585 F.2d 408 (9th Cir. 1978), 76-1870, Shell Oil Co. v. Train

Docket Nº:76-1870.
Citation:585 F.2d 408
Party Name:SHELL OIL COMPANY, Plaintiff-Appellant, v. Russell E. TRAIN, in his official capacity as Administrator of the Environmental Protection Agency, and the Environmental Protection Agency, Defendants-Appellees.
Case Date:November 03, 1978
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit

Page 408

585 F.2d 408 (9th Cir. 1978)

SHELL OIL COMPANY, Plaintiff-Appellant,


Russell E. TRAIN, in his official capacity as Administrator

of the Environmental Protection Agency, and the

Environmental Protection Agency,


No. 76-1870.

United States Court of Appeals, Ninth Circuit

November 3, 1978

Page 409

Richard C. Brautigam (argued), McCutchen, Doyle, Brown & Enersen, San Francisco, Cal., for plaintiff-appellant.

Jacques B. Gelin (argued), Dept. of Justice, Washington, D. C., for defendants-appellees.

Appeal from the United States District Court for the Northern District of California.

Before HUFSTEDLER and WALLACE, Circuit Judges, and GRAY, [*] District Judge.

HUFSTEDLER, Circuit Judge.

Shell Oil Company ("Shell") brought this action in the district court against the Environmental Protection Agency ("EPA") and its Administrator as one of its several assaults on the decisions of the California Regional Water Quality Control Board for the San Francisco Bay Region ("regional board") concerning a pollutant discharge permit for Shell's Martinez, California facility. Reasoning that there was no federal action for the court to review since a state administrative agency and not the federal EPA had rejected Shell's permit and variance applications, the district court dismissed Shell's complaint for lack of subject matter jurisdiction. (415 F.Supp. 70, 77-78 (N.D.Cal.1976).)

Shell's complaint must be read against the background of the cooperative federal-state scheme for the control of water pollution. The federal statute which dominates the field is the Federal Water Pollution Control Act Amendments of 1972 (33 U.S.C. §§ 1251-1376) ("FWPCA" or "the 1972 amendments"). The amendments effected major changes in both the strategy and the methods used in the nation's system of water quality control. Formerly, federal water pollution efforts had focused on the setting of national standards specifying acceptable levels of pollution in interstate navigable waters, but the amendments shifted federal pollution control strategy to strict limitations on the amount and type of

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pollutants which may be discharged from particular point sources. By imposing those direct restrictions, Congress sought to "facilitate enforcement by making it unnecessary to work backward from an overpolluted body of water to determine which point sources are responsible and which must be abated. . . ." (EPA v. California ex rel. State Water Resources Control Board (1976) 426 U.S. 200, 204, 96 S.Ct. 2022, 2024, 48 L.Ed.2d 578.) To achieve and to enforce the effluent limitations, the 1972 amendments established the National Pollutant Discharge Elimination System ("NPDES"). (33 U.S.C. § 1342.) Under the NPDES, it is unlawful for any person to discharge a pollutant without obtaining a NPDES permit and complying with its terms. (33 U.S.C. § 1311(a).) A NPDES permit serves to transform generally applicable effluent limitations into the obligations of individual dischargers, and the 1972 amendments provide for direct administrative and judicial enforcement of the permits. (33 U.S.C. §§ 1319, 1365.)

Combined with this policy of stiffening water pollution control through the imposition of effluent discharge limitations, Congress sought "to recognize, preserve, and protect the primary responsibilities and rights of States to prevent, reduce, and eliminate pollution." (33 U.S.C. § 1251(b).) The role envisioned for the states under the 1972 amendments is a major one, encompassing both the opportunity to assume the primary responsibility for the implementation and enforcement of federal effluent discharge limitations (33 U.S.C. § 1342(b)) and the right to enact requirements which are more stringent than the federal standards (33 U.S.C. § 1370). Thus, although the 1972 amendments gave the EPA the authority in the first instance to issue NPDES permits (33 U.S.C. § 1342(a)(1)), Congress clearly intended that the states would eventually assume the major role in the operation of the NPDES program.

Under § 1342(b), a state may submit to the EPA a proposed permit program governing discharges into navigable waters within its borders. If the state can demonstrate that it will apply the effluent limitations and the amendments' other requirements in the permits it grants and that it will monitor and enforce the terms of those permits, then, unless the Administrator of the EPA determines that a state program does not meet these requirements, he must approve the proposal (§ 1342(b)). The Administrator's determination that a state program does not meet the statutory criteria for approval is reviewable in the appropriate court of appeals. (33 U.S.C. § 1369(b)(1)(D).) Upon approval of a state program, the EPA must suspend its own issuance of permits covering those navigable waters subject to the approved state program (§ 1342(c)). However, while the direct federal regulatory role largely ceases following EPA approval of a state program, the EPA does retain a review authority over the states. The EPA may veto particular permits issued by the state (§ 1342(d)) if it finds that federal requirements have not been met, or it may withdraw approval of the entire state program upon a determination, after notice and an opportunity to respond, that the program is not being administered in compliance with the mandates of federal law (§ 1342(c)). Despite this residual federal supervisory responsibility, the federal-state relationship established under 33 U.S.C. § 1342 is "a system for the mandatory approval of a conforming State program and the consequent suspension of the federal program (which) creates a separate and independent State authority to administer the NPDES pollution controls." (Mianus River Preservation Committee v. Administrator, EPA (2d Cir. 1976) 541 F.2d 899, 905.)

California has adopted a plan for the issuance of NPDES permits (Cal. Water Code §§ 13370 Et seq.) which has been approved by the EPA. (39 Fed.Reg. 26,061 (1973).) The California State Water Resources Control Board ("State Board") and its nine subsidiary regional boards thus have primary responsibility for the enforcement of the FWPCA and the effluent limitations established pursuant to it in California.

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Shell has applied for a NPDES permit for its industrial complex near Martinez, California. The Martinez complex is composed of a petroleum refinery and an organic chemicals manufacturing plant. The EPA has published "Effluent Guidelines and Standards" for organic chemical manufacturing point sources (40 C.F.R. §§ 414.20 Et seq.) and for petroleum refinery point sources, classifying refineries into five categories "A" through "E", in increasing order of complexity (40 C.F.R. § 419.10 Et seq.). Shell sought a permit both as a Class D refinery and as an organic chemical plant. The Martinez application was reviewed by the regional board for San Francisco Bay, which, in October, 1974, presented Shell with a proposed NPDES permit which would classify the complex as a Class E refinery. Shell was dissatisfied with the classification and applied for a variance. Pursuant to the memorandum of understanding between the regional board and the EPA's Region IX office in San Francisco, the state agency forwarded Shell's application for a variance to the EPA regional office for comments. In February, 1975, the EPA regional office recommended denial of the variance, and the state regional board denied Shell's application.

Shell responded by instituting litigation challenging the Class E permit and the denial of a variance in three forums: First, Shell petitioned the State Board to set aside or modify the regional board's order. Concurrently with its effort to secure relief from within the state administrative structure, Shell filed two federal actions, one with our court and one with the district court. Although Shell's state administrative review petition must have been premised on the assumption that it was the decision of the regional board to deny Shell the Class D permit and the Class E variance, since the State Board's review authority extended only to "any action or failure to act by a regional board" (Cal. Water Code § 13320(a)), Shell's federal complaints articulated a strikingly different theory of which agency was actually responsible for the issuance of the Class E permit and the denial of the variance. Shell alleged that "(a)lthough the application for a variance was ostensibly made to and the variance was ostensibly denied by a Regional Board, and although the Permit was ostensibly issued by the Regional Board, the Administrator, through his subordinates, made all material decisions and instructed the Regional Board to follow those decisions." As the Class E permit and the denial of the variance were said to be a result of "the controlling decisions of the Administrator," Shell asserted that the EPA might appropriately be sued in federal court in an action for an injunction directing that a Class D permit or a Class E variance be issued.

Shell predicated its assertion of our court's jurisdiction to hear its claim on the provisions of 33 U.S.C. § 1369(b)(1)(F) which gives the courts of appeals original jurisdiction to review "the Administrator's action . . . in issuing or denying any (NPDES) permit." In September, 1975, we dismissed Shell's petition, holding that the decision of the regional board "was not an act of the Administrator of the (EPA) such as would give this Court jurisdiction." (Shell Oil Co. v. Train, Order No. 75-2070, September 30, 1975.)

Shell fared no better on its second effort to secure federal review. The district court found nothing in Shell's complaint which put into question the otherwise self-evident proposition that orders issued by a state agency "using its own personnel and...

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