Sixth Circuit Holds Federal Facilities Immune from State Implementation Plan Permit Requirements

Federal agency activities, such as those of the Tennessee Valley Authority, the Bonneville Power Authority, and the military departments often contribute significantly to ambient loads of air, water and noise pollution. In recognition of the seriousness of these sources, Congress, in § 118 of the Clean Air Act,¹ § 313 of the Federal Water Pollution Control Act,² and § 4 of the Noise Control Act of 1972,³ provided that all federal agencies operating facilities or engaging in activities which may result in air, water or noise pollution shall comply with federal, state, interstate, and local pollution control and abatement requirements to the same extent that any person is subject to such requirements.

Although this mandate seems unambiguous, § 118 of the Air Act, which is set forth below,⁴ has been the subject [4 ELR 10108] of conflicting interpretations by federal officials and state pollution control agencies. State officials have argued that the law clearly subjects federal facilities to all state air pollution control requirements, including the necessity of obtaining state permits before emitting air pollutants. The federal contention on the other hand has been that although government facilities must meet substantive emissions standards set by state implementation plans, they are not bound to comply with state procedural requirements, such as permit regulations also contained in those plans. Executive Order 11752⁵ which was issued by President Nixon on December 17, 1973, formally stated this position as executive policy. Section 1 of the Order provides that:

Compliance by Federal facilities with Federal, State, interstate, and local substantive standards and substantive limitations, to the same extent that any person is subject to such standards and limitations, will accomplish the objective of providing Federal leadership and cooperation in the prevention of environmental pollution. In light of the principle of Federal supremacy embodied in the Constitution, this order is not intended, nor should it be interpreted, to require Federal facilities to comply with State or local administrative procedures with respect to pollution abatement and control.

On June 5, 1974, the Sixth Circuit Court of Appeals upheld the federal government's interpretation of § 118 by ruling that the TVA, the Atomic Energy Commission, and the Department of the Army need not obtain permits from the Kentucky Air Pollution Control Commission to operate equipment emitting air pollutants which the state.⁶ The decision affirmed a lower court's dismissal of an action brought by the Attorney General of Kentucky to compel these federal facilities to comply with the permit regulations of the state implementation plan. Under this plan, which was approved by EPA pursuant to § 110 of the Air Act, the owners and operators of all air polluting equipment within Kentucky are required to apply to and obtain a permit from the state Commission before operating their equipment. The state contended that this permit scheme represents the primary mechanism for the knowledgeable regulation of emissions and the timely prevention of violations within its air pollution control program. Kentucky further claimed that under § 118 the federal facilities in question were clearly subject to these requirements also. The defendants countered by asserting that the statute was never intended to subject federal instrumentalities to state permit regulations, and that the suit was in any case barred by sovereign immunity.

After an examination of the legislative history, the district court agreed with the defendants' interpretation of § 118. According to the court, both the House and the Senate clearly understood the law as contemplating a self-imposed policy of federal compliance with state emissions standards rather than the subjugation of federal facilities to state procedures. Under the Supremacy Clause, as explicated in McCullough v. Maryland,⁷ the Federal Government is immune from state regulatory measures unless Congress expressly directs otherwise in a particular case, and the court could find no such expression of congressional intent in this instance.

The lower court also ruled that the suit was in fact against the sovereign because it interfered with important federal functions, and was therefore barred by the doctrine of sovereign immunity, which prohibits suits against the government except where expressly authorized by statute. Here, Congress had included no such waiver of immunity on the question of federal compliance with state permit regulations. The court noted that sovereign immunity was waived in §§ 304 and 307 of the Act, but pointed out that neither section deals with state procedural requirements.

Before the Circuit Court, Kentucky reasserted its view of the meaning of § 118, and maintained that the permit requirement is an integral and substantive part of the Kentucky implementation plan, without which the state would be unable to meet its primary responsibility under the Clean Air Act for the maintenance and enhancement of air quality. The defendants, in reiterating their position that federal compliance with state and local procedural regulations is not required, stated their willingness to supply all the information sought on the permit application form without actually applying for the permit itself.

The appeals court ruled that suit against the federal defendants other than TVA and EPA is barred by sovereign immunity since § 118 contains no waiver of the privilege, while the waiver contained in § 304 does not permit suit to compel federal facilities to obtain permits from a state agency in order to continue in operation. The TVA defendants were held protected from suit by the Supremacy Clause since an examination of the legislative history revealed no clear congressional intent to subject federal agencies and officials to state and local regulations. The court also pointed to Executive Order 11752 as an administrative interpretation of § 118 which serves as heavy evidence [4 ELR 10109] against the state's view of the meaning of that statutory provision.

The parties had agreed that § 304 provides a mechanism by which the United States can be sued for violation of a state emission standard or limitation, but the plaintiff argued that this provision allows only actions to abate existing pollution, whereas the state also has a strong interest in preventing air pollution. Kentucky argued that the permit device is the only means by which such preventive control may be exercised.

In dismissing this argument, the court pointed out that § 304(f) (1), which allows the filing of an action for violation of a schedule or timetable of compliance, is a means by which the state may prevent violation of emission standards.By defining the term "emission standard or limitation" broadly in § 307(f), Congress, according to the court, provided a means of enforcing all of the substantive provisions of a state implementation plan, for prevention of air pollution as well as for abatement of continuing violations.

In conclusion, the court found a clear congressional mandate in § 118 that federal facilities comply with the emission standards and limitations of the state plan where they are located, and noted that such compliance is made enforceable by legal action under § 304. The court also stated its belief that the congressional scheme for accomplishing the statutory purposes of protecting and enhancing the quality of the nation's air resources and of instituting a program to achieve the prevention and control of air pollution did not include subjection of federal agencies to state and local permit requirements. And as a final word, the court set forth its conviction that "the national dedication to improvement of the environment by prevention and control of air pollution is in no way impeded by exempting federal agencies from the permit requirement" of the Kentucky plan.

Although the case law on the point of federal compliance with state adminstrative and procedural requirements under § 118 supports the court's decision, the entire body of that law other than Kentucky ex rel. Hancock consists of two district court cases. In the first of these, the court ruled without stating its reasons that § 118 did not require the U.S. Navy to obtain a state permit before operating equipment which would emit air pollutants.⁸ And in the second, the court in an unreported order dismissed a complaint similar to the one in the instant case.⁹

In contrast to this paucity of precedent on the meaning of § 118, the doctrine that federal instrumentalities are immune from state regulation unless specifically subjected to it by Congress has long been a guiding principle of constitutional law. But the danger with the Supremacy Clause, as with the doctrine of sovereign immunity, both of which are grounded in general policy considerations regarding the operation of the federal system, is not that it will be misinterpreted, but that it will be misapplied in a particular circumstance where contravening policy considerations counsel a different result. In Kentucky ex rel. Hancock, the court's examination of the Clean Air Act's legislative history is perhaps defensible, but its formalistic and heavy-handed brandishing of sovereign immunity and the Supremacy Clause represents just such a misapplication. The court ignored more recent actions by the federal government establishing new policies and priorities regarding environmental interests that emphasize the primacy of state and local authorities. The NPDES program established under the Federal Water Pollution Control Act, § 202(b) (2) of the Environmental Quality Act of 1970, § 101(a) of NEPA, and the implementation plan scheme of the Clean Air Act all stress that primary responsibility for implementing environmental protection is given to the states. This consistent legislative emphasis of state initiative within a cooperative federal-state approach to environmental problem solving provides a strong basis for arguing that § 118 should be read literally and federal facilities required to comply with all state implementation plan regulations.

The arbitrary division of such regulations into those which are "substantive" and thus enforceable against federal instrumentalities, and those which are "procedural" and therefore unenforceable, is another portion of the opinion which is less than satisfying. Although the court was not troubled by the state's assertion that the permit procedure is an integral and, in the court's terminology, substantive part of its implementation plan, the utility of permit programs in other areas of environmental protection lends substantial credence to Kentucky's claim. As the model of the as yet incomplete National Pollutant Discharge Elimination System (NPDES) envisioned by the FWPCA Amendments of 1972 shows, the permit process can serve not only to regulate emissions and ensure compliance with a fixed standard, but also as a mechanism by which timetables or schedules of compliance may be formulated intelligently.

The importance of this fact can be seen from the court's discussion of § 304. That analysis nominally expands the section's utility as an enforcement tool by finding that, in addition to abatement actions, the state can bring a preventive suit for breach of a compliance schedule. But it leaves a void in the state regulatory scheme since there is now no mechanism by which to formulate such a schedule. Although the government is willing to supply all the information called for on the permit application, the further necessary steps of coordinated review, consultation, modification, and the possible attachment of conditions are all foreclosed.

The result of this foreclosure will most probably be additional and unnecessary difficulties for both the states and federal facilities. The former will have a harder time playing their admittedly demanding role under the Clean Air Act in the protection of air quality, and the latter will [4 ELR 10110] be burdened with the task of constructing their own compliance schedules under the threat of a § 304 suit should such timetables either not be rigidly followed or appear inadequate to ensure accomplishment of the applicable state emission standard.

This last consequence is particularly ironic. Federal-state disputes which otherwise might have been resolved within the state permit process framework may not be forced into litigation under § 304, belying the court's rationale that the decision will keep important federal agency functions from being interfered with. The court's shortsighted obeisance to sovereign immunity and the Supremacy Clause, by forcing parties to crank up the judicial machinery, may thus ultimately prove more disruptive of federal activities than subjection to state procedures could have been.

Section 118 gives the President authority to exempt specific emissions sources from the section's compliance requirements if he finds that it is in the paramount interest of the United States to do so. Such an exemption may be granted for a period not to exceed one year, but may be renewed indefinitely upon an identical determination.Although the circuit court did not address this provision, the district court did not accept plaintiff's contention that it provided a means by which important federal functions can be protected from possible interference because of state permit requirements. This rejection was due to the further provisions of § 118 which forbid the granting of such exemptions to new stationary sources, or the exempting of any sources due to lack of appropriation unless the President specifically requested such an appropriation through the budgetary process and the Congress failed to make it available.

The district court viewed these provisions as necessitating the blanket application of sovereign immunity to protect from possible interference federal instrumentalities which could not be granted exemptions. These portions of the law can, however, much more plausibly be seen as statutory devices designed to ensure that new federal sources are constructed in compliance with all applicable emission standards under § 118, and to prevent executive impoundments from causing noncompliance by new or existing sources. Under this interpretation, if the provisions had their intended effect, then state permit procedures would not interfere with or disrupt federal functions, since the only federal facilities which might be in violation of state emissions standards without being exempted under § 118 would be those forced to do so by executive impoundment, a practice which the courts have almost uniformly held illegal. Many of the agencies operating these facilities have thus already been interfered with to the extent of being brought into court, and the federal government has continued to function surprisingly well in spite of it.

The circuit court's reliance on Executive Order 11752 as an authoritative administrative interpretation of § 118 is also highly questionable. This order was issued more than three years after the statute's passage, but only four months after the district court's ruling. It superseded Executive Order 11507 which included no such "substantive" - "procedural" distinction. These circumstances suggest an Executive Branch attempt to rewrite the law along the lines of the lower court's opinion, rather than an objective effort to clarify the meaning of a statutory provision.

Since § 313 of the FWPCA contains the same compliance language as § 118, the circuit court's decision in Kentucky ex rel. Hancock may have implications for the NPDES permit program. As envisioned by the Water Act, an NPDES permit designed to ensure compliance with EPA's effluent limitations will ultimately be required for almost any point source discharge into navigable waters. Permits are initially to be issued by EPA, with the states subsequently taking over the permit issuance function, subject to federal procedural requirements and to EPA's authority to veto any permit which it considers not to be in compliance with the Act. This schema is perhaps distinguishable from the jurisdictional arrangement in Kentucky ex rel. Hancock because of the federal procedural requirements which are imposed on state permit issuance and the ultimate federal veto power vested in EPA. During the House-Senate conference on the bill, however, Congressman James Wright (D.-Tex.) declared that state NPDES permit issuance would be state rather than federal action for the purposes of NEPA,¹⁰ so the possibility of judicial acceptance of this position cannot be ruled out.

The implications of the Sixth Circuit's ruling thus seem serious. The NPDES permit program is the heart of the FWPCA Amendments of 1972; if it is restricted as an indirect result of this ruling the national effort toward clean water could unnecessarily be set back. The court's blithe assumption that its decision will in no way harm or undercut the program to protect and enhance air quality is open to grave doubt. Both in the field of federal-state cooperation and decision making under the Clean Air Act and in the implementation of the Water Act, this decision, on what at first glance seems a minor procedural issue, may have far-reaching harmful consequences.

1. 42 U.S.C. § 1857f.

2. 33 U.S.C. § 1323.

3. 42 U.S.C. § 4904.

4. Section 118 provides:

Each department, agency, and instrumentality of the executive, legislative, and judicial branches of the Federal Government (1) having jurisdiction over any property or facility, or (2) engaged in any activity resulting, or which may result, in the discharge of air pollutants, shall comply with Federal, State, interstate, and local requirements respecting control and abatement of air pollution to the same extent that any person is subject to such requirements. The President may exempt any emission source of any department, agency, or instrumentality in the executive branch from compliance with such a requirement if he determines it to be in the paramount interest of the United States to do so, except that no exemption may be granted from section 1857c-6 of this title, and an exemption from section 1857c-7 of this title may be granted only in accordance with section 1857c-7 (c) of this title.

No such exemption shall be granted due to lack of appropriation unless the President shall have specifically requested such appropriation as a part of the budgetary process and the Congress shall have failed to make available such requested appropriation. Any exemption shall be for a period not in excess of one year, but additional exemptions may be granted for periods of not to exceed one year upon the President's making of a new determination. The President shall report each January to the Congress all exemptions from the requirements of this section granted during the preceding calendar year, together with his reason for granting each such exemption.

5. ELR 45017.

6. Kentucky ex rel. Hancock v. Ruckelshaus, 4 ELR 20484 (6th Cir. June 5, 1974).

7. 17 U.S. (4 Wheat.) 316 (1819).

8. California v. Stastny, 2 ELR 20561 (C.D. Cal. 1972).

9. Alabama v. Seeber, No. 72-939 (N.D. Ala. June 5, 1973).

10. 118 Cong. Rec. H. 9129 (daily ed. Oct. 4, 1972).