Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-06-01214/USCOURTS-caDC-06-01214-0/pdf.json

Parties Involved:
American Petroleum Institute
Intervenor
Environmental Protection Agency
Respondent
National Petrochemical & Refiners Association
Intervenor
Natural Resources Defense Council
Petitioner
State of Connecticut
Intervenor
State of New Jersey
Petitioner
Utility Air Regulatory Group
Intervenor

Document Text:

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 20, 2008 Decided July 10, 2009

No. 06-1045

NATURAL RESOURCES DEFENSE COUNCIL,

PETITIONER

v.

ENVIRONMENTAL PROTECTION AGENCY,

RESPONDENT

NATIONAL PETROCHEMICAL & REFINERS ASSOCIATION, ET

AL.,

INTERVENORS

Consolidated with 06-1046, 06-1047, 06-1214, 07-1311

On Petitions for Review of an Order 

of the Environmental Protection Agency

David S. Baron argued the cause and filed the briefs for

petitioner Natural Resources Defense Council.

Anne Milgram, Attorney General, Attorney General’s

Office of the State of New Jersey, and Maurice A. Griffin,

Deputy Attorney General, were on the briefs for petitioner State

of New Jersey.

USCA Case #06-1214 Document #1195613 Filed: 07/10/2009 Page 1 of 64
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Kevin P. Auerbacher, Assistant Attorney General, entered an

appearance.

Frank S. Craig III, John B. King, Steven J. Levine, and

Patrick O'Hara were on the briefs for petitioners The Chamber

of Greater Baton Rouge, et al. Geraldine E. Edens entered an

appearance. 

Andrew Cuomo, Attorney General, Attorney General’s

Office of the State of New York, Morgan A. Costello and

Michael J. Myers, Assistant Attorneys General, Richard

Blumenthal, Attorney General, Attorney General's Office of the

State of Connecticut, and Kimberly P. Massicotte, Assistant

Attorney General, were on the briefs for intervenors the States

of New York and Connecticut in support of petitioner.

Charles H. Knauss and Sandra P. Franco were on the briefs

for intervenor National Petrochemical & Refiners Association

in support of petitioner Natural Resources Defense Council.

Brian H. Lynk, Attorney, U.S. Department of Justice,

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

John C. Cruden, Deputy Assistant Attorney General, and Diane

E. McConkey, Counsel, U.S. Environmental Protection Agency.

Norman W. Fichthorn and Lucinda M. Langworthy were on

the brief for intervenor Utility Air Regulatory Group in support

of respondents. Allison D. Wood entered an appearance. 

Charles H. Knauss was on the brief for intervenors National

Petrochemical & Refiners Association and American Petroleum

Institute in support of respondents. Martha E. Cox and Stacy R.

Linden entered appearances.

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Before: GINSBURG, HENDERSON and ROGERS, Circuit

Judges.

Opinion for the Court filed PER CURIAM.

Opinion concurring in part and dissenting in part filed by

Circuit Judge ROGERS.

PER CURIAM: In 1997, the EPA revised the National

Ambient Air Quality Standard (NAAQS) for ozone from a

1-hour standard to an 8-hour standard. These consolidated

petitions for review challenge aspects of the Final Rule To

Implement the 8-Hour Ozone National Ambient Air Quality

Standard — Phase 2, 70 Fed. Reg. 71,612 (2005) (Phase 2

Rule), and Phase 2 of the Final Rule To Implement the 8-Hour

Ozone National Ambient Air Quality Standard — Notice of

Reconsideration, 72 Fed. Reg. 31,727 (2007) (Reconsideration

Notice). We hold the Phase 2 Rule is inconsistent with the

Clean Air Act (CAA or Act) in allowing participation in a

regional cap-and-trade program to satisfy an area-specific

statutory mandate. We further hold the EPA arbitrarily

eliminated one safeguard and violated the anti-backsliding

provision of the Act insofar as it eliminated another from its

regulations governing review of new sources of pollution. We

therefore grant the petitions with respect to those aspects of the

Phase 2 Rule. In view of our decision in North Carolina v. EPA,

531 F.3d 896 (2008), in which we granted a petition for review

of the Clean Air Interstate Rule (CAIR), we defer consideration

of the Phase 2 Rule and Reconsideration Notice insofar as they

relate to the CAIR program. We deny the petitions in all other

respects.

I. Background

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The Act requires the EPA to designate areas as attainment,

nonattainment, or unclassifiable for each NAAQS. CAA §

107(d)(1)(B), 42 U.S.C. § 7407(d)(1)(B). States have primary

responsibility for implementing those standards, and must

submit a state implementation plan (SIP) that specifies how the

state will achieve and maintain compliance with the NAAQS.

Id. § 7407(a). Part D of the Act provides the SIP for a

nonattainment area must include certain control measures. Id.

§ 7501 et seq. Subpart 1 applies to all nonattainment areas, id.

§§ 7501-7509a, whereas Subpart 2 specifies additional

requirements for ozone nonattainment areas, id. §§ 7511-7511f.

Section 181 of the Act classifies ozone nonattainment areas

from “marginal” to “extreme” based upon the degree to which

the ozone level in the area exceeds the NAAQS. Id. § 7511. An

area that exceeds the NAAQS by a greater margin is given more

time to meet the standard but is subjected to progressively more

stringent emissions controls for ozone precursors, namely,

volatile organic compounds (VOCs) and oxides of nitrogen

(NOX). See CAA § 182, 42 U.S.C. § 7511a.

In 1997, the EPA determined the NAAQS for ozone,

expressed as the amount of ozone in the ambient air averaged

over one hour, was inadequate to protect public health. The

EPA therefore promulgated a new NAAQS of .08 ppm of ozone

averaged over eight hours. Under the 8-hour standard, some

ozone nonattainment areas are subject only to the more flexible

requirements of Subpart 1, while areas with higher levels of

ozone are subject to the additional requirements of Subpart 2.

See S. Coast Air Quality Mgmt. Dist. v. EPA, 472 F.3d 882,

893-95 (D.C. Cir. 2006).

The EPA implemented the 8-hour NAAQS in two phases;

the Phase 2 Rule and Reconsideration Notice here under review

implement the requirements of Subpart 1 and Subpart 2 for areas

not attaining the 8-hour NAAQS. The consolidated petitions

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1

 The affiliated petitioners are the West Baton Rouge Chamber of

Commerce, the Iberville Parish Chamber of Commerce, and the

Louisiana Oil Marketers and Convenience Store Association.

challenge those rules as follows. The Natural Resources

Defense Council, the States of New Jersey, Connecticut, and

New York, and the National Petrochemical and Refiners

Association challenge provisions implementing the statutory

requirement that each nonattainment area provide for such

emissions reductions as may be obtained by the adoption of

reasonably available control technology (RACT). The NRDC

and New Jersey challenge provisions governing review of new

sources of pollution. The NRDC also challenges two provisions

implementing the statutory requirements that a SIP for a

nonattainment area provide for specific percentage reductions in

emissions and for contingency measures. Finally, the Chamber

of Greater Baton Rouge and affiliated petitioners1

 challenge the

imposition of reformulated gasoline requirements in the Baton

Rouge area.

We review the EPA’s interpretation of the Act pursuant to

Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467 U.S.

837 (1984): We ask first whether the 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, however, the “statute is silent or

ambiguous with respect to the specific issue,” then we defer to

the EPA’s interpretation as long as it is “based on a permissible

construction of the statute.” Id. The Act requires us to review

the Phase 2 Rule deferentially to determine only whether it is

“arbitrary, capricious, an abuse of discretion, or otherwise not in

accordance with law.” CAA § 307(d)(9)(A), 42 U.S.C. §

7607(d)(9)(A); see Bluewater Network v. EPA, 372 F.3d 404,

410 (D.C. Cir. 2004) (“We give particular deference to the EPA

when it acts under unwieldy and science-driven statutory

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2

 The second and third challenges are to the EPA’s statements in

the preamble to the final rule. The statements constitute reviewable

schemes like the Clean Air Act”) (internal quotation marks

omitted).

II. Reasonably Available Control Technology

Section 172(c)(1) of the Act requires that the SIPs for

nonattainment areas “provide for the implementation of all

reasonably available control measures as expeditiously as

practicable (including such reductions in emissions from

existing sources in the area as may be obtained through the

adoption, at a minimum, of reasonably available control

technology).” 42 U.S.C. § 7502(c)(1) (emphasis added). Ozone

nonattainment areas that are subject to Subpart 2 of Part D are

subject to more specific reasonably available control technology

requirements. E.g., id. § 7511a(b)(2)(C); id. § 7511a(f).

Petitioners challenge three aspects of the implementation of the

RACT requirement in the Phase 2 Rule. First, the NRDC

challenges the rule providing that RACT is satisfied for Subpart

1 areas by SIPs “demonstrating that the area has adopted all

control measures necessary to demonstrate attainment as

expeditiously as possible,” Phase 2 Rule, 70 Fed. Reg. at 71,701

(codified at 40 C.F.R. § 51.912(c)(1)). Second, the State of New

Jersey challenges the EPA’s decision to allow states to meet the

RACT requirement under the 8-hour NAAQS by certifying that

RACT is met under the 1-hour NAAQS, see id. at 71,652-53.

Third, the NRDC, New Jersey, the States of Connecticut and

New York, and the National Petrochemical and Refiners

Association challenge the EPA’s conclusion that states may

satisfy the RACT requirement by participating in two

cap-and-trade programs, the NOX SIP Call and CAIR, see id.

The court has stayed consideration of the CAIR-RACT

determination.2

 

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final agency action, see CAA § 307(b)(1), 42 U.S.C. § 7607(b)(1), as

they represent “the consummation of the agency’s decisionmaking

process and . . . establish[] rights and obligations or create[] binding

legal consequences.” Natural Res. Def. Council v. EPA, 559 F.3d 561,

564 (D.C. Cir. 2009). The EPA’s statements as to how it will

implement the RACT requirement are not conjectural and their terms

are clear, so it is fair to infer that the EPA intended the statements to

create binding legal consequences. See Kennecott Utah Copper Corp.

v. Dep’t of Interior, 88 F.3d 1191, 1222-23 (D.C. Cir. 1996).

A. RACT in Subpart 1 Nonattainment Areas

The NRDC challenges the Phase 2 Rule’s treatment of the

“reasonably available control technology” requirement of CAA

§ 172(c)(1), 42 U.S.C. § 7502(c)(1). Under the Phase 2 Rule,

nonattainment areas governed by Subpart 1 that request an

attainment deadline within five years of their designation “shall

meet the RACT requirement by submitting an attainment

demonstration SIP demonstrating that the area has adopted all

control measures necessary to demonstrate attainment as

expeditiously as practicable.” Phase 2 Rule, 70 Fed. Reg. at

71,701/3 (codified at 40 C.F.R. § 51.912(c)(1)). The NRDC

contends that this provision is an unlawful waiver of the RACT

requirement of § 172(c)(1) because, under the Phase 2 Rule, a

state need not require RACT at all in such areas. It views the

statutory phrase “at a minimum” as imposing an unambiguous

requirement for all nonattainment areas. The NRDC thus

contends the Phase 2 Rule violates the plain text of § 172(c)(1)

by doing away with this requirement in some nonattainment

areas. However, we conclude that the term “reasonably

available control technology” is ambiguous in context and that

the EPA’s interpretation is reasonable. 

The court has previously concluded that the term

“reasonably available” in the analogous phrase “reasonably

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available control measure” (RACM) in § 172(c)(1) is ambiguous

and “clearly bespeaks [the Congress’s] intention that the EPA

exercise discretion in determining which control measures must

be implemented . . . .” Sierra Club v. EPA, 294 F.3d 155, 162-

63 (D.C. Cir. 2002). The court explained that the statute did not

specify which control measures would be deemed “reasonably

available” and did not “compel[] a state to consider whether any

measure is ‘reasonably available’ without regard to whether it

would expedite attainment in the relevant area.” Id. at 162.

Thus, the EPA had discretion to conclude that a measure was not

“reasonably available” if it would not expedite attainment. Id.

Because the same is true of the phrase “reasonably available

control technology,” the term “reasonably available” within

RACT is also ambiguous. Moreover, even if the phrase “at a

minimum” requires that at least RACT-level reductions be

achieved in all nonattainment areas, the phrase does not specify

the content of the RACT requirement. Given this ambiguity, the

EPA has discretion reasonably to define the controls that will

demonstrate compliance.

The EPA’s interpretation, construing “reasonably available”

as meaning only control technologies that advance attainment,

is reasonable in light of the statute’s accompanying text and

structure. Section 172(c)(1) requires all nonattainment areas to

achieve RACM “as expeditiously as practicable (including such

reductions . . . as may be obtained through the adoption, at a

minimum, of reasonably available control technology) . . . .” 42

U.S.C. § 7502(c)(1). To the extent an area is already achieving

attainment as expeditiously as possible, imposition of additional

control technologies would not hasten achievement of the

NAAQS. In such a situation, the EPA may reasonably conclude

that no control technologies are reasonably available and the

area need not implement further technologies to satisfy the

RACT requirement. Sierra Club v. EPA, 294 F.3d 155 (D.C.

Cir. 2002), supports the reasonableness of the EPA’s

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interpretation. In Sierra Club, the court held reasonable the

EPA’s interpretation of RACM as requiring only those control

measures that would contribute to timely and expeditious

attainment. 294 F.3d at 162; see also Sierra Club v. EPA, 314

F.3d 735, 743-45 (5th Cir. 2002). The court explained, in part,

that the “Act ‘use[s] the same terminology in conjunction with

the RACM requirement’ as it does in requiring timely

attainment.” Sierra Club, 294 F.3d at 162. The § 172(c)(1)

RACM requirement, like the timely attainment requirement of

CAA § 181(a)(1), 42 U.S.C. § 7511(a)(1), requires

implementation of RACM “as expeditiously as practicable.”

Thus, the court concluded, the RACM requirement could

reasonably be understood as a means of meeting the attainment

deadline. 294 F.3d at 162. Because the RACT requirement is

located in a parenthetical modifying RACM and because the

RACM requirement is described as “including” the RACT

requirement, the RACT requirement is likewise linked to the

timely attainment terminology. Given this textual linkage, the

EPA may reasonably extend to the RACT requirement its

interpretation of RACM as requiring only those control

measures that would facilitate expeditious attainment of the

NAAQS. 

Contrary to the NRDC’s arguments, the RACT requirement

does not lose all meaning under the EPA’s definition. When

control technology is necessary to advance attainment, it is

“reasonably available” under the definition and would be

required under the rule. The fact that the RACT requirement

was previously located in a separate section and not in a

parenthetical modifying the RACM requirement does not

support the NRDC’s position. Compare CAA § 172(b)(2), 42

U.S.C. § 7502(b)(2), (3) (1977), with CAA § 172(c)(1), 42

U.S.C. § 7502(c)(1) (1990). Rather, the fact that the Congress

moved the requirement to a parenthetical modifying the RACM

requirement supports the EPA’s conclusion that the RACT

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requirement could be interpreted in the same manner as the

RACM requirement. Although both the NRDC and the EPA

point to legislative history purportedly supporting their

positions, neither points to legislative history bearing on the

meaning of “reasonably available.” See H.R.REP.NO. 101-490,

reprinted in 2 LEGISLATIVE HISTORY OF THE CLEAN AIR ACT

AMENDMENTS OF 1990, at 223. The term “reasonably available”

is ambiguous, and the EPA’s interpretation is a permissible

construction of the statute.

B. Certifying 8-Hour RACT Based Upon 1-Hour RACT

The Phase 2 Rule provides that a control measure approved

as RACT under the 1-hour standard will be approved as RACT

under the 8-hour standard absent information indicating it

should not be approved. Phase 2 Rule, 70 Fed. Reg. at 71,652/3.

Rather than reassessing what constitutes RACT, a state can

certify that controls that previously satisfied the RACT

requirement also satisfy the requirement under the 8-hour

standard. New Jersey contends this provision is contrary to the

Act and arbitrary and capricious. In New Jersey’s view the EPA

should require a re-analysis for all sources, not just those for

which no controls had been considered RACT under the 1-hour

standard, see id. at 71,655, because what is “reasonably

available” changes over time. Without a re-analysis, New

Jersey maintains there is no basis for states to certify that the

initial RACT analysis meets the RACT requirement under the 8-

hour NAAQS and states may apply outdated RACT controls.

New Jersey thus claims that the EPA should have either updated

its RACT guidance documents or at least provided uniform

criteria for states to use in making RACT certifications.

The EPA promulgates two types of guidance that assist

states in determining what control techniques meet the RACT

requirement, control techniques guidelines (CTGs) and

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alternative control techniques (ACTs). Section 183 of the Act

requires the EPA to issue CTGs for certain categories of sources

that emit VOCs. See 42 U.S.C. § 7511b. Where CTGs exist,

they establish the presumptive level of control meeting RACT.

Phase 2 Rule, 70 Fed. Reg. at 71,654/3. Still, states can opt to

require alternative controls rather than following the guidance

in the CTGs. Notice of Final Determination and Availability of

Final Control Techniques Guidelines, 71 Fed. Reg. 58,745,

58,747 (Oct. 5, 2006). Section 183(c) of the Act requires the

EPA to issue ACTs for major sources of VOCs and NOX. 42

U.S.C. § 7511b(c). The ACTs “describe available control

techniques and their cost effectiveness” but do not establish

presumptive RACT. Phase 2 Rule, 70 Fed. Reg. at 71,654/3.

Thus, neither the CTGs nor ACTs set firm RACT requirements.

Despite New Jersey’s concerns, the EPA’s certification

provision does not conflict with the Act and is not arbitrary and

capricious. Although the EPA did not revise the guidance

documents, the EPA’s case-by-case approach adequately

ensures that RACT determinations will take into account

advances in technology. First, the EPA has directed states to

consider available information in addition to the CTG and ACT

documents when making RACT determinations. Id. at

71,655/1. If a state is presented with information indicating that

a previous RACT determination is inappropriate, the state must

consider that information and modify its RACT determinations

accordingly. Id. Second, when submitting RACT certifications

to the EPA as part of their RACT SIP submissions, states must

provide supporting information. Id. at 71,655/2. Third, if

additional information is presented during notice-and-comment

rulemaking, both the state and the EPA are required to consider

that information as part of the rulemaking; this includes

information presented during notice-and-comment rulemaking

for RACT SIP submissions for previously controlled sources.

Id. Because the EPA could reasonably conclude that these

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mechanisms will ensure the case-by-case determinations will

take into account advances in technology, the EPA could also

reasonably conclude “that the best way to address the possibility

that CTGs or ACTs might not reflect all currently available

technologies was by requiring each State to consider any new

available information in making its certification, which will then

be reviewed by the EPA as part of the SIP submission process,”

EPA Br. at 67; see also Phase 2 Rule, 70 Fed. Reg. at 71,655/1.

See Nat’l Wildlife Fed’n v. EPA, 286 F.3d 554, 566-67 (D.C.

Cir. 2002). Likewise, given the assurances that RACT

determinations will reflect advances in technology, the EPA’s

approach is consistent with the statutory goal of timely

attainment of the NAAQS, see CAA §§ 172, 182, 42 U.S.C. §§

7502, 7511a.

Additionally, even if the EPA had revised the national

guidelines and provided uniform criteria as New Jersey

preferred, such actions would not have eliminated case-by-case

inquiries by the states and the EPA. Both the CTGs and ACTs

are guidance documents, see Conn. Fund for the Env’t v. EPA,

672 F.2d 998, 1003 (2d Cir. 1982); United States v. Ford Motor

Co., 736 F. Supp. 1539, 1543 (W.D. Mo. 1990), and neither sets

firm RACT requirements. Thus, despite the existence of the

CTGs, the EPA makes case-specific determinations as part of its

SIP approval process. Notice of Final Determination and

Availability of Final Control Techniques Guidelines, 71 Fed.

Reg. at 58,747. ACTs are also merely guidelines and do not

create presumptive RACT levels. Phase 2 Rule, 70 Fed. Reg. at

71,654/3. As case-by-case determinations would be necessary

even if the EPA had revised the guidance documents, the EPA

could reasonably determine that the costs entailed in revising the

guidance documents outweighed the benefits. The EPA has

discretion to consider the costs of regulation unless the relevant

statute precludes such a consideration. See, e.g., Sierra Club,

294 F.3d at 162-63. 

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The EPA’s approach also addresses New Jersey’s concern

that allowing states to make RACT determinations by relying on

15-year-old CTGs plus new information, if any, provided by the

public in comments is “an inadequate substitute” for requiring

each state to undertake a new RACT determination for each

source category. As noted, the EPA has directed states to

submit supporting documentation along with RACT

certifications. Phase 2 Rule, 70 Fed. Reg. at 71,655/2. Thus, the

EPA will have available the information needed to verify states’

determinations that the previous controls are still appropriate

under the 8-hour standard. Additionally, persons disagreeing

with a particular RACT certification can seek judicial review of

a particular SIP approval. A state may also complete an entirely

new RACT analysis if it so chooses. Id. at 71,652/3.

In sum, we hold that the EPA’s decision to forego a revision

of the nationwide guidelines in favor of case-by-case RACT

certifications was reasonable and not inconsistent with the

statutory goal of expeditious attainment. Because the Phase 2

Rule requires each state to verify that previously-required RACT

controls still satisfy the RACT requirement, we need not address

the EPA’s assertion that a new RACT determination will likely

“result in the same or similar control technology as the initial

RACT determination under the 1-hour standard because the

fundamental control techniques . . . are still applicable.” Id. at

71,654/1. The EPA did not rest the rule upon this ground; each

state must “consider new information” — information that may

prove the EPA wrong — when the state determines whether

previously-required controls “still represent[] an appropriate

RACT level of control.” Id. at 71,655/1.

C. Meeting RACT via NOX SIP Call

The NOX SIP Call is a cap-and-trade program that regulates

NOX emissions. The program covers 22 states in the Northeast

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and the District of Columbia, and was intended to address the

interstate transport of ozone. See generally Final Rule, Finding

of Significant Contribution and Rulemaking for Certain States

in the Ozone Transport Assessment Group Region for Purposes

of Reducing Regional Transport of Ozone, 63 Fed. Reg. 57,356

(Oct. 27, 1998); Michigan v. EPA, 213 F.3d 663, 675, 685-86

(D.C. Cir. 2000). The NOX SIP Call established for each state

a “NOX emissions budget,” which limits total emissions during

the ozone season. Phase 2 Rule, 70 Fed. Reg. at 71,656/3. The

EPA also adopted a rule allowing interstate trading of emissions

allowances, and all states covered by the NOX SIP Call elected

to participate in the interstate program. Thus, a source within a

state could meet its emissions target either by installing controls

or by purchasing allowances from other sources located

anywhere in the region covered by the NOX SIP Call. See id. 

The Phase 2 Rule provides that to meet the NOX RACT

requirement, “the State need not perform (or submit) a NOX

RACT analysis for sources subject to the state’s emission

cap-and-trade program” where that program meets the NOX SIP

Call requirements or, in states achieving CAIR reductions solely

from Electricity Generating Units, CAIR requirements. Id. at

71,652/3. Petitioners and intervenors persuasively challenge

this provision as being contrary to the express terms of the

statute.

Section 172(c)(1) of the Act requires that nonattainment

areas achieve “such reductions in emissions from existing

sources in the area” as can be achieved by the adoption of

RACT. 42 U.S.C. § 7502(c)(1). Thus, the RACT requirement

calls for reductions in emissions from sources in the area;

reductions from sources outside the nonattainment area do not

satisfy the requirement. See id.; see also CAA § 182(b)(2), 42

U.S.C. § 7511a(b)(2) (requiring implementation of RACT with

respect to certain VOC sources “in the area” for moderate and

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above nonattainment areas). Accordingly, participation in the

NOX SIP Call could constitute RACT only if participation

entailed at least RACT-level reductions in emissions from

sources within the nonattainment area. In the preamble to the

proposed rule the EPA stated that “the overall emission

reductions from sources in the NOX SIP Call cap-and-trade

program will achieve more emissions reductions in the

nonattainment area than would application of RACT to each of

those units,” Proposed Rule to Implement the 8-Hour Ozone

National Ambient Air Quality Standard, 68 Fed. Reg. 32,802,

32,839 (June 2, 2003) (Proposed Rule). The preamble to the

final rule does not go as far. Rather, the final preamble states

only that the “NOX SIP Call is estimated to achieve a beyondRACT degree of control regionally,” Phase 2 Rule, 70 Fed. Reg.

at 71,657. Such regionwide RACT-level reductions in

emissions do not meet the statutory requirement that the

reductions be from sources in the nonattainment area. Because

the EPA has not shown that NOX SIP Call compliance will result

in at least RACT-level reductions in emissions from sources

within each nonattainment area, the EPA’s determination that

compliance with the NOX SIP Call satisfies the RACT

requirement is inconsistent with the “in the area” requirement

and thus violates the plain text of § 172(c)(1). 

In an analogous situation, the court invalidated the CAIR

trading program because the EPA’s regionwide approach made

it impossible to tell whether the rule achieved a specific

statutory objective. See North Carolina v. EPA, 531 F.3d 896,

906-08 (D.C. Cir. 2008). In developing CAIR, the court

explained, the EPA “did not purport to measure each state’s

significant contribution to specific downwind nonattainment

areas and eliminate them in an isolated state-by-state manner.”

Id. at 907. Despite a statutory provision prohibiting sources

“within the State” from contributing significantly to

nonattainment in “any other State,” CAA § 110(a)(2)(D), 42

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U.S.C. § 7410(a)(2)(D), the EPA adopted a regionwide approach

to the problem. The court therefore held that the EPA was not

exercising its statutory duty, reasoning that “[i]t is unclear how

EPA can assure that the trading programs . . . will achieve

section 110(a)(2)(D)(i)(I)’s goals if we do not know what each

upwind state’s ‘significant contribution’ is to another state.”

531 F.3d at 908. Similar reasoning applies to the NOX SIP Call.

The EPA has not provided assurance that the NOX SIP Call will

achieve the Act’s goal of “reductions from existing sources in

the area,” because it has not evaluated the effect of the program

on each nonattainment area.

The EPA responds that its approach “gives meaning to the

statute’s ‘in the area’ language” because its technical analysis

shows that the cap-and-trade programs achieve greater

reductions than would the application of RACT-level controls

at each source. EPA Br. at 73. However, the EPA’s cited

support for this proposition is the statement from the preamble

to the proposed rule stating the EPA “believes” participation

would “achieve more emissions reductions in the nonattainment

area than would application of RACT” to all sources in the area.

Proposed Rule, 68 Fed. Reg. at 32,839/2. That statement is

unsupported by any record evidence and it does not appear in

the preamble to the final rule. The EPA’s further response that

its technical analysis supports the conclusion that NOX SIP Call

participation meets the RACT requirement is no more

persuasive. The EPA explains that its analysis showed that

sources subject to the NOX SIP Call “collectively” would

achieve beyond-RACT reductions in emissions. EPA Br. at 83.

But regionwide reductions do not satisfy the “in the area”

requirement. The EPA explains further that it found that

purchasing allowances was more costly than installing RACTlevel control technology and thus “most” sources meeting the

NOX SIP call, “assuming rational economic behavior,” id.,

would opt to install controls rather than purchase allowances.

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17

This bare assertion is insufficient to demonstrate that NOX SIP

Call compliance would lead to RACT-level reductions from

sources in the area. Even if most sources in a nonattainment

area installed controls rather than purchasing allowances, a

small number of sources purchasing allowances and increasing

emissions could mean that overall emissions from sources in the

area remained unchanged or even increased.

The EPA’s attempt to show ambiguity in the Act is likewise

unavailing. The EPA maintains the statute is ambiguous as to

whether RACT must be installed at each source in an area,

noting that it has previously approved the concept of averaging

emissions within a nonattainment area. The EPA reads the

statutory phrase “as may be obtained” to indicate that the RACT

requirement does not necessarily call for implementation of

controls at each and every source, but rather requires an area to

achieve at least RACT-level reductions in emissions. Even if

the RACT requirement could be met through an emissionsaveraging approach within a nonattainment area, averaging

emissions across a region does not ensure that any reductions in

emissions derive from reductions at sources within a particular

area. Even if the EPA were correct that “nothing in the statute

precludes consideration of the air quality impact that controls

under a region-wide cap-and-trade program may have on NOX

within the nonattainment area,” EPA Br. at 72, the EPA has not

considered the impact of the NOX SIP Call on the air quality

within specific nonattainment areas. Therefore the EPA has

failed to demonstrate that NOX SIP Call compliance can be

equated to RACT compliance.

The EPA’s reliance on § 172(c)(6) is misplaced. That

section provides that SIPs must include “enforceable emission

limitations, and such other control measures . . . including

economic incentives such as . . . auctions of emission rights . .

. as may be necessary or appropriate to provide for attainment.”

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18

42 U.S.C. § 7502(c)(6). The EPA offers that its approach to

RACT is consistent with this express authorization of auctions.

However, § 172(c)(6) merely authorizes the EPA to approve

market-based measures in addition to those controls that are

required by CAA § 172(c), including the RACT requirement; it

does not authorize the EPA to replace the RACT requirement

with a cap-and-trade program as is promulgated in the Phase 2

Rule.

The EPA also offers that to the extent individual sources

emitting high levels of NOX are in compliance with the NOX SIP

Call through the purchase of allowances, the states can define

RACT to require greater reductions than are required by the

EPA, and they must require beyond-RACT reductions as

necessary to achieve timely attainment. The EPA’s

determination that NOX SIP Call compliance satisfies the RACT

requirement is not based on a state choosing to so exercise its

discretion. A state’s decision to require stricter controls cannot

eliminate the defect in the EPA’s approach — failing to

implement the requirement of at least RACT-level reductions in

emissions from sources in the nonattainment area. This part of

the Phase 2 Rule must therefore be remanded without vacatur

because the EPA may be able to reinstate the provision for most

nonattainment areas if, upon conducting a technical analysis, it

finds the NOX SIP Call results in greater emissions reductions in

a nonattainment area than would be achieved if RACT-level

controls were installed in that area.

III. Clean Data Policy

Under the Act, each nonattainment area must attain the

NAAQS by a deadline, known as the “attainment date,” which

is established by the statute itself for areas subject to Subparts

1 and 2, see CAA § 181, 42 U.S.C. § 7511, and by the EPA for

areas subject only to Subpart 1, see CAA § 172, 42 U.S.C. §

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19

3

 An area may in some circumstances substitute a combined

reduction in emissions of VOCs and NOX for the fixed percentage

reduction of VOCs required by CAA § 182(c)(2)(B). See 42 U.S.C.

§ 7511a(c)(2)(C). Although CAA § 182(b)(1)(A) applies by its terms

only to an area in moderate nonattainment, and § 182(c)(2)(B) only to

an area classified in serious nonattainment, § 182(c), (d), and (e) apply

those requirements to areas in a greater degree of nonattainment. See

id. § 7511a(c)-(e).

7502(a)(2). The Act also provides that the SIP for a

nonattainment area subject only to Subpart 1 must “require

reasonable further progress” (RFP), id. § 7502(c)(2); the SIP for

an area in moderate or a greater degree of nonattainment must

provide for fixed percentage reductions of VOCs on a specified

schedule. CAA §§ 182 (b)(1)(A), (c)(2)(B), 42 U.S.C. §§

7511a(b)(1)(A), (c)(2)(B).3

In order to ensure these requirements are met, the SIP for

any nonattainment area must include “contingency measures” to

be implemented “if the area fails to make reasonable further

progress, or to attain the [NAAQS] by the attainment date,”

CAA § 172(c)(9), 42 U.S.C. § 7502(c)(9), and the SIP for a

serious, severe, or extreme nonattainment area must also include

“contingency measures” that will take effect automatically “if

the area fails to meet any applicable milestone,” CAA §

182(c)(9), 42 U.S.C. § 7511a(c)(9).

In the Phase 2 Rule, the EPA suspended the planning

requirements for specified percentage reductions and

contingency measures for each nonattainment area that has

attained the 8-hour NAAQS but has not yet been designated an

attainment area. 40 C.F.R. § 51.918. The suspension lasts

“until ... the area is redesignated to attainment, at which time the

requirements no longer apply; or [until the] EPA determines that

the area has violated the 8-hour ozone NAAQS.” Id. The EPA

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terms this suspension the “Clean Data Policy,” 70 Fed. Reg. at

71,644, because it applies when a nonattainment area produces

“clean” air quality data. See Memorandum from John S. Seitz,

Dir., Office of Air Quality Planning & Standards, RFP,

Attainment Demonstration, and Related Requirements for

Ozone Nonattainment Areas Meeting the Ozone National

Ambient Air Quality Standard, at 5 (May 10, 1995),

www.epa.gov/ttn/oarpg/t1/memoranda/clean15.pdf . It adopted

the current version of the policy in 1995 and applied it in

rulemakings specific to individual areas under the 1-hour

NAAQS; it will similarly determine whether individual areas

qualify for the suspension in area-specific rulemakings. 70 Fed.

Reg. at 71,644-45.

The NRDC contends the Clean Data Policy conflicts with

both the letter and the purpose of the Act. More specifically, the

NRDC argues the statutory provisions requiring a SIP to include

contingency measures and percentage reductions allow no

waivers for an area that has achieved the NAAQS; the only way

for an area to be absolved of those requirements is to be

redesignated an attainment area. See CAA § 175A(c), 42 U.S.C.

§ 7505a(c) (“Until [a maintenance] plan revision is approved

and an area is redesignated as attainment ... the requirements of

[Part D] shall continue in force and effect”). Further, the NRDC

argues only its reading of the text is consistent with the intent of

the Congress that, in order to ensure the air stays clean, no

mandatory control requirement be lifted until a maintenance

plan is in place.

The EPA responds first that the NRDC did not raise before

the agency and therefore forfeited its objection to the suspension

of the planning requirement for contingency measures. See

CAA § 307(d)(7)(B), 42 U.S.C. § 7607(d)(7)(B) (“Only an

objection to a rule or procedure which was raised with

reasonable specificity during the period for public comment ...

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21

may be raised during judicial review”). We agree. We

“enforce[] this provision strictly,” Motor & Equip. Mfrs. Ass’n

v. Nichols, 142 F.3d 449, 462 (D.C. Cir. 1998) (internal

quotation marks omitted), and although we allow commenters

“some leeway in developing their argument before this court,”

the comment must have provided “adequate notification of the

general substance of the complaint,” S. Coast Air Quality Mgmt.

Dist. v. EPA, 472 F.3d 882, 891 (D.C. Cir. 2006).

The NRDC’s comments did not provide the EPA adequate

notice that it objected to the suspension of the contingency

measures. The NRDC did object to the Clean Data Policy, but

only to the suspension of the requirements for an attainment

demonstration and percentage reductions. The NRDC now

contends it objected to the suspension of all Subpart 2

requirements, pointing to its comment that the “EPA cannot

authorize states to simply drop subpart 2 measures when the area

is meeting either standard. The Act allows states to move

mandated controls to a maintenance contingency plan, but only

after the area has been redesignated to attainment.” Comments

of Clean Air Task Force et al., at 48 (Aug. 1, 2003). That

comment, however, was made in the context of an objection to

a different provision of the proposed rule, namely the EPA’s

determination that an area not attaining the 1-hour standard but

meeting the 8-hour standard need not submit a maintenance plan

meeting the requirements of CAA § 175A. The EPA cannot be

expected to take the NRDC’s argument, raised in support of one

specific objection, and apply it sua sponte to another provision.

Because the NRDC did not raise its objection with “reasonable

specificity,” the Act bars us from considering it. CAA §

307(d)(7)(B), 42 U.S.C. § 7607(d)(7)(B).

On the merits, the EPA maintains the Clean Data Policy

does not waive the planning requirements for percentage

reductions; instead, it contends, those requirements are by their

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terms inapplicable when an area meets the applicable NAAQS.

See Phase 2 Rule, 70 Fed. Reg. at 71,645/1-2, 71,646/1-2.

The two planning requirements for percentage reductions

are CAA § 182(b)(1), which requires an initial reduction of 15%

of VOC emissions in the first six years for an area in moderate

or greater nonattainment, and § 182(c)(2)(B), which requires

subsequent reductions in VOC emissions averaging 3% per year

for an area in serious or greater nonattainment unless an

exception applies. See 42 U.S.C. § 7511a(b)(1), (c)(2)(B). As

the EPA interprets these provisions, specific percentage

reductions are required only as necessary to achieve attainment.

We think the statute unclear as to whether those sections

apply to an area that is already attaining the NAAQS. For the

reasons below, we join the Tenth Circuit in holding the EPA’s

interpretation is reasonable. See Sierra Club v. EPA, 99 F.3d

1551 (10th Cir. 1996).

Section 182(b)(1)(A)(i) initially requires the SIP for an area

in moderate or greater nonattainment to plan a total reduction in

VOC emissions of 15% over six years. 42 U.S.C. §

7511a(b)(1)(A)(i). In the very next sentence, however, it

elaborates that a plan should mandate “such specific annual

reductions ... as necessary to attain the [NAAQS] for ozone by

the attainment date.” Id. Moreover, each percentage reduction

is linked to the requirement that an area make “reasonable

further progress” toward attainment. See id. § 7511a(b)(1)

(entitled “Plan provisions for reasonable further progress”); id.

§ 7511a(c)(2)(B) (entitled “Reasonable further progress

demonstration”). “Reasonable further progress,” in turn, means

“such annual incremental reductions in emissions ... as are

required ... for the purpose of ensuring attainment.” CAA §

171(1), 42 U.S.C. § 7501(1). The Act is therefore ambiguous as

to what reductions are required when no further progress toward

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23

attainment is necessary — or, for that matter, possible. The

EPA reasonably resolved this ambiguity by concluding the

specific percentage reductions are simply inapplicable in that

circumstance. As the Tenth Circuit put the matter, “If a

moderate ozone nonattainment area has in fact already attained

the ozone standard, it would make little sense to require a state

to demonstrate the area will make reasonable progress toward

attainment.” Sierra Club, 99 F.3d at 1557.

The EPA’s reasoning disposes as well of the NRDC’s

contentions that the Clean Data Policy unlawfully circumvents

the redesignation requirements, CAA § 107(d)(3)(E), 42 U.S.C.

§ 7407(d)(3)(E), violates the mandate that all Part D

requirements remain in force until an area has an approved

maintenance plan in place, CAA § 175A(c), 42 U.S.C. §

7505a(c), and disregards the Supreme Court’s admonition that

the EPA cannot “render Subpart 2’s carefully designed

restrictions on EPA discretion utterly nugatory,” Whitman v.

Am. Trucking Ass’ns, 531 U.S. 457, 484 (2001). The Clean Data

Policy does not effect a redesignation; an area must still comply

with the statutory requirements before it can be redesignated to

attainment. Furthermore, Part D — including Subpart 2 —

remains in force insofar as it applies but, as we have just seen,

the EPA has reasonably concluded the provisions of the Act

requiring percentage reductions do not apply to an area that has

attained the NAAQS.

IV. 15% VOC Reduction

CAA section 182(b)(1) requires that, for a moderate

nonattainment area, “no later than 3 years after November 15,

1990, the State shall submit a revision to the applicable

implementation plan to provide for volatile organic compound

emission reductions, within 6 years after November 15, 1990, of

at least 15 percent from baseline emissions, accounting for any

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4

 The statute permits a reduction in “an amount less than 3

percent of such baseline emissions each year, if the State demonstrates

to the satisfaction of the Administrator that the plan reflecting such

lesser amount includes all measures that can feasibly be implemented

in the area, in light of technological achievability.” CAA §

182(c)(2)(B)(ii), 42U.S.C. § 7511a(c)(2)(B)(ii).

5

 Section 182 does not provide for a specific VOC reduction for

a moderate area following the initial six-year 15% reduction period.

Accordingly, thereafter a moderate area is subject to the general

requirement in CAA section 172(c)(2) that “plan provisions shall

require reasonable further progress,” 42 U.S.C. § 7502(c)(2).

growth in emissions after 1990.” 42 U.S.C. § 7511a(b)(1)(A)(i).

CAA section 182(c), (d) and (e) incorporate the 15% VOC

reduction requirement for, respectively, “serious,” “severe” and

“extreme” nonattainment areas. Id. § 7511a(c)-(e). After the

initial six-year period, CAA section 182(c), (d) and (e) impose

on the same areas an additional RFP requirement that the SIP be

revised so that it “will result in VOC emissions reductions from

the baseline emissions . . . [of] at least 3 percent of baseline

emissions each year,” “averaged over each consecutive 3-year

period beginning 6 years after November 15, 1990, until the

attainment date.” Id. § 7511a(c)(2)(B)(i) (imposing requirement

on “serious” areas); see id. § 7511a(d), (e) (incorporating 3%

reduction requirement for “severe” and “extreme” areas).4

 As

used in the cited provisions, “the term ‘baseline emissions’

means the total amount of actual VOC or NOx emissions from

all anthropogenic sources in the area during the calendar year

1990.” CAA § 182(b)(1)(B), 42 U.S.C. § 7511a(b)(1)(B); see

also CAA § 182(c)(2)(B), 42 U.S.C. § 7511a(c)(2)(B).5

 

In the Phase 2 Rule, the EPA determined that for all

moderate and above areas “that had not met the 15 percent VOC

emission reduction requirement for the 1-hour standard,” the

RFP 15% reduction requirement “would apply” under the 8-hour

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6

 The EPA apparently meant section 172(c), see supra note 5;

section 172(e) is the anti-backsliding provision, see infra pp. 43-45.

7

 “Ozone, an essential presence in the atmosphere’s stratospheric

layer, is dangerous at ground level” and “is formed by the chemical

reaction of nitrogen oxides (‘NOX’) with any of a number of volatile

standard. 70 Fed. Reg. at 71,632-33. Conversely, the EPA

determined, 8-hour moderate and above areas that had already

satisfied the 15% VOC emission reduction for the 1-hour

standard will not be subjected a second time to the 15%

requirement under the 8-hour standard. Id. at 71,633. Thus,

“[a]reas classified under subpart 2 as moderate that had met the

15 percent VOC emission reduction requirement for the 1-hour

standard are treated in the final rule like areas covered under

subpart 1,” while “[a]reas classified under subpart 2 as serious

and above that had met the 15 percent VOC emission reduction

requirement for the 1-hour standard would be subject to the RFP

requirement in section 172(e) [sic6

] and the final rule would

require them to obtain an average of 3 percent annual reductions

of VOC and/or NOX emissions reductions for the first 6 years

after the baseline year and every subsequent 3 years out to their

attainment date.” Id. For both the 15% and the 3% reductions

RFP requirements, the Phase 2 Rule provides that the RFP

periods “would be equivalent to the periods Congress

established in subpart 2,” id. at 71,633, running from a new

baseline year, i.e., 2002 “for areas designated nonattainment for

the 8-hour ozone NAAQS with an effective date of June 15,

2004,” id. at 71,637.

First, the NRDC argues that the EPA “illegally waived”

Subpart 2’s RFP requirement that each SIP be revised three

years after the statute’s effective date to provide for a 15% VOC

reduction within 6 years after enactment for all areas classified

as “moderate” and above for ozone.7

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organic compounds (‘VOCs’), in the presence of sunlight.” S. Coast

Air Quality Mgmt. Dist. v. EPA, 472 F.3d 882, 887 (D.C. Cir. 2006).

As an initial matter, the EPA did not “waive” the 15%

requirement but simply determined that, if a State had made the

required revision for an area classified as moderate or greater

when the one-hour NAAQS took effect, the State did not have

to do so a second time after the 8-hour standard took effect. In

so doing, the EPA reasonably resolved a statutory ambiguity

under step 2 of the framework set out in Chevron U.S.A. Inc. v.

Natural Resources Defense Council, Inc., 467 U.S. 837, 843

(1984). See Natural Res. Def. Council v. EPA, 489 F.3d 1250,

1257 (D.C. Cir. 2007) (“Under Chevron: We first ask ‘whether

Congress has directly spoken to the precise question at issue,’ in

which case we ‘must give effect to the unambiguously expressed

intent of Congress.’ If the ‘statute is silent or ambiguous with

respect to the specific issue,’ however, we move to the second

step and defer to the agency’s interpretation as long as it is

‘based on a permissible construction of the statute.’ ” (quoting

Chevron, 467 U.S. at 842-43) (internal quotation marks

omitted)). Accordingly, we reject the NRDC’s challenge to the

VOC reduction provision. 

The NRDC contends that the EPA’s reading of the statute

is “untenable” because the statute requires that the SIP provide

for a 15% reduction from “baseline emissions”—which the

“EPA itself defines . . . for purposes of the 8-hour ozone

standard as emissions in 2002, not 1990”—and that the

reduction be effected “ ‘within 6 years after’ the baseline

year—that is, between 2002 and 2008 for the 8-hour standard.”

NRDC Br. at 29. This argument, however, sidesteps the EPA’s

rationale for its interpretation. The EPA identified a “gap in the

statutory scheme” because “[t]he CAA is silent regarding

whether a nonattainment area that implements the 15-percent

VOC emission reduction of 42 U.S.C. § 7511a(b)(1)(A) must

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27

implement that provision a second time if the NAAQS is

revised, or instead must implement other RFP provisions that

expressly would have applied had there been no revision of the

NAAQS.” EPA Br. at 29. The EPA filled this gap by selecting

the latter resolution. As the EPA explained in the Phase 2 Rule,

while it “believes that the CAA is quite clear that the SIP must

provide for a 15 percent reduction in baseline VOC emissions

for some period after 1990 in an area subject to section

182(b)(1)(A),” it “disagrees that the CAA plainly requires that

the SIP for an area must require a second 15 percent reduction

in VOC baseline emissions under a revised ozone standard.” 70

Fed. Reg. at 71,635-36 (first emphasis added); see also id. at

71,634 (“For those areas that have an approved 15 percent plan

for their 1-hour ozone SIPs, an additional 15 percent VOC

reduction is not necessary.”). Because the EPA ended its

statutory analysis with the threshold inquiry whether section

182(b)(1)(A)(i) must be applied a second time under its revised

standards (concluding it need not), the Agency did not need to

decide how to interpret the term “baseline emissions” or to

identify a baseline year for the purpose of so applying the

provision. Further, because it had no need to reach these issues,

it did not resolve them arbitrarily or capriciously, as the NRDC

asserts, by “allowing a select group of nonattainment areas to

rely on a different baseline from the distant past.” NRDC Br. at

30-31. Had the EPA required a nonattainment area to undertake

a second 15% VOC reduction, it might have been arbitrary to

use a different baseline or baseline year from that applicable to

areas undertaking the first 15% VOC reduction under the 8-hour

standard. But the Agency did not do so and we will not

speculate whether it could lawfully have done so.

The NRDC also argues that the EPA’s 15% approach is

inconsistent with its treatment of section 182(c)(2)(B)(i)’s 3%

reduction requirement for serious and above areas in that the

“EPA does not read the Act as excusing such 3% continuing

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emission cuts for serious and above 8-hour nonattainment areas

merely because they may have had plans under the 1-hour

standard to achieve continuing (i.e. post-1996) cuts of 3%/yr

from a 1990 baseline.” NRDC Br. at 30 n.8. The 3% provision,

however, is fundamentally different from the 15% provision in

that the former does not (as does the latter) establish a one-time

reduction requirement but instead imposes a continuing

obligation that applies to “each consecutive 3-year period

beginning 6 years after November 15, 1990, until the attainment

date.” CAA § 182(c)(2)(B), 42 U.S.C. § 7511a(c)(2)(B).

Finally, the NRDC asserts that the “EPA cannot override an

express statutory command ‘simply by asserting that its

preferred approach would be better policy,’ ” NRDC Br. at 30

(quoting Engine Mfrs. Ass’n v. EPA, 88 F.3d 1075, 1089 (D.C.

Cir. 1996)), referring to the EPA’s observation that its approach

“provides flexibility to States to use a mix of NOx and VOC

reductions” under CAA section 172, 42 U.S.C. § 7502, rather

than the required VOC-only reductions mandated by CAA

section 182(b)(1)(A)(1), 42 U.S.C. § 7511a(b)(1)(A)(1). 70 Fed.

Reg. at 71,634. As already explained, however, the EPA’s

interpretation does not override an express command but rather

resolves an ambiguity. Id. at 71,635-36. In commending the

flexibility afforded, the EPA merely offered one more reason

why its interpretation of the ambiguous statutory language is

reasonable. 

V. New Source “Offset” Credit for Past Emission

Reductions 

CAA section 172(b) requires that each State containing a

nonattainment area submit a nonattainment SIP meeting the

requirements of section 172(c) pursuant to a schedule set by the

EPA but not later than three years after a nonattainment area is

so designated. 42 U.S.C. § 7502(b), (c). Section 172(c)(5) of

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8

 Section 173(a)(1)(A) requires that

the permitting agency determine[] that—

(A) by the time the source is to commence operation,

sufficient offsetting emissions reductions have been

obtained, such that total allowable emissions from

existing sources in the region, from new or modified

sources which are not major emitting facilities, and from

the proposed source will be sufficiently less than total

emissions from existing sources (as determined in

accordance with the regulations under this paragraph)

prior to the application for such permit to construct or

modify so as to represent (when considered together with

the plan provisions required under section 7502 of this

title) reasonable further progress (as defined in section

7501 of this title); . . . .

42 U.S.C. § 7503(a)(1)(A). 

9

 Section 173(a) also requires that (1) the new source owner or

operator has demonstrated that all of its other major stationary sources

in the State are subject to and in (or scheduled for) compliance with

the Act requires that each nonattainment area SIP “shall require

permits for the construction and operation of new or modified

major stationary sources anywhere in the nonattainment area, in

accordance with section 7503 of [Title 42].” Id. § 7502(c)(5).

Section 173 sets out the permitting process, known as “New

Source Review” (NSR), in greater detail, providing that a permit

may be issued only if, inter alia, (1) the permitting agency has

determined that by the time the source begins operation,

sufficient offsetting emissions reductions are obtained that the

emission levels from the offsets and the plan provisions

represent RFP from the pre-permit levels, id. § 7503(a)(1)(A),8

and (2) the proposed source will “comply with the lowest

achievable emission rate” (LAER), id. § 7503(a)(2).9

 Section

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applicable emission limitations and standards; (2) the Administrator

has not determined the implementation plan applicable to the

attainment area site of the new source is not being adequately

implemented; and (3) an analysis of alternatives demonstrates that

“benefits of the proposed source significantly outweigh the

environmental and social costs imposed as a result of its location,

construction, or modification.” 42 U.S.C. § 7503(a)(3)-(5). 

10 More generally, the Act requires that all SIPs, even those for

attainment areas, include regulation of new and modified sources “as

necessary to assure that national ambient air quality standards are

achieved, including a permit program as required in parts C and D of

this subchapter.” CAA § 110(a)(2)(C), 42 U.S.C. § 7410(a)(2)(C). 

173 further requires that “[s]uch emission reductions shall be, by

the time a new or modified source commences operation, in

effect and enforceable and shall assure that the total tonnage of

increased emissions of the air pollutant from the new or

modified source shall be offset by an equal or greater reduction,

as applicable, in the actual emissions of such air pollutant from

the same or other sources in the area.” Id. § 7503(c)(1). Subpart

2 specifically applies the NSR requirement to ozone

nonattainment areas, CAA § 182(a)(2)(C)(i), 42 U.S.C.

§ 7511a(a)(2)(C)(i), and mandates increasingly stringent offset

ratios as the ozone classification increases, CAA § 182(a)(4),

(b)(5), (d)(2), 42 U.S.C. § 7511a(a)(4), (b)(5), (d)(2).10

The Phase 2 Rule allows proposed new and modified

sources to meet this offset requirement using credits from

sources that shut down or curtailed operations as long ago as

1977. 70 Fed. Reg. at 71,699 (to be codified at 40 C.F.R.

§ 51.165). The EPA has long allowed emissions reductions

occurring before a permit application to qualify as offset credits

under specified circumstances. Before 1989, such preapplication emissions reductions could be offset only if the

proposed source was “a replacement for the productive capacity

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31

11 The pre-1989 regulation provided:

Emissions reductions achieved by shutting down an existing

source or permanently curtailing production or operating

hours below baseline levels may be credited, provided that

the work force to be affected has been notified of the

proposed shutdown or curtailment. Source shutdowns and

curtailments in production or operating hours occurring

prior to the date the new source application is filed generally

may not be used for emissions offset credit. However,

where an applicant can establish that it shut down or

curtailed production after August 7, 1977, or less than one

year prior to the date of permit application whichever is

earlier, and the proposed new source is a replacement for the

shutdown or curtailment credit for such shutdown or

curtailment may be applied to offset emissions from the new

source.

40 C.F.R. § 51.165(a)(3)(ii)(C) (1988).

represented by the proposed offset credit.” Requirements for

Implementation Plans; Air Quality New Source Review, 54 Fed.

Reg. 27,286, 27,290 (June 28, 1989).11 The 1989 Rule

eliminated this restriction for an area with an approved

attainment demonstration. Id. at 27,292. In the Phase 2 Rule,

the EPA “lift[ed] the requirement to have an approved

attainment plan before using preapplication credits from

shutdowns or curtailments as offsets.” 70 Fed. Reg. at 71,676.

The NRDC challenges both the EPA’s longstanding policy

allowing pre-application reductions as NSR offsets and the

EPA’s elimination in the Phase 2 Rulemaking of the approved

attainment demonstration requirement. We reject as untimely

the NRDC’s challenge to the general policy of allowing preapplication offset credits but we agree that eliminating the

attainment demonstration requirement was arbitrary and

capricious and therefore in violation of the APA.

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32

CAA section 307(b), which governs judicial review of a

rulemaking under the Act, requires that “[a]ny petition for

review . . . shall be filed within sixty days from the date notice

of such promulgation . . . appears in the Federal Register.” 42

U.S.C. § 7607(b)(1). As already noted, the EPA has allowed

emission reductions from pre-application source shutdowns and

curtailments to qualify as NSR offset credits since at least 1989.

See 54 Fed. Reg. at 27,292. Thus, the deadline for filing a

petition for review of section 51.165(a)(3)(ii)(C) insofar as it

authorizes offset credits for pre-permit emission reductions is

long since past and the court lacks jurisdiction to review it. See

Motor & Equip. Mfrs. Ass’n v. Nichols, 142 F.3d 449, 460 (D.C.

Cir. 1998) (section 7607(b)(1) “filing period is jurisdictional in

nature, and may not be enlarged or altered by the courts”

(internal quotation marks omitted)). Nonetheless, the NRDC

contends that the EPA “reopened” the 1989 offset policy so as

to make its challenge timely. We disagree. 

“The reopening doctrine allows an otherwise stale challenge

to proceed because ‘the agency opened the issue up anew,’ and

then ‘reexamined . . . and reaffirmed its [prior] decision.’ ” P &

V Enters. v. U.S. Army Corps of Eng’rs, 516 F.3d 1021, 1023-24

(D.C. Cir. 2008) (quoting Pub. Citizen v. Nuclear Reg. Comm’n,

901 F.2d 147, 150-51 (D.C. Cir. 1990)) (internal quotation

marks omitted). In this case, the EPA did not expressly reopen

the issue of offsets for pre-application emission reductions. In

its proposed rule, the EPA offered two alternative amendments

to section 51.165(a)(3)(ii)(C), each of which eliminated the

attainment demonstration requirement under certain

circumstances. See Prevention of Significant Deterioration

(PSD) and Nonattainment New Source Review (NSR), 61 Fed.

Reg. 38,250, 38,311-14 (July 23, 1996) (Proposed Rules). In the

Phase 2 Rule, the EPA selected the less restrictive of the two

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33

12 Alternative 1 conditioned using offset credits upon an area

being “current with part D ozone nonattainment planning

requirements”; Alternative 2, which the EPA selected, did not. Phase

2 Rule, 70 Fed. Reg. at 71,673. 

alternatives.12 Neither alternative proposed changing the

regulation insofar as it permits offset of pre-application emission

reductions generally or even mentioned the matter. Further,

other than eliminating the approved attainment demonstration

requirement, the language of amended section 51.165(a)(3)(C)

remains substantively identical to the 1989 regulation. Compare

54 Fed. Reg. at 27,299 (§ 51.165(a)(3)(C) as effective June 29,

1989), with 70 Fed. Reg. at 71,699 (§ 51.165(a)(3)(C) as

effective Jan. 30, 2006). Accordingly, the subject of allowing

offsets in general was not expressly reopened. See Nat’l Ass’n

of Reversionary Prop. Owners v. Surface Transp. Bd., 158 F.3d

135, 142 (D.C. Cir. 1998) (“When an agency invites debate on

some aspects of a broad subject, . . . it does not automatically

reopen all related aspects including those already decided.”)

Nor did the EPA constructively reopen the issue, as the

NRDC contends. Under some circumstances an issue may be

“deemed to have been constructively reopened even though it

was not actually reopened” in a literal sense. Kennecott Utah

Copper Corp. v. U.S. Dep’t of Interior, 88 F.3d 1191, 1214

(D.C. Cir. 1996). “A constructive reopening occurs if the

revision of accompanying regulations ‘significantly alters the

stakes of judicial review’ as the result of a change that ‘could

have not been reasonably anticipated.’ ” Sierra Club v. EPA,

551 F.3d 1019, 1025 (D.C. Cir. 2008) (quoting Kennecott, 88

F.3d at 1227; Envtl. Def. v. EPA, 467 F.3d 1329, 1334 (D.C. Cir.

2006)). The EPA’s elimination of the attainment determination

requirement did not work such a sea change. The basic

regulatory scheme remains unchanged: pre-application offsets

are permitted if certain requirements are met. The only change

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34

is the elimination of the attainment demonstration

requirement—which was itself added in 1989 to replace the

more stringent requirement that “the proposed new source [be]

a replacement for the shutdown or curtailment.” 40 C.F.R.

§ 51.165(a)(3)(ii)(C) (1988) (alteration added); see supra note

11. That the NRDC’s challenge to the change may have merit,

as indeed we conclude infra, does not provide a ground to

conclude that the broader issue of allowing any pre-application

offsets at all has been reopened. It simply means the particular

change it challenges is unlawful. The “stakes” here are not

quantitatively different from what they were in 1989 when a

coalition of environmental groups argued to the EPA that the

attainment demonstration requirement itself was inadequate to

ensure RFP. See 54 Fed. Reg. at 27,291-92. Yet no one then

challenged the general policy allowing pre-application offsets.

Further, it could have been “reasonably anticipated” at that time

that the EPA might subsequently eliminate the attainment

demonstration requirement itself in favor of an alternative

safeguard which would likewise allow more liberal use of preapplication offset credits, as in fact happened here. In sum, the

EPA has done nothing since 1989 to reopen the general issue of

allowing pre-application offsets either expressly or

constructively.

We next address the NRDC’s objection to the specific NSR

revision that is subject to review in this proceeding—that the

EPA erred in eliminating the attainment demonstration

requirement. We agree with the NRDC that the EPA acted

arbitrarily and capriciously when it did so. 

In the 1989 rulemaking, the EPA imposed the approved

attainment demonstration requirement in order to comply with

CAA section 173(a)(1), which allows an NSR permit to issue

only if 

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35

the permitting agency determines that—

(A) by the time the source is to

commence operation, sufficient offsetting

emissions reductions have been obtained,

such that total allowable emissions from

existing sources in the region, from new or

modified sources which are not major

emitting facilities, and from the proposed

source will be sufficiently less than total

emissions from existing sources allowed

under the applicable implementation plan

prior to the application for such permit to

construct or modify so as to represent (when

considered together with the plan provisions

required under section 7502 of this title)

reasonable further progress (as defined in

section 7501 of this title); . . . .

42 U.S.C. § 7503(a)(1)(A) (1989). The EPA concluded that the

“essence of [this] provision is that a new source may be allowed

in a nonattainment area only where its presence would be

consistent with RFP toward attainment of the NAAQS” and that

this policy is satisfied if there is in place for the area a “fully

approved SIP” since, “[b]y definition, any fully approved SIP

has independently assured RFP and attainment.” 54 Fed. Reg.

at 27,292. “[W]here an attainment demonstration is lacking,”

however, the EPA concluded that “retention of the current

shutdown credit restriction on offset transactions”—that is, for

a pre-permit shutdown, “the proposed source is a replacement

for the productive capacity represented by the proposed offset,”

id. at 27,290—“is necessary both to assure RFP and to guarantee

that a new source does not cause or contribute to a violation of

the NAAQS.” Id. at 27,292. Nonetheless, when the EPA

amended section 51.165(a)(3)(C) in the Phase 2 Rule, it

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36

eliminated the fully-approved SIP requirement without adding

any other safeguard to ensure that issuing a particular permit is

consistent with CAA section 173’s mandate that total reductions

“represent . . . reasonable further progress.” 42 U.S.C. §

7503(a)(1)(A). The EPA justified eliminating the requirement

on the ground that the 1990 amendments to the Act “changed

the considerations involved” in that they “emphasized the

emission inventory requirement in section 172(c)(3) as a

fundamental tool in air quality planning” and “added new

provisions keyed to the inventory requirement, including

specific reduction strategies and [milestones] that measure

progress toward attainment from the base year emissions

inventory or subsequent revised inventories” along with “several

adverse consequences where States fail to meet the planning or

emissions reductions requirements.” 70 Fed. Reg. at 71,677; see

also Reconsideration Notice, 72 Fed. Reg at 31,739. But

imposing post hoc sanctions for failing to achieve RFP

milestones does not accomplish what CAA section 173 requires,

namely, that the EPA ensure that “by the time the source is to

commence operation, sufficient offsetting emissions reductions

have been obtained” to produce RFP, 42 U.S.C. § 7503(a)(1)(A)

(emphasis added). Because the EPA has not explained how the

amended rule, stripped of the approved attainment

demonstration requirement, ensures that emission reductions are

achieved “by the time” the new source begins operation rather

than sometime down the road after milestones have been missed,

we conclude that eliminating the requirement is arbitrary and

capricious. See N. Baja Pipeline, LLC v. FERC, 483 F.3d 819,

821 (D.C. Cir. 2007) (under arbitrary and capricious standard,

agency conclusions “must be reasonable and reasonably

explained” (citing Nat’l Fuel Gas Supply Corp. v. FERC, 468

F.3d 831, 839 (D.C. Cir. 2006))); Transactive Corp. v. United

States, 91 F.3d 232, 236 (D.C. Cir. 1996) (“In order to ensure

that an agency’s decision has not been arbitrary, we require the

agency to have identified and explained the reasoned basis for

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37

13 In light of this conclusion, we need not consider the NRDC’s

alternative contention that elimination of the requirement violates

section 172(e) of the Act, 42 U.S.C. § 7502(e). 

its decision.” (citing F.J. Vollmer Co. v. Higgins, 23 F.3d 448,

451 (D.C. Cir. 1994); Nat’l Treasury Employees Union v.

Horner, 854 F.2d 490, 498-99 (D.C. Cir. 1988))).13

VI. NSR Limits on Pollution from New and Modified

Major Sources

Pursuant to the SIP NSR requirements of CAA Part D,

supra pp. 28-30, the Phase 2 Rule accords a State three years to

develop and submit an approvable nonattainment major NSR

program for the 8-hour NAAQS. 70 Fed. Reg. at 71,672. In

addition to the Part D requirements for nonattainment areas,

however, CAA section 110(a)(2)(c) imposes on States a

“general duty” to implement a NSR program in their SIPs for all

areas, see supra note 10, which “exists during all periods,

including before a State has an approved part D NSR permit

program.” Id. at 71,677-78. Although section 110(a)(2)(c)

requires that the SIP contain NSR provisions, it does not specify

what NSR requirements apply during the period after an area is

designated nonattainment but before the NSR SIP is effective.

To fill this gap, the EPA decided in the Phase 2 Rule to retain an

interim NSR regime it has used for this purpose since 1979,

namely, Appendix S to 40 C.F.R. Part 51, which both establishes

interim NSR permitting requirements paralleling the Act’s (in

section IV.A) and provides for an exemption from the same

requirements under certain circumstances (in section VI). The

EPA further decided in the Phase 2 Rule, however, to eliminate

an existing 18-month time limit on the applicability of Appendix

S (including section VI’s exemption provision) to a given

nonattaiment area. Petitioners NRDC and New Jersey challenge

both the EPA’s general authority to exempt new sources from

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38

permitting requirements under section VI and, more specifically,

its decision to eliminate the 18-month limit on such exemptions.

We reject the petitioners’ objection to the EPA’s general

exemption authority as untimely but agree that eliminating the

18-month limit violates the “anti-backsliding” provision in CAA

section 172(e), 42 U.S.C. § 7502(e). 

In 1979, the EPA codified in its regulations a three year-old

“Emission Offset Interpretative Ruling” as Appendix S to 40

C.F.R. Part 51 and directed that Appendix S was to “govern[]

permits to construct and operate applied for before the deadline

for having a revised SIP in effect that satisfies Part D.”

Approval and Promulgation of Implementation Plans; Statutory

Restriction on New Sources Under Certain Circumstances for

Nonattainment Areas, 44 Fed. Reg. 38,471, 38,473 (July 2,

1979) (codified at 40 C.F.R. § 52.24(c) (1979) (now § 52.24(k));

see Emission Offset Interpretative Ruling, 44 Fed. Reg. 3274

(Jan. 16, 1979) (codifying interpretive ruling in regulations). In

so applying the interpretive rule, the EPA allowed a

nonattainment area to avoid, during the period before the SIP

was due, the statutory ban on all major source construction or

modification in any nonattainment area not subject to a SIP that

“me[t] the requirements of Part D (relating to nonattainment

areas).” See Clean Air Act Amendments of 1977, Pub. L. No.

95-95, § 108(b), 91 Stat. 685, 694 (Aug. 7, 1977) (establishing

construction ban) (1977 CAA Amendments). The EPA noted at

the time that the Congress had similarly adopted the rule (“as

may be modified by rule of the Administrator”) to govern NSR

during the interim period from enactment of the 1977 CAA

amendments until July 1, 1979, when the statutory ban was to

take effect. 44 Fed. Reg. at 38,472; 1977 CAA Amendments

§ 129(a)(1), 91 Stat. at 745 (adopting interpretive rule for

interim before ban) (Aug. 7, 1977). The Congress eliminated

the construction ban in 1990. Clean Air Act, Amendments, Pub.

L. No. 101-549, § 101(c), 104 Stat. 2399, 2408 (1990).

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39

In 1980, the EPA “clarif[ied]” Appendix S to limit to

eighteen months the period during which it governed NSR in a

qualifying nonattainment area. Approval and Promulgation of

Implementation Plans; Statutory Restriction on New Sources

Under Certain Circumstances for Nonattainment Areas, 45 Fed.

Reg. 65,209 (Oct. 2, 1980). Since that time the EPA has

continued to apply Appendix S’s NSR requirements in the

interim after an area’s nonattainment designation and before

implementation of a revised SIP. Thus, after the Congress

amended the Act in 1990—adding, inter alia, Subpart 2’s

ozone-specific requirements—the EPA again affirmed its policy

that Appendix S govern during the period between

nonattainment designation and SIP approval and

implementation. See State Implementation Plans; General

Preamble for the Implementation of Title I of the Clean Air Act

Amendments of 1990; Supplemental, 57 Fed. Reg. 18,070,

18,076 (Apr. 28, 1992).

Since Appendix S was formally codified in 1979, section VI

thereof has contained— unchanged—an exemption from section

IV.A’s permitting requirements for an area whose attainment

date had not passed if the source satisfied two conditions: 

In such cases, a new source which would cause or

contribute to an NAAQS violation may be exempt

from the Conditions of Section IV.A. so long as the

new source [1.] meets the applicable SIP emission

limitations and [2.] will not interfere with the

attainment date specified in the SIP under Section 110

of the Act.

44 Fed. Reg. at 3285 (codified at Appendix S, § VI); cf. 40

C.F.R. pt 51, app. S., § VI (2006) (same). In the Phase 2 Rule,

the EPA added a third condition so that the reformulated

provision now exempts new sources from the permitting

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40

requirements in section IV.A “if the conditions in paragraphs

VI.A through C are met,” namely:

A. The new source meets the applicable SIP emission

limitations.

B. The new source will not interfere with the

attainment date specified in the SIP under section 110

of the Act.

C. The Administrator has determined that conditions A

and B of this section are satisfied and such

determination is published in the Federal Register.

70 Fed. Reg. at 71,704 (codified at 40 C.F.R. pt 51, app. S., § VI

(2009)). The EPA further eliminated the 18-month limit on the

applicability of Appendix S (including section VI) to a pre-SIP

nonattainment area. 70 Fed. Reg. at 71,677; see 40 C.F.R. §

52.24(k) (2009).

As noted above, petitioners NRDC and New Jersey

challenge the EPA’s authority generally to exempt an area from

Appendix S’s permitting requirements and specifically the

EPA’s removal of the 18-month limit. We address each in turn.

First, we consider the general challenge to the EPA’s

exemption authority and conclude that it is time-barred. Under

CAA section 307(b), any objection to the exemption policy was

required to be raised in a petition for review “filed within sixty

days from the date notice of [its] promulgation . . . appears in the

Federal Register,” 42 U.S.C. § 7607(b)(1). In this case the

triggering date was July 2, 1979, when the EPA published its

final rule promulgating 40 C.F.R. § 52.24(c) (1979) (now

52.24(k)), which directed that “[t]he Emission Offset

Interpretative Ruling, 40 CFR Part 51, Appendix S”—which, as

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41

then codified, contained the exemption provision in section VI,

44 Fed. Reg. at 3285—“governs permits to construct and

operate applied for before the deadline for having a revised SIP

in effect that satisfies Part D.” 44 Fed. Reg. at 38,473 (codified

at 40 C.F.R. § 52.24(c) (1979) (now 52.24(k)). It was on that

date that the EPA unequivocally asserted its authority to exempt

new sources from permitting requirements under section VI.

Thus, the petitioners’ challenge to such authority in this case

comes almost thirty years late and we are precluded from

considering it. See Motor & Equip. Mfrs. Ass’n, 142 F.3d at

460. Nonetheless, the petitioners again (as with the emission

offset authority issue treated supra) seek to circumvent the

statutory time limit by invoking the reopening doctrine. Once

again their attempt is unavailing. 

The petitioners contend the EPA implicitly reopened the

question of its exemption authority because during the

rulemaking, the Agency sought comment on an alternative

exemption proposal which it subsequently declined to adopt.

See Edison Elec. Inst. v. EPA, 996 F.2d 326, 332 (D.C. Cir.

1993) (“By soliciting comments on the existing . . . regulations

and advancing a possible ‘alternative approach’ . . ., the EPA

clearly provided the type of ‘opportunity for renewed comment

and objection’ that suffices to restart the statutory period for

seeking review.” (quoting Ohio v. EPA, 838 F.2d 1325, 1328

(D.C. Cir. 1988)). Specifically, the petitioners argue that the

EPA reopened the question of its exemption authority when it

“proposed to remove the general waiver language from

Appendix S entirely, and replace it with a ‘transitional’ program

that would only allow relief from NSR in a limited group of

areas that, among other things, submitted plans by 2004

adequate to attain standards by 2007”—a proposal the EPA

subsequently declined to adopt. NRDC Br. at 41 (citing 68 Fed.

Reg. at 32,846-48) (emphases in brief). As the petitioners’

characterization demonstrates, however, the EPA reopened only

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42

the question of how broadly it should exercise its exemption

authority and not whether it had such authority in the first place.

The abandoned proposal would have replaced section VI’s

exemption provisions with a “transitional” program, which

would, like section VI, provide exemptions from section IV.A’s

NSR requirements but would allow the exemptions for a

narrower class of “eligible” areas. See Proposed Rule To

Implement the 8-Hour Ozone National Ambient Air Quality

Standard, 68 Fed. Reg. 32,802, 32,846-47 (June 2, 2003) (setting

out eligibility requirements for transitional program). Thus, the

EPA’s alternative proposal did not implicitly reopen the

question of its statutory authority vel non to grant any NSR

exemptions but only whether section VI as previously applied

might violate the Act by making exemptions too broadly

available. Because the EPA did not seek comment on its general

authority to exempt areas from the permitting requirements, this

case is plainly distinguishable from Edison Electric Institute, in

which the EPA “explicitly invited comments on the precise

question for which petitioners [there sought] review.” Edison

Elec. Inst., 996 F.2d at 332. Accordingly, we conclude that the

issue of the EPA’s general exemption authority is foreclosed

under CAA section 307(b)(1), 42 U.S.C. § 7607(b)(1).

The petitioners also argue that the EPA constructively

reopened the entire exemption provision “by dramatically

expanding its scope and effect” when it eliminated the 18-month

limit on Section VI exemptions. NRDC Br. at 41(citing

Kennecott, 88 F.3d at 1226-27); see also NRDC Reply Br. at 18.

The extension of the exemption term, however, did not

“ ‘significantly alter[] the stakes of judicial review’ as the result

of a change that ‘could have not been reasonably anticipated.’ ”

Sierra Club v. EPA, 551 F.3d at 1025 (quoting Kennecott, 88

F.3d at 1227; Envtl. Def., 467 F.3d at 1334). In fact, when first

codified in 1979, the interpretive ruling lacked such a limit—yet

its general exemption authority went unchallenged. Further, an

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exemption from NSR for even 18 months, if unlawful, seems

worth challenging in its own right—as it could have been when

the 18-month limit was added in 1980. To the extent that the

EPA’s removal of the limit extends the exemption period, the

extension is subject to direct challenge in this proceeding and we

next address the petitioners’ challenge thereto. 

The petitioners contend that the EPA’s elimination of the

18-month limit on NSR exemptions violates CAA

section 172(e), the Act’s “anti-backsliding” provision. Section

172(e) provides that if the the EPA “relaxes a national primary

ambient air quality standard,” it must “promulgate requirements

applicable to all areas which have not attained that standard as

of the date of such relaxation” which “shall provide for controls

which are not less stringent than the controls applicable to areas

designated nonattainment before such relaxation.” 42 U.S.C.

§ 7502(e). Although section 172(e) expressly applies only when

the EPA “relaxes” a NAAQS, the EPA has interpreted the

language to also apply when it strengthens a NAAQS—as it did

when it adopted the 8-hour ozone standard—reasoning that “if

Congress intended areas to remain subject to the same level of

control where a NAAQS was relaxed, they also intended that

such controls not be weakened where the NAAQS is made more

stringent.” Final Rule To Implement the 8-Hour Ozone National

Ambient Air Quality Standard—Phase 1, 69 Fed. Reg. 23,951,

23,972 (Apr. 30, 2004) (Phase 1 Rule). In South Coast Air

Quality Management District v. EPA, 472 F.3d 882 (D.C. Cir.

2006), we upheld this interpretation, id. at 900, and also

concluded that NSR is a “control” subject to section 172(e)’s

backsliding prohibition, id. at 902. Accordingly, the EPA’s

elimination of the 18-month exemption limit violates section

172(e) if the resulting NSR requirement is “less stringent” than

the existing requirement. Insofar as Appendix S now provides

for waiver of NSR for an unlimited time pending SIP approval,

it is plainly “less stringent” than the previous version which

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44

limited an NSR waiver to an 18-month term. As the petitioners

argue, the EPA’s revision could delay implementing NSR

controls in eligible nonattainment areas for years beyond the

previous 18-month limit. Accordingly, we conclude that the

revision constitutes backsliding in violation of section 172(e).

The EPA offers three defenses of its revision. First,

because the EPA established the time limit to allow a newlydesignated nonattainment area a reasonable time to develop a

SIP before the statutory construction ban applied, see 45 Fed.

Reg. at 65,209, the EPA contends that it reasonably removed the

18-month limitation after the Congress repealed the new source

construction ban in 1990. The EPA might have done so but for

section 172(e)’s unequivocal backsliding constraint, which

plainly prohibits a “less stringent” NSR control—precisely what

the revision produced. Second, the EPA asserts “there is no

basis to speculate” that it will grant waivers for the entire period

before SIP approval because “it ‘would be highly disinclined to

grant a waiver where the SIP submission deadline has passed

and EPA had not received the required submission.’ ” EPA Br.

at 102-03 (quoting 72 Fed. Reg. at 31,745-46). We do not

speculate, however, in concluding that, notwithstanding the

EPA’s promised discretionary restraint, the revised section VI

will produce some waivers lasting beyond the previously

prescribed 18-month period and thus impose a control less

stringent than before. This result contravenes section 172(e).

Nor are we persuaded by the EPA’s third argument, that the

revision’s new, third “pre-condition”—that the EPA determine

that the existing two pre-conditions (satisfaction of applicable

SIP emission limitations and non-interference with SIP’s

attainment date) have been met and publish the determination in

the Federal Register—“tightened” Part VI’s requirements. EPA

Br. at 103. The new pre-condition simply formalized and made

explicit what was already implicitly required—that the EPA find

the existing two pre-conditions satisfied. Thus, the additional

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14 Section 211(k) defines “conventional gasoline” as “any

gasoline which does not meet specifications set by a certification

under [section 211(k)]” as “reformulated gasoline.” 42 U.S.C.

§ 7545(k)(10)(E)-(F).

pre-condition produced no “tightening” effect; on the contrary,

it did nothing to counteract the indisputably relaxing effect of

removing the 18-month limit.

VII. Baton Rouge’s Reformulated Gasoline Requirement

The Chamber of Greater Baton Rouge and affiliated

petitioners (Chamber) contend the EPA arbitrarily and

capriciously concluded that the Baton Rouge, Louisiana area

(Baton Rouge) is a “covered area” under CAA section 211(k),

42 U.S.C. § 7545(k), and therefore subject to a statutory ban on

the sale to consumers of conventional gasoline.14 We conclude

that the EPA correctly determined the statutory definition of

“covered area” is ambiguous as to Baton Rouge under Chevron

step 1 and that it reasonably resolved the ambiguity under

Chevron step 2. 

CAA section 211(k)(1) authorizes the EPA to “promulgate

regulations . . . establishing requirements for reformulated

gasoline to be used in gasoline-fueled vehicles in specified

nonattainment areas.” 42 U.S.C. § 7545(k)(1). Section

211(k)(5) makes unlawful “[t]he sale or dispensing by any

person of conventional gasoline to ultimate consumers in any

covered area”—necessitating the use of reformulated gasoline

instead. Id. § 7545(k)(5)(A). Section 211(k)(10), in turn,

designates as a “covered area” each of nine specific, high ozone

areas and further provides: “Effective one year after the

reclassification of any ozone nonattainment area as a Severe

ozone nonattainment area under section 7511(b) of this title,

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46

such Severe area shall also be a ‘covered area’ for purposes of

this subsection.” Id. § 7545(k)(10)(D). 

In 1991, the EPA classified Baton Rouge as a “serious”

ozone nonattainment area under the 1-hour standard. On April

24, 2003, the EPA reclassified Baton Rouge as “severe,”

effective June 23, 2003, pursuant to the bump-up provision,

CAA § 181(b)(2), 42 U.S.C. § 7511(b)(2), because Baton Rouge

failed to reach attainment by its November 15, 1999 attainment

date. Notice of Withdrawal of October 2, 2002, Attainment

Date Extension, Determination of Nonattainment as of

November 15, 1999, and Reclassification of the Baton Rouge

Ozone Nonattainment Area, 68 Fed. Reg. 20,077 (Apr. 24,

2003) (effective June 23, 2003). At that time, the EPA advised

that “under Section 211(k) of the Act the use of reformulated

gasoline (RFG) will be required in the Baton Rouge area

beginning one year from the effective date of this rule,” that is,

as of June 23, 2004. Id. at 20,080. On April 30, 2004, the EPA

designated Baton Rouge as nonattainment under the 8-hour

standard and classified it as “marginal,” effective June 15, 2004.

Air Quality Designations and Classifications for the 8-Hour

Ozone National Ambient Air Quality Standards; Early Action

Compact Areas With Deferred Effective Dates, 69 Fed. Reg.

23,858, 23,907 (Apr. 30, 2004).

The Chamber filed a request for extension of the deadline

to commence using RFG or waiver of the RFG requirement,

which the EPA denied in a letter dated May 5, 2004. The

Chamber then petitioned the United States Court of Appeals for

the Fifth Circuit for review of the denial and the Fifth Circuit

stayed the RFG deadline on June 18, 2004. On August 2, 2004

the Fifth Circuit granted a joint motion to stay its proceedings

“pending the outcome of the administrative decision making

process,” with the RFG deadline stay to remain in effect during

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47

15 The EPA stated it was “reserving for future consideration what

RFG requirements, if any, should apply to the nine mandatory areas

and the bump-up areas covered by this final rule when they are

redesignated to attainment for the 8-hour NAAQS.” 70 Fed. Reg. at

71,687. The EPA further noted its determination did “not change or

affect any discretion EPA may otherwise have under the RFG

provisions to modify or remove RFG requirements.” Id. at 71,686.

remand. City of Baton Rouge v. EPA, No. 04-60408 (5th Cir.

Aug. 2, 2004).

In the Phase 2 Rule, the EPA concluded that an area such as

Baton Rouge, which automatically became a “covered area”

(subject to the RFG requirement) on the one-year anniversary of

its bump-up to “severe,” should remain subject to the RFG

requirement notwithstanding its classification to a less-thansevere status under the 8-hour standard and the subsequent

revocation of the 1-hour standard: “EPA has determined that

bump-up areas that lose their severe classification based solely

on revocation of the 1-hour NAAQS should remain RFG

covered areas at least until they are redesignated to attainment

for the 8-hour NAAQS.” 70 Fed. Reg. at 71,686.15 The EPA

concluded that “section 211(k)(10)(D) is ambiguous on the issue

of whether a bump-up area continues to be a covered area when

it is no longer classified as severe” and that therefore “EPA has

discretion to determine whether section 211(k)(10)(D)

authorizes removal of a bump-up area from the RFG program

when it is no longer classified as severe, and to set appropriate

criteria for such removal.” Id. The EPA explained that it “d[id]

not believe that Congress would have intended that removal of

the severe classification based solely on revocation of the less

protective 1-hour NAAQS should result in backsliding of the

RFG requirement.” Id. The Agency further found it

“instructive” that “if EPA had never revised the 1-hour

NAAQS[,] . . . the area would continue to be a covered area at

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48

least until it was redesignated to attainment for the 1-hour

NAAQS.” Id. Accordingly, because “[h]ere, the removal of the

severe classification is through revocation of the 1-hour

NAAQS, not through redesignation to 1-hour attainment,” the

EPA determined that “the removal of the severe classification

for these areas as a result of revocation of the 1-hour standard

should not lead to removal of the RFG requirement.” Id. The

Chamber offers three arguments against the EPA’s

interpretation. We address and reject each argument in turn.

First, the Chamber contends that at Chevron step 1 Baton

Rouge never became a “covered area” because the plain and

unambiguous language of the statutory definition requires that

a “covered area” be “a ‘Severe area’ that remains severe ‘one

year after the reclassification,’ ” Chamber Br. at 15 (quoting

CAA § 211(k)(10)(D), 42 U.S.C. § 7545(k)(10)(D)), that is, on

June 23, 2004, on which date Baton Rouge was no longer a

severe area as it had become a marginal area on June 15, 2004.

The EPA does not quibble with the Chamber’s interpretation of

the statutory language to require that the area remain classified

as “severe” on the one-year anniversary of the reclassification.

See EPA Br. at 111 (“[O]nce an area is reclassified as ‘severe,’

the only other precondition to becoming ‘covered’ is that the

area remain in severe nonattainment status for one year.”)

(emphasis in original). The EPA points out, however, that as of

the one-year anniversary of the bump-up—June 23,

20004—Baton Rouge was not only a marginal area under the 8-

hour standard but was also a severe area under the 1-hour

standard, which was not revoked until June 15, 2005, almost a

year later. See Phase 1 Rule, 69 Fed. Reg. at 23,954 (“We will

revoke the 1-hour standard in full, including the associated

designations and classifications, 1 year following the effective

date of the designations for the 8-hour NAAQS.”). Thus, the

EPA reasonably determined that under the plain language of the

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49

16 The Chamber argues that this reasoning is foreclosed because

the EPA itself “stated that the 8-hour NAAQS is the ‘relevant’

standard.” Chamber Br. at 18 (quoting Phase 1 Rule, 69 Fed. Reg. at

23,983). The EPA used the term “relevant,” however, in explaining

why it had decided that “control obligations an area is required to

retain in the approved SIP for an area’s 1-hour classification must

continue to be implemented under the SIP until the area attains and is

redesignated to attainment for the 8-hour NAAQS.” 69 Fed. Reg. at

23,983; see id. (“Since the relevant NAAQS is now the 8-hour

NAAQS, we believe it is appropriate to require these mandated

controls to remain as part of the implemented SIP until an area attains

the 8-hour NAAQS and is redesignated to attainment.”). Thus, the

cited language in fact supports retaining the RFG control based on the

one-hour standard bump-up until Baton Rouge reaches 8-hour

attainment.

statute, Baton Rouge was a severe area as of June 23, 2004 and

became a “covered area” on that date.16

Second, the Chamber asserts at Chevron step 2 that even if

the definition of “covered area” is ambiguous, the EPA resolved

the ambiguity unreasonably in two respects. The Chamber first

argues the EPA improperly relied on the Supreme Court’s

decision in Whitman v. Am. Trucking Ass’ns, 531 U.S. 457

(2001). In support of its interpretation, the EPA cited

Whitman’s “caution[] . . . against EPA making subpart 2

‘abruptly obsolete,’ ” 70 Fed. Reg. at 71,686 (quoting Whitman,

531 U.S. at 485), observing that, “[a]lthough the RFG

requirement itself is not set forth in subpart 2, the requirement

to use it in severe bump-up areas is tied directly to the

classifications that arise by operation of subpart 2” and therefore

“it would appear that the Supreme Court's caution should be as

relevant for RFG bump-up areas as it is for the subpart 2 control

obligations.” Id. Notwithstanding the Chamber’s contrary

assertions, the EPA reasonably determined that “the inclusion of

a bump-up area in the RFG program is integrally tied to the

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50

17 The Chamber also objects in particular to the EPA’s reliance on

CAA section 172(e), the anti-backsliding provision. See Chamber Br.

at 23-24; Chamber Reply Br. at 2-3. The Chamber argues section

172(e) applies only when the EPA “relaxes” a standard and that, in

promulgating the 8-hour standard, the EPA in fact strengthened, rather

than relaxed, the standard. The EPA’s reliance on section 172(e) in

the Phase 1 Rule, however, supported its specific policy against

backsliding in converting to the 8-hour standard notwithstanding the

8-hour standard is stricter (not more relaxed) than the one-hour

standard. We have already upheld this policy as reasonable. See S.

Coast, 472 F.3d at 900.

subpart 2 provisions that establish the original classification and

attainment date for an area and its later reclassification,” id.,

which provisions cause an area to become a “covered” RFG area

by operation of law. Accordingly, the EPA reasonably relied on

Whitman’s general admonition to preserve Subpart 2 to support

the Agency’s particular determination that the effects of the

integrally connected provisions should remain intact following

conversion to the 8-hour standard. 

The Chamber also asserts the EPA’s interpretation falters at

Chevron step 2 because the Agency unreasonably relied on “the

very same provisions it referred to in the Phase 1 Rule at 69 Fed.

Reg. 23972,” which provisions, the Chamber maintains, “did not

support the Phase 1 Rule, nor do they support the imposition of

RFG.” Chamber Br. at 22-23 (citing 70 Fed. Reg. at 71,686).

The Chamber examines each of the statutes cited in the Phase 1

Rule and asserts, correctly, that none of them directly relates to

the RFG requirement. See id. at 23-24. The Chamber makes too

much, however, of the EPA’s citation to the Phase 1 Rule. The

EPA was simply referring readers “[f]or further discussion of

the reasoning behind anti-backsliding provisions in the Phase 1

Rule” because the Agency also relied on the anti-backsliding

rationale for its interpretation of the “covered area” definition in

the Phase 2 Rule.17 See 70 Fed. Reg. at 71,686.

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51

Having rejected the Chamber’s contrary arguments, we

conclude that the EPA’s statutory interpretation readily satisfies

Chevron step 2. In upholding the EPA’s interpretation as

reasonable, we, like the Agency, find it “instructive” that but for

the happenstance of the EPA’s adoption of 8-hour standards, the

Chamber would have no statutory basis to dispute that Baton

Rouge is a covered RFG area under the mandatory bump-up and

RFG provisions because Baton Rouge remained a severe onehour area for one year following its classification as such. See

70 Fed. Reg. at 71,686 (quoted supra p. 47).

Finally, the Chamber contends the EPA was arbitrary and

capricious in not making a specific determination that RFG

would “protect the public health” in Baton Rouge and asserts

that in fact RFG will interfere with the area’s progress toward

attainment, thereby harming the public health. The Chamber

first asserts that the EPA was required by CAA section

109(b)(1) to make a specific finding that requiring RFG

“protects the public health” of Baton Rouge, citing 42 U.S.C.

§ 7409(b)(1) (“National primary ambient air quality standards,

prescribed under subsection (a) of this section shall be ambient

air quality standards the attainment and maintenance of which

in the judgment of the Administrator, based on such criteria and

allowing an adequate margin of safety, are requisite to protect

the public health.”). The Chamber further argues that requiring

RFG in Baton Rouge will interfere with the area’s attainment

because studies have shown RFG increases NOx levels and

Baton Rouge’s SIP strategy for reducing ozone relies largely on

reducing NOx (and not VOCs). By interfering with attainment,

the Chamber contends, RFG in fact endangers the public health.

As an initial matter, the Chamber’s objections based on harm to

public health and interference with RFP and attainment are

forfeited because they were not raised before the Agency. See

CAA § 307(d)(7)(B), 42 U.S.C. § 7607(d)(7)(B) (“Only an

objection to a rule or procedure which was raised with

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52

18 As the EPA notes, the Chamber submitted material originating

in the Fifth Circuit proceeding to support these objections but the

material was not submitted during the proceeding before the Agency.

See EPA Br. at 116.

reasonable specificity during the period for public comment

(including any public hearing) may be raised during judicial

review.”). To the extent Baton Rouge argues that RFG will not

improve the public health, the EPA adequately addressed these

objections and reasonably determined they may best be resolved

through individual waiver requests.18

In the Phase 2 Rulemaking, the Baton Rouge Clean Air

Coalition asserted that RFG use in Baton Rouge would “provide

no measurable benefits for NOx,” “less than 2 tons per day of

VOC reductions, and “an ozone benefit . . . of around 0.26 ppb,”

and asked whether these data “qualify as an ‘absurd result’ and

[would] be subject to consideration for waiver.” Letter from

Mike D. McDaniel, Executor Director, Baton Rouge Clean Air

Coalition to U.S. EPA at 4 (July 30, 2003); see Phase 2 Rule, 70

Fed. Reg. at 71,687-88. In response, the EPA noted that Baton

Rouge had “submitted requests for an RFG waiver and for a

waiver of the RFG oxygen content requirement, which are

currently before the Agency.” 70 Fed. Reg. at 71,688. Based on

its determination that “the transition to the more protective

8-hour standard should [not] result in less restrictive

requirements for RFG than would apply if the EPA had never

revised the 1-hour standard,” the EPA advised that “[t]he

appropriate mechanism to address Baton Rouge’s concerns is

. . . in the context of Baton Rouge’s petitions for relief under the

RFG program, and not by establishing different, less restrictive

RFG requirements as part of the transition to the 8-hour

standard.” Id. Baton Rouge’s waiver request is ongoing before

the Agency with judicial review available in the Fifth Circuit.

The EPA’s decision to address site-specific data and concerns in

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53

an individual waiver proceeding, rather than in the general

rulemaking, is reasonable. Cf. Nat’l Wildlife Fed’n v. EPA, 286

F.3d 554, 566 (D.C. Cir. 2002) (upholding as reasonable EPA’s

decision to address “color pollution” “on a case-by-case basis

through individual [National Pollutant Discharge Elimination

System] permits or, when appropriate, through local limits”

rather than “to establish nationwide standards for discharge of

‘color’ ”). 

VIII. Conclusion

In sum, we hold (1) the Phase 2 Rule violates the Act by

allowing participation in the NOX SIP Call to satisfy the

requirement that a nonattainment area mandate such reductions

as can be achieved by the application of RACT, (2) the EPA

acted arbitrarily when it eliminated the requirement that an

attainment demonstration be approved for an area before a new

source would be allowed to use a past emission reduction to

offset new emissions, and (3) the elimination of the 18-month

time limit for NSR waivers under Appendix S violates the

anti-backsliding provision of the Act. In light of the likelihood

the EPA will be unable to cure the backsliding inherent in the

removal of the 18-month time limit, we vacate that provision of

the Phase 2 Rule and remand it to the EPA. See Ill. Pub.

Telecomms. Ass’n v. FCC, 123 F.3d 693, 693 (D.C. Cir. 1997)

(“When this court remands a rule ... with little or no prospect of

the rule’s being readopted upon the basis of a more adequate

explanation of the agency’s reasoning, the practice of the court

is ordinarily to vacate the rule”). We remand to the EPA

without vacatur the other two provisions of the Phase 2 Rule we

hold invalid. We defer consideration of the Phase 2 Rule and

Reconsideration Notice insofar as they relate to the CAIR

program, and we deny the petitions in all other respects.

So ordered. 

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1

 Final Rule To Implement the 8-Hour Ozone National

Ambient Air Quality Standard—Phase 2; Final Rule to Implement

Certain Aspects of the 1990 Amendments Relating to New Source

Review and Prevention of Significant Deterioration as They Apply in

Carbon Monoxide, Particulate Matter and Ozone NAAQS; Final Rule

for Reformulated Gasoline, 70 Fed. Reg. 71,612, 71,677 (Nov. 29,

2005) (“Phase 2 Rule”).

ROGERS, Circuit Judge, concurring in part and dissenting in

part. I join the court’s opinion regarding challenges to the Phase

2 Rule1 except in three respects. The petitioners met their

burden to show reopening of both the general policies allowing

new and modified sources to use offset credits from past

emission reductions to meet the requirements of section 173 of

the Clean Air Act (“CAA”), 42 U.S.C. § 7503, and EPA’s

authority to waive interim new source review (“NSR”)

Appendix S permitting requirements, 40 C.F.R. pt. 51, app. S, §

VI. Additionally, the challenge to the contingency measure

element of the Clean Data Policy was not forfeited because

comments submitted by the NRDC and other environmental

groups put EPA on notice of the challenge, which EPA, in fact,

addressed.

I.

The principles underlying the reopening doctrine are wellestablished. It is only their application that may obfuscate the

reality of what an agency regulatory action entails. This is the

situation here.

Under the reopening doctrine, which is an exception to the

statutory limits on the period for seeking judicial review of

agency action, see Env. Defense v. EPA, 467 F.3d 1329, 1333

(D.C. Cir. 2006), an issue is reopened when an agency implicitly

or explicitly, see West Virginia v. EPA, 362 F.3d 861, 872 (D.C.

USCA Case #06-1214 Document #1195613 Filed: 07/10/2009 Page 54 of 64
2

Cir. 2004), solicits comment on a preexisting regulation or

“otherwise indicates its willingness to reconsider such a

regulation by inviting and responding to comments,” Kennecott

Utah Copper Corp. v. Dep’t of Interior, 88 F.3d 1191, 1213

(D.C. Cir. 1996). The “entire context” must “demonstrate[] that

the agency has undertaken a serious, substantive reconsideration

of the [existing] rule.” P & V Enters. v. U.S. Army Corps of

Eng’rs, 516 F.3d 1021, 1024 (D.C. Cir. 2008) (internal quotation

marks omitted) (alteration in original). Also, when a new rule

“increase[s] the significance” of preexisting regulations,

Kennecott, 88 F.3d at 1216, and thus “significantly alters the

stakes of judicial review,” the new rule “constructively reopens”

the previously settled issue, id. at 1227. Applying these

principles demonstrates EPA reopened consideration of two

subjects.

A.

Offset credits. The Phase 2 Rule allows new and modified

sources to meet emissions offset requirements under CAA §

173(c), 42 U.S.C. § 7503(c), by using credits from sources that

shut down or curtailed operations as long ago as August 7, 1977.

See 40 C.F.R. § 51.165(a)(3)(ii)(C)(1)(ii); Op. at 28-31.

Contrary to the court’s suggestion, this court’s opinion in

Kennecott makes clear that the fact that the “basic regulatory

scheme remains unchanged,” Op. at 33, is not dispositive of

whether an issue has been constructively reopened. See

Kennecott, 88 F.3d at 1219. Analyzing the reopening doctrine

at that level of generality begs the question. If “adding new

terms to [an] old rule” can result in reopening, see id., then so

can removing old terms from an old rule, at least where those

old terms were an important part of the underlying regulatory

scheme. Furthermore, Kennecott also makes clear that the

question whether the stakes are “quantitatively different,” Op.

at 34, does not turn on whether the petitioner or another failed

to object to a different change earlier. See Kennecott, 88 F.3d at

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3

1226-27. Although a 1989 Rule made it easier to use preapplication offset credits, see Requirements for Implementation

Plans, Air Quality New Source Review, Final Rule, 54 Fed. Reg.

27,286, 27,292 (June 28, 1989) (“1989 Rule”), the concomitant

addition of the attainment demonstration requirement mitigated

the impact of the change and may well have meant it was not

“worth challenging,” Kennecott, 88 F.3d at 1227, the regime as

a whole. However, once EPA eliminated the attainment

demonstration requirement and failed to replace it with a

comparable substitute, the need for a challenge by

environmental groups such as the NRDC arose because EPA had

“dramatically expanded authority to use [pre-application offset]

credits,” NRDC Br. at 44. This change meant that “a major new

pollution source [may] add substantial new emissions to a

nonattainment area without any contemporaneous offsets, even

when the state has no plan for meeting standards and no idea of

what total reductions are needed to attain standards.” Id. at 45.

Both EPA’s and the court’s analysis show that a

constructive reopening occurred. See Op. at 34-36. In

announcing the 1989 Rule, EPA stated that to comply with the

reasonable further progress (“RFP”) requirement of CAA §

173(a)(1)(A), 42 U.S.C. § 7503(a)(1)(A), the restriction on preapplication offset credit was “necessary both to assure RFP and

to guarantee that a new source does not cause or contribute to a

violation of the NAAQS,” 1989 Rule, 54 Fed. Reg. at 27,292.

This evaluation by EPA supports the conclusion that

environmental groups would have determined in 1989 that it

was not worth challenging the regulatory scheme as significant

limits remained in place. Once EPA removed this “necessary,”

id., limitation “without adding any other safeguard to ensure that

issuing a particular permit is consistent with section 173’s

mandate that total reductions ‘represent . . . reasonable further

progress,’” Op. at 36 (quoting CAA § 173(a)(1)(A), 42 U.S.C.

§ 7503(a)(1)(A)), the stakes of judicial review were significantly

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4

altered. The court’s speculation today — that it “could have

been ‘reasonably anticipated’ in 1989 that EPA might eliminate

the attainment demonstration requirement,” Op. at 34 — proves

too much. Given EPA’s evaluation in the 1989 Rule of the

importance of restricting the availability of pre-application

offset credits, environmental groups had no reason then to lodge

a challenge based on the possibility that EPA might, perhaps, at

some point in the future reverse course. Cf. S. Coast Air Quality

Mgmt. Dist. v. EPA, 472 F.3d 882, 898 (D.C. Cir. 2006).

Although the reopening doctrine may not apply if the change

could have been “reasonably anticipated,” see Env. Defense, 467

F.3d at 1333, such a limit on the doctrine does not go so far as

preventing review because a petitioner might have guessed EPA

could later change its evaluation of what was necessary. Such

an approach would render the constructive reopening precedents

nugatory.

On the merits, the NRDC persuasively contends that

“EPA’s final rule . . . unlawfully permits total allowable

emissions after the new source starts operating to be higher than

emissions from existing sources before the new source applied

for its permit.” NRDC Br. at 42-43. The Phase 2 Rule’s

allowance of offset credit for pre-application shutdowns and

curtailments is contrary to the plain text of the CAA and fails

under Chevron step one. Chevron U.S.A. Inc. v. Natural Res.

Def. Council, Inc., 467 U.S. 837, 842-43 (1984). Section

173(a)(1)(A) requires that “sufficient offsetting reductions” shall

be obtained “such that total allowable emissions from existing

sources in the region, from new or modified sources which are

not major emitting facilities, and from the proposed source will

be sufficiently less than total emissions from existing sources .

. . prior to the application for such permit to construct or modify

so as to represent . . . reasonable further progress.” 42 U.S.C. §

7503(a)(1)(A). Section 173(c)(1) requires that offsets come

from “an equal or greater reduction, as applicable, in actual

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5

emissions of such air pollutant from the same or other sources in

the area.” Id. § 7503(c)(1) (emphasis added); see also H.R. Rep.

No. 101-490, pt. 1 (1990) (referring to reductions in “actual

emissions”). Under the Phase 2 Rule, new and modified major

sources may claim offset credit from reductions in emissions

resulting from the shutdown or curtailment of operations from

more than three decades ago. The absence of any meaningful

time limit means the Rule is inconsistent with CAA §

173(c)(1)’s requirement that new sources’ emissions “shall be

offset” by an equal or greater reduction in “actual emissions,” 42

U.S.C. § 7503(c)(1). Congress is presumed, absent any

indication to the contrary, to have intended the ordinary meaning

of the word “actual,” as “existing or occurring at the time,”

MERRIAM WEBSTER’S COLLEGIATE DICTIONARY (10th ed. 1993)

(emphasis added); accord WEBSTER’S THIRD NEW INT’L

DICTIONARY (1993). See Engine Mfrs. Ass’n v. S. Coast Air

Quality Mgmt. Dist., 541 U.S. 246, 252 (2004). Congress has

given no indication in the surrounding text, or elsewhere, that it

intended to depart from the common meaning of “actual.”

Hence, allowing an offset for no-longer-existing emissions from

sources closed decades ago is inconsistent with the statutory

text. 

EPA offers that because the Phase 2 Rule requires the old

offsets to be included in the area’s emissions inventory,

allowance of pre-application offset credits is consistent with the

requirement in CAA § 173(a)(1)(A), 42 U.S.C. § 7503(a)(1)(A),

that offsets ensure reasonable further progress toward

attainment. See Phase 2 of the Final Rule to Implement the 8-

Hour Ozone National Ambient Air Quality Standard, Final

Notice of Reconsideration, 72 Fed. Reg. 31,727, 31,742/3 (June

8, 2007) (“Final Notice of Reconsideration”). But using

decades-old emissions in an accounting exercise cannot render

those emissions “actual” as that word is commonly understood.

Likewise, EPA offers that because “[f]rom an air quality

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6

planning perspective” emissions from the previously shutdown

or curtailed sources had impacted the area’s designations as

nonattainment, they are “actual emissions reductions.” Phase 2

Rule, 70 Fed. Reg. at 71,677; see also Final Notice of

Reconsideration, 72 Fed. Reg. at 31,742/3. But that emissions

were “actual” as long ago as the 1970s does not mean they

continue to meet the common understanding of “actual” years

later when a source applies for a construction or modification

permit. 

Because the flaws in this part of the Phase 2 Rule, see 40

C.F.R. § 51.165(a)(3)(ii)(C)(1)(ii), cannot be remedied by

further explanation by EPA, it must be vacated. See AlliedSignal, Inc. v. U.S. Nuclear Reg. Comm’n, 988 F.2d 146, 150-51

(D.C. Cir. 1993). To what extent the court’s holding that

elimination of the requirement of an approved attainment

demonstration is arbitrary and capricious under CAA §

307(d)(9)(A), 42 U.S.C. § 7607(d)(9)(A), Op. at 36, will result

in a different outcome than vacatur remains to be seen upon

remand.

B.

NSR waiver authority. Section 110(a)(2)(C), 42 U.S.C. §

7410(a)(2)(C), does not specify what NSR requirements apply

in the period between an area’s designation as nonattainment

and approval of its NSR state implementation plan (“SIP”).

Prior to promulgating the Phase 2 Rule, EPA had filled this

statutory gap by retaining Appendix S’s interim NSR regime,

which by its terms could apply for only 18 months. Given the

limited duration of its effect, the previous regulation “may not

have been worth challenging,” Kennecott, 88 F.3d at 1227.

However, EPA’s decision to eliminate the 18-month limitation

“alter[ed] the stakes of judicial review,” id. By parity of

reasoning, if there was a reopening in Kennecott where industry

petitioners faced a new requirement creating the possibility of

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7

the imposition of additional penalties, then there was a

constructive reopening where EPA’s change meant NSR

controls could be postponed indefinitely, thereby dramatically

changing the scope and effect of the waiver provision.

Additionally, EPA constructively reopened the issue of its

NSR waiver authority when it proposed to remove the general

waiver provision in Appendix S and replace it with a

“transitional” program in which waivers would be available in

only a limited set of nonattainment areas. See Proposed Rule to

Implement the 8-Hour Ozone National Ambient Air Quality

Standard, 68 Fed. Reg. 32,802, 32,846-48 (June 2, 2003)

(“NPRM”). EPA has described the proposal as a “major rewrite

of [A]ppendix S.” Phase 2 Rule, 70 Fed. Reg. at 71,674. In

explaining the 2003 proposal, EPA stated “we do not believe

that areas not meeting the transitional approach would be able

to ensure that they were implementing an NSR program ‘as

necessary’ to ensure the attainment of NAAQS . . . .” NPRM,

68 Fed. Reg. at 32,848 (quoting CAA § 110(a)(2)(C), 42 U.S.C.

§ 7410(a)(2)(C)). In other words, EPA expressed doubt about

a broad waiver’s consistency with statutory mandates in certain

circumstances. Although it ultimately rejected the proposed

alternative, EPA reopened the issue of its authority to waive

interim NSR requirements by raising the question whether a

broad waiver would be inconsistent with the CAA. See Edison

Elec. Inst. v. EPA, 996 F.2d 326, 332 (D.C. Cir. 1993). 

On the merits, the challenge by the NRDC and the State of

New Jersey to EPA’s authority to exempt new sources from the

interim NSR permitting requirements is unpersuasive. They

contend that “[w]here Congress has intended to allow exceptions

to NSR requirements, it has expressly said so,” NRDC Br. at 38

(citing, inter alia, CAA § 173(a)(1)(B), 42 U.S.C. §

7503(a)(1)(B), excepting economic development zones).

However, EPA persuasively responds that the waivers are the

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product of EPA’s gap-filling authority. See Chevron, 467 U.S.

at 843-45. In exercising that authority, EPA established

requirements “substantially similar to the requirements of part

D,” CAA § 171 et seq., 42 U.S.C. § 7501 et seq., although not

identical to the “major NSR” program under Part D. See Phase

2 Rule, 70 Fed. Reg. at 71,678/1. The “minor NSR” program

under CAA § 110(a)(2)(C) calls for “regulation of the

modification and construction of any stationary source within

the areas covered by the plan as necessary to assure that

[NAAQS] are achieved.” 42 U.S.C. § 7410(a)(2)(C) (emphasis

added). EPA thus could reasonably conclude that the interim

NSR requirements are inapplicable when the exemption

conditions are met. In those instances, a waiver would be

available only if the new source’s emissions would not interfere

with timely attainment, see 40 C.F.R. pt. 51, app. S, § VI,

making additional NSR requirements unnecessary.

Although EPA had authority to provide waivers on a caseby-case basis where a waiver would not interfere with timely

attainment, I concur in holding that EPA’s elimination of the 18-

month limitation violates the anti-backsliding provision in CAA

§ 172(e), 42 U.S.C. § 7502(e), see Op. at 43-45. 

II.

The Clean Data Policy, originally published in 1992 and

revised in 1995, excuses state planning requirements relating to

RFP, attainment demonstrations, and contingency measures for

areas attaining the NAAQS but not yet redesignated as

attainment areas. In commenting in 2003 on the proposed

codification of this statutory interpretation, environmental

groups, including the NRDC, stated that the “EPA cannot

authorize states to simply drop subpart 2 measures when the area

is meeting either [the 1-hour or 8-hour] standard.” Clean Air

Task Force, et al., Comments at 48. By arguing that “[t]he

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[CAA] allows states to move mandated controls to a

maintenance contingency plan, [CAA § 175A, 42 U.S.C.

§ 7505a], but only after the area has been redesignated to

attainment,” id. (emphasis added), environmental groups put

EPA on notice of its view that until an area is designated as

being in attainment, a state plan must continue to contain the

antecedent requirements, such as contingency measures,

applicable in nonattainment areas. 

Contrary to the court’s holding that the NRDC’s challenge

to the contingency plan aspect of EPA’s Clean Data Policy is

forfeited, Op. at 20-21, the rulemaking record evidences that

comments put EPA on notice of that objection. First, these

comments raised the objection to the Clean Data Policy with

respect to the contingency measures requirement of Subpart 2

“with reasonable specificity during the period for public

comment,” CAA § 307(d)(7)(B), 42 U.S.C. § 7607(d)(7)(B), and

sufficiently put EPA on notice of the objection. Second, the

comment did not make a mere “general [challenge] to EPA’s

approach,” Mossville Envt’l Action Now v. EPA, 370 F.3d 1232,

1238 (D.C. Cir. 2004) (internal quotation marks omitted)

(alteration in original), but instead challenged application of a

specific EPA policy — the Clean Data Policy — to a specific set

of statutory requirements — those in Subpart 2 of the CAA,

CAA § 181 et seq., 42 U.S.C. § 7511 et seq. The comment

therefore constituted “adequate notification of the general

substance of the complaint,” S. Coast Air Quality Mgmt. Dist. v.

EPA, 472 F.3d 882, 891 (D.C. Cir. 2006), including an objection

regarding antecedent contingency measures in particular. Third,

that other objections to the Clean Data Policy addressed only the

requirements for RFP and attainment demonstrations does not

render the broader objection insufficient to preserve for judicial

review the objection to elimination of the antecedent contingency

measures. Fourth, the comment that the “EPA’s ‘clean data

policy,’ 68 Fed. Reg. at 32,835/3, is unlawful with respect to

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both the 1-hour and 8-hour NAAQS for the reasons set forth . .

. above [regarding RFP and the attainment demonstration],”

Clean Air Task Force, et al., Comments at 100, shows that the

objection was not limited to any particular aspect of the Clean

Data Policy. Fifth, EPA’s response to the comments addressed

contingency measures, among other requirements, further

indicating the comments were sufficient to put EPA on notice of

the objection. See Phase 2 Rule, 70 Fed. Reg. at 71,645/1,

71,646/1; cf. Appalachian Power Co. v. EPA, 135 F.3d 791, 817-

18 (D.C. Cir. 1998). 

Nonetheless, although the NRDC’s challenge is properly

before the court, it fails on the merits. Section 172(c)(9)

provides that SIPs in nonattainment areas “shall provide for

implementation of specific measures to be undertaken if the area

fails to make reasonable further progress, or to attain the

[NAAQS] by the attainment date applicable under this part.” 42

U.S.C. § 7502(c)(9) (emphasis added). The NRDC contends that

“[t]he [Clean Data] [P]olicy waives mandatory pollution control

requirements based solely on an area’s current air quality,

without requiring the area to also show — as mandated by

Congress — that it has met all of the [CAA]’s applicable

requirements . . . .” NRDC Br. at 34. However, EPA’s view that

CAA §§ 172(c)(9) and 182(c)(9), 42 U.S.C. §§ 7502(c)(9),

7511a(c)(9), are written in a manner that ties the antecedent

contingency measures to the requirements for RFP and an

attainment demonstration, such that all are inapplicable upon

attainment, see Phase 2 Rule, 70 Fed. Reg. at 71,645, is

consistent with the plain text and to the extent there may be

ambiguity, it is a reasonable interpretation. The Clean Data

Policy requires that areas have “three consecutive years of clean

air quality monitoring data demonstrating attainment of the

ozone standard” before EPA can determine areas have attained.

Memorandum from John S. Seitz, Director, Office of Air Quality

Planning and Standards, EPA, to Various EPA Directors 5 (May

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10, 1995). Also, if EPA determines an area covered by the Clean

Data Policy has violated the NAAQS prior to formal designation

of attainment, the Clean Data Policy no longer applies to that

area. See 40 C.F.R. § 51.918.

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