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

e Cor

- Suprem

FILED

Nos. 82-1005, 82-1247 & 82-1591 FEB 18 1984

iL. GTEVAS.

In the Supreme Court.

OF THE

United States

Octosper Term 1983

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

Petitioners,

V5.

Natura Resources Derense Councu, Inc.,

Citizens ror A Better Environment, [nc.,

NogTuweEsterNn Ono Luna Association, Inc.,

Respondents.

REPLY BRIEF FOR PETITIONER

CHEVRON U.5.A. INC.

Mica. H. Sauinsky

COUNSEL OF RECORD

Kevin M. Fone

225 Bush Street

Mailing Address P.O. Box 7880

San Francisco, CA 94120

Telephone: (415) 983-1462

Counsel for Petitioner

Chevron U.S.A. Ine.

Pruussury, Mapison & Sutro

225 Bush Street

Mailing Address P.O. Box 7880

San Francisco, CA 94120

Of Counsel

BOWNE OF BAN FRANCISCO, INC. * 180 NINTH BT. ¢6.F., CA 04108 © (416) 664-8900

i

TABLE OF CONTENTS

a EE a rane eT ae 1

I, The EPA regulations in question simply con-

form the regulatory definition of “stationary

source” to the definition set forth in the Clean

II. The EPA regulations in question are in accord

with the legislative history and purposes of the

RUIN INI / MINIS ccuteaccacibasstadtheopsntingsonalpnininhidaghlententatiite 6

III. EPA acted reasonably in promulgating regula-

tions using the bubble concept in nonattain-

SINS IID sass sassaescipsindcincantppecaihuesastiseneniienleasbictaabeltbhs 10

| AE AA, ET. SNC ee CERI RE . 13

ii

TABLE OF AUTHORITIES

Cases

Page

Alabama Power Co. v. Costle, 636 F.2d 323 200.000.000.000... 4

ASARCO Ine. v. Environmental Protection Agey., 578

fF cee ne ee, aVReen, | ee 3,4

Motor Vehicle Mfrs. Ass’n. v. State Farm Mut., 103

RI I eich Crain sist sd iciciniclin nse dasadadaiebnausieadebdaiieed 12, 13

Train v. Natural Resources Def. Council, 421 U.S. 60 ..10, 11

Statutes

Clean Air Act:

OCT TAD CEB UB. 9 TERS) ccccssccscscccncccccscsccncersessicesens 4

Section 111) (43 U.B.C. § 7411) ..ccccccscccccccecscssscocccecseees oees 3,4

Regulation

GD FRO TORE CRIED sociicsccticesedeveceocevssinscctensicsecsesnsnses 4

Other Authorities

House of Representatives Report 121, 97th Congress,

Ist Session, p. 12, 1981 U.S. Code Cong. & Admin.

EE CE eae SA: "a 8

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

Be ED Sacbccttseeeerciaiintiiciitrnienenattibciinnsnen 4

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

Decade of Controversy over the Prevention of Signifi-

cant Deterioration of Air Quality? (1980) 10 Envtl.

L. 585 idcneintninaniiincilingasestnnniiticiteds 4

Rhinelander, The Bubble Concept: A Pragmatic Ap-

proach to Regulation under the Clean Air Act (1981)

1 Vad .Nat.Resouroes Li. 177 oo ccccccccceeeeseeeens 4

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

In the Supreme Court

OF THE

United States

Ocroser Tzem 1983

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

Petitioners,

vB.

Natunat Resources Derense Counci, Inc.,

Crrizens ror A Better EnvinonMent, Inc.,

NorstHwestern Oxn1o Luno Association, Inc.,

Respondents,

REPLY BRIEF FOR PETITIONER

CHEVRON U.S.A. INC.

PRELIMINARY? STATEMENT

Respondents have failed to come to grips with the argu-

ments raised in the opening brief for petitioner Chevron

U.S.A. Inc. Respondents repeatedly concede that the statu-

tory provisions of the Clean Air Act define a stationary

source as a “building, structure, facility or installation”

(Resps.’ Br., pp. 23, 24, 27, 28). But, as discussed in our

opening brief, the EPA regulations in question here simply

conformed the regulatory definition of stationary source to

that statutory definition; EPA defined stationary source as

“any building, structure, facility or installation,” the pre-

cise definition set forth in the Act. The terms “building,

structure [or] facility” have been reasonably construed

by EPA to mean, essentially, an entire plant under both

the 1981 regulations and the 1980 regulations advocated by

2

respondents. Thus, respondents’ case rests on the untenable

assertion that EPA abused its agency discretion by defin-

ing “installation” to mean an entire plant as well.

Moreover, the legislative history of the Clean Air Act

does not support respondents’ assertions that Congress

intended to preclude EPA from adopting the bubble con-

cept. Respondents ignore the finding of the court of ap-

peals that “the legislative history is at best contradictory”

(Chev.Pet.Appx., p. A-17, n. 39). With respect to the legis-

lative history of the 1977 amendments to the Act, respon-

dents assert that Congress in 1977 adopted EPA’s 1976

Offset Ruling. But the 1976 Emissions Offset Ruling is

itself not explicit as to what constitutes a “source.” At

most, that Ruling suggested that a “source” would be

defined as a new “facility, building, structure, installation

or operation” (J A 21)—a definition almost identical to that

adopted by EPA in the challenged 1981 regulations in

question.

Respondents attempt to confuse the matter by asserting

that EPA, in adopting a plantwide definition of “station-

ary source” in nonattainment areas, reversed a “long-

standing” rule which allegedly had been in effect since

1971. To put it succinctly, this argument is absurd. The

Part D provisions of the Clean Air Act which deal with

nonattainment areas were not even in existence in 1971.

Congress passed those provisions as part of the Clean Air

Act Amendments of 1977, and EPA made no attempt to

define “source” under Part D until 1979.

At the very least, Congress has left to EPA the task of

defining “stationary source” under the nonattainment pro-

3

visions of the Clean Air Act. Neither the court of appeals

nor this Court may substitute its judgment for that of

EPA on this basic policy issue.

I. THE EPA REGULATIONS IN QUESTION SIMPLY OON-

FORM THE REGULATORY DEFINITION OF “STATIONARY

SOURCE” TO THE DEFINITION SET FORTH IN THE

OLEAN AIR AOT.

Respondents have made no attempt to address the fact

that the EPA regulations in question simply conform the

regulatory definition of “stationary source” to the defini-

tion in the Clean Air Act. Instead, respondents concede

that the Clean Air Act defines a stationary source as a

“building, structure, facility or installation”—the precise

definition adopted by EPA in the challenged regulations

(Chev.Br., pp. 12-13). It is significant that respondents

do not identify any principle of law which would preclude

an agency from conforming its regulations to the control-

ling statutory language. EPA acted rationally, reasonably,

and well within both the terms of the Act and its agency

discretion in promulgating the 1981 regulation.

Respondents attempt, as they did in the court of appeals,

to confuse the matter by asserting that “stationary source”

must be defined so as to include units within each plant, such

as individual boilers or blast furnaces (Resps.’ Br., p. 26).

But nothing in the Clean Air Act requires that a “stationary

source” be defined so as to require permits for each indi-

vidual piece of equipment in a plant.’ EPA acted well within

‘Respondents rely upon the court of appeals prior decision in

ASARCO Ince. v. Environmental Protection Agcy. (D.C.Cir. 1978)

578 F.2d 319 in asserting that “stationary source” has been defined in

section 111 of the Act to “denote discrete industrial units of produc-

tion and operation” (Resps.’ Br., p. 8). As discussed in our prior

briefs (Chev.Br., pp. 11-12, n. 7; Chev.Pet., pp. 8-10), the ASARCO

4

its discretion in 1981 when it repealed its prior regulations

which had defined “installation”—one of the terms in the

stationary source definition—to include all identifiable

pieces of process equipment (Chev.Br., p. 13)

With respect to the remaining terms in the stationary

source definition—“building, structure [or] facility’—there

can be little doubt that these terms can reasonably be

defined to encompass an entire plant. Even the 1989 regu-

lations, which respondents now embrace as the correct

definition (Resps.’ Br., p. 15), defined “building, structure,

or facility” to “mean, essentially, an entire plant” (Chev.

Pet. Appx., p. A-9; 45 Fed.Reg. 52746 (Aug. 7, 1980); J.A.

decision has been widely criticized and cannot support the result

in the instant case (Landau, Alabama Power Co. v. Costle: An End

to a Decade of Controversy over the Prevention of Significant

Deterioration of Air Quality? (1980) 10 Envtl.L. 585, 626; see An

Overview of the Bubble Concept (1982) 8 Colum.J.Envtl.L. 137,

151; Rhinelander, The Bubble Concept: A Pragmatic Approach to

Regulation under the Clean Air Act (1981) 1 Va.J.Nat.Resources L.

177, 215). Moreover, the ASARCO decision was expressly limited to

the New Source Performance Standards in section 111; as the court

of appeals decision in Alabama Power Co. v. Costle (D.C.Cir.

1979) 636 F.2d 323 demonstrates, the ASARCO decision cannot be

read to prohibit use of the plantwide definition in contexts outside of

section 111 (Chev.Br., p. 11; Chev.Pet., pp. 8-10). The state imple-

mentation plan provision, section 110, involved in this case is a

separate regulatory system which is distinct from section 111: While

section 111 is oriented only towards developing technology stan-

dards on an industry-by-industry, equipment-by-equipment-type

basis, section 110 is oriented towards meeting air quality standards in

nonattainment areas (see EPA Br., pp. 4, 7). In light of section

110’s primary goal of assuring reasonable further air quality prog-

ress in nonattainment areas, the arguments in favor of a plantwide

definition for section 110 are particularly compelling. The plantwide

definition is consistent with section 110’s purpose of improving

overall air quality rather than section 111’s much narrower focus on

the technology of particular equipment or industries.

5

88). Respondents’ bare assertion that “the terms ‘building’

and ‘structure’ cannot [be] reasonably defined as anything

else besides individual industrial units” (Resps.’ Br., p. 30)

is thus inconsistent with the 1980 dual definition which

respondents proclaim properly “maintained the historical

scope of the [new source] review provisions” (Resps.’ Br.,

p. 15). The fact of the matter is that “building, structure

[or] facility” can be, and has been, reasonably construed

on a plantwide basis.

Respondents’ numerous references to the five conditions

for construction of major stationary sources (Resps.’ Br.,

pp. 2-4, 23-25, 32) are irrelevant; respondents do not even

attempt to refute our demonstration that a project which

results in a de minimis increase in plantwide emissions

(or often a net decrease in plantwide emissions) is simply

not a major stationary source within the meaning of the

nonattainment provisions of the Clean Air Act. As dis-

cussed in our opening brief, there are compelling reasons

for allowing a project to proceed in a nonattainment area

if the net emissions increase from the plant as a whole is

below the minimal threshold levels allowed by statute

(Chev.Br., pp. 18-20).

Implicit in respondents’ argument on this point is the no-

tion that an individual piece of equipment in a plant modifi-

cation or expansion which will emit 100 tons of pollution per

year must be subject to the same conditions as a similar

piece of equipment in a new plant construction, even if the

plant modification or expansion as a whole would result in

net decreases in emissions, But it is clear that the impact of

the two projects upon air quality is totally different—new

plant construction increases emissions in the nonattainment

area, while a project to expand or modify a plant may

6

allow replacement of old, poorly controlled facilities and

reduce emissions in the area. Respondents fail to explain

how a construction moratorium on projects which will

result in reduced emissions in nonattainment areas is con-

sistent with the terms or goals of the Clean Air Act.

IL THE EPA REGULATIONS IN QUESTION ARE IN ACCORD

WITH THE LEGISLATIVE HISTORY AND PURPOSES OF

THE OLEAN AIR AOT.

In arguing that the legislative history of the Clean Air

Act precludes a plantwide definition of “stationary source,”

respondents ignore the finding of the court of appeals that

“the legislative history is at best contradictory” (Chev.Pet.

Appx., p. A-17, n. 39). Hence, according to respondents,

it is irrelevant that the court of appeals found that

“Congress did not advert specifically to the bubble concept’s

application to various Clean Air Act programs” (Chev.

Pet.Appx., p. A-17, n. 39).

There is no merit to the several fragments of legislative

history advanced by respondents in this regard. We discuss

each briefly :

1, Contrary to respondents’ assertion (Resps.’ Br.,

p. 33), the 1976 Senate bill did not address the issue of

whether “source” should be given a plantwide definition

or a dual definition. The specific phrase relied upon by

respondents—“a facility proposed for construction or mod-

ification at an existing site or plant”’—was abandoned in

the 1977 conference bill which led to the 1977 Amendments

(EPA Br., pp. 44-46).

2. There is likewise no basis for the suggestion (Resps.’

Br., p. 34) that the 1976 Offset Ruling precluded a plantwide

7

definition of source. That ruling indicated that a source

would be defined as a “structure, building, facility, installa-

tion or operation” (JA 21), but did not discuss whether

those terms would, in turn, be defined to include only plants

or to include individual pieces of equipment as well. In

any event, there is no evidence that Congress intended

merely to codify the 1976 Offset Ruling when it adopted

the 1977 Amendments.

3. Again, respondents’ citations to the 1977 legislative

history of the Amendments do not support their assertion

(Resps.’ Br., pp. 34-35) that the nonattainment provisions

must be applied to units or pieces of equipment within

plants. As discussed in EPA’s opening brief, it is the House

version of the nonattainment program which was adopted

by the 1977 conference (EPA Br., p. 46); yet respondents

rely almost entirely upon the legislative history in the

Senate. Respondents’ cryptic references to the House bill

simply do not address the plantwide definition (see Resps.’

Br., pp. 35-36).

4. The extremes to which respondents (and the United

Steelworkers amicus) go in an attempt to bolster their

claims of favorable legislative history are perhaps best

illustrated by their reliance upon the legislative history of

the 1981 Steel Amendments (Resps.’ Br., pp. 14-15). In

fact, there is no legislative history in those amendments

which addresses the definition of “stationary source,” the

bubble concept, or any other issues relevant to this case.

The passage quoted by respondents (Resps.’ Br., p. 15) is

taken completely out of context; the full paragraph in the

legislative history states:

8

“The Committee proposal is intended to encourage

additional capital investments in steelmaking opera-

tions. It is anticipated that the industry will use this

opportunity to modernize the American steel industry

by building modern continuous casters, converting

existing open hearth shops to basic oxygen furnace

operations or undertaking similar projects to improve

the competitive posture of the industry. Additional

capital investments under the Committee proposal are

those investments that would not be made during the

same time period if extensions of time for compliance

were not granted. The deferred pollution control funds

are not to be diverted to routine capital investment

needed to maintain existing productive capacity at a

steel mill. For example, the Committee does not

envision that a routine blast furnace reline, coke oven

end-flue rebuild or other similar projects would qualify

as ‘additional capital investments in iron- and steel-

production operations’” (H.R.Rep. No. 121, 97th

Cong., 1st Sess. 12 (1981), reprinted in [1981] U.S.

Cong.& Admin.News 63; emphasis added).

In view of the fact that the steel industry must build and

modernize casters, open hearth shops, and furnaces, it is

not surprising that the House Report used those terms in

describing the capital investments encouraged by the

Amendments. But nothing in either the quoted passage or

any other part of the 1981 legislative history suggests that

each caster, each open hearth shop, or each furnace must

be deemed a separate “stationary source.” Respondent’s

assertion that the legislative history describes casters,

furnaces or shops as “examples of the type of projects

that would be subject to LAER and the other new source

permitting requirements” (Resps.’ Br., p. 15) is thus

refuted by the legislative history relied upon by respon-

dents and quoted in full above.

9

Respondents’ briefs make a pro forma attempt to argue

that the nonattainment provisions of the Act do not have

the two main purposes of allowing reasonable economic

growth and allowing states greater flexibility. The greater

part of their briefs, however, disregard Congress’ clear and

unambiguous statement of purposes and assume that

flexibility and economic growth are irrelevant.

Thus, for example, respondents do not dispute the fact

that plantwide definition and the bubble concept will afford

the states flexibility (see Chev.Br., pp. 15-17). In fact,

Pennsylvania and the other state amici assert that the

plantwide definition should be barred because the plantwide

definition would allow the states greater flexibility: The

state amici arguing that allowing states to incorporate the

plantwide definition in their attainment plans will somehow

create “interstate pressures to weaken emission standards”

(Penn.Amici Br., p. 7). The state amici’s assertions are

wide of the mark: As discussed in our opening brief, each

state must demonstrate to EPA that its overall air quality

plan assures reasonable further progress toward meeting

air quality standards (Chev.Br., p. 17). Thus, allowing

states the option of including the plantwide definition in

their air quality plans could not possibly create competition

among states to weaken emission standards. The only

interstate competition, if any, would be to encourage states

to develop cost-effective, efficient air quality plans which

are appropriate to the conditions of the particular state.

That is the very sort of competition which Congress

envisioned in setting forth the purpose of allowing states

greater flexibility.

Respondents have also made no attempt to dispute the

fact that the plantwide definition will allow reasonable

10

economic growth to continue in nonattainment areas while

reasonable further progress is made to attain air quality

standards (see Chev.Br., pp. 17-19). Instead, respondents

assert that use of the plantwide definition will “skew”

economic growth in favor of established firms in an area

(Resps.’ Br., pp. 40-41; see also Penn.Amici Br., pp. 11-13).

Hence, respondents argue that the plantwide definition

discriminates against a newcomer who wishes to build a

particular facility at a new site, and favors an established

firm who wishes to build a similar facility at an existing

plant. Respondents’ assumption that the two firms are

“similarly situated” (Resps.’ Br., p. 41) simply strains

credulity. A newcomer who wishes to build a new facility

which will emit 100 tons per year of a particular pollutant

is by no means similarly situated as an established firm

who wishes to replace an old facility currently emitting 200

tons per year with a new facility which will emit 100 tons

per year. The established firm’s modernization project will

result in a 100 ton per year net reduction in emissions; the

newcomer’s project would result in a 100 ton per year net

increase in emissions. Respondents fail to come to grips

with the facts that the plantwide definition encourages

modernization and expansion of industrial plants, in accord

with the legislative history and purposes of the Clean Air

Act.

IIL EPA ACTED REASONABLY IN PROMULGATING REGULA-

TIONS USING THE BUBBLE OONCEPT IN NONATTAIN-

MENT AREAS.

Throughout these proceedings, respondents have ignored

the limited scope of judicial review of an agency’s adminis-

trative action. Notably, respondents do not even attempt

to respond to the principle in Train_y, Natural Resources

Def. Council (1975) 421 U.S.60, that where an adminis-

11

trative agency adopts regulations implementing a “suffi-

ciently reasonable” construction of a statute, a court of

appeals is precluded “from substituting its judgment for

that of the Agency” (421 U.S. 87).

The court of appeals did not, and could not, find EPA’s

reguations to be unreasonable. This is not a case where

an agency adopted an unreasonable construction of a

statute. Consistent with the provisions of the Clean Air

Act, EPA adopted a plantwide definition of “stationary

source” to allow states greater flexibility in developing

nonattainment programs and to reduce regulatory com-

plexity (Chev.Br., p. 11). Nevertheless, the court of appeals

substituted its judgment for that of EPA and Congress,

relying solely on its own policy judgment that the bubble

concept would cause unacceptable harm to air quality. But

it is for Congress to define the de minimis emissions

increases which are acceptable and consonant with achieve-

ment of attainment in nonattainment areas, and it is for

EPA to fashion regulations to meet those levels.

There is also no merit to respondents’ assertion that

EPA’s 1981 plantwide definition “is a sharp break with

the long-standing prior rule” (Resps.’ Br., p. 42). Respon-

dents’ assertion that since 1971 EPA’s new source review

applied to individual units within plants (Resps.’ Br., pp.

15-19, 42-43) is simply wrong:

1. The Part D provisions of the Clean Air Act which

deal with nonattainment areas were not even in existence

until Congress passed the Clean Air Act Amendments of

1977.

2. Respondents concede that the 1971 EPA regulations

contain no definition of “stationary source” (Resps.’ Br.,

12

p. 15). The 1973 EPA regulations used the terms “facility,

building, structure, [or] installation’ (Resps.’ Br., p. 16)

— the same terms used in the 1981 regulations challenged

by respondents.

3. Similarly, the 1976 Offset Ruling relied upon by

respondents defined a “source” as a “facility, building,

structure, installation or operation” (JA 21). Nothing in

the 1976 Offset Ruling suggests that this definition was

intended to apply to individual units or pieces of equip-

ment within a given plant.

4. EPA made no attempt to define “source” under the

Part D nonattainment provisions until 1979. The history

of EPA’s 1979 proposal to allow states with approved

state plans to use a plantwide definition of source is set

forth in EPA’s opening brief (EPA Br., pp. 9-11).

Mo~eover, nothing in the record supports respondents’

assertion that EPA “fail[ed] to consider an important

aspect of the problem” (Resps.’ Br., p. 42). Respondents

argue that EPA failed to consider whether the plantwide

definition would increase pollution in the aggregate and, in

particular, failed to provide empirical evidence that the

plantwide definition would reduce pollution (Resps.’ Br.,

pp. 25-26, 44-47). The rule of law thus urged would require

an agency to produce empirical evidence showing the

superiority of its proposed rule (the plantwide definition)

over the prior rule (the dual definition). Such a standard

would be contrary to both common sense and established

legal principles. In Motor Vehicle Mfrs, Ass'n. v. State

Farm Mut. (1983) 103 8.Ct. 2856, for exampie, this Court

held that “(t]he agency must explain the evidence which is

available, and must offer a ‘rational connection between

13

the facts found and the choice made’ ” (103 S.Ct. 2871;

emphasis added). There is no requirement that exhaustive

empirical data be developed to support the proposed rule,

especially where, as here, no empirical evidence was ever

offered to support the prior rule.

Rescission or modification of a prior rule is subject to

the same “arbitrary and capricious” test as is applied to

adoption of new rules (103 S.Ct. 2865). Because “[aJn

agency's view of what is in the public interest may change,

either with or without a change in circumstances,” all that

is required is a “reasoned analysis” (103 S.Ct. 2874). This

Court will uphold even “a decision of less than ideal clarity

if the agency’s path may reasonably be discerned” (103

8.Ct. 2867). Here there can be no doubt as to EPA’s

reasoned analysis: PA reasonably decided to conform the

regulatory definition of “stationary” source to the defini-

tion in the Clean Air Act in order to allow states greater

flexibility and to reduce regulatory complexity. The basis

for this decision was carefully articulated by EPA and

should be upheld by this Court.

CONCLUSION

For the foregoing reasons, the judgment below should

be reversed.

Respectfully submitted,

Micwae. H. Satinsky

COUNSEL OF PECORD

Kevin M. Fono

Counsel for Petitioner

Chevron U.S.A. Inc.

Pussury, Mavison & Sutro

Of Counsel