Reasoned Decisionmaking in Regulatory Reform: The Third Circuit Reinstates EPA's Pretreatment Rules

Edward L. Strohbehn, Jr.

Editors' Summary: Regulatory reform must be carried out through the same reasoned decisionmaking processes which the Administrative Procedure Act (APA) requires for the promulgation of new rules. This, Mr. Stohbehn argues, is the Third Circuit's message to the Environmental Protection Agency (EPA) in Natural Resources Defense Council, Inc. v. Environmental Protection Agency, 12 ELR 20833. The Reagan EPA had indefinitely deferred the effective date of pretreatment regulations promulgated on January 29, 1981 (in a midnight action of the Carter Administration) in order to subject them to the regulatory impact analysis mandated by President Reagan's regulatory reform Executive Order 12291. The court found the deferral to be tantamount to repeal of the rule, an action which requires compliance with the APA's notice and comment procedures.

Mr. Strohbehn analyzes the regulatory history of the pretreatment regulation and court's decision. Noting that the court carefully avoided the substantive implications of the Reagan regulatory reform actions, and even sidestepped the question of whether a deferral of fixed duration would have required notice and comment, he concludes that the Third Circuit's primary concern was to ensure that the principles of good government decision-making embodied in the APA not be circumvented in the regulatory reform process.

Mr. Strohbehn is a member of Orrick, Harrington & Sutcliffe, P.C., San Francisco; and formerly was Executive Director, Council on Environmental Quality, Executive Office of the President.

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Regulatory reform was a major element of President Reagan's campaign and a priority concern of his new administration. The President wanted to reduce unnecessary regulatory burdens on industry. Quick to receive attention were regulations which had been promulgated at the close of the Carter Administration and which were not yet effective when the Reagan Administration took office.

Thus, acting in response to an executive order (E.O.)¹ issued by the President in February 1981, in March the Environmental Protection Agency (EPA) indefinitely deferred the effective date of Clean Water Act pretreatment program regulations,² which it had promulgated in January 1981.³

On July 8, 1982, in Natural Resources Defense Council, Inc. v. Environmental Protection Agency, the U.S. Court of Appeals for the Third Circuit overturned the EPA decision and made the regulations effective retroactively as of March 30, 1981.⁴ The court's decision was a setback for one element of the President's regulatory relief program and underscored that the Administrative Procedure Act governs the process of reforming existing regulations every bit as much as it controls their initial promulgation.

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The Pretreatment Program

The pretreatment program plays a critical role in the Clean Water Act's scheme for water pollution control.⁵ In contrast with the Act's other major components, however, its statutory framework is beguilingly simple:

The Administrator shall, within one hundred and eighty days after the date of enactment of this title and from time to time thereafter, publish proposed regulations establishing pretreatment standards for introduction of pollutants into treatment works (as defined in section 212 of this Act) which are publicly owned for those pollutants which are determined not to be susceptible to treatment by such treatment works or which would interfere with the operation of such treatment works.⁶

While the statutory directive seems straightforward, Congress' intent was not so simple. The legislative history revealed a concern that EPA avoid requiring indirect discharges to provide treatment where treatment was already being adequately provided by a publicly owned treatment work (POTW):

In no event is it intended that pretreatment facilities be required for compatible wastes as a substitute for adequate municipal waste treatment works.⁷

This policy, which was reinforced by the 1977 Clean Water Act Amendments, created the need for relatively complex regulatory requirements which became the principal source of serious delays in establishing the pretreatment program.

EPA decided to implement the pretreatment program by developing general requirements which apply to all indirect discharges and specific categorical pretreatment effluent limitation standards which apply to indirect dischargers in each major industrial point source category. The general pretreatment requirements establish: (1) administrative processes by which the pretreatment programs will be developed and adopted by local authorities; (2) general prohibitions against the discharge of pollutants which could interfere with a POTW by, for example, causing fire, explosion, or corrosion; and (3) methods by which the categorical pretreatment standards will be applied to specific industrial point sources, such as removal credits, the combined waste stream formula, and definitions of "interference" and "pass through."⁸

Legal Challenges to the Pretreatment Program

Congress intended that EPA implement the federal pretreatment program by August 1973, nine months after enactment of the 1972 Federal Water Pollution Control Act (FWPCA). EPA failed to meet the deadline. The Natural Resources Defense Council (NRDC) filed suit to compel performance and, in June 1976, the suit was settled, along with several others, producing the NRDC Consent Decree.⁹ Under the Decree, EPA agreed to implement the pretreatment program "as expeditiously as possible."¹⁰

The current litigation involves EPA's most recent attempt to meet its obligations under the Consent Decree and the Clean Water Act.¹¹ On January 15, 1981, the [13 ELR 10013] EPA Administrator signed final pretreatment regulations; these regulations, promulgated on January 28, 1981, after President Reagan's inauguration, were to become effective on March 13, 1981.¹² Suits challenging the 1981 regulations on the merits were filed in the Third, Seventh, and District of Columbia Circuits. All of these suits were consolidated in the Third Circuit and are now pending.

On January 29, 1981, President Reagan issued a memorandum directing agencies to postpone for 60 days all regulations which were scheduled to become effective during the 60-day period.¹³ On February 17, 1981, the President issued E.O. 12291 which directed agencies to defer the effective date of pending major regulations to the extent possible within existing laws to permit review and reconsideration pursuant to the regulatory reform provisions of the Executive Order.¹⁴ E.O. 12291 required agencies to prepare a Regulatory Impact Analysis, which was designed to examine the costs and benefits of the deferred regulations and alternatives to them.¹⁵ In response to the Executive Order, in March 1981 EPA deferred "until further notice" the 1981 pretreatment regulations, leaving in place the 1978 pretreatment rules.¹⁶

In June 1981 NRDC filed its petition for review in the Third Circuit, contending that the indefinite deferral was illegal under the Administrative Procedure Act. due to EPA's failure to comply with the APA notice-and-comment requirements. In brief, NRDC contended that the effective date of a rule is an integral, substantive element of the rule itself. Accordingly, any change in the effective date of a final rule is a substantive rulemaking action which can be accomplished only by following the strict notice-and-comment rulemaking procedures of § 553 of the APA.¹⁷ EPA and industry both took the position that, because of EPA rulemaking actions in October 1981 which, inter alia, made the 1981 pretreatment regulations effective in January, 1982, the case was moot or, if not moot, that NRDC had received all the relief to which it was entitled. In addition, industry contended that deferral of the future effective date of a rule is not a rule within the meaning of the APA and, even if it were, good cause existed for EPA's decision not to follow APA notice-and-comment rulemaking requirements in this case.

The Third Circuit's Decision

The case posed the issue whether an agency, without following APA notice-and-comment rulemaking requirements, could indefinitely defer the effective date of a regulation which had been issued in final form but had not become effective. The basic question was whether, as NRDC contended, the effective date element of a promulgated regulation is itself a "rule" within the meaning of the APA. The intervenors claimed that adopting NRDC's position "would be making a fundamental change in existing laws …."¹⁸ The gist of industry's contention was that EPA in deferring the effective date did not prescribe a course of conduct or substantially affect any interests but, instead, simply maintained the status quo based on strong public interest considerations.

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The intervenors' position was significantly undercut by two facts. First, EPA did not contend that deferral of the effective date was not rulemaking within the meaning of the APA; EPA's basic strategy was to seek to avoid judicial review.¹⁹ Thus, in October 1981, in an effort to moot the case, EPA issued an order making the challenged rules effective in January 1982; at the same time, and following APA notice-and-comment requirements, EPA proposed indefinitely deferring the effective date of the rules beyond January 1982.²⁰ Thus, only the industry intervenors took the position that EPA's March 1981 indefinite deferral action was not a rule.

Second, the Court of Appeals for the District of Columbia Circuit had held on April 16, 1981, in Council of Southern Mountains Inc. v. Donovan, that a temporary deferral of a rule was rulemaking with the meaning of the APA.²¹ In Council of Southern Mountains, as in NRDC v. EPA, the government did not dispute that the deferral order was a rule within the meaning of the APA.

It was in this context that the Third Circuit analyzed the issues in NRDC v. EPA. It considered indefinite deferral of a rule as tantamount to a repeal and pointed out that the APA defines rulemaking to include "agency process for … repealing a rule."²² Having reached this conclusion, the Third Circuit had to decide whether the rulemaking action fit either of the two exceptions to the notice-and-comment requirements: whether it was an "interpretive rule" or whether "good cause" existed to avoid the notice-and-comment requirement.²³

Courts rely on the substantial impact test to distinguish interpretive rules, which do not require compliance with notice-and-comment procedures, from substantive rules, which must comply. The Third Circuit found that the deferral would have a "substantial impact" on the regulated industry because EPA had earlier prescribed that the categorical pretreatment standard for the electroplating industry would take effect three years after promulgation of the combined waste stream formula, which was part of the deferred regulations.²⁴ Thus, as a consequence of the deferral, the regulated industry could indefinitely postpone installation and operation of the pollution control equipment necessary to meet the categorical pretreatment effluent limitations. That postponement, in turn, meant that discharges of pollutants would continue for a longer period than if EPA had not deferred the effective date. Accordingly, the court held that "the indefinite postponement of the effective date of a final rule fits the APA definition of 'rule' where, as here, the postponement has a substantial impact upon the public and upon the regulated industry …."²⁵

As noted above, the APA permits an agency to avoid compliance with the notice-and-comment procedures where "good cause" exists.²⁶ In analyzing the good cause issue, the Third Circuit held that the exception "'should be limited to emergency situations'"²⁷ and that there is a "need for exceptional circumstances before the imminence of a deadline will constitute good causes."²⁸ It found that the E.O. 12291 directive that promulgated-but-not-yet-effective major rules be deferred for further review and consideration and preparation of a Regulatory Impact Analysis did not constitute good cause for avoiding APA requirements, because: (1) E.O. 12291 required agencies to act consistent with applicable law, which, the Third Circuit found, included the APA, and (2) as to the 1981 pretreatment regulations, EPA could have satisfied the requirements of both the APA and E.O. 12291.²⁹ The court noted that EPA's October 1981 rulemaking, which prescribed a January 1982 effective date and which also proposed deferring the regulations indefinitely, supported the court's conclusion that rulemaking complied with E.O. 12291, according to EPA, and with the APA.³⁰ Thus, the court held that "good cause" did not exist for EPA's failure to comply with the APA.

Legal and Policy Implications of NRDC v. EPA

Benefits of APA Compliance: Better Decisionmaking

The Third Circuit's decision is part of a long line of cases which hold that courts will strictly enforce the procedural requirements of the APA.³¹ The Third Circuit briefly noted only two of the various policy considerations that underlie those cases. In determining that the deferral action was a rulemaking subject to the APA, it quoted the recent observation by U.S. Court of Appeals for the District of Columbia Circuit in Consumer Energy Council of America v. FERC³² that:

The value of notice and comment prior to repeal of a final rule is that it ensures that an agency will not undo all that it accomplished through its rulemaking without giving all parties an opportunity to comment on the wisdom of repeal.³³

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The Third Circuit then emphasized the educational and informational value of following the notice-and-comment procedures, noting that had EPA complied with the APA in March 1981, it might have discovered sooner the useful information which it obtained as a result of its October 1981 rulemaking.³⁴

The basic policies which the Third Circuit's decision advances are outlined in the cases relied on by the court. First, requiring strict compliance with the APA's rulemaking requirements provides the courts with a clear cut role in the judicial review process while ostensibly enabling them to avoid making judgments on the merits of the agency action in issue. Second, strict observance of the APA's requirements theoretically ensures public involvement in the rulemaking process, avoids domination of decisions by narrow or special interests, and educates the agency, the public, and the regulated community about the implications of the proposed rule and its alternatives. In sum, courts consider compliance with the APA's procedural requirements as a means for promoting better decisionmaking and good government.

Under the Third Circuit's decision, agencies have an incentive to consult fully and thoroughly with all potentially affected interests prior to promulgating a rule. Similarly, interested parties have an incentive for participating in the rulemaking process rather than waiting to see if the agency is serious and assessing the impact of the proposed rule after its promulgation in final form. Otherwise, the agency's action can be modified only by undertaking a full scale rulemaking process.

The Third Circuit may also have viewed its decision as making judicial challenge of agency rules less likely to occur and easier to resolve when brought. The decision makes it more likely that all contested issues will be before the agency when it makes its decision. As a result, it is more likely that the agency will act reasonably, relying on the best evidence and balancing competing interests, than that the agency will act "arbitrarily and capriciously." Moreover, judicial review of such a decision would be on the merits and, for such cases, as the Third Circuit emphasized, courts apply a "deferential standard of review for [the] substance of agency action."³⁵

APA Compliance And Regulatory Change

To the extent that the Third Circuit's decision represents sound precedent, it foreshadows certain significant policy implications. The first is that if outgoing administrations can adequately complete rulemaking proceedings prior to the inauguration, new administrations can reverse those decisions only by instituting new rulemaking proceedings. Two aspects of the Third Circuit's decision reinforce this conclusion. The Third Circuit emphasized that efforts to overturn prior administration last minute actions are those "'sharp changes of agency course [which] constitute "danger signals" to which a reviewing court must be alert.'"³⁶

[I]t makes sense to scrutinize the procedures employed by the agency all the more closely where the agency has acted, within a compressed time frame, to reverse itself by the procedure under challenge.³⁷

In subjecting the agency action in issue to close scrutiny, the Third Circuit held that efforts to defer the effective date of a rule are rulemaking actions subject to the APA procedural requirements. Thus, a new administration will have to weigh proposals to reverse the last-minute rules of the previous administration as carefully as it does other rulemaking proposals in ranking its priorities.

The second implication is that the role of career civil servants is probably enhanced by the decision.Sudden rulemaking changes are more likely to result from the appointment of new policy making officials, usually political appointees, than from discoveries of new information. By requiring substantive rulemaking changes to comply with APA notice-and-comment requirements and, accordingly, to be based on a record, the court's opinion means that new officials will have a great need to rely on experienced career officials. These are the people who can ensure that the rulemaking proceeds in a legitimate fashion; i.e., that proposal alternatives to existing rules are clearly supported by the agency's record.

The Unanswered Questions

* Did the Decision Fundamentally Change the Law? The Third Circuit decision leaves several important questions unanswered. The court chose not to address explicitly intervenors' contention that a fundamental change in the law would be effected if the court required application of APA notice-and-comment requirements to agency action deferring the effective date of a rule. The court justified its application of those procedural requirements by construing EPA's indefinite deferral of the rule as a "repeal," which is explicitly subject to APA requirements. Thus, under the court's analysis its decision does not change the law.

* Must All Deferrals Comply With Notice-and-Comment Requirements? It is clear that the court found its decision easy because EPA had indefinitely postponed the rule, an action which the court could analogize to a repeal, which is expressly identified in the APA as subject to notice-and-comment. Council of Southern Mountains, by contrast, involved a six-month rather than indefinite deferral.³⁸ The D.C. Circuit held that while this deferral was subject to APA notice-and-comment requirements, it met the good cause exception. Although the Third Circuit stated that it agreed with the D.C. Circuit's holding in Council of Southern Mountains, it chose to rest NRDC v. EPA on the narrower ground that an indefinite deferral is effectively a repeal and therefore explicitly subject to APA notice-and-comment requirements.³⁹

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Thus, NRDC v. EPA leaves open the question whether a 60-day, 90-day, six-month, or one-year deferral must necessarily comply with APA notice-and-comment requirements. For example, if a 60-day deferral was subject to APA notice-and-comment requirements and only "emergency situations" would constitute "good cause" for not complying with these requirements, agencies might be prevented from undertaking reasonable fine tuning of regulations which had not yet taken effect. This factual setting and concern were at the core of the contention by NRDC industry intervenors that the Third Circuit would be making a fundamental change in the law if it held that deferrals of a future effective date are subject to APA notice-and-comment requirements.

The Third Circuit's decision suggests that it may have been at least partly persuaded by industry's contention and wanted to leave open the possibility that some deferrals are not subject to notice-and-comment requirements. Two possibilities exist.

First, the Third Circuit may be willing to recognize "good cause" exceptions for deferrals that are broader than the District of Columbia Circuit's "emergency situations" or "exceptional circumstances" standards, which the Third Circuit cited with approval in NRDC v. EPA.⁴⁰ In fact, this is what the Third Circuit has recently done. In Philadelphia Citizens in Action v. Schweiker,⁴¹ the court distinguished two of its earlier "good cause" decisions, which had led the Philadelphia trial court to overturn an agency rulemaking action for failure to follow APA notice-and-comment requirements, and noted that it interpreted these cases "more cautiously.⁴² Thus, Philadelphia indicates that the court will provide more latitude for agency action to qualify for the "good cause" exception.

Second, the Third Circuit may be willing to construe the "substantive impacts" test narrowly, so that short-term deferrals could be considered "interpretative rules … or rules of agency organization, procedure, or practice"⁴³ rather than substantive rules. As a result, the rulemaking action would not have to comply with APA notice-and-comment requirements. Whether this was the court's intent cannot be divined from its decision in NRDC v. EPA, but the option was not foreclosed by the court.

* Does E.O. 12291 Have Any Legal Significance? In NRDC v. EPA, the Third Circuit carefully avoided any implication that it was construing the applicability or meaning of E.O. 12291. The court asserted that EPA "could have complied with both the APA and E.O. 12291."⁴⁴ It found support for its conclusion by pointing to EPA's rulemaking actions in October 1981 when EPA purported to comply with both the APA and E.O. 12291. But the court did not independently analyze the applicable law to reach its conclusion. As a result, it avoided two issues.

First, the Third Circuit explicitly avoided the issue "of whether a deadline imposed by an Executive Order is entitled to the same deference as a deadline created by statute."⁴⁵ Second, and more interesting, the court did not rule on whether E.O. 12291 provides agencies with a legal basis for avoiding other requirements. Under the Third Circuit's NRDC v. EPA discussion, this would appear not to be the case, at least with respect to the APA. In addition, E.O. 12291 states that it "is not intended to create any right or benefit, substantive or procedural, enforceable at law by a party against the United States, its agencies, its officers or any person."⁴⁶ But, both E.O. 12291 and the Third Circuit decision leave open the question whether in fact a situation could arise in which the Executive Order could affect the rights of a party. The most obvious example would be one in which compliance with the Executive Order entailed noncompliance with other prescribed procedures. In Public Citizen v. DHHS, the District of Columbia Circuit recently refused to reverse a district court decision which found that an indefinite deferral of an agency rule undertaken in compliance with "the spirit" of E.O. 12291 and without notice-and-comment did not violate APA requirements.⁴⁷ The District of Columbia Circuit gave the agency one month to decide whether it would modify its rulemaking action. Thus, the circuit court backed away fromthe holding one might believe was mandated by its earlier decision in Council of Southern Mountains.⁴⁸ As a result, legal effect of E.O. 12291 on agency decisionmaking and procedures remains unclear.

Conclusion

By its own reasoning NRDC v. EPA does not substantially change the law that governs agency rulemaking practices. The principal practical effect of the decision is to goad the Third Circuit and the parties before it to resolve more quickly the merits of the pending cases on the pretreatment regulations and to start tolling the three-year period by which those subject to these pretreatment regulations — the integrated electroplate industry — must comply with their requirements. The principal legal effect is to reinforce the statutory requirement that agencies must strictly observe prescribed APA procedures when modifying or substantially delaying regulations. Furthermore, the decision underscores that courts are likely to require strict APA compliance when the issue is doubtful.

1. Exec. Order No. 12291, 46 Fed. Reg. 13193 (Feb. 19, 1981), ELR REG. 45035.

2. 46 Fed. Reg. 19936 (Apr. 2, 1981).

3. 46 Fed. Reg. 9404 (Jan. 28, 1981), issued pursuant to Clean Water Act § 307(b)(1), 33 U.S.C. § 1317(b)(1), ELR STAT. 42130. See detailed discussion of the basic elements of the pretreatment program infra.

4. 683 F.2d 752, 12 ELR 20833 (3d Cir. July 8, 1982) (hereinafter referred to as NRDC v. EPA).

5. To understand the substantive importance of the federal pretreatment program, a brief discussion of the facts on which it is based follows. This discussion is based on information contained in briefs filed in NRDC v. EPA, note 4 supra, and in National Association of Metal Finishers v. EPA, Nos. 79-2256 et al. (3d Cir.) (These cases involve all the challenges on the merits of EPA's 1981 pretreatment program regulations).

About 87,000 industrial facilities discharge their wastewaters into publicly owned treatment works (POTWs). In contrast, about 60,000 industrial facilities discharge directly into the nation's rivers, lakes, streams, estuaries, and oceans. POTWs also receive waste streams from residences, city streets, and other nonindustrial sources. Although industrial facilities contribute only a modest amount of the total flow of wastewater to POTWs, they contribute about 65 percent of the total toxic metals which enter POTWs and an even greater share of other toxic pollutants such as ethyl benzene, cyanide, and phenol. Some of the toxic pollutants found in the effluent from industrial facilities are carcinogenic, mutagenic, teratogenic, or acutely toxic to humans and aquatic organisms. Many of these toxic pollutants pass through the POTW and are discharged into the nation's waters. Other pollutants in the industrial facilities' effluent may interfere with the operation of POTWs. Finally, some of the pollutants discharged by industrial facilities could corrode the POTW's pipes, ignite and explode within the POTW, or otherwise be incompatible with the POTW.

Prior to enactment of the Federal Water Pollution Control Act Amendments of 1972 (FWPCA) (Pub. L. No. 92-500, 86 Stat. 816), no federal requirements applied to discharges to POTWs. However, in many situations the industrial user of a POTW was subject to pretreatment requirements which were imposed by local ordinances or by POTW user contracts. However, these requirements were often concerned only with protecting the POTW itself and not water quality. POTW's would prohibit the discharge of substances which would destroy the biological treatment system or physically damage the facility. These requirements were not uniform and rarely dealt with pollutants which simply pass through the POTW into the nation's waters.

Two factors related to the 1972 FWPCA heightened federal interest in pretreatment issues. First, the principal purpose of the Act is to reduce the discharge of pollutants into the nation's waters. Congress made direct discharges of pollutants subject to technology-based effluent limitations established by EPA. See §§ 301, 304, 402, 33 U.S.C. §§ 1311, 1314, 1342, ELR STAT. 42123, 42126, 42141. However, Congress recognized that many of these regulated pollutants passed through POTWs; if it did not regulate indirect discharges, its efforts to clean up the nation's waters would be unsuccessful.

Second, Congress imposed effluent limitations on POTWs and, to help POTWs meet these requirements, established a construction grant program which would provide up to 70 percent of the funds necessary to meet the Act's effluent limitation requirements. This was the largest public works program in the nation's history. Thus, Congress had a strong interest in establishing a pretreatment program which would protect the federal investment in POTW construction. Accordingly, the FWPCA established a pretreatment program which applied to indirect discharges into POTWs.

6. Section 307(b)(1), 33 U.S.C. § 1317(b)(1), ELR STAT. 42130 (emphasis added).

7. S. CONF. REP. No. 92-1236, 92d Cong., 2d Sess., as reported in 1972 U.S. CODE CONG. & AD. NEWS 3807.

8. 40 C.F.R. pt. 403 and 46 Fed. Reg. 9404 (Jan. 28, 1981). The industry petitions for review on the merits of the pretreatment regulations promulgated by EPA in January 1981 involve challenges to those parts of the regulations which address the four issues noted in the text. In addition, environmental organizations raised other merits issues concerning the 1981 pretreatment regulations.

9. NRDC v. Train, 6 ELR 20588 (D.D.C. 1976), as modified, NRDC v. Costle, 9 ELR 20176 (D.D.C. 1979).

10. NRDC v. Train, 6 ELR 20588, 20592 (D.D.C. 1976) ("The regulations developed pursuant to this Agreement shall be applied and shall be required to be applied by the Administrator to the full extent of his authority as expeditiously as possible to all point sources covered by such regulations.").

11. A brief history of the 1979-1981 period follows.

In 1977, Congress generally endorsed the Decree, enacting many of its requirements into law. Clean Water Act of 1977, Pub. L. No. 95-217, 91 Stat. 1566; see NRDC v. Costle, 9 ELR 20176, 20178 (D.D.C. 1979) ("In view of Congress' general endorsement of the approach of the Agreement [Consent Decree] …."). Also in 1977, EPA proposed regulations which it promulgated in final form in June 1978. 43 Fed. Reg. 27736 (June 26, 1978). These regulations were challenged by industry and environmental groups. In May 1979, industry reached a settlement agreement with EPA which provided in part that the 1978 regulations would remain effective and that EPA would propose certain amendments to the pretreatment regulations consistent with the settlement agreement. The settlement did not affect the environmental organizations' challenges to the 1978 pretreatment regulation. The elements of the pretreatment program which were most controversial were those which translated the EPA technology-based categorical pretreatment effluent limitations into the actual limits which point sources would have to meet. Among the controversial elements were: the combined waste stream formula and removal credit system and the definitions of "interference" and "pass through."

In October 1979, EPA proposed regulations which were designed to comply with the settlement agreement. 44 Fed. Reg. 62260 (Oct. 29, 1979). Detailed comments submitted by parties to the settlement indicate that they considered the proposed regulations to be inconsistent with the settlement agreement in several key areas. Many other detailed comments were submitted to EPA, underscoring the House Public Works and Transportation Committee held oversight hearings on the Clean Water Act, including the pretreatment program. The Committee issued a report in which it indicated its concern with aspects of the pretreatment program, including the removal credit system which it recommended be abolished. HOUSE SUBCOMMITTEE ON REVIEW AND OVERSIGHT OF THE HOUSE COMMITTEE ON PUBLIC WORKS AND TRANSPORTATION, IMPLEMENTATION OF THE FEDERAL WATER POLLUTION CONTROL ACT, 96TH CONG., 2D SESS. 59-60 (1980).

12. 46 Fed. Reg. 9404 (Jan. 28, 1981).

13. 46 Fed. Reg. 11227 (Feb. 6, 1981).

14. 46 Fed. Reg. 13193 (Feb. 19, 1981), ELR REG. 45035.

15. This executive order was the keystone of the Reagan Administration's new regulatory reform program. Two major institutional changes were mandated by the program: (i) as noted above, agencies were required to prepare more detailed Regulatory Impact Analyses (RIAs) than was true under the Carter Administration on all major rules and (ii) major rules, together with their RIAs, were to be submitted to the Director of the Office of Management and Budget (OMB) for review before the rules were issed in proposed final form. Subject to certain narrow exceptions, the Executive Order gave the OMB Director authority to require agencies to defer promulgation pending resolution of concerns raised by OMB. It also imposed a number of other procedural and substantive analytical requirements, all of which were supposed to result in a more careful review of the costs and legal implications of agency regulations. It is fair to conclude that the underlying purpose of the regulatory reform program was "regulatory relief": i.e., to reduce the number, length, and detail of regulations and to reduce their direct costs on the regulated entities.

16. 46 Fed. Reg. 19936 (Apr. 2, 1981). Pursuant to the Presidential Memorandum of January 29, 1981 directing that the effective date of certain regulations be postponed for 60 days, on February 6, 1982 EPA deferred the effective date of the 1981 pretreatment regulations until March 30, 1981. 46 Fed. Reg. 11972 (Feb. 12, 1981). This EPA action was not challenged by NRDC, and the Third Circuit implicitly considers it valid because its decision makes the 1981 pretreatment regulations effective as of March 30, 1981.

17. 5 U.S.C. § 553, ELR STAT. 41002.

18. Brief for Intervenors Chemical Manufacturers Association, Nov. 23, 1981, at 22. Intervenor Ford Motor Company also contended that because EPA indefinitely deferred the 1981 pretreatment regulations before they had become effective, "the temporary deferral action was simply one step in an unfinished rulemaking" and no APA notice-and-comment violation occurred; there was "no rule" to which the APA could have applied. Brief for Intervenor Ford Motor Company, November 23, 1981, at 22, 27-37. The court's principal reason for rejecting intervenor's finality contention was that the 1981 final pretreatment regulations were effective for purposes of judicial review on February 10, 1981. The court concluded that "[t]o argue that they were not final for purposes of being altered by EPA renders illusory their finality for purposes for judicial review." NRDC v. EPA, note 4 supra, at 20837. The court also noted that the D.C. Circuit on January 29, 1982, held in Consumer Energy Council of America v. FERC, 673 F.2d 425 (D.C. Cir. 1982), that a final agency rule which was not yet effective was a final rule rule for which APA notice-and-comment requirements had to be met before the agency could repeal the rule. Id. at 446, discussed in NRDC v. EPA note 4 supra, at 20837-38.

19. See Brief for Respondent [EPA], Nov. 23, 1981.

20. 46 Fed. Reg. 50502, 50503 (Oct. 13, 1981).

21. 653 F.2d 573 (D.C. Cir. 1981).

22. 5 U.S.C. § 551(5), ELR STAT. 41002. The court reasoned that an "agency could (albeit indirectly) repeal a rule simply by eliminating (or indefinitely postponing) its effective date, thereby accomplishing without rulemaking something for which the statute requires a rulemaking proceeding." NRDC v. EPA, note 4 supra, 12 ELR at 20839; see also id., at 20840 n.23.

23. 5 U.S.C. § 553(b), ELR STAT. 41002.

24. 40 C.F.R. § 413.01.

25. NRDC v. EPA, note 4 supra, 12 ELR at 20840.

26. Section 553(b)(3) provides:

Except when notice or hearing is required by statute, this subsection does not apply —

(A) to interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice; or

(B) when the agency for good cause finds (and incorporates the finding and a brief statement of reasons therefor in the rules issued) that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest.

27. NRDC v. EPA, note 4 supra, 12 ELR at 20840, quoting Consumer Energy Council of America v. FERC, 673 F.2d 425 (D.C. Cir. 1982).

28. NRDC v. EPA, note 4 supra, 12 ELR at 20841 n.25.

29. Id. at 20840-42.

30. Id. at 20841-42.

31. E.g., NLRB v. Wyman-Gordan Co., 394 U.S. 759 (1969); State Farm Mutual Auto Ins. Ass'n v. Dep't of Transportation, 680 F.2d 206 (D.C. Cir. 1982); American Fed'n of Gov't Employees v. Block, 655 F.2d 1153 (D.C. Cir. 1981); American Bus. Ass'n v. U.S., 627 F.2d 525 (D.C. Cir. 1980); New Jersey Dep't of Envtl. Protection v. EPA, 626 F.2d 1038, 10 ELR 20963 (D.C. Cir. 1980); Weyerhauser Co. v. Costle, 590 F.2d 1011, 9 ELR 20284 (D.C. Cir. 1978); Texaco, Inc. v. Fed. Power Comm'n, 412 F.2d 740 (3d Cir. 1969).

32. 673 F.2d 425, 445-46 (D.C. Cir. 1982).

33. NRDC v. EPA, note 4 supra, 12 ELR at 20840.

34. Id. at 20842.

35. Id. at 20838.

36. Id. quoting State Farm Mutual Auto. Ins. Co. v. DOT, 680 F.2d 206, 220 (D.C. Cir. 1982), itself quoting Judge Leventhal in Joseph v. FCC, 404 F.2d 207, 212 (D.C. Cir. 1968). Compare Andrus v. Sierra Club, 442 U.S. 347, 358, 9 ELR 20390, 20393 (1979).

37. Id.

38. 653 F.2d 573 (D.C. Cir. 1981).

39. NRDC v. EPA, note 4 supra, 12 ELR at 20839. The Third Circuit's decision is narrow in another respect. By holding that the APA notice-and-comment requirement applies because there was substantial impact "upon the public and upon the regulated industry," the court leaves open the possibility that both sectors must be affected before a rule could be considered substantive rather than interpretative. (emphasis added.)

40. Id. at 20841 n.25. In addition, these very narrow "good cause" exceptions are similar to the Third Circuit's decisions in Sharon Steel Corp. v. EPA, 597 F.2d 377, 9 ELR 20316 (3d Cir. 1979), and American Iron & Steel Inst. v. EPA, 568 F.2d 284, 7 ELR 20738 (3d Cir. 1977).

41. 669 F.2d 877 (3d Cir. 1982).

42. Id. at 883.

43. 5 U.S.C. § 553(b)(3), ELR STAT. 41002.

44. NRDC v. EPA, note 4 supra, 12 ELR at 20841.

45. Id. at 20841 n.26.

46. Exec. Order No. 12291, § 9, ELR REG. 45037 (emphasis added).

47. Public Citizen v. DHHS, 671 F.2d 518 (D.C. Cir. 1981).

48. 653 F.2d 573 (D.C. Cir. 1981). Judge Edwards makes this point in his dissent in Public Citizen v. DHHS, 671 F.2d 518 (D.C. Cir. 1981).