Amicus Curiae Brief — Environmental Defense v. Duke Energy Corporation

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No. 05-848

IN THE

Supreme Court of the Anited States

ENVIRONMENTAL DEFENSE, £T AL.,

PETITIONERS,

Vv.

DUKE ENERGY CORPORATION,

RESPONDENT

On Writ of Certiorari to the

United States Court of Appeals for the Fourth Circuit

AMICUS CURIAE BRIEF OF

APA WATCH

IN SUPPORT OF RESPONDENT

LAWRENCE J. JOSEPH

2121 K Street, NW, Suite 800

Washington, DC 20037

Tel: 202-669-5135

TABLE OF CONTENTS

IDENTITY AND INTEREST OF AMICUS CURIAE .......... l

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TE Ie Tin Ua rerictirs sasccccenitncensniintninminninindtinnteon 2

Se eis ERODED ciicencrcnsncshsnasnmurunnnesncienmnanlieiasetneiocs 2

SUMMARY OF ARGUMENT ..............:.sscccssccscssssssesscseessees 7

IT eit hactehianestipnctinheiintaiigtinlnsiinniibigumisdininenanesindeinenien 8

I. §307 DOES NOT PRECLUDE DUKE’S

TT seis iiteidbitatinstinctahineiinsamnnaicetetionnniiesinntenie 8

A. §307(b)(2) Does Not Apply ..............:cccscceseeseseessees 9

B. §307 Does Not Preclude Courts’ Declaring Law.. 11

C. §307(b)(2) Is Unconstitutional as Applied............ 15

II. POST-PROMULGATION REINTERPRETATIONS

WARRANT LITTLE OR NO DEFERENCE .............. 15

A. EPA Cannot Amend its Regulations by

I cccndcsimnincsciihinntoassnsionsiccninineresnuiane 16

B. EPA Cannot Amend the States’ Regulations by

IUD a dtinisanas:cninionnncisheitliihcinensibaciieihedoiin 20

ae ities cchijeemnpnnrcinnecinnovioteiytimanpinnevaenmntntie 21

TABLE OF AUTHORITIES

Cases

Alabama Power Co. v. Costle,

SD Fe Sa tn BF isccinsiesecccncesisseinvecivesianinit 3,5

Alaska Dep't of Envtl. Conservation v. EPA,

Te I hnccithininiitiscchiniesincisinitetnusseebitunniendinnel 20

Alaska Prof’l Hunters Ass'n, Inc., v. FAA,

igh fo oe 19

Andrus v. Charlestone Stone Prod. Co.,

ee er Ge isinctilsdricccsnthsienisheiiailende tositniianpaaileyadie 11

Bowen v. Massachusetts, 487 U.S. 879 (1988).........c:ccee 12

Bowles v. Seminole Rock & Sand Co.,

Se Fe aah eccckehit daddies inreninciieiatiinilinneati 16-19

Bowsher v. Synar, 478 U.S. 714 (1986)..........cc:ccsseseeeeereeees 18

Califano v. Sanders, 430 U.S. 99 (1977) .........c0000+- 11,12, 13

Chevron U.S.A. v. NRDC, 467 U.S. 837 (1984)............ 16, 17

Chrysler Corp. v. Brown, 441 U.S. 281 (1979) 00.0... 12

Darby v. Cisneros, 509 U.S. 137 (1993) ........:cccccceseeeeeeeeeees 14

Dickinson v. Zurko, 527 U.S. 150 (1999) oo... cecceeseseseeeeeeeees 14

Duke Power Co. v. Carolina Envtl. Study Group, Inc.,

SI es FR et dbaitentiitinnisiiincischdiiviiciinbitpiastiiianitaaiitinion 13

Bastart v. FS, GG2 U.S. DO. (UGT1) .cececesecnveccosecveseesessvoescesses 16

FTC v. Standard Oil Co. of Cal., 449 U.S. 232 (1980)......... 9

Geier v. American Honda Motor Co., Inc.,

es ne aii etetititceinainiaapotadaciencnntbaisthapis 17, 20

Georgetown Univ. Hosp. v. Bowen,

Se Se I te sicciienindenpiahidbessvinaaiessinicdioncistachisienn 20

Heckler v. Ringer, 466 U.S. 602 (1984) ..0.......0...ccccceccceeeeees 12

INS v. Chadha, 462 U.S. 919 (1983) .0......ccccccsceeteeeeeeeeeeees 18

Larson v. Domestic & Foreign Commerce Corp.,

Be Ss GN II iisertinintistniscinndbidapipebeiiticiinny siptadioamai 14

Louisiana Pub. Serv. Comm’n v. FCC,

FO Se iciciicigteniiniienetcevnentnicimininnnininieial 18

Martin v. Occupational Safety & Health Review Comm'n,

ae Pe Ricicseantiditcidiiceniiicilgpieptndnitiiihninittnnneiiaies 17

McLouth Steel Products Corp. v. Thomas,

Be ee GF ice Gs SOD sat ictnccicntncionsidasnticabins 10

Metro. Washington Airports Auth. v. Citizens for the

Abatement of Aircraft Noise, Inc.,

ee ak ei iicteihiteticssatenniiesadscenntececstientnbinteenietens 18

Morton v. Mancari, 417 U.S. 535 (1974) .o....ceeccccceceeeeeetenees 12

Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins.

is ee actitinntesiesentincsepivniscidienmminenenianive 19

Nat’! Tour Brokers Ass'n v. U. S.,

Fe Fe Ce is i eicrctbcivicnsencicinnviinmviisetoes 10

Osborn v. Bank of U.S., 22 U.S. (7 Wheat.) 738 (1824)........ 8

Paralyzed Veterans of America v. D.C. Arena, L.P.,

EF ee AN TT Poicicinintnentdinctelpindapiinnsmainiids 19

Pauley v. Bethenergy Mines, Inc., 501 U.S. 680 (1991).......17

Potomac Elec. Power Co. v. EPA,

a ee ON iii cscaccacl decennial 5

Schlesinger v. Councilman, 420 U.S. 738 (1975).........:0020 12

Skidmore v. Swift & Co., 323 U.S. 134 (1944)... 18,19

Smiley v. Citibank (South Dakota), N. A.,

ee th Ne eich tv tiechntricsscthentisericciminliainiobianioneas 17

Syncor Int'l Corp. v. Shalala,

Ra ee i sc es Pe ciiccntisdiantoisiniranioncsigiceaciunvinss 19

U.S. v. Duke Energy Corp.,

278 F.Supp.2d 619 (M.D.N.C. 2003) ..........cccceeeeeeeeees 2, 6

U_S. v. Duke Energy Corp.,

thf > | gd EN rE ee Tene 2,6

U.S. v. Mead Corp., 533 U.S. 218 (2001)..........:cceeceeseeeeees 16

U.S. v. Mitchell, 463 U.S. 206 (1983).................csesccessceeeness 12

U.S. v. U.S. Fidelity & Guar. Co., 309 U.S. 506 (1940) .....14

lll

Verlinden B.V. v. Central Bank of Nigeria,

A Sea ei scic ide dieedsislicncsbcadgudadieteadeticsniiiadsttaihonadiiga 8

Whitman v. Am. Trucking Ass’ns, 531 U.S. 457 (2001)......... 9

Wisconsin Elec. Power. Co. v. Reilly,

PE Ce Ca FO asiccrsesetssitiscecoenmcccsicic 10

Statutes

Administrative Procedure Act,

5 U.S.C. §§S51-706 .....0..000000+0- 1, 9, 11-15, 17, 18, 19, 21

ic SP piesa hisinthndndhsivudteiindedantutndadiemsiastnanhinasaniih 18, 21

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oe | RE RE IPE Seay ced BS-AC ROOM OER 13

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PS caidas ht dicialcactenibebhiiopeimeiiietoeipensetibalesinitnontidinansi 13

east tities idndnsheliichahoaiesaslicnpbtdeiadvubeancaistisnsindinsetstabau 13

aie Se issiscinnnncencindcdestatesaeitinenicbmnsemabacinigiasstitneiiptlins tid 13

a NED ciudhciceichs-tnpbeagetitaaisdinnintellbidasninepiiinipuinoitiapiebudts 13

Sats ATI ts chach dca bichon daieseapeipbeaividiabitehebediaininitabemsebiill 14

Br psc ET dic citniigslhninteisiacioshenindnaicadaitiandageimniiniinetes 13,14

Fe ctlididathidstenth thatdpiinba iiuhedeiibnidoapmipeiniibignteita 12,14

Tins tacnsdaehce dnsstd cehpaltponeuniplsniciscindeelbteshechalapsadeciciea 13

te aicictielcalecchciniDidkiclctinsnipctiteiecedichlasiniandonsiihiiantih 9,14

SO aici: Adis nati cecepicapaniaciehidebadededbstieaialelimnbics 13,14

SSIs: ITI reticdeicetieihhenintbinpeatnbeniianinineisnddacitndatandimtiiliaaen 11-13

Ry Me iictikisbideicidesicdiinctiiandscmncbensiabcnaenandiaunabbeebidhied 12

a ciiccatssicishahchtsrapnliiectntaiiiniiashncntabedintadiaaspialpaaatings 11

Declaratory Judgment Act, 28 U.S.C. §§2201-2202........... 13

es I ii hinsiciniidelincictihasinhiciidadinniiceanbeenpedicsienialtukee 13

Ry eR chal iiinstinadit tisha tbinabininisannindigeiendianbbalinnitilinnian 12

Clean Air Act, 42 U.S.C. §§7401-7671q........... 1,2, 9, 13, 15

42 U.S.C. §7401(a)(3).............. hilkislbatdtiatmapiinlelis tee erliclibnaeclaiade 20

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G2 Gs BPR Fe ic Retcticcsncianciesetinnniccsvscivipibedssttbiaielia 2,5, 19

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Fe RBA BPO E setihicinivintinastinncsssinensasneditinpuaetuiiaagenenags 7, 8, 11

2 TEL... SE INGE D cinencsvectesscinntatsntntnsacreepenaicipti 2, 8,9, 11

2 GSK. Be GD seckccncicsisetonsccsnsemespicbinesiinns 2, 8,9, 11, 15

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Go ic BITE D ctvnccncsccscnstsnsisnsnscnssmcsiiuiiatinninmiian 9, 13

GB UE, BOD civninisinincinsecsisiiniisnsstactaunivtinciudilenin 9.12

Pub. L. 94-574, 90 Stat. 2721 (1976)..........::csesesesseseeeseseeees 11

Pub. L. 96-486, §2(a), 94 Stat. 2369 (1980) .........cceceeeeeee 12

Legislative History

ADMINISTRATIVE PROCEDURE ACT: LEGISLATIVE

History, S. Doc. No. 248,

ge | REO men 14

H.R. REP. No. 96-1461,

reprinted in 1980 U.S.C.C.A.N, 5063 ......cccccecceeseeereeeees 12

Rules and Regulations

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Senpamane Caett Babe 37B...ccccedecosccrvensosnasssscosnssninentswetotdesisinbe l

43 Fad. Bint, DE FEO CGT) ncccccscssessseconsessuissssonsvnemsntciinn 5,19

44 Fed. Reg, $4,169 (1G79) ..ccccccccsonvescsosessreccversessssasacurnssccsogs 5

SS Fad. Rese, S2B76 FCO) nceccacetecnessssesssnccssnesiossanaees 3,4, 5,7

47 Fed. Raw, GOUT (IGG ED ccosesesccescovensoinsctntansiisnssmaiubpiipeiinn 20

47 Fed. Rew, TEDG (IG GED icercncecorisssnrssncrsntsintsnvnnscmminionats 20

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TID. seniscensrecenscensnepecensessenesesneneceenannte 5

I cess nenepterteanincenteenetenennenintnti 3

Other Authorities

Robert A. Anthony, Interpretive Rules, Policy

Statement Guidances, Manuals, and the Like —

Should, ral Agencies Use Them to Bind the

Public?, 41 DUKE L.J. 1311 (1992)... eee cceeteeenees 19

EDWIN BoORCHARD, DECLARATORY JUDGMENTS (1941)......13

WILLIAM J. HUGHES, FEDERAL PRACTICE

ee COU ER CUI, BOGDD ccccsssccensecenerscncvesesecsessoeosuse 13

John F. Manning, Constitutional Structure and Judicial

Deference to Agency Interpretations of Agency Rules,

96 COLUM. L. REV. 612 (1996).............ccccsseessees 15, 17-18

vl

IDENTITY AND INTEREST OF AMICUS

CURIAE

Amicus curiae APA Watch is a nonprofit association

dedicated to ensuring that federal, state, and local agencies

comply with applicable rulemaking, information-

dissemination, and information-quality requirements. On its

own and through its membership, APA Watch devotes

significant effort to combat federal agencies’ amending

regulations by memoranda and reinterpretation, without the

notice-and-comment rulemaking required by _ the

Admunistrative Procedure Act, 5 U.S.C. §§551-706 (“APA”).

ISSUES PRESENTED

Through the decisions below, respondent Duke Energy

Corporation (“Duke”) prevailed in a civil enforcement action

brought under the Clean Air Act, 42 U.S.C. §§7401-7671q,

by the Environmental Protection Agency (“EPA”) and

petitioner environmentalist intervenors. See 42 U.S.C.

§§7413(b)(1) (civil actions by EPA), 7604(a)(3) (citizen

suits). As now before this Court, this case presents two

questions:

' Pursuant to Rule 37.6 of the Rules of this Court, amicus

curiae states that no counsel for a party has written this bref

in whole or in part and that no person or entity, other than

the amicus curiae, its members, or its counsel, has made a

monetary contribution to the preparation or submission of

this brief. Pursuant to Rule 37.3 of the Rules of this Court,

the parties have consented to the timely filing of all amicus

curiae briefs in this matter. The parties’ letters of consent

have been lodged with the Clerk of the Court.

1. Do the decisions below contravene Clean Air Act

§307(b)(2), which provides that EPA action that was

reviewable under §307(b)(1) “shall not be subject to judicial

review in civil or criminal proceedings for enforcement”?

2. If §307(b)(2) does not preclude courts’ considering

arguments on the proper interpretation of the applicable

regulations, do Duke’s actions at various power plants in the

Carolinas qualify as “major modifications” that triggered

review under the Clean Air Act’s Prevention of Significant

Deterioration (“PSD”) permitting program?

ST FA

Amicus curiae APA Watch adopts the facts as reported

by the Fourth Circuit, 411 F.3d at 544-45 (Pet. App. 5a-7a),

and the district court, 278 F.Supp.2d at 622-26 (Pet. App.

23a-3la). The facts, however, are essentially irrelevant

because EPA and the environmentalist intervenors have

stipulated that Duke prevails under Duke’s interpretation of

the applicable regulations. 411 F.3d at 546 (Pet. App. 9a).

LEGAL BACKGROUND

As signaled in the Statement of Facts, supra, this

litigation hinges on what the applicable regulations actually

provide. Accordingly, this section reviews the history and

text of the regulations and EPA’s evolving interpretations.

For existing stationary sources like Duke’s power plants

here, PSD applicability turns initially on the definition of

“modification.” See 42 U.S.C. §§7479(2)C) (adopting

§111(a)(4)’s definition of modification for PSD permitting),

7411(a)(4) (“‘modification’ means any physical change in,

or change in the method of operation of, a stationary source

2

which increases the amount of any air pollutant emitted by

such source”). In Alabama Power, the reviewing court

recognized that “alterations of almost any plant occur

continuously; whether to replace depreciated capital goods,

to keep pace with technological advances, or to respond to

changing consumer demands.” Alabama Power Co. v.

Costle, 636 F.2d 323, 401 (D.C. Cir. 1979). To focus

administrative and industry resources on those modifications

that may significantly impact air quality, EPA established de

minimis thresholds for the net emissions increases required

to trigger PSD review. 40 C.F.R. §52.21(b)(2), (3), (23).

Although EPA’s final 1978 PSD regulations had

focused on source-wide uncontrolled potential emissions to

determine whether “modifications” qualified as “major,”

EPA’s final 1980 PSD rule “follow[ed] the lead” of the

Alabama Power court to focus of the netting analysis to

actual emissions, while continuing to require a

“modification” as defined in §111(a)(4). See 45 Fed. Reg. at

52,700; see also Alabama Power, 636 F.2d at 353-55

(invalidating 1978 rule’s thresholds for increases above

source-wide uncontrolled potential emissions). In doing so,

EPA recognized the harm of “paper offsets” that would set

sources’ baselines for netting too high (and thereby allow

new or modified units to avoid triggering PSD by claiming

credit for pollution reductions that had never actually

occurred). See 45 Fed. Reg. at 52,700. Similarly, with

respect to PSD increments, EPA explained that “it is unwise

to restrict source growth based only on emissions that a

source is permitted to emit but which, in many instances,

have not been and are not likely to ever be emitted.” 45 Fed.

Reg. at 52,718. Accordingly, EPA recognized that “the most

reasonable approach, consistent with the statute, is to use

actual source emissions, to the extent possible,” for both

source-wide netting and for calculating PSD increment

3

consumption. /d.* In sum, EPA’s 1980 actual-emission

approach prevents both underregulation and overregulation.

To determine applicability under EPA’s 1980 PSD

regulations, therefore, “the first step... is to determine

whether the physical or operational change in question

would result in an increase in ‘actual emissions’” (i.e.,

whether the change qualifies as a “modification” under

§111(a)(4)). 45 Fed. Reg. at 52,698.° If not, that ends the

inquiry. Jd. If so, the next step analyzes whether that

modification qualifies as “major” based on a comparison of

source-wide actual emissions before and after the physical or

operational change. To conduct this netting analysis, the

regulations rely upon a series of somewhat overlapping

definitions for potential, allowable, and actual emissions. 40

C.F.R. §52.21(b)(4), (16), (21). For existing emitting units

with source-specific allowable emissions for the unit, the

permitting authority may assume that actual emissions equal

> Although the quoted text concerns increment

consumption, the preamble’s “Modification” section refers

to the “Increment Consumption” section “[flor a fuller

discussion of the concept of ‘actual emissions.’” 45 Fed.

Reg. at 52,699 (i.e., the “actual emission” focus applies both

to determining whether a major modification occurred and to

calculating increment consumption).

> Certain physical and operational changes are not

activities that can give rise to a “modification,” including

routine maintenance, repair and replacement and changes in

the hours of operation, notwithstanding their effect on

emissions. 40 C.F.R. §52.21(b)(2)(iti)(a), (b)(2)(i1)(f).

the unit-specific allowable emissions. 45 Fed. Reg. at

52,699, 52,718; 40 C.F.R. §52.21(b)(21)(iii). Otherwise, the

analysis uses the pre-modification rate at which the unit

actually emitted pollutants over a representative baseline. 40

C.F.R. §52.21(b)(21)(ii). For units that have not begun

normal operations, the analysis assumes that actual

emissions equal the controlled potential to emit. 40 C.F.R.

§52.21(b)(21 (iv), (4). Consistent with Alabama Power and

the 1980 rules, modified units that have commenced normal

operations use an “actual-to-actua]” netting test that relies on

actual (or unit-specific allowable) emissions to calculate a

net emissions increase.

In several PSD applicability determinations issued circa

1981-1983, Edward E. Reich, then Director of EPA’s

Division of Stationary Source Enforcement (“DSSE”),

interpreted the PSD regulations consistently with the New

Source Performance Standards (“NSPS”) regulations issued

to implement §111(a) and with EPA’s actual-to-actual focus.

See, e.g., JA 23-37 (PSD applicability analyses by Mr.

Reich); 43 Fed. Reg. 26,380, 26,396 (1978) (§169(2)(C) “in

effect adopts the definition of ‘modification’ under [§111(a)]

for purposes of PSD”). As the DSSE Director during the

time relevant to this litigation, Mr. Reich played an integral

and authoritative part in implementing EPA’s PSD

regulations. See, e.g., JA 23-37 (PSD applicability analyses

by Mr. Reich); see also 44 Fed. Reg. 54,109 (1979) (Federal

Register notice publishing EPA’s final agency action on PSD

applicability question signed by Mr. Reich); Potomac Elec.

Power Co. v. EPA, 650 F.2d 509, 514-15 (4™ Cir. 1981)

(citing a memorandum by Mr. Reich as EPA’s conciusion).‘

Unfortunately for U.S. industry and unnecessarily for

U.S. air quality, EPA has confounded the “modification” and

“major modification” tests, advocating presumptive use of an

“actual-to-potential” test to determine PSD applicability. See

Amici Curiae Br. of Nat’! Parks Conservation Ass’n et al. at

6-7 & n.3.° Because it compares emissions from historic

actual operations to fulltime future operations, EPA’s actual-

to-potential test finds PSD applicability whenever a source

that operates less than fulltime (i.e., less than 24 hours per

day, 7 days per week) makes a physical or operational

change that emits the same rate of pollutants as the pre-

change unit. Indeed, if a unit operating at 50% capacity

installs equipment that emits 25% less emissions, the actual-

to-potential test would find an emissions increase because it

compares 50% capacity at the original emission rate with

* The efforts to characterize Mr. Reich as a low-level

employee are simply revisionist history. Envtl. Def. Br. at 35

n.27; EPA Br. at 28. The record more than supports the

district court’s determination that Mr. Reich authoritatively

expressed EPA’s then-current interpretation, see 278

F.Supp.2d at 642 (Pet. App. 61a-62a), cf. 411 F.3d at 545-46

(Pet. App. 8a-9a), consistent with an unmodified part of

EPA’s 1$78 PSD rulemaking.

* Prospectively from 1992, EPA added an “actual-to-

representative-actual” test for electric utility steam

generating units, but not for other source types. 57 Fed. Reg.

32,314 (1992).

100% capacity at the lower emission rate, notwithstanding

that there is no “modification” within the meaning of

§111(a)(4) and notwithstanding that the PSD (like NSPS)

allows the facility to increase its hours of operation without

triggering review. Thus, contrary to its onginally

characterizing this policy as “unwise,” EPA now finds

modifications “based only on emissions that a source 1s

permitted to emit but which, in many instances, have not

been and are not likely to ever be emitted.” 45 Fed. Reg. at

§2,718; see also note 2, supra. This EPA reinterpretation, if

accepted, would cost billions of dollars in unnecessary

pollution controls and relocation of facilities to escape the

expenses associated with endless preconstruction permit

proceedings.

S NT

On jurisdiction, §307 docs not apply by its terms, §307

would not preclude Duke’s arguments on the proper

interpretation of the PSD regulations if it did apply, and

§307 would be unconstitutional if it precluded Duke’s

arguments and thereby authorized EPA to amend the

regulations via post-promulgation _ reinterpretation

(Sectionl). On the merits, EPA’s reinterpretation of its

regulations does not warrant deference and a fortiori its

reinterpretation of the applicable North and South Carolina

PSD regulations would not warrant deference, even if EPA

had authority unilaterally and summarily to reinterpret those

states’ regulations (Section II).

ARGUMENT

I. §307 DOES NOT PRECLUDE DUKE’S

ARGUMENTS

On threshold jurisdictional questions, a party establishes

the court’s jurisdiction if the court would have jurisdiction

under that party's interpretation of ‘federal law,

notwithstanding that the court may lack jurisdiction under

the adverse party's interpretation. Osborn v. Bank of U.S., 22

U.S. (7 Wheat.) 738, 822 (1824); Verlinden B.V. v. Central

Bank of Nigeria, 461 U.S. 480, 492-93 (1983). At the

jurisdictional threshold, this Court must assume that the

applicable national and regional regulations bore Duke’s

proffered interpretation when promulgated in 1980 and 1982,

respectively. Under that assumption, §307(b)(2) does not

apply here, §307 would not prevent the Fourth Circuit’s

action if it did apply, and §307 would violate the

Constitution if it allowed EPA summarily to amend

regulations by reinterpreting them, without judicial recourse.

By way of background, §307(b)(1) provides for direct

appellate review in the D.C. Circuit of “any... nationally

applicable regulations promulgated[] or final action taken”

by EPA, and for direct appellate review in the appropriate

circuit of “locally or regionally applicable” EPA regulations

and final actions. 42 U.S.C. §7607(b)(1).° Petitioners must

om ew ee

* Locally or regionally applicable regulations or actions

are reviewable in the D.C. Circuit if EPA’s Fetleral Register

notice publishes a finding that its regulation or action “is

_based on a determination of nationwide scope or effect.” /d.

file their petition for review within 60 days of EPA’s

noticing the regulation or action in the Federal Register or,

for petitions based on after-arising grounds, within 60 days

after those grounds arise. /d. Section 307(b)(2) prohibits civil

or criminal defendants’ seeking judicial review of EPA

actions reviewable under §307(b)(1) in the enforcement

proceeding. 42 U.S.C. §7607(b)(2). Section 307(e) provides

that nothing in the Clean Air Act authorizes judicial review

of EPA regulations or orders, except as provided in §307. 42

U.S.C. §7607(e). Section 307(d)(1) exempts enumerated

EPA regulations and other final actions from APA review,

but that APA exclusion expressly does not apply to

_ interpretive rules. 42 U.S.C. §7607(d)(1).

A. §307(b)(2) Does Not Apply

EPA argues that §307(b)(2) precludes review of the PSD

rules because review was available under §307(b)(1), as

evidenced by actual proceedings in the D.C. Circuit. EPA

Br. at 14. Even assuming this to be true (and Duke disputes

it) for the national PSD rules, EPA’s argument is inapposite

to the purported change to the regional PSD rules for North

and South Carolina. Because it has not taken any action

(other than this litigation) to amend the North or South

Carolina PSD rules or assume federal enforcement, EPA

cannot argue that review was available under §307(b)(1).

FTC v. Standard Oil Co. of Cal., 449 U.S. 232, 240-41

(1980) (filing complaint is not final agency action that

triggers APA review); Whitman v. Am. Trucking Ass'ns, 531

U.S. 457, 478 (2001) (“phrase ‘final action’... bears the

same meaning in §307(b)(1) that it does under... 5 U.S.C.

§704”). In any event, because EPA did not issue a Federal

Register notice containing findings of national scope and

effect, §307(b)\(1) review would lie in the Fourth Circuit, not

the D.C. Circuit.

9

Moreover, even as to the national rules, EPA, the

intervenors, and their supporting amici misconstrue Duke’s

(and the Fourth Circuit’s) arguments. Duke does not seek to

review (i.e., to invalidate) EPA’s 1980 PSD rulemaking.

Instead, Duke merely asked the courts below and asks this

Court to interpret those regulations consistently with their

promulgation and to ignore EPA’s subsequent, inconsistent

and procedurally invalid reinterpretations of those

regulations.’

7

Significantly, review of EPA’s reinterpretation based on

correspondence with the Wisconsin Electric Power Company

took place in the Seventh Circuit, not the D.C. Circuit.

Wisconsin Elec. Power. Co. v. Reilly, 893 F.2d 901 (7" Cir.

1990) (“WEPCO”). Moreover, although the preambles to

EPA’s post-WEPCO PSD rulemaking discussed PSD

generally, those preambles did not amend the PSD

regulations except prospectively as specifically proposed and

promulgated. Nat'l Tour Brokers Ass'n v. U. S., 59) F.2d

896, 899 & nn.8-10 (D.C. Cir. 1978) (where self-described

interpretive rule required notice-and-comment rulemaking,

the fact that the agency provided notice and took comment

does not satisfy the notice-and-comment rulemaking

requirement); McLouth Steel Products Corp. v. Thomas, 838

F.2d 1317, 1323 (D.C. Cir. 1988) (“agency may not

introduce a proposed rule in [the] crabwise fashion” of

merely discussing the issue in the preamble to a rulemaking

on another issue).

10

B. §307 Does Not Preclude Courts’ Declaring Law

Assuming arguendo that §307(b)(2) applies here,

federal courts outside the District of Columbia and this Court

have authority to declare the law in the process of decicing a

case or controversy properly before them.* Moreover, even if

EPA’s sovereign immunity would present an obstacle to a

federal court’s declaring the law, the environmentalist

intervenors render sovercign unmunity irrelevant.

APA and Declaratory Judgment Act

The federal-question statute, 28 U.S.C. §1331, provides

subject-matter jurisdiction for nonstatutory review of federal

agency action. Califano v. Sanders, 430 U.S. 99, 105 (1977)

(1976 amendments to §1331 removed the amount-in-

controversy threshold for “any [federal-question] action

brought against the United States, any agency thereof, or any

officer or employee thercof in his official capacity’’) (quoting

Pub. L. 94-574, 90 Stat. 2721 (1976)); Andrus v. Charlestone

Stone Prod. Co., 436 U.S. 604, 608 n.6 (1978) (“Nor does it

matter that the complaint does not... assert §1331(a) as a

* Of course, to the extent that Duke could have brought an

action directly in the Fourth Circuit under §307(b)(1) to

challenge EPA’s amendments by reinterpretation of the

regionally applicable North or South Carolina PSD rules, the

district court or this Court could transfer this action to the

Fourth Circuit, 28 U.S.C. §1631 (court lacking subject-

matter jurisdiction may transfer an action to a court that has

subject-matter jurisdiction), which would produce the same

result that the Fourth Circuit already has reached.

1]

basis of jurisdiction, since the facts alleged in it are sufficient

to establish such jurisdiction”); Chrysler Corp. v. Brown,

441 U.S. 281, 317 n.46 (1979) (§1331 provides subject-

matter jurisdiction to review agency action).

In 1980, Congress amended §1331 to its current form,

Pub. L. 96-486, §2(a), 94 Stat. 2369 (1980), but that

amendment did not repeal §1331’s 1976 amendment, relied

on by Sanders and its progeny. H.R. REP. NO. 96-1461, at 3-

4, reprinted in 1980 U.S.C.C.A.N. 5063, 5065; Bowen v.

Massachusetts, 487 U.S. 879, 891 n.16 (1988); U.S. v.

Mitchell, 463 U.S. 206, 227 & n.32 (1983); cf Morton v.

Mancari, 417 U.S. 535, 550 (1974) (repeal by implication is

disfavored); Schlesinger v. Councilman, 420 U.S. 738, 752

(1975) (“repeals by implication are disfavored,’ and this

canon of construction applies with particular force when the

asserted repealer would remove a remedy otherwise

available’’). Statutes that foreclose alternate forms of review

use stronger language that §307(e). Compare 42 U.S.C.

§405(h) (“[nJo action against the United States... or any

officer... thereof shall be brought under section 1331 or

1346 of title 28 to recover on any claim arising under this

subchapter”) with 42 U.S.C. §7607(e) (“Nothing in this

chapter shall be construed to authorize judicial review ‘of

[EPA] regulations or orders... under this chapter, except as

provided in this section”) (emphasis added); cf. Heckler v.

Ringer, 466 U.S. 602, 616-17 (1984) (assuming without

deciding that §405(h)’s exclusion of jurisdiction under 28

U.S.C. $1331] does not foreclose jurisdiction under 28 U.S.C.

$1361).

The APA waives sovereign immunity for equitable and

declaratory relief against agency action, 5 U.S.C. §702, and

requires courts to “decide all relevant questions of law,

interpret... statutory provisions, and determine the meaning

12

or applicability of the terms of an agency action” 5 U.S.C.

§706. In the absence or inadequacy of statutory review, the

APA authorizes declaratory as well as injunctive relief, 5

U.S.C. §703, unless a “statute[] preclude[s] judicial review.”

5 U.S.C. §701(a)(1). The Clean Air Act expressly exempts

enumerated regulations and other final agency action from

the APA, 42 U.S.C. §7607(d)(1) (“provisions of section 553

through 557 and section 706 of title 5 shall not... apply to

actions to which this subsection [307(d)] applies’), but that

exclusion expressly does not include interpretive rules. See

id. (“subsection [307(d)] shall not apply in the case of any

rule or circumstance referred to in subparagraphs (A) or (B)

of subsection 553(b) of title 5”). Because no statute

precludes their granting declaratory relief on the nugatory

effect of EPA’s reinterpretations, the courts below obviously

have jurisdiction to declare the law.

The Declaratory Judgment Act, 28 U.S.C. §§2201-2202

(“DJA”), authorizes declaratory relief “whether or not

further relief... could be sought.” 28 U.S.C. §2201(a); Duke

Power Co. v. Carolina Envtl. Study Group, Inc., 438 U.S. 59,

70-71 n.15 (1978) (“While the [DJA] does not expand our

jurisdiction, it expands the scope of available remedies”

where plaintiffs sought declaratory relief that a statute was

invalid as an alternate remedy to secking compensation for a

taking). Since 1976, §1331 has authorized DJA actions

against federal officers, regardless of the amount in

controversy. Sanders, 430 U.S. at 105 (quoted supra),

Moreover, the availability of declaratory relief against

federal officers predates the APA, WILLIAM J. HUGHES,

FEDERAL PRACTICE §25387 (1940 & Supp. 1945); EDWIN

BORCHARD, DECLARATORY JUDGMENTS, 787-88, 909-10

(1941), and the APA did not displace such relief, either as

enacted in 1946 or as amended in 1976. See

ADMINISTRATIVE PROCEDURE ACT: LEGISLATIVE HisToRY,

13

S. Doc. No. 248, 79" Cong., 2d Sess., at 37, 212, 276

(1946); 5 U.S.C. §559; Darby v. Cisneros, 509 U.S. 137, 153

(1993) (rejecting argument that 1976 APA amendments

expanded APA’s preclusion of review) (citing 5 U.S.C. §559

and Dickinson v. Zurko, 527 U.S. 150, 154-55 (1999)). Thus,

_even if the APA’s adequate-remedy and preclusion-of-

review provisions preclude declaratory relief under the APA,

5 U.S.C. §§704, 701(a)(1), Duke nonetheless could obtain

that relief under the DJA.

Sovereign Immunity

Assuming arguendo that the APA neither provides

judicial review (§706) nor waives sovereign immunity

($702), the United States’ sovereign immunity would raise

two interesting questions: (1) can a court grant declaratory

relief against a federal agency in an enforcement action, if

the United States has not waived sovereign immunity for

such relief, and (2) if not, could Duke file a cross complaint

against a relevant EPA officer to enable the court to grant

declaratory or equitable relief for ultra vires conduct?

Assuming again arguendo that the APA neither provides

judicial review nor waives sovereign immunity, this Court

should answer the foregoing questions (1) no, U.S. v. U.S.

Fidelity & Guar. Co., 309 U.S. 506, 513-14 (1940)

(“suability of the United States..., whether directly or by

cross-action, depends upon affirmative statutory authority’’),

and (2) yes, Larson v. Domestic & Foreign Commerce

Corp., 337 U.S. 682, 689 (1949) (“where the officer’s

powers are limited by statute, his actions beyond those

limitations are considered individual and not sovereign

actions”). On balance, and providing that it follows the

procedural prerequisites, Duke still could obtain a

declaratory ruling against EPA or its officers that confines

the PSD regulations consistently with the decisions below.

14

Even if this Court finds the APA’s waiver of sovereign

immunity not to apply and if Duke does not cross complain

against an EPA officer, the presence of the environmentalist

intervenors (who cannot assert sovereign immunity) renders

sovereign immunity irrelevant here. Given that the courts

below freely could enter declaratory relief against the

environmentalist intervenors, a fortiori nothing precludes

those courts’ merely interpreting the applicable regulations

consistently with EPA’s contemporaneous interpretations

and the Clean Air Act, as part of deciding litigation properly

before them.

307(b)(2) Is Unconstitutional as

Allowing §307(b)(2) to preclude Duke’s arguments here

would allow an agency to enforce a procedurally invalid

reinterpretation of its regulations over what the regulations

actually provide. If the Constitution has any vitality against

administrative overreaching, see John F. Manning,

Constitutional Structure and Judicial Deference to Agency

Interpretations of Agency Rules, 96 CoLUM. L. REV. 612,

618 (1996) (“separation of powers doctrine includes the

requirement of some minimum separation between

lawmaking and law-exposition”), framing the question in

that light answers the question: §307(b)(2) cannot prevent

courts’ interpreting duly promulgated regulations consistent

with the agency’s contemporaneous interpretations and

rejecting the agency’s subsequent, procedurally invalid

amendments under the guise of interpretation.

II. POST-PROMULGATION REINTERPRETATIONS

WARRANT LITTLE OR NO DEFERENCE

EPA concedes that Duke’s interpretation is permissible,

EPA Br. at 35, but contends that courts must defer to EPA's

15

current interpretation of the 1980 PSD regulations. /d. at 37.

Because Duke interprets the regulations consistently with

EPA’s contemporaneous, authoritative interpretations of the

PSD rules, however, courts cannot defer to EPA’s

amendatory, post-promulgation reinterpretation.

Instead, if EPA no longer approves of the regulations it

promulgated in 1980, as correctly interpreted by the courts

below and by EPA contemporaneously with their

promulgation, EPA could initiate notice-and-comment

rulemaking to amend the regulations. EPA cannot, however,

siumply amend those regulations by reinterpreting them.

Moreover, even if EPA amends its nationally applicable

PSD regulations, EPA nonetheless also would need to amend

the regionally applicable PSD regulations for North and

South Carolina before those changes prospectively would

affect Duke’s power plants in the Carolinas.

A. EPA Cannot Amend its Regulations by

Reinterpretation

This section considers the deference that courts owe to

EPA’s current interpretation of the PSD regulations.

Although interpretive rules may function as precedents, they

do not enjoy Chevron status as a class. U.S. v. Mead Corp.,

533 U.S. 218, 232 (2001) (citing Chevron U.S.A. v. NRDC,

467 U.S. 837 (1984)). Unfortunately, the somewhat related

Seminole Rock doctrine often leads courts to confer greater-

than-Chevron deference to spurious, post-promulgation

agency interpretations of vague agency regulations. Bowles

v. Seminole Rock & Sand Co., 325 U.S. 410, 414 (1945)

(“ultimate criterion” for judicial construction of ambiguous

regulation “is the administrative interpretation, which

becomes of controlling weight unless it is plainly erroneous

or inconsistent with the regulation”); Ehlert v. U.S., 402 U.S.

16

99, 105 (1971) (reviewing court must accept a “plausible

construction of the... regulation”); Martin v. Occupational

Safety & Health Review Comm'n, 499 U.S. 144, 157 (1991),

Pauley v. Bethenergy Mines, Inc., 501 U.S. 680, 696-97

(1991). Whereas Chevron encourages legislators to “pass the

buck” by enacting vague statutes for agencies to implement,

Seminole Rock encourages agencies to “hide the ball” by

promulgating vague regulations that they themselves

authoritatively interpret, post-promulgation.

It does not matter whether agency personnel

intentionally promulgate vague regulations to work mischief

(e.g., to accomplish by post-promulgation fiat what they

could not accomplish in a rulemaking) or merely choose that

course because of short resources or simple laziness. Nor

does it matter here whether EPA officials knew they had

changed prior interpretations or instead merely acted

negligently, without institutional memory. The point is that

Seminole Rock creates incentives inconsistent with

transparent rulemaking in which the public has the notice

that underlies the APA’s concern for notice-and-comment

rulemaking. See Manning, 96 COLUM. L. REV. at 655-57; of.

Smiley v. Citibank (South Dakota), N. A., 517 U.S. 735, 741

(1996) (“notice-and-comment procedures of the

Administrative Procedure Act designed to assure due

deliberation”). Moreover, the “generalf{] expect[ation that] an

administrative regulation [will] declare any intention to pre-

empt state law with some specificity... serves to ensure that

States will be able to have a dialog with agencies regarding

pre-emption decisions ex ante through the normal notice-

and-comment procedures of the Administrative Procedure

Act.” Geier v. American Honda Motor Co., Inc., 529 U.S.

861, 908-10 (2000) (interior citations omitted).

17

Even worse, the “Seminole Rock presumption — that an

agency’s delegated rulemaking power implicitly authorizes

the agency to construe its own handiwork — contradicts

[separation of powers,] a core structural commitment of our

constitutional scheme.” Manning, 96 CoLUo. L. REV. at 639-

40. The laxness of allowing executive agencies to serve in

both lawmaking and law-exposition functions contrasts

markedly with this Court’s separation-of-powers

jurisprudence. /d. at 651-53 (citing INS v_ Chadha, 462 U.S.

919, 952-58 (1983), Bowsher v. Synar, 478 U.S. 714, 726

(1986), and Metro. Washington Airports Auth. v. Citizens for

the Abatement of Aircraft Noise, Inc., 501 U.S. 252, 276-77

(1991)). Like Professor Manning, id. at 686-88, amicus

curiae APA Watch urges the Court to replace Seminole Rock

deference with Skidmore deference, judging an agency’s

interpretation of its regulations by the “thoroughness evident

in the [agency’s] consideration, the validity of its reasoning,

its consistency with earlier and later pronouncements, and all

those factors which give it the power to persuade, if lacking

power to control.” Skidmore v. Swift & Co., 323 U.S. 134,

140 (1944).

Where Congress has delegated rulemaking authority to

an agency, that agency either follows all applicable

rulemaking requirements or acts ultra vires its delegated

rulemaking authority. Cf Louisiana Pub. Serv. Comm'n v.

FCC, 476 U.S. 355, 374 (1986) (recognizing that “an agency

literally has no power to act... unless and until Congress

confers power upon it”). For that reason, whether it applies

Seminole Rock or Skidmore deference to agency

interpretations generally, this Court should grant no

deference to agency interpretations that change (without

explanation or notice-and-comment rulémaking) a prior

agency interpretive or legislative rule. See 5 U.S.C. §551(5)

(defining “rule making” as the agency process for amending

18

a rule); Robert A. Anthony, Interpretive Rules, Policy

Statements, Guidances, Manuals, and the Like-— Should

Federal Agencies Use Them to Bind the Public?, 41 DUKE

L.J. 1311, 1355 (1992) (“[i]f a document expresses a change

in substantive law or policy... [that] the agency intends to

make binding, or administers with binding effect, the agency

may not rely upon the statutory exemption for policy

statements, but must observe the APA’s legislative

rulemaking procedures”); see also, e.g., Paralyzed Veterans

of America v. D.C. Arena, L.P., 117 F.3d 579, 586 (D.C. Cir.

1997); Alaska Prof’l Hunters Ass'n, Inc., v. FAA, 177 F.3d

1030, 1034 (D.C. Cir. 1999); Syncor Int'l Corp. v. Shalala,

127 F.3d 90, 94-95 (D.C. Cir. 1997). Where an agency (like

EPA here) purports to amend a rule without the required

rulemaking, it acts u/tra vires, and descrves no deference

under either Seminole Rock or Skidmore.

The parties and other amici adequately cover the dispute

over the permissibility of multiple meanings springing from

the same definition. Even if it rejects the Fourth Circuit’s

holding that §111(a)(4) and §169(2)(C) create an un-

rebuttable presumption that “modification” must share the

same meaning for NSPS and PSD purposes, however, this

Court nonetheless should fault EPA for reinterpreting the

authoritative, contemporaneous interpretations that those

terms do share the same meaning, 43 Fed. Reg. 26,380,

26,396 (1978) (quoted supra); JA 23-34 (PSD

determinations circa 1981 and 1983), without any

administrative process or explanation for the changed

position. See Motor Vehicle Mfrs. Ass'n v. State Farm Mut.

Auto. Ins. Co., 463 U.S. 29, 42 (1983) (course change

requires reasoned analysis beyond that required to act in the

first instance). Having interpreted those provisions to share

the same meaning, EPA’s unexplained reversal should fall to

19

an un-rebutted presumption, even if it does not fall to the

Fourth Circuit’s un-rebuttable presumption.

B. EPA Cannot Amend the States’ Regulations by

Reinterpretation

Even if EPA could amend its PSD regulations by

reinterpretation, EPA’s reinterpretation many years later

nonetheless would not retroactively amend the rulemakings

that promulgated the North and South Carolina PSD rules in

1982. 47 Fed. Reg. 7836 (1982) (approving North Carolina

PSD regulations); 47 Fed. Reg. 6017 (1982) (same for South

Carolina). Such unilateral EPA action would violate both

federalism and federal law.

First, if EPA no longer approves of the PSD regulations

for North and South Carolina, EPA has ample prospective

authority to prevent PSD violations and work with the states

to correct their PSD rules. 42 U.S.C. §§7410(c), 7413(a)(5),

7477; Alaska Dep't of Envtl. Conservation v. EPA, 540 U.S.

461, 484 (2004). That federal-state disagreement, however,

should not involve Duke’s facilities or any other

retrospective and long-ago permitting issues. Alaska Dep't of

Envtl. Conservation, 540 U.S. at 502, 506-07, 518

(federalism concerns with ELPA’s overstepping _ state

prerogatives under CAA) (Kennedy, J., dissenting);

Georgetown Univ. Hosp. v. Bowen, 488 U.S. 204, 208-09

(1988) (absent an express delegation conferring it, federal

agencies lack authority to issue retroactive regulations); cf

Geier, 529 U.S. at 908-10 (federal agencies expected to

declare regulatory preemption with specificity through

rulemaking process) (quoted supra); 42 U.S.C. §7401(a)(3)

(state and local government bear pnmary responsibility for

controlling and preventing air pollution at its source).

20

Second, for the reasons already set forth in Section II.A,

supra, the APA precludes EPA’s amending the 1982

regulations by summarily reinterpreting them to mean what

EPA wants them to mean today. Simply put, EPA must

conduct a rulemaking to amend the North and South

Carolina rules. See 5 U.S.C. §551(5) (“rule making” is the

process for amending a rule).

CONCLUSION

Because they were properly decided, this Court should

affirm the decisions below.

September 15, 2006 Respectfully submitted,

LAWRENCE J. JOSEPH

2121 K Street, NW, Suite 800

Washington, DC 20037

Tel: 202-669-5135