American Petroleum Institute v. Costle

No. 79-0858 (E.D. La. July 16, 1981)

The court enjoins Environmental Protection Agency (EPA) enforcement of new discharger rules against movable offshore oil drilling rigs and upholds signatory and certification regulations implementing the national pollutant discharge elimination system (NPDES) permit program under the Federal Water Pollution Control Act. Initially, the court rules that it has jurisdiction pursuant to the Administrative Procedure Act. It then rejects EPA's claim that the court erred in considering affidavits from plaintiffs, which were not part of the administrative record since the affidavits concerned only the extent of the irreparable injury plaintiffs would suffer if injunctive relief was not granted.

Turning to the substantive issues, the court first holds that it must adhere to its former ruling enjoining the enforcement of the new discharge rules since no new arguments in their support were presented. Finally, the court holds that it was not arbitrary or capricious for EPA to require senior corporate officials to sign NPDES permit applications. Although the signatory provision lacks factual support in the record, such support is unnecessary for quasi-legislative policy decisions of this sort. In addition, the provision is not invalid even though communications with the Department of Justice were not included in the record. It is well established that agency personnel may consult privately with officials from other executive offices in developing regulations. EPA acted within its statutory authority in enforcing the regulations. It also properly determined not to (1) incorporate the Justice Department communication in the record because of the policy nature of the signatory provision, (2) explain the purpose of the provision in the preamble to the regulations, or (3) give consideration in the record to the costs of compliance.

Counsel for Plaintiffs
Gene W. Lafitte
Liskow & Lewis
50th Floor, One Shell Sq., New Orleans LA 70139
(504) 581-7979

Counsel for Defendants
David T. Buente Jr.
Land and Natural Resources Division
Department of Justice, Washington DC 20530
(202) 633-2807

Francis Allen, Ass't U.S. Attorney
3B12 Fed. Bldg., Shreveport LA 71101
(318) 226-5277

[12 ELR 20952]

DAVIS, J.:

Ruling on Motion

The plaintiffs brought suit to enjoin the Environmental Protection Agency (EPA) from enforcing regulations promulgated for the administration of the National Pollutant Discharge Elimination System (NPDES) established under the Federal Water Pollution Control Act (FWPCA), 33 U.S.C. § 1251 et seq. After oral argument concerning three sets of regulations,¹ the court on July 17, 1980, issued an order temporarily restraining the enforcement of the "new discharger" regulations insofar as they applied to movable drilling rigs operating in the Gulf of Mexico, excluding areas deemed environmentally sensitive by the Bureau of Land Management.

Before the hearing to consider the issuance of a preliminary injunction, the agency agreed to suspend the enforcement of the "new source" regulation, and the court therefore considered only the "new discharger" and "signatory and certification" regulations. After a hearing on August 18, 1980, the court enjoined the new discharger regulations but permitted implementation of the signatory and certification requirements set by the agency. Thereafter, the parties supplemented the record and submitted to the court without oral argument the issue of a permanent injunction.

Two threshold issues require resolution before the merits of the parties' contentions may be addressed. First, the agency takes the position that the court is without jurisdiction to review the challenged regulations. Second, EPA contends that the court was in error to consider affidavits filed by API which were not a part of the administrative record.

I conclude that this court has jurisdiction under the terms of the Administrative Procedure Act, 5 U.S.C. § 701 et seq. In a pretrial memorandum the parties filed with the court on August 18, 1980, prior to the hearing on the preliminary injunction, the agency agreed that jurisdiction to review the regulations lay under that act. The contrary contention now made by the government is without merit.

The agency also argues that error was committed when the court considered affidavits filed by API on the question of irreparable injury. The agency takes the position that only the administrative record (with several exceptions not relevant to this case) may be considered by the reviewing court. The industry plaintiffs concede that this is, indeed, the general rule, but point out that courts have looked to evidence outside the record for assistance in understanding technical or scientific data or for determining whether the agency considered all relevant factors in promulgating the regulations, Independent Meat Packers Ass'n v. Butz, 526 F.2d 228 (8th Cir. 1975), cert. denied 424 U.S. 966, 96 S. Ct. 1461, 47 L. Ed. 2d 733 (1976); Hiatt Grain & Feed, Inc. v. Bergland, 466 F. Supp. 457 (D. Kan. 1978). Moroever, API notes that in some cases affidavits have been considered (although apparently without objection) to determine whether plaintiffs will be irreparably injured in injunctive relief is withheld, Hamlin Testing Laboratories, Inc. v. United States Atomic Energy Comm'n, 337 F.2d 221, 222 (8th Cir. 1964); Dow Chemical, USA v. Consumer Product Safety Comm'n, 459 F. Supp. 378, 394 [9 ELR 20016] (W.D. La. 1978); International Waste Controls, Inc. v. Securities and Exchange Comm'n, 362 F. Supp. 117, 120-121 (S.D.N.Y. 1973).

The agency cites National Pork Producers Council v. Bergland, 631 F.2d 1353 (8th Cir. 1980), reversing National Pork Producers Council v. Bergland, 484 F. Supp. 540 (S.D. Iowa 1980) and Washington State Farm Bureau v. Marshall, 625 F.2d 296 (9th Cir. 1980), as instances in which district courts have been reversed for considering evidence not submitted to the administrative agency. However, neither case dealt with affidavits directed to the issue of irreparable injury. In Washington State Farm Bureau, the extra-record material consisted of expert testimony concerning the minimum time which had to elapse before adolescent harvestes could safety reenter berry fields sprayed with various pesticides. In the National Pork Producers case, the Eighth Circuit merely noted in passing that the district judge had considered extra-record materials, but then reversed his decision after an "independent review" of the record; it is unclear whether the extra-record evidence constituted reversible error in itself.

The agency also relies on Manufacturing Chemists Ass'n v. Costle, 455 F. Supp. 968 [8 ELR 20589] (W.D. La. 1978), in which the court granted EPA's motion to strike exhibits, stating that only the administrative record should be looked to in determining the legality of the challenged regulations. However, it is clear that the district judge was deciding the legality and propriety of the regulations and not whether a petitioning party had suffered the requisite injury entitling him to injunctive relief, an extraordinary remedy. In the instant case, API's affidavits concern the irreparable harm its members will suffer if the regulations at issue are enforced. The legality of the agency's action is not contested by the affidavits, which merely point out the harm the regulations will occasion to particular parties. Whether the regulations are "arbitrary and capricious" is another question, which, in the context of an injunction hearing, is considered as part of the plaintiff's burden in proving his likelihood of success. The court is therefore not persuaded that the offered affidavits cannot be considered to the extent indicated.

API also contends that an exception to the rule regarding extra-record evidence is presented if the parties demonstrate that they had no fair opportunity to present their views. API began its opposition to the new discharger regulations, contending chiefly that the agency lacked authority to create this classification and noting only inferentially that the regulations, as then written, could conceivably apply to mobile drilling rigs each time they moved to a new location. Finally regulations promulgated in 1979 defined a new discharger as a facility which, among other factors, "has never received a finally effective NPDES permit," 40 CFR § 122.3(u), a definition which API says fostered a belief that only one permit for an individual facility was required regardless of its movement to a new location. This impression was apparently reinforced by the preamble to the 1979 proposed generic regulations which discussed the problem of intermittent discharges and stated that the agency "does not intent to require a new permit automatically when a discharge ceases. Many permits cover facilities which in the normal course of their operations cease and recommence discharge." 44 Fed. Reg. 32859 (1979). Only in the final 1980 regulations was the site-specific language added to the new discharger definition.

The government's response to this argument is merely to assert that API was obviously aware of the regulation's application to movable rigs because API challenged the new discharger regulations when it filed suit in 1979. However, this position disregards the connections members of API may have with other facilities which more obviously came within the earlier definitions of new discharger. Therefore, these factors also militate in favor of considering the affidavits filed by the industry to determine whether irreparable harm will occur unless the regulations are enjoined.

Turning to the substantive issues of the case, the court is of the opinion that the previous ruling concerning the new discharger regulations is correct. Apart from the threshold issues discussed earlier, no argument was presented which was not previously considered on the application for preliminary injunction. The court therefore adheres to its former ruling enjoining the enforcement of these regulations in a manner consistent with the judgment rendered August 29, 1980.

The second regulation challenged by the plaintiffs, 40 CFR § 122.6, establishes new requirements for the signing and certification of permit applications. API again urges its contentions that the agency lacks the necessary statutory authority to promulgate the regulation and that the regulation is arbitrary and capricious because of the heavy burden placed on principal executive officers who must sign and certify all NPDES permit applications. The court considered these arguments before refusing to grant a preliminary injunction, and no new argument has been presented which requires reaching a different conclusion.

API also contends that the record does not support the regulation and instead demonstrates the agency's consideration of improper factors in reaching its decision. The plaintiffs also find the agency remiss for failing to consider the burdens the regulation would impose and claim that the agency's hesitancy in promulgating [12 ELR 20953] the regulation evidences a recognition of its deleterious effects. These objections will be considered in order.

In essence, the plaintiffs argue that the record must contain a rational basis, supported by competent evidence, for the challenged regulation, and note that the only justification offered for the regulation appears in the preamble in a list of goals the regulation was designed to accomplish. Although APR cites an array of cases stating the requirement of a factual basis in the administrative record for agency action, their inapplicability to the case at hand is apparent. In National Nutritional Food Ass'n v. Weinberger, 512 F.2d 688 (2nd Cir. 1975), the Commissioner of the Food and Drug Administration issued regulations treating high unit preparations of Vitamins A and D as prescription drugs. The only explanation for his action was a statement that the vitamins at high dosage came squarely within the Food & Drug Act's definition of "drug." The Second Circuit determined that agency experience without adequate explanation in the record cannot provide a factual basis for a regulation. A similar result was reached in Aqua Slide 'N' Dive Corp. v. Consumer Product Safety Comm'n, 569 F.2d 831 (5th Cir. 1978), in which the Fifth Circuit enjoined regulations affecting swimming pool slides which were based on economic analyses not made part of the administrative record. Data on overtonnage, not in the record but "reposing in the files of the Commission," were erroneously relied on by the Federal Maritime Commission to permit competitors to enter into a joint service agreement in United States Lines v. Federal Maritime Comm'n, 584 F.2d 519 (D.C. Cir. 1978).

In each of the cited cases, the determination to be made was one susceptible of factual verification: the qualities which make a vitamin a drug; the data which supported the Product Commission's view that the regulation was economically feasible; the amount of overtonnage needed to justify the Maritime Commission's sanction of an anticompetitive arrangement. The issue, therefore, is whether the decision to require high-level executives to sign and certify permit applications is one requiring a basis in factual findings or whether such a decision is essentially a legislative one for which factual certainties do not exist.

The agency's position on this issue, that the regulation in question is essentially an exercise in legislative decision making, finds support in the jurisprudence. In Industrial Union Department, AFL-CIO v. Hodgson, 499 F.2d 467 [4 ELR 20415] (D.C. Cir. 1974), a labor union challenged as too lenient the standards for maximum exposure to asbestos dust promulgated by the Occupational Safety and Health Administration. The Court recognized the agency's discretion to set the level at five fibers (greater than five microns in length) per millimeter of air instead of two, noting that OSHA had heard testimony from proponents of standards from zero to 12 and that none was convincing. Furthermore, the court recognized the legislative function played by the agency: "By the same token, when the Secretary is obliged to make policy judgments where no factual certainties exist or where facts alone do not provide the answer, he should so state and go on to identify the considerations he found persuasive," 449 F.2d 467, 476.

A similar position was taken by the Fifth Circuit in Superior Oil Company v. Federal Energy Regulatory Comm'n, 563 F.2d 191 (5th Cir. 1977), concerning a requirement that oil companies disclose their expenditures for exploration and development. Superior challenged the regulation as requiring information from subsidiaries not under the agency's jurisdiction and argued that the decision to require the reporting was not supported by the record. In dismissing these arguments, the Fifth Circuit observed:

At the root of this choice lies not ascertainable fact but a policy decision about how precise factual data must be for the FPC to determine reasonable rates under a broad statutory mandate.[FN omitted] While we do not adopt a single rule for all rule-making, we recognize that many legislative judgments cannot be anchored securely and solely in demonstrable fact, [citations omitted], and consequently these policy choices are not susceptible to the same type of verification or refutation by reference to the record as are factual questions. 563 F.2d 191, 200-201.

The Supreme Court has also recognized this distinction. In Federal Communications Comm'n v. National Citizens Committee for Broadcasting, 436 U.S. 775, 98 S. Ct. 2096, 56 L. Ed. 2d 697 (1978), the Court reviewed FCC regulations prohibiting common ownership of a television or radio station and a newspaper in one locality, but containing a grandfather clause. In reversing the Court of Appeals, the Court held that a factual basis for the grandfather clause was not required: "However, to the extent that factual determinations were involved in the Commission's decision to grandfather most existing combinations, they were primarily of a judgmental or predictive nature . . . . In such circumstances, complete factual support in the record for the Commission's judgment or prediction is not possible or required." 436 U.S. 775, 813-814, 98 S. Ct. 2096, 2121, 56 L. Ed. 2d 697, 726.

These cases squarely support the agency's position that the regulation in question, requiring signature by a high executive rather than a delegated subordinate (the previous system), is the sort of policy decision which is not susceptible of "complete factual support." Therefore, API's position that the regulation is unsupported in the record is erroneous.

API also advances the argument that interagency communications between the agency and the Department of Justice constituted the true basis for the challenged regulations, that these communications took EPA into areas beyond its statutory authority, and that the communications were not made part of the administrative record or explained in the regulation's preamble. For the following reasons, this contention is unpersuasive.

API points to a public meeting conducted in San Francisco in which an EPA panel member stated that the Department of Justice had suggested changes in the signatory and certification procedure to obtain a surer level of high cooperate liability and that some of the language used had been suggested by Justice attorneys. Although API has suggested that such communication was per se objectionable, the law is well established that an agency head in proceedings much more formal and adversarial than the rule-making procedure involved here, Hercules, Inc. v. Environmental Protection Agency, 598 F.2d 91 [8 ELR 20811] (D.C. Cir. 1978); Hoffman-LaRoche, Inc. v. Kleindienst, 478 F.2d 1 (3rd Cir. 1973); Wilson and Company, Inc. v. United States, 335 F.2d 788 (7th Cir. 1964).

API's corollary position that the enforcement of EPA regulations is beyond the statutory authority of the agency places form over substance. Although the agency does not prosecute criminal actions, under § 506 of the Clean Water Act, 33 U.S.C. § 1366, the Administrator is empowered to request the Attorney General to represent the United States in any criminal action instituted under the Act to which the Administrator is a party. The argument that EPA has no interest in the effective enforcement of its regulations and that it cannot communicate with the Department of Justice to ensure adequate enforcement is unrealistic and finds no support in the jurisprudence.

API also takes issue with the agency's failure to include this communication in the administrative record or to state in the preamble that effective enforcement of its regulations was a principal purpose of the new regulation. In light of the court's previous ruling that the regulation in question had aspects of a legislative decision, it is questionable whether the communications, even if formally written, would be required to be filed in the record since no factual basis for the regulation is required. It is also instructive to note that under the Clean Air Act, "The drafts of proposed rules . . . for any interagency review process prior to proposal of any such rule, all documents accompanying such drafts, and all written comments thereon by other agencies . . . ." 42 U.S.C. § 7607(d)(4)(B)(ii), must be made a part of the record for judicial review of regulations. Congress' silence on this point in the Clean Water Act suggests that such information need not be made a part of the record in a proceeding under the CWA.

API's position that the preamble fails to disclose the purpose of the regulation is clearly unavailing. The preamble clearly states that the regulation seeks to imbue a higher level of corporate concern for environmental problems and to insure an adequate level of corporate responsibility for violations. These statements echo the considerations apparently discussed with the Department of Justice and refute the industry's position on this issue.

API's final argument that EPA failed to consider the burdens [12 ELR 20954] this regulation would occasion is also unpersuasive. The industry cites EPA's interim suspension of the regulation as indicating an awareness that substantial burdens would be occasioned by its enforcement, but on the other hand condemns the agency for not considering these burdens in promulgating the regulation. In fact, EPA deleted a proposal that permit reports as well as applications be signed and also issued a policy letter stating that officers signing the applications could rely on the representations made by subordinates amassing the data and were not required to have personal knowledge of the information. API also contends that the agency failed to consider the costs of the new system, but the record supports the agency's position that the costs were considered and were not determined to be onerous.

In light of these considerations, the plaintiff have failed to prove the regulation to be either procedurally or substantively invlid, and their request for a permanent injunction of the regulation is therefore denied.

Counsel for plaintiff is directed to submit, within 10 days, a judgment to the court for signature. If no opposition to the form of the judgment is received within five days of its receipt, it will be signed.

1. 40 CFR § 122.66(b), definitions of "new source" and "modification" of an existing source; 40 CFR § 122.6, signatory and certification requirements for permit applications; and 40 CFR §§ 122.3, 122.10(a), 122.53, 122.66(b)(4) and 124.60(a), concerning "new dischargers."