Small Refiner Lead Phase-Down Task Force v. Environmental Protection Agency

Nos. 82-2282 et al. (D.C. Cir. January 26, 1983)

The court vacates the Environmental Protection Agency's (EPA's) interim standard on lead content limits for gasoline produced by small refiners. The interim standard, requiring that gasoline produced by small refiners within historic production levels not exceed 1.90 grams of lead per gallon of leaded gasoline, is vacated because EPA failed to give small refiners adequate notice that they would be required to reduce lead use immediately. The court finds a paucity of evidence in the record to support EPA's assumption that an untested inter-refinery lead credit trading market would develop fast enough for refiners to meet the interim standard. The court retains a stay on a historic ownership requirement in the regulations pending receipt of briefs by the parties on that issue. It holds that § 211(f)(5) of the Clean Air Act, which prohibits judicial stays of regulations, applies only to § 211(f) regulations and not to regulations applicable to other parts of § 211. The court declares that its order does not revive the previous standard, since it would be irrational to replace the vacated standard with a more stringent one. The court notes that EPA would be justified in immediately promulgating a temporary replacement.

Counsel for Petitioners
L. L. Hank Hankla
Pierson, Ball & Dowd
Ring Bldg., 1200 18th St. NW, Washington DC 20036
(202) 331-8566

Scott M. DuBoff
Debevoise & Liberman
1200 17th St. NW, Washington DC 20036
(202) 857-9800

Patrick M. Raher
Hogan & Hartson
815 Connecticut Ave. NW, Washington DC 20006
(202) 331-4500

Counsel for Respondents
David E. Dearing
Land and Natural Resources Division
Department of Justice, Washington DC 20530
(202) 633-5777

Samuel I. Gutter, Ralph J. Colleli Jr.
Office of the General Counsel
Environmental Protection Agency, Washington DC 20460
(202) 382-4134

Counsel for Intervenors
G. William Frick
Lathrop, Koontz, Righter, Clagett & Norquist
1140 Connecticut Ave. NW, Suite 202, Washington DC 20036
(202) 887-5100

Robert V. Percival
Environmental Defense Fund, Inc.
1525 18th St. NW, Washington DC 20036
(202) 387-3500

Before Wilkey, Wald, and Mikva, JJ.

[13 ELR 20391]

Per curiam:

Order

Petitioners Small Refiner Lead Phase-Down Task Force (SRTF), Plateau, Inc., and Simmons Oil Co. challenge various aspects of an EPA regulation that sets lead-content limits for leaded gasoline produced by certain "small" refiners. 47 Fed. Reg. 49,322 (Oct. 29, 1982) (to be codified at 40 C.F.R. §§ 80.2, .4, .7, .20). In brief, the new rule narrows EPA's previous definition of "small refinery" and requires small refiners to meet an interim standard of no more than 1.90 grams of lead per gallon of leaded gasoline (gplg) as of November 1, 1982, and a final standard of no more than 1.10 gplg as of July 1, 1983. (The rule also requires large refiners to meet the more stringent 1.10 gplg standard beginning November 1, 1982, but no large refiners have challenged this standard.) Because our disposition of the case makes speed of the essence, we are issuing an order today, with a full opinion explaining our rationale to follow shortly.

With two exceptions, we uphold that regulation in its entirety as within EPA's statutory authority, not arbitrary, capricious, or an abuse of discretion, and not procedurally flawed. First, we vacate the interim 1.90 gplg standard because EPA did not give adequate notice that it might immediately require small refiners to significantly reduce lead use. Clean Air Act § 307(d)(3), 42 U.S.C. § 7607(d)(3); see United Steelworkers v. Marshall, 647 F.2d 1189, 1221 [10 FLR 20784] (D.C. Cir. 1980) (final rule must be a "'longical outgrowth' of the rulemaking proceeding") (quoting South Terminal Corp. v. EPA, 504 F.2d 646, 659 [4 ELR 20768] (1st Cir. 1974)), cert. denied, 453 U.S. 913 (1981); Weyerhaeuser Co. v. Costle, 590 F.2d 1011, 1028-31 [9 ELR 20284] (D.C. Cir. 1978). To the contrary, throughout the 8 month rulemaking period, EPA had assured small refiners that its final rule "will take into account the lead time required for construction of any processing equipment needed for compliance." Notice of Proposed Rulemaking, 47 Fed. Reg. 7814 (Feb. 22, 1982); see also Final Notice of Rulemaking, 47 Fed. Reg. 38,090, 38,091 (Aug. 27, 1982) (suspending effective date of small refiner standard for 30 days "to defer the necessity for small refineries to decide whether to make the substantial capital expenditures required to meet a more stringent lead standard during the time that the Agency is still considering amendments to the lead phasedown program").

In addition, EPA's conclusion that the interim standard is feasible relies heavily on a new and untested scheme for inter-refinery trading of lead credits. See 47 Fed. Reg. at 49,324 col. 2. EPA assumed both that a market for lead credits would develop and that it would develop swiftly enough to permit small refiners to meet the interim standard by purchasing lead credits. EPA's belief that a market for lead credits will eventually develop is reasonable and is supported by the record. However, given the paucity of evidence in the record to support EPA's belief that a lead credit market will develop fast enough and extensively enough to materially assist the small refiners in meeting the 1.90 gplg interim standard, EPA was not warranted in factoring such a scheme into its decision to impose that standard.

Second, we defer decision on Simmons' challenge to the historic ownership requirement in 40 C.F.R. § 80.2(p)(3) pending receipt of briefs on the issue by Simmons and EPA. Our stay of the historic ownership requirement contained in that section remains in effect. We reject EPA's argument that § 211(f)(5) of the Clean [13 ELR 20392] Air Act, 42 U.S.C. § 7545(f)(5), prohibits a stay. Our review of the legislative history of that section convinces us that it applies only to actions of the EPA Administrator under § 211(f), and does not prohibit a judicial stay of regulations promulgated under other parts of § 211.

In light of the foregoing, we vacate so much of 40 C.F.R. § 80.20(b)(1)(i) as requires small refineries to limit the lead content of leaded gasoline to 1.90 grams per gallon for gasoline production not exceeding the refinery's historic production level. We leave in force the requirement in § 80.20(b)(1)(i) that production of leaded gasoline "in excess of the historic production level may not exceed 1.10 grams per gallon."

When an agency replaces an existing regulation with a new regulation, and we vacate all or part of the new regulation, we must decide whether the agency's prior regulation continues in effect or whether our action leaves no regulation in effect. Compare Natural Resources Defense Council, Inc. v. Gorsuch, 685 F.2d 718, 728 [12 ELR 20942] (D.C. Cir. 1982) (implicitly assuming that EPA will return to its previous regulation defining "source" under the Clean Air Act) with Burlington Northern, Inc. v. United States, 51 U.S.L.W. 4029 (U.S. Dec. 13, 1982) (Court of Appeals lacks power to reinstate old ICC rate after invalidating revised rate). In this case, returning to the old standard would be irrational, because the 0.5 grams per gallon (gpg) standard for small refiners (which would have become effective on November 1, 1982) is stricter than both the invalidated 1.90 gplg interim standard and the 1.10 gplg final standard. We therefore vacate only the interim standard and not EPA's conclusion that the old standard should be replaced. See Burlington Northern, 51 U.S.L.W. at 4033 n.9 (Court of Appeals should have vacated "only the Commission's new rate calculation and not the Commission's conclusion that the [previous] rate was too low").

Our decision leaves EPA without a regulatory limit on small refinery lead use for production of leaded gasoline not exceeding the refinery's historic production level. The unexpected nature of this regulatory vacuum, plus the public health danger posed by unrestricted lead use and the absence of any unfairness to small refiners in such a course of action, would justify EPA in immediately promulgating a temporary lead content regulation which does not require small refiners to reduce lead use to a level significantly below provious lead-use levels. See 5 U.S.C. §§ 553(b)(B) (agency may for "good cause" issue rules without notice or public procedure) (made applicable to Clean Air Act by 42 U.S.C. § 7607(d)(1) (last sentence)), 553(d)(3) ("good cause" exception to 30 day period between publication of a rule and the rule's effective date); American Federation of Government Employees v. Block, 655 F.2d 1153, 1156 (D.C. Cir. 1981) (these exceptions to the § 553 procedures permit agency to issue temporary rules in "emergency situations"). It is for EPA, not for the courts, to decide if an interim standard is needed and what that standard should be. Cf. Burlington Northern, supra (Court of Appeals lacks power to set railroad rates). We will delay issuing the mandate in this case until Wednesday, February 2, 1983, to give EPA an opportunity to promulgate such an emergency rule¹ that could become effective as of that date.

1. EPA may also, of course, institute regular rulemaking procedures with a view to adopting a more stringent interim standard, and may (within reason and statute) expedite such a rulemaking.