Standard Oil Co. v. Feldstein

*609SCOTT, J.—I dissent.

Appellant, the Air Pollution Control Officer of the Bay Area Pollution Control District, appeals from a judgment granting the issuance of a peremptory writ of mandamus under Code of Civil Procedure section 1094.5. The district’s hearing board, upon application by appellant, ordered respondent’s permit to operate a low sulphur fuel oil facility at its Richmond, California refinery revoked on February 2, 1978. The superior court’s writ ordered the hearing board to set aside its order revoking respondent’s permit. I would affirm the judgment.

This action encompasses events which date back to the year 1973. In that year respondent, Standard Oil Company, operated a refinery at Richmond, California consisting of three crude units which produced high sulphur fuel oil. The refinery’s capacity at that time was approximately 270,000 barrels per day (bpd) of fuel oil, though it had been operating for several years at a capacity of approximately 200,000 bpd due to the deactivation of several pieces of equipment. In response to a recognized critical need for low sulphur fuel oil, respondent and appellant began discussions in 1973 concerning the construction of a low sulphur fuel oil project at the refinery. The plan contemplated certain alterations to the existing three crude units and the construction of a fourth crude unit to produce low sulphur fuel oil. It was estimated that the alterations and construction would result in an increase of capacity at the refinery from 270,000 bpd to 365,000 bpd.

In order to proceed with construction and, subsequently, to operate the new facility it was necessary for respondent to acquire an authority to construct1 and a permit to operate2 from the district. The application and issuance of these permits were, at all relevant times, governed by *610the district’s regulation 2.3 That regulation was adopted to effectuate the mandate of Health and Safety Code section 40001, directing the district to “endeavor to achieve and maintain the federal ambient air quality standards” established by the Environmental Protection Agency. (See 40 C.F.R. pt. 50.)

Section 13094 of that regulation requires the denial of a new source permit where the use or operation of a new facility “may cause the emission of any air contaminant if any [state or federal] air quality standard. . .for such air contaminant from the proposed new source is exceeded in the vicinity in which it is proposed to be located.” At the time of respondent’s application for an authority to construct, the federal ambient air quality standards were exceeded in the Bay Area. Thus, unless respondent’s application fell within an exception to the provisions of section 1309, it could not be granted.

Section 13115 of the district’s regulation provides that a permit will not be denied if the proposed new facility is a “replacement” of an existing facility and the new facility “will when used or operated result in the emission of less of each air contaminant than the use or operation of the original such facility. . .for which it is a replacement.” Respondent submitted its application for consideration under section 1311.

*611In evaluating respondent’s application, the district interpreted section 131 l’s replacement requirement to refer to replacement of existing capacity of the refinery. For this purpose, the district determined the refinery had an existing capacity of 270,000 bpd even though it was operating at only approximately 200,000 bpd. Since the proposed project’s capacity would have been significantly greater than the 270,000 bpd capacity of the then existing refinery, the district rejected respondent’s application.

Subsequently, Standard submitted an application whereby it agreed to shut down two of the three existing units at such time as the proposed unit four came on line and was in operation. The application further provided “After startup of the new crude unit [No. 4], we will limit operation of the above units as outlined in the foregoing [two units down if unit No. 4 is operating] until applicable California and federal air standards are met in the vicinity of the refinery, or applicable District regulations are revised to make operation of such units permissible, or written approval for such operation is obtained from the BAAPCD [Bay Area Pollution Control District] or the BAAPCD Hearing Board.” The effect of the shutdown condition was to limit the capacity of the refinery after construction (new refinery) to approximately 275,000 bpd, which the district considered sufficiently close to the 270,000 bpd capacity of the refinery before construction (old refinery) to be deemed a replacement for purposes of section 1311. The requirement that the new facility emit less of each air contaminant having been already met to the district’s satisfaction, the district approved the application as submitted under section 1311 and issued an authority to construct accordingly. Standard completed the project in 1976 at an approximate cost of $200 million.

In December of 1974, the district amended regulation 2 by adding section 1311.2.6 In effect, it prohibited the control officer from denying a permit authorizing construction at existing facilities without regard to any “replacement” requirement provided that the operation of the facility after construction would result in the emission of significantly *612less of each air contaminant than the operation of the facility before construction.

In July 1976, Standard, upon completion of construction, began operating with all four units. It had not received authority to operate. In August 1976, the district issued to Standard a permit to operate unit No. 4 which contained the same condition, that two of the preexisting units be shut down, as was contained in the authority to construct.

On January 7, 1977, the district filed with the hearing board an “Application for Permit Revocation Pursuant to Health and Safety Code sections 42307-42309.” The application alleged that the grounds for the revocation of the permit to operate were based upon violations of the specific terms of the permit to operate, i.e., failure to shut down two of the three preexisting crude units during operation of crude unit No. 4. After hearing and argument, the hearing board, on February 2, 1978, issued an order revoking the permit to operate crude unit No. 4.

Respondent filed a petition for a writ of mandamus in the superior court seeking review of the revocation of the permit to operate. After hearing, the superior court determined that respondent had a fundamental vested right to operate crude unit No. 4 and issued a peremptory writ ordering the hearing board to set aside its order revoking the permit and to declare the shutdown condition in the permit null and void. This appeal followed.

Standard contends that its refinery, after construction, fits within the terms of section 1311.2 and that, therefore, under the terms of its permit to operate, it no longer must abide by the shutdown condition. Appellant contends that the refinery, after construction, does not fit within the terms of section 1311.2 and that, therefore, the operation of all four units at once constitutes a violation of the terms of the permit to operate.

The central issue in this case is the proper interpretation of section 1311.2 of the district’s regulation 2. The dispute between the parties is over the proper base line to which the emissions of the facility after construction are to be compared in order to determine whether there has been a significant reduction in the emissions of each air contaminant as a result of the construction.

*613Appellant contends that the proper base line is the actual emissions of the refinery prior to construction. Respondent contends that the proper base line is the projected level of emissions of the old refinery operating at full capacity in 1976, the year unit No. 4 came on line. The difference between these two interpretations is significant in light of the fact that for two years prior to the date of its application for authority to construct respondent had been operating its refinery at reduced capacity.

Both parties agree that under either interpretation there has been a significant reduction of all air contaminants except particulates. Evidence before the hearing board showed that, according to estimates submitted to and accepted by appellant in conjunction with the application for authority to construct, the new refinery with all four units operating would emit 1.6 tons per day (tpd) of particulates. Observed emissions of particulates for the year ending in July 1977 were 2.4 tpd. It was estimated that the old refinery, operating at full capacity under conditions expected to be present in 1976, would have emitted 3.9 tpd. The actual emissions of particulates at the old refinery, operating at reduced capacity in 1972, was 1.4 tpd.

It is apparent that respondent’s right to operate the new refinery at full capacity turns upon which interpretation of section 1311.2 is adopted. If appellant’s position is adopted, the project would not be in conformance with section 1311.2: actual emissions prior to construction were 1.4 tpd where both the projected and observed emissions after construction were higher. If respondent’s position is adopted, the project would be in conformance with section 1311.2: projected emissions of the old refinery operating at full capacity in 1976 were 3.9 tpd where both projected and observed emissions after construction were lower.

Respondent contends that it had a fundamental vested right to operate all four units, the trial judge properly exercised his independent judgment on the facts, and, therefore, the issue on appeal is whether there is substantial evidence to support the trial court’s findings of fact. (Pasadena Unified Sch. Dist. v. Commission on Professional Competence (1977) 20 Cal.3d 309, 314 [142 Cal.Rptr. 439, 572 P.2d 53]; Harlow v. Carleson (1976) 16 Cal.3d 731, 739 [129 Cal.Rptr. 298, 548 P.2d 698]; Bixby v. Pierno (1971) 4 Cal.3d 731, 739 [93 Cal.Rptr. 234, 481 P.2d 242].)

*614The question before this court, however, does not turn upon a factual issue but rather upon a legal one: the proper interpretation of section 1311.2. “In reviewing... an agency decision a court must determine whether the administrative agency applied the proper legal standard in evaluating the evidence before it. [Citation.] The interpretation of a regulation, like the interpretation of a statute, is, of course, a question of law [citations], and while an administrative agency’s interpretation of its own regulation obviously deserves great weight [citations], the ultimate resolution of such questions rests with the courts.” (Carmona v. Division of Industrial Safety (1975) 13 Cal.3d 303, 310 [118 Cal.Rptr. 473, 530 P.2d 161].)

When interpreting a statute or regulation a court should determine the legislative intent in order to effectuate the purpose of the statute or regulation. (People v. Caudillo (1978) 21 Cal.3d 562, 576 [146 Cal.Rptr. 859, 580 P.2d 274]; Select Base Materials v. Board of Equal. (1959) 51 Cal.2d 640, 645 [335 P.2d 672].) Here the intent of the district in adopting section 1311.2 can be ascertained by referring to controlling federal legislation and the specific circumstances under which the district adopted the regulations.

The Bay Area Pollution Control District is a regional agency which has an integral role to play in implementing federal ambient air quality standards under the federal Air Quality Act of 1967 (81 Stat. 485), as amended by the Clean Air Amendments of 1970 (Pub. L. No. 91-604, 84 Stat. 1676). Under that act, achievement of the ambient air quality standards was left to the states which were required to prepare and enforce a state implementation plan, subject to the approval of the Environmental Protection Agency.

In California the Legislature has created the State Air Resources Board with overall control of the effort to achieve ambient air quality standards (Health & Saf. Code, §§ 39002, 39003) but has given to local and regional bodies, such as the district, “the primary responsibility for control of air pollution from all sources other than emissions from motor vehicles.” (Health & Saf. Code, § 40000.) As stated above, these local bodies are directed to “endeavor to achieve and maintain the federal ambient air quality standards.” (Health & Saf. Code, § 40001.)

As the House Report to the federal Clean Air Amendments of 1970 makes clear, the purpose of that statute was to achieve national effective air pollution control, which includes “both reduction of *615present pollution and prevention of new significant pollution problems.” (House Rep. No. 91-1146, 1970 U.S.Code Cong. & Admin. News, pp. 5360-5361.)

The district’s regulation 2 was adopted to effectuate this mandate. Section 1309 requires the denial of a new source application where the proposed source would emit significant quantities of any contaminant for which any federal or state air quality standard is exceeded in the vicinity of the new source. Since air quality in the San Francisco Bay Area has never attained the standards established by the Environmental Protection Agency, the district could not approve any new source application unless there was some exception to the provisions of section 1309.

The provisions of section 1311 were intended to prevent this obviously undesirable result. That section allows the replacement of an existing facility if the use of the new facility will result in the emissions of less of each air contaminant than the use of the old facility. It is apparent from the record that section 1311.2 was adopted in response to the limitations which the replacement requirement imposed upon new source development. The extent of these limitations became apparent during the processing of respondent’s application for an authority to construct. Under the district’s interpretation of section 1311, respondent would be unable to alter its existing refinery to increase its capacity even if the net effect of the alterations would be to significantly reduce the level of emissions of each air contaminant. Such a result would not further the purposes of the federal Clean Air Amendments and would be particularly inappropriate in light of the critical need for low sulphur fuel oil. Section 1311.2 was adopted with the intent to permit new source construction and operation consistent with the basic goal of the federal Clean Air Amendments.

Appellant and amicus contend that only by adopting the actual emissions of the old refinery as the base line for the purposes of section 1311.2 will the intent of section 1311.2 be effectuated. They argue that no other interpretation would result in the reduction of present pollution. The purpose of the federal Clean Air Amendments, however, is to both reduce present pollution and prevent the development of significant new pollution problems. Appellant’s interpretation, as accepted by the majority here, ignores these dual purposes. In 1973 respondent’s refinery was operating at reduced capacity. It is not contested that *616respondent, under its operating permits and the applicable regulations, could have reactivated its equipment and operated the old refinery at full capacity. To do so would have resulted in significantly greater levels of pollutants being emitted. Only by adopting the projected level of emissions of the refinery operating at full capacity in 1976 as the base line for the purposes of section 1311.2 can an accurate determination of whether the proposed project would result in a significant reduction of emissions be made. This interpretation is consistent with the purpose of the federal Clean Air Amendments since it allows the construction and operation of new source development which would aid in the prevention of the development of significant new pollution problems. This can be seen by reference to the present case: the record shows that the level of emissions from the new refinery is significantly lower than it would have been if there had been no new construction.

The majority’s interpretation of section 1311.2 would also encourage conduct inconsistent with the purposes of the federal Clean Air Amendments. A simple example will suffice to illustrate this point. Assume that a facility owner operates, at 50 percent capacity, an old facility which cannot burn clean fuel. The facility produces particulate emissions of 100 tpd. If the owner has a need to double his activities within three years, he faces a choice between (1) operating the old facility at full capacity in the third year and producing particulate emissions of 200 tpd which his permit allows, or (2) altering the facility so that it can burn cleaner fuel and produce particulate emissions of 120 tpd. Under the majority’s interpretation, the district could not approve the alteration because it would not compare favorably to past emissions. The necessary effect of applying this interpretation is to force the facility owner either to produce substantially more emissions from the expanded operation of the old facility, or to continually operate an original facility at the dirtiest possible level so that, if and when expansion is required, authorization to construct may be obtained. Neither course of action would be consistent with the purpose of the federal Clean Air Amendments.

The majority’s interpretation of section 1311.2 fails to take into account that respondent, under its operating permits and the applicable regulations, could operate the old refinery at full capacity and, therefore, does not lead to an accurate determination of whether the new refinery would result in a significant reduction in the level of emissions of air contaminants. This failure would encourage conduct inconsistent with the purpose of the federal Clean Air Amendments.

*617I would hold that section 1311.2 allows the use of projected emissions of the old refinery operating at full capacity, under conditions that were expected to be present in 1976, as the base line to which the emissions of the new refinery are to be compared for the purposes of determining whether there has been a significant reduction.

Amicus and appellant’s argument that the calculation of projected emissions is highly speculative and subject to self-serving manipulations is unconvincing. The district has a technical staff whose competence, presumably, includes the ability to evaluate the accuracy of the projections made by applicants. In fact, the record reveals that the district accepted projections made by Standard in evaluating its application under section 1311 and, apparently, had no difficulty in assessing their accuracy. In any event, amicus and appellant’s position is fatally flawed in that the district’s own interpretation of section 1311.2 requires the use of projected emissions from the proposed facility in order to determine, at the time of issuing an authority to construct, if there will be a reduction of emissions. If the district is competent to evaluate projected emissions of the proposed facility, it is competent to evaluate projected emissions of the old facility. To the extent an applicant may have a tendency to manipulate projections to serve its own interests, this tendency may be corrected by a careful review of the projections by the district.

Appellant further argues that, even if projected emissions of the old refinery are adopted as the base line, the projections made by respondent in 1973 should not be adopted for the purposes of assessing respondent’s permit under section 1311.2. Appellant contends that respondent’s projections compare the emissions of the old refinery and the new refinery utilizing different fuel slates. Appellant argues that Standard has compared the case showing maximum emissions of the old refinery with the case showing minimum emissions of the new refinery. Appellant does not contest, however, that respondent could have operated, under its operating permits and applicable regulations, the old refinery at full capacity under conditions which would result in the level of emissions Standard projected. Adopting this maximum level, if that is the case, as the base line for purposes of section 1311.2 is reasonable in light of the purposes of that section. A significant reduction in the level of emissions respondent had a right, under its operating permits, to emit would serve to help prevent the development of significant new pollution problems. In addition, the district had an opportunity to re*618view these projections in 1973 in conjunction with the application under section 1311 and accepted them as a reasonable comparison.

Appellant’s contention that the trial court erred in not issuing findings of fact and conclusions of law is unsound. Appellant waived findings of fact and conclusions of law when it failed to request them within the time allowed by law. (See Code Civ. Proc., §§ 632, 1109; Cal. Rules of Court, rule 232(c); Kennedy v. South Coast Regional Com. (1977) 68 Cal.App.3d 660, 666-667 [137 Cal.Rptr. 396].)

I would affirm the judgment.

A petition for a rehearing was denied May 30, 1980, and the opinion was modified to read as printed above. Scott, J., was of the opinion that the petition should be granted. Respondent’s petition for a hearing by the Supreme Court was denied July 30, 1980. Clark, J., Richardson, J., and Manuel, J., were of the opinion that the petition should be granted.

Section 1301 provides: “Authority to Construct. No person shall construct any facility or building, or erect, alter, or replace any article, machine, equipment or other contrivance, the use of which may cause the emission of air contaminants, or the use of which may eliminate, reduce or control the emission of air contaminants unless he shall first have obtained written authorization for such construction, erection, alteration or replacement from the Air Pollution Control Officer.” (Eff. July 1, 1972.)

Section 1302 provides: “Authority to Operate. No person shall operate any facility or building, or any article, machine, equipment or other contrivance, the use of which may cause the emission of air contaminants, or the use of which may eliminate, reduce, or control the emission of air contaminants for which an authority to construct is required unless he shall first have obtained written authorization for such operation from the Air Pollution Control Officer.” (Eff. July 1, 1972.)

All citations to district regulations are to those regulations as they were written at the time of the events which are the basis of this appeal.

Section 1309 provides: “Denial—Air Quality Standards exceeded in the vicinity. The Air Pollution Control Officer, after considering all information available about existing air quality, information about the emission of air contaminants from existing source operations, information about the emission of air contaminants from the proposed new source operation, shall deny an authority to construct, erect, alter, or replace any facility, building, article, machine, equipment or other contrivance, or an authority to operate any facility, building, article, machine, equipment or other contrivance, the use of which may cause the emission of a significant quantity of any air contaminant if any air quality standard adopted by the California Air Resources Board or the Environmental Protection Agency for such air contaminant from the proposed new source is exceeded in the vicinity in which it is proposed to be located.” (Eff. Jan. 18, 1973.)

Section 1311 provides: “Improvement by Replacement—Not Cause for Denial. The Air Pollution Control Officer shall not deny an authority to construct, erect, alter or replace, or an authority to operate, any facility, building, article, machine, equipment or other contrivance if the facility, building, article, machine, equipment or other contrivance is a replacement for any existing facility, building, article, machine, equipment or other contrivance and the new facility, building, article, machine, equipment or other contrivance will when used or operated result in the emission of less of each air contaminant than the use or operation of the original such facility, building, article, machine, equipment or other contrivance for which it is a replacement. This Section 1311 shall apply only if the original emissions were in compliance with District regulations.” (Eff. July 1, 1972.)

Section 1311.2 provides: “Significant Reduction of Emissions—Not Cause for Denial. The Air Pollution Control Officer shall not deny an authority to construct, erect, or alter, or an authority to operate, any buildings, articles, machines, equipment or other contrivance which will become part of an existing facility if the use or operation of such facility after such construction, erection, or alteration, will result in the emission of significantly less of each air contaminant than the use or operation of the original such facility.” (Eff. Feb. 5, 1975.)