Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-99-01277/USCOURTS-caDC-99-01277-0/pdf.json

Parties Involved:
Commonwealth of Pennsylvania
Petitioner
Environmental Protection Agency
Respondent

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 23, 2001 Decided June 8, 2001

No. 99-1268

Appalachian Power Company, et al.,

Petitioners

v.

Environmental Protection Agency,

Respondent

Commonwealth of Pennsylvania,

Department of Environmental Protection, et al.

Intervenors

Consolidated with

99-1270, 99-1274, 99-1276, 99-1277, 99-1279,

99-1280, 99-1281, 99-1286, 99-1287, 00-1169,

00-1187, 00-1189, 00-1190, 00-1191, 00-1192,

00-1194

On Petitions for Review of an Order of the

Environmental Protection Agency

---------

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Norman W. Fichthorn argued the cause for the Industry

Petitioners on the Electric Generating Facility Issues. With

him on the briefs were Andrea Bear Field, James D. Elliott,

Mel S. Schulze, David M. Flannery, Kathy G. Beckett, Gale

R. Lea, Scott D. Goldman, and Jeff F. Cherry. Kyle W.

Danish entered an appearance.

Marc D. Bernstein, Assistant Attorney General, State of

North Carolina, argued the cause for the Petitioning States.

With him on the briefs were Michael F. Easley, Attorney

General, James C. Gulick and J. Allen Jernigan, Special

Deputy Attorneys General, James P. Longest, Jr. and Amy

R. Gillespie, Assistant Attorneys General, Betty D. Montgomery, Attorney General, State of Ohio, Bryan F. Zima, Assistant Attorney General, Bill Pryor, Attorney General, State of

Alabama, Tommy E. Bryan and Prudence A. Cash-Brown,

Assistant Attorneys General, Jennifer Granholm, Attorney

General, State of Michigan, Alan F. Hoffman, Assistant

Attorney General, Charles M. Condon, Attorney General,

State of South Carolina, Samuel L. Finklea and Thomas G.

Eppink, Attorneys, Mark L. Earley, Attorney General, Commonwealth of Virginia, Roger L. Chaffe, Senior Assistant

Attorney General, Stewart T. Leeth, Assistant Attorney General, and Thomas H. Zerbe, Senior Counsel, State of West

Virginia.

Theodore L. Garrett argued the cause for the Split State

Petitioners Kansas City Power & Light Company, et al.

With him on the briefs were Michael D. Hockley and Terry

W. Schackman.

Scott H. Segal argued the cause for the Non-Electric

Generating/Industrial Petitioners. With him on the briefs

were Lisa M. Jaeger, Charles S. Carter, Deborah Ann Hotel,

Kathy G. Beckett and Scott Goldman.

Andrew J. Doyle, Attorney, U.S. Department of Justice,

argued the cause for respondent. With him on the brief were

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Lois J. Schiffer, Assistant Attorney General, and Sara

Schneeberg, Attorney, U.S. Environmental Protection Agency.

Robert A. Reiley and M. Dukes Pepper, Jr. were on the

brief of Intervenor Commonwealth of Pennsylvania. Thomas

Y. Au entered an appearance.

Before: Edwards, Chief Judge, Williams and Sentelle,

Circuit Judges.

Opinion for the Court filed by Circuit Judge Sentelle.

Sentelle, Circuit Judge: This case involves multiple challenges to "Technical Amendments" to the "NOx SIP Call"

rulemaking at issue in Michigan v. EPA, 213 F.3d 663 (D.C.

Cir. 2000), cert. denied, 121 S.Ct. 1225 (2001). At issue here

are revisions to the database used to establish state "budgets"

for emissions of nitrogen oxide ("NOx") which are regulated

by the Environmental Protection Agency ("EPA") under the

Clean Air Act ("CAA"). Petitioners include upwind states

subject to the NOx SIP Call and industries located therein.

The Commonwealth of Pennsylvania intervenes in support of

the EPA.

We hold that petitioners' challenges to the EPA's growth

factors are neither time-barred nor estopped by principles of

res judicata. On the merits, we remand the EPA's growth

factors for electric generating units for the same reasons as

in Appalachian Power Co. v. EPA, Nos. 99-1200, et al. (May

15, 2001). The remaining claims in the various petitions for

review are denied with two exceptions. We remand the

EPA's source definitions pending completion of further rulemakings in accordance with Michigan, and remand and vacate the NOx emission budget for the state of Missouri as the

EPA continues to include portions of the state for which no

significant contribution findings have been made.

I. Background

A. Relevant Facts

In October 1998, the EPA issued the "NOx SIP Call"--a

final rule under CAA section 110(k)(5), 42 U.S.C. s 7410(k)(5),

requiring 22 states and the District of Columbia ("upwind

states") to revise their State Implementation Plans ("SIPs")

to impose additional controls on NOx emissions. See Finding

of Significant Contribution and Rulemaking for Certain

States in the Ozone Transport Assessment Group Region for

Purposes of Reducing Regional Transport of Ozone, 63 Fed.

Reg. 57,356 (Oct. 27, 1998) ("NOx SIP Call"). The EPA

concluded that emissions from the upwind states "contribute

significantly" to ozone nonattainment in downwind states, in

violation of CAA section 110(a)(2)(D)(i). 42 U.S.C.

s 7410(a)(2)(D)(i). Under the SIP Call, upwind states are

required to reduce NOx emissions by the amount accomplishable by "highly cost-effective controls," defined as those

controls capable of removing NOx at a cost of $2,000 or less

per ton.

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Under the NOx SIP Call, each upwind state must limit its

summertime NOx emissions to a statewide emission "budget"

for the year 2007. "The budgets represent the amount of

allowable NOx emissions remaining after a covered state

prohibits the NOx amount contributing significantly to downwind nonattainment." Michigan, 213 F.3d at 686. Specifically, the NOx state budgets represent the EPA's projection for

what NOx emissions in 2007 would be for each state were

"highly cost-effective controls" implemented. Under the NOx

SIP Call, states have substantial flexibility in selecting combinations of emission control measures to meet their respective

budgets, so long as they do so by the regulatory deadline.

In setting the NOx budgets, the EPA relied upon emission

inventory data collected by the Ozone Transport Assessment

Group, a working group comprised of federal, state, industry,

and environmental group representatives. See Findings of

Significant Contribution and Rulemaking on Section 126 Petitions for Purposes of Reducing Interstate Ozone Transport,

64 Fed. Reg. 28,250, 28,253 (May 25, 1999); Michigan, 213

F.3d at 672. The EPA divided each state's NOx emissions

according to five source types or "sectors": electric generating units ("EGUs"), non-EGU stationary sources (such as

industrial boilers), area sources (smaller stationary sources),

highway mobile sources, and nonroad mobile sources. The

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EPA calculated 2007 budget allocations for each sector. Under the NOx SIP Call, the EPA assumed that emission

reductions would occur primarily in the EGU and non-EGU

sectors, representatives of which are petitioners here. In

developing their SIPs, however, states are free to achieve

emission reductions from other sources, so long as the SIP

provides for attainment of the requisite emission reduction

level.

To calculate the EGU emission budgets, the EPA obtained

source-specific "utilization" (heat-input) data for either 1995

or 1996. To this baseline, the EPA applied "growth factors"

derived from growth projections for the years 2001 through

2010 generated by the "Integrated Planning Model" ("IPM"),

a widely used utility planning model. Even though the EPA

had 2007 utilization projections from the IPM, the EPA

instead opted to apply the 2001-2010 growth factors to project growth over the 1996-2007 period in each state. The

resulting 2007 emission projections were then reduced based

on the EPA's estimate of the amount of emission reductions

that could be achieved through "highly cost-effective" means.

The resulting 2007 budgets are at issue in this case.

On March 3, 2000 this Court upheld the bulk of the EPA's

NOx SIP Call. See Michigan, 213 F.3d 663. Relevant to

this case, we specifically upheld the EPA's ability to set statespecific NOx budgets. At the same time, this Court remanded the regulatory definition of EGU because the EPA failed

to provide an adequate explanation. This Court also partially

vacated and remanded the SIP call as it applied to Missouri

because the EPA included portions of Missouri in the SIP call

with no evidence that these areas contributed to downwind

nonattainment.

At the same time that it promulgated the NOx SIP Call,

the EPA also proposed a Federal Implementation Plan

("FIP") that would impose direct emission controls on EGUs

and non-EGUs in any state that failed to implement an

adequate SIP by the regulatory deadline--May 31, 2004. In

January 2000, the EPA also mandated specific NOx emission

controls on EGUs and non-EGUs in upwind states in reUSCA Case #99-1277 Document #601608 Filed: 06/08/2001 Page 5 of 23
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sponse to petitions filed by eight Northeastern states under

section 126 of the CAA. 42 U.S.C. s 7426. Both the FIP

and the section 126 rule seek NOx reductions in accordance

with the NOx budgets established for the NOx SIP Call, as

amended by the rules challenged in this case. Earlier this

year, this Court upheld the EPA's section 126 rule in most

respects, though some portions of that rule relevant to this

case were remanded to the EPA for additional consideration.

See Appalachian Power Co. v. EPA, Nos. 99-1200, et al. (May

15, 2001).

B. The Technical Amendments

In the final SIP Call rule promulgated on October 27, 1998,

the EPA reopened public comment on the accuracy of data

upon which the emission inventories and budgets were based.

See NOx SIP Call, 63 Fed. Reg. at 57,427. On December 24,

the EPA extended the comment period "for emission inventory revisions to 2007 baseline sub-inventory information used

to establish each State's budget in the NOx SIP Call," and

further explained that it was seeking comment on the relevant data and assumptions so the agency could correct errors

and update information used to compute the 2007 budgets.

See Correction and Clarification to the Finding of Significant

Contribution and Rulemaking for Purposes of Reducing Regional Transport of Ozone, 63 Fed. Reg. 71,220 (Dec. 24,

1998) ("SIP Call Correction"). The EPA also announced that

it would reopen the comment period on equivalent inventory

data for the FIP and section 126 rulemakings as well because

all three rules relied upon the same inventories. Id.

Following this rulemaking, the EPA published two "Technical Amendments" ("TAs") revising the SIP Call NOx emission

budgets. In the first TA published May 14, 1999 ("May 1999

TA"), the EPA made some modifications to source-specific

emissions data, as well as to the 2007 baseline inventories.

Technical Amendment to the Finding of Significant Contribution and Rulemaking for Certain States for Purposes of

Reducing Regional Transport of Ozone, 64 Fed. Reg. 26,298

(May 14, 1999). In the second Technical Amendment published March 2, 2000 ("March 2000 TA"), the EPA made addiUSCA Case #99-1277 Document #601608 Filed: 06/08/2001 Page 6 of 23
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tional "corrections" based upon additional public comments it

received and the EPA's own internal review of the accuracy

of its data and calculations. Technical Amendment to the

Finding of Significant Contribution and Rulemaking for Certain States for Purposes of Reducing Regional Transport of

Ozone, 65 Fed. Reg. 11,222 (Mar. 2, 2000). The EPA also

explained that the March 2000 TA was "necessary to make

the NOx SIP Call inventory consistent with the inventory

adopted" by the EPA in the final section 126 rule, as the two

rules were to be based upon the same inventory. Id. The

EPA also made "corrections to the growth rates of many nonEGU sources" because it had "misapplied" these growth rates

in the May 1999 TA "version of the budget." Id. at 11,223.

These changes altered the 2007 baselines for some source

categories and some states.

II. Industry Petitioners--Electric Generating Issues

A. EGU Growth Factors

Industry Petitioners challenge the lawfulness of the NOx

emission budgets as set forth in the TAs, specifically, the

particular "growth factors" the EPA used to project future

utilization rates for EGUs in 2007. Petitioners allege that the

EPA's reliance upon these growth factors was arbitrary and

capricious because the growth factors were unsupported and

in conflict with state-based growth estimates. Petitioners

further contend that the EPA arbitrarily failed to determine

whether the resulting emission budgets could be achieved in a

cost-effective manner. Other petitioners raise similar challenges to the TAs. Before turning to the merits of these

arguments, we must first address several jurisdictional issues

raised by the EPA. Specifically, the EPA claims that petitioners' claims are time barred and precluded by our Michigan decision under principles of res judicata and collateral

estoppel.1

__________

1 The EPA's alternative claim that this Court should stay consideration of these issues pending resolution of Appalachian Power

Co. v. EPA, Nos. 99-1200, et al. (May 15, 2001), is obviously moot.

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1. Statute of Limitations

The EPA contends that petitioners' objections to the EGU

growth factor determinations are not properly before this

Court because they were resolved in the underlying NOx SIP

Call rulemaking, not in the TA proceeding. Therefore, the

growth factors were subject to challenge in Michigan, and

not here. The EPA outlined and finalized its method for

determining state emission budgets, including the use of

growth factors, in the NOx SIP Call rulemaking. See NOx

SIP Call, 63 Fed. Reg. at 57,405-39. The EPA argues that

under CAA section 307(b)(1), 42 U.S.C. s 7607(b)(1), petitioners had sixty days from the publication of the SIP Call in the

Federal Register to challenge the EPA's final growth factor

determinations. By these lights, petitioners may not challenge the growth factors because they did not raise their

challenges within sixty days of publication of the SIP Call.

In October 1998, the EPA reopened comment on "the

source-specific data used to establish each State's budget."

NOx SIP Call, 63 Fed. Reg. at 57,427. However, the EPA

maintains petitioners' claims are precluded because it did not

explicitly invite comments on growth rate methodology. In

other words, the EPA argues that it undertook the TA

rulemakings for the purpose of ensuring the accuracy of the

EPA's data inputs, and not to reconsider prior methodological

determinations, such as how to construct growth factors and

how to use those growth factors in determining 2007 emission

budgets. According to the EPA, "[c]omments related to the

use of growth factors in determination of State budgets" were

addressed "in the context of the final NOx SIP call." May

1999 Response to Comments at 47. Therefore, the agency

pleads, petitioners' growth factor arguments are time-barred

under National Ass'n of Reversionary Property Owners v.

Surface Transportation Board, 158 F.3d 135, 141 (D.C. Cir.

1998) ("NARPO") ("If NARPO's reopening theory does not

apply, we are without jurisdiction to consider NARPO's due

process claim.").

The TA proceedings are not as clear cut as the EPA

maintains, nor are our precedents so restrictive. The initial

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TA rulemaking invited comment on both the source-specific

emission data used to calculate state budgets and the "2007

baseline sub-inventory information." NOx SIP Call, 63 Fed.

Reg. at 57,493. As the EPA recognizes, the 2007 baseline

sub-inventory information is nothing more than the product of

growth factors and the source-specific emission data used to

calculate state budgets. See SIP Call Correction, 63 Fed.

Reg. at 71,223 (noting that 2007 baseline inventory "is based

on the universe of sources in the 1995 inventory and a growth

factor ..." (emphasis added)). Therefore, insofar as the

EPA reopened comment on the 2007 baselines, it would seem

that the EPA reopened comment on the growth factors in

addition to the source-specific emission data used to calculate

state budgets. While the EPA did not reopen comment on

the broader issues of its authority to impose NOx emission

budgets on states, it did open comment on the budgets

themselves. Insofar as the agency was ambiguous on this

point, that only further supports petitioners' argument that

the growth factor issue was reopened. See NARPO, 158 F.3d

at 142 ("Ambiguity in an NPRM may also tilt toward a

finding that the issue has been reopened.").

Even accepting that the EPA did not explicitly reopen

growth factors for public comment, this does not preclude

petitioners' claim. Under Public Citizen v. NRC, "whether

an agency has in fact reopened an issue" is dependent upon

"the entire context of the rulemaking including all relevant

proposals and reactions of the agency," and not just on the

agency's stated intent. 901 F.2d 147, 150 (D.C. Cir. 1990).

Thus, "if an agency's response to comments 'explicitly or

implicitly shows that the agency actually reconsidered the

rule, the matter has been reopened.' " Panamsat Corp. v.

FCC, 198 F.3d 890, 897 (D.C. Cir. 1999) (citation omitted).

The EPA claims that the growth factors were completely

settled for the purposes of the NOx SIP Call by the time the

TA rulemaking began in October 1998. Yet this claim is

difficult to square with the EPA's purported justification for

the TA rulemakings--specifically to conform the emission

inventories of the NOx SIP Call and section 126 rules. The

TA rulemaking began in October 1998, but the first section

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126 rule was not final until May 1999. Thus, if the EPA was

sincere in seeking to use the TA rulemaking to conform the

emission inventories of the two rules, then the EPA's various

growth factor methodologies must have been open for comment for the purposes of the NOx SIP Call as they were

subject to revision in the section 126 rulemaking at least up

until the close of that proceeding.

Where a rulemaking notice is ambiguous "and could fairly

be read to 'suggest [ ] that the search for harmony might lead

to the rethinking of old positions' " this Court has "found that

the earlier decision was reopened." NARPO, 158 F.3d at 142

(citation omitted). This is an apt description of what happened here. Therefore, insofar as there are problems with

section 126 inventories and budgets, the EPA implicitly gave

petitioners an opportunity to identify the equivalent problems

with the NOx SIP Call inventories and budgets when the

EPA opened the TA rulemaking for the purpose of conforming the inventories for the two rules.

2. Res Judicata and Collateral Estoppel

Res judicata "bars relitigation not only of matters determined in a previous litigation but also ones that a party could

have raised." NRDC v. Thomas, 838 F.2d 1224, 1252 (D.C.

Cir. 1988) (emphasis in EPA brief). Collateral estoppel further bars parties from relitigating issues of law or fact

resolved in prior cases between those parties. Securities

Indus. Ass'n v. Bd. of Governors, 900 F.2d 360, 363 (D.C. Cir.

1990) ("When a court determines an issue of fact or law that

is actually litigated and necessary to its judgment, that

conclusion binds the same parties in a subsequent action.").

As the growth factor determinations were made as part of the

NOx SIP Call, the EPA maintains that petitioners should

have presented any challenge to the growth factors in Michigan, where "there were actual legal and factual challenges on

budget and growth-related topics" and where "nearly all" of

the petitioners here were represented. Brief for Respondent

EPA at 24-25.

Petitioners' challenges are based upon the emission inventories and budgets laid out in the TAs. As such, they present

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issues not litigated in Michigan. Though it is true that

petitioners could have challenged the EPA's growth factor

methodologies in that litigation, we hold here that the EPA

reopened comment on that issue. Just as it would be absurd

for the EPA to argue that res judicata and collateral estoppel

would preclude review had the EPA decided to change its

growth factor methodologies in response to invited comments,

so too is it absurd for the EPA to argue here that res

judicata and collateral estoppel preclude review of its decision not to change in response to those same invited comments.

3. Merits

On the merits, Industry Petitioners allege that the EPA's

emission budget determinations for EGUs are arbitrary and

unsupported on several grounds. First, they maintain that

the 2007 emission baselines reflect the unrealistic assumptions that utilization growth will be linear. Second, they

question the EPA's use of IPM-generated 2001-2010 growth

rates to estimate growth over the 1996-2007 period. Third,

they claim the EPA's reliance upon the growth factors resulted in unrealistic utilization estimates. For example, 1998

utilization rates in some states, such as Michigan and West

Virginia, are greater than the 2007 baselines estimated by the

EPA.

Petitioners contend that the arbitrariness of the growth

factors is compounded by the fact that more representative

growth estimates were available. In conducting its costeffectiveness analysis, the EPA used the IPM to generate

growth assumptions for 1996-2001, as well as to generate

state-by-state EGU utilization estimates for 2007. Yet the

EPA did not use this data for the purpose of developing its

growth factors for the 2007 baseline, and it offered no reasonable explanation for its choice. Even if the EPA finds on

remand that its choice was the better one, failure to "examine

the relevant data and articulate a satisfactory explanation for

its action" either is arbitrary decisionmaking or at least

prevents a court from finding it non-arbitrary. Motor Vehicle

Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29,

43 (1983).

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We confronted nearly identical challenges to the EPA's use

of growth factors to estimate baseline NOx emissions for 2007

in the section 126 litigation. See Appalachian Power Co. v.

EPA, Nos. 99-1200, et al. (May 15, 2001). Although the NOx

SIP Call covers more states than the section 126 rule, the

EPA's methodological choices and explanations (or lack thereof) were the same. Therefore, we see no reason to depart

from our conclusions in that litigation.

There is no question that "[a]gency determinations based

upon highly complex and technical matters are 'entitled to

great deference.' " Id., slip op. at 32 (quoting Public Citizen

Health Research Group v. Brock, 823 F.2d 626, 628 (D.C. Cir.

1987)). The EPA has "undoubted power to use predictive

models," such as the IPM, but it must "explain the assumptions and methodology used in preparing the model" and

"provide a complete analytic defense" should the model be

challenged. Small Refiner Lead Phase-Down Task Force v.

EPA, 705 F.2d 506, 535 (D.C. Cir. 1983) (citations and internal quotation marks omitted). "Given the highly deferential

standard of review applied to such questions, and the EPA's

clear authority to rely upon computer models in place of

inconsistent, incomplete, or unreliable empirical data, the

Agency's decision to rely upon the IPM, rather than the

projections offered by individual states, was not arbitrary and

capricious." Appalachian Power Co., slip op. at 34. However, this Court cannot excuse the EPA's reliance upon a

methodology that generates apparently arbitrary results particularly where, as here, the agency has failed to justify its

choice.

In the case at hand, the EPA adopted a particular methodology to estimate EGU utilization rates in 2007 that generated seemingly implausible results, such as a negative growth

forecast for some states in the coming decade. The EPA

adopted this methodology without offering any reasoned explanation for its choice. The EPA's decision not to use the

IPM projections for 2007 that were used to estimate the costeffectiveness of emissions controls may well have been reasonable. So too may have been the EPA's choice to rely upon

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ate a growth factor for the 1996-2007 period. However,

there is no way for us to tell because the EPA never offered

an explanation. Merely asserting that the choice was "reasonable" is not enough.

As we held in the section 126 litigation, so too here:

the EPA has not fully explained the bases upon which it

chose to use one set of growth-rate projections for costs

and another for budgets, nor has it addressed what

appear to be stark disparities between its projections and

real world observations. "With its delicate balance of

thorough record scrutiny and deference to agency expertise, judicial review can occur only when agencies explain

their decisions with precision, for 'it will not do for a

court to be compelled to guess at the theory underlying

the agency's action ...' " American Lung Ass'n v.

EPA, 134 F.3d 388, 392 (D.C. Cir. 1998) (quoting SEC v.

Chenery Corp., 332 U.S. 194, 196-97 (1947)). As a result,

we have no choice but to remand the EPA's EGU growth

factor determinations so that the agency may fulfill its

obligation to engage in reasoned decisionmaking on how

to set EGU growth factors and explain why results that

appear arbitrary on their face are, in fact, reasonable

determinations.

Id. at 37-38.

4. Cost-Effectiveness

Industry Petitioners make the additional argument that the

EPA failed to find the 2007 budgets achievable at the $2,000/

ton significant-contribution cut-off established in the NOx

SIP Call rule. Essentially, petitioners contend that the budgets the EPA analyzed for cost-effectiveness purposes were

different from the emission budgets imposed on the states.

This argument is without merit. The emission budget levels

themselves are based upon reductions deemed by the EPA to

be cost-effective. In the case of EGUs, the EPA concluded

that an average emissions rate of 0.15 lb/mmBtu could be

achieved at a cost of less than $2000/ton. NOx SIP Call, 63

Fed. Reg. at 57,399-403. Thus, insofar as the EPA properly

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generates, and adequately explains, estimated 2007 utilization

rates, it need not repeat its cost-effectiveness analysis.

B. Significant Contribution

Industry petitioners also allege that the TAs are arbitrary

because they rely upon emission inventories that are substantially different from those that were used to make the initial

"contribution" findings for the NOx SIP Call. Essentially,

petitioners argue that because the TAs changed the underlying state emission inventories and budgets, thereby altering

the relative contributions of upwind states to downwind nonattainment, the EPA was obligated to reevaluate its "significant contribution" findings for each of the affected states.

For example, the TAs decreased the 2007 baseline emissions

for West Virginia, an upwind state, and increased baseline

emissions for New York, a downwind state. Due to this

change, petitioners contend, the EPA could not continue to

assume that West Virginia contributes to New York nonattainment without additional analysis.

It is black-letter administrative law that "[a]bsent special

circumstances, a party must initially present its comments to

the agency during the rulemaking in order for the court to

consider the issue." Tex Tin Corp. v. EPA, 935 F.2d 1321,

1323 (D.C. Cir. 1991) (citing Eagle-Picher Indus. v. EPA, 822

F.2d 132, 146 (D.C. Cir. 1987)). Generalized objections to

agency action or objections raised at the wrong time or in the

wrong docket will not do. "An objection must be made with

sufficient specificity reasonably to alert the agency." Id. An

agency cannot be faulted for failing to address such issues

that were not raised by petitioners. Petitioners waived their

argument, and can cite no "special circumstances" to justify

their waiver.

Petitioners are able to cite no comments that were in the

relevant docket that raise the significant contribution issue.

For example, petitioners note that the West Virginia Manufacturers Association argued that "[i]f EPA has in fact made

adjustments to the inventories, we believe that this would

dramatically affect the modeled impact of the contribution of

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ment." The problem is that this document was submitted to

the dockets for the section 126 and FIP rulemakings, and was

not part of the TA rulemaking. Petitioners do cite other

documents which were part of the relevant rulemaking, but

these documents do not address the significant contribution

argument. This is insufficient; notice does not operate by

osmosis. Having failed to raise their concern in the relevant

agency docket, petitioners could perhaps have cured their

waiver by seeking reconsideration before the EPA, but they

did not. Thus, petitioners waived their argument that the

EPA was required to revisit its significant contribution findings.

III. State Petitioners

State Petitioners echo many of the arguments addressed

above. Their claims are unique insofar as they object to the

EPA's imposition of "erroneous projections of their economic

growth" on states through the NOx SIP Call. Joint Brief of

Petitioning States at 4. The State Petitioners' primary complaint is with the EPA's reliance upon the IPM to generate

state-by-state growth rates without promulgating a mechanism to review these projections based upon actual growth

rates. Petitioning states contend that the EPA's projections

underestimate actual growth in some affected states, but the

EPA refused to address this concern in the TA rulemaking.

While the EPA acknowledged some inconsistency between

IPM growth projections and those provided by individual

states, the EPA rejected the claim that the states' projections

are inherently more reliable. State Petitioners claim that it

was unreasonable for the EPA to reach this conclusion without conducting any analysis of the state projections.

State Petitioners aver that deference to the EPA's findings

in this area is unwarranted because deference is only due

within an agency's area of expertise. See NRDC v. EPA, 194

F.3d 130, 136 (D.C. Cir. 1999). Were the EPA making

environmental projections, they concede, deference would be

warranted. Since, however, the growth projections are essentially economic projections, this Court should give the

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EPA no more deference "than it would to the agency's

predictions of 2007 interest rates or the level of the Dow

Jones Index." Joint Brief of Petitioning States at 10 (citing

Montana v. EPA, 137 F.3d 1135, 1141 (9th Cir. 1998)). While

the EPA has authority to impose emission limits on states,

they argue, it does not have the authority to regulate a state's

economic growth. Insofar as the EPA has done this through

its growth projections, it has adopted an "overly broad"

reading of the CAA that "usurps States' sovereign power to

manage their own economic growth." Id. at 12.

The EPA raises the same untimeliness arguments discussed above. See infra Part II.A.1-2. We reject them for

the same reasons. However, insofar as the State Petitioners

seek relief beyond that which is provided above, their complaints are not well taken. The EPA has sufficient discretion

to use the IPM model in the first instance even if states

believe that some other state-specific modeling is more accurate. When it comes to these sorts of technical matters, the

EPA is entitled to great deference. See Environmental

Action, Inc. v. FERC, 939 F.2d 1057, 1064 (D.C. Cir. 1991)

("[I]t is within the scope of the agency's expertise to make

such a prediction about the market it regulates, and a reasonable prediction deserves our deference notwithstanding that

there might also be another reasonable view."). "[I]t is only

when the model bears no rational relationship to the characteristics of the data to which it is applied that we will hold

that the use of the model was arbitrary and capricious."

Appalachian Power Co. v. EPA, 135 F.3d 791, 802 (D.C. Cir.

1998).

"That the EPA's projections depend, in large part, on

economic projections, rather than environmental factors,

makes little difference." Appalachian Power Co. v. EPA,

Nos. 99-1200, et al. (May 15, 2001), slip op. at 34. Congress

has delegated to the EPA the power to set emissions limits

under the Clean Air Act. Merely because this requires the

selection and utilization of complex computer models to forecast future emissions does not change the standard with

which we evaluate the agency's actions, so long as the agency's actions are, as here, confined to those technical issues

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that must be resolved for the agency intelligently to address

the matters over which Congress has given it authority. See

generally id.; Small Refiner Lead Phase-Down Task Force

v. EPA, 705 F.2d 506, 535 (D.C. Cir. 1983). State Petitioners'

hyperbolic suggestion that the EPA's choice of industry forecasting models is tantamount to stock market forecasting is

simply absurd.

Similarly, that the EPA's selection of a computer model

and forecasting methodology results in the imposition of

emission controls on states that crimp economic growth does

not change the underlying analysis. In Michigan, this Court

squarely upheld the EPA's authority to establish statespecific NOx budgets against a claim that such authority

impermissibly intrudes on the statutory rights of states to

select their own emission control policies in the first instance.

Michigan v. EPA, 213 F.3d 663, 686-87 (D.C. Cir. 2000).

Acknowledging this point, State Petitioners seek to argue

that the Michigan holding somehow left open the claim that

the EPA's authority to set state emission budgets did not

entail authority to make the state-specific growth projections

upon which such emission budgets are inevitably based. This

is a distinction without a meaningful difference. Given the

regulatory structure created by the Clean Air Act, the former

authority clearly encompasses the latter, notwithstanding

State Petitioners' veiled appeals to federalism principles.

For these reasons, we hold that State Petitioners are not

entitled to any relief beyond that which is entailed by remanding the growth factor determinations for further proceedings in response to Industry Petitioners' claims.

IV. Non-Electric Generating Facility Issues

Non-Electric Generating Petitioners ("Non-EGU Petitioners") make two additional arguments against the EPA's TAs

to the NOx SIP Call. First, petitioners allege that the EPA

modified its methodology for calculating budgets for nonEGUs in its final rule without providing non-EGUs with

adequate notice of the change. Second, Non-EGU Petitioners claim that insofar as the EPA's emission budgets for

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Non-EGUs rely upon the source definitions remanded in

Michigan v. EPA, they are contrary to law and must be

remanded here as well, if not vacated in their entirety. We

conclude that the EPA's misapplication of non-EGU growth

factors constituted little more than clerical error, which the

EPA corrected without additional notice and comment.

While petitioners erroneously challenge the characterization

of the error as clerical, they do not challenge the power of the

EPA to correct clerical errors, compare Utility Solid Waste

Activities Group v. EPA, 236 F.3d 749 (D.C. Cir. 2001), and

we do not address that issue. The petitioners are therefore

not entitled to vacatur. However, petitioners are correct that

the EPA continues to rely upon source definitions that were

issued without adequate notice and comment and remanded

in Michigan. Therefore, we remand the source definitions

here as well.

A. Notice

The EPA began the budget-setting process with incomplete

data on emission sources upon which to base its 2007 projections. The EPA also began the process relying on one set of

growth factors, Non-EGU Petitioners charge, but then substituted other factors. The constant changes to the EPA's

methodology, "combined with the virtual inaccessibility of the

files containing the growth factors," made it impossible for

affected parties to determine whether the EPA's calculations

were reasonably accurate. Joint Brief of Non-Electric Generating/Industrial Petitioners at 6. As the aggregate nonEGU budget changed over time, petitioners allege the EPA

did not maintain a consistent explanation for these revisions.

In the May 1999 TA, the EPA said that a fourteen percent

increase in the aggregate non-EGU budget was due to source

reclassifications. May 1999 TA, 64 Fed. Reg. at 26,299. In

the March 2000 TA, however, it claimed that the budget

change was due to the EPA's prior misapplication of the

proper growth factors. Rather than consistently modify its

estimates, Petitioners attest that the EPA should have explained how the growth factors were misapplied and specifically sought comment from affected parties. In failing to do

so, it disregarded regulated entities' rights to notice and

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comment. Even if providing such opportunity to comment

would have delayed SIP implementation, Non-EGU Petitioners argue that this would not authorize the EPA to deprive

regulated entities of their rights to notice and comment.

The EPA responds that Non-EGU Petitioners allege no

more than a harmless procedural error. See 5 U.S.C. s 706

(instructing courts to take "due account ... of the rule of

prejudicial error."). The EPA merely adjusted inventory

data to fix clerical errors to ensure conformity between the

various rules. Petitioners had ample opportunity to comment

and yet have failed to identify "a single source that has not

been able to determine the growth factor assigned to it."

Brief for Respondent EPA at 42. The EPA readily admits

that it did not announce the correction of its previous misapplication of non-EGU growth factors until the March 2000

TA. Insofar as Non-EGU Petitioners challenge specific

changes in the Non-EGU portion of emission budgets, we

agree with the EPA. The record suggests that the changes

complained of here were little more than fixes to technical

errors, and not the sort of modifications that evince a change

in policy or methodology. Therefore, this portion of the

petition for review is denied. Petitioners' entreaty at oral

argument that their notice challenge was tantamount to an

unintelligible rulemaking challenge is likewise denied, as it

came too late.

B. Source Definitions

Non-EGU Petitioners further challenge the EPA's reliance

upon regulatory definitions of EGUs and non-EGUs that

were remanded by this Court in Michigan. There, we found

that the EPA changed the definition of "EGU" in the final

NOx SIP Call rule without providing sufficient notice and

opportunity to comment. Michigan, 213 F.3d at 692. The

altered definition reclassified some non-EGUs as EGUs.

This is significant because the EPA assumed that EGUs can

reduce more NOx emissions cost effectively, on a percentage

basis, than can non-EGUs. The EPA maintains that a new

source definition rulemaking is imminent, see Brief for Respondent EPA at 51 ("EPA is, in fact, presently reconsidering

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its EGU definition and intends to issue a proposed rule in the

near future, perhaps as early as December 2000."). However,

as of oral argument, a year had passed since the Michigan

remand and the EPA had yet to initiate new administrative

proceedings on source definitions.

Non-EGU Petitioners maintain that the EPA's continued

reliance on the remanded source definitions requires remanding and vacating the TAs in their entirety because the EPA

cannot accurately apply growth factors and calculate state

budgets until source categories are final. The EPA contends

that Non-EGU Petitioners seek more relief here than they

were afforded in Michigan. As the EPA notes, we did not

vacate the budgets or any other portion of the NOx SIP Call

in Michigan. Instead, we left the budgets in place while

EPA reconsidered a handful of narrow issues, including the

proper delineation of what constitutes an EGU. It seems

that Non-EGU Petitioners are entitled to the same relief

here-no more and no less. Therefore, because the "EPA did

not provide sufficient notice and opportunity to comment for

its redefinition of EGUs," 213 F.3d at 693, we remand this

portion of the rulemaking to the EPA for further consideration in light of this opinion and that in Michigan.

V. Missouri ("Split-State Petitioners")

A group of Missouri utilities and the City of Independence,

Missouri ("Split-State Petitioners") argue that the Technical

Amendments are unlawful insofar as they establish a budget

for the state of Missouri. In Michigan, this Court vacated

and remanded the NOx SIP Call insofar as it applied to

Missouri because the EPA's Missouri NOx budget was "calculated on the basis of hypothesized cutbacks from areas that

have not been shown to have made significant contributions."

213 F.3d at 684. Specifically, the EPA set a NOx emission

budget for the entire state of Missouri, even though the

computer models upon which the EPA relied only included

the eastern portion of the state. Before requiring a state or

portion thereof to control emissions that make a "significant"

contribution to downwind nonattainment, we held the EPA

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"must first establish that there is a measurable contribution." Id. at 683-84 (emphasis in original). Where the

agency's own data "inculpate part of a state and not another,

EPA should honor the resulting findings." Id. at 684.

Even though the NOx emission budget for Missouri was

vacated and remanded in Michigan, the EPA included Missouri's budget in the TAs. It is undisputed that insofar as

the TAs include a statewide Missouri emission budget they

are unlawful under Michigan. The only real dispute between

Split-State Petitioners and the EPA is on the proper remedy

for EPA's failure to address the Michigan holding.

Split-State Petitioners contend that this court must vacate

the entire Missouri budget, covering the budget for the "1-

hour" ozone standard as well as the "8-hour" ozone standard

at issue in American Trucking Ass'ns v. EPA, 175 F.3d 1027,

reh'g granted in part and denied in part, 195 F.3d 4 (D.C.

Cir. 1999), rev'd in part sub nom. Whitman v. American

Trucking Ass'ns, 121 S. Ct. 903 (2001). The EPA prefers a

more limited remand. In Michigan, this Court vacated the

budget for the 1-hour standard, but stayed addressing the

applicability of the 8-hour standard to the NOx SIP Call, at

the EPA's request, due to the pendency of the American

Trucking litigation. Michigan, 213 F.3d at 671. On this

basis, we only resolved issues involving the EPA's 1-hour

ozone standard, leaving issues related to the 8-hour standard

until another day.

Because we did not consider 8-hour issues in Michigan, the

EPA suggests, we should only vacate and remand Missouri's

budget under the 1-hour standard and stay consideration of a

statewide Missouri budget under the 8-hour standard pending completion of litigation. In other circumstances, we

might be inclined to offer the more modest remedy the EPA

suggests. After all, the EPA is simply asking that the

judgment in this case mirror that in Michigan, and that this

Court stay consideration of the 8-hour basis for Missouri's

budget until such time as the stay on the 8-hour standard is

lifted. Were there reason, any reason, to believe that the

EPA could justify a statewide Missouri budget based upon

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existing record evidence, this would be a prudent step. As it

happens, the record and briefing in Michigan addressed both

standards, and the EPA offered no evidence that would

suggest western Missouri contributes significantly to downwind nonattainment of any ozone standard. The EPA asserts that "it is entirely possible that the EPA's record could

support including Missouri in the SIP Call under the 8-hour

standard and assigning it a budget." Brief for Respondent

EPA at 49. However, the EPA does not dispute that it has

never modeled western Missouri sources under any standard.

In other words, it is undisputed that the EPA has no more

analytical basis for setting a statewide Missouri NOx budget

under the 8-hour standard than it did for the 1-hour standard, for which it had no analytical basis at all. While there

may be areas for which the EPA could, with existing data and

analysis, justify setting an emission budget for purposes of

the 8-hour standard, but not for purposes of the 1-hour

standard, western Missouri is not among them.

So long as any statewide NOx budget remains in place,

Split-State Petitioners and other entities potentially subject

to emission controls in western Missouri must operate under

the cloud of potential future controls. Therefore, we find it

prudent to vacate and remand the TAs insofar as they include

a budget for Missouri under any ozone standard. While we

vacate and remand the statewide Missouri budget, it should

be clear that we take this step only upon the record proffered

to date. As noted above, the EPA concedes that it has never

conducted the analyses that would be required to impose a

statewide budget for Missouri. Should the agency ever conduct such analyses and, for instance, model the contribution

of facilities located in western Missouri to downwind nonattainment of the 8-hour standard, it is quite possible that such

a budget could be justified. This decision should be read

neither to endorse nor to preclude such action. If the EPA

some day decides to impose a statewide NOx budget for

Missouri, that decision will be evaluated on its own merits at

that time.

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VI. Conclusion

In accordance with the above, we remand the EPA's EGU

growth factors as well as the source definitions challenged by

Non-EGU Petitioners. We further remand and vacate the

NOx emission budget for Missouri. With respect to all other

issues, including those not discussed expressly herein, the

petitions are denied.

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