The Proper Place for the Bubble Concept Under the Clean Air Act

Laurens H. Rhinelander

Editors' Summary: Supreme Court review in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. and congressional reauthorization offer the possibility at last of clarification of the role of the bubble policy in implementing the Clean Air Act. Professor Rhinelander reviews the administrative and judicial histories of the bubble policy, concluding that it should be applied liberally, but that Congress and the D.C. Circuit have left too many obstacles in EPA's path. Turning to the pending Supreme Court action, he argues that the court can and should tear down an unnecessarily large barrier recently erected by the D.C. Circuit but that only amendments to the Act will allow realization of the full potential of the bubble policy.

Mr. Rhinelander is a Professor Emeritus, University of Virginia School of Law, where he taught environmental law.

[13 ELR 10406]

As the Supreme Court prepares to review Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc.,¹ a case in which the D.C. Circuit threw a monkey wrench into the development of the "bubble policy"² under the Clean Air Act,³ it is an appropriate time to review the overall role the bubble should play in implementing that Act. The bubble concept is a method of measuring emissions from a factory as if there were a plastic bubble over the entire plant with only a single opening at which all the emissions from the plant are measured and controlled. This alternative to the smokestack by smokestack regulation generally imposed under the Act gives a company the flexibility to achieve the same or better overall emission reductions at a lower cost. While this seemingly simple regulatory reform offers substantial benefits, neither the courts nor the Environmental Protection Agency (EPA) have been able to resolve the basic question of how far the bubble should be used as a tool to help clean up the air where it is "too dirty,"⁴ and keep it relatively "clean"⁵ where that is now the case. Much of the continuing uncertainty stems from the fact that Congress never addressed whether or how the bubble policy might fit into the complex Clean Air Act scheme. Now both Congress and the Supreme Court have opportunities to find answers, and while the Court probably will act first, Congress must play the leading role.

Bubbles might be used in many ways. They could be used to negate the increased emissions from new or modified pollution emitters, as is now allowed in two contexts under the Clean Air Act,⁶ or they can be used to make it easier for existing sources to comply with applicable emission control regulations.⁷

Natural Resources Defense Council, Inc. v. Gorsuch⁸ involved a third application of the bubble to new emission points. The D.C. Circuit invalidated a change in EPA regulations that allowed the use of the bubble in nonattainment areas to avoid new source review of major modifications of existing plants — modifications that otherwise would be subject to demanding procedural and substantive requirements for major new sources. Under the statute such review is required for the construction or modification of a stationary source⁹ that would increase the emission of pollutants from that source by a significant¹⁰ amount. In applying the controls involved in new source review the definition of "source" is crucial. If any part of a plant which emits pollution to the atmosphere, for example a boiler in a large manufacturing facility, is itself a "source," a proposed project involving a significant increase in emissions from that boiler triggers the restrictions in the Act, including the need for a special permit, [13 ELR 10407] even if there are offsetting reductions elsewhere in the plant. If, however, the whole plant is the "source," then a decrease in emissions at one part of the plant effectively erases increases in emissions at another part. In such a case the project escapes the controls of new source review as long as there is no significant increase in emissions from the plant as a whole.

Deciding what the rules for the use of the bubble are or should be requires a lengthy journey through complex legislative, administrative, and judicial histories. This article reviews the genesis and history of the bubble's use by EPA, and considers the reasons for and against its use. It then reviews the painfully complex judicial pronouncements on the subject, a series of three cases decided by the D.C. Circuit: ASARCO, Inc. v. Environmental Protection Agency,¹¹ Alabama Power Co. v. Costle,¹² and finally NRDC v. Gorsuch,¹³ the case now before the Supreme Court. The cumulative effect of these decisions has been to curtail EPA's ability to make constructive use of the bubble policy. This conclusion leads to suggestions as to how the Court should decide Chevron and how Congress should amend the Clean Air Act to eliminate the legal confusion that has stifled use of a potentially productive reform in Clean Air Act regulation. And Congress probably holds the key: without congressional action the status of the bubble policy remains in doubt unless the Supreme Court takes the unlikely course of using the narrow platform provided in Chevron to enuniciate broad Clean Air Act principles.

Genesis and Checkered Career of the Bubble Concept

The Clean Air Act in 1983

Before discussing the origins and development of the bubble concept it is necessary to consider generally the locale where it operates: the Clean Air Act, which is the cornerstone of the federal effort to clean up the nation's air. Detailed descriptions of this Act can be found elsewhere;¹⁴ only a brief overview appears here.

The first Clean Air Act was passed in 1963, but its most important provisions date from amendments of 1970 and 1977.¹⁵ Under the 1970 amendments EPA was to issue national primary and secondary ambient air quality standards (NAAQSs) to protect, respectively, public health and welfare.¹⁶ These standards were to be "attained" by the mid-1970s through a combination of (1) state regulation of existing sources of pollution by state implementation plans (SIPs), prepared under EPA supervision,¹⁷ and (2) tough federal standards for new factories.¹⁸

The SIP was to be a comprehensive state-federal program for cleaning up the air to the federal NAAQS levels. Section 110 prescribed criteria by which EPA was to approve or reject state plans.¹⁹ Among the criteria was the requirement that the SIP impose quantitative (and thus enforceable) emission limitations on individual sources of air pollution.²⁰ States were to have considerable freedom in choosing policies of enforcement to meet these goals.²¹

To control new industrial polluters the 1970 Act required EPA to promulgate New Source Performance Standards (NSPSs) for categories of new or modified sources whose emissions were thought to "endanger public health or welfare."²² The NSPSs were to take advantage of the opportunity to achieve great emission reductions by designing controls into a new factory. Equally important the NSPSs would impose uniform national standards on new plants so that no state could induce such plants to locate inside their borders by offering more lenient pollution controls than other states. While the 1970 Act imposed no general controls to prevent the degradation of the air in clean areas, the NSPS were expected to minimize the amount of pollution from new plants in such areas as well.²³ Thus the 1970 Act had two major features. One was the provision of source-specific, enforceable emission limits by EPA and the states, respectively, for new and old factories. The impact of this approach turned largely on the definition of the "sources" being regulated.²⁴ The second key feature was that the tough new source standards were expected to accomplish much of the cleanup needed to attain the air quality standards simply through the passage of time and replacement of old, dirty plants with new, very clean ones.²⁵

[13 ELR 10408]

The 1977 Amendments to the Clean Air Act reflected Congress' conclusion that state implementation plans and new source performance standards alone would not achieve the goals of the Act. The amendments extended the dates for attaining the NAAQSs to 1982 or 1987²⁶ and introduced into the Act two new permit programs to control emissions from new sources. First, "clean" areas, i.e., those that meet the NAAQSs, are subject to "prevention of significant deterioration" (PSD) requirements that include new source review procedures, tough required emission controls, and limits on the amount of emissions that may be added to the ambient air in such areas.²⁷ Second, sources in "dirty" or nonattainment areas are subject to stringent review and emission control requirements.²⁸ States are directed to revise their SIPs to incorporate the nonattainment area permit program for major new sources and to impose "reasonably available control technology" and other requirements on existing sources so as to ensure "reasonable further progress" (RFP) toward attainment of the NAAQSs. One of the nonattainment area new source programs is the "offset policy," which is an adaptation of the bubble policy.²⁹

EPA and the Bubble

Today, the top leadership of EPA endorses the bubble policy. EPA Administrator Ruckelshaus responded to a question about the bubble policy in his confirmation hearings as follows:

I have several times suggested to this Committee my belief that the current laws do not provide the Administrator sufficient flexibility to search for the most cost-effective solution to our environmental and health goals. It stands to reason that the less it costs to meet environmental requirements, the more compliance we will have. The more cost-effective options a regulated firm has for coming into compliance, the faster pollution will be reduced and environmental quality improved. So long as new approaches are legal, technically sound, and structured to assure equal or better environmental results and avoid unnecessary expenditures — not just savings for industry — they should be vigorously pursued, since they help us all clean up better.

EPA currently believes the air bubble and other emissions trading steps are good examples, and that they give industry the flexibility to substitute inexpensive surplus emission reductions for expensive required ones, moving on to costly control options only after inexpensive alternatives have been explored. Because it often costs 100 times more to remove a pound of the same pollutant from one stack as from an adjacent one, this lets managers capitalize on plant-specific chances for cheaper equivalent control which are difficult for centralized agencies to take into account.

I believe the Agency should constantly look for more cost-effective ways to protect our public health and environment.³⁰

However, EPA has not gone as far with the concept as its proponents inside and outside the Agency would like, in large part due to opposition from environmental groups and a legacy of confusing precedent from the D.C. Circuit.

* The Bubble Before 1979: ASARCO and Alabama Power. The many vicissitudes of EPA in developing its bubble policies have been told elsewhere,³¹ and need not be repeated here. Suffice it to say that EPA, somewhat reluctantly, expressly approved its first bubble, a limited one, in 1975 when it revised its regulations³² governing the issuance and enforcement of new source performance standards for smelters. Bubbles were to be allowed for modifications of existing sources but not for constructing new ones.³³ In other words, if a plant owner expanded part of a facility, causing increased pollution emissions, but reduced pollution elsewhere in the plant by an equivalent amount, there would be no new source and no need to comply with the NSPS.³⁴ A wholly new source was fully subject to the NSPS.³⁵ EPA did this by first defining "stationary source" to include both a "facility" and a "combination of facilities,"³⁶ and then by stating that "modification" of a source did not occur for NSPS purposes if the "total emission rate of any pollutant has not increased from all facilities within the stationary source."³⁷ As noted below,³⁸ Judge Wright held in ASARCO in 1978 that this use of the bubble was contrary to the intent of the Act and criticized EPA for redefining "source" in the way it did.³⁹

[13 ELR 10409]

In 1978 EPA also issued PSD regulations that exempted a modification of a source whose emission increases were negated in a bubble from the substantive requirements, such as the best available control technology (BACT), but not from the obligation to obtain a pre-construction permit.⁴⁰ In Alabama Power, Judge Wilkey held that EPA correctly allowed the bubble in the PSD program, but that even the permit requirement was invalid.⁴¹

In 1979 EPA issued a general bubble policy statement urging the states to use the bubble concept liberally in connection with existing sources regulated under their SIPs.⁴² This policy statement was the first clear EPA approach, other than the offset policy, for using the bubble concept in implementing SIPs. But under the 1979 policy statement each state had to amend its SIP in order to adopt the bubble policy, and then do so again each time it approved an individual bubble, with all the SIP revisions requiring EPA approval.⁴³ In announcing this policy EPA stressed the value of the bubble, both as a means to control inflation and one to encourage innovation.⁴⁴

* In the 1980s — Emissions Trading and the Plant-wide Definition. EPA entered the 1980s apparently unsure as to how far it might use the bubble in the light of ASARCO and Alabama Power. In August 1980 it issued simultaneously two sets of regulations dealing with the bubble; one for PSD areas⁴⁵ and the other for nonattainment areas.⁴⁶ Both defined "stationary source" in the exact terms of the statutory NSPS definition,⁴⁷ buy they differed markedly in their subdefinitions of the four components of a "source": "building," "structure," "facility," or "installation." The PSD definition defined all four in identical fashion so that each one included a whole plant and not its separate parts.⁴⁸ But in the regulations under Part D for nonattainment areas, only the first three of the components: "building," "structure," or "facility" were given this definition. The fourth, "installation," was given a limited definition as an "identifiable piece of process equipment."⁴⁹ This became known as the "dual" definition because a "source" under it meant both a whole plant and one of its components, and it intentionally eliminated the use of the bubble to avoid new source review by providing that if a piece of process equipment was built or modified it was subject to the Part D SIP rules.⁵⁰

During the same period EPA attempted to develop a broad, coherent policy governing bubbles for new and old sources in clean and dirty air areas. Initially, the draft policy allowed bubbles to enable major modifications to avoid new source review in PSD areas, but not in nonattainment areas. At the very end of the Carter Administration in January 1981, to add momentum to emission trading, EPA began to change its mind on nonattainment area modification bubbles and announced it would liberalize the use of the bubble in dirty areas by using the same definition for a source's components in these areas as under the PSD rules.⁵¹ The change was formally proposed under the Reagan Administration in March.⁵² In October 1981 it became final⁵³ and was immediately attacked by the Natural Resources Defense Council (NRDC) in court.⁵⁴

As explained in detail below,⁵⁵ the D.C. Circuit found the plant-wide definition of source invalid in August 1982 in NRDC v. Gorsuch.⁵⁶ The court, through Judge Ginsburg, ruled that the statute, though not clear on its face or through reference to legislative history, had been definitively interpreted in that circuit to require the bubble in programs whose purpose was protecting clean air areas (Alabama Power), and to preclude it in programs like the nonattainment new source review, whose purpose was to clean up dirty air areas (ASARCO).

Before this third reversal at the hands of the only appellate court that supervises EPA's national rulings under the Clean Air Act,⁵⁷ EPA had continued to promote the use of the bubble in various areas. Most noteworthy was its approval in early 1981 of a generic rule in New Jersey that did away with the need for a SIP revision for each bubble approved.⁵⁸ Then, in April 1982, EPA issued a proposal for a liberal policy statement on emissions trading in general, including the bubble, outside the area of new source review.⁵⁹ The Agency also considered and in some cases approved uses of the bubble that broke through past limits on the policy.⁶⁰ The decision of the [13 ELR 10410] D.C. Circuit, however, cast a pall of uncertainty over several aspects of the policy statement, and it has not yet been issued in final form.⁶¹

The Pros and Cons of a Liberal Bubble Policy: The Pros Win

EPA's efforts over the last several years to promote the bubble policy have produced a sometimes heated debate over the merits of the concept. Arguments in favor of a liberal bubble policy hinge largely on one central theme: allowing a plant manager flexibility in choosing the most economical way to achieve the overall emission reduction needed from the entire plant will lead to speedy and efficient compliance with the goals of the Clean Air Act.⁶² The reason is the economic incentives that drive plant operators. A plant manager, freed of the shackles of prescribed emission limits set under command-and-control regulations for every emission point, will use his or her intimate knowledge of the operation of each piece or equipment to concentrate emission controls on the points where control is cheapest and will be encouraged to find new ways of cutting emissions at lower cost. The resulting incentives produce three benefits.

Arguments for the Bubble

* Saving Money. The most frequently voiced argument in favor of the bubble concept is that its use can save money while producing the same pollution reduction as smokestack-specific regulations. These arguments are supported by real-world examples:

DuPont, at a large New Jersey plant with over 100 hydrocarbon emission points, put controls more effective than required by law on the seven largest stacks, saving $12 to $14 million, and reducing total emissions by more than they would have been by complying with applicable reasonably available control technology regulations at each emission point.⁶³

Armco, Inc. arranged to cut the total particulate emissions from its Middletown, Ohio plant more than required by law by cutting fugitive dust from outdoor piles of raw materials and unpaved roads instead of controlling expensively certain emissions from the steel-making processes. This bubble saved Armco $14 to $16 million.⁶⁴

Central Illinois Public Service (CIPS) has applied for a bubble permit for a relatively newgenerating station which would allow it to burn inexpensive local high-sulfur coal in one boiler, emitting more sulfur dioxide (SO₂) than allowed by the applicable NSPS, while cutting emissions below the NSPS level at another boiler by installing an expensive "scrubber." This bubble would not only keep total emissions below the sum of the two NSPS limits for SO₂, but also save the company $20 million annually.⁶⁵

* Encouraging Innovation. A second reason for supporting a liberal bubble policy is that it should encourage innovation in pollution control. The standard regulatory system allows the corporate manager to profit from finding cheaper ways of complying with smokestack-specific standards, but, arguably, punishes innovation that cuts its emissions below standards. Regulators do not reward those who do better than the prescribed limits, but might codify the new control scheme for all similar facilities in response to the technology-forcing pressure of the Clean Air Act. This whole issue may be overemphasized since a recent study shows that NSPS are often not set at the strictest standard available but somewhere in the middle range of available emission controls, so that most facilities can comply with them.⁶⁶ Whether or not the fear of being forced to extend innovations to other facilities is realistic, it is clear that the bubble policy makes finding emission reductions not required by law profitable by allowing them to substitute for more expensive control requirements at other sources. With the bubble a plant manager may well develop techniques that would reduce emissions at some outlets below required levels at relatively low cost. Thus, according to bubble concept proponents, their policy replaces inefficient technology-forcing with technology stimulation.⁶⁷ The bubble's ability to encourage innovation has been demonstrated in some individual cases, although we have not had enough experience to know how important this effect could be overall.

* Encouraging Modernization. If there is insufficient experience from which to measure the overall effects on innovation of the bubble concept, it is even harder to [13 ELR 10411] evaluate the third bubble policy benefit: encouraging modernization of industrial facilities. But logic suggests that such benefits could be substantial. Industry spokesmen argue persuasively that strict controls imposed on new facilities by the Clean Air Act discourage firms from taking their older, dirtier facilities out of service, thus negating one of the major clean air forces built into the Act.⁶⁸ EPA has also voiced this view of the bubble's effect.⁶⁹ An illustration of this potential advantage appears in the industry intervenors' court of appeals brief in NRDC v. Gorsuch.⁷⁰ The example involves three production processes in a chemical plant: stripping, reacting, and finishing. They all emit volatile organic compounds (VOCs). If out-of-date steam vacuum jets, commonly used in the stripping process, are replaced by modern, mechanically driven vacuum pumps, VOC emissions from this operation would increase, but the cost of operation and the use of energy and wastewater would decrease. Moreover, the increase in VOC emissions at the stripping process would be more than offset by reductions in VOC emissions from the reacting and finishing stages of production. But, as the brief pointedly notes, unless the bubble policy is available, this environmentally desirable upgrading of technology would be uneconomical and unlikely to occur. Of course, a corporate decision to modernize a plant depends on many variables, most of them economic considerations that have no connection with pollution control requirements, so it is highly unlikely that clean air regulations alone block modernization or that a change to the bubble alone will produce widespread modernization. It does seem reasonable, however, that the flexibility that the bubble policy gives corporate managers increases the feasibility of new production initiatives.

Criticisms of a Liberal Bubble Policy — and Answers

Critics of the bubble policy raise five concerns about its effect on the administrative feasibility and air quality benefits of Clean Air Act programs. The bubble is said to weaken enforcement; complicate administration; "preserve the fat" of excess pollution from existing, under-regulated equipment; squander opportunities to use advanced control technology to cut emissions; and violate the sanctity of new source controls. Some of the criticisms apply to any bubble application, while others are reserved particularly for bubbles involving new sources. While there is a moralistic tone to some of the arguments,⁷¹ each has a substantial basis. All,however, can be countered with a properly designed bubble policy.

* Weakening Enforcement. Uniform emission limits are said to be easy to enforce because everyone knows what standard governs each emission outlet. The bubble complicates the picture by allowing emission limits to vary among similar outlets. However, most bubbles approved by EPA and states can specify emission limits for each outlet, thus preserving enforceability.⁷² Moreover, since the new limits were chosed by the person who must implement them and not by a government technician, they may be more reasonable and less likely to require governmental enforcement.

* Complicating Administrative Action. Widespread use of the bubble policy in a state can make life difficult for state administrators. Uniform standards encourage uniform compliance strategies, which become easy for administrators to review and approve. An active bubble program requires administrators to review and approve a wide variety of unfamiliar emission reduction proposals and may tax the limited resources of the state air agency.This real problem could be ameliorated, however, by requiring bubble applicants to document their plans fully, and by charging bubble permit fees sufficiently high to enable the state to retain the expertise it needs to evaluate the applications.⁷³

* Preserving the Fat. Another frequent criticism is that the bubble reserves pollution from old facilities beyond the time when they are shut down. Allowing an old source to be bubbled with a newer one to allow the latter to exceed applicable standards is said to preserve the "fat" from the old source beyond its retirement date, since the new or modified facility in effect takes over the pollution from the old one and continues to emit it during the newer one's longer useful life. While this argument has much surface plausibility, a well-constructed bubble policy can avoid its apparent pitfalls.

The "preserving the fat" argument is strongest for sources in nonattainment areas, where a dozen years of emission control efforts have not yet produced healthy air, but the argument is negated by the stringent Part D SIP requirements for nonattainment areas. If the new project is in a nonattainment area where an approved SIP is being carried out, whether a bubble may be allowed should depend on whether the agency enforcing the law relied on the eventual reduction in emissions from the old source to create reasonable further progress or to attain the NAAQS by the required deadline. If it did so rely, then in permitting the project to go ahead, the agency should be careful to see that any bubble allowed is tailored to meet its expectations under the SIP.⁷⁴ But if the agency did not so rely, it is difficult to see how a properly constructed bubble would harm the ambient air now [13 ELR 10412] or later when the offsetting facility is retired, or would have been retired in the normal course of events. If the old facility when finally retired is replaced by a new one, the proper action for meeting the SIP emission reduction requirements can be taken then. Of course, if the retired facility is not replaced by anything beyond the first "bubbled" one, then no serious problem arises as long as real progress towards attainment of the NAAQS is made.

Admittedly, if the nonattainment area has no approved SIP, or the SIP though approved, is in reality incapable of achieving attainment or is not being carried out, then preserving the fat from old sources can be a real problem. In such cases, the agency reviewing a proposed bubble should approve it, if at all, only under special conditions that will substantially reduce pollution in the ambient air.⁷⁵ Finally, if the area of the plant is a "clean" or attainment one, there seems to be no need to worry since the purpose of PSD, as explained in NRDC v. Gorsuch,⁷⁶ is merely to prevent the air from getting dirtier, which is exactly what the bubble does. A possible exception is where the state might have set aside a reserve or pool of emissions to increase the "increments" available for new growth;⁷⁷ in such case the agency should not only require a permit, but also condition its grant on some provision which will add to the increment pool.

* The "Squandered Opportunity." Another criticism, closely related to the one just described, is phrased quite differently as a "squandered opportunity." When a new or modified source is allowed to be bubbled with an old one, thereby avoiding the installation of the latest pollution controls, the opportunity to force installation of the best techniques has been lost or "squandered."⁷⁸ Had the bubble been disallowed, say the critics, the most effective anti-pollution equipment would have been installed in the new or modified source and this would have benefited the public health and welfare over the whole life of this source.

An extreme example would be the case where two sources, both subject to the same NSPS, are bubbled together, with one emitting below the NSPS level and the other above.⁷⁹ Some critics would even argue that the applicable NSPS should be tightened to the level of the low emitter, and the high emitter be forced to comply with the new NSPS.⁸⁰

The "squandered opportunity" criticism is essentially the same as the argument, just considered, that a bubble preserves the "fat" of the old source's pollution, and the answers to that argument apply equally here. In addition, in a great many cases there may be no lost opportunity at all, because without an available bubble a plant operator might well do nothing to the existing source to reduce its pollution until forced to do so by the state or federal agency.⁸¹ EPA used this argument to support its regulation in the NRDC case, but the court would not accept the argument for lack of proper proof.⁸²

Barely hidden in both the preserving the fat and squandered opportunity arguments is a basic lack of trust in the SIP planning process. Application of the strictest pollution control technology available on all nonattainment area sources not fully controlled might make sense if SIP attainment demonstrations and plans for reasonable further progress are merely paper fictions. Congress, however, clearly did not intend these plans to be make-work exercises, but the basis for cleaning up the air. While technology-forcing emission standards also play important roles in the congressional design, it is by no means clear that technology-forcing is to take precedence over the SIP process in determining what controls to require where federal emission limits are not expressly mandated.

* The Sanctity of New Source Standards. The arguments that the Clean Air Act puts technology-forcing above other considerations is strongest with new source standards. Many critics consider that NSPS, Lowest Achievable Emission Rate and BACT regulations should be enforced literally for their own sake. Under such a view every time an emission outlet, such as an "affected facility" subject to the controls of a federal new source standard, is built or modernized, it should comply fully with that standard. In fact, as to NSPS, this is the exact holding of the ASARCO⁸³ case, but the practical reality is not that simple, because the rule in ASARCO ignores the pollution from the rest of the plant and the amount of pollution in the ambient air.

The criticism that the bubble undercuts technology-forcing performance standards like NSPS grows in part from a rather moralistic position that the new source standards are ends in themselves.⁸⁴ Part of the argument [13 ELR 10413] is that federal emission control regulations like NSPS must be enforced rigidly because neither industry nor the states can be trusted to curb pollution as much as necessary, if allowed the flexibility inherent in the bubble policy. Industry allegedly will turn bubbles into loopholes.⁸⁵ States need the restrictive uniformity of federal standards⁸⁶ to keep them from shopping around for new industry by lowering their requirements for emission control.⁸⁷

Before the 1977 amendments inserted PSD provisions in the Clean Air Act, there was at least one good reason for applying NSPS and similar controls strictly. At that time the only other controls on pollution emissions in clean areas were those based on EPA's rather shaky⁸⁸ PSD regulations of 1974. But now that PSD controls are firmly in the Act in Part C, there seems to be no adequate reason for enforcing an NSPS without considering the effect on the ambient air of the project under consideration, and its conformance to the purposes of § 111 and of the Clean Air Act as a whole.

If a bubble is proposed for a clean area, there is little reason to impose a strict NSPS and refuse to allow the bubble unless there is some danger of interference with the PSD rules for the area. But in a nonattainment area the overall effect of a new source bubble on the ambient air should be one of the most important considerations in deciding whether a bubble should be allowed, and if so, how far it should extend. In the first place, there is, by hypothesis, too much of some pollutant in the air so that adding any additional amount will make it worse. Even the strictest application of a new source technology standard will produce some additional pollutant. Therefore, something is needed to counteract this and keep pollution at its current level, or reduce it by reasonable further progress towards meeting the NAAQS. If the new or modified facility undergoes Part D new source review that something else must be an "offset" in the form of a reduction in emissions from another source. If the bubble is used to bring the emission increase below the de minimis level that triggers new source review, a different sort of offset is used. The basic issue in considering the scope of a new source bubble in a dirty area is deciding how much of an offset is needed. Put another way, the question to be decided is whether there is any real difference between tight control on the new source, with a small offset elsewhere, and more lenient control on the new source, with a larger offset elsewhere. Ther are quality difference between the two situations appears small.

Weighing the Pros and Cons

In this author's view, as the preceding discussion should make clear, the arguments in favor of a liberal use of the bubble policy outweigh those in opposition. The bubble can save money and can stimulate innovation and, perhaps, modernization. The potential disruption of Clean Air Act programs can be avoided by careful design and vigilant implementaiton of reasonable safeguards. As persuasive as these arguments may be, the D.C. Circuit has not accepted them and Congress has not given them much attention. But the time is right for changes in the bubble's treatment in the courts and in Congress.

The Bubble in Court

While there are good reasons to use the bubble policy in implementing the Clean Air Act, the statute makes it very difficult to do so. Congress contemplated a role for bubbles in nonattainment area offsets under Part D, but never addressed other possible uses of the concept. Because the statute is incredibly complex, any other uses of the bubble must be tested against several different sets of provisions which are hard enough to reconcile when dealing with issues expressly discussed by Congress. Using bubbles with new sources and modifications is particularly difficult as new layers of new regulation have been added over time. EPA's discretion to use flexible programs like the bubble thus is constrained by rigid regulatory requirements and by the complexity of the statute. The D.C. Circuit three times wrestled with whether the Act's new source provisions leave EPA discretion to allow bubbles. The first two decisions wove new complexity into the law. The third sought to reconcile its predecessors and to find a simple rule for determining the scope of the bubble policy.Unfortunately the simple rule it found will greatly constrain use of the bubble, unless the Supreme Court overturns it.

D.C. Circuit Decisions

* ASARCO and Alabama Power. In 1978 the Sierra Club successfully attacked EPA's smelter NSPS which stated that modifications whose increased emissions were matched by emission decreases in a bubble were not new sources subject to the standards. The court ruled that this use of the bubble was contrary not only to the purpose of § 111,⁸⁹ but also to the whole philosophy of the Clean Air Act, which Judge Wright noted was designed to "enhance air quality and not merely to maintain it."⁹⁰ EPA did not make a very persuasive argument to support its asserted full discretion to permit this partial use of the bubble in an NSPS situation,⁹¹ and drew sharp criticism from the court for in effect rewriting the statute in its definition of "source."⁹²

A year later came Alabama Power, with the same court speaking through a three-judge panel on which only [13 ELR 10414] Judge Leventhal had participated in ASARCO. Now the court ruled that EPA was too restrained in applying the bubble concept in its PSD regulations. EPA had exempted plant owners in such areas from air quality analysis and from having to apply best available control technology when their construction of new or modified plants produced no overall "net increase" in pollution emissions.⁹³ But EPA still required a permit in such a case if there was an increase in emissions above de minimis levels from any emission unit at the plant. The court firmly stated that without a "net increase" in emissions from the plant as a whole, it must be free from all controls, procedural as well as substantive, including the need for a permit.⁹⁴ In his rather labored opinion on this issue Judge Willkey approved the ASARCO case, but distinguished it on many grounds, including the different aims of the NSPS and PSD programs.⁹⁵

* NRDC v. Gorsuch. In analyzing the first two D.C. Circuit bubble opinions, ASARCO and Alabama Power, this author⁹⁶ and other commentators⁹⁷ concluded that they were barely consistent with each other. The D.C. Circuit, however, in NRDC v. Gorsuch in August 1982 made surprisingly easy work of reconciling its earlier bubble decisions and applying them to the facts at hand. A wholly new panel of judges knocked out EPA's plantwide definition of "source" and the modification bubble for nonattainment areas. This new panel⁹⁸ hearing NRDC v. Gorsuch naturally turned for help to the court's two previous "bubble" decisions, where instead of finding the confusion and apparent inconsistency perceived by other writers, the new judges found a "bright line" to be used in deciding the case before them.⁹⁹ If the Clean Air Act program involved was designed to "improve the quality of the ambient air," then a bubble was improper; if the program was designed merely to "maintain existing air quality," the "bubble" must be allowed. Among the welter of words used in the ASARCO and Alabama Power opinions the court's new test can be found,¹⁰⁰ but many other ideas are disregarded in the process.¹⁰¹ Naturally, once having discovered this "bright line" test, the answer was easy. The Part D New source review program easily fell on the forbidden side of the line, as a program designed to "improve the quality" of the air.¹⁰² The court thus ruled that EPA could not apply to "dirty" areas the rule required by the Alabama Power court for PSD areas, to let a plant owner modify his plant freely when the effect of a package of emission increases and decreases at the plant is no net increase.

The NRDC opinion made much of the fact that EPA in its October 1981 regulations "dramatically" altered those issued in August 1980, which had severely limited the use of the bubble in nonattainment areas.¹⁰³ The court found in the record no "study, survey or support" for EPA's changed view that the restrictive regulations of August 1981 would "retard improvement in air quality by discouraging replacement of older processes or equipment with newer, cleaner varieties."¹⁰⁴ This is perhaps the crux of the court's holding and is contrary to the thesis, developed above, that a liberal bubble policy should encourage, rather than discourage, cleaning up the air.

The third D.C. Circuit decision left the bubble policy in worse straits. While the court reconciled first two decisions and found a simple way of reviewing bubble applications, it used a rationale so broad that it essentially guts the program. The bubble is most needed in nonattainment areas; NRDC v. Gorsuch could be read to bar it completely in those areas.¹⁰⁵ If the case was limited to its facts — cutting out only new source modification bubbles, but leaving SIP bubbles, there would be some market still ("reasonable available control technology" bubbles) but this does not address the need to use the bubble to stimulate growth compatible with the Clean Air Act. And, if the NRDC decision is affirmed EPA regulatory reform staff and industry may have the ingenuity to find ways of circumventing even the ASARCO restriction on NSPS bubbles — distinguishing "compliance" and "applicability" bubbles.¹⁰⁶ However, the logic of this distinction escapes this writer and probably would escape the D.C. Circuit as well. The Supreme Court could eliminate theneed for such conceptual gymnastics, but for reasons discussed below, seems likely to provide no more than limited repairs of the damage done in NRDC.

Supreme Court Review

There are many possible ways in which the Supreme Court may decide NRDC, now renamed Chevron.¹⁰⁷ These range from the narrow approach of considering only the limited nonattainment area bubble involved in the case itself, to the wide approach of considering all [13 ELR 10415] uses of bubbles in nonattainment areas. The Court will have to consider the validity of the "bright line" on which the circuit court based its decision and thus could address the issues in ASARCO and Alabama Power as well. However, if it follows its usual practice,¹⁰⁸ the Court will adopt the narrow approach and deal only with the facts before it. Certainly the arguments briefed to date will focus the Court's attention on the nonattainment area modification bubble alone. And a narrow ruling would return the problem to EPA, unless Congress finally decides to address it.

Of course, the Supreme Court may affirm the ruling below, relying on the lower court's reasoning, and, like it, duck the difficult underlying questions arising under this complex statute.¹⁰⁹ But this seems unlikely since at least four justices must have had serious doubts about the circuit court's ruling in voting to grant certiorari.¹¹⁰ If a majority of the justices do find the lower court's ruling wrong, the key question is how will they reach that result.

The arguments in the Supreme Court in Chevron probably will focus more on the language and legislative history of the Clean Air Act and the scope of EPA's rulemaking and rule-rescinding discretion than on the bright line test found by the D.C. Circuit in NRDC. Government and industry petitioners agree with the D.C. Circuit that the language and legislative history of the Act do not provide the definition of "source" for Part D.¹¹¹ They argue that under these circumstances the court should have deferred to EPA's redefinition, which is a reasonable means of carrying out the statutory purpose of Part D — allowing reasonable growth consistent with reasonable further progress toward attainment.¹¹² In addition, the government and industry maintain, the plantwide definition carries out the intent of Congress, recognized by the Supreme Court in earlier cases,¹¹³ to give the states the lead role in fashioning regulatory programs to attain the air quality standards.¹¹⁴ To these shared arguments, industry petitioners add that the D.C. Circuit wrongly concluded that the plantwide definition was an unsupported reversal of existing regulations in so far as EPA tried to justify it as a means of cleaning up nonattainment areas by stimulating replacement of dirty old sources with clean new ones.¹¹⁵ The industry point is that the earlier dual definition had not been firmly established, since it was under legal challenge from its recent inception and was not supported by the kind of information the D.C. Circuit suggested was necessary to support the change.¹¹⁶

NRDC on the other hand, disagrees with the D.C. Circuit and petitioners on the import of the statute and legislative history, finding enough there to require a dual definition.¹¹⁷ Moreover, the environmental groups contend, the plantwide definition is inconsistent with the clear purposes of Part D — that every large new and modified source comply with five cleanup conditions, with the only possible waiver of those requirements being for the offset rule.¹¹⁸ By Contrast, they claim, the plantwide definition allows partial compliance with the offset requirement to result in avoidance of the other four clean air conditions. NRDC also spends many pages attempting to demonstrate that since 1971 EPA had consistently regulated individual emission outlets under its new source programs.¹¹⁹ This lays the foundation for arguing that the EPA change was a marked departure from established rules and policy. Finally they argue that since EPA failed to consider the effect on aggregate emissions, an important aspect of the problem, the Agency's action is not due deference.¹²⁰

The Supreme Court, of course, is not bound by any of the three opinions of the D.C. Circuit discussed above. The Court could rule that the first two, ASARCO and Alabama Power, where the circuit court found its "bright line," were both wrongly decided, and that EPA is not bound by any of the rules laid down in those cases, especially the inflexible one of ASARCO that a bubble may never be used to relax an NSPS. The Court, however, would probably not so rule without being urged to do so by EPA or other petitioners. This seems unlikely as EPA has never publicly criticized the ASARCO decision and none of the briefs contain the slightest hint of such criticism. Perhaps the most likely and most desirable outcome would be for the Court merely to remove the restraint imposed by the circuit court on the use of the bubble in a nonattainment area, and to allow EPA to authorize use of such a bubble under proper safeguards, as urged in this article. An easy route to such a destination is offered by petitioners' arguments, relying on Union Electric Co. v. EPA, and other cases,¹²¹ that EPA has to fill in a gap left by Congress. The Court could find that the EPA properly exercised its discretion in extending its plantwide definition of "source" to nonattainment areas. The Court should not find the way blocked by NRDC's argument that the plantwide definition reversed a long-standing rule without adequate support. [13 ELR 10416] EPA had been anything but consistent before October 1981 in applying its "dual definition." Especially significant is the fact that as soon as the dual definition was promulgated for nonattainment areas in August 1980, it was attacked by the Chemical Manufacturers Association in a suit which was not settled until February 1982,¹²² well after the change in regulations in October 1981. In addition, the EPA Administrator announced in January 1981, only five months after the dual definition was made final, that it would be changed. This does not show a settled practice of having the dual definition in effect for many years, as NRDC claims in its briefs.¹²³ If the Court does not agree with this analysis and finds the plantwide definition a reversal of established policy, it will apply the standards it recently enunciated in Motor Vehicle Manufacturers Association of the United States v. State Farm Mutual Automobile Insurance Co.¹²⁴ in which the Court overturned rescission of a rule based on extensive safety data because the agency failed to develop a record countering that data. Here EPA reversed its position on the likely air quality impact of a rule, but both the original rule and the change were based essentially on EPA's subjective judgment about that impact.¹²⁵

The action of the Supreme Court may have a narrow or wide effect on EPA's continued use of the bubble. Even if EPA wins a complete victory and has its plantwide definition reestablished, this writer believes that in nonattainment areas plants should not be free to arrange and enforce their own bubbles without first convincing a regulatory authority that the bubble is a proper one. If on the other hand, the Supreme Court affirms the lower court's limits on the use of bubbles in nonattainment areas, or imposes its own limits, legislation will be necessary to permit the desirable use of the bubble under proper conditions in such areas. In either event Congress should express its views on the use of the bubble in 1984, just as it did on PSD and the offset policy in 1977. While a good argument can be made for having the Supreme Court remove the whole mass of restrictions which the D.C. Circuit has imposed on EPA's use of the bubble, thus letting EPA start over again, it would seem wiser for the Court merely to temove the final barrier erected in the NRDC case and let Congress lay down the general rules which would govern EPA's use of the bubble and other aspects of emissions trading.

The Congressional Solution

Congress, as the ultimate authority over cleaning up the air, has the primary duty to make its policy clear on the use of the bubble concept. EPA and the courts have invested heavily in resolving the uncertainty in the Clean Air Act over the propriety of various sorts of bubbles. While the Supreme Court might clarify the matter, Congress is the proper forum in which to find comprehensive answers. And to resolve the issue Congress need not engage in lengthy investigations or immerse itself in technical detail better left to EPA experts.

In this writer's view, the evidence in favor of the bubble concept warrants congressional action to allow its use in all Clean Air Act programs, with safeguards to ensure that it will not undermine those programs. Congress could do this in three simple steps.

The first step is to authorize a liberal bubble policy. This could be done with a policy statement favoring use of the bubble and other parts of the emissions trading program as tools to clean up the air and keep it clean. Alternatively, Congress could define source to be an entire plant for each of the programs for which it wished to authorize the bubble.¹²⁶

The second step is to require substantive constraints that will ensur that the bubble will not undermine the air quality enhancement and protection programs in which it is used. One way of accomplishing this end would be a statement of this principle in the Act, leaving implementation to EPA. Another would be to enact general safeguarding principles such as those in EPA's draft Emissions Trading Policy Statement.¹²⁷

The third step is to ensure that bubble actions will go through procedures that can carry out the safeguards without choking off the regulatory flexibility with unnecessary red tape. This requires separate approaches for attainment and nonattainment areas, which could be outlined or spelled out in the statute. In nonattainment areas a pre-construction permit should be required for any project involving "significant"¹²⁸ pollution increases, regardless of offsetting decreases. Where the considerations examined by the permit issuer are largely mechanical, as in the mathematical figuring of VOC emissions, if they are within allowable limits, the permit should be freely granted.¹²⁹ Where any modelling is needed to forecast the effect of a project on the ambient air,¹³⁰ procedures, such as "parallel processing,"¹³¹ should be [13 ELR 10417] adopted to speed up the process of permit issuance or denial.

In attainments areas, three procedures would be needed. Where the total increases in pollution, regardless of decreases, are "insignificant," no restrictions should apply.¹³² Where the total increases are "significant," but the net increase is "insignificant" because of a bubble matching against the decreases, no permit should be required, but before the project goes on line the plant owner should have to submit a full report of how the bubble is computed and how it is expected to work.¹³³ Where the net increase is "significant," a permit should be required and should be issued when a full review shows no expected increment violation.

The bubble policy is a useful regulatory reform that is being stifled by the legal uncertainties surrounding its use. The courts and EPA have struggled with these uncertainties, but their answers have not been satisfactory. The Supreme Court will get its chance in the coming months but it too is handicapped by Congress' long silence on the bubble policy. Should Congress finally speak on the subject, and it need not use many words, the door would open for more innovation and economy in compliance with the Clean Air Act.

1. Nos. 82-1005, 82-1247, and 82-1591, cert. granted, 103 S. Ct. 2427, 13 ELR 10223 (U.S. May 31, 1983). Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. is one of the three names under which certiorari was granted by the Court to the District of Columbia Circuit Court of Appeals in the case of Natural Resources Defense Council, Inc. v. Gorsuch, 685 F.2d 718, 12 ELR 20942 (D.C. Cir. 1982). The decision below is referred to throughout this article by NRDC v. Gorsuch or NRDC.

2. The "bubble" is an example of what has come to be known as "emissions trading," discussed infra at note 59 and accompanying text. In a recent article entitled Emissions Trading: The Subtle Heresy, ENVTL. FORUM, Dec. 1982, at 18, Senator Pete Domenici discusses emissions trading, including the bubble, and very perceptively and strongly advocates its use. See also Rhinelander, The Bubble Concept: A Pragmatic Approach to Regulation under the Clean Air Act, 1 VA. J. NAT. RESOURCES L. 177 (1981) [hereinafter cited as Rhinelander], for a full discussion of the use of the bubble before NRDC v. Gorsuch was decided.

Phillip Reed, Editor-in-Chief of the ENVIRONMENTAL LAW REPORTER, describes NRDC v. Gorsuch in Comment, NRDC v. Gorsuch: D.C. Circuit Bursts EPA's Nonattainment Area Bubble, 12 ELR 10089 (1982). Much of the description of, and comments on, the NRDC case expressed in this article are derived from that excellent article.

3. 42 U.S.C. §§ 7401-7642, ELR STAT. 42201-66.

4. Under the Clean Air Act an area is "too dirty" when the national ambient air quality standard (NAAQS) for one or more pollutants is exceeded. Such an area is known as a "nonattainment" area. The terms "dirty area" and "nonattainment area" are used interchangeably throughout this article.

5. A "clean" area is one where the relevant NAAQS is met; it is also known as an "attainment" area.

6. See infra notes 29 & 45 and accompanying text.

7. See infra note 42 and accompanying text.

8. 685 F.2d 718, 12 ELR 20942 (D.C. Cir. 1982).

9. The Clean Air Act establishes separate regulatory systems for "stationary" and "mobile" sources. The former is defined only in § 111(a)(3), 42 U.S.C. § 7411(a)(3), ELR STAT. 42213: "The term 'stationary source' means any building, structure, facility, or installation which emits or may emit any air pollutant."

10. New or modified sources that do not increase emissions more than "de minimis" amounts are exempt from nonattainment area new source review. The de minimis amounts for nitrogen oxides, sulfur dioxide (SO₂), and volatile organic compounds (VOCs) are 40 tons-per-year (TPY), while the level for particulates is 25 TPY and for carbon monoxide (CO) is 100 TPY, 45 Fed. Reg. 52675, 52709 (1980).

11. 578 F.2d 319, 8 ELR 20164, 20164 (D.C. Cir. 1978).

12. 636 F.2d 323, 10 ELR 20001 (D.C. Cir. 1979).

13. 685 F.2d 718, 12 ELR 20942 (D.C. Cir. 1982), cert. granted, 103 S. Ct. 2427, 13 ELR 10223 (U.S. May 31, 1983).

14. See, e.g., ELI, AIR AND WATER POLLUTION CONTROL LAW: 1982 1-352 (1982). Rhinelander, supra note 3, at 180-92.

15. Pub. L. No. 91-604, 84 Stat. 1676 (1970) and Pub. L. No. 95-95, 91 Stat. 685 (1977).

16. Clean Air Act § 109, 42 U.S.C. § 7409, ELR STAT. 42209.

17. Clean Air Act § 110, 42 U.S.C. § 7410, ELR STAT. 42210. For a discussion of the SIP review process, see Comment, Circuit Courts Endorse Conditional SIP Approval; Connecticut's Construction Ban Restored, 12 ELR 10055, 10055-57 (1982).

18. Clean Air Act § 111 provides for standards of performance for new industrial ("stationary") sources. EPA was also to promulgate federal ("mobile" source) emission standards for automobiles and trucks. Clean Air Act §§ 202-217, 42 U.S.C. §§ 7521-7574, ELR STAT. 42240-54.

19. Section 110(a)(2), 42 U.S.C. § 7410(a)(2), ELR STAT. 42210.

20. Section 110(a)(2)(B), 42 U.S.C. § 7410(a)(2)(B), ELR STAT. 42210.

21. See Union Electric Co. v. EPA, 427 U.S. 246, 6 ELR 20570 (1976).

22. Clean Air Act § 111(b)(1)(A), 42 U.S.C. § 7411(b)(1)(A), ELR STAT. 42213.

23. The National Commission on Air Quality in its 1981 report, To BREATHE CLEAN AIR, lists as objectives of Congress in imposing NSPSs in 1970: to help attain the ambient air standards; "to increase the likelihood that growth will be permitted throughout the country without causing ambient standards to be exceeded"; to ensure that new facilities will not have to add on controls later; and "to provide nationwide uniformity … so that air quality requirements would not affect the location of facilities," citing Senate and House reports of 1970. Id. P3.7-1. See also ASARCO, Inc. v. EPA, 578 F.2d 319, 327 n.25, 8 ELR 20164, 20169 n.25 (D.C. Cir. 1978).

24. If a source is an entire plant, then its owner is free to achieve pollution reductions mandated by the applicable emission limit at whichever pollution generating equipment is cheapest to control, thus minimizing total control costs. That is, the bubble policy automatically is available in the plant. If however, each piece of emitting equipment is a separate source, the plant owner has no flexibility. Only if government-set emission limits reflect differences in control costs at different types of sources will the control costs for the entire plant be minimized. This is unlikely to be the case, since administrative costs force agencies to set uniform emission limits for broad categories of sources.

25. Compare the manner in which automobile emissions were treated under Title II of the Act. Stricter emission controls were to be installed in new cars to be built in the future so that in a matter of five to 10 years, when most old cars would be taken off the road, the net total of pollution emitted from automobiles would be greatly lessened. See Clean Air Act §§ 202-216, 42 U.S.C. §§ 7521-7550, ELR STAT. 42240-53.

26. Section 172(a)(2), 42 U.S.C. § 7502(a)(2), ELR STAT. 42238.

27. Part C of Title I of the Act, entitled "Prevention of Significant Deterioration of Air Quality," sets out these provisions in §§ 160-169, 42 U.S.C. §§ 7470-7479, ELR STAT. 42233-36. They generally require a pre-construction permit for any new or modified "major emitting facility."

28. Section 110(a)(2)(I), 42 U.S.C. § 7410(a)(2)(I), ELR STAT. 42210, dictates that after June 30, 1979 no major stationary sources could be built or modified unless the state had a Part D SIP in place. Part D of Title I, entitled "Plan Requirements for Nonattainment Areas," in §§ 171-178, 42 U.S.C. §§ 7501-7508, ELR STAT. 42238-39, sets forth the new rules for nonattainment area SIPs.

29. EPA had announced the offset rule in an interpretive ruling in 1976 to enable it to allow some growth in areas not meeting the attainment deadlines, 41 Fed. Reg. 55524 (1976). The ruling barred construction of major new sources of air pollution in nonattainment areas unless their emissions were offset by reductions in emissions from existing sources. The 1977 amendments preserved the offset policy until states had Part D SIPs in place, Pub. L. No. 95-95, § 129(a), codified in a note to § 172. Part D SIPs must provide for sufficient offsets in new emissions to maintain reasonable further progress toward attainment. See § 173(1)(A), 42 U.S.C. § 7503(1)(A), ELR STAT. 42239.

30. Nomination of William D. Ruckelshaus: Hearings Before the Senate Comm. on Environment and Public Works, 98th Cong. 1st Sess. 277 (written answer of William D. Ruckelshaus, Administrator, EPA).

31. See, e.g., Levin, Getting There: Implementing the "Bubble" Policy in INSTITUTE FOR CONTEMPORARY STUDIES, SOCIAL REGULATIONS; STRATEGIES FOR REFORM 59 (1982); R. Liroff, The Bubble Concept for Air Pollution Control: A Political and Administrative Perspective (1981) (unpublished paper on file with the ENVIRONMENTAL LAW REPORTER) [hereinafter cited as Liroff, The Bubble Concept].

32. 40 Fed. Reg. 58416 (1975).

33. Id. at 58417.

34. A "reconstruction" qualified as a new source rather than a modification when its capital cost exceeded 50 percent of the cost of building a wholly new source. Id. at 58418, 58420.

35. Id. at 58416.

36. Id.

37. Id. at 58419.

38. See infra notes 89 & 90 and accompanying text.

39. ASARCO, Inc. v. EPA, 578 F.2d 319, 327, 329, 8 ELR 20164, 20168 (D.C. Cir. 1978).

40. 43 Fed. Reg. 26380 (1978).

41. Alabama Power Co. v. Costle, 636 F.2d 323, 401-03, 10 ELR 20001, 20030 (D.C. Cir. 1979).

42. 44 Fed. Reg. 71779 (1979).

43. Id. at 71782.

44. Id. at 71780.

45. 45 Fed. Reg. 52675, 52729 (1980).

46. Id. at 52680, 52743.

47. Clean Air Act § 111(a)(3), 42 U.S.C. § 7411(a)(3), ELR STAT. 42213, defines "stationary source" as any "building, structure, facility, or installation which emits or may emit any air pollutant."

48. 40 C.F.R. § 51.24(b)(6) defines "building, structure, facility or installation" as "all of the pollutant-emitting facilities which belong to the same industrial grouping, are located on one or more contiguous or adjacent properties, and are under the control of the same person …." 45 Fed. Reg. 52731 (1980).

49. Id. at 52744.

50. Id.

51. Press release of Administrator Costle, EPA Envtl. News, Jan. 16, 1981.

52. 46 Fed. Reg. 16280 (1981).

53. Id. at 50766.

54. No. 81-2208, ELR PEND. LIT. 65732 (D.C. Cir., petition filed Nov. 18, 1981). The Chemical Manufacturers Association (CMA) had attacked the earlier "dual definition" in the D.C. Circuit as soon as it was issued.That suit was settled by consent decree. CMA v. EPA, Nos. 80-1973 et al. (filed Aug. 15, 1980), consolidated with Nos. 79-1112 et al. (filed Dec. 15, 1980) (settlement agreement filed Feb. 22, 1982). NRDC was not a party to the settlement.

55. See infra text accompanying notes 96-106.

56. 685 F.2d 718, 12 ELR 20942 (D.C. Cir. 1982).

57. Under § 307(b)(1), 42 U.S.C. § 7607(b)(1), ELR STAT. 42257, petitions for review of "nationally applicable regulations promulgated … by the Administrator of EPA" may be filed only in the U.S. Court of Appeals for the D.C. Circuit.

58. 46 Fed. Reg. 20551 (1981), see Comment, EPA Approves New Jersey Generic Bubble Rule, Develops Consolidated Guidance for Controlled Trading Program, 11 ELR 10119 (1981).

59. 47 Fed. Reg. 15075, 12 ELR 30006 (1982).

60. See, e.g., EPA's approval of a "rural nonattainment area" bubble at Monsanto Chemical Intermediates Co., 47 Fed. Reg. 27071 (1982), and EPA's reported consideration of an NSPS bubble for Central Illinois Power, infra note 65.

61. On August 31, 1983, EPA requested further comment on various issues concerning its April 7, 1982 proposed policy statement, including the use of shutdowns in existing source bubbles in nonattainment areas and the use of existing source bubbles in such areas in general. The announcement extended the deadline for comments to September 30, 1983. 48 Fed. Reg. 39580 (1983). Six days earlier, EPA proposed amendments to its SIP regulations addressing the use of shutdowns in nonattainment area offsets. 48 Fed. Reg. 38742 (1983).

62. See, e.g., Clean Air Act Oversight, Part I: Hearing Before the Senate Comm. on Environment and Public Works, 97th Cong., 1st Sess. 485-87 (testimony of William Drayton) [hereinafter cited as Clean Air Act Oversight].

63. Id. at 585. See also 12 ENV'T REP. (BNA) (Current Devs.) 389 (1981); 48 Fed. Reg. 39580, 39583 (1983).

64. See Clean Air Act Oversight, supra note 62, at 595; 46 Fed. Reg. 19468 (1981); New Plant for Armco Steel, EPA J., May 1981, at 14-15; EPA Envtl. News, Mar. 31, 1981, at 11.

65. Petition for rulemaking to amend 60 C.F.R. subpt. B, submitted by Central Illinois Public Service Co. to EPA, Oct. 1, 1982. See 13 ENV'T REP. (BNA) (Current Devs.) 1577 (1983).

66. See EPA, NSPS Bubble Issues 9 (prepared for discussion at the National Air Pollution Control Technical Advisory Committee meeting, June 16-17, 1982).

The result of this approach to setting standards is that the standards are conservatively set at a level which would not be exceeded by BDT [best demonstrated technology] under any normal condition. As such, the typical (e.g. average or medium) performance of BDT for most facilities is well below the standard.

Id.

67. See Liroff, The Bubble Concept, supra note 31, at 1, 19. Industry has used this theory to back bubble proposals. See Clean Air Act Oversight, supra note 62, at 528 (Bubbling New Sources with Existing Sources, statement submitted by Pennsylvania Electric Co.: "Allowing this use of the bubble would tend to encourage the development of new technologies, since if they fail to meet the complete requirements, the balance of the requirements could be met by bubbling the new source with existing sources.").

68. See, e.g, statement of John Quarles, Clean Air Action Project of the National Economic Development Association, 14 ENV'T REP. (BNA) (Current Devs.) 162 (1983).

69. See, e.g., 46 Fed. Reg. 50766, 50767-78 (1981).

70. Brief for Intervenor-Respondents at 8-12, NRDC v. Gorsuch, 685 F.2d 718, 12 ELR 20942 (D.C. Cir. 1982), cert. granted, 103 S. Ct. 2427 (1983).

71. See infra note 84.

72. EPA's draft emission trading policy required translation of bubbles into new emission limits for each emission outlet. See 47 Fed Reg. 15075, 15080, 12 ELR 30006, 30011 (1982).

73. This remedy is not available to every state. See Rhinelander, supra note 2, at 196 n.95.

74. The author recognizes that as a practical matter, it may not always be easy to determine how a given SIP revision treated the shutdown of any specific facility. Some SIPs rely on general projections of numbers of shutdowns in their attainment demonstrations. In its comments on EPA's shutdown policy, NRDC argued that in states with such SIPs, no credit for shutdowns should be allowed in bubbles until all the projected volume of emission reductions from shutdowns had actually taken place. NRDC, Comments on the Emissions Trading Policy Statement, Request for Further Comments on Shutdown and Other Issues in 48 Fed. Reg. 39580 (Aug. 31, 1983) at 10, (Oct. 31, 1983) (hereinafter cited as NRDC Comments).

75. EPA's April 7, 1982 proposed emissions trading policy statement required a demonstration that any nonattainment area bubble be shown to be consistent with reasonable further progress and any likely future emission control requirements for the sources involved. See Emissions Trading Policy Statement, Technical Issues Document, 47 Fed. Reg. 15075, 15079-80, 12 ELR 30006, 30012-13 (1972).

76. 685 F.2d at 721, 12 ELR at 20943.

77. Section 173(1)(B) permits an agency to set aside a pool for new growth in nonattainment areas and this avoids the offset rule. Similarly, an agency might want to do this for an attainment area and thus have a larger "increment" to allocate in that area. See Clean Air Act § 163, 42 U.S.C. § 7473 (increments and ceilings), ELR STAT. 42233.

78. See Intervention Brief of Sierra Club and Environmental Defense Fund at 7, Alabama Power Co. v. Costle, 636 F.2d 323, 10 ELR 20001 (D.C. Cir. 1979).

79. Compare the CIPS case, supra note 65.

80. The argument in the text tends to give some support to the view that command-and-control regulations may well hinder innovation, since if industry thinks that an NSPS or similar standard will be tightened up when more effective controls are developed, they will be likely to avoid such development. But with an available bubble the innovator would seem to be less likely to be harmed by such a development.

81. This is essentially the argument urged above, that plants will not be modernized as often or as early without a liberal emission trading or bubble policy as with one. See supra text accompanying notes 68-70.

82. 685 F.2d at 727 n.41, 12 ELR at 20947-48 n.41.

83. See infra text accompanying note 90.

84. Senator Domenici in his recent article, Emissions Trading: The Subtle Heresy (see supra note 2), while opposing the philosophy discussed in the text, sums it up superbly as follows:

Consorting with the Enemy. The more moralistic strains of environmental thought have viewed the private sector as the enemy. Part of the rationale behind command-and-control theory is that the private sector needs to be told what to do — not just asked to do it….

The Ultimate Heresy — The New Source Bubble: The antitechnology implications of emission trading jeopardizes one of the Clean Air Act's most sacred canons: all new sources should have the most stringent technology placed on them.

ENVTL. FORUM, Dec. 1982, at 23.

85. See Landau, Economic Dream or Environmental Nightmare? The Legality of the "Bubble Concept" in Air and Water Pollution Control, 8 B.C. ENVTL. AFF. L. REV. 779 (1980) [hereinafter cited as Landau, The Bubble Concept].

86. See comments of Kathleen Bennett, EPA Assistant Administrator for Air, in connection with the proposed CIPS bubble. 13 ENV'T REP. (BNA) (Current Devs.) 1577 (1983).

87. See Brief of Petitioner NRDC in NRDC v. Gorsuch, 685 F.2d 718, 12 ELR 20942 (D.C. Cir. 1982), at 54-56.

88. See RODGERS, ENVIRONMENTAL LAW 279 (1977) for the argument that the statutory "textual basis" for PSD was "thin to the point of disappearance."

89. 578 F.2d 319, 327, 8 ELR 20164, 20168 (D.C. Cir. 1978).

90. Id.

91. See Rhinelander, supra note 2, at 206.

92. 578 F.2d at 327, 8 ELR at 20168.

93. 43 Fed. Reg. 26380 (1980).

94. 636 F.2d 323, 403, 10 ELR 20001, 20037, (D.C. Cir. 1979).

95. Id. at 402, 10 ELR at 20037.

96. See Rhinelander, supra note 2, at 198-216.

97. See Landau, The Bubble Concept, supra note 85, at 741; Comment, D.C. Circuit Bursts EPA's Bubble, supra note 2, at 10092.

98. Judge Ruth Bader Ginsburg, who wrote the opinion, was appointed to the D.C. Circuit in 1980 and Judge Abner J. Mikva was appointed in 1979. Judge William J. Jameson, Senior District Judge for the District of Montana, also sat on the panel.

99. In reaching its result the court stated that it expressed "no view on the decision we would reach if the line drawn in Alabama Power and ASARCO did not control our judgment," 685 F.2d at 720 n.7, 12 ELR at 20943 n.7, and also noted with regret that Congress "did not advert specifically to the bubble concept's application to various Clean Air Act programs." Id. at 726 n.39, 12 ELR at 20947 n.39.

100. See 578 F.2d at 327-29, 8 ELR at 20168-69; 636 F.2d at 401-03, 10 ELR at 20036-37.

101. Id.

102. 685 F.2d at 727, 12 ELR at 20946.

103. Id. at 723, 12 ELR at 20944.

104. Id. at 727 n.41, 12 ELR at 20946 n.41.

105. NRDC maintains that the bubble policy is so limited. See NRDC Comments, supra note 74, at 2-5.

106. An "applicability" bubble, like those struck down in ASARCO and NRDC, is said to remove a new or modified source from the coverage of otherwise applicable new source standards. A "compliance" bubble is said to comply with the applicable emission standards rather than avoiding them, because the bubble in the aggregate, produces precisely the emission reductions required by those standards. The CIPS bubble is of this type. See supra note 65. The net effect of the two type of bubbles, however, is remarkably similar.

107. See supra note 1.

108. The Supreme Court customarily, but not always, limits its consideration of a case to the narrowest ground on which it can be decided.

109. The court below noted that it was not deciding the underlying issues but relying solely on the "line drawn in Alabama Power and ASARCO," See supra note 99.

110. The Supreme Court grants certiorari when at least four justices vote in favor of the grant.

111. Brief for the Administrator of the Environmental Protection Agency at 41, Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., Nos. 82-1005 et al. (U.S., brief filed Aug. 31, 1983) [hereinafter cited as Government Brief]; Brief of Petitioners American Iron and Steel Institute, American Petroleum Institute, Chemical Manufacturers Association, General Motors Corporation, and Rubber Manufacturers Association at 19-28; Chevron U.S.A, Inc. v. Natural Resources Defense Council, Inc., Nos. 82-1005 et al. (U.S., brief filed Aug. 31, 1983) [hereinafter cited as Industry Brief], ELR PEND. LIT. 65801.

112. Government Brief, supra note 111, at 19-35; Industry Brief, supra note 111, at 22-28.

113. Union Electric Co. v. EPA, 427 U.S. 246, 6 ELR 20570 (1976); Train v. Natural Resources Defense Council, Inc., 421 U.S. 60, 5 ELR 20264 (1975).

114. Government Brief, supra note 111, at 35-41; Industry Brief, supra note 111, at 29-31.

115. Industry Brief, supra note 111, at 34-35.

116. Id.

117. Brief for Respondents Natural Resources Defense Council, Inc. et al. at 26-38, Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., Nos 82-1005 et al. (U.S., brief filed Oct. 28, 1983) [hereinafter cited as NRDC Brief].

118. Id. at 38-40.

119. Id. at 15-20, 41-46.

120. Id. at 44.

121. Union Electric Co. v. EPA, 427 U.S. 246, 6 ELR 20570 (1976). See also Vermont Yankee Nuclear Power Corp. v. NRDC, 435 U.S. 519, 8 ELR 20288 (1978).

122. See supra note 54.

123. See supra note 119.

124. 103 S. Ct. 2856, 13 ELR 20672 (1983).

125. See Industry Brief, supra note 111, at 34.

126. This would be a reversal of Senate committee action last year. The bill reported out by the Environment and Public Works Committee defined "major stationary source" for the nonattainment program as including each emission outlet. S. REP. No. 666, 97th Cong., 2d Sess. 42 (1982).

127. 47 Fed. Reg. 15075, 12 ELR 30006 (1982). For example, the policy statement requires that emission decreases used in trades be: (1) in excess of those otherwise required by law, (2) enforceable, (3) permanent, and (4) quantifiable. 47 Fed. Reg. at 15077, 12 ELR at 30007.

128. See supra note 10.

129. When EPA proposed in 1980 to approve New Jersey's generic bubble rule it noted that the rule required "only that the state perform the essentially mechanical task of adding up the new emission limits" and comparing the total with the total imposed by the SIP.45 Fed. Reg. 77459, 77460 (1980). In its approval of this proposal in 1981, EPA noted that it was in effect approving "in advance" New Jersey's bubbles granted under this rule and therefore no further SIP revisions were needed. 45 Fed. Reg. 20551, 20552 (1980). The same approach should apply here, and is supported by EPA's recent proposed Emissions Trading Policy Statement, 47 Fed. Reg. 15074 (1982). There it is urged that bubbles approved under generic state rules should be exempt from requiring SIP revisions when granted under "procedures that are sufficiently replicable in operations," with "replicability" being defined as meaning a "high likelihood that two decisionmakers applying the rule to a given trade would reach the same conclusion." 47 Fed. Reg. 15084 n.6 (1982).

130. See 47 Fed. Reg. at 15085 for the recommended rule when modelling is needed.

131. Beginning in 1981 EPA has adopted the procedure of considering an application for a permit while the state agency is doing so, instead of waiting until the state agency has finished. This is called "parallel processing." (See e.g., 48 Fed. Reg. 31398 (1983), approving a New Jersey SO₂ bubble rule.)

132. This conforms to the general rule throughout the administration of the Act that de minimis changes in emission levels are free from all controls. See an excellent discussion of this exemption in the Alabama Power opinion on which EPA's de minimis rules are based. 636 F.2d at 360-61, 10 ELR at 20010.

133. Where the air is clean there seems no need to have prior approval by a government agency as long as the facts are fully available for post-construction audit and control.