California v. Kleppe

No. CV76-3406-RMT (C.D. Cal. April 6, 1978)

The court finds that corporate defendants' counterclaim challenging the Environmental Protection Agency's (EPA's) regulatory jurisdiction over an offshore oil storage and treatment facility (OS&T) is not ripe for adjudication. EPA has made an initial determination that defendant Exxon's OS&T requires a new source permit under the Clean Air Act. Defendants' counterclaim that the OS&T operation is regulable only by the Secretary of the Interior under the Outer Continental Shelf Lands Act is not ripe under the Supreme Court's guidelines in Abbott Laboratories v. Gardner because EPA has not finally determined to assert regulatory authority over the facility. The hardship to Exxon in delaying adjudication of the counterclaim is outweighed by the hardship to EPA should its administrative decision be judicially shortcut. Moreover, even if the counterclaim were ripe, jurisdiction to review this issue properly lies only in the courts of appeals under the Clean Air Act § 307(b)(1), ELR STAT. & REG. 42257.

Counsel for Plaintiffs
Evelle J. Younger, Attorney General
600 State Bldg., San Francisco CA 94102
(415) 557-0269

Counsel for Defendant United States
Irwin L. Schroeder; James B. Moorman, Ass't Attorney General
Land and Natural Resources Division
Department of Justice, Washington DC 20530
(202) 739-2730

Counsel for Corporate Defendants
McCutchen, Black, Verleger & Shea
3435 Wilshire Blvd., Los Angeles CA 90010
(213) 381-3411

[8 ELR 20359]

Takasugi, J.:

Order

Defendants' Exxon Corporation, Shell Oil Company, and Chevron U.S.A., Inc. (sued herein as Standard Oil Company of California) motions for leave to file a counterclaim, for leave to [8 ELR 20360] add additional parties, for a temporary restraining order, and for other relief came on to be heard on March 13, 1978. The court, having carefully considered all submissions of counsel, including supplemental briefing submitted after oral argument was heard, denies all of defendants' motions for the reasons set forth in the Memorandum issued this date.

Memorandum

This matter is before the court on defendants' Exxon Corporation, Shell Oil Company, and Chevron U.S.A., Inc. (sued herein as Standard Oil Company of California) (hereinafter collectively Exxon) motions for leave to file a counterclaim against plaintiffs the State of California and the California Coastal Zone Conservation Commission; leave to add as additional parties hereto the Environmental Protection Agency (hereinafter EPA) and certain EPA officials; for a temporary restraining order enjoining the EPA from directly or indirectly requiring that an air pollution New Source Permit be obtained, or otherwise asserting jurisdiction over air emissions from the Santa Ynez Unit; and for relief dealing with setting of a timetable for the adjudication of the underlying merits of the counterclaim.

The underlying question raised by the proposed counterclaim is whether, under the Clean Air Act, 42 U.S.C. § 7401 et seq., the EPA can require Exxon to obtain a New Source Permit for Exxon's crude oil offshore storage and treatment facility (hereinafter OS&T) to be located 3.2 miles off the California coast near Santa Barbara or whether, under the Outer Continental Shelf Lands Act, 43 U.S.C. §§ 1331-1343, the authority to regulate such operations rests solely with the Secretary of Interior.

Before reaching the merits of this issue, which seems to be one of first impression, the court must first address three preliminary questions. (1) Is the counterclaim ripe? (2) Is this a proper counterclaim? (3) Does jurisdiction lie with the district court, or rather, does it lie with either the Ninth Circuit Court of Appeals or the Court of Appeals for the District of Columbia?

1. Is the Proposed Counterclaim Ripe?

The rationale behind the ripeness doctrine, in the context of review of administrative policy, has been explained by the Supreme Court as being:

. . . to prevent the courts, through avoidance of premature adjudication, from entangling themselves in abstract disagreements over administrative policies, and also to protect the agencies from judicial interference until an administrative decision has been formalized and its effects felt in a concrete way by the challenging parties.

Abbott Laboratories v. Gardner, 387 U.S. 136, 148 (1967).

The Court, in Abbott Laboratories, set forth two basic requirements to be used in determining ripeness: the fitness of the issues for judicial decision and the hardship to the parties of withholding court consideration. Id. at 149.

A. Fitness of the issues for judicial decision

In Abbott Laboratories, under this requirement, the Court emphasized that strictly legal issues remained. In the instant motion Exxon stresses that the issue of EPA jurisdiction, under the Clean Air Act, to regulate an OS&T 3.2 miles offshore is a strictly legal question. However, in Abbott Laboratories the Court pointed out that no claim was made that further administrative proceedings were contemplated. The Commissioner of Food and Drugs had already promulgated (and published in the CFR — though publication in the CFR is not determinative of "finality") the regulation in question. The drug manufacturers brought their action prior to enforcement, but after promulgation. The Court stated that "finality" should be determined in a practical way. In essence, it is not necessary to wait until the lash of the whip is felt so long as it is poised overhead and sure to strike. In Abbott Laboratories there was no hint that the Commissioner's regulation was tentative and the Government stated that, while enforcement had not yet begun against the manufacturers, immediate compliance was expected. Id. at 152.

The record, in the case at bar, presents no such final determination by the administrative agency as of the moment of the proposed counterclaim. The EPA first contacted Exxon in a letter dated September 3, 1976. This letter required Exxon to provide certain information so that the EPA could determine whether the OS&T would violate "the standards and requirements made applicable by the Outer Continental Shelf Lands Act." The EPA cited the Clean Air Act as its authority. Exxon responded by providing the information sought, but also joining with it a strong challenge to the authority of the EPA over the OS&T. (Letter of October 1, 1976.)

Other correspondence went back and forth between the EPA and Exxon, culminating in a letter from the EPA to Exxon, dated November 15, 1977, which reiterated the EPA's letter of September 23, 1977. The November 15, 1977 letter stated that "Exxon, is therefore, required to obtain an EPA New Source Review Approval to Construct for the proposed OS&T prior to the start-up of operations." The letter also stated that: "EPA has determined that Exxon Corporation's proposed crude oil offshore storage and treatment facility (OS&T), which is to be located approximately 3.2 miles off the Santa Barbara County coast on the OCS [Outer Continental Shelf], is subject to the New Source Review requirements under the Clean Air Act." This would seem pretty clear: an EPA "determination" and an EPA "requirement" of Exxon. Even though only by letter, this would be final and ripe. However, the story does not end here.

Exxon responded on December 1, 1977 submitting a lengthy brief again challenging the EPA's authority. On January 27, 1978, R. L. O'Connell, Director of the Enforcement Division of the EPA, wrote Exxon stating that the November 15, 1977 letter must be clarified. The January 25, 1978 letter stated that: "it is our tentative determination that the installation of the OS&T would be a major modification to the operation of Platform Hondo; a stationary source." The letter further stated that the EPA is "currently reviewing" the information provided by Exxon in its December 13, 1977 brief and that the EPA "may publish a final determination in the Federal Register. . . . As of this date, however, we have not made a final determination regarding the applicability of these provisions."

Further light on the EPA decision timetable is shed by the Eller Affidavit, signed March 1, 1978, submitted by the EPA in does intend to issue a final determination in the Federal Register no later than April 15, 1975. Until such a determination is published, EPA will not issue a notice of violation or commence an enforcement action to restrain Exxon's operations on the Santa Ynez Unit." Eller Affidavit at 7.

The issue is not ripe because the EPA's position is unclear at this point as to whether the EPA definitely will assert jurisdiction over the OS&T; as to what theory it will propound if it does assert authority (it should be noted that the EPA has changed its theory in its correspondence with Exxon to date); and as to whether it will promulgate regulations which apply to all Outer Continental Shelf development nationally, regionally, or only to the Santa Ynez Unit. No one really knows the shape, the form, the scope or the reasoning behind what the EPA may or may not do. The EPA has committed itself to a decision by April 15, 1978. This issue is of great local and national importance. The administrative process should be allowed to run its course until then.

B. Hardship to parties of withholding court consideration

Soon, Exxon contended at the time of filing, the OS&T vessel will be towed from Japan to a Gulf Coast shipyard, where it will undergo certain outfitting before being towed to the Santa Ynez Unit. Installation of the SALM, which moors the OS&T, will begin late in April 1978. Clearly, time is an urgent consideration for Exxon. Many millions of dollars, large numbers of jobs, and a tight time schedule are involved. Under the Clean Air Act Exxon could be fined up to $25,000 per day and its employees could be imprisoned for up to one year for violations of the Act. Significant national interests are involved, cutting both ways.

However, given the fact that the EPA will reach its decision by April 15, 1978, the court, in balancing the hardship of short delay to Exxon against shortcutting, through judicial interference, such an important decision by the EPA, finds that the hardship to the EPA would be greater.

[8 ELR 20361]

Thus, the issue is not ripe under either of the Abbott Laboratories requirements. The court would be tempted, however, not to deny leave to file the counterclaim at this moment absent its determination on the third preliminary issue presented, infra. Instead, the court might hold this matter over until April 15, 1978 so that, depending on the EPA's decision, Exxon would not have to refile their counterclaim with the delays so entailed. This would be in the interest of fairness, as the EPA has not seemingly proceeded with the due speed or sureness necessary to protect the environment, ensure commercial certainty, and, in general, provide for the national interest.

2. Is This a Proper Counterclaim?

Defendants must have a counterclaim against an existing plaintiff (either California or the Coastal Commission), Rule 13(a)(b), FED. R. CIV. P., before additional parties (EPA and EPA officials) can be joined, Rule 13(h), FED. R. CIV. P. The question before the court is whether Exxon has presented in its proposed counterclaim a claim against an existing plaintiff.

The court rejects Exxon's assertion that California would be a proper counterdefendant because it allegedly encouraged the EPA to assert jurisdiction over the OS&T or because it allegedly expressed its opinion with respect to the EPA's duties and obligations under the Clean Air Act. No legal rights or obligations flow from California's expression of such opinions. Of course, conspiracy counts are included in the proposed counterclaim.

The central question, which the parties have only peripherally addressed, is, if the EPA makes a final determination that it can apply the Clean Air Act to the OS&T, and incorporate thereby into federal law the Santa Barbara Air Pollution Control District's rules and regulations, does that then make California a proper party, since the district is a political subdivision of the state? In other words, would it be necessary for complete relief in the form of declaratory relief and/or an injunction that relief be sought against California, under these circumstances, as well as against the EPA? As can be seen by the way this question must necessarily be worded, the fact that the EPA has not yet reached a final and definite determination, makes the discussion of this issue conjectural. However, the court will attempt to answer it so that all the parties can have the court's ruling on all the questions raised, to save time as events unravel and to afford as complete a record for appellate review as is possible if the parties desire to seek such review.

Since in determining whether or not to issue a New Source Permit, if the EPA decides that it has jurisdiction to require such a permit, the EPA must apply the air pollution regulations adopted by the County of Santa Barbara as they may be modified, the State of California through its political subdivisions would be a proper party to a counterclaim. Additionally, it is reasonable to adjudicate these issues before one court.

3. Does Jurisdiction Lie with the District Court or Rather Does It Lie with Either the Ninth Circuit Court of Appeals or the Court of Appeals for the District of Columbia?

The heart of this dispute is whether Congress, in amending the Clean Air Act in 1977, took jurisdiction for an action such as the one at bar from the district court and placed it in the various appeals courts. Specifically, in amending the Act, Congress made extensive alterations to § 307, so that § 307(b)(1), 42 U.S.C. § 7607(b)(1), now reads, in part ". . . or any other final action of the Administrator under this . . . Act which is locally or regionally applicable may be filed only in the United States Court of Appeals for the appropriate circuit." If the action is "nationally applicable" it may only be filed, under § 307(b)(1), in the Court of Appeals for the District of Columbia. (Obviously, because of the court's holding, supra, that no final determination has yet been made by the EPA, it is not possible to determine at this stage whether whatever decision finally made will be nationally or only regionally applicable, if at all.)

Exxon contends that the words "or any other final action" do not mean what they would seem to mean based on a common sense first reading. Exxon argues that by applying the doctrine of ejusdem generis to § 307(b)(1) the court must limit the meaning of the general words in dispute. The Ninth Circuit has defined the doctrine as follows:

[U]nless a statute otherwise indicates, where a listing of particular or specific objects is followed by general words to indicate that the list is incomplete, the general words will not be construed broadly, but will be limited to include only objects of the same kind or class specifically enumerated.

United States v. Brown, 536 F.2d 117, 121 (9th Cir. 1976).

Exxon asserts that, since the enumerated categories which precede "or any other final action" in § 307(b)(1) are "predominantly" of a rule-making nature and all of such categories are either rules or orders issued after the making of a suitable record then those general words inquestion must be so limited and that such limitation would result in proper jurisdiction lying in the district court.

As to those enumerated categories which are of a rule-making nature, the fact that orders issued under §§ 113, 119, or 120 are not of a rule-making nature clearly shows that Exxon's interpretation of the doctrine of ejusdem generis is incorrect. Thus, where some enumerated categories are of rule-making nature and some are not, the general words that follow cannot be read as only applying to rule-making decisions, or, for that matter, to only applying to non-rule-making decisions. If the doctrine is applicable, its effect would be that the general words apply to both rule-making and non-rule-making decisions.

As to review in the court of appeals based on a suitable record, such a record exists in this case and has been presented to this court. In fact, Exxon's next motion, if jurisdiction were found in this court, would be for summary judgment as they contend that no further record need be developed in this matter.

Exxon further argues that § 307(d) limits the "final action" clause of § 307(b)(1). However, a reading of § 307(d) shows that its rule-making procedures apply only to those categories enumerated in § 307(d)(1), which categories do not include all the categories enumerated in § 307(b)(1). Exxon's contention that a "broad" reading of the "final action" clause would conflict with enforcement proceedings brought by the Administrator under § 113, 42 U.S.C. § 7413, or by a citizen under § 304, 42 U.S.C. § 7604, is likewise without merit. This contention ignores the effect of § 307(b)(2).

The legislative history cited by Exxon is not very useful. Neither the House Report nor the Conference Report specifically discuss the clause in contention. Congress obviously was concerned about clarifying venue problems between the various circuits and the Court of Appeals for the District of Columbia. This is evident from a reading of the legislative history as well as from a reading of § 307(b)(1). However, it is also evident that through its 1977 Amendments Congress significantly expanded the jurisdiction of the courts of appeals.

The clause "any final action" thus must be given its common sense clear meaning and applied, assuming a final determination in this matter, to the case at bar. The proper court of appeals can give prompt consideration to this important matter based on the legal issues involved. Inconsistent rulings and expensive delays awaiting appeal can be reduced. Jurisdiction properly lies in either the Ninth Circuit Court of Appeals or the Court of Appeals for the District of Columbia.

Summary

1. The proposed counterclaim is not ripe.

2. If it were ripe and if jurisdiction were to lie in the district court, it would be a proper counterclaim under Rule 13. (This is held with the caveat that, of course, the court would have to review this again based on the exact circumstances once a final determination was made.)

3. Jurisdiction lies in either the Ninth Circuit Court of Appeals or the Court of Appeals for the District of Columbia under § 307(b)(1) of the Clean Air Act.