Shell Oil Co. v. Costle

Decision Date16 May 1979
Docket NumberNo. 77-3207,77-3207
Citation595 F.2d 224
Parties, 9 Envtl. L. Rep. 20,465 SHELL OIL COMPANY, Petitioner, v. Douglas M. COSTLE, as Administrator, U. S. Environmental Protection Agency andthe United States Environmental Protection Agency, Respondents.
CourtU.S. Court of Appeals — Fifth Circuit

Gene W. Lafitte, George J. Domas, J. Berry St. John Jr., New Orleans, La., Barbara D. Little-Evans, Houston, Tex., for petitioner.

Stephen D. Ramsey, Dept. of Justice, Pollution Control, Section, Land & Natural Resources Div., Washington, D. C., Angus MacBeth, Chief, Pollution Control Section, Dept. of Justice, Alan Eckert, U. S. Environmental Prot. Agency, Joan Z. Bernstein, Gen. Counsel., Griffin B. Bell, Atty. Gen., U. S. Dept. of Justice, Douglas M. Costle, Administrator, U. S. EPA, James W. Moorman, Asst. Atty. Gen., Land & Natural Resources Div., Dept. of Justice, Washington, D. C., for respondents.

Petition for Review of An Order of the Environmental Protection Agency.

Before WISDOM, COLEMAN and RONEY, Circuit Judges.

WISDOM, Circuit Judge:

Shell Oil Company (Shell), the petitioner, operates a large petroleum refinery in Norco, Louisiana, about 30 miles north of New Orleans. In this appeal, Shell challenges the effluent limit allowed the refinery by the pollution permit issued to it by the Environmental Protection Agency (EPA). We find that the EPA's calculation of the effluent limit is supported by substantial evidence in the record. We affirm, therefore, the decision of the EPA's administrator, who refused to review the regional administrator's determination that the EPA had correctly calculated the effluent limit.

I.

The Norco refinery has an intake capacity of about 300,000 barrels per day of crude oil and natural gas liquids. Shell uses a variety of petrochemical engineering processes at this refinery to produce gasoline as well as other products. 1 In one of the refinery's many plants, Shell has two units designed primarily to produce ethylene and propylene, two petrochemicals that may be described in more general terms as olefins. We shall refer to these units as the "olefins plant".

In 1974, pursuant to the 1972 amendments to the Federal Water Pollution Control Act, 33 U.S.C. § 1251 Et seq., the EPA issued Shell a permit to discharge effluents from this refinery. Shell contested the terms of the permit, asserting that the EPA's calculation of the refinery's effluent limit failed to give proper credit for the effluents attributable to the olefins plant. Following an adjudicatory hearing before an administrative law judge, the regional administrator of the EPA held that the EPA's calculations involving the olefins plant were correct. The administrator of the EPA refused to review that decision. In this appeal, Shell renews its argument that the EPA incorrectly calculated the effluent limit attributable to the olefins plant.

II.

In 1972, Congress extensively amended the Federal Water Pollution Control Act in an attempt "to restore and maintain the chemical, physical, and biological integrity of the Nation's waters". 33 U.S.C § 1251(a). 2 These amendments established a new permit program, the National Pollutant Discharge Elimination System (NPDES). The NPDES permit establishes the conditions under which a refinery may discharge pollutants and states the types and quantities of pollutants that may be discharged. With certain exceptions not relevant to this case, no "point source" 3 may discharge any pollutant unless it has first obtained a valid NPDES permit from the administrator of the EPA. 33 U.S.C. §§ 1311, 1342. The administrator is authorized to issue a permit only if, among other things, the discharge of pollutants by a point source meets the standards of § 301 of the Act, which requires the achievement by July 1, 1977, of "effluent limitations" requiring the "best practicable control technology currently available". 33 U.S.C. § 1311(b)(1)(A)(i). The amendments require that the administrator prescribe by regulation that high level of technology for each type of point source. 33 U.S.C. §§ 1311(b)(1)(A)(i), 1314(b); E. I. duPont de Nemours & Co. v. Train, 1977, 430 U.S. 112, 97 S.Ct. 965, 51 L.Ed.2d 204. In this scheme, then, "an NPDES permit serves to transform generally applicable effluent limitations and other standards . . . into the obligations (including a timetable for compliance) of the individual discharger". EPA v. California ex rel. State Water Resources Control Board, 1976, 426 U.S. 200, 205, 96 S.Ct. 2022, 2025, 48 L.Ed.2d 578.

The EPA received the aid of the American Petroleum Institute (API) in developing regulations setting forth the amount of effluents to be allowed petroleum refineries. In 1972, the EPA and the API jointly sponsored a survey of a number of refineries in the United States. Shell's Norco refinery was included in this survey. Each refinery surveyed reported what processes it used and the amount of waste it produced. To analyze these data, the EPA used a complex statistical technique known as regression analysis, which allowed the EPA to predict the effect of each refinery process on the total waste produced by the refinery. The EPA first determined that the 126 processes included in the EPA/API survey could be properly grouped into nine more general process categories:

1. crude processes;

2. cracking processes;

3. hydrocarbon processes;

4. lubes and greases;

5. coking processes;

6. treating and finishing processes;

7. first generation petrochemicals;

8. second generation petrochemicals;

9. asphalt production.

In the EPA's regression calculations, six of the nine process categories proved significant in predicting the amount of refinery waste: crude processes, cracking processes, lubes and greases, coking processes, second generation petrochemicals, and asphalt production. The significance values of five of these six processes were positive numbers, which showed that their presence resulted in a relatively greater production of waste. The exception was second generation petrochemicals, which had a significance value of -6, indicating that its presence resulted in a relatively lesser production of waste. The EPA found that the remaining three processes hydrocarbon processes, treating and finishing processes, and first generation petrochemicals were not significant in predicting refinery waste. The EPA's analysis is found in its Development Document for Effluent Limitations Guidelines and New Source Performance Standards for the Petroleum Refinery Point Source Category (1974). R. 255-460.

Based on this analysis, the EPA promulgated regulations prescribing the effluent limitations for the petroleum refining industry. 40 C.F.R. Part 419. 4 The regulations divide the industry into five subcategories: topping, cracking, petrochemical, lube, and integrated. After the EPA has classified a refinery according to subcategory, the allowable amount of effluent for the refinery is calculated by multiplying three factors specified in the regulations: the effluent limitations factor, the size factor, and the process factor. The values for the effluent limitations factor and the size factor are obtainable simply by examining the appropriate tables in the regulations. 5 The value for the process factor, however, must be calculated.

The EPA designed the process factor to take into account the mix of processes found in a refinery. It is the direct result of the EPA's regression analysis of the data gathered in the EPA/API survey on the effect of refinery processes on amount of effluents. To calculate the process factor, one must first determine the "weighting factor" for each process category found at the refinery. As set forth in 40 C.F.R. § 419.42(b), the weighting factors are as follows:

                   Process              Processes included           Weighting
                  category                                            factor
                --------------------------------------------------------------
                Crude ........ Atm. crude distillation ..................... 1
                               Vaccum crude distillation
                               Desalting.
                Cracking ..... Fluid cat. cracking ......................... 6
                and coking.... Vis-breaking.
                               Thermal cracking.
                               Moving bed cat. cracking.
                               Hydrocracking.
                               Fluid coking.
                               Delayed coking.
                Lube ......... Further defined in the development ......... 13
                               document.
                Asphalt ...... Asphalt production ......................... 12
                               Asphalt oxidation.
                               Asphalt emulsifying.
                

The weighting factor for a given process is equivalent to the significance value that process had in the EPA's regression analysis. The three processes that had no significance value hydrocarbon processes, treating and finishing processes, and first generation petrochemicals receive a weighting factor of zero. Second generation petrochemicals, which had a -6 significance value, is also accorded a zero weighting factor.

The weighting factor for a process category is used to determine the "process configuration" for the process, according to the following equation:

                process configuration     process category     weighting
                for each               =  throughput        X  factor for
                                          ----------------
                process category          total refinery       each
                                          throughput           category
                

40 C.F.R. § 419.42(b). The next quantity to be determined is the "refinery process configuration", which is the sum of the process configurations for the several process categories present at the refinery. Id. Finally, the "process factor" for the refinery is determined by plugging the refinery process configuration into a table found in the regulations. 6

The EPA and Shell agree that the Norco refinery fits in the "cracking" subcategory of the regulations. 7 Counsel for Shell has offered us a graphic depiction of how the allowable amount of effluents for a...

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