Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-98-01618/USCOURTS-caDC-98-01618-0/pdf.json

Parties Involved:
Environmental Protection Agency
Respondent
Interstate Natural Gas Association of America
Petitioner

Document Text:

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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

---------

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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, Michael F. Easley, Attorney General, State of North Carolina,

J. Allen Jernigan, Special Deputy Attorney General, James

P. Longest, Jr., and Amy R. Gillespie, Assistant Attorneys

General, Bill Pryor, Attorney General, State of Alabama,

Tommy E. Bryan, Assitant Attorney General, Jeffrey Modisett, Attorney General, State of Indiana, Daniel B. Dovenbarger, Chief Counsel, Jennifer M. Granholm, Attorney General,

State of Michigan, Thomas Casey, Solicitor General, Alan F.

Hoffman, Assistant Attorney General, Charles M. Condon,

Attorney General, State of South Carolina, Mark E. Earley,

Attorney General, State of Virginia, Roger L. Chaffe, Senior

Assistant Attorney General, Stewart T. Leeth, Assistant Attorney 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,

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Mark E. Shere, Bryan G. Tabler, Jeffrey L. Landsman,

Jennifer S. McGinnity, Howard E. Shapiro, Margaret Claiborne Campbell, Thomas E. Knauer, David R. Straus, Deborah E. Jennings, Julie R. Domike, Patricia T. Barmeyer,

Lisa G. Dowden, Brian J. Renaud, Rhonda L. Ross, Jeffrey

F. Cherry, Katherine L. Rhyne, John M. Koeppl, Henry J.

Handzel, Jeffrey A. Knight, Joan Dreskin, Kevin B. Belford,

Pamela A. Lacey, Gene E. Godley, Michael H. Levin and

Edmund B. Frost. Earle D. Getchell, Jr., Neal J. Cabral,

Christopher D. Man, Jacqueline H. Fine, Jon S. Faletto and

John P. Proctor entered appearances.

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 Governments.

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 respondent. With them on the brief were Lois J. Schiffer, Assistant

Attorney General, and Jan Tierney, Howard Hoffman, Amey

W. Marrella and Dwight C. Alpern, Attorneys, U.S. Environmental Protection Agency.

J. Jared Snyder, Assistant Attorney General, State of New

York, argued the cause for state intervenors. With him on the

brief were Elliot Spitzer, Attorney General, Peter H. Schiff,

Deputy Attorney General, Thomas F. Reilly, Attorney General, State of Massachusetts, William L. Pardee, Assistant

Attorney General, M. Dukes Pepper, Jr., Assistant Counsel,

State of Pennsylvania, Sheldon Whitehouse, Attorney General, State of Rhode Island, Michael Rubin, Environmental

Advocate, William H. Sorrell, Attorney General, State of

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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, Attorney 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. Andrew P. Caputo entered an appearance.

Patrick M. Raher, John G. Roberts, Jr., Catherine E.

Stetson, Michael R. Barr, Michael A. Conley, Theresa Fenelon 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 implementation, 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 Purposes of Reducing Regional Transport of Ozone ("Final

Rule"), 63 Fed. Reg. 57,356 (1998). The statutory hook for

EPA's action was a 1990 amendment to the Clean Air Act

which requires that SIPs contain "adequate provisions" prohibiting

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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.

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 nitrogen oxides (NOx--an ozone precursor) by the amount accomplishable by what EPA dubbed "highly cost-effective controls," 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, Illinois, Indiana, Kentucky, Maryland, Massachusetts, Michigan, Missouri, North Carolina, New Jersey, New York, Ohio, Pennsylvania,

Rhode Island, South Carolina, Tennessee, Virginia, West Virginia,

and Wisconsin.

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 nondelegation 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 Missouri or Georgia. We reject the claim that South Carolina

was improperly included in the SIP call.

In Part III we reject the claim that EPA impermissibly

intruded on the statutory rights of states to fashion their

SIPs. We also reject the claim that EPA violated the Regulatory Flexibility Act.

In Part IV we reject the claim that EPA arbitrarily revised

the definition of a "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.

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In 1979, EPA set the acceptable level for ozone in the

ambient air at 0.12 parts per million ("ppm"), averaged over

intervals of one hour. This standard is commonly known as

the "1-hour standard." By 1997, EPA had concluded that the

1-hour standard no longer adequately protected public

health. See National Ambient Air Quality Standards for

Ozone, 62 Fed. Reg. 38,856 (1997). Pursuant to the agency's

statutory mandate to review and revise NAAQS as appropriate, 42 U.S.C. 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).

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EPA has undertaken the phasing out of the 1-hour standard 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 designations no later than July 1999 and EPA finalize those

designations no later than July 2000). EPA maintains that it

has the authority to include the 8-hour standard in the

current s 110(a)(2)(D)-specific SIP call pursuant to its authority 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 standard was derived from a construction of the Clean Air Act

that rendered the relevant provision an unconstitutional delegation of legislative power and remanded the case to the

agency. See id. at 1033-40. Seizing on this holding, petitioners added in their reply briefs that if this court does not

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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 maintain NAAQS within their borders. See CAA s 107(a), 42

U.S.C. s 7407(a). When EPA concludes that an "implementation 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 subchapter, any source or other type of emissions activity

within the State from emitting any air pollutant in

amounts which will ... contribute significantly to nonattainment in, or interfere with maintenance by, any other

State with respect to any such national primary or

secondary ambient air quality standard ... [and]

(ii) insuring compliance with the applicable requirements

of sections [126] and [115] ... (relating to interstate and

international pollution abatement).

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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 commission is to assess the interstate transport situation in the

relevant transport region, assess interstate pollution mitigation 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 authority 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

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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 additional 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. However, the OTAG members could not agree on specific control

measure recommendations. See 62 Fed. Reg. at 60,320. In

response to OTAG's efforts, EPA engaged in further analysis

and devised the SIP call challenged here.

Industry/Labor petitioners argue that the CAA required

EPA to convene a transport commission pursuant to sections

176A/184 prior to issuing the challenged SIP call. EPA

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.

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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 petitioners argue that EPA can only issue a section 110(k)(5) SIP

call to enforce section 110(a)(2)(D)'s requirement after forming a 176A/184 transport commission. We disagree.

As a threshold matter, subsections 176A(a) and (b)(1) make

clear that EPA must establish a transport commission if the

agency exercises its discretion to create a transport region

pursuant to section 176A(a). See 42 U.S.C. ss 7506a(a),

(b)(1). However, EPA can address interstate transport apart

from convening a 176A/184 transport commission as subsection (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 offending emissions be "emissions activity within the State." Several petitioners charge that EPA did not sufficiently analyze

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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 emissions 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 transportation painted with a rather broad brush.

We need not pass judgment on whether the evidence and

approach of the NPRM would have supported the final rule.

After receiving comments regarding the insufficiently statespecific 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 researchers 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

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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 petitioners argue that zero-out modeling is inappropriate because

it models an impossible scenario--the elimination of all manmade 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 Internet 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 "contribute significantly" to nonattainment in a downwind state.

Petitioners make essentially four arguments challenging

EPA's determination of "significance": (1) EPA acted contrary 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

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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 regarding 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 standard: "contribute significantly to nonattainment."

Nothing in the text of the new section or any other

provision of the statute spells out a criterion for classifying

"emissions activity" as "significant." Nor did EPA, under the

then-existing provision, bind itself to any criterion. Further,

given EPA's finding as to the cumulative effects of the

pollutants that generate ozone, EPA might well be able to

distinguish this case from the sulfur dioxide cases that the

states have cited. See 63 Fed. Reg. at 57,359 ("The chemical

reactions that create ozone take place while the pollutants are

being blown through the air by the wind, which means that

ozone can be more severe many miles away from the source

of emissions than it is at the source."). But the states point

to nothing suggesting any prior adoption by EPA of any

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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 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 ambient 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 making this listing EPA drew lines based on the magnitude,

frequency, and relative amount of each state's ozone contribution to a nonattainment area. For example, in one calculation

it looked at the number of NOx parts per billion ("ppb") that a

candidate state's emissions made to exceedances in specific

downwind locations (examined as a proportion of those exceedances). 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 nonattainment because none of these states ever contributed more

than 2 ppb to a 1-hour exceedance in that area. Although

EPA looked at other measures, e.g., the percentage contribution of a state's emissions to total concentrations in a specified

area, no one quarrels either with its use of multiple measures,

or with the way it drew the line at this stage.

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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 controls." 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 design 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 nonattainment areas, would vary from state to state depending on

variations in cutback costs.

State and Industry/Labor petitioners argue that this approach runs afoul of s 110(a)(2)(D), which they read as prohibiting 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 permitted to use that criterion in selecting its final rule.2 Nor has it

__________

2 Indeed, accepting EPA's belief that ozone cannot be held responsible for mortality effects, see Proposed Rule, 62 Fed. Reg. at

60,321 (not listing death as a health effect of groundlevel ozone);

compare Final Rule, 63 Fed. Reg. at 57,359 (listing "[p]ossible longUSCA Case #98-1618 Document #500811 Filed: 03/03/2000 Page 16 of 56
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been argued that the term "significant" required consideration of costs.

State petitioners initially argued that it was "arbitrary and

unlawful" for EPA to make cost effectiveness a "controlling

factor" or "linchpin" in the determination of significant contribution under 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 considerations; Petitioning States simply stress that EPA must establish a definition of significance that is dominated by air

quality factors, as air quality is the sole factor mentioned in

the statute." Reply Br. of Petitioning States at 4. In

support of this position, State petitioners cited our en banc

decision in Natural Resources Defense Council v. EPA, 824

F.2d 1146, 1163 (D.C. Cir. 1987) (en banc), where we held that

a statutory mandate for EPA to set a standard with an

"ample margin of safety to protect the public health" did not

preclude the consideration of costs and technological feasibility, but that these concerns could not be the "primary consideration."

At oral argument, counsel for the states abandoned this

position and decided that the statute flatly prohibits EPA

from 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.").

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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 determined by each state. See 63 Fed. Reg. 57,456. Obviously the

firms with the highest emission reduction costs will, if permitted by their states, buy up pollution allowances from firms

that are granted allowances because they have overcontrolled 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 environmental benefit to the public. Of course we are able to assume the

existence of EPA's allowance trading program only because

no one has challenged its adoption. As the program seems to

have no rationale other than cost reduction, see 63 Fed. Reg.

at 57,457, it would presumably be invalid under petitioners'

proposed reading of 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 Industry/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) requires consideration of only air quality impacts in determining the significance of any contribution." However, at oral

argument Industry/Labor offered a construction of the statute 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 convince any doubter that transaction costs can safely be expected to

be substantial. See 63 Fed. Reg. at 57,457-75.

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that costs could be considered when EPA determines if a SIP

is "adequate" under s 110(k)(5). Transcript of Oral Argument 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 considerations. The argument that costs may be considered under

s 110(k)(5) seems to concede that the structure of the statutory 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 ambient 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 concerns, such that any excess would put a state in the forbidden

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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, "significant" 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 between costs and benefits," id. at 615, but the upshot of

inserting the adjective "significant" was a consideration of

which risks are worth the cost of elimination. OSHA has

since interpreted s 3(8) and regulation of "significant risk" to

require "cost-effective protective measures" and set standards with an eye toward "the costs of safety standards

[being] reasonably related to their benefits." See International Union v. OSHA (Lockout/Tagout 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.

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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 formidable 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

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improving air quality and "reducing air pollution." 159 F.3d

at 622. But because there was nothing "in the text or

structure of the statute to indicate that the Congress intended to preclude the EPA from considering the effects a

proposed rule might have upon the price and supply of

gasoline," id. at 623, we found no such preclusion even though

the provision at issue contained no allusion whatever to such

effects. Similarly, in Grand Canyon Air Tour the statute

required the FAA to devise a plan for "substantial restoration

of the natural quiet" in the Grand Canyon area, but we found

nothing impermissible in the FAA's consideration of costs to

the air tourism industry in deciding how "substantial" that

restoration must be. 154 F.3d at 475. In NRDC v. EPA we

considered whether EPA permissibly used cost-benefit analysis 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 language and legislative history do not bar petitioners' construction, 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, Interpreting Statutes in the Regulatory State, 103 Harv. L. Rev.

405, 487 (1989) (suggesting an "interpretive principle" drawn

from case law, including NRDC v. EPA, 824 F.2d 1146, that

reviewing courts will read statutes as authorizing regulations

with benefits at least "roughly commensurate with their costs,

unless there is a clear legislative statement to the contrary").

Three of the cases, moreover--the two NRDC cases and

Grand Canyon--, involve statutory language with just the

same structure as here. A mandate directed to some environmental benefit is phrased in general quantitative terms

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jor"), and contains not a word alluding to non-health tradeoffs; in each case we found that in making its judgments of

degree the agency was free to consider the costs of demanding higher levels of environmental benefit. So too here.

Petitioners point to no evidence of the requisite "clear

congressional intent to preclude consideration of cost."

NRDC, 824 F.2d at 1163. The text, we have already seen,

works no such preclusion. As for the statutory structure,

petitioners willingly concede that costs may be considered

under s 110(k)(5) in determining the adequacy of a state plan.

Why would a Congress intent on precluding cost considerations 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 observe that where two states differ considerably in the amount

of their respective NOx contributions to downwind nonattainment, 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 contribution" line on a basis of cost differentials. Our upholding of

that decision logically entails upholding this consequence.

The second objection is that because of distance and the

vagaries of pollutant migration and ozone formation, a molecule 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

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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 tonfor-ton NOx trading. Public health benefits would be approximately 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 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), 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).

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We must recognize here that EPA's cost-effectiveness criterion is a radically incomplete line-drawing device. EPA has

effectively ruled that each affected state must get down to the

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 emissions 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 represents the right degree of "cost-effectiveness" (i.e., why "highly cost-effective" should be at that "height"). Accordingly, we

must read EPA as having understood that its selection of the

cut-off point was essentially unbounded.

But petitioners have ignored a limit to the nondelegation

doctrine that we relied on in American Trucking and even

more emphatically in its immediate precursor, 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, encompassing 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 distinguished them precisely on the ground of the narrower scope

within which the agencies could deploy that discretion. Id.

American Trucking, perhaps too succinctly for petitioners to

notice, incorporated the Lockout/Tagout I discussion of the

point. American Trucking, 175 F.3d at 1037.

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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, subjecting "all American industry" to EPA's s 110(a)(2)(D)(i)(I) discretion. But in practice, so far, these threshold criteria

appear to have so limited EPA's activity under the section as

to make the rule in question here the sole example of

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 Wisconsin'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 nonattainment 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

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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 Carolina; but the southern portion of Georgia borders the excluded state of Florida. Industrial petitioners within Missouri 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,

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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 controls" 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" contribution 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 nonexistent 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 stated: "[T]he focus on ozone air quality impacts in the fine grid

raised questions about the need for controls in the coarse

grid. The recommendations adopted by the Policy Group

recognize that the OTAG analyses demonstrated that transport impacts of the coarse grid areas on the fine grid are

minimal and therefore, do not include the coarse grid areas

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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) Statewide emissions budgets create fewer administrative difficulties than a partial-State budget.

Final Rule, 63 Fed. Reg. at 57,424. We review deferentially,

searching for the reasonableness of EPA's action, Appalachian Power, 135 F.3d at 802, whether that be EPA's interpretation 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 "emissions 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

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modelers allocated their scarce resources purposefully, by

reference to known air quality data, explicitly taking into

consideration the "locale of various problem areas (as represented by urban-area modeling domains), and emissions density." 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 Birmingham, and generally higher ozone density.

Of course the fine grid modeling of parts of Missouri and

Georgia showed emissions in the aggregate meeting the

EPA's threshold "contribution" criteria. Thus fine grid modeling 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 evidence").

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

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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 significantly 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 meteorological 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 "evidence" 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 emissions east of the Rocky Mountains. While we uphold EPA's

determination that a "significant" contribution is a costeffectively controllable contribution, EPA must first establish

that there is a measurable contribution. Interstate contributions cannot be assumed out of thin air.

In the end administrative convenience is EPA's only real

defense for basing NOx budgets on the entirety of a state's

emissions. There seem to be two species of this argument.

First, EPA seems to claim that it is just easier to calculate a

NOx budget based on all the emissions in the state instead of

only a portion of such emissions. EPA provides no explanation of why this is so, and it seems dubious. Within a state

are counties, air quality control regions, and for some unfortunate states, nonattainment areas. EPA also has emissions

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data on specific sources, some of which may be susceptible of

"highly cost-effective controls," and others of which may not

be. See, e.g., Emissions Data For Power Plants,

<www.epa.gov/acidrain/emissions> (visited January 26,

2000). Without data from such state subdivisions and specific

sources, EPA could never have performed modeling or even

set a statewide budget. EPA has not explained how calculation 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 concern for not allowing s 110(a)(2)(D)(i)(I) to encompass unproven areas compels an insistence on proof of contribution

from ever smaller geographic subdivisions, any area's specific

contribution may appear insubstantial, even though collectively there are significant contributions. In other words, unlike

bologna, which remains bologna no matter how thin you slice

it, significant contribution may disappear if emissions activity

is sliced too thinly.

While this argument was stressed on appeal, it is nowhere

to be found in the proposed or final rule, except insofar as it

may have lurked behind the vague invocation of "administrative difficulties." See Final Rule, 63 Fed. Reg. at 57,424;

Proposed Rule, 62 Fed. Reg. at 60,342. As a result it is quite

undeveloped. But it appears to be based on a distortion of

the claims of Missouri and Georgia. They are not asserting a

right to bologna tactics, to slice down the unit of measurement to a point of insignificance. All they are claiming is that

where the data--calculated under EPA's supervision--inculpate part of a state and not another, EPA should honor the

resulting findings.

Such a proposition would of course leave EPA free to select

states as the unit of measurement. In turn, states (or the

areas of states that believed themselves innocent of material

contributions, or sources located therein), might respond by

offering finer-grained computations. Such a process seems

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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 encompass 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 reconsideration in light of this opinion.

C. South Carolina

Petitioner Santee Cooper challenges South Carolina's inclusion in the SIP call by alleging that the state's downwind

ozone nonattainment impact is "minuscule" and therefore not

significant. We will hold unlawful EPA's decision to include

South Carolina in the SIP call if we find EPA's decision

"arbitrary, capricious, an abuse of discretion, or otherwise not

accordance with law." 5 U.S.C. 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,"

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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 information. 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 zeroout 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 maximum contribution and a frequency of at least 2 ppb to 30% of

the exceedences). See id. at C-5, G-6. Among the upwind

states, only Alabama had a higher maximum contribution.

See id. at Apps. G & H. Moreover, South Carolina's contribution to 1-hour nonattainment in Atlanta was no more "insignificant" than many of the other linkages that were found to

be significant (e.g., Indiana's contribution to New York City).

See id. at C-13, H-16.

In contrast, the petitioner seeks to show that the data,

when viewed in isolation, makes South Carolina's contribution

appear insignificant. In the end, we reject the challenge

made on behalf of South Carolina because the petitioner

attacks, not so much the accuracy of EPA's data, but rather

EPA's reasonable analysis and application of the data.

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

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address significant contribution to 1-hour ozone nonattainment 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 producing 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 emissions "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 budget requirements. See id. at 57,377; id. at 57,400. Under

EPA's budget plan, a state "may choose from a broader menu

of cost-effective, reasonable alternatives" including alternatives 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 addition, 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 circumstances 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 impermissibly 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.

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fashion their SIP submissions in the first instance. In support of this position, the petitioners primarily rely on our

decision in Virginia v. EPA, 108 F.3d 1397 (D.C. Cir.),

modified on other grounds, 116 F.3d 499 (D.C. Cir. 1997),

where we held that EPA may not use a section 110(k)(5) SIP

call to order states to adopt a particular approach to achieving the SIP 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 revising source-specific emission limits adopted in a SIP. See id.

at 68-71. The Train Court held that states have the authority under the CAA to initially propose specific emission

limitations. See id. at 79. The Court defined "emission limitations" as "regulations of the composition of substances

emitted into the ambient air from such sources as power

plants, service stations, and the like. They are the specific

rules to which operators of pollution sources are subject,

and which if enforced should result in ambient air which

meets the national standards." 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

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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); Riverside Cement Co. v. Thomas, 843 F.2d 1246, 1247-48 (9th

Cir. 1988) (citing Train and noting EPA's secondary role in

enforcing source-by-source emissions limitations). As we

elaborated in Virginia, "the Supreme Court decided ... that

[section 110] did not confer upon EPA the authority to

condition approval of [a state's] implementation plan ... on

the state's adoption of a specific control measure." Virginia, 108 F.3d at 1408. For the reasons set forth below, we

conclude that the 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 TrainVirginia 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 budget system. In essence, the NOx budget in question is an

EPA mandate prohibiting NOx emissions in the 23 jurisdictions from exceeding a tonnage specific to that jurisdiction.

See 63 Fed. Reg. 57,356 at 57,491-493 (1998). Of concern to

petitioners, the budget rule prohibits states from seeking

compliance, in whole or part, by controlling VOC emissions

even though VOCs as well as 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).

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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 "nonetheless subject[s] the States to strict minimum compliance requirements" 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 submitted SIPs adequately prohibit significantly contributing emissions, EPA permissibly relied on its general rulemaking

authority to prospectively inform the states of EPA's significance determinations.

Moreover, EPA does not tell the states how to achieve SIP

compliance. Rather, EPA looks to section 110(a)(2)(D) and

merely provides the levels to be achieved by state-determined

compliance mechanisms. Specifically, EPA set NOx reduction

levels based, in part, on assumptions about reductions obtainable through highly cost-effective controls. See Final Rule,

63 Fed. Reg. at 57,426. However, EPA made clear that

states do not have to adopt the control scheme that EPA

assumed for budget-setting purposes. See id. at 57,369-370.

States can choose from a myriad of reasonably cost-effective

options to achieve the assigned reduction levels. See, e.g., id.

at 57,438 (noting possibilities with regard to mobile sources);

id. at 57, 378 (noting possibilities with regard to stationary

sources); id. at 57,416. While EPA bases the budgets here

on "highly cost-effective" control measures, the states remain

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effective" measures in place of the ones identified by EPA.

See id. at 57,378; 63 Fed. Reg. 60,318 at 60,328 (1997) (noting

that "one State may choose to primarily achieve emissions

reductions from stationary sources while another State may

focus on emissions reductions from the mobile source sector"). More 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 controls. In Virginia, we did not bar EPA from permitting

more costly alternatives but rather alternatives states would

consider "unreasonable or impracticable." Here, EPA accommodates Virginia's mandate by allowing reasonable control alternatives and allowing states to focus reduction efforts

based on local needs or preferences. See 63 Fed. Reg. at

57,369; id. at 57,399-405; 62 Fed. Reg. at 60,328. Thus, real

choice exists for the covered states.

Regarding EPA's decision not to rely on VOC reductions,

EPA reasonably concluded that long-range ozone transport

can only be addressed adequately through 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 corresponding 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 alternative control measures will not be penalized with more stringent emissions targets. Since the challenged budget program does not mandate a "specific, source-by-source emission

limitation[ ]," the NOx budget plan does not run afoul of

Train or Virginia.

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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 impact 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 significant economic impact on a substantial number of small entities." Id. s 605(b). In the instant case, EPA certified that

the proposed and final rule will not have a significant economic impact on a substantial number of small entities and,

accordingly, did not perform any regulatory flexibility analysis. 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

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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 conclude 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 emissionproducing 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 requirements that a State would have to include in its trading rule in order

to participate in the EPA-managed multi-state trading program.

See id. at 57,461. EPA viewed that setting such requirements was

necessary for controlling the administrative costs of managing the

trading program. See id.

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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 generators but has a design heat capacity of greater than 250 million

Btu/hr ("mmBTu/hr"). See Supplemental Notice for the

Finding of Significant Contribution and Rulemaking for Certain States in the Ozone Transport Assessment Group Region

for Purposes of Reducing Regional Transport of Ozone ("Supplemental Notice of Proposed Rule"), 63 Fed. Reg. 25,902,

25,978 (1998). EPA sought comment on "the appropriateness

of including [such] categories ..., whether the size cut-offs

should be higher or lower for these source categories, and the

appropriateness of including other source categories in the

core group." 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 comments about excluding large boilers with high levels of emission 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 definition 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 drafting of the preamble to the final rule does not render the

substantive decision by EPA arbitrary.

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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 contributors, EPA's flawed cost assumptions in its determination

of cost-effective control measures for non-EGUs, EPA's erroneous 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 boilers in the rule without having isolated non-EGU emissions to

determine whether they "significantly contribute" to the interstate ozone transport problem and whether implementing

highly cost-effective emissions reduction measures on industrial boilers would ameliorate nonattainment in downwind

states. CIBO maintains that non-EGU boilers typically have

significantly shorter stacks than EGUs and that their emissions, as a result, fall below the "mixing layer" that promotes

long-range NOx transport. Therefore, CIBO contends, industrial 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.

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3. Cost-Effectiveness Calculation for Industrial Boilers'

Control Measures

CIBO also challenges EPA's conclusion that industrial boilers could achieve a 60% emissions reduction using highly

cost-effective control measures, see Final Rule, 63 Fed. Reg.

at 57,418, as based on flawed cost calculations. More specifically, 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 controls, for which 20 years was assumed.

- EPA's use of a 10% discount rate, not 7%, in its costeffectiveness 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 socalled 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 contemplates 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

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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 contribute little to improve the quality of agency rulemaking;

therefore, we reject CIBO's challenges regarding EPA's calculation 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 electric 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 proposed, "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 undisputed that EPA was departing from the definition of EGUs as

used in prior regulatory contexts, and EPA was not explicit

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about the departure from the prior practice until two months

after the rule was promulgated. Neither the proposed rulemaking in November 1997 nor the final rule in October 1998

introduced the new definition. EPA waited until the December 1998 correction notice to announce that it will "classify as

an EGU any boiler ... that is connected to a generator

greater than 25 MWe from which any electricity is sold."

Correction and Clarification to the Finding of Significant

Contribution and Rulemaking for Purposes of Reducing Regional Transport of Ozone ("Correction Notice to Final

Rule"), 63 Fed. Reg. 71,220, 71,223 (1998). After the December correction notice, EPA reopened the comment period for

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sixty days for comments on this and other issues. In EPA's

May 1999 response to the comments, EPA, for the first time,

discussed why the change was necessary and offered a justification 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." Supplemental Notice of Proposed Rule, 63 Fed. Reg. at 25,923.

Given the vague and conflicting signals that EPA was sending, it is an exaggeration to state that some general "theme"

of the regulatory consequences of deregulation of the utility

industry throughout rulemaking meant that EPA's lastminute 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

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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 consideration 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 Stationary International Combustion Engines 2 (September 4,

1998). When the rule was finally promulgated in October

1998, EPA stated that it was assuming a 90% control level.

See Final Rule, 63 Fed. Reg. at 57,418.

INGAA contends that EPA's switch from 70% to 90% for

large IC engines was unanticipated and that EPA should

have allowed comments on the issue. Considering EPA's

repeated affirmation of the 70% assumption throughout rulemaking and rejection of a higher, 80% assumption earlier, a

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revision in its assumption less than one month before the final

rule was promulgated hardly provided adequate notice, especially given the magnitude of the consequences of the proposed change on the regulated bodies. Therefore, we remand

for further consideration on this issue.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 largely 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.

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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 limited 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 allowance 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 supplement. 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 Responses 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.

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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 mechanism 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 contain 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

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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 emissions 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.

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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 constitutional 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 significance 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 effectiveness of alleviation. I agree with the State petitioners that it

is undeniable that EPA has exceeded its statutory authority.

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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 reviewed 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 compounds...." 42 U.S.C. s 7545(k)(1). Although EPA advanced commendable goals of economic benefit for its inclusion 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 promulgate legislative regulations is limited to the authority delegated 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 suggest 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 Administrator'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.

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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, "contribute." The majority compounds its error by divorcing significantly 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 added). 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 effectiveness to find a place in a statutory provision addressing

amounts of air pollutant contribution. While the contribution

must affect nonattainment significantly, no reasonable reading of the statutory provision in its entirety allows the term

significantly to springboard costs of alleviation into EPA's

statutorily-defined authority. 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 reasonable interpretation of those words which makes them depend

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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 administrative 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 agency's scurrilous "second-step" cost effectiveness analysis ventures 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 alleviating 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 determining the significance of the risk vel non.

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