UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT
decided: August 30, 1983.
SIERRA CLUB, PLAINTIFF-APPELLANT,
INDIANA-KENTUCKY ELECTRIC CORPORATION AND INDIANA & MICHIGAN ELECTRIC COMPANY, DEFENDANT-APPELLEE
Appeals from the United States District Court for the Southern District of Indiana, New Alabany Division. No. 81 C 7 -- Carl J. Holder, Judge. No. 81 C 8 -- James E. Noland, Judge.
Wood, Circuit Judge, Fairchild, Senior Circuit Judge, and Roszkowski, District Judge.*fn*
ROSZKOWSKI, District Judge.
This consolidated appeal arised under the Clean Air Act Amendments of 1970. The issue is whether a federal court may enforce an implementation plan provision which was adopted by the state to meet federal air quality standards, subsequently was approved by the Environmental Protection Agency, but thereafter was invalidated by a court of the adopting state on state law procedural grounds. The district courts below held that such a provision is not enforceable. For the reasons herein stated, this court affirms those decisions.
The Clean Air Act Amendments of 1970,*fn1 described by the Supreme Court as "a drastic remedy to . . . . (the) otherwise uncheckable problem of air pollution," Union Electric Co. v. EPA, 427 U.S. 246, 256, 96 S. Ct. 2518, 49 L. Ed. 2d 474 (1976), empowered the EPA to set national primary and secondary ambient air quality standards. 42 U.S.C. § 7409.*fn2 Compliance with the standards were then to be implemented through state plans. Each state, "after reasonable notice and public hearings, [was to] adopt and submit to the Administrator, within nine months after the promulgation of a national primary ambient air quality standard . . . . for any pollutant, a plan which provides for implementation, maintenance, and enforcement of such primary standard in each air quality control region . . . . within such state." 42 U.S.C. § 7410. The Act essentially gave the states the initial opportunity to develop a workable and equitable implementation for meeting national standards within the state. In the event the state was unable to present an implementation plan which met statutory requirements, the EPA administrator was authorized to develop its own implementation plan for the state. 42 U.S.C. § 7410(c).*fn3
On April 11, 1972, the State of Indiana submitted to EPA an implementation plan that included provision APC-13, which was designed to regulate sulfur dioxide emissions. On May 31, 1972, EPA approved APC-13 in part and rejected APC-13 in part.*fn4 The State of Indiana revised APC-13 to conform to EPA's objections and submitted the revised version to the EPA on September 15, 1972. The EPA accepted the revised APC-13 and revoked its prior disapproval.
A group of Indiana utilities, including one of the appellees now before us, chose to challenge APC-13 in both the federal and state courts.
The federal court challenge reached this court in 1975. In Indiana & Michigan Electric Co. v. EPA, 509 F.2d 839 (7th Cir. 1975), the utilities unsuccessfully challenged the EPA Administrator's approval of the Indiana implementation plan. Among the challenges raised was a due process objection. In rejecting the claim, this court held that the procedural scheme prescribed by the Act provided "adequate opportunity for the submission of views and for judicial appeal." Id. at 847. We observed that the utilities had "a right to challenge the reasonableness of state plans in state courts, and if part of a state implementation plan is held invalid by a state court, the state would have to revise that part." 509 F.2d at 847. It was further noted, that "should the state fail [to revise the invalidated provision] . . . . the Administrator must propose and promulgate a revision." Id. We reminded the utilities that whether the state or the Administrator made the revisions, "in either case a hearing, or at least an opportunity for a hearing is a prerequisite to adoption of the new regulation." Id.
As was suggested in Indiana & Michigan Electric Co. v. EPA, the utilities proceeded with their procedural challenges to APC-13 in state court. On November 10, 1975, the Circuit Court for Marion County held APC-13 invalid. Four years later, the Indiana Court of Appeals for the Second District affirmed the Circuit Court's invalidation on the procedural ground that the state officer who presided over the hearing had failed to submit written findings to the Indiana Environmental Management Board. Indiana Environmental Management Board v. Indiana-Kentucky Electric Corp., 181 Ind. App. 570, 393 N.E.2d 213, 222 (Ind. App. 1979).
Despite the state court ruling, the Sierra Club brought suits to enforce APC-13 against alleged polluters. In Case No. 81-1822, the Sierra Club sought to enforce APC-13 against the Indiana-Kentucky Electric Corporation. In Case No. 81-2173, the Sierra Club brought an identical action against the Indiana & Michigan Electric Company, the same utility which brought the earlier federal challenge.
In both cases, the defendant moved to dismiss the complaints. The courts below granted the motions, essentially ruling as did Judge Holder in Case No. 81-1822 that the action[s] "seek to enforce invalid regulations."
Plaintiff, Sierra Club, now appeals the two orders of dismissal. Appellant contends that APC-13, once approved by the EPA, becomes enforceable federal law which a subsequent state court ruling may not disturb. Sierra Club essentially argues that APC-13 should continue to be enforceable until a new state implementation plan is established in its place. Otherwise, Sierra Club argues, a major loophole in the Act would open.
The appellees claim that a plan (or plan provision) invalidated in state court is unenforceable under the Act in either federal or state court. They contend that a state cannot be deemed to have submitted a plan provision when that state's own court has held that the provision was not adopted in accordance with state law. The appropriate recourse under the Act, appellees argue, is for the EPA to formulate immediately a replacement provision.
Our examination of the statute, relevant judicial precedent, and the legislative history reveals that the Act does permit a successful state court challenge to render an implementation plan provision unenforceable in both federal and state court.
Three reasons support this conclusion. First, administrative action, to be valid, must substantially comply with applicable procedural rules. Because APC-13 was not promulgated in accordance with Indiana procedural law, APC-13 is invalid and may not be enforced. Second, decisions construing the Act have encouraged litigants to pursue their procedural challenges to state implementation plans in the state courts. For that review to be meaningful, a state court ruling, like that of the Indiana Appellate Court, must be given effect. Finally, no precedent exists to support the Sierra Club's novel suggestion that an invalid plan should be given effect until a replacement is devised; instead, the Act and its Legislative history foresaw EPA action as the appropriate remedy for any state level failure.
A. APC-13 WAS NOT ADOPTED IN ACCORDANCE WITH APPLICABLE PROCEDURES AND THEREFORE WAS AN INVALID PLAN SUBMISSION
The 1970 Amendments to the Clean Air Act provide that "each State shall, after reasonable notice and public hearings, adopt and submit to the Administrator . . . . a plan which provides for implementation, maintenance, and enforcement of such primary standard in each air quality control region (or portion thereof) within such State." 42 U.S.C. § 7410. Although the terms "shall submit" could be construed to impose a mandatory duty upon the states to formulate a plan, judicial construction of the Act has established that the Act merely gives the States the first opportunity to draft and submit a plan. A state may not be compelled to formulate or submit an implementation plan. Columbia v. Train, 172 U.S. App. D.C. 311, 521 F.2d 971 (D.C. Cir. 1975), vacated on other grounds 431 U.S. 99, 97 S. Ct. 1635, 52 L. Ed. 166 (1977). If, however, a proper plan is not submitted, EPA may establish a plan for the state. Id.
The record clearly establishes that Indiana's proposed submission for the control of sulfur dioxide emissions, APC-13, was promulgated without adherence to Indiana procedural law. Because administrative actions taken without substantial compliance with applicable procedures are invalid, it is as if Indiana never submitted APC-13. Since a valid APC-13 was never submitted, EPA's adoption of APC-13 cannot be given effect since EPA approved a provision which was invalid when submitted to the agency.
Both the federal and Indiana state courts have repeatedly recognized that administrative action which fails to substantially comply with applicable administrative procedures cannot be given effect. This Circuit, while noting the limited nature of judicial review of administrative action, has nevertheless stressed the need for judicial review to assure compliance with established procedures:
A judicial review of administrative proceedings respecting agency employee disciplinary action under the Administrative Procedure Act is limited to the question whether there has been substantial compliance with applicable procedures and statutes.
Fagan v. Schroeder, 284 F.2d 666, 668 (7th Cir. 1960) (emphasis supplied). The Indiana Courts have also recognized the need to assure that administrative decisions are not "without observance of procedure required by law." Natural Resources Commission of Dept. of Natural Resources v. Sullivan, 428 N.E.2d 92, 97 (Ind.App. 1981); State Dept. of Natural Resources v. Lehman, 177 Ind.App. 112, 378 N.E.2d 31, 35 (Ind.App. 1978).*fn5
Compliance with procedural requirements is especially significant, where, as here, a fundamental procedural safeguard such as the need for written findings is involved.
As we have frequently emphasized, findings of fact are not mere procedural niceties; they are essential to the effective review of administrative decisions. Without findings of fact a reviewing court is unable to determine whether the decision reached by an administrative agency follows as a matter of law from the facts stated as its basis, and whether the facts so found have any substantial support in the evidence.
U.S.V. Pharmaceutical Corp. v. Secretary of HEW, 151 U.S. App. D.C. 184, 466 F.2d 455, 462 (D.C. Cir. 1972); Great Lakes Screw Corp. v. N.L.R.B., 409 F.2d 375, 379 (7th Cir. 1969) ("reviewing authorities must know the basis upon which the conclusions rest"); International Paper Co. v. Federal Power Comm., 476 F.2d 121, 128 (5th Cir. 1972) ("it is incumbent on an administrative agency to supply clear findings").
The Indiana Appellate Court struck APC-13 precisely because the hearing officer's failure to make written findings made it impossible for the full Environmental Management Board to evaluate and review the decision. The Court stated that where a single board member is used to conduct the hearing, "it is mandatory that findings and recommendations be submitted to the full board." 393 N.E.2d at 217. The Court observed that "the stated intent [of the requirement] is to assure public impact on proposed regulations so that adequate consideration be given thereto by the full board." Id. (Emphasis and bracketed material supplied). The Appellate Court's ruling reflected the generally accepted principle of administrative law that in Indiana "all administrative agencies . . . . must in all cases set out written findings of fact in support of the decision so that th[e] Court may intelligently review the specific decision." Hawley v. South Bend Dept. of Redevelopment, 270 Ind. 109, 383 N.E.2d 333 (Ind. 1978); Lind v. Medical Licensing Bd. of Indiana, 427 N.E.2d 671 (Ind.App. 1981). APC-13, unsupported by written findings, was therefore invalid when submitted to the EPA.
B. MEANINGFUL STATE COURT REVIEW IS CONTEMPLATED UNDER THE ACT
Federal decisions construing the Act have encouraged litigants to pursue their procedural challenges in the state courts. If it were now held that a state court ruling has no effect under the Act, the method of review held out in previous decisions would be rendered utterly meaningless.
This Circuit, in Indiana and Michigan Electric, supra, recognized that the parties had "a right to challenge the reasonableness of state plans in state court." 509 F.2d at 847. The right was intended to be meaningful, in that the ultimate decision of the state court, if unfavorable, would force immediate revision of the plan. We stated:
Id. (emphasis supplied). We further observed that
Id. (emphasis supplied).
Other Circuits have also forcefully acknowledged a meaningful role for state court review of state procedural plan adoption. The Sixth Circuit, in Ohio Environmental Council v. United States Environmental Protection Agency, 593 F.2d 24 (6th Cir. 1979), upheld the EPA Administrator's approval of a state implementation plan, despite allegations of procedural irregularities, when the Administrator obtained an opinion from the Office of the Attorney General that Ohio procedural requirements had been followed by Ohio in its adoption of the plan. The Court concluded that the Administrator "acted reasonably in determining that the procedural requirements of Ohio law had been met and that the proposed revision was adopted by the State after reasonable notice and public hearing." Id. at 29. Significantly, the Court criticized the Ohio Environmental Council's ("OEC") failure to pursue its state based procedural challenges in an Ohio state court. The Court admonished the OEC, stating that:
The arguments of OEC, both substantive and procedural, were heard by the state agency charged by state law with enforcing the Ohio SIP. No appeal was taken by OEC to an Ohio court where a challenge might have been made to the adequacy of the administrative proceedings. In view of this failure to seek a definite ruling on its claim of procedural irregularities it cannot be heard to complain of U.S. EPA's reliance on an opinion from the office of the State Attorney General.
Id. at 29.
The Fourth Circuit, in Appalachian Power Co. v. Environmental Protection Agency, 579 F.2d 846 (4th Cir. 1978), upheld West Virginia's revised state implementation plan over procedural objections. The Court acknowledged that "before approving a state plan, the EPA must determine that the state plan was adopted at the state level 'after reasonable notice and public hearing. '" Id. at 850. The Court held that the notice and hearing requirement was satisfied because the procedure followed "was in accordance with West Virginia law." Id. at 850. Like the Sixth Circuit, the Fourth Circuit was also critical of the objector's failure to pursue its procedural challenges in state court, and even went so far as to suggest, in dicta, that the failure to pursue a state court challenge could mean the party has no standing to raise the challenge in federal court:
We have proceeded so far on the assumption that the petitioners have standing to by-pass available state remedies and assert these alleged defects in the state hearings either before the EPA or in this Court. This poses a serious question. Admittedly, there was a well-defined procedure provided by state law whereby the petitioners could have raised these alleged procedural defects by instituting a declaratory judgment action in a state court. Such a procedure would have provided an expeditious means for determining whether the state proceedings were flawed, and, if so, would have provided a means for correcting those flaws at the state level without all the delays involved in later appeals to the EPA and to this Court. The petitioners chose, however, to bypass this available state remedy. We find persuasive the reasoning that the petitioners, by bypassing the state remedy for correction of any defect in the state proceeding, lack standing to challenge any alleged errors in those State Agency proceedings later before the EPA or this Court. Cf. Anaconda Company v. Ruckelshaus, (10th Cir. 1973) 482 F.2d 1301, 1304. It is unnecessary, however, for us so to conclude in this case, since we have discovered no defects in the state proceedings.
Id. at 854-55 (emphasis added).
In Western Oil & Gas Association v. United States Environmental Protection Agency, 633 F.2d 803 (1980), the Ninth Circuit was asked to review alleged procedural irregularities in a related area, revision of a state implementation plan. The objectors, in challenging the California revisions, argued that "unless this court reviews the alleged state procedural errors they will escape review entirely." Id. at 813. The Court ruled that "state law must provide the remedy petitioners seek," Id. at 814, and added that "petitioners do not explain why the state's submission of the attainment status designations to the EPA terminated any possibility of relief in the state courts." Id. at n.14.
These decisions establish that, in the state and federal partnership established under the Clean Air Act and its subsequent amendments, state court review of plan adoption is an available, if not a mandatory, means of review which certainly is meant to be meaningful.
If the state court procedural review afforded under the Act is to have meaning, the rulings of the state court must be given effect. This precise reasoning was employed by the District Court for the Central District of Illinois in People of the State of Illinois v. Celotex, 516 F. Supp. 716 (1981). In Celotex, Illinois attempted to enforce an implementation plan provision which had been invalidated by the Illinois Supreme Court due to procedural deficiencies. In dismissing those portions of the complaint which sought to enforce the invalidated provision, the Court reasoned:
When the Seventh Circuit upheld USEPA's approval of the Illinois SIP, the court specifically recognized the petitioner's right to challenge the regulations in the state courts, based on procedural errors in the state administrative proceedings. This finding formed part of the basis for the court's denial of petitioner's due process claim, Indiana & Michigan, supra at 847. Several industries followed the cue and pursued judicial review in the state courts, with the result being that Regulations 203(g)(1)(B) and 204(c)(1)(A) were found to be invalid.
Id. at 718. The Celotex Court also commented on the unusual and inconsistent statutory scheme which would result if the state court rulings were not given effect:
It would be an anomaly, if not a denial of defendant's due process rights, to allow, at this point, full enforcement of those invalid regulations, especially by the State of Illinois, which is totally barred in its own courts.
The Celotex reasoning is persuasive. If we were to find that implementation plan provisions were enforceable despite state court invalidation of them, the state court review would be meaningless. Those who followed our pronouncements concerning the availability of state court review would find their efforts have been for naught; and the Clean Air Act would be construed to reach the inconsistent result that an implementation plan, the product of a joint federal and state effort under the same Act, would be enforceable in the courts of one level of government but not the other.*fn6 We therefore align this Circuit with the holding in Celotex.
We note here that Sierra Club also advances a number of other statutory arguments to establish the federal enforceability of APC-13. None of these arguments have merit.
Sierra Club argues that, once the EPA adopts a state implementation plan, that plan becomes federal law and only the federal government may alter that law. Sierra Club points out that Title 42, Section 7607(b)(1),*fn7 provides that an approved plan may be invalidated only in the appropriate federal court of appeals. This assumes, however, that the plan is adopted initially in accordance with the Act. The state-federal partnership fashioned under the Act gave a place to the states and their reviewing courts in the initial plan formulation. The state governmental bodies are entitled to review the procedures employed to adopt a state implementation plan. Once a plan is adopted by the state and it withstands any subsequent procedural challenge, then § 7607(b)(1) provides that invalidation may occur only in the federal appellate courts. Any other interpretation would destroy the meaningfulness of the review this circuit and others have held would be available in the state courts.
Sierra Club next contends that the ruling in the Indiana Appellate Court amounted to a plan revision or modification by the State. Appellant correctly observes that modifications or revisions must be approved by the EPA to become effective. See 42 U.S.C. § 7410(a)(3)(A);*fn8 Train v. N.R.D.C., 421 U.S. 60, 95 S. Ct. 1470, 43 L. Ed. 2d 731 (1975); Friends of the Earth v. Carey, 535 F.2d 165, 169 (2nd Cir. 1976).
The proceeding before the Indiana courts was not a revision or a modification of a plan. Modification or revision assumes the existence of a valid plan in the first place. The Indiana Court ruled that a valid plan never existed, for there were procedural defects which invalidated the plan at its inception. The state court proceedings therefore are not modifications or revisions.
This Circuit has expressly held that state court invalidation of an original plan provision for procedural defects does not constitute a revision of the plan. In Public Service Co. of Indiana v. U.S. E.P.A., 682 F.2d 626 (1982), cert. denied, 459 U.S. 1127, 103 S. Ct. 762, 74 L. Ed. 2d 977 (1983), the parties offered the two district court cases we now review as precedent on a revision question. We held the cases to be "inapposite" because they addressed plans that were "invalid when submitted to the agency," not revisions. 682 F.2d at 633. To the same effect, see Celotex, supra. Thus, the actions below do not constitute revisions.
In some ways, Sierra Club tacitly acknowledges that the state court ruling serves to invalidate APC-13. While Sierra Club pursued its statutory arguments to the contrary, it also chose to spend a great deal of its time on the alternative argument that this court should at least construe the Act to allow the APC-13 to continue in effect until an alternative provision is devised. We therefore will consider whether there is any support in the Act or its legislative history for continuing an invalid plan in effect until a replacement is devised.
C. APC-13 MAY NOT REMAIN IN EFFECT UNTIL A SUBSTITUTE PROVISION IS DEVISED
Sierra Club contends that the existing provision should remain enforceable until an alternative provision is substituted in its place. Sierra Club argues that if a state court invalidation of a plan provision is given immediate effect, then the EPA will never be entirely sure that a plan drafted at the state level is firmly in place until all state level challenges have been pursued to their bitter and protracted end.
Our examination shows that Congress, in passing the Clean Air Act Amendments of 1970 was aware of the risk that some states, for any number of reasons, might fail to promulgate an implementation plan which was proper in all respects. The remedy Congress built into the Act in the event of a state level failure is for the EPA to demand an immediate state replacement or to promulgate its own implementation plan (or appropriate provision) for the state. This is the remedy Congress foresaw for state inaction or ineffectiveness. The Sierra Club's proposed solution, that the invalid provision be deemed enforceable until a new plan is established, finds no support in the Act's terms or legislative history.
First, § 7410(c)(1) instructs the EPA Administrator to devise an implementation plan when the state plan fails to meet statutory requirements. The section provides:
The Administrator shall, after consideration of any state hearing record, promptly prepare and publish proposed regulations setting forth an implementation plan, or portion therefor, for a state if --
(A) The State fails to submit an implementation plan which meets the requirements of this section.
(B) the plan, or any portion thereof, submitted for such State is determined by the Administrator not to be in accordance with the requirements of this section, or
(C) the State fails, within 60 days after notification by the Administrator or such longer period as he may prescribe, to revise an implementation plan as required . . . .
(Emphasis added). In the present case, Indiana in effect failed to submit a valid provision for the regulation of sulfur dioxide emissions. This would fall within 7410(c)(1)(A), in that "the state fail[ed] to submit an implementation plan which meets the requirements of this section." Consequently, the intended remedy is for the EPA to act.*fn9
The legislative history also shows that Congress intended that EPA action serve as the contingent remedy in case of plan failure at the state level. While the legislative history is not so enlightening as to address the specific problem we face, it is replete with a number of general statements that the spectre of federal action was to serve as a backstop to state inaction or failure. Representative Staggers of West Virginia, in summarizing the bill for House members prior to the vote stated:
But if any State does not come up with a state plan to the satisfaction of the Federal Government then the Federal Government will step in and establish a plan for such a State.
116 Cong.Rec. H19205 (daily ed. June 10, 1970). Representative Jarman of Oklahoma echoed this evaluation of the bill's intent:
If the State fails to file a letter of intent or does not adopt a plan or adopts a plan which does not meet the statutory requirements, then after reasonable notice and hearing the Secretary*fn10 may publish proposed regulations setting forth a plan.
Id. at H19209. The views of Rep. Staggers and Rep. Jarman were reflected in the final House Report on the Bill. The Report, in its initial summary highlighting the primary features of the Bill stated:
If a State fails to file a letter of intent or does not adopt a plan or adopts a plan which does not meet statutory requirements, then after reasonable notice, the Secretary may publish proposed regulations setting forth a state plan.
House Comm. on Interstate and Foreign Commerce, Clean Air Amendments of 1970, H.Rep.No. 91-1146, 91st Cong., 2d Sess., reprinted in 1970 U.S. Code Cong. & Ad. News 5356, 5357.
The Senate also recognized the same role for the EPA Administrator. The Senate Report states:
The Committee also recognizes that it is possible that an implementation plan approved or promulgated by the Secretary may later be found inadequate to attain the national ambient air quality standard(s). Whenever information reveals that an approved or promulgated implementation plan is inadequate, the Secretary would be required to act to revise such plan.
Sen.Rep.No. 91-1196, 91st Cong., 2d Sess. 14 (1970).
Thus, while the Congress did not explicitly foresee the possibility of a successful state court challenge after an implementation plan was approved by EPA, it did rather clearly embrace the general proposition that federal action was intended to remedy any problem with a state implementation plan.
Where, as here, Congress has clearly shown an intent to have state participation and an intent to have EPA formulate a plan in the event of state level failures, this court is not free to fashion unprecedented and unusual alternative remedies that have no foundation in the terms of the Act or in the Act's legislative history. The court therefore rejects Sierra Club's proposed remedy.
While the court acknowledges that its ruling is in some ways a setback to environmental protection, it does not agree that years will pass before Indiana has an acceptable and workable implementation plan. APC-13 provides some examples and guidelines to the EPA as to what Indiana believes might be one approach to meeting national standards. The EPA may submit APC-13 in its current form for proper notice and hearing and comment in Indiana, if it so desires.*fn11 The same basic framework may be appropriate once proper administrative proceedings have been held.
For these reasons, the district courts are AFFIRMED.