WR Grace & Co v. Environmental Prot. Agcy.

Opinions of the United
2001 Decisions States Court of Appeals
for the Third Circuit

8-10-2001

WR Grace & Co v. Environmental Prot. Agcy.
Precedential or Non-Precedential:

Docket 99-5662 & 00-3302

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Filed August 10, 2001

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

Nos: 99-5662 & 00-3302
(Consolidated)

W.R. GRACE & CO,
Petitioner

v.

UNITED STATES ENVIRONMENTAL
PROTECTION AGENCY,
Respondent

On Petitions for Review of Orders of the
United States Environmental Protection Agency

Argued: September 27, 2000

Before: MANSMANN, ALITO and AMBRO, Circuit Jud ges

(Opinion filed: August 10, 2001)

Christopher H. Marraro (Argued)
Wallace, King, Marraro & Branson
1050 Thomas Jefferson Street, N.W.
Suite 500
Washington, D.C. 20007

Counsel for Petitioner
 Joshua M. Levin (Argued)
United States Department of Justice
Environmental Defense Section
P.O. Box 23986
Washington, D.C. 20026-3986

Yvette M. Wilkerson-Barron
United States Department of Justice
Environmental & Natural Resources
Division
10th & Pennsylvania Avenue, N.W.
Washington, D.C. 20530

Susan Perdomo
United States Environmental
Protection Agency
Office of General Counsel
C-14
77 West Jackson Boulevard
Chicago, IL 60004

Counsel for Respondent

OPINION OF THE COURT

AMBRO, Circuit Judge.

Two cases are before us. Case No. 99-5662 is a petition
for review of a July 29, 1999 order (the "July 29 Order" or
"Order") issued by the United States Environmental
Protection Agency (the "EPA") to W.R. Grace & Co. ("Grace")
pursuant to the emergency provisions of the Safe Drinking
Water Act ("SDWA"), 42 U.S.C. S 300i(a). Case No. 00-3302
is also a petition for review, this time of a Statement of
Work Grace was required to submit under the EPA's July
29 Order. The petitions were consolidated by order of this
Court on July 6, 2000. For the reasons noted below, we
vacate and remand the EPA's July 29 Order. Thus we need
not address the issues raised in the second petition for
review.

I. Background Facts

This case involves a water supply hazard at the Dye
Water Conditioning Plant (the "Dye Plant" or"Plant") in

2
Lansing, Michigan. The Dye Plant is one of two water
treatment plants owned and operated by the Lansing Board
of Water & Light (the "Lansing Board" or "LBW&L") that
supplies drinking water to the City of Lansing. The Dye
Plant is designed to operate and treat groundwater
("influent" water) through a disinfection process known as
"chloramination," in which ammonia and chlorine are
added to the water to form chloramines that inactivate
bacteria.

A plume of ammonia originating at a fertilizer plant
owned by Grace entered the Saginaw aquifer from which
the Dye Plant draws its water. The ammonia traveled from
a smaller aquifer located below the Motor Wheel Disposal
Site (but above the Saginaw aquifer) where Grace and other
local industries disposed of wastes from their respective
plants. On June 10, 1986, the Motor Wheel Disposal Site
was placed on a list of hazardous waste sites to be cleaned
up pursuant to section 105 of the Comprehensive
Environmental Response, Compensation and Liability Act
("CERCLA"), 42 U.S.C. S 9605. Grace joined with Goodyear,
Textron, and the Lansing Board in several agreements to
engage in long-term study and cleanup of a wide range of
chemicals at the Motor Wheel Disposal Site pursuant to
CERCLA. However, no agreement was made among these
parties to engage in a CERCLA cleanup of the Saginaw
aquifer that had become contaminated with excess
ammonia originating from the Motor Wheel Disposal Site.

In 1997, the Lansing Board became increasingly
concerned about the danger posed by the ammonia plume
to its Dye Plant wells located closest to the Motor Wheel
Disposal Site. As a precautionary measure, the Lansing
Board removed from service ten drinking water wells
located closest to the ammonia plume. The loss of these
wells constituted approximately 12% of the Dye Plant's total
capacity. Both parties acknowledge that the Lansing Board
is able to meet its current drinking water production
demands without these ten wells. However, the Lansing
Board claims that it may need to replace this lost
production capacity in the event of a severe drought or the
loss of further wells to contamination from the ammonia
plume. As of the date of oral argument in this case, the

3
Lansing Board was monitoring twenty-two drinking water
wells for possible ammonia contamination.

On May 4, 1998, the Michigan Department of
Environmental Quality notified the Safe Drinking Water
Branch of the EPA of its concern that excess ammonia
influent to the Dye Plant would cause nitrification that
could compromise the Lansing public's health. The
Michigan Department acknowledged that there was"no
existing State or Federal Maximum Contaminant Level for
ammonia, and no corresponding health effects information
for ammonia."1 Nonetheless, it expressed concern that the
ammonia level permitted at the Motor Wheel Disposal Site
-- 34 milligrams per liter ("mg/l") -- was a "taste and odor
level set for aesthetics only" that would not prevent
leaching of ammonia into the Saginaw aquifer at levels that
could cause excess nitrification at the Dye Plant. It
therefore referred the problem to the EPA's Safe Drinking
Water Branch to consider approaches for cleanup of the
Saginaw aquifer with a "stricter clean-up level (stricter than
34 mg/l) for ammonia" pursuant to CERCLA. In a
memorandum dated October 5, 1998, the Safe Drinking
Water Branch concurred in the Michigan Department's view
that excess ammonia could lead to excess nitrification and
microbial growth that could cause noncompliance with a
number of Federal and State regulations and pose a threat
to the public's health. The Safe Drinking Water Branch
concluded that the 34 mg/l standard would be insufficient
to protect the Lansing public drinking water system and
that an appropriate ammonia cleanup standard should be
set at 1.75 mg/l.
_________________________________________________________________

1. The EPA has issued a "lifetime health advisory" of 30 milligrams per
liter. See United States Environmental Protection Agency, Drinking Water
Standards and Health Advisories, Summer 2000, at 8. A health advisory
is an "estimate of acceptable drinking water levels for a chemical
substance based on health effects information." It is "not a legally
enforceable Federal standard, but serves as a technical guidance to
assist Federal, state, and local officials." Id. at iii. A lifetime health
advisory provides "[t]he concentration of a chemical in drinking water
that is not expected to cause any adverse noncarcinogenic effects for a
lifetime of exposure." Id. at iv.

4
In a report dated January 20, 1999, an outside
consultant hired by the Lansing Board concluded that
excess ammonia at the Dye Plant would encourage bacteria
growth and increase problems with excess chloramines,
nitrates, nitrites, lead, and copper, all of which may
threaten the public's health. The report attacked the 34
mg/l standard used to clean up the Motor Wheel Disposal
Site and urged that a stricter standard be used with respect
to the Saginaw aquifer because "[a]ny amount of excess
ammonia over existing background levels (0.1-0.5 mg/l
ammonia as nitrogen) will impact the current treatment
and operational practices at the Dye [Plant]." The report
further noted that if the influent ammonia levels were not
kept low or within narrow limits, new processes would have
to be developed at the Dye Plant to remove the ammonia
completely. These processes would add complexity to the
Plant operations, require capital expenditures, and increase
operations and maintenance costs.

The Safe Drinking Water Branch later amended its
October 5, 1998 memorandum recommending an ammonia
cleanup standard for the Saginaw aquifer. It stated that in
light of information obtained from meeting with the Lansing
Board's consultant and a review of its report, the Safe
Drinking Water Branch would revise its recommendation
for the ammonia cleanup standard from 1.75 mg/l to the
more stringent standard of 0.5 mg/l. That cleanup
standard was subsequently incorporated into an emergency
order issued by the EPA on February 26, 1999, requiring
that Grace alone reduce the ammonia levels in the Saginaw
aquifer to background levels (about 0.5 mg/l) and replace
the drinking water capacity lost by the Lansing Board from
shutting down ten of its drinking water wells.

In response to the EPA's order, Grace proposed forming
a technical committee of all interested parties to review the
issues and evaluate cooperatively the available options for
protecting the operations of the Dye Plant. On April 12,
1999, the EPA agreed to withdraw its first order and to
issue a new order based upon the findings of the newly-
formed Saginaw Aquifer Technical Evaluation Team
("SATET"), which would include technical representatives
from Grace, the EPA, the Lansing Board, and the Michigan
Department of Environmental Quality.

5
SATET was empaneled to evaluate four approaches to
protect the public from the health hazards associated with
excess ammonia in the Saginaw aquifer. SATET's mission
statement listed those approaches as follows:

Approach 1- "Control of Saginaw Aqui fer ground-
water ammonia-nitrogen contamination
incident to potentially impacted BW&L
wells by pump and treat measures."

Approach 2- "Limitation of influent ammonia-nitrogen
at the Dye Water Conditioning Plant
(WCP) to approximately 1 mg/l
(plus/minus approximately 0.2 mg/l),
including via measures arising from
Option 1 above. This may also involve a
well field management program,
including routine monitoring and
characterization of the water produced
from specific BW&L wells."

Approach 3- "Wellhead treatment of impac ted LBW&L
wells (either individually or combined,
i.e. intermediate treatment), by ammonia
control technology."

Approach 4- "Supplemental treatment at t he LBW&L
Dye WCP for ammonia control."

In less technical terms, the four approaches can be
summarized as follows. Under Approach 1, water is
pumped from the Saginaw aquifer in an attempt to
"capture" the ammonia plume and remove it from the water
before it affects the Lansing Board's wells. Approach 2
contains two alternative methods for keeping ammonia
concentrations below 1.0 mg/l and preventing spikes in
excess of 0.2 mg/l. The first alternative, known as
"blending," involves reordering the sequence in which wells
are turned on so that water from wells with higher levels of
ammonia may be blended with water from wells with low
ammonia concentrations. The second alternative involves
shutting down wells affected by elevated ammonia
("mothballing") and replacing them with newly drilled wells
of similar or greater capacity ("well-replacement"). Approach
3 involves treatment technologies known as ion exchange,

6
breakpoint chlorination, and air stripping. These could be
applied at individual wells or groups of wells to treat
ammonia before the water is pumped to the Dye Plant.
Approach 4 involves applying these same treatment
processes at the Dye Plant to reduce or eliminate ammonia
in the influent water already at the Plant.

On May 14, 1999, SATET produced a draft report
evaluating the four approaches to protect the public from
ammonia contamination in the Saginaw aquifer. In its
discussion of Approach 1, SATET's draft report
recommended that a program of data collection, including
new monitoring wells, and groundwater modeling be
conducted with the goal of confirming capture of the
ammonia plume in the Saginaw aquifer. If capture could
not be confirmed, the data would be used to decide where
additional extraction wells would be needed. The report
acknowledged that new extraction wells might take as long
as two years to be installed and become operational. In the
meantime, SATET recommended considering other options
to protect the Lansing Board's capability of producing water
in sufficient quantity for its customers, which would be the
thrust of Approaches 2, 3, and 4.

In its discussion of Approach 2, SATET's draft report
stated that blending could "help mitigate" an operational
problem at the Plant, but that making decisions on which
wells to operate could be complicated, and accurate
prediction of the resulting ammonia concentration would
require continuous monitoring of incoming ammonia
concentrations both at the well head and at the Plant. The
draft report concluded that mothballing of selected wells
with elevated ammonia levels would remove them from the
well sequence and any effect on the water supply, but
might not prevent contaminants from migrating to the next
tier of wells in the field. The report therefore recommended
that mothballed wells be replaced with new wells in a new
location far from potential contamination. The influent from
the new wells would keep ammonia concentrations low and
could be used effectively in an altered well sequence to
dampen ammonia spikes. Finally, the draft report
recommended that the Lansing Board refrain from pumping
the wells that it had shut down in 1997 and that it begin

7
regular monitoring of all wells to confirm that ammonia
concentrations would not rise to levels that would cause
concern.

The draft report indicated that Approaches 3 and 4 might
be effective, but noted limitations if Approach 4 were used
to treat ammonia concentrations greater than 1.0 mg/l. The
report also expressed the Lansing Board's opposition to
Approaches 3 and 4 because of public perceptions about
the quality of source water. Ultimately, the draft report
concluded that the data did not indicate a need for
Approaches 3 or 4 in the near future.

On May 21, 1999, SATET issued a final report
recommending that Approach 1 be adopted to protect the
Dye Plant and that Approaches 2, 3, and 4 be applied as
supplements to Approach 1. SATET concluded that

[t]he ultimate resolution of the Cooperating Parties[']
concerns regarding the Saginaw Aquifer and LBW&L
operations lies in remediation of the Saginaw Aquifer.
While aquifer remediation is proceeding, in the short
term, other options can be considered to protect the
LBW&L capability to produce safe water in sufficient
quantity for its customers. This is the thrust of
Approaches 2, 3, and 4. Each of these approaches
would be supplements to the treatment options
discussed in Approach 1.

The final report differed from the draft report by adding the
following concerns about Approach 2. It explained that
blending would allow contaminants to enter a drinking
water system and that the "LBW&L staff stated that the
knowing acceptance of contaminants, however diluted, in
the drinking water transmission system, would be
unacceptable, and would not be recommended to LBW&L
top management or Board of Commissioners." The report
further explained that the "LBW&L staff stated that
mothballing with replacement wells, in conjunction with
Approach 1 (plume containment and capture and treatment
of contaminated water from extraction wells) would likely be
recommended to LBW&L top management and Board of
Commissioners." In addition, the report noted that, in order
to avoid complicated control requirements associated with

8
a blending approach, "cleanup of [the] aquifer is essential,"
and that "[r]emoval of ammonia from the well field before it
impacts any production wells, as discussed in Approach 1,
may be preferable to the complex operational changes
required to manage incoming ammonia concentrations."

The parties dispute whether Grace concurred in SATET's
final recommendation for implementation of Approach 1.
The EPA maintains that SATET's recommendation was
unanimous and included Grace's approval. However, in a
July 7, 1999 memorandum from Grace's counsel to William
E. Muno, the Director of the EPA's Superfund Division,
Grace concurred in SATET's recommendation for
Approaches 1 and 2, but reserved an objection to the
implementation of Approach 1 pursuant to the emergency
provisions of SDWA rather than the EPA's long-term
cleanup powers under CERCLA.

In any event, the EPA issued a second emergency order
-- the July 29 Order -- purportedly based upon SATET's
findings and recommendations. The July 29 Order requires
that Grace engage in a long-term cleanup of the Saginaw
aquifer by installing, by January 1, 2003, extraction wells
or equivalent technology that will reduce ammonia levels in
the capture zone of the drinking water wells to 1.2 mg/l.
Although the Order does not explicitly say, this mandate
appears to require that Grace use Approach 1 to perform
the long-term cleanup of the Saginaw aquifer. In addition to
long-term cleanup, the July 29 Order requires that Grace
take immediate interim action ensuring that the"combined
influent ammonia concentrations of the Dye Plant do not
exceed 1.2 mg/l, or fluctuate by more than 0.2 mg/l within
a 24-hour period." As best we can tell, these interim
requirements are lifted from Approach 2 of the SATET
report.

On September 2, 1999, Grace filed a petition for review in
this Court challenging the EPA's authority to issue the July
29 Order pursuant to the emergency provisions of SDWA.
This first petition has been docketed as Case No. 99-5662.

Grace also filed with the EPA a Draft Interim Measures
Statement of Work ("draft Statement of Work") on
September 2, 1999. It outlined a plan to use a blending

9
process to ensure that the influent water entering the Dye
Plant after being combined from all wells contains ammonia
below levels mandated by the interim measures
requirement in the July 29 Order. On September 28, 1999,
the EPA responded with "draft comments" to Grace's draft
Statement of Work that rejected Grace's blending approach
and ordered Grace to ensure that water from each
production well individually meets the ammonia limitation
specified in the July 29 Order's interim measures mandate.
Grace subsequently revised its draft Statement of Work to
comply with the EPA's comments, but preserved the right to
challenge this requirement as an unwarranted material
change of Grace's obligation under the July 29 Order in a
second petition for review, Case No. 00-3302.

II. Jurisdiction & Standard of Review

We have jurisdiction over Grace's petition for review of
the July 29 Order pursuant to section 1448(a)(2) of SDWA,
which provides for judicial review of any final agency action
by the Administrator of the EPA. See 42 U.S.C. S 300j-
7(a)(2). The applicable standard of review is whether the
EPA's action was "arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law." 5
U.S.C. S 706(2)(A); see Southwestern Pa. Growth Alliance v.
Browner, 121 F.3d 106, 111 (3d Cir. 1997). In applying this
standard, our "only task is to determine whether[the EPA]
considered the relevant factors and articulated a rational
connection between the facts found and the choice made."
Growth Alliance, 121 F.3d at 111 (alteration in original).

However, we must remand to the EPA if "the record
before the agency does not support the agency action, if the
agency has not considered all relevant factors, or if the
reviewing court simply cannot evaluate the challenged
agency action on the basis of the record before it." C.K. v.
N.J. Dep't of Health & Human Servs., 92 F.3d 171, 182 (3d
Cir. 1996) (quoting Fla. Power & Light Co. v. Lorion, 470
U.S. 729, 744 (1985)). Moreover, we may not accept
appellate counsel's post hoc rationalizations for agency
action. Put another way, an agency's order must be upheld
on the same basis articulated in the order by the agency
itself. See Burlington Truck Lines, Inc. v. United States, 371

10
U.S. 156, 168-69 (1962); SEC v. Chenery Corp. , 332 U.S.
194, 196 (1947); Furnari v. Warden, Allenwood Fed. Corr.
Inst., 218 F.3d 250, 257 (3d Cir. 2000); Marshall v.
Lansing, 839 F.2d 933, 943-44 (3d Cir. 1988)." `Even if the
evidence in the record, combined with the reviewing court's
understanding of the law, is enough to support the order,
the court may not uphold the order unless it is sustainable
on the agency's findings and for the reasons stated by the
agency.' " Moret v. Karn, 746 F.2d 989, 992 (3d Cir. 1984)
(quoting Kenneth Culp Davis & Richard J. Pierce, Jr.,
Administrative Law Treatise S 14:29 (1980)). Moreover,
while a decision of less than ideal clarity will be upheld if
the agency's path may be reasonably discerned, see Motor
Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463
U.S. 29, 43 (1983), we will not search the record to find
support for the agency's decision unless its "conclusions
[are] . . . readily apparent" so that "broad inferential leaps
of logic [are] not needed to reach the determinations."
Marshall, 839 F.2d at 944; accord Furnari , 218 F.3d at 257.

III. Emergency Power Under SDWA

Section 1431(a) of SDWA authorizes the EPA
Administrator to take action necessary to protect the
public's health from an imminent and substantial
endangerment created by contaminants in a public water
system or an underground source of drinking water. See 42
U.S.C. S 300i(a). However, action by the EPA is only
authorized when state and local authorities have not acted
first. See id.

The legislative history to section 1431(a) demonstrates
that Congress intended "to confer completely adequate
authority to deal promptly and effectively with emergency
situations which jeopardize the health of persons" using
public water systems. H.R. Rep. No. 93-1185 (1974),
reprinted in 1974 U.S.C.C.A.N. 6454, 6487. Congress
intended a broad reading of the term "imminent" to allow
the EPA "the time it may take to prepare administrative
orders or moving papers, to commence and complete
litigation, and to permit issuance, notification,
implementation, and enforcement of administrative or court
orders to protect the public health." Id. at 6488. Moreover,

11
the EPA may take action to prevent even a risk of harm to
a public drinking water system. See id."[F]or example, the
Administrator may invoke this section when there is an
imminent likelihood of the introduction into drinking water
of contaminants that may cause health damage after a
period of latency." Id.

In United States v. Price, 688 F.2d 204 (3d Cir. 1982), we
addressed the nature of the EPA's emergency authority
under section 1431 of SDWA and under section 7003 of the
Resource Conservation and Recovery Act ("RCRA"), 42
U.S.C. S 6901 et seq.2 We explained that "[b]y enacting the
endangerment provisions of RCRA and SDWA, Congress
sought to invoke the broad and flexible equity powers of the
federal courts in instances where hazardous wastes
threatened human health." Price, 688 F.2d at 211.
Moreover, "these provisions have enhanced the courts'
traditional equitable powers by authorizing the issuance of
injunctions when there is but a risk of harm, a more
lenient standard than the traditional requirement of
threatened irreparable harm." Id.; see also Trinity Am. Corp.
v. EPA, 150 F.3d 389, 399 (4th Cir. 1998) (recognizing that
section 1431 is applicable when the EPA demonstrates an
imminent "risk of harm"); United States v. Waste Indus.,
Inc., 734 F.2d 159, 165 (4th Cir. 1984) (concluding that
section 7003 is not specifically limited to addressing an
"emergency"). Thus, it is well established from the
legislative history and case law that SDWA confers on the
EPA broad authority to address present and future harm
that may substantially threaten the health of persons who
use public water systems.

Yet, the EPA's emergency power is not without limitation.
The same House Report that expresses an intent to confer
broad emergency authority on the EPA also explains that,
"[i]n using the words `imminent and substantial
_________________________________________________________________

2. Using language similar to that found in SDWA, section 7003 of RCRA
authorizes the Federal Government to bring suit"to restrain" certain
activities, "or to take such other action as may be necessary," when
handling, storage, treatment, transportation or disposal of hazardous
waste "may present an imminent and substantial endangerment to
health or the environment." 42 U.S.C. S 6973.

12
endangerment to the health of persons,' the Committee
intends that this broad administrative authority not be
used when the system of regulatory authorities provided
elsewhere in the bill could be used adequately to protect
the public health." H.R. Rep. No. 93-1185 (1974), reprinted
in 1974 U.S.C.C.A.N. 6454, 6487-88. "Nor is the emergency
authority to be used in cases where the risk of harm is
remote in time, completely speculative in nature, or de
minimis in degree." Id. at 6488.

In Price, we also noted limitations on the EPA's power to
act. Price, 688 F.2d at 214. We observed that, under section
7003 of RCRA, the EPA may "authorize[ ] the cleanup of a
site, even a dormant one, if that action is necessary to
abate a present threat to the public health or the
environment[,]" but that it "could not order the cleanup of
a waste disposal site which posed no threat to health or the
environment." Id. Because the "authority conferred . . . by
section 1431 of SDWA is quite as broad as that conferred
by RCRA," id., we believe the limitations under the latter
provision are equally applicable to the former. As is the
case with RCRA, the EPA cannot order cleanup under
section 1431 of SDWA when there is no threat to the
public's health.

IV. Application of Law to this Case

In applying the requirements of SDWA to the facts of this
case, we find that the EPA's July 29 Order falls short of the
mark. More specifically, the EPA has failed to provide (A) a
rational basis for its determination that a cleanup standard
of 1.2 mg/l is necessary to protect the health of persons
who may use Lansing's public drinking water system, and
(B) a rational basis for its finding that remediation of the
aquifer through Approach 1 is necessary to protect the
health of those persons.3
_________________________________________________________________

3. We have carefully considered whether the EPA would ever have the
authority to order long-term remediation of an aquifer pursuant to
section 1431 of SDWA when alternative interim measures are sufficient
to abate the immediate threat to the public. While there exists
substantial support for the view that, under those circumstances, the

13
A. The Ammonia Standard (1.2 mg/l)

The July 29 Order mandates a reduction of ammonia
levels to 1.2 mg/l, but fails to provide a rational
explanation for why the EPA settled on this standard. In
support of the 1.2 mg/l standard, that Order makes the
following findings of fact:

SATET conducted a technical study of the Dye WCP in
order to determine how much influent ammonia, as
nitrogen, the Dye WCP could handle and still maintain
adequate protection of human health and comply with
current and future drinking water regulations. SATET
concluded that the maximum amount of influent
ammonia, as nitrogen, that the Dye WCP can handle
and still adequately protect human health, as well as
comply with current and future drinking water
regulations, is 1.2 milligrams per liter (mg/l), as
nitrogen.

Our colleague in dissent appears to accept these findings of
fact on face value when she states, for example, that "[t]he
Technical Evaluation Team concluded that the maximum
amount of influent ammonia, as nitrogen, that the Dye
_________________________________________________________________

EPA should order only interim measures under SDWA and pursue long-
term remediation pursuant to CERCLA, we do not decide this issue here.
Instead, we vacate the EPA's July 29 Order only on the narrower
grounds noted above.

We have also considered whether the July 29 Order makes a sufficient
finding of "imminent and substantial endangerment." The EPA states in
a conclusory fashion at the outset of the July 29 Order -- but not under
its formal Findings of Fact -- that ammonia in the Saginaw aquifer "may
present an imminent and substantial endangerment to the health of
persons receiving drinking water from the Lansing Board of Water and
Light." Although we do not limit our review to the EPA's formal Findings
of Fact in this case, we caution that ordinarily we"may not uphold the
order unless it is sustainable on the agency's findings," Moret, 746 F.2d
at 992, and that for the sake of clarity it would be better advised to
make a finding of "imminent and substantial endangerment" under its
formally articulated Findings of Fact. We also caution the EPA not to
assume that the inclusion of these "magic words," without any support
in the record to demonstrate that the finding is not arbitrary and
capricious, will be sufficient to sustain an order under SDWA.

14
Water conditioning plant can handle and still adequately
protect human health, as well as comply with current and
future drinking water regulations, is 1.2 milligrams per
liter, as nitrogen." However, for the reasons explained
below, we believe this statement mischaracterizes the
record.

An examination of the SATET report reveals no technical
study by SATET to determine the maximum level of
ammonia the Dye Plant could handle without jeopardizing
the public's health. In fact, the 1.2 mg/l standard appears
to have been expressed as an unquestioned baseline in
SATET's mission statement regarding Approach 2.

At oral argument, the EPA referred us to section 3.1 of
the SATET report for the technical study allegedly
performed by SATET. Our best guess is that the EPA was
referring to the following passage:

The SATET met in Lansing on April 8, 15, and 29,
1999. A technical workshop meeting which included
the SATET and an additional technical representative
from W.R. Grace & Co. was held in Lansing on May 5,
1999. In each of the meetings the SATET endeavored to
understand the data available, recommend additional
data collection needed, and discuss the alternative
ways the mission could be met.

This passage in no way explains how or why SATET settled
on a 1.2 mg/l ammonia standard. It certainly cannot
support the finding in the July 29 Order that "SATET
conducted a technical study of the Dye WCP in order to
determine how much influent ammonia, as nitrogen, the
Dye WCP could handle and still maintain adequate
protection of human health and comply with current and
future drinking water regulations."

The EPA has also directed our attention to section 4.1 of
the SATET report as support for the 1.2 mg/l ammonia
standard. Section 4.1 states as follows:

The goal of Approach 2 is to minimize the ammonia
concentration at the Dye Water Conditioning Plant
(WCP) to approximately 1.0 mg/l (plus or minus
approximately 0.2 mg/l), including measures arising

15
 from Approach 1. Approach 2 may also include a well
field management program, including routine
monitoring and characterization of the water produced
from specific Lansing Board of Water & Light (LBW&L)
wells. The water treatment target has been identified as
a maximum ammonia concentration of 1.0 mg/l plus
or minus 0.2 mg/l. An incoming ammonia
concentration no greater than 1.0 mg/l will ensure that
the plant can meet the maximum disinfectant residual
levels required for chloramines. Spikes in influent
ammonia concentration should be limited to 0.2 mg/l,
an increase that can easily be handled by the plant
based on existing fluctuations in ammonia
concentrations.

Despite the EPA's suggestion to the contrary, this passage
fails to provide support for its conclusion that a 1.2 mg/l
standard would be necessary to protect the Lansing
public's health. SATET's finding that an incoming ammonia
concentration no greater than 1.0 mg/l "will ensure that
the plant can meet its disinfectant levels" is not a finding
that no greater ammonia concentration can be tolerated by
the Dye Plant without endangering the public's health.
Likewise, SATET's conclusory finding that the Dye Plant
can "easily handle" spikes limited to 0.2 mg/l in no way
determines whether the Dye Plant could handle spikes
greater than 0.2 mg/l. Section 4.1 therefore fails to
demonstrate a rational basis for settling on the 1.2 mg/l
standard.

With no evidence that a technical study was ever
performed by SATET or the EPA to determine the
appropriate ammonia standard necessary to protect the
public's health, and no other explanation in the July 29
Order for the EPA's decision, we have no choice but to
conclude that the EPA arbitrarily and capriciously settled
on the 1.2 mg/l standard.4
_________________________________________________________________

4. We are aware that the EPA and SATET had before them a desktop
study by a consultant hired by the Lansing Board that concludes that
ammonia concentrations over existing background levels (0.1-0.5 mg/l)
would affect the current treatment and operational practices at the Dye
Plant. However, for the following reasons we conclude that this report

16
B. Remediation of the Saginaw Aquifer Through
Approach 1

The EPA has also failed to articulate a rational basis for
its conclusion that Approach 1 is necessary to protect the
health of the Lansing public. The July 29 Order's only
finding of fact in support of remediation of the Saginaw
aquifer as provided in Approach 1 states:

SATET also concluded that the MWDS [Motor Wheel
Disposal Site] ammonia contamination in the Saginaw
aquifer will cause the Dye WCP to experience influent
ammonia concentrations above 1.2 mg/l, which will
compromise the WCP's ability to protect human health
and comply with current and future drinking water
regulations. The SATET concluded that the only way to
avoid this risk was through the removal of excess
ammonia from the Saginaw aquifer.

Unfortunately, it is hardly clear from SATET's report that
the only way to protect the public's health is through the
removal of excess ammonia. Rather, it appears that there
was sharp disagreement among the members of SATET as
to whether this form of remediation would be necessary. On
appeal, the EPA refers us to the following passage in the
Executive Summary of SATET's final report:

The ultimate resolution of the Cooperating Parties[']
concerns regarding the Saginaw Aquifer and LBW&L
operations lies in remediation of the Saginaw Aquifer.
While aquifer remediation is proceeding, in the short
term, other options can be considered to protect the
LBW&L capability to produce safe water in sufficient
quantity for its customers. This is the thrust of
_________________________________________________________________

does not provide a rational basis for the July 29 Order. First, neither
the
July 29 Order nor SATET's final report purports to rely upon the
recommendation in that report. Second, the report provides no technical
data or research demonstrating that ammonia must be kept at those
background levels to protect the Lansing public's health. Finally, the
report provides no rational explanation for the EPA's decision to settle
on
a 1.2 mg/l standard. Indeed, if the report is accurate, the EPA should
have ordered a 0.5 mg/l standard in its July 29 Order (as it did in its
first order issued on February 26, 1999).

17
 Approaches 2, 3, and 4. Each of these approaches
would be supplements to the treatment options
discussed in Approach 1.

The fact that the ultimate resolution of the parties'
differences lies in a recommendation for Approach 1 does
not mean that Approach 1 is "the only way" to protect the
Lansing public's health as the EPA's July 29 Order
maintains.

Morever, we need more than a conclusory statement from
SATET to determine that the EPA did not arbitrarily and
capriciously settle on Approach 1 as the only method
sufficient to protect the public health. In the draft report,
SATET's discussion of Approach 1 ended with a
recommendation for a program of data collection (including
new monitoring wells) and groundwater modeling to be
conducted with the goal of confirming capture of the
ammonia plume. If capture could not be confirmed, the
draft report continued, the data would be used to decide
where additional extraction wells would be needed.

In its discussion of Approach 2, SATET's draft report
stated that mothballing of selected wells combined with a
well-replacement strategy could be an effective method to
protect the Lansing public's health. It explained that
mothballing the wells with elevated ammonia levels would
remove them from the well sequence and any effect on the
water supply. The report also stated that well-replacement
would prevent contaminants from migrating to the next tier
of wells in the field when mothballed wells were shut down.

On May 21, 1999, SATET issued its final report
recommending that long-term remediation under Approach
1 be adopted to protect the Dye Plant. It recommended
using Approaches 2, 3, and 4 only as supplements to
Approach 1. Yet the final report provided no rational
explanation for recommending remediation of the Saginaw
aquifer under Approach 1 when SATET had previously
concluded that a combined mothballing and well-
replacement strategy under Approach 2 would be an
effective method for keeping ammonia concentrations below
1.0 mg/l (plus/minus 0.2 mg/l).

18
The discussion of Approaches 1 and 2 in the final report
remained largely the same as in the draft report except for
two conclusory statements concerning Approach 2. The first
was that, "[i]n order to avoid . . . complicated control
requirements [under Approach 2], cleanup of[the] aquifer
[under Approach 1] is essential." The second stated that
"[r]emoval of ammonia from the well field before it impacts
any production wells, as discussed in Approach 1, may be
preferable to the complex operational changes required to
manage incoming ammonia concentrations [under
Approach 2]." SATET provided no reasons for reaching
these conclusions in the final report that were not made in
the draft report, and we can find no additional findings of
fact to back up this change in course. Moreover, we note
that the "complicated control requirements" and "complex
operational changes" referred to are problems the draft
SATET report attributed to the blending technique under
Approach 2. SATET's final report failed to explain how the
problems associated with blending would undermine the
value of the mothballing/well-replacement technique that
the draft report previously recommended as an effective
solution. If mothballing and well-replacement under
Approach 2 would be effective, it can hardly be said that
removal as provided in Approach 1 is essential.

The only explanation for SATET's change in
recommendation between the draft and final report appears
to be the Lansing Board's opposition to anything other than
Approach 1. In its discussion of Approach 2, the final
report explains that a blending approach "would allow
contaminants to enter a drinking water system." The very
next sentence explains that "[d]uring SATET meetings,
LBW&L staff stated that the knowing acceptance of
contaminants, however diluted, in the drinking water
transmission system, would be unacceptable, and would
not be recommended to LBW&L top management or Board
of Commissioners." The inference is that the Lansing
Board's staff pushed SATET not to recommend a blending
process under Approach 2 because blending would allow
some contaminants to enter the drinking water system.

The Lansing Board's staff also stated at SATET meetings
that Approaches 3 and 4 "will likely not be acceptable to

19
the LBW&L for reasons such as adverse public perceptions
about the quality of source water, the precedent of use of
formerly contaminated water for drinking water supply, and
the precedent of using drinking water supply wells as
pollutant extraction wells." They explained, however, that
"mothballing with replacement wells, in conjunction with
Approach 1 (plume containment and capture and treatment
of contaminated water from extraction wells) would likely be
recommended to LBW&L top management and Board of
Commissioners." Not surprisingly, the final report
recommends complete remediation under Approach 1 as
the "ultimate resolution of the Cooperating Parties[']
concerns regarding the Saginaw acquifer and LBW&L
operations." The report recommends Approaches 2, 3, and
4 only as "supplements to the treatment options discussed
in Approach 1."

We are left with the firm impression that SATET's
support for Approach 1 in the final report is primarily
based on the Lansing Board's opposition to any of the other
approaches. Such a recommendation is not rationally based
on the facts SATET found concerning ammonia
contamination in the Saginaw aquifer and the availability of
remedies to protect the public's health. We therefore vacate
the July 29 Order because it fails to provide a rational
explanation for concluding that remediation of the Saginaw
aquifer through Approach 1 is necessary to protect the
Lansing public's health.5
_________________________________________________________________

5. Grace has argued that SATET changed its recommendation in the final
report in response to pressure from the Safe Drinking Water Branch of
the EPA. It appears that the Chief of the Safe Drinking Water Branch,
Charlene J. Denys, sent an e-mail to her staff on May 12, 1999
expressing concern that the SATET group was concentrating more on the
short-term capacity/treatment of the Lansing public water system as
opposed to the long-term remediation of the Saginaw aquifer. She
indicated that she would expect any proposal from SATET to include the
long-term remediation of the Saginaw aquifer in addition to the short-
term capacity issue and the effect of ammonia on the Dye Plant and its
distribution system. We note, however, that the Denys e-mail was sent
prior to SATET's completion of even the draft report. We therefore cannot
be certain that SATET's change in recommendation between the draft
report and the final report was influenced by her e-mail. Instead we
observe that SATET's final report itself does not provide a rational
explanation for its change in recommendation and conclude that the
EPA's decision in reliance upon that report is therefore arbitrary and
capricious.

20
V. Conclusion

For the reasons discussed above, we vacate the EPA's
July 29 Order as arbitrary and capricious. In so doing, we
need not reach the following issues raised by Grace: (1)
whether the EPA erroneously failed to consider the ability of
local authorities to take action to protect the public health;
(2) whether the EPA improperly relied upon the 1996
Source Water Assessment Amendment to SDWA for
authority to issue the July 29 Order; and (3) whether the
EPA's interpretation of SDWA to authorize long-term
cleanup is unconstitutional because it denies Grace a full
and fair opportunity to challenge the EPA's post-issuance
amendments to the July 29 Order. Moreover, because we
are vacating the July 29 Order, we need not address issues
raised in Grace's second petition, Case No. 00-3302,
challenging requirements imposed by the EPA when
approving Grace's Statement of Work submitted under that
Order. The second petition is therefore denied as moot.

21
MANSMANN, dissenting:

I respectfully dissent from the majority opinion because
I would hold that the EPA's July 29 Order, though perhaps
suffering from poor draftsmanship, nonetheless passably
fulfills the requirements of the SDWA. I do not disagree
with the majority opinion's presentation of the law
proscribing the EPA's power to order cleanup under section
1431 when there is not any threat to the public's health. I
would emphasize, however, the highly deferential standard
of review in this case. The high degree of deference we are
to accord the EPA is a cornerstone to the EPA's power,
enshrined in the SDWA, "to protect the public, health, the
environment, and public water supplies from the pernicious
effects of toxic wastes." United States v. Price, 688 F.2d
204, 214 (3d Cir. 1982). Consequently, I have resolved that
the EPA's actions here were neither arbitrary nor
capricious, and that the EPA satisfactorily demonstrated
that the ammonia contamination in the Saginaw aquifer
endangers the public's health.

As the majority explains, a court must uphold any EPA
actions taken pursuant to the Act unless the action is
"arbitrary, capricious, an abuse of discretion, or otherwise
not in accordance with law." 5 U.S.C. S 706(2)(A). This
standard of review presumes the validity of agency action.
Frisby v. HUD, 755 F.2d 1052, 1055 (3d Cir. 1985); Ethyl
Corp. v. EPA, 541 F.2d 1, 34 (D.C. Dir. 1976)."The ultimate
standard is a narrow one," under which the court is not "to
substitute its judgment for that of the agency." Citizens to
Preserve Overton Park v. Volpe, 401 U.S. 402, 416 (1971).
Our sole task in reviewing the EPA action, as the majority
points out, "is to determine whether [the EPA] considered
the relevant factors and articulated a rational connection
between the facts found and the choice made."
Southwestern Pa. Growth Alliance v. Browner, 121 F.3d
106, 111 (3d Cir. 1997)(quoting Baltimore Gas & Elec. v.
Natural Res. Def. Coun., 462 U.S. 87, 105 (1983). Unlike
the majority, however, I am satisfied that the EPA
considered the relevant factors and articulated a basic
rational connection.

I am particularly mindful that we are a reviewing court,
experts in the law, and not expert environmental

22
toxicologists examining data ab initio. All the more reason
to apply the presumption of correctness to the EPA."A
reviewing court `must generally be at its most deferential'
when reviewing factual determinations within an agency's
area of special expertise." Southwestern Pa. Growth
Alliance, 121 F.3d at 117 (internal citation omitted). An
agency's evaluation of specific evidence forming the basis of
its decision is "entitled to respectful consideration" by the
reviewing court. Tri-Bio Labs v. United States , 836 F.2d
135, 142 (3d Cir. 1987). Thus, where the agency decision
turns on issues requiring the exercise of scientific
judgment, as it does here, the court "must look at the
decision not as a chemist, biologist or statistician that we
are qualified neither by training, nor experience to be, but
as a reviewing court exercising our narrowly defined duty of
holding agencies to certain minimal standards of
rationality." Ethyl Corp., 541 F.2d at 36-37.

I would uphold the agency action here because I would
find that the EPA's actions, in accordance with a complex
statute are sufficiently rational so as to preclude us from
substituting our judgment for that of the EPA.1 See e.g.
Chemical Mfrs. Ass'n v. Natural Res. Defense Council , 470
U.S. 116, 125 (1985). I agree with the EPA that the SATET
report2 provides sufficient support for the EPA's findings
that a cleanup standard of 1.2 mg/l is necessary to protect
the health of persons who may use that drinking water
system, and that remediation of the aquifer through
Approach 1 is necessary to protect the health of those
persons. This would remain my position even if some other
figure or another approach were ultimately shown to
adequately protect the public drinking water.

The evidence shows the following regarding the SATET
investigation and report. In March 1999, Grace agreed to
participate in a technical evaluation review committee to
_________________________________________________________________

1. The majority states that we accept the finding of 1.2 miligrams per
liter "on face value." Instead, we accept this finding because we conclude
that it is rationally based.

2. Grace's active participation in SATET is conspicuous, though I
hesitate to suggest that Grace has in any way waived its right to protest
the SATET report.

23
identify and evaluate options to protect the Saginaw
aquifer. Accordingly, Grace formed SATET. SATET meetings
were attended by representatives of Grace, the EPA,
Michigan Department of Environmental Quality and
Lansing Water. SATET conducted a technical study of the
Dye Water conditioning plant in order to determine how
much influent ammonia, as nitrogen, the Dye Water
conditioning plant could handle and still maintain adequate
protection of human health and comply with current and
future drinking water regulations. The Technical Evaluation
Team concluded that the maximum amount of influent
ammonia, as nitrogen, that the Dye Water conditioning
plant can handle and still adequately protect human
health, as well as comply with current and future drinking
water regulations, is 1.2 milligrams per liter, as nitrogen.

SATET also concluded that the Disposal Site ammonia
contamination in the Saginaw aquifer will cause the Dye
Water conditioning plant to experience influent ammonia
concentrations above 1.2 mg/l, which will compromise the
Water Conditioning Plant's ability to protect human health
and comply with current and future drinking water
regulations. SATET concluded that the only way to avoid
this risk was through the removal of excess ammonia from
the Saginaw aquifer.

On April 12, 1999, the EPA withdrew an emergency
administrative order under Section 1431 of the Safe
Drinking Water Act that it had issued to Grace on February
26, 1999. The EPA withdrew the Order because Grace
agreed to form SATET. On May 26, 1999, SATET sent to the
EPA and to Grace specific findings and recommendations
concerning both the remediation of the Saginaw aquifer and
the protection of Lansing Water's Dye Water Conditioning
Plant. The EPA then re-issued an emergency administrative
order under Section 1431 of the Safe Drinking Water Act
based upon SATET's findings and recommendations.

With respect to the technical study of Lansing Water's
Dye Water Conditioning Plant, in a relatively short period of
time, SATET examined and reviewed a substantial corpus
of information concerning the ammonia problem. As the
SATET report states, "The SATET met in Lansing on April
8, 15, and 29, 1999. A technical workshop meeting which

24
included the SATET and an additional technical
representative from W.R. Grace & Co. was held in Lansing
on May 5, 1999. In each of the meetings the SATET
endeavored to understand the data available, recommend
additional data . . . needed, and discuss alternative ways
the mission could be met." Moreover, "[t]o develop an
understanding of Dye [plant] operations, the SATET
received briefings from Dye [plant] engineering personnel.
Key information gained through these briefings included an
understanding of the order of operation of the [Dye plant]
wells."

Specifically regarding the amount of ammonia that the
plant could safely tolerate, the report states:"An incoming
ammonia concentration no greater than 1.0 mg/l will
ensure that the plant can meet the maximum disinfectant
residual levels required for chloramines. Spikes in influent
ammonia concentration should be limited to 0.2 mg/l, an
increase that can easily be handled by the plant based on
existing fluctuations in ammonia concentrations." The
report concluded that the Dye plant could handle 1.2 mg/l
of ammonia and still provide safe drinking water in
sufficient quantities to its customers. Similarly, with
respect to the adoption of the plan to remove excess
ammonia from the Saginaw aquifer, the SATET report
states that "[t]he ultimate resolution of the Cooperating
Parties [sic] concerns regarding the Saginaw aquifer and
[Dye plant] operations lies in the remediation of the
Saginaw Aquifer." Although this standard may have been
reached by virtue of a compromise, it is nonetheless valid
for the EPA, using its expertise and experience, to set forth
a standard which is generally supported but does not have
a specific and identical source in the record.

I agree with the majority that "for the sake of clarity [the
EPA] would be better advised to make a finding of
`imminent and substantial endangerment' under its
formally articulated findings of fact." The SDWA's plain
language reads that the Administrator may act "upon
receipt of information that . . . an underground source of
drinking water may present an imminent and substantial
endangerment to the health of persons." 42 U. S. C. S 300i.
This language is mirrored in the EPA order. Moreover, when

25
faced with a problem of statutory construction, we are
bound as a federal court to show "great deference to the
interpretation given the statute by the officers or agency
charged with its administration." EPA v. National Crushed
Stone Ass'n, 449 U.S. 64, 83 (1980) (quoting Udall v.
Tallman, 380 U.S. 1, 16 (1965)). "[I]f the statute is silent or
ambiguous with respect to the specific issue, the question
for the court is whether the agency's answer is based on a
permissible construction of the statute." Chemical Mfrs.
Ass'n v. Natural Res. Defense Council, 470 U.S. 116, 125
(1985). To uphold an agency interpretation, a court need
only find that the agency's understanding of a complex
statute "is a sufficiently rational one to preclude a court
from substituting its judgment for that of [the agency]." Id.
Permitting the EPA the understanding that it may include
the phrase "may present an imminent and substantial
endangerment to the health of persons" where it did within
the order is surely rational, though with good reason, we
may prefer other placement.

As we have held previously, in enacting the
endangerment provisions of the SDWA,

Congress . . . sought to invoke nothing less than the full
equity powers of the federal courts in the effort to
protect public health, the environment, and public water
supplies from the pernicious effects of toxic wastes.
Courts should not undermine the will of Congress by
either withholding relief or granting it grudgingly.

United States v. Price, 688 F.2d at 214. (emphasis added).3
_________________________________________________________________

3. Just three years ago, the Fourth Circuit, deciding a case, Trinity
American v. U.S. EPA, 150 F.3d 389 (4th Cir. 1998), under the same
provision of the SDWA, held similarly:

So that EPA can act promptly and effectively when a threat to
public
health is imminent, courts must ensure that the agency's power
under the Act remains "relatively untrammeled."

Id. at 395 (citation omitted). The Second Circuit is also in accord. See
United States v. Hooker Chemicals and Plastics, 749 F.2d 968, 989 (2d
Cir. 1984).

26
A True Copy:
Teste:

Clerk of the United States Court of Appeals
for the Third Circuit

27