Legal Analysis and Background on the EPA's Proposed Rules for Regulating Mercury Emissions from Electric Utilities

Congressional research reportMay 10, 2004

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Order Code RL32203

CRS Report for Congress

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Legal Analysis and Background on the EPA’s

Proposed Rules for Regulating Mercury

Emissions from Electric Utilities

Updated May 10, 2004

Michael John Garcia

Legislative Attorney

American Law Division

Congressional Research Service ˜ The Library of Congress

Legal Analysis and Background on the EPA’s Proposed

Rules for Regulating Mercury Emissions from Electric

Utilities

Summary

Mercury is a hazardous air pollutant (HAP) that can pose a serious public health

threat. In accordance with the authority provided by the Clean Air Act (CAA), the

EPA is considering regulation of mercury emissions from electric steam generating

units (electric utilities). Recently, the EPA proposed revising an earlier finding that

regulation of such emissions was warranted under section 112 of the CAA, because

the agency had failed to consider whether regulations promulgated under section 111

of the CAA would adequately address the health concerns associated with these

emissions. The EPA now proposes regulation of electric utilities’ mercury emissions

under section 111 through the adoption of a national “cap-and-trade” program.

A potential challenge to the EPA proposal could grow out of the statutory basis

for regulating electric utilities’ mercury emissions under section 111. If the EPA

implements the proposed revision and rule, it may argue that its interpretation should

be upheld given (1) the arguably conflicting amendments made to section 111 in

1990 and (2) the deference shown by the courts to agency interpretations. Opponents

may argue that the EPA’s interpretation is unreasonable because the conflicting

amendments do not represent a clear reversal of the previously explicit congressional

intent to prohibit an HAP listed under section 112 from being regulated under section

111.

The EPA will also need to provide a substantive basis for revising its earlier

findings and adopting any proposed rule for mercury regulation, as the agency is

prohibited from executing its rulemaking authority in an arbitrary and capricious

manner. Accordingly the EPA would need to provide a reasoned analysis for

concluding that the public health threat posed by electric utilities’ mercury emissions

could be adequately addressed using section 111. The fact that the EPA previously

concluded that regulation was warranted under section 112 may impose a heightened

burden upon the EPA to prove that subsequent revisions do not violate CAA

requirements.

Further, the agency may have difficulty “de-listing” electric utilities as a source

for regulation under section 112, which may require the EPA demonstrate that these

utilities are not a public health threat. The EPA may argue that this statutory

requirement does not apply because the agency listed electric utilities for regulation

only because it had previously failed to consider the possibility of regulating utilities

under section 111. Opponents of “de-listing” may argue that reinterpretation of

relevant CAA provisions should not be grounds to summarily rescind previous

designations.

One potential obstacle to EPA regulation under section 111 may be a 1998

settlement agreement requiring the EPA to take “final action” on a proposed rule to

regulate such emissions under section 112. Because this settlement decree was

apparently not incorporated into a judicial order, however, it does not appear that the

agreement could be used to restrict the EPA’s rulemaking discretion.

Contents

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Rulemaking Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Regulation of Electric Utilities under Section 112 of the CAA . . . . . . . 4

Regulation under Section 111 of the CAA . . . . . . . . . . . . . . . . . . . . . . 5

Legal Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

EPA Authority to Regulate Electric Utilities under Section 111

of the CAA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

The EPA’s Discretion to Revise Previous Regulatory Findings

and Institute a “Cap-and-Trade Program” . . . . . . . . . . . . . . . . . . 14

Implications of the 1998 Settlement Agreement upon the Manner

in which the EPA Can Regulate Electric Utilities . . . . . . . . . . . . 16

Legal Analysis and Background on the

EPA’s Proposed Rules for Regulating

Mercury Emissions from Electric Utilities

Background

Rulemaking Background. Mercury has long been recognized as a

hazardous air pollutant that can pose a significant threat to the public health. Indeed,

the Environmental Protection Agency (EPA) has recognized mercury emissions from

electric utility steam generating units (electric utilities) to be the “greatest concern to

public health from the [utilities] industry.”1 Accordingly, the EPA has recently

sought to regulate such emissions pursuant to the authority provided by the Clean Air

Act (CAA).2

At least two provisions arguably provide the EPA with authority to regulate

mercury emissions from electric utilities. Section 112 of the CAA requires the EPA

to establish technology-based emission standards for listed hazardous air pollutants

(HAP), including mercury. Sources designated for regulation under section 112 are

required to adopt maximum achievable control technologies (MACT) to reduce their

hazardous emissions. Section 111, on the other hand, provides the EPA with the

authority to regulate designated pollutants under a broader and looser standard than

section 112. Under section 111, the EPA has authority to enact national “standards

of performance” for sources of pollutants that the Administrator of the EPA

(Administrator) concludes to pose a danger to the public health.3 What is at issue in

the present situation is whether mercury from electric utilities must be regulated

under 112 or whether the EPA may interpret the CAA to regulate such emissions

under the more flexible rules of section 111.

The EPA is only permitted to regulate HAP emissions from electric utilities

pursuant to section 112 if the Administrator determines that such regulation is

appropriate and necessary. On December 14, 2000, the Administrator of the EPA

concluded that, in accordance with section 112(n)(1)(A) of the CAA, the regulation

Regulatory Finding on the Emissions of Hazardous Air Pollutants from Electric Utility

Steam Generating Units, 65 Fed. Reg. 79,825 (Dec. 20, 2000) [hereinafter “December 2000

Regulatory Finding”] (quoting EPA, STUDY OF HAZARDOUS AIR POLLUTANT EMISSIONS

FROM ELECTRIC GENERATING UNITS — FINAL REPORT TO CONGRESS (Feb. 1998)).

42 U.S.C. §§ 7401 et seq.

Section 111 requires the agency to (1) establish nationally uniform performance standards

for designated air pollutants from categories of new industrial facilities and (2) require states

to implement and enforce separate standards of performance for existing sources of

designated air pollutants. 42 U.S.C. § 7411.

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of mercury emissions from electric utilities was “appropriate and necessary,” and the

Administrator therefore added these units to the list of source categories to be

regulated under section 112.4

This regulatory finding had an additional implication relating to a 1998 legal

settlement agreement between the EPA and the National Resources Defense Council

(NRDC), which was made to avoid litigation over the agency’s regulation of mercury

emissions from electric utilities. The agreement was a modification of an earlier

settlement agreement between the EPA and NRDC, and provided that if the EPA

found that regulation of mercury emissions from electric utilities was appropriate and

necessary on or before December 15, 2000, the EPA would be required to “sign” a

notice of proposed rulemaking to regulate such admissions, pursuant to section 112

of the CAA, by December 15, 2003.5 Further, the 1998 agreement required the EPA

to take “final action”on the proposed rule by December 15, 2004.6 Because the EPA

determined that regulation of mercury emissions was appropriate and necessary

within the time period specified by the settlement agreement, pursuant to the

agency’s above-mentioned December 2000 regulatory finding, the 1998 settlement

agreement’s subsequent provisions were triggered.

On December 15, 2003, the EPA proposed to revise its December 2000

regulatory finding that the regulation of mercury emissions from electric utilities was

“appropriate and necessary” under section 112.7 The EPA argued that regulations

promulgated under section 111 of the CAA could effectively address the public

health threat posed by mercury emissions, and that regulation under section 112 was

therefore unnecessary.8 Further, the EPA proposed two alternative rules aimed at

significantly reducing mercury emissions from electric utilities.9 One proposal would

regulate mercury emissions under section 112 and require new and existing electric

utilities to adopt MACT controls to reduce their mercury emissions. The EPA

estimates that this proposal would reduce mercury emissions by 14 tons, or an

estimated 29 percent, by the end of 2007.10 This proposal also fulfills the EPA’s

December 2000 Regulatory Finding, supra note 1.

Natural Resources Defense Council v. EPA, Stipulation for Modification of Settlement

Agreement, No. 92-1415 (D.C. Cir. Nov. 17, 1998).

Id.

EPA, Proposed National Emission Standards for Hazardous Air Pollutants; and, in the

Alternative, Proposed Standards of Performance for New and Existing Stationary Sources:

Electric Utility Steam Generating Units, Dec. 15, 2003, available at

[http://www.epa.gov/mercury/1880338.pdf] [hereinafter “Proposed Rule and Revision”]

(published in 69 Fed. Reg. 4652 (Jan. 30, 2004)).

See id. at 39-40.

A more detailed, substantive discussion of these proposals can be found in CRS Report

RL31881: Mercury Emissions to the Air: Regulatory and Legislative Proposals (Feb. 10,

2004).

See EPA, Fact Sheet, EPA Proposes Options for Significantly Reducing Mercury

Emissions from Electric Utilities, Dec. 15, 2003, available at

[http://www.epa.gov/mercury/mercuryfact12-15final.pdf].

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obligation under the 1998 settlement agreement to propose a rule under section 112

for the regulation of electric utilities’ mercury emissions by December 15, 2003.

The second proposed rule announced by the EPA would instead establish

standards of performance for new and existing electric utilities under section 111 of

the CAA. With limited exceptions, this proposal would establish performance

standards for new sources which would be identical to the proposed MACT standards

for units selling more than 25 megawatts of electrical output.11 Both existing and

new electric utilities would be regulated through the creation of a market-based “capand-trade” program,12 which would “cap” overall mercury emissions and permit

utilities to purchase emissions credits from cleaner-operating utilities. The proposal

would be implemented in two phases. Pursuant to the first phase, due by 2010, a

national cap for mercury emissions would be established at 34 tons.13 The second

phase, due by 2018, would lower the mercury cap to 15 tons.14 Caps would also be

set at the state level, with states having authority to determine how to control

emissions from individual electric utilities.15 States would also required to amend

their respective State Implementation Plans (“SIPs”), used to verify compliance with

the CAA, so as to describe how they would reduce mercury emissions to levels

permitted under the cap. On February 24, 2004, the EPA proposed a model “capand-trade” program.16 States adopting the EPA’s model program would have their

SIP approved by the EPA automatically.17

The EPA is also co-proposing and soliciting comment on implementing a

“cap-and-trade program” under section 112, similar to that being proposed under

section 111 of the CAA.18 However, the EPA has discussed a “cap-and-trade”

program primarily in reference to section 111(d), and this report will deal with the

legality of regulating mercury emissions from electric utilities under that section.

On April 28, 2004, the EPA extended the public comment period concerning

the proposed mercury regulations until June 29, 2004, two months longer than

originally announced, and stated that it would push back final action in the

rulemaking proceeding until March 15, 2005. Although this extension would appear

to conflict with the EPA’s legal settlement agreement with the NRDC requiring final

agency action on a proposed mercury rule by December 15, 2004, the NRDC claimed

Proposed Rule and Revision, supra note 7, at 193.

A similar model program used to control the interstate transport of nitrogen oxides was

adopted by all 21 states (and the District of Columbia) to which the rule applied.

Id. at 256.

Id. at 257.

Id. at 265-66.

Supplemental Notice for the Proposed National Emission Standards for Hazardous Air

Pollutants; and, in the Alternative, Proposed Standards of Performance for New and Existing

Stationary Sources: Electric Utility Steam Generating Units; Proposed Rule, 69 Fed. Reg.

12398 (signed Feb. 24, 2004).

See Proposed Rule and Revision, supra note 7, at 265-66.

Id. at 2, 51-52, 56.

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prior to the extension that it had formally notified the EPA that it would agree to

extend the settlement deadline until March 15 to allow the agency to extend the

public comment period and undertake further analysis of the proposed rules’ effect.19

Regulation of Electric Utilities under Section 112 of the CAA. Section

112 of the CAA was amended in 1990 to establish National Emissions Standards for

Hazardous Air Pollutants (HAP). Pursuant to this section, the EPA is generally

required to list categories and subcategories of “major sources” and certain “area

sources” of 188 listed HAP, including mercury.20 Upon listing a source category for

HAP, the EPA must establish emission standards that require designated sources to

install MACT that achieve “the maximum degree of reduction in emissions,” taking

into consideration the costs of compliance and non-air quality health and

environmental impacts.21 Standards for new sources of HAP “shall not be less

stringent than the most stringent emissions level that is achieved in practice by the

best controlled similar source.”22 Although standards promulgated for existing

sources may be less stringent than those for new sources, they can be no less

stringent than (1) the average emission limitation achieved by the best performing

12 percent of existing sources, if there are 30 or more sources in the category or

subcategory or (2) the best performing 5 similar sources in categories or

subcategories with less than 30 sources.23

If a source category or subcategory is properly designated as being subject to

emission standards promulgated under section 112, it can only be “de-listed” in

limited circumstances pursuant to section 112(c)(9) of the CAA. For the EPA to “delist” a listed source determined to emit HAP that may result in cancer in humans, a

determination must be made that no source in the category emits HAP in such

quantities as may cause a lifetime risk of cancer greater than one in one million to the

individual in the population that is most exposed to such pollutants from the source.24

In the case of a listed source determined to emit HAP that may result in noncancerous adverse health effects in humans or adverse environmental effects, such

as mercury, a determination must be made that (1) no source in the category emits

HAP at a level exceeding that which is adequate to protect public health with an

Press Release, Natural Resources Defense Council, NRDC Extends Deadline for Final

Rule on Power Plant Pollution (Apr. 27, 2004), avai l able at

[http://www.nrdc.org/media/pressreleases/040427.asp].

42 U.S.C. § 7412(c)(1). A “major source” is any stationary source or group of stationary

sources location within a contiguous area under common control that emits or has the

potential to emit at least 10 tons per year of any HAP or 25 tons per year of any combination

of HAP. 42 U.S.C. § 7412(a)(1). An “area source” is any stationary source of HAP that is

not a major source. 42 U.S.C. § 7412(a)(2).

42 U.S.C. § 7412(d)(2).

42 U.S.C. § 7412(d)(3).

Id.

42 U.S.C. § 7412(c)(9)(B)(i).

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ample margin of safety and (2) no adverse environmental effects will result from the

“de-listing” the source.25

Electric utilities are regulated under a separate provision of section 112 than

other potential sources of HAP. The 1990 CAA amendments required the EPA to

study the hazards to public health reasonably anticipated to be caused by continuing

HAP emissions from electric utilities.26 On the basis of the study’s results, the EPA

was required to regulate such utilities under section 112 if the Administrator found

that such regulation was “appropriate and necessary” given the public health effects

of the utilities’ HAP emissions.27

Regulation under Section 111 of the CAA. Section 111 of the CAA

provides for a somewhat looser and broader standard for regulation of pollutants than

section 112. Section 111(b) requires the Administrator of the EPA to establish

Federal “standards of performance” directly regulating new sources that the

Administrator determines to either cause or contribute significantly to air pollution

that may reasonably be anticipated to endanger public health or welfare.28 With

respect to existing sources, pursuant to section 111(d), each state must submit to the

Administrator for approval an SIP that imposes “standards of performance” and

provides for the implementation and enforcement of such standards for existing

sources of pollutants.29 Section 111(a)(1) defines a “standard of performance” as an

emissions standard for air pollutants that “reflects the degree of emission limitation

achievable through the application of the best system of emission reduction” that the

Administrator determines has been adequately demonstrated, taking into account

costs of achievement and non-air quality health and environmental impacts.30

The precise relationship between sections 111 and 112 of the CAA, and whether

the EPA has authority under section 111 to regulate sources of HAP listed under

section 112, is not expressly clear from the sections’ language. Section 111(b) makes

no mention of section 112. More problematic is the fact that while section 112 does

expressly limit the EPA’s ability to regulate new sources of HAP under section

111(d), the breadth of this limitation is not entirely clear because of conflicting

statutory language. Prior to the 1990 CAA amendments, the express language of

section 111(d) prevented the EPA Administrator from establishing standards of

performance pursuant to the section for any existing source of an emission listed

under section 112.31 In amending the CAA in 1990, however, Congress

simultaneously enacted two amendments to section 111(d) which are arguably

conflicting. The amendment to section 111(d) introduced by the Senate and

described as a “conforming amendment” provides that section 111(d) cannot be used

42 U.S.C. § 7412(c)(9)(B)(ii).

42 U.S.C. § 7412(n)(1).

42 U.S.C. § 7412(n)(1)(A).

42 U.S.C. § 7411(b).

42 U.S.C. § 7411(d).

42 U.S.C. § 7411(a)(1).

See Proposed Rule and Revision, supra note 7, at 181.

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to regulate an existing source for any pollutant listed under section 112(b).32 In

contrast, the House amendment to section 111(d) only prevents the provision from

being used to regulate air pollutants “emitted from a source category which is

regulated under section 112.”33

This difference in language may significantly alter the scope of section 111(d).

Under the Senate amendment, the EPA could not regulate mercury emissions from

electric utilities pursuant to section 111(d), because mercury is listed as an HAP

under section 112(b). In contrast, under one interpretation of the House amendment,

the EPA would be permitted to regulate mercury emissions from electric utilities

pursuant to section 111(d) so long as the EPA had yet to promulgate regulations for

HAP emissions by electric utilities under section112.

It should be noted that while the Statutes at Large includes both the House and

Senate amendments to section 111(d), the United States Code only reflects the

language of the House amendment.34 However, Title 42 of the U.S. Code, which

contains the CAA, has yet to be codified into positive law.35 When the language of

the Statutes at Large conflicts with a corresponding section in the U.S. Code that has

not been codified, the language of the Statutes at Large is controlling.36

Legal Analysis

A decision by the EPA to regulate mercury emissions from electric utilities

pursuant to section 111 is likely to raise three legal concerns. First, does the CAA in

certain circumstances permit the EPA to regulate such emissions under section 111?

Second, even if such authority exists, can the EPA revise its December 2000

regulatory finding and establish a national “cap-and-trade” program? Third, does the

1998 settlement agreement obligate the EPA to regulate mercury emissions from

electric utilities pursuant to section 112 of the CAA? This section will provide

analysis of these issues.

EPA Authority to Regulate Electric Utilities under Section 111 of the

CAA. An agency’s authority to enact regulations is determined by the authority

provided to it by statute. However, the scope of this authority is not always clear,

raising questions as to the ability of an agency to act in a particular manner. Such is

the case in the present situation, where the EPA is considering regulating mercury

emissions from electric utilities under section 111 rather than section 112.

Depending upon how these statutory provisions are interpreted, the EPA may be

Pub. Law 101-549, § 302(a) (Nov. 15, 1990).

Pub. Law 101-549, § 108(g) (Nov. 15, 1990).

42 U.S.C. § 7411(d)(1).

See United States v. Ward, 131 F.3d 335, 339-40 (3d. 1997).

See, e.g. American Bank & Trust Co. v. Dallas County, 463 U.S. 855, 864 (1983); United

States v. Welden, 377 U.S. 95, 98 n.4 (1964); Cheney R.R. Co., Inc. v. Railroad Ret. Bd.,

50 F.3d 1071, 1076 (D.C. Cir. 1995).

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either permitted or prohibited from instituting a “cap-and-trade” program for mercury

emissions from electric utilities under section 111.

In Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc.,37 the

Supreme Court announced the primary criteria the courts would use in reviewing a

legal challenge to an agency’s interpretation of its statutory authority. Although

Chevron has generally been the guiding standard that courts use to determine the

permissibility of an agency’s interpretation of its statutory authority, recent Supreme

Court cases have suggested that Chevron analysis may not always be the appropriate

method with which to determine the permissibility of an agency’s interpretation. It

is possible that the EPA’s interpretation of section 111(d) will not be subjected to

Chevron analysis, but rather a different standard. Accordingly, this section will

analyze the EPA’s interpretation of relevant provisions of the CAA under the

framework of Chevron and, with respect to section 111(d), a potentially relevant nonChevron standard.

Analysis of the EPA’s Interpretation of CAA sections 112 and 111

under Chevron. The Chevron case concerned the EPA’s implementation of the

1977 amendments to the CAA, which in relevant part required the establishment of

a permit program regulating “new or modified major stationary sources” of air

pollution in states that had failed to meet national air quality standards. In

promulgating regulations for the permit program, the EPA interpreted the

legislation’s use of the term “stationary source” so as to allow states to adopt a plantwide definition of the term, meaning that a plant’s multiple emission sources could

be considered within a single “bubble” for purposes of calculating emission rates and

changes thereto. NRDC challenged this action, alleging that the EPA’s

implementation of the term “stationary source” was an impermissible interpretation

of the CAA amendments and was therefore contrary to law.

In resolving the legality of EPA’s interpretation of the CAA, the Court

announced a two-prong test for determining the legitimacy of an agency’s

interpretation of its statutory authority. The first prong of the Chevron test is “the

question whether Congress has directly spoken to the precise question at issue. If the

intent of Congress is clear, that is the end of the matter; for the court, as well as the

agency, must give effect to the unambiguously expressed intent of Congress.”38 A

court may attempt to ascertain congressional intent following “traditional tools of

statutory construction.”39 If congressional intent behind a statute is unclear, the

second prong of the Chevron test is considered: “[W]hether the agency’s

467 U.S. 837 (1984).

Id. at 842-43.

Id. at 843 n.9. Although the Court did not note what these “traditional tools” were, it did

look to the express language of the 1977 CAA amendments and the legislative history of

relevant provisions of the CAA when applying the first prong of this test in Chevron. See

id. at 851-53. Subsequently, the Supreme Court has held that a court’s determination of

congressional intent “must be guided to a degree by common sense as to the manner in

which Congress is likely to delegate a policy decision of....[significant] economic and

political magnitude to an administrative agency.” Food and Drug Admin. v. Brown &

Williamson Tobacco Corp., 529 U.S. 120, 133 (2000).

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[intepretation] is based on a permissible construction of the statute.”40 A reviewing

court does not impose its own interpretation of the statute for that of the agency.

Rather, it assesses whether the agency’s interpretation is a reasonable one.41 In

making this assessment, the court gives deference to the agency’s interpretation.42

The Supreme Court in Chevron noted that the district court had made a proper

determination that the CAA was ambiguous as to the meaning of “stationary source,”

because neither the express language of the Act nor the relevant legislative history

contained any specific comment on the “bubble” concept or addressed whether a

plant-wide definition of a “stationary source” would be permissible.43 Accordingly,

the Court in Chevron found that congressional intent could not be clearly determined

and moved to the second prong of the test. Using this second prong, the Court

determined in Chevron that the EPA’s implementation of the CAA relied on a

reasonable interpretation of “stationary source,” and the Court therefore upheld the

regulation.

The statutory interpretations that the EPA would rely upon to implement its

proposed revision to its December 2000 regulatory finding and its proposed “capand-trade” program under section 111 might be subjected to legal challenges by

opponents of these actions. If challenged, the EPA will almost certainly argue that

the interpretations of sections 111 and 112 that form the legal basis behind the

agency’s proposed revision and rule are legally valid under the Chevron test.

The first question that the EPA would likely need to address concerns the

reinterpretation of section 112(n)(1)(A) that forms the basis for the revision of its

December 2000 regulatory finding. Although the EPA initially found that regulation

of electric utilities was both appropriate and necessary, it now concludes that while

such regulation would be appropriate under section 112, it is not “necessary” because

such power plants could be adequately regulated under section 111. Accordingly,

the EPA argues, it does not have legal authority to regulate mercury emissions under

section 112, because section 112(n)(1)(A) only permits such regulation when it is

both appropriate and necessary.44

If challenged, the EPA will likely be able to argue that its interpretation of

section 112(n)(1)(A) fulfills the Chevron test. Indeed, the EPA might argue that its

interpretation of section 112(n)(1)(A) is in accordance with express statutory

language and there is no need for the court to even proceed to the second prong of

Chevron.45 Section 112(n)(1)(A) does not say that the EPA can regulate electric

Chevron, 467 U.S. at 843.

Id. at 844.

Id.

See Proposed Rule and Revision, supra note 7, at 19.

This argument might be further bolstered by portions of the limited legislative history

behind the 1990 amendments to the CAA. The EPA quotes Congressman Michael Oxley,

(continued...)

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utilities under section 112 if it finds such regulation to be either appropriate or

necessary; rather, it permits such regulation only if the EPA finds such regulation to

be “appropriate and necessary.”46 Even assuming that a court finds that the

congressional intent behind section 112(n)(1)(A) is ambiguous and proceeds to the

second prong of the Chevron test, there does not appear to be any obvious basis to

argue that the EPA’s interpretation of the phrase “appropriate and necessary” is

unreasonable. Accordingly, the EPA has a strong argument that its interpretation of

its statutory authority under section 112(n)(1)(A) is permissible, and that its

December 2000 regulatory finding that electric utilities should be regulated under

section 112 can be revised if the EPA no longer has reason to believe such regulation

is both appropriate and necessary.

The second question of statutory interpretation likely to be raised, assuming that

the EPA adopts the proposed “cap-and-trade” program under section 111, is whether

HAP emissions from electric utilities can be regulated under that section. Assuming

that the EPA’s interpretation of section 111 is challenged, there is reason to believe

that a court could conclude that congressional intent is ambiguous as to whether HAP

emissions from electric utilities can be regulated under section 111. As discussed

previously, section 111(b) makes no reference to section 112, and section 111(d)

contains apparently conflicting amendments that would either prohibit the EPA from

regulating existing sources for HAP listed under section 112 or, alternatively, permit

such regulation if the HAP source was not otherwise regulated under section 112.47

It therefore appears that a court hearing a challenge to the EPA’s authority under

section 111 to regulate mercury emissions from electric utilities could move to the

second prong of Chevron analysis and assess whether the EPA’s interpretation of the

section was reasonable. The EPA may argue that its interpretation is legally

permissible because the Senate and House amendments represent conflicting

congressional intent as to the scope of the EPA’s authority to regulate under section

111, and the EPA’s reinterpretation of section 111(d) harmonizes these conflicting

amendments. The Supreme Court has previously recognized that when an agency

interpretation of its statutory authority “represents a reasonable accommodation of

conflicting policies that were committed to the agency’s care by the statute, [the

court] should not disturb it unless it appears from the statute or its legislative history

that the accommodation is not one that Congress would have sanctioned.”48

The EPA might argue that its interpretation of section 111 is a “reasonable

accommodation” given the conflicting language of the amendments to section 111(d).

(...continued)

a member of the conference committee on the 1990 CAA amendments, as stating that

Congress intended section 112 to regulate “only those units that...[the Administrator]

determines — after taking into account compliance with all other provisions of the

act...-have been demonstrated to cause a significant threat of serious adverse affects on

public health.”Id. at 47.

42 U.S.C. § 7412(n)(1)(A) (emphasis added).

See supra pp. 4-5.

United States v. Shimer, 367 U.S. 374, 383 (1961) (quoted by Chevron, 467 U.S. at 845).

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Further, the EPA may argue that it is unlikely that Congress would have been

opposed to such an accommodation, given that Congress’s stated purpose in passing

the CAA was “to protect and enhance the quality of the Nation’s air resources so as

to promote the public health and welfare....”49 Permitting the EPA to regulate HAP

emissions from electric power plants exclusively under section112 would limit such

regulation only to circumstances where the imposition of section 112 MACT controls

was “appropriate and necessary” for the public health. The EPA might argue that

permitting the regulation of HAP from electric utilities under section 111 would

enable the EPA to address public health concerns caused by such emissions even in

situations where such concern would not be sufficient to warrant regulation under

section 112.

On the other hand, opponents of the EPA’s proposed “cap-and-trade” program

might dispute the reasonableness of the EPA’s interpretation of its statutory authority

under section 111. They might argue that the fact that Congress chose to list specific

HAP under section 112 indicated that Congress believed that these pollutants

required stricter measures than those permitted under section 111, and the EPA is

now acting contrary to this intent by attempting to regulate an HAP source under a

less stringent standard than Congress desired.

Opponents may also note that prior to the 1990 Amendments, the explicit

language of section 111(d) prevented it from being used to regulate existing sources

of HAP listed under section 112, and the Senate amendment reflects this continued

understanding. In the limited legislative history on the 1990 amendments to section

111(d) of the CAA, there does not appear to be any significant, specific discussion

of the House amendment. Opponents of the EPA’s “cap-and-trade” program might

therefore argue that this indicates that Congress did not intend the amendment to

permit the EPA to regulate HAP emissions under a different section of the CAA than

it had previously. Further, CRS has been unable to find an example of the EPA

acting pursuant to section 111(d) to regulate an existing source for an HAP listed

under section 112. Given these factors, opponents of the EPA’s proposed “cap-andtrade” program may argue that it is unreasonable for the EPA to interpret section 111

as permitting the regulation of sources of HAP listed under section 112.

The third question of statutory interpretation that may be raised is whether the

language of section 111(d), which requires the EPA to establish standards of

performance for existing sources that represent “the best system of emission

reduction...which the Administrator determines has been adequately demonstrated,”50

provides the EPA with authority to establish a “cap-and-trade” program for mercury

emissions from electric utilities. Assuming for purposes of discussion that a

reviewing court finds that section 111(d) can be used to regulate mercury emissions

from electric utilities, a straightforward application of the Chevron test might suggest

that the EPA could establish a “cap-and-trade” program for these emissions if the

Administrator concluded that it was the “best system” for reducing such emissions.

42 U.S.C. § 7401(b)(1).

42 U.S.C. § 7411(a)(1) (defining the meaning of “standards of performance” as used under

section 111(d)).

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Alternative Analysis of the EPA’s Interpretation of section 111(d)

Not Relying on Chevron. While application of the Chevron test has been the

primary means for the courts to determine the legality of an agency’s statutory

interpretation for almost two decades, recent Supreme Court cases indicate that the

Chevron test may not always be the appropriate means to evaluate agency

interpretations. In 2000, for example, the Court held that Chevron deference does not

apply to interpretations contained in opinion letters, agency manuals, and similar

informal issuances,51 though it stressed that Chevron deference “does apply to an

agency interpretation contained in a regulation.”52 More relevant to the present case,

the Court recognized in the same term that while Chevron deference is appropriate

when a “statute’s ambiguity constitutes an implicit delegation from Congress to the

agency to fill in the statutory gaps,”53 in a limited number of cases “there may be

reason to hesitate before concluding that Congress has intended such an implicit

delegation.”54

The issue of agency interpretation in the Chevron line of cases is arguably

different from the issue concerning the EPA’s reinterpretation of section 111(d). The

Chevron test may be understood to apply in instances where the scope of a

congressional delegation of authority is ambiguous because the legislation at issue

does not speak directly to the matter that the agency is attempting to regulate.55 In

the present case, however, Congress did speak directly to the question of whether the

EPA could regulate mercury emissions from electric utilities under section 111, but

did so in a manner that was self-contradicting. Accordingly, a court hearing a

challenge to the EPA’s interpretation of section 111 may decide that Chevron is an

inappropriate starting point for assessing the legitimacy of the agency’s

interpretation.

Although it was decided prior to Chevron, the D.C. Circuit’s decision in

Citizens to Save Spencer County v. Environmental Protection Agency56 dealt with a

situation very similar to the present case and might be used to resolve the legality of

the EPA’s interpretation of section 111. The Spencer County case concerned the

EPA’s implementation of conflicting congressional directives resulting from the

1977 CAA amendments. Whereas one provision of the amended CAA prohibited

Christenson v. Harris County, 529 U.S. 576, 587 (2000).

Id. See also United States v. Mead Corp., 533 U.S. 218 (2001) (holding that Chevron

deference is typically appropriate only when evaluating agency actions having the force of

law, and not when evaluating agency rulings that are only binding on the agency and/or a

particular party).

Brown & Williamson Tobacco Corp., 529 U.S. at 159 (2000).

Id.

See id. at 133 (“[I]f Congress has not specifically addressed the question, a reviewing court

must respect the agency’s construction of the statute so long as it is permissible”) (internal

citations omitted); Auer v. Robbins, 519 U.S. 452, 457 (1997) (“Because Congress has not

directly spoken to the precise question at issue, we must sustain...[the agency’s] approach

so long as it is based on a permissible construction of the statute”) (internal citations

omitted).

600 F.2d 844 (D.C. Cir. 1979).

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construction of any major pollution-emitting facility unless certain substantive

requirements had been met, another provision suggested that less stringent

construction requirements contained in state plans made pursuant to preexisting

federal regulations remained in effect until revised state plans had been approved.57

In regulations implementing the 1977 CAA amendments, the EPA pursued a “middle

path” that attempted to harmonize these conflicting congressional directives.58 In

upholding the EPA’s regulations harmonizing the conflicting CAA provisions, the

D.C. Circuit stated that it was “guided by the rule that the maximum possible effect

should be afforded to all statutory provisions, and, whenever possible, none of those

provisions rendered null or void.”59 To appropriately harmonize conflicting

provisions, the court declared that an agency should:

[L]ook for guidance to the statute as a whole and to consider the

underlying goals and purposes of the legislature in enacting the statute,

while avoiding unnecessary hardship or surprise to affected parties and

remaining within the general statutory bounds prescribed. Only by this

approach can legislative purposes and statutory instructions be given the

greatest possible practical effect.60

The Spencer County court concluded that if an agency acts “in a reasonable and

responsible manner” in exercising the perhaps inadvertent discretion provided by

conflicting statutory provisions, the result it reaches should be upheld.61 However,

the court noted that it is ultimately the reviewing court’s responsibility “to determine

whether the administering agency in the present case had authority to devise its

‘middle path,’ whether it pursued the appropriate procedural route in so doing, and

whether its results are substantively reasonable.”62

Opponents of the EPA’s reinterpretation of section 111 are likely to argue that

the agency’s interpretation of the conflicting House and Senate amendments is not

in accordance with the harmonization principle detailed in Spencer County.

Opponents will likely argue that rather than attempting to harmonize the

amendments, the EPA has instead chosen to exclusively adopt the House amendment

permitting regulation under section 111(d) of emission sources not regulated under

section 112, while ignoring the Senate amendment’s prohibition on the application

of section 111(d) to regulate any HAP listed under section 112. Opponents would

likely argue that to the extent that the amendments should be harmonized, it should

be in a manner giving preference to the Senate amendment, because the Senate

amendment reflects Congress’s longstanding intent to have HAP that are listed under

Id. at 851-54.

See id. at 859.

Id. at 870.

Id. at 871.

Id. at 872.

Citizens of Spencer County, 600 F.2d at 873.

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section 112 regulated exclusively under that provision, and nothing in the legislative

history of the House amendment reveals an intent to reverse this position.63

On the other hand, the EPA may counter that its reinterpretation of section 111

is in accordance with the harmonization principle detailed in Spencer County and

gives an appropriate degree of preference to the Senate amendment. The EPA

concedes that application of the Senate amendment alone would prevent the agency

from using section 111 to regulate any HAP emission listed under section 112,

including mercury emissions from electric utilities,64 and that the Senate amendment

“reflects the Senate’s intent to retain the pre-1990 approach of precluding regulation

under CAA section 111(d) for any HAP that is listed under section 112(b).65 The

EPA notes, however, that a literal reading of the House amendment, which prohibits

section 111(d) from applying to any pollutant “emitted from a source category which

is regulated under section 112,” would prevent the EPA from regulating both HAP

and non-HAP emissions from sources regulated under section 112, even though

section 112 is only used to regulate HAP emissions.66 The EPA therefore argues that

its reinterpretation of section 111(d) gives some effect to both amendments:

First, [the reinterpretation] gives effect to the Senate’s desire to focus on

HAP listed under section 112(b), rather than applying the section 111(d)

exclusion to non-HAP emitted from a source category regulated under

section 112, which a literal reading of the House amendment would do.

Second, it gives effect to the House’s apparent desire to increase the scope

of the EPA’s authority under section 111(d) and to avoid duplicative

regulation of HAP for a particular source category.67

The EPA alleges that its reinterpretation of section 111(d) is a reasonable one that

gives more effect to the Senate amendment than to the House amendment; a

preference the EPA deems appropriate because a literal reading of the House

amendment “would be inconsistent with the general thrust of the 1990 [CAA]

amendments.”68 Using this analysis, the EPA might argue that its reinterpretation of

section 111(d) is a reasonable effort to harmonize explicit, conflicting congressional

directives in a manner that gives weight to the overall purpose behind the CAA, and

Opponents might also argue that the House amendment conflicts with the purposes behind

the CAA, for reasons discussed at supra p. 10, and that the EPA should therefore ignore it

for purposes of interpreting section 111(d) of the CAA. Both the D.C. Circuit and Supreme

Court have recognized that, in rare circumstances, the plain meaning of a statute does not

control its interpretation by the courts when “the literal application of [the] statute will

produce a result demonstrably at odds with the intentions of its drafters.” Environmental

Defense Fund v. E.P.A., 82 F.3d 451, 468 (D.C. Cir. 1996) (quoting United States v. Ron

Pair Enterprises, Inc., 489 U.S. 235, 242 (1989)).

Proposed Rule and Revision, supra note 7 at 184-85.

Id. at 185.

Id.

Id. at 186.

Id.

CRS-14

that this harmonization effort accordingly should be upheld by a reviewing court

under either Chevron or Spencer County analysis.

The EPA’s Discretion to Revise Previous Regulatory Findings and

Institute a “Cap-and-Trade Program”. Although the EPA’s interpretation of

its statutory authority might be legally permissible, this does not necessarily mean

that every proposed regulation issued in accordance with this interpretation would be

upheld by the courts. A court reviewing actions taken by the agency may find them

to be unlawful if they are “arbitrary, capricious, an abuse of discretion, or otherwise

not in accordance with law.”69 By statute, the EPA is required to engage in a “noticeand-comment” rulemaking procedure concerning any proposed emission regulation

under CAA sections 111 or 112, whereby the EPA must provide notice of the

proposed action so that affected parties can comment on it.70 Courts have generally

required agencies that engage in “notice-and-comment” rulemaking to provide

detailed explanations of final rules which respond to notable comments and

arguments submitted by interested parties.71

In the present case, the EPA’s proposed “cap-and-trade” program and revision

of its December 2000 regulatory finding are based on the premise that regulation

under section 112 is not appropriate and necessary because the public health hazards

of mercury emissions from electric utilities can be adequately addressed through

regulation under section 111. Accordingly, the EPA has initiated a notice and

comment rulemaking procedure in which interested parties are provided with the

opportunity to comment on the proposed rule and regulatory revision prior to the

EPA issuing a final decision. If the EPA ultimately decides to revise its December

2000 finding and implement a “cap-and-trade” program, it will likely need to

adequately address the comments and data it receives during the notice and comment

proceeding for its final action to be upheld by a reviewing court.

The fact that the EPA previously concluded in December 2000 that the

regulation of mercury emissions from electric utilities was appropriate and necessary

under section 112 might increase the agency’s burden in proving that its subsequent

revisions are not arbitrary and capricious. The Supreme Court has long recognized

that “regulatory agencies do not establish rules of conduct to last forever.”72

Changing circumstances and the availability of new information requires that an

42 U.S.C. § 7607(d)(9)(A).

See 42 U.S.C. §§ 7607(d)(1),(5)-(6).

See, e.g., Action on Smoking & Health v. Civil Aeronautics Bd., 699 F.2d 1209, 1217-19

(D.C. Cir. 1983) (setting aside an agency rule in part because the agency failed to consider

several regulations suggested by commenters); National Tour Brokers Ass’n v. U. S., 591

F.2d 896 (D.C. Cir. 1978) ( recognizing that the purpose of comments is to enable an agency

to consider and benefit from the expertise of commenters when making rules); Automotive

Parts & Accessories Ass’n v. Boyd, 407 F.2d 330, 338 (D.C. Cir. 1968) (requiring agencies

to respond to significant issues raised in the rulemaking comments); see also 42 U.S.C. §

7607(d)(6)(B) (“The promulgated rule shall also be accompanied by a response to each of

the significant comments, criticisms, and new data submitted in written or oral presentations

during the comment period”).

American Trucking Assoc. v. Atchison, T. & S.F.R. Co., 387 U.S. 397 (1967).

CRS-15

agency “must be given ample latitude” to adapt and revise its rules and policies.73

Nevertheless, there is a presumption that a “settled course of behavior embodies the

agency’s informed judgment that, by pursuing that course, it will carry out the

policies committed to it by Congress...[and there is] a presumption that those policies

will be carried out best if the settled rule is adhered to.”74

Accordingly, an agency changing its regulatory course by rescinding a previous

rule is often required to supply “a reasoned analysis” for the change beyond that

which might have been required when it did not act in the first instance.75 In order

to regulate mercury emissions under section 111 of the CAA rather than section 112,

the EPA might need to overcome the presumption that the conclusions reached in its

December 2000 regulatory finding were accurate.

A further potential obstacle to EPA regulation of mercury emissions from

electric utilities under section 112 is the fact that the EPA’s earlier decision to list

such emissions for regulation might thereby prevent their subsequent regulation

under section 111. As discussed earlier, section 112(c)(9) requires that once an HAP

source is listed for regulation under section 112, it cannot be “de-listed” unless new

information essentially reveals that the source’s designated HAP emissions pose no

public health threat.76

The EPA argues that this requirement is inapposite in the present case, because

electric utilities were listed for regulation under section 112 only because the EPA

had failed to consider the possibility of regulating these sources under section 111.77

The EPA analogizes this situation with other times when it has “de-listed” a source

category without following the criteria of section 112(c)(9), after the agency had

determined that it lacked a factual predicate for initially listing the category.78 For

example, in 2002 the EPA removed asphalt concrete manufacturers from the list of

major sources to be regulated under section 112 after the agency concluded that these

sources did not emit or have the potential to emit a sufficient amount of HAP to

satisfy the statutory definition of a “major source.”79

Opponents might argue, however, that reinterpretation of section 112 should not

be grounds to summarily rescind previous designations that were based on an equally

reasonable yet contrary interpretation of the statute. Opponents might also argue that

it is inappropriate for the EPA to analogize instances where factual error was

responsible for misdesignation to the present case, where there is no dispute over the

Motor Vehicle Assoc. of U.S., Inc. v. State Farm Mutual Auto. Insurance Co., 463 U.S.

29, 42 (1984).

Id. (quoting Atchison, T. & S.F.R. Co. v. Wichita Bd. of Trade, 412 U.S. 800, 807-08

(1973)).

Id.

See supra p.3.

Proposed Rule and Revision, supra note 7 at 205-206.

Id.

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public health threat posed by mercury emissions from electric utilities, but rather

whether the EPA can interpret section 112 differently than it had previously.

Implications of the 1998 Settlement Agreement upon the Manner in

which the EPA Can Regulate Electric Utilities. A legal settlement agreement

is generally used to end or avoid litigation between parties, by obligating one or more

of the parties to take a particular course of action. The remedy available when a

settlement agreement is breached is dependant upon the nature of the agreement and

its express provisions.80 For a settlement agreement to act as controlling law that

binds an agency to take a particular course of action with respect to rulemaking, it

generally needs to be incorporated into a judicial order as a consent decree.81 If a

settlement agreement between an agency and a private party concerning agency

rulemaking has not been incorporated into a court order, the only remedy available

to the non-breaching party might be to move for the original case to be reopened.82

In that case, “the agency is back in its presettlement position, and the agreement itself

should not be seen as a significant limitation on the agency’s ability to change its

mind.”83

The 1998 settlement agreement between the EPA and NRDC was a

modification of an earlier 1994 agreement between the two parties that was filed with

the D.C. Circuit. According to the NRDC, however, neither the 1994 nor 1998

settlement agreement was incorporated into a judicial order. It therefore seems that

even if it could be argued that the EPA would be in breach of the settlement

agreement if it chose to regulate mercury emissions from electric utilities under

section 111 rather than 112 of the CAA, the NRDC’s remedy might be limited to

moving to reopen the case forming the underlying basis behind the breached

agreement. Accordingly, it does not appear likely that the 1998 settlement agreement

could be used to restrict the EPA’s rulemaking discretion.

For a discussion of the diverse nature of settlement agreements and their potential effect

on EPA rulemaking, see Jeffrey M. Gaba, Informal Rulemaking by Settlement Agreement,

73 GEO L.J. 1241 (1985).

A consent decree is a legal document approved by a court that formalizes an agreement

between parties in a case so as to avoid further litigation. The consent decree itself is “an

agreement that the parties desire and expect will be ... enforceable as ... a judicial decree that

is subject to the rules generally applicable to other judgments and decrees.” Frew v.

Hawkins, 2004 WL 57266 (U.S. Sup. Ct. Jan. 14, 2004) (quoting Rufo v. Inmates of Suffolk

County Jail, 502 U.S. 367, 378 (1992)). See FED. R. CIV. P. 54(a) (defining a “judgment”

as including “a decree and any order from which an appeal lies”); Gorsuch, 718 F.2d at

1125 (declaring that a consent decree “must be treated ‘as a judicial act’”) (quoting United

States v. Swift & Co., 286 U.S. 106, 115 (1932)).

See Gaba, supra note 80, at 1265 (Agency compliance with a settlement agreement not

incorporated into a judicial order “would presumably only dissolve the stay and accelerate

the underlying lawsuit”); Natural Resources Defense Council, Inc. v. Reilly, 781 F.Supp.

806, 807 (D.D.C. 1992) (discussing NRDC moving to reopen case against EPA after EPA

breached settlement agreement not incorporated into a judicial order).

Gaba, supra note 80, at 1265.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.