Opposition Brief — Appalachian Power Co. v. Environmental Protection Agency

Supreme Court, U.S.

‘ FiLED

fy) 7) JAN 4 2001 |

Nos. 00-632 and 00-633 !

Seo ee CLERK |

IN THE a

Supreme Court of the Anited States

STATE OF MICHIGAN, et al.,

Petitioners,

V.

U.S. ENVIRONMENTAL PROTECTION AGENCY, ef al.,

Respondents.

STATES OF OHIO AND INDIANA,

Petitioners,

V.

U.S. ENVIRONMENTAL PROTECTION AGENCY, et al.,

Respondents.

On Petitions for a Writ of Certiorari to the

United States Court of Appeals

for the District of Columbia Circuit

BRIEF IN OPPOSITION FOR CONSOLIDATED

EDISON COMPANY OF NEW YORK, INC., KEYSPAN

GENERATION LLC, PECO ENERGY COMPANY,

AND PSEG POWER LLC

PATRICK M. RAHER

JOHN G. ROBERTS, JR.*

JoDY M. FOSTER

HOGAN & HARTSON L.L.P.

555 Thirteenth Street, N.W.

Washington, D.C. 20004

(202) 637-5810

*Counsel of Record Counsel for Respondents

QUESTION PRESENTED

Whether this Court should grant certiorari to consider the

Court of Appeals’ correct determination that the Environ-

mental Protection Agency did not abuse its discretion or

violate the federalist structure of the Clean Air Act when it

considered a cost factor in the determination of significant

contribution under Section 110(a)(2)(D) of the Act.

(i)

il

PARTIES TO THE PROCEEDINGS

AND RULE 26.1 STATEMENTS

The following is a list of the parties filing this brief in

opposition, together with their statements pursuant to S. Ct.

R. 26.1. These parties were intervenors below in support of

affirmance and are respondents in this Court pursuant to S.

Ct. R. 1246:

Consolidated Edison Company of New York, Inc.,

states that its parent corporation is Consolidated Edison,

Inc., a publicly held corporation. Consolidated Edison

Company has no affiliates or subsidiaries that have issued

shares or debt securities to the public.

KeySpan Generation LLC states that its parent corpo-

ration is MarketSpan Corporation, d/b/a KeySpan En-

ergy, a publicly held company. An affiliate of KeySpan

Generation LLC, The Houston Exploration Company,

has also issued shares or debt securities to the public.

PECO Energy Company states that its parent company,

Exelon Corporation, has issued stock to the public. no

other affiliates or subsidiaries of the Company have is-

sued shares or debt securities to the public.

PSEG Power LLC (formerly Public Service Electric &

Gas Co.) states that its parent company, Public Service

Enterprise Group Incorporated, has issued stock to the

public. No other affiliates or subsidiaries of PSEG Power

have issued shares or debt securities to the public.

ili

TABLE OF CONTENTS

QUESTION PRESENTED .........-.2--ssssssssesessesensnensesnsnnenens i

PARTIES TO THE PROCEEDINGS AND

RULE 26.1 STATEMENTS ..........-scscsssersereeneeneenees ii

REASONS FOR DENYING THE WRIT........--:::0-se+s0004 5

I. THE DECISION BELOW DOES NOT

CONFLICT WITH DECISIONS OF THIS

COURT OR OTHER DECISIONS OF

A. The Decision Below Does Not Conflict

With Decisions Of This Court

Addressing EPA’s Authority To

Consider Cost Factors Under CAA

Bactitets 1.10. ....c..cccaccareccasorsesecssasecccscsvenscosscccccoces 6

B. The Decision Below Does Not Conflict

With D.C. Circuit Decisions

Addressing EPA’s Authority To

Consider Cost Factors Under CAA

Section 109.............cccocccccorsesscsccscoccsssssssccccccsscess 7

Il. THE DECISION BELOW CORRECTLY

AFFIRMED EPA’S DISCRETION TO

CONSIDER COST FACTORS IN THE

DETERMINATION OF SIGNIFICANT

CONTRIBUTION .........::scs:esessssesseresscenseseeneennsnnenns 10

iv

TABLE OF CONTENTS—Continued

Ill. EPA’S SIGNIFICANT CONTRIBUTION

DETERMINATION DOES NOT

VIOLATE FEDERALISM OR

INTERSTATE EQUITY CONCERNS..............00+ 14

A. EPA's Significant Contribution

Determination Does Not Ignore the

Significance of States' Boundaries in

Determining their Reduction

CN latlsie Riidcctacclincianessniiiiarladsiaeiane 15

B. The Federalism Structure of the CAA

Does Not Require EPA to Adopt a

Proportional Interpretation of States’.

Emission Reduction Obligations under

I DIED: baciinprceshisticiescheeinicsicisinnassi 17

C. EPA's Significant Contribution

Determination Does Not Raise

Interstate Equity Issues Requiring this

Ce BN ainsiciite secbicnsiicalibindlnticaSemcneinins 19

CA cisthteninstuiininniichioicirintintridtahanigtanesnnneeis 21

Vv

TABLE OF AUTHORITIES

Page

CASES:

American Trucking Ass'n v. EPA, 175 F.3d 1027, modi-

fied on reh'g, 195 F.3d 4 (D.C. Cir. 1999), cert.

granted, 120 S.Ct. 2003, 2193 (2000) .....seseeceeneesesseeeseerensenes 2

Association of Am. Railroads v. Surface Transp. Bd.,

161 F.3d 58 (D.C. Cir. 1998).......-sssssssssesessnssseserenenensnnenenenes 11

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

Council, Inc., 467 U.S. 837 (1984) ...--ssesssssseresereenenenenenenees 11

Illinois v. City of Milwaukee, 406 U.S. 91 (1972).......e0scereesseeees 15

Lead Indus. Ass'n v. EPA, 647 F.2d 1130 (D.C. Cir.),

cert. denied, 449 U.S. 1042 (1980)........:sssesssreerersrsneesnnenenees 6

New York v. EPA, 852 F.2d 574 (D.C. Cir. 1988), cert.

denied, 489 U.S. 1065 (1989) .......sessssssensereessnersensenensensnsestes 11

NRDC v. EPA, 824 F.2d 1146 (D.C. Cir. 1987) (en a 8

OSG Bulk Ships, Inc. v. United States, 132 F.3d 808

(D.C. Cir. 1998) ....s.cssssssccsssenssssnecsnseccnsscnsnecnncenscnnsennscencssscens 11

South Terminal Corp. v. EPA, 504 F.2d 646 (Ist Cir.

OTB oa icscncvosoressntonadatisshendssavesnccasnatennveeaseanniesaubsiiencvenaeeovenarnts 7

Train v. NRDC, 421 U.S. 60 (1976)......::s:s:sssesesessssessseneseneneses 5,6

Union Electric Co. v. EPA, 427 U.S. 246 (1976).....-----+++++ 5, 6,7

Virginia v. EPA, 108 F.3d 1397 (D.C. Cir.), modified on

reh'g, 116 F.3d 499 (D.C. Cir. 1997).......scscsssssssecsrscsrsocnresees 15

vi

TABLE OF AUTHORITIES—Continued

Page

STATUTES:

The Clean Air Act, 42 U.S.C. §§ 7401-7671q (1994 &

Deen, TE TGF scnctssenisnmninsnidnteelcgia eee 2

CAA § SOR: GRRE: © WB cielisticciisentinitcnenicl 6

CAA § 109(b), 42 U.S.C. § 7409(b) ..csssssssscccssssssessessenieeeesees 7

CAA § 110; BTID. BR ririiccrtntiececieciieeties 6

CAA § 110(aX(2)(D), 42 U.S.C. § 7410(aX(2)(D).........passim

CAA & 152, GB UGC. 6 FONG aciicticccsettie ee 8

CAA § 181(b)(2)(A), 42 U.S.C. § 7511(b)(2)(A) ......0.00e00- 13

CAA § 106; GB UURE. 6 T91U cilities 13

RULES AND REGULATIONS:

BCR BR. WB ccc nokenseseniendc ease eee 2

45 Fed. Rag. FO,531 Glapt, D, 2G C Rp .c.ncecsncssssssseesesnvegnenscscotssnseest 13

63 Fed. Reg. 57,356-537 (Oct. PE DD cscs passim

OTHER AUTHORITY:

Robert L. Stern, et al., Supreme Court Practice (7th ed.

SSE ccevnncesindsenessitb beisesepslinesnddeeesibadelieemsaiiesamaaeciateamets tecnica 10

IN THE

Supreme Court of the Anited States

Nos. 00-632 and 00-633

STATE OF MICHIGAN, ef al.,

Petitioners,

v.

U.S. ENVIRONMENTAL PROTECTION AGENCY, ef al.,

Respondents

STATES OF OHIO AND INDIANA,

Petitioners,

Vv.

U.S. ENVIRONMENTAL PROTECTION AGENCY, ef al.,

R

On Petitions for a Writ of Certiorari to the

United States Court of Appeals

for the District of Columbia Circuit

BRIEF IN OPPOSITION FOR CONSOLIDATED

EDISON COMPANY OF NEW YORK, INC., KEYSPAN

GENERATION LLC, AND PSEG POWER LLC

Respondents Consolidated Edison Company of New York,

Inc., Keyspan Generation LLC, and PSEG Power LLC

respectfully request that the Court deny’ the petitions for

certiorari filed in this case by the State of Michigan, et al. in

No. 00-632 (“Michigan”) and by the States of Ohio and

Indiana in No. 00-633 (“Ohio and Indiana”). We refer to

these petitioners collectively as “Petitioning States.”

2

INTRODUCTION

This case meets none of the criteria warranting an exercise

of this Court’s certiorari jurisdiction. See S. Ct. R. 10. It

implicates no conflict among the circuits and raises no

important unsettled questions of law. To the contrary, this

case involves the ordinary exercise of discretion by the

Environmental Protection Agency (“EPA”) in implementing

a statutory provision of the Clean Air Act (“CAA”), 42

U.S.C. §§ 7401-7671q (1994 & Supp. III 1997), requiring

states to address the interstate transport of air pollution. The

rule at issue, 63 Fed. Reg. 57,356-537 (Oct. 27, 1998), which

is referred to as the “NOx SIP Call,” requires certain states to

revise their State Implementation Plans (“SIPs”) to reduce

emissions of nitrogen oxides (NOx) that impact ozone

attainment problems in downwind areas.

In an attempt to transform this typical administrative rule-

making case into one worthy of this Court’s review, Peti-

tioning States argue that the Court of Appeals decision in this

case conflicts with holdings of the D.C. Circuit in other CAA

cases, including American Trucking Ass’ns v. EPA, 175 F.3d

1027 (“ATA”), modified on reh’g, 195 F.3d 4 (D.C. Cir.

1999), cert. granted, 120 S. Ct. 2003, 2193 (2000). Peti-

tioning States’ attempt to manufacture certworthy issues

from superficial similarities in these cases is misguided. Far

from implicating important jurisprudential conflicts, this case

involves an unremarkable affirmation of agency discretion

consistent with well-settled law.

Petitioning States also argue that this case raises important

federalism and interstate equity issues relating to the inter-

state transport of air pollution that require this Court’s

review. While the CAA provision at issue certainly does

implicate issues of federalism and interstate equity, the D.C.

Circuit correctly determined that EPA’s rulemaking. was

properly responsive to these concerns. Petitioning States do

3

not provide any compelling arguments for devoting this

Court’s scarce resources to further review of these matters.

Respondents filing this opposition provide the Court with

an important perspective on the rule at issue in this case: that

of electric generating companies in downwind states who

view the NOx SIP Call as a soundly reasoned, technologi-

cally and economically feasible, necessary step to address the

complex and persistent problem of interstate transport of

ozone.

Over the last decade electric generators in downwind states

have invested many millions of dollars in control technolo-

gies to improve air quality and assist in their states’ efforts to

attain the national ozone standard. The beneficial health

impacts of these emission control efforts, however, have been

largely thwarted by imported NOx from upwind sources in

the South and Midwest that are not subject to as strict emis-

sion control requirements and can produce electricity using

higher-emitting, cheaper fuel sources. Their transported

emissions intermingle with other airborne emissions and

significantly increase downwind states’ ozone levels. By

requiring upwind states to control their sources not only to

prevent local air pollution but to prevent—as the CAA

requires—significant contribution to ozone attainment

problems downwind, the NOx SIP Call will remedy this

gross inequity and its resulting adverse health impacts.

COUNTERSTATEMENT

As Petitioning States explain, Michigan at 4-5, Ohio and

Indiana at 3-4, Section 110(a)(2)(D) of the CAA, 42 US.C.

§ 7410(a)(2)(D), requires states to prevent air pollution

sources located within their boundaries from significantly

contributing to air quality attainment problems in downwind

states. Pursuant to its expressly delegated authority to

implement that provision, EPA promulgated the NOx SIP

4

Call, requiring certain states in the eastern half of the United

States to revise their state air quality plans to eliminate

amounts of NOx emissions that EPA had determined were

“significantly contributing” to downwind ozone attainment

problems.

While Petitioning States characterize EPA’s calculation of

“significant contribution” in the NOx SIP Call as one based

solely on cost considerations, see Michigan at 6-7, Ohio and

Indiana at 4, EPA’s determination of significant contribution

was in fact a two-step process based primarily on air quality

factors and only secondarily on cost considerations.

In the first step, the agency identified states that were “sig-

nificantly contributing” to downwind attainment problems,

using air quality modeling that determined whether the NOx

emissions of a state, when combined with emissions from

other states, were a significant factor in the formation of

ozone in downwind states. See 63 Fed. Reg. at 57,381. Only

after having thus identified, on the basis of air quality factors

alone, the states that were significantly contributing to ozone

attainment problems downwind did EPA use a cost-based

methodology to calculate the amounts of NOx emissions that

these states could permissibly emit without violating the

Section 110 prohibition on significant contribution. Jd.

Because air quality modeling is not well-adapted to quan-

tify precise emissions impacts,! in this second step EPA

identified a set of cost-effective control technologies and

then, using state-specific NOx inventory information, mod-

eled the air quality impacts of applying these technologies to

the covered states. Finding that the resulting levels of NOx

emissions would significantly reduce ozone formation in

1 Air quality models, particularly broad regional scale models

~ such as those used in the NOx SIP Call, are excellent tools for

identifying directional trends and relative impacts, but are not

regarded as well-suited for determining precise quantities of

emissions impacts.

5

downwind states, EPA established those levels as state-

specific “NOx budgets”—for each state, the total amount of

NOx emissions that could be emitted consistent with Section

110’s prohibition on significant contribution to transport.

Specifically, EPA’s NOx emission budgets were based on the

NOx emissions levels that would be permitted in these states

under uniform application to their NOx inventories of certain

NOx pollution controls that EPA had determined could be

cost-effectively implemented at $2,000 per ton or less. See

63 Fed. Reg. at 57,365.

The Court of Appeals upheld EPA’s consideration of this

cost factor in its determination of significant contribution

under Section 110(a)(2)(D). It also rejected challengers’

arguments that the CAA requires state-specific quantifica-

tions of significant contribution and that the SIP Call Rule

impermissibly denied states their rights under the CAA to

determine their implementation strategies.

REASONS FOR DENYING THE WRIT

I. THE DECISION BELOW DOES NOT CONFLICT

WITH DECISIONS OF THIS COURT OR OTHER

DECISIONS OF THE D.C. CIRCUIT

In an attempt to manufacture a case for certiorari where

none exists, Petitioning States argue that the decision below

conflicts with holdings of this Court and with prior decisions

of the D.C. Circuit regarding EPA’s discretion to consider

costs in implementing the CAA. See Michigan at 7-8, 20-21;

Ohio and Indiana at 14-15. Specifically, Petitioning States

point to two of this Court’s cases, Union Electric Co. v. EPA,

427 U.S. 246 (1976), and Train v. NRDC, 421 U.S. 60

(1976), addressing EPA’s authority to consider economic

factors when evaluating the adequacy of a state’s SIP sub-

mittals under CAA Section 110, 42 U.S. § 7410, and to two

D.C. Circuit decisions, Lead Indus. Ass’n v. EPA, 647 F.2d

6

1130 (D.C. Cir.), cert. denied, 449 U.S. 1042 (1980), and

ATA, 175 F.3d 1027, holding that EPA lacks authority to

consider costs when setting National Ambient Air Quality

Standards (“NAAQS”) under CAA Section 109, 42 U.S.C.

§ 7409.

A. The Decision Below Does Not Conflict With Deci-

sions Of This Court Addressing EPA’s Authority

To Consider Cost Factors Under, CAA Section

110.

on

The decision below does not conflict with the Section 110

precedents of this Court cited by Petitioning States. In both

Union Electric, 427 U.S. at 257 & n.5, and Train, 421 US. at

90-91, the Court addressed arguments about EPA’s authority

under provisions of Section 110 other than Sec-

tion 110(a)(2)(D) to consider claims of economic and tech-

nological infeasibility—i.e., to use cost considerations to

excuse a state’s failure to comply with EPA’s interpretation

of the requirements of Section 110. These cases are distin-

guishable first because they involve challenges to agency

action arising-under, and interpreting, different provisions of

Section 110 than the one at issue in this case. More impor-

tantly, the underlying principle of these cases—that EPA.

may not rely on cost factors to. allow states to impede CAA

compliance—does not conflict with the decision below

upholding EPA’s use of a cost factor in its determination of

how states must comply with Section 110(a)(2)(D)’s trans-

port prohibition.

Indeed, in Union Electric this Court expressly addressed

EPA’s authority to consider costs in the context of facilitat-

ing rather than hampering compliance with Section 110. As

Petitioning States acknowledge, Michigan at 9 n.4, the Court ©

indicated that, in evaluating whether a SIP includes provi-

sions for attaining the NAAQS “as expeditiously as practica-

ble” as required under Section 110(a)(2)(A)(i), EPA “may

consider whether it is economically or technologically

7

possible for the state plan to require more rapid progress than

it does.” Jd. (citing Union Electric, 427 U.S. at 265, n.13).

EPA’s use of a cost factor in determining significant contri-

bution in the NOx SIP Call is consistent with the principle

that the agency may consider costs in the context of facili-

tating state compliance with Section 110's air quality goals. 2

B. The Decision Below Does Not Conflict With D.C.

Circuit Decisions Addressing EPA’s Authority To

Consider Cost Factors Under CAA Section 109.

Contrary to Petitioning States’ assertions, the D.C. Cir-

cuit’s holding in the ATA and Lead Industries cases—that

EPA is prohibited from considering costs when establishing

the NAAQS under Section 109—does not conflict with the

decision below upholding EPA’s authority to consider cost

factors in determining significant contribution under Section

110(a)(2)(D). Sections 109 and 110 are different statutory

sections with different purposes. Section 109 requires EPA

to set NAAQS that, “based on [statutory] criteria and allow-

ing an adequate margin of safety, are requisite to protect the _

public health.” 42 U.S.C. § 7409(b). Section 110 is a very

lengthy section with many different provisions detailing the

many obligations of states with respect to their air quality

implementation plans. EPA is charged with responsibility

for implementing both sections, of course, but the statutory

2 Another circuit has also concluded that cost considerations are

permissible in enforcing Section 110’s requirements where those

considerations are employed to achieve, not impede, compliance

with Section 110’s air quality goals. See South Terminal Corp. v.

EPA, 504 F.2d 646, 676 (1st Cir. 1974) (observing, with respect to

EPA regional transportation control plan imposed as a Federal

Implementation Plan under Section 110, that “[e]conomic consid-

erations may play some role *** in EPA’s selection among

alternative means to achieve its mandated clean air goal”).

8

standards that EPA must interpret in defining the agency’s

and the states’ obligations under the two sections are entirely

unrelated to each other.

Thus, the decision below does not present an issue similar

to the one before this Court in ATA. Indeed, the Court of

Appeals expressly noted that the NOx SIP Call case only

concerned whether EPA could permissibly consider cost in

its implementation of Section 110(a)(2)(D) and did not raise

issues as to whether the agency was required to consider

costs or was permitted to use a cost/benefit criterion in

selecting its final rule, Michigan App. at 15a-16a, issues that

are raised in ATA. 3

Certainly, the judges who authored the opinion below

would be surprised to learn that the decision conflicts with

prior D.C. Circuit precedent. The opinion provides a lengthy

analysis of how the decision is derived from the “settled law

of this circuit.” Michigan App. at 20a-22a. In particular, the

opinion focuses on a prior case upholding EPA’s authority to

consider costs when regulating hazardous air pollutants under

Section 112 of the CAA, 42 U.S.C. § 7412, to achieve an

“ample margin of safety” to protect public health, see Michi-

gan App. at 20a (citing NRDC v. EPA, 824 F.2d 1146, 1163

(D.C. Cir. 1987) (en banc)). The Court of Appeals observed

that NRDC, along with several other cases, stands for the

principle that unless there is “clear congressional intent to

3 Indeed, the lack of conflict between the D.C. Circuit’s hold-

ings is evidenced by the fact that the decision below issued only

ten months after the ATA decision, with parts of both decisions

authored by the same judge; clearly, Circuit Judge Williams did

not perceive any conflict between the two cases. Further, petitions

for rehearing were rejected by the D.C. Circuit. See Michigan

App. at 55a-58a.

9

preclude consideration of cost,” an agency is not barred from

considering it. Jd.

Applying the NRDC standard, the D.C. Circuit concluded

that EPA’s consideration of cost factors in the significant

contribution determination was permissible, stating that

“there is nothing in the text, structure or history of

§ 110(a)(2)(D) that bars EPA from considering cost in its

application.” Jd. at 22a.

There is nothing about this holding that remotely warrants

this Court’s intervention. There is no conflict between it and

the other cited cases addressing EPA’s authority to consider

costs under Sections 109, 110, or 112. Indeed, the CAA

precedents are consistent with each other. They indicate that

EPA’s authority to consider cost factors when implementing

the CAA must be determined on a case-by-case basis through

analysis of congressional intent, as revealed by the text of the

statutory provision under which the agency acts and other

appropriate indicia, as well as the factual circumstances of

the specific consideration of costs at issue. .

In reality, Petitioning States do not seek from this Court a

“resolution” of the Section 109 and Section 110 precedents,

but rather a modification of earlier holdings with which they

disagree. See, e.g., Michigan at 21 (advocating that this

Court “resolve” alleged conflict by flipping the D.C. Cir-

cuit’s prior holdings and deciding that EPA must consider

costs under Section 109 but cannot consider them under

Section 110); see also Ohio and Indiana at 14-15 (advocating

that this Court hold that EPA may consider costs under both

Sections 109 and 110, but only as a secondary factor to

health concerns under Section 109 and to air quality concerns

under Section 110).

Given Petitioning States’ failure to demonstrate any con-

flicts between the decision below and other CAA cases

addressing EPA’s authority to consider costs, as well as the

10

lack of identity between the issues in this case and those in

ATA, this Court should deny the request of Ohio and Indiana

to defer consideration of the certiorari petitions until after

resolution of the ATA cases. See Ohio and Indiana at 16 n.8,

7,

Even were this Court persuaded that there is some tension

in D.C. Circuit precedents regarding EPA’s authority to

consider costs in implementing the CAA, it is well-settled

that this Court does not sit to resolve intracircuit conflicts.

The established principle, as Justice Harlan once wrote, is

that “decisions between different panels of the same Court of

Appeals will not be considered to present a reviewable

conflict, since such differences of view are deemed an

intramural matter to be resolved by the Court of Appeals

itself.” Robert L. Stern, et al., Supreme Court Practice 176

(7™ ed. 1993) (quoting Hon. John M. Harlan, Manning the

Dikes, 13 Record of N.Y.C. Bar Ass’n 541, 552 (1958)). The

en banc process is the established means of identifying and

settling any intracircuit conflicts.

Petitioning States also attempt to argue that, because EPA

actions under the CAA that have nationwide scope can only

be reviewed by the D.C. Circuit, conflicts among D.C.

Circuit CAA decisions are “on par” with conflicts between

different circuits. Michigan at 19. They offer no support for

this theory, which is inconsistent with the very reason the

CAA provides nationwide jurisdiction in the D.C. Circuit in

the first place.

Il. THE DECISION BELOW CORRECTLY AF-

FIRMED EPA’S DISCRETION TO CONSIDER

COST FACTORS IN THE DETERMINATION OF

SIGNIFICANT CONTRIBUTION

The issue before the D.C. Circuit was not whether EPA’s

consideration of a cost factor under Section 110(a)(2){D) is

the correct way to determine significant contribution, but

11

whether it is a permissible one. Neither the CAA nor its

legislative history detail how Congress intended the phrase

“contribute significantly” to be interpreted.4 Thus, as estab-

lished under Chevron’s familiar two-step framework, the

question for a reviewing court is whether the agency action is

based on a permissible construction of the statute. Chevron

U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467

U.S. 837, 842-843 (1984). EPA’s interpretation is reviewed

with great deference and upheld if reasonable. See, e.g.,

Association of Am. Railroads v. Surface Transp. Bd., 161

F.3d 58, 64 (D.C. Cir. 1998) (court engaging in Chevron

step-two analysis affords “significant leeway” to agency

interpretation); OSG Bulk Ships, Inc. v. United States, 132

F.3d 808, 814 (D.C. Cir. 1998) (court accords “great defer-

ence to the particular way in which the agency chooses to

implement a statute that it is empowered to administer”).

Deference to EPA’s interpretation is indeed at its zenith in

this case due to the highly technical nature of the significant

contribution determination and the complex statute in which

it is embedded. See New York v. EPA, 852 F.2d 574, 580

(D.C. Cir. 1988) (court accords great deference to decisions

within agency’s “area of special expertise, at the frontiers of

science”), cert. denied, 489 U.S. 1065 (1989).

4 Petitioning States Michigan ef al. argue that the “plain lan-

guage” of Section 110(a)(2)(D), and the legislative history associ-

ated with it, make clear that “[t]he word ‘significantly’ goes to the

level of the impact and cannot reasonably be interpreted to allow

the consideration of economic efficiency.” Michigan at 13. As

they note, the 1990 Amendments changed the transport prohibition

from a prohibition on interstate pollution that “prevent{ed] attain-

ment” downwind to the current significant contribution standard.

While Petitioning States see this change as indicating that the word

significantly goes to the level of impact, it is just as plausible that

the amendment from “prevent” to “significantly contribute”

reflects congressional awareness that it is difficult, if not impossi-

ble, from an air-quality perspective alone to quantify the role of

particular upwind states in determining downwind attainment.

12

The record in this case more than substantiates the Court of

Appeals’ judgment that EPA’s consideration of costs in

implementing the transport prohibition was permissible and

reasonable. As detailed above, the court concluded, based on

well-established precedent, that nothing in the CAA pre-

cludes EPA from considering cost when making a remedial

determination under its authority to issue SIP Calls. Further,

the D.C. Circuit recognized that EPA exercised its discretion

to consider costs under Section 110(a)(2)(D) in an appropri-

ate manner. Indeed, the court stated that “[i]n some contexts,

‘significant’ begs a consideration of costs,” Michigan App. at

19a, and detailed at length its reasons for concluding that the

determination of significant contribution under Section

110(a)(2)(D) was a circumstance that warranted considera-

tion of costs, see id.at 19a-22a.

Petitioning States assert that EPA’s determination of sig-

nificant contribution relied on an “arbitrary, unbounded”

standard. See Ohio and Indiana at 9-12; see also Michigan at

23 n.13. Petitioning States are wrong. As the Court of

Appeals recognized, EPA’s consideration of cost in its

significant contribution determination was a reasonable

decision, given the complexities of ozone transport, to design

a solution based on determining whether downwind attain-

ment problems could be addressed by eliminating at least the

amounts of NOx emissions that could be most cost-

effectively eliminated. See Michigan App. at 14a-15a.

Moreover, EPA’s air quality evaluation of the cost method-

ology included modeling and comparative analysis of the

downwind impacts of the cost-effective state NOx budgets as

well as of more stringent control measures. See 63 Fed. Reg.

at 57412-13. Thus, EPA’s use of a cost factor was neither

arbitrary nor unbounded but rather reflected a complex,

reasoned approach to identifying and addressing significant

contribution.

13

Moreover, the agency’s decision to consider cost-

effectiveness in devising a remedy for states’ violations of

Section 110(a)(2)(D) is consistent with basic principles of

ozone nonattainment planning. As reflected in twenty years’

worth of congressional guidance, Congress and EPA have

consistently concluded that in the absence of complete

knowledge on the sources and receptors of ozone transport, it

is reasonable to assign a level of emissions control to states

based on the technical and economic feasibility of available

controls.5 Accordingly, as the Court of Appeals properly

recognized, Michigan App. at 18a-20a, it was entirely

appropriate for EPA to take such factors into account, in

conjunction with air quality factors, to calculate the emission

reductions necessary for states to comply with Section 110’s

transport prohibition.

Indeed, EPA’s use of a cost factor in the NOx SIP Call is

consistent with the views expressed by Petitioning States

regarding when consideration of cost is appropriate under

Section 110. See, e.g., Ohio and Indiana at 15 (stating that

cost consideration is appropriate under Section 110 when the

consideration of cost is secondary to air quality factors) and

Michigan at 21 (stating that cost considerations are appropri-

5 The central concepts guiding federal and state ozone attain-

ment efforts over the past two decades have been requirements

related to “reasonably available control measures” (RACM) and

“reasonably available control technology” (RACT). See, e.g., 42

U.S.C. § 7511(b)(2)(A) (requiring ozone nonattainment areas to be

reclassified to follow through on requirements in § 75lla to

implement RACT measures); id. § 751llc (requiring states in

Northeast Ozone Transport Region to implement RACT). And for

more than two decades, EPA policy and guidance have interpreted

RACM and RACT requirements to call for the implementation of

controls that are technologically and economically feasible. See,

e.g., 45 Fed. Reg. 59,331 (Sept. 9, 1980) (defining RACT as “the

lowest emission limitation that a particular source is capable of

meeting by the application of control technology that is reasonably

available considering technological and economic feasibility”).

14

ate under Section 110 when they are “relevant to [the]

decision and indispensable in providing a reasoned basis for

the agency’s action”).

Thus, Petitioning States have not established any grounds

warranting this Court’s review of EPA’s consideration of

cost in determining significant contribution under Sec-

tion 110(a)(2)(D).

Ill. EPA’S SIGNIFICANT CONTRIBUTION DE-

TERMINATION DOES NOT VIOLATE FEDER-

ALISM OR INTERSTATE EQUITY CONCERNS

Petitioning States Ohio and Indiana argue that EPA’s ap-

proach in the NOx SIP Call is not consistent with the “feder-

alism-sensitive” approach of the CAA because it improperly

ignores the significance of state boundaries and does not base

emission reduction obligations upon an assessment of each

state’s proportionate contribution to downwind attainment

problems. Ohio and Indiana at 9-16. They also contend that

the decision below deserves review because, like other state

border disputes involving natural resources, this case in-

volves an important national problem and the States are

opposed to one another concerning the allocation of respon-

sibility for solving this problem. /d. at 16-17. These argu-

ments merely rephrase complaints that have already been

considered and rejected in the decision below. See Michigan

App. at lla-13a, 22a-23a and 33a-37a (holding that EPA

conducted sufficient state-specific analyses of significant

contribution, that EPA’s use of regional uniform controls to

calculate the states’ NOx budgets was reasonable, and that

EPA’s specification of NOx budgets did not vioiate states’

nights under the CAA to make implementation decisions).

15

A. EPA’s Significant Contribution Determination

Does Not Ignore the Significance of States’

Boundaries in Determining their Reduction Obli-

gations.

Ohio and Indiana argue that EPA’s significant contribution

determination violates the “cooperative federalism” scheme

of the CAA by ignoring the significance of state boundaries.

Ohio and Indiana at 8. As Michigan, et al. describe, the CAA

assigns EPA the responsibility to promulgate air quality

standards and to determine whether states are meeting all

applicable CAA requirements, while assigning to states the

responsibility to design SIPs to achieve the federally-

established CAA requirements. Michigan at 4. This scheme

includes deference to state authority on intrastate issues and

deference to federal authority on issues of interstate concern.

See, e.g., Illinois v. City of Milwaukee, 406 U.S. 91, 103-108

(1972) (recognizing necessity of federal common law remedy

for interstate water pollution where no federal statutory

remedy exists). EPA’s SIP Call is entirely consistent with

this statutory federalism scheme. In the SIP Call, EPA

properly met its statutorily-defined federal role under the

CAA to determine which states were failing to meet their

transport obligations under Section 110(aX2)(D), and to

require those states to revise their SIPs accordingly.

Moreover, contrary to the assertion that EPA’s approach

ignored the significance of state boundaries, EPA's approach

respects the significance of state boundaries in several ways.

First, as the Court of Appeals recognized, see Michigan App.

at 33a-37a, in calculating a remedial strategy to address

transport, EPA appropriately determined only the necessary

emissions reductions and left to the states to determine for

themselves the best implementation strategies, as required by

Virginia v. EPA, 108 F.3d 1397 (D.C. Cir.), modified on

other grounds, 116 F.3d 499 (D.C. Cir. 1997). Second, EPA

used inventories of NOx emissions from covered states to

determine, applying its cost-effectiveness methodology, the

16

amounts of NOx emissions that each state could emit con-

sistent with Section 110’s prohibition on significant contri-

bution. And third, as the D.C. Circuit recognized, see

Michigan App. at 1la-13a, EPA conducted state-specific air

quality modeling sufficient to confirm that the proposed state

NOx budgets would satisfactorily address the prohibited

regional transport.

Petitioning States also misleadingly imply that EPA’s

$2,000 per ton cost-effectiveness standard improperly affects

States’ implementation decisions about how to achieve the

NOx emissions budgets derived from the standard, and that

EPA’s use of the cost factor resulted in EPA promulgating

less stringent budgets than necessary for some states. See

Ohio and Indiana at 13-14; Michigan at 22-25. To the

contrary, EPA’s significant contribution determination did

not excuse any states from achieving the reductions EPA

determined were necessary to address downwind impacts,

nor does the cost factor EPA used in that determination play

any role at all in state’s implementation decisions. The

states’ obligations under the SIP Call are not to impose cost-

effective controls, but rather to limit sources within their

borders to the specific amounts of NOx emissions EPA

determined, using the cost-effectiveness methodology, that

each state could emit consistent with Section 110(a)(2)(D).

As the Court of Appeals affirmed, Michigan App. at 33a-37a,

the SIP Call appropriately leaves states free to achieve the

mandated emissions levels in any manner they choose,

including through expensive, technology-forcing mecha-

nisms, if they desire. See id. at 37a. ©

© EPA’s rule pointed out that certain controls—namely, controls

on coal-fired electric generators and large industrial sources—

would be the most cost-effective means of meeting the established

budgets, but the agency made clear that states could employ any

emissions control measure they chose to bring their emissions

within the NOx budget requirements. See 63 Fed Reg. at 57,400.

17

Thus, EPA’s significant contribution determination is ap-

propriately sensitive to federalism concerns. It does not

ignore the significance of states’ boundaries, nor does it

interfere with states’ implementation rights with regard to

ozone transport.

B. The Federalism Structure of the CAA Does Not

Require EPA to Adopt a Proportional Interpreta-

tion of States’ Emission Reduction Obligations

under Section 110(a)(2)(D).

Ohio and Indiana urge this Court to find with respect to

interstate transport that the federalist scheme of the CAA

requires that each State “contribute to the solution in propor-

tion to its contribution to the problem,” Ohio and Indiana at

14. They do not explain, however, why the cooperative

federalism structure of the CAA requires that the term

“significantly” in Section 110(a)(2)(D) must be interpreted in

proportionate terms. Mathematical proportionality is but one

possible interpretation of the “significant contribution”

standard and, as detailed above, it is not the interpretation

that EPA, in its discretion, found to be the most reasonable in

the context of ozone transport.

Petitioning States support their arguments by detailing

some apparently anomalous or nonproportional results of

EPA’s significant contribution determination that they allege

violate federalism and state sovereignty principles. See Ohio

and Indiana at 12-13; Michigan at 22-24. For example, Ohio

and Indiana complain that “a relatively large contribution of

ozone [from Pennsylvania to New York] is considered

insignificant undér EPA’s standard while a nominal contri-

bution of ozone [from Indiana to New York] is considered

significant.”’ Ohio and Indiana at 13; see also Michigan at

7 Ohio and Indiana do acknowledge that “[o]f course, Indiana

has an effect on other downwind nonattainment areas besides New

York,” Ohio and Indiana at 13 n.6, but still assert that somehow

Indiana’s emission reduction obligations should be based on the

“actual amounts” contributed to ozone problems elsewhere. Whai

18

24-25 (complaining that such outcomes illegitimately require

states to do both more and less than Congress intended them

to do to address interstate transport).

The Court of Appeals properly rejected similar complaints

below when it determined that EPA’s state-specific modeling

was sufficient to support the rationality of the NOx SIP Call,

see Michigan App. at 11a-13a, and that EPA’s use of region-

ally uniform controls to establish the budgets was reasonable,

see id. at 22a-23a. The isolated examples of nonproportional

outcomes raised by Petitioning States do not warrant this

Court’s review of the lower court’s findings. The examples

are based on modeling of unidimensional, static and partial

outcomes of the SIP Call (that is, impacts from one state to

one other state) when in reality ozone transport is multidi-

mensional and dynamic (that is, each state impacts and is.

impacted by multiple other states in a constantly changing

scenario).

In the real world, the “significance” of an upwind state’s

NOx emissions on downwind ozone nonattainment is a

function not only of air movements, weather, and chemical

transformations that vary endlessly over time, but also of the

actions of all the other upwind sources in other states, as well

as federal, state and local air pollution laws and other factors.

In these circumstances, as the court below found, EPA’s

functional interpretation of the term “significantly” reasona-

bly implements the CAA’s transport prohibition, particularly

as EPA’s interpretation is also appropriately sensitive to

states’ rights and interstate equities under the CAA.

Ohio and Indiana fail to acknowledge, however, is that determin-

ing “the” “actual” amounts that Indiana will contribute to down-

wind problems in other states is in some sense a conceptual

conundrum, as those amounts will vary at different times not only

with different weather patterns but also with variations in the

emission amounts coming from other states.

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19

C. EPA’s Significant Contribution Determination

Does Not Raise Interstate Equity Issues Requiring

this Court’s Review. |

Ohio and Indiana argue that this case is similar to the dis-

putes among States concerning borders and natural resources

over which this Court has exercised original jurisdiction, see

Ohio and Indiana at 17. To the contrary, this case is nothing

like those cases, which typically have arisen under common

and state law. The current case arises under one of the most

detailed and comprehensive. federal regulatory statutes, a

statute in which Congress expressly answered the difficult

question of how the burdens of interstate transport should be

addressed. Section 110(a)(2)(D) of the CAA clearly indi-

cates that states must control their sources to prevent signifi-

cant contribution to downwind attainment difficulties. Given

this unequivocal congressional directive, and the fact that the

Court below correctly upheld the agency’s approach to

implementing it, there is no need for further review by this

Court of the reasonableness of the agency’s approach.

Moreover, contrary to the view of Petitioning States Ohio

and Indiana, the fact that States are lined up against one

another with regard to the NOx SIP Call does not indicate a

flawed rule mandating review by this Court. Rather, it

reflects the difficulty of devising a rule to address interstate

responsibility for ozone transport that can please every state.

Indeed, as Michigan et al. acknowledge, the inability or

unwillingness of states to meet their obligations to eliminate

downwind pollution contributions is an important reason that

Congress revised the CAA in 1990 to strengthen the statutory

provisions addressing interstate transport, including Section

110(a)(2)(D). See Michigan at 13. Thus, in this case, EPA

has simply performed its congressionally-delegated federal

role of determining how states must meet their transport

obligations, a role made all the more important since the

states’ interests are diverse from each other.

20

In addition to addressing the interstate transport problem,

however, EPA’s approach in the NOx SIP Call also serves to

rectify an existing imequity among states’ air pollution

control schemes that has resulted from the impacts of ozone

transport. For decades, sources in the South and Midwest—

areas generally in attainment with the national ambient air

quality ozone standards—have been able to emit vast

amounts of NOx emissions that travel downwind to North-

east and Mid-Atlantic states not in attainment with ozone air

quality standards. These downwind states suffer not only

adverse health and environmental effects from the pollution

transported into the region, but also have been required to

impose increasingly stringent and costly control measures on

sources within their borders as they try to reach ozone

attainment. In particular, electric generating companies in

downwind states have been forced to install expensive

emission control equipment to address not only their local

emissions but also those transported from upwind regions.

By requiring states to comply with Section 110(a)(2)(D) ’s

transport prohibition, the SIP Call brings upwind states to

account for the NOx emissions their sources send downwind,

and does so while recognizing the economic constraints on

upwind states’ ability to implement emission controls. Thus,

the SIP Call promotes both cleaner air and a more equitable

allocation of the regional pollution reduction burden, as EPA

has recognized, see 63 Fed. Reg. at 57,404.

In short, EPA’s determination of significant contribution is

appropriately sensitive to issues of federalism and interstate

equity and does not warrant attention from this Court.

Congress has required states to prevent significant contribu-

tion to downwind attainment problems and delegated to EPA

_the duty to ensure that states comply. As the D.C. Circuit

held, EPA’s significant contribution determination properly

took into account state-specific factors and does not improp-

erly deny states their congressionally-assigned implementa-

21

tion role in the CAA statutory scheme. While Petitioning

States may disagree with this result, they have identified no

compelling reason for this Court to devote its scarce re-

sources to an exercise in purported error-correction.

CONCLUSION

For the foregoing reasons, the petitions should be denied.

Respectfully submitted,

PATRICK M. RAHER

JOHN G. ROBERTS, JR.*

Jopy M. FOSTER

HOGAN & HARTSON L.L.P.

555 Thirteenth Street, N.W.

Washington, D.C. 20004

(202) 637-5810

*Counsel of Record Counsel for Respondents