Petition for Writ of Certiorari — Alabama Power Co. v. Thomas

Supreme Court, US.

FILED

JUN 17 1988

87-2068

No. 87-

JOSEPH F SPANIOL, JR.

CLERK

IN THE

Supreme Court of the United States

OCTOBER TERM, 1987

ALABAMA POWER Co., et al., UNITED MINE WORKERS

OF AMERICA, ORMET CORPORATION,

AND NATIONAL COAL ASSOCIATION,

Pi titione rs,

Vi

LEE M. THOMAS, et al..

Re spond nts,

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

DONALD C. WINSON GEORGE C. FREEMAN, JR.

RICHARD S. WIEDMAN HENRY V. NICKEL

ECKERT, SEAMANS, CHERIN Counsel of Record

& MELLOTT I’. WILLIAM BROWNELL

42nd Floor, 600 Grant Street MEL S. SCHULZE

Pittsburgh, PA 15219 HUNTON & WILLIAMS

(412) 566-6000 2000 Pennsyvivania Ave., N.W.

Counsel for Petitioney suite VOUOO

Ormet Corporation Washington, D.C. 20006

202) 955-1500

DAVID C. BRANAND

1130 17th Street, N.W.

Washington, D.C. 20036

’ Ie x.

( ZnSeL TO?) Pe l fione ra

\labama Power Co., et al.

(202) 463-2643 MICHAEL H. HOLLAND

Counse l ] Pe fitioner Nat 1] 900 15th Street. N.W.

Coal Associatio? Washington, D.C. 20005

202) 842-7330

Counsel for Petitioner United

Mine Workers of America

WILSON - EPES PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 26001

QUESTIONS PRESENTED

1. Whether the notice requirement in $4 of the Ad-

ministrative Procedure Act, 5 U.S.C. § 553 (1982), is

satisfied when an agency adopts a final rule that was

suggested in or flows from a public comment that called

for a fundamentally different rule than the agency

proposed?

2. Whether an agency can avoid the obligation imposed

under the Administrative Procedure Act to provide record

support for a factual finding relied upon as the basis for

a final rule whenever the agency includes an “exceptions”

or “safety valve” procedure that purportedly allows a

regulated party to seek a case-specific waiver of the rule?

(i)

il

PARTIES TO THE PROCEEDINGS

This case involves challenges to final regulations prom-

ulgated by the United States Environmental Protection

Agency (EPA) pursuant to § 123 of the Clean Air Act,

42 U.S.C. § 7423 (1982). Petitioners Alabama Power

Co., 63 other electric utilities,* Edison Electric Institute,

National Rural Electric Cooperative Association, and

American Public Power Association were petitioners in

No. 85-1543 below. Petitioner Ohio Power Company was

petitioner in No. 85-1556. Petitioner Ormet Corpora-

tion was petitioner in No. 85-1558. Petitioner Na-

tional Coal Association was petitioner in No. 85-1560.

Petitioners Monongahela Power Co. and Potomae Edison

Co. were petitioners in No. 85-1557. Petitioner United

Mine Workers of America was petitioner in No. 85-1568.

Other petitioners below were the Natural Resources

Defense Council and Sierra Club (No. 85-1488), the

States of New York, Rhode Island, Connecticut, Ver-

mont, Maine, and New Hampshire, and the Common-

wealth of Massachusetts (No. 85-1489), the State of

New Jersey (No. 85-1554), and the Environmental De-

fense Fund (No. 85-1552). Pursuant to Rule 19.6 of

this Court, these other petitioners below are Respondents

in this Court. Respondents Lee M. Thomas, EPA Ad-

ministrator, and EPA were respondents in each of the

proceedings below. The proceedings were consolidated on

October 25, 1985.

Intervening on behalf of respondents in one or more

of the cases filed below by Petitioners here were the

American Paper Institute, National Forest Products

Association, Natural Resources Defense Council, and

Sierra Club. Intervening on behalf of the respondents

* A list of the individual companies that comprise Petitioners

Alabama Power Co., et al., and all parent companies, subsidiaries,

and affiliates is contained in the supplemental appendix attached

to this Petition pursuant to Rule 28 of this Court. Ormet Corpora-

tion is a wholly owned subsidiary of Ohio River Associates, Ine.

ili

below in other petitions were Alabama Power Co., et al.

(Nos. 85-1488, 85-1489, 85-1552, 85-1554), the American

Paper Institute and National Forest Products Associa-

tion (intervenors on all other petitions), the National

Coal Association (Nos. 85-1488, 85-1489, 85-1552, 85-

1554), Kennecott (Nos. 85-1488, 85-1489, 85-1552), the

Natural Resources Defense Council and Sierra Club (in-

tervenors on all other petitions except No. 85-1488), and

the State of Ohio (No. 85-1488). Pursuant to Rule 19.6

of this Court, all intervenors below other than Petition-

ers here are Respondents in this Court. Participating

below as amic? curiae in support of respondents on cer-

tain issues raised in Nos. 85-1488, 85-1489, 85-1552, and

85-1554 were the States of Indiana, Mississippi, and

Georgia.

Two other consolidated petitions for review, one filed

by Ohio Power Co. (No. 86-1331) and the other filed by

Ormet Corporation (No. 86-1362), were decided in the

same judgment of the court below as the preceding peti-

tions. These two petitions, which were not consolidated

with Nos. 85-1488, et al., sought review of EPA’s denial

of an administrative petition for reconsideration of cer-

tain of the § 123 regulations. The respondents in that

proceeding were also Lee M. Thomas, Administrator, and

EPA. The Natural Resources Defense Council and

Sierra Club intervened on behalf of EPA in both peti-

tions. Pursuant to Rule 19.6 of this Court, respondents

and intervenors in these petitions below are Respondents

in this Court.

TABLE OF CONTENTS

Tee OR BAF ee Oe crcrircrcsencccnetieeceneoniion

ORF EEE, SUMAN cincscctvcnversitpincncstinmnenctinameatecneehomnteninaiadinn

Cr I cela iD scedemenscmitiensinnndicnimacinatarennia

STATUTORY AND REGULATORY PROVISIONS

SE I TIP i nsn:ssesascesipssnendcininoninasabenveseusebinsidadaniadnepaaatens

Aa ee RI GNI sii insincentasticcedsscccdcimmasitoias

I.

II.

ITI.

THE STATUTORY CONTEXT OF THIS

SITE widainssskaccsicsd sctanbgeleninanpesendieiaaaeiaecaamios ian

EPA’S § 123 RULEMAKINGS ......... eal moauata

THE D.C. CIRCUIT’S DECISION ..... fare on

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

I.

Il.

THIS COURT NEEDS TO RESOLVE A CON-

FLICT IN THE CIRCUITS AND SETTLE

WHAT CRITERIA ARE TO BE APPLIED IN

JUDGING THE ADEQUACY OF RULEMAK-

PEPE SPRUE IPNUE cAscsensssatssnavisteniepeniincanerncicsstieons sdegatniin

THE D.C. CIRCUIT’S HOLDING THAT A

REGULATION CONTAINING AN “EXCEP-

TIONS” CLAUSE NEEDS NO RECORD

SUPPORT CONFLICTS WITH THE LAW OF

THE FOURTH CIRCUIT AND IS A RADI-

CAL DEPARTURE FROM ESTABLISHED

PRINCIPLES OF ADMINISTRATIVE LAW...

CONCLUSION .................... sneaiahs idathdeanoennonipanspnelatenaiaaiane

(v)

11

13

16

28

vi

TABLE OF AUTHORITIES

CASES: Page

AFL-CIO v. Donovan, TH7 F.2d 330 (D.C. Cir.

1985) ..... a 18

American Lron & Steet Puctitute | v. EPA, 568 F.2d

284 (3rd Cir. 1977), cert. denied, 435 U.S. 914

(1978) 17

Appalachian Power Co. v. Train, 515 F.2d 1851

(Ath Cir. 1976) ates 26

BASF Wyandotte Corp. v. Costle, 598 F.2d 637

(Ist Cir. 1979), cert. denied anb nom. Eli Lilly

Co. v. Costle, ALL US. 1096 (1980) 15, 20

Brazos Electrie Power Co-op v. SWPA, 819 F.2d

h37 (5th Cir, 1987) 17, 20

Chocolate Mfrs. Ass'n of United States r. Block.

755 F.2d 1098 (ith Cir, 1985). 14,18

Common Carrier Conference v. United States, 534

F.2d 981 (D.C. Cir.), cert. denied, 429 U.S. 921

(1976) 19

EI. du Pont de Nemours & Co. v. . Train, rT F. °d

1018 (4th Cir, 1976), aff'd in part, rev'd in

part, 450 US. 112 (L977) 15, 26

Kennecott Copper Corp. v. EPA, 780 F.2d 415

(ith Cir. 1985), cert. denied, 107 S. Ct. 67

(1986) ao 18

National Black Media Coalition v. FCC, 791 F.2d

1016 (2nd Cir, 1986) 17

ase Cable Television Ass'n v. FCC, 747 F.2d

1n03 (D.C. Cir, 1984) ne 17

National Lime Ass'n v. EPA, 627 F.2d 416 (D.C.

Cir. 1980) RCC

NLRB v. Wyman-Gordon Co., 394 U.S. 759

(1969) ae Ress 16

NRDC v. EPA, S21 F.2d 1258 (ist Cir. 1987) 20

NRDC v. Herrington, 768 F.2d 1855 (D.C. Cir.

1985) ;, 26

NRDC v. Thomas, S388 F.2d 1221 (D.C. Cir.

1988) passim

Portland Cement Ass'n vr. Ruckelshaus, 486 F.2d

375 (D.C. Cir. 1973), cert. denied, 417 U.S. 921

(1974) SERIO air oes 24, 26

vii

TABLE OF AUTHORITIES—Continued

Page

SEC v. Chenery Corporation, 332 U.S. 194

NN acai a aa 16

Sierra Club wv. Costle, 657 F.2d 298 (D.C. Cir.

| ee 26

Sierra Club v. EPA, 719 F.2d 436 (D.C. Cir. 1983),

cert. denied sub nom, Alabama Power Co. v.

Sierra Club, 468 U.S. 1204 (1984) .. 7

Small Refiner Lead Phase-Down Task Foree v

EPA, 705 F.2d 506 (D.C. Cir. 1983)... 18, 19, 20, 26

Union Oil Co. of California v. EPA, #21 F.2d

678 (D.C. Cir. 1987) .. RES 18

United States v. Nova "Scotia: Food Products

Corp., 568 F.2d 240 (2nd Cir. 1977) 26

United States v. Storer Broadcasting, 35 1 U. Ss.

a 16

United Steelworkers of America v. Schuylkill

Metals, 828 F.2d 314 (5th Cir. 1987) . 17

US. Lines v. Federal Maritime Commission, 584

fp Fi 's@: & ee 25

STATUTES:

The Administrative Procedure Act, 5 U.S.C.

§§ 551, et seq., 701, et seq. (1982)

§ 4,5 U.S.C. § 553 (1982) A A

§ 4(a),5 U.S.C. § 553 0b) (1982). 19, 25

§ 4(b), 5 U.S.C. § 5523 (c) (1982). Rs 25

§ 10(e), 5 U.S.C. § 706 (1982) 25

§10(e)(B)M), 5 USC. § 706(2)(A)

(1982) . Ric aac te 5 eS 12, 25

28 U.S.C. § 1254 (1) | (1982) . 2

28 U.S.C. § 2101 (c) (1982). 2

The Clean Air Act, 42 USC. § 7401, et seq.

(1982)

§ 108, 42 U.S.C. § 7408 (1982) 3

§ 109, 42 U S.C. § 7409 (1982) 3

§ 110,42 U.S.C. § 7410 (1982) oe YY %

§ 111, 42 U.S.C. § 7411 (1982)... 4, 8, 22, 24

viii

TABLE OF AUTHORITIES—Continued

Page

§ 111(a) (1) (C), 42 U.S.C. § 7411 (a) (1) (C)

RAS ARENT AS A ie EIR Rs 4

§ 111(a) (2), 42 U.S.C. § 7411(a) (2) (1984). 4

§ 111(b), 42 U.S.C. § 7411(b) (1982) 10

§ 123, 42 U.S.C. § 7423 (1982)... passim

§ 123(¢), 42 U.S.C. § 7423(c) (1982)... 5,11

§ 163, 42 U.S.C. § 7473 (1982). 3

§ 169(3), 42 U.S.C. § 7479(3) (1982) ieeieeiiontias 24

§$ 169A(g)(2), 42 USC. §7491(g) (2)

ee cach RESTS SN SO Te se a 24

§ 307(b) (1), 42 U.S.C. § 7607 (b) (1) (1982)... 2

REGULATIONS:

1 C.F.R. § 305.74-4 (1988) 0 26

40 C.F.R. § 50.4 (1987)... 5

0C.F.R. § 51.166(c) (1987)... 5

FEDERAL REGISTER:

29 Fed. Reg. 8325, et seq. (1965)... sis 16

38 Fed. Reg. 25697, et seq. (1973) .... 5

44 Fed. Reg. 2608, et seq. (1979)... 6

47 Fed. Reg. 5864, et seg. (1982). sis 7

47 Fed. Reg. 35784, et seg. (1982). sis 7

49 Fed. Reg. 44878, et seq. (1984). is 7

50 Fed. Reg. 27892, et seq. (1985). passim

MISCELLANEOUS:

H.R. Rep. No. 294, 95th Cong., Ist Sess. (1977)... 5, 10

S. Rep. No. 752, 79th Cong., Ist Sess. (1945). 13

S. Rep. No. 284, 97th Cong., Ist Sess. 165-166

(1981) . eee 26

K.C. Davis, Administrative Law Treatise, ‘Vol. 1

Be th SEE Licssccenseidiecttabeersnate ee 13, 16

Robinson, The Making of Administrative Policy:

Another Look at Rulemaking and Adjudication

and Administrative Procedure Reform, 118 U.

Pa. L. Rev. 485 (1970) 00 16

IN THE

Supreme Court of the United States

OCTOBER TERM, 1987

No. 87-

\

ALABAMA POWER Co., et a/., UNITED MINE WORKERS

OF AMERICA, ORMET CORPORATION,

AND NATIONAL COAL ASSOCIATION,

= Petitioners,

LEE M. THOMAS, et al.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Alabama Power Co., 63 other individual electric utili-

ties,' Edison Electric Institute, National Rural Electric

Cooperative Association, American Public Power Asso-

ciation, United Mine Workers of America, Ormet Cor-

poration, and National Coal Association respectfully pe-

tition for a writ of certiorari to review the judgment of

the United States Court of Appeals for the District of

Columbia Circuit entered in this proceeding on Jan-

uary 22, 1988.

OPINION BELOW

The opinion of the U.S. Court of Appeals in Natural

Resources Defense Council, et al. v. Thomas, et al., Nos.

85-1488, et a/. (D.C. Cir. January 22, 1988), is reported

at 838 F.2d 1224. A copy of the opinion appears in the

' The 64 individual utility petitioners and their parent companies,

subsidiaries, and affiliates are set forth in the supplemental appendix

attached to the Petition pursuant to Rule 28 of this Court. Ormet

Corporation is a wholly owned subsidiary of Ohio River Associates,

Inc.

nn

2

Appendix (hereinafter referred to as “App. —’’) at

la-64a.

JURISDICTION

The judgment of the U.S. Court of Appeals for the

D.C. Circuit was entered on January 22, 1988.° Three

timely Petitions for Rehearing and Suggestions for Re-

hearing En Bane, and two timely Petitions for Rehear-

ing, were denied on April 13, 1988, App. 65a-68a. This

petition for a writ of certiorari is being filed within

ninety days of that date pursuant to 28 U.S.C. § 2101(c)

(1982) and Rules 20.2 and 20.4 of this Court. This

Court’s jurisdiction is invoked pursuant to 28 U.S.C.

§$ 1254(1) (1982).

STATUTORY AND REGULATORY

PROVISIONS INVOLVED

The following statutory and regulatory provisions are

set forth in the Appendix:

1. Clean Air Act §§ 110(a) (1)-(a) (2) (K), 123, 42

U.S.C. §§ 7410(a) (1)-(a) (2) (K), 7423 (1982),

App. 172a-177a.

2. 49 Fed. Reg. 44878-44887 (1984) (Proposed Stack

Height Regulations), App. 134a-171a.

3. 50 Fed. Reg. 27892-27907 (1985), recodified at 40

C.F.R. §§ 51.100(tf)-(kk) (1987) (Final Stack

Height Regulations), App. 7la-1338a.

4. Administrative Procedure Act §§ 4, 10(e), 5 U.S.C.

$§ 553, 706 (1982), App. 178a-180a.

*The court below had jurisdiction of these cases under § 307

(b)(1) of the Clean Air Act, 42 U.S.C. § 7607(b) (1) (1982), which

provides tne District of Columbia Circuit with exclusive jurisdiction

to review any “nationally applicable regulations . . . promulgated

by the Administrator ... .”

3

STATEMENT OF THE CASE

This case concerns two fundamental principles of ad-

ministrative law that are important in virtually all in-

formal rulemaking proceedings conducted by EPA and

other federal agencies. It arises in the context of EPA’s

implementation of § 123 of the Clean Air Act.*

First, the D.C. Circuit in this case held that an agency

is not required by the Administrative Procedure Act

(APA) to provide notice of a rule in its rulemaking

proposal so long as the final rule was suggested in or

flows from a public comment that called for a funda-

mentally different rule than the agency proposed. Sec-

ond, the court’s decision establishes the novel principle

that a federal agency may promulgate a final rule with-

out record support for the factual finding asserted as the

basis for the rule, so long as that rule contains a “safety

valve” or “excepticns” procedure that purportedly allows

a regulated party to seek a case-specific waiver of the

rule.

I. THE STATUTORY CONTEXT OF THIS CASE

Sections 109 and 110 of the Clean Air Act establish a

system of regulation of ambient pollutant concentrations

that is based upon “National Ambient Air Quality Stand-

ards” (“ambient standards”) and “Prevention of Signifi-

eant Deterioration” increments (“PSD increments’’).*

242 U.S.C. § 7423 (1982), App. 176a-177a. The Clean Air Act,

42 U.S.C. § 7401, et seq. (1982), will be referred to as “CAA” or

“the Act.” For convenience, all further citations will be to the

Act. Parallel citations to the U.S. Code are given in the Table of

Authorities.

4The ambient standards define maximum ground level concen-

trations of pollution which, if attained, will assure protection of

public health and welfare. CAA §§ 108, 109. The PSD increments

define the maximum increases in ground level concentrations that

are allowed to occur as a result of new construction in areas where

the ambient standards are met. CAA § 163.

4

Under the Act, EPA is also authorized to establish tech-

nology-based emission standards that apply only to new

sources and that must be met without regard to the im-

pact of the new source on ambient air quality. For

example, under § 111, new source performance standards

(NSPS) define an emission level that reflects

the degree of emission reduction achievable through

the application of the best system of continuous emis-

sion reduction which (taking into consideration the

cost of achieving such emission reduction, and any

nonair quality health and environmental impact and

energy requirements) the Administrator determines

has been adequately demonstrated for that category

of [new] sourcees.°

While NSPS prescribe a level of control that must be

met regardless of a source’s ambient air quality impacts,

emission limitations developed pursuant to §110 are

based upon a scurce’s ambient impacts. Thus, under

$ 110 of the Act, the states must set emission limitations

for individual sources to ensure that their emissions will

not cause or contribute to ground-level pollutant concen-

trations that exceed the ambient standards or PSD

increments.

Dispersion of emissions from the point of release to

ground level where people breathe is integral to the op-

eration of the § 110 state programs. If emissions from

a fuel burning facility were released at ground level, they

could create pollutant concentrations that exceed ambient

air quality standards and PSD increments by factors of

many thousands.* In other words, for there to be in-

5CAA §111(a)(1)(C). Under § 111(a)(2), a “new source” is

one that commenced construction after proposal of an applicable

NSPS.

6 For example, if the emissions from a well-controlled source

(e.g., a power plant meeting the stringent EPA new source stand-

5

dustrial activity that does not threaten public health,

there must be dispersion. Under the § 110 programs, the

amount of dispersion will govern the type of fuel a scurce

can use, what control technologies the source must install,

and where the source can be built consistent with the

protection of public health.

By including $123 in the 1977 Amendments to the

Act, Congress recognized that reliance on dispersion is

a legitimate and necessary aspect of achieving compli-

ance with the ambient standards and PSD increments at

ground level. On the other hand, Congress was concerned

that excessive reliance on dispersion might be used by

regulated sources to avoid reducing the volume of pollut-

ant emissions.‘ To preclude excessive reliance on disper-

sion, Congress in § 123 directed EPA to develop a program

similar to one previously proposed by EPA in 1973°

that would limit the use of dispersion “credit” to that

provided by stack height conforming to “good engineer-

ing practice” (“GEP stack height’’).

GEP stack height is defined in § 123(c) of the Act as

the height necessary to insure that emissions from

the stack do not result in excessive concentrations

of any air pollutant in the immediate vicinity of the

source as a result of atmospheric downwash, eddies

and wakes which may be created by the source itself,

nearby structures or nearby terrain obstacles (as

determined by the Administrator).

ards) were released at ground level, they would create ambient

concentrations of sulfur dioxide (SO,) in the range of 900,000

micrograms per cubic meter in the vicinity of the source. By com-

parison, the primary (public health) ambient standard for SO, is

565 micrograms per cubic meter (24-hour calendar day average),

and the Class II PSD increment is 91 micrograms per cubic meter

(24-hour calendar day average). 40 C.F.R. §§ 50.4, 51.166(c)

(1987).

7H.R. Rep. No. 294, 95th Cong., Ist Sess. 81-93 (1977).

8 38 Fed. Reg. 25697 (1973).

6

Congress explicitly limited GEP stack height to 2.5

times the height of the source (“2.5H’’), unless the

source owner or operator demonstrates, to the satisfac-

tion of the Administrator, that a taller stack height is

needed to ensure against excessive pollutant concentra-

tions due to downwash. If such a demonstration of a taller

stack height is approved by EPA, that demonstrated

stack height is GEP stack height for the particular

source.

The regulations defining the requirements for demon-

strations of greater than 2.5H formula stack height are

of primary importance here. The availability of these

demonstrations, which are conducted in wind tunnel

(fluid model) facilities using scale models of the source

and surrounding terrain, are most important for sources

in rugged terrain areas where downwash of source emis-

sions can occur because of wind blowing over nearby

terrain features.

II. EPA’S §123 RULEMAKINGS

In January 1979, EPA proposed rules under § 123

governing demonstrations to establish GEP stack height

credit greater than the 2.5H formula height.° Among

other things, the 1979 proposal required sources conduct-

ing demonstrations to show the existence of a downwash-

induced “excessive concentration,” which was defined as

a forty percent increase in ambient concentrations and

an ambient standard or PSD increment “exceedance.”’ 1°

Under the 1979 proposal, as well as guideiines issued in

1981," a source’s actual or allowable emissions could be

used in the wind tunnel demonstration.

® 44 Fed. Reg. 2608 (1979).

10 Jd. at 2614. An “exceedance” is a term of art under the Act

that means an ambient pollutant concentration that is greater than

the concentration of the pollutant specified in the standard or

increment.

11 FPA-450/4-81-003, Guideline for Use of Fluid Modeling to

Determine Good Engineering Practice Stack Height (June 1981).

7

During the late 1970s and early 1980s, three sources

successfully conducted such demonstrations under EPA’s

supervision.'? No party challenged these demonstrations,

and no party in the 1979 rulemaking commented that

anything other than a source’s actual or allowable emis-

sions be used in demonstrations.

In 1981, EPA reproposed § 123 rules that, inter alia,

relaxed the definition of “excessive concentrations.” In

1982, EPA promulgated a final rule requiring that a

source only show a forty percent increase in downwash-

induced ambient concentrations in order to establish GEP

height above 2.5H formula height.’* The final rules still

allowed sources to use actual or allowable emissions in

conducting demonstrations.

In 1983, the U.S. Court of Appeals for the D.C. Cir-

cuit remanded the 1982 definition of ‘‘excessive concen-

trations” to EPA on the ground that the forty percent

test had not been adequately explained in reference to

public health or welfare concerns.** In remanding the

rule, the court suggested that the 1979 proposed defini-

tion, which included an ambient standard and PSD in-

ecrement exceedance test, would pass muster if adopted

on remand.'® In the 1984 remand rulemaking, EPA, as

urged by those who had challenged the 1982 rules *® and

as suggested by the court, proposed the same definition of

“excessive concentrations” that it had proposed in 1979

12 See, e.g., 47 Fed. Reg. 35784 (1982).

13 47 Fed. Reg. 5864, 5869 (1982).

14 Sierra Club v. EPA, 719 F.2d 436, 450, 470 (D.C. Cir. 1983),

cert. denied sub nom. Alabama Power Co. v. Sierra Club, 468 U.S.

1204 (1984).

15 Td. at 470.

16 Jd. at 446 (“Petitioners NRDC and Sierra Club... urge a

return to a standard like the one EPA originally proposed in 1979.’’).

8

(i.e, a forty percent increase in ambient concentrations

and an ambient standard or PSD increment exceed-

ance) .}7

Consistent with EPA’s practice of allowing actual or

allowable emissions to be used in demonstrations con-

ducted under the 1979 proposed and 1982 final rules,

EPA indicated in the preamble to the 1984 proposal that

sources conducting demonstrations were to use the emis-

sion rate that “is applicable to the source being mod-

eled.”** Thus, if a source were subject to an ambient

standard or PSD increment-based emission limit in a

§ 110 state plan, it would use that limit; if it were sub-

ject to a technology-based limit, such as an NSPS limit

under $111, it would use that limit.1? No regulatory

language relating to this preamble guidance was pro-

posed and, unlike in other parts of EPA’s preamble

addressing different rulemaking matters,?? no comments

were solicited on the issue of whether anything other

than applicable emission rates should be used.

KPA received extensive comments on the proposed

rules from over 400 commenters. Of these numerous

commenters, one group of commenters !ed by the Natural

Resources Defense Council (NRDC) urged in their com-

1749 Fed. Reg. 44878, 44887 (1984), App. 170a-171la.

18 Jd. at 44882, App. 150a.

19 See id. The NSPS, which are promulgated pursuant to § 111

of the Act, govern the emissions of pollutants emitted from new

sources of a defined source type. The NSPS are not “applicable”

to many of the sources subject to regulation under § 123.

20 See, e.g., 49 Fed. Reg. at 44881 (where EPA solicited com-

ments on a definition of “excessive concentrations” that would

include only the forty percent test, as an alternative to the pro-

posed forty percent and ambient standard or PSD increment

exceedance test), App. 147a; 44884 (where EPA discussed three

different approaches for considering terrain features in fluid model

demoiistrations, and solicited comment on which approach should

be adopted), App. 158a-159a.

ee

9

ments on the proposal for the first time in the lengthy

history of the § 123 rulemaking a new legal interpreta-

tion of § 123—an interpretation that would have funda-

mentally changed the Agency’s approach to how sources

must demonstrate an “excessive concentration.”

NRDC argued that the word “necessary” in § 123

should be construed to require al/ sources (not just those

conducting demonstrations to justify GEP credit above

formula height) to apply “maximum available controls”

(i.e., a stringent technology-based level of control) before

any concentration could be deemed “excessive.” Under

NRDC’s proposal, no stack height credit (even up to 2.5H

formula height) would be allowed for any source unless

the source first installed maximum available controls.*’

One other commenter, the Attorney General of New York,

made the bare assertion, based on the legal theory ad-

vanced in the NRDC comments, that “EPA must direct

that the emission rate to be assumed in determining

whether an ‘excessive concentration’ will occur, must be

the new source performance standard for the type of

plant in question.”

In the 1985 final rules, EPA rejected NRDC’s bizarre

interpretation of § 123.*° Consistent with the proposed

rule, EPA provided in the final rule that the applicable

emission rate would be used in demonstrations required

to justify credit up to GEP formula height. However,

for demonstrations conducted by sources seeking credit

above formuia height, EPA adopted an approach that

was fundamentally different from the approach described

in the preamble to the proposed rule.

In the final rule, EPA included, without reproposal

providing notice and opportunity for comment, a totally

21 Comments of Sierra Club, Natural Resources Defense Council

and Environmental Defense Fund at 5 et seq. (January 22, 1985).

22 Comments of the Attorney General of the State of New York

at 2 (January 8, 1985).

2350 Fed. Reg. 27892, 27896 (1985), App. 87a-88a.

————ee-.

10

new regulatory requirement that all sources (even those

not otherwise subject to NSPS) assume an NSPS level

of control in any above-formula height demonstration.

The only exception to this requirement would be if a

source owner could show that compliance with the in-

applicable NSPS would be “infeasible.” * If such a show-

ing could be made, EPA would purportedly allow another

inapplicable technology-based limit (‘best available retro-

fit technology” or “BART’”’) to be used.

Since EPA decided to adopt this new “NSPS presump-

tion” rule in the eleventh hour, no record to support the

factual basis for the rule was developed. Nevertheless,

EPA found, as the basis for the rule, that “this [NSPS]

limit can be met by all sources seeking to justify [GEP]

stack heights above [2.5H] formula height.” **

24 Jd. at 27907, App. 132a. EPA did inform counsel for Alabama

Power Co., et al. two weeks before the rules were signed that such

a rule would be promulgated. Last-minute objections by these

counsel, including the point that the “NSPS requirement was not in

the proposed rules and has not been subject to public comment,”

were ignored by EPA. See Letter from Henry V. Nickel, Hunton

& Williams, to Administrator Thomas (June 20, 1985). EPA did

not inform Petitioners United Mine Workers of America or Ormet

Corporation of this change.

2550 Fed. Reg. at 27898 n.6, App. 96a.

2650 Fed. Reg. at 27898, App. 96a. Since most sources that

would seek to undertake fluid modeling demonstrations would be

existing sources for which NSPS is not the “applicable” limit, the

NSPS limit is likely not achievable by most sources subject to

this provision. Cf. H.R. Rep. No. 294, 95th Cong., Ist Sess. 185

(1977) (“A third purpose of [NSPS] ... [is] to achieve long-term

cost savings. Building control technology into new plants at time of

construction will plainly be less costly then requiring retrofit.’’) ; id.

at 188 (given the additional costs associated with retrofit tech-

nology, “{[a}ny revised [NSPS] requirement under section 111(b)

would . . . be effective only prospectively.”)}. The result would be

that most sources would have to attempt to rebut the NSPS pre-

sumption and establish an alternative technology-based limit that

EPA describes in its final rule as “best available retrofit technology”

(BART). 50 Fed. Reg. at 27898 n.6, App. 96a. Sources unable to

11

Ill. THE D.C. CIRCUIT'S DECISION

Alabama Power Co., et al., together with the National

Coal Association, Ormet Corporation, and the United

Mine Workers of America, petitioned for review of the

“NSPS presumption” rule. On January 22, 1988, the

D.C. Circuit affirmed the rule.

Regarding the allegation that EPA failed to provide

adequate notice of and an opportunity to comment on the

final “NSPS presumption” rule, the D.C. Circuit found

that EPA’s claim that the Agency had in fact proposed

this rule was “quite disingenuous.” ** The court found

“ln]othing in the initial formulation [to] suggest|] that

EPA intended to adopt” a universally applicable NSPS

requirement for above-formula height fluid modeling dem-

onstrations.* Nevertheless, the court found that “indus-

try” should have realized that there was “a clearly for-

seeable risk that EPA would reject the environmentalists’

reading of the law [to require use of maximum available

controls] but proceed to adopt control-first” with respect

to only the above-formula height demonstration require-

ment.”°

Furthermore, the court felt that the New York Attor-

ney General’s comments “gave industry participants a

clear opportunity to shoot the [NSPS presumption] idea

down.” * The court did not discuss the fact that there

install NSPS or BART-type controls for economic or technological

reasons would as a practical matter be precluded from undertaking

fluid modeling demonstrations, even though $ 123(c) of the Act

imposes no such restrictions on such demonstrations. See also infra

pp. 23-25.

27 838 F.2d at 1242, App. 31a.

28 Id.

29 Id. at 1243, App. 33a.

30 Jd. (emphasis added). The court also indicated that the actual

notice provided by EPA to counsel for Alabama Power Co., et al.

two weeks before the rules were signed provided “at least a limited

was a labor 1 n ‘Unit fine W

and an indust) etitioner (Ormet (

did not file comments on the rulemaking prop

the proposal « 1 not ll ! VSP rye

These petitions ! tneretore, were 1

ing the rulen docket nd ere

NRDC’s and New Yor! mment

Regarding the egatinn

proy ide necessa} rl support f the rule

bitrary, capriciou buse of d e!

the Administrat Procedure Act. 5 U.S. 70619

(A), the eourt 4 1 t+ EPA '

support its factual finding that an NSPS

able by most of

cluded, howe, that “there is no need for ar rt

generic demo!

rule “allows a1 ource to uss higher ¢

when NSPS nf e,” In other v

rule contained an “except ,

some cases part

applying NSPS

no need to su

or otherwise

lated parties.*

opportunity” fo

obie ctions. Id.

America, howev:

31 Jd. at 1242,

2 Td.

3 Any mitig:

would apparent

of emissions cor

a different tec

technology”). § Bs

failed to addres

tive standard al:

record support.

RI

ASONS

FOR

GRANTING

PETITION

nies i

14

the law of the D.C. Circuit has evolved in a manner that

puts it at odds with Congress’ intent in the APA and

with the law of other circuits, including the Fourth Cir-

cuit’s decision in Chocolate Manufacturers Association of

United States v. Block" As a consequence, the D.C.

Cireuit decision in this case wili lead to unfair results,

will perpetuate conflicts in the circuits, and will create

confusion as to the standards that apply in future rule-

making proceedings.

Under the decision of the D.C. Circuit, the notice

required by $4 of the APA need not come from the

agency itself, but rather may come from rulemaking

participants. If allowed to stand, agencies will find au-

thority in this decision te promulgate final rules that are

not described in a rulernaking notice or are not raised

as an issue in the notice, so long as a comment on the

rulemaking proposal suggests such a final rule.

The D.C. Cireuit decision will impose an almost im-

possible burden on all persons that have even a remote

possibility of being potentially affected by the outcome of

a rulemaking. Specifically, all who may be affected mus:

monitor continuously the rulemaking docket (‘assuming

there is one, since the APA has no requirement that a

docket be kept! and prepare comments on any proposals

offered by commenters. No longer can interested persons

rely on the Federal Register to set the outer limits of

potential effects; any comment in the rulemaking can

expand the bounds.

As Chief Justice Rehnquist observed over eight vears

ago in dissenting with Justice Powell from an order deny-

ing certiorari, the question of what notice is adequate

when a final rule differs from a proposal is “an issue

of great importance, which cannot help but become

greater as time goes on and more and more administra-

tive proceedings are conducted . . . under the Adminis-

86755 F.2d 1098 (4th Cir. 1985).

15

‘tle

trative Procedure Act.”"* Accordingly, th: question “is

a recurring one that will ultimately require interpreta-

tion of [this] important [APA] statutory language by

this Court.” *

Rulemakings have proliferated as the Chief Justice pre-

dicted and, as the discussion below shows, the uncer-

tainty surrounding the law on the procedural require-

ments that apply when final rules differ from proposals

is greater now than it was eight years ago. Indeed, the

law on this question has evolved into a true conflict in

the circuits. Given the conflicting approaches of the cir-

cuits and the unique role of the D.C. Circuit in review-

ing federal agency decisions, this Court should take the

opportunity to address this “important statutory lan-

guage” of the APA™ and settle this basic principle of

administrative law.

Finally, failure to give notice of a rule in the Federal

Register will limit the extent to which a record support-

ing the rule can be developed through the rulemaking

process. The D.C. Circuit, however, has held that record

support for the factual finding asserted as the basis for a

rule establishing a technology-based standard is not needed

so long as an agency makes available an “exceptions” or

“safety valve” procedure. This is contrary to the law of

the Fourth Circuit announced in E./J. du Pont de Ne-

mours & Co. v. Train.”

Under the holding of the D.C. Circuit, agencies will

find authority to promulgate final rules without record

support, so long as the regulation contains a procedure

allowing an affected party to apply for some kind of an

Eli Lilly & Co. v. Costle, 444 U.S. 1096 (1980) (opinion of

Rehnquist, J., with whom Powell, J. joined, dissenting from decision

not to grant certiorari).

% Jd. at 1098.

8° Jd.

9541 F.2d 1018 (4th Cir. 1976), aff'd in part, rev'd in part, 430

U.S. 112 (1977).

16

exception to the rule. In combination with the lower

court’s holding that notice need not come from the agency,

but may come from rulemaking commenters, this decision

will lead to meager rulemaking records that create prob-

lems for agency decisionmakers and reviewing courts.

I. THIS COURT NEEDS TO RESOLVE A CONFLICT

IN THE CIRCUITS AND SETTLE WHAT CRITERIA

ARE TO BE APPLIED IN JUDGING THE ADE-

QUACY OF RULEMAKING NOTICE.

Today, administrative agencies execute their responsi-

bilities principally through informal rulemaking.*! This

is reflected in the rapidly expanding area of energy and

environmental regulation where legal and policy disputes

are often substantial, issues ave factually complicated and

technically sophisticated, the affected interests typically

include numerous private parties and the public generally,

and the need for action is often compelling.

Due to the importance of the issues being resolved in

rulemakings and the potentially huge costs to the Ameri-

can economy and labor force from new regulations, it is

important now more than ever that affected interests

perceive agency rulemakings to be conducted fairly. There

must be opportunity for presentation, and proper con-

sideration, of views.

41 KC. Davis, Administrative Law Treatise, Vol. 1, § 1.9, at 34,

§ 61.1, at 448-49 (2d ed. 1978). While the choice between proceed-

ing by general rule or individual adjudication to establish agency

policy is one that lies primarily within the informed discretion of

the agency, SEC v. Chenery Corporation, 332 U.S. 194, 203 (1947),

the advantages of rulemaking over individual adjudication in the

formulation of general regulations or agency policy have been recog-

nized by this Court, agencies themselves, and various commentators.

F..a., United States v. Storer Broadcasting, 351 U.S. 192 (1956):

NLRB v. Wyman-Gordon Co., 394 U.S. 759 (1969); Statement of

Basis and Purpose of Trade Regulation Rule, 29 Fed. Reg. 8225,

8365-8369 (1965); Robinson, The Making of Administrative Policy:

Another Look at Rulemaking and Adjudication and Administrative

Procedure Reform, 118 U. Pa. L. Rev. 485 (1970).

17

The APA’s requirement that notice and an opportunity

to comment be provided on legislative rules is basic to

administrative law and the right of due process. The

notice-and-comment procedure allows public participation

in the administrative process, educates the agency, and

establishes a rulemaking record. It is essential to in-

formed and reasoned decisionmaking and effective ju-

dicial review.

The circuit courts agree that an agency may promul-

gate a final rule that differs in some respects from a pro-

yosed rule, whether in response to new data or to com-

ments on the proposal.‘* The law of the circuits, how-

ever, is not settled concerning what constitutes adequate

notice under $4 of the APA when a final rule differs

from the proposal.

Most circuits use a variant of the “logical outgrowth”’

test in assessing the adequacy of notice in this circum-

stance.** Considerable difference exists, however, con-

cerning the scope and application of this test. The ques-

tion that appears to be dividing the circuits involves the

degree to which, under the “logical outgrowth” test, rule-

making comments can substitute for notice of a proposal

in the Federai Register.

In applying the “logical outgrowth” test, the Fourth

Circuit finds notice inadequate when the proposal de-

42 See, e.g., National Cable Television Ass’n v. FCC, 747 F.2d

1503, 1507 (D.C. Cir. 1984).

43 See infra note 50. In the Third Circuit, the adequacy of

notice is “tested by determining whether it would fairly apprise

interested persons of the ‘subjects and issues’ before the Agency.”

Ameyican Iron & Steel Institute v. EPA, 568 F.2d 284, 293

(3rd Cir. 1977), cert. denied, 435 U.S. 914 (1978). Two circuits, the

Second and the Fifth, have recently cited to both the “apprise” test

and the “logical outgrowth” test. National Black Media Coalition

v. FCC, 791 F.2d 1016, 1022 (2nd Cir. 1986); United Steelworkers

of America v. Schuylkill Metals, 828 F.2d 314, 317-18 (5th Cir.

1987). But cf. Brazos Electric Power Co-op v. SWPA, 819 F.2d 537,

543 (5th Cir. 1987) (stating that the circuit follows the “logical

outgrowth” test).

18

scribed in the Federal Register “is replaced by a final rule

which reaches a conclusion exactly opposite to that pro-

posed, on the basis of comments received from parties

representing only a single view of the controversy.” ** In

the Fourth Circuit, therefore, notice is adequate only if

the final rule is a logical outgrowth of the proposed rule

published in the Federal Register. If comments suggest

rules that are fundamentally different f:0m those de-

scribed in the Federal Register proposal, reproposal is

required before the agency can adopt final rules that

embrace those rulemaking comments.*

In sum, under the law of the Fourth Circuit, comments

cannot cure a notice defect. In the Fourth Circuit, there-

fore, no obligation is imposed on rulemaking partici-

pants, or other potentially affected parties, to monitor

the rulemaking comments.

By contrast, while the D.C. Circuit at times has dis-

cussed the “logical outgrowth” test in terms of the rule-

making proposal (and indeed continues to use this lan-

guage in its opinions), the law in that Circuit has evolved

to allow the court to inquire beyond the terms of the

proposal itself. Thus, according to that court, while an

agency may not generally “bootstrap aotice from a com-

ment,” ** it may do so where a rulemaking participant

had actual notice of the comment.‘

44 Chocolate Mfrs. Ass’n of United States v. Block, 755 F.2d 1098,

1103 (4th Cir. 1985) (footnote omitted); see also Kennecott Copper

Corp. v. EPA, 780 F.2d 445, 452-53 (4th Cir. 1985), cert. denied, 107

S. Ct. 67 (1986) (“...an agency may not bootstrap new technologies

’”

from the comments... .’’).

#5 See Chocolate Mfrs. Ass’n, 755 F.2d at 1107.

46 AFL-CIO v. Donovan, 757 F.2d 330, 340 (D.C. Cir. 1985),

citing Small Refiner Lead Phase-Down Task Force v. EPA, 705 F.2d

506, 549 (D.C. Cir. 1983).

47 Small Refiner, 705 F.2d at 548, 549 (“Actual notice” of a pro-

posal, even if not provided by the agency, would be sufficient to

satisfy APA requirements); see also Union Oil Co. of California

v. EPA, 821 F.2d 678, 683 (D.C. Cir. 1987) (“Our review of the

19

Moreover, in determining whether petitioners had no-

tice, the D.C. Circuit has found that rulemaking partici-

pants are “obliged to take reasonable steps... to keep

informed of EPA’s thinking,” where they are “aware gen-

erally” that the Agency may be considering significant

changes to the proposed rule.** Accordingly, in the D.C.

Circuit, a party can be considered to have received ade-

quate notice of a rule if the party could have discovered

through reasonable inquiry that an agency was consider-

ing a rule not contained in the proposal.*®

The instant case takes the D.C. Circuit’s interpreta-

tion of the APA notice requirements a step further, build-

ing on the “factual notice” and “reasonable inquiry” corol-

laries to the D.C. Circuit’s version of the “logical out-

growth” test. Under this decision, not only is notice

of a rule adequate if the specific rule is described in a

rulemaking comment, but notice is adequate if the final

record demonstrates that petitioners received actual notice sufficient

to permit them to present their objections to the agency.” (emphasis

added) ); Common Carrier Conference v. United States, 534 F.2d

981, 983 (D.C. Cir.), cert. denied, 429 U.S. 921 (1976) (“Even where

there is a technical flaw in the notice, it can be overcome if the

actual conduct of the proceeding provides notice to the participants

of what is under contemplation.” (emphasis added) ).

48 Small Refiner, 705 F.2d at 548. The court suggested that if

petitioner had made an inquiry to EPA regarding the Agency’s

thinking, “EPA presumably would have informed it that other

commenters had proposed” that the Agency adopt the rule in

question, thereby providing notice. /d.

49 Jd. Compare 5 U.S.C. $ 553(b) (1982), which provides that

“lgleneral notice of proposed rule making shall be published in the

Federal Register, unless persons subject thereto are named and

either personally served or otherwise have actual notice thereof [i.e..

of the agency’s proposal | in accordance with law’ (emphasis added).

In other words, under the APA, “actual notice” is an adequate

substitute for notice in the Federal Register only if it is given by

the agency and is otherwise “in accordance with law.” Notice is

“in accordance with law” under $4 of the APA only if it describes

the terms or substance of the proposed rule and the basis for that

rule, and only if it is given to all affected parties, not just those who

filed comments. See 5 U.S.C. § 553(b) (1982); supra pp. 11-12.

| | ,

20

rule is a “logical outgrowth” of that rulemaking com-

ment.” As a result, rulemaking participants will need to

evaluate comments that suggest rules different from the

proposed rule to determine what other rules that have

not been proposed might grow out of those comments.*!

Under this case, not only are rulemaking participants

“obliged to take reasonable steps . . . to keep informed

of EPA’s thinking,’ °** but members of the public that

5° The First and Fifth Circuits seem to be following a variant of

the logical outgrowth test that is similar to the D.C. Circuit’s ap-

proach. According to the First Circuit, notice is adequate when the

final rule is a logical outgrowth of “comments” filed during the rule-

making. Natural Resources Defense Council v. EPA, 824 F.2d 1258,

1283 (1st Cir. 1987) (“ ‘a logical outgrowth’ of the notice and com-

ment[s|”); BASF Wyandotte Corp. v. Costle, 598 F.2d 637, 643

(1st Cir. 1979), cert. denied sub nom. Eli Lilly Co. v. Costle, 444

U.S. 1096 (1980) (indicating that final rule was “‘a logical outgrowth

of industry’s comments”). The Fifth Circuit focuses on whether the

final rule was a logical outgrowth of the ‘published proceedings.”

Brazos Electric Power Co-op v. SWPA, 819 F.2d 537, 542 (5th Cir.

1987).

51 Thus, in this case, EPA included in the preamble of its rule-

making proposal a statement that a source desiring to conduct a

demonstration to establish GEP stack height above the 2.5H formula

was to use its “applicable” emission rate. The final rule is directly

contrary to the statement in the proposal that sources use their

“applicable” emission rate. The final rule requires existing sources

to use an emission rate in demonstrations that is not applicable.

See supra pp. 9-10. The lower court found that the agency’s pro-

posal did not give notice of the NSPS presumption rule, see supra

p. 11, but nonetheless found adequate notice on the grounds that

two out of over 400 comments suggested an approach that provided

the seed out of which the final rule grew. According to the lower

court, notice was adequate because there was “a clearly foreseeable

risk” that EPA would reject the legal theory underlying these com-

ments, but adopt a rule that was a “logical outgrowth” of these

comments. 838 F.2d at 1243, App. 33a. Since this rule was not

included in the rulemaking proposal, however, there was no mean-

ingful opportunity to comment on this rule, and important issues

went unaddressed. See infra note 54.

52 Small Refiner, 705 F.2d at 548.

21

were not even affected by the proposed rule would face

similar obligations. In this case, for example, Petitioners

United Mine Workers of America and Ormet Corpora-

tion did not file rulemaking comments because the Agency

had not proposed the NSPS presumption rule. Neverthe-

less, these parties are equally bound by the lower court’s

holding that adequate notice can flow from two out of

hundreds of rulemaking comments.”®

If §4 of the APA is read to limit the “logical out-

growth” test to notice given by the agency in the pro-

posed rulemaking, then all interested parties will have a

full and equal opportunity to understand and comment

on the proposal. Due process will be satisfied.

By contrast, if a final rule can be a logical outgrowth

of a comment that is inconsistent with the agency’s

Federal Register proposal, as the D.C. Circuit has held,

notice to those satisfied with the proposal, and therefore

not participating in the rulemaking (like the United Mine

Workers and Ormet Corporation in this instance), would

not be provided until the final rule was issued. No oppor-

tunity to be heard through comments would have been

afforded.

In view of the foregoing, the D.C. Circuit’s latest in-

terpretation of § 4 of the APA has significant implications

for the future conduct of informal rulemaking. Under

the D.C. Circuit rule, anyone potentially affected by the

outcome of a rulemaking proceeding (even if not spe-

cifically affected by the rule as proposed by the agency)

will need to scour each rulemaking record searching for

commenters’ proposals that the agency might conceivably

adopt. After this inquiry, they must guess as to the

nature of the rule that might be adopted (since the final

rule could be a logical outgrowth of those comments),

53 838 F.2d at 1243, App. 33a.

22

and as to what the agency’s basis for and purpose of any

eventual rule might be.

In the final analysis, development of meaningful com-

ments would require clairvoyance on the part of poten-

tially affected persons. Any post-comment period com-

ments formulated as a result of this process would be a

fanciful exercise in speculation and their contribution to

“reasoned decisionmaking” would be wholly fortuitous.

Obviously, to the extent someone affected by a final

rule chose not to pursue this expensive and difficult

search, or failed in the search, the agency would receive

no comments on its final rule. In either instance, affected

parties would be deprived of a meaningful opportunity

to comment, and courts would have meager records on

review of the final rule.

Notice and comment rulemaking under the APA should

not become an “insider’s game.” The fact that certain

“industry” petitioners may have had the “opportunity to

54 The NSPS rule promulgated in this case demonstrates the im-

portance of defining the “logical outgrowth” test in terms of the

agency's notice. For instance, there are actually two different sets

of NSPS that apply to one major type of source subject. to § 123

(electric utilities), and in the future other types of scurces will no

doubt have more than one set of NSPS (since $111 of the Act

requires periodic revision of NSPS). Yet the “NSPS presumption”

rule is silent on which NSPS should be used.

EPA also failed to explain why it chose NSPS, rather than some

other inapplicable technology-based limit such as “reasonably avail-

able control technology.” Some of these other technologies might

have made more sense, since they take into account factors relating

to the retrofit of equipment on existing sources.

Finally, in a footnote in the preamble to the rule, EPA refers

vaguely to a guideline that it says it will use in assessing “infeasi-

bility” showings. 50 Fed. Reg. at 27898 n.6, App. 96a. That guide-

line, developed in the context of an entirely different EPA program,

raises a whole different set of issues which EPA could have ad-

dressed if notice and an opportunity for comment had been provided.

23

shoot the idea [presented in a comment] down” *® should

not excuse the fact that the United Mine Workers of

America and others had no such opportunity.

For these reasons, certiorsri should be granted in this

case in order to resolve the conflict in the circuits on the

question of whether the notice provision of the APA re-

quires that final rules be a logical outgrowth of the

agency’s proposed rules, or allows final rules that are

solely the outgrowth of a rulemaking participant’s com-

ments.

Il. THE D.C. CIRCUIT’S HOLDING THAT A REGULA-

TION CONTAINING AN “EXCEPTIONS” CLAUSE

NEEDS NO RECORD SUPPORT CONFLICTS WITH

THE LAW OF THE FOURTH CIRCUIT AND IS A

RADICAL DEPARTURE FROM ESTABLISHED

PRINCIPLES OF ADMINISTRATIVE LAW.

EPA’s final NSPS presumption rule requires that ex-

isting sources that are not subject to NSPS apply this

technology-based standard in any greater-than-formula

height demonstration, with the result that they will have

to achieve at least that level of control if the demonstra-

tion is successful. Since this rule was not proposed, no

explanation or rulemaking record was developed to sup-

port it. Rather, EPA, in promulgating this rule, merely

asserted as the factual basis for the rule the Agency’s

assumption that “this [NSPS] limit can be met by all

sources seeking to justify [GEP] stack heights above

[2.5H] formula height.” **

Section 123 does not even suggest that EPA has au-

thority to adopt technology-based standards. By contrast,

Congress expressly provided for development of such

standards in specified circumstances in several other sec-

55 838 F.2d at 1243, App. 33a; see supra pp. 11-12.

56 50 Fed. Reg. at 27898, App. 96a.

24

tions of the Clean Air Act.*’ Those provisions require

that, in developing such standards, EPA demonstrate

that technology is “available” to meet the standard or

that the standard is “achievable.” ** They also require

that costs and environmental effects be considered to de-

termine whether a technology is “best.” **

These showings require that the Agency develop data on

control technology performance, costs, and environmental

consequences. The Agency must analyze those data to en-

sure, inter alia, “that variables [affecting equipment per-

formance are] ... accounted for, that the representative-

ness of test conditions . . . [are] ascertained, that the

validity of tests . . . [are] assured and the statistical

1 9? 60

significance of results [are] determined.

In contrast to the careful analysis required where

Congress specifically provided for development of tech-

nology-based standards, the court below found that “there

is no need for any sort of generic demonstration” on the

achievability of the $123 NSPS rule or on whether it

reflects “best” technology for the existing sources subject

to $123. The Agency is excused from this kind of show-

ing because, according to the court below, the rule allows

a source “to use a higher emissions rate [albeit another

57 See, e.g., CAA § 111 (providing for establishment of new source

performance standards) ; § 169(3) (defining “best available control

technology” requirements for new sources in attainment areas);

$ 169A(g)(2) (defining “best available retrofit technology” for cer-

tain existing sources subiect to the Act’s visibility program).

** For example, new source performance standards must be

“achievable” based on “best adequately demonstrated” technology.

PSD new source review requires examination of “best available con-

trol technology”; visibility standards focus on “best available retro-

fit technology.”

59 Id. See Portland Cement Ass’n v. Ruckelshaus, 486 F.2d 375.

384-85 (D.C. Cir. 1973), cert. denied, 417 U.S. 921 (1974).

* National Lime Ass’n vy. EPA, 627 F.2d 416, 452-53 (D.C. Cir.

1980).

25

inapplicable technology-based rate more stringent than

current practice] when NSPS is infeasible.” ”

This holding represents a radical departure from how

technology-based standards are set under the Clean Air

Act, a departure that conflicts with the law of the Fourth

Circuit. More fundamentally, it represent an abrupt

departure from established principles of administrative

law governing the need for record support for agency

rules.

Section 4 of the APA, 5 U.S.C. § 553(b), (c) (1982),

requires agency notice of a proposed rule and an oppor-

tunity to comment on that rule so that, inter alia, an ad-

ministrative record can be developed. Section 10(e) of

the APA, 5 U.S.C. $ 706 (1982), requires courts to base

their review of agency rules on the record developed

during the rulemaking proceeding. These requirements

by the terms of the APA apply to any legislative rule,

whether or not that rule contains an exceptions procedure.

According to the courts, these requirements are intended

to ensure that agency rules are firmly based on facts

substantially supported by the record, and that reviewing

courts will be able to “determine whether the final agency

decision reflects the rational outcome of the agency’s con-

sideration of all relevant factors... .’™ Thus, a long

line of cases make clear that when a rule is challenged

on the grounds that there is no substantial support in

61 838 F.2d at 1242, App. 30a.

62 See infra p. 26. This departure is surprising in this case, given

that § 123 of the Act, unlike other sections of the Act, does not

contain any requirement that an existing source not subject to

NSPS use NSPS or any other inapplicable limit in conducting

demonstrations. Other than stating obscurely that use of an applica-

ble emission rate “would amount to using a tail stack to justify

itself,” 50 Fed. Reg. at 27898, App. 97a, the Agency simply failed

to address this issue.

6817.8. Lines v. Federal Maritime Commission, 584 F.2d 519, 533

(D.C. Cir. 1978).

ne

26

the rulemaking record for a fact that is necessary to, or

an asserted basis for, the rule, the rule must be set aside

under the “arbitrary, capricious, [or] an abuse of dis-

cretion” criterion of 5 U.S.C. § 706(2) (A).

The Fourth Circuit, in conflict with the D.C. Circuit

in this case, has interpreted the APA to require sub-

stantial support in the rulemaking record for factual

findings asserted as the basis for a rule, notwithstanding

inclusion of a variance procedure in the rule. In EJ.

du Pont de Nemours & Co. v. Train, the U.S. Court

of Appeals for the Fourth Circuit reviewed, under § 10/e)

of the APA, regulations that were “presumptively ap-

plicable” unless “that presumption is rebutted.” In re-

viewing those regulations, the Fourth Circuit held that

“(t]he grounds upon which the agency acted must be

clearly disclosed in, and sustained by, the record.” “

Under the D.C. Cireuit’s new exception to the require-

ment for rulemaking records, by contrast, an agency

could avoid having to develop a record supporting a rule

64 See Natural Resources Defense Council v. Herrington, 768 F.2d

1355, 1421 n.63 (D.C. Cir. 1985) (“an agency ... [is] obliged to

produce substantial evidence for its major assumptions in a rule-

making... .); Small Refiner, 705 F.2d at 534 (“EPA retains a

duty to examine key assumptions as part of its affirmative ‘burden

of promulgating and explaining a non-arbitrary, non-capricious

rule’ ”’), quoting National Lime Association, 627 F.2d at 433; Sierra

Club v. Costle, 657 F.2d 298, 323 n.67 (D.C. Cir. 1981); Portland

Cement Ass'n v. Ruckelshaus, 486 F.2d 375, 393 (D.C. Cir. 1973),

cert. denied, 417 U.S. 921 (1974); accord, United States v. Nova

Scotia Food Products Corp., 568 F.2d 240, 251-52 (2d Cir. 1977):

Appalachian Power Co. v. Train, 545 F.2d 1351, 1356 (4th Cir.

1976). See also Recommendation 74-4 of the Administrative Con-

ference, 1 C.F.R. § 305.74-4 (1988); Report of the Judiciary Com-

mittee on S. 1080, The Regulatory Reform Act, S. Rep. No. 97-284,

97th Cong., Ist Sess. 165-166 (1981).

65 541 F.2d 1018, 1028 (4th Cir. 1976), aff'd in part, rev'd in part,

30 U.S. 112 (1977).

66 Td. at 1026.

i

27

simply by establishing, without notice and comment, a

waiver provision that defines the conditions under which

an affected party could attempt to argue in a subsequent

proceeding that a less stringent rule should apply. Such

rulemaking therefore could be insulated from meaningful

public participation, and courts would be deprived of a

record upon which to review such rules.”

The interests of both the public and the courts in having

clear, well-reasoned agency decisions therefore will be

frustrated by the lower court’s holding—a holding that

conflicts with the law of the Fourth Circuit. For these

reasons, this Court should grant certiorari in this case.

*? The implications of the D.C. Circuit's holding are illustrated by

its impact in this case. First, EPA’s unsupported statement that

the NSPS limit “can be met by all sources seeking to justify stack

heights above formula height” is likely untrue, since NSPS were

intended to be met by new sources that could be designed to incor-

porate the latest pollution control technology or to burn low-emitting

fuels such as natural gas or low sulfur fuel oil. See supra note

26. Sources to which NSPS are inapplicable cannot typically be

retrofitted with such technology, and may need to be altered before

burning different fuels.

Second, because EPA developed no record, the Agency nowhere

considered the effect of its rule on the statutory right provided by

Congress to conduct demonstrations. In effect, EPA has rendered

the demonstration right worthless for ali but a few sources that

might be willing and able to retrofit NSPS or BART-type controls.

Finally, EPA developed no record support regarding the emission

rate based upon another inapplicable technology-based standard

(i.e... BART) that must be used if NSPS is shown to be “infeasi-

ble.” Perhaps because there was no record on this point, the court

simply failed to address this important issue raised by petitioners

below.

ne

28

CONCLUSION

For the foregoing reasons, this petition for a writ of

certiorari to the United States Court of Appeals for the

D.C. Cireuit should be granted.

Respectfully submitted,

DONALD C. WINSON GEORGE C. FREEMAN, JR.

RIcHARD S. WIEDMAN HENRY V. NICKEL

ECKERT, SEAMANS, CHERIN (Counsel of Record)

& MELLOTT F. WILLIAM BROWNELL

42nd Floor. 600 Grant Street MEL 8S. SCHULZE

Pittsburgh, PA 15219 HUNTON & WILLIAMS

(412) 566-6000 2000 Pennsylvania Ave., N.W

Suite 9000

Washington, D.C. 20006

(99) ORS.15

Davip C. BRANAND a aoe — nd

1120 17th Street. N.W. ounsel for Pe titioners

Washington. D.C. 20036 Alabama Power Co., et al.

(202) 463-2643 MICHAEL H. HOLLAND

900 15th Street, N.W.

Washington, D.C. 20005

(202) 842-7330

Counsel for Petitioner United

Mine Workers of America

Counsel for Petitioner

Ormet Corporation

Counsel for Petitioner National

Coal Association

June 17, 1988

SUPPLEMENTAL

APPENDIX

SA-1

SUPPLEMENTAL APPENDIX

PARENT COMPANIES, SUBSIDIARIES, AND

AFFILIATES OF INDIVIDUAL

ELECTRIC UTILITIES

Alabama Power Company

(subsidiary of The Southern Company)

subsidiaries:

Alabama Property Company

Columbia Fuels, Ine.

affiliate:

Southern Electric Generating Company

Appalachian Power Company

(controlled by American Electric Power Company, Inc.)

subsidiaries:

Central Appalachian Coal Company

Central Coal Company

Central Operating Company

Kanawha Valley Power Company

Southern Appalachian Coal Company

West Virginia Power Company

Cedar Coal Company

Baltimore Gas and Electric Company

subsidiaries:

Safe Harbor Water Power Corp.

Constellation Holdings, Inc.

subsidiaries:

Constellation Biogas, Ince.

Constellation Investments, Inc.

Constellation Properties, Inc,

( ‘ P | { ] N .

r

{ " \ N) P .

ly

( ] net SN \\ { ,

/

Tel Pov | | ( nan

PP 1} ~ { t () ] y

LidLit tT t QO] } :

/ /

\ ( ee : Moi ] y ( (yTY nA

rn

I ! Inc

; a | ae ) ’ > ‘ = ente

SOUT Ve ern I ectrle | ower Company

a rT. ¢1e,° ‘

West Texas Utilities Company

(entral and soutn \V t Service (

CSW Credit, Inc.

/ fV0IV IOS

P ( n> |) ( ent {Oo } ? |

T |

Green Pol t Development Co al ?

Central Hudson Entervrises Cort

(‘'H Resources. Ine.

—?wT?es ‘

CH Ce reneration. ine

Commonwealth Edison © f Indiana, Ine.

Chicago and Illinois Midland Railway Co.

ter Corp.

7 | , ” | | oa

( ommonwealt! Rese aren ( ry).

Edison Development Canada, Inc.

SA-4

Edison Development Co.

Concomber, Ltd.

Consolidated Edison Company of New York, Inc.

Consumers Power Company

subsidiaries :

Michigan Gas Storage Company

Northern Michigan Exploration Company

Selective Collection Services, Inc.

Utility Systems, Inc.

Huron Hydrocarbons, Inc.

The Dayton Power and Light Company

(controlled by DPL, Inc.)

subsidiaries:

DP&L Community Urban Redevelopment Corp.

Miami Valley Development Company

Delmarva Power & Light Company

subsidiaries:

Delmarva Industries, Inc.

Delmarva Services Company

Delmarva Capital Investments, Inc.

subsidiaries:

DCI I, Inc. |

DCI II, Ine.

Delmarva Capital Technology, Ine.

Delmarva Capitol Realty Company

The Detroit Edison Company

subsidiaries:

Edison [luminating Company

Midwest Energy Resources Company

SA-5

Washtenaw Energy Corp,

St. Clair Energy Corp.

SYNDECO, Ince.

Duke Power Company

subsidiaries:

Mill-Power Supply Co.

Crescent Land & Timber Corp.

Wateree Power Co.*

Catawba Manufacturing and Electric Power

Co.*

Western Carolina Power Co.*

Caldwell Power Co.*

Southern Power Co.*

Greenville Gas and Electric Light

and Power Co.*

Church Street Capital Corp.

Duke Engineering and Services

Florida Power Corporation

(controlled by Florida Progress Corporation)

Florida Power & Light Company

(wholly-owned subsidiary of FPL Group, Inc.)

subsidiaries:

Land Resources Investment Company

FPL QualTee, Inc.

Alandco, Ine.

Georgia Power Company

(subsidiary of The Southern Company)

subsidiary:

Piedmont Forrest Co.

* Inactive

SA-6

affiliate:

Southern Electric Generating Company

Gulf Power Company

(subsidiary of The Southern Company)

Illinois Power Company

subsidiaries:

IP Ine.

IPF Co., N.V.

Illinois Power Fuel Company

affiliate :

Electric Energy, Inc.

Indiana Michigan Power Company

(controlled by American Electric Power Company, Inc.)

subsidiaries:

Price River Coal Company

Blackhawk Coal Company

Indianapolis Power & Light Company

(controlled by IPALCO Enterprises, Inc.)

lowa-Illinois Gas and Electric Company

subsidiary:

lowa-Illinois Energy Co,

Iowa Public Service Company

(controlled by Midwest Energy Co.)

Kansas City Power and Light Company

Kentucky Power Company

(controlled by American Electric Power Company, Inc.)

SA-7

Kentucky Utilities Company

subsidiary:

Old Dominion Power Company

affiliate :

Electric Energy, Inc.

Madison Gas and Electric Company

subsidiaries:

MG&E Nuclear Fuel Inc.

MAGAEL Ine.

MAGAEL Material Resources, Inc.

MAGAEL Communications, Ince.

Waters and Associates

Central Wisconsin Development Corp.

Monongahela Power Company

‘controlled by Allegheny Power System, Inc.)

affiliate:

Allegheny Generating Co.

Montaup Electric Company

(affiliated with Eastern Utilities Associates)

New England Power Company

‘controlled by New England Electric System)

subsidiaries:

Massachusetts Electric Company

Narragansett Electric Company

Granite State Electric Company

a

SA-8

Northern Indiana Public Service Company

subsidiaries:

Shore Line Shops, Incorporated

NIPSCO Exploration Co.

NIPSCO Fuel Co., Inc.

NIPSCO Energy Services, Inc.

Ohio Edison Company

subsidiaries:

Pennsylvania Power Co.

Ohio Edison Finance, N.A.

Ohio Power Company

(controlled by American Electric Power Company, Inc. )

subsidiaries:

Central Coal Company

Central Ohio Coal Company

Central Operating Company

Southern Ohio Coal Company

Cardinal Operating Company

Windsor Coal Company

Ohio Valley Electric Corporation

subsidiary :

Indiana-Kentucky Electric Corp.

Oklahoma Gas and Electric Company

affiliate:

Arklahoma Corporazion

Pacific Gas & Electric Company

subsidiaries :

Natural Gas Corp. of California

SA-9

subsidiary:

NGC Production Company

Gas Lines, Ince.

Alberta & Southern Gas Company, Ltd.

Calaska Energy Company

Standard Pacific Gas Lines, Inc.

Pacific Gas Transmission Company

affiliates:

ANGUS Biotech

ANGUS Chemical Company

ANGUS Petroleum Corp.

Alberta Natural Gas Company, Ltd.

affiliates:

ANGUS Biotech

ANGUS Chemical Co.

ANGUS Petroleum Corp.

Foothills Pipelines

subsidiaries:

Pacific Transmission Supply Co.

Rocky Mountain Gas Transmission Co.

Pacific Gas & Electric Gas Supply Co.

JWP Land Company

Pacific Gas and Electric Finance Company, N.V.

Alberta Natural Gas Company Ltd.

Pacific Conservation Services Company

Pacific Horizon Enterprises, Inc.

subsidiary:

Pacific Energy Services Co.

Pennsylvania Electric Company

(subsidiary of General Public Utilities Corp.)

subsidiaries:

Nineveh Water Co.

Waverly Electric Light & Power Co.

SA-10

Pennsylvania Power & Light Co.

subsidiaries:

Pennsylvania Coal Resources Corp.

subsidiaorie Ss a

srush Valley Coal Corp.*

Greene Manor Coal Company

Greene Hill Coal Company

Pemico Incorporated *

Pennsylvania Mines Corp.

subs idia rie =

Tunnelton Mining Co.

Rushton Mining Co.

CEP Group, Inc.

subhe idia ru.

Hanover Development Corp.

Interstate Energy Company

Safe Harbor Water Power Corp.

Realty Company of Pennsylvania

subsidiaris Oy

BDW Corp.

LCA Leasing Corp.

Lady Jane Collieries, Inc.

The Potomac Edison Company

(controlled by Allegheny Power System, Inc.)

subsidiaries:

Allegheny Generating Company

Allegheny Pittsburgh Coal Company

* Inactive

a ©

SA-12

Tucson Electric Power Company

subsidiaries:

Valencia Energy Co.

Eseavada Leasing Co.

Tucson Resources, Inc.

Tusconel Inc.

Sierrita Resources, Inc.

San Carlos Resources, Inc.

Union Electric Company

subsidiary:

Union Colliery Company

affiliate:

Electric Energy, Inc.

Virginia Electric and Power Company

(controlled by Dominion Resources, Inc. }

West Penn Power Company

‘eontrolled by Allegheny Power System, Inc.)

subsidiaries:

Allegheny Generating Company

Allegheny Pittsburgh Coal Company

West Virginia Power & Transmission Co.

subsidiary:

West Penn West Virginia

Water Power Co.

Wisconsin Electric Power Company

(controlled by Wisconsin Energy Corporation) )

Wisconsin Power and Light Company

subsidiaries:

South Beloit Water, Gas and Electric Co.

Wisconsin Power and Light Nuclear Fuel, Inc.

—— ee |

SA-13

NUFUS Resources, Inc.

Residuals Management Technology, Ince.

ENSERV, Ine.

REAC, Ine.

WP&L Holdings, Ine.

WP&L Communications. Ine.

Wisconsin Public Service Corporation

affiliates:

Wisconsin River Power Company

Wisconsin Valley Improvement Company

Delores Bench General Partner. Inc.

WPS Development, Ine.

WPS Communications, Ine.