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ROCHESTER PURE WATERS DIST. v. UNITED STATES EPA

November 13, 1989

ROCHESTER PURE WATERS DISTRICT, et al., Plaintiffs,
v.
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, Defendant


Joyce Hens Green, United States District Judge.


The opinion of the court was delivered by: GREEN

JOYCE HENS GREEN, UNITED STATES DISTRICT COURT JUDGE

 Plaintiffs Rochester Pure Waters District and the City of Rochester (collectively "Rochester") filed the instant complaint on October 13, 1989 seeking to require defendant United States Environmental Protection Agency ("EPA") to preserve and set aside $ 3,986,884 out of a total of $ 47,700,000 of unobligated federal funds which were appropriated to the EPA under the Clean Water Act ("CWA") Section 206 grant reimbursement program *fn1" pending final resolution of plaintiffs' administrative appeal with the EPA in which plaintiffs' entitlement to the $ 3,986,884 is in dispute. At the time the lawsuit was filed, Congress had pending bills that had passed both houses and was under consideration by a Conference Committee which included a provision rescinding the unexpended $ 47,700,000. In the face of this imminent Congressional action, plaintiffs filed the instant action, seeking to preserve the disputed $ 3,986,884 pending resolution of their administrative appeals. On October 13, 1989, this Court granted plaintiffs' motion for a temporary restraining order and directed EPA to set aside and preserve the disputed funds until November 15, 1989. Since that date, both the Senate and House have passed a bill rescinding the $ 47,700,000.

 Presently pending before the Court is plaintiffs' motion for a permanent injunction. *fn2" For the reasons set forth below, plaintiffs' motion is granted.

 I. BACKGROUND

 A. Statutory Background

 In 1956 Congress passed the Federal Water Pollution Control Act ("FWPCA"), *fn3" to address the problem of increasing levels of pollution in this country's waterways. Section 8 of the FWPCA provided federal assistance to eligible public treatment works to offset the costs of upgrading treatment facilities that were needed to abate pollution by reimbursing recipients up to thirty percent of eligible costs incurred during construction. *fn4"

 In 1972 Congress enacted the Federal Water Pollution Control Act Amendments of 1972, commonly known as the Clean Water Act ("CWA"). *fn5" In addition to creating the current regulatory scheme for abatement of pollution to this country's waterways, the CWA greatly expanded federal grant participation in constructing public facilities needed to treat wastewater. This program, the Title II construction grant program, *fn6" increased the federal government's reimbursement to seventy-five percent of the costs of construction.

 The funding scheme created by the CWA created serious inequities in that public treatment facilities which initiated improvement measures under the Section 8 program received less federal assistance than those which waited until the Title II program was passed, in effect rewarding those facilities who delayed implementation of needed pollution control strategies. Congress enacted CWA Section 206 to partially remedy these funding inequities. Under Section 206, eligible Section 8 grantees were entitled to a federal grant increase up to fifty-five percent of the eligible project costs. *fn7" Congress initially authorized $ 2 billion for this program *fn8" and further provided that an applicant under Section 206 could revise the project cost estimate from time to time, as was necessary. *fn9"

 Of the $ 2 billion authorized, Congress appropriated $ 1.9 billion to the Section 206 program. *fn10" In order for the Section 8 grantees to claim the $ 1.9 billion then appropriated, applications were required to be filed by January 31, 1974. *fn11" The following year, 1973, Congress authorized an additional $ 600 million. *fn12" In an effort to close the gap between the authorized and appropriated amounts, Congress appropriated an additional $ 200 million for the Section 206 program in 1976 *fn13" and another $ 300 million to the program in 1977. *fn14" No application deadline was set forth in either legislation.

 B. Rochester's Grant Awards

 On January 10, 1968, EPA awarded a Section 8 construction grant in the amount of $ 1,948,000 to the City of Rochester for the VanLare Treatment Plant. The Section 8 grant was subsequently increased to a total of $ 21,919,500 to reimburse Rochester for total project costs of $ 78,940,000. *fn15" Rochester timely applied for and received a Section 206 grant in the amount of approximately $ 43,472,000, which represented the maximum allowable fifty-five percent grant entitlement of the then estimated project costs of $ 79,040,000. *fn16"

 After the January 31, 1974 cutoff date for applications under Section 206, Rochester defended separate lawsuits initiated by its prime contractor on the VanLare Treatment Plant, Monsanto Enviro-chem, and its electrical subcontractor, Vinderlinde Electrical Corporation. Rochester eventually settled the Monsanto litigation for $ 5 million and the Vinderlinde litigation for $ 750,000. *fn17"

 On October 11, 1984, Rochester requested a grant increase under Section 206(c) *fn18" to reimburse Rochester for the federal statutory share of the settlement agreements. Through this request, Rochester sought reimbursement of $ 3,986,884 which resulted from its defense of the Monsanto and Vinderlinde litigation, claiming entitlement to the funds as a revision pursuant to 33 U.S.C. ┬ž 1286(c). Rochester presented the request to the New York State Department of Environmental Conservation ("NYDEC"), EPA's delegated agent for purposes of administering the construction grants program. *fn19" On December 19, 1984, Rochester's request was denied because "the eligible amount claimed in the reimbursement application prior to January 31, 1974 is a firm ceiling which cannot be exceeded according to the Federal Regulations governing reimbursement." *fn20" Rochester subsequently requested NYDEC reconsideration. *fn21" On December 12, 1986, NYDEC again rejected Rochester's request holding that the January 31, 1974 cutoff date was an absolute ceiling for funding purposes. *fn22" Rochester's subsequent appeals, pursued in accordance with the applicable administrative scheme, were rejected. *fn23" On August 4, 1987, NYDEC issued its final determination, concluding that the January 31, 1974 application amount was the maximum possible reimbursement cost. *fn24" On September 4, 1987, Rochester requested EPA, Region II, to review NYDEC's denial of Rochester's request for a federal grant increase. *fn25" That appeal is still pending. On September 13, 1989, Rochester submitted to EPA a Deviation Request, pursuant to 40 C.F.R. Part 30, Subpart J, requesting that EPA approve a deviation from its regulations to allow funding for Rochester's settlement costs submitted after January 31, 1974. That request is also pending.

 C. Rescission by Congress of the Section 206 Funds

 Approximately $ 47,700,000 of appropriated funds for the CWA Section 206 program have not been obligated by the EPA. In June 1989, EPA was asked by the staff of the House Committee on Appropriations to provide information and general comments regarding a potential rescission of these funds. *fn26" EPA examined data from its Regional Offices and concluded that no one would be adversely impacted by a rescission under applicable EPA regulations. *fn27" EPA subsequently advised the House committee staff that EPA did not believe anyone would be adversely affected by the rescission. *fn28" On July 20, 1989, the House appropriations bill for EPA, H.R. 2916, which provided for a rescission of the $ 47.7 million, was passed. The House Report stated that EPA had indicated that the rescission "will cause no adverse impacts." H.R. Rep. No. 101-150, 101st Cong. 1st Sess. 49 (1989).

 EPA did not initially inform the House Committee staff of Rochester's pending reimbursement grant claim, although it had been pending for two years with EPA, asserting that EPA first learned of it in early September, 1989, in a phone call from the staff of a senator. *fn29" EPA confirmed that Rochester's claim was pending in Region II and subsequently informed the congressional staff that although the administrative appeal was pending, EPA did not believe that Rochester was eligible for the reimbursement because the costs were submitted after the 1974 deadline. *fn30" EPA officials advised the Senate appropriations committee staff that EPA had some difficulties with the proposed rescission because there was a pending claim. *fn31" The Senate staff indicated that it was aware of the issue and the pending claim. *fn32"

 Despite Rochester's active claim, the Senate passed H.R. 2916 on September 28, 1989, which contained a provision identical to the one in the House bill rescinding $ 47.7 million in Section 206 funds. On or about September 28, 1989, EPA advised the House committee staff that Rochester had raised to EPA an issue regarding the 1974 deadline in EPA's regulations which had not been previously considered by the director of the construction grant program office and which ...


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