John W. Stokes, Jr., U. S. Atty., William D. Mallard, Jr., Asst. U. S. Atty., Atlanta, Ga., Edmund B. Clark, Chief, App. Sect., Land & Natural Resources Div., Dept. of Justice, Washington, D. C., Peter R. Taft, Asst. Atty. Gen., Maryann Walsh, Atty., Dept. of Justice, Robert V. Zener, Gen. Counsel, Joseph M. Zorc, Atty., Envir. Prot. Agency, Washington, D. C., for defendants-appellants.

W. Kent Campbell, Covington, Ga., Lloyd Sutter, Richard L. Stumm, Atlanta, Ga., for plaintiffs-appellees.

Appeal from the United States District Court for the Northern District of Georgia.

Before GOLDBERG and FAY, Circuit Judges, and DUMBAULD,* United States District Judge.

DUMBAULD, Senior District Judge.

This is an appeal by defendant Environmental Protection Agency administrators from a summary judgment of the District Court for the Northern District of Georgia, Atlanta Division, dated October 24, 1975, against them in favor of a Georgia municipality which had constructed a sewage facility for which it claimed a federal subsidy under the terms of Section 206(a) of the Federal Water Pollution Control Act, as added in Title II thereof by the Federal Water Pollution Control Act Amendments of 1972, approved October 18, 1972, 86 Stat. 838, 33 U.S.C. § 1286(a). That section reads:

Any publicly owned treatment works in a State on which construction was initiated after June 30, 1966, but before July 1, 1972, which was approved by the appropriate State water pollution control agency and which the Administrator finds meets the requirements of section 8 of this Act1 in effect at the time of the initiation of construction shall be reimbursed a total amount equal to the difference between the amount of Federal financial assistance, if any, received under such section 8 for such project and 50 per centum of the cost of such project, or 55 per centum of the project cost where the Administrator also determines that such treatment works was constructed in conformity with a comprehensive metropolitan treatment plan as described in section 8(f) of the Federal Water Pollution Control Act as in effect immediately prior to the date of enactment of the Federal Water Pollution Control Act Amendments of 1972. Nothing in this subsection shall result in any such works receiving Federal grants from all sources in excess of 80 per centum of the cost of such project. (Italics supplied)

Section 212(1) of Title II provides a definition of the term "construction" as used in that Title:

As used in this title

(1) The term "construction" means any one or more of the following: preliminary planning to determine the feasibility of treatment works, engineering, architectural, legal, fiscal, or economic investigations or studies, surveys, designs, plans, working drawings, specifications, procedures, or other necessary actions, erection, building, acquisition, alteration, remodeling, improvement, or extension of treatment works, or the inspection or supervision of any of the foregoing items.2

These statutory provisions are dispositive of the case at bar, which raises solely a question of law, there being no contest as to the operative facts. These are summarized as follows in the opinion of the District Court:

The chronological order of events in regard to construction of the sewage treatment plant is not in dispute. Beginning in January, 1971, the City proposed a rate revision to provide funds for a bond issue for the sewer construction. The funds from the sale of the bonds were received on November 29, 1971. On March 12, 1971, an engineering contract was signed between the City and Walker & Associates to provide the design and specifications for the sewer construction. On March 16, 1971, a grant offer was made to the City by the EPA and accepted on April 5, 1971. On September 13, 1971, the soil testing and exploratory boring were completed by the Georgia Testing Laboratory. On December 16, 1971, the plans and specifications for the construction were submitted to the EPA for review.After several submissions and revisions, the EPA finally approved the plans and specifications for the sewage treatment plant on May 9, 1972. On May 23, 1972, advertisements for bids were submitted. On July 11, 1972, the bids were received and publicly opened for the treatment plant and outfall line. On July 17, 1972, the construction contracts were awarded subject to the approval of the EPA. On September 20, 1972, a work order was issued to Christopher Construction Co. to begin physical construction on the treatment plant and on October 2, 1972, a work order was issued to C. F. W. Construction Company to begin physical construction on the outfall line.

The final cost of construction for the Dried Indian Creek project was $1,374,432.69. The EPA has agreed to pay the City of Covington thirty-three per cent (33%) of this amount. The amount here in controversy is $302,375.19, or twenty-two per cent (22%) of the foregoing construction cost, representing the difference between the amount EPA has agreed to reimburse the City and the fifty-five per cent (55%) amount to which the City believes it is entitled under Section 206 of the Act.3

Defendants rely upon an EPA regulation which defines "initiation of construction" as "the issuance to a construction contractor of a notice to proceed, or, if no such notice is required, the execution of a construction contract.4"

If the regulation were accepted as controlling, plaintiffs would obviously lose, for the date when actual physical construction began was after work orders were issued on September 20, 1972, and October 2, 1972, following contracts executed on July 17, 1972. These dates are all posterior to the cutoff date of July 1, 1972, prescribed in Section 206(a).

But if the broader definition of "construction" contained in the statute (which embraces and includes various preliminary steps as part of the defined concept) is accepted, plaintiffs win; for the summary of uncontested facts, as set forth in the extract from the District Court's opinion quoted above, clearly shows that many of the preliminary steps specified in the statutory definition were completed and consummated before July 1, 1972.

And we are persuaded that the District Court was correct in choosing to give effect to the statute rather than the regulation. The District Court reviewed and gave appropriate weight to cases enunciating the maxim that deference is due to a long-standing administrative construction of a statute,5 but could not ignore the equally valid maxim that such deference is not to be accorded to an administrative construction which is plainly wrong, or contrary to the clear terms of the statute. U. S. v. Calamaro, 354 U.S. 351, 359, 77 S. Ct. 1138, 1 L. Ed. 2d 1394 (1957); Dixon v. U. S., 381 U.S. 68, 73-74, 85 S. Ct. 1301, 14 L. Ed. 2d 223 (1965); Espinoza v. Farah Mfg. Co., 414 U.S. 86, 94-95, 94 S. Ct. 334, 38 L. Ed. 2d 287 (1973).

In case of conflict between regulation and statute, the simple rule laid down long ago by Chief Justice John Marshall is controlling: "that which is not supreme must yield to that which is supreme." Brown v. Maryland, 12 Wheat. 419, 448, 6 L. Ed. 678 (1827).