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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 2006

## Text

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386016_1813%3A1. Public record. Not legal advice.