TOXIC POLLUTANT REMOVAL CREDIT LAWSUIT  
POLLUTANT REMOVAL CREDIT LAWSUIT UNDER SECTION 405 -- CWA
CHEMICAL MANUFACTURERS ASSOCIATION, PETITIONER V. NATURAL RESOURCES
DEFENSE COUNCIL, INC., ET AL.

CHICAGO ASSOCIATION OF COMMERCE AND INDUSTRY, ET AL., PETITIONERS
V. NATURAL RESOURCES DEFENSE COUNCIL, INC., ET AL.

No. 86-239 and 86-608

In the Supreme Court of the United States

October Term, 1986

On Petitions for a Writ of Certiorari to the United States Court of
Appeals for the Third Circuit

Brief for the Federal Respondents in Opposition

     TABLE OF CONTENTS
Opinion below
Jurisdiction
Statute involved
Questions presented
Statement
Argument
Conclusion

                      OPINION BELOW

The opinion of the court of appeals (86-239 Pet. App. A1-A69) is
reported at 790 F.2d 289.

                      JURISDICTION

The judgment of the court of appeals was entered on April 30, 1986.
The petition for a writ of certiorari in No. 86-239 was filed on
August 15, 1986.  The petition for a writ of certiorari in No. 86-608
was filed on October 9, 1986.  The jurisdiction of this Court is
invoked under 28 U.S.C. 1254(1).

                    STATUTE INVOLVED

The relevant portions of Sections 307(b)(1) and 405(d) of the Clean
Water Act, 33 U.S.C. 1317(b)(1) and 1345(d), are set forth in the
appendix to the petition for a writ of certiorari in No. 86-239 (Pet.
App. A55-A57).

                   QUESTIONS PRESENTED

Section 307(b)(1) of the Clean Water Act, 33 U.S.C. 1317(b)(1)
authorizes the Environmental Protection Agency (EPA) to promulgate
pretreatment standards applicable to industrial discharges into
publicly owned treatment works.  Section 307(b)(1) also provides that
EPA may permit revision of pretreatment requirements to reflect
removal of toxic pollutants achievable by publicly owned treatment
works as long as those "removal credits" do not prevent sludge use or
disposal by such works in accordance with Section 405 of the Act, 33
U.S.C. 1345.  The questions presented are:

1. Whether the court of appeals exceeded its jurisdiction,
conferred by Section 509(b)(1) of the Clean Water Act, 33 U.S.C.
(Supp. II) 1369(b)(1), in ruling that EPA could not promulgate a
removal credit rule under Section 307(b) of the Act because EPA had
not yet promulgated comprehensive sludge regulations under Section 405
of the Act.

2. Whether EPA may allow removal credits under Section 307(b)(1)
prior to promulgating comprehensive sludge regulations pursuant to
Section 405.

3. Whether the court of appeals erred in setting aside EPA's
determination that, for the purposes of allowing removal credits, the
consistent rate of removal of pollutants by publicly owned treatment
works can be measured by the average rate of removal achieved by the
works.

                        STATEMENT

1. This case concerns the validity of pretreatment standards
promulgated by the Environmental Protection Agency (EPA) pursuant to
Section 307(b) of the Clean Water Act, 33 U.S.C. 1317(b).  The Clean
Water Act, 33 U.S.C. (& Supp. II) 1251 et seq., divides industrial
facilities into two groups:  direct dischargers into the waters of the
United States and indirect dischargers into sewer systems that lead to
publicly owned treatment works (POTWs).  Direct dischargers are
regulated through the National Polutant Discharge Elimination System
permit program (NPDES or Section 402 permit, 33 U.S.C. 1342).  The
terms and conditions of a NPDES permit are goverend by effluent
limitations guidelines (see 33 U.S.C. 1314) and by relevant state
water quality standards (see 33 U.S.C. 1312).  POTWs also are
regulated by the NPDES permit system, and for some pollutants that
industrial plants discharge, POTWs provide a level of treatment that
is equivalent to that required of direct dischargers under the
industrial NPDES program.

Congress, however, recognized that POTWs generally were not
designed to treat all forms of industrial pollutants.  In Section
307(b), Congress directed the Administrator to issue regulations
"establishing pretreatment standards" for "those pollutants which are
determined not to be susceptible to treatment" by POTWs or "which
would interfere with the operation" of POTWs.  Congress also
recognized that POTWs often do remove at least some offending
pollutants.  Hence, Congress also authorized POTWs to grant industries
"removal credits" -- i.e., revisions to the applicable pretreatment
standards to reflect the level of pollutant removal by the POTWs
(ibid.).  Under Section 307(b)(1), these credits are available (1) if
the combined level of treatment by the indirect discharger and the
POTW is equivalent to the effluent limitations imposed on the
comparable direct discharger and (2) if the granting of a credit does
not "prevent sludge use or disposal" in accordance with Section 405 of
the Act (33 U.S.C. 1345).  Section 405, in turn, addresses disposal of
sewage sludge.  Section 405(e) states that the manner of disposal or
use of sludge is a local determination, but use or disposal may not
violate guidelines established by the EPA Administrator.  Section
405(d) states that the Administrator "shall develop and publish * * *
regulations providing guidelines for the disposal of sludge."

In 1979, EPA first promulgated sludge criteria pursuant to Section
405(d) for landfilling, land application, and incineration.  See 44
Fed. Reg. 53460 (1979) (codified at 40 C.F.R. Pt. 257).  Sludge
disposal is also regulated by a variety of statutes depending upon the
method of disposal.  For example, ocean dumping of sludge requires a
permit under the Marine Protection, Research, and Sanctuaries Act of
1972, 33 U.S.C. 1401 et seq., and sludge incineration is regulated by
Section 111 of the Clear Air Act, 42 U.S.C. 7411.  EPA has
consistently interpreted the Section 307(b) requirement that removal
credits not prevent the use or disposal of sludge to mean that
whatever use or disposal the POTWs make of their sludge, they must
comply with all applicable federal, state, and local requirements, not
just whatever guidelines EPA may have explicitly promulgated under
Section 405(d).  See 43 Fed. Reg. 27749 (1978);  40 C.F.R.
403.7(a)(3)(iv).

2. In 1978, EPA promulgated General Pretreatment Regulations that
established the administrative framework for all indirect dischargers,
including provision for removal credits (see 43 Fed. Reg. 27736
(1978)).  /1/ The Natural Resources Defense Council, Inc. (NRDC) and
various industry groups sought review of those regulations in the
Court of Appeals for the District of Columbia Circuit.  This
litigation was stayed pending a settlement agreement with the industry
petitioners in which EPA agreed to propose changes to the 1978
regulations.  EPA subsequently published revised regulations on
January 28, 1981 (see 46 Fed. Reg. 9404), which both NRDC and industry
groups challenged by filing petitions for review that were heard in
the Third Circuit.  In National Ass'n of Metal Finishers v. EPA
(NAMF), 719 F.2d 624 (1983), rev'd in part sub nom. Chemical
Manufacturers Ass'n v. NRDC, 470 U.S. 116 (1985), the Third Circuit
upheld the removal credit provisions of the regulations but set aside
other portions of the regulations, including the "fundamentally
different factor" variance provision for pretreatment standards.  The
latter ruling was reversed by this Court in Chemical Manufacturers
Ass'n.

In 1984, EPA promulgated revisions to the removal credit provisions
of the pretreatment regulations (see 49 Fed. Reg. 31212).  These
revisions, inter alia, (1) changed the measure of "consistent removal"
of pollutants, for the purpose of calculating the appropriate credit,
from removal rates attained at least 75% of the time to average
removal rates;  (2) eliminated the adjustment for storm water bypass
of the POTW;  and (3) provided that removal credit authorization would
not be withdrawn during the effective period of a POTW's NPDES permit,
except in instances of substantial under-removal of pollutants.
During the comment period, NRDC claimed that EPA should not authorize
removal credits because a comprehensive set of Section 405 sludge
regulations had not been promulgated (86-239 Pet. App. A6-A7).

On review, the Third Circuit held that EPA's removal credit rule
was arbitrary and capricious in several respects (86-239 Pet. App.
A1-A55).  /2/ First, the court ruled that the rule did not provide for
consistent removal of pollutants equivalent to the removal achieved by
direct dischargers.  The court found that basing credits on average
removal rates achieved by POTWs meant that when the plants were
operating at below average performance, the dischargers would exceed
the daily or monthly effluent limitations applicable to direct
dischargers (id. at A29).  Second, the court disapproved of EPA's
decision to ignore the effects of storm water bypasses of the
treatment plant.  EPA had estimated that such bypasses contributed
approximately eight percent of the pollutants discharged by the system
and dismissed this effect as de minimis, but the court of appeals
disagreed and found that EPA had ignored the variability of this
factor among POTWs (id. at A41).  Third, the court set aside EPA's
determination not to withdraw removal credits except for substantial
under-removal of pollutants.  The court concluded that under that
policy the limits imposed on direct dischargers would not be
equivalent to the limits imposed on indirect dischargers and POTWs, as
required by the Clean Water Act (id. at A46).  Finally, the court of
appeals held that EPA erred in authorizing the issuance of removal
credits prior to promulgating a comprehensive set of sludge
regulations pursuant to Section 405.  The court determined that NRDC
was not precluded from raising this challenge by the 90-day review
period in Section 509(b) of the Act, 33 U.S.C. (Supp II) 1369(b), even
though NRDC might have raised the issue in response to earlier
rulemakings (86-239 Pet. App. A49).  On the merits, the court noted
that EPA had acknowledged that additional sludge rules were necessary.
The court also concluded that EPA's "device of incorporating other
regulations" did not meet the requirements of Section 405 (86-239 Pet.
App. A52).

                        ARGUMENT

The decision of the court of appeals is erroneous and may impose
additional, ultimately unnecessary, costs on industrial indirect
dischargers that must comply with pretreatment standards under the
Clean Water Act.  Nevertheless, we cannot conclude that further review
by this Court is warranted, since EPA rulemaking efforts now in
progress should eventually alleviate the principal burdens created by
the decision.

1. Petitioner Chemical Manufacturers Association (CMA) asserts that
the court of appeals lacked jurisdiction under Section 509(b) of the
Act, 33 U.S.C. (Supp II) 1369(b), to review the adequacy of the
Section 405 sludge regulations.  CMA argues, first, that promulgation
of regulations under Section 405 of the Act is not one of the
"Administrator's action(s)" expressly made reviewable in the court of
appeals by Section 509(b) (see Pet. 14) and, second, even if
promulgation of Section 405 regulations was reviewable, NRDC's
challenge in early 1985 was time-barred because NRDC failed to seek
review of the regulations, issued in 1979 and amended in 1981, within
90 days as required by Section 509(b) (see Pet. 17).

We do not believe, however, that this case presents a proper
vehicle for considering the claimed limitation on a court of appeals'
jurisdiction imposed by Section 509(b).  The issue before the court of
appeals was not whether to compel the Agency to promulgate regulations
under Section 405;  such an issue, as petitioner CMA points out (Pet.
15), could only be raised, in the first instance, in a district court.
See 33 U.S.C. 1365.  Instead, the issue before the court of appeals
was whether EPA was authorized by statute to adopt a removal credits
program under Section 307(b) of the Act.  Section 509(b)(1)(C)
explicitly provides that "(r)eview of the Administrator's action * * *
in promulgating any * * * pretreatment standard under section 307 * *
*may be had (in the court of appeals)," and hence, apart from
timeliness concerns, we do not dispute that the court of appeals had
jurisdiction over NRDC's challenge to the removal credit rule.

Second, although we disagree with the court of appeals' ruling that
NRDC's challenge to the removal credit program is timely, /3/ that
ruling is limited to the unusual circumstances presented by this case
and it is, therefore, relatively unimportant.  As the court of appeals
observed, Section 509(b) permits late challenges to administrative
actions "on 'grounds which arose after'" the 90-day period for
petitioning for review has expired (86-239 Pet. App. A49).  While we
disagree with the court's finding that the lengthy delay in
promulgating additional Section 405 regulations qualified NRDC's
challenge under this exception (ibid.), that determination is not of
sufficient significance to warrant this Court's review.  /4/

2. Petitioner CMA also asserts (Pet. 17, 22) that the court of
appeals' decision to set aside EPA's reasonable, long-standing
interpretation of the Clean Water Act was contrary to the rationale of
Chemical Manufacturers Ass'n v. NRDC, 470 U.S. 116 (1985), and Chevron
U.S.A. Inc. v. NRDC, 467 U.S. 837 (1984).  We agree that the court of
appeals should have deferred to EPA's interpretation of the
relationship between Section 405 sludge regulations and the removal
credits provisions of Section 307(b).  The court of appeals' blanket
reliance (86-239 Pet. App. A31) on the Senate Report (S. Rep. 95-370,
95th Cong., 1st Sess. 57-58 (1977)) to support its interpretation is,
moreover, misdirected because the Conference Committee substantially
rejected the Senate version of the relevant provisions when the
Committee fashioned the Conference bill ultimately enacted in 1977.
See H.R. Conf. Rep. 95-830, 95th Cong., 1st Sess. 86-88 (1977).

We also share petitioner CMA's concern that the court of appeals'
decision threatens to impose hardships on the regulated community.  By
forbidding removal credits in the absence of more comprehensive
Section 405 sludge guidelines, the court of appeals' decision will
force some individual indirect dischargers, which must comply now or
in the near future with categorical pretreatment standards, to invest
in pollution control systems that may ultimately be unnecessary once
EPA has promulgated Section 405 sludge guidelines and made removal
credits available.

Nevertheless, we do not urge further review.  It is our view that,
ultimately, disruption to the pretreatment program can be
substantially cured by promulgation of the Section 405 regulations
required by the court of appeals.  As noted by petitioner CMA (Pet.
11-12), the EPA regulatory agenda had Section 405 regulations
scheduled for promulgation in September 1987.  The Agency, however,
will not be able to meet that timetable.  The earliest it now expects
to be able to propose Section 405 regulations is August 1987.  This
rulemaking is one of the most complex on which the Agency is working;
it raises issues that affect many of the Agency's programs under a
host of federal environmental laws.  We acknowledge that the
unavailability of removal credits during the interim will impose a
significant impact on some members of the regulated community.
Because, however, the Agency is presently engaged in the process of
filling the regulatory gap perceived by the court of appeals, we do
not believe that the legal issues presented warrant further review.

3. Petitioners Chicago Association of Commerce and Industry, et al.
(CACI), also seek review of that portion of the court of appeals'
ruling that struck down the use of POTWs' average removal rate to
calculate the appropriate "removal credit" (86-608 Pet. 4).
Petitioner CACI asserts that the court of appeals' decision mandates
compliance with the monthly and daily discharge limitations imposed on
direct dischargers (id. at 5).  We believe that the relationship
between the effluent limitations in a direct discharger's NPDES Permit
and the calculation of allowable removal credits available to an
indirect discharger is quite complex, given the existing methodology
for calculation of POTW removal rates.  The court of appeals' decision
is quite explicit in ruling that the use of average removal rates to
calculate removal credits does not provide for consistent removal of
pollutants equivalent to the level of treatment required of direct
dischargers (86-239 Pet. App. A46).  Precisely what showing of
consistent removal would be required should EPA promulgate new removal
credit regulations, however, is not clearly stated in the court of
appeals' opinion.  /5/ In these circumstances, we believe it
appropriate to await the judicial response to the promulgation of new
regulations rather than for this Court to undertake review of the
issue now.

                       CONCLUSION

The petitions for a writ of certiorari should be denied.

Respectfully submitted.

DONALD B. AYER

Acting Solicitor General /6/

F. HENRY HABICHT II

Assistant Attorney General

PETER R. STEENLAND, JR.

ANNE S. ALMY

Attorneys

FRANCIS S. BLAKE

General Counsel Environmental Protection Agency

DECEMBER 1986

/1/ EPA has also promulgated categorical regulations for many
industries to establish pretreatment standards for the pollutants
discharged by those industries.  EPA plans to promulgate additional
categorical regulations for several industries.

/2/ Petitioners are the Chemical Manufacturers Association, Chicago
Association of Commerce and Industry, Illinois Manufacturers
Association, and related entities that intervened as respondents in
the court of appeals.

/3/ We argued below that NRDC's lawsuit was untimely because the
legal basis for NRDC's current challenge to the removal credit
provision -- the absence of comprehensive Section 405 sludge
guidelines -- had existed as well in 1978 (when EPA first promulgated
removal credit regulations) and NRDC had failed to assert that ground
in its earlier challenge to the 1978 pretreatment regulations.

/4/ We strongly disagree with the court of appeals' suggestion
(86-239 Pet. App. A48) that the changes made by the 1984 rule and the
reprinting of the rule in its entirety authorized a challenge after
the 90-day period set forth in Section 509(b) to removal credit
provisions that were not changed in 1984.

/5/ We note that in NAMF v. EPA, 719 F.2d 624 (3d Cir. (1983)), the
court of appeals upheld removal credit regulations that were based on
the removal rates achieved by the POTW 75% of the time.

/6/ The Solicitor General is disqualified in this case.