 172(b)(6),

which provides that each SIP must ‘require permits for the

construction and operation of new or modified major stationary

sources in accordance with section 173. ..."° A “major

stationary source’’ is defined as ‘‘any stationary facility or

source’’ emitting at least 100 tons of pollution per year,

Section 302(j), 42 U.S.C. §7602()).

Section 173 sets forth the three conditions, drawn directly

from the 1976 bill and the Offset Ruling, under which a state

may issue a permit for construction and operation. Paragraph

(1A) requires the owner of the major source to secure an

" Forced to extend the attainment dates by the widespread failure to

implemen. the necessary pollution controls, Congress was more convinced

than ever that it was insufficient to rely solely on

emissions ‘‘offset’’ that accomplishes a net reduction in

emissions.** Paragraph (2) requires compliance with the ‘‘low-

est achievable emission rate’’ (LAER).’* Paragraph (3) re-

quires the source owner to demonstrate that its existing

§ \rces are subject to, and in compliance (or on schedules

.ut Lompliance) with, their pollution limits.

The amendments provided a means for states to waive

one, and only one, of the permit requirements. Under Section

173(1)((B) a state may eliminate the offset requirement if,

pursuant to Section 172(b)(5), the state creates a ‘‘growth

allowance.’"** A growth allowance is created by requiring

extra emission reductions from existing sources, beyond those

needed for bare attainment of the health standards. Under no

circumstances, however, may a state waive the “lowest

}

” Section 171A) requires that:

by the time the source is to commence operation, total allowable

emissions from existing sources in the region, from new or modified

sources which are not major emitting facilities, and from the

proposed source will be sufficiently less than total emissions from

existing sources allowed under the applicable implementation plan

prior to the application for such permit to construct or modify so

as to represent (when considered togethe: with the plan provisions

required under section 172) reasonable further progress (as defined

in section 171)... .

™“ The ‘lowest achievable emission rate’’ (LAER)*%s defined as equal

to the lowest pollution rate actually being achieved by an existing source

of the same type, or as equal to the lowest rate required of such a source

by any state, whichever is lower. As an absolute floor, LAER may not

allow more pollution than the applicable New Source Performance Standard

(NSPS),,if one has been set for that type of source. Section 171(2), 42

U.S.C. 1(2). The legislative history indicates that the states and EPA

may consider the cost of controls when determining LAER, but in view of

the health interests at stake, they must give cost less weight than when

poy as See H.R. Rep. No. 294, om Cong. ist Sess. 215, 4 Leg.

achievable emission rate’’ or company-wide c»mpliance re-

quirements. These requirements must be met by major new

and modified sources even in a nonattainment area whose SIP

has a growth allowance.

States seeking a deadline extension to 1987 must include

an additional new source requirement in their SIPs. The state

_ must prepare ‘‘an analysis of alternative sites, sizes, produc-

tion processes, and environmental control techniques’’ for

each new or modified ‘major stationary source.’ For the

source to proceed, the analysis must demonstrate ‘‘that the

benefits of the proposed source significantly outweigh [its]

environmental and social costs.’’ Section 172(b)(11), 42 U.S.C.

§7502(b\(11). This most intense scrutiny of major new and

modified sources reflects Congress’ judgment that even the

conditions imposed by Section 173 were inadequate if public

health was to continue in jeopardy so long.

To govern during the interim period until the states revised

their SIPs, Congress adopted the EPA Offset Ruling directly

into law. Pub. L. 95-95, 129(a), codified as a note to 42 U.S.C.

$7502. When complete SIPs are in place, their permit provi-

sions take over.

If the required SIP revisions were not completed on

schedule, the amendments provided that no ‘‘major stationary

source’’ may be constructed or modified after July 1, 1979, if

it would emit a pollutant for which an area has unhealthy air.

Section 110(a(2X(1), 42 U.S.C. §7410(aX21). Once the SIP

is approved by EPA, the moratorium on major source con-

struction returns if the state is not carrying out the plan.

Section 173(4), 42 U.S.C. §7503(4) *

“ While the industry petitioners suggest dire economic consequences

flow from the moratorium, the National Commission on Air Quality found

it to be an effective spur to state action with little adverse economic impact:

“[MJoratoriums continue to have little effect on new sources. but stimulate

completion of required plan revisions’ National Commission on Air

Quality, To Breathe Clean Air, Finding %, pp. 16-17 (1981).

3. The 1981 Amendments

The final chapter in the legislative story was the enactment

of a special amendment to the Clean Air Act, the Steel

Industry Compliance Extension Act,” in July 1981. The

legislative history of this amendment reaffirms the established

scope of the Act's permit provisions.

The steel amendment allows iron and steel companies

more time to meet emission limits applicable to some of their

existing sources, provided the companies meet certain care-

fully drawn conditions. The principal conditions are that they

take certain steps to protect air quality in the interim, and

that they put the money saved by deferring compliance into

modernization of facitities. Section 113(e), 42 U.S.C. §7413(e),

95 Stat. 139-42 (1981).

The legislation was the product of an unusual direct

negotiation between the steel industry, labor, the government,

and environmentalists.” One article of this agreement was

that modernization projects involving the construction or

modification of units such as blast furnaces, coke ovens, and

the like were each ‘‘major stationary sources’’ subject to the

permit requirements of Section 173. See Brief of Amicus

Curiae United Steelworkers of America.

This agreement is reflected in the House Report, which

states:

[T]he program to modernize facilities will also con-

tinue to include the application of lowest achievable

_emission rate technology (LAER) on the modernized

facilities. . . .”

” Pub. L. No. 97-23, 95 Stat. 139 (1981), codified as amendments to

Section 113 of the Clean Air Act, 42 U.S.C. $7413.

™ **The bill reflects an historic hammered out last September

The Report then gives examples of the type of projects

that would be subject to LAER and the other new source

permitting requirements:

It is anticipated that the industry will use the oppor-

tunity to modernize the American steel industry by

building modern continuous casters, converting open

hearth shops to basic oxygen furnaces or undertaking

similar projects to improve the competitive posture

of the industry.” . '

Each type of project mentioned is a unit within a plant,

not a plant itself. The steel amendments, enacted just as EPA

moved to abandon the unit-specific *‘source’’ definition, point

in exactly the opposite direction.

B. THE REGULATORY HISTORY

From 1971 until the 1981 rules change, EPA's new source

review regulations applied to individual units, regardless

whether built at new sites or within existing plants. This is

evident in regulations published in 1971, 1973, 1976, 1979,

and 1980. A deviation from this course was proposed in 1979

but never promulgated; the regulations adopted in 1980 main-

tained the historical scope of the review provisions.

1. The 1971 and 1973 Regulations

EPA first issued.regulations to implement the locational

review in 1971. 40 C.F.R. Part 51, 36 Fed. Reg. 22,398,

(1971).“'. Under the title, “‘Review of New Sources and

Modifications,"’ the regulations required each SIP to provide

for review of ‘‘a new stationary source’’ or ‘“‘an existing

source which is to be modified." 40 C.F.R. §51.18(b), 36 Fed.

Reg. 22,404. While no definition of ‘‘stationary source’’ was

included in the regulations, reference obviously was intended

to the statutory definition found in Section 111(a\(3). As

“id. (emphasis added).

“ The regulations were first promulgated at 36 Fed. Reg. 15,486, (1971)

a OCF AR. Part 420. They were recodified later in the year.

intended and as applied, the 1971 regulations applied to

individual industrial units.

In 1973 EPA amended these regulations; in place of the

term ‘“‘stationary source,’ EPA used the terms ‘‘facility,

building, structure, [or] installation’’ 38 Fed. Reg. 15,836

(1973). These are the terms used in the Section 111(a)(3)

definition of *‘stationary source.’’”

2. The 1976 Offset Ruling

As mentioned above, when a filibuster killed the 1976

bill, EPA issued the ‘‘Emission Offset Interpretative Ruling”’

to fill the gap. 41 Fed. Reg. 55,524, J.A. 8. The ruling was an

interpretation of the existing §51.18 regulations governing the

locational review of the 1970 Act. /d. at 55,528, J.A. 20. The

ruling set forth terms on which additional sources could be

built or modified in areas that had failed to meet the health

standards by the 1975 deadline.

As an interpretation of §51.18, the Offset Ruling incor-

porated those regulations’ definition of a ‘‘stationary source"’

as a ‘facility, building, structure, [or] installation.’ Reflecting

the title of the §51.18 regulations, the Offset Ruling applied

to any ‘‘ ‘major’ new source”’ or ** ‘major’ modification.’’ A

new source or a modification was ‘‘major’’ if it would emit

at least 100 tons of pollution per year. 41 Fed. Reg. at 55,528,

® Respondents would be most surprised if petitioners denied this.

Traditionally, the air pollution program had always regulated discrete units

of production and operation. The ‘‘bubble"’ concept was not even conceived

until 1972. For the earliest history of the concept, see ASARCO v. EPA,

578 F.2d 319, 322-25 (D.C. Cir. 1978).

©” The regulations also used a fifth term after these four, ‘‘combination

thereof.'’ This term was added to deal with a special issue unrelated to this

case: regulation of ‘indirect sources’ such as airports and shopping centers.

As stated by the preamble to the proposed regulations, indirect sources are

“types of facilities, such as airports, amusement parks . . . [which affect)

air quality .. . primarily by means of the mobile source activity associated

with them." 38 Fed. Reg. 9599 (1973). The term “combination thereof”

was added to encompass such sources. Congress subsegently limited EPA's

authority to require state review of indirect sources, Section | 1@(an5), 42

U.S.C. §7410(aX5). In 1979, however, the term ‘combination thereof” was

reemployed to deal with a different problem. See note 45, infra.

J.A. 21.“ Thus, under the Offset Ruling, new or modified

industrial units were subject to review if they themselves

would emit 100 tons per year, regardless whether they were

located at new sites or within plants.

Like the 1976 bill, the Offset Ruling allowed such sources

to be constructed or modified in unhealthy-air areas only so

long as it met \he state-of-the-art technology, company-wide

compliance, and offset conditions. /d. at 55,528-29, J.A. 24-

26.

3. The Regulations From 1977 to 1979

While states prepared the SIP revisions required by the —

1977 amendments, EPA consistently implemented the Offset

Ruling to apply to units within plants. In January 1979, EPA

stated that this had been its ‘‘consistent application’’ since

1976. 44 Fed. Reg. 3277 (1979), J.A. 44. The Agency explicitly

rejected industry requests to let otherwise major new and

modified sources escape the three conditions of the Offset

Ruling merely by obtaining an offset within the plant. ‘‘It is

not enough that there be no net increase in emissions. . . ,"’

EPA stated. /d. at 3276-77, J.A. 43-44."

4. The 1979 Proposal

It is only now that we come to the point where the

petitioners’ version of the regulatory history begins. The

“ The ‘‘major™’ level for carbon monoxide was 1000 tons per year.

* In this notice EPA amended its definition of ‘‘stationary source’’ to

read as follows: ‘‘any structure, building, facility, equipment, installation

or operation (or combination thereof)."’ 40 C.F.R. Part 51, App. S, IAX(1),

44 Fed. Reg. 3282, J.A. 46-47. The first six terms were intended to encompass

industrial units. The term ‘‘combination thereof,”’ first used for another

purpose in 1973 (see note 43, supra), was now put to a new use. Now that

a source's emission rate determined whether it was “‘major’’ and subject

to review, EPA had found that some firms were attempting to evade review

by subdividing their projects on paper. In this way they kept cach

below the 100 ton threshold. The purpose of adding ‘‘combination thereof’

to the source definition was to curb this tactic. EPA gave the following

example: “This definition precludes a large plant from being separated into

petitioners point out that in the January 1979 notice just

discussed, EPA suggested that it would allow use of the plant-

wide ‘‘source"’ definition in the context of a revised SIP that

met all requirements of the 1977 amendments. 44 Fed. Reg.

at 3277, J.A. 44-45. This suggestion was repeated in April and

formally proposed in September. 44 Fed Reg. at 20,379; 44

Fed. Reg. at 51,933 (1979), J.A. 65-66. The petitioners further

suggest that all EPA did in 1981 was promulgate this proposal.

EPA Br. at 3; AISI Br. at 8-9.

The September 1979 proposal was never promulgated,

however. When EPA completed the rulemaking in 1980, EPA

rejected the proposal and retained the prior scope of new

source review even for areas with complete SIPs.

Moreover, the the 1979 proposal did not go nearly as far

as the 1981 rules change. The 1979 proposal would have

allowed a plant-wide definition only within a complete SIP,

and would have required the new unit's pollution increase to

be completely offset. In contrast, the 1981 rules allow the

plant-wide definition to be used even under the Offset Ruling

and the construction moratorium, and they allow net pollution

to increase, by 25-100 tons per year.”

5. The 1980 Regulations

In 1980, EPA rejected the 1979 proposal. The Agency

retained the prior requirement that major-emitting units built

within plants comply with the permit requirements, even

within a complete SIP. EPA stated: ‘

The legislative history of the Act indicates that new

source review was intended to be an important iool

* See 44 Fed. Reg. at 51,933, J.A. 66. The January and April notices,

moreover, did not go even as far as the September proposal. The

in the drive towards attainment of the ambient air

quality standards. ... To realize this goal fully,

Congress intended that new source review be applied

to the greatest extent possible. ©

45 Fed. Reg. 52,697, J.A. 81-82. EPA quoted legislative history

in which Congress expressed the important pollution-reducing

functions of the requirements for lowest achievable emission

rate technology and for company-wide compliance. 45 Fed.

Reg. 52,697, J.A. 81. ‘“‘Major stationary source,’’ EPA con-

cluded, must continue to be defined to encompass major-

emitting units within plants. /d.“’

C. THE 1981 RULES CHANGE

In March 1981, EPA proposed to change course radically

and adopt an exclusively plant-wide definition of ‘‘source.”’

46 Fed. Reg. 16,280 (1981), J.A. 89. The Agency proposed to

accomplish this result by defining all four terms which make

up a “stationary source’’ — ‘‘building,’’ ‘‘structure,’’ ‘‘facil-

ity,’ and ‘‘installation’’ — to mean entire plants only. Pro-

posed 40 C.F.R. Part 51, App. S II(A), §51.18(j)(1), §52.24(f),

46 Fed. Reg. at 16,282, J.A. 96.

The 1981 proposal went beyond even the rejected 1979

proposals. EPA no longer restricted the plantwide definition

to states with fully approved SIPs; EPA adopted it for the

Agency’s own use under the Offset Ruling and the construction

* In the wake of Alabama Power Co. v. Costle, 636 F.2d 323 (D.C.

Cir. 1979), EPA changed the terminology of the ‘‘source’’ definition, but

not its intent. Alabama Power held that ‘stationary source’’ may be defined

only by the four terms found in Section 111(aX3): ‘building, structure,

facility, or installation.’’ This erased the additional terms EPA had included

in the definition in 1979: ‘equipment . . . operation (or combination

thereof).’’ This was only a formal limitation, however, for the court had

then held that EPA has the authority to define the four statutory terms in

reasonable ways. 636 F.2d at 396. Consequently, in the 1980 rules EPA

defined ‘‘installation’’ to mean ‘‘an identifiable piece of process equipment,”

i.e., an industrial unit. 40 C.F.R. §51.18G\(1\ii}(iii), 45 Fed. Reg. 52,744

(1980), J.A. 87. If an installation had emissions exceeding 100 tons per

year, it was a “‘major stationary source” subject to the permit provisions.

Id. §51.18G(1Xv).

moratorium, which apply precisely where state plans are

inadequate. Moreover, where the 1979 proposals had at least

required that emissions increases be offset completely, the

1981 proposal allowed firms to create net emissions increases.

The proposal was strongly opposed in comments by

public health, environmental, and civic organizations® and

by several states.” It was nonetheless promulgated without

change in October 1981. 46 Fed. Reg. 50,766 (1981), J.A. 97.

In the promulgation notice, EPA claimed that the Clean Air

Act does not require the specific new source review procedure

set forth in Part D if the SIP as a whole projects reasonable

further progress and attainment by the deadlines. EPA also

contended that the plant-wide definition ‘‘simplifies’’ the

regulations and eliminated a ‘‘disincentive’’ to plant modern-

izations which ‘‘in some cases’’ may reduce pollution despite

failure to observe the permit conditions. As for the construc-

tion moratorium, which applies in places without a complete

SIP, EPA defended the reduction in the moratorium’s scope

with the argument that pollution would not increase ‘‘signif-

icantly.’ 46 Fed. Reg. 50,767-69, J.A. 102-05, 109-110.

D. THE COURT OF APPEALS DECISION

In the Court of Appeals, the petitioning public health and

environmental organizations challenged the exclusively plant-

wide definition of *‘source’’ on three grounds: It was contrary

(Chicago) (Court of Appeals App. (C.A.App.] 30), Citizens for a Better

Francisco) (C.A.App. 47), Northwestern Ohio Lung

52), and League of Women Voters of the United

HUTTE

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;

to the terms of the Clean Air Act, to its legislative history,

and to the statute’s fundamental purpose of rapidly reducing

pollution in order to meet the national health standards. A

permit program reaching individual major industrial units of

production and pollution, we argued, was a specific require-

ment of the Act.

The court below relied mainly on the third of these

arguments. The court held the case governed by both the

underlying purpose and structure of the nonattainment pro-

gram. On the Act’s purpose, the court stated:

The nonattainment program’s raison d’étre is to

ameliorate the air’s quality in nonattainment areas

sufficiently to achieve expeditious compliance with

the NAAQSs [National Ambient Air Quality Stand-

ards].

Id. at 726-27 (Chev. Pet. A-19) (footnote omitted). Con-

cerning the Act’s structure, the court added:

We further note that the permit and moratorium

provisions of Part D are wholly federal requirements

imposed on the states. . . . The states do not retain

flexibility to submit SIPs which provide for timely

attainment of the NAAQSs, but which do not contain

a permit program applicable to new or modified

sources. Allowing the states large leeway to define

the source to which the federal requirement applies

is not easily reconciled with the statutory design.

id. at 727-28 (Chev. Pet. A-19) (citation and footnote

is impermissible."’ id. at 720 (Chev. Pet. A-

4) (footnote omitted). The court vacated the 1981 change of

rules.”

* Since lower court decision, the two national organizations

In the lower court litigation, EPA abandoned an empirical

claim that the petitioners now seek to revive: the claim that

the unit-specific ‘‘source’’ definition discourages moderniza-

tions and retards pollution reduction. The government's Court

of Appeals brief stated (at p. 12): ‘EPA did not rely on this

as a basis for its decision.’’ The court nonetheless addressed

the issue in a footnote, observing that EPA had failed to

produce ‘‘any study, survey, or support"’ for the proposition

that new source review under the prior source definition

““retard[s] improvement of air quality in the aggregate.’ 685

F.2d at 727, n.41 (Chev. Pet. A-18) (emphasis in original).*'

Thus, ‘“‘EPA's decision to implement the bubble concept, if

based on this rationale, would not rise to the level of reasoned

decisionmaking.’’ /d.*

SUMMARY OF THE ARGUMENT

The decision of the Court of Appeals vacating the 1981

redefinition of ‘‘stationary source’’ was correct and should

(footnote continued)

reproduced as Appendices A & B to the brief of Amici Curiae States.

These officials, and the amici states, sharply disagree with EPA’ s claims

See pages 44-48. infra.

" The lower court also vacated EPA's repeal of the ‘‘reconstruction”’

rule, an action ancillary to the redefinition of ‘source.’ 46 Fed. Reg.

50,771, J.A. 116-17, repealing 40 C.F.R. Part 50, App. 8, INAK9) & (10),

40 C.F.R. $51. 18GK IMin) & (x), 40 C.F.R. 52.2071) & (10). In certain

be affirmed. The Agency's plant-wide definitiow of ‘‘source’’

is contrary to the terms, legislative history, and purposes of

the Clean Air Act. It is also a flat reversal of the long-standing

prior rule, internally inconsistent, and unsupported by the

record. Deference to EPA's construction is therefore com-

pletely unwarranted.

Section 111(a)(3) of the Clean Air Act defines *‘stationary

source”’ as ‘‘any building, structure, facility, or installation’’

which emits pollution. These are terms which denote individ-

ual units of industrial production and pollution. Section 302(j)

defines a ‘‘major stationary source’’ as any such unit which

emits at least 100 tons of pollution per year. The plainest

reading of this term is that a ‘‘major stationary source”’ is a

large ‘building, structure, facility, or installation.”’

Since 1970, ‘‘stationary sources’’ planned for an area

with unhealthy air have been subject to the locational review

required under Section 110(a)(2)D). In 1977 Congress ex-

panded upon the locational review, by requiring each new or

modified ‘‘major stationary source’’ to obtain a permit and

meet rigorous pollution control conditions. These require-

ments were set forth in amendments to Section 110(aX2\(D)

and new Sections 110(a)(2)(I), 172(b)(6) & (11) and 173. Five

pollution control conditions—a complete SIP, offsets, lowest

achievable emission rate technology, company-wide compli-

ance, and (after 1982) the cost-benefit analysis—must be met

before a major new or modified source may be built.

(footnote continued)

new source. This gap-filling rule dated from 1975, before the 1977 amend-

ments. See 40 C.F.R. $60.15, 40 Fed. Reg. 58417 (1975).

In 1981 EPA advanced just one reason for repealing it: That under a

plant-wide ‘‘source’’ definition there would be no more reconstructions. A

reconstruction plan, EPA observed, would only in the rarest case be so

vast as to amount to more than half the cost of an entire new plant. 46

Fed. Reg. 50,767, J.A. 103. The Court of Appeals held that the repeal of

the reconstruction rule had no independent basis, and vacated it along with

the ‘source’ definition. 685 F.2d at 728 (Chev. Pet. A-19, A-20) Citing

SEC v. Chenery, 332 U.S. 194, 196 (1947) and Gulf States Util. Corp. v.

FPC, 441 U.S. 747, 764 (1973), the court declined to address the arguments

against the rule which EPA had neither discussed nor relied on, but which

The petitioners fail to cite any statutory provisions or

legislative history which contradict this analysis. They cannot

show any congressional intention to define *‘stationary source”

as anything other than a ‘‘building, structure, facility, or

installation." They cannot show that Congress intended a

‘major stationary source’’ to be anything more complicated

than a large ‘‘stationary source.’’

The petitioners’ argument reduces to a contention that a

unit built within a plant may escape status as a ‘‘major

stationary source’’ merely by partially offsetting its pollution

with reductions elsewhere in the plant. In effect, they argue

that Congress intended to let a source avoid meeting five

carefully crafted conditions on construction merely by incorn-

pletely complying with one of the five conditions. Petitioners

cite no statutory provisions to support this notion.

The Act, in fact, provides for precisely the opposite

result. The offset requirement is the only condition on con-

struction or modification of major stationary sources that the

statute permits a state to waive. Section 173(1)(B). The other

four conditions are mandatory. Under EPA's rules, however,

offsets are the only condition that is even partly retained; all

four other conditions are allowed to go completely by the

boards.

The legislative history of the 1977 amendments reinforces

these conclusions from the statutory text. The 1976 bill (killed

only by a post-conference committee filibuster on another

issue) specifically provided that major-emitting units (*‘facil-

ities’’) built within plants had to meet the three pollution-

reducing conditions. Subsequently, EPA implemented a nearly

identical review procedure through its 1976 ‘Offset Ruling.”

In 1977, Congress adopted the conditions set forth in the 1976

bill and the Offset Ruling into law.

The legislative history of the 1981 amendments, which

grant the steel industry certain concessions in order to promote

modernization, further emphasizes the reach of new source

review. Congress made it clear that modernization projects

built within plants must comply with the lowest achievable

emission rate and the other permit conditions.

Each of the five statutory conditions serves a specific

purpose in the program to meet the health standards. The

prospect of a construction moratorium promotes industry-

state cooperation, rather than confrontation, in developing

complete SIPs. The greater-than-even offset requirement serves

the purpose of making growth contribute to, rather than

hinder, clean-up of unhealthy pollution. The lowest achievable

emission rate helps lower pollution and maximizes *‘room’ for

additional growth consistent with public health protection.

The company-wide compliance requirement gives firms pos-

itive reasons to bring their own facilities into compliance,

rather than to fight government enforcement actions. None

of these purposes is served by exempting more than 90 percent

of the intended objects of these requirements from their reach.

The EPA rules discriminate between established firms

and newcomers to an area. The newcomer must meet all five

statutory conditions because it builds at a new site. The

“established firm can expand its facilities while meeting only

one of the five conditions, and only partially at that. Nothing

in the Act or its legislative history suggests that Congress

intended to create such a distortion of economic competition.

EPA's current position reverses the regulation which had

been in effect since 1971 and which, as embodied in the 1976

Offset Ruling, was specifically adopted by Congress in 1977.

EPA's current position is also internally inconsistent: The

Agency says a plant-wide definition will be allowed only in

the context of a complete SIP; yet EPA also uses the plant-

wide definition under the Offset Ruling and the construction

moratorium, which apply precisely in areas whose SIPs are

not adequate.

The petitioners reassert in this Court an empirical claim

that the government abandoned in the court below: a conten-

tion that the plantwide ‘‘source”’ definition promotes pollution-

reducing modernizations. However, although EPA claimed

during the rulemaking that the prior rules *‘discouraged’’ such

modernizations in ‘‘some cases,”’ the Agency completely

failed to show that the prior rules were counter-productive in

the aggregate. EPA did not even address this question.

‘Because the Agency ‘‘failed to consider an important aspect

of the problem,’’ Motor Vehicle Mfrs Ass'n v. State Farm

Mut. Auto. Ins. Co., 103 S.Ct. 2856, 2867 (1983), the Court

of Appeals properly held EPA's empirical claim arbitrary.

The Court of Appeals also correctly struck down EPA's

repeal of the ‘‘reconstruction’’ rule. EPA's basis for this

repeal was completely dependent on the validity of changing

the ‘‘source"’ definition. Because it had no independent basis,

the repeal of the ‘‘reconstruction’’ rule must fall as well.

For these reasons the decision below should be affirmed.

ARGUMENT

I. THE CLEAN AIR ACT REQUIRES EACH NEW OR

MODIFIED INDUSTRIAL UNIT WHICH EMITS 100

TONS OF POLLUTION PER YEAR TO OBTAIN A

PERMIT, REGARDLESS WHETHER IT IS LOCATED

BY ITSELF OR WITHIN A PLANT

The petitioners’ argument depends on the incorrect prem-

ise that the Clean Air Act does not define the meaning of the

terms ‘‘stationary source’’ and ‘‘major stationary source’’

and does not specify the scope of the new source review and

permitting provisions. Having assumed a statutory ambiguity,

they then contend that EPA's interpretation should be deferred

to. Their deference argument fails, however, because the

provisions of the statute, the legislative history, and the

congressional expressions of purpose are not ambiguous: In

areas which do not meet the health standards, the Act's

requirements apply to all major industrial units such as boilers

and blast furnaces, regardless whether they are built at new

sites or in pre-existing plants.”

*® ‘Although an agency's interpretation of the law under which it

operates is entitled to some deference, ‘this deference is constrained by

our obligation to honor the clear meaning of a statute as revealed by its

language, purpose, and history.’"’ Southeastern Community College v.

Davis, 442 U.S. 397, 411 (1979). A plea for deference ‘‘is not an argument

(footnote continues)

A. The Definitions of ‘‘Stationary Source’’ and ‘‘Major

Stationary Source’’ Show That New and Modified

Units Which Emit 100 Tons Per Year Are Subject to

Review

The scope of new source review in areas with unhealthy

air is apparent in definitions of ‘stationary source’’ and *‘major

stationary source.’ A ‘‘stationary source’’ is defined in

Section 111(a)(3) as ‘‘any building, structure, facility, or

installation’’ which emits or may emit air pollution. The

definition is disjunctive; an industrial project which is any one

of these four terms is a ‘‘stationary source.’’ The terms clearly

denote the industrial units which make up a plant, not the

plant itself. A ‘‘building’’ cannot be a piant-wide combination

of buildings. A ‘‘structure’’ cannot be a plant-wide collection

of structures. ‘‘Facility,’’ as explained at page 33, infra, was

the term used by Congress in 1976 specifically to mean new

or modified units within a plant, as opposed to the plant itself.

‘*Installation’’ is the very term EPA used for this purpose in

1980.

The Section 111(a)(3) definition governs the scope of the

locational review established in 1970 by Section 110(a)(2(D)

and (a)(4). SIPs must contain ‘‘adequate authority to prevent

the construction or modification of any new source to which

a standard of performance under section 111 of this title will

apply,”’ if the source would interfere with attaining the health

standards. See pages 7-8, supra.

Congress used the same words, ‘‘stationary source,"’ in

the 1977 amendments to Section 110(a)(2D) which expanded

the new source review requirements to their current form. As

amended, Section 110(aX2)(D) requires each SIP to contain,

(footnote continued)

of sufficient force . . . to overcome the clear contrary indications of the

statute itself," Securities & Exchange Comm'n v. Sloan, 436 U.S. 103, 117

(1978), and cannot prevail when ‘ ‘inconsistent with an obvious congressional

intent,"’ Espinoza v. Farah Manufacturing CO”, 414 U.S. 86, 95 (1973). An

agency's demand for deference does not blunt the thoroughness of the

Court's review of the law and legislative materials. Volkswagenwerk

Aktiengeselischaft v. FMC, 390 U.S. 261, 272 (1968).

a \

in addition to the locational review, ‘‘a program to provide

for . . . regulation of the modification, construction, and

operation of any stationary source, including a permit program

as required in part[] . . . D of this subchapter."

The Part D permit program is established by Section

172(b)(6), which states that each SIP must require permits for

the construction and operation of ‘‘new or modified major

stationary sources’’ in accordance with the conditions set

forth in Section 173. ‘Major stationary source™’ is defined in

Section 302(j) as any ‘‘stationary facility or source’’ which

emits at least 100 tons of pollution per year.“

The plainest reading of these provisions is that a ‘‘major

stationary source’’ is simply a large ‘‘stationary source:"’ a

‘*building, structure, facility, or installation’’ which emits 100

tons or more per year. This reading comports with the ordinary

presumption that a word has the same meaning when used

throughout a single statute.** It also makes perfect sense:

Congress intended to target the 1977 amendments’ more

stringent pollution controls on larger sources; smaller ones

remain subject only to the 1970 Act's locational review.

EPA claims that ‘‘[a]s a matter of linguistic analysis’ all

four of the Section 111(a)(3) terms ‘‘can be"’ defined as an

“ Section 302(j) defines two terms, ‘‘major emitting facility’’ (the term

used in the Part C Prevention of Significant Deterioration provisions) and

“major stationary source’’ (the term used in the Part D nonattainment

provisions). The two terms are equated and defined as ‘‘any stationary

facility or source’’ which emits or may emit 100 tons per year or more.

* This was the conclusion of the Court of Appeals in Alabama Power

Co. v. Costle, 636 F.2d 323 (D.C. Cir. 1979), which held that the Section

111(aX3) definition of source governs under the Prevention of Significant

Deterioration (PSD) provisions of the Act, and that therefore EPA could

not supplement the four statutory terms, ‘‘building, structure, facility, or

installation’’ (see page 19, n.47):

Given no expression of any contrary intent in the Act or in the

legislative history, we must assume that the meaning of a particular

term is to be consistent throughout th: Act. This is especially true

under the present circumstances, where the subject term prior to

enactment of the controversial language had assumed a particular

definition under closely related statutory provisions.

636 F.2d at 396.

entire plant. EPA Br. at 44, n.56.% Respondents are unaware

of any techniques of ‘‘linguistic analysis’’ which can overcome

* EPA's reliance on Alabama Power as authority for this claim is

totally misplaced. Alabama Power said that EPA could reasonably define

two of the four terms (‘‘facility’’ and ‘‘installation’’) *‘broadly enough" to

encompass a plant. 636 F.2d at 396. The court did not suggest that the

terms ‘‘building’’ or ‘‘structure’’ could be so defined. The court's selection

of only the terms ‘‘facility’’ and ‘‘installatica’’ as susceptible of a plant-

wide definition strongly suggests that the court did not feel the two other

terms could be so construed.

Under the court's holding, EPA may define ‘‘facility’’ and ‘‘installation”’

as plants, but nothing in the court's opinion suggests that EPA may define

the terms ‘‘building"’ or ‘‘structure’’ as anything but units. Thus, the court's

decision recognizes that the statutory definition of ‘‘source’’ is broad enough

to cover two types of sources: individual units, which are covered by the

terms ‘‘building’’ or *‘structure,"’ and collections of units, which can be

covered by the terms ‘‘facility’’ or ‘‘installation.’’ Contrary to the govern-

ment's final assertion in its note 56, that places the dual definition adopted

for the unhealthy-air areas in 1980 well within EPA's authority. What EPA

may not do, however, is define all four terms to mean only plants. In the

1980 PSD rules, EPA did just that. EPA compounded the mistake in the

1981 rules here under review, in which it abandoned the dual definition.

The reason to define two of the terms ‘“‘broadly’’ was not to exempt

projects from review, but to assure their review. This is why EPA had

adopted the ‘‘combination"’ definition. See page 19, n.47, supra. The court

ruled out the ‘‘combination™’ definition, but held the EPA had discretion

to accomplish the same purpose by defining ‘‘facility’’ or ‘‘installation"’ as

“broadly"’ as a plant. /d.

The court's *‘source’’ holding implicitly recognizes the statutory limit

on the use of the ‘‘bubble"’ concept to avoid review—a limit which is not

immediately apparent when the court's discussion of the *‘bubble"’ several

pages later is read in isolation. Whether a ‘‘modification’’ occurs depends

on whether the net emissions of a source have increased. The court

specifically recognized, however, that netting is limited to increases and

decreases within the same source: ‘‘[T}he offsetting changes must be within

the same source, as defined by EPA."’ /d. at 402.

New source review is triggered only if a major source is modified.

Under the dual definition suggested by the court, the source can be both

the unit being changed and the plant in which it is located. If the plant as

a whole is a major source, but the unit itself is not, then review is triggered

by the change in the unit only if plantwide emissions increase. The firm

may avoid review by reducing emissions elsewhere in the plant. But if the

unit itself is a ‘‘major’’ emitter, then netting is limited to that unit alone.

If its emissions increase, review is required. The same analysis applies to

the addition of a wholly new unit within a plant; the firm may avoid review

by reducing emissions elsewhere in the plant only if the new unit itself is

not a ‘major’ emitter. (footnote continues)

the plain meaning of these terms. All four terms can be used

to mean units; the terms ‘‘building’’ and ‘‘structure’’ cannot

reasonably defined as anything else.

EPA next argues that the Section 111(a)(3) definition has

no application to the nonattainment provisions. EPA Br. at

42. The Agency is wrong. By virtue of the explicit reference

in Section 110(a)(2)(D) and (a)(4), the definition has applied

to new source review in areas with unhealthy air since 1970.’

EPA offers a final argument: that the 1977 conference

committee dropped a provision from the Senate bill, Section

302(m), that would have explicitly incorporated the Section

111(a)(3) definition of ‘‘stationary source’’ into Section 302.

EPA claims the deletion provides ‘‘compelling indications”

of congressional intent. EPA Br. at 43-44.

EPA, however, has reported only part of the conference

committee’s action on the definitional section and hastily

drawn an incorrect conclusion. The legislative history of

Section 302 bears out our contention that a ‘‘major stationary

source’’ is nothing more complicated than a large ‘‘stationary

source”’ as defined in Section 111(a)(3).

Section 302(m) was included in the Senate bill to begin

with because the bill did not use the term ‘‘major stationary

source”’ at all. Rather, the Senate bill used the term ‘‘major

emitting facility.’ ‘‘Major emitting facility’’ was defined in

n ipg is limite#’to that

is requipéd. The analysj

i t offly so as the

mitter

major .

Recognizing this limitation on the use of the bubble to avoid review

allows one to join the court's “‘source"’ and ‘‘bubble"’ holdings in a manner

that is both internally consistent and consistent with the Clean Air Act.

This limitation was respected in EPA's 1980 dual definition; it has been

tossed aside now.

” The Agency rests its case on the preface to Section I11(a), which

states that the definitions given therein are ‘‘[flor the purposes of this

section."’ It does not say ‘‘for the purposes of this section only.”

(footnote continued)

But if the i

unit

Section 302(k) as any ‘‘stationary source’’ which emits 100

tons or more per year. S.252, §302(k), 3 Leg. Hist. at 1593.

‘Stationary source’’ was then defined to have the same

meaning as in Section 111(a)(3). /d., §302(m). Thus the

function of Section 302(m) was only to clarify that ‘‘major

emitting facility’’ meant a building, structure, facility, or

installation which emits 100 tons or more per year.™

The House bill used the term ‘‘major stationary source,"

which was defined as ‘‘any stationary facility or source”

which emits 100 tons or more per year. H.R. 6161, §302(0)(1),

4 Leg. Hist. at 2905. The House bill and its legislative history

are devoid of any indication that this definition meant anything

other than its plain reading suggests: a large ‘‘building,

structure, facility, or installation.’’ In the House bill, there

was simply no need for another provision to define ‘‘major

stationary source.’’?

The conference committee described both the Senate and

House provisions in identical terms: ‘‘any stationary source”

which emits 100 tons per year.” The committee then adopted

both terms. It equated ‘‘major emitting facility’’ and ‘‘major

stationary source”’ and defined both as ‘‘any facility or source"’

emitting 100 tons or more per year. Section 302(j), 42 U.S.C.

7602(j). The conference report indicates that the committee

intended to adopt the Senate's definitions: The bill ‘*[dJefines

™ Any doubt about the Senate bill's intent is dispelled by the legislative

history of the permit provisions, which clearly shows that ‘‘major emitting

facility’’ term was intended to include to new and modified units built

within plants. See page 33, infra.

” Any doubt about the scope of the term ‘“‘major stationary source”

is dispelled by looking at the 1976 House bill, where the definition originated.

The definition first appeared in provisions giving certain sources extensions

of compliance deadlines on condition that they pay penalties. The definition

explicitly included ‘‘a source listed as provided in section 111," ie.,

*“stationary sources"’ as defined in 111(aX3). See H.R. 10498, $121(a\(3) as

' reported by the House Committee in 1976, 7 Leg. Hist. at 6880. See also

the legislative history of the House bill's permit provisions, pages 3& 96,

infra.

“H.R. Rep. No. 564, 95th Cong., Ist Sess. 172, 3 Leg. Hist. at 552.

major stationary source and major emitting facility as defined

in the Senate bill.’’*'

Thus, far from providing ‘‘compelling indications’’ to

support EPA, the legislative history of the ‘‘major stationary

source’ definition reiterates that units within plants are not

exempt from permit requirements.

B. Petitioners’ Construction Conflicts With the Terms of

the Statutory Offset Waiver

The Clean Air Act establishes five conditions which must

be satisfied before a ‘‘major stationary source’’ may be

constructed or modified in an area with * nhealthy air: A

complete SIP, net reduction offsets, the lowest achievable

emission rate, company-wide compliance, and (in areas with

1987 extensions) a cost-benefit analysis. If built at a new site,

a new project that will emit 100 tons or more per year is a

‘*major stationary source"’ and is subject to the five conditions.

But under EPA's construction, if the same project is built

within the confines of an existing plant, and if it partially

complies with the offset condition, then is not a ‘‘major

stationary source”’ at all. It may ignore the four other con-

ditions entirely.

EPA's construction produces a result completely opposite

that provided by the statute. Even when a SIP contains

sufficient room to accomodate new source emissions, the Act

allows a state to waive only one of the five conditions: the

offset requirement. Section 173(1)(B). See page 12, supra.

The other permit conditions may not be waived even though

the plan assures attainment of the health standards by the

deadlines. EPA's 1981 rules, however, retain the offset re-

quirement, the only condition the Act allows to be waived.

The rules allow the other four conditions, which are unwaiv-

able under the Act, to go completely by the boards.

“ Id.

C. The 1977 and 1981 Legislative History Confirms That

**Major Stationary Source’’ Includes Large Units Built

Within Plants

1. The 1977 Nonattainnent Amendments

The same conclusion follows from the legislative history

of the 1977 amendments to the Act. The current permit

provisions originated in 1976 legislation to amend the Act.

This bill proceeded as far as conference committee agreement,

but failed to become law because of a last-minute filibuster

on another issue. To tide over until Congress could complete

action the following year, EPA then adopted the ‘‘Offset

Ruling"’ discussed above. In 1977, Congress amalgamated the

1976 bill and the EPA ruling into the current law. From

beginning to end, the permit provisions applied to the major

new and modified units built withir plants, not just to plants

themselves.”

(a) The 1976 Bill. The 1976 bill provided only a limited

exception from the general growth prohibition of the 1970

Act. It did not allow construction of major emitting facilities

at new sites under any circumstances. It allowed the addition

of *‘a facility proposed for construction or modification at an

existing site or plant,’’ but only if the firm wishing to build

the facility demonstrated that the ‘‘best available control

technology,’’ company-wide compliance, “6 offset condi-

tions were met. S. 3219, $119, 94th Cong., 2a Sess. (1976), 5

Leg. Hist. at 4312.

The bill clearly distinguished between ‘‘facilities,’’ on the

one hand, and ‘‘sites,"’ ‘‘plants,’’ and ‘‘facility locations,”

on the other hand. /d. Under the terms of the bill there was

absolutely no room for use of an exclusively plant-wide

““source’’ definition to evade these requirements.

effort spanning two Congresses, the legislative history of the prior Congress

is a relevant source for insight into the meaning of the final legislation. See

Seatrain Shipbuilding Corp. v. Shell Oil Corp., 444 U.S. 572, 596 (1980),

FMC v. Seatrain Lines, 411 U.S. 726, 736 (1973).

(b) The Offset Ruling. After the 1976 bill failed to pass,

EPA issued the Offset Ruling. Patterned after the 1976

legislation, the ruling allowed ** ‘major’ new sources’’ and

‘** ‘major’ modifications’’ to be constructed only upon com-

pliance with the three technology, compliance, and offset

conditions. In previous regulations which the Offset Ruling

interpreted, a ‘‘new source’’ was defined as a new ‘‘facility,

building, structure, [or] installation’’ and a ‘‘modification”’

was a pollution-increasing change in such a source. 41 Fed.

Reg. at 55,528, J.A. 21.

Further evidence that the ruling applied to such units is

apparent in the ruling’s discussion of ‘‘internal’’ and ‘‘exter-

nal’’ offsets. /d. at 55,526, 55,529 J.A. 15, 30. (An “‘internal”’

offset is an emission reduction from another source at the

same plant; an ‘‘external’’ offset is one from another source

at another site.) Internal offsets do not exist unless ‘‘sources”’

are units within plants: If ‘‘source’’ meant plant, then internal

reductions would be used to avoid the permit process to begin

with, and the offset requirement would never come into play.

In addition, the ruling applied to a new source ‘‘even

though such source may replace an existing source with the

result that the net additional emissions are less than [major]

amounts.’’ Such a source is subject to the LAER requirement

and the other permit conditions. /d. at 55,528, (J.A. 22). For

two reasons, this passage shows that ‘‘source’’ means units

within plants. First, if ‘‘source’’ meant plant, then this project

would be able to avoid review by keeping ‘‘net additional

emissions’’ below major levels. Yet this is expressly prohib-

ited. Second, as EPA itself still recognizes (46 Fed. Reg.

50,767, J.A. 103), whole plants are almost never replaced. It

is units within plants that are replaced. Thus the passage

makes sense only if it refers to replacement of units within

plants.

House enacted bills that required major new and modified

units to obtain permits.

In the Senate, the Environment and Public Works Com-

mittee began its deliberations with a bill whose new source

permit provisions were identical to those of the 1976 confer-

ence committee bill. S. 252, §11, 5 Leg. Hist. at 3605-06. The

committee addressed the following question: ‘Should the

exception [from the growth ban) be available only for expan-

sion at existing sites, or also for the construction of new

facilities at new sites?’’ A Section-by-Section Analysis of S.

252 and S. 253 Clean Air Act Amendments, 5 Leg. Hist. at

3873. The committee opted to extend the exception.”

The committee maintained the three conditions of the

1976 bill and the Offset Ruling with only one significant

change: Like the final legislation, the Senate bill provided

that a state may waive the offset requirement if it revises its

SIP to accomodate the extra emissions.“ The committee

provision was adopted by the full Senate.

The House Interstate and Foreign Commerce Committee

reached the same result by adopting the EPA Offset Ruling

directly into the law. H.R. 6161, $117 (adding §127(b)(2)), 4

“” To accomplish this, the bill used the term ‘‘major emitting facility"

alone, dropping the limiting reference to ‘‘a facility proposed for construction

or modification at an existing site or plant.’’ S. 252, $13 (as reported by

the committee), 3 Leg. Hist. at 632.

Introducing the bill on the floor, Senator Muskie made clear the limited

nature of this change and the meaning of the term ‘‘major emitting facility."

He said:

This year the issue that drew the greatest attention during the

working sessions of the committee was the issue of new emissions

in areas exceeding standards. The provision contained in the bill

reported by the Committee last year dealt only with the expansion

of existing facilities in such areas.

The committee this year determined that a broadening of that

provision was necessary so that new sources, without any existing

facilities in the area, could still enter the area and construct new

facilities under carefully limited procedures and meeting stringent

requirements. The committee adopted a provision which provides

protection for air quality while at the same time allowing new

sources to be constructed.

3 Leg. Hist. at 711. There is absolutely no basis for EPA's suggestion (Br.

at 45) that term ‘‘facility’’ had been converted to meaning ‘‘plant."’

“ S. 252, $14 gX3) (as reported by the committee), 3 Leg. Hist. at 634-

Leg. Hist. at 2331-32. For future application once SIPs were

revised, the committee modified the EPA ruling in only one

significant respect; like the Senate, it provided for the offset

waiver. /d., §127(c) SA), (d)(1), 4 Leg. Hist. at 2333, 233637.

The committee provision was adopted by the full House. 4

Leg. Hist. at 3216.

The conference committee melded the two bills into the

current statutory language without any suggestion of a change

in the meaning of ‘‘source.’’ In post-conference Senate debate,

Senator Muskie succinctly stated the universally shared un-

derstanding:

I should note that the test for determining whether

a new or modified source is subject to the EPA

interpretative regulation [the Offset Ruling}—and to

the permit requirements of the revised implementa-

tion plans under the conference bill—is whether the

source will emit a pollutant into an area which is

exceeding a national ambient air quality standard for

that pollutant—or precursor. Thus, a new source is

still subject to such requirements as ‘‘lowest achiev-

able emission rate’’ even if it is used as a replacement

for an older facility resulting in a net reduction from

previous emission levels.

3 Leg. Hist. at 355-56."

Against this entire legislative history, the petitioners offer

a single passage from the 1977 House report stating that the

nonattainment amendments have two main purposes:

(1) to allow reasonable economic growth to continue

in an 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.R. Rep. No. 294, 95th Cong., Ist Sess. 211, 4 Leg. Hist.

* See also the statement of Rep. Paul Rogers, chairman of the House

subcommittee responsible for the legislation, when introducing the confer-

ence agreement to the full House. 3 Leg. Hist. at 319.

at 2678. From this generally-worded passage the petitioners

assert that EPA has a broad authority to change the ‘‘source”’

definition—and, by implication, any aspect of the nonattain-

ment provisions. EPA Br. at 23, AISI Br. at 23-24, Chev. Br.

at 14-15.

The quoted passage says nothing of the kind. li introduces

a discussion of the permit provisions which shows that

Congress intended precisely the opposite of the petitioners’

position. The pages of the House report that follow plainly

show that the committee, when referring to ‘‘greater flexi-

bility,’’ had in mind just two specific changes in the EPA

Offset Ruling.

First, where the EPA Offset Ruling required offsets in

every case, Congress provided for the state's option to waive

offsets under Section 173(1)(B). This option, in fact, is de-

scribed under the heading ‘‘State Flexibility.’ Jd. at 213, 4

Leg. Hist. at 2680.

Second, Congress relaxed the Offset Ruling’s baseline

for calculating the amount of offset credit gained by reducing

emissions at an existing source. The Offset Ruling had limited

offset credit to reductions below ‘‘reasonably available control

measure’’ levels. Congress provided that the offset baseline

This had the effect of allowing more ‘‘room"’ for new emis-

sions.

The 1977 amendments thus increased the states’ flexibility

in two very concrete ways. Nothing discussed in these pages

of legislative history either changes the definition of a ‘‘source,"’

or authorizes EPA to change it.”

* Pub. L. No. 95-95, §12%a), codified as a note to 42 U.S.C, $7502.

® The same is true of petitioners’ other, even more general quotations

from the legislative history. These passages do no more than recognize (1)

the balance between clean air and economic growth struck by the extension

of the attainment deadlines, and (2) the great flexibility which the states

retain to manage their programs as they see fit within the minimum

requirements of the Clean Air Act. None of these passages can be read to

support the plant-wide ‘‘source’’ definition.

2. The 1981 Steel Amendments

Congress reiterated the meaning of ‘‘source"’ in the 1981

Steel Industry Compliance Extension Act, described at page

14, supra. These amendments were explicitly the product of

an agreement between the steel industry, the steelworkers’

union, the government, and environmentalists. The amend-

ments allow steel firms to defer certain existing source

compliance dates provided they put the money saved thereby

into modernizations. To emphasize that these modernizations

projects are major new or modified sources subject to the

permit requirements, the House report stated explicitly that

projects such as the construction or modification of continuous

casters, open hearth shops, and basic oxygen furnaces—all

discrete units within steel plants—continue to be subject to

the lowest achievable emission rate requirement. See pp. 1!4-

15, supra. See brief of Amicus Curiae United Steelworkers

of America.

In the court below, EPA admitted that the legislative

history of the steel amendment ‘‘do[es] indicate that Congress

thought new source review would apply to facilities within a

plant.’ Court of Appeals brief for EPA at 19. EPA should

not be allowed to gainsay this now.

Court of found that definition contrary to law. 685

F.2d 718, ‘ 726-27 (Chev. App. A-4, A-20). The court

followed settled principles for construing a remedial statute

which seeks to protect public health from hazards over which

3”

people have no personal control. See Whirlpool Corp. v.

Marshall, 445 U.S. 1, 13 (1980); United States v. An Article

of Drug . . . Bacto-Unidisk, 394 U.S. 784, 798 (1969); United

States v. Dotterweich, 320 U.S. 277, 280 (1943).

The other statutory conditions each serve specific

congressional purposes as well. The House report states that

the lowest achievable emission rate requirement was adopted

because ‘‘in light of the adverse air quality and health

consequences of this new pollution, the committee concluded

that all feasible efforts to reduce or control this new pollution

should be mandated.’’ The committee concluded that the

requirement was also necessary to promote economic growth:

**[MJaximum pollution control from new sources is necessary

in order to permit room for maximum potential economic

growth.”’ In addition, the requirement furthered the objective

of improving pollution control technology: *‘[T]he technology-

forcing purpose of the act is best served by requiring maximum

feasible pollution control from these new sources in dirty air

areas."’ See H.R. Rep. No. 294, 95th Cong., Ist Sess. 215, 4

Leg. Hist. at 2682.

Congress intended the requirement for company-wide

compliance to be a major new incentive for enforcement.

precondition for permission to build new ones, Congress

sought to turn the enforcement incentives around.

The purpose of the cost-benefit analysis required of major

new and modified sources locating in areas with 1987 exten-

sions is evident on the face of the provision. Congress intended

that in areas with the longest delays in meeting health

standards, new pollution sources must be subjected io the

most exacting scrutiny.

Finally, the principle purpose of the construction mora-

torium was to give states and industry a common interest in

finishing the development and adoption of a complete SIP.

As the National Commission on Air Quality concluded, the

moratorium has served this purpose effectively with little

actual economic disruption.”

None of these purposes are served by exempting nearly

all major new and modified units from status as ‘‘major

stationary sources.’’ For these reasons as well as those cited

by the Court of Appeals, the plantwide definition contravenes

the purposes of the Act.

One last purpose—a purpose Congress surely did not

have—requires discussion. The EPA rules significantly distort

competition by giving established firms a regulatory edge over

newcomers. Consider a situation in which two firms perceive

a profitable opportunity to expand in a particular area. The

competitors are similarly situated, with but one difference:

One firm is new to the area and must build its facility at a

new site. The other firm already has a plant there and can

See page 13, supra. The petitioners complain that they cannot build

even pollution-reducing replacements where the construction moratorium

applies. This, however, is what Congress intended. See the statement of

Senator Muskie, quoted at page 36, supra. If the petitioners desire a

different rule, they must obtain an amendment of the statute from Congress.

Moreover, the “‘source™’ definition the petitioner attempt to defend

does not limit them to pollution-reducing replacement projects. Rather, it

explicitly allows contruction of projects which will increase plant-wide

pollution. Thus if EPA's rules stand, pollution increasing projects will be

allowed to go forward even in an area which has completely failed to

develop a SIP.

build its new facility within the plant. The newcomer’s project

is a ‘‘major stationary source’’ and cannot be built unless all

five statutory conditions are met. The established firm, how-

ever, needs only to secure a partial offset within the plant to

avoid its project’s being classified a ‘‘major stationary source”’

altogether. If both firms are subject to the same regulatory

regime (as the statute requires), they remain similarly situated.

Under EPA’s rules, however, the even-handed character of

the Clean Air Act’s requirements is systematically skewed.

The petitioners do not suggest any reason to believe Congress

intended such a result.

E. There Is No Conflict With Treis or Union Electric

The petitioners argue that a definition of ‘*major stationary

source’ reaching major-emitting units within plants conflicts

with this Court’s decisions in Train v. Natural Resources

Defense Council, 421 U.S. 60 (1975), and Union Electric Co.

v. EPA, 427 U.S. 246 (1976). These cases, they claim, give a

state freedom to choose any path to attainment of the health

standards that it wishes, regardless of specific minimum

requirements of the Clean Air Act. EPA Br. at 36, AISI Br.

at 19, Chev. Br. at 16-17.

Train and Union Electric, however, do not go so far.

Train recognizes that in addition to demonstrating timely

attainment of the health standards, the states’ programs must

also ‘‘satisf[y] the standards of 110(a)(2).’’ 421 U.S. at 79.

Similarly, Union Electric states that EPA must approve a

state’s plan ‘‘if it meets [the] eight specific criteria’’ set forth

in Section 110(aX(2). 427 U.S. at 250. The states have a wide

latitute to choose the ‘‘mixX"of emission limitations’’ (Train,

421 U.S. at 79), but this latitude does not include the authority

to waive specific requirements of the Act.

By virtue of subparagraph 110(aX(2)(D), since 1970 the

minimum requirements of Section 110(a)(2) have included

new source review requirements reaching units within plants.

As amended in 1977, subparagraph (D) incorporates into

Section 110(a)(2) the specific permit requirements of Sections

172(b)(6) and 173. While the states retain control over many

particulars of their SIPs under the 1977 amendments, this is

one requirement they may not waive. Because new source

review reaching major units within plants is a requirement of

Section 110(a)(2), there is no conflict with Train or Union

Electric.

Under this Court’s deference cases (including Train and

Union Electric) an agency’s construction must be rejected if

found inconsistent with the law. We have shown that the

plant-wide definition conflicts with the statutory terms, the

legislative history, and the congressional purpose. For these

reasons, the 1981 rules change must struck down.

Il. EPA’S NEW CONSTRUCTION IS A SHARP BREAK

WITH THE LONG-STANDING PRIOR RULE, INTER-

NALLY INCONSISTENT, AND THE PRODUCT OF

FAILING TO CONSIDER AN IMPORTANT ASPECT

OF THE PROBLEM

The Agency’s current interpretation is a flat contradiction

of a prior interpretation held for 10 years and twice ratified

by Congress. The current interpretation is also internally

inconsistent; EPA asserts that the plantwide definition may

be used only within a complete SIP, but EPA uses it under

the Offset Ruling and the construction moratorium. To the

extent that EPA asserts an empirical justification for its rules

change, the Agency ‘‘entirely failed to consider an important

aspect of the problem,’’ Motor Vehicle Manufacturers Ass'n

v. State Farm Mut. Auto. Ins. Co., 103 S.Ct. 2856, 2867

(1983), and failed to support even its partial claims with facts

in the rulemaking record. The petitioners therefore fail every

test for deference to an Agency’s construction.

A. The 1981 Rules Reversed the Long-Standing Prior

Interpretation

For areas which do not meet the health standards, EPA’s

effective rule through 1981 was that ‘stationary source”’

includes industrial units of production and operation, regard-

less whether located at new sites or within pre-existing plants.

This was the rule since issuance of the first regulations in

1971. See pages 15-19, supra.

Moreover, this was the rule embodied in the 1976 Emis-

sion Offset Interpretative Ruling which Congress adopted in

the 1977 amendments. The 1976 ruling applied to major new

and modified units within plants. The ruling was patterned

after the 1976 clean air bill which failed to pass only for other

reasons. In turn, the ruling was the basis for the 1977

amendments. See pages 33-36, supra.

This Court has frequently held that the reversal of a long-

standing administrative construction is a strong sign that

deference is not appropriate. International Brotherhood of

Teamsters v. Daniel, 439 U.S. 551, 566 (1979) (agency’s

“present position is flatly contradicted by its past actions’’).

See also Morton v. Ruiz, 415 U.S. 199, 237 (1974); Espinoza

v. Farah Manufacturing Co., 414 U.S. 86, 93-94 (1973).”

These principles weigh heavily against the abrupt 1981 rever-

sal.

The Court has also frequently held that great deference

is due to an agency interpretation which is contemporaneous

with the enactment of the legislation. See Udall v. Tallman,

380 U.S. 1, 16 (1965); Power Reactor Development Co. v.

International Union of Electrical, Radio & Machine Workers,

367 U.S. 396, 408 (1961). Deference is particularly in order if

the agency plays a role in developing the legislation and if

Congress shows that it was aware of and approved of the

agency view. United States v. Vogel Fertilizer Co., 455 U.S.

16, 31 (1982); Miller v. Youakim, 440 U.S. 125, 146 (1979);

Zuber v. Allen, 396 U.S. 168, 192 (1969).”' These principles

weigh strongly in favor the unit-specific definition which was

ratified by Congress in 1976.

* Even if EPA were able to show that its rules did embody the

exclusively plant-wide at some time prior to the 1981 change, its present

construction could not be rescued. *‘[A}n agency may not bootstrap itself

into an area in which it has no jurisdiction by repeatedly violating its

statutory mandate.’’ FMC v. Seatrain Lines, 411 U.S. 726, 745 (1973).

™ Vogel closely parallels this case. The statutory provision at issue

there was adopted some years before at the urging of the Treasury

Department. In Vogel the Department urged on the Court an interpretation

for this provision contrary to the interpretation the Department had

expressed to Congress in pressing for its enactment.

B. The Rationale for the 1981 Change Is Internally

Inconsisteni

The petitioners’ principal defense for the plant-wide

definition is that a state will have to show that its SIP still

guarantees reasonable further progress and timely attainment

of the standards. The petitioners, however, do not explain

why it is even colorably legal to use the plantwide ‘‘source”’

definition under the Offset Ruling and the construction mor-

atorium. These apply precisely in areas without adequate SIPs

demonstrating progress and attainment. These are the areas

lacking any safety net, however imperfect.”

C. EPA Failed to Consider Whether the Plant-Wide

Definition Increases Pollution in the Aggregate

The petitioners attempt now to revive a factual allegation

that EPA conceded in the Court of Appeals: the claim that

the prior ‘‘source’’ definition could retard pollution control

progress by discouraging modernization projects. This Court

should reject the claim, first, because it was conceded below

and, second, because EPA failed even to consider an essential

element of its claim: the aggregate effect of changing the

‘“*source”’ definition.

In its proposal notice, EPA asserted that the prior

**source’’ definition ‘‘can actually retard progress in air

pollution control by discouraging replacement of older, dirtier

processes or pieces of equipment with new, cleaner ones.”

In areas operating under under approved SIPs or the Offset

Ruling, EPA claimed that pollution-reducing replacement

projects were being delayed. In areas under the construction

moratorium (because the states do not have acceptable SIPs),

EPA claimed that some such projects were being blocked

altogether. 46 Fed. Reg. 16,281, J.A. 93-94.

Challenged by commenters to support these factual claims

with evidence, EPA retreated somewhat by the time of

” EPA in fact admits that the plantwide definition allows pollution to

increase in areas under the construction moratorium (but not, the Agency

claims, ‘‘significantly’’). 46 Fed. Reg. at 50,769, J.A. 109-110.

promulgation. In the final notice EPA continued to claim that

there was a ‘‘disincentive’’ for replacement projects, but now

asserted only that such replacements might reduce pollution

‘in some cases.’’ 46 Fed. Reg. 50,768, J.A. 104-05. All EPA

cited to support this ‘‘some cases’’ claim was a pair of

anecdotal, two-page letters from industry commenters.”

It is important to understand what EPA did not claim.

The Agency did noi assert that the plant-wide ‘‘source’’

definition would reduce pollution overall; this issue, in fact,

EPA did not address at all. EPA claimed only that some

unspecified fraction of replacement projects were being de-

layed by unspecified lengths of time, and that there could be

pollution reductions in ‘‘some’’ such cases. EPA made no

effort to show what percentage of projects covered by the

rules change would be replacements (versus expansions).

EPA made no effort to determine in what fraction of the

replacement cases would pollution be reduced. In short, EPA

made no effort to show that the prior ‘‘source’’ definition was

counter-productive in the aggregate.

Before the Court of Appeals, EPA abandoned even the

**some cases’’ claim. The Agency's brief stated: ‘‘EPA did

not rely on this [the alleged effect on modernizations] as a

basis for its decision.’’ Court of Appeals Br. for EPA at 12.

The court nonetheless addressed the issue briefly in a footnote,

observing that

in abandoning its earlier [pre-1981] position, EPA

did not cite, nor have we found in the record, any

study, survey, or support for the opposite position,

now tendered by EPA, that the dual definition would

indeed retard improvement of air quality in the

aggregate. Therefore, EPA’s decision to implement

the bubble concept, if based on this rationale, would

not rise to the level of reasoned decisionmaking for

EPA ‘‘has some burden . . . to show that a regulation

once considered to [effectuate policy] efficiently no

longer can be expected to do so."’ State Farm Mut.

J.A. 131, C.A. App. 67.

Auto. Ins. Co. v. Department of Transportation, 680

F.2d 206, 231 (D.C. Cir. 1982). Speculation is not

enough.

685 F.2d at 727, n.41 (Chev. Pet. A-18) (emphasis in original).

Since EPA conceded the claim in the court below, this

Court should reject the petitioners’ attempt to revive it now.

Even if the Court decides to consider the claim, however, it

should be rejected on the merits. The petitioners cannot

produce anything in the record other than unsupported anec-

dotes to buttress even the limited ‘‘some cases’’ claim. The

record is so weak even on this limited claim that the govern-

ment has felt it necessary to make up a totally speculative,

post hoc hypothetical. EPA Br. at 30-31. Even this hypo-

thetical fails to address the aggregate consequences of the

rules change.

At this point, the petitioners are reduced to vaguely

contending that the Court of Appeals applied an improper

standard of review. But in Motor Vehicle Manufacturers

Ass'n v. State Farm Mut. Auto. Ins. Co., 103 S.Ct. 2856

(1983), this Court stated:

Normally, an agency rule would be arbitrary

and capricious if the agency has. . . entirely failed

to consider an important aspect of the problem,

offered an explanation for its decision that runs

counter to the evidence before the agency, or is so

™ Courts will not consider post hoc rationalizations of counsel. Bur-

lington Truck Lines v. United States, 371 U.S. 156 (1962).

The petitioners also make vague allegations about long permitting

delays and large cost increases. See EPA Br. at 29, AISI Br. at 25-26. But

the facts are otherwise. According to the report of the National Commission

on Air Quality, the average time needed to obtain a nonattainment permit

was just three to five months, well within the corporate planning horizon

for any project large enough to be a ‘‘major’’ source. The Commission also

concluded that the permit requirements were unlikely to have any major

effect on siting decisions. National Commission on Air Quality, To Breathe

Clean Air 135, 139-40 (1981). (For background on the Commission, see

page 9, n.22, supra.)

implausible that it could not be ascribed to a differ-

ence in view or the product of agency expertise.

Id. at 2867. The Court of Appeals was certainly correct to

hold that the the aggregate impact of the rules change was

‘an important aspect of the problem" and that EPA's failure

to consider it rendered the rules change arbitrary. Indeed,

even the limited ‘‘some cases’’ claim is so insubstantially

supported that it cannot pass the ‘‘counter to the evidence"’

and ‘‘so implausible"’ tests.

Il. THE REPEAL OF THE “RECONSTRUCTION” RULE

HAD NO BASIS INDEPENDENT OF THE REDEFINI-

TION OF “SOURCE” AND MUST FALL AS WELL

The Court of Appeals also vacated EPA's repeal of the

““reconstruction”’ rule, holding that the repeal had no basis

independent of the change to an exclusively plant-wide ‘‘source”’

definition. The court refused to consider arguments against

the rule which were not considered by EPA but which were

pressed nonetheless by the industry intervenors. 685 F.2d at

728, n.43 (Chev. Pet. A-20). Petitioner AISI has made these

arguments again. AISI Br. at 32-34. They are without merit.

In certain industries (such as the steel industry) old

facilities are replaced often by rebuilding them rather than

demolishing and replacing them. The reconstruction of a coke

oven battery, for example, may be so extensive as to involve

replacing everything but the old source's foundation. See

page 22, n.52, supra.

If a major existing source is demolished and replaced,

the replacement is a major new source subject to the permit

requirements, even if it reduces pollution. See the statement

of Senator Muskie, quoted at page 36, supra. The purpose of

the ‘‘reconstruction"’ rule is to prevent industries such as the

steel industry from perpetually evading the pollution control

requirements of the Clean Air Act by reconstructing their

sources rather than demolishing and replacing them.

EPA fully considered and rejected AISI's arguments in

1980. 45 Fed. Reg. 52,703 (1980). The Agency repealed the

rule in 1981 only because adoption of the plantwide ‘‘source”’

definition rendered it vestigial. Even as EPA repealed the

‘*reconstruction"’ rule for nonattainment new source permit-

ting, the Agency retained the rule for the purposes of the

New Source Performance Standards. 46 Fed. Reg. 50,769, n.

7 (1981), J.A. 110.

The Court of Appeals properly refused to consider AISI's

additional arguments on which EPA had not relied. As stated

in SEC v. Chenery Corp., a court ‘‘may not supply a reasoned

basis for the agency's action that the agency itself has not

given.’ 332 U.S. 194, 196(1947). This Court recently reiterated

the Chenery principle in MVMA, supra, 103 S. Ct. at 2867.

The Court thus should affirm this portion of the lower court's

holding, as well as its vacating of the plant-wide ‘‘source”’

definition.

CONCLUSION

The plant-wide definition of ‘‘stationary source’’ conflicts

with the terms, legislative history, and purpose of the Clean

Air Act. The redefinition was a sharp reversal of the decade-

long congressional and administrative rule. Its legal rationale

is internally inconsistent. To the the extent EPA has tried to

support its action empirically, the Agency has failed to

consider an important aspect of the problem and failed to

supply record support for its conclusions. The redefinition of

““source’’ was therefore both contrary to law and arbitrary.

The repeal of the ‘‘reconstruction’’ rule had no independent

basis and thus must fall too.

For these reasons the decision of the Court of Appeals

vacating the rules changes and restoring the prior rules was

correct and should be affirmed.

Respectfully submitted,

Davip D. DONIGER

1725 I Street, Suite 600

Washington, DC 20006

(202) 223-8210

Counsel for Respondents

October 28, 1983

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.