Mirant Potomac River, LLC v. United States Environmental Protection Agency

PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

MIRANT POTOMAC RIVER, LLC, 

Petitioner,

v.

THE UNITED STATES

ENVIRONMENTAL PROTECTION

AGENCY; LISA P. JACKSON,

Administrator, U.S. Environmental  No. 08-1277

Protection Agency,

Respondents,

COMMONWEALTH OF VIRGINIA ex rel.

ROBERT F. MCDONNELL,

Intervenor.



On Petition for Review of an Order of the

United States Environmental Protection Agency.

(EPA-R03-OAR-2007-0381; FRL-8510-3)

Argued: May 12, 2009

Decided: August 12, 2009

Before MOTZ, GREGORY, and DUNCAN, Circuit Judges.

Dismissed by published opinion. Judge Duncan wrote the

opinion, in which Judge Motz and Judge Gregory joined.

2 MIRANT POTOMAC RIVER v. EPA

COUNSEL

ARGUED: Jeffrey R. Holmstead, BRACEWELL & GIULI-

ANI, LLP, Washington, D.C., for Petitioner. Jon Michael Lip-

shultz, UNITED STATES DEPARTMENT OF JUSTICE,

Environmental Defense Section, Washington, D.C., for

Respondents. Carl Josephson, OFFICE OF THE ATTORNEY

GENERAL OF VIRGINIA, Richmond, Virginia, for Interve-

nor. ON BRIEF: Sonja Rodman, EPA Office of General

Counsel, Washington, D.C., Neil Bigioni, EPA Office of Gen-

eral Counsel, Philadelphia, Pennsylvania; Ronald J. Tenpas,

Assistant Attorney General, John C. Cruden, Deputy Assistant

Attorney General, UNITED STATES DEPARTMENT OF

JUSTICE, Environmental Defense Section, Environmental

and Natural Resources Division, Washington, D.C., for

Respondents. William E. Thro, State Solicitor General, Ste-

phen R. McCullough, Deputy State Solicitor General, Roger

L. Chaffe, Senior Assistant Attorney General, OFFICE OF

THE ATTORNEY GENERAL OF VIRGINIA, Richmond,

Virginia, for Intervenor.

OPINION

DUNCAN, Circuit Judge:

Mirant Potomac River, LLC ("Mirant") appeals the Envi-

ronmental Protection Agency’s ("EPA") approval of Virgin-

ia’s Clean Air Interstate Rule State Implementation Plan

("CAIR SIP"). Mirant’s alleged injury, however, flows from

Virginia’s Nonattainment Provisions, which are separate

emissions standards adopted by Virginia’s Air Pollution Con-

trol Board ("Virginia Board") under the authority of the Vir-

ginia legislature. Because Mirant’s injury cannot fairly be

traced to EPA’s approval of Virginia’s CAIR SIP, we dismiss

for lack of standing.1

1

Since we find no subject matter jurisdiction, we need not evaluate a

recent decision by Virginia’s Court of Appeals that invalidated a portion

MIRANT POTOMAC RIVER v. EPA 3

I.

Mirant, which operates a coal-fired power plant in Alexan-

dria, Virginia, challenges EPA’s approval of Virginia’s CAIR

SIP as unlawful under the Clean Air Act ("CAA"), 42 U.S.C.

§§ 7401 et seq., and the Administrative Procedure Act

("APA"), 5 U.S.C. §§ 500 et seq. While a State Implementa-

tion Plan ("SIP") is a state’s compliance program under the

CAA, a "CAIR SIP" is a modification of a SIP that incorpo-

rates EPA’s recently promulgated Clean Air Interstate Rule

("CAIR"). Virginia’s CAIR SIP permits power plants to meet

CAIR compliance obligations through the trading of emis-

sions allowances2 with other power plants.

However, Mirant’s power plant must also meet the emis-

sions standards promulgated under Virginia’s Nonattainment

Provisions because of the plant’s geographic location in a

nonattainment area. These Provisions do not permit allowance

trading to meet state compliance obligations. Mirant claims

that the Nonattainment Provisions are practically and legally

a fundamental part of Virginia’s CAIR SIP.

Mirant further argues that the Nonattainment Provisions

interfere with its ability to meet its CAIR compliance obliga-

tions because these Provisions purportedly prohibit allowance

trading to meet CAIR obligations. Because of space con-

straints at its power plant that allegedly limit Mirant’s ability

to install emissions controls, Mirant argues that it will ulti-

mately be forced to close the plant if it is not permitted to

meet its CAIR compliance obligations through allowance

trading.

of the Nonattainment Provisions, 9 Va. Admin Code § 5-140-1061. Mirant

Potomac River, LLC v. Commonwealth of Virginia, State Air Pollution

Control Board, 2009 WL 1748524 (Va. Ct. App. June 23, 2009) (unpub-

lished).

2

An "allowance" is a permit to emit one ton of a given pollutant in a

given year.

4 MIRANT POTOMAC RIVER v. EPA

Mirant raises three issues on appeal, all grounded in alleged

violations of the APA. First, Mirant challenges EPA’s

approval of Virginia’s CAIR SIP without providing notice or

the opportunity to comment on Virginia’s Nonattainment Pro-

visions. Second, Mirant argues that EPA acted arbitrarily and

capriciously when it reviewed and approved the Nonattain-

ment Provisions outside its public process. Third, Mirant

alleges that EPA acted arbitrarily and capriciously in approv-

ing Virginia’s CAIR SIP because the Nonattainment Provi-

sions are both a part of the CAIR SIP and fundamentally

incompatible with EPA’s CAIR program. Mirant requests that

we "vacate EPA’s rule approving Virginia’s CAIR SIP and

direct the Agency to prohibit Virginia from implementing and

enforcing the Nonattainment Provisions unless and until Vir-

ginia modifies its rules governing emissions from power

plants to be consistent with federal requirements." Petr.’s Br.

at 41. In the alternative, "Mirant requests that [we] remand the

rule and require EPA to allow for public notice and comment

on the full Virginia CAIR program, including the provisions

at issue [i.e. the Nonattainment Provisions] in this case." Id.

at 41-42.

II.

EPA challenges Mirant’s standing to bring this suit and

argues that Mirant has failed to show an injury fairly traceable

to EPA’s actions. EPA maintains that Mirant’s alleged injury

does not flow from EPA’s approval of Virginia’s CAIR SIP,

but instead flows from Virginia’s independently promulgated

and administered Nonattainment Provisions. Because we must

satisfy ourselves of our jurisdiction, we address this question

first. See Pye v. United States, 269 F.3d 459, 466 (4th Cir.

2001).

In order to demonstrate standing, a party must show that

"(1) it has suffered an injury in fact; (2) the injury is fairly

traceable to the defendants’ actions, and (3) it is likely, and

not merely speculative, that the injury will be redressed by a

MIRANT POTOMAC RIVER v. EPA 5

favorable decision." Long Term Care Partners, LLC v. United

States, 516 F.3d 225, 231 (4th Cir. 2008) (citing Lujan v.

Defenders of Wildlife, 504 U.S. 555, 560-61 (1992)). To meet

the injury in fact requirement, the party must demonstrate an

injury that is "concrete and particularized, and actual or immi-

nent, as opposed to conjectural or hypothetical." Id. (citing

Lujan, 504 U.S. at 560-61). An injury sufficient to meet the

causation and redressability elements of the standing inquiry

must result from the actions of the respondent, not from the

actions of a third party beyond the Court’s control. See Frank

Krasner Enters. Ltd. v. Montgomery County, 401 F.3d 230,

234-35 (4th Cir. 2005) (citation omitted). Finally, the burden

of establishing standing "lies squarely on the party claiming

subject-matter jurisdiction." Id. at 234.

In challenging EPA’s approval of Virginia’s CAIR SIP,

Mirant argues that its injury stems from the Nonattainment

Provisions’ alleged prohibition on allowance trading, which

Mirant argues prevents it from meeting its CAIR compliance

obligations. Mirant attempts to establish the causal link

between its alleged injury and the federally required SIP

approved by EPA by arguing both that the "Nonattainment

Provisions are a fundamental part of Virginia’s CAIR pro-

gram, both legally and practically," Petr.’s Br. at 18, and that

these Provisions impermissibly interfere with EPA’s CAIR

program, see Petr.’s Br. at 16. For the reasons that follow, we

disagree.

We describe below the relevant regulatory regimes—the

SIP, grounded in federal law, and the Nonattainment Provi-

sions, grounded in Virginia state law—and explain why

Mirant has failed to establish an injury in fact that is fairly

traceable to EPA’s approval of Virginia’s CAIR SIP.

A.

We begin with an analysis of the federal regulatory scheme.

Title I of the CAA requires EPA to issue national ambient air

6 MIRANT POTOMAC RIVER v. EPA

quality standards ("NAAQS") for each air pollutant that

endangers, or may reasonably be anticipated to endanger,

public health or welfare. 42 U.S.C. § 7408(a)(1)(A). The

CAA also requires EPA to divide the country into areas desig-

nated as "nonattainment," "attainment," or "unclassified,"

based on whether the area meets the NAAQS. 42 U.S.C.

§§ 7407(d).

Under Title I, states have the primary responsibility for

assuring that air quality within their borders meets the

NAAQS. Title I requires each state to create a State Imple-

mentation Plan ("SIP") to meet the NAAQS. The SIP is then

submitted to EPA for approval. See 42 U.S.C. § 7410. Upon

approval by EPA, the SIP becomes a binding federal regula-

tion. 42 U.S.C. § 7413; see also Union Elec. Co. v. E.P.A.,

515 F.2d 206, 211 (8th Cir. 1975) ("Upon approval or pro-

mulgation of a state implementation plan, the requirements

thereof have the force and effect of federal law and may be

enforced by the Administrator in federal courts.").

Under the so-called "good neighbor" provisions of the

CAA, states are also responsible for preventing in-state emis-

sions "in amounts which will . . . contribute significantly to

nonattainment in, or interfere with maintenance by, any other

State." 42 U.S.C. § 7410(a)(2)(D). To address this concern,

EPA promulgated the Clean Air Interstate Rule ("CAIR") in

2005. 70 Fed. Reg. 25,162 et seq. (May 12, 2005). CAIR

applies to 28 states (plus the District of Columbia) that con-

tribute significantly to other states’ nonattainment.

CAIR gives these states the option of participating in a

regional cap and trade program. Under this program, EPA sets

an annual cap on the total number of tons of a pollutant (i.e.,

emissions allowances) that a state may emit. Each state then

distributes emission allowances to individual power plants.

These allowances establish each plant’s maximum emissions

for CAIR compliance purposes. Power plants can then

trade—buy or sell—allowances for a variety of purposes,

MIRANT POTOMAC RIVER v. EPA 7

including to meet current year CAIR compliance obligations,

to use in the future, to invest, or to raise money. The program

improves air quality by reducing the total emissions allowed

over time.

All states subject to CAIR, including Virginia, have chosen

to participate in this cap and trade program and have modified

their SIPs accordingly. One important implication for these

states is that, under CAIR, neither a state’s SIP nor any inde-

pendent state laws can directly interfere with EPA’s cap and

trade program; that is, they cannot place restrictions on a

power plant’s ability to engage in allowance trading to meet

CAIR obligations. Power plants in these states are subject to

specific federal penalties for failure to meet CAIR compliance

obligations.3 Virginia submitted its CAIR SIP to EPA early in

2007, and EPA approved it in December 2007.

B.

In addition to requiring states to propose and implement

SIPs, the CAA expressly authorizes states to adopt unilateral

emissions regulations as long as those regulations are no less

stringent than those adopted in the state’s SIP. The relevant

portion of the CAA states:

Except as otherwise provided . . . nothing in this

chapter shall preclude or deny the right of any State

or political subdivision thereof to adopt or enforce

(1) any standard or limitation respecting emissions

of air pollutants or (2) any requirement respecting

control or abatement of air pollution; except that if

3

In particular, CAIR provides that any source that exceeds its emissions

allowance must surrender allowances sufficient to offset the excess emis-

sions as well as allowances from the next control period equal to three

times the excess emissions. 70 Fed. Reg. at 25,274; see also 9 Va. Admin.

Code 5-140-1060(D)(1)-(2) (providing identical penalties for excess emis-

sions under Virginia’s CAIR SIP).

8 MIRANT POTOMAC RIVER v. EPA

an emission standard or limitation is in effect under

an applicable implementation plan . . . such State or

political subdivision may not adopt or enforce any

emission standard or limitation which is less strin-

gent than the standard or limitation under such plan.

42 U.S.C. § 7416. As the Supreme Court has observed, "Con-

gress, consistent with its declaration that ‘[e]ach State shall

have the primary responsibility for assuring air quality’ within

its boundaries, § 107(a), left to the States considerable latitude

in determining specifically how the standards would be met."

Train v. Natural Res. Def. Council, Inc., 421 U.S. 60, 86-87

(1975).

Virginia has adopted such additional standards. Virginia’s

Nonattainment Provisions impose emissions caps on individ-

ual power plants located within the state’s nonattainment

areas. See 9 Va. Admin. Code §§ 5-140-1061, -1062, -2061,

-2062, -3061, -3062. Power plants may not trade allowances

to meet their emissions caps under the Nonattainment Provi-

sions. See 9 Va. Admin. Code §§ 5-140-1061(C), -2061(C),

-3061(C). Virginia statutes provide a wide array of discretion-

ary penalties for failure to comply with its emissions caps.4

Like the state compliance obligation, this penalty regime is

distinct from, and in addition to, the federal penalty regime

under CAIR. Consistent with CAIR requirements, the Nonat-

tainment Provisions explicitly prohibit restrictions on allow-

ance trading to meet CAIR compliance obligations under the

EPA administered cap and trade program. See 9 Va. Admin.

Code §§ 5-140-1061(D), -2061(D), -3061(D).

Virginia originally planned to include its Nonattainment

Provisions as part of its CAIR SIP. Consequently, the statu-

4

See Va. Code § 10.1-1316 (providing for penalties of fines, injunction,

mandamus, or "other appropriate remedy"); Va. Code § 10.1-1320 (pro-

viding for a penalty of fines). Individual plant permits may provide for

additional penalties.

MIRANT POTOMAC RIVER v. EPA 9

tory subsection authorizing the promulgation of the Nonat-

tainment Provisions is part of the same statute that authorizes

promulgation of Virginia’s CAIR regulations (i.e., the set of

regulations that modify Virginia’s SIP to make it a CAIR

SIP), and the Nonattainment Provisions themselves are

numerically interspersed throughout these CAIR regulations.

Virginia eventually decided, however, to remove the Non-

attainment Provisions from its CAIR regulations, making

them independent state regulations. When Virginia submitted

its CAIR regulations to EPA, it attached the Nonattainment

Provisions with the explanation that it did so for informational

purposes only. Virginia clarified during the public comment

period on its CAIR regulations that, although the Nonattain-

ment Provisions would set emissions limits for each power

plant in nonattainment areas at levels equivalent to that power

plant’s CAIR allowances, the Provisions "place[ ] no restric-

tion on participation by any affected unit in the EPA trading

program" and "will not interfere with operation of the EPA

CAIR trading program." J.A. 199; accord 9 Va. Admin. Code

§§ 5-140-1061(D), -2061(D), -3061(D). Virginia also empha-

sized that its proposed CAIR SIP segregated "[1] compliance

under the nonattainment area provisions from [2] compliance

under the EPA trading program."5 J.A. 199; accord 9 Va.

Admin. Code §§ 5-140-1061(D), -2061(D), -3061(D). A

power plant can therefore meet its federal emissions obliga-

tions under CAIR through allowance trading, even though it

cannot use such trading to meet its state-imposed obligations

under the Nonattainment Provisions.

Approximately six months after receiving Virginia’s CAIR

SIP and supporting documentation, EPA published a notice in

5

As the Virginia regulations state, compliance with Virginia’s Nonat-

tainment Provisions (i.e., its state-mandated emissions caps) and compli-

ance with the CAIR SIP "shall be determined separately and in accordance

with the terms and provisions of each." 9 Va. Admin. Code 5-140-

1061(D).

10 MIRANT POTOMAC RIVER v. EPA

the Federal Register proposing to approve it. 72 Fed. Reg.

54,385 (Sept. 25, 2007). One of the documents that EPA

included with its notice was an EPA Technical Support Docu-

ment dated September 17, 2007. That document stated that

EPA concluded that Virginia’s Nonattainment Provisions did

not impermissibly interfere with the federal cap and trade pro-

gram. EPA noted:

Virginia has established an emissions cap for EGUs

[i.e., power plants] in the northern Virginia portion

of the DC Nonattainment area. Such a cap is within

the flexibilities of CAIR. The cap limits emissions of

sources to the amount of allowances originally allo-

cated by the Commonwealth. During the proposal

phase of Virginia’s rulemaking, EPA commented on

the nonattainment area provisions, and Virginia

modified the language pertaining to the emissions

cap to address EPA’s comments. However, Virginia

has chosen not to submit its nonattainment provi-

sions as part of its CAIR SIP revision, and EPA is

not taking action on this portion of regulation [9 Va.

Admin. Code § 5-140]. It is only mentioned here to

note that the state-only provision does not interfere

with the trading program under CAIR.

J.A. 397 (emphases added).

During the public comment period on EPA’s proposed

approval of Virginia’s CAIR SIP, the Virginia Board held its

own public proceedings on Virginia’s Nonattainment Provi-

sions at the state level. Mirant fully participated in the state

proceedings but chose not to participate in the EPA proceed-

ings. On December 28, 2007, EPA published a final rule

approving the Virginia CAIR SIP. 72 Fed. Reg. 73,602 (Dec.

28, 2007).

MIRANT POTOMAC RIVER v. EPA 11

C.

Having laid out the underlying statutory and regulatory

framework, we now consider whether Mirant has met its bur-

den of establishing standing to sue EPA for approving Virgin-

ia’s CAIR SIP. Mirant claims that Virginia’s Nonattainment

Provisions prohibit covered plants from purchasing emissions

allowances to comply with CAIR obligations. Because, in

Mirant’s view, the Nonattainment Provisions work in tandem

with the CAIR SIP to circumscribe its options for meeting its

CAIR obligations, the Nonattainment Provisions are an inte-

gral part of the CAIR SIP. Consequently, Mirant argues that

EPA’s approval of the CAIR SIP caused the injury of which

it complains.6 Mirant’s arguments are fundamentally flawed

for several reasons.

First, Mirant claims that the Nonattainment Provisions

impermissibly interfere with Virginia’s CAIR SIP. This claim

is contradicted by the plain language of the Nonattainment

Provisions. These Provisions, as we have pointed out, prohibit

Mirant from allowance trading to meet its state compliance

obligations, established under Virginia’s independent emis-

sions cap. See 9 Va. Admin. Code §§ 5-140-1061(C),

-2061(C), -3061(C). The Nonattainment Provisions do not,

however, directly interfere with Mirant’s ability to trade

allowances to meet its CAIR obligations. On the contrary,

these Provisions explicitly prohibit any restrictions on trading

to meet CAIR compliance obligations. See 9 Va. Admin.

Code §§ 5-140-1061(D), -2061(D), -3061(D).

Second, Mirant argues that the Nonattainment Provisions

are a fundamental part of Virginia’s CAIR SIP. However, its

arguments in this regard are also unpersuasive. For instance,

6

Of course, any alleged injury that accrues to Mirant directly on account

of the Nonattainment Provisions does not establish standing because such

an injury does not arise out of EPA’s decision to approve Virginia’s CAIR

SIP.

12 MIRANT POTOMAC RIVER v. EPA

although Mirant points out that Virginia’s CAIR SIP and its

Nonattainment Provisions were authorized by the same state

statute and proposed in the same legislative action, the expla-

nation for these commonalities is straightforward and does not

support Mirant’s position. As noted above, the Nonattainment

Provisions were once a part of Virginia’s CAIR program and

both programs have the same general goal of preventing air

pollution. Mirant’s emphasis on the common history and

common subject matter of Virginia’s Nonattainment Provi-

sions and its CAIR SIP do not support a conclusion that the

Nonattainment Provisions are now a fundamental part of that

CAIR SIP.

Our analysis of the two regulatory schemes supports a con-

clusion that the two are separate. As discussed, each received

final approval from different sovereigns through different pro-

cesses; each has different compliance obligations that are

enforced by these different sovereigns; each provides a sepa-

rate penalty regime for noncompliance. As we have noted, the

Nonattainment Provisions, as separate state regulations, do

not place any restrictions on participation in the EPA trading

program by any affected power plant. To meet federal com-

pliance obligations, any power plant can buy, sell, trade, or

use allowances without restriction. To meet state compliance

obligations, no power plant located in a nonattainment area

can exceed its independent state emissions cap without facing

state penalties.

In summary, there is no connection–-much less one that is

"fairly traceable"–-between Mirant’s claimed injury and

EPA’s approval of Virginia’s CAIR SIP because Virginia’s

Nonattainment Provisions and its CAIR SIP are separate regu-

latory schemes. Virginia’s Nonattainment Provisions are state

regulations. They are not part of, and do not directly interfere

with, the CAIR SIP approved by EPA.7 Consequently, Mirant

7

To be sure, fines or other penalties issued under the Nonattainment

Provisions might indirectly impact the affected power plant’s capacity to

MIRANT POTOMAC RIVER v. EPA 13

has failed to demonstrate a causal link between its alleged

injury and EPA’s approval of Virginia’s CAIR SIP. Mirant

has failed to carry its burden of establishing standing.

III.

Because Mirant lacks standing, this petition for review is

DISMISSED.

fully engage in the trading program. For example, the fines might curtail

a power plant’s ability to purchase excess CAIR allowances for future use

or for investment, or even make it unprofitable to continue operating the

plant. Such indirect effects, as opposed to direct interference with the trad-

ing program or direct restriction on trading to meet CAIR obligations, are

not fatal to the conclusion that the regulatory regimes are separate. Indeed,

any time a state adopts regulations more stringent than required by CAIR,

the regulations may have some impact on the CAIR trading program.

CAIR is not intended to supplant these regulations. Accord EPA Technical

Support Document at 7 (Sept. 17, 2007); reproduced at J.A. 397. At any

rate, the precise point at which indirect impacts become unacceptable

interference, if ever, is not an issue we need to resolve in this case. Virgin-

ia’s regulatory scheme provides a diverse array of remedies and explicitly

prohibits direct interference with the CAIR Annual Trading Program.