Reply Brief — Alaska Dept. of Environmental Conservation v. EPA

No. 02-658

IN THE

Supreme Court of the Anited States

STATE OF ALASKA, DEPARTMENT OF ENVIRONMENTAL

CONSERVATION,

Petitioner,

v.

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, ef al.,

Respondents.

On Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

REPLY BRIEF FOR PETITIONER

GREGG D. RENKES JONATHAN S. FRANKLIN*

Attorney General LORANE F. HEBERT

STATE OF ALASKA HOGAN & HARTSON L.L.P.

Department of Law 555 Thirteenth Street, N.W.

P.O. Box 110300 Washington, D.C. 20004

Juneau, Alaska 99811 (202) 637-5766

(907) 465-3600

CAMERON M. LEONARD

Assistant Attorney General

STATE OF ALASKA

Department of Law

100 Cushman Street, Suite 400

Fairbanks, Alaska 99701

(907) 451-2811

*Counsel of Record Counsel for Petitioner

WILSON-EPES PRINTING Co., INC. — (202) 789-0096 - WASHINGTON, D. C. 20001

n

an“

TABLE OF CONTENTS

TABLE OF AUTHORITIES. ............:::cccccssceeseeeeeeeneeees

EPA HAS NO AUTHORITY TO VETO A

STATE BACT DETERMINATION THAT

WEIGHS THE STATUTORY FACTORS.....

1.

Il.

A.

D.

Claims Of Arbitrary Or Unreasoned

Decisionmaking Are Addressed

Through Normal Administrative And

Judicial Review, Not By EPA Fiat............

There Is No “Correct” BACT

IIE, oc cccoscssnesccssessonnssonscssnnscneoncess

EPA’s Position Is Contrary To The

Statute’s Legislative History And

PUIPOSE. ........ceceseeeeresceseseenssenersasessesnennsnenns

Chevron Deference Does Not Applly.........

EVEN IF EPA COULD OVERTURN

UNREASONED BACT

DETERMINATIONS, IT HAD NO

AUTHORITY TO OVERTURN

ALASKA’S REASONED

DETERMINATION HERE. ............::2ceeeeee0e4

CONCLUSION ........c-eccssscsssssesessessseesessssensssesennsennenees

Petitioner’s Rule 29.6 Statement appears at Pet. Br. ii.

(i)

Page

13

15

20

*

TABLE OF AUTHORITIES

CASES:

Alabama Power Co. v. Costle, 636 F.3d 323

SEE

Appalachian Power Co. v. EPA, 249 F.3d 1032

a

Bering Straits Coastal Mgmt. Program v. Noah,

Fe © Ee 797 CRIREES BDDB) nncccccescccccesccescccsccseees

Bowers v. Pollution Control Hearings Bd., 13

P.3d 1076 (Wash. Ct. App. 2000), review

denied, 29 P.3d 717 (Wash. 2001) ............000ccee00s

Chevron U.S.A., Inc. v. NRDC, 467 U.S. 837

(1984)

Christensen vy. Harris County, 529 U.S. 576

ES ETSI gE Ea

Color Comm., Inc. v. Illinois Pollution Control

Bd., 680 N.E.2d 516 (Ill. App. Ct.), appeal

denied, 686 N.E.2d 1159 (Ill. 1997)........ccccce

FPC v. Natural Gas Pipeline Co., 315 U.S. 575

RSS ee

Gonzaga Univ. v. Doe, 536 U.S. 273 (2002) ............

Gregory v. Ashcroft, 501 U.S. 452 (1991)...

ICC v. Union Pac. R.R., 222 U.S. 541 (1912) ..........

Idaho v. Coeur d'Alene Tribe of Idaho, 521 U.S.

261 (1997)

11

13

15

—— +"

TABLE OF AUTHORITIES—Continued

In re Crown/Vista Energy Project, 652 A.2d

212 (N.J. Super. Ct. App. Div.), cert. denied,

GBB A.B SOE COLI. UDBS) ncrceccrrcccseccccessccccssccccses0e

Martin v. OSHRC, 499 U.S. 144 (1991) ......cccccees

NRDC v. Thomas, 838 F.2d 1224 (D.C. Cir.),

cert. denied, 488 U.S. 888 (1988) ..................6

Northern Illinois Steel Supply Co. v. Secretary

of Labor, 294 F.3d 844 (7th Cir. 2002)...............

Plumbers & Steamfitters, Local 52 v. Alabama

Dep't of Envtl. Mgmt., 647 So. 2d 793 (Ala.

Cie. Rate. BBG) ...ccceccsceeccsccecescessscccssscsccsscencscssees

Skidmore v. Swift & Co., 323 U.S. 134 (1944) .........

Suter v. Artist M., 503 U.S. 347 (1992).........ccccccceeees

TVA v. Whitman, 2003 WL 21452521 (11th Cir.

OO

United States v. AM General Corp., 34 F.3d 472

CLO ee

United States v. Mead Corp., 533 U.S. 218

CRGBGD ncccecccccscescrscssececsssccsssscnccsssncssnsesscnssasncsssoees

STATUTES:

NTT

ON I a aichisiiniesinicscsisiinsitiaiiasiiiaicl

42 U.S.C. § 7410(a)(2)(D)(i) ..cccccosscseessvseeseovvesensneeen

Page

iV

TABLE OF AUTHORITIES—Continued

Page

42 U.S.C. § 7410(a)(2)(D)( ii) ......cseescsseeccsseecssseeenseeee 11

ke 12

I I a netinitntsitnenenaniiotiid : 4

ke 10

42 U.S.C. § 7426(b)....ccccccsccsssecssssesssnecssuesssueesseeesseeen 10

Ck ee 10

Go EK. © PP ccsvssnesssrsescssenanennenensenesssssmee 6

42 U.S.C. § 7477 voccccccsceee oe Ee 4, 6

a passim

PL | ane 5

gM a 2

Alaska Stat. § 44.62.570(b)(3) ....c...cccssessseesssesseeeseees 4

REGULATIONS:

ere eee 7

a ey eT i2

te 3

QQ) Oa 4

RULE:

Tn eaaidies 16

LEGISLATIVE MATERIALS:

H.R. Rep. No. 95-294 (1977) ...ccccccccscesssseessssseeesseves 12

—<——— a

Vv

TABLE OF AUTHORITIES—Continued

S. Doc. No. 79-248 (Comm. Print 1945)..........:::00«

S. Rep. No. 95-127 (1977) .evssssssseeessseeeersnnnsneeeessees

OTHER AUTHORITIES:

Alaska Industrial Development and Export

Authority/Alaska Energy Authority, Project

Fact Sheet (available at: http://www.aidea.

org/PDF%20files/DMTSFactSheet.pdf) ometipieioue

ADEC Air Quality Construction Permit No.

0132-AC004 (Kotzebue Electric Associa-

tion) (available at: http://www.state.ak.us/

dec/dawa/aqm/132ac004fin. pdf) .........-.-..--

11

18

IN THE

SHupreme Court of the Anited States

No. 02-658

STATE OF ALASKA, DEPARTMENT OF ENVIRONMENTAL

CONSERVATION,

Petitioner,

Vv.

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, ef al.,

Respondents.

On Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

REPLY BRIEF FOR PETITIONER

EPA cannot dispute that Congress expressly intended that

the State make the discretionary determination of BACT in

this case. Instead, EPA argues that its general enforcement

powers trump Congress’s carefully-crafted scheme of coop-

erative federalism, and require EPA to veto a State’s BACT

determination whenever EPA believes the State has acted

unreasonably. Its argument, however, rests on a straw-man:

its incorrect assertion that EPA must be able to intervene

because Alaska desires to make unreasoned or arbitrary

decisions. As a government agency charged with protecting

the public, Alaska’s Department of Environmental Conserva-

tion (“ADEC”) does not argue that it can behave unreasona-

bly or arbitrarily in carrying out any of its responsibilities,

and it is confident it did not do so here. But ADEC’s inher-

ent duty to act reasonably is not a separate requirement of the

CAA to be enforced by EPA any more than it is a separate,

unstated requirement of any other law ADEC implements.

2

As set forth in the plain language of the CAA, once EPA has

approved a State’s implementation plan Congress trusted the

State to make certain discretionary determinations—

including BACT—and trusted EPA to make other determina-

tions, subject in both cases to appropriate judicial review to

ensure that discretion is exercised properly. EPA’s argument

that it may decide by fiat whether a sovereign state agency

has behaved arbitrarily or unreasonably, subject only to

limited judicial review of EPA’s decision, cannot be squared

with the statutory language or its underlying purposes. !

I. EPA HAS NO AUTHORITY TO VETO A STATE

BACT DETERMINATION THAT WEIGHS THE

STATUTORY FACTORS.

A. Claims Of Arbitrary Or Unreasoned Decision-

making Are Addressed Through Normal Adminis-

trative And Judicial Review, Not By EPA Fiat.

The plain language of the statute provides that BACT is to

be determined by “the permitting authority’—here, the

State—“on a case-by-case basis, taking into account energy,

environmental, and economic impacts and other costs.” 42

U.S.C. § 7479(3). EPA identifies no statutory language that

Alaska allegedly violated. Instead, EPA argues that its gen-

eral enforcement authority allows it to veto any state BACT

determination it believes is “arbitrary” or “unreasoned.” But

the statute does not say that. Although ADEC has never

argued that it can act arbitrarily or unreasonably in anything

! Alaska agrees with EPA that the orders at issue here were

“final action” within the meaning of 42 U.S.C. § 7607(b)(1), and

that the Court has jurisdiction. See EPA Br. 16-17. The constitu-

tional issue decided in TVA v. Whitman, 2003 WL 21452521, at

*18 (11th Cir. 2003), has not been raised in this case. But EPA’s

lack of an adjudicative process as highlighted by the Eleventh

Circuit in that case underscores why review of state BACT

determinations should be made through the usual state review

process rather than by EPA fiat. See Alaska Br. 37-38.

3

it does, that inherent duty is not an unstated “requirement” of

the CAA that Congress gave EPA the power to enforce.

Determinations of whether agencies have acted arbitrarily in

carrying out discretion afforded by statutes are made by

courts exercising their traditional function of judicial review.

Alaska has never suggested that, because BACT is “strictly

a State and local decision,” S. Rep. No. 95-127, at 31 (1977),

a State may “impose whatever emissions limitations it wants

under the BACT label.” EPA Br. 24. EPA confuses the

State’s “sole” discretion, Alaska Br. 27, with “absolute,”

“unreviewable” or “unfettered” discretion. EPA Br. 14, 35.

When any interested party (including EPA) believes that a

State’s BACT determination is unreasoned or arbitrary, it

may challenge that determination through a state administra-

tive and judicial review process. See Alaska Br. 19, 34.

State courts routinely review BACT and other determinations

made by States under the CAA.2 EPA does not dispute that

it can pursue this remedy. See United States v. AM General

Corp., 34 F.3d 472, 474-475 (7th Cir. 1994) (noting that EPA

could have challenged CAA permit through state review

process); cf. 40 C.F.R. § 72.72(b)(5)(iv) (EPA may intervene

in state Acid Rain permit appeals). Nor does it dispute that

2 See, e.g., Plumbers & Steamfitters Local 52 v. Alabama Dep't

of Envtl. Mgmt., 647 So. 2d 793, 795-796 (Ala. Civ. App. 1994)

(BACT determination); Bowers v. Pollution Control Hearings Bd.,

13 P.3d 1076, 1098 (Wash. Ct. App. 2000) (RACT determination);

Color Comm., Inc. v. Illinois Pollution Control Bd., 680 N.E.2d

516, 519-520 (Ill. App. Ct. 1997) (determination of “source”); Jn

re Crown/Vista Energy Project, 652 A.2d 212, 218-219 (NJ.

Super. Ct. App. Div. 1995) (emissions rate determination).

3 Here, the state review process would have been available to

EPA had it participated in the public comment process on

Cominco’s application. See Alaska Br. 34-35. Although ADEC

did consider EPA’s belated input, it is difficult to understand how

EPA can characterize its actions as “prompt,” EPA Br. 31 n.11,

when it failed to submit comments during the comment period.

4

the remedy adequately protects the interests it would vindi-

cate. Indeed, EPA will not even approve a state PSD permit

program unless the program provides “an opportunity for

State judicial review.” 61 Fed. Reg. 1800, 1882 (1996).

EPA has authority to enforce certain “requirements” of the

CAA, see 42 U.S.C. §§ 7413(a)(5), 7477, but the only perti-

nent “requirement” here is that the state-issued permit con-

tain a BACT limitation determined by the State after consid-

ering the applicable factors. It is not a specific requirement

of the CAA that the State make what EPA would believe to be

a non-arbitrary BACT determination, any more than it is a

specific requirement of any other substantive statute that an

agency act non-arbitrarily in exercising discretion. As it does

whenever it affords discretion to a state or federal agency,

Congress rightly assumed that States—just like EPA when it

exercises discretionary authority—could be trusted to make

reasoned BACT determinations. Like their federal counter-

parts, state agencies must engage in reasoned decisionmak-

ing. See, e.g., Bering Straits Coastal Mgmt. Program v.

Noah, 952 P.2d 737, 741 (Alaska 1998). That duty, how-

ever, is a basic principle of administrative law with constitu-

tional underpinnings.* To the extent such principles are codi-

fied, they are most commonly set forth in procedural statutes

such as the Administrative Procedure Act (“APA”). See,

e.g., 5 U.S.C. § 706(2)(A); Alaska Stat. § 44.62.570(b)(3).

A judicial finding that an agency acted arbitrarily or capri-

ciously is not a finding that the governing statute itself has

4 See ICC v. Union Pac. R.R., 222 U.S. 541, 547 (1912) (order

set aside if agency exercised its authority in “an unreasonable man-

ner”); Senate Comm. on the Judiciary, 8. Doc. No. 79-248, at 39

(Comm. Print 1945) (categories of judicial review of agency action

“were first established by the Supreme Court as the minimum

requisite under the Constitution and have also been carried into

State practice, in part at least, as the result of the identical due

process clauses of the [Constitution]”) (citations omitted).

Tae sa ra

——e

5

been violated. Those are two different inquiries. See, e.g.,

NRDC vy. Thomas, 838 F.2d 1224, 1253 (D.C. Cir. 1988)

(“While we do not by any means find that the EPA’s conclu-

sion is in violation of statutory authority, we are unable to

conclude that it rests upon ‘reasoned decisionmaking.’ ”);

compare 5 U.S.C. § 706(2)(A) (proscribing “arbitrary or cap-

ricious” action) with id. § 706(2)(C) (proscribing action “in

excess of statutory jurisdiction, authority, or limitations, or

short of statutory right”). Although the governing statute

may afford an agency discretion, the judiciary may still

determine that the discretion was not exercised consistently

with inherent principles of administrative procedure. Thus,

the recognition that a state review process is available is not

“at war’ with the notion that there is no objectively “correct”

BACT determination. See EPA Br. 34-36.

It is traditionally the role of courts, not federal agencies, to

determine whether state agencies have acted arbitrarily or

capriciously. See /daho v. Coeur d'Alene Tribe of Idaho,

521 U.S. 261, 276 (1997) (Kennedy, J.) (“[T]he elaboration

of administrative law * * * is one of the primary responsibili-

ties of the state judiciary.”). When Congress intends to upset

that traditional balance, it says so expressly, as it has done

elsewhere in the CAA. See 42 U.S.C. § 7543(b)(1)(A) (EPA

may deny waiver from certain standards if EPA finds that

State’s waiver determinations are “arbitrary or capricious’”’).

Moreover, if EPA were correct here, it would be able to

veto not only state agencies but also state courts, which could

well reach different conclusions from EPA on the reasonable-

ness of an agency action upon judicial review. Such extraor-

dinary federal agency authority over state judicial and execu-

tive branches should not be inferred without express direction

from Congress. Cf. Gregory v. Ashcroft, 501 U.S. 452, 460

(1991) (“{I]f Congress intends to alter the usual constitutional

balance between the States and the Federal Government, it

must make its intention to do so unmistakably clear in the

language of the statute.”) (quotations omitted).

6

Indeed, when Congress wanted to give EPA any role in the

PSD permitting process—and specifically in the determina-

tion of BACT—Congress did so explicitly. See Alaska Br.

25-26 & n.6. EPA argues that Section 165(a)(8)}—which

requires EPA approval of state BACT determinations in one

specified instance not applicable here, see 42 U.S.C.

§ 7475(a)(8)—is merely a requirement of “prior approval” in

“special circumstances” that does not prevent EPA from

exercising “general oversight” authority for other BACT

determinations. EPA Br. 37. The CAA, however, provides

that EPA “shall” take measures “to prevent the construction

or modification of a major facility which does not conform to

the requirements” of the Act’s PSD provisions. 42 U.S.C.

§ 7477 (emphasis added). Thus, if it were in fact a “require-

ment” of the Act that each BACT determination conform to

what EPA would consider reasonable, prior EPA approval of

each determination would be required. There is no reason

Congress would specify approval of certain state BACT

determinations in Section 165(a)(8) if EPA already had the

mandatory duty to approve every such determination.

B. There Is No “Correct” BACT Determination.

Because BACT in any given case will depend on how the

permitting authority weighs the pertinent factors in view of

the comments of the public and other agencies, it cannot be

said that a particular BACT determination is “correct” or

“incorrect.” Different decisionmakers may weigh the factors

differently under different policies and thus yield different

results, but one result is not more “correct” than another. If

the State sets a limitation based on consideration of the appli-

cable factors, it has complied with the BACT “requirement.”’5

Lb EPA erroneously asserts that the BACT “requirement” is no

different in nature than the requirement that a facility’s emissions

may not exceed the increments. EPA Br. 37 n.14. Although the

latter may involve the “sometimes complex judgment” of permit-

ting authorities, id., the CAA does not give permitting authorities

-™ el

a

-

EPA misses this fundamental point. It argues that a State

violates the BACT requirement when it is “clear” that the

State “has not actually determined the ‘maximum degree of

reduction * * * achievable’ by a facility.” EPA Br. 26.

BACT, however, is not simply the “maximum degree of

reduction * * * achievable” as a purely technological matter,

but rather what the State determines is the maximum achiev-

able after specifically “taking into account” non-technolog-

ical “energy, environmental, and economic impacts and other

costs.” 42 U.S.C. § 7479(3). EPA says a State would

necessarily violate the statute if it found as BACT a technol-

ogy that offers “a degree of reduction that requires no new

equipment installation,” or “the least expensive reduction in

emissions.” EPA Br. 26. But because “({t}he weight assigned

to such factors is to be determined by the State,” S. Rep. No.

95-127, at 31 (emphasis added), it may well be that economic

or other cost considerations would lead a State validly to

make such determinations. Indeed, sometimes BACT is no

control technology whatsoever. See, e.g., Cert. Rec. 71-100.®

This fact, among others, distinguishes this case from

Wilder v. Virginia Hosp. Ass'n, 496 U.S. 498 (1990), which

EPA cites as “analogous.” EPA Br. 27. Wilder, of course,

had nothing to do with the CAA. But EPA’s analogy is off-

base in any event. Wilder involved a statute that directed

States to determine, and “make[] assurances satisfactory to”

the Secretary of Health and Human Services, that certain

broad discretion to determine whether the increments would be

violated. In fact, EPA requires all air quality modeling to be

conducted under an EPA-approved model. See 40 C.F.R.

§ 51.166(/). By contrast, the CAA on its face gives the States

“broad flexibility” to determine BACT. S. Rep. No. 95-127, at 31.

6 Ifa State were to establish a blanket rule that BACT is always

the least expensive technology, such a rule would arguably

contravene the statutory requirement that BACT determinations be

made on “a case-by-case basis.” 42 U.S.C. § 7479(3). No such

issue, however, is presented in this case.

8

rates were “reasonable.” 496 U.S. at 501-502 (quotation

omitted). The holding in Wilder was based in part on the

idea that there was an objectively “correct” determination of

“reasonable” rates. /d. at 513-514. As the Court later ob-

served, “the word ‘reasonable’ occupied a prominent place in

the critical language of the statute” in Wilder. Suter v. Artist

M., 503 U.S. 347, 357 (1992). By contrast, the CAA does

not require such an objectively correct determination of

BACT, but rather directs a highly discretionary weighing of

factors in selecting the “best” available control technology.

The BACT determination is thus much closer to the statu-

tory scheme in Suter, supra, which the Court held created no

enforceable rights, than that in Wilder. Suter held that a

statute did not create an enforceable right under Section 1983

to ensure that States made “reasonable efforts” to keep

children in their homes, because the directive was one

“whose meaning will obviously vary with the circumstances

of each individual case.” 503 U.S. at 360. “How the State

was to comply with this directive * * * was, within broad

limits, left up to the State.” Jd. See also id. at 362 (legisla-

tive history “indicated that the Act left a great deal of discre-

tion to [the States]”). The CAA directs the States to weigh

“energy, environmental, and economic impacts and other

costs” in determining BACT, 42 U.S.C. § 7479(3), but

similarly provides no detailed, enforceable guidance as to the

specific impacts and costs the States should weigh, or how to

weigh them.’

To the extent Wilder has any marginal relevance here, it

supports Alaska’s position, not EPA’s. Wilder relied on the

fact that the statute at issue required States to “make[]

assurances satisfactory to the Secretary” that the rates they

7 By contrast, Wilder “relied in part on the fact that the statute

and regulations set forth in some detail the factors to be considered

in determining the methods for calculating rates.” Suter, 503 U.S.

at 359 (citing Wilder, 496 U.S. at 519 n.17).

9

found were “reasonable and adequate.” Wilder, 496 U.S. at

501-502 (citation omitted). The Court held that “there would

be no reason to require a State to submit assurances to the

Secretary if the statute did not require the State’s findings to

be reviewable in some manner by the Secretary.” /d. at 514.

That federal enforcement scheme stands in marked contrast

to the one at issue here. Here, as with the law in Suter, 503

U.S. at 360, the CAA does not require the States to submit

individual BACT determinations to EPA for approval, except

in one specified instance not applicable here.

C. EPA’s Position Is Contrary To The Statute’s Leg-

islative History And Purpose.

1. Like the Ninth Circuit, EPA steers clear of the CAA’s

legislative history making plain that Congress intended

BACT to be “strictly a State and local decision.” S. Rep. No.

95-127, at 31. Instead, EPA cites excerpts stating, for

instance, that “ ‘[t]he Administrator thus could go to court to

stop a permit * * * which * * * did not comply with the

requirements of [the PSD provisions], including the use of

{[BACT].’” EPA Br. 30-31 (citation omitted). But such

statements do nothing to advance EPA’s interpretation. As

we have already explained (Br. 33-34), the mere fact that

Congress intended EPA to enforce “requirements” of the Act

says nothing about what those requirements are.

EPA also ignores the history that makes clear that Congress

not only intended to allow continued economic growth in

clean air areas, but specifically intended the States—‘not

Federal agencies” —to determine how much growth to allow.

See Alaska Br. 30-32. As we have explained, BACT is “key”

to “manag[ing] * * * allowed internal growth” under the Act.

Alabama Power Co. v. Costle, 636 F.2d 323, 364 (D.C. Cir.

1980); S. Rep. No. 95-127, at 31. For this reason, Congress

“place[d] [the] responsibility [to determine BACT] with the

State.” Id. (emphasis added).

10

Contrary to EPA’s assertion, we do not suggest that “a

State may determine BACT simply by dividing up the allow-

able increments among facilities as it sees fit,” or that “com-

pliance with the overall increment limitations * * * estab-

lish[es] that the State has satisfied the separate BACT re-

quirement for each facility.” EPA Br. 36-37. Rather, we

have noted that, in weighing “energy, environmental, and

economic impacts and other costs,” a State has “broad flexi-

bility” to consider how much economic growth it desires in a

particular area and thus how much of the available increment

a State wants a particular facility to consume. See Alaska Br.

24. EPA does not dispute that States may take the incre-

ments into account in determining BACT. Nor could it, as

Congress expressly intended the States to consider “the incre-

ment of air quality which will be absorbed by any particular

major emitting facility.” S. Rep. No. 95-127, at 31. See also

id. (“flexible approach” in determining BACT “allows the

States * * * to judge how much of the defined increment

* * * will be devoted to any major emitting facility”).

2. EPA (and its amici States) contend that the CAA’s

legislative history shows that Congress intended EPA to have

“ultimate authority” over state BACT determinations to

protect other States from cross-border pollution. See EPA

Br. 32-33. Of course, there are no other States anywhere

near Alaska. But in any event, Congress provided a detailed

remedy for this general problem that does not grant EPA veto

authority over BACT determinations. Section 126 of the

CAA requires sources subject to PSD permits to provide

written notice to all nearby States whose pollution levels

might be affected. 42 U.S.C. § 7426(a)(1)(A). Upon the

petition of any such State, EPA is granted the authority to

block construction or operation of the source, but only if EPA

finds, after a public hearing, that the source would harm the

ability of the neighboring State to meet the NAAQS, or the

PSD measures in its SIP. See id. §§ 7426(b), (c)(1),

1]

7410(a2)(D)(i). Congress expressly recognized that some

States may have “more stringent control requirements” that

place plants in those States at a “competitive disadvantage,”

and it therefore enacted Section 126 as its carefully-crafted

solution. S. Rep. No. 95-127, at 42. Once again, Congress’s

express specification of an EPA enforcement remedy that

does not include the authority to veto BACT determinations

is further confirmation that such a veto power does not exist.

3. EPA also contends that the legislative history shows

that EPA must have veto power over state BACT determina-

tions to prevent States from competing for industry through

lax enforcement of environmental laws. See EPA Br. 33-34.

Of course, such concerns were never an issue here, as the

Red Dog Mine is not going anywhere.? But any concerns

that EPA, other States, or anyone else may have about a

permit may be addressed through the public comment and

state review process. Some States may face competing

applications for consumption of allowable increments, and

may therefore choose as BACT only the most stringent

controls. Such States may feel disadvantaged compared to

cleaner or less-developed Siates. But Congress intended

each State to consider “anticipated and desired economic

growth for the area.” S. Rep. No. 95-127, at 31 (eniphasis

8 Section 7426 gives EPA authority to enforce violations of the

SIP provisions of Section 7410 relating to cross-border pollution.

Although the amended text of Section 7426 refers to Section

7410(aX(2D)(ii), it has been held definitively that this was a

scrivener’s error that in fact refers to Section 7410(a)(2)(D)(i). See

Appalachian Power Co. v. EPA, 249 F.3d 1032 (D.C. Cir. 2001).

9 EPA’s statement that Alaska “provided just under half of the

funding” for Cominco’s PRI project is misleading. EPA Br. 5.

The State owns the port used by the Red Dog Mine as well as the

road connecting the two. Although the State issued bonds to fund

the expansion and improvement of its facilities in connection with

Cominco’s PRI project, the State spent no funds on the mine itself.

See http://www.aidea.org/PDF%20files/DMTSFactSheet.pef.

12

added). A State concerned with the impact of increased costs

on an economically disadvantaged population in an area

experiencing little growth or emissions may lawfully issue a

BACT determination reflecting those priorities.

Congress could have adopted a national standard for BACT

for particular sources. Indeed, Congress took precisely such

an approach under the New Source Performance Standards

(“NSPS”) program, enacted to further the attainment of the

NAAQS. There, Congress directed EPA to publish a list of

categories of sources and establish “Federal standards of per-

formance [i.e., emissions limitations] for new sources within

such category.” 42 U.S.C. § 7411(b). Thus, for example, all

fossil fuel-fired steam generators built after August 17, 1971

must have controls that prevent NOx emissions in excess of

specified levels. See 40 C.F.R. § 60.44.

But in the PSD program, Congress “purposely chose not to

dictate what State and local decisions on air quality deteriora-

tion must be,” H.R. Rep. No. 95-294, at 146 (1977), provided

those decisions meet the NSPS and other baseline federal

standards. In particular, Congress chose not to adopt a

“uniform Federal standard” for BACT. S. Rep. No. 95-127,

at 31. Rather than ensure “national consistency” for BACT

by adopting a “control technology of choice” for particular

sources—as EPA asserted below, J.A. 129, 148, 303—

Congress left it to the States to “weigh{] * * * environmental

and economic goals and needs,” and “balance sometimes

conflicting goals” H.R. Rep. No. 95-294, at 146, “on a case-

by-case basis.” 42 U.S.C. § 7479(3).

4. EPA has no answer for the incongruous results that

follow from its position. For instance, if a party had chal-

lenged the State’s decision through the state review process,

the challenger would have had to show that the State’s deci-

sion was arbitrary or capricious. But because EPA vetoed

ADEC’s decision here by fiat, the State had to show that

EPA's action was arbitrary or capricious, thereby resulting in

13

a diluted form of deference to ADEC’s decision. EPA’s cir-

cular response—that such an anomalous result supports its

interpretation of the CAA because it “naturally follows” from

its interpretation, EPA Br. 39, is no response at all. Nor does

EPA have a response for the other procedural anomalies

engendered by its interpretation. See Alaska Br. 36-37.'°

EPA’s interpretation effectively eliminates Congress's dis-

tinction between States exercising authority under approved

SIPs and States merely exercising federal power delegated by

EPA. See Alaska Br. 5-6. For in either case, EPA asserts

authority to override the State’s determination. In fact, EPA

provides greater rights to States that are merely exercising

delegated federal power. When EPA believes a “delegated”

State has made an unreasoned BACT determination, EPA’s

preferred approach is not to overturn it by fiat, as it did here,

but rather to challenge the determination through EPA’s own

review process. See Cert. Rec. 70-004 to -006. EPA's

assertion that it can unilaterally veto an approved State's

BACT determination turns the statutory scheme on its head.

D. Chevron Deference Does Not Apply.

As a last resort, EPA argues that its interpretation is owed

deference under Chevron U.S.A., Inc. v. NRDC, 467 U.S. 837

(1984). But no deference is due here, because Congress's

intent that the States be the sole arbiters of BACT is manifest

from the plain language of the CAA and its legislative his-

tory. See id. at 842-843 (“If the intent of Congress is clear,

that is the end of the matter; for the court, as well as the

agency, must give effect to the unambiguously expressed in-

10 In the Ninth Circuit, Alaska specifically noted that the record

in this case might not include all the materials on which the State

relied in making its BACT determination, and that additional

evidence in support of the State’s BACT determination would be

produced if EPA were required, like everyone else, to use the de

novo administrative state review process to challenge the State’s

decision. See Response to Hardesty Decl. at 3 (Aug. 17, 2001).

14

tent of Congress.”). Even if the CAA were ambiguous, how-

ever, EPA’s interpretation would still deserve no deference.

First, EPA seeks deference for its interpretation as “embod-

ied” in the orders in this case, EPA Br. 41, but those orders

nowhere state EPA’s current position that ADEC failed to

provide a “reasoned” BACT determination. Instead, the or-

ders simply assert that ADEC failed to comply with the PSD

requirements of the CAA because, as a factual matter, “SCR

is BACT.” Pet. App. 34a, 46a, 59a. Regardless of whether

deference can be given to an interpretation “embodied” in a

unilateral administrative compliance order, no deference is

due here given that the orders do not even embody the

particular interpretation for which deference is sought.

Second, this Court has “recognized a very good indicator of

delegation meriting Chevron treatment in express congres-

sional authorizations to engage in the process of rulemaking

or adjudication that produces regulations or rulings for

which deference is claimed.” United States v. Mead Corpo-

ration, 533 U.S. 218, 229 (2001) (emphasis added). No such

delegation is at issue here. While the orders at issue do carry

“the force of law” (EPA Br. 41) in that they subject Cominco

to severe penalties for their violation, they were not in any

sense issued “in the process of * * * adjudication.” EPA did

not conduct any sort of adjudicative proceeding, but simply

overturned Alaska’s BACT determination by fiat.!!

Third, although EPA argues for deference because its in-

terpretation is reflected in certain EPA guidance documents,

EPA Br. 41-42, “interpretations contained in policy state-

ments, agency manuals, and enforcement guidelines, all of

'! EPA’s observation that “formal” adjudication is not required

for Chevron deference is immaterial, because EPA’s orders were

not the result of any sort of “adjudication.” See EPA Br. 43 n.16.

In a similar vein, EPA's reliance on Martin v. OSHRC, 499 U.S.

144, 156-157 (1991), is misplaced. That case involved deference

to an agency’s interpretation of its own regulation.

15

which lack the force of law[{,] do not warrant Chevron-style

deference.” Christensen v. Harris County, 529 U.S. 576, 587

(2000). The same is true for statements made in a rulemak-

ing that are not reproduced in the rules themselves, EPA Br.

42-43, since such statements, too, “lack the force of law.”

Finally, EPA’s interpretation is not entitled to any weight

under Skidmore v. Swift & Co., 323 U.S. 134 (1944), where

the focus is on “the degree of the agency’s care, its consis-

tency, formality, and relative expertness, and to the persua-

siveness of the agency's position.” Mead, 533 U.S. at 228

(footnotes omitted). EPA’s interpretation is not the product

of any formal process. Nor does the straightforward question

of statutory interpretation implicate EPA’s technical exper-

tise. And EPA’s interpretation is contrary to Congress's

intent, so it plainly lacks the “power to persuade.” Skidmore,

323 U.S. at 140. Furthermore, such deference is singularly

inappropriate where, as here, the agency’s interpretation

involves the scope of its own authority. See, e.g., Northern

Illinois Steel Supply Co. v. Secretary of Labor, 294 F.3d 844,

846-847 (7th Cir. 2002). That principle applies with even

greater force in this case, where the issue is the allocation of

authority between the States and the Federal government—an

area where this Court has traditionally required a clear

statement by Congress. See supra at 5.

il. EVEN IF EPA COULD OVERTURN UNREA-

SONED BACT DETERMINATIONS, IT HAD NO

AUTHORITY TO OVERTURN ALASKA’S

REASONED DETERMINATION HERE.

Even if EPA were correct that it can unilaterally overturn

state BACT determinations that are “unreasoned” or “arbi-

trary,” EPA still had no authority to overturn Alaska’s action

here, because the State provided a reasoned explanation for

its decision.'2 In accordance with EPA’s own guidance,

12 This issue is embraced by the question presented, which asks

“(whether the Ninth Circuit erred in upholding EPA’s assertion of

16

ADEC determined that the cost of SCR for the MG-17

generator was “excessive” because it was well “outside the

range of costs being borne by similar sources under recent

BACT determinations”—in fact, more than fwice as much on

a cost-per-ton removal basis as the most expensive controls

previously imposed by ADEC as BACT to control NOx

emissions from a similar type of generator. J.A. 204. See

Alaska Br. 40, 44-45. ADEC also concluded that the costs of

SCR would be “disproportionate” for a rural electric utility

and therefore, by analogy, for a mine required to supply its

own power. J.A. 206. Thus, even though Cominco had not

provided detailed financial information concerning the

impact of SCR on its operations, J.A. 207, ADEC could still

reasonably conclude that the excessive and disproportionate

costs of SCR warranted its rejection as BACT.'3

authority to second-guess a permitting decision made by the State

of Alaska.” Pet. i. EPA asserts authority to overturn only “arbi-

trary or unreasoned” state BACT determinations. EPA Br. 21.

Thus, whether the State issued a reasoned justification is “fairly

included” within the question presented, S.Ct. R. 14.1(a), given

EPA’s view of the limits of its authority. See Cert. Reply 9 n.4.

'3 EPA notes that ADEC had concluded in its preliminary TAR

that SCR was economically feasible. EPA Br. 47. As we have

explained (Br. 43 n.13), ADEC did not conduct a cost-effective-

ness analysis at that time because it had accepted Cominco’s emis-

sions-netting proposal. The final decision prompted ADEC to

conduct a more informed weighing of economic impacts. There,

ADEC examined “four recent BACT determinations for diesel-

electric generators used for primary power production.” J.A. 205-

206. See also Cert. Rec. 22-032 to -033. Although these determi-

nations may not have been as recent as ADEC would have pre-

ferred, they were still ADEC’s most recent determinations and in

the end ADEC chose to rely on them. See J.A. 243. Like the

Ninth Circuit below, EPA fails to recognize that the type of heater

involved in the Yukon-Pacific permit, which imposed NOx con-

trols at $7,000 per ton of NOx removed, is not a “similar source.”

See EPA Br. 48; Pet. App. 14a; Alaska Br. 46; Cert. Rec. 22-033.

17

EPA claims that ADEC had no “reasoned basis” for reject-

ing SCR based on “economic impacts and other costs”

because SCR’s “world-wide pervasiveness” demonstrates its

“economic feasibility.” EPA Br. 47. Yet EPA has never

pointed to a single instance where SCR had previously been

imposed as BACT to reduce NOx emissions from a similar

source—and EPA does not do so now. See Cert. Rec. 71-116

(sources “should demonstrate to the satisfaction of the

permitting agency that costs of pollutant removal for the

control alternative are disproportionately high when com-

pared to the cost of control for that particular pollutant and

source in recent BACT determinations’) (emphasis added).'4

Moreover, EPA’s own BACT guidance provides that “[{1)n

the economic impact analysis, primary consideration should

be given to quantifying the cost of control and not the econ-

omic situation of the individual source.” Cert. Rec. 71-115

(emphasis added). Following that guidance, ADEC deter-

mined that SCR was far more costly than technologies that

had been found as BACT for similar sources, and would have

a “disproportionate” impact on a mine required to act as its

own primary power source. J.A. 206. ADEC reasoned that

if a rural utility would not be required to incur the costs that

SCR would impose on the local community, then a rural fac-

ility that must act as its own utility should not be required to

bear them either. Given that SCR would not be BACT if a

'4 EPA contends that a “fair reading” of its guidance is that once

a control technology has been “ ‘effectively employed in the same

source category,’ ” that technology generally should be considered

BACT for the source category. EPA Br. 47 n.17 (quoting Cert.

Rec. 71-115). Congress, however, plainly did not intend to

establish a national BACT standard for particular sources. In any

event, EPA’s post hoc explanation does it no good here. As just

explained, EPA has never been able to cite an example where SCR

had previously been imposed as BACT to reduce NOx emissions

from “diesel-electric generators used for primary power produc-

tion” —the source category at issue here. J.A. 205-206.

18

rural utility supplied power to the Red Dog Mine, cf. infra

n.15, the outcome should be no different where the power is

generated on site. Although EPA may disagree with this eXx-

planation, there is nothing arbitrary or unreasoned about it.

Ultimately, EPA’s disagreement with ADEC rests on a dis-

pute about policy—which even EPA must admit is not an

appropriate ground for it to overturn a state BACT determi-

nation. Disregarding its own guidance, EPA insisted during

the permitting process that “economic infeasibility” could be

justified only by a showing of “adverse economic impacts

upon Cominco specifically.” J.A. 127 (emphasis added).

And it now responds that Cominco “is not a rural utility and

it does not compete with rural utilities,” EPA Br. 48-49,

echoing the Ninth Circuit’s cavalier rejoinder that “Cominco

does not, in fact, buy power from an electric utility.” Pet.

App. 14a. According to EPA, the economic impact of SCR

ona large commercial venture would not be “anything like”

its impact on “a rural, non-profit utility that must pass costs

on to a small base of individual consumers.” EPA Br. 49.

EPA’s view, therefore, is that BACT is the most stringent

control technology a particular source can afford. Indeed, at

the same time that EPA was insisting that SCR was BACT

for the MG-17 generator, EPA was assuring an Alaska rural

electric cooperative association that EPA would not “make

the same demands for PSD permits for rural utilities which

install similar generators.” Cert. Rec. 62-001.!5

Nothing in the CAA—or even EPA’s own guidance—

suggests that BACT must be the most stringent control that

does not bankrupt a company. Indeed, it is EPA’s decision,

not ADEC’s, that is the arbitrary one. EPA’s assurance that

it would not “make the same demands for PSD permits for

'S Thus, EPA raised no objection when ADEC later determined

that a technology less stringent than either SCR or Low NOx was

BACT for a rural utility 90 miles from the Red Dog Mine. See

http://www.state.ak.us/dec/dawq/aqny 132ac004fin.pdf.

19

rural utilities” demonstrates that EPA itself believes that

“economic impacts and other costs” can include costs that

may have to be passed on to the regional community. That is

no different from considering the impact of the excessive

costs of a control on an undeveloped region’s largest and

most important private employer and the regional community

it benefits. That determination is exactly the kind of case-by-

case, discretionary balancing of economic factors that

Congress intended to leave to States, which have much

greater understanding of local conditions than EPA.

Finally, in judging the reasonableness of ADEC’s action, it

cannot be ignored that the result of the State’s approach was

lower NOx emissions than if ADEC had selected SCR as

BACT for the MG-17 generator, because Cominco had

agreed to install—and indeed has installed—Low NOx on all

its generators. See FPC v. Natural Gas Pipeline Co., 315

U.S. 575, 586 (1942) (“If the Commission’s order, as applied

to the facts before it and viewed in its entirety, produces no

arbitrary result, our inquiry is at an end.”).'6 In the final

16 EPA never disputed this point during the permitting process,

in the proceedings below, or at the certiorari stage in this Court.

Now—for the first time—EPA contends that ADEC’s decision

would not result in lower emissions. See EPA Br. 46. That

contention is mistaken. The pre-existing limit for NOx emissions

that was retained in the final permit applies only to the MG-1,

MG-3, MG-4, and MG-S generators, not MG-2 and MG-6. See

J.A. 156-157, 214-215. The installation of Low NOx on those two

otherwise exempt generators results in emissions savings because,

as ADEC reasonably found, a generator equipped with the more

costly SCR would remain on stand-by throughout the year. See

J.A. 86-87. EPA has never challenged the reasonableness of that

real-world and site-specific assumption. To protect the applicable

increment, the final permit imposes a new cap equal to the amount

of emissions from seven generators installed with Low NOx in

continuous operation. See J.A. 86, 155, 230. As a practical

matter, however, all seven generators will never be in continuous

20

analysis, ADEC decided not to rely on emissions savings

from the installation of Low NOx on all Cominco’s genera-

tors after EPA reversed course and objected to that approach.

See Alaska Br. 42 n.12. Nevertheless, EPA’s contention that

the CAA does not allow BACT determinations to be justified

by emissions savings is simply wrong. EPA Br. 45-46. The

Act requires consideration of “environmental” impacts “on a

case-by-case basis.” 42 U.S.C. § 7479(3). Given that

cleaner air is the ultimate goal of the CAA, a BACT decision

whose overali “environmental” impact is lower emissions as

compared to another technology cannot be deemed so inher-

ently arbitrary or unreasonable as to justify an EPA veto.

Ultimately, ADEC’s careful and conscientious weighing of

factors in light of local conditions and priorities further

demonstrates why the authority to render—and, if necessary,

to review—discretionary BACT determinations should be

left where Congress expressly put it: with the State.

CONCLUSION

For the foregoing reasons, and those in petitioner’s opening

brief, the judgment below should be reversed.

Respectfully submitted,

GREGG D. RENKES JONATHAN S. FRANKLIN*

Attorney General LORANE F. HEBERT

CAMERON M. LEONARD HOGAN & HARTSON L.L.P.

Assistant Attorney General 555 Thirteenth Street, N.W.

STATE OF ALASKA Washington, D.C. 20004

Department of Law (202) 637-5766

P.O. Box 110300

Juneau, Alaska 99811

(907) 465-3600

* Counsel of Record Counsel for Petitioner

operation. Thus, Cominco’s agreement to install Low NOx on

MG-2 and MG-6 will still result in lower emissions.