Petition for Writ of Certiorari — Appalachian Power Co. v. Environmental Protection Agency
Supreme Court brief2001
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No. ——
i PP othe
Supreme Court of the Anited States
APPALACHIAN POWER COMPANY, et ai.,
Petitioners,
U.S. ENVIRONMENTAL PROTECTION AGENCY,
Respondent.
On Petition for a Writ of Certiorari to the
United States Court of Appeals
for the District of Columbia Circuit
PETITION FOR A WRIT OF CERTIORARI
DAVID M. FLANNERY
KATHY G. BECKETT
JACKSON & KELLY
ANDREA BEAR FIELD
(Counsel of Record)
NORMAN W. FICHTHORN
1600 Laidley Tower HUNTON & WILLIAMS
500 Lee Street East 1900 K Street, N.W.
P. O. Box 553 Washington, D.C. 20006
Charleston, WV 25301 (202) 955-1500
(304) 340-1017 MEL S. SCHULZE
Counsel for Petitioner HUNTON & WILLIAMS
Midwest Ozone Group 600 Peachtree Street, N.E.
Atlanta, GA 30308
(404) 888-4000
Counsel for Petitioners
Appalachian Power
Company, et al.
WILSON-EPES PRINTING CO., INC. — (202) 789-0096 — WASHINGTON, D. C. 20001
00-445 SEP 20 om
Te oie
IN THE
rat =
QUESTIONS PRESENTED’
1. Whether the D.C. Circuit’s decision affirming the
Environmental Protection Agency’s (“EPA” or “the
Agency”) consideration of costs, rather than air quality
effects, in determining whether one sstate’s emissions
contribute “significantly” to nonattainment air quality in
another state under the Clean Air Act (“CAA” or “the Act”),
conflicts with decisions of this Court and other D.C. Circuit
decisions requiring EPA to consider the relevant statutory
factor in making regulatory decisions.
2. Whether EPA’s interpretation of the Act to allow selection
of a cost-effectiveness cut-off point, which rested on nothing
“in the language or function of [CAA] § 110(a)(2)(D)(i)(1)”
and involved an exercise of “essentially unbounded”
discretion, did not violate the non-delegation doctrine
because EPA’s rule only affects “half of the nation” rather
than “all American enterprise.”
* Both questions presented in this petition — which involve the role of
costs in establishing Clean Air Act regulations, and the scope and
applicability of the constitutional non-delegation doctrine in Clean Air
Act rulemakings — are questions that are currently before the Court, in a
different Clean Air Act context, in two related cases, Browner vy.
American Trucking Ass'ns, No. 99-1257, and American Trucking Ass'ns
v. Browner, No. 99-1426. As a result, the Court may wish to postpone
action on this petition until those cases are decided.
ll
PARTIES TO THE PROCEEDINGS
1. The following Parties were petitioners in_ the
consolidated proceeding, the judgment in which review is
sought.
In No. 98-1497, State of Michigan, Michigan Department
of Environmental Quality, and State of West Virginia,
Division of Environmental Protection.
In No. 98-1588, State of Ohio.
In No. 98-1596, Commonwealth of Virginia.
In No. 98-1615, State of Alabama, ex. rel. Bill Pryor,
Attorney General.
In No. 98-1617, State of Indiana and Indiana Department
of Environmental Management.
In No. 98-1619, State of North Carolina.
In No. 98-1621, State of South Carolina.
In No. 98-1499, United Mine Workers of America.
In No. 98-1500, Appalachian Power Company, ef al.,
consisting of:
Appalachian Power Company;
Baltimore Gas and Electric Company (now referred to
as Constellation Power Source Generation, Inc.)
Carolina Power & Light Company;
Central and South West Services, Inc.;
Central Power and Light Company;
Public Service Company of Oklahoma;
Southwestern Electric Power Company;
West Texas Utilities Company;
Central Illinois Light Company;
Central Illinois Public Service Company;
CINergy;
'
ee eT ae "
ill
Columbus Southern Power Company;
Commonwealth Edison Company;
Consumers Energy Company;
Dayton Power and Light Company, The;
Detroit Edison Company, The;
Duke Energy Company;
Florida Power Corporation;
Illinois Power Company;
Indiana Michigan Power Company;
Jacksonville Electric Authority;
Kentucky Power Company;
Kentucky Utilities Company;
Louisville Gas and Electric Company;
Madison Gas and Electric Company;
Minnesota Power Company;
Monongahela Power Company,
d/b/a Allegheny Power System, Inc.;
Northern Indiana Public Service Company;
Oglethorpe Power Corporation;
Ohio Power Company;
Ohio Valley Electric Corporation;
Oklahoma Gas & Electric Company;
Otter Tail Power Company;
PacifiCorp Electric Operations;
Plains Electric Generation & Transmission
Cooperative, Inc.;
Potomac Edison Company, The,
d/b/a Allegheny Power System, Inc.;
Potomac Electric Power Company;
Public Service Company of New Mexico;
Salt River Project;
South Carolina Electric & Gas Company;
iV
Southern Company;
Alabama Power Company;
Georgia Power Company;
Gulf Power Company;
Mississippi Power Company;
Savannah Electric and Power Company;
Tampa Electric Power Company;
Tucson Electric Company;
Union Electric Company;
Virginia Power;
West Penn Power Company,
d/b/a Allegheny Power System, Inc.;
Edison Electric Institute;
National Rural Electric Cooperative Association;
American Public Power Association.
In No
In No
In No
In No
In No
. 98-1500, Duquesne Light Company.
. 98-1501, Midwest Ozone Group.
. 98-1502, West Virginia Chamber of Commerce.
. 98-1504, National Mining Association.
. 98-1518, West Virginia Manufacturers Association.
In No. 98-1556, City of Springfield, Missouri through the
Board of Public Utilities, d/b/a City Utilities of
Springfield, Missouri.
in No
. 98-1567, Kansas City Power & Light Company;
St. Joseph Light & Power Company;
The Empire District Electric Company;
Utilcorp United, Inc.;
City of Independence, Missouri; and
Associated Electric Cooperative, Inc.
In No
. 98-1573, Indianapolis Power & Light Company
Vv
In No. 98-1585, The Alabama Forestry Association, Inc.
by and through its section The Alabama Pulp and Paper
Counsel.
In No. 98-1590, Dairyland Power Cooperative.
In No. 98-1598, South Carolina Public Service Authority
doing business as Santee Cooper.
In No. 98-1601, American Municipal Power-Ohio.
In No. 98-1602, Fort James Operating Company;
Gilman Paper Company;
Rayonier Inc.;
Savannah Electric & Power Company;
Southeast Paper Manufacturing Company;
International Paper Company.
In No. 98-1608, PP&L, Inc.
In No. 98-1609, Council of Industrial Boiler Owners.
In No. 98-1611, Network for Workable Air Policies.
In No. 98-1616, Georgia Coalition for Sound
Environmental Policy, Inc.
In No. 98-1618, Interstate Natural Gas Association of
America.
In No. 99-1070, Appalachian Power Company, et al.
In No. 99-1093, Wisconsin Paper Council;
Madison Gas and Electric Company;
Northern States Power Company;
Wisconsin Public Service Corporation;
Wisconsin Manufacturers & Commerce.
2. The following Party was a Respondent in the
consolidated proceeding, the judgment in which review is
sought.
U.S. Environmental Protection Agency.
vi
3. The following Parties were Intervenors in the
consolidated proceeding, the judgment in which review is
sought.
Appalachian Power Company, et al.
Dairyland Power Cooperative.
Virginia Manufacturers Association.
South Carolina Public Service Authority d/b/a Santee
Cooper.
Detroit Public Lighting;
Grand Haven Board of Light and Power;
Holland Board of Public Works;
Lansing Board of Water and Light;
Marquette Board of Light and Power;
Michigan South Central Power Agency; and
City of Wyandotte Department of Municipal Service.
GPU Generation, Inc.
American Gas Association.
Interstate Natural Gas Association of America.
Network for Workable Air Policies.
Business Council of Alabama.
Vii
Michigan Manufacturers Association.
State of Wisconsin.
State of New York;
State of Connecticut;
State of Maine;
State of New Hampshire;
Commonwealth of Pennsylvania;
State of Rhode Island;
State of Vermont; and
Commonwealth of Massachusetts.
State of Maryland.
Consolidated Edison Co. of New York, Inc.;
KeySpan Generation LLC;
Niagara Mohawk Power Corporation;
PECO Energy Company;
Public Service Electric and Gas Company;
Rochester Gas & Electric Corporation; and
PG&E Generating.
Natural Gas Supply Association; and
Sempra Energy.
Associated Industries of Massachusetts;
New England Council; and
New Jersey State Chamber of Commerce.
PP&L, Inc.;
Atlantic City Electric Company; and
Vill
Delmarva Power & Light Company. ‘
Natural Resources Defense Council;
Environmental Law & Policy Center of the Midwest;
Clean Air Task Force;
American Lung Association of Metropolitan Chicago;
Appalachian Mountain Club;
Citizens Action Coalition of Indiana, Inc.;
Clean Air Council;
Environmental Defense Fund;
Group Against Smog and Pollution;
Hoosier Environmental Council;
Illinois Environmenta! Council;
Izaak Walton League of America;
Legal Environmental Assistance Foundation;
Michigan Environmental Council;
National Environmental Trust;
Natural Resources Council of Maine;
New York Public Interest Research Group;
Ohio Citizen Action;
Ohio Environmental Council;
U.S. Public Interest Research Group; and
Wisconsin’s Environmental Decade Institute.
Province of Ontario, Canada;
Norman W. Sterling, Minister of the Environment,
Province of Ontario;
Charles A. Harnick, Attorney General of the Province of
Ontario; and
Christopher Carl Haromy.
ix
4. The following were Amici in the consolidated
proceeding, the judgment in which review is sought.
Toledo Metropolitan Area Council of Governments.
North Carolina Citizens for Business and Industry.
South Carolina Chamber of Commerce;
Environmental Management Association of South
Carolina; and
South Carolina Manufacturers Alliance.
Government of Canada.
DISCLOSURE STATEMENT
1. The following list of petitioners discloses the parent
companies of petitioners and any entity, other than the
parents, that has a 10% or greater ownership interest in any of
the petitioners.
Alabama Power Company
(parent: Southern Company)
Appalachian Power Company
(parent: American Electric Po er Company, Inc.)
Baltimore Gas and Electric Company (now referred to as
Constellation Power Source Generation, Inc.)
(parent: Constellation Energy Group, Inc.)
Carolina Power & Light Company
(10% or greater owner: State Street Bank & Trust
Company Boston) .
Central and South West Services, Inc.
(parent: Central and South West Corporation)
Central Illinois Public Service Company
(parent: Ameren Corporation)
Central Power and Light Company
(parent: Central and South West Corporation)
Columbus Southern Power Company
(parent: American Electric Power Company, Inc.)
Consumers Energy Company
(parent: CMS Energy Corporation)
Dayton Power and Light Company, The
(parent: DPL Inc.)
Detroit Edison Company, The
(parent: DTE Energy Company)
Florida Power Corporation
(parent: Florida Progress Corporation)
xi
Georgia Power Company
(parent: Southern Company)
Gulf Power Company
(parent: Southern Company)
Illinois Power Company
(parent: Dynegy, Inc.)
Indiana Michigan Power Company
(parent: American Electric Power Company, Inc.)
Kentucky Power Company
(parent: American Electric Power Company, Inc.)
Kentucky Utilities Company
(parent: Kentucky Utilities which is a subsidiary of
LGE Energy Corporation)
Louisville Gas & Electric Company
(parent: LGE Energy Corporation)
Mississippi Power Company
(parent: Southern Company)
Monongahela Power Company, dba Allegheny Power
System, Inc.
(parent: Allegheny Energy, Inc.)
Northern Indiana Public Service Company
(parent: NiSource Inc.)
Ohio Power Company
(parent: American Electric Power Company, Inc.)
Otter Tail Power Company
(10% or greater owner: Otter Tail Power Company
ESOP)
PacifiCorp Electric Operations
(parent: PacifiCorp)
Potomac Edison Company, The, dba Allegheny Power
System, Inc.
(parent: Allegheny Energy Inc.)
Xli
Public Service Company of Oklahoma
(parent: Central and South West Corporation)
Savannah Electric and Power Company
(parent: Southern Company)
South Carolina Electric & Gas Company
(parent: SCANA Corporation)
Southwestern Electric Power Company
(parent: Central and South West Corporation)
Tampa Electric Company
(parent: TECO Energy, Inc.)
Tucson Electric Power Company
(parent: UniSource Energy Corporation)
Union Electric Company
(parent: Ameren Corporation)
Virginia Power
(parent: Dominion Resources, Inc.)
West Penn Power Company, dba Allegheny Power
System, Inc.
(parent: Allegheny Energy, Inc.)
West Texas Utilities Co.
(parent: Central and South West Corporation)
2. The following petitioners have no_ parent
corporations, and no entity has a 10% or greater ownership in
any of these petitioners.
CINergy Corporation
Duke Energy Corporation
Jacksonville Electric Authority
Madison Gas and Electric Company
Minnesota Power
Oglethorpe Power Corp.
Ohio Valley Electric Corporation
Xlii
Plains Electric Generation & Transmission Cooperative,
Inc.
Potomac Electric Power Company
| Public Service Company of New Mexico
| - Salt River Project
Southern Company
: Edison Electric Institute
National Rural Electric Cooperative Association
American Public Power Association
National Mining Association
and
Midwest Ozone Group
Silla di iat Py
TABLE OF CONTENTS
Page
QUESTIONS PRESENTED ........2..0..<cescosssosesesssccesscoo-eoseces.... 1
PARTIES TO THE PROCEEDINGS ......-.eccccccccsceoceseeccecses... il
DISCLOSURE STATEMENT. ..0..0....cccccessessescscsssessesecoseosecen. X
TABLE OF AUTHORITIES. ...0..0.0...cccccccccssscscocoscesesecece... XVii
ig eR EE aE l
RAE AIRE iscincnsuinsticesicianlhdopulin iia ae cae eee ee l
CONSTITUTIONAL, STATUTORY, AND
REGULATORY PROVISIONS INVOLVED IN
SN Re socinaiclciessnebiontudicisishspesiceiidiia cee 5a oe nine 2
oR ATEIGIEE OF TE CABG oii 4
REASONS FOR GRANTING THE PETITION ................. 12
I. ALLOWING EPA TO DETERMINE
“SIGNIFICANT” CONTRIBUTION BASED ON
THE COST-EFFECTIVENESS OF EMISSION
REDUCTIONS, RATHER THAN BASED ON
THE AIR QUALITY EFFECTS OF
EMISSIONS, CONFLICTS WITH BASIC
PRINCIPLES OF STATUTORY INTERPRE-
TATION AND ADMINISTRATIVE LAW AS
REFLECTED IN THE DECISIONS OF THIS
COURT AND THE D.C. CIRCUIT. 00....cccccscsscsscccsceoeess 14
Il. THE COURT OF APPEALS’ DECISION
TURNS UPSIDE-DOWN THE PRINCIPLE OF
UNCONSTITUTIONAL DELEGATION. .....-cccccccccoe-.. 19
CONCLUSION
wy Tn eOODSOSSSSUSO60Sb505090OSS0S05E550050054655508 00065550006 bCRReES
XVi
APPENDIX
Decision of the United States Court of Appeals
for the D.C. Circuit, Decided March 3, 2000................. la
Order of the United States Court of Appeals for
the D.C. Circuit Denying Petition for Rehearing,
eRe FUND Bethe, De veitcésvacccvchbetedatana eae cadediniadiaditeavins 62a
Order of the United States Court of Appeals for
the D.C. Circuit Denying Petitions for Rehearing
Oe eS BO ee ee 64a
Mandate of the United States Court of Appeals for
the D.C. Circuit, Issued September 13, 2000............... 66a
XVii
TABLE OF AUTHORITIES
Page
CASES
American Lung Ass'n v. EPA, 134 F.3d 388 (D.C. Cir.
1998), cert. denied, 120 S. Ct. 58 (1999) oo... oecccceeeseeee 19
American Petroleum Inst. v. Costle, 665 F.2d 1176
(D.C. Cir. 1981), cert. denied, 455 U.S. 1034
SIRI inichiieduisacbinssseccanbadepuiantecennsnsesncetnaniashiaiennicanenamsbeacaanaacne 7
American Petroleum Inst. v. U.S. EPA, 52 F.3d 1113
Se Ie MOI ssisnisnsvovasinonnedasassicseendnsanannsteasecssacaasas 11,18
American Trucking Ass’ns v. EPA, 175 F.3d 1027,
modified on reh’g, 195 F.3d 4 (D.C. Cir. 1999),
cert. granted, 120 S. Ct. 2003, and cert. granted,
OE Matta MS CIID ncn scsscovovascosenssaranacesnkaunancseeseasres |
American Trucking Ass’ns v. EPA, 195 F.3d 4 (D.C.
Cir. 1999), cert. granted, 120 S. Ct. 2003, and
cert. granted, 120 S. Ct. 2193 (2000)............cccesseesceseees 19
Bowen v. Georgetown Univ. Hosp., 488 U.S. 204
AE ES SRAM OS A IORSY PSOE ACR eA 16
Ethyl Corp. v. EPA, 51 F.3d 1053 (D.C. Cir. 1995). 11, 17, 18
Industrial Union Dep’t v. American Petroleum Inst.,
ET CIE gic ssscasiesiscasiecestenssesinoesesosnavnesncsssns 17
Lead Indus. Ass'n v. EPA, 647 F.2d 1130 (D.C. Cir.),
cert. denied, 449 U.S. 1042 (1980) wo...ecccccccscesesceeseseees 6
Michigan v. EPA, 213 F.3d 663 (D.C. Cir. 2000)......... passim
New York v. EPA, 133 F.3d 987 (7 Cir. 1998) .......csccccceseeeee 8
XViil
NRDC v. EPA, 824 F.2d 1146 (D.C. Cir. 1987).............00e 7
NRDC v. EPA, 902 F.2d 962 (D.C. Cir. 1990),
vacated in part, 921 F.2d 326 (D.C. Cir.), cert.
dismissed, 498 U.S. 1075, and cert. denied, 498
Need. OIE OARS ssnicancicasceksensp'cinbonayancseneauaiamaiasunaaiced 6,7
Oil, Chemical, and Atomic Workers Int’l Union y.
NLRB, 46 F.3d 82 (D.C. Cir.), cert. denied, 516
Cre RE ED ecchcinwnadsnieaiensccsicdelcedeiteadisemaiaomleias 17
Zinn W. FEREM, SEE UD. Gy CIGD acccencscsensntioncscnesensecectienenns 5
Virginia v. EPA, 108 F.3d 1397, modified, 116 F.3d
Pe ee. i. 0 ics snorecaanaeeendlenieaaeenaee es 5
CONSTITUTION AND STATUTES
ens ig INE GEO ici cctccccnsisnscaresnacticccasdiebdipaneaha nites icalia y A
Fes. OF PE iisin'cosnsidobincesedsententenccckimiaaiaeianaauee 19
TI Binnie eee
The Clean Air Act, 42 U.S.C. §§ 7401-7671g (1994)
I Be FI iiichtiitsicnns ected dicen 2
CAA § 101(a)(3), 42 U.S.C. § 7401(a)(3)......... ee eeeeeeeeees 5
CAA § 101(b)(1), 42 U.S.C. § 7401(b)(1) ..... eee 4
CAA § 107(a), 42 U.S.C. § 7407(8).....0ccerccsscsescseeccssceeees 5
CPi GB BI, EE CLA © Pi eiicrscicctacipeekdinctainscenactascas 4
CAA © Beh ie Sil SS ee i siiscntssiciensanninenincnincicimnteniisa 4
CAA § 109(b)(1), 42 U.S.C. § 7409(b)(1) oes 6
CAA § 110(a)(1), 42 U.S.C. § 7410(a)(1).... eee 5
X1X
CAA § 110(a)(2), 42 U.S.C. § 7410(a)(2)..ecccccccseccceseeoes. 5
CAA § 110(a)(2)(D), 42 U.S.C. § 7410(a)(2)(D)............. 2
CAA § 110(a)(2)(D)(i), 42 U.S.C. §
PROMI evinsnasstannnigunicindiptcinat nancies ces passim
CAA § 110(a)(2)(D)(i)(I), 42 U.S.C. §
i | ee ee renee passim
CAA § 110(k), 42 U.S.C. § 7410(k) voececcccscccsescsceseccoseeees. 5
CAA § 110(k)(5), 42 U.S.C. § 7410(k)(5)...3, 5, 7, 13, 18
CAA §§ 181-185B, 42 U.S.C. §§ 7511-7511 f co.cc... 9
CAA § 182(f), 42 U.S.C. § 751 La(f) ..ccccescccccssccssescsceeeee. 8
CAA § 211(f)(1), 42 U.S.C. § 7545(f)(1)...ceccecsecsecseeseees 17
CAA § 211(f)(4), 42 U.S.C. § 7545(£)(4)...ccccccccccscccsseees 18
CAA § 307(b), 42 U.S.C. § 7607(b) .o.ceecccceseccccsescecececesees 6
CAA § 307(d)(9), 42 U.S.C. § 7607(d)(9) voccccccccccsecseese. 19
FEDERAL REGISTER
62 Fed. Reg. 60,318 (1997) o.oo. cececcccsee. jd nbianaieeeen isadiaa 8, 10
Gl Fee. Brg, GOSIG (107) gvcscsimsicrensivitsseresvencacsalevsnesimesees, 10
62 Fed. Reg. 60,376-79 (1997)......c.ccccssscessssssssseseseseecececeseesee. 9
GZ Fed. Rag. GO,378 (1997) ..a.sccecassccssecoseceososesssesessoessasseee,. 10
OS WW. Tm. 57 FIG COI css iccsinsesanscasitdsstascoouecsac. 4,10
PETITION FOR A WRIT OF CERTIORARI
Industry Petitioners’ respectfully petition for a writ of
certiorari to review the decision of the United States Court of
Appeals for the District of Columbia Circuit in Michigan y.
EPA, 213 F.3d 663 (D.C. Cir. 2000). Industry Petitioners
include over sixty electric utility companies; the major trade
associations for the electric utility industry (the Edison
Electric Institute, the American Public Power Association,
and the National Rural Electric Cooperative Association); the
National Mining Association; and the Midwest Ozone Group.
OPINIONS BELOW
The opinion of the court of appeals (App. la-61a) is
reported at 213 F.3d 663 (D.C. Cir. 2000), 341 U.S. App.
D.C. 306. The orders on the petitions for panel and en banc
rehearing and the court of appeals’ mandate are included in
the Appendix (App. 62a-67a).
JURISDICTION
The court of appeals entered its judgment on March Je
2000. Timely petitions for panel and en banc rehearing were
denied by orders of the court of appeals entered on June 22,
2000. The court’s mandate issued on September 13, 2000.
This Court’s jurisdiction is invoked under 28 U.S.C.
§ 1254(1).
' Petitioners jointly filing this petition for a writ of certiorari are
designated on the cover.
2
CONSTITUTIONAL, STATUTORY, AND
REGULATORY PROVISIONS
INVOLVED IN THE CASE
Article I, § 1, of the United States Constitution provides
in pertinent part that “[a]ll legislative Powers herein granted
shall be vested in a Congress of the United States....”
The relevant sections of the Clean Air Act, 42 U.S.C.
§§ 7401-7671q, are set forth below:
Clean Air Act § 110(a)(2)(D), 42 U.S.C. § 7410(a)(2)(D),
provides that:
Each implementation plan submitted by a
State under this chapter shall be adopted by
the State after reasonable notice and public
hearing. Each such plan shall —
(D) contain adequate provisions —
(i) prohibiting, consistent with the provisions
of this subchapter, any source or other type of
emissions activity within the State from
emitting any air pollutant in amounts which
will —
(1) contribute significantly to nonattainment
in, or interfere with maintenance by, any other
State with respect to any such national
primary or secondary ambient air quality
standard, or
(II) interfere with measures required to be
included in the applicable implementation
plan for any other State under part C of this
subchapter to prevent significant deterioration
of air quality or to protect visibility,
(ii) insuring compliance with the applicable
requirements of sections 7426 and 7415 of
this title (relating to interstate and
international pollution abatement).
Clean Air Act § 110(k)(5), 42 U.S.C. § 7410(k)(5),
provides that:
Whenever the Administrator finds that the
applicable implementation plan for any area is
substantially inadequate to attain or maintain
the relevant national ambient. air quality
standard, to mitigate adequately the interstate
pollutant transport described in section 7506a
of this title or section 751 1c of this title, or to
otherwise comply with any requirement of this
chapter, the Administrator shall require the
State to revise the plan as necessary to correct
such inadequacies. The Administrator shall
notify the State of the inadequacies, and may
establish reasonable deadlines (not to exceed
18 months after the date of such notice) for the
submission of such plan revisions. Such
findings and notice shall be public. Any
finding under this paragraph shall, to the
extent the Administrator deems appropriate,
4
subject the State to the requirements of this
chapter to which the State was subject when it
developed and submitted the plan for which
such finding was made, except that the
Administrator may adjust any dates applicable
under such requirements as appropriate
(except that the Administrator may not adjust
any attainment date prescribed under part D of
this subchapter, unless such date has elapsed).
The EPA rules at issue in this case are published at 63
Fed. Reg. 57,356 (1998). With the Clerk of the Court’s
permission, copies of the Federal Register notice containing
the preamble and the final rules have been lodged with the
Clerk of the Court.
STATEMENT OF THE CASE
The federal Clean Air Act (“CAA” or “the Act”) assigns
different responsibilities to EPA and the states in order to
achieve the Act’s goal of “protect[ing] and enhanc[ing] the
quality of the Nation’s air resources so as to promote the
public health and welfare and the productive capacity of its
population.” CAA §101(b)(1). For example, EPA has
responsibility under the Act’s national ambient air quality
standards (“NAAQS”) program to develop ambient standards
for air pollutants. CAA §§ 108, 109; see American Trucking
Ass'ns v. EPA, 175 F.3d 1027, modified on reh'g, 195 F.3d 4
(D.C. Cir. 1999), cert. granted, 120 S. Ct. 2003, and cert.
? 42 U.S.C. §§ 7401-7671q. Citations herein to the Act are to sections of
the statute; the Table of Authorities includes parallel citations to the
United States Code.
5
granted, 120 S. Ct. 2193 (2000), Browner v. American
Trucking Ass'ns, No. 99-1257, and American Trucking
Ass’'ns v. Browner, No. 99-1426 (hereinafter referred to as
“ATA”). Under CAA § 107(a), the states have the “primary
responsibility” for ensuring that NAAQS are attained and
maintained. See also CAA § 101(a)(3) (“...air pollution
control at its source is the primary responsibility of States
and local governments.”) A state must, under CAA
§ 110(a)(1), develop and adopt a state implementation plan
(“SIP”), which is a package of source-specific emission
limits and other regulatory measures necessary to attain and
maintain the NAAQS. SIPs must meet the requirements of
CAA § 110(a)(2).
Although the states have the primary responsibility for
determining how to attain and maintain the NAAQS, EPA
retains oversight authority. Each state’s SIP — and any
revisions to a SIP — must be reviewed and approved by EPA.
CAA §110(k). EPA also has authority in certain
circumstances to find a SIP “substantially inadequate” and to
issue a “SIP call” requiring the state to revise its SIP. CAA
§ 110(k)(5).
EPA’s oversight authority is not without limit, though.
For example, courts have held that EPA may not, in the guise
of a SIP call, order states to adopt any particular approach to
achieve SIP requirements. Virginia v. EPA, 108 F.3d 1397,
modified on other grounds, 116 F.3d 499 (D.C. Cir. 1997).
Indeed, this Court has held that each State has authority to
determine in the first instance what measures are necessary
and appropriate in that state to “satisf[y] the standards of
§ 110(a)(2).” Train v. NRDC, 421 US. 60, 79 (1975).
In addition to spelling out the respective roles of EPA and
the states in implementing the CAA, the Act contains
provisions indicating that a variety of different criteria —
6
including public health protection and the cost and feasibility
of pollution controls — are to be considered in making Clean
Air Act regulatory decisions, depending on the nature of the
regulatory decision in question. Over the past two decades,
EPA has had considerable experience in deciding which
factors are relevant under specific regulatory programs. The
Court of Appeals for the D.C. Circuit, the only court with
jurisdiction to review EPA actions having nationwide scope
and effect (see CAA §307(b)), has issued an array of
opinions sometimes upholding, and sometimes setting aside,
EPA’s actions, based on whether EPA has _ properly
considered (or has improperly ignored) factors relevant under
the Act.
In many of these cases, including this one, the issue is
whether cost is a relevant factor under the statutory
provision, and if so, how cost may be considered. EPA’s
evaluation of the role of cost has resulted in a hodge-podge of
D.C. Circuit opinions specifying different approaches for
determining whether, and if so, how, EPA is to take cost into
consideration in the creation and implementation of Clean
Air Act regulatory programs.
For example, in a series of CAA cases concerning the
adoption of NAAQS, the D.C. Circuit has read the Act’s
requirement that the NAAQS protect the public health and
welfare with “an adequate margin of safety,” CAA
§ 109(b)(1), as completely precluding EPA from considering
cost when it decides at what level to set an ambient standard.
The D.C. Circuit stated flatly that “the statute and its
legislative history make clear that economic considerations
play no part in the promulgation of ambient air quality
standards under [CAA] Section 109.” Lead Indus. Ass'n v.
EPA, 647 F.2d 1130, 1148 (D.C. Cir.) (emphasis added),
cert. denied, 449 U.S. 1042 (1980); see also NRDC v. EPA,
+
902 F.2d 962, 972-73 (D.C. Cir. 1990), vacated in part on
other grounds, 921 F.2d 326 (D.C. Cir.), cert. dismissed, 498
U.S. 1075, and cert. denied, 498 U.S. 1082 (1991); American
Petroleum Inst. v. Costle, 665 F.2d 1176, 1185 (D.C. Cir.
1981), cert. denied, 455 U.S. 1034 (1982). The D.C.
Circuit’s prohibition on the consideration of cost in the
ambient-standard-setting process is currently under review by
this Court in ATA.
In contrast, the D.C. Circuit, sitting en banc, unanimously
held that the Act allows consideration of cost as a relevant
factor in the implementation of another, essentially identical
CAA provision: § 112 of the Act, which authorized EPA to
set standards with “an ample margin of safety to protect the
public health.” See NRDC v. EPA, 824 F.2d 1146 (D.C. Cir.
1987). Specifically, the court read the language of § 112 as
prohibiting EPA from considering cost at the time the
Agency decides what is a safe level of emissions, while
allowing EPA to take cost into account thereafter in deciding
what margin of safety is needed to protect public health.
In the instant case, the D.C. Circuit adopted yet another
formulation to govern the consideration of cost in
implementing CAA provisions: specifically, in this case,
§§ 110(a)(2)(D)(i) and = 110(k)(5), addressing _ interstate
pollutant transport. Section 110(a)(2)(D){i) requires that each
state’s SIP contain provisions that prohibit, consistent with
other provisions of Title I of the Act, any source or other type
of emissions activity within that state “from emitting any air
pollutant in amounts which will contribute significantly to
nonattainment [of an ambient air quality standard] in ... any
other State ....” CAA § 110(k)(5) provides that if the EPA
Administrator finds that a state’s SIP “‘is substantially
inadequate ... to mitigate adequately” its interstate pollutant
transport, then EPA is to issue a SIP call “as necessary” to
8
correct the inadequacy, giving the “called-upon” state up to
18 months in which to revise its SIP in order to “mitigate
adequately” its interstate pollutant transport.
EPA addressed these interstate pollutant transport
provisions for the first time in a rulemaking proceeding
concerning the determination of measures needed to redress
what EPA concluded was contribution to nonattainment of
the NAAQS for ozone that EPA had adopted in 1971 and
revised in 1979. 62 Fed. Reg. 60,318 (1997). In the 1980s,
many areas did not attain the ozone NAAQS for several
reasons, including the complexity of the ozone formation
process. Unlike other pollutants, ozone is not directly
emitted from sources but is formed from complex chemical
reactions of nitrogen oxides (“NO,”) and volatile organic
compounds (“VOCs”) in heat and sunlight.’ NO,, which can
both create and destroy ozone,’ is emitted mainly by fuel-
burning sources, including mobile sources (e.g., cars, buses,
and trucks), stationary sources (e.g., power plants, refineries,
and industrial boilers), and “area” sources (e.g., furnaces in
office buildings and homes). VOCs come from mobile
sources, area sources, and certain stationary sources (e.g.,
factories using or producing VOC-containing materials like
solvents and paints). The amount of ozone formed depends
on the proportions of VOCs and NO, in the atmosphere at
any given location. Thus, the same degree of reduction in
NO, and VOCs will not reduce ozone by the same amount
* High ozone concentrations generally occur only during late spring and
summer.
* Because NO, emission reductions can cause ozone levels to increase,
Congress enacted CAA § 182(f), waiving NO, controls for major
stationary sources where reducing NO, would not improve air quality.
See New York v. EPA, 133 F.3d 987 (7" Cir. 1998).
9
everywhere, and NO, reductions may actually increase
ozone.
To address many areas’ failure to attain the ozone
NAAQS, Congress, in the 1990 Amendments to the CAA,
classified ozone nonattainment areas based on the severity of
the area’s ozone air quality and imposed new, detailed
requirements for those areas based on their classification.
CAA §§ 181-185B. Under these requirements, many former
nonattainment areas have attained the ozone air quality
standard. However, a few areas — including large urban areas
in the Northeast, Chicago, and Atlanta — have remained
ozone nonattainment areas subject to §§ 181-185B. Many of
the states containing these nonattainment areas, particularly
in the Northeast, have claimed that their failure to attain the
ozone NAAQS is due at least in part to the transport of ozone
and ozone precursors (NO, and VOCs) from upwind states.
In response to concerns about ozone transport, EPA in
1995 established an informal organization — the Ozone
Transport Assessment Group (“OTAG”) - including
representatives from 37 states in the eastern half of the
United States. OTAG conducted air quality computer
modeling in order to assess whether ozone transport is
actually occurring and, if so, what measures or combinations
of measures might be effective in addressing such transport.
Following two years of study, in June 1997 the majority of
OTAG _ states made several conclusions and
recommendations. See 62 Fed. Reg. at 60,376-79. One
conclusion, based on results of region-wide air quality
modeling, was that ozone and its precursors originating in
upwind states can be transported and can contribute to
nonattainment of the standard downwind. However, because
this conclusion was based on geographically broad, “region-
wide” modeling, OTAG’s principal recommendation was that
10
“states must have the opportunity to conduct additional local
and subregional modeling and air quality analyses” and
“develop and propose appropriate levels and timing of
controls.” Jd. at 60,376. For electric utilities, OTAG
recommended a range of various emission control levels,
from nothing more than current CAA requirements up to
substantially more stringent controls, with the ultimate
choices dependent on results of the recommended refined air
quality modeling. Jd. at 60,378.
Ignoring OTAG’s recommendation that states be allowed
to conduct more refined modeling and develop and propose
their own regulatory decisions regarding whether and to what
extent additional emission controls are necessary, EPA began
a rulemaking in which it concluded that NO, — but not VOC
— emissions from 22 states and the District of Columbia
(hereinafter, the “23 states”) “contribute significantly” to
ozone nonattainment in violation of § 110(a)(2)(D)(i). 62
Fed. Reg. 60,318 (1997). EPA then promulgated a rule — the
so-called NO, SIP call rule — which required each of the 23
states to reduce its ozone-season NO, emissions to meet an
EPA-determined statewide NO, emission tonnage “budget”
or “cap.” 63 Fed. Reg. 57,356 (1998).
A key issue in the rulemaking — and one of the main
issues argued in the litigation below — concerned EPA’s
application of the criterion that governed EPA’s
determination that each of the 23 states was contributing
“significantly” to ozone nonattainment air quality in one or
more other states. After determining through air quality
modeling whether the contribution of a given state’s NO,
(and VOC) emissions to out-of-state ozone levels exceeded a
very low “measurable” level, EPA determined whether that
contribution was “significant” under § 110(a)(2)(D)(i) based
solely on the cost-effectiveness of emission reductions.
1]
Specifically, EPA decided that the amount of emissions
contributing “significantly” to nonattainment air quality was
the amount that, in EPA’s view, would cost $2000 or less per
ton of NO, emissions to reduce — a criterion that is not
related at all to the air quality effects of those emissions.
Upon review, a divided panel of the D.C. Circuit (Judges
Williams and Rogers, with Judge Sentelle dissenting) agreed
with EPA that the Agency could use the cost-effectiveness of
emission reductions as the sole criterion to determine
whether a state’s contribution to ozone nonattainment air
quality was “significant.” 213 F.3d at 674-79, 683-84, App.
14a-25a, 34a. Although acknowledging _ petitioners’
argument that EPA’s approach would force two States, each
with vastly different contributions to downwind
nonattainment air quality, to make essentially the same
relative emission reductions (i.e., those emission reductions
costing $2000 per ton or less) — irrespective of resulting air
quality improvements, if any — the majority simply noted
that “upholding ... [EPA’s] decision [to use cost-
effectiveness] logically entails upholding this consequence.”
Id. at 679, App. 25a.
In dissent, Judge Sentelle explained that “(t]he majority
makes a fundamental mistake by divorcing the adverb
‘significantly’ from the verb it modifies, ‘contribute,’ ... [and]
from the rest of the statutory provision in issue.” Jd. at 696,
App. 59a. Moreover, Judge Sentelle noted that the majority’s
decision could not be reconciled with other decisions of the
court — Ethyl Corp. v. EPA, 51 F.3d 1053 (D.C. Cir. 1995),
and American Petroleum Inst. v. U.S. EPA, 52 F.3d 1113
(D.C. Cir. 1995) — requiring EPA to base regulatory
decisions on the factor or factors found in the applicable
Statutory provision. /d. at 696, App. 58a-59a. Because EPA
considered a criterion that Congress did not intend it to
12
consider in determining the significance or insignificance of
a state’s air quality contribution — i.e., the cost-effectiveness
of emission reductions (in dollars per ton of emissions
removed) — Judge Sentelle would have set aside the rule.
Petitioners below also argued that EPA had not justified
its $2000-per-ton cost-effectiveness cut-off point for
calculating the amount of emissions that contributes
“significantly” and therefore that EPA’s action violated the
constitutional non-delegation doctrine. The majority agreed
that EPA’s choice of a cost-effectiveness cut-off point was
not based “on anything in the language or function of
§ 110(a)(2)(D)(i)(I)” and “‘was essentially unbounded.” /d. at
680, App. 27a. Nevertheless, the majority held that because
the rule affects only “half of the nation” and not “all
American enterprise,” the non-delegation doctrine was not
violated. /d., App. 28a.
The D.C. Circuit denied petitions for panel and en banc
rehearing, with Judge Sentelle dissenting from the denials.
App. 62a-6Sa.
REASONS FOR GRANTING THE PETITION
Industry Petitioners do not question that cost is to play a
key role in the implementation of the CAA in general and in
the implementation of the interstate pollutant transport
provisions in particular. However, contrary to basic
principles of statutory interpretation and administrative law,
EPA and the majority below fundamentally misconstrued the
* Indeed, many of Industry Petitioners have also — as parties in ATA, now
pending before this Court (Nos. 99-1257 and 99-1426) — filed briefs
describing the role that costs should play in the establishment of ambient
standards under the Act.
13
role of cost and cost-effectiveness in the implementation of
these statutory provisions to authorize regulation that EPA
deems “cost-effective” even when the regulation has not been
justified on air quality grounds. Congress’ intent in writing
these provisions into the Act in 1990 was to establish a two-
Step process under which EPA must first, under
§ 110(a)(2)(D)(i), determine whether a State’s contribution to
nonattainment is “significant” based on the State’s air quality
contribution to out-of-state nonattainment air quality, not
based on the -dollars-per-ton cost of achieving emission
reductions. Then, if an adequate showing of significant
contribution has been made based on air quality effects, an
affected state may, consistent with § 110(k)(5), take cost (or
cost-effectiveness) into account in deciding the extent and
nature of the control measures necessary “to mitigate
adequately” its “significant” contribution to another state’s
nonattainment air quality.
The majority’s decision upholding EPA’s approach
would allow EPA, in implementing § 110(a)(2)(D)(i),_ to
ignore Congress’ intent, as expressed in the language of the
Statute, regarding the relevant factor that must govern EPA’s
regulatory decisions. As discussed below, this result
conflicts with this Court’s case law and with other D.C.
Circuit cases that have given effect to Congress’ decision to
constrain an Executive Branch agency’s discretion by
allowing the agency to consider only relevant factors
provided in the statute in making regulatory determinations.
Finally, even if EPA were not prohibited from
considering as its sole factor the cost-effectiveness of
emission reductions in determining whether one state’s
contribution to another state’s ozone nonattainment air
quality is “significant,” EPA could not, consistent with the
Constitution, exercise the unbounded discretion in selecting a
14
cost-effectiveness cut-off point that the majority below found
EPA had exercised. There is no basis in the law for the
unprecedented new doctrine, created by the majority, that
authorizes Executive Branch agencies to take action that is
unbounded by any obligation to follow, discern, or articulate
intelligible principles in a statute and that is unconstrained by
any obligation to obey Congress’ proscription against
arbitrary and capricious action.
I. ALLOWING EPA TO DETERMINE
“SIGNIFICANT” CONTRIBUTION BASED ON
THE COST-EFFECTIVENESS OF EMISSION
REDUCTIONS, RATHER THAN BASED ON
THE AIR QUALITY EFFECTS OF EMISSIONS,
CONFLICTS WITH BASIC PRINCIPLES OF
STATUTORY INTERPRETATION AND
ADMINISTRATIVE LAW AS REFLECTED IN
THE DECISIONS OF THIS COURT AND THE
D.C. CIRCUIT.
The panel majority below found that, because Congress
had not expressly precluded EPA from considering cost-
effectiveness in implementing § 110(a)(2)(D)(i), EPA could
properly rely on cost-effectiveness, to the exclusion of air
quality effects, in assessing whether one state’s emissions
contribute “significantly” to another state’s ozone
nonattainment air quality. Specifically, despite
acknowledging that, under § 110(a)(2)(D)(i), EPA must first
establish that a state’s emissions result in “a measurable [air
quality] contribution” to nonattainment in another state, 213
F.3d at 684, App. 34a (emphasis in original), the majority
held that EPA may then properly ignore the air quality effects
of the state’s emissions and determine the amount of
15
emissions contributing “significantly” based solely on an
EPA-selected cost-effectiveness criterion for reducing
emissions. This novel reading of the Act is contrary to basic
principles of statutory and administrative law and produces
an absurd result: determining whether one state’s emissions
contribute “significantly” to another state’s nonattainment air
quality does not tum on whether, for example, those
emissions come from a distant state and produce hardly any
air quality impact, or come from a nearby state and produce a
large air quality impact.° Rather, under EPA’s approach, the
significance vel non of an air quality contribution depends
only on whether a state’s emissions can be (in EPA’s view)
cost-effectively reduced.
Judge Sentelle, in dissent, examined the language and
structure of § 110(a)(2)(D)(i) and concluded that Congress
clearly did not intend to allow the cost-effectiveness of
emission reductions to govern determinations of whether a
contribution to nonattainment air quality is “significant” — a
Statutory criterion that on its face calls for defining and
assessing air quality effects. As Judge Sentelle explained, the
majority improperly divorced the adverb “significantly” from
the verb it modifies, “contribute,” and from the rest of
§ 110(a)(2)(D)(i), which addresses the amount of emissions
and the effect of that amount on air quality: “Given
[§ 110(a)(2)(D)(i)(1)’s] mandate as a whole, it becomes clear
that EPA and the majority have to contort the statute’s
language by isolating the term significantly and ignoring the
terms air pollutant, amounts, and contribute in order to work
* The majority acknowledged this result but simply made the circular
observation that its decision “logically entails upholding this
consequence.” 213 F.3d at 679, App. 25a.
16
cost considerations into the statute.” 213 F.3d at 696, App.
59a-60a.
Judge Sentelle is correct. The statute’s language makes
plain that Congress decided that EPA’s evaluation of
whether one state’s emissions do or do not contribute
significantly to nonattainment air quality in another state
must be based on an analysis of air quality contribution, not
on the cost of achieving emission reductions irrespective of
the air quality effects of those reductions. EPA’s approach
would read Congress’ limitation of “significance” out of the
Act, would preclude states from knowing whether their
contributions were “significant” until EPA defined “cost-
effectiveness,” and would allow EPA to take from the states
the primary responsibility for implementing
§ 110(a)(2)(D)(i),_ contrary to congressional intent.
Moreover, a_ state’s continuing compliance’ with
§ 110(a)(2)(D)(i) would depend not on the interstate air
quality effects of its emissions, but on the changing costs of
emission controls (and the resulting change in those controls’
dollar-per-ton-reduced cost-effectiveness) as determined by
EPA. This result cannot be reconciled with the air quality
purposes of the Act or with fundamental principles of law.
In observing that “no reasonable reading of the statutory
provision in its entirety allows the term significantly to
springboard costs of alleviation into EPA’s statutorily-
defined authority,” 213 F.3d at 696, App. 59a, Judge Sentelle
was mindful of the well-established principle that an
agency’s authority to promulgate regulations is limited to the
authority delegated to it by Congress. See id., App. 58a
(citing Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 208
(1988)). In reviewing an agency’s action, courts may not
presume that Congress has delegated authority to the agency
whenever Congress has not expressly withheld that authority
17
from the agency. Otherwise, agencies would “enjoy virtually
limitless hegemony” contrary to Article I, §1, of the
Constitution. Oil, Chemical, and Atomic Workers Int'l
Union v. NLRB, 46 F.3d 82, 90 (D.C. Cir.) (citation omitted),
cert. denied, 516 U.S. 821 (1995); see also Industrial Union
Dep't v. American Petroleum Inst., 448 U.S. 607, 646 (1980)
(finding that the Secretary of Labor, in assessing
“significant” risk of harm, could not substitute cost
considerations for the statute’s decisional criterion, risk of
harm to health).
The majority’s decision below stands for the proposition
that an Executive Branch agency may with impunity ignore
this well-established principle and make regulatory decisions
without regard to the statutory language. Instead of requiring
EPA to conduct an evaluation of the “significance” of a
contribution based on air quality effects, as Congress
instructed, the majority allowed EPA to exercise authority to
determine “significance” based entirely on an irrelevant
Statutory factor, the cost-effectiveness of reducing emissions.
The majority’s opinion not only conflicts with basic
principles of law announced in precedents of this Court, as
discussed above, it also ignores D.C. Circuit cases holding
that EPA may not supplant the decisional criterion that
Congress provided in the statute with an irrelevant decisional
criterion in order to implement the Agency’s policy
preferences. For example, in Ethyl Corp. v. EPA, 51 F.3d
1053 (D.C. Cir. 1995), the D.C. Circuit relied on this
principle in rejecting EPA’s use of an “adverse health”
criterion in the context of a Statutory provision that did not
include adverse health effects as the decisional criterion.
Ethyl involved CAA § 211(f)(1), which prohibits new fuel
additives unless they are “substantially similar” to additives
already in use. A waiver for a new additive can be obtained
18
if the additive will not “cause or contribute to a failure of any
emission control device....” CAA § 211(f)(4). Although
EPA found that the additive in question would not cause or
contribute to such failure, it denied the requested waiver
based on uncertainty about the additive’s effects on public
health. The court concluded that the determination whether
an additive would “contribute to a failure” of a control device
may be based only on “the effects of a fuel additive[]” on
emission control devices, not on concerns about health
effects, and ordered EPA to issue the waiver. Ethyl, 51 F.3d
at 1060; see also American Petroleum Inst. v. U.S. EPA, 52
F.3d 1113 (D.C. Cir. 1995) (striking down EPA’s
reformulated gas oxygenate requirement because EPA based
its decision on economic benefit rather than the relevant
CAA factor, reduction of VOCs).
These precedents all stand for the principle that an agency
must base its regulatory decisions on the decisional criterion
specified by Congress in the statute. In § 110(a)(2)(D)(i),
Congress specified air quality effects as the sole decisional
criterion for assessing the “significance” of a contribution to
nonattainment air quality. Once a state has been found to
have emissions that contribute significantly to another state’s
nonattainment air quality, Congress provided, through
§ 110(k)(S)’s_ requirement “to mitigate adequately” the
significant interstate air quality contribution, a means for
costs to be considered. By contrast, EPA’s NO, SIP call rule
does not define “contribute significantly to nonattainment”
based on § 110(a)(2)\(D)(i)’s decisional criterion: air quality
effects. Rather, EPA substituted, for the statutory criterion of
air quality effects, its $2000-per-ton cost-effectiveness cut-
off point.
Because the majority’s decision below conflicts with
precedent of this Court and D.C. Circuit law establishing that
19
an agency must base its decisions on the criteria that
Congress provided, this Court should grant certiorari.
Il. THE COURT OF APPEALS’ DECISION TURNS
UPSIDE-DOWN THE’ PRINCIPLE OF
UNCONSTITUTIONAL DELEGATION.
In reviewing rules adopted by administrative agencies,
the D.C. Circuit has used two different Standards for
evaluating the agency’s exercise of discretion. Under one
approach — that followed in ATA, now under review in this
Court — the D.C. Circuit evaluated whether the agency had
articulated an intelligible principle under the statute to govern
its action and, in the absence of articulation of an intelligible
principle, held that the agency’s action violated the
Constitution’s non-delegation doctrine. In the other
approach, the court evaluated the agency’s exercise of
discretion pursuant to the “arbitrary and capricious” standard
of the Administrative Procedure Act (“APA”), 5 U.S.C.
§ 706(2)(A), or similar standards found in specific statutes
such as CAA § 307(d)(9).’ Whichever of these two standards
the court applied, however, it consistently — and properly —
refused to leave undisturbed an agency’s “unbounded”
exercise of discretion.
In this case, by contrast, the majority applied neither
standard. Rather, the court created an unprecedented new
legal standard — one that authorizes Executive Branch
” See, e.g., American Lung Ass'n v. EPA, 134 F.3d 388, 391-93 (D.C. Cir.
1998), cert. denied, 120 S. Ct. 58 (1999); see generally American
Trucking Ass'ns v. EPA, 195 F.3d 4, 14-16 (D.C. Cir. 1999) (Silberman,
J., dissenting), cert. granted, 120 S. Ct. 2003, and cert. granted, 120 S.
Ct. 2193.
20
agencies to act unbounded by any obligation to follow,
discern, or articulate intelligible principles in a statute and
unfettered by any obligation to obey Congress’ proscription
against arbitrary and capricious action.
In upholding EPA’s _ significant contribution
determination, the majority recognized that “EPA’s cost-
effectiveness criterion [$2000 per ton of emissions reduced]
is a radically incomplete line-drawing device” and that EPA
“neither rests that benchmark on anything in the language or
function of § 110(a)(2)(D)()(), nor otherwise explains why
the resulting cut-off point represents the right degree of ‘cost-
effectiveness’ (i.e., why ‘highly cost-effective’ should be at
that ‘height’).” 213 F.3d at 680 (emphasis added), App. 27a.
Accordingly, the panel held, EPA’s “selection of the cut-off
point was essentially unbounded.” Id. (emphasis added).
Despite this holding, the panel stated that EPA’s selection
of its $2000-per-ton cut-off point does not run afoul of the
Constitution’s non-delegation doctrine because, unlike the
rules at issue in ATA, the rule does not affect “all American
enterprise” and imposes “substantial” control costs on only
“(njearly half of the nation.” /d., App. 28a. The panel’s
opinion, if left undisturbed by this Court, would stand for the
Startling proposition that the question whether the
Constitution’s non-delegation doctrine applies depends on a
court’s view at any given time of the number of states,
companies, or industries affected by the Executive Branch
action being reviewed — and that no constitutional constraint
on Executive Branch authority exists if an action affects no
more than “half of the nation” or less than “all American
enterprise.”
Even if the non-delegation doctrine were not implicated
by the panel’s conclusions regarding EPA’s selection of its
$2000-per-ton cut-off point, then at the very least the panel’s
ee
21
conclusions should lead to the rejection of EPA’s unbounded
exercise of discretion as a violation of Congress’
proscription, in the APA, of agency action that is arbitrary
and capricious. Rather than applying the congressionally
mandated APA standard of review available to persons
entitled to relief from arbitrary and capricious agency action,
_ however, the majority allowed EPA’s unbounded exercise of
discretion to go unchecked by any guiding principle and free
from any effective judicial review. This approach is
inconsistent with the law and should not be allowed to stand.
CONCLUSION
For the foregoing reasons, Petitioners respectfully request
that this petition for a writ of certiorari be granted.
Respectfully submitted,
DAVID M. FLANNERY
KATHY G. BECKETT
JACKSON & KELLY
1600 Laidley Tower
500 Lee Street East
P. O. Box 553
Charleston, WV 25301
(304) 340-1017
Counsel for Petitioner
Midwest Ozone Group
September 20, 2000
ANDREA BEAR FIELD
(Counsel of Record)
NORMAN W. FICHTHORN
HUNTON & WILLIAMS
1900 K Street, N.W.
Washington, D.C. 20006
(202) 955-1500
MEL S. SCHULZE
HUNTON & WILLIAMS
600 Peachtree Street, N.E.
Atlanta, Georgia 30308
(404) 888-4000
Counsel for Petitioners
Appalachian Power Co., et al.
APPENDIX
la
UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued November 9, 1999 Decided March 3, 2000
No. 98-1497
STATE OF MICHIGAN,
MICHIGAN DEPARTMENT OF ENVIRONMENTAL QUALITY AND
STATE OF WEST VIRGINIA, DIVISION OF
ENVIRONMENTAL PROTECTION,
Petitioners
Vv.
U.S. ENVIRONMENTAL PROTECTION AGENCY,
Respondent
NEW ENGLAND COUNCIL, INC., et al.,
Intervenors
Consolidated with
98-1499, 98-1500, 98-1501, 98-1502, 98-1504, 98-1518,
98-1556, 98-1567, 98-1573, 98-1585, 98-1588, 98-1590,
98-1596, 98-1598, 98-1601, 98-1602, 98-1608, 98-1609,
98-1611, 98-1615, 98-1616, 98-1617, 98-1618, 98-1619,
98-1621, 99-1070, 99-1093
On Petitions for Review of an Order of the
Environmental Protection Agency
Susan E. Ashbrook, Assistant Attorney General, State of
Ohio, James C. Gulick, Special Deputy Attorney, State of
North Carolina, Andrea B. Field, Theodore L. Garrett,
2a
Todd Palmer, Jonathan S. Martel, William F. Pedersen and
Scott H. Segal argued the causes for petitioners. With them
on the briefs were Betty D. Montgomery, Attorney General,
State of Ohio, Andrew S. Bergman, Assistant Attorney
General, Michael F. Easley, Attorney General, State of
North Carolina, J. Allen Jernigan, Special Deputy Attorney
General, James P. Longest, Jr., and Amy R. Gillespie,
Assistant Attorneys General, Bill Pryor, Attorney General,
State of Alabama, Tommy E. Bryan, Assistant Attorney
General, Jeffrey Modisett, Attorney General, State of
Indiana, Daniel B. Dovenbarger, Chief Counsel, Jennifer
M. Granholm, Attorney General, State of Michigan,
Thomas Casey, Solicitor General, Alan F. Hoffman,
Assistant Attorney General, Charles M. Condon, Attorney
General, State of South Carolina, Mark E. Earley, Attorney
General, State of Virginia, Roger L. Chaffe, Senior
Assistant Attorney General, Stewart T. Leeth, Assistant At-
torney General, Thomas H. Zerbe, Senior Counsel, State of
West Virginia, Samuel L. Finklea, Ill, Grant Crandall,
Eugene M. Trisko, Norman W. Fichthorn, Mel S. Schulze,
David M. Flannery, Kathy Beckett, Harold P. Quinn, Jr.,
Michael D. Hockley, J. Lister Hubbard, R. Brooke Lawson,
Ill, Robert E. Lannan, Il, Terry J. Satterlee, Alok Ahuja,
Mark E. Shere, Bryan G. Tabler, Jeffrey L. Landsman,
Jennifer S. McGinnity, Howard E. Shapiro, Margaret
Claiborne Campbell, Thomas E. Knauer, David R. Straus,
Deborah E. Jennings, Julie R. Domike, Patricia T.
Barmeyer, Lisa G. Dowden, Brian J. Renaud, Rhonda L.
Ross, Jeffrey F. Cherry, Katherine L. Rhyne, John M.
Koeppl, Henry J. Handzel Jeffrey A. Knight, Joan Dreskin,
Kevin B. Belford, Pamela A. Lacey, Gene E. Godley,
Michael H. Levin and Edmund B. Frost. Earle D. Getchell
Jr., Neal J. Cabral, Christopher D. Man, Jacqueline H.
Fine, Jon S. Faletto and John P. Proctor entered
appearances.
3a
James E. Doyle, Attorney General, State of Wisconsin, and
Philip Peterson and Thomas L. Dosch, Assistant Attorneys
General, were on the brief for intervenor State of Wisconsin.
Louis E. Tosi and William L. Patberg were on the brief for
amicus curiae Toledo Metropolitan Area Council of Govern-
ments.
Charles §. Carter and Deborah Ann Hottel were on the
brief of amici curiae South Carolina Chamber of Commerce,
Environmental Management Association of South Carolina,
South Carolina Manufacturers Alliance, and South Carolina
Farm Bureau Federation.
Jon M. Lipshultz and Patricia R. McCubbin, Attorneys,
U.S. Department of Justice, argued the causes for respondent.
With them on the brief were Lois J. Schiffer, Assistant
Attorney General, and Jan Tierney, Howard Hoffman, Amey
W. Marrella and Dwight C. Alpern, Attorneys, U.S. Environ-
mental Protection Agency.
J. Jared Snyder, Assistant Attorney General, State of New
York, argued the cause for state intervenors. With him on the
brief were Elliot Spitzer, Attorney General, Peter H. Schiff,
Deputy Attorney General, Thomas F. Reilly, Attorney
General, State of Massachusetts, William L. Pardee, Assistant
Attorney General, M. Dukes Pepper, Jr., Assistant Counsel,
State of Pennsylvania, Sheldon Whitehouse, Attorney Gener-
al, State of Rhode Island, Michael Rubin, Environmental
Advocate, William H. Sorrell, Attorney General, State of
Vermont, Ronald A. Shems, Assistant Attorney General,
Jennifer L. Wurzbacher, Assistant Attorney General, State of
Maryland, Richard Blumenthal, Attorney General, State of
Connecticut, Richard F. Webb, Assistant Attorney General,
Andrew Ketterer, Attorney General, State of Maine, Paul
Stern, Deputy Attorney General, Philip McLaughlin, Attor-
ney General, State of New Hampshire, and Maureen D.
Smith, Assistant Attorney General.
4a
Kathleen L. Millian argued the cause for intervenor Her
Majesty the Queen in Right of Ontario (Province of Ontario,
Canada). With her on the brief was Bruce J. Terris.
David Hawkins and Raissa Griffin were on the brief for
intervenor Natural Resources Defense Council, et al. Andrew
P. Caputo entered an appearance.
Patrick M. Raher, John G. Roberts, Jr., Catherine E.
Stetson, Michael R. Barr, Michael A. Conley, Theresa Fene-
lon Falk, John H. Sharp, Paul G. Wallach and Kenneth R.
Meade were on the brief for industry intervenors.
Richard A. Wegman was on the brief for intervenor the
Government of Canada.
Before: WILLIAMS, SENTELLE and ROGERS, Circuit Judges.
Opinion Per Curiam."
Dissenting opinion filed by Circuit Judge SENTELLE.
Introduction
Under the Clean Air Act the Environmental Protection
Agency promulgates national ambient air quality standards
(“NAAQS”) for air pollutants, and states must then adopt
state implementation plans (“SIPs”) providing for the imple-
mentation, maintenance, and enforcement of the NAAQS;
such plans are then submitted to EPA for approval. See Clean
Air Act (“CAA”) § 110(a)(1), 42 U.S.C. § 7410(a)(1) (1994).
Even after a SIP is approved, EPA may at a later time call for
SIP revisions if the Administrator finds a SIP inadequate to
attain or maintain the NAAQS, to meet the dictates of
pollutant transport commissions, or “to otherwise comply
with any requirement of this chapter.” CAA § 110(k)(5), 42
U.S.C. § 7410(k)(5).
* Judge Williams wrote Parts I.B-C and II.B; Judge Sentelle wrote
Parts I.A, II.A, II.C, and III.A; Judge Rogers wrote Parts III.B and IV.
Sa
In October 1998 EPA issued a final rule mandating that 22
States and the District of Columbia revise their SIPs to
mitigate the interstate transport of ozone.' See Finding of
Significant Contribution and Rulemaking for Certain States in
the Ozone Transport Assessment Group Region for Purposes
of Reducing Regional Transport of Ozone (“Final Rule’’), 63
Fed. Reg. 57,356 (1998). The statutory hook for EPA’s
action was a 1990 amendment to the Clean Air Act which
requires that SIPs contain “adequate provisions” prohibiting
any source or other type of emissions activity within the
State from emitting any air pollutant in amounts which
will . . . contribute significantly to nonattainment in, or
interfere with maintenance by, any other State with
respect to any such national primary or secondary ambi-
ent air quality standard.
CAA § 110(a)(2)(D)(i)(D, 42 U.S.C. § 7410(a)(2)(D)(i)(1)
(1994). EPA uniformly required that each state reduce nitro-
gen oxides (NO,—an ozone precursor) by the amount ac-
complishable by what EPA dubbed “highly cost-effective
controls,” namely, those controls EPA found capable of
removing NO, at a cost of $2000 or less per ton. Numerous
petitions for review challenge various aspects of EPA’s
decision.
In Part I we reject the following claims: that EPA could not
call for the SIP revisions without convening a transport
commission; that EPA failed to undertake a sufficiently state-
specific determination of ozone contribution; that EPA
unlawfully overrode past precedent regarding “significant”
contribution; that EPA’s consideration of the cost of NO,
reduction violated the statute; that EPA’s scheme of uniform
'The states are Alabama, Connecticut, Delaware, Georgia, Illinois,
Indiana, Kentucky, Maryland, Massachusetts, Michigan, Missouri, North
Carolina, New Jersey, New York, Ohio, Pennsylvania, Rhode Island,
South Carolina, Tennessee, Virginia, West Virginia, and Wisconsin.
64
controls is arbitrary and _ capricious; that CAA
§ 110(a)(2)(D)(i)(1) as construed by EPA violates the non-
delegation doctrine.
In Part II we hold that the record does not support
including Wisconsin in the SIP call, nor does it support
creating NO, budgets based on the entire emissions of Mis-
souri or Georgia. We reject the claim that South Carolina
was improperly included in the SIP call.
In Part III we reject the claim that EPA impermissibly
intruded on the statutory rights of states to fashion their SIPs.
We also reject the claim that EPA violated the Regulatory
Flexibility Act.
In Part IV we reject the claim that EPA arbitrarily revised
the definition of a “NO, budget unit. ” We reject all of the
claims raised by the Council of Industrial Boilers save one:
we hold that EPA failed to provide adequate notice of a
change in the definition of an electric generating unit. We
also hold that EPA did not provide adequate notice of a
change in the control level assumed for large, stationary
internal combustion engines, but we reject the claim that EPA
failed to follow its own standards in defining such engines.
Finally, we uphold EPA’s limits on early reduction credits,
and EPA’s use of a 15% multiplier for calculating emissions
from low mass emission units.
We note at the outset that one challenge has been stayed.
In 1979, EPA set the acceptable level for ozone in the
ambient air at 0.12 parts per million (“ppm’’), averaged over
intervals of one hour. This standard is commonly known as
the “1-hour standard.” By 1997, EPA had concluded that the
1-hour standard no longer adequately protected public health.
See National Ambient Air Quality Standards for Ozone, 62
Fed. Reg. 38,856 (1997). Pursuant to the agency’s statutory
mandate to review and revise NAAQS as appropriate, 42
U.S.C. § 7409(d)(1), EPA promulgated a new, more stringent
Ta
“8-hour standard” which limits ozone levels to 0.08 ppm,
averaged over an 8-hour period. See 62 Fed. Reg. 38,856
(codified at 40 C.F.R. § 50.10).
EPA has undertaken the phasing out of the 1-hour stan-
dard on an area-by-area basis, mandating that the standard
would no longer apply to an area once it is “determine[d] that
the area has air quality meeting the 1-hour standard.” 40
C.F.R. § 50.9(b). The call for SIP revisions in question here
requires the covered upwind states to submit SIP revisions
pursuant to the 8-hour standard even though EPA was not
designating any 8-hour nonattainment areas prior to July
1999. See 63 Fed. Reg. at 57,370; Transportation Equity Act
for the 21st Century, Pub. L. No. 105-178, § 6103, 112 Stat.
107, 465 (1998) (providing that states submit suggested
designations no later than July 1999 and EPA finalize those
designations no later than July 2000). EPA maintains that it
has the authority to include the 8-hour standard in the current
§ 110(a)(2)(D)-specific SIP call Pursuant to its authority
under § 110(a)(1). Section 110(a)(1) provides that
[eJach State shall . . . adopt and submit to [EPA], within
3 years (or such shorter period as [EPA] may prescribe)
after the promulgation of a national primary ambient air
quality standard (or any revision thereof)... , a plan
which provides for implementation, maintenance, and
enforcement of such primary standard in each air quality
control region (or portion thereof) within such State.
42 U.S.C. § 7410(a)(1).
State and Industry/Labor petitioners initially attacked the
challenged SIP call on the basis that EPA exceeded its
statutory authority and acted arbitrarily in basing the SIP call
on the 8-hour standard when the agency had not yet
designated any areas as being in nonattainment under the new
standard. After petitioners’ final briefs were submitted, we
held in American Trucking Ass’ns, Inc. vy. EPA, 175 F.3d
8a
1027, reh’g granted in part, den'd in part 195 F.3d 4 (D.C.
Cir. 1999), that the new NAAQS based on the 8-hour stan-
dard was derived from a construction of the Clean Air Act
that rendered the relevant provision an unconstitutional dele-
gation of legislative power and remanded the case to the
agency. See id. at 1033-40. Seizing on this holding, petition-
ers added in their reply briefs that if this court does not accept
the contention in their original briefs as to why EPA
impermissibly relied on the 8-hour standard, then we should
hold that American Trucking means that EPA cannot rely on
the 8-hour standard because it was promulgated in violation
of the non-delegation doctrine.
Regardless, EPA moved to stay consideration of the issues
involving the 8-hour standard because the agency has stayed
the 8-hour findings contained in the challenged SIP call. We
granted the motion. Because EPA’s stay removes the 8-hour
findings as a basis for the SIP call, we will resolve only the
issues involving the |-hour standard.
Il. General Claims
A. Transport Commission
States have the primary responsibility to attain and main-
tain NAAQS within their borders. Sc. CAA § 107(a), 42
U.S.C. § 7407(a).. When EPA concludes that an “implemen-
tation plan for any area is substantially inadequate to attain or
maintain the relevant [NAAQS], to mitigate adequately the
interstate pollutant transport described in section [176A] or
[184], or to otherwise comply with any requirement of this
chapter,” the CAA requires EPA to order a state to revise and
correct its SIP “tas necessary” (“SIP call”). CAA § 110(k)(5),
42 U.S.C. § 7410(k)(S). One such “requirement of this
chapter,” is the “good neighbor provision” of section
110(a)(2)(D). As amended, section 110(a)(2)(D) requires that
a SIP “contain adequate provisions”
9a
(i) prohibiting, consistent with the provisions of this
subchapter, any source or other type of emissions
activity within the State from emitting any air pollutant
in amounts which will . . . contribute significantly to
nonattainment in, or interfere with maintenance by, any
other State with respect to any such national primary or
secondary ambient air quality standard . . . [and]
(ii) insuring compliance with the applicable require-
ments of sections [126] and [115]... (relating to
interstate and international pollution abatement).
42 U.S.C. § 7410(a)(2)(D) (emphasis added). Section 126(b)
enables an individual state or a political subdivision of a state
to petition EPA to make a “finding that any major source
or group of stationary sources emits or would emit any
air pollutant in violation of the prohibition of
[§ 110(a)(2)(D)(ii)].”_ 42 U.S.C. § 7426(b). EPA may make
or deny such a finding. See id. Section 115 pertains to
petitions made by foreign countries. See 42 U.S.C. § 7415.
Title I, the subchapter referenced in section 110(a)(2)(D),
also includes sections 176A and 184, the provisions
referenced in section 110(k)(5). In 1990, Congress added a
provision to section 176A stating that EPA “may” establish
an interstate air pollution transport region whenever EPA
“has reason to believe that the interstate transport of air
pollutants from one or more States contributes significantly to
a violation of a national ambient air quality standard in one or
more other States.” 42 U.S.C. § 7506a(a). The section also
provides that whenever EPA “establishes a transport re-
gion . . . [EPA] shall establish a transport commission.” 42
U.S.C. § 7506a(b)(1). Among other things, a section 176A
commission is to assess the interstate transport situation in the
relevant transport region, assess interstate pollution mitiga-
tion strategies, and recommend to EPA measures neces-
sary “to ensure that the plans for the relevant States meet
the requirements of [section 110(a)(2)(D)].” 42 U.S.C.
10a
§ 7506a(b)(2). In addition, section 176A permits a transport
commission to request that EPA “issue a finding under
[section 110(k)(5)] . . . that the implementation plan for one
or more of the States in the transport region is substantially
inadequate to meet [section 110(a)(2)(D) requirements].” 42
U.S.C. § 7506a(c). After public comment, EPA has the au-
thority to approve, approve in part, or disapprove such a
request. See id.
In part, section 184, an ozone-specific provision,
establishes an ozone transport region in the northeast
(“NOTR”) and sets the deadline for convening the transport
commission required as a result of NOTR’s establishment.
See 42 U.S.C. § 751 1c(a). The section also requires that “[iJ]n
accordance with [section 110] . . . each State included [or
subsequently included] within a transport region established
for ozone shall submit a State implementation plan or
revision” regarding vehicle inspection programs and vola-
tile organic compounds control technology. 42 U.S.C.
§ 7511c(b). In addition, section 184 contains provisions
giving states within an established transport region the
opportunity to use their section 176A-established transport
commission to help develop additional ozone control
measures. See 42 U.S.C. § 751 Ic(c).
Efforts to control states’ upwind contributions to ozone
pollution continued to fall short during the early 1990s. In
1995, upon the recommendation of the Environmental
Council of the States, thirty-seven states and representatives
from EPA, industry, and environmental groups formed a
national work-group called the Ozone Transport Assessment
Group (“OTAG”) to study and devise solutions to the
interstate ozone transport problem. See 62 Fed. Reg. 60,318,
at 60,319; EPA, Ozone Transport Assessment Group
Executive Report, EPA Document No. A 95-56, Doc. No. II-
G-05 (“Executive Report’) at ii. More specifically, OTAG’s
purpose was to “identify and recommend a strategy to reduce
lla
transported ozone and its precursors, which, in combination
with other measures, will enable attainment and maintenance
of the ozone standard in the OTAG region.” Executive
Report at ii. OTAG concluded that upwind states needed to
reduce NO, emissions in order to address the transport
problem. However, the OTAG members could not agree on
specific control measure recommendations. See 62 Fed. Reg.
at 60,320. In response to OTAG’s efforts, EPA engaged in
further analysis and devised the SIP call challenged here.
Industry/Labor petitioners argue that the CAA required
EPA to convene a transport commission pursuant to sections
176A/184 prior to issuing the challenged SIP call. EPA con-
cedes that OTAG was not a statutorily-mandated 176A/184
transport commission as defined in the CAA. If a transport
commission is required, EPA would be bound by statute to
follow certain procedures in establishing and executing its
commission obligation. However, we hold that the CAA
does not require EPA to establish such a commission.
Industry/Labor petitioners contend that the reference to the
transport commission provisions in section 110(k)(5) and the
mandate of section 110(a)(2)(D) that SIP requirements be
consistent with Title I provisions obligated EPA, prior to
issuing the SIP call, to create a transport commission guided
by the terms in sections 176A and 184 of the statute.
Industry/Labor petitioners also note that sections 176A and
184 reference both sections 110(a)(2)(D) and 110(k)(5). See
42 U.S.C. §§ 7506a(b)(2), (c), 751 1¢(c)(5). From this hodge-
podge of largely unrelated cross-references, Industry/Labor
petitioners argue that EPA can only issue a section 1 10(k)(5)
SIP call to enforce section 110(a)(2)(D)’s requirement after
forming a 176A/184 transport commission. We disagree.
As a threshold matter, subsections 176A(a) and (b)(1)
make clear that EPA must establish a transport commission if
the agency exercises its discretion to create a transport region
pursuant to section 176A(a). See 42 U.S.C. §§ 7506a(a),
12a
(b)(1). However, EPA can address interstate transport apart
from convening a 176A/184 transport commission as subsec-
tion (a) provides that EPA “may” establish a transport region
and subsection (b)(1) only requires a transport commis-
sion upon the establishment of a transport region be-
cause “[w]henever the Administrator establishes a transport
region under subsection (a) . . . , the Administrator shall
establish a transport commission.” Moreover, the relevant
section 184 requirements apply to states within established
transport regions. See 42 U.S.C. § 751 1c(a)-(c). Thus, Indus-
try/Labor petitioners cannot reason around the determinative
statutory language contained in section 176A. Statutory
construction is not an exercise in picking apart a complex
statute and piecing the parts back together in a manner to ef-
fect a particular end. Ideally, a statute’s directive concerning
a certain issue will be plain and clear. Just so here.
B. State-Specific Analysis
Section 110(a)(2)(D)(I)(i) requires that the relevant offend-
ing emissions be “emissions activity within the State.” Sever-
al petitioners charge that EPA did not sufficiently analyze
each particular state in determining which states contributed
unduly to ozone downwind.
In issuing its Notice of Proposed Rulemaking (“NPRM”),
EPA relied on data collected from OTAG. The data were
multi-state and regional in nature and were framed as a model
of how ozone was transported downwind from 12 different
regions that covered the eastern half of the United States. See
Final Rule, 63 Fed. Reg. at 57,382. The OTAG regions do
not track state boundaries, so several states are split between
regions. EPA also relied upon the NO, emissions of the
individual states. See id. at 57,383-84. A potential short-
coming of the NPRM’s approach was that it was too multi-
state in nature. EPA knew how much NO, each state was
emitting, but a state’s emissions as a share of total emissions
do not necessarily correspond proportionately to its share in
13a
the creation of ozone in downwind states. OTAG’s multi-
State modeling of such downwind transportation painted with
a rather broad brush.
We need not pass judgment on whether the evidence and
approach of the NPRM would have supported the final rule.
After receiving comments regarding the insufficiently state-
specific analysis of the NPRM, EPA performed state-specific
modeling. /d. at 57,384. According to EPA, this confirmed
the results of the regional modeling. /d.
The two types of state-specific modeling go by the names
UAM-V and CAM«x. In the UAM-V approach, the research-
ers model an affected downwind area to establish a base case,
and then “zero-out” a particular source state. Thus with
UAM-V it can be estimated what ozone concentrations would
be like if a particular state contributed no ozone or ozone
precursors. The CAMx modeling, on the other hand, is a
source apportionment analysis which tracks modeled ozone
from its precursors (NO, and volatile organic compounds
(VOCs)) through the formation of ozone and subsequent
migration. Whereas UAM-V tells modelers how much ozone
is missing when one state is zeroed out, CAMx models an
ozone concentration and provides apportionment, i.e., who
sent what. An advantage of the CAMx model used by EPA
was that, unlike the UAM-V modeling, with CAMx EPA
could isolate man-made emissions, or ozone creation based
on reactions between man-made and biogenic emissions.
UAM-V modeling was less discriminating.
Petitioners really do nothing more than quibble with the
State-specific modeling. For example, Industry/Labor peti-
tioners argue that zero-out modeling is inappropriate because
it models an impossible scenario—the elimination of all man-
made NO, emissions; but they do not suggest how much this
characteristic is likely to distort the results. State petitioners
charge that sometimes the results of the two models were
inconsistent, with, for example, the CAMx showing a larger
Wretaracat ie Lb Theale
14a
migration of ozone from a state than the UAM-V showed for
all man-made NO, in that state. EPA itself noted this
infrequent inconsistency. See id. at 57,385. Neither criticism
affords ground for non-expert judges to find a material
likelihood of serious error. See Appalachian Power Co. v.
EPA, 135 F.3d 791, 802 (D.C. Cir. 1998).
Petitioners complain that EPA did not provide the data
sooner. EPA made the new modeling available on the Inter-
net six weeks prior to the final rule, published its availability
in the Federal Register a month before the final rule, and
during that time received and responded to questions and
comments regarding the modeling. Other than what we have
already mentioned, petitioners have evidently not been able to
identify further flaws in the modeling used, and thus have
failed to show any prejudice from EPA’s timetable. Personal
Watercraft Indus. Ass'n v. Department of Commerce, 48 F.3d
540, 544 (D.C. Cir. 1995).
C. Determining “Significant” Contribution
Section 110(a)(2)(D)(i)(I) applies only to states that “con-
tribute significantly” to nonattainment in a downwind state.
Petitioners make essentially four arguments challenging
EPA’s determination of “significance”: (1) EPA acted con-
trary to precedent; (2) EPA considered forbidden factors,
namely, costs of reduction; (3) EPA irrationally imposed
uniform NO, controls on the states; (4) EPA’s determination
was so devoid of intelligible principles as to violate the
nondelegation doctrine.
1. Past Precedent
Before the 1990 amendments to the Clean Air Act,
§ 110(a)(2)(E)(D directed the EPA to insist on SIP provisions
adequate to prevent sources within a state from emitting air
pollution that would “prevent attainment or maintenance [of
primary or secondary standards] by any other State.” 42
1Sa
U.S.C. § 7410(a)(2)(E) (1982) (emphasis added). In a num-
ber of decisions EPA found, with approval of the courts, that
various emissions of a particular state, having a proportionate
impact on some downwind state greater than the impacts
involved here, did not meet that standard. See New York y.
EPA, 852 F.2d 574 (D.C. Cir. 1988); Air Pollution Control
Dist. of Jefferson County v. EPA, 739 F.2d 1071 (6th Cir.
1984); New York v. EPA, 716 F.2d 440 (7th Cir. 1983); New
York v. EPA, 710 F.2d 1200 (6th Cir. 1983); Connecticut v.
EPA, 696 F.2d 147 (2d Cir. 1982). According to the states,
these decisions, and what they claim to be Congress’s implicit
endorsement in the 1990 amendments, bar EPA from regard-
ing the ozone emissions here as “significant” within the
meaning of § 110(a)(2)(D)(i)(I). Thus the states would
equate the old standard—“prevent attainment”—with the new
standard: “contribute significantly to nonattainment.”
Nothing in the text of the new section or any other
provision of the statute spells out a criterion for classifying
“emissions activity” as “significant.” Nor did EPA, under the
then-existing provision, bind itself to any criterion. Further,
given EPA’s finding as to the cumulative effects of the
pollutants that generate ozone, EPA might well be able to
distinguish this case from the sulfur dioxide cases that the
States have cited. See 63 Fed. Reg. at 57,359 (“The chemical
reactions that create ozone take place while the pollutants are
being blown through the air by the wind, which means that
ozone can be more severe many miles away from the source
of emissions than it is at the source.”). But the states point to
nothing suggesting any prior adoption by EPA of any binding
concept of how much was too much, so the claim falls short
at the threshold.
2. Consideration of costs
Petitioners claim § 110(a)(2)(D)(i)(I) does not permit EPA
to take into consideration the cost of reducing ozone. The full
Do wet Na
l6a
section provides that SIPs must contain provisions adequately
prohibiting
any source or other type of emissions activity within the
State from emitting any air pollutant in amounts which
will . . . contribute significantly to nonattainment in, or
interfere with maintenance by, any other State with
respect to any such national primary or secondary am-
bient air quality standard.
42 U.S.C. § 7410(a)(2)(D)(i)(D (emphasis added).
Before reviewing the petitioners’ attacks we must first
describe how EPA went about the business at hand. It first
determined that 23 jurisdictions are “significant” contributors
to downwind nonattainment. 63 Fed. Reg. 57,398. In making
this listing EPA drew lines based on the magnitude,
frequency, and relative amount of each state’s ozone
contribution to a nonattainment area. For example, in one
calculation it looked at the number of NO, parts per billion
(“ppb”) that a candidate state’s emissions made to exceed-
ances in specific downwind locations (examined as a
proportion of those exceedances). Indiana was found to
contribute at least 2 ppb to 4% of the 1l-hour ozone
exceedances in New York City, and was deemed a
“significant contributor” to nonattainment there. On the other
hand, Alabama, Georgia, Massachusetts, Missouri, South
Carolina, Tennessee, and Wisconsin were not deemed
“significant contributors” to New York City nonattainment
because none of these states ever contributed more than 2 ppb
to a 1-hour exceedance in that area. Although EPA looked at
other measures, e.g., the percentage contribution of a state’s
emissions to total concentrations in a specified area, no one
quarrels either with its use of multiple measures, or with the
way it drew the line at this stage.
Although the dividing line was a very low threshold of
contribution, in the end EPA’s rule called for termination of
A EME MTN INTE My dee
17a
only a subset of each state’s contribution. EPA decided that
the 23 “significant contributors” need only reduce their ozone
by the amount achievable with “highly cost-effective con-
trols.” 63 Fed. Reg. at 57,403. Thus, once a state had been
nominally marked a “significant contributor,” it could satisfy
the statute, i.e., reduce its contribution to a point where it
would not be “significant” within the meaning of
§ 110(a)(2)(D)(i)(D, by cutting back the amount that could be
eliminated with “highly cost-effective controls.” EPA’s de-
sign was to have a lot of states make what it considered
modest NO, reductions, uniformly limited to ones that could
be achieved (in EPA’s estimate) for less than $2000 a ton. As
a result, naturally, the ultimate line of “significance,” whether
measured in volume of NO, emitted or arriving in nonattain-
ment areas, would vary from state to state depending on
variations in cutback costs.
State and Industry/Labor petitioners argue that this ap-
proach runs afoul of § 110(a)(2)(D), which they read as pro-
hibiting any consideration of costs or cost-effectiveness in
determining what contributions are “significant.” So far as
appears, none of the states proposes that EPA, if reversed,
must require complete extirpation of their NO, emissions.
Rather, the gamble—at least of the small contributors—is
evidently that if EPA were barred from considering costs, it
would never have included such states. Because the attacks
from the states and Industry/Labor are somewhat dissimilar
and have shifted back-and-forth between the opening briefs,
reply briefs, and oral argument, a summary of the relevant
differences and vacillations is in order. We note that no party
makes any claim that EPA was either confined to adopting
rules whose benefits exceeded their costs, or permitted to use
ia ti
:
18a
that criterion in selecting its final rule.? Nor has it been
argued that the term “significant” required consideration of
costs.
State petitioners initially argued that it was “arbitrary and
unlawful” for EPA to make cost effectiveness a “controlling
factor” or “linchpin” in the determination of significant
contribution under § 110(a)(2)(D). Thus EPA’s error, as the
states would have it, was in considering costs too much:
“Petitioning States do not claim that there is no role for cost
considerations; Petitioning States simply stress that EPA must
establish a definition of significance that is dominated by air
quality factors, as air quality is the sole factor mentioned in
the statute.” Reply Br. of Petitioning States at 4. In support
of this position, State petitioners cited our en banc decision in
Natural Resources Defense Council v. EPA, 824 F.2d 1146,
1163 (D.C. Cir. 1987) (en banc), where we held that a
statutory mandate for EPA to set a standard with an “ample
margin of safety to protect the public health” did not preclude
the consideration of costs and technological feasibility, but
that these concerns could not be the “primary consideration.”
At oral argument, counsel for the states abandoned this
position and decided that the statute flatly prohibits EPA from
? Indeed, accepting EPA’s belief that ozone cannot be held responsible
for mortality effects, see Proposed Rule, 62 Fed. Reg. at 60,321 (not
listing death as a health effect of groundlevel ozone); compare Final Rule,
63 Fed. Reg. at 57,359 (listing “[p]Jossible long-term damage to the lungs
or even premature death” as health effects), and mainly using EPA data,
some outside observers have calculated the benefit per ton of NO,
reduction as ranging from a high of $750 per ton (for mobile sources in
certain areas) to a low of negative $6 per ton (for other mobile sources).
Alan Krupnick & Virginia McConnell, “Cost-Effective NO, control in the
Eastern U.S.” (Draft July 1999) (Table 4); see Krupnick & Anderson, A
Dilemma Downwind, 137 Resources for the Future 5, 7 (1999) (“If one
assumes that ozone does not cause deaths, the EPA’s proposal is much too
restrictive, incurring costs far out of proportion with the benefits it would
bring.”’).
19a
considering costs at all. Transcript of Oral Argument at 14-
17. Indeed, counsel eventually went so far as to claim that if
faced with two states, one of which could eliminate all
relevant emissions at a trivial cost, while the other could
eliminate none at a cost of less than $5000 a ton, EPA must
mandate the same cutback for each. /d. at 16-17.
We should note here that the consequence of this position
is not so extreme as it sounds. EPA’s rule allows ton-for-ton
emissions trading between firms based on allowances deter-
mined by each state. See 63 Fed. Reg. 57,456. Obviously the
firms with the highest emission reduction costs will, if
permitted by their states, buy up pollution allowances from
firms that are granted allowances because they have over-
controlled for NO,—firms, obviously, with low reduction
costs. If transaction costs were zero, the only effect of the
initial assignment of cutbacks would be distributional: firms
would make only the cheaper cutbacks, but firms with high
emission-reduction costs would buy allowances from those
with low costs and thereby transfer wealth to them. See
Ronald H. Coase, The Problem of Social Cost, 3 J. L. &
Econ. 1 (1960). But transaction costs notoriously are not
zero;> so the likely effect of the proposed Statutory
interpretation would be that any aggregate cutback would be
achieved at considerably higher cost than under EPA’s
reading of § 110(a)(2)(D)(i)(I), with absolutely no offsetting
environmental benefit to the public. Of course we are able to
assume the existence of EPA’s allowance trading program
only because no one has challenged its adoption. As the
program seems to have no rationale other than cost reduction,
see 63 Fed. Reg. at 57,457, it would presumably be invalid
under petitioners’ proposed reading of § 110(a)(2)(D)(i)(D, in
7A glance at EPA’s regulations for allowance trading will convince
any doubter that transaction costs can safely be expected to be substantial.
See 63 Fed. Reg. at 57,457-75.
20a
which case the states’ position really is as extreme as it
sounds.
Returning to the positions of the parties, we find Indus-
try/Labor engaging in a migration comparable to that of the
states, though in the opposite direction. In its opening and
reply brief Industry/Labor argued that Ҥ 110(a)(2)(D) re-
quires consideration of only air quality impacts in determin-
ing the significance of any contribution.” However, at oral
argument Industry/Labor offered a construction of the statute
that seemed to restore to EPA via § 110(k)(5) what it would
take away via § 110(a)(2)(D). Industry/Labor claimed that
costs could be considered when EPA determines if a SIP is
“adequate” under § 110(k)(5). Transcript of Oral Argument at
28. The states actually offered this same reading of
§ 110(k)(5) in their reply brief (back when they thought EPA
could consider costs) but appeared to abandon it at oral
argument in favor of a flat prohibition on EPA cost consider-
ations. The argument that costs may be considered under
§ 110(k)(5) seems to concede that the structure of the statu-
tory scheme manifests no intention to bar the consideration of
costs.
And so we are indeed presented with the question whether
§ 110(a)(2)(D) bars consideration of costs, but it is presented
to us with the caveat that costs can be considered later on in
the process, and accompanied by a false start by the states,
who initially said that EPA could consider costs, just not too
much. Against this backdrop, it would be at the very least
ironic for us to say there is “clear congressional intent to
preclude consideration of cost” under § 110(a)(2)(D). See
Natural Resources Defense Council v. EPA, 824 F.2d 1146,
1163 (D.C. Cir. 1987) (en banc).
For convenience we repeat the statutory language. Section
110(a)(2)(D)(i)(D provides that SIPs must contain provisions
adequately prohibiting
2la
any source or other type of emissions activity within the
_ State from emitting any air pollutant in amounts which
will . . . contribute significantly to nonattainment in, or
interfere with maintenance by, any other State with
respect to any such national primary or secondary am-
bient air quality standard.
42 U.S.C. § 7410(a)(2)(D)(i)() (emphasis added). By its
terms the statute is focused on “amounts” of “emissions
activity” that “contribute significantly to nonattainment.” The
fundamental dispute is over the clarity of the phrase
“contribute significantly.” Must EPA simply pick some fiat
“amount” of contribution, based exclusively on health con-
cerns, such that any excess would put a state in the forbidden
zone of “significance”? * Or was it permissible for EPA to
consider differences in cutback costs, so that, after reduction
of all that could be cost-effectively eliminated, any remaining
“contribution” would not be considered “significant”? In
deciding on the permissible ceiling, EPA used “significant” in
the second way.
The term “significant” does not in itself convey a thought
that significance should be measured in only one dimen-
sion—here, in the petitioners’ view, health alone. Indeed,
“significant” is a very odd choice to express unidimen-
sionality,; consider the phrase “significant other.” In some
contexts, “significant” begs a consideration of costs. In
finding a threshold requirement of “significant risk” in § 3(8)
of the Occupational Health and Safety Act, 29 U.S.C.
§ 652(8), a plurality of the Supreme Court understood a
“significant” risk as something more than a “mathematical
Straitjacket,” and held that “[s]ome risks are plainly
acceptable and others are plainly unacceptable.” Industrial
Union Dept., AFL-CIO v. American Petroleum Institute
* We deal below with a related question: Did EPA act irrationally in
setting the level of significance without regard for varying levels of
downwind impact? See part I.C.3 below.
22a
(“Benzene”), 448 U.S. 607, 655 (1980) (plurality opinion).
The plurality withheld judgment on whether the Act required
a “reasonable correlation between costs and benefits,” id. at
615, but the upshot of inserting the adjective “significant”
was a consideration of which risks are worth the cost of
elimination. OSHA _ has since interpreted §3(8) and
regulation of “significant risk” to require “cost-effective
protective measures” and set standards with an eye toward
“the costs of safety standards [being] reasonably related to
their benefits.” See International Union v. OSHA
(Lockout/Tagout Il), 37 F.3d 665, 668-69 (D.C. Cir. 1994)
(quoting OSHA’s final rule). OSHA’s reaction to the term
“significant” seems to confirm what some commentators have
asked rhetorically: “{C]an an agency sensibly decide whether
a risk is ‘significant’ without also examining the cost of
eliminating it?” Stephen G. Breyer, Richard B. Stewart, Cass
R. Sunstein & Matthew L. Spitzer, ADMINISTRATIVE LAW
AND REGULATORY P@QLicy 65 (4th ed. 1999).
Petitioners conspicuously fail to describe the intellectual
process by which EPA would determine “significance” if it
may consider only health. EPA has determined that ozone has
some adverse health effects—however slight—at every level.
See National Ambient Air Quality Standards for Ozone, 62
Fed. Reg. 38,856 (1997). Without consideration of cost it is
hard to see why any ozone-creating emissions should not be
regarded as fatally “significant” under § 110(a)(2)(D)(i)(D.
Perhaps EPA might (under such a rule) let the upwind states
off at the stringency level of the programs imposed on non-
attainment areas, but petitioners do not explain how “sig-
nificance” can exclude cost but admit equity.
Although the ambiguity of the word “significant” and the
implications of a health-only reading are potentially fatal
flaws in petitioners’ theory (aside from their own inability to
discern the “plain language” consistently), the most formida-
ble obstacle is the settled law of this circuit. It is only where
I ACE al TERIA Se wien ARE B IT EO ethic
VMAS P EMAL CEE AIR LGIREE A ELIE AT Hae EEG ce ELE AIOE (EG
ESET ATK LCS SEED BA Byes BLUE O ActANt
od
23a
there is “clear congressional intent to preclude consideration
of cost” that we find agencies barred from considering costs.
NRDC, 824 F.2d at 1163; see alse George E. Warren Corp. v.
EPA, 159 F.3d 616, 622-24 (D.C. Cir. 1998), reh’g granted,
164 F.3d 676 (D.C. Cir. 1999); Grand Canyon Air Tour
Coalition v. FAA, 154 F.3d 455, 475 (D.C. Cir. 1998), cert.
denied, 119 S. Ct. 2046 (1999); NRDC v. EPA, 937 F.2d 641,
643-46 (D.C. Cir. 1991); cf. International Bhd. of Teamsters
v. United States, 735 F.2d 1525, 1528-29 (D.C. Cir. 1984)
(construing mandate to adopt “reasonable requirements” for
safety as allowing consideration of cost).
In NRDC we considered § 112 of the Clean Air Act,
requiring EPA to set an air quality standard for hazardous
pollutants with an “ample margin of safety” to protect the
public health. We held that this phrase did not preclude a
consideration of costs. 824 F.2d at 1155, 1163. In George E.
Warren Corp. we acknowledged that the statutory scheme for
the reformulated gasoline program had the “overall goal” of
improving air quality and “reducing air pollution.” 159 F.3d
at 622. But because there was nothing “in the text or structure
of the statute to indicate that the Congress intended to
preclude the EPA from considering the effects a proposed
rule might have upon the price and supply of gasoline,” id. at
623, we found no such preclusion even though the provision
at issue contained no allusion whatever to such effects.
Similarly, in Grand Canyon Air Tour the statute required the
FAA to devise a plan for “substantial restoration of the
natural quiet” in the Grand Canyon area, but we found
nothing impermissible in the FAA’s consideration of costs to
the air tourism industry in deciding how “substantial” that
restoration must be. 154 F.3d at 475. In NRDC v. EPA we
considered whether EPA permissibly used cost-benefit analy-
sis in refusing to classify a particular polluting source as
“major.” The petitioners argued that cost considerations were
precluded, and we stated: “[WJhile the statutory language and
legislative history do not bar petitioners’ construction, they
24a
provide little support and no necessity for it.” 937 F.2d at
645. We affirmed EPA’s use of cost-benefit analysis.
These cases are unexceptional in their general view that
preclusion of cost consideration requires a rather express
congressional direction. See Edward W. Warren & Gary E.
Marchant, “More Good Than Harm”: A First Principle for
Environmental Agencies and Reviewing Courts, 20 Ecology
L.Q. 379, 421 (1993) (“The need to compare benefits and
costs has long played a role in judicial review of agency
actions regulating health and safety risks.”’”); Cass R. Sunstein,
Interpreting Statutes in the Regulatory State, 103 Harv. L.
Rev. 405, 487 (1989) (suggesting an “interpretive principle”
drawn from case law, including NRDC v. EPA, 824 F.2d
1146, that reviewing courts will read statutes as authorizing
regulations with benefits at least “roughly commensurate with
their costs, unless there is a clear legislative statement to the
contrary”). Three of the cases, moreover—the two NRDC
cases and Grand Canyon—, involve statutory language with
just the same structure as here. A mandate directed to some
environmental benefit is phrased in general quantitative terms
(“ample margin of safety,” “substantial restoration,” and
“major’), and contains not a word alluding to non-health
trade-offs; in each case we found that in making its judgments
of degree the agency was free to consider the costs of
demanding higher levels of environmental benefit. So too
here.
Petitioners point to no evidence of the requisite “clear
congressional intent to preclude consideration of cost.”
NRDC, 824 F.2d at 1163. The text, we have already seen,
works no such preclusion. As for the statutory structure,
petitioners willingly concede that costs may be considered
under § 110(k)(5) in determining the adequacy of a state plan.
Why would a Congress intent on precluding cost consider-
ations allow such an escape hatch? The petitioners cite no
SALLIE BUSA EAL LA LEENA LI PA
LUG Lar bir; RG IIE PLY REP MEN ISOM bet Se a he ot a
25a
legislative history suggesting that cost considerations should
be barred.
In sum, there is nothing in the text, structure, or history of
§ 110(a)(2)(D) that bars EPA from considering cost in its
application.
3. Uniform Controls
As we have seen, EPA required that all of the covered
jurisdictions, regardless of amount of contribution, reduce
their NO, by an amount achievable with “highly cost-
effective controls.” Petitioners claim that EPA’s uniform
control strategy is irrational in two distinct ways. First, they
observe that where two states differ considerably in the
amount of their respective NO, contributions to downwind
nonattainment, under the EPA rule even the small con-
tributors must make reductions equivalent to those achievable
by highly cost-effective measures. This of course flows
ineluctably from the EPA’s decision to draw the “significant
contribution” line on a basis of cost differentials. Our
upholding of that decision logically entails upholding this
consequence.
The second objection is that because of distance and the
vagaries of pollutant migration and ozone formation, a mole-
cule of NO, emitted in Indiana (for example) may cause far
less adverse health impact than a molecule emitted in eastern
Pennsylvania. EPA acknowledges that “[s]ources that are
closer to the nonattainment area tend to have much larger
effects on air quality than sources that are far away.” 63 Fed.
Reg. at 25,919. While EPA’s cost-effectiveness standard and
emissions trading seem to mean that EPA will secure the
resulting aggregate NO, reduction at roughly the lowest
possible cost, they do not necessarily mean that it will have
secured the resulting aggregate health benefits at the lowest
cost. Petitioners ask, in effect, why EPA did not, by one
means or another (e.g., in the emissions trading system),
pS ee ed thes Peed
26a
make reductions from sources near the nonattainment areas
(or otherwise more damaging, molecule for molecule) more
valuable than ones from distant sources?
EPA considered this approach, modeling the efficacy of
regional alternatives compared to its uniform strategy. See
Final Rule, 63 Fed. Reg. at 57,423. Its researchers found that
non-uniform regional approaches by comparison did not
“provide either a significant improvement in air quality or a
substantial reduction in cost.” /d. The complaining states
offer no material critique of EPA’s methodology in reaching
this answer, which in fact some independent investigators
have confirmed. See “Krupnick & Anderson, A Dilemma
Downwind, 137 Resources for the Future 5, 6 (1999) (“[Even
with] spatial differences, when viewed across the entire study
region, RFF concluded that there was no clear benefit to an
exposure-based trading system, compared with simple ton-
for-ton NO, trading. Public health benefits would be approx-
imately the same, and there would be no significant differ-
ence in costs to the utilities.”). We have no basis to upset
EPA’s judgment.
4. Nondelegation
In their opening brief and more prominently in their reply
brief, state petitioners argue that EPA has not determined
“significant contribution” based on any intelligible principles.
Petitioners rely heavily on our decision in American Truck-
ing Ass’ns, Inc. v. EPA, 175 F.3d 1027, reh’g granted in part,
den'd in part 195 F.3d 4 (D.C. Cir. 1999), essentially arguing
that nothing about EPA’s analysis explains how much of a
NO, contribution was too much (i.e., worthy of a SIP call).
We must recognize here that EPA’s cost-effectiveness
criterion is a radically incomplete line-drawing device. EPA
has effectively ruled that each affected state must get down to
the NO, emissions levels that would prevail if it removed all
NO, emissions costing $2000/ton or less to remove. This
27a
Satisfies its “cost-effeciiveness” criterion because (if states
also seek to minimize costs subject to the EPA’s constraint)
only these relatively low-cost tons will be removed. But
while EPA indicates that it rested the $2000/ton figure on
“NO, emissions controls that are available and of comparable
cost to other recently undertaken or planned NO, measures,”
Final Rule, 63 Fed. Reg. at 57,400, it neither rests that bench-
mark on anything in the language or function of
§ 110(a)(2)(D)(i)(D, nor otherwise explains why the resulting
cut-off point represents the right degree of “cost-
effectiveness” (i.e., why “highly cost-effective” should be at
that “height”). Accordingly, we must read EPA as having
understood that its selection of the cut-off point was
essentially unbounded.
But petitioners have ignored a limit to the nondelegation
doctrine that we relied on in American Trucking and even
more emphatically in its immediate precursor, /nternational
Union, UAW v. OSHA (“Lockout/Tagout I” ), 938 F.2d 1310
(D.C. Cir. 1991). There we noted that the scope of the
agency’s “claimed power to roam” was “immense, encom-
passing all American enterprise.” Jd. at 1317. Quoting
verbatim from Synar v. United States, 626 F. Supp. 1374,
1383 (D.D.C. 1986) (three-judge panel), aff'd sub nom.
Bowsher v. Synar, 478 U.S. 714 (1986), we said, “When the
Scope increases to immense proportions, as in [A.L.A.
Schecter Poultry Corp. v. United States, 295 U.S. 495
(1935)], the standards must be correspondingly more
precise.” Lockout/Tagout I, 938 F.2d at 1317. We noted that
a mass of cases in courts had upheld delegations of
effectively standardless discretion, and distinguished them
precisely on the ground of the narrower scope within which
the agencies could deploy that discretion. Id. American
Trucking, perhaps too succinctly for petitioners to notice,
incorporated the Lockout/Tagout I discussion of the point.
American Trucking, 175 F.3d at 1037.
AIMS eR 4
28a
Nominally, of course, § 110(a)(2)(D)(i)(I) encompasses
“all American enterprise.” But as a practical matter EPA
must make a number of threshold determinations that in
practice appear to have confined the statute to a modest role.
Before assessing “significance,” EPA must find (1) emissions
activity within a state; (2) show with modeling or other
evidence that such emissions are migrating into other states;
and (3) show that the emissions are contributing to
nonattainment. We do not mean to minimize the scope of
EPA’s action in the present case. Nearly half of the nation is
affected and control costs will be substantial. And it may
ultimately prove that the dam constituted by these criteria
will burst, subjecting “all American industry” to EPA’s
§ 110(a)(2)(D)(i)(D) discretion. But in practice, so far, these
threshold criteria appear to have so limited EPA’s activity
under the section as to make the rule in question here the sole
example of § 110(a)(2)(D)(i)(D) rulemaking. Accordingly, the
grounds on which we remanded in Lockout-Tagout I and
American Trucking for confining agency constructions are
absent here.
II. J/nclusion of Specific States
A. Wisconsin
Wisconsin industry petitioners separately challenge Wis-
consin’s inclusion in the SIP call. The Wisconsin petitioners
argue that the emissions from the state do not contribute
significantly to nonattainment in any other state. Section
110(a)(2)(D)(i)()_ requires that a state “contribute signif-
icantly to nonattainment in . . . any other State” in order
to be included in the challenged SIP call. 42 U.S.C.
§ 7410(a)(2)(D)(i)(D) (emphasis added). As explained below,
EPA erroneously included Wisconsin in the SIP call because
EPA failed to explain how Wisconsin contributes to
nonattainment in any other state.
A AREA SRA PAE Rath PNR SRO RMT RR ast SIANID GE YPLYSP MURA CITE ei 2
29a
EPA contends that Wisconsin contributes significantly to
other states’ nonattainment because the state significantly
contributes ozone over the Lake Michigan region. Despite
EPA’s Lake Michigan concerns, the agency does not show on
the record that Wisconsin’s ozone contribution affects any
onshore state nonattainment. At oral argument, counsel for
EPA conceded that “[t]he part that’s missing [from the
record] is a thorough explanation to support our modeling
data and things of that nature between the Lake Michigan
receptor area and the onshore states.” Oral Arg. Tr. at 107.
When asked for more, counsel could only respond that “the
best evidence . . . is simply the narrative statements in the
[final rule’s] preambles . . . . There’s nothing else there.” /d.
Because EPA conceded at oral argument that it has no record
evidence directly linking Wisconsin’s ozone contribution
over Lake Michigan to nonattainment in any state and
because EPA must “demonstrate[ ] a reasonable connection
between the facts on the record and its decision” made
pursuant to its statutory authority, Ethyl Corp. v. EPA, 51
F.3d 1053, 1064 (D.C. Cir. 1995), we hold that EPA acted
unlawfully by including Wisconsin in a SIP call limited by
statute to states contributing significantly to nonattainment in
any other state and therefore set aside Wisconsin’s inclusion
in the SIP call. See 5 U.S.C. § 706(2)(A), (C) (1994) (“The
reviewing court shall . . . hold unlawful and set aside agency
action . . . found to be . . . arbitrary, capricious, an abuse of
discretion, or otherwise not accordance with law [or] in
excess of statutory jurisdiction, authority, or limitations, or
short of statutory right.”’).
B. Missouri and Georgia
Missouri and Georgia were on the geographical perimeter
of EPA’s SIP call. No state west of Missouri was included,
nor were the two states directly to its north (Iowa and
Minnesota) and south (Arkansas). Georgia was a bit more in
the thick of things, surrounded on three sides by included
Ogg Ta ee a ee ea
30a
states—Alabama, Tennessee, North Carolina, and South Car-
olina; but the southern portion of Georgia borders the ex-
cluded state of Florida. Industrial petitioners within Missouri
and Georgia challenge EPA’s decision to calculate NO,
budgets for these two states based on the entirety of NO,
emissions in each state. Petitioners argue that there is record
support only for the proposition that emissions from, roughly
speaking, the eastern half of Missouri and the northern two-
thirds of Georgia “contribute” to downwind concentrations;
accordingly, they say, the NO, budgets for Missouri and
Georgia should be based solely on those emissions.
We must here explain how EPA calculated NO, budgets.
it projected the total amount of NO, emissions that sources in
a state would emit in the year 2007, in light of expected
growth and other controls required by the CAA. EPA then
projected total NO, emissions if “highly cost-effective con-
trols” were implemented. The resulting calculation became
the state’s NO, budget, with the difference between the base
case and the controlled case being the “significant” contribu-
tion discussed above. Obviously a state’s NO, budget will
vary depending on whether EPA considers all of the NO,
emissions in the state, or instead considers only emissions
located in a smaller portion of the state (assuming emissions
are dispersed throughout the state, which is the case here and
without which the issue would be immaterial, as nonexistent
emissions need not be controlled). For Missouri and Georgia,
as for all other included states, NO, budgets were calculated
using all NO, emissions in the state.
The challenge basically stems from the character of
OTAG’s modeling, and its resulting recommendations to
EPA. OTAG’s ozone transport model used grids drawn
across most of the eastern half of the United States. The first
grid was the most precise, with grid cells of 12 kilometers
squared (244 square kilometers)—the “fine grid.” A second
grid extended beyond the perimeter of the fine grid and had
3la
cells of 36 kilometers squared resolution—the “coarse grid.”
For a variety of reasons to be discussed shortly, the fine grid
did not track state boundaries, and Missouri and Georgia were
among several states that were split between the fine and
coarse grids. OTAG then ran modeling for both grids, but in
the final analysis did not find emissions from the coarse grid
worthy of special concern. OTAG’s executive summary stat-
ed: “[T]he focus on ozone air quality impacts in the fine grid
raised questions about the need for controls in the coarse grid.
The recommendations adopted by the Policy Group recognize
that the OTAG analyses demonstrated that transport impacts
of the coarse grid areas on the fine grid are minimal and
therefore, do not include the coarse grid areas for recom-
mended control measures other than those that would be
applied nationally.” Petitioners argue that EPA should base
NO, budgets for Missouri and Georgia only on portions of
these states within the fine grid.
EPA offers three reasons for including the entire states of
Missouri and Georgia:
(1) The division of individual States by OTAG was
based, in part, on computational limitations in OTAG’s
modeling analyses; (2) the additional upwind emissions
from full, as opposed to partial, States would provide
additional benefit to downwind nonattainment areas;
and, (3) State-wide emissions budgets create fewer
administrative difficulties than a partial-State budget.
Final Rule, 63 Fed. Reg. at 57,424. We review deferentially,
searching for the reasonableness of EPA’s action, Appala-
chian Power, 135 F.3d at 802, whether that be EPA’s inter-
pretation of the statute, see Chevron, 467 U.S. at 842-43, or
EPA’s explanation for its policy choice, see Motor Vehicle
Mfrs. Ass'n v. State Farm Mutual Auto. Ins. Co., 463 U.S. 29,
43 (1983). The two inquiries can and do overlap. See Animal
Legal Defense Fund v. Glickman, No. 97-5009, slip op. at 9
(D.C. Cir. Feb. 1, 2000).
32a
On its face the statute neither mandates nor prohibits an all-
or-nothing statewide perspective. It directs EPA to make sure
that SIPs (which of course are state plans) adequately prohibit
“any source or other type of emissions activity within the
State from emitting” in excess of the substantive limit. The
critical issue is whether the targeted “source” or “emissions
activity” “contribute[s] significantly to nonattainment” in
another state. 3
EPA’s first argument is that the fine grid split Missouri and
Georgia in part because of computer limitations—every
extension of the fine grid modeling was costly in terms of
both computer memory and data collection. Document No.
II-A-14, Draft OTAG Final Report Regional and Urban Scale
Modeling—Chapter 2, 2-7 (undated). But the OTAG model-
ers allocated their scarce resources purposefully, by reference
to known air quality data, explicitly taking into consideration
the “locale of various problem areas (as represented by urban-
area modeling domains), and emissions density.” Jd. Thus it
was no mere techno-fortuity that the fine grid included
enough of Missouri to include the city of St. Louis and
enough of Georgia to include Atlanta: both cities are
designated nonattainment areas for ozone under the 1-hour
NAAQS. See Final Rule, 63 Fed. Reg. at 57,359. Moreover,
the fine grid portions of both states are the closest to other
nonattainment areas, such as Chicago and Birmingham, and
generally higher ozone density.
Of course the fine grid modeling of parts of Missouri and
Georgia showed emissions in the aggregate meeting the
EPA’s threshold “contribution” criteria. Thus fine grid mod-
eling of each in its entirety would presumably also have done
so. But that is a simple arithmetic necessity (a state is
necessarily composed of its parts) and provides no reason for
EPA to ignore the very air quality factors that influenced the
design of the modeling that did occur. OTAG itself clearly
did not think those factors magically lost their force, for it
33a
recommended against controlling the rump areas. And EPA
itself acknowledged part of the reason this should be so when
it observed, “Sources that are closer to the nonattainment area
tend to have much larger effects on air quality than sources
that are far away.” 63 Fed. Reg. at 25,919. Indeed, even if
the line between areas for which there was evidence and ones
for which there was none were explained solely by fortuity,
EPA would still be required to act upon the evidence that was
generated. See Chemical Manufacturers Ass’n v. EPA, 859
F.2d 977, 989 (D.C. Cir. 1988) (holding that EPA must
consider “all the evidence—including the industry evi-
dence”’). ;
This leads us to EPA defenses other than modeling design.
The first is that “the larger the geographic area that is
controlled, the greater the downwind benefits.” Final Rule,
63 Fed. Reg. at 57,424. This reason can only stand if the
emissions at issue contribute significantly to nonattainment in
another state. OTAG concluded they did not. Jd. EPA
claims that its state-specific modeling, which supplemented
OTAG’s more regional modeling, supports including the
coarse grid areas. See id. Yet EPA’s explanation and
technique make clear that emissions from the fine grid areas
may have been the sole source of the finding. Indeed, EPA
says as much: “[I]f emissions from part of a State contribute
significantly to downwind nonattainment or maintenance
problems, emissions from the entire State contribute signif-
icantly to downwind nonattainment or maintenance prob-
lems.” Jd. This of course is also true as a matter of logic (a
State is the sum of its parts), But it is completely consistent
with the rump portion being innocent of downwind effect, and
thus is scarcely a reason for ruling that significant con-
tributions from a border city should rope in the entire state.
Aware of this problem, EPA simply throws the burden of
persuasion onto the states. “[T]Jhere is no peculiar meteor-
ological phenomenon that would indicate that emissions from
‘a re eee Se
34a
some portion of [each of the affected states] would not impact
downwind nonattainment or maintenance problems.” /d. In
addition, “the atmosphere is constantly in motion and has no
limitations at geo-political boundaries.” /d. If this is “evi-
dence” of contribution, it proves too much. If the simple
proposition that the prevailing westerlies carry pollutants
eastward were enough, EPA could, on the basis of a plant in
Pennsylvania, use § 110(a)(2)(D)(i)(I) to control all NOx
emissions east of the Rocky Mountains. While we uphold
EPA’s determination that a “significant” contribution is a
cost-effectively controllable contribution, EPA must first
establish that there is a measurable contribution. Interstate
contributions cannot be assumed out of thin air.
In the end administrative convenience is EPA’s only real
defense for basing NOx budgets on the entirety of a state’s
emissions. There seem to be two species of this argument.
First, EPA seems to claim that it is just easier to calculate a
NO, budget based on all the emissions in the state instead of
only a portion of such emissions. EPA provides no explana-
tion of why this is so, and it seems dubious. Within a state are
counties, air quality control regions, and for some unfor-
tunate states, nonattainment areas. EPA also has emissions
data on specific sources, some of which may be susceptible
of “highly cost-effective controls,” and others of which may
not be. See, e.g., Emissions Data For Power Plants,
<www.epa.gov/acidrain/emissions> (visited January 26,
2000). Without data from such state subdivisions and specific
sources, EPA could never have performed modeling or even
set a statewide budget. EPA has not explained how calcula-
tion of a budget for sources in only half of the state would be
any more onerous than for all sources in the state. Unless it is
relying on data that exist only for the state as a whole,
calculation seems on its face easier for a half than for a
whole.
35a
EPA offers a second administrative problem. If the con-
cern for not allowing § 110(a)(2)(D)(i)(1) to encompass un-
proven areas compels an insistence on proof of contribution
from ever smaller geographic subdivisions, any area’s
specific contribution may appear insubstantial, even though
collectively there are significant contributions. In other
words, unlike bologna, which remains bologna no matter how
thin you slice it, significant contribution may disappear if
emissions activity is sliced too thinly.
While this argument was stressed on appeal, it is nowhere
to be found in the proposed or final rule, except insofar as it
may have lurked behind the vague invocation of “administra-
tive difficulties.” See Final Rule, 63 Fed. Reg. at 57,424;
Proposed Rule, 62 Fed. Reg. at 60,342. As a result it is quite
undeveloped. But it appears to be based on a distortion of the
claims of Missouri and Georgia. They are not asserting a
right to bologna tactics, to slice down the unit of
measurement to a point of insignificance. All they are
claiming is that where the data—calculated under EPA’s
supervision—inculpate part of a state and not another, EPA
should honor the resulting findings.
Such a proposition would of course leave EPA free to
select states as the unit of measurement. In turn, states (or the
areas of states that believed themselves innocent of material
contributions, or sources located therein), might respond by
offering finer-grained computations. Such a process seems
more like a healthy search for truth than the collapse into
infinite regress that EPA claims to fear.
EPA also points to state flexibility: “Since each State has
the flexibility to determine which sources to control in order
to meet the budget, a State can structure its control strategy to
require fewer reductions in certain portions of the State and
greater controls in other areas.” Final Rule, 63 Fed. Reg. at
57,424. This theory presents at least two difficulties. First, it
overlooks the fact that state budgeis not only encompass the
36a
whole state but are calculated on the basis of hypothesized
cutbacks from areas that have not been shown to have made
significant contributions. Thus the “flexibility” comes at
the cost of a burden that is heavier in the aggregate, where
the added weight accomplishes no purpose relevant to
§ 110(a)(2)(D)(i)(D. Second, a state’s use of flexibility to
pursue a purely in-state set of tradeoffs between cost
and benefit (and thus unrelated to the goals of
§110(a)(2)(D)(i)(D) may actually diminish the cutbacks in
areas that are making a contribution to other states’
nonattainment.
Thus nowhere has EPA reasonably explained why NO,
budgets based on every state source are the best stopping
point with respect to states on the perimeter of the ozone
problem.
Therefore we vacate EPA’s final rule with respect to
Missouri and Georgia and remand to the agency for reconsid-
eration in light of this opinion.
C. South Carolina
Petitioner Santee Cooper challenges South Carolina’s
inclusion in the SIP call by alleging that the state’s downwind
ozone nonattainment impact is “minuscule” and therefore not
significant. We will hold unlawful EPA’s decision to include
South Carolina in the SIP call if we find EPA’s decision
“arbitrary, capricious, an abuse of discretion, or otherwise not
accordance with law.” 5 U.S.C. § 706(2)(A). In order for
EPA’s decision to include South Carolina in the SIP call to
survive review, the agency must “demonstrate[ ] a reasonable
connection between the facts on the record and its decision,”
Ethyl Corp., 51 F.3d at 1064. We conclude that the record
supports EPA’s decision to include the state as a significant
contributor to downwind nonattainment. See Proposed Rule,
62 Fed. Reg. at 60,337-339. EPA considered the analyses
submitted by the objecting petitioner but disagreed with the
37a
petitioner’s conclusions as drawn from the relevant informa-
tion. Specifically, EPA conducted additional modeling and
interpreted the data in context and found that South Carolina
significantly contributed to ‘ozone nonattainment. See id.;
Final Rule, 63 Fed. Reg. at 57,394-396.
For example, under the 1-hour standard, the UAM-V zero-
out modeling results indicated that South Carolina had a high
maximum contribution (16 ppb) and a high frequency of
contribution (at least 2 ppb.to 15% of the exceedences and at
least 10 ppb to 5% of the exceedences) to Atlanta. See
OFFICE OF AIR AND RADIATION, U.S. ENVIRONMENTAL
PROTECTION AGENCY, Doc. No. VI-B-11, AIR QUALITY
MODELING TECHNICAL SUPPORT DOCUMENT FOR THE NO,
SIP CALL C-5, H-2 (1998). The CAMx modeling results
were comparable (25 ppb maximum contribution and a
frequency of at least 2 ppb to 30% of the exceedences). See
id. at C-5, G-6. Among the upwind states, only Alabama had
a higher maximum contribution. See id. at Apps. G & H.
Moreover, South Carolina’s contribution to 1-hour nonattain-
ment in Atlanta was no more “insignificant” than many of the
other linkages that were found to be significant (e.g.,
Indiana’s contribution to New York City). See id. at C-13,
H-16.
In contrast, the petitioner seeks to show that the data, when
viewed in isolation, makes South Carolina’s contribution
appear insignificant. In the end, we reject the challenge made
on behalf of South Carolina because the petitioner attacks, not
so much the accuracy of EPA’s data, but rather EPA’s
reasonable analysis and application of the data.
Ill. Federalism and Regulatory F lexibility Act
A. NO, Budgets
Building on OTAG’s work, EPA ordered the challenged
SIP call under the authority of section 110(k)(5) in order to
address significant contribution to 1-hour ozone nonattain-
38a
ment as described under section 110(a)(2)(D).” In fashioning
the SIP call, EPA focused on OTAG’s determination that
“[rjegional NO, emissions reductions are effective in produc-
ing ozone benefits.” Proposed Rule, 62 Fed. Reg. 60,318, at
60,320. EPA also took into consideration OTAG’s conclusion
that while NO, controls are effective in addressing regional
ozone problems, VOC controls are most effective locally and
are most advantageous to urban nonattainment areas. See id.
Because OTAG concluded that NO, reductions provide the
key to addressing regional ozone problems, EPA’s SIP call
addresses regional ozone nonattainment through NO, emis-
sions “budgets” established by the agency for each covered
state. The budgets represent the amount of allowable NO,
emissions remaining after a covered state prohibits the NO,
amount contributing significantly to downwind nonat-
tainment. See Final Rule, 63 Fed. Reg. 57,356, at 57,368.
While EPA calculated the budgets using highly cost-effective
emission controls, the agency allows the states to choose the
control measures necessary to bring their emissions within the
budget requirements. See id. at 57,377; id. at 57,400. Under
EPA’s budget plan, a state “may choose from a broader menu
of cost-effective, reasonable alternatives” including alterna-
tives that “may even be more advantageous in light of local
concerns.” /d. at 57,369-370. In fact, EPA has stated that the
states have “full discretion in selecting the controls, so that
[the states] may choose any set of controls that would assure
achievement of the budget.” /d. at 57,378. In addition, each
state has the option of adopting an interstate trading program
that allows it to purchase NO, “allowances” from sources that
have elected to over-control. /d. at 57,430. The SIP call also
gives the states the option in some circumstances to use
“banked” allowances (i.e. allowances from prior years) to
comply with emissions limits. See id.
> As noted above, we will not address the 8-hour portion of the SIP
call.
39a
Petitioners assert that EPA’s NO, budget program imper-
missibly intrudes on the statutory right of the states to fashion
their SIP submissions in the first instance. In support of this
position, the petitioners primarily rely on our decision in
Virginia v. EPA, 108 F.3d 1397 (D.C. Cir.), modified on other
grounds, 116 F.3d 499 (D.C. Cir. 1997), where we held that
EPA may not use a section 110(k)(5) SIP call to order states
to adopt a particular approach to achieving the SIP require-
ments listed in section 110. Under the rule at issue in
Virginia, EPA required states to adopt California’s vehicle
emission program and in effect set the numerical emissions
limitations and mandated the means for the states to achieve
the necessary emissions reductions. That case involved an
EPA rule that required several states to reduce ozone
precursors by a particular program and only allowed states to
implement a more stringent program as an alternative or
substitute. We held that EPA’s approach exceeded its
authority under section 110 because each state retains the
authority to determine in the first instance the necessary and
appropriate control measures needed to satisfy section 110’s
standards. See id. at 1407-09 (citing Train v. NRDC, 421
U.S. 60, 78-79 (1975)).
Our holding in Virginia was mandated by the Supreme
Court’s decision in Train v. NRDC, 421 U.S. 60 (1975).
Train involved a challenge to Georgia’s procedures for revis-
ing source-specific emission limits adopted in a SIP. See id.
at 68-71. The Train Court held that states have the authority
under the CAA to initially propose specific emission
limitations. See id. at 79. The Court defined “emission
limitations” as “regulations of the composition of substances
emitted into the ambient air from such sources as power
plants, service stations, and the like. They are the specific
rules to which operators of pollution sources are subject, and
which if enforced should result in ambient air which meets
the national standards.” Jd. at 78 (emphasis added). The
Court further held that EPA has only “a secondary role in the
40a
process of determining and enforcing the specific, source-by-
source emission limitations.” /d. at 79 (emphasis added).
The Train decision and subsequent precedent make clear that
section 110 left to the states “the power to [initially] deter-
mine which sources would be burdened by regulation and to
what extent.” Union Elec. Co. v. EPA, 427 U.S. 246, 269
(1976) (emphasis added); cf. Virginia, 108 F.3d at 1399,
1401, 1408 (involving a source-specific program); Riverside
Cement Co. v. Thomas, 843 F.2d 1246, 1247-48 (9th Cir.
1988) (citing Train and noting EPA’s secondary role in
enforcing source-by-source emissions limitations). As we
elaborated in Virginia, “the Supreme Court decided . . . that
[section 110] did not confer upon EPA the authority to con-
dition approval of [a state’s] implementation plan . . . on the
state’s adoption of a specific control measure.” Virginia, 108
F.3d at 1408. For the reasons set forth below, we conclude
that the NO, budgets do not fall within the realm of imper-
missible SIP call regulation as defined in Virginia and Train.
Given the Train and Virginia precedent, the validity of the
NO, budget program underlying the SIP call depends in part
on whether the program in effect constitutes an EPA-imposed
control measure or emission limitation triggering the Train-
Virginia federalism bar: in other words, on whether the
program constitutes an impermissible source-specific means
rather than a permissible end goal. However, the program’s
validity also depends on whether EPA’s budgets allow the
covered states real choice with regard to the control measure
options available to them to meet the budget requirements.
Section 110(a)(2)(D) requires SIPs to contain adequate
provisions prohibiting emissions from “any source or other
type of emissions activity within the State” that “contribute
significantly” to NAAQS nonattainment in another state.
Here, EPA mandates that 22 states and the District of
Columbia implement section 110(a)(2)(D) using its NO, bud-
get system. In essence, the NO, budget in question is an EPA
4la
mandate prohibiting NO, emissions in the 23 jurisdictions
from exceeding a tonnage specific to that jurisdiction. See 63
Fed. Reg. 57,356 at 57,491-493 (1998). Of concern to
petitioners, the budget rule prohibits states from seeking
compliance, in whole or part, by controlling VOC emissions
even though VOCs as well as NO, emissions contribute to
ozone problems. See, e.g., id. at 57,359; see also 40 CER.
§ 52.31(b)(7) (1998) (defining ozone precursors).
Yet, the budget plan’s defining aspects do not necessarily
Cause the program to conflict with the limiting principles
contained in Train and Virginia. Analyzing the budget rule
together with the relevant precedent, we hold that based on
section 110’s silence, EPA reasonably interpreted section 110
as providing it with the authority to determine a state’s NO,
significant contribution level and agree with EPA that the
NO, budget plan does no more than project whether states
have reduced emissions sufficiently to mitigate interstate
transport. See 63 Fed. Reg. at 57,368.
Under section 110, EPA must “approve a [SIP] submittal
as a whole if it meets all of the applicable requirements of
[the Act].” 42 U.S.C. § 7410(k)(3). While the states have
considerable latitude in fashioning SIPs, the CAA “nonethe-
less subject[s] the States to strict minimum compliance re-
quirements” and gives EPA the authority to determine a
State’s compliance with the requirements. Union Elec. C 0.,
427 U.S. at 256-57 (referring to the requirements contained in
the statute). Given EPA’s authority to ensure that submitted
SIPs adequately prohibit significantly contributing emissions,
EPA permissibly relied on its general rulemaking authority to
prospectively inform the states of EPA’s significance
determinations.
Moreover, EPA does not tell the states how to achieve SIP
compliance. Rather, EPA looks to section 110(a)(2)(D) and
merely provides the levels to be achieved by state-determined
compliance mechanisms. Specifically, EPA set NO,
42a
reduction levels based, in part, on assumptions about
reductions obtainable through highly cost-effective controls.
See Final Rule, 63 Fed. Reg. at 57,426. However, EPA made
clear that states do not have to adopt the control scheme that
EPA assumed for budget-setting purposes. See id. at 57,369-
370. States can choose from a myriad of reasonably cost-
effective options to achieve the assigned reduction levels.
See, e.g., id. at 57,438 (noting possibilities with regard to
mobile sources); id. at 57,378 (noting possibilities with regard
to stationary sources); id. at 57,416. While EPA bases the
budgets here on “highly cost-effective” control measures, the
states remain free to implement other “cost-effective” or
“reasonably cost-effective” measures in place of the ones
identified by EPA. See id. at 57,378; 63 Fed. Reg. 60,318 at
60,328 (1997) (noting that “one State may choose to
primarily achieve emissions reductions from stationary
sources while another State may focus on emissions
reductions from the mobile source sector”). More im-
portantly, EPA went so far as to give the states “full
discretion in selecting . . . controls,” 63 Fed. Reg. at 57,378,
thereby allowing states to attain their budgets by imposing
even quite unreasonable, very cost-ineffective controls. In
Virginia, we did not bar EPA from permitting more costly
alternatives but rather alternatives states would consider
“unreasonable or impracticable.” Here, EPA accommodates
Virginia’s mandate by allowing reasonable control
alternatives and allowing states to focus reduction efforts
based on local needs or preferences. See 63 Fed. Reg. at
57,369; id. at 57,399-405; 62 Fed. Reg. at 60,328. Thus, real
choice exists for the covered states.
Regarding EPA’s decision not to rely on VOC reductions,
EPA reasonably concluded that long-range ozone transport
can only be addressed adequately through NO, reductions.
Petitioners’ reliance and emphasis on VOC reductions in lieu
of NO, reductions ignores the scientific basis for EPA’s rule.
OTAG and EPA concluded that VOC controls would not
43a
effectively address interstate ozone transport. Furthermore,
States can cure any NO, reduction “disbenefits” with corre-
sponding optional VOC controls. See 62 Fed Reg. at 60,344-
345; 63 Fed. Reg. at 57,425. Thus, the SIP call cannot be
invalidated merely because EPA reasonably chose not to
regulate VOCs.
In sum, we conclude that EPA’s NO, budget program
reasonably establishes reduction levels and leaves the control
measure selection decision to the states. In addition, unlike
the rule invalidated in Virginia, states implementing alterna-
tive control measures will not be penalized with more strin-
gent emissions targets. Since the challenged budget program
does not mandate a “specific, source-by-source emission
limitation[{ ],” the NO, budget plan does not run afoul of
Train or Virginia.
B. Regulatory Flexibility Act
The Regulatory Flexibility Act (“RFA”), 5 U.S.C. §§ 601-
612, as amended in 1996 by the Small Business Regulatory
Enforcement Fairness Act (“SBREFA”), Pub. L. No. 114-
121, Title I, 110 Stat. 847, 857-74, §§ 201-253 (codified at 5
U.S.C. §§ 601-612 (1994 & Supp. II 1996)), requires an
agency, when proposing a rule for notice and comment, to
“prepare and make available for public comment an initial
regulatory flexibility analysis ... . [that] describe[s] the im-
pact of the proposed rule on small entities,” 5 U.S.C.
§ 603(a), including small businesses, small organizations, and
small governmental jurisdictions. See id. § 601(6). In ad-
dition, when promulgating a final rule, an agency must
“prepare a final regulatory flexibility analysis” that describes,
among other things, “a summary of the significant issues
raised by the public comments in response to the initial
regulatory flexibility analysis, a summary of the assessment
of the agency of such issues,” and “the Steps the agency has
taken to minimize the significant economic impact on small
entities.” Jd. § 604(a).
— mx &
44a
However, these analyses are not required if the agency
“certifies that the rule will not, if promulgated, have a signifi-
cant economic impact on a substantial number of small enti-
ties.” Jd. § 605(b). In the instant case, EPA certified that the
proposed and final rule will not have a significant economic
impact on a substantial number of small entities and,
accordingly, did not perform any regulatory flexibility analy-
sis. See Final Rule, 63 Fed. Reg. at. 57,478; Proposed Rule,
62 Fed. Reg. at 60,375. RFA petitioners contend that EPA’s
certification was improper and in violation of the RFA. We
disagree.
The court has consistently held that the RFA imposes “no
obligation to conduct a small entity impact analysis of effects
on entities which it does not regulate.” Motor & Equip. Mfrs.
Ass'n. v. Nichols, 142 F.3d 449, 467 (D.C. Cir. 1998)
(quoting United Distribution Cos. v. FERC, 88 F.3d 1105,
1170 (D.C. Cir. 1996)); see also American Trucking, 175
F.3d at 1044. Therefore, the key issue in evaluating EPA’s
§ 605(b) certification is whether the NO, SIP call “regulates”
small entities.
EPA based its certification on its view that the NO, SIP
call “would not establish requirements applicable to small
entities” because “it would require States to develop, adopt,
and submit SIP revisions that would achieve the necessary
NO, reductions and would leave to the States the task of
determining how to obtain those reductions, including which
entities to regulate.” Final Rule, 63 Fed. Reg. at 57,478. We
agree with EPA’s statement that the SIP call does not directly
regulate individual sources of emissions. The instant case is
thus analogous to American Trucking, which upheld EPA’s
certification under § 605(b) because the revised NAAQS at
issue “regulate small entities only indirectly—that is, insofar
as they affect the planning decision of the States.” American
Trucking, 175 F.3d at 1044. Therefore, we conclude that
EPA’s certification under § 605(b) is justified.
45a
IV. Remaining Claims
A. Definition of “NO, Budget Unit”
RFA petitioners also contend that EPA arbitrarily revised
the definition of a “NO, budget unit” to bring certain small
sources within the scope of the core group of emission-
producing sources to which the NO, Budget Trading Rule
(“model trading rule”) applies.° This contention is meritless.
In the proposed rule, a “NO, budget unit” was defined
as a boiler that either serves electricity generators with a
Capacity greater than 25 megawatts (“MW”) or does not serve
generators but has a design heat capacity of greater than 250
million Btu/hr (“mmBTu/hr”). See Supplemental Notice for
the Finding of Significant Contribution and Rulemaking for
Certain States in the Ozone Transport Assessment Group
Region for Purposes of Reducing Regional Transport of
Ozone (“Supplemental Notice of Proposed Rule”), 63 Fed.
Reg. 25,902, 25,978 (1998). EPA sought comment on “the
appropriateness of including [such] categories . . . , whether
the size cut-offs should be higher or lower for these source
categories, and the appropriateness of including other source
categories in the core group.” /d. at 25,923. In the final rule,
EPA discussed and revised the definition to expand the core
group by including large boilers—those with design heat
capacity of greater than 250 mmBtu/hr—even if they served
° To assist states in meeting their budgets and to facilitate the most
cost-effective reductions, the SIP call established a model rule for
interstate trading of NO, “allowances.” Each state can choose whether to
adopt the model rule, which will be administered by EPA, to adopt its
own trading program, or to have no trading program at all. See Final Rule,
63 Fed. Reg. at 57,456-58.
The core group definition is used to set the minimum requirements that
a State would have to include in its trading rule in order to participate in
the EPA-managed multi-state trading program. See id. at 57,461. EPA
viewed that setting such requirements was necessary for controlling the
administrative costs of managing the trading program. See id.
—
46a
generators with a capacity less than 25 MW. See Final Rule,
63 Fed. Reg. at 57,518. EPA explained that it was making
this change in order to address the concern raised in the com-
ments about excluding large boilers with high levels of emis-
sion just because they happen to serve small generators. See
id. at 57,461.
EPA’s revision is reasonable. The only argument that RFA
petitioners seem to have against the change is that it
contradicts EPA’s statement elsewhere that “small electrical
generators less than 25 MW ... will be exempt under the
final model rule.” /d. at 57,463. It is unclear why this
statement renders EPA’s final action arbitrary. EPA’s defi-
nition of a NO, budget unit and the reasons for its change are
set forth in the preamble to the final rule, and the most that
the RFA petitioners have demonstrated is that EPA made at
least one statement that was, as EPA concedes in its brief,
“incomplete in that it did not address the case of large boilers
with small generators.” Such a minor oversight in the draft-
ing of the preamble to the final rule does not render the
substantive decision by EPA arbitrary.
B. Council of Industrial Boiler Owners
1. Introduction
In the rulemaking, EPA distinguished between electricity
generating units (“EGUs”) and non-electricity generating
units (“non-EGUs”). Council of Industrial Boiler Owners
(“CIBO”), a trade association whose membership consists of
companies and universities operating industrial boilers and
turbines (“industrial boilers”), which constitute one category
of non-EGUs, challenges the NO, SIP call for being based on
the following arbitrary and capricious actions by EPA:
EPA’s failure to determine whether non-EGUs are significant
contributors, EPA’s flawed cost assumptions in its deter-
mination of cost-effective control measures for non-EGUs,
EPA’s erroneous calculation of non-EGU budgets, and EPA’s
47a
arbitrary redefinition of the term “EGU.” We agree only that
EPA’s redefinition of EGUs was arbitrary and capricious.
2. Significant Contribution of Industrial Boilers
CIBO challenges EPA’s decision to include non-EGU boil-
ers in the rule without having isolated non-EGU emissions to
determine whether they “significantly contribute” to the in-
terstate ozone transport problem and whether implementing
highly cost-effective emissions reduction measures on indus-
trial boilers would ameliorate nonattainment in downwind
states. CIBO maintains that non-EGU boilers typically have
Significantly shorter stacks than EGUs and that their emis-
sions, as a result, fall below the “mixing layer” that promotes
long-range NO, transport. Therefore, CIBO contends, indus-
trial boilers as a group can have no impact on long-range
ozone transport. However, this factual claim fails in view of
contrary evidence in the record. OTAG’s Executive Report
States as one of its major conclusions that “[bJoth elevated
(from tall stacks) and low-level NO, reductions are
effective.” Executive Report at 4. EPA reiterated this finding
by OTAG in the NPRM, see Proposed Rule, 62 Fed. Reg. at
60,332, it relied on the finding, and it appears that members
of CIBO never challenged it during the comment period.
Therefore, we cannot say EPA’s inclusion of non-EGUs in
the group of significantly contributing sources was arbitrary.
3. Cost-Effectiveness Calculation for Industrial Boilers’
Control Measures
CIBO also challenges EPA’s conclusion that industrial
boilers could achieve a 60% emissions reduction using highly
cost-effective control measures, see Final Rule, 63 Fed. Reg.
at 57,418, as based on flawed cost calculations. More specifi-
cally, CIBO lists the following alleged problems in EPA’s
cost assumptions:
—EPA’s assumption of 10 years as the lifetime of all
control measures for industrial boilers, except for selective
48a
catalytic reduction and selective non-catalytic reduction con-
trols, for which 20 years was assumed.
—EPA’s use of a 10% discount rate, not 7%, in its cost-
effectiveness analysis.
—EPA’s failure to take into account the fact that control
effectiveness can vary by as much as 10% to 20%.
—EPA’s failure to take into account cost and feasibility
implications of load variability and firing of multiple fuels.
—EPA’s assumption of NO, emission allowance costs of
$2,000 per ton, when emission allowances trade for $5,500 to
$6,300 per ton.
The general problem of these criticisms is that CIBO
merely lists several items as problems and labels all of them
“irrational” without explaining why its claims should concern
the court. Given that almost all of CIBO’s challenges involve
technical details on which the court generally defers to the
agency’s expertise, CIBO’s failure to explain why the so-
called problems it identifies amount to an arbitrary and
capricious decisionmaking is fatal to its claims.’ Therefore,
we reject CIBO’s claims regarding EPA’s underlying cost
assumptions about industrial boilers.
’ For instance, the last item on the list, that it is arbitrary and Capricious
for EPA to assume NO, emission allowance costs of $2,000 per ton when
emission allowances now trade for $5,500 to $6,300 per ton, is
insufficiently explained. Of course, if the firms in the market generating
entitlement prices of $5,500 to $6,300 per ton were regulated at the same
degree of stringency as EPA contemplates for firms expected to be
burdened under the present rule, the market price would be strong
evidence that compliance would cost far more than the $2,000 per ton
figure that EPA has used. No one would pay $6,000 for an entitlement to
emit a ton that he .vuld remove at a cost of $2,000; the price of an
entitlement could not exceed the marginal removal cost. But if the prices
to which CIBO points arose among firms more stringently regulated, there
would be no such contradiction. CIBO has not even endeavored to show
equivalent stringency.
49a
4, Determination of Non-EGU Component of State NO,
Budgets
CIBO contends that EPA’s calculation of the non-EGU
component for the State NO, budget lacks adequate support
in the record and lists the following as problems:
—Non-EGU inventories had errors.
——EPA’s use of Bureau of Economic Analysis growth
factor to project 2007 emission levels have “inherent error.”
——EPA employed “crude extrapolations” to identify large
non-EGU boilers.
—The “default boiler capacity file” is not in the record and
the record does not reveal how EPA manipulated the data.
—The source of Bureau of Economic Analysis growth
factors is not identified in the record, and the record does not
show how EPA manipulated the data.
—It is unknown whether EPA credited NO, reductions
from fluidized-bed combustion technology.
Again, CIBO merely presents a list of problems without
explaining why these alleged errors render EPA’s rulemaking
arbitrary or capricious. In addition, CIBO members had
repeated opportunities to provide correct information for
some of these items during the rulemaking process. CIBO’s
poorly articulated, blanket accusations at this late stage con-
tribute little to improve the quality of agency rulemaking;
therefore, we reject CIBO’s challenges regarding EPA’s cal-
culation of NO, budgets for non-EGUs.
5. Definition of EGU
More persuasively, CIBO contends that EPA revised the
definition of “EGU” without adequate notice. Throughout
the rulemaking, EPA defined an EGU as it did under the acid
rain program, which excludes from the category of “utility
units” those cogeneration units that sell less than one-third of
50a
their potential electrical output capacity or less than 25 MW
per year. See 42 U.S.C. § 765la(17)(C). However, two
months after the promulgation of the rule, EPA redefined an
EGU as a unit that serves a “large” generator (greater than 25
MW) that sells electricity. CIBO contends that EPA did not
provide sufficient notice and opportunity to comment on this
revision, especially considering that the industrial boilers
have relied on the previous definition for a number of years.
We agree.
EPA maintains that it provided adequate notice in the May
1998 supplemental notice, stating that “deregulation of elec-
tric utilities” means that “it is not clear how ownership of the
electricity generating facilities will evolve.” Supplemental
Notice of Proposed Rule, 63 Fed. Reg. at 25,923. Given that
“there is no relevant physical or technological difference
between utilities and other power generators,” EPA pro-
posed, “all large electricity generating sources, regardless of
ownership,” should be treated the same. /d. There are
several problems with EPA’s response. First, it is undisputed
that EPA was departing from the definition of EGUs as used
in prior regulatory contexts, and EPA was not explicit about
the departure from the prior practice until two months after
the rule was promulgated. Neither the proposed rulemaking in
November 1997 nor the final rule in October 1998 introduced
the new definition. EPA waited until the December 1998
correction notice to announce that it will “classify as an EGU
any boiler . . . that is connected to a generator greater than 25
MWe from which any electricity is sold.” Correction and
Clarification to the Finding of Significant Contribution and
Rulemaking for Purposes of Reducing Regional Transport of
Ozone (“Correction Notice to Final Rule’), 63 Fed. Reg.
71,220, 71,223 (1998). After the December correction notice,
EPA reopened the comment period for sixty days for
comments on this and other issues. In EPA’s May 1999
response to the comments, EPA, for the first time, discussed
why the change was necessary and offered a justification
Sla
largely based on recent changes in the electric power
industry. See Responses to the 2007 Baseline Sub-Inventory
Information and Significant Comments for the Final NO, SIP
Call 10-12 (May 1999) (“Responses to Final Comments”).
As to the statement in the May 1998 supplemental! notice
that EPA claims constitutes notice, this statement was given
in EPA’s discussion of how the core group of sources for the
model trading rule should be defined, and not in the context
of a discussion about the general distinction between EGUs
and non-EGUs for the purposes of calculating state budgets.
Cf. Small Refiner Lead Phase-Down Task Force v. EPA, 705
F.2d 506, 550 (D.C. Cir. 1983). Moreover, EPA also
explicitly observed in the same May notice discussion about
the model trading rule that “[mJany of the definitions . . . are
the same as those used in . . . the Acid Rain Program
regulations, in order to maintain consistency among
programs.” Supplemental Notice of Proposed Rule, 63 Fed.
Reg. at 25,923. Given the vague and conflicting signals that
EPA was sending, it is an exaggeration to state that some
general “theme” of the regulatory consequences of dereg-
ulation of the utility industry throughout rulemaking meant
that EPA’s last-minute revision of the definition of EGU
should have been anticipated by industrial boilers as a
“logical outgrowth” of EPA’s earlier statements. See
American Water Works Ass'n. v. EPA, 40 F.3d 1266, 1274-75
(D.C. Cir. 1994),
EPA contends that even assuming that CIBO did not have
adequate notice and opportunity to comment on the EGU
definition, the error has been cured because it reopened the
comment period on this issue after its announcement of the
revision, See Correction Notice to Final Rule, 63 Fed. Reg. at
71,221-23. This response is to no avail. During the new
comment period, some commenters complained that there had
not been sufficient notice and opportunity to comment on the
EGU redefinition. See Responses to Final Comment, at 12.
S2a
EPA’s response to this charge primarily relied on the claim
that there had been adequate notice prior to the redefinition,
see id., and we have already rejected that argument.
Therefore, we conclude EPA did not provide sufficient
notice and opportunity to comment for its redefinition of
EGUs and remand the rulemaking to EPA for further consid-
eration in light of this opinion,
C. INGAA
Interstate Natural Gas Association of America (“INGAA”),
a trade association that represents major interstate natural gas
transmission companies in the United States, contends that
EPA did not provide adequate notice and opportunity to
comment on the control level assumed for “large” stationary
internal combustion (“IC”) engines in its determination of
state NO, budgets. We agree.
EPA’s NPRM in November 1997 assumed a 70% control
level for large IC engines, see Proposed Rule, 62 Fed. Reg. at
60,354, after considering and rejecting an 80% control level.
See id. at 60,348. Then, in the supplemental notice in May
1998, EPA continued to assume the 70% control level. See
Supplemental Notice of Proposed Rule, 63 Fed. Reg. at
25,908. EPA stated in the same notice that it “intends to
further analyze” control approaches for IC engines and said
that “[a]s the above analyses are completed, EPA intends to
place them in the docket.” /d. at 25,909. EPA did not present
a new analysis until September 4, 1998, when it concluded
that a 90% control level was more appropriate for large IC
engines. See Technical Support Document for Stationary
International Combustion Engines 2 (September 4, 1998).
When the rule was finally promulgated in October 1998, EPA
stated that it was assuming a 90% control level. See Final
Rule, 63 Fed. Reg. at 57,418.
INGAA contends that EPA’s switch from 70% to 90% for
large IC engines was unanticipated and that EPA should have
in
S3a
allowed comments on the issue. Considering EPA’s repeated
affirmation of the 70% assumption throughout rulemaking
and rejection of a higher, 80% assumption earlier, a revision
in its assumption less than one month before the final rule
was promulgated hardly provided adequate notice, especially
given the magnitude of the consequences of the proposed
change on the regulated bodies. Therefore, we remand for
further consideration on this issue.*
In addition, INGAA challenges EPA’s definition of large
IC engines. EPA, in the final rule, distinguished between
large and small sources by defining a “cutoff level.” 63 Fed.
Reg. at 57,414. EPA assumed no control for sources below
the cutoff level and defined small sources as units with a
capacity less than or equal to 250 mmBtu/hr and with
emissions less than or equal to one ton per day. See id. at
57,415. EPA added that “EPA is relying on a capacity
approach first and a tons per day approach second (where a
capacity data is not available or appropriate)” to define small
sources, /d. at 57,416. Then, in the December correction
notice, EPA largely repeated the same methodology for
determining the cutoff level, but added that “[a] stationary
internal combustion engine and a cement plant were deter-
mined to be ‘large’ if its 1995 average daily ozone season
emissions were greater than one ton.” Correction Notice to
Final Rule, 63 Fed. Reg. at 71,224.
INGAA contends_that EPA did not follow its own standard
in the correction notice and singled out IC engines and
cement plants without explanation. Although EPA’s various
statements on this issue throughout rulemaking have not
always been very clear or entirely consistent, EPA went
“INGAA further contends that, even putting aside the notice issue, the
documents that EPA relies on do not support EPA’s assumption of 90%
control level. Because we are remanding on the basis of the conclusion
that there was inadequate notice, we do not reach the merits of the issue.
S4a
through au extensive comment period on this issue, see Final
Rule, 63 Fed. Reg. at 57,415-17, and we agree with EPA that
the change that INGAA criticizes for being arbitrary is
merely a minor clarification that satisfies the reasonableness
standard.
D. PP&L
1. EPA’s Restrictions on Early Reduction Credits
PP&L, an electric utility that owns several generating
stations in Pennsylvania, contends that EPA arbitrarily limit-
ed the number of “early reduction credits” (“ERCs”). We
disagree.
Under the SIP call, a source can generate ERCs if it
reduces its NO, emissions before May 2003 to a leve
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