Third Circuit Reopens Basic Water Act Issues by Invalidating FDF Variance

William L. Want

Editors' Summary: This is the second of two articles in this issue concerning the Third Circuit's recent decision on EPA's pretreatment regulations. The first article, 14 ELR 10039, discusses all but one of the issues reached by the court in National Association of Metal Finishers v. Environmental Protection Agency, 13 ELR 21042, a decision that resolved finally most questions about the pretreatment program. The remaining issue, the legality of "fundamentally different factors" (FDF) variances from categorical pretreatment standards, is a controversial one with major implications for EPA's regulation of direct water pollution discharges as well. The Third Circuit accepted the arguments of the Natural Resources Defense Council, Inc. (NRDC) and ruled that Congress outlawed FDF variances from all categorical standards governing toxic pollutants in 1977 when it added § 301(1) to the FWPCA. Industry has filed a petition for certiorari on this issue and the government reportedly will follow suit.

In this article, Mr. Want examines the Third Circuit's ruling on FDF variances in light of the history of categorical effluent standards and FDF variances for direct dischargers. He argues that the FDF variance was an essential part of a compromise sanctioned by the Supreme Court that allowed EPA to take the shortcut of one-step, mandatory categorical effluent limits through the complex regulatory process dictated by Congress for controlling pollution from factories discharging directly to the nation's rivers and streams. EPA later used the same approach in the pretreatment program. Reviewing the parties' arguments on the issue in Metal Finishers, Mr. Want concludes that, while both sides have merit, the NRDC position adopted by the Third Circuit is flawed because it removes one of the essential working parts from the basic FWPCA regulatory mechanism upheld by the Supreme Court: the combination of categorical standards and FDF variances.

Mr. Want is a Visiting Scholar at the Environmental Law Reporter. He recently completed a year as a visiting professor at the University of Maryland School of Law where he taught environmental law and civil procedure. From 1973 to 1982 he was a trial attorney in the Pollution Control Section of the Land and Natural Resources Division of the Department of Justice.

[14 ELR 10047]

The Third Circuit recently ruled on the pretreatment regulations of the Environmental Protection Agency (EPA) in a decision that could have major effects on the Agency's implementation of the Federal Water Pollution Control Act (hereinafter referred to as the Clean Water Act).¹ In National Association of Metal Finishers v. Environmental Protection Agency,² the court upheld most of EPA's pretreatment regulations, which affect more than 60,000 dischargers. The decision also invalidated the "fundamentally different factors" (FDF) variance provision, which has been integral to EPA's basic approach to water pollution control. This article analyzes the Third Circuit's variance ruling and its potential effects on implementation of the Clean Water Act.³

The Clean Water Act directs EPA to set pretreatment standards for discharges to publicly owned [sewage] treatment works (POTWs) for entire categories or subcategories of industrial sources. EPA's pretreatment variance procedure allows a different control standard for an individual plant within an industrial category if the plant owner can show that the relevant factors⁴ for it are fundamentally different from those EPA considered in formulating the categorical regulation. The FDF variance is also applicable and indeed was first applied to industrial plants discharging pollutants directly into navigable waters.⁵

EPA considers the variance a safety valve for plants it overlooked or did not have time to consider when formulating a categorical standard. The combination of uniform categorical standards and FDF variances allows EPA to set standards relatively quickly since the Agency can regulate a few hundred categories instead of tens of [14 ELR 10048] thousands of individual plants. At the same time the availability of variances helps those standards withstand industry charges in court that they are not fully representative. The Natural Resources Defense Council, Inc. (NRDC), the petitioner in this and several other cases attacking FDF variance procedures, sees it as contrary to the statute's categorical approach to regulation as well as the Clean Water Act's 1977 prohibition in § 301(l) against "modifying" stringent categorical standards for toxic dischargers.⁶

Metal Finishers is but one of several stages on which the FDF variance drama is being played. In Metal Finishers the Third Circuit sided with NRDC on variance from pretreatment standards, accepting the argument that § 301(l) prohibits variances where toxics are involved. The reasoning is broad enough to bar FDF variances for direct discharges of toxics as well. However, the Fourth Circuit in Appalachian Power Co. v. Train,⁷ employed conflicting reasoning to uphold the FDF variance for direct dischargers of toxic pollutants. The Chemical Manufacturers Association has sought certiorari of the variance ruling in Metal Finishers,⁸ and EPA is likely to follow suit. NRDC has notified the D.C. Circuit that it intends to challenge the FDF variance for direct dischargers on the same grounds relied upon by the Third Circuit for invalidating the pretreatment variance.⁹ EPA Administrator William Ruckelshaus has asked Congress to amend the Clean Water Act to overturn the Third Circuit's variance ruling.¹⁰

Understanding the variance issue requires a review of some of the basic legal developments under the Clean Water Act. This article begins by briefly describing the Act's major provisions for regulating industrial and municipal discharges of water pollution. It describes EPA's first major regulatory program to control direct discharges into navigable waters and the compromises EPA made to reconcile a demanding regulatory charge with tight deadlines for developing standards. The compromises provoked challenges, which are reviewed in brief here, with particular emphasis on the attacks on the FDF variance procedure. The Supreme Court ultimately upheld the system of categorical standards and FDF variances for direct discharges regulated under the technology standards of § 301 of the Act. EPA, again under pressure of statutory deadlines, applied the same approach to toxic pollutants intended to be regulated under the different requirements of § 307(a) and to pretreatment standards, whose unique basis was spelled out in § 307(b). Congress incorporated most of the modifications in approach adopted by EPA in the 1977 amendments to the Act. This complex history is the backdrop for the Third Circuit's variance ruling in Metal Finishers. The article reviews the positions of the parties on the FDF variance issue, and after placing them in historical perspective, concludes that, while the question is close, the Third Circuit's ruling undermines the basic compromise made by EPA and sanctioned by the Supreme Court as a means of making the Clean Water Act mandate work.

The Statute

The pretreatment standards are controls for one of three types of discharges that the Clean Water Act requires EPA to regulate. First, the Administrator must establish standards for "point sources" that discharge pollutants directly into navigable waters (direct dischargers).¹¹ These two-stage performance standards, called effluent limitations, are to be prescribed for categories or classes of existing point sources.¹² The first stage requires compliance by 1977 with effluent limitations based on the "best practicable control technology currently available" (BPT) for all pollutants,¹³ and by 1984 with limitations based on the best available technology economically achievable (BAT) for toxic pollutants.¹⁴ In § 301(c)¹⁵ the Act allows the EPA Administrator to "modify" BAT standards for plants that are economically unable to meet the categorical standards. The Act makes no mention of modifications to or variances from the BPT standards.

Second, the Act requires the Administrator to set effluent limitations for POTWs based on "secondary treatment."¹⁶ The effluent limitations for industrial and municipal direct discharge sources must be incorporated into national pollutant discharge elimination system (NPDES) permits issued by EPA or states qualifying for delegation of the responsibility.¹⁷

Third, § 307 of the Act requires pretreatment standards for "indirect dischargers," industrial sources that discharge their pollutants not directly into navigable waters, but into POTWs. The pretreatment standards are to "prevent the discharge of any pollutant through treatment works … which pollutant interferes with, passes through or otherwise is incompatible with such works" and are directly applicable without the issuance of permits.¹⁸ The Administrator had to designate the categories of sources to which each standard would apply, and promulgate standards for existing sources by July 1973.¹⁹ No [14 ELR 10049] mention is made in the pretreatment statutory provisions of variances from or modifications of these categorical standards.

The Development of Effluent Limitations and Pretreatment Standards

EPA responded to the complex regulatory mandate of the Clean Water Act by tackling direct dischargers first. When it got around to toxic and indirect dischargers, EPA adapted approaches developed in the former enterprise. EPA's actions provoked numerous legal challenges from industry and environmental groups. The resulting decisions shaped subsequent EPA actions that led to the variance challenge in Metal Finishers.

Litigation Concerning Private Direct Dischargers

Although EPA addressed private direct dischargers first in its regulatory efforts, it nonetheless quickly fell behind statutory deadlines and was sued in 1973 by NRDC to establish effluent guidelines.²⁰ Since the date had passed for promulgating effluent guidelines required by § 304(b)(1),²¹ the court imposed on EPA a compliance schedule of its own. In subsequent years EPA struggled though the enormous task of promulgating the standards required by the court decision.²² Under the tremendous time and resource pressures, EPA adopted a regulatory approach that combined its obligations under § 304²³ to issue effluent guidelines with the requirement under § 301²⁴ that effluent limitations be issued. EPA's general approach and the specific effluent limitation guidelines it promulgated for industry categories were widely attacked by industry. Twenty-eight of the 46 effluent limitation guidelines promulgated from March 1974 to July 30, 1975 were challenged.²⁵

Industry's fundamental complaint in the cases was that EPA went beyond issuing general guidelines from which state agencies or regional EPA offices could set specific NPDES permit limitations based on local factors, to actually prescribing the specific national limitations for all the plants within an industrial category. At a minimum, industry argued, EPA should prescribe a range of numbers from which the permitting authority could choose depending on local factors rather than automatically requiring the categorical standard for each plant in the category. The defensive litigation that ensued became the principal caseload of EPA's attorney, the Pollution Control Section of the Justice Department, and consumed a significant amount of EPA's time and attention as well. Roughly half of EPA's standard setting staff was diverted at times to prepare for court challenges to the regulations.²⁶

The lawsuits that absorbed so much time and effort did not quickly resolve the issues. Of the seven circuits issuing opinions, only two upheld EPA as having authority both to set uniform national effluent limitations for industrial categories, instead of ranges for each category, and to allow FDF variances.²⁷ One circuit ruled against EPA on both uniformity and range,²⁸ while the other four, although accepting major portions of the EPA approach, did not fully uphold it.²⁹

NRDC Challenge to the Direct Discharge Variance

During the same period that industry was challenging the EPA categorical standard/variance approach as not allowing enough consideration of local factors, NRDC attacked from the other side. In Natural Resources Defense Council, Inc. v. EPA³⁰ the environmental group accepted the categorical aspect of the EPA standards, but challenged the procedure that allowed the permit-writer to grant FDF variances from BPT and BAT categorical limitations for individual plants. According to NRDC, the Act contemplated uniformity of standards and allowed subcategorization of industry categories as the only method for dealing with variation among dischargers.³¹ NRDC feared that when plants comprising a subcategory are located in several different states, as is typical, each state's permit-granting agency would, through the variance procedure, develop different standards for plants EPA intended by subject to the same limitations.³²

The Second Circuit was not convinced; it upheld the variance provision as an "administrative safety valve" which the court said "permits a more rigorous adherence to an effective regulation."³³ The court also found the variance procedure well adapted to the need under the Act to get national regulations out quickly even if it [14 ELR 10050] meant that individual problems would have to be dealt with later.³⁴

DuPont v. Train, the Supreme Court Enters the Fray

Thus, in 1976 only the NRDC challenge has been settled; the numerous industry challenges had resulted in diverse results in the various circuits. The Supreme Court agreed to resolve the conflicts by granting certiorari in the Fourth Circuit cases.³⁵ The significance of the pending high court decision was described by two commentators as follows:

Should the Court find in favor of the industry position — that the Administrator lacks the authority to set uniform national effluent standards … — the EPA would be forced to withdraw regulations already promulgated for some forty categories of industrial point sources.EPA then would have to re-promulgate effluent limitation guidelines for these categories, as well as draft new guidelines for additional categories. This would in turn disrupt the permit-issuing mechanisms of the Act, casting serious doubt on the validity of permits already issued under the existing EPA regulations and creating additional difficulties for permit issuers by forcing them to set effluent limitations on an ad hoc basis without EPA regulations to guide them, at least until EPA could comply with the Court's interpretation of the Act.

A Supreme Court decision upholding the EPA position, on the other hand, would allow EPA to complete the standard-setting phase of the Act and move on to the enforcement monitoring phase.³⁶

The Court chose not to turn back the regulatory clock. In E.I. DuPont de Nemours & Co. v. Train it upheld the EPA position.³⁷ The Court agreed with EPA that the legislative history of the Clean Water Act contemplated a high degree of uniformity in standards that was consistent with EPA's categorical approach.³⁸ Addressing the specific statutory provisions under review, the Court noted industry's argument that for BPT standards, the Act spoke in terms of limitations for point sources, implying individual rather than categorical standards.³⁹ Yet it also noted that the BAT standards were described in terms of categories.⁴⁰ Concluding that Congress did not intend any radical difference in the programs for BAT and BPT, the Court gave significance both to the point source and category language by holding that the catogrical approach for BPT was valid only "so long as some allowance is made for variations in individual plants as EPA had done by including a variance clause in its limitations."⁴¹ Thus, without a specific statutory basis, the Court found the BPT variance, which NRDC had previously attacked, to be a necessary component of uniform national standards. The Court declined to give more specific guidance, ruling that whether EPA's actual variance provision included the appropriate criteria was not ripe for judicial consideration.⁴²

Subsequent Litigation on the Variance Procedure

While DuPont established that variances are an essential part of the categorical standards for direct dischargers, at least for BPT, it did not specify the nature of the variance required. In subsequent litigation on that issue, EPA successfully withstood two lines of industry attack aimed at broadening the factors considered for allowing the FDF variance. The first concerned the Agency's refusal to allow variances for individual facilities based on their economic inability to meet BPT limitations. The two circuits that considered this issue split on whether such variances were required.⁴³ The Supreme Court resolved the issue in Environmental Protection Agency v. National Crushed Stone Association,⁴⁴ ruling against the economic variance. According to the Court, the Act requires consideration of whether the costs of BPT are reasonable for the industry category as a whole, but contemplates that the uniform standards apply to all plants in the category regardless of their economic effect on individual plants.⁴⁵ The Court concluded that the unification of the BPT and BAT approaches in DuPont did not dictate that the grounds for issuing variances were to be identical for both types of standards.⁴⁶

Industry's second line of attack on the scope of EPA's BPT variance provision was to argue that it should allow consideration of the water quality impacts of a plant's discharge on receiving water. Industry wanted less stringent standards where the receiving water was relatively clean and the discharge would have little or no harmful impact on water quality. Their position, however, was rejected by both circuits that considered it.⁴⁷

Control of Toxics and the Evolution of the BAT-Toxics Approach

The Federal Water Pollution Control Act Amendments of 1972 provided a different mechanism in § 307⁴⁸ for the control of toxic pollutants than for general effluent limitations in §§ 301 and 304. For toxics, EPA was to establish standards for individual pollutants rather than for industrial categories. Also, the standards themselves were to be based on toxicity effects rather than cost and technological achievability.⁴⁹ Finally, the administrative procedure to be employed was formal rather than the informal process specified for categorical standards.

EPA failed to promulgate toxic standards, even years after the Act's deadlines for them had expired. Producing [14 ELR 10051] toxicity data to support a precise health standard proved to be an extremely difficult task, made even harder by the requirement that it be subject to trial-type administrative procedures.⁵⁰

The situation and its consequences were recounted by the D.C. Circuit in its ruling on the first toxic standards EPA managed to promulgate and not withdraw:

EPA's failure to promulgate any toxic standards triggered a waive [sic] of suits by environmental groups seeking to compel EPA to promulgate regulations for PCBs and other toxic substances. Before those suits could be resolved, EPA developed a new approach to toxic regulation, and negotiated a consent decree with the environmental groups ….⁵¹

The principal thrust of that new approach implemented in 1976 was to employ BAT standards to control toxics while maintaining the § 307 method as a supplement if needed.⁵² This approach amounted to a simple recognition that the BAT technological method based on informal rulemaking had proven more feasible than had the toxic impact method relying on formal rulemaking. Congress incorporated this new approach for toxics control in 1977 amendments to the Act.⁵³ The same amendments also raised a question about the applicability of variances to the new toxics BAT by including in § 301(l) a prohibition against modifying a requirement for a toxic pollutant.

Pretreatment Standards

EPA next turned its attention to pretreatment. Section 307(b) of the Act directs EPA to promulgate pretreatment standards to "prevent the discharge of any pollutants through [POTWs], which pollutant interferes with, passes through, or otherwise is incompatible with [the POTW]."⁵⁴ Although the statute does not require a BPT/BAT approach, EPA and NRDC, in the settlement of the lawsuit on toxic controls, agreed that EPA would use that approach, requiring an initial BPT standard for some pollutants and BAT for others.⁵⁵ EPA also employed the FDF variance component of its BPT/BAT approach, but its use was not specifically sanctioned by the decree or agreed to by NRDC.

Metal Finishers: The Arguments of the Parties

NRDC carried its long fight against the FDF variance to the pretreatment regulations that eventually emerged.⁵⁶ This time, however, NRDC weighed into the fight with the strength of the 1977 statutory amendment forbidding the Administrator to "modify any requirement of this section [§ 301] as it applies to any specific pollutant which is on the toxic pollutant list under Section 1317(a)(1) of this title."⁵⁷ NRDC also argued that DuPont should be construed to prevent a FDF variance from BAT. The government by contrast construed DuPont to support such a variance and responded to NRDC's § 301(l) argument by contending that the FDF variance is not a prohibited "modification" but rather a more appropriate category for the plant at issue.

NRDC's argument that DuPont bars BAT variances is countered by much in the opinion. In DuPont the Court found that FDF variances were necessary for BPT and noted that Congress did not intend any radical differences between BPT and BAT. In its argument, NRDC noted that while the Court said a variance was required for the BPT program, it also held that variances were impermissible for new source standards. According to NRDC, BAT and thus pretreatment standards for toxics, which are based on BAT, are closer to new source standards than to BPT and similarly should not allow for a variance. The Third Circuit did not decide the issue because it found NRDC's argument on § 301(l)⁵⁸ dispositive. The argument may have to be decided in other related cases⁵⁹ or by the Supreme Court if it accepts certiorari in Metal Finishers and is not convinced that § 301(l) is controlling.⁶⁰

[14 ELR 10052]

NRDC's second argument in Metal Finishers and the basis of the court's holding, was that for toxics, variances are impermissible under § 301(l)⁶¹ Forbidding the Administrator to "modify" a requirement for a toxic pollutant. The Third Circuit chose a very direct, uncomplicated approach in its analysis of this argument. Although the legislative history shows that the modification provision was aimed primarily at prohibiting modifications that the statute otherwise allowed under §§ 301(c) and 301(g),⁶² the word "modify" was nonetheless broad enough to cover EPA's administratively developed FDF variance.⁶³ Indeed, the congressional concern that for toxic pollutants no lessening of categorical standards be allowed is equally applicable to the FDF variance.⁶⁴

The court's holding has a sound legal basis as far as it goes. However, the court did not go as deeply into the complex issues involved here as it might have. One approach to a deeper analysis of these issues is to focus on what the Third Circuit at oral argument labelled EPA's "elegant argument." That argument is that the FDF variance is not really a modification of or exception to a categorical limit, but rather an establishment of a separate standard for a category of one or several plants.⁶⁵ As explained in EPA's brief,⁶⁶ rather than constituting an "exemption," the FDF variance is a determination of the BPT, BAT, or pretreatment requirements for an individual discharger, based on the statutory factors and circumstances concerning the discharger that were not considered in the development of standards for the industry. This distinction seemed to be generally accepted by the Supreme Court in Crushed Stone in the following statement:

If a point source can show that its situation … is not within the range of circumstances considered by the Administrator, then it may receive a variance … In such situations, the variance is an acknowledgment that the uniform BPT limitation was set without reference to the full range of current practices, to which the Administrator was to refer. Insofar as a BPT limitation was determined without consideration of a current practice fundamentally different from those that were considered by the Administrator, that limitation is incomplete.⁶⁷

In essence, the argument for EPA's position is that when it grants an FDF variance, it is creating a new subcategory for a plant, and establishing standards for that category based on statutory factors.⁶⁸

Potential Consequences of Metal Finishers

Another basis for examining the legality of the FDF variance for pretreatment standards for toxics is to consider the practical consequences and determine whether they are compatible with the goals of the statute. According to NRDC, the FDF variance procedure "is a resource intensive, open-ended invitation to delay regulation."⁶⁹ If only a small percentage of the at least 60,000 dischargers subject to pretreatment apply for variances, "the burden on [14 ELR 10053] EPA will be staggering."⁷⁰ NRDC disputes EPA's argument that the past experience of only 47 requests for FDF variances from BPT regulations⁷¹ indicates that there will not be many for pretreatment regulations. That experience is said to be a poor guide to the future because most BPT discharge permits to date were issued without reference to the categorical standards.⁷² Those standards typically were promulgated after the individual permits had already been issued so that standards in the permits were set on a case-by-case basis in the first place. NRDC also complains that the pretreatment variance procedure would mean more toxic pollution, a result that is clearly contrary to the Act's goals.⁷³

Industry in its petition for certiorari counters NRDC's statutory purpose argument, contending that the Third Circuit rejection of the variance procedure if not overturned also will have dire consequences. It would likely "cause confusion, further litigation and delay of the program" for the control of toxics just as the last BAT phase of the program for its control is being implemented.⁷⁴ The petition adds that "if the Third Circuit decision on variances is allowed to stand, EPA would be subject to requests by industry to reopen previously promulgated regulations to address the atypical plants not previously considered."⁷⁵ The Third Circuit decision also would prevent EPA from effectively establishing standards for direct and indirect sources of toxic pollutants in the future. It would require that EPA address all plants, including atypical ones, by establishing sufficient subcategories of plants in the original technology-based standards regulations. This is the very approach that previously proved impractical due to data, resource, and time constraints.⁷⁶ Even those categorical regulations that the Agency managed to promulgate may not be able to withstand judicial review without a variance provision.⁷⁷ The very existence of the variance provision was explicitly found by one circuit to be grounds to uphold categorical regulations since it was available to address atypical situations.⁷⁸

The government has not yet filed its petition for certiorari on the variance ruling in Metal Finishers⁷⁹ and therefore has not yet stated its views in legal filings of the likely consequences of that decision. One action by EPA, however, suggests that it does not think the ruling will have major effects. In a pretreatment regulation promulgated subsequent to Metal Finishers, EPA devised a new subcategorization process coming after the establishment of categorical standards that retains the substantive aspects of the variance procedure. Specifically, EPA would allow a plant to obtain a new subcategorization and separate standard based on the same factors for which it was previously allowed a variance.⁸⁰ This approach may not survive under the Third Circuit opinion, because it is so close to the forbidden variance procedure. If that were to occur, EPA would likely predict dire consequences. The specifics of the government's views, however, must await its petition for certiorari.

Evaluation of the Parties' Arguments

The themes in the pretreatment variance issue arising in Metal Finishers are similar to those from the previous litigation on variances for direct dischargers.NRDC, which has consistently attacked the FDF variance in all its incarnations, once again claims that variances are illegal because they allow individual facilities to avoid the mandated categorical standards. Industry defends the ad hoc procedure EPA developed under the pressure of statutory and court deadlines with the arguments that it is a practical implementation of the statutory requirements and that invalidating it now would undo years of work and make future regulation difficult. In the pretreatment litigation, NRDC has a much stronger argument in § 301(l) than it had when it lost the variance issue in DuPont. However, the Fourth Circuit did not find this argument strong enough to invalidate a similar regulation. Also, EPA is supported by the weight of established regulatory practice that if disrupted could cause some of the problems industry suggests.⁸¹ EPA's legal support is an "elegant argument" that courts sometimes find too rich for their palates. However, the argument does provide sound legal support for the established practice if a court is inclined to leave well enough alone.

Additionally, the historical perspective of the evolution of EPA's implementation of the Clean Water Act supports the reasonableness of the Agency's treatment of pretreatment. The categorical/variance approach was EPA's response to conflicting statutory provisions and to pressing statutory and judicial deadlines. This approach was upheld by the Supreme Court in DuPont. In the meantime, the Agency was floundering in implementing toxic regulations under § 307 in large part because the standards had to be based on toxicity rather than technological [14 ELR 10054] considerations. EPA devised a regulatory approach in 1976 that was in 1977 incorporated into the Act and allowed the Agency to regulate toxics by the BAT technological approach. Under extreme time pressures to promulgate pretreatment regulations, EPA employed its previously developed categorical/variance approach once again. The Supreme Court has previously been sympathetic to EPA when the Agency has fashioned compromise solutions to complex problems presented by the Clean Water Act and in view of the historical perspective of the development of pretreatment standards, the Court is likely to uphold the Agency action again.

The NRDC (and Third Circuit) counter-argument is a simple, but substantial one. Despite the variance's evolution and judicial endorsement, Congress in the § 301(l) amendment⁸² made a change. Because Congress' focus was toxics it may not have considered the amendment's effect on the categorical/variance approach that had so arduously been crafted. Nonetheless, the statutory language clearly prohibits variances and that prohibition accomplishes the statutory purpose of further limiting toxic pollution.

Conclusion

In Metal Finishers, NRDC finally emerged victorious in its long time effort to invalidate the FDF variance. The environmental group now seeks to expand that victory to direct discharger regulations as well. In contrast, EPA and industry seek to resurrect the pretreatment FDF variance in the Supreme Court, or through legislative amendment or regulatory adjustment. The arguments on the issue are familiar, but the final resolution will be delayed until the efforts to build upon or undo Metal Finishers run their course.

1. 33 U.S.C. §§ 1251-1376, ELR STAT. 42101.

2. 719 F.2d 624, 13 ELR 21042 (3d Cir. 1983).

3. Analysis of the other aspects of the court's decision in National Ass'n of Metal Finishers v. EPA is the subject of the preceding article in this issue of ELR. See Neuman, Third Circuit Clears Way for National Pretreatment Program, 14 ELR 10039 (Feb. 1984).

4. These factors, which correspond to the factors listed in the statute for formulating the categorical standards, 33 U.S.C. § 1314(b)(1)(B) & (2)(B), ELR STAT. 42127, are: the nature or quality of pollutants; the volume of the discharger's process wastewater; the nonwater quality environmental impact of control and treatment; the energy requirements of treatment technology; the age, size, land availability, and configuration as they relate to the discharger's equipment or facilities; processes employed; process changes; engineering aspects of the application of the control technology; and the cost of compliance with required control technology. 40 C.F.R. § 403.13(d) (1983). To obtain a variance the discharger also must demonstrate that compliance with the industry standards would result in either a pollutant removal cost wholly out of proportion to the cost considered by EPA during the development of the standards, or a nonwater quality environmental impact fundamentally more adverse than the impact considered in developing the standards. 40 C.F.R. § 403.12(c)(2)(iv) & (3)(ii)(1983).

5. See infra text accompanying notes 11-14.

6. 33 U.S.C. § 1311(l), ELR STAT. 42123.

7. 620 F.2d 1040, 10 ELR 20319 (4th Cir. 1980).

8. Petition for Certiorari, Chemical Manufacturers Ass'n v. NRDC, No. 83-1013, 52 U.S.L.W. 3512 (Dec. 19, 1983). EPA's desire to obtain certiorari is noted in Ward, 404, Pretreatment Decisions Likely to Draw Congress' Attention, ENVTL. FORUM, Jan. 1984, at 7. The Solicitor General of the United States will make the government's final decision whether to seek certiorari. At press time the decision reportedly had been made to file for certiorari, but the petition had not yet been filed.

9. NRDC v. EPA, Nos. 80-1607 et al. (D.C. Cir., filed June 1, 1980).

10. See Ward, supra note 8, at 7.

11. 33 U.S.C. § 1311(b), ELR STAT. 42123.

12. The EPA Administrator also has to promulgate standards for new direct dischargers. 33 U.S.C. § 1316, ELR STAT. 43128:1.

13. 33 U.S.C. § 1311(b)(1)(A), ELR STAT. 42123.

14. 33 U.S.C. §§ 1311(b)(2)(A), (C), & (F), 1317(a)(2), ELR STAT. 42123, 42129. The Act also requires the use, by deadlines between 1984 and 1987, of the best conventional control technology (BCT) for conventional pollutants, 33 U.S.C. § 1311(b)(2)(E), ELR STAT. 42123, and of BAT for those pollutants that areneither toxic nor conventional, 33 U.S.C. § 1311(b)(2)(A) & (F), ELR STAT. 42123. Conventional pollutants are identified under 33 U.S.C. § 1314(a)(4), ELR STAT. 42127, and include, among other things, biochemical oxygen demand, suspended solids, fecal coliform, and pH. Only the BPT and BAT requirements are pertinent to this article.

15. 33 U.S.C. § 1311(c), ELR STAT. 42123.

16. See 33 U.S.C. §§ 1292(2), 1301(b)(1)(13), 1314(d)(1), ELR STAT. 42122:5, 42127, 42128.

17. 33 U.S.C. § 1342, ELR STAT. 42141.

18. 33 U.S.C. § 1311(b)(1), ELR STAT. 42123.

19. Additionally, the Administrator had to promulgate controls for new indirect dischargers simultaneously with the promulgation of standards for new direct dischargers. 33 U.S.C. § 1317(c), ELR STAT. 42130.

20. NRDC v. Train, 4 ELR 20108 (D.D.C. 1973), modified, 510 F.2d 692, 5 ELR 20046 (D.C. Cir. 1975), which opinion was modified, 5 ELR 20696 (D.C. Cir. 1975).

21. 33 U.S.C. § 1314(b)(1), ELR STAT. 42127.

22. See Hunciber & Pagano, Federal Environmental Litigation in 1976: The Federal Water Pollution Control Act, 1 HARV. ENVTL. L. REV. 59, 86, 87 (1976).

23. 33 U.S.C. § 1314, ELR STAT. 42126.

24. 33 U.S.C. § 1311, ELR STAT. 42123.

25. Hunciber & Pagano, supra note 22, at 87.

26. Comptroller General of the United States, Implementing the National Water Pollution Control Permit Program: Progress and Problems 7 (1976), reprinted in Implementation of the Federal Water Pollution Control Act: Hearings before the Subcomm. on Investigations and Review of the Committee on Public Works and Transportation, House of Representatives, 94th Cong., 2d Sess. 93, 109, 145 (1976).

27. American Frozen Food Institute v. Train, 538 F.2d 107, 6 ELR 20485 (D.C. Cir. 1976); Hooker Chemicals & Plastics Corp. v. Train, 537 F.2d 620, 6 ELR 20467 (2d Cir. 1976).

28. CPC International, Inc. v. Train, 515 F.2d 1032, 5 ELR 20392 (8th Cir. 1975). Because this was the first ruling on the issues, it created a great deal of confusion at EPA as to how to proceed with its standard-setting procedures.

29. American Iron and Steel Institute v. EPA, 526 F.2d 1027, 6 ELR 20068 (3d Cir. 1975); E.I. DuPont de Nemours & Co. v. Train, 528 F.2d 1136, 6 ELR 20117 (4th Cir. 1975) (DuPont I); American Meat Institute v. EPA, 526 F.2d 442, 6 ELR 20029 (7th Cir. 1975); American Petroleum Institute v. Train, 526 F.2d 1343 (10th Cir. 1975). See also Parenteau & Tauman, The Effluent Limitations Controversy: Will Careless Draftsmanship Foil theObjectives of the Federal Water Pollution Control Act Amendments of 1972?, 6 ECOLOGY L.Q. 1, 52-54 (1976).

30. 537 F.2d 642, 6 ELR 20461 (2d Cir. 1976).

31. Id. at 644, 6 ELR at 20462.

32. Id.

33. Id. at 647, 6 ELR at 20463, quoting Portland Cement Ass'n v. Ruckelshaus, 486 F.2d 375, 399, 3 ELR 20642, 20654 (D.C. Cir. 1973), cert. denied, 417 U.S. 921 (1974).

34. Id.

35. DuPont I, 528 F.2d 1136, 6 ELR 20117 (4th Cir. 1975) and E.I. DuPont de Nemours & Co. v. Train (DuPont II), 541 F.2d 1018, 6 ELR 20371 (4th Cir. 1976).

36. Parenteau & Tauman, supra note 29, at 6, 7.

37. 430 U.S. 112, 7 ELR 20191 (1977) [hereinafter the Supreme Court decision will be referred to as DuPont].

38. Id. at 129, 7 ELR at 20195.

39. Id. at 127, 7 ELR at 20194.

40. Id. at 126, 127, 7 ELR at 20194.

41. Id. at 128, 7 ELR at 20194.

42. Id. at 128 n.19, 7 ELR at 20194 n.19.

43. Weyerhaeuser Co. v. Costle, 590 F.2d 1011, 9 ELR 20284 (D.C. Cir. 1978), disallowing economic variances for individual companies and Appalachian Power Co. v. Train, 545 F.2d 1351, 6 ELR 20732 (4th Cir. 1976), allowing them.

44. 449 U.S. 64, 10 ELR 20924 (1980).

45. Id. at 83, 10 ELR at 20929.

46. Id. at 73-74 n.13, 10 ELR at 20926 n.13.

47. Appalachian Power Co. v. EPA, 671 F.2d 801, 12 ELR 20278 (3d Cir. 1982); Crown Simpson Pulp Co. v. Costle, 642 F.2d 323, 11 ELR 20450 (9th Cir.), cert. denied, 445 U.S. 193 (1981).

48. 33 U.S.C. § 1317, ELR STAT. 42129.

49. 33 U.S.C. § 1317(a) (prior to the 1977 amendments).

50. See Hall, The Evolution and Implementation of EPA's Regulatory Program to Control the Discharge of Toxic Pollutants to the Nation's Waters, 10 NAT. RESOURCES LAW. 507, 513-14 (1977); Environmental Defense Fund, Inc. (EDF) v. EPA, 598 F.2d 62, 68-69, 8 ELR 20765, 20767-68 (D.C. Cir. 1978).

51. 598 F.2d at 69, 8 ELR at 20768.

52. See Hall, supra note 50, at 516-17; EDF v. EPA, 598 F.2d at 70, 8 ELR at 20769.

53. See EDF v. EPA, 598 F.2d 74, 8 ELR at 20771.

54. 33 U.S.C. § 1317(b)(1), ELR STAT. 42130.

55. NRDC v. Train, 6 ELR 20588 (1976), rev'd in part sub nom. NRDC v. Costle, 561 F.2d 904, 7 ELR 20547 (D.C. Cir. 1977). As to the substantive approach of the decree, EPA contends in its brief in the NRDC pretreatment variance case, infra note 56, at 7, that it decided "to develop pretreatment standards for indirect dischargers upon a technology-based approach similar to that which the Act requires for direct dischargers" in order to "harmonize various statutory provisions." Application of the technological feasibility approach to pretreatment requirements seems somewhat inconsistent with their aim of preventing the introduction of pollutants into POTWs which would undermine the public investment in municipal pollution control, rather than achieving a particular technological level of treatment.

56. NRDC v. EPA, No. 81-1977 (3d Cir., filed 1981). The action was consolidated with Metal Finishers.

57. 33 U.S.C. § 1317(l), ELR STAT. 42124.

58. Id.

59. Among the possible cases to which this issue could be critical is one challenging EPA's authority to allow FDF variances from nontoxic pretreatment standards. In this situation, § 301(l) would not be dispositive. The Third Circuit noted this issue but refused to decide it on grounds of ripeness. 719 F.2d at 645 n.25, 13 ELR 21050 n.25. In a recent pretreatment regulation following the Metal Fibishers case, EPA construed the case as not applying to nontoxic discharges: "Since the opinion addressed only the availability of FDF variances for toxics, indirect dischargers are still eligible for FDF variances for nonconventional pollutants." EPA Electrical and Electronic Components Point Source Category Pretreatment Standards and New Source Performance Standards, 48 Fed. Reg. 55690, 55700 (Dec. 14, 1983).

60. Considering the merits of the argument, if the basis of decision is whether for variances BPT is more analogous to BAT or new source standards, then EPA should prevail. The DuPont Court that upheld the variance for BPT also employed, as a principal basis for accepting the whole EPA regulatory approach for existing direct sources, the dogma that Congress did not intend "any radical difference in the mechanism used to impose limitations for the 1977 [BPT] and 1983 [BAT] deadlines." 430 U.S. at 127, 7 ELR at 20194. The Court seemed to merge the two types of rulemaking for existing sources — BPT and BAT — into a single method despite certain word differences that the Court ultimately found not to be critical. The Court, in disallowing variances for new source standards, specifically noted striking contrasts with BAT, thus implying FDF variances were acceptable for BAT. Id. at 138, 7 ELR at 20197.

There are several possible defenses to the above conclusion, which though substantial, are not ultimately persuasive. The first involves EPA v. National Crushed Stone Ass'n, 449 U.S. 64, 10 ELR 20924 (1980), where the Supreme Court ruled subsequent to DuPont that the similarity required of the BPT and BAT processes did not extend so far as to make the § 301(c) economic hardship variance specified for BAT also apply to BPT. It could be argued that the converse of that ruling is that the FDF variance crafted by EPA for BPT standards does not apply to BAT.Dicta in Crushed Stone further supports this argument treating BPT and BAT differently for variance by suggesting that the § 301(c) variance bears the same relationship to the central BAT factors that the FDF variance for BPT bears to the BPT factors. Id. at 73-80, 10 ELR at 20927-28.

Second, DuPont's support for an FDF variance for pretreatment BAT can be rebutted by the argument that the BPT/BAT approach is not a proper basis upon which to judge the legality of the pretreatment variance. Congress only required that approach for direct sources. The Agency and the Supreme Court in DuPont thus had to fashion BPT and BAT requirements into a compatible methodology for controlling all direct discharges. The methodology had to be based on statutory language and policies for both BPT and BAT that in certain instances were conflicting. Because FDF variance from BPT fitted into or even made that overall scheme work is not reason the variance should be upheld for another program — pretreatment — that does not even require the BPT/BAT approach. A possible Achilles' heel for NRDC in arguing this is its participation with EPA in formulating and accepting in a consent decree the BPT/BAT approach for pretreatment in NRDC v. Train, 6 ELR 20588 (D.D.C. 1976), rev'd in part sub nom. NRDC v. Costle, 561 F.2d 904, 7 ELR 20547 (D.C. Cir. 1977) (the Flannery decree). NRDC did not, however, specifically agree to the variance component of the BPT/BAT approach and nothing in the Flannery decree specifically requires it. Other problems with the argument are that the legislative history of the 1977 amendments seems to endorse the Flannery decree, 123 CONG. REC. S19,647-48 (daily ed. Dec. 15, 1977), and the use of BAT for pretreatment. Conference report on H.R. 3199, which became the Clean Water Act of 1977, H.R. REP. NO. 830, 95th Cong., 1st Sess. 87, reprinted in A LEGISLATIVE HISTORY OF THE CLEAN WATER ACT OF 1977, COMM. ON ENVIRONMENT AND PUBLIC WORKS, at 271 (1978).

61. 33 U.S.C. § 1311(l), ELR STAT. 42124.

62. 33 U.S.C. § 1311(c) & (g), ELR STAT. 42123.

63. 719 F.2d at 646, 13 ELR at 21051. The Third Circuit noted that the Fourth Circuit had ruled in Appalachian Power Co. v. Train, 620 F.2d 1040, 1046, 10 ELR 20319, 20322 (4th Cir. 1980), that § 301(l) did not prohibit FDF variances from BPT limitations for direct toxic dischargers. It treated that decision as conflicting with its ruling and dealt with it by simply stating that it disagreed with the Fourth Circuit. Although the reasoning in the two decisions is clearly conflicting, the results could be construed as consistent if a different approach were taken. The Fourth Circuit case was on direct dischargers for which the Clean Water Act requires the two-step approach of BPT and BAT. See supra text accompanying notes 12-14. The statutory provisions for pretreatment only require a single standard, clearly omitting any BPT requirement. Upholding the BPT variance for direct dischargers could be based on the ruling in DuPont that it is integral to the BPT procedure. See supra text accompanying notes 35-42.Not allowing the variance for pretreatment then would be based on the statutory omission of any BPT requirement that necessitates a variance. But see supra note 60 stating that in the legislative history of the 1977 amendments to the Act, Congress endorsed the BAT approach for pretreatment.

64. 719 F.2d at 646, 13 ELR at 21051.

65. Whether or not elegant, the argument certainly is not a post hoc rationalization as perhaps implied by the judge's remark. The Supreme Court in EPA v. National Crushed Stone Ass'n, 449 U.S. at 77-78, 10 ELR at 20928 (1980), seemed to accept this view of the FDF variance. See infra text accompanying note 67. Also, Professor William Rogers, in his authoritative hornbook ENVIRONMENTAL LAW, states that the FDF variance is easily defended as a declaration of inapplicability of the categorical standard, adding "[g]eneric lawmaking, however determined, cannot anticipate all the concrete cases." W. ROGERS, ENVIRONMENTAL LAW, at 458-59 (1977).

66. EPA Brief, NRDC v. EPA, No. 81-1977, at 23 (3d Cir., filed Apr. 28, 1982). A similar explanation is contained in industry's petition for certiorari of Metal Finishers. Petition of Chemical Manufacturers' Ass'n, No. 83-1013, 52 U.S.L.W. 3512 (Dec. 19, 1983).

67. EPA v. National Crushed Stone Ass'n, 449 U.S. at 77-78, 10 ELR at 20928 (1980).

68. NRDC takes exception to this view, arguing that the FDF variance process significantly differs from the original standard-setting process in that (1) there is reduced opportunity for public comment; (2) there is no time limit for action; and (3) the decisions are made in the first instance by state officials or EPA regional offices rather that the EPA national office. These differences, according to NRDC, show that "the variance is in practice a localized modification, not a more appropriate standard." NRDC Reply Brief, NRDC v. EPA, No. 81-1977, at 12 n.8, (3d Cir., filed June 24, 1982).

69. Id. at 16.

70. NRDC Brief, supra note 66, at 32. The process allegedly can address numerous factors and has no time limit. Id.

71. EPA has approved only four of those variance requests. See Ward, supra note 8, at 7.

72. NRDC Reply Brief, supra note 68, at 16-17.

73. NRDC Opening Brief, supra note 70, at 35; EDF v. EPA, 598 F.2d 62, 8 ELR 20765 (D.C. Cir. 1978).

74. Petition for Certiorari, supra note 8, at 12.

75. Id. at 13.

76. Id. at 14.

77. Id. at 13.

78. Kennecott Copper Corp. v. EPA, 612 F.2d 1232, 10 ELR 20415(10th Cir. 1979). In Weyerhaeuser Co. v. Costle, the court referred to this phenomenon, stating that because of the deadlines in the Act, standards must be issued before much relevant data is obtained and that without the variance clause a company whose data was not considered in the original rulemaking could overturn the entire rule. 590 F.2d at 1040, 9 ELR at 20296.

79. See supra note 8.

80. In a few cases, information which would affect these PSES [pretreatment standards for existing sources] may not have been available to EPA or affected parties in the course of this rulemaking. As a result it may be appropriate to issue specific categorical standards for such facilities, treating them as a separate subcategory with more, or less, stringent standards as appropriate. This will only be done if a different standard is appropriate because of unique aspects of the factors listed in Section 304(b)(2)(B) of the Act ….

EPA Electrical and Electronic Components Point Source Category Pretreatment Standards and New Source Performance Standards, 48 Fed. Reg. 55690, 55700-01 (Dec. 14, 1983).

81. Similarly, during the pendency of DuPont, a commentator warned that if the EPA approach for regulating direct dischargers was invalidated by the Supreme Court, it would likely unravel the program the EPA had nearly completed. Parenteau & Tauman, supra note 29, at 6, 58-59. See also supra text accompanying note 29.

82. 33 U.S.C. § 1311(l), ELR STAT. 42124.