The United States Court of Appeals for the District of Columbia Circuit decided last Friday in Natural Resources Defense Council v. Environmental Protection Agency (EPA) that (1) the emissions-related provisions of the 2013 Portland Cement Rule were permissible but that (2) EPA exceeded its statutory authority in a 2010 version by promulgating an affirmative defense in private civil suits when control equipment unavoidably malfunctions. The court, therefore, granted the petitions for judicial review in part and vacated the provision of the rule pertaining to the affirmative defense. The vacatur illustrates several limitations of agency regulatory authority that agencies can easily forget and that counsel for regulated parties must constantly consider.
Background: The Clean Air Act (CAA) requires EPA to establish technology-based National Emission Standards for Hazardous Air Pollutants (NESHAP) for major sources of certain hazardous air pollutants. The standards must reflect “the maximum degree of reduction in emissions” that EPA determines is “achievable,” taking into consideration “the cost of achieving such emission reduction, and any non-air quality health and environmental impacts and energy requirements” – or standards reflecting the “maximum achievable control technology” (MACT).
The D.C. Circuit previously remanded without vacatur EPA’s first attempt to set emission standards for Portland cement* manufacturing plants as arbitrary and capricious under the Administrative Procedure Act (APA) because EPA had included cement kilns properly classified as commercial incinerators, which are regulated under a separate provision of the CAA, in its dataset information in calculating the floor for MACT purposes. On EPA’s next attempt, environmental groups petitioned for review arguing that the 2013 final rule’s emission standards for particulate matter and the compliance schedule were flawed. The court rejected these arguments and dismissed that part the petition for review.
* Portland cement is ubiquitous: Manufacturers pulverize limestone and other minerals and heat those raw materials to several thousand degrees. The resulting “clinker” is cooled and ground into the fine gray powder called Portland cement. Portland cement, combined with sand, gravel, and water, makes concrete. The process of pulverizing, baking, and re-pulverizing, however, creates can release into the atmosphere numerous hazardous air pollutants, including mercury, hydrochloric acid, hydrocarbons, and coarse and fine particulate matter, which may be or must be regulated by the EPA.
Affirmative Defense & Citizen Suits: The CAA allows individuals to file citizen suits in a United States district court against sources that violate emission standards, and in that litigation a district court impose “any appropriate civil penalties,” including monetary penalties. In these suits, a district court must “take into consideration (in addition to such other factors as justice may require) the size of the business, the economic impact of the penalty on the business, the violator’s full compliance history and good faith efforts to comply, the duration of the violation as established by any credible evidence …, payment by the violator of penalties previously assessed for the same violation, the economic benefit of noncompliance, and the seriousness of the violation.”
In the facet of the 2010 standards critical here, EPA adopted an affirmative defense in private civil suits when violations of the standards occurred because of “unavoidable” malfunctions to replace an EPA policy exempting malfunction events from the emission standards that was struck down in 2008 because it was inconsistent with the requirement that emission standards apply continuously. The regulatory provision in question, however, provided that civil penalties could only be assessed if a defendant in a civil suit failed to carry the burden of proving all of the elements in the affirmative defense.
The D.C. Circuit panel set aside this provision, rejecting several arguments that go to the heart of regulatory authority. The concepts are generalized here because they apply across the board to regulatory agencies, not just the EPA, and should be considered carefully by both agencies and counsel for the regulated parties.
- The statute created a private right of action, and as the Supreme Court reiterated in City of Arlington v. FCC, “the Judiciary, not any executive agency, determines ‘the scope’ – including the available remedies – ‘of judicial power vested by’ statutes establishing private rights of action.” Thus, the CAA vests authority in the courts, not the agency, to determine whether civil penalties are “appropriate.” EPA’s authority to determine penalties extends only to administrative penalties, not to civil penalties imposed by a court. The division between judicial power and an agency’s regulatory and adjudicative authority is sometimes difficult to discern, but Congress was clear in this case. A healthy skepticism should be applied to agency suggestions that they may regulate judicial functions.
- Authority to issue general program regulations is not “open-ended.” Program and ancillary regulations may not conflict with specific statutory language. That is to say, EPA cannot by regulations “trump” a specific statutory provision. In reviewing a statute, the specific provisions must be given effect over general provisions, both of a statute and dependent regulations.
- EPA and other agencies may not “presume a delegation of power absent an express withholding of such power.” Filling in the interstices is far different from creating a new authority and authority must be delegated. In short, an agency must have expressly granted regulatory authority and may not assume regulatory authority not granted, but Congress has deeply complicated this distinction.
- The tension between the requirement for continuous emissions limitations and the practical reality that control technology can fail unavoidably may be a good argument before a court in a specific private action, but it does not create authority in the EPA to promulgate a regulation. Courts recognize that Congress meant what it said and said what it meant and inconvenient realities may get in the way. That inconvenient reality does not alter or add to the authority of an agency to promulgate regulations.
Some agencies wisely provide a detailed statement of statutory delegated authority in the preamble to proposed rules and final rules, and counsel should take these statements seriously. Although City of Arlington v. FCC counsels that courts defer to an agency’s interpretation of ambiguous jurisdictional statutes under Chevron v. Natural Resources Defense Council, delegation of regulatory authority still have structural limit, and delegated regulatory authority and deference must be justified.