Petition for Writ of Certiorari — Chemical Manufacturers Ass'n v. Natural Resources Defense Council, Inc.

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Text

. : ’ ‘See On US

86-2390 If FIDED.

AUG 15 1986

JOSEPH F. SPANIOL, JR

CLERK

No. 86- <a

IN THE

Supreme Court of the Anited States

OCTOBER TERM, 1986

CHEMICAL MANUFACTURERS ASSOCIATION,

Petitioner,

Vv.

NATURAL RESOURCES DEFENSE COUNCIL, INC., et al.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

Of Counsel: THEODORE L. GARRETT

Davip F. Zoi (Attorney of Record)

Frepric P. ANDES CoRINNE A. GOLDSTEIN

; Covington & Burling

Chemical bees te 1201 Pennsylvania Ave., N.W.

Association

‘ P.O. Box 7566

Washington, D.C. 20037 (202) 662-6000

Attorneys for Petitioner

Chemical Manufacturers

Association

August 1986

<8 SR NR ees aoe neeenr

QUESTIONS PRESENTED

The decision below raises important questions con-

cerning the implementation of pretreatment standards

under Section 307(b) of the Clean Water Act. Under

this program, EPA has established technology-based

standards for industrial wastewater discharges to pub-

licly owned treatment works (POTWs). However, in

order to avoid wasteful expenditures for redundant

treatment, Congress provided in Section 307(b) that

these standards may be adjusted to reflect the re-

moval of pollutants by POTWs receiving industrial

wastes. The court below struck down EPA’s so-called

“removal credit’? regulations, on the grounds that

EPA has not established sufficiently comprehensive

guidelines for municipal sludge use or disposal under

Section 405 of the Act. The questions presented are:

1. Whether the decision of the Third Circuit im-

properly upset EPA’s reasonable and longstanding

construction of the Act, thereby disrupting a key as-

pect of the control of water pollution.

2. Whether the decision below conflicts with deci-

sions of this Court and other circuit courts in ruling

upon the adequacy of regulations not reviewable in

the courts of appeals.

3. Whether the decision below is contrary to the

unambiguous language of the Act and the intent of

Congress.

PARTIES

The parties to this action are as follows:

Chemical Manufacturers Association (CMA);

Chicago Association of Commerce and Industry

(CACI), Illinois Manufacturers’ Association and Mid-

America Legal Foundation;

U.S. Environmental Protection Agency (EPA); and

Natural Resources Defense Council, Inc. (NRDC).

NRDC was the petitioner below, and EPA was the

respondent. CMA and CACTI, et al. were intervenor-

respondents below.

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TABLE OF CONTENTS

Page

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i iain sccsnsanhscnnasonsorioesorvonsorcesees 1

I ti iain denestantnesepsqnerensrenscseesetancecoeeecosers 2

STATUTE AND REGULATIONS INVOLVED ............00000008 2

DRATHMENT OP THE CARB occccereseccssccccccssccvevcscosscceces 2

A. Legislative And Administrative Back-

ET ialidasebtubibebelvestisnisartnncensesrsrcocoseseesses 4

B. The Proceedings Below .................:ssseeeeees 7

REASONS FOR GRANTING THE WRIT ..........ss00seeeeeeees

I. The Decision Below Presents Important Ques-

— Of Law That Should Be Settled By This

TEE ph thnnddandddueiddsttinsaduascsveonsenctascessaccbiinsisccsoorse 9

II. The Decision Below Conflicts With Decisions

Of This Court And Numerous Courts Of

Appeals In Ruling On The Adequacy Of Reg-

ulations Not Reviewable In The Diets Of

BIE eaidatinaetighntitnssibisvnnirespisatbveveescancsesesceee 13

III. Contrary To Recent Decisions Of This Court,

The Decision Below Upsets EPA’s Reasonable

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I a saubineccneneophoontes 23

APPENDIX

TABLE OF AUTHORITIES

Page

CASES:

American Association of Meat Processors v. Costle,

— Be FS Be | cy) Berean 16

American Federation of Labor v. NLRB, 308 U.S.

"ARE SERBRET ER ESI SiR AR won 13

Assessors v. Osbornes, 76 U.S. (9 Wall.) 567

STEIN : -cadshacenpiahiinamelbbbaiookencctochewiiiacubreeyatuntives 13

Bethlehem Steel Co. v. EPA, 538 F.2d 513 (2d Cir.

SEO << sinihalalidbiauaiansainadeiaieeibiaiibindinabaniatibarsdianiassdes 14

Chemical Manufacturers Association v. NRDC, 105

Se Se EE Ridauebiidinidiablainenenitenesenscaotinns 17, 22

Chevron v. NRDC, 467 U.S. 837 (1984) ........ 17, 20, 22

City A Baton Rouge v. EPA, 620 F.2d 478 (5th Cir.

BONE SeadidchiseckbentuiactiindsidbiiabincdannibbialiceWelnsexese 14

EI. ri Pont de Nemours & Co. v. Train, 430 U.S.

EE EEE idchcisencisaieidocinaviibiccsninsmente vasidintaedidbesn 14, 15

Granite City Steel Co. v. EPA, 501 F.2d 925 (7th

SARE te ane eerie eee er ee 16

Homestake Mining Co. v. EPA, 584 F.2d 862 (8th

Cnn: HEI stead, ~ \chenaaiinesdisiinideisiebelincanashiainnebasenes 14, 16

Louisville & Nashvile Railroad Co. v. Mottley, 211

SF IIE: decrhiaddetnnhaaatotadnpeaiiis Seciiiiniiiatidetes 13

National Association of Metal Finishers v. EPA, 719

F.2d 624 (3d Cir. 1983), rev’d in part sub nom.

Chemical Manufacturers Association v. NRDC,

SED Bian BEG Ge ~~ ernciercctivieenipeintititaninsnssivess 7

Peabody Coal Co. v. Train, 518 F.2d 940 (6th Cir.

BTU senhcsnccididcouneedinbnnaniaaahenbieiuasenaiiadidiaaunideioes 15, 16

Sumner v. Mata, 449 U.S. 5389 (1981). .................. 13

Sun Enterprises, Ltd. v. Train, 532 F.2d 280 (2d

UME - senciseamiannnsdtasaenebbanapiababiaabsaanaih dese 16

STATUTES:

Be Rea, OE OI TIT © vavccvsicsscesecessccssersess 19

LE Pe eas 5 earner meena 2

A a Ba IRL

Table of Authorities Continued

Page

SB U.S.C. © TERRI) IGE) nveccncsnccrscccedsnsizessee 4

SB U.S.C. § UBLIG IEMA) C1GGR) _...ncccercrrrcesecsscccseceee 4

BS UB... § UBT) CGBE) ann cccevvcccecisccssccsesees 4

BD TEs. De I | inst desddrensitancensncctztiennseticen 19

Be As IEE fahiccniscssinresscenencsresdcaeenaten 2, §

BS UA. © PFT CR sicevccssisccciscscscesssosis 5, 6, 18

Be ee IE | bideidsedesictscnccennnciceusintintuiates 10

Be i, PD voksscentersescineccecsescososnsscestpeanes 2,3

Oe ass ED Ncénveincrinsstessseesesiseonanescns 18, 19

Fete IEE, bacressnicnccacscenicncrabenpnecntans 21

Tar ie Ey CRUE. enisccpecsansancncveenncatinonses 14

Be Fe IE victnccnienssenscehsisuotiantessrunsnennn 19

BD SEs. Be: |: Seindennennttccdcidinninsctatsrntescamnie 19

42 U.S.C. § 6901, et seg. (1982 & Supp. II 1984) 19

GR UB. Fe CRE: inesrtanseniccenissetcecineens, 13

42 U.S.C. § 7401, et seg. (1982 & Supp. II 1984) 19

Be Tn. ee . enivantetcnntigecntinssexnndions 13

ADMINISTRATIVE ACTIONS:

BD Fe Fe et esinnsvsccctnecessceconcxseenesesace 6

G6 FR Be Fe ED tekccedivncsccsnsessosstessctecsesns 17

SO Fe Fe Ee 5 ine ciicicccincniceinnticcecenntonsns 6

BG Fe ED | Sitedsccusccsescrnssesecicasanaesines 17

GT FUG, Te, Ge Ge wesc cvsecericscseserevesesnescoessas 11

GD Fae, FEO BEN FIG ccesnscnscvccvvescesecccessssnnconees 6

GO Fad, Tee. TI GAC O) hasccvecsescscccssccccosccsesssseses 11

GE FR BE IE birccccrcciscncesasensnctonsossonsens 12

G1 FO TR TR Diss cevscccitascersesctcncnscsspseees 20

Table of Authorities Continued

REGULATIONS:

BO CPR. Parte GEES (IGG) ceccevcccsccecsccscccescssccecees

40 C.F.R. Part 60, subpart O (1985) wn... wees

40 C.F.R. Part 61, subpart E (1985)... eee

40 C.F.R. Part 125, subpart M (1985) _...................

40 C.F .R. Parte BOO-BZE (10GB) . ...cccccccccsccccsscccesovees

We Reece UNG MIT CII pecccsiscececscesevccnensacenscossones

$0- CFR, Parts - BESTE LAGER) oneenccsecccccccccsesscccsccess

40 C.F.R. Parts 400-469 (1985) « ...........cccsscesceeerees

Be ee Ee SIN dich detisectncccccissesesezevsosncesadeenss

40 C.F.R. § 403.7(aX1)Gi) (1985) — .........ccccsssceseccereees

BO C.F. SACG TI CRO) ivcnesivccvccccssccesscssnscooes

40 C.F.R. § 403.7(aX3Xiv) (1985) ............ccccccsssssseesees

40 C.F.R. Part 761, subpart D (1985) _....................

LEGISLATIVE MATERIALS:

A Legislative History of the Clean Water Act of 1977,

Cong. Research Service, No. 14 (Comm. Print

SD lasssisivchisntcicconiusipsighettiiiaiaciekeaponiadaniaduilciidiitinies

H.R. Rep. No. 911, 92d Cong., 2d Sess. (1972), re-

printed in Vol. 1, A Legislative History of the

Water Pollution Control Act Amendments of

1972, Cong. Research Service, No. 1 (Comm.

PURE TFS aivcicticisciscrccsectutinavnineipabbanitapiiasiavess

H.R. Rep. No. 830, 95th Cong., 1st Sess. (1977),

reprinted in Vol. 3, A Legislative History of the

Clean Water Act of 1977, Cong. Research Ser-

vice, No. 14 (Comm. Print 1978) _...................

IN THE

Supreme Court of the Gnited States

OCTOBER TERM, 1986

No. 86-

CHEMICAL MANUFACTURERS ASSOCIATION,

Petitioner,

NATURAL RESOURCES D&FENSE COUNCIL, INC., et al.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

Petitioner Chemical Manufacturers Association

prays that a writ of certiorari issue to review the

opinion and judgment of the United States Court of

Appeals for the Third Circuit in this case.'

OPINION BELOW

The opinion of the court of appeals is reported at

___ F.2d __ , and is reprinted in the Appendix to this

petition at A-1.

1 This petition was filed on an expedited basis. The Court may

wish to defer acting on this petition until the United States and

CACI file petitions for a writ of certiorari, or the time for

seeking certiorari has expired, so that the Court will have before.

it all relevant matters.

JURISDICTION

The decision below was rendered on April 30, 1986.

A timely request for a rehearing was denied by the

Third Circuit on July 11, 1986. The jurisdiction of

this Court is invoked pursuant to 28 U.S.C. § 1254(1)

(1982).

STATUTES AND REGULATIONS INVOLVED

This case involves pretreatment standards for in-

dustrial dischargers established under Section 307(b)

of the Clean Water Act, 33 U.S.C. § 1317(b) (1982).

Section 405 of the Clean Water Act contains provi-

sions relating to the disposal or use of sewage sludge

resulting from the operation of municipal treatment

works. 33 U.S.C. § 1845 (1982). Sections 307(b) and

405 of the Act are set forth in the Appendix at A-

55 and in n. 18 below.

EPA’s regulations governing the issuance of re-

moval credits for pretreatment standards are codified

at 40 C.F.R. § 403.7 (1985), and are set forth in the

Appendix A-57.

STATEMENT OF THE CASE

Under the Clean Water Act, EPA is directed to

promulgate technology-based effluent limitations

guidelines and standards applicable to various major

segments of American industry. Under Section 307(b)

of the Act, EPA promulgates pretreatment standards

for industrial wastewater discharges to publicly owned

treatment works (POTWs). Pretreatment standards

are established by EPA for various industrial cate-

gories to reflect “‘best available technology’’ levels of

control. The standards are called “pretreatment”

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standards because the wastewater that an industrial

facility discharges will be treated twice—once by the

facility prior to discharge to a city sewer, and once

by a POTW prior to discharge to navigable waters.

Recognizing that there would be duplicative treatment

of wastewater discharged by industry to POTWs,

Congress authorized POTWs to grant ‘‘removal cred-

its” to industrial dischargers. The intent of Congress

was to avoid needless expenditures by industry for

redundant treatment.2 Removal credits thus modify

the pretreatment standards promulgated by EPA in

order to take into account the removal of pollutants

that individual POTWs achieve; such credits are an

integral part of the pretreatment program.?

This petition seeks review of a judgment of the

Third Circuit which struck down EPA’s removal credit

regulations on the ground that EPA does not have

sufficiently comprehensive regulations governing the

use or disposal of municipal sludge under Section 405

of the Act, 33 U.S.C. § 1345. The court’s decision

will have an enormous impact on the pretreatment

2A Legislative History of the Clean Water Act of 1977, Cong.

Research Service, No. 14, 95th Cong., 2d Sess. (Comm. Print

1978) at 343.

’ To illustrate the effect of a removal credit, assume that a

plant’s wastewater contain 10 pounds per day of copper and

that the pretreatment standard applicable to the plant allows

the plant to discharge only 1 pound per day of copper. Also

assume that the POTW to which the plant discharges its wastes

is capable of removing 50 percent of the copper discharged to

it, resulting in a 50 percent removal credit. Then the plant will

be required to remove 8 (rather than 9) of the 10 pounds of

copper from its wastewater; the POTW will remove half of the

2 pounds discharged to it, resulting in a discharge to navigable

waters of 1 pound of copper.

program. Removal credits are reflected in federal and

state permits, municipal ordinances and contracts be-

tween municipal agencies and industrial dischargers.

Industrial dischargers have been taking action to come

into compliance with pretreatment standards on the

assumption that credits would be available. The court’s

decision, however, will mean that timely removal

credits will be unavailable. As a result, industrial dis-

chargers to POTWs will be required to spend large

sums of money to design, install and operate redun-

dant wastewater treatment.

The decision below upsets EPA’s reasonable and

longstanding construction of the Act. Moreover, the

Third Circuit has struck down the removal credit reg-

ulations because of its views on the adequacy of a

set of regulations concerning sludge use and: disposal

that were not properly reviewable in the courts of

appeals.

A. Legislative And Administrative Background

A brief discussion of the Act’s program of guide-

lines and standards provides the background of the

proceedings below. Under the Clean Water Act, dis-

chargers must comply with technology-based ef-

fluent limitations and standards. The statute

regulates both direct discharges to waters of the

United States, and indirect discharges to POTWs.

Direct industrial dischargers must achieve limita-

tions based upon the “‘best available technology eco-

nomically achievable’ (BAT) by July 1, 1984. 33

U.S.C. § 1311(b\2\A), (C) (1982). POTWs, which

are also direct dischargers, are required by the

Clean Water Act to meet discharge limitations based

upon secondary treatment. 33 U.S.C. § 1311(b\1\B).

Industrial dischargers to POTWs are required to

comply with pretreatment standards established un-

der the Act for pollutants that are not susceptible

to treatment by POTWs or would interfere with the

operation of POTWs. 33 U.S.C. § 1317(b).

The federal government has provided billions of dol-

lars for the construction of POTWs. Although most

POTWs are designed to treat primarily domestic

wastes,* POTWs also remove significant amounts of

toxic pollutants contained in industrial wastewaters.

Recognizing this fact, Congress sought to avoid

wasteful expenditures for duplicative treatment of in-

dustrial wastes by POTWs and industrial dischargers

to municipal sewers. Congress thus provided in Sec-

tion 307(b) of the Act that POTWs may revise pre-

treatment standards applicable to industrial users to

reflect the removal of toxic pollutants by the POTWs.

Id.

To implement the pretreatment provisions of Sec-

tion 307(b), EPA has promulgated a series of tech-

nology-based pretreatment standards for specific

industrial categories, such as the inorganic chemicals

manufacturing industry. These categorical standards

are analogous to the “‘best available technology’”’ reg-

ulations applicable to direct dischargers. See 40 C.F.R.

Parts 400-469 (1985). EPA has also promulgated a

set of general pretreatment regulations, codified in

40 C.F.R. Part 403 (1985), which contain provisions

‘Congress intended to encourage joint treatment by POTWs

of compatible industrial and municipal wastewater. As a result,

pollutants that are compatible with a POTW are not subject to

pretreatment standards. See 33 U.S.C. § 1317(bX1) (1982); H.R.

Rep. No. 911, 92d Cong., 2d Sess. 113 (1972), reprinted in Vol.

1, A Legislative History of the Waer Pollution Control Act

Amendments of 1972, Cong. Research Service, No. 1 (Comm.

Print 1973) at 800. |

for calculating, adjusting and implementing the cat-

egorical, technology-based pretreatment standards.

These regulations include the “removal credit’ pro-

visions allowing for the revision of pretreatment

standards to reflect the removal of pollutants by

POTWs. 40 C.F.R. § 403.7 (1985). The general pre-

treatment regulations were first promulgated in 1978

(43 Fed. Reg. 27736), and then revised in 1981 (46

Fed. Reg. 9404) and in 1984 (49 Fed. Reg. 31212).

Section 307(bX1) of the Act provides that the grant-

ing of any removal credits may ‘‘not prevent sludge

use or disposal by such [POTW] in accordance with

section 1345 of this Title... .”’ 33 U.S.C. § 1317(bX1).

Accordingly, EPA’s removal credit regulations, as

promulgated in 1978 and as repromulgated in

amended form in 1981 and 1984, have consistently

authorized the granting of removal credits only if the

credits do not prevent a POTW from complying with

any sludge requirements in effect at the time the

POTW applies for EPA approval of removal credits.

40 C.F.R. § 403.7(aX3\Xiv) (1985).5 Indeed, EPA has

gone beyond the requirements of Section 307(b) of

the Act by providing that removal credits are con-

tingent upon compliance not only with Section 405 of

the Act, but also with any other applicable federal,

state or local requirements. In particular, removal

5 EPA’s 1984 general pretreatment regulations made certain

modifications to the 1978 and 1981 removal credit provisions,

but the regulations have remained essentially the same as they

relate to sludge use and disposal. The regulations provide that

a POTW may grant credits to reflect consistent removal by the

POTW of pollutants regulated in EPA pretreatment standards

provided that various conditions are met. 40 C.F.R. § 403.7(a\2)

(1985).

credits may be granted only if the credits ‘‘will not

cause the POTW to violate the local, State, and Fed-

eral Sludge Requirements which apply to the sludge

management method chosen by the POTW.’’6

Suits challenging the 1978 and 1981 general pre-

treatment regulations were consolidated and heard by

the Third Circuit in National Association of Metal

Finishers v. EPA, 719 F.2d 624 (3d Cir. 1983), rev’d

wn part sub nom. Chemical Manufacturers Association

v. NRDC, 470 U.S. 116 (1985). While other issues

relating to EPA’s removal credit regulations were

contested in this prior litigation, the Natural Re-

sources Defense Council never challenged the ade-

quacy of the sludge disposal requirements in the 1978

or 1981 removal credits regulations.

B. The Proceedings Below

NRDC challenged EPA’s 1984 removal credits reg-

ulations on a number of grounds. In its most broad-

based attack, NRDC claimed that EPA’s rules were

unlawful because removal credits could be approved

°40 C.F.R. § 403.7(aX3\iv) (1985). Sludge may be managed

in a variety of ways, such as disposal on land for use as a soil

conditioner, landfilling, incineration, and ocean dumping. As

noted above, EPA’s regulations extend beyond the requirements

of Section 405 of the Act and condition removal credits upon

compliance with any federal, state and local sludge restrictions.

Federal sludge requirements are defined to mean statutory pro-

visions, regulations and permits under Section 405 of the Clean

Water Act, and several other federal programs including the

Solid Waste Disposal Act, the Clean Air Act, and the Toxic

Substances Control Act. Id. § 403.7(aX1\ii) (1985). EPA thus

chose to implement the sludge disposal condition in Section 307(b)

for granting removal credits in a broad fashion to incorporate

a number of relevant federal and state programs, including Sec-

tion 405 of the Act.

even though EPA had not promulgated comprehen-

sive regulations for sludge use and disposal under

Section 405 of the Act. NRDC characterized EPA’s

existing sludge regulations as “‘skeletal,’’ and argued

that they did not represent full compliance with Sec-

tion 405. NRDC relied principally on EPA studies and

documents stating that the Agency planned to develop

additional sludge regulations in the future. EPA ar-

gued in response that since the sludge disposal pro-

visions of the removal credit regulations had not

changed since 1978, NRDC’s challenge to those pro-

visions was untimely and that the court of appeals

therefore lacked jurisdiction to consider NRDC’s

claim. EPA also argued that it had already promul-

gated a substantial number of sludge regulations and

that, while it may supplement those regulations in

the future, Congress had not made the availability of

removal credits contingent upon such further rule-

making.

The Third Circuit accepted all of NRDC’s attacks

on the removal credit regulations. Despite the fact

that none of EPA’s sludge use or disposal regulations

were before the court, the court held that Section

405(d) of the Act required “comprehensive standards

for sludge disposal,’’ and that EPA’s sludge disposal

regulations were inadequate. (Appx. at A-50 — A-51)

Calling EPA’s reliance on other federal, state and

local requirements a “regulatory patchwork,” the

Third Circuit accepted NRDC’s argument that certain

aspects of sludge disposal were not specifically reg-

ulated. (Appx. at A-50) However, neither the court’s

opinion nor NRDC’s brief below contained any de-

tailed discussion of the existing federal, state and

local requirements. Indeed, the court appears to have

reached its decision more on policy than legal grounds,

stating that EPA’s sludge regulations “do nothing to

advance the congressional goal of making sludge into

a productive asset rather than a toxic liability.”’ (Appx.

at A-51) The Third Circuit also rejected EPA’s ar-

gument that NRDC’s challenge regarding the sludge

provisions of the removal credits regulations was

barred by Section 509 of the Act, stating that the

1984 removal credit rules were different from prior

rules, and that in any event EPA had submitted the

entire 1984 rule for public comment. (Appx. at A-48)

REASONS FOR GRANTING THE WRIT

This Court should grant this petition for certiorari

for three reasons that the Court has traditionally

found compelling. First, the decision below raises an

issue of national importance concerning a major EPA

program. Second, the decision below conflicts with

decisions of this Court and other circuit courts in

ruling on the adequacy of sludge use and disposal

regulations not reviewable in the courts of appeals.

Third, contrary to recent decisions of this Court, the

decision below upsets EPA’s reasonable and long-

standing construction of the Act.

I. The Decision Below Presents Important Questions Of

Law That Should Be Settled By This Court.

The decision of the Third Circuit that EPA’s re-

moval credit regulations are invalid undermines a cen-

tral feature of the pretreatment program. This

program is of singular importance to current efforts

under the Clean Water Act to reduce the discharge

of pollutants. The Third Circuit’s decision, issued as

pretreatment standards are being implemented for the

nation’s major industries, will result in the expendi-

tures of enormous sums of money for redundant

treatment and will disrupt local pretreatment pro-

grams that were developed at considerable public ex-

pense over many years.

Many public agencies have developed local pretreat-

ment programs under Section 402(bX8) of the Clean

Water Act. As an integral part of those pretreatment

programs, a number of POTWs have applied for and

received approval, or have applications under devel-

opment or pending approval, to grant removal credits

under EPA’s current regulations.’ Where credits have

already been authorized, the approval for such credits

is reflected in federal and state discharge permits

issued to POTWs under the Clean Water Act, 33

U.S.C. § 1342 (1982). The credits also have been in-

corporated in local permits issued to industrial dis-

chargers or in contracts between POTWs and their

industrial users, as well as in municipal sewer service

ordinances or regulations. Public agencies have in-

vested considerable public resources in the develop-

ment of pretreatment programs tailored to the

particular facts and circumstances of the communities

they serve. Since removal credit authority is an in-

tegral component of a POTW’s pretreatment strat-

egy, the decision of the Third Circuit in this case

places in jeopardy those investments of time, money

and commitment made over many years. Industry

groups have also invested time and resources in as-

sisting in the development of POTW removal credit

applications. The Third Circuit’s decision has put un-

der a cloud elements of local ordinances, permits or

7 See, e.g., the motion by the City of Albuquerque, Metropolitan

Sanitary District of Greater Chicago, et al. for leave to intervene

below.

contracts between local industries and POTWs, pre-

treatment program approvals, and federal/state dis-

charge permits.

The court’s decision will have a major adverse im-

pact on industrial dischargers to POTWs. For ex-

ample, EPA estimates that compliance with

pretreatment standards for the organic chemicals,

plastics and synthetics fibers industry alone—absent

removal credits—would cost $304 million in capital

and $166 million in annual operating and maintenance

costs. 50 Fed. Reg. 29068, 29097 (1985). Removal

credits would reduce these costs substantially by

avoiding redundant treatment.*? In cases where a

POTW is removing part or all of a pollutant, an in-

dustrial discharger need not incur costs to provide

the same removal.

By holding that removal credits may not be issued

until EPA has promulgated a comprehensive set of

sludge use and disposal regulations, the Third Circuit

has effectively precluded the issuance of timely re-

moval credits, not only for the organic chemicals in-

dustry but for other industries as well. Additional

sludge guidelines have not even been proposed by

EPA, and according to the Agency’s latest regulatory

agenda, these additional guidelines are not scheduled

®In the context of a proposal several years ago to establish

national removal credits, EPA estimated that such credits could

result in substantial cost savings for the electroplating industry

alone. For one group of electroplaters, EPA estimated that re-

moval credits could save approximately $223 million in capital

costs and $84 million in annual operating costs. For another

segment of the industry, EPA projected savings of about $22.5

million in capital costs and $7.5 million in annual operating costs.

47 Fed. Reg. 42698, 42703 (1982).

to be promulgated until September 1987. 51 Fed. Reg.

14552 (1986). After the guidelines are issued, it will

take many months for POTWs to prepare removal

credit applications, to submit them to EPA for re-

view, and to implement removal credits at the local

level. This process can be expected to take well over

a year. In the meantime, time is running for com-

pliance with pretreatment standards for most indus-

tries, and money is being spent now for the design

and installation of treatment technology. Therefore

the granting of credits two years hence will come too

late to avoid the expenditure of funds for redundant

treatment.’

Thus, the Third Circuit’s decision conditioning cred-

its on the development of more comprehensive sludge

guidelines will have a major impact on the organic

chemicals industry, as well as other industries whose

pretreatment standards have already been promul-

gated and who are now making decisions about what

treatment technology must be installed to meet those

standards.

® EPA is now scheduled to issue pretreatment standards for

the chemical industry by December 1986, and will presumably

grant the industry the statutory three-year period of time for

compliance, which is necessary to design and install treatment

technology to meet the standards. By the time removal credits

might be approved, two years of the industry’s compliance time

already would have elapsed, and enormous sums of money would

have been spent in the design and installation of treatment

systems.

II. The Decision Below Conflicts With Decisions Of This

Court And Numerous Courts Of Appeals In Ruling

On The Adequacy Of Regulations Not Reviewable

In The Courts Of Appeals.

It is one of the most basic principles of federal

jurisdiction that the courts of appeals are courts of

limited jurisdiction, with only such jurisdiction as is

expressly granted to them by statute. American Fed-

eration of Labor v. NLRB, 308 U.S. 401 (1940); As-

sessors v. Osbornes, 76 U.S. (9 Wall.) 567 (1870).

Although there may be policy reasons for judicial re-

view, the courts may not expand that limited jur-

isdiction without express authorization from Cong”ess.

American Federation of Labor v. NLRB, supra, 308

U.S. at 411-412. It is the responsibility of this Court

to ensure that the statutory limits and bounds of the

lower courts’ jurisdiction are not exceeded. Sumner

v. Mata, 449 U.S. 539, 547 n.2 (1981); Louisville &

Nashville Ratlroad Co. v. Mottley, 211 U.S. 149, 152

(1908).

While Congress could have vested original juris-

diction in the courts of appeals to review virtually

all EPA regulations of general applicability under

the Clean Water Act, as it did under other envi-

ronmental statutes,'!° it declined to do so. Instead,

Section 509(bX1) provides for original court of

appeals jurisdiction over EPA action in only six

10 See, e.g., 42 U.S.C. § 7607(bX1) (1982) (authorizing court of

appeals review of eight specified categories of action and ‘“‘any

other nationally applicable regulations promulgated or final ac-

tion taken” under the Clean Air Act); and 42 U.S.C. § 6976(a)1)

(1982) (authorizing the filing with courts of appeals of “‘a petition

for review of action of the Administrator in promulgating any

regulation” under the Resource Conservation and Recovery Act).

entimerated situations.'! In EJ. du Pont de Nemours

& €o. v. Train, 480 U.S. 112, 124, 186 (1977), this

Court held that EPA’s action in establishing effluent

guidelines regulations was reviewable in the courts of

appeals because the rules in question fell within the

provisions specifically enumerated under Section

509(b) of the Act. A number of U.S. circuit courts

have also held that the courts of appeals have no

power to review EPA actions not specifically enum-

erated in Section 509 of the Act. It is clear that

none of the enumerated actions in Section 509 has

anything to do with review of sludge use and disposal

regulations under Section 405 of the Act. Therefore,

the Section 405 regulations may not ve reviewed in

These are EPA actions: .

“(A) in promulgating any standard of performance under sec-

tion 1316 of this title,

“(B) in making any determination pursuant to section

1316(bX1XC) of this title,

“(C) in promulgating any effluent standard, prohibition, or

pretreatment standard under section 1317 of this title,

“(D) in making any determination as to a State permit pro-

gram submitted under section 1342(b) of this title,

“(E) in approving or promulgating any effluent limitation or

other limitation under section 1311, 1312, or 1316 of this title,

and

“(F) in issuing or denying any permit under section 1342 of

this title ....” 33 U.S.C. § 1369(bX1) (1982).

12 See City of Baton Rouge v. EPA, 620 F.2d 478 (5th Cir.

1980) (court of appeals has no jurisdiction to review EPA order

requiring compliance with NPDES permit); Bethlehem Steel Co.

v. EPA, 538 F.2d 513 (2d Cir. 1976), and Homestake Mining

Co. v. EPA, 584 F.2d 862 (8th Cir. 1978) (court of appeals has

ho jurisdiction to review state water quality standards).

the courts of appeals. Instead, EPA’s Section 405

regulations would be reviewable in federal district

court under 28 U.S.C. § 1331 (1982).

Yet the Third Circuit did review the adequacy of

the Section 405 sludge regulations in ruling on

NRDC’s challenge to the removal credit regulations.

The court ruied that Section 405 mandated ‘‘compre-

hensive standards for sludge disposal.’’ It held that

EPA could not rely upon regulations promulgated un-

der other federal laws to satisfy its obligations under

Section 405, and ruled that EPA’s existing sludge

regulations were inadequate because they “‘do nothing

to advance the congressional goal of making sludge

into a productive asset rather than a toxic liability.”

(Appx. at A-51)

NRDC may argue that since EPA’s pretreatment

regulations refer to sludge rules under Section 405

of the Act, that reference gives the court of appeals

ancillary jurisdiction to review the merits of EPA’s

Section 405 sludge rules. However, as discussed be-

low, nothing in Section 307(b) of the Act conditions

removal credits on the existence of comprehensive

sludge rules. Moreover, this is not a case where the

Section 405 regulations were developed on the same

record as the general pretreatment standards, and

thus where an argument can be made that the court

of appeals has ancillary jurisdiction over the Section

405 regulations. Cf E.J. du Pont de Nemours & Co.

v. Train, supra, 430 U.S. at 125 n.14. In a case

under the Clean Air Act, which has similar judicial

review provisions,'* the Seventh Circuit held that

13 See Peabody Coal Co. v. Train, 518 F.2d 940 (6th Cir. 1975)

and cases discussed therein.

such a collaterai attack on prior EPA regulations must

fail. In Granite City Steel Co. v. EPA, 501 F.2d 925,

926 (7th Cir. 1974), the court of appeals stated:

The Company did not petition this Court to

review the December 31, 1974, attainment

date in the Illinois rule when it was approved

by the EPA on May 31, 1972. Such a petition

had to be filed within 30 days from that ap-

proval under Section 307(b\1) of the Clean

Air Act (42 U.S.C. § 1857h-5(b\(1)). Although

the Company formally disclaims any attack

on the December 31, 1974, date, it is now

attacking the increment of progress dates in

the federal rule on the ground that the at-

tainment date itself is unreasonable. Such a

collateral attack would evade the time period

for reviewing the attainment date and cannot

be countenanced.

In addition, the decision below is contrary to nu-

merous decisions of the courts of appeals strictly con-

struing the requirement of Section 509(b) of the Clean

Water Act that suits challenging enumerated EPA

actions be commenced within 90 days.‘ EPA’s sludge

regulations under Section 405 of the Act were prom-

ulgated in 1979, and amended in certain respects in

4 Sun Enterprises, Ltd. v. Train, 532 F.2d 280 (2d Cir. 1976)

(rejecting claim of new evidence constituting grounds for re-

view); Peabody Coal Co. v. Train, 518 F.2d 940 (6th Cir. 1975)

(dismissing petition filed 92 days after EPA’s action); American

Ass’n of Meat Processors v. Costle, 556 F.2d 875 (8th Cir. 1977)

(dismissing argument as to uncertainty regarding the proper

forum for challenging EPA effluent guidelines); Homestake Min-

ing Co. v. EPA, 584 F.2d 862 (8th Cir. 1978) (dismissing suit

filed four days after the statutory period expired).

ee ee a ee ae -

1981. 40 C.F.R. Part 257 (1985).4° NRDC has never

filed suit challenging the adequacy of the Section 405

rules. Thus, even if the Section 405 rules were deemed

reviewable under Section 509(b) of the Act, NRDC’s

suit would nonetheless be barred.

NRDC’s failure to pursue the Section 405 sludge

regulation issues in the proper manner, in violation

of the jurisdictional provisions of the Act, causes great

prejudice to all affected parties. If NRDC had chal-

lenged the EPA sludge rules in 1979 or 1981 (or had

NRDC promptly challenged the sludge provisions in

the 1978 or 1981 removal credit regulations), the Sec-

tion 405 issues would almost. certainly have been re-

solved by now. Because NRDC chose to wait up to

eight years to file suit, the decision below will result

in considerable disruption to the pretreatment pro-

gram. See pages 9-12 above.

III. Contrary To Recent Decisions Of This Court, The

Decision Below Upsets EPA’s Reasonable Con-

struction Of The Act.

The Supreme Court has held that in deciding

whether EPA regulations are in conformity with the

statute, the Court need not find that EPA’s construc-

tion of the statute is the only permissible construc-

tion, but simply that EPA’s construction is ‘a

sufficiently rational one to preclude a court from sub-

stituting its judgment for that of EPA.” Chemical

Manufacturers Association v. NRDC, 105 S.Ct. 1102,

1108 (1985); see also Chevron v. NRDC, 467 U.S. 837,

842-45 (1984). In the present case, the Third Circuit

has overturned EPA’s reasoned construction of the

1544 Fed. Reg. 53460 (1979). Certain amendments were pub-

lished in 1981. 46 Fed. Reg. 47052 (1981).

Act on grounds which appear to relate more to policy

concerns than to the language and history of the Act.

The court below held that under Section 307(b\1)

of the Clean Water Act, removal credits may only be

granted if EPA has promulgated a “comprehensive

framework” to regulate sludge use and disposal.

(Appx. at A-52) (Emphasis added.) Under the court’s

ruling, it is not sufficient that a POTW comply with

guidelines under Section 405(d) of the Act and all

other applicable federal, state and local sludge use

and disposal requirements. (Appx. at A-50 — A-51)

The court found an absence of a “comprehensive

_ framework” of Section 405 regulations, and thus held

that credits may not be granted. The decision below

overlooks the plain language of the statute and the

legislative history.

Section 307(bX1) of the Act says nothing about a

comprehensive set of sludge guidelines. It simply re-

quires that the granting of any removal credits ‘‘not

prevent sludge use or disposal by such [POTW] in

accordance with section 1345 of this Title ....” 33

U.S.C. § 1317(bX1). The natural reading of this pro-

vision is that removal credits must be consistent with

any applicable sludge use and disposal requirements—

not some comprehensive set of requirements that

might be developed in the future.

The language of Section 405 of the Act confirms

this interpretation of the removal credits provision.

Section 405(d) of the Act requires EPA to publish

sludge use and disposal regulations within one year

of enactment (i.e., by December 1978) and from time

to time thereafter. 33 U.S.C. § 1345(d) (1982). Con-

gress understood that EPA could not be expected

immediately to have a complete, comprehensive set

of rules in place, and thus envisioned that they would

be established over a period of years. Moreover, noth-

ing in Section 405(d) of the Act mentions a ‘‘com-

prehensive” set of rules. It simply directs EPA to

identify uses of sludge, various factors to be taken

into account in determining disposal measures, and

concentrations of pollutants that interfere with each

such use. Id. This directive is very general in nature

and gives EPA considerable latitude in determining

appropriate guidelines and developing the guidelines

over time. Yet the decision below requires that there

be some undefined comprehensive program in place

before POTWs may grant removal credits.

As the Third Circuit recognized, EPA has promul-

gated sludge disposal criteria under Section 405 and

has issued rules governing the use and disposal of

sludge under other federal statutes as well.’* The

‘6 The Section 405 criteria include location and groundwater

criteria, prohibit the open burning of sludge and restrict land-

filling and landspreading of sludge under certain circumstances.

Rules governing sludge disposal under other statutes are also

applicable. If sludge is hazardous, land disposal is governed by

40 C.F.R. Parts 260-71 (1985), pursuant to the Resource Con-

servation and Recovery Act (RCRA), 42 U.S.C. § 6901, et seg.

(1982 & Supp. II 1984). Ocean dumping is governed under 40

C.F.R. Parts 220-228 (1985), pursuant to the Marine Protection,

Research, and Sanctuaries Act, 33 U.S.C. §§ 1412, 1418 (1982).

Ocean discharge is regulated under the permitting criteria of 40

C.F.R. Part 125, subpart M (1985) and the restrictions of Section

301(h) of the Clean Water Act, 33 U.S.C. § 1311(h) (1982).

Sludge incineration is regulated pursuant to several programs

under the Clean Air Act, 42 U.S.C. § 7401, et seg. (1982 &

Supp. IT 1984), and the Toxic Substances Control Act, 15 U.S.C.

§ 2601, et seq. (1982), including state implementation plans and

permitting requirenients under 40 C.F.R. Parts 51-52 (1985);

new source performance standards under 40 C.F.R. Part 60,

Third Circuit refers to these restrictions on sludge

disposal as a “regulatory patchwork” (Appx. at A-

50), but it is quite logical for EPA to rely on rules

developed under statutory programs directed at par-

ticular means of disposal. For example, the Clean Air

Act establishes a comprehensive set of mechanisms

for regulating air emissions. See, e.g., Chevron v.

NRDC, supra. It makes perfect sense for EPA to say

that incineration of sludge will be governed by the

requirements of the Clean Air Act.!”

In understanding what Congress meant in Section

307(b) of the Act, Section 405(e) is significant. The

Third Circuit read Section 307(b) as if it referred only

to Section 405(d) of the Act; it does not. Instead,

Section 307(b) refers to all of Section 405, including

Section 405(e), which makes clear that POTWs must

comply only with whatever sludge use and disposal

regulations are in effect. Congress could in theory

have provided that no disposal of POTW sludge would

be lawful unless it complied with a comprehensive set

of EPA guidelines—but Congress did not do so. Con-

gress apparently recognized that development of en-

vironmental rules on an issue as complex as sludge

takes time, and thus must be phased in over time.

Accordingly, Congress provided in Section 405(e) only

subpart O (1985); national emission standards under 40 C.F.R.

Part 61, subpart E (1985); and control requirements under 40

C.F.R. Part 761, subpart D (1985).

17 For example, EPA recently proposed to modify the new

source performance standards for incineration of sewage sludge

by sewage treatment plants. 51 Fed. Reg. 13424 (1986). EPA

noted that the proposal “relies on the authority of the Clean

Air Act, and does not require the use of the authority of Section

405 of the Clean Water Act for its implementation.” Id. at

13425.

that it is unlawful to dispose of sludge™‘for any use

for which guidelines have been established pursuant

to subsection (d) of this section, except in accordance

with such guidelines.’’!* The import of this language

is clear—a POTW must comply only with applicable

sludge guidelines, not some set of rules that EPA

might someday establish given sufficient time, data

and resources.

The decision below is also contrary to the intent

of Congress. The Conference Report on the 1977

Amendments to the Act, which enacted Section 405,

states as follows:

The determination of the manner of disposal

or use of sludge is a local determination ex-

cept that if a guideline has been established

for a use it is thereafter unlawful for the

owner or operator of a [POTW] to dispose

of sludge from such works for that use ex-

cept in accordance with the guideline.”

18 Section 405(e) of the Act, 33 U.S.C. § 1845(e) (1982), pro-

vides as follows:

The determination of the manner of disposal or use of sludge

is a local determination except that it shall be unlawful for

the owner or operator of any publicly owned treatment

works to dispose of sludge from such works for any use for

which guidelines have been established pursuant to subsec-

tion (d) of this section, except in accordance with such guide-

lines.

19 H.R. Rep. No. 830, 95th Cong., lst Sess. 87 (1977), re-

printed in Vol. 3, A Legislative History of the Clean Water Act

of 1977, Cong. Research Service, No. 14 (Comm. Print 1978) at

271 (hereinafter ‘1977 Leg. Hist.’’).

This point was emphasized by Representative Anderson, one

(footnote continues)

Once again, not a word is said about a “‘comprehen-

sive framework’ for sludge disposal. Congress di-

rected EPA to establish guidelines it finds

appropriate, and POTWs are allowed to dispose of

their sludge in any manner they choose, so long as

they comply with those guidelines.

In interpreting Section 307(b), the Third Circuit

summarily rejected EPA’s construction of that pro-

vision, which had been unchanged since Section 307(b)

was enacted. The court did not analyze the language

of Sections 307(b) or 405(d), and did not even mention

Section 405(e) or the legislative history cited above.

In substituting its own policy judgment for that of

EPA, the court has violated the fundamental princi-

ples set forth by this Court in Chemical Manufactur-

ers Association v. NRDC, supra, and Chevron v.

NRDC, supra.

(footnote continued)

of the Conferees on the 1977 Amendments, whe described Sec-

tion 405 as follows:

The determination of the manner of sludge use or disposal

is a local determination. However, once EPA has published

guidelines for a sludge use or disposal, it is unlawful for

the owner or operator of a municipal treatment works to

use or dispose of sludge except in accordance with such

guidelines.

1977 Leg. Hist. at 404.

CONCLUSION

For the foregoing reasons, the petition for a writ

of certiorari should be granted.

Of Counsel:

DAVID F. ZOLL

FREDRIC P. ANDES

Chemical Manufacturers

Association

2501 M Street, N.W.

Washington, D.C. 20037

August 1986

Respectfully submitted,

THEODORE L. GARRETT

(Attorney of Record)

CORINNE A. GOLDSTEIN

Covington & Burling

1201 Pennsylvania

Avenue, N.W.

P.O. Box 7566

Washington, D.C. 20044

(202) 662-6000

Attorneys for Petitioner

Chemical Manufacturers

Association

APPENDIX

INDEX TO APPENDIX

Page

. Opinion of the Court in Natural Resources Defense

Council, Inc., et al. v. EPA, No. 84-3530 (3d Cir.,

RG, SE perisicnicaraatbecdeeteensssaisnstantiasnentanies A-1

. Clean Water Act Provisions .................cccsecseceeees A-55

. Removal Credit Regulation, 40 C.F.R. § 403.7

CD slesciechziiisdiattha bicchd cia cbrtibiierisdcbiadiiandstipiiinedsaphinnaes A-57

. Orders of The Third Circuit Denying Rehearing

in Natural Resources Defense Council, Inc., et al.

v. EPA, No. 84-3530 (3d Cir., July 11, 1986) ... A-70

. Order of the Third Circuit Staying the Mandate

in Natural Resources Defense Council, Inc., et al.

v. EPA, No. 84-3530 (3d Cir., July 28, 1986) ... A-78

A-1

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 84-3530

NATURAL RESOURCES DEFENSE COUNCIL, INC.

Petitioner

U. S. ENVIRONMENTAL PROTECTION AGENCY

Respondent

CHEMICAL MANUFACTURERS ASSOCIATION

Intervenor

CHICAGO ASSOC. OF COMMERCE &

INDUSTRY, ILLINOIS MANUFACTURERS’

ASSOC. AND MID-AMERICA LEGAL FOUNDATION

Intervenors

No. 85-3012

CERRO COPPER PRODUCTS COMPANY,

AND VILLAGE OF SAUGET

Petitioners

WILLIAM D. RUCKELSHAUS, ADMINISTRATOR,

UNITED STATES ENVIRONMENTAL

PROTECTION AGENCY,

and

UNITED STATES ENVIRONMENTAL

PROTECTION AGENCY

Respondents

NATURAL RESOURCES DEFENSE COUNCIL, INC.

Intervenor

A-2

On Petition for Review of a Final Rule

Issued by the United States

Environmental Protection Agency

Argued September 10, 1985

BEFORE: HUNTER, GARTH, and HIGGINBOTHAM.

Circuit Judges

(Opinion filed April 30, 1986)

Frances Dubrowski (Argued)

Natural Resources Defense Council, Inc.

1350 New York Avenue, N.W., Suite 300

Washington, D.C. 20005

Attorney for Petitioner

(No. 84-3530)

Attorney for Intervenor

(No. 85-8012)

Richard J. Kissel

M. Therese Yasdick (Argued)

Daniel F. O’Connell

Martin, Craig, Chester & Sonnenschein

115 S. LaSalle Street

Chicago, Illinois 60603

Harold G. Baker, Jr.

56 South 65th Street

Belleville, Illinois 62223

Attorneys for Petitioners

Cerro Copper Products Co.

and Village of Sauget

(No. 85-8012)

A-3

F. Henry Habicht, II

Assistant Attorney General

Land and Natural Resources Division

Carl Strass

Land and Natural Resources Division

Environmental Defense Section

United States Department of Justice

Post Office Box 7415

Washington, D.C. 20044

Dov Weitman (Argued)

Office of General Counsel (LE-1325)

U. S. Environmental Protection Agency

401 M Street, S.W.

Washington, D. C. 20460

Of Counsel:

Gerald H. Yamada

Acting General Counsel

Susan G. Lepow

Assistant General Counsel

Attorneys for Respondents

(Nos. 84-8530 & 85-3012)

Theodore L. Garret

Corinne A. Goldstein

Covington & Burling

1201 Pennsylvania Avenue, N.W.

P. O. Box 7566

Washington, D.C. 20044

Of Counsel: |

David F. Zoll

Frederic P. Andes

Chemical Manufacturers Association

2501 M Street, N.W.

Washington, D. C. 20037

Attorneys for Intervenor

Chemical Manufacturers Association

(No. 84-3530)

John M. Cannon

Susan W. Wanat

Ann Plunkett Sheldon

Mid-America Legal Foundation

20 North Wacker Drive, Suite 842

Chicago, Illinois 60606

Attorneys for Intervenors

Chicago Assoc. of Commerce & Industry,

Illinois Manufacturers’ Association

and Mid-America Legal Foundation

(No. 84-3530)

A-5

OPINION OF THE COURT

GARTH, Cirewit Judge:

These consolidated petitions challenge an amended final

rule of the Environmental Protection Agency (EPA),

known as the removal credit rule, 49 Fed. Reg. 31212

(1984) codified at 40 C.F.R. § 403.7), promulgated pursuant

to the Federal Water Pollution Control Act (“FWPCA”’

or “Clean Water Act’’) of 1977, Pub. L. No. 95-217.91

Stat. 1566 (codified at 33 U.S.C. 1251 et seq.).

The Clean Water Act of 1972 set as a national goal the

Elimination, by 1985, of the discharge of pollutants into

the nation’s navigable waters. Pub. L. No. 92-500, 86 Stat.

816 § 101(aX1) (codified at 33 U.S.C. § 1251(aX1)). In 1977,

recognizing that the 1972 Act’s regulatory mechanism for

the control of toxics‘‘ha{d] failed,’ Congress amended the

Clean Water Act to clarify and strengthen its provisions

for dealing with toxic pollutants. Leg. Hist. 326-27! (com-

ments of the House manager of the bill, Rep. Roberts);

see also id. at 369 (statement of Rep. Clausen); id. at 427

(statement of Sen. Muskie).

One aspect of the 1977 Act’s strengthened program to

control toxic pollutants was a requirement that an indirect

discharger i.e. an industrial discharger whose wastes flow

into a public sewage system rather than directly into na-

vigable waters, had to “pretreat” its waste waters so as

to achieve, together with the Publicly Owned Treatment

Works (POTW) that treated the waste before final dis-

charge into navigable waters, the same level of toxics re-

moval as was required of a direct discharger, which

discharged directly into a river, lake, or ocean. At the

same time, the Act allowed the indirect discharger to re-

' Citations to the legislative history, unless otherwise indicated, are

to Senate Comm. on Environment and Public Works, A Legislative

History of the Clean Water Act of 1977 (Comm. Print 1978) (prepared

by the Environmental Policy Division of the Congressional Research

Service of the Library of Congress).

A-6

ceive a “removal credit” from the POTW for the amount

of waste removed from the stream of waste water by the

POTW itself. 33 U.S.C. § 1317(bX1). This provision, de-

signed to avoid redundant treatment, permits an increased

amount of pollutants to flow from the indirect discharger’s

plant to the municipal treatment plant provided that the

additional pollutants are removed by the municipal plant.

By this process, the amount of pollutants ultimately dis-

charged by the combination of the indirect discharger and

the POTW will be no greater than the amount discharged

by the direct discharger.

The Act also required EPA to develop regulations for

the disposal and utilization of POTW sewage sludge, so

as to prevent contamination of the sludge with toxics re-

moved from the effluent flowing through the POTW, and

so as to encourage the productive recycling of sludge. In

furtherance of this goal, the Act provided that POTWs

could not grant removal credits to indirect dischargers for

the POTW’s removal of toxics from the liquid waste stream

if this removal and consequent transfer of toxics to the

POTW sludge would render the sludge toxic and thus pre-

vent sludge disposal in accordance with those regulations.

33 U.S.C. § 1317(bX1). ~

NRDC challenges four aspects of the removal credit rule.

First, it argues that EPA’s methods of calculating waste

removal by POTWs violates the statutory requirement that

direct and indirect dischargers be held to the same stan-

dard. Second, it argues that EPA’s decision to ignore sewer

overflow events in calculating the amount of toxic waste

removed by a POTW violates the same requirement. Third,

NRDC claims that EPA’s action in modifying the test for

determining when a credit must be withdrawn violates the

Administrative Procedure Act, 5 U.S.C. § 551 et seq., and

the Clean Water Act, 33 U.S.C. § 1251 et seg. Fourth,

NRDC questions whether EPA may put into effect a re-

laxed removal credit rule when the sludge regulations that

A-7

are a precondition for issuance of such credits have not

been promulgated.

In each of these areas, we conclude that EPA’s 1984

removal credit regulations fail to meet statutory require-

ments. Furthermore, even extending the utmost deference

to the Agency, we conclude that the promulgation of these

regulations on the basis of the administrative record before

us is arbitrary and capricious. Thus we grant NRDC’s

petition for review.

In contrast to NRDC, Petitioners Cerro Copper and Vil-

lage of Sauget challenge the regulations as too strict and

inflexible to take into account situations such as theirs.

The petitions of Cerro Copper and the Village of Sauget

will be denied.

In order to understand the issues presented on this

appeal, it is helpful to trace the history of the statute and

regulations which were designed to eliminate the discharge

of pollutants into our waters.

The removal credit rule at issue here is a part of a

complex regulatory framework mandated by the Federal

Water Pollution Control Act Amendments of 1972 and

1977, 33 U.S.C. §§ 1251 et seg. The statute calls for a

two-phase program to limit discharges of effluence. Direct

dischargers of toxic wastes were to comply with the Best

Practicable Control Technology (BPT) by July 1, 1977, 33

U.S.C. §§ 1811(bX1XA), 1314(b\(1). Between 1983 and 1987,

direct dischargers of toxic wastes were to meet the more

stringent standards consistent with the Best Available ©

Technology economically achievable (BAT), 33 U.S.C. §

1311(bX2). The statute also mandated that the EPA set

effluent limitations for POTWs engaged in the treatment

A-8

of municipal sewage or industrial wastewater.” Id. §§ 1311

(bX1XB){C), 1314(dX1). Such limitations were to result in

equal levels of treatment for ali toxic discharges, whether

issued directly into navigable waters or channelled by a

sewage system through a POTW.

Because secondary treatment by POTWs cannot deal

adequately with toxic pollutants, the statute required that

EPA establish national pretreatment standards, i.e. stan-

dards to which an indirect discharger must conform in

treating its waste before such waste reaches the POTW.

Those standards, applicable to indirect dischargers, provide

for pretreatment which is equivalent to BAT standards.

33 U.S.C. 1817 (b\1).?

In order to avoid redundant treatment by the indirect

discharger and the POTW (‘‘treatment for treatment’s

sake,” Leg. Hist. 343), section 307(bX1) of the 1977 Act,

33 U.S.C. § 1317(bX1), requires that the POTW be au-

thorized to give credit to the indirect discharger for re-

moval of pollutants achieved by the POTW. The removal

credit provision thereby equates the amount of pollutants

removed by the combined treatment of the POTW and the

indirect discharger with the amount of pollutants removed

by the direct discharger operating under the relevant BAT

standard. 33 U.S.C. § 1317(b\1).

? There are three levels of wastewater treatment. Primary treatment

refers to a physical sedimentation process for removing settleable solids.

Secondary treatment refers to a physical/biological process for removing

solids and pollutants characterized by biological oxygen demand and

pH. Tertiary treatment involves processes which remove other pollut-

ants such as non-biodegradable toxics. See Assessment of the Impacts

of Industrial Discharges on Publicly Owned Treatment Works 1:7 (re-

port prepared for EPA by JRB Associates) (1981) (App.192): see also

Leg. Hist. 329-30. The statute requires that existing POTWs meet

standards based on secondary treatment. Tertiary treatment is ordi-

narily provided only by industrial dischargers or by specially designed

POTWs.

® Section 307(bX1) of the Clean Water Act, 33 U.S.C. § 1317(bX1),

is reproduced in its entirety in the Appendix as Exhibit A.

A-9

The removal credit provision was added to the statute

by the Clean Water Act of 1977, Pub. L. No. 95-217, 91

Stat. 1589. That law was enacted in response to Congress’s

recognition of the growing seriousness of the problems of

toxic pollution, and of the woeful inadequacy of the 1972

Act in dealing with them. Leg. Hist. 326-27, 454-55, 862-

65.

The 1977 Act strengthened the controls over toxic pol-

lutants in several ways. The 1977 Act explicitly codified

the toxics consent decree issued by the District Court for

the District of Columbia. That decree resulted from liti-

gation brought by environmental groups to challenge

EPA’s failure to promulgate the effluent standards man-

dated for toxic substances by the 1972 Act. See NRDC v.

Train, 8 Env’t Rep. Cas. (BNA) 2120 (D.D.C. 1976), mod-

ified sub nom. NRDC v. Costle, 12 Env’t Rep. Cas. (BNA)

1833 (D.D.C. 1979), modified sub nom. NRDC v. Gorsuch,

No. 72-2153 (D.D.C. Oct. 26, 1982), modified sub nom.

NRDC v. Ruckelshaus, No. 73-2153 (D.D.C. Aug. 2, 1983

and Jan. 6, 1984). Following that decree, Congress re-

quired that BAT effluent guidelines, applicable to direct

dischargers, be developed by July 1, 1980 for the 65 toxic

pollutants listed in the decree. Pub. L. No. 95-217, § 53(a),

91 Stat. 1589 (codified at 33 U.S.C. § 1317(aX2)). Also

following the toxics decree, the 1977 Act amended section

307(bX1) of the Act, 33 U.S.C. § 1317(bX1), to require EPA

to promulgate pretreatment regulations for indirect dis-

chargers analogous to the BAT standards for direct dis-

chargers.‘ Congress stressed that pretreatment standards

had to be based on BAT or more stringent limits. See 33

U.S.C. § 1817(a); Leg. Hist. at 271, 342, 403, 461, 690.

‘It is fairly arguable that the 1972 Act already required EPA to do

what the toxics consent decree mandated. In any case, the 1977 Act

clarified the congressional intent to cleanse the nation’s waters of toxic

pollutants.

A-10

While strengthening and clarifying the pretreatment re-

quirements for toxics, Congress added the following pro-

vision to the statute, thus providing for removal credits

to avoid redundant treatment:

If, in the case of any toxic pollutant under subsection

(a) of this section introduced by a source into a pub-

licly owned treatment works, the treatment by such

works removes all or any part of such toxic pollutant

and the discharge from such works does not violate

that effluent limitation or standard which would be

applicable to such toxic pollutant if it were discharged

by such source other than through a publicly owned

treatment works, and does not prevent sludge use or

disposal by such works in accordance with section

1345 of this title, then the pretreatment requirements

for the sources actually discharging such toxic pol-

lutant into such publicly owned treatment works may

be revised by the owner or operator of such works

to reflect the removal of such toxic pollutant by such

works.

33 U.S.C. § 1317(bX1).5

In addition, Congress sought to ensure that sewage

sludge, instead of becoming a depository for toxic pollut-

ants, should be usable as fertilizer or for other productive

purposes. It did so by amending section 405 of the Clean

Water Act to require EPA to develop regulations for

sludge use or disposal within one year of the statute’s

enactment. 33 U.S.C. § 1345(d).

In conjunction with this amendment to section 405, Con-

gress also amended section 307(bX1) of the Act to ensure

that EPA did not, in the course of administering the re-

moval credit program, undermine the objective of render-

ing sewage sludge nontoxic and usable. By the same

‘As we discuss below, the concept of removal credits had already

been adopted by EPA in its 1973 pretreatment regulations.

A-11

amendment, quoted above, that provided for removal cred-

its, Congress also prohibited for granting of removal cred-

its if such credits would lead to sludge contamination that

would prevent the use of disposal of sludge in conformity

with the section 405 regulations. FWPCA 307(bX1), 33

U.S.C. § 1317(bX1).®

The removal credit regulation at issue here allows

POTWs to grant removal credits to indirect dischargers

so that the indirect discharger may increase its dischargers

of the pollutant by the amount that the POTW removes.

The statute mandates that such credits be equal to the

amount of toxics consistently removed by the POTW.

The regulation requires that each POTW first determine

its removal efficiency (or “consistent removal rate’’) for

each regulated pollutant. This is generally done through

a process of measuring the concentration of a given pol-

lutant found in the waste flowing into a POTW (i.e., the

influent) and then measuring its concentration in the waste

flowing out of the POTW (i.e., the effluent). Removal is

expressed as a percentage of the amount in the influent.

If, for example, a POTW consistently removes 60% of a

particular pollutant that flows into it, it can grant a 60%

credit to the indirect discharger. The indirect discharger

would then be permitted to discharge more than twice as

* Congress also increased EPA’S power to enforce the pretreatment

program. New section 309(f), 33 U.S.C. § 1319%f), gave EPA direct

enforcement authority against industrial users violating pretreatment

standards, so that EPA would not be forced to rely solely on munic-

ipalities for enforcement. Amended section 402(bX8), 33 U.S.C. §

1342(bX8), ensured timely identification of pollutants discharged by in-

direct dischargers to POTWs.

New enforcement provisions were also enacted to ensure compliance

with the new section 405 siudge regulations. FWPCA §§ 309(a\1), (aX3),

& (d), 33 U.S.C. §§ 1319(aX1), (aX3), & (d).

A-12

much of that pollutant to the POTW than it would oth-

erwise have been allowed to discharge.’

The removal credit rule is one part of the General Pre-

treatment Regulations for Existing and New Sources of

Pollution, 40 C.F.R. § 403.1-16 (1984). These pretreatment

regulations provide the framework for implementation of

another set of regulations, the Categorical Pretreatment

Standards, which establish specific limits for the discharge

of particular toxic pollutants.

The present removal credit rule is the fourth version of

the rule promulgated by EPA on this subject. The first

version, promulgated in 1973, was sketchy. It foreshad-

owed the statutory removal credit provision of section

1317(bX1) enacted in 1977. 38 Fed. Reg. 30982-84 (1973).

In 1977, EPA promulgated more complete regulations.

Each of the two succeeding versions following the 1977

version has further relaxed the requirements that POTWs

and indirect dischargers are required to meet. From the

first regulations through all subsequent revisions, the reg-

ulations purport to require that indirect dischargers be

held to the same standard as direct dischargers, subject

to credit for removal of toxics by the POTW.

In 1977, following the issuance of the toxics consent

decree in NRDC v. Train, 8 Env’t Rep.Cas. (BNA) 2120,

EPA proposed more developed pretreatment regulations.

42 Fed. Reg. 6176 (1977). While this proposal was pending,

Congress enacted the Clean Water Act amendments of

1977, adding the removai credit provision to section

307(bX1). After extensive comment and participation by

7For example, if we were to assume a standard that permits the

discharge of 20 units per 1000, and if the POTW removes 60% of the

pollutants found in the influent, then the indirect discharger can dis-

charge 50 units, which will then be reduced to the permissible standard

of 20 units by the POTW before the final discharge into navigable

waters. In the absence of removal by the POTW, the indirect discharger

itself would, of course, be required to remove all but the 20 units.

A-13

interested parties, including four public hearings and six-

teen public meetings, which generated testimony and com-

ments from 400 individuals and groups, EPA, on June 26,

1978, promulgated its second removal credit regulations

as a part of the General Pretreatment Regulations on June

26, 1978. 48 Fed. Reg. 27736 (1978).

Following adoption of these regulations, industry and

environmental groups brought several actions challenging

the second removal credit provision. A settlement agree-

ment between EPA and the industry parties led EPA to

propose amendments to these regulations. 44 Fed. Reg.

62260 (1979). A third regulation was promulgated on Jan-

uary 28, 1981. 46 Fed. Reg. 9404 (1981).

The revised rules made it substantially easier for POTWs

to grant removal credits and to give larger credits for the

same pollutant removals. Several industry parties none-

theless again brought suit, contending that the new rules

did not go far enough. These actions were consolidated

with the actions of environmental groups challenging the

1978 and 1981 regulations, all of which were heard by this

Court in National Association of Metal Finishers v. EPA,

719 F.2d 624 (3d Cir. 1983) [hereinafter NAMF’] reversed

in part sub nom. Chemical Manufacturers Ass’n v. NRDC,

105 S. Ct. 1102 (1985). In NAMF, this court upheld the

1981 removal credit rule, rejecting industry arguments

similar to, or identical with, those made by EPA here.’

At the same time that they were attacking the 1981

regulations in court, the industry petitioners also urged

EPA to suspend these same regulations so that they could

be reconsidered by the new Administration. See, e.g., let-

® In Chemical Manufacturers Ass’n. v. NRDC, 105 S. Ct. 1102 (1985),

the Supreme Court reversed a part of the Third Circuit’s judgment in

NAMF, however, the Supreme Court left undisturbed that portion of

the judgment that dealt with removal credits.

A-14

ters from Chemical Manufacturers Ass’n to EPA, Mar. 9,

1981 & Mar. 19, 1981, App. 145-51. In fact, EPA did

defer the effective date of the 1981 regulations indefi-

nitely, and subsequently proposed to develop yet another

removal credits provision. 47 Fed. Reg. 4520 (1982).

In response to a suit brought by NRDC, this Court ruled

that EPA’s suspension of the pretreatment regulations

without notice or opportunity for public comment violated

the Administrative Procedure Act, 5 U.S.C. § 553(b}e),

and that therefore both this initial suspension and a sub-

sequent rulemaking proceding, extending that suspension

in part, were illegal. The EPA was therefore ordered to

reinstate all of the amendments retroactively to March 10,

1981. Natural Resources Defense Council v. EPA, 683 F.2d

752,768-69 (8rd Cir. 1982).

EPA complied with this order on September 28, 1982.

47 Fed. Reg. 42688 (1982). However, on that same day,

EPA proposed to amend the removal credit rule once

again, on the grounds that it “has been criticized as being

so burdensome and unwieldy as to discourage POTWs from

applying for and obtaining authorization to grant removal

credits.” 47 Fed. Reg. 42698 (1982).

The fourth and ostensibly final removal credit rule, which

is the one at issue here, was promulgated on August 3,

1984. 49 Fed. Reg. 31212 (1984) (codified at 40 C.F.R. §

403.7) (1985). Among other changes, this rule adopted a

new, more lenient, method of measuring the consistency

of toxics removal by POTWs. The overall effect of the

new rule is that it enables POTWs to grant more and

larger credits than under the 1981 rule, which itself con-

stituted a relaxation of the 1978 rule. As a consequence,

the requirements for industrial pretreatment have been

very significantly reduced.

* The full text of the 1984 removal credit is reproduced in the Ap-

pendix as Exhibit C.

A-15

Petitioner NRDC filed a timely petition for review of

the 1984 (fourth) rule, claiming that whereas the 1981 rule

was in compliance with the statute, the 1984 rule has

relaxed the conditions for granting removal credits beyond

the bounds permitted by the Clean Water Act. Petitioners

Cerro Copper and Village of Sauget, in contrast, seek to

have the 1984 rule set aside on the ground that, as applied

to them, the rule is more severe than the statute allows.

In addition, all petitioners present procedural arguments

as to why the rule is invalid.

Il.

Our standard of review of the Agency’s informal rule-

making in this case is governed by section 10(eX2) of the

Administrative Procedure Act, 5 U.S.C. § 706(2), and in

particular by subsections (A), (C), and (D), which provide

that the reviewing court shall ‘‘hold unlawful and set aside

agency action, findings, and conclusions found to be—(A)

arbitrary, capricious, an abuse of discretion, or otherwise

not in accordance with law; ... (C) in excess of statutory

jurisdiction, authority, or limitations, or short of statutory

right; [or] (D) without observance of procedure required

by law.”’ 5 U.S.C. § 706(2XA), (C), & (D).

We must first determine whether the regulations are in

conformity with the statute. In making this determination,

the ‘“‘view of the agency charged with administering the

statute is entitled to considerable deference; and to sustain

it, we need not find that it is the only permissible con-

struction that EPA might have adopted but only that

EPA’s understanding of this ‘very complex statute’ is a

sufficiently rational one to preclude a court from substi-

tuting its judgment for that of EPA.” Chemical Manu-

facturers Association v. NRDC, 105 S.Ct. 1102 (1985)

(interpreting the Clean Water Act); see also Chevron v.

NRDC, 104 S.Ct. 2778, 2781-83 (1984); NAMF, 719 F.2d

at 6387.

A-16

On the other hand, this court may not abdicate its re-

sponsibility to interpret the statute in accordance with tra-

ditional principles of statutory construction. ‘[Whhile

reviewing courts should uphold reasonable and defensible

constructions of an agency’s enabling Act ... they must

not ‘rubber-stamp ... administrative decisions that they

deem inconsistent with a statutory mandate or that frus-

trate the congressional policy underlying a statute.’” Bu-

reau of Alcohol, Tobacco, and Firearms v. Federal Labor

Relations Authority, 464 U.S. 89, 97 (1983) (quoting NLRB

v. Brown, 380 U.S. 278 (1965)); see also Consumer Product

Safety Commission v. GTE Sylvania, Inc., 447 U.S. 102,

120 (1980); International Brotherhood of Teamsters, Chauf-

feurs, Warehousemen, and Helpers of America v. Daniel,

439 U.S 551, 566 & n.20 (1979); Hi-Craft Clothing Co. v.

NLRB, 660 F.2d 910, 915 (8d Cir. 1981).

Statutory interpretation is one of the traditional func-

tions of courts. Of course, [fi]f 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 ex-

pressed intent of Congress.’ Chevron v. NRDC, 104 S. Ct.

2781-82 (1984). Furthermore, agency action in fulfillment

of a statutory mandate is entitled to a presumption of

regularity. Citizens to Preserve Overton Park v. Volpe, 401

U.S. 402, 415 (1971). But this presumption is not “‘equiv-

alent [t]o the presumption of constitutionality afforded leg-

islation drafted by Congress.” Motor Vehicle Manufacturers

Ass’n., 463 U.S. at 43 n.9. “The judiciary is the final

authority on issues of statutory construction and must re-

ject administrative constructions which are contrary to

clear congressional intent.” Chevron v. NRDC, 104 S. Ct.

2778, 2782 n.9. We must, therefore, first determine

whether EPA’s position is at least “‘within the outer limits

of its authority to interpret” the statute. Teamsters v.

Daniel, 439 U.S. at 566.

Second, we must examine the challenged aspects of the

rulemaking procedure carefully to determine independently

A-17

that the Agency has not acted unfairly or in disregard of

the statutorily prescribed procedures for notice and com-

ment rulemaking. See, ¢.g., NAMF’, 719 F.2d at 627-38;

American Iron & Steel Institute v. EPA, 568 F.2d (3d Cir.

1977).

Third, we must review the substantive aspects of agency

action under the arbitrary and capricious standard of 5

U.S.C. § 706(2XA). This standard has recently been de-

scribed by the Supreme Court as follows:

The scope of review under the ‘arbitrary and capri-

cious” standard is narrow and a court is not to sub-

stitute its judgment for that of the agency.

Nevertheless, the agency must examine the relevant

data and articulate a satisfactory explanation for its

action including a ‘rational connection between the

facts found and the choice made.” Burlington Truck

Lines, Inc. v. United States, 371 U.S. 156, 168 (1962).

In reviewing that explanation, we must “consider

whether the decision was based on a consideration of

the relevant factors and whether there has been a

clear error of judgment.” Bowman Transportation,

Inc. v. Arkansas-Best Freight System, Inc., supra, at

416. 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 differ-

ence in view or the product of agency expertise. The

reviewing court should not attempt itself to make up

for such deficiencies; we may not supply a reasoned

basis for the agency’s action that the agency has not

given. SEC v. Chenery Corp., 332 U.S. 194, 196 (1947).

We will, however, “‘uphold a decision of less than ideal

clarity if the agency’s path may reasonably be dis-

cerned.”’ Bowman Transportation, Inc. v. Arkansas-

A-18

Best Freight System, Inc., supra, at 286. See also

Camp v. Pitts, 411 U.S. 188, 142-43 (1978) (per cur-

1am).

Motor Vehicle Manufacturers Ass’n v. State Farm Mutual,

463 U.S. 29, 43 (1983). See also Bowman Transportation,

Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. 281,

284 (1974); Citizens to Preserve Overten Park v. Volpe, 401

U.S. 402, 416 (1971).

We must defer to an agency’s expert judgment when

it is acting within the scope of the statute, but we cannot

allow expertise to shield an irrational decision-making proc-

ess. ‘“[U]nless we make the requirements for administra-

tive action strict and demanding, expertise, the strength

of modern government, can become a monster which rules

with no practical limits on its discretion.’ ... We have

frequently reiterated that an agency must cogently explain

why it has exercised its discretion in a given manner... .”

Motor Vehicle Manufacturers Ass’n, 463 U.S. at 48-49 (ci-

tations omitted).

Where, as here, an agency has reversed its established

interpretation of a statute, the degree of deference ac-

corded to the agency may be somewhat lessened. As this

court has said, “sharp changes of agency course constitute

‘danger signals’ to which a reviewing court must be alert.”

NRDC v. EPA, 683 F.2d at 760 (citation omitted). See also

Motor Vehicle Manufacturers Ass’n v. State Farm Mutual,

463 U.S. at 42 (“A ‘settled course of behavior embodies

the agency’s informed judgment that, by pursuing that

course, it will carry out the policies committed to it by

Congress. There is, then, at least the presumption that

those policies will be carried best if the settled rule is

adhered to.’” (citation omitted)); Sierra Club v. United

States Army Corps of Engineers, 772 F.2d 1048, 1046 (2d

Cir. 1985) (“A change in something from yesterday to

today creates doubt. When the anticipated explanation is

not given, doubt turns to disbelief.”) An agency is, of

course, free to change its position, but it must supply

adequate data and a reasoned analysis to support the

change.

We will apply these standards of review first to the

challenges raised by NRDC (parts III-IV) and then to the

issues raised by Cerro Copper and the Village of Sauget

(part VII).

Ill.

EPA’s 1984 removal credit rule provides that the com-

bined amount of toxics removed by an indirect discharger

and a POTW must equal the amount of toxics removed

by the direct discharger. However, as we discuss in greater

detail below, EPA’s 1984 rule fails to require the same

consistency in the removal of toxics by POTWs and indirect

dischargers as is required of direct dischargers. It there-

fore violates the statutory requirement of section 307(b\1)

of the Clean Water Act that the indirect discharge of

pollutants through a POTW must “not violate that effluent

limitation or standard which would be applicable to such

toxic pollutant if it were discharged by [a direct dischar-

ger].” 33 U.S.C. § 1817(bX1) (1977).

The BAT (Best Available Technology) limitations and

standards issued under the statute require direct dischar-

gers to remove a certain amount of each toxic pollutant

with a certain degree of consistency. BAT limitations and

standards have at all times contained these two require-

ments.” Thus, the statutory mandate that the indirect dis-

charger and the POTW together must achieve the same

standard of treatment as is required of the direct dis-

charger requires that the standard of treatment be the

469 (1984). "

A-20

same both in total amount of toxics removed and in the

consistency of such removal.

The BAT limits applicable to direct dischargers are based

on empirical studies of the amount and consistency of re-

moval that can be achieved by a well-designed and oper-

ated plant. These limits require consistency of removal in

two important respects. First, they are set so that a dis-

charger can be in compliance virtually all the time. See,

e.g., General Pretreatment Regulations. 43 Fed. Reg. 27743

(1978). ‘Guidelines are generally calculated with a 99%

confidence level. Therefore, if a discharger exceeds the

effluent limitations established by the guideline regulation,

there is a 99% certainty that it was caused by discharger

error rather than statistical variation.” National Pollutant

Discharge Elimination System Permit Regulations, 49 Fed.

Reg. 38019 (1984). Second, the limits fix precise daily max-

ima as well as monthly averages, neither of which may

be exceeded by the direct discharger. The indirect dis-

charger and the POTW must achieve an equivalent con-

sistency in these two respects.

When Congress enacted the 1977 amendments, many of

the BAT effluent limitations applicable to direct dischar-

gers had already been promulgated and others were near

promulgation. All of them were set so that they could be

met 99% of the time, and all of them contained monthly

averages and daily maxima. See, e.g., 40 C.F.R. §§ 129.192-

129.104 (1984) (effluent standards for endrin, toxaphene,

and benzidine); 40 C.F.R. pts. 405-469 (1984) (effluent lim-

itations guidelines for various industrial categories). Con-

gress, in its 1977 amendment to section 307(bX1) of the

Clean Water Act, used the term “effluent limitation or

standard,’”’ thereby incorporating the consistency require-

ment of that term into the removal credit provision and

making the requirement applicable to POTWs and indirect

dischargers.

A-21

As previously noted, the Clean Water Act of 1977 not

only required indirect dischargers to meet standards equiv-

alent to the BAT standards required of direct dischargers,

but also provided for removal credits to avoid redundant

treatment of wastes by the POTW and the indirect dis-

charger. It is evident to us, from our reading of the stat-

ute, that such removal credits should be made available

only when both the consistency and amount of treatment

are indeed equivalent to BAT standards.

Under the guise of preventing redundant treatment,

EPA has defined the term “consistent removal rate’’ to

encompass POTW pollutant removal that is not consistent

at all. Yet in promulgating the first full removal credit

rule, in 1978, EPA stated:

Since direct dischargers are required to comply with

their effluent limitations at all times, the EPA be-

lieves that the pollutant removal claimed by a POTW

should be that removal which occurs virtually all of

the time. As used in the regulation (§ 403.7), ‘‘con-

sistent’’ removal is the removal capability that a

POTW achieves in 95% of the representative samples

taken.

43 Fed. Reg. 27743 (1978). By permitting inconsistent re-

moval, EPA also permits the granting of credits for treat-

ment that is not redundant but mandatory under the

statute.

The 1978 rule required the POTW to- conduct 12 in-

fluent/effluent samplings each year. The consistent removal

rate was defined as the lowest of the 12 removal rates in

the sample, under the assumption that the POTW would

be removing at least that amount 95% of the time. Because

POTW removal is more variable than that of direct dis-

chargers, and because EPA believed that it would be too

burdensome for POTWs to determine whether they are

removing a toxic with 99% consistency, EPA adopted the

A-22

95% consistency figure for POTWs as substantially equiv-

alent to the 99% figure applicable to direct dischargers.

In response to complaints from indirect-dischargers and

POTWs that the 1978 removal credit provision was ‘“un-

workable” and that most POTWs would not apply for cred-

its, this definition of consistent removal was amended in

the 1981 rule to provide that the level of removal on which

the credit would be based would be that achieved by a

POTW 75% of the time. See 46 Fed. Reg. 9424 (1981).

Seventy-five percent consistency was measured by aver-

aging the lowest six of 12 POTW removal samplings. Jd.

As noted above, the regulated dischargers still claimed

that the removal credit rule was “unworkable,” and

pressed successfully for a further relaxation of the meas-

urement of consistent removal. The 1984 rule, in fact,

provides that ‘‘consistent removal is calculated ... as the

difference between the average influent and effluent con-

centrations in all of the sample data.” 49 Fed. Reg. 31215

(1984). Instead of basing its measure of consistent removal

on an average of the lowest six of the twelve samplings,

as the 1981 rule required, the 1984 rule bases its measure

on the average amount removed in all twelve samplings.

According to this formulation, the amount of removal

achieved by a POTW on average, that is, 50% of the time,

will determine the amount of credit an indirect discharger

will receive.

In short, EPA first changed the definition of ‘‘consist-

ent’”’ removal from its original meaning, i.e. removal that

occurs 95% of the time, to a second meaning, i.e. removal

that occurs 75% of the time. EPA, then, in its 1984 rule,

revised its definition of consistency to refer to removal

that occurs only 50% of the time. We find it difficult to

fathom how a level of removal that is met one half of the

time and exceeded one half of the time, and that contains

no limit on the permissible amount of variability, can be

termed ‘‘consistent.”’

A-23

EPA provides two justifications for the change in the

definition of ‘‘consistent’”’ removal from 75% consistency

to 50% consistency. These justifications are the same ones

advanced by EPA in 1981 for its shift from 95% to 75%

consistency.

The first justification is that the approach used in the

1978 rule, which based the measure of consistent removal

on the lowest of 12 sample removals, is ‘‘statistically un-

sound.” Brief for Respondent at 32 (quoting 1981 Final

Rule, 46 Fed. Reg. 9424 (1981)). In 1981, in justifying its

shift from 95% consistency to 75% consistency, EPA out-

lined its thinking on this issue with commendable candor.

EPA pointed out that using the lowest of the 12 samplings

to define consistent removal might easily give rise to error,

because ‘[tJhe data at the extremes of this 12 point dis-

tribution have the greatest chance of being in error. Thus,

if the lowest level of Removal identified were unrepresen-

tatively low, the POTW would be held to an unreasonably

small level of Removal.” 1981 Final rule, 46 Fed. Reg.

9424. It would be better, EPA said, to estimate the amount

removed 75% of the time rather than trying to estimate

the amount removed 95% of the time, because the amount

removed with 75% consistency could be measured reliably

without increasing the number of samplings.

EPA admitted, in 1981, that the choice between 95%

consistency and 75% consistency was not a purely technical

choice of the one statistically correct method. It stated

frankly that it could estimate the amount of removal re-

quired to attain 95% consistency, and thus cure the “‘sta-

tistical unsoundness.” by increasing the number of annual

samplings required of POTWs. The choice of the 75% level

was “admittedly a compromise,” id., between two policy

11 We observe that twelve samplings may give a fairly good idea of

how much a POTW removes on average, but they are not enough to

give a reliable measure of how much pollutant a POTW removes 95%

of the time.

A-24

considerations. Because POTWs generally have little in-

centive to apply for authorization to grant removal credits,

EPA was concerned that POTWs would not apply for such

authorization if the sampling and reporting requirements

imposed upon them were too onerous.” On the other hand,

EPA was concerned that the rule “ensure that a reason-

ably consistent level of removal is maintained.” 46 Fed.

Reg. 9424 (1981).

Even if EPA’s reasoning might have justified a change

from a 95% to a 75% consistency requirement, that same

reasoning cannot justify a change from a 75% to a 50%

consistency requirement if such a change violates the com-

mand of the statute. That command, as we have repeatedly

observed, requires that the amount and variability of toxic

discharges through a POTW not exceed those that would

be discharged by a direct discharger operating under BAT-

level controls."* The relevant question is not one of finding

2 EPA stated that it “seeks ... to avoid placing more extensive

sampling requirements on the POTW.”’ 1981 Final Rule. 46 Fed. Reg.

at 9424 (1981). In fact, the complaints of industry commenters re-

garding the “unworkability” of the 1978 and 1981 versions of the

removal credit rule were addressed less to the substantive standards

of these rules than to the measurement and reporting requirements

that they imposed. See, e.g. Brief for Intervenors Chicago Ass’n. of

Commerce and Industry et al. (CACI Brief), at 4-5 (Chicago POTW did

not apply for credits under earlier version of removal credits provision

even though it had achieved compliance with applicable limitations):

Letter to EPA from Chemical Manufacturers Association, March 9,

1981 (App. 146) (POTWs will not seek authorization to revise categorical

standards even though they are removing high percentages of pollu-

tants).

Of course, EPA may accommodate such objections, but only within

the limits set by statute. The removal credit calculation, if it is to

embody the necessary controls, will inevitably burden POTWs some-

what. It is up to the indirect discharger, who has a strong incentive

to do so, to reach an arrangement with the POTW so that it can obtain

the removal credit due it under the Clean Water Act.

8 The 1981 change from 95% to 75% consistency was never chal-

A-25

the one correct method of measuring consistent removal,

nor of determining the easiest method of consistent re-

moval, but rather whether a removal credit based on the

amount a POTW removes 50% of the time conforms with

the requirement of the Act. We are convinced that it does

not.

In its brief, EPA makes much of the fact that using all

twelve samplings gives “‘‘a more reliable estimate of the

actual removal achieved than [did] the method employed

in the 1981 amendments’.’’ Brief for EPA at 34 (quoting

Proposed Rule, 47 Fed. Reg. 42700 (1982) (emphasis added

by EPA). EPA’s definition may indeed provide a more

reliable estimate of the actual removal on average. But

both the statute and EPA’s own previous regulations re-

quire that the indirect discharger, in combination with the

POTW, meet the same standard as the direct discharger

must meet. This means not only that the total amount

removed by the POTW and the indirect discharger to-

gether must be at least equal to that removed by a direct

discharger operating under BAT controls, but also that

the POTW and the indirect discharger must consistently

meet the monthly and daily limits that direct dischargers

meet.

EPA’s second justification for its new definition of con-

sistency is that it gives full effect to Congress’ desire to

avoid redundant treatment while still complying with the

mandate of section 307(bX1) that the ultimate discharge

from the POTW must not be greater than that which

would be allowed from a direct discharger.

In its statement of basis and purpose accompanying the

1981 rule, EPA argued that although “ijn most cases the

proposed calculation will indeed result in higher removal

lenged in the courts. Of course, the fact that NRDC did not challenge

a 1981 change that arguably led to some deviation from the statutory

requirement does not bar NFDC today from challenging a rule that is

clearly in violation of the statute.

A-26

allowances and consequently less stringent ... pretreat-

ment limits,’ this would not lead to the discharge of ‘‘un-

acceptable amounts of pollutants . . . to navigable waters.”’

46 Fed. Reg. 9424. EPA explained why, in its view, the

change in the definition of consistent removal would not

lead to POTW discharges in excess of BAT limits:

Industrial users are subject to “daily maximum” and

“long term average” pretreatment limits. If the In-

dustrial User is to meet the long term average, the

User can only: infrequently approach the daily maxi-

mum number in its daily discharge. For the joint

treatment provided by the Industrial User and POTW

to be less effective than that required of a direct

discharger, a discharge by the User at the daily max-

imum level would have to coincide with abnormally

lower removal at the POTW. The statistical compiex-

ities of the situation do not permit a numerical es-

timate of the number of times this might occur, but

EPA expects it to be small. One comment received

by EPA on this subject stated that a computer sim-

ulation of the problem showed that violations of the

daily maximum would occur less than 2% of the time.

This simulation made certain assumptions concerning

the statistical distributions which EPA is unable to

verify, and EPA did not rely on this result in reaching

a decision on the final method of calculation of Con-

sistent Removal.

1981 Final Rule, 46 Fed. Reg. 9424 (emphasis added). The

same explanation is reiterated in EPA’s Rebuttal to

NRDC’s Reply Brief. In essence, EPA’s argument rests

on the claims that the POTW will rarely perform below

its average, that the indirect discharger will virtually never

exceed its limit, and that the frequency with which these

two events will occur simultaneously is even lower.

EPA is correct in asserting that the indirect discharger

will rarely exceed its limit. That limit is set so that it can

A-27

be complied with virtually all the time, and this remains

true even when the limit is raised to credit the indirect

discharger for the POTW’s additional remova! of pollu-

tants.

But there is no evidence whatsoever to support the claim

that the POTW will rarely perform below its average. In

fact, this claim is blatantly contradicted by a wealth of

evidence in the record, including repeated statements by

EPA itself that POTW removal is extremely variable. In

1977, EPA cautioned that “extreme variability in pollutant

removals experienced by POTWs’”’ was among the factors

to be taken into account in defining an approach to the

granting of credits. Proposed Pretreatment Regulations,

42 Fed. Reg. 6485 (1977).

In promulgating the 1981 rule, EPA noted that “‘in-

dustrial pretreatment provides much superior removal of

pollutants than does treatment at the POTW.” 1981 Final

Rule, 46 Fed. Reg. 9406. This is true, EPA said, first,

because POTWs are not designed to remove toxic pollut-

ants, and second, because “the dilution [by sewage, other

industrial wastes, and, on some days, by rainwater] that

occurs at the POTW causes less efficient removal .. . than

would be achieved by the Industrial User with its more

concentrated waste stream. ... Partially because removal

of toxic pollutants by the POTW is incidental to its normal

operations, it is also variable.... Removal of toxic pol-

lutants by the POTW will ... be more variable than re-

moval by treatment technologies designed to remove such

toxics.”’ Id. at 9406, 9407.

Most recently, in promulgating the 1984 rule, EPA once

again emphasized the lack of consistency in POTW re-

moval. 1984 Final Rule, 49 Fed. Reg. 31216. And, in its

brief to this court, EPA declares that “‘the variability of

daily removal estimates [for POTWs] may be quite large.”’

Brief for EPA at 35.

In fact, EPA would have us believe that the variability of POTW

A-28

The data from EPA’s 1978 study of 40-POTWs provide

ample confirmation of the variability of POTW removal.

These data clearly reveal that a POTW may remove vir-

tually ali of a particular pollutant on day one while re-

moving little or none of that pollutant on day two. See,

e.g., Determining National Removal Credits for Selected

Pollutants for Publicly Owned Treatment Works, EPA 440/

2 82-008, at B25-B28 (1982) (showing removal of silver on

6 different days for 16 POTWs). In contrast, most BAT

limits provide that the discharge for any one day cannot

be more than double the average limit for the month as

a whole. See 40 C.F.R. pts 405-469 (1984).

The amount of variability (or inconsistency) in POTW

removal is particularly important where the removal credit

is great. In this situation, most of he removal required

in reaching BAT-equivalent levels of treatment will be per-

formed by the POTW, not by the indirect discharger. Thus,

the consistency of performance that the indirect discharger

achieves in removing the small share of the toxics that it

must remove will be relatively unimportant in comparison

to the large amount of variability in the POTW’s per-

formance in removing the larger share for which it is

responsible. See NRDC’s Reply to EPA’s Rebuttal.

It is not at all unusual for removal credits to be in the

80 to 90 percent range. Especially using the method of

removal is so slight that the daily maximum will rarely be exceeded,

while simultaneously arguing that the variability of POTW removal is

so great that the 1981 rule must be relaxed. EPA argues that if POTWs

are forced to take their variability into account, they may be prevented

from authorizing credits large enough to fully reflect average actual

removal. Disregarding the fact that the statute requires compliance with

both the consistency requirement and the amount requirement, EPA

argues that it is justified in ignoring variability. Brief for Respondent

at 35-36. Here, as in its argument that the measurement of consistent

removal is too difficult, EPA’s position is that it should be allowed to

avoid the plain command of the statute because compliance with the

statute would lead to the granting of fewer removal credits.

A-29

calculating consistent removal permitted by the 1984 rule,

such large credits are very common for many toxics. See,

e.g., applications for removal credit authority from Chicago

and Los Angeles County, App. 340-41, 344, 346-48. In such

cases, the POTW by itself is responsible for removing be-

tween 80% and 90% of the pollutant. When this is so, the

variability in the removal performance of the POTW will

be almost fully reflected in variability in the final discharge

into navigable waters.

As noted above, EPA admitted in 1981 that it had no

reliable evidence to support its contention that the joint

treatment by the indirect. discharger and the POTW op-

erating under a 75% consistency requirement would only

rarely exceed the BAT limits that direct dischargers must

meet. Yet in 1984, again without presenting any evidence,

and in the face of a substantial body of evidence to the

contrary collected by EPA itself, including EPA’s own

assertions, EPA claims that a measure of average removal

or (or 50% consistency) will not lead to violations of the

variability limits imposed on BAT discharger.

In fact, as we have seen, the evidence on POTW var-

iability in the record shows that the measure of consistent

removal under the 1984 rule will frequently allow dis-

charges very substantially above the daily and monthly

maxima that BAT dischargers must not exceed. Under

EPA’s rule, the parity in removals between direct and

indirect dischargers that is mandated by the statute is

guaranteed, if at all,’* only over the space of a year.

‘® Unlike the POTW operating under a 50% consistency requirement,

the direct discharger, required to operate under a 99% consistency

requirement, cannot offset its bad days against its good days. Because

it needs a margin of safety, the direct discharger will operate well

within its limits, removing more pollutant than it is required to. As a

result, it is likely that even as regards total amount removed over the

course of a year, the combined performance of POTW and indirect

A-30

If there could be any doubt regarding the fact that

EPA’s 1984 rule is in derogation of the statute’s mandate,

it is dispelled by a consideration of the legislative history

of the 1977 Act. In enacting the removal credit provision

in 1977, Congress had two purposes. Congress’ first, and

overriding, concern was to ensure that the combined treat-

ment by the indirect discharger and the POTW is equal

to that by the direct discharger operating under BAT lim-

its. Secondly, as a subordinate goal, Congress sought to

avoid redundant treatment by the indirect discharger and

the POTW insofar as this is possible without compromising

the primary goal of parity.

The first major water pollution control legislation, the

Clean Water Act of 1972, stated in its first section, en-

titled ‘Declaration of Goals and Policy,” that “‘it is the

national policy that the discharge of toxic pollutants in

toxic amounts be prohibited.” 33 U.S.C. § 1251(aX3).'* As

we have noted above, Congress’s concern with the problem

of toxic pollutants led it to strengthen the provisions for

dealing with toxics in the 1977 Act. The Conference Re-

port was explicit in stating that ‘[t]he combination of pre-

discharger will not equal that of the direct discharger.

EPA argues that if the POTW were required to operate under a

99% (or a 95%) consistency requirement, it would be forced to remove

more toxics on average than the BAT discharger, because the POTW’s

greater variability would require it to set itself a higher level of average

removal in order to meet the consistency requirement. Contrary to

EPA’s assertions, however, such treatment would not be redundant.

Indeed, it is necessary if the POTW and the indirect discharger are

to comply with the consistency requirements of BAT limitations or

standards.

* As Representative Roberts, manager of the legislation in the House,

said in introducing the conference bill in 1977, the Clean Water Act

of 1972 “fully intended that toxics be regulated. They have not only

polluted drinking water and destroyed both commercial and sport fish-

ing, but in many major water bodies they also constitute a hazard to

aquatic environment and public health that has yet to be fully recog-

nized.”’ Leg.Hist. 327.

A-31

treatment and treatment by the municipal treatment works

shall achieve at least that level of treatment which would

be required if the industrial source were making a direct

discharge.” Leg. Hist. 271 (emphasis added). This point

was reiterated by Representative Roberts, the House’ man-

ager, in presenting the conference bill to the House. Leg.

Hist. 343.

The Senate Report suggests that Congress wished re-

moval credits to be granted sparingly. The Report notes

that with the exception of a few POTWs specifically de-

signed to treat industrial wastes, POTW treatment of

wastes is too variable to allow the assumption of a specific

level of removal. Comm. on Environment and Public

Works, Clean Water Act of 1977, S. Rep. No. 370, 95th

Cong., 1st Sess. 58 (Leg. Hist. 691). The Report also points

out that the toxics removed through secondary treatment

by a POTW would simply be transferred to the sewage

sludge, creating further disposal problems. ‘In the long

run,” the Report notes, “the only real solution to the

problem of safe disposal of toxic or hazardous industrial

pollutants is in their reuse and recycling by industry, not

the transfer of such materials from [an] industrial waste

stream into municipal waste streams....” Jd. This can

only be accomplished by pretreatment of the pollutants by

the industrial discharger. Congress’s reasoning suggests

that it did not intend the removal credit provision to be

interpreted too generously, and it certainly did not intend

that provision to be interpreted so as to nullify the pro-

tections it was then enacting against toxic pollution.

Finally, the EPA itself has stated that the statute re-

quires that POTW removal be highly consistent before a

credit could be granted:

In order to justify allowing a revision to a categorical

pretreatment standard the pollutant removal claimed

by a POTW must occur virtually all the time. The

EPA believes that a stringent interpretation of “‘re-

A-32

moval” is warranted in light of the policy of the Act

to prohibit the discharge of toxic pollutants in toxic

amounts (section 101(aX3)), and the application of sec-

tion 307(bX1) to section 307(aX1) toxic pollutants.

1978 Final Rule, 43 Fed. Reg. 27765 (1978).

Nothing in the language of the statute or in the leg-

islative history suggests that Congress intended to permit,

let alone require, that removal credits be granted when

these credits would result in discharges that would violate

the daily maximum and monthly average limits under which

direct dischargers must operate.

We do not believe that Congress’ mandate for the re-

moval of toxic wastes should be subject to exceptions dic-

tated by the convenience of the dischargers. The reason

for requiring polluters to meet daily and monthly limits

as well as long-term limits is obvious: a single concentrated

discharge of a toxic pollutant can do irreparable damage

to the ecology of a body of water, killing fish and other

life forms. Such excessive toxic discharges cannot be com-

pensated for by a reduced discharge of water during sub-

sequent months.’ Under EPA’s current definition of

consistent removal, discharges could be above the limit for

months at a stretch, so long as these above-average months

were offset by below-average discharges in other months.

We therefore hold that EPA’s definition of consistent

POTW removal, i.e. removal that is achieved only 50% of

the time, violates section 307(bX1) of the Clean Water Act,

33 U.S.C. 1317(bX1).

Even had we not held that EPA’s 1984 definition of

consistent removal violated section 307(b\X1) of the Clean

17 As NRDC’s attorney put it at oral argument, “It’s not much con-

solation to the beachgoers on a hot day in August to know that the

pollution control results for the stream or the ocean were terrific for

the months of November to February.”

A-33

Water Act, we would be obliged to hold that EPA’s en-

actment of the challenged regulation was arbitrary and

capricious. According the utmost deference to the Agency,

we still cannot find that EPA has given reasons for its

new rule that “could lead a reasonable person to make

the judgment that the Agency has made.” Weyerhaeuser

v. Costle, F.2d 1011, 1026-27 (D.C. Cir. 1978).

In 1981, when EPA reduced the consistency requirement

from 95% to 75%, it acknowledged that this reduction

might lead to violations of the required parity between

indirect dischargers and POTWs on the one hand and di-

rect dischargers on the other. Yet in 1984, when EPA

further reduced the consistency requirement from 75% to

50%, it did not even address the key question of whether

its new measure of “‘consistent”’ removal will assure such

parity. Instead, in a one-sentence explanation of the

change, EPA conclusorily stated that its new measure of

consistency “provides a more accurate and equitable es-

timate of the actual removal achieved than the method

employed in the 1981 regulation.”’ 1984 Final Rule, 49 Fed.

Reg. 31215 (1984). This statement is misleading in that it

focuses solely on the amount of removal while ignoring

the consistency requirement of the statute. The available

evidence, to which we have previously referred, indicates

that the parity required by the statute will rarely be

achieved under EPA’s 1984 rule.

The fact that the Agency has ‘‘entirely failed to consider

an important aspect of the problem [and has] offered an

explanation for its decision that runs. counter to the evi-

dence before the agency” renders arbitrary and capricious

its decision to change the measure of consistent removal

to what is in reality a measure of average removal. Motor

Vehicle Manufacturers Ass’n v. State Farm Mutual, 463

U.S. 29, 48 (1983). Without regard to Congress’s overrid-

ing intent that pollutants be eliminated from the nation’s

waters, without evidentiary support in the record, and

without adequate explanation, EPA has de facto deleted

A-34

the consistency requirement from the removal credit rule.

For this reason, without more, we are satisfied that EPA’s

regulation is arbitrary and capricious under the test set

out by the Supreme Court in Motor Vehicle Manufacturers

Ass’n v. State Farm Mutual, 463 U.S. 29, 43 (1983).

IV.

Combined sewers are conduits that transport domestic

wastewater, industrial wastewater, and, during periods of

wet weather, storm water runoff. Combined sewer systems

were built in major American cities before the turn of the

century, at a time when the need for separate treatment

of wastewater was not yet apparent.’* POTWs in these

systems generally do not have the capacity to deal with

the great increase in flow that occurs during rainfall or

snowmelt. They therefore have overflow points and treat-

ment plant bypasses to handle the excess flow during such

periods. Events of overflow are referred to as ‘“‘combined

sewer overflows” (CSOs). The 1981 removal credit rule

contained a provision that adjusted the amount of credit

that an indirect discharger could receive so as to take

CSOs into account. We conclude that EPA’s deletion of

this provision from the 1984 rule, without any plausible

explanation, violates section 307(bX1), and in any event is

arbitrary and capricious.

The 1978 removal credit rule provided that removal

credits could be granted by a POTW that experienced

overflow at least once a year only if that POTW was

implementing an approved plan to treat and control such

overflows. 1978 Final Rule, 43 Fed. Reg. 27765.

® Such systems serve about 1300 municipalities, with a total popu-

lation of about 38 million, most of whom live in 58 major cities along

the upper East coast, in the upper Midwest, and in the far West.

Report to Congress on Control of Combined Sewer Overflow in the United

States 1-2—1-3 (EPA doc.no. 430/9-78-006) (1978).

A-35

In response to complaints from indirect dischargers, this

provision was modified in the 1981 rule to allow an al-

ternative way for a POTW with overflow problems to grant

credits. The POTW could calculate the number of hours

per year during which overflow occurs. The removal credit

would then be reduced by a percentage equal to the per-

centage of overflow time during the year. If, for example,

overflow occurréd during 15% of the year, the removal

credit would be reduced by 15%.

In promulgating the 1981 rule, EPA explained that if

the regulations are to meet the statutory requirement of

parity between treatment by the direct discharger and

treatment by the indirect discharger plus POTW,

it is obvious that the POTW should be credited only

with that removal which it actually achieves. Thus,

EPA has imposed, through the provisions of [40

C.F.R.] § 403.7, several requirements which ensure

that industry standards are relaxed only to the extent

that the POTW actually removes the pollutants in

question.

[Therefore,] the provisions of § 403.7(b) provide that

a removal allowance must reflect those periods where

industrial pollutant-bearing wastes overflow the POTW

and there is, consequently, no actual removal of these

pollutants by the POTW.

ss + *

Although some commenters have indicated that the

foregoing requirements place unduly burdensome re-

strictions on the POTW wishing to request a removal

allowance, the Agency believes that it has properly

interpreted the statute to provide that the POTW will

be credited only with that level of removal which is

actually and consistently achieved. Support for this

interpretation is found in the conference report ac-

A-36

companying the Clean Water Act and in the House

debate on the Conference Report [as well as in the

Senate debate on the Conference Report].

1981 Final Rule, 46 Fed. Reg. 9423.

Notwithstanding its own interpretation of the statutory

requirement, EPA resorted to what it termed a ‘“‘justifiable

compromise” that went- beyond giving credit for toxic

waste which is actually and consistently removed. 46 Fed.

Reg. 9426. In fact, adjusting the credit granted to the

indirect discharger by the percentage of time that over-

flows occur does not take into account the fact that CSOs

cause sudden increases in pollutant discharges into navig-

able waters. “[An] important characteristic of CSO ... is

the intermittent nature of the discharge. ... The impact

of a large combined sewer overflow event on any viable

aquatic biota element in the receiving water can be ex-

tremely detrimental.’’ Report to Congress on Control of

Combined Sewer Overflow, supra, at ES-4.° A strict inter-

pretation of the statute would, therefore, need to take into

account the POTW’s performance during an overflow.

However, here, as with the definition of consistent re-

moval, the Agency was concerned not to adopt an ap-

proach that would be “unduly burdensome for POTWs to

implement,” or that would reduce too greatly the number

of POTWs able to grant removal credits to their industrial

dischargers. 46 Fed. Reg. 9246.”

The impact on receiving waters is augmented by the fact that

pollutants are “resuspended”’ during CSO events. During dry weather,

the sluggish flow through the sewage pipes leads to the sedimentation

of some pollutants, which collect in the pipes. During rainy periods,

the velocity of water flowing through the pipes ‘“‘resuspends” these

pollutants, and a part of them pass completely untreated into navigable

waters.

2” EPA’s 1981 discussion of CSOs characterized the compromise CSO

adjustment factor in the 1981 rule as providing for an “average con-

sistent removal level.” 46 Fed. Reg. 9426. According to the Agency,

A-37

Although the 1981 CSO provision was a relaxation of

the 1978 rule, and an admitted compromise, it was chal-

lenged by industry petitioners in this court. National As-

sociation of Metal Finishers v. EPA, 719 F.2d 624 (8d Cir.

1983) (NAMF). The petitioners argued that “POTWs will

be unable to make verifiable engineering estimates of the

hours of overflow, and will thus be unable to grant removal

credits.” NAMF’, 719 F.2d at 649.2 This court, upholding

the CSO provision, responded that ‘‘section 403.7(b) simply

implements the statutory requirement that removal credits

be granted only for pollutants actually removed by the

POTW. Moreover a POTW unable to estimate the time,

let alone the amount, of untreated wastewater overflow

may not be able to accurately predict the proportion of

pollutants which it will remove.” Jd.

In 1982, EPA proposed a further relaxation: it would

entirely eliminate the overflow compensation requirement

from the calculation of removal credits, on the ground that

“the overflow adjustment makes a negligible difference in

the final removal credit.” 1982 Proposed Rule, 47 Fed.

Reg. 42701. It based its conclusion on a 1978 study of 15

POTWs. See Report to Congress on Control of Combined

Sewer Overflow, supra, ch. 6 passim. “Relying on fre-

quency modeling of the rainfall characteristics of [10 of

the 15] sites, the report found that combined sewers will

overflow an average of 7.3% of the time.” 1982 Proposed

this is a level of removal computed by taking into account ‘“‘both those

periods of high removal and those periods of low or zero removal.”

As with the definition of consistent removal discussed in part III above,

here too it remains puzzling, to say the least, that removal which is

high at some times and zero at others can be termed consistent. EPA’s

penchant for looking solely at long-term effect spreads the quantitative

impact of an overflow over many days when there are no overflows,

thus understating the true impact of the inconsistency in treatment.

* In order to simplify the POTWs’ task, EPA had already permitted

them to substitute “a verifiable engineering estimate of the annual

hours of Overflow where actual monitoring of Overflow points is in-

feasible.” 1981 Final Rule, 46 Fed. Reg. 9427.

A-38

Rule, 47 Fed. Reg. 42701. A 7.3% adjustment in the re-

moval credit, EPA stated, will led [sic] to a negligible

adjustment in the discharge limit the indirect discharger

is required to meet.” The 1984 rule did in fact eliminate

the CSO provision.

The deletion of the CSO provision violates section 307(b\X1)

of the Clean Water [Act] in two respects. First, EPA may

not base removal credits on a purported average figure for

the frequency of CSOs. To do so ignores the great variability

among POTWs in the number and duration of CSO events

and in the amount of bypass that occurs during such events.

For many POTWs, overflow would require an adjustment of

substantially more than 7.3%.

Second the statute does not permit EPA to raise pol-

lutant discharge limits for indirect dischargers by 7.3%,

or by any amount that is not de minimis, over those that

are required of direct dischargers simply because it feels

that an increase in pollutant discharge is not very large.

This violates the requirement that treatment by indirect

dischargers plus POTWs must equal that by the direct

discharger, because it permits the indirect discharger and

the POTW to discharge a greater total amount of pollut-

ants, and because it permits POTWs and indirect dis-

chargers to discharge waste that is largely untreated, in

complete disregard of any requirement of consistency.

The type of average measure relied upon by EPA in

deciding to delete the CSO provision is similar to the na-

In addition to the argument based on the “negligible” total number

of hours per year of CSOs, EPA relied on an analysis of the amount

of pollutants that escape treatment during CSO events at eight sites

in four cities. Combined Sewer Overflow Toxic Pollutant Study, (EPA

doc. no. 440/1-84/504) (1984). ‘This analysis indicated that, on average,

eight percent of metals bypassed the POTW and were thus not treated.”

1984 Final Rule, 49 Fed. Reg. 31220.

A-39

tional removal rate measure proposed (in 1982) and sub-

sequently rejected (in 1984) by the Agency as a method

of determining how much credit to grant to indirect dis-

chargers. According to EPA’s 1982 proposal, a national

removal rate for each pollutant was to have been set at

the level which was met by roughly 75% of 40 POTWs

studied by EPA. 1982 Proposed Rules, 47 Fed. Reg. 42699-

700.

In rejecting the national removal credit proposal as pro-

posed in 1982, EPA stated:

The Agency has concluded, upon reconsideration, that

Congress intended that a removal credit be granted

for a particular pollutant only to the extent that a

particular POTW can demonstrate that it removes the

pollutant. The language of the statute, buttressed by

the legislative history, indicates that removal credits

are to be based upon case-by-case removal determi-

nations, rather than upon a nationally determined rate.

1984 Final Rule, 49 Fed. Reg. 31212-13.

EPA correctly relied on the language of section 307(b\1)

of the Clean Water Act, on the legislative history of the

1977 Act, and on this court’s holding in NAMF, 719 F.2d

624, to conclude that the enormous variability of removal

performance among POTWs made the use of an average

removal figure unlawful.

For the very same reasons, EPA’s reliance on an av-

erage rate of “removal,” i.e. of overflow, cannot support

its deletion of the CSO adjustment in the 1984 rule. If

EPA concedes, as it does, that removal rates for individual

POTWs cannot be determined on the basis of a national

sample; it is difficult to see how the duration and impor-

tance of CSO events at individual POTWs can be deter-

mined on the basis of two studies of a smaller number of

POTWs, (one of ten POTWSs, the other of eight POTWs)

A-40

neither of which can be deemed representative of the en-

tire universe of 1300 municipalities.“

By using an average 7.3% figure for overflows, EPA

fails to take into account that in some cities the percentage

of time in which overflows occur is substantially greater.

In Philadelphia, for example, overflows occur at nearly

double the average rate. Chicago’s 1984 application for

authority to grant removal credits, included in the record

in this case, states that in two typical pumping stations,

overflows occurred 10.9% of the time. See Request of Au-

thority to Revise Categorical Pretreatment Standards 25

(Metropolitan Sanitary District of Greater Chicago,

1984 App. 343).

In addition to ignoring variability in the frequency and

duration of CSOs, EPA also bases its decision on the as-

serted “insignificance” of a 7.3% adjustment in the dis-

charge limit applicable to indirect dischargers. It seems

* The 8-POTW study is not even mentioned in the statement of basis

and purpose accompanying the rule. In any case, the data from the

very small samples of POTWs that EPA has studied indicate that

combined sewer systems vary widely in the duration of their overflows

and in the mass of metals that bypass the POTW during overflow

events. EPA appears to have relied exclusively on data from the 10

POTWs in concluding that combined sewers overflow on average 7.3%

of the time. Yet these data show enormous variability from city to

city. In Sacramento, the computer simulation indicated that overflow

would occur 3.2% of the time, whereas in Philadelphia it indicated that

overflow would occur 13% of the time. See The Elimination of By-Pass

Factors in the Removal Credit Package (EPA internal memorandum,

Aug. 4, 1982) (App. 271). The 8 POTWs studied in the 1984 study

show similar variability, both in duration and in the percentage of

metals that bypass the POTW. See Effect of CSO’s on Removal Credits,

Table 3 (EPA memorandum to the record, Jan. 9, 1984).

The amount of overflow depends not only on the amount and in-

tensity of rainfall at the city in question, but also on factors such as

the design of the POTW and the system channelling wastewater into

the POTW. Combined Sewer Overflow Toxic Pollutant Study 56 (EPA

doc. no. 440/1-84/304, 1984).

A-41

obvious that a 7.3% difference in the total amount of pol-

lutant discharged into navigable waters over the long term

is not de minimis. As NRDC points out, EPA has in the

past deemed relatively small changes sufficient to warrant

promulgating new rules. For example, the Agency pro-

mulgated new pretreatment standards for electroplaters

for nickel, even though the new limits were only 3% to

8% more stringent than the old ones. Compare 46 Fed.

Reg. 9472 (1981) with 48 Fed. Reg. 32487 (1983). Likewise,

in its iron and steel standards, EPA gave merchant coke

plants different daily and monthly direct discharge effluent

limits only 7% less stringent than those for other coke-

making plants. 47 Fed. Reg. 23287.

Adopting EPA’s data and analysis, NRDC concludes that

as a result of CSOs, indirect dischargers dispose of 560,000

additional pounds of toxics a year directly into the nation’s

waters. Reply Brief for NRDC at 14-15. This figure ex-

ceeds the total volume of toxics currently discharged into

POTWs by eight industrial categories which EPA has

nevertheless seen fit to regulate. See Assessment of the

Impacts of Industrial Discharges on Publicly Owned Treat-

ment Works Table 1-3 (1981) (Report prepared for EPA

by JRB Associates). We need not, however, rely on this

illustrative calculation to understand that combined sewer

overflow is a major environmental hazard, and has been

viewed as such not only by EPA, but by Congress as well.

See section 416(c) of the Clean Water Act, 33 U.S.C.

§ 1375(c) (requiring the Administrator of EPA to submit

report on CSO to Congress); see also comments of House

manager Rep. Roberts, Leg. Hist. 357 (‘Combined sewer

overflow is a serious pollution problem which must be ad-

dressed in order to meet the enforceable requirements of

the Act.”’)

We therefore hold that a removal credit regulation that

permits indirect dischargers and their POTWs to ignore

CSOs, and thus to exceed the limits applicable to: direct

dischargers by 7.3% on average, and by at least 13% in

A-42

some cities, is in violation of section 307(b\1) of the Clean

Water Act, 33 U.S.C. § 1317(b\X1).

Ll.

EPA has failed to provide any plausible reason for de-

leting the CSO requirement. Nor has it provided any ex-

planation for, or evidence supporting, a 7.3% average

increase in pollutant discharges, and a discharge increase

of 18% or more in certain cities. Nevertheless, it has pro-

ceeded to eliminate the CSO provision.

Neither the 1978 report on which EPA relied in its

initial proposal nor the 1984 report which EPA uses to

buttress this proposal even addresses the question of en-

vironmental effects. Furthermore, at the time when EPA

proposed to delete the CSO provision, it cited no data

whatsoever in support of its decision beyond what had

been available to it when it promulgated the 1981 rule.

Even if it were admitted, which it cannot be, that dele-

tion of the CSO adjustment would have little significant

detrimental impact on the environment, the Agency has

provided no explanation of why the adjustment should be

deleted except to say that POTWs have difficulty meas-

uring their CSOs. This might at most argue for the use

of an average figure, but it certainly cannot provide sup-

port for deleting the adjustment entirely.

Thus, in addition to violating section 307(bX1), the Agen-

cy’s deletion of the CSO adjustment without any rational

justification, and without any discussion of the environ-

mental effects that will result, must be deemed arbitrary

and capricious.

¥.

The 1984 rule changed the test for determining when

a removal credit has to be modified or withdrawn. Instead

of acting whenever the POTW no longer fulfills the con-

A-43

ditions justifying a credit, EPA will, under its 1984 rule,

withdraw a credit before the expiration of the POTW’s

five-year permit only if the POTW’s removal rate drops

“consistently and substantially” below the rate claimed in

its permit application. 1984 Final Rule, 49 Fed. Reg. 31224.

We agree with NRDC that the new test violates the Clean

Water Act.%

EPA’s 1978 version of the rule had simply stated that

“EPA or the NPDES State* can withdraw [2 POTW’s]

authorization [to grant credits] ... upon 60 days notice of

continued violation.”’ 1978 Final Rule, 48 Fed. Reg. 27766.

Later, in the 1981 version of the rule, EPA expanded upon

this statement in section 403.7(f(5). This section provided

that, following notice to the POTW of a violation,

If appropriate corrective action is not taken within a

reasonable time, not to exceed 60 days unless the

POTW or the affected Industrial Users demonstrate

that a longer time period is reasonably necessary to

* NRDC also argues that the Agency violated the Administrative

Procedure Act by failing to give notice of the change in its proposed

rule and by making the change without having any evidentiary basis

in the record for doing so. We agree with EPA that EPA’s proposal

was sufficient to apprise interested parties of the subjects and issues

to be addressed by the Agency in the final rule. See American Iron

and Steel Institute v. EPA, 568 F.2d 284, 293 (8d Cir. 197/); Action

for Children’s Television v. FCC, 564 F.2d 458 (D.C. Cir. 1977). We

also agree with EPA that this change would not require any empirical

support if it were within the area of discretion that the statute left

open to Agency policy-making. See, e.g., Chevron, U.S.A., Inc. v. NRDC,

104 S. Ct. 2778, 2793 (1984) (‘‘an agency to which Congress has del-

egated policymaking responsibilities may, within the limits of that del-

egation, properly rely upon the incumbent administration’s views of

wise policy to inform its judgments’’).

* The NPDES state is the state issuing the POTW’s permit under

the National Pollutant Discharge Elimination System, through which,

under section 402 of the Clean Water Act, 33 U.S.C. § 1342, the EPA

and the states issue permits to dischargers, including POTWs. Such

permits are issued for five-year periods.

A-44

undertake the appropriate corrective action, the Ap-

proval Authority shall either withdraw such discharge

limits or require modifications in the revised discharge

limits [i.e. in the removal credit].

1981 Final Rule, 46 Fed. Reg. 9447.

Under the 1981 rule, action by the Approval Authority

or by EPA was triggered by a determination “that such

discharge limit revisions [i.e., removal credits] are causing

or significantly contributing to a violation of any conditions

or limits contained in the POTW’s NPDES Permit.” Id.

For the definition of when a removal credit “significantly

contributes to a violation,”’ the rule referred to subsections

403.3(i) and (n) of the General Pretreatment Regulations,

40 C.F.R. 403.3() and (n) (1982), which define when an

indirect discharger “significantly contributes” to a POTW

permit violation. 1981 Final Rule, 46 Fed. Reg. 9439-40.

Subsections 403.3(i) and (n) define any discharge in excess

of permitted amounts as significant.

In NAMF, 719 F.2d 624, this provision of the 1981

removal credit rule was attacked by industry petitioners

as unworkable: “Joint petitioners say that due to section

403.7(£5) they will be unable to rely on their removal-

revised discharge limits and will be forced to install just

as much control technology as if there were no removal

[by the POTW] at all.” NAMF, 719 F.2d at 649. This

court responded: ‘‘We agree with EPA ... that such with-

drawn or modified discharge limits, though unfortunate,

are merely the recognition of the POTW’s failure to re-

move the pollutant.” Jd.

In spite of this court’s approval of the 1981 provision,

in 1982 EPA proposed to amend section 403.7(f) to give

the POTW six months to return to compliance after the

initial violation. The proposal provided further that, “‘The

Approval Authority can . . . extend the time for compliance

for up to one year if the POTW demonstrates good faith

A-45

efforts to return to compliance.” 47 Fed. Reg. 42703.

NRDC, in its comments on the proposed rule, challenged

the legality of this extended tolerance of POTW violations.

In promulgating the 1984 final rule, the Agency responded

that it “agrees that the proposed procedure ... provided

too much latitude to a POTW which is experiencing prob-

lems,” and it deleted the proposed change. 1984 Final

Rule, 49 Fed. Reg. 31220.

However, EPA found another route to the same goal:

it amended the test that determined when action by the

Approval Authority or by EPA will be triggered. Under

the 1984 rule, ‘“‘the removal credits will generally remain

set for the [five-year] term [of] the POTW’s NPDES per-

mit.”” 49 Fed. Reg. 31216. The removal credits can be

modified or withdrawn during the permit term only if ‘“‘the

POTW’s consistent removal rate is consistently and sub-

stantially lower than the removal credit specified in the

POTW’s NPDES permit.’”’ 1984 Final Rule, 49 Fed. Reg.

31224.

With this change, EPA has relaxed both the consistency

and the amount of removal of pollutants required of

POTWs and indirect dischargers. Under this test, even

grossly inconsistent removal will not be sufficient cause

for withdrawal of a credit; and even removal substantially

below the required amount will not be sufficient cause for

withdrawal of a credit. Only when both these violations

occur can a credit be withdrawn before the expiration of

a POTW’s permit. After the credit is withdrawn, the in-

direct discharger may, in certain cases, have up to three

more years to install the required treatment systems. See

40 C.F.R. §§ 403.7(f4\Xiii) & 403.6(b) (1985). Thus, a vi-

olation of the BAT-equivalent limits required by section

307(bX1) of the Clean Water Act, 33 U.S.C. § 1317(bX1),

may continue for up to eight years before the Agency’s

rules permit it to act against the violators.

A-46

EPA conceded that its proposal, made in 1982, to delay

for up to 12 months the initiation of credit withdrawal

procedures against a POTW that is in violation of its dis-

charge limits would have “provided too much latitude to

a POTW which is experiencing problems,”’ even as applied

to a POTW that was only slightly in violation of these

limits. 49 Fed. Reg. 31220. Yet after deleting the change

proposed in 1982, EPA in 1984 substituted a provision

that allows a potential of up to eight years of violative

discharges.

We note once again that the BAT limits are set so that,

applying available technology, they can be met with 99% -

consistency. Removal credits must also be set so that they

can be met consistently. The Clean Water Act forbids

POTWs and indirect dischargers to exceed BAT-equivalent

limits for substantial periods of time. Yet EPA’s 1984 rule,

in permitting precisely this, is in contravention of section

307 (bX1) of the Clean Water Act.

VI.

Virtually all of the toxics that do not pass untreated

through the POTW become concentrated in the sludge.

The “removal” of non-biodegradable toxics, such as metals,

from the wastes that flow into the POTW transfers these

toxics from the POTW’s liquid wastestream to the POTW’s

solid waste, i.e. to the sludge. See 1981 Final Rule, 46

Fed. Reg. 9408. For example, EPA has found that 28 of

the 129 priority pollutants listed in the toxics consent de-

cree, NRDC v. Train, 8 Env’t Rep. Cas. (BNA) 2120,

although not detected in POTW influents, had become con-

centrated in sufficient amounts to be detectable in POTW

sludge. The Fate of Priority Pollutants in Publicly Owned

Treatment Works 70-71 (EPA doe. no. 440/1-82/303) (1982).

Contamination of POTW sludge with toxics creates nu-

merous problems. It makes disposal by municipalities ex-

A-47

pensive and difficult. It may prevent productive uses of

sludge, for example as fertilizer or soil conditioner, or it

may introduce toxics into the food chain, where they be-

come further concentrated. Toxics from landfills may leach

into groundwater and contaminate drinking supplies. If

incinerated, toxics can poison the atmosphere, harming

POTW workers and surrounding communities. As EPA has

noted, “It is therefore desirable to isolate these toxic pol-

lutants in small, but concentrated, industrial sludges, rather

than sending them on to the larger POTW sludge.’”’ 1981

Final Rule, 46 Fed. Reg. 9410.

This can only be done through pretreatment by the dis-

charger. Pretreatment has other advantages as well. Tox-

ics can be treated more efficiently when they are more

concentrated and when the treatment can be designed for

the specific pollutants involved. In some cases, the industry

can apply technologies to recover and recycle valuable met-

als and organic toxics which could not be applied at the

POTW.

With these considerations in mind, Congress in 1977

added subsection 405(d) to the Clean Water Act. This sub-

section provides as follows:

The Administrator, after consultation with appropri-

ate Federal and State agencies and ‘other interested

persons, shall develop and publish, within one year

after December 27, 1977, and from time to time there-

after, regulations providing guidelines for disposal of

sludge and the utilization of sludge for various pur-

poses. Such regulations shall—-(1) identify uses for

sludge, including disposal; (2) specify factors to be

taken into account in determining the measures and

practices applicable to each such use or disposal (in-

cluding publication of information on costs); (3) iden-

tify concentrations of pollutants which interfere with

such use or disposal.

33 U.S.C. § 1345(d).

A-48

At the same time, Congress amended section 307(bX1)

of the Act to condition the granting of removal credits

upon POTW compliance with subsection 405(d). Such cred-

its may be authorized only if they do not “prevent sludge

use or disposal by such works in accordance with section

405 of this Act.” 33 U.S.C. § 1317(bX1).

The 1984 removal credit rule purports to satisfy these

statutory requirements by providing that credits will not

be granted unless “[tJhe granting of [such] removal credits

will not cause the POTW to violate the local, State and

Federal Sludge Requirements which apply to the sludge

management method chosen by the POTW.” 40 C.F.R.

§ 403.7(aX3Xiv) (1985). The rule proceeds to define federal

sludge requirements by reference to regulations issued un-

der other environmental statutes. 40 C.F.R. § 403.7(aX1\ii)

(1985).

EPA argues that NRDC’s challenge to this portion of

the removal credit rule is time-barred. Section 509(bX(1) of

the Clean Water Act provides that a petitioner may obtain

review of such a rule if a petition is filed “within ninety

days from the date of ... promulgation, ... or after such

date only if such application is based solely on grounds

which arose after such ninetieth day.’’ 33 U.S.C.

§ 1369(bX1). EPA argues that because the sludge regula-

tions have remained unchanged ‘for the past six years,”

they cannot be challenged in this court now. Brief for EPA

at 21.

This argument is not persuasive. First, the 1984 rule

differs from its predecessor rules, both in its sludge pro-

visions and in other significant features which affect sludge

contamination. Second, regardless of any differences be-

tween the 1984 rule and earlier rules, EPA submitted the

entire 1984 rule for public comment.

A-49

Third, we are empowered to entertain NRDC’s claim

because NRDC bases its argument on “grounds which

arose after [the] ninetieth day” following promulgation of

earlier removal credit rules, as provided by 33 U.S.C.

§ 1369(bX1). EPA’s sludge regulations were already over-

due in 1979, when EPA called for comments on the 1981

rule, but at that time EPA was only one year beyond the

statutory deadline, and the sludge regulations were said

to be close to proposal. Yet as of October, 1985 the Fed-

eral Register revealed that the section 405(d) regulations

had yet to be proposed, let alone promulgated. A final ruie

is now promised for July, 1987. Current and Projected

Rulemakings, 50 Fed. Reg. 44672 (1985).

For these reasons, we hold that EPA’s failure to pro-

mulgate these regulations and the others required by sec-

tion 405 as a precondition to the granting of removal

credits defeats its contention that NRDC is time-barred in

its challenge.

NRDC argues that the removal credit rule, as it pertains

to sludge, is in violation of the statute because no regu-

lations under section 405(d) have been promulgated by

EPA. As a consequence, NRDC argues, no removal credits

can be authorized. NRDC rejects EPA’s contention that

the regulations which have been issued under other en-

vironmental statutes constitute section 405(d) regulations,

claiming that such a “‘grab-bag”’ of, regulations cannot con-

stitute the comprehensive framework of sludge regulations

required by Congress in sections 405(d) and 307(bX1). EPA,

on the other hand, asserts that its rule, by incorporating

regulations issued under other environmental statutes,

meets the requirement of section 405(d) that “the Admin-

istrator ... shall develop and publish ... regulations pro-

viding guidelines for the disposal [and utilization] of

sludge. .. .”” 33 U.S.C. § 1345(d). EPA argues that because

A-50

such sludge regulations exist, removal credits may be au-

thorized under section 307(b\1).

Section 405 sludge regulations must “specify factors to

be taken into account in determining the measures and

practices applicable to each’’ method of utilization or dis-

posal of sludge, and “identify concentrations of pollutants

which interfere with such use or disposal.” 33 U.S.C.

§ 1345(d). According to a report prepared for EPA, the

major methods of sludge disposal are landfill (51% of total

tonnage), incineration (31%), land spread (8%) and ocean

dumping (11%). Assessment of the Impact of Industrial Dis-

charges on Publicly Owned Treatment Works 1:10 (1981)

(report prepared for EPA by JRB Associates). For each

of these methods, EPA must set limits of concentration

for each of the priority pollutants found in POTW sludge.

EPA’s 40-POTW study found that over 100 of the 129

priority pollutants are to be found in sludge. Forty of these

were detected in at least 10% of the samples, and 24 of

these were detected in at least 50% of the samples. Jd.

at B54.

A number of regulations issued under other statutes do

affect aspects of sludge disposal, and they are referenced

by the removal credit rule. In promulgating the 1981 rule,

EPA stated that “the section 405 regulations will, to a

large degree, simply reference the existing requirements.”

46 Fed. Reg. 9428. However, this regulatory patchwork,

sewn together from pieces of regulations authorized by

other statutes, is able to protect against only a few of the

most extreme environmental consequences of sludge con-

tamination. We agree with NRDC that the regulations ref-

erenced in the current rule, which are if anything fewer

than those listed in the 1981 rule,” do not, nor were they

intended to, provide the comprehensive standards for

* The 1981 rule referenced the regulations on distribution and mar-

keting of sludge products, which were listed as forthcoming. There is

no mention of these regulations in the 1984 rule.

A-51

sludge disposal intended by section 405(d). They leave many

aspects of sludge disposal completely unregulated.

For example, EPA has defined safe limits for two toxics,

cadmium and PCBs, but only when they are landfilled or

land spread. Mercury limits are defined only for inciner-

ation. Landfill regulations issued under the Resources Con-

servation and Recovery Act, 42 U.S.C. 6901 et seq., specify

impermissible concentrations of certain metals in ground

water, but they do not specify such concentrations for

sludge. Distribution and marketing regulations, which were

in the preproposal draft stage in May of 1980 but which

have still not been proposed, would, according to EPA,

provide additional limits on cadmium and PCBs, as well

as restrictions on toxic metals in sludge products. 1981

Final Rule, 46 Fed. Reg. 9428. Certainly, the existing reg-

ulations do nothing to advance the congressional goal of

making sludge into a productive asset rather than a toxic

liability.

Not only do we reject EPA’s argument that it may refer

to other regulations in order to satisfy its statutory ob-

ligation to enact sludge rules, but EPA’s position is belied

by letters from EPA’s Administrator to the chairman of

the Senate Oversight Committee. On June 28, 1983, EPA

Administrator Ruckelshaus, in response to a letter of in-

quiry from Senator Robert Stafford, Chairman of the Com-

mittee on Environment and Public Works, wrote:

I believe that I can, however, commit at this time to

promulgating within two years a basic regulation

which will establish the programmatic framework for

sludge management, list the significant pollutants

found in sludge, list sludge uses, and specify factors

to be taken into account in determining measures and

practices to be applied to the various sludge uses and

disposal practices, and issue concentration criteria for

those key pollutants for which we now have adequate

scientific information to develop regulatory standards.

A-52

Letter from Administrator Ruckelshaus to Senator Staf-

ford, June 28, 1983 (App. 349).

Nearly a year later, Administrator Ruckelshaus again

reported to Senator Stafford as follows:

We are well underway in our work on several aspects

of the technical regulations required by section 405

of the Clean Water Act. I know that these regulations

are of special concern to you. We have identified more

than 30 pollutants found in sludge that are of initial

concern, and we have identified the sludge uses we

will reguiate. We have begun to assemble the back-

ground data and documentation for the regulatory re-

cord.

Letter from Administrator Ruckelshaus to Senator Staf-

ford, May 22, 1984 (App. 352). These letters clearly rec-

ognize EPA’s failure to promulgate the section 405 rules.

We hold that despite EPA’s contention that sludge reg-

ulations are in place, EPA’s device of incorporating other

regulations does not meet the statute’s command for a

comprehensive framework to regulate the disposal and util-

ization of sludge, and that EPA cannot, in the absence of

the section 405 regulations, authorize the issuance of re-

moval credits under section 307(b\1).

VII.

The Village of Sauget, Illinois operates a POTW that

treats waste from nine industrial users, which waste ac-

counts for 98% to 99% of the POTW influent. Cerro Cop-

per is one of the indirect dischargers using the Sauget

POTW. Sauget and Cerro challenge EPA’s removal credit

formula and complain that the Agency has failed to re-

spond publicly to their comments and has failed to take

into account the uniqueness of their situation.

These petitioners presented exactly the same substantive

issues in a petition filed in the Seventh Circuit challenging

A-53

the 1981 removal credit rule and EPA’s 1983 pretreatment

standards for the copper-forming industry, 40 C.F.R. pt.

468 (1984). The Seventh Circuit ‘summarily dispose{d]’’ of

the petitioners’ attack on the national pretreatment stan-

dards for the copper-forming industry, pointing out that

EPA’s rulemaking was not addressed to the situations of

individual POTWs and that the statute clearly intended

that the rules should be national in scope. Cerro Copper

Products Co. and Village of Sauget v. Ruckelshaus, 766

F.2d 1060,1067 (7th Cir. 1985). As to Cerro and Sauget’s

challenge to the removal credit rule, the court stated that

it was without jurisdiction to entertain a challenge to a

1981 rule in a petition filed in November, 1983. Id. at

1069.

Possibly anticipating the Seventh Circuit’s response to

their challenge to the 1981 removal credit rule, on No-

vember 16, 1984, Cerro and Sauget filed a timely petition

for review in the Seventh Circuit challenging the 1984 rule.

In an order dated January 7, 1985, the Seventh Circuit

transferred this petition here, where it was consolidated

with the previously filed petition of NRDC.

For the reasons discussed in part VI above, we reject

EPA’s contention that Cerro and Sauget’s challenge to

the removal credit rule is barred because it regards an

aspect of the rule that remains basically unchanged from

the 1981 rule. However, we find no merit in Cerro and

Sauget’s procedural and substantive challenges.

First, we observe that EPA is not required to answer

publicly every comment, no matter how frivolous, but only

to comment on major issues that are central to the ex-

ercise of its regulatory discretion. Action on Smoking and

Health v. C.A.B., 699 F.2d 1209, 1216 (D.C. Cir. 1983)

(agency must address major comments); American Stan-

dard, Inc. v. United States, 602 F.2d 256, 269 (Ct.Cl. 1979)

(purpose of statement of basis and purpose is to enable

reviewing court to exercise its function); National Nutri-

A-54

tional Foods Association v. Weinberger, 512 F.2d 688, 701

(2d Cir. 1975) (same). Cerro and Sauget’s claim that their

situation is “unique’”’ hardly presents a major issue. EPA

responded by letter to petitioners’ claim several times. On

the issue of removal credits, the Agency responded twice,

once on December 8, 1982, and again, in much more detail,

on June 15, 1984. See App. 326-27, 328-36.

Cerro and Sauget’s argument boils down to nothing more

than a claim that EPA’s rule violates the intent of section

307(bX1) because it does not exempt Cerro from the pre-

treatment requirements. They argue that the treatment of

Cerro’s wastes by the Sauget POTW is “adequate,” so

EPA’s formula must be faulty. However, it is Cerro and

Sauget’s proposed method of calculating pollutant removal

that is flawed. It amounts to nothing more than seeking

removal credit for dilution of pollutants, a “‘solution’’ that

Congress has explicitly ruled out. Leg. Hist. at 691. See

also 40 C.F.R. § 403.6(d). EPA has simply concluded, based

on the information provided to it by Cerro and Sauget,

that the Sauget POTW’s current waste removal does not

meet the standards set by EPA.

Cerro and Sauget argue further that the treatment pro-

vided by the Sauget POTW will, in a year’s time, be aug-

mented by the treatment provided at a regional POTW

now under construction. That POTW will receive wastes

from the Sauget POTW and treat them further before

discharging them into navigable waters. Cerro and Sauget

claim that EPA must consider the joint operation of the

two POTWs in calculating the removal credit due Cerro.

This is an issue regarding the implementation of the

removal credit rule, and is therefore not one that is prop-

erly addressed here. If Cerro and Sauget disagree with

EPA’s appplication of the rule to them, they will be able

to challenge this application in court.” See Bethlehem Steel

We note that EPA does not disagree with petitioners’ interpre-

A-55

Corp. v. Gorsuch, 742 F.2d 1028, 1033 (7th Cir. 1984);

Tanners’ Council of America, Inc. v. Train, 540 F.2d 1188,

1196 (4th Cir. 1976). Their present demand for a promise

of exemption on the basis of hypothetical treatments by

an as yet uncompleted POTW is premature and irrelevant

to the national removal credit rule.

Vill.

We have concluded that EPA’s 1984 removal credit rule

fails to meet the requirements mandated by statute. We

will therefore grant NRDC’s petition for review at No.

84-3530.

The petition of Cerro Copper and the Village of Sauget

at No. 85-3012 will be denied.

APPENDIX

Exhibit A

Section 307(bX1) of the Clean Water Act, 33 U.S.C.

§ 1317(bX1), provides as follows:

The Administrator shall, within one hundred and

eighty days after October 18, 1972, and from time to

time thereafter, publish proposed regulations estab-

lishing pretreatment standards for introduction of pol-

lutants into treatment works (as defined in section

1292 of this title) which are publicly owned for those

pollutants which are determined not to be susceptible

tation, but simply states that it will consider their case when they are

able to produce the relevant data. As EPA has told petitioners, ‘“‘Once

this information [on the removal efficiency of the as-yet-uncompleted

regional POTW] is available, the need for pretreatment at the industries

may be eliminated through application of removal credits, if the com-

bined treatment of the facilities at Sauget and [the regional POTW]

sufficiently removes the pollutants... .” Letter from Bruce R. Barrett,

Director, Office of Water Enforcement and Permits, EPA, to Richard

J. Kissel, Esq., December 8, 1982 (App. 326).

A-56

to treatment by such treatment works or which would

interfere with the operation of such treatment works.

Not later than ninety days after such publication, and

after opportunity for public hearing, the Administra-

tor shall promulgate such pretreatment standards.

Pretreatment standards under this subsection shall

specify a time for compliance not to exceed three

years from the date of promulgation and shall be es-

tablished to prevent the discharge of any pollutant

through treatment works (as defined in section 1292

of this title) which are publicly owned, which pollutant

interferes with, passes through, or otherwise is in-

compatible with such works. If, in the case of any

toxic pollutant under subsection (a) of this section in-

troduced by a source into a publicly owned treatment

works, the treatment by such works removes all or

any part of such toxic pollutant and the discharge

from such works does not violate that effluent limi-

tation or standard which would be applicable to such

toxic pollutant if it were discharged by such source

other than through a publicly owned treatment works,

a and does not prevent sludge use or disposal’ by such

works in accordance with section 1345 of this title,

then the pretreatment requirements for the sources

actually discharging such toxic pollutant into such

publicly owned treatment works may be revised by

the owner or operator of such works to reflect the

removal of such toxic pollutant by such works.

Exhibit B

Section 405(d) of the Clean Water Act, 33 U.S.C. § 1345(d),

provides as follows:

The Administrator, after consultation with appro-

priate Federal and State agencies and other interested

persons, shall develop and publish, within one year

after December 27, 1977, and from time to time there-

A-57

after, regulations providing guidelines for the disposal

of sludge and the utilization of sludge for various

purposes. Such regulations shall—

(1) identify uses for sludge, including disposal;

(2) specify factors to be taken into account in

determining the measures and practices applicable

to each such use or disposal (including publication

of information on costs);

(3) identify concentrations of pollutants which in-

terfere with each such use or disposal.

The Administrator is authorized to revise any regu-

lation issued under this subsection.

Exhibit C

The 1984 removal credit rule, 49 Fed. Reg. 31212 (1984)

(codified at § 403.7 (1985)) provides as follows:

§ 403.7 Removal credits.

(a) Introduction—(1) Definitions.

For the purpose of this section:

al (i) ““Removal’”’ means a reduction in the amount of—.

a pollutant in the POTW’s effluent or alteration of

the nature of a pollutant during treatment at the

POTW. The reduction or alteration can be obtained

by physical, chemical or biological means and may be

the result of specifically designed POTW capabilities

or may be incidental to the operation of the treatment

system. Removal as used in this subpart shall not

mean dilution of a pollutant in the POTW.

(ii) “Sludge Requirements” shall mean the following

statutory provisions and regulations or permits issued

thereunder (or more stringent State or local regula-

tions): section 405 of the Clean Water Act; the Solid

Waste Disposal Act (SWDA) (including Title II more

A-58

commonly referred to as the Resource Conservation

Recovery Act (RCRA) and State regulations contained

in any State sludge management plan prepared pur-

suant to Subtitle D of SWDA); the Clean Air Act;

the Toxic Substances Control Act; and the Marine

Protection, Research and Sanctuaries Act.

(2) General. Any POTW receiving wastes from an

Industrial User to which a categorical Pretreatment

Standard(s) applies may, at its discretion and subject

to the conditions of this section, grant removal credits

to reflect removal by the POTW of pollutants specified

in the categorical Pretreatment Standard(s). The

POTW may grant a removal credit equal to or, at its

discretion, less than its consistent removal rate. Upon

being granted a removal credit, each affected Indus-

trial User shall calculate its revised discharge limits

in accordance with subparagraph (4) of this paragraph.

Removal credits may only be given for indicator or

surrogate pollutants regulated in a categorical Pre-

treatment Standard if the categorical Pretreatment

Standard so specifies.

(3) Conditions for authorization to give removal

credits. A POTW is authorized to give removal credits

only if the following conditions are met:

(i) Application. The POTW applies for, and receives,

authorization from the Approval Authority to give a

removal credit in accordance with the requirements

and procedures specified in paragraph (e) of this sec-

tion.

(ii) Consistent removal determination. The POTW

demonstrates and continues to achieve consistent re-

moval of the pollutant in accordance with paragraph

(b) of this section.

(iii) POTW local pretreatment program. The POTW

has an approved pretreatment program in accordance

with and to the extent required by Part 403; provided,

however, 2 POTW which does not have an approved

A-59

pretreatment program may, pending approval of such

a@ program, conditionally give credits as provided in

paragraph (d) of this section.

(iv) Sludge requirements. The granting of removal

credits will not cause the POTW to violate the local,

State and Federal Sludge Requirements which apply

to the sludge management method chosen by the

POTW. Alternatively, the POTW can demonstrate to

the Approval Authority that even though it is not

presently in compliance with applicable Sludge Re-

quirements, it will be in compliance when the Indus-

trial User(s) to whom the removal credit would apply

is required to meet its categorical Pretreatment

Standard(s) as modified by the removal credit. If

granting removal credits forces a POTW to incur

greater sludge management costs than would be in-

curred in the absence of granting removal credits, the

additional sludge management costs will not be eli-

gible for EPA grant assistance.

(v) NPDES permit limitations. The granting of re-

moval credits will not cause a violation of the POTW’s

permit limitations or conditions. Alternatively, the

POTW can demonstrate to the Approval Authority

that even though it is not presently in compliance

with applicable limitations and conditions in its

NPDES permit, it will be in compliance when the

Industrial User(s) to whom the removal credit would

apply is required to meet its categorical Pretreatment

Standard(s), as modified by the removal credit pro-

vision.

(4) Calculation of revised discharge limits. Revised

discharge limits for a specific pollutant shall be de-

rived by use of the following formula:

A-60

where:

x = pollutant discharge limit specified in the appli-

cable categorical Pretreatment Standard

r = removal credit for that pollutant as established

under paragraph (b) of this section (percentage

removal expressed as a proportion, i.e., a number

between 0 and 1)

y = revised discharge limit for the specified pollutant

(expressed in same units as x)

(b) Establishment of Removal Credit; Demonstration

of Consistent ‘Removal. A POTW may be authorized

to grant a removal! credit that does not exceed its

consistent removal rate. In order to demonstrate con-

sistent removal, the POTW shall, for each pollutant

with respect to which removal credit authorization is

sought, collect influent and effluent data and calculate

consistent removal in accordance with the following

requirements. As a condition of retaining removal

credit authorization, the POTW’s consistent removal

must continue to be equal to or greater than the

removal credit.

(1) Number of samples. At least twelve represen-

tative samples of influent and effluent shall be taken

at approximately equal intervals throughout one full

year. Upon concurrence of the Approval Authority, a

POTW may utilize an historical data base either in

lieu of or as a supplement to these twelve samples.

In order to be approved, the historical data base must

be representative of the yearly and seasonal condi-

tions to which the POTW is subject and be repre-

sentative of the POTW’s performance for at least one

year. As an alternative to the above, a POTW, upon

concurrence of the Approval Authority, may utilize an

alternative sampling design, as long as the alternative

design provides for samples to be taken at times which

are representative of the POTW’s normal operating

A-61

conditions and the different seasonal conditions to

which the POTW is subject.

(2) Method of Sampling. The POTW must use the

composite sampling method unless the grab sampling

method is more appropriate. A description of these

methods and suggestions on when each method should

be used are included in Appendix E as guidance.

(3) Method of Analysis for Pollutants. The POTW

shall analyze the samples for pollutants in accordance

with the analytical techniques prescribed in 40 CFR

Part 136. If 40 CFR Part 136 does not contain an-

alytical techniques for the pollutant in question, or if

the Approval Authority determines that Part 136 an-

alytical techniques are inappropriate, the analysis shall

be performed using validated analytical methods or

any other applicable analytical procedures a

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