B-253214, October 21, 1993

B-253214, October 21, 1993

MISCELLANEOUS TOPICS Environment/Energy/Natural Resources Environmental protection Air quality Standards Deadlines In imposing sanctions against a state after a finding of inadequacy with respect to a plan revision required under Part D of the Clean Air Act, EPA is required, under section 179 of the Act, to allow the state 18 months to correct the deficiency before imposing the sanctions. MISCELLANEOUS TOPICS Environment/Energy/Natural Resources Environmental protection Air quality Rulemaking EPA may not, consistent with the statutory scheme for sanctions imposition under the Clean Air Act and the notice and comment requirements for rulemaking under the Administrative Procedure Act, propose sanctions against a state before the state has submitted its SIP.

The Honorable John D. Dingell Chairman, Subcommittee on Oversight and Investigations Committee on Energy and Commerce House of Representatives

Dear Mr. Chairman:

This responds to your request that we examine certain legal issues raised by an April 13, 1993, letter to California Governor Pete Wilson from Environmental Protection Agency (EPA) Administrator Carol M. Browner and Secretary of Transportation Frederico Pehoulda. That letter informed Governor Wilson that if California fails to submit, by November 15, 1993, authorizing legislation and regulations to EPA for an enhanced motor vehicle emissions inspection and maintenance (I&M) program that is "fully approvable" under federal I&M requirements, EPA intends to impose statewide sanctions on California under the Clean Air Act (the Act).

The EPA letter characterizes as incorrect the view that EPA is required to give states 18 months to come into compliance before imposing sanctions under section 179 of the Clean Air Act (referred to in the letter as the "18-month sanctions clock"). Rather, the letter asserts, EPA is authorized under section 110(m) of the Act to impose sanctions at any time after making a finding that a State Implementation Plan (SIP) is deficient. Finally, the letter states that EPA may propose sanctions in anticipation of the state's actual failure to submit an adequate SIP by November 15, 1993.

As agreed with Mr. Finnegan of your staff, we have examined the following legal issues raised by Administrator Browner and Secretary Pehoulda's letter:

1. Is EPA authorized under section 110(m) of the Clean Air Act to impose sanctions on the state of California immediately after finding that a revision to its SIP required under Part D of the Act is deficient, regardless of the "18-month sanctions clock" provided in section 179?

2. May EPA legally propose sanctions in anticipation of a state's failure to submit an adequate SIP, before finding that the state's SIP is inadequate, and even before the state has submitted its SIP?

As explained in the enclosed detailed analysis, we have concluded that:

1. After a finding of SIP deficiency with respect to a required Part D plan revision, EPA is required to allow states 18 months to correct the deficiency before imposing sanctions.

2. EPA is not authorized to formally propose sanctions against a state until it finds that the state's SIP submission is deficient.

We hope our comments are helpful to you. In accordance with our usual procedures, this opinion will be available to the public 30 days from this date.

ANALYSIS

Background

The Clean Air Act Amendments of 1990 added to the Clean Air Act two new provisions addressing the imposition of sanctions on states that fail to meet certain requirements. They are section 110(m) and section 179.

Section 110(m) provides:

"The Administrator may apply any of the sanctions listed in section 179(b) at any time (or at any time after) the Administrator makes a finding, disapproval, or determination under paragraphs (1) through (4), respectively, of section 179(a) in relation to any plan or plan item (as that term is defined by the Administrator) required under this Act, with respect to any portion of the State the Administrator determines reasonable and appropriate, for the purpose of ensuring that the requirements of this Act relating to such plan or plan item are met. The Administrator shall, by rule, establish criteria for exercising his authority under the previous sentence with respect to any deficiency referred to in section 179(a) to ensure that, during the 24-month period following the finding, disapproval, or determination referred to in section 179(a), such sanctions are not applied on a statewide basis where one or more political subdivisions covered by the applicable implementation plan are principally responsible for such deficiency."

Section 179(a) provides:

"For any implementation plan or plan revision required under this part [Part D][1] (or required in response to a finding of substantial inadequacy as described in section 110(k)(5)),[2] if the Administrator--

"(1) finds that a State has failed, for an area designated nonattainment under section 107(d), to submit a plan, or to submit 1 or more of the elements (as determined by the Administrator) required by the provisions of this Act applicable to such an area, or has failed to make a submission for such an area that satisfies the minimum criteria established in relation to any such element under section 110(k),

"(2) disapproves a submission under section 110(k), for an area designated nonattainment under section 107, based on the submission's failure to meet one or more of the elements required by the provisions of this Act applicable to such an area,

"(3)(A) determines that a State has failed to make any submission as may be required under this Act, other than one described under paragraph (1) or (2), including an adequate maintenance plan, or has failed to make any submission, as may be required under this Act, other than one described under paragraph (1) or (2), that satisfies the minimum criteria established in relation to such submission under section 110(k)(1)(A), or

"(B) disapproves in whole or in part a submission described under subparagraph (A), or

"(4) finds that any requirement of an approved plan (or approved part of a plan) is not being implemented,

"unless such deficiency has been corrected within 18 months after the finding, disapproval, or determination referred to in paragraphs (1), (2), (3), and (4), one of the sanctions referred to in subsection (b) shall apply,[3] as selected by the Administrator, until the Administrator determines that the State has come into compliance, except that if the Administrator finds a lack of good faith, sanctions under both paragraph (1) and paragraph (2) of subsection (b) shall apply until the Administrator determines that the State has come into compliance. If the Administrator has selected one of such sanctions and the deficiency has not been corrected within 6 months thereafter, sanctions under both paragraph (1) and paragraph (2) of subsection (b) shall apply until the Administrator determines that the State has come into compliance. In addition to any other sanction applicable as provided in this section, the Administrator may withhold all or part of the grants for support of air pollution planning and control programs that the Administrator may award under section 105."

Discussion

1. Relationship of Sections 110(m) and 179

To our knowledge, no court has yet addressed the question of the relationship between Clean Air Act sections 110(m) and 179. The EPA has taken the position, in a notice of proposed rulemaking under section 110, that the language of section 110(m) stating that the Administrator may apply the sanctions listed in section 179(b) "at any time (or at any time after)" the Administrator makes a finding of SIP deficiency under section 179(a) provides EPA discretion to apply section 179(b) sanctions before the end of the 18-month period for mandatory application of sanctions under section 179(a). Criteria for Exercising Discretionary Sanctions under Title I of the Clean Air Act, 57 Fed. Reg. 44534, 44535 (to be codified at 40 C.F.R. pt. 52) (proposed Sept. 28, 1992).[4] Several commenters on the notice of proposed rulemaking, including the Illinois Environmental Protection Agency, the Virginia Department of Transportation, and the city of Chicago, disagree with EPA's position.

In an August 6, 1993 letter to GAO, EPA elaborated on its position with respect to sections 110(m) and 179. EPA's letter points out that the 18- month sanctions clock under section 179(a) "is triggered only when . . . a finding is made with respect to an implementation plan or plan revision required under Part D of the Act or required [by a SIP call]." However, according to EPA, "sanctions may also be imposed under section 110(m) after EPA makes any such finding with respect to any plan or plan revision required under the Act." Thus, EPA states, its section 110(m) sanctions authority is triggered in all instances in which section 179(a) sanctions are triggered, and in some additional circumstances.

EPA observes that section 179(a) provides for an 18-month clock, under which the sanctions in that section must be imposed if the state does not correct the deficiency before the 18 months expire. However, section 110(m), EPA points out, does not provide a required timeframe for imposition of the section 179 sanctions. Rather, it provides for the imposition of those sanctions "at any time (or at any time after)" the Administrator makes a finding. Therefore, EPA argues, the agency may impose sanctions with respect to an area for which the 18-month clock has been started under section 179, but before the 18-month clock has run its course.

a. Statutory Language

We believe the provisions of sections 179 and 110(m), as they apply to required Part D submittals, are in conflict. As EPA points out, section 179 specifically applies when EPA has made a finding of deficiency with respect to any implementation plan or plan revision required under Part D of the Act. The enhanced vehicle and maintenance (I&M) program that is the subject of EPA's letter to California is a plan revision required under various provisions of Part D of the Clean Air Act.[5]

Section 179 provides that sanctions "shall apply" after a finding of deficiency, "unless such deficiency has been corrected within 18 months." By conditioning the imposition of sanctions on whether the deficiencies have been corrected within 18 months, section 179 assumes the state will have an opportunity to avoid sanctions entirely. In effect, it appears to provide an 18-month grace period for the state to come into compliance after a finding of deficiency, at least with respect to required Part D submittals, such as the one at issue here.

EPA claims that its authority to impose sanctions before the 18-month sanctions clock of section 179 has run is found in section 110(m). That provision says EPA may impose sanctions "at any time (or any time after)" a finding is made with respect to "any plan or plan item."

As EPA explains it, section 110(m) provides the agency with discretionary sanctions authority, while section 179 provides for the mandatory imposition of sanctions, unless the state corrects the deficiency within 18 months after the finding. According to EPA, a finding of inadequacy "trigger[s] both the mandatory imposition of sanctions and EPA's discretionary authority to impose sanctions under section 110(m)."

EPA's statement that sections 179 and 110(m) both are triggered after a finding underscores the apparent conflict between the two provisions. It is not possible to give full weight to the meaning of one without diminishing the other. Thus, if section 179 provides states with the opportunity to avoid sanctions by correcting deficiencies within 18 months of the finding, then EPA may not impose sanctions "at any time" after the finding--as section 110(m) seems to authorize--but must wait until the 18- month clock has run its course. By the same token, if section 110(m) provides EPA with discretionary authority to impose sanctions "at any time" after the finding, then the 18-month grace period--which section 179 appears to provide--is rendered a nullity.

EPA would resolve this apparent conflict by construing section 110(m) as authorizing EPA to override the 18-month grace period provided in section 179. Under EPA's construction of the statute, the 18-month sanctions clock, prescribed in section 179, does not protect states against sanctions imposition if EPA chooses to exercise its discretionary authority under section 110(m) to impose sanctions before the clock has run out. As EPA states in its letter to GAO, "under section 110(m), sanctions could be imposed with respect to an area for which the 18-month clock was started . . . ."

Thus, under EPA's construction of section 110(m), EPA would be under no obligation to allow the states a grace period of 18 months before imposing sanctions. Indeed, EPA would have no obligation to allow the states any grace period at all.

It is uncertain from the statutory language alone whether EPA's construction of section 110(m) is correct. There is nothing in the language of section 110(m) that expressly authorizes EPA to override the 18-month sanctions clock in section 179. Indeed, section 110(m) contains no reference at all to the sanctions timetable of section 179. Two other sections of the Clean Air Act dealing with operating permits, both of which also provide for the 18-month grace period prescribed in section 179, do contain separate provisions explicitly authorizing EPA to impose sanctions before the expiration of the 18-month grace period. For example, section 502(d)(2)(B), which is concerned with the imposition of sanctions for failure of a state Governor to submit a required permit program, provides the identical 18-month grace period provided in section 179. In fact, it incorporates by reference the sanctions provisions of section 179.

However, section 502(d)(2)(A) provides, in relevant part:

"If the Governor does not submit a program . . . the Administrator may, prior to the expiration of the 18-month period referred to in subparagraph (B), in the Administrator's discretion, apply any of the sanctions specified in section 179(b)." (Emphasis added.)

Section 502(i), concerned with the imposition of sanctions for inadequate enforcement of a permit program, contains provisions that are substantively identical to those in section 502(d).

Thus, in two other sections of the Clean Air Act--the same legislation that is at issue here--Congress made clear, through express language referring to the "18-month period," its unmistakable intention to authorize EPA to impose sanctions before expiration of the 18-month sanctions clock provided in section 179. These express references in section 502, coupled with the absence of a similar reference in section 110(m), make it uncertain whether Congress intended section 110(m) as an instrument through which EPA, in matters involving required Part D submittals, could override the 18-month sanctions clock of section 179.

Adding to the uncertainty of EPA's construction of section 110(m)--that it authorizes EPA to override the 18-month sanctions clock provided in section 179--is the language of section 110(m) itself. The part of the provision that appears to authorize EPA to impose sanctions "at any time" after a finding of inadequacy is contained in the first sentence of section 110(m). Section 110(m) also contains a second sentence, which provides as follows:

"The Administrator shall, by rule, establish criteria for exercising his authority under the previous sentence with respect to any deficiency referred to in section 179(a) to ensure that, during the 24-month period following the finding . . . referred to in section 179(a), such sanctions are not applied on a statewide basis where one or more political subdivisions covered by the applicable implementation plan are principally responsible for such deficiency." (Emphasis added.)

Under the second sentence of section 110(m), EPA may not impose statewide sanctions for 24 months following the finding, if the entity principally responsible for the deficiency is not the state itself, but rather, one or more political subdivisions. Thus, the statute mandates a 24-month sanctions clock that cannot be ignored and an 18-month clock which, according to EPA, can be overridden. In light of this 24-month clock, EPA's construction of section 110(m) would apparently produce an incongruous or inexplicable result. The state would be guaranteed a full 24 months to correct deficiencies before sanctions could be imposed, if its political subdivisions were principally responsible, but no time at all if the state itself were responsible.

For the above reasons, we believe there is an apparent conflict between sections 110(m) and 179 which cannot be resolved satisfactorily on the basis of the statutory language alone. That is, it is impossible to determine with confidence, through analysis of the two statutory provisions, whether EPA is required to allow states an 18-month grace period prior to the imposition of sanctions or whether immediate sanctions are authorized in circumstances such as those here, involving a finding of SIP deficiency with respect to a Part D requirement. Accordingly, we have examined the legislative history to determine whether it helps shed light on the meaning of the statutory language.

b. Legislative History

We found nothing in the legislative history to support EPA's view that it may impose sanctions under section 110(m) for a deficient Part D submittal earlier than 18 months after the finding of deficiency. Indeed, we have found no discussion in the legislative history of the meaning of the "at any time" phrase of section 110(m), nor of the relationship between that phrase and the 18-month "clock" of section 179. However, there are numerous references in the legislative history to the sanctions "clock" in section 179, stressing that states are to be afforded 18 months to correct deficiencies before sanctions apply.

As previously noted, sections 110(m) and 179 were added to the Act by the Clean Air Act Amendments of 1990. At the conference on the 1990 amendments, the language of the House of Representatives prevailed in relevant part on sanctions sections 110(m) and 179. 136 Cong. Rec. E3713 (daily ed. Nov. 2, 1990) (statement of Chairman Dingell). The House language was derived from the Administration's proposal, which was introduced as H.R. 3030 and reported out of the House Energy and Commerce Committee with amendments to both sanctions provisions. See H.R. Rep. No. 490, Part 1, 101st Cong., 2d Sess. 144 (1990). Subsequently, the House Committee on Public Works and Transportation amended section 110(m). H.R. Rep. No. 490, Part 3.

When the Administration's bill was introduced in the House, the Administration's spokesperson testified concerning the purpose of the sanctions provisions of the bill. He stated: "There have been some questions in the past about when and how sanctions should be applied. The Administration's bill clarifies this matter . . . ."[6] The spokesperson went on to explain that, under the Administration bill, if the EPA Administrator made one of the findings of SIP inadequacy that became law in section 179(a), and if the EPA found that the state was not making reasonable efforts to correct the deficiency, the EPA would be required to propose sanctions. Id. Further, he stated:

"If a state does not correct a deficiency within six months after the sanctions have been proposed, EPA must promulgate one or more of the sanctions, which would take effect within 60 days of promulgation.

"States would, therefore, have about eight months to correct any deficiency following EPA's initial proposal of sanctions."

Id. Although a precursor to section 110(m) containing the "at any time" language was in the bill at this point, the Administration spokesperson did not make any reference to discretion on the part of EPA to impose sanctions prior to the expiration of the 8-month grace period.

The House Committee on Energy and Commerce amended the Administration's version of section 179 significantly. The Committee eliminated the provisions concerning EPA determinations as to whether the state was making reasonable efforts to correct a SIP deficiency, in favor of the provision that was enacted, requiring mandatory imposition of sanctions 18 months after a finding of SIP deficiency unless the deficiency has been corrected by that time. Compare H.R. 3030, Sec. 102(g), as introduced in the House of Representatives, July 27, 1989, with H.R. 3030, Sec. 102(g), as reported out of the House Energy and Commerce Committee, H.R. Rep. No. 490, Part 1, 101st Cong., 2d Sess. 15-16. In discussing the new section 179 mandatory sanctions for SIP deficiencies with respect to Part D requirements, the Committee explained:

"Section 179(a) outlines the State failures which are sanctionable once the EPA Administrator makes the finding or determination or takes a disapproval action . . . .

"If the State has not corrected such deficiency within 18 months from the Administrator's finding, determination, or disapproval, one of the two listed sanctions in section 179(b) . . . is to apply immediately upon expiration of such 18-month period. If the deficiency is not corrected within an additional six months, the second sanction from section 179(b) is similarly to apply immediately. Both sanctions are to apply at the expiration of the original 18-month period if the Administrator finds that the State is not making a good faith effort to rectify the deficiency."

Id. at 227-28.

Moreover, the Committee explicitly stated:

"To give States operating in good faith an opportunity to correct their failures, 18 months is provided for States to correct deficiencies before sanctions apply."

Id. at 228 (emphasis supplied).

The House Energy and Commerce Committee also amended the Administration's version of section 110(m). The Committee gave no indication that it viewed section 110(m) as an alternative avenue, separate from section 179, under which EPA could proceed to impose sanctions according to a different timetable from that in section 179. Instead, the Committee stated concerning that section:

"New Clean Air Act section 110(m) authorizes the Administrator to apply the sanctions provided in section 179 . . . . [If the Administrator makes a finding of SIP deficiency under section 179], a sanction applies as provided in section 179. The sanction may be applied to any portion of a State, subject to criteria established by rule by the EPA."

Id. at 221.

In hearings on H.R. 3030, after it was amended by the House Energy and Commerce Committee, the Administration's spokesperson, comparing the Administration's bill to the bill reported out of the Committee, discussed the timing of sanctions solely in terms of the 18-month grace period contained in section 179. He stated:

"The Committee bill significantly increases the time from six to eighteen months that States have to correct deficiencies to avoid sanctions."[7]

Thus, the Committee on Energy and Commerce and the Administrations' spokesperson both viewed the amendments to the sanctions provisions as allowing the states an 18-month grace period to come into compliance prior to imposing sanctions. Amendments to section 110(m) subsequent to those of the Energy and Commerce Committee, and the legislative history concerning those subsequent amendments, also support this view. Moreover, as noted above, under certain circumstances, the 18-month grace period provided to states under section 179 is extended to 24 months.

After the Energy and Commerce Committee amended the sanctions provisions of H.R. 3030, the House Public Works and Transportation Committee amended section 110(m). As noted above, section 110(m) of H.R. 3030, as reported out of the Energy and Commerce Committee allowed the EPA Administrator to apply sanctions to any portion of a state, subject to criteria established by rule by the EPA. H.R. Rep. No. 490, Part 1, at 9, 221. The Public Works and Transportation Committee, however, saw "a need to clarify the circumstances under which areas other than the nonattainment area should be sanctioned." H.R. Rep. No. 490, Part 3, at 5. In the Committee's view: "To the extent that the EPA Administrator must impose sanctions, they should be applied [to] the governmental entity [that] is primarily responsible for the failure to achieve compliance." Id. Therefore, the Committee amended the second sentence of section 110(m) to prohibit the Administrator from applying the sanctions on a statewide basis during the 24-month period following a finding of a SIP deficiency, when one or more political subdivisions covered by the applicable implementation plan are principally responsible for the deficiency. Id. at 10.

Thus, the Committee's amendment to section 110(m) may be seen as addressing the proper geographic scope of the sanctions.[8] In other words, section 110(m), as amended by the Public Works and Transportation Committee, serves the function of allowing the Administrator to limit the application of sanctions to appropriate portions of the transgressing state.[9] Section 110(m) also appears to be aimed at providing assurance that, at least in cases where political subdivisions of the state are principally responsible for the deficiency, statewide sanctions are not imposed after 18 months, as section 179 would otherwise require, but that the state is given an additional 6 months to bring about compliance.

There is no suggestion in the legislative history of the amendment of section 110(m) that this section was to provide an alternative timetable for the imposition of statewide sanctions, different from that contained in section 179. Indeed, Representative Anderson, then Chairman of the House Public Works and Transportation Committee, which had amended section 110(m), stated his understanding that the time period established in the bill for states to come into compliance prior to the imposition of Clean Air Act sanctions was that contained in section 179. In discussing the Committee's amendment to section 110(m), Chairman Anderson stated:

"On the issue of sanctions, . . . after 18 months, the sanction cannot be statewide if a political subdivision of a state is principally responsible for noncompliance. In an additional 6 months, EPA may extend sanctions statewide. This gives a State, after the initial 18 months, 6 additional months to remedy the failure of a region to come into compliance before there is any threat of a statewide sanction."

136 Cong. Rec. H2579 (daily ed. May 21, 1990) (statement of Chairman Anderson) (emphasis supplied).

Thus, according to the Chairman of the second of the two House committees that amended the relevant sections of the sanctions provisions of the legislation that became the Clean Air Act Amendments of 1990, section 110(m) provides states, under certain circumstances, with additional time, beyond the 18-month grace period, to correct deficiencies, prior to the imposition of sanctions. That is, section 179 provides a minimum grace period of 18 months during which states may attempt to correct their SIP deficiencies prior to the imposition of sanctions. Chairman Anderson's amendment to section 110(m) ensures that, in cases where one or more political subdivisions are principally responsible for the deficiency, states are afforded an additional 6 months--24 months in all--to come into compliance before there is any threat of statewide sanctions. . . . . .

We have found nothing in the text or the legislative history of the Clean Air Act Amendments of 1990 that clearly explains the role or function of the "at any time" language of section 110(m). A possible explanation for the presence of that statutory phrase could be inadvertence. That is, the language, which was contained in the original Administration bill--in a provision that was the precursor to what was later enacted as section 110(m)--served a function, at an early stage of the legislative process, as a useful link to the provision that was the precursor to what was later enacted as section 179.

The original section 179 required EPA, after a finding of SIP inadequacy, to make determinations whether the state was making reasonable efforts to correct the deficiencies. Id. It also allowed EPA to conduct such reasonable efforts determinations "at any other time." Id. If any of these reasonable efforts determinations revealed that the state was not, or was no longer, making reasonable efforts, the bill required EPA to impose sanctions.

Thus, in the context of EPA's discretionary authority under the precursor of section 179 to make reasonable efforts determinations "at any . . . time," followed by the potential proposal of sanctions, the corresponding language of section 110(m), authorizing the imposition of sanctions "at any time (or any time after)" a finding of SIP deficiency, made sense as a functional link between sections 110(m) and 179.

However, in this view, the "at any time" provision of section 110(m) lost its function when section 179 was substantially amended by the House Energy and Commerce Committee. The amended section 179, which was enacted into law, provides for mandatory imposition of sanctions 18 months after an EPA finding of SIP inadequacy, if states fail to correct the deficiencies found. Thus, the original function of the "at any time" phrase in the precursor to section 110(m)--to emphasize EPA's continuing authority to impose sanctions subsequent to the agency's discretionary reasonable efforts determination--no longer obtained after section 179 was amended to provide for the mandatory "18-month sanctions clock."

If the "at any time" language was retained in section 110(m) through inadvertence, it is mere surplusage. Although we recognize that normally each word of a statute should be given effect, there are occasions where words of a statute are nothing but surplusage, and therefore should not be given effect.[10] This may represent such an occasion.

We conclude there is an apparent conflict between sections 110(m) and 179. Section 110(m) says EPA may impose sanctions "at any time" after a finding, while section 179 allows the state 18 months to correct deficiencies before sanctions are imposed. There are serious uncertainties as to the validity of EPA's attempted resolution of this apparent conflict --by construing the statute to mean that section 110(m) authorizes EPA to override the 18-month sanctions clock provided in section 179. In our view, the apparent conflict cannot be resolved satisfactorily on the basis of the statutory language alone. For that reason, we have examined the legislative history.

There is very little legislative history concerning section 110(m) and none of it has to do with EPA's claimed discretionary authority to impose sanctions "at any time." Indeed the phrase, "at any time," is not even mentioned in the legislative history, nor is there any suggestion in the legislative history that EPA is granted such power in the Act.

Rather, the legislative history stresses that states are to be allowed 18 months to correct deficiencies before sanctions are to be applied. Most of this legislative history is concerned with the provisions of section 179. However, the limited legislative history on section 110(m) also provides support for the 18-month grace period. That legislative history focuses on the provision in the second sentence of section 110(m) that ensures states a 24-month grace period if political subdivisions of the state are principally responsible for the deficiency. It makes clear that the 24 months represents an additional 6 months over and above the 18 month grace period already assured to the states under section 179.

Thus, we are persuaded by the legislative history that Congress, in establishing the 18-month sanctions clock in section 179, meant to ensure states, at a minimum, an 18-month grace period in which to correct deficiencies in their Part D submittals, prior to the imposition of sanctions. We are also persuaded by the legislative history that, whatever function, if any, the "at any time" language of section 110(m) may continue to serve, it does not serve to empower EPA to override the 18- month sanctions clock, with respect to required Part D submittals. Accordingly, we conclude that if EPA makes a finding of SIP deficiency with respect to California's I&M submittal--a Part D requirement--EPA is required to allow the state 18 months to correct the deficiency prior to imposing sanctions.

2. Proposal of sanctions prior to a finding of SIP deficiency

As noted above, EPA's April 13, 1993, letter to California Governor Pete Wilson asserts that even though sanctions may not be imposed prior to a state's actual failure to submit an adequate SIP by November 15, 1993, sanctions may be proposed in anticipation of this failure. Although EPA has not yet proposed such sanctions, you have asked us to examine whether EPA may legally do so before finding that the state's SIP submission is inadequate, and even before the state has submitted its SIP.

In its letter to GAO discussing its position on this issue, EPA concedes that it would have to go through notice-and-comment rulemaking before imposing section 179 sanctions under the authority of section 110(m), but argues that it could do so adequately before all the requirements for the imposition of sanctions have been satisfied. That is, according to EPA, full notice-and-comment review of any issue relevant to sanctions under the section 110(m) rulemaking could take place even though the finding of any deficiency--the deficiency on which sanctions must be based--has not been made by the time sanctions are proposed. EPA states that the issues that would be relevant to a section 110(m) rulemaking are: (1) which sanction or sanctions to impose; (2) the timing of the imposition of the sanction; and (3) the geographic scope of the imposition of the sanction. As to these issues, EPA asserts, sufficient notice and opportunity for comment could be provided before the SIP deficiency finding, and before the state had even submitted the SIP which would be the subject of the finding.

We disagree with EPA.

First, even if EPA were correct in its assertion that section 110(m) is an alternative to section 179 as an avenue for the imposition of sanctions against California, we believe it may not lawfully carry out its announced intention to propose sanctions in anticipation of that state's failure to submit an adequate SIP. In our view, such action would distort beyond recognition the statutory scheme under both sections 110(m) and 179 for sanctions imposition and would fail to satisfy the notice and comment requirements of the Administrative Procedure Act (APA).

Section 110(m), as well as section 179, plainly contemplates a multi-step process leading to the imposition of sanctions which involves a number of actions that necessarily occur in chronological order. These actions are:

1. The state submits a SIP or SIP revision. Under section 110(m), as well as section 179, the four findings leading to the imposition of sanctions are based on the state's failure to submit a complete SIP, the state's failure to submit an adequate SIP, or the state's failure to implement the SIP. Thus, the sanctions process, whether under section 110(m) or 179, necessarily begins with the SIP submission.

2. EPA evaluates the SIP submission for completeness, adequacy, and, at some point, proper implementation. Of course, if the state fails to submit a SIP, there will be nothing for EPA to evaluate.

3. Based on its evaluation of the SIP submission (or after determining that the state has failed to submit a required plan or plan item), EPA makes one or more of four specified "findings of inadequacy," spelled out in section 179(a).[11]

4. EPA publishes a proposed rule for notice and comment, calling for possible imposition of sanctions.

5. Following notice and the receipt of comments on the proposed sanctions rule, EPA imposes the sanctions.[12]

If EPA were to carry through on its announced intention, step 4 (the proposed rule to impose sanctions), which, under the statutory sanctions scheme, is the penultimate action, would become instead, the first action EPA would take in the process of imposing sanctions on California. Thus, before EPA makes any of the requisite findings of inadequacy (whether through rulemaking or otherwise), before the agency has even evaluated the adequacy of the SIP, indeed, before California has submitted its SIP, which provides the basis for the finding and ultimate sanction, EPA would take the last step in the sanctions process before the actual imposition of sanctions. This, in our view, turns on its head the orderly, step-by- step process of sanction imposition contemplated in section 110(m), as well as section 179.

EPA's intended action is no mere informal cautionary warning to California that the state's failure to submit a SIP that satisfies federal I&M requirements may carry serious consequences. There would be nothing illegal or improper about EPA's taking action, at least on an informal basis, to warn states of its intention to enforce the law. However, in this case, the notice of sanctions that would be offered by such a proposed rule would not satisfy the notice and comment requirements of the Administrative Procedure Act. In a realistic sense, it would constitute no notice at all. It would purport to place California and other interested parties on "notice" that EPA intends to impose sanctions when, as EPA concedes, California has done nothing that yet justifies sanctions or allows EPA to impose them.

Moreover, EPA's proposed rule would not provide adequate opportunity for comment, as required by the APA. In this case, EPA's proposed rule to impose sanctions on California would purport to provide the notice and opportunity for comment that the APA requires. EPA's next step, after consideration of the comments, would be issuance of the final rule imposing the sanctions. Id. No further opportunity for comments need be provided.

This would place California in the position of defending a SIP the state has not yet submitted, nor EPA found deficient. California would have to argue against sanctions imposition--and would have to do so immediately-- even though nothing yet has occurred to warrant any action leading to the imposition of sanctions against the state. California has no assurance that it will have that opportunity later, when--and if--EPA makes a finding of inadequacy and proceeds to impose the sanctions. Under these circumstances, we believe that EPA's "notice" of proposed imposition of sanctions on that state would lack the element of fairness to the affected parties that is an essential component of the rulemaking process under the APA. See, e.g., Small Refiners Lead Phase-Down Task Force v. U.S.E.P.A., 705 F.2d 506, 549 (D.C. Cir. 1983).

Thus, despite EPA's "anticipation" that California will submit an inadequate SIP or fail to submit one at all, either of which, according to EPA, would result in a finding of inadequacy, and then the imposition of sanctions, California has not yet done anything at all, nor is it yet required to. And whether EPA will be able to find sufficient grounds, after the November 15, 1993, deadline, to undertake the sanctions imposition process is, at this time, only conjectural.

Therefore, we believe that, even if EPA were correct in its contention that it may use section 110(m) to impose sanctions on California, it may not, consistent with the statutory scheme of section 110(m) or the notice and comment requirements of the APA, propose sanctions before making the requisite finding under section 179(a).

In any event, we do not agree that section 110(m) is an alternative to section 179 for imposition of sanctions against California. And, assuming notice and comment rulemaking is required for the imposition of sanctions under section 179,[13] we do not believe EPA can provide adequate notice under that section either. As noted above, in its letter to GAO, EPA states that, to satisfy the APA's notice and comment requirements, the agency is obligated to provide notice and take comment on each of the following three issues: (1) which sanction or sanctions to impose; (2) the timing of the imposition of the sanction; and (3) the geographical scope of imposition of the sanction. As explained below, we believe that, in this case, EPA is unable, at this stage, to provide adequate notice as to at least one of these three issues--the sanction or sanctions to be imposed.[14]

Section 179 provides EPA with discretion to select the appropriate sanction or sanctions, and provides guidance on how to make that selection. Section 179 states, in relevant part, that unless the deficiency has been corrected within 18 months after its finding,

"one of the sanctions referred to in subsection (b) shall apply, as selected by the Administrator . . . except that if the Administrator finds a lack of good faith, sanctions under both paragraph (1) and paragraph (2) of subsection (b) shall apply . . . ."

Thus, the decision whether one or both of the available sanctions will be imposed depends on whether "the Administrator finds a lack of good faith." According to the House Committee on Energy and Commerce, the congressional committee responsible for this language, the "good faith" required in section 179 consists of action on the part of the state to remedy the deficiency EPA has found in the SIP submission. H.R. Rep. No. 490, Part 1, 101st Cong., 2d Sess. 228. Concerning this provision, the Committee explained:

"Both sanctions are to apply at the expiration of the original 18-month period if the Administrator finds that the State is not making a good faith effort to rectify the deficiency."

Id. Similarly, the Committee stated:

"The Committee intends that States not making good faith efforts are to be sanctioned more severely than would otherwise be provided for under section 179."

Id.

Thus, under section 179, as clarified by the legislative history, EPA's determination of which sanction or sanctions to impose cannot be made at this time, before the finding of inadequacy, or even at a later time, immediately after the finding. It can be made only at the expiration of the 18-month grace period following the finding. Accordingly, EPA is unable at this time, before California has even submitted its SIP, to satisfy the APA's notice and comment requirements with respect to at least one of the important issues involved in the proposed rulemaking under section 179--which sanction or sanctions are to be imposed. Therefore under section 179, EPA may not now lawfully propose to impose sanctions.

1. Part D of the act contains special requirements for "nonattainment areas"--areas that have not attained EPA-set standards of air quality for various pollutants.

2. Section 110(k)(5) allows the Administrator to make what are known as "SIP calls" to require states to revise their SIPs, when, inter alia, the Administrator finds that the state's SIP is substantially inadequate to attain or maintain the relevant national ambient air quality standard.

3. The sanctions available to the Administrator under section 179(b) are highway funding sanctions and emission offset sanctions. The highway funding sanction allows the Administrator to impose a prohibition on the approval by the Secretary of Transportation of certain projects, or awarding of certain grants under title 23 of the United States Code. The emission offset sanction requires a ratio of at least 2 to 1 for emissions reductions from existing sources of pollution within the nonattainment area to offset emissions from major new or modified facilities. The offset requirement refers to reductions in emissions that major new and modified sources must get from existing sources before they may begin construction.

4. In its notice of proposed rulemaking, EPA further states:

"EPA anticipates that it will exercise this discretion to impose section 110(m) sanctions earlier than 18 months following a finding only in unusual circumstances where the State has indicated an explicit resistance to working to resolve a plan deficiency." 57 Fed. Reg. at 44535.

5. Sections 182, 184, 187.

6. The Impact of Air Quality Regulation on Federal Highway and Transit Programs, and on Fuel Tax Collections: Hearing Before the House Committee on Public Works and Transportation, Subcommittee on Investigations and Oversight, 101st Cong., 1st Sess. 17 (1989) (statement of Richard D. Wilson, Director, Office of Mobile Sources, U.S. Environmental Protection Agency).

7. Provisions of H.R. 3030, the Clean Air Act Amendments of 1989, that Fall Within the Jurisdiction of the Committee on Public Works and Transportation: Hearing Before the House Committee on Public Works and Transportation, 101st Cong., 2d Sess. 45 (1990) (statement of Richard D. Wilson, Director, Office of Mobile Sources, U.S. Environmental Protection Agency).

8. See also John-Mark Stensvaag, Clean Air Act 1990 Amendments Law and Practice Sec. 4.43 (1991).

9. Id.

10. See, e.g., J.C. Penney Co. v. Commissioner of Internal Revenue, 312 F.2d 65, 72 (2d Cir. 1962)(Friendly, J.).

11. As EPA concedes, at least two of these findings (disapproval and failure to implement) themselves require rulemaking action.

12. A sixth step, also an integral part of the sanctions process, is that of removing the sanctions. The circumstances under which sanctions are to be removed are spelled out in section 179.

13. EPA has advised us that it expects to engage in notice and comment rulemaking for the imposition of sanctions under section 179, at least with respect to its selection of which sanction or sanctions to impose.

14. In other cases, e.g., failure to implement the SIP, the issues of timing and geographical scope of the sanction could present EPA with obvious, even insuperable, problems in providing adequate notice at this premature stage. At this point--before the SIP has been submitted--it would be impossible to know whether the SIP will be adequately implemented and, if not, whether it is the state or one or more of its political subdivisions that are principally responsible. This would provide the basis for the geographical scope of the sanction and when, if at all, the sanction will be imposed. The earliest time when this determination could be made is the implementation phase.