NATURAL RESOURCES DEFENSE COUNCIL, PETITIONER v.

ENVIRONMENTAL PROTECTION AGENCY, RESPONDENT, NATIONAL

PETROCHEMICAL & REFINERS ASSOCIATION, ET AL., INTERVENORS

No. 06-1045 Consolidated with 06-1046, 06-1047, 06-1214, 07-1311

UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA

CIRCUIT

571 F.3d 1245; 387 U.S. App. D.C. 162; 2009 U.S. App. LEXIS 15384; 69 ERC (BNA)

1284; 39 ELR 20150

November 20, 2008, Argued

July 10, 2009, Decided

PRIOR HISTORY: [***1]

On Petitions for Review of an Order of the

Environmental Protection Agency.

NRDC v. EPA, 2008 U.S. App. LEXIS 963 (D.C. Cir.,

Jan. 11, 2008)

COUNSEL: David S. Baron argued the cause and filed

the briefs for petitioner, Natural Resources Defense

Council.

Anne Milgram, Attorney General, Attorney General's

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

Griffin, Deputy Attorney General, were on the briefs for

petitioner, State of New Jersey.

Kevin P. Auerbacher, Assistant Attorney General,

entered an appearance.

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

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

Chamber of Greater Baton Rouge, et al. Geraldine E.

Edens entered an appearance.

Andrew Cuomo, Attorney General, Attorney General's

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

Michael J. Myers, Assistant Attorneys General, Richard

Blumenthal, Attorney General, Attorney General's Office

of the State of Connecticut, and Kimberly P. Massicotte,

Assistant Attorney General, were on the briefs for

intervenors, the States of New York and Connecticut in

support of petitioner.

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

briefs for intervenor National Petrochemical & Refiners

Association in support of petitioner, Natural Resources

Defense [***2] Council.

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

argued the cause for respondents. With him on the brief

were John C. Cruden, Deputy Assistant Attorney

General, and Diane E. McConkey, Counsel, U.S.

Environmental Protection Agency.

Norman W. Fichthorn and Lucinda M. Langworthy were

on the brief for intervenor Utility Air Regulatory Group

in support of respondents. Allison D. Wood entered an

appearance.

Charles H. Knauss was on the brief for intervenors

National Petrochemical & Refiners Association and

American Petroleum Institute in support of respondents.

Martha E. Cox and Stacy R. Linden entered appearances.

JUDGES: Before: GINSBURG, HENDERSON and

ROGERS, Circuit Judges. Opinion concurring in part and

dissenting in part filed by Circuit Judge ROGERS.

Page 1
OPINION

[*1250] [**167] Opinion for the Court filed PER

CURIAM.

PER CURIAM: In 1997, the EPA revised the

National Ambient Air Quality Standard (NAAQS) for

ozone from a 1-hour standard to an 8-hour standard.

These consolidated petitions for review challenge aspects

of the Final Rule To Implement the 8-Hour Ozone

National Ambient Air Quality Standard -- Phase 2, 70

Fed. Reg. 71,612 (2005) (Phase 2 Rule), and Phase 2 of

the Final Rule To Implement the 8-Hour Ozone [***3]

National Ambient Air Quality Standard -- Notice of

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

(Reconsideration Notice). We hold the Phase 2 Rule is

inconsistent with the Clean Air Act (CAA or Act) in

allowing participation in a regional cap-and-trade

program to satisfy an area-specific statutory mandate. We

further hold the EPA arbitrarily eliminated one safeguard

and violated the anti-backsliding provision of the Act

insofar as it eliminated another from its regulations

governing review of new sources of pollution. We

therefore grant the petitions with respect to those aspects

of the Phase 2 Rule. In view of our decision in North

Carolina v. EPA, 531 F.3d 896, 382 U.S. App. D.C. 167

(2008), in which we granted a petition for review of the

Clean Air Interstate Rule (CAIR), we defer consideration

of the Phase 2 Rule and Reconsideration Notice insofar

as they relate to the CAIR program. We deny the

petitions in all other respects.

I. Background

The Act requires the EPA to designate areas as

attainment, nonattainment, or unclassifiable for each

NAAQS. CAA § 107(d)(1)(B), 42 U.S.C. §

7407(d)(1)(B). States have primary responsibility for

implementing those standards, and must submit a state

implementation plan [***4] (SIP) that specifies how the

state will achieve and maintain compliance with the

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

SIP for a nonattainment area must include certain control

measures. Id. § 7501 et seq. Subpart 1 applies to all

nonattainment areas, id. §§ 7501-7509a, whereas Subpart

2 specifies additional requirements for ozone

nonattainment areas, id. §§ 7511-7511f. Section 181 of

the Act classifies ozone nonattainment areas from

"marginal" to "extreme" based upon the degree to which

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

7511. An area that exceeds the NAAQS by a greater

margin is given more time to meet the standard but is

subjected to progressively more stringent emissions

controls for ozone precursors, namely, volatile organic

compounds (VOCs) and oxides of nitrogen (NO[X]). See

CAA § 182, 42 U.S.C. § 7511a.

In 1997, the EPA determined the NAAQS for ozone,

expressed as the amount of ozone in the ambient air

averaged over one hour, was inadequate to protect public

health. The EPA therefore promulgated a new NAAQS of

.08 ppm of ozone averaged over eight hours. Under the

8-hour standard, some ozone nonattainment areas are

subject only to the more flexible [***5] requirements of

Subpart 1, while areas with higher levels of ozone are

subject to the additional requirements of Subpart 2. See S.

Coast Air Quality Mgmt. [*1251] [**168] Dist. v.

EPA, 472 F.3d 882, 893-95, 374 U.S. App. D.C. 121

(D.C. Cir. 2006).

The EPA implemented the 8-hour NAAQS in two

phases; the Phase 2 Rule and Reconsideration Notice here

under review implement the requirements of Subpart 1

and Subpart 2 for areas not attaining the 8-hour NAAQS.

The consolidated petitions challenge those rules as

follows. The Natural Resources Defense Council, the

States of New Jersey, Connecticut, and New York, and

the National Petrochemical and Refiners Association

challenge provisions implementing the statutory

requirement that each nonattainment area provide for

such emissions reductions as may be obtained by the

adoption of reasonably available control technology

(RACT). The NRDC and New Jersey challenge

provisions governing review of new sources of pollution.

The NRDC also challenges two provisions implementing

the statutory requirements that a SIP for a nonattainment

area provide for specific percentage reductions in

emissions and for contingency measures. Finally, the

Chamber of Greater Baton Rouge and affiliated

petitioners [***6] 1 challenge the imposition of

reformulated gasoline requirements in the Baton Rouge

area.

1 The affiliated petitioners are the West Baton

Rouge Chamber of Commerce, the Iberville

Parish Chamber of Commerce, and the Louisiana

Oil Marketers and Convenience Store

Association.

We review the EPA's interpretation of the Act

pursuant to Chevron U.S.A. Inc. v. Natural Res. Def.

Council, Inc., 467 U.S. 837, 104 S. Ct. 2778, 81 L. Ed. 2d

Page 2

571 F.3d 1245, *; 387 U.S. App. D.C. 162, **;

2009 U.S. App. LEXIS 15384, ***2; 69 ERC (BNA) 1284
694 (1984): We ask first whether the Congress has

"directly spoken to the precise question at issue." Id. at

842. If so, then we must "give effect to the

unambiguously expressed intent of Congress." Id. at 843.

If, however, the "statute is silent or ambiguous with

respect to the specific issue," then we defer to the EPA's

interpretation as long as it is "based on a permissible

construction of the statute." Id. The Act requires us to

review the Phase 2 Rule deferentially to determine only

whether it is "arbitrary, capricious, an abuse of discretion,

or otherwise not in accordance with law." CAA §

307(d)(9)(A), 42 U.S.C. § 7607(d)(9)(A); see Bluewater

Network v. EPA, 372 F.3d 404, 410, 362 U.S. App. D.C.

37 (D.C. Cir. 2004) ("We give particular deference to the

EPA when it acts under unwieldy and science-driven

statutory [***7] schemes like the Clean Air Act")

(internal quotation marks omitted).

II. Reasonably Available Control Technology

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

for nonattainment areas "provide for the implementation

of all reasonably available control measures as

expeditiously as practicable (including such reductions in

emissions from existing sources in the area as may be

obtained through the adoption, at a minimum, of

reasonably available control technology)." 42 U.S.C. §

7502(c)(1) (emphasis added). Ozone nonattainment areas

that are subject to Subpart 2 of Part D are subject to more

specific reasonably available control technology

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

Petitioners challenge three aspects of the implementation

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

NRDC challenges the rule providing that RACT is

satisfied for Subpart 1 areas by SIPs "demonstrating that

the area has adopted all control measures necessary to

demonstrate attainment as expeditiously as possible,"

Phase 2 Rule, 70 Fed. Reg. at 71,701 (codified at 40

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

challenges the EPA's decision to allow states to meet the

[***8] RACT [*1252] [**169] requirement under the

8-hour NAAQS by certifying that RACT is met under the

1-hour NAAQS, see id. at 71,652-53. Third, the NRDC,

New Jersey, the States of Connecticut and New York,

and the National Petrochemical and Refiners Association

challenge the EPA's conclusion that states may satisfy the

RACT requirement by participating in two cap-and-trade

programs, the NO[X] SIP Call and CAIR, see id. The

court has stayed consideration of the CAIR-RACT

determination. 2

2 The second and third challenges are to the

EPA's statements in the preamble to the final rule.

The statements constitute reviewable final agency

action, see CAA § 307(b)(1), 42 U.S.C. §

7607(b)(1), as they represent "the consummation

of the agency's decisionmaking process and . . .

establish[] rights and obligations or create[]

binding legal consequences." Natural Res. Def.

Council v. EPA, 559 F.3d 561, 564, 385 U.S. App.

D.C. 132 (D.C. Cir. 2009). The EPA's statements

as to how it will implement the RACT

requirement are not conjectural and their terms

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

intended the statements to create binding legal

consequences. See Kennecott Utah Copper Corp.

v. Dep't of Interior, 88 F.3d 1191, 1222-23, 319

U.S. App. D.C. 128 (D.C. Cir. 1996).

A. [***9] RACT in Subpart 1 Nonattainment Areas

The NRDC challenges the Phase 2 Rule's treatment

of the "reasonably available control technology"

requirement of CAA § 172(c)(1), 42 U.S.C. § 7502(c)(1).

Under the Phase 2 Rule, nonattainment areas governed by

Subpart 1 that request an attainment deadline within five

years of their designation "shall meet the RACT

requirement by submitting an attainment demonstration

SIP demonstrating that the area has adopted all control

measures necessary to demonstrate attainment as

expeditiously as practicable." Phase 2 Rule, 70 Fed. Reg.

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

NRDC contends that this provision is an unlawful waiver

of the RACT requirement of § 172(c)(1) because, under

the Phase 2 Rule, a state need not require RACT at all in

such areas. It views the statutory phrase "at a minimum"

as imposing an unambiguous requirement for all

nonattainment areas. The NRDC thus contends the Phase

2 Rule violates the plain text of § 172(c)(1) by doing

away with this requirement in some nonattainment areas.

However, we conclude that the term "reasonably

available control technology" is ambiguous in context

and that the EPA's interpretation is [***10] reasonable.

The court has previously concluded that the term

"reasonably available" in the analogous phrase

"reasonably available control measure" (RACM) in §

172(c)(1) is ambiguous and "clearly bespeaks [the

Congress's] intention that the EPA exercise discretion in

determining which control measures must be

implemented . . . ." Sierra Club v. EPA, 294 F.3d 155,

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571 F.3d 1245, *1251; 387 U.S. App. D.C. 162, **168;

2009 U.S. App. LEXIS 15384, ***6; 69 ERC (BNA) 1284
162-63, 352 U.S. App. D.C. 357 (D.C. Cir. 2002). The

court explained that the statute did not specify which

control measures would be deemed "reasonably

available" and did not "compel[] a state to consider

whether any measure is 'reasonably available' without

regard to whether it would expedite attainment in the

relevant area." Id. at 162. Thus, the EPA had discretion to

conclude that a measure was not "reasonably available" if

it would not expedite attainment. Id. Because the same is

true of the phrase "reasonably available control

technology," the term "reasonably available" within

RACT is also ambiguous. Moreover, even if the phrase

"at a minimum" requires that at least RACT-level

reductions be achieved in all nonattainment areas, the

phrase does not specify the content of the RACT

requirement. Given this ambiguity, the EPA has

discretion reasonably [***11] to define the controls that

will demonstrate compliance.

[*1253] [**170] The EPA's interpretation,

construing "reasonably available" as meaning only

control technologies that advance attainment, is

reasonable in light of the statute's accompanying text and

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

areas to achieve RACM "as expeditiously as practicable

(including such reductions . . . as may be obtained

through the adoption, at a minimum, of reasonably

available control technology) . . . ." 42 U.S.C. §

7502(c)(1). To the extent an area is already achieving

attainment as expeditiously as possible, imposition of

additional control technologies would not hasten

achievement of the NAAQS. In such a situation, the EPA

may reasonably conclude that no control technologies are

reasonably available and the area need not implement

further technologies to satisfy the RACT requirement.

Sierra Club v. EPA, 294 F.3d 155, 352 U.S. App. D.C.

357 (D.C. Cir. 2002), supports the reasonableness of the

EPA's interpretation. In Sierra Club, the court held

reasonable the EPA's interpretation of RACM as

requiring only those control measures that would

contribute to timely and expeditious attainment. 294 F.3d

at 162; see also Sierra Club v. EPA, 314 F.3d 735,

743-45 (5th Cir. 2002). [***12] The court explained, in

part, that the "Act 'use[s] the same terminology in

conjunction with the RACM requirement' as it does in

requiring timely attainment." Sierra Club, 294 F.3d at

162. The § 172(c)(1) RACM requirement, like the timely

attainment requirement of CAA § 181(a)(1), 42 U.S.C. §

7511(a)(1), requires implementation of RACM "as

expeditiously as practicable." Thus, the court concluded,

the RACM requirement could reasonably be understood

as a means of meeting the attainment deadline. 294 F.3d

at 162. Because the RACT requirement is located in a

parenthetical modifying RACM and because the RACM

requirement is described as "including" the RACT

requirement, the RACT requirement is likewise linked to

the timely attainment terminology. Given this textual

linkage, the EPA may reasonably extend to the RACT

requirement its interpretation of RACM as requiring only

those control measures that would facilitate expeditious

attainment of the NAAQS.

Contrary to the NRDC's arguments, the RACT

requirement does not lose all meaning under the EPA's

definition. When control technology is necessary to

advance attainment, it is "reasonably available" under the

definition and would be required [***13] under the rule.

The fact that the RACT requirement was previously

located in a separate section and not in a parenthetical

modifying the RACM requirement does not support the

NRDC's position. Compare CAA § 172(b)(2), 42 U.S.C.

§ 7502(b)(2), (3) (1977), with CAA § 172(c)(1), 42

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

Congress moved the requirement to a parenthetical

modifying the RACM requirement supports the EPA's

conclusion that the RACT requirement could be

interpreted in the same manner as the RACM

requirement. Although both the NRDC and the EPA

point to legislative history purportedly supporting their

positions, neither points to legislative history bearing on

the meaning of "reasonably available." See H.R. REP.

NO. 101-490, reprinted in 2 LEGISLATIVE HISTORY

OF THE CLEAN AIR ACT AMENDMENTS OF 1990,

at 223. The term "reasonably available" is ambiguous,

and the EPA's interpretation is a permissible construction

of the statute.

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

RACT

The Phase 2 Rule provides that a control measure

approved as RACT under the 1-hour standard will be

approved as RACT under the 8-hour standard absent

information indicating it should not be approved.

[***14] Phase 2 Rule, 70 Fed. Reg. at [*1254] [**171]

71,652/3. Rather than reassessing what constitutes

RACT, a state can certify that controls that previously

satisfied the RACT requirement also satisfy the

requirement under the 8-hour standard. New Jersey

contends this provision is contrary to the Act and

Page 4

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2009 U.S. App. LEXIS 15384, ***10; 69 ERC (BNA) 1284
arbitrary and capricious. In New Jersey's view the EPA

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

for which no controls had been considered RACT under

the 1-hour standard, see id. at 71,655, because what is

"reasonably available" changes over time. Without a

re-analysis, New Jersey maintains there is no basis for

states to certify that the initial RACT analysis meets the

RACT requirement under the 8-hour NAAQS and states

may apply outdated RACT controls. New Jersey thus

claims that the EPA should have either updated its RACT

guidance documents or at least provided uniform criteria

for states to use in making RACT certifications.

The EPA promulgates two types of guidance that

assist states in determining what control techniques meet

the RACT requirement, control techniques guidelines

(CTGs) and alternative control techniques (ACTs).

Section 183 of the Act requires the EPA to issue CTGs

[***15] for certain categories of sources that emit VOCs.

See 42 U.S.C. § 7511b. Where CTGs exist, they establish

the presumptive level of control meeting RACT. Phase 2

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

require alternative controls rather than following the

guidance in the CTGs. Notice of Final Determination and

Availability of Final Control Techniques Guidelines, 71

Fed. Reg. 58,745, 58,747 (Oct. 5, 2006). Section 183(c)

of the Act requires the EPA to issue ACTs for major

sources of VOCs and NO[X]. 42 U.S.C. § 7511b(c). The

ACTs "describe available control techniques and their

cost effectiveness" but do not establish presumptive

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

neither the CTGs nor ACTs set firm RACT requirements.

Despite New Jersey's concerns, the EPA's

certification provision does not conflict with the Act and

is not arbitrary and capricious. Although the EPA did not

revise the guidance documents, the EPA's case-by-case

approach adequately ensures that RACT determinations

will take into account advances in technology. First, the

EPA has directed states to consider available information

in addition to the CTG and ACT documents when

making RACT determinations. [***16] Id. at 71,655/1.

If a state is presented with information indicating that a

previous RACT determination is inappropriate, the state

must consider that information and modify its RACT

determinations accordingly. Id. Second, when submitting

RACT certifications to the EPA as part of their RACT

SIP submissions, states must provide supporting

information. Id. at 71,655/2. Third, if additional

information is presented during notice-and-comment

rulemaking, both the state and the EPA are required to

consider that information as part of the rulemaking; this

includes information presented during

notice-and-comment rulemaking for RACT SIP

submissions for previously controlled sources. Id.

Because the EPA could reasonably conclude that these

mechanisms will ensure the case-by-case determinations

will take into account advances in technology, the EPA

could also reasonably conclude "that the best way to

address the possibility that CTGs or ACTs might not

reflect all currently available technologies was by

requiring each State to consider any new available

information in making its certification, which will then be

reviewed by the EPA as part of the SIP submission

process," EPA Br. at 67; see also [***17] Phase 2 Rule,

70 Fed. Reg. at 71,655/1. See Nat'l Wildlife Fed'n v. EPA,

286 F.3d 554, 566-67, 351 U.S. App. D.C. 42 (D.C. Cir.

2002). Likewise, given the assurances [*1255] [**172]

that RACT determinations will reflect advances in

technology, the EPA's approach is consistent with the

statutory goal of timely attainment of the NAAQS, see

CAA §§ 172, 182, 42 U.S.C. §§ 7502, 7511a.

Additionally, even if the EPA had revised the

national guidelines and provided uniform criteria as New

Jersey preferred, such actions would not have eliminated

case-by-case inquiries by the states and the EPA. Both

the CTGs and ACTs are guidance documents, see Conn.

Fund for the Env't v. EPA, 672 F.2d 998, 1003 (2d Cir.

1982); United States v. Ford Motor Co., 736 F. Supp.

1539, 1543 (W.D. Mo. 1990), and neither sets firm RACT

requirements. Thus, despite the existence of the CTGs,

the EPA makes case-specific determinations as part of its

SIP approval process. Notice of Final Determination and

Availability of Final Control Techniques Guidelines, 71

Fed. Reg. at 58,747. ACTs are also merely guidelines and

do not create presumptive RACT levels. Phase 2 Rule, 70

Fed. Reg. at 71,654/3. As case-by-case determinations

would be necessary even if the EPA [***18] had revised

the guidance documents, the EPA could reasonably

determine that the costs entailed in revising the guidance

documents outweighed the benefits. The EPA has

discretion to consider the costs of regulation unless the

relevant statute precludes such a consideration. See, e.g.,

Sierra Club, 294 F.3d at 162-63.

The EPA's approach also addresses New Jersey's

concern that allowing states to make RACT

determinations by relying on 15-year-old CTGs plus new

information, if any, provided by the public in comments

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2009 U.S. App. LEXIS 15384, ***14; 69 ERC (BNA) 1284
is "an inadequate substitute" for requiring each state to

undertake a new RACT determination for each source

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

supporting documentation along with RACT

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

Thus, the EPA will have available the information needed

to verify states' determinations that the previous controls

are still appropriate under the 8-hour standard.

Additionally, persons disagreeing with a particular RACT

certification can seek judicial review of a particular SIP

approval. A state may also complete an entirely new

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

In sum, we hold that the EPA's decision [***19] to

forego a revision of the nationwide guidelines in favor of

case-by-case RACT certifications was reasonable and not

inconsistent with the statutory goal of expeditious

attainment. Because the Phase 2 Rule requires each state

to verify that previously-required RACT controls still

satisfy the RACT requirement, we need not address the

EPA's assertion that a new RACT determination will

likely "result in the same or similar control technology as

the initial RACT determination under the 1-hour standard

because the fundamental control techniques . . . are still

applicable." Id. at 71,654/1. The EPA did not rest the rule

upon this ground; each state must "consider new

information" -- information that may prove the EPA

wrong -- when the state determines whether

previously-required controls "still represent[] an

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

C. Meeting RACT via NO[X] SIP Call

The NO[X] SIP Call is a cap-and-trade program that

regulates NO[X] emissions. The program covers 22 states

in the Northeast and the District of Columbia, and was

intended to address the interstate transport of ozone. See

generally Final Rule, Finding of Significant Contribution

and Rulemaking for Certain States in the Ozone

Transport Assessment Group Region for Purposes of

Reducing Regional [*1256] [**173] Transport of

Ozone, 63 Fed. Reg. 57,356 (Oct. 27, 1998); [***20]

Michigan v. EPA, 213 F.3d 663, 675, 685-86, 341 U.S.

App. D.C. 306 (D.C. Cir. 2000). The NO[X] SIP Call

established for each state a "NO[X] emissions budget,"

which limits total emissions during the ozone season.

Phase 2 Rule, 70 Fed. Reg. at 71,656/3. The EPA also

adopted a rule allowing interstate trading of emissions

allowances, and all states covered by the NO[X] SIP Call

elected to participate in the interstate program. Thus, a

source within a state could meet its emissions target

either by installing controls or by purchasing allowances

from other sources located anywhere in the region

covered by the NO[X] SIP Call. See id.

The Phase 2 Rule provides that to meet the NO[X]

RACT requirement, "the State need not perform (or

submit) a NO[X] RACT analysis for sources subject to

the state's emission cap-and-trade program" where that

program meets the NO[X] SIP Call requirements or, in

states achieving CAIR reductions solely from Electricity

Generating Units, CAIR requirements. Id. at 71,652/3.

Petitioners and intervenors persuasively challenge this

provision as being contrary to the express terms of the

statute.

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

nonattainment areas achieve "such reductions in

emissions [***21] from existing sources in the area" as

can be achieved by the adoption of RACT. 42 U.S.C. §

7502(c)(1). Thus, the RACT requirement calls for

reductions in emissions from sources in the area;

reductions from sources outside the nonattainment area

do not satisfy the requirement. See id.; see also CAA §

182(b)(2), 42 U.S.C. § 7511a(b)(2) (requiring

implementation of RACT with respect to certain VOC

sources "in the area" for moderate and above

nonattainment areas). Accordingly, participation in the

NO[X] SIP Call could constitute RACT only if

participation entailed at least RACT-level reductions in

emissions from sources within the nonattainment area. In

the preamble to the proposed rule the EPA stated that

"the overall emission reductions from sources in the

NO[X] SIP Call cap-and-trade program will achieve

more emissions reductions in the nonattainment area than

would application of RACT to each of those units,"

Proposed Rule to Implement the 8-Hour Ozone National

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

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

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

preamble states only that the "NO[X] SIP Call is

estimated to achieve [***22] a beyond-RACT degree of

control regionally," Phase 2 Rule, 70 Fed. Reg. at 71,657.

Such regionwide RACT-level reductions in emissions do

not meet the statutory requirement that the reductions be

from sources in the nonattainment area. Because the EPA

has not shown that NO[X] SIP Call compliance will

result in at least RACT-level reductions in emissions

from sources within each nonattainment area, the EPA's

determination that compliance with the NO[X] SIP Call

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2009 U.S. App. LEXIS 15384, ***18; 69 ERC (BNA) 1284
satisfies the RACT requirement is inconsistent with the

"in the area" requirement and thus violates the plain text

of § 172(c)(1).

In an analogous situation, the court invalidated the

CAIR trading program because the EPA's regionwide

approach made it impossible to tell whether the rule

achieved a specific statutory objective. See North

Carolina v. EPA, 531 F.3d 896, 906-08, 382 U.S. App.

D.C. 167 (D.C. Cir. 2008). In developing CAIR, the

court explained, the EPA "did not purport to measure

each state's significant contribution to specific downwind

nonattainment areas and eliminate them in an isolated

state-by-state manner." Id. at 907. Despite a statutory

provision prohibiting sources "within the State" from

contributing significantly to nonattainment [***23] in

"any other State," CAA § 110(a)(2)(D), 42 U.S.C. §

7410(a)(2)(D), the EPA adopted a [*1257] [**174]

regionwide approach to the problem. The court therefore

held that the EPA was not exercising its statutory duty,

reasoning that "[i]t is unclear how EPA can assure that

the trading programs . . . will achieve section

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

upwind state's 'significant contribution' is to another

state." 531 F.3d at 908. Similar reasoning applies to the

NO[X] SIP Call. The EPA has not provided assurance

that the NO[X] SIP Call will achieve the Act's goal of

"reductions from existing sources in the area," because it

has not evaluated the effect of the program on each

nonattainment area.

The EPA responds that its approach "gives meaning

to the statute's 'in the area' language" because its technical

analysis shows that the cap-and-trade programs achieve

greater reductions than would the application of

RACT-level controls at each source. EPA Br. at 73.

However, the EPA's cited support for this proposition is

the statement from the preamble to the proposed rule

stating the EPA "believes" participation would "achieve

more emissions reductions in the nonattainment area than

[***24] would application of RACT" to all sources in the

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

statement is unsupported by any record evidence and it

does not appear in the preamble to the final rule. The

EPA's further response that its technical analysis supports

the conclusion that NO[X] SIP Call participation meets

the RACT requirement is no more persuasive. The EPA

explains that its analysis showed that sources subject to

the NO[X] SIP Call "collectively" would achieve

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

But regionwide reductions do not satisfy the "in the area"

requirement. The EPA explains further that it found that

purchasing allowances was more costly than installing

RACT-level control technology and thus "most" sources

meeting the NO[X] SIP call, "assuming rational

economic behavior," id., would opt to install controls

rather than purchase allowances. This bare assertion is

insufficient to demonstrate that NO[X] SIP Call

compliance would lead to RACT-level reductions from

sources in the area. Even if most sources in a

nonattainment area installed controls rather than

purchasing allowances, a small number of sources

purchasing allowances and increasing [***25] emissions

could mean that overall emissions from sources in the

area remained unchanged or even increased.

The EPA's attempt to show ambiguity in the Act is

likewise unavailing. The EPA maintains the statute is

ambiguous as to whether RACT must be installed at each

source in an area, noting that it has previously approved

the concept of averaging emissions within a

nonattainment area. The EPA reads the statutory phrase

"as may be obtained" to indicate that the RACT

requirement does not necessarily call for implementation

of controls at each and every source, but rather requires

an area to achieve at least RACT-level reductions in

emissions. Even if the RACT requirement could be met

through an emissions-averaging approach within a

nonattainment area, averaging emissions across a region

does not ensure that any reductions in emissions derive

from reductions at sources within a particular area. Even

if the EPA were correct that "nothing in the statute

precludes consideration of the air quality impact that

controls under a region-wide cap-and-trade program may

have on NO[X] within the nonattainment area," EPA Br.

at 72, the EPA has not considered the impact of the

NO[X] SIP Call on the [***26] air quality within

specific nonattainment areas. Therefore the EPA has

failed to demonstrate that NO[X] SIP Call compliance

can be equated to RACT compliance.

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

section provides that [*1258] [**175] SIPs must

include "enforceable emission limitations, and such other

control measures . . . including economic incentives such

as . . . auctions of emission rights . . . as may be necessary

or appropriate to provide for attainment." 42 U.S.C. §

7502(c)(6). The EPA offers that its approach to RACT is

consistent with this express authorization of auctions.

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

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approve market-based measures in addition to those

controls that are required by CAA § 172(c), including the

RACT requirement; it does not authorize the EPA to

replace the RACT requirement with a cap-and-trade

program as is promulgated in the Phase 2 Rule.

The EPA also offers that to the extent individual

sources emitting high levels of NO[X] are in compliance

with the NO[X] SIP Call through the purchase of

allowances, the states can define RACT to require greater

reductions than are required by the EPA, and they must

require beyond-RACT reductions as necessary [***27]

to achieve timely attainment. The EPA's determination

that NO[X] SIP Call compliance satisfies the RACT

requirement is not based on a state choosing to so

exercise its discretion. A state's decision to require

stricter controls cannot eliminate the defect in the EPA's

approach -- failing to implement the requirement of at

least RACT-level reductions in emissions from sources in

the nonattainment area. This part of the Phase 2 Rule

must therefore be remanded without vacatur because the

EPA may be able to reinstate the provision for most

nonattainment areas if, upon conducting a technical

analysis, it finds the NO[X] SIP Call results in greater

emissions reductions in a nonattainment area than would

be achieved if RACT-level controls were installed in that

area.

III. Clean Data Policy

Under the Act, each nonattainment area must attain

the NAAQS by a deadline, known as the "attainment

date," which is established by the statute itself for areas

subject to Subparts 1 and 2, see CAA § 181, 42 U.S.C. §

7511, and by the EPA for areas subject only to Subpart 1,

see CAA § 172, 42 U.S.C. § 7502(a)(2). The Act also

provides that the SIP for a nonattainment area subject

only to Subpart 1 must "require [***28] reasonable

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

area in moderate or a greater degree of nonattainment

must provide for fixed percentage reductions of VOCs on

a specified schedule. CAA §§ 182 (b)(1)(A), (c)(2)(B),

42 U.S.C. §§ 7511a(b)(1)(A), (c)(2)(B).

3

3 An area may in some circumstances substitute

a combined reduction in emissions of VOCs and

NO[X] for the fixed percentage reduction of

VOCs required by CAA § 182(c)(2)(B). See 42

U.S.C. § 7511a(c)(2)(C). Although CAA §

182(b)(1)(A) applies by its terms only to an area

in moderate nonattainment, and § 182(c)(2)(B)

only to an area classified in serious

nonattainment, § 182(c), (d), and (e) apply those

requirements to areas in a greater degree of

nonattainment. See id. § 7511a(c)-(e).

In order to ensure these requirements are met, the

SIP for any nonattainment area must include

"contingency measures" to be implemented "if the area

fails to make reasonable further progress, or to attain the

[NAAQS] by the attainment date," CAA § 172(c)(9), 42

U.S.C. § 7502(c)(9), and the SIP for a serious, severe, or

extreme nonattainment area must also include

"contingency measures" that will take effect

automatically "if the area [***29] fails to meet any

applicable milestone," CAA § 182(c)(9), 42 U.S.C. §

7511a(c)(9).

In the Phase 2 Rule, the EPA suspended the planning

requirements for specified percentage reductions and

contingency [*1259] [**176] measures for each

nonattainment area that has attained the 8-hour NAAQS

but has not yet been designated an attainment area. 40

C.F.R. § 51.918. The suspension lasts "until ... the area is

redesignated to attainment, at which time the

requirements no longer apply; or [until the] EPA

determines that the area has violated the 8-hour ozone

NAAQS." Id. The EPA terms this suspension the "Clean

Data Policy," 70 Fed. Reg. at 71,644, because it applies

when a nonattainment area produces "clean" air quality

data. See Memorandum from John S. Seitz, Dir., Office

of Air Quality Planning & Standards, RFP, Attainment

Demonstration, and Related Requirements for Ozone

Nonattainment Areas Meeting the Ozone National

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

www.epa.gov/ttn/oarpg/t1/memoranda/clean 15.pdf. It

adopted the current version of the policy in 1995 and

applied it in rulemakings specific to individual areas

under the 1-hour NAAQS; it will similarly determine

whether individual areas qualify [***30] for the

suspension in area-specific rulemakings. 70 Fed. Reg. at

71,644-45.

The NRDC contends the Clean Data Policy conflicts

with both the letter and the purpose of the Act. More

specifically, the NRDC argues the statutory provisions

requiring a SIP to include contingency measures and

percentage reductions allow no waivers for an area that

has achieved the NAAQS; the only way for an area to be

absolved of those requirements is to be redesignated an

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

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7505a(c) ("Until [a maintenance] plan revision is

approved and an area is redesignated as attainment ... the

requirements of [Part D] shall continue in force and

effect"). Further, the NRDC argues only its reading of the

text is consistent with the intent of the Congress that, in

order to ensure the air stays clean, no mandatory control

requirement be lifted until a maintenance plan is in place.

The EPA responds first that the NRDC did not raise

before the agency and therefore forfeited its objection to

the suspension of the planning requirement for

contingency measures. See CAA § 307(d)(7)(B), 42

U.S.C. § 7607(d)(7)(B) ("Only an objection to a rule or

procedure which was raised with reasonable [***31]

specificity during the period for public comment ... may

be raised during judicial review"). We agree. We

"enforce[] this provision strictly," Motor & Equip. Mfrs.

Ass'n v. Nichols, 142 F.3d 449, 462, 330 U.S. App. D.C. 1

(D.C. Cir. 1998) (internal quotation marks omitted), and

although we allow commenters "some leeway in

developing their argument before this court," the

comment must have provided "adequate notification of

the general substance of the complaint," S. Coast Air

Quality Mgmt. Dist. v. EPA, 472 F.3d 882, 891, 374 U.S.

App. D.C. 121 (D.C. Cir. 2006).

The NRDC's comments did not provide the EPA

adequate notice that it objected to the suspension of the

contingency measures. The NRDC did object to the

Clean Data Policy, but only to the suspension of the

requirements for an attainment demonstration and

percentage reductions. The NRDC now contends it

objected to the suspension of all Subpart 2 requirements,

pointing to its comment that the "EPA cannot authorize

states to simply drop subpart 2 measures when the area is

meeting either standard. The Act allows states to move

mandated controls to a maintenance contingency plan,

but only after the area has been redesignated to

attainment." Comments of Clean Air Task Force et al., at

48 (Aug. 1, 2003). [***32] That comment, however, was

made in the context of an objection to a different

provision of the proposed rule, namely the EPA's

determination that an area not attaining the 1-hour

standard but meeting the 8-hour [*1260] [**177]

standard need not submit a maintenance plan meeting the

requirements of CAA § 175A. The EPA cannot be

expected to take the NRDC's argument, raised in support

of one specific objection, and apply it sua sponte to

another provision. Because the NRDC did not raise its

objection with "reasonable specificity," the Act bars us

from considering it. CAA § 307(d)(7)(B), 42 U.S.C. §

7607(d)(7)(B).

On the merits, the EPA maintains the Clean Data

Policy does not waive the planning requirements for

percentage reductions; instead, it contends, those

requirements are by their terms inapplicable when an area

meets the applicable NAAQS. See Phase 2 Rule, 70 Fed.

Reg. at 71,645/1-2, 71,646/1-2.

The two planning requirements for percentage

reductions are CAA § 182(b)(1), which requires an initial

reduction of 15% of VOC emissions in the first six years

for an area in moderate or greater nonattainment, and §

182(c)(2)(B), which requires subsequent reductions in

VOC emissions averaging 3% per year [***33] for an

area in serious or greater nonattainment unless an

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

As the EPA interprets these provisions, specific

percentage reductions are required only as necessary to

achieve attainment.

We think the statute unclear as to whether those

sections apply to an area that is already attaining the

NAAQS. For the reasons below, we join the Tenth

Circuit in holding the EPA's interpretation is reasonable.

See Sierra Club v. EPA, 99 F.3d 1551 (10th Cir. 1996).

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

an area in moderate or greater nonattainment to plan a

total reduction in VOC emissions of 15% over six years.

42 U.S.C. § 7511a(b)(1)(A)(i). In the very next sentence,

however, it elaborates that a plan should mandate "such

specific annual reductions ... as necessary to attain the

[NAAQS] for ozone by the attainment date." Id.

Moreover, each percentage reduction is linked to the

requirement that an area make "reasonable further

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

(entitled "Plan provisions for reasonable further

progress"); id. § 7511a(c)(2)(B) (entitled "Reasonable

further progress demonstration"). "Reasonable further

[***34] progress," in turn, means "such annual

incremental reductions in emissions ... as are required ...

for the purpose of ensuring attainment." CAA § 171(1),

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

to what reductions are required when no further progress

toward attainment is necessary -- or, for that matter,

possible. The EPA reasonably resolved this ambiguity by

concluding the specific percentage reductions are simply

inapplicable in that circumstance. As the Tenth Circuit

put the matter, "If a moderate ozone nonattainment area

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has in fact already attained the ozone standard, it would

make little sense to require a state to demonstrate the area

will make reasonable progress toward attainment." Sierra

Club, 99 F.3d at 1557.

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

contentions that the Clean Data Policy unlawfully

circumvents the redesignation requirements, CAA §

107(d)(3)(E), 42 U.S.C. § 7407(d)(3)(E), violates the

mandate that all Part D requirements remain in force until

an area has an approved maintenance plan in place, CAA

§ 175A(c), 42 U.S.C. § 7505a(c), and disregards the

Supreme Court's admonition that the EPA cannot "render

Subpart 2's carefully designed restrictions [***35] on

EPA discretion utterly nugatory," Whitman v. Am.

Trucking Ass'ns, 531 U.S. 457, 484, 121 S. Ct. 903, 149

L. Ed. 2d 1 (2001). The Clean Data Policy does not effect

a redesignation; an area must still comply with the

statutory requirements before it can be redesignated to

attainment. Furthermore, Part D -- including [*1261]

[**178] Subpart 2 -- remains in force insofar as it applies

but, as we have just seen, the EPA has reasonably

concluded the provisions of the Act requiring percentage

reductions do not apply to an area that has attained the

NAAQS.

IV. 15% VOC Reduction

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

nonattainment area, "no later than 3 years after November

15, 1990, the State shall submit a revision to the

applicable implementation plan to provide for volatile

organic compound emission reductions, within 6 years

after November 15, 1990, of at least 15 percent from

baseline emissions, accounting for any growth in

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

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

VOC reduction requirement for, respectively, "serious,"

"severe" and "extreme" nonattainment areas. Id. §

7511a(c)-(e). After the initial six-year period, CAA

section 182(c), (d) and (e) impose [***36] on the same

areas an additional RFP requirement that the SIP be

revised so that it "will result in VOC emissions

reductions from the baseline emissions . . . [of] at least 3

percent of baseline emissions each year," "averaged over

each consecutive 3-year period beginning 6 years after

November 15, 1990, until the attainment date." Id. §

7511a(c)(2)(B)(i) (imposing requirement on "serious"

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

reduction requirement for "severe" and "extreme" areas).

4 As used in the cited provisions, "the term 'baseline

emissions' means the total amount of actual VOC or

NO[x] emissions from all anthropogenic sources in the

area during the calendar year 1990." CAA §

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

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

5

4 The statute permits a reduction in "an amount

less than 3 percent of such baseline emissions

each year, if the State demonstrates to the

satisfaction of the Administrator that the plan

reflecting such lesser amount includes all

measures that can feasibly be implemented in the

area, in light of technological achievability." CAA

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

5 Section 182 does [***37] not provide for a

specific VOC reduction for a moderate area

following the initial six-year 15% reduction

period. Accordingly, thereafter a moderate area is

subject to the general requirement in CAA section

172(c)(2) that "plan provisions shall require

reasonable further progress," 42 U.S.C. §

7502(c)(2).

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

moderate and above areas "that had not met the 15

percent VOC emission reduction requirement for the

1-hour standard," the RFP 15% reduction requirement

"would apply" under the 8-hour standard. 70 Fed. Reg. at

71,632-33. Conversely, the EPA determined, 8-hour

moderate and above areas that had already satisfied the

15% VOC emission reduction for the 1-hour standard

will not be subjected a second time to the 15%

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

Thus, "[a]reas classified under subpart 2 as moderate that

had met the 15 percent VOC emission reduction

requirement for the 1-hour standard are treated in the

final rule like areas covered under subpart 1," while

"[a]reas classified under subpart 2 as serious and above

that had met the 15 percent VOC emission reduction

requirement for the 1-hour standard would be subject

[***38] to the RFP requirement in section 172(e) [sic 6]

and the final rule would require them to obtain an average

of 3 percent annual reductions of VOC and/or NO[X]

emissions reductions for the first 6 years after the

baseline year and every subsequent 3 years out to their

attainment [*1262] [**179] date." Id. For both the 15%

and the 3% reductions RFP requirements, the Phase 2

Rule provides that the RFP periods "would be equivalent

to the periods Congress established in subpart 2," id. at

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71,633, running from a new baseline year, i.e., 2002 "for

areas designated nonattainment for the 8-hour ozone

NAAQS with an effective date of June 15, 2004," id. at

71,637.

6 The EPA apparently meant section 172(c), see

supra note 5; section 172(e) is the

anti-backsliding provision, see infra pp. 43-45.

First, the NRDC argues that the EPA "illegally

waived" Subpart 2's RFP requirement that each SIP be

revised three years after the statute's effective date to

provide for a 15% VOC reduction within 6 years after

enactment for all areas classified as "moderate" and

above for ozone. 7

7 "Ozone, an essential presence in the

atmosphere's stratospheric layer, is dangerous at

ground level" and "is formed by the chemical

reaction [***39] of nitrogen oxides ('NO[x]')

with any of a number of volatile organic

compounds ('VOCs'), in the presence of sunlight."

S. Coast Air Quality Mgmt. Dist. v. EPA, 472

F.3d 882, 887, 374 U.S. App. D.C. 121 (D.C. Cir.

2006).

As an initial matter, the EPA did not "waive" the

15% requirement but simply determined that, if a State

had made the required revision for an area classified as

moderate or greater when the one-hour NAAQS took

effect, the State did not have to do so a second time after

the 8-hour standard took effect. In so doing, the EPA

reasonably resolved a statutory ambiguity under step 2 of

the framework set out in Chevron U.S.A. Inc. v. Natural

Resources Defense Council, Inc., 467 U.S. 837, 843, 104

S. Ct. 2778, 81 L. Ed. 2d 694 (1984). See Natural Res.

Def. Council v. EPA, 489 F.3d 1250, 1257, 376 U.S. App.

D.C. 414 (D.C. Cir. 2007) ("Under Chevron: We first ask

'whether Congress has directly spoken to the precise

question at issue,' in which case we 'must give effect to

the unambiguously expressed intent of Congress.' If the

'statute is silent or ambiguous with respect to the specific

issue,' however, we move to the second step and defer to

the agency's interpretation as long as it is 'based on a

permissible construction of the statute.'" (quoting

Chevron, 467 U.S. at 842-43) [***40] (internal quotation

marks omitted)). Accordingly, we reject the NRDC's

challenge to the VOC reduction provision.

The NRDC contends that the EPA's reading of the

statute is "untenable" because the statute requires that the

SIP provide for a 15% reduction from "baseline

emissions"--which the "EPA itself defines . . . for

purposes of the 8-hour ozone standard as emissions in

2002, not 1990"--and that the reduction be effected

"'within 6 years after' the baseline year--that is, between

2002 and 2008 for the 8-hour standard." NRDC Br. at 29.

This argument, however, sidesteps the EPA's rationale for

its interpretation. The EPA identified a "gap in the

statutory scheme" because "[t]he CAA is silent regarding

whether a nonattainment area that implements the

15-percent VOC emission reduction of 42 U.S.C. §

7511a(b)(1)(A) must implement that provision a second

time if the NAAQS is revised, or instead must implement

other RFP provisions that expressly would have applied

had there been no revision of the NAAQS." EPA Br. at

29. The EPA filled this gap by selecting the latter

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

while it "believes that the CAA is quite clear that the SIP

must provide [***41] for a 15 percent reduction in

baseline VOC emissions for some period after 1990 in an

area subject to section 182(b)(1)(A)," it "disagrees that

the CAA plainly requires that the SIP for an area must

require a second 15 percent reduction in VOC baseline

emissions under a revised ozone standard." 70 Fed. Reg.

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

71,634 ("For those areas that have an approved 15

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

percent VOC reduction is not necessary."). [*1263]

[**180] Because the EPA ended its statutory analysis

with the threshold inquiry whether section

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

revised standards (concluding it need not), the Agency

did not need to decide how to interpret the term "baseline

emissions" or to identify a baseline year for the purpose

of so applying the provision. Further, because it had no

need to reach these issues, it did not resolve them

arbitrarily or capriciously, as the NRDC asserts, by

"allowing a select group of nonattainment areas to rely on

a different baseline from the distant past." NRDC Br. at

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

undertake a second 15% VOC reduction, it [***42]

might have been arbitrary to use a different baseline or

baseline year from that applicable to areas undertaking

the first 15% VOC reduction under the 8-hour standard.

But the Agency did not do so and we will not speculate

whether it could lawfully have done so.

The NRDC also argues that the EPA's 15% approach

is inconsistent with its treatment of section

182(c)(2)(B)(i)'s 3% reduction requirement for serious

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and above areas in that the "EPA does not read the Act as

excusing such 3% continuing emission cuts for serious

and above 8-hour nonattainment areas merely because

they may have had plans under the 1-hour standard to

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

1990 baseline." NRDC Br. at 30 n.8. The 3% provision,

however, is fundamentally different from the 15%

provision in that the former does not (as does the latter)

establish a one-time reduction requirement but instead

imposes a continuing obligation that applies to "each

consecutive 3-year period beginning 6 years after

November 15, 1990, until the attainment date." CAA §

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

Finally, the NRDC asserts that the "EPA cannot

override an express statutory command 'simply by

asserting [***43] that its preferred approach would be

better policy,'" NRDC Br. at 30 (quoting Engine Mfrs.

Ass'n v. EPA, 88 F. 3d 1075, 1089, 319 U.S. App. D.C. 12

(D.C. Cir. 1996)), referring to the EPA's observation that

its approach "provides flexibility to States to use a mix of

NO[x] and VOC reductions" under CAA section 172, 42

U.S.C. § 7502, rather than the required VOC-only

reductions mandated by CAA section 182(b)(1)(A)(i), 42

U.S.C. § 7511a(b)(1)(A)(i). 70 Fed. Reg. at 71,634. As

already explained, however, the EPA's interpretation does

not override an express command but rather resolves an

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

flexibility afforded, the EPA merely offered one more

reason why its interpretation of the ambiguous statutory

language is reasonable.

V. New Source "Offset" Credit for Past Emission

Reductions

CAA section 172(b) requires that each State

containing a nonattainment area submit a nonattainment

SIP meeting the requirements of section 172(c) pursuant

to a schedule set by the EPA but not later than three years

after a nonattainment area is so designated. 42 U.S.C. §

7502(b), (c). Section 172(c)(5) of the Act requires that

each nonattainment area SIP "shall require permits for the

construction [***44] and operation of new or modified

major stationary sources anywhere in the nonattainment

area, in accordance with section 7503 of [Title 42]." Id. §

7502(c)(5). Section 173 sets out the permitting process,

known as "New Source Review" (NSR), in greater detail,

providing that a permit may be issued only if, inter alia,

(1) the permitting agency has determined that by the time

the source begins operation, sufficient offsetting

emissions reductions are obtained that the emission levels

from the offsets and the plan provisions represent RFP

from the pre-permit levels, id. [*1264] [**181] §

7503(a)(1)(A),

8 and (2) the proposed source will

"comply with the lowest achievable emission rate"

(LAER), id. § 7503(a)(2).

9 Section 173 further requires

that "[s]uch emission reductions shall be, by the time a

new or modified source commences operation, in effect

and enforceable and shall assure that the total tonnage of

increased emissions of the air pollutant from the new or

modified source shall be offset by an equal or greater

reduction, as applicable, in the actual emissions of such

air pollutant from the same or other sources in the area."

Id. § 7503(c)(1). Subpart 2 specifically applies the NSR

requirement [***45] to ozone nonattainment areas, CAA

§ 182(a)(2)(C)(i), 42 U.S.C. § 7511a(a)(2)(C)(i), and

mandates increasingly stringent offset ratios as the ozone

classification increases, CAA § 182(a)(4), (b)(5), (d)(2),

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

10

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

the permitting agency

determine[] that--

(A) by the time

the source is to

commence

operation, sufficient

offsetting emissions

reductions have

been obtained, such

that total allowable

emissions from

existing sources in

the region, from

new or modified

sources which are

not major emitting

facilities, and from

the proposed source

will be sufficiently

less than total

emissions from

existing sources (as

determined in

accordance with the

regulations under

this paragraph) prior

to the application

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for such permit to

construct or modify

so as to represent

(when considered

together with the

plan provisions

required under

section 7502 of this

title) reasonable

further progress (as

defined in section

7501 of this title); . .

. .

42 U.S.C. § 7503(a)(1)(A).

9 Section 173(a) also requires that (1) the new

source owner or operator has demonstrated that

all of its other major stationary sources in the

State are subject to [***46] and in (or scheduled

for) compliance with applicable emission

limitations and standards; (2) the Administrator

has not determined the implementation plan

applicable to the attainment area site of the new

source is not being adequately implemented; and

(3) an analysis of alternatives demonstrates that

"benefits of the proposed source significantly

outweigh the environmental and social costs

imposed as a result of its location, construction, or

modification." 42 U.S.C. § 7503(a)(3)-(5).

10 More generally, the Act requires that all SIPs,

even those for attainment areas, include regulation

of new and modified sources "as necessary to

assure that national ambient air quality standards

are achieved, including a permit program as

required in parts C and D of this subchapter."

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

The Phase 2 Rule allows proposed new and modified

sources to meet this offset requirement using credits from

sources that shut down or curtailed operations as long ago

as 1977. 70 Fed. Reg. at 71,699 (to be codified at 40

C.F.R. § 51.165). The EPA has long allowed emissions

reductions occurring before a permit application to

qualify as offset credits under specified circumstances.

[***47] Before 1989, such pre-application emissions

reductions could be offset only if the proposed source

was "a replacement for the productive capacity

represented by the proposed offset credit." Requirements

for Implementation Plans; Air Quality New Source

Review, 54 Fed. Reg. 27,286, 27,290 (June 28, 1989).

11

The [*1265] [**182] 1989 Rule eliminated this

restriction for an area with an approved attainment

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

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

attainment plan before using pre-application credits from

shutdowns or curtailments as offsets." 70 Fed. Reg. at

71,676. The NRDC challenges both the EPA's

longstanding policy allowing pre-application reductions

as NSR offsets and the EPA's elimination in the Phase 2

Rulemaking of the approved attainment demonstration

requirement. We reject as untimely the NRDC's

challenge to the general policy of allowing

pre-application offset credits but we agree that

eliminating the attainment demonstration requirement

was arbitrary and capricious and therefore in violation of

the APA.

11 The pre-1989 regulation provided:

Emissions reductions achieved

by shutting down an existing

source or permanently curtailing

[***48] production or operating

hours below baseline levels may be

credited, provided that the work

force to be affected has been

notified of the proposed shutdown

or curtailment. Source shutdowns

and curtailments in production or

operating hours occurring prior to

the date the new source application

is filed generally may not be used

for emissions offset credit.

However, where an applicant can

establish that it shut down or

curtailed production after August

7, 1977, or less than one year prior

to the date of permit application

whichever is earlier, and the

proposed new source is a

replacement for the shutdown or

curtailment credit for such

shutdown or curtailment may be

applied to offset emissions from

the new source.

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

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CAA section 307(b), which governs judicial review

of a rulemaking under the Act, requires that "[a]ny

petition for review . . . shall be filed within sixty days

from the date notice of such promulgation . . . appears in

the Federal Register." 42 U.S.C. § 7607(b)(1). As already

noted, the EPA has allowed emission reductions from

pre-application source shutdowns and curtailments to

qualify as NSR offset credits since at least 1989. See 54

Fed. Reg. at 27,292. [***49] Thus, the deadline for

filing a petition for review of section 51.165(a)(3)(ii)(C)

insofar as it authorizes offset credits for pre-permit

emission reductions is long since past and the court lacks

jurisdiction to review it. See Motor & Equip. Mfrs. Ass'n

v. Nichols, 142 F.3d 449, 460, 330 U.S. App. D.C. 1

(D.C. Cir. 1998) (section 7607(b)(1) "filing period is

jurisdictional in nature, and may not be enlarged or

altered by the courts" (internal quotation marks omitted)).

Nonetheless, the NRDC contends that the EPA

"reopened" the 1989 offset policy so as to make its

challenge timely. We disagree.

"The reopening doctrine allows an otherwise stale

challenge to proceed because 'the agency opened the

issue up anew,' and then 'reexamined . . . and reaffirmed

its [prior] decision.'" P & V Enters. v. U.S. Army Corps of

Eng'rs, 516 F.3d 1021, 1023-24, 380 U.S. App. D.C. 96

(D.C. Cir. 2008) (quoting Pub. Citizen v. Nuclear Reg.

Comm'n, 901 F.2d 147, 150-51, 284 U.S. App. D.C. 41

(D.C. Cir. 1990)) (internal quotation marks omitted). In

this case, the EPA did not expressly reopen the issue of

offsets for pre-application emission reductions. In its

proposed rule, the EPA offered two alternative

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

eliminated the [***50] attainment demonstration

requirement under certain circumstances. See Prevention

of Significant Deterioration (PSD) and Nonattainment

New Source Review (NSR), 61 Fed. Reg. 38,250,

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

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

alternatives. 12 Neither alternative proposed changing the

regulation insofar as it permits offset of pre-application

emission reductions generally or even mentioned the

matter. Further, other than eliminating the approved

attainment demonstration requirement, the language of

amended section 51.165(a)(3)(ii)(C) remains

substantively identical to the 1989 regulation. Compare

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

June 29, 1989), with 70 Fed. Reg. at 71,699 (§

51.165(a)(3)(ii)(C) as effective Jan. 30, 2006).

Accordingly, the subject of allowing offsets in general

was not expressly reopened. See Nat'l Ass'n of

Reversionary Prop. Owners v. Surface Transp. Bd., 158

F.3d 135, 142, 332 U.S. App. D.C. 325 (D.C. Cir.

[*1266] [**183] 1998) ("When an agency invites

debate on some aspects of a broad subject, . . . it does not

automatically reopen all related aspects including those

already decided.")

12 Alternative 1 conditioned using offset

[***51] credits upon an area being "current with

part D ozone nonattainment planning

requirements"; Alternative 2, which the EPA

selected, did not. Phase 2 Rule, 70 Fed. Reg. at

71,673.

Nor did the EPA constructively reopen the issue, as

the NRDC contends. Under some circumstances an issue

may be "deemed to have been constructively reopened

even though it was not actually reopened" in a literal

sense. Kennecott Utah Copper Corp. v. U.S. Dep't of

Interior, 88 F.3d 1191, 1214, 319 U.S. App. D.C. 128

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

revision of accompanying regulations 'significantly alters

the stakes of judicial review' as the result of a change that

'could have not been reasonably anticipated.'" Sierra Club

v. EPA, 551 F.3d 1019, 1025, 384 U.S. App. D.C. 96

(D.C. Cir. 2008) (quoting Kennecott, 88 F.3d at 1227;

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

2006)). The EPA's elimination of the attainment

determination requirement did not work such a sea

change. The basic regulatory scheme remains unchanged:

pre-application offsets are permitted if certain

requirements are met. The only change is the elimination

of the attainment demonstration requirement-which was

itself added in 1989 to replace the more stringent

[***52] requirement that "the proposed new source [be] a

replacement for the shutdown or curtailment." 40 C.F.R.

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

note 11. That the NRDC's challenge to the change may

have merit, as indeed we conclude infra, does not provide

a ground to conclude that the broader issue of allowing

any pre-application offsets at all has been reopened. It

simply means the particular change it challenges is

unlawful. The "stakes" here are not quantitatively

different from what they were in 1989 when a coalition of

environmental groups argued to the EPA that the

attainment demonstration requirement itself was

inadequate to ensure RFP. See 54 Fed. Reg. at 27,291-92.

Yet no one then challenged the general policy allowing

pre-application offsets. Further, it could have been

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"reasonably anticipated" at that time that the EPA might

subsequently eliminate the attainment demonstration

requirement itself in favor of an alternative safeguard

which would likewise allow more liberal use of

pre-application offset credits, as in fact happened here. In

sum, the EPA has done nothing since 1989 to reopen the

general issue of allowing pre-application offsets either

expressly [***53] or constructively.

We next address the NRDC's objection to the

specific NSR revision that is subject to review in this

proceeding--that the EPA erred in eliminating the

attainment demonstration requirement. We agree with the

NRDC that the EPA acted arbitrarily and capriciously

when it did so.

In the 1989 rulemaking, the EPA imposed the

approved attainment demonstration requirement in order

to comply with CAA section 173(a)(1), which allows an

NSR permit to issue only if the permitting agency

determines that--

(A) by the time the source is to

commence operation, sufficient offsetting

emissions reductions have been obtained,

such that total allowable emissions from

existing sources in the region, from new or

modified sources which are not major

emitting facilities, and from the proposed

source will be sufficiently less than total

emissions from existing sources allowed

under the applicable implementation plan

prior to the application for such permit to

construct or modify so as to represent

(when considered together with the plan

provisions required under section 7502 of

this title) reasonable further progress (as

defined in section 7501 of this title); . . . .

42 U.S.C. § 7503(a)(1)(A) (1989). [***54] The EPA

concluded that the "essence of [this] provision is that a

new source may be [*1267] [**184] allowed in a

nonattainment area only where its presence would be

consistent with RFP toward attainment of the NAAQS"

and that this policy is satisfied if there is in place for the

area a "fully approved SIP" since, "[b]y definition, any

fully approved SIP has independently assured RFP and

attainment." 54 Fed. Reg. at 27,292. "[W]here an

attainment demonstration is lacking," however, the EPA

concluded that "retention of the current shutdown credit

restriction on offset transactions"--that is, for a pre-permit

shutdown, "the proposed source is a replacement for the

productive capacity represented by the proposed offset,"

id. at 27,290--"is necessary both to assure RFP and to

guarantee that a new source does not cause or contribute

to a violation of the NAAQS." Id. at 27,292. Nonetheless,

when the EPA amended section 51.165(a)(3)(ii)(C) in the

Phase 2 Rule, it eliminated the fully-approved SIP

requirement without adding any other safeguard to ensure

that issuing a particular permit is consistent with CAA

section 173's mandate that total reductions "represent . . .

reasonable further progress." 42 U.S.C. § 7503(a)(1)(A).

[***55] The EPA justified eliminating the requirement

on the ground that the 1990 amendments to the Act

"changed the considerations involved" in that they

"emphasized the emission inventory requirement in

section 172(c)(3) as a fundamental tool in air quality

planning" and "added new provisions keyed to the

inventory requirement, including specific reduction

strategies and [milestones] that measure progress toward

attainment from the base year emissions inventory or

subsequent revised inventories" along with "several

adverse consequences where States fail to meet the

planning or emissions reductions requirements." 70 Fed.

Reg. at 71,677; see also Reconsideration Notice, 72 Fed.

Reg at 31,739. But imposing post hoc sanctions for

failing to achieve RFP milestones does not accomplish

what CAA section 173 requires, namely, that the EPA

ensure that "by the time the source is to commence

operation, sufficient offsetting emissions reductions have

been obtained" to produce RFP, 42 U.S.C. § 7503

(a)(1)(A) (emphasis added). Because the EPA has not

explained how the amended rule, stripped of the

approved attainment demonstration requirement, ensures

that emission reductions are achieved "by the time"

[***56] the new source begins operation rather than

sometime down the road after milestones have been

missed, we conclude that eliminating the requirement is

arbitrary and capricious. See N. Baja Pipeline, LLC v.

FERC, 483 F.3d 819, 821, 376 U.S. App. D.C. 13 (D.C.

Cir. 2007) (under arbitrary and capricious standard,

agency conclusions "must be reasonable and reasonably

explained" (citing Nat'l Fuel Gas Supply Corp. v. FERC,

468 F.3d 831, 839, 373 U.S. App. D.C. 351 (D.C. Cir.

2006))); Transactive Corp. v. United States, 91 F.3d 232,

236, 319 U.S. App. D.C. 428 (D.C. Cir. 1996) ("In order

to ensure that an agency's decision has not been arbitrary,

we require the agency to have identified and explained

the reasoned basis for its decision." (citing F.J. Vollmer

Co. v. Higgins, 23 F.3d 448, 451, 306 U.S. App. D.C. 140

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

Horner, 854 F.2d 490, 498-99, 272 U.S. App. D.C. 81

(D.C. Cir. 1988))).

13

13 In light of this conclusion, we need not

consider the NRDC's alternative contention that

elimination of the requirement violates section

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

VI. NSR Limits on Pollution from New and Modified

Major Sources

Pursuant to the SIP NSR requirements of CAA Part

D, supra pp. 28-30, the Phase 2 Rule accords a State

three years to develop and submit [***57] an approvable

nonattainment major NSR program for the 8-hour

NAAQS. 70 Fed. Reg. at 71,672. In [*1268] [**185]

addition to the Part D requirements for nonattainment

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

States a "general duty" to implement a NSR program in

their SIPs for all areas, see supra note 10, which "exists

during all periods, including before a State has an

approved part D NSR permit program." Id. at 71,677-78.

Although section 110(a)(2)(c) requires that the SIP

contain NSR provisions, it does not specify what NSR

requirements apply during the period after an area is

designated nonattainment but before the NSR SIP is

effective. To fill this gap, the EPA decided in the Phase 2

Rule to retain an interim NSR regime it has used for this

purpose since 1979, namely, Appendix S to 40 C.F.R.

Part 51, which both establishes interim NSR permitting

requirements paralleling the Act's (in section IV.A) and

provides for an exemption from the same requirements

under certain circumstances (in section VI). The EPA

further decided in the Phase 2 Rule, however, to

eliminate an existing 18-month time limit on the

applicability of Appendix S (including section VI's

exemption provision) to a given [***58] nonattaiment

area. Petitioners NRDC and New Jersey challenge both

the EPA's general authority to exempt new sources from

permitting requirements under section VI and, more

specifically, its decision to eliminate the 18-month limit

on such exemptions. We reject the petitioners' objection

to the EPA's general exemption authority as untimely but

agree that eliminating the 18-month limit violates the

"anti-backsliding" provision in CAA section 172(e), 42

U.S.C. § 7502(e).

In 1979, the EPA codified in its regulations a three

year-old "Emission Offset Interpretative Ruling" as

Appendix S to 40 C.F.R. Part 51 and directed that

Appendix S was to "govern[] permits to construct and

operate applied for before the deadline for having a

revised SIP in effect that satisfies Part D." Approval and

Promulgation of Implementation Plans; Statutory

Restriction on New Sources Under Certain

Circumstances for Nonattainment Areas, 44 Fed. Reg.

38,471, 38,473 (July 2, 1979) (codified at 40 C.F.R. §

52.24(c) (1979) (now § 52.24(k)); see Emission Offset

Interpretative Ruling, 44 Fed. Reg. 3274 (Jan. 16, 1979)

(codifying interpretive ruling in regulations). In so

applying the interpretive rule, the EPA allowed [***59]

a nonattainment area to avoid, during the period before

the SIP was due, the statutory ban on all major source

construction or modification in any nonattainment area

not subject to a SIP that "me[t] the requirements of Part D

(relating to nonattainment areas)." See Clean Air Act

Amendments of 1977, Pub. L. No. 95-95, § 108(b), 91

Stat. 685, 694 (Aug. 7, 1977) (establishing construction

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

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

may be modified by rule of the Administrator") to govern

NSR during the interim period from enactment of the

1977 CAA amendments until July 1, 1979, when the

statutory ban was to take effect. 44 Fed. Reg. at 38,472;

1977 CAA Amendments § 129(a)(1), 91 Stat. at 745

(adopting interpretive rule for interim before ban) (Aug.

7, 1977). The Congress eliminated the construction ban in

1990. Clean Air Act, Amendments, Pub. L. No. 101-549,

§ 101(c), 104 Stat. 2399, 2408 (1990).

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

eighteen months the period during which it governed

NSR in a qualifying nonattainment area. Approval and

Promulgation of Implementation Plans; Statutory

Restriction on New Sources Under Certain

Circumstances for Nonattainment Areas, 45 Fed. Reg.

65,209 (Oct. 2, 1980). [***60] Since that time the EPA

has continued to apply Appendix S's NSR requirements

in the interim after an area's nonattainment designation

and before implementation of a revised SIP. Thus, after

the Congress amended the Act in 1990-adding, [*1269]

[**186] inter alia, Subpart 2's ozone-specific

requirements-the EPA again affirmed its policy that

Appendix S govern during the period between

nonattainment designation and SIP approval and

implementation. See State Implementation Plans; General

Preamble for the Implementation of Title I of the Clean

Air Act Amendments of 1990; Supplemental, 57 Fed.

Reg. 18,070, 18,076 (Apr. 28, 1992).

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Since Appendix S was formally codified in 1979,

section VI thereof has contained--unchanged--an

exemption from section IV.A's permitting requirements

for an area whose attainment date had not passed if the

source satisfied two conditions:

In such cases, a new source which would

cause or contribute to an NAAQS

violation may be exempt from the

Conditions of Section IV.A. so long as the

new source [1.] meets the applicable SIP

emission limitations and [2.] will not

interfere with the attainment date specified

in the SIP under Section 110 of the Act.

44 Fed. Reg. at 3285 (codified at [***61] Appendix S, §

VI); cf. 40 C.F.R. pt 51, app. S., § VI (2006) (same). In

the Phase 2 Rule, the EPA added a third condition so that

the reformulated provision now exempts new sources

from the permitting requirements in section IV.A "if the

conditions in paragraphs VI.A through C are met,"

namely:

A. The new source meets the applicable

SIP emission limitations.

B. The new source will not interfere

with the attainment date specified in the

SIP under section 110 of the Act.

C. The Administrator has determined

that conditions A and B of this section are

satisfied and such determination is

published in the Federal Register.

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

S., § VI (2009)). The EPA further eliminated the

18-month limit on the applicability of Appendix S

(including section VI) to a pre-SIP nonattainment area.

70 Fed. Reg. at 71,677; see 40 C.F.R. § 52.24(k) (2009).

As noted above, petitioners NRDC and New Jersey

challenge the EPA's authority generally to exempt an area

from Appendix S's permitting requirements and

specifically the EPA's removal of the 18-month limit. We

address each in turn.

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

exemption authority and conclude [***62] that it is

time-barred. Under CAA section 307(b), any objection to

the exemption policy was required to be raised in a

petition for review "filed within sixty days from the date

notice of [its] promulgation . . . appears in the Federal

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

triggering date was July 2, 1979, when the EPA

published its final rule promulgating 40 C.F.R. § 52.24(c)

(1979) (now 52.24(k)), which directed that "[t]he

Emission Offset Interpretative Ruling, 40 CFR Part 51,

Appendix S"--which, as then codified, contained the

exemption provision in section VI, 44 Fed. Reg. at

3285--"governs permits to construct and operate applied

for before the deadline for having a revised SIP in effect

that satisfies Part D." 44 Fed. Reg. at 38,473 (codified at

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

that date that the EPA unequivocally asserted its authority

to exempt new sources from permitting requirements

under section VI. Thus, the petitioners' challenge to such

authority in this case comes almost thirty years late and

we are precluded from considering it. See Motor &

Equip. Mfrs. Ass'n, 142 F.3d at 460. Nonetheless, the

petitioners again (as with the emission [***63] offset

authority issue treated supra) seek to circumvent the

statutory time limit by invoking the reopening doctrine.

Once again their attempt is unavailing.

The petitioners contend the EPA implicitly reopened

the question of its exemption authority because during the

rulemaking, [*1270] [**187] the Agency sought

comment on an alternative exemption proposal which it

subsequently declined to adopt. See Edison Elec. Inst. v.

EPA, 996 F.2d 326, 332, 302 U.S. App. D.C. 60 (D.C.

Cir. 1993) ("By soliciting comments on the existing . . .

regulations and advancing a possible 'alternative

approach' . . ., the EPA clearly provided the type of

'opportunity for renewed comment and objection' that

suffices to restart the statutory period for seeking

review." (quoting Ohio v. EPA, 838 F.2d 1325, 1328, 267

U.S. App. D.C. 375 (D.C. Cir. 1988)). Specifically, the

petitioners argue that the EPA reopened the question of

its exemption authority when it "proposed to remove the

general waiver language from Appendix S entirely, and

replace it with a 'transitional' program that would only

allow relief from NSR in a limited group of areas that,

among other things, submitted plans by 2004 adequate to

attain standards by 2007"--a proposal the EPA

subsequently declined to [***64] adopt. NRDC Br. at 41

(citing 68 Fed. Reg. at 32,846-48) (emphases in brief).

As the petitioners' characterization demonstrates,

however, the EPA reopened only the question of how

broadly it should exercise its exemption authority and not

whether it had such authority in the first place. The

abandoned proposal would have replaced section VI's

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exemption provisions with a "transitional" program,

which would, like section VI, provide exemptions from

section IV.A's NSR requirements but would allow the

exemptions for a narrower class of "eligible" areas. See

Proposed Rule To Implement the 8-Hour Ozone National

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

32,846-47 (June 2, 2003) (setting out eligibility

requirements for transitional program). Thus, the EPA's

alternative proposal did not implicitly reopen the question

of its statutory authority vel non to grant any NSR

exemptions but only whether section VI as previously

applied might violate the Act by making exemptions too

broadly available. Because the EPA did not seek

comment on its general authority to exempt areas from

the permitting requirements, this case is plainly

distinguishable from Edison Electric Institute, in which

the [***65] EPA "explicitly invited comments on the

precise question for which petitioners [there sought]

review." Edison Elec. Inst., 996 F.2d at 332.

Accordingly, we conclude that the issue of the EPA's

general exemption authority is foreclosed under CAA

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

The petitioners also argue that the EPA

constructively reopened the entire exemption provision

"by dramatically expanding its scope and effect" when it

eliminated the 18-month limit on Section VI exemptions.

NRDC Br. at 41(citing Kennecott, 88 F.3d at 1226-27);

see also NRDC Reply Br. at 18. The extension of the

exemption term, however, did not" 'significantly alter[]

the stakes of judicial review' as the result of a change that

'could have not been reasonably anticipated.'" Sierra Club

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

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

codified in 1979, the interpretive ruling lacked such a

limit--yet its general exemption authority went

unchallenged. Further, an exemption from NSR for even

18 months, if unlawful, seems worth challenging in its

own right--as it could have been when the 18-month limit

was added in 1980. To the extent that [***66] the EPA's

removal of the limit extends the exemption period, the

extension is subject to direct challenge in this proceeding

and we next address the petitioners' challenge thereto.

The petitioners contend that the EPA's elimination of

the 18-month limit on NSR exemptions violates CAA

section 172(e), the Act's "anti-backsliding" provision.

Section 172(e) provides that if the the EPA "relaxes a

national primary ambient air quality standard," it must

"promulgate requirements applicable to all areas which

[*1271] [**188] have not attained that standard as of

the date of such relaxation" which "shall provide for

controls which are not less stringent than the controls

applicable to areas designated nonattainment before such

relaxation." 42 U.S.C. § 7502(e). Although section 172(e)

expressly applies only when the EPA "relaxes" a

NAAQS, the EPA has interpreted the language to also

apply when it strengthens a NAAQS--as it did when it

adopted the 8-hour ozone standard--reasoning that "if

Congress intended areas to remain subject to the same

level of control where a NAAQS was relaxed, they also

intended that such controls not be weakened where the

NAAQS is made more stringent." Final Rule To

Implement the 8-Hour [***67] Ozone National Ambient

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

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

Air Quality Management District v. EPA, 472 F.3d 882,

374 U.S. App. D.C. 121 (D.C. Cir. 2006), we upheld this

interpretation, id. at 900, and also concluded that NSR is

a "control" subject to section 172(e)'s backsliding

prohibition, id. at 902. Accordingly, the EPA's

elimination of the 18-month exemption limit violates

section 172(e) if the resulting NSR requirement is "less

stringent" than the existing requirement. Insofar as

Appendix S now provides for waiver of NSR for an

unlimited time pending SIP approval, it is plainly "less

stringent" than the previous version which limited an

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

argue, the EPA's revision could delay implementing NSR

controls in eligible nonattainment areas for years beyond

the previous 18-month limit. Accordingly, we conclude

that the revision constitutes backsliding in violation of

section 172(e).

The EPA offers three defenses of its revision. First,

because the EPA established the time limit to allow a

newly-designated nonattainment area a reasonable time to

develop a SIP before the statutory construction [***68]

ban applied, see 45 Fed. Reg. at 65,209, the EPA

contends that it reasonably removed the 18-month

limitation after the Congress repealed the new source

construction ban in 1990. The EPA might have done so

but for section 172(e)'s unequivocal backsliding

constraint, which plainly prohibits a "less stringent" NSR

control--precisely what the revision produced. Second,

the EPA asserts "there is no basis to speculate" that it will

grant waivers for the entire period before SIP approval

because "it 'would be highly disinclined to grant a waiver

where the SIP submission deadline has passed and EPA

had not received the required submission.'" EPA Br. at

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

speculate, however, in concluding that, notwithstanding

the EPA's promised discretionary restraint, the revised

section VI will produce some waivers lasting beyond the

previously prescribed 18-month period and thus impose a

control less stringent than before. This result contravenes

section 172(e). Nor are we persuaded by the EPA's third

argument, that the revision's new, third

"pre-condition"--that the EPA determine that the existing

two pre-conditions (satisfaction of applicable SIP

emission [***69] limitations and non-interference with

SIP's attainment date) have been met and publish the

determination in the Federal Register--"tightened" Part

VI's requirements. EPA Br. at 103. The new

pre-condition simply formalized and made explicit what

was already implicitly required--that the EPA find the

existing two pre-conditions satisfied. Thus, the additional

pre-condition produced no "tightening" effect; on the

contrary, it did nothing to counteract the indisputably

relaxing effect of removing the 18-month limit.

VII. Baton Rouge's Reformulated Gasoline

Requirement

The Chamber of Greater Baton Rouge and affiliated

petitioners (Chamber) contend the EPA arbitrarily and

capriciously [*1272] [**189] concluded that the Baton

Rouge, Louisiana area (Baton Rouge) is a "covered area"

under CAA section 211(k), 42 U.S.C. § 7545(k), and

therefore subject to a statutory ban on the sale to

consumers of conventional gasoline. 14 We conclude that

the EPA correctly determined the statutory definition of

"covered area" is ambiguous as to Baton Rouge under

Chevron step 1 and that it reasonably resolved the

ambiguity under Chevron step 2.

14 Section 211(k) defines "conventional

gasoline" as "any gasoline which does not meet

[***70] specifications set by a certification under

[section 211(k)]" as "reformulated gasoline." 42

U.S.C. § 7545(k)(10)(E)-(F).

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

"promulgate regulations . . . establishing requirements for

reformulated gasoline to be used in gasoline-fueled

vehicles in specified nonattainment areas." 42 U.S.C. §

7545(k)(1). Section 211(k)(5) makes unlawful "[t]he sale

or dispensing by any person of conventional gasoline to

ultimate consumers in any covered area"--necessitating

the use of reformulated gasoline instead. Id. §

7545(k)(5)(A). Section 211(k)(10), in turn, designates as a

"covered area" each of nine specific, high ozone areas

and further provides: "Effective one year after the

reclassification of any ozone nonattainment area as a

Severe ozone nonattainment area under section 7511(b)

of this title, such Severe area shall also be a 'covered area'

for purposes of this subsection." Id. § 7545(k)(10)(D).

In 1991, the EPA classified Baton Rouge as a

"serious" ozone nonattainment area under the 1-hour

standard. On April 24, 2003, the EPA reclassified Baton

Rouge as "severe," effective June 23, 2003, pursuant to

the bump-up provision, CAA § 181(b)(2), 42 U.S.C. §

7511(b)(2), [***71] because Baton Rouge failed to reach

attainment by its November 15, 1999 attainment date.

Notice of Withdrawal of October 2, 2002, Attainment

Date Extension, Determination of Nonattainment as of

November 15, 1999, and Reclassification of the Baton

Rouge Ozone Nonattainment Area, 68 Fed. Reg. 20,077

(Apr. 24, 2003) (effective June 23, 2003). At that time,

the EPA advised that "under Section 211(k) of the Act

the use of reformulated gasoline (RFG) will be required

in the Baton Rouge area beginning one year from the

effective date of this rule," that is, as of June 23, 2004. Id.

at 20,080. On April 30, 2004, the EPA designated Baton

Rouge as nonattainment under the 8-hour standard and

classified it as "marginal," effective June 15, 2004. Air

Quality Designations and Classifications for the 8-Hour

Ozone National Ambient Air Quality Standards; Early

Action Compact Areas With Deferred Effective Dates, 69

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

The Chamber filed a request for extension of the

deadline to commence using RFG or waiver of the RFG

requirement, which the EPA denied in a letter dated May

5, 2004. The Chamber then petitioned the United States

Court of Appeals for the Fifth Circuit [***72] for review

of the denial and the Fifth Circuit stayed the RFG

deadline on June 18, 2004. On August 2, 2004 the Fifth

Circuit granted a joint motion to stay its proceedings

"pending the outcome of the administrative decision

making process," with the RFG deadline stay to remain in

effect during remand. City of Baton Rouge v. EPA, No.

04-60408 (5th Cir. Aug. 2, 2004).

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

such as Baton Rouge, which automatically became a

"covered area" (subject to the RFG requirement) on the

one-year anniversary of its bump-up to "severe," should

remain subject to the RFG requirement notwithstanding

its classification to a less-than-severe status under the

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8-hour standard and the subsequent revocation of the

1-hour standard: [*1273] [**190] "EPA has

determined that bump-up areas that lose their severe

classification based solely on revocation of the 1-hour

NAAQS should remain RFG covered areas at least until

they are redesignated to attainment for the 8-hour

NAAQS." 70 Fed. Reg. at 71,686.

15 The EPA concluded

that "section 211(k)(10)(D) is ambiguous on the issue of

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

when it is no longer classified as severe" and that

[***73] therefore "EPA has discretion to determine

whether section 211(k)(10)(D) authorizes removal of a

bump-up area from the RFG program when it is no longer

classified as severe, and to set appropriate criteria for

such removal." Id. The EPA explained that it "d[id] not

believe that Congress would have intended that removal

of the severe classification based solely on revocation of

the less protective 1-hour NAAQS should result in

backsliding of the RFG requirement." Id. The Agency

further found it "instructive" that "if EPA had never

revised the 1-hour NAAQS[,] . . . the area would continue

to be a covered area at least until it was redesignated to

attainment for the 1-hour NAAQS." Id. Accordingly,

because "[h]ere, the removal of the severe classification

is through revocation of the 1-hour NAAQS, not through

redesignation to 1-hour attainment," the EPA determined

that "the removal of the severe classification for these

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

should not lead to removal of the RFG requirement." Id.

The Chamber offers three arguments against the EPA's

interpretation. We address and reject each argument in

turn.

15 The EPA stated it was "reserving for future

[***74] consideration what RFG requirements, if

any, should apply to the nine mandatory areas and

the bump-up areas covered by this final rule when

they are redesignated to attainment for the 8-hour

NAAQS." 70 Fed. Reg. at 71,687. The EPA

further noted its determination did "not change or

affect any discretion EPA may otherwise have

under the RFG provisions to modify or remove

RFG requirements." Id. at 71,686.

First, the Chamber contends that at Chevron step 1

Baton Rouge never became a "covered area" because the

plain and unambiguous language of the statutory

definition requires that a "covered area" be "a 'Severe

area' that remains severe 'one year after the

reclassification,'" Chamber Br. at 15 (quoting CAA §

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

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

a severe area as it had become a marginal area on June

15, 2004. The EPA does not quibble with the Chamber's

interpretation of the statutory language to require that the

area remain classified as "severe" on the one-year

anniversary of the reclassification. See EPA Br. at 111

("[O]nce an area is reclassified as 'severe,' the only other

precondition to becoming 'covered' is [***75] that the

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

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

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

20004--Baton Rouge was not only a marginal area under

the 8-hour standard but was also a severe area under the

1-hour standard, which was not revoked until June 15,

2005, almost a year later. See Phase 1 Rule, 69 Fed. Reg.

at 23,954 ("We will revoke the 1-hour standard in full,

including the associated designations and classifications,

1 year following the effective date of the designations for

the 8-hour NAAQS."). Thus, the EPA reasonably

determined that under the plain language of the statute,

Baton Rouge was a severe area as of June 23, 2004 and

became a "covered area" on that date. 16

16 The Chamber argues that this reasoning is

foreclosed because the EPA itself "stated that the

8-hour NAAQS is the 'relevant' standard."

Chamber Br. at 18 (quoting Phase 1 Rule, 69 Fed.

Reg. at 23,983). The EPA used the term

"relevant," however, in explaining why it had

decided that "control obligations an area is

required to retain in the approved SIP for an area's

1-hour classification must continue to be

implemented [***76] under the SIP until the area

attains and is redesignated to attainment for the

8-hour NAAQS." 69 Fed. Reg. at 23,983; see id.

("Since the relevant NAAQS is now the 8-hour

NAAQS, we believe it is appropriate to require

these mandated controls to remain as part of the

implemented SIP until an area attains the 8-hour

NAAQS and is redesignated to attainment.").

Thus, the cited language in fact supports retaining

the RFG control based on the one-hour standard

bump-up until Baton Rouge reaches 8-hour

attainment.

[*1274] [**191] Second, the Chamber asserts at

Chevron step 2 that even if the definition of "covered

area" is ambiguous, the EPA resolved the ambiguity

unreasonably in two respects. The Chamber first argues

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the EPA improperly relied on the Supreme Court's

decision in Whitman v. Am. Trucking Ass'ns, 531 U.S.

457, 121 S. Ct. 903, 149 L. Ed. 2d 1 (2001). In support of

its interpretation, the EPA cited Whitman's "caution[] . . .

against EPA making subpart 2 'abruptly obsolete,'" 70

Fed. Reg. at 71,686 (quoting Whitman, 531 U.S. at 485),

observing that, "[a]lthough the RFG requirement itself is

not set forth in subpart 2, the requirement to use it in

severe bump-up areas is tied directly to the classifications

that arise by operation [***77] of subpart 2" and

therefore "it would appear that the Supreme Court's

caution should be as relevant for RFG bump-up areas as

it is for the subpart 2 control obligations." Id.

Notwithstanding the Chamber's contrary assertions, the

EPA reasonably determined that "the inclusion of a

bump-up area in the RFG program is integrally tied to the

subpart 2 provisions that establish the original

classification and attainment date for an area and its later

reclassification," id., which provisions cause an area to

become a "covered" RFG area by operation of law.

Accordingly, the EPA reasonably relied on Whitman's

general admonition to preserve Subpart 2 to support the

Agency's particular determination that the effects of the

integrally connected provisions should remain intact

following conversion to the 8-hour standard.

The Chamber also asserts the EPA's interpretation

falters at Chevron step 2 because the Agency

unreasonably relied on "the very same provisions it

referred to in the Phase 1 Rule at 69 Fed. Reg. 23972,"

which provisions, the Chamber maintains, "did not

support the Phase 1 Rule, nor do they support the

imposition of RFG." Chamber Br. at 22-23 (citing 70

Fed. Reg. at 71,686). The [***78] Chamber examines

each of the statutes cited in the Phase 1 Rule and asserts,

correctly, that none of them directly relates to the RFG

requirement. See id. at 23-24. The Chamber makes too

much, however, of the EPA's citation to the Phase 1 Rule.

The EPA was simply referring readers "[f]or further

discussion of the reasoning behind anti-backsliding

provisions in the Phase 1 Rule" because the Agency also

relied on the anti-backsliding rationale for its

interpretation of the "covered area" definition in the

Phase 2 Rule. 17 See 70 Fed. Reg. at 71,686.

17 The Chamber also objects in particular to the

EPA's reliance on CAA section 172(e), the

anti-backsliding provision. See Chamber Br. at

23-24; Chamber Reply Br. at 2-3. The Chamber

argues section 172(e) applies only when the EPA

"relaxes" a standard and that, in promulgating the

8-hour standard, the EPA in fact strengthened,

rather than relaxed, the standard. The EPA's

reliance on section 172(e) in the Phase 1 Rule,

however, supported its specific policy against

backsliding in converting to the 8-hour standard

notwithstanding the 8-hour standard is stricter

(not more relaxed) than the one-hour standard.

We have already upheld this policy [***79] as

reasonable. See S. Coast, 472 F.3d at 900.

[*1275] [**192] Having rejected the Chamber's

contrary arguments, we conclude that the EPA's statutory

interpretation readily satisfies Chevron step 2. In

upholding the EPA's interpretation as reasonable, we, like

the Agency, find it "instructive" that but for the

happenstance of the EPA's adoption of 8-hour standards,

the Chamber would have no statutory basis to dispute that

Baton Rouge is a covered RFG area under the mandatory

bump-up and RFG provisions because Baton Rouge

remained a severe one-hour area for one year following

its classification as such. See 70 Fed. Reg. at 71,686

(quoted supra p. 47).

Finally, the Chamber contends the EPA was arbitrary

and capricious in not making a specific determination that

RFG would "protect the public health" in Baton Rouge

and asserts that in fact RFG will interfere with the area's

progress toward attainment, thereby harming the public

health. The Chamber first asserts that the EPA was

required by CAA section 109(b)(1) to make a specific

finding that requiring RFG "protects the public health" of

Baton Rouge, citing 42 U.S.C. § 7409(b)(1) ("National

primary ambient air quality standards, prescribed under

subsection (a) [***80] of this section shall be ambient air

quality standards the attainment and maintenance of

which in the judgment of the Administrator, based on

such criteria and allowing an adequate margin of safety,

are requisite to protect the public health."). The Chamber

further argues that requiring RFG in Baton Rouge will

interfere with the area's attainment because studies have

shown RFG increases NO[x] levels and Baton Rouge's

SIP strategy for reducing ozone relies largely on reducing

NO[x] (and not VOCs). By interfering with attainment,

the Chamber contends, RFG in fact endangers the public

health. As an initial matter, the Chamber's objections

based on harm to public health and interference with RFP

and attainment are forfeited because they were not raised

before the Agency. See CAA § 307(d)(7)(B), 42 U.S.C. §

7607(d)(7)(B) ("Only an objection to a rule or procedure

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which was raised with reasonable specificity during the

period for public comment (including any public hearing)

may be raised during judicial review."). To the extent

Baton Rouge argues that RFG will not improve the public

health, the EPA adequately addressed these objections

and reasonably determined they may best be resolved

[***81] through individual waiver requests. 18

18 As the EPA notes, the Chamber submitted

material originating in the Fifth Circuit

proceeding to support these objections but the

material was not submitted during the proceeding

before the Agency. See EPA Br. at 116.

In the Phase 2 Rulemaking, the Baton Rouge Clean

Air Coalition asserted that RFG use in Baton Rouge

would "provide no measurable benefits for NO[x]," "less

than 2 tons per day of VOC reductions, and "an ozone

benefit . . . of around 0.26 ppb," and asked whether these

data "qualify as an 'absurd result' and [would] be subject

to consideration for waiver." Letter from Mike D.

McDaniel, Executor Director, Baton Rouge Clean Air

Coalition to U. S. EPA at 4 (July 30, 2003); see Phase 2

Rule, 70 Fed. Reg. at 71,687-88. In response, the EPA

noted that Baton Rouge had "submitted requests for an

RFG waiver and for a waiver of the RFG oxygen content

requirement, which are currently before the Agency." 70

Fed. Reg. at 71,688. Based on its determination that "the

transition to the more protective 8-hour standard should

[not] result in less restrictive requirements for RFG than

would apply if the EPA had never revised the 1-hour

standard," the [***82] EPA advised that "[t]he

appropriate mechanism to address Baton Rouge's

concerns is . . . in the context of Baton Rouge's petitions

for relief [*1276] [**193] under the RFG program, and

not by establishing different, less restrictive RFG

requirements as part of the transition to the 8-hour

standard." Id. Baton Rouge's waiver request is ongoing

before the Agency with judicial review available in the

Fifth Circuit. The EPA's decision to address site-specific

data and concerns in an individual waiver proceeding,

rather than in the general rulemaking, is reasonable. Cf.

Nat'l Wildlife Fed'n v. EPA, 286 F.3d 554, 566, 351 U.S.

App. D.C. 42 (D.C. Cir. 2002) (upholding as reasonable

EPA's decision to address "color pollution" "on a

case-by-case basis through individual [National Pollutant

Discharge Elimination System] permits or, when

appropriate, through local limits" rather than "to establish

nationwide standards for discharge of 'color'").

VIII. Conclusion

In sum, we hold (1) the Phase 2 Rule violates the Act

by allowing participation in the NOX SIP Call to satisfy

the requirement that a nonattainment area mandate such

reductions as can be achieved by the application of

RACT, (2) the EPA acted arbitrarily when it eliminated

the [***83] requirement that an attainment

demonstration be approved for an area before a new

source would be allowed to use a past emission reduction

to offset new emissions, and (3) the elimination of the

18-month time limit for NSR waivers under Appendix S

violates the anti-backsliding provision of the Act. In light

of the likelihood the EPA will be unable to cure the

backsliding inherent in the removal of the 18-month time

limit, we vacate that provision of the Phase 2 Rule and

remand it to the EPA. See Ill. Pub. Telecomms. Ass'n v.

FCC, 123 F.3d 693, 693, 326 U.S. App. D.C. 315 (D.C.

Cir. 1997) ("When this court remands a rule ? with little

or no prospect of the rule's being readopted upon the

basis of a more adequate explanation of the agency's

reasoning, the practice of the court is ordinarily to vacate

the rule"). We remand to the EPA without vacatur the

other two provisions of the Phase 2 Rule we hold invalid.

We defer consideration of the Phase 2 Rule and

Reconsideration Notice insofar as they relate to the CAIR

program, and we deny the petitions in all other respects.

So ordered.

CONCUR BY: ROGERS (In Part)

DISSENT BY: ROGERS (In Part)

DISSENT

ROGERS, Circuit Judge, concurring in part and

dissenting in part. I join the court's opinion regarding

[***84] challenges to the Phase 2 Rule 1 except in three

respects. The petitioners met their burden to show

reopening of both the general policies allowing new and

modified sources to use offset credits from past emission

reductions to meet the requirements of section 173 of the

Clean Air Act ("CAA"), 42 U.S.C. § 7503, and EPA's

authority to waive interim new source review ("NSR")

Appendix S permitting requirements, 40 C.F.R. pt. 51,

app. S, § VI. Additionally, the challenge to the

contingency measure element of the Clean Data Policy

was not forfeited because comments submitted by the

NRDC and other environmental groups put EPA on

notice of the challenge, which EPA, in fact, addressed.

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1 Final Rule To Implement the 8-Hour Ozone

National Ambient Air Quality Standard--Phase 2;

Final Rule to Implement Certain Aspects of the

1990 Amendments Relating to New Source Review

and Prevention of Significant Deterioration as

They Apply in Carbon Monoxide, Particulate

Matter and Ozone NAAQS; Final Rule for

Reformulated Gasoline, 70 Fed. Reg. 71,612,

71,677 (Nov. 29, 2005) ("Phase 2 Rule").

I.

The principles underlying the reopening doctrine are

well-established. It is only their application that may

obfuscate [***85] the reality of what an agency

regulatory action entails. This is the situation here.

[*1277] [**194] Under the reopening doctrine,

which is an exception to the statutory limits on the period

for seeking judicial review of agency action, see Env.

Defense v. EPA, 467 F.3d 1329, 1333 (D.C. Cir. 2006),

an issue is reopened when an agency implicitly or

explicitly, see West Virginia v. EPA, 362 F.3d 861, 872,

360 U.S. App. D.C. 419 (D.C. Cir. 2004), solicits

comment on a preexisting regulation or "otherwise

indicates its willingness to reconsider such a regulation

by inviting and responding to comments," Kennecott

Utah Copper Corp. v. Dep't of Interior, 88 F.3d 1191,

1213, 319 U.S. App. D.C. 128 (D.C. Cir. 1996). The

"entire context" must "demonstrate[] that the agency has

undertaken a serious, substantive reconsideration of the

[existing] rule." P & V Enters. v. U.S. Army Corps of

Eng'rs, 516 F.3d 1021, 1024, 380 U.S. App. D.C. 96

(D.C. Cir. 2008) (internal quotation marks omitted)

(alteration in original). Also, when a new rule

"increase[s] the significance" of preexisting regulations,

Kennecott, 88 F.3d at 1216, and thus "significantly alters

the stakes of judicial review," the new rule

"constructively reopens" the previously settled issue, id.

at 1227. Applying these principles [***86] demonstrates

EPA reopened consideration of two subjects.

A.

Offset credits. The Phase 2 Rule allows new and

modified sources to meet emissions offset requirements

under CAA § 173(c), 42 U.S.C. § 7503(c), by using

credits from sources that shut down or curtailed

operations as long ago as August 7, 1977. See 40 C.F.R. §

51.165(a)(3)(ii)(C)(1)(ii); Op. at 28-31. Contrary to the

court's suggestion, this court's opinion in Kennecott

makes clear that the fact that the "basic regulatory

scheme remains unchanged," Op. at 33, is not dispositive

of whether an issue has been constructively reopened. See

Kennecott, 88 F.3d at 1219. Analyzing the reopening

doctrine at that level of generality begs the question. If

"adding new terms to [an] old rule" can result in

reopening, see id., then so can removing old terms from

an old rule, at least where those old terms were an

important part of the underlying regulatory scheme.

Furthermore, Kennecott also makes clear that the

question whether the stakes are "quantitatively different,"

Op. at 34, does not turn on whether the petitioner or

another failed to object to a different change earlier. See

Kennecott, 88 F.3d at 1226-27. Although a 1989 Rule

made it [***87] easier to use pre-application offset

credits, see Requirements for Implementation Plans, Air

Quality New Source Review, Final Rule, 54 Fed. Reg.

27,286, 27,292 (June 28, 1989) ("1989 Rule"), the

concomitant addition of the attainment demonstration

requirement mitigated the impact of the change and may

well have meant it was not "worth challenging,"

Kennecott, 88 F.3d at 1227, the regime as a whole.

However, once EPA eliminated the attainment

demonstration requirement and failed to replace it with a

comparable substitute, the need for a challenge by

environmental groups such as the NRDC arose because

EPA had "dramatically expanded authority to use

[pre-application offset] credits," NRDC Br. at 44. This

change meant that "a major new pollution source [may]

add substantial new emissions to a nonattainment area

without any contemporaneous offsets, even when the

state has no plan for meeting standards and no idea of

what total reductions are needed to attain standards." Id.

at 45.

Both EPA's and the court's analysis show that a

constructive reopening occurred. See Op. at 34-36. In

announcing the 1989 Rule, EPA stated that to comply

with the reasonable further progress ("RFP") requirement

[***88] of CAA § 173(a)(1)(A), 42 U.S.C. §

7503(a)(1)(A), the restriction on pre-application offset

credit was "necessary both to assure RFP and to

guarantee that a new source does [*1278] [**195] not

cause or contribute to a violation of the NAAQS," 1989

Rule, 54 Fed. Reg. at 27,292. This evaluation by EPA

supports the conclusion that environmental groups would

have determined in 1989 that it was not worth

challenging the regulatory scheme as significant limits

remained in place. Once EPA removed this "necessary,"

id., limitation "without adding any other safeguard to

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ensure that issuing a particular permit is consistent with

section 173's mandate that total reductions 'represent . . .

reasonable further progress,'" Op. at 36 (quoting CAA §

173(a)(1)(A), 42 U.S.C. § 7503(a)(1)(A)), the stakes of

judicial review were significantly altered. The court's

speculation today -- that it "could have been 'reasonably

anticipated' in 1989 that EPA might eliminate the

attainment demonstration requirement," Op. at 34 --

proves too much. Given EPA's evaluation in the 1989

Rule of the importance of restricting the availability of

pre-application offset credits, environmental groups had

no reason then to lodge a challenge [***89] based on the

possibility that EPA might, perhaps, at some point in the

future reverse course. Cf. S. Coast Air Quality Mgmt.

Dist. v. EPA, 472 F.3d 882, 898, 374 U.S. App. D.C. 121

(D.C. Cir. 2006). Although the reopening doctrine may

not apply if the change could have been "reasonably

anticipated," see Env. Defense, 467 F.3d at 1333, such a

limit on the doctrine does not go so far as preventing

review because a petitioner might have guessed EPA

could later change its evaluation of what was necessary.

Such an approach would render the constructive

reopening precedents nugatory.

On the merits, the NRDC persuasively contends that

"EPA's final rule . . . unlawfully permits total allowable

emissions after the new source starts operating to be

higher than emissions from existing sources before the

new source applied for its permit." NRDC Br. at 42-43.

The Phase 2 Rule's allowance of offset credit for

pre-application shutdowns and curtailments is contrary to

the plain text of the CAA and fails under Chevron step

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

Inc., 467 U.S. 837, 842-43, 104 S. Ct. 2778, 81 L. Ed. 2d

694 (1984). Section 173 (a)(1)(A) requires that

"sufficient offsetting reductions" shall be obtained "such

that total allowable [***90] emissions from existing

sources in the region, from new or modified sources

which are not major emitting facilities, and from the

proposed source will be sufficiently less than total

emissions from existing sources . . . prior to the

application for such permit to construct or modify so as to

represent . . . reasonable further progress." 42 U.S.C. §

7503(a)(1)(A). Section 173(c)(1) requires that offsets

come from "an equal or greater reduction, as applicable,

in actual emissions of such air pollutant from the same or

other sources in the area." Id. § 7503(c)(1) (emphasis

added); see also H.R. Rep. No. 101-490, pt. 1 (1990)

(referring to reductions in "actual emissions"). Under the

Phase 2 Rule, new and modified major sources may claim

offset credit from reductions in emissions resulting from

the shutdown or curtailment of operations from more than

three decades ago. The absence of any meaningful time

limit means the Rule is inconsistent with CAA §

173(c)(1)'s requirement that new sources' emissions

"shall be offset" by an equal or greater reduction in

"actual emissions," 42 U.S.C. § 7503(c)(1). Congress is

presumed, absent any indication to the contrary, to have

intended the ordinary [***91] meaning of the word

"actual," as "existing or occurring at the time,"

MERRIAM WEBSTER'S COLLEGIATE

DICTIONARY (10th ed. 1993) (emphasis added); accord

WEBSTER'S THIRD NEW INT'L DICTIONARY

(1993). See Engine Mfrs. Ass'n v. S. Coast Air Quality

Mgmt. Dist., 541 U.S. 246, 252, 124 S. Ct. 1756, 158 L.

Ed. 2d 529 (2004). Congress has given no indication in

the [*1279] [**196] surrounding text, or elsewhere,

that it intended to depart from the common meaning of

"actual." Hence, allowing an offset for no-longer-existing

emissions from sources closed decades ago is

inconsistent with the statutory text.

EPA offers that because the Phase 2 Rule requires

the old offsets to be included in the area's emissions

inventory, allowance of pre-application offset credits is

consistent with the requirement in CAA § 173(a)(1)(A),

42 U.S.C. § 7503(a)(1)(A), that offsets ensure reasonable

further progress toward attainment. See Phase 2 of the

Final Rule to Implement the 8- Hour Ozone National

Ambient Air Quality Standard, Final Notice of

Reconsideration, 72 Fed. Reg. 31,727, 31,742/3 (June 8,

2007) ("Final Notice of Reconsideration"). But using

decades-old emissions in an accounting exercise cannot

render those emissions "actual" as that word is commonly

understood. [***92] Likewise, EPA offers that because

"[f]rom an air quality planning perspective" emissions

from the previously shutdown or curtailed sources had

impacted the area's designations as nonattainment, they

are "actual emissions reductions." Phase 2 Rule, 70 Fed.

Reg. at 71,677; see also Final Notice of Reconsideration,

72 Fed. Reg. at 31,742/3. But that emissions were

"actual" as long ago as the 1970s does not mean they

continue to meet the common understanding of "actual"

years later when a source applies for a construction or

modification permit.

Because the flaws in this part of the Phase 2 Rule,

see 40 C.F.R. § 51.165(a)(3)(ii)(C)(1)(ii), cannot be

remedied by further explanation by EPA, it must be

vacated. See Allied-Signal, Inc. v. U.S. Nuclear Reg.

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2009 U.S. App. LEXIS 15384, ***88; 69 ERC (BNA) 1284
Comm'n, 988 F.2d 146, 150-51, 300 U.S. App. D.C. 198

(D.C. Cir. 1993). To what extent the court's holding that

elimination of the requirement of an approved attainment

demonstration is arbitrary and capricious under CAA §

307(d)(9)(A), 42 U.S.C. § 7607(d)(9)(A), Op. at 36, will

result in a different outcome than vacatur remains to be

seen upon remand.

B.

NSR waiver authority. Section 110(a)(2)(C), 42

U.S.C. § 7410(a)(2)(C), does not specify what NSR

requirements apply [***93] in the period between an

area's designation as nonattainment and approval of its

NSR state implementation plan ("SIP"). Prior to

promulgating the Phase 2 Rule, EPA had filled this

statutory gap by retaining Appendix S's interim NSR

regime, which by its terms could apply for only 18

months. Given the limited duration of its effect, the

previous regulation "may not have been worth

challenging," Kennecott, 88 F.3d at 1227. However,

EPA's decision to eliminate the 18-month limitation

"alter[ed] the stakes of judicial review," id. By parity of

reasoning, if there was a reopening in Kennecott where

industry petitioners faced a new requirement creating the

possibility of the imposition of additional penalties, then

there was a constructive reopening where EPA's change

meant NSR controls could be postponed indefinitely,

thereby dramatically changing the scope and effect of the

waiver provision.

Additionally, EPA constructively reopened the issue

of its NSR waiver authority when it proposed to remove

the general waiver provision in Appendix S and replace it

with a "transitional" program in which waivers would be

available in only a limited set of nonattainment areas. See

Proposed Rule to Implement [***94] the 8-Hour Ozone

National Ambient Air Quality Standard, 68 Fed. Reg.

32,802, 32,846-48 (June 2, 2003) ("NPRM"). EPA has

described the proposal as a "major rewrite of [A]ppendix

S." Phase 2 Rule, 70 Fed. Reg. at 71,674. In explaining

the 2003 proposal, EPA stated "we do not believe that

areas [*1280] [**197] not meeting the transitional

approach would be able to ensure that they were

implementing an NSR program 'as necessary' to ensure

the attainment of NAAQS . . . ." NPRM, 68 Fed. Reg. at

32,848 (quoting CAA § 110(a)(2)(C), 42 U.S.C. §

7410(a)(2)(C)). In other words, EPA expressed doubt

about a broad waiver's consistency with statutory

mandates in certain circumstances. Although it ultimately

rejected the proposed alternative, EPA reopened the issue

of its authority to waive interim NSR requirements by

raising the question whether a broad waiver would be

inconsistent with the CAA. See Edison Elec. Inst. v. EPA,

996 F.2d 326, 332, 302 U.S. App. D.C. 60 (D.C. Cir.

1993).

On the merits, the challenge by the NRDC and the

State of New Jersey to EPA's authority to exempt new

sources from the interim NSR permitting requirements is

unpersuasive. They contend that "[w]here Congress has

intended to allow exceptions to NSR requirements,

[***95] it has expressly said so, "NRDC Br. at 38 (citing,

inter alia, CAA § 173(a)(1)(B), 42 U.S.C. §

7503(a)(1)(B), excepting economic development zones).

However, EPA persuasively responds that the waivers are

the product of EPA's gap-filling authority. See Chevron,

467 U.S. at 843-45. In exercising that authority, EPA

established requirements "substantially similar to the

requirements of part D," CAA § 171 et seq., 42 U.S.C. §

7501 et seq., although not identical to the "major NSR"

program under Part D. See Phase 2 Rule, 70 Fed. Reg. at

71,678/1. The "minor NSR" program under CAA §

110(a)(2)(C) calls for "regulation of the modification and

construction of any stationary source within the areas

covered by the plan as necessary to assure that [NAAQS]

are achieved." 42 U.S.C. § 7410(a)(2)(C) (emphasis

added). EPA thus could reasonably conclude that the

interim NSR requirements are inapplicable when the

exemption conditions are met. In those instances, a

waiver would be available only if the new source's

emissions would not interfere with timely attainment, see

40 C.F.R. pt. 51, app. S, § VI, making additional NSR

requirements unnecessary.

Although EPA had authority to provide waivers on a

[***96] caseby-case basis where a waiver would not

interfere with timely attainment, I concur in holding that

EPA's elimination of the 18- month limitation violates the

anti-backsliding provision in CAA § 172(e), 42 U.S.C. §

7502(e), see Op. at 43-45.

II.

The Clean Data Policy, originally published in 1992

and revised in 1995, excuses state planning requirements

relating to RFP, attainment demonstrations, and

contingency measures for areas attaining the NAAQS but

not yet redesignated as attainment areas. In commenting

in 2003 on the proposed codification of this statutory

interpretation, environmental groups, including the

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2009 U.S. App. LEXIS 15384, ***92; 69 ERC (BNA) 1284
NRDC, stated that the "EPA cannot authorize states to

simply drop subpart 2 measures when the area is meeting

either [the 1-hour or 8-hour] standard." Clean Air Task

Force, et al., Comments at 48. By arguing that "[t]he

[CAA] allows states to move mandated controls to a

maintenance contingency plan, [CAA § 175A, 42 U.S.C.

§ 7505a], but only after the area has been redesignated to

attainment," id. (emphasis added), environmental groups

put EPA on notice of its view that until an area is

designated as being in attainment, a state plan must

continue to contain the antecedent [***97] requirements,

such as contingency measures, applicable in

nonattainment areas.

Contrary to the court's holding that the NRDC's

challenge to the contingency plan aspect of EPA's Clean

Data Policy is forfeited, Op. at 20-21, the rulemaking

record [*1281] [**198] evidences that comments put

EPA on notice of that objection. First, these comments

raised the objection to the Clean Data Policy with respect

to the contingency measures requirement of Subpart 2

"with reasonable specificity during the period for public

comment," CAA § 307(d)(7)(B), 42 U.S.C. §

7607(d)(7)(B), and sufficiently put EPA on notice of the

objection. Second, the comment did not make a mere

"general [challenge] to EPA's approach," Mossville Envt'l

Action Now v. EPA, 370 F.3d 1232, 1238, 361 U.S. App.

D.C. 508 (D.C. Cir. 2004) (internal quotation marks

omitted) (alteration in original), but instead challenged

application of a specific EPA policy -- the Clean Data

Policy -- to a specific set of statutory requirements --

those in Subpart 2 of the CAA, CAA § 181 et seq., 42

U.S.C. § 7511 et seq. The comment therefore constituted

"adequate notification of the general substance of the

complaint," S. Coast Air Quality Mgmt. Dist. v. EPA, 472

F.3d 882, 891, 374 U.S. App. D.C. 121 (D.C. Cir. 2006),

[***98] including an objection regarding antecedent

contingency measures in particular. Third, that other

objections to the Clean Data Policy addressed only the

requirements for RFP and attainment demonstrations

does not render the broader objection insufficient to

preserve for judicial review the objection to elimination

of the antecedent contingency measures. Fourth, the

comment that the "EPA's 'clean data policy,' 68 Fed. Reg.

at 32,835/3, is unlawful with respect to both the 1-hour

and 8-hour NAAQS for the reasons set forth . . . above

[regarding RFP and the attainment demonstration],"

Clean Air Task Force, et al., Comments at 100, shows

that the objection was not limited to any particular aspect

of the Clean Data Policy. Fifth, EPA's response to the

comments addressed contingency measures, among other

requirements, further indicating the comments were

sufficient to put EPA on notice of the objection. See

Phase 2 Rule, 70 Fed. Reg. at 71,645/1, 71,646/1; cf.

Appalachian Power Co. v. EPA, 135 F.3d 791, 817- 18,

328 U.S. App. D.C. 379 (D.C. Cir. 1998).

Nonetheless, although the NRDC's challenge is

properly before the court, it fails on the merits. Section

172(c)(9) provides that SIPs in nonattainment areas "shall

[***99] provide for implementation of specific measures

to be undertaken if the area fails to make reasonable

further progress, or to attain the [NAAQS] by the

attainment date applicable under this part." 42 U.S.C. §

7502(c)(9) (emphasis added). The NRDC contends that

"[t]he [Clean Data] [P]olicy waives mandatory pollution

control requirements based solely on an area's current air

quality, without requiring the area to also show -- as

mandated by Congress -- that it has met all of the

[CAA]'s applicable requirements . . . ." NRDC Br. at 34.

However, EPA's view that CAA §§ 172(c)(9) and

182(c)(9), 42 U.S.C. §§ 7502(c)(9), 7511a(c)(9), are

written in a manner that ties the antecedent contingency

measures to the requirements for RFP and an attainment

demonstration, such that all are inapplicable upon

attainment, see Phase 2 Rule, 70 Fed. Reg. at 71,645, is

consistent with the plain text and to the extent there may

be ambiguity, it is a reasonable interpretation. The Clean

Data Policy requires that areas have "three consecutive

years of clean air quality monitoring data demonstrating

attainment of the ozone standard" before EPA can

determine areas have attained. Memorandum from John

S. Seitz, [***100] Director, Office of Air Quality

Planning and Standards, EPA, to Various EPA Directors

5 (May 10, 1995). Also, if EPA determines an area

covered by the Clean Data Policy has violated the

NAAQS prior to formal designation of attainment, the

Clean Data Policy no longer applies to that area. See 40

C.F.R. § 51.918.

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