Amicus Curiae Brief — Alaska Dept. of Environmental Conservation v. EPA

In The 7 Gm 2 2

Supreme Court of the Anited States

o CLERK

STATE OF ALASKA, DEPAR

ENVIRONMENTAL CONSERVATION,

Petitioner,

vs.

UNITED STATES ENVIRONMENTAL

PROTECTION AGENCY, et ai.,

Respondents.

¢

On Petition For Writ Of Certiorari

To The United States Court Of Appeals

For The Ninth Circuit

+

BRIEF OF AMICI CURIAE STATES OF

NORTH DAKOTA, WYOMING, ALABAMA,

DELAWARE, IOWA, MONTANA, NEBRASKA,

NEVADA, SOUTH DAKOTA, AND UTAH

IN SUPPORT OF PETITIONER

7

WAYNE STENEHJEM HOKE MACMILLAN

NORTH DAKOTA ATTORNEY WYOMING ATTORNEY

GENERAL GENERAL

LYLE WITHAM THOMAS J. DAVIDSON

Assistant Attorney General Deputy Attorney General

Counsel of Record 123 Capitol Building

600 E. Boulevard Ave., Cheyenne, Wyoming 82002

Dept. 125 (307) 777-6946

Bismarck, North Dakota

58505-0040

(701) 328-2210

Counsel for Amici Curiae States

[Additional Counsel Listed On Inside Cover]

COCKLE LAW BRIEF PRINTING CO. (800) 225-6964

OR CALL COLLECT (402) 342-2831

WILLIAM H. Pryor, JR.

Alabama Attorney General

Alabama State House

11 South Union Street

Third Floor

Montgomery, Alabama 36130

(334) 242-7300

M. JANE BRADY

Delaware Attorney General

820 N. French Street

Wilmington, Delaware 19801

(302) 577-8400

THOMAS J. MILLER

Iowa Attorney General

1305 E. Walnut Street

Des Moines, Iowa 50319

(515) 281-5164

MIKE MCGRATH

Montana Attorney General

215 N. Sanders, Third Floor

PO Box 201401

Helena, Montana 59620-1401

(406) 444-2026

DON STENBERG

Nebraska Attorney General

Department of Justice

2115 State Capitol

Lincoln, Nebraska 68509

(402) 471-2682

FRANKIE SUE DEL PAPA

Nevada Attorney General

100 North Carson Street

Carson City, Nevada

89701-4717

(775) 684-1100

MARK BARNETT

South Dakota Attorney

General —

500 East Capitol

Pierre, South Dakota

57501-5070

(605) 773-3215

MARK L. SHURTLEFF

Utah Attorney General

236 State Capitol

Salt Lake City, Utah

84114 |

(801) 538-9600

-

f

(h

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TABLE OF CONTENTS

Page

BR CE BUT CIE BENE ccccccccccesscesccscccccccesescsseeess ii

INTEREST OF AMICI CURIAE ..............:..cccecceeeeeeees 1

REASONS FOR GRANTING THE PETITION ......... 3

I. Congress Expressly Reserved To The States

Specific Authority Under The Clean Air Act.. 3

II. EPA May Not Usurp Reserved State Author-

ity Through Enforcement Orders................... 7

III. The Ninth Circuit Decision Will Harm State

Air Programs And Interests.......................6655 11

ERS EE Se a A ee Te 12

ii

TABLE OF AUTHORITIES

Page

CASES

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

Cle. 1GBB) .ncccccccccccessccoscoscetssennntmennsicianaaaa 4,11

Train v. Natural Resources Defense Council, Inc.,

431 UB. GB (2B TE) .nnccsccccccessescseresesemeniaa 4

Union Elec. Co. v. E.P.A., 427 U.S. 246 (1976)..............:000 4

STATUTES AND REGULATIONS

43 U.B.C. § TOD MAIEED nccccccescsscesssinsecsentsiamimmmaaannn 3,5

4B UBC. § FOBB.cccccccccossesesecscecssssvenemetemaianeee 3

42 U.S.C. § 7410 csccccssssssssssssseseceseesseesees india 4

4B UBC. © FORBGRIIID ccceccsssssestnscecsetiontttammmna 3, 7, 10

4B UB.C. § FERBGRIGIIEA) ccccosscnssenscensscnstonioninimnmmana 8, 11

48 UB.C. § FOFEEED nccescoccnscccsnetecessssnnsenenhianinumaia 4

4B UB.C. § FETC ncoccrcssssasssentsesescssesteaisameiia 4

4B UBC. § FOGG cccccosssesesssestissiemenmemeniimae 3, 8, 11

4B UB. § FOTEEEP ccececesssessesccstsmenietmnenininn 2, 6, 7, 9,12

4B C.F § G2. BEAD cccccccevcnccstntssensmaianiinimamaan 4

4B C.F. 9 GS. MD caccccoscccccicessstnanisiiinliceaiainen 6

OTHER AUTHORITIES

EPA OFFICE OF GEN. COUNSEL [“OGC”] LEGAL OpP.,

EPA Enforcement Authority with Respect to

Sources Based on a Finding of a State’s Failure to

Comply with New Source Requirements, at 2

GEOR, TR, BaP accsrccsssescsssccntinniesininetntsiniiandnimnianaaiaial 5, 6

TABLE OF AUTHORITIES — Continued

39 Fed. Reg. 31000, 31001 (1974).............0000..

S. REP. No. 127, 95th Cong., 1st Sess. 31 (1977)

1

BRIEF OF AMICI CURIAE

The States of North Dakota, Wyoming, Alabama,

Delaware, Iowa, Montana, Nebraska, Nevada, South

Dakota, and Utah, as amici curiae (“Amici States”),

respectfully submit this brief in support of the Petition for

a Writ of Certiorari filed by the State of Alaska. Amici

States oppose the decision below of the United States

Court of Appeals for the Ninth Circuit, which skews the

federal-state partnership envisioned by Congress under

the Clean Air Act (the “Act”), 42 U.S.C. §§ 7401, et seg., in

general and, in particular, under the Act’s Prevention of

Significant Deterioration (“PSD”) provisions, id., §§ 7470-

7479. Amici States urge this Court to grant Alaska’s

petition in order to correct the imbalance wrought by the

Ninth Circuit’s decision.

¢

INTEREST OF AMICI CURIAE

Protection of public health and the environment is of

manifest importance to all States. Air pollution affects

health and quality of life, and it has both near-to-source

and long-range impacts on the environment. As a result,

Amici States fully support the goals and policies that

underlie and are embodied in the Act. At the same time,

Amici States have an important interest in ensuring that

the Act is construed in a way that protects the social and

economic well being of their citizens, as well as their

public health and welfare.

The Act recognizes and respects the tension that can

arise between envi onmental protection and social and

economic impacts on a community. Congress expressly

reserved to the States the role of balancing those

2

competing concerns under the Act’s PSD provisions, which

apply in “clean air” areas of the country. The Act requires

new sources of poliutant emissions to use Best Available

Control Technology (“BACT”) in areas where air quality is

already better than the National Ambient Air Quality

Standards (the “NAAQS”). In the statutory definition of

BACT, Congress provided that the States must exercise

their discretion to decide what constitutes BACT for a

particular source. 42 U.S.C. § 7479(3). Nowhere in the

language or the structure of the Act, or in its legislative

history, did Congress state or imply that State BACT

determinations are merely preliminary. Yet the Ninth

Circuit erroneously held that such BACT decisions are

only “initial,” and that they are subject to EPA’s “ultimate”

authority to disagree and override States’ determinations.

App. at 10a-lla. Amici States have a compelling interest

in protecting their authority under the Act, including

fulfilling their primary role of weighing the statutory

BACT factors in implementing their respective PSD

programs. The Ninth Circuit's decision strips the State of

Alaska of that role, and Amici States fear that EPA will

attempt to wrest from them, too, their responsibility for

BACT determinations, relegating state environmental

agencies to the role of EPA branch offices.

Amici States also have an interest in promoting the

orderly function of their respective administrative

decision-making processes under the PSD program and

generally under the Act. Beyond their common interest in

making correct decisions under their PSD programs, they

also care about the wise and efficient use of state

resources dedicated to those programs. When Congress

granted EPA authority to issue enforcement orders for

violations of “requirements” of a State Implementation

a

3

Plan (“SIP”) or the Act’s PSD provisions, 42 U.S.C.

§§ 7413(a\(5), 7477, it did not intend EPA to use that

limited authority as a substitute for participation in and

respect for the State’s PSD permitting process. Yet, in this

case EPA declined to challenge Alaska’s BACT

determination at the state administrative level, thereby

denying Alaska the chance to develop a complete

administrative record in support of its BACT decision, and

instead presented the BACT question to a federal court of

appeals on an incompletely-developed state administrative

record. Amici States have a strong interest in avoiding

this emasculation of their administrative process and

waste of state resources in future PSD permitting

proceedings.

For these reasons, Amici States file this brief in

support of the State of Alaska’s petition.

¢

REASONS FOR GRANTING THE PETITION

I. Congress Expressly Reserved To The States

Specific Authority Under The Clean Air Act

In the Act, Congress assigned distinct roles to the

federal and state governments. A key federal role is the

promulgation of the NAAQS, which define the amount of

pollutants that may be emitted in a given area without

harming public health and welfare. 42 U.S.C. § 7409.

Despite EPA’s responsibility for setting the NAAQS, which

apply nationally, the Act makes clear that “air pollution

prevention . .. and air pollution control at its source is the

primary responsibility of States and local governments.”

42 U.S.C. § 7401(aX3). Thus, the States, through their

approved SIPs, are charged with implementation of the

4

federally-set NAAQS. Id. § 7410. As this Court has

recognized, “Congress plainly left with the States, so long

as the [NAAQS] were met, the power to determine which

sources would be burdened by regulation and to what

extent.” Union Elec. Co. v. E.P.A., 427 U.S. 246, 269 (1976);

see also Train v. Natural Resources Defense Council, Inc.,

421 U.S. 60, 79 (1975).

Congress also gave the federal and state governments

distinct functions in the implementation of the Act’s PSD

program. EPA sets the allowable increments that may be

consumed for a particular regulated pollutant. 42 U.S.C.

§ 7476(a). The States, meanwhile, determine the areas in

which the increments will apply, and provide for non-

exceedence of the increments through their SIPs. Id.

§ 7474(a); 40 C.F.R. §51.166(a) (1999). EPA “is without

authority to dictate to the States their policy for

management of the consumption of allowable [PSD]

increments.” Alabama Power Co. v. Costle, 636 F.2d 323,

361 (D.C. Cir. 1980). Rather, “assuming compliance” with

the maximum limitations defined by EPA through the

increments, “growth-management decisions were left by

Congress for resolution by the states.” Id. at 364.

When Congress gave the States responsibility for

managing the PSD increments, it acted consistently with

EPA’s own earlier judgment that implementing the PSD

program is uniquely local in nature:

Any policy to prevent significant deterioration

involves difficult questions regarding how the

land in any area is to be used. Traditionally,

these land use decisions have been considered

the prerogative of local and State governments,

and ... the primary opportunity of making these

5

decisions is reserved for the States and local

governments. ... In the Administrator’s judgment,

this matter should not be handled at the Federal

level,....

39 Fed. Reg. 31000, 31001 (1974). Almost twenty years

later, EPA confirmed its perception of the States’ ultimate

responsibility to implement the PSD program:

[I]t is the state that must make the final decision

on all issues relating to the specific [PSD]

permit. There is no suggestion in the Act’s NSR

[New Source Review] provisions that EPA has

authority to second-guess the state on matters

that are a lawful and rational exercise of

discretion properly conferred upon the state... .

EPA OFFICE oF GEN. COUNSEL [“OGC”] LEGAL Op., EPA

Enforcement Authority with Respect to Sources Based on a

Finding of a State’s Failure to Comply with New Source

Requirements, at 2 (Jan. 22, 1993), AS App. at 3.’

Not surprisingly in light of the Act’s allocation to state

and local governments of responsibility for “air pollution

prevention ... and air pollution control at its source,” 42

U.S.C. § 7401(aX3), Congress also charged those States

with EPA-approved SIPs with responsibility for BACT

determinations. The Act defines BACT as “an emission

limitation ... which the permitting authority, on a case-

by-case basis, taking into account energy, environmental,

' Citations to “AS App.” refer to Amici States’ appendix, which is

bound with this brief. Citations to “App.” refer to the appendix that

accompanied the petitiori in this docket.

6

and economic impacts and other costs, determines is

achievable for such facility. . .” 42 U.S.C. § 7479(3); see also

40 C.F.R. § 51.166(b)(12) (1999).’

Beyond making clear that States — not EPA — would

select BACT, the Act’s BACT definition confirms that the

determination is a discretionary one, based on the

statutory factors. 42 U.S.C. § 7479(3). While the Act

defines the factors that States must consider, the ultimate

selection of BACT is a judgment call by the States, and

there is no one “correct” BACT for a given source.

As stated best by EPA itself, “the state remains free

to exercise informed judgment in making the

determinations” required for PSD permits, including the

selection of BACT. OGC LEGAL Op. at 2, AS App. at 4. “[I)f

a state has met all procedural norms, considered all

available control technologies, and given a reasoned

justification of the basis for its [BACT] decision, EPA has

no grounds on which to challenge a final substantive state

decision that does not violate such objective standards.”

Id. at 5. That is precisely what Congress was thinking

when it enacted the PSD provisions: “The decision

regarding the actual implementation of best available

technology is a key one, and the [Act] places this

responsibility with the State, to be determined in a case-

by-case judgment.” S. REP. No. 127, 95th Cong., 1st Sess.

31 (1977). Moreover, “the phrase [BACT] has broad

flexibility in how it should and can be interpreted,

depending on site.” Id.

* States with approved SIPs are the “permitting authorit{ies]”

under 42 U.S.C. § 7479(3).

ee Ren om

7

Thus, the plain language of the statute, its legislative

history, decisions of this Court and lower federal courts,

and EPA’s own interpretations of the PSD provisions

confirm beyond doubt that States must determine BACT

for a particular source, and must exercise discretion in

that process. As is true with implementing the NAAQS

and other authority under the Act that Congress expressly

reserved to the States, EPA lacks the power to question

the wisdom of a State’s BACT determination, so long as

that State determination protects the federally-set

increments and was made based on the statutory factors

and the state’s EPA-approved SIP.

II. EPA May Not Usurp Reserved State Authority

Through Enforcement Orders

Here, the State of Alaske exercised its authority to

determine BACT in accordance with the Act. Alaska

considered a variety of possible technologies in light of the

statutory factors listed in 42 U.S.C. § 7479(3); it engaged

in a lengthy dialogue with the permit applicant, EPA, and

other interested parties; it independently researched the

pros and cons of the many potentially available

technologies; it prepared preliminary, draft, and final

technical analysis reports; and it ultimately selected a

technology known as “Low NOx” as BACT.

Where did Alaska go wrong? Stated plainly, it selected

a technology different from the one that EPA favored —

selective catalytic reduction or “SCR.” EPA, offended by

Alaska’s failure to march in step, responded by issuing a

series of enforcement orders under Sections 113(a)(5) and

167 of the Act. Section 113(a)(5). permits EPA to issue

8

orders prohibiting the construction of new sources or

the modification of existing sources when the EPA

Administrator “finds that a State is not acting in

compliance with any requirement or prohibition of the Act”

relating to such construction or modification. 42 U.S.C.

§ 7413(a)(5)(A). Section 167 permits orders “as necessary

to prevent the construction or modification of a major

emitting facility which does not conform to the

requirements” of the PSD provisions. Id. § 7477.

EPA asserted, and the Ninth Circuit accepteu, that

the Act's enforcement provisions in 42 U.S.C.

§ 7413(a)(5)(A) and § 7477 vest EPA with broad authority

to use enforcement orders to override a State’s selection of

BACT whenever EPA disagrees with the State’s “improper

determination.” App. at 10a. The Ninth Circuit reasoned

as follows: (a) Subjecting a facility to BACT is a

“requirement” of the Act and its PSD sub-part, id. at 8a;

(b) when EPA disagreed with Alaska’s choice of Low NOx

as BACT, it concluded that Alaska “had not complied with

the BACT requirement,” id. at 9a; and (3) ergo, EPA could

invoke its enforcement powers to override the Alaska

decision, id. at 10a-lla. On this basis, the Ninth Circuit

held that Alaska “made the initial BACT decision,” id. at

9a, but “EPA has the ultimate authority” to determine

BACT, id. at 10a-11la.

The Ninth Circuit’s logic, however, is overly simplistic

and fatally flawed. It assumes that the “requirement” of

the Act, for purposes of 42 U.S.C. § 7413(aX(5XA) and

§ 7477, is the choice of one particular technology as BACT,

when, in fact, the Act requires only that a State undertake

a BACT analysis and select the technology that the State

deems appropriate in light of the statutory factors (and

one that protects the increment). The State’s chosen

9

technology might or might not coincide with EPA's choice

of BACT, if EPA were the decision-maker. The point,

however, is that EPA is not the decision-maker under 42

U.S.C. § 74793). The Ninth Circuit essentially ignored

that section, which, by defining BACT as a discretionary

State judgment, necessarily defines what the BACT

“requirement” is under the Act. Yet, the Ninth Circuit

inexplicably concluded that “[njothing in the BACT

definition of 42 U.S.C. §7479(3) limits the EPA’s

authority.” App. at lla.

The Ninth Circuit held that “[t]he structure and

legislative history of the Act” further support the court’s

endorsement of a radical shift in power from the States to

EPA App. 9a. The court reviewed various amendments to

the Act since its original enactment in 1963, concluding

that “[flollowing disappointing state response to air

pollution concerns, Congress has consistently increased

over time federal authority in pollution control.” Id. Amici

States do not dispute the legislative events that the

decision below summarizes; they do, however, challenge

the relevance of those events to the issue here, i.e.,

whether EPA may use enforcement orders to divest States

of the discretion that Congress vested in them to make

BACT determinations.

For example, the fact that in 1970 Congress directed

EPA to publish NAAQS and directed the States to develop

SIPs to meet the NAAQS, see id., has no bearing on the

then-non-existent PSD program; the federal concern in

1970 over “dirty air” areas was distinct from the later

focus of the PSD program on preserving “clean air” areas.

Moreover, as discussed supra at pp. 3-4, but ignored by the

Ninth Circuit Congress expressly allocated authority to

implement the NAAQS to the States. Similarly, the

10

“internal industry ‘pressure’” referred to by the Ninth

Circuit as one basis for Congress’s adoption of the PSD

provisions in 1977, App. 10a (quoting legislative history),

resulted in federally-set maximum increments, but not

federal control over the implementation of the PSD program;

rather, Congress specifically gave that responsibility to the

States. See supra at p. 4.

Missing from the Ninth Circuit’s analysis of the Act’s

historical development are the most important points of

all — acknowledgments that (a) in 1977 Congress

unambiguously gave the States the primary authority to

implement the PSD program, including BACT

determinations, and (b) Congress has not reduced that

authority since 1977. Indeed, EPA concluded in 1993 -

after the legislative events on which the Ninth Circuit

relies for its anti-state-authority premise — that “[tJhere is

no suggestion ... that EPA has authority to second-guess

the state on matters that are a lawful and rational

exercise of discretion properly conferred upon the

state. ...” OGC Op. at 2, AS App. 3.

Under the Ninth Circuit’s decision, EPA is in complete

control of a State’s air program, both under the PSD

provisions (to which Section 167 applies) and under a

state’s SIP in general (to which Section 113(a)(5) applies).

No matter that Congress specifically allocated authority to

the States - EPA’s enforcement authority trumps that

State authority. No matter that the particular issue calls

for the exercise of discretion and that the Act does not

require one objectively-definable outcome - if EPA

disagrees with the State’s subjective analysis, it may

steamroll the State through the exercise of its “ultimate”

enforcement authority.

11

Ill. The Ninth Circuit Decision Will Harm State Air

Programs And Interests

Beyond its substantive deficiencies, the Ninth Circuit

decision will have an enormous effect on all States,

including the Amici States, as they attempt to implement

their air programs. The essential holding of the Ninth

Circuit decision is that the Act gives the States only

“initial responsibility” for PSD permitting decisions, but

that “EPA has the ultimate authority to decide” BACT.

App. 10a-lla. This sweeping pronouncement, based on an

unduly-broad constructicn of the word “requirement” in 42

U.S.C. § 7413(aX(5A) and § 7477 relegates state programs

to mere preliminary involvement with no substantial

decision-making power. State authority to determine

BACT, and likely with respect to other discretionary

decisions under the Act as well, is rendered a mere

illusion.

The impact of this restriction on States’ authority is

obvious. First, permit applicants will be left with

uncertainty whether and when EPA will choose to inject

itself into the state permitting process, and whether they

can participate in that process with confidence; that

uncertainty, in turn, will frustrate growth, thereby

depriving the States of control over the “growth

management decisions” that Congress specifically “left .. .

for resolution by the states.” Alabama Power, 636 F.3d at

364. Second, applicants will see scant value in working

meaningfully with the States on BACT and other

determinations under the Act, because they will know that

EPA will be the ultimate decision-maker. Third, the

administrative process will be thrown into disarray: state

administrative procedures for hearings on and review of

permitting decisions will be rendered superfluous as

12

applicants work directly with EPA instead of through

State air programs; and absent defined procedures, there

will be no useful administrative records, which (as in

this case) will make EPA’s determinations virtually

unreviewable.

Congress did not intend these results when it made

permit-specific decisions the province of the States, so long

as the States apply the statutory factors stated in 42

U.S.C. § 74793), follow the requirements incorporated

into their federally enforceable SIP, and protect the

increments from over-consumption. The Ninth Circuit's

decision — its acceptance of EPA’s effort to bootstrap a

difference of opinion into a violation of law — turns the

Clean Air Act on its head.

+

CONCLUSION

Because both the analysis and conclusion in the

decision below are flawed, Amici States urge this Court to

grant the State of Alaska’s Petition for a Writ of Certiorari

and to reverse the judgment of the United States Court of

Appeals for the Ninth Circuit.

(701) 328-2210

13

HOKE MACMILLAN

WYOMING ATTORNEY GENERAL

THOMAS J. DAVIDSON

Deputy Attorney General

123 Capitol Building

Cheyenne, Wyoming 82002

(307) 777-6946

WILLIAM H. Pryor, JR.

ALABAMA ATTORNEY GENERAL

Alabama State House

11 South Union Street

Third Floor

Montgomery, Alabama 36130

(334) 242-7300

M. JANE BRADY

DELAWARE ATTORNEY GENERAL

820 N. French Street

Wilmington, Delaware 19801

(302) 577-8400

THOMAS J. MILLER

IOWA ATTORNEY GENERAL

1305 E. Walnut Street

Des Moines, Iowa 50319

(515) 281-5164

MIKE MCGRATH

MONTANA ATTORNEY GENERAL

215 N. Sanders, Third Floor

PO Box 201401

Helena, Montana 59620-1401

(406) 444-2026

DON STENBERG

NEBRASKA ATTORNEY GENERAL

Department of Justice

2115 State Capitol

Lincoln, Nebraska 68509

(402) 471-2682

January 2, 2003

14

FRANKIE SUE DEL PAPA

NEVADA ATTORNEY GENERAL

100 North Carson Street

Carson City, Nevada 89701-4717

(775) 684-1100 1

MARK BARNETT

SOUTH DAKOTA ATTORNEY GENERAL

500 East Capitol

Pierre, South Dakota 57501-5070

(605) 773-3215

MARK L. SHURTLEFF

UTAH ATTORNEY GENERAL

236 State Capitol -

Salt Lake City, Utah 84114

(801) 538-9600

o—_

App. 1

(LOGO) UNITED STATES

ENVIRONMENTAL PROTECTION AGENCY

WASHINGTON, D.C. 20460

JAN 22 1993

OFFICE OF

MEMORANDUM GENERAL COUNCIL

SUBJECT:

FROM:

ISSUE:

ANSWER:

EPA Enforcement Authority with Respect to

Sources Based on a Finding of a State’s Fail-

ure to Comply with New Source Require-

ments: The Effect of the 1990 Amendments

LEGAL OPINION

Raymond J. Luduiazanski

Acting General Counsel

Scott Fulton

Acting Assistant Administrator for

Enforcement

Whether the 1990 Amendments to the Clean

Air Act (CAA) section 113(a)5) provide au-

thority for EPA to take enforcement action

against a source when EPA finds that a per-

mit issued by a state does not comply with

the new source review requirements to pre-

vent significant deterioration (PSD) of air

quality in attainment areas under Part C of

Title I of the CLA?

Section 113(aX5) as amended gives EPA

authority to take enforcement action against

a source with a state-issued permit that does

not comply with PSD new source review re- —

quirements, and thus provides enforcement

authority similar to that which already exists

under that section with respect to state-

issued permits that do not comply with new

App. 2

source review (NSR) in attainment areas un-

der Part D of Title I of the CAA.

DISCUSSION:

1. Introduction

The Clean Air Act (CAA), 42 USC § 7401 et. seg., as

amended in 1977, authorized civil enforcement action and

administrative compliance orders with respect to major

stationary sources based on a finding that a state “is not

acting in compliance” with “any plan provisions” that

require new sources to obtain a new source review (NSR)

permit in nonattainment areas. Section 113(a)(5)-549,

have revised and expanded this EPA authority. This

memorandum is in response to a request from the Office of

Enforcement for a legal opinion addressing whether the

amended section provides authority to EPA to take en-

forcement action, based on a finding of state non-

compliance, with respect to sources subject to new source-

review requirements in attainment areas, as well as

sources in nonattainment areas. The Office of Enforcement

also seeks advice on whether the Amendments affect the

proper parties to any enforcement action and the circum-

stances in which an action may be brought. The Office of

Enforcement plans to issue revised enforcement guidelines

with respect to its authority under this section which will

identify the Agency position on the policy matters.

Il. Background

There are two principal new source review programs

under the Clean Air Act calling for the preconstruction

review and permitting of major stationary sources and

major modifications to existing sources of air pollution.

App. 3

The nonattainment NSR requirements in Part D of Title I

apply in areas designated as nonattainment under section

107 of the Act, while the prevention of significant deterio-

ration (PSD) requirements under Part C apply in all other

areas.’

As with all SIP programs — Congress envisioned that

states would play the primary role in enforcing the nonat-

tainment and PSD new source review programs. See

sections 101(aX1), 110(aX2XC), 161, and 172(b\(5) of the

Act. However, it is also clear that Congress intended EPA

to play an important oversight and enforcement role. This

intent is manifest in the numerous and detailed federal

enforcement provisions affecting NSR in sections 107 and

especially 113 that are discussed below.

EPA follows two general principles in reconciling the

tensions between the state and federal responsibilities in

the administration of NSR programs. First, it is the state

that must make the final decision on all issues relating to

the specific permit. There is no suggestion in the Act’s

NSR provisions that EPA has authority to second-guess

the states on matters that are a lawful and rational

exercise of discretion properly conferred upon the state.

Second, and conversely, EPA is the agency with primary

responsibility to interpret the federal law. In so doing,

' Parts C and D were added to the Clean Air Act by the Clean Air

Act Amendments of 1977. In addition, the 1977 Amendments revised

section 110(aX2D) to require a rudimentary review of any new source

or modification without regard to size. This so-called genera] or minor

NSR program was revised again and recodified as section 110(aX2\C)

by the 1000 Amendments. It is implemented by EPA regulations at 40

CFR 51-160-164 and the SID of the various states.

App. 4

EPA acts to ensure that the state exercises its discretion

within the bounds of the law and otherwise acts in accor-

dance with applicable statutory and regulatory norms. In

carrying out these principles, it is apparent that EPA acts

largely as a guarantor that the state follow applicable

procedures and not act arbitrarily or violate any objective

standards that may apply, while the state remains free to

exercise informed judgment in making the determinations.

See Conference Report on Clean Air Amendments of 1977,

H.R. Rep. No. 95-564, 95th Cong., lst Sess., reprinted in 3

Legislative History of the Clean Air Act Amendments of

1977 (Legislative History) 533 (“The Administrator shall

issue orders and seek other action to prevent the issuance

of an improper permit.”); Senate Report No. 95-127, p. 31,

36 (1977), reprinted in 3 Legislative History 1405, 1410

(“The decision regarding the actual implementation of best

available technology is a key one, and the committee

places this responsibility with the State, to be determined

in a case-by-case judgment.” (p. 1405), and “The committee

intends a sharply restricted role for the (EPA) in regard to

implementing the policy to prevent significant deteriora-

tion. EPA is limited to ... seeking injunctive relief or

other measures that would be necessary to prevent the

issuing of a permit for a new source if it does not comply

with the requirements of the subsection.” (p. 1410)).’

* The Legislative History specifically discussed the permit program

for PSD. There is no reason to believe that the discussion is not also

fully applicable to the NSR permit program in nonattainment areas

enacted at the same time.

App. 5

In implementing these principles, EPA must strike a

balance between infringing on state discretion, and pre-

venting or remedying unlawful permits. For example, EPA

is authorized to inquire into whether the state violated

applicable procedures or acted arbitrarily in reaching its

decision on lowest achievable emission rate (LAER) under

section 173(2), such as by ignoring SIP limits in other

states that are more stringent than the limits reflected in

the permit in question. On the other hand, in the case of a

decision applying best available control technology (BACT)

under section 166(a)(4) for PSD, if a state has met all

procedural norms, considered all available control tech-

nologies, and given a reasoned justification of the basis for

its decision, EPA has no grounds on which to challenge a

final substantive state decision that does not violate such

objective standards. These principles and the demarca-

tions of EPA’s enforcement authority have been set out in

EPA’s approval of state PSD programs, see, e. g., 57 Fed.

Reg. 28093, 28095 (1992) and in enforcement guidance,

Memorandum, “Procedures for EPA to address Deficient

New Source Permits Under the Clean Air Act,” irom

Michael S. Alushin, Associate Enforcement Counsel for

Air, and John S. Seitz, Director, Stationary Sources

Compliance Division (July 15, 1988) (“Deficient Permit

Guidance”).

II. Applicability of Section 113(a)(5) to New Source

Review.

A. The 1977 Act.

Section 113(a)(5), as enacted in 1977, provided:

Whenever, on the basis of information available

to him, the Administrator finds that a State is not

acting in compliance with any requirement of the

App. 6

regulation referred to in section 129(a)(1) of the

Clean Air Act Amendments of 1977 (relating to

certain interpretative regulations) or any plan

provisions required under section 7410(a)(2)(I) of

this title and part D of this subchapter ... he

may issue an order prohibiting the construction

or modification of any major stationary source in

any area to which such provisions apply or he

may bring a civil action under subsection (b)(5) of

this section. (Emphasis added).

Under section 113(a)(5) as it appeared in the 1977

Amendments, the 95th Congress authorized EPA both to

issue general construction bans or to take enforcement

action regarding a specific source when EPA has made a

finding that the state is not acting in compliance with any

requirements under Part D with respect to the construc-

tion or modification of a major stationary source. EPA’s

construction ban authority under § 113(a)(5) is not, ho» -

ever, the focus of this memorandum. But See, e.g., 44 Fed.

Reg. 20372, 20380 (1979) (general preamble for approval

of SIPs under 1977 Amendments); 57 Fed. Reg. 13498,

13552, 13555-56 (general preamble for approval of SIPs

under 1990 Amendments) (section 113(a)(5) now author-

izes construction bans in attainment as well as nonat-

tainment areas).

EPA has also interpreted section 113(a)(5) to permit

action against a source to prevent construction or modifi-

cation pursuant to a specific state-approved NSR permit

that, while arguably valid on its face, EPA has found to be

deficient in meeting the applicable statutory or regulatory

requirements.

Before the 1990 Amendments, EPA could challenge

deficient state-issued PSD permits in attainment areas

App. 7

under §§ 113(a)(1), 113(b)(1) or 167 but not under section

113(a)(5). The scope of EPA’s PSD enforcement authority

under the 1977 amendments is addressed in only one

reported decision, United States v. Solar Turbines, 732

F.Supp. 535 (M.D. Pa. 1989). In that case, the court held

that sections 113(a)(1), (b)(1) and 167: did not authorize

EPA enforcement action solely against a source when the

source had been issued a state permit under Part C

allowing the construction or modification, unless the

source had violated “objective standards.”

Instead, the court found that EPA would have to take

action against the state where the source itself had vio-

lated no “objective standards.” See, id. at 539-40. Accord-

ing to the court, action against the state to remedy permit

deficiencies could be taken under section 167, or in an

enforcement action arising under section 113(a)(1), or, in a

nonattainment area, under section 113(a)(5). Id. at 537,

539-40 (citing United States v. Ohio Department of High-

way Safety, 635 F.2d 1195, 1203 (6th Cir. 1980)).° The

court did not discuss whether enforcement action could be

brought against both the state and the source for a viola-

tion of the provisions. EPA has stated, with respect to that

decision, that if a state-issued permit does not conform to

the Act’s PSD requirements, EPA will decide “whether to

sue the state and/or the source.” 55 Fed. Reg. 23547, 23548

* The Sixth Circuit held that a state ic subject to the enforcement

procedures of section 113(a\(1) as a “person” under the Act when the

state fails to perform a duty reasonably required of the state under the

implementation plan. In that case, the state failed to deny registration

to motor vehicles that did not pass inspection and maintenance

omission tests, as required in the federally-promulgated provisions of

the implementation plan.

App. 8

(June 11, 1990) (notice of clarification regarding approval

of Kentucky’s PSD program).

B. The 1990 Amendments.

The 1990 Amendments to section 113(a)(5) (Pub L.

101-549, section 701) have given EPA enforcement author-

ity with respect to all new source review requirements; not

solely those under Part D and related provisions that are

applicable only in designated nonattainment areas. The

revised language also refers to a finding of noncompliance

with “any requirement or prohibition of the Act” relating

to the construction or modification of new sources, rather

than with only a “plan provision” or other specified provi-

sions of the Act.

Section 113(a)(5) now provides:

Whenever, on the basis of any available informa-

tion, the Administrator finds that a State is not

acting in compliance with any requirement or

prohibition of the Act relating to the construction

of new sources or the modification of existing

sources, the Administrator may —

(A) issue an order prohibiting the construction

or modification of any major stationary source in

an area to which such requirement applies;

(B) issue an administration penalty order in ac-

cordance with subsection (d), or

(C) bring a civil action under subsection (b).

(Emphasis added to indicate new language.)

Judicial action to enforce section 113(a)(5) continues

to be authorized, as was the case under the 1977 Amend-

ments, pursuant to subsection (b)\(3), as follows:

App. 9

The Administrator shall, as appropriate, in the

case of any person that is the owner or operator

of ... a major emitting facility, or a major sta-

tionary source ... commence a civil action for a

permanent or temporary injunction, or to assess

and recover a civil penalty of not more than

$25,000 per day for each violation, or both, . . .

(3) Whenever such person attempts to construct

or modify a major source in any area with respect

to which a finding under subsection (a)(5) has

been made.

By replacing the specific references to noncompliance

with section 129 (relating to the emissions offset interpre-

tative ruling in 40 CFR Part 51, Appendix S) and SIPs

under Part D in section 113(a)(5), as enacted in 1977, with

references in the 1990 Amendments to noncompliance

with new source review requirements generally, Congress

has provided EPA with authority to prevent construction

and modification of major sources in both attainment and

nonattainment areas based on a finding of a state failure

to comply with either statutory or regulatory require-

ments.

The legislative history of the 1990 Amendments

makes clear that the amended provisions of section

113(a)(5) were intended to apply to new source review for

PSD in attainment areas under Part C, as well as to NSR

in nonattainment areas under Part D. The House bill

specifically referred to findings of noncompliance — “with

any requirement of Part C or Part D.” H.R. 3030. Section

601. The House Committee Report also states with respect

to the provision that became section 113(a)(5):

App. 10

Failure to comply with Part C or Part D of title I

— This paragraph of subsection (a) authorizes en-

forcement actions where a State is not acting in

compliance with any requirement of Part C or

Part D of Title I. H.R. Rept. No. 101-490, Pt. 1, P.

391."

The extension of the 1990 Amendments to include

PSD permits in attainment areas within the scope of

section 113(aX5) makes EPA enforcement action against

these source [sic] appropriate to the same extent as is the

case when EPA finds that a state is not acting in compli-

ance with any requirements or prohibition of the Act

governing new sources in nonattainment areas. The court

in Solar Turbines recognized that EPA had enforcement

authority to take action against a source in a nonattain-

ment area when a finding had been made under section

113(aX5). The court stated that EPA may take enforce-

ment action “when after a finding has been made that a

State is not acting in compliance with the Act’s non at-

tainment [sic] provisions, an owner/operator persists in

* In discussing the related enforcement provisions in section 113(b)

of the final bill, Senators Chafee and Baucus, two of the Senate

Conference managers stated:

The agreement also adopts the House language making

clear that [enforcement actions) can also be brought when-

ever an owner or operator is attempting to construct or mod-

ify a major stationary source in violation of new source

requirements. 136 Cong. Record S 16950 (Oct. 27, 1990).

Thus, these Senate Conference managers agreed with the House

Committee Report that enforcement actions could be brought against a

specific source whenever a finding under subsection (a5) has been

made with respect to any new source requirement. There is no contrary

legislative history.

App. 11

attempting to construct in violation of that finding.” 732 F.

Supp. at 537 (emphasis in original).

Like the court in Solar Turbines, EPA has interpreted

section 113(a\5), as enacted in 1977, to permit enforce-

ment action against a source with a state-issued permit

based on a finding of state failure to comply with the

applicable nonattainment requirements.

The 1990 Amendments strengths EPA’s position. As

noted above, section 113(a)(5) as revised clarifies that

enforcement action may be based on a finding of state

failure to comply with “any requirement or prohibition” of

the Act relating to new sources, and not only failure to

comply with “plan provisions” or the offset Ruling in 40

CFR Part 51, Appendix S. Congress has thus clarified that

a state failure to conform to the underlying statutory

requirements regarding new source review, as well as

state noncompliance with the terms of a SIP implementing

those requirements, may provide a basis for action under

section 113(a)(5). This revision reaffirms that the underly-

ing congressional concern is that new sources be con-

structed in compliance with the statutory requirements,

and not solely that the source comply with the SIP plan

provisions as interpreted and applied by the state. Thus,

where a state fails to submit timely SIP revisions under

the 1990 Amendments, EPA may use section 113(a)(5) to

insure that new source permitting by the state conforms to

the amended statutory requirements during the period

prior to adopting of revised implementation plan [sic]. See

57 Fed. Reg. 13555-56.

App. 12

As discussed below, the statute is clear that EPA may

maintain enforcement proceedings against a source under

section 113(a\(5). The statute does not require that the

state be joined as a party in such proceedings. This is the

position EPA has taken in the past. Deficient Permit

Guidelines, supra, p. 8.

The 1990 Amendments do not contain any new provi-

sions bearing on the proper parties. Section 113(a)(5) and

the related enforcement provisions, as found in both the

1977 and 1990 Amendments, on their face contemplate the

enforcement action being brought against the source.

“(t]he Administrator shall in the case of any per-

son which is the owner of an affected major

source ... and may, in the case of any other per-

son, commence a civil action...

(3) Whenever such person ... attempts to

construct or modify a major stationary source

in any area with respect to which a finding

under subsection (a5) has been made. (Em-

phasis added.)

This language leaves the Agency with discretion

whether to join the state as a party in an enforcement

action against a source based on a finding of a state failure

to comply. As noted above, enforcement action against the

state has been found to be permissible under other provi-

sions of Title I. United States v. Ohio Department of

Highway Safety, supra; see also Solar Turbines, 732 F.

Supp. at 540. Although the statute plainly allows EPA to

proceed against a source as sole defendant as a matter of

law, it would be prudent to join the state as well in most

———

App. 13

cases. This will prevent sources from asserting as an

equitable defense that EPA has failed to join a state that

is the “responsible” party because it issued the allegedly

deficient permit at issue.

The 1990 amendments do not specify how the Admin-

istrator’s finding of noncompliance by a state is to be

made. EPA’s Deficient Permit Guidelines provide a model

Finding of Violation to the state. The model Finding of

Violation gives the basis for the finding of noncompliance,

and a copy is provided to the state and the source. Defi-

cient Permit Guidance, Appendix 3. The document states

that it serves to provide an opportunity to confer with EPA

prior to initiation of civil action, but without any waiver of

EPA’s right to commence action immediately. Under the

EPA Deficient Permit Guidelines, section V. B., EPA is to

“keep the source informed of all EPA’s attempts to con-

vince the permitting agency to change the permit.” This

policy is important as a matter of equity in providing

assurance that the source is on notice of EPA’s position

before any non-complying permit is issued.

IV. Action Against Operating Sources.

The Office of Enforcement seeks advice on whether

enforcement action to implement section 113(a\(5) is

limited to sources that are being, or may soon be, con-

structed or modified, or whether action may also be taken

with respect to a source already in operation. Section

113(a\5) states that the Administrator may “issue an order

prohibiting the construction or modification” of any source.

The related enforcement provisions in section 113(bX3), and

(dX1XC), authorize action when a person “attempts to

construct or modify a major stationary source.” These

App. 14

provisions are focused on construction in progress or in the

future, and might be read to exclude enforcement against

sources that have already begun operation.

The better reading of section 113(a)(5) — and certainly

a reasonable one — is that EPA is not precluded from

taking enforcement action simply because the source has

been able to commence construction, and even operation.

before EPA has had a chance to discover the violation and

act upon it. This interpretation is supported by the legisla-

tive history of the 1990 Amendments.’ Likewise, judicial

enforcement action and administrative penalties are not

barred if, following EPA’s comments during a state-

permitting proceeding or issuance of a Notice of Violation

or administrative order, a source manages to complete

construction or modification and begin operation prior to

* The Senate bill expressly provided for enforcement against the

operation of a non-complying source. S. 1630, section 601(g). This

provision was not included in the final 1990 Amendments, apparently

because the agency was found to already have appropriate authority.

Senators Baucus and Chafee, two of the Senate Conference managers,

stated their view that the intent of the conference agreement was to:

preserve the current interpretation of the EPA that it can

prohibit the operation of a source upon discovery that such

source 1s operating in violation of new source requirements.

Indeed, it is particularly important that the EPA be allowed

to take enforcement action against operating sources that

have circumvented new source review requirements. .. .

We note that EPA has been judicous in the use of this au-

thority to date, and we would encourage the Agency to con-

tanue to exercise its discretion with some restraint in this

area. 136 Cong. Record, S. 16951 (Oct. 27, 1990) (emphasis

added).

App. 15

the filing of a civil action or commencement of an adminis-

trative penalty proceeding. EPA’s existing guidelines urge

the Agency to act promptly upon the discovery of noncom-

pliance, and EPA has interpreted the provisions as allow-

ing enforcement action even if operations have started. See

Deficient Permit Guidelines, pp. 1, 2 and 4.

Given the underlying statutory purposes, this guid-

ance is proper. Section 113(a)5) and the related provisions

of section 113(a)(1), (b\1), (bX3) amd section 167 are

plainly intended to grant EPA adequate enforcement

authority to ensure that new or modified, major stationary

sources follow the new source review requirements of the

Act. That statutory purpose would be undermined if new

or modified sources were insulated from compliance with

the statutory requirements merely because EPA did not

discover and fully act upon such noncompliance prior to

the beginning of operations at the new or modified source.

Moreover, beginning operations does not cure the ongoing

violation of the underlying provisions of the Act and

applicable regulations and SIPs. That is, it does not

change the fact that the new source or modification was

constructed without a permit that conforms to the re-

quirements of the Act. As discussed above, those provi-

sions obligate states to issue, and sources to construct in

accordance with, new source review permits that conform

to the substantive and procedural requirements of the new

source review program. It is worth noting, however, that

upon issuance of a facially valid permit, substantial

App. 16

equities begin building on behalf of the holder of that

permit. Deficient Permit Guidance at 2.°

* Many of the issues discussed in this memorandum were ad-

dressed in a recent district court decision, United States v. AM General

Corp., Civ. No. $87-00377 (N.D. Ind.), slip op. Dec. 14, 1992. In that

case, the court upheld EPA's position on several points, but granted

summary judgment for the defendant based upon the timing of EPA's

claim. AM General involved an EPA finding that a major stationary

source had violated the Clean Air Act by modifying its operations based

upon a facially valid Part D permit issued by the state that did not

conform to the Act’s NSR requirements. First, the court properly found

that mere possession of a facially valid permit does not shield the

source from enforcement action and that EPA has authority to bring an

enforcement case under section 113 without exhausting state adminis-

trative or judicial remedies when a state issues a permit that fails to

conform to the Act’s requirements. AM General, slip op. at 15-16, 23.

The court also found, however, that in order to maintain such an action,

EPA must as a matter of law, issue a finding of violation to the state

alleging permit deficiencies before the source constructs or modifies in

reliance on the state permit. Jd at 24-25. EPA believes this decision

reconsideration, which is pending. Regardless of the final outcome,

however, AM General suggests that EPA may want to reconsider

aspects of its NSR enforcement policy, as the case underscores a

pattern of judicia] misunderstanding of those policies. The staff of the

Office of General Counsel would be happy to assist in any such effort.