Environmental Protection Agency v. National Crushed Stone Association – Oral Argument – October 07, 1980

Media for Environmental Protection Agency v. National Crushed Stone Association

Audio Transcription for Opinion Announcement – December 02, 1980 in Environmental Protection Agency v. National Crushed Stone Association

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Warren E. Burger:

We’ll hear arguments next in No. 79-770, The Environmental Protection Agency vs. National Crushed Stone, et al.–

Mr. Levander, I think you may proceed when you are ready.

Andrew J. Levander:

Thank you, Mr. Chief Justice, and may it please the Court:

This case is here on the Government’s petition to review two decisions of the United States Court of Appeals for the 4th Circuit.

At issue in this case is the scope of the variance clause promulgated by the Environmental Protection Agency with regard to the so-called 1977 effluent limitations required by the Clean Water Act.

At the outset I’d like to emphasize that there is no question in this case about the reasonableness or practicability or validity of any technical or substantive regulation promulgated by EPA.

The only question concerns this variance clause.

The court below concluded in both cases that the variance clause promulgated by EPA is invalid because EPA refuses to consider the inability of an individual discharger to afford compliance with the ’77 limitations as a basis for granting a variance.

Those decisions are in square conflict with the decision of the United States Court of Appeals for the District of Columbia Circuit in the Weyerhaeuser case.

This Court has considered on several occasions the complicated provisions of the Clean Water Act, recognizing that it represents a bold attempt by Congress to clean up this nation’s waters.

As I said, it is a complicated act.

I would like to begin by outlining the statutory framework which informs this case.

There are three critical provisions to keep in mind.

Section 301(b), Section 304(b), and 301(c).

Section 301(b)–

William J. Brennan, Jr.:

What was that second–

Andrew J. Levander:

–304(b).

Section 301(b) directs the Administrator to promulgate two sets of increasingly stringent effluent limitations.

Those are the so-called 1977 and 1987 effluent limitations.

The Court recognized in dupont, or held in dupont, that the regulations are to be promulgated on an industry-by-industry basis or category-by-category basis, and not on a plant-by-plant basis.

And the language and legislative history of the Act shows that the difference in the stringency between the regulations is approximated by that the ’77 limitations are to approximate if appropriate the average of the best performers in the various subcategories of an industry; whereas the 1987 regulations are to be based on the best performer in an industry with an eye, if possible, to eliminating discharges altogether.

So, as I said, Section 301 requires the promulgation of these two sets of industry-wide effluent limitations.

Section 304(b) in turn sets forth factors that EPA must consider in promulgating the industry-wide effluent limitations.

As to both the ’77 and ’87 limitations, Section 304(b) requires that EPA consider such factors as the differences between plants, the ages of plants, the technologies used in those plants, processes, and other similar factors.

And in both cases and most pertinent to this case, EPA must take into account the cost of application.

And there’s no dispute in this case that in setting the industry-wide regulations in the crushed stone, sand and gravel, and coal industries, which are before this Court, that EPA did take into account quite extensively the costs, total costs, of application.

The extensive administrative proceedings leading up to the promulgation of the regulations contain several reports by independent analysts regarding the various industries, and this is the procedure that EPA follows in every case.

These ensure that no effluent limitations promulgated by EPA will substantially undermine an industry or in any way shut down an industry in toto or any substantial part.

For example, in the crushed stone industry and sand and gravel industry combined, EPA considered that the total cost of the 1977 limitations would be approximately $21 million, and there are 10,000 dischargers in these combined industries.

William H. Rehnquist:

–When you say an industry, you’re not talking about a particular firm, you’re talking about all of the firms in the industry?

Andrew J. Levander:

All of the industry.

That’s right.

And there are 10,000 of those in the two combined, crushed stone and sand and gravel, approximately, and the estimate was that the total cost to those 10,000 different firms would be about $20 million, and that this would have an effect on the price of the product that they sell somewhere between 2 and 8 percent, at most.

And further, EPA goes even further than just estimating the total impact and total cost to the industry.

It also estimates how many marginal firms may be forced to close because they cannot afford compliance.

As I indicated before, there are about 4,800 crushed stone facilities and EPA estimated that at most 35 marginal firms would be forced to close because they could not afford to comply or otherwise would not want to comply.

And these are all very small firms.

The EPA also estimated, with regard to the sand and gravel industry, for example, that only 26 out of the more than 5,000 dischargers might be forced to close as a result of the effluent limitation.

Byron R. White:

The ’77?

Andrew J. Levander:

That’s the ’77; that’s right.

Now, that indicates that EPA takes very seriously the requirement that it take into account total cost when it sets the initial industry-wide regulation.

In fact, the proceedings in these cases show that EPA rejected various requests by environmental groups and others to regulate other kinds of pollutants than those it chose eventually to regulate because they were prohibitively expensive.

Byron R. White:

Well, I suppose, then, the EPA does think it’s relevant and significant how many marginal firms will be put out of existence?

Andrew J. Levander:

That’s right.

I mean, EPA would not promulgate a regulation which would close down the industry entirely, that no one in the industry could afford.

And that’s not a very realistic possibility because, in the first instance, the guideline for the ’77 limitations are existing firms which have technology and the limitations based on existing use of technology.

William J. Brennan, Jr.:

In arriving at that conclusion, what was the concept of total cost?

Andrew J. Levander:

The concept of total cost as evidenced in the legislative history primarily is a kind of economic total cost, the outlay of firms, capital costs, operating costs, and also–

William J. Brennan, Jr.:

It would include economic dislocation of unemployment?

Andrew J. Levander:

–Yes.

William J. Brennan, Jr.:

Did it?

Andrew J. Levander:

It did in these cases.

Representative Jones indicated that total cost also means total impact on the economy as a whole in the regional economics.

Nothing in the word “total cost”, however, or in the legislative history suggests–

William J. Brennan, Jr.:

Well, but did they do all this before arriving at the conclusion that there were only 28, if that’s the number–

Andrew J. Levander:

–That’s right.

There are very thick, huge reports that they put out which analyze in detail the economics of a particular industry.

And only having judged that, they will not dislocate industry in toto and there will not be massive dislocation, do they promulgate a reasonable and practicable regulation.

William J. Brennan, Jr.:

–And now, is there any difference in this respect between the ’77 limitations and the ’87?

Andrew J. Levander:

Well, to some extent.

Andrew J. Levander:

Again, EPA takes into account on the ’87, the cost of application.

It’s required to do so by statute and it does so.

But the emphasis, there’s a slightly greater emphasis on costs with regard to the ’77 limitations.

William J. Brennan, Jr.:

Well, the ’87 said something about, there must be the maximum technology, not the best practical technology–

Andrew J. Levander:

It says–

William J. Brennan, Jr.:

–which is the ’77 test, isn’t it?

Andrew J. Levander:

–That’s right, but–

William J. Brennan, Jr.:

And the ’87 is maximum.

Now, is there a difference between those two tests?

Andrew J. Levander:

–Yes.

As a practical matter, as I indicated, the starting point is a different one.

One is the average of the best performers, the other one is the best performer.

And as a statutory matter, you–

Warren E. Burger:

I missed the first… the average of the best, or–

Andrew J. Levander:

–The average of the best performers in the various subcategories of a particular industry.

And you kind of analyze the industry as a whole to see in various-aged plants who’s the best of the old plants, the new plants, or other–

William J. Brennan, Jr.:

–Well, doesn’t this mean that under the ’87 test the burden is going to be much greater on a member of the industry?

Andrew J. Levander:

–It can be but it doesn’t necessarily have to be and in fact–

William J. Brennan, Jr.:

What did you say was the difference?

Under the ’77, how many would be driven out of business?

Andrew J. Levander:

–Twenty-six and 35, respectively, in the two–

William J. Brennan, Jr.:

Thirty-five under the ’87 and 26 under–

Andrew J. Levander:

–No, excuse me; I’m sorry.

Thirty-five out of the 4,800 crushed stone facilities and 26 out of the more than 5,000 in the sand and gravel industry will be or could be forced out of business as a result of the ’77 limitations.

William J. Brennan, Jr.:

–Now, how about as a result of the ’87?

Andrew J. Levander:

There has… since in these industries up till now the ’87 limitations are approximating the ’77 limitations, since the best performers happen also to be the best performer, and since there’s not a great need for further improvement at this time, they don’t expect anybody to be put out of business, as I understand it, as a result of the ’87 limitations.

Warren E. Burger:

Realistically, the two standards might not be very far apart.

Is that not so?

Andrew J. Levander:

That’s exactly correct, Mr. Justice.

Warren E. Burger:

The average of the best, or the highest, might be quite close together.

Andrew J. Levander:

They could be.

That’s right.

On the other hand, then, in other cases, Mr. Chief Justice, there could be large differences between the two, although that has not happened to date.

Warren E. Burger:

And that’s why the 10-year span–

Andrew J. Levander:

That is right.

Warren E. Burger:

–to allow time for economic and other and technological adjustments?

Andrew J. Levander:

That’s right.

And also it’s a technology-forcing statute, and so in the course of the ten years there may be new inventions and new devices which will–

Warren E. Burger:

Suppose, instead of 27 and 35 it was 270 and 350?

How would that alter this case?

Andrew J. Levander:

–Well, at some point, if EPA initially promulgated on the interim basis, not a final regulation, and then they went out and they did an economic survey and they saw that a substantial portion of the industry was going to be closed down as a result of that, they would have to rethink the level of technology and make it more affordable and reasonable for the industry as a whole.

Potter Stewart:

You do concede that the statute with respect to the 1977 limitations does require the agency to weigh the total cost to the industry?

Andrew J. Levander:

That’s correct, and that was done here, and there’s no dispute about that.

Potter Stewart:

And if the figures were such as suggested by the Chief Justice as a hypothetical question, that could affect the total… that could affect… the total cost to the industry?

Andrew J. Levander:

I am informed by the Administration that in no case under the 1977 limitations did the economic forecast show that anything more than 1 percent of an industry would be closed as a result of the industry-wide level.

Warren E. Burger:

If you had those larger figures, there would be a further subanalysis to be made to determine whether those were the marginal operators or whether they were average all the way through the industry.

Andrew J. Levander:

Or it could turn out that upon promulgation they’ll find out that they didn’t know enough about the industry as a whole, and so they have to go back and get some more information, because when you have an industry of more than 5,000 or 6,000 dischargers, as you have in these cases, you can’t… they don’t take into account every single discharger.

And so they mighty have to go back and get some more data or whatever, or they’d have to rethink the process.

But today, as I said, in this case there’s no question that the effluent limitations which are not at issue here were reasonable and did take into account total cost of application.

William J. Brennan, Jr.:

Suppose a given member of the industry is determined by EPA to be unable to meet the prevailing 1977 standards, must EPA then grant a variance?

Andrew J. Levander:

No, that’s the… well, that’s the issue in this case.

But the reason is, the question is, why can’t he meet the limitations?

If the–

William J. Brennan, Jr.:

Well, suppose they determine they can’t, what I’m trying to get to, is it your position that they need not, even in that situation, grant a variance but merely to consider that as one of other factors?

Andrew J. Levander:

–No.

It depends, Mr. Justice Brennan–

Potter Stewart:

The issue in this case is, if the reason a particular component of the industry cannot is a financial reason, your claim is that they do not and need not grant a variance, period.

Andrew J. Levander:

–That’s right.

And they cannot consider–

Potter Stewart:

And that’s the issue, and your brothers on the other side claim you have a duty to grant a variance.

Andrew J. Levander:

–Yes.

And their basis is… I want to make one point very clear.

We do take into account the cost of compliance for an individual discharger in the sense that we analyze their plant.

If they come in and they say, we need a variance, and this is a real case I’ll have to give you as a hypothetical, one of the requirements, say in the gravel industry was the recycling of water.

And this was based on the fact that there are large pits that are easily available to most dischargers in the industry to allow a settling pit to allow the recycling of the water.

And this discharger came in and said, well, that may be true for the rest of my competitors but I’m located on a 100-foot cliff and the place that I have, the only place that I have for a settling pond is 100 feet below.

In order for him to recycle, of course, he would have to have tremendously expensive pumping equipment to get the water back up to the top and in that case EPA says, we’ll grant a variance, because you are fundamentally different from the other members of the industry whom we considered in setting this regulation.

And so, to that extent, cost does come in in the sense that his costs of compliance would be exceedingly greater, maybe sixty times greater, than the average.

William J. Brennan, Jr.:

Suppose in that very instance EPA had refused to grant the variance?

Andrew J. Levander:

Well, then there might be an abuse of discretion, and that’s reviewable in the–

Byron R. White:

Wouldn’t he have to show that he had some other proposal that would improve?

Andrew J. Levander:

–No.

Under the variance provision, with regard to the ’77 effluent limitations–

Byron R. White:

Oh, you’re talking about ’77 now?

Andrew J. Levander:

–That’s correct.

Byron R. White:

If it were ’87–

Andrew J. Levander:

Well, I will get to that in one moment if I could, Mr. Justice White.

Warren E. Burger:

–Before you leave ’77, let me put this hypothetical.

Suppose an applicant comes in and shows that if he is required to comply with the contemporary standards, he will not be competitive with the other two or three existing competitors in his area.

Is that a factor that would be weighed?

I’m not saying that it would be dispositive, but would it be considered by EPA?

Andrew J. Levander:

I am not quite sure I follow the hypothetical, Mr. Chief Justice, Insofar as he came in and said–

Warren E. Burger:

Well, I’d come in to EPA and say, I’ve got three competitors here.

If I do all the things that you’re telling me to do, and which they are now doing, I won’t be able to compete with them.

Andrew J. Levander:

–And the question then becomes, why his expenses would–

Warren E. Burger:

Is EPA going to say to me, well, you’re just not very efficient, because if your competitors can do it, you ought to be able to do it?

Andrew J. Levander:

–Well, if your plant for all purposes directly relevant to compliance is exactly the same as your three competitors and it is simply a matter of your having been economically inefficient, or incompetent, and you just cannot afford, because you don’t have the money that your more efficient competitors have to comply, and you are no different in any other respect, that is not a basis for a variance and you’ll be forced to close.

Except–

Warren E. Burger:

Forced to comply?

Andrew J. Levander:

–Or comply; right.

Andrew J. Levander:

And, I want to point out that Section 8 of the Act creates a $800 million revolving loan fund which is administered by the Small Business Administration.

Any firm under 250 employees who would otherwise have to shut his plant or close his operations because he could not afford to comply can go and get an SBA loan.

And that is a very active program.

Up to June 30 of this year I understand there were $28 million in SBA loans under Section 8.

Going back to the statutory framework for a moment, as I said before, 301 requires the industry-wide effluent limitations, ’77 and ’87.

304(b) sets forth the factors that must be taken into account as to both ’77 and ’87 costs of application as relevant.

And Section 301(c), which is quite critical to this case, provides the kind of affordability variance that respondents seek here, but it only provides it with regard to the ’87 limitations.

Under the 1987 limitations a discharger can get a variance by going in and saying, I cannot afford to comply.

The variance–

John Paul Stevens:

He has to also say, I have made reasonable progress over the ’77 limitations, and if the ’77 limitations are the same as the ’87 limitations, he can’t get a variance under those circumstances.

Andrew J. Levander:

–But then presumably he’s been complying with the ’77 all along; there’s no reason he needs a variance.

John Paul Stevens:

But there really can’t be a hypothetical case, can there, in which anybody could get a variance under the ’87 limitations, who has complied with the ’77 in this industry?

Andrew J. Levander:

That’s right.

Insofar as the coal regulations may be more stringent in ’87.

John Paul Stevens:

Before you finish, will you tell me the statutory source of the variance authority under the ’77 limitations?

Andrew J. Levander:

Well, that was a… that was underlying the problem in dupont, I think.

In dupont we suggested that the statute and the language and the legislative history of the Act clearly required industry-wide regulations.

But because we cannot take into account every single discharger in the industry, we would grant variances based on fundamentally different factors between one discharger and another that we hadn’t taken into account in setting the regulation.

And in a sense, for that particular discharger, that is simply creating a category of one or more, depending on how many fit into his kind of situation as opposed to the industry as a whole, and we’re allowed under the Act, under 301 and 304, to create subcategories.

There is no specific variance provision, and the 10th Circuit in the Petroleum Institute case and some commentators have suggested that no variances need be granted at all, and there is some strength to that.

First of all, dupont’s discussion of the new sources under 306 indicated that the absence of variance meant that no variances should be granted.

We still believe, however, that some variances should and will be granted based on this fundamental difference factor.

But the express language of 301(c), which is the critical provision here, which allows an affordability variance with regard to the ’87 limitations, does not apply to ’77 limitations and Congress clearly intended that the inability of a discharger to afford compliance was not to be a factor with regard to the ’77 limitations.

William H. Rehnquist:

Well, Mr. Levander, looking at the government policy as a whole here and including the Small Business Administration loan, it isn’t going to be the kind of mom-and-pop crushed stone operators that are hit, when you refer to the marginal ones, because they can get the loans.

It’s going to be ones conceivably who employ more than 250 people.

Andrew J. Levander:

That is conceivable although I’d like to point out two things, Mr. Justice Rehnquist.

First, Congress anticipated at a minimum that the imposition of the 1977 effluent limitations will require as many as 300 major firms employing up to 125,000 people to be put out of business because they couldn’t afford or did not wish to afford compliance with the regulations.

So that’s Congress’s judgment that the clean waters of this nation are more important than some of those marginal firms.

And the second point is that in the facts of this case I believe that all the firms that EPA anticipated would be forced out of business were in fact smaller firms and I take it that they were in such positions and so penurious that they could afford even with a Section 8 loan or didn’t wish to try under a Section 8 loan to afford to comply.

The respondents rely on section 304(b)(1)(B) as the basis for their argument.

Andrew J. Levander:

They say, the statute requires EPA to take into account total cost; we agree, on the industry-wide level.

And that under our own version of the variance, we have to retake into account and reconsider every single factor on the variance level.

And therefore we are trapped in our own language and we must therefore grant these economic variances.

Well, there are several problems with that argument.

First, both the ’77 and ’87 limitations, actually Section 304(b)(1)(B) and (b)(2)(B) require EPA to take into account “cost of application”.

If the words “cost of application” meant,

“and you must reconsider on the variance level. “

there would have been no need for Congress to expressly create this Section 301(c) variance, which it did create and which it created only with regard to the ’87 limitations.

The second problem is that respondents have misconstrued EPA’s variance clause and a well-stated and firm position all along.

Since 1974 when the first regulation came out–

Byron R. White:

I’ll argue with you on that.

That ’87 variance clause puts another condition on them.

Andrew J. Levander:

–That’s right.

It must be above ’77 level.

But that makes a very–

Byron R. White:

That’s an independent reason for having it, for having that variance expressly stated.

Andrew J. Levander:

–Well, except that you wouldn’t have needed to say, 301.

You wouldn’t have needed to create the variance on economic grounds.

You would have just said, variances which are permissible under the ’87 have to at least meet the ’77 level.

But they went ahead and created a specific variance based on the affordability factor and put a limitation on it.

But that limitation further emphasizes the correctness of EPA’s position.

Congress obviously intended the ’77 effluent limitations to be a uniform floor and ’87 was a hope to clean up the waters even further, but there was a realization that those were more stringent regulations and that some businesses who were doing a good job insofar as they had already complied with the ’77 limitations might not be able to take the next step further, only part of that step.

And so, under those circumstances, a variance may be available.

Warren E. Burger:

Let me back up a little bit to ask whether this record discloses how many of the total in each of these industries would be under 250 employees?

Andrew J. Levander:

The record does not break it down but it does indicate that the majority of firms are quite small in terms of the percentage–

Warren E. Burger:

I should think that the general observation would be, although I would not notice it judicially, that most of the crushed stone people, more than half of them, would be under 250 now.

Andrew J. Levander:

–I would guess that is absolutely correct, Mr. Chief Justice, although in terms of production there are few firms, like 1 percent or 10 percent of one industry produces 40 percent of the production.

So there are a few large firms out there producing over a million tons a year.

Warren E. Burger:

They might be large firms but each unit… they might well be scattered; a corporation might own ten of these units… but each of the units is not likely to be over 250 employees.

Andrew J. Levander:

I think that’s probably correct.

Warren E. Burger:

And they’d each be operating under different conditions with different drainage problems and different supply problems.

Andrew J. Levander:

Well, but the regulation was set by taking into account these variances.

If an industry comes in, as I said, this Birdsall Company in South Dakota and says, well, we’re not just slightly different than our fellow next door, we’re a hundred feet different, and that’s a fundamental difference, then he’s entitled to a variance.

William J. Brennan, Jr.:

Tell me something.

How long does a variance last when it’s granted?

Andrew J. Levander:

Well, the permits last for five years.

William J. Brennan, Jr.:

Five?

Andrew J. Levander:

Right.

And so the variance is applied for and received at the beginning of the permit.

Then it’s good for the five years.

Byron R. White:

This is for the ’77?

Andrew J. Levander:

That’s correct.

And for ’87, actually.

Byron R. White:

But at least a variance under ’77 couldn’t last any longer than… a variance would be required for the ’87s?

Andrew J. Levander:

That’s right.

The ’77 limitations… when a permit expires, then you would have to reapply for the variance.

Byron R. White:

Well, did the Court of Appeals hold that you had to take in affordability in a sense that if he couldn’t afford it, you had to give the variance.

Is that it?

Andrew J. Levander:

That’s not altogether clear.

There, the language of the opinion–

Byron R. White:

On the other hand, it isn’t altogether clear that the question that you present in your brief is really the question.

You say, does it require a consideration of the economic?

Andrew J. Levander:

–Yes.

Well, that at a minimum.

Respondents seem to back off the borderline which is the Court of Appeals decision and say that all we need to consider, you don’t… it’s not dispositive.

The Court of Appeals language seems to indicate that it’s just like 301(c), which is dispositive, provided that you are at least complying with the ’77 limitations.

I’d like to reserve the rest of my time for rebuttal, if I might.

Warren E. Burger:

Very well.

Mr. Freeman.

George C. Freeman, Jr.:

Mr. Chief Justice, may it please the Court:

George C. Freeman, Jr.:

I have argued this case against EPA three times before the Court of Appeals for the 4th Circuit, I have filed amicus briefs in the dupont case which preceded this whole issue in many ways in that circuit and in this Court.

I have read with great diligence the opinions and briefs in the Weyerhaeuser case.

I am back in the 4th Circuit in a continuation of the Appalachian case with EPA.

Every time I argue this case, EPA has a new theory for its position.

If you will look at the opinions below, you will see the confusion that EPA is continually shifting interpretation of its variance clause and the basis for its right to exclude evidence of affordability in a variance proceeding in all of the cases which they have decided.

Justice White, to come to the point that you just made, the issue here today is not the question of whether or not evidence of affordability in a variance proceeding, standing alone, justifies a variance.

That has never been an argument that we have made, it has never been a holding–

Byron R. White:

You mean you’ve never claimed that just because you couldn’t afford it, you were entitled to a variance?

George C. Freeman, Jr.:

–No, sir.

And what the heart of this case is, is what kind of evidence, economic evidence is admissible in a variance clause proceeding.

And I submit to the Court that able counsel’s concession that under 304(b)(1)(B) that EPA must consider evidence of affordability for the industry as a whole is completely–

Byron R. White:

Or even… or for the variance.

George C. Freeman, Jr.:

–Yes, sir.

–is conclusive that they have to consider it in a variance proceeding.

Byron R. White:

Well, he… I thought he also said that in making the ’77 regulations, might not that… that they considered affordability in the sense that, how many firms would be put out of existence?

George C. Freeman, Jr.:

And that’s the heart of this case, sir.

As Mr. Justice Stevens observed, there is no express authority in 301 for EPA to issue 1977 regulations.

That’s what dupont was all about.

What dupont said was, you have to look at the structure of the Act as a whole to derive implied authority for EPA to issue those ’77 regulations in the first place.

And what the 4th Circuit said and what you affirmed in dupont was that that implied authority was conditioned.

It was conditioned two ways.

First, those ’77 regulations were only presumptively applicable at the permit-issuing stage, and as this Court characterized it, saying the same thing, therefore you have to have a meaningful variance clause.

And the logic of dupont is, and the logic of the Government’s brief in the recent Appalachian Power case, which I just argued against them, is that a variance clause proceeding under 1977 regulations is not a true variance at all.

What it does is it shifts the burden and permits the plant owner to come in and produce evidence under all of the statutory criteria of 304(b)(1)(B) that was relevant to the setting of those presumptively applicable nationwide effluent limitations for ’77, and if he can show by evidence under those criteria that BPT for his own particular plant is a different limitation, then he doesn’t get a variance.

This is for case-by-case adjustment of BPT.

That’s in the Government’s first brief in this case–

Byron R. White:

Well, when does he get a variance?

George C. Freeman, Jr.:

–He never gets a true variance, sir.

He gets the right… the purpose of the variance clause is to shift the evidence to him at–

Byron R. White:

Well, I know, but when does he win?

Byron R. White:

I’ll put it that way.

George C. Freeman, Jr.:

–When does he win?

Well, let’s take how you would introduce–

Byron R. White:

What does he have to show to win so that he gets his permit?

That’s what I–

George C. Freeman, Jr.:

–All right.

What he has to show is… and let’s assume this is an owner that cannot afford, he cannot pay the price–

Byron R. White:

–You know, well, you’ve already conceded as far as I can tell that just because he–

George C. Freeman, Jr.:

–Yes, but i’m going to tell you–

Byron R. White:

–can’t afford it doesn’t get him very far.

George C. Freeman, Jr.:

–That’s right.

But I would like to say how that evidence is relevant.

And EPA’s position is that the evidence is not relevant and it will refuse to receive any evidence of individual plant affordability in a variance clause, and that’s the heart of this.

Byron R. White:

Under ’77, for ’77?

George C. Freeman, Jr.:

Yes, sir.

One of the statutory criteria under 304(b)(1)(B) is… and I will try to quote it to be precise about it… I’m quoting from the statute,

“Total cost of application of technology is relevant to the effluent reduction benefits to be achieved from such application. “

Now that is a statutory cost benefit test.

It says, not that, some total costs come in and you look to see what the resulting social benefits are going to be.

And we believe that the word benefits here means social benefits because the legislative history of the Act shows clearly that Congress wanted unemployment effects and impacts on the local economy to be considered.

Now, if you make that showing, that still doesn’t get you home free.

And the Court of Appeals for the 4th Circuit recognized that.

It showed you’ve got to bring in evidence under the other statutory criteria.

There are other factors in there too.

This is just one of them.

And viewing them all as a whole, you have the right to try to persuade EPA or the state that a different limitation represents best practical technology for your plant.

Warren E. Burger:

Mr. Freeman, let me ask you this.

George C. Freeman, Jr.:

Yes, sir.

Warren E. Burger:

What inferences, if any, could reasonably be drawn from the fact that such a small percentage of the… such a small segment of the industry in each case here is adversely affected?

George C. Freeman, Jr.:

Sir, we don’t know how many people are adversely affected here.

George C. Freeman, Jr.:

If you will compare–

Warren E. Burger:

Well, we were given some figures.

Do you challenge those figures?

George C. Freeman, Jr.:

–I do not challenge those figures as being figures in the record.

But I will ask the Court, along that line, to compare the meticulous subcategorization which EPA went through with for the paper industry in Weyerhaeuser with the sort of hit-or-miss, few-sample-plant type of subcategorization they went through in the crushed stone industry and in the coal industry.

And that’s spelled out in our brief.

What this variance clause is all about, it permits EPA because of the time pressures involved in issuing those ’77 regulations to make the kinds of oversimplifications and generalizations that it has to make to issue those industry-wide regulations.

Warren E. Burger:

Suppose, for example, that the record showed that 1/10 of 1 percent of all the employees in the industry, the employees, would be unemployed, out of business, under the regulations, would… would that reasonably suggest that the regulations were not unduly stringent?

George C. Freeman, Jr.:

Oh, sir, I think that would suggest that the regulations were probably all right.

Warren E. Burger:

Or even too loose?

George C. Freeman, Jr.:

Well, but the regulations meet one test.

At the permit-setting stage what we are looking for is to see whether or not those general regulations which were roughly set will create an anomaly under the statutory criteria that will not make it best available controlled technology at this particular plant.

If the plant is going to be closed down, if one of our coal mines is going to be closed down, all the miners that work at the mine are put out of work, the one town that is dependent upon them bankrupted, and if we can show through other evidence that the limitation that EPA is proposing here at that particular mine not only will have that economic effect but it won’t do the water or the fish or people or anybody any good, then we think that in that special circumstance the variance clause is supposed to allow EPA to correct on a case-by-case basis for the overgeneralization that it had to go through in issuing these regulations–

Byron R. White:

What do you make out of the example that your colleague gave a few moments ago that the man who is on the edge of a cliff, and if you really enforce the regulations against him, he wouldn’t get a permit and if he had to live up to it he couldn’t afford it?

Didn’t he indicate that under the ’77 variance procedures that they might give him a special treatment?

George C. Freeman, Jr.:

–I didn’t in any way understand him to say that.

Byron R. White:

Oh, you didn’t.

George C. Freeman, Jr.:

And I know that in the cases that I’ve had where I have tried to present evidence of those economic effects, that EPA clearly will exclude it.

And I think that–

Byron R. White:

Well, I asked him if he weren’t talking about the ’87 variance and he said, no, he was talking about the ’77.

George C. Freeman, Jr.:

–Well, sir, I ask you to look at their reply brief–

Byron R. White:

Because let’s assume that I understood him correctly.

Then I assume that he’s, what he said is that he would have to undertake a very expensive pumping operation.

And if that isn’t taking into consideration evidence of cost and affordability, what is it?

George C. Freeman, Jr.:

–Well, sir, if he said that, I didn’t understand it that way.

Byron R. White:

Then he’s even changed his position more than you thought, then.

George C. Freeman, Jr.:

Yes, sir, and it’s contrary to the position set forth in footnote 9 of his reply brief where he makes it clear that–

Byron R. White:

I perhaps misunderstood him.

George C. Freeman, Jr.:

–that evidence would not be admissible in a variance proceeding.

Byron R. White:

What do you think he meant by it?

Byron R. White:

What was his cliff example all about?

George C. Freeman, Jr.:

I don’t know.

I would say this, sir.

The way I took his reference to mean, because my problem is, I’ve argued this thing over and over again and I get different examples each time… it is not our argument… and maybe he’s saying here, if all you can show is that you are on the edge of the cliff and if you have to comply with the regulations, you get pushed off the cliff under our theory and as I understand the Government’s theory, you get pushed off the cliff.

You have to show something more.

So what’s at issue here is, do we have evidence… do we have the right in a variance proceeding to show that we’re going to get pushed off the cliff as well as to show that we shouldn’t be pushed off the cliff because of the other statutory factors as well in 304(b)(1)(B)?

Warren E. Burger:

Let me put a hypothetical concretely to see if I understand the point you made about their resistance to subjective evidence, as distinguished from objective, industry-wide evidence.

Assume a town that has 500 employable and employed people and a coal mine, and you offer to prove to EPA that if a variance is not granted, 350 of them will be out of work.

And do you say that they will decline to consider that?

George C. Freeman, Jr.:

In a variance clause proceeding.

That is the logic of their position and–

Warren E. Burger:

Well, do they in fact?

George C. Freeman, Jr.:

–it’s what they state clearly time and time again.

Warren E. Burger:

Do they in fact and in practice have they refused tenders of evidence of that kind?

George C. Freeman, Jr.:

Well, we have pointed out, sir, and in certain cases of inconsistency on EPA’s part… because one of the things that it has argued here is the presumption of validity to its own regulation, which changes daily, but, in some of the cases, we pointed out that they had admitted evidence of that.

And in footnote 9 to their reply brief, they said, yes, there was such a case.

But the evidence was admitted over our objection because it was inconsistent with our interpretation and reading of our regulations.

Warren E. Burger:

Well, then the EPA is allowing it in.

It doesn’t make any difference–

George C. Freeman, Jr.:

Well, it’s allowing it in… it’s being allowed in by a hearing examiner over the objections of counsel for the agency.

But the whole reason this case is before this Court… and I will say that there is no inconsistency whatsoever in the Weyerhaeuser case and the 4th Circuit cases… they both read the regulation and they both read this Court’s opinion in dupont as requiring EPA in a variance clause proceeding to admit evidence under all of the statutory factors that it had to consider when it set the regulations.

And that means everything that’s in 304(b)(1)(B).

And–

John Paul Stevens:

–Mr. Freeman, it seems to me we’ve got another problem that we haven’t talked about yet.

George C. Freeman, Jr.:

–Yes, sir.

John Paul Stevens:

At one stage of the proceeding I thought the question was whether affordability was a sufficient ground for a variance.

Another stage I thought the question was whether affordability was relevant at all.

Now you’re telling us that they won’t even admit evidence of unaffordability to be received in a proceeding.

And one of the problems I have is, we’re dealing with a regulation and not a specific concrete dispute, and I’m seriously concerned about the question of whether the controversy is ripe.

And one of the reasons is, I think you kind of shift the arguments as the proceeding goes, and your point about whether or not there is disagreement between the Court of Appeals for the D. C. Circuit and the 4th Circuit emphasizes that to my mind.

John Paul Stevens:

I have difficulty knowing whether–

George C. Freeman, Jr.:

If I may have… yes, sir… well, if I may address that because I think you are wrong, and I think what happened is that the D. C. Circuit and the Court of Appeals for the 4th Circuit arrived at the same point, namely that all of this evidence under 304(b)(1)(B) had to be considered.

They both reached the same conclusion that evidence of affordability was relevant to total cost, that component in the cost/benefit test that’s in 304(b)(1)(B).

The 4th Circuit following… you remember, it started this whole thing with dupont… and it looked mainly in dupont not to legislative history but to the overall scheme of the Act to see whether EPA had this implied authority to issue the regulations in the first place.

It started in Appalachian; two months after it decided dupont it picked up right where it was and said, looking at the overall scheme of the Act as a whole, we think the concept of affordability… that is, evidence of affordability… clearly ought to be admissible under total cost because otherwise you would have the anomalous situation of being able to get away to have it considered under the more stringent limitation without having it taken into account under ’77.

We think that the reference in the 4th Circuit opinions in Appalachian has to be viewed in that context, that is, its reference to 301(c) said that evidence of affordability has to be considered under the statutory criteria language of total cost in relation to resulting effluent benefit.

And it’s clear to us that Weyerhaeuser reached that point a different way, because it had benefit of your decision in dupont and the benefit of EPA’s shift in its interpretation of the regulations to permit the consideration of economic evidence.

So it simply took the shorthand route and looked at legislative history with regard to total cost.

Warren E. Burger:

Mr. Garrett.

Theodore L. Garrett:

Mr. Chief Justice, and may it please the Court:

Warren E. Burger:

Before you go on, let me pursue the hypothetical if not real question posed by Mr. Justice Stevens.

Should the Court try to decide this kind of issue on abstractions as distinguished from a case in which, a specific case in which evidence were tendered that 350 out of 500 people in a particular town would be unemployed because of the closure of a coal mine, rather than trying to pass on the regulations in the abstract?

If you’d care to comment on that at some point in your presentation?

Theodore L. Garrett:

–Well, I’ll address it now, since it seems to be on your mind.

It is true that the variance clause as it was contained in the regulations before the 4th Circuit had a certain amount of vagueness to it.

It talked about fundamentally different factors without indicating what those were.

And indeed, when we argued the case in the 4th Circuit, one of the problems that we had with the variance clause is that it was vague.

You couldn’t tell what the grounds were for the granting of a BPT variance.

Now, with respect to the ripeness question, I think that that problem has been solved because EPA in 1979 published regulations under its MPDS program applicable to all industries and specifying in detail what factors will and will not be considered in granting a variance.

You can look at 40 CFR, Section 125.31, and in particular Section 31(e).

In that provision of EPA’s regulations, which are binding on the agency and express its position, state unequivocally that the inability of a particular plant to afford costs of compliance will not be grounds for a variance.

Warren E. Burger:

Will not be grounds, but will it be received and weighed, along with other factors?

Theodore L. Garrett:

The Agency’s regulations say not, and I think that if you read the preamble to the Agency’s 1979 regulations, it makes it absolutely clear.

The regulations say that a variance will only be considered if there are fundamentally different factors.

And the Agency’s regulations go on to state that economic affordability under no circumstances can be considered fundamentally different.

Byron R. White:

This is for the ’77 variance?

Theodore L. Garrett:

Yes.

This is for the 1977 variance.

Byron R. White:

Different from the ’87?

Is that right?

Theodore L. Garrett:

I believe that’s right.

Of course, the Agency’s position is that 301(c) supersedes its variance clause for ’33.

Warren E. Burger:

Well, is your response to be taken as saying that if the EPA declined to receive evidence of the hypothetical I suggested, economic factors on the town, that would be error?

Or–

Theodore L. Garrett:

Well, it would be consistent with its own regulations and the Agency would be bound to follow those regulations.

It’s our position that the Agency’s regulations are invalid and that’s why we’re before the Court.

Otherwise we would have a situation where this very issue before the Court would be litigated in hundreds of individual proceedings and indeed it’s not clear that it could be litigated, because EPA’s–

Byron R. White:

–But at least we’d have a record about what kind of evidence they really will permit and what they won’t.

How did you understand the example that the Solicitor General presented, the 100-foot cliff example?

Theodore L. Garrett:

–Well, what I made of it is that if there was a technological factor–

Byron R. White:

Technological?

It’s just he’s on a cliff and it’d cost him money to pump water.

Theodore L. Garrett:

–My understanding, and I think it’s better addressed to the EPA counsel–

Byron R. White:

I thought that the implication was that, sure, we’ll receive evidence of that.

Theodore L. Garrett:

–As to the costs, but not as to affordability.

In other words, if you can show that the costs are so high that it would force the plant to close–

Byron R. White:

Well, it’s evidence of affordability anyway, the cost is.

Theodore L. Garrett:

–Well, I guess all I can suggest is that you read EPA’s regulations as I just cited them.

And it seems to me clear on their face–

Byron R. White:

And so you’re suggesting the Solicitor General isn’t following his own regulations, in this example?

Theodore L. Garrett:

–Well, I think that you’d better ask him.

Byron R. White:

Well, I thought it was fair, I thought it was fair to ask you.

Theodore L. Garrett:

I had understood it in a different way.

I understood him to be saying that they would consider costs but not the question of affordability.

Byron R. White:

You mean, if the fellow who is putting in the evidence couldn’t go on and say, furthermore, I can’t afford this?

Theodore L. Garrett:

That’s exactly right.

And that’s what I understand the brief to say.

Byron R. White:

But that they might give him a variance because it was more expensive for him?

Theodore L. Garrett:

That’s correct.

On the other hand, on the other hand, if the Government could show that it were not more expensive for some strange reason, then the affordability question would be irrelevant and he might not be entitled to a variance.

Warren E. Burger:

I’m sure Mr. Levander will enlighten us when it comes to his four minutes.

Your position, as I understand it, the cliff is only about a third as high as it’s been described but it’s right on the border between justifying a fundamental cost difference and fundamental not.

You have two companies, one owned by a very large corporation with lots of money, another owned by a marginal operator, that the marginal operator would get a variance and the other one would not.

Theodore L. Garrett:

Well, yes and no.

John Paul Stevens:

It has to… for it to be a relevant factor it has to be decisive in some cases.

Now, I gave you a marginal case and see if you’re not saying that in that marginal case the small company gets it and the big one does not?

Theodore L. Garrett:

Well, first of all, I think our position has consistently been that you have to consider a number of factors so that that one factor–

John Paul Stevens:

All other factors are neutral except affordability in my hypothetical.

Theodore L. Garrett:

–Secondly, I’m not sure that the size of the plant alone–

John Paul Stevens:

Well, it’s the capital structure of the company.

Those plants are physically identical in my case.

Theodore L. Garrett:

–Well, let’s say that the large company concludes that by virtue of imposition of these added costs that it becomes uneconomical to operate that plant, whether it be a crushed stone facility or some other facility.

John Paul Stevens:

You keep changing my example.

Theodore L. Garrett:

Well, my only point is that it might be a relevant distinction and it might not.

Warren E. Burger:

Yes; dupont’s.

If dupont owned that coal mine or crushed rock–

You’re saying the regulations are okay.

Oh no.

–Well, if you say it might or might not be relevant, what are we arguing about?

Theodore L. Garrett:

My point is it’s always relevant.

Byron R. White:

What are we arguing about?

Theodore L. Garrett:

It’s always relevant.

The question is whether or not it’s–

Byron R. White:

The government’s position was that that was wholly irrelevant.

Theodore L. Garrett:

–That’s our understanding of their position.

Byron R. White:

But now you just said it might or might not be relevant.

Theodore L. Garrett:

Well, our position is that it would always be relevant.

I understood the question to be whether or not it would be dispositive, and I’m sorry for the confusion.

John Paul Stevens:

I don’t understand how anything could be relevant but never be dispositive.

If it’s the only differentiating factor between two otherwise comparable cases.

John Paul Stevens:

Seems to me it’s either dispositive or it’s then irrelevant; one of the two.

Theodore L. Garrett:

Well, I just think that all other factors being equal it might be dispositive, yes, recognizing the fact that there is a certain amount of discretion that the Agency has and that it’s hard to find two plants that are in identical circumstances with respect to the impact on receiving waters and other factors.

Warren E. Burger:

I’m sure Mr. Levander will clear it up for us.

Theodore L. Garrett:

The difficulty that we have with the Agency’s regulations is that the Agency says that it will grant the variance based on a number of factors, and they enumerate them, including engineering, process factors, land availability, and so forth.

Yet the one issue that they… as we understand it… refuse to consider in current permits is the question of whether or not the discharger can pay for the required control equipment.

The Agency will not consider the issue even if the resulting controls will result in no benefit to the environment.

Now, the Agency says, oh, yes, we’ll consider financial inability as a factor in 1984 but not now.

This is hardly any consolation to a plant that’s forced to close now because they cannot afford BPT permit requirements.

Now, Shakespeare once said,

“Those who die seldom do, or never recover. “

We submit that it’s totally arbitrary for EPA that it will consider every relevant factor except the one that means the very survival or extinction of a company.

Now, it seems to me that there is a tradition of fair play in America that allows persons to be heard on matters of significance.

And I think that EPA’s position here is at odds with that tradition.

It’s inconceivable to me that Contress would have delegated to EPA the authority to shut down a plant without a hearing at least on this issue, not in cases where they are in clear violation of that law, not in a situation where a plant is endangering human health, but simply because a small businessman cannot obtain financing or otherwise afford the cost involved.

Now, there’s been a lot said about the statutory structure.

I’d like to simply make a couple of points regarding that.

The 1977 standard is supposed to be practicable and in turn the Agency notes that it’s not anticipated that large numbers of plants will be forced to close as a result of BPT.

In contrast, by 1984, the standards are supposed to be more stringent and reflect the best available technology economically achievable, and to ensure that firms will not be forced to close.

Congress provided in Section 301(c) for an explicit variance from the 1984, or the Government refers to them as the 1987 limits on grounds of affordability.

Now there are two key respects in which the regulations depart from this scheme and in turn those departures relate to two independent grounds for affirming the decision below.

First of all, EPA’s initial BPT regulations often go very far beyond what is practicable.

In the case of the crushed stone industry, for example, EPA adopted BPT regulations that require zero discharge of process water, and they publish the identical regulations planned for the 1984 standards.

Now, contrary to the Government’s suggestion that the regulations were upheld in all respects, certainly the 4th Circuit found that in major respects the crushed stone regulations were unreasonable.

The crushed stone industry contains hundreds of small privately owned businesses.

And EPA’s regulations would close many plants that cannot afford the costs involved.

We strenuously disagree with Government counsel that the costs were fully considered by the Agency or that the impact would be small.

And on that, I would point out a couple of factors since it’s been brought up as an issue this morning.

The Agency acknowledges that the greatest impact of its regulations will fall on small plants.

Indeed, the Agency predicted that there would be 35 closures within its small plant category.

Its economic analysis had several categories of plants, the smallest of which was the so-called small plant category, and this consisted of a 100,000 ton-per-year plant.

Warren E. Burger:

How does that translate into number of employees?

Theodore L. Garrett:

I’m not sure, Mr. Justice Burger, but it’s relevant with respect to EPA’s economic analysis, and the adequacy of that analysis, that on-third of the industry… some 1,600 companies… are composed of plants that produce less than 25,000 tons per year, far smaller than studied by EPA even in its smallest small plant economic analysis.

In other words, this is a category of plants that was never studied by EPA.

We believe that many small plants in this industry will have a financial position that is significantly different from that studied by the Agency.

And if EPA’s position is upheld today, then plants in this subcategory will never have a chance to have EPA or state or anyone consider whether they’re fundamentally different in this respect.

Potter Stewart:

Mr. Garrett, you don’t make any constitutional argument in this care, do you?

Theodore L. Garrett:

Well, we suggest that there’s a delegation problem that could be avoided if the statute’s interpreted our way.

Potter Stewart:

Well, I thought it was a matter entirely of statutory construction.

Theodore L. Garrett:

I think the case can be disposed of as a matter of statutory construction but I–

Potter Stewart:

I thought that’s what the issues were.

Theodore L. Garrett:

–That is the issue.

I would just simply point out that, as I mentioned earlier, that I can’t conceive that Congress intended to delegate to EPA the power to make these kinds of decisions without considering this factor and without even affording the company an opportunity for hearing.

Potter Stewart:

But there’s no due process argument, or there’s no argument that there’s a taking without compensation, or anything like that.

Theodore L. Garrett:

Well–

Potter Stewart:

Is there or isn’t there?

Theodore L. Garrett:

–Not as such, although the issue is going to surface in one proceeding or the other, which was getting to my second point.

There is a relationship here, an interrelationship between the setting of the national standards and the allowance of a variance.

The courts have in many cases upheld national regulations considering EPA’s data base and the way in which EPA evaluated the evidence on the grounds that, well, maybe this was less than perfect, but in situations where it isn’t perfect, where there might be a taking or there might be a problem of insufficient consideration for statutory factors, that’ll be accounted for in the variance procedure.

The implications of EPA’s positions, it seems to me, are going to be to put an enormous burden on the initial regulation-setting stage, because if companies realize that the possibility of a variance is really illusory, that EPA has to have done superb economic analysis in the first instance, otherwise they’re never going to be heard on the question of affordability, you’re going to have extensive litigation and rule-making proceedings on the extent to which EPA conducted an adequate economic analysis.

It seems to us that at some stage these issues must be considered.

Now, the Agency’s justification apparently is that since the statute allows for a variance and for BAT in 1984, and it’s silent for BPT as to 1977, that that’s dispositive on the question.

We submit that Congress would not have intended such a result and that the decision of the 4th Circuit should be upheld.

Thank you.

Warren E. Burger:

Now you’ll clarify this problem for us, Mr. Levander.

Andrew J. Levander:

Yes.

Before I do that I’d like to make one point, if I might, Mr. Chief Justice, or two points.

The first point is that nothing in their brief… at least I read it several times, and I could find nothing about any constitutional question, any delegation question; this is simply a matter of statutory construction.

The second point is, as this Court made very clear in the dupont opinion, under the Clean Water Act the question is not what we think is an appropriate way to regulate; it is what Congress said and what Congress did.

And here the language of the Act, although somewhat complicated, strongly supports EPA’s position and the legislative history, which has not been discussed here at all, is simply overwhelming.

The report, the conference report… Senator Muskie, who was quoted with approval in this Court’s dupont opinion at page 130 and page 129, and other consistent statements by Congressmen over and over and over again reflect three things, one, that these regulations would force certain marginal economically inefficient companies out of business; two, that in order to sort of appease that problem to some extent, Congress created Section 8 financing.

Andrew J. Levander:

Senator Nelson introduced that bill saying variances are a problem because… and it’s exactly the situation where you have a little fellow who’s going to go out of work and it’s very sympathetic, that it’s hard to deny him a variance.

Nonetheless, Congress made a determination that he would be denied a variance unless he could get the Section 8 funding.

And three, over and over and over again… and I direct the Court’s attention to page 7 and 8 of the reply brief in particular.

There’s just statement after statement that the economic affordability will not be reconsidered on a plant-by-plant basis.

Byron R. White:

Are there some contrary indications in the legislative history?

Andrew J. Levander:

No.

The only contrary indications that are put out by respondent are post-adoptive legislative history.

And even as to that, I think it is indicative of the weakness of their position.

They claim that in 1977 when Congress amended the Act that it thoroughly considered and approved and acquiesced in the 4th Circuit Appalachian Power decision.

Now, the basis of that claim is three things.

First, the Congress didn’t expressly disapprove it in 1977, so we have this legislative silence which is supposed to be dispositive.

Second, that a Congressman got up on the floor of the House and waved a 126-page Library of Congress report which indexes 144 reported decisions, including the Appalachian Power decision and including decisions that suggested that the variance clause was valid on the same page, and said that this report he found it very useful to understand the Act, saying nothing about the Appalachian Power decision.

And on the basis of this we are supposed to assume that Congress was aware of and acquiesced in this decision.

John Paul Stevens:

Would the Government be satisfied if we adopted the formulation of the problem of the D.C. Circuit with which you say this 4th Circuit is in conflict?

Andrew J. Levander:

Yes.

I think the D.C. Circuit decision is correct that… and this is the part I explain what the difference is… EPA will take into account all kinds of fundamental differences directly related to compliance which affect the cost, that is, the financial outlay that a discharger would have to spend in order to comply.

Warren E. Burger:

Is that the man on the cliff problem?

Andrew J. Levander:

That’s the man on the cliff problem and all kinds of other problems.

Another example–

Byron R. White:

So you take evidence of cost as relevant?

Andrew J. Levander:

–Cost of compliance.

Byron R. White:

And you do… would you agree with Brother Stevens that it will be determinative sometimes?

Andrew J. Levander:

That is correct.

What we will not take into account, the discharger’s bankbook, which is to say we will not take into account affordability, his ability to afford, so that if you had four dischargers in an industry, all of them identical, and one of them was simply economically inefficient and had wasted money or didn’t have money or was incompetent or whatever his problem is–

John Paul Stevens:

Does the cost of compliance include capital costs?

Interest costs?

Andrew J. Levander:

–Well, that, of course, I answer by Section 8 financing which is available, so that the person who couldn’t get monies for–

John Paul Stevens:

No, no, not in whether there’s financing, but in determining costs, are capital costs an item that you’re looking at?

Which in turn may vary from company to company, as you know.

Andrew J. Levander:

–Well, that’s a closer question as to whether his lack of money, we don’t take into account.

Andrew J. Levander:

Now, if he were to show that for some reason he was different from the rest of the industry in his ability to get financing and that was not satisfied by Section 8, that’s a question I don’t think EPA’s passed upon, but my answer would be that he would not be entitled to a variance simply because his cost of money was 11 percent versus 12 percent or 10 percent.

Byron R. White:

So if he offers his operating statement for the past five years, you reject it?

Andrew J. Levander:

We don’t want to see it.

Byron R. White:

You reject it.

Andrew J. Levander:

That’s right.

What we want to know–

Byron R. White:

But if he wants to tell you how much it’s going to cost him?

Andrew J. Levander:

–That we want to know, and that’s the basis for variances and that’s what will keep these claims of all these industries–

Byron R. White:

Even though in making up the regulation you wanted all those operating statements?

Andrew J. Levander:

–In taking into account we analyze the total cost of application, which includes the industry-wide outlay to afford compliance.

And we also, in addition, we have discretion under 304(b) to take into account any other relevant factor and we have consistently–

Byron R. White:

You don’t think the fact that he’ll go out of business triggers the necessity to consider some of the other factors?

Andrew J. Levander:

–Well, I think it heightens the analysis on the variance proceeding, but it’s simply irrelevant–

Byron R. White:

Well, then, how can you say you don’t want to see his operating statements?

Andrew J. Levander:

–We don’t.

It’s not affordability.

Congress made the determination that affordability is only a factor to be considered in the ’87 limitations and not as to the ’77 limitations.

And one last point, if I might.

There’s been a lot of criticism here of EPA vacillating.

If you’ll read the progression of EPA statements, starting with 39 Fed. Reg. in 1974 and up to this very date, one thing that has never been vacillated on is this question of affordability.

EPA has never suggested and has never taken into account affordability as a basis, based on the language and the legislative history of the Act.

Thank you very much.

Warren E. Burger:

Thank you, gentlemen.

The case is submitted.

The Honorable Court is now adjourned until tomorrow at 10:00.