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

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

Petitioner,

vB.

Natvurat Resources Derense Councn, Ino., et al.,

Respondents.

Amenican [ron anv Sreex Inetirvte, et al.,

Petitioners,

va.

Natura. Resources Derense Councn, Ino., et al.,

Respondents,

Apmrnistrrator, ExvrronmentaL Protection Acency,

Petitioner,

v6.

Naturat Resources Derznwae Counc, Lxco., e¢ al.,

Respondents.

On Writs of Certiorari to the United States Court

of Appeals for the District of Columbia Circuit

BRIEF AMICUS CURIAE OF

PAOIFIO LEGAL FOUNDATION

IN SUPPORT OF PETITIONERS

Rowavtp A. Zumsruw

Rosin L. Riverr

COUNSEL OF RECORD

Pactrio Lzoat Founpation

455 Capitol Mall, Suite 600

Sacramento, California 95814

Telephone: (916) 444-0154

Attorneys for Amicus Curiae

Pacific Legal Foundation

ee RE A LT

BOWNE OF BAN FRANCIBCO, ING, * 190 NINTH BT. ¢ 8.7., CA 84108 © (418) 064-8800

)

ay

so * 60s

Interest of amicus ..........

EE Ree

i re ES ON

SIND scxcsiccsoucibecincssnsseteitiiennecintitnusmnasiinnitnsiniatinnnnersbitnghbdintiin

The goals.of the nonattainment provisions of the Clean

Air Act include enhancement of this nation’s eco-

ES ED senseecittitcsercennemniineraiteianaisiniaentincenititanaeds

Even environmental and scientific spokesmen agree

that as a matter of policy promulgations of environ-

mental regulations must consider economic needs

GE RE cicitanpsnicecsenteetisins tnadiielinsntehdinnsiiciilatiasdniaiiamiaeiean

Ill

States need flexibility to adopt or not adopt programs

such as the plantwide definition in order to satisfy

their primary responsibility to implement the Clean

BED: DAR <iivcinsiecnntibciiitinninintninaeinainiininadiaaiienia

The plantwide definition complies with the goals of the

nonattainment provisions of the Clean Air Act. The

dual definition preferred by the lower court does not

A. The plantwide definition properly promotes

attaining ambient air quality standards ..............

B. The dual definition of source discourages air

pollution reductions while the plantwide defini-

tion promotes it through incentives ......................

ll

ll

ii

Taste or Contents

Page

C. The dual definition of source has contributed to

a slow growth economy while the plantwide defi-

tion will promote economic growth 2.0... 15

Vv

The lower court ignored the fact that an administra-

tive agency’s discretion in promulgating regulations

is quite wide while a reviewing court’s scope of

NE I anki ssiean ecsenitstneheincctnccnibaniiiaesenqnipeast 19

REAR TON Ts SE SS RI eo SD 26

iii

TABLE OF AUTHORITIES CITED

Cases

Anaconda Company vy. Ruckelshaus, 482 F.2d 1301

Page

§ eA RIESE aa col ee A Ae SL 7

Baltimore Gas & Electric Co., et al. v. NRDC, et al.,

siete. US. ........, 51 U.S.L.W, 4678

CFE GR pesca as enitihtiaitacensnisvsticnivitornses 19, 20, 21, 23

Bessemer and Lake Erie Railroad Co., et al. v. Inter-

State Commerce Commission, 691 F.2d 1104 (3d Cir.

ER RE LO SEL SANDY Fei NT MO ee 22

Bowman ‘Transportation, Inc. v. Arkansas-Best

Freight System, Inc., 419 U.S. 281 (1974) oo... 19

Kenvironmental Defense Fund, Inc. v. Costle, 631 F.2d

Se I oo sccendenutiptnnotinmenisais 7

Environmental Defense Fund, Inc. v. Costle, 657 F.2d

NE iN PIED :ccsscdeecuteninsediistsistathiecsnesvachedtiatctinete 23

Georgia v. Tennessee Copper Co., 206 U.S. 230 (1907) 9

Industrial Union Department, AFL-CIO v. American

Petroleum Institute, 448 U.S. 607 (1980) 2.0... 21

Montana Power Co. v. EPA, 608 F.2d 334 (9th Cir.

LS ae oe Ea ea 23

Motor Vehicle Manufacturers Association v. State

Farm Mutual Automobile Insurance Company,

aT U.S. ........, 51 U.S.L.W, 4953 (June 24, 1983)....21, 23

NRDC v. Gorsuch, 685 F.2d 718 (D.C, Cir. 1982)....10, 21, 24

Pacific Legal Foundation v. Andrus, 657 F.2d 829 (6th

|

Train v. Natural Resources Defense — 421 U.S.

6O (1975) . seacetiaiatiniaiiaaites nate mamatiasinaitidiaaiteaiiitie

7

iv

Tasie or AUTHORITIES

Statutes

Page

Clean Air Act, 42 U.S.C.:

I ec cilet lf nn seesereemalaninnnneeidsadiahdosiaiiiale 14

I i ambiente 3,4

SUITE IPTIIED chs cichessmcsinciicadeinenepnenianianagssisghasnicieseaessinhibeabanh 10

PIII’ sstissrcinintessstcdchancteidiccetpusdilbcunseidimbbeainsaiovenaiadion 10

Section 7501 through 7508 ............scssssssssesesseesenseersees 3, 6, 11

INES DEL LILD sccsicvdcncccotecasiupeaibitsiantnsentsibteiiliiainindabidssntibbiinaed 12

PIL UNIET . ienienesisshstesitcalia sccstensnhssnpdancttdiamsidbsiaiiehictnalsiomieeahidlal ll

Other Authorities

An Overview of the Bubble Concept, 8 Colum. J. of

BG, Tess TE ARG D aivccseseclitticientiosnieviceensstsivinsisitaioibiii 12, 14

Harrington and Krupnick, Stationary Source Pollution

Policy and Choices for Reform, 21 Nat. Resources J.

BO CRUD ciecniashctnticsiciscssntseiiilcnniiinnsgassataisttbinehiile 13, 16, 17,18

Haveman and Christainsen, Environmental Regula-

tions and Productivity Growth, 21 Nat. Resources J.

OD CI Ds csceiicinttedeneditesiiisiaicaigaatanieiniiaga tigated: 13, 16, 18

H.R. Rep. No. 294, 95th Cong. lst Sess. 211, reprinted

in 1977 U.S. Code Cong. & Ad. News 1290 ..0....0....0.0... 6, 11

The Bureau of National Affairs, Inc., 14 Environment

Reporter 157 (June 3, 1983) .. 5

National Commission on Air Quality, To Breathe

Clean Air: Report of the National Commission on

Bhp Qe TES CITT crtrsrinstqsiimaiincinvnian 17,18

Vv

Taste ory Autnoritizs Crrep

Orner AUTHORITIES

Office of Science and Technology Policy, Executive

Office of the President, General Comments on Acid

Rain, A Summary by the Acid Rain Peer Review

Panel for the Office of Science and Technology

POR (TUG Beg ROOD wedecnctencterstemsdinscissitciliiithaesestacentende 8

Portney, The Macroeconomic Impacts of Federal

Environmental Regulations, 21 Nat. Resources J.

GER CIGD ccccccacususssesinicntennistcahenitintsbicessassipsinicscasilin hiceiaiss 18

Renz, The Effect of Federal Legislation on Historical

State Powers of Pollution Control: Has Congress

Muddied State Waters?, 43 Mont. L. Rev. 199

CEE .. snisinincncenthesentectienbeielacdcigiaiiicabeetiaaed i 9,10

13th Annual Report of the Council on Environmental

Quality, Environmental Quality 1982 000.00... 14

Weekly Comp. Pres. Doc, 1214 (August 15, 1977) .......... 15

Statement of Signing H.R. 6161 Into Law .................... 13

44 Fed. Reg. 71,780 through 71,781 (1979) .........cccccccee 12

45 Fed. Reg. 52,696 through 52,698 (August 7, 1980) .... 25

46 Fed. Reg:

16,281 (March 12, 1981) ................ccceces 13

50,766 (October 14, 1981) ........ A 13

50,767 (October 14, 1981) ...... v2, 18, 20, 21

50,768 (October 14, 1981) ................... 24, 25

123 Cong. Ree. 27,076 (1977) 7

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

In the Supreme Court

OF THE

United States

Octoser Term, 1982

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

Petitioner,

vs.

Natura Resources Derensz Councn., Inc., et al.,

Respondents.

American Iron anv Sreex Institute, et al.,

Petitioners,

vs.

Natura. Resources Derense Counc, Inc., et al.,

Respondents.

ApMINISTRATOR, ENVIRONMENTAL Protection AGENCY,

Petitioner,

vB.

Natura Resources Derense Councn, Inc., et al.,

Respondents.

On Writs of Certiorari to the United States Court

of Appeals for the District of Columbia Circuit

2

INTEREST OF AMICUS

Pacific Legal Foundation (PLF) respectfully submits

this brief in support of petitioners, Chevron U.S.A. Inc.,

American Iron and Steel Institute, and Administrator,

United States Environmental Protection Agency pursuant

to Rule No. 36 of the revised Rules of the Supreme Court

of the United States. Consent to the filing of this brief has

been granted by counsel for all parties. Copies of these

letters of consent have been lodged with the Clerk of this

Court.

Organized and operating under the laws of California,

PLF is a nonprofit, tax.exempt public interest law firm

with over 18,000 contributors located throughout the coun-

try. Policy is set by a 18-member Board of Trustees, com-

posed of concerned citizens, a majority of whom are

attorneys. PLF’s Board of Trustees evaluates the merits

of any contemplated legal action of the Foundation and

authorizes legal action only where PLF’s position has broad

support within the general community and is in the public

interest. The PLF Board of Trustees has authorized the

filing of this brief amicus curiae.

Due to its unique perspective of representing the public

interest, PLF is most interested in a resolution of the

statutory and public policy issues inherent in application of

the plantwide definition of “source” in nonattainment areas

(areas in which air quality does not meet federal stan-

dards) and thus in the litigation at bar. The interest of

PLF is heightened as a consequence of many PLF con-

tributors and members of PLF’s Board of Trustees

residing in areas subject to the regulations at hand.

3

Further, PLF believes that there is great public interest

in achieving clean air by means which consider the

economic well-being of this nation. Thus, there is also

significant public interest in the activities of Environmen-

tal Protection Agency (KPA) in enforcing the Clean Air

Act. The regulations at issue here are of particular public

interest in that they seek to strike a delicate balance between

the congressionally mandated requirements to attain clean

air and to enhance the economic well-being and productive

capacity of the nation’s population.

OPINION BELOW

The opinion of the United States Court of Appeals for

the District of Columbia Circuit is reported at 685 F.2d

718 (D.C. Cir. 1982).

SUMMARY OF ARGUMENT

I. The purposes and goals of the nonattainment sections

of the Clean Air Act (42 U.S.C. §§ 7501 through 7508)?

include enhancement of this nation’s economic well-being.

This premise is supported by 42 U.S.C. § 7401(b) (1), which

defines the purpeses of Subchapter I—Programs and

Activities (which encompasses the nonattainment provi-

sions), as well as the legislative history of the bill which

established the nonattainment provisions of the Clean Air

Act. Due to the fact that enhancement of the economy of

the United States is one of the congressionally mandated

Throughout this brief, reference is made to the nonattainment

sections of the Clean Air Act. Such reference is limited herein to

42 U.S.C. §§ 7501 through 7508 and the requirement therein that

nonattainment permits are a prerequisite to the construction and

operation of new or modified major stationary sources.

4

purposes of the nonattainment program administered by

EPA, satisfaction of this goal is properly pursued through

the regulations promulgated by EPA. Pacific Legal Foun-

dation argues that enhancement of national productive

capacity was a proper consideration of the October 14,

1981, EPA regulations in question.

II. Scientific and environmental spokesmen agree with

EPA that the economic needs of the country must be con-

sidered when promulgating environmental regulations.

Their statements reflect a broad consensus for and the

importance of considering the economic needs of the United

States in developing environmental programs and policy.

III. States have the primary responsibility for imple-

menting and meeting the goals of the Clean Air Act, yet to

do so they need substantial flexibility in choosing their

strategies. The latitude to be granted the states must

include the option to adopt a plantwide definition of source.

Allowing the states to adopt a plantwide definition of

source will not permit states to avoid meeting national air

standards, nor will it preclude states from establishing a

more stringent definition of source.

IV. Both goals of the nonattainment provisions of the

Clean Air Act, enhancement of the nation’s productive ca-

pacity, and attainment of ambient air quality standards are

met with EPA’s plantwide source definition. They are not

met by use of the prior dual source definition which is

preferred by the court below. Since EPA will allow a

state to use the bubble concept only if reasonable further

progress toward attainment of air quality standards is

shown through an EPA approved state implementation

plan, the plantwide definition will not negatively impair

5

reaching national air quality standards. This is particularly

true since utilization of the plantwide definition of source

provides industry with the economic incentives to replace

older, polluting equipment with newer less polluting equip-

ment. This economic incentive is noticeably absent in the

use of the dual definition of source which, as a consequence,

has contributed to a slow growth economy. This negative

impact on the economy and on air quality is contrary to

the goals of the nonattainment program and may be

corrected through use of the plantwide definition of source.

V. The court below abused its judicial discretion and

violated the’ applicable standard of review in this case. The

law articulates a standard of wide discretion which is to

be accorded administrative agencies in their promulgation

of regulations. The scope of judicial review is narrow and

a reviewing court may overturn regulations adopted by an

agency only if such regulations are adopted in a manner

which is arbitrary and capricious. EPA substantiated its

promulgation of the regulations at issue and acted within

the wide latitude accorded an agency. The action of the

court below in vacating the October 4, 1981, regulations

violated the standard of review.

6

ARGUMENT

I

THE GOALS OF THE NONATTAINMENT PROVI-

SIONS OF THE CLEAN AIR ACT INCLUDE EN-

HANCEMENT OF THIS NATION'S ECONOMIC

WELL-BEING

The Clean Air Act admonishes that among the purposes

of its programs is the enhancement of economic well-being.

Title 42, United States Code, Section 7401(b)(1) clearly

states:

“The purposes of this subchapter are—to protect and

enhance the quality of the nation’s air resources so as

to promote the public health and welfare and the pro-

ductive capacity of its population.” (Emphasis added.)

Legislative history of the nonattainment provisions of

the Act expressly states that one purpose is “to allow rea-

sonable economic growth to continue in an area while mak-

ing reasonable further progress to assure attainment of the

standards by a fixed date.” H.R. Rep. No. 294, 95th Cong.

1st Sess. 211, reprinted im 1977 U.S. Code Cong. & Ad.

News 1290 (emphasis added). See also H.R. Rep. No. 294

at 13, 1977 U.S. Code Cong. & Ad. News at 1091, for the

proposition that the goals of the nonattainment program

were equivalent to the goals of Subchapter I—Programs

and Activities (42 U.S.C. §§ 7401 through 7508), those goals

being to attain air quality standards and to provide for

new economic growth. Further history of congressional

intent to allow economic development in nonattainment

areas is found in comments made on the floor of the House

by California Congressman Henry Waxman. Representa-

tive Waxman, a noted environmental proponent, stated

7

prior to the vote on the 1977 amendments to the Clean Air

Act that: “We have struck a proper balance between en-

vironmental controls and economic growth in the dirty air

areas of America. ... [NJeither [pollution control nor new

jobs] need be compromised.” 123 Cong. Rec. 27,076 (1977).

Courts have adhered to this statutory mandate. In en-

acting standards for state implementation plans needed to

meet national ambient air quality standards, EPA must

weigh economic factors. Anaconda Company v. Ruckels-

haus, 482 F.2d 1301, 1306 (10th Cir. 1973). See also Pacific

Legal Foundation v. Andrus, 657 F.2d 829 (6th Cir. 1981) ;

Environmental Defense Fund, Inc. v. Costle, 631 F.2d 922

(D.C. Cir. 1980). However, the court below ignored these

precedents and determined that the favorable economic

advantages of the plantwide definition were irrelevant.

This is clear error.

II

EVEN ENVIRONMENTAL AND SCIENTIFIC SPOKES.-

MEN AGREE THAT AS A MATTER OF POLICY

PROMULGATIONS OF ENVIRONMENTAL REGULA-

TIONS MUST CONSIDER ECONOMIC NEEDS OF

SOCIETY

In addition to Congress and the courts, the scientific

community has also begun to recognize the imperative of

considering the economic needs of society when devising

environmental protection programs.

Recently Mr. Gus Speth, President of World Resources

Institute and former chairman of the Council for Environ-

mental Quality, emphasized that

“(t]he environmental community should realize the

need for considering business and economic concerns.

... Environmental conservation and economic growth

are complementary.” The Bureau of National Affairs,

Inc., 14 Environment Reporter 158 (June 3, 1983).

Dr. S. Fred Singer, Professor of Environmental Sciences

at the University of Virginia, Senior Fellow of the Heri-

tage Foundation, and a member of the Acid Rain Peer

Review Panel of the White House Office of Science and

Technology Policy, recently implored to the American As-

sociation for the Advancement of Science that cost effec-

tiveness of regulatory programs should be considered by

the regulator and that “the ‘serious damage’ caused by acid

rain could be controlled through a ‘least cost approach like

the bubble plans’ now being used for controlling certain air

pollutants in limited geographic areas.” 14 Enviromnent

Reporter at 157.

On June 27, 1983, the Acid Rain Peer Review Panel

issued its General Comments and recommended that “addi-

tional steps should be taken now which will result in mean-

ingful reductions in the emissions of sulphur compounds

into the atmosphere beginning with those steps which are

most cost effective.” Office of Science and Technology Pol-

icy, Executive Office of the President, General Comments

om Acid Rain, A Summary by the Acid Rain Peer Review

Panel for the Office of Science and Technology Policy

(June 27, 1983).

These comments are only a small sampling but they

reflect the serious consideration of the scientific community

regarding the use of concepts such as the bubble approach

not only to meet clean air goals but also to control acid

rain.

9

That EPA properly considered the economic costs as

well as the environmental benefits of its regulations defining

source for nonattainment areas is thus not only supported

by the statute and case law, but also the rational viewpoints

of the scientific community. By all accounts EPA acted

within its congressionally approved role.

Il

STATES NEED FLEXIBILITY TO ADOPT OR NOT

ADOPT PROGRAMS SUCH AS THE PLANTWIDE

DEFINITION IN ORDER TO SATISFY THEIR PRI-

MARY RESPONSIBILITY TO IMPLEMENT THE

CLEAN AIR ACT

It is a basic premise that states historically have had

the primary responsibility for protecting their citizens’

health and welfare.

“The powers of the states to protect the health and

welfare of their citizens by statute, by an action to

abate a nuisance, or by other means is well estab-

lished.” Renz, The Effect of Federal Legislation on

Historical State Powers of Pollution Control: Has

Congress Muddied State Waters?, 43 Mont. L. Rev. 199

(1982).

As far back as 1907, states exercised these powers in the

area of air pollution. Georgia v. Tennessee Copper Co., 206

U.S. 230 (1907). In keeping with this role, states were ex-

pected to continue to have the primary responsibility in

air pollution control through the implementation of the

Clean Air Act. This fact was emphasized in the initial fed-

eral effort to reduce air pollution, where “the Air Pollu-

tion Control Act of 1955, declared that pollution control

was the responsibility of the states.”” Renz, 43 Mont. L.

10

Rev. at 201 (emphasis added). This Court has recognized

that “the prevention and control of air pollution at its

source is the primary responsibility of states and local

governments.” T'rain v. Natural Resources Defense Coun-

cul, 421 U.S. 60, 64 (1975).

In order to be able to fulfill its role in implementing the

Clean Air Act, a state needs sufficient flexibility. “Wide

latitude” is to be accorded the states. Jd. “The states’

powers to guard against these threats [hazards to public

health} cannot be limited if the states are to continue their

historic role... .” Renz, 43 Mont. L. Rev. at 216. Though

Congress and some courts have recognized the state’s pri-

mary role and the need for flexibility, the court below did

not.

In the opinion below, the court narrowly defined that

the purpose of the nonattainment program was “undoubt-

edly to improve air quality in regions lagging behind in

meeting the NAAQS.”* NRDC v. Gorsuch, 685 F.2d 718,

727 (D.C. Cir. 1982). It discounted EPA’s undorstanding

that the purpose and nature of the nonattainment program

was “to afford the states flexibility in designing revised

SIPs* which will attain compliance with the NAAQS.” The

Court simply countered that “offering flexibility to the

states may be a method of attaining that objective, but it

is not an independent goal of the nonattainment scheme.”

This is contrary to the intent and purpose of Congress,

as reflected in House Report No. 294.

*National Ambient Air Quality Standards (NAAQS). Section 109

of the Clean Air Act, 42 U.S.C. § 7409.

*State Implementation Plans (SIPs) for the Attainment, Mainte-

nance and Enforcement of NAAQS. Section 110 of the Clean Air

Act, 42 U.S.C. § 7410.

ll

In discussing the nonattainment provisions of the Clean

Air Act Amendments of 1977, codified at 42 U.S.C. §§ 7501

through 7508, the House committee stated that there are

“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 at 211 (emphasis

added). The lower court’s judicial interpretation to the

contrary simply does not mesh with legislative history, nor

does it mesh with common sense. Congress believed that

flexibility must be afforded a state in order to allow a state

to meet all the purposes of the Clean Air Act. These

purposes include reasonable economic growth. As shown

infra this nation’s economic growth will suffer needlessly

if flexibility and the bubble concept are capriciously

rejected.

IV

THE PLANTWIDE DEFINITION COMPLIES WITH

THE GOALS OF THE NONATTAINMENT PROVI-

SIONS OF THE CLEAN AIR ACT. THE DUAL DEFI-

NITION PREFERRED BY THE LOWER COURT

DOES NOT

A. The Plantwide Definition Properly Promotes Attain.

ing Ambient Air Quality Standards

EPA has frequently articulated that if a state chooses

to define “source” on a plantwide basis that state is still

subject to the requirements of 42 U.S.C. § 7502: The SIP

must continue to demonstrate attainment of NAAQS and,

in the interim until such standards are met, reasonable

12

further progress (RFP)* toward attainment by the statu-

tory deadlines must be demonstrated (46 Fed. Reg. 50,767

(October 14, 1981)). Since a nonattainment state must

demonstrate RFP, by definition that state must prove

actual reductions in air pollution. And as stated above,

demonstration of RFP is not precluded by use of the

plantwide definition but, on the contrary, it is required.

For existing sources, EPA restricts the use of the alter-

native emissions approach in a nonattainment area to the

situation where the source does not increase pollution:

“TA)ll emissions under the bubble must be quantifiable and

trade-offs among them must be equal in order to prove that

the alternative emissions approach does not increase the

level of overall emissions.” Note, An Overview of the

Bubble Concept, 8 Colum. J. of Envtl. L. 137, 142 (1982),

which relies on 44 Fed. Reg. 71,780 through 71,781 (1979).

Essentially, these EPA restrictions are present “to ensure

that the bubble concept ... [is] used to improve air quality

rather than to continue air pollution.” Jd. As a result, the

bubble concept furthers the goals of the nonattainment pro-

gram by leading to attainment of NAAQS and simultane-

ously providing for economic growth, the same goals the

plantwide definition would accomplish.

‘Title 42, United States Code, Section 7501(1) defines reasonable

further progress as: “annual incremental reductions in emissions of

the applicable air pollutant.”

13

B. The Dual Definition of Source Discourages Air Pollu-

tion Reductions While the Plantwide Definition Pro-

motes It Through Incentives

As EPA has repeatedly stated, “the dual definition was

discouraging replacement of older, dirtier processes with

new cleaner ones. It thereby acted as a disincentive to new

investment and modernization and retarded progress to-

ward clean air.” 46 Fed. Reg. 50,766 (October 14, 1981)

and 46 Fed. Reg. 16,281 (March 12, 1981). Quite simply,

the current “technology-based standards provide little in-

centive for innovations that reduce emissions below state-

of-the-art.” Harrington and Krupnick, Stationary Source

Pollution Policy and Choices for Reform, 21 Nat. Re-

sources J. 539, 544 (1981). Similarly, clean air legislation

has “led to serious delays and ‘stretch-outs’ in investment

plans, delays which have the inevitable effect of extending

the use of outmoded facilities and retarding technical

change and economic growth.” Haveman and Christainsen,

Environmental Regulations and Productivity Growth, 21

Nat. Resources J. 489, 507 (1981). One of the primary

reasons for this effect is due to the current regulations

under which new sources of pollution are subjected to more

stringent standards than existing sources. “This discrep-

ancy between old and new plant requirements tends to

reduce investment in plant and equipment, and remaining

investment is diverted away from new plant construction

and toward rehabilitation of older equipment. Innovation

is retarded ... .” Harrington and Krupnick, 21 Nat. Re-

sources J. at 544.

Alternatively, the alternative emissions approach is

believed by many, including EPA, to “actually have a

beneficial effect on the development of pollution control

14

technology [since] the bubble would serve as an incentive

for developing cost effective pollution control technology.”

Note, 8 Colum. J. of Envtl. L. at 155. Distinct from the

current technology based pollution control standards, EPA

has developed an “emissions trading policy” as an alterna-

tive for controlling emissions, which is a market approach

to air pollution control. The bubble concept, one of four

innovative regulatory mechanisms, takes advantage of mar-

ket incentives to reduce air emissions at the lowest possible

cost.

The Council on Environmental Quality (CEQ) has stated

that these innovative regulatory mechanisms, including the

bubble concept, “are needed in the 1980’s if further gains

are to be made at reasonable costs.” 13th Annual Report

of the Council on Environmental Quality, Environmental

Quality 1982, 8. To illustrate that the bubble concept does

meet the goals established by Congress for the nonattain-

ment program, including reducing air emissions, CEQ

cited a 3M factory in Bristol, Pennsylvania, which “used

an innovative manufacturing process to overcontrol vola-

tile organic compound (VOC) emissions in return for less

control on other sources. This bubble reduced VOC emis-

sions 1,000 tons per year more than would have been

achieved through conventional compliance.” Jd. Evidence

that the dual goals of reaching attainment and enhancing

the productive capacity of the population (42 U.S.C.

§ 7401(b)) are met by the bubble concept is manifest in that

“(bly the end of 1982, EPA’s efforts to encourage emis-

sions trading had resulted in a number of concrete cases

where industry had reduced air emissions while simulta-

neously reducing capital and/or operating costs.” 13th An-

nual Report of the Council on Environmental Quality at

76 (emphasis added). Overall, 21 of the 34 bubbles

15

approved or proposed by EPA reduce emissions further

than legally required by NAAQS. /d. at 185. As shown by

these figures, the bubble concept provides crucial environ-

mental benefits for “through emissions trading, every firm

has economic incentives to reduce its pollution beyond the

requirements of the law.” Jd. at 184. The plantwide defini-

tion for new and modified sources would act in a similar

fashion.

The strategy of providing industry with economic incen-

tives to reduce their pollution was thus an important ele-

ment of the Clean Air Act Amendments of 1977. President

Carter actually highlighted this strategy when he signed

the 1977 amendments into law: “The Act provides us with

a new tool to help abate industrial sources of pollution by

authorizing use of economic incentives to reduce noncom-

pliance.” Statement of Signing H.R. 6161 Into Law, 13

Weekly Comp. Pres. Doc. 1214 (August 15, 1977). Such

important incentives, however, are conspicuously missing

from the lower court’s prefered approach to the non-

attainment program. The plantwide definition strategy to

reduce air pollution may be good, or bad, but it is not the

court’s role to disapprove it because the court prefers

another strategy. The evidence shows that EPA’s selected

strategy not only works to reduce air pollution but also

gives a needed boost to economic growth. Congress asked

for no more. Neither should the Court.

©. The Dual Definition of Source Has Contributed to a

Slow Growth Economy While the Plantwide Definition

Will Promote Economic Growth

The environmental regulations promulgated under the

Clean Air Act, particularly those which define “source” for

16

nonattainment areas on a dual basis, have resulted in the

impairment of productivity and have contributed to dimin-

ished economic growth over the past several years.

The general premise is supported by findings of several

legal and economic scholars:

“Many causes have been suggested for stagflation and

declining productivity growth, including ... regulatory

activities—in particular environmental regulations.”

Haveman and Christainsen, 21 Nat. Resources J. at

489 (emphasis added).

“The environmental policies with the greatest impact on

the national economy are probably those that limit indus-

trial air and water pollution.” Harrington and Krupnick,

21 Nat. Resources J. at 539 (emphasis added). Further, “it

is reasonable to suggest that between 12 and 25% of the

slowdown in productivity growth in the private sector of

the economy between the early 1960's and the mid-1970’s

can be atttributed to the entire bundle of federal regula-

tions.” Haveman and Christainsen, 21 Nat. Resources J. at

498, And of those federal regulations, a reasonable estimate

is that 8% to 12% of the slowdown in productivity is

atttributable to environmental regulations. Jd. at 508.

Clearly, our nation’s economy has not escaped unharmed

from the extensive regulations promulgated by government

at all levels and, particularly, the environmental regulations

concerning air pollution.

The 8% to 12% loss in the productivity of the economy

attributable to environmental regulation directly contra-

venes the purposes of Subchapter I of the Clean Air Act.

This. negative impact is partially attributable to the eco-

nomie disadvantages in the existing approach of imple-

menting the Clean Air Act for, “the existing structure of

=

17

air and water pollution regulation, particularly the preven-

tion of significant deterioration and nonattainment provi-

sions of the Clean Air Act, is a potentially serious obstacle

to economic growth in the United States.” Harrington and

Krupnick, 21 Nat. Resources J. at 548.

Contrary to the current regulatory scheme, there are

many positive aspects of the bubble concept. The National

Commission on Air Quality (NCAQ) indicated that EPA

adopted the bubble concept

“as a result of studies suggesting that substantial cost

savings could be achieved [through its utilization]. One

study, completed by Maloney and Yandle (1979) for

52 DuPont Corporation plants, showed that allowing

the use of the bubble concept at each of the plants to

achieve 85 per cent emission reductions would reduce

costs of emission control by 35 per cent over point

source controls.’ National Commission on Air Quality,

To Breathe Clean Air: Report of the National Com-

mission on Air Quality 276 (1981).

NCAQ went on to state that the “resulting emissions will

be equal to the emissions that would have occurred if

specific point-source reduction had been required, however,

substantial savings in costs should be realized.” Jd. at 276-

77. The positive aspects of the bubble concept are further

illustrated by the fact that during 1981, over 40 companies

were developing bubble applications “showing savings of

several million dollars each in either capital or operating

costs.” Harrington and Krupnick, 21 Nat. Resources J. at

557. Overall use of the bubble concept wonld result in im-

proved alloc, cion of resources, increased productivity and

innovation, and reduced inflation. Jd. at 558. It also is seen

as “the means to a considerable reduction in the cost of

18

environmental policy with little, if any, sacrifice in environ-

mental quality,” id. at 562, as the bubble concept has been

determined to be “environmentally benign,” id. at 563.

One way to judge air pollution policy is to examine its

cost effectiveness, which in this context has been defined as

“the ability to achieve given environmental quality goals

for the lowest possible costs.” Jd. at 542. In teiims of cost

effectiveness, NCAQ was correct in their assessment that

the bubble policy is “perhaps the best known economic

incentive approach to air pollution control.” National Com-

mission on Air Quality at 276. NCAQ further stated that

utilization of the bubble concept would allow a facility to

use a more cost-effective mix of emission reduction meas-

ures. 7d. Thus, use of the bubble concept, which would be

allowed only in those state implementation plans which

provide for attainment of national ambient air quality

standards while showing reasonable further progress, 46

Fed. Reg. 50,767 (1981), would result in reaching air quality

standards in a more cost-effective manner. This is also

underscored by CEQ’s estimation that by “1988, expendi-

tures for pollution abatement and other environmental

quality programs will grow to nearly $70 billion in constant

(1979) dollars. This represents an estimated annual real

rate of growth of 6.6 percent... .” Portney, The Macro-

economic Impacts of Federal Environmental Regulations,

21 Nat. Resources J. 468 (1981). CEQ also estimates that

$31.5 billion will be the cost by 1988 (in 1979 dollars) for

water and stationary air quality controls alone. Haveman

and Christainsen, 21 Nat. Resources J. at 495.

The purpose of enhancing the productive capacity of the

nation cannot be accomplished under the current

19

environmental regulatory scheme. EPA’s adherence to the

bubble concept recognizes its statutory charge to consider

the economic impacts as well as health benefits. The plant-

wide definition of source is one application of this concept.

It is a step in the right direction fully within the authority

of the Clean Air Act and should be upheld.

Vv

THE LOWER COURT IGNORED THE FACT THAT AN

ADMINISTRATIVE AGENCY'S DISCRETION IN

PROMULGATING REGULATIONS IS QUITE WIDE

WHILE A REVIEWING COURT'S SCOPE OF RE-

VIEW IS VERY NARROW

The decision of the Court of Appeals below can only be

viewed as another attempt by that court to substitute its

judgment on the propriety of environmental regulatory

programs for the judgment of EPA. The Court of Appeals

disagrees with EPA’s policy decision and has improperly

dissected the decision to ascribe an improper administra-

tive motive behind the adoption of the plantwide defini-

tion. The court asks too much of itself and gives too little

to EPA and such conduct by the court constitutes reversi-

ble error. As Justice Douglas stated: “The Court is not

empowered to substitute its judgment for that of the

agency.” Bowman Transportation, Inc. v. Arkansas-Best

Freight System, Inc., 419 U.S, 281, 285 (1974).

On June 6, 1983, this Court affirmed a basic premise of

administrative law that an agency is to have wide discre-

tion in promulgating regulations and a reviewing court

is to have a very narrow seope of review. In Baltimore

Gas & Electric Co., et al. v. NRDC, et al, ........ Se ‘

51 U.S.L.W. 4678 (June 6, 1983), writing for an eight to

zero Court, Justice O'Connor stated :

“Congress has assigned the courts only the limited,

albeit important, task of reviewing agency action to

determine whether the agency conformed with con-

trolling statutes. .. .‘[a]dministrative decisions should

be set aside in this context, as in every other, only

for substantial procedural or substantive reasons as

mandated by statute ... not simply because the court

is unhappy with the result reached. Vermont Yankee,

435 U.S. at 558.’

“...'™he role of the courts is simply to ensure that

... the [agency’s] . . . decision is not arbitrary or

capricious.” Baltimore Gas & Electric Co. v. NRDC,

Sabianh USS. ........, 51 U.S.L.W. at 4680.

The Court continued, stating, “it is not our task to deter-

mine what decision we, as Commissioners, would have

reached. Our only task is to determine whether the Com-

mission has considered the relevant factors and articulated

a rational connection between the facts found and the

choice made.” Baltimore Gas & Electric Co. v. NRDC, ......

US. ......, 51 U.S.L.W. at 4683.

Unquestionably an administrative agency is granted

broad discretion to promulgate regulations. In defining

source on a plantwide basis, EPA properly considered all

the relevant factors including the economic impact of its

action and articulated a rational connection between the

facts found and the choice made. EPA carefully articulated

that one policy it was pursuing in defining source on a

plantwide basis was the attainment of NAAQS in those

designated areas that had not yet achieved those standards

(nonattainment areas). See 46 Fed. Reg. 50,767 through

21

50,768 (October 14, 1981). A relevant factor considered in

promulgating the plantwide definition—state flexibility—

likewise comports with the congressional mandate by

enhancing productive capacity as well as promoting public

health and welfare. Jd. Moreover, EPA was “correct to

look at the costs as well as the benefits” of the regulation

involved. Motor Vehicle Manufacturers Association v. State

Farm Mutual Automobile Insurance Company, ........ US.

yeuk , 51 U.S.L.W. 4953, 4959 (June 24, 1983).

The Baltimore Gas case and the instant case are factually

similar—both concern the findings of an administrative

agency which are within the agency’s area of special exper-

tise. In Baltimore Gas the Court stated its scope of review

when an agency is acting within its area of special exper-

tise. “When examining this kind of scientific determination,

as opposed to simple findings of fact, a reviewing court

. must generally be at its most deferential.” Baltimore Gas

€& Electric Co. v. NRDC, ...... US. ......, 51 U.S.L.W. at 4682.

Herein EPA made the expert determination that imple-

mentation of the plantwide definition would not only pro-

mote public health and welfare by improving the quality

of the nation’s air but also would promote the productive

capacity of this nation’s people. Though a reviewing court

is required “to give [the agency] some leeway where its

findings must be made on the frontiers of scientific knowl-

edge.” Industrial Union Department, AFL-CIO v, Ameri-

can Petroleum Institute, 448 U.S. 607, 656 (1980), the

lower court nevertheless discounted EPA’s finding that

the plantwide definition would properly promote clean air

in nonattainment areas because of its belief EPA improp-

erly considered the economic impact of its nonattainment

program, 685 F.2d at 726-27. The court did not find, nor

could it, that the purpose of meeting NAAQS would not be

met but nevertheless rejected the plantwide definition, This

amounts to a dispute over the type of program selected by

EPA to meet the objective of the Clean Air Act and is

clearly outside the scope of judicial review. Unfortunately,

the Court of Appeals improperly deferred to its predisposi-

tions and ignored EPA’s expertise.

The Third Cireuit Court of Appeals gives further insight

into the role of a reviewing court within the limits of the

highly deferential scope of review to be accorded agency

promulgated regulations. NRDC complained below that

EPA’s promulgation of a plantwide definition of source

was a substantial departure from the agency’s prior defini-

tions and course of rulemaking. Even if this assertion were

true, there still is a wide degree of deference to be accorded

to the agency’s actions. Although the following language

regards regulations promulgated by the Interstate Com-

merce Commission, it is insightful when applied to any

administrative agency. “[E]ven when . . . rulemaking rep-

resents a departure from [an] agency’s prior position, so

long as the policies it is pursuing can be discerned from its

opinion, and those policies are consistent with congres-

sional directives, we must defer to the... agency judg-

ment.” Bessemer and Lake Erie Railroad Co., et al. v.

Interstate Commerce Commission, 691 F.2d 1104, 1110 (3d

Cir. 1982).

Bessemer also held that “(t]he choice by an agency

among alternative means for satisfying a statutory man-

date is exclusively for that agency.” Bessemer, 691 F.2d at

1110. Congress directed EPA through the Clean Air

Act to promulgate regulations to meet NAAQS’s in

nonattainment areas. The choice for a plantwide definition

of source among several alternatives is exclusively for

EPA; and the court has not demonstrated that the plant-

wide definition will not satisfy the required statutory man-

date. Thus, the court must accord great deference to EPA’s

program adoption, yet has failed to do so.

Moreover, contrary to the imputation of the lower court,

“(t)he agency is not absolutely bound by its prior deter-

minations, but rather may adjust its policies and rulings

in light of experience.” Montana Power Co. v. EPA, 608

F.2d 334, 347 (9th Cir. 1979), “EPA is free to make rea-

sonable changes in the interpretation of its regulations

.. +’ Montana Power Co, v. EPA, 608 F.2d at 348, See also

Environmental Defense Fund, Inc. v. Costle, 657 F.2d 275,

289 (D.C, Cir, 1981).

In order to have properly overturned EPA’s nonattain-

ment program using the plantwide definition, the court

must have found the implementing regulations were arbi-

trary and capricious. Baltimore Gas, 51 U.S.L.W. at 4680.

“Normally, an agency rule would be arbitrary and

capricious if the agency has relied on factors which

Congress has not intended it to consider, 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

implausible that it could not be ascribed to a difference

in view or the product of agency expertise.” Motor

Vehicle Manufacturers Association, 51 U.S.L.W. at

4956.

24

The lower court relied on two of these factors to find

the plantwide definition for air pollution source in non-

attainment areas arbitrary and capricious. First, the court

points primarily to economic considerations as a factor

Congress intended EPA not to consider. On the contrary,

EPA's consideration of economic factors was intended by

Congress to be considered by EPA in meeting NAAQS’s in

nonattainment areas. See Arguments I and IV, supra.

The second basis found by the lower court for over-

turning the plantwide definition was EPA’s failure to sup-

port its action with evidence. In Footnote No. 41 of the

opinion below, Circuit Judge Ginsburg criticized EPA for

not basing its October, 1981, amendment of its regulations

on any “study, survey, or support for the opposite posi-

tion, now tendered by EPA, that the dual definition would

indeed retard improvement of air quality in the aggre-

gate.” NRDC v. Gorsuch, 685 F.2d at 727. However, the

court’s statement ignored the facts articulated by EPA,

46 Fed. Reg. 50,768 (October 14, 1981), that comprehensive

written comments with implementation examples were con-

sidered, “EPA believes that the examples provided by the

commentators support its statement in the proposal that

the dual definition impedes legitimate efforts to modernize

existing plants. (See, ¢.g., comments of Crown Zellerbach ;

Union Oil Corporation.)”

Additionally, EPA stated as of March, 1981, when it

initially proposed the changes in the regulations, that it

had reevaluated all of the arguments and facts on all sides

of the nonattainment issues and had concluded that the

elimination of the dual definition requirement will remove

a barrier to modernization of the nation’s industrial base.

46 Fed. Reg. 50,768 (October 14, 1981). Such a conclusion

of EPA, based upon comments and surveys from inter-

ested parties, reevaluation of all arguments on the issues,

and its own expert judgment is not arbitrary and ca-

pricious.

As a side note, it is curious that the October, 1981, reg-

ulations were struck down due to a lack of evidence that

the dual definition would retard growth and the plantwide

definition would not adequately achieve ambient air quality

standards. When promulgating the August 7, 1980, dual

definition of source for nonattainment areas (45 Fed.

Reg. 52,696 through 52,698 (August 7, 1980)), EPA failed

to cite any study or survey supporting the definition’s

efficacy yet the court finds this fact of no interest. The

court below was not at liberty to substitute its opinion

for that of the agency, yet the above dichotomy suggests

that this is precisely what the court did.

EPA's decision was based upon relevant considerations,

did not run counter to the evidence before the agency, is

plausible, and may be ascribed as the product of sgency

expertise. Based on these factors, the action of EPA can-

not be considered arbitrary and capricious.

26

CONCLUSION

PLF respectfully submits that based on the foregoing

arguments, the decision of the court below was contrary to

the law and therefore is in error. The August 17, 1982,

decision rendered by the United States Court of Appeals

for the District of Columbia Circuit should be reversed

and the regulations promulgated by EPA on October 14,

1981, should be reinstated. Such action by this Court will

enable EPA and the states to more fully comply with the

congressional mandates of the nonattainment provisions of

the Clean Air Act.

August, 1983.

Respectfully submitted,

Ronautp A. ZuMBRUN

Rost L. Riverr

COUNSEL OF RECORD

Pacific Legal Foundation

455 Capitol Mall, Suite 600

Sacramento, California 95814

Telephone : (916) 444-0154

Attorneys for Amicus Curiae

Pacific Legal Foundation