New York v. Reilly

Nos. 91-1168;-1170 (D.C. Cir. July 14, 1992)

The court holds that the U.S. Environmental Protection Agency (EPA) properly supported its decision not to promulgate a requirement mandating waste separation in its proposed rules regulating municipal incinerators under § 111 of the Clean Air Act, but EPA did not adequately explain its reasons for omitting a ban on the burning of lead-acid batteries. When it promulgated its final rules, EPA abandoned two sections of its proposed rules covering materials separation and battery burning, which the Office of Management and Budget and the President's Council on Competitiveness (PCC) had disapproved. The court initially holds that EPA may exercise its discretion under the Clean Air Act to determine the best demonstrated technology (BDT) for limiting harmful emissions, because Congress did not specify the weight EPA should accord to air quality or other factors in determining BDT. The court then holds that EPA's decision to abandon the separation requirement for recoverable or recyclable materials is adequately supported. First, sufficient evidence supports EPA's conclusion that emissions reductions resulting from materials separation were difficult to quantify and relatively small. Second, while EPA initially forecast a likely benefit from requiring separation and recycling, the agency's changed position in the final rules was supported by comments that uncertainty over costs associated with separation and recycling might be even greater than EPA had originally believed. Third, EPA was not obliged to address the option of issuing combustion permits for incinerator operators unable to find a recycling market for recovered materials, because combustion permits would not have solved the problems that led EPA to change its position. Fourth, EPA's use of a worst case scenario in making economic predictions was permissible, and several commentors supported the Agency's economic predictions. Finally, that EPA reevaluated its conclusions in light of the advice from the PCC does not mean that the Agency failed to exercise its own expertise in promulgating the final rules. The Clean Air Act allows EPA to balance costs and benefits both related and unrelated to air quality; thus, EPA's change of position on the materials separation requirement was not improper. The court next holds that EPA did not adequately discuss the economic benefits that would justify omitting from the final rules the provision banning the burning of lead-acid batteries. EPA originally proposed the ban as the best demonstrated technology for reducing emissions from batteries, and the Clean Air Act requires the Agency to explain why it changed its mind on this point. The mere existence of statutory authority in the Resource Conservation and Recovery Act which includes strict provisions against the burning of lead-acid batteries is insufficient to justify the omission of the battery ban.

Counsel for Petitioners
James A. Sevinsky, Joan L. Matthews, Ass't Attorneys General
New York State Attorney General's Office
120 Broadway, New York NY 10271
(212) 416-8000

Counsel for Respondents
Robert J. Martineau Jr.
U.S. Environmental Protection Agency
401 M St. SW, Washington DC 20460
(202) 260-2090

BeforeSILBERMAN, HENDERSON and RANDOLPH, Circuit Judges.

[22 ELR 21306]

KAREN LECRAFT HENDERSON, Circuit Judge:

Petitioners State of New York and State of Florida (petitioners or petitioner States) challenge the decision of the Environmental Protection Agency (EPA or Agency) to forgo promulgation of two provisions of two proposed rules. The relevant provisions would have required incinerator operators to separate a percentage of certain types of waste from their waste streams before incineration and would have placed a ban on the incineration of lead-acid vehicle batteries. Because our review of the record demonstrates that EPA adequately supported its decision to drop the waste separation provision, we uphold this portion of the Agency's action. On the other hand, because EPA did not adequately explain why a ban on lead-acid vehicle battery combustion does not represent the best demonstrated technology for reducing harmful incinerator emissions, we remand for further explication of this issue.

Section 111 of the Clean Air Act, 42 U.S.C. § 7411 (CAA or Act), authorizes EPA to regulate municipal incinerators (municipal waste combustors or MWCs) as sources of air pollution.¹ Pursuant to section 111(b)(1)(B) of the CAA, [22 ELR 21307] EPA directly regulates new sources of air pollution. Under section 111(d) of the CAA, EPA is required to establish guidelines to be used by the states in regulating existing sources of air pollution. Although EPA proposed separate rules to meet the requirements of sections 111(b) and 111(d), the relevant portions of the rules are virtually indistinguishable for our purpose. See Proposed Emission Guidelines: Municipal Waste Combustors, 54 Fed. Reg. 52,209, 52,240 (proposed December 20, 1989, under section 111(d)); Proposed Standards of Performance for New Stationary Sources; Municipal Waste Combustors, 54 Fed. Reg. 52,251, 52,281 (proposed December 20, 1989, under section 111(b)).

In general, subsection 111(a) of the CAA requires EPA to set "standards of performance" for sources of air pollution. It provides:

a standard of performance shall reflect the degree of emission limitation . . . achievable through application of the best technological system of continuous emission reduction which (taking into consideration the cost of achieving such emission reduction, any nonair quality health and environmental impact and energy requirements) the Administrator determines has been adequately demonstrated.

42 U.S.C. § 7411(a)(1). EPA has labelled its goal in setting a standard of performance as selection of the "best demonstrated technology" (BDT). See, e.g., 54 Fed. Reg. at 52,253.

EPA's BDT analysis of MWCs resulted in proposed rules which focused primarily on limiting emissions from incinerator smokestacks. At issue in this appeal are three subparts of the proposed rules, viz. 40 C.F.R. § 60.56a(d), 40 C.F.R. § 60.56a(e) and 40 C.F.R. § 60.36a. Proposed rule 40 C.F.R. § 60.56a(d) would have required operators of new sources of air pollution to achieve a twenty-five per cent reduction by weight of unprocessed waste by separating out some or all of the following recoverable/recyclable materials: paper and paperboard combined; ferrous materials; nonferrous metals; glass; plastics; household batteries; and yard waste.² Proposed rule 40 C.F.R. § 60.56a(e) would have placed a total prohibition on the burning of lead-acid vehicle batteries by new sources. Proposed rule 40 C.F.R. § 60.36a would have incorporated the requirements of sections 60.56a(d) and (e) into the guidelines for existing sources.

On December 4, 1990, EPA submitted a package of final rules to the Office of Management and Budget (OMB) for review pursuant to Executive Order 12291. OMB did not approve the sections of the proposed rules covering materials separation and battery burning. EPA then appealed to the President's Council on Competitiveness (Council).³ In a "Fact Sheet," the Council rejected the proposed rules on materials separation as being inconsistent with "several of the Administration's regulatory principles," (JA 429), including their failure to "meet the benefit/cost requirements for regulatory policy laid out in Executive Order 12291" (JA 430).⁴ The Fact Sheet also noted the Council's opinion that the materials separation requirement did not constitute a "performance standard" and that it violated principles of federalism. EPA subsequently abandoned the materials separation and battery burning provisions when it promulgated its final rules. See Standards of Performance for New Stationary Sources; Municipal Waste Combustors, 56 Fed. Reg. 5488, 5496 (1991)(to be codified at 40 C.F.R. §§ 51, 52 and 60); Emissions Guidelines; Municipal Waste Combustors, 56 Fed. Reg. 5514, 5521 (1991) (to be codified at 40 C.F.R. § 60).

II.

A. The Separation Requirements

In determining the BDT for limiting harmful emissions, the EPA Administrator must "tak[e] into consideration the cost of achieving such emission reduction, and any nonair quality health and environmental impact and energy requirements." 42 U.S.C. § 7411(a)(1)(C). Because Congress didnot assign the specific weight the Administrator should accord each of these factors, the Administrator is free to exercise his discretion in this area. See Center for Auto Safety v. Peck, 751 F.2d 1336, 1342 (1985). We must therefore uphold EPA's decision to abandon the separation requirements if such action is supported on either air or nonair (including economic) grounds.⁵

Under the CAA, promulgated rules must be accompanied by "an explanation of the reasons for any major changes in the promulgated rule from the proposed rule." 42 U.S.C. § 7607(d)(6)(A). The Act also requires the court to sustain the Administrator's actions unless they are "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 42 U.S.C. § 7607(d)(9)(A).⁶ The petitioners claim that EPA's decision to omit the proposed materials separation requirement from its final rules was arbitrary and capricious because the decision was not supported by substantial evidence, the Agency failed to explain why certain alternatives were not adopted, it improperly based its finding on the "worst case scenario" and it improperly relied on the views of the Council rather than its own expertise. We conclude that EPA's failure to promulgate the materials separation provision survives all of these attacks.

The petitioners first claim that EPA's explanations for excluding the materials separation requirement are not adequately supported by the administrative record. We will uphold an agency's conclusions if they are supported by "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Universal Camera Corp. v. NLRB, 340 U.S. 474, 477 (1951) (quoting Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229 (1938)); see also Consolidated Oil & Gas, Inc. v. FERC, 806 F.2d 275, 279 (D.C. Cir. 1986). Furthermore, even if the evidence supports both sides of an issue, we will sustain the agency "if a reasonable person could come to [22 ELR 21308] either conclusion on that evidence." Public Citizen Health Research Group v. Tyson, 796 F.2d 1479, 1485 (D.C. Cir. 1986) (citing Consolo v. Federal Maritime Com., 383 U.S. 607, 620 (1966)). We are particularly deferential when reviewing agency actions involving policy decisions based on uncertain technical information. Id. at 1505 ("As long as Congress delegates power to an agency to regulate on the borders of the unknown, courts cannot interfere with reasonable interpretations of equivocal evidence.").

The petitioners attack the sufficiency of the evidence supporting EPA's conclusions regarding both air and non-air benefits. On the issue of air-related benefits, EPA's proposed rules noted that, due to the substantial reductions achieved by air pollution control devices, it was unable to reliably quantify the emission reductions attributable to materials separation. 54 Fed. Reg. at 52,240; 54 Fed. Reg. at 52,281. At the time it proposed the rules, however, EPA concluded: "It is simply common sense, and the Agency's expectation, that reductions in the amount of pollution-generating materials combusted in an MWC will reduce the amount of pollutants in its air emissions." 54 Fed. Reg. at 52,240; 54 Fed. Reg. at 52,281. When it omitted the separation requirements from its final rules, EPA concluded that emissions reductions resulting from materials separation were not only difficult to quantify but were in fact relatively small. 56 Fed. Reg. 5488, 5496 (1991) (to be codified at 40 C.F.R. §§ 51, 52 and 60); 56 Fed. Reg. 5514, 5521 (1991) (to be codified at 40 C.F.R. § 60). This conclusion has adequate support in the record. See Emission Standards Division, Division of the Office of Air Quality Planning and Standards, U.S. Envtl. Protection Agency, Pub. No. EPA-450/3-90-021, Municipal Waste Combustion: Background Information for Materials Separation 5-15 to 5-16 (1991) (describing tests examining emissions from unseparated versus separated waste and concluding that efficacy of existing antipollution devices results in small emissions reduction from waste separation).

The petitioners next challenge whether EPA's conclusions regarding nonair benefits are adequately supported in the record. Both the proposed rules and the final rules note that requiring separation and recycling could lead to either a cost benefit or a cost detriment. See 54 Fed. Reg. at 52,242; 54 Fed. Reg. at 52,283-84; 56 Fed. Reg. at 5497. While EPA initially forecast a likely benefit, 54 Fed. Reg. at 52,243, in promulgating its final rules it determined that the record was too inconclusive to justify a materials separation rule, 56 Fed. Reg. at 5497. We must therefore determine whether EPA adequately supported its change in position. The preamble to the final rules recites that the Agency, based in part on its own analysis, agreed with those comments suggesting that the uncertainty over costs associated with separation and recycling might be even greater than EPA had originally believed. See, e.g., Comments of The U.S. Conference of Mayors National Resource Recovery Association, JA 342 ("We estimate that, depending on the technology/program mix, total program costs are likely to range from $ 100 to more than $ 200 per ton of recycled product, including collecting, processing, and marketing the material"). We conclude that these comments, on which the Agency expressly relied to confirm its own views on cost uncertainty, see 56 Fed. Reg. at 5497, provide sufficient evidence to support its changed view.⁷

The petitioners next claim that EPA arbitrarily and capriciously deleted the materials separation requirement because of its uncertainty whether sales of recycled materials would compensate for separation costs. The petitioners claim that any economic losses could be avoided by issuing a "combustion permit" which would serve as a waiver of the separation requirement if an incinerator operator could not find a recycling market for its recovered materials. See 54 Fed. Reg. at 52,245; 54 Fed. Reg. at 52,286-87. As set forth in the proposed rules, if after 120 days an incinerator operator could not sell its separated materials, it could then obtain a combustion permit to burn them. 54 Fed. Reg. at 52,245; 54 Fed. Reg. at 52,286-87. Combustion permits were omitted from the rules along with the separation requirements.

We do not find the petitioners' combustion permit rationale persuasive. According to the proposed rules, combustion permits were designed to encourage combustion rather than landfilling where recycling would not be feasible. See 54 Fed. Reg. at 42,245; 54 Fed. Reg. at 52,286. In fact, as originally proposed, combustion permits would not have insured cost benefits because incinerator operators would have been required to continue separating waste even while operating under a permit. 54 Fed. Reg. at 42,245; 54 Fed. Reg. at 52,286. Because, under the proposed rules, combustion permits would not have solved the problems that led EPA to change its position, and because no genuine cost saving alternative to the proposed combustion permit was offered by commenters during the rule making proceedings, EPA was not obliged to address the combustion permit issue in its final rules.⁸

The petitioners further claim that EPA improperly relied solely on the "worst case scenario" in arriving at its final conclusion regarding the economics of materials separation. Our review of the record demonstrates that several commenters supported EPA's economic predictions. See Summary of Public Comments and Responses, supra, at 4-55 to 4-56. Moreover, even if EPA's prediction did take into account the worst case scenario, its action would be permissible. This court has held that in applying a uniform standard to an industry, the standard must "be capable of being met under most adverse conditions which can reasonably be expected to recur." National Lime Ass'n v. EPA, 627 F.2d 416, 431 n.46 (D.C. Cir. 1980).

Lastly, the petitioners claim that EPA acted improperly in relying on the opinion of the Council rather than exercising its own expertise. See Tyson, 796 F.2d at 1505 ("We cannot defer when the agency simply has not exercised its expertise."). After reviewing the record, we conclude that EPA did exercise its expertise in this case. The [22 ELR 21309] procedural history of the rules at issue demonstrates that the Council's views were important in formulating EPA's final policy decision regarding materials separation. The fact that EPA reevaluated its conclusions in light of the Council's advice, however, does not mean that EPA failed to exercise its own expertise in promulgating the final rules.⁹

In sum, EPA's change of position on the materials separation issue was not improper. We are extremely deferential to administrative agencies in cases involving technical rulemaking decisions, see Tyson, 796 F.2d at 1505, and EPA has supported its new view of the materials separation policy with adequate evidence. Because the CAA allows EPA to balance air and nonair benefits and costs, which it did, EPA's decision not to promulgate materials separation rules was neither arbitrary nor capricious.¹⁰

B. The Battery Burning Prohibition

Despite its continued belief that "lead acid batteries are certainly a significant source of lead in MWC emissions," 56 Fed. Reg. at 5499, EPA decided not to include a ban on the burning of lead-acid vehicle batteries in its final rules, id.; 56 Fed. Reg. at 5521. The Agency offered three reasons for its decision to omit the ban: (1) commenters questioned whether it would be possible to achieve 100 per cent compliance; (2) the Resource Conservation and Recovery Act includes strict provisions against the burning of lead-acid batteries; and (3) EPA is considering a comprehensive approach to recycling lead-acid batteries under section 6 of the Toxic Substances Control Act. 56 Fed. Reg. at 5499. Because EPA's proffered reasons for omitting the battery ban do not adequately explain why the ban is not the BDT in this area, this portion of the proposed rules, 40 C.F.R. §§ 60.56a(e) and 60.36a (to the extent that it imposes a ban on burning lead-acid vehicle batteries), is remanded to the Agency for more reasoned decisionmaking.

The petitioners countered EPA's first rationale by suggesting that, if 100 per cent compliance with a ban on burning lead-acid batteries is impossible, EPA could have adopted some lesser restriction (e.g. a 99 or 95 per cent ban). EPA responded by stating that it was limited to a choice between a 100 per cent ban or no ban at all. See EPA Br. at 40. We disagree with EPA's position. We have held that EPA has the authority to deviate from a proposed rule as long as its final rule represents a "logical outgrowth" of the proposal. See Small Refiner Lead Phase-Down Task Force v. EPA, 705 F.2d 506, 547 (D.C. Cir. 1983); United Steelworkers of Am. v. Marshall, 647 F.2d 1189, 1221 (D.C. Cir. 1980), cert. denied, 453 U.S. 913 (1981). EPA cannot claim to have been unaware of the possibility of a less restrictive rule as at least one commenter suggested a "best efforts" or "reasonable efforts" standard. See Summary of Public Comments and Responses, supra, at 4-86.

EPA's next two rationales simply recognize that the matter of lead-acid battery incineration can be addressed under other statutes. Because EPA originally proposed the ban as the BDT for reducing emissions from batteries, and the CAA requires the Agency to explain why it changed its mind on this point, the mere existence of other statutory authority which might undergird EPA's final stance is insufficient to justify the omission of the battery ban. EPA has admitted that a ban would achieve air benefits. See 56 Fed. Reg. at 5499. The final rules, however, do not discuss nonair benefits or other economic benefits which would justify omitting the provision despite the air benefits. We therefore conclude that the rules must be remanded to EPA to explain why the BDT for reducing emissions resulting from lead-acid vehicle batteries is not a total or limited ban on their combustion.

III.

Because EPA did not adequately explain its reasons for not imposing a ban of some degree on the burning of lead-acid vehicle batteries, we remand the rules to the Agency. We uphold EPA's decision not to promulgate blanket materials separation rules, however, because the Agency adequately articulated and supported its change in position.¹¹

The petitions for review are therefore granted in part and denied in part.

1. The Clean Air Act was amended in November 1990, Pub. L. No. 101-549, 104 Stat. 2399. Because the rules involved here were proposed and promulgated before the 1990 amendments took effect, all statutory references are to the 1977 version of the Act.

2. Under the proposed rules an MWC could choose which of the listed materials it wished to separate from its waste stream without regard to the degree of harmful emissions associated with each of the different types of waste. See 54 Fed. Reg. at 52,298-99. The materials separation requirement therefore appears to have been directed more toward encouraging recycling than toward emissions reduction.

3. The Council was created in 1989. It is chaired by the Vice President and its members include other executive branch officials. Agencies whose regulations have not been approved by OMB may appeal OMB's decision to the Council.

4. The Fact Sheet did not mention the proposed rule prohibiting lead-acid battery combustion.

5. We refer to factors affecting air quality as "air" factors and those affecting economic and other non-air quality concerns as "nonair" factors.

6. The Administrative Procedure Act contains no provision analogous to § 7607(d)(6)(A) and we express no opinion on the standard of review under the APA applicable to an agency decision not to adopt all or part of a proposed rule.

7. After issuing its proposed rules, EPA conducted two studies on the economic effect of materials separation. These studies produced varying estimates regarding the effect of separation on costs. EPA stated that it did not rely on these studies in promulgating its final rules because the studies were not available for public inspection during the comment period. 55 Fed. Reg. at 5497. But EPA specifically mentioned these studies in responding to comments on the materials separation issue. See Emission Standards Division, Division of the Office of Air Quality Planning and Standards, U.S. Envtl. Protection Agency, Pub. No. EPA-450/3-91-004, Municipal Waste Combustion: Background Information for Promulgated Standards and Guidelines — Summary of Public Comments and Responses 4-52 to 4-53 (1990). EPA also used the studies in its brief. See EPA Brief at 25 & n.8. As we noted, however, the final rules expressly rely on the comments and other analyses rather than the additional studies. See 56 Fed. Reg. at 5497 (citing document II-B-047 in docket A-89-09). EPA's references to the post-proposal studies, therefore, do not alter our conclusion that EPA's decision to omit the materials separation provision was supported by substantial evidence.

8. The proposed rules solicited comments on "whether, under certain circumstances, the requirement to separate materials for which a combustion permit has been granted . . . should be dropped." 54 Fed. Reg. at 52,246; 54 Fed. Reg. at 52,287. The petitioners point to no comments received in response to the solicitation.

9. The petitioners also challenge some of the Council's comments. First, they challenge the Council's conclusion that the separation plan would violate principles of federalism because waste management is traditionally a state and local concern. Second, they challenge the Council's contention that the separation requirement is not a "standard of performance" because it sets a strict standard rather than allowing flexibility in meeting a particular goal. We do not address the merits of either of these arguments as neither appears to have been a decisive factor in EPA's decision to omit the materials separation requirement.

10. We note that EPA has stated that it may impose separation requirements during individual permit proceedings as part of its "Best Available Control Technology" (BACT) determinations under section 169(3) of the CAA. 56 Fed. Reg. at 5496 n.4. The Agency also plans to address waste recycling further under the provisions of the Resource Conservation and Recovery Act (RCRA). See 56 Fed. Reg. at 5497. Thus, although it has decided against promulgating a general rule on materials separation, EPA has reserved the right to require recycling and separation in those cases it believes suited to such a program.

11. Intervenor Institute of Resource Recovery (IRR) claims that EPA does not have the authority to promulgate these rules at all. In general, "an intervening party may join issue only on a matter that has been brought before the court by another party." Illinois Bell Tel. Co. v. FCC, 911 F.2d 776, 786 (D.C. Cir. 1990) (citing Vinson v. Washington Gas Light Co., 321 U.S. 489, 498 (1944)). Neither the petitioners nor the respondent has suggested that EPA lacks the authority to promulgate materials separation rules. Although we have held that the Illinois Bell requirement is a prudential matter, Synovus Fin. Corp. v. Board of Governors, 952 F.2d 426, 434 (D.C. Cir. 1991), we waive the Illinois Bell requirement only in "extraordinary cases." Lamprecht v. FCC, 958 F.2d 382, 389 (D.C. Cir. 1992); see also Platte River Whooping Crane Critical Habitat Maintenance Trust v. FERC, No. 90-1397, slip op. at 18 n.4 (D.C. Cir. April 17, 1992). This is not an extraordinary case. The intervenor has not been aggrieved and the Agency has not expressed its opinion on the question. Cf. Synovus, 952 F.2d at 432-33.