Court Opinion

ID: 8907842
Source: CourtListenerOpinion
Date Created: 2022-11-27 02:08:20.510913+00
Date Added: 2024-06-11T17:08:20.158514
License: Public Domain

WALLACE, Circuit Judge,
Dissenting:
This case presents a very limited legal issue: is federal review available of a decision announced by the California Regional Water Quality Board but in fact made informally by the Environmental Protection Agency? Because I conclude that there is jurisdiction, I respectfully dissent.
I

A. The Statutory Scheme

Prior to 1972, the Refuse Act of 1899, 33 U.S.C. § 407, provided the primary statutory mechanism for controlling the effluence of industrial pollutants into federal waters. The enactment of the Federal Water Pollution Control Act Amendments of 1972 (the Act), 33 U.S.C. § 1251 et seq.,1 established a new comprehensive scheme designed “to restore and maintain the chemical, physical, and biological integrity of the Nation’s waters.” Act § 101(a), 33 U.S.C. § 1251(a). As a concomitant of this objective, the Act declares that “it is the national goal that the discharge of pollutants into the navigable waters be eliminated by 1985.” Act § 101(a)(1), 33 U.S.C. § 1251(a)(1).
A central feature of the new scheme is the creation of the National Pollutant Discharge Elimination System (NPDES). Act § 402, 33 U.S.C. § 1342.2 The Act empowers the Administrator of the Environmental Protection Agency (EPA) to issue discharge permits regulating the nature and quantity of the various pollutants which may lawfully be discharged from what the Act characterizes as “point sources.” Act §§ 402(a), 502(14), 33 U.S.C. §§ 1342(a), 1362(14). The pollutant levels set forth in a permit are based on EPA regulations which establish effluent limitations for various types of point sources.3 Act § 301(b), 33 U.S.C. § 1311(b). No pollutant may be discharged into navigable waters without an applicable NPDES permit. Act § 301(a), 33 U.S.C. § 1311(a).
In order “to recognize, preserve, and protect the primary responsibilities and rights of States to prevent, reduce, and eliminate pollution,” Act § 101(b), 33 U.S.C. § 1251(b), the Act expressly provides that each state may establish and administer its own permit program covering pollutant discharges into navigable waters within its jurisdiction. Act § 402(b), 33 U.S.C. § 1342(b). The Administrator of the EPA must approve a proposed state permit program unless he determines that the program does not meet the requirements set forth, in the Act. Id. Once a state program is ap*416proved, the EPA is required to suspend its own issuance of permits for navigable waters covered by the state program. Act § 402(c), 33 U.S.C. § 1342(c).
State permit programs established pursuant to this authority are not completely autonomous. For example, the EPA may revoke its approval of a state program if it determines that the program does not conform to the requirements of the Act. Act § 402(c)(3), 33 U.S.C. § 1342(c)(3). More significantly, the Administrator may veto any state discharge permit which he deems to be “outside the guidelines and requirements of [the] Act.” Act § 402(d)(2), 33 U.S.C. § 1342(d)(2).4

B. The History of the Dispute

Shell owns and operates a large industrial manufacturing complex near Martinez, California. The Martinez complex includes two distinct facilities, a petroleum refinery and an organic chemical plant.
In June 1971, Shell applied under the Refuse Act for a permit to discharge pollutants into the navigable waters near Martinez. Upon passage of the Act, Shell’s application automatically became an application for an NPDES permit. Act § 402(a)(5), 33 U.S.C. § 1342(a)(5).
On May 14, 1973, the Administrator approved the State of California’s proposed permit program. 39 Fed.Reg. 26,061 (1973). Accordingly, the California Regional Water Quality Control Board (State Regional Board) became the agency primarily responsible for effectuating the policies and enforcing the requirements of the Act with respect to navigable waters within California’s borders. See Cal. Water Code §§ 13370, et seq. (West Supp.1978).
In October 1974, the State Regional Board prepared a proposed permit for the Martinez complex. The proposed permit treated the complex as a single point source and required it to meet the effluent limitations established for “Class E” refineries. See 40 C.F.R. § 419.50-.56 (1974). Pursuant to the requirements of the Act, the State Regional Board notified the EPA of the contents of the proposed permit. Act § 402(d)(1), 33 U.S.C. § 1342(d)(1).
Shell was displeased with the effluent limitations expressed in the permit. The heart of Shell’s dissatisfaction is its assertion that the Martinez complex cannot achieve the “Class E” effluent limitations even though the “best practicable control technology currently available” is already in operation. On this basis Shell requested a variance from the Class E limitations. See 40 C.F.R. § 419.52 (1974). The essence of Shell’s request is that because the Martinez complex consists of a petroleum refinery and a chemical plant, it should be given effluent limitations based on the combined limitations for a “Class D” refinery and an organic chemical plant.
Shell’s formal request for a variance was submitted to the State Regional Board on November 13, 1974. Two weeks later, the State Regional Board transmitted the request to the EPA as it was required to do by section 402(d)(1) of the Act.
The substance of the EPA’s response to Shell’s request is unclear. Because this case was dismissed on the pleadings, however, “we must, of course, take as true the material facts alleged in [Shell’s] complaint.” Hospital Bldg. Co. v. Trustees of Rex Hosp., 425 U.S. 738, 740, 96 S.Ct. 1848, 1850, 48 L.Ed.2d 338 (1976). Shell’s complaint, in essence, alleges that the EPA itself made *417the actual decision to give the Martinez complex the Class E designation, and then to deny the requested variance.5 At this point, it is crucial to note that the EPA did not publicly veto the request via a formal objection, but rather, as Shell alleges, it caused the State Regional Board to announce its decisions. After the denial of its variance request, Shell continued its legal resistance to the effluent limitations contained in the permit on three fronts.
First, Shell petitioned the State Water Resources Control Board to review the action of the State Regional Board as permitted by state law.6 Cal. Water Code § 13320 (West). There is nothing in the record indicating that this avenue provided Shell with satisfaction of its claims.7
Second, Shell brought a petition in this court based upon our original jurisdiction to review “the Administrator’s action . in issuing or denying any permit under section 402 .. . .” Act § 509(b)(1)(F), 33 U.S.C. § 1369(b)(1)(F). We subsequently dismissed this petition on the ground that the “decision by the California Regional Water Quality Control Board was not an act by the Administrator of the Environmental Protection Agency such as would give this Court jurisdiction under Section 509(b)(1) . . . Shell Oil Co. v. Train, No. 75-2070 (Order filed Sept. 30, 1975). We thus determined that on these facts, we do not have original jurisdiction to review a discharge permit issued by a state agency. See Washington v. EPA, 573 F.2d 583 (9th Cir. 1978) (EPA’s formal objection to state-issued permit not reviewable under section 509(b)(1)(F)); Save The Bay, Inc. v. EPA, 556 F.2d 1282, 1290-92 (5th Cir. 1977) (EPA’s refusal to object to state-issued permit not reviewable under section 509(b)(1)(F)); Mianus River Reservation Comm. v. EPA, 541 F.2d 899, 902 (2d Cir. 1976) (EPA’s failure to consider merits of state permit and failure to object not reviewable under section 509(b)(1)(F)).
Shell’s third assault was launched in the district court by commencing this action to challenge the permit on two grounds. First, Shell alleged that the general effluent limitations promulgated for petroleum refineries were invalid for various reasons. Second, Shell claimed that the Martinez complex had been improperly classified as a Class E refinery and that it should be given a Class D classification, or, alternatively, a variance from the Class E effluent limitations.
The EPA moved to dismiss both prongs of Shell’s complaint for lack of jurisdiction. After briefing and argument, the district judge dismissed Shell’s complaint in its entirety. Shell Oil Co. v. Train, 415 F.Supp. 70 (N.D.Cal.1976).
*418The district judge’s dismissal of the first aspect of the complaint was based on his ruling that jurisdiction to review the Administrator’s promulgated effluent limitation regulations is vested exclusively in the court of appeals. Id. at 75-77. Shell has not here challenged this ruling, and properly so, since the Supreme Court has now resolved the issue in favor of the position taken by the district judge. See E. I. du-Pont de Nemours & Co. v. Train, 430 U.S. 112, 136-37, 97 S.Ct. 965, 51 L.Ed.2d 204 (1977). Shell does contend before us, however, that the district court erred in dismissing the second aspect of its complaint which challenges the specific effluent limitations of the permit. I agree with this contention.
II
The district judge correctly observed that Congress intended the states to play a highly significant role in the administration of the NPDES program. Since in this case the permit had been nominally issued by the appropriate state agency, the district judge concluded that there had simply been no federal action reviewable in federal court. The district judge analyzed the EPA’s role in the issuance of Shell’s permit as follows:
The state requested and received advice from the regional office of the federal Environmental Protection Agency; however, we do not believe that this advice rises to the level of behind-the-scenes coercion charged by plaintiff. It is true that the Administrator of the federal Environmental Protection Agency has authority to veto any permit which fails to conform to federal standards. 33 U.S.C. § 1342(d). However, it is a logical leap to equate the federal failure to veto with federal control sufficient to invoke federal jurisdiction. If the federal agency had exercised its veto power, there would have been federal action reviewable in a federal forum; however, the mere failure to disapprove a state administrative action cannot be deemed decision-making by a federal body.
415 F.Supp. at 77-78 (emphasis in original).
Although I do not intend to minimize the difficulty of the issue facing the district court, I believe this analysis misses the mark in two respects. First, in ruling on the EPA’s pretrial motion to dismiss, the district court was required to take as true the allegations of Shell’s complaint. Hospital Bldg. Co. v. Trustees of Rex Hosp., supra, 425 U.S. at 740, 96 S.Ct. 1848. Thus, the district court was bound to take as true Shell’s averments that the EPA’s veiled actions actually and effectively determined the effluent limitations contained in the state-issued permit.
Second, the district court seemed to construe Shell’s complaint as challenging the EPA’s “failure to veto” or take other action to correct the permit. I believe the allegations of Shell’s complaint are directly to the contrary. The complaint clearly seeks to premise a cause of action on allegations of affirmative acts on the part of the EPA. The essence of the complaint is that even though the permit was nominally issued by the state agency, the effluent limitations expressed in the permit were actually determined by the EPA.
Thus, viewing Shell’s complaint from the proper perspective, I believe the issue before the district court and now before us is whether a federal district court has jurisdiction to review informal EPA action which is intentionally determinative of the effluent limitations contained in a state-issued NPDES permit. While certain facts have been called to our attention which occurred subsequent to the decision by the district court, we review only the action of the district court. Therefore, I would consider these subsequent facts only in light of a suggestion of mootness. The majority apparently disagrees.
At this point, it is crucial to recognize that the resolution of this issue requires the striking of a delicate balance between two important, yet competing, aspects of public policy. First, I acknowledge the importance of minimizing procedural complexity and delay in the issuance and enforcement of NPDES permits. Accordingly, I would be reluctant to create a rule which may result in protracted litigation prior to is-*419suanee. On the other hand, I am also mindful of the “basic presumption of judicial review” for persons adversely affected by administrative actions. Abbott Laboratories v. Gardner, 387 U.S. 136, 140, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967). Thus, “only upon a showing of ‘clear and convincing evidence’ of a contrary legislative intent should the courts restrict access to judicial review” of agency actions. Id. at 141, 87 S.Ct. at 1511. See also Dunlop v. Bachow-ski, 421 U.S. 560, 566-67, 95 S.Ct. 1851, 44 L.Ed.2d 377 (1975). This precise conflict of values was implicit in our prior decision in Washington v. EPA, supra 573 F.2d 583, and my conclusion is largely premised upon that case.
Having concluded that Washington is “completely inapposite,” the majority states that Shell’s claim is “unsupported by any legal authority.” I disagree. The Washington opinion and the other eases cited above set forth authority clearly to the contrary.
In Washington v. EPA, Scott Paper Company was issued an NPDES permit by the State of Washington’s permitting agency even though the Administrator had formally objected to the terms of the permit. The EPA then sought to impose sanctions on Scott. Scott brought suit in district court to challenge the Administrator’s objection. On appeal, we held “that the district court [had] jurisdiction to entertain Scott’s challenge to the Administrator’s objection to the . . . permit . . .” Id. at 588. In large measure, our decision was founded on the importance of the right to judicial review of agency action, and specifically on section 10 of the Administrative Procedure Act, 5 U.S.C. §§ 701-06.8
I believe our holding in Washington v. EPA to be highly relevant here. In the case before us, the Administrator did not enter a formal objection to a proposed state permit, but rather, taking Shell’s allegations as true, he informally controlled the terms of the state permit by compelling the State Regional Board to reject Shell’s request. The relevant distinction between Washington v. EPA and this case is merely that there the Administrator did directly and formally what he here did indirectly and informally. I perceive no substantive difference between those two methods of proceeding. Of course, “the particular label” placed on the agency’s action is not determinative of a federal court’s authority to review, “for it is the substance of what the [agency] has purported to do and has done which is decisive.” Columbia Broadcasting System, Inc. v. United States, 316 U.S. 407, 416, 62 S.Ct. 1194, 1200, 86 L.Ed. 1563 (1942).
Looking thus to the substance of Shell’s allegations, I cannot agree with the majority’s attempt to distinguish Washington on the grounds that there was no “actual veto” here, nor “any conflict between the state and federal agencies.” Both cases involve an actual decision by the EPA which set the limitations of the permit. I fail to see any relevance in the fact that in the first case the EPA’s controlling decision was made after a contrary state decision and in the second case the EPA’s decision was made without the benefit of an initial state decision.
In Independent Broker-Dealers’ Trade Ass’n v. SEC, 142 U.S.App.D.C. 384, 442 F.2d 132, cert. denied, 404 U.S. 828, 92 S.Ct. 63, 30 L.Ed.2d 57 (1971), the District of Columbia Circuit considered a case with strikingly parallel facts. In that case, the SEC requested the New York Stock Exchange to amend its rules regarding brokerage commissions. The SEC had the power to impose the change by regulation. The Exchange adopted the requested rule, and, as a result, various affected brokers *420brought suit to challenge the SEC’s action. The court of appeals held that the district court had jurisdiction pursuant to section 10 of the Administrative Procedure Act to review the agency’s action. I agree with the D.C. Circuit’s analysis that
[t]he vitality of the CBS doctrine, in finding finality and reviewability of agency actions not issued as regulations or orders but having the consequence and contemplation of “expected conformity,” is unmistakable.
Id. at 141.
I am convinced that Shell’s complaint alleges EPA action which is the functional equivalent of the formal veto in Washington v. EPA. I would therefore hold that Shell may seek review of the Administrator’s alleged de facto determination of effluent limitations prescribed for its Martinez complex in federal district court pursuant to section 10 of the Administrative Procedure Act.
I am concerned with any introduction of delay and complexity into the NPDES program; however, as we implied in Washington, such concern cannot overreach a permittee’s right to meaningful judicial review of final agency action. In substantial measure, Shell could not otherwise obtain meaningful judicial review.9 Although California provides an effective system of administrative and judicial review of its NPDES program, there is no certainty that it would be helpful to Shell. Since the California agencies have formally agreed to acquiesce to the demands of the Administrator,10 a state court might require the agencies to comply with the Administrator’s direction. Alternatively, if Shell were able to persuade the administrative appeal body and the reviewing state courts to grant relief on the ground that the effluent limitations were incorrectly determined, the EPA could continue to block the issuance of any state permit which did not conform to its dictates. To me, that is not meaningful judicial review.
In addition, I am confident that the district courts would not allow state-NPDES permittees to use the position I expose, if adopted, to circumvent state review procedures in inappropriate cases. Thus, where a permittee fails to allege and to prove that the EPA’s actions constituted a de facto veto or were otherwise determinative of the challenged effluent limitations, there would be no federal agency action reviewable pursuant to the Administrative Procedure Act. 5 U.S.C. §§ 701(b)(1), 702.
In this case, however, it is clear that Shell has alleged that the EPA’s actions were controlling and determinative. Accordingly, Shell should be permitted to attempt to prove its case.
The majority, however, asserts that Shell’s theory would lead to “mischief.” This is based on a reading of Shell’s complaint different from mine. The majority characterizes Shell’s theory as being based on coercion or domination of the state by the EPA. Thus, the majority argues, *421adoption of Shell’s theory would pose grave federalism issues for all joint federal-state programs which have “strings attached.” I do not agree.
Shell’s theory does not rest on any coercion between federal and state agencies. In fact, the memorandum of understanding between the state and federal agencies suggests that the relationship here was quite agreeable to both parties. Shell’s complaint should be read as a simple allegation that the EPA made all material decisions in setting the limitations of the state-issued permit. Since this was federal agency action, it is judicially reviewable pursuant to the Administrative Procedure Act (APA) by a district court.
In my view, the issue raised by the majority regarding federal-state coercion and the resulting constitutional concerns is unpersuasive. Shell’s appeal simply asks for judicial review of federal agency action; it does not challenge the NPDES program.
The majority also concludes that the EPA’s decision was not final for APA purposes. I disagree. There was no administrative process by which Shell could obtain meaningful review of the EPA’s action. As pointed out above, state administrative review is insufficient because no state agency could modify or overrule the EPA’s decision without its permission. Thus, the state review board’s allowance of Shell’s variance request could ultimately be voided if the EPA decided to maintain its original decision. That is all there was before the district court when the decision we are reviewing was made.
I would therefore reverse the decision and remand the case to the district court.

. On December 27, 1977, President Carter signed into law the Clean Water Act of 1977, Pub.L. No. 95-217, 91 Stat. 1566 (1977), which amends the Federal Water Pollution Control Act Amendments of 1972. Although it is too early to assess fully the impact of the Clean Water Act, it does not appear to affect the substantive provision of the 1972 Act at issue here.

. The NPDES permit program embodies the Act’s fundamental change in approach from the Refuse Act. The earlier system focused on the general quality of a body of water and its capacity to assimilate additional effluence. The new Act, on the contrary, focuses on individual point sources of pollutants and requires them to meet applicable effluent limitations regardless of the quality of the receiving waters. The theory of this new approach is that “[s]uch direct restrictions on discharges facilitate enforcement by making it unnecessary to work backward from an overpolluted body of water to determine which point sources are responsible and which must be abated.” EPA v. California ex rel. State Water Resources Control Bd„ 426 U.S. 200, 204, 96 S.Ct. 2022, 2024, 48 L.Ed.2d 578 (1976); see also Save The Bay, Inc. v. EPA, 556 F.2d 1282, 1284 (5th Cir. 1977); Note, Nondeterioration and the Protection of High Quality Waters Under Federal Water Pollution Control Law, 1977 Utah L.Rev. 737, 739 n. 12.

. The effluent limitations established by regulation for various types of point sources are derived by application of a particular technological standard set forth in the Act. Thus, point sources were required to achieve effluent limitations requiring “the application of the best practicable control technology currently available” by July 1, 1977. The Act requires the effluent limitations to meet technological standards which are increasingly stringent over time. See Act § 301, 33 U.S.C. § 1311.

. The EPA’s power to prevent the issuance of California NPDES permits to which it objects, has been formalized in two additional places. First, California’s administrative regulations provide that the agencies charged with administering the NPDES program may not issue a permit if the “regional administrator [of the EPA] has objected to issuance in writing.” 23 Cal.Adm.Code 2235.5(a)(1)(c).
In addition, the California agencies have agreed that “[wjhenever the Regional Administrator ‘objects’ . . . neither the State Board nor the regional boards shall adopt any waste discharge requirements for purposes of the NPDES until all ‘objections’ of the Regional Administrator have been eliminated.” Memorandum of Understanding Regarding Permit and Enforcement Programs Between the State Water Resources Control Board and the Regional Administrator, Region IX, Environmental Protection Agency, p. 1 (March 26, 1973).

. The essence of Shell’s allegations is found in paragraphs 22 and 23 of its complaint:
On or about November 13, 1974, Plaintiff applied to the Regional Board for individualized treatment for the Martinez Complex pursuant to the variance clause. The variance was denied, and plaintiff was issued an NPDES permit for the Martinez Complex on or about February 18, 1975 by the Regional Board. The permit classifies the Martinez Complex as an E subcategory refinery ....
Although the application for a variance was ostensibly made to and the variance was ostensibly denied by the Regional Board, and although the Permit was ostensibly issued by the Regional Board, the Administrator, through his subordinates, made all material decisions by which the variance was denied and by which the Permit issued and instructed the Regional Board to follow those decisions.

. Shell’s state administrative review petition was not before us so I am unwilling to conclude, as does the majority, as to how it “must have been premised.”

. We were informed by counsel that the State Water Resources Control Board has reversed the State Regional Board’s denial of Shell’s variance request. Because of the obvious potential for mootness, we requested counsel to inform us of the EPA’s response to the State Board’s decision.
I am convinced, as is the majority, that the case is not moot. During oral argument, counsel for both sides indicated that there could be a significant substantive difference in the terms of Shell’s permit if the Martinez complex were given a Class D classification, rather than a Class E classification with a variance as presently approved by the State Water Resources Control Board.

. We observe particularly the relevance of the following provisions of section 10:
A person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute, is entitled to judicial review thereof.
5 U.S.C. § 702.
Agency action made reviewable by statute and final agency action for which there is no other adequate remedy in a court are subject to judicial review.
5 U.S.C. § 704.

. Our decision in Washington v. EPA did not analyze the adequacy of pertinent state administrative and judicial review procedures. Because Scott was apparently satisfied with the terms of the permit granted to it by the state, there were no logical or practical grounds for seeking state court review of the terms of the permit. In this case, however, the terms of the permit actually issued to Shell are unacceptable to it. Accordingly, the question surfaces whether Shell can obtain meaningful judicial review in the state process.
In my view, California’s statutory review procedures generally provide satisfactory judicial review. See Cal. Water Code § 13320 (administrative review of decisions of state regional board by State Water Resources Control Board); Cal. Water Code § 13330 (judicial review in superior court of decisions of State Control Board; court to exercise independent judgment); Cal.Civ.Proc.Code § 1094.5(c) (where court is authorized to exercise independent judgment, agency finding to be sustained only if supported “by the weight of the evidence”). Nevertheless, at the time of the decision by the district court Shell was confronted with this dilemma: even if Shell were to obtain its desired relief via this procedure, the EPA could continue to block the issuance of a permit not complying with its dictates. Thus, if relegated to the state review process, Shell could not be certain of an efficacious review unless it were ultimately granted a hearing in the Supreme Court.

. See note 4 supra.