## Facts

- EPA promulgated effluent limitations for conventional pollutants from industrial point sources under the Clean Water Act’s “best conventional pollutant control technology” (BCT) program.
- Industry associations and companies filed consolidated petitions for pre-enforcement review in the court of appeals, challenging the legality of EPA’s BCT methodology.
- Petitioners argued the Clean Water Act required EPA to apply two cost-related components in setting BCT limits: (1) an industry cost-effectiveness analysis and (2) a comparison between the costs imposed on industry and the costs incurred by publicly owned treatment works (POTWs) for similar pollutant reductions.
- Petitioners contended EPA effectively relied on the POTW comparison alone and that EPA’s chosen POTW benchmark was arbitrary and supported by statistically unreliable and internally inconsistent data.
- Petitioners also asserted rulemaking defects, including inadequate opportunity for meaningful comment and other methodological flaws.
- The court reviewed the regulations under the Administrative Procedure Act’s arbitrary-and-capricious standard, recognizing deference to technical agency judgments but requiring reasoned decisionmaking consistent with statutory criteria.

## Issues

1. Whether § 304(b)(4)(B) of the Clean Water Act required EPA, in setting BCT limits, to consider both an industry cost-effectiveness test and an industry-versus-POTW cost comparison.
2. Whether EPA’s POTW benchmark for the cost comparison was arbitrary and capricious because it relied on statistically unreliable data.
3. Whether other asserted methodological and procedural deficiencies (including opportunity to comment) independently required invalidation of the BCT regulations.

## Decision

- The Fourth Circuit affirmed in part, reversed in part, and remanded.
- The court held that EPA’s BCT regulations promulgated under § 301(b)(2)(E) were invalid because EPA failed to consider all factors mandated by § 304(b)(4)(B).
- The court further held that the data EPA used to formulate its POTW benchmark were statistically unreliable.
- The court rejected (or found insufficient) the petitioners’ remaining challenges beyond these defects.

## Legal Principles

- When a statute specifies factors that must be considered in rulemaking, an agency acts unlawfully if it ignores a required factor, even under deferential arbitrary-and-capricious review.
- Section 304(b)(4)(B) requires EPA’s BCT methodology to incorporate both (1) industry cost-effectiveness and (2) comparison of industry costs to POTW costs for comparable reductions, rather than relying solely on a POTW benchmark.
- Agency technical judgments must still rest on a reasoned basis supported by reliable data; statistically unreliable data can render a benchmark irrational.
- Under arbitrary-and-capricious review, agency action is presumed valid, but the presumption does not shield rules that fail to apply statutory criteria or that depend on unsound evidentiary foundations.

## Conclusion

The Fourth Circuit vacated and remanded EPA’s BCT effluent limitations because EPA did not apply all statutorily required cost considerations and because the POTW benchmark relied on statistically unreliable data, while otherwise leaving undisturbed aspects of EPA’s approach and procedures not shown to be unlawful.


Am. Paper Inst. v. EPA, 660 F.2d 954 (4th Cir. 1981)