United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 13, 2012 Decided August 21, 2012

No. 11-1302

EME HOMER CITY GENERATION, L.P.,

PETITIONER

v.

ENVIRONMENTAL PROTECTION AGENCY, ET AL.,

RESPONDENTS

SAN MIGUEL ELECTRIC COOPERATIVE, ET AL.,

INTERVENORS

Consolidated with 11-1315, 11-1323, 11-1329, 11-1338, 

11-1340, 11-1350, 11-1357, 11-1358, 11-1359, 11-1360, 

11-1361, 11-1362, 11-1363, 11-1364, 11-1365, 11-1366, 

11-1367, 11-1368, 11-1369, 11-1371, 11-1372, 11-1373, 

11-1374, 11-1375, 11-1376, 11-1377, 11-1378, 11-1379, 

11-1380, 11-1381, 11-1382, 11-1383, 11-1384, 11-1385, 

11-1386, 11-1387, 11-1388, 11-1389, 11-1390, 11-1391, 

11-1392, 11-1393, 11-1394, 11-1395

On Petitions for Review of a Final Rule

of the Environmental Protection Agency

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2

Bill Davis, Assistant Solicitor General, Office of the 

Attorney General for the State of Texas, argued the cause for 

Governmental Petitioners. With him on the briefs were Greg 

Abbott, Attorney General, Jonathan F. Mitchell, Solicitor 

General, Jon Niermann, Chief, Environmental Protection 

Division, Luther J. Strange, III, Attorney General, Office of 

the Attorney General for the State of Alabama, Leslie Sue 

Ritts, Pamela Jo Bondi, Attorney General, Office of the 

Attorney General for the State of Florida, Jonathan A. 

Glogau, Chief, Complex Litigation, Samuel S. Olens, 

Attorney General, Office of the Attorney General for the State 

of Georgia, John E. Hennelly and Diane L. DeShazo, Senior 

Assistant Attorneys General, Thomas M. Fisher, Solicitor 

General, Office of the Attorney General for the State of 

Indiana, Valerie Marie Tachtiris, Deputy Assistant Attorney 

General, Jeffrey A. Chanay, Deputy Attorney General, Office 

of the Attorney General for the State of Kansas, Henry V. 

Nickel, George P. Sibley, III, James D. “Buddy” Caldwell, 

Attorney General, Office of the Attorney General for the State 

of Louisiana, Megan K. Terrell, Chief, Environmental 

Section, Herman Robinson, Jackie Marie Scott Marve, Deidra 

L. Johnson, Kathy M. Wright, Donald James Trahan, David 

Richard Taggart, Jeffrey Winston Price, John Joseph Bursch, 

Solicitor General, Office of the Attorney General for the State 

of Michigan, Neil David Gordon, Assistant Attorney General, 

Sean Peter Manning, Chief, Environmental, Natural 

Resources, and Agriculture Division, Harold Edward 

Pizzetta, III, Special Attorney, Office of the Attorney General 

for the State of Mississippi, Jon Cumberland Bruning, 

Attorney General, Office of the Attorney General for the State 

of Nebraska, Katherine J. Spohn, Special Counsel, Dale T. 

Vitale, Gregg H. Bachmann, and Chris Kim, Assistant 

Attorneys General, Office of the Attorney General for the 

State of Ohio, Thomas Bates, Chief, Public Protection Unit, 

Office of the Attorney General for the State of Oklahoma, 

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Patrick Wyrick, Solicitor General, P. Clayton Eubanks, 

Assistant Attorney General, Alan Wilson, Attorney General, 

Office of the Attorney General for the State of South 

Carolina, James Emory Smith, Jr., Assistant Deputy Attorney 

General, Kenneth T. Cuccinelli, II, Attorney General, Office 

of the Attorney General for the Commonwealth of Virginia, 

E. Duncan Getchell, Jr., Solicitor General, and Thomas James 

Dawson, Assistant Attorney General, Wisconsin Department 

of Justice.

Peter D. Keisler argued the cause for Non-Governmental 

Petitioners. With him on the briefs were Roger R. Martella,

Jr., C. Frederick Beckner III, Timothy K. Webster, F. William 

Brownell, Gregory G. Garre, Claudia M. O’Brien, Lori 

Alvino McGill, Jessica E. Phillips, Katherine I. Twomey, 

Stacey VanBelleghem, Janet J. Henry, Steven G. McKinney, 

Terese T. Wyly, William M. Bumpers, Joshua B. Frank, 

Megan H. Berge, P. Stephen Gidiere, III, Richard Alonso, 

Jeffrey R. Holmstead, Gary C. Rikard, Robert J. Alessi, Chuck 

D’Wayne Barlow, Peter P. Garam, Kyra Marie Fleming, 

Richard G. Stoll, Brian H. Potts, Julia L. German, Robert A. 

Manning, Joseph A. Brown, Mohammad O. Jazil, Eric J.

Murdock, Andrea Bear Field, Norman W. Fichthorn, E.

Carter Chandler Clements, James S. Alves, Gary V. Perko, 

William L. Wehrum, Jr., David M. Flannery, Gale Lea 

Rubrecht, Maureen N. Harbourt, Tokesha M. Collins, Bart E. 

Cassidy, Katherine L. Vaccaro, Diana A. Silva, William F. 

Lane, Jordan Hemaidan, Todd Palmer, Douglas E. Cloud, 

David Meezan, Christopher Max Zygmont, Matthew J. 

Splitek, Gary M. Broadbent, Michael O. McKown, Terry 

Russell Yellig, Dennis Lane, Karl R. Moor, Margaret 

Claiborne Campbell, Byron W. Kirkpatrick, Hahnah 

Williams, Peter S. Glaser, Tameka M. Collier, Grant F. 

Crandall, Arthur Traynor, III, Eugene M. Trisko, Jeffrey L. 

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Landsman, Vincent M. Mele, Elizabeth P. Papez, John M. 

Holloway III, Elizabeth C. Williamson, and Ann M. Seha.

Michael J. Nasi, Shannon L. Goessling, and Douglas A. 

Henderson were on the brief for intervenor San Miguel 

Electric Cooperative and amici Industrial Energy Consumers 

of America, et al., in support of petitioners. Robert M. Cohan

entered an appearance.

Norman L. Rave, Jr., David S. Gualtieri, and Jon M. 

Lipshultz, Attorneys, U.S. Department of Justice, argued the 

causes for respondent. With them on the briefs were Jessica 

O’Donnell, Sonja Rodman, and Stephanie Hogan, Attorneys.

Simon Heller, Assistant Solicitor General, Office of the 

Attorney General for the State of New York, argued the cause 

for State/City Respondent-Intervenors. With him on the brief 

were Eric T. Schneiderman, Attorney General, Barbara D. 

Underwood, Solicitor General, Andrew G. Frank and Michael 

J. Myers, Assistant Attorneys General, Benna R. Solomon, 

James B. Dougherty, Joseph R. Biden, III, Attorney General, 

Office of the Attorney General for the State of Delaware, 

Valerie M. Satterfield, Deputy Attorney General, Douglas F. 

Gansler, Attorney General, Office of the Attorney General for 

the State of Maryland, Mary E. Raivel, Assistant Attorney 

General, Peter F. Kilmartin, Attorney General, Office of the 

Attorney General for the State of Rhode Island, Gregory S. 

Schultz, Special Assistant Attorney General, Martha Coakley, 

Attorney General, Office of the Attorney General for the 

Commonwealth of Massachusetts, Frederick D. Augenstern, 

Assistant Attorney General, Scott J. Schwarz, William H. 

Sorrell, Attorney General, Office of the Attorney General for 

the State of Vermont, Thea J. Schwartz, Assistant Attorney 

General, Lisa Madigan, Attorney General, Office of the 

Attorney General for the State of Illinois, Gerald T. Karr, 

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Assistant Attorney General, Irvin B. Nathan, Attorney 

General, Office of the Attorney General for the District of 

Columbia, Amy E. McDonnell, Deputy General Counsel, 

George Jepsen, Attorney General, Office of the Attorney 

General for the State of Connecticut, Kimberly P. Massicotte, 

Scott N. Koschwitz, and Matthew I. Levine, Assistant 

Attorneys General, William R. Phelan, Jr., Roy Cooper, 

Attorney General, Office of the Attorney General for the State 

of North Carolina, James C. Gulick, Senior Deputy Attorney 

General, Marc Bernstein and J. Allen Jernigan, Special 

Deputies Attorney General, and Christopher King. William J. 

Moore, III entered an appearance.

Brendan K. Collins argued the cause for Industry 

Respondent-Intervenors. With him on the brief were Robert 

B. McKinstry, Jr. and James W. Rubin.

Sean H. Donahue argued the cause for Public Health 

Respondent-Intervenors. With him on the brief were David T. 

Lifland, Vickie L. Patton, George Hays, Josh Stebbins, John 

Walke, and David Marshall. Ann Brewster Weeks entered an 

appearance. 

Before: ROGERS, GRIFFITH, and KAVANAUGH, Circuit 

Judges.

Opinion for the Court filed by Circuit Judge

KAVANAUGH, with whom Circuit Judge GRIFFITH joins.

Dissenting opinion filed by Circuit Judge ROGERS.

KAVANAUGH, Circuit Judge: Some emissions of air 

pollutants affect air quality in the States where the pollutants 

are emitted. Some emissions of air pollutants travel across

State boundaries and affect air quality in downwind States. 

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To deal with that complex regulatory challenge, Congress did 

not authorize EPA to simply adopt limits on emissions as 

EPA deemed reasonable. Rather, Congress set up a 

federalism-based system of air pollution control. Under this 

cooperative federalism approach, both the Federal 

Government and the States play significant roles. The Federal 

Government sets air quality standards for pollutants. The 

States have the primary responsibility for determining how to 

meet those standards and regulating sources within their 

borders.

In addition, and of primary relevance here, upwind States 

must prevent sources within their borders from emitting 

federally determined “amounts” of pollution that travel across 

State lines and “contribute significantly” to a downwind 

State’s “nonattainment” of federal air quality standards. That 

requirement is sometimes called the “good neighbor” 

provision. 

In August 2011, to implement the statutory good 

neighbor requirement, EPA promulgated the rule at issue in 

this case, the Transport Rule, also known as the Cross-State 

Air Pollution Rule. The Transport Rule defines emissions

reduction responsibilities for 28 upwind States based on those 

States’ contributions to downwind States’ air quality 

problems. The Rule limits emissions from upwind States’

coal- and natural gas-fired power plants, among other sources. 

Those power plants generate the majority of electricity used 

in the United States, but they also emit pollutants that affect 

air quality. The Transport Rule targets two of those 

pollutants, sulfur dioxide (SO2) and nitrogen oxides (NOx).

Various States, local governments, industry groups, and 

labor organizations have petitioned for review of the 

Transport Rule. Although the facts here are complicated, the 

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legal principles that govern this case are straightforward: 

Absent a claim of constitutional authority (and there is none 

here), executive agencies may exercise only the authority 

conferred by statute, and agencies may not transgress 

statutory limits on that authority.

Here, EPA’s Transport Rule exceeds the agency’s

statutory authority in two independent respects. First, the 

statutory text grants EPA authority to require upwind States to 

reduce only their own significant contributions to a downwind 

State’s nonattainment. But under the Transport Rule, upwind 

States may be required to reduce emissions by more than their 

own significant contributions to a downwind State’s 

nonattainment. EPA has used the good neighbor provision to 

impose massive emissions reduction requirements on upwind 

States without regard to the limits imposed by the statutory 

text. Whatever its merits as a policy matter, EPA’s Transport 

Rule violates the statute. Second, the Clean Air Act affords 

States the initial opportunity to implement reductions required 

by EPA under the good neighbor provision. But here, when 

EPA quantified States’ good neighbor obligations, it did not 

allow the States the initial opportunity to implement the 

required reductions with respect to sources within their 

borders. Instead, EPA quantified States’ good neighbor 

obligations and simultaneously set forth EPA-designed 

Federal Implementation Plans, or FIPs, to implement those 

obligations at the State level. By doing so, EPA departed 

from its consistent prior approach to implementing the good 

neighbor provision and violated the Act.

For each of those two independent reasons, EPA’s 

Transport Rule violates federal law. Therefore, the Rule must 

be vacated.

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In so ruling, we note that this Court has affirmed 

numerous EPA clean air decisions in recent years when those 

agency decisions met relevant statutory requirements and 

complied with statutory constraints. See, e.g., National 

Environmental Development Association’s Clean Air Project 

v. EPA, No. 10-1252 (D.C. Cir. July 20, 2012); API v. EPA, 

No. 10-1079 (D.C. Cir. July 17, 2012); ATK Launch Systems, 

Inc. v. EPA, 669 F.3d 330 (D.C. Cir. 2012); NRDC v. EPA, 

661 F.3d 662 (D.C. Cir. 2011); Medical Waste Institute & 

Energy Recovery Council v. EPA, 645 F.3d 420 (D.C. Cir. 

2011); American Trucking Ass’ns v. EPA, 600 F.3d 624 (D.C. 

Cir. 2010). In this case, however, we conclude that EPA has 

transgressed statutory boundaries. Congress could well 

decide to alter the statute to permit or require EPA’s preferred 

approach to the good neighbor issue. Unless and until 

Congress does so, we must apply and enforce the statute as 

it’s now written. Our decision today should not be interpreted 

as a comment on the wisdom or policy merits of EPA’s 

Transport Rule. It is not our job to set environmental policy. 

Our limited but important role is to independently ensure that 

the agency stays within the boundaries Congress has set. 

EPA did not do so here.1

 1 The dissent argues that petitioners’ challenge to EPA’s 

approach to the significant contribution issue is not properly before 

us because that issue was not sufficiently raised before the agency 

in the rulemaking proceeding. We fundamentally disagree with the 

dissent’s reading of the record on that point.

The dissent also claims that petitioners’ challenge to EPA’s 

issuance of the FIPs is not properly before us because the affected 

States should have raised such a challenge earlier in the process. 

We again disagree. The dissent’s analysis on the FIPs issue 

conflates (i) EPA’s rejection of certain States’ SIPs and (ii) EPA’s 

decision in the Transport Rule to set States’ “good neighbor” 

obligations and emissions budgets and simultaneously issue FIPs. 

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I

A

Under the Clean Air Act, the Federal Government sets air 

quality standards, but States retain the primary responsibility 

(if the States want it) for choosing how to attain those 

standards within their borders. See Train v. NRDC, 421 U.S. 

60, 63-67 (1975); Virginia v. EPA, 108 F.3d 1397, 1406-10

(D.C. Cir. 1997). The Act thus leaves it to the individual 

States to determine, in the first instance, the particular 

restrictions that will be imposed on particular emitters within 

their borders. (If a State refuses to participate, the Federal 

Government regulates the sources directly.)

To spell this out in more detail: The Clean Air Act 

charges EPA with setting National Ambient Air Quality 

Standards, or NAAQS, which prescribe the maximum 

permissible levels of common pollutants in the ambient air. 

See 42 U.S.C. § 7409(a)-(b). EPA must choose levels which, 

“allowing an adequate margin of safety, are requisite to 

protect the public health.” 42 U.S.C. § 7409(b)(1). 

After a lengthy process, the details of which are not 

relevant here, EPA designates “nonattainment” areas – that is, 

areas within each State where the level of the pollutant 

exceeds the NAAQS. See 42 U.S.C. § 7407(d).

 

The States here are challenging only the latter issue, and they have 

done so in a timely fashion. Indeed, they could not have done so 

until EPA, in the Transport Rule, simultaneously set the States’ 

individual emissions budgets and issued FIPs.

We will explain both points more below. Suffice it here to say 

that, much as we might like to do so, we respectfully do not believe 

we can avoid the merits of this complex case, as the dissent urges.

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Once EPA sets a NAAQS and designates nonattainment 

areas within the States, the lead role shifts to the States. The 

States implement the NAAQS within their borders through

State Implementation Plans, or SIPs. (As the experienced 

reader knows, there is no shortage of acronyms in EPA-land.) 

In their SIPs, States choose which individual sources within 

the State must reduce emissions, and by how much. For 

example, a State may decide to impose different emissions 

limits on individual coal-burning power plants, natural gasburning power plants, and other sources of air pollution, such 

as factories, refineries, incinerators, and agricultural activities. 

States must submit SIPs to EPA within three years of 

each new or revised NAAQS. See 42 U.S.C. § 7410(a)(1). 

Section 110(a)(2) of the Act lists the required elements of a 

SIP submission.

Section 110(a)(2)(D)(i)(I), the “good neighbor” provision 

at issue in this case, is one of the required elements of a SIP. 

The good neighbor provision requires that SIPs:

(D) contain adequate provisions –

(i) prohibiting, consistent with the provisions of this 

subchapter, any source or other type of emissions 

activity within the State from emitting any air 

pollutant in amounts which will –

(I) contribute significantly to nonattainment in, 

or interfere with maintenance by, any other State 

with respect to any such national primary or 

secondary ambient air quality standard . . . .

42 U.S.C. § 7410(a)(2)(D). 

The good neighbor provision recognizes that emissions 

“from ‘upwind’ regions may pollute ‘downwind’ regions.” 

Appalachian Power Co. v. EPA, 249 F.3d 1032, 1037 (D.C. 

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Cir. 2001). To put it colloquially, the good neighbor 

provision requires upwind States to bear responsibility for 

their fair share of the mess in downwind States. By placing 

the good neighbor requirement in Section 110(a)(2), Congress 

established the upwind State’s SIP as the vehicle for 

implementing the upwind State’s good neighbor obligation. 

Of course, an upwind State will not know what it needs to do 

to meet its good neighbor obligation until it learns the level of 

air pollution in downwind States, and further learns how 

much it is contributing to the problems in the downwind 

States. EPA plays the critical role in gathering information 

about air quality in the downwind States, calculating each 

upwind State’s good neighbor obligation, and transmitting 

that information to the upwind State. With that information, 

the upwind State can then determine how to meet its good 

neighbor obligation in a new SIP or SIP revision. See 42 

U.S.C. § 7410(k)(5).

After EPA quantifies a State’s good neighbor obligation, 

if a State does not timely submit an adequate SIP (or an 

adequate SIP revision) to take account of the good neighbor 

obligation as defined by EPA, responsibility shifts back to the 

Federal Government. Within two years of disapproving a 

State’s SIP submission or SIP revision, or determining that a 

State has failed to submit a SIP, EPA must promulgate a 

Federal Implementation Plan to implement the NAAQS 

within that State. See 42 U.S.C. § 7410(c)(1).

B

The good neighbor provision – and EPA’s attempts to 

implement it – are familiar to this Court from past cases.

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

considered a challenge to EPA’s 1998 NOx Rule, commonly 

referred to as the NOx SIP Call, which quantified the good 

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neighbor obligations of 22 States with respect to the 1997 

ozone NAAQS. See 63 Fed. Reg. 57,356, 57,358 (Oct. 27, 

1998).

The 1998 NOx Rule did not define “amounts which will 

. . . contribute significantly to nonattainment” solely on the 

basis of downwind air quality impact, as one might have 

expected given the statutory text. Rather, EPA also 

considered how much NOx could be eliminated by sources in 

each State if those sources installed “highly cost-effective” 

emissions controls. See Michigan, 213 F.3d at 675. On 

review, some States argued that the statutory text required 

EPA to order reductions based on air quality impact alone, not 

cost of reduction. But the Michigan Court found no “clear 

congressional intent to preclude consideration of cost.” Id. at 

677 (citation omitted). The Court thus held that EPA may

“consider differences in cutback costs, so that, after reduction 

of all that could be cost-effectively eliminated, any remaining 

‘contribution’ would not be considered ‘significant.’” Id. at 

677; see also id. at 677-79. In other words, EPA could use 

cost considerations to lower an upwind State’s obligations 

under the good neighbor provision.

2

In North Carolina v. EPA, 531 F.3d 896 (D.C. Cir. 2008), 

we considered a challenge to EPA’s 2005 Clean Air Interstate 

Rule, or CAIR. See 70 Fed. Reg. 25,162 (May 12, 2005). 

CAIR built on the 1998 NOx Rule and defined 28 States’ 

 2 Judge Sentelle dissented. In his view, the statutory text

unambiguously “set forth one criterion: the emission of an amount 

of pollutant sufficient to contribute significantly to downwind 

nonattainment.” Id. at 696 (Sentelle, J., dissenting); cf. Whitman v. 

American Trucking Ass’ns, 531 U.S. 457, 467 (2001) (“We have 

therefore refused to find implicit in ambiguous sections of the CAA 

an authorization to consider costs that has elsewhere, and so often, 

been expressly granted.”).

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good neighbor obligations with respect to the 1997 ozone 

NAAQS and the 1997 NAAQS for annual levels of fine 

particulate matter, or annual PM2.5. See id.

CAIR employed two different formulas – both of which 

incorporated cost considerations – to quantify each State’s 

obligations for the pollutants covered by CAIR, SO2 and NOx. 

The North Carolina decision held that the formulas went 

beyond Michigan’s authorization to use cost and that the 

formulas therefore exceeded EPA’s statutory authority. EPA

may use cost to “require termination of only a subset of each 

state’s contribution,” the Court explained, but “EPA can’t just 

pick a cost for a region, and deem ‘significant’ any emissions 

that sources can eliminate more cheaply.” 531 F.3d at 918 

(citation, emphasis, and some internal quotation marks 

omitted). The Court also held that “section 110(a)(2)(D)(i)(I) 

gives EPA no authority to force an upwind state to share the 

burden of reducing other upwind states’ emissions. Each state 

must eliminate its own significant contribution to downwind 

pollution.” Id. at 921. The Court emphasized that EPA “may 

not require some states to exceed the mark.” Id.

North Carolina thus articulated an important caveat to 

Michigan’s approval of cost considerations. The statute 

permits EPA to use cost to lower an upwind State’s obligation 

under the good neighbor provision. See Michigan, 213 F.3d 

at 675, 677. But EPA may not use cost to increase an upwind 

State’s obligation under the good neighbor provision – that is, 

to force an upwind State to “exceed the mark.” North 

Carolina, 531 F.3d at 921. Put simply, the statute requires 

every upwind State to clean up at most its own share of the air 

pollution in a downwind State – not other States’ shares.

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C

The North Carolina Court remanded CAIR without 

vacatur, leaving CAIR in place “until it is replaced by a rule 

consistent with our opinion.” North Carolina v. EPA, 550 

F.3d 1176, 1178 (D.C. Cir. 2008) (on rehearing).

The Transport Rule is EPA’s attempt to develop a rule 

that is consistent with our opinion in North Carolina. EPA 

proposed the Transport Rule in August 2010 and finalized it

in August 2011. See 75 Fed. Reg. 45,210 (Aug. 2, 2010)

(proposed); 76 Fed. Reg. 48,208 (Aug. 8, 2011) (final). The 

Transport Rule addresses States’ good neighbor obligations 

with respect to three NAAQS: the 1997 annual PM2.5

NAAQS, the 1997 ozone NAAQS, and the 2006 24-hour 

PM2.5 NAAQS. See id. at 48,209.3

The Transport Rule contains two basic components. 

First, the Rule defines each State’s emissions reduction 

obligations under the good neighbor provision. Second, the 

Rule prescribes Federal Implementation Plans to implement 

those obligations at the State level. We describe each

component here in some detail.

EPA began by quantifying the “amounts” of pollution

that each State must prohibit under the good neighbor 

provision – that is, “amounts which will . . . contribute 

significantly to nonattainment” or “interfere with 

maintenance” of the three NAAQS in other States. 42 U.S.C. 

§ 7410(a)(2)(D)(i).

4

 3 The 2006 24-hour PM2.5 NAAQS post-dated and therefore 

was not covered by CAIR.

4 EPA bases different aspects of the Transport Rule on distinct 

sources of statutory authority. EPA relied on its general 

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EPA used a two-stage approach to quantify each State’s 

obligations under the good neighbor provision. 

In the first stage, EPA determined whether a State emits

“amounts which will . . . contribute significantly” to a 

downwind State’s nonattainment of any of the three NAAQS. 

EPA identified the significantly contributing upwind States 

based on “linkages” between each upwind State and specific 

downwind “nonattainment” or “maintenance” areas – that is, 

downwind areas that EPA modeling predicted would not 

attain, or absent regulation would not maintain, the NAAQS. 

Transport Rule, 76 Fed. Reg. at 48,236. An upwind State was 

linked to a downwind nonattainment or maintenance area for 

a given NAAQS if EPA modeling showed that the upwind 

State’s contribution to that downwind area exceeded a 

numerical “air quality threshold” – that is, a specific amount 

of air pollution sent from the upwind State into the downwind 

State’s air. Id. EPA set the air quality threshold for each 

pollutant at an amount equal to 1% of the relevant NAAQS. 

The resulting thresholds were (i) 0.8 ppb for ozone, (ii) 0.15 

μg/m3 for annual PM2.5, and (iii) 0.35 μg/m3 for 24-hour 

PM2.5. Id. If modeling showed that an upwind State would 

send more than those amounts into a downwind State’s air, as 

measured at a receptor site in a downwind State, the upwind 

State was deemed a “significant contributor” to the downwind 

State’s air pollution problem.

 

rulemaking authority under Section 301(a)(1) of the Clean Air Act, 

42 U.S.C. § 7601(a)(1), to construe Section 110(a)(2)(D)(i)(I) and 

to quantify the States’ obligations to reduce emissions. See 

Transport Rule, 76 Fed. Reg. at 48,217; see also Michigan, 213 

F.3d at 687. EPA relied on its authority under Section 110(c)(1), 

42 U.S.C. § 7410(c)(1), to issue the Transport Rule FIPs. See 

Transport Rule, 76 Fed. Reg. at 48,217.

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Those numerical air quality thresholds determined which 

upwind States had to reduce their SO2 and NOx emissions and 

which upwind States did not – that is, the thresholds 

determined which upwind States’ emissions “contribute 

significantly” to downwind States’ air pollution problems. 

Upwind States “whose contributions are below these 

thresholds,” EPA found, “do not significantly contribute to 

nonattainment or interfere with maintenance of the relevant 

NAAQS” in downwind States. Id. Because their emissions 

did not “contribute significantly,” those States were not 

required to cut their emissions for purposes of the good 

neighbor provision.

As one would expect, this “significant contribution”

threshold produced some close cases at the margins. For 

example, Maryland and Texas were covered for annual PM2.5

based on downwind contributions of 0.15 and 0.18 μg/m3, 

respectively – just barely meeting the 0.15 μg/m3 threshold. 

See id. at 48,240. And Texas exceeded the annual PM2.5

threshold at just a single downwind receptor, in Madison, 

Illinois. See id. at 48,241.5

 By contrast, Minnesota and 

Virginia, with maximum downwind contributions of 0.14 and 

0.12 μg/m3

, respectively, just missed being covered for annual

PM2.5. See id. at 48,240. 

For annual PM2.5, a total of 18 States6 exceeded the 

threshold and were therefore deemed “significant 

 5 Texas also narrowly exceeded the 0.35 μg/m3 threshold for 

24-hour PM2.5; its maximum downwind contribution was 0.37

μg/m3

. See Transport Rule, 76 Fed. Reg. at 48,242.

6 Those States were: Alabama, Georgia, Illinois, Indiana, Iowa, 

Kentucky, Maryland, Michigan, Missouri, New York, North 

Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, 

West Virginia, and Wisconsin. See Transport Rule, 76 Fed. Reg. at 

48,240.

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contributors.” For 24-hour PM2.5, a total of 22 States7

exceeded the threshold. See id. at 48,241-42. Those States 

were thus included in the Rule’s reduction programs for SO2

and annual NOx, pollutants that contribute to PM2.5 formation. 

See id. at 48,210. For ozone, a total of 26 States8 exceeded 

the threshold. See id. at 48,245. Those States were thus 

included in the Rule’s reduction program for ozone-season 

NOx, which contributes to ozone formation. See id. at 48,210; 

see also 76 Fed. Reg. 80,760 (Dec. 27, 2011) (finalizing six

States’ inclusion in the Transport Rule for ozone-season 

NOx).

At the second stage, however, EPA abandoned the air 

quality thresholds – that is, the stage one standard for whether 

an upwind State’s emissions “contribute significantly” to a 

downwind State’s nonattainment of air quality standards. 

Instead, at stage two, EPA used a cost-based standard: EPA 

determined how much pollution each upwind State’s power 

plants could eliminate if the upwind State’s plants applied all

controls available at or below a given cost per ton of pollution 

reduced. The cost-per-ton levels applied without regard to the 

size of each State’s “significant contribution” at stage one. In 

other words, how much pollution each upwind State was 

 7 Those States were: Alabama, Georgia, Illinois, Indiana, Iowa, 

Kansas, Kentucky, Maryland, Michigan, Minnesota, Missouri, 

Nebraska, New Jersey, New York, North Carolina, Ohio, 

Pennsylvania, Tennessee, Texas, Virginia, West Virginia, and 

Wisconsin. See Transport Rule, 76 Fed. Reg. at 48,242.

8 Those States were: Alabama, Arkansas, Florida, Georgia, 

Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, 

Michigan, Mississippi, Missouri, New Jersey, New York, North 

Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina, 

Tennessee, Texas, Virginia, West Virginia, and Wisconsin. See

Transport Rule, 76 Fed. Reg. at 48,245.

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18

required to eliminate was not tied to how much the upwind 

State contributed to downwind States’ air pollution problems.

EPA predicted how far emissions would fall if power 

plants throughout the State were required to install controls 

available at or below various cost levels. The cost levels, or 

thresholds, were expressed in terms of cost per ton of 

pollutant reduced, with the idea being that plants would install 

all controls that cost less than the designated threshold.

9

EPA then added up the emissions from all of the covered

States to yield total regionwide emissions figures for each 

pollutant, at each cost threshold. See Transport Rule, 76 Fed. 

Reg. at 48,250-53. The higher the cost level selected, the 

greater the reduction of emissions, but also the greater the 

costs and burdens imposed on sources within the States.

Next, EPA used computer modeling to estimate the 

downwind air quality effects of imposing different cost-perton levels on the upwind States. Id. at 48,253. EPA modeled

the air quality effects of applying a $500/ton cost level for 

NOx and ascending cost-per-ton levels for SO2. See id. at 

 9 For example, a technology that cost $1,000 to install and 

eliminated 2 tons of NOx from a power plant’s emissions would 

cost $500/ton. In effect, EPA predicted how far emissions would 

fall if plants installed all of the controls from $1/ton to $500/ton. 

EPA used a computer model to predict the reductions that 

would occur in each State at various cost thresholds. See EPA, 

Documentation for EPA Base Case v.4.10, at 2-1 (Aug. 2010), J.A. 

2339. For example, for annual NOx, EPA modeled cost levels of 

$500, $1,000, and $2,500/ton. See Transport Rule, 76 Fed. Reg. at 

48,249-50. EPA went as high as $5,000/ton for ozone-season NOx. 

See id. at 48,250. For SO2, EPA modeled emissions at cost levels 

of $500, $1,600, $2,300, $2,800, $3,300, and $10,000 per ton. See 

id. at 48,251. At a later stage in the process, EPA used those 

predictions to decide how much each State would have to cut.

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19

48,255; EPA, Analysis to Quantify Significant Contribution 

Technical Support Document 15 & n.9 (July 2010), J.A. 2177.

Armed with those two sets of modeling data, EPA 

proceeded to choose which regionwide cost-per-ton threshold 

to apply for each of the three pollutants – SO2, annual NOx, 

and ozone-season NOx. EPA consulted both its cost-ofreduction modeling and its air quality modeling and identified 

what it termed “significant cost thresholds” – that is, cost-perton levels at which steep drops in upwind emissions or jumps 

in downwind air quality would occur. Transport Rule, 76 

Fed. Reg. at 48,255; see also id. at 48,255-56. EPA then 

weighed both air quality and cost concerns in a “multi-factor 

assessment” to choose the final cost-per-ton levels. Id. at 

48,256. The “multi-factor assessment” did not employ any 

hard formula to weigh those factors.

In the end, EPA settled on a single $500/ton threshold for 

ozone-season and annual NOx. See id. at 48,256-57. 

For SO2, instead of using a single cost threshold for all of 

the SO2 States, EPA divided the upwind States into two 

groups for the 2014 program year (that is, the emissions cuts 

required in 2014). EPA modeling showed that applying a

$500/ton cost threshold resolved the attainment problems in 

the downwind areas to which seven upwind States were 

linked. See id. at 48,257. Those seven upwind States became 

the Group 2 States, which were subject to a $500/ton 

threshold for SO2. See id. But $500/ton did not resolve 

attainment problems in the downwind areas to which 16 other 

upwind States were linked. Those 16 upwind States became 

the Group 1 States, which were subject to a stricter $2,300/ton 

cost threshold for SO2. See id. at 48,259.

EPA determined the amount of SO2, annual NOx, or 

ozone-season NOx that each covered State could eliminate if 

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20

its power plants installed all cost-effective emissions controls 

– that is, those controls available at or below the applicable 

cost-per-ton thresholds. See id. at 48,260. EPA then used

those figures to generate 2012, 2013, and 2014 emissions 

“budgets” for each upwind State, for each pollutant for which 

that State was covered. See id. at 48,259-63. The budget is

the maximum amount of each pollutant that a State’s power 

plants may collectively emit in a given year, beginning in 

2012.

10

EPA did not stop there and leave it to the States to 

implement the required reductions through new or revised 

State Implementation Plans, or SIPs. Cf. 42 U.S.C. 

§ 7410(k)(5). Instead, EPA simultaneously promulgated 

Federal Implementation Plans, or FIPs. 

The FIPs require power plants in covered upwind States 

to make the SO2 and NOx reductions needed to comply with 

each upwind State’s emissions budget, as defined by EPA. 

The FIPs also create an interstate trading program to allow 

covered sources to comply as cost-effectively as possible. See 

Transport Rule, 76 Fed. Reg. at 48,271.

The FIPs convert each State’s emissions budget into 

“allowances,” which are allocated among power plants in the 

State. Under the FIPs, it is EPA, and not the States, that 

decides how to distribute the allowances among the power 

plants in each State. See id. at 48,284-88.

11

 10 States may augment their budgets somewhat by buying outof-state allowances. See Transport Rule, 76 Fed. Reg. at 48,263-68.

11 Each power plant is “required to hold one SO2 or one NOx

allowance, respectively, for every ton of SO2 or NOx emitted” 

during the relevant year. Transport Rule, 76 Fed. Reg. at 48,271; 

see also id. at 48,296-97 (describing penalties for noncompliance). 

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The Rule retains a limited, secondary role for SIPs. 

States have the option of submitting SIPs that modify some 

elements of the FIPs. See id. at 48,327-28. The first program 

year for which States can submit such SIPs is 2014. See id. 

States may also seek to replace the FIPs wholesale, as long as 

the SIP prohibits the amounts of NOx and SO2 emissions that 

EPA specified. See id. at 48,328. EPA says it would “review 

such a SIP on a case-by-case basis.” Id. But, importantly, the 

States do not have a post-Rule opportunity to avoid FIPs by 

submitting a SIP or SIP revision: The FIPs “remain fully in 

place in each covered state until a state’s SIP is submitted and 

approved by EPA to revise or replace a FIP.” Id.

Since it issued the final rule in August 2011, EPA has 

taken several subsequent regulatory actions related to the 

Transport Rule. See 76 Fed. Reg. 80,760 (Dec. 27, 2011) 

(finalizing six States’ inclusion in the Rule for ozone-season 

NOx); 77 Fed. Reg. 10,324 (Feb. 21, 2012) (making technical 

 

Sources were required by the Rule to begin complying with the 

annual SO2 and NOx requirements by January 1, 2012 for the 2012-

13 budgets and by January 1, 2014 for the post-2014 budgets. See 

id. at 48,277. (This Court stayed the Rule before it took effect.) 

The ozone-season NOx requirements would kick in on May 1 of 

those years. See id. EPA chose those compliance deadlines in light 

of this Court’s holding in North Carolina that the deadlines must be 

“consistent with the provisions in Title I mandating [NAAQS] 

compliance deadlines for downwind states.” 531 F.3d at 912; see 

also Transport Rule, 76 Fed. Reg. at 48,277-78.

The FIPs use allowance trading to enable covered plants 

within the States to comply as cost-effectively as possible. The 

program creates four allowance trading markets: one for annual 

NOx, one for ozone-season NOx, one for the Group 1 SO2 States, 

and one for the Group 2 SO2 States. See Transport Rule, 76 Fed. 

Reg. at 48,271. Power plants in Group 1 SO2 States may not 

purchase Group 2 SO2 allowances, and vice versa. See id. at 

48,271-72. Otherwise, interstate trading is generally permitted.

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22

adjustments to modeling and delaying assurance penalty 

provisions until 2014); 77 Fed. Reg. 34,830 (June 12, 2012) 

(revising budgets for 13 States).

D

An array of power companies, coal companies, labor 

unions, trade associations, States, and local governments 

petitioned for review of EPA’s Transport Rule.

On December 30, 2011, this Court stayed the Rule 

pending a decision on the merits. See Order, No. 11-1302, 

slip op. at 2 (D.C. Cir. Dec. 30, 2011). The Court’s order

instructed EPA to “continue administering the Clean Air 

Interstate Rule pending the court’s resolution of these 

petitions for review.” Id.

In Part II of this opinion, we address whether the Rule 

exceeds EPA’s authority to order upwind States to reduce

“amounts which will . . . contribute significantly to 

nonattainment” in downwind States. In Part III, we address 

whether the statute permits EPA to issue FIPs without giving 

the States an initial opportunity to implement the required 

reductions through SIPs or SIP revisions. In Part IV, we 

consider the remedy.

II

In this Part, we analyze petitioners’ argument that EPA 

exceeded its statutory authority under the “good neighbor” 

provision. Under the statute, EPA is limited to ordering 

upwind States to reduce “amounts which will . . . contribute 

significantly to nonattainment” in downwind States. 42 

U.S.C. § 7410(a)(2)(D)(i).

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23

A

The Transport Rule defines States’ obligations under 

Section 110(a)(2)(D)(i)(I) of the Clean Air Act, a provision 

sometimes described as the “good neighbor” provision. See 

42 U.S.C. § 7410(a)(2)(D)(i)(I); Michigan v. EPA, 213 F.3d 

663, 671 (D.C. Cir. 2000). The good neighbor provision 

requires that a State Implementation Plan, or SIP:

(D) contain adequate provisions –

(i) prohibiting, consistent with the provisions of this 

subchapter, any source or other type of emissions 

activity within the State from emitting any air 

pollutant in amounts which will –

(I) contribute significantly to nonattainment in, 

or interfere with maintenance by, any other State 

with respect to any such national primary or 

secondary ambient air quality standard . . . .

42 U.S.C. § 7410(a)(2)(D). The good neighbor provision

recognizes that not all air pollution is locally generated: 

Some ambient air pollution “is caused or augmented by 

emissions from other states. Emissions from ‘upwind’

regions may pollute ‘downwind’ regions.” Appalachian 

Power Co. v. EPA, 249 F.3d 1032, 1037 (D.C. Cir. 2001).

Although the statute grants EPA significant discretion to 

implement the good neighbor provision, the statute’s text and

this Court’s decisions in Michigan and North Carolina

establish several red lines that cabin EPA’s authority. Those 

red lines are central to our resolution of this case.

First, and most obviously, the text of Section 

110(a)(2)(D)(i)(I) tells us that the “amounts which will . . . 

contribute” to a downwind State’s nonattainment are at most 

those amounts that travel beyond an upwind State’s borders 

USCA Case #11-1302 Document #1390314 Filed: 08/21/2012 Page 23 of 104
24

and end up in a downwind State’s nonattainment area.12 The 

statute is not a blank check for EPA to address interstate 

pollution on a regional basis without regard to an individual 

upwind State’s actual contribution to downwind air quality.

Moreover, the statutory text and this Court’s decision in 

North Carolina v. EPA demonstrate that EPA may not force a 

State to eliminate more than its own “significant” contribution 

to a downwind State’s nonattainment area – that is, to “exceed 

the mark,” as we put it in North Carolina. 531 F.3d 896, 921

(D.C. Cir. 2008). Thus, once EPA reasonably designates 

some level of contribution as “insignificant” under the statute,

it may not force any upwind State to reduce more than its own 

contribution to that downwind State minus the insignificant 

amount.13

Second, under the terms of the statute and as we 

explained in North Carolina, the portion of an upwind State’s 

contribution to a downwind State that “contribute[s]

significantly” to that downwind State’s “nonattainment” 

necessarily depends on the relative contributions of that 

upwind State, of other upwind State contributors, and of the 

 12 At oral argument, EPA’s counsel refused to concede this 

point.

13 For example, suppose that EPA determined that any upwind 

State whose contribution to a downwind State was less than 3 units 

did not “contribute significantly to nonattainment.” That would 

mean EPA had established 3 units as the significance floor. Other 

upwind contributors to that downwind State could not be required 

to reduce their downwind contributions below that floor. So an 

upwind State whose contribution to that downwind State is 30 units 

could be required to reduce its contribution by at most 27 units.

Of course, that is not the only constraint on EPA’s authority to 

force the State to reduce its emissions. The other legal constraints 

described in this Part can further lower a State’s maximum 

obligation.

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downwind State itself. Each upwind State may be required to 

eliminate only its own “amounts which will . . . contribute 

significantly” to a downwind State’s “nonattainment.” As 

explained in North Carolina, EPA may not require any 

upwind State to “share the burden of reducing other upwind 

states’ emissions.” Id. In other words, the statutory text –

which refers to “amounts” which will “contribute 

significantly” to a downwind State’s “nonattainment” –

contains not just an absolute component (meaning that an 

upwind State’s insignificant amounts are not covered) but also 

a relative component (meaning that each State’s relative 

contribution to the downwind State’s nonattainment must be 

considered).

Moreover, the end goal of the statute is attainment in the 

downwind State. EPA’s authority to force reductions on 

upwind States ends at the point where the affected downwind 

State achieves attainment.

Therefore, if the downwind State would attain the 

NAAQS but for upwind States’ contributions – that is, if the 

entire above-NAAQS amount is attributable to upwind States’ 

emissions – then the upwind States’ combined share is the 

entire amount by which the downwind State exceeded the 

NAAQS. And as we said in North Carolina, when EPA 

allocates that burden among the upwind States, EPA may not 

force any upwind State to “share the burden of reducing other 

upwind states’ emissions.” Id. Each upwind State must bear 

its own fair share. Therefore, the “significance” of each 

upwind State’s contribution cannot be measured in a vacuum, 

divorced from the impact of the other upwind States. Rather, 

the collective burden must be allocated among the upwind 

States in proportion to the size of their contributions to the 

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26

downwind State’s nonattainment. Otherwise, EPA would 

violate the statute and our decision in North Carolina.

14

A specific example helps illustrate that point. Suppose

the NAAQS is 100 units, but the downwind State’s 

nonattainment area contains 150 units. Suppose further that 

the downwind State contributes 90 units, and three upwind 

States contribute 20 units each. Because the upwind States 

are responsible for the downwind State’s exceeding the 

NAAQS by 50 units, the downwind State is entitled to at most

50 units of relief from the upwind States so that the 

downwind State can achieve attainment of the NAAQS. 

Distributing those obligations in a manner proportional to 

their contributions, each of the three upwind States’ 

significant contribution would be, at most, 16 2⁄3 units. Or 

suppose instead that the three upwind States contribute 10, 20, 

 14 Before Congress adopted the current text in the Clean Air 

Act Amendments of 1990, the statutory text targeted amounts from 

an upwind State that would “prevent attainment” in a downwind 

State. 42 U.S.C. § 7410(a)(2)(E) (1988) (emphasis added); cf. Pub. 

L. No. 101-549, § 101(b), 104 Stat. 2399, 2404 (1990). Under the 

“prevent attainment” standard, none of the three upwind States in 

that hypothetical would by itself be a but-for cause of the 

downwind State’s nonattainment. By moving from “prevent

attainment” to “contribute significantly to nonattainment,” the 1990 

Amendments dropped the requirement that an individual upwind 

State’s emissions on their own prevent downwind attainment or 

maintenance. See S. REP. NO. 101-228, at 21 (1989) (“Since it may 

be impossible to say that any single source or group of sources is 

the one which actually prevents attainment, the bill changes 

‘prevent attainment or maintenance’ to ‘contribute significantly to 

nonattainment or interfere with maintenance by,’ thus clarifying 

when a violation occurs.”). Instead, it now suffices if EPA 

identifies upwind emissions that, together with emissions from 

other upwind contributors, push a given downwind maintenance 

area above the NAAQS.

USCA Case #11-1302 Document #1390314 Filed: 08/21/2012 Page 26 of 104
27

and 30 units respectively. Distributing those obligations in a 

manner proportional to their contributions, those three States’ 

significant contributions would be at most 8 1⁄3, 16 2⁄3, and 25 

units, respectively, leading to the combined reduction of 50 

units needed for the downwind State to reach attainment.15

In addition, our decisions in Michigan and North 

Carolina establish that EPA may consider cost, but only to 

further lower an individual State’s obligations. See Michigan, 

213 F.3d at 675; North Carolina, 531 F.3d at 918. Under 

Michigan, moreover, EPA may do so in a way that benefits 

some upwind States more than others. See 213 F.3d at 679. 

In other words, in order to prevent exorbitant costs from being 

imposed on certain upwind States, EPA may lower the 

obligations imposed on those States.

 15 If the downwind State’s contribution alone would push it 

above the NAAQS, then the entire above-NAAQS amount cannot 

be attributed only to upwind States. The downwind State is 

responsible for its own share of the above-NAAQS amount. In that 

scenario, upwind States that contribute to the downwind State are 

collectively on the hook for that share of the above-NAAQS 

amount that is attributable to upwind States’ contributions. And, 

again, that collective burden must be allocated among the upwind 

States in proportion to the size of their contributions to the 

downwind State. Otherwise, one upwind State would be forced to 

“share the burden of reducing other upwind states’ emissions,” in 

violation of the statute. North Carolina, 531 F.3d at 921.

An example helps illustrate that point. Suppose the NAAQS is 

100 units, and the downwind State’s air contains 180 units. The 

downwind State contributes 120 units, and three upwind States 

contribute 20 units each. The downwind State is 80 units over the 

NAAQS – but 20 units of that is its own responsibility. The 

upwind States must therefore provide at most 60 units of relief. 

Distributing those obligations proportionally, each of the three 

upwind States’ significant contribution would be, at most, 20 units.

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Third, to conform to the text of the statute, EPA must

also ensure that the combined obligations of the various 

upwind States, as aggregated, do not produce more than 

necessary “over-control” in the downwind States – that is, that 

the obligations do not go beyond what is necessary for the

downwind States to achieve the NAAQS.

Even when EPA carefully conforms to the above limits 

on its authority, the possibility of over-control in downwind 

States still arises because multiple upwind States may affect a 

single downwind State and, conversely, a single upwind State 

may affect multiple downwind States. The requirement to 

prevent such over-control comes directly from the text of the 

statute: The good neighbor provision of the statute targets 

those emissions from upwind States that “contribute 

significantly to nonattainment” of the NAAQS. EPA may 

require only those reductions that are necessary for downwind 

States to attain the NAAQS. The good neighbor provision is 

not a free-standing tool for EPA to seek to achieve air quality

levels in downwind States that are well below the NAAQS. 

Therefore, if modeling shows that a given slate of upwind 

reductions would yield more downwind air quality benefits 

than necessary for downwind areas to attain the NAAQS, 

EPA must attempt to ratchet back the upwind States’ 

obligations to the level of reductions necessary and sufficient 

to produce attainment in the downwind States.

16

 16 For example, suppose that under the proportional approach 

explained above, State A would have to cut 5,000 tons of NOx to 

achieve its largest downwind obligation, while State B would have 

to cut 2,000 tons to achieve its largest downwind obligation. If 

EPA modeling showed that all downwind nonattainment would be 

resolved if those two upwind States’ combined reduction 

obligations were, say, 10% lower, EPA would have to ratchet back 

the upwind States’ reduction obligations by a total of 10%. That 

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To be sure, as even petitioners acknowledge, there may 

be some truly unavoidable over-control in some downwind 

States that occurs as a byproduct of the necessity of reducing 

upwind States’ emissions enough to meet the NAAQS in 

other downwind States. See Industry & Labor Reply Br. 11 

n.2. For those reasons, EPA must have some discretion about 

how to reasonably avoid such over-control. Moreover, 

because multiple upwind States may affect a single downwind 

State, and because a single upwind State may affect multiple 

downwind States, it may not be possible to accomplish the 

ratcheting back in an entirely proportional manner among the 

upwind States. Our cases recognize as much. See Michigan, 

213 F.3d at 679; North Carolina, 531 F.3d at 908. But the 

point remains: EPA must avoid using the good neighbor 

provision in a manner that would result in unnecessary overcontrol in the downwind States. Otherwise, EPA would be 

exceeding its statutory authority, which is expressly tied to 

achieving attainment in the downwind States.

B

We now apply those principles to the EPA Transport 

Rule. “It is axiomatic that an administrative agency’s power 

to promulgate legislative regulations is limited to the authority 

delegated by Congress.” Bowen v. Georgetown Univ. Hosp., 

488 U.S. 204, 208 (1988); see also Michigan v. EPA, 268 

F.3d 1075, 1081 (D.C. Cir. 2001) (“EPA is a federal agency –

a creature of statute,” and may exercise “only those 

authorities conferred upon it by Congress.”). An agency may 

not exceed a statute’s authorization or violate a statute’s 

limits. If a statute is ambiguous, an agency that administers 

the statute may choose a reasonable interpretation of that 

ambiguity – but the agency’s interpretation must still stay

 

would ensure that upwind States were only forced to prohibit those 

emissions that “contribute significantly to nonattainment.”

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30

within the boundaries of the statutory text. See Chevron

U.S.A. Inc. v. NRDC, 467 U.S. 837, 842-44 (1984).17

In the Transport Rule, EPA used a two-stage approach to 

define “amounts which will . . . contribute significantly” to 

downwind attainment problems. The first stage identified 

those upwind States that were “significant contributors” to 

downwind attainment problems. EPA determined that a 

State’s contribution to a downwind nonattainment or

maintenance area was significant if it exceeded a numerical 

“air quality threshold” of 0.8 ppb for ozone, 0.15 μg/m3 for 

annual PM2.5, and 0.35 μg/m3 for 24-hour PM2.5. Transport 

Rule, 76 Fed. Reg. 48,208, 48,236 (Aug. 8, 2011). States 

“whose contributions are below these thresholds,” EPA 

found, “do not significantly contribute to nonattainment or 

interfere with maintenance of the relevant NAAQS.” Id. 

Those upwind States were off the hook altogether.

But an upwind State that exceeded the significance 

threshold at even one downwind State’s receptor was drawn 

wholesale into the Rule’s second stage – cost-based emissions 

reductions. At that second stage, EPA abandoned the 

previous measure of significance – the numerical air quality 

thresholds, which were based on the quantity of pollution an 

upwind State sent to a downwind area. Instead, EPA 

switched over to relying on cost of reduction alone. EPA 

required each State’s power plants to cut all of the emissions 

 17 We set aside EPA’s action here if “arbitrary, capricious, an 

abuse of discretion, or otherwise not in accordance with law,” or if 

“in excess of statutory jurisdiction, authority, or limitations, or 

short of statutory right.” The standard we apply “is the same” 

under the judicial review provision of the Clean Air Act, 42 U.S.C. 

§ 7607(d)(9), as under the Administrative Procedure Act, 5 U.S.C. 

§ 706(2). Motor Vehicle Manufacturers Ass’n v. EPA, 768 F.2d 

385, 389 n.6 (D.C. Cir. 1985).

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they could eliminate at a given cost per ton of pollution 

reduced – regardless of the “amounts” of the State’s 

emissions EPA deemed to “contribute significantly” at stage 

one and regardless of the relative contributions of the other 

upwind States and the downwind State.

We perceive at least three independent but intertwined 

legal flaws in EPA’s approach to the good neighbor provision. 

Those flaws correspond to the three requirements we outlined 

above that come from the statutory text.

First, and most fundamentally, the Transport Rule is 

flawed because the requirement that EPA imposed on upwind 

States was not based on the “amounts” from upwind States

that “contribute significantly to nonattainment” in downwind 

States, as required by the statute and our decision in North 

Carolina.

Petitioners claim that the initial stage of EPA’s analysis –

the numerical air quality thresholds, which used a bright-line 

test for whether a State’s downwind emissions “contribute 

significantly” – created a “‘floor’ below which any 

contribution is, by definition, viewed as insignificant.” 

Industry & Labor Br. 20. Petitioners argue that EPA has no 

statutory authority to compel States to reduce amounts of 

pollution that are “insignificant.” Therefore, petitioners 

contend that EPA could not ignore that floor at the later stage, 

when it calculated each State’s “significant contribution” 

based on cost.18

 18 The dissent contends that this point was not preserved for 

judicial review and that the agency was not aware of this issue 

during the agency proceedings. See 42 U.S.C. § 7607(d)(7)(B). 

For several reasons, we are convinced EPA had more than 

“adequate notification of the general substance” of petitioners’ 

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argument. NRDC v. EPA, 571 F.3d 1245, 1259 (D.C. Cir. 2009) 

(quoting South Coast Air Quality Mgmt. Dist. v. EPA, 472 F.3d 

882, 891 (D.C. Cir. 2006)). Indeed, one of the central questions in 

the long history of EPA’s efforts to implement the good neighbor 

provision has been whether EPA has complied with the basic 

statutory limits on its authority. So it is here.

First, the Transport Rule proceeding arose out of this Court’s 

decision in North Carolina, on which petitioners’ argument relies. 

See Transport Rule, 76 Fed. Reg. at 48,211 (“EPA is promulgating 

the Transport Rule in response to the remand of the Clean Air 

Interstate Rule (CAIR) by the U.S. Court of Appeals for the District 

of Columbia Circuit”). In North Carolina v. EPA, this Court 

explained the applicable statutory limitations and instructed EPA on 

remand to craft a new rule “consistent with our opinion.” 550 F.3d 

1176, 1177 (D.C. Cir. 2008) (on rehearing). Instructing EPA to 

proceed in a manner “consistent with” North Carolina presupposes 

that EPA is aware of the Court’s opinion. And the opinion made 

clear that once EPA defines each upwind State’s “significant 

contribution,” it may not “require some states to exceed the mark.” 

531 F.3d at 921. In sum, EPA knew from the beginning that it was 

required to comply with North Carolina, including that part of the 

Court’s holding on which petitioners rely here.

Second, EPA considered – and rejected – precisely the same 

argument in CAIR. EPA first acknowledged the comment: “Some 

commenters stated, more broadly, that the threshold contribution 

level selected by EPA should be considered a floor, so that upwind 

States should be obliged to reduce their emissions only to the level 

at which their contribution to downwind nonattainment does not 

exceed that threshold level.” CAIR, 70 Fed. Reg. 25,162, 25,176-

77 (May 12, 2005). It then dismissed that argument: “Most 

important for present purposes, as long as the controls yield 

downwind benefits needed to reduce the extent of nonattainment, 

the controls should not be lessened simply because they may have 

the effect of reducing the upwind State’s contribution to below the 

initial threshold.” Id. at 25,177. EPA’s rejection of the same 

argument in a prior rulemaking – indeed, in a prior rulemaking that 

is the direct progenitor of the current one – is highly relevant to 

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33

 

whether the argument is preserved here. See, e.g., American 

Petroleum Institute v. EPA, 52 F.3d 1113, 1120 n.1 (D.C. Cir. 

1995); NRDC v. EPA, 824 F.2d 1146, 1151 (D.C. Cir. 1987) (en 

banc); see also Appalachian Power Co. v. EPA, 135 F.3d 791, 818 

(D.C. Cir. 1998) (“The purpose of the exhaustion requirement is to 

ensure that the agency is given the first opportunity to bring its 

expertise to bear on the resolution of a challenge to a rule.”). 

EPA’s prior rejection of the same argument in CAIR, together with 

this Court’s opinion in North Carolina, show that EPA “had notice 

of this issue and could, or should have, taken it into account.” 

NRDC, 824 F.2d at 1151.

Third, EPA’s statements at the proposal stage indicated EPA 

was not open to reconsidering CAIR’s earlier rejection of 

petitioners’ argument. See Proposed Transport Rule, 75 Fed. Reg. 

45,210, 45,299 (Aug. 2, 2010) (“EPA evaluated a number of 

alternative approaches to defining significant contribution and 

interference with maintenance in addition to the approach proposed 

in this rule. Stakeholders suggested a variety of ideas. EPA 

considered all suggested approaches. . . . EPA is not proposing any 

of the alternative approaches listed here.”). By that point, EPA had 

already dismissed the two air quality-only approaches it considered 

and had indicated its firm commitment to the cost-based approach. 

See EPA, Alternative Significant Contribution Approaches 

Evaluated Technical Support Document 7 (July 2010) (EPA, 

Significant Contribution TSD), J.A. 2312 (uniform cost-per-ton 

approach “has been successfully implemented before, with 

excellent environmental results”); see also id. at 3-7, J.A. 2308-12. 

In light of the indications that EPA was aware of their objection but 

had no intention to revisit its approach (and indeed had already 

rejected the objection), the specificity of commenters such as 

Wisconsin and Tennessee was “reasonable” under the 

circumstances. 42 U.S.C. § 7607(d)(7)(B); see, e.g., Wisconsin 

Cmt., J.A. 1293 (“EPA needs to primarily depend on air quality 

results instead of control costs in defining” significant 

contributions); Tennessee Cmt., J.A. 556 (“A lower cost threshold 

should be considered for any State that can reduce their 

contribution below 1% significance using cost thresholds below the 

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34

We agree with petitioners. The Transport Rule includes

or excludes an upwind State based on the amount of that 

upwind State’s significant contribution to a nonattainment 

area in a downwind State. That much is fine. But under the 

Rule, a State then may be required to reduce its emissions by 

an amount greater than the “significant contribution” that 

brought it into the program in the first place. That much is 

not fine.

Put more plainly, EPA determined that a State was 

subject to the good neighbor provision if it contributed at least

a certain threshold amount to air pollution in a downwind 

State. But EPA then imposed restrictions based on regionwide air quality modeling projections; those restrictions could 

require upwind States to reduce emissions by more than the 

amount of that contribution.

 

maximum values ($2,000/ton for SO2 and $500/ton for NOx), if 

applicable. . . . We would like to see a summary for each State and 

pollutant that indicates, independently of cost, the amounts 

necessary to eliminate the significant contribution and interference 

with maintenance from upwind States.”); Delaware Cmt., J.A. 1756 

(challenging EPA’s decision to depart from the air quality 

thresholds used for inclusion and to quantify States’ significant 

contributions based on cost considerations, not air quality); see also 

Appalachian Power, 135 F.3d at 817 (“the word ‘reasonable’

cannot be read out of the statute in favor of a hair-splitting 

approach”); id. at 818 (an objection need not be “phrased in exactly 

the same way in each forum”); South Coast, 472 F.3d at 891 

(petitioners have “some leeway in developing their argument” on 

review).

In sum, we are confident here that EPA had more than 

“adequate notification of the general substance of the complaint.” 

South Coast, 472 F.3d at 891. EPA was plainly on notice that its 

disregard of the significance floor was a potential legal infirmity in 

its approach.

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EPA’s approach poses a fundamental legal problem – one 

that derives from the text of the statute and from our 

precedents. Our decision in Michigan held that EPA may use 

cost considerations to require “termination of only a subset of 

each state’s contribution.” 213 F.3d at 675. And our decision 

in North Carolina made clear that EPA may not use cost to 

force an upwind State to “exceed the mark.” 531 F.3d at 

921.19

By using a numerical threshold at the initial stage – and 

thereby creating a floor below which “amounts” of downwind 

pollution were not significant – EPA defined the “mark,” to 

use the term employed in North Carolina. EPA could not 

then ignore that mark and redefine each State’s “significant 

contribution” in such a way that an upwind State’s required 

reductions could be more than its own significant contribution 

to a downwind State.20

 19 The Court in North Carolina reached these conclusions in its 

discussion of EPA’s use of power plant fuel mix to distribute NOx

reduction obligations among the CAIR States. See 531 F.3d at 904, 

918-21. EPA claims that the reasoning of that analysis is not 

relevant here because it did not relate to “general significant 

contribution issues,” but rather to the manner of calculating each 

State’s emissions budget. EPA Br. 23.

That is a distinction without a difference. The fuel mix 

analysis increased some States’ obligations and reduced others’. 

EPA’s argument overlooks that no step in its analysis – however 

the step is labeled – may impose burdens on States or private 

entities unless those burdens are anchored in statutory authority. 

Under the statute, States are required to prohibit only those 

“amounts which will . . . contribute significantly to nonattainment” 

or “interfere with maintenance.” 42 U.S.C. § 7410(a)(2)(D)(i); see 

also North Carolina, 531 F.3d at 919.

20 This particular issue was not presented in Michigan. In the 

1998 NOx Rule, EPA balanced various air quality factors using a 

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EPA now claims that the Rule’s air quality thresholds 

were established for a “limited analytical purpose” and 

“otherwise say nothing about what part of each State’s 

contribution should be considered ‘significant.’” EPA Br. 33. 

That claim rings hollow. EPA itself said in the final rule that 

“states whose contributions are below these thresholds do not 

significantly contribute to nonattainment or interfere with 

maintenance of the relevant NAAQS.” Transport Rule, 76 

Fed. Reg. at 48,236. EPA therefore acknowledged that 

amounts below the threshold are not “amounts which will . . .

contribute significantly” to downwind attainment problems.21

In short, EPA used the air quality thresholds to establish a 

floor below which “amounts” of air pollution do not 

 

“weight-of-evidence approach.” 63 Fed. Reg. 57,356, 57,381 (Oct. 

27, 1998). Unlike the Transport Rule, the 1998 NOx Rule did not 

employ a numerical threshold, nor any other “bright line criterion,” 

to screen out States at the first stage. Id. at 57,383.

21 EPA cannot avoid North Carolina by declining to quantify 

the “amount” of each State’s downwind contribution, “beginning its 

analysis with cost,” 531 F.3d at 918, and simply designating the 

output of that cost-based analysis each State’s “significant 

contribution.” The statutory term “amounts which will . . . 

contribute significantly” is not so elastic. See id. at 920 (“When a 

petitioner complains EPA is requiring a state to eliminate more than 

its significant contribution, it is inadequate for EPA to respond that 

it never measured individual states’ significant contributions.”). As 

explained above, “amounts which will . . . contribute” logically 

cannot exceed the amount of a pollutant that leaves a State’s 

borders and reaches a nonattainment area. And insignificant 

amounts must be excluded. Moreover, the “significance” of an 

upwind State’s emissions for a downwind area’s attainment 

problem cannot be divorced from the relative impact of other 

States’ contributions to that problem.

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“contribute significantly.”22 The statute requires a State to 

prohibit at most those “amounts” which will “contribute 

significantly” – and no more. If amounts below a numerical 

threshold do not contribute significantly to a downwind 

State’s nonattainment, EPA may not require an upwind State 

to do more. The Transport Rule does not adhere to that basic 

requirement of the statutory text and our precedents.

23

Second, EPA’s Transport Rule also runs afoul of the 

statute’s proportionality requirement as described in our 

decision in North Carolina: EPA has “no authority to force 

an upwind state to share the burden of reducing other upwind 

states’ emissions.” 531 F.3d at 921; see Industry & Labor Br. 

33 (in imposing SO2 budgets, EPA “did not even consider the 

relative contributions of the various States”). EPA’s 

“redistributional instinct may be laudatory,” North Carolina, 

531 F.3d at 921, but it cannot trump the terms of the statute. 

Under the statute, each upwind State that contributes to a 

 22 EPA protests that it used the numerical thresholds only to 

determine “which upwind State contributions to downwind 

problems are so small as to warrant exclusion.” EPA Br. 31. But 

that must mean those “amounts” that are “so small as to warrant 

exclusion” are not “significant.” (It would be illogical to carve out 

a de minimis exception for emissions that are statutorily 

“significant.”)

23 EPA seems reluctant to acknowledge any textual limits on 

its authority under the good neighbor provision. At oral argument, 

EPA suggested that “reasonableness” is the only limit on its 

authority to use cost-effectiveness to force down States’ emissions. 

Tr. of Oral Arg. at 44-45. EPA would not rule out the possibility 

that under the good neighbor provision, it could require a State to 

reduce more than the State’s total emissions that go out of State. 

See id. at 43-45. But such a claim of authority does not square with 

the statutory text – “amounts” of pollution obviously cannot 

“contribute” to a downwind State’s pollution problem if they don’t 

even reach the downwind State.

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downwind nonattainment area is responsible for no more than 

its own “amounts which will . . . contribute significantly” to 

the downwind State’s pollution problem. To be sure, under 

Michigan, EPA may rely on cost-effectiveness factors in 

order to allow some upwind States to do less than their full 

fair share. See 213 F.3d at 675; cf. Petitioning States’ Br. 17, 

Michigan, 213 F.3d 663 (No. 98-1497). But when EPA asks 

one upwind State to eliminate more than its statutory fair 

share, that State is necessarily being forced to clean up 

another upwind State’s share of the mess in the downwind 

State. Under the statute and North Carolina, that is 

impermissible.

Here, EPA’s Transport Rule violated the statute because 

it made no attempt to calculate upwind States’ required 

reductions on a proportional basis that took into account 

contributions of other upwind States to the downwind States’ 

nonattainment problems.

In the same vein, EPA’s Transport Rule failed to take 

into account the downwind State’s own fair share of the 

amount by which it exceeds the NAAQS. See Industry & 

Labor Br. 24-25. How “significantly” an upwind State 

contributes to a downwind State’s nonattainment also depends 

in part on how much of the above-NAAQS amount comes 

from the downwind State itself. As we explained above, EPA 

therefore must factor in the downwind State’s own 

contribution, alongside those of the various upwind States. 

But EPA did not do that here.

Third, and relatedly, EPA also failed to ensure that the 

collective obligations of the various upwind States, when 

aggregated, did not produce unnecessary over-control in the 

downwind States. EPA’s statutory authority, once again, is 

limited to attaining the NAAQS in the downwind States. 

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39

EPA may not require upwind States to do more than

necessary for the downwind States to achieve the NAAQS. 

Here, EPA did not try to take steps to avoid such overcontrol.24

In sum, EPA’s authority derives from the statute and is 

limited by the statutory text.25 EPA’s reading of Section 

110(a)(2)(D)(i)(I) – a narrow and limited provision – reaches

far beyond what the text will bear.

 24 At the proposal stage in the proceeding that culminated in 

the Transport Rule, EPA considered a proportional approach that 

reflected many of the essential principles described above. See 

EPA, Significant Contribution TSD at 6-7, J.A. 2311-12. Under 

that approach, the upwind contributors to a given downwind area 

would collectively have to provide a “defined air quality 

improvement” to the downwind State, in the amount by which the 

downwind State exceeded the NAAQS. Id. at 6, J.A. 2311. And 

the upwind States’ individual shares of that collective duty would 

be defined “in direct proportion to their original contribution[s]” to 

the downwind State. Id. EPA ultimately chose not to adopt that 

approach, however.

25 The statute also requires upwind States to prohibit emissions 

that will “interfere with maintenance” of the NAAQS in a 

downwind State. “Amounts” of air pollution cannot be said to 

“interfere with maintenance” unless they leave the upwind State 

and reach a downwind State’s maintenance area. To require a State 

to reduce “amounts” of emissions pursuant to the “interfere with 

maintenance” prong, EPA must show some basis in evidence for 

believing that those “amounts” from an upwind State, together with 

amounts from other upwind contributors, will reach a specific 

maintenance area in a downwind State and push that maintenance 

area back over the NAAQS in the near future. Put simply, the 

“interfere with maintenance” prong of the statute is not an openended invitation for EPA to impose reductions on upwind States. 

Rather, it is a carefully calibrated and commonsense supplement to 

the “contribute significantly” requirement.

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Although the statutory text alone prohibits EPA’s Rule, 

the statutory context provides additional support for our 

conclusion. The Supreme Court, in analyzing Section 109 of 

the Clean Air Act, rejected the premise that Congress would 

“alter the fundamental details of a regulatory scheme” in

“ancillary provisions” – in other words, that Congress would 

“hide elephants in mouseholes.” Whitman v. American 

Trucking Ass’ns, 531 U.S. 457, 468 (2001). The good 

neighbor provision is one of more than 20 SIP requirements in 

Section 110(a)(2). It seems inconceivable that Congress 

buried in Section 110(a)(2)(D)(i)(I) – the good neighbor 

provision – an open-ended authorization for EPA to 

effectively force every power plant in the upwind States to 

install every emissions control technology EPA deems “costeffective.” Such a reading would transform the narrow good 

neighbor provision into a “broad and unusual authority” that 

would overtake other core provisions of the Act. Gonzales v. 

Oregon, 546 U.S. 243, 267 (2006). We “are confident that 

Congress could not have intended to delegate a decision of 

such economic and political significance to an agency in so 

cryptic a fashion.” FDA v. Brown & Williamson Tobacco 

Corp., 529 U.S. 120, 160 (2000).

* * *

States are obligated to prohibit only those “amounts” of 

pollution “which will . . . contribute significantly” to 

downwind attainment problems – and no more. Because the 

Transport Rule exceeds those limits, and indeed does not 

really try to meet those requirements, it cannot stand.

III

There is a second, entirely independent problem with the 

Transport Rule. EPA did not stop at simply quantifying each 

upwind State’s good neighbor obligations. Instead, in an 

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unprecedented application of the good neighbor provision, 

EPA also simultaneously issued Federal Implementation 

Plans, or FIPs, to implement those obligations on sources in 

the States. EPA did so without giving the States an initial

opportunity to implement the obligations themselves through 

their State Implementation Plans, or SIPs.

The Clean Air Act ordinarily gives States the initial

opportunity to implement a new air quality standard on 

sources within their borders; States do so by submitting SIPs. 

See 42 U.S.C. §§ 7407(a), 7410(a)(1). Here, by preemptively 

issuing FIPs, EPA denied the States that first opportunity to 

implement the reductions required under their good neighbor 

obligations. EPA justifies its “FIP-first” approach by pointing 

to its earlier findings that the States had failed to meet their 

good neighbor obligations. But those findings came before

the Transport Rule quantified the States’ good neighbor 

obligations. EPA’s approach punishes the States for failing to 

meet a standard that EPA had not yet announced and the 

States did not yet know.

Under the Act, EPA has authority to set standards, but the 

statute reserves the first-implementer role for the States. That 

division of labor applies not just to the NAAQS but also to the 

good neighbor provision, Section 110(a)(2)(D)(i)(I), as EPA 

itself has recognized several times in the past. When EPA 

defines States’ good neighbor obligations, it must give the 

States the first opportunity to implement the new 

requirements.

A

“Under the Clean Air Act, both the Federal Government 

and the States exercise responsibility for maintaining and 

improving air quality.” American Trucking Ass’ns v. EPA, 

600 F.3d 624, 625 (D.C. Cir. 2010). The Act sets forth a 

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basic division of labor: The Federal Government establishes

air quality standards, but States have primary responsibility 

for attaining those standards within their borders. See Train 

v. NRDC, 421 U.S. 60, 63-67 (1975); American Trucking, 600 

F.3d at 625-26; Virginia v. EPA, 108 F.3d 1397, 1406-10

(D.C. Cir. 1997); see also 42 U.S.C. § 7401(a) (“The 

Congress finds . . . that air pollution prevention (that is, the 

reduction or elimination, through any measures, of the amount 

of pollutants produced or created at the source) and air 

pollution control at its source is the primary responsibility of 

States and local governments . . . .”); 42 U.S.C. § 7407(a) 

(“Each State shall have the primary responsibility for assuring 

air quality within the entire geographic area comprising such 

State . . . .”).26

That statutory division of authority is strict. This Court 

has described the Train-Virginia line of cases as erecting a 

statutory “federalism bar” under Section 110 of the Act. See 

Appalachian Power Co. v. EPA, 249 F.3d 1032, 1046 (D.C. 

Cir. 2001) (citing Train, 421 U.S. 60; Virginia, 108 F.3d 

1397); Michigan v. EPA, 213 F.3d 663, 687 (D.C. Cir. 2000). 

That statutory federalism bar prohibits EPA from using the 

SIP process to force States to adopt specific control measures. 

See Michigan, 213 F.3d at 687; Virginia, 108 F.3d at 1410.

In Train, the Supreme Court invoked that statutory 

division of labor in holding that the Clean Air Act gives EPA 

 26 The 1970 Amendments, which “sharply increased federal 

authority” in setting air quality standards, at the same time 

“explicitly preserved the principle” of State primacy in 

implementing pollution controls. Train, 421 U.S. at 64. The 1990 

Amendments, which enacted the current text of Section 

110(a)(2)(D)(i)(I), “did not alter the division of responsibilities 

between EPA and the states in the section 110 process.” Virginia, 

108 F.3d at 1410.

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“no authority to question the wisdom of a State’s choices of 

emission limitations,” so long as the State’s SIP submission 

would result in “compliance with the national standards for 

ambient air.” 421 U.S. at 79. The Court stated:

The Agency is plainly charged by the Act with the 

responsibility for setting the national ambient air 

standards. Just as plainly, however, it is relegated by the 

Act to a secondary role in the process of determining and 

enforcing the specific, source-by-source emission 

limitations which are necessary if the national standards 

it has set are to be met.

Id. (emphasis added); see also Union Electric Co. v. EPA, 427 

U.S. 246, 256, 269 (1976) (EPA may not reject a SIP on 

grounds of technical or economic infeasibility; that “would 

permit the Administrator or a federal court to reject a State’s 

legislative choices in regulating air pollution, even though 

Congress plainly left with the States, so long as the national 

standards were met, the power to determine which sources 

would be burdened by regulation and to what extent”).

Similarly, in Virginia, this Court held that EPA had no 

authority under Section 110 to condition its approval of 

northeastern States’ SIPs on the States’ adoption of 

California’s vehicle emission control measures. See 108 F.3d 

at 1401-10. The Court relied on the basic principle that the 

States, not EPA, are the primary implementers under Section 

110. See id. at 1410 (“section 110 does not enable EPA to 

force particular control measures on the states”). 

In sum, Title I of the Act establishes a “partnership 

between EPA and the states.” NRDC v. Browner, 57 F.3d 

1122, 1123 (D.C. Cir. 1995). The terms of that partnership 

are clear: EPA sets the standards, but the States “bear 

primary responsibility for attaining, maintaining, and 

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enforcing these standards.” American Lung Ass’n v. EPA, 

134 F.3d 388, 389 (D.C. Cir. 1998).

B

With that basic structure in mind, we consider the 

question presented here: whether EPA may use its rulemaking 

authority to quantify States’ obligations under Section 

110(a)(2)(D)(i)(I) and simultaneously issue Federal 

Implementation Plans, without giving the States a first 

opportunity to comply.

We begin by briefly describing the set of statutory 

provisions on which EPA relies here. 

EPA is the first mover in regulating ambient air pollution 

in Title I of the Clean Air Act. Section 109 requires EPA to 

promulgate NAAQS for common air pollutants. See Whitman 

v. American Trucking Ass’ns, 531 U.S. 457, 462 (2001) 

(citing 42 U.S.C. § 7409(a)). But once EPA sets a NAAQS, 

“responsibility under the Act shifts from the federal 

government to the states.” Lead Industries Ass’n v. EPA, 647 

F.2d 1130, 1137 (D.C. Cir. 1980).

Section 110 governs State Implementation Plans. Section 

110(a)(1) requires States to submit SIPs to implement each 

new or revised NAAQS. See 42 U.S.C. § 7410(a)(1). Section 

110(a)(2) lists many elements that a SIP must contain in order

to ensure that the Plan will be comprehensive enough to 

enable the State to attain the NAAQS. See 42 U.S.C. 

§ 7410(a)(2).27 The good neighbor provision, Section 

110(a)(2)(D)(i)(I), is one of those required elements.

 27 See, e.g., 42 U.S.C. § 7410(a)(2)(A) (SIP shall “include 

enforceable emission limitations and other control measures,” “as 

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Section 110(c)(1) creates a federal backstop if the States 

fail to submit adequate SIPs. When EPA finds that a State 

“has failed to make a required submission” or “disapproves a 

State implementation plan submission in whole or in part”

because of a SIP “deficiency,” EPA must “promulgate a 

Federal implementation plan” within two years, “unless the 

State corrects the deficiency” in the meantime in a manner 

approved by EPA. 42 U.S.C. § 7410(c)(1). In essence, the 

issue here is whether a State’s implementation of its good 

neighbor obligation can be considered part of the State’s 

“required submission” in its SIP (or whether the SIP can be 

deficient for failing to implement the good neighbor 

obligation) even before EPA quantifies the State’s good 

neighbor obligation. We think not. EPA’s quantifying of a 

State’s good neighbor obligation and setting of a State’s 

emissions budget is what “require[s]” the State to make a 

“submission” implementing that obligation on sources within 

the State. After EPA has set the relevant emissions budgets 

for each State, EPA may require States to submit new SIPs 

under Section 110(a)(1) or to revise their SIPs under Section 

110(k)(5). That is the approach EPA has used in the past. In 

short, once EPA defines or quantifies a State’s good neighbor 

obligation, the State must have a reasonable time to 

 

well as schedules and timetables for compliance”), 7410(a)(2)(B) 

(SIP shall provide for means to “monitor, compile, and analyze data 

on ambient air quality” and provide the data to EPA upon request), 

7410(a)(2)(C) (SIP shall “include a program to provide for the 

enforcement of” the control measures required by subparagraph 

(A)), 7410(a)(2)(E) (SIP shall provide assurances that State and 

local authorities “will have adequate personnel, funding, and 

authority” under State and local law “to carry out such 

implementation plan”), 7410(a)(2)(F) (SIP shall require “the 

installation, maintenance, and replacement of equipment” by 

“stationary sources to monitor emissions from such sources”).

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implement that requirement with respect to sources within the 

State.28

In short, the triggers for a FIP are EPA’s finding that the 

SIP fails to contain a “required submission” or EPA’s 

disapproving a SIP because of a “deficiency.” But logically, a 

SIP cannot be deemed to lack a required submission or be 

deemed deficient for failing to implement the good neighbor 

obligation until after EPA has defined the State’s good 

neighbor obligation. Once it defines the obligation, then 

States may be forced to revise SIPs under Section 110(k)(5) 

or to submit new SIPs under Section 110(a)(1). Only if that 

revised or new SIP is properly deemed to lack a required 

submission or is properly deemed deficient may EPA resort to 

a FIP for the State’s good neighbor obligation.

C

1

In light of Section 110(c)(1), EPA here made “a finding 

of failure to submit and/or disapproved a SIP submission” for 

each State with respect to each NAAQS for which that State 

would be covered. EPA Br. 44 (citing 42 U.S.C. 

§ 7410(c)(1)); see also EPA, Status of CAA 110(a)(2)(D)(i)(I) 

SIPs Final Rule Technical Support Document (July 2011) 

(EPA, SIPs TSD), J.A. 3167.29 On the basis of those 

 28 Section 110(k)(5), the SIP call provision, authorizes EPA to 

“establish reasonable deadlines” not to exceed 18 months for SIP 

revisions, once notice is given. 42 U.S.C. § 7410(k)(5); cf. 1998 

NOx Rule, 63 Fed. Reg. at 57,451 (12-month deadline). 29 EPA was cognizant of another potential obstacle: its own 

past approval of CAIR SIPs. CAIR covered the 1997 ozone and 

annual PM2.5 NAAQS, two of the three NAAQS at issue here. See 

70 Fed. Reg. 25,162, 25,165 (May 12, 2005). Many covered States 

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findings, EPA asserted authority to issue the Transport Rule

FIPs.

But EPA’s many SIP disapprovals and findings of failure 

to submit share one problematic feature: EPA made all of 

those findings before it told the States what emissions 

reductions their SIPs were supposed to achieve under the 

good neighbor provision. See EPA, SIPs TSD, J.A. 3167.

EPA sees no problem with that. In EPA’s view, there is 

no difference between a State’s obligation to comply with the 

NAAQS and a State’s good neighbor obligation: States must 

 

had submitted and received EPA approval of CAIR SIPs. See EPA, 

SIPs TSD, J.A. 3167. EPA apparently was concerned that those 

approved CAIR SIPs might deprive EPA of authority under Section 

110(c)(1) to issue Transport Rule FIPs for those two NAAQS. 

EPA tried to address this in the final rule. It claimed that 

because North Carolina invalidated CAIR, approved CAIR SIPs no 

longer fulfilled States’ Section 110(a)(2)(D)(i)(I) obligations. See 

Transport Rule, 76 Fed. Reg. 48,208, 48,219 (Aug. 8, 2011). It 

bears noting, however, that EPA continued to approve CAIR SIPs 

after North Carolina. See, e.g., 74 Fed. Reg. 65,446 (Dec. 10, 

2009).

But to try to make sure, in the final Transport Rule EPA 

retrospectively “corrected” its past approvals of CAIR SIPs, to

clarify its view that an approved CAIR SIP did not shield a State 

from the Transport Rule FIPs. See 76 Fed. Reg. at 48,219; see also 

42 U.S.C. § 7410(k)(6) (EPA may “revise” any approval the 

Administrator determines “was in error”). EPA made those 

“corrections” without using notice and comment rulemaking, 

despite the statutory requirement that EPA make any corrections 

“in the same manner as the approval.” 42 U.S.C. § 7410(k)(6).

Because the Transport Rule must be vacated in any event, we 

need not address here whether EPA’s “corrections” of CAIR SIP 

approvals exceeded its authority under Section 110(k)(6).

USCA Case #11-1302 Document #1390314 Filed: 08/21/2012 Page 47 of 104
48

submit SIPs addressing both within three years of a NAAQS, 

or face FIPs.

But there is a difference – a glaring one – between the 

two obligations. A NAAQS is a clear numerical target. For 

example, the NAAQS for annual PM2.5 is 15 μg/m3. Every 

State knows precisely what numerical goal its SIP must 

achieve. If a State misses that clear numerical target, it has 

only itself to blame.

By contrast, the good neighbor obligation is not a clear 

numerical target – far from it – until EPA defines the target. 

Even after EPA sets a NAAQS, an upwind State’s good 

neighbor obligation for that pollutant is nebulous and 

unknown. The statutory standard is “amounts” of pollution 

which will “contribute significantly to nonattainment” or 

“interfere with maintenance” of the new NAAQS in a 

downwind State. There is no way for an upwind State to 

know its obligation without knowing levels of air pollution in 

downwind States and then apportioning its responsibility for 

each downwind State’s nonattainment. Therefore, the upwind 

State’s obligation remains impossible for the upwind State to 

determine until EPA defines it.

30 Without further definition

by EPA, a prohibition on “amounts which will . . . contribute 

significantly” is like a road sign that tells drivers to drive 

“carefully.” The regulated entities – here, the upwind States –

 30 As EPA itself has recognized in the past: “The precise 

nature and contents of such a submission is [sic] not stipulated in 

the statute. EPA believes that the contents of the SIP submission 

required by section 110(a)(2)(D)(i) may vary depending upon the 

facts and circumstances related to the specific NAAQS.” EPA, 

Guidance for State Implementation Plan Submissions to Meet 

Current Outstanding Obligations Under Section 110(a)(2)(D)(i) for 

the 8-Hour Ozone and PM2.5 National Ambient Air Quality 

Standards 3 (Aug. 15, 2006) (EPA, 2006 Guidance).

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49

need more precise guidance to know how to conform their 

conduct to the law. A SIP logically cannot be deemed to lack 

a “required submission” or deemed to be deficient for failure 

to meet the good neighbor obligation before EPA quantifies 

the good neighbor obligation.

EPA faults the States for not hitting that impossible-toknow target with their SIP submissions. In effect, EPA’s 

view is that the only chance States have to hit the target is 

before EPA defines the target. By the time EPA makes the 

target clear, it’s already too late for the States to comply.

Interestingly, outside of this litigation, EPA has itself 

recently and repeatedly recognized that it makes no sense for 

States to act until EPA defines the target. Just a few weeks 

ago, for example, in a separate proceeding EPA said that 

while some elements of a SIP submission are “relatively 

straightforward,” “others clearly require interpretation by 

EPA through rulemaking, or recommendations through 

guidance, in order to give specific meaning for a particular

NAAQS.” 77 Fed. Reg. 46,361, 46,363 (Aug. 3, 2012). “For 

example, section 110(a)(2)(D)(i) requires EPA to be sure that 

each state’s SIP contains adequate provisions to prevent 

significant contribution to nonattainment of the NAAQS in

other states. This provision contains numerous terms that 

require substantial rulemaking by EPA in order to determine 

such basic points as what constitutes significant contribution.” 

Id. at n.7. Thus, EPA has said that the good neighbor 

provision “clearly require[s] interpretation by EPA through 

rulemaking, or recommendations through guidance, in order 

to give specific meaning for a particular NAAQS.” Id.; see 

also, e.g., 77 Fed. Reg. 45,320, 45,323 & n.7 (July 31, 2012)

(same); 77 Fed. Reg. 43,196, 43,199 & n.7 (July 24, 2012) 

(same); 77 Fed. Reg. 22,533, 22,536 & n.7 (Apr. 16, 2012)

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50

(same); 76 Fed. Reg. 40,248, 40,250 & n.5 (July 8, 2011)

(same).

In this litigation, however, EPA insists that the text of 

Section 110(c)(1) compels its FIP-first approach. But EPA 

pursues its reading of the statutory text down the rabbit hole 

to a wonderland where EPA defines the target after the States’ 

chance to comply with the target has already passed. Cf. FCC 

v. Fox Television Stations, Inc., 132 S. Ct. 2307, 2317 (2012) 

(“A fundamental principle in our legal system is that laws

which regulate persons or entities must give fair notice of 

conduct that is forbidden or required.”); id. (“regulated parties 

should know what is required of them so they may act 

accordingly”); Christopher v. SmithKline Beecham Corp., 132 

S. Ct. 2156, 2168 (2012) (“It is one thing to expect regulated 

parties to conform their conduct to an agency’s interpretations 

once the agency announces them; it is quite another to require 

regulated parties to divine the agency’s interpretations in 

advance . . . .”).

We take a different view. Statutory text “cannot be 

construed in a vacuum. It is a fundamental canon of statutory 

construction that the words of a statute must be read in their 

context and with a view to their place in the overall statutory 

scheme.” Roberts v. Sea-Land Services, Inc., 132 S. Ct. 1350, 

1357 (2012) (quoting Davis v. Michigan Dep’t of Treasury, 

489 U.S. 803, 809 (1989)).

Title I’s core two-step process is that the Federal 

Government sets end goals and the States choose the means to 

attain those goals. See Michigan, 213 F.3d at 687; see also 

Virginia, 108 F.3d at 1410. EPA’s theory – that EPA can 

define the end goals for the good neighbor provision and

simultaneously issue federal plans to implement them –

upends that process and places the Federal Government firmly 

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51

in the driver’s seat at both steps. The FIP-first approach is 

incompatible with the basic text and structure of the Clean Air 

Act.

In our view, determining the level of reductions required 

under Section 110(a)(2)(D)(i)(I) is analogous to setting a 

NAAQS. And determining the level of reductions under the 

good neighbor provision triggers a period during which States 

may submit appropriate SIPs under Section 110(a)(1) or SIP 

revisions under Section 110(k)(5).

That approach fits comfortably within the statutory text 

and structure. In both situations – setting a NAAQS and 

defining States’ good neighbor obligations – EPA sets the 

numerical end goal. And in both cases, once the standards are 

set, “determining the particular mix of controls among 

individual sources to attain those standards” remains “a State 

responsibility.” 1998 NOx Rule, 63 Fed. Reg. 57,356, 57,369 

(Oct. 27, 1998).

2

Other contextual and structural factors also support our 

conclusion that Section 110(a)(2)(D)(i)(I) preserves the basic 

principle that States, not the Federal Government, are the 

primary implementers after EPA has set the upwind States’ 

good neighbor obligations.

Section 110’s particular function in the statutory scheme 

is to give the States the first opportunity to implement the 

national standards EPA sets under Title I. See 42 U.S.C. 

§ 7410(a)-(c); see also Train, 421 U.S. at 79; Virginia, 108 

F.3d at 1410; Michigan, 213 F.3d at 686-87. The good 

neighbor requirement’s placement in Section 110(a) – a 

provision calling for State-level regulation – strongly suggests 

that Congress intended States to implement the obligations set 

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52

forth in Section 110(a)(2)(D)(i)(I). By contrast, if EPA’s FIPfirst interpretation were to prevail, Section 110(a)(2)(D)(i)(I) 

would not fit well in Section 110(a).

Moreover, Title I contains a separate provision, Section 

126, that explicitly contemplates direct EPA regulation of 

specific sources that generate interstate pollution. See 42 

U.S.C. § 7426(b)-(c); see also Appalachian Power, 249 F.3d 

at 1046. Section 126(b) permits a State to petition EPA for a 

finding that a source in a neighboring State emits pollution in 

violation of Section 110(a)(2)(D)(i).31 See 42 U.S.C. 

§ 7426(b). Section 126(c) gives EPA discretion to impose 

severe sanctions, including “emission limitations and 

compliance schedules,” on a source for which a finding has 

been made. 42 U.S.C. § 7426(c); see also 42 U.S.C. § 7509. 

The fact that Congress explicitly authorized EPA to use direct 

federal regulation to address interstate pollution suggests it 

did not contemplate direct Federal regulation in Section 

110(a)(2)(D)(i)(I). Cf. Whitman, 531 U.S. at 467-68; General 

Motors Corp. v. United States, 496 U.S. 530, 541 (1990). 

And as this Court has previously held, that Section 126 

imposes “extrinsic legal constraints” on State autonomy “does 

not affect a state’s discretion under § 110.” Appalachian 

Power, 249 F.3d at 1047 (emphasis added).

In sum, the text and context of the statute, and the

precedents of the Supreme Court and this Court, establish the 

States’ first-implementer role under Section 110. We decline 

 31 Section 126(b)’s text refers to “section 7410(a)(2)(D)(ii).” 

42 U.S.C. § 7426(b). This Court has identified the cross-reference 

to paragraph (ii), instead of paragraph (i), as scrivener’s error. See 

Appalachian Power, 249 F.3d at 1040-44.

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53

to adopt a reading of Section 110(a)(2)(D)(i)(I) that would 

blow a hole in that basic structural principle.32

3

The novelty of EPA’s approach underscores its flaws. In 

the past, EPA has applied the good neighbor provision in the 

States-first way we have outlined here.

The 1998 NOx Rule (which we addressed in Michigan) 

quantified each State’s good neighbor obligation but then 

gave the States 12 months to submit SIPs to implement the 

required reductions. See 63 Fed. Reg. at 57,358, 57,450-51; 

42 U.S.C. § 7410(k)(5). Indeed, EPA explicitly assured 

States that the Rule did not intrude on their authority to 

choose the means to achieve the EPA-defined end goal. See 

1998 NOx Rule, 63 Fed. Reg. at 57,369. EPA then explained, 

persuasively, why it made sense not to deviate from Title I’s 

standard division of labor in the good neighbor context:

The task of determining the reductions necessary to 

meet section 110(a)(2)(D) involves allocating the use of 

the downwind States’ air basin. This area is a commons 

in the sense that the contributing State or States have a

greater interest in protecting their local interests than in 

protecting an area in a downwind State over which they 

do not have jurisdiction and for which they are not 

politically accountable. Thus, in general, it is reasonable 

to assume that EPA may be in a better position to 

determine the appropriate goal, or budget, for the 

 32 We conclude that EPA’s interpretation on the FIPs issue is 

contrary to the text and context of the statute (a Chevron step 1 

violation), in the alternative is absurd (a Chevron step 1 violation), 

and again in the alternative is unreasonable (thus failing Chevron

step 2 if we get to step 2).

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contributing States, while leaving [it] to the contributing 

States’ discretion to determine the mix of controls to 

make the necessary reductions.

Id. at 57,370 (emphases added). 

In Michigan, this Court held that the 1998 Rule did not 

transgress the Train-Virginia federalism bar. But the terms of 

the Michigan Court’s approval highlight how flagrantly the 

new Transport Rule crosses that line. We said: “EPA does 

not tell the states how to achieve SIP compliance. Rather, 

EPA looks to section 110(a)(2)(D) and merely provides the 

levels to be achieved by state-determined compliance 

mechanisms.” 213 F.3d at 687 (emphasis added). We 

emphasized that States had a “real choice” how to implement 

the required reductions. Id. at 688.

Like the 1998 NOx Rule, the 2005 Clean Air Interstate 

Rule gave States the first crack at implementing the 

reductions required by EPA. See 70 Fed. Reg. 25,162, 25,263 

(May 12, 2005) (requiring SIPs within 18 months). When 

EPA issued CAIR FIPs in April 2006, about a year after it 

promulgated CAIR, it clarified that it intended the FIPs to 

serve as a “Federal backstop” to the ongoing SIP process, and 

did not intend to “take any other steps to implement FIP 

requirements that could impact a State’s ability to regulate 

their sources in a different manner” until “a year after the 

CAIR SIP submission deadline.” See CAIR FIPs, 71 Fed. 

Reg. 25,328, 25,330 (Apr. 28, 2006). That timetable, EPA 

assured the States, would allow EPA “to approve timely SIPs 

before implementation of FIP requirements occurs.” Id. at 

25,331 (emphasis added).

In both the 1998 NOx Rule and the 2005 CAIR, EPA was 

therefore careful not to infringe the States’ first-implementer 

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55

role. EPA’s own past practice and statements illustrate the 

anomaly of its new FIP-first approach.

D

On a separate tack, EPA does not concede that it denied 

the States their rightful chance to implement their good 

neighbor obligations. It contends States did have an 

opportunity to submit SIPs. In EPA’s view, once it issued the 

2006 24-hour PM2.5 NAAQS, States had three years under 

Section 110(a)(1) to seek and obtain EPA approval of SIPs 

addressing their good neighbor obligations.

But to reiterate, the problem is that the three-year period 

expired before EPA issued the Transport Rule and defined the

good neighbor obligations of upwind States. EPA has an 

answer for that – one we find extraordinarily unpersuasive. In 

its view, each State should have come up with (i) its own 

definition of “amounts which will . . . contribute 

significantly” and (ii) its own modeling and methodology for 

applying that definition. See EPA Br. 48 (“EPA has never

stated that its methodology is the only way”) (emphasis 

omitted).

In effect, EPA claims the statute requires each State to 

take its own stab in the dark at defining “amounts which will

. . . contribute significantly” to a downwind State’s 

nonattainment. The State would then have to apply that 

homemade definition using its own homemade 

methodology.33

 33 EPA points to guidance documents it issued in 2006 and 

2009. Those documents further undermine EPA’s contention that 

the stab in the dark was a realistic opportunity for States to avoid 

being pulled into the Transport Rule FIPs.

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Of course, once a State takes its stab, EPA could 

disapprove it – especially if the State defined its own 

 

The 2006 document, published after CAIR but before North 

Carolina, did not apply to CAIR States. See EPA, 2006 Guidance

at 4. It told non-CAIR States that “EPA anticipates, based upon 

existing information developed in connection with the CAIR, that 

emissions from sources in States not covered by the CAIR do not 

contribute significantly to nonattainment or interfere with 

maintenance of the 8-hour ozone or PM2.5 NAAQS in any other 

State.” Id. at 5.

The 2009 guidance document concerned the 2006 24-hour 

PM2.5 NAAQS, which was not covered by CAIR. The seven-page 

document included three paragraphs of vague guidance on 

“significant contribution” under Section 110(a)(2)(D). See EPA, 

Guidance on SIP Elements Required Under Sections 110(a)(l) and 

(2) for the 2006 24-Hour Fine Particle (PM2.5) National Ambient 

Air Quality Standards (NAAQS) 3 (Sept. 25, 2009) (EPA, 2009 

Guidance) (“The state’s conclusion must be supported by an 

adequate technical analysis. Information to support the state’s 

determination with respect to significant contribution to 

nonattainment might include, but is not limited to, information 

concerning emissions in the state, meteorological conditions . . . , 

monitored ambient concentrations . . . , the distance to the nearest 

area that is not attaining the NAAQS in another state, and air 

quality modeling.”); cf. 1998 NOx Rule, 63 Fed. Reg. at 57,370 (if 

EPA does not identify the “acceptable level of NOx reductions, the 

upwind State would not have guidance as to what is an acceptable 

submission”).

The 2009 document ordered the States, equipped with that 

vague guidance, to submit SIPs to address Section 

110(a)(2)(D)(i)(I) for 24-hour PM2.5. But in the same breath, it 

warned them that EPA itself intended to “complete a rule to address 

interstate pollution transport in the eastern half of the continental 

United States.” EPA, 2009 Guidance at 3. EPA did not say what 

would happen if a State’s approach did not coincide with the 

approach EPA was developing for its own rule, but experience tells 

the tale.

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obligation to be less than what EPA deemed it to be. 

Experience appears to bear that out: Petitioners point out that 

every Transport Rule State that submitted a good neighbor 

SIP for the 2006 24-hour PM2.5 NAAQS was disapproved. 

See State & Local Br. 29-31; State & Local Reply Br. 5-7.

That should not come as a surprise. In the 1998 NOx

Rule, EPA acknowledged that pre-Rule stabs in the dark were 

bound to fail. “Without determining an acceptable level of 

NOx reductions,” EPA warned, “the upwind State would not 

have guidance as to what is an acceptable submission.” 63 

Fed. Reg. at 57,370. And States would incur significant costs 

developing those SIP submissions.

As EPA repeatedly reminds this Court, interstate 

pollution is a collective problem that requires a 

comprehensive solution. See EPA Br. 5 (“Absent effective 

federal control, individual States often have little economic or 

political incentive to self-impose regulatory controls (and 

attendant costs) within their States solely to address air 

quality problems in other States.”). And EPA itself has 

recognized that having each State independently guess at its 

own good neighbor obligations is not a plausible solution to 

interstate pollution: “It is most efficient – indeed necessary –

for the Federal government to establish the overall emissions 

levels for the various States.” 1998 NOx Rule, 63 Fed. Reg. at 

57,370 (emphasis added).

Yet EPA now encourages us to suspend disbelief and 

conclude that under the statute, a State’s only chance to avoid 

FIPs is to make a successful stab in the dark – a feat that not 

one Transport Rule State managed to accomplish. EPA

clearly does not believe the stab-in-the-dark approach would 

really permit States to avoid FIPs – its own past statements 

USCA Case #11-1302 Document #1390314 Filed: 08/21/2012 Page 57 of 104
58

show that. But EPA’s authority to issue these FIPs rests on 

our accepting its rickety statutory logic.

We decline the invitation. Our duty is to “interpret the 

statute as a symmetrical and coherent regulatory scheme and 

fit, if possible, all parts into an harmonious whole.” FDA v. 

Brown & Williamson Tobacco Corp., 529 U.S. 120, 133 

(2000) (citations and internal quotation marks omitted). 

EPA’s FIP-first approach fails that test.

When EPA quantifies States’ good neighbor obligations, 

it must give the States a reasonable first opportunity to 

implement those obligations. That approach reads Section 

110(a)(2)(D)(i)(I) in harmony with the rest of Section 110. It 

preserves Title I’s Federal-State division of labor – a division 

repeatedly reinforced by the Supreme Court and this Court. 

And it accords with the commonsense notion that Congress 

did not design the good neighbor provision to set the States up 

to fail.34

 34 The dissent contends that the States’ challenge on this issue 

comes too late. We disagree. The dissent conflates (i) EPA’s prior 

disapproval of certain States’ SIPs and (ii) EPA’s decision to 

quantify the good neighbor obligation and to simultaneously issue 

FIPs rather than to issue a SIP call for SIP revisions (or to allow 

new SIPs). Petitioners are challenging only the latter point. And 

EPA announced its final decision to proceed that way in the 

Transport Rule itself. Put another way, the statute says that EPA 

must issue a FIP within two years after a State fails to make a 

“required submission” or submits a deficient SIP. But a State 

cannot be “required” to implement its good neighbor obligation in a 

SIP “submission” – nor be deemed to have submitted a deficient 

SIP for failure to implement the good neighbor obligation – until it 

knows the target set by EPA. In this case, EPA set the relevant 

target in the Transport Rule. Petitioners’ challenge to the Transport 

Rule’s FIPs is entirely timely.

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59

IV

The decision whether to vacate a flawed rule “depends on 

the seriousness of the order’s deficiencies (and thus the extent 

of doubt whether the agency chose correctly) and the 

disruptive consequences of an interim change that may itself 

be changed.” Allied-Signal, Inc. v. NRC, 988 F.2d 146, 150-

51 (D.C. Cir. 1993) (internal quotation marks omitted); see 

also Davis County Solid Waste Mgmt. v. EPA, 108 F.3d 1454, 

1459 (D.C. Cir. 1997).

Here, we have no doubt that the agency chose incorrectly. 

The Transport Rule stands on an unsound foundation –

including EPA’s flawed construction of the statutory term 

“amounts which will . . . contribute significantly to 

nonattainment.” 42 U.S.C. § 7410(a)(2)(D)(i). That 

deficiency is too fundamental to permit us to “pick and 

choose portions” of the rule to preserve. North Carolina v. 

EPA, 531 F.3d 896, 929 (D.C. Cir. 2008). And as with the 

Clean Air Interstate Rule, the Transport Rule’s “fundamental 

flaws foreclose EPA from promulgating the same standards 

on remand.” Id. (internal quotation marks omitted). EPA’s 

chosen manner of implementing the Rule – issuing FIPs 

without giving the States a post-Rule opportunity to submit 

SIPs – also rests on a misreading of the statute.

We therefore vacate the Transport Rule rulemaking 

action and FIPs, and remand to EPA.

The remaining question is the status of CAIR. In North 

Carolina, this Court initially held that CAIR’s “fundamental 

flaws” required vacatur. 531 F.3d at 929. On rehearing, the

Court reconsidered its initial decision and modified its order 

to remand CAIR without vacatur. North Carolina v. EPA, 

550 F.3d 1176, 1178 (D.C. Cir. 2008). The Court noted that 

under our precedents, it is appropriate to remand without 

USCA Case #11-1302 Document #1390314 Filed: 08/21/2012 Page 59 of 104
60

vacatur “where vacatur would at least temporarily defeat the 

enhanced protection of the environmental values covered by 

the EPA rule at issue.” Id. (internal quotation marks, 

brackets, and ellipsis omitted). The Court was “convinced 

that, notwithstanding the relative flaws of CAIR, allowing 

CAIR to remain in effect until it is replaced by a rule 

consistent with our opinion would at least temporarily 

preserve the environmental values covered by CAIR.” Id.

In accordance with our Order granting the motions to stay

the Transport Rule, EPA has continued to administer CAIR. 

See Order, No. 11-1302, at 2 (D.C. Cir. Dec. 30, 2011); see 

also http://www.epa.gov/cair. Vacating CAIR now would 

have the same consequences that moved the North Carolina

Court to stay its hand – and indeed might be more severe

now, in light of the reliance interests accumulated over the 

intervening four years. We therefore conclude, as did the 

Court in North Carolina, that the appropriate course is for 

EPA to continue to administer CAIR pending its development

of a valid replacement.35

* * *

We vacate the Transport Rule and the Transport Rule 

FIPs and remand this proceeding to EPA. EPA must continue

administering CAIR pending the promulgation of a valid 

replacement.

So ordered.

 35 The North Carolina Court did “not intend to grant an 

indefinite stay of the effectiveness” of its decision. 550 F.3d at

1178. We likewise expect that EPA will proceed expeditiously on 

remand.

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ROGERS, Circuit Judge, dissenting: To vacate the Transport

Rule, the court disregards limits Congress placed on its

jurisdiction, the plain text of the Clean Air Act (“CAA”), and

this court’s settled precedent interpreting the same statutory

provisions at issue today. Any one of these obstacles should

have given the court pause; none did. The result is an unsettling

of the consistent precedent of this court strictly enforcing

jurisdictional limits, a redesign of Congress’s vision of

cooperative federalism between the States and the federal

government in implementing the CAA based on the court’s own

notions of absurdity and logic that are unsupported by a factual

record, and a trampling on this court’s precedent on which the

Environmental Protection Agency (“EPA”) was entitled to rely

in developing the Transport Rule rather than be blindsided by

arguments raised for the first time in this court.

 Congress has limited the availability of judicial review of

challenges to final rules promulgated by the EPA in two ways

that are relevant here. Under CAA section 307(b)(1), 42 U.S.C.

§ 7607(b)(1), petitions for judicial review must be filed within

sixty days of promulgation of a final rule, and under CAA

section 307(d)(7)(B), 42 U.S.C. § 7607(d)(7)(B), “[o]nly an

objection to a rule or procedure which was raised with

reasonable specificity during the period for public comment . . .

may be raised during judicial review.” The court has, until

today, strictly enforced these requirements, which exist for two

important reasons: to enforce repose so that the rulemaking

process is not crippled by surprise challenges to matters that

were rightfully presumed settled, and to guarantee an agency’s

expert consideration and possible correction of any flaws in its

rules before the matter reaches a court. Instead the court casts

aside both jurisdictional provisions, upending these two

fundamental principles. In so doing, the court thus fails to

“maintain uniformity of the court’s decisions” on these

“question[s] of exceptional importance.” FED. R. APP. P.

35(a)(1) & (2). 

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2

As one basis underlying its vacatur of the Transport Rule,

the court permits a collateral attack on prior final rules in which

EPA disapproved state implementation plan (“SIP”) submissions

with respect to the “good neighbor provision,” CAA

§ 110(a)(2)(D)(i)(I), 42 U.S.C. § 7410(a)(2)(D)(i)(I), or found

States failed to submit such a SIP at all. In those Final SIP

Rules, EPA unambiguously stated its interpretation that States

had an independent obligation under section 110(a) to submit

“good neighbor” SIPs regardless of whether EPA first quantified

each State’s emission reduction obligations. Under section

307(b)(1), States had sixty days to seek judicial review of those

Final SIP Rules to challenge EPA’s interpretation of section

110(a). EPA’s authority to promulgate the federal

implementation plans (“FIPs”), pursuant to section 110(c), in the

Transport Rule was triggered by EPA having published those

Final SIP Rules, and under section 307(b)(1) States may not

collaterally attack the propriety of those Final SIP Rules now. 

This is not a mere technicality — EPA developed and

promulgated the Transport Rule with the knowledge that all but

three States did not seek judicial review of its interpretation of

section 110(a) and in light of this court’s opinion in North

Carolina v. EPA, 531 F.3d 896 (D.C. Cir. 2008). The court

therefore lacks jurisdiction under section 307(b)(1) to consider

States’ belated challenge to EPA’s interpretation of section

110(a) as part of its review of the Transport Rule; the petitions

challenging the Final SIP Rules filed by three States are not

consolidated with the petitions challenging the Transport Rule,

as they involve separate provisions of the CAA and different

final rules. The court glosses over the plain text and structure of

section 110 to avoid that reality, and in the process rewrites

sections 110(a) and 110(c), altering the triggering mechanism

for States’ obligations to submit “good neighbor” SIPs and

EPA’s obligation to promulgate FIPs, based on its own

speculative conclusion that the process Congress adopted is

“impossible” for States to follow. To reach its conclusion, the

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3

court today holds that the CAA requires what it previously held

the CAA ambiguously permits EPA to do. 

As another ground to vacate the Transport Rule, the court

concludes that, under EPA’s two-step approach to defining

“significant contribution” under the “good neighbor”

requirement in section 110(a)(2)(D)(i)(I), a State “may be

required to reduce its emissions by an amount greater than the

‘significant contribution’ that brought it into the program in the

first place.” Op. at 34. No objection was made during the

Transport Rule administrative proceedings to EPA’s approach,

let alone its statutory authority, to use different, unrelated

measures of significance for inclusion and budget-setting. 

Acknowledging this, the court reaches beyond the Transport

Rule administrative record, despite section 307(d)(7)(B)’s clear

command, to find jurisdiction. But the three reasons it offers do

not add up. By suggesting that EPA acted inconsistently with

North Carolina in adopting a two-step approach, with different,

unrelated measures of “significant contribution” for inclusion

and budget-setting, the court ignores that in North Carolina this

court expressly declined to disturb that same approach. 531

F.3d at 916-17. In relying on a comment expressing a policy

preference made during the administrative proceedings of the

predecessor of the Transport Rule (to which petitioners failed to

alert the court until rebuttal oral argument), the court ignores 

that the comment does not challenge EPA’s statutory authority

to pursue its two-step approach, and the fact that no one

petitioned the court in North Carolina for judicial review based

on that comment, which is why the court in North Carolina left

that approach undisturbed, see id. The court also ignores that

the prior rulemaking docket was not incorporated into the

Transport Rule administrative proceedings. Together, these

“ignored” facts demonstrate that EPA had no reason to suspect

any party before it in the Transport Rule administrative

proceedings subscribed to the objection stated in the old

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4

comment, nor even to locate and consider that comment. 

Finally, EPA’s rejection on technical grounds of alternative

approaches for measuring “significant contribution” based solely

on air quality, not cost and air quality, during the Transport Rule

administrative proceedings says nothing about whether EPA

would have refused to entertain petitioners’ new objection in

this court that EPA was statutorily required to modify its twostep approach by making the inclusion threshold of step-one a

floor for reductions under the cost approach of step-two. The

alternative approaches EPA considered and rejected are not even

the approaches petitioners now endorse, and, in any event,

cannot excuse a failure to state their objection with “reasonable

specificity” during the Transport Rule administrative

proceedings. 

The court’s remaining reasons for vacatur lack merit. First,

the court concludes EPA violated the “good neighbor”

provision’s “proportionality” requirement, but petitioners

presented no such statutory authority argument in their briefs,

instead challenging EPA’s grouping of States for purposes of

SO2 reduction as arbitrary and capricious. Even if they had, the

court lacks jurisdiction because the argument is premised on

speculation that EPA’s two-step approach to measuring

“significant contribution” might require States to reduce

emissions by more than the amount that triggered their

inclusion in the Transport Rule in the first place — the same

argument over which the court lacks jurisdiction due to

petitioners’ failure to challenge EPA’s statutory authority for its

approach during the Transport Rule administrative proceedings. 

On the merits, the court’s “proportionality” conclusion

contradicts the court’s opposite conclusion in North Carolina

 that EPA’s measurement of a State’s “significant contribution”

did not have to correlate directly with its air quality impact

“relative to other upwind states.” 531 F.3d at 908 (citing

Michigan v. EPA, 213 F.3d 663, 679 (D.C. Cir. 2000)). 

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5

Similarly, the court’s holding that EPA failed to consider the

effect of in-state emissions is likewise premised on the subthreshold argument. Further, the court’s “in-State emissions”

and its “over-control” conclusions are contradicted by the

Transport Rule administrative record.

 

I.

Section 307(b)(1) of the CAA, 42 U.S.C. § 7607(b)(1),

requires a petition for judicial review of EPA final actions to be

filed within sixty days of publication in the Federal Register. 

“The filing period in the Clean Air Act ‘is jurisdictional in

nature’; if the petitioners have failed to comply with it, we are

powerless to address their claim.” Med. Waste Inst. & Energy

Recovery Council v. EPA, 645 F.3d 420, 427 (D.C. Cir. 2011)

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

460 (D.C. Cir. 1998)). 

The Supreme Court has explained that “judicial review

provisions are jurisdictional in nature and must be

construed with strict fidelity to their terms. This is all

the more true of statutory provisions specifying the

timing of review, for those time limits are, as we have

often stated, mandatory and jurisdictional, and are not

subject to equitable tolling.”

Slinger Drainage, Inc. v. EPA, 237 F.3d 681, 682 (D.C. Cir.

2001) (quoting Stone v. Immigration & Naturalization Serv.,

514 U.S. 386, 405 (1995) (internal quotation marks, alterations,

and citation omitted)). Accordingly, in Medical Waste this court

dismissed a challenge to a final rule for lack of jurisdiction

where petitioners failed to seek judicial review when EPA “first

use[d]”its statutory approach, 645 F.3d at 427 (emphasis added).

“An objection is considered a collateral attack only if ‘a

reasonable [petitioner] . . . would have perceived a very

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6

substantial risk that the [rule] meant what the [agency] now says

it meant.” S. Co. Servs., Inc. v. FERC, 416 F.3d 39, 45 (D.C. Cir.

2005) (internal quotations marks, citation, and alterations

omitted).

The Transport Rule, responding to States’ failures to submit

adequate “good neighbor” SIPs, is a FIP that addresses the

interstate transport of emissions in twenty-seven States in the

eastern United States for three national ambient air quality

standards (“NAAQS”): the 1997 8-hour ozone NAAQS, the

1997 annual PM2.5 NAAQS, and the 2006 24-hour PM2.5

NAAQS.1 See Transport Rule, 76 Fed. Reg. 48,208 (Aug. 8,

2011). In the Transport Rule, EPA determined that the same

level of emission reduction obligations would apply for each of

these three NAAQS. See id. at 48,264. Over a year prior to

promulgating the Transport Rule, EPA promulgated Final SIP

Rules publishing findings that twenty-nine States and territories

had failed to submit SIPs with the required “good neighbor”

1

 Section 110(a)(1) of the CAA provides that States must

submit SIPs within three years (or less, if set by EPA) of promulgation

of a NAAQS. Section 110(a)(2)(D), in turn, requires States to submit

SIPs with “adequate provisions”

(i) prohibiting, consistent with the provisions of this

subchapter, any source or other type of emissions activity

within the State from emitting any air pollutant in amounts

which will--

(I) contribute significantly to nonattainment in, or

interfere with maintenance by, any other State with

respect to any such national primary or secondary

ambient air quality standard.

42 U.S.C. § 7410(a)(2)(D)(i)(I).

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provisions for the 2006 24-hour PM2.5 NAAQS.2 See Failure to

Submit Good Neighbor SIP Finding, 75 Fed. Reg. 32,673 (June

9, 2010); Tennessee Failure to Submit Good Neighbor SIP

Finding, 76 Fed. Reg. 43,180 (July 20, 2011). In these Final SIP

Rules, EPA stated:

This finding establishes a 2-year deadline for

promulgation by EPA of a FIP, in accordance with

section 110(c)(1), for any state that either does not

submit or EPA can not approve a SIP as meeting the

attainment and maintenance requirements of [the “good

neighbor” provision] for the 2006 24-hour PM2.5

NAAQS. . . . This action . . . does not pertain to . . . a

SIP Call pursuant to section 110(k)(5).

Id. at 32,674; see also 76 Fed. Reg. at 43,180-81 (Tennessee). 

The Final SIP Rules further state that the findings of failure to

submit were of nationwide scope and effect, and therefore

pursuant to section 307(b)(1), 42 U.S.C. § 7607(b)(1), a petition

for judicial review had to be filed with the D.C. Circuit within

sixty days of the publication of the findings in the Federal

Register. See Failure to Submit Good Neighbor SIP Finding, 75

2

 The States and territories were: Alaska, Colorado, Hawaii,

Idaho, Illinois, Iowa, Louisiana, Maryland, Michigan, Minnesota,

Montana, Nebraska, North Dakota, Oklahoma, Oregon, Pennsylvania,

South Dakota, Utah, Virginia, Washington, West Virginia, Wisconsin,

Wyoming, the District of Columbia, American Samoa, the

Commonwealth of the Northern Mariana Islands, Guam, Puerto Rico,

and the U.S. Virgin Islands. See Failure to Submit Good Neighbor

SIP Findings, 75 Fed. Reg. at 32,674. (On July 20, 2011, EPA

published an additional finding that Tennessee had failed to submit a

“good neighbor” SIP for the 2006 24-hour PM2.5 NAAQS. See

Tennessee Failure to Submit Good Neighbor SIP Finding, 76 Fed.

Reg. 43,180 (July 20, 2011). Tennessee is not a petitioner here. 

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Fed. Reg. at 32,675-76; Failure to Submit Good Neighbor SIP

Finding (Tennessee), 76 Fed. Reg. at 43,182-83. No State filed

a petition for judicial review.

Other States submitted 2006 24-hour PM2.5 SIPs with “good

neighbor” provisions, but EPA disapproved that portion of the

SIP submissions of ten States covered by the Transport Rule: 

Alabama, Georgia, Indiana, Kansas, Kentucky, Missouri, New

Jersey, New York, North Carolina, and Ohio.3

 In the Final SIP

Rules, EPA rejected objections that States had no obligation to

submit SIPs until EPA had quantified the States’ amount of

“significant contribution” and that EPA was required to permit

States to revise their SIPs prior to imposing a FIP pursuant to 42

U.S.C. § 7410(c)(1).4 The Final SIP Rules disapproving the

“good neighbor” SIP submissions alerted the affected States that

“petitions for judicial review must be filed in the United States

Court of Appeals for the appropriate circuit by September 19,

3 See Approval and Promulgation of Air Quality

Implementation Plan; Alabama; Disapproval of Interstate Transport

Submission for the 2006 24-Hour PM2.5 Standards, 76 Fed. Reg.

43,128 (July 20, 2011); 76 Fed. Reg. 43,159 (Georgia); 76 Fed. Reg.

43,175 (Indiana & Ohio); 76 Fed. Reg. 43,143 (Kansas); 76 Fed. Reg.

43,136 (Kentucky); 76 Fed. Reg. 43,156 (Missouri); 76 Fed. Reg.

43,153 (New Jersey & New York); 76 Fed. Reg. 43,167 (North

Carolina). 

4 See 76 Fed. Reg. at 43,131-33 (Alabama); 76 Fed. Reg. at

43,162-64 (Georgia); 76 Fed. Reg. at 43,176-79 (Indiana & Ohio); 76

Fed. Reg. at 43,145-47 (Kansas); 76 Fed. Reg. at 46,139-41

(Kentucky); 76 Fed. Reg. at 43,170-72 (North Carolina). No

comments were submitted to the proposed disapproval of Missouri’s

“good neighbor” SIP submission, see 76 Fed. Reg. at 43,156, and only

one unrelated comment was submitted to New York and New Jersey’s

proposed disapproval, see 76 Fed. Reg. at 43,154. None of these three

States is a petitioner here.

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2011,” see, e.g., 76 Fed. Reg. at 43,136 (Alabama), the sixty day

deadline prescribed by CAA section 307(b)(1), 42 U.S.C.

§ 7607(b)(1). Only Georgia, Kansas, and Ohio filed petitions

for judicial review of EPA’s disapproval action and their

petitions are not consolidated with the petitions now under

review, as they challenge different final rules.5

A.

Now that EPA has, as it warned, promulgated FIPs for 

States covered by the Transport Rule, State petitioners contend

that EPA lacked authority to do so for the 2006 24-hour PM2.5

NAAQS because “a FIP can cure a deficiency only in a required

submission, and States were not required to include SIP

provisions to eliminate ‘significant contributions’ not yet

defined by EPA legislative rule.” State Petrs’ Br. at 31. If a

State wished to object that under section 110(a) it had no

obligation to include “good neighbor” provisions in its SIP until

EPA quantified its “significant contribution” in emission

reduction budgets, then the CAA required it do so at the time

EPA found it had not met its SIP “good neighbor” obligation. 

State petitioners offer no response in their reply brief to EPA’s

5

 See Ohio v. EPA, No. 11-3988 (6th Cir.); Westar Energy,

Inc. v. EPA, No. 11-1333 (D.C. Cir.); Kansas v. EPA, No. 12-1019

(D.C. Cir.); Georgia v. EPA, No. 11-1427 (D.C. Cir.). The court

consolidated the two Kansas cases (Nos. 11-1333 and 12-1019) on

January 10, 2012. See Order Case No. 12-1019 (Jan. 10, 2012). The

court also severed from Kansas’s Transport Rule petition, Case No.

11-1329, its challenge to EPA’s disapproval of its “good neighbor”

SIP submission. See id. On January 10, 2012, the Sixth Circuit

granted the parties’ joint motion to hold the case in abeyance pending

the outcome of the instant case. On January 18, 2012, the D.C. Circuit

issued orders holding the Kansas and Georgia cases in abeyance

pending the outcome of the appeal in the present case. 

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position that this argument is a collateral attack barred by

section 307(b)(1). See Resp.’s Br. at 46-47. 

Ignoring the plain terms of section 307(b)(1) as well as this

court’s long-settled precedent, the court reaches the merits of

this issue despite its lack of jurisdiction. In the Final SIP Rules

finding States had failed to submit “good neighbor” SIPs, EPA

put covered States on unambiguously “sufficient notice” that it

interpreted the CAA as placing an independent obligation on

each State to include adequate “good neighbor” provisions in its

SIP regardless of whether EPA had prospectively quantified its

amount of “significant contribution.” S. Co. Servs., 416 F.3d at

44. By the very nature of the Final SIP Rules, EPA was

informing States that they had not met their obligation to submit

“good neighbor” SIPs, an obligation States now contend they

never had. Furthermore, EPA warned that its findings of failure

to submit triggered the two-year FIP clock of section 110(c)(1),

and not the SIP Call provision of section 110(k)(5). See Failure

to Submit Good Neighbor SIP Finding, 75 Fed. Reg. at 32,673-

74; Failure to Submit Good Neighbor SIP Finding (Tennessee),

76 Fed. Reg. at 43,180-81. In alerting States to the judicial

review deadline, EPA reiterated that States had sixty days to file

“any petitions for review . . . related to [] findings of failure to

submit SIPs related to the requirements of [the ‘good neighbor’

provision].” Failure to Submit Good Neighbor SIP Finding, 75

Fed. Reg. at 32,676; Failure to Submit Good Neighbor SIP

Finding (Tennessee), 76 Fed. Reg. at 43,183 (emphases added). 

Not having sought judicial review of the Final SIP Rules

determining that they failed to submit required “good neighbor”

SIPs, States may not now object that they were not required to

submit “good neighbor” SIPs until EPA first quantified their

reduction obligations. “The sixty day window provided by

statute has long since closed, and we may not reopen it and

entertain a belated challenge . . . now.” Med. Waste, 645 F.3d

at 427. Therefore, the court lacks jurisdiction over the collateral

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11

attacks by petitioners Louisiana, Michigan, Nebraska,

Oklahoma, Virginia, and Wisconsin, as part of the Transport

Rule petitions, on EPA’s interpretation of section 110(a) stated

in the Final SIP Rules finding they failed to submit required

“good neighbor” SIPs.

Similarly on notice, neither Alabama nor Indiana petitioned

for judicial review of EPA’s disapproval of their SIP

submissions. In the Final SIP Rule disapproving Alabama’s SIP

submission, EPA quotes one commenter as stating: 

EPA has not stated the amount of reduction they

believe is needed to satisfy the transport requirements.

. . . [T]he finish line isn’t even knowable (because EPA

refuses to inform the states how much reduction is

enough to satisfy the requirements). EPA seems to say

that it has to be whatever the final Transport Rule says,

even though there is no final Transport Rule. 

76 Fed. Reg. at 43,131. EPA responded that “the state

obligation stems from the CAA itself. . . . States had an

opportunity to conduct their own analyses regarding interstate

transport.” Id. (emphasis added). EPA also warned that it was

obligated to promulgate a FIP within two years of disapproving

Alabama’s SIP, see id. at 43,132, and rejected comments that the

SIP Call revision process of section 110(k)(5) should apply,

because, in its view, that provision applies only where there is

an existing, approved SIP, see id. at 43,133. In its summary of

Indiana’s comments on the proposed disapproval of its SIP

submission, EPA noted that Indiana took the position that EPA

“should provide [the State] the opportunity to revise its [] SIP

once the Transport Rule is completed” and that a “FIP is []

contrary to the spirit of the CAA by unnecessarily limiting

[S]tate authority.” 76 Fed. Reg. at 43,177. EPA responded,

relying on the CAA’s plain text, that Indiana was required by

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12

section 110(a) to submit SIPs with adequate “good neighbor”

provisions, and that upon disapproving its submission, EPA had

a legal obligation under the CAA to promulgate a FIP. See id.

Alabama and Indiana’s comments, along with EPA’s responses,

demonstrate that the two States were on clear notice of EPA’s

interpretation of the CAA as imposing an independent obligation

on the States to submit “good neighbor” SIPs, even in the

absence of EPA-quantified amounts of “significant

contribution.” Yet neither Alabama nor Indiana sought judicial

review of EPA’s Final SIP Rules disapproving their SIP

submissions, and their attempt now to collaterally attack those

Final SIP Rules is barred. See Med. Waste, 645 F.3d at 427.

Given EPA’s clear statements in its Final SIP Rules

disapproving States’ SIP submissions and finding they failed to

submit required “good neighbor” SIPs, there is no basis to

conclude that State petitioners might not have perceived a

substantial risk that EPA meant what it said. See S. Co. Servs.,

416 F.3d at 45. The instant case, involving consolidated

petitions challenging the Transport Rule, is therefore not the

appropriate forum to decide whether, under section 110(a),

States have an independent obligation to submit “good

neighbor” SIPs when EPA has not first quantified amounts of

“significant contribution.” EPA promulgated Final SIP Rules in

which it made its interpretation clear; judicial challenge to those

rules is the proper forum to decide the question.6

 

6

 The same is true for Ohio, Georgia, and Kansas, which

petitioned for judicial review of EPA’s disapproval of their “good

neighbor” SIP submissions. The court’s “review in th[e] [instant] case

is limited to” the Transport Rule, and the court thus “lack[s]

jurisdiction over” challenges to those States’ SIP disapprovals

premised on whether they have an independent obligation to submit

“good neighbor” SIPs. Coalition for Responsible Regulation, Inc. v.

EPA, 684 F.3d 102, 149 (D.C. Cir. 2012). The petitions filed by those

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13

Indeed, the court itself forecasts this conclusion: “EPA’s

many SIP disapprovals and findings of failure to submit share

one problematic feature: EPA made all of those findings before

it told the States what emission reductions their SIPs were

supposed to achieve under the “good neighbor” provision.” Op.

at 47 (emphasis in original). However “problematic” the court

views this “feature” of those Final SIP Rules, this is a “problem”

this three-judge panel is powerless to resolve because it lacks

jurisdiction under CAA section 307(b)(1) to entertain State

petitioners’ “back-door challenge” to EPA’s interpretation of

section 110(a) stated in those Final SIP Rules. Natural Res. Def.

Council v. EPA, 824 F.2d 1146, 1150 (D.C. Cir. 1987) (internal

quotation marks omitted).

The court responds that the dissent “conflates” State

petitioners’ collateral attack on the Final SIP Rules announcing

their Section 110(a) SIP obligations with State petitioners’

supposedly distinct argument that EPA cannot promulgate a FIP

simultaneously with its quantification of a State’s emission

States challenging their SIP disapprovals are not consolidated with the

petitions before the court today, see supra n. 5, and Ohio’s petition is

pending in the Sixth Circuit. The court must therefore “decline [State]

[p]etitioners’ invitation to rule on the merits of cases which are

properly before different panels.” Id. This is all the more important

here, where EPA has not yet been afforded the opportunity to assert

an improper venue defense in the two cases pending before the D.C.

Circuit. See Tex. Mun. Power Agency v. EPA, 89 F.3d 858, 867 (D.C.

Cir. 1996); 42 U.S.C. § 7607(b)(1) (petitions for review of SIP

disapprovals may be brought only in the court of appeals “for the

appropriate circuit”) (emphasis added). If Georgia, Kansas, and Ohio

wish to avoid enforcement of the Transport Rule FIPs because they

contend EPA’s SIP disapprovals were in error, the proper course is to

seek a stay of EPA’s disapprovals in their pending cases; if granted,

a stay would eliminate the basis upon which EPA may impose FIPs on

those States. See 42 U.S.C. § 7410(c)(1)(B). 

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14

reduction obligations. See Op. at 8 n.1, 58 n.34. This response

misleadingly quotes the statute, and in the process, proves the

dissent’s point. The court states “the statute says that EPA must

issue a FIP within two years after a State fails to make a

‘required submission’ or submits a deficient SIP. But a State

cannot be ‘required’ to implement its “good neighbor”

obligation in a SIP ‘submission’ . . . until it knows the target set

by EPA.” Id. at 58 n.34.7 That is not what the statute says. 

Section 110(c) provides that:

(1) The Administrator shall promulgate a Federal

implementation plan at any time within 2 years after

the Administrator --

(A) finds that a State has failed to make a required

submission . . . or

(B) disapproves a State implementation plan

submission in whole or in part;

unless the State corrects the deficiency, and the

Administrator approves the plan or plan revision,

before the Administrator promulgates such Federal

implementation plan.

42 U.S.C. § 7410(c)(1) (emphases added). EPA’s FIP obligation

is therefore not triggered, without more, by a State’s mere

7

 Notice the circularity in the court’s statement. The court

says State petitioners’ “simultaneity” argument can be “[p]ut another

way,” Op. at 58 n.34, as an argument that States had no section 110(a)

SIP requirements until EPA quantified their emission reduction

budgets. Under section 307(b)(1), that is exactly the argument that

States were required to make in petitions for judicial review of the

Final SIP Rules setting forth EPA’s section 110(a) interpretation. 

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15

failure to submit a SIP required by section 110(a), but instead by

an explicit EPA Final Rule finding that the State either failed to

submit a required SIP or an adequate SIP. A challenge to EPA’s

interpretation of section 110(a) must therefore be brought as a

petition for judicial review of those Final SIP Rules announcing

that States failed to meet their section 110(a) “good neighbor”

SIP obligations. See Med. Waste, 645 F.3d at 427. Under the

plain terms of the CAA, EPA’s obligation (and authority) to

promulgate a FIP is triggered by those Final SIP Rules, and the

process by which EPA must promulgate a FIP is governed by

section 110(c), not, as the court posits, by section 110(a). The

court therefore, and not the dissent, does the conflating by

turning what should be a challenge to EPA’s FIP authority under

section 110(c) into a collateral attack on EPA’s interpretation of

section 110(a) set forth in the prior Final SIP Rules. 

The plain text of section 110(c)(1) obligates EPA to

promulgate a FIP “at any time” within two years of disapproving

a SIP submission or finding a State failed to submit a SIP. 42

U.S.C. § 7410(c)(1). Moreover, nothing in section 110(c)

requires EPA to reveal to States the content (i.e., the emission

reduction budgets) it intends to include in its FIP prior to

proposing a FIP. Although the CAA allows States to submit

SIPs to “correct[] the deficiency,” they must do so “before”

EPA’s promulgation of a FIP, which may occur “at any time”

within two years. Id.

The court thus rewrites section 110(c)(1)’s unambiguous

grant of authority to EPA (and ultimate obligation of EPA) to

promulgate a FIP at any time within the two year window to

read: “unless but not until the State corrects the deficiency and

the Administrator approves the [SIP] or [SIP] revision, before

may the Administrator promulgates such [FIP].” “[A]s the

Supreme Court has emphasized time and again, courts have no

authority to rewrite the plain text of a statute.” Kay v. FCC, 525

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F.3d 1277, 1279 (D.C. Cir. 2008). Because the CAA “means

what it says,” EPA was required, after publishing disapprovals

and findings of failure to submit SIPs, to promulgate FIPs within

two years, and it was not required to wait for States first to

submit SIPs. Landstar Express Am. v. Fed. Maritime Comm’n,

569 F.3d 493, 498 (D.C. Cir. 2009). The court’s attempt to

ferret out an argument about “simultaneity” as a distinct

challenge properly brought against the Transport Rule based on

EPA’s interpretation of section 110(a) is thus a straw man for its

endorsement of State petitioner’s collateral attack on EPA’s 

interpretation of section 110(a) in the Final SIP Rules. Its

rewriting of section 110(c) is made all the more remarkable by

its recognition that “we must apply and enforce the statute as it’s

now written.” Op. at 8. 

B.

Even if the court had jurisdiction over State petitioners’

challenge to their independent obligation to submit “good

neighbor” SIPs under CAA section 110(a), its statutory analysis

proceeds with no regard for the plain text and structure of the

CAA or for the deference owed to permissible agency

interpretations of statutes they administer where Congress has

left a gap for the agency to fill or the statute is ambiguous.

“As in all statutory construction cases,” the court must

“begin with the language of the statute.” Barnhart v. Sigmon

Coal Co., Inc., 534 U.S. 438, 450 (2002). “[C]ourts must

presume that a legislature says in a statute what it means and

means in a statute what it says there. When the words of a

statute are unambiguous, then, this first canon is also the last:

judicial inquiry is complete.” Id. at 461-62 (quoting Connecticut

Nat. Bank v. Germain, 503 U.S. 249, 253-54 (1992) (internal

quotation marks and citation omitted)). Thus, under Chevron

U.S.A. Inc v. Natural Res. Def. Council, 467 U.S. 837, 842-44

(1984), the first step in statutory interpretation requires a

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17

determination of “whether Congress has directly spoken to the

precise question at issue. If the intent of Congress is clear, that

is the end of the mater; for the court, as well as the agency, must

give effect to the unambiguously expressed intent of Congress,”

id. If, after applying traditional tools of statutory construction,

the court determines “the statute is silent or ambiguous with

respect to the specific issue,” then, under step two, the court will

defer to an agency’s statutory interpretation if it “is based on a

permissible construction of the statute.” Id. at 843.

The questions regarding States’ obligations to submit “good

neighbor” SIPs are straightforward: (1) Do States have an

independent obligation to submit SIPs with adequate “good

neighbor” provisions; (2) if so, what triggers that obligation; (3)

if there is an obligation, what is the deadline for the SIP

submission; and (4) must EPA prospectively quantify each

States’ amount of “significant contribution” to downwind

nonattainment? The plain text of the statute provides equally

straightforward answers: (1) Yes; (2) promulgation of a

NAAQS; (3) within three years of promulgation of a NAAQS

(unless the EPA Administrator prescribes a shorter deadline);

and (4) no, but EPA may do so if it chooses.

Section 109 of the CAA requires EPA to promulgate

NAAQS, a national health-based standard. See 42 U.S.C.

§ 7409. Section 110, in turn, provides that 

(a)(1) Each State shall . . . adopt and submit to the

Administrator, within 3 years (or such shorter period as

the Administrator may prescribe) after the

promulgation of a national primary air quality

standard (or any revision thereof) . . . a plan which

provides for implementation, maintenance, and

enforcement of such [] standard . . . within such State.

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(2) Each implementation plan submitted by a State

under this chapter . . . shall

. . . 

(D) contain adequate provisions–

(i) prohibiting, consistent with the provisions

of this subchapter, any source or other type of

emissions activity within the State from

emitting any air pollutant in amounts which

will–

(I) contribute significantly to

nonattainment in, or interfere with

maintenance by, any other State with

respect to any such [NAAQS].

Id. §§ (a)(1) & (a)(2)(D)(i)(I) (emphases added). The plain text

requires that within three years of EPA’s promulgation of a

NAAQS, States shall submit SIPs, and those SIPs shall include

adequate “good neighbor” provisions. This is the unambiguous

obligation and chronology established by Congress. EPA has

the first duty to set the NAAQS, and then States have series of

follow-up duties, listed in section 110(a), to ensure attainment

of the NAAQS. Among the duties clearly assigned to States is

the inclusion in SIPs of adequate “good neighbor” provisions.

The court views this “interpretation” — that is, reading the

actual text of the statute — as a scene from Alice in

Wonderland. See Op. at 50. It concludes that “[i]n our view,

determining the level of reductions required under Section

110(a)(2)(D)(i)(I) is analogous to setting a NAAQS. And

determining the level of reductions under the “good neighbor”

provision triggers a period during which States may submit

USCA Case #11-1302 Document #1390314 Filed: 08/21/2012 Page 78 of 104
19

 SIPs.” Id. at 51. Even if the court’s analogy were sound,8

the premise of its analogy does not support its conclusion that

EPA’s determination of emission reduction obligations triggers

States’ obligations to submit “good neighbor” SIPs. Rather, the

court rewrites a decades-old statute whose plain text and

structure establish a clear chronology of federal and State

responsibilities. Nowhere does the CAA place a requirement on

EPA to quantify each State’s amount of “significant

contribution” to be eliminated pursuant to the “good neighbor”

provision, let alone include any provision relieving States of

their “good neighbor” SIP obligations in the event EPA does not

first quantify emission reduction obligations.9

 The court’s

“view” that EPA “determining the level of reductions under the

“good neighbor” provision triggers the period during which

States may submit SIPs” is irrelevant in view of the

unambiguously plain text of section 110(a)(1) and

(a)(2)(D)(i)(I), and, if the statute were ambiguous, the court

8

 The NAAQS are determined based on what is “requisite to

protect the public health” and “public welfare,” 42 U.S.C. §§

7409(b)(1) & (2), and are a uniform national standard. The “good

neighbor” provision, on the other hand, is not a separate national

standard, but instead is simply one of the CAA’s State-specific 

mechanisms to ensure attainment of the NAAQS. See 42 U.S.C.

§ 7410(a)(2)(D)(i)(I). 

9

 The court’s comparison of section 110 to section 126, see

Op. at 52, conflates direct federal regulation of sources with EPA’s

statutory authority to enforce requirements that States comply with

their “good neighbor” SIP obligations. Given that Congress included

a specific provision obligating EPA to promulgate FIPs if States fail

to submit adequate SIPs within three years of promulgation of a

NAAQS, see CAA § 110(c)(1); 42 U.S.C. § 7410(c)(1), and EPA

relies on it in the Transport Rule, section 126's federal authorization

to regulate specific sources of emissions has no bearing on the

statutory analysis here.

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20

would be required to defer to EPA’s interpretation that States

have an independent obligation to submit “good neighbor” SIPs

within three years of promulgation of the NAAQS because that

interpretation is permissible under the statute, see Chevron, 467

U.S. at 843. The court’s “role is ‘not to ‘correct’ the text so that

it better serves the statute’s purposes’; nor under Chevron may

[the court] ‘avoid the Congressional intent clearly expressed in

the text simply by asserting that [the court’s] preferred approach

would be better policy. The Congress has spoken plainly . . . .” 

Virginia Dep’t of Med. Assistance Servs. v. Dep’t of Health &

Human Servs., 678 F.3d 918, 926 (D.C. Cir. 2012) (quoting

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

1996)). 

Furthermore, the court’s holding is entirely at odds with the

holding in Michigan v. EPA, 213 F.3d 663 (D.C. Cir. 2000), see

LaShawn A. v. Barry, 87 F.3d 1389, 1395 (D.C. Cir. 1996) (en

banc). In Michigan, State petitioners contended that EPA

violated the CAA by prospectively informing States what their

nitrogen oxides (NOx) emission reduction budgets needed to be

to adequately eliminate their amounts of “significant

contribution” under the “good neighbor” provision, thus

acknowledging their independent obligation to submit adequate

“good neighbor” SIPs, see 213 F.3d at 686-87. State petitioners

in Michigan argued that EPA had no authority to do what the

State petitioners now before the court contend EPA has no

authority not to do. In Michigan the court deferred, pursuant to

Chevron step two, to EPA’s interpretation it could set State

emissions budgets prospectively, given section 110's “silence”

on the question, as a permissible exercise of EPA’s general

rulemaking authority under CAA section 301(a)(1), 42 U.S.C.

USCA Case #11-1302 Document #1390314 Filed: 08/21/2012 Page 80 of 104
21

§ 7601(a)(1).10 Inverting Michigan’s analysis of section 110, the

court holds that under Chevron step one, see Op. at 53 n.32,

section 110 itself unambiguously requires EPA to prospectively

inform States of their “good neighbor” emission reduction

requirements. See id. at 46-53. Nothing in section 110, section

301, or any other section of the CAA requires EPA to do this.

Instead the court today turns “may” into “must,” and holds that

if EPA does not exercise its general rulemaking authority in the

manner of the court’s design, then section 110(a)(1)’s and

110(a)(2)(D)(i)(I)’s mandatory, unambiguous requirements that

States submit adequate “good neighbor” SIPs within three years

of the promulgation of a NAAQS are erased from the statute by

judicial fiat — relieving States of the duty Congress imposed.11

The court offers no explanation for how its holding can be

squared with Michigan in this regard.

The court’s rationale for rewriting the CAA’s plain text is

its own conclusion that “the upwind State’s obligation remains

impossible for the upwind State to determine until EPA defines

it.” Id. at 48 (first emphasis added). In its words, the statute

“requires each State to take its own stab in the dark . . . [and]

apply [a] homemade definition using its own homemade

methodology.” Id. at 55. The court concludes EPA’s

10 Section 301(a)(1) of the CAA provides that “[t]he

Administrator is authorized to prescribe such regulations as are

necessary to carry out his functions under this chapter.” 42 U.S.C.

§ 7601(a)(1).

11 Suffice it to say, it is extraordinarily unusual for a court to

conclude, at Chevron step one, that it must delete mandatory

obligations from a statute in order to accord with Congress’s plain

intent. See Op. at 53 n.32. It is all the more unusual to suggest that an

agency’s interpretation is “impermissible” at Chevron step two when

the interpretation parrots the text of the statute. 

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22

interpretation (that is, following the statute’s plain text)

produces absurd results, see id. at 53 n.32. Pretermitting

whether there is a shred of record evidence to show such an

impossibility, a statutory outcome is absurd [only] if it defies

rationality[;] . . . an outcome so contrary to perceived social

values that Congress could not have intended it.” Landstar

Express, 569 F.3d at 498-99 (internal quotation marks and

citations omitted) (emphases added). To the extent the court’s

rationale hinges on its speculation that States lack technical

capability and information, this blinks at reality. As counsel for

EPA emphasized at oral argument, see Tr. Oral Arg. at 59, 61,

without contradiction by any petitioners’ counsel during rebuttal

oral argument, States are fully capable of measuring interstate

transport of emissions by conducting modeling, and they have

done so before and continue to do so: “The states can make that

effort, and they can submit SIPs to EPA. Again, that is how the

process works in the states that aren’t included in these transport

regions.” Id. at 61. Indeed, as this court has recognized, States

are charged with operating air quality monitors; “[e]xhaustive

technical specifications regulate the States’ operation of a

network of air monitors that collect air quality data for any given

area.” Catawba Cnty., N.C. v. EPA, 571 F.3d 20, 30 (D.C. Cir.

2009); cf. ATK Launch Sys. v. EPA, 669 F.3d 330, 334 (D.C.

Cir. 2012). The air quality monitoring data collected by the

States is publically available in the National Emissions

Inventory.12 That is, State air quality divisions are no strangers

12 See U.S. EPA, Technology Transfer Network Clearinghouse

for Inventories & Emissions Factors, available at

http://www.epa.gov/ttnchie1/eiinformation.html (last visited July 23,

2012); see also U.S. EPA, Technology Transfer Network

Clearinghouse for Regulatory Atmospheric Modeling, available at

http://www.epa.gov/ttn/scram/aqmindex.htm (last visited July 23,

2012) (providing modeling tools). 

USCA Case #11-1302 Document #1390314 Filed: 08/21/2012 Page 82 of 104
23

to complex air quality and meteorological modeling of interstate

transport of emissions.13 

No petitioner suggests that States lack the capability to

measure their interstate emissions of pollutants or to access that

information from other States to independently determine

emission reduction budgets, much less that they have not had

time to do so; rather their reason for not doing so appears to

stem from insistence (supported by industry sources) that their

reduction of emissions not be one iota greater than is necessary

for downwind States to attain and maintain NAAQS and that it

is easier (and presumably less costly, see Oral Arg. Tr. 58) for

EPA to figure this out than it is for the individual States to do so,

working cooperatively and using any EPA guidance. This may

be so but it does not demonstrate that Congress’s scheme,

protecting States’ choices about how to meet NAAQS

13 To cite one example: the State of Texas. The Texas Council

on Environmental Quality (“TCEQ”) has published an extensive

description of its air quality modeling activities and capabilities on its

website. “The TCEQ uses state of the art computer models to simulate

the meteorological conditions and chemical reactions that contribute

to the formation of air pollutants.” TCEQ, Introduction to Air Quality

Modeling, available at

http://m.tceq.texas.gov/airquality/airmod/overview/am_intro.html (last

visited July 23, 2012). Furthermore, “TCEQ uses state-of-the-science,

four-dimensional computer models that incorporate atmospheric

physical laws and measured observations to predict weather conditions

over space and time.” TCEQ, Introduction to Air Quality Modeling:

M e t e o r o l o g i c a l M o d e l i n g , 

http://m.tceq.texas.gov/airquality/airmod/overview/am_met.html (last

visited July 23, 2012. Indeed, TCEQ uses the same model EPA used

to model emission contributions — CAMx. EPA notes in its brief that

Texas provided some of the technical data that led to its inclusion in

the final Transport Rule. See EPA Br. at 109. These are far from

“homemade” methodologies. See Op. at 55. 

USCA Case #11-1302 Document #1390314 Filed: 08/21/2012 Page 83 of 104
24

requirements, in part by independently determining ways to

meet their “good neighbor” obligation as the States argued in

Michigan, is absurd.

 

It is true, as the court notes, see Op. at 53-55, that in two

previous “good neighbor” rulemakings EPA afforded States the

opportunity to submit SIPs after announcing emission reduction 

budgets. But an agency is not forever restricted to its previous

policy choices or statutory interpretations; instead, it may

change course provided it acknowledges it is doing so, presents

“good reasons” for doing so, and its approach is “permissible

under the statute.” FCC v. Fox Television Stations, Inc., 556

U.S. 502, 515 (2009). Agencies “need not demonstrate to a

court’s satisfaction that the reasons for the new policy are better

than the reasons for the old one.” Id. The discretion agencies

enjoy in modifying their policy approaches is particularly

expansive where the agency declines to exercise its

discretionary rulemaking authority, as EPA did here. “It is only

in the rarest and most compelling of circumstances that this

court has acted to overturn an agency judgment not to institute

rulemaking.” WWHT, Inc. v. FCC, 656 F.2d 807, 818 (D.C. Cir.

1981). 

Here, EPA acknowledged its previous approach, see

Transport Rule, 76 Fed. Reg. at 48,217; NPRM, 75 Fed. Reg. at

45,222-223, and explained its decision in response to comments

requesting States be given time to submit SIPs before EPA

imposed the Transport Rule FIPs. EPA stated, first, that it had

no authority to alter the statutory deadlines for SIP submissions

and that the CAA did not require it to issue a rule quantifying

States’ “good neighbor” obligations, see Transport Rule, 76 Fed.

Reg. at 48,220; second, that the court in North Carolina, in

remanding rather than vacating CAIR, “emphasized EPA’s

obligation to remedy [CAIR’s] flaws expeditiously” and thus

“EPA d[id] not believe it would be appropriate to establish a

USCA Case #11-1302 Document #1390314 Filed: 08/21/2012 Page 84 of 104
25

lengthy transition period to the rule which is to replace CAIR,” 

Transport Rule, 76 Fed. Reg. at 48,220; and third, that in North

Carolina this court also required EPA to align upwind States’

emission reduction deadlines with the NAAQS attainment dates

of “2015 or earlier,” see North Carolina, 531 F.3d at 930.14

EPA’s decision to adhere to the plain text of the statute, and not

to exercise its discretionary general rulemaking authority, see

Michigan, 213 F.3d at 686-87, was thus well-explained by the

time pressures imposed by this court. See Fox Television, 556

U.S. at 515. Inasmuch as those time pressures were animated as

well by concern for the public health and welfare — Congress

required that attainment with the NAAQS occur “as

expeditiously as practicable.” 42 U.S.C. §§ 7502(a)(2)(A) &

7511; see North Carolina, 531 F.3d at 930 — the instant case is

particularly ill-suited for overturning EPA’s exercise of its

discretion in not adding an additional rulemaking step to the

process. Given that the court “will overturn an agency’s decision

not to initiate a rulemaking only for compelling cause,” and one

of those few compelling reasons is when the decision declining

14 That EPA may, under different circumstances, view it as

preferable to prospectively quantify States’ emission reduction

obligations, see Op. at 49, is irrelevant to whether EPA’s stated 

reasons for departing, in the Transport Rule from its previous

approach are adequate, given the court’s instruction in North Carolina

to expeditiously replace the flawed CAIR and align NAAQS

attainment dates. The context of the federal register citations is,

EPA’s points out, EPA’s review of a submitted SIP; the preamble does

not state EPA must engaged in detailed interstate transport analysis

before States must meet their statutory SIP obligations. Furthermore,

consistent with the federal register citations noted by the court, EPA

has traditionally issued guidance to States on calculating their “good

neighbor” emission reduction obligations and it did so here, see, e.g.,

EPA Guidance on SIP Elements Required Under Sections 110(a)(1)

and (2) for the 2006 24-hour Fine Particle (PM2.5) National Ambient

Air Quality Standards (NAAQS) (Sept. 25, 2009).

USCA Case #11-1302 Document #1390314 Filed: 08/21/2012 Page 85 of 104
26

to promulgate a rule exacerbates “grave health and safety

problems for the intended beneficiaries of the statutory scheme,”

Midwest Indep. Transmission Sys. Operator, Inc. v. FERC, 388

F.3d 903, 911 (D.C. Cir. 2004) (internal quotation marks and

citation omitted), it hardly makes sense for the court to require

EPA to promulgate a rule when the effect will be to delay health

benefits. Indeed, the court is most reluctant to require agencies

to promulgate rules “when the interests at stake are primarily

economic,” id., and the court’s view that it is “impossible” for

States to comply with their independent “good neighbor”

obligation under section 110(a) is animated by the burdens that

obligation imposes on States and industry sources, see Oral Arg.

Tr. 58. 

In sum, the court’s conclusion that it would have been a

“homemade” “stab in the dark” for the States to submit adequate

“good neighbor” SIPs prior to promulgation of the Transport

Rule lacks a basis in fact, and the court’s speculation that EPA

would have inevitably disapproved such submissions, see Op. at

56-57, is just that — speculation. And if that happened, States

could judicially challenge the disapprovals, seeking a stay to

avoid application of the Transport Rule FIPs. Absent record

evidence to suggest that the plain text of the CAA’s “good

neighbor” SIP obligation on States leads to “an outcome so

contrary to perceived social values that Congress could not have

intended it,” Landstar Express, 569 F.3d at 498-99 (internal

quotation marks and citations omitted) (emphasis added), the

court is bound, in view of the host of responsibilities placed on

States in the CAA, to enforce the statute as Congress wrote it in

plain terms, to give deference to EPA’s permissible

interpretations where the CAA is silent or ambiguous, and to

adhere to the court’s interpretation of EPA’s authority in

Michigan, as well as acknowledge, as the expert agency has

advised without contradiction, that States have demonstrated

USCA Case #11-1302 Document #1390314 Filed: 08/21/2012 Page 86 of 104
27

competence to satisfy their plain statutory “good neighbor” obligations.

II.

The court also is without jurisdiction to hold that EPA

lacked statutory authority to use a different measure of

“significant contribution” for setting emission reduction budgets,

unrelated to its measure of “significance” for purposes of

threshold inclusion of individual States in the Transport Rule. 

Op. at 34-37. Petitioners contended that there was a hypothetical

possibility that “application of cost-effective controls [] could

drive a State’s emissions below the point that, under phase one,

would have excluded the State from any regulation whatsoever.” 

State Petrs’ Br. at 35; Industry & Labor Petrs’ Br. at 22-24.15

Because no objection was made during the Transport Rule

administrative proceedings to EPA’s statutory authority to adopt

its two-step approach, the court thus lacks jurisdiction to decide

this issue. See CAA § 307(d)(7)(B), 42 U.S.C. § 7607(d)(7)(B). 

The jurisdictional question is not close; the court’s effort to avoid

this court’s well-settled precedent fails clearly.

A. 

Section 307(d)(7)(B) of the CAA provides that “[o]nly an

objection to a rule or procedure which was raised with

15 As EPA responded, nothing in the record suggests this

hypothetical possibility actually would occur as a result of the

Transport Rule, see Resp.’s Br. at 33-34 & n.20; id. at 32 n.18, and the

point of choosing a “cost” that is “effective” for each State assumes

only a reasonable subset of emissions will be reduced. See Oral Arg.

Tr. at 44-46. Furthermore, contrary to the court’s suggestion, see Op. 

37 n.23, EPA explained that selecting a cost below $500/ton of

emissions would permit States to stop operating existing controls, thus

increasing, rather than decreasing, pollution. See Transport Rule, 76

Fed. Reg. at 48,256-57. 

USCA Case #11-1302 Document #1390314 Filed: 08/21/2012 Page 87 of 104
28

reasonable specificity during the period for public comment . . .

may be raised during judicial review.” 42 U.S.C. § 7607(d)(7)(B)

(emphasis added). The court has “‘strictly’ enforce[d] this

requirement,” Mossville Envtl. Action Now v. EPA, 370 F.3d

1232, 1238 (D.C. Cir. 2004) (quoting Motor & Equip. Mfrs.

Ass’n v. Nichols, 142 F.3d 449, 462 (D.C. Cir. 1998)); see also

Natural Res. Def. Council v. EPA, 571 F.3d 1245, 1259 (D.C.

Cir. 2009). The court also has made clear that “[r]easonable

specificity requires something more than a general challenge to

EPA’s approach.” Mossville, 370 F.3d at 1238 (internal

quotation marks and alteration omitted). The court’s

enforcement of this requirement has been most strict in the

context of statutory authority objections: 

While there are surely limits on the level of congruity

required between a party’s arguments before an

administrative agency and the court, respect for

agencies’ proper role in the Chevron framework

requires that the court be particularly careful to ensure

that challenges to an agency’s interpretation of its

governing statute are first raised in the administrative

forum. 

Cement Kiln Recycling v. EPA, 255 F.3d 855, 860 (D.C. Cir.

2001) (quoting Natural Res. Def. Council, Inc. v. EPA, 25 F.3d

1063, 1074 (D.C. Cir. 1994)) (emphasis added). Consistently,

until now, the court has held that failure to object specifically to

EPA’s lack of statutory authority is grounds for dismissal of

such objections in this court. See, e.g., Natural Res. Def. Council

v. EPA, 559 F.3d 561, 563-64 (D.C. Cir. 2009); Engine Mfrs.

Ass’n v. EPA, 88 F.3d 1075, 1097 (D.C. Cir. 1996); Ohio v. EPA,

997 F.2d 1520, 1528 (D.C. Cir. 1993); Linemaster Switch Corp.

v. EPA, 938 F.2d 1299, 1308 (D.C. Cir. 1991); Natural Res. Def.

Council v. Thomas, 805 F.2d 410, 427 (D.C. Cir. 1986). 

USCA Case #11-1302 Document #1390314 Filed: 08/21/2012 Page 88 of 104
29

Notably on point, in Cement Kiln the court held that

comments stating a policy preference to EPA were insufficient

to preserve for judicial review objections that the preferred

approach was statutorily required, 255 F.3d at 860-61. “[T]hese

comments merely argued that EPA could permissibly consider

[the approach], not (as petitioners now argue) that [the CAA]

requires [the approach].” Id. at 860 (internal quotation marks

and citation omitted) (emphases in original). And “the parties

were not saved by the fact that they had made other technical,

policy, or legal arguments before the agency. Indeed, if such

were the rule, a party could never waive a legal claim as long as

the party in fact appeared and argued something before the

agency.” Nat. Res. Def. Council, 25 F.3d at 1074 (internal

quotation marks omitted) (emphasis added).

Petitioners rely on two comments in an attempt to show a

challenge to EPA’s statutory authority to the approach it adopted

was presented during the Transport Rule administrative

proceedings. See Industry & Labor Petrs.’ Reply Br. at 6, n.1. 

Neither is sufficient. Tennessee commented that “[a] lower cost

threshold should be considered for any State that can reduce their

contribution below 1% significance using cost thresholds below

the maximum values ($2,000/ton for SO2 and $500/ton for NOx),

if applicable.” Tennessee Comments on 2010 Proposed

Transport Rule, Attachment 1, at 1 (Aug. 27, 2010). But this

comment does not suggest that EPA is statutorily barred from

following its approach. See Cement Kiln, 255 F.3d at 860-61;

Natural Res. Def. Council, 25 F.3d at 1073-74. Furthermore,

Tennessee’s comment does not even suggest a policy preference

that the one percent of NAAQS threshold level be a floor. 

Rather, Tennessee’s comment specifically mentions States

reducing contributions below the threshold without suggesting

that result would violate the CAA. Thus, the only thing

Tennessee commented on with “reasonable specificity” was that

EPA consider not using a uniform cost threshold for all States.

USCA Case #11-1302 Document #1390314 Filed: 08/21/2012 Page 89 of 104
30

Wisconsin’s comment also does not demonstrate the

statutory authority challenge now advanced by petitioners in this

court was preserved. First, Wisconsin stated that it “support[ed]

the 1% contribution threshold . . . for identifying states that are

significant contributors to downwind state’s air quality

nonattainment and maintenance problems.” Wisconsin

Comments, at 1 (Oct. 1, 2010). Wisconsin further stated: 

State final emission budgets (2014) need to be set with

a stronger linkage to residual air quality impact from

the [electricity generating unit (“EGU”)] on downwind

sites compared to the current proposed linkage of

limiting emission reductions by an arbitrarily low cost

threshold. EPA has set which states have contribution

reduction responsibility based on air quality impact, but

appears to default to a modeling of the most efficient

regional EGU control program based exclusively on

cost-effectiveness.

In defining significant contribution, EPA should place

a greater emphasis on air quality impact (contribution)

remedy than the assessed state-by-state marginal

control cost-effectiveness of proposed remedy in the

setting of the 2014 state budgets for EGU reductions. 

Issues are both legal and a concern for some level of

EGU system control installation equity between nearby

states and between facilities with differing coal types

which are dispatched within the same electricity

markets.

Id. at 7 (emphases added). Wisconsin nowhere suggested that

EPA is statutorily required to use the one percent inclusion

threshold as a floor for emission reductions; it simply urged that

EPA “should” put a “greater emphasis” on air quality impacts at

the individual EGU level. Indeed, Wisconsin commented that

USCA Case #11-1302 Document #1390314 Filed: 08/21/2012 Page 90 of 104
31

the cost threshold was too low, the exact opposite of what

petitioners now claim. See Industry & Labor Petrs.’ Br. at 31-34. 

The closest Wisconsin comes to raising a statutory authority

argument is its statement that the “issues are [] legal;” but that

vague comment is in a sentence indicating the State’s preference

that EPA regulate at the EGU, rather than the State level, in order

to achieve “EGU system control installation equity.” Wisconsin

Comments, at 7. 

Consequently, neither Tennessee’s nor Wisconsin’s

comments argued “with reasonable specificity” that EPA was

statutorily required to treat the threshold inclusion level in its

two-step approach to defining “significant contribution” as a

floor in calculating emission reduction requirements.16 Nor do

they even present a policy preference for such an approach and,

indeed, can be interpreted as supporting sub-threshold

reductions. Even if the comments implied a challenge, which

they do not, an implied challenge is insufficient because

that is not the way the regulatory system is structured. 

Such a standard would require agencies to review

perpetually all of the ‘implied’ challenges in any

challenge they receive. We will not impose such a

burden on the agency. All that [petitioner] had to do

was draft one sentence that specifically challenged

EPA’s decision. It did not, and that specific challenge

is thus not preserved.

16 The court adds a cite, see Op. at 34 n.18, to a comment from

Delaware: “It is Delaware’s opinion that an upwind state’s emissions

contribution is significant . . . based on the emissions and their effect

on air quality, and is independent of cost considerations.” This is not

a statutory authority objection to the two-step approach, and in any

event EPA’s rejection of Delaware’s “opinion” was sustained in

Michigan, 213 F.3d at 679. 

USCA Case #11-1302 Document #1390314 Filed: 08/21/2012 Page 91 of 104
32

. . . 

[T]he only way [the comments] could be read as

placing the EPA on notice is to place the burden on

EPA to cull through all the letters it receives and

answer all of the possible implied arguments. Such a

rule would defeat the statutory requirement for

“reasonable specificity.”

Mossville, 370 F.3d at 1239-40. None of the comments during

the Transport Rule administrative proceedings approaches the

level of “reasonable specificity” required for this court to have

jurisdiction over petitioners’ new statutory authority argument.

B.

Acknowledging this, the court nonetheless concludes that

it has jurisdiction to address this new issue because “EPA was

on notice that its disregard of the significance floor was a

potential legal infirmity in its approach.” Op. at 34 n.18. None

of the three reasons the court offers for its conclusion that there

need not be objections raised “with reasonable specificity

during the period for public comment,” 42 U.S.C. §

7607(d)(7)(B), is convincing. 

First, the court states that EPA was required “to craft a new

rule consistent with [North Carolina],” Op. at 32 n.18 (internal

quotation marks and citation omitted), and thus should have

been alerted to petitioners’ new objection, raised for the first

time now in this court. But in North Carolina the court

specifically permitted the exact same approach in CAIR. 

Discussing this approach, the court explained:

[S]tate SO2 budgets are unrelated to the criterion (the

“air quality factor”) by which EPA included states in

CAIR’s SO2 program. Significant contributors, for

purposes of inclusion only, are those states EPA

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33

projects will contribute at least 0.2 μ/m3

 of PM2.5 to a

nonattainment area in another state. While we would

have expected EPA to require states to eliminate

contributions above this threshold, EPA claims to have

used [as its] measure . . . emissions that sources within

a state can eliminate by applying “highly cost-effective

controls.” EPA used a similar approach in deciding

which states to include in the NOx SIP Call, which

Michigan did not disturb since “no one quarrel[ed]

either with its use of multiple measures, or the way it

drew the line at” the inclusion stage. 213 F.3d at 675. 

Likewise here, the SO2 Petitioners do not quarrel with

EPA drawing the line at 0.2 μ/m3 or its different

measure of significance for determining states’ SO2

budgets. Again, we do not disturb this approach.

North Carolina, 531 F.3d at 916-17 (emphases added). There

is no basis to conclude that EPA acted inconsistently with North

Carolina by replicating the approach the court left undisturbed.

It is true that in North Carolina the court rejected EPA’s use of

fuel factors in allocating allowances for the CAIR trading

program because doing so redistributed reduction

responsibilities to the benefit of States with more coal-fired

electricity generation, see id. at 920-21. The court stated that

EPA

may not require some states to exceed the mark. 

Because the fuel-adjustment factors shifted the burden

of emission reductions solely in pursuit of equity

among upwind states — an improper reason — the

resulting state budgets were arbitrary and capricious.

Id. at 921 (emphases added). But a holding that EPA had acted

arbitrarily in designing its trading program cannot fairly be

deemed to alert EPA that it might exceed its statutory authority

in using an approach to measuring “significant contribution”

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34

that the court specifically declined to disturb. Cf. Natural Res.

Def. Council v. EPA, 571 F.3d 1245, 1259 (D.C. Cir. 2009)

(“EPA cannot be expected to take [an] argument, raised in

support of one specific objection, and apply it sua sponte to

another provision.”). EPA was entitled, in the absence of

objection in the Transport Rule administrative proceedings, to

rely in promulgating the Transport Rule upon the court’s

decision not to disturb its approach. And the fact that after

North Carolina no comment in the Transport Rule

administrative proceedings objected that EPA was exceeding its

statutory authority in adopting its approach underscores the fact

that EPA was not acting inconsistently with North Carolina in

light of a few sentences about fuel factors plucked out of

context. 

Second, reaching farther afield, the court points to a

comment submitted during the CAIR rulemaking that it deems

sufficient, when combined with the holding in North Carolina,

to “show that EPA ‘had notice of this issue and could, or should

have, taken it into account.’” Op. at 33 n.18 (quoting Natural

Res. Def. Council v. EPA, 824 F.2d at 1146, 1151 (D.C. Cir.

1987)).17 The CAIR comment stated “that the threshold

contribution level selected by EPA should be considered a floor,

so that upwind States should be obliged to reduce their

emissions only to the level at which their contribution to

downwind nonattainment does not exceed that threshold level.” 

CAIR, 70 Fed. Reg. 25,162, 25,176-77 (May 12, 2005). This

comment, which was not cited in any petitioners’ brief to this

court but first mentioned by industry petitioners during rebuttal

17 Remarkably, the court quotes a case in which the common

law exhaustion doctrine, rather than CAA section 307(d)(7)(B),

applied: the rule at issue was promulgated prior to enactment of

section 307(d)(7)(B). See Natural Res. Def. Council, 824 F.2d at

1150-51.

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35

oral argument, cannot carry the weight the court assigns to it,

particularly in light of the holding in North Carolina. The court

generally does not entertain arguments raised for the first time

in a reply brief, see Altman v. SEC, 666 F.3d 1322, 1329 (D.C.

Cir. 2011); North Carolina, 531 F.3d at 924 n.6, let alone for

the first time at oral argument, see Roth v. U.S. Dep’t of Justice,

642 F.3d 1161, 1181 (D.C. Cir. 2011); Ark Las Vegas Rest.

Corp. v. NLRB, 334 F.3d 99, 108 n.4 (D.C. Cir. 2003), much

less during rebuttal oral argument, see Coalition of Battery

Recyclers Ass’n, 604 F.3d at 623; Old Dominion Dairy

Products, Inc. v. Sec. of Defense, 631 F.2d 953, 961 n.17 (D.C.

Cir. 1980). The reason is simple: “in order to prevent

‘sandbagging of appellees and respondents,’ we do not consider

arguments that were raised neither in the opening brief nor by

respondents.” S. Coast Air Quality Mgmt. Dist. v. EPA, 554

F.3d 1076, 1081 n.* (D.C. Cir. 2009) (quoting Sitka Sound

Seafoods, Inc. v. NLRB, 206 F.3d 1175, 1181 (D.C. Cir. 2000)). 

Here that reason has particular resonance because EPA was

relying on the court’s decision in North Carolina, 531 F.3d at

916-17, to “not disturb” its two-step approach to defining

“significant contribution,” and no one referenced the CAIR

comment during the Transport Rule administrative proceedings.

Even setting aside the starkly novel forfeiture standard the

court has chosen to apply to industry petitioners, the cited CAIR

comment is insufficient to establish that the issue of EPA’s

statutory authority was properly preserved for the court to have

jurisdiction to address it. The court relies on a footnote in

American Petroleum Institute v. EPA, 52 F.3d 1113, 1120 n.1

(D.C. Cir. 1995), for the proposition that it is “highly relevant”

if an agency previously “reject[ed] [] the same argument in a

prior rulemaking,” Op. at 33 n.18. Although the CAIR

comment communicates a policy preference, this court has

distinguished between comments presenting policy preferences

and those presenting statutory authority objections, see, e.g.,

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Cement Kiln, 255 F.3d at 860-61, and technical and policy

arguments are insufficient to preserve objections to EPA’s

statutory authority. See Nat. Res. Def. Council, 25 F.3d at 1074. 

The CAIR comment that EPA rejected in the other rulemaking

is therefore not “the same argument” that petitioners belatedly

attempt to raise now. Furthermore, in American Petroleum, the

court concluded that the jurisdictional question was “close”

inasmuch as EPA had explicitly incorporated the docket from

the previous rulemaking in the second rulemaking, and the

previous rulemaking had been aborted, such that there was no

intervening opportunity for judicial review. See Am. Petroleum,

52 F.3d at 1120 n.1. Neither of those factors that made

American Petroleum a close case is present here. The Transport

Rule was promulgated to replace CAIR, but the CAIR docket

was never incorporated into the Transport Rule docket —

perhaps because of the court’s instruction in North Carolina

that EPA “redo its analysis from the ground up.” 531 F.3d at

929. EPA would have had no reason to reexamine the

voluminous CAIR docket in search for objections that were not

raised before the court in North Carolina. Also, unlike the

aborted rule whose docket EPA incorporated in American

Petroleum, in CAIR there was an intervening opportunity for

judicial review. Yet no one sought judicial review of CAIR on

the basis of the CAIR comment now relied on by the court. 

This precise circumstance was relied upon by the court in North

Carolina in declining to disturb EPA’s approach. See id. at

917; see Med. Waste, 645 F.3d at 427.18 Once the court in

18 The fact that Kansas, Nebraska, and Oklahoma were not

regulated under CAIR, and thus would have a newly ripened claim,

see Coalition for Responsible Regulation, 684 F.3d at 129-32, does

not mean that those States are relieved from making that claim during

the Transport Rule administrative proceedings, as CAA section

307(d)(7)(B) requires. This is all the more true here because the

petitioners who were subject to CAIR abandoned the CAIR comment

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37

North Carolina declined to disturb EPA’s approach, because no

objection to EPA’s authority to adopt its approach had been

raised to the court, petitioners were required to inform EPA

during the Transport Rule administrative proceedings that they

objected to EPA’s statutory authority to pursue that approach. 

See 42 U.S.C. § 7607(d)(7)(B). If American Petroleum

presented a “close” jurisdictional question, then the

jurisdictional question here is easily decided. 

Third, the court concludes that “EPA’s statements at the

proposal stage indicated EPA was not open to reconsidering

CAIR’s earlier rejection of petitioners’ argument,” and that

because EPA had dismissed “the two air quality-only

approaches it considered,” the comments of Tennessee,

Wisconsin, and Delaware were “‘reasonable’ under the

circumstances,” Op. at 33, n.18. But there was no such “earlier

rejection of petitioners’ argument” in CAIR because the CAIR

comment did not suggest that EPA exceeded its statutory

authority by following its two-step approach to defining

“significant contribution.” See Cement Kiln, 255 F.3d at 860-

61. Furthermore, industry petitioners acknowledge in their

Reply Brief that they “are not advocating an ‘air quality-only’

approach,” but instead a cost-based approach with a floor for

emission reduction obligations. Industry & Labor Petrs’ Reply

now relied on by the court when they sought judicial review. To

suggest that EPA should have foreseen that Kansas, Nebraska, and

Oklahoma, despite not making an objection to the proposed Transport

Rule on this ground, secretly did object on the basis of a comment

made during a rulemaking to which they were not parties, and was

abandoned on judicial review by those who made it, distorts the

ripeness and CAA exhaustion doctrines beyond recognition and

“give[s] parties to Clean Air Act proceedings a powerful weapon for

delaying and sandbagging Agency action.” Lead Indus. Ass’n Inc. v.

EPA, 647 F.2d 1130, 1173 (D.C. Cir. 1980). 

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38

Br. at 10. So, EPA’s rejection of two alternative air qualityonly approaches has no bearing on whether EPA would have

been willing to entertain an objection during the Transport Rule

administrative proceedings that the “good neighbor” provision

required it to use the threshold level for a State’s inclusion in

the Transport Rule as a floor for emission reduction obligations. 

Nothing in this court’s precedent on CAA section

307(d)(7)(B), 42 U.S.C. § 7607(d)(7)(B), supports the court’s

tortured efforts to avoid the jurisdictional limits in the CAA and

seize jurisdiction where petitioners clearly fall far short of

preserving their claim by objecting to EPA’s statutory authority

during the Transport Rule administrative proceedings with

“reasonable specificity.” The court does not acknowledge this

court’s precedent setting a strict standard for preservation of

statutory authority objections, which demonstrates the

inconsistency of the court’s exercise of jurisdiction today. See,

e.g., Natural Res. Def. Council, 559 F.3d at 563-64; Am. Farm

Bureau Fed’n v. EPA, 559 F.3d 512, 538 (D.C. Cir. 2009);

Natural Res. Def. Council v. EPA, 571 F.3d 1245, 1259 (D.C.

Cir. 2009); Mossville, 370 F.3d at 1238; Cement Kiln, 255 F.3d

at 860-61; George E. Warren Corp. v. EPA, 159 F.3d 616, 629

(D.C. Cir. 1998); Motor & Equip. Mfrs. Ass’n, 142 F.3d at 462;

Natural Res. Def. Council, 25 F.3d at 1074; Ohio v. EPA, 997

F.2d at 1528-29; Natural Res. Def. Council v. EPA, 937 F.2d

641, 647-48 (D.C. Cir. 1991); Linemaster Switch Corp., 938

F.2d at 1308; Thomas, 805 F.2d at 425-27; Lead Indus. Ass’n,

647 F.2d at 1173. 

Rather than confront the force of this precedent, the court

relies on phrases from a few opinions suggesting a more flexible

standard, see Op. at 31-34 n.18, but tellingly omits any

discussion of the analyses or outcomes in those cases. This is

because even where the court has mentioned flexibility, the

comments at issue were either significantly more specific than

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39

the comments of Tennessee and Wisconsin, and were thus

sufficient, or were more specific but nonetheless deemed

wanting. For example, in Natural Resources Defense Council

v. EPA, 571 F.3d 1245, 1259 (D.C. Cir. 2009), the court

suggested there is “leeway” but concluded, in words that

resonate here, that “EPA cannot be expected to take [an]

argument, raised in support of one specific objection, and apply

it sua sponte to another provision.” Id. at 1259-60. The irony

in the court’s reliance on this case is that it expects EPA to read

North Carolina in precisely the opposite manner — it concludes

EPA should have taken a holding about “exceeding the mark”

in the CAIR trading allowance program and sua sponte applied

it to the methodology for calculating “significant contribution,”

even though the court explicitly declined to disturb that

methodology. See supra Pt. II.B. In Appalachian Power, 135

F.3d 791, 817 (D.C. Cir. 1998), the court concluded the

“argument . . . during the comment period [was] — in

substance, if not in form, the same objection” raised before the

court, whereas here the comments of Tennessee and Wisconsin

did not raise the statutory authority objection now urged upon

the court in either form or substance. The court also relies on

Natural Resources Defense Council v. EPA, 824 F.2d 1146,

1150-51 (D.C. Cir. 1987) (en banc), which involved common

law exhaustion, not CAA section 307(d)(7)(B), and in that case

the issue was “explicitly raised . . . in comments” before the

EPA, id. at 1151. And although observing in South Coast Air

Quality Management District v. EPA, 472 F.3d 882, 891-92

(D.C. Cir. 2009), that petitioners have “some leeway,” the court

concluded that leeway did not permit the petitioner to rely upon

a general procedural preference stated in a cover letter to its

comments to alert EPA to the details of the objections to a final

rule.

None of the court’s proffered reasons for ignoring section

307(d)(7)(B)’s jurisdictional limitations has merit on its own,

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40

nor in combination. “[Z]ero plus zero [plus zero] equals zero.” 

U.S. v. Clipper, 313 F.3d 605, 609 (D.C. Cir. 2002).

III.

The court’s remaining reasons for vacating the Transport

Rule are also either beyond its jurisdiction or unpersuasive. 

First, the court concludes that EPA violated the CAA by

not calculating the required emission reductions “on a

proportional basis that took into account contributions of other

upwind States to the downwind States’ nonattainment

problems.” Op. at 38. This is so, the court says, because in

Michigan the court only permitted cost to be considered as a

way “to allow some upwind States to do less than their full fair

share,” not more. Id. Petitioners have not argued that EPA

violated the CAA by not calculating emission reductions on a

proportional basis, as the court suggests. See Anna Jaques

Hosp. v. Sebelius, 583 F.3d 1, 7 (D.C. Cir. 2009). The

statement in industry petitioners’ brief that the court quotes, see

Op. at 37, instead maintains that EPA was arbitrary and

capricious in the way it grouped States for 2014 sulfur dioxide

(SO2) budgets because, they claimed, EPA did so without

“consider[ing] relative contributions of the various States,”

Industry & Labor Petrs’ Br. at 33. This challenge is limited to

the asserted arbitrariness of how certain States were

categorized for one pollutant’s budget for one year. The court

lacks jurisdiction to consider sua sponte an objection to EPA’s

statutory authority not raised by petitioners within the sixty day

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

7607(b)(1); see Med. Waste, 645 F.3d at 427. As this court has

previously said, “[t]o rely on relief plaintiffs never requested on

a claim they never made would be to conclude that zero plus

zero equals more than zero.” NAACP, Jefferson Cnty. Branch

v. U.S. Sugar Corp., 84 F.3d 1432, 1438 (D.C. Cir. 1996). 

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Second, even if petitioners had raised a “proportionality”

statutory authority objection, this objection and the court’s

conclusion are premised on the speculative possibility that the

Transport Rule might require States to reduce emissions to a

level below the one percent of NAAQS inclusion threshold of

EPA’s two-step approach to defining “signification

contribution,” and thus more than their statutory fair share — an

argument over which the court also lacks jurisdiction. See

supra Part II. Further, the court’s conclusion is at odds with

North Carolina where the court concluded that EPA’s measure

of significant contribution need not “directly correlate with each

State’s individualized air quality impact on downwind

nonattainment relative to other upwind states.” 531 F.3d at 908

(emphasis added); see LaShawn A., 87 F.3d at 1395. It also

ignores that in Michigan the court expressly permitted the use

of uniform cost thresholds to measure “significance,” and

likewise permitted the “ineluctabl[e]” result of small and large

contributors being required to make the same amount of

reductions. 213 F.3d at 679. Without jurisdiction to reach an

argument on whether the Transport Rule requires States to

reduce more than their statutory fair share, Michigan requires

the conclusion that EPA’s choice of cost thresholds in the

Transport Rule was permissible. 

Next, the court concludes that EPA failed to consider the

effect of in-State emissions of downwind States on their own

nonattainment and interference with maintenance problems, see

Op. at 38. Petitioners conceded at oral argument that this “inState contribution” contention was “not actually an independent

statutory authority argument,” Oral Arg. Tr. at 32, but merely a

repackaged version of the objection to the possibility of

reductions below the one percent of NAAQS inclusion

threshold, an argument over which the court lacks jurisdiction,

see supra Part II. Even if the court had jurisdiction to address

it, the court’s conclusion is unsupported by the record. EPA

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examined the various cost threshold for each State, and in so

doing considered 

how much air quality improvement in downwind states

result[ed] from upwind state emission reductions at

different levels; whether, considering upwind emission

reductions and assumed local (in-state) reductions, the

downwind air quality problems would be resolved; and

the components of the remaining downwind air quality

problem (e.g., whether it is a predominantly local or

in-state problem, or whether it still contains a large

upwind component).

Transport Rule, 76 Fed. Reg. at 48,256 (emphases added); see 

id. at 48,259 (concluding remaining nonattainment problem in

Liberty-Clairton was the result of local emissions). EPA thus

in fact examined the contribution of downwind States to their

own nonattainment problems. 

Finally, the court concludes that EPA “did not try to take

steps to avoid” collective over-control, Op. at 39. This

conclusion too is unsupported by the record. The Transport

Rule was not projected to achieve attainment of all downwind

nonattainment and maintenance problems attributed to upwind

States. See id. at 48,210, 48,232, 48,247-48; Resp.’s Br. at 38

n.24. Because EPA’s analysis demonstrated instances of

“remaining downwind air quality problems,” Transport Rule, 76

Fed. Reg. at 48,256, there is no support for the court’s

conclusion that the Transport Rule resulted in collective overcontrol.

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IV.

The Transport Rule, as EPA observes, represents “the

culmination of decades of Congressional, administrative, and

judicial efforts to fashion a workable, comprehensive regulatory

approach to interstate air pollution issues that have huge public

health implications.” Resp.’s Br. at 12. The legislative history

to amendments of the CAA documents Congress’s frustration

with the upwind States’ historic failure to take effective action

on their own to curtail their contributions to problems of

pollution in downwind States, leading to amendments to

strengthen EPA’s hand. The court ignores Congress’s

limitations on the court’s jurisdiction and decades of precedent

strictly enforcing those limitations and proceeds to do violence

to the plain text of the CAA and EPA’s permissible

interpretations of the CAA, all while claiming to be “apply[ing]

and enforc[ing] the statute as it’s now written.” Op. at 8. The

result is the endorsement of a “maximum delay” strategy for

regulated entities, rewarding States and industry for cloaking

their objections throughout years of administrative rulemaking

procedures and blindsiding the agency with both a collateral

attack on its interpretation of section 110(a) and an objection

raised for the first time in this court, despite the court’s previous

decisions declining to disturb the approach EPA adopted in the

Transport Rule. 

To reach the result — vacating the Transport Rule — the

court does several remarkable things. It seizes jurisdiction over

the issue of States’ independent “good neighbor” obligation by

allowing States to pursue a collateral attack on Final SIP Rules

from which they either failed timely to file petitions for review

or their petitions challenging those rules have not been

consolidated with the petitions challenging the Transport Rule

that are before this three-judge panel. It asserts jurisdiction over

industry’s challenge to EPA’s two-step approach to defining

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“significant contribution” by excusing industry from its failure

to preserve the issue by first presenting it to EPA and then

resting jurisdiction on a comment in another rulemaking that

was first cited by industry in rebuttal oral argument and cannot

bear the weight the court assigns to it because it did not

challenge EPA’s statutory authority to adopt its two-step

approach. All this is contrary to Congress’s limitations on the

court’s jurisdiction and this court’s precedent enforcing those

limitations. The rest of the court’s analysis recalibrates

Congress’s statutory scheme and vision of cooperative

federalism in the CAA. Along the way, the court abandons any

consideration that an agency is entitled to repose, absent

objection during its administrative proceedings, when a court,

here on two occasion, expressly leaves undisturbed its two-step

approach to enforcing a statute it administers and no objection

is raised during the Transport Rule administrative proceedings. 

Then, in dictum, the court offers suggestions as to how EPA

might fix the problems the court has created upon rewriting the

CAA and trampling on this court’s precedent in North Carolina

and Michigan. 

None of this is to suggest that EPA should be excused from

the statutory limits on its authority or any material procedural

missteps under the CAA or the APA. But neither can the court

ignore jurisdictional limits or substantive provisions that

Congress wrote in clear terms and EPA’s permissible

interpretations of the CAA in addressing statutory silence or

ambiguity. Rather it underscores why, as a programmatic and

public health matter, Congress concluded there are important

reasons for jurisdictional limits and administrative exhaustion

that this court heretofore has steadfastly acknowledged in

recognizing both the limits of its jurisdiction and of its role in

enforcing the CAA as Congress wrote it. 

Accordingly, I respectfully dissent.

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