Texas v. United States Environmental Protection Agency

Case: 16-60118 Document: 00513595283 Page: 1 Date Filed: 07/15/2016

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT United States Court of Appeals

Fifth Circuit

FILED

July 15, 2016

No. 16-60118

Lyle W. Cayce

Clerk

STATE OF TEXAS; TEXAS COMMISSION ON ENVIRONMENTAL

QUALITY; PUBLIC UTILITY COMMISSION OF TEXAS; LUMINANT

GENERATION COMPANY, L.L.C.; BIG BROWN POWER COMPANY,

L.L.C.; LUMINANT MINING COMPANY, L.L.C.; BIG BROWN LIGNITE

COMPANY, L.L.C.; LUMINANT BIG BROWN MINING COMPANY, L.L.C.;

SOUTHWESTERN PUBLIC SERVICE COMPANY; UTILITY AIR

REGULATORY GROUP; COLETO CREEK POWER, L.P.; NRG TEXAS

POWER, L.L.C.; NUCOR CORPORATION,

Petitioners,

v.

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY; GINA

MCCARTHY, in her official capacity as Administrator of the United States

Environmental Protection Agency,

Respondents.

Petitions for Review from the

United States Environmental Protection Agency

Before CLEMENT, ELROD, and SOUTHWICK, Circuit Judges.

JENNIFER WALKER ELROD, Circuit Judge:

The State of Texas, numerous energy companies, power plants, steel

mills, consumer organizations, state regulators, and a labor union in Texas

(collectively, “Petitioners”) challenge the Environmental Protection Agency’s

Case: 16-60118 Document: 00513595283 Page: 2 Date Filed: 07/15/2016

No. 16-60118

action disapproving Oklahoma’s and Texas’s plans for controlling regional

haze and imposing EPA’s own plans instead. Petitioners contend that EPA

has acted outside its statutory authority and seek a stay pending review of

the rule on the merits. EPA moves to dismiss or transfer the petition because

it asserts this court lacks jurisdiction over the petition. Because the Clean Air

Act gives jurisdiction over petitions for review to the courts of appeal

generally and because the Act’s forum selection clause designates the

regional circuit as the appropriate venue for this challenge, we DENY EPA’s

motion to dismiss or transfer. Because Petitioners have demonstrated a

strong likelihood of success on the merits, because they are likely to suffer

irreparable injury in the absence of a stay while EPA has not shown similar

injury from the issuance of a stay, and because the public interest weighs in

favor of a stay, we GRANT the motion for a stay pending resolution of the

petitions for review on the merits.

I.

A. The Clean Air Act’s Regulatory Process

The Clean Air Act is “an experiment in cooperative federalism.”

Michigan v. EPA, 268 F.3d 1075, 1083 (D.C. Cir. 2001). It “establishes a

comprehensive program for controlling and improving the nation’s air quality

through state and federal regulation.” BCCA Appeal Grp. v. EPA, 355 F.3d

817, 821–22 (5th Cir. 2003). The Act requires the states and the federal

government to set and seek to achieve targets for visibility in protected

national parks and wildlife areas by modifying regulations that control air

pollutants in ambient air. 42 U.S.C. §§ 7410, 7491, 7492(e)(2). While the

federal government has the primary responsibility for identifying air

pollutants and setting standards, the states “bear ‘the primary responsibility’

for implementing those standards” by promulgating state implementation

2

Case: 16-60118 Document: 00513595283 Page: 3 Date Filed: 07/15/2016

No. 16-60118

plans (“SIPs”). Luminant Generation Co. v. EPA, 675 F.3d 917, 921 (5th Cir.

2012) (quoting BCCA Appeal Grp., 355 F.3d at 822).

The Clean Air Act gives each state “wide discretion in formulating its

plan” for achieving the air quality standards set by EPA. Union Elec. Co. v.

EPA, 427 U.S. 246, 250 (1976). “[S]o long as the ultimate effect of a State’s

choice of emission limitations is compliance with the national standards for

ambient air, the State is at liberty to adopt whatever mix of emission

limitations it deems best suited to its particular situation.” Train v. Nat. Res.

Def. Council, Inc., 421 U.S. 60, 79 (1975).

The Clean Air Act confines EPA’s role in implementing air quality

standards “to the ministerial function of reviewing SIPs for consistency with

the Act’s requirements.” Luminant, 675 F.3d at 921. The statute mandates

that “the administrator shall approve such [a state implementation plan] as a

whole if it meets all of the applicable requirements of this chapter.” 42 U.S.C.

§ 7410(k)(3) (emphasis added); see also Fla. Power & Light Co. v. Costle, 650

F.2d 579, 587 (5th Cir. 1981) (“The great flexibility accorded the states under

the Clean Air Act is . . . illustrated by the sharply contrasting, narrow role to

be played by EPA.”); Michigan, 268 F.3d at 1083 (EPA’s “overarching role is

in setting standards, not in implementation.”). “This division of responsibility

between the states and the federal government ‘reflects the balance of state

and federal rights and responsibilities characteristic of our federal system of

government.’” Luminant, 675 F.3d at 921 (quoting Fla. Power & Light, 650

F.2d at 581). The structure of the Clean Air Act indicates a congressional

preference that states, not EPA, drive the regulatory process. As our sister

circuit recently observed, “[d]isagreeing with Congress’s expressly codified

policy choices isn’t a luxury administrative agencies enjoy.” Central United

Life Ins. Co. v. Burwell, ___ F.3d ___, No. 15-5310, 2016 WL 3568084, at *2

(D.C. Cir. July 1, 2016).

3

Case: 16-60118 Document: 00513595283 Page: 4 Date Filed: 07/15/2016

No. 16-60118

Only if the state has not complied with the requirements of the Clean

Air Act does EPA assume the role of primary regulator by drafting a state-

specific plan. At that point, after disapproving a state implementation plan,

EPA has two years to promulgate a federal implementation plan (“FIP”). 42

U.S.C. § 7410(c)(1). EPA promulgates the federal implementation plan “to fill

all or a portion of a gap . . . in a State implementation plan.” 42 U.S.C.

§ 7602. As a result, EPA’s obligations and authority to promulgate the federal

implementation plan are the same the state had when promulgating its

implementation plan. See, e.g., 77 Fed. Reg. 40,150, 40,164 (July 6, 2012) (“At

the point EPA becomes obligated to promulgate a FIP, EPA steps into the

State’s shoes, and must meet the same requirements. . . .”).

Within this framework, one provision of the Clean Air Act requires

EPA and the states to jointly act to improve visibility at certain protected

federal lands. 42 U.S.C. § 7491. EPA’s obligations under this provision begin

with identifying the federal lands that need improved visibility. 42 U.S.C.

§ 7491(a)(2); 40 C.F.R. §§ 81.400–81.437. After EPA has identified areas for

targeted haze reduction, the Act requires EPA to write regulations providing

the guidelines that states will use to design state implementation plans to

reduce haze in the affected areas. 42 U.S.C. § 7491(b)(1), (2). In 1999, EPA

promulgated the Regional Haze Rule. 40 C.F.R. § 51.308; 64 Fed. Reg. 35,714

(July 1, 1999). The Regional Haze Rule established the guidelines for state

compliance with the air visibility requirements of § 7491. 1

The Regional Haze Rule requires five elements in a state

implementation plan. For each affected wilderness and national park, the

plan must: (1) set “reasonable progress goals” toward achieving natural

1 The guidelines were updated in 2005 after the 1999 version was partially vacated.

Am. Corn Growers Ass’n v. EPA, 291 F.3d 1 (D.C. Cir. 2002) (vacating 1999 Haze Rule

because it imposed technology requirements stricter than those permitted by the Clean Air

Act); 70 Fed. Reg. 39,104 (July 6, 2005) (replacing vacated 1999 Haze Rule).

4

Case: 16-60118 Document: 00513595283 Page: 5 Date Filed: 07/15/2016

No. 16-60118

visibility conditions that ensure improvements in visibility on the most

impaired days over the period of the implementation plan; (2) calculate

baseline visibility and natural visibility conditions; (3) devise a long-term

strategy with enforceable emissions limitations, compliance schedules, and

other measures necessary to achieve the reasonable progress goals;

(4) develop a monitoring strategy for measuring and reporting visibility; and

(5) list the best available retrofit technology (“BART”) that emission sources

in the state will have to adopt to achieve the visibility goals, along with a

schedule for implementing BART. 40 C.F.R. § 51.308(d), (e).

The Regional Haze Rule also prescribes how states may calculate their

reasonable progress goals. A state begins by calculating the steady linear rate

of decreasing emissions that would achieve natural visibility in the covered

wildernesses and national parks by the year 2064. 40 C.F.R. § 51.308. If a

state determines that the linear rate would result in unreasonable

regulations, it must propose an alternative set of reasonable progress goals

and demonstrate both that the linear rate is unreasonable and that the

alternative goals are reasonable. Id. § 51.308(d)(1)(ii). The Clean Air Act and

the Regional Haze Rule require a state to consider four factors when setting

reasonable progress goals: “the costs of compliance, the time necessary for

compliance, and the energy and nonair quality environmental impacts of

compliance, and the remaining useful life of any existing source subject to

such requirements.” 42 U.S.C. § 7491(g)(1); see also 40 C.F.R.

§ 51.308(d)(1)(i)(A) (repeating the factors listed in § 7491(g)(1)).

BART is the only portion of the implementation plan that is enforced

against emission sources in a state. See 64 Fed. Reg. at 35,733 (“Once a State

has adopted a reasonable progress goal and determined what progress will be

made toward that goal over a 10-year period, the goal itself is not enforceable.

5

Case: 16-60118 Document: 00513595283 Page: 6 Date Filed: 07/15/2016

No. 16-60118

All that is ‘enforceable’ is the set of control measures which the State has

adopted to meet that goal.”).

If emissions in one state are anticipated to impact the visibility

conditions in protected areas in another state, the Regional Haze Rule

requires the states to consult with one another and develop a coordinated

emission strategy. 40 C.F.R. § 51.308(d)(3). States may participate in regional

planning organizations that jointly approve the technical analyses assessing

the cross-border impact of emissions. Id.

The Regulatory Process under the Clean Air Act

1 2 3 4 5

Clean Air Act Interior and States write EPA approves States

Establishes EPA designate SIPs with SIP or enforce

Regulatory wilderness areas reasonable disapproves BART

Framework and set SIP progress goals and imposes

guidelines and BART FIP

B. The Texas and Oklahoma SIPs

The rulemaking under challenge here concerns visibility in two

national parks and one federal wildlife refuge. 2 The Wichita Mountains

Wildlife Refuge in southwestern Oklahoma was established in 1901 and

protected by statute in 1905. 16 U.S.C. § 684. The refuge is home to scores of

bird, mammal, and fish species, including reintroduced populations of turkey,

bison, and elk. 3 Big Bend National Park was established in 1935 with lands

in southwest Texas donated by the state to the federal government. 16 U.S.C.

2 Changes in visibility are measured in deciviews. A higher deciview measurement

indicates more haze and less visibility. 40 C.F.R. § 51.301. A single deciview is around the

increment that the average person can perceive with the naked eye. Nat’l Parks

Conservation Ass’n v. EPA, 788 F.3d 1134, 1139 n.2 (9th Cir. 2015).

3 Wichita Mountains Wildlife Refuge: About the Refuge, U.S. Fish & Wildlife Serv.,

http://www.fws.gov/refuge/Wichita_Mountains/about.html (last visited May 3, 2016).

6

Case: 16-60118 Document: 00513595283 Page: 7 Date Filed: 07/15/2016

No. 16-60118

§ 156. Today the park spans over 801,000 acres of desert, mountain, and river

valley and is home to cultural, geological, and biological treasures of the

United States. 4 Guadalupe Mountains National Park in west Texas is the

world’s premier example of a fossilized reef from the Permian Era, more than

250 million years ago. 5 Now it is home to 60 species of mammals, 289 species

of birds and 55 species of reptiles including black bear, grey fox, porcupine,

mountain short-horned lizard, and mountain lion. 6

The Regional Haze Rule requires states to develop an implementation

plan for the period from 2009–2018 and to submit revised plans for each ten-

year period thereafter. 40 C.F.R. § 51.308(b), (f). 7 Initial state

implementation plans were due December 17, 2007. 40 C.F.R. § 51.308(b). In

January 2009, EPA found that thirty-seven states, including Texas and

Oklahoma, had missed the deadline. 74 Fed. Reg. 2392–01 (Jan. 15, 2009).

This finding triggered a two-year deadline for EPA to promulgate a federal

implementation plan. 42 U.S.C. § 7410(c)(1). Before EPA drafted its federal

implementation plan, Texas submitted a state implementation plan on March

31, 2009. More than three years later—and three years into the ten-year

window for this round of implementation plans—EPA issued a limited

4 Michael Welsh, Landscape of Ghosts, River of Dreams: A History of Big Bend

National Park 2–6 (2002).

5 Guadalupe Mountains National Park: Geologic Formations, Nat’l Park Serv.,

https://www.nps.gov/gumo/learn/nature/geologicformations.htm (last visited May 4, 2016).

6 Guadalupe Mountains: Animals, Nat’l Park Serv., https://www.nps.gov/gumo/

learn/nature/animals.htm (last visited May 4, 2016).

7 The Clean Air Act gives EPA flexibility to determine the length of time between

revisions to implementation plans and the length of time each implementation plan will

cover. See 42 U.S.C. § 7491(b)(2)(B) (requiring EPA to draft regulations requiring states to

develop “a long-term (ten to fifteen years) strategy for making reasonable progress toward

meeting the national goal. . . .”). When it promulgated the Regional Haze Rule, EPA elected

to bind states to a ten-year revision period. 40 C.F.R. § 51.308(f). When EPA steps into the

shoes of a state to develop a federal implementation plan, that period is binding on EPA as

it was on the state. See 77 Fed. Reg. at 40,164 (“At the point EPA becomes obligated to

promulgate a FIP, EPA steps into the State’s shoes, and must meet the same

requirements. . . .”).

7

Case: 16-60118 Document: 00513595283 Page: 8 Date Filed: 07/15/2016

No. 16-60118

disapproval of Texas’s plan. 77 Fed. Reg. 33,642, 33,653 (June 7, 2012). 8

Oklahoma first submitted its state implementation plan in February 2010.

EPA partially disapproved its plan in 2011. 76 Fed. Reg. 81,728 (Dec. 28,

2011).

In 2014, five years after receiving Texas’s SIP and four years after

receiving Oklahoma’s SIP, EPA proposed a federal implementation plan to

replace the parts of the Texas and Oklahoma state implementation plans

that EPA found deficient. 79 Fed. Reg. 74,818 (Dec. 16, 2014). Finally, in

2016—nearly seven years after Texas submitted its implementation plan and

nearly six years after Oklahoma submitted its implementation plan—EPA

promulgated a final rule (“the Final Rule”) partially approving and partially

disapproving the Texas and Oklahoma plans and replacing portions of them

with a federal implementation plan. 81 Fed. Reg. 296 (Jan. 5, 2016). The

Final Rule imposes federal reasonable progress goals for wildlife refuges and

national parks in Texas and Oklahoma but only requires emission controls in

Texas. No Oklahoma power plants or emission sources are affected.

Texas’s state implementation plan included each of the five elements

required by the Regional Haze Rule. Texas concluded that the linear rate

required to achieve natural visibility by 2064 was unreasonable and set an

alternative series of reasonable progress goals. It coordinated with eight

other states—Louisiana, Oklahoma, Arkansas, Kansas, Minnesota, Missouri,

Nebraska, and Iowa—through the Central Regional Air Planning Association

(“CENRAP”) and used CENRAP analysis to assess the impact of Texas

8 State implementation plans for haze reduction need not impose additional

requirements if other emissions controls will achieve the necessary visibility improvements.

Texas relied on the requirements of the Clean Air Interstate Rule (which imposed National

Ambient Air Quality Standards) to meet its haze obligations. After the D.C. Circuit vacated

the Clean Air Interstate Rule, North Carolina v. EPA, 531 F.3d 896, 929 (D.C. Cir. 2008),

modified by 550 F.3d 1176 (remanding for reconsideration without vacatur), EPA

disapproved Texas’s haze plan because it had relied on the vacated Rule’s requirements.

8

Case: 16-60118 Document: 00513595283 Page: 9 Date Filed: 07/15/2016

No. 16-60118

emissions on protected areas in other states. CENRAP modeled visibility

estimates for 2018 (the close of the current SIP window) and compared the

2018 estimates to the linear rate of progress. Texas determined that current

actual visibility conditions in the covered areas were already better than the

reasonable progress goals it set for 2018. 81 Fed. Reg. at 341; 79 Fed. Reg. at

74,887 (finding that measured visibility already exceeds reasonable progress

goals under both Texas’s state implementation plan and EPA’s alternative

federal implementation plan). Texas considered various emission control

technologies and concluded that any additional technologies would impose

more costs than benefits.

EPA partially approved and partially disapproved Texas’s proposed

plan. 81 Fed. Reg. at 298–99. EPA approved Texas’s measurements of current

visibility conditions in Big Bend, Guadalupe Mountains, and Wichita

Mountains. These measurements show that visibility at all three

wildernesses is already better than the reasonable progress goals in both the

disapproved Texas plan and the replacement federal implementation plan.

Reasonable Progress Goals under Texas’s and EPA’s plans

Texas Goal EPA Goal Texas goal less EPA Actual

(2018) (2018) goal (% of Tex. goal) 9 Visibility 10

Big Bend 16.6 dv 16.57 dv 0.03 dv (0.18%) 16.3 dv

Guadalupe

16.3 dv 16.26 dv 0.04 dv (0.24%) 15.3 dv

Mountains

Wichita

21.47 dv 21.33 dv 0.14 dv (0.65%) 21.2 dv

Mountains

EPA agreed that the linear rate necessary to achieve natural visibility

by 2064 was unreasonable but disapproved Texas’s alternative reasonable

9 A difference of 1.0 deciview is the smallest change perceptible to the average

person.

10This is the recorded visibility on the 20% of days with the worst visibility from

2009–2013. 79 Fed. Reg. at 74,843, 74,870.

9

Case: 16-60118 Document: 00513595283 Page: 10 Date Filed: 07/15/2016

No. 16-60118

progress goals on the grounds that Texas’s analysis “was not appropriately

refined, targeted, or focused on those sources having the most significant and

potentially cost-effective visibility benefits.” 81 Fed. Reg. at 299. EPA also

disagreed with Texas’s calculation of natural visibility conditions while

approving Texas’s calculation of current baseline visibility. EPA based its

disapproval on a disagreement over the amount of dust that is naturally

occurring in the protected regions. 81 Fed. Reg. at 300. EPA further

disapproved Texas’s long-term strategy, arguing that Texas’s failure to

conduct source-specific analysis also invalidated this portion of the Texas

plan. Id. at 302.

EPA also, in the same rulemaking, disapproved Oklahoma’s plan. EPA

disapproved only the reasonable progress goals in the Oklahoma plan and did

so exclusively because of the effects of Texas emissions on the Wichita

Mountains Wildlife Refuge in Oklahoma. Id. EPA argued that Oklahoma’s

consultation with Texas was “flawed” because Texas “denied [Oklahoma] the

knowledge it needed—the extent to which cost-effective controls were

available for those sources or groups of sources in Texas with the greatest

potential to impact visibility at the Wichita Mountains—in order to properly

construct its reasonable progress goal for the Wichita Mountains.” Id.

Essentially, the only flaw in Oklahoma’s plan springs from EPA’s conclusion

that Texas was required to conduct a source-specific analysis and impose

restrictions on specific sources in Texas. 11

EPA then imposed a federal implementation plan for Texas and

Oklahoma. 81 Fed. Reg. at 303–07. It analyzed emissions individually by

11 The alleged inadequacy of the consultation and the reasonable progress goals that

Oklahoma set as a result of the consultation seem to be Oklahoma’s only involvement in the

Final Rule. All of the additional emission controls in EPA’s federal implementation plan

affect only electrical generating units located in Texas. 81 Fed. Reg. at 298. Oklahoma has

not sought to participate in any of the petitions for review.

10

Case: 16-60118 Document: 00513595283 Page: 11 Date Filed: 07/15/2016

No. 16-60118

source and selected fifteen electrical generating units with the greatest

impact on the protected areas. The federal implementation plan required

specific emission controls only for these specific sources without consideration

of other controls at other sources. 81 Fed. Reg. at 304–05. EPA demanded

scrubber upgrades at eight facilities and scrubber retrofits at an additional

seven facilities with installation deadlines of 2019 and 2021. 81 Fed. Reg. at

305.

By the time EPA promulgated the Final Rule, only two years remained

in the 2008–18 regulatory window. After promulgating the Final Rule, EPA

issued a notice of proposed rulemaking indicating that it would amend the

Regional Haze Rule and change the governing standards for the second and

all subsequent ten-year planning periods. 81 Fed. Reg. 26,942 (May 4, 2016)

(proposing revisions to 40 C.F.R. § 51.308(f)).

The power companies, labor unions, consumer groups, state regulatory

agencies, steel manufacturers, and state of Texas petitioned for review of the

Final Rule. 12 Petitioners argue that EPA, under the guise of requiring

imperceptible haze reductions, has actually targeted coal-fired power plants.

According to Petitioners, the proposed changes at the targeted power plants

would cost $2 billion, rendering them uneconomical and forcing the plants to

close. The association that manages the Texas power grid, ERCOT, concluded

that EPA’s proposal, which became the Final Rule, would close plants and

12 After filing this challenge here, Petitioners also filed for review of the same rule in

the D.C. Circuit, Texas v. EPA, No. 16-1078 (filed Mar. 4, 2016), consolidated with Nos. 16-

1086, 16-1087, 16-1083, 16-1091, 16-1084, 16-1085, and in the Tenth Circuit, Luminant

Generation Co. v. EPA, No. 16-9508 (filed Mar. 2, 2016), consolidated with Nos. 16-9509, 16-

9511, 16-9512. The D.C. Circuit has suspended the filing deadlines in the consolidated

petitions and has yet to set a briefing schedule. Texas v. EPA, No. 16-1078, (D.C. Cir. Apr.

6, 2016) (order suspending filing deadlines). The Tenth Circuit has ordered the petitions

abated pending resolution of EPA’s motion to dismiss or transfer by this court. Luminant

Generation Co. v. EPA, No. 16-9508 (10th Cir. Jun. 16, 2016) (order granting motions to

intervene, consolidate, and abate).

11

Case: 16-60118 Document: 00513595283 Page: 12 Date Filed: 07/15/2016

No. 16-60118

remove 3,000 MW to 8,400 MW of generating capacity in Texas. Petitioners

further argue that it would be cost-prohibitive to reopen the affected plants

even if courts ultimately conclude that EPA acted unlawfully. Highlighting

this installment deadlines of 2019 and 2021, Petitioners argue that EPA’s

plan produces no benefits in the period it is intended to cover (2009–2018)

while imposing significant compliance costs.

Petitioners also argue that closure of the plants would substantially

threaten grid reliability in Texas. Electricity rates would increase for Texas

consumers and businesses. Power companies in the state would need to

undertake costly construction projects to create new transmission

infrastructure that would supply power to central Texas. Until infrastructure

projects are completed or new electrical generation facilities are opened in the

state, Petitioners argue that Texas could face power shortages and grid

failures because the federal implementation plan does not include any

exemption for grid reliability.

While the petitions for review are pending, Petitioners request a stay of

the Final Rule to avoid the irreparable damage they assert the federal

implementation plan would impose. EPA has filed a motion to dismiss or

transfer this petition for review to the D.C. Circuit pursuant to the Clean Air

Act’s mandate that an EPA ruling “based on a determination of nationwide

scope or effect” can only be brought in the D.C. Circuit. 42 U.S.C.

§ 7607(b)(1). Petitioners argue, by contrast, that the Final Rule is only

“locally or regionally applicable” and therefore cannot be brought in the D.C.

Circuit. Id.

II.

EPA moved to dismiss or transfer this petition for review arguing that

jurisdiction lies only in the D.C. Circuit and that this court lacks the power to

12

Case: 16-60118 Document: 00513595283 Page: 13 Date Filed: 07/15/2016

No. 16-60118

consider Petitioners’ challenge. Petitioners respond that jurisdiction and

venue are appropriate in this court.

A.

Section 7607(b)(1) of the Clean Air Act delineates the appropriate

forum for petitions for review. It provides, in relevant part, that:

A petition for review of . . . any . . . nationally applicable

regulations promulgated, or final action taken, by the

Administrator under this chapter may be filed only in the United

States Court of Appeals for the District of Columbia. A petition

for review of the Administrator’s action in approving or

promulgating any implementation plan . . . or any other final

action of the Administrator under this chapter . . . which is

locally or regionally applicable may be filed only in the United

States Court of Appeals for the appropriate circuit.

Notwithstanding the preceding sentence a petition for review of

any action referred to in such sentence may be filed only in the

United States Court of Appeals for the District of Columbia if

such action is based on a determination of nationwide scope or

effect and if in taking such action the Administrator finds and

publishes that such action is based on such a determination.

42 U.S.C. § 7607(b)(1); see also Texas v. EPA, No. 10-60961, 2011 WL 710598,

at *3 (5th Cir. Feb. 24, 2011). Because “the determination of our jurisdiction

is exclusively for the court to decide,” we do not defer to the agency’s

interpretation of this section. Lopez-Elias v. Reno, 209 F.3d 788, 791 (5th Cir.

2000); see also Exelon Wind 1, L.L.C. v. Nelson, 766 F.3d 380, 392 (5th Cir.

2014) (“‘[T]he courts, however, have to make their own determination [about]

jurisdiction, rather than defer to the [federal agency] in the first instance.’”

(first alteration added) (quoting Reeb v. Econ. Opportunity Atlanta, Inc. 516

F.2d 924, 926 (5th Cir. 1975))). 13 Nor do we defer to the agency’s

13Our sister circuits also determine the jurisdiction of the court without deference.

Shweika v. Dep’t of Homeland Sec., 723 F.3d 710, 718 (6th Cir. 2013) (“Chevron deference

does not apply to an agency’s interpretation of a federal court’s jurisdiction.”); Lindstrom v.

United States, 510 F.3d 1191, 1195 n.3 (10th Cir. 2007) (“Determining federal court

13

Case: 16-60118 Document: 00513595283 Page: 14 Date Filed: 07/15/2016

No. 16-60118

interpretation when determining venue. See Smith v. Aegon Co. Pension

Plan, 769 F.3d 922, 928 (6th Cir. 2014).

Section 7607(b)(1) divides challenges into three general categories.

Petitions for review of nationally applicable actions may only be filed in the

D.C. Circuit. Petitions for review of locally or regionally applicable actions

may only be filed in the regional circuit courts of appeal. 14 Petitions for

review of locally or regionally applicable actions based on a determination

that has nationwide scope or effect may only be filed in the D.C. Circuit.

Texas, 2011 WL 710598, at *3.

EPA argues that the division between the three groups is jurisdictional.

In prior cases, we have treated § 7607(b)(1) as a venue provision without

deciding whether it is jurisdictional. Texas, 2011 WL 710598, at *3 n.28.

Here, the parties continue to dispute whether this provision governs

jurisdiction or venue and, therefore, dispute whether we have power to

consider the motion for a stay. We conclude that § 7607(b)(1) is a two-fold

jurisdiction is exclusively the province of the courts regardless of what an agency may say.”

(internal quotation marks omitted)); Bechtel v. Competitive Techs., Inc., 448 F.3d 469, 478

(2d Cir. 2006) (Leval, J., concurring in the judgment) (“[B]ecause the statutory

interpretation at issue concerns the scope of federal court jurisdiction, it is not a proper

subject of deference under Chevron.”); Verizon Md., Inc. v. Global NAPS, Inc., 377 F.3d 355,

383 (4th Cir. 2004) (Niemeyer, J., concurring in part and dissenting in part) (“Chevron

deference is not required when the ultimate question is about federal jurisdiction.”);

Murphy Exploration & Prod. Co. v. Dep’t of Interior, 252 F.3d 473, 478–80 (D.C. Cir. 2001)

(“Chevron does not apply to statutes that . . . confer jurisdiction on the federal courts.”),

modified on denial of petition for reh’g, 270 F.3d 957 (D.C. Cir. 2001), cited with approval in

NetCoalition v. SEC, 715 F.3d 342, 348 (D.C. Cir. 2013).

14 State implementation plans under the Regional Haze Rule are the subject of

frequent litigation in the regional courts of appeal. See, e.g., Arizona v. EPA, 815 F.3d 519

(9th Cir. 2016) (upholding EPA’s partial disapproval of Arizona’s state implementation plan

and the replacement federal implementation plan); Wildearth Guardians v. EPA, 770 F.3d

919 (10th Cir. 2014) (upholding EPA’s approval of state implementation plans for Wyoming,

New Mexico, and Utah); North Dakota v. EPA, 730 F.3d 750 (8th Cir. 2013) (vacating in

part and upholding in part EPA’s disapproval of North Dakota’s implementation plan and

the replacement federal implementation plan); Oklahoma v. EPA, 723 F.3d 1201 (10th Cir.

2013) (upholding EPA’s partial disapproval of Oklahoma’s state implementation plan and

the replacement federal implementation plan).

14

Case: 16-60118 Document: 00513595283 Page: 15 Date Filed: 07/15/2016

No. 16-60118

provision. First, it is a “conferral of jurisdiction upon the courts of appeals.”

Harrison v. PPG Indus., Inc., 446 U.S. 578, 593 (1980). Second, its allocation

of petitions between the regional circuits and the D.C. Circuit delineates the

appropriate venue for challenges. 15

This reading accords with the text of the statute, which empowers both

the D.C. Circuit and the regional circuits. The statute is not framed as a

limitation on the power of the courts but as an instruction to petitioners. Our

two-fold reading comports with that of our sister circuit. Dalton Trucking,

Inc. v. EPA, 808 F.3d 875, 878–80 (D.C. Cir. 2015) (holding that § 7607(b)(1)

confers jurisdiction on all courts of appeal and divides venue among them).

B.

Having concluded that § 7607(b)(1)’s three categories delineate venue,

we now conclude that venue is appropriate in the Fifth Circuit because the

present challenge addresses a “locally or regionally applicable” action, which

is not based on a determination that has nationwide scope or effect.

Section 7607(b)(1) is not a model of statutory clarity. Interpreting it

requires close attention to detail. We begin by defining the significant

statutory terms. Section 7607(b)(1) categorizes petitions for review according

to the “action” under challenge. The “action” is the rule or other final action

taken by the agency that the petitioner seeks to prevent or overturn. Here,

the “action” in question is EPA’s final rule disapproving portions of the Texas

and Oklahoma SIPs and imposing a FIP. Section 7607(b)(1) then looks to the

“determination” that the challenged action is “based on.” These

determinations are the justifications the agency gives for the action and they

15 In reading the allocation of petitions between circuit courts as a venue provision,

we are mindful of the Supreme Court’s consistent instruction that courts should not infer

jurisdictional limitations when a statute does not expressly limit jurisdiction. See, e.g., V.L.

v. E.L., 136 S. Ct. 1017, 1021–22 (2016); Arbaugh v. Y&H Corp., 546 U.S. 500, 513–16

(2006).

15

Case: 16-60118 Document: 00513595283 Page: 16 Date Filed: 07/15/2016

No. 16-60118

can be found in the agency’s explanation of its action. They are the reason the

agency takes the action that it does. For example, because EPA determined

that Texas failed to appropriately calculate reasonable progress goals, EPA

disapproved Texas’s reasonable progress goals and imposed its own. EPA’s

determination about Texas’s goals provided the basis for EPA’s action.

Because the statute speaks of the determinations the action “is based on,” the

relevant determinations are those that lie at the core of the agency action.

Merely peripheral or extraneous determinations are not relevant—the agency

should identify the core determinations in the action. Last, § 7607(b)(1)

speaks of a “find[ing]” and publication by the Administrator. This finding is

an independent, post hoc, conclusion by the agency about the nature of the

determinations; the finding is not, itself, the determination. The finding must

be published as part of the action itself.

Section 7607(b)(1) categorizes petitions for review according to the

nature of the action that the petition challenges. The statute separates

petitions for review of nationally applicable actions from petitions for review

of locally or regionally applicable actions. The question of applicability turns

on the legal impact of the action as a whole. See, e.g., Texas, 2011 WL 710598,

at *3 (action disapproving SIPs from thirteen widely dispersed states and

issuing SIP call requiring states to submit new SIPs is nationally applicable);

Am. Road & Transp. Builders Ass’n v. EPA, 705 F.3d 453, 455–56 (D. C. Cir.

2013) (action disapproving California SIP is locally applicable and must be

filed in Ninth Circuit); ATK Launch Sys., Inc. v. EPA, 651 F.3d 1194, 1199

(10th Cir. 2011) (“[SIPs are] an undisputably regional action [and] the nature

16

Case: 16-60118 Document: 00513595283 Page: 17 Date Filed: 07/15/2016

No. 16-60118

of the regulation . . . controls.”). The parties agree that the Final Rule under

review is a locally or regionally applicable action. 16

Next, § 7607(b)(1) subdivides challenges to locally or regionally

applicable actions. The default presumption is that petitions for review of

locally or regionally applicable actions “may only be filed in the United States

Court of Appeal for the appropriate circuit.” 42 U.S.C. § 7607(b)(1). The

statute creates an exception, however, for actions “based on a determination

of nationwide scope or effect.” Id. If a challenged action is based on such a

determination, § 7607(b)(1) gives the Administrator the discretion to move

venue to the D.C. Circuit by publishing a finding declaring the

Administrator’s belief that the action is based on a determination of

nationwide scope or effect. EPA argues that the Administrator’s finding alone

is conclusive, but this does not comport with the statutory text. Section

7607(b)(1)’s exception lists two criteria: “(1) if such action is based on a

determination of nationwide scope or effect and (2) if in taking such action

the Administrator finds and publishes that such action is based on such a

determination.” 42 U.S.C. § 7607(b)(1) (emphasis and numerals added).

Because these criteria are listed “if . . . and if . . . ,” both criteria must be

satisfied to transfer venue from the appropriate regional circuit to the D.C.

Circuit.

To determine whether the exception applies, we must answer two

questions: (1) is the action based on a determination that has nationwide

16Section 7607(b)(1) directs that “[a] petition for review of the Administrator’s action

in approving or promulgating any implementation plan . . . or any other final action . . .

which is locally or regionally applicable” may only be filed in the regional circuit. 42 U.S.C.

§ 7607(b)(1). Regardless of whether “which is locally or regionally applicable” modifies only

“any other final action” or both “any other final action” and “action in approving or

promulgating any implementation plan,” see Barnhart v. Thomas, 540 U.S. 20, 27–28

(2003) (describing the last-antecedent canon), the statutory text places review of SIP

approvals or disapprovals in the regional circuits while providing an exception for review of

a small subset of those actions in the D.C. Circuit.

17

Case: 16-60118 Document: 00513595283 Page: 18 Date Filed: 07/15/2016

No. 16-60118

scope or effect; and (2) did the Administrator publish an adequate finding? 17

EPA argues that the court has no role in assessing whether the action is

based on a determination of nationwide scope or effect. 18 EPA, however,

cannot point to any part of § 7607(b)(1) giving it such exclusive authority. 19

Rather, the statute provides a clear metric by which a court can assess the

scope or effect of the relevant determinations. The reviewing court merely

asks whether the scope 20 or effect 21 of the determinations is nationwide. 22

Numerous cases demonstrate that courts must assess the

“applicability” of the action. See, e.g., Texas, 2011 WL 710598, at *3

(challenged action is nationally applicable); Am. Road & Transp. Builders

Ass’n v. EPA, 705 F.3d 453, 455–56 (D. C. Cir. 2013) (SIP is locally or

regionally applicable); ATK Launch Sys., 651 F.3d at 1199 (SIP call is

nationally applicable); Madison Gas & Elec. Co. v. EPA, 4 F.3d 529, 530–31

17 EPA concedes that courts of appeals can and should independently consider

whether the Administrator has published a suitable finding. If a circuit court holds that the

Administrator made no publication, or made an inadequate publication, the exception

transferring venue to the D.C. Circuit does not apply. See, e.g., Nat’l Parks Conservation

Ass’n v. McCarthy, 816 F.3d 989, 993 (8th Cir. 2016) (EPA made no publication); Lion Oil

Co. v. EPA, 792 F.3d 978, 981–82 (8th Cir. 2015) (EPA publication was defective because

EPA notified regulated party privately rather than publishing finding in Federal Register).

18 In the alternative, EPA argues that only the D.C. Circuit can assess the scope or

effect of the determinations. This argument is unsupported by any statutory text and is

directly contrary to the familiar maxim that “[w]hen judicial review depends on a particular

fact or legal conclusion, then a court may determine whether that condition exists.” Okoro

v. INS, 125 F.3d 920, 925 n.10 (5th Cir. 1997) (internal quotation marks omitted).

19 Nor does EPA establish that it has unreviewable discretion under the standard

test for reviewability. An agency’s conclusions are unreviewable only in limited

circumstances when “(1) statutes preclude judicial review . . . [or (2)] the statute is drawn so

that a court would have no meaningful standard against which to judge the agency’s

exercise of discretion.” Heckler v. Chaney, 470 U.S. 821, 828, 830 (1985); see also 5 U.S.C.

§ 701(a). Although the Administrator may have discretion over the decision to publish a

finding, the statutory text does not give it exclusive discretion to assess the scope or effect

of the determinations.

20 “The area covered by a given activity or subject.” Scope, American Heritage

Dictionary (2d. College Ed. 1982).

21 “Something brought about by a cause or agent; result.” Effect, Id.

22 “Throughout a whole nation.” Nationwide, Id.

18

Case: 16-60118 Document: 00513595283 Page: 19 Date Filed: 07/15/2016

No. 16-60118

(7th Cir. 1993) (EPA regulation allocating emissions allowances to listed

power plants is locally or regionally applicable). Courts make this decision by

asking whether the action is “nationally applicable” or “locally or regionally

applicable.” Assessing whether a determination’s scope or effect is

“nationwide” requires a similar judicial inquiry.

We consider whether the first condition is satisfied by assessing the

scope or effect of the determinations underlying the challenged action.

Petitioners suggest that we must make our inquiry as to the scope or effect of

the determinations independent from EPA’s finding because the inquiry

governs the powers of the court rather than those of the agency. EPA, by

contrast, argues that we review whether its finding is arbitrary or capricious.

We agree with Petitioners. The exception for locally or regionally applicable

actions based on a determination of nationwide scope or effect has two

conditions. First the action must be based on such a determination and

second the agency must so find and publish. The statute gives EPA discretion

to transfer venue only if the first condition is also satisfied. Because the

answer to the first condition controls the role of the court, we are persuaded

that we must make an independent assessment of the scope of the

determinations just as we make an independent assessment of the

applicability of the action. See Exelon Wind, 766 F.3d at 392; Texas, 2011 WL

710598, at *3–*4 (conducting an independent inquiry into the applicability of

SIP call); ATK Launch Sys., 651 F.3d at 1196–97 (same).

Addressing the first condition de novo, we conclude that the Final Rule

is not based on any determinations that have nationwide scope or effect. EPA

based its disapproval of the Texas and Oklahoma SIPs and its FIP on a

19

Case: 16-60118 Document: 00513595283 Page: 20 Date Filed: 07/15/2016

No. 16-60118

number of intensely factual determinations. 23 These determinations all

related to the particularities of the emissions sources in Texas and the

confluence of factors impacting visibility at two locations in Texas and one in

southwest Oklahoma. 24

Even assuming, arguendo, that our task is to review the agency’s

conclusion about the scope or effect of the determinations—rather than to

23 EPA’s determinations that Texas’s and Oklahoma’s SIPs have inadequate

reasonable progress goals and long term strategies are the core determinations that are

relevant for the § 7607(b)(1) inquiry, but even assuming, arguendo, that the action is “based

on” all the determinations EPA made in the course of promulgating the Final Rule, we see

none that has nationwide scope or effect. EPA “determined that Texas’ analysis [setting

reasonable progress goals] is inadequate because it does not provide the information

necessary to determine the reasonableness of controls at those sources. . . .” 81 Fed. Reg. at

301. It “determined that Texas has satisfied [the monitoring] requirement.” Id. It

“determined that nine facilities (with 21 units) merited further modeling to assess what the

visibility benefits might be. . . .” 81 Fed. Reg. at 303. It “determined the amount the

baseline visibility values exceeded the natural visibility conditions to calculate visibility

impairment for each area.” 81 Fed. Reg. at 306. EPA “determined that the CAMx

photochemical model was best suited” to model visibility impacts at the affected sites on the

20% worst days. 81 Fed. Reg. at 304. EPA “determine[d] that under a proper assessment of

reasonable progress factors, additional controls for some sources in Texas are warranted for

the first planning period.” 81 Fed. Reg. at 316. EPA “determined that additional controls on

Parish and Welsh were not required for reasonable progress for the first planning period.”

81 Fed. Reg. at 331. Because EPA “determined that the visibility impacts due to [certain]

facilities was almost entirely due to their sulfate emissions [EPA] determined that to

address the visibility impacts on 20% worst days from these sources, it was only necessary

to evaluate sulfate controls for this planning period.” 81 Fed. Reg. at 332. EPA “determined

that it was reasonable to focus [its] analysis on point sources of SO2 and NOX.” Id.

24 Although the SIP process is generally highly fact-bound and particular to the

individual state, EPA has made determinations in other SIP approvals that may have

nationwide scope or effect. For example, in another rulemaking, it determined that CSAPR,

a nationwide regulation governing NAAQS, “would provide for greater reasonable progress

than BART and established regulations that allow certain states to rely on CSAPR to meet

the SO2 and NOX BART requirements.” 81 Fed. Reg. at 301–02 (discussing a determination

made in Regional Haze: Revisions to Provisions Governing Alternatives to Source-Specific

Best Available Retrofit Technology Determinations, 77 Fed. Reg. 33642-01 (June 7, 2012)). A

determination that a national standard satisfies a particular requirement in each state may

be a determination that has nationwide scope or effect. But EPA explicitly declined to make

that determination in the Final Rule: “Given the uncertainty arising from the remand of

Texas’ CSAPR budgets, we have concluded that it would not be appropriate to finalize our

proposed determination to rely on CSAPR as an alternative to SO2 and NOX BART for

EGUs in Texas at this time.” 81 Fed. Reg. at 302.

20

Case: 16-60118 Document: 00513595283 Page: 21 Date Filed: 07/15/2016

No. 16-60118

make our own independent inquiry—and ask only whether the agency’s

finding is arbitrary or capricious, 25 we are not persuaded that the Final Rule

is based on a determination of nationwide scope or effect. 26 EPA could not

identify with particularity the determinations with nationwide scope or effect

that formed the basis of the Final Rule. EPA advanced two general

arguments in support of its position that the Final Rule is based on a

determination of nationwide scope or effect. These arguments are legal in

nature and do not rely on EPA’s factual conclusions or expertise. First, EPA

argues that because the Final Rule disapproves SIPs from states in two

different circuits, it has nationwide scope or effect. Second, EPA argues that

its rejection of the Texas and Oklahoma reasonable progress goals and long-

term strategies relied on novel interpretations of the Regional Haze Rule and

that the novel interpretation will guide other states designing future SIPs.

EPA’s first argument is unpersuasive and improperly focuses on the

nature of the rule as a whole and not on the determinations on which the

Final Rule is based. It speaks to applicability of the rule, not to the scope or

effect of the relevant determinations. 27

25 [A]n agency must give adequate reasons for its decisions. The agency must

examine the relevant data and articulate a satisfactory explanation for its

action including a rational connection between the facts and the choice made.

That requirement is satisfied when the agency’s explanation is clear enough

that its path may be reasonably discerned. But where the agency has failed to

provide even that minimal level of analysis, its action is arbitrary and

capricious and so cannot carry the force of law.

Encino Motorcars, LLC v. Navarro, ___ S. Ct. ___, No. 15-415, 2016 WL 3369424, at *7

(June 20, 2016) (internal quotation marks omitted).

26 In the Final Rule, EPA found that “our action on the Texas and Oklahoma

regional haze SIPs, which includes the promulgation of a partial FIP for each state, is based

on a determination of nationwide scope and effect.” 81 Fed. Reg. at 346.

27 EPA supports its argument by reference to a single comment in one House Report

commenting on 1977 amendments to § 7607(b)(1). We do not consider passing commentary

in the legislative history, however, when the statutory text itself yields a single meaning.

United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241 (1989); see also Bank One

Chicago, N.A. v. Midwest Bank & Trust Co., 516 U.S. 264, 280 (Scalia, J., concurring)

21

Case: 16-60118 Document: 00513595283 Page: 22 Date Filed: 07/15/2016

No. 16-60118

EPA’s prior actions also call into question EPA’s assertion here that the

involvement of two circuits gives nationwide scope or effect to the relevant

determinations. While § 7607(b)(1) gives EPA discretion to make and publish

a finding in certain actions while declining to do so in other similar actions,

general principles of administrative law demand that EPA explain its basis

for doing so. See FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515

(2009) (requiring agency to “provide reasoned explanation for its action”).

In another SIP assessment for Michigan and Minnesota—neighboring

states falling in different circuits—EPA did not argue that determinations of

nationwide scope or effect existed even though the plans regulated facilities

in both states. Approval and Promulgation of Regional Haze Implementation

Plan for States of Minnesota and Michigan, 78 Fed. Reg. 8706, 8733 (Feb. 6,

2013) (petitions for judicial review of federal implementation plans “must be

filed in the United States Court of Appeals for the appropriate circuit.”); see

also Disapproval of Interstate Transport Requirements for the 2008 Ozone

NAAQS, 81 Fed. Reg. 38,957-01 (June 15, 2016) (disapproving SIPs for Ohio

(6th Cir.) and Indiana (7th Cir.) without any suggestion of nationwide scope

or effect). EPA may treat different actions differently but EPA must provide

an explanation for its varying treatment. While EPA’s briefing advanced

explanations for treating the Michigan and Minnesota approval differently

(“Legislative history that does not represent the intent of the whole Congress is

nonprobative; and legislative history that does represent the intent of the whole Congress is

fanciful.”). Furthermore, even if we were to consider the House Report, it would weigh in

favor of review in this circuit. The House Report from which EPA extracted its passing

reference explicitly adopted the views expressed by the Administrative Conference of the

United States, which observed that “available transfer provisions” could prevent any

“undue duplication of proceedings.” 41 Fed. Reg. 56,767 (Dec. 30, 1976). The normal

governing transfer provision dictates that venue for a petition for review is proper in the

circuit where a petition for review is first filed. 28 U.S.C. § 2112(a). In the present case,

Petitioners’ petition for review in this circuit was the first filed.

22

Case: 16-60118 Document: 00513595283 Page: 23 Date Filed: 07/15/2016

No. 16-60118

from the Texas and Oklahoma disapproval, no such explanation appears in

the Final Rule.

Nor are we persuaded by EPA’s second argument that whatever

precedential effect the Final Rule has shows that it is based on

determinations with nationwide scope or effect. Specifically, EPA argues that

its determination that Oklahoma and Texas conducted insufficient

discussions about the impact of Texas emissions on the Wichita Mountains

Wildlife Refuge in Oklahoma will provide guidance to future interstate

consultations. This argument focuses on the appropriate level—the scope or

effect of the determinations that are the basis of the Final Rule—but it too is

unconvincing. To begin with, the argument sweeps too broadly. All SIPs are

likely informed by EPA’s assessment of SIPs from other states. It would

reverse § 7607(b)(1)’s presumption that review of implementation plans

should take place in regional circuits if the guidance one SIP approval

provides another state necessarily gave nationwide scope or effect to EPA’s

determinations. See Am. Road & Transp. Builders, 705 F.3d at 456.

Furthermore, EPA’s argument that a SIP disapproval like the Final

Rule provides interpretive guidance with nationwide scope or effect is

undermined by EPA’s own actions and arguments. In the Final Rule itself,

EPA responded to commenters who alleged inconsistency with other SIP

approvals by arguing that its regulations “do not require uniformity

between . . . actions in all circumstances and instead ‘allow for some

variation’ in actions taken in different regions.” 81 Fed. Reg. at 326 (quoting

Amendments to Regional Consistency Requirements, 80 Fed. Reg. 50,250,

50,258 (Aug. 19, 2015)). Some variation is to be expected because SIP

approvals or disapprovals are highly fact-dependent actions. As EPA itself

insisted during oral argument, the agency’s particular interpretations of the

23

Case: 16-60118 Document: 00513595283 Page: 24 Date Filed: 07/15/2016

No. 16-60118

Regional Haze Rule in the Final Rule cannot be divorced from the particular

factual context of the Texas and Oklahoma plans.

EPA’s practices confirm that SIP analyses are contextual and variable.

Two years ago, EPA approved a New Mexico SIP with a less stringent

reasonable progress goal for the monitor at the Guadalupe Mountains than

the reasonable progress goal in the disapproved Texas SIP. 28 Had Texas

looked to New Mexico’s SIP for guidance, it would have been misled precisely

because the SIP process is fact-intensive and will vary from state to state.

Finally, as a practical matter, the determinations in the Final Rule will

have no nationwide precedential scope or effect because every other state has

already submitted its SIP for the 2008–18 round. Nor will the Final Rule

impact SIPs considered in the next round because EPA has proposed

revisions of the exact portions of the Regional Haze Rule that EPA claims to

have definitively interpreted in the Final Rule. Protection of Visibility:

Amendments to Requirements for State Plans, 81 Fed. Reg. 26,942, 26,952

(May 4, 2016). If the Final Rule has the impact on other SIPs that EPA

argues it has, no revision of the Regional Haze Rule would be needed.

Because the Final Rule is a locally or regionally applicable action, the

default presumption of § 7607(b)(1) requires review in this circuit. Because

the action is not based on any determinations that have nationwide scope or

effect, the exception to the default presumption does not apply. Therefore,

review is appropriate here, in the regional circuit.

28Compare 77 Fed. Reg. 36,044, 36,071, 36,078 (June 15, 2012) (setting a visibility

goal of 16.92 deciviews for the Carlsbad Caverns National Park measured at “the

IMPROVE monitoring site . . . located in Guadalupe Mountains National Park, Texas”),

with 81 Fed. Reg. at 301, 347 (setting a visibility goal of 16.26 for the Guadalupe Mountains

National Park measured using the IMPROVE monitoring site in Guadalupe Mountains).

24

Case: 16-60118 Document: 00513595283 Page: 25 Date Filed: 07/15/2016

No. 16-60118

III.

We consider four factors when deciding whether to grant a stay

pending appeal: “(1) whether the stay applicant has made a strong showing

that he is likely to succeed on the merits; (2) whether the applicant will be

irreparably injured absent a stay; (3) whether issuance of the stay will

substantially injure the other parties interested in the proceeding; and (4)

where the public interest lies.” Nken v. Holder, 556 U.S. 418, 426 (2009)

(quoting Hilton v. Braunskill, 481 U.S. 770, 776 (1987)). “A stay is not a

matter of right, even if irreparable injury might otherwise result” to the

appellant. Id. at 433 (quoting Va. Ry. Co. v. United States, 272 U.S. 658, 672

(1926)). Similarly situated petitioners challenging other federal

implementation plans under the Regional Haze Rule have often obtained

stays. See, e.g., Oklahoma v. EPA, 723 F.3d at 1206–07 (staying

implementation of rule imposing $1.2 billion in costs); Wyoming v. EPA, Nos.

14-9529, 14-9530, 14-9533, 14-9534 (10th Cir. Sept. 9, 2014) (staying and

tolling compliance deadlines for rules imposing $700 million in costs); Cliffs

Nat. Res. Inc. v. EPA, Nos. 13-1758, 13-1761 (8th Cir. June 14, 2013) (staying

and tolling compliance deadlines for rules imposing $200 million in costs).

A.

To show a strong likelihood of success on the merits, Petitioners must

demonstrate that EPA acted arbitrarily, capriciously, or unlawfully. 29

Because the BART requirements—the portion of the Final Rule imposing

29 Our determination of Petitioners’ likelihood of success on the merits is for the

purposes of the stay only and does not bind the merits panel. See Mattern v. Eastman

Kodak Co., 104 F.3d 702, 704 (5th Cir. 1997), abrogated on other grounds by Burlington N.

& Santa Fe Ry. Co. v. White, 548 U.S. 53 (2006); see also Planned Parenthood of Greater

Tex. Surgical Health Servs. v. Abbott, 734 F.3d 406, 419 (5th Cir. 2013). By contrast, our

conclusions regarding jurisdiction and venue in evaluating the motion to dismiss or transfer

are not preliminary.

25

Case: 16-60118 Document: 00513595283 Page: 26 Date Filed: 07/15/2016

No. 16-60118

injury on Petitioners—flow from the federal implementation plan, and

because EPA only has the power to promulgate a federal implementation

plan if it disapproves the state implementation plan, Petitioners can

demonstrate a strong likelihood of success on the merits either by showing

that EPA acted unlawfully when it disapproved the Texas and Oklahoma

SIPs or that EPA acted unlawfully when it drafted the FIP.

The Clean Air Act permits a reviewing court to invalidate any action

taken by EPA that is “arbitrary, capricious, an abuse of discretion, or

otherwise not in accordance with the law . . . in excess of statutory

jurisdiction, authority, or limitations, or short of statutory right; or without

observance of procedure required by law. . . .” 42 U.S.C. § 7607(d)(9); see

Luminant, 675 F.3d at 925 (standard of review of Clean Air Act actions

tracks standards provided by Administrative Procedure Act, 5 U.S.C. § 706).

Agency action:

is arbitrary and capricious “if the agency has relied on factors

which Congress has not intended it to consider, entirely failed to

consider an important aspect of the problem, offered an

explanation for its decision that runs counter to the evidence

before the agency, or is so implausible that it could not be

ascribed to a difference in view or the product of agency

expertise.”

Tex. Oil & Gas Ass’n v. EPA, 161 F.3d 923, 933 (5th Cir. 1998) (quoting Motor

Vehicle Mfrs. Ass’n v. State Farm, 463 U.S. 29, 43 (1983)). “We must

disregard any post hoc rationalizations of EPA’s action and evaluate it solely

on the basis of the agency’s stated rationale at the time of its decision.”

Luminant, 675 F.3d at 925; see Motor Vehicle Mfrs. Ass’n, 463 U.S. at 50 (“It

is well-established that an agency’s action must be upheld, if at all, on the

basis articulated by the agency itself.”); Burlington Truck Lines, Inc. v.

United States, 371 U.S. 156, 168–69 (1962) (“The courts may not accept

appellate counsel’s post hoc rationalizations for agency action; Chenery

26

Case: 16-60118 Document: 00513595283 Page: 27 Date Filed: 07/15/2016

No. 16-60118

requires that an agency’s discretionary order be upheld, if at all, on the same

basis articulated in the order by the agency itself.” (citing SEC v. Chenery

Corp., 332 U.S. 194, 196 (1947))).

We review factual findings to determine if they are supported by

substantial evidence, but legal conclusions are reviewed de novo. Bd. of Miss.

Levee Comm’rs v. EPA, 674 F.3d 409, 417 (5th Cir. 2012). Because EPA’s

disapproval of Texas’s plan occurred in the form of a rulemaking and has the

force of law, our assessment of EPA’s disapproval is deferential to EPA’s

interpretation of the Clean Air Act if the statute is susceptible to multiple

reasonable interpretations. See United States v. Mead Corp., 533 U.S. 218,

226–27 (2001); Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, 467 U.S. 837,

844 (1984).

If EPA’s action is not permitted by the statute, we must overturn the

action. 5 U.S.C. § 706(2) (“[T]he reviewing court shall . . . hold unlawful and

set aside agency action . . . found to be . . . arbitrary, capricious, an abuse of

discretion, or otherwise not in accordance with law.”); Food and Drug Admin.

v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 125 (“Regardless of how

serious the problem an administrative agency seeks to address, . . . it may not

exercise its authority ‘in a manner that is inconsistent with the

administrative structure that Congress enacted into law.’” (quoting ETSI

Pipeline Project v. Missouri, 484 U.S. 495, 517 (1988))).

Petitioners assert two grounds on which EPA’s disapproval of Texas’s

state implementation plan was unlawful: (1) that EPA exceeded its powers

when it disapproved Texas’s reasonable progress goals and the resulting

long-term strategy despite their compliance with the Clean Air Act; (2) that

EPA acted arbitrarily and capriciously when it disapproved Texas’s

consultation with Oklahoma. Petitioners also assert three independent

grounds on which EPA’s alternative federal implementation plan is unlawful:

27

Case: 16-60118 Document: 00513595283 Page: 28 Date Filed: 07/15/2016

No. 16-60118

(3) that the federal plan impermissibly relied on effects outside the ten-year

regulatory window in requiring emission controls; (4) that the federal plan

failed to adequately consider costs as required by Michigan v. EPA, 135 S. Ct.

2707 (2015); and (5) that the federal plan failed to consider the effects on grid

reliability in Texas.

We now turn to the particular challenges Petitioners raise regarding

EPA’s disapproval of Texas’s implementation plan and EPA’s alternative

federal implementation and consider whether Petitioners have a strong

likelihood of success on the merits.

1. Reasonable Progress Goals

Petitioners have a strong likelihood of success in showing that EPA

exceeded its statutory authority by disapproving the Texas and Oklahoma

reasonable progress goals even though the goals complied with the Clean Air

Act’s standards. EPA cannot base disapproval on any requirements other

than those listed in the Clean Air Act because EPA has “no authority to

question the wisdom of a State’s choices of emission limitations if they are

part of a plan which satisfies the standards of [§ 7410(a)(2)].” Train, 421 U.S.

at 79. “[T]he Agency may devise and promulgate a specific plan of its own

only if a State fails to submit an implementation plan which satisfies those

standards.” Id.

The Clean Air Act imposes a multi-step process for setting visibility

targets. States begin by estimating natural visibility conditions at the

protected federal lands. The state then assesses the changes necessary to

achieve natural visibility by 2064. If those changes impose unreasonable

costs, the state must devise alternative reasonable progress goals for the

close of the current regulatory window.

The Regional Haze Rule grants states considerable flexibility when

they estimate natural conditions, requiring that they “estimat[e] the degree

28

Case: 16-60118 Document: 00513595283 Page: 29 Date Filed: 07/15/2016

No. 16-60118

of visibility impairment existing under natural conditions for the most

impaired days and least impaired days, based on available monitoring

information and appropriate data analysis techniques . . . .” 40 C.F.R.

§ 51.308(d)(2)(iii). EPA’s natural visibility guidance expressly permits states

to use refined approaches for the calculation and to “identify [other

approaches] that are more appropriate for their own situations.” 30 Yet EPA

disapproved Texas’s refined estimates for Big Bend and Guadalupe

Mountains because Texas assumed that natural factors such as dust storms

and wildfires contributed 100% of coarse mass and soil to the air on the 20%

of days with the most visibility impairment. EPA devised its own estimate

using an 80% contribution from natural factors. Petitioners argue that EPA

provided scant justification for its substitution other than to allege that

Texas’s estimate was inadequately supported. 81 Fed. Reg. at 325. 31

Once a state has estimated natural visibility conditions, the Regional

Haze Rule requires the state to calculate the changes necessary to achieve

natural visibility by 2064. If those changes are unreasonable, a state is

required to set reasonable progress goals that ensure more gradual progress

toward natural visibility conditions. Both EPA and Texas agree that the

regulatory changes necessary to achieve natural visibility by 2064 are

unreasonable. 81 Fed. Reg. 299. As required by the Clean Air Act and the

Regional Haze Rule, Texas’s state implementation plan proposed an

alternative set of reasonable progress goals.

30 Environmental Protection Agency, Guidance for Estimating Natural Visibility

Conditions Under the Regional Haze Program, 3-2 (2003), available at https://www3.epa.gov

/ttn/caaa/t1/memoranda/rh_envcurhr_gd.pdf.

31 Because EPA’s use of a source-specific analysis provides a sufficient basis for

concluding that EPA’s disapproval of the reasonable progress goals was “arbitrary,

capricious, an abuse of discretion, or otherwise not in accordance with the law,” we do not

address whether EPA acted arbitrarily or exceeded its statutory authority by disapproving

the natural visibility estimates.

29

Case: 16-60118 Document: 00513595283 Page: 30 Date Filed: 07/15/2016

No. 16-60118

Texas considered emissions from a broad range of sources in Texas and

conducted a holistic analysis of emissions controls for this range of sources.

EPA’s disapproval asserted that this approach was unreasonable and instead

substituted its own source-specific analysis examining the particular costs

and benefits of emissions from particular power plants. 81 Fed. Reg. 298–99.

Texas set 2018 reasonable progress goals of 16.6 dv, 16.3 dv, and 21.47 dv for

Big Bend, Guadalupe Mountains, and Wichita Mountains, respectively.

EPA’s replacement reasonable progress goals instead demanded 16.57 dv,

16.26 dv, and 21.33 dv. 81 Fed. Reg. at 306–07; 79 Fed. Reg. at 74,887 tbl. 43.

EPA’s reasonable progress targets are less than 1% lower than the Texas

goals that EPA found inadequate and current visibility conditions are already

better than the targets set in either Texas’s or EPA’s reasonable progress

goals. EPA’s reasonable progress goals would require a number of costly

changes including: installation of sulfur dioxide scrubbers at seven electrical

generating units and upgrades of existing scrubbers at seven other electrical

generating units. 81 Fed. Reg. at 298.

EPA disapproved both Texas’s and Oklahoma’s goals by arguing that

Texas incorrectly weighed the four statutory factors that govern the

development of reasonable progress goals. See 42 U.S.C. § 7491(g)(1) (“costs of

compliance, the time necessary for compliance, and the energy and nonair

quality environmental impacts of compliance, and the remaining useful life of

any existing source subject to such requirements”). EPA argues that it had

several grounds for disapproving the Texas and Oklahoma goals and suggests

each alone provides a sufficient basis for the disapproval. Most of these

“independent” grounds boil down to EPA’s insistence that Texas should have

conducted a source-specific requirement. Other grounds for disapproval were

asserted in the proposed rule but were not finalized in the Final Rule.

Compare 79 Fed. Reg. at 74,842–43 (proposing disapproval because of Texas’s

30

Case: 16-60118 Document: 00513595283 Page: 31 Date Filed: 07/15/2016

No. 16-60118

cost threshold, weighing of factors for individual sources, reliance on CAIR

reductions, assumptions about efficiency of SO2 scrubbers, evaluation of

potential improvements, order of magnitude estimate, and scrubber upgrade

estimates), with 81 Fed. Reg. at 298–300 (finalizing disapproval because of

lack of source-specific analysis and estimation of natural visibility

conditions).

EPA’s requirement that Texas conduct a source-specific analysis is not

supported by the Clean Air Act or the Regional Haze Rule. As our sister

circuit held, “[n]either the Clean Air Act nor the Regional Haze Rule requires

source-specific analysis in the determination of reasonable progress goals.”

Wildearth Guardians v. EPA, 770 F.3d 919, 944 (10th Cir. 2014). Indeed,

EPA itself has repeatedly argued that states are not required to use a source-

specific analysis. See, e.g., Wildearth, 770 F.3d at 944; Arizona, 815 F.3d at

539–40 (upholding EPA decision not to conduct source-specific analysis). If

the Clean Air Act empowered EPA to draft reasonable progress goals on a

blank slate, EPA’s action may be permissible, but the Clean Air Act limits

EPA to a deferential role. EPA must defer to Texas’s goals so long as the

Texas goals comply with the Act. See 42 U.S.C. § 7410(k)(3) (EPA “shall

approve” a state implementation plan that satisfies the requirements of the

Act); Luminant, 675 F.3d at 921. EPA’s lack of deference to the state inverts

the agency’s “ministerial function” in this system of “cooperative federalism.”

Luminant, 675 F.3d at 921.

Petitioners are likely to establish that EPA improperly failed to defer to

Texas’s application of the statutory factors and improperly required a source-

specific analysis not found in the Act or Regional Haze Rule.

2. Consultation between Texas and Oklahoma

The Regional Haze Rule requires states to “consult with the other

State(s) in order to develop coordinated emission management strategies” if

31

Case: 16-60118 Document: 00513595283 Page: 32 Date Filed: 07/15/2016

No. 16-60118

emissions in one state affect visibility at a protected area in another state. 40

C.F.R. § 51.308(d)(3)(i). The Regional Haze Rule adds that states may collect

and project visibility data using a regional planning process and that a state

implementation plan must document its compliance with any agreements

that the regional planning process produces. 40 C.F.R. § 51.308(d)(3)(ii), (iii).

Texas and Oklahoma consulted through CENRAP, the regional

planning association. CENRAP assessed the impact each state’s emissions

had on visibility in other member states. Texas and Oklahoma relied on the

CENRAP process to ensure they satisfied the requirement to control

emissions causing visibility impairment in downwind states.

EPA disapproved Oklahoma’s consultation with Texas because EPA

disagreed with Oklahoma’s decision not to demand further emissions controls

at plants located in Texas. 81 Fed. Reg. at 302–03. EPA’s disapproval seems

to stem in large part from its assertion that Texas had to conduct a source-

specific analysis and provide Oklahoma with that source-specific analysis. 32

Neither the Regional Haze Rule nor the Clean Air Act explicitly

requires upwind states to provide downwind states with source-specific

emission control analysis. The Regional Haze Rule only requires that

“[w]here the State has emissions that are reasonably anticipated to

contribute to visibility in [protected areas] in another State or States, the

State must consult with the other State(s) in order to develop coordinated

32[W]e find that this additional analysis [that Texas provided to Oklahoma]

was inadequate because the large control set Texas selected was not

appropriately refined, targeted, or focused on those sources having significant

and potentially cost-effective visibility benefits and did not provide the

information necessary to determine the reasonableness of controls at those

sources in Texas that have the greatest visibility impacts at the Wichita

Mountains.

81 Fed. Reg. at 300–01.

32

Case: 16-60118 Document: 00513595283 Page: 33 Date Filed: 07/15/2016

No. 16-60118

emission management strategies.” 40 C.F.R. § 51.308(d)(3)(i). The Clean Air

Act makes no mention of interstate consultation at all.

Given the absence of a regulation or statute requiring source-specific

consultations, the extent of negotiations between CENRAP states, the volume

of analysis produced by CENRAP, and the fact that EPA has never before

disapproved the consultation between states under the Regional Haze Rule,

Petitioners have a strong likelihood of success in showing that EPA’s

disapproval of the consultation between Oklahoma and Texas was arbitrary

and capricious.

3. Effective Date of Emissions Controls

Petitioners also have a strong likelihood of success in establishing that

EPA exceeded its statutory authority by imposing emissions controls that go

into effect years after the period of time covered by the current round of

implementation plans.

The Regional Haze Rule requires states to “consider . . . the emission

reduction measures needed to achieve [the reasonable progress goal] for the

period covered by the implementation plan,” and to impose “enforceable

emissions limitations, compliance schedules, and other measures, as

necessary to achieve the reasonable progress goals.” 40 C.F.R.

§ 51.308(d)(1)(i)(B), (d)(3) (emphasis added). The Regional Haze Rule provides

that each implementation plan will cover a ten-year period; before the close of

each ten-year period, the state must submit a comprehensive revision to

cover the next ten-year period. 40 C.F.R. § 51.308(b), (f) (first implementation

plan due December 2007; first “comprehensive periodic revision” due July 31,

2018, and every ten years thereafter).

The emissions controls included in a state implementation plan,

therefore, must be those designed to achieve the reasonable progress goal for

the period covered by the plan. 40 C.F.R. § 51.308(d)(1)(i)(B). When the EPA

33

Case: 16-60118 Document: 00513595283 Page: 34 Date Filed: 07/15/2016

No. 16-60118

disapproves a SIP and proposes a FIP, it stands in the position of the state

with all the same requirements and powers the state had in initially drafting

its SIP. Here, the state implementation plans under review only cover the

period up to 2018. 33 Yet EPA’s federal implementation plan requires power

plants in Texas to meet reasonable progress goals by installing scrubbers in

2019 and 2021. 81 Fed. Reg. at 347. Petitioners persuasively argue that this

exceeds the power granted by the Regional Haze Rule.

EPA responds that it has the statutory authority to impose emission

control requirements outside the ten-year window because the Clean Air Act

gave EPA the flexibility to require revised implementation plans at ten- to

fifteen-year intervals. 42 U.S.C. § 7491(b)(2)(B). The minimal deference owed

to an agency interpretation first raised during the course of litigation is

insufficient to persuade us that EPA’s interpretation of the Clean Air Act and

Regional Haze Rule is reasonable. 34 The Clean Air Act may grant EPA the

authority to require new state implementation plans with fifteen-year

coverage periods, but EPA bound states (and accordingly bound itself) to a

ten-year window when it promulgated the Regional Haze Rule.

As Petitioners observe, if EPA wishes to extend the ten-year regulatory

window, it may do so by amending the Regional Haze Rule. EPA, apparently

recognizing this, has already proposed amendments to the Regional Haze

Rule to remove the language tying emissions controls to the reasonable

progress controls “for the period covered by the implementation plan.” 81

33 40 C.F.R. § 51.308(f).

34 EPA raised this argument for the first time in its response to Petitioners’ motion

for a stay and asks the court to defer to this novel interpretation of the Clean Air Act. As we

have stated in prior Clean Air Act cases, Chevron deference does not apply to statutory

interpretations an agency advances in documents, like litigation documents, that do not

bind with the force of law. Luminant, 675 F.3d at 928; see also Calix v. Lynch, 784 F.3d

1000, 1007 (5th Cir. 2015) (Agency interpretations “warrant Chevron deference so long as

they were established prior to the case under consideration.”).

34

Case: 16-60118 Document: 00513595283 Page: 35 Date Filed: 07/15/2016

No. 16-60118

Fed. Reg. at 26,972. 35 The regulations in effect when Texas and Oklahoma

submitted their plans, however, require states to set the emissions controls

necessary to achieve the reasonable progress goal for 2018. Agency actions

must be assessed according to the statutes and regulations in effect at the

time of the relevant activity. See Caring Hearts Personal Home Servs., Inc. v.

Burwell, No. 14-3243, 2016 WL 3064870 (10th Cir. May 31, 2016) (vacating

CMS sanctions imposed under regulations that came into effect years after

the relevant claims were filed). “[I]t is elementary that an agency must

adhere to its own rules and regulations. Ad hoc departures from those rules,

even to achieve laudable aims, cannot be sanctioned.” Reuters Ltd. v. FCC,

781 F.2d 946, 950 (D.C. Cir. 1986).

EPA also defends the 2019 and 2021 deadlines by arguing that Texas

ought not to benefit from Texas’s delay in promulgating a state

implementation plan. Were there some evidence that Texas’s alleged

intransigence caused the delay in the promulgation of the Final Rule, we

might be inclined to consider this argument. But Texas submitted its

implementation plan for approval in 2009. EPA waited seven years before

finalizing its disapproval in 2016. It does not seem that Texas created

inordinate delay in order to obstruct EPA. EPA may not use its own delay as

an excuse for imposing burdens on Texas that the Regional Haze Rule does

not permit.

Petitioners have a strong likelihood of showing that EPA acted in

excess of its statutory power when it disapproved the Texas state

implementation plan for failing to require scrubbers that will not be installed

until the state implementation plan is no longer in effect.

35 Under the proposed amendments, Petitioners’ argument would be much less

compelling.

35

Case: 16-60118 Document: 00513595283 Page: 36 Date Filed: 07/15/2016

No. 16-60118

4. Consideration of Costs

Petitioners further challenge EPA’s federal implementation plan,

arguing that EPA did not adequately consider the costs of the power plant

changes—mostly installation of sulfur dioxide scrubbers—when it imposed

the plan.

The Clean Air Act requires EPA to consider “costs of compliance” when

it develops its reasonable progress goals and sets the emission controls

necessary to obtain them. 42 U.S.C. § 7491(g)(1). EPA set a cost threshold for

emissions controls in terms of cost per ton of emissions reduction.

Commenters suggested that because the purpose of the Regional Haze Rule is

to improve visibility, EPA should instead assess costs in terms of cost per

deciview of visibility improvement. EPA declined to do so. 81 Fed. Reg. at

319. Notably, even though the designated areas have all achieved better

visibility than their targets for 2018, 36 the federal implementation plan

imposes emissions controls that will cost $2 billion without achieving any

visibility changes in the time period covered by the plan. Because, as

discussed infra, Petitioners have a strong likelihood of establishing other

flaws in EPA’s federal implementation plan, we need not decide whether

EPA’s use of $/ton metrics instead of $/dv metrics fell short of its obligation to

consider the costs of its regulations, or whether the costs imposed are

unreasonable as a whole in light of the minimal visibility benefits the FIP

would achieve in the relevant time period. See Michigan v. EPA, 135 S. Ct. at

2712; Entergy Corp. v. Riverkeeper, Inc., 556 U.S. 208, 225–26 (2009)

(“[W]hether it is ‘reasonable’ to bear a particular cost may well depend on the

resulting benefits; if the only relevant factor was the feasibility of the costs,

their reasonableness would be irrelevant.”).

3681 Fed. Reg. at 341 (acknowledging that visibility on the 20% worst days is better

than the agency’s reasonable progress goals).

36

Case: 16-60118 Document: 00513595283 Page: 37 Date Filed: 07/15/2016

No. 16-60118

5. Grid Reliability

The Clean Air Act requires EPA to consider “the energy . . . impacts of

compliance” with the emission controls in a SIP or FIP. 42 U.S.C.

§ 7491(g)(1). Petitioners have a strong likelihood of success in showing that

EPA failed to do so when it devised its FIP because the Final Rule would

render several of the affected electrical generating units uneconomical and

cause the closure of 3,000 to 8,400 MW of generating capacity in Texas.

In its electrical grid, as in so many things, Texas stands alone. While

all the other states in the Union have extensive interconnections with

neighboring states, nearly 90% of Texas is covered by a single isolated grid

with limited connections to external power supplies. This grid shares the

name of its governing board, the Electric Reliability Council of Texas

(ERCOT). Pub. Utility Comm’n of Tex. v. City Pub. Serv. Bd. of San Antonio,

53 S.W. 3d 310, 312 (Tex. 2001). ERCOT’s independence makes the Texas

electrical grid uniquely vulnerable to sudden power shortages when power

plants in the state unexpectedly close because each power plant provides a

larger fraction of the grid’s total power than individual power plants in either

the Western or Eastern Interconnections.

EPA, responding to concerns ERCOT submitted in the notice-and-

comment period, attempted to address all questions about the impact of the

Final Rule on power capacity in Texas in half of one page of the Federal

Register. 81 Fed. Reg. at 345. EPA criticized ERCOT’s rules for failing to

require “meaningful notice” from producers planning to close plants and

suggested that any reliability concerns arose not from the Final Rule but

from ERCOT’s regulatory system. 37 Id. EPA also criticized ERCOT’s

37 ERCOT rules require a plant operator to provide 90 days’ notice before closing an

electrical generating unit in the system. 16 Tex. Admin. Code § 25.502. ERCOT also has

37

Case: 16-60118 Document: 00513595283 Page: 38 Date Filed: 07/15/2016

No. 16-60118

comment for understating new gas turbine capacity in the state and for

overstating the likelihood of plant closures (although the power company

petitioners in the present case agree with ERCOT’s projections for plant

closures). Id. EPA summarily dismissed concerns about grid reliability in

Texas and relied on a report prepared by a private expert outside the agency

to bolster its conclusion. 81 Fed. Reg. at 345.

Figure 1. Power Grids in the United States. 38

authority to compel power plants to stay online in order to guarantee adequate electrical

supply. Id.

38 Brad Plumer, What Happens If You Add Lots of Wind and Solar Power to the

Grid?, Wash. Post, Sept. 25, 2013, https://www.washingtonpost.com/news/wonk/wp/2013/09/

25/what-happens-if-you-add-lots-of-wind-and-solar-power-to-the-grid/.

38

Case: 16-60118 Document: 00513595283 Page: 39 Date Filed: 07/15/2016

No. 16-60118

The Final Rule, other than pointing to the report of EPA’s outside

expert, does not detail why the emissions controls in question would not

endanger reliability or cause the closure of up to 8,400 MW of generating

capacity, as ERCOT’s studies suggest. While the agency is free to rely on

outside experts to support its conclusions, the level of deference owed to an

agency’s conclusions is substantially diminished when the subject matter in

question lies beyond the agency’s expertise. Cf. Brown & Williamson Tobacco

Corp., 529 U.S. at 132 (deference is justified by “the agency’s greater

familiarity with the ever-changing facts and circumstances surrounding the

subjects regulated.”). As EPA’s reliance on an outside expert demonstrates,

EPA has no expertise on grid reliability—its sister agency FERC, uninvolved

in this regulatory scheme or this rulemaking, is the federal expert in that

area. Therefore the deference owed to EPA’s assertions about grid reliability

are diminished and the agency must support its arguments more thoroughly

than in those areas in which it has considerable expertise and knowledge.

Particularly when contrasted with the expert report of ERCOT, the group

with the greatest knowledge regarding questions of grid reliability in Texas,

EPA’s truncated discussion of grid reliability indicates that the agency may

not have fulfilled its statutory obligation to consider the energy impacts of

the FIP.

Given the exceptional complexity of grid reliability concerns in Texas,

EPA’s limited authority to dictate how ERCOT should run the Texas grid,

and the explicit directive in the Clean Air Act that implementation plans

“take[] into consideration . . . the energy . . . impacts of compliance,” 42 U.S.C.

§ 7491(g)(1), it is noteworthy that the Final Rule provides neither an

exemption from compliance when necessary to preserve the power supply nor

a more rigorous exploration of the impact of the Final Rule on grid reliability.

39

Case: 16-60118 Document: 00513595283 Page: 40 Date Filed: 07/15/2016

No. 16-60118

Petitioners have a strong likelihood of success in showing that the Final

Rule’s failure to include either may render it arbitrary and capricious.

B.

Petitioners have demonstrated several irreparable injuries if the Final

Rule is not stayed. They argue that compliance with the Final Rule would

impose $2 billion in costs on power companies, businesses, and consumers.

Because plant emission controls take several years to install, the regulated

companies will have to begin installation almost immediately. The costs of

compliance would not only increase rates for consumers but would also

endanger the reliability of power in ERCOT if plant operators close facilities

rather than install or upgrade uneconomical emissions controls. These

closures would permanently shut down plants with up to 8,400 MW of

generating capacity. 39 The petitioner steel mills and business associations

allege they would also suffer injury as their input costs rise substantially. 40

The petitioner unions argue that their members would lose their employment

at the various power and industrial plants that are threatened by the rule.

Petitioners also state that the absence of a stay would require the Public

Utility Commission of Texas to spend significant resources enforcing

compliance with a voided federal implementation plan rather than enforcing

a valid state implementation plan. Finally, Petitioners assert that allowing

the Final Rule to stand pending the appeal would disrupt the system of

cooperative federalism enshrined in the Clean Air Act. See Michigan v. EPA,

268 F.3d at 1083.

39 Petitioners argue that it is economically infeasible to reopen a plant even if the

regulations are invalidated on the merits.

40 For petitioner Nucor, for example, electricity costs are the second largest

production cost. Substantial rate increases would threaten Nucor’s plants in the state and

the livelihoods of the employees who work there.

40

Case: 16-60118 Document: 00513595283 Page: 41 Date Filed: 07/15/2016

No. 16-60118

The losses Petitioners allege are sufficient to satisfy the irreparable

injury prong of the stay test. The tremendous costs of the emissions controls

impose a substantial financial injury on the petitioner power companies

which, in this circuit, “may also be sufficient to show irreparable injury.”

Enter. Int’l Inc. v. Corp. Estatal Petrolera Ecuatoriana, 762 F.2d 464, 472–73

(5th Cir. 1985). Indeed “complying with a regulation later held invalid almost

always produces the irreparable harm of nonrecoverable compliance costs.”

Thunder Basin Coal Co. v. Reich, 510 U.S. 200, 220–21 (1994) (Scalia, J.,

concurring in part and in the judgment). When determining whether injury is

irreparable, “it is not so much the magnitude but the irreparability that

counts. . . .” Enter. Int’l, 762 F.2d at 472. No mechanism here exists for the

power companies to recover the compliance costs they will incur if the Final

Rule is invalidated on the merits. 41

EPA relies on precedent from other circuits to argue that all the alleged

injuries are purely financial, and cannot satisfy the irreparable injury prong.

See Am. Hosp. Ass’n v. Harris, 625 F.2d 1328, 1331 (7th Cir. 1980); Freedom

Holdings, Inc. v. Spitzer, 408 F.3d 112, 115 (2d Cir. 2005); Mexichem

Specialty Resins, Inc. v. EPA, 787 F.3d 544 (D.C. Cir. 2015). These same

cases, however, recognize Petitioners’ injury because our sister circuits

categorize financial losses as irreparable injury “where no ‘adequate

compensatory or other corrective relief will be available at a later date, in the

ordinary course of litigation,’” Mexichem, 787 F.3d at 555 (quoting Wis. Gas,

41 EPA suggests that the power companies can request cost recovery from their

customers through the state rate recovery process but this does not eliminate the threat of

injury to Petitioners. The power company petitioners are not guaranteed any rate recovery

would be approved. Approval, if granted, would merely spread the injury more broadly and

increase further the damage to the manufacturing petitioners and consumer groups.

Furthermore, the costs imposed on parties are irreparable where they cannot be recovered

“in the ordinary course of litigation.” Wis. Gas Co. v. FERC, 758 F.2d 669, 674 (D.C. Cir.

1985). Even recoverable costs may constitute irreparable harm “where the loss threatens

the very existence of the movant’s business.” Id.

41

Case: 16-60118 Document: 00513595283 Page: 42 Date Filed: 07/15/2016

No. 16-60118

758 F.2d at 674), or “where the loss threatens the very existence of the

movant’s business,” Wis. Gas Co., 758 F.2d at 674. The plant closures here

threaten the very existence of some of Petitioners’ businesses and, even

assuming, arguendo, that the plant operators could recover their costs from

ERCOT or their consumers, this would not be a recovery made in the course

of the litigation.

Here Petitioners have raised threatened harms—including

unemployment and the permanent closure of plants—that would arise during

the litigation if a stay is not granted, that are irreparable, and that are great

in magnitude. Even setting aside the costs of compliance for the power

company petitioners, if the Final Rule causes plant closures, the threat of

grid instability and potential brownouts alone constitute irreparable injury to

Texans. Similarly, the institutional injury to Texas from the inversion of the

federalism principles enshrined in the Clean Air Act may constitute

irreparable injury. In sum, Petitioners have shown irreparable injury.

C.

The third and fourth factors ask whether the absence of a stay will

injure other parties and whether the public interest favors or disfavors a

stay. EPA asserts that a stay would injure the public by delaying the

achievement of natural visibility at covered areas under the Clean Air Act.

But EPA’s asserted injury from a stay is unconvincing as it acknowledges

that its proposed implementation plan would not reduce emissions for at

least three years, after the next revision window has opened. Given the

miniscule difference between the 2018 visibility goals in the federal and state

implementation plans, given that current visibility already exceeds even the

federal goals for 2018, and given that the major emissions controls will not

take effect until 2019 and 2021 (although producers would incur significant

costs imminently), we are not persuaded that a stay would injure EPA or the

42

Case: 16-60118 Document: 00513595283 Page: 43 Date Filed: 07/15/2016

No. 16-60118

intervenors. 42 Petitioners, who themselves represent a broad spectrum of the

public including labor unions, manufacturers, power providers, and consumer

groups, argue that because of the increase in electricity costs and the threat

to grid reliability, the public interest favors a stay.

We agree with Petitioners that the public’s interest in ready access to

affordable electricity outweighs the inconsequential visibility differences that

the federal implementation plan would achieve in the near future. See, e.g.,

Sierra Club v. Ga. Power Co., 180 F.3d 1309, 1311 (11th Cir. 1999) (“[A]

steady supply of electricity during the summer months, especially in the form

of air conditioning to the elderly, hospitals and day care centers, is critical.”);

Tri-State Generation & Transmission Ass’n v. Shoshone River Power, Inc.,

805 F.2d 351, 357 (10th Cir. 1986) (holding that public interest favored an

injunction pending appeal when necessary to preserve power supply to the

public).

D.

We have the power to stay the agency’s action “to the extent necessary

to prevent irreparable injury[.]” 5 U.S.C. § 705. Petitioners request a stay of

the Final Rule in its entirety. EPA, in passing, requests that any stay be

“narrowly tailored.” Because EPA offers nothing beyond this cursory

42 Intervenors Sierra Club and National Parks Conservation Association introduce

expert reports to argue that the FIP would produce health benefits for the public. We are

not persuaded this argument is relevant. Section 7491 is concerned not with health but

with the beauty of our nation’s wild spaces. Other provisions of the Clean Air Act which are

not relevant here protect public health. See, e.g., 42 U.S.C. § 7410. As EPA itself observed,

“for purposes of this action, we are not authorized to specifically consider [health, welfare,

and economic benefits, including ecosystem and tourism benefits] under the regional haze

program.” 81 Fed. Reg. at 325. Even assuming, arguendo, that the technological controls

required by the Final Rule would improve health in a manner relevant to the public

interest component of the stay test, because the emissions controls need not be in place

until 2019 at the earliest, these health benefits (unlike the costs of initiating the scrubber

installation process) would only be realized well after this petition for review concludes

regardless of whether a stay is granted.

43

Case: 16-60118 Document: 00513595283 Page: 44 Date Filed: 07/15/2016

No. 16-60118

comment, it has waived any argument about the scope of the stay. See United

States v. Green, 964 F.3d 365, 371 (5th Cir. 1992) (“Failure to prosecute an

issue on appeal constitutes waiver of the issue.”). Although it is our

understanding that the emissions controls in the Final Rule are the only

portion of the Final Rule with practical effect and therefore a stay of those

requirements effectively operates as a stay of the Final Rule, neither party

has briefed how we might craft a limited stay. Therefore, we stay the Final

Rule in its entirety, including the emissions control requirements, pending

the outcome of this petition for review.

IV.

Section 7607(b)(1) directs that challenges to EPA’s assessment of a

state implementation plan may only be filed in the appropriate regional

circuit. Because the Final Rule is not based on a determination that has

nationwide scope or effect, the narrow exception in § 7607(b)(1) does not

apply. Venue for this challenge is appropriate in this court.

Petitioners have demonstrated a strong likelihood of success in

establishing that EPA acted arbitrarily, capriciously, and in excess of its

statutory authority when it disapproved the Texas and Oklahoma

implementation plans and imposed a federal implementation plan.

Petitioners have also shown a threat of irreparable injury if a stay is not

granted and have demonstrated that EPA will not suffer injury if a stay is

granted. Finally, Petitioners have shown that the balance of public interests

weigh in favor of a stay. Therefore, Petitioners’ motion for a stay of the Final

Rule is GRANTED.

44

Case: 16-60118 Document: 00513595283 Page: 45 Date Filed: 07/15/2016

No. 16-60118

LESLIE H. SOUTHWICK, Circuit Judge, concurring.

I concur in the opinion but write separately as to Section III.A.3. The

majority concludes it is strongly likely the EPA improperly required scrubber

installations “after the period of time covered by the current round of

implementation plans,” meaning after the end of the current plan in 2018.

The problem as the petitioners put it is that the EPA has in effect

required that parts of the federal plan be implemented after the end of the

ten-year period. That argument focuses on the back-end of the requirement.

It seems equally proper when determining the EPA’s authority to focus on

the front-end, which is that the construction must start during the ten-year

plan period. The EPA found “that five years is an adequate amount of time

to allow for the installation of scrubber retrofits, and three years is an

adequate amount of time to allow for the installation of scrubber upgrades.”

81 Fed. Reg. 296, 305 (Jan. 5, 2016).

Indeed, the fact that construction must begin now is central to the

argument on irreparable injury. As the Texas Energy petitioners say in their

briefing: “Construction of the new scrubbers that EPA’s rule mandates

involves massive expenditures, extensive coordination, and long lead-times

for planning, design, engineering, procurement, permitting, and actual

construction. EPA’s rule provides the bare minimum amount of time for

completing this work, and the clock has already started ticking.” That

argument clearly accepts that the work ordered on the scrubbers must begin

now, well before the end of the current plan.

I do not believe we need to decide whether the EPA has such authority.

It is unclear to me whether the Regional Haze Rule dictates a time frame

within which projects must be completed. One view is that the recurring

ten-year deadlines for submitting revised state plans are administrative

45

Case: 16-60118 Document: 00513595283 Page: 46 Date Filed: 07/15/2016

No. 16-60118

benchmarks, checkpoints at which the State and the EPA must review

progress and revise reasonable progress goals and long-term strategies. See

40 C.F.R. § 51.308(f). Stated another way, the Rule does not clearly impose a

requirement that everything begun during a plan term must be completed

during that same term. As just discussed, the enormity of some projects that

might limit pollution from coal plants could require years of construction.

Limiting the State’s or the EPA’s authority to establishing plans that require

every project begun during the plan term also be completed seems

impractical and not clearly required by statute or regulation. Indeed, the

goal of the recurring plans is “to attain natural visibility conditions by 2064.”

Id. § 51.308(d)(1)(i)(B). To reach that goal, plans presumably must be shaped

in a way that considers how far along the road to that goal the current plan’s

steps will take the State.

I close with an observation about the problems of requiring each ten-

year plan to be, as it were, self-contained temporally, problems well

exemplified by the record in this case. Texas’s initial implementation plan

remains un-finalized, and how much of it is to be implemented may well not

be resolved before a revised plan is due on July 31, 2018. Similar delays may

be expected in the submission of revised plans for the next ten-year period.

If, as the majority concludes, a plan may only include projects designed to be

completed before the next revision is due, but the approval of that next plan

may be as delayed as the approval of this one, significant construction

projects may never be feasible. Because I do not see clarity in the statute or

regulations, I am reluctant to state categorically that EPA could not require a

construction project to begin within the plan period even though it would not

end until later.

46

Case: 16-60118 Document: 00513595283 Page: 47 Date Filed: 07/15/2016

No. 16-60118

Notwithstanding these concerns, I concur in the majority’s conclusion

because the petitioners have a strong likelihood of showing the EPA exceeded

its statutory authority by disapproving Texas’s and Oklahoma’s

implementation plans and imposing a federal implementation plan. I would

grant the petitioner’s motion to stay without addressing the import of the

Rule’s recurring ten-year periods.

47