Reply Brief — Utility Air Regulatory Group v. New Jersey (No. 08-352)

“Supreme Coun, Us.

\Q FILED

\ G FEB 6 - 2009

No. 08-352 OFFICE OF THE CLERK

IN THE

Supreme Court of the Gnited States

UTILITY AIR REGULATORY GROUP,

Petitioner,

. -

STATE OF NEW JERSEY, ET AL.,

Respondent.

On Petition for Writ of Certiorari to the

United States Court of Appeals

for the District of Columbia Circuit

REPLY BRIEF FOR PETITIONER

HENRY V. NICKEL

F. WILLIAM BROWNELL

LEE B. ZEUGIN

(Counsel of Record)

HUNTON & WILLIAMS LLP

1900 K Street, N.W.

Washington, D.C. 20006

(202) 955-1500

WILSON-EPES PRINTING CO., INC. — (202) 789-0096 — VVASHINGTON, D.C. 20002

DISCLOSURE STATEMENT

Pursuant to Rule 29.6, the Utility Air Regulatory

Group (““UARG’”) hereby incorporates by reference the

disclosure statement filed with its petition for a writ

of certiorari on September 17, 2008.

TABLE OF CONTENTS

Page

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I. This Court Should Put an End to the

D.C. Circuit’s Misapplication of Chevron...... 4

Il. The Decision Below Embraces an Approach

to Statutory Construction That Conflicts

with Fundamental Principles of

Administrative Law and

2remeas v. NOW TON B iis ckikcistecvdcneneeee 7

Ill. The Alleged “Uncertainty” of the Rules

that Underpinned EPA’s March 2005

Provides No Reason for This Court to

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TABLE OF AUTHORITIES

CASES

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

467 U.S. 837 (1984)........0...cc.ccccccvececssescoeees 1, 4, 5,

7

FDA v. Brown & Williamson Tobacco Corp.,

BF Gre. Be ic dak akcevn nicbevannwcs vasedciaxies +)

King v. St. Vincent’s Hospital, 502 U.S.

ee Ce i oenrta bases So canara ceeaaeaanes cats 5

Philbrook v. Glodgett, 421 U.S. 707 (1975)...... 5

Thomas v. New York, 802 F.2d 1443

2 3 OR kA: ARRRESaR A etcrerc eee ener ee mene PRN een (fe

STATUTES

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

oT Bir gtk 5 Oe ay | > Snes passim

CAA S ¥i2ie); 42 U.S.C. § T41200)...... 00055. 2<.. passim

CAA § 112(d); 42 U.S.C. § 7412(d)............... passim

CAA § 112(e); 42 U.S.C. § 7412(e)............... 9,10

CAA § 112(n); 42 U.S.C. § 7412(n)............... passim

INTRODUCTION

The U.S. Environmental Protection Agency (“EPA”

or “the Agency”) is authorized to regulate hazardous

air pollutant (“HAP”) emissions from electric gener-

ating units (““EGUs’”) under § 112 of the Clean Air Act

(“CAA” or “the Act”) only where EPA has determined

pursuant to CAA § 112(n)(1)(A) that “such regulation

is appropriate and necessary.” In March 2005, the

Agency determined, following notice-and-comment

rulemaking, that regulation of EGUs was neither

“appropriate” nor “necessary.”

Nevertheless, the D.C. Circuit held that the re-

quirements promulgated by EPA under CAA § 111,

limiting EGU emissions of one particular HAP (z.e.,

the “Clean Air Mercury Rule” or CAMR), were unlaw-

ful, and that the Agency was required instead to con-

duct a rulemaking to establish HAP standards for

EGUs under CAA § 112(d). Only at the conclusion of

this rulemaking, the D.C. Circuit ruled, could UARG

seek to have the resulting “[un]necessary” and

“finjappropriate” CAA § 112(d) standards set aside on

the ground that, given EPA’s March 2005 determina-

tion, the entire process had been illegal from the out-

set.

According to the D.C. Circuit, this bizarre waste of

time and resources — and the vacatur of the CAMR,

the only set of federal requirements ever adopted for

regulating EGU mercury emissions — is mandated by

the “plain language” of the CAA and, thus, reflects

the “unambiguously expressed” intent of Congress

under Chevron step one. As Judge Tatel put it:

“(Mjaybe that’s what Con-

gress intended” —- te., for

EPA to “go through a stan-

dard setting process that

2

the Agency itself admits is

wrong.”

See App. 232a.

The D.C. Circuit said it was able to detect this sup-

posed “unambiguously expressed intent” of Congress

in a three-word phrase (i.e, “any source category”)

contained in a single sentence in subparagraph (B) of

CAA § 112(c)(9). The court said it therefore had no

reason to consider any other provision of CAA § 112,

including the provision that specifically governs

regulation of EGUs, CAA § 112(n)(1)(A).

The myopic approach to statutory imterpretation

employed by the D.C. Circuit resulted in the court’s

failing to recognize that any regulation of EGUs un-

der CAA § 112 (including their “listing” as a source

category under CAA §112(c)) was not authorized,

given EPA’s determination in March 2005 that such

regulation was neither “appropriate” nor “necessary.”

Moreover, the D.C. Circuit’s circumscribed focus on a

fragment of CAA § 112(c)(9) caused the court to over-

look (1) that it had rested its decision on a provision

of the Act that is irrelevant to the question at hand;

(2) that, apart from its being irrelevant, CAA

§ 112(c)(9) does not even say what the court wants it

to say; and (3) that another provision of CAA § 112

that was ignored by the court (1.e., CAA § 112(c)(1))

authorizes EPA’s so-called “de-listing” of EGUs. See

UARG Petition at 24-27.

Respondents argue that “[nleither EPA nor UARG

makes a viable case that the court of appeals commit-

ted error in finding that Congress has directly spoken

to the issue” at hand. See Respondents’ Brief in Op-

position (“Opposition”) at 16. They further contend

that, “[gliven the specific statutory language and con-

text at issue,” the D.C. Circuit’s decision “has no gen-

3

eral legal or practical importance to agency decision-

making.” Id.

On the contrary, it is not too much to expect that,

before the D.C. Circuit strikes down an EPA rule de-

veloped over the course of some five years and predi-

cated on a massive record that was the most detailed

ever developed by EPA to support regulatory action

under CAA § 112, the court would at a minimum take

account of all of the relevant statutory provisions.

That did not happen here.

ARGUMENT

The D.C. Circuit identified, in isolated language in

CAA § 112(c)(9), an “unambiguous” command that

EPA must keep a source category on the CAA § 112(c)

list, and proceed to regulate that source under CAA

§ 112(d), even where the statutory threshold for initi-

ating regulation under CAA § 112 is not met. In the

case of sources other than EGUs, EPA can regulate

under CAA § 112(d) only if they are in a “major source

category’ that is listed under CAA § 112(c). Under

the D.C. Circuit's reading of the Act, once a source

category is listed as a “major source category,” based

upon a preliminary finding that the source category

contains “major sources,” EPA must adopt CAA

§ 112(d) standards for that source category notwith-

standing a subsequent finding by the Agency that the

source category in fact contains no “major” sources.”

See App. at 18a-19a.

As for EGUs, EPA can regulate those sources under

CAA § 112 only if such regulation is found by the

Agency pursuant to CAA § 112(n)(1) to be “appropri-

ate and necessary.” The D.C. Circuit held, however,

that EPA’s listing of EGUs under CAA § 112(c), based

on a preliminary notice ostensibly made pursuant to

CAA § 112(n)(1)(A), precludes the Agency thereafter

4

from (i) determining through rulemaking that regula-

tion of EGUs under CAA § 112 is neither “appropri-

ate” nor “necessary,” and (ii) choosing instead to

regulate EGUs under another provision of the CAA

(i.e., the CAMR).

For the reasons discussed below, review is needed

to correct an approach to Chevron step one that nas

become an established part of D.C. Circuit jurispru-

dence. Review is needed to reject an interpretation of

the CAA under which preliminary Agency action is

given the effect of a legislative rule that cannot be re-

pealed.

I. This Court Should Put an End to the

D.C. Circuit’s Misapplication of Chevron.

This case is but a recent (although the most egre-

gious) example of the D.C. Circuit’s propensity in the

past few years to invoke what it claims to be a Chev-

ron step one analysis in order to strike down an EPA

rule with which the court disagrees. See UARG Pe-

tition at 20-21. In each instance, the D.C. Circuit has

seized on a particle of statutory text in claiming to

have discerned “unambiguously expressed” congres-

sional intent. This Court should use this case to put

an end to this D.C. Circuit practice, which distorts the

Chevron doctrine and which has occasioned a serious

and unjustified disruption of EPA’s legitimate exer-

cise of its discretionary rulemaking authority.

Chevron instructs that a reviewing court is to “em-

ploy{] traditional tools of statutory construction” in

order to “ascertain[] whether ... Congress had an in-

tention on the precise question at issue.” See Chevron

v. NRDC, 467 U.S. 837, 843 n.9 (1984). Among those

“traditional tools” are the interrelated principles that

5

a reviewing court “should not confine itself to exam-

ining a particular statutory provision in isolation;”!

that, in “expounding a statute,” a court “must not be

guided by a single sentence or member of a sentence,

but look to the provisions of the whole law, and to its

object and policy;”? and that a “cardinal rule” of statu-

tory construction is that a “statute it to be read as a

whole,” since the “meaning of statutory language,

plain or not, depends on context.”3 The D.C. Circuit

abandoned these principles in this case, just as it had

in the earlier decisions that UARG cited. See UARG

Petition at 20-21.

Respondents claim that a “reading of those deci-

sions ... reveals” that the D.C. Circuit “employed a

conventional approach to statutory construction con-

sistent with Chevron,” and that, as a result, UARG

“fails to show more” than that it “simply disagrees

with a selection of cases in which the court of appeals

found EPA’s actions inconsistent with the statutory

text.” Opposition at 21. Those decisions speak for

themselves. But it bears repeating that it defies cre-

dulity to imagine that Congress could so often convey

unambiguous intent on such complex subjects

through isolated words or fragments of phrases. See

UARG Petition at 21.

Through its singular focus on three words in CAA

§ 112(c)(9), the D.C. Circuit was able to dismiss CAA

§ 112(n)(1)(A) out of hand, asserting that that section

“says nothing about delisting EGUs,” and that the

\ See FDA v. Brown & Williamson Tobacco Corp., 529 U.S.

120, 132 (2000).

2 See Philbrook v. Glodgett, 421 U.S. 707, 713 (1975).

3 See King v. St. Vincent’s Hosp., 502 U.S. 215, 221 (1991).

6

“plain text of section 112(c)(9) specifies that it applies

to the delisting of ‘any source.” See App. 16a. But no

one disputes that an “appropriate and necessary”

finding under CAA § 112(n)(1)(A) is the statutory

prerequisite for EPA’s undertaking any regulation

of EGUs under CAA § 112. The D.C. Circuit offered

no explanation as to how EPA could possibly be pre-

cluded from removing EGUs from the list of source

categories under CAA § 112(c) — and, in turn, be

forced to regulate EGUs under CAA § 112(d) — when

at the same time the Agency had concluded after ex-

tensive rulemaking that regulation of EGUs under

CAA § 112 was neither “appropriate” nor “necessary.”

Respondents argue that “once EPA determined [i.e.,

in December 2000] that regulation of EGUs under

[CAA §112] was appropriate and necessary and

placed power plants on the [CAA § 112(c)] list,” CAA

112(n)(1)(A)’s “function was at an end.” Opposition at

22. They further assert that CAA § 112(n)(1)(A) “con-

templates a single determination” based upon the

statutorily-mandated Utility Study, and that EPA

was somehow barred by the CAA from subsequently

determining (as it did in this case), following rule-

making and based on new information, that the De-

cember 2000 notice was “without foundation.” Id. at

233.

Respondents offer no explanation for this construc-

tion of CAA § 112(n)(1)(A), the plain language of

which supports no such interpretation.‘ Even more

4 As for Respondents’ claim that, when EPA issued its March

2005 determination, it “did not assert any new scientific

understanding of EGU HAPs and their public health or

environmental impact,” Opposition at 12, the administrative

record shows otherwise. When EPA issued its December 2000

notice, it based that action on the finding of a “plausible link

(Continued... .)

7

significantly, Respondents’ attempt to prop up the

D.C. Circuit’s decision by resorting to an analysis of

CAA § 112(n)(1)(A) underscores the court’s misappli-

cation of Chevron step one. Respondents cannot plau-

sibly contend that the D.C. Circuit “employed a con-

ventional approach to statutory construction consis-

tent with Chevron,” Opposition at 21, while at the

same time they implicitly acknowledge that the

court’s decision can only be justified (if at all) when

considered in light of statutory language that the

court itself found unnecessary to engage.

Il. The Decision Below Embraces’ an

Approach to Statutory Construction That

Conflicts with Fundamental Principles of

Administrative Law and Thomas v. New

York.

If “preliminary findings announced without rule-

making” could “compel future administrations to es-

tablish new regulatory programs,” then “new regula-

tory policy could be mandated without any account-

ability or opportunity for correcting that finding.” See

UARG Petition at 28. By effectively determining that

EPA could not revisit its December 2000 notice, and

between methylmercury concentrations in fish and mercury

emissions from coal-fired” EGUs. See App. at 38a. At the same

time, EPA acknowledged that the “degree to which that linkage

occurs cannot be estimated quantitatively now.” Jd. In other

words, EPA acted in December 2000 on a scientific theory that it

could not then verify. Subsequently, in making its March 2005

determination, EPA relied upon detailed modeling to quantify

the linkage between mercury emissions from coal-fired EGUs

and methylmercury in fish. This modeling, which is reported tn

over 1,000 pages of techmecal reports, shows that mercury

emissions from EGUs have an insignificant effect on

methylmercury levels in fish. See App. at 138a-167a.

8

requiring the Agency to proceed to regulate EGUs

under CAA § 112(d), the D.C. Circuit construed the

CAA contrary to its own precedent in Thomas v. New

York, 802 F.2d 1143 (D.C. Cir. 1986).

Recognizing the significance of Thomas, and the

problem it poses for the D.C. Circuit's approach to

statutory construction here, Respondents seek to rec-

oncile the two cases by claming that EPA’s December

2000 notice was itself a “rule.” To that end, they ar-

gue that, in issuing its March 2005 determination,

“EPA not only disagreed with the December 2000

finding,” but “concluded that that its finding was in-

valid when made and therefore ineffective to have

subjected EGUs (and EPA) to the provisions” of CAA

§ 112. Opposition at 18 (emphasis in original). Ac-

cording to Respondents, “EPA’s reversal of its Decem-

ber 2000 determination and listing . . . was an at-

tempt to reverse and expunge a rule, which is little

more than retroactive rulemaking.” Jd. (emphasis

added).

But EPA’s December 2000 notice was not a “rule.”

While Respondents claim that that notice was issued

following “extensive opportunity for public comment,”

Opposition at 22, the requests for comment made be-

fore the December 2000 notice were not on a proposed

CAA § 112(n)(1)(A) finding, but were akin to advance

notices of proposed rulemaking. No specific finding or

action under CAA § 112(n)(1)(A) was ever proposed in

these opportunities for public comment. EPA never

offered a legal interpretation of the terms “appropri-

ate” and “necessary;” it never explained why an “ap-

propriate and necessary” finding under CAA §

112(n)(1)(A) required listing of EGUs under § 112(c);

and it never identified its legal authority to regulate

all EGU HAP emissions under CAA § 112(d) when

9

the Agency only found a public health “concern” re-

sulting from the emission of mercury.

And, as noted above, the Agency had not yet been

able to estimate the “degree to which .. . [a] linkage

occurs” between “methylmercury concentrations in

fish and mercury emissions from coal-fired” EGUs,

the penultimate issue in the March 2005 determina-

tion. By contrast, when EPA conducted the rule-

making that culminated in that subsequent determi-

nation, it solicited comment on all of these issues and

fully explained its legal rationale. See supra note 4.

Further, as EPA represented to the D.C. Circuit,

the December 2000 notice was not even “final agency

action,” must less a “rule” adopted through notice and

comment rulemaking. See App. at 56a. It was on this

basis that the D.C. Circuit granted EPA’s- motion to

dismiss UARG’s petition for review of the December

2000 notice, with the court agreeing with EPA that

“the decision to add” EGUs “to the source category list

[was] not yet final agency action.” Id. (emphasis

added).

Respondents further argue that neither Thomas nor

the “general authority of administrative agencies to

reverse course on policy matters” is “implicated” by

the D.C. Circuit’s decision, »ecause the “specific

statutory language plainly provides otherwise.” Op-

position at 16. The “specific statutory language” to

which Respondents refer includes CAA § 112(e)(4),

which provides, in relevant part, that “no action of the

Administrator .. . listing a source category .. . under

subsection (c) of this section . . . shall be final agency

action subject to judicial review,” except that “any

such action may be reviewed ... when the Adminis-

trator issues emission standards for such . . . cate-

gory. According to Respondents, the D.C. Circuit's

conclusion that EPA must adopt HAP emission stan-

10

dards for EGUs, even though the Agency has deter-

mined under CAA § 112(n)(1)(A) that such regulation

is neither “necessary” nor “appropriate,” is supported

by Congress’s direction in CAA § 112(e)(4) that judi-

cial review of “listing” decisions under CAA § 112(c) is

available only following the promulgation of stan-

dards under CAA § 112(d). See Opposition at 20.

But CAA § 112(e)(4) cannot bear the weight that

Respondents would place upon it. While this provi-

sion may direct that judicial review of a “listing” deci-

sion for a source category is only available after a

standard has been established, this cannot be con-

strued as a statutory mandate that such a standard

must be adopted notwithstanding a rulemaking de-

termination by EPA that the listing decision itself

lacked lawful basis. Such a construction of CAA

§ 112(e)(4) implicitly assumes that Congress intended

a fundamental departure from basic principles of ad-

ministrative law and from the rulemaking require-

ments of CAA § 307(d). No such intent can be in-

ferred on the face of CAA § 112(e)(4).

For its part, the D.C. Circuit reasoned that the

“listing” of EGUs under CAA § 112(c), in and of itself,

somehow compelled EPA to proceed to adopt CAA

§ 112(d) standards. In truth, the opposite is the case:

EPA’s determination in Marhc 2005 not to regulate

EGUs under CAA § 112 necessarily entailed that the

continued presence of EGUs on the CAA § 112(c) “list”

of source categories subject to regulation under CAA

§ 112 was no longer authorized. The removal of

EGUs from the list was, in other words, a detail, a

regulatory correction purely incident to EPA’s March

20005 determination.

1]

Ill. The Alleged “Uncertainty” of the Rules

that Underpinned EPA’s March 2005

Provides No Reason for This Court to

Decline Review.

Even though the D.C. Circuit expressly declined to

address the merits of EPA’s March 2005 determina-

tion, Respondents argue that alleged “uncertainty”

surrounding certain of the EPA rules upon which the

Agency relied in reaching that determination (e.g., the

“Clean Air Interstate Rule,” or CAIR, which was de-

clared unlawful by the D.C. Circuit in July 2008) pro-

vides an additional reason for this Court to decline

review. See Opposition at 25-28. As the validity of

EPA’s March 2005 determination is a matter that the

court refused even to address, Respondents’ conten-

tion that it “seems highly doubtful that EPA could to-

day affirm” that determination, id. at 26, can hardly

provide a reason for this Court to decline review.

More importantly, no matter how the “uncertainty”

regarding the CAIR is eventually resolved, the result

will be more stringent emission reduction require-

ments on EGUs, resulting in even greater indirect re-

auctions in EGU HAP emissions than those EPA took

account of in its March 2005 determination. Thus,

the D.C. Circuit’s CATR decision does not in any way

“cast[] mto doubt the entire foundation upon which

EPA relied in promulgating the rules at issue” here.

See Opposition at 25.

CONCLUSION

The petition for writ of certiorari should be

granted.

12

Respectfully submitted,

HENRY V. NICKEL

F. WILLLAM BROWNELL

LEE B. ZEUGIN

(Counsel of Record)

HUNTON & WILLIAMS LLP

1900 K Street, N.W.

Washington, D.C. 20006

(202) 955-1500

Counsel for the Utility Air

Regulatory Group

February 6, 2009