Petition for Writ of Certiorari — Utility Air Regulatory Group v. New York (No. 06-750)

Supreme : |

p mn Cour U.S.

06-750 NOV 27 2008

No. 06-__ |

IN THE

Supreme Court of the United States

UTILITY AIR REGULATORY GROUP,

Petitioner,

Vv.

STATE OF NEW YORK, ET AL.,

Respondent.

On Petition for Writ of Certiorari to the

United States Court of Appeals

for the District of Columbia Circuit

PETITION FOR A WRIT OF CERTIORARI

HENRY V. NICKEL

F. WILLIAM BROWNELL

(Counsel of Record),

DavipS. HARLOW

HUNTON & WILLIAMS LLP

1900 K Street, N.W.'

Washington, D.C. 20006

(202) 955-1500

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

QUESTIONS PRESENTED

Under the Equipment Replacement Provision rule (the

“ERP rule”), an equipment replacement project at an existing

source would not trigger the New Source Review (“NSR”)

programs of the Clean Air Act (“CAA”) if the project did not

change the source’s “basic design parameters” (including its

maximum hourly emission rate) — i.e., if it was not a “modifi-

cation” under 42 U.S.C. § 7411(a)(4), CAA § 111(a)(4), as

defined by the U.S. Environmental Protection Agency

(“EPA”) since 1971 under the New Source Performance Stan

dards (“NSPS”) program. In the 1977 CAA Amendments,

Congress defined “modification” for NSR by reference to its

meaning and use under NSPS. Nevertheless, relying solely on

its interpretation of the words “any physical change” in CAA

§ 111(a)(4)’s definition of “modification,” the D.C. Circuit

held that the ERP rule was unlawful under the first step of

Chevron. The questions presented are:

1. Whether reliance on a fragment of the 40-word statu

tory definition of “modification” to find a clear expression of

congressional intent, instead of applying traditional tools of

statutory construction to the provision as a whole, conflicts

with this Court’s Chevron decision.

2. Whether EPA has discretion under the CAA to adopt a

rule that excludes from NSR a subset of projects that are not

NSPS modifications, as that term has been defined and used

under the CAA for the past 35 years.

i

PARTIES TO THE PROCEEDINGS

1. The following were petitioners in the consolidated pro-

ceeding, the judgment in which review is sought.

In No. 03-1380, the State of New York, State of Connecti

cut, State of Maine, State of Maryland, Commonwealth of

Massachusetts, State of New Hampshire, State of New Jersey,

State of New Mexico, Commonwealth of Pennsylvania De-

partment of Environmental Protection, State of Rhode Island,

State of Vermont, State of Wisconsin, the District of Colum-

bia, the City of New York, the City of San Francisco, and the

following Connecticut municipalities: the City of Groton,

City of Hartford, City of Middletown, City of New Haven,

City of New London, City of Stamford, and City of

Waterbury, the Town of Comwall, Town of Easton, Town of

Greenwich, Town of Hebron, Town of Lebanon, Town of

Newton, Town of North Stonington, Town of Pomfret, Town

of Putnam, Town of Rocky Hill, Town of Salisbury, Town of

Thompson, Town of Wallingford, Town of Washington,

Town of Westbrook, Town of Weston, Town of Westport, and

Town of Woodstock.

In No. 03-1381, the Natural Resources Defense Council,

Environmental Defense, Sierra Club, American Lung Asso-

ciation, Communities for a Better Environment, United States

Public Interest Research Group, Alabama Environmental

Council, Clean Air Council, Group Against Smog and Pollu-

tion, Michigan Environmental Council, Ohio Environmental

Council, Scenic Hudson, and Southern Alliance for Clean En-

ergy.

In No. 03-1383, the People of the State of California ex rel.

Bill Lockyear, Attorney General of California, and California

Air Resources Board.

In No. 03-1390, the State of Illinois.

iil

In No. 03-1402, the South Coast Air Quality Management

District.

In No. 03-1453, the Delaware Nature Society.

In No. 03-1454, the State of Delaware.

In No. 04-1029, the Natural Resources Defense Council.

In No. 04-1035, the State of New York, State of California,

State of Connecticut, State of Illinois, State of Maine, State of

Maryland, Commonwealth of Massachusetts, State of New

Hampshire, State of New Mexico, State of New Jersey,

Commonwealth of Pennsylvania, State of Rhode Island, State

of Vermont, State of Wisconsin, the District of Columbia, the

City of New York and the City of San Francisco.

In No. 04-1064, the South Coast Air Quality Management

District.

In No. 05-1234, the State of New York, State of Connect+

cut, State of Illinois, State of Maine, State of Maryland,

Commonwealth of Massachusetts, State of New Hampshire,

State of New Jersey, State of New Mexico, Commonwealth of

Pennsylvania Department of Environmental Protection, State

of Rhode Island, State of Vermont, State of Wisconsin, the

District of Columbia, the City of New York, the City of San

Francisco, and the following Connecticut municipalities: the

City of Groton, City of Hartford, City of Middletown, City of

New Haven, City:of New London, City of Stamford, and the

City of Westbury, the Town of Comwall, Town of Easton,

Town of Greenwich, Town of Hebron, Town of Lebanon,

Town of Newtown, Town of North Stonington, Town of Pom

fret, Town of Putnam, Town of Rocky Hill, Town of Salis-

bury, Town of Thompson, Town of Wallingford, Town of

Washington, Town of Westbrook, Town of Weston, Town of

Westport, and Town of Woodstock.

In No. 05-1287, the Natural Resources Defense Council,

Environmental Defense, Sierra Club, American Lung Asso-

ciation, Communities for a Better Environment, United States

Public Interest Research Group, Alabama Environmental

1V

Council, Clean Air Council, Group Against Smog and Pollu-

tion, Michigan Environmental Council, Ohio Environmental

Council, Scenic Hudson, and Southern Alliance for Clean En-

ergy.

2. The following was respondent in the consolidated pro-

ceeding, the judgment in which review is sought.

United States Environmental Protection Agency.

3. The following was intervenor in support of respondent

in the consolidated proceeding, the judgment in which review

is sought, and who files this petition.

The Utility Air Regulatory Group.

4. The following were intervenors in support of respon

dent in the consolidated proceeding, the judgment in which

review is sought, and who do not join in this petition.

The Equipment Replacement Rule Coalition.

The Clean Air Implementation Project.

The Illinois State Chamber of Commerce and the Illinois

Environmental Regulatory Group.

The National Environmental Development Association’s

Clean Air Project.

The American Iron and Steel Institute, the Steel Manufac-

turers Association, and the Specialty Steel Industry of North

America.

The Alliance of Automobile Manufacturers.

The Commonwealth of Virginia, State of Alabama, State of

Alaska, State of Arkansas, State of Kansas, State of Missouri,

State of Nebraska, State of North Dakota, State of South Da-

kota, State of Utah, and State of Wyoming.

Vv

5. The following was intervernor in support of petitioners

in the consolidated proceeding, the judgment in which review

is sought.

The Adirondack Mountain Club.

6. The following appeared as amici in support of respon

dent in the consolidated proceeding, the judgment in which

review is sought.

The State of Indiana, State of Ohio, and Washington Legal

Foundation. .

7.° The following appeared as amici in support of

petitioners in the consolidated proceeding, the judgment in

which review is sought.

Sen. Hillary Rodham Clinton, Sen. Jon S. Corzine, Sen.

James M. Jeffords, Sen. Patrick J. Leahy, Sen. Barbara Boxer,

Sen. Frank Lautenberg, Sen. John F. Kerry, Sen. Christopher

J. Dodd, Sen. Charles E. Schumer, Sen. Jack Reed, Rep. Ed-

ward J. Markey, Calpine Corporation, the American Thoracic

Society, American College of Chest Physicians, National As-

sociation for the Medical Direction of Respiratory Care, and

Atlantic Salmon Federation.

v1

DISCLOSURE STATEMENT

The Utility Air Regulatory Group (“UARG”) is a nom

profit, unincorporated organization of individual electric utili-

ties and national trade associations. UARG has no out-

standing shares or debt securities in the hands of the public

and does not have any parent, subsidiary or affiliate that has

issued shares or debt securities to the public.

TAB) . OF CONTENTS

Questions Presented

Parties to the Proceedings

Disclosure Statement

Table of Authorities

Opinion Below

Jurisdiction

Statutory and Regulatory Provisions

Involved in the Case

Introduction

Statement of the Case

1. EPA’s Interpretation of “Modification”

under CAA § 111(a)(4)

. The 1974 PSD Rules

. The 1977 CAA Amendments

. The ERP Rule

. New York II

Reasons for Granting the Petition

Vil

Vill

. The D.C. Circuit’s Approach to Statutory

Construction Conflicts with Chevron

. Given the Central Importance of the NSR

Programs to the Economy, Whether EPA

Has Authority to Define “Modification”

Consistently for NSR and NSPS Is an

Important Issue that Merits this Court’s

Attention

Conclusion

TABLE OF AUTHORITIES

CASES

Alabama Power Co. v. Costle,

636 F.2d 323 (D.C. Cir. 1979) 12

Alaska Dep’t Envtl. Conserv. v. EPA,

540 U.S. 461 (2004) 20

Bragdon v. Abbot, 524 U.S. 624 (1998) 15

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

467 U.S. 837 (1984) passim

Cleveland Elec. Illuminating Co.

v. EPA, 572 F.2d 1150 (6th Cir. 1978)

Comm’r of Internal Rev. Serv. v. Lundy,

516 U.S. 235 (1996)

FDA v. Brown & Williamson Tobacco Corp.,

529 U.S. 120 (2000)

” Fri v. Sierra Club, 412 U.S. 541 (1973)

IBP, Inc. v. Alvarez, 126 S.Ct. 514 (2005)

Lorillard v. Pons, 434 U.S. 575 (1978)

Merrill Lynch, Pierce, Fenner & Smith, Inc.

v. Curran, 456 U.S. 353 (1982)

1X

Montana Power Co. v. EPA,

TTR katie s Pivddieurs lekewesicesacdesasicins 19

New York v. EPA, 413 F.3d 3

ins a EE kh ecint ca uieicdiedduck take kaedugewenddees oom 1,2, 18

New York v. EPA, 443 F.3d 880

iy AN SIE ial Sab eco gen a ee eas passim

NLRB v. Bell Aerospace Co.,

ee ee cic ve ieevn dc nun waeuddisndesnsadvews 17

Philbrook v. Glodgett, 421 U.S. 707 (1975)............ 15

Sierra Club v. EPA, 540 F.2d 1114

ies ee IE cite tian Jhdaunnvenaziendoruseeinceaes ; 19

Sierra Club v. Ruckelshaus, 344 F.Supp. 253

Es HIT Minis Aik sna denaisiocaudulsaceanciacseeiee kas 19

Train v. NRDC, 421 U.S. 60 (1975)......0000ccccc00cc0 6, 12

U.S. v. Duke Energy Corp.,

EF Fe re Ce Gs I waa dona ccccebesceeeceusees 4

U.S. v. Duke Energy Corp.

278 F.Supp.2d 619 (M.D.N.C, 2003)................... 19

U.S. v. Mead Corp., 533 U.S. 218 (2001)............... 15

Vermont Yankee Nuclear Power Corp. v.

PR A athe FER ET ik bs deca nciedckcdonoanees 4

Xi

STATUTES

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

CAA § 110(a); 42 U.S.C. § 7410(a).......... cece ee 5, 6

CAA § 111(a)(2); 42 U.S.C. § 7411(a)(2)............ 5

CAA § 111(a)(4); 42 U.S.C. § 741 1(a)(4)............ passim

CAA § 111(b); 42 U.S.C. § 7411(b)................ ” 5

CAA S 160; SE UBL. 8 TOT B vcnsiccsissesccsecassseves a9, 42

CAA § 168(a); 42 U.S.C. § 7478(a)..........eeeeeee 9

CAA § 168(b); 42 U.S.C. § 7478(b)............ 00: 9,17

CAA § 169(2)(C); 42 U.S.C. § 7479(2)(C).......... passim

CAA § 171(4); 42 U.S.C. § 7501(4).......cccceeeeees passim

CAA § 172(c)(5); 42 U.S.C. § 7502(c)(5)............ he Fa

6 EE ikisapsnnpranedsivadacdraseanisnatarints l

CODE OF FEDERAL REGULATIONS

40 C-F.R. § 51.165(h)(2003).....00..cceccceeseceeseecees 2

40 CER. § 51.1666 yMZ003), noses enscroencescsenee 2

HOCER. § S201). (197A. ....00-.06.se0eeeccscoeecnees. 8,9, 13,

40 C.F.R. § 52.01(f) (1974)

40 C.F.R. § 52.21(b)(7) (1974)

40 C.F.R. § 52.21(d)(1) (1974)

40 C.F.R. § $2.21 (cc) (2003)

40 C.F.R. § 60.2 (1971)

40 C.F.R. § 60.14(a) (1975)

40 C.F.R. § 60.14(b) (1975)

40 C.F.R. § 60.14(e)(1)

FEDERAL REGISTER

36 Fed. Reg. 24,876, et seg. (1971)

39 Fed. Reg. 36,946, et seg. (1974)

39 Fed. Reg. 42,510, et seg. (1974)

40 Fed. Reg. 58,416 (1975)

57 Fed. Reg. 32,314 (1992)

68 Fed. Reg. 61,248, et seq. (2003)

70 Fed. Reg. 33,838, ef seg. (2005)

PETITION FOR A WRIT OF CERTIORARI

The Utility Air Regulatory Group (“UARG”) respectfully

petitions for a writ of certiorari to review the decision of the

United States Court of Appeals for the District of Columbia

Circuit in New York v. U.S. Environmental Protection Agency,

443 F.3d 880 (D.C. Cir. 2006) (“New York lr’).'

OPINION BELOW

The opinion of the D.C. Circuit is reported at 443 F.3d 880,

370 U.S. App. D.C. 239, and is reproduced in the Appendix

(“App.”) at pages la-19a. The orders on the petitions for

panel and en banc rehearing, as well as the judgment of the

D.C. Circuit, are included in the Appendix at pages 189a-

190a, 191a-192a, and 193a-194a.

JURISDICTION

The D.C, Circuit entered its judgment on March 17, 2006.

Timely petitions for panel and en banc rehearing were denied

by orders entered on June 30, 2006. On September 21, 2006,

this Court extended the deadline for the filing of the instant

petition to and including October 30, 2006. On October 30,

2006, the Court again extended the deadline to and including

-November 27, 2006. The Court’s jurisdiction is invoked un-

der 28 U.S.C. § 1254(1).

' This petition seeks review of the second of two decisions rendered by

the D.C. Circuit, both of which involve challenges to legislative rules

promulgated by the U.S. Environmental Protection Agency (“EPA”) and

both of which are styled New York v. EPA. In New York v. EPA, 413 F.3d

3 (D.C. Cir. 2005) (“New York f°), the court upheld in part and rejected in

part revisions made by EPA in 2002 to its rules implementing the Preven-

tion of Significant Deterioration (“PSD”) and nonattainment New Source

Review (collectively, “NSR”) provisions of the Clean Air Act (“CAA”).

2

STATUTORY AND REGULATORY

PROVISIONS INVOLVED IN THE CASE

This case involves portions of the Clean Air Act, 42 U.S.C.

§§ 741 1(a), 7475, 7479(2\(C), 7501(4), and 7502(c)(5); CAA

§§ 11 1(a), 165, 169(2)(C), 171(4), and 172(c)(S) (App. 195a-

198a); and the now-vacated Equipment Replacement Provi-

sion rule (the “ERP rule”), 68 Fed. Reg. 61,248 et seg., (Oct.

27, 2003), 70 Fed. Reg. 33,838 ef seg. (June 10, 2003) (on

reconsideration), and 40 C.F.R. §§ 51.165(h), 51.166(y), and

52.21(cc) (App. 20a-142a, App. 143a-188a).

INTRODUCTION

The provision that lies at the heart of the D.C. Circuit’s de-

cision is the definition of “modification” under CAA §

1 11(a)(4), which was enacted in December 1970. Under that

definition, a “modification” is “any physical change in, or

change in the method of operation of, a stationary source

which increases the amount of any air pollutant emitted by

such source” or “which results in the emission of any air pok

lutant not previously emitted.” 42 U.S.C. § 7411(a)(4), CAA

§ 111l(a)(4). Beginning soon after enactment of CAA §

111(a)(4), and continuing for some 35 years to this day, EPA

has interpreted “modification” under the New Source Per-

formance Standards (“NSPS”) program as a project that in-

creases a source’s capacity to emit (as measured by its maxi-

mum hourly emission rate), not a project that merely allows

for continued operation within applicable emission limits.

Citing its decision in New York J, however, the D.C. Circuit

found that “EPA’s reliance on its NSPS regulations” to dem

onstrate the scope of EPA’s discretionary authority to prom

ulgate the ERP rule for the NSR programs was “unavailing.”

443 F.3d at 889, App. 17a. Contrary to EPA’s contemporane-

ous (and longstanding) interpretation of CAA § 111(a)(4)’s

definition of “modification” for NSPS, the court found that

the CAA is not intended to “allow sources operating below

3

applicable emission limits to increase significantly the pollu-

tion they emit [within those limits] without government re-

view.” Jd. at 886, App. 12a.

Having presumed that any increased operations within ap-

plicable CAA limits is an “emissions increasing activity,” the

D.C. Circuit then focused on three words in CAA § 111(a)(4)

— ie., “any physical change” — and concluded that those three

words required vacatur of the ERP rule as a matter of Chevron

step one. See Chevron U.S.A., Inc. v. NRDC, 467 U.S. 837

(1984). According to the court, because “Congress defined

the phrase ‘physical change’ in terms of increases in emis-

sions” within permit limits, “the word ‘any’ . . . indicate[s]

that ‘physical change’ cover[s] all such [emission increasing]

activities, and was not left to agency interpretation.” 443 F.3d

at 887, App. 14a. On this basis, and even though the court

specifically recognized that it was not “decid[ing] whether

part replacements . . . necessarily constitute a ‘modification’

under the [CAA § 111(a)(4)] definition taken as a whole,” id.

at 888 n.4 (emphasis added), App. 15a, the court vacated the

ERP rule as contrary to congressional intent.

The court’s New York II decision presents a new formula-

tion of Chevron, under which specific meaning is given to

fragments of statutory language in order to find an unambigu-

ous congressional “intent” that could not be discerned if trad+

tional canons of statutory. construction were applied to the

statutory provision as a whole. In applying its new formula-

tion of Chevron, the D.C. Circuit has erroneously decided an

important question of federal law that this Court has not previ-

ously addressed, but the importance of which this Court has

recognized by granting certiorari in Environmental Defense v.

Duke Energy, No. 05-848 (argued November |, 2006). Spe-

cifically, under every EPA rule implementing CAA §

111(a)(4) beginning in 1971, only a change that increased a

source’s capacity to emit — i.e., a change that increased its

maximum hourly emission rate — constituted a “modification.”

When Congress enacted amendments to the CAA in 1977, it

expressly indicated that EPA’s approach was, at a minimum, a

4

permissible interpretation of “modification.” Given that the

ERP rule applicd only to those projects that did not increase a

source’s capacity to emit, it necessarily follows that, contrary

to the D.C. Circuit’s holding, the rule comports with congres-

sional intent.’

Years ago, this Court admonished the D.C. Circuit that the

“fundamental policy questions appropriately resolved in Con

gress .. . are not subject to re-examination in he federal

courts under the guise of judicial review of agency action.”

Vermont Yankee Nuclear Power Corp. v. NRDC, 435 U.S.

519, 558 (1978) (emphasis in original). “Administrative dect

sions,” the Court said, should not be set aside “simply because

the [reviewing] court is unhappy with the result reached.” /d.

A return to these principles is in order. In striking down the

ERP rule, the D.C. Circuit has so far departed from the ac-

cepted and usual course of judicial proceedings under Chev-

ron that it alls for the exercise of this Court’s supervisory

power.

STATEMENT OF THE CASE

In New York II, the D.C. Circuit concluded that Congress’s

use of the word “any” in defining “modification” in 1970 was

dispositive of what Congress intended some seven years later,

when it adopted the CAA’s Prevention of Significant Deterio-

In Duke Energy, the U.S. Court of Appeals for the Fourth Circuit

found that, because Congress “expressly directed [in CAA § 169(2)(C)]

that the PSD provisions of the Act employ” the “same definition” of

“modification” as under the CAA’s NSPS provisions, EPA had no discre-

tion to “interpret ‘modification’ under the PSD inconsistent/y with the way

it interprets that term under the NSPS.” See U.S. v. Duke Energy Corp.,

411 F.3d 539, 546, 547 (4th Cir. 2005) (emphasis added). In contrast, the

D.C. Circuit in New York // held that EPA had no discretion to interpret

“modification” consistently under the NSR and NSPS programs. All that

is needed to reject the New York // holding is to recognize that, regardless

of whether the CAA mandates consistency or merely authorizes it, the

Statutory language cannot possibly be read to prec/ude consistency.

5

ration (“PSD”) and nonattainment NSR programs. The court

therefore found it unnecessary to address any aspect of the

extensive regulatory history related to EPA’s implementation,

through notice-and-comment rulemaking, of the term “mod+

fication” between enactment of the CAA in [970 and the

CAA Amendments of 1977. Nor did the court think it neces-

sary to take into account the 1977 Amendments themselves,

even though they make clear that Congress was aware of

EPA’s interpretation of “modification” and expressly author-

ized its continued use under the new NSR programs. Consid-

eration of this regulatory and statutory history shows why the

court’s “plain language” rationale based on the word “any”

conflicts with this Court’s decision in Chevron, and why the

ERP rule was lawful under the CAA.

1. EPA’s Interpretation of “Modification” under

CAA § 111(a)(4)

In the 1970 CAA, Congress directed EPA to develop pollu-

tion-reducing “standards of performance” for categories of

new stationary sources. 42 U.S.C. § 7411(b)(1)(A), (B); CAA

§ 111(b)(1)(A), (B). For purposes of this NSPS program,

Congress defined a “new” stationary source to include any

source whose “modification” commenced after the time EPA

had proposed a standard of performance for the particular

source category. 42 U.S.C. § 7411(a)(2), CAA § 111(a)(2).

In the 1970 CAA, Congress also directed states to adopt

state implementation plans (“SIPs”) to ensure that the national

ambient air quality standards (“NAAQS”) set to protect public

health and welfare were attained and maintained. 42 U.S.C. §

7410(a)(1), (2); CAA § 110(a)(1), (2). Congress directed

EPA to approve those SIPs if they contained, among other

things, emission limits for existing sources designed to attain

the NAAQS,” and a “procedure . . . for review (prior to cor

struction or modification) of the location of new sources to

> Such emission limits are based on the assumption that sources “oper-

ate 24 hours a day at full capacity” every day of the year. Cleveland Elec.

Illuminating Co. v. EPA, 572 F.2d 1150, 1160 (6th Cir. 1978).

6

i]

which a [CAA § 111] standard of performance will apply.” 42

U.S.C. § 7410(a)(2)(B), (D); CAA § 110(a)(2)(B), (D), see

also Train v. NRDC, 421 U.S. 60, 66-67 (1975). The new

source review procedure of the 1970 CAA ensured that pollu-

tion that had not yet been regulated under applicable CAA

limits for existing sources (“new pollution”) would be re-

viewed and subjected to regulation prior to construc tion.

Consistent with CAA §§ 111 and 110(a)(2)(D), the CAA §

111(a)(4) definition of “modification” reflected congressional

policy to apply new source programs to activity that created a

source of new pollution. Under this definition, activity that

created new capacity to pollute would trigger application of

both the relevant NSPS and the requirement for review (prior

to construction) of the impact of that new pollution on

NAAQS attainment.

Within a year of enactment of CAA § 111(a)(4)’s definition

of “modification,” EPA adopted NSPS rules interpreting the

modification provision to implement this congressional pok

icy. 36 Fed. Reg. 24,876 (1971) (the “1971 NSPS rules’).

Under the 1971 NSPS rules, only projects that created a

source of new pollution constituted the “modification” of that

source. Thus, “modification” was defined as nor including (i)

an “increase in the production rate, if such increase does not

exceed the operating design capacity” of the source; (ii) an

“merease in hours of operation” of the source; or (iii) the “use

of an alternative fuel or raw material,” if the source had been

“designed to accommodate such alternative use.” 40 C.F.R. §

60.2. By providing that an “increase in hours of operation”

could not be a “modification,” EPA effectively required a cal

culation of the amount of pollutant emitted in terms of a

maximum “emission rate,” using a fixed period of time,* to

* A “rate” is the “quantity, amount, or degree of something measured

per unit of something else (as time).” Webster's Third New International

Dictionary 1884 (1993). An “emission rate,” therefore, is the amount of

pollution released per unit of time (e.g., one hour; a 24-hour day; an 8,760

hour year), and a comparison of maximum “emission rates” involves a

comparison of emissions over the same unit of time.

7

determine whether an activity would create a source of new

pollution.

In October 1974, EPA proposed revisions to the NSPS rules

to make explicit the “emission rate” increase requirement and

to define more precisely the activities that were deemed to

increase a source’s capacity to emit. Under proposed 40

C.F.R. § 60.14(a), “modification” was defined as “any physt

cal or operational changes . . . which result in an increase in

emission rate to the atmosphere of any pollutant.” 39 Fed.

Reg. 36,949 (1974). Under proposed 40 C.F.R. § 60.14(b),

“emission rate” was “expressed as kg/hr of any pollutant dis-

charged into the atmosphere.” /d. EPA also proposed to re-

vise the “production rate” exclusion to establish an objective

test for determining “operating design capacity.” /d.

Explaining these changes, EPA pointed to the “considerable

confusion” that then existed “outside the Agency” as to the

meaning of “modification.” 39 Fed. Reg. 36,946. The princt

pal way EPA proposed to resolve this “confusion” was the

adoption of “kilograms per hour” as the measure for deter-

mining whether an emission rate increase would occur. Jd. at

36,947. Among its advantages, EPA said, this approach

“automatically allow[s] increases in operating hours as in-

tended by the . . . existing” exclusion for increases in “hours

of operation.” Jd. EPA further explained that “design oper-

ating capacity” would be “implicitly” defined as the “produc-

tion rate which can be accomplished without making major

capital expenditures on the stationary source containing the

existing facility.” /d. at 36,949.

EPA promulgated these revisions in December 1975, in es-

sentially the same form as they had been proposed. -40 Fed.

Reg. 58,416 (1975). By defining an emission increase in

terms of an increase in maximum “emission rate,” unaffected

by increased hours of operation, EPA implemented the con

gressional policy reflected in the 1970 CAA. That is, by fo-

cusing on increases in maximum hourly emission rate, and by

defining “modification” to exclude (i) activity that increased

the “production rate” without a “major capital expenditure,”

8

and (11) the use of an “alternative fuel” that the source was de-

signed to accommodate, the NSPS rules captured only those

projects that created new pollution (i.e., that actually increased

the maximum capacity of a source to burn fuel, or enabled it

to burn a more polluting fuel than that which the source was

originally designed to use).

Beginning in 1971, therefore, EPA defined “modification”

as changes that enabled a unit to emit more than it could ever

have emitted before. This, then, was EPA’s implementation

of the congressional policy embodied in “modification” under

CAA § 111(a)(4) as of 1977.

2. The 1974 PSD Rules

While the first statutory PSD preconstruction permitting

program would be established by Congress in 1977, prior to

that time, EPA had already undertaken rulemaking to adopt a

PSD program in response to a district court preliminary in-

junction. 39 Fed. Reg. 42,510 (1974) (the “1974 PSD rules”).

Consistent with the NSPS program, EPA applied the require-

ments of its 1974 PSD rules to both “new” and “modified”

stationary sources. 40 C.F.R. § 52.21(d)(1) (1974). Under the

1974 PSD rules, the terms “modification” and “modified

source” were defined as a physical or operational change that

increased the source’s “emission rate.” 40 C.F.R. § 52.01(d)

(1974). The 1974 PSD rules further defined “modification” to

exclude the same types of activities that were not “modifica-

tions” under the NSPS rules — e.g., increases in hours of op-

eration; increases in production rate, where such increases did

not exceed the source’s “operating design capacity”; and the

use of “alternative fuels” that the source was designed to ac-

commodate. /d. As EPA explained in adopting the 1974 PSD

rules, its ntent was to make the “definition of modification

under Part 52 [PSD] . . . consistent with the final definition of

this term under Part 60 [NSPS].” 39 Fed. Reg. 42,513 (1974).

3. The 1977 CAA Amendments

Because EPA had already developed, by regulation, a PSD

program as of the time work began on the 1977 Amendments,

Congress was afforded the unique, if not unprecedented, op-

9

portunity to legislate in direct reference to those existing

regulatory requirements. Reflecting this, the 1977 Amend-

ments enacted, with specific revisions, the preconstruction

review and permitting program from the 1974 PSD rules.

Certain of those revisions were made immediately effective

by Congress.° Other changes to the 1974 PSD rules were to

be implemented through EPA or state SIP rulemakings. 42

U.S.C. § 7471, CAA § 161. The balance of the 1974 PSD

program was left intact, including the definition of “modifica-

tion” under the 1974 PSD rules (.e., 40 C.F.R. § 52.01(d)).

Pursuant to CAA § 168(a), these provisions continued to gov-

ern the application of the new statutory NSR programs with

out the need for further rulemaking.

With respect to program coverage, the new statutory PSD

program applied to the “construction” of a “major emitting

facility.” 42 U.S.C. § 7475, CAA § 165. In the 1977

Amendments, Congress defined the term “construction” to

include “the modification (as defined in [CAA § 111(a)]) of

any source or facility.” 42 U.S.C. § 7479(2)(C), CAA §

169(2)(C). Similarly, the nonattainment NSR provisions of

the 1977 Amendments provided that the “terms ‘modifica-

tions’ and ‘modified’ mean the same . . . as used in [CAA §

111(a)].” 42 U.S.C. § 7501(4), CAA § 171(4). Thus, far from

rejecting the congressional policy reflected in the pre-1977

rules interpreting “modification,” Congress ratified that con

gressional policy and, at a minimum, authorized a consistent

application of “modification” for all of the new source pro-

grams (i.e., NSPS, PSD and nonattainment NSR).

4. The ERP rule

From the first days of the modification program, EPA’s

rules have provided that a “modification” did not include the

routine repair or replacement of broken or deteriorated equip-

> Those provisions that- took effect immediately and superseded

inconsistent portions of the 1974 PSD rules were identified in 42 U.S.C. §

7478(b), CAA § 168(b) —i.e., anew definition of “commenced,” area clas-

sification re quirements, and more stringent increments.

10

ment. In the NSPS rules, EPA provided that “routine” would

be determined in reference to activity in the relevant source

category. See 40 C.F.R. § 60.14(e)(1). In 1992, EPA con

firmed that the same test applied to the RMRR provision for

purposes of NSR, stating that the “determination of whether

the repair or replacement of a particular item of equipment is

‘routine’ under the NSR regulations,” while made on a “case-

by-case basis,” must be “based on the evaluation of whether

that type of equipment has been repaired or replaced by

sources within the relevant industrial category.” 57 Fed. Reg.

32,326 (1992). Beyond this clarification, however, EPA ex-

plained that it used a “multi-factor test for determining

whether a particular activity falls within or outside the exclu-

sion.” 68 Fed. Reg. 61,249 (2003), App. 28a.

Because of the confusion that this approach engendered in

recent years, particularly in the context of enforcement cases,

see, e.g., U.S. v. Duke Energy, 278 F.Supp.2d 619, 630-38

(M.D.N.C. 2003), EPA adopted the ERP rule for the NSR

programs. Under the ERP rule, certain projects would auto-

matically be deemed to constitute RMRR — and, thus, could

never give rise to an NSR “major modification” — where those

projects met specific requirements.

Generally speaking, in order for a project to qualify under

the ERP rule, all of the following had to be true:

(1) the project must involve the replacement of existing

components of a process unit with new components that were

either identical, or functionally equivalent, to the replaced_

components;

(2) the fixed capital costs associated with the replacement

component must not exceed 20 percent of the current value of

the replacement value of the process unit;

(3) the replacement must not alter the “basic design pa-

rameters” of the process unit; and

(4) the replacement must not cause the unit to exceed either

an applicable emission limitation or a legally enforceable op-

erational limitation. See, e.g., 40 C.F.R. § 52.21(cc); 68 Fed.

Reg. 61,252 (2003), App. 36a-37a.

11

The term “basic design parameters” was defined by the

ERP rule to include such factors as “maximum hourly heat

input,” “maximum hourly fuel consumption rate,” and

“maximum steam flow rate,” i.e., factors which determine a

unit’s maximum hourly emission rate. 40 C.F.R. § 52.21(cc),

App. 141a-142a. A major stationary source that undertook an

equipment replacement project that qualified under the ERP

rule, therefore, might well increase its total annual emissions

from one year to the next, due to a reduction in the number of

hours of operation lost on account of defective or deteriorated

equipment. But in no circumstance would the ERP rule ex-

cuse from NSR any project that altered the unit’s basic design

parameters, including its maximum hourly emission rate.

5. New York Il

Numerous petitions for review of the ERP rule were filed in

the D.C. Circuit within a few days of the rule’s publication in

the Federal Register. All of these cases were subsequently

consolidated under the lead docket, State of New York v. EPA,

No. 03-1380.° UARG was one of several entities that subse-

quently intervened in support of the ERP rule.

On March 17, 2006, the D.C. Circuit issued its decision in

New York II. Having cautioned that “(t]he court has no occa-

sion to decide whether part replacements . . . constitute a

‘modification’ under the [statutory] definition as whole,” 443

F.3d at 888 n.4, App. 15a, the court struck down the ERP rule

citing Chevron step one, finding the rule to be “contrary to the

plain language of section 111(a)(4)” of the CAA. /d. at 883,

App. 6a.

© On December 24, 2003, some of the petitioners in New York I] peti-

tioned EPA to reconsider certain aspects of the ERP rule. EPA subse-

quently granted reconsideration, undertook further notice-and-comment

rulemaking on the ERP rule, and issued its final decision on reconsidera-

tion on June 10, 2005. 70 Fed. Reg. 33,838, App. 143a. Petitions for re-

view of EPA’s decision on reconsideration were subsequently filed in the

D.C. Circuit, and those challenges were consolidated with the original

petitions under lead docket No. 03-1380.

12

According to the court, because CAA § 111(a)(4) defines

“modification” to mean “any physical change . . . which re-

sults in the emission of any air pollutant,” and because the

word “any” has an “expansive meaning,”’ “Congress’s use of

the word ‘any’... means that all types of ‘physical changes’

are covered.” /d. at 890, App. 19a. This includes, the court

said, the replacement of broken or deteriorating equipment

with functionally identical equipment that does not change a

source’s emission characteristics, but which allows the source

to recover any hours of operation lost due to the deterioration.

Relying on the remarkable assertion that Congress could not

have “intended . . . to allow sources operating below applica-

ble [CAA] emission limits to increase significantly the pollu-

tion they emit [within those limits] without government re-

view,” id. at 886, App. 11-12a," the court concluded that the

ERP rule was unlawful because it “would allow equip ment re-

placements resulting in nonde minimis emission increases to

avoid NSR.” /d. at 890, App. 19a.

REASONS FOR GRANTING THE PETITION

Under the CAA, the requirements of the PSD program are

triggered by the “construction” of a “major emitting facility,”

with “construction” defined to include the “modification” (as

defined in CAA § 111(a)) of “any source or facility.” 42

U.S.C. § 7475(a), 7479(2)(C); CAA §§ 165(a), 169(2)(C).

Similarly, the requirements of the nonattainment NSR pro-

gram are triggered by the “construction” of a “new or mod+

” 443 F.3d at 885, quoting U.S. v. Gonzales, 520 U.S. 1, 5 (1997), App.

10a.

" The “limits” to which the D.C. Circuit refers are emission limits cre-

ated by EPA or states to protect the NAAQS and the PSD increments.

Therefore, changes in pollution levels below such limits have a/ready been

subject to, and, indeed, are the product of, “government review.” See, e.g.,

Train v. NRDC, 421 U.S. 60, 7881 (1975) (NAAQS): Alabama Power v.

Costle, 636 F.2d 323, 361-364 (D.C. 1979) (protection of the increments).

13

fied stationary source,” with “modified” defined to “mean the

same as the term ‘modification’ as used in” CAA § 111(a). 42

U.S.C. §§ 7502(c)(5), 7501(4); CAA §§ 172(c)(5), 171(4).

Because EPA has discretion under the CAA to define “mod+

fication” for NSPS to exclude projects that do not increase an

existing source’s capacity to emit, it follows that EPA was, at

a minimum, authorized to promulgate a legislative rule that

excludes such projects from the requirements of NSR.

I. THE. D.C. CIRCUIT’S APPROACH TO

STATUTORY CONSTRUCTION CONFLICTS

WITH CHEVRON. |

In the case below, the D.C. Circuit had no answer for why a

rule that excludes from NSR a subset of projects that are not

NSPS modifications is unlawful under the “plain language” of

the CAA, when Congress in the 1977 Amendments (i) defined

“modification” for NSR to have the “mean{ing]” and “use[]”

it has under NSPS, and (ii) specifically authorized EPA to

continue to define “modification” as it had under the 1974

PSD rules (i.e., 40 C.F.R. § 52.01(d)). Unable to respond, the

court simply says that it “ha[d] no occasion to decide whether

part replacements or repairs necessarily constitute a ‘modifi-

cation’ under the definition taken as a whole.” 443 F.3d at

888 n.4, App. 1Sa.

The D.C. Circuit nevertheless vacated the ERP rule, apply-

ing a new approach to judicial review of EPA’s interpretation

of its authorizing statute. Under the guise of a Chevron step

one analysis, the court excerpted three words (i.e., “any phys

cal change”) from the definition of “modification” as the fo-

cus of its inquiry into congressional intent. Identifying “[t]he

parties’ essential disagreement” as being “the effect of Con

gress’s decision . . . to insert the word ‘any’ before ‘physical

change’,” id. at 885, App. 10a, the court found it clear that

“when Congress places the word ‘any’ before a phrase [i.e.,

“physical change”] with several common meanings, the

statutory phrase encompasses all of those meanings.” /d. at

14

888, App. 15a. Then, in a complete reversal of Chevron def-

erence, the court told EPA that even though its interpretation

of “modification” in the ERP rule might reflect “better pot

icy,” that interpretation must be rejected unless EPA could

show that the statutory “policy” found by the court in the

word “any” “borders on the irrational.” /d. at 889, App. 18a.

In Chevron, this Court enunciated the now-familiar ap-

proach to judicial review of an agency’s interpretation of its

enabling statute: “First, always, is the question whether Con-

gress has directly spoken to the precise questions at issue.”

467 U.S. at 842. “If the intent of Congress is clear, that is the

end of the matter.” /d If, however, “the court determines

Congress has not directly addressed the precise question at

issue . . . the question for the Court is whether the agency’s

answer is based on a permissible construction of the statute.”

Id. at 843. In the latter case, “federal judges . . . have a duty

to respect legitimate policy choices” made by the agency. /d.

at 866.

The judiciary is “the final authority on issues of statutory

construction.” 467 U.S. at 843 n.9. Exercising this authority

with care is particularly important for the D.C. Circuit, be-

cause it is charged with exclusive jurisdiction to review many

of the legislative rules issued by EPA and other agencies. In

exercising this authority, this Court has made clear that the

“court... employ[s] traditional tools of statutory construc-

tion . . . [to} ascertain[] whether . . . Congress had an intention

on the precise question at issue.” /d. at 843 n.9 (emphasis

added).

Application of “traditional tools of statutory construction”

requires a court to examine both the statutory context and the

history of a word or phrase. Thus, while “[a] ‘word may have

a character of its own not to be submerged by its association’

[citation omitted] . . . the meaning of a word must be ascer-

tained in the context of achieving particular objectives, and

the words associated with it may indicate . . . the true mean

ing.” Chevron, 467 U.S. at 860, 861. For that reason, a re-

viewing court “should not confine itself to examining a par-

15

ticular statutory provision in isolation.” See FDA v. Brown &

Williamson Tobacco Corp. 529 U.S. 120, 132 (2000). See

also Philbrook v. Glodgett, 421 U.S. 707, 713 (1975) (“In ex-

pounding a statute, we must not be guided by a single ser

tence or member of a sentence, but look to the provisions of

the whole law, and to its object and policy.”).

Other provisions of a statute may be relevant to discerning

congressional intent for other reasons as well. For example,

“identical words used in different parts of the same act” are

generally presumed “to have the same meaning.” Comm’r of

Internal Rev. Serv. v. Lundy, 516 U.S. 235, 250 (1996); BP,

Inc. v. Alvarez, 126 S.Ct. 514, 523-24 (2005) (heightened pre-

sumption of identical meaning where the term is explicitly

referenced in a separate section of the same statute).

Moreover, what the agency has said historically about a

statutory provision may be relevant to congressional intent,

because “agencies charged with applying a statute make all

sorts of interpretive choices . . . [that] certainly may influence

courts facing questions the agencies have already answered.”

U.S. v. Mead Corp., 533 U.S. 218, 227 (2001). And, as this

Court has observed, once an agency has given meaning to a

term through rulemaking, Congress is presumed to be aware

of that regulatory definition and is presumed to ratify it when

adopting the term in subsequent legislation. Bragdon v. Ab-

bott, 524 U.S. 624, 631 (1998); Merrill Lynch, Pierce, Fenner

& Smith, Inc. v. Curran, 456 U.S. 353, 382 n.66 (1982); Lor-

illard v. Pons, 434 U.S. 575, 581-82 (1978) (When “Congress

adopts a new law incorporating sections of a prior law,” Con-

gress “normally can be presumed to have had knowledge of

the interpretation given to the incorporated law.”).

In the case below, the D.C. Circuit concedes that it did not

“decide whether part replacements or repairs necessarily corm

stitute a ‘modification’ under the [§ 111(a)(4)] definition

taken as a whole.” 443 F.3d at 888 n.4, App. 15a. Nor did the

court look to “the structure of the Act,” id. at 889, App. 18a;

EPA’s contemporaneous rulemaking interpretation of the

1970 CAA; or the nature and implications of Congress’ action

16

in 1977 defining “modification” for NSR by reference to its

“meanjing]” and “use[]” under NSPS. CAA §§ 169(2)(C),

171(4). Rather, the court dismissed the relevance of such

statutory and regulatory context on the grounds that there is

no “ambiguity in the phrase ‘any physical change.’” 443 F.3d

at 886, App. 12a.

By limiting its analysis to the words “any physical change,”

while not resolving whether equipment replacements that met

the requirements of the ERP rule were “modifications” under

the definition read as a whole, 443 F.3d at 888 n.4, App. 15a,

the D.C. Circuit has created a new standard for reviewing an

agency’s interpretation of its authorizing statute. Reading

Chevron to require a determination of the “plain meaning” of

words isolated from their statutory context produces precisely

the result this Court sought to avoid in Chevron: disregard for

the agency’s legitimate policy choices.

Had the D.C. Circuit applied “traditional tools of statutory

construction” here, as opposed to trying to divine the meaning

of three isolated words, the court would have found that Con-

gress in 1977 made it clear that, at a minimum, the NSPS in-

terpretation of “modification” could continue to govern NSR

applicability. First, Congress in 1977 had before it EPA’s

preexisting PSD rules, and Congress reviewed those rules

provision by-provision, adopting some elements and changing

others. Having undertaken this review, Congress did not re-

quire that EPA change the way it had been implementing

CAA § 11i(a)(4)’s definition of “modification” under the

1974 PSD rules in 40 C.F.R. § 52.01(d), as it did with the

1974 regulatory provisions defining “commence construc tion”

and “best available control technology.” See 40 C.F.R. §§

52.01(f); 52.21(b)(7) (1974). To the contrary, Congress in

CAA § 168(a) expressly directed that, until such time as an

imple mentation plan was approved for a particular area, the

“applicable regulations under this chapter prior to August 7,

1977 [1.e., the 1974 PSD rules] shall remain in effect to pre-

vent significant deterioration of air quality in any such area,”

17

except as those rules were automatically amended by opera-

tion of CAA § 168(b) (emphasis added).

Second, Congress in 1977 expressed no disagreement with

the way CAA § 111(a)(4) was implemented under the NSPS

program. To the contrary, it specifically (i) defined “con-

struction” for PSD as including “the modification (as defined

in section 111(a) of this title) of any source or facility”; and

(ii) provided that, for nonattainment NSR purposes, the “terms

‘modifications’ and “modified’ mean the same as . . . used in”

CAA § 111(a). 42 U.S.C. §§ 7479(2)(C), 7501(4); CAA §§

169(2)(C); 171(4). In this manner, Congress made it clear

that, at a minimum, EPA had discretion to continue to inter-

pret “modification” under NSR consistent with its interpreta-

tion of that term under NSPS. Indeed, it would be a particu

larly odd approach to statutory interpretation to conclude that,

by defining “modification” for NSR to mean “modification”

as defined in NSPS, Congress intended to preclude EPA from

implementing CAA § 111(a)(4) for NSR the same way it had

always implemented that provision for NSPS.

Among the traditional tools of statutory construction that

are available to a reviewing court is the canon that a court

“may accord great weight to the longstanding interpretation

placed on a statute by an agency charged with its administra-

tion.” NLRB v. Bell Aerospace Co., 416 U.S. 267, 274-75

(1974). This is “especially so where Congress has reenacted

the statute without pertinent change.” Jd. at 275. In such cir-

cumstances, “congressional failure to revise or repeal the

agency’s interpretation is persuasive evidence that the inter-

pretation is one intended by Congress.” /d.

In the “circumstances” of the 1977 CAA Amendments,

Congress effectively did “reenact” the congressional policy

reflected in EPA’s NSPS rules by defining “construction” for

PSD to include “modification” as defined for NSPS, and de-

fining “modification” for nonattainment NSR to “mean the

same as_... used in” NSPS. In so doing, Congress did not

“revise or repeal” EPA’s interpretation of “modification” as a

project that increases an existing source’s operating design

18

capacity. That interpretation was squarely before Congress in

its review of the 1974 PSD rules, and Congress did not require

any change in this particular aspect of those rules. Cf. Loril-

lard, 434 U.S. at 580-81 (1978) (where “Congress adopted a

new law incorporating sections of a prior law,” it “normally

can be presumed to have had knowledge of the interpretation

given to the incorporated law,” with that presumption being

“particularly appropriate [where] Congress exhibited both a

detailed knowledge of the [prior law’s] provisions . . . and a

willingness to depart from those provisions regarded as _unde-

sirable or inappropriate for incorporation.”).

In sum, Congress in 1977 specifically defined “modifica-

tion” for NSR by reference to its meaning and use under

NSPS and expressly authorized EPA to continue to follow the

approach to “modification” taken in the 1974 PSD rules. The

court missed these clear indications of congressional intent by

reformulating Chevron step one to require an inquiry into

whether isolated words in a statute have a meaning of their

own that is “plain” or “clear,” as opposed to what “the defini-

tion [of modification] taken as a whole” signals as to congres-

sional intent. 443 F.3d at 888 n.4, App. 15a. This new Chev-

ron test has resulted in precisely the problem this Court

sought to avoid in that case, i.e., rejecting the agency’s legit

mate policy choices. Because the D.C. Circuit has shown of

late a penchant to apply this reformulated Chevron step one

test,” this Court should grant certiorari to address the conflict

between New York // and Chevron.

9 ) , . .: a4

See, e.g. New York I 413 F.3d at 39-40, where the D.C. Circuit's

Chevron step one analysis turns on the “juxtaposition” of isolated words

(e.g., “emit,” “emitted,” “potential to emit’) in the CAA.

19

GIVEN THE CENTRAL IMPORTANCE OF THE

NSR PROGRAMS TO THE ECONOMY,

WHETHER EPA HAS AUTHORITY TO DEFINE

“MODIFICATION” CONSISTENTLY FOR NSR

AND NSPS IS AN IMPORTANT ISSUE THAT

MERITS THIS COURT’S ATTENTION.

The PSD and nonattainment NSR programs are the gateway

to economic development in this country. New electric gen

erating facilities, new manufacturing facilities, new refineries,

and virtually every other type of facility that makes up this

country’s economic infrastructure are potentially subject to

this NSR gatekeeper. Not surprisingly, therefore, every time

this Court has been asked to review D.C. Circuit decisions

significantly affecting the nature and scope of those programs,

it has granted certiorari.

First, in 1972, the U.S. District Court for the District of

Columbia issued a preliminary injunction ordering EPA to

establish a PSD program. See Sierra Club v. Ruckelshaus,

344 F.Supp. 253 (D.D.C. 1972). The D.C. Circuit affirmed,

without opinion. /d., 4 ERC 1815 (D.C. Cir. 1972). This

Court granted certiorari and, without a written opinion, re-

manded the case to the District Court as a result of a 4-4 decr

sion. See Fri v. Sierra Club, 412 U.S. 541 (1973). The regu-

latory PSD program adopted in December 1974 resulted from

that remand.

Second, industry challenged the 1974 PSD rules in the D.C.

Circuit. The D.C. Circuit affirmed those rules in 1976. See

Sierra Club v. EPA, 540 F.2d 1114 (D.C. Cir. 1976). This

Court again granted certiorari to review the D.C. Circuit’s de-

cision. Before that case was decided, however, Congress en

acted the statutory PSD program, and the petition was dis-

missed without opinion. See Montana Power Co. v EPA, 434

U.S. 809 (1977).

Third, when EPA in 1981 revised the rules governing NSR

in nonattainment areas, the Natural Resources Defense Coun-

sel challenged those rules in the D.C. Circuit. The D.C. Cir-

20

cult vacated the rules and ordered EPA to adopt rules that

would expand coverage of the nonattainment NSR program.

This Court granted certiorari in Chevron and was finally able

to write an opinion addressing the NSR program. The Court

reversed the D.C. Circuit and affirmed EPA’s nonattainment

NSR “major modification” rule. As this Court explained,

EPA properly “exempt{[ed] modifications of existing facilities

[from NSR] that are accompanied by intrasource offsets so

that there is no increase in emissions” [i.e., no “major” mod+

fication]. 467 U.S. at 854 (quoting EPA’s rulemaking de-

scription of the rule); see also id. at 840 (Under the “major

modification” rule, a source “may install or modify one piece

of equipment without meeting [NSR] . . . if the alteration will

not increase the total emissions from the plant.”).

Fourth, in Alaska Dep't Envtl. Conserv. v. EPA, this Court

granted certiorari to address EPA’s authority to review state

determinations under the PSD program. 540 U.S. 461 (2004).

In his dissent, Justice Kennedy noted the central role of PSD

in “Congress” design to grant States a significant stake in de-

veloping and enforcing” the CAA, and the substantial impacts

of PSD on individual companies and the economy. /d. at 516,

517 (noting that some companies “spend up to $500,000 on

the permit process and . . . the time for approval [for a com

plex project] can take from five to seven years.’’).

Most recently, this Court granted certiorari to the Fourth

Circuit to address whether “modification” must be interpreted

consistently for NSPS and NSR. Environmental Defense v.

Duke Energy Corp., No. 05-848. In that case, states, unions,

industry groups and others filed briefs as amici curiae ad-

dressing the importance of interpreting the scope of NSR con

sistent with congressional policy, dating back to the 1970

CAA.

All of the amici supporting Respondent Duke Energy ex-

plain that, contrary to the D.C. Circuit’s decision in New York

II, they have always understood the statutory term “modifica-

tion” (as opposed to the regulatory concept of “major modifi-

cation”) as having a consistent meaning across the NSPS and

21

NSR programs of the CAA, i.e., as activity that creates new

emitting capacity that could be measured in terms of maxi

mum hourly emission rate. By contrast, as the state amici ex-

plain, the reading of “modification” advanced by Petitioner

Environmental Defense (under which “modification” for NSR

is much broader in coverage than “modification” for NSPS)

“[{e]nvisions a breathtaking transfer of enforcement authority

from the States to the federal government . . . undermin[ing]

the Clean Air Act’s federalism-respecting foundations . . . and

. needlessly overwhelming the limited resources [of] .. .

state environmental agencies.” Brief of Amici Curiae the

States of Alabama, et al. (Sept. 15, 2006), at 1. Indeed, as

Duke amici explain, an NSR program under which “sources

operating below applicable emission limits” established either

by EPA or the states could not undertake projects that would

increase their operations within those limits without an end-

less cycle of “government review,” cf New York II, 433 F.3d

at 886, App. 12a, would be devastating to the environment

and the economy. Brief of Amici Curiae Alabama Power Co.,

et al. (Sept. 15, 2006); Brief Amici Curiae of the American

Public Power Ass’n. and the National Rural Electric Coopera-

tive Ass’n (Sept. 15, 2006); Brief Amici Curiae of the Interna-

tional Brotherhood of Boilermakers, et a/. (Sept. 15, 2006);

Brief Amici Curiae of the Manufacturers Ass’n Work Group

(Sept. 15, 2006).

This case involves the latest chapter in the NSR saga, but

one having greater implications for the economy than any

earlier one. Repairing and replacing worn out equipment is

something every industrial source does repeatedly. As a result

of the D.C. Circuit’s vacatur of the ERP rule, today and for

the indefinite future, every existing major facility 1s poten

tially subject to NSR (nonattainment and PSD) whenever they

repair or replace existing equipment to avoid losing hours of

operation due to normal equipment deterioration. In reaching

this result, the D.C. Circuit overthrows 35 years of statutory

and regulatory history based on its interpretation of a three-

word phrase excerpted from a 40-word definition in a lengthy

22

and complex statute. The Court should grant certiorari to ad-

dress this important issue of law and public policy.

CONCLUSION

The petition for writ of certiorari should be granted.

Respectfully submitted,

HENRY V. NICKEL

F. WILLIAM BROWNELL

(Counsel of Record)

DAVID S. HARLOW

HUNTON & WILLIAMS LLP

1900 K Street, N.W.

Washington, D.C. 20006

(202) 955-1500

Counsel for the Utility Air

Regulatory Group

November 27, 2006