St MI v. EPA , 254 F.3d 1087 ( 2000 )

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
v.
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, 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, Mi-
chael 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, Assitant Attorney General, Jeffrey Modi-
sett, Attorney General, State of Indiana, Daniel B. Dovenbar-
ger, 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, III, 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,
III, Robert E. Lannan, II, Terry J. Satterlee, Alok Ahuja,
Mark E. Shere, Bryan G. Tabler, Jeffrey L. Landsman,
Jennifer S. McGinnity, Howard E. Shapiro, Margaret Clai-
borne Campbell, Thomas E. Knauer, David R. Straus, Debo-
rah 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.
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 S. 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 respon-
dent. 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 Gener-
al, 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.
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. An-
drew 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") s 110(a)(1), 42 U.S.C. s 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
__________
* 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.
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
s 110(k)(5), 42 U.S.C. s 7410(k)(5).
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.1 See Finding of
Significant Contribution and Rulemaking for Certain States
in the Ozone Transport Assessment Group Region for Pur-
poses 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" pro-
hibiting
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.
CAA s 110(a)(2)(D)(i)(I), 42 U.S.C. s 7410(a)(2)(D)(i)(I)
(1994). EPA uniformly required that each state reduce nitro-
gen oxides (NOx--an ozone precursor) by the amount accom-
plishable by what EPA dubbed "highly cost-effective con-
trols," namely, those controls EPA found capable of removing
NOX 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 NOx
__________
1 The states are Alabama, Connecticut, Delaware, Georgia, Illi-
nois, Indiana, Kentucky, Maryland, Massachusetts, Michigan, Mis-
souri, North Carolina, New Jersey, New York, Ohio, Pennsylvania,
Rhode Island, South Carolina, Tennessee, Virginia, West Virginia,
and Wisconsin.
reduction violated the statute; that EPA's scheme of uniform
controls is arbitrary and capricious; that CAA
s 110(a)(2)(D)(i)(I) as construed by EPA violates the nondele-
gation doctrine.
In Part II we hold that the record does not support
including Wisconsin in the SIP call, nor does it support
creating NOx 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 Regu-
latory Flexibility Act.
In Part IV we reject the claim that EPA arbitrarily revised
the definition of a "NOx 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 appropri-
ate, 42 U.S.C. s 7409(d)(1), EPA promulgated a new, more
stringent "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. s 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. s 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, s 6103, 112 Stat.
107, 465 (1998) (providing that states submit suggested desig-
nations 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 s 110(a)(2)(D)-specific SIP call pursuant to its au-
thority under s 110(a)(1). Section 110(a)(1) provides that
[e]ach 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. s 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. v. EPA, 175 F.3d
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 1-hour standard.
I. General Claims
A. Transport Commission
States have the primary responsibility to attain and main-
tain NAAQS within their borders. See CAA s 107(a), 42
U.S.C. s 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 "as necessary" ("SIP call"). CAA
s 110(k)(5), 42 U.S.C. s 7410(k)(5). 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"
(i) prohibiting, consistent with the provisions of this sub-
chapter, any source or other type of emissions activity
within the State from emitting any air pollutant in
amounts which will ... contribute significantly to nonat-
tainment 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 requirements
of sections [126] and [115] ... (relating to interstate and
international pollution abatement).
42 U.S.C. s 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 [s 110(a)(2)(D)(ii)]."
42 U.S.C. s 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. s 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. s 7506a(a). The section also provides
that whenever EPA "establishes a transport region ...
[EPA] shall establish a transport commission." 42 U.S.C.
s 7506a(b)(1). Among other things, a section 176A commis-
sion is to assess the interstate transport situation in the
relevant transport region, assess interstate pollution mitiga-
tion strategies, and recommend to EPA measures necessary
"to ensure that the plans for the relevant States meet the
requirements of [section 110(a)(2)(D)]." 42 U.S.C.
s 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. s 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.
s 7511c(a). The section also requires that "[i]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 volatile organic compounds
control technology. 42 U.S.C. s 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 addi-
tional ozone control measures. See 42 U.S.C. s 7511c(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 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 NOx
emissions in order to address the transport problem. Howev-
er, 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
concedes 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. ss 7506a(b)(2), (c), 7511c(c)(5). From this hodgepodge
of largely unrelated cross-references, Industry/Labor peti-
tioners argue that EPA can only issue a section 110(k)(5) SIP
call to enforce section 110(a)(2)(D)'s requirement after form-
ing 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. ss 7506a(a),
(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 commission
upon the establishment of a transport region because
"[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. s 7511c(a)-(c). Thus, Industry/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 togther in a manner to effect 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 NOx emis-
sions of the individual states. See id. at 57,383-84. A
potential shortcoming of the NPRM's approach was that it
was too multi-state in nature. EPA knew how much NOx
each state was emitting, but a state's emissions as a share of
total emissions do not necessarily correspond proportionately
to its share in the creation of ozone in downwind states.
OTAG's multi-state modeling of such downwind transporta-
tion 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. Id. at 57,384. According to EPA, this confirmed
the results of the regional modeling. Id.
The two types of state-specific modeling go by the names
UAM-V and CAMx. 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 (NOx 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 NOx 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
migration of ozone from a state than the UAM-V showed for
all man-made NOx 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 NOx 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,
s 110(a)(2)(E)(I) 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
U.S.C. s 7410(a)(2)(E) (1982) (emphasis added). In a number
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 v.
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 s 110(a)(2)(D)(i)(I). Thus the states would equate
the old standard--"prevent attainment"--with the new stan-
dard: "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 s 110(a)(2)(D)(i)(I) does not permit EPA
to take into consideration the cost of reducing ozone. The
full section provides that SIPs must contain provisions ade-
quately 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. s 7410(a)(2)(D)(i)(I) (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 mak-
ing this listing EPA drew lines based on the magnitude,
frequency, and relative amount of each state's ozone contribu-
tion to a nonattainment area. For example, in one calculation
it looked at the number of NOx parts per billion ("ppb") that a
candidate state's emissions made to exceedances in specific
downwind locations (examined as a proportion of those excee-
dances). Indiana was found to contribute at least 2 ppb to
4% of the 1-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 nonat-
tainment 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 contribu-
tion 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
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
s 110(a)(2)(D)(i)(I), 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 NOx 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 NOx 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 s 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 NOx 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 permit-
ted to use that criterion in selecting its final rule.2 Nor has it
__________
2 Indeed, accepting EPA's belief that ozone cannot be held re-
sponsible 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]ossible long-
been argued that the term "significant" required consider-
ation 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 contri-
bution under s 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 consider-
ations; Petitioning States simply stress that EPA must estab-
lish 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 feasibili-
ty, but that these concerns could not be the "primary consid-
eration."
At oral argument, counsel for the states abandoned this
position and decided that the statute flatly prohibits EPA
from 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. Id. at 16-17.
__________
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 NOx 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 NOx 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.").
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 permit-
ted by their states, buy up pollution allowances from firms
that are granted allowances because they have over-
controlled for NOx--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;3 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
s 110(a)(2)(D)(i)(I), with absolutely no offsetting environmen-
tal 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 s 110(a)(2)(D)(i)(I), in 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 "s 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 stat-
ute that seemed to restore to EPA via s 110(k)(5) what it
would take away via s 110(a)(2)(D). Industry/Labor claimed
__________
3 A glance at EPA's regulations for allowance trading will con-
vince any doubter that transaction costs can safely be expected to
be substantial. See 63 Fed. Reg. at 57,457-75.
that costs could be considered when EPA determines if a SIP
is "adequate" under s 110(k)(5). Transcript of Oral Argu-
ment at 28. The states actually offered this same reading of
s 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
s 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
s 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 s 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)(I) 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. s 7410(a)(2)(D)(i)(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 flat
"amount" of contribution, based exclusively on health con-
cerns, such that any excess would put a state in the forbidden
zone of "significance"?4 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 dimension--
here, in the petitioners' view, health alone. Indeed, "signifi-
cant" is a very odd choice to express unidimensionality;
consider the phrase "significant other." In some contexts,
"significant" begs a consideration of costs. In finding a
threshold requirement of "significant risk" in s 3(8) of the
Occupational Health and Safety Act, 29 U.S.C. s 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 ("Benzene"), 448 U.S. 607, 655
(1980) (plurality opinion). The plurality withheld judgment
on whether the Act required a "reasonable correlation be-
tween 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 s 3(8) and regulation of "significant risk" to
require "cost-effective protective measures" and set stan-
dards with an eye toward "the costs of safety standards
[being] reasonably related to their benefits." See Interna-
tional Union v. OSHA (Lockout/Tagout II), 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,
__________
4 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.
Richard B. Stewart, Cass R. Sunstein & Matthew L. Spitzer,
Administrative Law and Regulatory Policy 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
s 110(a)(2)(D)(i)(I). 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 "significance" 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
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 also 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 s 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 intend-
ed 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: "[W]hile the statutory lan-
guage and legislative history do not bar petitioners' construc-
tion, they 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, Inter-
preting 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 envi-
ronmental benefit is phrased in general quantitative terms
("ample margin of safety," "substantial restoration," and "ma-
jor"), 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 demand-
ing 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 s 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
legislative history suggesting that cost considerations should
be barred.
In sum, there is nothing in the text, structure, or history of
s 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 NOx 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 ob-
serve that where two states differ considerably in the amount
of their respective NOx contributions to downwind nonattain-
ment, under the EPA rule even the small contributors 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 contribu-
tion" 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 NOx 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 NOx 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),
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." Id. 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 NOx trading. Public health benefits would be approx-
imately the same, and there would be no significant difference
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
NOx contribution was too much (i.e., worthy of a SIP call).
We must recognize here that EPA's cost-effectiveness cri-
terion is a radically incomplete line-drawing device. EPA has
effectively ruled that each affected state must get down to the
NOx emissions levels that would prevail if it removed all NOx
emissions costing $2000/ton or less to remove. This satisfies
its "cost-effectiveness" 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 "NOx emis-
sions controls that are available and of comparable cost to
other recently undertaken or planned NOx measures," Final
Rule, 63 Fed. Reg. at 57,400, it neither rests that benchmark
on anything in the language or function of s 110(a)(2)(D)(i)(I),
nor otherwise explains why the resulting cut-off point repre-
sents the right degree of "cost-effectiveness" (i.e., why "high-
ly 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, International
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, encompass-
ing all American enterprise." Id. 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 distin-
guished 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.
Nominally, of course, s 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, subject-
ing "all American industry" to EPA's s 110(a)(2)(D)(i)(I) dis-
cretion. 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
s 110(a)(2)(D)(i)(I) rulemaking. Accordingly, the grounds on
which we remanded in Lockout-Tagout I and American
Trucking for confining agency constructions are absent here.
II. Inclusion 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)(I) requires that a state "contribute significantly
to nonattainment in ... any other State" in order to be
included in the challenged SIP call. 42 U.S.C.
s 7410(a)(2)(D)(i)(I) (emphasis added). As explained below,
EPA erroneously included Wisconsin in the SIP call because
EPA failed to explain how Wisconsin contributes to nonattain-
ment in any other state.
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." Id.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. s 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
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 Mis-
souri and Georgia challenge EPA's decision to calculate NOx
budgets for these two states based on the entirety of NOx
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 north-
ern two-thirds of Georgia "contribute" to downwind concen-
trations; accordingly, they say, the NOx budgets for Missouri
and Georgia should be based solely on those emissions.
We must here explain how EPA calculated NOx budgets.
It projected the total amount of NOx 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 NOx emissions if "highly cost-effective con-
trols" were implemented. The resulting calculation became
the state's NOx budget, with the difference between the base
case and the controlled case being the "significant" contribu-
tion discussed above. Obviously a state's NOx budget will
vary depending on whether EPA considers all of the NOx
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 nonexis-
tent emissions need not be controlled). For Missouri and
Georgia, as for all other included states, NOx budgets were
calculated using all NOx 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 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 trans-
port impacts of the coarse grid areas on the fine grid are
minimal and therefore, do not include the coarse grid areas
for recommended control measures other than those that
would be applied nationally." Petitioners argue that EPA
should base NOx 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 diffi-
culties 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).
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 "emis-
sions activity" "contribute[s] significantly to nonattainment"
in another state.
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
modelers allocated their scarce resources purposefully, by
reference to known air quality data, explicitly taking into
consideration the "locale of various problem areas (as repre-
sented by urban-area modeling domains), and emissions den-
sity." Id. 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 Birming-
ham, 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
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. Id. 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 signifi-
cantly to downwind nonattainment or maintenance problems."
Id. 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 contributions
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]here is no peculiar meteoro-
logical phenomenon that would indicate that emissions from
some portion of [each of the affected states] would not impact
downwind nonattainment or maintenance problems." Id. In
addition, "the atmosphere is constantly in motion and has no
limitations at geo-political boundaries." Id. 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 s 110(a)(2)(D)(i)(I) to control all NOx emis-
sions 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 contribu-
tions 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
NOx 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,
(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.
EPA offers a second administrative problem. If the con-
cern for not allowing s 110(a)(2)(D)(i)(I) 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 collective-
ly 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 measure-
ment to a point of insignificance. All they are claiming is that
where the data--calculated under EPA's supervision--incul-
pate 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 budgets not only encom-
pass the 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
s 110(a)(2)(D)(i)(I). 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 s 110(a)(2)(D)(i)(I))
may actually diminish the cutbacks in areas that are making
a contribution to other states' nonattainment.
Thus nowhere has EPA reasonably explained why NOx
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 inclu-
sion 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. s 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
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 NOx SIP Call C-5, H-2 (1998).
The CAMx modeling results were comparable (25 ppb maxi-
mum 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 contribu-
tion to 1-hour nonattainment in Atlanta was no more "insig-
nificant" 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.
III. Federalism and Regulatory Flexibility Act
A. NOx 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-
ment as described under section 110(a)(2)(D).5 In fashioning
the SIP call, EPA focused on OTAG's determination that
"[r]egional NOx 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 NOx 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 NOx reductions provide the
key to addressing regional ozone problems, EPA's SIP call
addresses regional ozone nonattainment through NOx emis-
sions "budgets" established by the agency for each covered
state. The budgets represent the amount of allowable NOx
emissions remaining after a covered state prohibits the NOx
amount contributing significantly to downwind nonattainment.
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 bud-
get 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." Id. 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." Id. at 57,378. In addi-
tion, each state has the option of adopting an interstate
trading program that allows it to purchase NOx "allowances"
from sources that have elected to over-control. Id. at 57,430.
The SIP call also gives the states the option in some circum-
stances to use "banked" allowances (i.e. allowances from prior
years) to comply with emissions limits. See id.Petitioners assert that EPA's NOx budget program imper-
missibly intrudes on the statutory right of the states to
__________
5 As noted above, we will not address the 8-hour portion of the
SIP call.
fashion their SIP submissions in the first instance. In sup-
port 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 achiev-
ing the SIP requirements 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 au-
thority under the CAA to initially propose specific emission
limitations. See id. at 79. The Court defined "emission lim-
itations" 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." Id. at 78 (emphasis added).
The Court further held that EPA has only "a secondary role
in the process of determining and enforcing the specific,
source-by-source emission limitations." Id. at 79 (emphasis
added). The Train decision and subsequent precedent make
clear that section 110 left to the states "the power to [initial-
ly] determine which sources would be burdened by regula-
tion 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); Riv-
erside 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
condition approval of [a state's] implementation plan ... on
the state's adoption of a specific control measure." Virgi-
nia, 108 F.3d at 1408. For the reasons set forth below, we
conclude that the NOx budgets do not fall within the realm
of impermissible SIP call regulation as defined in Virginia
and Train.
Given the Train and Virginia precedent, the validity of the
NOx 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 NOx bud-
get system. In essence, the NOx budget in question is an
EPA mandate prohibiting NOx emissions in the 23 jurisdic-
tions 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 NOx emissions contribute to
ozone problems. See, e.g., id. at 57,359; see also 40 C.F.R.
s 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 NOx
significant contribution level and agree with EPA that the
NOx 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. s 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. Co.,
427 U.S. at 256-57 (referring to the requirements contained
in the statute). Given EPA's authority to ensure that submit-
ted SIPs adequately prohibit significantly contributing emis-
sions, EPA permissibly relied on its general rulemaking
authority to prospectively inform the states of EPA's signifi-
cance 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 NOx reduction
levels based, in part, on assumptions about reductions obtain-
able 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 sec-
tor"). More importantly, 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 con-
trols. In Virginia, we did not bar EPA from permitting
more costly alternatives but rather alternatives states would
consider "unreasonable or impracticable." Here, EPA ac-
commodates Virginia's mandate by allowing reasonable con-
trol 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 NOx reductions.
Petitioners' reliance and emphasis on VOC reductions in lieu
of NOx reductions ignores the scientific basis for EPA's rule.
OTAG and EPA concluded that VOC controls would not
effectively address interstate ozone transport. Furthermore,
states can cure any NOx 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 NOx 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 pro-
gram does not mandate a "specific, source-by-source emission
limitation[ ]," the NOx budget plan does not run afoul of
Train or Virginia.
B. Regulatory Flexibility Act
The Regulatory Flexibility Act ("RFA"), 5 U.S.C. ss 601-
612, as amended in 1996 by the Small Business Regulatory
Enforcement Fairness Act ("SBREFA"), Pub. L. No.
114-121, Title II, 110 Stat. 847, 857-74, ss 201-253 (codified
at 5 U.S.C. ss 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. s 603(a),
including small businesses, small organizations, and small
governmental jurisdictions. See id. s 601(6). In addition,
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."
Id. s 604(a).
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." Id. s 605(b). In the instant case, EPA certified that
the proposed and final rule will not have a significant econom-
ic 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
s 605(b) certification is whether the NOx SIP call "regulates"
small entities.
EPA based its certification on its view that the NOx 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
NOx 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 s 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 con-
clude that EPA's certification under s 605(b) is justified.
IV. Remaining Claims
A. Definition of "NOx Budget Unit"
RFA petitioners also contend that EPA arbitrarily revised
the definition of a "NOx budget unit" to bring certain small
sources within the scope of the core group of emission-
producing sources to which the NOx Budget Trading Rule
("model trading rule") applies.6 This contention is meritless.
__________
6 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 NOx "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 require-
ments 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.
In the proposed rule, a "NOx budget unit" was defined as a
boiler that either serves electricity generators with a capacity
greater than 25 megawatts ("MW") or does not serve genera-
tors 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 Cer-
tain States in the Ozone Transport Assessment Group Region
for Purposes of Reducing Regional Transport of Ozone ("Sup-
plemental 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." Id. 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 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." Id. at 57,463. It is unclear why this
statement renders EPA's final action arbitrary. EPA's defi-
nition of a NOx 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 NOx SIP call for being based on
the following arbitrary and capricious actions by EPA: EPA's
failure to determine whether non-EGUs are significant con-
tributors, EPA's flawed cost assumptions in its determination
of cost-effective control measures for non-EGUs, EPA's erro-
neous calculation of non-EGU budgets, and EPA's 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 NOx 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 "[b]oth elevated
(from tall stacks) and low-level NOx 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 boil-
ers 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
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 NOx 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.7 Therefore,
__________
7 For instance, the last item on the list, that it is arbitrary and
capricious for EPA to assume NOx 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 contem-
plates for firms expected to be burdened under the present rule, the
we reject CIBO's claims regarding EPA's underlying cost
assumptions about industrial boilers.
4. Determination of Non-EGU Component of State NOx
Budgets
CIBO contends that EPA's calculation of the non-EGU
component for the State NOx 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 NOx 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 NOx budgets for non-EGUs.
__________
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 could
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.
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
their potential electrical output capacity or less than 25 MW
per year. See 42 U.S.C. s 7651a(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
25MW) 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. Id. There are
several problems with EPA's response. First, it is undisput-
ed 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 rule-
making in November 1997 nor the final rule in October 1998
introduced the new definition. EPA waited until the Decem-
ber 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 Re-
gional Transport of Ozone ("Correction Notice to Final
Rule"), 63 Fed. Reg. 71,220, 71,223 (1998). After the Decem-
ber 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 justifi-
cation 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 NOx 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 "[m]any of the definitions ... are the same
as those used in ... the Acid Rain Program regulations, in
order to maintain consistency among programs." Supple-
mental Notice of Proposed Rule, 63 Fed. Reg. at 25,923.
Given the vague and conflicting signals that EPA was send-
ing, it is an exaggeration to state that some general "theme"
of the regulatory consequences of deregulation 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.
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 NOx 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." Id. 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 Sta-
tionary 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 allowed comments on the issue. Considering EPA's
repeated affirmation of the 70% assumption throughout rule-
making 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, espe-
cially given the magnitude of the consequences of the pro-
posed change on the regulated bodies. Therefore, we remand
for further consideration on this issue.8
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. Id. at
57,416. Then, in the December correction notice, EPA large-
ly repeated the same methodology for determining the cutoff
level, but added that "[a] stationary internal combustion
engine and a cement plant were determined 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
through an 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.
__________
8 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.
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 NOx emissions before May 2003 to a level below
that is required by any regulatory scheme. ERCs can then
be used to compensate for emitting emissions above required
levels in a later time period. See Final Rule, 63 Fed. Reg. at
57,430. EPA limited the amount of available ERCs for each
state to the size of each state's compliance supplement pool
("CSP"). See id. at 57,474. The CSP is an additional allow-
ance of emissions that allows states to emit 200,000 tons of
NOx in the 2003-2004 ozone seasons over the state emissions
budgets. Id. at 57,428. EPA created the CSP in response to
the comments that if all utilities had to install pollution
control equipment by May 1, 2003, there might be disruptions
in electricity supply. See id. If a state chooses to use the
CSP, it can either provide ERCs or distribute the allowances
to sources that demonstrate a need for the compliance supple-
ment. See id. at 57,429-30.
PP&L contends that imposing this limit on the number of
ERCs is arbitrary and capricious because placing any limit on
ERCs is environmentally counterproductive. We do not find
this contention persuasive. EPA noted during the comment
period that ERCs, although generally beneficial, can be costly
in that they allow states to exceed their budgets. See Re-
sponses to Significant Comments on the Proposed Finding of
Significant Contribution and Rulemaking for Certain States
in the Ozone Transport Assessment Group (OTAG) Region
for Purposes of Reducing Regional Transport of Ozone 346
(September 1998) ("Responses to Comments"). EPA noted
further that the CSP, by establishing a cap on the number of
allowances to be distributed, limited such potential costs. Id.
EPA's decision is thus reasonable.
PP&L also contends that EPA has not demonstrated why
the "flow control mechanism" is not sufficient to address its
concern. Under the flow control mechanism, the use of
banked allowances exceeding 10% of the emissions budget for
sources in the trading program is either flatly prohibited or
discouraged by discounting the value of ERCs used as such,
and states can choose between either method. See Final
Rule, 63 Fed. Reg. at 57,431-32. This complaint by PP&L
overlooks the fact that EPA included the flow control mecha-
nism in the regulatory scheme "[a]s a final safeguard limiting
the impact of additional allowances eligible for banking in the
system." Responses to Comments, at 346. Therefore, it was
a safeguard created in addition to the CSP limitation. It was
within EPA's discretion to devise multiple limitations to con-
tain the environmental cost of ERCs.
PP&L further contends that, even if it is rational for EPA
to place a limit on the amount of ERCs, EPA's choice of
setting the limit at the same amount as the CSP is arbitrary
and capricious. This contention fails as well. The record
shows that EPA allowed ERCs merely as a mechanism for
managing the CSP, not as an independent program with a
purpose separate from that of the CSP. See Final Rule, 63
Fed. Reg. at 57,428-33. Therefore, EPA's decision to limit
the amount of ERCs to the size of the CSP was reasonable.
2. Emissions Multiplier for Low Mass Emission Units
PP&L also contends that EPA arbitrarily required "low
mass emission units" ("LMEUs") to use a 15% multiplier to
calculate their emissions. We disagree.
EPA allows LMEUs either to use a generic default NOx or
to determine a unit-specific NOx emission rate by conducting
a stack test once every five years. Because EPA found that
the stack test results can vary by 15% or more depending on
atmospheric conditions, EPA requires an LMEU to calculate
its emissions rate by adding 15% to the stack test result. See
Final Rule, 63 Fed. Reg. at 57,490.
PP&L contends that this is unreasonable because EPA has
stated that the testing would likely underestimate emissions
during cooler less humid conditions. See id. PP&L reasons
that because the SIP call applies only during summer seasons
(when ozone forms), that the stack test underestimates emis-
sions during the winter cannot justify the 15% multiplier.
This contention is to no avail. Because the record contains
evidence that NOx rates determined by the stack test can
vary widely even during the ozone season, EPA's decision was
reasonable. See Docket A-97-35, Item IV-A-1 at 43-54
(August 26, 1998).
Conclusion
We vacate EPA's final rule with respect to Wisconsin,
Missouri, and Georgia (see Part II.A-B). These cases are
remanded for further consideration in light of this opinion.
We hold that EPA failed to provide adequate notice of a
change in the definition of an electric generating unit (see
Part IV.B.5), and that EPA did not provide adequate notice of
a change in the control level assumed for large stationary
internal combustion engines (see Part IV.C). These cases are
also remanded.
In all other respects, the petitions for review are denied.
So ordered.
Sentelle, Circuit Judge, dissenting: Unlike the majority's
journey through this regulatory scheme, mine is neither
lengthy nor complex, because I get off at the first stop. In
promulgating the regulations at issue, EPA purported to
exercise the authority Congress conferred upon it to enforce
the requirements of 42 U.S.C. s 7410(a)(2)(D)(i)(I) which
empowers the Administrator to police the contents of State
Implementation Plans ("SIPs"), specifically to ensure that
such plans 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 ambient air quality
standard....
42 U.S.C. s 7410(a)(2)(D)(i)(I) (1994) (emphasis added). EPA
is a federal agency--a creature of statute. It has no constitu-
tional or common law existence or authority, but only those
authorities conferred upon it by Congress. If there is no
statute conferring authority, a federal agency has none. The
only statute upon which EPA purports to rely in the current
controversy is s 7410(a)(2)(D)(i)(I). That section provides
authority for EPA to require States to act in a certain fashion
based upon the presence of sources or activities which emit
"pollutants in amounts which will ... contribute significantly
to nonattainment." It would appear to me that Congress
clearly empowered EPA to base its actions on amounts of
pollutants, those amounts to be measured in terms of signifi-
cance of contribution to downwind nonattainment. Instead,
EPA has chosen, doubtless in the pursuit of beneficent ends,
to assert authority to require the SIPs to contain provisions
based not on the amounts of pollutants, nor even on the
relative significance of the contributions of such pollutants to
downwind nonattainment, but on the relative cost effective-
ness of alleviation. I agree with the State petitioners that it
is undeniable that EPA has exceeded its statutory authority.
We have before had occasion to remind EPA that its
mission is not a roving commission to achieve pure air or any
other laudable goal. In American Petroleum Institute v.
United States EPA, 52 F.3d 1113 (D.C. Cir. 1995), we re-
viewed an EPA rule requiring that thirty percent of the
oxygen in reformulated gasoline be derived from renewable
sources, such as ethanol. The statutory authority under
which EPA operated, 42 U.S.C. s 7545(k)(1) empowered EPA
to promulgate regulations achieving "the greatest reduction
in emissions of ozone forming volatile organic com-
pounds...." 42 U.S.C. s 7545(k)(1). Although EPA ad-
vanced commendable goals of economic benefit for its inclu-
sion of the additional goal of ethanol market protection, we
struck down the overreaching and reminded EPA that "it is
axiomatic that an administrative agency's power to promul-
gate legislative regulations is limited to the authority delegat-
ed by Congress." API, 52 F.3d at 1119 (quoting Bowen v.
Georgetown Univ. Hosp., 488 U.S. 204, 208 (1988)).
Similarly, in Ethyl Corp. v. EPA, 51 F.3d 1053 (D.C. Cir.
1995), we considered EPA's denial of a Clean Air Act waiver
application based on health considerations. We did not sug-
gest that EPA acted in bad faith or that health considerations
were not important, but we repaired to the statutory grant of
authority in 42 U.S.C. s 7545(f)(4), which based the Adminis-
trator's authority to deny waiver solely on the property of an
additive to "cause or contribute to a failure of any emission
control device or system...." 42 U.S.C. s 7545(f)(4). We
again granted the petition for review of the Administration's
action, reminding EPA that where "the plain language of a
provision makes it clear that ... decisions are to be based on
one criterion, the EPA cannot base its decision on other
criteria," even on a criterion as laudable as the health of the
public. Ethyl Corp., 51 F.3d at 1058.
For all the majority's discussion of inconsistent arguments
by States and the possibility of taking costs into account
elsewhere raised by the Administration and adopted by the
majority, I do not see why the present controversy does not
fall squarely within the four corners of API and Ethyl Corp.
Congress set forth one criterion: the emission of an amount
of pollutant sufficient to contribute significantly to downwind
nonattainment. EPA adopted a different criterion: the cost
effectiveness of alleviation. I would remind the agency once
more of the lessons of API and Ethyl Corp., allow the
petitions for review, and end the case.
The majority makes a fundamental mistake by divorcing
the adverb "significantly" from the verb it modifies, "contrib-
ute." The majority compounds its error by divorcing signifi-
cantly from the rest of the statutory provision in issue. Maj.
Op. at 19-23. By focusing on "significance" or what it means
to be "significant," the majority ignores the fact that the
statute permits EPA to address that which is "contribut[ed]
significantly." 42 U.S.C. s 7410(a)(2)(D)(i)(I) (emphasis add-
ed). And what should EPA look for as being contributed
significantly? Congress clearly answered that question for
the agency as being an "amount" of an "air pollutant." Id.Considering that Congress expressly gave EPA authority
with regard to "any air pollutant in amounts which will ...
contribute significantly to nonattainment ...," id. (emphasis
added), I marvel at an interpretation that permits cost effec-
tiveness to find a place in a statutory provision addressing
amounts of air pollutant contribution. While the contribution
must affect nonattainment significantly, no reasonable read-
ing of the statutory provision in its entirety allows the term
significantly to springboard costs of alleviation into EPA's
statutorily-defined authority. Given s 7410(a)(2)(D)(i)(I)'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 cost considerations
into the statute. I just cannot agree with such an unusual
exercise in statutory construction.
I see nothing in Chevron U.S.A. Inc. v. NRDC, Inc., 467
U.S. 837 (1984), that either compels or counsels the majority's
result. EPA argues that Congress did not define significant
contribution. True, it did not. Neither did it define amount.
But neither EPA nor the majority have offered any reason-
able interpretation of those words which makes them depend
upon or even relate to the cost effectiveness of alleviation.1
EPA comes close to arguing: Congress has not expressly
forbidden us to use this criterion, therefore we may use it.
As we said in Ethyl Corp.:
To suggest, as the [EPA] effectively does, that Chevron
step two is implicated any time a statute does not
expressly negate the existence of a claimed administra-
tive power ..., is both flatly unfaithful to the principles
of administrative law ... and refuted by precedent.
51 F.3d at 1060. Because the majority's deference to EPA's
unreasonable statutory interpretation as couched in the agen-
cy's scurrilous "second-step" cost effectiveness analysis ven-
tures off track, as I said, I am getting off at the first stop.
Because I would invalidate the regulatory scheme before us
at its inception, I will not address the subsidiary issues
pursued by my colleagues.
__________
1 Contrary to the suggestion of the majority, neither of the cases
cited by the majority bear any implication that the cost of alleviat-
ing or otherwise dealing with risk expressed as a noun or a verb has
any effect upon the definition of "significant" or "significantly" used
as an adjective or adverb modifying that noun or verb. The portion
of Industrial Union Department v. American Petroleum Institute,
448 U.S. 607, 655 (1980) (plurality opinion) quoted by the majority
to the effect "that a 'significant' risk ... is not a mathematical
straitjacket," (Maj. Op. at 20) does not deal in any fashion with the
cost of alleviation. Rather, Justice Stevens in that opinion was
contrasting the significance of a one-in-a-billion chance of cancer
from drinking chlorinated water against the one-in-a-thousand risk
that regular inhalation of certain benzene-containing vapors would
be fatal. Obviously, the "significance" of the risk deals with its
importance, not the cost of its alleviation. Equally off point is
International Union, United Auto Workers v. OSHA, 37 F.3d 665,
668-69 (D.C. Cir. 1994), which concerned the cost-effectiveness of
alleviating measures directed at risk theretofore determined to have
been significant, not with the use of cost-effectiveness in determin-
ing the significance of the risk vel non.