Treasure State Resource Industry Ass'n v. Environmental Protection Agency

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 16, 2015 Decided November 3, 2015

No. 13-1263

TREASURE STATE RESOURCE INDUSTRY ASSOCIATION,

PETITIONER

v.

ENVIRONMENTAL PROTECTION AGENCY AND GINA

MCCARTHY, ADMINISTRATOR, U.S. ENVIRONMENTAL

PROTECTION AGENCY, RESPONDENTS

Consolidated with 13-1264, 14-1093, 14-1164

On Petitions for Review of Actions of the

United States Environmental Protection Agency

William W. Mercer argued the cause for petitioner

Treasure State Resource Industry Association. Douglas A.

McWilliams argued the cause for petitioner United States

Steel Corporation. With them on the briefs were John D.

Lazzaretti, Emily C. Schilling, Marie Bradshaw Durrant, and

Michael P. Manning.

Norman J. Mullen, Special Assistant Attorney General,

Office of the Attorney General for the State of Montana, was

on the brief for amicus curiae State of Montana in support of

2

remedy of reversal urged by petitioner Treasure State

Resource Industry Association in 13-1263 and 14-1164.

Amanda Shafer Berman, Attorney, U.S. Department of

Justice, argued the cause for respondents. With her on the

brief were John C. Cruden, Assistant Attorney General, and

Mike Thrift, Counsel, U.S. Environmental Protection Agency.

Before: GRIFFITH and MILLETT, Circuit Judges, and

WILLIAMS, Senior Circuit Judge.

Opinion for the Court filed by Senior Circuit Judge

WILLIAMS.

WILLIAMS, Senior Circuit Judge: The Clean Air Act, 42

U.S.C. §§ 7401-7671q, directs the Environmental Protection

Agency to establish air concentration levels above which

certain pollutants may endanger public health and welfare,

called National Ambient Air Quality Standards (“NAAQS”),

id. §§ 7408-7409. On June 22, 2010 EPA exercised this

authority to issue a new standard for sulfur dioxide, SO2. 75

Fed. Reg. 35,520/1. The new NAAQS imposes a 1-hour

ceiling of 75 parts per billion, based on the 3-year average of

the annual 99th percentile of 1-hour daily concentrations. Id.

(Because the stringency of the changes derives largely from

the ways in which compliance is calculated rather than from

the raw concentration numbers, it is almost impossible to give

a meaningful statement of the degree by which the standard

increased stringency. See Sulfur Dioxide (SO2) Primary

Standards – Table of NAAQS, http://www3.epa.gov/ttn/

naaqs/standards/so2/s_so2_history.html.) States were then to

develop state implementation plans (“SIPs”) to guide them in

imposing requirements on pollution sources in order to

implement the NAAQS. 42 U.S.C. §§ 7502(c), 7503(a).

3

Within two years after a new NAAQS is established

(extendable as in this case to three for want of adequate data),

id. § 7407(d)(1)(B)(i), EPA must designate all parts of the

country as being in “attainment,” in “nonattainment,” or

“unclassifiable” with respect to the air quality standards, id.

§ 7407(d)(1)(A). “Nonattainment” areas either fail to satisfy

the NAAQS themselves or contribute to pollution in another

area that does not satisfy the NAAQS. “Attainment” areas

both satisfy the NAAQS and do not contribute to

nonattainment status for another area. In “unclassifiable”

areas, EPA lacks adequate information to make a

determination either way. Id. § 7407(d)(1)(A)(i)-(iii).

On August 5, 2013 EPA designated 29 areas as not

meeting its new SO2 standards. Air Quality Designations for

the 2010 Sulfur Dioxide (SO2) Primary National Ambient Air

Quality Standard, 78 Fed. Reg. 47,191/3 (“Final Rule”). Each

of the two petitioners now before us, Treasure State Resource

Industry Association and United States Steel Corporation,

challenges one of these 29 designations: the Association

attacks the one for part of Yellowstone County, Montana, and

U.S. Steel challenges the one for part of Wayne County,

Michigan. Each sought reconsideration by EPA,

unsuccessfully. 79 Fed. Reg. 18,248/3 (Apr. 1, 2014); 79 Fed.

Reg. 50,577/3 (Aug. 25, 2014).

We deny the petitions for review. Except insofar as both

are attacks on EPA’s August 2013 designations with respect

to the 2010 SO2 NAAQS, the two claims have virtually

nothing in common. We take Montana first, then Michigan.

* * *

The Association is “a trade association comprised of

natural resource industries and associations, labor unions,

consulting firms and law firms, and recreation organizations

4

located throughout Montana.” Petitioners’ Br. iii. Its

standing is clear and uncontested; its members are located

within the nonattainment area and are subject to regulations

resulting from the designation. The Association’s primary

arguments are: (1) that the data on which EPA relied were so

unreliable that its reliance was arbitrary and capricious, 42

U.S.C. § 7607(d)(9)(A), and (2) that EPA’s application of the

Act was retroactive within the meaning of Landgraf v. U.S.I.

Film Products, 511 U.S. 244 (1994), and thus, there being no

clear congressional intent to authorize retroactivity, not in

accord with the statute.

The Association claims that EPA failed to follow its

regulations because Montana, which collected the monitoring

data, had an “outdated” Quality Assurance Project Plan

(“QAPP”) for data collection. In particular, EPA regulations

require that states have a QAPP that

ensure[s] that the monitoring results: (a) Meet a well-

defined need, use, or purpose; (b) Provide data of

adequate quality for the intended monitoring objectives;

(c) Satisfy stakeholder expectations; (d) Comply with

applicable standards specifications; (e) Comply with

statutory (and other) requirements of society; and (f)

Reflect consideration of cost and economics.

40 C.F.R. § Pt. 58, App. A. Although the Association says

that Montana’s QAPP was “outdated” because it was

developed in 1996, it identifies only one respect in which

Montana’s failure to adjust the QAPP might have undermined

its usefulness or accuracy. Specifically it claims that the 1996

QAPP was aimed at an obsolete NAAQS standard, seeking

“to measure a standard set at more than six times the 2010

SO2 NAAQS and [it therefore] contains sub-optimal

equipment settings, range levels, and monitoring guidance”

for measuring satisfaction of the new NAAQS. Petitioners’

5

Br. 22. We can easily imagine a situation where a calibration

aimed at a different ambient pollution level would lead to

such questionable readings that agency acceptance of the data

would be arbitrary and capricious. But the Association

presents no evidence that the calibration to a prior standard

here has actually led, or was likely to lead, to faulty

measurement. In fact the record points the other way.

Montana conducted numerous audits of the monitor at levels

lower than the new standard, which showed the monitor’s

ability to record data properly at that level. There was nothing

unreasonable in EPA’s determination that the data from the

monitor were “robust enough to be reliable” for the 2010

NAAQS. Responses to Significant Comments on the State

and Tribal Designation Recommendations for the 2010 Sulfur

Dioxide National Ambient Air Quality Standards (NAAQS)

(July 2013) (“Responses to Comments”) at 45, Joint Appendix

(“J.A.”) 431.

The Association’s last data-quality claim is that EPA

inappropriately applied a “weight of evidence” standard in its

evaluation of the air quality monitoring data. Specifically, it

says, EPA’s regulation requiring use of the “weight of

evidence” was promulgated only weeks before comments

were due on EPA’s proposed SO2 designations and well after

issuance of the new NAAQS standard. 78 Fed. Reg. 3,086,

3,283/3-3,284/1 (Jan. 15, 2013). Given this timing, the

Association claims that the use of the new “weight of

evidence” standard was post hoc. But in its response to the

Association’s petition for reconsideration EPA observed that

in promulgating the standard it had merely codified its long-

established practice in review of data quality, EPA Denial

Letter to Treasure State at 6, J.A. 302, and the Association

offers only lame arguments to refute that contention.

As to retroactivity, the Association’s argument turns on

the fact that EPA used data from as far back as 2009 to make

6

the nonattainment designation under the June 2010 SO2

NAAQS regulation. Thus it imposed special regulatory

burdens on parties in Yellowstone County as a direct result of

activities that took place in 2009, and the first half of 2010,

before promulgation of the June 2010 NAAQS rule. The

regulatory burdens do not flow instantly from the

nonattainment designation, but they flow ineluctably.

Designation of an area as nonattainment triggers an obligation

for the state within which the area is located to modify its SIP

(or create one), with the goal of bringing the area into

attainment. To that end the SIP must require “all reasonably

available control measures as expeditiously as practicable

(including such reductions in emissions from existing sources

in the area as may be obtained through the adoption, at a

minimum, of reasonably available control technology).” 42

U.S.C. § 7502(c)(1). And the SIP also must impose special

permitting requirements on firms proposing construction of a

new source or modification of an existing one, id.

§ 7502(c)(5); the new or modified source must comply “with

the lowest achievable emission rate,” id. § 7503(a)(2). Thus

the challenged nonattainment designation leads to a regulatory

burden on parties in nonattainment areas such as the

Association’s members.

The Act and EPA’s enforcement strategy made it highly

likely that data pre-dating the final adoption of the new

NAAQS would be critical in causing some areas to be

designated nonattainment and to incur those burdens.

Combining to make that probable are (1) EPA’s decision to

measure compliance with the new NAAQS standard by a 3-

year average of various 1-hour readings, (2) the requirement

that EPA make its final designations within three years of

promulgation, 42 U.S.C. § 7407(d)(1)(B)(i), and (3)

conventional process delays and a general desire to use full

calendar years. The Association does not, however, challenge

the three-year averaging rule itself. Rather, it attacks the

7

actual designation in August 2013, which because of these

features in fact drew on data antedating the new NAAQS

standard.

The Supreme Court will refuse “to give retroactive effect

to statutes burdening private rights unless Congress ha[s]

made clear its intent.” Landgraf, 511 U.S. at 270. (The due

process clause also may place limits on retroactive burdens,

see, e.g., Usery v. Turner Elkhorn Mining Co., 428 U.S. 1

(1976), but is not in play here.) We have already found, in a

case involving a party’s attempt to have a nonattainment

designation made effective before EPA actually issued the

designation, that the sections of the Act relating to

nonattainment “contain no language suggesting that Congress

intended to give EPA the unusual ability to implement rules

retroactively.” Sierra Club v. Whitman, 285 F.3d 63, 68 (D.C.

Cir. 2002). 1 Thus a finding that EPA’s Final Rule had

retroactive effect (within the meaning of Landgraf) would

render it impermissible under the attainment designation

provisions of the Act.

Although Landgraf requires that courts evaluating a rule

for retroactivity ask “whether the new provision attaches new

legal consequences to events completed before its enactment,”

that is far from the end of the story; “[a] statute does not

operate ‘retrospectively’ merely because it is applied in a case

arising from conduct antedating the statute’s enactment.” 511

1

Furthermore, the APA prohibits retroactive rulemaking. See

Georgetown Univ. Hosp. v. Bowen, 821 F.2d 750, 756-58 & n.11

(D.C. Cir. 1987), aff'd, 488 U.S. 204 (1988) (citing 5 U.S.C.

§ 551(4), defining a “rule” as “an agency statement of general or

particular applicability and future effect” (emphasis added)). We

said in Celtronix Telemetry, Inc. v. FCC, 272 F.3d 585, 588 (D.C.

Cir. 2001), that the “tests formulated in Landgraf are indeed

pertinent to the APA issue.”

8

U.S. at 269-70. The most concrete factors are “considerations

of fair notice, reasonable reliance, and settled expectations,”

id. at 270 (citations omitted), to which we now turn.

The typical form of unfairness that retroactivity may

wreak is by radically undermining the value of costs that

parties incurred in reasonable reliance on continuation of the

status quo, or by discouraging parties from incurring costs that

by virtue of the new rule might have yielded net savings. An

example of the first would be decisions to build or improve a

plant for compliance with the old standards—changes that as a

result of the new rule and the nonattainment designation may

require costly retrofitting. A cost that knowledge of the new

rule and nonattainment classification might have encouraged

would be building to the resulting specifications—again in

order to avoid retrofitting costs that would stem from an

improvement that complied merely with the old regulatory

landscape. (A further advantage would have been the chance

of avoiding nonattainment designation—and its attendant

regulatory entanglement—by improving the area’s overall air

quality, but it’s hard to imagine a single source owner’s

employing such a strategy, which could easily be undermined

by the conduct of other source owners.) Here, in fact, the

record discloses no evidence of Yellowstone County source

owners’ taking any such steps in reliance on the old standards.

The absence of such evidence is hardly surprising in light

of the established rules governing nonattainment designation

and the ample public notice of the impending change in the

NAAQS. The Act itself requires that “at five-year intervals

. . . , the [EPA] Administrator shall complete a thorough

review of” the NAAQS and revise them as appropriate. 42

U.S.C. § 7409(d)(1). Moreover, these changes have moved

generally toward greater stringency over the life of the Act.

See links to historical NAAQS standards at

http://www3.epa.gov/ttn/naaqs/criteria.html. More

9

specifically, EPA had long given notice of the prospect of

more stringent SO2 regulations. (See the review of the history

in 75 Fed. Reg. at 35,522/2-35,523/3.) As early as 1988, it

requested public comment on a new 1-hour standard similar to

the one that was adopted in 2010. 53 Fed. Reg. 14,926/1

(Apr. 26, 1988). In 1998, this court held that a later decision

not to revise the standards had been inadequately reasoned.

American Lung Association v. EPA, 134 F.3d 388 (D.C. Cir.

1998). EPA embarked on further data collection, and in 2006

initiated the review of its SO2 air quality criteria, 71 Fed. Reg.

28,023/2 (May 15, 2006), a review that culminated in the

2010 standards. While of course divining the specifics of

EPA’s decision would have been impossible, firms had years

of notice that more stringency was possible. Accordingly, any

investment decisions taken in the expectation of stasis would

not have qualified as having been made in reasonable reliance

on preexisting law.

Finally, the Association challenges EPA’s denial of its

reconsideration petition. 79 Fed. Reg. 50,577/3. Its main

argument in its petition for reconsideration was that if EPA

had considered new data from 2013 it would have found that

Yellowstone County was no longer out of attainment. Petition

for Reconsideration or Repeal of a Portion of the Final Rule

and Request for an Administrative Stay Pending Agency

Proceedings at 7-8, J.A. 332-33. There are at least two

problems with this claim. First, the 2013 data were not

complete or certified at the time that the Association

suggested that they be used. Id. at 6 n.28. And using only

data for 2010-2012 would not have undone the county’s

violation of the NAAQS. Responses to Comments at 51, J.A.

437.

Second, a ruling that an agency’s disregard of data

gathered after final agency action was arbitrary and capricious

could make it difficult for many actions to go into effect.

10

Since new data may continue to pour in, reconsideration based

on such data could materially delay arrival at a final decision.

And the Act clearly did intend to produce final rules, since

“Congress imposed deadlines on EPA and thus clearly

envisioned an end to the designation process.” Catawba

County, N.C. v. EPA, 571 F.3d 20, 51 (D.C. Cir. 2009).

Further, parties in areas designated nonattainment aren’t

without recourse: Congress explicitly provided a re-

designation process in 42 U.S.C. §§ 7407(d)(3), 7505a.

Rejecting the petition for reconsideration, EPA explained this

recourse, as well as the possibility of submitting a request for

a “clean data determination,” which “would suspend certain

nonattainment planning requirements.” Treasure State Den.

Ltr. at 22-23, J.A. 318-19. Given the difficulties arising from

reconsideration of new data and the availability of other

avenues of redress, it was reasonable for EPA to deny

reconsideration of this claim.

The Association’s remaining arguments, alleging data

quality deficiencies that it claims the agency ignored in

finalizing the Montana designation, were not specifically

raised until reconsideration and were then fully and

reasonably disposed of by EPA in its denial.

We therefore uphold the Final Rule’s designation of part

of Yellowstone County as nonattainment.

* * *

We turn now to the Michigan designation. U.S. Steel has

a plant located in the nonattainment portion of Wayne County

and does not dispute the designation of that portion as

nonattainment. But it argues that it was not reasonable for

EPA to designate part of Wayne County as nonattainment

without simultaneously making the same determination for at

least that portion of neighboring Monroe County that includes

11

the Monroe Coal-Fired Power Plant (the “Monroe plant”).

Pointing to the statutory criteria for nonattainment

designation, § 107(d)(1)(A)(i), 42 U.S.C. § 7407(d)(1)(A)(i),

which require inclusion of any area “that contributes to

ambient area quality in a nearby area that does not meet” the

NAAQS, U.S. Steel says that SO2 from the Monroe plant

significantly contributes to SO2 levels in Wayne County and

that therefore designation of Wayne County without the

Monroe plant violates the statute and is arbitrary and

capricious.

U.S. Steel must first establish its standing by showing

satisfaction of the now-standard elements of injury in fact,

causation and redressability. Lujan v. Defenders of Wildlife,

504 U.S. 555, 560-61 (1992). Once we understand the

process for remedying nonattainment in an area so designated,

it is apparent that U.S. Steel meets those requirements.

U.S. Steel has suffered an injury in fact that is “concrete

and particularized” and “actual or imminent, not ‘conjectural’

or ‘hypothetical,’” id. at 560 (citations omitted), because the

designation of Wayne County as nonattainment without the

inclusion of the Monroe plant area subjects it to a markedly

higher risk of facing costly (or more costly) regulatory

pollution controls. EPA claims that there is little risk of such

an injury, since Michigan can elect to address nonattainment

in Wayne County by “impos[ing] emission reduction

requirements on all facilities that it determines are, in fact,

contributing to nonattainment.” Respondents’ Br. 40. Thus,

says EPA, the burden of reducing pollution could be shared

between U.S. Steel and the Monroe plant regardless of

whether the Monroe plant is included in the nonattainment

area. EPA’s contention is a considerable oversimplification.

The Act gives a kind of primacy to reductions from

sources in the nonattainment area itself, and we have read it as

12

sharply prioritizing reductions inside the nonattainment area.

Speaking of the SIP required for a nonattainment area, the Act

provides:

(1) In general

Such plan provisions shall provide for the implementation

of all reasonably available control measures as

expeditiously as practicable (including such reductions in

emissions from existing sources in the area as may be

obtained through the adoption, at a minimum, of

reasonably available control technology) and shall

provide for attainment of the national primary ambient air

quality standards.

Act, § 172(c)(1), 42 U.S.C. § 7502(c)(1) (emphasis added).

We considered this provision in NRDC v. EPA, 571 F.3d

1245 (D.C. Cir. 2009), where we reviewed an EPA rule

defining state SIP obligations for NOx over a 22-state region

and instituting a cap-and-trade program throughout the region.

Besides relying on the language of the parenthetical clause in

§ 172(c)(1), NRDC had expressed concern that EPA’s rule

allowed states to rely on sources not only outside

nonattainment areas but also on sources “in other states

hundreds of miles away.” Final Opening Brief of Natural

Resources Defense Council at 21, NRDC, 571 F.3d 1245 (No.

06-1045). We ruled that the parenthetical “calls for

reductions in emissions from sources in the area; reductions

from sources outside the nonattainment area do not satisfy the

requirement.” Id. at 1256. And we went on to say that

satisfaction of § 172(c)(1)’s “reasonably available control

technology” (“RACT”) mandate must “entail[] at least RACT-

level reductions in emissions from sources within the

nonattainment area.” Id. Thus, if Monroe County were

designated nonattainment (and if it is a significant enough

13

contributor, as U.S. Steel claims), then the Monroe plant

would be subject to RACT; without such designation, any

state pressure for cutbacks at the Monroe plant would be up to

Michigan (acting, of course, within the constraints of the Act).

And, while Michigan could impose restrictions on the Monroe

plant, as EPA assures us, under NRDC the resulting reductions

would “not satisfy the [§ 172(c)(1) RACT] requirement.” Id.

Given that understanding of § 172(c)(1), it might seem

that the cutbacks likely to be imposed on U.S. Steel will be

the same regardless of whether the Monroe plant is included

in the nonattainment area. But EPA’s concept of RACT is

such that inclusion of the Monroe plant (again assuming that

its contribution to SO2 exceedances in Wayne County is

significant) would likely reduce the stringency of the RACT

imposed on U.S. Steel. RACT takes into account “[t]he

necessity of imposing such controls in order to attain and

maintain a national ambient air quality standard.” 40 C.F.R.

§ 51.100(o)(1) (2009). Indeed, in its response to comments on

the regulation targeting U.S. Steel’s SO2 emissions, the State

of Michigan cites this definition. Proposed SIP, Appendix F:

Draft Rule 430 Comments/Responses at 1-2,

http://www.deq.state.mi.us/aps/downloads/SIP/SO2SIP.pdf.

Thus, expansion of the nonattainment area to include another

seriously contributing source would likely reduce the severity

of the RACT imposed on U.S. Steel; conversely, EPA’s

failure to add the Monroe plant area inflicts a substantial risk

of more severe controls on U.S. Steel, an imminent and non-

hypothetical injury, redressable by a mandate to include that

area.

EPA also argues that its Final Rule is not final within the

meaning of the APA, 5 U.S.C. § 704, with respect to this

challenge, because it expressly said that it had not completed

the designation process for Monroe County. Michigan

Technical Support Document at 7-8, J.A. 655-56. But this

14

misconceives U.S. Steel’s claim, which, to repeat, is that it

was unlawful to designate Wayne County without

simultaneously designating the area containing the Monroe

plant.

Reaching the merits, however, we find neither a violation

of the Act nor any arbitrariness in EPA’s action. For its SO2

rulemaking, EPA issued guidance to the states for making

their initial recommendations, indicating that “the perimeter

of a county containing a violating monitor would be the initial

presumptive boundary for nonattainment areas.” 78 Fed. Reg.

at 47,195/2. Nothing in the Act or its associated regulations

prevents EPA from presumptively following county

boundaries. Recall that the Act defines a nonattainment area

as “any area that does not meet (or that contributes to ambient

air quality in a nearby area that does not meet) the national

primary or secondary ambient air quality standard for the

pollutant.” 42 U.S.C. § 7407(d)(1)(A)(i). Assuming that the

portion of Monroe County containing the Monroe plant may

ultimately be found to contribute to nonattainment in Wayne

County, nothing in the definition requires a simultaneous

decision on both counties. (Nor does it require that a single

area be created. At oral argument EPA counsel told the court

that in the event of a later nonattainment designation of the

Monroe plant area because of its contributions to Wayne

County, “the measuring would ultimately be a collective one

of [whether] these counties collectively brought

[non]attainment at the monitoring site in Wayne County.”

Oral Argument at 58:27.)

Of course, EPA’s approach could still be arbitrary and

capricious even in the absence of a statutory or regulatory

mandate. Under the APA, EPA must “conform to ‘certain

minimal standards of rationality.’” Small Refiner Lead Phase-

Down Task Force v. EPA, 705 F.2d 506, 521 (D.C. Cir. 1983).

But EPA has offered many reasons that justify its decision to

15

defer a decision on Monroe County. Most importantly, there

was uncertainty over whether pollution from Monroe County

is, in fact, substantially contributing to air quality in Wayne

County. The Monroe plant is approximately 54 kilometers

away from the violating Wayne County monitor. Responses

to Comments at 27, J.A. 413; Michigan Technical Support

Document at 6, J.A. 654. Additionally, another monitor

located between the Monroe plant and the violating Wayne

County monitor—and significantly closer to the former than

to the latter—showed no exceedances. Responses to

Comments at 28, J.A. 414. Finally, EPA reasonably asserted

the need for further study on the effect of recently-installed

emission control scrubbers on the Monroe plant. Michigan

Technical Support Document at 6, J.A. 654. Given the

current uncertainty, postponement of the classification of

Monroe County was not arbitrary and capricious.

Finally, U.S. Steel’s challenge to the denial of its petition

for reconsideration fails. In denying that petition, EPA

thoroughly and reasonably addressed U.S. Steel’s arguments.

See EPA Denial Letter to U.S. Steel, J.A. 598-610.

* * *

The petitions for review of the Final Rule and EPA’s

denial of petitions for reconsideration are accordingly

Denied.