Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-97-01656/USCOURTS-caDC-97-01656-0/pdf.json

Parties Involved:
Carol M. Browner
Respondent
Environmental Protection Agency
Respondent
Independent Refiners Coalition
Petitioner

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 8, 1998 Decided November 3, 1998

No. 97-1651

George E. Warren Corporation,

Petitioner

v.

U.S. Environmental Protection Agency

and Carol M. Browner, Administrator,

Respondents

Friends of the Earth, et al.,

Intervenors

Consolidated with

97-1656

---------

On Petitions for Review of an Order of the

Environmental Protection Agency

Jeffrey C. Bates argued the cause for petitioner George E.

Warren Corporation. With him on the briefs were Harvey

M. Sheldon and Ellen S. Tenenbaum.

Michael F. McBride argued the cause for petitioner Independent Refiners Coalition. With him on the briefs were

Gene E. Godley and Daniel C. Esty.

Seth M. Barsky, Attorney, U.S. Department of Justice,

argued the cause for respondents. With him on the brief

were Lois J. Schiffer, Assistant Attorney General, Jonathan

Z. Cannon, General Counsel, Environmental Protection

Agency, and John Hannon, Attorney.

J. Martin Wagner argued the cause for intervenors

Friends of the Earth, Inc., et al. With him on the brief were

Patti Goldman, Marcus W. Sisk, Jr. and Lori A. Lange.

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V. Robert Denham, Jr. argued the cause for intervenors

Petroleo Brasileiro, S.A., and Petrobras America, Inc. With

him on the brief were Rex R. Veal and N. David Palmeter.

Before: Ginsburg, Sentelle, and Rogers, Circuit Judges.

Opinion for the court filed by Circuit Judge Ginsburg.

Ginsburg, Circuit Judge: Before the court are petitions to

review a rule promulgated by the Environmental Protection

Agency in 1997 to implement the anti-dumping provision of

the reformulated gasoline program established by the Clean

Air Act Amendments of 1990. See 42 U.S.C. s 7545(k)(8).

The challenged rule regulates emissions from conventional

gasoline for motor vehicles, and changes the way importers

and foreign refiners of conventional gasoline sold in the

United States had been treated under the prior rule. The

petitioners are the George E. Warren Corporation, an importer of gasoline, and the Independent Refiners Coalition, a

trade organization composed of domestic gasoline refiners.

Three environmental pressure groups intervene on behalf of

the petitioners, and two foreign refiners intervene on behalf

of the EPA.

The petitioners and their supporters (hereinafter collectively the petitioners) contend that in promulgating the 1997 rule

the EPA acted beyond its statutory authority, arbitrarily and

capriciously, and in reliance upon comments submitted after

the close of the comment period. For the reasons set out

below, we reject each of these challenges and deny the

petition for review.

I. Background

The Clean Air Act Amendments of 1990 require the reformulation of conventional gasoline to reduce motor vehicle

emissions in certain large urban regions with elevated levels

of ozone. See 42 U.S.C. s 7545(k)(1) (nonattainment areas).

In those areas reformulated gasoline alone may be sold to

consumers; conventional gasoline may be sold in the remainder of the country. See id. s 7545(k)(1), (5).

To prevent pollutants being transferred from reformulated

gasoline to conventional gasoline in the refining process, the

Congress included an "anti-dumping" provision, see id.

s 7545(k)(8),* which requires generally that the conventional

__________

* Section 7545(k)(8) provides:

(A) In General

[T]he Administrator shall promulgate regulations applicable

to each refiner, blender, or importer of gasoline ensuring that

gasoline sold or introduced into commerce by such refiner,

blender, or importer (other than reformulated gasoline subject

to the requirements of paragraph (1)) does not result in average per gallon emissions (measured on a mass basis) of (i)

volatile organic compounds, (ii) oxides of nitrogen, (iii) carbon

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monoxide, and (iv) toxic air pollutants in excess of such emissions of such pollutants attributable to gasoline sold or introduced into commerce in calendar year 1990 by that refiner,

blender, or importer.

....

(E) Baseline for determining compliance

If the Administrator determines that no adequate and reliable data exists [sic] regarding the composition of gasoline sold

or introduced into commerce by a refiner, blender, or importer

in calendar year 1990, for such refiner, blender, or importer,

baseline gasoline shall be substituted for such 1990 gasoline in

determining compliance with subparagraph (A).

The statutory "baseline gasoline" referred to in s 7545(k)(8)(E) is

set out in s 7545(k)(10)(B).

gasoline of each supplier (including both domestic and foreign

refiners and importers) remain as clean as it was in 1990.

Compliance is measured for each of several specified pollutants by comparing the yearly average emissions per gallon

attributable to each supplier's conventional gasoline with an

individual baseline representing the quality of gasoline that

supplier introduced into the United States in 1990. If, however, the Administrator of the EPA "determines that no

adequate and reliable data exist[]" to set an individual baseline for a particular supplier, then that supplier's compliance

is measured against a statutory baseline representing the

average emissions per gallon for all gasoline introduced into

commerce in 1990. And like it or not, thereby hangs a tale.

A.The 1994 Rule

In 1994 the EPA announced standards for setting individual baselines under which domestic refiners, foreign refiners,

and importers were all treated differently. See Final Rule:

Regulation of Fuels and Fuel Additives: Standards for

Reformulated and Conventional Gasoline, 59 Fed. Reg.

7,716. Domestic refiners were each required to establish an

individual baseline because the EPA determined they have

adequate and reliable data with which to do so. Foreign

refiners were not regulated, but their gasoline was subject to

the regulations applicable to the importer thereof. Each

importer was permitted to establish an individual baseline,

but because they generally lacked the data to do so, importers were in practice assigned the statutory baseline. See id.

at 7,785/2-3, 7,786/2.

The EPA had considered giving foreign refiners the option

of either petitioning to establish an individual baseline or

accepting the statutory baseline, but rejected this approach

for three reasons. First, foreign refiners generally would not

have adequate data with which to establish an individual

baseline. Second, the agency was concerned with the potential for "gaming": a foreign refiner presumably would choose

to apply for an individual baseline only if doing so would allow

the refiner to sell gasoline dirtier than would be allowed

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under the statutory baseline, which might result in overall

degradation of air quality. Finally, the EPA determined that

because foreign refiners, unlike domestic refiners, are not

"subject to the full panoply of EPA's regulatory jurisdiction,"

the agency could not impose upon them mechanisms to

ensure compliance monitoring and enforcement, functions

that it considered "integral to the establishment of accurate

and verifiable baselines." Id. at 7,786/2. Because a foreign

refiner's gasoline typically passes through many channels and

may be blended with gasoline from other refineries before it

reaches the United States, and because gasoline cannot be

identified by its refinery of origin, the EPA would have only

the paperwork accompanying the imported gasoline to identify its source. See id. at 7,787/1-2. The agency also considered requiring each foreign refiner, like each domestic refiner, to establish an individual baseline, but ultimately rejected

this mandatory approach for two of the three reasons it

rejected the optional approach: most foreign refiners lack the

necessary data, and it would be difficult to monitor for and to

enforce compliance. See id. at 7,786/1-2.

B.The 1997 Rule

In 1995 the World Trade Organization held the 1994 rule

violated the anti-discrimination norm of the General Agreement on Tariffs and Trade because domestic refiners were

allowed to set individual baselines while foreign refiners were

not. The United States Trade Representative in June 1996

advised the WTO that the United States intended to comply

with that decision. See 19 U.S.C. s 3533 (specifying procedures agencies must follow before amending a rule held

inconsistent with GATT). The EPA accordingly solicited

public comment to identify its choices, see Invitation For

Public Comment: World Trade Organization (WTO) Decision on Gasoline Rule (Reformulated and Conventional Gasoline), 61 Fed. Reg. 33,703 (1996), and later proposed to

adopt the optional baseline approach it had rejected in the

1994 rule, allowing each foreign refiner either to accept the

statutory baseline or to petition the EPA for permission to

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establish an individual baseline. See Notice of Proposed

Rulemaking: Regulation of Fuels and Fuel Additives: Baseline Requirements for Gasoline Produced By Foreign Refiners, 62 Fed. Reg. 24,776 (1997).

In 1997 the EPA promulgated a final rule to that effect.

See Final Rule: Regulation of Fuels and Fuel Additives:

Baseline Requirements for Gasoline Produced By Foreign

Refiners, 62 Fed. Reg. 45,533 (codified at 40 C.F.R. pt. 80).

The new rule conditions the assignment of an individual

baseline upon the foreign refiner's agreement to certain

conditions necessary to ensure compliance and to facilitate

enforcement. See id. at 45,539-41, 45,550-59. The EPA

concluded that the risk of an adverse environmental impact

from gaming by foreign refiners, although "difficult to quantify," id. at 45,537/2, was acceptable; indeed, during the first

year in which the 1994 rule was in effect imported gasoline on

average actually had been somewhat cleaner than required by

the statutory baseline. See id. at 45,542/2 & n.13. Nevertheless, the EPA again acknowledged, as it had in 1994, that

allowing foreign refiners selectively to petition for individual

baselines could have an adverse environmental effect. Accordingly, as a remedial measure, the agency announced that

it will monitor the average quality of imported gasoline for

emissions of oxides of nitrogen (NOx)--the pollutants which

in its judgment are most likely to increase over 1990 levels--

and will compare the results with the average quality of

gasoline imported in 1990; if the 1990 levels are ever exceeded, then the permissible levels of NOx for gasoline imported

under the statutory baseline will automatically be decreased

by an offsetting amount, in order thereby to maintain the

"environmental neutrality" of the rule. Id. at 45,537.

II. Analysis

The petitioners bring both substantive and procedural challenges to the 1997 rule. As to substance, the petitioners

argue the rule is beyond the EPA's statutory authority

because (1) allowing foreign refiners the option to petition the

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EPA for an individual baseline may result in a degradation of

air quality; (2) in promulgating the rule the EPA considered

factors other than air quality, namely (a) the WTO's decision

that the 1994 rule was inconsistent with the GATT, and (b)

the likely effect of regulation upon the price and supply of

gasoline in the U.S. market; (3) the EPA may not allow

foreign refiners to choose whether to establish an individual

baseline but must assign them each one unless it determines

with respect to a particular refiner that there are not adequate and reliable data with which to do so; and (4) the

remedial provision impermissibly alters the statutory baseline

set by the Congress. The petitioners also challenge the

agency's reasoning as arbitrary and capricious in several

respects. As to procedure, the petitioners challenge the

EPA's reliance upon comments filed by the Department of

Energy after the close of the period for public comment, and

the agency's failure to consider certain factors when fashioning the remedial provision. We address the latter procedural

point in conjunction with the petitioners' substantive challenge to the remedial provision, to which it is closely related.

A. Justiciability

Before discussing the merits of this dispute we consider the

EPA's two threshold objections to this proceeding. First, the

EPA contends the IRC lacks prudential standing because it is

not within the zone of interests protected by the Clean Air

Act. The agency then concedes, however, that because Warren raises "essentially the same claims as IRC," our holding

that the IRC lacks standing would "not reduce the number of

issues before the Court." See, e.g., Mountain States Legal

Found. v. Glickman, 92 F.3d 1228, 1232 (D.C. Cir. 1996)

("For each claim, if constitutional and prudential standing can

be shown for at least one plaintiff, we need not consider the

standing of the other plaintiffs to raise that claim"). Contrary to the EPA's concession, however, we observe that

several of the arbitrary and capricious challenges in this case

are advanced only by the IRC. We must therefore consider

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whether the IRC has standing to bring them. See Louisiana

Envtl. Action Network v. Browner, 87 F.3d 1379, 1382 (1996)

("before we reach the merits of any claim, we must first

assure ourselves that the dispute lies within the constitutional

and prudential boundaries of our jurisdiction").

As it turns out, however, we find it unnecessary to resolve

the question of the IRC's prudential standing because the

citizen suit provision of the Clean Air Act, 42 U.S.C. s 7604(a)

("any citizen may commence a civil action"), apparently removes that "judicially self-imposed limit[] on the exercise of

federal jurisdiction." Bennett v. Spear, 520 U.S. 154, 162

(1997). In the cited case the Court concluded that the

Congress had removed the zone-of-interests barrier to suits

brought under the Endangered Species Act by including a

citizen suit provision that the Court described as follows:

The first operative portion of the provision says that

"any person may commence a civil suit"--an authorization of remarkable breadth when compared with the

language Congress ordinarily uses. Even in some other

environmental statutes, Congress has used more restrictive formulations.... Our readiness to take the term

"any person" at face value is greatly augmented by two

interrelated considerations: that the overall subject matter of this legislation is the environment (a matter in

which it is common to think all persons have an interest)

and that the obvious purpose of the particular provision

in question is to encourage enforcement by so-called

"private attorneys general"--evidenced by its elimination

of the usual amount-in-controversy and diversity-ofcitizenship requirements, its provision for recovery of the

costs of litigation (including even expert witness fees),

and its reservation to the Government of a right of first

refusal to pursue the action initially and a right to

intervene later.

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Id. at 164-65. The citizen suit provision in the Clean Air Act

is indistinguishable, for it contains all of the elements the

Court found significant in the corresponding provision of the

ESA. See 42 U.S.C. s 7604(a) ("any person may commence a

civil action"); id. (eliminating amount-in-controversy and diversity-of-citizenship requirements); s 7604(d) (providing for

recovery of costs of litigation, including expert witness fees);

s 7604(b)(1)(A) (Administrator must be given right of first

refusal); s 7604(c)(2) (Administrator, if not a party, may

intervene at any time). Accordingly, we hold the IRC has

standing.

Second, the EPA claims that Warren's challenge to the

remedial provision is unripe because the remedial provision

may never be implemented; if ever it is, that will constitute

"final action" from which Warren may then appeal. Warren

responds with the broad nostrum that under the Clean Air

Act "immediate challenge of a regulation is the prudent

course." Despite the generality of its response, we agree

with Warren that its challenge is ripe.

To determine the ripeness of a controversy for judicial

review ordinarily requires the court to evaluate "both the

fitness of the issues for judicial decision and the hardship to

the parties of withholding court consideration." Ohio Forestry Ass'n v. Sierra Club, 118 S.Ct. 1665, 1670 (1998) (quoting

Abbott Lab. v. Gardner, 387 U.S. 136, 149 (1967)). "In

determining the fitness of an issue for judicial review we look

to see whether the issue is purely legal, whether consideration of the issue would benefit from a more concrete setting,

and whether the agency's action is sufficiently final." Clean

Air Implementation Project v. EPA, 150 F.3d 1200, 1204

(D.C. Cir. 1998). All three criteria are met here: Whether

the remedial provision is consistent with the statute is purely

an issue of law. That issue is as concrete now as it will ever

be because the rule operates automatically to lower the

statutory baseline if and when average emissions of NOx

from gasoline imported thereunder exceed corresponding

1990 levels; no future factual developments will add to our

present understanding of the effect the remedial provision

will have upon Warren, when and if it is implemented. Cf. id.

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at 1205 (contention that EPA's credible evidence rule altered

emission standards not fit for review because effects of rule

could not be adequately determined prior to its application in

concrete factual setting). And the rule is undoubtedly final.

Under these circumstances, we need not address the EPA's

argument that Warren will suffer no hardship unless and

until the remedial provision is implemented. "[W]here the

first prong of the [Abbott Laboratories] ripeness test is met

and Congress has emphatically declared a preference for

immediate review [as it has under the Clean Air Act, 42

U.S.C. s 7607(b)] ... no purpose is served by proceeding to

the second prong." NRDC v. EPA, 22 F.3d 1125, 1133 (D.C.

Cir. 1994). We conclude, therefore, that Warren's challenge

to the rule's remedial provision is ripe for review.

B.Substantive Challenges

Because the EPA is charged with administering the Clean

Air Act, we evaluate a challenge to its statutory authority

under the familiar two-step analysis of Chevron U.S.A., Inc.

v. NRDC, 467 U.S. 837 (1984). See Motor Vehicle Mfrs.

Assoc. v. EPA, 768 F.2d 385, 389 n.6 (D.C. Cir. 1985) (Chevron analysis applies to questions of statutory construction

under Clean Air Act). Under Chevron step one the court

asks "whether Congress has directly spoken to the precise

question at issue," id. at 842; if so, then we "must give effect

to the unambiguously expressed intent of Congress." Id. at

843. If the Congress has not addressed the issue, however,

then under Chevron step two we will defer to the agency's

interpretation if it is reasonable in light of the structure and

purpose of the statute. See id.

We review a challenge to the agency's actions as arbitrary

and capricious under the same standards that we apply when

reviewing a rule pursuant to the Administrative Procedure

Act. See 42 U.S.C. s 7607(d)(9)(A); Chemical Mfrs. Ass'n v.

EPA, 28 F.3d 1259, 1263 (D.C. Cir. 1994). As we have

pointed out before, this inquiry may overlap with our analysis

under step two of Chevron, see Republican Nat'l Comm. v.

FEC, 76 F.3d 400, 407 (1996); so it does to some extent in

this case.

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1. Air Quality Improvement

The petitioners base all their challenges to the EPA's

statutory authority upon the premise that any rule that does

not guarantee the maintenance or improvement of air quality

violates the anti-dumping provision of 42 U.S.C. s 7545(k)(8).

For this they rely upon our remark in American Petroleum

Institute (API) v. EPA, 52 F.3d 1113, 1119 (1995), that the

"sole purpose of the [reformulated gasoline] program is to

reduce air pollution." In doing so, however, the petitioners

misjudge the applicability of that precedent.

The overall goal of the reformulated gasoline program is, of

course, to improve air quality by reducing air pollution; the

means chosen to achieve that end are, first, requiring that

only reformulated gasoline be sold in nonattainment areas,

see s 7545(k)(1), and second, prohibiting the transfer of pollutants in the refining process from reformulated to conventional gasoline, see s 7545(k)(8). In API the court was interpreting s 7545(k)(1), which sounds the main theme by requiring

"the greatest reduction in emissions of [specified pollutants]

achievable through the reformulation of conventional gasoline." That interpretation has no application to s 7545(k)(8),

which is intended (though for reasons discussed in the next

paragraph is not guaranteed) to maintain the emissions per

gallon attributable to conventional gasoline at levels no higher

than they were in 1990, but does not require that they be

reduced. The petitioners thus conflate the overriding statutory purpose of the reformulated gasoline program, which

was at issue in API, with an express statutory command

applicable to conventional gasoline, which is at issue in this

case.

Indeed, far from requiring that emissions per gallon of

conventional gasoline be reduced--or even capped at 1990

levels, as a bill passed by the House would have done, see S.

1630, 101st Cong. s 212(k)(6) (May 23, 1990), reprinted in

Sen. Comm. on Env't & Pub. Works, 103d Cong., 2 Legislative

History of the Clean Air Act Amendments of 1990, at 2065

(1993)--the anti-dumping scheme as enacted allows such

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stances. If individual baselines could be established for every

supplier, and if the market share of each were to remain at its

1990 level, then of course emissions per gallon also would

remain at 1990 levels. Because, however, the data needed to

set an individual baseline do not exist for every supplier--a

contingency for which the Congress expressly provided, see

s 7545(k)(8)(E)--the statute inherently tolerates an increase

over 1990 emissions per gallon. While suppliers with an

individual baseline must maintain the quality of their gasoline

at its 1990 level or better, suppliers operating under the

statutory baseline may be providing gasoline that is dirtier

than was the corresponding gasoline on the market in 1990.

In addition, the market share of the latter group may increase, which would also contribute to a lessening of air

quality. In sum, although the general purpose of the antidumping provision is to maintain average emissions per gallon

from conventional gasoline at no more than 1990 levels, the

specific approach adopted by the Congress makes full

achievement of that goal less than certain. This result apparently reflects a legislative compromise between two potentially conflicting goals--avoiding degradation of air quality and

not disrupting the market for conventional gasoline. See 136

Cong. Rec. 35,759 (1990) ("There are several dilemmas ...

that must be equitably addressed by EPA in implementation

of [s 7545(k)(8)], taking into account costs, fuels, availability

and energy penalties to refiners") (statement of Sen.

Simpson); id. at 35,002 ("Control over supply means control

over price. EPA must be sensitive to this danger: New

[s 7545(k) does] not intend to resurrect a 1970's DOE type

scheme of detailed government intervention in U.S. gasoline

markets. An approach of this sort would be especially unacceptable, in view of the fact that DOE's restrictions artificially

lowered prices, whereas EPA restrictions on supply would

artificially raise them") (statement of Rep. Sharp), reprinted

in 1 Legislative History of the Clean Air Act Amendments of

1990 at 1164, 1219.

2. Factors Other Than Air Quality

Again proceeding from the mistaken premise that the

maintenance or improvement of air quality is the sole focus of

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the anti-dumping provision, the petitioners argue that the

EPA may not consider factors other than air quality in

promulgating rules under s 7545(k)(8). Thus do they challenge the EPA's consideration both of the WTO's decision

interpreting the GATT and of the comments of the Department of Energy concerning the economic effects of the alternatives before the agency. The DOE predicted that mandating individual baselines for foreign refiners could adversely

affect the price and supply of gasoline by making it more

difficult for the foreign refiners quickly to divert gasoline to

the U.S. market in times of increased demand. See 1997

Rule, 62 Fed. Reg. at 45,536/2. The EPA responds that

nothing in the statute precludes consideration of such factors,

and that its approach is congruent with that employed by the

Congress when it enacted the anti-dumping provision.

The petitioners do not direct our attention to anything 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 and the treaty obligations of the United States.

Under step two of Chevron, therefore, we must defer to the

agency's construction if it is reasonable. See NRDC v. EPA,

824 F.2d 1146, 1157 (D.C. Cir. 1987) (en banc) (interpreting 42

U.S.C. s 7412 of the Clean Air Act and rejecting the view

that "as a matter of statutory interpretation, cost and technological feasibility may never be considered under the Clean

Air Act unless Congress expressly so provides"); International Bhd. of Teamsters v. United States, 735 F.2d 1525,

1529 (D.C. Cir. 1984) ("In the absence of clear congressional

direction to the contrary, we will not deprive the agency of

the power to fine-tune its regulations to accommodate worthy

nonsafety interests" under a statute focused upon safety); see

also Grand Canyon Air Tour Coalition v. FAA, 154 F.3d 455,

475, (D.C. Cir. 1998) (FAA properly considered effects of rule

on air tourism industry where the statute did not forbid such

consideration and required not total but only "substantial

restoration of the natural quiet").

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Under step two of Chevron, we think the agency's interpretation is permissible. Section 7545(k)(8) specifically allows

foreign refiners that produced dirtier than average gasoline

in 1990 to continue importing gasoline of that quality, presumably in order to prevent the disruption that might ensue

were those refiners forced to choose between producing

cleaner gasoline than they did in 1990 or quitting the U.S.

market. The agency, following the lead of the Congress,

similarly sought to prevent its rule from disrupting the

market.

In the particular circumstances of this case our usual

reluctance to infer from congressional silence an intention to

preclude the agency from considering factors other than

those listed in a statute is bolstered by the decision of the

WTO lurking in the background. "Since the days of Chief

Justice Marshall, the Supreme Court has consistently held

that congressional statutes must be construed wherever possible in a manner that will not require the United States 'to

violate the law of nations.' " South African Airways v. Dole,

817 F.2d 119, 125 (D.C. Cir. 1987) (quoting The Schooner

Charming Betsy, 6 U.S. (2 Cranch.) 64, 118 (1804)); see also

Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515

U.S. 528, 539 (1995) ("If the United States is to be able to

gain the benefits of international accords and have a role as a

trusted partner in multilateral endeavors, its courts should be

most cautious before interpreting its domestic legislation in

such manner as to violate international agreements").

In sum, we conclude the EPA's consideration of factors

other than air quality is not precluded by anything in

s 7545(k)(8); in this case, moreover, that consideration appears to be congruent with both the congressional purpose

not to disrupt the market for imported gasoline and the

Supreme Court's instruction to avoid an interpretation that

would put a law of the United States into conflict with a

treaty obligation of the United States. For these reasons we

deem the EPA's interpretation of the anti-dumping provision

a reasonable one; pursuant to Chevron step two, therefore,

we must uphold it.

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3. Adequate and Reliable Data

The petitioners argue that in s 7545(k)(8)(E) the "Congress

provided that the Statutory Baseline was not an option but

could be used only if 'the Administrator determines that no

adequate and reliable data exist[] regarding the composition

of gasoline sold or introduced into commerce by a refiner,

blender, or importer in calendar year 1990.' " The EPA does,

however, link assignment of the statutory baseline to the

unavailability of data with which to set an individual baseline.

As we understand the petitioners' argument, therefore, they

object to the manner in which the agency makes this determination.

Under step one of Chevron, we conclude the Congress did

not speak to the precise question at hand: s 7545(k)(8)(E)

requires the EPA to determine whether the necessary data

are available, but it does not tell the agency how it must go

about the task. Nor could counsel for the petitioners say,

when asked, what the statute requires the agency to do when

a foreign refiner claims it does not have data relevant to

establishing an individual baseline. In view of the lack of

guidance in the statute concerning how the EPA is to determine whether "adequate and reliable data exist[]" within the

meaning of s 7545(k)(8), we proceed to step two of Chevron

and examine whether the agency's method of making that

determination represents a reasonable construction of the

statute.

The EPA determined implicitly--but nonetheless clearly--

that for the purpose of setting an individual baseline no

adequate and reliable data can exist with respect to a foreign

refiner unless that refiner agrees to certain conditions, several of which relate directly to the production of information,

necessary to ensure compliance with and enforcement of the

statute. "[W]e defer to an interpretation which was a necessary presupposition of the [agency's] decision," so long as that

interpretation is reasonable. National R.R. Passenger Corp.

v. Boston & Maine Corp., 503 U.S. 407, 420 (1992). (As in

the cited case, it is "noteworthy ... that [no petitioner]

contends the [EPA's] decision was not informed and governed

by this statutory interpretation." Id.)

In the 1994 rulemaking the EPA stated its belief that most

foreign refiners lack the data necessary to establish the

quality of the (often minor) portion of their 1990 output sold

in the United States. See 1994 Rule, 59 Fed. Reg. at 7,786/1-

2. As to those refiners that might have the data, the agency

explained that such data cannot be deemed "adequate and

reliable" unless backed up by appropriate mechanisms for

monitoring and enforcing the refiner's compliance with EPA

regulations:

There is a fundamental distinction between EPA's

ability to monitor and enforce regulatory requirements

that would apply against domestic as opposed to foreign

refiners. Simply put, domestic refiners are subject to

the full panoply of EPA's regulatory jurisdiction and

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compliance monitoring, while not all foreign refiners

desiring to produce reformulated and/or conventional

gasoline may be subject to EPA's regulatory jurisdiction

with equivalent certainty. Compliance monitoring and

enforcement are integral to the establishment of accurate

and verifiable baselines, as well as subsequent compliance with standards based on these baselines.

The reformulated gasoline program compliance monitoring and enforcement scheme consists of several elements designed in the aggregate to ensure that the

environmental goals of the Clean Air Act are met, including, inter alia: baseline-setting audits; mandatory reporting and record keeping; independent laboratory

sampling and testing; tracking of product from point of

production to point of distribution; unannounced EPA

compliance inspections; annual attest engagements by

certified professionals; and an enforcement scheme comprised of civil penalties, injunctive relief, and criminal

sanctions. Domestic refiners and importers are subject

to EPA jurisdiction in each of these activities; all foreign

refiners may not be equally amenable to EPA jurisdiction.

Id. at 7,786/2-3.

The 1997 rule addresses these concerns by allowing a

foreign refiner that is able to establish the quality of the

gasoline it sold in the United States in 1990 to petition the

EPA to establish an individual baseline if the refiner agrees

to specific conditions aimed at ensuring its compliance.

These are: (1) in the case of a state-owned or operated

refinery, that it waive any defense of sovereign immunity in

civil, criminal, or administrative enforcement proceedings;

and (2) in all cases, that the refiner (a) appoint an agent for

the service of process in Washington, D.C.; (b) post a substantial bond to ensure payment of penalties in the event of

its noncompliance; (c) commit to allowing EPA inspections

and audits of all gasoline produced, regardless whether it is

intended for the U.S. market; (d) submit to the jurisdiction of

United States courts or administrative tribunals in any enforcement action; (e) implement detailed tracking and certification procedures to ensure its compliance with EPA regulations; and (f) procure independent third-party sampling and

laboratory tests. See 1997 Rule, 62 Fed. Reg. at 45,539-41,

45,550-59.

In effect, then, the agency presumes that foreign refiners

will not have (or will not produce) the 1990 data necessary to

establish an individual baseline; it then provides foreign

refiners that do have those data with the option, subject to

the conditions necessary to ensure their compliance with the

agency's program, of petitioning for an individual baseline.

In view of the evident likelihood that foreign refiners--even if

willing--would be unable to produce the requisite data, and

the significant jurisdictional obstacles to obtaining data from

and enforcing compliance against the unwilling, we think the

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EPA's construction of s 7545(k)(8) is a reasonable one. That

data with which to set an individual baseline merely "exist" in

the abstract is meaningless, as the agency concluded, unless

backed by adequate provisions for enforcing the refiner's

compliance with that baseline.

4. The Remedial Provision

Recall that the EPA provided for an automatic tightening

of the statutory baseline for imported conventional gasoline in

the event emissions per gallon of NOx ever exceed a benchmark representing the average quality of gasoline imported in

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1990. See 1997 Rule, 62 Fed. Reg. at 45,537/2-3. Warren

asserts the EPA has no authority to alter the statutory

baseline set out in s 7545(k)(10)(B), to which the agency

responds that s 7545(c)(1)(A) empowers it to do precisely

that.

Under the latter provision, the EPA has broad authority to

"control" the introduction into commerce of any motor vehicle

fuel "if in the judgment of the Administrator any emission

product of such fuel ... causes, or contributes, to air pollution which may reasonably be anticipated to endanger the

public health or welfare." It is well-established that under

this provision the EPA may control "fuels or fuel additive[s]

already in commerce," API, 52 F.2d at 1121, which the

agency has long done with respect to leaded gasoline. See

Union Oil Co. v. EPA, 821 F.2d 678, 680 (D.C. Cir. 1987);

Amoco Oil Co. v. EPA, 501 F.2d 722, 744-46 (D.C. Cir. 1974).

The agency may also use the same authority to alter decisions

made under other subsections of s 7545. See Ethyl Corp. v.

EPA, 51 F.3d 1053, 1063-64, 1065 (D.C. Cir. 1995) (explaining

that under s 7545(c) EPA may control or prohibit a fuel

additive previously waived into commerce under s 7545(f)).

Warren does not respond directly to the EPA's claim of

authority under s 7545(c)(1)(A), but instead asserts that

s 7545(k)(10)(B) specifies "exactly" what the statutory baseline for imported gasoline should be. That is neither formally

nor functionally correct, however. Section 7545(k)(10)(B) refers not to gasoline that contains specific levels of pollutants

but to gasoline that "meets the [listed] specifications"; as a

matter of ordinary language, gasoline that exceeds those

specifications necessarily also "meets" them. See American

Heritage Dictionary 1122 (3d ed. 1992) (def. 11: "[t]o satisfy

(a need, for example); fulfill: meet all the conditions in the

contract"). Nor does anything in s 7545(k) suggest the

Congress intended to limit the Administrator's broad authority under s 7545(c)(1)(A).

Warren next argues that the agency failed to satisfy a

procedural prerequisite to regulation under s 7545(c)(1)(A):

the Administrator may regulate a fuel under s 7545(c)(1)(A)

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only "after consideration of all relevant medical and scientific

evidence available to [her], including consideration of other

technologically or economically feasible means of achieving

emission standards under section 7521 of this title [governing

emissions controls on motor vehicles]." s 7545(c)(2)(A).

This claim founders, however, upon Warren's own failure to

show (indeed, even to attempt to show) that the alleged

oversight was material to the Administrator's decision, as

required by the Act. See s 7607(d)(8) ("In reviewing alleged

procedural errors, the court may invalidate the rule only if

the errors were so serious and related to matters of such

central relevance to the rule that there is a substantial

likelihood that the rule would have been significantly changed

if such errors had not been made"); s 7607(d)(1)(E) (making

s 7607(d) applicable to rules regulating fuels under s 7545);

Texas Mun. Power Agency v. EPA, 89 F.3d 858, 875 (D.C.

Cir. 1996) (under s 7607(d)(8) court may reverse only procedural errors that are material).

Accordingly, we hold that in enacting the remedial provision the EPA acted within its authority under s 7545(c)(1)(A),

that such authority is not limited by s 7545(k)(10)(B), and

that Warren's procedural challenge to the remedial provision

is barred.

5. Arbitrary and Capricious Challenges

The petitioners challenge the 1997 rule as arbitrary and

capricious in seven respects. First, they argue the EPA has

not provided a reasoned explanation for departing from its

prediction in the 1994 rulemaking that the optional baseline

approach would adversely affect the average quality of imported gasoline due to "gaming" by foreign refiners. See

Motor Vehicles Mfrs. Ass'n v. State Farm Mut. Auto Ins. Co.,

463 U.S. 29, 57 (1983) ("An agency's view of what is in the

public interest may change, either with or without a change in

circumstances. But an agency changing its course must

supply a reasoned analysis"). In response, the EPA points

out that it continued to recognize the possibility that gaming

by foreign refiners might lessen air quality but concluded that

this risk was not as great as the agency previously had

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thought; indeed, one of its basic assumptions in the 1994

rulemaking was contradicted by new data.

In 1994 the agency had simply assumed that refiners would

supply the dirtiest gasoline allowed by law. See 1994 Rule,

59 Fed. Reg. at 7,785/1-2. In the 1997 rulemaking, however,

the EPA noted that data collected under the 1994 rule

showed that for imported gasoline in 1995 the volumeweighted average of exhaust toxics was significantly lower,

and in the case of NOx was slightly lower, than both the

statutory baseline and the volume weighted average for domestic individual baselines. See 1997 Rule, 62 Fed. Reg. at

45,542/2 & n.13. Those data corroborated data submitted by

a major foreign supplier to the U.S. market showing its

expected individual baseline for exhaust toxics would be

cleaner than the statutory baseline. See id. at 45,542/2. The

evidence therefore showed that although under the 1994 rule

foreign suppliers were required only to meet the statutory

baseline, they were in fact on average producing cleaner

gasoline, apparently for other reasons. The facts having

changed, the agency reasonably changed its position, as it

explained at the time.

Second, and relatedly, the petitioners argue that the afterthe-fact nature of the remedy is arbitrary and capricious

because it allows air quality to degrade in the first place.

The EPA says it was responding, however, to the uncertainties inherent in attempting to predict whether a future degradation of gasoline quality, should it occur, will be due to

gaming by foreign refiners or to shifts in the composition of

the market. (Obviously those foreign refiners that do not

have the data to construct an individual baseline simply can

not game the system; they do not have the option of petitioning for an individual baseline.) In monitoring the quality of

imported gasoline the EPA will be using a three-year average

in order to distinguish between these two possible causes; as

the agency explained, a "change in average gasoline quality

during any particular year ... might indicate the effects of

allowing the option for individual baselines,* or it might

__________

* In quoting the EPA decisions, acronyms have been replaced with

the terms they represent.

reflect the unique circumstances [due to shifts in the market]

for that year." Id. at 45,542/1.

The EPA further explained that any adverse impact upon

the quality of conventional gasoline due to gaming by foreign

refiners depends upon a host of factors, to wit:

the number of foreign refiners that receive an individual

baseline, the actual individual baselines assigned to them,

the volume of gasoline included in the individual baseline,

the source and amount of conventional and reformulated

gasoline imported each year, and the extent, if any, to

which foreign refiners whose 1990 exports to the U.S.

were cleaner on average than the statutory baseline

would now ship gasoline that is dirtier than what they

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exported to the United States in 1990.

Id. at 45,560/3; see also id. at 45,537/2 (noting similar uncertainties); DOE Comments, 1997 Rulemaking, Pub. Dkt. No.

A-97-26, IV-G-03, at 3 (filed July 8, 1997). It seems to us

entirely reasonable for the EPA to plan now how it will deal

with uncertain future developments but to delay remedial

action until the need for any remedy is known. See North

Carolina v. FERC, 112 F.3d 1175, 1190 (D.C. Cir. 1997) ("In

the face of 'serious uncertainties,' an agency need only 'explain the evidence which is available, and ... offer a rational

connection between the facts found and the choice made' ")

(quoting State Farm, 463 U.S. at 52); see also NRDC v.

Thomas, 805 F.2d 410, 425 (D.C. Cir. 1986) (emissions averaging method reasonable even though it could lead to worse air

quality under certain scenarios, because tradeoffs in terms of

clean air objectives are difficult to predict).

Third, Warren argues it would be unfair for the EPA, by

tightening the statutory baseline for NOx, to place upon

importers such as itself the burden of compensating for the

dirtier than average gasoline supplied by foreign refiners

operating under individual baselines. As the agency explains,

however, because gasoline supplied under an individual baseline necessarily reflects the quality of the supplying party's

1990 gasoline, any increase in emissions per gallon from

foreign gasoline must be due to gasoline imported under the

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statutory baseline. Restating the argument in other terms,

Warren claims importers and domestic refiners are similarly

situated and must therefore be treated alike. Although Warren claims the EPA did not respond to this formulation of the

point in its rulemaking, it is clear that the agency's response

to the first formulation is equally applicable: because all

domestic refiners have individual baselines, all gasoline supplied at the statutory baseline must be imported. Targeting

this pool of gasoline, therefore, is not arbitrary and capricious; on the contrary, it is congruent with the statutory

scheme permitting a refiner of dirtier than average gasoline

in 1990 to continue, by establishing an individual baseline,

selling gasoline at that standard.

Relatedly, Warren observes that if the statutory baseline is

ever tightened, then more foreign refiners will have an incentive to apply for an individual baseline. This is likely true but

it is no more arbitrary and capricious than the underlying

decision, which we uphold, to place the remedial burden upon

gasoline imported under the statutory baseline. Additionally

we note the EPA has limited the volume of gasoline a foreign

refiner may import under its individual baseline to the volume

of gasoline it imported in 1990; gasoline in excess of that

amount must comply with the presumably more stringent

statutory baseline and therefore will not add to Warren's

potential burden under a tightened statutory baseline. See

1997 Rule, 62 Fed. Reg. at 45,550/2 n.23.

Fourth, the IRC challenges the agency's reasoning that the

mandatory baseline approach could cause adverse environmental effects because foreign refiners of cleaner gasoline

might leave the U.S. market in response to the added compliance burdens entailed in having an individual baseline. The

EPA explained that a mandatory baseline approach

might produce incentives that would tend to reduce the

average quality of imported conventional gasoline. For

example, gasoline from refiners with cleaner individual

baselines would be measured against a more stringent

baseline than under the [1994] rules, while gasoline from

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sured against a less stringent baseline than under the

[1994] rules. Additional costs would be associated with

segregation, tracking, and other requirements.... To

the extent these changes put refiners with clean individual baselines at an economic disadvantage compared to

refiners with either the statutory baseline or an individual baseline dirtier than the statutory baseline, it could

potentially push the supply of gasoline away from refiners with clean individual baseline.

Id. at 45,536/3. The IRC asserts that this reasoning is

illogical because foreign refiners with a dirtier individual

baseline bear the same compliance and tracking costs as

those with a cleaner individual baseline; therefore, we are

told, the two groups of refiners would be equally likely to

abandon the U.S. market for one with lower transaction costs.

It is common ground among all parties, however, that cleaner

gasoline is more expensive to produce. Therefore, it is not

irrational to believe that if all foreign refiners incur an

increased cost, then the suppliers of cleaner gasoline among

them, with their higher costs and therefore smaller profit

margins, will be the first to leave the U.S. market. See Paul

A. Samuelson & William D. Nordhaus, Economics 138-44

(16th ed. 1998) (because profit-maximizing firms will cease

additional production when marginal cost exceeds price, firms

with higher marginal costs will supply relatively fewer goods

at a given price than competitors with lower marginal costs).

Fifth, the IRC contests the EPA's conclusion that because

foreign refiners might abandon the U.S. market when faced

with the significant additional transaction costs associated

with individual baselines, mandating individual baselines for

all foreign refiners could affect the price and supply of

gasoline in the United States. The IRC claims this reasoning

is equally applicable to domestic refiners. As the EPA

explained in its rulemaking decision, however, and no petitioner contests, the 1994 rule mandating individual baselines

for all domestic refiners "has been successfully implemented

without significant disruptions to the supply or price of

conventional gasoline." 1997 Rule, 62 Fed. Reg. at 45,545/3.

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Sixth, the IRC claims that to allow foreign refiners the

option to petition for an individual baseline discriminates

arbitrarily against domestic refiners, which are not afforded

that option. [Brief at 28] As the EPA explains, however, and

as we have discussed (in part II.B.3, above), foreign refiners

are situated differently from domestic refiners; the EPA can

impose upon domestic refiners by force the conditions necessary to ensure compliance with individual baselines. Additionally, because it has determined domestic refiners have

adequate and reliable data to establish individual baselines, to

allow domestic refiners such an option would exceed the

agency's authority under s 7545(k)(8)(A). See id. at 45,545/3

n.18.

Lastly, the IRC claims that because the agency in 1994

allowed domestic refiners to establish individual baselines

using post-1990 data to model 1990 production, see id. at

45,534/2, it "cannot be contended, as EPA did, that a foreign

refiner could not construct its own Individual Baseline using

post-1990 data and submit it to EPA for approval." The

EPA does not respond to this argument in its brief, perhaps

because the agency did not take the position attributed to it;

rather, it concluded in 1994 that modeling the quality of

overall gasoline refinery production in order to establish an

individual baseline "will not work properly for some or most

foreign refineries [because they] ship only a portion of their

production to the U.S. market." 1994 Rule, 59 Fed. Reg. at

7,786/2. Accordingly, in the 1994 rule the agency declined to

permit any foreign refiner to use post-1990 data to establish

an individual baseline. Under the 1997 rule, the agency still

presumes that foreign refiners will be unable to use such

data, see 1997 Rule, 62 Fed. Reg. at 45,536/2, but it gives

them the opportunity to try.

C.Procedural Challenge: Late-Filed Comments

The petitioners challenge the EPA's reliance upon comments filed by the DOE after the close of the comment

period. The EPA argues that the court lacks jurisdiction

over this claim because the IRC failed to exhaust its administrative remedies. Under the Clean Air Act the court may not

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consider a procedural claim unless it has been "raised with

reasonable specificity" before the EPA, either "during the

period for public comment" or in a petition for reconsideration. 42 U.S.C. s 7607(d)(7)(B); see Texas Mun. Power, 89

F.3d at 871.

In its notice of proposed rulemaking the EPA noted the

DOE's concern, which the DOE had expressed informally,

that the supply and therefore the price of gasoline could be

adversely affected if the EPA were to mandate individual

baselines for all foreign refiners. See 62 Fed. Reg. at 24,-

779/2. At the public hearing the IRC protested the lack of

any data or analysis in the record to justify this concern.

After the period for public comment the DOE submitted its

analysis for the record. The IRC now claims its earlier

objection to the lack of analysis somehow morphed into its

current objection to the late filing of that analysis. The two

points are clearly different, however. Consequently, the

IRC's current challenge to the agency's reliance upon the

DOE's late-filed comments is raised here for the first time,

and for that reason barred.

III. Conclusion

In summary, we hold that the EPA had authority to enact

the optional baseline rule and, in view of the uncertainties

inherent both in the anti-dumping provision of the Act and by

extension in the agency's implementation of that provision, to

provide a prospective remedy against possible degradation of

air quality. We also hold the agency did not act arbitrarily

and capriciously in enacting the rule, for it based its different

treatment of importers, foreign refiners, and domestic refiners upon rational distinctions. Finally, we do not pass upon

the petitioners' two procedural challenges to the rule; one

has not been shown to be material and the other is raised

here for the first time. Accordingly, the petitions for review

are

Denied.

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