Town of Brookline v. Gorsuch

• Decision Date: 18 December 1981
• Docket Number: No. 81-1360,81-1360
• Citation: 667 F.2d 215
• Parties: , 12 Envtl. L. Rep. 20,115 TOWN OF BROOKLINE, et al., Petitioners, v. Anne McGill GORSUCH, Administrator of the United States Environmental Protection Agency, et al., Respondents. President and Fellows of Harvard College, Intervenor.
• Court: U.S. Court of Appeals — First Circuit

Page 215

667 F.2d 215

16 ERC 1857, 12 Envtl. L. Rep. 20,115

TOWN OF BROOKLINE, et al., Petitioners, v. Anne McGill GORSUCH, Administrator of the United States Environmental Protection Agency, et al., Respondents President and Fellows of Harvard College, Intervenor.

No. 81-1360.

United States Court of Appeals First Circuit.

Argued Oct. 9, 1981.

Decided Dec. 18, 1981.

Jerome Aaron, Cambridge, Mass., for The Mission Hill petitioners.

Thomas B. Bracken, Boston, Mass., with whom J. Raymond Miyares and Bracken & Baram, Boston, Mass., were on brief, for Brookline petitioners.

Jose R. Allen, Atty., Dept. of Justice, Washington, D.C., with whom Anthony C. Liotta, Acting Asst. Atty. Gen., Land and Natural Resources Div., Donald W. Stever, Jr., Atty., Dept. of Justice, Washington, D.C., and Susan Studlien, Atty., E. P. A., Boston, Mass., were on brief, for Federal respondents.

Robert W. Meserve, Boston, Mass., with whom Palmer & Dodge, Verne W. Vance, Jr., and Foley, Hoag & Eliot, Boston, Mass., were on brief, for respondent Medical Area Total Energy Plant, Inc. and intervenor President and Fellows of Harvard College.

Before CAMPBELL and BOWNES, Circuit Judges, and CAFFREY, ^* District Judge.

BOWNES, Circuit Judge.

The Town of Brookline, Massachusetts (Brookline), and the Mission Hill Planning Commission, Inc., and residents of the Mission Hill area of Boston (Mission Hill) ¹ petition us to review a determination of the acting Regional Administrator (ARA) of the Environmental Protection Agency (EPA) that diesel engines to be installed in a cogeneration plant being constructed in Brookline are exempt from the Prevention of Significant Deterioration of Air Quality (PSD) provisions and regulations of the Clean Air Act, 42 U.S.C. §§ 7470-7479; 40 C.F.R. § 52.21.

The respondents are Anne McGill Gorsuch, the Administrator of EPA, and Medical Area Total Energy Plant, Inc. (MATEP), owner of the plant. The President and Fellows of Harvard College (Harvard) appear as intervenor. We have jurisdiction under 42 U.S.C. § 7607(b)(1).

The exemption was granted because the ARA found that the owner of the diesel engines was a nonprofit health or education institution within the meaning of 42 U.S.C. § 7479(1) and 45 Fed.Reg. 52676, 52739 (1980) (to be codified in 40 C.F.R. § 52.21(i)(4)(vi) (1981)).

The plant in question is a large facility designed to produce electricity, steam, and chilled water. It is to contain six diesel engines-making it, according to the petitioners, the largest diesel power plant in the United States-that will generate heat that will help to make steam in the electric generation portion of the facility. Most of the heat to generate steam will, however, come from other sources. The steam will be used not only to generate electricity but also to provide space heat in certain buildings, hence the plant is a cogeneration facility. Electric chillers will be used to produce chilled water for air conditioning in those buildings. The steam and chilled water portions of the facility are in operation and are not subject to PSD review. The question is whether the diesel engines must undergo PSD review by EPA before installation.

The facility is owned and operated by a corporation, MATEP, organized under Chapters 156 (business corporations) and 121A (urban redevelopment corporations) of the Massachusetts General Laws Annotated. All of MATEP's issued and outstanding stock is owned by Harvard. Harvard conceived of and set up MATEP to own the facility in the hope that a taxable financial institution would purchase MATEP's stock in order to reap certain tax benefits and would lease the facility back to a service corporation to which Harvard belonged at a rate reflecting the tax benefits. No institution was interested, however, and Harvard kept the stock and retained the MATEP structure while going ahead with the cogeneration facility.

Harvard planned that the cogeneration facility would meet the electricity, steam, and chilled water needs of Harvard's Medical School, Dental School, and School of Public Health and of six so-called "affiliated teaching hospitals." ² Harvard has entered into contracts with all of these hospitals to supply their total electricity, steam, and chilled water needs. The hospitals will pay for these services at the rates charged by public utilities for comparable services although Harvard had hoped that the efficiencies of cogeneration and third-party ownership of MATEP would mean lower costs. Even at the current rates, Harvard will sustain losses initially. Should operation of the facility later yield financial savings, as a result of relatively lower operating costs, third-party financing of the facility, or sale of the facility to a third party, the hospitals will, under the terms of their utilities contracts, be able to participate in such savings. Any "profits" will be reflected in lower costs to Harvard and the hospitals. In addition, less than two percent of the facility's steam capacity will be sold to the Massachusetts College of Art, a nonprofit state educational institution, and less than five percent of the steam capacity (but no electricity, according to respondents) will be provided at no cost to Mission Park, a subsidized housing project.

This case concerns only one of the several federal and state air pollution requirements that MATEP must meet in order to install the diesel engines. The PSD provisions of the federal Clean Air Act require so-called "major emitting facilities," which MATEP with its diesel engines would be, to obtain permission from their states (if the state has a PSD program) or from EPA for their construction. Permission is granted only if the proposed plant satisfies PSD requirements, which, broadly speaking, are that the plant will not cause a significant deterioration in the quality of air in the region. 42 U.S.C. §§ 7470-7479. This permission procedure does not apply, however, to "new or modified facilities which are nonprofit health or education institutions which have been exempted by the (s)tate." Clean Air Act § 169(1), 42 U.S.C. § 7479(1). In states such as Massachusetts that do not have their own PSD review programs and that are therefore regulated directly by EPA, the governor of the state may request EPA to exempt nonprofit health or education institutions from PSD requirements. 45 Fed.Reg. 52676, 52739 (1980) (to be codified in 40 C.F.R. § 52.21(i)(4)(vi) (1981)).

Originally contemplating ownership by a third-party financial institution, MATEP, through its owner Harvard, prepared for its PSD review by EPA. When financing was not forthcoming, Harvard decided that MATEP should apply for an exemption under 42 U.S.C. § 7479(1) and the regulation thereunder. Request for an exemption was sent to Governor Edward J. King, who approved it and forwarded it to EPA. The ARA solicited comments on the request, although not required to do so, and decided that MATEP qualified for an exemption. The ARA determined that an exempt facility must meet three requirements: it must have a request from the governor, it must be an "education or health" institution, and it must be nonprofit. The ARA found that Governor King had requested an exemption for MATEP. She also found that, although the facility was not itself a hospital or school, its purpose in serving health or education institutions and its ownership and operation by such an institution qualified it as a health or education institution. Finally, according to the ARA, the fact that MATEP "exists solely for the benefit of and is merely an extension of Harvard and the Affiliated Teaching Hospitals, all of which are nonprofit institutions" and the fact "that neither MATEP nor Harvard is expected to receive a profit in the conventional sense" provided two independent grounds for finding that MATEP is nonprofit.

"Under the Clean Air Act, our scope of review in this case is limited to determining whether the ARA's decision was 'arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.' 5 U.S.C. § 706(2)(A). ³ The case law has established the principle that a court should give deference to an administrative agency's decision. Udall v. Tallman, 380 U.S. 1, 16-18 (85 S.Ct. 792, 801-802, 13 L.Ed.2d 616) (1965); Train v. Natural Resources Defense Council, 421 U.S. 60, 87, (95 S.Ct. 1470, 1485-1486, 43 L.Ed.2d 731) (1975)." This principle of deference has had, however, varied applications depending on the nature of the decision reviewed. Thus "(a) lthough an agency's interpretation of the statute under which it operates is entitled to some deference, 'this deference is constrained by our obligation to honor the clear meaning of a statute, as revealed by its language, purpose, and history.' Teamsters v. Daniel, 439 U.S. 551, 566 n.20 (99 S.Ct. 790, 800 n.20, 58 L.Ed.2d 808) (1979)." Southeastern Community College v. Davis, 442 U.S. 397, 411, 99 S.Ct. 2361, 2369, 60 L.Ed.2d 980 (1979). See also Federal Election Commission v. Democratic Senatorial Campaign Committee, --- U.S. ----, ---- 102 S.Ct. 38, 41, 70 L.Ed.2d --- (1981); FCC v. RCA Communications, Inc., 346 U.S. 86, 91, 73 S.Ct. 998, 1002, 97 L.Ed. 1470 (1953); Russell v. Law Enforcement Assistance Administration, 637 F.2d 1255, 1264 (9th Cir. 1980). Greater deference is given where the agency decision relates to factual matters in which the agency has special technical expertise, FPC v. Florida Power & Light Co., 404 U.S. 453, 463, 92 S.Ct. 637, 643-644, 30 L.Ed.2d 600 (1972), as well as to matters of apparently mixed factual and legal issues in which the agency has expertise, American Ship Building Co. v. NLRB, 380 U.S. 300, 316, 85 S.Ct. 955, 966, 13 L.Ed.2d 855 (1965). Longstanding agency practice, particularly where acquiesced in by the Congress, also receives deferential treatment. Saxbe v. Bustos, 419 U.S. 65, 74, 95 S.Ct. 272, 278-279, 42 L.Ed.2d 231 (1974). We may rely more heavily on our own judgment when reviewing an...