Petition for Writ of Certiorari — Hoechst Celanese Corp. v. United States

‘FILED

971578 NAR2 31998

OFFICE OF THE CLERK

IN THE

Supreme Court of the United States

OCTOBER TERM, 1997

HoECHST CELANESE CORPORATION,

Petitioner,

UNITED STATES OF AMERICA,

Respondent.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Fourth Circuit

PETITION FOR A WRIT OF CERTIORARI

ANDREA BEAR FIELD

MAIDA O. LERNER

DAVID S. HARLOW.

LEE A. CASEY

HUNTON & WILLIAMS

1900 K Street, N.W.

Washington, D.C. 20006

(202) 955-1500

DOUGLAS W. DAVIS

JOHN CHARLES THOMAS

CYNTHIA S. CECIL

HUNTON & WILLIAMS

Riverfront Plaza, East Tower

951 East Byrd Street

Richmond, Virginia 23219

March 23, 1998 (804) 788-8200

RNP RE

WILSON - EPES PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001

QUESTIONS PRESENTED

The Fourth Circuit held that it was bound-—by deci-

sions of this Court—to defer to an EPA post-rulemaking

regulatory interpretation that contradicted the interpreta-

tion expressed by EPA’s Administrator when he published

the rule in 1984, Although finding that Petitioner did not

receive constitutionally adequate notice of that EPA in-

terpretation until 1989—five years after the rule was

published—the Fourth Circuit nonetheless held that Peti-

tioner faced liability for violating the rule starting just

three months after Petitioner finally got “fair notice.” If

Petitioner had received fair notice from the start, Peti-

tioner would have had up to two years in which to com-

ply. The questions presented are these:

1. Whether this Court’s deference standard forces a

reviewing court to defer to a post-promulgation, secret

interpretation of a rule, developed by an agency without

following notice-and-comment rulemaking procedures.

2. Whether a federal court ignores its historical duty

to say what the law is by deferring to an agency interpre-

tation that is measured not by reasonableness but by a

not “nonsensical” test.

3. Whether basic principles of due process are vio-

lated when a regulated entity is given less time in which

to comply with a rule than it would have had if it had

received good notice ab initio.

il

LIST OF PARTIES TO THE PROCEEDINGS BELOW

Effective January 1, 1998, the name of Petitioner,

Hoechst Celanese Corporation, a Delaware Corporation,

was changed to HNA Holdings, Inc. (HNA). HNA is

wholly owned by Hoechst Corporation, a Delaware Cor-

poration, which is wholly owned by Hoechst Aktiengesell-

schaft (Hoechst AG), a publicly held corporation organ-

ized and existing under the laws of the Federal Republic

of Germany. Hoechst AG’s shares and depository receipts

are traded on the Frankfurt, London, Amsterdam, Brus-

sels, Luxembourg, Paris, Vienna, Zurich, Tokyo and New

York stock exchanges.

HNA participates in the following joint ventures:

* IB Chemical Company, a New York general partner-

ship which is 50% owned by VirChem, Inc., a

Delaware Corporation which is an indirect wholly-

owned subsidiary of HNA and 50% owned by

Mitsubishi;

Hoechst Diafoil Company, a Delaware general part-

nership which is 66.7% owned by US PET Film,

Inc., a Delaware Corporation which is an indirect

wholly-owned subsidiary of HNA and 33.3% owned

by Diafoil USA, Inc., a Delaware Corporation wholly

owned by Mitsubishi;

* Clear Lake Methanol Co. LLC, a Delaware limited

liability company which is 50% owned by Celanese

Chemicals, Inc., a Delaware Corporation which is

an indirect wholly-owned subsidiary of HNA, and

50% owned by Valero Javelina Corporation;

Clear Lake Methanol Co. LP, a Texas limited part-

nership which is 49.5% owned by Celanese Chem-

icals, Inc., a Delaware Corporation which is an in-

direct wholly-owned subsidiary of HNA, 49.5%

owned by Valero Javelina Corporation, and 1%

owned by Clear Lake Methanol Co., LLC;

ee

iii

Fortron Industries, a North Carolina general part-

nership which is 50% owned by HCC Fortron, Inc.,

a Delaware Corporation and a wholly-owned subsid-

iary of HNA, and 50% owned by Kureha KPS, Inc.;

Polyplastics Co., Ltd., a Japanese corporation which

is 45.0% owned by Ticona LLC, a Delaware limited

liability company and a wholly owned subsidiary of

HNA, and 55% owned by Daicel Ltd., a Japanese

corporation;

DyStar LP, a North Carolina limited partnership

which is 49.5% owned by Hoechst Celanese Dyes

Company, a Delaware corporation and a wholly-

owned subsidiary of HNA, 49.5% owned by Bayer

Corporation, and 1% owned by DyStar Corporation,

a Delaware corporation which is 50% indirectly

owned by Bayer AG and 50% indirectly owned by

Hoechst AG;

Dyneon LLC, a Delaware limited liability company

which is 7.6% owned by Hoechst Celanese Fluoro-

polymer Holdings, Inc., a Pennsylvania corporation

and a wholly owned subsidiary of HNA, 38.8% by

Hoechst Fluoropolymer Holdings, Inc., a Delaware

corporation and a wholly owned subsidiary of

Hoechst AG, and 54.6% owned by the Minnesota

Mining and Manufacturing Corporation;

CTE Petrochemicals Company, a Grand Cayman,

British West Indies corporation which is 50% owned

by Elwood Insurance Limited, a Bermuda corpora-

tion and a wholly owned subsidiary of HNA and

50% owned by Panhandle Eastern Corporation:

Kunming Cellulose Fibers Company Limited, a cor-

poration of the People’s Republic of China, which is

30% owned by Celanese Far East Limited, a Hong

Kong Corporation and an indirect wholly owned

subsidiary of HNA, and 70% owned by Chinese in-

vestors;

iv

* Zhuhai Cellulose Fibers Company Limited, a corpo-

ration of the People’s Republic of China, which is

30% owned by Celanese Far East Limited, a Hong

Kong Corporation and an indirect wholly owned

subsidiary of HNA, and 70% owned by Chinese in-

vestors;

* Nantong Cellulose Fibers Company Limited, a cor-

poration of the People’s Republic of China, which is

30.7% owned by Celanese Fibers Operations Lim-

ited, a Delawzre Corporation and an indirect wholly

owned subsidiary of HNA, and 70% owned by

Chinese investors;

° AOF Teclinologies, LLC, a Delaware limited liability

company which is 85% owned by AQF Holding,

Inc., a Delaware corporation and a wholly owned

subsiidary of HNA and 15% owned by BBA US,

Inc.

HNA has significant ownership interest in the following

publicly traded companies:

* Celanese Canada, Inc., a Canadian corporation,

56.2% owned by Celanese Overseas Corporation, a

Delaware Corporation and a wholly-owned subsidiary

of HNA. The remaining 43.8% are owned by third

parties. The shares of Celanese Canada are publicly

traded on the Montreal and Toronto stock exchanges;

* Grupo Celanese SA, a Mexican corporation, is 40%

owned by HNA, 11.1% owned by Hoechst Corpora-

tion, and 48.9% owned by third parties. The shares

of Grupo Celanese are publicly traded on the Mexi-

can stock exchange;

Interactive Radiation, Inc., a New Jersey Corpora-

tion is 21.6% owned by HNA and 78.4% by third

parties. The shares of Interactive Radiation are pub-

licly traded on the over the counter market.

————ee eee

4

HNA has investments of less than 7.5% in the follow-

ing companies:

MBW Ventures Limited, a Michigan limited partner-

ship—2.7 %

NPC Services, Inc., a Louisiana corporation—4.3%

Japan/US Venture Partners, a California limited

partnership—6.7 %

Tortuga Casualty Co., a Grand Cayman corporation

—4.76%

United Insurance Company, a Grand Cayman corpo-

ration—-5.0%

Delta Holding Inc., a Delaware Corporation—3.1%

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED .............................._. . i

LIST OF PARTIES TO THE PROCEEDINGS i

TE eitihincigiece Sd NES AEST rT ii

tania OF AUTHORITIES... x

eur SN co ee seal PT 1

JURISDICTION . UTA jlbaetieias cas 1

STATUTES AND REGULATIONS INVOLVED. 2

STATEMENT OF THE CASE _._ ; ; 2

REASONS FOR GRANTING THE WRIT ies 8

I. THIS COURT SHOULD MAKE CLEAR TO

THE FEDERAL COURTS THAT UDALL v.

TALLMAN DEFERENCE DOES NOT MEAN

THAT THE COURTS MUST DEFER TO

AGENCY INTERPRETATIONS OF REGULA-

TIONS IN VIRTUALLY ALL CASES ___ 11

A. The Fourth Circuit and Other Circuits Have

Deviated from This Court’s Basic Deference

Principles ......... EE hah AN OE finite 11

B. The Agencies—Having Learned That Their

Power Has Virtually No Court-Imposed Lim-

its—Have Responded By Running Rough-

shod Over Both the Statutes Constraining

Their Behavior and the Regulated Com-

ce LN ae ae cee 13

II. THE CASE PROVIDES AN APPROPRIATE

VEHICLE FOR’ REASSERTING THE

PROPER RULES GOVERNING JUDICIAL

DEFERENCE TO AGENCY INTERPRETA-

TIONS ...... pustsilbuiniohsteks sinhetdibeiomeapil cigubicibene.. 14

(vii)

III,

IV.

CONCLUSION

viii

TABLE OF CONTENTS—Continued

A. This Court Should Make Clear That It Is Not

Appropriate For Federal Courts to Defer to

Agency Interpretations That Defy the Very

Language of a Published Rule .............

B. This Court Should Not Allow the Federal

Courts to Defer to Latter Day Agency Inter-

pretations that Contradict Agency Explana-

tions Made When the Rule Was Promul-

WATOD ...........cceccsecescecrsecensssenssnnsaeenocsesoneassoeneonasenses

C. The Federal Courts Should Not Defer to the

Latest in a Series of Agency Interpretations

IN ADDITION, THIS CASE PROVIDES AN

APPROPRIATE VEHICLE FOR CONSIDER-

ING WHETHER THE FEDERAL COURTS

SHOULD GIVE ANY DEFERENCE TO

UNPUBUBLISHED, POST-PROMULGATION

AGENCY snip ainenlenciahtsiene aA OF AGENCY

RULES .. ;

THIS COURT SHOULD HOLD THAT CON-

STITUTIONAL FAIR NOTICE INCLUDES

WITHIN ITSELF THE REQUIREMENT

THAT ONCE FAIR NOTICE IS GIVEN TO

A REGULATED ENTITY, THAT ENTITY

MUST HAVE A REASONABLE AMOUNT OF

TIME IN WHICH TO COMPLY WITH THE

OBLIGATION THAT HAS BEEN NOTICED..

APPENDICES

A.

B.

C.

D.

Decision of the Fourth Circuit

Decision of the District Court ................................

Order Denying Petition for Rehearing

Mandate of the Fourth Circuit

Page

15

16

17

19

24

ix

TABLE OF CONTENTS—Continued

Page

Excerpts from §§ 112 and 301 of the Clean Air

po ERED ESS PIES SEG SMEARS SIS AMEND AO NY RT 77a

Benzene NESHAP Rule and Preamble... 85a

Excerpts from 40 C.F.R. Part 61. nee . 166a

Affidavit and Initial Report of E. Bruce Nau-

MINE stacticbewnmsebecaus 175a

Report of James Wei PN RDO Am: 187a

x

TABLE OF AUTHORITIES

FEDERAL CASES Page

Alliance for Cannabis Therapeutics v. DEA, 115

F.3d 11381 (D.C. Cir. 1994) ............ BE SANA 25

Associated Fisheries of Maine, Inc. v. Daley, 127

F.3d 104 (ist Cir. 1997) ......................---.--..+------- 12

Bowles v. Seminole Rock & Sand Co., 325 U.S. 410

COI ai Binnie a cienictlnctenmsicion 11, 19, 20

Chevron U.S.A. v. Natural Resources Defense

Council, 467 U.S. 837 (1984), reh’g denied, 468

it Ge | at. | | aw eaoseenemee oes 12, 19, 21, 22

Clean Ocean Action v. York, 57 F.3d 328 (3d Cir.

IID oi ciioninrisacnenacenstnatsiensinninnnittanntenanmscesanesenrtmiminss 18

Diamond Roofing Co. v. OSHRC, 528 F.2d 645 (5th

a I ans ie iceeccteninccrcciiicniniensiplencationemnnslebiene 24

Ethyl Corp. v. EPA, 51 F.3d 1053 (D.C. Cir.

II i sicices cis cinieonntacinns an enapocninsaenennannCrmieniies 25

FTC v. Colgate-Palmolive Co., 380 U. S. 374

I saa esis eecceecasiecrpesha taper emtanencrecaetines 21-22

First American Bank v. Dole, 763 F.2d 644 (4th

a) RRR aehre abhi: cars siotow. rrr oe over eee 24

General Electric Co. v. EPA, 53 F.3d 1324 (D.C.

CE, I ciccnctrcecsceinccbesintnescphannenceahioapiahibepactiienicinies 24

Hoechst Celanese Corp. v. U.S., 964 F. Supp. 967

(1996), aff'd in part, rev'd in part, 128 F.3d

RODD sincsincpeieccssccemcceecidad coacetaessihnitacdianap aa Wniminieenieaasehd passim

Homemakers North Shore, Ine. v. Bowen, 832 F.2d

SE Be GI, BERG Siteestierieiiiiin 18, 17

Marbury v. Madison, 5 U.S. (1 Cranch) 137

I aos ccc scaticplenictanivestbatondiccenersaculuatabataninl inka bonion 10, 21

Martin v. Occupational Safety and Health Review

Commission, 499 U.S. 144 (1991) —................ 12, 18, 20

Ohio State Univ. v. Secretary, United States Dep't

of Health and Human Services, 996 F.2d 122

(6th Cir. 1993), cert. granted, vacated on other

grounds, 512 U.S. 1231 (1994) .................-.---.-.-- 12

Paralyzed Veterans of America v. D.C. Arena,

117 F.3d 579 (D.C. Cir. 1997), cert. denied, 66

ie RM fe a _: RRR AR GRSe eens erent 13

xi

TABLE OF AUTHORITIES—Continued

Page

Rollins Environmental Services v. U.S. E.P.A., 937

em Wer Gam Cs i 26

Secretary of Labor v. Western Fuels-Utah, Inc.,

900 F.2d 318 (D.C. Cir. 1990)... 24

State of Vermont v. Thomas, 850 F.2d 99 (2d Cir.

tes a ERE ORLEANS SAT, OI 23

Stinson v. United States, 508 U.S. 36 (1998) ........ 12

Thomas Jefferson Univ. v. Shalala, 512 U.S. 504

Lo) PRETENSE Daan seinelp sa pashciniabaeinieunaahedladssSladin Saas 11, 20, 21

Udall v. Tallman, 380 U.S. 1 (1965) _........ 7, 9, 11, 19, 20

FEDERAL STATUTES AND REGULATIONS

Administrative Procedure Act, 5 U.S.C. § 551(4)

Eg OEE MOET eT Te be Ea UE 5, 23

Administrative Procedure Act, 5 U.S.C. § 552

BR Agha eer eee 24

ane OO eeeetes Cees 2

Clean Air Act § 112, 42 U.S.C. § 7412 (1988) 2,6

Clean Air Act § 112, 42 U.S.C. § 7412 (2008) .....:. 2,6

Clean Air Act §301(a) (1), (1994) ..... 17

Federal Register Act, 44 U.S.C. §$ 1507 (4) (1994) 23

Sera See ee Cees 2

CF ts Ole COT) oc 2

40 C.F.R. § 61.855 (1997) ........ FP TEA RE TO TA Le ET 6

40 C.F .R. § 61.116(e) (1907).................... DERE 2

ie er ss en ee, 6

WCF Mm CCLSE(a) (1907)... 4,6

FEDERAL REGISTER

52 Fed. Reg. 21157 (June 4, 1987)... 9

In THE

Supreme Court of the United States

OCTOBER TERM, 1997

No.

HoECHST CELANESE CORPORATION,

. Petitioner,

UNITED STATES OF AMERICA.

Respondent.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Fourth Circuit

PETITION FOR A WRIT OF CERTIORARI

Petitioner, Hoechst Celanese Corporation (HCC), prays

that a writ of certiorari issue to review the judgment

of the United States Court of Appeals for the Fourth

Circuit.

OPINIONS BELOW

The opinion of the court of appeals (App. 1a-33a) is

reported at 128 F.3d 216 (1997). The district court’s

decision (App. 34a-72a) is reported at 964 F. Supp. 967

(D.S.C. 1996).

JURISDICTION

The court of appeals’ opinion and judgment were

entered on October 27, 1997. App. 76a. A timely peti-

tion for rehearing and suggestion for rehearing en banc

was denied by an order of the court of appeals entered

2

on December 23, 1997 (App. 74a-75a). This Court's

jurisdiction is invoked under 28 U.S.C. 1254(1).

STATUTES AND REGULATIONS INVOLVED

This case involves portions of Clean Air Act § 112

(App. 77a-84a)' and 40 C.F.R. Part 61 (App. 123a-

124a).

STATEMENT OF THE CASE

This petition concerns the meaning of an exemption

contained in a rule promulgated by the Administrator of

the Environmental Protection Agency (EPA) on June 6,

1984, as part of benzene emission standards known as the

National Emission Standard for Equipment Leaks (Fugi-

tive Emission Sources) of Benzene (the benzene NESHAP).

App. 85a-155a. Because the standards called for covered

sources to make many changes at their plant sites, those

subject to the NESHAP could seek up to two years in

which to meet the rule’s requirements. App. 78a-79a;

83a; 156a.

The benzene NESHAP expressly exempts from cover-

age any equipment in benzene service that is located at a

plant site designed to “use” up t' 1,000 megagrams (1,000

metric tons) of benzene per year. 40 C.F.R. § 61.110(c)

(1997), App. 123a-124a. In 1984, four of Petitioner's

plants employed benzene in their processes, and Petitioner

sought to find out whether or not its plants were exempt.

To do that, Petitioner needed to determine what the ex-

emption meant by “use” of benzene. At that time, Peti-

tioner’s four plants—including the Celriver Plant in South

1 Those parts of § 112 at issue in this case were not changed in

any meaningful way by the 1990 Amendments to the Clean Air

Act; however, relevant portions of 112 were renumbered by the

1990 Amendments. Thus what was § 112(c) (1) (B) of the pre-1990

Clean Air Act (42 U.S.C. § 7412 (1988)) is §112(f) (4) of the Act

as amended in 1990. 42 U.S.C. § 7412 (1994). Both versions are in

the appendix. App. 78a-79a; 83a.

apenas mec i cceminara ra nama ea aT

3

Carolina—recycled benzene: that is, they used the same

benzene over and over within internal plant processes.’

To determine the meaning of “use”—and thus to learn

whether its four plants were exempt from the benzene

standards—Petitioner looked to the words in the exemp-

tion, to the rule’s preamble, and to other documents in

the rulemaking record. All indicated that “use” meant

the amount of benzene “consumed” or the amount of

benzene “in inventory” at a plant site. See App. 50a-51a,

63a-64a. By either measure, Celriver—which annually con-

sumed and had in inventory far less than 1,000 mega-

grams of benzene—was exempt. App. 42a.

Petitioner sought and received further confirmation of

its reading of the rule when it questioned regulators with

respect to two of its Texas plants: the Bishop Plant and

the Pampa Plant, which then both recycled benzene in a

manner comparable to Celriver. In both the Bishop and

Pampa cases, state regulators and EPA Region 6 officials

confirmed in writing to HCC that to determine the amount

of benzene “used” at a plant site, one looked at either the

amount of benzene consumed or kept in inventory at the

site. Again, under either test, Celriver was exempt. /d.

In the years following these communications with HCC,

EPA personnel continued to tell members of the regulated

community that benzene “use” at a plant site was to be

based on a single counting of the amount of benzene

annually consumed or kept in inventory at a plant site.

The record contains examples of how—between 1984 and

1990—EPA representatives (and state regulators acting

as EPA’s representatives) repeatedly told HCC and others

that the term “use” in the exemption meant either the

amount of benzene consumed or in inventory at a plant

site. App. 62a, 65a.

But in the five years following promulgation of the

1984 benzene NESHAP, others within EPA began dis-

? Since then, Celriver—and Petitioner’s Celco and Pampa Plants—

have entirely ceased using benzene in their processes,

4

cussing—internally—an entirely different interpretation of

the term “use.” Secret EPA memoranda—brought to

light during this litigation—showed that after the rule

was published, EPA staffers resolved that “use,” when

applied to plant sites that recycled benzene, would be in-

terpreted to mean the amount of benzene as counted over

and over as it recirculated through the plant site. App.

30a-33a. By that approach, a source that had on site only

one megagram of benzene which it recirculated 1,000 times

would be deemed to have “used” 1,000 megagrams of

benzene and would not be exempt. And with no rules or

guidance to constrain them as to where or when to recount

the recirculated benzene, EPA staffers further undercut the

exemption by. designating—on an ad hoc basis—multiple

places inside a plant where the recirculated benzene would

have to be counted. By counting recirculated benzene at

multiple points within a plant, even one megagram of

benzene could quickly multiply into millions of megagrams

of benzene: and the exemption would be extinguished.

App. 33a.

The staff’s count-the-circulating benzene—or “multiple

counting” “—approach gave EPA the absolute power to

interpret the exemption out of existence at whim. To

illustrate. here is how EPA’s interpretation would work

in determining the amount of oil “used” by an automobile

engine that holds only six quarts of oil and that neither

leaks any oil, burns up any oil, or otherwise consumes

any oil. Though most people would say that the engine

uses only six quarts of oil, under EPA’s approach, the

amount of oil the car used would be equal to six quarts

oe

8 The term “multiple counting” does not appear in the rulemaking

record since such an approach was not contemplated when the rule

was adopted. EPA itself coined the term “multiple counting” in a

subsequent rulemaking on benzene waste operations. There, after

considering comments from the public, EPA rejected any multiple

counting approach and called for counting “benzene quantity in a

waste stream... only once without multiple counting ....” 40

C.F.R. § 61.842(a) (1997) (emphasis added) (App. 173a).

5

times the number of times the six quarts circulate within

the engine. If you counted the oil at only one point within

the engine, the amount of oil “used” could reach hundreds

of thousands of quarts a year. And if you counted the oil

at two, four, or more counting points within the engine,

then the oil used would be two, four, or more times greater

—Potentially amounting to millions or billions of quarts

of oil used. Thus, at the whim of the person making the

calculation, the engine could be found to be using vast

amounts of oil each year even though the amount of oil

actually in the engine was never more than six quarts.

See App. 33a; 58a n.12.

Because EPA staff’s multiple counting interpretation of

the exemption was never published,t HCC did not learn

of it until many years after the benzene NESHAP was

promulgated. In August 1989—five years after the

NESHAP went into effect—EPA’s southeastern Office, Ke-

gion 4, told HCC of one version of a multiple counting

interpretation, saying that under that interpretation, Cel-

river was not exempt from the benzene NESHAP.

At the time, HCC questioned how EPA could interpret

the exemption as it did, particularly in light of the lan-

guage of the 1984 rule, including preamble language

which flatly contradicts any multiple counting approach.

Significantly, there is not one example in the rulemaking

record that discusses how to count circulating or recycling

benzene. This omission is telling since agencies typically

give examples—in the record—demonstrating what the

regulated community is expected to do. But this rulemak-

* Indeed, the internal] Agency memoranda that supposedly set out

the multiple counting interpretaion have still not been published,

even though the Administrative Procedure Act (APA) notice-and-

comment rulemaking procedures apply to any “agency statement of

general or particular applicability and future effect designed to

implement, interpret, or prescribe law or policy... .” 5 U.S.C.

§ 551(4) (1994).

6

ing record is silent with respect to measuring “use” by any

method other than what is consumed or what is on hand.®

Despite its belief that Region 4’s counterintuitive inter-

pretation of the rule was not the interpretation of the rule

intended by EPA’s Administrator at the time he published

the benzene NESHAP, HCC—after it learned of EPA

staff's reading—agreed voluntarily for Celriver to meet

the terms of the NESHAP as read by the Region 4 staff.

In early 1990, HCC provided Region 4 with a compre-

hensive compliance schedule that called for HCC not only

to meet but to exceed the terms of the NESHAP at Cel-

river and to do so within approximately two years. HCC’s

proposed time to comply was consistent with the Clean

Air Act and with EPA’s own rules, which said that af-

fected sources could seek up to two years in which to

meet the terms of the NESHAP.*

EPA voiced no disapproval of HCC’s proposed com-

pliance schedule. And HCC met that proposed schedule:

by September 1991, Celriver had actually exceeded the

terms of the benzene NESHAP even as interpreted by

EPA’s staff. Nevertheless, EPA decided to sue HCC and

to seek penalties from HCC for violating the rule. After

5 The absence in the 1984 NESHAP of examples of how to count

circulating benzene lies in sharp contrast to the examples that

EPA included in its rulemaking on benzene waste operations. Com-

pare 40 C.F.R. §§ 61.342 and 61.355 (1991), as adopted by EPA in

1990 (App. 157a-172a) with the current version of § 61.342(a),

which was changed, following public comment, to make it clear that

calculations were to be done “without multiple counting.” App.

173a.

® The relevant portions of Clean Air Act § 112 (App. 78a-79a;

83a) and 40 C.F.R. §61.05(c) (App. 156a) provide that the

NESHAP rules “shall not apply” until 90 days after the rule’s

effective date and that EPA may grant a waiver giving affected

sources up to two years in which to comply with the rules. Plants

receiving waivers were not deemed to be in violation of the NESHAP

after the 90th day. Rather, such plants were excused from having

to comply during the period of the waiver.

ee

7

four years of proceedings, the district court disposed of

the liability phase of the case on cross-motions for sum-

mary judgment.

The district court acknowledged that from 1984 to

1990 EPA had interpreted the exemption many different

ways. App. 62a. But, citing a long line of cases going

back to Udall v. Tallman, 380 US. 1, 16-17 (1965)

(App. 38a), the district court ruled that it was compelled

to defer to EPA’s “present interpretation” of the rule.

App. 38a-39a; 69a.

The district court, however, commented on all the evi-

dence in the rulemaking record supporting Petitioner's

reading of the rule and indicating that EPA representa-

tives had previously interpreted the rule as Petitioner did.

App. 50a-Sla; 62a. Because of this, it ruled that HCC

had not, in 1984, received constitutionally required fair

notice of EPA’s multiple counting reading of the rule and

thus could not be found liable or penalized for having

violated the rule when it was published. The district court

then held that even if HCC received actual notice of a

multiple counting interpretation later on, it should still

not be held liable for violating the NESHAP because it

was “undisputed” that Celriver had “acted responsibly to

meet—and far exceed—the terms of the NESHAP” within

the two-year period to which HCC would have been en-

titled had EPA given HCC fair notice of its regulatory

obligations in June 1984. App. 69a-70a.7

Both sides appealed. The Fourth Circuit found record

support for HCC’s reading of the exemption (App. 15a),

and it recognized that EPA had interpreted its rule incon-

sistently (App. 15a n.6). But, citing many of the defer-

ence cases relied upon by the district court (App. 7a),

TIn reaching its decision, the district court considered that if

HCC had received constitutionally adequate notice at the right time,

it would have had the chance to seek—and in all likelihood to secure

——a waiver giving it up to 24 months in which to come into compli-

ance. App. 69a-70a.

8

the Fourth Circuit concluded that it was bound to defer

to EPA’s present interpretation of the rule so long as

EPA’s interpretation was not “nonsensical.” App. 8a.

The Fourth Circuit then affirmed part of the district

court’s “fair notice” holding. It found that until August

1989, HCC had not received fair notice of EPA’s reading

of the rule and thus was not liable for failing to comply

with the standards between 1984 and 1989. App. 16a-

20a. But though the district court had concluded that

HCC should not be penalized even if it did get actual

notice of the interpretation in 1989, the Fourth Circuit

concluded that HCC could be penalized beginning 90 days

after that court said HCC had notice of EPA’s reading of

the rule. App. 26a. In other words, the Fourth Circuit

held that from the moment in 1989 when it concluded

HCC received actual notice of EPA’s current interpreta-

tion, HCC had only 90 days in which to cure all defi-

ciencies. On the ninety-first day and thereafter, the Fourth

Circuit held that HCC could be subject to penalties to be

determined by the district court. /d.

By holding HCC liable so soon after it said HCC had

actual notice of EPA’s interpretation, the Fourth Circuit

has put HCC in a much worse position than it would

have been in had EPA given HCC constitutionally ade-

quate notice from the outset. That part of the appeals

court’s ruling thus takes away much of the force and

effect of its lack-of-fair-notice ruling.

REASONS FOR GRANTING THE WRIT

The Fourth Circuit’s decision in this case raises several

important principles: that agencies are required to use

notice-and-comment rulemaking to develop sound regula-

tions and to tell regulated entities what is expected of

them: that courts have the power and the duty to say

what the law is; and that fair notice must include within

it a reasonable amount of time in which to comply once

notice is given. Here, in accordance with its legal obliga-

9

tions, EPA put a regulation out for comment, made a

record, provided examples of how the rule would work,

and then put the rule into effect. But then, EPA staffers

decided that they did not like what was written down.

Instead of going through another round of rulemaking in

order to change the rule, though, they proceeded to change

the rule by re-interpreting it without the benefit of public

notice and comment. That is the only explanation for

how far fewer than 1,000 megagrams of benzene could

suddenly come to be counted as many times more than the

1,000 megagram exemption threshold.*

When HCC asked the federal courts to e amine EPA’s

conduct, the courts replied that the Supreme Court of the

United States required them to defer to an agency’s inter-

pretation of its own regulations. The Fourth Circuit has

read the case law to say that a not “nonsensical” test can

be used to examine an agency’s interpretation of its rules,

Put into plain English, the Fourth Circuit’s test for

deference means no more than “was the agency’s position

not absurd or not ridiculous.” Put more bluntly, the test

is the “not stupid” test. But that is a far, far more minimal

standard for deference than this Court expressed in Udall

v. Tallman or elsewhere. And, as will be shown below,

®This is illustrative of what can happen when agencies are

allowed to avoid Statutory rulemaking safeguards. The regulation

and the preamble provide an exemption that is illusory once the

unpublished, post-promulgation reinterpretation is discovered and

enforced, Moreover, EPA’s attempt to change the meaning without

going through rulemaking has put EPA in the position of enforcing

an approach that—to our knowledge—EPA has consistently rejected

as unsound whenever it has been considered in notice-and-comment

rulemaking. See supra note 5 (EPA’s benzene waste operation

rules) ; 52 Fed. Reg. 21157 (June 4, 1987) (application instructions

under the Emergency Planning and Community Right to Know Act

specifically precluding multiple counting). See also App. 5la (de-

scribing EPA’s rejection in another rulemaking of “ ‘processing

rate,’ a version of multiple counting,” because it was “difficult to

establish” ).

10

the Fourth Circuit is not the only court of appeals that has

dropped the standard for deference below the floor. In

order to get the federal courts back on track, this Court

must make clear to them that they have no duty to yield

to anything and everything that an agency conjures up

just because the agency calls it an interpretation or just

because what the agency says is not “nonsensical.”

As things now stand—with federal courts thinking that

they must defer to virtually everything an agency does—

the federal courts have abdicated their power and duty

to say what the law is. This leaves federal agencies with

the authority both to make up law and then to interpret

that “law” as they wish in individual cases.

This, though, stands on end the basic constitutional

principle that, in the United States, it “is emphatically

the province and duty of the judicial department to say

what the law is.” Marbury v. Madison, 5 U.S. (1 Cranch)

137, 177 (1803). It is the courts that tell federal agen-

cies whether they have stayed within the bounds of the

law.

Though deference has its place among the tools that

courts use to decide cases, if courts defer as a matter of

course, they run the risk of letting an agency become the

arbiter of what the law is. Deference can result in—and

we believe in this case did result in—the impermissible

promulgation and retroactive application of secret law

with no real forum in which a regulated entity has a

chance to correct the abuse.’ This is certainly true if the

test for whether deference is to be accorded is so minimal

that all an agency has to do is present, during litigation,

an interpretation that is “not absurd,” “not ridiculous,”

“not stupid.”

®In an enforcement context, agency enforcement personnel can

give “inconvenient” regulatory language a “creative” reading to

serve the immediate needs of the litigation, and they can then try to

legitimize such a reading by calling it an “interpretation.”

ee

11

Such a weak standard for deference opens the door for

an agency to operate without regard to law. Such a weak

standard is an invitation for agencies to be corrupted by

heady power. The Court should step in to correct this

spreading misunderstanding of the deference standard.

I. THIS COURT SHOULD MAKE CLEAR TO THE

FEDERAL COURTS THAT UDALL v. TALLMAN

DEFERENCE DOES NOT MEAN THAT THE

COURTS MUST DEFER TO AGENCY INTERPRE-

TATIONS OF REGULATIONS IN VIRTUALLY ALL

CASES.

A. The Fourth Circuit and Other Circuits Have De-

viated from This Court’s Basic Deference Prin-

ciples.

Federal regulatory law can be complex but—complex

or not—the goal of regulatory law is that those doing the

regulating speak clearly and say plainly that which they

mean to say so that those who are being regulated will

know what is required of them. But disputes can arise

even with respect to comprehensive, well-written regula-

tions.

In the search for an approach to resolving disputes be-

tween regulators and those regulated, this Court decided

to give some effect—to defer, in certain circumstances—

to agency interpretations of the laws under which they

operated and to agency rules and regulations adopted after

notice-and-comment rulemakings. But this Court did not

say that deference knows no bounds. Rather it said that

courts are to defer to agency interpretations only so long

as those interpretations are not “plainly erroneous” or “in-

consistent” with the underlying rule. See Udall v. Tall-

man, 380 U.S. 1, 16 (1965), quoting Bowles v. Seminole

Rock & Sand Co., 325 U.S. 410. 414 (1945) (An

“agency’s interpretation of its own regulations . . . must

be given controlling weight unless it is plainly erroneous

or inconsistent with the regulation.”); Thomas Jefferson

Univ. v. Shalala, 512 U.S. 504, 512 (1994) (“We must

12

give substantial deference to an agency’s interpretation of

its own regulations.”); Stinson v. United States, 508 U.S.

36, 45 (1993); Martin v. Occupational Safety and Health

Review Comm'n, 499 U.S. 144, 150-151 (1991). Cf.

Chevron U.S.A. v. Natural Resources Defense Council,

467 U.S. 837, 845 (1984), reh’g denied, 468 U.S. 1227

(1984).

Though this Court never indicated that deference was

intended to turn the federal courts into rubber stamps

for any agency conduct, the federal courts have, over the

years, misread the deference cases as imposing upon them

the most minimalist of standards when reviewing agency

conduct. In this case, the Fourth Circuit has used a not

“nonsensical” standard.” In a similar vein, the First Cir-

cuit has applied a not “mindless, or whimsical” standard.

Associated Fisheries of Maine, Inc. v. Daley, 127 F.3d

104, 110 (1st Cir. 1997). And the Sixth Circuit has

“thrown up its hands” and decried the way in which the

deference standard has softened into a virtual legal “quick-

sand”: “The standard has been constantly shifting, stead-

ily sinking, and, from the perspective of the intermediate

appellate courts, frustrating.” Ohio State Univ. v. Secre-

tary, United States Dep’t of Health and Human Services,

996 F.2d 122, 123 (6th Cir. 1993), cert. granted, vacated

on other grounds, 512 U.S. 1231 (1994).

Petitioner submits that the deference standard has be-

come unhinged from its underpinnings. Though it began

life as a tool to help courts to evaluate agency rules, it

has evolved—indeed transmuted—into an excuse for the

© The Fourth Circuit also said it upheld EPA’s multiple counting

interpretation because such an interpretation “harmonizes” with

the purposes of the Clean Air Act. App. 8a. This misses the point.

Of course EPA has the authority to adopt an exemption based on

multiple counting, but to do so it must first propose and seek com-

ment on such a rule. EPA did not do that here.

13

courts to accept any agency interpretations that are not

ridiculous.”

B. The Agencies—Having Learned That Their Power

Has Virtually No Court-Imposed Limits—Have Re-

sponded By Running Roughshod Over Both the

Statutes Constraining Their Behavior and the Reg-

ugated Community.

The fact that the courts defer to agencies almost as a

matter of course has not been lost on the agencies. Know-

ing that they can act almost with impunity, agencies have

taken advantage of the situation by first adopting rules

that say one thing and then, over time, interpreting them

to mean something entirely different. As one court de-

scribes it, this allows agencies to take “one view one year

and another the next”—all without giving any notice to

the public and without following APA and other statutory

notice-and-comment procedures for changing agency rules.

See Homemakers, 832 F.2d at 412.

Another consequence of such wholesale deference js

that some agencies have stopped trying to write clear rules

in the first instance. Instead, they write “mush” and then

give that “mush . . . concrete form only through subse-

quent, less formal interpretations.” Paralyzed Veterans of

America v. D.C. Arena, 117 F.3d 579, 584 (D.C. Cir.

1997), cert. denied, 66 U.S.L.W. 3387 (1998).

This increasing agency audacity—coupled with the def-

erence being paid by the courts to virtually anything an

administrative agency says—leaves the regulated com-

munity in a perilous situation. While regulated entities

try their best to comply with the law, they find themselves

11 Though courts have said they will not defer to all agency inter-

pretations, the actual practice of reviewing courts has been to defer

to agency interpretations of their own rules “in all but extraordi-

nary cases.” See, e.g., Homemakers North Shore, Inc. v. Bowen, 832

F.2d 408, 411 (7th Cir. 1987), citing Skidmore v. Swift & Co., 323

U.S. 184 (1944).

14

not being able to get a fix on what the law is." They are

subject to the vagaries of shifting agency interpretations,

plagued by secret law. They cannot trust the words of

a regulation and the illustrative examples used. The rule-

making record serves as no constraint on agency caprice

because agencies can—as EPA did here—simply change

the law whenever agency staffers change their minds about

what they wish the law to be. Even letters or comments

from federal and state regulators do not rein in the agency

because those representations can be shunted aside. Order

needs to be brought back to this situation.

Il. THIS CASE PROVIDES AN APPROPRIATE VE-

HICLE FOR REASSERTING THE PROPER RULES

GOVERNING JUDICIAL DEFERENCE TO AGENCY

INTERPRETATIONS.

In this case, EPA’s Administrator wrote one thing in

the 1984 benzene NESHAP and EPA’s staff tried to

change what the Administrator had written. Here, the

staff's internal actions—aimed at avoiding notice-and-

comment rulemaking—were exposed through internal EPA

memoranda that came to light only because of this litiga-

tion. This case puts on display the dangers of federal

agencies acting as if they need not answer to anyone, not

even to the courts. On this record, the Court will be able

to see what EPA published, then measure whether EPA’s

“present interpretation” reasonably relates to what the

public was told. With this case, this Court can replace the

limits on deference that have been lost by the lower

federal courts.

12 Regulated entities wanting to comply with environmental re-

quirements can be stymied if they do not know what they are sup-

posed to do because EPA fails to follow the rulemaking procedures

designed to tell them what is expected of them. Judicial deference

to agency interpretations in these circumstances encourages EPA

to continue to “hide the ball,” thus hindering timely compliance

efforts and—in turn—interfering with the prompt accomplishment

of environmental goals.

“ Rs arta ap AIM

15

A. This Court Should Make Clear That It Is Not Ap-

propriate For Federal Courts to Defer to Agency

Interpretations That Defy the Very Language of a

Published Rule.

If words in a rule mean what they normally mean, then

companies can learn what the rule means—they get notice

of what they must do—just by reading it. In this case,

both the district court and the appeals court found that

HCC’s single counting interpretation was a reasonable

way to interpret the term “use” in the exemption. Indeed,

one of the reviewing judges stated explicitly that the

most commonplace and natural reading of the rule’s lan-

guage is that “use” is a single counting concept: it equals

the amount of benzene in use and consumed at a plant

site during a year. App. 29a. And all the reviewing

judges determined that EPA’s interpretation of the term

“use” was so abnormal that HCC did not get fair notice

of that interpretation from the plain language of the rule.

Nonetheless, all the reviewing judges—even the judge

who said he believed that EPA’s interpretation defied the

plain language of the exemption—still felt compelled to

defer to the agency’s multiple counting interpretation.

Such is the strength of the belief among federal judges

that they have no choice but to defer to all but the most

ridiculous agency interpretations.“ The Court must cor-

rect that misimpression.

18 The courts here not only ignored the normal meaning of the

words in the rule, but also they ignored unrebutted expert testimony

about the plain meaning of technical terms in the record describing

the rule. Specifically, the courts deferred to EPA’s interpretation

of enginering terms like “throughput” and “mass balance,” even

though that required them to ignore those terms’ established tech-

nical meanings. According to the unrebutted expert testimony of

chemical engineers—Dr. James Wei, Dean of the School of Engi-

nering and Applied Sciences at Princeton University and Dr. E.

Bruce Nauman, full professor of chemical engineering at Rensselaer

Polytechnic Institute—those engineering terms, when applied to a

16

B. This Court Should Not Allow the Federal Courts

to Defer to Latter Day Agency Interpretations that

Contradict Agency Explanations Made When the

Rule Was Promulgated.

The rulemaking record also contains several examples

which show that EPA’s Administrator intended “use” in

the exemption to mean the amount of benzene “con-

sumed” or “on hand.” In one example, the Adminis-

trator’s statements in the rule’s preamble—published as

part of the 1984 final rule—definitively equated the con-

cept of “use” in the exemption with “consume.” Thus,

the most authoritative contemporaneous statements of the

Agency’s intent support and compel reading the exemp-

tion in the way that HCC has read the exemption from

the beginning, and they flatly contradict the regulatory

interpretation that EPA has advanced in this litigation.

By contrast, EPA could not point to one place in the

rulemaking record that contains an example of how to

count benzene as it circulates through a plant site. The

primary basis for EPA’s multiple counting approach was

internal memoranda that were written by EPA staff after

the rule was published and were never subjected to the

scrutiny of notice-and-comment rulemaking. App. lla-

12a. Such material is not entitled to deference. The very

purpose of notice-and-comment rulemaking is eliminated

when an agency can successfully advance post-rulemaking

plant site as a whole (as called for by the benzene NESHAP exemp-

tion), refer to a plant’s overall net production or consumption, which

are single counting concepts. App. 175a-19la; see 47a.

The Administrator explained that the exemption was meant to

address the concerns of an unidentified pharmaceutical industry

source which was known to recycle benzene in a process that “con-

sumed about 325 MG/year [of benzene] during 1981.” App. 113a.

The Administrator went on to state that, under the terms of the

exemption as originally adopted, the possibility that such phar-

maceutical operations “could be adversely affected is very small”

because “most pharmaceutical plants use very little benzene.” Jd.

at 113a-114a (emphasis added). See also App. 29a-30a.

17

interpretations that contradict what is in the rulemaking

record.

C. The Federal Courts Should Not Defer to the Latest

in a Series of Agency Interpretations.

It is not appropriate to defer to an agency interpretation

which is but one of several from the agency because when

“an agency waffles without explanation, taking one view

one year and another the next,” this may show that there

has been no real decision made by the agency. Home-

makers, 832 F.2d at 412. Thus when courts face waffling

agencies, courts should be “less willing to accept the

agency’s latest word as authoritative ....” Jd. The latest

in a string of vacillations may be no better or no more

enduring than a preceding position. In addition, an about-

face by an agency may be a telltale sign of an effort

either to defy the outcome or to avoid the requirements

of notice-and-comment rulemaking. Jd. To defer to “here

today gone tomorrow” interpretations on the part of agen-

cies encourages misconduct by the agencies; it allows

them to avoid making up their minds and to play a game of

“bait and switch” with the regulated community.”

The need to prevent agency staffers from re-writiag

rules is particularly acute in the case of regulations prom-

ulgated under the Clean Air Act. This is so because the

Clean Air Act—distinct from other major federal environ-

mental statutes—places the power to make regulations

solely in the hands of EPA’s Administrator and expressly

prohibits the Administrator from delegating that power.*®

15 That is what happened here: certain aspects of EPA’s multiple

counting approach were presented, for the first time, in the govern-

ment’s briefs in support of its summary judgment motion in the

district court. See App. 41a.

6 See Clean Air Act § 301(a)(1) (“The Administrator may dele-

gate to any officer or employee of the Environmental Protection

Agency such of his powers and duties under this chapter, except

the making of regulations, subject to section 7607(d) of this title,

18

Consequently, none of the various EPA regional offices

can speak with authority as to what a particular regula-

tion means, and the statements of the Administrator take

on added significance.”

In this case, the Fourth Circuit deferred to an EPA

Region 4 interpretation that materially conflicted with the

statements made by EPA’s Administrator when the rule

was published. Moreover, Region 4’s interpretation con-

flicted with statements made by another EPA region in

the years following the rulemaking. Region 4’s interpre-

tation thus could not be taken as the “authoritative” EPA

interpretation of the rule. And only the authoritative

agency interpretation could ever be properly accorded

deference.

The courts should not be left to think that they must

give in to such interpretations. If the courts are left with

that impression, the administration of justice will suffer;

the role of statutorily mandated notice-and-comment rule-

making will be further eroded; the agencies will become

convinced that they are free to chase the regulated com-

munity helter-skelter with interpretations du jour. The

agencies need to be reminded that, “[o]nce a legislative

rule . . . is adopted, its substantive provisions may be

changed only by compliance with the notice and hearing

requirements of the Administrative Procedure Act.” Clean

Ocean Action v. York, 57 F.3d 328, 333 (3d Cir. 1995).

as he may deem necessary or expedient.”) (emphasis added). App.

84a.

17 The appeals court cited the Supreme Court for the proposition

that the “power authoritatively to interpret its own regulations is

a component of the agency’s delegated law-making powers.” App.

7a, quoting Martin v. OSHRC, 499 U.S. at 151 (1991). This misses

the point that where, as with the Clean Air Act, Congress has

placed an agency’s “delegated lawmaking powers” exclusively in the

hands of that agency’s Administrator, then only the Administrator

can exercise the “power authoritatively to interpret” a rule promul-

gated under the Act.

19

Ill. IN ADDITION, THIS CASE PROVIDES AN AP-

PROPRIATE VEHICLE FOR CONSIDERING

WHETHER THE FEDERAL COURTS SHOULD

GIVE ANY DEFERENCE T9 UNPUBLISHED,

POST-PROMULGATION AGENCY INTERPRETA-

TIONS OF AGENCY RULES.

As we have discussed above, the once salutary idea of

deferring to agency interpretations of their rules has

broken down in the real world of courts and business

and administrative regulation. Deference has become a

shield behind which agencies are hiding laws made by

whim rather than through rulemaking. As deference has

left its Udall v. Tallman underpinnings and changed into

what it has become today, agencies like EPA have for-

gotten that a “substantive regulation must have sufficient

content and definitiveness as to be a meaningful exercise

in agency lawmaking” and that it is not “open to an

agency to promulgate mush and then give it concrete form

only through subsequent less formal ‘interpretations.’ ”

Paralyzed Veterans, 117 F.3d at 584.

Deference has gotten out of hand, and HCC submits

that this Court may want to consider doing away with

deference altogether, especially where deference is being

given to unpublished, post-promulgation agency interpre-

tations. Although the rationale for giving deference to

an agency’s interpretation of a statute it is charged with

implementing has been clearly expressed (see Chevron,

467 U.S. at 844), that rationale does not apply when the

interpretation at issue is an agency’s interpretation of a

rule that the agency itself has devised and promulgated

and which may not become public until years after promul-

gation, often in enforcement proceedings. In HCC’s view,

the application of the deference standard to cases involv-

ing an agency’s interpretation of its own rules has never

been adequately justified.

In Seminole Rock—pc: saps the earliest expression of

this aspect of the “deference” concept—the Court ob-

20

served that a reviewing court “must necessarily look to the

administrative construction of the regulation if the mean-

ing of the words used is in doubt.” 325 U.S. at 413-14

(emphasis added). But the Court did not explain why

it was “necessary” for the reviewing court to look to the

agency’s interpretation rather than determine the meaning

of the regulation itself, nor did the Court cite any prior

decision or other authority for the proposition.

Facing the issue twenty years later in Udall v. Tall-

man, the Court—invoking Seminole Rock—asserted that

“[w]hen the construction of an administrative regulation

rather than a statute is in issue,” deference to the agency’s

interpretation “is even more clearly in order.” 380 U.S.

at 16 (emphasis added). But again, the Court provided

no explanation for why deference was “even more clearly

in order” in the case of a regulation as opposed to a

statute.

More recently, the Court has attempted to provide some

rationale for its deference-to-agency-constructions-of-their-

own-rules concept. For instance, in Martin v. OSHRC,

the Court stated that “[b]ecause applying an agency’s

regulations to complex or changing circumstances calls

upon the agency’s unique expertise and policymaking

prerogatives,” the Court “presume[s] that the power au-

thoritativeiy to interpret its own regulations is a com-

ponent of the agency’s delegated lawmaking powers.”

499 US. at 151, citing Ford Motor Credit Co. v. Milhol-

lin, 444 U.S. 555, 568 (1980).28 The Court developed

18 Broad deference is “all the more warranted,” the Court has

asserted, when the regulation “concerns ‘a complex and highly tech-

nical regulatory program,’ in which the identification and classifica-

tion of relevant ‘criteria necessarily require significant expertise

and entail the exercise of judgment grounded in policy concerns.’ ”

Thomas Jefferson Univ. v. Shalala, 512 U.S. at 512, citing

Pauley v. BethEnergy Mines, Inc., 501 U.S. 680, 697 (1991). Yet,

the relevant question is not who is best positioned to apply a regula-

tion to a “complex” technical situation, but rather, which govern-

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21

this delegation thought in Chevron, where the Court sug-

gested that an agency may be deemed to have been dele-

gated the authority to write rules that fill gaps left by

Congress.’®

But where Congress has left a “gap” for an agency to

fill, the agency should be required to fill that “gap”

through rulemaking that establishes clear and definitive

regulatory language. The “very purpose behind the dele-

gation of lawmaking power to administrative agencies” is

to “ ‘resolve . . . ambiguity in a statutory text.’” Thomas

Jefferson Univ., 512 U.S. at 525 (Thomas, J., dissenting ),

citing Pauley v. BethEnergy Mines, Inc., 501 U.S. 680,

696 (1991). Agencies should not be permitted “merely

[to] replace[] statutory ambiguity with regulatory ambigu-

ity.” Id.

It therefore follows from Chevron that an agency’s

chance to exercise its “expertise” and “policymaking pre-

rogatives” comes only at the time the agency writes its

regulations. But once those regulations have been pro-

mulgated, the question of what they mean is a pure ques-

tion of law that only a court should be allowed to decide.

This has been so since the beginning of the Republic:

“[I]t is emphatically the province and duty of the judicial

department to say what the law is.” Marbury v. Madison,

5 U.S. (1 Cranch) 137, 177 (1803); see also FTC v.

mental entity under our constitutional system is ultimately entitled

to establish the meaning of laws, including regulations.

19 The deference afforded agencies under Chevron’s second prong

is grounded in the principle that, in those situations where Con-

gress has not “unambiguously expressed” its “intent” as to the

meaning of a statutory provision, there has been either an explicit

or implicit delegation of authority by Congress to the implementing

agency to resolve the matter. The “‘power of an administrative

agency to administer a congressionally created . . . program,’ ...

necessarily requires the formulation of policy and the making of

rules to fill any gap left, implicitly or explicitly, by Congress.”

Chevron, 467 U.S. at 848, citing Morton v. Ruiz, 415 U.S. 199, 231

(1974).

22

Colgate-Palmolive Co., 380 U.S, 374, 385 (1965) (While

an “informed judicial determination is dependent upon

enlightenment gained from administrative expertise,” in

the “last analysis the words [of a statute] set forth a legal

standard and they must get their final meaning from judi-

cial construction.”). Thus, the principle is well estab-

lished that “[t]he judiciary is the final authority on issues

of statutory construction.” Chevron, 467 U.S. at 843

n.9,

To follow Chevron’s logic to its conclusion is to see

that deference is not appropriate where an agency’s post-

promulgation interpretation of a regulation is concerned.

Regulations are laws just as statutes are laws. Like stat-

utes, regulations dictate behavior by those to whom they

apply. Like statutes, regulations drive the expenditure of

time, of money, of peace of mind on the part of those

who are being regulated. Like statutes, if regulations are

violated, enforcement proceedings, stop-sale orders, civil

penalties, and perhaps even criminal sanctions may follow.

The responsibility for determining the meaning of reg-

ulations must rest ultimately not with any element of the

executive branch that promulgated them, but with the

judiciary. With all due respect, HCC submits that the

prospect that EPA should be able to read a rule any way

EPA pleases so long as that reading is not “nonsensical”

Should ring alarm bells in the judiciary, alerting the

courts to the very real risk that EPA has gotten “bigger

than the law.”

Accordingly, to address situations where an agency

advocates, during litigation, a regulatory interpretation

that differs from the one it presented to the public at the

time of rulemaking or where an agency promulgates an

ambiguous rule and later (without further rulemaking)

reads it to allow only one of several plausible interpreta-

tions, HCC respectfully suggests that the Court use this

case explicitly to abandon the “deference” principle and

direct the reviewing court to determine the single correct

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23

meaning of the provision. That is, if the reviewing court

——applying traditional tools of regulatory construction °—

finds that the agency has indeed advanced the best inter-

pretation of the regulation as promulgated, then that inter-

pretation should be upheld. Otherwise, it should be re-

jected.

In the instant case, both the district court and the court

of appeals upheld EPA’s “multiple counting” interpreta-

tion of the benzene NESHAP exemption provision on the

grounds that HCC had not shown that multiple counting

was a “plainly erroneous” reading of the regulatory lan-

guage. At the same time, both courts found that HCC’s

single counting interpretation was a reasonable way to

construe the exemption. In such circumstances, the courts

should have resolved the matter not by simply determin-

ing whether “multiple counting” is one of several not

“nonsensical” ways to read the exemption, but, rather, by

ascertaining whether or not “multiple counting” is indeed

what the exemption as promulgated means.

In sum, deferring to an agency’s interpretation of its

own ambiguous regulation does not vindicate any consti-

tutional separation of powers principle or give effect to

the agency’s supposed expertise in a complex technical

field. Rather, it rewards the agency for having failed to

meet its obligation to resolve statutory ambiguity through

rulemaking. Deference in this context is a perversion of

fundamental principles of administrative law. It is an

*° Use of traditional tools of regulatory construction would in-

clude evaluation of the regulatory language in light of the explana-

tion of the rule in the contemporaneous preamble to the rule pub-

lished in the Federal Register. The preamble to an EPA rule pro-

vides singularly authoritative evidence of the agency’s intent. See

State of Vermont v. Thomas, 850 F.2d 99, 108 (2d Cir. 1988).

Indeed, the preamble is part of an agency rule. See 5 U.S.C.

$551(4) (1994) (definition of “rule” in the APA); 44 U.S.C.

§ 1507(4) (1994) (Federal Register Act provides that content of

the Federal Register “shall be judicially noticed.’’).

od

abdication of judicial responsibility that this Court should

restore.

IV. THIS COURT SHOULD HOLD THAT CONSTITU-

TIONAL FAIR NOTICE INCLUDES WITHIN IT-

SELF THE REQUIREMENT THAT ONCE FAIR

NOTICE IS GIVEN TO A REGULATED ENTITY,

THAT ENTITY MUST HAVE A REASONABLE

AMOUNT OF TIME IN WHICH TO COMPLY WITH

THE OBLIGATION THAT HAS BEEN NOTICED

In General Electric Co. y. EPA, 53 F.3d 1324, 1328

(D.C. Cir. 1995), the court gave voice to the principle

that due process requires that a regulated entity have fair

notice of what it is supposed to do before it can be

penalized for not doing it. Other circuits have voiced sim-

ilar concepts. See Diamond Roofing Co. v. OSHRC, 528

F.2d 645, 649 (Sth Cir. 1976); First American Bank y.

Dole, 763 F.2d 644, 651 n.6 (4th Cir. 1985).

The Court should use this case to make clear that the

“fair notice” concept established in the General Electric

line of cases must also necessarily encompass the notion

of “timely notice”—i.e., that after an entity is given notice

of a regulatory obligation, it must be en a reasonable

amount of time in which to meet that obligation without

being nenalized for getting the late notice. This aspect of

the fair notice concept is codified in the notice require-

ments cf the APA. See, e.g., Secretary of Labor v. West-

ern Fuels-Uteh, Inc., 900 F.2d 318, 327 (D.C. Cir.

1990). Among other things, the APA Says this: “[e]x-

cept to the extent that a person has actual and timely

notice of the terms thereof,” a person may not in any way

be “adversely affected by” any matter—such as an agency

interpretation—that is required to be published in the

Federal Register and not so published. See 5 U.S.C.

§ 552(a)(1) (1994) (emphasis added).

Courts which have analyzed the APA’s requirement of

“actual and timely notice” have concluded that a regu-

lated entity must be given sufficient time to bring its con-

Os Pat Daal sd pee ik dati pln

25

duct into conformity with the obligations of which it has

been put on notice. See Alliance for Cannabis T herapeu-

tics v. DEA, 15 F.3d 1131, 1136 (D.C. Cir. 1994),

quoting Northern California Power A gency v. Morton,

396 F. Supp. 1187, 1191 (D.D.C. 1976). In other words,

a regulated entity that establishes that it did not originally

receive fair notice must—after finally getting notice—be

given sufficient opportunity and time in which to comply

with the rule.

The district court’s decision in this case is consistent

with the foregoing principles, but the Fourth Circuit’s is

not. The district court concluded that the Clean Air Act

and EPA’s rules contemplate that those who get notice at

the time of promulgation that they are subject to a

NESHAP provision could seek up to two years in which

to comply with that provision. Therefore, it made good

sense for the district court to hold, as it did, that HCC

was not liable for having violated the benzene NESHAP

because Celriver had “acted responsibly to meet—and far

exceed—-the terms of the NESHAP” within the two-year

compliance time-frame to which HCC would have been

entitled had EPA given HCC fair notice of its regulatory

obligations in June 1984, App. 65Sa-7 la.

The Fourth Circuit, however, did not look back in time

to consider the posture HCC would have been in had HCC

received fair notice from the beginning. It did not con-

sider that a company that got fair notice from the start

(in June 1984) was Virtually assured of having 730 days

in which to come into compliance.” Rather, the Fourth

Circuit held that after HCC received actual notice that

*! Notwithstanding Congress’ statement that EPA “may” grant

the waiver, EPA has no discretion to exercise; it must grant a

waiver when a source makes a showing that satisfies the statutory

test. See, e.g., Ethyl Corp. v, EPA, 51 F.8d 1053, 1058-59, n.7

(D.C. Cir. 1995). Since HCC could make the statutory showing for

its similarly situated Pampa Plant (App. 50a; 56a-57a), it is rea-

sonable to assume that HCC could have made the showing—and

received a waiver—at Celriver.

26

its Celriver Plant was not exempt, HCC had only 90 days

in which to meet the terms of the standards at Celriver.

And on the 91st day, HCC was liable for Celriver’s failure

to meet the standards. App. 26a. According to the Fourth

Circuit, all HCC’s efforts to meet the standards promptly

upon being told it was subject to them are irrelevant to

whether it is “liable”; such efforts—says the Fourth Cir-

cuit—can be taken into account only in a subsequent

penalty phase of the litigation.

This “remedy” is not adequate. Even if HCC can, in

further proceedings, establish that no monetary penalty is

warranted for its 1989-1991 actions (and HCC believes

it can), a “violation found is still a significant penalty.”

Rollins Environmental Services v. U.S. E.P.A., 937 F.2d

649, 654 n.2 (D.C. Cir. 1991) (Edwards, J., dissenting

in part and concurring in part). Not only has HCC here

been “labeled a ‘law breaker,’ but this violation can be

used against the company in assessing penalties with re-

spect to any future violations.” /d. In addition, the 4th

Circuit’s decision forces HCC to incur the potentially sub-

stantial costs of the other proceedings that would need to

take place before the district court could decide that no

monetary penalty is warranted.

Petitioner prays that the Court use this case to make

clear that the “fair notice” component of due process

means not only that a regulated entity must have actual

notice of a rule’s meaning, but also that it must not be

penalized for getting notice later than it should have

gotten the notice. Regulated entities put in the position

of HCC—sources that are not timely told of their regula-

tory obligations—are entitled to avoid the stigma of “law-

breaker.” Fair notice requires no less.

27

CONCLUSION

Important principles of the way administrative agencies

do business are on the line here. So too are important

principles of justice and fairness. Agencies must know

that they are not above the law and that they cannot

make law in internal memos and then impose it upon the

regulated community through post-hoc re-interpretations

that fly in the face of the published statements of the agen-

cies. But more than that, the federal courts need to

be reminded that they say what the law is in our country,

that they decide whether the law has been complied with.

These are important principles that the Court ought to

address in this case.

Wherefore, HCC prays that its petition for a writ of

certiorari be granted.

Respectfully submitted,

ANDREA BEAR FIELD

MAIDA O. LERNER

DAVID S. HARLOW

LEE A. CASEY

HUNTON & WILLIAMS

1900 K Street, N.W.

Washington, D.C. 20006

(202) 955-1500

DouGLas W. Davis

JOHN CHARLES THOMAS

CYNTHIA S. CECIL

HUNTON & WILLIAMS

Riverfront Plaza, East Tower

951 East Byrd Street

Richmond, Virginia 23219

March 23, 1998 (804) 788-8200