Opposition Brief — Union Oil Co. v. Citizens for a Better Environment-California

Supreme Court brief1997

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No. 96-747

In The

Supreme Court of the United States

October Term, 1996

UNION OIL COMPANY OF CALIFORNIA,

Petitioner,

CITIZENS FOR A BETTER

ENVIRONMENT-CALIFORNIA, et al.,

Respondents.

On Petition For Writ Of Certiorari

To The United States Court Of Appeals

For The Ninth Circuit

BRIEF IN OPPOSITION TO

PETITION FOR WRIT OF CERTIORARI

Barry GOLDSTEIN

TERESA DEMCHAK

Linpa M. DARDARIAN

Counsel of Record

JoLLee Faser

SAPERSTEIN, GOLDSTEIN, DEMCHAK

& BALLER

1300 Clay Street, 11th Floor

Oakland, CA 94612

Telephone: 510/763-9800

Counsel for Respondents

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

OR CALL COLLECT (402) 342-2831

QUESTION PRESENTED

Pursuant to 33 U.S.C. § 1319(g)(6)(A)(iii), an entity that

violates its pollutant discharge permit limits imposed pur-

suant to the Clean Water Act can avoid a citizen penalty

action for that violation if “the State has issued a final order

not subject to further judicial review and the violator has paid

a penalty assessed under this subsection, or such comparable

State law, as the case may be, .. . ” The question presented is

the following:

Did the Ninth Circuit err in concluding that Unocal

cannot obtain a dismissal of a citizen penalty action alleging

violations of Unocal’s selenium discharge permit limits, when

the record shows that Unocal never paid a penalty for its

violations as required by 33 U.S.C. § 1319(g)(6)(A)(ili), but

simply made a payment to the State of California to settle a

prior lawsuit that Unocal brought against the State, and that

the payment was not assessed under a state law provision

comparable to the penalty provision of the Clean Water Act?

LIST OF PARTIES

The Respondents in this proceeding are Citizens for a

Better Environment-California, San Francisco BayKeeper,

Save San Francisco Bay Association, The Bay Institute of San

Francisco, and Santa Clara Valley Audubon Society, all non-

profit environmental organizations; and Kalon Wofford and

Anthony Willis, individuals (hereinafter referred to as

“Respondents”).

TABLE OF CONTENTS

SE PE ES oe vin ce cceuscbnsc ater cece

ooo hs psn ois nas 5 Cube ce eas Co fe ke>

A. Pursuant to the Clean Water Act and EPA Direc-

tives, the State of California Imposed Limits on

the Amount of Selenium Unocal May Discharge

re Cem ame

Unocal Sued to Avoid Compliance with the Final

Limits, Which the Regional Board Agreed Not to

SE ia we BC cs cy kp -a-beoik wk ob Aaa om x

The Regional Board Did Not Require Unocal to

Pay a Penalty for Unocal’s Failure to Comply with

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REASONS FOR DENYING THE PETITION FOR WRIT

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A. The District Court’s Conclusion that Unocal’s Set-

tlement Payment Was Not a Penalty, Which the

Ninth Circuit Affirmed, Is the Type of Fact-Bound

Determination that Does Not Warrant Review By

pe AG re aoe eae 78 aos) 5 ae

1. The Question of Whether Unocal’s Payment

Was a Penalty Is Predominantly Fact-Based

2. There Is No Split Between the Circuits on the

Issue of what Constitutes a Penalty ........

TABLE OF CONTENTS -— Continued

Page

B. There is No Direct Split Between the Circuits on

the Issue of what Constitutes a “Comparable State

Law” As That Term Is Used in Section

ESSER Ak india Sed ackrees ana dbeeaa<s 15

C. The Ninth Circuit’s Holding that This Citizen Pen-

alty Action Is Not Barred by the Settlement of

Unocal’s Lawsuit Against the State Is Consistent

with This Court’s Decision in Gwaltney........ 19

1. Following Gwaltney, the Ninth Circuit

and District Court Interpreted

§ 1319(g)(6)(A)(iii) As It Is Written ....... 20

2. The Ninth Circuit Determined that Because

Respondents’ Action Seeks to Prosecute

Unocal for Violations That the Board Has Not

Enforced, Respondents’ Suit Supplements

Governmental Enforcement ................ 21

3. The Ninth Circuit’s Decision Will Not Allow

Citizens to Interfere with Government

Enforcement of the Clean Water Act....... 23

a. The Ninth Circuit’s Decision Provides

Certainty that Settlement Agreements

with Governmental Enforcement Agencies

Providing for the Payment of Penalties

Will Preclude Citizen Suits ............ 24

b. The Ninth Circuit’s Decision Makes Clear

to Unocal What It Must Do to Comply

with the Clean Water Act.............. 27

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TABLE OF AUTHORITIES

Page

CASES

Ackels v. United States EPA, 7 F.3d 862 (9th Cir.

| ES ONS pe ee TO ee PEN OWE Ch tee ay et 27

Arkansas Wildlife Fed’n v. ICI Ams. Inc., 29 F.3d 376

(8th Cir. 1994), cert. denied, 115 S. Ct. 1094

CONSD oo dccns vous d kee coe evERO egy es 14-15, 17, 18

Atlantic States Legal Found. v. Universal Tool &

Stamping Co., 735 F. Supp. 1404 (N.D. Ind. 1990) .... 16

Bethlehem Steel Corp. v. Train, 544 F.2d 657 (3d Cir.

1976), cert. denied, 430 U.S. 975 (1977).......-+++- 28

Brotherhood of Locomotive Firemen and Enginemen

v. Bangor & Aroostook R.R. Co., 389 U.S. 327

2: } 5 POOP PEPTEV OC Te CONT ith east ie eee ee 8

California Pub. Interest Research Group v. Shell Oil

Co., 840 F. Supp. 712 (N.D. Cal. 1993)..........-- ae

California Sportfishing Protection Alliance v. City of

W. Sacramento, 905 F. Supp. 792 (E.D. Cal. 1995) .... 16

Cohens v. Virginia, 19 U.S. (6 Wheat.) 264 (1821)..... 21

Consumer Prod. Safety Comm'n v. GTE Sylvania,

Inc., 447 U.S. 102 (1980). .....--- ee cece ee eee e eens 20

Goodman vy. Lukens Steel Co., 482 U.S. 656 (1987) ..... 9

Graver Tank Mfg. Co., Inc. v. Linde Air Products Co.,

BAG US. 271 CIDGD) . oc ccc ccs civic tien seas denen 9

Gwaltney of Smithfield v. Chesapeake Bay Found.,

ASA U.S. 49 CIDBT) 0 62 ence aeccceweesagbivess passim

Hamilton-Brown Shoe Co. v. Wolf Bros. & Co., 240

U.S. 251 (i9i6) ..... SP BO one ae alee Sar ne: Gee? 8

TABLE OF AUTHORITIES — Continued

Page

Knee Deep Cattle Co. v. Bindana Inv. Co., Ltd., 94

ide BEE Oe Ca Fe an a Shas R05 KS 25-26

Natural Resources Defense Council v. Vygen Corp.,

S03 F.Supp. SF (ND. Gene FPR Z) 6. ccs iis wccavencees 16

North and South Rivers Watershed Ass'n v. Scituate,

OD Fe SSe CEG CAR BOGE vas isc ccteecaseccwss 17, 18

Public Interest Research Group v. GAF, 770 F. Supp.

SR OES 2. Map era, oP PD abr ee Metere imra get one Bey 16

Rogers « Lodge, 456-U.S: GIS CI9GZ). ou iis ec 9

Saboe v. Oregon, 819 F. Supp. 914 (D. Ore. 1993)..... 16

Sierra Club v. Colorado Refining Co., 838 F. Supp.

REO SEE, CO ROSA 05 KR RAE Ree e Ra PORES 16

Tull v. United States, 481 U.S. 412 (1987)............. 11

United States v. City of Toledo, 867 F. Supp. 603

(N.D. Ohio 1994)....... ig sce a cela pe aka Eh Bon 16-17

United States v. Johnston, 268 U.S. 220 (1925)......... 9

Washington Pub. Interest Research Group v. Pendleton

Woolen Mills, 11 F.3d 883 (9th Cir. 1993) .......... 20, 24

FEDERAL STATUTES

33 USL.

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vii

TABLE OF AUTHORITIES ~- Continued

Page

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FEDERAL REGULATIONS

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Stare STATUTES

California Water Code

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STATEMENT OF THE CASE

A. Pursuant to the Clean Water Act and EPA Directives,

the State of California Imposed Limits on the Amount

of Selenium Unocal May Discharge into San Francisco

Bay.

Unocal operates an oil refinery in Rodeo, California,

from which it discharges pollutants into San Francisco Bay

(“the Bay”). Pursuant to the Clean Water Act, Unocal may

only discharge such pollutants in the specific amounts set

forth in its National Pollutant Discharge Elimination System

(“NPDES”) permit, which is issued by California’s Regional

Water Quality Control Board (“Regional Board”). 33 U.S.C.

§§ 1311(a), 1342.!

Selenium, a highly toxic pollutant, see 40 C.F.R.

§ 401.15,2 occurs in high concentration in the crude oil

Unocal refines and is contained in the wastewater Unocal

discharges into the Bay. Resp’t App. at 78. Excess amounts of

selenium are having a devastating effect on the health of the

Bay and the ecosystems it sustains. /d. at 78, 87-88. In 1989,

the Environmental Protection Agency (“EPA”) concluded that

the Upper San Francisco Bay was a “toxic hot spot” as a

result of elevated levels of selenium and that Unocal was a

“point source” of this selenium contamination. 33 U.S.C.

§§ 1314()(1)(B) and (C); Excerpts of Record (“ER”) 206-07,

222. EPA based its determination on three main factors: (1)

selenium was found “in animal tissue samples collected from

these areas”; (2) the California Department of Health Services

had issued “a health advisory regarding the consumption of

surf scoters and greater scaups [diving ducks] because of

elevated levels of selenium observed in these birds”; and (3)

' Unless otherwise noted, all section cites shall be to 33 United States

Code. Cites to the United States Code are set forth in Respondents’

Appendix (“Resp’t. App.”) at 106-26.

2 Cites to the Code of Federal Regulations are set forth in

Respondents’ Appendix at 127-29.

there was ample “evidence of levels of bioaccumulation

harmful to human health.” (ER 170-71, 208.)

The Clean Water Act requires states to develop “individ-

ual control strategies” to limit the discharge of pollutants

from point sources, such as Unocal, to achieve specific water

quality standards within three years of the date that the

individual control strategy is adopted. 33 U.S.C.

§ 1314(/)(1)(D). Pursuant to this requirement, the Regional

Board in 1991 issued Order 91-026, which required Unocal to

reduce its selenium discharges by December 12, 1993 to no

more than an annual mass average of .85 pounds per day at a

concentration not to exceed 50 parts per billion (the “final

limits”). Resp’t App. at 81. In the interim, the Regional Board

required Unocal to comply with higher selenium discharge

limits (the “interim limits”), which expired on December 12,

1993, when the final limits took effect. (ER 374-77.)

B. Unocal Sued to Avoid Compliance with the Final

Limits, Which the Regional Board Agreed Not to

Enforce.

Rather than come into compliance with its final limits,

Unocal moved to have these limits repealed. First, Unocal,

along with its trade association, Western States Petroleum

Association (“WSPA”), and several other refiners operating

on the Bay, petitioned the State Water Resources Control

Board (“State Board”) to overturn the final limits, arguing

that selenium discharges into the Bay could not be regulated

under the Clean Water Act. See Resp’t App. at 88-89. The

State Board dismissed the petition. /d. Unocal, WSPA, and the

other refiners then filed a Petition for Writ of Mandate in

California state court to have the final limits set aside. /d. at

89; ER 235-50. Before the state court could reach a decision

on the merits of the action, Unocal, WSPA and the other

refiners reached a settlement with the Regional Board, and the

refiners and WSPA agreed to dismiss their state court action

against the Regional Board.

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The Settlement Agreement provided that the three

refiners resisting compliance with the final limits would pay

the Regional Board $2 million, of which Unocal’s portion was

$780,000. Resp’t App. at 102; ER 95-97.3 In exchange for the

Settlement Agreement, the Regional Board issued a separate

Cease and Desist Order (“CDO”) under California Water

Code § 13301.4 The CDO provides that the Regional Board

will refrain from enforcing the final limits until at least July

31, 1998, as long as Unocal complies with the far less strin-

gent interim limits in the meantime. Resp’t App. at 96-97.

The CDO does not assess any monetary payments or penalties

against Unocal. It does not require Unocal to expend a speci-

fic sum of money on remediation efforts.5 Nor does the CDO

3 Approximately 90% of these funds were paid to the California

Department of Justice, which represented the Board in the State court

action, and the remaining funds were deposited into California’s Water

Pollution Cleanup and Abatement Account. Resp’t App. at 102-03.

4 All references herein to the “Water Code” refer to the California

Water Code. All cites to the California Water Code are set forth in

Respondents’ Appendix at 130-39.

> Unocal asserts in its Petition for Writ of Certiorari (“Petition”) that

it is unable to comply with the final limits because of a lack of available

technology. (Pet’r Br. at 4.) The facts of this and related cases indicate

otherwise. In the state court action, Unocal, along with Shell and Exxon,

similarly asserted that they could not comply with the final limits due to an

alleged lack of available technology. (ER 246.) Based only upon

“information presented by the dischargers,” and despite the fact that three

other refiners operating on the Bay comply with the final limits, the

Regional Board incorporated the refiners’ position in the CDO. Resp’t

App. at 89-90.

However, only one year after the Regional Board issued the CDO,

Shell entered into a consent decree with citizens who had sued Shell for

similar violations of its final selenium limits. See California Pub. Interest

Research Group (CalPIRG) v. Shell Oil Co., 840 F. Supp. 712 (N.D. Cal.

1993); Plaintiffs’/Appellees’ Request for Judicial Notice (“Plaintiffs’

RJN”) at 25-51, Citizens for a Better Environment-California, et al. v,

Union Oil Company of California, No. 95-15139 (9th Cir.). That consent

decree, which requires Shell to reduce its selenium discharges by one ton

state that Unocal is relieved from having to comply with the

final limits until July 31, 1998. Instead, the CDO specifies

that the final limits “become effective on December 12,

1993.” Id. at 88. The CDO only represents that the Regional

Board will not enforce the final limits until July 31, 1998,

unless Unocal violates a term of the CDO. /d. at 96-98.° The

CDO also provides that if the refiners are unable to identify

and implement a workable selenium removal technology by

July 31, 1998, they can request a further extension of this

deadline. /d. at 97-98. Finally, the refiners expressly pre-

served the right to again challenge the validity of the final

limits if the Board ever attempts to enforce the final limits.

id. at 103.

The Regional Board released the Settlement Agreement

and proposed CDO to the public on November 10, 1993,

before the final limits came into effect on December 12, 1993.

(ER 43-60.) Thus, Unocal was not in violation of the final

limits at the time of the settlement.’

more than is required under the CDO, reflects the fact that Shell can reduce

its selenium discharges in a manner that (1) will not generate hazardous

waste or (2) will generate hazardous waste that can be disposed of safely.

Plaintiffs’ RJN at 25-51.

6 Unocal implies in its Petition that the CDO legally deferred the

deadline by which Unocal must comply with the final limits until July 31,

1998, and asserts that the Ninth Circuit’s opinion leaves Unocal subject to

both the interim limits and the final limits. As the Ninth Circuit found, and

Unocal does not contest in its Petition, the CDO did not and could not

legally defer the deadline by which Unocal must comply with the final

limits. See Argument, § C.3.b., infra.

7 Throughout its Petition, Unocal states, without any support in the

record, that the settlement was reached to resolve the State’s “civil penalty

claims” against Unocal. This is a misrepresentation of the facts. The

settlement was reached before the final limits even went into effect. The

Regional Board never commenced or even announced that it intended to

commence a penalty enforcement proceeding against Unocal for its

anticipated violation of the final limits. The documents Unocal cites

indicate only that the Regional Board intended to commence enforcement

proceedings against Shell Oil Company, which also operates a refinery on

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C. The Regional Board Did Not Require Unocal to Pay a

Penalty for Unocal’s Failure to Comply with the Final

Limits.

At a public hearing regarding the Settlement Agreement

and CDO, the Regional Board held that “it is inappropriate to

characterize the payment [made by Unocal and the other

refiners]... as a penalty,” because the money was “being

paid as a means of settling the lawsuit.” (ER 150.) At the

same hearing, the Regional Board’s counsel concurred:

. if you look at the expressed language of the

settlement, it says, ‘As part of the settlement, the

companies shall collectively pay the Regional

Board the sum of two million.’ The settlement docu-

ment does not characterize this as a penalty. It

characterizes it as a payment.

(ER 149 (emphasis added).)8

the Bay, and which failed to comply even with its less stringent interim

limits. CalPIRG, 840 F. Supp. at 715. See also, ER 369.

8 Unocal makes much of one letter from EPA, in which EPA referred

to the refiners’ settlement payment as a penalty. However, in a subsequent

letter, EPA clarified that its informal use of the term “penalty” was not

intended to imply an opinion that the payment legally constituted a penalty

that could preclude Respondents’ citizen suit. Resp’t App. at 140-41. The

United States Department of Justice again clarified the meaning of EPA's

letter in its amicus brief to the Ninth Circuit and at oral argument before the

Ninth Circuit, where the United States argued that Unocal’s payment was

not a penalty and should not operate to preclude Respondents’ citizen suit.

Amicus Curiae Br. for the United States on Behalf of Respondents, at

29-34, CBE, et al. v. Unocal, No. 95-15139 (9th Cir. 1996).

The CDO itself states that the Regional Board specifically

considered and rejected the option of imposing a penalty:

The Regional Board has considered the various

enforcement and penalty options available to it

regarding violation of Order No. 91-026, including

the issuance of a cease and desist order or a cleanup

or abatement order [or] imposition of an administra-

tive civil penalty. . . . [T]he Regional Board has

determined that the most appropriate course of

action is settlement of the litigation and issuance of

a cease and desist order.

Resp’t App. at 94-95.

D. Citizens Sued to Enforce the Final Limits.

The final limits became effective on December 12, 1993,

and Unocal immediately began violating those limits. Resp’t

App. at 3. Unocal has violated its final limits on a continuing

basis since that date. /d. Respondents therefore filed this

citizen suit in federal court on March 2, 1994, pursuant to 33

U.S.C. § 1365(a)(1), seeking an injunction against Unocal’s

continued illegal selenium discharges, declaratory relief and

civil penalties.

On May 2, 1994, Unocal filed a Motion to Dismiss

Respondents’ citizen suit, arguing that the Settlement Agree-

ment should bar this citizen suit under 33 U.S.C.

§ 1319(g)(6)(A)(iii) (hereinafter “subdivision (iii)”), the sub-

division of the Clean Water Act that precludes citizen penalty

actions when the state has taken prior penalty enforcement

action against the violator for the same violations that the

citizen suit seeks to enforce. Resp’t App. at 48-49.

The district court denied Unocal’s Motion to Dismiss,

finding that the Setthement Agreement did not satisfy the

criteria of subdivision (iii). Resp’t App. at 68-69. Subdivision

(iii) precludes citizen penalty actions only if all of the follow-

ing criteria are satisfied: (a) the state has issued a final order

not subject to further judicial review, (b) the violator has paid

a penalty, and (c) the penalty was assessed under a state law

“comparable” to 33 U.S.C. § 1319(g), the subsection of the

Clean Water Act authorizing the imposition of civil penalties.

33 U.S.C. § 1319(g)(6)(A)(ili). The district court made the

factual finding that Unocal’s $780,000 payment was not a

penalty, but a sum of money Unocal paid in exchange for the

State’s agreement not to enforce Unocal’s selenium discharge

limits for at least four and one-half years, until July 31, 1998.

Resp’t App. at 26, 28, 68. The district court further held that

the state law under which the CDO was issued, which was not

the state law authorizing the imposition of civil penalties, was

not comparable to the penalty provision of the Clean Water

Act. Id. at 59-62.

The Ninth Circuit affirmed the district court’s fact-based

findings and resulting order. Resp’t App. at 5-16.

REASONS FOR DENYING THE PETITION

FOR WRIT OF CERTIORARI

The Ninth Circuit’s decision is not appropriate for review

by this Court. The Ninth Circuit affirmed the district court’s

factuai finding that the payment Unocal made was not a

penalty, and this finding presents no question of federal law

upon which there is a split between the circuits. See Argu-

ment, Sections A., B., infra. The determination that the pay-

ment was not a penalty is, by itself, dispositive of Unocal’s

motion to dismiss, because all three criteria set forth in

subdivision (iii) must be satisfied to preclude this citizen

penalty action.?

Furthermore, Unocal is seeking review of the Ninth Cir-

cuit’s interpretation of a seldom-utilized statute. Since 1987,

when subdivision (iii) was enacted, no federal court of appeal

other than the Ninth Circuit has analyzed whether a citizen

penalty action is barred by a prior, concluded state enforce-

ment proceeding. In fact, subdivision (1ii1) has been addressed

9 Section 1319(g)(6)(A) precludes only “civil penalty action{s].” 33

U.S.C. § 1319(g)(6)(A). Thus, even if the Court were to reverse the Ninth

Circuit’s decision, only Respondents’ civil penalty claims would be

precluded. Respondents’ claims for injunctive and declaratory relief would

survive.

by only a few of the United States District Courts outside of

the Ninth Circuit, and of those cases, only one has considered

whether a settlement between a state and a permit violator can

bar a citizen suit when the settlement did not require the

violator to pay a penalty. See Argument, Section C., infra.'®

The First and Eighth Circuit decisions Unocal cites for its

interpretation of “comparable state law” arose under an

entirely different subdivision of § 1319(g)(6)(A) than the one

at issue in this case. Jd. Because no other circuit has inter-

preted the meaning of the term “comparable state law” within

the context of subdivision (ili), there is no split regarding the

interpretation of that provision that requires resolution by this

Court.

Finally, there is no inconsistency between the Ninth Cir-

cuit’s opinion and any decision by this Court. To the contrary,

Supreme Court precedent supports Respondents’ right to sue

Unocal under the Clean Water Act for Unocal’s ongoing

violation of the final limits. See Argument, Section D.,

infra"!

10 Thus, even if there are 75,000 companies and municipalities

nationwide that hold NPDES permits (see Pet’r Br. at 2, 8 and 25), and

even if there have been hundreds of citizen suits seeking enforcement of

those permits (see Pet’r Br. at 8), only one other case filed in the federal

courts over the past nine years has considered the precise issue presented in

the instant case.

!! Additionally, Unocal’s Petition is premature, because a final

disposition has not been reached in this case. Allowing this case to proceed

to judgment may render Supreme Court review unnecessary. See, e.g.,

Brotherhood of Locomotive Firemen and Enginemen v. Bangor &

Aroostook R.R. Co., 389 U.S. 327 (1967); Hamilton-Brown Shoe Co. v.

Wolf Bros. & Co., 240 U.S. 251, 258 (1916) (“[E]xcept in extraordinary

cases, the writ is not issued until final decree’’).

A. The District Court’s Conclusion that Unocal’s Settle-

ment Payment Was Not a Penalty, Which the Ninth

Circuit Affirmed, Is the Type of Fact-Bound Deter-

mination that Does Not Warrant Review By This

Court.

This Court has repeatedly stated that it does not sit to

resolve factual disputes. United States v. Johnston, 268 U.S.

220, 227 (1925) (“We do not grant a certiorari to review

evidence and discuss specific facts”); see also, Goodman v.

Lukens Steel Co., 482 U.S. 656, 665 (1987). Yet that is

precisely what this Court must do to resolve the issues pre-

sented in Unocal’s Petition.

To preclude Respondents’ citizen penalty action under

subdivision (iii), Unocal must, inter alia, demonstrate that the

State assessed a penalty against Unocal.!? Unocal does not

dispute that the State must have actually assessed a penalty

before Respondents’ penalty claims can be precluded. What

Unocal does contest is the district court’s factual determina-

tion that the settlement payment Unocal made was not a

penalty. However, this Court should not enter the fray of this

factual dispute simply because the lower court’s findings

were not to Unocal’s liking. Johnston, 268 U.S. at 227.

The Ninth Circuit affirmed the district court’s factual

findings, rendering these findings even less appropriate for

certiorari “A court of law, such as this Court is, rather than a

court of correction of errors in fact finding, cannot undertake

to review concurrent findings of fact by two courts below in

the absence of a very obvious and exceptional showing of

error.” Graver Tank Mfg. Co., Inc. v. Linde Air Products Co.,

336 U.S. 271, 275 (1949). See also, Rogers v. Lodge, 458 U.S.

613, 623 (1982) (“[T]his Court has frequently noted its reluc-

tance to disturb findings of fact concurred in by two lower

courts.”’).

'2 Pursuant to subdivision (iii), Unocal must also show that the

penalty was assessed under a state law comparable to 33 U.S.C. § 1319(g),

and that the State issued a final order not subject to further judicial review.

1. The Question of Whether Unocal’s Payment Was a

Penalty Is Predominantly Fact-Based.

Unocal argues for the first time in its Petition to this

Court that the question of whether its payment to the State of

California was a penalty is an issue of federal law. Unocal

also suggests that the district court determined that the pay-

ment was not a penalty only because the CDO did not label it

as such. (Pet’r Br. at 6.) Unocal’s assertions misrepresent the

basis for the Ninth Circuit’s and district court’s opinions in

this case. As set forth below, there were four principal factual

grounds for the district court’s determination, as affirmed by

the Ninth Circuit, that Unocal’s payment was not a penalty.

These findings of fact need not be revisited by this Court.

First, the district court considered that Unocal negotiated

with the Regional Board to ensure that Unocal would make a

payment, rather than be assessed a penalty, and that both

Unocal and the Regional Board denied that the payment was a

penalty. Resp’t App. at 63-67; ER 140, 149, 150.'3 Unocal

admitted that it took steps to ensure that it would not pay a

penalty because of the serious stigma that attaches to penal-

ties. Counsel for Unocal stated at the hearing on Unocal’s

Motion to Dismiss in the district court that “there simply was

agreement that we would not have to sign on to paperwork

that characterized it as a penalty, because of the punitive and

bad conduct implications that the general public takes from

that term.” (ER 264 (emphasis added).) As the district court

found, “[i]t appears quite clear that Unocal . . . insisted as a

condition of the settlement that the payment not be charac-

terized as a ‘penalty’ in order that the settlement not be

construed as an admission of wrongdoing.” Resp’t App. at 65.

The Ninth Circuit affirmed that “Unocal itself insisted on

13 Unocal claims that the payment had to be a penalty because “there

is nothing else it could have been; . . .” (Pet’r Br. at 21.) This is wrong. The

payment was what counsel for Unocal and the Board said it was: a payment

in exchange for the Regional Board’s agreement not to enforce the final

limits. Resp’t App. at 53, 67.

oe ee Th.

characterizing the financial transfer as a ‘payment’ and not a

‘penalty’ at the time of the state action settlement.” /d. at 9.

Second, the district court found that Unocal’s settlement

payment did not function as a penalty. Resp’t App. at 63-67.

The function of a penalty is to punish permit violators and

deter future violations. Tull v. United States, 481 U.S. 412,

422-23 (1987). The district court found that Unocal admitted

that it has not been punished or deterred by virtue of making

the settlement payment. Resp’t App. at 27, 29, 63-67. The

Ninth Circuit affirmed this conclusion: “the fairest character-

ization of the $780,000 payment is that it was not a penalty

but, instead, the price of avoiding the stigma of a formal

enforcement action.” /d. at 9-10. As Unocal’s counsel

explained at the public hearing on the CDO, “[i]t has always

been the refineries’ position that they have done nothing

wrong and as a consequence it is inappropriate to characterize

the payments which are being made to the Board as a pen-

alty.” (ER 150.) Unocal’s counsel reiterated at oral argument

before the district court that “[W]hile the state might require

payment of money, it should not be characterized in such a

way that the dischargers are made to agree or admit that they

deserved to be punished.” (ER 263.)

The district court found, and the Ninth Circuit confirmed,

that it is wholly inconsistent and at this late date opportunistic

for Unocal on the one hand to deny that it has engaged in any

violation of the final limits while on the other hand to argue

that the settlement payment should now be termed a penalty

in order to preclude this citizen penalty action. Resp’t App. at

9, 67. Both courts resolved that “Unocal simply cannot have it

both ways.” /d.

Third, the district court’s determination that Unocal’s

settlement payment was not a penalty was further based on

the fact that the Regional Board did not consider specific and

mandatory penalty assessment factors required by Water Code

§ 13385 when the Regional Board entered into the Settlement

Agreement with Unocal.'* Resp’t App. at 60-62. The Ninth

Circuit affirmed this factual determination. /d. at 8-10.

The penalty assessment factors are designed to ensure

that the penalty punishes and deters violators. Tull, 481 U.S.

at 422-23. Those factors include “the nature, circumstances,

extent, and gravity of the violation, and, with respect to the

violator, the ability to pay, any prior history of violations, the

degree of culpability, economic benefit or savings, if any,

resulting from the violation, and other matters that justice

may require.”!5 Cal. Water Code § 13385(e). The district

court found, and the Ninth Circuit affirmed, that the Regional

Board did not consider any of these factors, including the

economic benefit to Unocal of violating the final limits, when

it agreed that Unocal would pay $780,000 to the state to settle

the state court action. Resp’t App. at 10, 60-62. “[T]here was

no formal sorting of the economic benefits to Unocal of non-

compliance and thus no assurance that Unocal has fully dis-

gorged the benefit it receives from violating effluent limits.”

Id. at 10.'6

14 The CDO was not issued under Water Code § 13385, but under

Water Code § 13301. Resp’t App. at 95 (“It is hereby ordered, pursuant to

Section 13301 of the California Water Code that-[Unocal] shall cease and

desist. .. .”). The parties do not dispute this fact. Resp’t App. at 11. Water

Code § 13301 only authorizes issuance of cease and-desist orders; civil

penalties cannot be assessed under Water Code § 13301. California Water

Code § 13301; Resp’t App. at 61-62.

'5 These factors are the same as the factors that must be considered

when assessing a penalty under the Clean Water Act. 33 U.S.C.

§ 1319(g)(3); Resp’t App. at 10.

'6 Unocal claims that its $780,000 payment must be a penalty

because it is in excess of the maximum administrative penalty EPA can

assess under § 1319(g). (Pet’r Br. at 18.) This is not an apt analysis. To be a

penalty under a state law comparable to § 1319(g), the payment must have

been assessed under Water Code § 13385, which has no maximum for

penalties. Cal. Water Code § 13385. Furthermore, Unocal admits that the

amount of money it paid does not determine whether the payment was a

penalty. (Pet’r Br. at 18.)

Fourth, the district court also considered the fact that the

Regional Board did not follow the procedures required by

Water Code § 13385 for the imposition of civil penalties when

the Regional Board settled the state court action and issued

the CDO. Resp’t App. at 60-62. Specifically, the Regional

Board did not issue a complaint, issue a proposed decision,

allow each member of the Regional Board independently to

review the record, or issue a final order imposing penalties, as

required by the Water Code when assessing penalties. Cal.

Water Code §§ 13323, 13385; Resp’t App. at 60-62.'’? The

Ninth Circuit affirmed this factual finding, which Unocal did

not dispute: “[Unocal] cedes that the specific requirements of

§ 13385 were not adhered to.” Resp’t App. at 11.

These four factual findings are the main grounds for the

district court’s holding that the payment was not a penalty.

Resp’t App. at 67. The Ninth Circuit affirmed the district

court’s interpretation of these facts. /d. at 10. Unocal has

presented no reason for this Court to revisit this factual

determination.

17 California law also requires that civil penalties be paid within

thirty days of the penalty assessment. Cal. Water Code §§ 13323, 13385.

Unocal was given a full year after the CDO was issued to make its

settlement payments. Resp’t App. at 10. The Ninth Circuit took note of this

fact when affirming the district court’s determination that the payment was

not a penalty. /d. The Ninth Circuit also noted that only 10% of Unocal’s

payment was deposited into an account designated for civil penalties. /d. at

9. State law requires all civil penalties to be paid into this account. Cal.

Water Code § 13385. Furthermore, payments other than civil penalties are

deposited into this account, including all monies contributed to the State

Board and all monies collected in settlement of any proceeding brought

pursuant to the Water Code. Cal. Water Code § 13441. Thus, the fact that

Unocal deposited 10% of its payment into this account does not mean that

the 10% was a penalty.

2. There Is No Split Between the Circuits on the

Issue of what Constitutes a Penalty.

In an attempt to disguise that the district court’s fact-

bound determination that Unocal has not paid a penalty is not

worthy of certiorari, Unocal claims that the Ninth Circuit’s

decision that Unocal did not pay a penalty is in conflict with

the Eighth Circuit’s holding in Arkansas Wildlife Fed’n v. ICI

Ams. Inc., 29 F.3d 376 (8th Cir. 1994), cert. denied, 115 S. Ct.

1094 (1995). (Pet’r Br. at 20-21.) There is no such conflict.

Arkansas Wildlife involves wholly different facts than are

present in this case. In Arkansas Wildlife, the defendant

sought to preclude a citizen suit under § 1319(g)(6)(A)(ii)

(“subdivision (ii)”), a separate subdivision of § 1319(g)(6)(A)

than is at issue here.'® 29 F.3d at 378. Moreover, it was

uncontested in that case that the state agency had taken a

penalty enforcement action against the defendant and that the

defendant had paid two separate penalties for violations of its

discharge limits. /d. at 378-79.'9 In contrast, in this case, no

penalty enforcement action has been taken against Unocal,

and Unocal has not paid a penalty.

The quote Unocal excerpts from Arkansas Wildlife — “it

would be unreasonable and inappropriate to find failure to

diligently prosecute simply because [the discharger] prevailed

in some fashion or because a compromise was reached,” 29

'8 Subdivision (ii) precludes citizen penalty actions for violations

“with respect to which the State has commenced and is diligently

prosecuting an action under a State law comparable to this subsection.”

19 “The [Consent Administrative Order issued by the State] required

[defendant] to pay a civil penalty. . . . [B]y December of 1991, [defendant]

was not in compliance. . . . [The state agency] . . . assessed another

penalty. . . . In the present case, the facts were not in material dispute.”

Arkansas Wildlife, 29 F.3d at 378-79.

Additionally, in Arkansas Wildlife, the state agency took the history of

defendant’s violations into account when determining the amount of the

penalty. 29 F.3d at 380. In the instant case, by contrast, no penalty

assessment factors were taken into account when the Regional Board

settled Unocal’s state court action. See Argument, Section A.1., supra.

F.3d at 380 — interprets subdivision (ii)’s requirement that the

state be “diligently prosecuting” an action against the violator

in order to preclude a citizen penalty action. /d. Unocal takes

the quote out of context. The Eighth Circuit was not ruling on

whether the defendant had paid a penalty, but was determin-

ing that the state was “diligently prosecuting” an action

against the defendant, a requirement not even at issue in the

instant case.?°

Given the divergent postures of these cases, the Arkansas

Wildlife decision does not bear at all on the factual determina-

tion of whether a penalty has been paid in this case. There 1s

no conflict between the Eighth and Ninth Circuits on the

question of what constitutes a penalty.

B. There is No Direct Split Between the Circuits on the

Issue of what Constitutes a “Comparable State Law”

As That Term Is Used in Section 1319(g)(6)(A)(iii).

Unocal attempts to manufacture a direct conflict between

the Ninth Circuit’s decision below and the decisions of two

other circuit courts on the issue of whether a citizen penalty

action can be precluded under subdivision (iii) when the state

did not assess a penalty under the precise provision of state

law authorizing administrative penalties. (Pet’r Br. at 17.)*'

20 Unocal also implies that the plaintiffs in Arkansas Wildlife were

challenging whether the defendant had paid a penalty at all because the

penalties assessed were minimal. (Pet’r Br. at 20.) Again, this

misrepresents the facts. The Arkansas Wildlife plaintiffs did not contest that

the defendant had actually paid two penalties. 29 F.3d at 378-79. Rather,

the plaintiffs challenged whether or not the state agency was “diligently

prosecuting” an action against the defendant because the state assessed

only minimal penalties. Jd. at 380. There was no factual dispute, as exists

here, concerning whether a penalty had been paid.

21 The Ninth Circuit’s finding that “Unocal has not paid a penalty”

was a sufficient basis for its conclusion that “the § 1319(g)(6)(A)(iii) bar to

citizen suits does not apply.” Resp’t App. at 9-10. Nevertheless, the court

took the next step in analyzing the statute and found that Unocal’s payment

was not “assessed under . . . subsection [1319(g)], or such comparable State

Contrary to Unocal’s argument, there is no direct split among

the circuits that this Court must resolve.

The Ninth Circuit’s decision below is the only circuit

court opinion interpreting subdivision (iii). In the nine years

since Congress enacted § 1319(g)(6)(A), only a handful of

other cases in the district courts have interpreted subdivision

(ii1)’s bar on citizen penalty actions when the state’s enforce-

ment has concluded. See California Sportfishing Protection

Alliance v. City of W. Sacramento, 905 F. Supp. 792, 801,

803-05 (E.D. Cal. 1995); United States v. City of Toledo, 867

F. Supp. 603, 606-07 (N.D. Ohio 1994); Sierra Club v. Colo-

rado Refining Co., £38 F. Supp. 1428, 1434-36 (D. Col.

1993); Saboe v. Oregon, 819 F. Supp. 914, 916-19 (D. Ore.

1993); Natural Resources Defense Council v. Vygen Corp.,

803 F. Supp. 97, 100-02 (N.D. Ohio 1992); Public Interest

Research Group v. GAF, 770 F. Supp. 943, 948-51 (D.N.J.

1991); Atlantic States Legal Found. v. Universal Tool &

Stamping Co., 735 F. Supp. 1404, 1415-17 (N.D. Ind. 1990).

Of those cases that were decided by district courts outside of

the Ninth Circuit, only one interpreted subdivision (iii) to

preclude a citizen penalty action, and it did so because the

violator had already paid a penalty for the same violations the

citizens sought to enforce. Sierra Club, 838 F. Supp. at 1434,

1436. This conclusion is not at odds with the Ninth Circuit’s

holding below. Furthermore, only one of the cases interpret-

ing subdivision (iii) has addressed the precise issue involved

here — whether a settlement reached between the state

enfercement agency and the permit violator, which concludes

the state enforcement, does not bring the violator into compli-

ance, and does not require the violator to pay a penalty, can

preclude a citizen penalty for those same violations. City of

law....” Id.; § 1319(g)(6)(A)(iii). Thus, even if there were a direct split

between the circuits on the issue of the meaning of “comparable state law”

and the split were resolved against the Ninth Circuit, this still would not

result in the reversal of the Ninth Circuit’s conclusion that Respondents’

citizen penalty action proceeds, because the lower courts’ finding that

Unocal did not pay a penalty to the State provides an independent basis for

affirmance.

Toledo, 867 F. Supp. at 606-07. In that case, the court con-

cluded, as did the Ninth Circuit here, that the citizen penalty

action was not barred. /d.

Unocal nevertheless argues that the Court should review

the Ninth Circuit’s decision because it is allegedly in direct

conflict with North and South Rivers Watershed Ass'n v.

Scituate, 949 F.2d 552, 555-56 (Ist Cir. 1991) and Arkansas

Wildlife, 29 F.3d at 381-82.22 However, as Unocal acknowl-

edges, both Scituate and Arkansas Wildlife interpret

§ 1319(g)(6)(A)(ii), a different subdivision than is addressed

in the instant case. (See Pet’r Br. at 15 n.13.)

The express terms of subdivision (iii) clearly provide that

in the case of a concluded governmental enforcement action,

citizens cannot bring a duplicative claim for penalties if “the

State has issued a final order not subject to further judicial

review and the violator has paid a penalty assessed under this

subsection, or such comparable State law, as the case may

be, .. >” 33 U.S.C. § 1319(g)(6)(A)(iii) (emphasis added).

Subdivision (iii) explicitly requires the assessment of a pen-

alty. Nonetheless, Unocal argues that “comparable state law”

refers to a state’s entire statutory scheme for enforcing permit

violations, rather than the specific provision of state law

authorizing administrative penalties. Unocal’s argument is

belied by subdivision (iii)’s plain terms. As the Ninth Circuit

found, under subdivision (iii) the “comparability” analysis

must be conducted by examining the state statutory enforce-

ment provision actually used by the state, and not the state

statutory scheme as a whole, to determine whether a penalty

was actually assessed.23 Resp’t App. at 11-12, 56-57.

22 No circuit courts other than the First, Eighth and Ninth have

interpreted the terms of any of the subdivisions of § 1319(g)(6)(A).

23 State agencies cannot assess penalties except under specific

statutory authorization, such as California Water Code § 13385. Water

Code § 13301, the provision of state law under which the Board expressly

issued the CDO, does not authorize the Board to impose penalties and

contains no penalty assessment factors. Cal. Water Code § 13301. It is in no

way comparable to § 1319(g), which sets forth the procedures and

Subdivision (ii), on the other hand, deals with cases

involving ongoing governmental enforcement and precludes

citizen penalty actions for any violation “with respect to

which a state has commenced and is diligently prosecuting an

action under a State law comparable to this subsection, ... ”

Subdivision (ii) does not contain the term “penalty” as does

subdivision (iii). Thus, in Scituate and Arkansas Wildlife, the

courts concluded that subdivision (i1)’s comparability require-

ment is met when the state “statutory scheme” contains a

penalty provision comparable to 33 U.S.C. § 1319(g), the

federal provision that authorizes EPA to assess administrative

penalties. The First and Eighth Circuits determined that it is

not necessary that the state actually be pursuing a penalty

action against the violator, as long as state law provides the

state with the power to do so. Scituate, 949 F.2d at 555-56;

Arkansas Wildlife, 29 F.3d at 381-82. This interpretation of

subdivision (ii) simply does not translate to subdivision (1i1),

which by its plain terms requires the violator to have paid a

penalty.2* As such, there is no direct conflict between the

circuits regarding the correct interpretation of subdivision

(iii)’s preclusion provision that requires this Court’s attention.

substantive considerations for EPA’s assessment of penalties. 33 U.S.C.

§ 1319(g).

24 Unocal argues that Congress revealed its intent that “comparable

state law” mean any enforcement option available to the state when it

deleted the requirement that the state agency be “diligently pursuing

assessment of a civil penalty under section 309(g) of this Act” and replaced

it with “ ‘the more general comparable State law’ language.” (Pet’r Br. at

17.) The legislative history Unocal cites is for subdivision (ii). Congress

did not delete the term “penalty” from subdivision (iii), the particular

preclusion provision at issue here. Furthermore, the change in the language

of subdivision (ii) reflects Congress’ acknowledgement that most states

have their own laws authorizing state agencies to enforce permits, and that

therefore those states do not “pursue” penalties “under section 309(g) of

this Act,” which gives EPA authority to assess penalties against permit

violators.

C. The Ninth Circuit’s Holding that This Citizen Penalty

Action Is Not Barred by the Settlement of Unocal’s

Lawsuit Against the State Is Consistent with This

Court’s Decision in Gwaltney.

Contrary to Unocal’s assertion, the Supreme Court’s

decision in Gwaltney of Smithfield v. Chesapeake Bay Found.,

484 U.S. 49 (1987), is not in conflict with, and indeed

supports, the Ninth Circuit’s decision that Respondents’ case,

which seeks to redress Unocal’s ongoing violation of the final

limits, should proceed. Unocal’s argument is untenable, as it

is based on a distorted reading of dictum from the case.?° In

Gwaltney, this Court held simply that citizen suits cannot be

brought for wholly past violations. 484 U.S. at 64.26 The

Court reached this conclusion by interpreting the plain lan-

guage of the statute. The Court analyzed 33 U.S.C. § 1365(a),

which authorizes citizen suits against any person “alleged to

be in violation” of the Act, and interpreted it to require that

there be a reasonable likelihood that the defendant is violating

the Act at the time the citizen suit is filed. Jd. at 56-57, 65.

There is no dispute that Unocal consistently has been “in

violation” of its final limits since they went into effect on

December 12, 1993. Resp’t App. at 3. Respondents’ citizen

suit is therefore necessary to bring Unocal into compliance

with its final selenium discharge permit limits and fulfills the

purpose of citizen suits described in Gwaltney.

25 Gwaltney arose prior to the enactment of § 1319(g)(6)(A). It

therefore does not address § 1319(g)(6)(A)’s bar on citizen penalty actions

that duplicate government penalty enforcement actions.

26 The plaintiffs in Gwaltney brought suit in June 1984 against a meat

packing plant that discharged pollutants in excess of its permit limits

between 1981 and May 1984. By May 1984, before the suit was filed, the

defendant upgraded its wastewater treatment system and stopped violating

iis permit limits. 484 U.S. at 53-54. Neither EPA nor the state had taken

any enforcement action against the defendant in that case for these

violations. Id. at 54.

1. Following Gwaltney, the Ninth Circuit and District

Court Interpreted § 1319(g)(6)(A)(iii) As It Is

Written.

In Gwaltney, the Supreme Court instructed that “the

starting point for interpreting a statute is the language of the

statute itself.” 484 U.S. at 56, quoting Consumer Prod. Safety

Comm'n v. GTE Sylvania, Inc., 447 U.S. 102, 108 (1980).

“Absent a clearly expressed legislative intention to the con-

trary, that language must ordinarily be regarded as conclu-

sive.” GTE Sylvania, 447 U.S. at 108.

In its Petition, Unocal claims that the lower courts’

decisions are contrary to Gwaltney because the Ninth Circuit

and district court followed the plain language of

§ 1319(g)(6)(A) instead of making a ruling based upon gen-

eral policy concerns about preserving the discretion of gov-

ernmental agencies to choose their methods for enforcing

permits. (Pet’r Br. at 10-13.) The Ninth Circuit, in a previous

case interpreting a separate subdivision of § 1319(g)(6)(A),

had already rejected this argument, refusing “to abandon the

clear language that Congress used when it drafted the statute”

in favor of “general arguments about congressional intent and

the EPA’s need for discretion. .. . ” Washington Pub. Interest

Research Group v. Pendleton Woolen Mills, 11 F.3d 883, 886

(9th Cir. 1993).

In the instant case, the district court and the Ninth Circuit

again refused to allow policy concerns to override the plain

language of the statute. Resp’t App. at 11-16. Instead, the

lower courts did exactly what this Court in Gwaltney

instructed. They interpreted subdivision (iii) as it is written,

to bar citizen penalty actions only when the citizen suit seeks

to prosecute violations for which “the violator has paid a

penalty.” /d. at 14, 59-68.

2. The Ninth Circuit Determined that Because

Respondents’ Action Seeks to Prosecute Unocal

for Violations That the Board Has Not Enforced,

Respondents’ Suit Supplements Governmental

Enforcement.

In an attempt to portray the lower courts’ decisions as

contrary to Gwaltney, Unocal excerpts the Supreme Court’s

dictum regarding the dangers of permitting citizen suits for

wholly past violations of the Clean Water Act. (Pet’r Br. at

10.)27 In Gwaltney, the Court stated that “(t]he bar on citizen

suits when governmental enforcement action is under way

suggests that the citizen suit is meant to supplement rather

than to supplant governmental action.” 484 U.S. at 60. The

Court then illustrated its concern with an example. The Court

hypothesized a situation in which EPA decided to not seek

civil penalties against a violator but instead issued a compli-

ance order under 33 U.S.C. § 1319(a) that required the viola-

tor to take “some extreme corrective action, such as to install

particularly effective but expensive machinery, that it other-

wise would not be obliged to take.” Gwaltney, 484 U.S. at 61.

The Supreme Court noted that under these circumstances,

where the extreme and expensive corrective action ended the

violation, to allow a subsequent citizen suit seeking penalties

that EPA decided to forego for those same, wholly past

violations “could undermine the supplementary role envi-

sioned for the citizen suit.” /d. at 58-59, 61. This hypothetical

has nothing to do with subdivision (iii)’s preclusion of citizen

penalty actions and is in no way analogous to the circum-

stances giving rise to Respondents’ citizen suit.

27 Unocal contends incorrectly that the Court’s dictum in Gwaltney

constitutes the Court’s holding in that case. (Pet’r Br. at 10.) This is plainly

not so. See Cohens v. Virginia, 19 U.S. (6 Wheat.) 264, 399 (1821) (“The

question actually before the court is investigated with care, and considered

in its full extent. Other principles which may serve to illustrate it, are

considered in their relation to the case decided, but their possible bearing

on all other cases is seldom completely investigated.”).

Respondents’ citizen suit is precisely the type of case this

Court approved in Gwaltney. In contrast to the Gwaltney

hypothetical, the Regional Board failed to bring Unocal into

compliance with the final limits. Unocal has consistently

violated the final limits since December 12, 1993, the date

those limits went into effect. Respondents thus sued Unocal

for its continuing violation of the final limits. Additionally,

unlike the Gwaltney hypothetical, the CDO did not require

Unocal to institute an expensive or extreme corrective action

that would bring it into immediate compliance with its final

limits.28

Furthermore, the CDO leaves unclear whether the Board

will ever require Unocal to take “extreme corrective action”

to bring it into compliance with the final limits, because the

CDO allows Unocal to request that the Regional Board further

delay its enforcement of the final limits beyond July 31, 1998,

and allows Unocal to base that request on no independent

evidence. See Resp’t App. at 97-98. The lower courts’ conclu-

sion that Respondents’ citizen suit, which seeks Unocal’s

immediate compliance with, and penalties for violation of, the

28 Contrary to Unocal’s inflated contention that the CDO required it

to spend millions of dollars to implement “groundbreaking” selenium

removal technologies (Pet’r Br. at 4, 11, 22), the CDO simply requires

Unocal and the five other refiners to engage in a $1.3 million research

study over a period of two years to identify a technology that is capable of

removing selenium from refinery wastewater and to study biological

treatment options for selenium removal. Resp’t App. at 95-96. At the

completion of the studies, each refiner is to select an appropriate

technology for pilot evaluation based upon effectiveness, feasibility and

cost. /d. at 96-97. After pilot testing, the refiners are accorded at least

another two years, until July 31, 1998, to start up the successfully tested

technology. /d. However, the CDO also provides an escape from these

responsibilities: “[iJn the event a discharger is unable by July 31, 1998, to

identify or implement a workable removal technology or other control

strategy, . . . an extension of the final compliance date will be considered

and may be granted based on information regarding technological

availability and demonstration of a good faith effort to achieve

compliance.” /d. at 97-98.

on et Sioned sino Yh

final limits, does not duplicate or “supplant” any govern-

mental enforcement action taken against Unocal is consistent

with this Court’s decision in Gwaltney.

3. The Ninth Circuit’s Decision Will Not Allow Citi-

zens to Interfere with Government Enforcement

of the Clean Water Act.

Unocal sounds a false alarm that the Ninth Circuit's

decision will allow citizens unrestricted access to the federal

courts to undo settlement agreements reached between the

government and permit holders. The Ninth Circuit’s opinion

does no such thing. The Ninth Circuit properly construed the

role Congress created for citizen suits in enforcing the Clean

Water Act and correctly placed Respondents’ citizen suit

within the scheme Congress created for enforcing pollutant

discharge permits under the Clean Water Act.

As this Court recognized in Gwaltney, the Clean Water

Act was enacted in 1972 “to restore and maintain the chemi-

cal, physical and biological integrity of the Nation’s waters.”

33 U.S.C. § 1251(a); Gwaltney, 484 U.S. at 52. Because of

the enormous national importance of water quality, Congress

established a multiple-level enforcement scheme which

authorized the states, EPA, and the public to enforce the

Clean Water Act. See Resp’t App. at 2-3. Under this enforce-

ment scheme, permit holders were subject to judicial enforce-

ment proceedings initiated by EPA or the state. 33 U.S.C.

§§ 1319, 1342(b)(7), 1365(a). If the state or EPA diligently

acted to obtain compliance, then no other enforcement was

necessary or allowed. The citizen suit provision reflected a

deliberate choice by Congress to widen citizen access to the

courts as a supplemental and effective assurance that the Act

would be enforced. 33 U.S.C. § 1365; Gwaltney, 484 U.S. at

53. As this Court explained in Gwaltney, the citizen suit

provision’s “central purpose [is to permit] citizens to abate

pollution when the government cannot or will not command

compliance.” 484 U.S. at 62.

In 1987, Congress amended the Clean Water Act to

provide EPA with the additional option to enforce permit

compliance through the assessment and imposition of admin-

istrative penalties against permit violators. 33 U.S.C.

§ 1319(g). Congress also enacted § 1319(g)(6)(A), which is

designed precisely to preclude citizen penalty actions that

would be duplicative of an “administrative penalty action.”

Resp’t App. at 6; Pendleton Woolen Mills, 11 F.3d at 885-86.

It does not preclude citizen suits when EPA or the state

agency has merely issued an administrative compliance order,

such as the CDO, that does not impose a penalty. Pendleton

Woolen Mills, 11 F.3d at 885-87; Resp’t App. at 13, 62. See

also, 33 U.S.C. § 1319(g)(6)(A).

The Ninth Circuit’s decision placed Respondents’ citizen

suit within this multi-level scheme Congress created to allow

“citizens to abate pollution when the government cannot or

will not command compliance.” Gwaltney, 484 U.S. at 62. It

is therefore consistent with Gwaltney.

a. The Ninth Circuit’s Decision Provides Cer-

tainty that Settlement Agreements with Gov-

ernmental Enforcement Agencies Providing

for the Payment of Penalties Will Preclude

Citizen Suits.

Unocal repeatedly complains that the Ninth Circuit’s

decision will dissuade violators from settling administrative

penalty actions brought by the government because violators

risk being subject to duplicative citizen penalty enforcement.

Unocal’s complaint is baseless. First, Unocal’s argument pre-

sumes that the Regional Board brought an administrative

penalty action against Unocal for violation of the final permit

limits and that the parties settled that action. That is not the

case. Instead, Unocal sued the state to invalidate the final

limits, and the agreement to settle Unocal’s case against the

state expressly provided that Unocal’s payment was not a

penalty. See Statement of the Case, Sections B., C., supra.

Second, Unocal’s argument that the Ninth Circuit’s deci-

sion will deter regulated businesses and municipalities from

settling enforcement actions with states is unrealistic. On the

contrary, the Ninth Circuit’s decision will give permit viola-

tors greater incentive to settle formal state administrative

actions by agreeing to ~pay penalties, in accordance with

statutory criteria and procedures, to avoid subsequent citizen

suits.

Third, contrary to Unocal’s warning, the Ninth Circuit's

decision does not require polluters to fight rather than settle.

Instead, it simply makes clear what businesses and munici-

palities subject to NPDES permits already know — that net all

settlements preclude citizen suits, and that they can settle

governmental enforcement proceedings and avoid subsequent

citizen suits only within the constraints of the Clean Water

Act. The Clean Water Act plainly provides that only adminis-

trative penalty actions or judicial actions filed by the govern-

ment preclude citizen penalty actions. 33 U.S.C.

§§ 1319(g)(6)(A), 1365(b).29

Therefore, if the state or federal government brings an

enforcement action against a polluter for violating its permit

limits, the polluter can avoid a subsequent citizen suit regard-

ing the same violations by doing one of two things: (1) it can

settle with the government under terms that require the pollu-

ter to pay a penalty that is assessed after consideration of the

penalty factors enumerated in 33 U.S.C. § 1319(g)(3) or the

comparable state penalty provision; or (2) the polluter can

come into compliance with its permit limits. Unocal did

neither.3°

29 Under Unocal’s scenario (Pet’r Br. at 23-24), all settlements

between the government and a regulated entity would preclude a citizen

suit, even if the settlement required the government to pay the polluter.

Clearly, this is not what the Clean Water Act states, nor what it intended.

30 Contrary to Unocal’s assertion (see Pet’r Br. at 26), the Ninth

Circuit’s decision in Knee Deep Cattle Co. v. Bindana Inv. Co., Ltd., 94

F.3d 514 (9th Cir. 1996), also makes clear that when permit violators settle

with the state under terms that require the violator to pay a penalty, the

violator can avoid a subsequent citizen suit. In Knee Deep, the state

brought an enforcement action against the defendant for violating its permit

on various dates in February through May of 1993 and for engaging in a

The lower courts’ decisions also make clear, and provide

polluters with the certainty, that if they do not pay penalties to

the state but instead enter into compliance schedules with the

state agency and continue to violate their permit limits in the -

interim, they do so at the risk of citizen or EPA enforcement.

Compliance schedules and negotiated settlements by which

the government agrees not to enforce NPDES permits do not

and cannot modify or suspend permit limits.*! If they did, as

Unocal suggests, then no polluter would have any incentive to

abide by its permit limits. Instead, the polluter could simply

defy its permit limits and treat them as opening offers for

negotiation toward some less restrictive parameter that does

not achieve the water quality objectives of the Clean Water

Act. This result would render the entire NPDES permit pro-

cess superfluous. It also would place at a competitive disad-

vantage the thousands of businesses and municipalities that

have made the efforts and incurred the costs of complying

with their permit limits.3* This clearly is not what Congress

intended when it passed the Clean Water Act.

separate, one-time raw sewage discharge violation on June 2, 1994. 94 F.3d

at 515. The defendant paid a $1,400 penalty for the one-time raw sewage

discharge, and the state then settled the remainder of its claims by

obtaining defendant’s agreement to a compliance schedule and foregoing

the assessment of penalties for the February through May 1993 violations.

Knee Deep, 94 F.3d at 515. After the settlement, defendant continued to

violate its permit and the state did not assess penalties for those continued

violations. /d. Accordingly, the Ninth Circuit held that a citizen suit for

enforcement of defendant’s permit was not precluded by the prior

settlement, because the settlement did not require defendant to pay a

penalty for the ongoing violation that the citizens sought to enforce. /d. at

516-17.

3! As the district court and Ninth Circuit found, and Unocal does not

contest, NPDES permit limits can only be modified in accordance with

formal procedures which were not employed by the Regional Board when

it issued the CDO. See Argument, Section C.3.b., infra.

32 For example, Tosco, Pacific and Chevron also operate refineries

that discharge selenium into San Francisco Bay, but those companies are in

compliance with their final permit limits. Resp’t App. at 4, 27. The record

indicates that the crude oil that Unocal refines is cheaper and more rich in

b. The Ninth Circuit’s Decision Makes Clear to

Unocal What It Must Do to Comply with the

Clean Water Act.

Unocal complains that the Ninth Circuit’s opinion places

Unocal in the uncertain position of being subject to both the

final limits and the interim limits. (Pet’r Br. at 12.) This is

patently false. The CDO did not modify or suspend Unocal’s

final permit limits or replace them with a less stringent

effluent standard.33 The Regional Board has no power to

extend or “defer” limits contained in an NPDES permit with-

out formally modifying the permit in accordance with manda-

tory procedures set forth in federal regulations. Resp’t App. at

18-19, 37; Ackels v. United States EPA,7 F.3d 862, 864-65 n.1

(9th Cir. 1993). It is uncontested that the Board did not follow

those formal procedures. Resp’t App. at 19, 37.34 Contrary to

————

selenium than the crude oil that these other refineries process. See, e.g., ER

156-58. Accordingly, Tosco, Pacific and Chevron are placed at a palpable

competitive disadvantage to Unocal because they have chosen not to refine

that same selenium-rich, cheap crude oil and have implemented techniques

to bring their selenium discharges within permitted levels.

33 Unocal argues that Respondents’ lawsuit amounts to 2 challenge to

the CDO and that Respondents should not be able to make this challenge in

federal court without first exhausting state administrative remedies. This

argument is incorrect. Exhaustion of administrative remedies is not a

condition precedent to filing a Clean Water Act citizen suit. 33 U.S.C.

§ 1365. The only condition precedent to such a suit is service of a 60-day

notice letter. § 1365(a); Resp’t App. at 18.

Second, Respondents are not challenging the validity of the CDO,

_ which is merely an expression of the Regional Board’s decision not to

enforce the final limits until at least July 21, 1998. Thus “the [abstention]

doctrine is simply not relevant where the federal action is not seeking a

ruling on the validity of the state action.” Resp’t App. at 18. Instead,

Respondents are challenging Unocal’s failure to comply with the final

limits, which the CDO itself states went into effect on December 12, 1993.

34 Despite Unocal’s prior admission that the CDO did not modify or

amend Unocal’s NPDES permit for selenium discharges (Resp’t App. at

17), Unocal now claims that the CDO “deferred” the final permit limits

Unocal’s argument, the issuance of a CDO pursuant to Cali-

fornia Water Code § 13301 cannot supersede and thereby

render superfluous the specific federal requirements for mod-

ifying NPDES permits.

Furthermore, in response to public comments and at the

December 13, 1993 public hearing on the CDO, the Board

stated that it did not intend to modify or revise Unocal’s

permit. (ER 119, 158.)95 In fact, the CDO clarifies that the

final limits “become effective on December 12, 1993.” Resp’t

App. at 88. Therefore, Unocal is under only one permit limit,

the final limits contained in Order 91-026, which Unocal has

consistently exceeded since December 12, 1993. The Ninth

Circuit’s conclusion that this citizen suit is necessary to

prosecute Unocal for its ongoing violation of the final limits,

and that this suit does not supplant governmental enforcement

of those limits, is therefore consistent with and supported by

this Court’s decision in Gwaltney.

CONCLUSION

There is no split among the circuit courts or inconsis-

tency between the decision of the Ninth Circuit and any

decision of this Court that warrants this Court’s review of the

Ninth Circuit’s opinion affirming the district court’s denial of

Unocal’s Motion to Dismiss Respondents’ citizen penalty

action. In affirming the district court, the Ninth Circuit made

until July 31, 1998. (Pet’r Br. at 3-4, 12.) Such a deferment in truth would

be a modification by another name.

35 Even if the Board had intended to extend the final limits until July

31, 1998, it would have transgressed the Clean Water Act. Order No.

91-026 embodies Unocal’s Individual Control Strategy for its selenium

discharges into San Pablo Bay. See Statement of the Case, Section A.,

supra. As mandated by Congress, Unocal was required to comply with

Order No. 91-026’s final selenium limits by no later than December 12,

1993, to achieve water quality standards. /d. Deadlines Congress set in the

Clean Water Act may not be modified by governmental agencies. See

Bethlehem Steel Corp. v. Train, 544 F.2d 657, 661-62 (3d Cir. 1976), cert.

“denied, 430 U.S. 975 (1977).

a predominantly factual, case-specific determination that “the

fairest characterization of the payment at issue is that it was,

indeed, a settlement made to avoid an enforcement action by

the Regional Board. Accordingly, because Unocal has not

paid a ‘penalty,’ the § 1319(g)(6)(A)(iii) bar to citizen suits

does not apply.” Resp’t App. at 10. There is no reason for this

Court to disturb the lower courts’ fact-based determinations

Accordingly, Respondents respectfully request that Unocal’s

Petition for Writ of Certiorari be denied.

Respectfully submitted,

Barry GOLDSTEIN

TeresA DEMCHAK

Linpa M. DARDARIAN

Counsel of Record

JoLLee FABER

SAPERSTEIN, GOLDSTEIN, DEMCHAK

& BALLER

1300 Clay Street, 11th Floor

Oakland, CA 94612

Counsel for Respondents

Dated: December 13, 1996

ne Te eT OT eT CE pi sie tid

App. 1

APPENDIX 1

CITIZENS FOR A BETTER ENVIRONMENT-

CALIFORNIA, San Francisco

Baykeeper, Save San Francisco Bay

Association, The Bay Institute of San

Francisco, Santa Clara Valley Audubon

Society, Kalon Wofford and Anthony

Willis, Plaintiffs-Appellees,

Vv.

UNION OIL-COMPANY OF

CALIFORNIA, a corporation,

Defendant-Appellant.

No. 95-15139.

United States Court of Appeals,

Ninth Circuit.

Argued and Submitted April 8, 1996.

Decided May 13, 1996.

As Amended July 16, 1996.

Appeal from the United States District Court for the

Northern District of California; Thelton E. Henderson,

District Judge, Presiding.

Before: BROWNING and JOHN T. NOONAN, Jr.,

Circuit Judges, and MERHIGE, Senior District Judge.*

MERHIGE, Senior District Judge:

* The Honorable Robert R. Merhige, Jr., Senior United

States District Judge for the Eastern District of Virginia, sitting

by designation.

App. 2

This case arises under the federal Water Pollution

Control Act (the “Clean Water Act”), 33 U.S.C. § 1251, et

seq. The Appellees, Citizens for a Better Environment, et

al. (“CBE”), brought this action in the federal district

court for the Northern District of California pursuant to

the citizen suit provision of that Act, 33 U.S.C. § 1365. In

the Complaint, CBE asserted a claim for violations of the

Clean Water Act effluent standards, a claim for violations

of Clean Water Act water quality standards, and a state

law claim. Although the district court granted the motion

of the Appellant, Union Oil Company of California

(“UNOCAL”), to dismiss as to the water quality stan-

dards claim, the district court denied UNOCAL’s motion

to dismiss, premised on 33 U.S.C. § 1319(g)(6)(A)(ii) and

(iii), as to the effluent standards claim and the dependent

state law claim. The district court certified its order deny-

ing UNOCAL’s motion to dismiss for immediate appeal

pursuant to 28 U.S.C. § 1292(b).

The Clean Water Act regulates the discharge of pollu-

tants into navigable waters. The Act prohibits all dis-

charge of pollutants except inasmuch as one of several

enumerated statutory exceptions applies. 33 U.S.C.

§ 1311(a). One such exception is where the polluter has

been issued a National Pollution Discharge Elimination

System (“NPDES”) permit. 33 U.S.C. § 1342. The effluent

discharge standards or limitations specified in an NPDES

permit define the scope of the authorized exception to the

prohibition in § 1311(a). Authority to administer the

NPDES permit system may be delegated to a state or

regional agency where the state or regional regulatory

App. 3

scheme meets certain criteria. 33 U.S.C. § 1342(b). The

entity responsible for issuing permits in the San Francisco

Bay area of California is the California Regional Water

Quality Control Board, San Francisco Region (the

“Regional Board”). Private citizens may bring suit pur-

suant to 33 U.S.C. § 1365 to enforce effluent standards or

limitations, which are defined as including violations of

33 U.S.C. § 1311(a). 33 U.S.C. § 1365(f)(1).

UNOCAL owns and operates a petroleum refinery in

the San Francisco Bay area of California. Wastewater from

the refinery is subject to UNOCAL’s NPDES permit

issued by the Regional Board. On February 20, 1991 the

Regional Board-issued Order No. 91-026, which amended

the UNOCAL’s NPDES permit for the San Francisco Bay

area refinery. The order set a “final” concentration limit

on selenium discharges of 50 parts per billion (“ppb”)

and a mass emission rate of .85 pounds per day, calcu-

lated on a running annual average. The final selenium

limitation was to take effect December 12, 1993. On June

16, 1991 the Regional Board issued Order No. 91-099

amending UNOCAL’s NPDES permit to include an

“interim limit” less stringent than the final limit which

took effect immediately and which was to remain in force

until the final limit came into effect. UNOCAL is in

substantial compliance with the interim limit but is not in

compliance with the final limit.

The Regional Board issued these orders pursuant to

33 U.S.C. § 1314(1) of the Clean Water Act, which required

the Regional Board to adopt individual control strategies

for discharges into waters determined by the United

States Environmental Protection Agency (“EPA”) or the

App. 4

state to be impaired. The Regional Board listed San Fran-

cisco Bay as a “hot spot” under § 1314(/) on the ground

that it failed to meet the “applicable water quality stan-

dard” of the Clean Water Act “due entirely or substan-

tially to discharges from point sources of any toxic

pollutants.” See 33 U.S.C. § 1314(/)(1)(B).

The state water board denied an appeal by UNOCAL

and other refiners challenging the selenium discharge

limits. Shortly thereafter, on October 12, 1992, UNOCAL

and others filed a petition for a writ of mandate in the

Solano County Superior Court of California seeking to set

aside the interim and final limits on the grounds that the

Regional Board’s listing of the San Francisco Bay as a

“hot spot” violated the Clean Water Act and its imple-

menting regulations.

Over the course of 1993, UNOCAL and others were

in settlement discussions with the Regional Board.

Although other refiners in the area became able to meet

the final limits, UNOCAL and other refiners maintained

their inability, due to technological constraints, to meet

the final selenium limits. On November 8, 1993,

UNOCAL, along with other refiners, reached a settlement

agreement whereby UNOCAL and others would dismiss

the state lawsuit and the Regional Board would adopt a

proposed cease and desist order (“CDO”). The parties

dispute whether the settlement agreement and proposed

CDO were released for public comment on November 9,

1993 or November 12, 1993. On November 19, 1993 and

December 15, 1993 public hearings were held on the

proposed CDO at which CBE participated. The Regional

Board, with some minor modifications, issued the CDO

on January 19, 1994 as Order No. 94-015.

App. 5

The principal elements of the settlement agreement

and the CDO were that UNOCAL and the other refiners

dismissed their state court lawsuit without prejudice,

UNOCAL and others paid the state a total of $2 million

($780,000 of which was contributed by UNOCAL), and

the Regional Board issued the CDO which, among other

things, relieves UNOCAL and others from meeting the

final selenium limit until July 31, 1998. The CDO states,

with respect to the latter element, that:

Compliance with this Order shall be in accor-

dance with the following tasks and time sched-

ules:

c. The dischargers shall implement a removal

technology or technologies, or an alternate con-

trol strategy, which has been determined by the

dischargers to be capable of achieving compli-

ance with the discharge limitations as specified

in [the NPDES permits] and shall comply with

these limits, no later than July 31, 1998.

CBE filed this lawsuit on March 2, 1994. On July 8,

1994, the district court dismissed the water quality stan-

dards claim. The district court subsequently certified the

question of its denial of the motions to dismiss as to the

other claims for immediate appeal pursuant to 28 U.S.C.

§ 1292(b).

II.

UNOCAL asserts two arguments as to why dismissal

of the effluent standards claim is proper. First, UNOCAL

argues that dismissal is warranted because the citizen

App. 6

suit is barred under § 1319(g)(6)(A)(ii) and

§ 1319(g)(6)(A)(iii). Second, - UNOCAL urges that dis-

missal for failure to state a claim is appropriate because

the CDO issued by the Regional Board had the effect of

extending until 1998 the deadline for complying with the

final selenium limits specified in the NPDES permit and,

thus, there is no effluent standards violation. The Court

reviews each of these questions of law de novo. Kruso v.

International Tel. & Tel., 872 F.2d 1416, 1421 (9th Cir.1989).

A. Is the Citizen Suit Barred Under 33 U.S.C.

§ 1319(g)(6)(A)(ii) or § 1319(g)(6)(A) (iii)?

33 U.S.C. § 1365 generally authorizes private citizens

to sue those violating, among other things, “an effluent

standar” or limitation” under the Clean Water Act. 33

U.S.C. § 1319(g)(6) sets out certain instances where these

citizen suits are barred. The provisions of § 1319(g)(6)(A)

are precisely designed to preclude citizen suits which

would be duplicative of an “administrative penalty

action.” See Washington Public Interest Research Group v.

Pendleton Woolen Mills, 11 F.3d 883, 885 (9th Cir.1993).

The citizen suit provision of the Clean Water Act, 33

U.S.C. § 1365, provides, in relevant part:

Except as provided in subsection (b) of this sec-

tion and section 1319(g)(6) of this title, any citi-

zen may commence a civil action on his own

behalf -

(1) against any person... who is alleged

to be in violation of (A) an effluent standard

or limitation under this chapter or (B) an

order issued by the Administrator [of the

App. 7

EPA] or a State with respect to such a stan-

dard or limitation. . .

The district courts shall have jurisdiction . . . to

enforce such an effluent standard or limitation,

or such an order, as the case may be, and to

apply any appropriate civil penalties under sec-

tion 1319(d) of this title.

33 U.S.C. § 1365(a).

Section 1319(g)(6) provides, in relevant part:

[A]ny violation -

(i) with respect to which the Administra-

tor [of the EPA] or the Secretary [of the

Army] has commenced and is diligently

prosecuting an action under this subsection,

(ii) with respect to which a State has com-

menced and is diligently prosecuting an

action under a State law comparable to this

subsection, or

(iii) for which the Administrator, the Sec-

retary, or the State has issued a final order

not subject to further judicial review and

the violator has paid a penalty assessed

under this subsection, or such comparable

State law, as the case may be,

shall not be the subject of a civil penalty action

under subsection (d) of this section or section

1321(b) of this title or section 1365 of this title.

33 U.S.C. § 1319(g)(6){A).

App. 8

1. Applicability of § 1319(g)(6)(A)(iii)

Sec. 1319(g)(6)(A){iii) precludes this citizen suit if the

CDO at issue in this case is a “final order not subject to

further judicial review,” and if UNOCAL has paid a “pen-

alty” that was “assessed under this subsection, or such

comparable State law.” Because UNOCAL has not paid a

“penalty” “assessed under . . . comparable State law” the

Court concludes that CBE’s suit is not barred by

§ 1319(g)(6)(A)(iii).

a. “penalty”

UNOCAL maintains that the $780,000 it paid to the

Regional Board constituted a “penalty” within the mean-

ing of § 1319(g)(6)(A)(iii). The district court concluded

that the $2 million payment, of which UNOCAL’s pay-

ment was a part, was not a penalty but “was simply

settling the refineries’ state court lawsuit.” The district

court noted that the CDO refers to a “payment” not a

“penalty” and that the CDO clearly stated that it was

issued pursuant to the Regional Board’s authority under

California Water Code § 13301, governing cease and des-

ist orders. The district court also noted that in the CDO

the Regional Board “expressly declined to invoke its [Cal-

ifornia Water Code] § 13385 authority” to impose a civil

penalty.!

1 The CDO states, in part, that:

[t]he Regional Board has considered the various

enforcement and penalty options available to it

regarding the violation [of the NPDES permit],

App. 9

UNOCAL argues, essentially, that it has paid out

over $780,000 (10% of which went into the California

Water Pollution Cleanup and Abatement Account that is

the repository of fines levied pursuant to § 13385, and

90% into a “Selenium Mitigation Fund”)? and that it

elevates form over substance to call this anything other

than a “penalty.”

In support of the formal reasoning of the district

court, CBE asserts two additional reasons why UNOCAL

may not characterize the payment as a penalty. First,

UNOCAL itself insisted on characterizing the financial

transfer as a “payment” and not a “penalty” at the time of

the state action settlement. CBE notes that counsel for

UNOCAL stated at the hearing on the motion to dismiss

at the district court that UNOCAL would not, at the time

of the settlement of the state lawsuit, “sign on to paper-

work that characterized it as a penalty, because of the

punitive and bad conduct implications that the general

public takes from that term.” CBE, appropriately, in the

Court’s view, argues that UNOCAL simply “cannot have

it both ways” and that the fairest characterization of the

including the issuance of a cease and desist order ora

cleanup or abatement order, imposition of an

administrative civil penalty and referral to the

Attorney General for civil prosecution. Under the

circumstances detailed in the Findings set forth

above, the Regional Board has determined that the

most appropriate course of action is settlement of the

litigation and issuance of a cease and desist order.

2 The Appellees argue, however, that this cuts against the

Appellant because § 13385 requires all penalties to be paid into

the California Water Pollution Cleanup and Abatement

Account.

App. 10

$780,000 payment is that it was not a penalty but, instead,

the price of avoiding the stigma of a formal enforcement

action.

Second, CBE argues that there are other significant

advantages that were obtained by UNOCAL by making a

payment independent of the state statutory provision,

California Water Act § 13385, that is analogous to the

administrative penalty provision of the Clean Water Act,

33 U.S.C. § 1319(g). California Water Code § 13385 sets

out formal procedures to be followed and specific factors

to be considered in setting a penalty. Thus, asserts CBE,

by making a payment outside the context of § 13385,

UNOCAL avoided a significant level of scrutiny as to the

nature and amount of a penalty. For example, the United

States, as amicus curiae, notes that there was no formal

scrutiny of the economic benefits to UNOCAL of non-

compliance and thus no assurance that UNOCAL has

fully disgorged the benefit it receives from violating

effluent standards. CBE also notes that while payment of

an administrative penalty must be made within 30 days

of being imposed, California Water Code § 13323(d),

UNOCAL was not required to make half of its payment

until a year after the settlement was entered into.

The Court determines that the fairest characterization

of the payment at issue is that it was, indeed, a settlement

made to avoid an enforcement-action by the Regional

Board. Accordingly, because UNOCAL has not paid a

“penalty,” the § 1319(g)(6)(A)(iii) bar to citizen suits does

not apply. This conclusion that § 1319(g)(6)(A)(iii) is not

implicated is buttressed by the Court’s interpretation of

the term “comparable state law,” discussed below.

App. 11

b. “comparable state law”

Having determined that the payment at issue was not

a “penalty,” the district court also concluded that the

payment was.not “assessed under this subsection, or such

comparable State law” within the meaning of

§ 1319(g)(6)(A)(iii). It is undisputed that the penalty pro-

vision in § 13385 of the California Water Code is compa-

rable to the federal Clean Water Act penalty provision of

33 U.S.C. § 1319. It is also not disputed that the payment

at issue in this case was not levied pursuant to California

Water Code § 13385.3 The key issue, therefore, is whether

a penalty assessed not in accordance with § 13385 but,

instead, under the aegis of a related provision of the

California statutory scheme is “assessed under this sub-

section, or such comparable State law.” UNOCAL argues,

as it did in the district court, that although the CDO

states that it was issued under the authority of California

Water Code § 13301, because § 13301 is within the same

statutory scheme as § 13385 a penalty assessed under the

former provision is assessed under a “comparable State

law” within the meaning of 33 U.S.C. § 1319(g)(6)(A)(iii).

The district court held that the “comparability assess-

ment is conducted by examining the state statutory

enforcement provision involved,” here California Water

Code § 13301, and “not the state statutory enforcement

scheme as a whole.” Because California Water Code

3 Although the parties dispute the degree of similarity to

the requirements of § 13385-of the procedures and factors that

were actually taken and considered in this case, Appellant cedes

that the specific requirements of § 13385 were not adhered to.

App. 12

§ 13301 is not comparable to the federal penalty provision

in 33 U.S.C. § 1319(g), reasoned the district court, a

penalty assessed under § 13301 does not implicate the

§ 1319(g)(6)(A)(iii) bar on citizen suits. In reaching this

conclusion the district court specifically rejected the rea-

soning of the First Circuit in North and South Rivers Water-

shed Ass‘n v. Scituate interpreting the term “comparable”

in § 1319(g)(6)(A)(ii). 949 F.2d 552, 555-556 (1st Cir.1991).

In Scituate the First Circuit held that the compara-

bility requirement of § 1319(g)(6)(A)(ii) is met where the

state “statutory scheme” contains a penalty provision

comparable to the federal penalty provision and that a

state’s decision not to utilize the comparable state law

penalty provision in any particular case does not negate

the “comparability” of the state action. Id.; accord,

Arkansas Wildlife Federation v. ICI Americas, Inc., 29 F.3d

376, 382-383 (8th Cir.1994). The Scituate Court reasoned:

The State’s decision not to utilize the penalty

provisions does not alter the comparability of

the State Act’s statutory scheme to the scheme

found in the Federal Act. While the specific

statutory section under which the State issued

its Order does not, itself, contain a penalty pro-

vision, another section of the same statute does

contain penalty provisions. These two coordi-

nate parts are cogs in the same statutory scheme

implemented by the State for the protection of

its waterways.

Scituate, 949 F.2d at 556, (internal citations omitted). Thus,

“i]t is enough that the [state] statutory scheme

... contains penalty assessment provisions comparable to

the Federal Act, that the State is authorized to assess

those penalties, and that the overall scheme of the two

App. 13

acts is aimed at correcting the same violations, thereby

achieving the same goals.” Id. Furthermore, according to

the Scituate Court, “[s]o long as the provisions in the State

Act adequately safeguard the substantive interests of citi-

zens in enforcement actions, the rights of notice and

public participation found in the State Act are satisfac-

torily comparable to those found in the Federal Act.” Id.

In Washington Public Interest Research Group v. Pen-

dleton Woolen Mills this Court interpreted the terms of 33

U.S.C. § 1319(g)(6)(A)(i). 11 F.3d 883 (9th Cir.1993). The

Court noted that § 1319(g) deals only with administrative

penalty actions. Id. at 885. The Court then concluded that

when determining whether the EPA was “diligently pros-

ecuting an action under this subsection,” the phrase

“under this subsection” could mean only that the EPA

was prosecuting an administrative penalty action. Id. at

886. The § 1319(g)(6)(A)(i) bar to citizen suits, therefore,

was not implicated “in the face of an administrative

compliance order.” Id. The Court specifically noted that it

was not persuaded by the reasoning underlying the Scitu

ate Court's interpretation of § 1319(g)(6)(A)(ii) which was

grounded in that court’s concern that the discretion of

enforcement authorities to choose enforcement methods

be preserved. Id. This Court noted the language of the

statute was clear and that there was no evidence in the

legislative history that suggested that Congress intended

to extend the bar on citizen suits to a context beyond

administrative penalty actions. Id. at 885-886. This Court

also noted that had Congress intended that administra-

tive compliance orders preclude citizen suits, it could

have done so — as it has in other instances. Id. at 886

App. 14

The Court concludes that the requirement in

§ 1319(g)(6)(A)(iii) that any penalty be “assessed under

this subsection, or such comparable State law” before it

precludes citizen suits means that the penalty at issue

must have been assessed under that provision of state

law that is comparable to § 1319(g). There are several

reasons for this conclusion. First, this is the plainest read-

ing of the statutory language.* Second, § 1319(g) man-

dates various public notice and comment procedures as

well as penalty assessment factors. Unless any penalty is

assessed according to the particular provision of state law

that is comparable to § 1319(g), there is no guarantee that

the public will be given the requisite opportunity to

participate or that the penalty assessed is of the proper

magnitude. Third, as noted by the United States in its

amicus brief, the holding of Scituate leads to the anoma-

lous conclusion that state administrative enforcement

actions would more broadly preclude citizen suits than

the administrative enforcement actions of the EPA. Noth-

ing in the language and structure of the § 1319(g)(6)(A) in

4 As the Supreme Court has stated, “the starting point for

interpreting a statute is the language of the statute itself.”

Gwaltney, 484 U.S. at 56, 108 S.Ct. at 381, quoting Consumer

Product Safety Comm'n v. GTE Sylvania, Inc., 447 U.S. 102, 108,

100 S.Ct. 2051, 2056, 64 L.Ed.2d 766 (1980). “Absent a clearly

expressed legislative intention to the contrary, that language

must ordinarily be regarded as conclusive.” GTE Sylvania, Inc.,

447 U.S. at 108, 100 S.Ct. at 2056. “If the intent of Congress is

clear, that is the end of the matter; for the court... must give

effect to the unambiguously expressed intent of Congress.”

Chevron U.S.A. v. Natural Resources Defense Council, 467 U.S. 837,

842-43, 104 S.Ct. 2778, 2781, 81 L.Ed.2d 694 (1964).

SE eT Py aT

, “ee

| . ’ Sets eatin

App. 15

any way suggests that Congress intended such a dichot-

omy. Nor has the UNOCAL pointed to any legislative

history that would indicate that Congress intended that

state administrative actions be given broader preclusive

effect than the administrative actions of the EPA.

2. Applicability of § 1319(g)(6)(A)(ii)

Sec. 1319(g)(6)(A)(ii) precludes this citizen suit if the

State “has commenced and is diligently prosecuting an

action under a State law comparable to this subsection.”

The district court concluded that the

§ 1319(g)(6)(A)(ii) bar was inapplicable for two reasons.

First, the district court concluded that the action at issue

was not taken “under a State law comparable to this

subsection.” Additionally, the district court concluded

that “because of the entry of the settlement agreement

and the CDO, the Regional Board’s enforcement action is

no longer still being ‘prosecuted’ within the meaning of

§ 1319(g)(6)(A)(ii).”

UNOCAL has made no contention in its briefs as to

why the district court erred in concluding that the action

was no longer being “prosecuted” within the meaning of

§ 1319(g)(6)(A)(ii).5 It seems plain that no action is being

prosecuted at this time. Thus, § 1319(g)(6)(A)(ii) is inap-

plicable. Furthermore, the Court concludes, for the rea-

sons discussed above with respect to § 1319(g)(6)(A)(ii),

5 Indeed, the Appellant raised this provision in the district

court only in a footnote of its briefs and it was dealt with by the

district court in a footnote to its decision.

App. 16

that the district court did not err in concluding that the

Regional Board’s action was not taken “under a State law

comparable to this subsection.”

B. Did the Regional Board’s Cease and Desist

Order Effectively Defer the Compliance Date

for Selenium Discharges so that UNOCAL is

not “in Violation” of an Effluent Standard or

Limitation?

UNOCAL asserts that CBE has failed to state a claim

because the facts it alleges do not constitute a “violation

of an effluent standard or limitation” within the meaning

of § 1365(a)(1)(A) because the CDO issued by the

Regional Board had the effect of modifying UNOCAL’s

NPDES permit to extend until 1998 the deadline for com-

plying with the final selenium limit.

33 U.S.C. § 1365 generally authorizes private citizens

to sue those violating, among other things, “an effluent

standard or limitation” under the Clean Water Act.®

6 Section 1365 provides, in part, that:

Except as provided in subsection (b) of this section

and section 1319(g)(6) of this title, any citizen may

commence a civil action on his own behalf -

(1) against any person... who is alleged to be in

violation of (A) an effluent standard or limitation

under this chapter or (B) an order issued by the

Administrator [of the EPA] or a State with respect

to such a standard or limitation... .

33 U.S.C. § 1365.

App. 17

“Effluent standard or limitation” means “an effluent lim-

itation or other limitation under section 1311” or “a per-

mit or conditions thereof issued under section 1342 [the

NPDES provision] of this title.” 33 U.S.C. § 1365(f). Thus,

violation of the limits specified in an NPDES permit is a

violation of “an effluent standard or limitation” within

the meaning of § 1365.

The district court concluded that the issuance by the

Regional Board of the CDO extending the compliance

schedule was akin to an exercise of prosecutorial discre-

tion and did not suspend the limits and deadlines con-

tained in the NPDES permit or shield UNOCAL from this

citizen suit. While UNOCAL concedes that the CDO did

not purport to modify the NPDES permit and did not

constitute a formal amendment or modification of the

NPDES permit,” it argues that the CDO did have the

practical effect of modifying the compliance date con-

tained in the NPDES permit. For the first time on appeal,

UNOCAL also argues that the district court was fore-

closed, under either the doctrine of exhaustion of

remedies or the doctrine of Younger v. Harris, 401 U.S. 37,

91 S.Ct. 746, 27 L.Ed.2d 669 (1971), from addressing the

argument that the CDO issued by the Regional Board

failed to effectively modify the NPDES compliance date

because California law provided CBE a right, of which

they did not avail themselves, to review of the CDO by

7 There are specific, mandatory procedure for NPDES

permit modification. Cal.Code Regs. Tit. 23, § 2235; 40 C.F.R.

§ 122.62. See also Ackels v. U.S.E.P.A., 7 F.3d 862, 864, n. 1 (9th

Cir.1993). It is undisputed that these procedures were not

followed in this case.

App. 18

appeal to the state water board or by judicial review in

state court. California Water Code §§ 13320, 13330.

The Court concludes that the federal courts are not

precluded from addressing the issue of whether the CDO

effectively modified the NPDES compliance date. While it

is true that there, were procedures available for CBE to

appeal the CDO within the state system, this action does

not challenge the validity of the CDO but rather seeks to

enforce the requirements of the Clean Water Act. Further-

more, 33 U.S.C. § 1365 makes no mention of exhaustion of

state remedies as a prerequisite for bringing a citizen suit.

Similarly, Younger abstention is not appropriate. There are

three requirements for the invocation of Younger ~— ongo-

ing state proceedings, implication of an important state

interest in the state proceedings, and an adequate oppor-

tunity to raise federal questions in the proceedings. World

Famous Drinking Emporium v. City of Tempe, 820 F.2d 1079

(9th Cir.1987). While failure to exhaust state appellate

remedies may satisfy the requirement that there be ongo-

ing state proceedings, Id., the doctrine is simply not rele-

vant where the federal action is not seeking a ruling on

the validity of the state action.

The Court further concludes that the CDO at issue

did not modify, effectively or otherwise, the terms of

UNOCAL’s NPDES permit. This conclusion is appropri-

ate for the following reasons.

First, the CDO does not purport to modify the

NPDES permit. In the Findings to the CDO, the Regional

Board states in paragraph 4 that “[t]he effluent limita-

tions imposed under Order No. 91-026 [amending the

NPDES permit to include the final selenium limits]

App. 19

become effective on December 12, 1993. . . . The Regional

Board is adopting this Order to enforce the provisions of

Order No. 91-026.” Thus, the Regional Board did not

intend to modify the Permit but instead worked out a

compliance schedule wherein, according to paragraph 7

of the CDO, if “the dischargers have failed to comply

with the provisions of this Order [the official may .. . ]

request the Attorney General to take appropriate action

against the dischargers, including injunctive and civil

remedies, if appropriate, or to issue a Complaint for

Board consideration of Administrative Civil Liabilities.”

Thus, the language of the CDO itself fits with the conclu-

sion that the CDO was an exercise of prosecutorial discre-

tion.

Second, as noted above, federal and state regulations

govern the modification of NPDES permits. It is not dis-

puted that these regulations were not followed in this

case. These regulations, both procedural and substantive,

ensure that the standards embodied in an NPDES permit

cannot be evaded with the cooperation of compliant state

regulatory authorities. For instance, there are public

notice requirements for a permit modification process

that are different than those required in an enforcement

action. Further, there is a five year duration on the life of

an NPDES permit that the “effective modification”

asserted here would violate. § 1342(b)(1)(B).

Third, even if the CDO were to be construed as

having effectively extended the compliance date in the

NPDES permit, such a modification would likely run

afoul of the substantive constraint on the ability of regu-

lators to modify permits found in 33 U.S.C. § 1342(0) (the

“anti-backsliding” provision). This provision prohibits,

App. 20

with certain narrow exceptions,® any modified permit

from containing “effluent limitations which are less strin-

gent than the comparable effluent limitations in the pre-

vious permit.” UNOCAL asserts that the “effective”

modification of the permit under consideration would not

violate the anti-backsliding provision because the permit

contained interim limits which would remain in full effect

until the final limits actually took effect. Essentially,

argues UNOCAL, the final limits have never taken effect

so they cannot be backslided on. This argument seems to

assume that effluent standards are not effectively part of

the NPDES permit until they take effect. It appears to the

Court, however, that a modified NPDES permit that does

not contain a strict effluent limitation that had been about

to come into effect is, indeed, “less stringent” than the

previous, unmodified NPDES permit - regardless of

whether the limitation had yet taken effect.

Il.

For the foregoing reasons, the district court’s denial

of UNOCAL’s motion to dismiss is AFFIRMED.

8 Appellant has asserted that two such exceptions are

applicable. Appellant asserts that “new information is

available” that “would have justified” a less stringent standard

under § 1342(0)(2)(B)(i) and that there is no “reasonably

available remedy” under § 1342(0)(2)(C). Because it is not

necessary so to do, the Court does not comment on the

applicability of these exceptions.

App. 21

APPENDIX 2

CITIZENS FOR A BETTER

EN VIRONMENT-CALIFORNIA,

et al., Plaintiffs,

Vv.

UNION OIL COMPANY OF

CALIFORNIA, Defendant.

CITIZENS FOR A BETTER

EN VIRONMENT-CALIFORNIA,

et al., Plaintiffs,

Vv.

EXXON COMPANY USA, Defendant.

Nos. C 94-0712 TEH, C 94-0713 TEH.

United States District Court,

N.D. California.

July 8, 1994.

THELTON E. HENDERSON, Chief Judge.

The two above-captioned related cases are identical

citizen suits brought by non-governmental environmental

conservation organizations against defendant oil com-

panies. The suits challenge each defendant’s discharge

into portions of the San Francisco Bay of waste water

containing the chemical selenium from oil refineries

owned by each defendant located in the San Francisco

Bay area. The first suit is brought against defendant

Union Oil Company of California (“Unocal”) and con-

cerns Unocal’s refinery at Rodeo, California, which dis-

charges waste water containing selenium into the San

Pablo Bay. The second is against the Exxon Corporation

App. 22

(“Exxon”) and concerns Exxon’s refinery at Benicia, Cali-

fornia, which discharges selenium into Suisan Bay. Plain-

tiffs allege that the selenium levels in the effluent

discharged from Unocal and Exxon’s refineries violate the

federal Water Pollution Control Act (“Clean Water Act”

or “Act”), 33 U.S.C. § 1251 et seq.

Defendants Unocal and Exxon have moved to dis-

miss the suits on several grounds. In addition, Exxon has

moved that the suit against it be dismissed on the ground

that venue over that case properly lies in the U.S. District

Court for the Eastern District of California. Oral argu-

ment on these motions was heard by the Court on June 6,

1994. After consideration of the parties’ written and oral

arguments, the Court rules that venue in the suit against

Exxon, Citizens for a Better Environment-California v. Exxon,

No. C 94-0713 TEH, indeed lies in the Eastern District and

therefore ORDERS that the case be TRANSFERRED from

this Court to the U.S. District Court for the Eastern Dis-

trict of California. As for the suit against Unocal, the

Court DENIES Unocal’s motion to dismiss. The reasons

for these rulings are set forth in the memorandum opin-

ion and order that follows.

I. BACKGROUND

In these two actions brought pursuant to the citizen

suit provision of the Clean Water Act, 33 U.S.C. § 1365,

the plaintiff environmental groups seek to enforce efflu-

ent discharge standards and deadlines contained in cer-

tain pollution permits issued to defendants Unocal and

Exxon pursuant to the Clean Water Act. These suits are

undertaken in the face of an administrative order, issued

App. 23

by a state agency charged with enforcing the Clean Water

Act, which purports to grant defendants a five-year

extension of the deadline by which they must come into

compliance with the pollution discharge standards con-

tained in their permits. The issue central to these motions

is what effect the state administrative order has on the

enforceability of the standards contained in defendants’

pollution permits.

A. THE REGULATORY FRAME-WORK

The Clean Water Act regulates the discharge of pollu-

tants into navigable waters. The statute is structured such

that all discharge of pollutants is prohibited except inso-

far as one of several enumerated statutory exceptions

applies. See 33 U.S.C. § 1311(a). One such exception

obtains where a polluter has been issued a permit pur-

suant to the National Pollution Discharge Elimination

System (“NPDES permit” or “permit”), authorizing it to

discharge designated pollutants at certain levels subject

to certain conditions. See 33 U.S.C. § 1342. The effluent

discharge standards or limitations specified in an NPDES

permit define the scope of the authorized exception to the

33 U.S.C. § 1311(a) prohibition, such that violation of a

permit limit places a polluter in violation of 33 U.S.C.

§ 1311(a). Private parties may bring citizen suits pursuant

to 33 U.S.C. § 1365 to enforce effluent standards or limita-

tions, which are defined as including violations of 33

U.S.C. § 1311(a). 33 U.S.C. § 1365(f)(1).

The Act provides that, in any given state or region,

authority to administer the NPDES permitting system can

be delegated by the federal Environmental Protection

App. 24

Agency (“EPA”) to a state or regional regulatory agency,

provided that the applicable state or regional regulatory

scheme under which the local agency operates satisfies

certain criteria. See 33 U.S.C. § 1342(b). In California, EPA

has granted authorization to a state regulatory apparatus,

comprised of the State Water Resources Control Board

(“State Board”) and several subsidiary Regional Water

Quality Control Boards, to issue NPDES permits. The

entity responsible for issuing NPDES permits and other-

wise regulating discharges in the region at issue in these

cases is the California Regional Water Quality Control

Board, San Francisco Region (“Regional Board” or

“Board”).

B. HISTORY OF UNOCAL AND EXXON’S

NPDES PERMITS

Exercising its delegated authority under the Clean

Water Act, the Regional Board in 1989 and 1990 issued

NPDES permits for Unocal, Exxon, and four other Bay

Area oil refineries, specifying certain limits on the

amount of pollutants that the refineries could discharge

into the San Francisco Bay and its estuary (“Bay”).

Selenium, a toxic element, occurs in high concentrations

in the relatively low grade crude oil from the San Joaquin

Valley that is refined at the six Bay Area refineries.

Selenium passes through the refineries and is present in

the wastes that they discharge into the Bay.

The 1987 Amendments to the Clean Water Act

required states to identify a list of navigable waters for

which water quality standards established under the Act

————

App. 25

were unlikely to be achieved “due entirely or substan-

tially to discharges from point sources of any toxic pollu-

tants listed pursuant to [33 U.S.C. § 1317(a)].” 33 U.S.C.

§ 1314(/)(1)(B). Selenium has been listed by EPA as a toxic

pollutant pursuant to this code section. See 40 C.F.R.

§ 401.15. As part of such listing, the state must identify

the point sources causing selenium pollution in the listed

waters and develop an “individual control strategy”

(“ICS”) to control each point source so as to achieve the

water quality objectives for such waters “as soon as pos-

sible, but not later than 3 years after the date of the

establishment of such strategy.” 33 U.S.C. §§ 1314(/)(1)(C),

(D).

On February 3, 1989, when the California Water

Resources Control Board published its list required pur-

suant to the 1987 Clean Water Act Amendments, the State

Board did not identify several portions of the upper San

Francisco Bay Estuary — San Pabio Bay, Carquinez Strait,

and Suisan Bay - as “toxic hot spots” for selenium, nor

did it specify oil refinery selenium discharges as a sub-

stantial cause of selenium pollution in the Bay. EPA took

issue with these omissions, among other things. Exercis-

ing its regulatory authority under the Clean Water Act,

EPA issued a final listing on September 28, 1990, desig-

nating these portions of the Bay as “impaired waters”

due to selenium pollution, and attributing that selenium

substantially to the discharges from the six Bay Area

refineries: Unocal’s refinery in Rodeo, Exxon’s refinery in

Benicia, Shell Oil Company’s manufacturing complex in

Martinez, Tosco Corporation’s refinery in Avon, Chevron

U.S.A.’s refinery in Richmond, and Pacific Refining Com-

pany’s facility in Hercules. EPA stated that it disapproved

App. 26

of the ICS’s then in effect for Unocal, Exxon, and the

other dischargers, and made known its intention to issue

its own ICS’s not later than December 31, 1990, which

would require compliance with specified effluent limits,

calculated based on state water quality standards, within

three years of the date of issuance.

Responding to EPA’s rebuke, on February 20, 1991,

the Board issued an order listing San Pablo Bay, Car-

quinez Strait, and Suisan Bay as “hot spots” under 33

U.S.C. § 1314(]), and amending Unocal, Exxon, and the

other refineries’ NPDES permits to specify certain con-

centration — and mass-based limits on the amount of

selenium that each refinery could discharge. By the terms

of the amended permits, these new limits (“final limits”)

would become effective on December 12, 1993. On June

16, 1991, the Board issued an additional order, amending

the permits of Unocal, Exxon, and the other refineries to

include interim selenium discharge limits (“interim

limits”), significantly less stringent than the final limits.

The interim limits went into effect immediately on that

date and were to remain in force until the final limits took

effect.

C. STATE COURT LAWSUIT BY REFINERIES

Unocal, Exxon, and the other Bay Area refineries

sought unsuccessfully to challenge the Regional Board’s

listing of San Pablo Bay, Carquinez Strait, and Suisan Bay

as impaired waters, each filing applications for review

with the State Water Resources Control Board. On Octo-

ber 16, 1992, shortly after those applications were dis-

missed by the State Board, the Bay Area refineries and

ee ee ee oe

a ee

App. 27

their trade association, the Western States Petroleum

Association (“WSPA”), filed a petition for writ of man-

date in Solano County Superior Court seeking to set aside

the Regional Board’s orders imposing the final limits and

the interim limits on the ground that the listing of the

above-noted regions of the Bay as impaired bodies of

water was in violation of various provisions of the Clean

Water Act and of EPA administrative regulations promul-

gated under the Act.

D. SETTLEMENT OF LAWSUIT AND REGIONAL

BOARD ENFORCEMENT ACTION

The refineries and WSPA did not press for a hearing

on the merits of their state court suit but instead initiated

settlement negotiations with the Regional Board and the

California Attorney General’s Office, which proceeded

over the course of 1993. Three of the Bay Area refineries,

Chevron, Tosco, and Pacific Refining, reduced their dis-

charge levels, such that they would be in compliance with

the final limits when they took effect. Unocal, Exxon, and

Shell, however, contended that they could not comply

with the final limits. Although the other three refineries

had succeeded in reducing their effluent levels to meet

the final limits, Unocal, Exxon, and Shell maintained that,

due to technological constraints, they could not reduce

their selenium discharge levels sufficiently to comply

with the final limits scheduled to take effect on December

12, 1993.

On November 8, 1993, the six refineries, the state,

and the Regional Board agreed on a settlement pursuant

App. 28

to which the refineries and WSPA would consent to dis-

missal of their state court action, and the Board would

issue a Cease and Desist Order (“CDO”). The Board pub-

lished the proposed settlement and CDO in the days that

followed, and noticed public hearings on them.

The principal terms of the settlement were that the

three refineries that had not complied with their final

selenium limits — Unocal, Exxon, and Shell -— would

receive a nearly five year extension until July 31, 1998 of

their deadline for complying with their final limits, and

in exchange would pay the state $2 million and, along

with the other refineries, would drop their state court

action. Oddly, however, neither the settlement agreement

nor the CDO expressly state that Unocal, Exxon, and

Shell are relieved from having to comply with the final

limits contained in their NPDES permits until July 31,

1998. Rather, the CDO effects this purported extension by

providing that Unocal, Exxon, and Shell

shall cease and desist from discharging waste in

violation of [their NPDES permits] by comply-

ing with the following:

* * ~

3. Compliance with this Order shall be in

accordance with the following tasks and

time schedules:

+ * *

c. The dischargers shall implement a

removal technology or technologies, or an

alternate control strategy, which has been

determined by the dischargers to be capable

of achieving compliance with the discharge

eS” 2 ta

IM ire! <sit aaant U GA P ap reed ee

eee

App. 29

limitations as specified in [the NPDES per-

mits] and shall comply with these limits, no

later than July 31, 1998.

CDO at 7. The settlement agreement stated that the

above-quoted provision of the CDO “effectively mod-

ified” the deadlines specified in defendants’ NPDES per-

mits for complying with the final selenium limits. The

CDO also provided that Unocal, Exxon, and Shell would

implement a study to identify technologies for reducing

selenium discharge levels, and would carry out pilot tests

and source reduction studies.

The terms of the settlement agreement dismissing the

refineries’ state court suit specified that the dismissal was

to be “without prejudice” and expressly provided that

nething in the agreement waived the refineries’ right to

challenge the validity of the final limits contained in their

NPDES permits. The refineries agreed only to refrain

from challenging the final limits unless and until the

refineries should find in 1998 that they are unable to

identify or implement a workable removal technology or

other control strategy that would enable them to meet the

limits, and the Board declines to extend the July 31, 1998

deadline further. Thus, in effect, the refineries merely

agreed to drop their challenge to the final limits so long

as the limits are not being enforced, but retained the right

to challenge them once they are.

On November 19, 1993, and December 15, 1993, pub-

lic hearings on the CDO were held at which the instant

plaintiffs and other members of the public testified. The

Board made some minor modifications to the CDO in

response to comments received from the public and from

App. 30

EPA, and issued a final CDO on January 19, 1994. Plain-

tiffs filed these lawsuits on March 2, 1994.

Il. LEGAL STANDARD

Dismissal is appropriate under Fed.R.Civ.P. (“Rule”)

12(b)(6) when a plaintiff’s complaint fails to state a claim

upon which relief can be granted. The Court must accept

as true the factual allegations of the complaint and

indulge all reasonable inferences to be drawn from them,

construing the complaint in the light most favorable to

the plaintiff. Dodd v. Spokane County, 393 F.2d 330, 334

(9th Cir.1968); NL Industries, Inc. v. Kaplan, 792 F.2d 896,

898 (9th Cir.1986). Unless the Court converts the Rule

12(b)(6) motion into a motion for summary judgment, the

court may not consider material outside of the complaint.

Powe v. City of Chicago, 664 F.2d 639, 642 (7th Cir.1981).

However, “on a motion to dismiss a court may properly

look beyond the complaint to matters of public record

and doing so does not convert a Rule 12(b)(6) motion to

one for summary judgment.” Mack v. South Bay Beer Dis-

tributors, Inc., 798 F.2d 1279, 1282 (9th Cir.1986). Matters

of public record include court and agency orders and

agency regulations. Id. Thus, this Court may take judicial

notice on this motion of rulings and regulations issued or

published by the Regional Board or by EPA, regardless

whether such documents were filed as attachments to the

complaint.

The Court must construe the complaint liberally, and

dismissal should not be granted unless “it appears to a

certainty that the plaintiff can prove no set of facts in

support of his claim that would entitle him to relief.”

App. 31

Intake Water Co. v. Yellowstone River Compact Comm'n, 769

F.2d 568, 569 (9th Cir.1985), cert. denied, 476 U.S. 1163, 106

S.Ct. 2288, 90 L.Ed.2d 729 (1986). However, legal issues

on which the actionability of the claim depends can and

should be resolved at this stage. Dismissal is appropriate

if, as a consequence of such resolution, the court deter-

mines that, as a matter of law, the complaint’s allegations

fail to state a claim.

Dismissal is appropriate under Rule 12(b)(3) where

venue in a case does not properly lie in the court in which

it is filed. However, where the court deems it to be “in the

interest of justice,” the court may instead transfer an

improperly venued case to a court in which it could have

been brought. 28 U.S.C. § 1406(a).

lil. DISCUSSION

In their complaints in each of these two related cases,

plaintiffs allege three causes of action: that defendant has

not complied with an applicable effluent standard or

limitation — to wit, the final selenium limits and accom-

panying compliance deadline contained in their NPDES

permits — in violation of the Clean Water Act, 33 U.S.C.

§ 1311(a); that defendant has not complied with an appli-

cable water quality standard, also in violation of the

Clean Water Act; and that defendant has engaged in an

unfair business practice in violation of California Busi-

ness & Professions Code § 17200 et seq.

As to the first cause of action, defendants contend

that the CDO issued by the Regional Board properly

extended the deadline by which defendants are required

to comply with the selenium discharge limits specified in

App. 32

their NPDES permits, such that their present failure to

meet that limit does not violate the federal Clean Water

Act. Alternatively, defendants argue that, in any event,

plaintifs may not bring a citizen suit to enforce the

effluent standards specified in defendants’ NPDES per-

mits because the Regional Board has already taken

enforcement action as to that violation and defendants

have paid a penalty, thereby precluding a parallel citizen

enforcement suit under 33 U.S.C. § 1319(g)(6)(A)(iii).

Finally, defendants charge that plaintiffs’ suits are barred

for failure to satisfy the notice requirements imposed

under 33 U.S.C. § 1365(b)(1)(A) for citizen suits.

As to the second cause of action, defendants urge

that water quality standards - as distinct from effluent

standards — are not enforceable in citizen suits under the

Clean Water Act and that the count must consequently be

dismissed. As for the third cause of action, defendants

contend that dismissal of the first two claims necessitates

dismissal of the third state law claim as well. Finally,

defendant Exxon charges that the suit against it must be

dismissed for improper venue since its refinery is not

located within the geographic area for which venue prop-

erly lies in this Court.

A. VENUE IN CITIZENS FOR A BETTER ENVI-

RONMENT V. EXXON

The citizen suit provision of the Clean Water Act, 33

U.S.C. § 1365, under which plaintiffs have brought these

suits, contains a special venue provision stating that

Any action respecting a violation by a discharge

source of an effluent standard or limitation or an

App. 33

order respecting such standard or limitation

may be brought under this section only in the

judicial district in which such source is located.

33 U.S.C. § 1365(c)(1) (emphasis added). As is clear on the

face of the complaint, Exxon’s refinery is located in the

City of Benicia, see Complaint { 9, which is within the

County of Solano. Solano County is in the geographic

region covered by the U.S. District Court for the Eastern

District of California, not this Court. 28 U.S.C. § 84(b).

The Eastern District is therefore the only district in which

venue is proper under the Act. On this basis, Exxon urges

that the Court dismiss the suit for improper venue pur-

suant to Rule 12(b)(1). Conceding this venue error in their

opposition papers, plaintiffs urge that the Court transfer

the case to the Eastern District rather than dismiss it.

28 U.S.C. § 1406(a) instructs that:

The district court of a district in which is filed a

case laying venue in the wrong .. . district shall

dismiss, or if it be in the interest of justice,

transfer such case to any district . . . in which it

could have been brought.

Whether the interest of justice militates in favor of trans-

fer rather than dismissal is a judgment committed to the

sound discretion of the district court. “[T]ransfer is gener-

ally .. . consistent with the ‘interest of justice’ . . . because

it eliminates the delay and additional expense associated

with reinstituting suit in another forum.” Banque de la

Mediterranee-France, S.A. v. Thergen, Inc., 780 F.Supp. 92,

95 (D.R.1I.1992). On the facts of this case, the Court holds

that transfer rather than dismissal is appropriate. Accord-

ingly, it is hereby ordered that Citizens for a Better Envi-

ronment-California v. Exxon, No. C 94-0713 TEH, shall be

App. 34

TRANSFERRED FORTHWITH from this Court to the U.S.

District Court for the Eastern District of California. In

view of this ruling, the remainder of this opinion ard

order shall address only the motion to dismiss filed by

the defendant in the Unocal case.

B. FIRST CAUSE OF ACTION: VIOLATION OF

EFFLUENT STANDARD OR LIMITATION

Under the Clean Water Act, dischargers are strictly

liable for any violation of the terms of an NPDES permit.

California Public Interest Research Group v. Shell, 840

F.Supp. 712, 714 (N.D.Cal.1993). As explained above, the

Act authorizes private parties to bring citizen suit

enforcement actions, and provides, in pertinent part, that

such actions may be brought against

any person . . . who is alleged to be in violation

of ...an effluent standard or limitation under

[the Act].

33 U.S.C. § 1365. See 33 U.S.C. § 1365(f) (defining “efflu-

ent standard or limitation”). As noted above, the defini-

tion of “effluent standard[s] or limitation[s]” for which

violations are actionable under this section includes efflu-

ent standards or limits prescribed in NPDES permits,

since violation of such limits places a polluter in violation

of 33 U.S.C. § 1311(a). Additionally, violations of terms

contained in NPDES permits are generally enforceable of

their own accord in citizen suits. See 33 U.S.C.

§ 1365(f)(6).

There is no dispute that on December 12, 1993 — the

date the final selenium limits took effect under Unocal’s

NPDES permit - and every day since then, Unocal’s

App. 35

discharges of selenium have exceeded the daily limits

under its NPDES permit. Rather, Unocal contends that

plaintiffs’ citizen suit should be dismissed on the

grounds: (1) that the CDO issued by the Regional Board

properly extended the deadline by which defendant is

required to comply with the final selenium discharge

limits specified in its NPDES permit, such that the dead-

line specified in its permit is no longer in effect; (2) that,

in any event, the citizen suit is barred under 33 U.S.C.

§ 1319(g)(6)(A)(iii) because the state agency charged with

enforcing the Act, acting pursuant to a “comparable”

state law, has already issued a “final order” regarding the

violation, assessing a “penalty” against Unocal which

Unocal has paid; and (3) that plaintiffs have failed to

satisfy the notice requirements for a citizen suit. Each of

these objections, if correct, would provide an indepen-

dently adequate basis for dismissing plaintiffs’ suit. Thus,

in order to avoid dismissal, plaintiffs must establish that

none of these objections is well-founded.

1. WHETHER, ON THE MERITS, THERE IS

NO VIOLATION OF UNOCAL’S NPDES

PERMIT BECAUSE THE REGIONAL

BOARD’S CDO VALIDLY EXTENDED THE

COMPLIANCE DEADLINE CONTAINED

IN UNOCAL’S PERMIT

Unocal’s first argument for dismissing plaintiffs’

claim under the Clean Water Act seeking to enforce com-

pliance with an effluent standard or limitation - plain-

tiffs’ first cause of action — is that, on the merits, Unocal

has not violated its NPDES permit because the CDO

issued by the Regional Board validly extended until 1998

App. 36

the deadline for complying with the final selenium limit

specified in the NPDES permit.! As recounted above,

pursuant to the settlement reached by the Regional

Board, the State Attorney General’s Office, and the Bay

Area oil refineries in late 1993, the Regional Board issued

a CDO containing several terms that had been agreed to

in the settlement. The CDO provided, in pertinent part:

IT IS HEREBY ORDERED, pursuant to Section

13301 of the California Water Code, that Shell

Oil Company, Union Oil Company of California,

and Exxon Company, U.S.A. shall cease and des-

ist from discharging waste in violation of Order

No. 91-026 [- the order amending the refineries’

1 Unocal labels this argument a motion to dismiss for lack

of subject matter jurisdiction under Rule 12(b)(1), reasoning that

if the NPDES limits are effectively suspended such that Unocal

has not violated an effluent limit, then this Court lacks subject

matter jurisdiction, for 33 U.S.C. § 1365(a) confers jurisdiction

over citizen suits against polluters only where violations of

effluent standards or other orders exist. However, the Supreme

Court has held that, generally, assertion of a claim under a

federal statute “alone is sufficient to empower the District Court

to assume jurisdiction over the case and determine whether, in

fact, the [statute] does provide the claimed rights.” Romero v.

International Terminal Operating Co., 358 U.S. 354, 359, 79 S.Ct.

468, 473, 3 L.Ed.2d 368 (1959). In such cases, a finding of no

statutory violation results in dismissal for failure to state a claim

rather than for lack of jurisdiction. The Court will therefore treat

Unocal’s argument here as a motion to dismiss for failure to

state a claim. Ultimately, however, the label affixed to the

motion is unimportant. Regardless whether dismissal on such

grounds is correctly characterized as based on absence of

jurisdiction or failure to state a claim, in both cases it hinges on

the same legal question: whether the Board’s action, as a matter

of law, suspended the final limits and deadline contained in

Unocal’s NPDES permit.

eta Pw! ps ab

App. 37

NPDES permits to impose final selenium dis-

charge limits -] by complying with the follow-

ing:

~ + *

3. Compliance with this Order shall be in

accordance with the following tasks and

time schedules:

* * *

c. The dischargers shall implement a

removal technology or technologies, or an

alternate control strategy, which has been

determined by the dischargers to be capable

of achieving compliance with the discharge

limits specified in Order No. 91-026 and

shall comply with these limits, no later than

July 31, 1998.

CDO at 7.

Unocal concedes both (1) that the CDO did not pur-

port to modify Unocal’s NPDES permit, and (2) that even

if it did purport to do so, such a modification would not

have been valid. Any such putative modification would

have been invalid for three reasons. First, modifications

to NPDES permits must be implemented in accordance

with standards and procedures specified in federal

agency regulations which were not followed here.? Sec-

ond, even if a purported modification had been pro-

cedurally proper, it would have violated a substantive

2 The procedures for NPDES permit modification are

mandatory. Cal.Code Regs. tit. 23, § 2235; 40 C.F.R.

§ 123.25(a)(22); Ackels v. U.S. E.P.A., 7 F.3d 862, 864 n. 1 (9th

Cir.1993); United States v. Metropolitan District Commission, 16

Envtl.L.Rep. 20621, 20624, 1985 WL 9071 (D.Mass.1985). Unless

properly modified in accordance with these procedures, the

App. 38

requirement of the 1987 Clean Water Act Amendments

which establish a three-year deadline for a polluter’s

coming into compliance with water quality standards

imposed pursuant to 33 U.S.C. § 1314(1)(1)(D), such as

those contained in Unocal’s NPDES permit.? The three-

year deadline for Unocal and the other refineries’ permits

permit as originally issued remains in effect, and violations of

the permit may be subject to a citizen enforcement suit. Public

Interest Research Group v. Yates Industries, 757 F.Supp. 438, 445

(D.N.J.1991); Metropolitan District Commission, 16 Envtl.L.Rep. at

20624, 1985 WL 9071.

First, the enforcement agency modifying the permit must

make a finding of cause appropriate for modifying the permit.

40 C.ER. §§ 122.41(f), 122.62, 122.63. The Regional Board made

no such finding in this case. Second, the enforcement agency

must prepare a draft permit and issue a fact sheet setting forth

the significant factual, legal, methodological, and policy

questions considered in preparing the draft permit, or take

other mandatory steps to ensure careful assessment of

alternatives. 40 C.F.R. §§ 124.6, 124.8(a), 124.10, 124.11, 124.12,

124.56. The Regional Board did not follow these procedures in

this case. Furthermore, the Board’s notice of hearing on the

CDO makes no reference to a permit modification, further

indicating that the Board did not purport to be modifying the

refineries’ permits.

3 As discussed above, 33 U.S.C. § 1314(/)(1)(D) requires that

individual control strategies (ICS’s) be adopted in order to

achieve reduction in pollution levels in certain waters

designated pursuant to 33 U.S.C. § 1314(/)(1)(D). An ICS must

impose limits on toxic pollutants sufficient to attain water

quality standards within three years. 33 U.S.C. § 1314(1)(1)(D);

40 C.F.R. § 123.46; Westvaco Corp. v. U.S. E.P.A., 899 F.2d 1383,

1385 (4th Cir.1990). To that end, Unocal’s NPDES permit

compelled it to reduce selenium discharges to meet certain

limits by December 12, 1993, which was within three years of

the February 20, 1991 issuance of the Board’s order amending

the permit to impose the final selenium limits.

eee ee ee EEE

App. 39

was triggered, at the very latest, on February 20, 1991,

when the Board issued its order amending the NPDES

permits to include the final selenium limits. In light of

that fact, any ruling purporting to extend the compliance

deadline beyond February 20, 1994 would violate the

statutory three-year deadline. Third, any purported mod-

ification to Unocal’s permit would have violated another

substantive requirement of the 1987 Clean Water Act

Amendments, the “anti-backsliding” provision, which

forbids permits of the type held by Unocal from being

“renewed, reissued, or modified to contain effluent lim-

itations which are less stringent than the comparable

effluent limitations in the previous permit,” subject to

certain exceptions. 33 U.S.C. § 1342(0)(1).4

Rather than contending that its permit was “mod-

ified” by the CDO, Unocal argues instead that a deadline

for complying with effluent standards specified in an

NPDES permit may permissibly be extended through an

administrative enforcement order issued by the state

agency that issued the permit. Unocal makes the novel

argument that though such an enforcement action cannot

“modify” a permit, an extension granted under such an

4 In the case of effluent limitations established on the

basis of section 1311(b)(1)(C) of this title or section

1313(d) or (e) of the title [all concerning water quality

standards], a permit may not be renewed, reissued, or

modified to contain effluent limitations which are less

stringent than the comparable effluent limitations in

the previous permit... .

33 U.S.C. § 1342(0)(1). See New Jersey Public Interest Research

Group v. New Jersey Expressway Auth., 822 F.Supp. 174, 185

(D.N.J.1992).

App. 40

order constitutes a valid authorization that has the legal

effect of suspending the effect of the permit requirements

such that a polluter is shielded from citizen suits seeking

to enforce compliance with the permit’s original deadline

and limits.

It is clear that California law authorizes Regional

Boards to issue CDO’s that purport to grant polluters an

extended time schedule within which to come into com-

pliance with discharge limits. See Cal. Water Code

§ 13301.5 However, Unocal can point to no case where a

federal court has held that a state enforcement action that

does not satisfy the requirements to qualify as a valid

“modification” of an effluent standard or limit contained

in an NPDES permit, can nonetheless suspend the permit

limit, shielding the polluter from having the terms of the

permit enforced against it through a citizen suit.® Indeed,

> When a regional board finds that a discharge of

waste is taking place or threatening to take place in

violation of requirements or discharge prohibitions

prescribed by the regional board or the state board,

the board may issue an order to cease and desist and

direct that those persons not complying with the

requirements or discharge prohibitions (a) comply

forthwith, (b) comply in accordance with a time

schedule set by the board, or (c) in the event of a

threatened violation, take appropriate remedial or

preventative action.

Cal.Water Code § 13301.

6 Again, this argument by Unocal is distinct from its

separate argument that, even if the final limits contained in

Unocal’s NPDES permit did, in theory, take effect on December

12, 1993, and are still in force today, enforcement of those limits

€3

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“ et “4 ftcany) ONS Maid iy

mae eet)

ORS SE AGC LOOT IN AI EN AR AE ert wt

App. 41

the only analogous case cited by the parties indicates the

opposite. That case, United States v. Bedford, 1987 U.S.Dist.

LEXIS 16103 (N.D.Ohio 1987), adopted, 1988 U.S.Dist

LEXIS 18612 (N.D.Ohio 1988), held that a state enforce-

ment action that purported to suspend the terms of an

NPDES permit, but which did not qualify as a valid

“modification” of the permit, did not prevent the federal!

government from bringing a civil enforcement action in

federal court pursuant to 33 U.S.C. § 1319(b) to enforce

the terms of the permit. 1987 U.S.Dist. LEXIS 16103, at

*10-"12. 33 U.S.C. § 1319(b) authorizes the U.S. Attorney

General to bring suit to enforce compliance with, inter

alia, effluent limits imposed under NPDES permits. Since

the instant citizen suit also seeks enforcement of permit

limits,? Bedford is authority for the proposition that the

Regional Board’s CDO did not suspend the final limits

through a citizen suit is precluded under 33 U.S.C

§ 1319(g)(6)(A)(iii). That separate argument is addressed by the

Court later in this opinion. See infra Part II.B.2.

7 33 U.S.C. § 1319(b), the enforcement provision involved in

Bedford, authorizes the Attorney General to sue polluters who

violate, inter alia, 33 U.S.C. § 1311(a). 33 U.S.C. §§ 1319(a), (b)

As noted above, violation of effluent limits imposed under an

NPDES permit places a permit-holder in violation of 33 U.S.C

§ 1311(a). See discussion supra Part I.A. As also noted above

citizen suits may be brought under 33 U.S.C. § 1365 for

violations of, inter alia, 33 U.S.C. § 1311(a). 33 U.S.C. § 1365(f)(1)

Thus, NPDES permit limits that are enforceable by the federa!

government under 33 U.S.C. § 1319(b) are also enforceable

through citizen suits. The only exception to this proposition

obtains where a citizen suit is precluded under 33 U.S.C

§ 1319(g)(6)(A) by a pending or final state or federal

enforcement action. This separate bar to citizen suits ts

discussed later in the opinion. See infra Part III.B.2.

App. 42

and deadline contained in Unocal’s NPDES permit such

that those terms may not still be enforced against it.

Unocal attempts to draw support for its position

from language found in Sierra Club v. Colorado Refining

Co., 838 F.Supp. 1428, 1436 (D.Colo.1993). However, Colo-

rado Refining Co. concerned only whether a state enforce-

ment action erected a 33 U.S.C. § 1319(g)(6)(A) preclusive

bar against a citizen suit, and expressed no opinion on

Unocal’s instant argument. Unocal’s citations to North-

west Environmental Advocates v. Portland, 11 F.3d 900,

906-11 (9th Cir.1993), and this Court’s recent opinion in

the related case of California Public Interest Research Group

v. Shell Oil Co., 840 F.Supp. 712 (N.D.Cal.1993), are sim-

ilarly inapposite. Portland, as discussed later in this opin-

ion, involved entirely different issues. Similarly, the

language quoted from Shell stating that “any challenge to

effluent limits in an NPDES permit presents a matter for

the Water Board, not this Court, to address,” 840 F.Supp.

at 712, concerns just what it says: the circumstances

under which a discharger may bring suit in federal court

to challenge limits contained in an NPDES permit promul-

gated by a state enforcement agency. Shell in no way

addresses the entirely separate issue of citizen suits to

enforce permit limits.

In its reply papers, Unocal also cites an administra-

tive ruling issued by the Environmental Appeals Board of

EPA, In the Matter of Star-Kist Caribe, Inc., NPDES Appeal

No. 88-5, 1990 NPDES LEXIS 4 (April 16, 1990), as sup-

porting their argument that a non-modification can none-

theless excuse non-compliance with an NPDES permit.

The language from Star-Kist cited by Unocal simply states

that EPA has authority, under 33 U.S.C. § 1319(a), to issue

App. 43

compliance orders that extend the deadlines for polluters

to come into compliance with their NPDES permit

requirements. That proposition is non-controversial. Star-

Kist does not address the subtly but significantly different

issue of the effect of such extensions: whether EPA com-

pliance orders extending NPDES permit deadlines sus-

pend the effect of the permit requirements such that

polluters are shielded against citizen suits seeking to

enforce compliance with the permit limits. Nor does Star-

Kist address the analogous issue that is presented on this

motion: whether state compliance orders extending

NPDES permit deadlines can suspend the effect of per-

mits such that their terms may no longer be enforced

through citizen suits.

At first blush, it may not appear obvious how to

assemble the different component parts of the statutory

scheme at issue here into a coherent whole. First, there

exist the very stringent procedures and substantive rules

limiting the circumstances under which enforcement

agencies may “modify” the terms of NPDES permits.

Second, there exists authorization for enforcement agen-

cies to bring civil penalty actions, see 33 U.S.C. § 1319(g),

pursuant to which compliance schedules may, de facto, be

extended, since such actions preclude citizen suits to

enforce the NPDES permits. See 33 U.S.C.

§ 1319(g)(6)(A)(iii).8 Third, there exists authorization for

8 Although 33 U.S.C. § 1319(g) authorizes only federal civil

penalty actions brought by EPA, 33 U.S.C. § 1319(g)(6)(A)(iii)

provides that penalty actions brought by state agencies under

comparable state laws trigger the same preclusive bar against

citizen suits to enforce NPDES permits.

App. 44

enforcement agencies to bring non-penalty civil compli-

ance actions, see 33 U.S.C. § 1319(a),? pursuant to which

compliance schedules may be extended, Star-Kist, 1990

NPDES LEXIS 4, at *21, but which nonetheless do not bar

citizen suits to enforce the terms of the original NPDES

permits. Washington Public Interest Research Group v. Pen-

dleton Woolen Mills, 11 F.3d 883 (9th Cir.1993).

The element of the scheme the role of which may at

first appear difficult to reconcile is the non-penalty civil

compliance action. On the one hand, it is clear that such

actions cannot amend NPDES permits to postpone com-

pliance deadlines, Star-Kist, 1990 NPDES LEXIS 4, at *6,

and do not trigger the statutory preclusive bar against

citizen suit enforcement of limits contained in NPDES

permits. Pendleton, 11 F.3d 883. On the other hand, how-

ever, it is also clear that EPA can authorize extended

compliance schedules in the course of such compliance

actions, Star-Kist, 1990 NPDES LEXIS 4, at *6, and that

Regional Water Quality Control Boards can do the same

under California law. Cal. Water Code § 13301. If such

extended compliance schedules do not suspend the effect

of limits and deadlines contained in NPDES permits such

that the permit terms may still be enforced against the

polluter through citizen suits, then what good are compli-

ance actions and what meaning do their extended time-

tables have? The answer to this question is that such

9 Although 33 U.S.C. § 1319(a) authorizes only federal non-

penalty civil compliance actions brought by EPA, as noted

above, California Water Code § 13301 authorizes regional water

boards to bring non-penalty civil compliance actions pursuant

to which a revised compliance time-tables may be established.

See supra note 5.

App. 45

orders constitute agreements by the issuing enforcement

authority on how the authority — be it EPA or a state

agency - plans to exercise its prosecutorial discretion.

Given that such authorities are vested with enforcement

powers broader in some respects than those conferred on

private citizens under the citizen suit provision, and that

in the vast majority of cases there exists no serious threat

of citizen suit enforcement, assurances regarding authori-

ties’ intended exercise of their enforcement discretion

carry great real-world significance. See Shell, 840 F.Supp.

at 716-17 (construing language in NPDES permit as an

assurance as to how the Regional Board intended to

exercise its prosecutorial discretion, and not as a term

modifying and weakening the permit’s effluent limit).

Thus, even if they cannot shield polluters from citizen

suits brought to enforce the terms of NPDES permits,

such actions still serve a meaningful role in the Clean

Water Act enforcement scheme.

With this tension resolved, the Court concludes that,

when viewed as a whole, the structure of the Clean Water

Act clearly evidences a legislative intent on the part of its

drafters that disfavors the interpretation urged by Unocal

regarding the effect of deadline extensions contained in

administrative compliance orders. As explained above,

the statute imposes a variety of stringent conditions

before administrative actions can modify the terms of

NPDES permits. Moreover, as discussed in the next sec-

tion, the statute also expressly provides that citizen suits

are barred only in circumstances where certain specified

types of agency enforcement actions have been taken by

state or federal enforcement agencies. Unocal, in effect,

App. 46

contends that administrative extensions of permit dead-

lines can bar citizen suits to enforce permits even where

the extensions neither (1) qualify as “modifications,” nor

(2) satisfy the requirements of the provision that

expressly bars citizen suits in some circumstances. Recog-

nition of such an unenumerated category of administra-

tive extension would render superfluous the very specific

requirements established by Congress for permit mod-

ifications and preclusion of citizen suits. The canon of

statutory construction strongly disfavors such interpreta-

tions that do not accord meaning to every word and

provision in a statute, or to statutory distinctions drawn

by Congress. See United States v. Nordic Village, Inc., __

U.S. __, __, 112 S.Ct. 1011, 1015, 117 L.Ed.2d 181 (1992)

(“[It is a] settled rule that a statute must, if possible, be

construed in such a fashion that every word has some

operative effect.”); In the Matter of Greystone III Joint Ven-

ture, 948 F.2d 134, 138-39 (5th Cir.1991) (interpretation of

one statutory provision so as to render another provision

superfluous “is anathema to elementary principles of

statutory construction”). By writing these provisions out

of the statute, Unocal’s construction would create an

enormous loophole, elevating civil compliance orders to

the status of de facto modifications, thereby allowing dis-

chargers to achieve, in effect, modifications that would

otherwise be illegal under the Act. The existence of these

specific provisions in the statute creates a strong infer-

ence that Congress did not intend to authorize unenume-

rated exceptions of the sort urged by Unocal.?°

10 Additional support for this conclusion can be inferred

from Washington Public Interest Research Group v. Pendleton

App. 47

In light of the above, the Court holds that, as a matter

of law, an administrative enforcement action by a state

agency charged with enforcing the Clean Water Act that

purports to extend a deadline specified in an NPDES

Woolen Mills, 11 F.3d 883 (9th Cir.1993). In Pendleton, the EPA

issued an administrative compliance order to a polluter that had

violated the discharge limits specified in its NPDES permit. The

EPA order set an extended compliance schedule, and ordered

the polluter to make certain identified physical improvements

deemed to be necessary to bring about compliance, and

threatened sanctions if the polluter did not comply with the

terms of the compliance order. Subsequently, an environmental

group filed a citizen suit seeking, inter alia, an injunction

requiring immediate compliance with the discharge limits

specified in the permit. The Ninth Circuit held that because the

type of enforcement action that EPA had taken was not an

administrative penalty action under 33 U.S.C. § 1319(g) but

rather an administrative compliance action under 33 U.S.C.

§ 1319(a), a citizen suit could still be maintained to enforce the

limits and deadlines contained in the original permit. (As noted

above and discussed below, penalty actions can trigger the 33

U.S.C. § 1319(g)(6)(A) preclusive bar against citizen suits.)

The Pendleton defendant apparently did not expressly raise

the argument made by Unocal that the administrative order

extending the compliance deadline suspended the effect of the

permit deadline such that it was not enforceable through a

citizen suit. However, in reversing, the Ninth Circuit implicitly

rejected this argument, for the argument would have afforded

an alternative basis for affirming the district court’s dismissal,

and the court of appeals will normally affirm so long as there

exists any alternative ground, fairly supported in the record,

that would justify the district court’s ruling. Golden Nugget, Inc.

v. American Stock Exch., Inc., 828 F.2d 586, 590 (9th Cir.1987)

(affirmance on alternative ground appropriate where the record

adequately establishes material facts and issues are purely

legal). Thus, the Pendleton holding supports an inference that

the Ninth Circuit was not persuaded by Unocal’s argument.

App. 48

permit for complying with the permit’s discharge limits

does not serve to suspend the permit’s deadlines such

that they may not be enforced through a citizen suit. Such

an extension, unless it satisfies the requirements to qual-

ify as a “modification,” is simply a statement by the

agency as to how it plans to exercise its prosecutorial

discretion. Unocal’s motion to dismiss plaintiffs’ first

cause of action on this ground is therefore DENIED.

2. WHETHER A CITIZEN SUIT IS PRE-

CLUDED UNDER THE 33 U.S.C.

§ 1319(g)(6)(A)(iii) BAR

As noted above, the Clean Water Act expressly pro-

vides that citizen suits are barred in circumstances where

certain categories of agency enforcement action have

either been concluded or are pending with respect to an

alleged violation. Unocal contends that the CDO issued

by the Regional Board qualifies as an enforcement action

that suffices to trigger a preclusive bar against the instant

citizen suit, thereby requiring its dismissal.

33 U.S.C. § 1319(g)(6)(A) provides:

[A]ny violation -

(i) with respect to which the Administra-

tor [of the EPA] or the Secretary [of the

Army] has commenced and is diligently

prosecuting an action under [33 U.S.C.

§ 1319(g), which allows EPA to assess civil

penalties],

(ii) with respect to which a State has com-

menced and is diligently prosecuting an

App. 49

action under a State law comparable to [33

U.S.C. § 1319(g)], or

(iii) for which the Administrator, the Secre-

tary, or the State has issued a final order not

subject to further judicial review and the viola-

tor has paid a penalty assessed under [33

U.S.C. § 1319(g)], or such comparable State

law, as the case may be,

shall not be subject to a civil penalty action

under [33 U.S.C. § 1319(d)] or [33 U.S.C.

§ 1321(b)] or [a citizen suit under 33 U.S.C.

§ 1365].

(Emphasis added). Unocal contends that the CDO and the

settlement agreement constitute “a final order” under a

state law “comparable” to 33 U.S.C. § 1319(g) for which

the violator has paid an assessed “penalty,” thereby trig-

gering the citizen suit bar under 33 U.S.C.

§ 1319(g)(6)(A)(iii). In order for dismissal on this ground

to be appropriate, all of these conditions must be met.

a. “Final Order”

Plaintiffs argue that the CDO and settlement agree-

ment do not constitute a “final order not subject to fur-

ther judicial review.” Under the settlement agreement,

Unocal and the other refineries expressly retained the

right to challenge in court in 1998 the final selenium

limits specified in their NPDES permits when, under the

CDO, they are finally obligated to comply with those

App. 50

limits.!! In light of this provision, there indeed appears to

be a substantial issue as to whether the CDO is a

“final order” within the meaning of 33 U.S.C.

§ 1319(g)(6)(A)(iii). However, because this issue was not

well briefed by the parties and since there exist other

bases for denying dismissal on preclusion grounds, the

Court declines to reach this question.

b. “Comparable State Law”

The 33 U.S.C. § 1319(g)(6)(A)(iii) preclusive bar

applies only where “the violator has paid a penalty

assessed under [33 U.S.C. § 1319(g)], or such comparable

State law.” In evaluating whether this provision is satis-

fied in this case, the Court must determine, first, what

state law the putative penalty was assessed under and,

second, whether that law is “comparable” to 33 U.S.C.

§ 1319(g).

i. The Regional Board’s Action Was

Taken under California Water Code

§ 13301

California law vests regional water boards wiih a

variety of different prosecutorial tools for enforcing

11 The settlement agreement provides that the refineries

agree not to challenge the final selenium limits in court in 1998 if

they are able to win an additional extension of the compliance

schedule pursuant to { 5 of the CDO. However, that concession

is no concession at all, for if the refineries succeed in obtaining

such an additional extension of the compliance deadline, then,

of course, there will be no reason for them to challenge the

limits.

App. 51

compliance with effluent limits or standards imposed

under NPDES permits. These include issuance of cease

and desist orders under California Water Code § 13301,

issuance of cleanup or abatement orders under California

Water Code § 13304, imposition of administrative civil

penalties under California Water Code § 13385, and refer-

ral to the California Attorney General for civil prosecu-

tion.

It appears quite clear that in issuing the CDO, the

Regional Board was exercising its authority under Cali-

fornia Water Code § 13301, which empowers regional

boards to issue cease and desist orders pursuant to which

such boards may establish extended time-tables for com-

pliance with Board-imposed effluent limits. Cal.Water

Code § 13301(b). The CDO itself expressly states that it

was issued “pursuant to Section 13301 of the California

Water Code.” CDO at 7. Moreover, the CDO offers the

following explanation of the decisionmaking process that

resulted in the settlement and issuance of the CDO:

The Regional Board has considered the various

enforcement and penalty options available to it

regarding violation of [the NPDES permit],

including the issuance of a cease and desist

order or a cleanup or abatement order, imposi-

tion of an administrative civil penalty and refer-

ral to the Attorney General for civil prosecution.

Under the circumstances detailed in the Find-

ings set forth above, the Regional Board has

determined that the most appropriate course of

action is settlement of the litigation and issu-

ance of a cease and desist order.

CDO at 6.

App. 52

Unocal appears to argue that since Unocal, Exxon,

and Shell agreed to make a $2 million payment to the

state as part of the settlement of which the CDO was a

component, the Regional Board’s enforcement action

must be construed as a civil penalty action under Califor-

nia Water Code § 13385. Unocal speculates that if it,

Exxon, and Shell had refused to agree to the payment, the

Regional Board would then have instituted a civil penalty

action under § 13385. However, as noted above, the CDO

expressly categorized the actions taken as (1) entry of a

cease-and-desist order under § 13301, and (2) settlement

of the refineries’ state court lawsuit. The fact that the

Board identified its actions as such after first noting the

different enforcement options available to it — including

the option of imposing of a civil penalty under § 13385 -

makes clear that the Board expressly declined to invoke

its § 13385 authority in issuing the CDO and entering the

settlement agreement. The only mention of the $2 million

payment in the CDO is found in the “findings” section,

where the payments are described only as a “term” of the

settlement of the state court lawsuit, CDO at 6; no men-

tion of the payment appears in the “order” section of the

CDO, and the document does not purport to order pay-

ment of the sum.

This labeling clearly was not accidental. The CDO

and settlement agreement resulted from lengthy and

detailed negotiations among the parties. The Court sees

no reason to disregard the Regional Board and the par-

ties’ deliberate decision to label the Board action a cease-

and-desist order, and the accompanying document a set-

tlement agreement. If the Board and the parties had

intended for the Board order and settlement agreement to

App. 53

be deemed a settlement of a threatened but unfiled civil

penalty action, they could easily have so indicated. The

Court must conclude from their failure to do so that they

did not so intend. Since the Regional Board is vested with

authority to choose which of its enforcement options to

exercise, the Board’s categorization of its action as a

cease-and-desist action under § 13301 is dispositive of the

question of what type of enforcement action the Board

attempted to take.

In light of the above, the Court concludes that, as a

matter of law, the CDO was issued in an exercise of the

Board’s administrative enforcement authority under Cali-

fornia Water Code § 13301 to issue cease and desist

orders establishing time-tables for compliance with

Board-imposed effluent limits. The Court further con-

cludes that, as a matter of law, the settlement agreement

was just that — a settlement of the refineries’ state court

lawsuit. The Court rules that, as a matter of law, neither

instrument constituted an exercise of the Board’s author-

ity under California Water Code § 13385 to impose civil

penalties.

ii. The “Comparability” Assessment Is

Conducted By Examining the Par-

ticular State Statutory Enforcement

Provision Involved, Not the State

Statutory Enforcement Scheme as a

Whole

The thrust of Unocal’s argument as to why the “com-

parability” requirement is satisfied in this case focuses

not on the particular statutory power that the Board was

App. 54

exercising in issuing the CDO and entering the settle-

ment, but rather on the California law enforcement

scheme as a whole. Unocal argues that even if the CDO

was issued pursuant to California Water Code § 13301

and even if, as the Court concludes below, that enforce-

ment provision is not comparable to 33 U.S.C. § 1319(g),

the comparability requirement is still satisfied because

the comparability assessment must be conducted by

examining the state statutory enforcement scheme as a

whole, not simply the particular state statutory enforce-

ment provision under which the action in question was

taken. Unocal argues that the California scheme, when all

of its various enforcement provisions are considered, is

comparable to 33 U.S.C. § 1319(g), thereby satisfying the

requirement.

The issue here is whether the language “comparable

state law” should be interpreted to mean “comparable

state enforcement scheme” or “comparable state enforce-

ment provision.” While quite technical, this interpretive

question is an important one which has not yet been

resolved by the courts. Research has revealed only a

single reported decision discussing this question at any

length. That case, North & South Rivers Watershed Ass’‘n v.

Scituate, 949 F.2d 552 (1st Cir.1991), did not construe the

comparability requirement as it applies under 33 U.S.C.

§ 1319(g)(6)(A)(iii); rather it interpreted it under a neigh-

boring provision, 33 U.S.C. § 1319(g)(6)(A)(ii), which

reads:

App. 55

[A]ny violation —

* * *

(ii) with respect to which a State has com-

menced and is diligently prosecuting an action

under a State law comparable to [33 U.S.C.

§ 1319(g)]

shall not be subject to a civil penalty action

under [33 U.S.C. § 1319(d)] or [33 U.S.C.

§ 1321(b)] or [a citizen suit under 33 U-S.C.

§ 1365]. —

(Emphasis added). However, because the language in the

two provisions is parallel and the canon of statutory

construction presumes that when Congress uses a term in

more than one location in a statute, it is meant to have the

same meaning, see United States v. Thompson/Center Arms

Co., __ U.S. __, __n. 5, 112 S.Ct. 2102, 2107 n. 5, 119

L.Ed.2d 308 (1992) (plurality opinion); Mississippi Poultry

Ass‘n, Inc. v. Madigan, 992 F.2d 1359, 1363 (5th Cir.1993),

Scituate is relevant to the instant question before this

Court.

In Scituate, the state was prosecuting an enforcement

action under a provision of state law that would not

result in imposition of civil penalties against the Clean

Water Act violator. Arguing that the comparability assess-

ment required the court to compare the particular state

enforcement provision used by the state with 33 U.S.C.

§ 1319(g), the citizen suit plaintiff contended that the

preclusive bar was not triggered since the state was pro-

ceeding under a provision that, unlike 33

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