Appendix — Alabama Power Co. v. Thomas

Supreme Court brief1988

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No. 87- I

In THE hiss

Supreme Court of the United States

OCTOBER TERM, 1987

ALABAMA POWER Co., et al., UNITED MINE WORKERS

OF AMERICA, ORMET CORPORATION,

AND NATIONAL COAL ASSOCIATION,

. Petitioners,

LEE M. THOMAS, et al.,

Respondents,

APPENDIX TO

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

DONALD C. WINSON GEORGE C. FREEMAN, JR.

RICHARD S. WIEDMAN HENky V. NICKEL

ECKERT, SEAMANS, CHERIN (Counsel of Record)

& MELLOTT F. WILLIAM BROWNELL

42nd Floor, 600 Grant Street MEL S. SCHULZE

Pittsburgh, PA 15219 HUNTON & WILLIAMS

(412) 566-6000 2000 Pennsylvania Ave., N.W.

Counsel for Petitioner Suite 9000

Orme t Corporation Washington, D.C. 20006

(202) 955-1500

DAVID C. BRANAND al

Counsel for Petitioners

1130 17th Street, N.W.

Washington, D.C. 20036 Alabama Power Co., et al.

(202) 463-2643 MICHAEL H. HOLLAND

Counsel for 900 15th Street, N.W.

National Coal Association Washington, D.C. 20005

(202) 842-7350

Counsel for United Mine

Workers of America

June 1988

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APPENDIX

TABLE OF CONTENTS

DECISION AND SUBSEQUENT ORDERS OF THE

COURT

Natural Resources Defense Council v. Thomas,

Soe Pie tone (OC Cie. We) kk ke

Order of April 13, 1988 [denying petitions for

SI a tr ee

Order of April 18, 1988 [denying suggestions for

I me I i ace cst tnecaai dk

Order of May 5, 1988 [delaying issuance of man-

AGENCY DECISIONS, FINDINGS OF FACT AND

REGULATIONS

Environmental Protection Agency, Final Stack

Height Regulations, 50 Fed. Reg. 27892, et seq.

SIREN Dat eee er 0 ee CN A Se

Environmentai Protection Agency, Proposed Stack

Height Regulations, 49 Fed. Reg. 44878, et seq.

PI aicesccaeaetia ve elena te aren ae

RELATED STATUTES

Clean Air Act §§ 110(a) (1)-(a) (2) (k), 123, 42

U.S.C. §§ 7410(a) (1)-(a) (2) (k), 7423 (1982)...

Administrative Procedure Act §§4, 10(e), 5

U.B.C. $6 666, 706 (iGB2) ...............:....... be STE

Page

134a

172a

UNITED STATES COURT OF APPEALS

DISTRICT OF COLUMBIA CIRCUIT

Nos. 85-1488 and 86-133

NATURAL RESOURCES DEFENSE COUNCIL, INC., et al..

Petitioners,

LEE M. THOMAS, Administrator,

United States Environmental Protection Agency,

Respondent,

ALABAMA POWER COMPANY, et al., AMERICAN PAPER IN-

STITUTE and the NATIONAL FOREST PRODUCTS ASSOCIA-

TION, NATIONAL COAL ASSOCIATION, KENNECOTT, NAT-

URAL RESOURCES DEFENSE COUNCIL, INC., and SIERRA

CLUB, STATE OF OHIO,

Intervenors.

OHIO POWER COMPANY,

Pe titione ra

LEE M. THOMAS, Administrator,

United States Environmental Protection Agency, et al.,

Re sponde nts,

NATURAL RESOURCES DEFENSE COUNCIL, INC., and

SIERRA CLUB,

Inte rMVeENOTS,

Argued Sept. 25, 1987

Decided Jan. 22. 1988

Petition for Review of an Order of the

U.S. Environmental Protection Agency

David G. Hawkins, with whom Richard E. Ayers and

Howard I. Fox, Washington, D.C., for the Natural Re-

sources Defense Council, Inc., et al., James M. Shannon,

Atty. Gen. and Janet G. McCabe, Asst. Atty. Gen., the

Commonwealth of Massachusetts, Boston, Mass., James E.

Tierney, Atty. Gen. for the State of Maine, Augusta Me.,

and Robert Abrams, Atty. Gen. for the State of New

York, Albany, N.Y., were on the brief for petitioners.

Robert Whitehead and Kenneth N. Tedford, Asst. Atty.

Gen., State of Conn., Hartford, Conn., and Greg Sample,

Asst. Atty. Gen., State of Maine, Augusta, Me., also en-

tered an appearance for Natural Resources Defense Coun-

cil, Ine., et al.

Henry V. Nickel, with whom F. William Brownell and

Mel S. Schulze, Washington, D.C., for Alabama Power

Co., et al., Donald C. Winson and Richard S. Wiedman.

Pittsburgh, Pa., for Ormet Corp.; Robert F. Stauffer.

Washington, D.C. and David C. Branand, Cleveland,

Ohio for National Coal Ass’n, and Michael H. Holland

and Earl R. Pfeffer, Washington, D.C., for United Mine

Workers of America were on the joint brief for peti-

tioners Alabama Power Co., et al. John W. Ublinger,

Jr., also entered an appearance for petitioner Ormet Corp.

Lawrence A. Demase, Pittsburgh, Pa., and J. Daniel

Hull, Washington, D.C., were on the brief for petitioners

Monongahela Power Co. and Potomac Edison Co.

Ann G. Daniels, San Francisco, Cal., entered an ap-

pearance for petitioner Environmental Defense Fund, Inc.

Paul H. Schneider, Asst. Atty. Gen., State of New

Jersey, Trenton, entered an appearance for petitioner,

State of New Jersey.

Charles Carter, Asst. Gen. Counsel, EPA and Lisa F.

tyan, Atty., U.S. Dept. of Justice, with whom Scott

Slaughter, Atty., Dept. of Justice, Alan Eckert, Associate

General Counsel, EPA and Patricia Embrey, Atty., EPA,

Washington, D.C., were on the brief for respondents.

Michael W. Steinberg, Atty., U.S. Dept. of Justice and

Gaylene Vasaturo, Atty., EPA, Washington, D.C., also

entered an appearance for respondents.

Alfred V.J. Prather and Kurt E. Blase, Washington,

D.C., were on the brief for intervenor Kennecott.

Dale T. Vitale, Asst. Atty. Gen., Columbus, Ohio for

the State of Ohio, was on the brief for intervenor-

respondent the State of Ohio.

Henry V. Nickel, W. William Brownell and Mel S.

Schulze, Washington, D.C. for Alabama Power Co., et al.,

Michael K. Glenn, Washington, D.C., for American Paper

Institute, et al., and David C. Branand, Washington,

D.C., for National Coal Ass’n., were on the brief for in-

tervenors Alabama Power Co., et al. Richard S. Wasser-

strom, Washington, D.C., also entered an appearance for

American Paper Institute, et al. Robert F. Stauffer,

Washington, D.C., also entered an appearance for Na-

tional Coal Ass’n.

Edwin Lloyd Pittman, Atty. Gen. State of Mississippi

and Robert Franklin Spencer, Asst. Atty. Gen., State of

Mississippi, Jackson, Miss., were on the brief for amici

curiae the State of Mississippi, et al. urging affirmance.

Before RUTH B. GINSBURG and WILLIAMS, Cir-

cuit Judges, and AUBREY E. ROBINSON, Jr., Chief

Judge, U.S. District Court for the District of Columbia.*

Opinion for the Court filed by Circuit Judge WIL-

LIAMS.

* Sitting by designation pursuant to 28 U.S.C. § 292(a).

I. BACKGROUND

II. STACK HEIGHT VALIDATION: EMIssions RATE

ASSUMPTIONS IN DEMONSTRATIONS

Il.

IV.

The Control-First Dispute

Demonstrations Supporting Stack Height In-

creases Within the Formula

1. Attacks on the formula

2. Attacks on the demonstration procedures.

. The NSPS Presumption for Above-Formula

Stacks

1. Substantive objections

2. Procedural challenges

STACK GRANDFATHERING ISSUES

Sheltering pre-October 1, 1983 Within-

Formula Stack Increases from the Demon-

stration Requirement

Automatic Credit to Formula Height for pre-

January 12, 1979 Stacks

1. Credit up to 2.5H for pre-1979 sources

showing reliance . a -

2. Credit up to H+1.5L for pre-1979 sources

not showing reliance

EPA's Definition of “Stack Height in Exist-

ence” _..... bs anaes

Application of New Demonstration Require-

ments to Sources that Have Completed

Demonstrations

PLUME RISE

Original Design and Construction as One

Stack

Genera! Rule for Merged Stacks .

Partial Grandfathering of Stacks Merged

Before July 8, 1985

1231

12338

1235

1239

1240

1241

1242

1245

fr), neers EA Ie tine a

A. Multi-Point Rollback ...........cccccc0cccccceee 1256

B. Definition of “Nearby” as Used in Demon-

SE NAA ERR nD Sade an AE aE 1256

C. Modeling Adjustments for Complex Terrain.. 1257

COONCEAIBIOIN onccccccccccncccccccccsccccecssccscscnscccscccconsscsssscsososeecses .. 1257

WILLIAMS, Circuit Judge:

Under the Clean Air Act as amended in 1970, 42 U.S.C.

$$ 7401 et seg. (1982), the Environmental Protection

Agency sets national ambient air quality standards

(“NAAQS”) for various pollutants. /d. § 7409. Once

they are set, each state must adopt and submit to the

EPA a state implementation plan (“SIP”) providing for

achievement of the standards in each air quality control

region. Jd. § 7410(a)‘1).' | Such plans obviously must

distribute the necessary pollution cutbacks among the

various pollution sources. From 1970 to this day a dis-

pute has raged over the extent to which pollution sources

may make their required contribution toward these

localized clean air goals by dispersing pollution rather

than by reducing their emissions.

Dispersion may be either through space or time. A

source may disperse its pollution through space by such

devices as “tall stacks,” which carry the pollutants away

from the region and from the ground levels at which

satisfaction of the NAAQS is measured. It may disperse

pollution over time by intermittent controls systems

(“ICS”), which vary the time of discharges so as to take

advantage of changes in weather conditions.

1 Under 42 U.S.C. § 7407, the country is subdivided into inter-

state as we'll as intra-state regions. As of 1981 there were 236 such

regions. B. ACKERMAN & W. Hassver, CLEAN COAL, Dirty AIR 65

(1981).

Dispersion techniques vary from emission reductions

in two fundamental ways. They are, at least up to a

point, considerably cheaper than emissions reductions.

This makes them attractive to industry and often to the

states of origin. (The attraction may be particularly

great where the state of origin produces high-sulphur

coal.) On the other hand, reliance cn such techniques in-

creases the aggregate amounts of pollution dumped into

the atmosphere. This makes them unattractive to en-

vironmentalists and to the citizens of downwind states,’

to which the poliution will be swept and where acid rain

may result.

First the courts and then Congress intervened to pre-

vent states from allowing pollution sources to satisfy their

obligations by means of dispersion. As a result, reduc-

tions in local ground-level pollution do not “count” toward

satisfaction of the NAAQS to the extent that they rely

on those dispersion techniques that are disapproved.

While these limitations obviously relate to important

goals, the system has a certain eccentricity. The ambient

air quality standards are ones to be fulfilled in more

than 236 specific local areas. The anxiety over dispersion

stems primarily from dispersion’s impact outside the

region of origin. But the means of allaying that anxiety

is to disregard, for purposes of measuring contribution to

local clean air, conduct which indisputably helps clean

local ais. Yet none of the constraints on dispersion,

whether devised by courts, EPA or Congress, has forged

2 Of course individuals may also benefit from restrictions on

dispersion as residents of the states where the stacks exist, for (as

will appear) denial of credit for pollution control through dispersion

will result in local sources reducing their pollution by more than

the amount required for achievement of the NAAQS. However,

as the NAAQS are set at levels found by EPA as “requisite to

protect” the public health and welfare, 42 U.S.C. §7409(b), many

local residents may feel that the decrease in pollution is not worth

the increment in electricity costs.

an operating link between those constraints and the in-

juries inflicted by dispersion. Thus, although the parties

adduce some figures as to changes over time in total

atmospheric “loadings” of sulphur dioxide, these are not

related to any statutory goal or to any scheme for attain-

ing specific cutbacks. This incongruity may account for

some of the logical difficulties encountered in trying to

apply the statute and controlling precedents.

This battle has proceeded in the agency, the courts and

Congress. The latter tried to resolve the matter in 1977

by adding a new provision to the Act, § 123, 42 U.S.C.

§ 7423 (1982), which has not proved at all free of am-

biguity. This court reviewed the EPA’s 1982 “stack

height” regulations in Sierra Club v. Environmental Pro-

tection Agency, 719 F.2d 436 (D.C.Cir.1983), cert. denied,

468 U.S. 1204, 104 S.Ct. 3571, 82 L.Ed.2d 370 (1984)

(“Sierra Club”). We affirmed many aspects of those

regulations, invalidated two provisions, and directed the

agency to reconsider other provisions on remand. In

1985 the agency promulgated a new set of regulations

attempting to respond to Sierra Club.’ In these consoli-

dated cases, environmental] petitioners led by the Natural

Resources Defense Council (and supported by an array

of northeastern states)‘ and industry petitioners( sup-

* The 1985 Final Stack Height Regulations at issue here appear

at 50 Fed.Reg. 27,892 (1985). After their publication, Title 40 of the

C.F.R. was reorganized, and these regulations are now codified at

40 C.F.R. Part 100. This opinion, however, will refer to the C.F.R.

cites as they appear in the 1985 Federal Register notice.

‘ Petitioners attacking the regulations as insufficiently protective

of the environment include NRDC, the Environmental Defense

Fund (“EDF”), the Sierra Club, and the states of Connecticut,

Maine, Massachusetts, New Hampshire, New Jersey, New York,

Rhode Island and Vermont. These parties submitted one consoli-

dated brief, and will be referred to collectively as “NRDC” or the

“environmental petitioners.”

ported by an array of middle western states)* challenge

the amended regulations. We regret to say that we can-

not find them in full compliance with § 123 as construed

in Sierra Club.®

I. BACKGROUND

This court described the statutory provisions at issue

in this case, together with their legislative and adminis-

trative history, in Sierra Club, 719 F.2d at 439-43, and

in our earlier opinion in Alabama Power Co. v. Costle,

636 F.2d 323, 388-91 (D.C.Cir.1979). Here we confine

ourselves to a brief summary.

Section 110 of the Act directed the EPA Administrator

to approve a SIP if it complied with the applicable pro-

5 Parties petitioning on the ground that the regulations are too

stringent, and intervening in support of the agency against the

NRDC challenges, include Alabama Power Co., the American Paper

Institute, the National Forest Products Association, United Mine

“Torkers of America, Monongahela Power Co., the National Coal

Association, Ohio Power Co., Ormet Corp., and the State of Ohio.

These parties have been aided by an amici curiae brief submitted

by the states of Indiana, Mississippi and Georgia. These parties will

be referred to generally as “industry petitioners.” Kennecott is an

Intervenor in support of the agency’s approval of the multipoint

roll-back system, an emissions control system challenged by the

environmental petitioners.

6 Prior to oral argument, petitioner NRDC filed a motion for

enlargement of time to submit a supplemental appendix. Soon there-

after it submitted a motion to correct the certified index to the

record and file its supplemental appendix. These motions were

opposed by both the agency and the industry petitioners /intervenors.

The industry petitioners in turn filed a motion requesting the oppor-

tunity to tender supplemental briefs should we grant NRDC’s mo-

tions. NRDC’s motion for enlargement of time is, at this point,

moot. We have reviewed its supplemental appendix and conclude

that nothing contained therein affects our disposition of the case,

It is therefore unnecessary for us to consider the merits of NRDC’s

motion or those tendered in opposition. We deny both the motion

to correct the certified index and file the supplemental appendix

and the industry petitioners’ subsequent motion for supplemental

briefing.

joa caaiiiaiaian 7

cedural requirements and included (among other things)

“emissions limitations . . . and such other measures as

may be necessary to insure attainment” of the NAAQS.

42 U.S.C. § 7410(a) (2) (B). The agency initially ap-

proved state plans that authorized the use of “tall stacks”

and ICS compliance measures. Several courts found this

approach illegal, reading $110 to establish a hierarchy

among control techniques. Under the hierarchial view,

“other measures” qualified as “necessary” only to the

extent that the SIP had exhausted the “emissions limita-

tions” approach, i2.e., only where further compliance

through such limitations was “unavailable or infeasible.”

NRDC v. EPA, 489 F.2d 390, 410 (5th Cir.1974), rev'd

on other issues sub nom., Train v. NRDC, 421 U.S. 60,

95 S.Ct. 1470, 438 L.Ed.2d 731 (1975); Big Rivers Elec-

tric Corp. v. EPA, 523 F.2d 16, 21-22 (6th Cir.1975)

(involving ICS), cert. denied, 425 U.S. 934, 96 S.Ct.

1668, 48 L.Ed.2d 175 (1976); Kennecott Copper Corp. v.

Train, 526 F.2d 1149, 1153-54 (9th Cir.1975) (involving

ICS and tall stacks), cert. denied, 425 U.S. 935, 96 S.Ct.

1665, 48 L.Ed.2d 176 (1976). (We refer to these cases

collectively as the “NRDC triolgy.”) Round I to the

environmentalists.

In 1976 EPA issued guidelines seeking to implement

the Fifth Circuit’s view of $110. 41 Fed.Reg. 7450

(February 11, 1976) (“1976 Guidelines”). The guide-

lines employed a variety of distinctions that continue to

haunt the area. First, they focused on the control credit

that a source could receive for pollution control through

stack height. Thus they did not purport to restrict a

source’s actual employment of a tall stack, but simply

limited the extent to which the actual reduction in

ground-level pollution achieved by such a stack would

count towards compliance with the NAAQS. /d. at 7451.

Second, they drew a distinction between stacks that

were equal to or less than 2!; times the height of the

10a

facility (the “2.5H” formula) and stacks that were tal-

ler, favoring within-formula stacks. /d.'

Third, they looked relatively askance at increases in

stack height as opposed to stack heights attained in

original construction, presumably because the former

were more likely than the latter to reflect a purpose to

avoid emission reduction costs rather than adherence to

conventional engineering practice. Id.

Fourth, they employed “grandfathering” concepts both

with respect to increases and original construction stacks.

For example, they treated the stacks of sources that re-

ceived construction permits before the Fifth Circuit’s

decision more favorably than those of sources initiating

construction later. Jd.

This is not the place to describe the rather complex

pattern that emerged from all these elements. We will

return to aspects of the 1976 Guidelines as we go along.

For the moment, we note that credit for control through

stacks was to be unlimited if the source applied “the best

available control technology” (“BACT”), even for the

least favored vintage of stack and for stacks of increased

height. Jd. at 7451-52. Stacks initiated before the Fifth

Cireuit’s NRDC decision were grandfathered, up to what-

ever figure the 2.5H formula might produce. Id.

In 1977 Congress stepped in with § 123,85 moved at

lease in part by concern that the 1976 Guidelines were

7In 1981, the agency began defining H as the “height of nearby

structure(s).” 46 Fed.Reg. 49,817/1 (Oct. 7, 1981). This minor

alteration has no bearing on the current action.

‘Section 123, 42 U.S.C. § 7423, reads as follows:

(a) The degree of emission limitation required for control

of any air pollutant under an applicable implementation plan

under this subchapter shall not be affected in any manner by—

(i) so much of the stack height of any source as exceeds good

engineering practice (as determined under regulations promul-

gated by the Administrator), or (2) any other dispersion

technique. The preceding sentence shall not apply with respect

lla

too lax. See Sierra Club, 719 F.2d at 440. The section

in essence elaborates on §110’s references to “other

methods,”” and, to a degree, subordinates the use of tall

stacks and other dispersion techniques to emission con-

trols. It creates a new concept, “good engineering prac-

tice” (“GEP”), with a complex definition. The methods

and distinctions used in the 1976 guidelines reappear,

with important variations.

Like the earlier guidelines, § 123 addresses only the

issue of credit for pollution reduction through dispersion

techniques, explicitly stating that the Administrator is

not to prohibit increases or restrict stack height. § 123

(e), 42 U.S.C. § 7423(¢c). Further, it builds in at least

some significance for the 2.5H formula,’ specifying that

to stack heights in existence before December 31, 1970, or dis-

prsion techniques implemented before such date... .

(b) For the purpose of this section, the term “dispersion

technique” includes any intermittent or supplemental control

of air pollutants varying with atmospheric conditions.

Administrator, [sie] shall[,] after notice and opportunity for

public hearing, promulgate regulations to carry out this section.

For purposes of this section, good engineering practice means,

with respect to stack heights, the height necessary to insure

that emissions from the stack do not result in excessive con-

centrations of any air pollutant in the immediate vicinity of

the source as a result of atmospheric downwash, eddies and

wakes which may be created by the source itself, nearby struc-

tures or nearby terrain obstacles ‘as determined by the Ad-

ministrator). For purposes of this section such height shall

not exceed two and a half times the height of such source unless

the owner or operator of the source demonstrates, after notice

and opportunity for public hearing, to the satisfaction of the

Administrator, that a greater height is necessary as provided

under the preceding sentence. In no event may the Adminis-

trator prohibit any increase in any stack height or restrict in

any manner the stack height of any source.

® The agency carried the 2.5H formula over from the 1976 Guide-

lines in its initial effort to give meaning to the GEP concept. 42

12a

GEP height must not exceed that formula unless the

source owner demonstrates to the Administrator that

such greater height is “necessary” as that term is used

in the GEP definition. Third, it employs grandfathering,

but in a more limited sense than did the 1976 guidelines,

protecting only stacks “‘in existence” or dispersion tech-

niques “implemented” before the 1970 amendments (De-

cember 31, 1970). § 123(a), 42 U.S.C. § 7423(a). § 123’s

structure differs from that of the 1976 Guidelines in that

it draws no explicit distinction between increases in

stack height and original construction.

Although $ 123(¢) directed the EPA to issue regula-

tions implementing its provisions by February 7, 1978,

they did not emerge in final form until February 8,

1982. 47 Fed.Reg. 5864. The Sierra Club and the Na-

tural Resources Defense Council challenged the regula-

tions in this court under 42 U.S.C. §$ 7607(b) and pre-

vailed in part. We will not here summarize the hold-

ings of Sierra Club, as a summary would be unneces-

sary for the cognoscenti, meaningless for others. The im-

portant aspects of the decision appear throughout this

opinion as we address the many current issues.

The upshot was a remand to the agency, with direc-

tions to promulgate new final regulations “within six

months from the date of issuance of [the] court’s man-

date,” 719 F.2d at 470. The mandate issued on July 18,

1984, after the denial of certiorari by the Supreme Court,

Fed.Reg. 57,459 (Nov. 3, 1977). It refined this formula in its 1979

proposed regulations, defining GEP stack height as the height of a

nearby structure plus one and a half times the lesser of the height

or the width of the nearby structure, or H + 1.5L. 46 Fed.Reg.

2608, 2610 (Jan. 12, 1979). The current regulations except from

the H + 1.5L formula those pre-1979 sources that relied on 2.5H.

50 Fed.Reg. 27,906/3 (1985), 40 C.F.R. § 51.1(ii) (2) (i). When we

use the term “formula height,” we are referring to that height

dictated by the stack height formula applicable to the source in

question.

13a

468 U.S. 1204, 104 8.Ct. 3571, 82 L.Ed.2d 870. The

agency later secured a postponement from the court, and

promulgated the final regulations on June 27, 1985. 50

Fed.Reg. 27,892 (1985). Environmental and industry

petitioners challenge the revised regulations in this court

under 42 U.S.C. § 7607(b) (1), which directs review here

for ‘nationally applicable regulations.” Thus, 17 years

after the 1970 amendments and 10 years after the enact-

ment of § 123, we again address the permissible scope

of reliance on dispersion techniques.

II. STACK HEIGHT VALIDATION: EMISSIONS RATE

ASSUMPTIONS IN DEMONSTRATIONS

A. The Control-First Dispute

The 1982 Regulations allowed sources to build stacks

to formula height and to increase existing stacks to for-

mula height at will. But a source seeking credit for

above-formula stacks was required to demonstrate (by

fluid modeling or field studies) that the extra height was

“necessary” within the meaning of § 123’s definition of

GEP (“height necessary to insure that emissions .. . do

not result in excessive [downwash-induced] concentra-

tions of any air pollutant... .”). 47 Fed.Reg. 5865/2

(1982!. The agency defined “excessive concentrations”

in terms of a “relativist” test: downwash-induced pol-

lutant concentrations were excessive if they exceeded

maximum non-downwash concentrations by 40 percent

or more Id. at 5869/1.

Though the 40 percent figure is not in itself at issue,

a word of explanation is in order. In preparing the 1982

regulations EPA found that downwash increased ground-

level pollution concentration levels by about 40 percent

where a source’s stack was at formula height (i.e.,

2.5H). Sierra Club, 719 F.2d at 446. As Congress had

recognized the 2.5H formula as indicative of traditional

engineering practice and therefore presumptively sound,

14a

the agency reasoned that any downwash-induced pollu-

tion increase exceeding what a formula-height stack

would normally produce should be regarded as excessive.

Id.

In Sierra Club, environmenal petitioners attacked the

relativist test and prevailed. They argued that Congress

was content to give credit to stacks only to the extent

that their height was necessary to protect human health,

so that a downwash-induced concentration could be “ex-

cessive” only if it were health-threatening. 719 F.2d at

447. The 40 percent realtivist test of course had no

direct connection with any health threat.

The relativist-absolute dispute appeared to the court in

Sierra Club to dissolve into the question whether Congress

meant in § 123 to codify a traditional engineering formula

or to create a health-and-welfare based stack height

standard. The court found that the statute and its

legislative history “disclose[d] sharply conflicting sig-

nals,” and concluded, after reviewing the question in

detail, that “Congress [probably] thought traditional en-

gineering practice and protection of health were the

same thing.” Jd. at 448. But the court also found evi-

dence in the legislative history that Congress recognized

that a choice between the two standards would be neces-

sary if traditional engineering practice dictated a height

greater than that necessary to protect human health. /d.

The court concluded that “meeting air quality standards

was primary in [Congress’s] mind and that good engi-

neering practice was merely a way to do so.” /d. Finding

it unlikely that the 40 percent standard would identify

‘an absolute pollutant concentration that is dangerous to

health,” the court remanded to the ageney with instruc-

tions to “develop a standard directly responsive to the

concern for health and welfare that motivated Congress

to establish the downwash exception.” /d. at 450.

The mandate to deveiop an absolute test revealed an

issue that did not exist under the relativist one. Ground-

15a

level concentrations are obviously a function not only of

stack height and other elements mentioned in § 123’s

GEP definition, but also of the emissions emerging at the

top of the stack. Once “excessive” concentrations are de-

fined in absolute terms, the stack height ‘necessary’ to

avoid those concentrations on the ground will obviously

vary with a source’s actual emissions. Thus Sierra Club

opened a gap in § 123’s GEP definition, the gap expressed

in the bracketed and emphasized clause below: “height

necessary [given a specified emissions level| to insure

that emissions from the stack do not result in excessive

concentrations. ...”

Although the parties disagree as to how much the

assumed emissions rate affects any computation of credit-

worthy stack height, they agree on the direction of the

impact; high assumed emissions rates entail relatively

generous stack credits (and thus relatively high permis-

sible emissions rates), low assumptions the opposite.

EPA’s choice of a baseline emissions rate in the 1985

regulations has varied with the particular contexts pre-

sented by the rule-making. The critical decisions have

related to the “demonstrations” (consiting of field studies

or fluid modeling demonstrations) that the regulations

require of sources in some circumstances. First, sources

seeking credit for any stack height increase after original

construction must (unless the stack is grandfathered)

demonstrate compliance with § 123’s GEP definition, even

though the height for which credit is sought in within

EPA’s formula.” 40 C.F.R. § 51.1(kk) (2). Here, EPA

has specified that the baseline must be “the emission rate

10 These increases account for a substantial share of the pollution

dispersed rather than controlled by the utility industry, but the data

before us do not indicate precisely how much. NRDC directs

our attention to data suggesting that 168 pre-1970 sources have

“doubled” their ability to disperse pollution, NRDC Brief at 9-11,

but its data combine the effects of stack height increases with

those of merged stacks (a practice discussed in part IV, infra). Id.

l6a

specified by any applicable State implementation plan (or,

in the absence of such a limit, the actual emissions rate).”

Id. NRDC argues that instead the baseline must be that

emissions rate which would result from the source’s using

all “available methods.” NRDC Brief at 22 (emphasis

added). The parties have dubbed NRDC’s contention the

“control-first” approach.

EPA also requires a demonstration for any stack

height above that resulting from its formula (unless the

stack is grandfathered). 40 C.F.R. § 51.1(kk} (1). Here

it uses as the baseline the rate provided in the “new

source performance standards” (“NSPS”) promulgated

for new power plants under § 111 of the Act, 42 U.S.C.

$ 7411, unless the source can show that the NSPS rate is

unfeasible. This conditional NSPS standard is, of course,

a variant of control-first; it is vigorously attacked by

industry."

Finally, the baseline emissions rate is relevant to EPA’s

validation of its formula, a matter that is indirectly at

issue here. That validation was based in part on studies

from various power plants, the cleanest having an emis-

sions rate of 4.65 pounds of sulphur dioxide per million

British thermal units (Btu). J.A. 834. This compares

with an NSPS emissions limit of 1.2 pounds per million

Btu for plants built between 1971 and 1978, 40 C.F.R.

s 60.43(a) (2), and thus obviously does not fit the control-

first model.

In this part we address the general question whether

s 123 requires use of control-first and conclude that it

1! Under the new regulations, sources are also required to under-

take GEP stack height demonstrations when a federal, state, or

local authority believes that the formula has overestimated their

necessary stack height. 40 C.F.R. § 61.1(kk)(3). For purposes of

these demonstrations, EPA chose to retain its old relativistic defi-

nition of excessive concentrations, and thus had no need to define

an applicable emissions rate.

17a

does not. Later sections face the baseline emissions rate

problem in the specific contexts already mentioned.

We first address EPA’s contention that NRDC’s control-

first claims are barred by res judicata, as it failed to

raise the argument in Sierra Ciub. Of course where res

judicata (claim preclusion) applies, it bars relitigation

not only as to all matters which were determined in the

previous litigation, but also as to all matters that might

have been determined. Tutt v. Doby, 459 F.2d 1195, 1197

(D.C.Cir.1972). Moreover, enforcement of the 60-day

time limits imposed by the statute providing for review,

42 U.S.C. § 7607(b) (1), requires that issues raised by an

initial set of rules be raised within that time limit, not

saved for use against the rules that may emerge from a

remand.

Neither of these barriers applies here. The issue of the

proper baseline emissions rate became ripe only after the

Sierra Club court remanded for application of an abso-

lute test. While the environmentalists’ briefs in Sierra

Club might nave mentioned the issue, they could hardly

have induced this court to pass on it before EPA had a

chance to do so. They are not, therefore, precluded from

raising the matter in the present litigation.

On the merits, we start by noting the scope of our

review. If, using “traditional tools of statutory construc-

tion,” we can discern Congress’s intentions in regard to

baseline emissions rates, obviously we must give effect to

Congress’s will. NLRB v. United Food & Commercial

Workers Union, Local 23, U.S. : , 108 S.Ct.

413, 421, 98 L.Ed.2d 429 (1987) (citations omitted) ;

Chevron U.S.A., Inc. v. NRDC, 467 U.S. 837, 842-43, 104

S.Ct. 2778, 2781-82, 81 L.Ed.2d 694 (1984). If we find

that “the statute is silent or ambiguous” on the issue,

however, we must defer to the EPA’s interpretation if it

is based upon a “permissible” statutory construction.

NLRB, —— U.S. at ——, 108 S.Ct. at 421, quoting

Chevron, 467 U.S. at 8438, 844, 104 S.Ct. at 2782, 2783.

18a

Before evaluating the various appeals to the dictionary

and to legislative history, we think it suitable to note that

the view which NRDC says Congress adopted carries

drastic implications. Control-first would require each

source to assume, for purposes of its stack height credit

demonstration, the lowest achievable emissions rate, de-

termined on either a generic or an individualized basis.

Although the record does not allow us to infer exactly the

impact of the baseline emissions rate on the emissions

rate that would emerge (after the stack height credit

were calculated and then used to determine the permissi-

ble emissions), all parties agree that that impact is sub-

stantial. Indeed, that is what the fight is all about. If

Congress in § 123 prescribed the use of such a baseline

emissions rate, with all its implications for ultimate

emissions ceilings, it did so in a remarkably cryptic way.

In the Clean Air Act Congress has formulated stand-

ards for development of emissions limits in a variety

of contexts. For example, it provided for generic emis-

sions limits for new sources in § 111, 42 U.S.C. § 7411

(1982), spelling out at length the criteria for calculation

of the limits. In a variety of other contexts, it has pro-

vided—at length—for determination of the lowest feasible

emissions level on a source-by-source basis. See, e.g., 42

U.S.C. §§ 7475(a) (4), 7479(3) {mandating use of the

“best available control technology” (“BACT”) for new

sources in attainment areas, and defining the parameters

of the standard); 42 U.S.C. §§ 7502(b)(2}, 7501/3)

(requiring “lowest achievable emissions rate” (“LAER”)

for new sources in nonattainment areas, and defining

LAER); 42 U.S.C. § 7502(b) (3) (requiring “reasonably

available control technology (“RACT’”) for existing

sources in nonattainment areas): 42 U.S.C. § 7491(¢)

(requiring “best available retrofit technology” (“BART”)

for pre-1971 sources impairing visibility in national parks

and certain other clean areas}. NRDC in essence con-

tends that in § 123 Congress mandated agency pursuit

NN —

19a

of a similar strategy, but without providing a word of

guidance. All NRDC’s arguments must be assessed in

light of one’s estimate of the plausibility of any such

scenario. We think it quite unlikely.

NRDC argues that its control-first interpretation is

consistent with the plain meaning of the statutory lan-

guage and is clearly supported by relevant legislative

history. It argues further that even if the statute were

ambiguous, EPA’s interpretation is internally inconsistent

and therefore invalid.

NRDC contends that the control-first approach follows

inexorably from the plain meaning of the word “neces-

sary.” Webster’s Third New World Dictionary defines

“necessary” to mean essential or “indispensable.” Jd. at

1511. It argues that this definition compels a finding

that stack height cannot be “necessary” to control ground

level pollution unless the source has employed all feasible

emission-control alternatives for reaching the desired

levels under downwash conditions. NRDC Brief at 22.

But courts have frequently interpreted the word “neces-

sary” to mean less than absolutely essential, FTC v.

Rockefeller, 591 F.2d 182, 188 (2d Cir.1979): 9 to 5

Organization for Women Office Workers v. Board of Gov-

ernors, 721 F.2d 1, 10 (1st Cir.1983), and have explicitly

found that a measure may be “necessary” even though

acceptable alternatives have not been exhausted. In FTC

v. Rockefeller, supra, for example, the court said that

“the word ‘necessary’ is not always used in its most rigid

sense.” 591 F.2d at 188. Specifically, it found that a

subpoena could be “necessary” to an FTC investigation

even though the Commission had not pursued “reasonably

available alternatives.” Jd.; cf. Chrisner v. Complete

Auto Transit, Inc., 645 F.2d 1251, 1261-62 (6th Cir.

1981) (statutory term “reasonably necessary” is not ab-

solute and does not require complete absence of alterna-

tives). As these courts have recognized, meaning varies

20a

with context; Webster’s definition by no means tells us

that Congress intended that the baseline emissions rate—

an issue that surfaced only after this court’s Sierra Club

decision—must be premised on the source’s having em-

ployed all available emissions controls.

NRDC asserts that the legislative history clearly dem-

onstrates Congress’s intent to adopt a control-first posture.

The House Committee which drafted § 123 stated that it

was “intended to ratify the general thrust, if not the

specific holdings, of the three U.S. courts of appeals

which have considered the issue of the permissibility of

use of intermitten controls, tall stacks, and other dis-

persion enhancement techniques.” House Report at 91-

92. The cases cited by the House Report are, of course,

the familiar ones of the NRDC trilogy, and each found

that “other measures” for complying with the NAAQS

are “necessary,” for purposes of § 110(a)(2)(B) review,

only when further limits on emissions were infeasible.

We do not believe, however, that legislative history en-

dorsing the “general thrust” of the NRDC triolgy demon-

strates that Congress in § 123 itself clearly resolved the

exact degree of hierarchy appropriate in ranking control

above dispersion.

Just as the Sierra Club court did not anticipate the

present issue, we see no evidence that the courts involved

in the NRDC trilogy anticipated it. Once one recognizes

as Congress indisputably recognized in § 123—that dis-

persion through stacks can play a quite legitimate role

in protecting health and welfare from downwash, it is

not by any means obvious that in calculating the appropri-

ate role of stacks one must assume that reduction efforts

have been pushed to the point of infeasibility.

Section 123’s concept of GEP stack height not only

acknowledges a legitimate role for stacks, but endorses

engineering practices developed at a time when emissions

were largely unregulated. In fact, Congress gave those

2la

practices a specific endorsement in authorizing the EPA

to rely on the 2.5H formula in granting credit. See § 123

strations for above-formula stacks). It is true that this

court decided in Sterra Club that in any potential clash

between defining GEP as that height necessary to avoid

downwash-induced effects on human health and welfare,

and defining it as 2.5H, the former must prevail. 719

F.2d at 448. But that decision did not undermine the

statutory assumption that sources might legitimately rely

on stacks aimed at protecting health and welfare from

emissions rates such as have prevailed on plants built

before Congress’s vigorous 1970 intervention into clean

air regulation.

Thus it appears to us that the cases of the NRDC

trilogy simply do not speak to the issue of calculating

GEP height, because those courts never even considered

the possibility that sources could rely on stacks except

when driven to do so by the infeasibility of all alterna-

tives. Legislative history endorsing their “general thrust”

therefore cannot answer new questions posed by §123

itself: “Necessary” as used in the GEP definition of $ 123

‘annot be answered by reference to the trilogy’s construc-

tion of the word in § 110(a) (2) (B).

NRDC further points to legislative history that in its

view suggests that Congress believed credit should be

given only for stack heights needed by “well controlled”

sources. In discussing its reasons for granting source’s

credit for GEP stack height, the House Committee ex-

plained that

for many years, good air quality management has

meant building a stack sufficiently tall to offset aero-

dynamic downwash created by structures in the im-

mediate vicinity of the stack. Without some provision

for stack height, a plume released downwind of such

structure might become engulfed by turbulent eddys

22a

|sic] within the wake of the structure. When this

occurs even the plume from a well-controlled source

may cause air quality standards (or other require-

ments) to be violated.

House Report at 93, U.S.Code Cong. & Admin.News 1977,

p. 1171 (emphasis added).

We find NRDC’s reading strained. It seems clear to

us that the Committee was merely justifying its decision

to grant credit up to GEP stack height with the observa-

tion that even well controlled sources may need to rely on

the dispersion engendered by a GEP height stack to avoid

excessive local ground-level pollution concentration.

Finally, NRDC points to a number of references ex-

pressing disapproval of the use of the dispersion effects of

“tall stacks” to meet the NAAQS. See, e.g., House Re-

port at 93 (“the courts have determined that the 1970

act prohibited tall stacks as a final compliance method”) ;

Conference Report, H.R.Rep. No. 564, 95th Cong., Ist

Sess. 144 (1977), U.S.Code Cong. & Admin.News, pp.

1077, 1171, 1524 (‘Tall stacks are not a means of emis-

sion limitation under the Clean Air Act of 1970.”). But

we noted in Alabama Power v. Costle that “tall stack” is

“a term that really covers a too-tall stack. 636 F.2d 323,

389 (D.C.Cir.1979) (emphasis added). Thus the refer-

ences merely reiterate the Congress’s intent to deny stack

height credit beyond the hight dictated by GEP; they do

not reflect any legislative decisions on how to calculate

GEP.

Far from finding a clear Congressional intent to adopt

NRDC’s control-first strategy, we find the statute’s use

of the term “necessary” to be completely ambiguous. We

find no evidence in the statute or the legislative history

that Congress ever thought through the question of how

to determine GEP or formulated any view on the “control-

first” approach. In view of Congress’s endorsement of the

historic practice of using stacks to protect health from

as 9p in

23a

downwash-induced pollution, we think the agency, in

adopting existing or SIP-required emissions rates as the

baseline for demonstrations to support within-formula

height increases, gave the statute a quite reasonable

interpretation.

NRDC asserts that even if we find the statute to be

silent as to the appropriate emission level assumption,

we should reject the agency’s approach as internally in-

consistent and therefore arbitrary and capricious. See

5 U.S.C. § 706(2) (A). As noted above, while EPA au-

thorizes use of existing or SIP-required emissions as the

baseline for justifying within-formula increases, 40 C.F.R.

$ 51.1(kk) (2), it requires an assumption of NSPS emis-

sions for demonstrations needed to justify above-formula

stack heights, 40 C.F.R. § 51.1(kk) (1). NRDC claims

that as NSPS is defined in terms of technological and

economic feasibility, the latter provision reflects the

agency’s partial acceptance of the control-first approach.

The agency’s treatment of within-formula increases, it

Says, is hopelessly inconsistent with its view of above-

formula stacks. NRDC Brief at 28-29,

The EPA explained in the rulemaking that it rejected

use of existing emissions in the above-formula context for

fear of impermissible circularity—“to the extent that la

source’s preexisting emissions] limit relied on greater

than formula hight, it would amount. to using a tall

stack to justify itself.” See 50 Fed.Reg. 27,898/2. But

we think that $123 left the agency free to regard this

circularity as permissible in the within-formula context,

impermissible in the above-formula context. EPA ex-

plained that its use of NSPS (the stringent standard

applicable to new sources) for above-formula stacks con-

formed to Congress’s expectation that the “credit for

stacks above formula height .. . be granted only in rare

cases.” 50 Fed.Reg.27,898 /1.

NRDC is certainly correct when it notes that the

circularity problem that attends the use of existing emis-

0 on, csc ee ee

24a

sions levels for above-formula demonstration purposes also

applies to within-formula demonstrations. Where the

formula has overstated the stack height necessary to

avoid excessive ground level concentrations, the SIP or

existing emissions levels may reflect the benefit of the

erroneous assumption, so that its use in a within-formula

stack height demonstration will inflate the “necessary”

stack height. The problem, however, is plainly less severe

than in the above-formula height context. The initial

stack height credit was by definition within-formula, thus

limiting the source’s existing emissions rate, and thus

the extent to which the laxity of the process may inflict

potential damage. The reliance on the formula in the

initial computation establishes an outer bound on the

degree of error. This is quite different from the risks

entailed by use of existing rates in the above-formula

context, precisely where both this court and Congress

itself have warned the agency to extend credit only with

“utmost caution,” Sierra Club, 719 F.2d at 450.

Accordingly, we reject NRDC’s contentions that § 123

prohibits use of existing emissions rates in within-for-

mula demonstrations and that the discrepancy between

the baseline assumptions for above- and within-formula

demonstrations renders the latter arbitrary and capri-

cious.

B. Demonstrations Supporting Stack Height Increases

Within the Formula.

1. Attacks on the formula. In the Sierra Club litiga-

tion the environmental petitioners did not directly chal-

lenge the accuracy of the stack height formula. (By then

the 2.5H formula had evolved into H +- 1.5L, where L

refers to the lesser of the height or width of any struc-

ture near the stack. Some references are to formulas in

the plural because the old 2.5H persisted as to some

grandfathered stacks.) They did, however, attack the

agency's failure to require demonstrations to justify

25a

stack height credit in either of two special cases: (1)

when a source raised a preexisting stack, and (2) when

federal, state or local authorities believed the formula

had overstated the necessary stack height. The EPA in

turn defended the omission of such demonstration re-

quirements largely on the ground of the formula’s ac-

euracy. 719 F.2d at 456. The court found this faith

unsupported by the record, as it was explicitly based on

the agency’s erroneous relativistic conception of “exces-

sive concentrations.” '* Jd. at 458. The court therefore

held that the agency had not considered whether the for-

mulas were an accurate enough measure, in light of the

construction of “excessive” concentrations as related to

health and welfare, to justify dispensing with a demon-

stration requirement in the two special cases. It remanded

for that reconsideration. Jd. Thus, despite the absence of

direct attack, the Sierra Club decision invited reconsid-

eration of the formula, by suggesting to EPA that supe-

rior validation of the formula was an alternative to

adopting demonstration requirements in the areas spe-

cifically found to be vulnerable.

On remand, the agency provided demonstration §re-

quirements not only for the two circumstances specifically

disputed in the preceding litigation, 40 C.F.R. § 51.1(kk)

(2) (stack height increase demonstrated), 51.1(kk) (3)

(governmental authority instigated demonstration). but

also for sources with porous structures or buildings whose

shapes are areodynamically smoother than the simple

structures on which the formulae were based. 50 Fed.

Reg. 27,900 2 (explaining the reach of 40 C.F.R. § 51.1

‘2 The agency had derived its concept of “excessive” from the

formula itself, defining excessive emissions as ones exceeding the

percentage increase in ground level concentrations normally occur-

ring with formula height stacks during periods of downwash. 50

Fed.Reg. at 27,8933; and see pp. 1233-1234 supra. Its subsequent

finding that the formula predicted the minimum stack height neces-

sary to avoid excessive concentrations was as unsurprising as it

was circular.

26a

(kk) (3)). Given these demonstration requirements,

nothing in our Sierra Club opinion required EPA to re-

evaluate the accuracy of its formula. Accordingly, con-

sideration of deficiencies in the formula is barred by res

judicata (and by the time limits of 42 U.S.C. § 7607(b)

(1)), unless we find that the demonstration procedures

chosen by EPA are insufficient to fulfill the statutory

purposes. We now turn to that issue.

2. Attacks on the demonstration procedures. In Sierra

Club this court found it proper to assume that large

plants of the sort at issue here would have been built

in accordance with “good air quality management” prac-

tices, or, effectively, GEP as the term is used in § 123.

719 F.2d at 459. The corollary of this was an assump-

tion that post-construction stack increases were not jus-

tified by any need to correct downwash-induced dangers

to health and welfare. The court said that this assump-

tion could be rebutted in individual cases “only by a re-

liable indicator” of the height needed for that purpose.

Id.

EPA responded by imposing demonstration requir

ments. Under the 1985 regulations, sources seeking credit

for height increases must show, through fluid modeling

or wind tunne! demonstrations, that the increase is neces-

sary to avoid downwash that would otherwise exceed at

least one of several health- or welfare-related criteria

(applicable NAAQS, “prevention of significant deteriora-

tion” standards covering areas in full attainment of the

NAAQS under § 7475(a) (4), or levels amounting to a

local nuisance). 40 C.F.R. § 51.1/kk)2). As noted above,

a source is to assume for the purposes of the demonstra-

tion an emission level equivalent to the applicable SIP,

or, if no SIP applies, to its actual emissions rate. Jd.

NRDC argues that these emissions rate assumptions

undermine the demonstrations, denying them the relia-

bility demanded by Sierra Club. As we have noted, an

27a

assumption of existing or SIP-required emissions rates

plainly gives the demonstrations a certain circularity:

the now existing or required emissions rate will have

been based on a given stack height, which will then be

used to justify a stack height. NRDC Brief at 29."

NRDC argues that instead EPA was required to as-

sume the best achievable emissions rate. /d. at 22.

We have already rejected NRDC’s claims that failure

to employ control-first assumptions directly violates § 123

or is arbitrary and capricious in light of EPA’s own con-

demnation of circularity and partial adoption of control-

first for above-formula demonstrations. The sole question

currently before us, then, is whether EPA’s use of ex-

isting rates in this context is so defective as to fall short

of Sierra Club’s reliability requirement.

We note at this point that the agency’s failure to es-

tablish perfect logic in support of its emissions baseline

decision may well stem from the nature of § 123 itself.

While its goal is the reduction of overall pollution load-

ings, at least in part with a view to protect against acid

rain in regions distant from the sources, it operates

solely on the means by which sources meet national goals

for local health and welfare. It would be startling if im-

plementation of this process did not involve a few logical

imperfections.

There appears, in fact, to be no completely logical basis

on which to select a baseline rate for any demonstration.

If EPA were to use NSPS for all demonstrations, for

example, demonstrations would in a sense underpredict

the appropriate stack height for sources with higher

13 NRDC does not suggest that under EPA’s regulations a source

could increase its emissions and raise its stack, justifying the stack

height (and thus the increased emissions) by demonstrations em-

ploying the latter rate. We do not read the reference in 40 C.F.R.

§ 51.1(f8)(2) to “the actual emission rate” to encompass such a

scenario.

28a

emissions rates. Assumption of a single high emissions

rate, conversely, would overpredict the appropriate stack

height for cleaner plants. But selecting each plant’s ex-

isting permitted rate is subject to the circularity objec-

tion. In this world of imperfections, we think EPA’s

choice reasonable. This is particularly so in light of

Congress’s having obviously contemplated reliance on a

historic notion of ‘‘good engineering practice,” a notion

developed during an era of relatively primitive emissions

controls. We do not find EPA’s methodology for the

conduct of within-formula demonstrations arbitrary or

capricious.

C. The NSPS Presumption for Above-Formula Stacks.

In developing a baseline emissions rate for demonstra-

tions to justify above-formula stacks, EPA initially pro-

posed that sources assume “either (1) the existing, ap-

proved emission limit; (2) any applicable , technology-

based emission limit, such as the new source performance

standards (NSPS); or (3) the emission limit that would

result from the use of GEP formula stack height, which-

ever is applicable to the source being modeled.” 49 Fed.

Reg. 44,882/1. The last phrase clearly indicates that

NSPS would be used only for plants to which it applied

by virtue of $111. The final rule was dramatically

different. It required each source to assume NSPS emis-

sion levels, or, if it could show those to be infeasible,_

the lowest achievable levels. 40 C.F.R. § 51.1(kk) (1).

Industry petitioners strenuously object to this conditional-

NSPS assumption on both substantive and procedural

grounds.”

144 NRDC does not directly challenge the agency’s above-formula

stack height demonstration provisions, which mandate a NSPS

emissions level assumption, subject to feasibility constraints. But

it does object to EPA’s proposals for gauging feasibility, set forth

in certain “guidance memoranda.” NRDC Brief 28 n.54. This court

has previously held that the memoranda at issue do not represent

i i ‘S™:;CS

29a

1. Substantive objections. Petitioners raise three dis-

tinct challenges to the agency’s decision to adopt the

NSPS presumption.” First, they argue that because Con-

gress did not prescribe the use of a techonolgy-based emis-

sions limit for GEP fluid modeling demonstrations, the

Administrator lacks the authority to mandate its use.

Alabama Power Brief at 19. As we have already noted

in our discussion of NRDC’s control-first argument, Con-

gress imposed technology-based emission limitations—

NSPS, BACT, LAER, RACT and BART—in a variety

of situations. Two of these, BART and RACT, govern

pre-1971 sources. 42 U.S.C. $§ 7502(b), 7491 (b) (2) (A).

Industry petitioners would have us infer from the con-

trast between those express conferrals cf authority, and

the absence of any such reference here, that Congress

denied EPA the authority to assume such an emissions

rate.

We find the attempt of industry to bar control-first

here is not stronger than NRDC’s effort to require it

in the within-formula context. As we noted in discussing

NRDC’s theory, the record raised considerable doubt

whether anyone in Congress even recognized the issue.

The silence alone seems to support neither a requirement

nor a prohibition. What Congress did in § 123 was to

grant broad discretion to the agency, requiring owners

of above-2.5H stacks to demonstrate the necessity for the

higher stacks “to the satisfaction of the Administrator.”

42 U.S.C. § 7423(c). In Sierra Club we read the section

to mean above-2.5H credit should be granted only with

final agency action subject to review. NRDC v. Thomas, No. &85-

1834 (D.C. Cir. Aug. 3, 1986) (Order dismissing petition for re-

view).

15 Besides the three is a frivolous effort to prove that EPA mis-

takenly read Sierra Club as mandating the use of NSPS. This is

patched together from arguments in EPA’s brief explaining how

its efforts to meet the Sierra Club remand, coupled with defects in

alternative emissions baselines, led it to choose NSPS.

aes

‘ aaa

30a

the “utmost caution,” 719 F.2d at 447, which the selection

of the NSPS baseline seems to reflect.

Second, industry petitioners assert that the use of the

NSPS presumption only for above-formula stack height

demonstrations will unfairly prejudice sources located in

mountainous terrain, since it is in such areas that above-

formula stacks are most likely to be found. Industry

petitioners argue that this contravenes the will of Con-

gress. Alabama Power Brief at 34. In Sierra Club, how-

ever, we found a congressional recognition “that the tall

stacks provision would have a disproportionately heavy

impact on polluters in mountain areas.” 719 F.2d at 455.

In fact, the court found an affirmative intent to “dis-

courage utilities from locating in hilly terrain, because

such locations tend to require very tall stacks, leading

to a greater dispersion of pollutants.” Jd. at 445. The

court adopted that construction in the context of rejecting

EPA’s claim that it could consider “plume impaction” in

computing excessive concentrations. Jd. at 452-56. As

that decision applied even to plants contsructed before

the adoption of § 123, whose owners were obviously not

free to respond to its “discourag/ing]” influence, Sierra

Club’s interpretation of congressional non-solicitude for

plants in hilly terrain was a strong one. Any disad-

vantages inflicted on such plants by EPA’s choice of the

NSPS baseline fit readily within our prior reading of

the law.

Finally, the industry petitioners assert that in order

to use the NSPS presumption, EPA must be able to point

to substantial evidence that it is attainable by most of

the affected sources. But as EPA allows any source to

use a higher emissions rate when NSPS is infeasible,

there is no need for any sort of generie demonstration

that it is normally so. Nor was it improper for EPA

to place the burden of showing infeasibility on the source

owner, rather than assuming the burden of showing

feasibility. Congress appears to have intended that above-

3la

formula stack height be approved only in “rare circum-

stances.” House Report at 93, U.S.Code Cong. & Admin.

News 1977, p. 1171. Cf. Sierra Club, 719 F.2d at 450

(“utmost caution” to be exercised in granting above-

formula credit). EPA’s location of the burden is thus

rationally related to the purposes of the statute and well

within the Administrator’s discretion.

2. Procedural challenges. As described above, EPA

initially outlined a scheme through which each source

would assume its “applicable” emissions rate for purposes

of above-formula demonstrations: (1) sources subject to

technology-based emission limits would assume those rates;

(2) sources not subject to such limits would assume their

existing, approved SIP limits; and (3) sources not sub-

ject to either of the above would assume the limit

that would result if they were to operate with the stack

height credit that the formula would produce. 49 Fed.

Reg. 44,882/1. Less than two weeks before promulgating

the final regulations, the agency informed industry repre-

sentatives of its decision to adopt instead a uniform (but

conditional) NSPS presumption. Because time was short,

industry representatives were only able to respond with

two short letters strongly urging reconsideration of the

new rule. J.A. 1483, 1491 (letters from the Utility Air

Regulatory Group (“UARG’”) and American Electric

Power Company). Industry petitioners now assert that

this abrupt shift denied them the opportunity to comment

afforded by $4 of the Administrative Procedure Act, 5

U.S.C. § 533.

In the preamble to its Final Rule, the agency sought to

undermine this claim by characterizing its 1984 proposal

as presenting three distinct alternatives, rather than a

coherent three-part scheme. 50 Fed.Reg. 27,898 /2. This

is quite disingenuous. Nothing in the initial formulation

suggested that EPA intended to adopt one of the three

rates for universal use. And where EPA was offering

alternatives from which it intended to make a choice in

32a

its final rule, it said so. See, e.g., 49 Fed.Reg. 44,881/1

(proposing and soliciting comments on two alternatives

for the definition of “excessive concentrations”) ; 44,884 (1

(proposing and soliciting comments upon three approaches

for modeling “nearby” terrain features).

The EPA can obviously promulgate a final regulation

that differs in some respects from its proposed regulation.

We recognized in /nternational Harvester Co. v. Ruckles-

haus, 478 F.2d 615, 682 n. 51 (D.C.Cir.1973), that “a

contrary rule would lead to the absurdity that . .. the

agency can learn from the comments on its proposals only

at the peril of starting a new procedural round of com-

mentary.” Thus, this court has held under both the APA

and the Clean Air Act that the agency’s final rule must

only be a “logical outgrowth” of its proposed rule. Small

Refiner Lead Phase-Down Task Force v. EPA, 705 F.2d

906, 547 (D.C.Cir.1983) (citing circuit precedent on this

matter).

We think the agency’s ultimate choice qualifies—if

barely—as a logical outgrowth of the original proposal.

Obviously the germ of NSPS was there, as one of the

possibly-applicable technology-based limits. Moreover, the

primary concern that drove EPA away from allowing

sources to use existing SIP limits (and thus towards

NSPS) was obvious at an early stage: NRDC’s con-

stantly asserted control-first theme. See 51 Fed.Reg.

27,898/2 (agency rejects use of existing SIP emissions

limits beeause “to the extent that [a source’s limit] relied

on greater than formula height, it would be using a tall

stack to justify itself’’).

To be sure, EPA never explained in the administrative

proceeding why it rejected use of the emissions rate that

would flow from use of the formula. In fact, in its Re-

sponse to Comments the agency defended this option

against environmentalist charges that it was incurably

circular. J.A. 314-15. Here the agency’s lawyer explained

EE eV

ee ee ee

33a

that the formula emissions level assumption was inap-

propriately strict. EPA Brief in Ohio Power, Nos. 86-

1331, 86-1362, at 28-29. However valid this critique may

be, it is little help in showing the agency’s intellectual

path to the NSPS choice. However, as neither the in-

dustry petitioners nor anyone else in this litigation advo-

cates that choice, it can hardly have been so attractive

that its disappearance came as a shock.

Further, the public comments raised the possibility of

adopting a single, technology-based limit. The New York

State Attorney General’s Office suggested an NSPS as-

sumption for all demonstrations. J.A. 434. This gave

industry participants a clear opportunity to shoot the

idea down. NRDC attacked each of the three limits set

forth in the 1984 proposal, J.A. 829-33, and advocated

use of the rate that would result from use of “the maxi-

mum degree of control available to the source.” Jd. at

832 n. 6. Though the target raised by this contention

was broader than NSPS, it certainly gave industry critics

an opportunity both to shore up the non-NSPS components

of the original proposal and to attack any form of control-

first. Nor was industry free to discount these proposals

merely because they came from parties favoring a control-

first reading of the statute, see Alabama Power Reply

Brief at 15; there was a clearly foreseeable risk that

EPA would reject the environmentalists’ reading of the

law but proceed to adopt control-first as a matter of

choice. This, in essence, is what it did in a limited sphere.

Finally, EPA’s warning of the NSPS threat, communi-

cated two weeks before promulgation, gave industry peti-

tioners at least a limited opportunity to focus a direct

attack on NSPS. Though severely pressed, they managed

to file objections 7-10 days before the final regulations

were signed. J.A. 1483, 1491.

Although this case stretches the concept of “logical out-

growth” to its limits, we think it does not reach the

breaking point. The NSPS assumption appears to have

34a

emerged from the agency’s notice and comment process,

as the agency responded to others’ comments by stripping

away the components of the original proposal that it con-

cluded were more vulnerable. Of course, our affirmance

of EPA on this point does not require it permanently

to resist useful suggestions or critiques that may emerge.

Ill. Strack GRANDFATHERING ISSUES

The agency has in several cases grandfathered stacks

and in one instance rejected an industry request for

grandfathering treatement. NRDC attacks several ele-

ments of the grandfathering as too generous; several

firms (including one heavy buyer of electricity) attack

the rejection of their claim. The decisions at issue are as

follows:

1. EPA limited its demonstration requirement for

within-formula stack height increases to “sources seeking

credit after October 1, 1983 [10 days before our decision

in Sierra Club].” 40 C.F.R. § 51.1(kk) (2). (The pre-

amble makes clear that the date refers to the time owners

raised the stack, not the time they “sought” credit. 50

Fed.Reg. 27,899 /2.)

2. EPA affords credit up to 2.5H, free of any demon-

stration requirements (‘including such as might be im-

posed by state or local air pollution authorities), for any

stack in existence on January 12, 1979, the date when

EPA first proposed the more sophisticated formula, H+-

1.5L. Pursuant to our remand in Sierra Club, this is

limited to cases where the owner or operator produces

evidence of having relied on the 2.5H formula in estab-

lishing its emission limitation. 40 C.F.R. §§ 51.1 (ii) (2)

(i). EPA also affords credit up to H-+-1.5L or any stack

in existence on January 12, 1979, regardles of reliance.

Id. at § 51.1 (ii) (2) (ii).

3. For purposes of the grandfathering explicitly af-

forded by £ 123, for stacks “in existence” before Decem-

oo,

35a

ber 31, 1970, EPA in the 1982 regulations defined “in

existence” in terms of the start of continuous construction

or entering into certain types of contracts. 40 C.F.R.

§ 51.1(gg). We upheld this in Sierra Club, 719 F.2d at

464-66. NRDC claims that EPA should have revised this

definition in the light of later discoveries about the num-

ber of plants advantaged by the grandfathering.

4. EPA has refused to provide any grandfathering for

plants that prior to the Final Rule conducted demonstra-

tions to justify above-formula stacks, even though the

demonstrations conformed entirely to the then-applicable

rules. J.A. 64-65.

Some general principles are applicable to all these

issues. First, none of them is governed by the rule

adopted in Georgetown University Hospita! v. Bowen,

821 F.2d 750, 756-58, 760 (D.C.Cir.1987), generally in-

validating retroactive rules. The rules there at issue

would have limited reimbursements for past transactions.

All that is at stake here are restrictions on plants’ future

emissions. Retroactivity is involved here simply because

enforcement of the demonstration requirement might im-

pinge unfairly on source owners that made investments or

other commitments in reasonable reliance on prior under-

standings.

Second, our decision in Sierra Club observed that some

of the considerations governing an agency’s duty to apply

a rule retroactively were

(1) whether the new rule represents an abrupt de-

parture from well established practice or merely

attempts to fill a void in an unsettled area of law,

(2) the extent to which the party against whom the

new rule is applied relied on the formed [sic] rule,

(3) the degree of the burden which a retroactive

order imposes on a party, and (4) the statutory

interest in applying a new rule despite the reliance

of a party on the old standard.

36a

719 F.2d at 467 (quoting Retail, Whoiesale & Depart-

ment Store Union v. NLRB, 466 F.2d 380, 390 (D.C.

Cir.1972)). Clearly the issue entails a balancing of the

interest in prompt and complete fulfillment of statutory

goals against the inequity of enforcing a new rule against

persons that justifiably made investment decisions in re-

liance on a past rule or practice. Cf. Retail, Wholesale &

Department Store Union v. NLRB, 466 F.2d at 390;

Associated Gas Distributors v. FERC, 824 F.2d 981, 1040

(D.C.Cir.1987).

We now turn to the specific complaints.

A. Sheltering pre-October 1, 1983 Within-Formula Stack

Increases from the Demonstration Requirement

At the outset, EPA invites us to discard NRDC’s ob-

jection by means of an argument that to us is quite

obscure: that the Sierra Club court did not insist on a

retroactive demonstration requirement, or indeed on any

demonstration requirement at all. EPA Brief at 34. The

premise seems to be that because EPA’s adoption of a

demonstration requirement was voluntary, it need not

explain its decision not to impose the requirement on pre-

1983 increases. The argument does not add up. First,

EPA’s adoption of a demonstration requirement for in-

ereases could be viewed as wholly voluntary only if EPA

had set out thoroughly to validate its H-+1.5L formula.

This it did not really purport to do, although its preamble

contains some favorable—and hotly disputed—observa-

tions on the subject.’®

16The agency asserts that “[s!tacks below formula height are

associated with downwash-related violations of the [3-hour SO,,

NAAQS] where emission rates significantly exceed the level specifi-

fied by NSPS.” 50 Fed. Reg. 27,987/3. To back up this assertion

EPA relies primarily upon its evaluation of five fluid modeling

studies which, it claims, demonstrate significant exceedances of the

NAAQS. Id. at 27,897/1. NRDC argues that because these studies

measured only ten-to-fifteen minute concentrations, they cannot be

37a

In any event, the agency found, in light of this court’s

reading of $123 in Sierra Club, that a demonstration

requirement was suitable. That being so, exemption of

a large class of increased stacks is an important de-

cision subject to attack as possibly arbitrary and ca-

pricious. It would fail that test if it is inconsistent

with the retroactivity analysis set forth in Sverra Club.

e NAAQS exceedances. NRDC Brief at 37-38.

As wind speed and direction are highly variable in the real world,

one cannot simply extrapolate ten-to-fifteen minute averages to

estimate pollution averages for longer periods. Thus, the normal

practice is to apply a conversion factor to short-term wind tunnel

results. See e.g., “Eastlake 1980” study at B4-B6, J.A. 111-12; EPA

3rief at 23. Environmental petitioners contend that if the agency

had applied a standard conversion factor to the EPA studies, the

results would demonstrate conclusively that even the comparatively

dirty plants tested did not need formula height stacks to avoid

NAAQS exceedances. NRDC Brief at 38. In response EPA asserts

only that its analysis of meteorological data for each plant convinced

taken to demonstrat

it that use of a conversion factor was not warranted.

In addition to its NAAQS exceedances rationale, the agency

asserts that the formula is necessary to prevent short-term emis-

sions peaks that “raise a real prospect of local health or welfare

impacts.” 50 Fed. Reg. 27,987/3-98/1. We have no doubt that the

agency is permitted to consider hazardous short-term conditions as

within the sphere of “excessive concentrations.” Cf. Sierra Club,

719 F.2d at 447 (state nuisance law may provide a proxy for ex-

cessive concentrations). However, the agency provides no support

for its assertion that the current formula predicts the stack height

necessary to avoid such short-term hazards.

EPA has stated that it did not rely upon industry data to sup-

port its short-term peaks rationale, Response to Comments at 40,

J.A. 308, and has specifically disavowed reliance upon the only other

study cited in its preamble that supports its short-term peak con-

elusions (Huber & Pooler, “Comments on Peak Ground-Level Con-

centrations Due to Building Downwash Relative to Peak Concentra-

tions Under Atmospheric Dispersion Processes” (June 10, 1985

J.A. 129). See EPA Brief at 27. And while the agency points out

that the ten-to-fifteen minute concentrations measured in the fluid

modeling studies exceeded the 1300 microgram per cubic meter

level specified in the three hour NAAQS, it does not demonstrate

that short-term exposures at that level are hazardous.

38a

Invoking the first factor identified by Sierra Club,

NRDC argues that here there simply is no ‘“well-estab-

lished practice.” A fluctuating rather than well-estab-

lished practice presumably counts against grandfather-

ing, as it undermines the actor’s claim that its reliance

was legitimate. In fact, the record indicates consider-

able waffling by EPA. There appear to have been new

policy moves in 1978, 1976, 1979, 1980, and 1981 and

1982. In its 1973 Guidelines, it actively encouraged

sources with short stacks to increase to GEP formula

height. 38 Fed Reg. at 25,701/2 (1973) (“The increase

of stack height up to a height consistent with good en-

gineering practice is acceptable without qualification. ...

For fairly level terrain, good engineering practice 1s nor-

mally taken to be a stack height 2! times the height of

the facility or nearby structure.”). In 1976 it responded

to the circuit courts’ disparaging treatment of its 1973

effort with considerable severity: putting aside stack

increases started before the Fifth Cirecuit’s NRDC de-

cision, the 1976 guidelines gave credit only for increases

by sources that applied BACT (“best available control

technology”). 41 Fed.Reg. at 7451/2-3 (1976). In 1979,

after Congress’s adoption of § 123, the agency proposed

regulations considerably less stringent, allowing sources

that raised existing stacks automatic credit up to H +

1.5L, with the proviso that the EPA or a state or local

control agency could order the source to justify use of

the formula height by demonstrating, through fluid

modeling, the existence of “an air quality problem, at-

tributable to downwash.” 44 Fed.Reg. at 2614/1 (Jan.

12, 1979). In a 1980 “policy change,” sparked by a

heightened concern ‘that use of its GEP formula for

stack height increases {was] increasing pollutant load-

ings and acid rain,’ the agency tightened again, an-

nouncing its intention to require fluid modeling demon-

strations for all future stack height increases. 45 Fed.

Reg. 42,282/1 (June 24, 1980). Eleven months later,

the EPA drew back, leaving in place the scheme adopted

39a

in its 1979 proposed ruies. 46 Fed.Reg. 28,650 (May

28, 1981). The agency’s 1982 Final Regulations moved

further in the direction of leniency, granting automatic

credit up to formula height for sources raising existing

stacks, with no provision for support through demon-

strations. 47 Fed.Reg. 5868/3 (1982). Of course it was

this rule that the Sierra Club court remanded for recon-

sideration. 719 F.2d at 458-59.

Clearly the legitimacy of increasing stack height in

reliance on regulatory policy has varied radically from

period to period. The equities for a firm increasing its

stack in the 1976-79 era are slight compared to ones

that increased under the 1973, 1979 or 1981 policies.

Besides, the policies represent a scatter rather than a

clear line, reducing the equities for reliance even on

the moments of lax policy. Finally, equitable claims have

some tendency to degrade over time; a 15-year 1973

contract for the purchase of high-sulphur coal may have

loomed large in 1976 but hardly amounts to anything in

1987.

EPA’s defense of its grandfathering decision failed to

focus on any of these difficulties. See 50 Fed.Reg. at

27,899 /3-900/1. Indeed, EPA’s policy imposed no re-

quirement of reliance at all, even though it was precisely

that omission that persuaded this court to remand the

grandfathering issue raised in Sierra Club. 719 F.2d at

468.

Against the seemingly weak claims for grandfathering

is the possible frustration of the statutory goal. This

looks significant. The vulnerability of the formula per-

suaded EPA to require demonstrations. These demon-

strations are impaired by the circularity problem that

EPA has recognized. Yet EPA’s grandfathering rule

allows most of the affected sources to escape even this

modest check.

40a

Administrative problems may partly explain EPA’s

generous grandfathering. An immediate run of demon-

strations for all sources that have increased stack height

since 1970 would evidently tax the capacity of the facili-

ties for running such demonstrations. EPA Brief at 18.

But this alone appears a weak justification, as EPA has

the alternative of adopting a formula clearly valid

enough to dispense with demonstrations altogether.

Thus we find it necessary to remand. We do not say

there is no room for grandfathering on these facts, but

the case for it seems unusually weak. Any grandfather-

ing chosen should fit, to a reasonable degree, the varia-

tions in regulatory history and degrees of reliance. We

recognize, of course, that administrative necessity or de

minimis principles will prevent a perfect fit; EPA could

not be expected to match the six layers of regulatory

policy with a six-layer grandfathering scheme. But fi-

delity to the congressional purpose requires a far more

careful effort to address the problem than the agency

has yet made.

B. Automatic Credit to Formula Height for pre-January

12, 1979 Stacks

The regulations provide credit for heights up to for-

mula levels for sources originally built or subsequently

raised before January 12, 1979. 40 C.F.R. §§ 51-1/ii)

(2) (i) and (ii). As now written, the rule shelters such

sources not only from the requirement of demonstrations

initiated by state or local authorities, 40 C.F.R. § 51.1

(kk) (3), but also from the demonstration requirements

for stack increases. For purpose of our present discus-

sion, we assume that on remand EPA will look to our

analysis in part IIIA in deciding to what extent (if

any) it will shelter older within-formula increases from

the new demonstration requirements. Acccordingly we

limit our consideration here to the 1979 grandfathering

provision only insofar as it shelters stacks from state-

4la

initiated demonstration requirements and only insofar

as it applies to credit for stacks at or within their origi-

nal heights. The rules have this effect for (1) credit up

to 2.5H for pre-1979 stacks of sources whose owners re-

lied on the 2.5H formula and (2) credit up to H + 1.5L

for all pre-1979 stacks regardless of reliance.

At the outset, and applicable to both types of grand-

fathering, is the question whether freedom from the ne-

cessity for supplying demonstrations, at the behest of

government authorities, is of any great importance to the

realization of the goals of the Clean Air Act. We can-

not detect much importance. As a practical matter, it

seems likely that virtually all such requirements would

originate with a state, or with a local entity acting with

the authority of the state. But 42 U.S.C. § 7410 leaves

states completely free to establish more stringent pollu-

tion controls than EPA. See Indiana & Michigan Elec-

tric Co. v. EPA, 509 F.2d 839, 844 (7th Cir.1975); Ap-

palachian Power Co. v. EPA, 477 F.2d 495, 498 (4th

Cir.1973). Thus no EPA rules on demonstrations could

bar a state from insisting on the most onerous demon-

stration imaginable. The failure to provide for such a

demonstration for pre-1979 sources seeking credit within

the formulae thus has little practical effect; the statutory

interest in retroactive application is modest. On the

other hand, the agency must supply some reason for

treating pre-1979 sources more leniently than later ones.

We now turn to that problem in the 2.5H and H +

1.5L contexts.

1. Credit up to 2.5H for pre-1979 sources showing re-

liance. In Sierra Club, we made clear that the agency

was to either justify its faith in the accuracy of the

formula or provide a mechanism through which local au-

thorities could force sources within their jurisdiction to

prove their need for formula height stacks. As noted

in part III.A above, the agency failed to properly vali-

date its formula. It chose instead to promulgate a state-

42a

initiated demonstration provision, 40 C.F.R. § 51.1(kk)

(3), subject to the grandfathering here at issue.

We have no difficulty upholding this limited shelter.

We found in Sierra Club that calculation of GEP through

use of the 2.5H formula was, until 1979, an established

practice and that protection of sources relying on such

a practice in their original construction would not “main-

tain a situation that Congress sought to end.” 719 F.2d

at 468. Moreover, the states’ alternative route to control,

noted above, further dilutes the interests supporting ret-

roactivity.

NRDC first contends that EPA’s failure to advance a

full substantiation of even the H + 1.5L formula utterly

prevents it from allowing automatic credit for stacks

originally constructed in reliance on the 2.5H formula.

But the environmental petitioners in Sierra Club did not

attack the formula at all and attacked the want of dem-

onstrations only for stack height increases and instances

where local authorities were concerned that the formula

might over-predict GEP. Thus, once the state option to

be more severe is recognized, Sierra Club left EPA quite

free so far as concerns within-formula original-construc-

tion stacks. The sole constraint was that, in grandfather-

ing the difference (for original-construction stacks) be-

tween the height yielded by the 2.5H formula and that

yielded by the newer H + 1.5L, EPA must afford the

benefit only to firms actually relying on the 2.5H figure.

719 F.2d at 468. The agency responded to that aspect

of the remand by explicitly conditioning grandfather

treatment under the new regulations on such a showing

of reliance. 40 C.F.R. § 51.1 (ii) (2) (i).

NRDC’s second objection relates to the exact terms

of the reliance requirement. The grandfathering is avail-

able where the source owner establishes its reliance on

the formula “in establishing an emission limitatien,” 40

C.F.R. § 51.1 (ii) (2) (ii), meaning, all agree, that the

43a

agency looks to the source’s emission rate rather than its

actual stack height. See also 50 Fed.Reg. 27,901/2.

Thus, if a source built a stack taller than 2.5H, but

set its emission limits assuming 2.5H credit, the agency

will concede that “a convincing demonstration has been

made that the source properly relied on the formula.”

Id. at 27,901/3. Conversely, if such source based its

emission limits “on some other stack height credit, such

as 2.8H, 3.5H or some other number,” the agency would

infer that it had not relied on the formula. /d.

Here NRDC’s cbjection flows from its reading of our

decision in Sierra Club. It believes that case to preclude

grandfather treatment for sources with stacks taller than

2.5H, relying heavily on the following paragraph, es-

pecially its last sentence:

We hold that the statute does not prevent EPA from

allowing its past rule to be applied to stacks built

before its new formula was proposed. but that the

agency has erred in allowing sources that did not

rely on the old formula to use it. Congress was

moved to enact section 123 by evidence that during

the 1970’s many sources had built tall stacks far

above the heights dictated by sound engineering

practice. To allow such sources to claim credit for

heights up to the 2.5 Rule would be a windfall for

them, unjustifiable under either the statute or the

equitable considerations that govern retroactivity.

719 F.2d at 467.

The paragraph taken as a whole simply states that

allowing sources with above-formula height stacks to

claim 2.5H credit without a demonstration of reliance on

the 2.5H formula would be unlawful. That it does not

require EPA to deny credit for the dispersion effects of

the part of a tall stack fitting within the 2.5H formula

is reinforced by the court’s discussion of the burden of

retroactivity. The court observed that such a burden

44a

might take the form of expensive retrofitting of control

equipment or renegotiation of coal contracts. /d. at 468.

As these consequences derive from the need to change

emission limitations, and not from the height of the stack

itself, it is clear that the court believed that a source

could demonstrate the requisite reliance by demonstrating

that it had set its emission limits by reference to the

2.5H formula. As the statute does not regulate actual

stack height (and in fact specifically forbids the Ad-

ministrator from doing so, $ 123(c), 42 U.S.C. § 7423(¢)),

but rather regulates stack height credit, it would be

perverse to make grandfathering depend on actual stack

height rather than upon emission limitation decisions

driven by expectations of allowable credit.

2. Credit up to H + 1.5L for pre-1979 sources not

showing reliance. As noted above, the states’ complete

freedom to impose demonstration requiremerts appears to

sap this particular grandfathering of any great signifi-

cance. Nonetheless, in drawing a distinction between pre-

1979 and later stacks, the agency must supply some

reason. In this context we cannot identify one.

Before EPA introduced the H + 1.5L formula in its

1979 proposal, the 2.5H formula was the only formula

sanctioned by the agency. Thus, not only does the agency

not impose a reliance requirement in this context, but we

cannot understand how a pre-1979 source could have relied

on H —- 1.5L. Even when the statutory interest in apply-

ing a rule retroactively is slight, an agency must articu-

late some equitable rationale for grandfathering. Al-

though we cannot say that there is none, we cannot upheld

the decision in the absence of any explanation.

C. EPA’s Definition of “Stack Height in Existence”

In Sierra Club petitioners contended that EPA’s defini-

tion of stack “in existence on December 31, 1970,” as used

in § 123(a), impermissibly extended protection to stacks

merely under construction. The court accepted EPA’s

————————

45a

view. 719 F.2d at 464-65. At the time, the record before

the court indicated that only four to eight plants would

be affected by the dispute, and the court mentioned this

fact. Jd. at 465. NRDC now contends that the broader

definition will encompass 32-to-$8 utility sources, NRDC

Brief at 74, and challenges EPA’s refusal] to reconsider

the issue in light of this reassessment of its probable

impact.

Although the Sierra Club court indisputably mentioned

the limited number of plants thought to be affected, its

acceptance of EPA’s interpretation rested on the view

that it was “necessary to make the clause equitable,

which was undoubtedly Congress’s purpose,” 719 F.2d at

465, not on the number of plants affected. We recognize

that under the balancing test by which retroactivity is

evaluated, frustration of the statutory purpose is a key

element militating against non-retroactive application.

The new discoveries of affected plants up the ante. But

the “in existence” definition did not represent a de novo

retroactivity decision by EPA, merely an implementation

of Congress’s decision. NRDC points us to nothing in the

prior rulemaking suggesting that the number of plants

affected influenced EPA’s choice of the broader definition.

Compare 46 Fed.Reg. at 49,816/1 (Oct. 7, 1981) (ex-

pressing decision to broaden definition without a word as

to the number of plants). Accordingly, we are not con-

fronted with a case where “a significant factual predicate

of a prior decision” has been removed, which may some-

times trigger a duty to revisit the issue. See WWHT,

Inc. v. FCC, 656 F.2d 807, 819 (D.C.Cir.1981) ; Geller v.

FCC, 610 F.2d 973, 980 n. 59 (D.Cir.1979). EPA’s

adherence to its prior position is lawful. We would be

reluctant in any event to start undermining a six-year-

old provision governing the scope of Congress’s 10-year-

old choice to protect decisions actually made more than

17 years ago.

46a

D. Application of New Demonstration Requirements to

Sources that Have Completed Demonstrations

Industry petitioners urged the agency to exempt from

its new demonstration requirements sources that had

already made demonstrations supporting above-formula

stacks but employing prior more lenient tests. Response to

Comments 333-34, J.A. 65-66. The agency refused, ex-

plaining that “[t|he fluid modeling demonstration has no

significance apart from showing whether the source quali-

fied for credit under the stack height guidelines then in

effect.” Id. at 334, J.A. 66 (emphasis added). Three

power companies (Ohio Power, Monongahela Power and

Potomac Edison), and an aluminum manufacturer that

is a major buyer from Ohio Power, challenge this re-

jection. These petitioners challenge the validity of the

final regulations in NRDC v. Thomas, No. 85-1488, and

challenge the agency's denial of their petition for re-

consideration of these regulations in Ohio Power v.

Thomas, Nos. 86-1331, 86-1362.

A preliminary issue raised by petitioners is whether

this court or the Fourth Circuit properly has jurisdiction

over their claims. § 307(b)(1) of the Act provides for

review here of “nationally applicable regulations.” 42

U.S.C. § 7607(b) (1). It then states that a petition for

review of final action which is “locally or regionally ap-

plicable may be filed only in the United States Court of

Appeals for the appropriate circuit.” Jd.

Conceivably one might characterize the present grand-

fathering issue as regional, as its impact evidently falls

only on sources in limited geographic areas. Whatever

the distribution of affected plants, however, we think the

clearly nationwide scope of the regulation is controlling.

The section calls for review in local courts of appeals

for regulations that are “locally or regionally applicable.”

If the jurisdictional provision turns on the de facto scope

of the regulation, choice of the correct forum might

47a

raise complex factual and line-drawing problems. Such

a complication of the jurisdictional test would waste time

and serve little purpose. See Sharp v. Weinberger, 798

F.2d 1521, 1524 (D.C.Cir.1986) (Scalia, J.). We believe

the clause governing “nationally applicable regulations”

provides jurisdiction over both the direct challenge to the

regulations and the petition for reconsideration.

A second preliminary issue is whether the regulations,

which say nothing explicit on the subject, actually in-

validate the prior approvals. We believe they do. First,

nothing in the regulations expresses any affirmative in-

tent to grandfather such sources. The statute precludes

emission credit for stack height beyond GEP. The reg-

ulations in turn state the rules for determination of

GEP. The fact that a source’s stack has been found to

comply with a former definition of GEP clearly does not

suggest that the stack qualifies under the current, more

stringent standard. Moreover, the agency has in many

places expressly stated its provision of grandfather treat-

ment, discussed in prior parts of this section of this opin-

ion. It has included none in its articulation of criteria

for above-formula demonstrations. Finally. EPA in the

preamble to the Final Regulations explicitly denied any

intention to exempt post-1970 sources from the above-

formula demonstration provisions, 50 Fed.Reg. 27,899 1,

and in its response to industry comments explicitly de-

nied any intention to grandfather previously approved

plants, J.A. 334. Thus, we conclude that the agency has

in fact made a final decision not to exempt these sources.

Petitioners make two distinet challenges to the agency’s

decision. First, they argue that the failure to honor the

stack height credit they received pursuant to valid notice

and comment proceedings violates the doctrine of “re-

pose.”” Ohio Power Company Brief at 20-26. The cases

cited for the doctrine all involve agencies’ attempts to

revoke, in adjudicatory proceedings, previously issued

licenses, exemptions, or rights-of-way. See, e.g., Hirschey

48a

v. FERC, 701 F.2d 215 (D.C.Cir.1983) ; Greater Boston

Television Corporation v. FCC, 463 F.2d 268 (D.C.Cir.),

cert. denied, 406 U.S. 950, 92 S.Ct. 2042, 32 L.Ed.2d 338

(1971); Chapman v. El Paso Natural Gas Co., 204 F.2d

46, 52-54 (D.C.Cir.1953). In Greater Boston, the court

described the doctrine as binding an agency “to respect

the governance of a final administrative decision for the

particular matter there determined.” Greater Boston,

463 F.2d at 291. The doctrine is not an absolute even

where clearly applicable. /d. (the finality interests em-

bodied in the doctrine of repose are “dominant but not

absolute”).

Clearly one can make a linguistic argument, as the

EPA does, that the matters determined in the earlier

demonstrations were only the applicants’ entitlements to

above-formula credit under the rules then prevailing.

This is so, but one could construct similarly narrow defi-

nitions of the first decision in each of the above cases.

More to the point, it seems that in the context of adjudi-

eatory revocations of adjudicatory grants, special scrutiny

is needed to protect legitimate reliance interests from un-

justifiable agency shifts in direction.

Here, a new set of duly promulgated rules has substi-

tuted more stringent criteria for those prevailing when

petitioners made their demonstrations. The risk of ca-

pricious agency action is far less severe, as the shift

from one set of regulations to another was applicable to

a broad range of parties. Cf. Bi-Metallic Investment Co.

v. State Board of Equalization, 239 U.S. 441, 36 S.Ct.

141, 60 L.Ed. 372 (1915): Upjohn Co. v. FDA, 811 F.2d

1583 (D.C.Cir.1987)}:; American Airlines, Inc. v. CAB,

359 F.2d 624 (D.C.Cir.), cert. denied, 385 U.S. 843, 87

S.Ct. 73, 17 L.Ed.2d 75 (1966). Accordingly, we think

the EPA’s authority to apply the new criteria to peti-

tioners is not governed by the relatively restrictive

bounds of the doctrine of repose, but by the looser ones

49a

already employed in the earlier retroactivity analyses of

this section.

Petitioners’ second claim is in fact based on the retro-

activity criteria set forth in Sierra Club and applied in

this section of this opinion. They object that the agency

failed to spell out any application of those criteria, ren-

dering its decision arbitrary and capricious. Monanga-

hela Power Company Brief at 15-16. The agency’s spare

disposition of the subject seems to us to fall, barely, on

the “tolerably terse” side of the line, as distinct from

the “intolerably mute.” Greater Boston Television Corp.

v. FCC, 444 F.2d 841, 852 (D.C.Cir.1970), cert. denied,

403 U.S. 923, 91 S.Ct. 2229, 29 L.Ed.2d 701 (1971).

First, it stressed the importance of the statutory goal.

In the preamble to the Final Regulations, it rested its

decision to apply the new demonstration requirements to

all post-1970 sources on its view that Congress in § 123

did “affirmatively ‘intend to alter’” industry reliance

upon above-formula height stacks. 50 Fed. Reg. 27,8991.

On the other side of the retroactivity balance fal] the

sources’ reliance interests. Sources that underwent pre-

vious above-formula stack height demonstrations obviously

relied on previous EPA guidance in doing so, and the

new absolute test, coupled with the NSPS presumption

as to emissions, indisputably represents a significant de-

parture from the past requirements. (But EPA noted

that regulatory pronouncements since 1970 had consis-

tently placed a higher burden on credits for above-

formula stacks. Jd.) If the new regulations forced the

petitioners to renegotiate longterm coal contracts or ren-

dered obsolete major investments in emission control

equipment, petitioners might in some circumstances have

a strong equitable argument for grandfathering. (Ohio

Power makes claims of such commitments; Monangahela,

which has not constructed its proposed stack, relies solely

on the funds expended in the earlier demonstration it-

self.) But as the NSPS presumption can be rebutted by

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a showing of infeasibility, each source owner will have

an opportunity to identify these costs and secure such

relief as their size may justify. 50 Fed.Reg. 27,898 /2.

Thus, the petitioners have not demonstrated that retro-

active application of the new demonstration requirement

will force them to shoulder a heavy burden.

In fact, the only sunk cost that is directly wasted by

the new regulations is the cost of the demonstrations

themselves. In the case of one facility that cost was

$500,000, in the other $200,000. These figures are hardly

negligible, but we should think it a rare case where the

costs of securing data could alone entitle a party to

grandfathering. We think the agency did not here abuse

its discretion.

IV. PLUME RISE

Dispersion of pollutants is greater when a lot of ex-

haust is combined in a single stack rather than ejected

through several. Thus one key indicator of dispersive

effect is “plume rise,” the distance the exhaust is carried

above the top of the stack. We deal here with EPA reg-

ulation of such stack combinations. The phenomenon oc-

curs both as (1) a stack originally constructed combining

exhaust that might have been handled with several stacks

and as (2) a stack built to replace several separate

stacks.

Section 123(a) bars credit not only for “too tall’

stacks but also for “any other dispersion technique.” In

its 1982 Regulations, EPA expressed a narrow definition

oi the practices to be denied credit under this language,

and expressly excluded several, including “‘combining the

exhause gases from several stacks into one stack.” 47

Fed.Reg. 5868/3 (1982). The Sierra Club court read

EPA’s explanation of the definition as in essence a weigh-

ing of “the likelihood that [the various practices] would

be used as dispersion techniques . . . and the burden,

both on enforcement agencies and on industry, of at-

5la

tempting to differentiate legitimate from illegitimate

uses.” 719 F.2d at 462. The environmental petitioners

challenged the definition’s exclusion of certain practices,

including stack combination. They advocated a defini-

tion depending on intent: if a source adopted a practice

in order to obtain a less stringent emission level or to

avoid imposition of a harsher one, the practice would be

regarded as a “dispersion technique.” Sierra Club Brief

(Sierra Club litigation) at 36.

The court agreed with Sierra Club that the agency’s

conception of ‘dispersion technique’ was unduly re-

stricted, and held that “the words . . . sweep broadly

enough to encompass at least the meaning urged by pe-

titioners; the use of devices, alterations to the stack, or

other techniques when they are significantly motivated

by an intent to gain emissions credit for greater disper-

sion.” Sierra Club, 719 F.2d at 462. The court acknow]l-

edged the agency’s authority to exempt entire categories

of practices on either of two grounds—administrative

necessity or the de minimis character of the effects. But

it concluded that the agency nad “‘fall{en| far short” of

demonstrating either. 7d. at 463. In its remand to the

agency, however, the court left open the possibility that

the agency could "develop classes of plant improvements

that are clearly legitimate or clearly illegitimate” so as

to “reduce substantially the number of cases in which

a full-scale examination of the motivation for the change

will be required.” /d. at 463-64.

The agency responded to the court’s remand by amend-

ing its definition of “dispersion technique” to include

any technique which attempts to affect the concen-

tration of a pollutant in the ambient air by

(ili) Increasing final exhaust gas plume rise by

manipulating source process parameters, exhaust gas

parameter, stack parameters, or combining exhaust

gases from several existing stacks into one stack;

52a

or other selective handling of exhaust gas streams

so as to increase the exhaust gas plume rise.

40 C.F.R. §51.1(hh)(1) (emphasis added). NRDC

challenges the agency’s new intent-based test, arguing

that Congress intended to cover all features having dis-

persive effects, at least to the extent they may exceed

“normal” dispersion. See NRDC Brief at 62 n. 121.

NRDC urged this court four years ago to adopt a defi-

nition of “dispersion technique” based on a source’s mo-

tivation. This court accepted NRDC’s view. The envir-

onmental petitioners could then have made their current

argument in favor of an effects test. Since res judicata

(claim preclusion) bars relitigation not only of matters

determined in a previous litigation but also ones that a

party could have raised, Tutt v. Doby, 459 F.2d 1195,

1197 (D.C.Cir.1972), NRDC is barred. To accept

NRDC’s invitation to reopen the issue would be to ignore

the concern for finality that underlies res judicata and

create incentives for future strategic gamesmanship. We

decline.

Nor does the presence of other parties on the brief

open up reconsideration of the matter. 42 U.S.C. § 7607

(b) (1) (1982) requires that any petition for review of

such regulations as these be filed within 60 days after

their appearance in the Federal Register. Contentions

in favor of an effects test over one of intent were obvi-

ously ripe at the time of initial promulgation in 1982.

No party offers the slightest excuse for failure to raise

these contentions in the challenges to that set of rules.

While we have recently suggested a number of implicit

qualifications to apparently iron time limits on challenges

to agency rules, National Labor Relations Board Union

v. FLRA, 834 F.2d 191, 195-197 (D.C.Cir.1987}, noth-

ing in that case suggests that a party, fully on notice

as to the potential impact of rules upon its interests, is

free to sit back while the matter is subject to prolonged

53a

and complex litigation, and then challenge remanded

rules on the basis that the court’s first ruling did not go

far enough. Any such interpretation would make a trav-

esty of Congress’s efforts to bring litigation of agency

rules to a timely conclusion and to protect the likely

reliance of affected parties.

Thus the only issue properly before us is whether the

agency properly responded to our remand in Sierra Club.

It endeavored to do so by creating bright line rules with

which to discern whether a source’s decision to use a

single stack was significantly motivated by a desire to

achieve a higher degree of pollution dispersal. These are

expressed in the subparts of 40 C.F.R. § 51.1 (hh) (2)

(ii). Subpart (A) exempts stacks “originally designed

and constructed” with combined gas streams, and sub-

part (B) exempts stack mergers occurring as part of a

change in operations comprising an installation of pollu-

tion controls and a net reduction in allowable emissions

of a pollutant. Subpart (C) provides a laxer test, based

on grandfathering precepts, for stack mergers occurring

before July 8, 1985 (the date of the rules’ appearance in

the Federal Register). For them, exemption applies if

the merger occurred either as part of a change in opera-

tions that included installation of emissions control equip-

ment or was carried out for “sound economic or engineer-

ing reasons.”” NRDC objects to each of these classes of

exemptions. We address them in turn.

A. Original Design and Construction as One Stack

A person with only the notoriously risky “little knowl-

edge” of our air pollution control laws might suppose

that the pollution effects of this exclusion must be de

minimis. After all, we are talking only of post-1970

stacks, and original-design post-1970 stacks should be at-

tached to post-1970 plants, which in turn should be sub-

ject to NSPS emissions rates. If SIPs are unlikely to

54a

impose stricter controls than NSPS, then nothing would

be at stake.

NRDC asserts, however, that as many as 56 post-1970

plants are not covered by NSPS, and it appears that of

these 25 have a combined stack as part of their original

design. ICF Inc., Final Analysis of the Proposed Stack

Height Regulations, June 1985, Appendix D, reprinted

in NRDC Brief, Addendum B. EPA appears not to con-

test the point, and indeed has not invoked the de minimis

concept to justify its decision. Accordingly, we plunge

ahead on the premise that something of moment is at

issue.

The agency provides three arguments in support of

this exemption. Each of them appears to us, for one rea-

son or another, to misfire. While we do not by any means

find that the EPA’s conclusion is in violation of statu-

tory authority, we are unable ‘to conclude that it rests

upon “reasoned decisionmaking.” See SEC v. Chenery

Corp., 332 U.S. 194, 196, 67 S.Ct. 1575, 1577, 91 L.Ed.

1995 (1947) (‘We may not supply a reasoned basis for

the agency’s action that the agency itself has not

given.”); Greater Boston Television Corp. v. FCC, 444

F.2d 841, 851 (D.C. Cir. 1970), cert. denied, 403 U.S.

923, 91 S.Ct. 2229, 29 L.Ed.2d 701 (1971) (the court

must intervene if the agency “has not genuinely engaged

in reasoned decisionmaking”’).

First, EPA rests on the text of our opinion in Sierra

Club and on concepts of ordinary language. It notes that

original design characteristics do not increase plume rise,

so that, it says, they cannot be dispersion techniques.

50 Fed. Reg. at 27,903. It cites Sierra Club’s references

to dispersion techniques as “alterations to the stack,”

“changes in stack dimensions,” and “improvements” in

support of this reading of the statutory language. EPA

Brief at 60, citing 719 F.2d at 462-64.

We think the observations of Sierra Club on the sub-

ject are highly inconclusive. The passages cited by the

5da

EPA appear to have been merely mentioning examples,

not attempting an exhaustive list. Elsewhere the court

used potentially more inclusive language. See 719 F.2d

at 462 (noting that the statutory term would reach “the

use of devices ... when they are significantly motivated

by an intent to gain emissions credit for greater dis-

persion’’).

So far as ordinary language is concerned, clearly noth-

ing inherently prevents the term “dispersion technique”

from encompassing a practice adopted during the facility

design phase. Moreover, the statute itself does not use

the term “increase,” with its connotation of change from

the levels produced by an existing condition. That term

appears only in the FPA’s definition of dispersion tech-

nique. 40 C.F.R. $51.1¢hh) (1) (iii) (“any technique

which attempts to affect the concentration of a pollutant

in the ambient air by... [i]ncreasing final exhaust gas

plume rise by . . . selective handling of exhaust gas

streams’’).

Second, the EPA argues that treatment of original

design stacks as dispersion techniques raises insuperable

administrative difficulties, namely determining what stack

configuration a firm would have adopted in lieu of a uni-

fied stack. Indeed, EPA could not necessarily assume

that the size of the plant’s units would have been the

same. Cf. Sierra Club, 719 F.2d at 462 (endorsing ex-

emption of a class of practices if the agency could dem-

onstrate that “attainment of the statutory goals is im-

possible”). As ariculated by EPA, however, these diffi-

culties do not seem enough standing alone. NRDC has

suggested one plausible solution, that of using average

plume rise as of 1970 as a proxy for normal plume rise.

NRDC Brief at 62 n.121. Indeed, the agency’s August

1984 draft of the current regulations would have estab-

lished assumptions as to normal plume rise for scurce

categories through a comparative analysis of stack pa-

rameters. Rebuttal Comments 61, J.A. 865. EPA’s re-

jection of both these alternatives is unexplained, leaving

’

56a

the claim of undue enforcement difficulty inadequately

supported.

Finally, the agency asserts that stacks are often

merged pursuant to original facility design for legiti-

mate economic or engineering reasons. It points out, for

instance, that it is less expensive to build one large stack

than three smaller stacks, and also less costly to fit one

stack with pollution control equipment than to install

such equipment in multiple stacks. 50 Fed. Reg. at

27,903. EPA suggests that because there are legitimate

nondispersion-related reasons for merging gas streams,

and mergers for the purpose of increasing plume rise are

“only a theoretical possibility,” its decision to >xempt all

originally designed merged streams is justified.

The difficulty with this argument is that, given other

data in the record, it appears not to satisfy EPA’s own

test of “intent” to obtain dispersion benefits. NRDC

points to evidence indicating that power plants have long

realized that merged gas streams can significantly in-

crease plume rise, and that firms have purposefully de-

signed plants to take advantage of this increased dis-

persion since the early 1960s. A.J. Clarke, “The Applica-

tion of Air Pollution Research to Power Station De-

sign,” Phil. Transportations (Roy. Soc. London), Nov. 18,

1969, at 265, 269-72, J.A. 862 n.25. Thus the record,

viewing it most favorably to the EPA position, appears

to suggest dual purposes, each alone sufficient to explain

sources’ selection of the single-stack option.

Conceivably EPA might rest on the view that the ex-

istence of a sufficient non-dispersion motive exonerates a

practice, i.e., establishes its failure to meet the Sierra

Club intent test. Although the language of Sierra Club

is ambiguous, and the matter was not at issue, the court

appears likely to have contemplated a different view—

that the presence of dispersion intent as a sufficient mo-

tive, or as a motive crucial (in combination with others)

to tilt the decision in favor of a single stack, would ren-

der the device a dispersion technique. See 719 F.2d at

57a

463 (suggesting that the EPA could not find a lack of

dispersion intent for an entire class of techniques unless

it could demonstrate that “there is in fact no or little

incentive to implement these techniques because the poten-

ial reduction in emissions limitations would not be worth

the cost”). But in fact the EPA appears to have re-

jected the narrower test. See 50 Fed. Reg. 27,902/3 (“a

pure ‘but for’ test runs the risk of creating exclusions

that effectively swallow the rule itself’). Thus, so far

as we can grasp it, the EPA believes a source charac-

teristic should be presumed a dispersion technique if dis-

persion purposes alone provide a sufficient motivation, re-

gardless of the strength of other purposes. If so, EPA’s

findings of legitimate nondispersionary purposes are not

enough, by its standards, to exonerate an original-con-

struction single stack.

To sum up: EPA relies on (1) a notion of “increase”

that it never tries to substantiate; (2) administrative

difficulties that it asserts without negating the solutions

proposed by others and itself; and (3) the existence of

a sufficient alternative purpose, which (assuming it is

substantiated) is not enough under its own apparent

view of the law. The total is three flawed reasons. While

in some cases they might form a tenuous sort of tripod,

here they seem to us to fail. According to NRDC’s un-

disputed claim this issue accounts for a large fraction of

the dispersed emissions at stake. It is fair to demand

more, loath as we are to prolong the agony of this proc-

ess,

Obviously we owe the agency deference if it affords a

reasoned explanation, consistent with what Congress has

“clearly” required or (in the absence of a clear man-

date) with a “reasonable” interpretation of the statute.

Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837, 842-44, 104

S.Ct. 2778, 2781-83, 81 L.Ed.2d 694 (1984). The present

record, however, does not appear to bring us to that

point.

’

58a

B. General Rule for Merged Stacks

As noted, this rule exempts stack mergers effected as

part of a change in operation that includes the installa-

tion of pollution controls and is accompanied by a net

reduction in the allowable emissions of a pollutant. This

exclusion only applies to the emission limitation for the

pollutant affected by the change in operations. 40 C.F.R.

§ 51.1(hh) (2) (ii) (B). NRDC argues that this exemp-

tion is potentially too lenient by noting the hypothetical

possibility that a source could use merger credit for “in-

crement expansion” purposes under the prevention of

significant deterioration (PSD) program, 42 U.S.C.

$ 7470 et seq., thus enabling the source to meet PSD re-

quirements at reduced expense. NRDC does not spell out

the objection in any detail. Mere allusion to such a hypo-

thetical is not enough to persuade us that the exemption

represents an abuse of the Administrator’s discretion.

C. Partial Grandfathering of Stacks Merged Before

July 8, 1985

Such mergers qualify for exemption if a source can

demonstrate that its merger was accomplished as part of

a change in operation to install pollution control equip-

ment or for good economic or engineering reasons. 40

C.F.R. § 51.1(ii) (2) (ii) (C). The rule creates a_ pre-

sumption of intent to gain emissions credit in two cases:

(1) where there was an increase in the emission limita-

tion after the merger; or (2) where there was no emis-

sion limitation in existence before the merging but the

quantity of pollutants actually emitted increased in com-

parison to the pre-merger levels. Jd.

NRDC attacks EPA’s retroactivity analysis, claiming

that the agency has not supported its decision to apply

a more lenient rule to pre-1985 mergers than to post-

1985 mergers. First, it maintains that before 1985 there

was no “well established practice” of allowing credit for

59a

dispersion resulting from stack merger. NRDC finds evi-

dence of a more severe approach in EPA’s 1976 Guide-

lines and the 1979 proposed regulations. It substantiates

the former solely with one letter from a regional EPA

administrator disapproving credit for a _ particular

merger, and the latter with quotation of the proposal’s

vague language (“other selective handling of exhaust gas

streams so as to increase the exhaust gas plume rise’).

NRDC Brief at 60, 61 n.119. The agency asserts the

existence of a uniformly permissive rule, pointing to

three 1980 guidance documents which “uniformly took

the view that merging of separate stacks into a single

stack ‘is generally not considered a dispersion techniaue’

absent other factors.” 50 Fed. Reg. 27,903/2. We find

the evidence in this regard to be somewhat inconclusive.

Second, NRDC argues that the agency erred in not

requiring a demonstration of reliance. The agency re-

sponds that it is infeasible to require a demonstration of

“actual reliance” when the reliance in question is upon

general agency guidance rather than a specific formula

or rule. EPA Brief at 66. The point is well taken. Thus,

for us, the question comes down to whether the agency’s

rule for pre-1985 sources is sufficiently protective of the

statutory purpose.

NRDC asserts that the regulations provide large loop-

holes for mergers that were significantly motivated by

an intent to gain increased dispersion credit. As to

mergers accompanying installation of pollution control

equipment, it suggests that a source might intentionally

install equipment for one pollutant in order to secure the

right to increase emissions of another. On the facts, this

seems most improbable. The rule applies only to pre-

1985 mergers, and we doubt many source owners had the

foresight to anticipate EPA’s exemption and slip through

its supposed loophole before its promulgation. Further

protection is added by EPA’s presumption of a signifi-

cant dispersion motive where the merger was accompa-

60a

nied by a relaxation of emissions limits or an increase in

emissions,

As to the exemption for mergers made for “sound

economic or engineering reasons,” NRDC objects not on

the basis of that language itself but by reference to lan-

guage in a “Guidance” document later published by

EPA, “Implementation of Stack Height Regulations—

Exceptions From Restrictions on Credit for Merged

Stacks” at 3 (October 28, 1985). In a separate suit

brought by NRDC before this court we declined substan-

tive review of that document on the ground that the

guidelines “represent tentative agency positions that may

be modified in subsequent agency proceedings,” and “do

not represent final agency action subject to judicial re-

view under 42 U.S.C. § 7607(b) (1982).”" NRDC vy.

Thomas, No. 85-1488 and consolidated cases (D.C. Cir.

Aug. 3, 1986). NRDC has brought nothing to our atten-

tion that would increase their finality.

Acordingly, the substantive review now appropriate re-

veals no illegality in EPA’s rules for pre-1985 stack

mergers.

V. MISCELLANY

A. Mu/!ti-Point Rollhack

NRDC argued in a footnote in its opening brief that

a system of calculating emissions limitations known as

multi-point rollback (“MPR”) is a form of intermittent

control system (“ICS”), and is therefore unlawful under

the statute. §123(b) states that dispersion techniques

include “any intermittent . . . control of air pollutants

varying with atmospheric conditions.”

MPR in fact involves calculating emission limits in

light of the fact that a certain proportion of days will

involve relatively high dispersion; it allows the source to

emit more on an equivalent proportion of days. But the

days of higher emission need not correspond with the ac-

tual days of higher dispersion. We think that under

6la

Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837, 104 S.Ct.

2778, 81 L.Ed.2d 694 (1984), EPA was entitled to read

the statutory language as referring only to control sys-

tems that varied output with the time of actual weather

changes. We join the Ninth Circuit in upholding the

agency's reading. See Kamp v. Hernandez, 752 F.2d

1444, 1451-52 (9th Cir.1985).

B. Definition of “Nearby” as Used in Demonstrations

Section 123(c) defines GEP stack height as that height

necessary to insure that emissions from the stack will not

cause excessive pollution concentrations as a result of

downwash created by “the source itself, nearby structures

or nearby terrain obstacles.” 42 U.S.C. § 7423(c) (em-

phasis added.) In its 1982 Regulations, the agency’s ar-

ticulation of its formula considered structures only if !o-

cated within one-half mile of the source. Its provision

for demonstrations provided no similar limit on the struc-

tures or terrain features to be taken into account. In

Sierra Club, this court upheld the one-half mile defini-

tion of “nearby” used in the formula as consistent with

the statute and legislative history, 719 F.2d at 444, but

criticized the agency for not applying the same restric-

tion in its rules for demonstrations. The court remanded

for EPA to “include new regulations that apply the same

nearby’ limitation to demonstrations as is applied to the

formulas.” /d. at 445-46. The agency proceeded to do so.

40 C.F.R. § 51.1¢jj) (2).

Industry petitioners, noting an EPA statement that the

Sierra Club “court required EPA to apply the half-mile

limit to the definition of ‘nearby’ in fluid-modeling dem-

onstrations,” J.A. 286, argues that EPA erroneously sup-

posed that Sierra Club bound it to the half-mile figure

and therefore failed to exercise its discretion to determine

whether a different definition might be more appropriate

for demonstrations. Alabama Power Brief at 40-42. See

ooo

- ’

Phillips Petroleum Co. v. FERC, 792 F.2d 1165, 1169

(D.C.Cir.1986) (“deference . . . is only appropriate when

the agency has exercised its own judgment. When, in-

stead, the agency’s decision is based on an erroneous view

of the law, its decision cannot stand”) (emphasis in orig-

inal).

We agree with the petitioners that this court did not

mandate a one-half mile restriction for demonstrations.

Rather, it held that the one-half mile restriction was a

reasonable exercise of the Administrator’s statutory dis-

cretion as applied to the formula, and also that the Ad-

ministrator must apply in demonstrations the same nu-

merical limit as it uses in application of its formula. If

we thought that the agency had misread Sierra Club to

preclude its choice of some other numerical limit, we

would remand the issue for further consideration.

In fact, however, we do not read the quoted language

as indicating such a mistake. So far as appears no peti-

tioner asked the agency to reconsider the half-mile figure

for formulas. Accordingly, when the agency spoke of the

compulsion of Sierra Club, we think it meant only that,

there being no further debate on use of the half-mile

figure for the formula, Sierra Club required it to employ

that figure for demonstrations.

C. Modeling Adjustments for Complex Terrain

“Plume impaction” occurs when a stream of exhaust

gases hits a higher hill or mountain downwind before

dispersion, causing high concentrations on the mountain-

side. 719 F.2d at 452. To take account of this phenom-

eon, the agency gave credit in its 1982 Final Regulations

“for the amount of its stack necessary to ensure thot

violations [would] not occur on the mountain as a result

of the amount of the mountain’s height that is above GEP

height.” /d. This court found “much to commend EPA’s

63a

action from a policy perspective,” but concluded that

$ 123 did not permit such an adjustment. /d at 455. The

court therefore reversed the agency’s “attempt to reduce

emissions limitations by [credit for] so much of the stack

height as needed to avoid plume impaction.” /d. at 456.

Pursuant to this court’s holding on the matter, the

agency included no provision for plume impaction credit

in its 1985 regulations. Industry petitioners recognize

that the agency is precluded from reintroducing plume

impaction credits. Alabama Power Brief at 45. However,

they maintain that unless the agency adjusts its complex

terrain screening models to account for the existence of

plume impaction, sources will be treated as if they were

violating NAAQS in mountainous terrain when in fact

they have avoided such violations by building approvri-

ately tall stacks. /d. at 45-47. They therefore urged the

agency during the rulemaking to make “adjustments to

its overpredictive complex terrain screening models.” /d.

at 45; see also J.A. 557-81.

EPA rejected the proposal because it found that

“|mljanipulation . . . of modeling parameters to

avoid predicting theoretical plume impaction where

actual stacks have been constructed above GEP

would be tantamount to granting the same impac-

tion credit that was invalidated by the [Sierra Club]

court.” 50 Fed.Reg. 27,904 /2.

The actual meaning of EPA’s remark is not fully clear

to us. In a currently ongoing rulemaking EPA is revis-

ing its “Guideline on Air Quality Models” and is evaluat-

ing the merits of the “Rough Terrain Display Model”

advocated by industry. 50 Fed.Reg. at 27,904/2. The

outcome of this rulemaking will presumably delineate

what the agency believes is permissible and what is not.

There being no final decision on the subject, we may not

intervene.

64a

CONCLUSION

We uphold the agency except as to its grandfathering

of pre-October 1, 1983 stack increases from demonstra-

tion requirements (part IIIA), grandfathering of pre-

January 12, 1979 original height stacks up to H + 1.5L

(part III.B.2), and exemption of original construction

single stacks from its “dispersion technique” definition

(part IV.A). These we remand to the agency for pro-

ceedings consistent with this opinion.

65a

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

No. 85-1488

NATURAL RESOURCES DEFENSE COUNCIL, INC. et al.

LEE M. THOMAS, Administrator

U.S. Environmental Protection Agency

and consolidated cases

No. 86-1331, et al.

OHIO POWER COMPANY, et al.

LEE THOMAS, et al.

and consolidated cases

Before: RuTH B. GINSBURG and WILLIAMS, Circuit

Judges; AUBREY ROBINSON, Chief Judge, U.S.

District Court of the District of Columbia

66a

ORDER

Upen consideration of the petitions for rehearing of

Respondents, of the Natural Resources Defense Council

Ine, et al., and of the State of Ohio, et al., it is

ORDERED, by the Court, that the aforesaid petitions

are denied.

FoR THE COURT:

CONSTANCE L. DUPRE

Clerk

By: /s/ Robert A. Bonner

ROBERT A. BONNER

Deputy Clerk

67a

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

No. 85-1488

NATURAL RESOURCES DEFENSE COUNCIL, INC. et al.

LEE M. THOMAS, Administrator

U.S. Environmental Protection Agency

Before:

and consolidated cases

No. 86-1331, et al.

OHIO POWER COMPANY, et al.

Vv.

LEE THOMAS, et al.

and consolidated cases

{Filed Apr. 13, 1988]

WALD, Chief Judge; ROBINSON, MIKvA, ED-

WARDS, RUTH B. GINSBURG, STARR, SILBER-

MAN, BUCKLEY, WILLIAMS, D. H. GINSBURG

and SENTELLE, Circuit Judges; AUBREY RoB-

INSON, Chief Judge, U.S. District Court for

the District of Columbia

68a

ORDER

The sugestions for rehearing en banc of the United

Mine Workers of America, et al., Ohio Power Company

and Ormet Corporation and of the State of Ohio, et al.,

have been circulated to the full court. No member of the

court requested the taking of a vote thereon. Upon con-

sideration of the foregoing it is

ORDERED, by the Court en banc, that the aforesaid

suggestions are denied.

FOR THE COURT:

CONSTANCE L. DUPRE

Clerk

By: /s/ Robert A. Bonner

ROBERT A. BONNER

Deputy Clerk

Circuit Judge Silberman did not participate in this

Order.

69a

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

No. 85-1488

NATURAL RESOURCES DEFENSE COUNCIL, INC. et al.

Petitioners

LEE M. THOMAS, Administrator

U.S. Environmental Protection Agency

Respondent

and consolidated Cases Nos. 85-1489, 85-1548, 85-1552,

85-1554, 85-1556, 85-1557, 85-1558, 85-1560, 85-1568

[Filed May 5, 1988]

Before: RuTH B. GINSBURG and WILLIAMS, Circuit

Judges, and AUBREY ROBINSON, Chief Judge,

United States District Court for the District

of Columbia

ORDER

Upon consideration of the Motion of Respondent—

Intervenors Alabama Power Company, et al. for Stay of

Issuance of Mandate, the Opposition thereto, and of the

reply, it is

70a

ORDERED, by the Court, that the Clerk is directed

to withhold issuance of the Court’s mandate for a period

of 30 days from the date of this order.

FOR THE COURT:

: CONSTANCE L. DUPRE

| Clerk

By: /s/ Robert A. Bonner

ROBERT A. BONNER

Deputy Clerk

Tla

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 51

{| AD-FRL-2847-6 |

Stock Height Regulation

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rulemaking.

SUMMARY: Section 123 of the Clean Air Act, as

amended, requires EPA to promulgate regulations to en-

sure that the degree of emission limitation required for

the control of any air pollutant under an applicable State

implementation plan (SIP) is not affected by that portion

of any stack height which exceeds good engineering prac-

tice (GEP) or by any other dispersion technique. A reg-

ulation implementing section 123 was promulgated on

February 8, 1982, at 47 FR 5864. Revisions to the regu-

lation were proposed on November 9, 1984, at 49 FR

44878. Today’s action incorporates changes to the pro-

posal and adopts this regulation in final form.

EFFECTIVE DATE: This regulation becomes effective

on August 7, 1985.

FOR FURTHER INFORMATION CONTACT: Eric 0.

Ginsburg, MD-15, Office of Air Quality Planning and

Standards, EPA, Research Triangle Park, North Carolina

27711. Telephone (919) 541-5540.

SUPPLEMENTARY INORMATION:

Docket Statement

Pertinent information concerning this regulation is in-

cluded in Docket Number A-83-49. The docket is open for

| |

(2a

public inspection between the hours of 8:00 a.m. and

4:00 p.m., Monday through Friday, at the EPA Central

Docket Section, West Tower Lobby, Gallery One, 401 M

Street, SW., Washington, D.C. Background documents

normally available to the public, such as Federal Register

notices and Congressional reports, are not included in the

docket. A reasonable fee may be charged for copying

documents.

Background

Statute

Section 123, which was added to the Clean Air Act by

the 1977 Amendments, regulates the manner in which

techniques for disperson of pollutants from a source may

be considered in setting emission limitations. Specifically,

section 123 requires that the degree of emission limitation

shall not be affected by that portion of a stack which ex-

ceeds GEP or by “any other dispersion technique.” It

defines GEP, with respect to stack heights as:

the height necessary to insure that emissions from the

stack do not result in excessive concentrations of any air

pollutant in the immediate vicinity of the source as a re-

sult of atmospheric downwash, eddies or wakes which

may be created by the source itself, nearby structures or

nearby terrain obstacles ... [Section 123(c)].

Section 123 further provides that GEP stack height shall

not exceed two and one-half times the height of the source

(2.5H) unless a demonstration is performed showing that

a higher stack is needed to avoid “excessive concentra-

tions.” As the legislative history of section 123 makes

clear, this reference to a two and one-half times test re-

flects the established practice of using a formula for de-

termining the GEP stack height needed to avoid excessive

downwash. Finally, section 123 provides that the Admin-

istrator shall regulate only stack height credits—that is,

73a.

the portion of the stack height used in calculating an

emission limitation—rather than actual stack heights.

With respect to “other dispersion techniques” for which

emission limitation credit is restricted, the statute is less

specific. It states only that the term shall include inter-

mittent and supplemental control systems (ICS, SCS),

but otherwise leaves the definition of that term to the

discretion of the Administrator.

Thus the statute delegates to the Administrator the

responsibility for defining key phrases, including “exces-

sive concentrations” and “nearby,” with respect to both

structures and terrain obstacles, and “other dispersion

techniques.” The Administrator must also define the re-

quirements of an adequate demonstration justifying stack

height credits in excess of the 2.5H formula.

Rulemaking and Litigation

On February 8, 1982 (47 FR 5864), EPA promulgated

final regulations limiting stack height credits and other

dispersion techniques. Information concerning the devel-

opment of the regulation was included in Docket Number

A-79-01 and is available for inspection at the EPA Cen-

tral Docket Section. This regulation was challenged in

the U.S. Court of Appeals for the D.C. Circuit by the

Sierra Club Legal Defense Fund, Inc.; the Natural Re-

sources Defense Council, Inc.; and the Commonwealth of

Pennsylvania in Sierra Club v. EPA, 719 F.2d 436. On

October 11, 1983, the court issued its decision ordering

EPA to reconsider portions of the stack height reguia-

tion, reversing certain portions and upholding other por-

tions. Further discussion of the court decision is pro-

vided later in this notice.

Administrative Proceedings Subsequent to the Court De-

cision

On December 19, 1983, EPA held a public meeting to

take comments to assist the Agency in implementing the

74a

mandate of the court. This meeting was announced in

the Federal Register on December 8, 1983, at 48 FR

54999. Comments received by EPA are included in

Docket Number A-83-49. On February 28, 1984, the elec-

tric power industry filed a petition for a writ of certio-

rari with the U.S. Supreme Court. While the petition

was pending before the court, the mandate from the U.S.

Court of Appeals was stayed. On July 2, 1984, the Su-

preme Court denied the petition (104 S.Ct. 3571), and

on July 18, 1984, the Court of Appeals mandate was for-

mally issued, implementing the court’s decision and re-

quiring EPA to promulgate revisions to the stack height

regulations within 6 months. The promulgation deadline

was ultimately extended to June 27, 1985, in order to

provide additional opportunities for public comment, to

allow EPA to hold a public hearing on January 8, 1985,

and to provide additional time for EPA to complete its

analysis of rulemaking alternatives.

Documents

In conjunction with the 1982 regulation and this re-

vision, EPA developed several technical and guidance

documents. These served as background information for

the regulation, and are included in Dockets A-79-01 and

A-83-49. The following documents have been or will be

placed in the National Technical Information Service

(NTIS) system and may be obtained by contacting NTIS

at 5285 Port Royal Road, Springfield, Virginia 22161.

(1) “Guideline for Use of Fluid Modeling to Deter-

mine Good Engineering Stack Height,” July 1981. EPA,

Office of Air Quality Planning and Standards, EPA-450

4-81-003 (NTIS PB82 145327).

(2) “Guideline for Fluid Modeling of Atmospheric

Diffusion,” April 1981. EPA, Environmental Sciences

Research Laboratory, EPA-600/8-81-009 (NTIS PBS81

201410).

75a

(3) “Guidance for Determination of Good Engineer-

ing Practice Stack Height (Technical Support Document

for the Stack Height Regulation),” June 1985. EPA,

Office of Air Quality Planning and Standards, EPA-450/

4-80-023R.

(4) “Determination of Good Engineering Practice

Stack Height—A Fluid Model Demonstration Study for a

Power Plant,” April 1983, EPA. Environmental Sciences

Research Laboratory, EPA-600/3-83-024 (NTIS PB85

207407).

(5) “Fluid Modeling Demonstration of Good-

Engineering Practice Stack Height in Complex Terrain,”

April 1985, EPA Atmospheric Sciences Research Labora-

tory, EPA 600/3-85/022 (NTIS PB85 203107).

In addition, the following documents are available in

Docket A-83-49.

“Economic Impact Assessment for Revisions to the

EPA Stack Height Regulations,” June 1985.

“Effect of Terrain-Induced Downwash on Determina-

tions of Good-Engineering-Practice Stack Height,” July

1984.

Program Overview

General

The problem of air pollution can be approached in

either of two ways: through reliance on a technology-

based program that mandates specific control require-

ments (‘either control equipment or control efficiencies)

irrespective of ambient pollutant concentrations, or

through an air quality based system that relies on am-

bient air quality levels to determine the allowable rates

of emissions. The Clean Air Act incorporates both ap-

proaches, but the SIP program under section 110 uses an

air quality-based approach to establish emission limita-

tions for sources. Implicitly, this approach acknowledges

76a

and is based on the normal dispersion of pollutants from

their points of origin into the atmosphere prior to meas-

urements of ambient concentrations at ground level.

There are two general methods for preventing viola-

tions of the national ambient air quality standards

(NAAQS) and prevention of significant deterioration

(PSD) increments. Continuous emission controls reduce

on a continuous basis the quantity, rate, or concentra-

tions of pollutants released into the atmosphere from a

source. In contrast, dispersion techniques rely on the dis-

persive effects of the atmosphere to carry pollutant emis-

sions away from the source in order to prevent high con-

centrations of pollutants near the source. Section 123 of

the Clean Air Act limits the use of dispersion techniques

by pollution sources to meet the NAAQS or PSD incre-

ments.

Tall stacks, manipulation of exhaust gas parameters,

and varying the rate of emissions based on atmospheric

conditions (ICS and SCS) are the basic types of dis-

persion techniques. Tall stacks enhance dispersion by

releasing pollutants into the air at elevations high above

ground level, thereby providing greater mixing of pol-

lutants into the atmosphere. The result is to dilute the

pollutant levels and reduce the concentrations of the pol-

lutant at ground level, without reducing the total amount

of pollution released. Manipulation of exhaust gas pa-

rameters increases the plume rise from the source to

achieve similar results. ICS and SCS vary a source’s

rate of emissions to take advantage of meteorologic con-

ditions. When conditions favor rapid dispersion, the

source emits pollutants at higher rates, and when condi-

tions are adverse, emission rates are reduced. Use of

dispersion techniques in lieu of constant emission con-

trols results in additional atmospheric loadings of pol-

lutants and can increase the possibility that pollution

will travel long distances before reaching the ground.

77a

Although overreliance on dispersion techniques may

produce adverse effects, some use of the dispersive prop-

erties of the atmosphere has long been an important fac-

tor in air pollution control. For example, some stack

height is needed to prevent excessive pollutant concentra-

tions near a source. When wind meets an obstacle such

as a hill or a building, a turbulent region of cownpath,

wakes, and eddies is created downwind of the obstacle

as the wind passes over and around it. This can force a

plume rapidly to the ground, resulting in excessive con-

centrations of pollutants near the source. As discussed

previously, section 123 recognizes these phenomena and

responds by allowing calculation of emission limitations

with explicit consideration of that portion of a source’s

stack that is needed to ensure that excessive concentra-

tions due to downwash will not be created near the

source. This height is called GEP stack height.

Summary of the Court Decision

Petitions for review of EPA’s 1982 regulation were

filed in the D.C. Cireuit within the statutory time period

following promulgation of the regulation. On October 11,

1983, the court issued its decision ordering EPA to re-

consider portions of the stack height regulation, revers-

ing certain portions and upholding others. The following

is a summary of the court decision.

The EPA’s 1982 rule provided three ways to determine

GEP stack height. One way was to calculate the height

by using a formula based on the dimensions of nearby

structures. The other two were a de minimis height of

65 meters, and the height determined by a fluid modeling

demonstration or field study. The court endorsed the

formula as a starting point to determine GEP height.

However, it held that EPA has not demonstrated that

the formula was an accurate predictor of the stack height

needed to avoid “excessive concentrations of pollutants

due to downwash. Accordingly, the court directed EPA

78a

to re-examine in three ways the conditions under which

exceptions to the general rule of formula reliance could

be justified.

First, the 1982 rule allowed a source to justify raising

its stack above formula height by showing a 40-percent

increase in concentrations due to downwash, wakes, or

eddies, on the ground that this was the percentage in-

crease that the formula avoided. The court found this

justification insufficient, and remanded the definition to

EPA with instructions to make it directly responsive to

health and welfare considerations.

Similarly, the 1982 rule allowed a source that built a

stack to less than formula height to raise it to formula

height automatically. Once again, the court required

more justification that such a step was needed to avoid

adverse health or welfare effects.

Finally, the court directed EPA either to allow the

authorities administering the stack height regulations to

require modeling by sources in other cases as a check

on possible error in the formula, or explain why the ac-

curacy of the formula made such a step unnecessary.

The 1982 rule provided two formulae to calculate GEP

stack height. For sources constructed on or before Janu-

ary 12, 1979, the date of initial proposal of the stack

height regulations, the applicable formula was 2.5 times

the height of the source or other nearby structure. For

sources constructed after that date, the rule specified a

newer, refined formula, the height of the source or other

nearby structure plus 1.5 times the height or width of

that structure, whichever is less (H+1.5L). The EPA

based its decision to include two formulae on the unfair-

ness of applying the new formula retroactively. In its

examination of this issue, the court specified four factors

that influence whether an agency has a duty to apply a

rule retroactively. They are:

79a

1. Whether the new rule represents an abrupt

departure from well established practice or merely

attempts to fill a void in an unsettled area of law,

2. The extent to which the party against whom

the new rule is applied relied on the former rule.

3. The degree of burden which a retroactive order

imposes on a party, and

4. The statutory interest in applying a new rule

despite the reliance of a party on the old standard.

719 F.2d at 467 (citations omitted). Applying this anal-

ysis to the two formulae, the court upheld EPA’s basic

decision.

However, the court also held that sources constructed

on or before January 12, 1979, should not be automati-

cally entitled to full credit calculated under the 2.5H

formula unless they could demonstrate reliance on that

formula. The court remanded this provision for revision

to take actuai reliance on the 2.5H formula into account.

The statute limits stack height credit to that needed to

avoid excessive concentrations due to downwash caused by

“nearby” structures or terrain features. The 1982 regu-

lation defined “nearby” for GEP formula applications

as five times the lesser of either the height or projected

width of the structure causing downwash, not to exceed

one-half mile. No such distance limitation was placed on

structures or terrain features whose effects were being

considered in fluid modeling demonstrations or field stu-

dies. The court held that section 123 explicitly applies

the “nearby” limitation to demonstrations and studies as

well as formula applications, and remanded the rule to

EPA to apply the limitation in both contexts.

The 1982 rule defined “dispersion techniques” as those

techniques which attempt to affect pollutant concentra-

tions by using that portion of a stack exceeding GEP, by

80a

varying emission rates according to atmospheric condi-

tions or pollutant concentrations, or by the addition of a

fan or reheater to obtain a less stringent emission limita-

tion. The court found this definition too narrow because

any technique “significantly motivated by an intent to

gain emissions credit for greater dispersion” should be

barred. 719 F.2d 462. As a result, the court directed

EPA to develop rules disallowing credit for all such dis-

persion techniques unless the Agency adequately justi-

fied exceptions on the basis of administrative necessity or

a de minimis result.

The GEP formulae established in the 1982 rule do not

consider plume rise, on the ground that plume rise is not

significant under downwash conditions. In its review of

this provision, the court affirmed this judgment by EPA.

The 1982 rule addressed pollutant concentrations esti-

mated to occur when a plume impacts elevated terrain by

allowing credit for stack height necessary to avoid air

quality violations in such cases. However, the court ruled

that section 123 did not allow EPA to grant credit for

plume impaction in setting emission limits, and reversed

this part of the regulation.

The preamble to the 1982 regulation provided a 22

month process for State implementation of the regula-

tion. The court found this period to be contrary to sec-

tion 406(d) (2) of the Clean Air Act and reversed it.

The regulation, following the statute, excluded stacks

“in existence” on or before December 31, 1970, from the

GEP requirements. However, the regulation did not pro-

hibit sources constructed after December 31, 1970, from

receiving credit for tving into pre-1971 stacks. Although

the court upheld EPA’s definition of “in existence,” it

noted that EPA had failed to address the tie-in issue.

Accordingly, the court remanded this issue to EPA for

justification,

8la

One other provision of the regulation was challenged

in the Sierra Club suit: The exclusion of flares from the

definition of “stack.”’ In its review of this provision, the

court held that EPA had acted properly.

Other provisions of the stack height regulations, such

as the de minimis stack height established under § 51.1

(ii) (1), were not challenged in the suit and thus remain

in effect.

Summary of the November 9, 1984, Notice of Proposed

Rulemaking

In the November 9, 1984, notice responding to the

court decision, EPA proposed to redefine the number of

specific terms, including “excessive concentrations,”

“dispersion techniques,” “nearby,” and other important

concepts, and proposed to modify some of the bases for

determining GEP stack height. The following is a sum-

mary of the revisions that were proposed.

Excessive Concentrations

The Court of Appeals held that EPA erred in defining

“excessive concentrations” due to downwash, for purposes

of justifying a stack greater than formula height, as

nothing more than a 40-percent increase in pollutant con-

centrations over what would occur in the absence of

downwash. It remanded this issue to EPA to relate the

definition to some absolute level of air pollution that

could be interpreted to endanger health and welfare, and

thus to be “excessive.”

The EPA proposed two alternative approaches to de-

fining “excessive concentrations.” First, EPA requested

comment on whether the 40-percent approach adopted as

part of the 1982 regulation in fact protects against the

dangers to health and welfare envisioned by Congress

when it enacted section 123. In the event that such a

showing could not be made, EPA proposed a two-part

82a

definition of excessive concentrations, requiring that the

downwash, wakes, or eddies induced by nearby structures

or terrain features result in increases in ground-level

pollutant concentrations that:

(a) Cause or contribute to an exceedance of a NAAQS

or applicable PSD increment, and

(b) Are at least 40 percent in excess of concentrations

projected to occur in the absence of such structures or

terrain features.

Definition of GEP Stack Height

EPA proposed to find that the traditional (2.5H) and

refined (H-+-1.5L) formulae remained proper methods for

calculating GEP stack height except EPA proposed to

revise its regulation to allow EPA, the State or local air

pollution control agency discretion to require a further

demonstration using a field study or fluid model to dem-

onstrate GEP stack height for a source in a case where

it was believed that the formula may not reliably predict

GEP height. In the case of structures that are porous

or aerodynamically smoother than block-shaped struc-

tures, it would require a source to demonstrate the

downwash effects of such structures using a field study

or fluid model before receiving credit for stack height

based on the structures. EPA also proposed generally to

allow sources to raise existing stacks up to formula GEP

height without further demonstrations with the exception

noted above for discretionary modeling.

Reliance on the 2.5H Formula

In its 1982 rules, EPA allowed sources built before

January 12, 1979, the date on which it proposed the

refined H-+1.5L formulae, to calculate their emission

limits based on the traditional 2.5H formula that existed

previously. The court approved this distinction, but

ruled that it should be limited to sources that “relied”

83a

on the traditional formula, suggesting, for example, that

sources that had claimed credit for stacks far taller than

the formula provided could not be said to have “relied”

on it.

In response to the court decision, EPA proposed to

revise its regulation to require that for stacks in exist-

ence on January 12, 1979, sources demonstrate that they

actually relied on the 2.5H formula in the design of

their stacks before receiving credit for that height in

setting their emission limitations. In the proposal, EPA

requested comments on what it should consider as ac-

ceptable evidence of such reliance.

Definition of “Nearby”

In its 1982 rules, EPA allowed sources that modeled

the effects of terrain obstacles on downwash to include

any terrain features in their model without limiting

their distance from the stack. The court, though per-

suaded that this was a sensible approach, since it al-

lowed the model to best approximate reality, ruled that

Congress had intended a different result, namely that

terrain features beyond 14 mile from the stack should

not be included in the model.

In response, EPA proposed to revise § 51.1(ii) (3) of

its regulation to limit the consideration of downwash,

wakes, and eddy effects of structures and terrain features

to those features classified as being ‘‘nearby” as defined

in §51.1(ii). Under this proposal, structures and ter-

rain features would be considered to be “nearby” if they

occur within a distance of not more than 0.8 km (1.

mile); terrain features that extend beyond 0.8 km could

be considered if, at a distance of 0.8 km, they achieved a

height greater than or equal to 40-percent of the GEP

stack height calculated by applying the GEP formula to

actual nearby structures. In other words, a terrain fea-

ture would be said to “begin” within 14, mile if it reached

84a

at least the height of nearby buildings within that dis-

tance. Such features could be considered only out to a

distance equal to 10 times the maximum height of the

feature, not to exceed 2 miles.

The EPA proposed two options for distinguishing be-

tween sources constructed before and after the date of

promulgation of these revisions. The first option would

treat both categories of sources the same. The second

option would limit the consideration of terrain for new

sources to only those portions of terrain features that

fall entirely within 0.8 km, thereby removing the possi-

bility of including features extending beyond 1! mile.

Finally, EPA proposed three alternatives for conduct-

ing fluid modeling to evaluate the downwash effects or

nearby terrain features. These alternatives described

various ways of limiting terrain in the model beyond the

proposed distance limitations.

To establish a baseline for comparison, two alterna-

tives would initially model the stack on a flat plane with

no structure or terrain influences. To analyze downwash

effects, the first approach would then insert nearby ter-

rain, with all terrain beyond the distance limit “cut off”

horizontally. The second approach would gradually

smooth and slope the terrain beyond the distance limit,

down to the elevation of the base of the stack.

The third approach would proceed in a somewhat dif-

ferent manner. A baseline would be established by mod-

eling all terrain beyond the distance limit, smoothing

and sloping nearby terrain to minimize its influence. To

analyze downwash effects, the nearby terrain would then

be inserted into the model and the difference in effect

measured to determine appropriate downwash credit for

stack height.

Definition of “Dispersion Techniques”

In the 1982 rules, EPA identified two practices, in ad-

dition to stacks above GEP and ICS/SCS, as having no

85a

purpose other than to obtain a less stringent emission

limitation. In so doing, it allowed credit for any other

practice that had the result of increasing dispersion.

The court concluded that Congress had intended, at a

minimum, to forbid any dispersion enhancement prac-

tice that was significantly motivated by an intent to ob-

tain additional credit for greater dispersion, and _ re-

manded the question to EPA for reexamination.

The EPA proposed to revise its definition of “disper-

sion techniques” generally to include, in addition to ICS,

SCS, and stack heights in excess of GEP, any techniques

that have the effect of enhancing exhaust gas plume rise.

Combining several existing stacks into one new stack can

have such an effect. However, such combinations also

often have independent economic and engineering justi-

fication. Accordingly, EPA requested comment on de-

fining the circumstances under which the combining of

gas streams should not be considered a dispersion tech-

nique, and proposed to allow sources to take credit in

emission limitations for such merging where a facility

was originally designed and constructed with merged gas

streams or where the merging occurs with the installa-

tion of additional controls yielding a net reduction in

total emissions of the affected pollutant. The EPA re-

tained exclusions from its definition of prohibited dis-

persion techniques for smoke management in agricul-

tural and silvicultural prescribed burning programs and

also proposed to exclude episodic restrictions on residential

woodburning and debris burning.

New Sources Tied into Pre-1971 Stacks

Section 123 exempts stacks “‘in existence” at the end

of 1970 from its requirements. EPA’s general approach

to implementing this language was upheld by the court.

However, in its 1982 rule EPA had also allowed this

credit to sources built after that date that had tied into

stacks built before that date. EPA failed to respond to

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comments objecting to this allowance, and so the court

remanded the question to EPA for the agency to address.

Upon reexamination, EPA saw no convincing justifi-

cation for granting credit to these sources. Consequently,

for sources constructed after December 31, 1970, with

emissions ducted into grandfathered stacks of greater

than GEP height and for sources constructed before that

date but for which major modifications or reconstruction

have been carried out subsequently, EPA proposed to

limit stack height credit to only so much of the actual

stack height as conforms to GEP. Sources constructed

prior to December 31, 1970, for which modifications are

carried out that are not classified as “major” under 40

CFR 51.18(j) (i), 51.24(6) (2) (i), and 51.21(6) (2) (i)

would be allowed to retain full credit for their existing

stack heights.

Plume Impaction

In its 1982 rules, EPA allowed stack height credit for

“plume impaction,” a phenomenon that is distinct from

downwash, wakes and eddies. The court, though sympa-

thetic to EPA’s policy position, reversed this judgment

as beyond the scope of the statute. Accordingly. EPA

proposed to delete the allowance of plume impaction

credit from its regulation in compliance with the court

decision. However. EPA also recognized that sources in

complex terrain face additional analytical difficulties

when attempting to conduct modeling to determine ap-

propriate emission limitations. Consequently, EPA re-

- quested comment on whether any allowance should be

made for implementution problems that may result from

the application of revised GEP stack height assumptions

and, if so, how such allowance should be made.

State Implementation Plan Requirements

EPA’s 1982 rules gave states a total of 22 months to

revise their rules and to establish source emission limi-

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tations based on new stack height credits. The court

found this, too, to go beyond the language of the statute.

In response, EPA stated in the proposal that States would

be required, pursuant to section 406(d)(2)(b) of the

Clean Air Act, to review their rules and existing emis-

sion limitations, revising them as needed to comply with

the new regulation within 9 months of the date of its

promulgation.

Response to Public Comments on the

November 9, 1984, Proposal

The EPA received over 400 comments during the pub-

lie comment period and at the public hearing, addressing

a number of aspects of the proposed reguiation. These

comments have been consolidated according to the issues

raised and are discussed, along with EPA’s responses, in

a “Response to Comments” document included in the rule-

making docket. Certain comments can be characterized

as “major” in that they address issues that are funda-

mental to the development of the final regulation. These

comments are summarized below, along with EPA’s re-

sponses. Additional discussion of the issues raised and

further responses by EPA can be found in the “Response

to Comments” document.

I. Maximum Control of Emissions in Lieu of Dispersion

A central legal and policy question addressed in this

rulemaking was raised in the comments of the Natural

Resources Defense Council (NRDC) and the S

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