Opinion ID: 399151
Heading Depth: 2
Heading Rank: 1

Heading: Review of EPA Approval

Text: 7 Under section 204(b)(1)(A) of the FWPCA, the EPA may approve a federal construction grant only upon a showing that the applicant ... has adopted or will adopt a system of charges to assure that each recipient of waste treatment services ... will pay its proportionate share of the costs of operation and maintenance (including replacement) of any waste treatment services provided by the applicant. 33 U.S.C. § 1284(b)(1)(A) (1977 Supp. I) (emphasis added). Section 204(b)(2)(B) requires the EPA to issue guidelines for such user charges, including criteria against which to determine the adequacy of charges imposed on classes and categories of users reflecting all factors that influence the cost of water treatment including strength, volume, and delivery flow rate characteristics of waste .... 33 U.S.C. § 1284(b)(2)(B) (1977 Supp. I) (emphasis added). 2 8 HEA interprets these two subsections to require grant applicants to apportion operation and maintenance costs in proportion to the burden each user places on the treatment system. While HEA concedes that the City charge system meets this requirement with respect to sanitary sewage, it contends that the charge system fails to apportion the cost of treating surface run-off on a proportionate basis. HEA estimates, and for summary judgment purposes the district court agreed, that surface run-off treatment costs account for thirty-five percent of the total operating and maintenance costs of the City's treatment system. The charge system allocates surface run-off treatment costs on a pro-rata user basis; each user's percentage share of total run-off treatment cost is the same as the percentage share each user contributes to the total cost of treating only sanitary sewage. According to HEA, however, this is erroneous; the amount of surface run-off attributable to a user's property depends upon the property's land area and not upon how much sewage the user loads into the treatment system. To meet the proportionality requirement of section 204(b), HEA contends that the charge system must apportion the costs of treating surface run-off according to the acreage occupied by each user. 9 As section 204(b) approval does not require a hearing or formal findings on a record, EPA's decision to approve the City's charge system is reviewed under the arbitrary or capricious standard of 5 U.S.C. § 706(2)(A) (1976). See Camp v. Pitts, 411 U.S. 138, 142, 93 S.Ct. 1241, 1244, 36 L.Ed.2d 106 (1973) (per curiam). Under this narrow standard, a reviewing court must determine whether the agency decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment. Bowman Transportation, Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. 281, 285, 95 S.Ct. 438, 441, 42 L.Ed.2d 447 (1974); Washington State Farm Bureau v. Marshall, 625 F.2d 296, 302 (9th Cir. 1980). We must affirm the agency action if a reasonable basis existed for its decision. Id. at 302. 10 The district court sustained the EPA's approval under this standard because the EPA could rationally conclude that: (1) the City's charge system satisfied the proportionality requirement of section 204(b), and (2) the City's charge system was consistent with regulations promulgated by EPA to implement section 204(b).
11 Section 204(b)'s reference to proportionate share is nowhere defined in the FWPCA. The district court, however, found that the section's legislative history suggests that Congress did not intend to impose an absolute proportionality requirement and meant to require only proportionality which is generally equitable. The court argued that proportionality, while a general requirement, was not a primary motivation for the enactment of the user fee requirement. According to the court, Congress instead was primarily concerned with ensuring that treatment systems would be self-financing and was tolerant of local variations in user charge schemes so long as this basic requirement was met. Thus, while the City charge system apportioned costs on a proportionate basis only with respect to sanitary sewage, the court concluded that the system was sufficiently sensitive to each user's burden on the total treatment system to satisfy the proportionality requirement. 12 HEA concedes that Congress desired to give localities flexibility in devising financing schemes, but argues that this broad concern should not obscure the command of the statute's text requiring proportionality. To bolster its point, HEA emphasizes that in 1974 Congress failed to adopt an EPA-proposed bill that would have specifically authorized localities to apportion surface run-off treatment costs on a pro-rata basis. 3 HEA reasons that had Congress intended to permit pro-rata allocation of these costs, it would have adopted this amendment. 13 We believe HEA is reading too much into this instance of Congressional inaction. The proposed bill's main focus was to permit localities to finance treatment costs through ad valorem taxes. This portion of the bill was ultimately enacted three years later without the language cited by HEA. 4 Although Congress may have refused to act on this part of the 1974 bill because it opposed the bill's intent, inaction might also have been due to the belief that the point was already covered by existing law. See e.g., Diamond Crystal Salt Co. v. P. J. Ritter Co., 419 F.2d 147, 148 (1st Cir. 1969). The scant legislative history that exists concerning the 1974 bill supports this latter possibility. As noted by the district court, the letter submitted by then-EPA Administrator Russell Train in support of the 1974 bill reveals that EPA considered surface run-off treatment costs as not attributable to a user and thus not subject to the proportionality requirement under then-existing law. 5 Given that the bill's focus was elsewhere, it is likely that Congressional attention was never specifically drawn to the portion of the 1974 bill HEA cites. 14 HEA is correct, however, to the extent that nothing in section 204(b)'s legislative history supports the conclusion that Congress specifically authorized the method the City has employed to apportion surface run-off treatment costs. The legislative history underlying section 204(b) supports the district court's conclusions concerning the purpose of user's fees and the importance Congress placed upon giving localities flexibility in designing user fee systems. 6 Unfortunately, nothing in the various committee reports or floor debates speaks directly to how Congress wished surface run-off treatment costs to be apportioned. Congress appears to have enacted the proportionality requirement with sewage treatment squarely in mind, but it appears that it never directly confronted how it desired localities to finance the treatment of surface run-off. 15 The legislative history's emphasis upon local flexibility, however, persuades us against narrowly interpreting section 204(b)(1) to require localities to apportion treatment costs with exacting mathematical precision. Although HEA is correct in arguing that no logical connection exists between a landowner's sewage loading and how much rainfall runs off his or her property, basing the City charge system solely upon sewage loading achieves at least rough proportionality because the preponderance of operating costs are attributable to sewage loading. The Congressional emphasis upon local flexibility suggests that section 204(b) requires no more. 16 Moreover, in contrast to a user loading sewage into a treatment system, surface run-off cannot be fairly ascribed to individual land-owners' use of the treatment system. Nature's whims and not land-owners' actions determine where and how much rainfall descends upon the City. It therefore would not be irrational for the EPA Administrator to conclude that surface run-off is not attributable to any individual property owner. 17 In sum, we conclude that the district court was correct in concluding that the EPA Administrator had a rational basis for concluding that the City's charge system conformed with section 204(b)'s proportionality requirement. 18
19 In 1978, the EPA promulgated a regulation describing how user charge systems should apportion treatment costs of surface run-off. It provides: 20 (d) Charges for operation and maintenance for extraneous flows. The user charge system shall provide that the costs of operation and maintenance for all flow not directly attributable to users (i.e., infiltration/inflow) be distributed among all users of the grantee's treatment works system based upon either of the following: 21 (1) In the same manner that it distributes the costs of operation and maintenance among users (or user classes) for their actual use, or 22 (2) Under a system which uses one of any combination of the following factors on a reasonable basis: 23
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26 (iv) Property valuation of the users, if the grantee has a user charge system based on ad valorem taxes approved under § 35.929-1(b). 27 40 C.F.R. § 929-2(d) (1980). 28 The district court ruled that the City's charge system was consistent with subsection 2(d)(1) because surface run-off treatment costs are allocated using the same formula used to apportion sewage treatment costs. HEA argues that subsection 2(d)(1) does not apply because the City's charge system apportions sewage treatment costs according to the added treatment burden attributable to each user and does not follow this general approach in apportioning the costs of treating surface run-off. This argument, however, ignores the regulation's first clause, which indicates that EPA does not consider inflow such as surface run-off 7 to be directly attributable to users. A literal reading of subsection 2(d)(1) instead appears to endorse the City's method of allocating surface run-off costs according to the same formula used to apportion sewage costs. 29 HEA also argues that if the City's charge system is consistent with the regulation, the regulation is invalid because it violates FWPCA section 204(b) (1)'s proportionality requirement. We reject this argument because HEA has failed to demonstrate that the City's method of allocating surface run-off costs is inconsistent with the statutory proportionality requirement. 30 In sum, we conclude that the district court was correct in concluding that the EPA Administrator had a rational basis for concluding that the City's charge system conformed with 40 C.F.R. § 929-2(d)(1).