George E. Warren Corp. v. U.S. E.P.A.

• Decision Date: 03 November 1998
• Docket Number: Nos. 97-1651 and 97-1656,s. 97-1651 and 97-1656
• Citation: 159 F.3d 616
• Parties: , 29 Envtl. L. Rep. 20,252 GEORGE E. WARREN CORPORATION, Petitioner, v. U.S. ENVIRONMENTAL PROTECTION AGENCY and Carol M. Browner, Administrator, Respondents. Friends of the Earth, et al., Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 616

159 F.3d 616

333 U.S.App.D.C. 26, 29 Envtl. L. Rep. 20,252

GEORGE E. WARREN CORPORATION, Petitioner, v. U.S. ENVIRONMENTAL PROTECTION AGENCY and Carol M. Browner, Administrator, Respondents.

Friends of the Earth, et al., Intervenors.

Nos. 97-1651 and 97-1656.

United States Court of Appeals, District of Columbia Circuit.

Argued Sept. 8, 1998.

Decided Nov. 3, 1998.

On Petitions for Review of an Order of the Environmental Protection Agency.

Jeffrey C. Bates, Boston, MA, argued the cause for petitioner George E. Warren Corporation. With him on the briefs were Harvey M. Sheldon, Chicago, IL, and Ellen S. Tenenbaum, Washington, DC.

Michael F. McBride argued the cause for petitioner Independent Refiners Coalition. With him on the briefs were Gene E. Godley, Washington, DC and Daniel C. Esty.

Seth M. Barsky, Attorney, U.S. Department of Justice, argued the cause for respondents. With him on the brief were Lois J. Schiffer, Assistant Attorney General, Washington, DC, Jonathan Z. Cannon, General Counsel, Environmental Protection Agency, and John Hannon, Attorney.

J. Martin Wagner argued the cause for intervenors Friends of the Earth, Inc., et al. With him on the brief were Patti Goldman, Marcus W. Sisk, Jr. and Lori A. Lange.

V. Robert Denham, Jr. argued the cause for intervenors Petroleo Brasileiro, S.A., and Petrobras America, Inc. With him on the brief were Rex R. Veal and N. David Palmeter, Washington, DC.

Before: GINSBURG, SENTELLE, and ROGERS, Circuit Judges.

GINSBURG, Circuit Judge:

Before the court are petitions to review a rule promulgated by the Environmental Protection Agency in 1997 to implement the anti-dumping provision of the reformulated gasoline program established by the Clean Air Act Amendments of 1990. See 42 U.S.C. § 7545(k)(8). The challenged rule regulates emissions from conventional gasoline for motor vehicles, and changes the way importers and foreign refiners of conventional gasoline sold in the United States had been treated under the prior rule. The petitioners are the George E. Warren Corporation, an importer of gasoline, and the Independent Refiners Coalition, a trade organization composed of domestic gasoline refiners. Three environmental pressure groups intervene on behalf of the petitioners, and two foreign refiners intervene on behalf of the EPA.

The petitioners and their supporters (hereinafter collectively the petitioners) contend that in promulgating the 1997 rule the EPA acted beyond its statutory authority, arbitrarily and capriciously, and in reliance upon comments submitted after the close of the comment period. For the reasons set out below, we reject each of these challenges and deny the petition for review.

I. Background

The Clean Air Act Amendments of 1990 require the reformulation of conventional gasoline to reduce motor vehicle emissions in certain large urban regions with elevated levels of ozone. See 42 U.S.C. § 7545(k)(1) (nonattainment areas). In those areas reformulated gasoline alone may be sold to consumers; conventional gasoline may be sold in the remainder of the country. See id. § 7545(k)(1), (5).

To prevent pollutants being transferred from reformulated gasoline to conventional gasoline in the refining process, the Congress included an "anti-dumping" provision, see id. § 7545(k)(8), ^* which requires generally that the conventional gasoline of each supplier (including both domestic and foreign refiners and importers) remain as clean as it was in 1990. Compliance is measured for each of several specified pollutants by comparing the yearly average emissions per gallon attributable to each supplier's conventional gasoline with an individual baseline representing the quality of gasoline that supplier introduced into the United States in 1990. If, however, the Administrator of the EPA "determines that no adequate and reliable data exist[]" to set an individual baseline for a particular supplier, then that supplier's compliance is measured against a statutory baseline representing the average emissions per gallon for all gasoline introduced into commerce in 1990. And like it or not, thereby hangs a tale.

A. The 1994 Rule

In 1994 the EPA announced standards for setting individual baselines under which domestic refiners, foreign refiners, and importers were all treated differently. See Final Rule: Regulation of Fuels and Fuel Additives: Standards for Reformulated and Conventional Gasoline, 59 Fed.Reg. 7,716. Domestic refiners were each required to establish an individual baseline because the EPA determined they have adequate and reliable data with which to do so. Foreign refiners were not regulated, but their gasoline was subject to the regulations applicable to the importer thereof. Each importer was permitted to establish an individual baseline, but because they generally lacked the data to do so, importers were in practice assigned the statutory baseline. See id. at 7,785/2-3, 7,786/2.

The EPA had considered giving foreign refiners the option of either petitioning to establish an individual baseline or accepting the statutory baseline, but rejected this approach for three reasons. First, foreign refiners generally would not have adequate data with which to establish an individual baseline. Second, the agency was concerned with the potential for "gaming": a foreign refiner presumably would choose to apply for an individual baseline only if doing so would allow the refiner to sell gasoline dirtier than would be allowed under the statutory baseline, which might result in overall degradation of air quality. Finally, the EPA determined that because foreign refiners, unlike domestic refiners, are not "subject to the full panoply of EPA's regulatory jurisdiction," the agency could not impose upon them mechanisms to ensure compliance monitoring and enforcement, functions that it considered "integral to the establishment of accurate and verifiable baselines." Id. at 7,786/2. Because a foreign refiner's gasoline typically passes through many channels and may be blended with gasoline from other refineries before it reaches the United States, and because gasoline cannot be identified by its refinery of origin, the EPA would have only the paperwork accompanying the imported gasoline to identify its source. See id. at 7,787/1-2. The agency also considered requiring each foreign refiner, like each domestic refiner, to establish an individual baseline, but ultimately rejected this mandatory approach for two of the three reasons it rejected the optional approach: most foreign refiners lack the necessary data, and it would be difficult to monitor for and to enforce compliance. See id. at 7,786/1-2.

B. The 1997 Rule

In 1995 the World Trade Organization held the 1994 rule violated the anti-discrimination norm of the General Agreement on Tariffs and Trade because domestic refiners were allowed to set individual baselines while foreign refiners were not. The United States Trade Representative in June 1996 advised the WTO that the United States intended to comply with that decision. See 19 U.S.C. § 3533 (specifying procedures agencies must follow before amending a rule held inconsistent with GATT). The EPA accordingly solicited public comment to identify its choices, see Invitation For Public Comment: World Trade Organization (WTO) Decision on Gasoline Rule (Reformulated and Conventional Gasoline), 61 Fed.Reg. 33,703 (1996), and later proposed to adopt the optional baseline approach it had rejected in the 1994 rule, allowing each foreign refiner either to accept the statutory baseline or to petition the EPA for permission to establish an individual baseline. See Notice of Proposed Rulemaking: Regulation of Fuels and Fuel Additives: Baseline Requirements for Gasoline Produced By Foreign Refiners, 62 Fed.Reg. 24,776 (1997).

In 1997 the EPA promulgated a final rule to that effect. See Final Rule: Regulation of Fuels and Fuel Additives: Baseline Requirements for Gasoline Produced By Foreign Refiners, 62 Fed.Reg. 45,533 (codified at 40 C.F.R. pt. 80). The new rule conditions the assignment of an individual baseline upon the foreign refiner's agreement to certain conditions necessary to ensure compliance and to facilitate enforcement. See id. at 45,539-41, 45,550-59. The EPA concluded that the risk of an adverse environmental impact from gaming by foreign refiners, although "difficult to quantify," id. at 45,537/2, was acceptable; indeed, during the first year in which the 1994 rule was in effect imported gasoline on average actually had been somewhat cleaner than required by the statutory baseline. See id. at 45,542/2 & n. 13. Nevertheless, the EPA again acknowledged, as it had in 1994, that allowing foreign refiners selectively to petition for individual baselines could have an adverse environmental effect. Accordingly, as a remedial measure, the agency announced that it will monitor the average quality of imported gasoline for emissions of oxides of nitrogen (NOx)--the pollutants which in its judgment are most likely to increase over 1990 levels--and will compare the results with the average quality of gasoline imported in 1990; if the 1990 levels are ever exceeded, then the permissible levels of NOx for gasoline imported under the statutory baseline will automatically be decreased by an offsetting amount, in order thereby to maintain the "environmental neutrality" of the rule. Id. at 45,537.

II. Analysis

The petitioners bring both substantive and procedural challenges to the 1997 rule. As to substance, the petitioners argue the rule is beyond the EPA's statutory authority because (1) allowing foreign refiners the option to petition the EPA for an individual baseline may result in a degradation of air quality; (2) in promulgating the rule the EPA considered factors other than air quality, namely (a) the WTO's decision that the 1994 rule was inconsistent with the GATT, and (b) the likely effect of regulation upon the price and supply of gasoline in the U.S....