Star Enterprise v. Environmental Protection Agency ( 2000 )

Opinions of the United
2000 Decisions States Court of Appeals
for the Third Circuit
12-7-2000
Star Enterprise v. Environmental Protection Agency
Precedential or Non-Precedential:
Docket 98-6321
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Filed December 7, 2000
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 98-6321
STAR ENTERPRISE; TEXACO INC.,
Petitioners
v.
UNITED STATES ENVIRONMENTAL
PROTECTION AGENCY,
Respondent
On Petition for Review of a Final Action by
The United States Environmental Protection Agency
Argued July 15, 1999
Before: ROTH and RENDELL, Circuit Judges
POLLAK,1 District Judge
(Opinion filed: December 7, 2000)
William H. Lewis, Jr., Esquire
Michael W. Steinberg, Esquire
(Argued)
Morgan, Lewis & Bockius LLP
1800 M Street, N.W.
Washington, D.C. 20036-5869
_________________________________________________________________
1. Honorable Louis H. Pollak, United States District Court Judge for the
Eastern District of Pennsylvania, sitting by designation.
Jeffrey N. Hurwitz, Esquire
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103-2921
Counsel for Petitioners
Lois J. Schiffer
Assistant Attorney General
Norman L. Rave, Esquire (Argued)
United States Department of Justice
Environmental Defense Section
P.O. Box 23986
Washington, DC 20026-3986
Diane McConkey, Esquire
Office of General Counsel
United States Environmental
Protection Agency
Charles McPhedran
Senior Assistant Regional Counsel
United States Environmental
Protection Agency
Counsel for Respondent
OPINION OF THE COURT
ROTH, Circuit Judge:
The United States Environmental Protection Agency (EPA)
determined that the "Standards of Per formance for
Petroleum Refineries," promulgated under the Clean Air Act
and codified at 40 C.F.R. SS 60.100-60.109 (1999) (Subpart
J), applied to two stationary gas turbines located in an
electrical power plant complex in Delaware City, Delaware.
The petitioners challenge this determination. Because we
conclude that the stationary gas turbines at issue in this
case are not "in" a "petroleum r efinery," we hold that these
turbines are not "affected facilities" as defined at 40 C.F.R.
S 60.100(a) and therefore ar e not subject to regulation
under the "Standards of Perfor mance for Petroleum
2
Refineries." For that reason, the EP A erred in determining
that these performance standards ar e applicable to the gas
turbines at issue in this case.
I. FACTS
Petitioners, Motiva Enterprises, LLC, and Texaco, Inc.,
challenge a final agency action, issued on July 21, 1998, by
the Environmental Protection Agency.2 This final action,
entitled "New Source Performance Standards Subpart J
Applicability Determination for the Star Enterprise
Petroleum Refinery in Delaware City, Delaware," set forth
the EPA's conclusion that two stationary gas turbines,
owned by Motiva and located in an electrical power plant
complex adjacent to Motiva's petroleum r efinery in
Delaware City, are subject to regulation under the New
Source Performance Standards (NSPS) for Petroleum
Refineries, codified at 40 C.F.R. SS 60.100-60.109.
Before addressing the merits of the petitioners' challenge,
we will discuss the relevant regulatory framework. The
emission of sulfur dioxide (SO2), which causes acid rain
and has serious adverse health effects, particularly among
asthmatics, is regulated by the EPA under the Clean Air
Act. See, e.g., American Lung Ass'n v. Environmental
Protection Agency, 134 F.3d 388, 389-90 (D.C. Cir. 1998).
Section 111 of the Clean Air Act, codified at 42 U.S.C.
S 7411, authorizes the EPA to pr omulgate performance
standards for new and modified sources of pollution that
the EPA concludes cause or significantly contribute to air
pollution. See 42 U.S.C. S 7411(b) (2000). These standards,
the NSPS's, must:
[R]eflect[ ] the degree of emission limitation achievable
through the application of the best system of emission
reduction which (taking into account the cost of
_________________________________________________________________
2. On October 1, 1998, all assets of Star Enterprise, including the
facilities at issue in this case, were transferred to Motiva. Petitioners
filed
a motion on July 15, 1999, to formally substitute Motiva for Star
Enterprise in this litigation. The motion was unopposed and was
granted. Thus, Motiva and Texaco became the petitioners and parties of
interest. We refer to both Motiva and Star throughout this opinion as
appropriate.
3
achieving such reduction and any nonair quality health
and environmental impact and energy r equirements)
the Administrator determines has been adequately
demonstrated.
42 U.S.C. S 7411(a)(1) (2000). NSPS's apply only to "affected
facilities" that were constructed, modified or reconstructed
after the publication of the applicable proposed regulation.3
Each NSPS explicitly defines and describes the"affected
facilities" to which it applies.
The EPA has issued NSPS's for over 70 "sour ce"
categories. Most of these NSPS's relate to specific industries
such as glass manufacturing, see 40 C.F .R. SS 60.290-
60.296 (1999), nitric acid manufacturing, see 40 C.F.R.
SS 60.70-60.74 (1999), ferroalloy pr oduction, see 40 C.F.R.
SS 60.260-60.266 (1999), copper smelting, see 40 C.F.R.
SS 60.160-60.166 (1999), and the NSPS at issue here,
Subpart J, petroleum refining, see 40 C.F.R. SS 60.100-
60.109 (1999). The EPA has also issued NSPS's for generic
source categories. These generic source NSPS's apply to
specific types of industrial equipment regar dless of the
purpose for which the equipment is used. Examples of
generic source categories include incinerators, see 40
C.F.R. SS 60.50-60.54 (1999), r ecently constructed fossil-
fuel-fired steam generators, see 40 C.F.R. SS 60.40-60.46
(1999), and stationary gas turbines, see 40 C.F.R.
SS 60.330-60.335 (1999) (Subpart GG).4
NSPS Subpart J, "Standards of Perfor mance for
Petroleum Refineries," was designed to r educe SO2
emissions from petroleum refineries. As set forth in
S 60.100, the provisions of Subpart J"are applicable to the
following affected facilities in petroleum refineries: fluid
catalytic cracking unit catalyst regenerators, fuel gas
combustion devices, and all Claus sulfur r ecovery plants
_________________________________________________________________
3. See 40 C.F.R. S 60.1(a) (1999) ("[T]he provisions of this part apply to
the owner or operator of any stationary sour ce which contains an
affected facility, the construction or modification of which is commenced
after the date of publication in this part of any standard (or, if
earlier,
the date of publication of any proposed standar d) applicable to that
facility.").
4. See supra Part IV C for further on Subpart GG.
4
except Claus plants of 20 long tons per day (L TD) or less."
40 C.F.R. S 60.100(a) (1999) (emphasis added). Subpart J
goes on to define a "petroleum refinery" as "any facility
engaged in producing gasoline, kerosene, distillate fuel oils,
residual fuel oils, lubricants, or other pr oducts through
distillation of petroleum or through r edistillation, cracking
or reforming of unfinished petr oleum derivatives." 40 C.F.R.
S 60.101(a) (1999). At issue in this case ar e two stationary
gas turbines, turbines that the EPA contends are "fuel gas
combustion devices" and thus "affected facilities" (as set
forth in S 60.100(a)), subject to regulation under Subpart J.5
The EPA initially proposed the NSPS for petroleum
refineries in 1973 and issued the corr esponding final
regulation, what is now Subpart J, on Mar ch 8, 1974.
Recognizing that petroleum refineries pr ocess numerous
gases that contain significant amounts of hydr ogen sulfide
(H2S) and that the uncontr olled combustion of these gases
resulted in significant SO2 emissions, the EPA's primary
goal in promulgating Subpart J was the r eduction of SO2
emissions from petroleum refineries. Subpart J prohibits
the owner or operator of a "fuel gas combustion device"
located in a petroleum refinery fr om combusting any "fuel
gas" that contains H2S in excess of 230 milligrams per dry
standard cubic meter. See 40 C.F .R. S 60.104(a)(1).
Compliance with this standard can be established either by
monitoring the amount of H2S in the fuel being burned or
by monitoring the amount of SO2 emitted from the fuel gas
combustion device in question.6
_________________________________________________________________
5. The term "fuel gas combustion device" is defined in Subpart J as "any
equipment, such as process heaters, boilers andflares used to combust
fuel gas, except facilities in which gases ar e combusted to produce
sulfur
or sulfuric acid." 40 C.F.R. S 60.101(g) (1999). The term "fuel gas" is
further defined in Subpart J as "any gas which is generated at a
petroleum refinery and which is combusted." 40 C.F.R. S 60.101(d)
(1999).
6. In October 1990, the EPA established an"SO2 equivalence level" to
allow regulated entities to monitor the amount of SO2 emitted after
combustion in lieu of monitoring the amount of H 2S in the "fuel gas"
prior to combustion. See 40 C.F.R.S 60.105(a)(3)(ii) (1999). Based on the
investigation "of typical fuel gas compositions and their combustion
products," the EPA determined that the "SO2 equivalence level" set forth
in S 60.105(a)(3)(ii) (20 parts per million (ppm), dry basis, zero percent
excess air) was equivalent to an H2S level of 230 milligrams per dry
standard cubic meter. 55 Fed. Reg. 40,171, 40,172 (Oct. 2, 1990).
5
Consistent with the goal of reducing SO2 emissions from
petroleum refineries, the definition of "fuel gas" in Subpart
J was modified on two separate occasions to exclude gases
that do not contain significant amounts of H2S. Originally,
in 1974, "fuel gas" was defined as "any gas which is
generated by a petroleum refinery pr ocess unit and which
is combusted, including any gaseous mixture of natural gas
and fuel gas which is combusted." 39 Fed. Reg. 9308, 9315
(Mar. 8, 1974). In March 1979, the EP A modified the
definition of "fuel gas" to include:
[N]atural gas or any gas generated by a petr oleum
refinery process unit which is combusted separately or
in any combination. Fuel gas does not include gases
generated by catalytic cracking unit catalyst
regenerators and fluid coking unit coke bur ners.
44 Fed. Reg. 13,480, 13,481 (Mar. 12, 1979). The definition
was changed in 1979 to explicitly exclude gases generated
by "catalytic cracking unit catalyst regenerators and fluid
coking unit coke burners" because such gases do not
contain significant amounts of H2S.
By changing the definition of "fuel gas" in 1979, the EPA
arguably brought within the scope of the regulation natural
gas produced off-site and transported to a petroleum
refinery via pipeline. The EPA had not intended to subject
such natural gas to regulation under Subpart J because
natural gas transported to a petroleum r efinery via pipeline
contains only trace amounts of H2S due to specifications
established to minimize pipeline corrosion. See 45 Fed. Reg.
13,991, 13,991 (March 3, 1980). The EPA, however, did
intend to regulate natural gas that was both pr oduced and
combusted on-site at a petroleum refinery:
In a few cases, however, a refinery may [itself] generate
natural gas. There may be no legal or technical
requirement that this gas be desulfurized before
combustion. If this gas contains appreciable hydrogen
sulfide and sulfur constituents, significant emissions of
sulfur dioxide would result when it is bur ned. The
existing standards of performance were intended to
cover these types of gases.
6
Id. The EPA further noted that the"intent of the existing
standards of performance for r efinery fuel gas has always
been to prevent the emissions of sulfur dioxide resulting
from the burning of gaseous fuels containing hydrogen
sulfide." Id. To clarify this distinction (the distinction
between natural gas produced on-site at a petr oleum
refinery and natural gas transported fr om an off-site
location via pipeline), the EPA proposed revising the first
sentence of the definition of "fuel gas" to read: " ``Fuel gas'
means natural gas generated at a petroleum r efinery or any
gas generated by a refinery process unit, which is
combusted separately or in any combination with any type
of natural gas." Id. The EPA ultimately received several
comments indicating that this proposed language was
confusing because gases produced at a r efinery were not
generally considered "natural gas" even if their chemical
composition was similar to that of natural gas. See 45 Fed.
Reg. 79,452, 79,453 (Dec. 1, 1980). In response to these
comments, the EPA modified the definition of fuel gas one
last time to include "any gas which is generated at a
petroleum refinery and which is combusted." Id. The EPA
indicated that this final definition was meant to encompass
"any gas which has the composition of natural gas." Id.
The stationary gas turbines at issue in this case ar e to be
located in an existing electrical power plant complex
adjacent to the Motiva petroleum refinery in Delaware City.
This power plant complex was originally owned and
operated by Delmarva Power & Light Company.7 At the time
of its construction in the mid-1950's, Delmarva entered into
an agreement with Star, Motiva's pr edecessor in interest, to
provide steam and electricity to Star's adjacent petroleum
refinery. Delmarva owned and operated the power plant for
35 years. In January 1989, Star exercised its option to
purchase the power plant from Delmarva, and actual
ownership of the power plant was transferred in January
1992. Following the transfer of ownership, ther e was no
change in the purpose or operation of the power plant, and
Delmarva has continued to operate the power plant. In
connection with its acquisition of the power plant complex,
_________________________________________________________________
7. In 2000, Delmarva changed its name to Conectiv. In this opinion,
however, we will continue to refer to the company as Delmarva.
7
Star entered into an agreement with Delmarva to supply
electrical power on demand to the Delmarva power grid
from one of the boilers in the power plant.
The stationary gas turbines are part of a lar ger project
being designed and constructed within the existing power
plant complex in Delaware City. This pr oject, known as the
Repowering Project, is designed to replace and/or upgrade
certain existing power plant units at the power plant
complex. Once operational, the Repowering Pr oject will
convert high-sulfur petroleum coke produced at Motiva's
adjacent petroleum refinery into synthesis gas, which will
then be burned in the stationary gas turbines at issue to
produce steam and electricity. The steam and electricity will
power Motiva's adjacent petroleum refinery; excess
electricity will be sold to Delmarva and others on the
commercial power grid.
On July 17, 1997, pursuant to 40 C.F.R. S 60.5, Star
requested a determination of Subpart J nonapplicability
from the EPA Region III office. In essence, Star asked the
EPA to issue a ruling stating that Subpart J does not apply
to the Repowering Project's stationary gas turbines.
Approximately one year later, the EP A responded by issuing
an action entitled "New Source Perfor mance Standards
Subpart J Applicability Determination for the Star
Enterprise Petroleum Refinery in Delawar e City, Delaware"
in which the EPA concluded that Subpart J applies to
Motiva's Repowering Project, and, more specifically, applies
to the two stationary gas turbines that are part of the
Repowering Project and will burn synthesis gas to produce
steam and generate electricity. In reaching its conclusion,
the EPA relied primarily on three facts: (1) the power plant
that houses the Repowering Project is adjacent to Motiva's
petroleum refinery, (2) the Repowering Project will provide
electricity and steam to the Motiva's adjacent petr oleum
refinery, and (3) Motiva owns not only the electrical power
plant complex which houses the Repowering Pr oject but
also the Repowering Project itself and the adjacent
petroleum refinery.8
_________________________________________________________________
8. The EPA also determined that because the aforementioned "synthesis
gas," which was to be combusted in the stationary gas turbines at issue
8
The EPA's determination was initially communicated not
to Star but to the EPA Region III office. When Star learned
of EPA's decision, it sought to withdraw its r equest for a
determination of nonapplicability. However , the State of
Delaware asked the EPA for a final determination because
certain conditions to the issuance of a state construction
permit were based on EPA's decision that Subpart J was
applicable to the two stationary gas turbines.
The EPA finalized its determination on July 21, 1998,
and Star timely filed petitions for review with both this
Court and the U.S. Court of Appeals for the District of
Columbia Circuit. On January 19, 1999, the U.S. Court of
Appeals for the District of Columbia Circuit granted the
EPA's motion to dismiss on venue grounds. The petition
then proceeded before us.
II. JURISDICTION
We have appellate jurisdiction over this petition for review
pursuant to S 307(b)(1) of the Clean Air Act. See 42 U.S.C.
S 7607(b)(1) (2000). Moreover, we note that despite earlier
concerns about the justiciability of the pr esent controversy,
we are now persuaded that all the necessary pr erequisites
to adjudicating this dispute have been met. Indeed, it is
undisputed by the parties that the EPA deter mination at
issue is a final agency action, see, e.g., Bennett v. Spear,
520 U.S. 154, 177-78 (1997),9 that the EPA determination
_________________________________________________________________
in this case, was generated "at" a petr oleum refinery, this gas was a
"fuel
gas" as defined in Subpart J. See 40 C.F.R. S 60.101(d) (1999). The
parties to this action argue extensively as to whether the "synthesis gas"
burned in these stationary gas turbines is indeed "fuel gas" and as to
whether the stationary gas turbines at issue ar e "fuel gas combustion
devices" as these terms are defined in Subpart J. As discussed infra, we
hold today that Subpart J is inapplicable to the stationary gas turbines
at issue in this case because the turbines ar e not located "in" a
"petroleum refinery." We therefore need not reach the question of
whether the "synthesis gas" burned in these stationary gas turbines is a
"fuel gas" or whether these turbines ar e "fuel gas combustion devices" as
these terms are defined in Subpart J.
9. As the Supreme Court noted in Bennett :
9
at issue is ripe for review, see, e.g., Ohio Forestry Ass'n v.
Sierra Club, 523 U.S. 726, 733 (1998),10 and that at least
one of the petitioners, Motiva, has standing to challenge the
EPA's determination, see, e.g., Lujan v. Defenders of
Wildlife, 504 U.S. 555, 560 (1992).11
_________________________________________________________________
[T]wo conditions must be satisfied for agency action to be "final":
First, the action must mark the "consummation" of the agency's
decisionmaking process, Chicago & Souther n Air Lines, Inc. v.
Waterman S.S. Corp., 333 U.S. 103, 113 (1948)--it must not be of
a merely tentative or interlocutory natur e. And second, the action
must be one by which "rights or obligations have been determined,"
or from which "legal consequences will flow," Port of Boston Marine
Terminal Ass'n. v. Rederiaktiebolaget T ransatlantic, 400 U.S. 62,
71
(1970).
Bennett, 520 U.S. 177-78. As the parties concede, and as the facts
detailed above clearly indicate, the two conditions set forth in Bennett
have been met. Thus, the EPA's determination is a final agency action
and is reviewable by this Court.
10. As the Supreme Court stated in Ohio Forestry:
In deciding whether an agency's decision is, or is not, ripe for
judicial review, the Court has examined both the "fitness of the
issues for judicial decision" and the "har dship to the parties of
withholding court consideration." Abbott Laboratories v. Gardner,
387 U.S. 136, 149 (1967). To do so in this case, we must consider:
(1) whether delayed review would cause har dship to the plaintiffs,
(2) whether judicial intervention would inappr opriately interfere
with
further administrative action, and (3) whether the courts would
benefit from further factual development of the issues presented.
Ohio Forestry, 523 U.S. at 733. As the parties concede, and as the facts
detailed above clearly indicate, evaluation of the three factors
delineated
in Ohio Forestry clearly demonstrates that the EPA's determination is
ripe for judicial review.
11. As the Supreme Court held in Lujan :
Over the years, our cases have established that the irreducible
constitutional minimum of standing contains thr ee elements. First,
the plaintiff must have suffered an"injury in fact"--an invasion of
a legally protected interest which is (a) concrete and
particularized
and (b) "actual or imminent, not ``conjectural' or ``hypothetical.' "
Second, there must be a causal connection between the injury and
10
III. STANDARD OF REVIEW
A necessary precursor to determining the appropriate
standard of review in this case is deter mining whether the
agency action in question is an "interpretive rule" or a
"legislative rule." Although petitioners contend that the
EPA's determination is an "interpr etive rule" rather than a
"legislative rule," and thus that the deter mination is
entitled to little or no judicial deference, we conclude that
the EPA's determination is a legislative rule. See, e.g.,
Wisconsin Elec. Power Co. v. Reilly, 893 F .2d 901, 904-05
(7th Cir. 1990) (en banc); National-Southwire Aluminum Co.
v. EPA, 838 F.2d 835, 838, 841-42 (6th Cir. 1988); Potomac
Elec. Power Co. v. EPA, 650 F.2d 509, 513 (4th Cir. 1981).
An agency determination is a "rule" under the
Administrative Procedure Act if it is a"statement of general
or particular applicability and future ef fect [and] designed
to implement, interpret, or prescribe law or policy . . . ." Dia
Navigation Co. v. Pomeroy, 34 F.3d 1255, 1263 (3d Cir.
1994) (quoting 5 U.S.C. S 551(4)). Such a"rule" may be an
"interpretive rule" or a "legislative rule." Id. at 1264. As we
stated in Dia:
If the rule is based on specific statutory pr ovisions, and
its validity stands or falls on the correctness of the
_________________________________________________________________
the conduct complained of--the injury has to be"fairly . . .
trace[able] to the challenged action of the defendant, and not . .
.
th[e] result [of] the independent action of some third party not
before
the court." Third, it must be "likely," as opposed to merely
"speculative," that the injury will be "r edressed by a favorable
decision."
Lujan, 504 U.S. at 560. As the parties concede, and as the facts detailed
above clearly indicate, the three requir ements set forth in Lujan have
been met with respect to Motiva. Because Motiva has standing to bring
suit, we need not reach the question of whether Texaco has met the
necessary constitutional and/or prudential standing requirements. See,
e.g., Director, Office of Workers' Compensation Programs v. Perini N.
River
Assocs., 459 U.S. 297, 303-05 (1983); V illage of Arlington Heights v.
Metropolitan Hous. Dev. Corp., 429 U.S. 252, 263-64 & n.9 (1977). See
generally Lujan, 504 U.S. at 560 (constitutional standing); Hazardous
Waste Treatment Council v. Thomas, 885 F.2d 918, 921-27 (D.C. Cir.
1989) (prudential standing).
11
agency's interpretation of those provisions, it is an
interpretive rule. If, however, the rule is based on an
agency's power to exercise its judgment as to how best
to implement a general statutory mandate, the rule is
likely a legislative one.
Id. (quoting United Techs. Corp. v. EPA, 821 F.2d 714, 719-
20 (D.C. Cir. 1987)).
Courts will reject an agency's interpretive rule if it is
contrary to clear congressional intent. See Chevron, U.S.A.,
Inc. v. Natural Resources Defense Council, Inc., 467 U.S.
837, 843 n.9 (1984); American Ambulance Serv. v. Sullivan,
911 F.2d 901, 908 (3d Cir. 1990). If a statute is silent or
ambiguous with respect to congressional intent, courts
must defer to an agency's determination if the
determination is consistent with a per missible construction
of the statute. See Chevron, 467 U.S. at 843-45; see Beatty
v. Danri Corp., 49 F.3d 993, 997 (3d Cir . 1995). "Varying
degrees of deference are accor ded to administrative
interpretations, based on such factors as the timing and
consistency of the agency's position, and the natur e of its
expertise," Batterton v. Francis, 432 U.S. 416, 425 n.9
(1977), and an interpretive rule is not binding on the
agency or this Court, see Armstead v. United States
Department of Housing and Urban Development, 815 F.2d
278, 282 (3d Cir. 1987). In contrast, a legislative rule, an
agency's interpretation of its own regulation, is "controlling
unless ``plainly erroneous or inconsistent with the
regulation.' " Auer v. Robbins, 519 U.S. 452, 461 (1997)
(quoting Robertson v. Methow Valley Citizens Council, 490
U.S. 332, 359 (1989)); see Beatty, 49 F .3d at 997;
Rodriguez v. Reading Hous. Auth., 8 F.3d 961, 965 (3d Cir.
1993).
Although the Third Circuit has yet to r eview an EPA
determination under the Clean Air Act, the Fourth, Sixth,
and Seventh Circuit Courts of Appeals have engaged in
such review, with all three Circuits concluding that
Congress, through the Clean Air Act, dir ected the EPA to
promulgate New Source Perfor mance Standards. See
Wisconsin Elec. Power Co., 893 F.2d at 904-905; National-
Southwire Aluminum Co., 838 F.2d at 838, 841-42; Potomac
Elec. Power Co., 650 F.2d at 513. The Fourth and Seventh
12
Circuit Courts of Appeals have held that EP A
determinations made with respect to New Source
Performance Standards are controlling unless plainly
erroneous or inconsistent with the regulation at issue. See
Wisconsin Elec. Power Co., 893 F.2d at 907; Potomac Elec.
Power Co., 650 F.2d at 513. The Sixth Cir cuit, in contrast,
has held that EPA determinations made with respect to
New Source Performance Standar ds are controlling unless
"arbitrary, capricious, an abuse of discr etion, or otherwise
not in accordance with law." National-Southwire Aluminum
Co., 838 F.2d at 836.
Section 111 of the Clean Air Act provides:
The Administrator shall . . . publish (and fr om time to
time thereafter shall revise) a list of categories of
stationary sources. He shall include a category of
sources in such list if in his judgment it causes, or
contributes significantly to, air pollution which may
reasonably be anticipated to endanger public health or
welfare.
42 U.S.C. S 7411(b)(1)(A) (emphasis added). Section 111
further provides:
Within one year [of making a list accor ding to the
above provision], the Administrator shall publish
proposed regulations, establishing Federal standards of
performance for new sources within such category. . . .
[After opportunity is given for public comments and the
comments are considered], he shall pr omulgate . . .
such standards with such modifications as he deems
appropriate.
42 U.S.C. S 7411(b)(1)(B) (emphasis added).
These provisions clearly indicate that the EP A was
directed by Congress to promulgate r egulations necessary
to implement the Clean Air Act. Thus, we conclude that
EPA determinations interpreting New Source Performance
Standards, once handed down, constitute "legislative rules."
Consistent with our reasoning in Dia, as well as with
Supreme Court jurisprudence and opinions in the Fourth,
Sixth, and Seventh Circuit Courts of Appeals, the EPA
determination at issue in this case is a "legislative rule,"
13
and therefore must be upheld unless plainly erroneous or
inconsistent with Subpart J. See, e.g., Auer v. Robbins, 519
U.S. 452, 461 (1997); Beatty, 49 F.3d at 997; Rodriguez, 8
F.3d at 965.
IV. DISCUSSION
A. Subpart J & "Affected Facilities in Petroleum
Refineries"
As detailed above, each New Source Perfor mance
Standard promulgated under the Clean Air Act applies to
specific "affected facilities," and each New Source
Performance Standard explicitly sets forth and defines the
"affected facility" or "affected facilities" to which it applies.
Consistent with this regulatory framework, Subpart J
states in relevant part:
The provisions of this subpart are applicable to the
following affected facilities in petr oleum refineries: fluid
catalytic cracking unit catalyst regenerators, fuel gas
combustion devices, and all Claus sulfur recovery
plants except Claus plants of 20 long tons per day
(LTD) or less. The Claus sulfur recovery plant need not
be physically located within the boundaries of a
petroleum refinery to be an affected facility, provided it
processes gases produced within a petr oleum refinery.
See 40 C.F.R. S 60.100(a) (1999) (emphasis added).
In determining that the stationary gas turbines located at
Motiva's Repowering Project are fuel gas combustion
devices subject to regulation under Subpart J, the EPA
concluded that the turbines are "affected facilities" as
defined by 40 C.F.R. S 60.100(a). However, as 40 C.F.R.
S 60.100(a) expressly indicates, Subpart J does not apply to
all "fuel gas combustion devices," but rather applies only to
"fuel gas combustion devices" located "in petroleum
refineries." Thus, the key question, upon which the
outcome of this petition hinges, is: Are the stationary gas
turbines here "in" a "petroleum r efinery?"
Subpart J defines a "petroleum refinery" as "any facility
engaged in producing gasoline, kerosene, distillate fuel oils,
residual fuel oils, lubricants, or other pr oducts through
14
distillation of petroleum or through r edistillation, cracking
or reforming of unfinished petr oleum derivatives." 40 C.F.R.
S 60.101(a) (1999). While the EPA r eadily concedes that the
Repowering Project and the larger electrical power plant
complex, in which the Repowering Project is located, are
not a "petroleum refinery,"12 the EPA nonetheless contends
that the Repowering Project's two stationary gas turbines
are "in" a "petroleum refinery" and are subject to regulation
under Subpart J.
In originally determining that the stationary gas turbines
are subject to regulation under Subpart J, the EPA stated:
Star's [Repowering] Project is located adjacent to the
remainder of the refinery and is under common
ownership and control; therefore, it is considered part
of the refinery. Further evidence that the[Repowering]
Project is integrated into refinery operations is that the
[Repowering] Project will supply most of the refinery's
steam and all power requirements, has the ability to
combust other fuel gas from the refinery, and . . . will
help Star manage its solid waste from the r efinery.
Because the [Repowering] Project is part of the refinery,
fuel gas combustion devices associated with the
[Repowering] Project are "in" a refinery and fuel gas
generated at the [Repowering] Project is generated at a
refinery.
NSPS Subpart J Applicability Determination for the Star
Enterprise Petroleum Refinery in Delawar e City, Delaware,
Memorandum Dated July 21, 1998 (Star Applicability
Determination). In short, the EPA concluded and now
contends that because Motiva's Repowering Pr oject "is
located adjacent to" a "[petroleum] r efinery [that] is under
common ownership and control," it should be"considered
part of the [adjacent] refinery," and thus that the stationary
gas turbines at issue in this case, turbines that ar e an
integral part of the Repowering Project, ar e "in" a
"petroleum refinery."
_________________________________________________________________
12. It is undisputed that Motiva's Repowering Pr oject is a cogeneration
facility that will gasify petroleum coke and combust the resulting
synthesis gas to generate only electricity and steam.
15
This reasoning alone cannot, however, pr ovide the basis
for concluding that the Repowering Project's stationary gas
turbines are subject to regulation under Subpart J. Indeed,
were the EPA's reasoning sufficient to establish that the
Repowering Project is part of Motiva's adjacent petroleum
refinery, it would also be sufficient to establish that any
independent, free-standing facility owned by Motiva and
built on land adjacent to Motiva's petroleum r efinery is part
of Motiva's petroleum refinery. For example, EPA's
reasoning would also be sufficient to establish that a
McDonald's restaurant, owned by Motiva and built on land
adjacent to Motiva's petroleum refinery for the convenience
of refinery workers, is part of Motiva's adjacent petroleum
refinery. Under this interpretation, the EPA would be able
to regulate, under Subpart J, fuel gas combustion devices
inside the McDonald's. Even though these fuel gas
combustion devices would not be located "in" a"petroleum
refinery," such devices would be subject to regulation under
Subpart J under the EPA's interpretation because they
would be treated as "affected facilities in [a] petroleum
refinery[ ]."
Were we to accept the EPA's r easoning (assuming
"common ownership and control"), any fuel gas combustion
device located in a facility adjacent to Motiva's petroleum
refinery would be subject to regulation under Subpart J
because such devices would be treated, inappr opriately, as
"affected facilities in [a] petr oleum refinery[ ]." This
conclusion is untenable.
As detailed above, it is undisputed that Motiva's
Repowering Project is a cogeneration facility that will gasify
petroleum coke and combust the resulting synthesis gas to
generate electricity and steam. Moreover , even though
Motiva's Repowering Project is adjacent to a petroleum
refinery that Motiva owns, the Repowering Pr oject is located
in a free-standing building, an electric power plant complex
that is physically separate and distinct from Motiva's
petroleum refinery. Neither the Repowering Project nor the
electric power plant complex in which the Repowering
Project is to be constructed and operated is a"petroleum
refinery." We therefor e fail to understand how the EPA
concluded and now contends that the Repowering Pr oject's
16
stationery gas turbines are themselves "in" a "petroleum
refinery." Furthermore, if these turbines are not "in" a
"petroleum refinery," they ar e not "affected facilities" and
thus are not subject to regulation under Subpart J.
The EPA also argues that the Repowering Project will be
an integral part of the refinery's operations and for that
reason the stationary gas turbines at issue ar e "in" a
"petroleum refinery." The EP A asserts that:
[The Repowering Project] will take low value material
from the refinery, i.e., petr oleum coke, convert it into a
different low value material, i.e. , a combustible gas,
burn the gas in a combustion turbine, and use the
steam and electricity produced by the turbine to
provide energy for other refinery processes. The
[Repowering] Project is thus a integral part of the
refinery's operations both because it is part of the
refinery's process of manufacturing usable products
from crude oil and because it uses refinery products to
provide a valuable input, i.e. ener gy [in the form of
electricity and steam] to the refinery's operation.
Star Applicability Determination. While much of the above is
accurate, the Repowering Project is neither part of the
adjacent petroleum refinery nor necessary to the refinery's
operations. Indeed, as the EPA concedes, Motiva could as
easily have chosen to power its refinery by purchasing
electricity from the local electric company's commercial grid.13
If we were to follow the EPA's reasoning that the
Repowering Project is part of Motiva's adjacent petroleum
refinery, we would also be requir ed to conclude that any
building that is located on land adjacent to Motiva's
petroleum refinery and has a mutually beneficial
relationship with the petroleum refinery -- be it to provide
food to the workers or energy to the machinery-- is part of
the petroleum refinery. Following this r easoning, the EPA
would be able to regulate facilities within any such building
as if they were located "in" the petr oleum refinery.
_________________________________________________________________
13. As we have already noted, Motiva's Repowering Project produces
more than enough electricity to power the adjacent petroleum refinery
and that surplus electricity will be sold to Delmarva and/or other
customers on the commercial power grid.
17
The EPA acknowledges that the term "petroleum refinery"
is clearly defined in Subpart J as "any facility engaged in
producing gasoline, kerosene, distillate fuel oils, residual
fuel oils, lubricants, or other products thr ough distillation
of petroleum or through redistillation, cracking or reforming
of unfinished petroleum derivatives." 40 C.F.R. S 60.101(a).
Moreover, the EPA concedes that Motiva's Repowering
Project is a cogeneration facility that generates only
electricity and steam and that the Repowering Pr oject
resides in a separate, free-standing electric power plant
complex. The EPA also concedes that none of the processes
described in the definition of "petroleum refinery" set forth
in S 60.101(a) takes place as a part of the Repowering
Project or even within the building in which the Repowering
Project resides. Nonetheless, the EP A contends that a
"broad definition" of "petroleum refinery" to include
operations essential to its purpose is consistent with the
language of Subpart J. Using this broad definition, the EPA
concluded:
The Star [petroleum] refinery is engaged in the
processes described in the NSPS Subpart J definition
of "petroleum refinery." The [Repowering] Project is an
integral part of the refinery. It gasifies coke generated
by refinery process units, producing synthesis gas,
combusts the synthesis gas and is also capable of
combusting other types of refinery fuel gas. The sulfur
compounds (mainly H2S) stripped during the
gasification process will be sent to the modified Claus
sulfur recovery plant. The steam and most of the
electricity produced by the project will be routed back
to other refinery process units.
Star Applicability Determination. The EPA's reasoning is
flawed because the Repowering Project is not essential to
the operation of Motiva's petroleum refinery. Were the
Repowering Project essential to the operation of the
refinery, the EPA might be able to convince us that the
Repowering Project was part of Motiva's petr oleum refinery
and that the stationary gas turbines located in the
Repowering Project are "in" a "petroleum refinery." However,
as mentioned above, Motiva does not need electricity from
the Repowering Project to power its refinery. Motiva could
18
just as easily purchase electricity from the local power
company. Nor is the Repowering Project necessary for coke
disposal. Rather than using the petroleum coke, produced
in its refinery, to power the turbines at issue here, Motiva
could ship the coke off-site for use at other industrial
facilities or for disposal. Indeed, because Motiva's
petroleum refinery operated for many years prior to the
conception of the Repowering Project, it is har d to
understand how the EPA concludes that the Repowering
Project is essential to the operation of the adjacent
petroleum refinery.14Moreover, the EPA's claim that"[i]f the
current power plant did not exist, Star would not be able to
operate the refinery at its current capacity" is also
inaccurate for the reasons articulated above. Presumably,
the only limitations on refinery capacity would be
limitations on available power and available raw materials.
The Repowering Project in no way affects the availability of
raw materials, and although the Repowering Pr oject would
supply power to Motiva's petroleum refinery, Motiva could
just easily purchase that power (and any additional power
needed) from a commercial supplier .
Finally, in support of its initial determination, the EPA
contends that:
The coke gasification project is not a stand-alone
facility. . . . In Star's case, the refinery in its current
form could not operate without the curr ent "power
plant" or without the planned Project, and it is not
likely that the current "power plant" or planned Project
would exist (they certainly would not exist in their
current or planned form) without the r emainder of the
refinery.
_________________________________________________________________
14. Were we to accept the EPA's logic, if Motiva purchased electricity
from the local electric company, generated by a generator located in a
free-standing building on land adjacent to its petroleum refinery, and
then, at a later date, Motiva purchased outright the entire local electric
company, any stationary gas turbines that wer e a part of the
aforementioned generator facility would (quite suddenly) become subject
to regulation under Subpart J, since these turbines would be literally
transformed into "affected facilitiesin [a] petroleum refinery[ ]." This
sort
of reasoning, and the outcome dictated by it, are untenable.
19
Star Applicability Determination. For the same reasons
detailed above, this argument is unpersuasive. Put simply,
the Repowering Project is a stand-alone facility and could
operate absent the existence of Motiva's petr oleum refinery
by obtaining petroleum coke from another commercial
supplier (rather than Motiva's adjacent petr oleum refinery)
and selling all of the steam and electricity pr oduced by the
Repowering Project to commercial customers such as
Delmarva.
While it is undisputed that a mutually beneficial
relationship exists between Motiva's Repowering Project and
Motiva's petroleum refinery, the EP A's determination that
the stationary gas turbines at Motiva's Repowering Project
are subject to regulation under Subpart J is not only
plainly erroneous but also inconsistent with the language of
Subpart J itself. In short, the EPA's deter mination that the
stationary gas turbines at Motiva's Repowering Pr oject are
"affected facilities" subject to r egulation under Subpart J
ignores the requirement that r egulated turbines be located
"in" a "petroleum refinery."
B. Physical Location as the Touchstone of S 60.100(a)
Despite the EPA's arguments to the contrary, in
determining what facilities are "af fected facilities" that can
be regulated under Subpart J, and, specifically, in
determining what facilities are "in petroleum refineries," the
touchstone of such a determination is the physical location
of the facilities in question. As noted above, 40 C.F.R.
S 60.100(a) states:
The provisions of this subpart are applicable to the
following affected facilities in petroleum refineries: fluid
catalytic cracking unit catalyst regenerators, fuel gas
combustion devices, and all Claus sulfur recovery
plants except Claus plants of 20 long tons per day
(LTD) or less. The Claus sulfur recovery plant need not
be physically located within the boundaries of a
petroleum refinery to be an af fected facility, provided it
processes gases produced within a petr oleum refinery.
40 C.F.R. S 60.100(a) (1999) (emphasis added). For the last
sentence of S 60.100(a) to make any sense, the ultimate
question to be answered when determining whether certain
20
facilities are "in petroleum refineries" must be: Where are
the facilities physically located?
Although the EPA argues strenuously that the term
"petroleum refinery" must be interpreted broadly to include
not only Motiva's petroleum refinery but also an adjacent,
free-standing, independent electric power plant complex
that produces steam and electricity for use by the refinery
(as well as other commercial customers including the local
power company), the stationary gas turbines in this free-
standing, independent facility are simply not"in" a
"petroleum refinery" because neither the Repowering Project
nor the electric power plant complex in which the
Repowering Project is located engages in the pr oduction of
"gasoline, kerosene, distillate fuel oils, r esidual fuel oils,
lubricants, or other products through distillation of
petroleum or through redistillation, cracking or reforming of
unfinished petroleum derivatives." 40 C.F .R. S 60.101(a)
(1999). Moreover, the explicit inclusion in S 60.100(a) of
Claus recovery plants "not . . . physically located within the
boundaries of a petroleum refinery," and the corresponding
absence of a similar inclusion with respect to"fuel gas
combustion devices" "not . . . physically located within the
boundaries of a petroleum refinery," further undermines
the EPA's determination.
C. Chemical Composition of Synthesis Gas Bur ned in
the Stationary Gas Turbines
Although our determination that Subpart J does not
apply here frees us from having to determine whether the
synthesis gas to be burned by the stationary gas turbines
is a "fuel gas" regulated under Subpart J, we do note that
the chemical composition of the synthesis gas is markedly
different from the chemical composition of other fuel gases,
the burning of which is subject to regulation under Subpart
J. As the petitioners highlight in their brief, and as the
regulatory history of Subpart J suggests, the exclusive
focus and purpose of Subpart J is the reduction of sulfur
emissions (specifically sulfur dioxide (SO2) emissions) by
limiting the amount of hydrogen sulfide (H 2S) in
combustible fuel gases combusted in petroleum r efineries.
According to Motiva, a not insignificant amount of the
sulfur/SO2, emitted when the synthesis gas at issue is
21
combusted in these turbines, comes not from H 2S in the
synthesis gas but from COS in the synthesis gas.
Regardless of the exact source of the sulfur/SO2
emissions, it appears from the recor d that at least some of
the sulfur/SO2 emitted when the synthesis gas at issue is
combusted comes not from H2S in the gas but rather from
COS in the gas. As mentioned above, compliance with
Subpart J can be established either by measuring and
monitoring the H2S level in the fuel gas prior to combustion
or by measuring and monitoring the SO2 level in the
emissions after combustion. See supra, note 4. If subject to
regulation under Subpart J, Motiva is without a legally
acceptable method for measuring the combined
concentration of COS and H2S in the pre-combustion
synthesis burned at the Repowering Project. Therefore,
Motiva will be forced either to monitor and r educe the
emission of SO2, or to monitor and control the level of H2S
in the pre-combustion synthesis gas being combusted at
the Repowering Project (rather than the level of H2S and
COS in the pre-combustion synthesis gas), even though by
itself, the level of H2S in the synthesis gas being combusted
is an arguably poor and clearly inferior measure of Motiva's
compliance with Subpart J. As the EPA points out, the
unique chemical composition of the synthesis gas, in and of
itself, does not and would not exempt the stationary gas
turbines at issue here from regulation under Subpart J.
This composition may suggest, however, that another
regulation, for example, Subpart GG,15 regulating stationary
gas turbines, rather than Subpart J, may be the
_________________________________________________________________
15. 40 C.F.R. S 60.330, entitled"Applicability and Designation of Affected
Facility," is the first section of Title 40, Subpart GG, and states in
relevant part:
(a) The provisions of this subpart ar e applicable to the following
affected facilities: All stationary gas turbines with a heat input
at peak load equal to or greater than 10.7 gigajoules per hour,
based on the lower heating value of the fuel fir ed.
(b) Any facility under paragraph (a) of this section which
commences construction, modification, or r econstruction after
October 3, 1977, is subject to the requir ements of this part
. . . .
40 C.F.R. S 60.330 (1999). It is undisputed by the parties that Subpart
GG applies to the stationary gas turbines at issue in this case. The
parties dispute only the applicability of Subpart J, which imposes much
more stringent requirements than does Subpart GG on emissions from
these stationary gas turbines.
22
appropriate regulation under which to r egulate emissions
from these gas turbines. The discontinuity between the
chemical composition of synthesis gas to be combusted at
the Repowering Project and the chemical composition of
other fuel gases, the combustion of which is subject to
regulation under Subpart J, also suggests that the EPA's
determination is "inconsistent with the r egulation" at issue
and should be set aside.16
D. EPA's Prior Determination Under Subpart OOO
In arguing that its determination in this case is neither
plainly erroneous nor inconsistent with Subpart J, the EPA
relies in part on what it characterizes as a prior, analogous
determination under Subpart OOO--Standar ds of
Performance for Nonmetallic Mineral Pr ocessing Plants.17
The EPA's reliance on this determination is misplaced for
two reasons.
First, while the factual background of the EP A's earlier
determination under Subpart OOO is not entir ely clear (the
record is incomplete), it is clear that the facts of this earlier
determination are distinguishable, in at least one key
respect, from the facts in this case. Unlike the stationary
gas turbines at issue here, the Cement T reated Base plants
located at nonmetallic mineral processing plants were
portable. This fact alone distinguishes the EP A's prior
determination under Subpart OOO because, as discussed
above, physical location is the touchstone for deter mining
which facilities are "affected facilities" as the term is defined
in Subpart J. Because the Cement Treated Base plants at
issue in this prior determination were portable, had the
EPA concluded that these Cement Tr eated Base plants were
subject to regulation under Subpart OOO based on their
physical location, the regulatory framework established by
_________________________________________________________________
16. We further note that Motiva's inability to monitor and control the
level of H2S and COS (prior to combustion) in the gas being combusted
at the Repowering Project would take on heightened significance if it
could be shown that monitoring the post-combustion SO2 emissions was
more costly than monitoring the pre-combustion level of H2S in the
synthesis gas at issue.
17. See Standards of Perfor mance for Nonmetallic Mineral Processing
Plants, 40 C.F.R. SS 60.670-60.676 (1999).
23
Subpart OOO could have been easily circumvented simply
by moving the Cement Treated Base plants. Phrased
differently, when portable facilities ar e at issue, physical
location cannot possibly be the touchstone for deter mining
if, and/or when, regulation is appropriate. This obvious
consequence of portability is, of course, irr elevant in the
present case because the gas turbines her e are stationary.
Second, and more importantly, even assuming, arguendo,
that the facts surrounding the prior deter mination under
Subpart OOO and the present determination under
Subpart J are sufficiently analogous, this in no way implies
that the EPA's prior determination under Subpart OOO was
either correct or consistent with Subpart OOO. Neither this
Court nor any other court of which we are awar e has
addressed the propriety and/or legality of this prior
determination upon which the EPA r elies in part. As such,
even assuming that the facts surrounding this prior
determination under Subpart OOO and the pr esent
determination under Subpart J are sufficiently analogous,
we can only conclude from this that the EP A has addressed
the issues consistently, not correctly.18
V. CONCLUSION
It well-established, as a general proposition, that the
EPA's interpretation of its own r egulations is entitled to
"great deference." As the Supr eme Court stated in Udall v.
Tallman:
When faced with a problem of statutory construction,
this Court shows great deference to the interpretation
given the statute by the officers or agency char ged with
its administration. . . . [Moreover, w]hen the
construction of an administrative regulation rather
_________________________________________________________________
18. The parties argue extensively as to whether subjecting the stationary
gas turbines at issue in this case to regulation under Subpart J would
"yield . . . any environmental benefits." As discussed supra, we hold
today that Subpart J is inapplicable to these stationary gas turbines
because the turbines are not located "in" a "petroleum refinery." We
therefore need not reach the question of whether subjecting the turbines
at issue in this case to regulation under Subpart J would "yield . . . any
environmental benefits."
24
than a statute is in issue, deference is even more
clearly in order.
Udall v. Tallman, 380 U.S. 1, 16 (1965). Such deference,
however, is not without limitations. The EP A determination
at issue in this case seemingly ignores the r equirement, set
forth at 40 C.F.R. S 60.100(a) (1999), that "affected
facilities" regulated under Subpart J be located "in [a]
petroleum refinery." In light of this, we conclude that the
EPA's determination is both "plainly erroneous," and
inconsistent with Subpart J. We will ther efore grant
Motiva's petition for review and vacate the EP A's
Determination.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
25