United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued January 24, 2002 Decided April 19, 2002
No. 99-1452
National Wildlife Federation, et al.,
Petitioners
v.
Environmental Protection Agency
and Christine Todd Whitman, Administrator,
Environmental Protection Agency,
Respondents
American Forest and Paper Association Inc.,
Intervenor
Consolidated with
99-1454, 99-1455, 99-1456
On Petitions for Review of a Final Rule of the
Environmental Protection Agency
Neil S. Kagan argued the cause and filed the briefs for
petitioners National Wildlife Federation, et al.
Raymond B. Ludwiszewski argued the cause for petition-
ers Alliance for Environmental Technology, et al. With him
on the briefs were Peter E. Seley and Scott H. Segal. Gene
E. Godley entered an appearance.
Carol Ann Siciliano, Attorney, U.S. Environmental Protec-
tion Agency, and Jon M. Lipshultz, Attorney, U.S. Depart-
ment of Justice, argued the cause for respondents. With
them on the brief was John C. Cruden, Assistant Attorney
General. Seth M. Barsky and Karen L. Egbert, Attorneys,
U.S. Department of Justice, entered appearances.
Russell S. Frye argued the cause for intervenor American
Forest and Paper Association Inc. With him on the brief was
Richard Wasserstrom.
Before: Sentelle, Henderson and Rogers, Circuit Judges.
Opinion for the Court filed PER CURIAM.
PER CURIAM: A coalition of environmental organizations
and a Native American tribe led by the National Wildlife
Federation (collectively "NWF") and the Alliance for Envi-
ronmental Technology, Boise Cascade Corporation, Interna-
tional Paper Company, The Mead Corporation, and Westvaco
Corporation (collectively "Industry Petitioners") separately
challenge the Final Effluent Limitations Guidelines, Pretreat-
ment Standards, and New Source Performance Standards for
the Pulp, Paper, and Paperboard Category. 63 Fed. Reg.
18,504 (April 15, 1998) ("Final Rule"). Their challenge is
confined to that portion of the Final Rule promulgated by the
Environmental Protection Agency ("EPA") under the Clean
Water Act as applied to one subcategory of the pulp and
paper industry--the bleached papergrade kraft and soda
subcategory (often referred to as the "BPK" subcategory).
The American Forest & Paper Association, Inc. intervenes in
support of the Final Rule. We deny the petitions.
I.
The Clean Water Act of 1977 ("CWA") requires EPA to
promulgate limitations on the discharge of pollutants into the
waters of the United States. 33 U.S.C. s 1311 (1994). These
limitations are referred to as effluent limitations. The ef-
fluent limitations are based on the discharge levels achievable
by what EPA determines to be the "best available technology
economically achievable" (known as the "BAT") for existing
discharging sources (defined as "point sources" in the stat-
ute), id. s 1311(b)(2)(A), (C), (D), & (F), and a different
technology--the best available demonstrated control technol-
ogy or "BADT"--for new pollutant sources, known as the new
source performance standard or "NSPS," id. s 1316(b)(1)(B).
In determining a BAT and BADT, EPA evaluates existing or
"available" technologies and considers their cost and capabili-
ties among other factors. Id. s 1314(b)(2)(B). EPA then
promulgates discharge limitations that correspond to the
application of the identified technology but does not require
dischargers to install that technology.
Pursuant to a 1988 consent decree entered into by EPA in
settlement of Environmental Defense Fund and National
Wildlife Federation v. Thomas, Civ. No. 85-0973 (D.D.C.),
EPA committed to reviewing effluent limitations guidelines
under the CWA for pulp and paper mills producing bleached
pulp. 58 Fed. Reg. 66,078, 66,089 (Dec. 17, 1993). EPA also
anticipated that it would be imposing substantial new air
pollution control requirements on these mills under the Clean
Air Act ("CAA"), 42 U.S.C. s 7412. In order to avoid incom-
patible and potentially overly burdensome rulemaking, EPA
commenced a "Cluster Rulemaking" that would jointly estab-
lish effluent limitations guidelines under the CWA and haz-
ardous air pollutant standards under the CAA. Involved in
the instant appeal is the portion of the Cluster Rules that
apply to the BPK subcategory within the pulp and paper
industry. These provisions establish limitations on the dis-
charge of several pollutants as identified by EPA. See 40
C.F.R. ss 430.20-430.28. These pollutants include dioxin,
abbreviated as TCDD, furan, abbreviated as TCDF, 12 specif-
ic chlorinated phenolic pollutants, chloroform, and adsorbable
organic halides ("AOX"). National Emission Standards &
Effluent Limitations Guidelines, 63 Fed. Reg. 18,504, 18,542
(Apr. 15, 1998).
To understand these limitations and the process by which
they were determined, we provide a brief description of the
paper production process. One of the components of wood
(the basis of paper products) that must be removed during
the pulping process is called lignin. The process of removing
lignin is called "delignification." The degree of delignification
is expressed as a "kappa" number. Prior to bleaching, addi-
tional lignin can be removed through either of two extended
delignification processes: extended cooking or oxygen deligni-
fication ("OD"). Supplemental Technical Development Docu-
ment ("STDD") s 7.2.3, at 7-4 and s 7.2.6, at 7-9 (Oct. 15,
1997). During bleaching, traditional bleaching agents that
are used lead to the formation of a number of pollutants that
are ultimately discharged into external streams. Using a
process known as elemental chlorine free ("ECF") bleaching
lowers chemical consumption during bleaching and thereby
reduces the formation of undesired pollutants. The material
removed from the pulp in bleaching is typically discharged to
the mill wastewater treatment system. This wastewater is
known as effluent; its environmental quality at discharge
depends in part on the quantity of lignin in the pulp remain-
ing after bleaching.
For the model technologies, EPA considered a number of
options, each in turn involving a package of technologies for
prevention of pollution within a pulp mill and treatment of
wastewater once it leaves the mill, 58 Fed. Reg. at 66,109-10,
ultimately focusing, after public comment on additional data,
on two technologies, referred to as Option A and Option B.
61 Fed. Reg. 36,835, 36,838-39. In the Final Rule, Option A
was defined as conventional pulping followed by ECF bleach-
ing. 63 Fed. Reg. at 18,542. Option B did the same but
added oxygen delignification and/or extended cooking that
resulted in a kappa number at or below 20 for softwoods and
below 13 for hardwoods. Id. EPA determined that Option B
was too costly to be the BAT, naming it instead as the BADT
for new sources and naming Option A as the BAT. Id. at
18,549-53. The projected capital cost of Option B was more
than twice that of Option A (already almost $1 million) and
would result in mill closures and the likely bankruptcy of
major paper companies. Id. at 18,550. EPA further deter-
mined that imposing limitations based on Option B technology
would result in little incremental reduction in toxic pollutants
and would produce no difference in monetized water quality
benefits. See id. at 18,545; 61 Fed. Reg. at 36,841. Cf. 63
Fed. Reg. at 18,590 with 63 Fed. Reg. at 18,592. EPA did
adopt, however, an innovative Voluntary Advanced Technolo-
gy Incentives Program, which offered various benefits to
mills that installed beyond-BAT technology, such as OD plus
ECF or totally chlorine free ("TCF") processes. 63 Fed.
Reg. at 18,593-611.
EPA declined to establish separate limitations for mills
bleaching exclusively hardwood or softwood, even though
unbleached hardwood pulp contains less lignin than un-
bleached softwood pulp, in view of both the absence of
complete data on how these mills work and the difficulty of
applying separate limitations, as many mills pulp both hard-
wood and softwood in varying proportions, or swing between
the two. See, e.g., 58 Fed. Reg. at 66,167; Proposed Techni-
cal Development Document for Pulp, Paper, and Paperboard
Category Effluent Limitations Guidelines, Pretreatment
Standards, and New Source Performance Standards (Oct. 29,
1993) DCN 08517 at 2-3; STDD at 5-7. EPA also declined to
set effluent limitations for color, finding that the natural
coloring of receiving waters varies, with the result that the
aesthetic and aquatic impacts of color discharges on a particu-
lar receiving water is driven by highly site-specific conditions,
best left to regulation under federal and state permitting
procedures. 63 Fed. Reg. at 18,538.
In these appeals, the petitioners are at either extreme in
challenging the Cluster Rules under the CWA regarding the
BPK subcategory of the pulp and paper industry. Essential-
ly, NWF contends that the Final Rule is too lax, because
EPA should have based the BAT for the BPK subcategory on
Option B, technology that EPA wrongly found too costly,
while Industry Petitioners contend that the Final Rule is too
strict, moving far beyond the adoption of ECF bleaching as
the BAT and the NSPS, and thus beyond EPA's authority.
Supporting the rule, the industry association as Intervenor
points out that the Final Rule is not only the result of a
unique process involving simultaneous development of air and
water regulations, but the result of many years of research
and analysis by both EPA and the pulp and paper industry
and the result of a process in which environmental interest
groups also had substantial involvement. Who is right about
the Final Rule as it applies to BPK in an ultimate sense is not
the concern of the court.
The question before the court is limited to whether EPA
has acted arbitrarily or capriciously, or otherwise not in
accordance with law. 5 U.S.C. s 706(2)(A); see American
Iron & Steel Inst. v. EPA, 115 F.3d 979, 1004 (D.C. Cir.
1997). This standard is a narrow one, Citizens to Preserve
Overton Park, Inc. v. Volpe, 401 U.S. 402, 415-16 (1971), and
if the "agency's reasons and policy choices ... conform to
'certain minimal standards of rationality' ... the rule is
reasonable and must be upheld." Small Refiner Lead
Phase-Down Task Force v. EPA, 705 F.2d 506, 521 (D.C. Cir.
1983) (citation omitted). Furthermore, particular deference
is given by the court to an agency with regard to scientific
matters in its area of technical expertise. Baltimore Gas &
Elec. Co. v. Natural Res. Def. Council, 462 U.S. 87, 103
(1983); Appalachian Power Co. v. EPA, 249 F.3d 1032, 1051-
52 (D.C. Cir. 2001). This deference extends, moreover, to the
agency's interpretation of a statute it administers, particular-
ly in a notice and comment rulemaking context. United
States v. Mead Corp., 533 U.S. 218, 227-31 (2001); Chevron,
U.S.A., Inc. v. Natural Res. Def. Council, 467 U.S. 837, 842-
45 (1984). In Part II, we address NWF's contentions. In
Part III, we address Industry Petitioners' contentions.
In Part IV, we address Industry Petitioners' motion to
sanction NWF counsel.
II.
NWF challenges the Final Rule on seven grounds.
A.
In-plant Limitations. NWF contends that EPA lacked
the authority to define Option B in the manner that it did.
By specifying that Option B involved extended delignification
that resulted in particular kappa numbers, NWF contends
that EPA defined Option B in a way that would have imposed
in-plant limitations on regulated entities. Because, NWF
contends, EPA lacks the authority to impose such limits,
defining Option B in this way unlawfully inflated EPA's
evaluation of Option B's cost, thus invalidating its cost-driven
rejection of Option B as the BAT.
NWF's contentions are not well taken. As Intervenor
points out, NWF's contention is based on inaccurate assump-
tions about the technical basis for EPA's decision. There is
nothing in the record to suggest that EPA defined Option B
in a way that would have imposed in-plant restrictions on the
lignin content of unbleached pulp had EPA selected Option B
as the BAT technology. Rather, NWF infers such limitations
in the face of direct EPA statements to the contrary. 63 Fed.
Reg. at 18,546. EPA has an obligation to identify the tech-
nology options it is considering with sufficient particularity
that the industry to be regulated as well as environmental
groups such as NWF can review and comment upon proposed
effluent limitation guidelines and standards. See BASF
Wyandotte Corp. v. Costle, 598 F.2d 637, 644-45 (1st Cir.
1979), cert. denied, 444 U.S. 1096 (1980); Kennecott v. U.S.
EPA, 780 F.2d 445, 452-53 (4th Cir. 1985); see also Connecti-
cut Light & Power Co v. NRC, 673 F.2d 525, 530-31 (D.C.
Cir.), cert. denied, 459 U.S. 835 (1982). Consistent with its
obligation, the technology that EPA identified as Option B
involved extended delignification that pulped to particular
kappa levels for hardwoods and softwoods. However, the
effluent limitations deriving from that technology would not
have required particular mills to reach kappa numbers within
the mill prior to discharges of wastewater into external
streams, but rather would only have placed limitations on the
discharge amount of dioxin, furan, chloroform, AOX, and a
collection of chlorinated phenolic pollutants. This is evident
from the NSPS, which reflects the limitations for new sources
based on the operation of Option B technology. 40 C.F.R.
s 430.25(1) & (2). Indeed, as Intervenor points out, identify-
ing a BAT technology that included effective operation of OD
that would result in a kappa number of 20 or less for
softwood and below 13 for hardwood, 63 Fed. Reg. at 18,542,
is no different than EPA's statements that Option A and
Option B included "effective brownstock washing, i.e., wash-
ing that achieves a soda loss of less than or equal to 10 kg
Na2SO4 per ADMT of pulp (equivalent to approximately 99%
recovery of pulping chemicals from the pulp)," 100% substitu-
tion of chlorine dioxide for chlorine, and "efficient biological
wastewater treatment, achieving removal of approximately 90
percent or more of influent BOD5." Id. As EPA counsel
suggested at oral argument, because mills are not required to
employ the BAT to achieve the effluent limitations, a mill
could implement an alternative technology that would achieve
the limitations by making adjustments in other parameters
and without achieving the kappa numbers associated with
Option B. See, e.g., Effluent Limitations Guidelines, Pre-
treatment Standards, and New Source Performance Stan-
dards dards: Pharmaceutical Manufacturing Category, 60
Fed. Reg. 21,592, 21,497 (May 2, 1995) (to be codified at 40
C.F.R. pt. 439). Thus, it is apparent that no in-plant kappa
number requirements would have been imposed on mills had
Option B been selected as the BAT. Because EPA did not
establish in-plant lignin limitations, we have no occasion to
reach NWF's contention that EPA was without authority to
impose in-plant technology limitations or that EPA failed to
provide the required notice and opportunity to comment
before imposing such limitations.
NWF's claim is perplexing because it contends that EPA
erred in rejecting a technology option that according to NWF
it would have been unlawful for EPA to impose. That is,
NWF is simultaneously contending that the definition of
Option B was unlawful but that EPA should have selected it
as the BAT. NWF cannot have it both ways. If Option B
was unlawful, then EPA was right to reject it. But this is not
the case. NWF does not truly advocate the adoption of
Option B; rather, it is seeking the adoption of a non-existent
"Option C," which would embody some but not all of the
elements of Option B. EPA is not obliged to develop anew a
technology for consideration as the BAT; rather, it must
"survey the practicable or available pollution-control technolo-
gy for an industry and assess its effectiveness." E.I. du Pont
de Nemours & Co. v. Train, 430 U.S. 112, 131 (1977). That is
what EPA did here and we find no error in its definition of
Option B or its rejection as the BAT. Thus, we deny NWF's
petition to vacate EPA's identification of Option A as the
BAT.
B.
Capital Cost Estimate for Option B. NWF next con-
tends that EPA erred when it included the cost of installing
oxygen delignification ("OD") on hardwood lines in its deter-
mination of the capital costs of extended delignification tech-
nology for Option B. This is error, contends NWF, because
OD technology is only necessary on hardwood lines to achieve
a kappa number lower than thirteen, a goal that is an invalid
in-plant limitation and costs for invalid limitations cannot be
considered. Alternatively, NWF contends that if the court
does not view the kappa number requirement as an invalid in-
plant restriction, consideration of the costs of installing OD on
hardwood lines is still beyond EPA's authority because that
technology is not required for hardwood lines to meet the
effluent limitations. As a result, EPA's estimate of Option
B's capital costs was grossly inflated, contributing to its
rejection as the BAT. NWF also contends that the cost of
Option B was further inflated by EPA's wrongful decision to
use the most modern OD equipment as the basis for its
pricing analysis. NWF finally contends, in a separate line of
argument, that even if it was within EPA's authority to
consider costs not necessary to achieve the effluent limita-
tions, it was arbitrary and capricious for EPA actually to
include such costs.
We decline to reach the merits of NWF's cost estimate
challenges because neither NWF nor any other party before
the agency raised any of these contentions during the admin-
istrative phase of the rulemaking process. It is well estab-
lished that issues not raised in comments before the agency
are waived and this Court will not consider them. E.g. Nat'l
Elec. Mfrs. Ass'n v. EPA, 99 F.3d 1170, 1171 n.1 (D.C. Cir.
1997); Washington Ass'n for Television & Children v. FCC,
712 F.2d 677, 681 (D.C. Cir. 1983). Further, this principle
does not apply only to newly raised factual issues as NWF
suggests. Indeed, there is a near absolute bar against raising
new issues--factual or legal--on appeal in the administrative
context. Appalachian Power Co. v. EPA, 251 F.3d 1026,
1036 (D.C. Cir. 2001).
Although neither NWF nor any other party raised the
issue that the cost of OD technology for all mills should not
be included in the Option B cost estimates or that the
assumption that modern equipment would be installed was
improper, NWF attempts to justify its acknowledged failure
to raise these issues by stating that "EPA did not provide any
notice or opportunity to comment on its inclusion of costs to
meet an in-plant limitation" and "the NWF Petitioners could
not have known that EPA would impose any such in-plant
limitation after they submitted their comments." This claim
is patently false. In its BAT and Best Management Practices
("BMP") Compliance Cost Estimates Report, EPA clearly
states, "Option B employs reduction of the lignin content of
the unbleached pulp through oxygen delignification (OD),
extended cooking (EC), or both. These extended pulping
technologies result in a typical kappa number of approximate-
ly 15 for softwood and 10 for hardwood." EPA went on to
itemize the cost of Option B with reference to the individual
component technologies that comprise that Option in Table
2-8 of the same report. In this Table, two separate line items
under the headings of "Capital Cost Component" and "Oper-
ating Cost Component" are entitled "Kappa Reduction (OD/
EC)." Those line items report costs for this component as
not applicable ("N/A") to Option A and exceeding a total of
$1.5 billion for Option B. Thus, NWF had notice that EPA
was including OD technology in Option B, that it expected
this technology to apply to both softwoods and hardwoods,
and that the cost of OD technology was a component of the
total cost of Option B. As a result, NWF's claim of no notice
is meritless and it is left with no circumstance excusing its
failure to raise the issue. The cases on which NWF relies are
to no avail. Darby v. Cisneros, 509 U.S. 137 (1993), address-
es exhaustion of administrative remedies, not waiver of
claims, and is thus wholly inapposite; Nat'l Ass'n of Mfrs. v.
Department of the Interior, 134 F.3d 1095 (D.C. Cir. 1998), is
directly contrary to NWF's position that it has not waived its
OD cost claims, stating that "Our cases ... require complain-
ants, before coming to court, to give the [agency] a fair
opportunity to pass on a legal or factual argument." Id. at
1111 (quoting Washington Ass'n for Television & Children v.
FCC, 712 F.2d 677, 681 (D.C. Cir. 1983)). We thus hold that
NWF has waived the OD costing issues and decline to pass
on their merits.
C.
Failure to Explain the Reasonableness of EPA's Eco-
nomic Assessment of Option B. NWF next contends that
EPA's rejection of Option B was arbitrary and capricious
because EPA failed to demonstrate the reasonableness of its
assessment that Option B is not affordable by the bleach
paper kraft subcategory as a whole. Because "we do not
review EPA's cost figuring de novo, but accord EPA discre-
tion to arrive at a cost figure within a broad zone of reason-
able estimate," Weyerhauser Co. v. Costle, 590 F.2d 1011,
1049 (D.C. Cir. 1978), in view of the complex nature of
economic analysis typical in the regulation promulgation pro-
cess, NWF's burden to show error is high. As the Fourth
Circuit put it, "While EPA must take seriously its statutory
duty to consider cost, courts of review should be mindful of
the many problems inherent in an undertaking of this nature
and uphold a reasonable effort made by the Agency." FMC
Corp. v. Train, 539 F.2d 973, 979 (4th Cir. 1976). Thus, when
reviewing economic analyses of EPA, "a court's 'inquiry will
be limited to whether the Agency considered the cost of
technology, along with the other statutory factors, and wheth-
er its conclusion is reasonable.' " Chem. Mfrs. Ass'n v. EPA,
870 F.2d 177, 250 (5th Cir. 1989) (quoting Ass'n of Pacific
Fisheries, 615 F.2d 794, 818 (9th Cir. 1980)). The court
should not "undertake its own economic study, but must
uphold the regulations if EPA has established in the record a
reasonable basis for its decision." Kennecott v. EPA, 780
F.2d 445, 456 (4th Cir. 1986); accord Chem. Mfrs., 870 F.2d
at 251.
NWF contends that EPA's economic analysis was inade-
quate because it failed to give sufficient specifics to support
the reasonableness of its conclusions regarding economic
impact. Reference to EPA's duties under statutory and case
law with respect to cost assessments reveal that this conten-
tion is without merit. EPA is statutorily required to take
into account the cost of achieving effluent reduction. 33
U.S.C. s 1314(b)(2)(B). However, the court has interpreted
this statute to mean that "the Agency need not on its own
undertake more than a net cost-benefit balancing to fulfill its
obligation under section 304." Weyerhaeuser Co. v. Costle,
590 F.2d 1011, 1048 (D.C. Cir. 1978). Although its analysis
may be general, EPA "has the heaviest of obligations to
explain and expose every step of its reasoning." American
Lung Ass'n v. EPA, 134 F.3d 388, 392 (D.C. Cir. 1998). This
duty to explain arises out of the need for reviewing courts to
be able to discern the basis for EPA's decision. Id.
In view of our deferential standard of review it is not
difficult to conclude that NWF's contentions regarding EPA's
cost analysis must fail. NWF's chief contention is that "EPA
failed ... to substantiate its claim by specifying the identity
of the 'large' firm or firms, how large the firm or firms are, or
the number of mills in the BPK subcategory owned by the
firm or firms." NWF Petitioner's Br. at 37. This is not the
type of contention that will topple an EPA cost assessment,
particularly in the context of an economic analysis as thor-
ough and considered as the one EPA undertook in the instant
rulemaking. EPA provided a detailed explanation of the
bases for its economic conclusions both in the Federal Regis-
ter, 63 Fed. Reg. 18,549-51, and in the accompanying report
entitled "Economic Analysis for the National Emission Stan-
dards for the Hazardous Air Pollutants for Source Category:
Pulp and Paper Production--Phase I (Oct. 27, 1997)" ("Eco-
nomic Analysis").
Specifically, EPA articulated its methodology, applied it to
industry data, and presented the results in verbal and tabular
form making clear the information upon which EPA based its
conclusion that Option B's costs were too high. In the
Economic Analysis EPA explains that compliance costs in-
cluded both capital costs and annual operating costs. EPA
described its market impact analysis methodology under
heading 3.2 of that report, explaining that it used elasticities
to estimate market price increases and factored those into the
financial and economic analysis. Financial impact was de-
scribed as encompassing facility closure, employment, and
output impacts resulting from compliance costs. As EPA
explained, if "the present value of post-compliance net earn-
ings is less than the salvage value of the mill ... the mill is
projected to close because closure is more economically ad-
vantageous to the owner." EPA went on to explain that
"[w]hen the closure analysis projects a facility closure, all
employment, production, and exports reported for the facility
are considered lost." Regarding bankruptcy analysis, EPA
explained that it would use the Altman Z-score analysis,
comparing pre- and post-compliance Z-scores and determin-
ing that a score dropping below 1.81 was indicative of a
compliance-induced bankruptcy.
EPA applied this methodology to reach several conclusions,
which it presented in the Economic Analysis report. It
concluded that for the 29 public companies with facilities
regulated by the BAT, "the final BAT/PSES option [Option
A] results in no additional bankruptcies" while "[o]ne or more
companies move into the 'bankruptcy likely' category with
BAT/PSES Option B." EPA then went on to outline the
many adverse economic consequences associated with bank-
ruptcy which rendered any option that induced bankruptcy an
economically unachievable alternative under the statute. See
33 U.S.C. s 1311 (b)(2)(A), (C), (D) & (F). Regarding facility
closures, EPA determined that Option B would have twice the
adverse impact of Option A, resulting in two plant closures, a
loss of $273 million worth of shipments, $19 million in exports,
and 900 jobs. The differences between Options A and B were
exacerbated when compliance costs of the entire Cluster
Rules were analyzed; Option B in conjunction with the air
quality regulations would result in 4 plant closures, lost
shipments of $1.3 billion, $24 million in lost exports, and a loss
of 4,800 jobs. This is compared to two plant closures, a loss
of $273 million worth of shipments, $19 million in exports, and
900 jobs associated with the compliance costs of Option A
combined with the air quality standards.
This description of how EPA applied its methodology con-
stitutes just a portion of the detailed economic and financial
analysis conducted and presented by EPA. This analysis
hardly arises to a failure to explain "the reasonableness of its
assessment that Option B is not affordable by the BPK
subcategory as a whole" as NWF contends. EPA sufficiently
fulfills its duty to explain when it makes an "attempt at
explanation or justification" sufficient to provide the review-
ing court with a "way to know the agency's methodology."
Engine Mfrs. Ass'n v. EPA, 20 F.3d 1177, 1182 (D.C. Cir.
1994). Here, EPA offered a thorough explanation and the
court hardly has to "guess at the theory underlying the
agency's action." SEC v. Chenery Corp., 332 U.S. 194, 196-97
(1947). Indeed, EPA's "theory" is clear: Option B costs a
certain amount, that cost renders facility closure a more
economically advantageous option, and facility closures result
in the loss of jobs and output formerly associated with those
plants.
Furthermore, any ambiguity in EPA's analysis is unrelated
to the methods, rationales, or assumptions of its analysis.
Rather, the ambiguity in the analysis and complained of by
NWF relates to the specific identities of the firms adversely
impacted in the manner that EPA predicts. Such ambiguity
is insufficient to undermine the explanatory value of EPA's
analysis for two reasons. First, because much of the firm-
specific information NWF seeks constitutes protected confi-
dential business information ("CBI") that may not be publicly
disclosed, EPA cannot be faulted for keeping such informa-
tion confidential. See 33 U.S.C. s 1318(b). Second, the
provision of the identity of the specific firms at risk of
bankruptcy--either through naming or through the sharing
of sufficient descriptive information to allow interested per-
sons to figure out the identity--is not a requisite of an
adequately explained economic analysis because a plant-by-
plant analysis is not required under the statute. Chem. Mfrs.
Ass'n v. EPA, 870 F.2d 177, 219 n.157 (5th Cir. 1989). EPA
need only be concerned with the nature of the impact on the
industry as a whole. Id. at 238.
In sum, EPA has provided more than an adequate explana-
tion of its economic analysis. EPA determined through
methods it clearly described that a certain number of bank-
ruptcies and plant closures would occur under Option B.
EPA then determined that such economic impact rendered
Option B economically unachievable. Whether Firm A or
Firm Z was the firm involved in the potential bankruptcy or
plant closure would not alter the outcome that those bank-
ruptcies and closures would occur. The court will not second-
guess EPA's analysis nor "undertake [its] own economic
study"; rather, the court must "uphold the regulations if
EPA has established in the record a reasonable basis for its
decision." Kennecott v. EPA, 780 F.2d 445, 456 (4th Cir.
1986). A reasonable basis exists here. We thus hold that
EPA's analysis was sufficiently detailed to provide an under-
standing of the basis of its decision and that EPA's conclusion
that Option B was not economically achievable was not arbi-
trary and capricious.
D.
Altman Bankruptcy Model. NWF next asserts EPA
erred in using Edward I. Altman's Z-score analysis to predict
the likely incidence of bankruptcies in the cost analysis of
Option B. We may reject an agency's choice of a scientific
model "only when the model bears no rational relationship to
the characteristics of the data to which it is applied." Appa-
lachian Power Co. v. EPA, 135 F.3d 791, 802 (D.C. Cir. 1998)
(citing Am. Iron & Steel Inst. v. EPA, 115 F.3d 979, 1005
(D.C. Cir. 1997); Chem. Mfrs. Ass'n v. EPA, 28 F.3d 1259,
1265 (D.C. Cir. 1994)). That is not the case here.
NWF contends EPA's use of the Altman model is arbitrary
and capricious because (1) the model has become outdated
since its adoption in 1968, (2) it was devised to predict
bankruptcies of companies smaller than those involved here,
(3) it has an error rate of at least 15% and (4) in applying it,
EPA collected data from only a single year. We reject each
objection in turn. First, as recently as 1993 Altman con-
firmed the model's continuing reliability, noting it had been
"quite accurate over these last 25 years and remains an
objective, established tool." See Edward I. Altman, Corpo-
rate Financial Distress and Bankruptcy 179 (2d ed. 1993).
Second, as EPA points out, Altman himself has cited the
financial decline of LTV Corp., International Harvester and
Chrysler Corp., all large companies, to illustrate the accuracy
of his Z-score analysis. Id. at 197-99, 201-02. Third, the
15% inaccuracy rate does not seem so large as to call into
question the model's reliability, especially given that the
decision to enter bankruptcy vel non can be influenced by
factors other than mere financial distress. See id. at 197
(characterizing "bankruptcy" as "a behavioral event" that
"manifests due to the combined 'efforts' of an ineffective firm
and its management and the decision on the part of creditors
to try to recover their investment within the confines of the
Bankruptcy Code"). Finally, although Altman recommended
gathering multi-year data, he recognized that this might not
always be practical and so admonished that "[t]he analyst
interested in practical utilization of the Z-score model is
therefore advised to be careful." Id. at 206.
E.
No Limits for Color. Next, NWF challenges EPA's deci-
sion not to establish nationwide standards for discharge of
"color." EPA determined instead that color pollution should
be "dealt with on a case-by-case basis through individual
[National Pollutant Discharge Elimination System] permits
or, when appropriate, through local limits." 63 Fed. Reg. at
18,538. NWF contends EPA lacks authority to address the
problem of color pollution piecemeal but is required by sec-
tion 301(b)(2) of the CWA to establish a single, national
standard. We believe EPA acted both reasonably and within
its authority in adopting a case-by-case approach.
Section 301(b)(2) of the CWA governs standards for pollu-
tants such as color:
[T]here shall be achieved--
...
(2)(A) for pollutants identified in subparagraphs (C), (D),
and (F) of this paragraph,1 effluent limitations for catego-
ries and classes of point sources, other than publicly
owned treatment works, which (i) shall require applica-
tion of the best available technology economically achiev-
able for such category or class, which will result in
reasonable further progress toward the national goal of
eliminating the discharge of all pollutants, as determined
in accordance with regulations issued by the Administra-
tor pursuant to section 1314(b)(2) of this title, which such
effluent limitations shall require the elimination of dis-
charges of all pollutants if the Administrator finds, on
the basis of information available to him (including
information developed pursuant to section 1325 of this
title), that such elimination is technologically and eco-
nomically achievable for a category or class of point
sources as determined in accordance with regulations
issued by the Administrator pursuant to section
1314(b)(2) of this title....
33 U.S.C. s 1311(b)(2)(A) (footnote and emphasis added).
EPA found below that elimination of discharge is not "techno-
logically and economically achievable" for color pollutants as a
category or class but, to the contrary, that a case-by-case
approach was necessary because "[t]he potential for signifi-
cant aesthetic or aquatic impacts from color discharges is
driven by highly site-specific conditions." 63 Fed. Reg. at
18,538.2 In light of this finding, EPA's decision does not
__________
1 Color is among the "pollutants identified in subparagraph[ ] ...
(F)," the catchall subparagraph for all pollutants not identified in
subparagraph (C), (D) or (E).
2 EPA has long adhered to this position, which it explained more
fully in a 1982 rulemaking:
conflict with its statutory responsibilities under section
301(b)(2) and its decision to handle color on a case-by-case
basis must be upheld as reasonable. Cf. Maier v. EPA, 114
F.3d 1032 (10th Cir.), cert. denied, 522 U.S. 1014 (1997)
("When we apply the deference due an administrative agency
which Chevron mandates, '[t]he permissive nature of the
statute implies broad agency discretion in selecting the appro-
priate manner of regulation.' EPA's position that the statute
allows the agency to impose limits for [nitrogenous biochemi-
cal oxygen demand] on a case-by-case basis through the
permitting process is a reasonable and permissible reading of
the statute, to which we must defer.") (quoting Professional
Drivers Council v. Bureau of Motor Carrier Safety, 706 F.2d
1216, 1221 (D.C. Cir. 1983)).
III.
Next we consider, and reject, each of the challenges raised
by Industry Petitioners.
A.
AOX Limits. Industry Petitioners first challenge EPA's
decision to set limits on the discharge of AOX and to require
daily monitoring of AOX levels. For the following reasons,
we conclude EPA's decision was within its authority and not
arbitrary or capricious.
__________
The Agency is withdrawing the existing effluent limitations and
standards for color and we are not establishing any new ones
based on our evaluation that color is not a pollutant of national
significance in this industry. In some cases, it has been shown
that color can interfere with light transmission and the process
of photosynthesis in the aquatic environment. However, in
most instances, color is simply an aesthetic pollutant. Thus,
EPA no longer believes that color is a pollutant of uniform
national concern in this industry.
Pulp, Paper, and Paperboard and the Builders' Paper and Board
Mills Point Source Categories Effluent Limitations Guidelines, Pre-
treatment Standards, and New Source Performance Standards, 47
Fed. Reg. 52,006, 52,014 (1982).
Industry Petitioners complain EPA should not have im-
posed AOX limits because AOX is not itself harmful and it is
a poor predictor of the presence of chlorinated pollutants that
are harmful, notably dioxin and furan. The petitioners ex-
plain that because ECF bleaching reduces the amount of
dioxin and furan, which make up only a small percentage of
total AOX,3 much more quickly than it reduces other AOX
components, AOX levels in treated wastewater do not accu-
rately reflect the remaining levels of dioxin and furan. In-
dustry Petitioners may be correct that AOX is not a good
surrogate for dioxin and furan but EPA does not justify the
AOX limits on the basis that it is. EPA proposes AOX limits
and testing as a means to monitor BAT/NSPS technological
compliance at a mill and thereby to indirectly ensure reduc-
tion of dioxin and furan levels through compliance. EPA
notes this method is both less expensive than the alternative
of daily measuring the specific chlorinated pollutants, see 63
Fed. Reg. at 18,537 ("monitoring for AOX as required in
today's rule is considerably less expensive" than monitoring
for dioxin, furan, chloroform and the 12 regulated chlorinated
phenolic pollutants), and more effective as well, see 63 Fed.
Reg. at 18,537 ("[T]he presence of AOX can be readily
measured in mill effluent, in contrast to the presence of many
of the chlorinated organic compounds regulated in today's
rule, which for the most part are likely to be present at levels
that cannot be reliably measured by today's analytical meth-
ods."); "Justification for Establishing Limitations and Stan-
dards for AOX" 1 ("Limitations on AOX provide much more
certainty than monitoring directly for [dioxin and furan]
because AOX is detectable when [dioxin and furan] concentra-
tions are below the analytical method minimum level.").
In response, Industry Petitioners do not dispute that meas-
uring AOX levels is an effective means of monitoring BAT
and NSPS compliance. They do, however, cite cheaper alter-
natives they contend will also be effective. First, they sug-
gest EPA could rely on weekly or monthly testing which
__________
3 AOX "is a measure of the total chlorinated organic matter in
wastewaters." 63 Fed. Reg. at 18,537.
would adequately determine compliance. EPA reasonably
concluded below, however, that daily testing is required to
ensure consistent and effective treatment; otherwise a mill
could switch its bleaching chemicals between testings. See
id. at 14 (With only monthly monitoring, "there is nothing to
stop a mill running with some chlorine, and switching to ClO2
bleaching for a few days prior to the day that [dioxin and
furan] are monitored."). Second, Industry Petitioners sug-
gest EPA could simply authorize mills to "certify" that they
are in compliance in lieu of testing. EPA responds, again
reasonably, that certification will not prevent treatment laps-
es attributable to human error.
B.
Definition of "New Source." Industry Petitioners next
contend that EPA unreasonably broadened the existing defi-
nition of "new source" by designating supplemental fiber lines
as "new sources" in the Rule's preamble, and thereby subject-
ing supplemental fiber lines to Option B technology under the
New Source Performance Standard ("NSPS"). We conclude,
as did the relevant parties at oral argument, that this argu-
ment is "much ado about nothing" given the language of the
regulatory text.
Section 306 of the Act defines a "new source" as "any
source, the construction of which is commenced after the
publication of proposed regulations prescribing a standard of
performance under this section which will be applicable to
such source, if such standard is thereafter promulgated in
accordance with this section." 33 U.S.C. s 1316(a)(2); see
also 40 C.F.R. s 122.2 (general definition of "new source" for
direct dischargers). A "source" is defined as "any building,
structure, facility, or installation from which there is or may
be the discharge of pollutants." 33 U.S.C. s 1316(a)(3); 40
C.F.R. s 122.29(a)(2). If a source is designated as a "new
source," then it must adhere to the NSPS.
In 1984, EPA promulgated a final rule which made it clear
that the NSPS applies only to sources that meet the "new
source" definition in 40 C.F.R. s 122.2, as well as one of the
following three criteria: (i) it is constructed at a site at which
no other source is located (i.e., a greenfield site); (ii) it totally
replaces the process or production equipment that causes the
discharge of pollutants at an existing source; or (iii) its
processes are substantially independent of an existing source
at the same site. 40 C.F.R. s 122.29(b)(1). If new construc-
tion does not satisfy 40 C.F.R. s 122.2 and one of the three
criteria set forth in 40 C.F.R. s 122.29(b)(1), then the con-
struction is generally classified as a "modification" and is not
subject to the NSPS.
The 1984 rule also included two factors to assist in deter-
mining whether new processes are "substantially indepen-
dent" from an existing source under 40 C.F.R.
s 122.29(b)(1)(iii). See National Pollutant Discharge Elimina-
tion System Permit Regulations, 49 Fed. Reg. 37,998, 38,043
(1984). The first factor examines the degree to which new
processes are integrated with existing ones. "Under this first
factor, if the new facility is fully integrated into the overall
existing plant, the facility will not be a new source....
However, on the other extreme, if the only connection be-
tween the new and old facility is that they are supplied
utilities such as steam, electricity, or cooling water from the
same source or that their wastewater effluents are treated in
the same treatment plant, then the new facility will be a new
source." 49 Fed. Reg. at 38,043. The second factor is
whether and to what extent "the construction results in
facilities or processes that are engaged in the same general
type of activity as the existing source." Id. This factor looks
to whether "the proposed facility is engaged in a sufficiently
similar type of activity as the existing source," in which case
the facility "will not be treated as a new source." Id.
In the Cluster Rules, EPA promulgated a new definition of
"new source" for pulp and paper mills in the bleached paper-
grade kraft and soda and papergrade sulfite subcategories.
See 40 C.F.R. s 430.01(j). This new definition completely
adopted the three criteria from the general definition in Part
122 (compare 40 C.F.R. s 122.29(b)(1)(i), (ii) & (iii) with 40
C.F.R. s 430.01(j)(1)(i), (ii) & (iii)). It also clarified the
second criterion by stating that the "total replacement of a
fiber line" could trigger a new source determination. Com-
pare 40 C.F.R. s 430.01(j)(1)(ii) with 40 C.F.R.
s 122.29(b)(1)(ii); see also National Emission Standards for
Hazardous Air Pollutants for Source Category: Pulp and
Paper Production, 63 Fed. Reg. 18,504, 18,552 (1998). EPA
thus specifically identified a particular type of construction
that would trigger a new source determination under 40
C.F.R. s 430.01(j)(1)(ii). EPA also explained in the Rule's
preamble that a "new fiber line built to supplement an
existing fiber line" would be considered a "substantially inde-
pendent" source within the meaning of 40 C.F.R.
s 430.01(j)(1)(iii), and would consequently be considered a
"new source" subject to the NSPS. See 63 Fed. Reg. at
18,552, 18,567-68; 40 C.F.R. s 430.01(j)(1)(iii). EPA did not,
however, incorporate this concept into the regulatory text of
40 C.F.R. s 430.01(j)(1)(iii); s 430.01(j)(1)(iii) remains identi-
cal to s 122.29(b)(1)(iii). Moreover, EPA made clear in its
Response to Comments that its new definition was not intend-
ed to include as a new source any new facilities that "would
not otherwise be captured by the current definition of new
source at 40 C.F.R. 122.29(b)(1)." EPA also explained during
oral argument that while the preamble states an "expecta-
tion" regarding supplemental fiber lines based on the evi-
dence in the record, the "new source" definition was not
intended to be inconsistent with its earlier definition.
Despite the unchanged language from s 122.29(b)(1)(iii) to
s 430.01(j)(1)(iii), Industry Petitioners and EPA devote signif-
icant portions of their briefs to arguing whether supplemental
fiber lines are "substantially independent" such that they fit
the definition of "new source," and, consequently, whether
they should be subject to the NSPS. Industry Petitioners
argue that, through the Final Rule's preamble, EPA has
created an irrebuttable presumption that all supplemental
fiber lines are "substantially independent" from existing
sources and therefore subject to the NSPS. Industry Peti-
tioners further argue that EPA cannot, as a matter of law,
make that presumption. EPA must instead make indepen-
dent determinations of supplemental fiber lines based on the
two factors in the "substantially independent" test. At oral
argument, Industry Petitioners stated that they would not
object to the new source definition if we found that such an
irrebuttable presumption was inappropriate, and instead re-
lied on the "substantially independent" test for new source
determinations.
We find that EPA did not establish an irrebuttable pre-
sumption that supplemental fiber lines are new sources under
the Final Rule. Consequently, Industry Petitioners' objec-
tion to the "new source" definition is moot. The definition of
"new source" included in the text of the Final Rule as it
pertains to supplemental fiber lines is altogether unchanged
from EPA's earlier definition of "new source." To the extent
the preamble suggests a change in EPA's "new source"
determinations, that suggestion is rejected. The preamble to
a rule is not more binding than a preamble to a statute. "A
preamble no doubt contributes to a general understanding of
a statute, but it is not an operative part of the statute and it
does not enlarge or confer powers on administrative agencies
or officers." Ass'n of American R.Rs. v. Costle, 562 F.2d
1310, 1316 (D.C. Cir. 1977) (citing Yazoo Railroad Co. v.
Thomas, 132 U.S. 174, 188 (1889)). "Where the enacting or
operative parts of a statute are unambiguous, the meaning of
the statute cannot be controlled by language in the pream-
ble." Id. Section 430.01(j)(1)(iii) (the section applicable to
supplemental fiber lines) remains unchanged from EPA's
earlier "new source" definition set forth in 40 C.F.R.
s 122.29(b)(1)(iii). When we examine the text of 40 C.F.R.
s 430.01(j)(1)(iii), together with EPA's statements both in its
Response to Comments and during oral argument that it did
not intend to change the definition of 40 C.F.R.
s 122.29(b)(1), there is nothing left of the Industry Petition-
ers' objection to the "new source" definition. Permitting
authorities will continue to make "new source" determinations
using the regulatory text and the two factors of the "substan-
tially independent" test identified by EPA to assist in making
such determinations--criteria that have not been changed in
any fundamental respect from EPA's earlier rule. In short,
EPA did not act arbitrarily or capriciously in promulgating its
"new source" definition.
C.
Selection of Option B Technology for "New Sources."
Industry Petitioners next challenge EPA's decision to adopt
Option B technology as the NSPS. See 63 Fed. Reg. at
18,553. Industry Petitioners object to Option B on two
grounds: 1) extended cooking/oxygen delignification will only
result in measurable decreases in AOX, not known pollutants;
and 2) in light of EPA's "new source" definition applying to
supplemental fiber lines, Option B's cost is not justified.
We addressed, and dismissed, Industry Petitioners' first
argument under our discussion of "AOX Limits," supra, and
we need not repeat our analysis here. As for Industry
Petitioners' second argument, we find that much of it results
from their assumption that the Rule's preamble language
creates an "irrebuttable presumption" that supplemental fiber
lines will be considered new sources under the Final Rule.
We dismissed this assumption under our previous section,
noting that it is the language of the regulatory text, and not
the preamble, that controls. To the extent that construction
of a supplemental fiber line meets the long-held and un-
changed criteria of the "substantially independent" test (and
thus constitutes a "new source"), then that supplemental fiber
line would be subject to Option B technology--as would any
"new source" construction.
In any event, EPA's economic analysis concerning Option B
technology for the NSPS was not arbitrary or capricious.
First, appellate courts give EPA considerable discretion to
weigh and balance the various factors required by statute to
set NSPS. See, e.g., BP Exploration & Oil, Inc. v. EPA, 66
F.3d 784, 802 (6th Cir. 1995). "The CWA does not state what
weight should be accorded to the relevant factors; rather, the
Act gives EPA the discretion to make those determinations."
Id. Second, as Industry Petitioners concede, section 306
requires that, when setting the NSPS, the Administrator
must take costs into consideration, but does not require that
she conduct a cost-benefit analysis. "[T]he Administrator
must inquire into the initial and annual costs of applying the
technology and make an affirmative determination that those
costs can be reasonably borne by the industry." Chem. Mfrs.
Ass'n v. EPA, 870 F.2d 177, 262 (5th Cir. 1989); see also CPC
Int'l, Inc. v. Train, 540 F.2d 1329, 1341 (8th Cir. 1976)
("There is no language in s 306 requiring a cost-benefit
analysis. Rather, EPA is required only to take costs under
'consideration.' We conclude, therefore, that a cost-benefit
analysis is not required in determining the reasonableness of
the cost of achieving the new source standards."). Section
306(b)(1)(B) requires only that "[i]n establishing or revising
Federal standards of performance for new sources ... the
Administrator shall take into consideration the cost of achiev-
ing such effluent reduction, and any non-water quality envi-
ronmental impact and energy requirements." 33 U.S.C.
s 1316(b)(1)(B). This EPA has done.
After conducting its economic analysis, EPA rejected Op-
tion B technology for existing sources because EPA conclud-
ed it would cause severe economic disruption that could not
be reasonably borne by the pulp and paper industry. See 63
Fed. Reg. at 18,550-51. With respect to its cost analysis at
new sources, EPA concluded that "[t]he incremental capital
cost of complying with the selected NSPS for all pollutants,
as compared to the costs of complying with the standards
based on the next best technology, BAT Option A, is only .5
to 2.0% of the total capital cost of constructing either a new
source fiber line at an existing mill or a new greenfield mill."
63 Fed. Reg. at 18,553. Thus implementing Option B tech-
nology would only increase the costs of constructing a new
mill or fiber line by 0.5% to 2%. As such, EPA concluded
that the cost of implementing Option B technology for new
sources was reasonable. Indeed, Industry Petitioners con-
cede that this economic analysis alone would likely satisfy
section 306. Industry Petitioners instead take issue with the
perceived "irrebuttable presumption" concerning supplemen-
tal fiber lines set out in the Rule's preamble. Such a pre-
sumption, argues Industry Petitioners, renders EPA's eco-
nomic analysis arbitrary and capricious because EPA "failed
to take into account the tremendous cost of retrofitting
existing mills to accommodate the Option B technology as
required under the expanded definition of new source." Ac-
cording to Industry Petitioners, existing mills will, in fact, be
required to implement Option B technology--at a cost that
EPA has already found to be prohibitive.
Industry Petitioners' argument depends on an expanded
definition of "new source." Without reliance on the expanded
definition, Industry Petitioners have already conceded that
EPA's economic analysis will likely pass judicial review.
They are correct. And because we have already rejected the
"expanded definition" of "new source" (drawn from the Rule's
preamble) in favor of the existing definition of "new source"
(based on the traditional "substantially independent" test), we
find no merit to Industry Petitioners' argument challenging
EPA's economic analysis.
D.
Monthly Effluent Limitations. Industry Petitioners next
object to EPA's decision to set the monthly maximum effluent
limitation at the 95th percentile of the distribution of monthly
measurements rather than the 99th percentile. For the
reasons that follow, we find that EPA did not act arbitrarily
or capriciously in setting the monthly limitation at the 95th
percentile.
EPA monitors a mill's discharge of pollutants by setting
and monitoring daily and monthly standards of performance
that mills must achieve. The Cluster Rules require plants to
achieve effluent limitations that are based on the proper
operation of mills using the model technologies. According to
EPA, "limitations ... are numerical values that are bounds
on the amounts of pollutants that may be discharged and are,
in effect, measures of how well the production processes and
wastewater treatment systems must be operated." The daily
maximum limitation is a restriction on the amount of pollutant
in any one daily sample. The type of limitation at issue here,
the monthly average limitation, is a restriction on the average
of daily measurements taken during a month.
Briefly, the limitations are derived using the following
process: EPA determines an average performance level, or
long-term average, that a well-designed mill using the model
technologies can achieve. Recognizing variability among
treatment processes, pollutant concentrations, sampling, and
analysis, EPA incorporates "variability factors" into the limi-
tations to account for these sources of variability. Because
the variability factors for the Cluster Rules were derived
from mills using the model technologies, EPA asserts that the
effluent limitations "already account for any reasonable varia-
bility likely to occur and thus well operated mills implement-
ing technologies representing the appropriate levels of control
will be capable of compliance at all times." EPA then
calculates limitations based on percentiles using the products
of long-term averages and variability factors. The chosen
percentiles are intended to accommodate reasonably antici-
pated variability within the mill's control while at the same
time reflect a level of performance consistent with BAT and
BADT.
EPA has consistently used the 99th percentile of the distri-
bution of daily measurements as the basis for daily maximum
limitations, and has at times used the 99th percentile of the
distribution of monthly averages as the basis for monthly
average effluent limitations. In its Cluster Rules, EPA set
the daily maximum limitation for BAT technology at the 99th
percentile, and it set the monthly maximum limitation for
BAT technology at the 95th percentile. Industry Petitioners
argue that EPA deviated from past precedent by setting the
monthly average limitations at the 95th percentile rather than
the 99th percentile, and that EPA has designed a system that
ensures a well-operated mill using the model technologies will
exceed the monthly average limitations 5% of the time.
We reject Industry Petitioners' arguments and uphold
EPA's decision to set the monthly average limitation at the
95th percentile. EPA has considerable discretion in deter-
mining a technical approach that will ensure that effluent
limitations reasonably account for expected variability in
plant operations while still maintaining an effective level of
control. See Weyerhaeuser Co. v. Costle, 590 F.2d 1011,
1056-58 (D.C. Cir. 1978). While EPA set monthly average
limitations at the 99th percentile for the pulp and paper
industry in 1982 and 1986 rulemakings for Best Practicable
Technology ("BPT") and Best Conventional Technology
("BCT"), Industry Petitioners ignore the fact that after those
rule-makings, EPA determined, "as a matter of policy, that
the 95th percentile was a more appropriate choice for month-
ly average limitations in all industrial effluent guidelines
rulemakings because the variability of monthly averages is
less than the variability of daily measurements." EPA has
followed that policy in developing monthly average limitations
in all effluent guidelines rulemakings since 1987. It was
neither arbitrary nor capricious for EPA to continue that
policy here.
EPA carefully explained that its purpose in setting the
monthly average limitations at the 95th percentile was to
ensure that a mill achieves the long-term average effluent
levels. EPA explained that the daily maximum limitations
are set at a higher percentile level to account for the greater
variability expected from daily measurements. But consis-
tent compliance with the daily maximum limitation alone
would not ensure compliance with the long-term average.
Continuous operation at or near the daily maximum would in
fact result in discharges that exceed the long-term average.
Likewise, setting monthly limitations at the 99th percentile
would not insure that the long-term average is met. EPA
therefore set the monthly average limitation at a lower level
to ensure that mills operate more closely around the long-
term average. EPA reasonably anticipated that, because
monthly average limitations are based on averages of more
than one daily measurement, less variability would be present
in monthly measurements than in daily measurements. As
EPA observed in its Response to Comments: "In establishing
monthly average limitations, EPA's objective is to provide an
additional restriction that supports EPA's objective of having
facilities control their average discharges at the long-term
average. The monthly average limitation requires continuous
dischargers to provide on-going control, on a monthly basis,
that complements controls imposed by the daily maximum
limitation. In order to meet the monthly average limitation,
a facility must counterbalance a value near the daily maxi-
mum limitation with one or more values well below the daily
maximum limitation. To achieve compliance, these values
must result in a monthly average value at or below the
monthly average limitation."
Industry Petitioners argue that even if they employ the
model technologies, they will still exceed the monthly average
limitations five percent of the time. The "fundamental flaw"
in using the 95th percentile, according to Industry Petition-
ers, is EPA's assumption that variability of discharges can be
adequately controlled through quality control of plant pro-
cesses and treatment procedures. They argue that not all
variances or exceedances will result from improper quality
control or treatment procedures, and cite the presence of two
elevated levels of chlorinated phenolic compounds recorded
by mills using the model technologies. We reject this argu-
ment. First, EPA did not establish monthly average limita-
tions for chlorinated phenolic compounds. The relevance of
this argument by Industry Petitioners is therefore unclear.
Second, Industry Petitioners completely ignore the "upset
provision" that is available should an exceedance arise due to
an unforeseen or unexplainable event. If such an event
occurs, operators may raise this "upset defense" as an affir-
mative defense in an enforcement action. See 40 C.F.R.
s 122.41(n).
EPA's approach to developing monthly limitations was
reasonable. It established limitations based on percentiles
achieved by facilities using well-operated and controlled pro-
cesses and treatment systems. It is therefore reasonable for
EPA to conclude that measurements above the limitations are
due to either upset conditions or deficiencies in process and
treatment system maintenance and operation. EPA has in-
cluded an affirmative defense that is available to mills that
exceed limitations due to an unforeseen event. EPA reason-
ably concluded that other exceedances would be the result of
design or operational deficiencies. EPA rejected Industry
Petitioners' claim that facilities are expected to operate pro-
cesses and treatment systems so as to violate the limitations
at some pre-set rate. EPA explained that the statistical
methodology was used as a framework to establish the limita-
tions based on percentiles. These limitations were never
intended to have the rigid probabilistic interpretation that
Industry Petitioners have adopted. Therefore, we reject
Industry Petitioners' challenge to the effluent limitations.
IV.
Motion for Sanctions. As a final matter, we consider
Industry Petitioners' motion to sanction NWF counsel. A
summary of the events leading up to Industry Petitioners'
motion is included below.
EPA, acting under its authority in 33 U.S.C. s 1318(a),
collected certain industry confidential business information
("CBI") during the development of the Cluster Rules. On
November 9, 1998, NWF Petitioners filed a motion in the
Ninth Circuit to compel production of all CBI that EPA had
collected. Nat'l Wildlife Fed'n v. Browner, No. 98-70506 (9th
Cir. filed Nov. 9, 1998). Specifically, NWF sought the num-
ber of mills with hardwood lines that used oxygen delignifica-
tion. Both EPA and Industry Petitioners opposed the mo-
tion. This Court (after receiving the transferred case) denied
NWF Petitioners' motion on the ground that the CBI sought
was "the type of sensitive information and confidential or
trade secret information that EPA can properly withhold
from public view." Nat'l Wildlife Fed'n v. EPA, No. 99-1452
(D.C. Cir. Feb. 2, 2000) (order denying motion to compel
disclosure of information in the administrative record) (citing
Natural Res. Def. Council v. Thomas, 805 F.2d 410, 418 n.13
(D.C. Cir. 1986)).
In 1999, NWF Petitioners requested information from EPA
regarding bleached kraft mills. In response, EPA emailed a
computer file attachment to an NWF law clerk, who then
forwarded the email attachment to NWF counsel on June 16,
1999. The file attachment contained three spreadsheets, the
second of which contained CBI and included the notation
"CBI" above the spreadsheet.
According to NWF, NWF counsel opened the file, printed
the spreadsheets, and reviewed them in May 2000 without
immediately noticing that the second spreadsheet, which in-
cluded nine separate pages, was marked as "CBI." He did,
however, determine that the information contained on the
second spreadsheet included the information he had sought in
his motion to compel (i.e., the number of mills running
hardwood lines). Only after NWF counsel attempted to
locate the information in the administrative record did he
notice that the spreadsheet was labeled "CBI." According to
NWF's counsel, the CBI notation was only located on the
first page of the second spreadsheet, and was in all other
ways inconspicuous.
That same day, NWF counsel consulted an attorney re-
garding his ethical obligations with respect to the CBI. The
attorney advised NWF counsel that a DC Ethics Opinion
supported the position that he could use the information that
was inadvertently disclosed to him. NWF counsel then noti-
fied EPA's in-house counsel that he received a document
labeled "CBI." EPA's counsel requested return of the docu-
ment--NWF counsel forwarded the email, but informed EPA
counsel that he intended to use the information included in
the CBI in a brief filed under seal with this Court. EPA's
counsel of record then contacted NWF counsel, urged him not
to refer to the CBI in NWF's brief, and provided him with a
citation to the sources in the confidential portion of the
administrative record supporting the information included in
the CBI. NWF Petitioners used this citation in its brief to
this Court.
Despite requests to return the CBI, NWF counsel refused
on grounds he would need the information if another party
contested the accuracy of the information in NWF's brief.
Only after EPA stipulated to certain CBI on July 17, 2000,
did NWF counsel return the CBI. The next day, Industry
Petitioners filed a motion to impose sanctions, including dis-
missing the NWF petition or, in the alternative, striking
portions of the merits brief filed by the NWF Petitioners and
awarding attorney fees and costs to Industry Petitioners, on
grounds the NWF counsel improperly disclosed CBI and
improperly used CBI to extract additional data from EPA
and a stipulation from EPA in support of NWF's litigation
position.
NWF argues that its counsel acted properly throughout the
present litigation with respect to the CBI. NWF assures this
Court that its counsel did not know that the email contained
CBI when he first reviewed it, and relies on a DC Ethics
Opinion which provides that an attorney who receives inad-
vertently disclosed information, and who has no knowledge
that the information was disclosed inadvertently, does not act
unethically in using that information to his advantage. See
District of Columbia Legal Ethics Comm., Formal Op. 256
(1995). (NWF does not suggest that counsel would have been
able to use the information if he knew that it was confidential
when he initially reviewed it.) NWF also denies that NWF
counsel used the CBI as a bargaining chip with EPA. Final-
ly, NWF argues that NWF counsel did not violate this
Court's Order denying NWF's motion to compel because the
order was silent as to whether NWF could use information
released to it by EPA.
We begin and end our analysis with this Court's Order
denying NWF's motion to compel. NWF insists that its
attorney did nothing wrong in retaining and using the CBI
because our Order did not specifically address whether the
information could be used if EPA disclosed it, but was instead
limited to whether EPA could, in fact, disclose it. This
argument is disingenuous at best. We issued our Order in
direct response to NWF's request for CBI--the CBI it
subsequently received, used, and retained. Our Order stated
clearly that "[t]he confidential business information NWF
seeks is the type of sensitive information and confidential or
trade secret information that EPA can properly withhold
from public view." The effect of our Order was simple:
NWF requested access to the information; we denied the
request. That NWF later received this information inadver-
tently in no way changes our designation of this material as
"confidential," "sensitive," and similar to "trade secret infor-
mation," and in no way changes our position that NWF
counsel should not have had access to it. Because of that, we
fail to understand how NWF counsel, after receiving the
information and learning of the inadvertent disclosure, could
justify retaining and using the information in his possession.
NWF counsel, and the attorney he consulted, relied on
ethics and judicial opinions which hold that under some
circumstances, a privilege is waived if inadvertently released
by the privilege holder. In doing so, NWF counsel and his
attorney appear to have mischaracterized the operative facts
and been unaware of caselaw from this Circuit that closely
resembles the question at hand: whether the inadvertent
disclosure of privileged or confidential information main-
tained by a third party (here, EPA) constitutes waiver. See
SEC v. Lavin, 111 F.3d 921 (D.C. Cir. 1997). In Lavin, we
noted that cases wherein a holder of the privilege inadver-
tently discloses information provide "limited guidance on
whether disclosures by third parties over whom the holder of
the privilege has virtually no control, i.e., involuntary disclo-
sures," constitute waiver. Id. at 930. We then adopted the
reasoning of the Ninth Circuit in United States v. de la Jara,
973 F.2d 746, 749-50 (9th Cir. 1992), holding that the privi-
lege is preserved in involuntary disclosures if the privilege
holder has made reasonable efforts designed to protect and
preserve the privilege. See Lavin, 111 F.3d at 930. In so
holding, we observed that "[u]nless communications remain
privileged as long as the holder has acted reasonably in
attempting to protect them, involuntary disclosures by third
parties may render illusory the privilege's guarantee of priva-
cy." Id. We find that Industry Petitioners' efforts in oppos-
ing NWF's motion to compel the CBI was indeed a reason-
able attempt to protect its confidential business information,
and any protection afforded that information was not waived
through the inadvertent disclosure of that information by
EPA.
We understand, however, that the present situation in-
volves an Order of this Court concerning trade secret infor-
mation rather than an evidentiary privilege. The holding of
Lavin then, while instructive, is not necessarily controlling.
The Lavin holding does instruct us, however, to seriously
question the propriety of counsel's actions, especially when
taken together with the language of our Order denying NWF
access to the very information NWF now argues it was
entitled to use. For these reasons, rather than impose
sanctions against NWF counsel, we refer this matter to the
Committee on Admissions and Grievances for its consider-
ation and such recommendation or petition to the Court as
the Committee may see fit to present. See In re Door, 195
F.2d 766, 770 (D.C. Cir. 1952).
V.
For the reasons stated, the petitions for review and the
motion for sanctions are denied.