Opinion ID: 519994
Heading Depth: 2
Heading Rank: 1

Heading: The EPA's Consideration of the Industry's Costs of Complying With the BPT Limitations

Text: 133 CMA maintains that the cost-effectiveness of BPT rulemaking should be measured by a knee-of-the-curve test to determine the point at which costs rise steeply per pound of pollutant removed and that, under such a test, the BPT rules are not cost-effective. 134 The CWA contains no specific statutory language establishing a BPT knee-of-the-curve test or any other quantitative cost-benefit ratio test for BPT. The statute simply requires that the EPA consider the total cost of application of technology in relation to the effluent reduction benefits to be achieved from such application. 78 The courts of appeal have consistently held that Congress intended Section 304(b) to give the EPA broad discretion in considering the cost of pollution abatement in relation to its benefits and to preclude the EPA from giving the cost of compliance primary importance. 79 135 Senator Muskie, the principal Senate sponsor of the Act and the Chairman of the Senate Subcommittee on Air and Water Pollution, stated: 136 The balancing test between total cost and effluent reduction benefits is intended to limit the application of technology only where the additional degree of effluent reduction is wholly out of proportion to the costs of achieving such marginal level of reduction for any class or category of sources. 137 The Conferees agreed upon this limited cost-benefit analysis in order to maintain uniformity within a class and category of point sources subject to effluent limitations, and to avoid imposing on the Administrator any requirement to consider the location of sources within a category or to ascertain water quality impact of effluent controls, or to determine the economic impact of controls on any individual plant in a single community. 80 138 The EPA argues that the Administrator acted well within this broad discretion in concluding that the costs of the OCPSF BPT limitations were justified by the significant quantities of pollutants that would be removed. 81 The EPA notes that the OCPSF industry is currently a national leader in discharging conventional pollutants into our nation's waters. The industry has approximately 300 direct dischargers which annually discharge an estimated 61 million pounds of biochemical oxygen-demanding substances (BODS) and 100 million pounds of total suspended solids (TSS) for a total estimate of approximately 161 million pounds annually. 82 The EPA estimated that the BPT limitations would result annually in the removal of 108 million pounds of conventional pollutants from OCPSF discharges and consequently from our nation's waters 83 at an annualized compliance cost of 76.6 million dollars after a capital investment of 215.8 million dollars. 84 Thus, the EPA concluded that the total cost of BPT is warranted by the total pounds of pollutant removed. 139
Cost-Effectiveness Test 140 CMA argues that Congress was concerned generally that the EPA's regulations not require expenditures that would pass the point at which costs escalate rapidly in relation to benefits--the knee-of-the-curve on a diagram depicting the cost curve. CMA conceives of the knee-of-the-curve test as a generally applicable cost-effectiveness test with the knee defining the most stringent level of regulation permissible. Thus, CMA asserts, whether the EPA labels its regulations BPT or BCT, the EPA is required to consider whether the marginal costs exceed the marginal benefits of the rule. Applying this test, CMA argues that increasing the removal of conventional pollutants from 96 to 99 percent as required by the limitations would cost the OCPSF industry almost twice as much per pound of pollutant removed as current treatment methods: The annual removal of 108 million pounds would cost 76 million dollars per year--71 cents per pound--whereas industry efforts to date have required an expenditure of only 38 cents per pound. CMA concludes that the cost per pound for removal of pollutants is thus well beyond the knee-of-the-curve and that the regulations are therefore not cost-effective. 141 The EPA argues, however, that even if the knee-of-the-curve test applies to any of its regulations, the test is applicable only to assess the cost-effectiveness of incremental increases in limitations beyond BPT--that is, only to BCT. 85 Representative Roberts, the author of the conference report on the 1977 amendments, emphasized that the additional technology requirements of BCT were to be imposed only to remove additional cheap pounds of conventional pollutants beyond BPT. 86 Congress, however, did not specify that initial BPT must be cheap. In fact, Congress anticipated that initially BPT might cause many plant closures and the loss of 50,000 to 125,000 jobs. 87 142 The BCT provisions were intended to establish an intermediate level between BPT and the stricter BAT limitations for conventional pollutants by adding a cost-effectiveness test for incremental technology requirements that exceed BPT technology. 88 Under BCT, additional limitations on conventional pollutants that are more stringent than BPT can be imposed only to the extent that the increased cost of treatment [would] be reasonable in terms of the degree of environmental benefits. 89 143 Thus, Congress intended that cost would occupy a different role in EPA's promulgation of BPT limitations than it would in the promulgation of BCT because of the different aims of the two standards. While Congress did not consider cost to be irrelevant to BPT, it clearly intended it to be a less significant factor than in the promulgation of BCT limitations. The EPA's interpretation of the Act is rational and supported by both the legislative history and the case law insofar as the EPA emphasizes that the BPT limitations are not subject to the type of stringent cost-benefit analysis required for BCT. The relevant inquiry with respect to BPT, as indicated above, is whether the costs are wholly disproportionate to the benefits. 144 To the extent that CMA's claim is that wholly disproportionate is to be measured by a knee-of-the-curve test, the EPA responds that CMA misconceives the nature of the test. Rather than displaying the rate at which costs increase relative to pounds of pollutant removed, CMA's curve displays the rate at which the cost-per-pound increases relative to the percent of pollutant removed, resulting in a misleadingly steep curve. While both the BPT and BCT tests require a comparison between costs and effluent reduction, 90 neither test requires the comparison of costs to the percentage removed, as implied by CMA's curve. 145 CMA relies upon legislative history to justify its percent-removal approach to evaluating the reasonableness of costs. However, the statute does not require that a percent-removal approach be used to establish BPT regulations. 91 Almost all of the BPT regulations promulgated by the EPA since the 1972 enactment of the Clean Water Act are based upon either concentration limitations (as in the case of the OCPSF rule) or more stringent mass limitations which limit both concentrations and flow volumes. 92 In the current case, the regulation will require a 10% increase above current industry costs to remove 108 million additional pounds. 93 The EPA reasonably concluded that these costs were not wholly disproportionate to the benefits.
146 CMA also argues that whether or not BPT rules are, as a general matter, subject to a knee-of-the-curve test, the EPA's BPT limitations for conventional pollutants must pass the BCT cost test which Congress enacted in 1977. 94 147 In promulgating BCT limitations, the Act directs the EPA to consider: 148 the reasonableness of the relationship between the costs of attaining a reduction in effluents and the effluent reduction benefits derived, and the comparison of the cost and level of reduction of such pollutants from the discharge from publicly owned treatment works to the cost and level of reduction of such pollutants from a class or category of industrial sources.... 95 149 CMA contends that this test governs the BPT rules because they represent an increase in regulation over the limitations established on a case-by-case basis by NPDES permits issued before 1977. In other words, CMA contends that the permit limitations established BPT for individual plants and that in enacting the BCT requirements in 1977 Congress intended that any subsequent, more stringent regulations must be evaluated according to the BCT standards. 150 The EPA responds, however, that its authority to promulgate BPT regulations is not abrogated by the fact that, pursuant to Section 402(a)(1), 96 NPDES permits were issued prior to the promulgation of industry-wide BPT regulations. The EPA notes that, since 1977, it has promulgated BPT regulations limiting conventional pollutants in the iron and steel, metal finishing, coal mining, oil and gas, battery manufacturing, plastics molding and forming, metal molding and casting, coil coating, porcelain enameling, aluminum forming, copper forming, electrical and electronic products, and nonferrous metals forming industries 97 --notwithstanding the fact that most of these facilities had previously been regulated by permits. The oil-and-gas-pollutant effluent limitations were promulgated in 1979 and reviewed by this court in 1981 without any reference to the BCT cost test. 98 151 The EPA also maintains that Congress did not intend BCT to displace BPT. The EPA notes that Congress has never repealed the BPT factors as a vital and continuing requirement of the Act 99 and has not stripped the EPA of its explicit authority, under Section 304(b) of the Act, to revise or update BPT periodically. Section 304(b) directs the EPA to publish ... regulations, providing guidelines for effluent limitations, and at least annually thereafter, revise, if appropriate, such regulations. 100 Thus, as the EPA interprets the Act, BCT standards, which place cost-effectiveness constraints on incremental technology requirements that exceed BPT technology, do not displace BPT or override the EPA's authority to promulgate BPT for conventional pollutants. 152 As additional evidence that Congress enacted BCT to supplement, rather than to replace, BPT, the EPA points to the fact that, ten years after the enactment of BCT, Congress enacted a stricter BPT provision requiring a level of control substantially greater or based on fundamentally different control technology for BPT regulations promulgated after 1981. 101 This applies to all BPT regulations for all pollutants, including conventional pollutants, without limitation. 153 As evidenced by numerous rulemakings, the EPA has consistently interpreted the Act to allow the promulgation of BPT limitations applicable to facilities operating under NPDES permits despite the enactment of BCT standards in 1977. We must accord considerable weight to an agency's construction of a statutory scheme it is entrusted to administer. 102 Finding the EPA's interpretation of the Act to be reasonable, we conclude that CMA's objections do not compel us to remand the limitations. 154
155 Finally, having concluded that the EPA construed the statute reasonably in declining to subject the BPT limitations to the BCT cost test, we find that the Administrator did not act arbitrarily and capriciously in determining that the costs of the limitations were justified by the significant amount of pollutants that would be removed. 156 Although the cost per pound of 71 cents required to meet the BPT limitations is almost double the 38 cents per pound that the OCPSF industry presently spends to remove conventional pollutants, the 71-cents-per-pound figure is not so high as to make the EPA's decision arbitrary and capricious: 103 The selection of the point of diminishing returns is a matter for agency determination. 104 157