Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-98-01537/USCOURTS-caDC-98-01537-0/pdf.json

Parties Involved:
Clean Air Implementation Project
Petitioner
Environmental Protection Agency
Respondent

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 8, 2000 Decided April 14, 2000

No. 98-1512

Appalachian Power Company, et al.,

Petitioners

v.

Environmental Protection Agency,

Respondent

Consolidated with

Nos. 98-1536, 98-1537, 98-1538, 98-1540 & 98-1542

On Petitions for Review of an Order of the

Environmental Protection Agency

Lauren E. Freeman argued the cause for petitioners.

With her on the briefs were Henry V. Nickel, Leslie Sue

Ritts, Michael H. Levin, Edmund B. Frost, David F. Zoll,

Alexandra Dapolito Dunn, John Reese, Charles F. Lettow,

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Marcilynn A. Burke, L. Burton Davis, William H. Lewis,

Michael A. McCord and Ellen Siegler. Michael P. McGovern and Neal J. Cabral entered appearances.

Jon M. Lipshultz, Attorney, U.S. Department of Justice,

argued the cause for respondent. With him on the briefs

were Lois J. Schiffer, Assistant Attorney General, and Gregory B. Foote, Attorney, Environmental Protection Agency.

Before: Williams, Henderson, and Randolph, Circuit

Judges.

Opinion for the Court filed by Circuit Judge Randolph.

Randolph, Circuit Judge: These consolidated petitions for

judicial review, brought by electric power companies, and

trade associations representing the nation's chemical and

petroleum industry, challenge the validity of portions of an

EPA document entitled "Periodic Monitoring Guidance," released in 1998. In the alternative, petitioners seek review of

a 1992 EPA rule implementing Title V of the Clean Air

Amendments of 1990.

I.

Title V of the 1990 amendments to the Clean Air Act

altered the method by which government regulated the private sector to control air pollution. Henceforth, stationary

sources of air pollution, or of potential air pollution, must

obtain operating permits from State or local authorities administering their EPA-approved implementation plans. The

States must submit to EPA for its review all operating

permits and proposed and final permits. See 42 U.S.C.

s 7661d. EPA has 45 days to object; if it does so, "the

permitting authority may not issue the permit," id.

s 7661d(b)(3).1 Congress instructed EPA to pass regulations

establishing the "minimum elements of a permit program to

be administered by any air pollution control agency," includ-

__________

1 If the State permitting authority fails to revise the permit to

satisfy EPA's objection, EPA shall issue or deny the permit, at

which point EPA's action becomes subject to judicial review. See

42 U.S.C. s 7661d(c).

ing "Monitoring and reporting requirements." 42 U.S.C.

s 7661a(b). Under Title V, the Governor of each State could

submit to EPA a permit program by November 15, 1993, to

comply with Title V and with whatever regulations EPA had

promulgated in the interim. See 42 U.S.C. s 7661a(d). This

was to be accompanied by a legal opinion from the State's

attorney general that the laws of the State contained sufficient authority to authorize the State to implement the program. Id. If a State decided not to participate, or if EPA

disapproved the State's program, federal sanctions would kick

in, including a cut-off of federal highway funds and an EPA

takeover of permit-issuing authority within the State. See

Commonwealth of Virginia v. Browner, 80 F.3d 869, 873-74

(4th Cir. 1996).

EPA promulgated rules implementing the Title V permit

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program in 1992. The rules list the items each State permit

program must contain,2 including this one:

(3) Monitoring and related record-keeping and reporting requirements. (i) Each permit shall contain the following requirements with respect to monitoring:

(A) All monitoring and analysis procedures or test

methods required under applicable monitoring and testing requirements, including part 64 of this chapter and

any other procedures and methods that may be promulgated pursuant to sections 114(a)(3) or 504(b) of the Act.

If more than one monitoring or testing requirement

applies, the permit may specify a streamlined set of

monitoring or testing provisions provided the specified

monitoring or testing is adequate to assure compliance at

least to the same extent as the monitoring or testing

applicable requirements that are not included in the

permit as a result of such streamlining;

(B) Where the applicable requirement does not require periodic testing or instrumental or noninstrumental

monitoring (which may consist of record-keeping de-

__________

2 The list is nicely summarized in David R. Wooley, Clean Air

Act Handbook: A Practical Guide to Compliance s 5.02[1] (9th ed.

2000).

signed to serve as monitoring), periodic monitoring sufficient to yield reliable data from the relevant time period

that are representative of the source's compliance with

the permit, as reported pursuant to paragraph(a)(3)(iii) of

this section. Such monitoring requirements shall assure

use of terms, test methods, units, averaging periods, and

other statistical conventions consistent with the applicable requirement. Recordkeeping provisions may be sufficient to meet the requirements of this paragraph

(a)(3)(i)(B) of this section; and

(C) As necessary, requirements concerning the use,

maintenance, and, where appropriate, installation of monitoring equipment or methods....

40 C.F.R. s 70.6(a)(3).

The key language--key because this dispute revolves

around it--is in the first sentence of s 70.6(a)(3)(i)(B). Permits contain terms and conditions with which the regulated

entities must comply. Some of the terms and conditions--in

regulatory lingo, "applicable requirements" (see

s 70.6(a)(3)(i)(B))3--consist of emission limitations and standards, State and federal. Experts in the field know that

federal emission standards, such as those issued for hazardous air pollutants and new stationary sources, contain far

more than simply limits on the amount of pollutants emitted.

Take for instance the following examples drawn at random

from the Code of Federal Regulations. The national emission

__________

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3 One EPA official explained:

Permits must incorporate terms and conditions to assure

compliance with all applicable requirements under the Act,

including the [state implementation plan], title VI, sections 111

and 112, the sulfur dioxide allowance system and NOx limits

under the acid rain program, emission limits applicable to the

source, monitoring, recordkeeping and reporting requirements,

and any other federally-recognized requirements applicable to

the source.

John S. Seitz, Director, Office of Air Quality Planning and Standards, Developing Approvable State Enabling Legislation Required

to Implement Title V, at p. 4 (Feb. 25, 1993).

standard for hazardous air pollutants from primary lead

smelting is contained in 40 C.F.R. ss 63.1541-.1550. In

addition to emission limits,4 the operator must comply with

detailed and extensive testing requirements contained in

s 63.8 of the regulations, and must monitor certain pressure

drops daily; make weekly checks to ensure that dust is being

removed from hoppers; perform quarterly inspections of

fans, and so forth. Id. s 63.1547. Or consider the standards

of performance for new stationary sources contained in 40

C.F.R. part 60, one of the thickest of the dozen or so volumes

EPA commands in the C.F.R. In the "beverage can surface

coating industry," those subject to these regulations must--if

they use "a capture system and an incinerator"--install some

sort of "temperature measurement device," properly calibrated and having a specified accuracy stated in terms of degrees

Celsius. 40 C.F.R. s 60.494.5 Or if the new source is in the

rubber tire manufacturing industry, an operator doing a

"green tire spraying operation" using organic solvent-based

sprays must install "an organics monitoring device used to

indicate the concentration level of organic compounds based

on a detection principle such as infrared ..., equipped with a

__________

4 See 40 C.F.R. s 63.1543(a):

No owner or operator of any existing, new, or reconstructed

primary lead smelter shall discharge or cause to be discharged

into the atmosphere lead compounds in excess of 500 grams of

lead per megagram of lead metal produced ... from the

aggregation of emissions discharged from the air pollution

control devices used to control emissions from the sources

[listed].

5 If the facility does not use a capture system, it must calculate its

emission limits using a series of equations provided by EPA. For

some idea of the complexity of this exercise, consider that the

facility must figure its total volume of coating solids per month

using the following equation:

n

Ls =E LciVsi

i=1

40 C.F.R. s 60.493(b)(1)(i)(B). It would serve no useful purpose to

explain this or the many other equations in the sequence.

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continuous recorder, for the outlet of the carbon bed." Id.

s 60.544(a)(3).

Typically, EPA delegates to the States its authority to

require companies to comply with these federal standards.

The States incorporate the federal standards in their implementation plans and, under Title V of the 1990 law, the

applicable standards become terms and conditions in permits.

States too have their own emissions limitations and standards

in their implementation plans, which they need in order to

comply with national ambient air quality standards. See 40

C.F.R. part 52; Chevron U.S.A. Inc. v. Natural Resources

Defense Council, Inc., 467 U.S. 837, 846 (1984); Union Electric Co. v. EPA, 427 U.S. 246, 249-50 (1976); Commonwealth

of Virginia v. EPA, 108 F.3d 1397, 1406 (D.C. Cir.), modified,

116 F.3d 499 (D.C. Cir. 1997). Petitioners tell us that States

may formulate their emission standards not only by limiting

the amount of air pollutants, but also by imposing practices,

including the monitoring of emissions.6

On one thing the parties are in agreement. If an applicable State emission standard contains no monitoring requirement to ensure compliance, EPA's regulation requires the

State permitting agency to impose on the stationary source

some sort of "periodic monitoring" as a condition in the

permit or specify a reasonable frequency for any data collection mandate already specified in the applicable requirement.

According to petitioners this sort of gap-filling is all

s 70.6(a)(3)(i)(B)--the so-called periodic monitoring rule--requires of State permit programs. By petitioners' lights, if a

federal or State emission standard already contains some sort

of requirement to do testing7 from time to time, this portion

of the standard must be incorporated in the permit, not

changed by the State to conform to EPA's imprecise and

__________

6 In some instances, States may adopt emission standards or

limitations that are more stringent than federal standards. 42

U.S.C. s 7416. States may also adopt more stringent permit

requirements. 40 C.F.R. s 70.1(c).

7 By testing we mean to include instrumental and noninstrumental monitoring as well.

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evolving notion of what constitutes "periodic monitoring."8

Otherwise, State authorities will wind up amending federal

emission standards in individual permits, something not even

EPA could do without conducting individual rulemakings to

amend the regulations containing the federal standards. And

with respect to State standards, the State agency will in

effect be revising its implementation plan at EPA's behest,

without going through the procedures needed to accomplish

this. See, e.g., 42 U.S.C. s 7410(k)(5) & (l).

In a document entitled "Periodic Monitoring Guidance for

Title V Operating Permits Programs," released in September

1998, EPA took a sharply different view of s 70.6(a)(3) than

do petitioners. The "Guidance" was issued over the signature

of two EPA officials--the Director of the Office of Regulatory

Enforcement, and the Director of the Office of Air Quality

Planning and Standards. It is narrative in form, consists of

19 single-spaced, typewritten pages, and is available on EPA's

internet web site (www.epa.gov). "Periodic monitoring," the

Guidance states, "is required for each emission point at a

source subject to title V of the Act that is subject to an

applicable requirement, such as a Federal regulation or a SIP

emission limitation." Periodic Monitoring Guidance for Title

V Operating Permits Programs (hereinafter "Guidance") at 5.

New source performance standards, and national emission

standards for hazardous pollutants, if EPA promulgated the

standards after November 15, 1990, the effective date of the

Clean Air Act amendments, are "presumed to have adequate

monitoring." Id. Also, for "emission units subject to the

acid rain requirements," EPA has determined that its "regulations contain sufficient monitoring for the acid rain requirements." Id. Outside of these categories and one other, the

__________

8 In support of their view, petitioners point to the Title V rule's

preamble which states: "If the underlying applicable requirement

imposes a requirement to do periodic monitoring or testing ..., the

permit must simpl[y] incorporate this provision under

s 70.6(a)(3)(i)(A)." 57 Fed. Reg. 32,278 (1992).

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Guidance states that "periodic monitoring is required ...

when the applicable requirement does not require ... monitoring sufficient to yield reliable data from the relevant time

period that are representative of the source's compliance with

the permit." Id. at 6. How to determine this? Clearly,

according to the Guidance, if an "applicable requirement

imposes a one-time testing requirement, periodic monitoring

is not satisfied ...," presumably because one time is not from

time to time, which is what periodic means. Id.

II.

The phenomenon we see in this case is familiar. Congress

passes a broadly worded statute. The agency follows with

regulations containing broad language, open-ended phrases,

ambiguous standards and the like. Then as years pass, the

agency issues circulars or guidance or memoranda, explaining, interpreting, defining and often expanding the commands

in the regulations. One guidance document may yield another and then another and so on. Several words in a regulation

may spawn hundreds of pages of text as the agency offers

more and more detail regarding what its regulations demand

of regulated entities. Law is made, without notice and comment, without public participation, and without publication in

the Federal Register or the Code of Federal Regulations.

With the advent of the Internet, the agency does not need

these official publications to ensure widespread circulation; it

can inform those affected simply by posting its new guidance

or memoranda or policy statement on its web site. An

agency operating in this way gains a large advantage. "It

can issue or amend its real rules, i.e., its interpretative rules

and policy statements, quickly and inexpensively without following any statutorily prescribed procedures." Richard J.

Pierce, Jr., Seven Ways to Deossify Agency Rulemaking, 47

Admin. L. Rev. 59, 85 (1995).9 The agency may also think

__________

9 How much more efficient than, for instance, the sixty rounds of

notice and comment rulemaking preceding the final rule in Motor

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there is another advantage--immunizing its lawmaking from

judicial review.

A.

EPA tells us that its Periodic Monitoring Guidance is not

subject to judicial review because it is not final, and it is not

final because it is not "binding."10 Brief of Respondent at 30.

See Guidance at 19. It is worth pausing a minute to consider

what is meant by "binding" in this context. Only "legislative

rules" have the force and effect of law. See Chrysler Corp. v.

Brown, 441 U.S. 281, 302-03 & n.31 (1979). A "legislative

rule" is one the agency has duly promulgated in compliance

with the procedures laid down in the statute or in the

Administrative Procedure Act.11 If this were all that "binding" meant, EPA's Periodic Monitoring Guidance could not

possibly qualify: it was not the product of notice and com-

__________

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

34 (1983).

10 Our jurisdiction extends to "any ... nationally applicable ...

final action taken by" the EPA "Administrator." 42 U.S.C.

s 7607(b)(1). The Guidance issued over the signatures of two high

level EPA officials rather than the Administrator. EPA does not,

however, contest petitioners' assertion that because "the document

was drafted, and reviewed by, high ranking officials in several EPA

offices, including EPA's lawyers, there is no reason to doubt the

authors' authority to speak for the Agency." Brief of Petitioners at

42. See Her Majesty the Queen v. EPA, 912 F.2d 1525, 1531-32

(D.C. Cir. 1990); Natural Resources Defense Council, Inc. v. Thomas, 845 F.2d 1088, 1094 (D.C. Cir. 1988).

11 We have also used "legislative rule" to refer to rules the agency

should have, but did not, promulgate through notice and comment

rulemaking. See, e.g., American Mining Congress v. Department

of Labor, 995 F.2d 1106, 1110 (D.C. Cir. 1993). In this case, by

"rule" we mean the following:

... the whole or a part of an agency statement of general or

particular applicability and future effect designed to implement,

interpret, or prescribe law or policy or describing the organization, procedure, or practice requirements of an agency....

5 U.S.C. s 551(4).

ment rulemaking in accordance with the Clean Air Act, 42

U.S.C. s 7607(d), and it has not been published in the Federal

Register.12 But we have also recognized that an agency's

other pronouncements can, as a practical matter, have a

binding effect. See, e.g., McLouth Steel Prods. Corp. v.

Thomas, 838 F.2d 1317, 1321 (D.C. Cir. 1988). If an agency

acts as if a document issued at headquarters is controlling in

the field, if it treats the document in the same manner as it

treats a legislative rule, if it bases enforcement actions on the

policies or interpretations formulated in the document, if it

leads private parties or State permitting authorities to believe

that it will declare permits invalid unless they comply with

the terms of the document, then the agency's document is for

all practical purposes "binding." See Robert A. Anthony,

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als, and the Like--Should Federal Agencies Use Them to

Bind the Public?, 41 Duke L.J. 1311, 1328-29 (1992), and

cases there cited.

For these reasons, EPA's contention must be that the

Periodic Monitoring Guidance is not binding in a practical

sense. Even this, however, is not an accurate way of putting

the matter. Petitioners are not challenging the Guidance in

its entirety. Under the Administrative Procedure Act, a

"rule" may consist of "part of an agency statement of general

or particular applicability and future effect...." 5 U.S.C.

s 551(4), quoted in full in supra note 11; see 5 U.S.C.

ss 551(13), 702. "Interpretative rules" and "policy statements" may be rules within the meaning of the APA and the

Clean Air Act, although neither type of "rule" has to be

promulgated through notice and comment rulemaking. See

42 U.S.C. s 7607(d)(1), referring to 5 U.S.C. s 553(b)(A) &

(B).13 EPA claims, on the one hand, that the Guidance is a

__________

12 5 U.S.C. s 552(a)(1)(D) requires publication in the Federal

Register of all "interpretations of general applicability." Compare

5 U.S.C. s 552(a)(2)(B), requiring agencies to make available for

inspection and copying "those statements of policy and interpretations which have been adopted by the agency and are not published

in the Federal Register."

13 We quoted, in Panhandle Eastern Pipeline Co. v. FERC, 198

F.3d 266, 269 (D.C. Cir. 1999), the statement in Pacific Gas &

Electric Co. v. Federal Power Commission, 506 F. 2d 33, 38 (D.C.

policy statement, rather than an interpretative rule, and is

not binding.14 On the other hand, EPA agrees with petitioners that "the Agency's position on the central legal issue

here--the appropriateness of a sufficiency review of all Title

V monitoring requirements--indeed is settled...." Brief of

Respondent at 32. In other words, whatever EPA may think

of its Guidance generally, the elements of the Guidance

petitioners challenge consist of the agency's settled position, a

position it plans to follow in reviewing State-issued permits, a

__________

Cir. 1974), that a policy statement is not a "rule," apparently within

the meaning of 5 U.S.C. s 551(4). Dicta in Syncor International

Corp. v. Shalala, 127 F.3d 90, 94 (D.C. Cir. 1997), suggests the same

without referring to s 551(4). See also Hudson v. FAA, 192 F.3d

1031 (D.C. Cir. 1999).

On the other hand, in Batterton v. Marshall, 648 F.2d 694, 700

(D.C. Cir. 1980), we interpreted the term "rule" in s 551(4) as

"broad enough to include nearly every statement an agency may

make...." Quoting this language, we held in Center for Auto

Safety v. National Highway Safety Administration, 710 F.2d 842,

846 (D.C. Cir. 1983), that agency policy statements accompanying

the withdrawal of a notice of proposed rulemaking fell within the

definition of a "rule." A few years later, then-Judge Scalia--citing

Batterton--wrote for the court that under APA s 551(4), it is

"clear" that "the impact of an agency statement upon private

parties is relevant only to whether it is the sort of rule that is ... a

general statement of policy." Thomas v. New York, 802 F.2d 1443,

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1447 n.* (D.C. Cir. 1986). See also National Tank Truck Carriers,

Inc. v. Federal Highway Admin., 170 F.3d 203, 207 n.3 (D.C. Cir.

1999).

There is no need for us to try to reconcile these two lines of

authority. Nothing critical turns on whether we initially characterize the Guidance as a "rule."

14 EPA is under the impression that policy statements can never

be "rules" within the meaning of APA s 551(4): "even if the

Guidance were somehow deemed to be a 'rule' (a conclusion that

would, in EPA's view, be erroneous due to the non-binding nature

of the Guidance), Petitioners' procedural challenge would still fail

because the Guidance undoubtedly would be an interpretive (not

legislative) rule...." Brief of Respondent at 43-44 n.40.

position it will insist State and local authorities comply with in

setting the terms and conditions of permits issued to petitioners, a position EPA officials in the field are bound to apply.

Of course, an agency's action is not necessarily final merely

because it is binding.15 Judicial orders can be binding; a

temporary restraining order, for instance, compels compliance

but it does not finally decide the case. In the administrative

setting, "two conditions must be satisfied for agency action to

be 'final': First, the action must mark the 'consummation' of

the agency's decisionmaking process, Chicago & Southern

Airlines, Inc. v. Waterman S.S. Corp., 333 U.S. 103, 113

(1948)--it must not be of a merely tentative or interlocutory

nature. And second, the action must be one by which 'rights

or obligations have been determined,' or from which 'legal

consequences will flow,' Port of Boston Marine Terminal

Assn. v. Rederiaktiebolaget Transatlantic, 400 U.S. 62, 71

(1970)." Bennett v. Spear, 520 U.S. 154, 178 (1997). The first

condition is satisfied here. The "Guidance," as issued in

September 1998, followed a draft circulated four years earlier

and another, more extensive draft circulated in May 1998.

This latter document bore the title "EPA Draft Final Periodic Monitoring Guidance."16 On the question whether States

must review their emission standards and the emission stan-

__________

We should note that the Guidance itself states that it "interprets"

s 70.6(a)(3) of the regulations. Guidance at 4 n.1.

15 We add that agency action does not necessarily have binding

effect--that is, does not necessarily alter legal rights and obligations--merely because it is final. Denials of petitions for rulemaking, for instance, may be final although no private person is

required to do anything. In the past, when this court examined the

binding effect of agency action, we did so for the purpose of

determining whether the non-legislative rule should have undergone

notice and comment rulemaking because it was, in effect, a regulation. See, e.g., Florida Power & Light Co. v. EPA, 145 F.3d 1414,

1418-19 (D.C. Cir. 1998); American Portland Cement Alliance v.

EPA, 101 F.3d 772, 776 (D.C. Cir. 1996); Kennecott Utah Copper

Corp. v. Dep't of Interior, 88 F.3d 1191, 1207 (D.C. Cir. 1996);

National Solid Waste Mgmt. Ass'n v. EPA, 869 F.2d 1526, 1534

(D.C. Cir. 1989).

16 In the title to the Guidance we have before us, EPA dropped

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the word "final."

dards EPA has promulgated to determine if the standards

provide enough monitoring, the Guidance is unequivocal--the

State agencies must do so. See Guidance at 6-8. On the

question whether the States may supersede federal and State

standards and insert additional monitoring requirements as

terms or conditions of a permit, the Guidance is certain--the

State agencies must do so if they believe existing requirements are inadequate, as measured by EPA's multi-factor,

case-by-case analysis set forth in the Guidance. See Guidance at 7-8.

EPA may think that because the Guidance, in all its

particulars, is subject to change, it is not binding and therefore not final action. There are suggestions in its brief to this

effect. See, e.g., Brief of Respondent at 3, 33 n.30. But all

laws are subject to change. Even that most enduring of

documents, the Constitution of the United States, may be

amended from time to time. The fact that a law may be

altered in the future has nothing to do with whether it is

subject to judicial review at the moment. See McLouth Steel

Prods. Corp. v. EPA, 838 F.2d at 1320.

On the issue whether the challenged portion of the Guidance has legal consequences, EPA points to the concluding

paragraph of the document, which contains a disclaimer:

"The policies set forth in this paper are intended solely as

guidance, do not represent final Agency action, and cannot be

relied upon to create any rights enforceable by any party."

Guidance at 19. This language is boilerplate; since 1991

EPA has been placing it at the end of all its guidance

documents. See Robert A. Anthony, supra, 41 Duke L.J. at

1361; Peter L. Strauss, Comment, The Rulemaking Continuum, 41 Duke L.J. 1463, 1485 (1992) (referring to EPA's

notice as "a charade, intended to keep the proceduralizing

courts at bay"). Insofar as the "policies" mentioned in the

disclaimer consist of requiring State permitting authorities to

search for deficiencies in existing monitoring regulations and

replace them through terms and conditions of a permit,

"rights" may not be created but "obligations" certainly are--

obligations on the part of the State regulators and those they

regulate. At any rate, the entire Guidance, from beginning to

end--except the last paragraph--reads like a ukase. It

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commands, it requires, it orders, it dictates. Through the

Guidance, EPA has given the States their "marching orders"

and EPA expects the States to fall in line, as all have done,

save perhaps Florida and Texas. See Natural Resources

Defense Council, Inc. v. Thomas, 845 F.2d 1088, 1094 (D.C.

Cir. 1988); Community Nutrition Inst. v. Young, 818 F.2d

943, 947-48 (D.C. Cir. 1987).

Petitioners tell us, and EPA does not dispute, that many of

them are negotiating their Title V permits, that State authorities, with EPA's Guidance in hand, are insisting on continuous

opacity monitors17 for determining compliance with opacity

limitations although the applicable "standard specifies EPA

Method 9 (a visual observation method) as the compliance

method (and, in some cases, already provides for periodic

performance of that method)." Brief of Petitioners at 43-44.

See Natural Resources Defense Council, Inc. v. EPA, 22 F.3d

1125, 1133 (D.C. Cir. 1994).

The short of the matter is that the Guidance, insofar as

relevant here, is final agency action, reflecting a settled

agency position which has legal consequences both for State

agencies administering their permit programs and for companies like those represented by petitioners who must obtain

Title V permits in order to continue operating.18

__________

17 A continuous opacity monitor employs "a calibrated light source

that provides for accurate and precise measurement of opacity at all

times." See Credible Evidence Revisions, 62 Fed. Reg. 8319 (1997).

In contrast, "Method 9 requires that a trained visible emissions

observer (VEO) view a smoke plume with the sun at a certain angle

to the plume" to determine the opacity of the plume released. Id.

18 EPA also claims that the Guidance is not ripe for review

because the court's review would be more focused in the context of

a challenge to a particular permit. We think there is nothing to

this. Whether EPA properly instructed State authorities to conduct sufficiency reviews of existing State and federal standards and

to make those standards more stringent if not enough monitoring

was provided will not turn on the specifics of any particular permit.

Furthermore, EPA's action is national in scope and Congress

clearly intended this court to determine the validity of such EPA

actions. See 42 U.S.C. s 7607. A challenge to an individual permit

would not be heard in this court. (Petitioners contend that only

state courts could adjudicate such cases. We express no view about

that.)

B.

As to the validity of the Guidance, petitioners' arguments

unfold in the following sequence. First, they contend that the

Guidance amended the "periodic monitoring rule" of

s 70.6(a)(3)(i)(B). Although the rule only allowed State authorities to fill in gaps, that is, to require periodic monitoring

when the applicable State emission standard contained no

monitoring requirement, a one-time startup test, or provided

no frequency for monitoring, the Guidance applies across the

board, charging State authorities with the duty of assessing

the sufficiency of all State and federal standards.19 With the

Guidance in place, regional EPA offices have solid legal

grounds for objecting to State-issued permits if the State

authorities refuse to bend to EPA's will. Therefore, as petiUSCA Case #98-1537 Document #510656 Filed: 04/14/2000 Page 12 of 20
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tioners see it, the Guidance is far more than a mere interpretation of the periodic monitoring rule and it is far more than

merely a policy statement. In practical effect, it creates a

new regime, a new legal system governing permits, and as

such it should have been, but was not, promulgated in compliance with notice and comment rulemaking procedures. Petitioners say that if they are wrong about this, if the Guidance

represents a valid interpretation of the periodic monitoring

rule in s 70.6(a)(3)(i)(B), then the rule itself is invalid. Congress did not authorize EPA to require States, in issuing Title

V permits, to make revisions to monitoring requirements in

existing federal emission standards.

The case is presented to us in pure abstraction. Neither

side cites any specific federal or State emission standard.

Although petitioners complain that State officials will revise

federal standards promulgated before November 1990, petitioners' briefs identify no specific federal standard potentially

subject to revision. Which, if any, federal standards are

susceptible to State revision in a permit for lack of periodic

monitoring is thus something about which we can only guess.

The same is true regarding State emission standards.

__________

19 Petitioners also claim that the Guidance revised EPA's "Compliance Assurance Monitoring" rule, sustained in Natural Resources

Defense Council, Inc. v. EPA, 194 F.3d 130 (D.C. Cir. 1999), an

argument we find unnecessary to consider.

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Perhaps petitioners should not be faulted. They disagree

with EPA's general principle, with the agency's position that

it can give State permit officials the authority to substitute

new monitoring requirements in place of existing State or

federal emission standards already containing some sort of

monitoring requirements. The validity of that general principle does not turn on the specifics of any particular emission

standard, although its application does. Besides, EPA is

currently developing even more detail in far more extensive

"guidance" using concrete examples of what would, and would

not, constitute "periodic monitoring" in EPA's opinion. See

Draft--Periodic Monitoring Technical Reference Document

(Apr. 30, 1999).

It is well-established that an agency may not escape the

notice and comment requirements (here, of 42 U.S.C. s 7607

(d)) by labeling a major substantive legal addition to a rule a

mere interpretation. See Paralyzed Veterans v. D.C. Arena

L.P., 117 F.3d 579, 588 (D.C. Cir. 1997); American Mining

Congress v. MSHA, 995 F.2d 1106, 1109-10 (D.C. Cir. 1993).

"We must still look to whether the interpretation itself carries

the force and effect of law, ... or rather whether it spells out

a duty fairly encompassed within the regulation that the

interpretation purports to construe." (citations and internal

quotations omitted). See Paralyzed Veterans, 117 F.3d at

588. With that in mind, we will deal first with petitioners'

claim that the Guidance significantly expanded the scope of

the periodic monitoring rule. Section 70.6(a)(3)(i)(B) tells us

that "periodic monitoring" must be made part of the permit

when the applicable State or federal standard does not provide for "periodic testing or instrumental or noninstrumental

monitoring."20 If "periodic" has its usual meaning,21 this

__________

20 EPA identified the source of its authority for s 70.6(a)(3) as 42

U.S.C. s 7661c(b). This provides that EPA "may by rule" set forth

methods and procedures "for monitoring and analysis of pollutants

regulated under this chapter, but continuous emissions monitoring

need not be required if alternative methods are available that

provide sufficiently reliable and timely information for determining

compliance."

21 Although EPA defined many terms in its regulations governing

permits, 40 C.F.R. s 70.2, it provided no definition of "periodic" or

of "monitoring."

signifies that any State or federal standard requiring testing

from time to time--that is yearly, monthly, weekly, daily,

hourly--would be satisfactory. The supplementing authority

in s 70.6(a)(3)(i)(B) therefore would not be triggered; instead, the emission standard would simply be incorporated in

the permit, as EPA acknowledged in the rule's preamble, see

supra note 8. On the other hand, if the State or federal

standard contained merely a one-time startup test, specified

no frequency for monitoring or provided no compliance method at all, s 70.6(a)(3)(i)(B) would require the State authorities

to specify that some testing be performed at regular intervals

to give assurance that the company is complying with emission limitations.

So far, our parsing of the language of s 70.6(a)(3)(i)(B)

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corresponds with petitioners' view that the rule serves only a

gap-filling function. If this is what the rule means, there is

no doubt that it is much narrower than the Guidance issued in

1998. There, EPA officials stated that regardless whether an

emission standard contained a "periodic testing" or monitoring requirement, additional monitoring "may be necessary" if

the monitoring in the standard "does not provide the necessary assurance of compliance."22 E.g., Guidance at 7-8. Petitioners describe that aspect of the Guidance this way: "The

Guidance unequivocally directs state permitting authorities,

as a minimum element of continued EPA program approval,

to conduct wide-ranging sufficiency reviews and upgrade

monitoring in nearly all individual permits or permit applications, even where the underlying applicable requirement incorporates 'periodic testing or instrumental or noninstrumen-

__________

22 By measuring the adequacy of monitoring in this manner,

EPA's position introduces circularity. The Guidance instructs permitting authorities that monitoring is sufficient if it provides "a

reasonable assurance of compliance with requirements applicable to

the source." Guidance at 7. But some of the applicable requirements are themselves methods for testing a source's compliance

with other standards. For instance, in the case of a requirement to

conduct an annual stack test, EPA's methodology suggests that

performance of the one-time test would be sufficient as it provides

"a reasonable assurance of compliance" with the applicable requirement. The problem is this gives permitting authorities no assistance in evaluating the proper frequency of such tests.

tal monitoring' in facial compliance with s 70.6(a)(3)(i)(B)."

Reply Brief of Petitioners at 13.

EPA's view of the scope of the Guidance is about the same

as petitioners'. But the agency thinks statements in the

preamble to its 1992 rule and its responses to comments in

the final rulemaking alerted interested onlookers to its current position and show that the Guidance issued in 1998 is no

broader than the rule itself. EPA's strongest point is the

following statement made in 1992: "To the extent commentators assert that Title V does not authorize EPA to require

monitoring beyond that provided for in the applicable requirement, EPA disagrees with the commenters." EPA Response

to Comments (hereinafter "RTC") at 6-3. On the face of it,

this assertion of statutory authority may have reflected

EPA's claim--which no one now disputes--that if an "applicable requirement" contained a one-time stack test, the federal

agency could insist that the State authority insert in the

permit a requirement that the test be performed at regular

intervals. If that is all the EPA statement signified, it would

be entirely consistent with petitioners' interpretation of the

final rule.23

In its response to comments and in the preamble to the

Title V regulations, EPA promised that if there is "any

federally promulgated requirement with insufficient monitoring, EPA will issue a rulemaking to revise such requirement."

57 Fed. Reg. 32,278 (1992); RTC at 6-4.24 The Guidance, of

course, charts a very different course. Now, it is initially up

to the States to identify federal standards with deficient

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__________

23 According to EPA's response to comments:

Examples of situations where Section 70.6(a)(3)(i)(B) would

apply include a SIP provision which contains a reference test

method but no testing obligation, or a NSPS which requires

only a one time stack test on startup. Any Federal standards

promulgated pursuant to the Act amendments of 1990 are

presumed to contain sufficient monitoring and, therefore, only

Section 70.6(a)(3)(i)(A) applies.

RTC at 6-4.

24 Later in its response to comments, EPA repeated this promise:

"... EPA will revise federal regulations that need additional specification of test methods, including specification of frequency and

degree of testing." RTC at 6-5.

monitoring, doubtless with EPA's input, formal or informal.

And it is the State and local agencies that must alter the

standards by requiring permittees--such as petitioners--to

comply with more stringent monitoring requirements. Needless to say, EPA's approach--delegating to State officials the

authority to alter duly promulgated federal standards--raises

serious issues, not the least of which is whether EPA possesses the authority it now purports to delegate. One would

suppose, and EPA did in 1992, that if federal regulations

proved inadequate for one reason or another, EPA would

have to conduct a rulemaking to amend them. See Clean Air

Implementation Project v. EPA, 150 F.3d 1200, 1203-04 (D.C.

Cir. 1998).

EPA thinks two other statements in its response to comments alerted everyone that its new rule would set in motion

an across-the-board review of the existing monitoring requirements contained in federal and State emission standards.

The first of these statements is: "In many cases, the monitoring requirements in the underlying regulation will suffice for

assessing compliance." RTC at 6-3. EPA treats the "in

many cases" as a qualification. What does this tell the

careful reader? Only that sometimes the State or federal

emission standard will need to be supplemented. But the

critical question is when--when the monitoring in the standard consists only of a one-time test? or when the yearly or

monthly or weekly or daily testing specified in the standard is

not enough, as determined by State authorities or EPA

during the permit process?

The second statement is this:

The EPA reiterates that permits must be enforceable,

and must include periodic monitoring, which might involve the use of, or be based on, appropriate reference

test methods.... Where EPA has not provided adequate guidance in regard to source testing or monitoring,

permitting authorities are allowed to establish additional

requirements, including requirements concerning the degree and frequency of source testing on a case-by-case

basis, as necessary to assure compliance with Part 70

[Title V] permit terms or conditions. However, in no

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case may such frequency be less stringent than any

frequency required by an underlying applicable requirement.

Id. at 6-5. If "periodic monitoring" means testing from time

to time, the first sentence in this passage hardly advances

EPA's current position. And the second sentence seems set

against it. Only when "EPA has not provided adequate

guidance in regard to source testing or monitoring," may

State authorities provide additional monitoring. So what is

"adequate guidance"? Once again the only concrete example

EPA gave in 1992 was a one-time stack test, which rather

makes petitioners' point.

The short of the matter is that the regulatory history EPA

offers fails to demonstrate that s 70.6(a)(3)(i)(B) initially had

the broad scope the Guidance now ascribes to it. Nothing on

the face of the regulation or in EPA's commentary at the time

said anything about giving State authorities a roving commission to pore over existing State and federal standards, to

decide which are deficient, and to use the permit system to

amend, supplement, alter or expand the extent and frequency

of testing already provided. In fact, EPA's promise in the

1992 rulemaking--that if federal standards were found to be

inadequate in terms of monitoring it would open rulemaking

proceedings--is flatly against EPA's current position. (EPA

makes no attempt to square this promise with the argument

it makes today.)

Furthermore, we attach significance to EPA's recognition,

in its 1992 permit regulations, that "Title V does not impose

substantive new requirements," 40 C.F.R. s 70.1(b). Test

methods and the frequency of testing for compliance with

emission limitations are surely "substantive" requirements;

they impose duties and obligations on those who are regulated. Federal testing requirements contained in emissions

standards are promulgated after notice and comment rulemaking. Testing requirements in emission standards in State

standards are presumably adopted by the State's legislature

or administrative agency, and approved by EPA as part of

the State's implementation plan. We have recognized before

that changing the method of measuring compliance with an

emission limitation can affect the stringency of the limitation

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itself. Portland Cement Ass'n v. Ruckelshaus, 486 F.2d 375,

396-97 (D.C. Cir. 1973), discussed in Clean Air Implementation Project v. EPA, 150 F.3d at 1203. In addition, monitoring imposes costs. Petitioners represent that a single stack

test can "cost tens of thousands of dollars, and take a day or

more to complete," which is why "stack testing is limited to

once or twice a year (at most)." Brief of Petitioners at 22

n.75. If a State agency, acting under EPA's direction in the

Guidance, devised a permit condition increasing a company's

stack test obligation (as set forth in a State or federal

standard) from once a year to once a month, no one could

seriously maintain that this was something other than a

substantive change.25

There is still another problem with EPA's position. Although its Guidance goes to great lengths to explain what is

meant by the words "periodic monitoring," it almost completely neglects a critical first step. On the face of

s 70.6(a)(3)(i)(B), "periodic monitoring" is required if and only

if "the applicable requirement does not require periodic testing or instrumental or noninstrumental monitoring (which

may consist of record-keeping designed to serve as monitoring)." While the Guidance is quick to say that all Title V

permits must contain "periodic monitoring," it never explains

what constitutes "periodic testing" or what constitutes "instrumental or noninstrumental monitoring." Instead,

throughout the Guidance, EPA either yokes these three items

together, or treats the terms as synonymous, without saying

why. Yet if "periodic testing" and "instrumental or noninstrumental monitoring" mean the same thing as "periodic

monitoring," there is no accounting for why s 70.6(a)(3)(i)(B)

was written as it was. The regulation could simply have said

"periodic monitoring" is required for all permits, period.26

__________

25 The Guidance, at p. 8, provides a six-point bullet point list for

permit-writers, making clear that EPA expects them to engage in

an intricate regulatory trade off (often on a unit-by-unit basis),

assessing the costs and benefits of available technologies for the

particular pollutant. This six-part list has mutated into a complex

flow chart in the Draft Periodic Monitoring Technical Reference

Document, and is reprinted as an Addendum to this opinion.

26 EPA argues that our opinion in Natural Resources Defense

Council, Inc. v. EPA, 194 F.3d 130, 135-36 (D.C. Cir. 1999), reflects

In sum, we are convinced that elements of the Guidance--

those elements petitioners challenge--significantly broadened

the 1992 rule. The more expansive reading of the rule,

unveiled in the Guidance, cannot stand. In directing State

permitting authorities to conduct wide-ranging sufficiency

reviews and to enhance the monitoring required in individual

permits beyond that contained in State or federal emission

standards even when those standards demand some sort of

periodic testing, EPA has in effect amended s 70.6(a)(3)(i)(B).

This it cannot legally do without complying with the rulemaking procedures required by 42 U.S.C. s 7607(d).27 See Alas-

__________

an understanding of s 70.6(a)(3) "nearly identical" to that contained

in the Guidance. Supplemental Brief of Respondent at 4. The

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opinion stated:

[T]he 1990 Clean Air Act Amendments did not mandate that

EPA fit all enhanced monitoring under one rule and EPA has

reasonably illustrated how its enhanced monitoring program,

when considered in its entirety, complies with s 114(a)(3).

Specifically, EPA demonstrated that many of the major stationary sources exempt from CAM are subject to other specific

rules, and if they are not, they are subject to the two residual

rules: (1) "[The permit shall contain] periodic monitoring sufficient to yield reliable data ... that are representative of the

source's compliance with the permit...." 40 C.F.R.

s 70.6(a)(3)(i)(B); (2) "All part 70 permits shall contain the

following elements with respect to compliance: (1) Consistent

with paragraph (a)(3) of this section, compliance certification,

testing, [and] monitoring ... requirements sufficient to assure

compliance with the terms and conditions of the permit." Id.

s 70.6(c)(1).

Id. The bracketed portion of the quotation reads out of subsection

(B) the conditions that "periodic monitoring" is required only when

"the applicable requirement does not require periodic testing or

instrumental or noninstrumental monitoring (which may consist of

record-keeping designed to serve as monitoring)." When that

clause is reinserted, it becomes clear that the quotation does not

speak to the situation of permits which already provide for periodic

testing, addressed in 40 C.F.R. s 70.6(a)(3)(i)(A).

27 Unless EPA certifies that the amendments to the Title V rule

would not "have a significant economic impact on a substantial

ka Professional Hunters Ass'n v. FAA, 177 F.3d 1030, 1034

(D.C. Cir. 1999); Caruso v. Blockbuster-Sony Music Entertainment Centre, 174 F.3d 166, 176-78 (3d Cir. 1999); Paralyzed Veterans, 117 F.3d at 585-86.

For the reasons stated, we find setting aside EPA's Guidance to be the appropriate remedy. Though petitioners

challenge only portions of the Guidance, partial affirmance is

not an option when, as here,"there is 'substantial doubt' that

the agency would have adopted the severed portion on its

own." Davis County Solid Waste Management v. EPA, 108

F.3d 1454, 1458 (D.C. Cir. 1997) (quoting North Carolina v.

FERC, 730 F.2d 790, 795-96 (D.C. Cir. 1984)). In view of the

intertwined nature of the challenged and unchallenged portions of the Guidance, the Guidance must be set aside in its

entirety. See 42 U.S.C. s 7607. State permitting authorities

therefore may not, on the basis of EPA's Guidance or 40

C.F.R. s 70.6(a)(3)(i)(B), require in permits that the regulated

source conduct more frequent monitoring of its emissions

than that provided in the applicable State or federal standard,

unless that standard requires no periodic testing, specifies no

frequency, or requires only a one-time test.

So ordered.

__________

number of small entities," 5 U.S.C. s 605(b), it must also comply

with the various procedural requirements of the Small Business

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Regulatory Enforcement Fairness Act, 5 U.S.C. ss 601-612.

[Addendum not available electronically]

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