-tCsr..- 3-' i-

# np:+ 

## { .l UNITEDSTATESENVIROt.I;vIENTAL PROTECTIONAGENCY r,

.

## ..- +'+c -,,~t- WAShIidGTO?:. DC 20466

April 17, 1989 OFFICEOF LENERAL COUNSEL

SUBJECT: Justice Department Opinion on CFC Auction and Fees

FROM: Gerald H. Yamada Acting General 

## c i. William K. 

## ~eid~ ! Administrator L

In response to a request from OMB, the Office of Legal Counsel of 'theDepartment of Justice (OLC)has issued an opinion concluding that EPA has authority under the Clean Air Act (CAA) to regulate CFCs by means of an auction or fee.

OLC says that the grant of regulatory authority under CAA section 157(b)--authorizing "regulations for the control [of CFCs]" on its face authorizes an auction or fees. Moreover,
even if section 157(b)were ambiguous, EPA's broad discretion in interpreting the Clean Air Act would allow an auction or fees.

OMB further asked for OLC's opinion on whether the Independent Offices Appropriations Act (IOM) and the Toxic Substances Control Act (TSCA)authorize an auction or fee. Because the CMprovides authority, OLC declined to address whether these other statutes provide authority.

A copy of the OLC opinion is attached.

Attachment(J.S.f)epartn~ertt ofJusricc

Ot'ticcot'LegalCourtst.1

Officeofthe AssiscantAttorneyGeneral Washinglon.D.C.20530 April 14, 1989



### MEMORANDUM FOR ALAN RAUL 

### General Counsel Office of Management and Budget

This is in response to your request for our opinion on whether 

### the EPA has statutory authority to allocate production and consumption privileges for chloroflurocarbonsand halons

("CFC") through an auction or other market pricing mechanism, such as a regulatory fee. You have suggested three possible
sources of statutory authority for such action by EPA,provisions of the Independent OfficeAppropriationAct of 1952 ("IOAA"), 

### 31 U.S.C. 9701, the CleanAir Act, 42 U.S-C. 

### 7457,and the Toxic Substances Control Act, 15 U.S.C. 2605.



### For the 

### reasons that follow,we conclude that EPA has authorityunder the CleanAir Act to allocateproduction privileges for CFCs through an auction or quota with regulatory fees. ~ecause'~~~ has this authority under the CleanAir Act, we 

### do not resolve the issue of whether EPA also possesses the authority under the IOAA 

### or the Toxic Substances Control Act.I

You also appeared to reqtiest thatwe generally address the 

### issue of whether the IOAA 

### authorizes an agency, acting in its governmental or sovereign capacity, to charge a fee for a benefit that exceeds the cost to 

### the agency of granting the benefit. We 

### do not resolve this issuehere, largely because we believe that this question will rarelybe able to he analyzed in the abstract, apart from an administrativeagency's organic statutes. For instance, in this case it would be 

### an essentialpredicate to finding authorityunder the IOAA 

### that EPA have authority under the CleanAir Act or other organic statute to issue CFC allowances and make them transferable, thus creating a thing of value forwhich a feemay potentially be charged. On the other hand, the IOAA 

### itselfwould be essential to upholding EPAfs authority to sell CFC 

### allowances forvalue only if its 

### organic statutes,such as the CleanAir Act, were consistent with charges forvalue but did not themselves authorize such charges. Accordingly, while'webelieve it may be 

### useful in other contexts to use the IOAA 

### to supplementan agency's statutoryauthority, that is unnecessary here 

### in light of EPAfsability to interpret ambiguities or silence in its organic ~tatute~s in a manner that will advance a chosen regulatory initiative, such as charging for items of value. See Chevron v. Natural Resources Defense (continued ...)

### I. Background

On September 12, 1988, EPA issued a final rule ("rule"or "existing rule")

### , which took effect January 1, 1989, limiting the amount of certain chloroflurocarbons and halons that can be produced, imported or exported by United States firms.2 53 Fed. Reg. 30566 (1988) (tobe codified at 40 C.F.R. Part 82). The rule implements the Montreal Protocol on Substances that Deplete the Ozone Layer, which has been ratified by the United States. 26 I.L.M. 1541 (1987). In conformity with the Montreal Protocol, the rule limits the total production and consumption3 of CFCs of the United States to their 1986 levels.4 At present the mechanism chosen by EPA to realize these limits is a prohibition

on the production of CFCs without the possession of an allowance
or right, and a restriction to 1986 levels on the amount of CFCs that are authorized by allowances. The allowances are then distributed to firms based on the amount of the firm's CFC production in 1986. EPA plans to issue regulations authorizing the sale of allowances. As discussed below, however, EPA specifically left open the possibility of issuing modifications to the quota system, including the introduction of an auction system to allocate

## allowance^.^

l(...continued) Council, 467 U.S. 837 (1984). We do, however, provide for your information a suggested framework'of analysis for the IOAA.

2~lthough the rule covers both chloroflurocarbons and halons, wewill refer to them jointly asCFCs.

3~or ease of exposition, we will refer to the consumption and production of CFCs jointly as "the production of CFCs."

4~o be more precise, under the Montreal Protocol chloroflurocarbons are frozen initially at 1986 levels. Chloroflurocarbons are to be reduced to 80percent and 50 percent of 1986 levels by July 1, 1993 and July 1, 1998, respectively. See 53 Fed. Reg. 30566 (Aug. 12, 1988). Moreover, halons are to be frozen at 1986 levels beginning on January 1, 1992. Further, the Montreal Protocol allows limited production, but not consumption, increases and for rationalization to take account of international transfers of CFCs. 53 Fed. Reg. at 30587, 30581- 83, 30589. For purposes of exposition, we shall generally ignore these complications in the text, and refer to the CFC restrictions as simply requiring CFCs tobe reduced to ;986 levels.

5~3 Fed. Reg. 30604 (August .12,1988).

### A principal reason that EPA adopted a system of allocated allowances or quotas was that it ensured compliance with the levels set by the Montreal Protocol. In contrast to a system of regulatory fees (designed to discourage use of CFCs), engineering controls or bans on selected products or types of CFCs, the system of allocated quotas permits EPA to control the amount of CFCs that are lawfully used with certainty. The alternative methods risk the United States, failure to comply with the Montreal Protocol.6

' 

### During the rulemaking process, EPA also considered issuance of two modifications of the system of allocated quotas, which also ensure certainty in the control of CFCS.~ First, 

### EPA discussed the imposition of a regulatory fee in addition to the allocated quota system. 

### EPA considered whether the fee is necessary toprevent CFC producers from receiving a windfall 

### in the form of a price increase forproducts which require CFCs. The price of such products might increase if the demand for them rises but 

### the supply is limited due to restraints on the production of CFCs. 

### EPA is consideringwhether the resulting windfall to CFC producers would lead them to delay the introduction of CFC

## substitute^.^ Such a delay would cause several harmful effects, including increasing the cost of future required reductions in CFC production and discouraging developing nations from joining the Montreal Protocol.

Second EPA also discussed the use of an auction to allocate allowances. Instead of allocating allowances based on a finn's 1986 

### CFC production, an auction would be held inwhich all persons could bid for the allowances. An auction would eliminate the possibility of 

### a windfall to 

### CFC producers, and would also serve economic efficiency 

### by allocating the allowances to firmswhich placed the highest value on their use. Under both the auction and the combination of quotaswith regulatory fees, the money received by EPA would be placed in the United States Treasury pursuant to 31

### U.S.C, 3302.

653 

### Fed. Reg. at 30576-79.



### 753 'Fed.

### Reg. at 30576-79; 53 

### Fed. Reg. 30604-11.

8~~~ 

### bases the fear of a delay in the introduction of CFC 

### substitutes on the fact that the principal researchers for the substitutes are also producers of CFCs. Moreover, the researchers are joined in a consortium,which might permit them collectively to d'elayresearch progress to maintain increased profits from CFCs. 53 

### Fed. Reg* at 30606.

953 

### Fed. Reg. 30606-11 (1988).11. Analysis

A. Allocatins CFC Allowances under the Clean Air Act

The issue presented is whether.EPApossesses the legal authority under the Clean Air Act to establish an auction system
or a quota with fees for the allocation of allowances. We believe that EPA has this authority under Section 157(b) of the Clean Air Act. Section 157(b)

### , 42 U.S.C. 7457(b)

### , authorizes without limitations the imposition of "regulations for the control of [a] substance" which the Administrator has determined to affect the stratosphere and endanger public health. Both an auction and a system of regulatory fees fits within the plain meaning of this authority because they operate to reduce the supply of a substance. Moreover, even were EPAfsauthority in this area less sweeping or more ambiguous, the deference 'dueto
an agency's reasonable construction of its administrative statute would also militate in favor of upholding an auction system or quota with fees. That Congress did not specifically consider and endorse such methods of substance control is no argument that EPA may not choose such 

### a method. It is a basic axiom of administrative law'thatCongress in order to address a complex problem may delegate to an agency authority broad enough to fashion solutions that Congress itself did not endorse or consider.

Section 157(b) of the Clean Air Act, 42 U.S.C. 7457(b)

### , provides the Administrator with specific regulatory authority to control substances that might endanger public health by affecting the ozone layer. Section 157 states:

the Administrator shall propose regulations for the control of any substance,practice, process, or activity (or any combination thereof) which in .hisjudgment may reasonably be anticipated to affect the stratosphere, especially ozone in the stratosphere, if such effect in the stratosphere may reasonably be anticipated to endanger public health or welfare. Such regulations shall take into account the feasibility and the costs of achieving such control.



## . . . From time to time, and under the same procedures, the Administrator may revise any of the regulations submitted under this subsection.

This-section was added by the Clean Air Act Amendments of 1977, which enacted Part B of Subchapter 1 of the Clean Air Act. 42 U.S.C. 7450-59, Part B provides for various studies and research
on ozone conditions.

### The plain language of Section 157(b) indicates that the Administrator may allocate the allowances to produce CFCs through either an auction or the combination of allocated quota and regulatory fees. Both an auction and a quota with fees clearly fall within the meaning of a "regulation[] for the control of [a] substanceNwhich the ~dministrator has determined to affect the stratosphere and endangerpublic health. In both cases, the proposed regulation attempts to restrain, but not prohibit, the production of CFCs.

This point can be made clearer by distinguishing the two parts of the proposed regulations. The first part limits collective CFC production by restricting allowances to the amount set in the Montreal Protocol. This cap on CFC production clearly involves "the control of" CFCs. Moreover, the cap is superior to alternatives (such as regulatory fees, engineering controls or selective bans) in that it permits the EPA 

### to specify the exact amount of lawful CFC 

### production. The cap also enables 

### EPA to
ensure conformity with the Montreal Protocol. 

### EPA has chosen to exercise its regulatory discretion to conform CFC 

### production to the Protocol and United States' international obligations, and the cap serves this goal'withmore certainty than the alternatives.1°

The second part of the regulations involve the allocation of the allowances

# -- either through an auction or on historical grounds with additional fees. Once the decision has been made to cap the production of CFCs with allowances, a method for allocating the allowances isnecessary. Auctions and historically based allocations (with or without additional fees) merely constitute differentmethods of allocating the allowances. Under the existing rule of'allocated quotas, the allowances are distributed on historical grounds, and then are to be made transferable. In effect, the existing rule chooses to make a gift of the allowances to firmswhich have produced CFCs in the past.l1 

### Under the auction, in contrast, the allowances are sold to those firmswhich value them themost, Finally,under the queta with fee approach, the allowances are given to firms on historical grounds, but then a fee (setat the predicted increase

lO~he Clean Air Act specifically encourages international cooperation concerning the control of substances harmful to the
ozone. Section 156, 42 

### U.S.C. 7456, 

### encourages the President "to enter into international agreements



## . 

# . . to.developstandards and regulationswhich protect the stratosphere consistentwith regulations applicable within the United States."

l1 

### Thus, rewarding firms to the extent they have previously produced CFCs.inthe price of CFC products resulting from the restriction on CFCS)~~ would be imposed toextract any windfall conferred on allowance recipients. All of these allocation approaches fall within thelanguage of the statute conferring authority on the EPA to issueregulations "for the control of" CFCs.

The auction and quota with fee rules arealsoconsistent with the statutory requirement in section 157(b) that the regulations "take into account the feasibility and the costs of achieving



### . 

## . . controlNover CFCs. First, every restriction on CFCs willimpose some cost on producers. Wevery much doubt that the limitsimposed by the Montreal Protocol are sorestrictive that they could be said toconflict with the language of section 157(b). Moreover, even assuming the auction and quota with fee rules willimpose greater costs on CFC producers than another method of control, EPA could conclude that these charges better

serve theprimary health purpose of controlling CFCs. Under the statute, EPA must consider costs, it need not have its control decision determined by this factor. This is especially true, of course, if the EPA believes the greater cost does not outweigh the control benefit.l3 As the House Committee Report stated:

the committee intends toassure that any [stratosphere protection measure] is undertaken only with adequate awareness ot its costs and its other economic impacts and social impacts.



## . .

# . [I]nlight of the primary purpose of protecting public health

1253 Fed. Reg. at30608-10.

l3 EPA could reasonably conclude thatthe auction and quota with fee rules better advance the statutory 

### aimsfor a number of

reasons. First, these rules aretheoretically superior to a historical allocation incontrolling CFCs. By eliminating the windfall toCFC producers created by thehistorical allocation, the auction and quota with feerulesmay lessen the incentive of producers todelay the introduction of CFC substitutes. Similarly, the economic incentive of a feemay be assumed to encourage producers todevelop CFC substitutes. The existence of CFC substitutesdecreases the demand for CFC production and, as noted above, increases the chances that nations not parties to theMontreal Protocol willreduce their CFC production. Second, the auction and quota with feerules arguably lower social costs, because anhistorical allocation is more likelytoreward an inefficientproducer than either the auction orquota with fee system. Further, therules may alsobe implemented atless cost 

### to thegovernment. 'EPA presumably avoids thedifficultyof prescribing and monitoring a firm's technological processes, and instead simply focuses on the amount of CFCs produced by different firms.and assuring a habitable environment, the committee does not wish to tie the Administrator's hands or confer an authority which is cumbersome or unduly difficult to use, administer, or enforce. Therefore, the committee has required only that a costbenefit, cost-risk or cost-effectiveness analysis be performed.

H.R. Rep. No. 294, 95th Cong.., 1st Sess. 101 (1977).
Second,EPA could reasonably conclude that firms will be able to feasibly comply with the auction and quota with fee rules. In both cases, there is no requirement that any particular production process be employed. Rather, the firms are given substantial flexibility in complying with the limits on CFCs. Within the supply available, therewould not appear to be restrictions on the number of allowances that a firmmay purchase, and the firmsmay choose not to emit CFCs and develop CFC alternatives.

Given the clear application of the statutory language to the auction and quota with fee rules, we believe that the plain meaning rule resolves thematter. If the words of a statute are clear, then the plain meaning of a statute ought to be followed unless it leads to conclusions-thatare absurd or clearly contrary to the manifest purpose of the statute. See United States v. Bryan, 339 U.S. 323, 338 (1950); United States v. Brown, 333 U.S. 18, 26 (1948); United Statesv. Wiltberser, 18 U.S. 76, 96 (1820) (Marshall,C.J.). Here, there can be no argument that the plain meaning leads to conclusions that require modification of the statute. Rather, the auction and quota with fee rules are options that 

### EPA considers to have many desirable features for limiting CFC production at a reasonable cost.

It cannot be seriously argued that the use of economic incentives to regulatepollution is a novel 

### or strange idea that could not have been anticipated by the authors,ofthe Clean Air Act Amendments. The idea of using economic methods to regulate pollution has been widely discussed and advocated in the policy literature in recent decades, including for many years before the Clean Air Act Amendments were passed in 1977. See, e.g., 

### J. Dales, Pollution, Propertv & Prices (1968) (advocating the government sale of transferablepollution rights); E. Mishan,

### The Costs of Economic Growth (1967); A. Kneese and 

### B. Bower, Manasinq Water Quality: Economics. Technoloqv, Institutions (1968); Environmental Quality-The Second Annual Report of the Council on ~nvironmental Quality 136-138 (1971);Environmental Law Institute, Efficient Charses on 

### Air and Water Pollution (1973) (Report on 1971 Conference concerning desirability of effluent charges).

### Indeed,other provisions of the Clean Air Act Amendments reveal that Congress was aware of economic methods of regulation and even employed them for certainpurposes- Section 120

### of the Amendments provides for the imposition of a noncompliancepenalty on certain stationary sourc'es,and the penalty is based on the economic value to the source of noncompliance. 42 U.S.C. 7420. Section 405 of the Amendments directs the Administrator to undertake a study as to economic measures that could strengthen the effectiveness of existing methods of air pollution control. 42 

### U.S.C. 7401 (note). It is thus clear that Congress was cognizant of economic forms of regulation, did not prohibit them, but instead used general language permitting a wide scope of regulatory measures for the control of CFCs.l4

There is also nothing in the legislativehistory to indicate that the plain language of section 157(b) should be narrowed. The relevantdiscussion of section 157(b) in the principal committeereport emphasizes that the Administrator's regulatory "authority should be exercised with the primary purpose of health protection in mind." H.R. 

### Rep. No. 294, 95th Cong., 1st Sess. 102 (1977). The report also states 

### in a footnote that ff'controls' may include design standards,work practice standards,prohibitions, and/or such other measures as may be necessary to assure protection for health and environment and to protect the stratosphere." Id. n. 2. This language is consistentwith the auction and quota with fee rules. The rules constitute "other [necessary]measures" and possibly "prohibitions1'aswell.l5

l4 As the text indicates,we do not believe that Congressf legislation of an economically based noncompliance penalty or its requirement of a study of economic methods of regulation suggest that the Clean Air Act denies by implication the auction or quota with 

### fee rules. Rather, that Congress employed economicmethods under section 120 indicates, if it indicates anythingmore than the'text suggests, that Congress approved of suchmethods. Moreover, that Congress in 1979 chose to study economicmethods under section 405 (ratherthan to expressly enact them) does not suggest that it deprived the Administrator of authority to use such methods under 157(b). Congress creates administrative agencies in part because it lacks expertise sufficient to fashion

a solution to the regulatoryproblems at issue, seeAmerican Truckins Assoc. v. United States, 344 U.S. 

### 298, 309 (1953),and thus Congress will typically avoid precise specification of an agency's authority.

151t might be contended that the evolution of section 157(b) suggests that economic methods were excluded. The original version of the sectionwould have banned CFCs from certain
sources and subsequentdiscussions of the section did not refer (continued...) -8-

### An interpretation of section 157(b) that would deny authority to regulate through economicmethods would in effect rewrite the statute to read that "the Administrator shall [issue] regulations for the control [of CFCs] bv traditional command and control or specification standard methods." Such rewriting is unwarranted in any case, but especially sowhere Congresswas aware of economic methods of control and where such 

### methods so ably serve the underlying purposes of the statute in the judgment of EPA. Moreover, such a crabbed reading of the statutemight well invalidate the interim allocated quota rule. Although it does not charge recipients for their allowances, the quota rule nonetheless departs from traditional methods permitting allowances to be transferred and creating a market in allowances.l6



### Even if the language of section 157(b) were not plain, however, it is still clear that the Administrator would be able to issue either the auction or quota with fee regulations. First, the Supreme Court has long held that regulatory statutes are to be interpreted broadly to further the purposes of the delegation. InAmerican Truckinq Assoc. v. U.S., 344 U.S. 298

(1953), the court1/ explained:

l5(

# .. . continued) to economicmethods of control. 7 

### Congressional Research Service,

### A Legislative History of the Clean Air Act Amendments of 1977, 7063-7069 

### (H.R. 3118);

# a.at 6353, (122 Cong. Rec. 29548 

### (Sept. 9, 1976); H.R; 

### Rep. No, 1175, 94th Cong., 2d Sess. 6628. 

### We d~ not believe, however, that anything can be inferred from the original version of the section. The House.of Representatives quite clearly abandoned its originalplan to prohibit CFCs 

### and instead chose to rely on regulation by the Administrator. Moreover, the fact that the discussions of the section focused on the methods of regulationmost familiar to Congress

# -- and were silent on economic methods of control

# -- cannot be used to narrow the language of the section. There is

no suggestion that Congress intended these methods to be the exclusive fonns of regulation.

16~.snoted above, EPA has not yet promulgated the section on transfers ofallowances under the existing allocated quota rule. See Section 82.12

171n'American Truckinq, the Court approved ICC regulations

on the use by regu1:atedcarriers

### of equipment leased or ' 

### interchangedwith other carriers. The InterstateCommerceAct did'notspecifically authorize the 

### ICC to regulate leasing practices. Rather, the statuteprovided the Commission with the (continued.



# .. ) -9-[Appellants] urge upon usthe fact that nowhere inthe Act is there an express delegation of power tocontrol, regulate oraffect leasing practices, and it is further insisted that ineach separate provision of theAct granting regulatory authoritythere is no direct implication of suchpower. Our function, however, does not stopwith a section-by-section search forthe phrase "regulation of leasingpractices" among the literal words of the statutoryprovisions- Asa matter of principle, wemight agree with appellants' contentions if we thought it a reasonable canon of interpretationthat the draftsmen of actsdelegating agency powers as a practical and realisticmatter, can ordo include specificconsideration of every evil sought tobe corrected. But no great acquaintance with practical affairs is required toknow that such prescience, either in fact or inminds of Congress, does not exist. Its very absence, moreover, is precisely one of the reasons why regulatory agencies such asthe Commission arecreated, for 

### it is the fond hope of theirauthors that theybring totheirwork the expert's familiaritywith industry conditions which members of thedelegating legislatures cannotbe expected topossess.

344 U.S. at 309-10 (citationsand footnotes omitted). In American Truckinq, the authority found by theSupreme Court was much less clearthan inthepresent case. The language of section 157(b), unless artificially narrowed providesthe Administrator with the requisite authority.l8 The Supreme Court applied a similarruleof interpretation inUnited Statesv. Southwestern Cable Co., 392 U.S. 157, 173 (1968), holdingthat

l7 (


# ..

# . continued) authoritytoregulatecertaincarriers "as-prcvidedinthis chapter." Section 204(a)(1)and (2)

# . The Court relied on the ICC's general regulatory authorityto

### issue allnecessary rules for the enforcement and administration of theAct.and on the fact that theregulations were "aimed atconditions which may directly frustrate

### the success of theregulation undertaken by Congress." 344 U.S. at 311.

l8InAmerican Truckinq, however, the Supreme Courtwas unable toidentify a provisionwhich directly authorizedthe practices., Although the Court cited toa general provision, 344 U.S. at311 (citingsection 202(a), it was lessapparentthat 

### it


### was .intendedtoconfer authorityon,the Commission, especially given themany specificgrants of authorityinthe statute. Here, however, the general provision is clearly

### a grant of authority, and it is the only sourceof regulatory authority.



## . ,

### the FCC had authority to regulate cable television under the ~ommunications Act because such authority was necessary "to perform with appropriate effectiveness certain of its other responsibilities."


### Second,when a statute is ambiguous or silent on an 

### issue, the interpretation of the agency entrusted to administer it is entitled to considerabledeference when reviewed by 

### a court. In Chevron v. Natural Resources Defense Council,which involved the Administrator's authority under the Clear Air Act Amendments of 1977, the Supreme Court stated:

The power of an administrative agency to administer a congressionally created program necessarily requires the formulation of policy and the making of rules to fill any gap left, implicitly or explicitly, by Congress- If Congress has explicitly left a gap for the agency to fill, there is an express delegation of authority to the 

### agency to elucidate a specific provision of the statute by regulation. Such legislative regulations are given controllingweight unless they are arbitrary, capricious, or manifestly contrary to the statute. Sometimes the legislativedelegation to an agency on a particular question is implicit rather than explicit. In such a case, a courtmay not substitute its own construction ofa statutoryprovision for a reasonable interpretationmade by the administrator of
anagency.

467 U.S. 837, 843-44 (1984) (quotationmarks and footnotes omitted). See Younq v. Community Nutrition Inst., 476 U.S. 

### 974 (1986); Commodity Futures Tradinq Comrn'n 

### v. Schor, 478 

### U.S. 833, 844-45 (1986); 

### NLRB v. City Disposal Svstems. Inc., 465 

### U.S. 822, 830 n. 7 (1984).



### If the language of section 157(b) is read as ambiguous or silent as to the issuewhether the Administratormay use economic methods of regulations, then the Administrator's interpretation 

### of the provision, if reasonable,must be approved by a court. See Chevron, 467 U.S. 

### at 845. Therefore, the economic regulations could only be invalidated if a court determined that Congress had clearly limited the Administrator's authority totraditional forms of regulation. No such determination is possible.l9

The plain language of the statutealso should not be narrowed on constitutional grounds. It might be argued that auctions and fees constitutetaxes, and thatthe constitutional uncertainty of thedelegation of thetaxingpower should lead one tointerpret section 157(b)not toauthorizeauctions or fees. This argument relies on language inNational Cable Television Assoc- v. U.S., 415 U.S. 336 (1974),ZC) where theSupreme Court narrowed the Independent Offices Appropriations Act "to avoid constitutional problems" concerning the delegation of legislative power. The Court held that the statutory language conferring authority on agency heads toprescribe fees on thebasis of the "value tothe recipient, public policy orinterest served, and other pertinent facts" should be read togive effect only tothe "value tothe recipient1' standard. The Court drew a distinction between taxes and fees: when imposing taxes, thegovernment might arbitrarilydisregard benefits bestowed, and rely on abilityto pay, butwhen imposing fees, the government must use the standard of benefit tothe recipient. The Court then stated that it ''would be a sharpbreak with our traditions toconclude that Congress had imposed on a federal agency thetaxing power."

19~hus, ifEPA adopts the interpretation of section 157(b) articulatedhere inpromulgating either theauction orquota with fee rules, then this interpretationwould be entitledto deference. Based on its discussions of thestatutoryauthority,
we do notunderstand EPA tohave adopted a firm interpretation of section 157(b). Rather, weunderstand EPA toadvocate an auction

orquota with fee, and simply tohave been uncertain whether the courtswould uphold its authoritytoissuethe rules. See 53 Fed. Reg. 30605-08, 30611-14; letter toDouglas W. Kmiec, AssistantAttorney General, Officeof Legal Counsel, U.S. Department of Justice from GeraldH. Yamada, Acting General Counsel, Environmental ProtectionAgency (March 17, 1989). Even ifEPA had previously adopted a narrow interpretation of section 157(b), however, 

### it could still change its interpretation and be accorded deference by the courts. See Chevron, 467 U.S. at863 (thatEPA "has from timetotimechanged its interpretationof [a statutoryterm] does not



## . . . leadus to conclude that no deference should be accorded theagency's interpretation of the statute. An initialagency interpretation is not instantly carved instone. On thecontrary, the agency, toengage ininformed rulemaking, must consider varying interpretations.")

. . *Osee also FPC v. New Enqland Power Co'., 415 U.S. 345 (1974) (companion casetoNational Cable Television).



### - 12

## -

### 415 u.S. at 341. 

### Moreover, the Court also discussed J.W. Ham~ton & 

### co. v. United States, 276 U.S. 394 (1928) and Schecter Cor~. V. 

### United States, 295 U.S. 

### 495, 529 (1935),which required Congress to "lay down an intelligible principle" when delegating authority to 

### the executive, and stated that "the hurdles revealed in those decision lead us to read the [IOAA]

### narrowly to avoid constitutional problems." - 

### Id. at 342.

We reject any argument that the Clean Air Act need be read narrowly to avoid an unconstitutional delegation 

### in this context. First,we question whether Congress is precluded from delegating its taxing power, subject only to the same constraints as are imposed on delegations of its other legislative powers.21 In both cases, if the delegation is constitutional, it is because the executive is sufficiently constrained by statutory standards that it does not truly exercise legislativepower. The Supreme Court has stated thisposition in upholding the delegation of 

### the taxing power, In J.W. 

### Ham~ton & 

### Co. 

### v. United States, the Supreme Court approved a delegation to the President to increase custom duties:

It 

### is conceded by counsel that Congressmay use executive officers in the application and enforcement of a policy declared in law by Congress, and authorize such officers in the application of the Congressional declaration to enforce it by regulation equivalent to law. But it is said that this never has'beenpermitted to be done where Congress has exercised the power to levy taxes and fix customs duties. The authorities make no such distinction- The same principle that permits.Congressto exercise its ratemaking power in interstate commerce, by declaring the rulewhich shall prevail in the legislative fixing of rates, and enables it to remit to a rate-making body created in accordancewith its provisions the fixing 

### of such rates, justifies a similar provision for the fixing of customsduties on imported merchandise. If Congress shall lay down by legislativeact an intelligibleprinciple to which the person or body authorized to fix such rates is directed to conform, such legislative action is not
a forbiddendelegation of legislative power.

This is not 

### to concede that the auction price or quota with fee would constitute a tax. Quite the contrary, since arguably any price set by market forces, or premised on market values, would reflect the benefit to the purchaser or recipient of the allowance, rather than any tax calculationbased on such entity's ability to pay. See also text, infra.Harn~ton,276 U.S. at 409.~~ Moreover, the D.C. Circuit, relying

on Hampton, has also recently held that there is no per se rule against delegation of the taxing power. Florida Power & Liqht Co. v. United States, 846 F.2d 765 (D.C. Cir. 1988)."
Furthermore, National Cable Television is better read as limiting the IOAA toavoid an excessive delegation of power generally, rather than as.proscribingdelegation of the taxing power. Florida Power & Liaht Co. v. United States, 846 F.2d 765 (D.C. Cir. 1988). This interpretation, which was recently adopted by the D.C. Circuit, views the "constitutional problemsn that are avoided by narrowly interpreting the IOAA as excessive delegation problems and not delegation of taxing power problems. This interpretation has the virtue of explaining the prominent reference toJ.W. Ham~ton & Co. v. United States and Schechter Poultrv v. United States in National Cable Television. If the Supreme Court meant tosuggest theproblematic nature of delegations of the taxingpower, 

### it is hard to imagine why it would cite tothe one prior Supreme Court case implying that delegations of the taxingpower arenot a special problem.
Similarly, National Cable Television's reference to Schechter Poultrv, which did not even involve taxes, suggests that the Courtwas concerned with the adequacy of the dele ation under general principles. Florida Power, 846 F.2d at774.94

22~oreover, 

### it is clear from the opinion that the Court considered the statuteasinvolvingthe.taxingpower rather than the foreign commerce power even though one of thepurposes stated in the statutewas "to regulate the foreign commerce of the United States." 

### In response tothe argument that it is unconstitutional to set customs duties for any purpose in additiontoraising revenue, the Court stated that "So long as themotive of Congress and the effect of its legislativeaction

aretosecure revenue fdrthebenefit of thegeneral government, the existence of other motives inthe selection of the subjects of taxes can not [sic] invalidate Congressional action." 276 U.S. at412.

23~s the D.C. Circuit stated, Florida Power & Liqht, 846 F.2d at775, Hamwton continues tobe good law. Indeed, it is one of the classicdelegation citations. See, e.q., Mistretta v. United States, No. 87-7028 (Jan. 18, 1989).

24~he interpretation is alsosupported by the definition of the taxing power articulated in'Nationa1Cable ~elevision asthe power 

### tochoose between imposing charges on the basis of ability topay oron benefit tothe recipient. Because thisdefinition is not the constitutional definition of a tax, it isunlikely that the Court was stating that therewere constitutional (continued.



# .. )

### This interpretation of National Cable Television is 

### also supported by the Supreme Court's recent citation of the case.for the proposition.that "In recentyears, our application of the nondelegation doctrine principally has been limited to the ' 

### interpretation of statutory texts, and, more particularly, to giving narrow constructions to statutory delegations that might otherwise be thought to be unconstitutional." Mistretta v. United States,No. 87-7028 (slipop. at 12-11.7) (Jan. 18, 1989).L'



### Under fair interpretation, National Cable Television does not support a 

### narrow interpretation of section 157(b). In addition, the plain meaning interpretationof section 157(b) 

### clearly satisfies the requirements of the non-delegation doctrine, as stated in J.W. 

### Hampton and Schechter Cor~.Section 157(b) sets the purpose of the regulation as controlling substances thatmight endanger public health by affecting the
ozone layer. Moreover, the singular character of thispurpose sewesto heighten the limitations it imposes on the Administrator's discretion. The section also imposes a 

### constraint on the Administrator's choice of the means of control



### -- the Administrator must take into account feasibility and costs.26 Thus, section 157(b) provides defined limitations on the regulatorymethods chosen by theAdministrator. The section certainly provides "an intelligible principle"27 by which the courts may determine whether or not the Administrator has chosen
one of the permissible means available to him of controlling harmful substances. The courtswill have more guidance here than under other delegations approved by the Court, see Federal Power Commfn

### v. HOD^ 

### Natural Gas Co., 320U.S. 591, 600 

### (1944)

(upholdingdelegation to determine just and reasonable rates); National Broadcastina Co. 

### v. United States, 319 U.S. 190, 225-26

24(


# ...continued) problems thatneeded to be avoided whenever Congress delegated its'taxingpower. Rather, the reference to the broad range of the choice conferred is consistentwith a concern about excessive delegation generally.

25~n addition to citing National Cable Television, the Court also cited Industrial Union Dept. v. American Petroleum Institute, 448 U.S. 607 (1980), a delegation case that did 

### not involve taxation.

26~he 

### section also permits the Administrator to exempt "medical use products forwhich



# . . , 

### there is no suitable substitute." 42U.S.C, 7457(b).

27~.~. 

### Hampton & 

### Co. 

### v. United States, 276 U.S. 394, 409 (1928).(1943) (upholding delegation toregulate broadcast licensing Itas public interest, convenience, or necessity" require), and substantiallymore guidance than under the IOAA's broad grant of authority (priortothe decision in National Cable Television) to set fees on thebasis of "value tothe recipient, public policy

or interest served, and other pertinent facts." 415 U.S. at 341.28
Second, even if there was uncertainty ~oncerning Congress1 power todelegate the taxing power, that should not lead toa narrowing interpretation of section 157(b)because the Clean Air Act is enacted generally under the commerce power, not the taxing power. Regulatory actions by the EPA under section 157(b) are also supported by the commerce clause, and this includes rules that would require auctions or quotas with a fee, Moreover, it is particularly difficult toargue that an auction constitutes a tax because it is the market, and not the government, that determines the amount that is tobe collected. We are not aware of a previous argument asserting that any of the other auctions conducted by the government constituted taxes.

The Supreme Court has long held that impositions of some duties and fees arenot exercises of the taxing power but may be justified by other provisions, such asthe commerce clause. In the Head Money Cases, 112U.S. 580, 595-96 (1884), the Supreme

28~or can it be argued, based on National Cable Television, that the delegation in section 157(b) "would be a sharpbreak with our traditions." Asdemonstrated below, the power toemploy auctions orquotas with feesdoes not constitute the taxing power, but rather theuse of economic methods to regulate commerce, and such methods have been frequently employed. See Head Money Cases, 112U.S. 580, 596 (1884);Wickard
v. Filburn, 317 U.S. 111 (1942); South Carolina v. Block, 717 F.2d 874, 887 (4th Cir. 1983, cert. denied, 465 U.S. 1080 (1984); United Statesv. Stansland, 242 F.2d 843 (7th Cir. 1957);Rodqers


### v. United States, 138 F.2d 992 (6th Cir. 1943). Moreover, discretion by the executive inthe application of such methods is alsonot novel. See South Carolina v. Block, 717 F.2d 

### at887 (provision conferring discretion on Secretary of Agriculture whether todeduct forregulatory purposes a specified amount from theproceeds of milk sales tooffset cost of theprice support program). See also J.W. Ham~ton & Co. v. United States, 276 U.S. at409 (discretionby President astothe amount of a tax). Indeed, inthe year before section 157(b)was enacted, the Supreme Court upheld the imposition of license fees on importers

on thebasis of a statuteauthorizing the President to "take such action and for such'time, ashe deems necessary toadjust the imports of [an] articleand its derivatives." FEA v. Alqonquin SNG. Inc., 426 U.S. 548 (1976)-

### Court held that a duty on the transportation by 

### vessel of persons who are not citizens of the United Stateswas not "a 

### tax or duty within the meaning of the Constitution." The Court stated that the statute related to the subject of immigration,was designed to regulate its evils, and was not intended to raise revenue for the general support of the government. See also Wickard v. Filburn, 317 U.S. 111 

### (1942). Lower courts have followed the Head Money Cases,holding that if "regulation is the primary purpose of a statute, revenue raised under the statutewill be considered a fee rather than 

### a tax." South Carolina v. Block, 717 

### at 887 (provisionauthorizing Secretary of Agriculture to deduct a specified amount from the proceeds of milk sales to offset cost.ofthe price support program was not a tax because its primary purpose was regulatory); United States 

### v. Stansland, 242 

### F.2d 843 (7th Cir. 1957);

### Rodsers v. United States, 138 

### F.2d 992 (6th Cir, 1943). See also Brock v. Washinston Metropolitan Area Transit Authority, 796 F.2d 481, 488 (D.C. Cir. 1986, cert. denied, 481U.S. 

### 1013 (1987))

In sum, section 157(b) authorizes the Administrator to issue regulations to control dangerous substances. Auction and quota with fee rules that have as theirprimary purpose regulating or controlling such substances are not proscribed methods of control merely because revenue is also raised under these rules, Such
revenue would merely be incidental to the primary purpose of controlling CFCs.

The 

### IndependentOffices A~prouriations Act

The IOAA provides authority for federal agencies.toimpose fees 

### an the recipients of services or things of value from the government. 31U.S.C. 9701. The 

### question we have been asked is whether the IOAA provides authority to the 

### EPA to conduct the auction or to impose regulatory fees. In light of our conclusion that the Clean Air Act clearly authorizes the 

### EPA to conduct an auction or to impose regulatory fees,we do not resolve this issue. We set forth a general discussion of the IOAA as .it relates to the regulatorymechanisms contemplated by EPA.29 As will be clear from our discussion, the extent towhich EPA could rely on the IOAA for authority to conduct auctions or impose regulatory fees is a complex and close question.

As an initial matter, we note that the 

### IOAA alone cannot provide the full authority for the auction or quota with fee rules. Before EPA can impose charges for the allowances, itmust first have the authority to create the allowances and make them transferable. It is the allowances, after all, that is the thing

.. 

### 290ur reasons for declining to opine on IOAA in the abstract, apart from any statutory scheme, are set forth in footnote 1, 

### suDra.of value which the agency is providing and for which it is entitled tocharge. Thus, we assume in this section that a

. system of allowances is established under other legal authority, and consider whether the IOAA provides authority for EPA to auction off the allowances or tocharge fees of allowance recipients.

The 10- provides:
(a) It is the sense of Congress that each service or thing of value provided by an agency 

## . . . toa person 

## . . . is tobe selfsustaining tothe extent possible.
(b) The head of each agency 

## . . . may prescribe regulations establishing the charge for a service orthing of value provided by --agency, Rewlations prescribed by the

--

# ------- heads of executive agencies are sublect to policies prescribed by the President and shall be asuniform aspracticable. Each charge shallbe--

(1)fair; and
(2) based on-- (A) the costs tothe Government; (b) thevalue of the service or thing tothe recipient; 

### (c)public policy or interest served; and (d) other.relevantfacts.

31U.S.C. 9701. Based on the language of the statute,30 it might be argued that an auction orregulatory fee might bejustified as chargesbased on thevalue of an allowance tothe recipient. As noted above, however, the Supreme Court inNational Cable Television Assoc. v. U.S., 415 J.S. 336 (1974) and its companion case, FPC v. New Enaland Power Co., 415 U.S. 345 (1974), and the circuit courts have narrowed the IOAA totheoretically avoid constitutionalproblems concerning delegation.

-- In National Cable Television, the Supreme Court held invalid ~nde~~~f~~theimp~~i;ew---&ia~M~kb~-~ system (CATV) a fee of 30 cents per subscriber. The FCC had

30~he original version of the IOAA (theIndependent Offices Appropriation Act of 1952), see 65 Stat. 290 (1951), differed slightly inwording and structure from the existing statute. The changes made in 1982, however, weremerely formal and not intended to alter themeaning. SeeH.R. Rep. No. 651, 97th Cong., 2d Sess. 226 (1982).determined the total cost for CATV regulation and then established a formula thatwould recover those costs. The Court stated, however, that the "value'to the recipient" standard should be "the measure of the fee." Because some of the costs of the regulation "inured tothebenefit of the public," the entire cost could not be imposed on CATV systems consistent with charging the systems only for thevalue they received. 415 U.S. at 340-43.

New Ensland Power involved an assessment, inproportion to wholesale sales and interchange of electricity, of the cost of administering the Federal Power Actwith respect to Njurisdictionalutilities."31 The Court construed the IOAA 

### in accordance with a Bureau of the Budget circular.32 The Court quoted thecircular's statement that a reasonable charge "should be made toeach identifiable recipient for a measurable unit or amount of Government serviceorproperty from which he derives a specialbenefit. 415 U.S. at349 (quoting circular) (emphasis added by the Court). Further, "no charge should be made for services rendered, 'when the identification of the ultimate beneficiary is obscure and the service can be primarily considered asbenef.itting (sic)broadly the general public.", 415 U.S. at350) (quoting circular)



# . Because some of the assessmentswere on companies that "had no proceedings before the [FPC] during theyear inquestion," and apparently "neither asked for nor received-theCommissionfsservicesfnthe assessmentswere not authorized by the IOAA. Id,at351.

Based on these cases in isolation, it might seemthat an agency could impose chargesbased either on thecosttothe agency or thevalue provided totherecipient. National Cable Television expressly stated-thatthe "value tothe recipientN standard should be "the measure of thefee." Moreover, in limiting the reach of the statute, theCourt specifically chose todeem not relevant "the words 'public policy or interest served, and otherpertinent.facts,'" thereby suggesting that the two legitimate factorstoconsider were "cost totheGovernmentu and "value totherecipient." 415 U.S. 

### at 343. Finally, although thetwo Supreme Court cases involved feesbased on

. agency costs, thatwas simply the result of the agency's choice to set cost-based fees. If the agency had set fees on a value to

31~atural gas companies werealsorequired topay fees. companies with operating revenues over $1,000,000 

### werecharged a fee inproportion totheirdeliveries ininterstatecommerce of natural gas. Moreover, other natural gas companies were assessed

a fee inproportion'to thenew reserves of natural gas certificated each year.
32~udget CircularNo. A-25, September 23-,; 1959.

### the recipient standard,'the 

### Court's analysis suggests that this too would have been legitimate.

The circuit courts,however, have not adopted this interpretation of National Cable Television and New Enqland Power. 

### Rather, beginning with National Cable Televisionv. FCC, 554 

### F.2d 1094 (D.C. Cir. 1976), Electronic IndustriesAssoc. V. 

### FCC, 554 

### F.2d 1109 

### (D.C. Cir. 1976), National Association of Broadcasters 

### v. FCC, 554 

### F.2d 1118 (D.C. Cir. 1976) and Capital Cities Communicationsv. 

### FCC, 554 

### F.2d 1135 (D.C. Cir. 1976), the circuit courts'haveinterpreted the IOAA 

### to require agencies to base the charges on agency costs rather than somemeasure of the benefit received. Thus, in National Cable Television v. 

### F.C.C, 554 

### F.2d at 1106, the D.C. Circuit held that fees "should be a reasonableapproximation of the attributable costswhich the Commission identifies as being expended to benefit the recipient." The court elaborated:

as we interpret [National Cable Television], the agency must look at the value which the regulated party may immediately or eventually derive 

### from the regulatory scheme, but at the value of the direct and indirect sewiceswhich the agency confers. This means, for example, that a fee, in order not to be 

### a tax, cannot be justified by the
revenues received 

### or the profits [of the regulated parties], but must be reasonably related to those attributabledirect and indirect costs which the agency actually incurs in regulating (servicing) the industry.

Id. at 1107, This interpretation of the IOAA

### has been followed - 

### or cited 

### in several other circuit courtdecisions. See Central & 

### Southern Motor Freisht Tariff Assoc., 777 F.2d 

### 722 (D.C. Cir 1985); Nevada ~ower Co. 

### v. Watt, 711 F.2d 

### 913, 933 (10thCir. 1983); M~SS~SS~DD~ 

### Power & 

### Lisht v. 

### NRC, 601 

### F.2d 223, 230 

### (5th Cir, 1979), 

### cert. denied, 444 

### U.S. 1102 (1980).33 

### It should be

331n Central & 

### SouthernMotor Freiaht ~ariff Assoc., 777 F.2d 722, 730 (1985), the D.C. Circuit summarized the principles that govern the imposition of 

### fees under the 

### IOAA:

.

### These general principles, enumerated in existing decisional law,taken together suggest that an agency 

### may recover the full costs of providing a 

### service when 

### the following conditions are met: (I) the agency has 'identified

### the specific agency activity or activities forwhich the fee isbeing assessed; (2).the

### service (continued...)


## - 2Q

# -noted, however, that one judge who participated in the original D.C. Circuit cases rejected the panel decisiontolimitfees to costs. See National Association of Broadcasters, 554 F.2d at 1134 (concurring opinion). Judge Tam stated:



### *Inlightof this substantial diminution of agency discretion [by the Supreme Court] in setting "fair and equitable" fees, I do not believe that we should now attempt tolimit further the applicable statutory standard by peremptorily defining "value tothe recipient" asincluding only the costs and not also the value of the benefits bestowed

on a regulatee.



# . . . [I]f an agency chooses

a cost basis approach, as the FCC did in its 1970 fee schedule


# . . 

# . , it should be required toidentify the specific itemsof cost and demonstrate how they arerelated to thebenefits forwhich the fee is assessed.



# .

. . I am not convinced that [National Cable Television, prohibits the Commission from developing a fee schedule through a measure of "value tothe recipientn.that is not initiallyrelated toits costs. Thus, for example, the Commission by nllemaking could determine foreach class of feeswhat factors best reflect the value of that'benefittothe regulatee and then calculate a feebased on those criteria,

Under Judge Tamm's interpretation of the statute, which inour judgment deserves serious consideration, an agency could charge fees on the basis of benefit tothe recipient. Inthepresent case, the EPA might be abletoframe a measure of benefit to the recipient thatwould justify eitherthe auction or the quota with fees. To justify the auction, the standard would be articulated

as the value that the recipient derives frompossession of the allowances. To justify thequota with fees, which are set atthe amount of the windfalls received by firms, the standard could be articulatedasthevalue that the recipient derives in light of the restriction inthe number of legal allowances. In contrast, if the IOAA is interpreted torequire cost-based fees, then the

33(


# . ..continued) produces a special, private benefit; (3) the value of thatprivate benefit is reasonably related tothe fee; (4) thebenefit accrues atleast inpart toan identifiable privatebeneficiary and not merely tothe industry as a whole; and (5) the service inquestion produces no independent public benefit.maximum charge that EPA could impose would be linked to its costs inregulating CFCs.

It ispossible, that it is only the D.C. Circuit that has held that feesmust be limited tocosts rather than benefits. The decisions from the other circuits are less clearbecause they have arisen in the context of cost-.based fee schedules. See Nevada Power Co. v. Watt, 711 F.2d 913, 933 (10th Cir. 1983); Mississippi Power & Liqht v. NRC, 601 F.2d 223, 230 (5th

### ~ir. 1979), cert. denied, 444 U.S. 1102 '(1980). Although one of these

cases cites Electronic Industries Assoc. v. FCC, 554 F.2d 1109 (D.C. Cir. 1976), for the proposition that "the fee assessed cannot exceed the cost to the agency of rendering the service," M~ss~ss~D~~ Power & Liqht, 601 F.2d at230, it is not clearthat the court intended to foreclose by that citation a benefit-based fee schedule.

Even beyond circuit court interpretation, it is not entirely clear thatthe appropriate interpretation of the IOAA and National Cable,Televisionwould permit the auction orquota with fees. First, although the statutemay permit benefits, rather than costs, tobe used inmeasuring fees, the statutemay nonetheless limitthe total fees received fora thing of value to agency costs. The IOAA does not appear toauthorizeprofitmaking by the government, but only therecovery of costs. Thus, section (a) of the IOAA provides that "It is the sense of Congress that each service orthing of value provided by an agency 

# .

# . . toa person 

# .

# . . is tobe self-sustaining tothe extent possible." Under this interpretation, EPA could base fees

on the benefit received but themaximum feewould be limitedby the costs tothe agency of limiting CFCs. Second, even under a benefit-based measure of fees, agencies would stillbe required tocharge for the actual benefit received by theregulatee, and therefore would be required, .for example, toexclude any independent public benefits from themeasure of fees. Although


### we do not consider the issue further, 

### we note the possibility that some portion of the CFC restrictionmight be argued to benefit the public rather than the industry. 3S

34~hat the cases involve fees that are generally cost-based appears tobe explained by the factthatthe government has followed the D.C- Circuit decisions and that the Budget Circular imposes thisrequirement. See Budget Circular No. A-25, at 3 ("The maximum fee for a special service 

### willbe governed by its total costand not by the value of the service tothe recipient-")

35~his question seems todepend on whether the program is analyzed as restricting CFCs orpermitting firms to.produce CFCs. Under the former analysis, the-regulateesmay .be said not to (continued...) 

# - 22

# -Given the circuitcourt decisions that interpret the IOAA to require a cost-based measure of fees, and given the clear authority of EPA topromulgate an auction or quota with fee rule under the Clean AirAct, we do not believe it is necessary, at thispoint, toresolve this issue.36 Wedo note, however, that the Supreme Court in New Enqland Power relied upon the Bureau of the Budget's interpretation of the IOAA. If the decision were made torely upon the authority of IOAA to impose fees greater than agency costs, it would be advisable for the Office of Management and Budget toadopt formally an interpretation of the statute that provides for such authority. Cf. Chevron v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).

35(


# ... continued) benefit, while under the latterview, the regulatees are clearly receiving a "thing of value" from the government. To the extent that CFC's constitute under the law an environmental harm, and if there is no entitiernent tocause such harm without rectification, it can be reasonably argued that no part of the fee confers a pub1icbenefit.

36~e alsodo not addresswhether the allowances could be sold as 

### a species of property. Although agencies are limited to costswhen imposing feesregarding regulatory services, they may charge more than costs when property is sold. This view is adopted by the Budget Circularwhich provides "Where federally owned resources orproperty are leased or sold, a fairmarket value should be obtained



# .

# . .

# . Charges need not be limited to therecovery of costs; theymay produce net revenues tothe Government." Budget CircularNo. A-25, atp. 2. Similarly, the' united States Court of Claims inYosemite Park and Curry Co. v. United States, 686 F.2d 925 (Cl. Ct. 1982), held that the National Park Service could charge fees for electricity provided to

### a concessioner pursuant tocontract based on rates charged by local electricalutilities. The court held that theprinciples .statedinthe Supreme Court's decision inNational Cable Televisionwerenot applicabletocontracts, where the government acts as an owner of property rather than in its sovereign capacity. But it is not clearthat the IOAA governs the saleof property. Wenote thatthe existing IOAA statuteauthorizes charges for "a service orthing of value provided by an agency," 31U.S.C. 9701, and that this language replaced language inthe 1952 statute, which provided forcharges for "any work, service, publication, report, document, benefit, privilege, authority, use, franchise, license, permit, certificate, registration or similar thing of value orutility," but not property. 65 Stat. 290 (1951). Beyond this, the context makes 

### clear that the sale of allowances here is intended as a control, and thus, they are seemingly not sold inthegovernment's role asowner but rather
as sovereign.C. 

### The Toxic Substances Control Act

Another possible source of 

### authority for the auction or quota with fee rules is section 6(a) of the Toxic Substances Control Act (TSCA)



## . Section 6(a) provides:

If 

### the Administrator finds that there is a reasonable basis to conclude that the manufacture, processing, distribution in commerce [etc.]'of a chemical substance
or mixture...p 

### resents



## ... an unreasonable risk of injury to health



## ... the Administrator shall by rule apply one
or more of the following requirements to such substance
or mixture to the'extentnecessary to protect adequately against such risk using the least burdensome requirements:

(5)

### A requirement prohibiting or

### otherwise regulating any manner or method of commercial use of such substance or mixture.

TCSA also requires the Administrator to consider ,,the reasonably ascertainable economic consequences of the 

### rule." 15 

### U.S.C. 2605

### (c) (1)

### (Dl

TSCA,

### however, expresses a preference for regulatory action to be taken under alternative legal authority. Thus, section 6

### (c) provides:

If the Administrator determines that a risk of injury to health or the environment could be eliminated or reduced to a sufficient extent 

### by actions taken under another Federal la-w (or laws) administered in whole or in part by theAdministrator, the Administrator may not promulgate a rule under subsection

(a) of this section to protect against such risk of injury unless.theAdministrator finds, in theAdministrator's discretion, that it is in the public interest to protect against such risk under this chapter. In making such a finding the Administrator shall consider (i) all relevant aspects of the risk, as determined by the Administrator in the Administrator's discretion, (ii) 

### a comparison of the estimated costs of .complyingwith actions taken under this chapter and under such law (or laws), and (iii) the relative efficiency of actions under this chapter and under such 

### law (or laws) to protect against such risk of injury.See also 15 U.S.C. 2608 (expressing similar preference for regulation under other authority).

In view of our determination that the auction and quota with fee rules are within the authority of the Administrator under the Clean Air Act, we do not believe it is necessary to discuss this issue further. ~egulation under TSCA would require a finding that it is in the public interest to issue the same rules under this statute rather than the Clean Air Act. Moreover, we believe many of the same arguments that support the Administrator's authority under the Clean Air Act also support his authority here. To the extent that the two statutes differ,we believe that the Administrator's authority is more secure under the Clean Air Act.

Conclusion

In conclusion, we find that the Administrator has authority under section 157(b) of the Clean Air Act to promulgate the auction or quota with fee rules. Because we have found authority under the Clean Air Act, it is unnecessary to resolve the question whether similar he IOAA or the TSCA.

cc: Gerald 

### H. Yamada Acting General Counsel Environmental ProtectionAgency