Record and brief — Am. Lung Ass'n v. Eme Homer City Generation, L.P.

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(4) SUPREME COURT

OF THE UNITED STATES

Art

No. 12-1183

Vide 12-1182

Title: American Lung Association, et al., Petitioners

EME Homer City Generation, L.P., et al.

Docketed: March 29, 2013

Lower Ct United States Court of Appeals for the District of Columbia Circuit

Case Nos.: (11-1302, et al.)

Decision Date. August 21, 2012

Rehearing

Denied: January 24, 2013

Questions

Presented

~~~Date~~~ ~~~~~~~Proceedings and Orders~~~~~~~

Mar 29 2013 Petition for a writ of certioran filed. (Response due April 29, 2013)

Apr 10 2013 Order extending time to file response to petition to and including May 29, 2013,

for all respondents.

Apr 18 2013 Brief of Respondent States and Cities in support filed. VIDED.

Apr 18 2013 Brief of respondents Calpine Corporation,and Exelon Corporation in support

filed. VIDED.

May 29 2013 Brief of respondents Luminant Generation Company LLC, et al. in opposition

filed. VIDED.

May 29 2013 Brief of State and Local respondents in opposition filed. VIDED

Jun 42013 DISTRIBUTED for Conference of June 20, 2013.

Jun 62013 Reply of petitioner American Lung Association, et al. filed. (Distributed)

Jun 24 2013 Petition GRANTED limited to the questions presented by the petition in No. 12-

1182. The petition for a writ of certiorari in No. 12-1182 is granted. The cases

are consolidated and a total of one hour is allotted for oral argument.

Jul 16 2013 Order extending time to file the joint appendix and petitioner's brief on the

merits to and including September 4, 2013.

Jul 16 2013 Order extending time to file respondent's brief on the merits to and including

October 31, 2013.

Aug 21 2013 Consent to the filing of amicus curiae briefs, in support of either party or of

neither party, received from counsel for petitioners Amencan Lung Association,

et al. VIDED.

Aug 30 2013 Consent to the filing of amicus curiae briefs, in support of either party or of

neither party, received from counsel for the Industry and Labor Respondents .

VIDED

Aug 30 2013 Consent to the filing of amicus curiae briefs, in support of either party or of

neither party, received from counsel for the State and Local Respondents

(Texas, et al.) . VIDED

Aug 30 2013 Consent to the filing of amicus curiae briefs, in support of either party or of

neither party, received from counsel for the respondents Calpine Corporation

and Exelon Corporation. VIDED

Sep 42013 Consent to the filing of amicus curiae briefs, in support of either party or of

neither party, received from counsel for the Federal Petitioners. VIDED

Sep 4 2013 Joint appendix filed. (Statement of costs filed.) VIDED.

Sep 42013 Brief of petitioner in No. 12-1182, Environmental Protection Agency, et al., filed.

VIDED.

Sep 42013 Motion of the federal parties to deem the Court of Appeals Joint Appendix to be

Volumes 2 thru 8 of the Supreme Court Joint Appendix filed by respondent

Environmental Protection Agency, et al. VIDED.

Sep 42013 Brief of Respondent States and Cities in support of petitioners filed. VIDED

Sep 42013 Brief of respondents Calpine Corporation and Exelon Corporation filed. VIDED.

Sep 42013 Brief of petitioners American Lung Association, et al. filed.

Sep 10 2013 Consent to the filing of amicus curiae briefs, in support of either party or of

neither party, received from counsel for the State and City Respondents (New

York, et al.). VIDED

Sep 10 2013 Brief amici curiae of Law Professors on Issue Exhaustion filed. VIDED.

(Distributed)

Sep 10 2013 Brief amicus curiae of American Thoracic Society filed. VIDED.

Sep 11 2013 Brief amici curiae of Atmospheric Scientists and Air Quality Modeling Experts

filed. VIDED.

Sep 11 2013 Brief amicus curiae of APA Watch in support of neither party filed. VIDED

Sep 11 2013 Brief amicus curiae of Institute for Policy Integnty at New York University

School of Law ‘iled. VIDED.

Sep 11 2013 Brief amicus curiae of Constitutional Accountability Center filed. VIDED.

Sep 11 2013 Brief amici curiae of Benjamin F. Hobbs, et al. filed. VIDED.

Sep 17 2013 SET FOR ARGUMENT ON Tuesday December 10, 2013.

Sep 17 2013 CIRCULATED

Sep 30 2013 Records received from USCA for the DC Circuit electronically filed.

Oct 7 2013 Motion to deem the Court of Appeals Joint Appendix to be Volumes 2 thru 8 of

the Supreme court Joint Appendix GRANTED. Justice Alito took no part in the

consideration or decision of this motion.

Oct 31 2013 Brief of respondents Utility Air Regulatory Group, et al. filed. VIDED.

(Distributed)

Oct 31 2013 Brief of respondents State and Local respondents filed. VIDED. (Distributed)

Oct 31 2013 Brief of respondents Luminant Generation Company LLC, et al. filed. VIDED.

(Distributed)

Nov 4 2013 Motion for divided argument filed by respondents. VIDED.

Nov 7 2013 Brief amicus curiae of Chamber of Commerce of the United States of America

filed. VIDED. (Distributed)

Nov 72013 Brief amici curiae of West Virginia and 8 Other States filed. VIDED.

(Distnbuted)

Nov 26 2013 Motion for divided argument filed by respondents GRANTED. Justice Alito took

no part in the consideration or decision of this motion.

Dec 2 2013 Reply of respondents Environmental Protection Agency, et al. filed. VIDED

(Distributed)

Dec 32013 Reply of petitioners American Lung Association, et al. filed. (Distributed)

Dec 32013 Reply of respondents Calpine Corporation and Exelon Corporation in support

of petitioners filed. VIDED. (Distributed)

Dec 32013 Reply of Respondent States and Cities in support of petitioners filed. VIDED.

(Distnbuted)

Dec 10 2013 Argued. For petitioners: Malcolm L. Stewart, Deputy Solicitor General,

Department of Justice, Washington, D. C. For State and Local respondents:

Jonathan F. Mitchell, Solicitor General, Austin, Tex. For Industry and Labor

respondents: Peter Keisler, Washington, D. C.

PETITION

FOR

WRIT OF

CERTIORARI

Supreme Court of the Unite!

AMERICAN LUNG ASSOCIATION, et al.,

Petitioners,

EME HOMER CITY GENERATION, L.P., e¢ ad,

Respondents.

On PeTITION For A Writ or CERTIORARI TO THE

UniTeD StraTeEs Court OF APPEALS FOR THE

District or CoLumsBia Circurr

PETITION FOR A WRIT OF CERTIORARI

GEORGE E. Hays

236 West Portal Ave.

No. 110

San Francisco, CA 94127

(415) 566-5414

Davip MARSHALL

CLEAN Arr Task Force

41 Liberty Hill Road

Building 2, Suite 205

Henniker, NH 03242

(603) 428-8114

JoHN D. WALKE

EMILy Davis

NATURAL RESOURCES

DEFENSE COUNCIL

1152 15th St., Ste. 300

Washington, DC 20005

(202) 289-6868

SEAN H. DoNAHUE

Counsel of Record

DoNAHUE & GoLppBerc, LLP

2000 L St. NW, Ste 808

Washington DC 20036

(202) 277-7085

sean@donahuegoldberg.com

PAMELA A. CAMPOS

GRAHAM G. McCAHAN

VICKIE L. PATTON

ENVIRONMENTAL DEFENSE FUND

2060 Broadway, Ste 300

Boulder, CO 80302

(303) 440-4901

JOSHUA STEBBINS

ZACHARY M. Fasisu

THE SIERRA CLUB

50 F Street NW, 8th Floor

Washington DC 20001

(202) 675-6273

246829

QUESTIONS PRESENTED

The Clean Air Act’s “Good Neighbor” provision

requires that state implementation plans contain

“adequate” provisions prohibiting emissions that will

“contribute significantly” to another _ state’s

nonattainment of health-based air quality

standards. 42 U.S.C. 7410(a)(2)(D)(i). A divided D.C.

Circuit panel invalidated, as contrary to statute, a

major EPA regulation, the Transport Rule, that

gives effect to the provision and requires 27 states to

reduce emissions that contribute to downwind states’

inability to attain or maintain air quality standards.

The questions presented are:

(1) Whether the statutory challenges to EPA's

methodology for defining upwind _ states’

“significant contributions” were properly before the

court, given the failure of anyone to raise these

objections at all, let alone with the requisite

“reasonable specificity,” “during the period for

public comment,” 42 U.S.C. 7607(d)(7)(B);

(2) Whether the court’s imposition of its own

detailed methodology for implementing the Good

Neighbor provision violated foundational principics

governing judicial review of administrative

decision-making;

(3) Whether an upwind state that is polluting a

downwind state is free of any obligations under the

Good Neighbor provision unless and until EPA has

quantified the upwind state’s contribution to

downwind states’ air pollution problems.

PARTIES TO THE PROCEEDING

The following were parties in the proceedings in

the United States Court of Appeals for the District of

Columbia Circuit:

American Lung Association, Clean Air Council,

Environmental Defense Fund, Natural Resources

Defense Council, and Sierra Club, petitioners in this

Court, were intervenors in support of the United

States Environmental Protection Agency.

The United States Environmental Protection

Agency (“EPA”), respondent in the D.C. Circuit, has

filed a separate petition in this Court. The other

named respondent in the court of appeals was EPA

Administrator Lisa Perez Jackson. As of February

15, 2013, Ms. Jackson no longer holds that office.

Robert Perciasepe is the Acting Administrator.

Additional respondent-intervenors below in

support of the United States Environmental

Protection Agency, who are nominal respondents on

review, are Calpine Corporation; City of Bridgeport,

Connecticut; City of Chicago; City of New York (in

all but D.C. Cir. Nos. 11-1388 & 11-1395); City of

Philadelphia; Commonwealth of Massachusetts;

District of Columbia; Exelon Corporation; Mayor and

City Council of Baltimore; Public Service Enterprise

Group, Inc.; State of Connecticut; State of Delaware;

State of Illinois; State of Maryland; State of New

York (in all but D.C. Cir. Nos. 11-1388 & 11-1395);

State of North Carolina; State of Rhode Island; and

State of Vermont.

Petitioners below, who are respondents in this

Court, were AEP Texas North Company; Alabama

Power Company; American Coal Company;

American Energy Corporation; Appalachian Power

Company; ARRIPA; Big Brown Lignite Company

LLC; Big Brown Power Company LLC; City of Ames,

Iowa; City of Springfield, Illinois, Office of Public

Utilities, d/b/a City Water, Light & Power; Columbus

Southern Power Company; Consolidated Edison

Company of New York, Inc.; CPI USA North

Carolina LLC; Dairyland Power Cooperative; DTE

Stoneman, LLC; East Kentucky Power Cooperative,

Inc.; EME Homer City Generation, LP; Entergy

Corporation; Environmental Committee of the

Florida Electric Power Coordinating Group, Inc.;

Environmental Energy Alliance of New York, LLC;

GenOn Energy, Inc.; Georgia Power Company; Gulf

Power Company; Indiana Michigan Power Company;

International Brotherhood of Electrical Workers,

AFL-CIO; Kansas City Board of Public Utilities,

Unified Government of Wyandotte County, Kansas

City, Kansas; Kansas Gas and Electric Company;

Kenamerican Resources, Inc.; Kentucky Power

Company; Lafayette Utilities System; Louisiana

Chemical Association; Louisiana Department of

Environmental Quality; Louisiana Public Service

Commission; Luminant Big Brown Mining Company

LLC; Luminant Energy Company LLC; Luminant

Generation Company LLC; Luminant Holding

Company LLC; Luminant Mining Company LLC;

Midwest Food Processors; Mississippi Power

lil

Company; Mississippi Public Service Commission;

Municipal Electric Authority of Georgia; Murray

Energy Corporation; National Rural _ Electric

Cooperative Association; Northern States Power

Company (a Minnesota Corporation); Oak Grove

Management Company LLC; Ohio Power Company;

Ohio Valley Coa] Company; Ohio American Energy

Inc.; Peabody Energy Inc.; Public Service

Commission of Oklahoma; Public Utility

Commission of Texas; Railroad Commission of

Texas; Sandow Power Company; South Mississippi

Electric Power Association; Southern Company

Service, Inc.; Southern Power Company;

Southwestern Electric Power Company;

Southwestern Public Service Company; State of

Alabama; State of Florida; State of Georgia; State of

Indiana; State of Kansas; State of Louisiana; State of

Michigan; State of Nebraska; State of Ohio; State of

Oklahoma; State of South Carolina; State of Texas;

State of Virginia; State of Wisconsin; Sunbury

Generation LP; Sunflower Electric Power Corp.;

Texas Commission on Environmental Quality; Texas

General Land Office; Utility Air Regulatory Group;

United Mine Workers of America; Utah America

Energy, Inc.; Westar Energy, Inc.; Western Farmers

Electric Cooperative; Wisconsin Case Metals

Association; Wisconsin Electric Power Company;

Wisconsin Paper Council, Inc.; Wisconsin

Manufacturers and Commerce; and Wisconsin Public

Service Corp.

Intervenors in support of petitioners below, who

are respondents or nominal respondents on review,

were City of New York (D.C. Cir. Nos. 11-1388 & 11-

1395 only); San Miguel Electric Cooperative, and

State of New York (D.C. Cir. Nos. 11-1388 & 11-1395

only).

RULE 29.6 DISCLOSURE STATEMENT

Petitioners American Lung Association, Clean Air

Council, Environmental Defense Fund, Natural

Resources Defense Council, and Sierra Club have no

parent companies. Nor have any of them issued

publicly held stock.

TABLE OF CONTENTS

QUESTIONS PRESENTED ....................ccccecesssesessevere i

PARTIES TO THE PROCEEDINGS ..............00.0...... il

RULE 29.6 DISCLOSURE STATEMENT................ Vv

yi tisccesccssicincsciciinsesiciecnsieadiiabimnintiiotin vi

TABLE OF AUTHORITIES .................cesseeeececeeeeees viii

I i nisiscaiicsiainiinitisinsinibiiadienbdiagatlateneansian 1

SANE RSS eee en an KOE 1

STATUTES AND REGULATORY PROVISIONS ... 1

TIT sie nie iisceiiiphieeidipalendiehaieaeiiniins 2

STATEMENT OF THE CASE.............. ccc ceeceeeseseeeees 4

| TD 4

B. Interstate Air Pollution and the Act’s

“Good Neighbor” Provision ................:::00eee++0+ 5

C. The D.C. Circuit’s Prior Transport

Ns ictal teshiasieedaleed enelbieeamamenichpaiedee 7

D. EPA’s Post-North Carolina

I I daasniremnnmiiiioniisil 10

is a tain iniciecieennibatelenaniieeite 11

F. Proceedings on Judicial Review ................... 13

REASONS FOR GRANTING CERTIORARI.......... 16

If.

Il.

IV.

THE PANEL VIOLATED CLEAR

STATUTORY LIMITS ON _ JUDICIAL

REVIEW BY RESTING ITS DECISION ON

THEORIES NO PARTY HAD PRESENTED

TO THE AGENCY DURING’ THE

TT 16

THE COURT OF APPEALS IMPOSED RIGID

REQUIREMENTS ON EPA’S

IMPLEMENTATION OF THE GOOD

NEIGHBOR PROVISION THAT ARE NOT

FOUND IN THE STATUTE AND THAT

DISREGARD THE REALITIES OF

INTERSTATE AIR POLLUTION. ............... 21

THE D.C. CIRCUITS RULING THAT EPA

MUST QUANTIFY THE GOOD NEIGHBOR

OBLIGATIONS OF UPWIND- STATES

BEFORE THOSE STATES NEED TO

REDUCE THEIR EMISSIONS LACKS ANY

i Oe 30

THE CASE PRESENTS ISSUES OF VITAL

NATIONAL IMPORTANCE THAT

WARRANT THIS COURT'S REVIEW. ........ 34

IT <ecucennvenssinimannenicesenmunitciaienimitin 39

vil

TABLE OF AUTHORITIES

Cases:

Am. Elec. Power Co., Inc. v. Connecticut,

$8) § of. | een 20, 22, 24

Appalachian Power Co. v. EPA,

S51 F.3a 1086 G).C.. Cap. BOG) ....ccccccccecccccssccesess 18

Booth v. Churner,

I, i I ical acini meine 18

Chevron, U.S.A. Inc. v. Natural

Resources Defense Council, Inc.,

I ll 21

City of Milwaukee v. Illinois,

Ce a ccc erinleaannnananiiiaianl 38

Clapper v. Amnesty Int’ USA,

a eis eI ci ncnsniniesccititiiteninssincindavlasinionaies 20

Entergy Corp. v. Riverkeeper, Inc.,

| | NT ET A nee en 21

General Motors Corp. v. United States,

I a cnisccsissaitaaiasiite 4

Georgia v. Tennessee Copper Co.,

ee I nttinannintiibininaitinniisientinsinansinniibe 6

vill

McCarthy v. Madigan,

I a la 17

McKart v. United States,

a adaenaslaad 17

Michigan v. EPA,

213 F.3d 663 (D.C. Cir. 2000)..................... passim

Missouri v. Illinois,

TE on asc icnmnnmaduiiahdenmenecionntisnidiin 6, 34

Missouri v. Illinots,

I I ill ecaal a 6, 38

Motor Vehicle Mfrs. Ass'n of U.S., Inc. v.

State Farm Mut. Auto. Ins. Co.,

I I eis 25

Nat'l Mining Ass'n v. MSHA,

612 F.3a GO6 (D.C. Civ. BOGS) ........00<c0sc0000000:.5.... 37

Natural Resources Defense Council, Inc. v. EPA,

483 F.2d GOO (Gtih Cir. 1973). .......:00.0.00..000000000050.. 7

North Carolina v. EPA,

531 F.3d 896, reh’g granted in part,

550 F.3d 1176 (D.C. Cir. 2008), ................... passim

Ohio v. Wyandotte Chemicals Corp.,

ee es ST TEED sicelenicoubbicdpniaamdaonmesteendontan 38

Sierra Club v. EPA,

314 F.S6 TOG Goths Car. BOOB). ........000000s0000000000000.. FS

Sierra Club v. EPA,

311 F.3d O63 (7th Cir. 2002)..........cccccccccccesesesseee 35

Sierra Club v. EPA,

294 F.3d 155 (D.C. Cir. 2002)............................. 35

Train v. Natural Resources Defense Council, Inc.,

ER Sees a ee At IT 4

United States v. L.A. Tucker Truck Lines, Inc.,

Lt & 7 ees Lf Caan 17

Verizon Communications, Inc. v. F.C.C.,

ARSE ESTA EE oer Mie ae 27

Whitman v. Am. Trucking Ass'ns, Inc.,

Be i: Se CIEE sciintctchscncdictctecedsdcnsudenioceuse 28, 36

Woodford v. Ngo,

IIE al es as aT Se 17

Statutes:

| ae, IRC iy Sead oa rhea on Soi era ae 37

Fa ERE ae a a on Oe 37

| ERS RNAS NRT Mee One mere REE ]

| I eae eC eines Sele eC ER LenS 37

ETRE oe Oks eee ACE? aes 37

4 | RESETS IanO ee eet Se CI Ha WME COT 4

Re Es, Hi ankcaitgintisacnshennsssccdetsdiubsddbinsentaiidudinasiialis 4

ee ee PI etricisncscieeecnincessentintessenscseensrets 32, 36

Ss IIIT atic dnecencotuiniacnseieniinmmsneniiinandainanntonte 4

hs PI iiicicieniniinaianteniutensiincoontiaianin 10, 32

ee is IL emsiicecnsissdiccnsncnnnnsinenbevaicenneninipoen 32

ee TI dertsnicnsecesasemcinsiinsiniccnninniecn 1, 10

42 U.S.C. 7410(a)(2)(D)G)(D)..........cccccccsssccesscrees passim

PE teresaniccnnnnitisctninceieieniisiniimsniin 32

es SD cetitcitennsnisenlasinicnsdivinemmenicesiaiins 2, 5

ee es, i iciatedenapirnschankcniastaniatiaterisenscainsouenuns 31

Se es, SEI cncitsecnnnedinceiiccestcesuiedsiacodbeninteich 5

es IE ED sccdcncicsniniesngicentacannneesdobehenpuicontesieas 5

Se he PN ibdivaitidisncnbudssntsdhdncesssinstauintansetenteiotines 5

ls, SI icccniccdiccisnddscncnestuscnsenaosenanil passim

ne ey BI, sccinnccnuniiathineadnastssontulensanbeinninss 5

Ee ke TE eis issncdcassrvencerctcnsecsinaeieies passim

ie ERE Sag Se eB RL ea 5

ey EE bic ccnbslitsécnesaenicinanxsucoinnoscsdeansesies 37

Pub. L. No. 95-95, 91 Stat. 685 (1977) ........... ee 7

Pub. L. No. 91-604, 84 Stat. 1676 (1970) «0.0.0.0... 7

Administrative Materials:

63 Fed. Reg. 57356 (Oct. 27, 1998). ............ccccceceeeeees 8

70 Fed. Reg. 25162 (May 12, 2005) .............0000ccc i)

72 Fed. Reg. 41629 (July 31, 2007)... B4

75 Fed. Reg. 32673 (June 9, 2010)........000000000ccc eee. 10

76 Fed. Reg. 48208 (Aug. 8, 2011)..........00..0..... passim

76 Fed. Reg. 53638 (Aug. 29, 2011) 0.0.0.0... 32

77 Fed. Reg. 1027 (Jan. 9, 2012)....................ccceeeeeee OO

77 Fed. Reg. 30088 (May 21, 2012) .....0..0.c, 36

77 Fed. Reg. 34221 (June 11, 2012)... eee 36

77 Fed. Reg. 38501 (June 28, 2012)... 33

77 Fed. Reg. 45992 (Aug. 2, 2012). .....0.....cceceseceeeeees 32

78 Fed. Reg. 3086 (Jan. 15, 2013)..........ccecceeeeeeeee 37

Legislative History:

es I, SPN, De OI I ccciccctinstecsiandinctmecenéiuneineessesecnts 7

xll

OPINION BELOW

The opinion of the United States Court of Appeals

for the District of Columbia Circuit is reported at

696 F.3d 7. The opinion may be found in the

Appendix to the Environmental Protection Agency's

petition for certiorari (hereinafter “App.”) at la-116a.

JURISDICTION

The judgment of the court of appeals was entered

on August 21, 2012. That court denied petitions for

rehearing en banc on January 24, 2013.

This Court’s jurisdiction is invoked under 28

U.S.C. 1254(1).

STATUTES AND REGULATORY PROVISIONS

INVOLVED

Section 110(a)(2)(D) of the Clean Air Act requires

that each state implementation plan contain

“adequate provisions”:

(i) prohibiting, consistent with the

provisions of this subchapter, any source or

other type of emissions activity within the

State from emitting any air pollutant in

amounts which will —

(1) contribute significantly to

nonattainment in, or interfere with

maintenance by, any other State with

respect to any such national primary or

secondary ambient air quality standard...

42 U.S.C. 7410(a)(2)(D).

Section 110(c) of the Act provides that:

(1) The [EPA] Administrator shall promulgate

a Federal implementation plan at any time

within 2 years after the Administrator—

(A) finds that a State has failed to make a

required submission... or

(B) disapproves a State implementation plan

submission in whole or in part, unless the State

corrects the deficiency, and the Administrator

approves the plan or plan revision, before the

Administrator promulgates such _ Federal

implementation plan.

Id. 7410(c)(1).

Challenges to EPA actions under the Clean Air

Act “shall be filed sixty days from the date notice of

such action .. . appears in the Federal Register.” /d.

7607(b)Q1). “Only an objection to a rule or procedure

which was raised with reasonable specificity during

the period for public comment . . . may be raised

during judicial review.” Jd. 7607(d)(7)(B).

IK PA’s Cross State Air Pollution Rule, 76 Fed. Reg.

48208 (Aug. 8, 2011) (“Transport Rule”), is reprinted

at App. B to EPA’s petition for certiorari.

INTRODUCTION

Air quality in large areas of the nation is impaired

by air pollution that crosses state lines and causes

thousands of premature deaths and illnesses each

year. Interstate pollution raises difficult and

complex problems of measurement and equitable

standard-setting; it is well-suited to legislative

judgment and administrative expertise. Section

110(a)(2)(D)Q)(1) of the Act — known as the “Good

Neighbor” provision — _ requires’ that _ state

implementation plans contain adequate provisions to

prohibit emissions activity within their borders that

will “contribute significantly” to any other state’s

nonattainment of air quality standards. 42 U.S.C.

7410(a)(2)(D)()(1).

In this case, a divided D.C. Circuit panel struck

down EPA’s Transport Rule, a major regulation

designed to bring long-delayed relief to millions of

Americans whose health is at risk because they live

in downwind states unable to attain or maintain air

quality standards because of pollution from upwind

states. The Rule was designed to conform to a

decision by a different panel of the same court that

had declared unlawful a predecessor interstate air

pollution rule in large part because it did not deliver

downwind states sufficiently timely or certain relief.

The court of appeals’ decision is riddled with error.

The majority overran express statutory limits on its

review authority. Despite the Act's rigorous

exhaustion requirement, the panel ruled on issues

that the challengers had plainly failed to raise

during the public comment period. The panel also

allowed collateral attacks on past agency actions

long after expiration of the statute’s jurisdictional

time period for review. The court imposed a series of

rigid strictures upon EPA's authority to give effect to

the Good Neighbor provision that are not found in

the statutory text and that vastly complicate its

implementation. The court disregarded KPA’s own

explanation for the technical judgments and complex

policy choices it made in crafting the Rule. And the

court created an entirely new limitation, not found

in the statutory text or prior administrative practice,

that the Good Neighbor provision imposes no

obligations on upwind states unless and until EPA

issues regulations quantifying the upwind states’

contribution and abatement obligations.

The harmful effects of these erroneous rulings are

far-reaching. Downwind states need the protection

the Rule afforded in order to meet their own

statutory obligations and to protect the health and

welfare of their citizens. The decision will

complicate the crafting of a workable rule that can

deliver the protection downwind states were

promised decades ago when the Good Neighbor

provision was enacted and amended.

This Court’s review is warranted.

STATEMENT OF THE CASE

A. Statutory Background

In the Clean Air Act amendments of 1970,

Congress adopted a “comprehensive national

program that made the States and the Federal

Government partners in the struggle against air

pollution.” General Motors Corp. v. United States,

496 U.S. 530, 532 (1990). The Act requires the EPA

to establish science-based national ambient air

quality standards for certain pollutants to protect

public health and the environment. See 42 U.S.C.

7408, 7409. States then have a responsibility to

adopt state implementation plans (“SIPs”) adequate

to maintain air quality standards in “attainment”

areas and to bring “nonattainment” areas into

compliance with those standards. /d. 7410(a); see

Train v. Natural Resources Defense Council, Inc.,

421 U.S. 60, 79 (1975). If a state does not timely

adopt an adequate state plan, EPA must adopt a

federal implementation plan for the state to address

the deficiencies. /d. 7410(c)(1). Specific temporal

deadlines for nonattainment areas to meet air

quality standards vary, and standards must in

addition be achieved as “expeditiously as

practicable.” See, eg., id. 7502(a)(2)(A), 7511(a)(1),

7513(c).

The Clean Air Act establishes a comprehensive

judicial review scheme that entrusts the D.C. Circuit

with exclusive review of rulemakings of national

significance. 42 U.S.C. 7607(b)(1). The Act affords

parties broad rights of participation, and requires

EPA to respond to “each of the significant comments,

criticisms and new data submitted . . . during the

comment period.” /d. 7607(d)(6)(B). The Act also

imposes limits on the judicial review process,

including that review must be sought within 60 days

of EPA’s action, id. 7607(b)(1), and that “[o}nly an

objection to a rule or procedure which was raised

with reasonable specificity during the period for

public comment . . . may be raised during judicial!

review,” id. 7607(d)(7)(B). See also id. 7607(e)

(“Nothing in this chapter shall be construed to

authorize judicial review . . . except as provided in

this section.”).

B. Interstate Air Pollution and the Act’s “Good

Neighbor” Provision

Decades before Congress enacted the Clean Air

Act, this Court recognized interstate pollution to be a

distinct problem and area of special federal

responsibility. In a series of decisions, this Court

determined that a state could obtain judicial relief

from out-of-state pollution on the principle that:

When the States by their union made the

forcible abatement of outside nuisances

impossible to each, they did not thereby agree

to submit to whatever might be done. They

did not renounce the possibility of making

reasonable demands on the ground of their

still remaining quasi-sovereign interests; and

the alternative to force is a suit in this court.

Georgia v. Tennessee Copper Co., 206 U.S. 230, 236

(1907); see also Missouri v. [/linois, 180 U.S. 208, 241

(1901); Missouri v. [/linois, 200 U.S. 496, 519 (1906).

In issuing Georgia’s requested injunction, the Court

explained that it was “a fair and reasonable demand

on the part of a sovereign that the air over its

territory should not be polluted on a great scale” by

pollution from beyond its borders. /d. at 238.

Interstate pollution remains a serious problem to

this day. For many areas with difficulties attaining

or maintaining the health-based air quality

standards, pollution from upwind states accounts for

more than three-quarters of local air pollution

concentrations. !

State-by-state implementation of national

ambient air quality standards does not by itself deal

effectively with interstate air pollution because each

state lacks the ability to regulate “persons beyond its

control.” Tennessee Copper, 206 U.S. at 238. The

1970 Act attempted to address interstate transport

by requiring states to include transport-related

“intergovernmental cooperation” provisions in their

! See, eg, Air Quality Modeling Final Rule Technical

Support Document, App. F (June 2011), avaslable at

http://www.epa.gov/airtransport/CSAPR/techinfo. html.

implementation plans. See Pub. L. No. 91-604,

§4(a), 84 Stat. 1676, 1681 (1970); see also Natural

Resources Defense Council, Inc. v. EPA, 483 F.2d

690, 692 (8th Cir. 1973). In 1977, Congress amended

the interstate transport provision by requiring states

to prohibit emissions from “any stationary source

within the State . . . which will . . . prevent

attainment or maintenance by any other state.”

Pub. L. No. 95-95, §108(a)(1), 91 Stat. 685, 693

(1977). Determining that “additional efforts must be

made” to address the “transport problem,” see S.

Rep. No. 101-228, at 48-49 (1989), Congress again

amended the Act in 1990 to include the current Good

Neighbor provision, which requires _ that

implementation plans:

(D) contain adequate provisions —

(i) prohibiting, consistent with the

provisions of this subchapter, any source or

other type of emissions activity within the

State from emitting any air pollutant in

amounts which will -

(1) contribute significantly to

nonattainment in, or interfere with

maintenance by, any other State with respect

to any such national primary or secondary

ambient air quality standard .. .

42 U.S.C. 7410(a)(2)(D).

C. The D.C. Circuit’s Prior Transport Decisions

In the first major EPA rulemaking under the Good

Neighbor provision, the 1998 NO, SIP Call, EPA

determined that the “major reason” that some states

failed to timely demonstrate attainment with the

national ozone standard was that states were not

able to address pollution transported from upwind

areas. 63 Fed. Reg. 57356, 57361 (Oct. 27, 1998).

That rule required 22 states and the District of

Columbia to address their interstate contributions to

downwind states’ ozone pollution by reducing their

emissions of nitrogen oxides (“NO,,” an ozone

precursor). Jd. at 57358. For purposes of setting

upwind states’ NO, emissions “budgets,” EPA

determined upwind states’ “significant contributions”

to downwind nonattainment based on “both air

quality factors relating to amounts of upwind

emissions and their ambient impact downwind, as

well as cost factors relating to the costs of the

upwind emissions reductions.” /d. at 57376. EPA

established a model emissions credit trading

program as a flexible and cost-effective mechanism

for states to meet their emissions budgets. /d. at

57359.

In Michigan v. EPA, 213 F.3d 663 (D.C. Cir. 2000),

the D.C. Circuit upheld the NO, SIP Call in relevant

respects. The court upheld EPA’s use of “a very low

threshold of contribution” to determine which

upwind states contributed to downwind

nonattainment. Jd. at 675. Noting the “ambiguity”

of the statute’s “significant” contribution

formulation, id. at 678, the court also upheld EPA’s

decision to base states’ NO, emissions budgets

primarily on the amount of emissions that could be

controlled in a “highly cost-effective” manner (1.e., by

application of controls costing less than $2,000 per

ton of NO, reductions). See sd. at 675-79; see also id.

at 679 (upholding EPA’s “decision to draw the

‘significant contribution’ line on a basis of cost

differentials”).

In 2005, EPA promulgated the Clean Air

Interstate Rule (““CAIR”), 70 Fed. Reg. 25162 (May

12, 2005), a rule that built upon the NO, SIP Call

and addressed, in addition to ozone, the contribution

of upwind states’ pollution to downwind states’

unhealthful concentrations of fine particulate matter

(PMe25). CAIR required reductions in upwind states’

emissions of the pollutants — NO, and sulfur dioxide

(“SOx”) -— that are precursors to fine particle

concentrations downwind. CAIR required 28 eastern

states and the District of Columbia to revise their

implementation plans to reduce NO, and SOs:

emissions.

The D.C. Circuit remanded CAIR in North

Carolina v. EPA, 531 F.3d 896 (D.C. Cir. 2008), rehg

granted in part, 550 F.3d 1176 (D.C. Cir. 2008),

largely because it determined that CAIR gave North

Carolina insufficient protection from upwind

pollution. The court did not disturb Michigans

acceptance of EPA’s use of cost-effectiveness analysis

to help determine’ each state’s “significant

contribution” to downwind nonattainment. See id. at

917. The court also concluded that KPA need not

determine each state’s individualized air quality

impact on downwind states “relative to other upwind

states.” Jd. at 908. The court found, however, that

EPA had failed to explain how CAIR’s formulation of

emissions budgets based on allowance allocations

from a different emissions trading program served

the objectives of the Good Neighbor provision. See

id. at 917-18. Furthermore, the court concluded

that, due to features including CAIR’s unconstrained

emissions trading system, the rule did not assure

downwind states their congressionally prescribed

protection. /d. The court also held that EPA had

‘Sgnored its statutory mandate” to harmonize CAIR

with downwind states’ staty cry compliance

deadlines. Jd. at 908-12.

The court left CAIR in place as an interim

measure, but required EPA to expeditiously remedy

the “fundamental flaws” the court had identified.

550 F.3d at 1178.

D. EPA’s Post-North Carolina Disapproval

Actions

After the North Carolina decision, EPA took steps

to ensure timely protection for downwind states.

Section 110(a)(1) of the Act requires states to submit

implementation plans (which must include adequate

Good Neighbor measures) to EPA within three years

after promulgation of a new or revised NAAQS. 42

U.S.C. 7410(a)(1), 7410(a)(2)(D). For the 1997 ozone

and 2006 PMe>5 air quality standards covered by the

Transport Rule, adequate state plans were due in

2000 and 2009, respectively. See 76 Fed. Reg. at

48219. In 2010 and 2011, EPA found that many

states had failed to submit state plans with adequate

Good Neighbor measures, and determined, in other

instances, that submitted state plan provisions on

transport were inadequate. F-.g., 75 Fed. Reg. 32673

(June 9, 2010) (finding with respect to the 2006

PMeos standard for 23 states, D.C., and certain

territories); 76 Fed. Reg. at 48219 (summarizing

these actions). EPA explained that “[t]his finding

creates a 2-year deadline for the promulgation of a

{federal implementation plan] by EPA for a

particular state or territory, unless that state or

territory submits a SIP to satisfy these section

110(a)(2)(D)G@)(I) requirements, and EPA approves

such submission prior to that deadline.” 75 Fed. Reg.

at 32674.

E. The Transport Rule

EPA promulgated the regulation at issue in direct

response to North Carolina. 76 Fed. Reg. at 48211.

The Transport Rule identified 27 states whose

emissions of NOx and SOs significantly affected the

ability of downwind states to attain or maintain

compliance with the applicable air quality standards

for ozone and PMes5. Jd. at 48208. EPA projected

that the Transport Rule would allow a number of

downwind states to meet, in accordance with

statutory deadlines, their ozone attainment and

maintenance obligations, and almost all to meet

similar obligations for PMe25. Jd. at 48210.

EPA estimated that the reductions in fine particle

pollution under the Transport Rule would, starting

in 2014,

[A]Jnnually reduce between 13,000 and 34,000

PM2.5-related premature deaths, 15,000 non-

fatal heart attacks, 8,700 incidences of chronic

bronchitis, 8,500 hospital admissions, and

400,000 cases of aggravated asthma while also

reducing 10 million days of restricted activity

due to respiratory illness and approximately 1.7

million work-loss days.

Id. at 48309. EPA calculated that “the annual net

benefit (social benefits minus social costs)” of the

Transport Rule in 2014 would be $110 to $280

billion, with compliance costs totaling $1.85 billion

in 2012 and less than $1 billion in 2014. Jd. at

48313-14.

In formulating the Transport Rule, EPA

performed a two-step analysis to determine which

states were subject to the Rule, and for those states,

to evaluate their “significant contributions” to

downwind nonattainment. First, based on air

pollution transport modeling and monitoring data,

the agency excluded many states from regulation: if

a state’s contributions to air quality monitors in

downwind nonattainment and maintenance areas

never exceeded one percent of the relevant national

ambient air quality standard, it was not subject to

the Rule. Jd. at 48211, 48236-37. Second, for the

states not excluded, EPA applied cost-effectiveness

and air quality factors to determine the amount of

each state’s significant contribution and abatement

obligation. EPA then established emissions budgets

incorporating safeguards (in response to North

Carolina) to allow limited interstate’ trading

consistent with ensuring timely reductions in

interstate pollution. See sd. at 48210-12, 48214,

48246-48.

Having previously found that states had not

amended their implementation plans to meet their

Good Neighbor obligations within the three-year

statutory time period, EPA implemented the Rule via

federal implementation plans pursuant to Section

110(c)(1) of the Act. Section 110(c)(1) provides that

EPA “shall” promulgate a federal plan “within 2

years after’ EPA either (1) finds that a state failed to

submit an adequate state implementation plan that

complies with statutory requirements; or (2)

disapproves a state’s plan. See 76 Fed. Reg. at

48217. Beginning in 2014, the Rule allowed states to

submit state implementation plans, for EPA's

approval, that would modify or replace the federal

implementation plans. See id. at 48327-28. In

adopting federal plans, EPA explained that it lacked

authority to extend Section 110(a)(1)’s three-year

deadline for state plan submissions or alter Section

110(c)(1)’s unambiguous trigger for starting the two-

year clock by which EPA must promulgate a federal

plan. /d. at 48219-20. EPA also pointed to the North

Carolina court’s “emphasis on remedying CAIR’s

flaws expeditiously.” /d. at 48210.

F. Proceedings on Judicial Review.

On August 21, 2012, a divided D.C. Circuit panel

granted petitions for review from upwind states and

industry and vacated the Transport Rule. The court

interpreted the Act, North Carolina and Michigan as

creating a set of “red lines” limiting EPA’s authority

under the Good Neighbor provision, App. 22a: (1)

“once EPA reasonably delegates some level of

contribution as ‘insignificant’ under the statute, it

may not force any upwind State to reduce more than

its own contribution to that downwind state minus

the insignificant amount,” App. 23a; (2) the

“collective burden” of reducing interstate pollution

“must be allocated among the upwind States in

proportion to the size of their contributions to the

downwind State’s nonattainment,” App. 25a; and (3)

the “combined obligations of the various upwind

States, as aggregated,” must “not go beyond what is

necessary for the downwind states to achieve the

NAAQS.” App. 27a.

The majority next concluded that the Rule crossed

each of these statutory “red lines.” The “most

fundamental[}” problem was the possibility the

restrictions imposed by the Rule in the second step

of its methodology “could require upwind states to

reduce emissions by more than the amount” EPA

had used to exclude states from program coverage in

the first step, App. 3la, 35a, re, to require

abatement of contributions that were less than 1% of

the NAAQS in the relevant downwind state. App.

3la-36a. In a lengthy footnote, App. 32a-34a n.18,

the majority rejected EPA’s contention that this

statutory argument was barred by 42 U.S.C.

7607(d)(7)(B) because no one raised it in the

rulemaking comment period.

The majority next concluded that the Transport

Rule violated “the statute’s proportionality

requirement,” because, the opinion said, EPA had

“made no attempt to calculate upwind States’

required reductions on a proportional basis that took

into account contributions of other upwind States to

the downwind States’ nonattainment problems.”

App. 38a-39a. In addition, the majority concluded

that the Rule “failed to ensure that the collective

obligations of the various upwind States, when

aggregated, did not produce unnecessary over-

control in the downwind States.” App. 39a.

The majority held that the Rule was invalid for a

second, independent reason, namely, that EPA had

implemented it “without giving the States an initial

opportunity to implement the obligations themselves

through State Implementation Plans.” App. 42a. As

noted above, after the North Carolina decision, EPA

had found that none of the states subject to the

Transport Rule had submitted approvable Good

Neighbor plans. Supra, pp. 10-11. As part of the

Transport Rule, the agency adopted federal

implementation plans for these states pursuant to 42

U.S.C. 7410(c)(1), which obligates the agency to

“promulgate a [federal plan]” within two years of

such findings. The majority nonetheless held that

the states had no obligation to submit Good

Neighbor plans until EPA “defines or quantifies”

their obligations. App. 47a. The majority denied

that the challenge was a collateral attack on EPA’s

earlier disapproval findings, and _ hence

jurisdictionally barred under 42 U.S.C. 7607(b)(1),

which limits courts’ jurisdiction to chailenges filed

within 60 days of EPA’s action. App. 61a-62a n.34.

Judge Rogers filed a comprehensive dissent

faulting the majority for “disregard[ing] limits

placed on its jurisdiction, the plain text of the Clean

Air Act, and the Court’s settled precedent

interpreting the same statutory provisions at issue.”

App. 65a. She concluded that the majority's

invalidation of EPA’s method for determining upwind

states’ obligations violated the “clear command” of

the Act’s express exhaustion requirement, because

“{njo objection was made during the Transport Rule

administrative proceedings to EPA’s approach, let

alone its statutory authority.” App. 67a. Judge

Rogers also concluded that the challengers could not

collaterally attack EPA’s prior, unchallenged actions

disapproving the state plans for Good Neighbor

deficiencies. App. 74a-78a. She rejected as contrary

to the plain statutory text the majority’s conclusion

that states have no Good Neighbor obligations until

the EPA defines them. App. 85a-87a.

The dissent insisted that the majority’s reasons

for entertaining statutory challenges to EPA’s

“significant contribution” methodology were invalid

and that it had ignored the administrative record in

finding a statutory violation based on possible “over-

control.” App. 95a-110a. Judge Rogers (who was on

the panels that decided both Michigan and North

Carolina) concluded that the majority badly

misapplied both cases. App. 112a, 116a.

Petitions for rehearing en banc were denied.

REASONS FOR GRANTING CERTIORARI

Bypassing statutory limits on its own authority,

the D.C. Circuit majority imposed a set of detailed

requirements not found in the statute and poorly

suited to the complex realities of the interstate air

pollution problem as documented by the

administrative record. The decision, if uncorrected,

will deprive downwind states and their residents of

badly needed relief from interstate air pollution and

will create unjustified obstacles to EPA’s and states’

ability to give effect to the Good Neighbor provision.

This Court’s review is warranted.

I. THE PANEL VIOLATED CLEAR STATUTORY

LIMITS ON JUDICIAL REVIEW BY RESTING

ITS DECISION ON THEORIES NO PARTY HAD

PRESENTED TO THE AGENCY DURING THE

RULEMAKING.

As this Court has insisted, “courts should not

topple over administrative decisions unless the

administrative body not only has erred, but Aas

erred against objection made at the time appropriate

under its practice,” Woodford v. Ngo, 548 U.S. 81, 90

(2006) (quoting United States v. L.A. Tucker Truck

Lines, Inc., 344 U.S. 33, 37 (1952); emphasis added

in Woodford), and “[e]xhaustion concerns apply with

particular force ... when the agency proceedings in

question allow the agency to apply its special

expertise.” McCarthy v. Madigan, 503 U.S. 140, 145

(1992) (citing McKart v. United States, 395 U.S. 185,

194 (1969)).

In order to facilitate timely and _ orderly

implementation of its requirements, the Clean Air

Act explicitly limits judicial review to issues properly

raised during the administrative proceedings. 42

U.S.C. 7607(d)(7)(B); supra, p. 5. The court of

appeals flagrantly disregarded this limitation. The

court lacked authority to address what it

characterized as the Transport Rule’s “most

fundamental|[]” statutory flaw, see App. 31la, because,

as the dissent explained, “[nJo objection was made

during the ‘Transport Rule administrative

proceedings to EPA’s approach, let alone its statutory

authority, to use different, unrelated measures of

significance for inclusion and budget-setting.” App.

67a. The question “is not close.” App. 96a.

The majority never identified anything in the

Transport Rule’s docket that satisfies the Act's

explicit requirement that objections be raised during

the public comment period. None of the grounds

offered in the majority’s lengthy footnote, see App.

32a-34a n.18, withstands scrutiny. For example,

that the prior interstate transport proceedings

involved the question “whether EPA has complied

with the basic statutory limits on its authority,” did

not excuse parties’ failure to raise particular

“objections.” Nor did standard remand language in

North Carolina (see App. 32a n.18) suffice to excuse

a failure to raise statutory objections to EPA’s two-

step methodology, which had not been challenged in,

and expressly left “undisturbed” by North Carolina,

see 531 F.3d at 916-17. (Judge Rogers, the only

member of the North Carolina panel to sit on this

case, was of the view that EPA’s approach in the

Transport Rule was fully consistent with North

Carolina). The court also pointed to comments made

years earlier in the CAIR proceeding, but the D.C.

Circuit has made clear that comments from prior

rulemakings are insufficient under 42 U.S.C.

7607(d)(7)(B), see Appalachian Power Co. v. EPA,

251 F.3d 1026, 1036 (D.C. Cir. 2001)). And the fact

that EPA had considered but not adopted “two air

quality only approaches” (App. 33a n.18), by no

means excused the challengers’ failure to raise their

dii.erent, statutory theories “during the period for

public comment.” 42 U.S.C. 7607(d)(7)(B). Section

7607(d)(7)(B) contains no futility exemption, and

courts may “not read futility or other exceptions into

statutory exhaustion requirement where Congress

has provided otherwise.” Booth v. Churner, 532 U.S.

731, 741 n.6 (2001).?

2 The Court lastly cited two comments in the Transport

rulemaking, one from Wisconsin that urged less reliance on

costs to achieve more stringent regulation, and one from

Tennessee that urged EPA to “consider” a lower cost threshold

for states that can reduce their emissions below the

contribution level EPA defined as significant. App. 34a n.18.

Neither argued that the statute prohibited EPA’s approach.

See App. 98a-101a (dissent).

The diverse rationales in the court of appeals’

footnote are far removed from the rule laid down in

the statute, which is whether an objection was

“raised with reasonable specificity during the period

for public comment.” 42 U.S.C. 7607(d)(7)(B). Left

uncorrected, this grab-bag of excuses would provide

ready means for parties to disrupt’ the

administrative and judicial processes by raising on

review issues they had failed to raise below. See

App. 65a-66a, 115a-116a.

The circumstances here illustrate, in an especially

vivid way, the hazards of bypassing statutory

exhaustion requirements. The panel overturned

EPA’s rule not because it found that the agency’s

methodology actua//y required even a single upwind

state to reduce emissions below the 1% threshold the

majority regarded as a statutory “red line,” App. 22a;

rather, the majority deemed the mere possibility of

such a result to be fatal. See, e.g., App. 35a (EPA’s

budgets “cou/d require upwind States to reduce

emissions by more than the [initial threshold]

amount”) (emphasis added).

Precisely because no participant in_ the

rulemaking raised the objection, EPA had no reason

during the rulemaking to model whether, in fact, the

court’s “red line” would be exceeded for any state.

Indeed, after the challengers first presented the

issue in their opening briefs, EPA analyzed the

record evidence on this newly-raised objection and

explained that “data in the record suggest that, at

the cost thresholds used in the Rule, such a scenario

is extremely un/rkely to occur.” EPA CA Br. 33; see

also id. 33-34 n.20. It is highly doubtful that any

party would have had Article II] standing to press

any “over-control” claim had the issue been timely

raised during the rulemaking, and had EPA

demonstrated then that none of the states subject to

the Transport Rule would be required to reduce

emissions below the 1% threshold. See Clapper v.

Amnesty Int?) USA, 133 §. Ct. 1138, 1147 (2013)

(discussing injury in fact requirement).

The court’s departures from the _ statutory

exhaustion requirements were not limited to the

“over-control” issues. As the dissent noted, the

challengers never (even in their briefs) raised the

argument that the statute required “proportionality,”

App. 69a, and not a single commenter proposed the

regime later invented by the majority as a supposed

statutory requirement. Further, there was no

agency record addressing the efficacy or feasibility of

the majorit’s approach.

For a court to prescribe, sua sponte, a set of

untried rules on a highly technical matter lke

controlling multistate air pollution inverts the

decisional structure created by Congress. Cf Am.

Elec. Power Co., Inc. v. Connecticut, 131 S. Ct. 2527,

2539 (2011) (“the first decider under the Act is the

expert administrative agency, the second, federal

judges”). The D.C. Circuit’s bypassing of the Act’s

exhaustion requirement to reach statutory claims

that had not been presented to the agency warrants

this Court’s correction.

il. THE COURT OF APPEALS IMPOSED RIGID

REQUIREMENTS ON EPA’S

IMPLEMENTATION OF THE GOOD

NEIGHBOR PROVISION THAT ARE NOT

FOUND IN THE STATUTE AND THAT

DISREGARD THE REALITIES OF

INTERSTATE AIR POLLUTION.

The court of appeals departed sharply from the

proper role of a federal court reviewing the actions of

an agency to which Congress had granted authority

to implement a federal statute. As this Court has

repeatedly insisted, the agency’s interpretation

“governs if it is a reasonable interpretation of the

statute—not necessarily the only _ possible

interpretation, nor even the interpretation deemed

most reasonable by the courts.” Entergy Corp. v.

Riverkeeper, Inc., 556 U.S. 208, 217-18 (2009) (citing

Chevron, U.S.A. Inc. v. Natural Resources Defense

Council, Inc., 467 U.S. 837, 843-844 (1984)). In an

uncommonly stark way, however, the court of

appeals majority improperly “impose[d] its own

construction on the statute,” Chevron, 467 U.S. at

843, in place of the agency’s reasonable construction.

Its decision, which will improperly constrain EPA's

efforts to give the intended effect to an important

provision of the Act, calls for this Court’s review.

The regulatory context here is especially ill-suited

for such a judicial imposition. As the record in this

proceeding shows, mitigating interstate air pollution

problems — especially those involving multiple

upwind and downwind states, with pollution

resulting from dynamic emissions activity that

quickly shifts in response to changes in power

demand or control costs — is unusually complex and

technically demanding. See Regulatory Impact

Analysis, JA 3192-98; 76 Fed. Reg. at 48352-61;

“Federal judges lack the scientific, economic, and

technological resources an agency can utilize in

coping with issues of this order.” Am. Elec. Power

Co., 131 S. Ct. at 2539-40. The statutory text

requiring each state to develop “adequate” plan

provisions that “prohibit[]” “any” emissions activity

that “will . . . contribute significantly to

nonattainment in... any other State,” 42 U.S.C.

7410(a)(2)(D)()(D), manifestly calls upon

administrative judgment and technical expertise.

In Michigan, the D.C. Circuit recognized that the

statutory language is ambiguous and provides no

“criterion for classifying ‘emissions activity’ as

‘significant,’ 213 F.3d at 674. The court upheld EPA’s

two-step approach as a permissible statutory

construction, including the agency’s “decision to

draw the ‘significant contribution’ line on a basis of

cost differentials.” See rd. at 679. In North Carolina,

the Court sustained the same two-step approach to

defining upwind states’ “significant contributions.”

See 531 F.3d at 917 (“Again, we do not disturb this

approach”). EPA relied on these holdings and

adhered to same basic two-step approach to defining

significant contributions. See 76 Fed. Reg. at 48270-

71, 48303-04.

In a jarring change of direction, the majority here

held that EPA’s_ twice-approved _ two-step

methodology violated unambiguous _ statutory

Janguage in multiple respects. The decision’s

statutory analysis is hampered by a _ repeated

inversion of statutory exhaustion rules, in which

EPA was repeatedly faulted for failing to rebut

objections never made, and by the majority’s

complete failure to demonstrate that EPA’s own

explanations regarding its “significant contribution”

methodology were unlawful or arbitrary. Far from

performing the deferential review Chevron

prescribes, the majority never even engaged with the

agencys explanation of why its methodology

appropriately implemented the _ statute and

conformed to the D.C. Circuit’s interpretation in

Michigan and North Carolina. See 76 Fed. Reg. at

48270-71.

“Over-Control” Although the majority declared

that EPA “did not try to take steps to avoid . . . over-

control,” App. 40a, this conclusion is_ simply

“unsupported by the record,” App. 113a (Rogers, J.).

In fact, EPA projected that, even when fully

implemented, the Rule would not reduce emissions

enough in some nonattainment areas. 76 Fed. Reg.

at 48210, 48232, 48247-48; App. ll4a (Judge

Rogers, concluding that “there is no support for the

court’s conclusion that the Transport Rule resulted

in collective over-control.”); Technical Support

Document, Air Quality Modeling, JA 2466, 2470 (five

areas are projected to have 24-hour PM2,>5 issues

post-implementation, while ten sites in two areas

(Houston, TX and Baton Rouge, LA) will have ozone

problems); Technical Support Document, Alternative

Significant Contribution Approaches’ Evaluated

(“Alternative Approaches TSD”), JA 2311 (criticizing

alternative methodology as potentially producing

“substantial over-control”). Significantly, neither

the court, nor the challengers, identified any

instance in which the Rule required greater

reductions than necessary to achieve attainment.

Nor is there any basis in the statutory text for the

court’s singular focus on a hypothetical danger of

“over-control.” The Good Neighbor provision is not a

“blank check” authorizing EPA to reduce air

pollution indiscriminately. App. 22a. But neither is

the provision a wooden nickel; it is aimed at actually

achieving necessary restrictions on upwind pollution

transport that downwind states need to protect their

citizens’ health and well-being. The text prescribes

that measures to address interstate pollution must

be “adequate,” and must “prohibit[]” “any” emissions

that will contribute significantly to nonattainment

“or” interfere with maintenance of standards in

downwind states. See North Carolina, 531 F.3d at

908 (transport rule “must actually require

elimination of emissions” that contribute

significantly to downwind nonattainment). All this

must be done “consistent with the provisions of this

[Act],” including the statutory attainment deadlines

downwind states must meet. /d. at 911-12.

Evaluating the risk that a given methodology will

go too far in controlling interstate pollution and the

risk it will not go far enough requires a “complex

balancing,” Am. Elec. Power Co., 131 S. Ct. at 2539,

that is the job of agency policymakers, not judges.

Here, EPA considered these problems and resolved

them in a reasoned way. The court’s analysis did not

demonstrate that the agencys work was

unreasonable or arbitrary and capricious, or even

seriously engage with the agency’s reasoning. The

court’s erection of a series of formidable bulwarks

against the merest possibility of over-control — even

if undocumented — is altogether out of step with

Congress’s repeated amendments to the statute to

strengthen controls on transported pollution, and

with the history of upwind states’ persistent under-

control of interstate air pollution.

Proportionality. Addressing another statutory

argument that the challengers had not raised, see

App. illa (dissent), the court concluded that the

statutory text includes a “fair share” requirement,

under which abatement obligations “must be

allocated among the upwind States in proportion to

the size of their contributions to the downwind

State’s nonattainment.” App. 25a; see also App. 26a-

27a & n.15 (illustrated majority’s proportionality

rule with a numerical example involving how three

upwind states contribute to nonattainment in one

downwind state).

Nothing in the Act’s language imposes any

“proportionality” or particularized “fair share”

requirement like that contained in the court's

discussion.* To be sure, under the arbitrary and

capricious standard, a claim of improper disparities

among states’ compliance obligations, if duly raised

in comments, would demand a reasoned agency

response. Motor Vehicle Mfrs. Ass’n of U.S., Inc. v.

State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43-44

(1983). But judicial review of such a claim would

require examining the legal and policy reasons given

by the agency for its choices, its responses to

3 In North Carolina, the D.C. Circuit rejected EPA’s use of

fairness as a regulatory rationale because “what is an

‘equitable governmental approach to attainment’ is not among

the objectives of [the Good Neighbor provision].” 531 F.3d at

918.

objections properly raised in comments, and the

feasibility and probable consequences of alternative

approaches. The court below, in contrast, looked at

none of this, casting its proportionality rule instead

as a peremptory statutory requirement.

The majority did note that EPA had considered “a

proportional approach that reflected many of the

essential] principles described above,” but “ultimately

chose not to adopt that approach.” App. 40a n. 24

(citing Alternative Approaches TSD, JA 2311-12).

Unmentioned by the majority, however, were the

facts that (1) no commenter in the rulemaking

advocated for that approach, let alone claimed that

that such an approach was required by statute, see

App. 107a-108a (dissent); (2) EPA rejected this

approach for a variety of candidly explained reasons,

pointing out, inter a/ia, the risk of overburdening

states that had already adopted controls and noting

that the proportionality concept breaks down

whenever more than one downwind state is involved,

JA 2311-12; and (3) EPA’s reasons for rejecting the

approach were not challenged by any party.

The court’s proportionality rule fares poorly under

real-world conditions. Unlike the court’s

hypothetical, upwind states frequently contribute to

nonattainment in multiple downwind states. £.g.,

76 Fed. Reg. at 48242-44, Tables V.D-5, V.D-6.

Indeed, in considering a methodology requiring

upwind states to reduce their emissions “by an

amount that is proportional to their contribution,”

EPA explained that “most upwind states contribute

to multiple downwind monitors (in multiple states)

and would have a different reduction percentage for

each one.” Alternative Approaches TSD, JA 2312.

The court of appeals did not mention EPA's

explanation, let alone show why it was wrong.‘

If the Good Neighbor provision incorporates a

“fair share” norm requiring equitable treatment of

states, that norm does not preclude EPA from

considering how much effort different upwind states

have already made to control pollution. Under a

standard that required upwind states to reduce

emissions by “the same percent reduction of existing

emissions,” EPA explained,

states that had _ previously implemented

stringent contro] programs might not be able to

achieve the required reductions using existing

control technologies, while others that had

previously done little (and presumably have

larger absolute contributions) would achieve

their required reductions using significantly less

than optima] control technologies.

Alternative Approaches TSD, JA 2312. Certainly

nothing in the concept of “fair share” compelled EPA

to adopt the majority’s approach. Indeed, even if the

statute had express/y directed EPA to identify

upwind states’ “fair share” of emissions reductions,

that broad term could not reasonably be interpreted

to dictate one particular approach. Cf Verizon

Communications, Inc. v. F-C.C., 535 U.S. 467, 501

(2002) (statutory prescription of “just and

4 The majority suggested that some departures from

proportionality might be tolerable where necessary to “ratchet

back” emissions control reductions to avoid “over-control.” See

App. 29a. But there is no textual or logical basis for making

only this departure, and the majority’s proportionality rule fails

whenever states’ emissions contribute to nonattainment in

more than one downwind state.

reasonable” rates leaves methodology “largely

subject to [agency] discretion”).

Reliance on Cost. In Michigan, the D.C. Circuit

explicitly approved EPA's reliance on uniform cost

levels as a means of fixing states’ “significant

contributions” to nonattainment, over objections that

doing so resulted in an improper lack of

proportionality. 213 F.3d at 679. The majority here

recast Michigan as having merely upheld rules

“preventf{ing] exorbitant costs from being imposed on

certain upwind States.” App. 27a.5

There is no basis in the statute for limiting

consideration of control costs to avoiding “exorbitant”

costs. In the Transport Rule, EPA did not rely upon

cost to weaken the Act’s public health protections,

see Whitman v. Am. Trucking Ass‘ns, Inc., 531 U.S.

457, 465 (2001). Instead, the agency used control

costs as a tool for assigning abatement obligations

among states jointly responsible for downwind

pollution, concluding that cost thresholds

corresponding to differing levels of pollution-control

effort, combined with air quality considerations,

achieved the necessary reductions in an effective and

efficient manner. See 76 Fed. Reg. at 48256. EPA

explained that basing emissions limits in part on

control cost thresholds had the advantage of taking

account of whether upwind states had already taken

steps to reduce their transported pollution.

5 In fact, the NO, SIP Call methodology relied on a uniform

cost standard based on what were judged to be “highly cost

effective controls” and did not require a particular showing of

extreme burdens, as the Michigan court definitely recognized.

See 213 F.3d at 675-79.

Alternative Approaches TSD, JA 2312. The agency

explained that approaches using air quality

considerations alone could lead to extreme

obligations for a few states while still failing to

achieve adequate reductions. See id., JA 2309-10

(evaluating “air quality only” approach and finding

that for certain upwind states (Indiana, Kentucky,

Ohio, and Pennsylvania) it would require reductions

of 90% or more of all SO2 and NO, emissions (not

just power plant emissions) using a 1%-of-NAAQS

threshold, and of 69% or more even if the threshold

were increased more than threefold).

Given the dynamic, cost-driven realities of the

electric power industry, an interstate transport rule

is unlikely to achieve its goal if it is not designed

with costs in mind, as EPA discussed extensively.

Suppliers of electricity “bid” to supply power to the

interstate electric grid based largely on their

operating costs, and system operators dispatch

power based on those bids. Installation and

operation of environmental controls can affect

operating costs and can cause emissions to shift to

units with fewer controls, causing more pollution.

See 76 Fed. Reg. at 48255 (discussing “shifting of

emissions between states” due to “interconnected

nature of the country’s energy system”).

EPA’s mixed cost and air quality approach was

based upon extensive consideration of those realities.

In developing the Rule, EPA used both an air

pollution transport model, CAMx, and a model

developed for the electric industry, the Integrated

Planning Model (“IPM”), to evaluate how pollution

control costs would shift dispatch, and how

downwind air quality would be affected. JA 2333.

The statute permitted EPA to adopt a methodology

attuned to real-world conditions, rather than a static

analysis of oversimplified hypotheticals.

M1.THE D.C. CIRCUITS RULING THAT EPA

MUST QUANTIFY THE GOOD NEIGHBOR

OBLIGATIONS OF UPWIND STATES BEFORE

THOSE STATES NEED TO REDUCE THEIR

EMISSIONS LACKS ANY STATUTORY BASIS.

The court of appeals’ ruling that states have no

obligation to include Good Neighbor reductions in

implementation plans until EPA has quantified their

obligations, App. 45a-48a, was _ jurisdictionally

barred, strayed far from the text of the Act, and

disrupts settled state and EPA practice.

First, as the dissent explained, App. 69a-94a, the

challenge to EPA’s_ reliance’ on federal

implementation plans was barred by the Act’s

express limits judicial review. Following the North

Carolina decision, EPA disapproved state plans in all

of the states covered by the Transport Rule because

of the absence of adequate Good Neighbor measures.

Those actions triggered an unambiguous statutory

obligation to promulgate federal plans. 42 U.S.C.

7410(c)(1) (Administrator “shall promulgate” federal

implementation plan “at any time within 2 years”

after failure finding or SIP disapproval). States that

sought to challenge EPA's conclusion that their plans

were inadequate with respect to interstate transport,

and that wished to stop the mandatory statutory

deadline for federal plans had 60 days to challenge

EPA's disapproval. See 42 U.S.C. 7607(b)(1). Only

three parties (Georgia, Kansas, and a Kansas-based

firm) filed such challenges, and their (still-pending)

challenges were not part of the challenge to the

Transport Rule. See App. 74a & n.5 (dissent, citing

these separate challenges). The majority lacked

jurisdiction to entertain these collateral challenges

in the instant case. See App. 73a-82a.

Second, the language of the Act does not support

the court’s ruling that EPA must quantify Good

Neighbor obligations before the state planning

process can begin. To the contrary, the text of the

Good Neighbor provision puts the obligation directly

on the state as part of its initial plan submission:

“|E]ach [state implementation] plan shall . . . contain

adequate provisions .. . prohibiting . . . any source or

other type of emissions activity within the State[.]”

42 U.S.C. 7410(a)(2)(D)G)(). The majority noted

that the states have no obligation to implement an

ambient air quality standard until EPA has set the

concentration level of such standard, and then

analogized that states have no obligation to address

pollution transport in their plans until EPA specifies

the quantity that they must abate. App. 53a. But,

as Judge Rogers explained, the analogy between

states’ interstate transport obligations and their

obligations regarding new or amended air quality

standards is unmoored from the “plain text.” See

App. 84a-86a. States’ obligation to develop

amendments to its implementation plan to eliminate

“significant contribution” to downwind

nonattainment of previously established air quality

standards comes directly from the statute. /d. ©

6 The majority's argument that Section 126 of the Act, 42

U.S.C. 7426, supports its EPA-first approach, App. 54a-55a,

also is unmoored from the text. As the dissent explained, “[t}he

As the dissent explained, “[t]he plain text [of 42

U.S.C. 7410(c)(1)] requires that within three years

of EPA’s promulgation of [an air quality standard],

States shal] submit SIPs, and those SIPS sha//

include adequate good neighbor provisions.” App.

85a. Under the statute’s plain language, States have

a direct obligation te ensure that their

implementation plans contain acequate provisions to

prohibit significant contribution. They must submit

such provisions for EPA approval or disapproval. 42

U.S.C. 7410(a)(1), (2). That obligation to adopt and

submit measures to prevent significant contribution

exists whether or not EPA has promulgated

regulations quantifying “significant contribution.”

The majority's ruling that EPA must first quantify

the Good Neighbor obligations of states ignores the

Act’s explicit requirement that states “provide for. . .

performance of such air quality modeling as |EPA]

may prescribe for the purpose of predicting the effect

on ambient air quality of any emissions of any air

pollutant” covered by an air quality standard. 42

U.S.C. 7410(a)(2)(K). Pursuant to this requirement,

states have regularly performed the type of

quantification analysis that the majority assumed

they cannot do. See, e.g., 76 Fed. Reg. 53638 (Aug.

29, 2011) (approving a Good Neighbor plan from

Delaware). States have also formed regional

coalitions in order to perform complex air quality

modeling. See 77 Fed. Reg. 45992, 46004 (Aug. 2,

majority's “comparison of section 110 to section 126...

conflates direct federal regulation of sources with EPA's

statutory authority to enforce requirements that States comply

with their ‘good neighbor’ SIP obiigations[.]” App. 85a, n.9.

2012). Like EPA, States analyze power sector

emissions using sophisticated computer programs.

See, e.. 77 Fed. Reg. 38501, 38506 (June 28, 2012)

(southeastern states conducted “air quality

modeling” and “generated future-year emissions

inventories for the electric generating sector of the

contiguous United States using [IPM]”).

The majority’s conclusion that upwind states have

no Good Neighbor obligations until EPA specifies a

numerical standard is contradicted by the statutory

text (which says otherwise) and by common sense.

The majority managed to abandon a _ statute

containing an unambiguous “shall” obligation

because it believed language of the Good Neighbor

provision, like a traffic sign that says “drive

‘carefully,” does not provide sufficiently “precise

guidance” to upwind states, App. 5la; but laws that

establish general, but still obligatory, norms are

ubiquitous, from common-law negligence and

nuisance to statutory prohibitions against

“unreasonable restraints of trade.” “Good neighbors”

do not have to be told exactly how many decibels

they may blast their stereos before becoming a

nuisance — even though, if necessary, the police

officer will tell them. Neither the fact of interstate

pollution nor the means of abating it are

impenetrable mysteries; abatement frequently

involves well recognized techniques such as

requiring high-emitting sources to operate installed

pollution controls. See 76 Fed. Reg. at 48250-52.

States (including the many states that have never

been covered by EPA’s regional transport rules)

regularly prepare plans addressing transport. See,

e.g., 77 Fed. Reg. 1027 (Jan. 9, 2012) (approval of

Colorado interstate transport plan); 72 Fed. Reg.

41629 (July 31, 2007) (approval of Arizona interstate

transport plan).

The ruling imposes a regulatory hurdle that does

not exist in the Act, and places the resulting burden

of inertia on the downwind states and their

residents, compounding the delays and under-control

of interstate pollution the Good Neighbor provision

was intended to remedy. This Court’s review is

warranted.

IV.THE CASE PRESENTS ISSUES OF VITAL

NATIONAL IMPORTANCE THAT WARRANT

THIS COURTS REVIEW

The Transport Rule was crafted to provide

downwind states with relief from cross-border

pollution that interferes with their ability to meet

and maintain health-based air quality standards.

The stakes for public health are high. EPA found

that the Rule would save tens of thousands of lives

annually, and avoid hundreds of thousands of serious

illnesses. See supra, p. 11.7

The subject-matter of this case makes this Court's

intervention particularly important. States injured

by trans-border pollution rightfully expect the

federal government to bear “the duty of providing a

remedy,” Missouri, 180 U.S. at 241, for harms the

downwind states themselves are without power to

address. Interstate pollution misdirect the forces of

interstate competition; states favored by geography

7 Designed to remedy the predecessor rule’s flaws, the

Transport Rule provides greater health benefits than CAIR.

See Dec. of David Schoengold, Ex. A to Intervenors’ Dec. 1,

2011, Stay Opp. (D.C. Cir. Doc. 1345215).

or wind patterns can export the social costs of their

economic activity, securing an advantage over

neighboring states (and companies located there).

Some downwind states are unable, due to interstate

pollution, to meet air quality standards even after

imposing abatement obligations upon local sources

far more demanding than upwind states have

imposed. Downwind states stymied by interstate

pollution are not excused from the Act’s attainment

deadlines. See Sierra Club vy. EPA, 294 F.3d 155, 160

(D.C. Cir. 2002); Sierra Club v. EPA, 311 F.3d 853,

860 (7th Cir. 2002); Sierra Club v. EPA, 314 ©.3d 735,

741 (5th Cir. 2002).

The decision below has left the law governing the

pivotal Clean Air Act provision in disarray. The

effect of the decision is to restore a prior rule, CAIR,

that the D.C. Circuit, in North Carolina, has

declared to have “fundamental flaws,” including its

failure to provide downwind states with adequate

protection within’ the © statutorily mandated

deadlines. Both the prior rule, and this one, were

crafted (by successive Administrations) in efforts to

conform to the D.C. Circuit’s guidance.

The D.C. Circuit’s commands to EPA as to how the

statute is supposed to work now point in opposite

directions: In North Carolina, the court faulted EPA

for failing to ensure that emission reductions from

upwind states would occur in time for downwind

states to meet their statutory nonattainment

8 See Conn. Dept. of Envtl. Prot., Comments (JA 1227-29);

Md. Dep’t of the Envt., Comments (JA 586); N.Y.S. Dep’t of

Envtl. Cons., Comments (JA 928).

deadlines — an interest that EPA strove to satisfy

with the timing of its rule. The court here, however,

laid out a set of substantive strictures and

procedural rules that give no weight to the central

statutory goal of providing speedy relief for

downwind states. See App. 93a-94a, 114a (dissent).

While the majority did not purport to overturn the

prior D.C. Circuit decisions approving regional

transport programs based in part on_ cost

considerations, the court’s various methodological

strictures appear to eliminate EPA's ability to do so

in practice. The majority’s instructions on

proportionality conflict not only with Michigan's

explicit rejection of the same argument, 213 F.3d at

679, but, in a large class of cases, with basic

arithmetic. See supra, p. 26. Its lack of

consideration for the practical and legal concerns

that led EPA to support its two-step methodology

will unduly complicate the agency’s ability to give

effect to the statute going forward.

Heightening the importance of the case are the

many ways in which EPA's transport rules are

interwoven with the air quality planning processes

of upwind and downwind states, and with the

implementation of other federal and state programs.

Moreover, the air quality standards to which the

Good Neighbor provision is tied must be periodically

reviewed and revised, 42 U.S.C. 7409(d)(1); see Am.

Trucking Ass’ns, 531 U.S. at 463, and new

nonattainment areas designated. See 77 Fed. Reg.

30088 (May 21, 2012) (designating 45 areas

(including 7 multistate areas) as nonattainment for

the 2008 ozone NAAQS); see also 77 Fed. Reg. 342.1

(June 11, 2012) (additional designations); 78 Fed.

Reg. 3086 (Jan. 15, 2013) (revised standard for

PM25). The questions with which the D.C. Circuit

has struggled for more than a decade will recur.

The court of appeals’ repeated bypass of statutory

exhaustion requirements - and its embrace of

numerous easily manipulated theories to excuse a

failure to present objections — are also of broad

public significance. The D.C. Circuit is the sole

forum for judicial review of national Clean Air Act

rulemakings, 42 U.S.C. 7607(b)(1), and has a

singular role reviewing rulemakings under a host of

major regulatory statutes with exhaustion

requirements.? The decision here is apt to encourage

“blindsiding” of agencies, see App. 114a, and the

majority's long menu of rationales for bypassing

clear limits on judicial review, App. 32a-34a n.18,

supra, pp. 17-18, injects costly uncertainty into rules

that form the foundation of administrative law.

The court of appeals’ violation of bedrock rules of

administrative procedure, its disregard of the

agency’s own analysis (even as the majority took up

objections not presented to the agency), and its

willingness to impose detailed methodological

requirements on EPA without any examination of

their feasibility are ironic given the long and

unhappy background of judicia/ efforts to handle the

chronic problem of interstate pollution:

8 See, e.g, 47 U.S.C. 405(a)(2) (Communications Act); 15

U.S.C. 77i({a) (Securities Act of 1933); 15 U.S.C. 78y(c)(1)

(Securities Exchange Act of 1934); 29 U.S.C. 160(e) (National

Labor Relations Act); 29 U.S.C. 210(a) (Fair Labor Standards

Act); Nat7 Mining Ass'n v. MSHA, 512 F.3d 696, 700 (D.C. Cir.

2008) (such provisions are “common” in “many regulatory

statutes”).

History reveals that the course of this Court’s

prior efforts to settle disputes regarding

interstate air and water pollution has been

anything but smooth. In Missouri v. J/linois,

200 U.S. 496, 520—522 (1906), Justice Holmes

was at pains to underscore the great difficulty

that the Court faced in attempting to

pronounce a suitable general rule of law to

govern such controversies.

Ohio v. Wyandotte Chemicals Corp., 401 U.S. 493,

501 (1971). See also City of Milwaukee v. Illinois,

451 U.S. 304, 325 (1981) (“(Djifficult” “technical

problems” associated with water pollution control

were “doubtless the reason Congress’ vested

authority to administer the Act in administrative

agencies possessing the necessary expertise.”). The

court of appeals forgot these important lessons, at

great cost to downwind states and their millions of

residents.

CONCLUSION

The petition for certiorari should be granted.

George E. Hays

236 West Portal Ave.

No. 110

San Francisco, CA

94127

(415) 566-5414

Joshua Stebbins

Zachary M. Fabish

The Sierra Club

50 F Street NW,

8th Floor

Washington DC 20001

(202) 675-6273

John D. Walke

Emily Davis

Natural Resources

Defense Council

1152 15% St., Ste. 300

Washington, DC 20005

(202) 289-6868

Respectfully submitted.

Sean H. Donahue

Counsel of Record

Donahue &

Goldberg, LLP

2000 L St. NW, Ste 808

Washington DC 20036

(202) 277-7085

sean@donahuegoldberg.com

Pamela A. Campos

Graham G. McCahan

Vickie L. Patton

Environmental Defense

Fund

2060 Broadway, Ste 300

Boulder, CO 80302

(303) 440-4901

David Marshall

Clean Air Task Force

41 Liberty Hill Road

Building 2, Suite 205

Henniker, NH 03242

(603) 428-8114

OPPOSITION

BRIEF

‘>

Nos. 12-1182, 12-1188 | ae

IN THE a q Pa

” oupreme Gourt of the Matted States ==-2-"~

UNITED STATES

ENVIRONMENTAL PROTECTION AGENCY, et al.,

Petitioners,

Vv.

EME HoMeEr City GENERATION, L.P. et al.,

Respondents.

AMERICAN LUNG ASSOCIATION, et al.,

Petitioners,

EME Homer Cry GENERATION, L.P., et al.,

Respondents.

On Petitions for a Writ of Certiorari

to the United States Court of Appeals

for the District of Columbia Circuit

BRIEF IN OPPOSITION OF —

INDUSTRY AND LABOR RESPONDENTS

F. WILLIAM BROWNELL PETER D. KEISLER

HUNTON & WILLIAMS LLP Counsel of Record

2200 Pennsylvania C. FREDERICK BECKNER ITI

Avenue, N.W. ROGER R. MARTELLA, JR.

Washington, D.C. 20037 TIMOTHY K. WEBSTER

(202) 955-1500 ERIC D. MCARTHUR

CHRISTOPHER A. BATES

P. STEPHEN GIDIERE III SIDLEY AUSTIN LLP

BALCH & BINGHAM LLP 1501 K Street, N.W.

1901 Sixth Avenue North Washington, D.C. 20005

Suite 1500 (202) 736-8000

Birmingham, AL 35203 pkeisler@sidley.com

(205) 251-8100

Counsel for Luminant Generation Company LiCetal. ....:..

[Additional Counsel Listed on Inside Pages] «-.: - |

WILSON-EPES PRINTING Co., INC. — (202) 788-0096 — WASHINGTON, D.C. 20002

JANET J. HENRY

AMERICAN ELECTRIC POWER SERVICE CORP.

1 Riverside Plaza

Columbus, OH 43215

(614) 716-1612

Counsel for AEP Texas North Company, Appalachian

Power Company, Indiana Michigan Power Company,

Kentucky Power Company, Ohio Power Company,

Public Service Company of Oklahoma, and

Southwestern Electric Power Company

STEVEN G. MCKINNEY BART E. CASSIDY

BALCH & BINGHAM LLP KATHERINE L. VACCARO

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Birmingham, AL 35203- & Fox, LLP

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(205) 251-8100 Suite 500

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Counsel for Alabama (484) 430-5700

Power Co.

Counsel for ARI?PA

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WHEELER, VAN SICKLE &

ANDERSON, S.C.

25 West Main Street

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JOSHUA B. FRANK

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BAKER BorTs L.L.P.

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Counsel for Entergy

Corporation, Northern

States Power Company -

Minnesota, Southwestern

Public Service Company,

and Western Farmers

Electric Cooperative

GREGORY G. GARRE

CLAUDIA M. O’BRIEN

LORI ALVINO MCGILL

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LATHAM & WATKINS LLP

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Counsel for EME Homer

City Generation, L.P.

KELLY M. MCQUEEN

ASSOCIATE GENERAL

COUNSEL

ENTERGY SERVICES, INC.

425 W. Capitol Avenue

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Corporation

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HOPPING GREEN &

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Group

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BYRON W. KIRKPATRICK

HAHNAH WILLIAMS GAINES

TROUTMAN SANDERS LLP

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Co., Southern Co.

Services, Inc., and

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ROBERT J. ALESSI

DLA PIPER LLP (US)

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Alliance of New York,

LLC

ROBERT A. MANNING,

HOPPING GREEN &

SAMS, P.A.

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Counsel for Gulf

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SHERMAN, DUNN, COHEN, LEIFER & YELLIG, PC

900 7th Street, N.W.

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Counsel for International Brotherhood of Electrical

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DENNIS LANE DAVID R. TRIPP

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MAUREEN N. HARBOURT

TOKESHA M. COLLINS

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Association

MICHAEL J. NASI

JACOB ARECHIGA

JACKSON WALKER L.L.P.

100 Congress Avenue

Suite 1100

Austin, Texas 78701

(512) 236-2000

Counsel for San Miguel

Electric Cooperative, Inc.

ANN M. SEHA

ASSISTANT GENERAL

COUNSEL

XCEL ENERGY INC.

414 Nicollet Mall

5th Floor

Minneapolis, MN 55401

(612) 215-4619

Counsel for Northern

States Power Company —

Minnesota and

Southwestern Public

Service Company

KARL R. MOOR

JULIA A. BAILEY DULAN

SOUTHERN COMPANY

SERVICES, INC.

600 North 18th Street

Bin 15N-8190

Birmingham, AL 35203

(205) 251-6227

Counsel for Southern Co.

Services, Inc.

GRANT CRANDALL EUGENE M. TRISKO

ARTHUR TRAYNOR, III LAW OFFICES OF EUGENE

UNITED MINE WORKERS M. TRISKO

OF AMERICA P.O. Box 47

18354 Quantico Gateway Glenwood, MD 21738

Drive (301) 639-5238

Suite 200

Triangle, VA 22172

(703) 291-2457

Counsel for United Mine Workers of America

ANDREA BEAR FIELD

NORMAN W. FICHTHORN

E. CARTER CHANDLER CLEMENTS

HUNTON & WILLIAMS LLP

2200 Pennsylvania Avenue, N.W.

Washington, D.C. 20037

(202) 955-1500

Counsel for the Utility Air Regulatory Group

RICHARD G. STOLL BRIAN H. POTTS

FOLEY & LARDNER LLP FOLEY & LARDNER LLP

3000 K Street, N.W. Verex Plaza

Suite 600 150 East Gilman Street

Washington, D.C. 20007 Madison, WI 53703

(202) 295-4021 (608) 258-4772

Counsel for Wisconsin Public Service Corporation

QUESTIONS PRESENTED

The Clean Air Act’s “good-neighbor” provision re-

quires upwind States to prohibit sources within their

borders from “emitting any air pollutant in amounts”

that “contribute significantly” to downwind States’

“nonattainment” of national ambient air quality

standards (“NAAQS”). 42 U.S.C. §7410(a)(2)(D)(@i)(1).

Pursuant to this provision, the Environmental Pro-

tection Agency (“EPA”) issued a regulation, known as

the Transport Rule, requiring upwind States to make

emissions reductions without regard to whether the

reductions mandated in a particular State were

greater than necessary to eliminate that State’s sig-

nificant contribution to downwind States’ nonattain-

ment of the NAAQS, and without regard to whether

the overall reductions mandated in the upwind States

were greater than necessary for the downwind States

to achieve attainment.

The questions presented are:

1. Whether the court of appeals correctly held that

the challenges to the Transport Rule on which the

court granted relief were adequately presented to

EPA and preserved for judicial review.

2. Whether the court of appeals correctly held that

the States must be given the initial opportunity to

implement the reductions required by EPA under the

good-neighbor provision.

3. Whether the court of appeals correctly held that

the Transport Rule exceeded EPA’s statutory author-

ity to prohibit only those “amounts” of emissions that

“contribute significantly” to downwind States’ “nonat-

tainment” of the NAAQS.

(1)

RULE 29.6 STATEMENT

AEP Texas North Company is a wholly owned sub-

sidiary of AEP Utilities, Inc. AEP Utilities, Inc., Ap-

palachian Power Company, Indiana Michigan Power

Company, Kentucky Power Company, Ohio Power

Company, Public Service Company of Oklahoma, and

Southwestern Electric Power Company are wholly

owned subsidiaries of American Electric Power Com-

pany, Inc. American Electric Power Company, Inc.

has no parent, and no publicly held corporation owns

ten percent or more of its stock.

ARIPPA is a non-profit trade association that rep-

resents a membership primarily comprised of electric

generating plants using environmentally friendly cir-

culating fluidized bed (“CFB”) boiler technology to

convert coal refuse and/or other alternative fuels such

as biomass into alternative energy and/or steam, with

the resultant alkaline ash used to reclaim mine

lands. ARIPPA was organized in 1988 for the pur-

pose of promoting the professional, legislative and

technical interests of its member facilities. ARIPPA

has no outstanding shares or debt securities in the

hands of the public and does not have any parent,

subsidiary, or affiliate that has issued shares or debt

securities to the public.

Big Brown Lignite Company LLC is a wholly owned

subsidiary of Luminant Holding Company LLC,

whose complete corporate disclosure statement ap-

pears below.

Big Brown Power Company LLC is a wholly owned

subsidiary of Luminant Holding Company LLC,

whose complete corporate disclosure statement ap-

pears below.

Dairyland Power Cooperative is a non-stock, not-

for-profit cooperative association organized under the

laws of the State of Wisconsin, with its principal of-

fice located in La Crosse, Wisconsin. Dairyland is

engaged, among other things, in the business of gen-

erating and transmitting electric power to its 25

member distribution cooperatives and to other whole-

sale customers. Dairyland has no corporate parent.

No publicly held corporation owns a 10% or greater

ownership interest in Dairyland.

EME Homer City Generation, L.P. “(EME Homer

City”) is a limited partnership composed of Mission

Energy Westside, Inc., a California corporation, as

the general partner and Chestnut Ridge Energy

Company, a California corporation, as the limited

partner. Mission Energy Westside, Inc. and Chestnut

Ridge Energy Company are wholly owned subsidiar-

ies of Edison Mission Holdings Company, which, in

turn, is a wholly owned subsidiary of Edison Mission

Energy. Edison Mission Energy is a Delaware Corpo-

ration, which is a wholly owned subsidiary of Mission

Energy Holdings Company, a Delaware corporation,

which, in turn, is a wholly owned subsidiary of Edi-

son Mission Group, Inc., a Delaware corporation,

which, in turn, is a wholly owned subsidiary of Edi-

son International, a California corporation.

On May 2, 2013, EME Homer City filed a voluntary

petition for relief under chapter 11 of title 11 of the

United States Code (the “Bankruptcy Code”) in the

United States Bankruptcy Court for the Northern

District of Illinois. EME Homer City has requested

that the bankruptcy court jointly administer its case

(13-18703) with the lead case, Jn re Edison Mission

Energy, Case No. 12-49219 (JPC).

When EME Homer City filed its petition in the

Court of Appeals, EME Homer City was the lessee

and operator of the Homer City generating station, a

coal-burning electric power facility that is affected by

the Transport Rule. Edison Mission Energy is an in-

dependent power producer that generates electricity

to sell wholesale in the open market. The ultimate

parent company, Edison International, is engaged in

the business of holding for investment the common

stock of its subsidiaries which also include Southern

California Edison, a California public utility corpora-

tion, and Edison Capital, which has investments in

energy and infrastructure projects worldwide. In ad-

dition, the following parent companies, or affiliates of

EME Homer City have outstanding shares that are in

the hands of the public: Edison International and

Southern California Edison.

Entergy Corporation is a publicly traded company

and no publicly held company has a 10 percent or

greater ownership interest in Entergy Corporation.

Environmental Energy Alliance of New York, LLC

has no parent corporations and no publicly held com-

pany owns 10% or more of its stock.

The Florida Electric Power Coordinating Group,

Inc., (“FCG”) is a non-profit, non-governmental corpo-

rate entity organized under the laws of Florida. The

FCG does not have a parent corporation. No publicly

held corporation owns ten percent or more of the

FCG’s stock.

International Brotherhood of Electrical Workers,

AFL-CIO (“IBEW”) is an unincorporated internation-

al labor organization with headquarters in Washing-

ton, D.C. The IBEW provides collective bargaining

representation and other services to its members, and

collective bargaining representation to all members of

collective bargaining units it exclusively represents.

The IBEW represents electrical workers in the Unit-

ed States, Canada, and the Republic of Panama, en-

gaged in the manufacture, assembling, construction,

installation, and erection, repair or maintenance of

all materials, equipment, apparatus and appliances

required in the production, generation, utilization

and control of electricity and its effects, and trans-

mission of data, voice, sound, video and other emerg-

ing technologies (including fiber optics, high speed

data cable, etc.). The IBEW has no parent compa-

nies, subsidiaries, or affiliates that have issued

shares or debt securities to the public.

The Kansas City Board Of Public Utilities-Unified

Government Wyandotte County/Kansas City, Kansas

is not required to provide a Corporate Disclosure

Statement because it is a governmental entity orga-

nized under the laws of the state of Kansas. Accord-

ingly, no Corporate Disclosure Statement is being

provided.

The Lafayette Utilities System, a department with-

in the Lafayette City-Parish Consolidated Govern-

ment, is a local government utility primarily servic-

ing the citizens of the City of Lafayette, Louisiana.

As a customer-owned municipal utility, the Lafayette

Utilities System’s mission is to provide its customers

with quality and affordable electric, water,

wastewater and fiber optic services. The Lafayette

Utilities System does not issue stock; it does not have

a parent corporation, and no publicly held corporation

holds any Lafayette Utilities System stock.

The Louisiana Chemical Association has no parent

companies, and no publicly held company has a 10%

or greater ownership interest. The Louisiana Chemi-

cal Association is a non-profit Louisiana corporation

formed in 1959. Its mission is to promote a positive

climate for chemical manufacturing that ensures

long-term economic growth for its members. It is a

“trade association.”

Luminant Big Brown Mining Company LLC is a

wholly owned subsidiary of Luminart Holding Com-

pany LLC, whose complete corporate disclosure

statement appears below.

Luminant Energy Company LLC is a wholly owned

subsidiary of Luminant Holding Company LLC,

whose complete corporate disclosure statement ap-

pears below.

Luminant Generation Company LLC is a wholly

owned subsidiary of Luminant Holding Company

LLC, whose complete corporate disclosure statement

appears below.

Luminant Holding Company LLC is the parent

company that wholly owns Luminant Generation

Company LLC, Sandow Power Company LLC, Big

Brown Power Company LLC, Oak Grove Manage-

ment Company LLC, Luminant Mining Company

LLC, Big Brown Lignite Company LLC, Luminant

Big Brown Mining Company LLC, and Luminant En-

ergy Company LLC (collectively, the “Luminant Enti-

ties”). Luminant Holding Company LLC is a wholly

owned subsidiary of Texas Competitive Electric Hold-

ings Company LLC (“TCEH”). TCEH is a wholly

owned subsidiary of Energy Future Competitive

Holdings Company (“EFCH”). EFCH is a wholly

owned subsidiary of Energy Future Holdings Corp.

(“EFH Corp.”), formerly TXU Corp. Substantially all

of the common stock of EFH Corp is owned by Texas

Energy Future Holdings Limited Partnership, which

is a privately held hmited partnership. No publicly

held entities have a 10% or greater ownership inter-

est in EFH Corp.

Luminant Mining Compary LLC is a wholly owned

subsidiary of Luminant Holding Company LLC,

whose complete corporate disclosure statement ap-

pears above.

The Midwest Ozone Group is an unincorporated as-

sociation of businesses and organizations formed to

assist in the development of scientifically sound and

effective air quality strategies. The Midwest Ozone

Group has no outstanding shares or debt securities in

the hands of the public and has no parent company.

No publicly held company has a 10% or greater own-

ership interest in the Midwest Ozone Group.

National Mining Association (“NMA”) is an incorpo-

rated national trade association whose members in-

clude the producers of most of America’s coal, metals,

and industrial and agricultural minerals; manufac-

turers of mining and mineral processing machinery,

equipment, and supplies; and engineering and con-

sulting firms that serve the mining industry. NMA

has no parent companies, subsidiaries or affiliates

that have issued shares or debt securities to the pub-

lic, although NMA’s individual members have done

SO.

The National Rural Electric Cooperative Associa-

tion (““NRECA”) is the national association of rural

electric cooperatives. NRECA does not have a parent

corporation, and no publicly held corporation owns 10

percent or more of its stock.

Northern States Power Company — Minnesota is a

wholly owned subsidiary of Xcel Energy Inc. Xcel

Energy Inc. is a registered, public utility holding

company that is incorporated under the laws of the

State of Minnesota. No other publicly held company

holds a 10 percent or greater ownership interest in

Northern States Power Company — Minnesota.

Vlil

Oak Grove Management Company LLC is a wholly

owned subsidiary of Luminant Holding Company

LLC, whose complete corporate disclosure statement

appears above.

Peabody Energy Corporation is a publicly traded

company on the New York Stock Exchange (“NYSE”)

under the symbol “BTU.” As of March 31, 2013 fil-

ings, no holding companies own more than 10% of

Peabody Energy Corporation’s outstanding shares.

San Miguel Electric Cooperative, Inc. is a 400 MW,

mine-mouth, lignite-fired electric generating unit lo-

cated in Atascosa County, Texas roughly 45 miles

south of San Antonio. San Miguel was created on

February 17, 1977, under the Rural Electric Coopera-

tive Act of the State of Texas, for the purpose of own-

ing and operating the generating plant and associat-

ed mining facilities that furnish power and energy to

Brazos Electric Power Cooperative, Inc. and South

Texas Electric Cooperative, Inc. San Miguel is a not-

for-profit electric cooperative incorporated in the

State of Texas under the Electric Cooperative Corpo-

ration Act, Tex. Util. Code, Chapter 161. San Miguel

does not have any outstanding shares or debt securi-

ties in the hands of the public nor any parent, subsid-

iary, or affiliates that have issued shares or debt se-

curities to the public and no publicly owned company

has an ownership interest in San Miguel.

Sandow Power Company LLC is a wholly owned

subsidiary of Luminant Holding Company LLC,

whose complete corporate disclosure statement ap-

pears above.

Southern Company Services, Inc., Alabama Power

Company, Georgia Power Company, Gulf Power

Company, Mississippi Power Company, and Southern

Power Company are all wholly owned subsidiaries of

Southern Company, which is a publicly held corpora-

tion. Other than Southern Company, no publicly held

company owns 10% or more of any of these Respond-

ents’ stock. No publicly held company holds 10% or

more of Southern Company’s stock. Southern Com-

pany stock is traded publicly on the New York Stock

Exchange under the symbol “SO.” Through its sub-

sidiaries, Southe: 2 Company is a leading U.S. pro-

ducer of electricity, generating and delivering elec-

tricity to over four million customers in the south-

eastern United States. Southern Company subsidiar-

ies include four vertically integrated electric utili-

ties—Alabama Power Company, Georgia Power

Compa.uy, Gulf Power Company, and Mississippi

Power Company—as well as Southern Power Compa-

ny, which owns generation assets and sells electricity

at market-based rates in the wholesale market. The-

se subsidiaries, each a Respondent here, operate

more than 42,000 megawatts of coal, natural gas, oil,

nuclear, and hydroelectric generating capacity.

Southern Company Services, Inc. is the services com-

pany for Southern Company and its operating subsid-

iaries. Southern Company Services, Inc. provides,

among other things, engineering and other technical

support for the operating companies.

Southwestern Public Service Company is a wholly

owned subsidiary of Xcel Energy Inc. Xcel Energy

Inc. is a registered, public utility holding company

that is incorporated under the laws of the State of

Minnesota. No other publicly held company holds a

10 percent or greater ownership interest in South-

western Public Service Company.

Sunflower Electric Power Corporation is a Kansas

non-profit corporation doing business as a cooperative

with its principal place of business in Hays, Kansas.

It is not a publicly held corporation; no publicly held

corporation holds any ownership interest in it and it

has no “parent” corporation. It is wned solely by its

seven member distribution cooperatives, all of which

are located in western Kansas. Sunflower Electric

Power Corporation is engaged in the generation,

transmission and sale of electric power and energy at

wholesale to its member distribution cooperatives

and municipalities in the state of Kansas.

United Mine Workers of American (““UMWA’") is a

non-profit national labor organization with headquar-

ters in Triangle, Virginia. UMWA's members are ac-

tive and retired miners engaged in the extraction of

coal and other minerals in the United States and

Canada, and workers in other industries in the Unit-

ed States organized by the UMWA. UMWA is affili-

ated with the American Federation of Labor-Congress

of Industrial Organizations. UMWA has no parent

companies, subsidiaries, or affiliates that have issued

shares or debt securities to the public.

The Utility Air Regulatory Group (“UARG’) is a

not-for-profit association of individual electric utili-

ties and electric generating companies and national

trade associations that participates on behalf of its

members collectively in administrative proceedings

under the Clean Air Act, and in litigation arising

from those proceedings, that affect electric genera-

tors. UARG has no outstanding shares or debt secu-

rities in the hands of the public and has no parent

company. No publicly held company has a 10% or

greater ownership interest in UARG.

Westar Energy, Inc., a publicly traded Kansas cor-

poration with its principal place of business in Tope-

ka, Kansas, is the parent corporation of Kansas Gas

and Electric Company (“KGE”), a Kansas corporation

with its principal place of business in Topeka, Kan-

sas. Westar and its wholly owned subsidiary, KGE,

are electric utilities engaged in the generation,

transmission, distribution and sale of electric power

and energy at wholesale and retail to approximately

687,000 customers in the state of Kansas. Westar

owns all of the stock of KGE. In addition to Westar’s

publicly traded stock, both Westar and KGE have is-

sued debt and bonds to the public. There is no corpo-

ration that owns 10% or more of the stock of Westar

Energy, Inc.

Western Farmers Electric Cooperative (“WFEC”)

hereby certifies that no publicly held company has a

10 percent or greater ownership interest in WFEC.

WFEC is a non-profit generation and transmission

rural electric cooperative that supplies wholesale

electricity to its member owners, which include 19

rural electric distribution cooperatives located in Ok-

lahoma and 4 distribution cooperatives located in

New Mexico.

Wisconsin Public Service Corporation (“WPSC”) is a

wholly owned subsidiary of the publicly owned corpo-

ration Integrys Energy Group, Inc (NYSE: TEG).

WPSC is a regulated electric and natural gas utility

operating in northeast and central Wisconsin and an

adjacent portion of Upper Michigan.

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED...........00.0.000..0. ee 1

RULE 29.6 STATEMENT .........00.0.0.... cece ceeeeeceees il

TABLE OF AUTHORITIES ................0.0...0000..2024. X1V

STATEMENT OF THE CASE.....0000...........cceeeeee 1

REASONS FOR DENYING THE PETITIONS... 7

.. EPA DOES NOT DISPUTE AN INDE-

PENDENT BASIS UPON WHICH THE

COURT OF APPEALS VACATED THE

IIIT TINIIIIIEE sntcnssanstesssvescoseinasavececesess 9

Il. THE COURT OF APPEALS’ CORRECT

AND FACTBOUND DETERMINATION

THAT THE “SIGNIFICANT CONTRIBU-

TION” ARGUMENT WAS RAISED BE-

FORE EPA DOES NOT WARRANT RE-

VIEW, AND ITS HOLDING ON THE UN-

DERLYING MERITS OF THE ARGU-

MENT WAS CORRECT ........0........0:ccceceeeeeees 14

lil. PETITIONERS ALSO FAIL TO DEMON-

STRATE ANY ERROR WITH REGARD

TO THE COURT OF APPEALS’ INDE-

PENDENT “PROPORTIONALITY” HOLD-

Sit Acaslidahihidiiididniahessnaniintntentiniennnerininessteisaceotes 24

IV. EPA’S OWN FINDINGS PRECLUDE RE- .

ADOPTION OF THE TRANSPORT RULE. 30

V. THE TRANSPORT RULE IS NOT NEC-

ESSARY TO ENSURE THAT DOWN-

WIND STATES ATTAIN AND MAINTAIN

X1V

TABLE OF AUTHORITIES

CASES Page

Michigan v. EPA, 213 F.3d 663 (D.C. Cir.

a da aa a 2, 26, 27

North Carolina v. EPA, 531 F.3d 896 (D.C.

Cir.), on reh’g, 550 F.3d 1176 (D.C. Cir.

TSAR SIN OD A OT Se LAR if aeD ST 2, 17, 18, 23

North Carolina v. EPA, 550 F.3d 1176

Ss a a i i 2

United States v. Johnston, 268 U.S. 220

SESE ER Sit seein eed otes Rie teers Me are ee 16

STATUTES AND REGULATIONS

4 RSET een enero 1

ESET wena ere 1

EE IDO ee 1, 7, 10, 11, 28

TORE RIES EE 15, 17

63 FR 57356 (Oct. 27, 1998)..................... 2,11, 14

70 FR 25162 (May 12, 2005).................... 2, 17, 33

75 FR 45210 (Aug. 2, 2010)............... 5, 18, 24, 30

76 FR 48208 (Aug. 8, 2011)....................... passim

70091 (Nov. 10, 2011)......... Guihaiigutans 30

78 FR 3086 (Jan. 15, 2013) ............0.0....0...2.. 31

OTHER AUTHORITIES

Comments of West Virginia Department of

Environmental Protection (Sept. 30,

2012), available at http://www.

regulations.gov/#!documentDetail];D=

EPA-HQ-OAR-2009-0491-29811 ................. 23

EPA, Design Values (2012), http://www.

epa.gov/airtrends/values.html................... 31

TABLE OF AUTHORITIES—continued

Page

EPA, Progress Report 2011: Environmental

and Health Results (2013), available at

http://www.epa.gov/airmarkets/progress/

ARPCAIR11_downloads/ARPCAIR11_

environmental_health.pdf .................... 7, 31, 33

Industry and Labor Respondents respectfully sub-

mit this brief in opposition to the petitions for certio-

rari filed by the Environmental Protection Agency, et

al. (“EPA”) and the American Lung Association, et al.

(“ALA”).

STATEMENT OF THE CASE

1. The Clean Air Act (“CAA”) requires EPA to es-

tablish national ambient air quality standards

(“NAAQS”) for air pollutants that “cause or contrib-

ute to air pollution which may reasonably be antici-

pated to endanger public health or welfare.” 42

U.S.C. §7408(a)(1)(A); see also id. §7409. It also re-

quires EPA to designate areas of the country as “at-

tainment,” “nonattainment,” or “unclassifiable” for

each such air pollutant, depending on whether the

area meets the NAAQS. Id. §7407(c), (d). Although

EPA sets the NAAQS, each State has “the primary

responsibility for assuring air quality” within its bor-

ders, id. §7407(a), and must develop a state imple-

mentation plan (“SIP”) to meet the NAAQS and sub-

mit its SIP to EPA for approval, id. §7410.

The CAA also contains a “good-neighbor” provision.

Section 110(a)(Zj)(D)G@)(1) requires that SIPs “contain

adequate provisions” prohibiting “any source ... with-

in the State from emitting any air pollutant in

amounts which will ... contribute significantly to

nonattainment in, or interfere with maintenance by,

any other State with respect to any [NAAQS].” Id.

§7410(a)(2)(D)(i) (1). As pertinent here, various

sources, including power plants, emit sulfur dioxide

(“SO”) and nitrogen oxides (“NO,”), which can con-

tribute to a downwind State’s nonattainment of the

particulate matter (“PM2s5") and ozone NAAQS. 76

FR 48208, 48209-10 (Aug. 8, 2011).

In 1998, EPA issued the “NO, SIP Call,” which in-

structed upwind States to revise their SIPs to miti-

gate downwind ozone formation by imposing NO,

emissions limits. 63 FR 57356 (Oct. 27, 1998). The

D.C. Circuit largely upheld the NO, SIP Call in Mich-

igan v. EPA, 213 F.3d 663 (D.C. Cir. 2000) (per

curiam).

In 2005, EPA promulgated the Clean Air Interstate

Rule (“CAIR”), which addressed interstate transport

of NO, and SO». 70 FR 25162 (May 12, 2005). CAIR

required upwind States to achieve EPA-specified

“emissions budgets” reflecting emissions reductions

for each State that EPA determined were cost-

effective.

In North Carolina v. EPA, the D.C. Circuit invali-

dated CAIR because EPA had not tailored its budgets

to individual upwind States’ emissions that actually

“contribute significantly” to downwind nonattain-

ment. 531 F.3d 896, 907-08 (D.C. Cir.) (per curiam),

on reh’g, 550 F.3d 1176 (D.C. Cir. 2008) (per curiam).

North Carolina rejected EPA’s effort to reallocate

emissions-reduction burdens among the States in a

way the agency considered “faifr].”". Id. 918-19. It

held that §110(a)(2)(D)G)(]) “gives EPA no authority

to force an upwind state to share the burden of reduc-

ing other upwind states’ emissions”; rather, “[eJach

state must eliminate its own significant contribution

to downwind pollution,” and EPA “may not require

some states to exceed the mark.” Jd. 921. The D.C.

Circuit remanded, but allowed CAIR to remain in

place while EPA developed a new rule. 550 F.3d at

1178.

In response, EPA issued the Transport Rule. EPA

initially determined which downwind States would

have problems “attaining” or “maintaining” NAAQS

in 2012 assuming CAIR would not be in effect. 76 FR

at 48211. EPA relied on computer modeling to make

this hypothetical future air-quality projection using

2005 base-year data rather than “the most recent

ambient data” that showed improvements in actual

air quality in the covered States. Jd. 48229-30.

After identifying projected downwind “nonattain-

ment” and “maintenance” locations, EPA employed a

two-stage approach to determine (1) whether to regu-

late an upwind State’s emissions and (2) the emis-

sions budget for that State. At the first stage, EPA

used its air-quality models to predict the amount

each upwind State would “contribute” to the “nonat-

tainment” and “maintenance” locations it had identi-

fied (again, assuming, counterfactually, that CAIR

was not in effect). Id. 48233-36. To determine which

upwind States to regulate, EPA set air-quality con-

tribution thresholds at 1% of each NAAQS. Id.

48236. States whose contributions to a nonattain-

ment or maintenance location were predicted to ex-

ceed this threshold were deemed “linked” to that loca-

tion and subjected to emissions budgets. Jd. Con-

versely, EPA determined that “states whose contribu-

tions are below these thresholds do not significantly

contribute to nonattainment,” id. (emphasis added),

and thus were not subject to any emissions budgets,

see also id. 48237 (the 1% threshold “identiffies]

states whose contributions do not significantly con-

tribute to nonattainment or interfere with mainte-

nance of the relevant NAAQS”) (emphasis added).

For upwind States with predicted contributions ex-

ceeding these “insignificance” thresholds, EPA's se-

cond stage imposed emissions limits based on the cost

of reducing emissions. EPA identified the emissions

reductions available at various “cost thresholds” and

then set emissions budgets reflecting the “amounts”

of emissions EPA projected would remain if emissions

were eliminated at a dollar-per-ton cost equal to

those cost thresholds. Id. 48248-52, 48258. For 2012

budgets, EPA used a $500/ton threshold for both SO2

and NO,—1.e., EPA calculated the amount of SO2 and

NO, emissions each State could reduce for $500 per

ton of emissions. Id. 48252, 48257-—59.!

Notwithstanding objections raised by commenters,

CAJA556, 1293, 1756, EPA did not attempt to deter-

mine an individual State’s downwind “contribution”

after imposition of emissions controls, let alone de-

termine whether the emissions controls would drive a

State’s “contribution” below’ the insignificance

threshold it had determined in stage-one “d[id] not

significantly contribute to nonattainment or interfere

with maintenance,” 76 FR at 48236. Instead, EPA

set emissions limits based on its view of “reasonable”

and “cost-effective” emissions reductions that could

be undertaken by upwind States collectively.”

Moreover, although §110(a)(2)(D)(i)(7) authorizes

reductions only of emissions that contribute signifi-

cantly “to nonattainment” or “interfere with mainte-

nance” of NAAQS, EPA never considered whether the

emissions reductions it directed were greater than

necessary to achieve or maintain the relevant

NAAQS, 76 FR at 48256-57, even though EPA’s own

data showed that the agency was imposing emissions

' For 2014 budgets, EPA split the States into two groups for

SO2, using $2,300/ton for Group 1 and $500/ton for Group 2. 76

FR at 48252, 48257. The 2014 NOx budgets used the $500/ton

threshold. Id. 48257.

2 See, e.g., 76 FR at 48249 (setting controls at the “point where

large upwind emission reductions become available because a

certain type of emissions control strategy becomes cost-

effective”); id. 48257 (EPA’s controls achieved “significant air

quality improvements” with “cost impacts [that] remained rea-

sonable”).

reductions far greater than necessary for downwind

States to achieve attainment, CAJA2546-637, and de-

spi ‘ata demonstrating that less stringent emis-

sion: iumits would still result in downwind attain-

ment, CAJA1066-68, 1374. Nor did EPA consider the

extent to which projected nonattainment resulted

from the downwind States’ own in-state pollution.

See, e.g., 75 FR 45210, 45226, 45241 (Aug. 2, 2010);

76 FR at 48248, 48259.

2. The D.C. Circuit vacated the Transport Rule,

finding that it exceeded EPA’s authority under

§110(a)(2)(D)(i)(1) in “at least three independent” re-

spects relevant here. EPA.Pet.App. 31a.

First, the court found EPA’s approach for setting

emissions budgets unlawful because those limits were

not based on “amounts’ from upwind States that ‘con-

tribute significantly to nonattainment’ in downwind

States.” Id. EPA first defined “amounts” of air-

quality contribution that were “insignificant,” but

then “ignore[d]” that threshold and defined emissions

budgets “in such a way that an upwind State’s re-

quired reductions could be more than its own signifi-

cant contribution to a downwind State.” Id. 36a.3

Second, the court found that the Transport Rule

unlawfully imposed reductions greater than neces-

sary for downwind States to attain NAAQS. Under

§110(a)(2)(D)G@)), EPA may only “targe[t] those

3The court also found EPA’s approach “illogical” and that

EPA's justification “rings hollow.” Jd. 36a, 37a n.22. As the

court noted, “EPA itself said in the final rule that ‘states whose

contributions are below these thresholds do not significantly

contribute to nonattainment or interfere with maintenance of

the relevant NAAQS,” yet EPA simultaneously adopted an ap-

proach that could arbitrarily require a State to reduce emissions

below those thresholds. Jd. 36a.

emissions from upwind States that ‘contribute signif-

icantly to nonattainment.” Id. 28a. Thus, “EPA may

not require upwind States to do more than necessary

for the downwind States to achieve the NAAQS.” Id.

39a-40a. The court found, however, that “EPA did

not try to take steps to avoid such over control.” Id.

40a.

Third, the court found the Transport Rule violated

North Carolina’s holding that EPA may not force a

State to “share the burden” of reducing another

State’s emissions. Id. 38a. Here, the court rendered

two related, yet distinct, holdings. It first held that

EPA violated the good-neighbor provision because it

“made no attempt to calculate ... on a proportional

basis ... contributions of other upwind States to the

downwind States’ nonattainment problems.” /d. 39a.

The court also held that EPA “failed to take into ac-

count the downwind State’s own fa.r share of the

amount by which it exceeds the NAAQS.” Id. In oth-

er words, EPA could not require upwind States to re-

duce emissions to compensate for downwind State

emissions that caused NAAQS to be exceeded. Id.

26a & n.15, 39a.

The court recognized, however, that “multiple up-

wind States may affect a single downwind State” and

“a single upwind State may affect multiple downwind

States.” Id. 29a. The court held that EPA had “dis-

cretion” to account for these complexities and was not

required to “accomplish the ratcheting back in an en-

tirely proportional manner” when it was “not ... pos-

sible” to do so. Id. The court required EPA to elimi-

nate “over-control” only where technically feasible

and not where it is “unavoidable.” Jd. 28a-29a.

3. The court vacated the Transport Rule but di-

rected EPA to “continue administering CAIR pending

the promulgation of a valid replacement.” Id. 64a.

Under CAIR, virtually all downwind locations in the

eastern United States (the area of concern in the

Transport Rule proceedings) have attained the rele-

vant NAAQS. EPA, Progress Report 2011: Environ-

mental and Health Results 12, 14 (2013) (“2011 Pro-

gress Report’), available at http://www.epa.gov/

airmarkets/progress/ARPCAIR11_downloads/

ARPCAIR11_environmental_health.pdf.

REASONS FOR DENYING THE PETITIONS‘

Petitioners do not claim the decision below conflicts

with any other decision or presents any broadly re-

curring legal issue. Instead, petitioners argue that

the court of appeals erred and that there will be ad-

verse health consequences unless the Transport Rule

is reinstated.

Petitioners fail to demonstrate any error in the de-

cision below, let alone error warranting review. In

the Transport Rule, EPA mandated that upwind

States make whatever emissions reductions the

agency deemed “reasonable” and “cost-effective”

without regard to whether those “amounts”

“contribut[ed] significantly to nonattainment.” The

court of appeals correctly held that this approach had

no basis in the statute. While other provisions of the

CAA authorize EPA to require further emissions re-

ductions, §110(a)(2)(D)G)(1) permits EPA only to re-

quire an upwind State’s SIP to “prohibi[t] [emissions]

within the State [of] any air pollutant in amounts

which will ... contribute significantly to nonattain-

ment” of NAAQS in any downwind State. The good-

4 This brief addresses the court of appeals’ holding that the

Transport Rule violated the good-neighbor provision’s substan-

tive limits. The court also held that the Transport Rule violated

the CAA’s “cooperative federalism” structure; that issue is ad-

dressed in the State and loca] governments’ brief in opposition.

neighbor provision thus has both a State-specific fo-

cus—EPA must consider “amounts” from “within”

each upwind State that “contribute”—and a focus on

air quality—EPA may prohibit only those “amounts”

that “contribute significantly to nonattainment” in a

downwind State. EPA's assertion of broader authori-

ty to order whatever collective upwind reductions it

deemed “reasonable” ignored those statutory limits.

Moreover, EPA challenges only a subset of the hold-

ings below, leaving unchallenged key holdings that

led to the Transport Rule’s vacatur. For example,

while EPA acknowledges that the court of appeals in-

dependently vacated the Transport Rule because EPA

imposed emissions reductions greater than necessary

for downwind States to attain NAAQS, EPA.Pet. 10,

that issue is nowhere addressed in EPA’s petition.

Likewise, EPA does not mention, let alone dispute,

the court’s holding that EPA failed to account for

downwind States’ own contributions to nonattain-

ment. Thus, even if EPA’s petition were granted and

this Court ruled in EPA's favor, the Transport Rule

would remain vacated and would still need to be fun-

damentally revised.

EPA’s own air-quality findings both confirm the

flaws identified by the court of appeals and refute the

notion that the Transport Rule is essential to public

health. The Transport Rule mandated more strin-

gent emissions controls than its predecessor, CAIR.

But EPA’s most recent actual air-quality data

demonstrate that virtually all downwind areas in the

eastern United States have attained the NAAQS un-

der CAIR. Significant emissions reductions beyond

CAIR are thus unnecessary to eliminate “significant

contribution” to “nonattainment.”

Indeed, the Transport Rule itself found that be-

cause of other independent factors (such as other fed-

eral requirements, industry efforts and State-

mandated emissions reductions), many downwind ar-

eas addressed in the Transport Rule would attain

NAAQS in 2014 even in the absence of any good-

neighbor emissions controls. Thus, even if this Court

upheld EPA’s approach to defining upwind States’ ob-

ligations without regard to each State’s actual contri-

bution to downwind nonattainment, the Transport

Rule would still need to be substantially redone to ac-

count for EPA’s own fi: ‘ings that the upwind emis-

sions controls it adopted in 2011 will, in many in-

stances, be unnecessary in 2014.

EPA’s air-quality data also provide the complete

answer to petitioners’ unfounded suggestion that

thousands of deaths and other massive public health

consequences will occur unless the Transport Rule is

reinstated. Petitioners rely on analyses comparing

the Transport Rule’s benefits to a hypothetical world

with no good-neighbor emissions controls. See 76 FR

at 48308-19. Those analyses are irrelevant to wheth-

er the decision below will adversely affect public

health because the court of appeals directed EPA to

continue administering CAIR until a replacement

rule is adopted. And, as noted, there has been wide-

spread attainment of NAAQS under CAIR—a level of

ambient air quality that is by definition sufficient “to

protect the public health.” 42 U.S.C. §7409(b)(1).

I. EPA DOES NOT DISPUTE AN INDEPEND-

ENT BASIS UPON WHICH THE COURT OF

APPEALS VACATED THE TRANSPORT

RULE.

1. EPA does not challenge an independent ground

upon which the court of appeals vacated the

Transport Rule. Rather, EPA challenges only a sub-

set of the holdings below. See EPA.Pet. 10, 21-28;

EPA.Pet.App. 3la-4la. The court correctly held that

the Transport Rule was flawed because EPA failed to

“targe[t] those emissions from upwind States that

‘contribute significantly to nonattainment.” Id. 28a.

EPA does not challenge that holding and it is not in-

cluded in EPA’s Questions Presented. Even apart

from the merits of the legal issues, therefore, this

case 1s a particularly inappropriate candidate for cer-

tiorari.

This holding was an “independent” basis for vacat-

ing the Transport Rule, id. 31a, and it is distinct from

the court of appeals’ additional holding that the

Transport Rule unlawfully used cost to “redefine each

State’s ‘significant contribution,” id. 35a-36a. Sec-

tion 110(a)(2)(D)G)(1) authorizes EPA to require

States to prohibit only those “amounts” of emissions

that “contribute significantly to nonattainment” (em-

phasis added). EPA was thus separately obligated to

ensure that its emissions controls did not “require

upwind States to do more than necessary for the

downwind States to achieve the NAAQS.”

EPA.Pet.App. 39a-40a. Where less costly emissions

controls would have achieved downwind attain-

ment—which was the case here, see infra pp. 11-12—

EPA was required to “ratchet back the upwind States’

obligations to the levels of reductions necessary and

sufficient to produce attainment in the downwind

States.” EPA.Pet.App. 28a. This independent statu-

tory limitation applies even if EPA were otherwise

permitted to use its two-stage approach to define

“cost-effective” “significant contribution.”

2. EPA’s decision not to challenge the court of ap-

peals’ “nonattainment” holding is understandable be-

cause that holding is correct. “The good neighbor

provision is not a free-standing tool for EPA to seek

to achieve air quality levels in downwind States that

are well below the NAAQS.” Id. Under

§110(a)(2)(D)G@)(D, EPA may require a State to pro-

hibit only “amounts” of emissions that “contribute

significantly to nonattainment” (emphasis added).

Once a downwind location achieves attainment,

EPA’s authority to regulate upwind emissions ceases.

Indeed, EPA has previously recognized this inde-

pendent limitation. In the NO, SIP Call, EPA

stressed it had ensured that its “cost-effective” emis-

sions controls had not produced any “instance of

‘overkill,’ so that none of the upwind reductions re-

quired under [the NO, SIP Call] is more than neces-

sary to ameliorate downwind nonattainment.” 63 FR

at 57403; see also id. 57379, 57446-47. And in oppos-

ing certiorari in Michigan, EPA again stressed that it

had not imposed emissions controls greater than nec-

essary to eliminate downwind nonattainment. EPA

Michigan Cert. Opp. 11.

As the NO, SIP Call demonstrates, EPA can pre-

vent this type of overcontrol even when it determines

“significant contribution” based on “cost-

effectiveness.” But EPA in the Transport Rule re-

fused even to consider its statutory obligation to do

so.

As noted, EPA used uniform “cost per ton thresh-

olds”—~-i.e., emissions reductions that could be

achieved at a certain cost per ton—to determine

emissions reductions requirements. See supra pp. 3-

4. EPA, however, refused to consider whether down-

wind States could attain NAAQS even if less strin-

gent emissions limits were imposed on upwind

States. For example, EPA conceded that it selected

the uniform $500/ton threshold for NO, without mod-

eling whether downwind attainment could be

achieved at lower costs. 76 FR at 48256. EPA also

refused to consider the impact of SOz controls costing

less than $500/ton, despite having gathered data on

such controls, see CAJA2192-93. Had EPA consid-

ered these data, it would have found, as commenters

showed, that less costly controls would still have al-

lowed downwind States to attain NAAQS—and thus

EPA had no statutory basis for imposing more strin-

gent emissions’. controls. See CAJA1066-68;

CAJA1374.

3. Although ALA, unlike EPA, does challenge this

aspect of the court of appeals’ decision, it does not

dispute the substance of the court’s holding that EPA

cannot mandate emissions reductions beyond those

necessary to achieve downwind attainment, and it

does not dispute the court’s holding that EPA failed

to consider whether less costly emissions controls

would have allowed downwind States to attain

NAAQS. Instead, ALA asserts that “challengers [did

not] identif[y] any instance in which the Rule re-

quired greater reductions than necessary to achieve

attainment.” ALA.Pet. 23-24.

That is simply false. As shown above, commenters

specifically demonstrated that less costly controls

would still have enabled downwind States to attain

the NAAQS, and EPA has never disputed that show-

ing. Moreover, EPA’s own findings further demon-

strate that EPA significantly overcontrolled. For ex-

ample, for the locations EPA projected to have prob-

lems attaining or maintaining the annual PM»;

NAAQS, the emissions controls imposed by the

Transport Rule were projected to achieve air quality

at each of those locations superior to the relevant

NAAQS, in many instances by a substantial margin.®

5 See CAJA2964. The difference between the NAAQS and the

average air-quality levels EPA imposed in the Transport Rule

for these locations was more than 15 times the level of “signifi-

EPA likewise imposed reductions far greater than

necessary for downwind States to attain NAAQS for

24-hour PMe2>5 and ozone for the substantial majority

of the relevant locations. Any doubt on this score is

further dispelled by the fact that widespread attain-

ment of NAAQS by the downwind States has been

achieved under CAIR even though CAIR allows for

higher levels of emissions than the Transport Rule.

See infra pp. 30-31.

Indeed, ALA appears to concede that in numerous

instances the Transport Rule mandated emissions

reductions that will produce downwind air quality

substantially superior to NAAQS, but speculates that

such overcontrol is necessary to ensure that all other

downwind locations achieve NAAQS. ALA.Pet. 24.

cant contribution” that tmggered imposition of emissions con-

trols. Industry/Labor DC Cir. Merits Br. 28 n.11.

6 Industry/Labor Merits DC Cir. Br. 28-29 & nn.12-13 (citing

EPA data). To the extent ALA suggests the record is unclear as

to whether any specific State was overcontrolled, EPA's own da-

ta confirm that such overcontrol would occur under the

Transport Rule. For example, Texas was “linked” solely to Mad-

ison, Illinois with respect to PMes, see 76 FR at 48241 (tbl.V.D-

2), 48243 (tbl.V.D-5), but Madison was projected to achieve air

quality significantly superior to the relevant NAAQS, see

CAJA2964-65. So too for South Carolina. Compare 76 FR at

48241 (tbl. V.D-2) (linking South Carolina to Fulton, Georgia for

annual PMes), with CAJA2964 (projecting post-Rule air quality

for Fulton superior to NAAQS). Examples of overcontrol with

respect to ozone-related emissions abound as well. Compare,

e.g., 76 FR at 48246 (tbl.V.D-9) (linking lowa, Kansas, Oklaho-

ma and Wisconsin to Allegan, Michigan), with CAJA2561 (pro-

jecting post-Rule air quality for Allegan superior to NAAQS).

More broadly, the record demonstrated that downwind attain-

ment could have been achieved with much less strict emissions

controls, CAJA1066-68; CAJA1374, and, indeed, that current

emissions levels have produced widespread attainment of

NAAQS by downwind States, see infra pp. 31-32.

But EPA never made such a finding and, in fact, de-

termined in the NO, SIP Call that it could adjust up-

wind emissions obligations to avoid imposing obliga-

tions “more than necessary to ameliorate downwind

nonattainment.” 63 FR at 57403. Here, as explained,

EPA simply refused even to examine the relevant da-

ta, see supra pp. 11-12, which directly contradict

ALA’s claim. In any event, that one upwind State

may need to be “overcontrolled” in the sense posited

by ALA to ensure that a downwind State achieves at-

tainment is not grounds for overcontrolling other

States.’

II. THE COURT OF APPEALS’ CORRECT AND

FACTBOUND DETERMINATION THAT

THE “SIGNIFICANT CONTRIBUTION”

ARGUMENT WAS RAISED BEFORE EPA

DOES NOT WARRANT REVIEW, AND ITS

HOLDING ON THE UNDERLYING MERITS

OF THE ARGUMENT WAS CORRECT.

Petitioners’ lead argument for certiorari is that the

court of appeals “should not even have decided” what

they call the “significant contribution” issue because,

petitioners claim, it was not first presented to EPA.

See EPA.Pet. 18-21; see also ALA.Pet. 16-20. This

7 Likewise, that some locations may not achieve attainment

even ® ter imposition of the Transport Rule’s emissions budgets

provides no justification for overcontrolling other upwind States

that are not “significantly contributing” to those locations. Cf.

ALA.Pet. 23. In any event, EPA found that the Transport Rule

would “resolve all projected downwind nonattainment of the an-

nual and 24-hour PMzs NAAQS,” except for a single area that

“is significantly affected by local emissions from a sizable coke

production facility and other nearby sources,” 76 FR at 48259,

and this single, unique instance of nonattainment says nothing

about whether upwind States linked to other areas were

overcontrolled.

“waiver” issue does not remotely warrant review. It

presents only the context-specific application of set-

tled precedent to a single issue that, given the multi-

ple statutory violations found by the court of appeals,

was not even dispositive. Moreover, petitioners’ focus

on waiver only underscore that certiorari is improper

because, if petitioners were correct about waiver, the

Court would not even reach the merits argument that

petitioners contend justifies certiorari. See EPA.Pet.

(1), 21-28; ALA.Pet. i, 28-30.

In all events, the court of appeals correctly held

that the “significant contribution” argument was

raised with sufficient “specificity” before EPA.

EPA.Pet.App. 34a n.18. And neither EPA nor the

dissent below has seriously disputed the merits of the

court of appeals’ holding that the Transport Rule was

“flawed” because it imposed emissions reductions

that were “not based on the ‘amounts’ from upwind

States that ‘contribute significantly to nonattain-

ment.” Id. 31a.

1. Petitioners make no serious effort to claim that

the court of appeals’ “waiver” holding itself presents

an issue of exceptional importance justifying certiora-

ri. Nor could they, as this holding does not even raise

a legal issue.

Indeed, there was common ground below on the ap-

plicable legal principles. Both the majority and dis-

sent agreed that §307(d)(7)(B) of the CAA, 42 U.S.C.

§7607(d)(7)(B), supplied the standard for exhaustion.

Compare EPA.Pet.App. 32a n.18, with id. 65a, 96a.

Both the majority and dissent therefore considered

whether “objections” were raised with “reasonable

specificity” in the Transport Rule proceeding. Com-

pare id. 34a n.18, with id. 96a. They likewise both

recognized that §307(d)(7)(B) does not limit parties to

the precise formulations made before the agency, but

rather permits “leeway” to expand and elaborate on

review. Compare id. 34a n.18, with id. 109a-10a.

Thus, the only issue is the court of appeals’ applica-

tion of these agreed-upon principles to the specific

record in this case. Certiorari to review such a

factbound question is clearly unwarranted. See, e.g.,

United States v. Johnston, 268 U.S. 220, 227 (1925).

That is particularly so here given EPA’s and ALA’s

treatment of the waiver issue below. EPA’s brief be-

low did not even mention “waiver” in its jurisdictional

statement, statement of issues, or summary of argu-

ment. See EPA DC Cir. Merits Br. 1-3, 12-17. And in

the body of its brief, EPA only suggested in the most

glancing and tentative fashion (amid sections ad-

dressed to the merits) that the claim may have been

waived. See id. 30 (merely complaining that com-

menters did not articulate their views “forcefully”

and stating that “[w]hether their failure to do so for-

mally rises to the level of waiver, it at the very least

bolsters the reasonableness of EPA’s adoption of its

proposed approach”). Elsewhere, EPA tersely assert-

ed—in a single sentence—that petitioners’ “signifi-

cant contribution” argument “likely has_ been

waived.” Jd. 32. Nowhere did EPA contend that this

argument was actually waived, let alone provide the

argument and case citations it now advances. For its

part, ALA did not mention waiver of the issue below

at all.

2. Nor do petitioners identify any error in the court

of appeals’ application of settled law to the facts of

this case. EPA wrongly suggests that the court held

§307(d)(7) was satisfied solely by comments made in

the predecessor CAIR rulemaking. EPA.Pet. 20. As

EPA conceded below, and ALA concedes now, com-

menters in the Transport Rule proceeding did raise

objections to EPA’s “significant contribution” ap-

proach. EPA DC Cir. Merits Br. 30 & n.16, 32 &

n.18; ALA.Pet. 18 n.2. The court of appeals consid-

ered comments made in the prior CAIR proceeding—

along with North Carolina’s reasons for invalidating

CAIR—as relevant context for assessing whether the

arguments made in the Transport Rule proceeding

were “reasonabl{y] specifi[c].” See 42 U.S.C.

§7607(d)(7)(B); EPA.Pet.App. 34a n.18 (“In light of

the indications that EPA was aware of their objection

but had no intention to revisit its approach ... the

specificity of the commenters such as Wisconsin and

Tennessee was ‘reasonable’ under the circumstanc-

es.”). The court’s conclusion that the Transport Rule

comments were sufficiently specific was correct and

in any event does not warrant further review.

In particular, the court of appeals evaluated the

Transport Rule comments objecting to EPA's “signifi-

cant contribution” approach in lght of the fact that

EPA “considered—and rejected—precisely this same

argument in CAIR.” EPA.Pet.App. 32a n.18. CAIR

commenters argued “that the threshold contribution

level selected by EPA should be considered a floor, so

that upwind States should be obliged to reduce their

emissions only to the level at which their contribution

to downwind nonattainment does not exceed that

threshold level.” 70 FR at 25176-77. In issuing

CAIR, EPA acknowledged this argument but rejected

it. Id. 25177; see also EPA Reh’g Pet. 11 (acknow!l-

edging CAIR rejected commenters’ objection to EPA’s

“significant contribution” methodology “for legal and

policy reasons’).

EPA had another opportunity—and, indeed, an ob-

ligation—to revisit this issue after North Carolina.

As noted, North Carolina held that once EPA defines

each State’s “significant contribution,” it may not “re-

quire some states to exceed the mark.” 531 F.3d at

921; see also id. 918 (‘EPA can't just pick a cost for a

region, and deem ‘significant’ any emissions that

sources can eliminate more cheaply.”). North Caroli-

na found that CAIR was “fundamentally flawed” be-

cause it failed to make “state-specific quantitative

contribution determinations or emissions require-

ments,” and instructed “EPA [to] redo its analysis

from the ground up.” Id. 929 (emphasis added).®

In the remand proceeding that led to adoption of

the Transport Rule, commenters urged EPA to adopt

regulatory approaches consistent with North Caroli-

na. 75 FR at 45299; CAJA2308-12. Among the al-

ternatives put before EPA was one that reflected the

“essential principles” of the statutory construction ul-

timately adopted by the court of appeals.

EPA.Pet.App. 40a n.24. But EPA refused to recon-

sider its fundamental position on significant contri-

bution and rejected these alternative approaches. 75

FR at 45299; CAJA2308-12. And notwithstanding

EPA's statements that it would not revisit this issue,

’ EPA's suggestion that North Carolina did not “disturb the

agency's basic two-step analytical approach” is incorrect. EPA

Pet. 10; see also id. 21. The portion of North Carolina EPA cites

observed merely that petitioners in that case had not challenged

EPA's “two-step analytical approach” and that the court was

thus not directly addressing it. See 531 F.3d at 916-17. But, as

the court of appeals correctly concluded below, North Carolina's

findings that CAIR’s distribution of NOx reduction obligations

was unlawful because it could “force an upwind State to ‘exceed

the mark,” EPA.Pet.App. 35a (quoting North Carolina, 531 F.3d

at 921), clearly called into question EPA's use of the second

stage here to require States to reduce emissions to levels below

the “insignificance” threshold or beyond those necessary for the

downwind State to achieve NAAQS. The same “statutory au-

thority” applied in both instances. /d. 35a n.19. In North Caro-

lina, as here, EPA could require States only to “prohibit those

‘amounts which will ... contribute significantly to nonattain-

ment.” Id.

several parties still filed additional comments in the

Transport Rule proceeding urging EPA to abandon its

approach of setting emissions budgets solely based on

cost and without considering the impact on downwind

“contribution.” CAJA556, 1293, 1756.

ALA acknowledges that commenters did, in fact,

raise the “significant contribution” issue in the

Transport Rule proceeding, but ALA tries to mini-

mize the importance of these comments by mischar-

acterizing them. Wisconsin did not advocate “more

stringent regulation.” ALA.Pet. 18 n.2 (emphasis

omitted). Wisconsin’s proposed approach would have

produced less stringent budgets in situations where

the agency had required a State to eliminate more

than its significant contribution. CAJA1293. And

Tennessee contended that EPA should not apply its

uniform cost controls when doing so would “reduce [a

State’s}] contribution below [the] 1% significance

[threshold].” CAJA556.

ALA also acknowledges that, at the outset of the

Transport Rule proceeding, parties argued against

the approach ultimately adopted by EPA and in favor

of alternative approaches more consistent with North

Carolina. ALA, however, says these objections are

irrelevant because they merely challenged the agen-

cy’s policy as arbitrary. ALA.Pet. 18. But the court

of appeals found EPA’s approach was arbitrary too.

EPA.Pet.App. 36a, 37a n.22; see infra p. 21. More

fundamentally, as shown above, the agency in fact

received, considered, and rejected statutory as well as

policy arguments and the issue was clearly raised

and not waived.

3. Finally, EPA does not seriously dispute the mer-

its of the court of appeals’ holding that under the

good-neighbor provision the agency cannot require an

upwind State to make reductions greater than its

own “significant contribution.” EPA also acknowl-

edges, EPA.Pet. 28, that it will ultimately need to

confront this statutory requirement as it continues to

regulate upwind emissions—including in the remand

that will be necessary for EPA to ensure it is not im-

posing emissions reductions beyond those necessary

for downwind locations to attain NAAQS and to ac-

count for EPA’s own projections of substantially im-

proved air quality in 2014 even absent good-neighbor

emissions controls. Certiorari in such circumstances

is clearly unwarranted.

As noted, EPA used a two-stage approach to define

significant contributions. In the first stage, EPA de-

fined “amounts” of downwind pollution that were

deemed to be, by definition, insignificant. 76 FR at

48236 (“states whose contributions are below these

thresholds do not significantly contribute to nonat-

tainment”) (emphasis added); see also id. 48237. But

in the second stage, EPA ignored those “insignifi-

cance” thresholds and instead set emissions budgets

based on “cost-effectiveness,” with the result that a

State “may be required to reduce its emissions by an

amount greater than the ‘significant contribution’

that brought it into the program in the first place.”

EPA.Pet.App. 34a-35a.

The court of appeals found this aspect of EPA’s ap-

proach unlawful for two reasons. First, the court

found that EPA’s approach violated the plain lan-

guage of §110(a)(2)(D)(i)(1) because the reductions

EPA imposed were not based on “the ‘amounts’ from

upwind States that ‘contribute significantly to nonat-

tainment’ in downwind States.” Jd. 3la. EPA cannot

“redefine each State’s ‘significant contribution’ in

such a way that an upwind State’s required reduc-

tions could be more than its own significant contribu-

tion to a downwind State.” Jd. 36a (emphasis omit-

ted). The “statute requires a State to prohibit at most

those ‘amounts’ which will ‘contribute significantly —

and no more.” Id. 37a (emphasis added).

Second, the D.C. Circuit found EPA’s approach ar-

bitrary because it was internally inconsistent. 7d.

36a, 37a n.22. EPA found at stage one that “states

whose contributions are below th[e] thresholds do not

significantly contribute to nonattainment,” id. 36a

(quoting 76 FR at 48236), but then adopted a defini-

tion of “significant contrmbution” that disregarded

that finding and that could arbitrarily require a State

to reduce emissions below those “insignificance”

thresholds, id.

Neither EPA nor ALA presents this issue fairly, be-

cause each studiously avoids quoting the operative

language from EPA’s rule on which the court of ap-

peals relied. One would never know by reading the

petitions that EPA found that States whose emissions

fall below the stage-one threshold “do not significant-

ly contribute to nonattainment.” Instead, petitioners

invent a new nomenclature that never appeared in

the Transport Rule, calling stage one “the Screening

Analysis’ and stage two “the Control Analysis.”

EPA.Pet. 6-7. But whatever their terminology, peti-

tioners do not and cannot dispute that EPA expressly

found that certain amounts were insignificant and

then ignored that statutory boundary in determining

the amount of reductions to order.

Petitioners offer no objection to the court of appeals’

actual reasoning. Nor did the dissent below dispute

the majority's analysis on the merits. EPA.Pet.App.

llla-14a. That is because there is no possible justifi-

cation for a methodology that defines an “insignifi-

cant contribution” threshold as a basis for determin-

ing whether to regulate, but then ignores the very

same definition when imposing specific regulatory

requirements.

To the limited extent that EPA now defends the

Transport Rule as actually written, EPA’s arguments

highlight that the Transport Rule’s approach is un-

tethered from statutory text. EPA asserts it is “rea-

sonable” to “determine the ‘significan[ce]’ of particu-

lar state contrmbutions by reference to _ [cost-

effectiveness] and without regard to the amount of

each State’s downwind contribution.” EPA.Pet. 21

(first alteration in original).? As the court of appeals

correctly held, however, the “statute requires a State

to prohibit at most those ‘amounts’ which will ‘con-

tribute significantly—and no more.” EPA.Pet.App.

37a. By contrast, as EPA conceded below, the

Transport Rule’s approach would permit EPA to “re-

quire a State to reduce more than the State’s total

emissions that go out of State.” Id. 38a n.23 (empha-

sis added).

Finally, EPA suggests that the concern that it re-

quired States to reduce emissions beyond the “signifi-

cance” threshold is “hypothetical.” EPA.Pet. 28. No-

tably, EPA does not and cannoi claim that it did not

mandate such overcontrol, because EPA never de-

termined the “amounts” upwind States were “con-

tributing” after it imposed emissions budgets.

EPA.Pet.App. 15a-17a; see also EPA DC Cir. Merits

Br. 33 n.20 (“this was not an issue EPA analyzed in a

direct fashion for the Rule”). As the D.C. Circuit ob-

served in North Carolina, “[w]hen a petitioner com-

°EPA incorrectly suggests that Michigan approved the

Transport Rule’s approach to “significant contribution.” See

EPA.Pet. 24-25. This issue “was not presented in Michigan,”

EPA.Pet.App. 36a n.20, and, as explained infra, the Transport

Rule's use of “cost” differed from that approved in Michigan.

plains EPA is requiring a state to eliminate more

than its significant contribution, it is inadequate for

EPA to respond that it never measured individual

states’ significant contributions.” 531 F.3d at 920.18

EPA seeks to excuse this failure by asserting that no

party raised any concern about whether its regulato-

ry approach could force a State to eliminate “insignif-

icant” contributions. EPA.Pet. 28. But as explained

above, commenters not only objected to EPAs ap-

proach, but also—specifically referencing the 1% in-

significance threshold—asked EPA to provide State-

specific contribution data showing what levels of

emissions reductions were necessary to eliminate

“significant contribution” “without considering costs.”

Comments of West Virginia Department of Environ-

mental Protection 3 (Sept. 30, 2010), available at

http://www.regulations.gov/#!documentDetail;D=EPA

-HQ-OAR-2009-0491-2981. EPA’s response was to

completely ignore the issue.

10 Although EPA asserts “[t]he court cited no basis in the rec-

ord for believing” there was a “realistic possibility” States could

be forced to reduce emissions below the “insignificance” thresh-

old, EPA.Pet. 28, the record indicates the opposite. In several

instances, the Transport Rule required States that were con-

tributing only slightly above the “insignificance” threshold to

make substantial emissions reductions. See, e.g., 76 FR at

48240 (tbl.V.D-1) (regulating Texas notwithstanding a “contri-

bution” of only 0.03 yg/m* to nonattainment above the “insignifi-

cance” threshold); td. 48245 (tbl.V.D-7) (regulating South Caro-

lina notwithstanding a “contribution” of only 0.1 ppb above the

“insignificance” threshold); td. 48261-63 (imposing emissions

budgets).

Ill. PETITIONERS ALSO FAIL TO DEMON-

STRATE ANY ERROR WITH REGARD TO

THE COURT OF APPEALS’ INDEPENDENT

“PROPORTIONALITY” HOLDING.

1. The only aspect of the court of appeals’ decision

seriously disputed by EPA on the merits is what EPA

calls the “proportionality” holding. EPA.Pet. 22-28.

But even here, EPA’s challenge is incomplete. As

noted, the court of appeals rendered two related, yet

distinct, holdings on this point. It held that EPA vio-

lated the good-neighbor provision because EPA “made

no attempt to calculate upwind States’ required re-

ductions on a proportional basis that took into ac-

count contributions of other upwind States to the

downwind’ States’ nonattainment problems.”

EPA.Pet.App. 39a. It also separately held that EPA

“failed to take into account the downwind State’s own

fair share of the amount by which it exceeds the

NAAQS.” Jd. EPA does not even mention the latter

holding.

2. Even as to the aspect of the “proportionality”

holding EPA does challenge, it fails to demonstrate

any error.'! That holding corrected EPA’s attempts

to “force an upwind state to share the burden of re-

ducing other upwind states’ emissions.”

EPA.Pet.App. 38a (quoting North Carolina, 531 F.3d

at 921).

As noted, in determining the amount of reductions

to require, EPA defined these “amounts” based on the

collective “cost-effectiveness” of pollution controls on

all emissions in the upwind State. 76 FR at 48248-

‘1 EPA is wrong in suggesting (EPA.Pet. 19-20) this issue was

not raised in the court of appeals. See Industry/Labor DC Cir.

Merits Br. 22, 33. ALA is wrong in claiming (ALA.Pet. 20, 25) it

was not raised to EPA. See 75 FR at 45299; CAJA2311-12.

52, 48255, 48258-59. Under EPA’s interpretation, the

cost of emissions reductions determined what portion

of an upwind State’s emissions would be prohibited.

Id.

This is inconsistent with—indeed, completely dis-

connected from—the text of §110(a)(2)(D)()(1), which

requires EPA to consider each “individual upwind

State’s actual contribution to downwind air quality.”

EPA.Pet.App. 23a. Under EPA’s “cost-effectiveness”

approach, however, emissions-reduction obligations

were “not tied to how much the upwind State con-

tributed to downwind States’ air pollution problems.”

Id. 16a.

As a result, under EPA's approach, a State could be

subjected to a heightened emissions-reduction obliga-

tion simply because it can reduce emissions more

cheaply than another State contributing equal

amounts to the same location. See EPA.Pet. 27-28.

A “definition” of “significant contribution” that has

that consequence cannot be squared with the plain

text of §110(a)(2)(D)(G)(1). There is no statutory basis

for setting States’ emissions budgets at levels more

stringent than justified by the “amounts” that States

are individually “contributing.”

EPA’s approach also impermissibly ignores the

statute’s focus on each State’s individual co... ribution

to nonattainment. As noted, EPA determined upwind

States’ emissions-reductions obligations based on

whether those reductions are collectively cost-

effective. See also EPA DC Cir. Merits Br. 29 (noting

EPA determined emissions reductions on upwind

States “collectively”). But nothing in the CAA per-

mits EPA to increase emissions-reduction obligations

on one upwind State merely because that State can

reduce more cheaply than another upwind State. To

the contrary, the good-neighbor provision directs EPA

to consider the “amounts” from “within” each upwind

State that “contribute significantly” to downwind

nonattainment.

In contrast to EPA’s approach, the court of appeals’

“proportionality” reading faithfully applies the stat-

ute’s text and purpose. That interpretation is the on-

ly one that ensures consistency in determining the

“air pollutant ... amounts” that “contribute signifi-

cantly to nonattainment” and prevents a State from

being required to eliminate “more than its own

‘amounts which will ... contribute significantly” to

downwind nonattainment. EPA.Pet.App. 38a; see id.

(EPA has “no authority to force an upwind state to

share the burden of reducing other upwind states’

emissions”). It ensures that when States “contrib-

ute” equal “air pollutant ... amounts” to a downwind

location, they are treated equally. Cf. EPA.Pet. 27.

And it ensures that EPA cannot find an “air pollu-

tant ... amount” in one State to constitute a “signifi-

cant contribution” to nonattainment simply because

EPA deems the costs of eliminating it in that State to

be minor, while it simultaneously finds a much great-

er “amount” in another State to be insignificant.

In this regard, and contrary to EPA's claims,

EPA.Pet. 21, 24, the Transport Rule did not use cost

considerations in the way previously approved by the

D.C. Circuit in Michigan. There, EPA had relied on

cost considerations to “reduce” the emissions reduc-

tions required by regulated upwind States. 213 F.3d

at 675. The Michigan court recognized that EPA had

“first determined that 23 jurisdictions [were] ‘signifi-

cant’ contributors” based on each State’s contribution,

but held EPA could thereafter consider costs to

“terminatife]” only a “subset of each state’s contribu-

tion.” Id. It based that holding on the interpretive

principle that Congress intends for agencies “to con-

sider the costs of demanding higher levels of envi-

ronmental benefit” and to reduce the level of control

required when costs are disproportionate to benefits.

Id. 679 (emphasis added).

By contrast, as the court of appeals found, the

Transport Rule used cost in a different manner.

EPA.Pet.App. 38a. Rather than seeking “to prevent

exorbitant costs from being imposed on certain up-

wind States” and reducing the amount of contribution

above the insignificance threshold that a State must

eliminate, as Michigan approved, id. 27a, the

Transport Rule misused cost to define and increase

States’ emissions-reduction obligations. EPA used

“cost-effectiveness” without regard to its own insignif-

icance threshold and without regard to whether the

emissions reductions it imposed were needed to ad-

dress nonattainment. Indeed, EPA’s misuse of costs

would allow it to “require a State to reduce more than

the State’s total emissions that go out of State.” Id.

38a n.23. The court correctly concluded that neither

§110(a)(2)(D)G@)(1) nor Michigan countenanced that

entirely different use of costs. Id. 25a.

3. EPA offers no statutory argument to the contra-

ry, but instead tries to justify its approach on two pol-

icy grounds. First, EPA says its “cost effectiveness

approach provides a rough but objective means of eq-

uitably distributing pollution-control burdens among”

upwind States. EPA.Pet. 28. In particular, EPA pos-

es a hypothetical in which three upwind States con-

tribute equal amounts to a downwind State’s nonat-

tainment but have made differing levels of invest-

ment in pollution controls. Jd. 27-28. EPA says that

under the court of appeals’ approach, all three would

be required to make equivalent emissions reductions.

Id. 27. EPA contends that the Transport Rule’s reli-

ance on “cost-thresholds” properly reduces the obliga-

tion of States that have already mandated substan-

tial emissions controls by imposing greater reductions

on States that have not made such investments on

the ground that they can reduce emissions more

cheaply. Id. 27-28; see also ALA.Pet. 27.

Again, EPA’s arguments only highlight the

Transport Rule’s failure to “adhere to th{e] basic re-

quirement of the statutory text.” EPA.Pet.App. 37a-

38a. As noted, §110(a)(2)(D)(G)(1) permits EPA to re-

quire an upwind State to “prohibit” only the “amount”

of “air pollutants” emitted by sources “within the

State” that travel to downwind locations and “con-

tribute significantly to nonattainment.” From the

perspective of the good-neighbor provision, not to

mention the downwind State, the three upwind

States in EPA’s hypothetical all “contribute equal

amounts to downwind nonattainment.” EPA.Pet. 27.

The court of appeals’ decision thus furthers the con-

gressional purpose embodied in the statutory text.

In contrast, EPA never explains why it would be

“inequitable” to treat the same amount of “contribu-

tion” by two States equally merely because one State

had previously mandated investments to reduce its

amount to the same level as a neighboring State. For

example, the neighboring State may have achieved

lower “amounts” of emissions by mandating greater

use of clean energy or undertaking policies that min-

imized energy consumption, or its economy may

simply have a different industrial base—none of

which makes it necessarily more equitable, much less

lawful, for it to be required to bear a portion of the

first State’s statutory burden.

Second, EPA says that the court of appeals’ textual

reading of §110(a)(2)(D)(i)(1) is “unrealistifc}” and

suggests this standard would be difficult for the

agency to implement. EPA.Pet. 22; see also ALA.Pet.

26. But EPA stops short of saying it would be impos-

sible for the agency to comply and ultimately

acknowledges that the decision below leaves it

“enough latitude” to “craft a new regulatory approach

that meets the court’s requirements.” EPA.Pet. 30.

Nor could it maintain otherwise. The “difficulty”

identified by EPA is that it may not be possible to

undertake precisely “proportional” reductions when

multiple upwind Stat

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