EPA's Use of Contractors on Stationary Source Inspections Provokes Circuit Split Over § 114 of Clean Air Act

J. B. Dougherty

Enforcement was much on the mind of Congress when it drafted the Clean Air Act Amendments of 1970.¹ The Act gave the Environmental Protection Agency (EPA) broad authority to monitor the emissions of individual polluting facilities and to seek the imposition of potentially severe sanctions on violators. In the first six years of the Act's existence, however, EPA's attention focused less on enforcement than on developing and defending a regulatory and institutional framework for implementing the Act. By the mid to late 1970s the majority of stationary sources had come into compliance. Nevertheless, more than a thousand major emitters remained in violation. Among those that had attained compliance, the often difficult and expensive task of maintaining compliance was frequently neglected in the absence of oversight and prodding by enforcement agencies. Consequently, EPA has devoted an increasing proportion of its operating budget to enforcement-related activities.

In 1977, armed with enhanced enforcement authority,² EPA increased its enforcement and monitoring activities significantly. This surge in activity led inevitably to a number of legal challenges to the scope of the Agency's enforcement powers.³ Of these the most frequently litigated has concerned the use of non-EPA employees in conducting field monitoring and source inspections.

In the late 1970s, to overcome a shortage of expert enforcement personnel, EPA began to turn to private consulting firms. The Agency now regularly contracts with private firms for assistance in performing many enforcement functions such as visible emissions observations and stack testing. However, it has encountered staunch industry opposition when it has attempted to use these private contractors in making on-premise inspections of sources. Some source owners have demanded that non-EPA inspectors sign exhaustive confidentiality agreements while others have simply barred them at the gate, in one instance risking contempt penalties by refusing entry to an inspection team possessing a valid search warrant.⁴

Why such determined resistance? Are these source owners simply dragging their heels on compliance or do they have legitimate grounds for discriminating between Agency and non-Agency inspectors? While it is no doubt true that some source owners fight environmental controls at every opportunity, in the majority of cases the owners have valid concerns that the presence of EPA contractors in their plants exposes them to security risks not presented by government employees. Many of these contractors work both for EPA and industry, creating reasonable concern among source owners over intentional or inadvertent disclosure of confidential industrial information.

On at least four occasions, these disputes have erupted into litigation. Industry lawyers have presented well developed arguments that § 114(a)(2)⁵ of the Clean Air Act authorizes EPA to use only government employees in making inspections. EPA's interpretation, not surprisingly, is to the contrary. To date, three district courts⁶ and the Ninth Circuit⁷ have sided with the Agency, while one district court⁸ and the Tenth Circuit⁹ have come down the other way. Similar cases are now pending before the Fourth and Sixth Circuits.¹⁰ The ultimate resolution of the conflict will be important to EPA's enforcement program, and could well figure in the continuing debate over the Act's reauthorization.

Section 114

Section 114(a)(2) of the Clean Air Act provides:

the Administrator or his authorized representative, upon presentation of his credentials —

(A) shall have a right of entry to, upon or through any premises of such person or in which any records required [12 ELR 10019] to be maintained under paragraph (1) of this section are located, and

(B) may at resonable times have access to and copy any records, inspect any monitoring equipment or method required under paragraph (1), and sample any emissions which such person is required to sample under paragraph (1).¹¹

The essential question is whether the term "authorized representative" is to be construed to embrace non-Agency employees. Since the term is not defined anywhere in the statute, EPA has argued to the courts, its "plain meaning" should control. It is not the meaning of the word "authorized" but the term "representative" that is in dispute. It is defined in the dictionary as "a person duly authorized to act or speak for another."¹² Under this view of § 114(a)(2) EPA may contract with virtually may person to inspect sources. The Ninth Circuit found the dictionary definition "persuasive"¹³ and saw nothing in the legislative history or elsewhere to override the plain meaning of the provision. The Tenth Circuit, on the other hand, "declined to give such a literal interpretation" to § 114(a)(2).¹⁴

Significantly, the term "authorized representative" is used elsewhere in § 114. Section 114(c) imposes a general ban on the disclosure of trade secrets acquired during investigations. However, it expressly authorizes the disclosure of such information to "officers, employees or authorized representatives of the United States concerned with carrying out (the Act)."¹⁵ If the terms "officers" and "employees" are given their apparent meaning, how could then term "authorized representative" be read to mean anything other than non-government employees? It would seem, then, that by using the same term in § 114(a)(2), Congress extended to non-government employees the authority to conduct source inspections.

A look at related provisions in other environmental statutes reveals that their inspection provisions contain similar language. For example, one of the many provisions of the Federal Water Pollution Control Act (FWPCA)¹⁶ which are analogous to provisions in the Clean Air Act is § 308, relating to inspections. Like § 114(a)(2) of the Air Act, § 308(a) of the FWPCA confers a right of entry upon "the Administrator or his authorized representative."¹⁷ A subsequent phrase in $308 also mirrors § 114(c)'s use of the term "officers, employees, or authorized representatives."¹⁸ But as the legislative history (and not the text) of the 1972 amendments to the FWPCA demonstrate, Congress seems not to have intended EPA to use non-Agency personnel when making inspections.¹⁹ This supports an argument that Congress did not deem the term "authorized representative" to apply to private contractors. However, the Tenth Circuit overstated the case to say that it would be "anomalous" to construe § 308 to permit contractor entry while construing § 114 differently.²⁰ Such an interpretation might be "curious," but given the inconsistencies within the Air Act itself,²¹ an inconsistency between statutes is not surprising.

Where the term "authorized representative" has been used in other environmental statutes, it has applied to non-EPA employees. For example, the inspection provision of the Resource Conservation and Recovery Act (RCRA)²² referred only to "officers and employees" when it was initially passed. In 1980, however, Congress added the term "representatives" explicitly in order to sanction contractor entry.²³ Section 14 of the Toxic Substances Control Act,²⁴ which uses the term "duly designated representative," has been judicially construed to apply to private contractors.²⁵ The implications of the language used in these statutes, however, are far from clear. Whether they support a similar or a different construction of the Clean Air Act depends largely on the beholder's predisposition on the merits.

The Legislative History

The legislative history of § 114 also adds gloss to its facial meaning. Unfortunately, that history is ambiguous, contradictory, and created for the most part after the enactment of § 114. The House bill that preceded the enactment of the 1970 amendments to the Act gave the Secretary to Health, Education, andWelfare (HEW) (from which EPA was transferred authority to enforce the Act) a somewhat circumscribed power to conduct source inspections. Section 112(f) of H.R. 17255²⁶ provided that "officers or employees duly designated by the Secretary" could inspect sources after first providing written notice and complying with other requirements.²⁷ The Senate bill,²⁸ on the other hand, followed a more aggressive approach which eschewed the limitations of the House bill and permitted inspection by the "Secretary or his authorized representative."²⁹

The conference committee adopted the more limited inspection provisions of the House bill for the auto industry [12 ELR 10020] only. Thus, § 206(c) now provides a right of entry (for enforcing mobile source requirements) to "officers or employees duly designated by the Administrator."³⁰ For stationary sources the provisions of the Senate bill were selected, including the term "authorized representative." In this light it appears that Congress deliberately decided to sanction the use of non-government employees to inspect stationary sources.

That appears not to be the case, however. The conference report described the Senate provision which was ultimately incorporated into the Act as authorizing inspections by "DHEW personel."³¹ The Tenth Circuit viewed this statement as indicative of Congress' intent to limit entry powers to government employees.³² But the report itself does not speak in terms of limitations and in fact provides no evidence that the conference committee ever considered, much less resolved, the issue of contractor entry. Indeed, the Ninth Circuit and several district courts disagreed with the Tenth Circuit on the basis of the conferee's adoption of the Senate's generally stricter inspection provisions.³³

The first occasion on which Congress clearly confronted the issue of contractor entry under § 114 was two years later, in its deliberations over the 1972 amendments to the FWPCA. In its discussion of proposed § 308, which parallels § 114 of the Clean Air Act, the Senate Public Works Committee stated that.

[i]t should also be noted that the authority to enter, as under the Clean Air Act, is reserved to the Administrator and his authorized representatives which such representatives must be full time employees of the Environmental Protection Agency. The authority to enter is not extended to contractors with the EPA in pursuit of research and development.³⁴

Post-enactment expressions of legislative intent, of course, are only secondarily authoritative indicia of statutory meaning.³⁵ Nevertheless, one can readily understand the statement of one district court, which ultimately ruled in EPA's favor, that the sentences quoted above "give the Court pause."³⁶ That court was evidently not aware, however, of a similar segment of post-enactment congressional commentary that expressed a diametrically opposite opinion. The Senate report on S. 1480,³⁷ the precursor to the Comprehensive Emergency Response, Compensation, and Liability Act,³⁸ states quite directly that independent contractors may be used in making inspections under either the Clean Air Act or the FWPCA.³⁹

On a number of occasions Congress has appropriated monies for items in EPA's air enforcement budget covering contractor assistance.⁴⁰ Regrettably, however, when faced with a prime opportunity to make clarifying amendments to § 114(a) in the sweeping 1977 amendments, Congress chose not to do so. This failure to act adds equal weight to either side of the debate, since it can be construed as a reaffirmation of either of the conflicting interpretations of the provision. The lack of any reference to the issue in the legislative history of the 1977 amendments indicates that Congress simply avoided it. On the other hand, there is case support for the argument that congressional silence does have legal significance where, as here, an agency has previously considered and expressed an opinion on the meaning of an ambiguous provision.⁴¹

EPA's interpretation of the term "authorized representative" was spelled out, if somewhat indirectly, in connection with a rulemaking under § 114(c) governing the disclosure of trade secrets obtained during the investigative process. When proposing the rulemaking EPA interpreted the term "authorized representative," as it is used in § 114(c), to include non-government employees.⁴² Because the scope of the proposed rule was limited to disclosure safeguards, there was no occasion for a direct interpretation of § 114(a). But in responses to the views of commenters that the term "authorized representative" refers to EPA personnel only, the Agency has consistently asserted that under § 114 as a whole, as well as the analogous provision in the FWPCA, it construes the term more broadly.⁴³

The Need for Confidentiality

There can be no question as to the legitimacy of industry's concern over the disclosure of trade secrets as a result of EPA, investigations. The competitive viability of many industrial processes in due largely to engineering innovations which, if disclosed, could jeopardize the viability of entire product lines. To a trained eye, the essential nature of many commercial processes is apparent almost at a glance.Moreover, EPA investigations are often not confined to gathering data on emissions output, but require an understanding of the process itself. Investigators frequently diagram production equipment and processes, demand input and production information from the source owner, and take photographs.

Plant managers would have less concern if assured that such information was going to EPA personnel only. Government employees at least have no direct affiliation with industry competitors and, more importantly, can be held liable for criminal penalties for disclosing certain confidential information under the Trade Secrets Act.⁴⁴ EPA contractors, on the other hand, are not subject to penalties under the Trade Secrets Act, and might well be able to evade liability under any cause of action advanced by an aggrived stationary source owner.⁴⁵ Moreover, contractors are often in a position which lends itself to abuse. Since most depend on both the public and the private sector for business, they can easily be faced with conflicts of interest concerning the use of information they obtain as surrogate EPA inspectors.

This is not to suggest, however, that source owners stand naked against trade secret predations by EPA contractors. Any contractor caught or even suspected of using its EPA-funded inspection activities to trade in industrial data would quickly lose both its government and private sector clients. Moreover, the Agency's "disclosure" regulations apply fully to outside contractors; penalties for violations include suspension and termination of contracts. According to the standard form used for these contracts, "any affected business having an interest in information" improperly disclosed by the contractor may, as a third party beneficiary of the contract, bring an action against the contractor.⁴⁶ It has also been suggested that common law theories might support an action for damages against government contractors who improperly disclose information acquired during inspections.⁴⁷

The apparent absence of reported cases dealing with such conflicts probably indicates the lack of a serious problem rather than a lack of adequate legal remedies. In any event, industry concerns over disclosure, regardless of their merit, seem most appropriately raised in the context of proposed legislation dealing with safeguards. Such matters could hardly be viewed by a court as grounds for overriding what otherwise appears to be the proper interpretation of § 114(a).

Conclusion

Congress' use of the term "officers, employees, or authorized representatives' in § 114(c) suggests strongly that the term "authorized represetatives" refers to non-government employees. Accepting that to be the case, however, why did Congress, in § 114(a)(2), give a right of entry to "the Administrator or his authorized representative" without mentioning "officers or employees"? The best answer seems to be poor legislative drafting, which renders pointless any attempt to parse the words of the statute with precision.

The legislative history is no more illuminating. If anything, it seems to show that Congress did not anticipate the issue of contractor entry in 1970 and never considered it directly. Post-enactment committee reports expressing an opinion on the matter seem less a reliable indicator of congressional intent than a testament to the ability of EPA and industry to lobby committee staffs for the insertion of helpful phrases into committee reports.

The protection of trade secrets is of crucial concern to industry, whose efforts to keep foreign eyes (and cameras) out of its factories is understandable. Nevertheless, EPA has gone to great lengths to protect against abuses. Little more could be done short of abandoning the practice of using contractors to make inspections, an option which EPA obviously feels would put a crimp in its enforcement program.

1. Pub. L. No. 91-604, 84 Stat. 1676 (1970).

2. The Clean Air Act Amendments of 1977, Pub. L. No. 95-95, amended §§ 113 and 303 of the Act to increase the penalties leviable against source owners and to authorize EPA to issue administrative abatement orders.

3. See, e.g., In re Clean Air Act Administrative Inspection of the Bunker Hill Co. (Bunker Hill I), 11 ELR 20558 (D. Idaho 1980) (challenge to issuance of ex parte search warrant).

4. See Bunker Hill I, 11 ELR at 20559.

5. 42 U.S.C. § 7414(a)(2), ELR STAT. & REG. 42223.

6. See Bunker Hill I, 11 ELR 20558 (D. Idaho 1980); In re Aluminum Co. of America, 11 ELR 20554 (M.D.N.C. 1980); United States v. Stauffer Chemical Co., 11 ELR 20555 (M.D. Tenn. 1981).

7. In re Clean Air Act Administrative Inspection of the Bunker Hill Co. (Bunker Hill II), 11 ELR 21084 (9th Cir. 1981).

8. In re Stauffer Chemical Co., 11 ELR 20560 (D. Wyo. 1980).

9. Stauffer Chemical Co. v. Environmental Protection Agency, 11 ELR 20562 (10th Cir. 1981).

10. Aluminum Co. of America v. Environmental Protection Agency, No. 80-1599 (4th Cir. brief filed Nov. 1980); United States v. Stauffer Chemical Co., No. 81-5311 (6th Cir. brief filed Aug. 10, 1981).

11. 42 U.S.C. § 7414(a), ELR STAT. & REG. 42223 (emphasis added).

12. WEBSTER'S NEW WORLD DICTIONARY (2d coll. ed. 1974); see also OXFORD ENGLISH DICTIONARY (1970).

13. Bunker Hill II, 11 ELR at 21084.

14. Stauffer Chemical Co. v. EPA, 11 ELR 20562 (10th Cir. 1981).

15. 42 U.S.C. § 7414(c), ELR STAT. & REG. 42223.

16. 33 U.S.C. §§ 1251-1376, ELR STAT. & REG. 42101.

17. 33 U.S.C. § 1318(a), ELR STAT. & REG. 42130.

18. FWPCA § 308(c), 33 U.S.C. § 1318(c), ELR STAT. & REG. 42130.

19. See discussion at note 34, infra, and accompanying text.

20. Stauffer Chemical Co. v. EPA, 11 ELR 20562, 20564 (10th Cir. 1981).

21. Cf. Alabama Power Co. v. Costle, 626 F.2d 323, 10 ELR 20001 (D.C. Cir. 1979) (noting flat contradiction between §§ 165 and 168 of Clean Air Act).

22. RCRA § 3007, 42 U.S.C. § 6927, ELR STAT. & REG. 41910.

23. 94 Stat. 2339 (1981). See the discussion of this issue in the conference report to the amendments, H.R. REP. NO. 96-1444, 96th Cong., 2d Sess. 35, reprinted in [1980] U.S. CODE CONG. & AD NEWS 5034-35.

24. 15 U.S.C. § 2613, ELR STAT. & REG. 41346.

25. Aluminum Co. of America v. DuBois, No. C80-1178V (W.D. Wash. June 11, 1981).

26. 91st Cong., 2d Sess. (1970).

27. See SENATE COMM. ON PUBLIC WORKS, A LEGISLATIVE HISTORY OF THE CLEAN AIR ACT AMENDMENTS OF 1970 at 923 (Comm. Print 1974) (hereinafter cited as LEGISLATIVE HISTORY).

28. S. 4358, 91st Cong., 2d Sess. (1970).

29. See LEGISLATIVE HISTORY, supra note 27, at 570.

30. 42 U.S.C. § 7525(c), ELR STAT. & REG. 42246. See also § 208(a), 42 U.S.C. § 7542(a), ELR STAT. & REG. 42248.

31. See LEGISLATIVE HISTORY, supra note 27, at 197.

32. Stauffer Chemical Co. v. EPA, 11 ELR at 20564.

33. See Bunker Hill II, 11 ELR at 21085. See also, e.g., United States v. Stauffer Chemical Co., 11 ELR 20555, 20557 (M.D. Tenn. 1981).

34. S. REP. NO. 92-414, 92d Cong., 1st Sess., reprinted in SENATE COMM. ON PUBLIC WORKS, A LEGISLATIVE HISTORY OF THE WATER POLLUTION CONTROL ACT AMENDMENTS OF 1972 at 1481 (Comm. Print 1973) (emphasis added).

35. See, e.g., TVA v. Hill, 427 U.S. 153, 8 ELR 20513 (1978); Int'l Brotherhood of Teamsters v. United States, 431 U.S. 324 (1977); Regional Rail Reorganization Act Cases, 419 U.S. 102 (1974).

36. United States v. Stauffer Chemical Co., 11 ELR 20555, 20556 (M.D. Tenn. 1981).

37. 96th Cong., 1st Sess. (1979).

38. 42 U.S.C. §§ 9601-9657, ELR STAT. & REG. 41941.

39. To implement the site and facility investigation and response authorities contemplated by this bill, the Administrator will frequently utilize contractors as his authorized representatives. The access, entry, and other information-gathering powers granted to the Administrator and his authorized representatives under … section 114 of the Clean Air Act [and] section 308 of the Clean Water Act … authorized Federal contractors as the Administrator's representatives.

S. REP. No. 96-848, 96th Cong., 2d Sess. 62 (1980).

40. Since 1976 the Agency has requested and received congressional appropriations for "contractor assistance" and "contractual support" for "air enforcement" and "compliance monitoring and field surveillance." Budget requests for and reports of expenditures on these items are found in House Hearings on HUD-Independent Agencies Appropriations for 1981, 96th Cong., 2d Sess. 469-73 (1980); House Hearings on HUD-Independent Agencies Appropriations for 1980, 96th Cong., 1st Sess. 958-61 (1979); House Hearings on HUD-Independent Agencies Appropriations for 1978, 95th Cong., 1st Sess. 340, 392-96 (1977).

41. Saxbe v. Bustos, 419 U.S. 65 (1974); Zuber v. Allen, 396 U.S. 168 (1969).

42. 40 Fed. Reg. 21987-22002 (May 20, 1975).

43. 41 Fed. Reg. 36902-24 (Sept. 1, 1976) (denying relevance of legislative history of § 308 of FWPCA). Accord, 43 Fed. Reg. 40000 (Sept. 8, 1978). The relevant portion of EPA's confidentiality regulations is codified at 40 C.F.R. § 2.301(h)(2)(i) (1981). It also appears that there are three internal, unpublished memoranda addressing the issue, one of which construes the term "authorized representative" not to apply to independent contractors. See Appendix to Brief for Appellant, United States v. Stauffer Chemical Co., No. 81-5311 (6th Cir. Brief filed Aug. 10, 1980) at pp. 128-64.

44. 18 U.S.C. § 1905.

45. See generally the Tenth Circuit's discussion of this issue in Stauffer Chemical Co. v. United States, 11 ELR 20562, 20564 (10th Cir. 1981).

46. See 40 C.F.R. § 2.301(h)(2)(ii)(C) (1981).

47. See In re Aluminum Co. of America, 11 ELR 20554, 20555 (M.D.N.C. 1980) (expressing conclusion that source owner would have a "private right of action" against a private inspector for improper disclosures).