ELR Citation: ELR 20306
No(s). 92-2359 (1st Cir. Oct 21, 1993)

The court holds that the U.S. Environmental Protection Agency (EPA or the Agency) acted arbitrarily and capriciously when it adopted state certification requirements for an oil refinery's discharge permit under the Federal Water Pollution Control Act (FWPCA), while refusing to await the Puerto Rican Environmental Quality Board's (Board's) reconsideration of its decision not to include a mixing zone analysis in the permit. Under mixing-zone analyses, effluent limits are measured after pollutants have been discharged into, and diluted by, a receiving body of water, rather than at the point of discharge. Puerto Rico was in the process of reformulating its mixing-zone criteria when the Board issued to the refinery a draft permit that set effluent limitations at the point of discharge. The Board issued its final certification without including a mixing-zone analysis, despite having promulgated the new regulations four days earlier. The Board then granted the oil company's request to reconsider its certification and include a mixing-zone analysis. Both the Board and the oil company notified EPA that the certification was under reconsideration, and the company requested EPA to stay action on the permit while the Board's decision was pending. EPA soon issued a final permit, accepting the Board's original certification. The Board then informed EPA that it did not want EPA to consider the permit final. EPA stayed the permit's effectiveness through the administrative appeal process, wherein EPA upheld the permit as issued and denied further review.

The court first holds that although it committed no procedural error, EPA's decision was arbitrary and capricious, because the Agency issued the final permit without explaining its refusal to wait until the Board reconsidered the certification. EPA is required to explain its action, because Puerto Rico historically used mixing-zone analyses in the refinery's prior permits and the refinery cannot practically operate if the effluent limitations are applied at the point of discharge. Moreover, EPA's refusal to use a mixing-zone analysis at the state's request apparently departs from the Agency's usual practice. Furthermore, the court finds an element of apparent irrational discrimination in EPA's action, because only those facilities that were either permitted or re-permitted within the time that Puerto Rico was reworking its mixing-zone criteria have encountered the same difficulty.

The court also holds that EPA did not err procedurally in declining to waive state certification after Puerto Rico failed to issue its final certification within both the 60-day regulatory and one-year statutory deadlines. EPA's interpretation of the statute as giving it the discretion to issue a delayed, final certification, rather than automatically waiving state certification when untimely issued, is entitled to great weight. The court finds the Agency's interpretations of its own regulations even more compelling. Moreover, EPA's reading of the statute and its regulation is sensibly flexible and courts can assure that this flexibility does lead to permanent inaction. The court holds that the Board's certification was final when EPA adopted it. Therefore, the Board's subsequent decision to re-characterize its certification order as nonfinal cannot affect the procedural validity of EPA's decision to grant the permit. In addition, EPA was not required to grant the Board's postpermit stay unless its regulations governing postpermit stays were satisfied. The court concludes by emphasizing that it has not ruled on the validity of either the Board's final certification, which is a matter for local courts, or use of the mixing-zone analysis under the FWPCA.

Counsel for Petitioner
Robert Brager, Richard S. Davis
Beveridge & Diamond
1350 I St. NW, Ste. 700, Washington DC 20005
(202) 789-6000

Counsel for Respondent
Alan D. Greenberg
Environment and Natural Resources Division
U.S. Department of Justice, Washington DC 20530
(202) 514-2000

Before SELYA, CYR, and BOUDIN, Circuit Judges.