Opinion ID: 413378
Heading Depth: 1
Heading Rank: 1

Heading: the clean air act and section 120

Text: 20 The Clean Air Act (Act) imposes an interlacing set of emission controls on stationary sources of air pollution. National standards limiting levels of pollutants in the air we breathe, termed ambient air quality standards, are set for particular pollutants by EPA. Act Sec. 109, 42 U.S.C. Sec. 7409 (Supp. IV 1980). 2 They are put into effect, by state implementation plans (SIPs), approved by EPA, which limit emissions from particular sources within the state in a manner designed to attain the ambient air quality standards. Id. Sec. 110, 42 U.S.C. Sec. 7410 (Supp. IV 1980). Additional, highly protective federal standards are set by EPA to limit emissions by particular sources of hazardous air pollutants, such as asbestos, that are capable of causing serious injury or death. Id. Sec. 112, 42 U.S.C. Sec. 7412 (Supp. IV 1980); see, e.g., Ethyl Corp. v. EPA, 541 F.2d 1 (D.C.Cir.1976). EPA also sets separate, uniform standards for new stationary sources of emissions under Sec. 111, 42 U.S.C. Sec. 7411 (Supp. IV 1980). These separate standards are designed so that pollution controls will be installed when the plant is being built and design changes are easiest, and so that the states will not compete for new industry by adjusting emissions levels for air pollution. 3 21 Although the original statutory framework was only put in place in 1970, by 1977 Congress expressed serious dissatisfaction with the slow progress towards improving air quality. 4 Part of the explanation for the slow pace was that the original timetables for developing and implementing air quality standards had been overly optimistic in light of the technological, economic, and political complexities of the problem of air pollution. 5 Another part was that the Act is technology-forcing: 6 sources must meet emissions standards or else face statutory penalties for continuing operations, regardless of whether available technology enables them to meet the standards. At least as important an obstacle, however, was the expense of reducing emissions, making it profitable for industry to delay needed expenditures as long as possible. 7 22 With this view of the problem, Congress both revised the substantive standards of the Act and strengthened the methods it provided for enforcing air quality standards. Substantive changes included new provisions for state plans to implement air quality standards in areas of persistent pollution--so-called non-attainment areas. Act Secs. 171-178, 42 U.S.C. Secs. 7501-7508 (Supp. IV 1980). The Amendments also required the states to set standards to prevent significant deterioration of air quality in areas relatively free from pollution. Id. Secs. 160-169A, 42 U.S.C. Secs. 7470-7491 (Supp. IV 1980). Congress also revised the new source performance standards, requiring new sources to use the best available systems of emissions controls. Id. Sec. 111, 42 U.S.C. Sec. 7411 (Supp. IV 1980). 8 23 The Act, as established in 1970, provided for criminal fines of up to $25,000 per day or imprisonment of up to one year for knowing violations of standards under the Act. It also empowered EPA to order sources to comply with applicable air quality standards, and to seek injunctive relief for violations of its orders. Pub.L. No. 91-604, Sec. 113(b), 84 Stat. 1676, 1686-87 (1970). The 1977 Amendments added civil penalties to the enforcement scheme. Act Sec. 113(b), 42 U.S.C. Sec. 7413(b) (Supp. IV 1980). Together with these changes in traditional methods, the 1977 Amendments also added section 120 noncompliance penalties to the enforcement scheme of the Act. 24 Section 120 is a unique federal experiment with economic penalties. It is designed to alter economic behavior by changing the costs of emitting pollutants in violation of applicable air quality standards. See H.R.REP. NO. 294, 95th Cong., 1st Sess. 72-79 (1977) [hereinafter 1977 HOUSE REPORT], reprinted in 4 A LEGISLATIVE HISTORY OF THE CLEAN AIR ACT AMENDMENTS OF 1977 at 2539-46 (1978) [hereinafter 1977 LEGISLATIVE HISTORY]. Congress added section 120 to the Act because it anticipated that even the augmented civil and criminal penalty scheme would not create sufficient incentives for sources to comply with air quality standards. Id. at 72. Congress also hoped that the section 120 penalties would increase administrative flexibility in enforcing the Act, by serving as a middle ground between stiff criminal sanctions or shutdown of noncomplying facilities. Id. at 5. Equally important, by removing the economic benefits of noncompliance with the Act, Congress hoped to place polluters on the same economic footing as those who had limited their emissions through increased anti-pollution expenditures. Id. 25 Section 120 begins by specifying the sources made subject to noncompliance penalties. Under section 120(a)(2), penalties may be assessed against any major stationary source--defined as any source that emits or has the potential to emit one hundred or more tons of any pollutant per year, Act Sec. 302(j), 42 U.S.C. Sec. 7602(j) (Supp. IV 1980)--not in compliance with any applicable emission limitation. Such penalties also are to be assessed against other stationary sources not in compliance with federal new source performance standards or standards for hazardous pollutants. Finally, sources operating under certain types of delayed compliance orders allowed by the Act are to be assessed penalties if they fail to comply with the terms of such orders. 26 Sources meeting certain conditions, however, are to be exempted from the noncompliance penalties. For example, sources converting from petroleum to coal pursuant to orders issued under the Act, and complying with the terms of such orders, are exempt from noncompliance penalties. Sec. 120(a)(2)(B)(i). So are sources experimenting with innovative technology under the Act, Sec. 120(a)(2)(B)(iii), and certain sources unable to comply with emission limitations for reasons utterly beyond their control, Sec. 120(a)(2)(B)(iv). These exemptions are mandatory, although the burden of demonstrating entitlement to any of them falls on the source. In addition, EPA may exempt sources from penalties for certain instances of noncompliance that are de minimis in nature and duration. Sec. 120(a)(2)(C). 27 Penalties are to be assessed against noncomplying sources either by EPA or by the individual states. Section 120 directs EPA to promulgate regulations implementing the penalties after notice and opportunity for public hearing--the regulations we must evaluate here. Individual states may take over responsibility for administering the noncompliance penalty program if they submit plans approved by EPA, Sec. 120(a)(1)(B)(i), in which case the penalties are paid to the states, Sec. 120(d)(1). To date, however, states have shown little interest in taking responsibility for the program. In any event, the statute does not differentiate substantively between the penalty program as administered by EPA and by the states, and the discussion to follow will for convenience refer principally to EPA as administering the program. 28 Section 120 sets out carefully the procedures to be followed in assessing the noncompliance penalties. Sources not complying with applicable air quality standards are to be given a brief but reasonably specific notice of noncompliance. Sec. 120(b)(3). Upon receipt of a notice of noncompliance, a source must either calculate the amount of the penalty owed, which begins to accrue with the issuance of the notice of noncompliance, Sec. 120(d)(3)(C)(ii), or submit a petition within forty-five days challenging the notice of noncompliance or asserting entitlement to an exemption. EPA is to provide a hearing on the record and to act on the petition within ninety days. 9 Sec. 120(b)(5). Should a source in receipt of a noncompliance notice fail to respond, EPA may contract for calculation of the penalty. Sec. 120(c). 29 Penalties are to be calculated to reflect the projected economic value of noncompliance to a source. EPA is to promulgate regulations for calculating the penalty, which must include at least the quarterly equivalents of capital costs, operating costs, and maintenance expenses avoided as a result of noncompliance. Sec. 120(d)(2)(A). The penalty is to be paid on a quarterly basis, in equal installments during the entire period of noncompliance, beginning with issuance of the notice of noncompliance and ending when the source comes into full compliance with applicable air quality standards. Sec. 120(d)(3)(B), (C). Expenditures made during a quarter for the purpose of bringing the source into compliance with air quality standards, and not otherwise reflected in the calculation of the penalty amounts, are to be credited against the penalty assessment for that quarter. Sec. 120(d)(2)(B). Credits not taken into account fully in a given quarter may be carried over and offset against the next quarter's penalty assessment. Sec. 120(d)(2). When a source reaches full compliance with air quality standards, the penalty is to be recalculated to take into account the actual--rather than the projected--expenditures required to bring the source into compliance with air quality standards and the length of the actual period of delay in the expenditures. Sec. 120(d)(4). Sources that have overpaid are entitled to reimbursement, at interest rates set by the United States Treasury (or by the state, if the state is administering the penalty program); sources that have underpaid are to be assessed the deficiency, again with interest. Sec. 120(d)(4)(A), (B). 30 Initial penalty payments are due six months after issuance of the notice of noncompliance. A source may seek judicial review of a determination by EPA that penalizes the source under section 120, but the penalty is not stayed pending the review process, Sec. 120(e). The penalties are in addition to other civil and criminal penalties under the Act, and do not alter a source's other obligations under the Act. Sec. 120(f). 31 Before turning to the particular issues in this case, we note that the standard for judicial review is spelled out in the Act itself. Section 307(d)(9) provides that: 32 In the case of review of any action of the Administrator to which this subsection applies, the court may reverse any such action found to be-- 33 (A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; 34 (B) contrary to constitutional right, power, privilege, or immunity; 35 (C) in excess of statutory jurisdiction, authority, or limitations, or short of statutory right; or 36 (D) without observance of procedure required by law, if (i) such failure to observe such procedure is arbitrary or capricious, (ii) the failure to observe such procedure was raised with reasonable specificity during the period for public comment, and (iii) the failure to observe such procedure was so serious and related to matters of such central relevance to the rule that there is a substantial likelihood that the rule would have been significantly changed if such failure had not been made. 37 Sec. 307(d)(9). 42 U.S.C. Sec. 7607(d)(9) (Supp. IV 1980). 38 We have reviewed these regulations with this standard as our measure.