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ATLANTIC CITY MUN. UTILS. AUTH. v. REGIONAL ADMR.

August 27, 1985

ATLANTIC CITY MUNICIPAL UTILITIES AUTHORITY, Plaintiff,
v.
REGIONAL ADMINISTRATOR, REGION II, UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, Defendant



The opinion of the court was delivered by: COHEN

 This injunctive action is before the Court on a motion to dismiss for lack of subject matter jurisdiction made by the defendant, the Regional Administrator of Region II (the Regional Administrator) of the United States Environmental Protection Agency (EPA). Alternatively, the EPA seeks summary judgment on the merits of the underlying action which has been brought pursuant to the citizen suit provision of the Federal Water Pollution Control Act (FWPCA) (the relevant portions of which are sometimes referred to as the Clean Water Act), 33 U.S.C. § 1251 et seq. Because we find that the plaintiff seeks to have this Court order the EPA Regional Administrator to perform a nondiscretionary duty, we shall hold that we have citizen suit jurisdiction pursuant to 33 U.S.C. § 1365(a)(2).

 Because we further find that the EPA has properly insisted that, in order to receive a $3.5 million construction grant, plaintiff must obtain current state certification of its plan, we shall grant defendant's motion for summary judgment.

 I. Facts and Procedural History

 The plaintiff in this action is the Atlantic City Municipal Utilities Authority (ACMUA), a municipal corporation of the State of New Jersey operating pursuant to N.J.S.A. 40:14B-1 et seq. In August of 1980, the ACMUA submitted an application for an EPA grant to pay for the cost of acquiring a sewage collection system in Atlantic City, New Jersey. Pursuant to the Clean Water Act, plaintiff's application was first addressed to the New Jersey Department of Environmental Protection (NJDEP). In order to understand our response to plaintiff's subsequent complaints, it is necessary to gain some familiarity with the FWPCA funding scheme.

 A. The Clean Water Act Construction Grants Application Process

 Grant funds are annually appropriated by Congress and distributed by the EPA to citizens of the states based upon an allotment formula found at 33 U.S.C. § 1285. Currently, New Jersey entities receive about 4.2% of the total dollars available. Since September 30, 1984, these federal grants have provided up to 55% of a project's total construction cost. Prior to the FWPCA amendment that set this maximum, EPA grants could provide up to 75% of total costs. *fn1"

 In order to become eligible for a Clean Water Act grant, *fn2" an organization must first obtain a favorable ranking in a state's project priority list. See 33 U.S.C. § 1313(e)(3)(H). In New Jersey, these lists are annually prepared by NJDEP, the state agency designated by the Governor as having responsibility for the administration of EPA construction grants. See 40 C.F.R. § 35.2005(b)(42) (1984) (hereinafter all CFR citations are to the 1984 volume unless otherwise noted). Each NJDEP project priority list "contains two portions: the fundable portion, consisting of those projects anticipated to be funded from funds [currently] available . . . and the planning portion, consisting of projects anticipated to be funded from future authorized allotments." 40 C.F.R. § 35.2015(c). In determining the relative desirability of competing treatment projects, the NJDEP considers the cost of competing projects and the estimated public benefits to be derived therefrom as well as the propriety of federal aid. The last consideration depends upon several specific criteria codified at 33 U.S.C. § 1284 and 40 C.F.R. § 35.830(b).

 If a grant application receives a favorable ranking on a state's priority list, its fate passes to the EPA Administrator, see 33 U.S.C. § 1296, who must approve or disapprove the application within forty-five days after the date of its receipt. 33 U.S.C. § 1299. Applications not acted upon within this time period are deemed approved. Id. The EPA's evaluation employs the same criteria as the state certification process and, in addition, the Administrator determines the following: (1) whether the proposed project conforms with the state water pollution control plan and has received priority certification by the relevant state agency; (2) whether the project is included in an effective basinwide plan for pollution abatement; (3) whether the project is included in an effective metropolitan or regional plan developed and certified by the Governors of the states affected; and (4) whether the grant applicant has demonstrated that the project will adequately and efficiently treat liquid wastes. See 40 C.F.R. § 35.835-1 to -7. See also 33 U.S.C. §§ 1284(b)(1) & 1296. In addition, where an existing water treatment facility is being modified, the grant applicant must provide assurance to the Regional Administrator that it will remain operable during construction. 40 C.F.R. § 35.835-8. Finally, the state water pollution control agency must provide assurance of at least annual inspection of the facility for the first three years following construction. Id. at -9.

 The process by which appeals are taken from a Regional Administrator's determination of funding eligibility (or ineligibility) has recently been changed. ACMUA's appeal, which is more fully discussed below, was taken to the EPA Board of Assistance Appeals. This Board, which was established by the EPA in 1979, provided an adversarial dispute resolution format. Its procedures are published at 44 Fed. Reg. 46,770 (1979) (never codified in CFR). Seeking a more "simple, expeditious and inexpensive means to resolve disputes," see 48 Fed. Reg. 45,061 (1983), the EPA developed a new administrative review process which is described at 40 C.F.R. § 30, Subpart L (§§ 30.1200 - .1235). The new review process has only recently become effective because the Board of Assistance Appeals was charged with resolving all appeals docketed on or before October 31, 1983.

 Pursuant to the new appeals process, a Regional Administrator's grant decisions are conclusive unless a petition for a discretionary review is filed to the EPA Assistant Administrator within thirty days of the date of the Regional Administrator's decision. 40 C.F.R. § 30.1225. As implied, the Assistant Administrator may decide not to review the Regional Administrator's decision. Id. at § 30.1225(2)(b). Thus, in many cases, the decisions made by the Regional Administrators will be the final decisions of the EPA.

 If a construction grant application is approved, the EPA prepares an assistance agreement which must be signed by the grant applicant within three weeks after receipt. Id. at § 30.305(a). The execution of an assistance agreement creates contractual obligations both on the part of the EPA and on the part of the grant recipient. The obligations of the latter are explicitly nondelegable. Id. at § 30.309. Disagreements about assistance agreement requirements are handled in the same manner as those regarding funding applications. Id. at § 30.1200.

 B. ACMUA's Construction Grant Application

 The plaintiff submitted its grant application to the NJDEP on August 5, 1980 and therein requested the state to include the purchase of a privately owned, sewage collection system on its priority list for fiscal year (FY) 1980. The application was atypical in this respect because EPA policy clearly favors the funding of new sewage system constructions rather than the rehabilitation of old systems. Nevertheless, the FWPCA broadly defines the term "construction" to include acquisitions and EPA regulations specifically authorize regional administrators to award grants for the acquisition of existing treatment facilities. 40 C.F.R. § 35.940-3(d).

 Apparently impressed by the need to rehabilitate the Atlantic City system, construction of which began in 1885, as well as the engineering and economic analyses obtained by the ACMUA, the New Jersey Construction Grants Administrator informed the group, by letter dated May 19, 1980, that he would support their funding application. The project received official support on the FY 1981 priority list and was ranked number 154 out of 231 eligible projects. *fn3"

 This litigation essentially began when the EPA Regional Administrator denied funding for the state certified project in FY 1981.

 His denial was based on the following reasons:

 
1. The acquisition did not conform with EPA's policy of assigning the highest priority to the construction of new facilities.
 
2. The acquisition would not eliminate existing pollution and enhance water quality.
 
3. If the acquisition were funded by EPA, the result, contrary to EPA policy, would be to reduce the debt the Authority would incur in purchasing the collection system.

 Appeal of ACMUA, Docket No. 81-19, EPA Board of Assistance Appeals, slip op. at 4 (attached as Exhibit B to plaintiff's complaint) (hereinafter cited as EPA Bd. op.). Pursuant to the aforementioned dispute resolution provisions of the EPA regulations, the ACMUA appealed the Regional Administrator's decision to the EPA Board of Assistance Appeals (the Board) and on October 28, 1982, the Board reversed the regional determination.

 The Board's reversal was based primarily on its interpretation of a draft Construction Grants Program Requirements Memorandum (RPM), dated November 16, 1979, which provides the EPA's only guidelines for the acquisition of pre-existing sewage facilities. *fn4" See 40 C.F.R. § 35.940-3(d). The Board found that each of seven criteria enumerated therein had been met. Specifically, the Board found "that the clear weight of the evidence demonstrates that significant pollution benefits will be gained by acquiring and rehabilitating the existing system." EPA Bd. op. at 7. Additionally, New Jersey's low number of new construction projects would have permitted the ACMUA's acquisition of the privately owned system without jeopardizing federal funding for any new construction projects. Id. at 8. Finally, the Board found that the proposed rehabilitation was "the most cost-effective and practicable alternative" for providing pollution control benefits to the ...


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