Reply Brief — Michigan v. Environmental Protection Agency

| Supreme Court, U.S.

| FILED

| MAR 28 9001

No. 00-746 |

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IN THE \

Supreme Court of the Anited States

STATE OF MICHIGAN, et al,

Petitioners,

We

U.S. ENVIRONMENTAL PROTECTION AGENCY,

Respondent.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the District of Columbia Circuit

REPLY BRIEF FOR PETITIONERS

JENNIFER M. GRANHOLM HENRY V. NICKEL

ATTORNEY GENERAL (Counsel of Record)

THOMAS L. CASEY DAVID S. HARLOW

SOLICITOR GENERAL HUNTON & WILLIAMS

JOHN FORDELL LEONE 1900 K Street, N.W.

ASSISTANT ATTORNEY GENERAL Washington, D.C. 1500

300 S. Washington Square (202) 955-20006

Suite 315

Counsel for Salt River Project

Lansing, Michigan 48913 Agricultural Improvement and

(517) 373-7540 Power District and Public

Counsel for the State of Service Company of Nev

Michigan Mexico

March 28, 2001

[Additional Counsel Listed Inside]

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

JOHN B. WELDON, JR.

KAREN S. GAYLORD

SALMON, LEWIS & WELDON, P.L.C.

4444 North 32nd Street

Phoenix, Arizona 85018

(602) 801-9060

Counsel for Salt River Project

Agricultural Improvement and

Power District

BRIAN J. RENAUD

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HOWARD & HOWARD .

ATTORNEYS, P.C. .

Pinehurst Office Center e

39400 Woodward Avenue i

Suite 101 .

Bloomfield Hills, Michigan 48304 ¢

(248) 645-1483 ;

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Counsel for the National Association

of Manufacturers, the Michigan

Chemical Council, the Timber

Producers Association of Michigan

and Wisconsin, Inc., and the

Rhinelander Area Chamber of

Commerce, Inc.

DISCLOSURE STATEMENT

Pursuant to Rule 29.6, Petitioners hereby incorporate

by reference the corporate disclosure statement filed with the

petition for a writ of certiorari on November 9, 2000.

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TABLE OF AUTHORITIES

CASES Page

Brown v. Gardner, 513 U.S. 115 (1994)... TEA atest 5

Bugenig v. Hoopa Valley Tribe, 229 F.3d

See CHINE Sls SIE varias cinmssinlasaetcks comes enameneon eee aes 10

McAlpine v. U.S., 112 F.3d 1429 (10th Cir. 1997)... 0. 2

United Savings Ass'n of Texas v. Timbers

of Inwood Forest Associates, Ltd.,

NW SF: Sr 8 PIIID sissnrcseinssncecdoncuineubaaeasiea 6

U.S. v. Roberts, 185 F.3d 1125 (10th Cir. 1999)... ]

Whitman v. American Trucking Ass'n, No. 99-1257

CULE. EGR. 29, Aes BP ssscsncdsaenciasaneamavercmaneananaeae: 2, 5,6

STATUTES

The Clean Air Act, 42 U.S.C. §§ 7401 et seq.

CAA § 116, 42 U.S.C. § 7416 ..ccccccccccsseccssscccsseesese 9,10

CAA § 162, 42 U.S.C. § 7472 .ccccccccccsssessssesssssescssecsense 4

CAA § 164, 42 U.S.C. § 7474 ..ccccccccccsseescssesssseee passim

CAA § 164(a), 42 U.S.C. § 7474(a) ceccccccssseccsseecessee: 4,8

CAA § 164(b), 42 U.S.C. § 7474(b) cecccccsccccscccseccsseesse 2

iV

CAA § 164(b)(2), 42 U.S.C. § 7474(b)(2) -occscseseeessseee 2

CAA § 164(c), 42 U.S.C. § 7474(C) ceccecssesccssssseeessen 4,5

CAA § 164(€), 42 U.S.C. § 7474(€) cecccsccsssssssesssssseeeeee 8

CAA § 168(b), 42 U.S.C. § 7478(b) ..ccccsccccssssseeesessenee 6

CAA § 169(3), 42 U.S.C. § 7479(3) ccccccccsssssessssseeessnee 6

CAA § 301(d), 42 U.S.C. § 7601 ...cccccsssssssssssessssseeeeeee 8

CAA § 301(d)(2)(B), 42 U.S.C. § 7601(d)(2)(B).....8, 9

The Indian Reorganization Act, 25 U.S.C. §§ 461 ef seq.

mA § 5, 25 USA. O56 wcnneissmimaianmeaa i, 7

CODE OF FEDERAL REGULATIONS

25 CBR. Patt 1S8 ccccsssssssisssiseststesseiacaianmaaaa 2

40 C.F.R. § 52.01(f) (1974) ..cccccccccccsssscessssuecssssuesesseesssnnesessnees 6

REPLY BRIEF FOR PETITIONERS

ARGUMENT

The D.C. Circuit ruled that lands taken into trust

pursuant to the Indian Reorganization Act of 1934, 25 U.S.C.

§§ 461 et seg. (IRA), located outside the boundaries of

formal reservations — those established by treaty, Executive

Order, or Act of Congress — constitute reservation lands for

purposes of the Clean Air Act (CAA or the Act). This ruling

raises important issues that go to the heart of state-tribal

relations. The decision below permits tribes to redesignate

such lands to the more stringent “Class I” air quality status.

This action affords tribes unilateral and extraterritorial

authority to constrain or even stop growth and development

by non-Indians on lands under state land use jurisdiction.

The IRA was enacted both to reverse the alienation of

Indian lands that had resulted from the General Allotment

Act of 1887, as well as to establish a mechanism for recovery

of lands for tribes. On the face of the IRA, the only

consequence of taking land into trust is to exempt such land

from state and local taxation. IRA §5. Courts have

generally held, however, that a very significant additional

consequence flows from lands being taken into trust under

the IRA — ie., the loss of state and local regulatory

jurisdiction over such lands.

The IRA itself would appear to provide no decisional

criteria to govern the Secretary’s exercise of discretion in

taking lands into trust, other than, perhaps, that the land be

taken for the beneficial use of the tribe or individual Indian.

See U.S. v. Roberts, 185 F.3d 1125, 1137 (10th Cir. 1999).

The Secretary’s view of her discretion to take lands into trust

is bounded only by the self-imposed requirement that she

consider a series of factors identified in the Bureau of Indian

2

Affairs regulations set forth at 25 C.F.R. Part 151.’ None of

these listed factors involves the CAA _ regulatory

consequences that may flow from the Secretary’s decision to

take land into trust. Judicial review is thus limited to a

procedural inquiry into whether various factors, all irrelevant

to the CAA, were “considered” by the Secretary. See

McAlpine v. U.S., 112 F.3d 1429, 1434 (10th Cir. 1997).

The D.C. Circuit’s decision adds a new and very

troubling dimension to the Secretary’s authority under the

IRA to take lands into trust. The court found that, because

Congress did not specifically define the term “reservation” in

the CAA, EPA had the discretion, under the second prong of

Chevron, to interpret the Act as giving tribes authority to

redesignate IRA trust lands located outside the boundaries of

formal reservations. ~—

Under EPA’s interpretation of the CAA, the creation

of IRA trust lands by the Secretary now has an additional

ramification: the expansion of the extraterritorial authority

that tribes possess under the CAA over the activities of non-

Indians on non-Indian lands. This is a consequence certainly

not envisioned by Congress when it enacted the IRA in 1934,

and one which the Secretary need not even consider prior to

taking lands into trust. Moreover, given that the CAA

commits tribal redesignation decisions solely to the

discretion of the tribe,’ the EPA interpretation upheld by the

' But see Whitman v. American Trucking Ass'n, No. 99-1257, slip op.

at 12 (U.S. Feb. 27, 2001) (“We have never suggested that an agency can

cure an unlawful delegation of legislative power by adopting in its

discretion a limiting construction of the statute.”’).

* While CAA § 164(b) establishes procedures that states and tribes

must following in proposing redesignations to Class |, it contains no

substantive decisional criteria governing EPA’s approval of such

redesignations. To the contrary, EPA is authorized to disapprove such a

redesignation “only if [the Agency] finds . . . such redesignation does not

meet the procedural requirements” of CAA § 164. See CAA § 164(b)(2).

3

D.C. Circuit gives the Secretary the discretion to create tribal

power under the CAA without there being any guidance

governing the exercise of that discretion under either the [RA

or the CAA, or, for that matter, any supervision by EPA of

the Secretary’s exercise of that discretion.

Petitioners are unaware of any federal regulatory

statute that has ever been interpreted by the agency assigned

by Congress to administer that statute as implicitly delegating

to another federal agency the authority to create regulatory

powers in a non-federal instrumentality (such as an Indian

tribe) without any explicit guidance from Congress governing

that delegation, or without any oversight by the agency

administering the statute. Petitioners are unaware, until the

D.C. Circuit’s decision, of any court being asked to sustain,

much less sustaining, such a remarkable interpretation of a

federal regulatory statute.

EPA does not dispute Petitioners’ characterization of

the implications of the decision below. EPA does not

suggest that Petitioners have overstated the importance of the

decision, or contend that Petitioners’ concerns are not

immediate and concrete.’ Rather, EPA rests its argument that

Court review is “not warranted” solely on the grounds that

the D.C. Circuit was correct on the merits. EPA Opp. at 8.

As explained below, EPA is wrong.

> The brief in opposition by the respondent tribes suggests that

Petitioners have “attempt{ed] to elevate the importance of this relatively

routine administrative rulemaking to the level of a crisis by

misconstruing EPA’s action as a dramatic departure from existing

precedent and a significant threat to states.” Tribes Opp. at 11. The Brief

of Amici States in Support of Petitioners, which warns that the D.C.

Circuit decision allows tribes to “threaten use of their Class |

redesignation authority to override state and local government industrial

land use planning decisions, to restrict operation of existing facilities, to

even block new industrial and residential development, and to otherwise

impact a State’s natural resource policies,” States Brief at 4, rebuts the

tribes’ attempt to minimize the decision’s importance.

I. Congress Did Not Intend for EPA to Have the

Discretion to Construe the CAA to Give the

Secretary of Interior Authority to Expand the

Lands That Tribes May Redesignate.

When Congress amended the CAA in 1977 to

establish an area classification/redesignation scheme, it for

the first time explicitly delegated to tribes certain limited, but

extraordinary, authority to engage in air quality regulation

that could impose land use constraints both inside and

outside tribes’ formal reservations. What EPA has

overlooked is that Congress also delegated similar

extraordinary federal authority to the states.

Specifically, Congress in 1977 designated as Class II

the entire geographic area of the country (with the exception

of certain national parks, which were permanently designated

as Class 1). See CAA § 162. At the same time, Congress

created a new federal power: the authority to redesignate

those Class II areas as either the more stringent Class I or the

less stringent Class III. See CAA § 164.

In the 1977 Amendments, states were given the

exclusive power to redesignate a// of the land area within

their geographic borders, with the sole exception of “[l]ands

within the exterior boundaries of reservations of federally

recognized Indian tribes.” Congress delegated the authority

to redesignate “reservation” lands exclusively to the tribes.

See CAA §§ 164(a), 164(c).

For this reason, EPA’s assertions that “trust lands are

Indian country,” and that “federal law generally prohibits

States from exercising regulatory authority in Indian country

unless Congress has specifically authorized such action,”

EPA Opp. at 11, are beside the point. Congress has

“specifically authorized” states to redesignate those lands in

“Indian country” that are not “reservation” lands. That is,

with the exception of those specific portions of Indian

5

country that constitute “lands within the exterior boundaries

of reservations,” states were given exclusive authority by

Congress in the 1977 CAA Amendments to redesignate all

lands within their geographic borders.

Accordingly, EPA is wrong when its asserts that

Petitioners’ argument “rests on the incorrect premise that

States have general authority over Indian lands.” EPA Opp.

at 12 n.5. Petitioners do not assert that the states’ power to

redesignate is an attribute of their inherent sovereignty.

Rather, Petitioners’ position rests on the fact that the states

were delegated by Congress exclusive federal authority to

redesignate all areas of Indian country within the states’

borders except for those lands that constitute “reservation”

lands within the meaning of CAA § 164(c). While Congress

could have delegated to tribes redesignation authority over

the entirety of Indian country, it did not do so.

Thus, this case does not turn on general principles of

federal Indian law, but on statutory construction. As a result,

Congress’s intent when it first used the term “reservation” in

the 1977 CAA Amendments is of paramount importance.

EPA endorses the D.C. Circuit’s finding that, because

Congress provided no statutory definition of “reservation” in

the CAA, the term is “ambiguous.” It should therefore be

presumed, says EPA, that “Congress chose to entrust” the

Agency with the “task” of defining the term for CAA

purposes. EPA Opp. at 10.

As this Court has observed, however, “[a]mbiguity is

a creature not of definitional possibilities but of statutory

context.” Brown v. Gardner, 513 U.S. 115, 118 (1994).

“Words that can have more than one meaning are given

content” by “their surroundings.” American Trucking Ass'n,

slip op. at 5, citing FDA v. Brown & Williamson Tobacco

Corp., 529 U.S. 120, 132-133 (2000). Thus, statutory

construction is properly undertaken as a “holistic endeavor,”

in which a “provision that may seem ambiguous in isolation

is often clarified by the remainder of the statutory scheme.”

6

United Savings Ass'n of Texas v. Timbers of Inwood Forest

Associates, Ltd., 484 U.S. 365, 371 (1988).

Had the D.C. Circuit applied these principles, it

would have recognized that, in the case of the CAA, the

demarcation of “reservation” lands is precisely what

determines the extent to which tribes, through redesignation,

are permitted to constrain the activities of non-Indians on

non-Indian lands. See Cert. Pet. at 14-16. Having failed to

apply these principles, however, the court wrongly assumed

that, because Congress included no statutory definition of

“reservation,” it intended to leave the resolution of this issue,

with its attendant implications for the balance of state and

tribal jurisdiction, to the discretion of EPA. Cf American

Trucking Ass'n, slip op. at 8, citing Christensen v. Harris

County, 529 U.S. 576, 589-90 n. (2000) (Scalia, J.,

concurring in par* and concurring in judgment) (“The

implausibility of Congress’s leaving a highly significant

issue unaddressed (and thus ‘delegating’ its resolution to the

administering agency) is assuredly one of the factors to be

considered in determining whether there is ambiguity”).

The redesignation provisions in CAA § 164 were

enacted against a backdrop in which Congress codified, with

certain limited exceptions, the “prevention of significant

deterioration” (PSD) program that EPA had adopted in 1974.

See § 168(b). In those PSD rules, EPA defined the term

“reservation” to mean a formal reservation. ‘ee Cert. Pet. at

6-7. In this context, Congress did not have to define

“reservation” in the siatute in 1977; the term had already

been defined by EPA in 1974. Congress chose not to change

that definition, although it did change the definition of other

terms. Compare, e.g., 40 C.F.R. § 52.01(f) (1974) with CAA

§ 169(3) (definition of “best available control technology”).

EPA argues that there is “no reason to assume” that

“Congress by its silence intended to adopt the narrower

definition” of “reservation” from the Agency’s PSD program,

rather than the “broader” definitions found in other federal

7

statutes. EPA Opp. at 10. However, it is this very “silence”

in 1977 (and again in 1990) that indicates Congress’s

intended preservation of the definition of “reservation”

previously employed by EPA, a definition that reflected the

conventional and historic understanding of the formal

methods by which a “reservation” is created, and the

definition in reference to which Congress codified EPA’s

1974 PSD rules in 1977. Only if Congress wished to depart

from that definition to include off-reservation IRA trust lands

would a different statutory definition have been necessary.

In sum, EPA and the D.C. Circuit would have this

Court believe that Congress in 1977 intended to impart to

EPA the discretion, when it promulgated the Tribal Authority

Rule (TAR) in 1998, to interpret the term “reservation” as

used in CAA § 164 in a manner contrary to how EPA had

defined the term in its PSD rules both before and after

enactment of the 1977 CAA Amendments. EPA and the

D.C. Circuit would also have this Court believe that

Congress in 1977 gave EPA the further discretion, when it

would later promulgate the TAR, to redefine “reservation”

based on the Agency’s reading of judicial decisions rendered

after 1977, and to include in this new definition not only

those off-reservation lands which the Secretary of Interior

had taken into trust pursuant to IRA § 5, but also all such

lands which the Secretary might take into trust in the future.

And EPA and the D.C. Circuit would have this Court believe

that Congress intended this result without its having provided

any guidance in either the CAA or the IRA, or without its

requiring EPA to exercise any substantive supervision.

As a fallback position, EPA also argues that, if

Congress did not in 1977 delegate to tribes the authority to

redesignate lands beyond “reservation” lands, Congress did

extend to tribes this further authority in 1990. Because “trust

lands ordinarily are subject to tribal jurisdiction under

general principles of federal Indian law,’ EPA claims that

they constitute “other areas within the tribe’s jurisdiction”

8

under CAA § 301(d)(2)(B). EPA Opp. at 12. Thus, “eligible

Tribes would have authority” to redesignate trust lands “even

if petitioners were correct that trust lands are not properly

considered ‘reservation[s].’” Jd.

EPA’s assertion is refuted by the plain language of

CAA § 164(a). Under that provision of the Act, a state’s

redesignation authority applies to all lands within that state

other than reservation lands. EPA’s (and the D.C. Circuit’s)

interpretation of CAA § 301(d)(2) would mean that states and

tribes would both have jurisdiction to redesignate the same

non-reservation lands. However, states and tribes cannot

have concurrent authority to redesignate these same lands —

e.g., one reclassifying them Class I, the other reclassifying

them Class III.

Thus, had Congress intended to permit tribes to

redesignate lands other than “reservation” lands when it

enacted CAA § 301(d), it would have also had to have

revised CAA § 164(a) to remove from states their exclusive

authority to redesignate such lands. Congress did not so

revise CAA § 164(a) in 1990 to restrict state redesignation

authority over non-reservation lands within the state.

Finally, EPA errs when its suggests that Petitioners’

concerns should be assuaged by the process established by

CAA § 164(e), under which EPA will “resolve disputes

between Tribes and States over proposed redesignations.”

See EPA Opp. at 11 n.3. While EPA is permitted under CAA

§ 164(e) to negotiate disputes between states and tribes over

redesignation requests, the Agency is authorized to

disapprove a tribal redesignation request only when certain

procedural requirements have not been met. See note 2.

Where those procedural requirements have been fulfilled, a

tribe possesses the absolute discretion to redesignate any

lands located within the exterior boundaries of its reservation.

9

Il. Under the CAA, States May Not Be Divested of

Any Regulatory Authority They May Have Over

Non-Indian Fee Lands.

In light of the significant implications of Congress’s

“expressly delegating” to tribes regulatory authority over

non-Indian fee lands located within a reservation, there are

compelling reasons for this Court to review the D.C.

Circuit’s determination that the “treatment as_ states”

provisions of the 1990 CAA Amendments constitute such a

rare delegation. While relying on the D.C. Circuit’s decision,

EPA’s arguments are similarly inadequate..

First, in support of the D.C. Circuit’s delegation

holding, EPA reiterates the panel majority’s conclusion that

the distinction that CAA § 301(d)(2)(B) draws between areas

“within the exterior boundaries of the reservation” and “other

areas within the tribe’s jurisdiction” carries with it “the

implication that Congress considered the areas within the

exterior boundaries of a tribe’s reservation to be per se within

the tribe’s jurisdiction.” EPA Opp. at 15. Even if an express

delegation could ever be founded on so abstruse an

“implication,” as Judge Ginsburg correctly observed in his

partial dissent, “when one reads the relevant sentence as a

whole — rather than focusing solely upon the last phrase — one

sees that, rather than expressing a delegation of authority

over fee lands and rights-of-ways within a reservation,” the

sentence “by its terms merely lays down a precondition to the

Administrator’s treating a tribe as a state.” App. 44a. EPA is

wrong when it asserts that Petitioners’ “contrary reading”

would “render this careful formulation superfluous.” EPA

Opp. at 16.

Second, EPA rejects Petitioners’ contention that CAA

§ 116 precludes the “treatment as states” provisions being

construed as constituting an express delegation of authority

to tribes. arguing that CAA § 116 “does not grant States

authority to regulate air pollution activity in Indian country,

10

which includes fee lands within reservation boundaries.”

EPA Opp. at 17. EPA has misconstrued Petitioners’ position.

Petitioners do not assert that CAA § 116 gives states

authority over lands within Indian country, or that EPA lacks

authority under the Act to approve tribal regulatory programs

for non-Indian fee lands over which a tribe can demonstrate

inherent authority under the so-called Montana “second

exception.” If a particular tribe is found to have inherent

authority over non-Indian fee lands, there is, in effect, no

state authority over those lands which CAA §116 serves to

retain. At the same time, in those situations where a state

possesses authority under its own laws to regulate air quality

on non-Indian fee lands — authority which is “preserved” by

CAA § 116, as EPA itself concedes (see EPA Opp. at 17

n.10) — no federal authority over such lands exists under the

CAA that can then be delegated to the tribe.

Finally, EPA misconstrues the significance of

Bugenig v. Hoopa Valley Tribe, 229 F.3d 1210 (9th Cir.

2000), in which the Ninth Circuit adopted the reasoning of

Judge Ginsburg’s dissent as a “clear statement rule” for

determining delegation questions. Bugenig illustrates that the

approach taken by the D.C. Circuit’s panel majority is, to say

the least, subject to serious doubt. Moreover, since Judge

Ginsburg had himself misapplied the very test which the

Ninth Circuit was now adopting, review by this Court is

necessary in order to forestall the injection of more confusion

into a field of jurisprudence — federal Indian law — that

remains in desperate need of clarity.

CONCLUSION

Petitioners respectfully request that the petition for a

writ of certiorari be granted.

Re LN tk oh

ee nea = Berne

JENNIFER M. GRANHOLM

ATTORNEY GENERAL

THOMAS L. CASEY

SOLICITOR GENERAL

JOHN FORDELL LEONE

ASS’T ATTORNEY GENERAL

300 S. Washington Square

Suite 315

Lansing, Michigan 48913

(517) 373-7540

Counsel for the State of

Michigan

BRIAN J. RENAUD

HOWARD & HOWARD

ATTORNEYS, P.C.

Pinehurst Office Center

39400 Woodward Avenue

Bloomfield Hills,

Michigan 48304

(248) 645-1483

Counsel for the

National Association of

Manufacturers, et al.

Respectfully submitted,

HENRY V. NICKEL

(COUNSEL OF RECORD)

DaviD S. HARLOW

HUNTON & WILLIAMS

1900 K Street, N.W.

Washington, D.C. 20006

(202) 955-1500

Counsel for Salt River

Project Agricultural

Improvement and Power

District and Public Service

Company of New Mexico

JOHN B. WELDON, JR.

KAREN S. GAYLORD

SALMON, LEWIS &

WELDON, P.L.C.

4444 North 32nd Street

Phoenix, Arizona 85018

(602) 801-9060

Counsel for Salt River

Project Agricultural

Improvement and

Power District