Petition for Writ of Certiorari — American Methyl Corp. v. Motor Vehicle Manufacturers Ass'n of the United States

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85 re ‘4 18 if Supreme Court, U.S.

FIL t& J

OCT 25 1985

- JOSEPH F. SPANICL, JR.

IN THE SUPREME COURT OF THE untrep sTaTee™”

ee

OCTOBER TERM, 1985

No.

AMERICAN METHYL CORPORATION,

PETITIONER

V.

THE MOTOR VEHICLE MANUFACTURERS ASSOCIA-

TION OF THE UNITED STATES, INC., AMERICAN

MOTORS CORPORATION, CHRYSLER CORPORATION,

GENERAL MOTORS CORPORATION, VOLKSWAGEN

OF AMERICA, INC., AND ENVIRONMENTAL PROTEC-

TION AGENCY

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

DISTRICT OF COLUMBIA CIRCUIT

Dale Edward Anderson

Claron C. Spencer

1200 Beneficial Life Tower

36 South State Street

Salt Lake City, Utah 84111

Attorneys for Petitioner

QUESTION PRESENTED

Once a fuel or fuel additive has been waived into

commerce, can its waiver be revoked and the fuel be

excluded from commerce without first proceeding as

required by § 211(c) of the Clean Air Act for the

regulation and control of fuels in commerce?

INDEX

Page

Opinions below ....cccccccccccccccccccccccccces 2

JUPISGICTION ....ccccccrccccccccces Pe eccsseseess 2

Question presented ............+.-- CEN V4.0 6 00 6 cleiss 2

Statutes involved ......cceeenecccccccecs Teivie 2

StateMent ..ccccccccccccvcccccccsccccccccccces )

Reasons for granting the petition............e.204- 11

1. The decision below would read

out of the statute the specific

procedures specified by con-

gress to be followed for the

control of fuels already in

eee re Se ee eee re ee ee 11

2. The procedure followed by the

court below in reviewing an

administration decision conflicts

with the procedures recently

reiterated and detailed by this

COURT 2 ccc nccecesnceecccccccccccccccecens 14

3. The actions of the two panels

of the court of appeals are in

ee ee res 18

CONCLUSION 2... ccsccccccncccccccccccccecececcees 21

Appendices under separate cover:

Appendix A (Opinion of Court of Appeals) ...... App. la

Appendix B ((Judgment of Court of Appeals) ... App. 37a

Appendix C (Grant of waiver by EPA)......... App. 39a

Appendix D (Order denying petition for

PEEPS ow ceecSe bese ccccccecncess App. 55a

Appendix E (Order denying petition

for reconsideration en banc) ........... App. 56a

Appendix F (Order staying issuance of

PEED Cie reweercovccvcncvcccacce App. 57a

Appendix G (42 U.S.C. 7545) ......... cece anes App. 58a

CITATIONS

CASES:

American Methyl Corp. v. E.P.A.,

749 F.2d 826, 829 (D.C. Cir. 1984) ...6,7, 8,.9,.11, 18

Motor Vehicle Mfrs. Ass'n v. State

Farm Mut., U.S. , 103

S.Ct. 2856, 2870 (1983) ........... eee eee L4,.16, 17

Chevron, U.S.A., Inc. v. Natural

Resources Defense, 104 S.Ct. 2778,

BU EE a ewes ene cnsaceecevecesvececcccces 14

rns sae

ili

Vermont Yankee Nuclear Power Corp.

v. NRDC, 435 U.S. 519, 98 S.Ct.

RAG CEOTED xc ccc secccccsecsncccossccsecsses 15

STATUTES:

42 U.S.C. § 7545, 211(c)(1) of the

Clean Air Act ....... 2, 3, .4,.6,.11, 12, 14, .18,.19, 20

42 U.S.C. § 7545, 211(f4) of the

Cigam Alt Act vc cccccvescvecccesecs 4,5, 6,.7,.8, 12

MISCELLANEOUS:

46 Fed. Reg. at 48,978, 48,979 (Grant

GE WERNER Ber EPA). ccc ccescccsccceccccccesces 2

The Senate Committee Report on the

Clean Air Amendments of 1977 .............26. 13

IN THE SUPREME COURT OF TH& UNITED STATES

OCTOBER TERM, 1985

No.

AMERICAN METHYL CORPORATION,

PETITIONER

Vv.

THE MOTOR VEHICLE MANUFACTURERS ASSOCIA-

TION OF THE UNITED STATES, INC., AMERICAN

MOTORS CORPORATION, CHRYSLER CORPORATION,

GENERAL MOTORS CORPORATION, VOLKSWAGEN

OF AMERICA, INC., AND ENVIRONMENTAL PROTEC-

TION AGENCY

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

DISTRICT OF COLUMBIA CIRCUIT

American Methyl Corporation (intervenor below)!

petitions for a writ of certiorari to review the judgment

of the United States Court of Appeals for the District of

Columbia Circuit entered in this case.

1 American Methyl Corporation was formerly known

as Anafuel Unlimited and is so referred to in the decision

of the administrator of the Environmental Protection

Agency.

2

OPINIONS BELOW

The opinion of the Court of Appeals (per Judge Wald)

is reported at 768 F.2d 385, and appears as Appendix A.

The decision of the administrator of the Environmental

Protection Agency (EPA) was published at 46 Fed. Reg.

48975 (Oct. 5, 1981), and appears as Appendix C. Subse-

quent orders of the Court of Appeals denying a petition

for rehearing and a suggestion that rehearing be en banc,

entered September 18, 1985, are unreported, and eppear

as Appendices D and E.

JURISDICTION

The judgment of the Court of Appeals (App. B, infra)

was entered on July 26, 1985. A timely petition for

rehearing was denied on September 18, 1985. The

jurisdiction of this Court is invoked under 28 U.S.C.

§ 1254(1).

3

STATUTES INVOLVED

The applicable statutory provisions are set forth in

full in Appendix G, p. 58a. The pertinent parts of said

statutes provide as follows:

Section 211(cX1) of the Clean Air Act, 42 U.S.C.

§ 7545(c)(1) provides (Appendix G, p. 59a):

(1) The Administrator may, from time to time

on the basis of information obtained under sub-

section (b) of this section or other information

available to him, by regulation, control or prohibit

the manufacture, introduction into commerce,

offering for sale, or sale of any fuel or fuel

additive for use in a motor vehicle or motor

vehicle engine (A) if in the judgment of the

Administrator any emission product of such fuel

or fuel additive causes, or contributes, to air

pollution which may reasonably be anticipated to

endanger the public health or welfare, or (B) if

emission products of such fuel or fuel additive

will impair to a significant degree the perfor-

mance of any emission control device or system

which is in general use, or which the

4

Administrator finds has been developed to a point

where in a reasonable time it would be in general

use were such regulation to be promulgated.

Section 211(f)(4) of the Clean Air Act, 42 U.S.C.

§ 7545(f)(4) provides (Appendix G, p. 64a):

(4) The Administrator, upon application of any

manufacturer of any fuel or fuel additive, may

waive the prohibitions established under para-

graph (1) or (3) of this subsection or the limitation

specified in paragraph (2) of this subsection, if he

determines that the applicant has established that

such fuel or fuel additive or a specified concen-

tration thereof, and the emission products of such

fuel or additive or specified concentration

thereof, will not cause or contribute to a failure

of any emission control device or system (over the

useful life of any vehicle in which such device or

system is used) to achieve compliance by the

vehicle with the emission standards with respect

to which it has been certified pursuant to section

7525 of this title. If the Administrator has not

acted to grant or deny an application under this

3)

paragraph within one hundred and eighty days of

receipt of such application, the waiver authorized

by this paragraph shall be treated as granted.

STATEMENT

1. Before the 1977 amendments to the Clean Air

Act, the EPA was authorized by regulation under § 211

(eX1)2 to control or prohibit the sale of a fuel or fuel

additive already introduced into commerce if it was

found to significantly impair emission control devices or

systems.

The 1977 amendments to the Clean Air Act inciuded

new § 211(f) (Appendix, p. 63a) designed to prohibit the

introduction of any new fuels or fuel additives other than

those substantially similar to fuels used by manufac-

turers in certification testing of new vehicles under §

206 of the Act. Behind the enactment of § 211(f) was

the concern of Congress that some new fuels, particu-

larly one known as MMT, would reduce the effectiveness

of existing emission control devices in cars and light-

duty trucks before the EPA would be able to complete

2 42 U.S.C. § 7545(¢e)(1). (Appendix, p. 59a.)

6

the administrative proceedings under § 211(c). See

American Methyl Corp. v. E.P.A., 749 F.2d 826, 829

(D.C. Cir. 1984).

At the same time Congress wanted to avoid delaying

unnecessarily the admission into commerce of new fuels

that did not cause or contribute to the failure of vehicles

to meet emission standards. To avoid unnecessary delays

for introduction into commerce of such fuels, Congress

added a new § 211(f)(4) pursuant to which new fuels

would be automatically waived into commerce if the

Administrator does not act to grant or deny a waiver

application within 180 days of its receipt.

An example of a new fuel is methanol (methyl/alco-

hol) which is considered by many experts to be the most

promising transportation fuel of the future. One of the

chief advantages of this fuel is that it can be produced

very efficiently from a wide range of domestic feed-

siocks including natural gas, refuse and coal. Methanol's

chief current market is as a gasoline extender and

octane enhancer. When used in place of petroleum-

derived octane boosters, which are more expensive, more

gasoline can be generated from a barrel of oil.

7

Petitioner, American Methyl Corporation, was one of

the first companies to recognize the potential of

methanol-gasoline blends. On February 20, 1981,

American Methyl applied under § 211(f)(4) of the Clean

Air Act for a waiver, which was granted September 28,

1981, for a fuel additive known as Petrocoal. American

Methyl's expenditures in developing and marketing

Petrocoal totaled nearly one million dollars. American

Methyl Corp. v. E.P.A., supra, 749 F.2d at p. 829, fn. 13.

3. Shortly after the granting of the Petrocoal

waiver, two attempts were made by the Motor Vehicle

Manufacturers Association (MVMA), one unsuccessful

and the other successful, to have Petrocoal eliminated

from commerce. This petition stems from the con-

flicting treatment of those attempts by two different

panels of the Court of Appeals for the District of

Columbia Circuit.

The unsuccessful attempt to end the Petrocoal

waiver was an MVMA effort to have the waiver revoked

under § 211(f) of the Act. After the proceedings in the

EPA, the Administrator proposed to revoke the Petro-

coal waiver claiming an inherent power of revocation

8

under § 211(f) of the Act. American Methyl Corp. v.

E.P.A., supra, 749 F.2d at pp. 829-830. American Methyl

petitioned the Court of Appeals for review of the

proposed revocation claiming that the Petrocoal sales

which had been at a record high level before the EPA

threatened to revoke the waiver, had virtually ceased

within a matter of months. The loss of sales was

attributed by American Methyl's president to the EPA's

assertion of a right to revoke the waiver under § 211(f).

The Administrator took the position, among others,

that he had inherent authority under § 211(f) to revoke

the waiver of fuels already introduced into commerce

but the Court of Appeals held otherwise in the light of

(1) Congress' insistence that the EPA make a "careful

albeit expeditious decision in the first instance" of

waiving a fuel into commerce under § 211(f) and (2) the

"Congressionally-mandated procedural safeguards" of §

211(e) for correcting mistakes once a fuel has been

admitted into commerce under § 211(f).

Before the Administrator may "control or prohibit"

under § 211(c) a fuel or fuel additive already introduced

into commerce, he must, among other things, (1)

9

consider all pertinent scientific, medical, or economic

data; (2) prepare a cost/benefit analysis (for regulation

protecting emission controls); (3) formally declare that

the fuel or fuel additive causes or contributes to harmful

air pollution or would significantly impair the effective

functioning of emission control systems; and (4) formally

declare that regulation would not result in use of more

dangerous additives. No such protections are found in §

21i(f).

The Court of Appeals set aside the notice proposing

revocation of the Petrocoal waiver after finding that

"implied power to revoke waivers under § 211(f) of the

Clean Air Act [was] contrary to the intention of

Congress and the design of that statute * # «."

American Methyl Corp. v. E.P.A., supra, 749 F.2d at

p. 840.

The serious harm to the country from the existence

of power to revoke existing waivers of fuel already in

commerce without § 211(c) proceedings was described by

the Court of Appeals in the following language (749 F.2d

at 840):

Like the sword suspended by a hair above the

10

courtier Damocles, the Administrator's claimed revo-

cation authority would pose an ever-present threat to

the marketing of new fuels, fostering great uncer-

tainty in the business community. Technologically-

advanced fuels could be taken off the market at any

time, and neither specified hearing procedures nor

rules of repose would cabin the Administrator's dis-

cretion. This risk is hardly typical of commercial

operations in a reguiated economy. Moreover,

because the manufacturer's product is assumed

undeserving of waiver, the presumption is against the

continued existence of his business even if his waiver

is challenged with evidence gathered years after

heavy capital investment—an extraordinary risk for a

commercial entity to bear, as agency counsel con-

ceded at oral argument.

Because a manufacturer could never know ex ante

whether his product would be available for sale for a

sufficient time to recoup his initial investment, he

might well decide not to risk his capital in the first

place. As a consequence, the public and this nation

would suffer from lack of innovation in fuels and fuel

11

additives, to the ultimate detriment of air quality

and our national security.

The American Methyl Corp. v. E.P.A. case was

remanded to EPA for proceedings under § 211(c).

Before any of the proceedings required by § 211(c)

had been conducted, MVMA's second effort to revoke the

Petrocoal waiver—direct review of the original granting

of the waiver by the Court of Appeals—came before

another panel of the Court. The second panel, without

the benefit of any proceedings having been conducted

under § 211(¢c), proceeded to find that the Adminis-

trator’s granting of the Petrocoal waiver was arbitrary,

capricious and an abuse of discretion and vacated the

waiver. The case was remanded for furthe. proceedings

for the possible grant of a new waiver for Petrocoal. It

is from this second action of the Court of Appeals that

this petition stems.

REASONS FOR GRANTING THE PETITION

1. THE DECISION BELOW WOULD READ OUT OF

THE STATUTE THE SPECIFIC PROCEDURES SPECI-

FIED BY CONGRESS TO BE FOLLOWED FOR THE

CONTROL OF FUELS ALREADY IN COMMERCE.

12

The decision of the Circuit Court, if permitted to

stand, will remove all the substantive and procedural

safeguards expressly provided by Congress in § 211(c) for

the protection of the public and the manufacturers and

sellers of fuel or fuel additives already introduced into

commerce.

Congress provided a procedure to be followed by the

EPA Administrator to waive the prohibitions which Con-

gress had established making it "unlawful for any manu-

facturer of any fuel or fuel additive to first introduce

into commerce" such fuel or fuel additive. Section

211(f)(4) of the Clean Air Act, 42 U.S.C. 7545(f)(4)

grants the Administrator the right to waive the said

prohibition against introducing certain fuels into com-

merce. In addition, said § 211(f)(4) provides that if no

action is taken by the Administrat»r to grant or deny an

application then the waiver made possible by said § 211

(f)(4) "shall be treated as granted."

In its wisdom, Congress did not exclude "waived"

fuels from the already existing procedures to be followed

for fuels already set forth in § 211(c) of the Clean Air

Act, 42 U.S.C. 7545(c).

13

The procedures to control or prohibit such offending

fuels are detailed and were intended by Congress to be

followed to protect both the public and the manufac-

turers who had devoted substantial resources to pro-

ducing the fuel or fuel additives pursuant to a waiver.

The Senate Committee Report on the Clean Air Amend-

ments of 1977 (p. 91) states (S.Rep. No. 127, 95th Cong.,

ist Sess. 91 (1977) reprinted in 3 Legislative History,

supra note 8, at 1371, 1465:

"The Committee was mindful that the Adminis-

trator could choose not to act on the waiver applica-

tion within the 180 days provided for such action. If

the Administrator does fail to act under subsection

(d) [now subsection (f)] to either grant, conditionally

grant, or deny the waiver, it does not diminish the

Administrator's power to act against the fuel or fuel

additive through the application of the provisions of

subsection (c) of this section.

The Court below determined that the actions of the

Administrator were arbitrary, capricious and an abuse of

discretion and then vacated the Administrator's decision

and remanded the matter to the EPA to make a reasoned

14

decision as to whether to grant the waiver. There is no

authority in the statute for such action for fuels already

in commerce. If there was a mistake made authorizing a

fuel to be introduced into commerce, then the matter

must be remanded to the Agency for determination

pursuant to § 211(c) which deals specifically with this

very problem. Section 211(c) is a part of the Con-

gressional Act and the Court below had no right to

interpose its own procedure in preference to that speci-

fied by Congress. As this Court said in Chevron, U.S.A..,

Inc. v. Natural Resources Defense, 104 S.Ct. 2778, 2783

(1984):

*« « « If the intent of Congress is clear, that is

the end of the matter; for the court, as well as the

agency, must give effect to the unambiguously

expressed intent of Congress *« * «.

2. THE PROCEDURE FOLLOWED BY THE COURT

BELOW IN REVIEWING AN ADMINISTRATION DECI-

SION CONFLICTS WITH THE + PROCEDURES

RECENTLY REITERATED AND DETAILED BY THIS

COURT.

This Court in Motor Vehicle Mfrs. Ass'n v. State

15

Farm Mut., USS. , 103 S.Ct. 2856, 2870 (1983)

reaffirmed its holding in Vermont Yankee Nuclear Power

Corp. v. NRDC, 435 U.S. 519, 98 S.Ct. 1197 (1978) as

follows:

* « « In Vermont Yankee, we heid that a court

may not impose additional procedural] requirements

upon an agency.

and also at p. 2871 said:

* « « The agency must explain the evidence

which is available, and must offer a "rational connec-

tion between the facts found and the choice

made."* * *

The second panel of the Court of Appeals found a

statement in an Appendix to the Petrocoal Waiver

granted by the EPA which discusses a "statistical deter-

iorated Emissions Test" utilized by the EPA (46 Fed.

Reg. at 48,978, 48,979, Appendix C, pp. 53a, 54a). The

Administrator states that "Petrocoal just fails (by one

vehicle) this Test for NO»9." The panel then concludes

that the EPA has established specific statistical criteria

for determining whether a fuel will cause a vehicle to

exceed emission standards.

16

In fact, the EPA does not have any specific standards

or procedures established for review of such waivers.

The EPA has several tests which it employs in accor-

dance with the authority granted the EPA by Congress to

determine whether or not to waive the prohibitions

against introduction of any fuel or fuel additive into

commerce. It is assumed that the EPA has not esta-

blished nor published any specific standards or pro-

cedures because of the various methods which may be

used. As the Administrator said in its grant of the

Petrocoal Waiver (Appendix C, p. 44a):

An alternative to providing the amount of data

necessary to meet the statistical requirements, is to

make judgments based upon a reasonable theory

*s * *,

This Court in the State Farm Mut. case, supra, at

p. 2866, recognized that:

"regulatory agencies do not establish rules of

conduct to last forever" * *« * and that an agency

must be given ample latitude to “adapt their rules

and policies to the demands of changing circum-

stances."

17

The second panel of the Court of Appeals did not

follow the dictates of this Court regarding the scope of

judicial review of administrative decisions.

The Administrator's waiver grant demonstrated the

fact that the Agency did adapt its rules and policies to

the demands of changing cire’mstance and did consider

all of the information provided and did make an informed

judgment from those facts. The second panel of the

Court of Appeals nevertheless concluded that the

Administrator acted arbitrarily, capriciously and abused

her discretion in direct contradiction of the guidelines

set forth by this Court in Motor Vehicle Mfrs. Ass'n v.

State Farm Mut., supra, at p. 2867, as follows:

* « « Normally, en 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. *« « « We will, however, "uphold a decision

18

of less than ideal clarity if the agency's path may

reasonably be discerned.”

In this case the agency's path is easily discerned and

is neither arbitrary nor capricious based upon all of the

factors specified as grounds for finding that the Agency's

action was arbitrary or capricious.

3. THE ACTIONS OF THE TWO PANELS OF THE

COURT OF APPEALS ARE IN DIRECT CONFLICT.

The first panel of the Court of appeals in American

Methyl Corp. v. E.P.A., 749 F.2d 826 (1984) decided

basically the same issues that were decided in this case

for which certiorari is sought. The said case involved all

of the parties to this case and no others.

The issues in the proceeding decided in 1984 included

a consideration of whether a grant of waiver could be

revoked by the granting agency and whether there were

any grounds for revocation.

The court in the 1984 decision determined that the

record could not be remanded for possible revocation

because § 211(c) of the Clean Air Act is the "exclusive"

means by which the Administrator was to correct

waivers mistakenly granted by default and (749 F.2d at

p. 836):

19

* « « What suffices to correct waivers mistakenly

granted by default should also suffice to correct the

(hopefully) far smaller proportion of waivers

mistakenly granted after careful consideration.

The court in the 1984 decision also considered the

reasons proposed as grounds for revocation and found

that there were three reasons stated. One of these was

based on new evidence presented to the Agency after the

Agency issued a notice in the Federal Register on May 2,

1983, proposing to revoke the waiver and the other two

were "make-weights by EPA's own admission" ( 749 F.2d

at p. 837) and were "red herrings" (749 F.2d at p. 838).

The court concluded that any "implied power to

revoke waivers under Section 211(f) of the Clean Air

Act [is] contrary to the intention of Congress and

the design of that statute." (749 F.2d at p. 840).

The said court then remanded that case for further

proceedings under § 211(c), if the Administrator deems

them desirable. The said remand was not appealed, is a

final determination, is in accordance with the statutory

scheme and is in direct conflict with the determination

in the instant case. Said determination being that the

20

remedy for issuance of an erroneous waiver is vacation

by judicial action and not remand for consideration

pursuant to the § 211(c) mechanism provided by Congress

for rectifying mistaken actions.

This case is one of first impression in this Court, is of

extreme importance to all parties who are now

attempting to provide alternative sources of fuel or may

be willing to invest in such a venture in the future. The

court in the 1984 decision summarized the situation as

follows (749 F.2d at pp. 839-840):

By upholding Congress's disinclination to grant

EPA un unguided and open-ended power to revoke

waivers, we ensure that entities subject to regulation

under section 211 know what is expected of them.

Protecting the legitimate expectations of fuel manu-

facturers comports with busie fairress; it also

encourages investment in technology to create more

efficient, less costly, and less polluting substitutes

for conventional fuels.

Because a manufacturer could never know ex ante

whether his product would be available for sale for a

sufficient time to recoup his initial investment, he

21

might well decide not to risk his capital in the first

place. As a consequence, the public and this nation

would suffer from lack of innovation in fuels and fuel

additives, to the ultimate detriment of air quality

and our national security.

CONCLUSION

For the foregoing reasons, the petition for a writ of

certiorari should be granted.

Respectfully submitted,

Dale E. Anderson

Claron C. Spencer

October 1985