Tennessee Valley Authority v. Whitman, No. 00-15936.

Decision Date24 June 2003
Docket NumberNo. 00-16236.,No. 00-16235.,No. 00-16234.,No. 00-15936.
Citation336 F.3d 1236
PartiesTENNESSEE VALLEY AUTHORITY, Petitioner, v. Christine Todd WHITMAN, Administrator, United States Environmental Protection Agency, United States Environmental Protection Agency, Respondents. Alabama Power Company, Petitioner, v. Christine Todd Whitman, Administrator, United States Environmental Protection Agency, United States Environmental Protection Agency, Respondents. Tennessee Valley Public Power Association, Memphis Light, Gas & Water Division, et al., Petitioners, v. Christine Todd Whitman, Administrator, United States Environmental Protection Agency, United States Environmental Protection Agency, Respondents. Duke Energy Corporation, Petitioner, v. Christine Todd Whitman, Administrator, United States Environmental Protection Agency, United States Environmental Protection Agency, Respondents.
CourtU.S. Court of Appeals — Eleventh Circuit

Melvin Scott Schulze, Benjamin Franklin Johnson, IV, Hunton & Williams, Atlanta, GA, James E. Fox, Robert Chester Glinski, Harriet A. Cooper, Gregory R. Signer, Ronald E. Klipsch, Jim Hall, TVA, Knoxville, TN, F. William Brownell, Makram B. Jaber, Henry V. Nickel, Hunton & Williams, Washington, DC, James C. Cope, Murfree, Cope, Hudson & Scarlett, Murfreesboro, TN, Henry C. Tharpe, Jr., Kinney, Kemp, Pickell, Sponcler & Joiner, Dalton, GA, Garry Stephen Rice, Duke

Energy Corp., T. Thomas Cottingham, Charlotte, NC, Karl R. Moor, Southern Co., Washington, DC, Steven G. McKinney, Michael D. Freeman, Lyle D. Larson, R. Bruce Barze, Jr., Balch & Bingham, LLP, Birmingham, AL, J. Robin Rogers, Carlos Clifford Smith, Mark Windhorn Smith, Timothy H. Nichols, Strang, Fletcher, Carriger, Walker, Hodge & Smith, Chattanooga, TN, J. Maxwell Williams, Memphis Light, Gas & Water Div., Memphis, TN, for Petitioners.

David Gualtieri, J. Steven Rogers, Environmental and Natural Resources Div., Environmental Defense Section, U.S. Dept. of Justice, Washington, DC, Angelia Souder Blackwell, Atlanta Fed. Ctr., Atlanta, GA, for Respondents.

David R. Wooley, Young, Sommer, Ward, Ritzenbert, Wooley, Baker & Moore, Albany, NY, for Amicus Curiae.

Petitions for Review of a Final Order of the United States Environmental Protection Agency.

Before TJOFLAT, BARKETT and WILSON, Circuit Judges.

TJOFLAT, Circuit Judge:

The Environmental Protection Agency ("EPA") concluded that the Tennessee Valley Authority ("TVA") violated the Clean Air Act ("CAA")1 when it undertook fourteen rehabilitation projects at nine coal-fired electric power plants without permits. The EPA then issued an administrative compliance order ("ACO"), which required that TVA undertake several costly and burdensome compliance initiatives. TVA contended that the EPA had an incorrect understanding of the law and facts, and it therefore refused to comply with the terms of the ACO. Believing that TVA could not be sued in federal court,2 the EPA created a scheme in which the Environmental Appeals Board ("EAB") was delegated the task of "reconsidering" the ACO by informally adjudicating the issue of liability. After the EAB decided that TVA did, in fact, violate the CAA when it undertook the rehabilitation projects without permits, TVA filed a petition for review in this court, asking us to set aside the EAB Order as unlawful and the product of "arbitrary and capricious" decision-making pursuant to the Administrative Procedure Act's ("APA") judicial review provision, 5 U.S.C. § 706(2)(A).

We hold that we lack jurisdiction to review the ACO because it does not constitute "final" agency action. Although the CAA empowers the EPA Administrator to issue ACOs that have the status of law,3 we believe that the statutory scheme is unconstitutional to the extent that severe civil and criminal penalties can be imposed for noncompliance with the terms of an ACO. Accordingly, ACOs are legally inconsequential and do not constitute final agency action. We therefore decline to assert jurisdiction over TVA's petition for review pursuant to 42 U.S.C. § 7607(b)(1).4 The EPA must prove the existence of a CAA violation in district court; until then, TVA is free to ignore the ACO without risking the imposition of penalties for noncompliance with its terms.

This opinion consists of six parts. In part I, we describe the CAA's enforcement scheme. An important component of this discussion is the following observation: Congress clearly intended that ACOs be issued without any sort of adjudication, and the EPA has always (until now) abided by this obvious interpretation. This part also describes the course of this litigation, detailing the EPA's decision to conduct an adjudication prior to the issuance of the ACO — an adjudication that employed procedural rules that were invented by the EAB and administrative law judge ("ALJ") and applied on an ad hoc basis. Part II provides an overview of the Supreme Court's finality doctrine. This part concludes by focusing the discussion on one essential finality factor: whether the agency's action fixes a legal right or obligation. Although we ultimately believe that the CAA clothes ACOs with the status of law, part III explains why this conclusion is not axiomatic, notwithstanding the plain language of the statute. Several factors that might inform our interpretation of the CAA — agency practice, legislative history, the canon of statutory construction which requires courts to interpret statutes in a way that renders them constitutional, the problem of judicial review, and statutory structure — all point to the conclusion that Congress did not intend that ACOs have the status of law. Part IV explains how the plain language of the CAA leads to the unavoidable conclusion that Congress did, in fact, authorize the issuance of ACOs with the status of law. In this vein, the tension between parts III and IV reveals that the CAA was poorly drafted. Part V explains why the CAA is unconstitutional to the extent that monetary penalties and imprisonment can be imposed merely for noncompliance with an ACO. This part also explains why the statute cannot be saved by a voluntary pre-ACO adjudication. Part VI, the conclusion, makes the following point: since a deprivation of liberty or property cannot stem from mere noncompliance with an ACO, ACOs have no legal consequence and therefore do not constitute final agency action. Not only is this result constitutionally compelled, it also enables future courts to sidestep the thorny problems presented by part III, such as the fact that ACOs are typically issued without a record and the fact that an EPA adjudication of liability conflicts with other provisions of the statutory scheme.

I. Background
A. The Statutory Scheme

When the EPA finds that a regulated party is engaging in some sort of unlawful activity — such as emitting pollutants in excess of that allowed by EPA regulations or constructing a pollution source without a permit required by a state implementation plan ("SIP")—the EPA has four enforcement options. First, the EPA can request that the Attorney General commence a criminal prosecution. See 42 U.S.C. § 7413(a)(3)(D), (c).5 Second, the EPA can file suit in district court and seek injunctive relief and the imposition of civil fines.6 See 42 U.S.C. § 7413(a)(1)(C) (a)(2)(C), (a)(3)(C), (b). Third, the EPA can, after a formal adjudication of liability consistent with the APA7 and 40 C.F.R. § 22,8 assess civil penalties against the violator. See 42 U.S.C. § 7413(d). Whenever any of these three enforcement methods is used, the following fact remains true: if the defendant believes that the EPA has based its conclusions upon erroneous facts or an incorrect understanding of the law, the defendant may make legal and factual arguments in an independent forum — one that enables the defendant to utilize a panoply of pre-established procedural rights.

The EPA also has a fourth option: it can issue an ACO directing the regulated party to comply with various requirements. See 42 U.S.C. § 7413(a)(1)(A), (a)(2)(A), (a)(3)(B), (a)(4). ACOs can be issued so long as the following requirements are met: (a) they must be based upon "any information available to the Administrator"; (b) they must be issued thirty days after the issuance of a Notice of Violation; and (c) the regulated party must be given an "opportunity to confer" with the Administrator. See 42 U.S.C. § 7413(a)(1), (4).

The problem with ACOs stems from their injunction-like legal status coupled with the fact that they are issued without an adjudication or meaningful judicial review. First, ACOs are issued without any sort of adjudication that a party has violated the CAA. Like the decision to pursue a civil enforcement action in district court and the decision to refer a potential criminal violation to the Attorney General, the decision to issue an ACO is made "on the basis of any information available to the Administrator." 42 U.S.C. § 7413(a)(1). That is, the Administrator need only have a staff report, newspaper clipping, anonymous phone tip, or anything else that would constitute "any information." The standard is less rigorous than the probable cause standard required for the issuance of search warrants; certainly no pre-ACO adjudication that a party has violated the CAA (such as by modifying a pollution source in violation of an SIP) is contemplated. This observation is confirmed not only by the language of the statute, but also by agency practice. ACOs are rarely, if ever, issued after an agency adjudication.9 Finally, section 7413(d) explicitly requires an adjudication before the EPA can assess civil penalties, underscoring the fact that when Congress wants the EPA to conduct an adjudication, it knows how to effectuate that result. In sum, the statute's language and structure, in addition to agency practice, make clear that ACOs are issued without any adjudication.

A second aspect of ACOs is that they have...

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