Page1LexisNexis1of100DOCUMENTSCALIFORNIACOMMUNITIESAGAINSTTOXICS,anunincorporatedassociation;COMMUNITIESFORABETTERENVIRONMENT,aCalifornianon-profitorganization,Petitioners,v.UNITEDSTATESENVIRONMENTALPROTECTIONAGENCY;LISAJACKSON,Administrator,U.S.EnvironmentalProtectionAgency;JAREDBLUMENFELD,Respondents,CPVSENTINELLLC;SOUTHCOASTAIRQUALITYMANAGEMENTDISTRICT,Respondents-intervenors.No.11-71127UNITEDSTATESCOURTOFAPPEALSFORTHENINTHCIRCUIT688F.3d989;2012U.S.App.LEXIS15428;74ERC(BNA)2121June5,2012,ArguedandSubmitted,Pasadena,CaliforniaJuly26,2012,FiledPRIORHISTORY:[**1]OnPetitionforReviewofaFinalRulemakingoftheUnitedStatesEnvironmentalProtectionAgency.DISPOSITION:REMANDEDwithoutVACATUR.CASESUMMARY:PROCEDURALPOSTURE:Petitioners,twoenvironmentalgroups,soughtreviewofafinalrulemakingbyrespondent,EnvironmentalProtectionAgency(EPA).Thepartiesagreedthatthecaseshouldberemanded,sotheonlydisputewaswhethervacaturwasappropriate.OVERVIEW:TheEPAadmittedthatthereasoningforitsfinalrulewasflawedandvoluntarilysoughtremandtoexplainhowcreditsearmarkedforasoon-to-becompletedpowerplantmetregulatoryrequirementsandtorevisititscalculationsofastatemanagementdistrict’savailablecredits.BecausetheEPArecognizedthemeritsofpetitioners’challengesandwasforthcomingintheproceedings,therewasnoevidencethattheremandrequestwasfrivolousormadeinbadfaith.Aflawedruledidnotnecessarilyneedtobevacated.TheEPAmisstatedthatalldocumentsinthedocketwerelistedintheindex.Whilethatmayhaveviolatedaninterestedparty’srighttomeaningfullycomment,thecourtdidnotneedtodecidethatissue.Assumingproceduralerror,itwasharmlessastopetitionersbecausetheyhadthedocumentsintheirpossessionfromearlierproceedings.Becauseofitsfaultyreasoning,theEPA’sfinalrulewasinvalid,buttherule’sinvaliditydidnotendthecourt’sanalysis.TheEPA’serrorshadtobeweighedagainsttheconsequencesofvacatur.Althougharemandwithoutvacaturwasorderedonlyinlimitedcircumstances,savingthepowersupplywarrantedjudicialrestraint.OUTCOME:Thecourtremandedwithoutvacatur.COUNSEL:AngelaJohnsonMeszarosandTimothyR.Grabiel,LawOfficesofAngelaJohnsonMeszaros,SouthPasadena,California,forpetitionerCaliforniaCommunitiesAgainstToxics.ShanaLazerowandMayaGolden-Krasner,CommunitiesforaBetterEnvironment,Oakland,California,forpetitionerCommunitiesforaBetterEnvironment.AnnLyons,UnitedStatesEnvironmentalProtectionAgency,OfficeofRegionalCounsel,SanFrancisco,California;ScottJordan,UnitedStatesEnvironmentalProtectionAgency,OfficeofGeneralCounsel,Washington,D.C.;IgnaciaS.Moreno,AssistantAttorneyGeneral;andAmyJ.Dona,EnvironmentalDefenseSection,Environment&NaturalResourcesDivision,UnitedStatesDepartmentofJustice,Washington,D.C.,forrespondentsUnitedStatesEnvironmentalProtectionAgency,LisaJacksonandJaredBlumenfeld.MichaelJ.CarrollandJoshuaT.Bledsoe,Latham&WatkinsLLP,CostaMesa,California,forrespondent-intervenorCPVSentinel,LLC.Page2688F.3d989,*;2012U.S.App.LEXIS15428,**;74ERC(BNA)2121KurtR.Wiese,BarbaraBaird,LaurenB.NevittandMeganE.Lorenz,SouthCoastAirQualityManagementDistrict,Diamond[**2]Bar,California,forrespondent-intervenorSouthCoastAirQualityManagementDistrict.JUDGES:Before:AlexKozinski,ChiefJudge,StephenS.TrottandSidneyR.Thomas,CircuitJudges.OPINION[*991]PerCuriamOpinionPERCURIAM:TwoenvironmentalgroupspetitionforreviewofafinalrulemakingbytheEPA.ThegroupsandtheEPAagreethiscaseshouldberemanded,sotheonlydisputeiswhethervacaturisappropriate.BackgroundTheCleanAirActrequirestheEPAtosetnationalambientairqualitystandardsforairpollutants.42U.S.C.§7409.Statesareresponsiblefordevelopingplanstoimplementthosestandards.§7410(a)(1).Thestates’plans,andanyrevisions,mustbeapprovedbytheEPA.§7410(k).Aspartoftheplans,statesmustestablishapermittingprogramfornewpollutersinareasthatdon’tmeettheEPA’sstandards.§7502(c)(5),7503(c).Thoseprogramsmustensureanyemissionincreasesbeoffsetbycorrespondingemissionreductions.§7503(c).TheSouthCoastAirQualityManagementDistrict(“theDistrict”)regulatestheairqualityintheSouthCoastAirBasinandtheRiversideportionsoftheSaltonSeaAirBasin.Cal.Health&SafetyCode§40412;Cal.CodeRegs.tit.17,§60104,60114.[**3]Becausetheseareasdon’tmeettheEPA’sairqualitystandards,theDistrictisresponsiblefordevelopingaplanthatensuresnewemissionincreasesareoffsetbyreductions.See40C.F.R.§81.305;42U.S.C.§7410(a)(1).Whenreductionsexceedincreases,theexcessreductionstaketheformof“credits,”whicharetradedinanopenmarkettoentitiesseekingtomeettheiroffsetrequirements.TheDistrictmaintainsastockofthesecreditsinaninternalbankfordistributiontoentitieslikeschoolsandhospitals.In2009,CaliforniapassedAssemblyBill1318,whichrequirestheDistricttotransfercreditstoasoon-to-becompletedpower[*9921plantnamedSentinel.2009Cal.Legis.Serv.3402-07(West).SincetheBillchangedthestateplan,theDistrictsoughttheEPA’sapproval.PetitionerschallengetheEPA’sfinalruleapprovingtheDistrict’srevision.SeeRevisiontotheSouthCoastPortionoftheCaliforniaStateImplementationPlan,CPVSentinelEnergyProjectAB1318TrackingSystem,76Fed.Reg.22,038(Apr.20,2011).TheyallegethattheEPAcommittedproceduralerrorsduringtherulemakingprocessandthatthesubstanceoftherevisedstateplanviolatestheCleanAirAct.AnalysisWe[**4]reviewagencyactiontoseeifit’sarbitraryandcapricious.Sacorav.Thomas,628F.3d1059,1068(9thCir.2010);5U.S.C.§706(2)(A).Here,theEPAhasadmittedthatthereasoningadoptedforitsfinalrulewasflawedandvoluntarilyseeksremand.Afederalagencymayrequestremandinordertoreconsideritsinitialaction.See,e.g.,SKFUSAInc.v.UnitedStates,254F.3d1022,1029(Fed.Cir.2001).That’swhattheEPAhasdonehere.ItseekstoexplainonremandhowcreditsearmarkedforSentinelmeetcertainregulatoryrequirements,see40C.F.R.§51.l65(a)(3)(ii)(C)(l)(i),andtorevisititscalculationsoftheDistrict’savailablecredits.Generally,courtsonlyrefusevoluntarilyrequestedremandwhentheagency’srequestisfrivolousormadeinbadfaith.SKFUSAInc.,254F.3dat1029.CompareSw.BellTel.Co.v.FCC,10F.3d892,896,304U.S.App.D.C.117(D.C.Cir.1993)(discussingthecourt’spreviousdecisiontogranttheagency’srequestforaremand)withLutheranChurch-Mo.Synodv.FCC,141F.3d344,349,329U.S.App.D.C.381(D.C.Cir.1998)(refusingtoremandbecausetheagencyjustwantedtoavoidjudicialreview).BecausetheEPAhasrecognizedthemeritsofthepetitioners’challengesandhas[**51beenforthcomingintheseproceedings,thereisnoevidencethattheEPA’srequestisfrivolousormadeinbadfaith.WethereforegranttheEPA’srequestforremand.ThatbringsustowhetherwemustvacatetheEPA’sfinalrule.Aflawedruleneednotbevacated.SeeIdahoFarmBureauFed’nv.Babbitt,58F.3d1392,1405(9thCir.1995);W.Oil&GasAss’nv.EPA,633F.2d803,813(9thCir.1980).Indeed,“whenequitydemands,theregulationcanbeleftinplacewhiletheagencyfollowsthenecessaryprocedures”tocorrectitsaction.IdahoFarmBureau,58F.3dat1405.Eventhoughtheagency’serrorwassignificantinIdahoFarmBureau,wedidn’tvacatetheagency’srulebecausethatcouldhavewipedoutaspeciesofsnail.Id.at1405-06.Similarly,inWesternOilandGas,wedidn’tordervacaturbecausedoingsowouldhavethwarted“theoperationoftheCleanAirActintheStateofCaliforniaduringthetimethedeliberativeprocess[was]reenacted.”633F.2dat813.Whetheragencyactionshouldbevacateddependsonhowserioustheagency’serrorsare“andthedisruptiveconsequencesofaninterimchangethatmayitselfbePage3688F.3d989,*;2012U.S.App.LEXIS15428,**;74ERC(BNA)2121changed.”Allied-Signal,Inc.v.US.NuclearRegulatoryComm’n,988F.2d146,150-51,300U.S.App.D.C.198(D.C.Cir.1993)[**6](internalquotationmarksomitted).I.AllegedErrorsPetitionersallegetwotypesoferrors--proceduralandsubstantive.A.ProceduralErrors.Duringtherulemakingprocess,theEPAdidn’tdisclosecertaindocumentsintheelectronicdocketorlisttheminthedocketindex.Accordingtothepetitioners,thosefailuresviolatedthenotice-and-comment[*993]requirementsoftheAdministrativeProcedureAct.SeeSU.S.C.§553(c).Agenciesmust“giveinterestedpersonsanopportunitytoparticipateintherulemakingthroughsubmissionofwrittendata,views,orarguments.”5U.S.C.§553(c).Thismeanstheagencymust“identifyandmakeavailabletechnicalstudiesanddatathatithasemployedinreachingthedecisionstoproposeparticularrules.”KernCnty.FarmBureauv.Allen,450F.3d1072,1076(9thCir.2006)(internalquotationmarksomitted).EPA’sfailuretoincludealldocumentsintheelectronicdocketwasnotanerror.TheE-GovernmentActrequiresonlinedisclosureonly“totheextentpracticable,asdeterminedbytheagencyinconsultationwiththeDirector”oftheOfficeofManagementandBudget.E-GovernrnentActof2002,PubL.No.107-347,§206(d)(2),116Stat.2899,2916(2002)[**7](emphasisadded).WedefertotheEPAonwhatispracticabletopostonitsonlinedocket.SeeHecklerv.Chancy,470U.s.821,831-32,105S.Ct.1649,84L.Ed.2d714(1985)(notingthatagenciesarebetterequippedthancourtstomakecertainchoices,giventheirexpertiseandtheirsuperiorunderstandingoftheirownresourcesandpriorities).EPAdidmisstatethatalldocumentsinthedocketwerelistedintheindex.Whilethismightviolateaninterestedparty’srighttomeaningfullycomment,see5U.S.C.§553(c),weneednotdecidethathere.Assumingproceduralerror,itwasharmlessastothepetitionersbecausetheyhadthedocumentsintheirpossessionfromearlierproceedings.And,whereapartyhasactualnoticeandwasabletosubmititsviewstotheagencypriortothechallengedaction,noproceduralharmissufferedbyfailuretoprovidenotice.Cal-Almond,Inc.v.US.Dep’tofAgric.,14F.3d429,441-42(9thCir.1993);see5U.S.C.§706(“[DJueaccountshallbetakenoftheruleofprejudicialerror.”).Petitionersdon’tdisputetheyhadthedocumentsinhand;instead,theyclaimtheyhadnowayofknowingwhichdocumentstheEPAwasreviewing.Butpetitionersknewthatalldocumentsweren’tlisted[**8]inthedocketindexbeforethecommentperiodendedandtheywereintimatelyfamiliarwiththedocumentsatissue.Finally,anydisadvantagepetitionerssufferedcanbecorrectedonremandwhentheywillhaveanopportunitytocommentmeaningfullyonthedocuments.B.SubstantiveErrorsPetitionersarguethattheEPAviolatedtheCleanAirActinapprovingtheDistrict’srevisiontoitsplan.TheEPAconcedesthatthereareflawsinthereasoningadoptedforitsfinalrule.Despiteitsconcession,EPAmaintainsitsruleisnotarbitraryandcapriciousandoffersnewreasoningtosupportitsfinalrule.But“ourreviewofanadministrativeagency’sdecisionbeginsandendswiththereasoningthattheagencyreliedoninmakingthatdecision.”SafeAirforEveryonev.EPA,488F.3d1088,1091(9thCir.2007);seealsoSECv.CheneryCorp.,318U.S.80,87,63S.Ct.454,87L.Ed.626(1943).WethereforefindthattheEPA’sfinalruleisinvalid.ThattheEPA’sfinalruleisinvalidisnottheendoftheanalysis.Inconsideringwhethervacaturiswarranted,wemustbalancetheseerrorsagainsttheconsequencesofsucharemedy.II.ConsequencesofvacaturThedelayandtroublevacaturwouldcausearesevere.Sentinel[**9]isscheduledtocomeonlineinNovember,butvacaturwouldpavetheroadtolegalchallengestoSentinel’sconstructionthatcouldwelldelayamuchneededpowerplant.[*994]WithoutSentinel,theregionmightnothaveenoughpowernextsummer,resultinginblackouts.Blackoutsnecessitatetheuseofdieselgeneratorsthatpollutetheair,theverydangertheCleanAirActaimstoprevent.See42U.S.C.§7401(b)(1)(statingthepurposeoftheCleanAirActis“toprotectandenhancethequalityoftheNation’sair”).Stoppingconstructionwouldalsobeeconomicallydisastrous.Thisisabillion-dollarventureemploying350workers.Inaddition,vacaturwouldlikelyrequiretheCalifornialegislaturetopassanewbilltoallowtheDistricttotransfercreditsfromitsinternalbanktoSentinel,whichwouldcreateneedlessandduplicativelegislativeeffort.PetitionersclaimthatfailuretovacatetheEPA’srulewillallowSentineltocontinueconstruction,andthatconstructionwillpollutetheair.ButtheCaliforniaEnergyCommissionhasalreadyfoundthatSentinel’scon-688F.3d989,*;2012U.S.App.LEXIS15428,**;74ERC(BNA)2121Page4structionharmsareinsignificantwithmitigation.Andthatmitigationdoesn’timplicatethecreditsatissue.While101wehaveonlyorderedremandwithoutvacaturinlimitedcircumstances,ifsavingasnailwarrantsjudicialrestraint,seeIdahoFarmBureau,58F.3dat1405-06,sodoessavingthepowersupply.Accordingly,weremandwithoutvacatursothatconstructionofSentinelmayproceedwithoutdelay.ThisdoesnotauthorizecommencementofSentinel’soperationwithoutanewandvalidEPAruleinplace.REMANDEDwithoutVACATUR.