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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Respondents Brief
- **Published:** January 1, 1984
- **Citation:** 467 U.S. 837

## Text

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OCT 28 1903
Nos. 82-1005, abt 82-1591 | ALEXANOER L. STEVAQ,
K
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.

i
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 ..............

RSSSSWIRABARorara-~e.

D.
E.

iv

(c) The 1977 Amendments..........
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

42
42

Vv

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

vi

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
3,12

3

30,31
2,11,23,
28,31

9

13,37

14,38
14,38

12,31,33,

35,36,37,

39

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

(1977)

(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.
44 Fed.
44 Fed.
45 Fed.
46 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

31,35
31,35,36

14

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

19
11,19,22
16,17

17

19
11,19,22

5
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.

2

‘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

3

§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.

;
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4

§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)

5

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,

7

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.).

9

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

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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

12

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.

13

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).

+

14

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.

16

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.

17

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

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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).

20

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

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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

22

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

23

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

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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.

25

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.

26

‘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)

27

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 \

|

28

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.

29

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)

ww

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

31

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.

32

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.

33

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.

© Where, as here, legislation was developed in a continuous, integrated
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).

34

(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.

(c) The 1977 Amendments. In 1977, both the Senate and
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

35

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.

37

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
should be the emission level allowed by the current SIP.©
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.

38
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.

40

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.

41

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

42

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.

43

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.

44

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.

45

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.

dh

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.)

47

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.

49
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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385010_0106%3A09. Public record. Not legal advice.