Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-99-01307/USCOURTS-caDC-99-01307-0/pdf.json

Parties Involved:
Environmental Protection Agency
Respondent
State of Rhode Island
Petitioner

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued December 15, 2000 Decided May 15, 2001

No. 99-1200

Appalachian Power Company, et al.,

Petitioners

v.

Environmental Protection Agency,

Respondent

Commonwealth of Pennsylvania,

Department of Environmental Protection, et al.,

Intervenors

Consolidated with 99-1205,

99-1206, 99-1246, 99-1266, 99-1285, 99-1289, 99-1291,

99-1292, 99-1293, 99-1295, 99-1299, 99-1300, 99-1301,

99-1303, 99-1304, 99-1306, 99-1307, 00-1013, 00-1021,

00-1022, 00-1024, 00-1038, 00-1042, 00-1050, 00-1071,

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00-1074, 00-1077, 00-1083, 00-1087, 00-1088, 00-1096,

00-1097, 00-1098, 00-1099, 00-1102, 00-1103, 00-1105,

00-1106, 00-1107, 00-1108, 00-1109, 00-1110, 00-1113,

00-1114, 00-1119, 00-1122, 00-1123, 00-1125, 00-1128

_______

On Petitions for Review of Orders of the

Environmental Protection Agency

Norman W. Fichthorn, James C. Gulick, Special Deputy

Attorney General, State of North Carolina, Lisa M. Jaeger,

Brian J. Renaud and Anthony C. Sullivan argued the issues

for petitioners. Counsel appearing with them on the briefs

were Andrea Bear Field, Mel S. Schulze, James D. Elliott,

Allison D. Wood, Grant Crandall, Eugene M. Trisko, Jeff F.

Cherry, Kathy G. Beckett, Scott D. Goldman, David M.

Flannery, Jeffrey J. Lettrich, Gale R. Lea, Charles S. Carter,

Deborah Ann Hotel, Theodore L. Garrett, Michael D. Hockley, Terry W. Schackmann, Robert M. Sussman, Claudia M.

O'Brien, Scott H. Segal, Charles E. Dunn, Rhonda Lee Ross,

Robert L. Brubaker, Andrew S. Bergman, Alan H. McConnell, Kurt E. Blase, J. Jeffrey McNealey, Michael F. Easley,

Attorney General, Grayson G. Kelley, Senior Deputy Attorney General, Thomas J. Ziko and J. Allen Jernigan, Special

Deputy Attorneys General, Marc D. Bernstein, Assistant

Attorney General, State of North Carolina, James M. Hauck,

Gordon Alphonso, Stuart Pierson, Geoffrey K. Barnes, Scott

T. Kragie, Lisa G. Dowden, Matthew W. Ward, Kathy G.

Beckett, Scott Goldman, Eliot Spitzer, Attorney General,

Peter H. Schiff, Senior Counsel, J. Jared Snyder and Michael

J. Myers, Assistant Attorneys General, State of New York,

Thomas F. Reilly, Attorney General, William L. Pardee,

Assistant Attorney General, Commonwealth of Massachusetts, M. Dukes Pepper, Jr., Commonwealth of Pennsylvania,

Jennifer M. Granholm, Attorney General, Thomas L. Casey,

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eral, State of Michigan, John G. Horne, II, Jack B. Bates,

Susan Rose Green, Commonwealth of Kentucky, Betty D.

Montgomery, Attorney General, Bryan F. Zima, Assistant

Attorney General, State of Ohio, Mark L. Earley, Attorney

General, Steward T. Leeth, Assistant Attorney General, Commonwealth of Virginia, Karen M. Freeman-Wilson, Attorney

General, Steven D. Griffin, Deputy Attorney General, State of

Indiana, Thomas H. Zerbe, Office of Legal Services, State of

West Virginia, Bill Pryor, Attorney General, Prudence A.

Cash-Brown, Assistant Attorney General, State of Alabama.

Thomas Y. Au and Gene E. Godley entered appearances.

David J. Kaplan, Norman L. Rave, Jr. and Scott Williams,

Attorneys, U.S. Department of Justice, argued the cause for

respondents. With them on the briefs were Lois J. Schiffer,

Assistant Attorney General, Alexandra Teitz, Howard Hoffman and Dwight C. Alpern, Attorneys, U.S. Environmental

Protection Agency. Christopher S. Vaden, Attorney, entered

an appearance.

William L. Pardee, Assistant Attorney General, Commonwealth of Massachusetts, argued the cause for intervenors

Commonwealth of Massachusetts, et al. and amicus curiae

State of New Jersey. With him on the briefs were Thomas

F. Reilly, Attorney General, Commonwealth of Massachusetts, Eliot Spitzer, Attorney General, J. Jared Snyder, Assistant Attorney General, State of New York, Richard Blumenthal, Attorney General, Richard F. Webb, Assistant Attorney

General, State of Connecticut, M. Dukes Pepper, Jr., Commonwealth of Pennsylvania, Philip McLaughlin, Attorney

General, Maureen D. Smith, Assistant Attorney General,

State of New Hampshire, William H. Sorrell, Attorney General, Dianne H. Sanford, Assistant Attorney General, State

of Vermont, Sheldon Whitehouse, Attorney General, Tricia

Jedele, Assistant Attorney General, State of Rhode Island,

John J. Farmer, Jr., Attorney General, Howard Geduldig,

Deputy Attorney General, State of New Jersey. Roger L.

Chaffe, Senior Assistant Attorney General, Commonwealth of

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Virginia, and Ronald A. Shems, Assistant Attorney General,

State of Vermont, entered appearances.

Andrea Bear Field, Norman W. Fichthorn and Mel S.

Schulze appeared on the brief of Appalachian Power Company, et al. as intervenors.

David W. Marshall, Ann Brewster Weeks and David G.

Hawkins appeared on the brief of intervenors Natural Resources Defense Council, et al. Raissa Griffin entered an

appearance.

David P. Novello was on the brief of the Electric Generator

intervenors.

Before: Williams, Ginsburg and Sentelle, Circuit Judges.

Opinion for the Court filed Per Curiam.*

TABLE OF CONTENTS

I. BACKGROUND 5

A. Statutory Framework 6

B. The NOx SIP Call 8

C. The Original Section 126 Rule-Conditional Findings 8

D. Revised Section 126 Rule-Final Findings 10

II. COMMON AND GENERAL ISSUES 12

A. Scrivener's Error 12

B. The NOx SIP Call and s 126 19

C. Significant Contribution 27

D. Emission Limitation Determinations 32

1. Standard of Review 32

2. The Integrated Planning Model 33

3. EGU Growth Factors 35

__________

* Judge Williams wrote Parts II.C, III.B-C, and V; Judge Ginsburg wrote Parts II.A-B and II.D.5; Judge Sentelle wrote Parts

I, II.D.1-4, II.E-F, III.A., and IV.

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4. Non-EGU Budget Determinations 38

5. Local Regulation and Permit Trading 39

E. Regulation of "Future" Sources 40

F. The Dorris Report 44

III. NON-ELECTRIC GENERATING UNIT ISSUES 47

A. Alleged Budget Allocation Errors 47

B. Treatment of Cogenerators 48

C. Source-Specific Issues 53

1. AK Steel Corporation 53

2. New Boston Coke Corporation 54

IV. FACILITY-SPECIFIC ISSUES 55

A. Midland Cogeneration Venture 55

B. Indiana Municipal Power Agency 56

V. PITTSBURGH 57

VI. CONCLUSION 60

PER CURIAM.

In response to petitions from several northeastern states

that alleged that nitrogen oxide emitted in neighboring states

was harming their local air quality, the Environmental Protection Agency promulgated a rule that requires many NOxemitting facilities in several midwestern and southeastern

states to conform to emission limits set by the EPA and to

participate in an emissions trading program. Numerous petitioners challenge the rule as inconsistent with the Clean Air

Act, arbitrary and capricious, and technically deficient. We

uphold most aspects of the rule but remand several particulars to the Agency for reconsideration.

I. BACKGROUND

On January 18, 2000, the Environmental Protection Agency

("EPA") issued its final rule to control emissions of nitrogen

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oxide ("NOx") under section 126 of the Clean Air Act

("CAA"). 42 U.S.C. s 7426. Under certain conditions, NOx

combines with hydrocarbons in the atmosphere to create

ozone, commonly known as "smog." In the January rule, the

EPA made final its findings that stationary sources of NOx

emissions in twelve upwind states and the District of Columbia contribute significantly to ozone nonattainment in northeastern states. This finding triggers direct federal regulation

of stationary sources of NOx in the upwind states. The rule

further established a "cap and trade" system for NOx emissions within each upwind jurisdiction. Covered sources must

obtain NOx emission allowances to cover their emissions,

adopt additional emission controls, or cease operations. Numerous petitions for review challenge various aspects of the

rule.

A. Statutory Framework

Under the Clean Air Act, the EPA promulgates national

ambient air quality standards ("NAAQS") for criteria air

pollutants, including tropospheric ozone. See 42 U.S.C.

s 7409. The EPA then designates those areas of the United

States that fail to meet the various NAAQS. 42 U.S.C.

s 7407(d). States, in turn, are required to adopt state implementation plans ("SIPs") providing for the attainment of the

NAAQS. 42 U.S.C. s 7410. The SIPs are submitted to the

EPA for approval, and may be revised at the EPA's insistence if found to be inadequate to ensure maintenance of the

NAAQS or public health. States that fail to comply with

these requirements are subject to various sanctions and the

imposition of a Federal Implementation Plan ("FIP"). 42

U.S.C. s 7509.

Much air pollution is a local or regional problem. Some

pollution, however, is caused or augmented by emissions from

other states. Emissions from "upwind" regions may pollute

"downwind" regions. Several provisions of the CAA are

designed to address such transboundary air pollution. In

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particular, section 110(a)(2)(D)(i)(I) of the Act requires states

to prohibit emissions within the state in amounts that will

"contribute significantly to nonattainment in, or interfere with

maintenance by, any other State" of the NAAQS. 42 U.S.C.

s 7410(a)(2)(D)(i)(I).

CAA section 126 provides a mechanism whereby downwind

states may petition the EPA to directly regulate upwind

sources of pollution. Under section 126(b), 42 U.S.C.

s 7426(b), a downwind state "may petition the Administrator

for a finding that any major source or group of stationary

sources emits or would emit any air pollutant in violation" of

CAA section 110(a)(2)(D). Once the EPA makes a section

126(b) finding, section 126(c) provides that:

it shall be a violation of this section and the applicable

implementation plan in such State--

(1) for any major proposed new (or modified) source

with respect to which a finding has been made under

subsection (b) of this section to be constructed or to

operate in violation [of this section or section 110], or

(2) for any major existing source to operate more than

three months after such finding has been made with

respect to it.

42 U.S.C. s 7426(c). The Administrator may allow the continued operation of existing sources beyond three months

provided such sources comply with emission limitations and

compliance schedules provided by the Administrator which

"bring about compliance ... as expeditiously as practicable,

but in no case later than three years after the date of such

finding." Id.

At issue in this case is the extent of the EPA's authority to

make findings and directly regulate sources in upwind states

under section 126, and whether the EPA's section 126 rule

was arbitrary and capricious or contrary to law.

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B. The NOx SIP Call

In October 1998, the EPA issued a final rule calling upon

twenty two states1 and the District of Columbia to revise

their ozone SIPs to address interstate air pollution (aka

"interstate transport"). See Finding of Significant Contribution and Rulemaking for Certain States in the Ozone Transport Assessment Group Region for Purposes of Reducing

Regional Transport of Ozone, 63 Fed. Reg. 57,356 (1998)

("NOx SIP Call"). Concluding that upwind states contribute

significantly to ozone nonattainment problems in downwind

states, the EPA required each jurisdiction to promulgate a

new SIP to reduce NOx emissions. This "NOx SIP call"

required states to reduce NOx emissions by the amount that

could be accomplished by emission controls capable of reducing emissions at a cost of $2,000 or less per ton. Under the

rule, revised SIPs were due by September 30, 1999, and SIP

provisions covering stationary sources had to be implemented

by May 1, 2003. Failure to submit an adequate NOx SIP by

the deadline would result in implementation of a FIP by the

EPA. In other words, if the states do not submit a plan for

meeting their CAA obligations, the EPA will impose one of its

own.

C. The Original Section 126 Rule-Conditional Findings

In August 1997, eight states submitted petitions requesting

that the EPA find that stationary sources in upwind states

contribute significantly to downwind air pollution. Specifically, the petitioning states sought findings pursuant to CAA

section 126(b), 42 U.S.C. s 7426(b), that specified sources or

categories thereof are the source of NOx emissions that

__________

1 The states are Alabama, Connecticut, Delaware, Georgia,

Illinois, Indiana, Kentucky, Maryland, Massachusetts, Michigan,

Missouri, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Virginia, West Virginia, and Wisconsin.

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contribute significantly to ozone nonattainment in the petitioning states in violation of CAA section 110(a)(2)(D). 42

U.S.C. s 7410(a)(2)(D). Each petition further sought to have

the EPA implement direct federal regulation of stationary

sources in upwind states, primarily electric generating facilities and fossil-fuel fired industrial boilers and turbines. Because the section 126 petitions raised many of the same issues

as the NOx SIP call, and would require comparable emission

reductions, the EPA coordinated its response to the section

126 petitions with the NOx SIP call rulemaking.

In a final rule published on May 25, 1999, the EPA

determined that NOx emissions in twelve states and the

District of Columbia contribute significantly to nonattainment of the one-hour ozone NAAQS in Connecticut,

Massachusetts, New York, and Pennsylvania. Findings of

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

64 Fed. Reg. 28,250 (May 25, 1999) ("May 1999 Rule"). The

twelve states are Delaware, Indiana, Kentucky, Maryland,

Michigan, New Jersey, New York, North Carolina, Ohio,

Pennsylvania, Virginia, and West Virginia.

Rather than make section 126 findings at that time, however, the EPA determined that it was appropriate to postpone

such findings pending the resolution of the NOx SIP call

process. Accordingly, the EPA issued a rule providing that

the findings would automatically be deemed made with regard to sources from a given state should that state fail to

comply with a NOx SIP call deadline. The EPA based this

decision on the judgment that full compliance with the NOx

SIP call would obviate the need for section 126 findings.

Once made, the section 126 findings would require covered

sources to come into compliance no later than May 1, 2003.

Sources that failed to comply by that date would be required

to cease operations.

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D. Revised Section 126 Rule-Final Findings

Subsequent to the completion of the section 126 rulemaking,2 this court issued two orders which caused the EPA to

change course. First, on May 14, 1999 this court remanded

the EPA's proposed revisions to the ozone NAAQS. American Trucking Ass'ns v. EPA, 175 F.3d 1027, reh'g granted in

part and denied in part, 195 F.3d 4 (D.C. Cir. 1999), rev'd in

part sub nom. Whitman v. American Trucking Ass'ns, 121 S.

Ct. 903 (2001). Second, this court issued an order staying the

NOx SIP call deadline. Michigan v. EPA, No. 98-1497 (D.C.

Cir. May 25, 1999) (order granting stay in part).

In response to these orders, the EPA revised the section

126 rule. Findings of Significant Contribution and Rulemaking on Section 126 Petitions for Purposes of Reducing Interstate Ozone Transport, 65 Fed. Reg. 2674 (Jan. 18, 2000)

("Jan. 2000 Rule"). In particular, the EPA made the requested findings of significant contributions, granting the

relevant portions of the section 126 petitions and delinking

the section 126 findings from compliance with the NOx SIP

call. The EPA explained that it was "implementing the

requirements of section 126 of the CAA in the absence of any

currently effective requirement for upwind States to address

the interstate pollution transport problems themselves." Id.

at 2683. Instead, the EPA's new rule contained a provision

to withdraw the relevant findings upon approval of a NOx SIP

in accordance with the October 1998 NOx SIP call.

As with the NOx SIP call, the EPA considered both NOx

emissions and the cost of control in determining which

sources contribute significantly to downwind ozone nonattainment. Based upon its analysis of the cost of emissions

controls, the EPA concluded that measures which can reduce

NOx emissions for $2,000 or less per ton are highly cost-

__________

2 Although published on May 25, the initial section 126 rule was

signed by the Administrator on April 30, 1999. See May 1999 Rule,

65 Fed. Reg. at 28,318.

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effective. May 1999 Rule, 64 Fed. Reg. at 28,299. The EPA

then divided NOx emission sources into various categories and

determined the level of emission reduction that would be

highly cost-effective for each category. Id. at 28,300-01.

The section 126 rule also established an emission allowance

"cap and trade" program, known as the Federal NOx Budget

Trading Program. Under this program, originally outlined in

the May 1999 rule, regulated sources are allocated tradeable

NOx emission allowances and are prohibited from emitting

more NOx than the amount of allowances held. If a facility

emits more than its initial allowance allocation, it must purchase additional allowances from another facility, reduce its

emissions, or cease operations. Jan. 2000 Rule, 65 Fed. Reg.

at 2733.

To determine the initial allocations, the EPA established a

NOx emission cap for each upwind state. Each state's cap is

based upon expected emission reductions from highly costeffective controls in that state as of 2007. Id. at 2698.

Ninety-five percent of each state's cap is allocated proportionally among existing sources based upon each facility's heat

input. Five percent of the cap is set aside for future, as-yetunproposed sources. Id. at 2698-99. These initial allocations

will apply for the 2003-07 time period. Id. at 2700. The

EPA will issue revised allocations for the 2008-12 time period, and every five years thereafter. Id.

Since the issuance of the final section 126 rule, this Court

has ruled on various challenges to the EPA's NOx SIP call.

In Michigan v. EPA, 213 F.3d 663 (D.C. Cir. 2000), we

upheld the SIP call in most respects, remanding portions of

the rule to the EPA. Of greatest relevance to these proceedings, we upheld the EPA's analyses of interstate transport of

NOx emissions and its use of cost-effectiveness criteria in

determining which upwind sources "contribute significantly"

to nonattainment in downwind states. Subsequently, we enUSCA Case #99-1307 Document #595967 Filed: 05/15/2001 Page 11 of 60
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tered an order amending the deadline for full implementation

of NOx SIP revisions from May 1, 2003 to May 31, 2004.

Michigan v. EPA, No. 98-1497, 2000 WL 1341477 (D.C. Cir.

Aug. 30, 2000) (order denying motion to stay mandate pending petition for certiorari).

After the EPA published the final section 126 rule in

January 2000, numerous groups petitioned this Court for

review. Among the petitioners are a group of upwind states

from the midwestern and southeastern United States ("MW

& SE State Petitioners"); utilities and other operators of

electric generating facilities ("Non-State Petitioners"); companies that operate non-electric generating/industrial facilities

("Non-EGU Petitioners"); and several individual companies

that have facility-specific concerns ("Facility-Specific Petitioners"). A group of northeastern states ("NE State Petitioners") also petitioned for review alleging that the EPA's

rule did not go far enough in controlling upwind NOx emissions. The northeastern states otherwise intervened in support of the EPA, as did a group of environmental organizations. The various petitions for review were consolidated into

this case.

II. COMMON AND GENERAL ISSUES

A. Scrivener's Error

The Clean Air Act Amendments of 1990 eliminated a

subsection of s 110 of the Clean Air Act ("CAA"), causing

s 110(a)(2)(E) to be renumbered as s 110(a)(2)(D). See

Clean Air Act, Pub. L. No. 101-549, sec. 101(b),

s 110(a)(2)(D), 104 Stat. 2399, 2404 (1990) (codified at 42

U.S.C. s 7410(a)(2)(D)). The Amendments correspondingly

updated several references to s 110(a)(2)(E)(i) that had appeared in s 126 of the Clean Air Act, but changed them to

read "section 110(a)(2)(D)(ii)." See Clean Air Act, Pub. L.

No. 101-549, sec. 109(a), s 126(b)-(c), 104 Stat. at 2469-70

(codified at 42 U.S.C. s 7426). The 1990 Amendments thus

not only substituted "(D)" for "(E)" in s 126, as necessitated

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by the renumbering, but also substituted "(ii)" for "(i)." The

EPA, which contends that the Congress amended s 126 only

in order to update the cross-references so as to preserve the

status quo ante, claims that this substitution of "(ii)" for "(i)"

was "inadvertent[ ]." May 1999 Rule, 64 Fed. Reg. at

28,267/3. The agency therefore construes s 126 as if this

"inadvertence" had not occurred, i.e., as if that section referred to s 110(a)(2)(D)(i). See id. The Non-State Petitioners, by contrast, argue that s 126 should be read as written,

that is, to refer to s 110(a)(2)(D)(ii).

Section 126 gives a state the right to petition the EPA to

find "that any major source or group of stationary sources [in

another state] emits or would emit any air pollutant in

violation of the prohibition of" a subsection of s 110(a)(2)(D),

the subsection here at issue. 42 U.S.C. s 7426(b). As we

have noted, the ability of such a source or group of sources to

operate is severely constrained once such a finding is made.

42 U.S.C. s 7426(c). The constraints in s 126(c) are triggered by the "prohibition" in whichever subsection of

s 110(a)(2)(D) it is that s 126 cross-references. Section

110(a)(2)(D) provides that a state implementation plan

("SIP"), which describes how a state plans to comply with the

National Ambient Air Quality Standards ("NAAQS"), must

(D) contain adequate provisions--

(i) prohibiting ... any source or other type of emissions

activity within the State from emitting any air pollutant

in amounts which will--

(I) contribute significantly to nonattainment in, or interfere with maintenance by, any other State with

respect [to the NAAQS] or

(II) interfere with [various other] measures.

(ii) insuring compliance with the applicable requirements

of sections 7426 [CAA s 126] and 7415 [CAA s 115] of

this title (relating to interstate and international pollution

abatement).

42 U.S.C. s 7410(a)(2)(D). Thus, prior to the 1990 Amendments, s 126 provided an avenue by which a state could

compel the EPA to enforce emissions limitations upon a

neighboring state the emissions from which contributed to its

own nonattainment of the NAAQS. The EPA argues that

s 126 should still be read to have this effect, notwithstanding

the substitution of "(ii)" for "(i)" therein.

Reading a statute contrary to its seemingly clear meaning

is permissible "[i]f 'the literal application of a statute will

produce a result demonstrably at odds with the intentions of

its drafters.' " Mova Pharm. Corp. v. Shalala, 140 F.3d 1060,

1068 (D.C. Cir. 1998) (quoting United States v. Ron Pair

Enterprises, 489 U.S. 235, 242 (1989)). We will not, however,

invoke this rule to ratify an interpretation that abrogates the

enacted statutory text absent an extraordinarily convincing

justification:

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[T]he court's role is not to "correct" the text so that it

better serves the statute's purposes, for it is the function

of the political branches not only to define the goals but

also to choose the means for reaching them.... Therefore, for the EPA to avoid a literal interpretation at

Chevron step one, it must show either that, as a matter

of historical fact, Congress did not mean what it appears

to have said, or that, as a matter of logic and statutory

structure, it almost surely could not have meant it.

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

1996). The EPA's reading of the reference in s 126 to

s 110(a)(2)(D)(ii) to mean s 110(a)(2)(D)(i) meets this test.

The cross-references to s 110(a)(2)(D)(ii) that appear in s 126

clearly do not reflect the intent of the Congress. Although

the cross-references as written "point[ ] in one direction, all

the other evidence from the statute points the other way,"

United States Nat'l Bank of Oregon v. Independent Ins.

Agents of America, Inc., 508 U.S. 439, 455 (1993). See

Thomas W. Merrill, Golden Rules for Transboundary Pollution, 46 Duke L.J. 931, 955 n.124 (1997) ("[S]ection 126(b)

contains what appears to be a typographical error which, if

read literally, would render the EPA's obligation to make [a

s 126] finding meaningless").

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For example, although s 126 twice refers to the "prohibition of section 7410(a)(2)(D)(ii) [CAA s 110(a)(2)(D)(ii)],"

there is no literal "prohibition" in that section--whereas there

is in s 110(a)(2)(D)(i) ("prohibiting ... any source"). The

petitioners dismiss this point, arguing that "prohibition" is not

a term of art and that it easily embraces the directive of

s 110(a)(2)(D)(ii) to "insur[e] compliance with the applicable

requirements of sections 7426 [CAA s 126] and 7415 [CAA

s 115]." For support, the petitioners note that the third and

final reference to s 110 in s 126 refers to the "requirements

contained in section 7410(a)(2)(D)(ii) [CAA s 110(a)(2)(D)(ii)]."

42 U.S.C. s 7426(c). Although the "requirements" of these

sections certainly include some "prohibitions," the petitioners'

argument that the two terms are "interchangeabl[e]"

stretches the ordinary meaning of the term "prohibition." It

does not, however, stretch that meaning beyond recognition.

Taken alone, therefore, the usage is insufficient to prove the

agency's claim of scrivener's error; in conjunction with the

other evidence described below, however, it lends credence to

the view that such an error indeed was made.

A similar analysis applies to the observation that s 126 as

written creates a circular cross-reference: both s 126(b) and

s 126(c) refer to the "prohibition" or "requirements" of

s 110(a)(2)(d)(ii), which in turn mandates compliance with

"the applicable requirements of [CAA s 126]." Although a

fully circular cross-reference would be absurd, the petitioners

note that s 110(a)(2)(d)(ii) refers to s 126 in its entirety,

rather than to ss 126(b) and (c) alone; it thus includes the

requirement of s 126(a) that a state's SIP provide for notifying its neighbors of any major proposed new source that

might affect their air quality adversely, see 42 U.S.C.

s 7426(a). This reading is not unreasonable. Cf. Connecticut

v. EPA, 656 F.2d 902, 907 (2d Cir. 1981) ("When [CAA

s 110(a)(2)(D)(ii)] requires an SIP to insure compliance with

s 126, it clearly refers to subsection (a) [of s 126] only and

not to the petition procedure set forth in subsection (b)"). A

statute that incorporates a cross-reference that is only partially circular is not for that reason absurd, although--as in

this case--such a reference may make the statute sufficiently

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convoluted to warrant searching for a less infelicitous construction.

It is impossible to accept, however, that the Congress

intended simultaneously to repeal the regulatory regime that

had existed before the 1990 Amendments and to replace it

with the one that the petitioners describe. See Nat'l Bank of

Oregon, 508 U.S. at 454 (eschewing "purported plain-meaning

analysis" of statute as written when scrivener's error has

"distort[ed] a statute's true meaning"); id. at 461 n.10 (holding theory of scrivener's error constituted "best reading" of

statute notwithstanding that statute as written could be coherently explained). Before the 1990 Amendments--and still

today, under the EPA's reading--s 126 provided a mechanism by which a state could compel the EPA to control

emissions from sources in a neighboring state that contributed to the complaining state's nonattainment of the NAAQS.

See 42 U.S.C. s 7426(b)-(c). The petitioners argue that, by

substituting "(ii)" for "(i)" in the cross-references of s 126,

the Congress intended to withdraw the state's right to force

the hand of the EPA when emissions from a neighboring

state contributed to its own violation of the NAAQS, and

simultaneously to create a right by which a state may compel

such enforcement when a neighboring state fails to meet "the

requirements of [42 U.S.C. ss ] 7426 and 7415 of this title

[CAA ss 126 and 115] (relating to interstate and international

pollution abatement)." 42 U.S.C. s 7410(a)(2)(D)(ii).

This reading makes no sense of either s 126 or s 115. As

we have noted, in order to avoid circularity, the petitioners

suggest that the reference to s 126 in s 110(a)(2)(d)(ii) refers

only to the notification requirements of s 126(a). According

to the petitioners' reading, the 1990 amendment of ss 126(b)

and (c) gave each state the right to compel enforcement

against another state that fails to provide notice of new

sources and took away their right to compel enforcement

against a state that actually pollutes the complaining state's

air. Even were we to assume that such a counterintuitive

switch from substantive to procedural compliance could plausibly reflect congressional policy, the petitioners' reading

would still be flawed. Section 126(b) permits a state to

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petition the EPA to find that "any major source or group of

stationary sources emits or would emit any air pollutant in

violation of the prohibition of section 7410(a)(2)(D)(ii) [CAA

s 110(a)(2)(D)(ii)]." 42 U.S.C. s 7426(b). The notice requirement of s 126(a), to which the petitioners claim this reference

ultimately points, binds states only to warn their neighbors of

proposed new and modified sources; it does not restrict the

behavior of sources or groups of sources, whose "violation" of

s 110(a)(2)(D) is the predicate for a s 126(b) finding. See id.

s 7426(a).

For s 126 to incorporate the reference of s 110(a)(2)(d)(ii)

to s 115 is similarly anomalous. Section 115 allows a foreign

nation affected by a state's emissions to complain to the EPA,

which can then require the state to revise its SIP. 42 U.S.C.

s 7415. According to the petitioners, the 1990 Amendments

created a new right whereby a state may compel enforcement

against a neighboring state polluting a foreign country, while

simultaneously abrogating that state's preexisting right to

compel enforcement against a neighboring state polluting the

complaining state. That any state would be empowered to

trump the EPA's discretion in an international dispute to

which it is not a party--even as it lost the power to address

another state's pollution of its own air--cannot be taken to

express congressional intent if there is any plausible alternative reading of the statute.

The petitioners' suggestion that the enactment of ss 176A

and 184, 42 U.S.C. ss 7506a, 7511c, as part of the 1990

Amendments somehow mitigates these problems is without

foundation. Those sections authorize the EPA to designate a

multistate "transport region" in a case where one state's

emissions affect another state's attainment of the NAAQS;

for each such region, the EPA must convene a "transport

commission," including officials from each state within the

region, to advise the EPA Administrator. Id. The petitioners correctly describe these new sections as establishing, at

least in part, a new approach to interstate air pollution.

Because the Congress did not repeal s 126, however, this new

approach was clearly not meant to be exclusive; and neither

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s 176A nor s 184 renders the change in s 126 from "(i)" to

"(ii)" any less linguistically or substantively anomalous.

Even if the Congress had simultaneously enacted ss 176A,

184 and 126 as written, we might not embrace the petitioners'

reading. See Environmental Defense Fund, Inc. v. EPA, 82

F.3d 451, 468 (D.C. Cir. 1996) (refusing to construe a statute

literally in order to avoid "absurd and futile results"). This

case, however, is much clearer: the EPA has demonstrated

not only that s 126 as written is at odds with congressional

intent; it also offers a convincing account of how it came to be

enacted nevertheless. We find it quite plausible that the

Congress substituted "(ii)" for "(i)" in s 126 inadvertently in

the course of a routine renumbering of statutory crossreferences. Cf. In re Chateaugay Corp., 89 F.3d 942, 953-54

(2d Cir. 1996) (accord regarding a post-amendment renumbering of the bankruptcy code).

Because the EPA has established that the "seemingly clear

statutory language does not reflect the 'unambiguously expressed intent of Congress,' " Mova, 140 F.3d at 1068 (quoting Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842 (1984)), we proceed under Chevron

step two to consider whether the EPA's construction of s 126

is reasonable. Lest it "obtain a license to rewrite the statute," id., however, we do not give an agency alleging a

scrivener's error the benefit of Chevron step two deference,

by which the court credits any reasonable construction of an

ambiguous statute. Rather, the agency "may deviate no

further from the statute than is needed to protect congressional intent." Id. By reading s 126 to refer to

s 110(a)(2)(D)(i)--thus restoring it to the meaning it had

before the 1990 Amendments, as the Congress almost certainly intended--the EPA in no way overreaches; we therefore

accept its reading.3

__________

3 In the alternative, the petitioners suggest that the reference

in s 126 to s 110(a)(2)(D)(ii) may have stemmed from a different

error than that posited by the EPA; perhaps, they argue, the

Congress intended to refer not to s 110(a)(2)(D)(i) but to

s 110(a)(2)(D)(i)(II). This construction is less plausible than the

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B. The NOx SIP Call and s 126

The Administrator of the EPA must require a state to

revise its SIP "as necessary" whenever she finds such a plan

"substantially inadequate to ... comply" with various requirements of the Act, including the requirement that the

plan "contain adequate provisions" to prevent sources within

a state from contributing significantly to any other state's

nonattainment or nonmaintenance of the NAAQS. Id.

ss 7410(a)(2)(D)(i)(I), 7410(k)(5). Pursuant to this authority,

in October 1998 the EPA issued a request for SIP revisions,

or a "SIP call," that required 22 states and the District of

Columbia to revise their SIPs in order to mitigate the interstate transport of ozone. Michigan v. EPA, 213 F.3d 663,

669 (D.C. Cir. 2000) (explicating NOx SIP Call, 63 Fed. Reg.

at 57,358-59). This court upheld the essential elements of the

NOx SIP call in March 2000, although we remanded the rule

for further proceedings with regard to three states and to

certain types of sources. Id. at 695.

In August 1997, during the preparation of the NOx SIP call,

eight states petitioned the EPA to find, pursuant to CAA

s 126(b), that "major stationary sources or groups of sources"

in specified states were contributing to the petitioning states'

failure to meet the NAAQS for ozone. 42 U.S.C. s 7426(b).

In the first of the two rules challenged here, the EPA

announced that because it was "operating on basically the

same set of facts" in making determinations under s 126 as it

had when it issued the NOx SIP call--that is, facts showing

__________

EPA's for the simple reason that the EPA's reading restores the

statute to its unarguably coherent, pre-Amendment form. In any

event, when "there are multiple ways of avoiding a statutory

anomaly, all equally consistent with the intentions of the statute's

drafters (and equally inconsistent with the statute's text)," we

accord standard Chevron step two deference to an agency's choice

between such alternatives. See Mova, 140 F.3d at 1068.

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that upwind sources contributed to downwind nonattainment

of the NAAQS--it would eschew making formal findings

under s 126. May 1999 Rule, 64 Fed. Reg at 28,274/3,

28,275/2. Instead, the agency made the "affirmative technical

determination" that sources in upwind states were contributing to nonattainment in downwind states, and provided that a

formal finding to that effect under s 126 would be

deemed to be made for such sources in a state if by May

1, 2000, EPA has not either (a) approved a state's SIP

revision to comply with the NOx SIP call or (b) promulgated implementation plan provisions meeting the [CAA]

section 110(a)(2)(D)(i) requirements.

Id. at 28,275/2.

The EPA used this "automatic trigger mechanism," Jan.

2000 Rule, 65 Fed. Reg. at 2679/1, as part of a "coordinated

approach" to the SIP call and the s 126 petitions, May 1999

Rule, 64 Fed. Reg. at 28,275/3: s 126 findings would be

withheld until the conclusion of the SIP call, but would be

entered automatically should a state's response to the SIP

call be either unsatisfactory or untimely. May 1, 2000 was

chosen as the date for triggering the s 126 finding because

s 126(c) allows the EPA to permit sources found to contribute to another state's nonattainment to continue to operate

for no more than three years after the date of such a finding.

42 U.S.C. s 7426(c). For findings made on May 1, 2000, the

three-year clock would expire on May 1, 2003--the same date

by which states were required to have implemented controls

over sources of interstate ozone under the original NOx SIP

call. See NOx SIP Call, 63 Fed. Reg. at 57,308/1.

The congruence between the two schedules was disrupted

by an order of this court staying the EPA's original SIP call

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deadline. See Michigan v. EPA, No. 98-1497 (D.C. Cir. May

25, 1999); see also Michigan v. EPA, No. 98-1497, 2000 WL

1341477 (D.C. Cir. Aug. 30, 2000) (ordering new deadline of

May 31, 2004 for implementation of SIPs that are revised

pursuant to the SIP call). The extended timetable for the

SIP call led the EPA to determine that "the circumstances

under which the linkage between action on the section 126

petitions and the NOx SIP call was appropriate are no longer

present." Jan. 2000 Rule, 65 Fed. Reg. at 2680/1; see also

id. at 2676/2. The EPA therefore abandoned the automatic

trigger mechanism and instead simply made the s 126 findings. See id. at 2679/1.

The EPA maintains that its approach is necessitated by the

"language and purposes of section 126" and that it is consistent with "the language of section 110, the cooperative federalism structure of title I of the CAA, [and this] court's

decision to stay the deadlines for States to submit SIP

revisions under the NOx SIP call." Id. at 2680/1. The MW &

SE State and Non-State Petitioners disagree. They argue

that ss 110 and 126 require the agency to refrain from

making any s 126 findings while the NOx SIP call is ongoing,

and that a similar constraint is imposed by the doctrine of

"cooperative federalism" that this court has recognized as

being embodied in the Act.

Once the "prohibition" to which s 126 refers is understood

as the "functional prohibition" upon emissions of pollutants

that subsequently cross state lines, the petitioners can find

little support for their position by parsing ss 110 and 126.4

The Non-State Petitioners argue that

__________

4 The EPA may make findings under s 126 only if a major

source or group of sources is in "violation of the prohibition of

[s 110(a)(2)(D)(i)]." 42 U.S.C. s 7426(b). The petitioners might

have argued, therefore, that because s 110(a)(2)(D) requires a SIP

to "contain adequate provisions prohibiting" interstate emissions,

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[a]t a time when the relevant States were under a legal

obligation to adopt "adequate [SIP] provisions" to control

NOx emissions found by EPA to significantly contribute

to ozone nonattainment--and at a time when States had

not defaulted on that obligation--EPA lacked the authority to determine that those same States' NOx emission

sources were "in violation" of that same prohibition.

Non-State Petitioners Br. at 29. This statement lacks a

logical basis. It is entirely reasonable for the EPA to regard

a state that is under a legal obligation to revise its plan as

being, in the meantime, in violation of a functional prohibition.

The petitioners' primary argument, therefore, is that Title I

of the Clean Air Act is animated by a commitment to "cooperative federalism" under which the EPA is to determine what

level of air quality is required but must defer in the first

instance to the judgments of the states regarding how to

achieve that level. This principle, according to the petitioners, requires that a SIP call inviting states to respond to the

problem of interstate transport be the preferred remedy,

while direct federal regulation of sources, as authorized by

s 126, must be a last resort reserved for cases in which states

cannot or do not meet their SIP obligation.

In Michigan this court assessed the legality of the emissions budgets that the EPA assigned to each state as part of

__________

the "prohibition of [CAA s 110(a)(2)(D)(i)]" in s 126 refers only to

restrictions upon emissions incorporated into state or federal implementation plans prepared pursuant to s 110(a)(2)(D). When this

argument was raised during the rulemaking, the EPA rejected it in

favor of the view that "prohibition" means "the actual functional

prohibition of section 110(a)(2)(D)(i), which bars impermissible state

transport, rather than the specific provisions through which states

implement that prohibition ... in an approved SIP." May 1999

Rule, 64 Fed. Reg. at 28,272/2. No petitioner, however, argued the

former view in its opening brief, and we therefore need not decide

it.

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the NOx SIP call with respect to what we called the "TrainVirginia federalism bar." 213 F.3d at 687. We referred

there to our holding in Virginia v. EPA, 108 F.3d 1397, 1408,

modified on other grounds, 116 F.3d 499 (1997), that under

s 110 each state retains the power, in its SIP, to determine

how it will achieve the NAAQS, and that the EPA may not

dictate to a state a particular "source-specific means" to that

end, a proposition for which we relied upon Train v. Natural

Resources Defense Council, Inc., 421 U.S. 60, 79 (1975). This

principle, of course, cannot be absolute in the face of s 126,

which contemplates that in at least some circumstances the

EPA will directly regulate sources within a state. See 42

U.S.C. s 7426(c). Neither Train and Virginia nor Michigan

considered the interaction of their holdings with s 126,5 but in

its 1999 rule the EPA noticed the tension between s 126 and

the Train-Virginia line of cases, and properly sought to

accommodate the two:

Section 126 is somewhat unusual in Title I [of the CAA]

in that it authorizes EPA to control sources directly,

rather than providing a means for EPA to encourage

states to control those sources. In that sense, it is

similar to the provisions for federal implementation plans

in section 110(c). With both of these provisions, Congress provided tools for direct federal action to address

serious failures of state action. Nevertheless, Congress'

clear preference throughout Title I is that states are to

decide and plan how they will control their sources of air

pollution.

May 1999 Rule, 64 Fed. Reg. at 28,273/2. This analysis led

the EPA to adopt the automatic trigger approach during the

pendency of the NOx SIP call.

The petitioners contend that the delay in the NOx SIP call

deadline, because it did not affect the "Congress' clear preference" for state implementation decisions, should not have

__________

5 Train, of course, was decided before s 126 was enacted.

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altered the EPA's determination that the SIP call takes

precedence over s 126. The EPA, however, is obligated not

only to give to s 110 a meaning that is consistent with Train

and Virginia, but also reasonably to construe s 126. The

EPA, which considers the two provisions to be "independent

statutory tools to address the problem of interstate pollution

transport" that the EPA may deploy either singly or in

tandem, Jan. 2000 Rule, 65 Fed. Reg. at 2680/1, reasonably

construes both provisions.

The EPA's view accords with the position of the Second

Circuit which, in Connecticut v. EPA, was presented with the

converse of the question before us: Do ss 110 and 126

require the EPA to postpone its approval of SIP revisions

pending its final action upon petitions for findings under

s 126(b)? 656 F.2d at 906-08. Although the Connecticut

court suggested that "s 126(b) appears to have been primarily designed as a means for resolving interstate pollution

disputes in situations where an SIP is not being revised," id.

at 907--a dictum in some tension with the EPA's view that

s 126 is "independent" of the SIP revision process--the

Second Circuit's point was only that the EPA need not, upon

receipt of a s 126 petition, suspend the SIP revision process.

The court therefore concluded, properly we think, that "[a]s

the substantive inquiry for decision is the same in both [s 110

and s 126] proceedings, an argument that one proceeding

must be completed as a prerequisite to a final decision in the

other makes no sense." Id. at 907; see also id. at 908 n.4

(quoting statement of H.R. Rep. No. 95-249, at 331, reprinted

in 4 A Legislative History of the Clean Air Act Amendments

of 1977, at 2798 (1978), that "the s 126(b) process is designed

to provide an 'entirely alternative method and basis for

preventing and abating interstate pollution' ") (emphasis omitted).

By contrast, three critical provisions of s 126 would lose

their force if, as the petitioners suggest, the lengthened

timetable of the NOx SIP call were to suspend the s 126

process. First, s 126 emphatically requires that any source

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found to contribute to downwind nonattainment may in no

event be permitted to operate for more than three years after

such finding. See 42 U.S.C. s 7426(c). Second, under s 126

"[r]elief does not depend upon any action by the upwind

states, as is necessary for a SIP revision." May 1999 Rule,

64 Fed. Reg. at 28,264/2. Third, relief under s 126 is independent also of the discretionary policy preferences of the

EPA; the agency must act upon a request for a s 126 finding

within 60 days. See 42 U.S.C. s 7426(b). Under the EPA's

approach, of course, s 126 retains each of these features.

See, e.g., Jan. 2000 Rule, 65 Fed. Reg. at 2681/1 ("Congress

provided section 126 to downwind states as a critical remedy

to address pollution problems ... otherwise beyond their

control, and EPA has no authority to refuse to act under this

section").

The petitioners argue, however, that the EPA's construction deprives s 110 of its force because it constrains the

development of the SIP: sources subject to a s 126 finding

will be bound by emissions limitations set by the agency, see

42 U.S.C. s 7426(c), and by the emissions trading program,

see Part II.D below, even if the state in which they are

located prefers to regulate different sources or to use different methods to mitigate downwind nonattainment. The petitioners argue that such constraints violate s 110 as interpreted in Virginia, but they plainly do not. In Virginia, this

court disapproved the EPA's plan to reject SIPs that did not

incorporate particular limits upon emissions from new cars;

we held that the EPA may not, as part of the "section 110

process," intervene in a state's choice of how to reach the

NAAQS. 108 F.3d at 1410; cf. id. at 1406 (question is what is

permissible "under section 110"). We did not suggest that

under s 110 states may develop their plans free of extrinsic

legal constraints. Indeed, SIP development, like any environmental planning process, commonly involves decisionmaking

subject to various legal constraints. That s 126 imposes one

such limitation--and it is surely not the only independent

provision of federal law to do so--does not affect a state's

discretion under s 110.

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The MW & SE State Petitioners argue in the alternative

that, if ss 110 and 126 are independent, then the EPA may

select either one but cannot impose s 126 findings and a SIP

call simultaneously. Neither the statute nor the states' brief

offers support for this suggestion, and the states' suggestion

that the EPA embraced it in the preamble to its second rule

is without foundation. Because it is reasonable, and because

the "Congress provided both [ss 110 and 126] without indicating any preference for one over the other," Jan. 2000 Rule,

65 Fed. Reg. at 2680/1, the EPA's conclusion that these two

provisions operate independently merits our deference under

Chevron step two. See Chevron, 467 U.S. at 843.

Finally, we note that the MW & SE State Petitioners

object to the EPA's construction of 40 C.F.R. s 52.34(i),

which provides that s 126 findings will be withdrawn if the

EPA takes "final action" to approve a SIP or impose a FIP

that will control NOx emissions that contribute to downwind

nonattainment. See 40 C.F.R. s 52.34(i) (2000), promulgated

at 65 Fed. Reg. at 2727. Although the rule contains no date,

the agency avers that it will apply the rule only to SIPs or

FIPs adopted before May 1, 2003, the s 126 deadline.

The Supreme Court recently held that we should not defer

to an agency's interpretation imputing a limiting provision to

a rule that is silent on the subject, lest we "permit the

agency, under the guise of interpreting a regulation, to create

de facto a new regulation." Christensen v. Harris County,

529 U.S. 576, 588 (2000). The Court, however, carefully

limited this principle to cases in which the agency's interpretation postdated its adoption of the rule and was not itself

"subject to the rigors of ... notice and comment." Id. (citing

Reno v. Koray, 515 U.S. 50, 61 (1995)). We therefore continue to grant "a high degree of deference" to an interpretation

that the agency promulgates contemporaneously with its own

regulation, affirming it "unless it is plainly erroneous or

inconsistent with the regulation." Jersey Shore Broad. Corp.

v. FCC, 37 F.3d 1531, 1536 (D.C. Cir. 1994).

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Here the agency contends that it imputed a date to

s 52.34(i) not post hoc but "[t]hroughout the Section 126

rulemaking." Although the date might better have been

made explicit in the preamble to the rule, the agency did

clearly, albeit implicitly, assume that s 52.34(i) would apply

only to SIPs promulgated before the s 126 deadline. This is

evident from the agency's express reservation for another

rulemaking of the question whether it would "automatically

withdraw the section 126 findings upon EPA approval of a

later SIP revision." Jan. 2000 Rule, 65 Fed. Reg. at 2683/2.

A contrary interpretation, moreover, would apparently create

a conflict between s 52.34(i) and the s 126 deadlines, the

sanctity of which the EPA emphasized throughout its rulemaking. Because the EPA appears ever since the rule was

promulgated to have interpreted s 52.34(i) to apply only to

SIPs approved before May 1, 2003, and because this interpretation is not "plainly erroneous or inconsistent with the

regulation," Jersey Shore, 37 F.3d at 1536, we defer to the

agency's view.

C. Significant Contribution

Non-State Petitioners challenge the methodology by which

EPA reached its findings of "significant contribution" to

nonattainment of the "1-hour" ozone rule under s 126, 42

U.S.C. s 7426. EPA started with the two-step method that it

had used in issuing the SIP call and that we upheld in

Michigan v. EPA, 213 F.3d 663, 674-80 (D.C. Cir. 2000). As

we explained there, EPA first performed computer modeling

to determine whether a state's manmade NOx emissions

perceptibly hindered a downwind state's attainment. Id. at

675. For any state exceeding EPA's threshold criteria, EPA

then defined as "significant" those emissions that could be

eliminated through application of "highly cost-effective" controls, namely measures costing no more than $2,000 per ton of

NOx removed. Id. Similarly, EPA relied here on the statewide threshold findings made in the SIP call and then applied

the same cost-effectiveness criterion to determine which

sources to include. See Findings of Significant Contribution

and Rulemaking on Section 126 Petitions for Purposes of

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Reducing Interstate Ozone Transport, 63 Fed. Reg. 56,292,

56,301/3 (proposed Oct. 21, 1998) ("Oct. 1998 Rule").

As discussed above, see supra Part II.B, both the SIP call

and the s 126 rulemaking are directly linked to the requirement under s 110(a)(2)(D)(i) that SIPs contain provisions

prohibiting "any source or other type of emissions activity

within the State from emitting any air pollutant in amounts

which will ... contribute significantly to nonattainment...."

s 110(a)(2)(D)(i), 42 U.S.C. s 7410(a)(2)(D)(i). But the necessary determinations are different in at least two material

respects. First, whereas the SIP call exercise yielded a total

amount of NOx cutback for each state, which the state was

then free to achieve however it might, see Michigan, 213 F.3d

at 687-88, here the mandate applies directly to sources.

Second, whereas s 110(a)(2)(D)'s broad reference to "any

source or other type of emissions activity" supported SIP call

findings based on aggregate emissions from within each

regulated state, s 126 demands that the significant contribution come from a "major source or group of stationary

sources." 42 U.S.C. s 7426(b) (emphasis added).

The Non-State Petitioners argue that this latter distinction

renders EPA's reliance on the SIP call findings inadequate;

the findings based on all emissions can't determine whether

stationary source emissions are sufficient. Instead of using

those findings, petitioners argue, EPA needed first to make

the more rigorous finding that the specified stationary

sources within a given state independently met its threshold

test for effect on downwind nonattainment.

Petitioners find support for their view of the statute in

Michigan, where we said that the first step in EPA's

s 110(a)(2)(D)(i) finding must show a "measurable contribution" to downwind nonattainment. 213 F.3d at 683-84.

Here, EPA did not purport to satisfy such a standard on the

basis of the covered stationary sources alone. Rather, it

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conceded, "[i]t is conceivable that modeling only the emissions

from the section 126 sources would result in smaller ambient

impacts downwind [compared to total man-made emissions],

and.... those smaller impacts, if analyzed on the basis of

the metrics and thresholds developed for State-wide [total

man-made] emissions, may not exceed those thresholds."

May 1999 Rule, 64 Fed. Reg. at 28,283/1.

EPA defended its approach both as a recognition of the fact

that the ozone problem is due to the accumulation of emissions and as a sensible reconciliation of s 110(a)(2)(D)(i) and

s 126. See id. at 28,282-83. On the need for some aggregation, of course, there can be no quarrel. Congress's use of

the phrase "group of ... sources" plainly reflected a decision

to act against sources whose emissions, while harmless individually, could become harmful when combined with others.

And, given the relevant statutory provisions, it was reasonable for EPA to link its stationary source findings to the

significance of a state's total NOx emissions. By speaking of

stationary sources that emit pollutants "in violation of the

prohibition of [s 110(a)(2)(D)(i)]," Congress clearly hinged the

meaning of s 126 on that of s 110(a)(2)(D)(i). EPA reasoned

that if it treated any state's entire manmade emissions as the

controlling aggregate for both purposes and found a "significant contribution," "then the State's section 126 sources may

be subject to SIP controls." Id. at 28,282/3 (emphasis added).

In other words, a source can be subject to s 126 controls only

if it is at least at risk of being subject to SIP controls. The

effect, of course, is to displace the discretion the state would

enjoy in the SIP process under s 110(a)(2)(D)(i). But this

displacement of state power seems not materially greater

than is inherent in EPA's interpretation of s 126, which we

uphold vis-A-vis the objections petitioners raised in their

initial briefs. See supra Part II.B. EPA's current reading,

to be sure, may not be the only possible or even the most

compelling view of s 126. Perhaps the EPA could reasonably

read it as petitioners would, and require that stationary

sources as a whole independently satisfy some "meaningful

contribution" test before they may be subject to s 126 findings. But given s 126's silence on what it means for a

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stationary source to violate s 110(a)(2)(D)(i), EPA's approach

is at least reasonable, and therefore entitled to deference

under Chevron.

Petitioners point to language we used in Michigan striking

down part of what EPA had done there. For certain states

EPA had analyzed emissions data only from a portion of the

state closest to the affected downwind areas, and, finding that

portion to have made contributions exceeding the threshold,

had made "contribution" findings for the entire state. We

held this extension to the whole state invalid because EPA

might well have included areas that were "wholly innocent of

material contributions." Michigan, 213 F.3d at 681-85. In

that context, we said that a significant contribution finding

required evidence of a "measurable contribution" and that

"[i]nterstate contributions cannot be assumed out of thin air."

Id. at 684.

In the present case Non-State Petitioners do not dispute

that emissions from affected s 126 sources actually contribute

to total manmade NOx emissions that, at the statewide aggregate level, meet the EPA criteria upheld in Michigan. The

process here does not involve sweeping up individual sources

that might well not be part of the problem at all. The

concern that drove our discussion in Michigan is inapplicable.

Non-EGU Petitioners, by contrast, suggest a point that

might conceivably implicate Michigan's "measurable contribution" concern. They argue that because EPA failed to

model the contribution of each particular source individually,

its findings ignore the effects of industrial sources' having

lower smoke stacks than utility sources. If in fact NOx

emissions from stationary sources with low smoke stacks do

not reach other states as easily as emissions from other

sources, these petitioners might have a point as to the scope

of what Michigan allows. But the petitioners' vague claim

that lower stack height "affects the downwind impact" in no

way quantifies the effect, much less makes out a claim that

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certain sources do not measurably contribute to downwind

nonattainment. In Michigan we left "EPA free to select

states as a unit of measurement," saying that "[i]n turn,

states (or the areas of states that believed themselves innocent of material contributions, or sources located therein),

might respond by offering finer-grained computations." 213

F.3d at 684. So, too, the low-stack sources might have come

forward with such numbers, but they have not. Or they

might have shown that EPA's modeling bore "no rational

relationship to the reality it purport[ed] to represent," Sierra

Club v. EPA, 167 F.3d 658, 662 (D.C. Cir. 1999), thereby

throwing the burden back on EPA, but they have not.

A final challenge to the "contribution" findings is the NonState Petitioners' argument that for four states (Indiana,

Kentucky, Michigan and New York) EPA used state-based

aggregations to find the contribution but then applied controls to sources in only part of each state. This is a reverse

of what we struck down in Michigan: there extension from

part to the whole, here, contraction from the whole to a part.

EPA's explanation was that while the modeling was statewide, s 126 empowered it only to address sources named in

the downwind states' petitions (which here they did by area).

See Jan. 2000 Rule, 65 Fed. Reg. at 2685/1. Petitioners do

not contest EPA's legal assumption, but simply say that the

process invalidates the finding.

EPA questions whether this objection was raised with

reasonable specificity, which under 42 U.S.C. s 7607(d)(7)(B)

is a precondition for judicial review. But in the rulemaking

itself EPA plainly acknowledged a claim that it was wrong to

rely on all manmade emissions from an entire state where the

petitions sought relief "from sources located in only a portion

of the upwind State." May 1999 Rule, 64 Fed. Reg. at

28,292/3. Nonetheless, petitioners' claim leaves out a critical

point. Extension of a finding from an area responsible for

pollution problems to another area, where the two are linked

only by falling within state boundaries, raises obvious risks of

burdening the innocent with the guilty. That risk is far lower

in moving from the whole to a part, at least in the absence of

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some reason to doubt that the part in question shared in the

state's "contribut[ory]" role or that it had been rationally

selected on the basis of relevant criteria. Accordingly, the

principle that we accepted above in the context of the broad

claim (based on s 126's exclusive focus on stationary

sources)--namely, that EPA may subject to s 126 controls

any source that might have been subject to SIP controls

properly adopted under s 110(a)(2)(D)(i), see id. at 28,282/3--

appears to cover this issue equally well--at least in the

absence of any contention that the petitioning states were

arbitrary or discriminatory in their designation of sources

(whether they identified them by geographic category, as

here, or otherwise).

D. Emission Limitation Determinations

In order to allocate NOx emission allowances to individual

sources, the EPA made state-by-state emission projections

for 2007. The EPA based each state's NOx emission budget

on projected 2007 heat input (or "utilization") for electric

generating units ("EGUs") and projected 2007 emissions for

non-electric generating, industrial facilities ("non-EGUs").

The projections were developed with computer models working off of "baseline" emissions and heat input data from 1995

and 1996. Various petitioners challenge the EPA's budget

allocations as arbitrary and capricious. While we generally

uphold the EPA's authority to make emission projections and

set emission limitations accordingly, we do so only where the

EPA adequately responded to comments and explained the

basis for its decisions. Thus, although we uphold the EPA's

use of the Integrated Planning Model ("IPM") as against the

specific challenges forwarded by MW & SE Petitioners, we

conclude that at least one application of the model is sufficiently unexplained that we must remand the EPA's IPMderived growth factors for further explanation.

1. Standard of Review

Agency determinations based upon highly complex and

technical matters are "entitled to great deference." Public

Citizen Health Research Group v. Brock, 823 F.2d 626, 628

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(D.C. Cir. 1987); see also Huls Am., Inc. v. Browner, 83 F.3d

445, 452 (D.C. Cir. 1996) ("[W]e will give an extreme degree

of deference to the agency when it 'is evaluating scientific

data within its technical expertise.' " (citation omitted)). In a

prior case named Appalachian Power Co. v. EPA, 135 F.3d

791, 802 (D.C. Cir. 1998), we described statistical analysis as

"perhaps the prime example" of an area

of technical wilderness into which judicial expeditions are

best limited to ascertaining the lay of the land. Although

computer models are "a useful and often essential tool

for performing the Herculean labors Congress imposed

on EPA in the Clean Air Act," their scientific nature

does not easily lend itself to judicial review.... [I]t is

only when the model bears no rational relationship to the

characteristics of the data to which it is applied that we

will hold that the use of the model was arbitrary and

capricious.

Id. at 802 (citation omitted).

Under this standard, the EPA has "undoubted power to

use predictive models" so long as it "explain[s] the assumptions and methodology used in preparing the model" and

"provide[s] a complete analytic defense" should the model be

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

EPA, 705 F.2d 506, 535 (D.C. Cir. 1983) ("SRLPTF") (citations and internal quotation marks omitted). That a model is

limited or imperfect is not, in itself, a reason to remand

agency decisions based upon it.

Ultimately, ... we must defer to the agency's decision on

how to balance the cost and complexity of a more elaborate model against the oversimplification of a simpler

model. We can reverse only if the model is so oversimplified that the agency's conclusions from it are unreasonable.

Id.

2. The Integrated Planning Model

The MW & SE Petitioners contend that the EPA's emissions growth projections were arbitrary and capricious because they relied upon a computer model--the "IPM"--that

underestimated growth rates for electric power generation in

some upwind states. Several states, including North Carolina, submitted comments to the EPA arguing that they

projected significantly greater growth in electric power generation than that predicted by the IPM.

Rather than address the specific complaints of each commenting state, the EPA defended its reliance upon the IPM

on three broad grounds. First, all state NOx budget growth

rates should be based upon the same methodology to ensure

consistency in the NOx cap's application. Responses to Significant Comments on the Proposed Findings of Significant

Contribution and Rulemaking on Section 126 Petitions for

Purposes of Reducing Interstate Ozone Transport at 111

(April 1999) ("April 1999 RTC"). Second, the IPM "has

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received extensive comment, review, and revision over the

past several years" during the NOx SIP call and other

proceedings. Id.; see also Appalachian Power, 135 F.3d at

814-15 (upholding the EPA's use of the IPM). Third, the

IPM "provides a reasonable forecast of State growth rates

because it carefully takes into account the most important

determinants of electricity generation growth that are facing

the power industry today." April 1999 RTC at 112.

Given the highly deferential standard of review applied to

such questions, and the EPA's clear authority to rely upon

computer models in place of inconsistent, incomplete, or

unreliable empirical data, the Agency's decision to rely upon

the IPM, rather than the projections offered by individual

states, was not arbitrary and capricious. See Texas Mun.

Power Agency v. EPA, 89 F.3d 858, 870 (D.C. Cir. 1996). In

the EPA's judgment, the IPM offered a more comprehensive

and consistent means of allocating emission allowances than

sorting through the various state-specific projections. That

the EPA's projections depend, in large part, on economic

projections, rather than environmental factors, makes little

difference. "[I]t is within the scope of the agency's expertise

to make such a prediction about the market it regulates, and

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a reasonable prediction deserves our deference notwithstanding that there might also be another reasonable view." Environmental Action, Inc. v. FERC, 939 F.2d 1057, 1064 (D.C.

Cir. 1991). MW & SE State Petitioners may believe their

projections are superior to the EPA's--and they may even be

correct--but they have not proved their case.

3. EGU Growth Factors

Accepting the EPA's general reliance upon the IPM, NonState Petitioners object to the EPA's use of growth rates

generated by the IPM for 2001-2010 to estimate facility

utilization growth for the period 1996-2007. According to

petitioners, this yielded estimates for facility utilization in

2007 that not only fail to reflect the best information available

to the Agency but that are flatly inconsistent with observed

growth rates through 1998. Such apparently anomalous estimates, petitioners claim, are arbitrary and capricious, at least

absent any explanation from the agency as to why they are

appropriate. As a result, Non-State Petitioners claim, at

least some EGUs are subject to excessively stringent emission limitations.

The EPA based its state-specific emission budget limitations on projections of facility utilization for 2007. This

projection was calculated by taking a baseline utilization rate

and applying a "growth factor" to project the 2007 utilization

rate, upon which the emission budget limitation would then be

imposed. For the starting baseline utilization rate, the EPA

used the actual EGU utilization rate for either 1995 or 1996,

whichever was greater. For the growth factors, the EPA

relied upon the IPM facility utilization projections for the

2001-2010 period to generate an average annual growth rate

that was then applied to the 1996-2007 period.

Petitioners contend that the EPA's resulting projections

significantly underestimated growth rates in some states. In

Michigan and West Virginia, for example, actual utilization in

1998 already exceeded the EPA's projected levels for 2007.

This, on its face, raises questions about the reliability of the

EPA's projections. While courts routinely defer to agency

modeling of complex phenomena, model assumptions must

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have a "rational relationship" to the real world. See, e.g.,

Chemical Mfrs. Ass'n v. EPA, 28 F.3d 1259, 1265 (D.C. Cir.

1994). Future growth projections that implicitly assume a

baseline of negative growth in electricity generation over the

course of a decade appear arbitrary, and the EPA can point

to nothing in the record to dispel this appearance.

Despite the apparent disparity between the EPA's growth

projections and observed growth rates, the EPA claims its

growth factors were reasonable and due deference from this

court. Yet even in the face of evidence suggesting the EPA's

projections were erroneous, the EPA never explained why it

adopted this particular methodology. The EPA claims it

made a reasonable choice--and it may be right--but simply

to state such a claim does not make it so. There must be an

actual reason articulated by the agency at some point in the

rulemaking process. There is none here.

The EPA tries to defend its projections by claiming that

they may, at least in some instances, actually inflate utilization projections generating "slack" for affected EGUs. Yet

the fact that some petitioners may benefit from the inaccuracy of the EPA's projections does not make them reasonable.

Faced with evidence that its projections for 2007 are lower

than actual utilization rates in 1998 for some states, the EPA

has little answer. The EPA first claims that regulated

facilities can always purchase additional allowances, albeit at

their own expense. This is no answer. The EPA then

suggests that facility utilization can fluctuate from year to

year. For example, the EPA found in some states that

utilization rates were higher in 1995 than 1996. This may be

true from one year to the next, but the EPA offers no

plausible explanation for how interannual variation can explain utilization rates in 2007 substantially lower than those

observed in 1998. Finally, the EPA claims that when the

projections are considered on a region-wide level such disparities are likely to disappear. As budgets are set on a state-bystate level, this is small consolation to petitioners. The EPA

is well aware of its obligation to "examine the relevant data

and articulate a satisfactory explanation for its action," yet it

failed to discharge this obligation here. Motor Vehicle Mfrs.

Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43

(1983).

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The EPA had other ways of generating 2007 utilization

projections. The EPA readily admits that it had IPM projections for the 1996-2001 period, as well as for 2007. The EPA

makes no claim that these results, as opposed to the projections offered up by the states, are inherently less reliable or

consistent than the growth projections the EPA used here.

The EPA readily acknowledges it utilized one set of growthrate projections to set allowance budgets, another to assess

emission reduction costs. As it explained in its Response to

Comments:

The budgets were constructed using growth rates for

1996-2007 that were consistent with the growth rates in

IPM for 2001-2010, which may be higher or lower than

the growth rates for the years 1996-2001. EPA's analysis of the costs of complying with these budgets, however, was conducted using IPM, which incorporates internally consistent growth assumptions--i.e., the growth for

1996 through 2001 is based on IPM assumptions for 1996

through 2001, and the growth for 2001 through 2010 is

based on IPM assumptions for 2001 through 2010.

April 1999 RTC at 112-13. While admitting that two sets of

growth rates were used, the EPA offers no cogent explanation for this difference. Instead, the EPA merely asserts,

without adequate explanation, that each choice was reasonable. The EPA further offers no comprehensible explanation

how relying upon erroneously low growth rates will not cause

petitioners harm.

As we discussed above, the EPA has "undoubted power to

use predictive models" but only so long as it "explain[s] the

assumptions and methodology used in preparing the model"

and "provide[s] a complete analytic defense" should the model

be challenged. SRLPTF, 705 F.2d at 535 (citations and

internal quotation marks omitted). In this case, the EPA has

not fully explained the bases upon which it chose to use one

set of growth-rate projections for costs and another for

budgets, nor has it addressed what appear to be stark

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disparities between its projections and real world observations. "With its delicate balance of thorough record scrutiny

and deference to agency expertise, judicial review can occur

only when agencies explain their decisions with precision, for

'it will not do for a court to be compelled to guess at the

theory underlying the agency's action ...' " American Lung

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

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

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

growth factor determinations so that the agency may fulfill its

obligation to engage in reasoned decisionmaking on how to

set EGU growth factors and explain why results that appear

arbitrary on their face are, in fact, reasonable determinations.

4. Non-EGU Budget Determinations

Non-State Petitioners allege that the EPA repeatedly modified the growth assumptions in its calculation of non-EGUsector NOx budgets in such a fashion as to preclude any

meaningful opportunity to comment. According to petitioners, when the EPA modified successive versions of its technical support document ("TSD") it did not include a complete

set of non-EGU growth factors. Then, when the EPA issued

the final non-EGU growth budgets in December 1999, it

released modified growth rates without any explanation. The

EPA explained that "corrections to the growth rates ... were

made to reflect the growth rates misapplied in the May 14,

1999 version of the budget." Technical Amendment to the

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

Ozone, 65 Fed. Reg. 11,222, 11,223 (Mar. 2, 2000). Because

these changes were made without notice or explanation, petitioners contend they must be set aside.

The EPA asserts petitioners waived this claim. "[T]he

procedural requirements of the Clean Air Act do not permit

[petitioners] to raise this objection for the first time on

appeal." API v. Costle, 665 F.2d 1176, 1190-91 (D.C. Cir.

1981). Under section 307(d)(7)(B) of the Act, a reviewing

court may only consider "an objection to a rule or procedure

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which was raised with reasonable specificity during the period

for public comment." 42 U.S.C. s 7607(d)(7)(B). The petitioner is only excused from raising an objection where it is

"impracticable ... or if the ground for such objection arose

after the period for public comment." Yet even then the

petitioner must first seek a proceeding for reconsideration.

Id. Only then may petitioner seek judicial review. This

court "enforces this provision 'strictly.' " MEMA v. Nichols,

142 F.3d 449, 462 (D.C. Cir. 1998) (citation omitted).

These objections were never raised during the notice and

comment period, nor did petitioner ever seek reconsideration.

Neither of these facts is contested by petitioners. Thus, even

if, as petitioners claim, it was impracticable for many facilities

to determine their growth factors, they waived their claim.

Moreover, the EPA notes that petitioners do not cite any

facilities that were unable to determine their growth factors

due to the EPA's alleged omissions, suggesting that there is

no harm to redress. Accordingly, the relevant petitions are

denied.

5. Local Regulation and Permit Trading

The MW & SE State Petitioners have also argued that the

permit trading system contravenes CAA s 116, which allows

a state to impose a local air quality standard more stringent

than the corresponding NAAQS. 42 U.S.C. s 7416. The

petitioners' concern is that a source might purchase permits

in excess of applicable local limits and then claim the right to

pollute in excess of those limits, up to the full amount of its

permits. The EPA properly denies that the permit trading

program would make such a claim viable. Nothing in the

challenged rules exempts from s 116 a source that has acquired permits.

Although they are unable to point to any provision of the

rule that allows permit trading to trump a local rule authorized by s 116, the petitioners worry in their reply brief that

"other interpretations" might prevail in the future. Perhaps

so, but for now, and until such time as it may conduct a new

rulemaking, the EPA is committed to the position that it

espouses here. The petitioners also suggest that the EPA

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might decline to approve a SIP that imposes stringent local

limits because of its commitment to a market in emissions

permits; but non-approval of a SIP is subject to judicial

review, and an argument based upon the incompatibility of

EPA policy and s 116 may be raised when and if the EPA

disapproves a SIP in order to advance the market for emissions permits.

E. Regulation of "Future" Sources

The section 126 rule establishes a NOx budget for each

upwind state found to contribute significantly to nonattainment in the petitioning states. Ninety-five percent of this

budget is allocated in the form of NOx emission allowances to

existing sources. Five percent of each state's budget is set

aside for future sources. In this fashion, the rule caps

emissions on existing and proposed sources, as well as

sources to be proposed and built in the future.

MW & SE State Petitioners challenge the EPA's authority

to impose the NOx cap limits to future, as-yet-unproposed

stationary sources under section 126. Petitioners argue that

the statute does not authorize the EPA to regulate future

sources, and that the EPA's contrary interpretation of section

126 is unreasonable. We disagree.

We review the EPA's interpretation under the two-part

analysis established in Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). "First,

always," we must consider "whether Congress has directly

spoken to the precise question at issue." An affirmative

answer "is the end of the matter; for the court, as well as the

agency, must give effect to the unambiguously expressed

intent of Congress." Id. at 842-43. If, on the other hand,

"the statute is silent or ambiguous with respect to the specific

issue," we must uphold "a reasonable interpretation made by

the administrator of an agency." Id. at 843, 844; see also

American Bus Ass'n v. Slater, 231 F.3d 1, 4 (D.C. Cir. 2000).

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Under section 126(b) a downwind state "may petition the

Administrator for a finding that any major source or group of

stationary sources emits or would emit any air pollutant" in

an amount which contributes significantly to nonattainment in

the petitioning state. 42 U.S.C. s 7426(b). Once the EPA

makes a section 126(b) finding, section 126(c) provides that:

it shall be a violation of this section and the applicable

implementation plan in such State--

(1) for any major proposed new (or modified) source

with respect to which a finding has been made under

subsection (b) of this section to be constructed or to

operate in violation [of this section or section 110], or

(2) for any major existing source to operate more than

three months after such finding has been made with

respect to it.

Id. s 7426(c). The Administrator may allow the continued

operation of existing sources beyond three months provided

such sources comply with emission reductions provided by the

Administrator to "bring about compliance ... as expeditiously as practicable, but in no case later than three years after

the date of such finding." Id.

Petitioners argue that the EPA's interpretation fails at the

first step of Chevron, contending that section 126(c) authorizes the EPA to regulate existing and proposed sources but

not future sources that are not as yet proposed. In petitioners' view, the enumeration of two classes of sources that may

be controlled--"major existing sources" and "proposed new

(or modified) sources"--precludes the EPA's authority over a

third class of sources--"future as-yet-unproposed" sources.

Expressio unius est exclusio alterius. Petitioners argue that

irrespective of whether the EPA can make findings with

regard to future, as-yet-unproposed sources, it is not empowered to prohibit their construction or limit their emissions

under section 126(c).

We reject petitioners' contention that the statute unambiguously reflects congressional intent to limit the EPA to the

two categories defined by petitioners. Section 126 is at least

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subject to the interpretation that Congress intended to authorize the regulation of emissions from future sources. Under

section 126(b), the EPA may find that "any major source or

group of stationary sources emits or would emit" pollution in

violation of section 110. The inclusion of the future conditional phrase "would emit" arguably contemplates the EPA's

intervention to prevent future emissions that would contribute significantly to nonattainment in downwind states. Similarly, as the EPA argues, section 126(c) explicitly bars the

construction or operation of "any major new proposed

sources." By barring the construction of those sources, the

statute clearly contemplates the imposition of controls on at

least some facilities that do not yet exist. These provisions,

taken together, may not compel the regulation of future

sources under section 126, but they do not unambiguously

forbid it. At the least, they introduce sufficient ambiguity

into the statutory scheme to prevent resolution of this issue

under Chevron step one.

In the absence of an unambiguous expression of congressional intent in the plain language of the statute, we advance

to the second step of the Chevron analysis to determine

whether the EPA's interpretation of section 126 is a reasonable one. We conclude that it is. Prior to 1990, section

126(b) only authorized EPA findings that "a major source

emits or would emit any air pollutant" which contributes

significantly to nonattainment in a downwind state. 42

U.S.C. s 7426(b) (1977). The 1990 Clean Air Act Amendments expanded the scope of this provision by allowing EPA

findings with regard to "any major source or group of stationary sources." 42 U.S.C. s 7426(b) (1994) (emphasis added). Similarly, the EPA notes that the cross-referenced

provision of the act, section 110(a)(2)(D)([i]) prohibits "type[s]

of emissions activity" that contribute significantly. 42 U.S.C.

s 7410(a)(2)(D)(i). Like section 126, section 110 confers authority based upon the kind of activity in question. It does

not impose any temporal limit.

The statutory language allows the EPA to regulate facilities in upwind states as a class or category, e.g. all coal-fired

power plants in North Carolina. If such facilities, as a class,

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contribute significantly to nonattainment in northeastern

states, this is as true for as-yet-unbuilt plants as it is for

existing ones. Therefore, the EPA argues, it is reasonable to

include future sources in the "group of stationary sources"

found to contribute significantly to downwind nonattainment

under section 126(b). Indeed, it would be irrational to enable

the EPA to make findings that a group of sources in an

upwind state contribute to downwind nonattainment, but then

preclude the EPA from regulating new sources that contribute to that same pollution. As the EPA explained in its

Response to Comments:

Once EPA has determined that the emissions from the

existing sources in an upwind State already make a

significant contribution to one or more petitioning downwind States, any additional emissions from a new source

in that upwind State would also constitute a portion of

that significant contribution, unless the emissions from

that new source are limited to the level of highly effective

controls.

April 1999 RTC at 39. The EPA's construction of section 126

avoids this result.

The language of section 126(c) does not make the EPA's

interpretation an unreasonable one. Petitioners note that

section 126(c) specifically identifies two classes of sources--

"major existing sources" and "proposed new (or modified)

sources"--and makes no mention of future, as-yet-unproposed

sources. What petitioners ignore is that section 126(c), by its

terms, defines what constitutes a violation of section 126.

For a facility to violate the law, by definition it must either

exist or be proposed. Future, as-yet-unproposed sources are

not mentioned because unproposed, unbuilt facilities cannot

themselves be in violation of anything. At the time they

become subject to the section 126(c) limitation, however, they

will either be an "existing" or "proposed new" source. That

is to say, section 126(c) has no direct effect on plants that

have yet to be proposed for the precise reason that they have

not yet been proposed. This does not mean, however, that

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ings are exempt from section 126(c). Once they are proposed, they become part of the regulated class.

Perhaps it would be reasonable for the EPA to interpret

the statute as urged by petitioners. Section 126 is arguably a

stop-gap provision designed to protect downwind states from

upwind pollution by empowering the federal government to

take direct action against those specific upwind facilities

which cause downwind harm. From a structural standpoint,

this interpretation may seem intuitive: States regulate all

emitters; the EPA only regulates those emitters shown to

contribute significantly to downwind nonattainment despite

the existence of a SIP. Yet however rational this alternative

interpretation of the Clean Air Act may be, under Chevron

step two, the EPA's interpretation controls so long as it is

based upon a permissible construction of the statute. As we

conclude that the EPA adopted a reasonable interpretation of

section 126's somewhat ambiguous provisions, its interpretation is upheld.

F. The Dorris Report

In comments submitted on August 9, 1999, North Carolina

requested that the EPA consider and comment upon "all

materials submitted to it by Dr. Gary Dorris, Hagler-Bailly,

or Stratus Consulting since July 1, 1998." Dr. Dorris was

hired by the EPA to conduct modeling work in conjunction

with the NOx SIP call. According to North Carolina, Dr.

Dorris's "extensive" modeling "shows that North Carolina

does not significantly contribute to nonattainment areas"

and provides "a rational basis for determining significant

contribution that considers cost effectiveness...." In its

comments, North Carolina identified numerous materials

submitted by Dr. Dorris, including briefing documents and

preliminary analytical results. North Carolina states that it

would have commented on these materials directly, however

the EPA had denied North Carolina's FOIA requests for

access to the studies.

On November 24, 1999, Dr. Dorris submitted his final

report to the EPA. According to the EPA, the report used

computer modeling to assess the relative cost-effectiveness of

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NOx emission reductions in upwind states in comparison to

emission reductions in downwind states. This report concluded, among other things, that the relative contribution of a ton

of NOx emissions will vary due to "emission source location,

stack elevation, and chemical species." This, in turn, impacts

the cost-effectiveness of emission reductions in upwind states.

In promulgating its final section 126 rule, the EPA made no

mention of the Dorris Report or any of Dr. Dorris' preliminary findings. While the report was relevant to the significant contribution issue, the EPA maintains that it made its

final significant contribution determination with the May 1999

section 126 rule. When North Carolina submitted its comments in August, the EPA was only considering narrow

issues related to the stay of the SIP submission deadlines and

the impact of American Trucking Ass'ns v. EPA, 175 F.3d

1027, reh'g granted in part and denied in part, 195 F.3d 4

(D.C. Cir. 1999), rev'd in part sub nom. Whitman v. American Trucking Ass'n, 121 S. Ct. 903 (2001).

North Carolina contends that the EPA erred in refusing to

consider the Dorris Report in the section 126 rulemaking.

There is no doubt that the EPA is required to examine the

relevant data and articulate a sufficiently reasoned explanation for its action. See Motor Vehicle Mfrs. Ass'n, Inc. v.

State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983). This

Court is obligated to "overturn a rulemaking as arbitrary and

capricious where the EPA has failed to respond to specific

challenges that are sufficiently central to its decision." International Fabricare Inst. v. EPA, 972 F.2d 384, 389 (D.C. Cir.

1992). An agency is not required to consider issues and

evidence in comments that are not timely filed. Personal

Watercraft Indus. Ass'n v. Dept. of Commerce, 48 F.3d 540,

543 (D.C. Cir. 1995) ("Agencies are free to ignore such late

filings."). Therefore, if North Carolina did not raise the

Dorris Report at the appropriate time, the EPA may ignore

the findings contained therein.

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Contrary to North Carolina's claims, the EPA was justified

in ignoring the Dorris materials because they pertained to

aspects of the section 126 rule which the EPA had already

finalized by the time North Carolina submitted its regulatory

comments. It may well be true that the EPA had access to

draft copies of the Dorris Report while the comment period

was still open. Yet the EPA was no longer considering the

significant contribution issues when North Carolina first requested review of the Dorris materials. Significant contribution was considered in the prior rulemaking and finalized in

the May 1999 rule. Jan. 2000 Rule, 65 Fed. Reg. at 2684-85.

Because North Carolina's request that the EPA consider

the Dorris Report with respect to the significant contribution

issues was not timely filed, the EPA did not arbitrarily and

capriciously ignore the Dorris Report. Instead of considering

the Dorris Report as part of the section 126 rulemaking, the

EPA treated North Carolina's submission as a petition for

reconsideration. See id. at 2676.

Under CAA section 307(d), any documents "which become

available after the proposed rule has been published and

which the Administrator determines are of central relevance

to the rulemaking shall be placed in the docket as soon as

possible after their availability." 42 U.S.C. s 7607(d)(4)(B)(i).

Under both the plain language of this provision and this

Court's precedents, the Administrator enjoys substantial deference in determining whether to consider material submitted

after the close of the comment period. See, e.g., Eastern

Carolinas Broad. Co. v. FCC, 762 F.2d 95, 103 (D.C. Cir.

1985) ("Courts normally reverse an agency's decision not to

reopen the record only for abuse of discretion.").

The EPA maintains its comments reveal that it carefully

considered the report and its relevance to the section 126

rule. After such consideration, however, the EPA concluded

that the report was too preliminary and limited to justify

reopening the record and reconsidering its prior determination. While the Dorris Report relates to issues at the core of

the NOx SIP call and section 126 rulemaking, the EPA viewed

the report as "preliminary" and its findings limited. In its

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August 2000 Response to Comments, the EPA noted the

report "has not undergone scrutiny through notice-andcomment rulemaking" or "careful scientific and technical review." Rulemaking for Section 126 Petitions-Responses to

Significant Comments Which are [sic] Outside the Scope of

the June 24, 1999 Notice of Proposed Rulemaking at 8 (Aug.

2000). The EPA further noted that the approach put forward

by the report conflicts with the implementation of a marketbased NOx emission trading program. Given the deferential

standard employed in this context, the EPA's refusal to

reopen and reconsider its significant contribution findings

must be upheld.

III. NON-ELECTRIC GENERATING UNIT ISSUES

A. Alleged Budget Allocation Errors

Non-EGU Petitioners complain that the EPA made substantial errors in the allocation of emission allowances which

can only be cured by a remand and reallocation of all

emission allowances in the affected states. Specifically, NonEGU Petitioners identify two facilities for which there is a

great disparity between allocated emissions and actual emissions.6 In one case, the EPA allocated a facility less than

one-seventh what it should have been allocated because it

used erroneous heat-input data. In another, it grossly overestimated a facility's share of state-wide NOx emissions.

These errors not only impact the facilities in question, peti-

__________

6 Non-EGU Petitioners also argue that non-EGU sources that

began operating between 1995 and May 1, 1997 were never allocated the required NOx allowances. We do not consider this claim

because the EPA addressed the claims of the three units identified

that fell into this category. See Appalachian Power Co. v. EPA,

No. 99-1200, 2000 WL 1683469 (D.C. Cir. Oct. 13, 2000) (order,

inter alia, severing claims of petitioners and holding them in

abeyance pending implementation of settlement agreements).

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tioners claim, but all facilities in the state due to the statewide NOx caps.

The EPA argues that such claims are waived because they

were not raised during the notice and comment period, nor

does the record contain any indication that petitioners filed a

motion for reconsideration. The EPA allocated allowances

based upon the heat input data it received from covered

entities. Where the EPA received information from covered

facilities indicating an allocation error, it made corrections.

Insofar as a covered facility failed to ensure that the EPA

was making its allocation based upon proper data, the claim is

waived and cannot be addressed via judicial review. Of the

two facilities cited by Petitioners in their brief, the EPA notes

that one has settled its claim with the EPA, and the other

was specifically identified in the EPA's rulemaking. Oct.

1998 Rule, 63 Fed. Reg. at 56,369. The EPA's proposed rule

also specified what sorts of units would be covered, irrespective of their inclusion on the proposed list of allocations. Id.

at 56,332.

Petitioners nonetheless argue that the existence of any

allocation error requires setting aside all allowance allocations

for a given state because the EPA has imposed state-specific

budgets. Even were this claim to have merit, it too was

waived. Under the CAA, "[o]nly an objection to a rule or

procedure which was raised with reasonable specificity during

the period for public comment ... may be raised during

judicial review." 42 U.S.C. s 7607(d)(7)(B). The general

complaints raised by Non-EGU Petitioners during the rulemaking about errors in allowance allocations are insufficient

to meet this requirement as they failed to provide the agency

with enough information to address the alleged failing of the

rule.

B. Treatment of Cogenerators

The world of significant stationary sources producing NOx

can loosely be divided into two categories--electric generating units ("EGUs") and sources that do not generate electricity ("non-EGUs"). Cogenerators straddle these lines, as they

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serve two functions, electricity generation and some direct

industrial activity. We deal here with their classification.

EPA concluded that the application of its $2000/ton costeffectiveness principle called for different standards for the

two types of units. First, for "large EGUs"--boilers and

turbines that serve generators capable of producing greater

than 25 megawatts ("MWe") and that produce electricity for

sale to an electric grid (with different minimum sales levels

depending on the generator's date), see May 1999 Rule, 64

Fed. Reg. at 28,300-01--EPA imposed a ceiling of .15 pounds

per million Btu per hour ("lb./mmBtu/hr.").

Second, for "large non-EGUs" or "large boilers"--boilers

and turbines with a heat input greater than 250 mmBtu/hr.

that, in general, only generate steam and/or mechanical work

or that produce electricity for internal use only, see Jan. 2000

Rule, 65 Fed. Reg. at 2731 (40 C.F.R. s 97.4(a)(1)-(2))--EPA

required a 60% reduction in NOx emissions, which it says

corresponds to an average control level of approximately 0.17

lb./mmBtu/hr., May 1999 Rule, 64 Fed. Reg. at 28,301/2.

We do not know why EPA frames one limit in terms of NOx

emissions per mmBtu and the other as a percentage reduction. In the original SIP call, EPA stated a preference for a

flat limit over a percentage reduction for EGUs, noting that a

percentage reduction rule tended to benefit states that had

made less effort. 62 Fed. Reg. at 60,351/1. We've found, and

the parties offer, no explanation for rejecting this logic for

non-EGUs. But here the concern is that large cogenerators

selling electricity to the grid end up being treated as large

EGUs (at least if they sell at the minimum levels specified),

subject to the more stringent rule (evaluated in terms of

maximum emissions per mmBtu/hour).

Petitioners claim that EPA departed without adequate

explanation from a long-standing agency and congressional

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policy favoring cogeneration, and also failed affirmatively to

justify the new classification. We do not find the historical

policy concerns to be dispositive, but we agree on their

second point.

In previous regulatory contexts, EPA and Congress have

treated cogenerators as non-EGUs if they sold to the grid

less than one-third of their potential capacity, or less than 25

MWe per year. May 1999 Rule, 64 Fed. Reg. at 28,297/2. In

proposing its new definition of large EGUs in the preamble to

the May 1999 rule, EPA offered two relevant responses to

comments. First it argued that when the agency began using

the earlier division in 1978, it served broadly as "a proxy" to

distinguish between units that were, or were not, owned by

utilities. But it reasoned that since 1990 deregulation had

had a dramatic effect on the industry, allowing non-utilities

increasingly to compete with utilities. EPA believed that this

effect obviated the need to differentiate between utilities and

non-utilities. See id. In addition, EPA cited a supplemental

notice of proposed rulemaking under the NOx SIP call for the

proposition that "there is no relevant physical or technological

difference between utilities and other power generators," id.

at 28,297/3 (quoting 63 Fed. Reg. at 25,923), and stated that it

"continue[d] to believe that cogeneration units can achieve

similar NOx emission reductions as utility units," id. at

28,298/1.

The explanation by reference to electric utility deregulation

may well explain abandonment of the old definition, although

the point is hard to evaluate since the link between choosing

suitable emissions limits and the degree of direct competition

between the classes of regulated firms is unexplained and not

self-evident. In any event, the rationality of moving away

from the prior classification in itself says nothing about why

EPA chose the new one. On that score, EPA's current

reasoning, to the extent that we are able to discern it,

supports the new classification as a means to implement the

cost-effectiveness criteria. While as we noted above the

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standard for large EGUs is more stringent than the one for

large non-EGUs when evaluated in terms of emissions per

mmBtu/hour heat input (.15 lb. as opposed to .17 lb.), a table

in the preamble to the May 1999 rule indicates that the two

control levels have virtually identical predicted incremental

costs ($1,468 for the former, $1,467 for the latter, all in terms

of estimated cost per ton in 1990 dollars in 2007). See id. at

28,300 (Table II-4).7

If this analysis is correct (and EPA has presented no

alternative), then the classification of cogenerators should

turn on whether their NOx reduction costs best match those

of EGUs or non-EGUs. We note at the outset that the nonEGU class includes cogenerators that produce electricity for

internal purposes only. Thus sources that apparently may be

identical physically are subject to different standards--a divergence hard to reconcile to the supposedly controlling

criterion of cost. To the extent that it is linked to EPA's

former concern over competition with utilities, the agency's

own abandonment of that concern renders it obsolete. Indeed, EPA does not even attempt to justify the distinction.

It merely notes that "it may be appropriate at some time in

the future to consider all units generating electricity, whether

for sale or internal use, as a single category." Id. at 28,298/1.

EPA does assert that "there is no relevant physical or

technological difference between utilities and other power

generators." Id. at 28,297/3 (quoting 63 Fed. Reg. at 25,923).

If true, this similarity would support treating cogenerators as

EGUs, but EPA cites no record support. See id. Otherwise,

EPA merely claimed that "it continues to believe that industrial cogeneration units can achieve similar NOx emission

limitations reductions as utility units" and that selective catalytic reduction and selective non-catalytic reduction are "prov-

__________

7 The preamble to the final rule presents updated figures that

are more divergent, estimating the large EGU controls to cost

$1,432 per ton in 1990 dollars in 1997, and the large non-EGU

controls to cost $1,589. Jan. 2000 Rule, 65 Fed. Reg. at 2677.

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en technologies demonstrated on industrial and utility units."

Id. at 28,298/1. But the point that cogenerators can implement these technologies hardly shows that they can do so at

the same costs as other EGUs.

In its brief, EPA claims that it "specifically reviewed the

cost-effectiveness of controls for cogeneration facilities in

response to comments" and "determined that the control

technologies that EPA had determined to be highly costeffective for EGUs ..., had been successfully applied to

cogeneration facilities, and, therefore, there was no technical

reason to distinguish between generating facilities owned by

utilities and other electric generators, including cogenerators." But, once again, neither this statement nor any of the

record documents cited in support purports to assess the

costs of "successfully" applying such controls to cogenerators.

Additional materials cited in EPA's brief are equally silent on

the subject. See Office of Air and Radiation, U.S. Environmental Protection Agency, "Analyzing Electric Power" (July

1996); 62 Fed. Reg. at 60,349 (Table III-3),

60,350/3.

Finally, EPA's brief also notes that "EPA's analysis of

which controls are highly cost-effective for EGUs included all

cogeneration units that generated electricity for sale." But

the fact that all units currently classified as "EGUs" can, on

average, cost-effectively implement the EGU cap, see May

1999 Rule, 64 Fed. Reg. at 28,300 (Table II-4), says nothing

about whether cogenerators, as a discrete subclass, can do so.

Indeed, if cogenerators represented a small enough portion of

the sample size, even astronomical control costs would have

little effect on the average. On the central question of

whether EPA actually compared the costs of cogenerator

controls to those of other EGUs, EPA does not speak and the

documents it cites shed no light.

As EPA has failed to explain its classification of cogenerators, see, e.g., American Lung Ass'n v. EPA, 134 F.3d 388,

392 (D.C. Cir. 1998), and its failure to respond to significant

comments leaves us only to guess whether its decision was

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"based on a consideration of the relevant factors," see, e.g.,

Thompson v. Clark, 741 F.2d 401, 409 (D.C. Cir. 1984)

(quoting Citizens to Preserve Overton Park v. Volpe, 401 U.S.

402, 416 (1971)), we vacate and remand that portion of the

rule.

C. Source-Specific Issues

1. AK Steel Corporation

AK Steel, one of the Non-EGU Petitioners, claims that the

final rule improperly subjected four of its waste heat boilers

to regulation as large non-EGUs. The regulations at issue

apply to these boilers only if they (a) are "fossil fuel fired"

boilers with a 1995 "heat input" comprised more than 50% of

fossil fuel, Jan. 2000 Rule, 65 Fed. Reg. at 2728/3, 2731/1 (40

C.F.R. s 97.2 (definitions of "unit" and "fossil fuel fired")),

and (b) have a "maximum design heat input" greater than 250

mmBtu/hr., id. at 2731/2 (40 C.F.R. s 97.4(a)(2)(i)).

AK Steel argues initially that its four furnaces fail to meet

the first criterion: The waste heat input from its "slab heat

furnaces" is great enough to render its fossil fuel input less

than 50% of the total, so that its boilers are not "fossil fuelfired." EPA argues that AK Steel failed to raise its objection

with the necessary specificity. See 42 U.S.C. s 7607(d)(7)(B)

("Only an objection to a rule or procedure which was raised

with reasonable specificity during the period for public comment ... may be raised during judicial review."). We think

its submission adequate, though only barely so. On the

merits, however, AK Steel is mistaken; it hasn't read the

regulations carefully enough.

EPA correctly notes that the regulation defines "heat

input" as excluding "heat derived from preheated combustion

air, recirculated flue gases, or exhaust from other sources."

Jan. 2000 Rule, 65 Fed. Reg. at 2729/1 (40 C.F.R. s 97.2).

The EPA asserts, and petitioners do not dispute, that the

waste heat input that it invokes is precisely such "preheated

combustion air" or "exhaust from other sources." So those

inputs do not prevent its boilers from satisfying the 50%

fossil-fuel calculation.

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In their reply brief, petitioners raise a new issue. There

they argue that waste heat should be excluded from calculation of the 250 mmBtu/hr. threshold for "maximum design

heat input," see id. at 2731/2 (40 C.F.R. s 97.4(a)(2)(i)), which

if true would mean that their boilers would not exceed the 250

mmBtu/hr standard. AK Steel has no explanation for why

waste heat should be counted in one context and not the

other, but EPA does offer a defense of the opposite position,

arguing that, unlike the definition for "heat input," the capacity-based definition of "maximum design heat input" does not

exclude specific input types. See Jan. 2000 Rule, 65 Fed.

Reg. at 2729/1 (40 C.F.R. s 97.2) (defining maximum design

heat input as "the ability of a unit to combust a stated

maximum amount of fuel per hour ... on a steady state basis,

as determined by the physical design and physical characteristics of the unit"). But because of petitioners' failure to raise

the issue in their opening brief, we do not address it on the

merits. See United States v. Wilson, 240 F.3d 39, 45 (D.C.

Cir. 2001).

2. New Boston Coke Corporation

New Boston Coke Corporation operates two regulated boilers subject to the same set of regulations. Its brief states

that these boilers "are each designed with maximum heat

capacity of 464 mmBtu/hr.," but claims that in actual operation the heat input of each is less than half that figure. One

boiler is usually kept in reserve while the other fires, and the

one that fires usually does so at 40% of capacity or less.

Thus, argues New Boston, the normal input capacity for the

units is less than 232 mmBtu/hr., below the 250 mmBtu/hr.

threshold.

The EPA responds that New Boston has forfeited the claim

because it never raised the objection before the agency, as

required by s 307(d)(7)(B) of the Clean Air Act, 42 U.S.C.

s 7607(d)(7)(B). New Boston's rebuttal is that it never received notice of the proposed rule, arguing that its name

didn't appear in the appendix to that notice and denying that

it was included by virtue of the notice's generic terms. See

Oct. 1998 Rule, 63 Fed. Reg. 56292, 56,332 (40 C.F.R.

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s 52.34(k) & Table F-1), 56,341 (40 C.F.R. s 97.4), 56,360-91.

(This same defect in notice is raised by the Non-EGU

Petitioners on behalf of an unspecified group of sources, but it

is only for New Boston that petitioners claim that the supposed defect had any adverse effect (from petitioners' perspective) on the ultimate regulation, and so we address the

claim only in this connection.)

Section 307(d)(7)(B) addresses the possibility of defective

notice. It excuses a party's failure to object in the course of

the rulemaking where it was "impracticable to raise" the

objection, and the agency's failure to give proper notice would

plainly create such impracticality. American Petroleum Institute v. Costle, 665 F.2d 1176, 1190-91 (D.C. Cir. 1981).

Section 307(d)(7)(B), however, explicitly makes the excuse

conditional on the party's seeking relief before the agency by

petition for reconsideration. See id. at 1191-92. As there is

no evidence that any such petition was submitted, we cannot

reach the merits of petitioners' claim, including even the claim

of defective notice.

IV. FACILITY-SPECIFIC ISSUES

Two petitioners raise facility-specific objections to the section 126 rule. In each case, we have no occasion to reach the

merits of petitioners' arguments. By failing to raise their

objections to the EPA prior to seeking judicial review, petitioners waived their claims.

A. Midland Cogeneration Venture

Petitioner Midland Cogeneration Venture ("MCV") operates a "combined cycle" cogeneration plant that produces

electricity and steam in Midland, Michigan. MCV alleges

that the EPA was arbitrary and capricious in applying the

section 126 rule to its facility because MCV is legally and

operationally incapable of emitting in excess of the rule's

"NOx Cap."8

__________

8 MCV also challenges the EPA's treatment of cogeneration

facilities. This issue is addressed supra Part III.B.

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This Court has no jurisdiction to consider MCV's claims.

Under section 307(d) of the Act, "[o]nly an objection to a rule

or procedure which was raised with reasonable specificity

during the period for public comment ... may be raised

during judicial review." 42 U.S.C. s 7607(d)(7)(B). MCV

does not dispute that its comments did not address this issue.

Its defense is that no such comments were possible because,

as the EPA admits, the agency did not have sufficient data on

cogenerators to develop an output-based approach to setting

emission limits for given facilities. This may be so, but "the

procedural requirements of the Clean Air Act do not permit

[MCV] to raise this objection for the first time on appeal."

API v. Costle, 665 F.2d 1176, 1190 (D.C. Cir. 1981). Rather,

the CAA requires a petitioner to first raise its objection to the

agency though a petition for reconsideration. See id. at 1191

("The statute states that before this court may review a

procedural objection the parties must raise the objection on a

petition for reconsideration before the EPA when the grounds

for such objection 'arose after the period for public comment

(but within the time specified for judicial review).' "); Appalachian Power Co. v. EPA, 135 F.3d 791, 799 n.14 (D.C. Cir.

1998) (same). Because MCV never registered its objections

with the agency, let alone filed a formal petition for reconsideration, we cannot reach the merits of its claim.

B. Indiana Municipal Power Agency

Petitioner Indiana Municipal Power Agency ("IMPA") is a

municipal power agency that operates four combustion turbines that provide supplemental power on days with high

power usage. IMPA alleges that the "25-ton exemption" in 40

C.F.R. s 97.4(b) is arbitrary and capricious because it "ignores actual emissions and instead calculates hypothetical

maximum emissions" in determining whether a unit is eligible

for the exemption. By adopting a "worst-case-fuel assumption," the exemption treats IMPA as if its emissions were

nearly five times greater than the actual emissions rate

during normal operating conditions.

Like MCV, IMPA never raised its objection in comments

before the agency. Unlike MCV, however, IMPA cannot

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claim that it was caught by surprise by the EPA's final rule.

While the specific contours of the 25-ton exemption were not

identified in the EPA's Notice of Proposed Rulemaking

("NOPR"), the NOPR did propose adopting the exemption

contained in the NOx SIP regulations at 40 C.F.R. s 96.4(b).

See Oct. 1998 Rule, 63 Fed. Reg. at 56,313. The proposal

used different language than s 97.4, but it similarly bases the

exemption on a unit's "maximum potential hourly NOx mass

emissions." 40 C.F.R. s 96.4(b)(1)(ii), (iii). This satisfies the

requirement that the final rule be a "logical outgrowth" of the

proposed rule. See Fertilizer Inst. v. EPA, 935 F.2d 1303,

1311 (D.C. Cir. 1991). Therefore, IMPA had ample opportunity to comment on the proposed rule. Because it did not, it

waived its claim under section 307(d). 42 U.S.C.

s 7607(d)(7)(B).

V. PITTSBURGH

Like many of the affected states, Pennsylvania is both an

"upwind" state subject to the s 126 regulation and a "downwind" state that has petitioned EPA under s 126 to regulate

"upwind" contributions to Pennyslvania's own nonattainment

problems. Acting in its capacity as a downwind state, Pennsylvania objects to EPA's refusal to use ozone pollution in the

Pittsburgh area as a basis for s 126 findings (thus, it argues,

potentially failing to impose crackdowns on additional sources

upwind of Pittsburgh). The problems arise from two circumstances: Pittsburgh appeared at the time of the rulemaking

to be on the verge of being reclassified as in attainment of the

1-hour standard, but also on the verge of being subject to the

more stringent 8-hour rule.

In its May 1999 Rule, EPA denied the portion of Pennsylvania's s 126 petition that alleged upwind contribution to the

nonattainment of the 1-hour ozone standard in the Pittsburgh

area. Having received preliminary data showing that Pittsburgh (and a number of other areas) were no longer in

violation of that standard, and having taken steps to formally

revoke its nonattainment determination, see 64 Fed. Reg. at

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28,257/2, EPA thought "it would not be appropriate" to

consider whether the pertinent upwind areas were "significantly contributing" to a nonattainment that was apparently

non-existent, id. at 28,291/2. Section 110(a)(2)(D)(i) also requires that SIPs bar emissions that would "interfere with

maintenance" of ambient standards, and petitioning states

such as Pennsylvania asked for such a finding as to the 1-

hour standard. EPA declined this too, explaining that its

policy was to revoke the 1-hour standard for any area that

attained it and replace it with the stricter 8-hour standard.

See id. at 28,291-92. But in January 2000, after this court's

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

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

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

Trucking Ass'n, 121 S. Ct. 903 (2001), which remanded the 8-

hour standard, EPA moved to reimpose the 1-hour standard

for all areas where it had been revoked and has yet to reintroduce the 8-hour standard. See Jan. 2000 Rule, 65 Fed.

Reg. at 2678-79. In its January 2000 rule, in which it

converted its technical determinations into formal s 126 findings, EPA recognized that the 1-hour standard might once

again become the sole NOx standard. But it didn't seize the

occasion to revisit its rejection of the "interfere with maintenance" portion of Pennsylvania's petition. See id. at 2678/3.

Pennsylvania's first objection is that the Pittsburgh attainment data were only preliminary; to this day they have not

yielded a formal finding of attainment. (In fact, data from

the 1999 ozone season indicate renewed violations.) Moreover, the statute provides that a region in "moderate" nonattainment that fails to move into attainment will, at the very

least, be reclassified as "serious" and thus subject to more

stringent controls, see 42 U.S.C. ss 7511(b)(2), 7511a(c), and

petitioners claim that such a fate awaits Pittsburgh. Pennsylvania argues that if EPA had pursued the "substantial

contribution" inquiry, Pennsylvania would get the benefit of

upwind states' being forced to share some of burden of

achieving ozone attainment in Pittsburgh.

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EPA responds that Pennsylvania suffered no prejudice and

thus lacks the "injury in fact" necessary to claim Article III

standing. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560

(1992). It claims that had it granted Pennsylvania's petition

with regard to Pittsburgh, EPA's modeling methods dictated

that it would have found linkages with regard to North

Carolina, Ohio, and West Virginia, all states on which EPA

has imposed s 126 controls anyway, as a result of its findings

as to the Philadelphia area. But Pennsylvania observes that

its s 126 petition had sought findings as to the contribution of

a number of other upwind states, several of which were not

ultimately subjected to s 126 findings. EPA cannot, it argues, deflect judicial review of its refusal to inquire into

effects on Pittsburgh simply by filing a brief asserting that, if

it had done so, it would have found no more than it did when

it focused on Philadelphia. If EPA's ground for refusing to

crunch the data for Pittsburgh is illegal, Pennsylvania has

been wrongly denied potential benefits. Thus Pennsylvania

asserts a real injury that the court could redress. See Lujan,

504 U.S. at 560-61.

While Pennsylvania wins on the standing argument, it loses

on the merits. EPA observes that s 110(a)(2)(D)(i) speaks

simply of emissions that "contribute significantly to nonattainment ... in any other State," with no language suggesting, as

the Act does in a number of places, that formal designation or

reclassification is critical. See 42 U.S.C. s 7407(d)(1)(A) (allowing EPA to require state governors to supply EPA with a

list designating areas as "attainment" or "nonattainment");

s 7502 (framework for setting deadlines and plans for areas

deemed "nonattainment"); s 7511(b)(2) (procedures for reclassifying areas that fail to meet attainment deadlines). It

seems reasonable for EPA to refrain from investigating

whether upwind emissions "significantly contribute" to nonattainment that, according to evidently undisputed data, does

not exist, rather than to march forward on the basis of a

formal classification that it believed to be outdated and was in

the process of revoking. (In reaching this conclusion we

express no opinion on the issue that intervenors Appalachian

Power et al. tell us is raised in D.C. Cir. No. 00-1223, namely,

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whether EPA may make significant contribution determinations for areas that have never been formally classified as

nonattainment.).

Developments in the Pittsburgh area after the close of the

present rulemaking record of course cannot be a basis for

faulting EPA's decision on that record. Nor did its January

2000 decision, converting its May 1999 technical determinations into formal findings (without, as originally contemplated,

conditioning such findings on the failure of the SIP process),

require a reopening. Pennsylvania may, of course, use later

developments as the basis for another s 126 petition.

Pennsylvania further argues that in light of EPA's reinstatement of the 1-hour ambient standard, it should have

addressed the "interfere with maintenance" portion of Pennsylvania's petition. Here too EPA was reasonable. Because

the EPA policy in May 1999 was to supplant the 1-hour

standard with the 8-hour standard as soon as an area met the

1-hour standard, it made sense to decline all petitions seeking

findings of interference with maintaining the 1-hour standard; there was then every reason to suppose that such

findings would almost immediately become obsolete. Once

again, Pennsylvania can respond to later developments by

submitting another s 126 petition.

VI. CONCLUSION

In summary, we remand the rules to the EPA to allow the

agency to (1) properly justify either the current or a new set

of EGU utilization growth factors to be used in estimating

utilization in 2007, and (2) either alter or properly justify its

categorization of cogenerators that sell electricity to the

electric grid as EGUs. With respect to all other issues,

including those not discussed expressly herein, the petitions

are denied.

So ordered.

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