Atlas Copco, Inc. v. Environmental Protection Agency

Citation: 642 F.2d 458Docket: 76-1354

Court: Court of Appeals for the D.C. Circuit; May 30, 1980; Federal Appellate Court

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Atlas Copco, Inc. and ten other manufacturers challenge regulations established by the Environmental Protection Agency (EPA) under the Noise Control Act of 1972, which impose noise emission standards and testing procedures for portable air compressors. The manufacturers do not dispute the prescribed sound levels but contest other aspects of the regulatory framework, including compliance testing responsibilities and enforcement measures.

The Noise Control Act mandates the EPA to set federal maximum noise emission levels for specified products, including portable compressors. The contested regulations include an elaborate testing program that primarily places compliance testing responsibilities on manufacturers, along with monitoring and enforcement protocols to ensure adherence to noise limits.

The court notes it lacks jurisdiction over many of the manufacturers' claims due to the limitations set by Section 16(a) of the Noise Control Act, which restricts review to actions tied to Section 6. Consequently, issues related to monitoring, inspection, and enforcement fall outside its jurisdiction. However, complaints regarding testing regulations that derive from Section 6(c)(1) are within the court's purview and are subject to review. Section 6(c)(1) authorizes the EPA to establish decibel limits and necessary testing procedures to ensure compliance with noise emission standards, which the current regulations seek to implement.

The primary testing phase for compressors involves production verification, which mandates that one test compressor from each configuration must undergo verification under the manufacturer's control before commercial distribution. A configuration is verified if the test compressor meets the applicable noise level standards through specified testing methods. To ease the testing burden, manufacturers may test only the highest noise-emitting configuration within a category, with its compliance sufficing for all products in that category. Additionally, annual verification is required for each configuration or category, regardless of modifications, although the Administrator can waive this requirement upon request.

Production verification is further supported by the EPA's selective enforcement auditing (SEA) program, which addresses the limitation of actual testing in production verification. The SEA program involves the Administrator requesting broader testing of a specified category or configuration from the manufacturer, utilizing the same procedures as production verification. This results in a statistical sampling that informs whether the sampled products meet emission standards, allowing for a comparison against established acceptance-rejection rates to determine if further testing is required. The SEA is not intended as a quality control measure but as an audit for product conformity.

If a failure occurs during the SEA process, the regulations permit a third testing procedure where the Administrator can mandate testing of all compressors in the affected category before they can be distributed. This three-phase testing scheme aims to provide the Administrator with an effective tool for ensuring product integrity.

Petitioners challenge the annual testing requirement of the production verification regulation, arguing that it violates the notice provisions of the Administrative Procedure Act by not allowing adequate opportunity for public comment. They further assert that requiring annual reverification without a model change is unreasonable, given the regulation's purpose of confirming a manufacturer's capability to apply noise control technology.

Petitioners' claim regarding insufficient notice of the annual reverification requirement is rejected. Their argument, which suggests that reverification was only necessary when basic identification parameters changed, is undermined by their failure to comment on the proposed regulation, which was similar to the final version. The proposed standards clearly indicated that production verification for each configuration was required at the beginning of each model year, providing petitioners ample opportunity for meaningful input. Consequently, the Administrator's actions comply with the Administrative Procedure Act, and petitioners cannot raise this issue in court after missing the chance to object at the agency level.

The characterization of the annual reverification requirement as unjustifiable is also dismissed. The necessity of annual testing is justified within the broader context of the testing program, which involves limited actual testing of compressors. The initial verification only confirms a manufacturer's capability at the time of testing, while the argument against periodic checks overlooks production process variables that may affect compliance over time. Without ongoing testing, there is a risk of undetected quality decline, thus posing environmental hazards. The annual reverification requirement allows the Administrator to monitor manufacturers' production processes with minimal additional burden.

The requirement for production verification aligns with the purpose of confirming a manufacturer's control technology and its application in manufacturing. This verification is an ongoing process that necessitates periodic testing, particularly at the start of each model year as defined by regulations. The Administrator has the discretion to waive the annual testing requirement based on several factors, including the standards for the model years, previous product verification data, selective enforcement testing results, and any noise emission design changes in new models. 

Petitioners challenge the selective enforcement audit (SEA) program, arguing it is arbitrary due to the lack of specified conditions for when audit testing may be requested. Although the Administrator agrees that audits should be based on reasonable suspicion of noncompliance, the finalized regulation lacks explicit restrictions. The Administrator asserts that no specific cause is needed to initiate testing, emphasizing that the regulation merely outlines the process for the EPA to request testing and report results. Any challenges to an SEA should be raised when the request is made.

The excerpt highlights judicial skepticism towards regulations that lack clear standards. Courts often review regulations that impose compliance obligations without providing measurable guidelines, deeming them impermissibly vague. Even broad regulatory authority granted by Congress cannot justify such lack of precision in regulatory mandates.

Litigation regarding the SEA (Selective Enforcement Audit) compliance indicates that petitioners cannot claim insufficient guidelines for measuring performance since the criteria are clearly outlined in regulations. The primary uncertainty lies in the conditions that would initiate an SEA test request. The SEA process necessitates additional compliance testing by manufacturers for accurate assessment and reporting to the EPA, serving as an early oversight mechanism. Petitioners seek clarity on what triggers this process, but the agency is not obligated to provide this information, as their legitimate interest is in understanding compliance standards rather than the specific circumstances prompting audits.

While the SEA regulation may lack precise guidelines, potential abuse is inherent in any testing capability. Challenges should focus on specific applications of the program rather than its general validity. The Administrator's SEA regulation is deemed sufficiently precise to withstand scrutiny.

If a batch fails an audit, the Administrator may require further testing of all products in that category before distribution, with manufacturers allowed to request a hearing limited to the SEA's proper conduct and batch rejection criteria. Petitioners argue that this limitation is arbitrary and excludes critical evidence regarding testing orders. The court acknowledges that while agencies have discretion in evidence admission during hearings, they cannot exclude relevant facts that may influence their decisions. The limitation imposed on the hearing scope is deemed unreasonable and unduly restrictive, raising concerns about the fairness of the process.

The Administrator argues that the failure of a Selective Enforcement Audit (SEA) is the sole prerequisite for further testing under the regulation, suggesting that hearings should focus exclusively on this issue. However, the regulation allows for a discretionary determination regarding whether additional testing is needed for 'any or all' compressors in a failing configuration. Therefore, evidence concerning the appropriateness of further testing orders is relevant and potentially influential in the decision-making process. The blanket exclusion of such evidence is deemed unreasonable without justification.

In terms of compliance costs, petitioners challenge the adequacy of the data used by the Administrator to estimate the economic impact of the SEA program, asserting that the open-ended nature of the enforcement strategy complicates the ability to predict testing frequency and associated costs. While the absence of a limit on test requests makes precise cost calculation difficult, the statutory language does not demand such precision. The Administrator is required to consider reasonable cost estimates in formulating regulations, and Congress intended to allow for necessary further testing despite previous requests against a manufacturer.

Petitioners previously suggested that the Administrator should establish a finding of 'cause' before issuing SEA requests, which aligns with the current open-ended standard, thereby undermining their argument for precise cost analysis. The lack of a clear prediction regarding compliance costs does not prevent the Administrator from fulfilling the statutory mandate.

In conclusion, although petitioners raise several challenges related to the regulations under the Noise Control Act of 1972 regarding portable air compressors, many issues fall outside the jurisdictional review. The product-testing program has been deemed reasonable, with a valid selective enforcement auditing process that, while potentially subject to abuse, should be addressed within the context of specific applications. The court affirms these findings.

The regulatory framework governing the hearing process upon the failure of a State Environmental Agency (SEA) is deemed inadequate, as it restricts the consideration of evidence relevant to potential orders that may arise from such failures. This regulation has been ruled invalid, and the matter is remanded to the Environmental Protection Agency (EPA) for further proceedings.

In response to petitioners' request for rehearing concerning regulations established by the EPA under the Noise Control Act of 1972, the court has reaffirmed its earlier position that it lacks jurisdiction to review the challenged rules. These regulations were not issued under Section 6 of the Act, which pertains to noise emission standards and related provisions. The court emphasized that monitoring, inspection, and enforcement regulations fall outside the jurisdiction conferred by Section 16(a) of the Act.

Specifically, the court addressed two challenges from the petitioners: 

1. **Vicarious Liability**: Petitioners contested Section 204.5-6(b) of the EPA's regulations for imposing vicarious liability on manufacturers for distributor misuse. The court clarified that this provision, intended to void product exemptions for breaches of terms, is based on Section 10 of the Act and does not derive from Section 6, thus falling outside the court’s review authority. The court distinguished this case from a prior ruling (Chrysler Corp. v. EPA) that involved warranty liability, which was within jurisdiction due to its basis in Section 6(d)(1).

2. **Production Projections**: The court addressed Section 204.53(b), which allows the Administrator to require manufacturers to submit production schedule information. Petitioners sought clarification regarding the ongoing impact of a court-imposed stay on this data request, which had been issued earlier in the litigation.

The court's refusal to grant rehearing is based on its belief that it previously addressed all raised issues and that the matters at hand remain beyond its statutory authority to adjudicate.

A stay issued under Federal Appellate Rule 8(a) automatically dissolves upon the resolution of an appeal. The court lacks jurisdiction to review Section 204.53(b) because it was enacted under Section 13, which pertains to records and information, rather than Section 6. Consequently, the stay will not persist after the case's final resolution. 

Petitioners challenge Section 204.56(a)(1), which allows the Administrator to require the submission of compressors for testing. This regulation implements the directive in Section 13 of the Act regarding product testing and is outside the court's jurisdiction under the Act. 

Additionally, petitioners contest Section 204.55-1, mandating compliance of new compressors with performance standards as an enforcement provision under Section 10 of the Act. This regulation is also beyond the scope of judicial review based on the court's previous ruling in Chrysler.

Ultimately, the court confirms it lacks jurisdiction to address any of the petitioners' complaints, reiterating its earlier opinion and denying the petition for rehearing. 

Furthermore, petitioners question the adequacy of EPA's cost-of-compliance data, specifically regarding the exclusion of 600 cfm compressors. However, the EPA's economic analysis, which substituted data from 750 cfm compressors due to a lack of information on 600 cfm models, counters this claim. Petitioners also assert that the EPA's analysis on testing costs is outdated due to changes in regulations requiring annual reverification, but this interpretation is deemed consistent with the finalized regulations.

Reverification waivers can be granted if no modifications to parameters have occurred, contradicting the petitioners' claims. The Background Document accurately mentions potential cost reductions. According to 42 U.S.C. 4905(c)(1), any regulation regarding a product must establish a noise emission standard, considering the best available technology for noise reduction and compliance costs. Various cited legal precedents and statutory references reinforce these points, including provisions specific to railroad and motor carrier noise standards. The document also references specific sections of the Code of Federal Regulations (CFR) relevant to noise emissions, further supporting the regulatory framework established by the federal law.