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20 ELR 20556 | Environmental Law Reporter | copyright © 1990 | All rights reserved United States v. Zimmer Paper Products, Inc.No. IP 88-194-C (S.D. Ind. December 5, 1989)The court holds that an internal Environmental Protection Agency (EPA) memorandum that imposes new and more stringent Clean Air Act duties on the paper coating industry violates the Administrative Procedure Act because it was not subject to notice and comment rulemaking. The memorandum provides that compliance with state implementation plan emission limits, expressed in terms of mass of volatile organic compounds per unit volume, must be determined on an equivalent solids basis. The memorandum also stated that emissions achieved through incineration must be equivalent to those attainable under the alternative approach of using a higher solids coating. The court holds that the memorandum amounts to a legislative rule and thus must be subject to notive and comment rulemaking before being applied to the paper poroducts industry. The memorandum imposes additional, substantial emissions requirements beyond those in the present regulations. Further, EPA made clear in its enforcement action that it regards the memorandum to have a present, binding effect on regulated firms. The memorandum also amended a prior legislative rule that had been adopted through notice and comment procedures. Counsel for Plaintiff Counsel for Defendant This cause is before the Court on cross-motions for summary declaratory judgment filed by the plaintiff, United States of America (the government), and the defendant, Zimmer Paper Products, Inc. (Zimmer), on Zimmer's counterclaim. For the following reasons, Zimmer's motion is granted, and the government's motion is denied. The Clean Air Act, 42 U.S.C. § 7401, et seq., provides a comprehensive program for controlling air pollution through integrated state and federal regulation. The Environmental Protection Agency (EPA)is responsible for identifying air pollutants that endanger the public health or welfare, determining what concentrations of those pollutants are safe, and promulgating its determinations as National Ambient Air Quality Standards (NAAQS). 42 U.S.C. §§ 7408-09. The states must then draft State Implementation Plans (SIPs) to achieve and maintain compliance with the NAAQS. 42 U.S.C. § 7410(a)(1). Prior to submission of an SIP to the EPA, the State must have adopted its provisions "after an opportunity for notice and public hearings." 42 U.S.C. § 7410(a). Once approved by the EPA, provisions of the SIP are enforceable as federal law. 42 U.S.C. § 7410. A similar rule applies to revisions of the SIP by the State. Under the statute, the Administrator of the EPA will approve a revision only if it was adopted by the State "after reasonable notice and public hearings." 42 U.S.C. § 7410(a)(3)(A). EPA published control technique guidelines (CTGs) in order to assist the states in developing regulations with respect to VOC emissions. One area of industrial pollution addressed by the NAAQS and Indiana's SIP was the release of volatile organic compounds (VOCs) by the paper coating industry. Emissions of VOCs by the coating industry are regulated by the following provision of Indiana's SIP: Section 5. Paper Coating . . . (b) No owner or operator of a coating line subject to this section may cause, allow or permit the discharge into the atmosphere of any volatile organic compounds in excess of . . . 2.9 pounds per gallon excluding water, delivered to the coating applicator from a paper coating line. 326 IAC § 8-2-5(b). Operators of paper coating lines may comply with the above emission limitation "through one or any combination of the following: (C) Higher solids (low solvent) coating . . . (D) Water based coatings . . . (E) Transfer efficiency improvements . . . (F) The use of non-photochemically reactive solvents . . . (G) Other methods approved by the Board . . . ." After Indiana's SIP had been approved by the EPA, what the government characterizes as an "internal memorandum" (the Rhoads memo) was distributed to the chiefs of the Air Programs Branch in the ten EPA regional offices. This "memo" was written by Richard Rhoads, director of EPA's Control Programs Development Division. In short, the Rhoads memo stated that difficulties had arisen in securing compliance with emissions limitations in the paper industry when add-on control equipment (incinerators) is used. To eliminate these difficulties, the Rhoads memo stated that units of emissions in mass VOC per volume of coating "cannot be used." (Emphasis original.) Rather, emissions limitations "must be based on mass of VOC per volume of solids consumed." (Emphasis original.) In addition, the memo stated that the emissions achieved through incineration must be equivalent to those attainable under the alternative approach of using a higher solids (lower solvent) coating. Defendant Zimmer operates a facility in Indianapolis which coats, prints, and cuts paper for food packaging overwrap and pressure sensitive labels. Zimmer's "Faustel" coating line applies a solvent based coating that is subsequently dried in an oven. During the coating process, VOCs in the solvent system are released into the atmosphere. Based on a March 5, 1987 inspection, the EPA found that Zimmer's Faustel line was not in compliance with the Indiana SIP, specifically the emissions limitation set out in 326 IAC § 8-2-5(b). As a result, the government filed the present action on February 18, 1988, seeking an injunction and civil penalties against Zimmer for excessive emissions of VOCs. EPA also informed Zimmer that in order to comply with Indiana's SIP, its emissions would be measured pursuant to the procedures set out in the Rhoads memo. Zimmer responded by filing a counterclaim which alleges that EPA and Indiana authorities are relying on the Rhoads memo as if it were a "legislative rule." Zimmer argues that since the Rhoads memo has not been duly promulgated as a rule as required by law, it cannot be adversely affected by the emissions requirements of the memo because they go beyond the requirements promulgated in 326 IAC § 8-2-5(b). This cause is now before the Court on cross-motions for summary declaratory judgment on Zimmer's counterclaim. The issue before the Court is whether the Rhoads memo is a legislative rule. A legislative rule must first be promulgated pursuant to the notice and comment provisions of the Administrative Procedure Act (APA) prior to its implementation. 5 U.S.C. § 500, et seq. (1989). If a legislative rule is not properly promulgated in this fashion, it cannot be applied adversely to any party, 5 U.S.C. § 552(a)(1). The government argues that the Rhoads memo is not a legislative rule. Rather, the government contends that the Rhoads memo is merely a policy statement or interpretive rule which clarifies how to determine whether add-on controls — such as incinerators — comply with Indiana's emission limitation. Thus, the Rhoads memo was intended to clear up confusion over the appropriate means of determining compliance with emissions limitation, not as a substantive change in those limitations. In this vein, the government reasons that the Rhoads memo is nothing more than a policy statement to educate agency officials in their work. Zimmer responds that the Rhoads memo does not merely interpret or construe the present Indiana regulations, 326 IAC §§ 8-2-5(b) and 8-1-2. Rather, the Rhoads memo is a legislative rule because it imposes additional, substantive emissions requirements beyond those embodied in the present regulations. I. Legislative and Interpretive Rules The APA provides in pertinent part as follows: Each agency shall separately state and currently publish in the Federal Register for the guidance of the public . . . (D) substantive rules of general applicability adopted as authorized by law . . . and (E) each amendment, revision, or repeal of the foregoing. Except to the extent that a person has actual and timely notice of the terms thereof, a person may not in any manner be required to resort to, or be adversely affected by, a matter required to be published in the Federal Register and not so published. 5 U.S.C. § 552(a)(1). The APA also requires that proposed rulemaking published in the Federal Register be subject to public notice and comment. 5 U.S.C. § 553(b). However, an exception from the notice and comment requirement is made for " interpretive rules and statements of policy." 5 U.S.C. § 553(d)(2). An interpretive rule or policy statement, as it is sometimes called, "expresses the agency's view of what another rule, regulation, or statute means." Allied Van Lines, Inc. v. I.C.C., 708 F.2d 297, 300 (7th Cir. 1983) (citation omitted). Thus, interpretive rules "are designed primarily to provide both practitioners and laymen with explanations and clarifications of what are often the very intricate and complex operating procedures embodied in the agency regulations." Lauer v. Bowen, 818 F.2d 636, 639-40 (7th Cir. 1987). Put another way, "[a]n interpretive rule simply states what the administrative agency thinks the statute means, and only reminds affected parties of existing duties." American Medical Association v. Heckler, 606 F. Supp. 1422, 1439 (S.D. Ind. 1985) (citations omitted). By contrast, "[a]n agency promulgates a legislative rule when it intends to create new law, rights or duties." Id. Courts have determined whether an agency's action imposes new duties or creates new law by reference to two criteria. First, whether the agency's statement presently imposes a binding obligation or norm on a regulated individual or firm. American Bus Association v. United States, 627 F.2d 525, 529 (D.C. Cir. 1980); McLouth v. Thomas, 838 F.2d 1317 [18 ELR 20473] (D.C. Cir. 1988); Community Nutrition Institute v. Young, 818 F.2d 943 (D.C. Cir. 1987). Second, whether the agency's statement "genuinely leaves the agency and its decision-makers free to exercise discretion." Id. Using these two criteria, the court in American Bus distinguished a legislative rule from an interpretive rule as follows: A general statement of policy [or interpretive rule] . . . does not establish a binding norm. It is not finally determinative of the issues or rights to which it is addressed. The agency cannot apply or rely upon a general statement of policy as law because a general statement of policy only announces what the agency seeks to establish as policy. A policy statement announces the agency's tentative intentions for the future. American Bus, 627 F.2d at 529 (citation omitted). The court in McLouth added that "if . . . a so-called policy statement is in purpose or likely effect one that narrowly limits administrative discretion, it will be taken for what it is — a binding rule of substantive law." McLouth v. Thomas, 838 F.2d at 1320. In McLouth, the court held that an EPA policy or interpretive rule was in fact a legislative rule. Under prior regulations, the EPA was required to list wastes that are hazardous and thereby subject to regulation. McLouth, 838 F.2d at 1319. In order to have a particular waste "delisted," a petitioner had to demonstrate that its facility's waste did not meet any of the criteria under which the waste was originally listed. Upon this showing, the EPA could delist the waste only if the petitioner also showed that there were no factors other than those originally listed which might cause the waste to become hazardous. Id. The controversy arose when EPA developed a vertical and horizontal spread "model" to predict the level of leachate hazardous components of waste subject to a delisting petition. Id. Specifically, the model "estimate[d] the ability of an aquifier to dilute the toxicants from a specific volume of wastes, and predict[ed] toxicant levels at a receptor well." Id. EPA rigidly applied the "model" to McLouth. Although the Federal Register announcement suggested that EPA retained the discretion to deviate from use of the model, the EPA also referred to it as "'the quantitative approach' that 'will be used to predict the level of the various toxicants which could migrate to environmental receptors.'" Id. at 1320. The court observed that "[t]he use ofthe word 'will' suggests the rigor of a rule, not the pliancy of a policy." Id. at 1320-21. Although the EPA attempted to recharacterize the model during the litigation, the court stated that "courts are to give far greater weight to the language actually used by the agency in the past than to its present characterization of the rule." Id. at 1320. EPA also indicated that it was imposing new duties on regulated firms through the model when it denied McLouth's delisting petition, stating that "even if the listed wastes do not exhibit the characteristics of hazardous waste, the wastes must also pass the VHS model evaluation." Id. at 1321 (emphasis original). Because the model substantially curtailed EPA's discretion in delisting decisions and thereby imposed new duties on regulated individuals, the court concluded that the model was a legislative rule which had been adopted without the notice and comment procedures required by the APA. Id. at 1322. Applying this law to the case at bar, it is clear that the Rhoads memo does not merely express the EPA's view about what another statute or regulation means. See Allied Van Lines, 708 F.2d at 300 (7th Cir. 1983). Rather, through the Rhoads memo, the EPA imposes new and more stringent duties on the paper coating industry than those imposed under previously promulgated regulations. Under existing regulations, operators of coating lines are not allowed [20 ELR 20558] to discharge into the atmosphere VOCs "in excess of . . . 2.9 pounds per gallon excluding water delivered to the coating applicator." 326 IAC § 8-2-5(b). Operators may comply through any one of a number of techniques, including incineration or the use of a higher solids (low solvent) coating. 326 IAC § 8-1.1-2. The Rhoads memo makes two substantive changes in these regulations which impose higher duties on polluters. First, the memo in effect changes 326 IAC § 8-2- 5(b) by requiring that emissions be measured in units of "volume of [coating] solids consumed" rather than in pounds of VOC per gallon of coating solution. Second, the memo requires that if add-on equipment is used to achieve compliance under 326 IAC § 8-1.1-2, then the emissions achieved must be equivalent to those attainable by using a higher solids (low solvent) coating. In this way, the memo changes the present regulation, which allows compliance by any one of a number of techniques, to a new regulation which requires equivalence with the emissions achieved by the use of low solvent coatings. In fact, pursuant to Zimmer's request for admissions, the government has admitted that present Indiana SIP regulations do not require that equivalency calculations be performed in units of VOCs per gallon of coating solids when add on controls are used. Thus, the Rhoads memo is in fact a legislative rule under the criteria developed in American Bus and its progeny. As in McLouth, the following mandatory language of the Rhoads memo indicates that the EPA intends to treat it as a binding norm which narrowly limits agency discretion: It has come to my attention that surface coaters, State agencies, and vendors are having a difficult time performing the calculations necessary to determine equivalency when add-on control equipment is used to meet CTG type emission limits. This is partially because the units used for the CTG limits (mass VOC per volume of coating less water) cannot be used for equivalency calculations. Equivalency calculations must be based on mass of VOC per volume of solids consumed (or applied when transfer efficiency is considered). Procedures in the State regulations for calculating equivalence with the CTG type limits must contain equations that are stated on a pounds of VOC per gallon of solids basis. (Emphasis original.) In addition, as in McLouth, EPA is attempting to impose the Rhoads memo upon Zimmer as a presently binding rule. As Zimmer points out in its briefs, under 326 IAC § 8-2-5(b) Zimmer should be allowed to take the number of pounds of VOCs it discharges into the atmosphere and divide them by the number of gallons of coating solution delivered into the coating applicator to achieve compliance; hence, "pounds VOC per gallon excluding water delivered to the coating applicator." 326 IAC § 8-2-5(b). Given that Zimmer now uses a 7.5 pounds VOC per gallon of coating solution, roughly a 60% reduction of emissions would be necessary to comply with the 2.9 pounds VOC per gallon limit under 326 IAC § 8-2-5(b). However, in its response to Zimmer's interrogatories, the government states that under its "pounds VOC per coating solids" standard set out in the Rhoads memo, Zimmer is required to capture and destroy 95% of its emissions in order to be in compliance when using an incinerator. This level of reduction, the government asserts, is necessary to achieve emissions equivalent with those attainable through the use of a lower solvent, higher solids coating. As Zimmer correctly notes, this level of capture would reduce Zimmer's emission to 0.285 pounds VOC per gallon of coating solution, far less than the required limitation under 326 IAC § 8-2-5(b). Thus, as in McLouth, the EPA has imposed new and more stringent duties upon regulated firms through the Rhoads memo. EPA has set out the new emissions standards in mandatory language much more suggestive of "the rigor of a rule, not the pliancy of a policy." McLouth, 838 F.2d at 1320-21. Also, in the present enforcement action, EPA has made it clear that it regards the Rhoads memo to have a present, binding effect on regulated firms. Indeed, as in McLouth, Zimmer must comply with the emissions requirements of the Rhoads memo to be in compliance with the Indiana SIP. See McLouth, 838 F.2d at 1322. Thus, the Rhoads memo is in fact a legislative rule. As noted above, however, Zimmer cannot be adversely affected by such a legislative rule unless it was promulgated pursuant to notice and comment rulemaking. 5 U.S.C. § 552(a)(1). There was no such rulemaking in the case at hand. II. Amending Legislative Rules Notice and comment rulemaking procedures were required prior to imposing the Rhoads memo's new obligations and duties on Zimmer for another reason. In this circuit, "once a regulation is adopted by notice and comment rulemaking, its text may be changed only in that fashion." Homemakers North Shore, Inc. v. Bowen, 832 F.2d 408, 413 (7th Cir. 1987). The present emissions regulations were adopted pursuant to public notice and comment requirements. As noted earlier, under the Clean AirAct (the Act), SIPs are approved and implemented by the EPA only after an opportunity for notice and public hearings at the state level. 42 U.S.C. § 7410(a)(1) (1989). Moreover, the Act provides that "[t]he Administrator shall approve any revision of an implementation plan . . . if he determines [inter alia] that it . . . has been adopted by the State after reasonable notice and public hearings." 42 U.S.C. § 7410(a)(3)(A). Thus, under both the APA and the Clean Air Act, regulations approved after notice and public comment for Indiana's SIP may only be revised through further notice and public comment procedures. In Homemakers, the court dealt with revisions to Medicare regulations. In 1979, the Secretary of Health and Human Services promulgated a regulation exempting nursing homes from its usual limits on reimbursement if the home "has operated as the type of provider for which it was certified for Medicare . . . for less than three full years." Homemakers, 832 F.2d at 408 (quoting 42 C.F.R. § 405.460(f)(7)). Without going through formal notice and comment rulemaking, the Secretary amended this regulation in 1984 to exempt from its reimbursement limits any provider who "has provided . . . for a period of less than three years home health care services equivalent to those that would have been covered if the agency had a Medicare provider agreement in effect." Id. In Homemakers, the home in question had been providing nursing care essentially equivalent to that given by Medicare providers for more than three years prior to its application for reimbursement. However, it could not have received reimbursement for the three years prior to its application largely because it had used licensed practical nurses instead of registered nurses. Ultimately, the court in Homemakers concluded that the new regulation was binding upon the home despite the lack of formal rulemaking because the new regulation did not really change the provisions of the older regulation. In fact, the court determined that the case instead turned upon which technical reading of the old regulation was to be followed. As the court observed: Homemakers thinks that any fool can see that "type of provider" (the 1979 language) is different from "services equivalent to those that would have been covered" (the 1984 language). A "provider" is a technical term under the Medicare laws denoting a supplier eligible for reimbursement, and Homemakers reads "type of" provider to distinguish among the statutory categories, such as "home health agencies," hospitals, and physicians. In all events, Homemakers insists, the firm must have been a "provider" or have been eligible to be one. The Secretary replies to the emphasis on "provider" with an emphasis on "type," which the Secretary wants to read in the lay sense of equivalent services. A hospital does not furnish the same "type" of services as a nursing agency, but one nursing agency is apt to furnish the same "type" of services as another, qualified for reimbursement or not. The ambiguity — whether to read the 1979 regulation in a technical or lay sense — was clarified in 1984, according to the Secretary. A new regulation excluding the technical reading of the old one is no change at all. Id. at 411. The court dealt with similar issues in PPG Industries v. Costle, 659 F.2d 1239 [11 ELR 20858] (D.C. Cir. 1981). Prior to 1979, compliance with the 24-hour NAAQS for sulfur oxides was generally determined by monitoring daily average concentrations based on air samples collected during midnight-to-midnight periods. PPG Industries, 659 F.2d at 1240. EPA changed its approach by requiring a new monitoring system pursuant to formal rulemaking. However, EPA omitted from the rulemaking specific guidelines issued by the [20 ELR 20559] agency which required monitoring stations to measure sulfur oxide concentrations continuously and to calculate hourly running averages for 24-hour periods for purposes of NAAQS compliance, rather than using only midnight-to-midnight averages. Id. Even though the guidelines requiring continuous testing were not published, EPA sought to impose them on PPG Industries. The court determined that the prior regulations did not require the use of midnight-to-midnight averages so that the new guidelines did not revise that standard. Id. at 1241. However, more relevant for present purposes, the court did find that the EPA violated the APA in imposing the new guidelines without prior notice and public comment. In finding that the EPA had violated the APA's notice and comment requirements, the court focused on the impact which the new rule would have on regulated parties as compared to requirements of the prior midnight-to-midnight averaging. The court observed that "[b]y the EPA's own account, midnight-to-midnight sampling can indicate sulfur concentrations 30% to 40% lower than those that would be measured using running averages." Id. at 1250. The court found that EPA had violated the APA because it had not engaged in rulemaking "directed to the effect the new measurement technique would have on the stringency of the standards as applied." Id. The case at hand is much more analogous on the facts to PPG Industries than to Homemakers. EPA's imposition of the Rhoads memo is more akin to the change in measurement of pollutants discussed in PPG Industries, which wrought substantial differences in compliance requirements and costs, than to the determination in Homemakers regarding which technical reading of the prior regulation should obtain. Indeed, as noted above, the change in measuring units and the new equivalency requirement would reduce Zimmer's allowable emissions to 0.285 pounds VOC per gallon of coating solution, far less than the required limit under 326 IAC § 8-2-5(b). In addition, exhibits submitted by Zimmer with its motion for summary judgment further confirm that the Rhoads memo represents a real change in the regulatory approach — recognized as such by agency officials — rather than a mere interpretation of existing regulations. Indiana's SIP guidelines were developed by reference to a publication entitled Control of Volatile Organic Emissions From Existing Stationary Sources-Volume II (CTGs), published in May, 1977. The CTGs stated in pertinent part as follows: Solvent content limitations may be expressed in terms of mass or volume and may be based on the entire coating (including solvent) or only on paint solids. In this document, limitations are expressed as the allowable mass of VOC per unit volume of coating (kg per liter or lb per gallon) as it is applied to the product. The principal advantage of this format is that enforcement is relatively simple. Field personnel can draw samples and have them analyzed quickly. A disadvantage is that the relationship between solvent fraction and VOC emissions is not linear. As illustrated in Figure D-2 of Appendix D, use of a coating containing 3 lbs of VOC per gallon of coating emits 4.4 times as much solvent as use of one with 1 lb per gallon and only 55 percent as much as one of 4.1 lbs per gallon. The above disadvantage is eliminated if the solvent content is expressed in terms of mass of VOC per unit volume of paint solids . . . Here the relationship is linear . . . a coating containing 2 lbs per gallon of solids releases twice as much VOC as one of 1 lb per gallon. The disadvantage of this format is that it relies on an analytical method which has had only limited usage in the industry and is virtually untried by control agencies. CTGs Vol. II, § 1 at 7-8. This excerpt confirms the fact that there were two distinct means by which to measure emissions in the coating industry from which Indiana could choose in developing its SIP. As 326 IAC § 8-2-5(b) indicates, Indiana chose to measure emissions as the allowable mass of VOC per unit volume of coating (kg per liter or lb per gallon) as it is applied to the product. Thus, the government cannot successfully argue that the Rhoads memo, which seeks instead to measure emissions according to the mass of VOCs per unit of solids, is merely a clarification of 326 IAC § 8-2-5(b). Rather, the Rhoads memo seeks to adopt a different, more stringent standard. The Rhoads memo also requires that emissions achieved through incineration be equivalent to those achieved through the use of a higher solids (lower solvent) coating. The government argues in its brief that this portion of the Rhoads memo is an interpretive rule because it expresses the intent of the agency in promulgating Indiana's SIP as expressed in the CTGs. However, as Zimmer correctly points out, the CTGs do not require equivalency calculations when add-on technologies such as incinerators are used. Rather, the CTGs stated as follows: In general, the recommended control approach is to reduce emissions from the coating line by means of low solvent coating technology. This approach is recommended since, in addition to reducing emissions at the applicator, it also serves to reduce fugitive and flash area emissions while at the same time eliminating the need for add-on equipment. It should be recognized, however, that for certain source categories or coating lines it may be preferable to use add-on controls, particularly when heat or VOC recovery techniques can be employed. Therefore, the regulations should not preclude the employment of add-on devices such as incinerators and absorbers with appropriate capture systems. CTGs, Volume II, Appendix C, at 1-2. Thus, the CTGs clarify the intent of the 326 IAC § 8-1.1-2 that any of the compliance methods listed therein may be used to achieve the emissions requirements of Indiana's SIP and that equivalence to any one method over the others is neither required nor intended. Thus, the Rhoads memo constitutes a change in the present regulations with regard to this point as well. Perhaps even more telling are the indications that both EPA and Indiana officials consider the Indiana regulations in their present form to be deficient when compared with the requirements of the Rhoads memo. For example, EPA has acknowledged in the Federal Register that many SIPs are, in its view, deficient in stating emissions limitations: Existing VOC rules contain a variety of other ambiguities and exemptions that may impede efforts to achieve full RACT-level reductions. Although some of the affected State or local agencies currently interpret these rules consistently with EPA policy, courts will frequently turn to the actual words of the rules to decide the legal obligations of the affected sources. For that reason, EPA believes it is essential for States to amend these rules to state clearly what is required. Emission Limit Units: VOC rules incorporating limits expressed as pounds of VOC per gallon (lb VOC/gal) of coating should also list the equivalent lb VOC/gal of solids emission limit . . . VOC rules should state that units of lbs. VOC/gal. of solids be used for all calculations involving . . . determining compliance by add-on control equipment such as incinerators and carbon adsorbers. 52 Fed. Reg. 45107-45108 (1987). Following this publication in the Federal Register, EPA officials contacted Thomas Rarick, Assistant Commissioner of the Indiana Department of Environmental Management, and enclosed a list of eighteen "Indiana SIP Deficiencies." Deficiency 10 stated that "Indiana's rules do not specify that equivalency calculations must be performed in units of lb VOC/gallon solids for bubbles, crossline averages, or compliance using add-on control. (Emphasis added.) Indiana officials apparently agree that their regulations must be amended before the requirements of the Rhoads memo may be imposed upon regulated firms. Zimmer has submitted with its briefs the agenda for the June 28, 1989 meeting of the Indiana Air Pollution Control Board. Attached to the agenda was a proposed revision of 326 IAC § 8-2-5 reads as follows: (b) VOC emissions shall be limited to no greater than the equivalent emissions, expressed as pounds of VOC per gallon of coating solids, allowed under the applicable emission limitation contained in 326 IAC 8 for any surface coating operation using the compliance methods contained in subsection (a) of this section or section (5) of this rule. Equivalency shall be determined by the following equation: E = L / 1 - L / D Where: L = Applicable emission limit from 326 IAC 8 in pounds of VOC per gallon of coating D = Density of VOC in coating in pounds per gallon E = Equivalent emission limit in pounds of VOC per gallon of coating solids. A solvent density of 7.36 pounds of VOC per gallon of coating shall be used to determine equivalent pounds of VOC per gallon of solids for the applicable emission limit contained in 326 IAC 8. Actual solvent density shall be used to determine compliance of surface coating operations using the compliance methods contained in subsection (a) of this section (5) of this rule. As Zimmer correctly notes, this proposed amendment is a clearcut acknowledgment that Indiana's present rules do not require that equivalency calculations be performed when determining whether compliance has been achieved with add-on controls such as incinerators. It also implicitly acknowledges that if the current legislative rules embodied in 326 IAC §§ 8-2-5(b) and 8-1.1-2 are to be altered in this fashion, formal notice and public comment rulemaking must precede their imposition on regulated firms such as Zimmer Paper. In sum, the Rhoads memo must be promulgated by means of notice and public comment rulemaking before its requirements may be imposed upon Zimmer for two reasons: first, the Rhoads memo constitutes a legislative rule; second, as such, it has the effect of amending a prior legislative rule which had itself been adopted through notice and public comment procedures. Because the Rhoads memo was not promulgated in this fashion, Zimmer is not bound by its requirements. 5 U.S.C. § 552(a)(1). Therefore, Zimmer's motion for summary declaratory judgment on its counterclaim is granted, and the government's motion for summary declaratory judgment is denied. The Court having this day filed its entry in the above captioned matter in the following words and figures: (H. I.), now therefore, IT IS CONSIDERED, ADJUDGED AND DECLARED that defendant Zimmer Paper Products, Inc., is not bound by the "Rhoads Memo" because said memo was not duly promulgated as a legislative rule as required by the Administrative Procedure Act, specifically 5 U.S.C. § 553(b) (1989). IT IS FURTHER CONSIDERED, ADJUDGED AND DECLARED that defendant Zimmer Paper Products, Inc., would be in compliance with 326 IAC § 8-2-5(b) if it were to install an incinerator that would reduce emissions to 2.9 pounds VOC per gallon of coating solution excluding water delivered to the coating applicator. 20 ELR 20556 | Environmental Law Reporter | copyright © 1990 | All rights reserved |