D.C. Circuit Rejects EPA's Use of the "Bubble Concept" in Applying New Source Performance Standards

On January 27, the United States Court of Appeals for the District of Columbia Circuit ruled that the Environmental Protection Agency (EPA) cannot apply the "bubble concept" in determining whether a modification in an existing plant is subject to new source performance standards under § 111 of the Clean Air Act.¹ In ASARCO, Inc. v. Environmental Protection Agency,² the court invalidated portions of EPA regulations providing that the new source performance standards, which are generally more stringent than emission standards for existing sources, do not apply if net emissions from the entire plant do the increase as a result of modification of a portion of it. This concept, which is similar to the agency's emission offset method of determining whether to allow new sources in nonattainment areas,³ treats the collection of individual buildings and facilities which make up an existing plant as a single "source" for the purpose of deciding whether a modification has resulted in an increase in emissions.⁴ If the pollutants emitted by a modified component are more than offset by reductions in emissions from components that have been partially or completely taken out of service, for example, the addition will not bring the new source performance standards into play.⁵ "Modification" of an existing source is covered by the bubble concept whereas new construction or "reconstruction" at the plant site is not.⁶

Although the bubble concept was adopted to deal with the special problems of the nonferrous smelter industry, its ramifications are much broader. The definition applies equally to owners or operators of other major industrial plants seeking to avoid the more stringent new source performance standards. Reductions in emissions from portions of the plant could serve to allow such operators to expand production (and increase emissions) at other facilities without having to acquire the more effective but more expensive control technology required to meet those standards.

In ASARCO, the regulations embodying this approach were attacked by both the Sierra Club and several nonferrous smelter companies. The former charged that adoption of the bubble concept for modified sources exceeded EPA's authority under the Act and subverted the statutory purpose of enhancing air quality. The industrial petitioners, on the other hand, argued that the regulations were impermissibly inconsistent in allowing use of the bubble concept in determining whether the new source performance standards apply to a specific modified source while not permitting its use in making the same determination for newly constructed or reconstructed facilities at existing plant sites.

Background

EPA's original regulations⁷ implementing § 111 did not allow an entire plant to be considered a single stationary source for the purpose of applying the new source performance standards. The bubble concept was suggested by the nonferrous smelting industry in 1972 as a desirable amendment to these rules, and the Department of Commerce supported the industry on this point in a number of interagency communications.⁸

EPA's major objection to adopting any form of the bubble concept was that it would make emission standards very difficult to enforce.⁹ The agency nonetheless finally bowed to the pressure and made a series of changes in its position, culminating in the adoption in 1975 of revised regulations which defined a stationary source as "any one or a combination" of facilities.¹⁰ The regulations specifically providedthat a "modification" triggering the new source performance standards would not be deemed to have occurred if the total emissions of any pollutant from all existing facilities comprising the source had not increased as a result of a physical or operational change.¹¹ The rules thus in effect adopted the bubble concept for plant modifications and allowed an operator who changes an existing facility in a way that increases it emissions to avoid the application of new source performance standards by decreasing emissions from other facilities within the same plant.

The ASARCO Decision

In his opinion for the court, Judge Wright acknowledged at the outset of his analysis that EPA's interpretation of provisions of the Clean Air Act is entitled to substantial judicial deference under dicta in recent Supreme Court decisions.¹² Nevertheless, he asserted, a reviewing court must carefully examine the agency's position to see if it is reasonable in light of the statutory language and legislative history. As an illustration that the court must do more than simply rubberstamp the EPA position, Judge Wright pointed to two recent D.C. Circuit decisions¹³ in which EPA's interpretation [8 ELR 10053] of provisions of the Clean Air Act and the Noise Control Act of 1972 were invalidated as being contrary to the clear import of the relevant statutory language and legislative history of those Acts.

The court first considered the Sierra Club's contention that EPA's regulations governing application of the new source performance standards were inconsistent with the plain language of § 111. The court immediately noted the clear disparity between § 111(a)(3) of the Act, which defines a stationary source as "any building, structure, facility or installation" that emits or may emit an air pollutant,¹⁴ and the regulations' definition of such a source to include "any … combination of … facilities…."¹⁵ Finding no persuasive justification for this conflict, Judge Wright concluded that the regulations were in fact inconsistent with the language of the Act insofar as they incorporated the bubble concept.

The court's conclusion on this point was reinforced by several additional considerations. Judge Wright noted that one of the basic purposes underlying the statute is the enhancement of air quality. He pointed out that adoption of the bubble concept undercut this goal by allowing operators to avoid installing the best pollution control technology that has been adequately demonstrated on modified facilities by escaping application of the new source performance standards. He also termed the regulations internally inconsistent and confusing in that they defined a stationary source as an entire plant when determining whether a source has been modified but as an individual facility when a source is newly constructed or reconstructed.

In addition, the court found unconvincing EPA's argument that the bubble concept is necessary to provide flexibility in applying new source performance standards to modified facilities because the cost of bringing existing facilities into compliance with such standards is much greater than the cost of bringing new facilities into compliance. In Judge Wright's view, such cost considerations should be taken into account in setting the relevant new source performance standards at the outset rather than in determining whether these standards apply to particular facilities.

The court also noted that EPA's partial adoption of the bubble concept was supported primarily by examples drawn from circumstances peculiar to the nonferrous smelting industry. The proper forum in which to consider the economic and technological problems of a particular industry, the court ruled, is the proceeding setting the new source performance standards for that industry. Having determined that any version of the bubble concept is incompatible with the statutory language and purpose, Judge Wright had no difficulty rejecting industry's contention that for consistency's sake a stationary source must be defined to include an entire plant for new construction or reconstruction as well as modification.

In a short concurring opinion, Judge Leventhal voiced the fear that EPA's partial adoption of the bubble concept would potentially immunize all modified facilities from compliance with new source performance standards. He also reiterated Judge Wright's suggestion that the EPA Administrator set more liberal performance standards for modified facilities than for newly constructed or reconstructed facilities in the same industrial categories if cost considerations so dictate.

Conclusion

The court's invalidation of EPA's partial incorporation of the bubble concept into the new source performance regulations in ASARCO seems correct given the facial contradiction between these provisions and the statutory language. Commentators had previously questioned the concept's validity under § 111 of the Act,¹⁶ and EPA itself had originally interpreted that section as requiring the application of new source standards to all modifications regardless of offsetting emission reductions in other parts of a modified plan.¹⁷

The court's decision was based on the belief that EPA had chosen the wrong method by which to ease the plight of the smelting industry. Judges Wright and Leventhal saw the bubble concept as a loophole in the Act through which many other sorts of industrial sources could escape application of the new source performance standards for plant modifications. The court's rejection of the concept closes this escape route, and the suggestion of differential standards for modified facilities represents a less openended way of making allowances for the greater cost of upgrading emission controls in connection with modifications of existing facilities than designing them into new ones.

Judge Wright's description of the factual background in the case raises the suspicion that he perceived his ruling as essentially forcing EPA to return to the position it wanted to adopt in the first place. But the court's statement that EPA should instead set separate standards for modified sources, together with its reference to the pending proceeding for review of the new source performance standards for the nonferrous smelting industry, strongly suggests that EPA will now have to revise those industry standards.

1. The Act includes the "modification" of "any stationary source" within the definition of new sources subject to these standards. Section 111(a)(2), 42 U.S.C. § 7411(a)(2), ELR STAT. & REG. 42216.

2. __ F.2d __, 8 ELR 20164 (D.C. Cir. Jan. 27, 1978).

3. 41 Fed. Reg. 55524 (Dec. 21, 1976). See Comment, Emission Offsets: EPA Rules Clean Air Act Allows New Sources in Nonattainment Areas, 7 ELR 10029 (Feb. 1977).

4. 40 C.F.R. § 60.2(d) (1977).

5. 40 C.F.R. § 60.14(d) (1977).

6. The difference between "reconstruction" and "modification" is quantitative: any changes in existing facilities that cost more than a fixed percentage of the value of the changed facility are classified as "reconstruction." 40 C.F.R. § 60.15 (1977).

7. 36 Fed. Reg. 24877 (1971).

8. ASARCO, Inc. v. EPA, __ F.2d at __, 8 ELR at 20166.

9. Id. at __, 8 ELR at 20166.

10. 40 C.F.R. § 60.2(d) (1977), 40 Fed. Reg. 58416 (Dec. 16, 1975).

11. 40 C.F.R. § 60.14(d) (1977).

12. Union Electric Co. v. EPA, 427 U.S. 246, 256, 6 ELR 20570, 20573 (1976); Train v. NRDC, 421 U.S. 60, 75, 87, 5 ELR 20264, 20267, 20270 (1975).

13. Lubrizol Corp. v. EPA, 562 F.2d 807, 7 ELR 20652 (D.C. Cir. 1977); Ass'n of American Railroads v. Costle, 562 F.2d 1310, 7 ELR 20730 (D.C. Cir. 1977).

14. 42 U.S.C. § 7411(a)(3), ELR STAT. & REG. 42216.

15. 40 C.F.R. § 60.2(d)(1977).

16. See, e.g., W. RODGERS, ENVIRONMENTAL LAW § 3.10 at 273 (1977).

17. See 36 Fed. Reg. 24877 (1971).