Natural Resources Defense Council, Inc. v. U.S. Environmental Protection Agency

The objective of the Clean Water Act is to "restore and maintain the chemical, physical, and biological integrity of the Nation's waters." 33 U.S.C. Sec. 1251 (1982). Under the Act, the discharge of any pollutant into the navigable waters of the United States is unlawful. Id. Sec. 1311(a). This basic rule admits of a critical exception--the discharge of pollutants is permitted if the source obtains and complies with a permit that limits the amounts and kinds of pollutants which can lawfully be discharged. Thus, the cornerstone of the Clean Water Act's pollution control scheme is the National Pollution Discharge Elimination System (NPDES) permit program, established under the Federal Water Pollution Control Act Amendments of 1972. See 33 U.S.C. Sec. 1342 (1982).

The original regulations implementing the NPDES program were promulgated by the Environmental Protection Agency in 1972 and 1973. Prompted by its experience during the "first round" of permitting, as well as statutory changes wrought by the Clean Water Act Amendments of 1977, EPA comprehensively revised the NPDES regulations in 1979. 44 Fed.Reg. 32,854 (June 7, 1979). Petitions for review of these regulations were filed in this and other circuits by numerous challengers, including trade associations, corporations, the Natural Resources Defense Council (NRDC), and Citizens for a Better Environment (CBE). Eventually, all petitions for review of both sets of regulations were consolidated in this court. NRDC v. EPA, 673 F.2d 392 (D.C.Cir.1980), cert. denied sub nom. Chemical Manufacturers Association v. EPA, 459 U.S. 879, 103 S.Ct. 175, 74 L.Ed.2d 143 (1982); Virginia Electric and Power Co. v. EPA, 655 F.2d 534 (4th Cir.1981).1 At that time, the litigants identified about 55 issues under challenge. See Status Reports of Industry NPDES Petitioners, Respondents, and NRDC and CBE (filed Sept. 14, 1981).

After almost two years of settlement negotiations, EPA and the industry representatives (Industry) entered into an NPDES Settlement Agreement (Agreement) (filed June 9, 1982) covering 27 of 47 issues raised by Industry's challenge.2 In the wake of this development, our court remanded the record to the agency to permit implementation of the Agreement. Order (Aug. 6, 1982). After notice and comment, EPA promulgated final revisions to the NPDES regulations. 49 Fed.Reg. 37,997 (Sept. 26, 1984). By virtue of the Agreement, Industry signatories were free to renew their challenges to the extent that the final regulations were not substantially the same as or altered the meaning of the terms of the Agreement. Because the final regulations reflected various changes from the Agreement, another flurry of petitions for review, both new and amended, were filed and consolidated in this court.

This opinion addresses the various challenges mounted by the Industry petitioners, on the one hand, and NRDC, on the other, to regulations which (1) define "new source"; (2) grant a ten-year grace period to new sources from more stringent technology-based standards of performance; (3) require permit applicants to identify all toxic pollutants used or manufactured in the industrial process; and (4) prohibit "bypasses," that is, diversions of waste streams from effluent treatment facilities. Finally, we address petitioners' challenges to an issue arising under both the Clean Water Act and the National Environmental Policy Act of 1969 (NEPA), 42 U.S.C. Secs. 4321-4347 (1982)--whether EPA may ban the construction of new sources pending issuance of a permit.3 For the reasons that follow, we deny the petitions for review on each of these issues save for the construction ban.

* The fundamental premise of the Clean Water Act is that "the discharge of any pollutant by any person shall be unlawful" except as otherwise permitted under the Act. 33 U.S.C. Sec. 1311(a) (1982). A "discharge of a pollutant" is defined, in pertinent part, as "any addition of any pollutant to [the waters of the United States] from any point source." Id. Sec. 1362(12)(A). The term "pollutant" is broadly defined to include, among other things, solid waste; industrial, municipal, and agricultural waste; sewage sludge; biological or radioactive materials; wrecked or discarded equipment; heat; rock; sand; and cellar dirt. Id. Sec. 1362(6). A "point source" is "any discernible, confined and discrete conveyance." Id. Sec. 1362(14).

Thus, the Act allows the discharge of pollutants from a point source only in compliance with limitations established in the Act. The Act imposes effluent limitations4 through two programs. The first applies water-quality based standards. Id. Sec. 1313. It imposes on a point source effluent limitations that are based on the amounts and kinds of pollutants in the water in which the point source discharges. Id. Sec. 1312(a). The second applies technology-based standards. It imposes on a point source effluent limitations based on how much of a reduction technology can achieve. Id. Secs. 1311(b), (e), 1314(b).

To describe briefly the second approach, technology-based effluent limitations, as their name suggests, derive from standards formulated with reference to pollution control technology. See id. Sec. 1314(b). The standard applicable in a particular case depends on the kind of pollutant--toxic, conventional, or non-conventional5--and on whether the point source is a new or existing source.6 Under section 301, existing sources must achieve effluent limits on nonconventional pollutants that reflect the reduction in effluents that can be achieved through "the application of the best available technology economically achievable." Id. Sec. 1311(b)(2)(A). This is known as the "BAT" standard. New sources, on the other hand, are subject to stricter effluent limitations with respect to nonconventional pollutants. Section 306 prescribes new source performance standards (NSPS) that must reflect the "best available demonstrated control technology." Id. Sec. 1316(a)(1). This more stringent standard for new sources is known as the "BACT" standard.7 Toxic pollutants, whether from new or existing sources, are subject to effluent limitations based on application of the BAT standard. Id. Sec. 1317(a)(2). Finally, by 1984 new and existing sources were to achieve effluent reductions in "conventional" pollutants that reflect the application of the "best conventional pollutant control technology," known as a "BCT" standard. Id. Secs. 1311(b)(2)(E), 1314(a)(4), (b)(4)(B).

In addition to technology-based standards, Section 302 of the Act provides for water-quality related effluent limitations. These limitations supplement technology-based standards and protect specific bodies of water. Id. Sec. 1312. Whenever a technology-based effluent limitation is insufficient to make a particular body of water fit for the uses for which it is needed, the EPA is to devise a water-quality based limitation that will be sufficient to the task. Id. Sec. 1312(a).

These national standards establish a nationwide floor for the achievement of pollution control. At the same time, the Act contemplates the delegation of pemit-writing and enforcement authority (as well as some standard-setting authority) to the several States. To date, thirty-seven States have assumed responsibility for issuing NPDES permits.

Both national and state effluent standards are enforced through the NPDES permit program. The NPDES permits thus "transform generally applicable effluent limitations and other standards ... into the obligations (including a timetable for compliance) of the individual discharger." EPA v. California ex rel. State Water Resources Control Board, 426 U.S. 200, 205, 96 S.Ct. 2022, 2025, 48 L.Ed.2d 578 (1976). All dischargers are required to obtain a permit, which is issued after public notice and an opportunity for public hearing. 33 U.S.C. Sec. 1342(a)(1), (b)(3).

Permits are issued only so long as the point source meets all applicable effluent limitations. Id. Sec. 1342(a)(1). If no national standards have been promulgated for a particular category of point sources, the permit writer is authorized to use, on a case-by-case basis, "best professional judgment" to impose "such conditions as the permit writer determines are necessary to carry out the provisions of [the Clean Water Act.]" Id. Thus, compliance with a permit is generally deemed to constitute compliance with the Act's requirements. Id. Sec. 1342(k).

The effluent limitations set forth in an NPDES permit are ordinarily drafted in terms of limitations on the amount, rate, or concentration of a specific pollutant. Permits may also include limitations on key generic parameters, such as pH or biochemical oxygen demand (BOD).8 Permits generally include other provisions, such as monitoring and reporting requirements, compliance schedules, and management practices. See id. Secs. 1314, 1318, 1342(a)(2).

As should now be evident, the comprehensive NPDES regulations are pivotal to implementation of the Clean Water Act's permit scheme. They include the full panoply of procedural and substantive requirements, including elaborations upon the statutory definitions, state program requirements, conditions to be incorporated into NPDES permits, and procedural requirements for revising or challenging a permit. It is to various portions of these final NPDES regulations that the present challenges are directed.

It is well established that the judiciary's standard of review over such agency regulations is deferential. A "presumption of regularity" extends to agency rulemakings. Motor Vehicle Manufacturers Association v. State Farm Mutual Automobile Insurance Co., 463 U.S. 29, 43 n. 9, 103 S.Ct. 2856, 2866 n. 9, 77 L.Ed.2d 443 (1983). Under the standard of review laid down by Congress, such regulations may be set aside only if they are arbitrary or capricious, unsupported by the record, outside the scope of authority delegated to the agency by the operative statute, or not in accordance with law. 5 U.S.C. Sec. 706(2)(A) (1982). As elaborated by the case law, an agency rule is arbitrary and capricious if the agency relies upon improper factors, ignores important arguments or evidence, fails to articulate a reasoned basis for the rule, or produces an explanation that is "so implausible that it could not be ascribed to a difference in view or the product of agency expertise." State Farm, 463 U.S. at 43, 103 S.Ct. at 2867.

We are also mindful that EPA is in various respects construing the statute it is charged with enforcing. In such cases, we are to look to the statute and, if necessary, legislative history to divine the intent of Congress, which of course binds both agency and court. If Congress has not spoken to the "precise question at issue," that is, if Congress' intent on the issue at hand is unclear, then the agency's interpretation must be sustained if it is reasonable in light of the language, legislative history, and policies of the statute. Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837, 842-45, 104 S.Ct. 2778, 2781-83, 81 L.Ed.2d 694 (1984); see also United States v. Riverside Bayview Homes, Inc., 474 U.S. 121, 106 S.Ct. 455, 461, 88 L.Ed.2d 419 (1985); Chemical Manufacturers Association v. NRDC, 470 U.S. 116, 105 S.Ct. 1102, 1108, 84 L.Ed.2d 90 (1985); I.N.S. v. Cardoza-Fonseca, --- U.S. ----, 107 S.Ct. 1207, 1221-22, 94 L.Ed.2d 434 (1987).

We are, as to some aspects of this case, confronted with EPA's modifications of positions previously advanced by the agency and incorporated in the Settlement Agreement. An agency's change of course with respect to a particular policy does not in itself suggest a lack of reasoned decisionmaking. To the contrary, an agency volte face may evidence careful and thorough evaluation of the policy at issue. Analogously, the agency may promulgate a final rule that differs from the proposed rule, without triggering a new round of public commentary, if the changes represent a "logical outgrowth" of the prior notice and comments. American Paper Institute v. EPA, 660 F.2d 954, 959 n. 13 (4th Cir.1981); International Harvester Co. v. Ruckelshaus, 478 F.2d 615, 632 n. 51 (D.C.Cir.1973). We should also observe that a final rule which declines to embrace a proposed policy change and stays the course with the agency's original approach can be "positive evidence of careful decisionmaking." Small Refiner Lead Phase-Down Task Force v. EPA, 705 F.2d 506, 527 (D.C.Cir.1983). The ultimate issue is, of course, whether the agency engaged in reasoned decisionmaking. With these general principles in mind, we turn to the specific challenges addressed in this opinion.

The Natural Resources Defense Council contends that the regulatory definition of "new source," 40 C.F.R. Sec. 122.2 (1985),9 is inconsistent with the language, legislative history, and policies of the Clean Water Act. As we noted earlier, "new sources" are subject to special treatment under the Act. Section 306 of the Act provides for "new source performance standards," which are generally more stringent than standards for existing sources. 33 U.S.C. Sec. 1316 (1982). See 49 Fed.Reg. at 38,043. Additionally, new sources are ineligible for variances from performance standards; variances are, on the other hand, potentially available to existing sources. See E.I. Dupont deNemours & Co. v. Train, 430 U.S. 112, 138, 97 S.Ct. 965, 980, 51 L.Ed.2d 204 (1977). Finally, in contrast to existing sources, NPDES permits for new sources are considered "major Federal actions" subject to NEPA's requirements, 33 U.S.C. Sec. 1371(c)(1).

"New source" is defined by section 306 as "any source, the construction of which is commenced after the publication of proposed [new source performance standards] which will be applicable to that source, if such standard is thereafter promulgated in accordance with this section. " 33 U.S.C. Sec. 1316(a)(2) (emphasis added). Section 306 expressly requires that final regulations be promulgated within 120 days after publication of proposed regulations. Id. Sec. 1316(b)(1)(B). Relying upon this latter provision, EPA in the regulation now challenged by NRDC defines "new source" as a facility on which construction commences after the proposal of applicable new source performance standards "but only if the standards are promulgated in accordance with section 306 within 120 days of their proposal." 40 C.F.R. Sec. 122.2. See supra note 6. Unconvinced by EPA's approach in tracking the statutory language itself, NRDC argues that the Clean Water Act mandates application of new source performance standards to all facilities commenced after publication of proposed regulations, regardless of when the regulations are issued in final form.

* The obvious difficulty of NRDC's interpretation is that it rests upon one portion of the statutory definition and ignores the remaining part. To read out of a statutory provision a clause setting forth a specific condition or trigger to the provision's applicability is, we should have thought, an entirely unacceptable method of construing statutes. 2A Sutherland, Statutes and Statutory Construction Secs. 46.05, .06 (C. Sands rev. 4th ed. 1984). If there were any doubt that statutes must be read as a whole, and we cannot fathom how there would be, we will reaffirm that settled method of reading statutes. See, e.g., National Soft Drink Association v. Block, 721 F.2d 1348, 1352 (D.C.Cir.1983); National Insulation Transportation Committee v. ICC, 683 F.2d 533, 537 (D.C.Cir.1982); Greyhound Corp. v. ICC, 668 F.2d 1354, 1362 (D.C.Cir.1981). See generally Frankfurter, Some Reflections on the Reading of the Statutes, 47 Colum L.Rev. 527, 533, 538 (1947).

NRDC's interpretation, while simplifying the statute, has the admitted and untoward effect of blue penciling out express conditional language in the statute. That language clearly seems intended to have "restrictive significance." See Reiter v. Sonotone Corp., 442 U.S. 330, 339, 99 S.Ct. 2326, 2331, 60 L.Ed.2d 931 (1979). It would be illegitimate for the judiciary, in pursuit of some overriding Congressional goal (such as eliminating water pollution), to tear asunder a specific provision which Congress saw fit to enact. It scarcely needs repeating that statutes are rarely, if ever, unidimensionally directed towards achieving or vindicating a single public policy. See Board of Governors v. Dimension Financial Corp., 474 U.S. 361, 106 S.Ct. 681, 689, 88 L.Ed.2d 691 (1986); International Brotherhood of Teamsters, et al. v. Interstate Commerce Commission, 801 F.2d 1423, 1430 (D.C.Cir.1986), pet'n for reh'g granted, 818 F.2d 87 (D.C.Cir.1987). While a broad policy goal may well be the animating force driving the legislation, achievement of actual passage of the measure invariably requires compromise and accommodation. Board of Governors, 106 S.Ct. at 689. So here in this landmark environmental statute, the pertinent definition is quite clear, encompassing facilities commenced after the publication of proposed standards if that standard is thereafter promulgated in accordance with the subsequent provision of section 306. One such requirement expressly laid down by the statute, as we have seen, is promulgation of the final regulation within 120 days of publication of the proposed regulation.

When the statute is clear in evidencing Congress' intent, there is ordinarily no warrant for resorting to legislative history. Burlington Northern Railroad Co. v. Oklahoma Tax Commission, --- U.S. ----, ----, 107 S.Ct. 1855, 1858-60, 95 L.Ed.2d 404 (1987). Repair to debates and reports and other precursors to law is ever fraught with difficulty. See, e.g., International Brotherhood of Teamsters, 801 F.2d at 1428 n. 4; Abourezk v. Reagan, 785 F.2d 1043, 1054 n. 11 (D.C.Cir.1986), cert. granted, --- U.S. ----, 107 S.Ct. 666, 93 L.Ed.2d 718 (1986); Hirschey v. FERC, 777 F.2d 1, 7-8 & n. 1 (D.C.Cir.1985) (Scalia, J., concurring). Such recourse, we believe, is much to be avoided if no ambiguity infects the language which Congress enacted and the President signed into law. Eagle-Picher Industries v. EPA, 759 F.2d 922, 929 n. 11 (D.C.Cir.1985). But even accepting the invitation to leave that upon which Congress and the President acted,10 we find in the history of this enactment little that is instructive in this specific regard.

The original Senate bill defined "new sources" solely in terms of the date of publication of either proposed or final standards. See S. 2770, 92d Cong., 1st Sess. Sec. 306(a)(2) (1971), reprinted in A Legislative History of the Federal Water Pollution Control Act Amendments of 1972, at 1623-24 (1973) (1972 Legislative History). That provision would have vindicated NRDC's approach. But that approach was not destined for enactment. The House bill added the triggering "in accordance with" language. H.R. 11896, 92d Cong., 1st Sess. Sec. 306(a)(2) (1972), reprinted in 1972 Legislative History at 990. The Conference Committee thereafter adopted the House's approach. As is so frequently the case, the reason for the Conference Committee's embracing the added language is nowhere revealed in the mists of legislative history. But what does seem clear is that the provision reflects Congress' accommodation of two competing policies. On the one hand, as the Third Circuit has rightly said, "Congress intended to subject as many firms as possible to the new source regulations." Pennsylvania Department of Environmental Resources v. EPA, 618 F.2d 991, 999 (3d Cir.1980). But that policy, standing alone, would argue in favor of universal coverage, treating that which is old as new. Congress did not go so far. Thus it was that the new source-existing source distinction is premised upon the policy determination that pollution controls implemented during the period of planning and construction of new plants was "the most effective and, in the long run, the least expensive approach to pollution control," S.Rep. No. 414, 92d Cong., 1st Sess. 58 (1971), U.S.Code Cong. & Admin.News 1972, pp. 3668, 3724, reprinted in 1972 Legislative History at 1476. It was this approach that was to be preferred to the high cost of retrofitting, H.R.Rep. No. 911, 92d Cong., 2d Sess. 110 (1972), reprinted in 1972 Legislative History at 797, which would be the necessary consequence of treating that which was old (or more precisely, existing) as new. This policy choice is reflected in the 120-day window; as EPA well put it, "construction of a source to meet new source performance standards can only proceed in a meaningful way if final standards are available." 44 Fed.Reg. at 32,858.

The Third Circuit has aptly described the 120-day limitation as:

[serving] to limit the period during which businesses contemplating construction, put on notice by a proposal for a standard, are left in a state of uncertainty with respect to final agency action. Congress said, in effect, that it is not unreasonable, once a business has been put on notice of a proposed standard affecting it, for that business to pattern its conduct for four months to the likely application of the standard.

Pennsylvania Department of Environmental Resources, 618 F.2d at 999. That is to say, Congress must have concluded that a period of uncertainty extending beyond 120 days was unreasonable, that economic life had to go on, and that American industry should not have to languish in doubt as to when non-final regulations would eventually enjoy the force of law. It is well-settled that in such cases it is not for the judiciary to "substitute its own construction of a statutory provision for a reasonable interpretation made by the administrator of an agency." Chevron, 467 U.S. at 844, 104 S.Ct. at 2782. We reject NRDC's attempt to write out the clear language that Congress saw fit to enact or, assuming the existence of ambiguity even where clarity nonetheless appears to us, see supra note 10, to overturn a reasonable agency interpretation of the statute.11IV

In enacting section 306 of the Clean Water Act, Congress intended to subject new sources to the most stringent regime of technology-based standards. In exchange for this exacting approach, Congress added a provision which provided new sources a measure of protection against early, legally mandated obsolescence of their investments in pollution control equipment. Specifically, section 306(d) of the Act grants a qualifying "new source" a ten-year period of exemption from any "standard of performance" more stringent than the standard to which it was subject at the time of construction. 33 U.S.C. Sec. 1316(d).

NRDC challenges EPA's interpretation of "more stringent standard of performance." The reason for NRDC's disagreement is that EPA's interpretation is not limited to new source performance standards (NSPS), but rather provides the ten-year grace period from other more stringent technology-based standards as well, such as BAT, BPT (best practicable control technology), and BCT.12

Notwithstanding any other provision of this chapter, any point source the construction of which is commenced after October 18, 1972, and which is so constructed as to meet all applicable standards of performance shall not be subject to any more stringent standard of performance during a ten-year period beginning on the date of completion of such construction or during the period of depreciation or amortization of such facility whichever period ends first.

33 U.S.C. Sec. 1316(d). Since this provision applies only to "new sources," the "applicable standards of performance" which must be satisfied to qualify for the grace period are clearly NSPS standards, as those are the standards applicable to new sources. Moreover, the term "standard of performance" in this provision is defined in a prior subsection, section 306(a)(1), to mean NSPS standards. Id. Sec. 1316(a)(1). If this specific definition is indeed incorporated into the grace-period provision, then the literal reading of section 306(d), championed by NRDC, would grant new sources ten years of protection only against more stringent NSPS standards.

There is an obvious drawback in embracing this fundamentalist approach to construing section 306(d). It would render utterly meaningless the grace period created by the statute. By definition, NSPS standards apply only to "new sources," that is sources built after an NSPS standard is proposed. Id. Sec. 1316(a)(2). (This assumes, of course, final promulgation within the requisite 120 days.) NSPS standards never apply to existing sources, as we discussed at some length in the preceding section of this opinion. Once a new source, subject to the applicable NSPS stan