In a majority opinion, the U.S. Court of Appeals for the D.C. Circuit dismissed a petition from the state of California and environmental groups to have the court review the legality of a memo William L. Wehrum, the assistant administrator for the EPA’s Office of Air and Radiation, issued to all Regional Air Division directors. The January 2018 memo provides regulatory relief to stationary major sources of hazardous air pollutants (HAPs) that make a binding commitment to reduce their emissions. Two judges agreed that although the memo was the “consummation of the EPA’s decisionmaking process” regarding the applicability of Section 112, it was not a final action under Clean Air Act (CAA) Section 7607(b)(1) and hence was not subject to judicial review.

Justice Judith W. Rogers dissented and asserted that the memo is a final action because it “commands, orders, and dictates without caveats or disclaimers about the binding nature of its statutory interpretation.”

Seitz memo replaced

As described by the majority, the Wehrum memo “declares that the plain language of Section 112 compels the conclusion that a source of toxic emissions classified as ‘major’ can reclassify to an ‘area source,’ and thereby ease its regulatory burden at any time after it limits its potential-to-emit [PTE] to below the major source threshold.”

The Wehrum memo replaces and reverses a 1995 memo issued by John Seitz, then director of the EPA’s Office of Air Quality Planning and Standards, which interpreted Section 112 to mean that once the EPA classifies a source as major, that source can never reclassify to area source status, even if it limits its potential to emit (PTE) to below the major source threshold.

Petitioners argued that the Wehrum memo is a final legislative rule that was issued without notice and opportunity for public comment—in violation of the Administrative Procedures Act. They further contended that even if the court found that the memo is an interpretive rulenot subject to notice and comment, the court must still vacate it because the EPA’s interpretation of Section 112 is incorrect.

Issuance of the Wehrum memo and withdrawal of the Seitz memo were announced in the Federal Register.

Eye of the beholder

The majority states at the start that its opinion only addresses whether the Wehrum memo is a final agency action. “We express no opinion as to whether the Wehrum Memo is prudentially ripe, an interpretive rule or a legislative rule, or on the merits of its interpretation of Section 112,” wrote the majority.

The majority also notes that there are no “predictable answers” to questions about when an action is a final agency action that is ripe for judicial review. “Indeed, the nature of agency action, it seems, is too often in the eye of the beholder,” wrote the majority. An important point, and one made twice by the U.S. Supreme Court in the last 5 years, is that although all legislative rules—that is, those subject to judicial review—are final actions, not all final actions are legislative rules.

The majority bases its conclusion that the Wehrum memo is not a final agency action on a two-prong test the Supreme Court used in Bennett v. Spear (1997). The Supreme Court stated:

“As a general matter, two conditions must be satisfied for agency action to be ‘final’: First, the action must mark the ‘consummation’ of the agency’s decisionmaking process—it must not be of a merely tentative or interlocutory nature. And second, the action must be one by which ‘rights or obligations have been determined,’ or from which ‘legal consequences will flow.’”

Prong one

The majority, as well as the dissent, agreed that the Wehrum memo “mark[s] the consummation of [the EPA’s] decisionmaking process.” Furthermore, the EPA offered no substantive argument to the contrary, said the majority.

“The Wehrum Memo unequivocally states that the plain language of Section112 ‘compels’ the legal conclusion that qualifying major sources can reclassify at such time that they take an enforceable limit on their PTE to below the major source threshold,” the majority states. “In other words, the Wehrum Memo does not advance what EPA believes is a reasonable interpretation of Section112; it advances what EPA believes is the only permissible interpretation of the statute.”

Prong two

The next question is whether the memo has “direct and appreciable legal consequences.” Petitioners argued that it does because it creates a new right by allowing major sources unable to reclassify to area sources under the Seitz memo to so reclassify. The EPA countered that the Wehrum memo does not change the rights of regulated sources. Whether a regulated source has the right to reclassify, the Agency continued, is only determined within the Title V permitting process. The majority agreed:

“Neither EPA nor any regulated source can rely on the Wehrum Memo within the Title V permitting process or in any other proceeding. In other words, as [the EPA] concedes, although the Wehrum Memo forecasts EPA’s position as to Section 112, it has no independent legal authority. In addition, under the Act and EPA regulations, a state permitting authority that refuses to comply with the Wehrum Memo faces no penalty or liability of any sort. Further still, the instant matter does not present a circumstance where the action at issue may be legally consequential because its binds agency staff and affected parties have no means (outside of judicial review) by which to challenge it. To the contrary, the Act contains clear provisions pursuant to which: (1) a state permitting authority can refuse to apply the Wehrum Memo and seek judicial review if EPA issues a permit over its refusal; and (2) a regulatory beneficiary can petition EPA to object to a state permitting authority’s application of the Wehrum Memo and seek judicial review if EPA denies the petition.”

Simply put, “[t]he Wehrum Memo is all bark and no bite,” stated the majority.

Dissent

Rogers first states that the federal courts have repeatedly held that judicial review is available pursuant to CAA Section 7607(b)(1) for guidance documents that bind EPA officials on how to make Title V permitting decisions. In one case cited by Rogers, the 3rd Circuit held that a guidance document that definitively interpreted a provision of the CAA “altered the legal regime” because it required EPA officials to consider alternatives to a specific program when reviewing state implementation plans. The court explained that the guidance “binds EPA regional directors and thus qualifies as final.”

Rogers continues her dissent by noting the obligation the memo places on the states. She writes:

“The Wehrum Memorandum directs EPA enforcement officials to send the memorandum to the States and thereby, in light of the Federal Register Notice, puts States doubly on notice that EPA’s interpretation of Section 112 has changed, effective immediately. Given the text, structure, and purpose of the CAA, state permitting authorities are not free to ignore EPA’s new interpretation of Section 112. The statutory scheme is based on a partnership between federal and state governments, whereby EPA sets federal standards and States develop implementation plans to set emissions limitations and standards to conform to these federal standards.”

Rogers adds that the majority’s suggestion that the Wehrum memo is “all bark and no bite” ignores its plain text, as well as the second clause of the second prong of the final actiontest.

“With EPA’s blessing, legal consequences will flow from the Wehrum Memorandum no later than when ‘major sources’ take enforceable limits on their PTE below ‘major source’ thresholds and obtain new or modified Title V permits,” wrote Rogers.

The EPA recently issued a proposal to allow a major source of HAPs to reclassify as an area source after acting to limit emissions to below the levels that define major sources. Neither the majority nor the dissent in the case discussed here referenced the proposal.