U.S. v. Coastal Refining and Marketing, Inc.

• Citation: 911 F.2d 1036
• Decision Date: 14 September 1990
• Docket Number: No. 89-6056,89-6056
• Parties: , 59 USLW 2227, 20 Envtl. L. Rep. 21,421 UNITED STATES of America, Plaintiff-Appellant, Cross-Appellee, v. COASTAL REFINING AND MARKETING, INC., Defendant-Appellee, Cross-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1036

911 F.2d 1036

32 ERC 1088, 59 USLW 2227, 20 Envtl.

L. Rep. 21,421

UNITED STATES of America, Plaintiff-Appellant, Cross-Appellee, v. COASTAL REFINING AND MARKETING, INC., Defendant-Appellee,

Cross-Appellant.

No. 89-6056.

United States Court of Appeals, Fifth Circuit.

Sept. 14, 1990.

Kenneth W. Starr, Sol. Gen., U.S. Dept. of Justice, Michael P. Healy, Robert L. Klarquist, Land & Natural Res. Div., Dept. of Justice, Appellate Sect., C. Carrick Brooke-Davidson, Dept. of Justice, Environmental Enforcement Sect., Washington, D.C., for plaintiff-appellant cross-appellee.

Keith A. Jones, Fulbright & Jaworski, Washington, D.C., Louis S. Zimmerman, J.B. Ruhl, Fulbright & Jaworski, Austin, Tex., for defendant-appellee cross-appellant.

Appeal from the United States District Court for the Southern District of Texas.

Before REAVLEY, DUHE and WIENER, Circuit Judges.

REAVLEY, Circuit Judge:

The United States brought this action against Coastal Refining and Marketing, Inc. ("Coastal"), alleging violations of the Environmental Protection Agency's Clean Air Act regulations with respect to five cargos of imported petroleum product. On cross-motions for summary judgment, the trial court held that Coastal had, in fact, violated the regulations as to four of the five cargos. The trial court, however, refused to impose the $9 million in mandatory penalties sought by the government because the court found that Sec. 211(d) of the Clean Air Act, which establishes the mandatory penalty, is unconstitutional. The government appeals, arguing that Sec. 211(d) is constitutional and that Coastal violated the regulations with respect to the fifth cargo. Coastal cross-appeals, contending that the trial court erred in concluding that it had violated the regulations with respect to four of the cargos. We vacate the judgment and dismiss the suit of the United States.

I.

Section 211(c) of the Clean Air Act authorizes the Administrator of the Environmental Protection Agency ("EPA") to promulgate regulations to

control or prohibit the manufacture, introduction into commerce, offering for sale, or sale of any fuel or fuel additive for use in a motor vehicle or motor vehicle engine ... if in the judgment of the Administrator any emission product of such fuel or fuel additive causes, or contributes, to air pollution which may reasonably be anticipated to endanger the public health or welfare....

42 U.S.C. Sec. 7545(c)(1).

For several years the EPA has recognized that lead, which historically was used as an additive to enhance the octane level of gasoline, poses a threat to human health. See Small Refiner Lead Phase-Down Task Force v. United States EPA, 705 F.2d 506, 511, 527-31 (D.C.Cir.1983). Accordingly, the EPA has regulated the use of lead as an additive since 1973. See id. at 512. In 1985, the Administrator issued regulations under Sec. 211(c) to reduce substantially the lead content in gasoline. See Union Oil Co. v. U.S. EPA, 821 F.2d 678, 679 (D.C.Cir.1987). The regulations called for a gradual reduction in lead content over a period of time. ¹ To provide producers and importers with flexibility during the "lead phasedown" period, the EPA regulations permitted those who voluntarily used less lead per gallon than specified in the regulations to "bank" the difference as a "lead usage right." See 40 C.F.R. Sec. 80.20(e)(1). These "rights," also referred to as "credits," could then be withdrawn through the end of 1987 to comply with the new, more stringent, standards as they became effective. Id. Sec. 80.20(e)(2). These "credits" could also be transferred through the end of 1987, at which time the program ended. Id.; see also Union Oil Co., 821 F.2d at 680.

In order for a producer or importer to generate any "lead usage rights" under the regulatory program, the product produced or imported had to be "gasoline." See 40 C.F.R. Sec. 80.20(c)(1)(i), (e)(1)(i)-(ii), (e)(3). "Gasoline" is defined as

any fuel sold in any State for use in motor vehicles and motor vehicle engines, and commonly or commercially known or sold as gasoline.

Id. Sec. 80.2(c) (footnote omitted). Those who participated in the lead banking program were required to make quarterly reports to the EPA in which the product being produced or imported was identified. See id. Sec. 80.20(a)(3), (c)(3), (e)(2)(iii), (e)(3)(iv). These reports enabled the EPA to ensure that the total amount of "banked" credits used by the industry did not exceed the maximum allowed under the lead content standard. See Union Oil Co., 821 F.2d at 680.

To give the Sec. 211(c) regulations force, Sec. 211(d) of the Clean Air Act provides that

[a]ny person who violates ... the regulations prescribed under subsection (c) ... shall forfeit and pay to the United States a civil penalty of $10,000 for each and every day of the continuance of such violation....

42 U.S.C. Sec. 7545(d). Section 211(d) further provides that the Administrator of the EPA may remit or mitigate the $10,000 per day penalty. Id.

II.

During the first half of 1985, Coastal imported five cargos of petroleum product from Mexico. In its quarterly reports to the EPA, Coastal classified the cargos as "gasoline" and reported the creation of approximately 30 million grams of "lead usage rights" based on this classification.

The United States brought this action against Coastal, contending that the imported product was not "gasoline" and that the "lead usage rights" were, therefore, invalidly created. The government sought $9 million in penalties under Sec. 211(d) ($10,000 per day for 900 days--from the time Coastal classified the product as "gasoline" in the quarterly report on July 15, 1985, until December 31, 1987, the date the banking program ended).

Coastal moved for summary judgment and the United States filed a cross-motion for summary judgment. The trial court granted partial summary judgment on the issue of liability in favor of the United States. With regard to four of the five cargos, the court concluded that Coastal had not imported "gasoline" and, therefore, that the lead credits were not validly created. The court determined that Sec. 211(d) of the Clean Air Act, which imposes the mandatory $10,000 per day penalty for a violation of the regulations issued under Sec. 211(c), was unconstitutional. Consequently, the trial court did not impose any penalty on Coastal. The court also granted partial summary judgment for Coastal, holding that one cargo was "gasoline."

The government appeals the lower court's determination that Sec. 211(d) is unconstitutional and that one of the five cargos was "gasoline" as defined by the regulations. Coastal cross-appeals, claiming that the trial court erred in holding that four of its cargos were not "gasoline."

III.

A. "Gasoline "

In order to create "lead credits" under the EPA's "banking" program, an importer must import "gasoline" as defined in the regulations. Two requirements must be met for a petroleum product to be considered "gasoline": (1) it must be fuel of a type "sold in any State for use in motor vehicles and motor vehicle engines," and (2) it must be "commonly or commercially known or sold as gasoline." 40 C.F.R. Sec. 80.2(c). ² The EPA's regulatory definition is non-technical and provides no objective test against which product can be measured. As the trial court noted, in determining whether a product is "gasoline," the courts are resigned to using "other objective standards available as a way of postulating some formula or standard which encompasses this legal definition." A number of standards were presented to the trial court, including specifications of the American Society for Testing and Materials ("ASTM").

The ASTM has established a standard specification for automotive gasoline. ³ This specification, "established on the basis of the broad experience and close cooperation of producers of gasoline, manufacturers of automotive equipment, and users of both," provides guidance "in establishing the requirements of gasoline for ground vehicles equipped with spark-ignition engines." As the specification itself admits, "[i]t neither necessarily includes all types of gasolines ⁴ that are satisfactory for automotive vehicles, nor necessarily excludes gasolines that may perform unsatisfactorily...." Although the specification does not provide an objective, comprehensive definition of gasoline, it is useful to the court as an aid in determining whether a particular product is "commonly or commercially known or sold as gasoline"; the standard was developed in conjunction with gasoline producers, automotive equipment manufacturers, and users of both. In addition, it has been incorporated into certain federal procurement standards. Because of the broad-based participation of key groups in developing the standard and its use in federal procurement practices, we accept that standard as our guide in determining whether a product is "commonly or commercially known" as "gasoline." ⁵

The ASTM standard identifies several characteristics of gasoline. These characteristics include, but are not limited to, sulphur content, gum content, vapor pressure, oxidation stability, and octane content. The specification establishes objective standards for each of these several characteristics. For example, the specification establishes 87 ⁶ as a minimum octane level ⁷ for leaded gasoline. Similar objective standards are established for each of the other characteristics identified in the specification.

In its order, the trial court recognized that a number of characteristics are considered in determining whether product is "gasoline" and that octane plays a critical role in that determination. The court also acknowledged that to be "gasoline" a product must be both (1) fuel of a type "sold in any State for use in motor vehicles and motor vehicle engines" and (2) "commonly or commercially known or sold as gasoline." Id. However, the lower court focused its analysis on the second portion of the...