Potomac Elec. Power Co. v. E.P.A.
| Decision Date | 04 June 1981 |
| Docket Number | No. 80-1255,80-1255 |
| Citation | 650 F.2d 509 |
| Parties | , 11 Envtl. L. Rep. 20,815 POTOMAC ELECTRIC POWER COMPANY, Petitioner, v. ENVIRONMENTAL PROTECTION AGENCY, Douglas M. Costle, Administrator, and Jack J. Schramm, Regional Administrator, Environmental Protection Agency, Respondents. |
| Court | U.S. Court of Appeals — Fourth Circuit |
George V. Allen, Jr., Washington, D. C. (William P. Barr, Shaw, Pittman, Potts & Trowbridge, Washington, D. C., Alan G. Kirk, II, Potomac Electric Power Company, Washington, D. C., on brief), for petitioner.
Bingham Kennedy, Dept. of Justice, Washington, D. C. (Todd Joseph, Environmental Protection Agency, Angus MacBeth, Acting Asst. Atty. Gen., David Mayer, Environmental Protection Agency, Washington, D. C., on brief), for respondents.
Before WIDENER, PHILLIPS and ERVIN, Circuit Judges.
The Potomac Electric Power Company (PEPCO) has petitioned this court, pursuant to § 307(b)(1) of the Clean Air Act, 42 U.S.C. § 7607(b)(1), for review of a decision of the Environmental Protection Agency (EPA), through one of its regional administrators, finding that the boiler at PEPCO's Chalk Point Unit $ 4 electric generating station is subject to the new source performance standard (NSPS), see 40 C.F.R. § 60.40 et seq., promulgated by the EPA for fossil fuel-fired steam generating units under the Clean Air Act, 42 U.S.C. § 7401 et seq. The regional administrator's decision was based on his determination that PEPCO had not "commenced construction" of the Chalk Point Unit $ 4 boiler prior to EPA's publication of the relevant NSPS on August 17, 1971.
Two questions are presented by PEPCO's petition for review of the regional administrator's decision. 1 First, is the EPA's interpretation of the regulations it has promulgated for determining whether an NSPS is to be applied to a particular facility "plainly erroneous"? Second, was the regional administrator's decision, on application of the EPA's regulations and interpretation of those regulations to the facts of this case, arbitrary, capricious or an abuse of discretion? Answering both questions in the negative, we affirm the decision of the regional administrator that PEPCO's Chalk Point Unit $ 4 must comply with the NSPS promulgated for fossil fuel-fired steam generators.
Because the decision of the EPA concerning the applicability of an NSPS to a particular facility turns largely upon the facts of each case, a brief review of the facts underlying PEPCO's present petition for review is essential for an understanding of our disposition of this appeal. Chalk Point Units $ 3 and $ 4 are two of the four electric generating facilities that collectively comprise PEPCO's Chalk Point Generating Station south of Aquasco, Maryland. At the core of each unit is an oil-fired boiler designed to generate steam to power a turbine that produces electricity. The two units share several ancillary facilities, including a common water treatment system, fuel oil tank farm and control room, and a single building houses the boilers and turbines for both units. Units $ 3 and $ 4 were planned in the late 1960s as a single procurement and were to be placed in service "back to back" in 1974 and 1975. A sudden and unprecedented decline in electricity use following the Arab Oil Embargo of 1973, however, caused construction of both units to be slowed after their commencement. Unit $ 3 was placed in service in 1975; Unit $ 4 is scheduled to go into operation in the fall of 1981.
The information that PEPCO later submitted to the EPA indicates that negotiations for the construction of Unit $ 4 were commenced in 1970 and that PEPCO was dealing primarily with General Electric (GE), United Engineers & Constructors (UE&C) and Combustion Engineering (CE). PEPCO's negotiations with GE were for the main turbine-generator and boiler feed pump turbines. On March 12, 1971, PEPCO awarded the order to GE subject to the final approval of PEPCO's board of directors and mutually agreeable contract terms. On March 25, 1971, GE confirmed the order but stipulated that PEPCO could cancel the order without charge up to the earlier of the 30-month period prior to shipment or the release of the units for engineering and manufacturing. On June 30, 1971, PEPCO notified GE of approval of the order by its board of directors. On August 2, 1971, the units were released by GE for design and manufacture. A formal contract for the units, however, was not signed until April 23, 1973.
PEPCO's negotiations with UE&C were for engineering and construction services at the Chalk Point site. The contract for these services was signed on November 12, 1974 but had an "effective date" of April 12, 1971. This contract covered services for both Units $ 3 and $ 4. Prior to August 17, 1971, UE&C had developed drawings that indicated the planned construction of Unit $ 4. Site preparation for Unit $ 4, however, did not begin until late 1971.
PEPCO's negotiations with CE were for fabrication of the boiler to be used in Unit $ 4. On August 17, 1970, PEPCO received a price quotation from CE on a boiler unit for an undetermined facility; that boiler was eventually used in Unit $ 4. A CE "Parts Shipment Forecast" dated February 18, 1971 listed this unit for initial parts shipment during the first quarter of 1973. The unit was listed as a "Forecast Unit" that was identified by an internal control number as contrasted to listing as a "Booked Unit" identified by a domestic contract number.
On March 11, 1971, CE stated in a letter to PEPCO that it had committed space in its production schedule for the Unit $ 4 boiler pending a final decision by PEPCO. Also included in the letter were a price quotation and a projected delivery date. On July 12, 1971, PEPCO sent a letter to CE stating that "we are now considering a design for proposed Chalk Point No. 4." This letter concluded with the statement that, "(s)ubject to a mutually satisfactory contract, it is our intent to award the No. 4 boiler unit to you." This letter also referred to a meeting between PEPCO and CE to be held on August 3, 1971 to review a design proposal for Unit $ 4.
Although a CE engineering and production team began to design the Unit $ 4 boiler after CE's August 3 meeting with PEPCO, no subcontracts were let or materials acquired prior to August 17, 1971. On October 26, 1971, CE prepared a "Contract Abstract" for Unit $ 4 that included descriptions of the major boiler components, the total price, shipping and payment conditions, and an "award date" of July 12, 1971.
A formal contract for the Unit $ 4 boiler was not executed until April 18, 1973, at which time fabrication of the boiler was 75% complete. Affidavits later sworn to by PEPCO's Vice President for Nuclear Engineering and Environmental Affairs and CE's principal representative in the boiler negotiations, however, indicate that the parties felt that they had a binding agreement based on PEPCO's letter of July 12, 1971.
Construction of Chalk Point Unit $ 4, although slowed or "deferred" as a result of the 1973 oil embargo, has continued substantially uninterrupted to the present day. It was not until May 20, 1977, however, that PEPCO, pursuant to 40 C.F.R. § 60.5(a), requested a ruling from the EPA on whether Unit $ 4 would be subject to the NSPS for fossil fuel-fired steam generating units published by the EPA on August 17, 1971. Appended to this request were 156 pages of pertinent documents.
Fifteen months after receiving PEPCO's request, EPA communicated its first response to PEPCO a request for further information. This request, dated August 17, 1978, stated that the EPA had "preliminarily determined" that Unit $ 4 was subject to the 1971 NSPS for steam electric plants but requested additional information to determine the "exact status" of the unit. The reasons given for the EPA's preliminary determination were that construction of Unit $ 4 had been neither continuous nor of reasonable length, as required by 40 C.F.R. § 60.2(i). PEPCO supplied the requested information and urged that the EPA make its decision "just as quickly as possible."
At a meeting requested by PEPCO that took place on July 3, 1979, the EPA informed PEPCO for the first time that its ruling would turn on the question whether a "contractual obligation" to construct the Unit $ 4 boiler existed before August 17, 1971. Following PEPCO's compliance with two more EPA requests for information, the EPA staff briefed the regional administrator in October 1979 and again in March 1980. His final ruling on PEPCO's Chalk Point Unit $ 4 request was published on March 27, 1980. 45 Fed.Reg. 20,155 (1980). In this ruling the regional administrator determined that, because PEPCO had not entered into a "contractual obligation" on the Unit $ 4 boiler the "affected facility" in the present case PEPCO had not "commenced construction" at its Chalk Point Unit $ 4 prior to the EPA's publication of the NSPS for steam electric plants on August 17, 1971. He therefore concluded that the NSPS for steam electric plants was applicable to Unit $ 4.
Before addressing the specific issues raised by this appeal, a brief discussion of the regulatory scheme out of which they arise is essential. Section 111 of the Clean Air Act, 42 U.S.C. § 7411, requires that the EPA promulgate new source performance standards (NSPS), reflecting the best demonstrated pollution control technology, for application to any new stationary source, "the construction or modification of which is commenced after the publication of (the NSPS) applicable to such source." The only statutory guidance that the EPA is given in promulgating the NSPS, however, is the definition of "stationary source" in § 111(a)(3) of the Clean Air Act, 42 U.S.C. § 7411(a)(3), as "any building, structure, facility, or installation which emits or may emit any air pollutant."
Based on this loosely defined statutory...
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