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McLouth Steel Prods. Corp. v. Thomas

ELR Citation: 18 ELR 20473
Nos. No. 87-1049, 838 F.2d 1317/27 ERC 1288/(D.C. Cir., 02/09/1988)

The court holds that the Environmental Protection Agency's (EPA's) vertical and horizontal spread (VHS) model, used to predict the probable contamination levels of hazardous substances under the Resource Conservation and Recovery Act, constitutes a rule requiring public notice and comment under the Administrative Procedure ACT (APA). EPA had used the VHS model to predict the leachate levels of drained liquid from the plaintiff's industrial sludge, relying on the VHS model's "reasonable worst case assumptions" to estimate the acquifer's ability to dilute the toxic properties of the hazardous waste. The court first holds that the VHS model is a rule, not a policy, under the APA. A policy statement has no present-day binding effect and genuinely leaves agency decisionmakers free to exercise discretion, as determined principally by the agency's actual applications of the policy and its past characterizations of the policy's effect. In this case, while EPA's original characterization of the VHS model noted that EPA retains discretion to consider other factors, it also said that the VHS model will necessarily be used to predict contamination levels and other factors may be considered where there is a "compelling" case to do so. More importantly, EPA's actual application of the model treated satisfactory evaluation under the model as a necessary prerequisite for a successful petition by the plaintiff, and concluded that the model's structure was final and not challengeable by the plaintiff. Although EPA has rejected the VHS model's results in four out of approximately 100 uses, in three of these the rejections were based on faulty data fed into the model, and the fourth was actually based on the model's application to the waste in the future. EPA's claim to have been open to consideration of other factors does not make the VHS model any less of a rule; if a regulatory decision turns on affirmative answers to two questions, and an agency adopts a rule giving conclusive answers to the first question once certain data are supplied, the rule is a rule even though it does not purport to answer the second question.

The court next finds that as a rule, EPA did not subject the VHS model to the APA's requirement for adequate notice and opportunity for public comment. Although EPA described the VHS model in the Federal Register and invited comments on it in six early uses of the model, the Federal Register notices were too vague to alert the reader to the rulemaking stakes. Because the notice was thus inadequate, EPA's consideration of the comments received in response, no matter how careful, could not cure the defect. Nor was the defect cured by this plaintiff's actual notice of the use of the VHS model and its opportunity to comment on it in its own delisting case; here, EPA had already closed its mind too far to do more than consider comments as a matter of grace.

Finally, the court holds that the doctrine of harmless error is not applicable here. Where the agency has completely failed to comply with the APA's notice and comment requirements, even if the challenger now presents no substantive bases for invalidating the agency decision, a court cannot say with certainty whether the challenger's comments would have had some effect on the agency had they been considered by the agency when it made its decision. Here, the only disadvantage of remanding to EPA is that, as with any other action at EPA, it will consume EPA's time and resources. EPA may now treat the VHS model as a binding rule if it complies with the APA's requirements for notice and comment, or EPA may choose to treat the model as a non-binding policy if it truly exercises discretion in individual cases.

[Briefs in this case are digested at ELR PEND. LIT. 65975.]

Counsel for Petitioner
Jay E. Brant, William A. Wichers II, Peter D. Holmes
Honigman, Miller, Schwartz & Cohen
2290 First Nat'l Bldg., Detroit MI 48226
(313) 256-7800

Counsel for Respondents
J. Carol Williams
Land and Natural Resources Division
Department of Justice, Washington DC 20530
(202) 633-2757

Before: WALD, Chief Judge, WILLIAMS, Circuit Judge, and HOGAN,[*] District Judge.