EPA Noncompliance Penalty Regulations Upheld, But Will They Be Applied?

Phillips D. Reed

Editors' Summary: On January 7, 1983 the D.C. Circuit decided Duquesne Light Co. v. Environmental Protection Agency, turning back sweeping industry challenges to EPA's Clean Air Act § 120 noncompliance penalty regulations. The Comment reports that the rules' broad coverage and narrow exemptions, streamlined administrative procedures, and methodology for calculating penalties equal to the economic benefits of delayed compliance all survived the court's scrutiny. The court remanded the rules on only three relatively minor, though not insignificant, points. However, the court victory must be viewed in the context of the Agency's unchallenged assertion of discretion to impose § 120 penalties on only a fraction of those facilities that are liable. The Comment concludes that § 120 will see expanded use in the aftermath of Duquesne Light, but that it is too early to tell how far the expansion will carry.

[13 ELR 10104]

January 7, 1983 may be remembered as the dawning of a new era in environmental enforcement. Or it may prove to be nothing more than a footnote in an interesting, but minor story of an experiment in the use of economics in enforcement under § 120 of the Clean Air Act.¹ On that date, in Duquesne Light Co. v. Environmental Protection Agency,² the D.C. Circuit upheld Environmental Protection Agency (EPA) regulations implementing § 120. The regulations could support a system under which as many as 2,000 facilities found in significant violation of the Act would automatically pay quarterly penalties equal to the economic benefits reaped by putting off expensive compliance measures.³ On the other hand, EPA has maintained discretion to limit imposition of § 120 penalties. To date it has used that discretion to implement the regulations in a very modest fashion. The D.C. Circuit did not address this aspect of EPA's § 120 pogram, and it is quite possible that noncompliance penalties will continue to be the exception rather than the rule for violators of Clean Air Act rules. Nevertheless, the Duquesne Light decision, coupled with the pending change in EPA leadership, seem certain to give new momentum to § 120 implementation and will trigger a reappraisal of the proper role of noncompliance penalties in Clean Air Act enforcement.

Background

Section 120 was an innovative enforcement tool added to the Clean Air Act in 1977 to provide an efficient deterrent against the common corporate impulse to put off expensive air pollution control measures as long as possible.⁴ The impulse to delay compliance was an economically rational one because compliance with the Clean Air Act could cost millions, even hundreds of millions, of dollars in capital and operating costs while producing no financial return. Delaying expenditures of that magnitude for even one year could save millions of dollars. Moreover, companies that would put prompt compliance with the law achead of temporary economic gain were discouraged from doing so becuse their competitors might gain an economic advantage by following the opposite course. Section 120 was enacted to change that balance of compliance/noncompliance incentives.

Section 120 added economic theory to basic penalty logic. Penalty theory, such as it is, holds that one contemplating violating the law will not do so if the rewards of violation are exceeded by the probably penalty (the product of the risk of being caught, multiplied by the risk that penalties will be imposed, imes the size of the penalties). Putting aside the likelihood of detection, which is not affected by the penalty scheme, before 1977 the Clean Air Act compliance equation did not produce a large incentive to obey the law. EPA enforcement was limited to administrative orders (invitations to negotiate) or criminal penalties, which were potentially severe, but never imposed. Violators usually could avoid penalties by agreeing to compliance schedules;⁵ the procedural difficulties [13 ELR 10105] in invoking the criminal law and the fact that criminal sanctions seem extreme for most environmental violations, which are the result of business realities, not evil intent, discouraged use of criminal sanctions. The objective of the enforcement process was compliance, not collection of penalties. Yet noncompliance still was widespread in 1977. Section 120 was to make it more likely that violators would have to pay significant penalties and that those penalties would be responsive to the economic forces producing noncompliance.

Section 120's scheme for taking the profit out of noncompliance has four key elements.⁶ First, § 120 appears to make it relatively certain that violators will be penalized. It defines the categories of sources liable for penalties clearly and broadly, providing only narrow exceptions, and sets a deadline (July 1, 1979) after which specified violations would almost automatically produce penalties. Although the statute is not entirely clear on this point, there are some indications that Congress expected § 120 penalties to apply almost automatically, like a tax.⁷ Second, the section prescribes noncompliance penalties calculated, using modern capital budgeting techniques, to approximate the economic benefits of delayed compliance. Each day of noncomplince produces economic benefits because of the time value of money; now each day in violation also would produce an equivalent penalty. By erasing the benefits of noncompliance, § 120 would make it rational for companies moved solely by the short-term economic consequences to comply promptly, and would reassure those inclined to comply in spite of the short-term economic consequences that their competitors would not be able to get ahead as a result. Third, by specifying the economic formula by which penalties were to be calculated in all cases, § 120 limits (and arguably eliminates) the government's discretion to negotiate away the penalties. Fourth, § 120 establishes an administrative system for imposing penalties that eliminates the cost, delay, and uncertainty inherent in going to court for penalties, and discourages dilatory challenges by providing that the penalties continue to add up while unsuccessful court appeals are pending.

The noncompliance penalty program proved difficult for EPA to implement. Congress directed the Agency to promulgate regulations by February 1978⁸ so there would be time to put the program into action by the July 1, 1979 deadline. In fact, EPA proposed regulations on March 21, 1979⁹ and promulgated the final rules on July 28, 1980.¹⁰

Several features of the long and complicated regulations¹¹ highlight EPA's administrative strategy for implementing § 120. First, EPA tried to establish that it has some discretion in deciding whether to levy a noncompliance penalty.The regulations themselves do not make this clear,¹² but in the preamble, EPA announced that it could not handle the administrative workload imposed by an automatic application of § 120 and that, as a result, it would use a priority system for deciding whether to issue notices of noncompliance.¹³ On the other hand, the Agency went to great lengths to ensure that the penalties would be based on economic benefit, and that agreement to compliance schedules¹⁴ or even expenditure of funds to begin compliance would not excuse a violator from liability.¹⁵ In addition, EPA made full use of its statutory authority to develop streamlined administrative procedures from the notice of noncompliance through the final adjustment (with interest) in the event of over- or underpayment,¹⁶ and to limit opportunities for judicial review.¹⁷ [13 ELR 10106] The regulations established an exceptionally potent administrative civil penalty program whose main flexibility came in the opportunity for discretionary imposition of penalties or in manipulation of the complex penalty formula, and which relied heavily on a post-compliance settling of accounts to avoid inequity.

The final § 120 regulations provoked considerable consternation in industy. Individual companies and trade associations filed twenty petitions challenging the rules.¹⁸ Since Congress made clear that many aspects of the § 120 program could only be challenged in court when the regulations were promulgated,¹⁹ this litigation was to be expected. The challenges covered a multitude of issues falling into five categories. Petitioners alleged that EPA (1) defined the categories of sources subject to noncompliance penalties too broadly; (2) circumscribed three critical exemptions allowed by the statute too narrowly; (3) limited procedural relief unfairly; and (4) used a penalty model that would estimate economic benefit incorrectly, systematically erring on the side of overestimation. The fifth objection was that due process considerations required EPA to provide variances to avoid inequities from the application of the stringent uniform penalty program in individual cases. Environmentalist intervenors essentially supported the EPA position, and no one challenged the Agency's assertion of discretion not to send noncompliance notices to all violators within § 120's coverage.

If successful, the industry challenges would have produced a far less formidable § 120 program. They would have reduced the certainty that an individual violator would be subject to penalties, expanded opportunities to litigate preliminary decisions before the Agency or in court, and would have made it more likely that individual violators would be able to demonstrate that they had had no economic benefit from the compliance delay. A number of the changes sought would have added protection against unfair imposition of noncompliance penalties. They also would have reduced the deterrent effect of the program.

A year ago it seemed possible that many of the issues would be settled²⁰ but that did not come to pass. The parties went to court on all but three issues,²¹ and on January 7, 1983, the D.C. Circuit handed down its decision.

The Decision

In a lengthy opinion authorized by Judge Mikva the D.C. Circuit rejected virtually all the industry challenges to the § 120 regulations. For the most part, it found that EPA had acted in accord with the express directives of Congress. However, the court did order several revisions in the § 120 regulations, expanding a key exemption provision and modestly strengthening procedural safeguards. But for the most part, the decision stands as a ringing endorsement of EPA's § 120 program.

The court rejected a series of industry arguments that would have narrowed the class of persons who could be subject to § 120 penalties. It found that a source in violation of a state implementation plan (SIP) or other requirement covered by § 120 is subject to the penalties even if it is in compliance with a consent decree that will correct the violation,²² unless the decree specifically exempts the source from § 120 liability.²³ A source in violation of a SIP, but in compliance with a proposed revision to the SIP, is subject to the penalties.²⁴ On this point, however, the court gave industry one small victory, ruling that the penalties must be held in abeyance once the deadline for EPA action on the proposal has passed. The penalties continue to mount, but must not be paid unless and until EPA rejects the proposed SIP revision.²⁵ The court also upheld EPA's decision to include lessees and supervisors of violating facilities among those covered by § 120, finding that the rule was necessary to enable EPA to remove the economic benefits of noncompliance in all cases.²⁶ The court refused to order EPA to narrow its definition of "potential to emit," which in turn would narrow the definition of "major" sources, those subject to § 120 penalties for SIP violations. EPA had defined "major" source on the basis of the maximum potential emissions with controls installed, including fugitive emissions where they are regulated by the applicable SIP.²⁷

After construing the coverage of § 120 broadly, the court upheld EPA's narrow construction of three challenged [13 ELR 10107] exemptions to the penalty program. It held that § 120(a)(2)(B)(iv),²⁸ which exempts facilities whose violations are due to "inability to comply" and that qualify for delayed compliance orders, does not apply to cases of technological impossibility.²⁹ The court also ruled that EPA erred in limiting the inability-to-comply exemption to seven specified situations,³⁰ remanding the rule for the addition of a general, case-by-case exemption to carry out Congress' intention to give EPA flexibility to avoid inequitable penalty assessments.³¹

The regulations also state that the inability-to-comply exemption is not available if anyone who "controls" the violator is able to remedy the violation. The court rejected industry's argument that EPA should have defined the term "controls" more precisely, holding that this was properly a question to be resolved in individual cases by the finder of fact.³² Closing the subject of exemptions, the court held that EPA properly specified criteria going beyond those stated in the statute for issuance of exemptions for noncompliance that is "de minimis in nature and duration," because that exemption is discretionary and the EPA criteria are consistent with the purpose of § 120.³³

The industry challengers fared only slightly better in their attack on EPA's § 120 procedures. The court remanded provisions allowing EPA to reject industry petitions for hearings on challenges to notices of noncompliance, allegations of entitlement of an exemption, or challenges to EPA reassessment of penalties.³⁴ The statute requires hearings upon request in all three cases, the court concluded. However, it upheld EPA's decision not to allow hearings in all cases in which a source sought a de minimis exemption or reconsideration of a penalty calculation, since the statute places acceptance of such petitions within the Administrator's discretion.³⁵

The court also upheld two controversial provisions of the § 120 rules which limit a violator's opportunities for judicial review of EPA penalty decisions. The regulations require the recipient of a notice of noncompliance to include all grounds for challenging the assessment in its petition, or waive them in all subsequent proceedings; though a petition may be amended under certain circumstances.³⁶ The court held this to be a reasonable measure in light of the statute's requirement that EPA act on such petitions within 90 days. It rejected a due process challenge, but noted that a specific instance of EPA refusal to allow amendment of a petition might violate that constitutional guarantee.³⁷ The regulations also bar judicial review until the penalty has been assessed. For example, EPA's rejection of a challenge to a notice of noncompliance could not be taken to court before EPA specified the penalty. While the court did not find clear statutory authorization for this limitation, it found some support in the language of § 120(e) and upheld it as serving Congress' "clear intent to see that penalties were swiftly assessed and collected."³⁸

The EPA methodology for estimating the economic benefits of noncompliance is complex and relies on several general assumptions to facilitate penalty calculation.³⁹ The court rejected a battery of industry challenges to the methodology, first ruling that four assumptions relied on by EPA were reasonable.⁴⁰ It also held that EPA's refusal to give credit against the penalty under § 120(d)(2) for expenditures on interim or extra controls that do not reduce emissions is in accord with the statute, whose main focus is "to ensure swift and steady movement towards meeting federal and state standards that have been honed through the regulatory process."⁴¹

The scope of EPA's victory perhaps is most clearly evident in the fact that the court held that the Agency properly rejected industry's request for dollar-for-dollar credits for expenditures to achieve compliance. EPA had allowed credits only for the economic value of expenditures made to comply, not for their full amount. While § 120 offered some support for the dollar-for-dollar interpretation, the overall statutory scheme supports the EPA position. Crediting the full amount would enable a company to erase its § 120 penalty liability by making compliance expenditures promptly on receipt of its noncompliance notice.⁴² The court concluded that

[13 ELR 10108]

EPA's use of a prorated credit takes account of the fact that it is the time value, not the absolute value, of the economic benefit that is relevant to penalty calculations.⁴³

Thus the court concluded that to fulfill the purpose of § 120, the penalties must be imposed even though compliance investments are being made.

Finally, the court rejected the industry argument that a broadly applicable and rigid regulatory program like § 120 requires a variance provision as a safety valve, an argument growing out of the Supreme Court's ruling in E.I. DuPont de Nemours & Co. v. Train⁴⁴ on the need for a general variance provision qualifying the uniform 1977 effluent limitations prescribed by the Federal Water Pollution Control Act. The D.C. Circuit ruled that the generalized inability-to-comply exemption it had mandated obviated the need for a general, court-established variance provision.⁴⁵

Implications

The D.C. Circuit's decision in Duquesne Light gives a strong boost to EPA's § 120 program, but the full effect of the decision is not yet clear. The court certainly sent a clear message that more active use of § 120 is in order:

It is more than five years since Congress enacted this section; it is certainly time to put into operation the penalty assessment system Congress mandated.⁴⁶

But will EPA adopt the recommendation?

The Agency's history of implementing § 120 suggests that a dramatic change is not in the offing. In the first months that EPA had the § 120 regulations in place, it issued few notices of noncompliance and the penalties sought were not large.⁴⁷ One reason for tentative implementation may have been fear that the assessment procedures in the § 120 regulations will be an administrative nightmare, opening the door to long hearings and court actions on arcane subjects like corporate finances. Some enforcement officials may fear that fighting over noncompliance penalties would divert attention and resources from the primary goal of compliance. If such attitudes are widespread in EPA's enforcement office, the Agency may make heavy use of its apparent discretion to limit the number of noncompliance notices issued. On the other hand, generally good reviews from the Agency's Region II office, which has issued a number of § 120 notices,⁴⁸ may encourage more active use of noncompliance penalties.

Although the D.C. Circuit did not address EPA's assertion of discretion not to issue notices of noncompliance, in the aftermath of Duquesne Light it will be increasingly difficult for the Agency to leave noncompliance penalties on the shelf. First, the regulations upheld in that case do not appear to give the Agency much discretion in issuing notices.⁴⁹ It is the preamble that most strongly asserts EPA's discretion and even the preamble indicates that there will be a presumption in favor of issuing noncompliance penalties routinely for significant categories of violations.⁵⁰ Moreover, Duquesne Light does not necessarily foreclose an environmentalist challenge to discretionary application of § 120. While failure to raise the issue in a timely petition on the regulations will be an argument against such a challenge,⁵¹ it is questionable that a claim that EPA has failed to carry out a nondiscretionary duty under the statute can be waived. And while the court did not address the issue directly, the overall interpretation of § 120 that was upheld in Duquesne Light is that noncompliance penalties should be a regular cost of doing business in violation of the Clean Air Act.

If § 120 is to be of concern, who will be affected? Any major source and any other source covered by new source performance standards or national emission standards for hazardous air pollutants that fails to comply with state or federal emission limitations by the applicable deadline, and whose violation is not de minimis in nature and duration could be liable for § 120 penalties. Only EPA's discretionary decision not to issue a notice of noncompliance, application of one of the narrow "mandatory" exemptions or the discretionary de minimis exemption, or a consent decree specifically waiving § 120 liability would protect such sources. The thousands of companies that are in compliance with applicable emission standards need not worry at present. But those subject to new emission limitations, for example reasonably available control technology requirements in Part D⁵² SIP revisions or control requirements imposed to combat acid rain, will face a new and potentially severe liability for failure to comply in timely fashion. Compliance dates, which in the past have operated more as guidelines than deadlines, will have real meaning. And given Congress' and EPA's penchant for technology-forcing deadlines, the timetables in new emission control rules will be of great concern.

1. 42 U.S.C. § 7420, ELR STAT. 42226.

2. 13 ELR 20251 (D.C. Cir. Jan. 7, 1983).

3. In the preamble to the § 120 regulations, EPA estimated that as many as 2,000 sources might be liable for § 120 penalties. 45 Fed. Reg. 50087 (July 28, 1980).

4. "At least as important an obstacle, [to progress in cleaning up air quality] however, was the expense of reducing emissions, making it profitable for industry to delay needed expenditures as long as possible, n7" 13 ELR at 20253 citing H.R. REP. NO. 294, 95th Cong., 1st Sess. 72 reprinted in 4 LEGISLATIVE HISTORY OF THE CLEAN AIR ACT AMENDMENTS OF 1977 at 2539 (1978) (this multivolume set is hereinafter cited as LEGISLATIVE HISTORY).

5. The situation was similar with civil penalties. Other environmental statutes (e.g., the Federal Water Pollution Control Act § 309, 33 U.S.C. § 1319, ELR STAT. 42130) and, after 1977, the Clean Air Act (§ 113(b), 42 U.S.C. § 7413(b), ELR STAT. 42216) authorized imposition of potentially large civil penalties, up to $25,000 per day under the Clean Air Act. However, the courts were given no guidance on how to set a penalty in an individual case. Enforcement agencies usually were satisifed to forego penalties if compliance schedules were set. After 1977 EPA developed a civil penalty policy designed to incorporate some elements of the § 120 penalty concept into judicially imposed civil penalties. The policy sought penalties at least as large as the estimated economic benefit from noncompliance, using essentially the same formula as that developed for § 120, and to seek penalties even where compliance schedules were agreed upon in order to remove the economic benefit otherwise enjoyed by violators. However, even under this policy, penalties were not to be sought when it was demonstrated that they would interfere with the source's ability to comply promptly. Enforcement of Environmental Regulations: Hearings Before the Subcomm. on Environmental Pollution of the Comm. on Environment and Public Works, 96th Cong., 1st Sess. 224-29 (1979) (Statement of Marvin Durning, Assistant Administrator for Enforcement, EPA.).

6. For a description of the provisions of § 120, see Duquesne Light, 13 ELR at 20253-54. See also Orloff, Buttressing the Traditional Approach to Enforcement of Environmental Requirements: Noncompliance Penalties Under the Clean Air Act, 9 ELR 50029 (1979).

7. "This provision adds a new section 120 to the existing law. Any source which receives an enforcement order but does not comply with the regulation by July 1, 1979, shall be automatically subject to a delayed compliance penalty …." S. REP. NO. 127, 95th Cong., 1st Sess. 48 (1978) reprinted in 3 LEGISLATIVE HISTORY at 1422 (1978). In fact, the concept of an emission tax had had some influence on Congress' thinking on § 120. See H.R. REP. NO. 294, 95th Cong., 1st Sess. 72-74, reprinted in 4 LEGISLATIVE HISTORY at 2539-41. (1978).

8. Clean Air Act § 120(a)(1)(A), 42 U.S.C. § 7420(a)(1)(A), ELR STAT. 42226.

9. 44 Fed. Reg. 17310 (Mar. 21, 1979), amended 44 Fed. Reg. 34524 (June 15, 1979).

10. 45 Fed. Reg. 50110 (July 28, 1980).

11. See Comment, EPA Begins Implementation of Noncompliance Penalty Regulations, Fights Rearguard Action in D.C. Circuit, 12 ELR 10012 (1982). The National Commission on Air Quality (NCAQ) found that one important reason for the delay was EPA's "reluctance to incur the administrative burden of assessing the nondiscretionary noncompliance penalty against all sources violating control requirements" NCAQ, TO BREATH CLEAN AIR 39 (1981).

12. 40 C.F.R. § 66.11(a) states:

The Administrator shall issue a notice of noncompliance to the owner or operator of any source which he determines is in violation of applicable legal requirements and which is located in a State without an approved Section 120 program.

The quoted language appears to give no discretion ("shall issue") to withhold a notice of noncompliance once EPA determines that a source covered by § 120 is in violation of the Act.

13. The preamble states:

EPA's limited resources are insufficient to implement the stringent procedural requirements of the statute simultaneously for the large number of sources that are potentially subject to penalties …. EPA will, therefore, implement the noncompliance penalty program in a manner which will maximize the use of limited resources. EPA will proceed initially against sources that have never achieved compliance with Clean Air Act requirements and are not complying with enforceable compliance schedules contained in federal or EPA-approved State consent decrees and administrative orders. Other factors EPA will consider in setting priorities include the size of the economic benefit enjoyed, the nature and amount of the source's emissions, and whether the emissions are causing or contributing to a nonattainment situation. EPA will not issue notices of noncompliance to sources which it considers to be economically unable to both pay the penalty and meet pollution control requirements without shutting down, and to sources it considers probably entitled to an exemption.

45 Fed. Reg. at 50088 (July 28, 1980).

14. See the court's discussion of application of § 120 to sources with consent decrees, 13 ELR at 20255, 20256.

15. See the court's discussion of "dollar-for-dollar" credits, 13 ELR at 20266.

16. See the court's discussion of § 120 procedures, 13 ELR at 20263-65.

17. See the court's discussion of waiver of issues and final actions, 13 ELR at 20264, 20265.

18. 13 ELR at 20252.

19. 13 ELR at 20252 n.1.

20. See Comment, EPA Begins Implementation of Noncompliance Penalty Regulations, Fights Rearguard Action in D.C. Circuit, 12 ELR at 10014 (1982).

21. The three issues still in negotiation are the methodology for calculating noncompliance penalties for public utilities, the use of a 30-year period as the useful life of control equipment, and the effect of extensions in attainment deadlines on § 120 penalties. 13 ELR at 20252 n.1.

22. The court held that the language and the legislative history of § 120 supported EPA's application of penalties to sources operating under consent decrees. 13 ELR at 20255. In addition, it relied on the fact that penalizing sources with decrees would further the purposes of the noncompliance penalty program:

The penalties are intended to provide a swift, even-handed economic incentive for compliance with the Act's standards, but would not do so if sources could escape the penalty by means of consent decrees.

13 ELR at 20256. Finally, the court rejected the industry argument that penalizing sources with court approved consent decrees violates constitutionally mandated separation of powers by interfering with the res judicata of the decrees. It found that assessing § 120 penalties under these circumstances was not changing the terms of a decree, but adding a new penalty for continuing violations of the law, which Congress clearly is empowered to do. 13 ELR at 20256-57. However, while the court ruled that EPA could penalize sources under consent decrees, it did not rule that it must. In practice, EPA's policy of making such sources low priorities, see supra note 13, should enable many to avoid § 120 penalties.

23. On the subject of decrees specifically addressing § 120 liability, the court said:

Although we are not aware of any instance in which EPA has assessed a section 120 penalty against a source operating under a consent decree that purports to settle section 120 liability, we note that such a practice would be of dubious validity.

24. The court relied on the fact that the proposed SIP revision has no legal effect and that any other holding would allow states to circumvent § 120 by proposing SIP revisions. 13 ELR at 20258.

25. 13 ELR at 20258.

26. "Were either of these categories omitted from the definition, EPA might be unable to assess penalties against the party that benefits from noncompliance." 13 ELR at 20259.

27. The court also suggested that its approval of EPA's definition of "potential to emit" might foreshadow its resolution of the parallel controversy under the prevention of significant deterioration regulations. 13 ELR at 20259-60.

28. 42 U.S.C. § 7420(a)(2)(B)(iv), ELR STAT. 42227.

29. The court found that excluding technological impossibility from the grounds for exemption was appropriate because of the Act's technology-forcing drive. However, the court also expressed approval of EPA's policy of setting the penalties at zero for sources in violation due to the absence of technology capable of meeting the standards, if the sources used the best technology available and invested in research to finds ways of complying. 13 ELR at 20261.

30. EPA's list included acts of God, fires, embargoes, strikes, inability to obtain capital due to temporary market conditions, failure of properly designed controls to function, and the complete inability of a supplier to provide necessary labor or materials. 40 C.F.R. § 66.31(c)(1)-(7). 13 ELR at 20261.

31. "Although Congress intended the exemption to be narrowly limited, it also required that 'some flexibility' be written into the regulations." 13 ELR at 20261. The court rejected EPA's argument that such a general exemption provision would turn into a loophole, arguing that an applicant would still have to meet the heavy burden of showing that its violation stemmed from conditions entirely beyond its control.13 ELR at 20262.

32. 13 ELR at 20262. The court also ruled that EPA correctly limited the exemption to sources that actually have been granted delayed compliance orders, rejecting the argument that a source need only qualify for such an order to avoid the penalties. Id. In addition, the court upheld EPA's decision to limit an exemption for violations caused by conditions authorizing temporary emergency suspensions under § 110(f) & (g), 42 U.S.C. § 7401(f) & (g), ELR STAT. 42212, to sources which had actually been granted the exemptions by the President, rejecting the argument that sources which could be granted suspensions should also qualify. 13 ELR at 20262.

33. 13 ELR at 20262-63.

34. 13 ELR at 20264.

35. 13 ELR at 20263.

36. Amendments are allowed (1) within 45 days, (2) with the Administrator's consent, and (3) after 45 days, if based on new and unforeseeable conditions. 13 ELR at 20264.

37. 13 ELR at 20265.

38. Id.

39. For example, the formula uses industry-wide average rates of return on equity to determine the time value of money, rather than company-specific rates. 13 ELR at 20265.

40. 13 ELR at 20265-66.

41. 13 ELR at 20266.

42. The court stated:

Section 120 does not explicitly state whether particular expenditures are to be subtracted from or calculated into the penalty assessment. It merely says that the expenditures credited should not have been already taken into account in the calculation of the penalty. Petitioners' contention would, in all probability, wipe out the penalty once a source begins significant outlays directed toward compliance.

13 ELR at 20266.

43. Id.

44. 430 U.S. 112, 7 ELR 20191 (1977).

45. 13 ELR at 20267.

46. Id.

47. Comment, EPA Begins Implementation of Noncompliance Penalty Regulations, Fights Rearguard Action in D.C. Circuit, 12 ELR 10012, 10016-17 (1982).

48. A staff attorney with Clean Air Act enforcement responsibilities in the Office of the Regional Counsel for Region II reports that his office finds § 120 an attractive enforcement measure because it can impose penalties without having to refer cases to another agency for court action. Because penalties are mandatory, the threat of § 120 action and the issuance of noncompliance notices have proved effective in encouraging settlement of long-standing compliance disputes and in speeding up the compliance programs of violators. The penalty assessments to date have not been large, however. Phone interview with William Sawyer, March 18, 1983. This limited picture of Region II's application of § 120 suggests that it is using noncompliance penalties in a relatively traditional enforcement mode, gaining negotiation leverage with the threat of penalties and using issuance of notices as an escalation of enforcement pressure on uncooperative sources. The Region's initial results suggest also that § 120 can be an effective enforcement tool even in a limited application.

49. See supra note 12.

50. See supra note 13.

51. Failure to raise the argument arguably constitutes waiver. 13 ELR at 20252 n.1.

52. Clean Air Act §§ 171-178, 42 U.S.C. §§ 7501-7508, ELR STAT. 42238-39.