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CALIFORNIA COMMUNITIES AGAINST TOXICS, an unincorporated associa

tion; COMMUNITIES FOR A BETTER ENVIRONMENT, a California non-profit

organization, Petitioners, v. UNITED STATES ENVIRONMENTAL PROTEC

TION AGENCY; LISA JACKSON, Administrator, U.S. Environmental Protection

Agency; JARED BLUMENFELD, Respondents, CPV SENTINEL LLC; SOUTH

COAST AIR QUALITY MANAGEMENT DISTRICT, Respondents-intervenors.

No. 11-71127

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

688 F.3d 989; 2012 U.S. App. LEXIS 15428; 74 ERC (BNA) 2121

June 5, 2012, Argued and Submitted, Pasadena, California

July 26, 2012, Filed

PRIOR HISTORY: [**1]

On Petition for Review of a Final Rulemaking of the

United States Environmental Protection Agency.DISPOSITION: REMANDED without VACATUR.CASE SUMMARY:

PROCEDURAL POSTURE: Petitioners, two environ

mental groups, sought review of a final rulemaking by

respondent, Environmental Protection Agency (EPA).

The parties agreed that the case should be remanded, so

the only dispute was whether vacatur was appropriate.

OVERVIEW: The EPA admitted that the reasoning forits final rule was flawed and voluntarily sought remand

to explain how credits earmarked for a soon-to-be completed power plant met regulatory requirements and torevisit its calculations of a state management district’s

available credits. Because the EPA recognized the merits

of petitioners’ challenges and was forthcoming in the

invalid, but the rule’s invalidity did not end the court’s

analysis. The EPA’s errors had to be weighed against theconsequences of vacatur. Although a remand without

vacatur was ordered only in limited circumstances, sav

ing the power supply warranted judicial restraint.

OUTCOME: The court remanded without vacatur.COUNSEL: Angela Johnson Meszaros and Timothy R.Grabiel, Law Offices of Angela Johnson Meszaros,South Pasadena, California, for petitioner California

Communities Against Toxics.

Shana Lazerow and Maya Golden-Krasner, Communities

for a Better Environment, Oakland, California, for peti

tioner Communities for a Better Environment.Ann Lyons, United States Environmental ProtectionAgency, Office of Regional Counsel, San Francisco,

California; Scott Jordan, United States Environmental

Protection Agency

Office of General Counsel

Wash
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688 F.3d 989, *; 2012 U.S. App. LEXIS 15428, **;

74 ERC (BNA) 2121

Kurt R. Wiese, Barbara Baird, Lauren B. Nevitt and

Megan E. Lorenz, South Coast Air Quality ManagementDistrict, Diamond [**2] Bar, California, for respond

ent-intervenor South Coast Air Quality Management

District.

JUDGES: Before: Alex Kozinski, Chief Judge, Stephen

S. Trott and Sidney R. Thomas, Circuit Judges.

OPINION

[*99 1] Per Curiam Opinion

PER CURIAM:Two environmental groups petition for review of a

final rulemaking by the EPA. The groups and the EPA

agree this case should be remanded, so the only dispute

is whether vacatur is appropriate.

Background

The Clean Air Act requires the EPA to set national

ambient air quality standards for air pollutants. 42 U.S.C.

§ 7409. States are responsible for developing plans to

implement those standards. § 7410(a)(1). The states’

plans, and any revisions, must be approved by the EPA.

§ 7410(k). As part of the plans, states must establish a

permitting program for new polluters in areas that don’t

meet the EPA’s standards.

§ 7502(c)(5), 7503(c). Those

programs must ensure any emission increases be offsetby corresponding emission reductions. § 7503(c).

The South Coast Air Quality Management District

(“the District”) regulates the air quality in the SouthCoast Air Basin and the Riverside portions of the SaltonSea Air Basin. Cal. Health

& Safety Code § 40412; Cal.

Code Regs. tit. 17,

§ 60104, 60114. [**3] Because

these areas don’t meet the EPA’s air quality standards, the

District is responsible for developing a plan that ensuresnew emission increases are offset by reductions. See 40C.F.R. § 81.305; 42 U.S.C. § 7410(a)(1). When reduc

tions exceed increases, the excess reductions take the

form of “credits,” which are traded in an open market toentities seeking to meet their offset requirements. TheDistrict maintains a stock of these credits in an internal

bank for distribution to entities like schools and hospi

Portion of the California State Implementation Plan,

CPV Sentinel Energy Project AB 1318 Tracking System,76 Fed. Reg. 22,038 (Apr. 20, 2011). They allege that the

EPA committed procedural errors during the rulemaking

process and that the substance of the revised state planviolates the Clean Air Act.

Analysis

We [**4] review agency action to see if it’s arbi

trary and capricious. Sacora v. Thomas, 628 F.3d 1059,

1068 (9th Cir. 2010); 5 U.S.C. § 706(2)(A). Here, the

EPA has admitted that the reasoning adopted for its final

rule was flawed and voluntarily seeks remand.

A federal

agency may request remand in order to reconsider its

initial action. See, e.g., SKF USA Inc. v. United States,

254 F.3d 1022, 1029 (Fed. Cir. 2001). That’s what theEPA has done here. It seeks to explain on remand howcredits earmarked for Sentinel meet certain regulatory

requirements, see 40 C.F.R. § 51.l65(a)(3)(ii)(C)(l)(i),

and to revisit its calculations of the District’s available

credits.

Generally, courts only refuse voluntarily requested

remand when the agency’s request is frivolous or made inbad faith. SKF USA Inc., 254 F.3d at 1029. Compare Sw.

Bell Tel. Co. v. FCC, 10 F.3d 892, 896, 304 U.S. App.

D.C. 117 (D.C. Cir. 1993) (discussing the court’s previ

ous decision to grant the agency’s request for a remand)

with Lutheran Church-Mo. Synod v. FCC, 141 F.3d 344,

349, 329 U.S. App. D.C. 381 (D.C. Cir. 1998) (refusing

to remand because the agency just wanted to avoid judi

cial review). Because the EPA has recognized the meritsof the petitioners’ challenges and has [* *51 been forthcoming in these proceedings, there is no evidence that

the EPA’s request is frivolous or made in bad faith. Wetherefore grant the EPA’s request for remand.

That brings us to whether we must vacate the EPA’s

final rule.

A flawed rule need not be vacated. See Idaho

Farm Bureau Fed’n v. Babbitt, 58 F.3d 1392, 1405 (9th

Cir. 1995); W. Oil

& Gas Ass’n v. EPA, 633 F.2d 803,

813 (9th Cir. 1980). Indeed, “when equity demands, the

regulation can be left in place while the agency follows

the necessary procedures” to correct its action. IdahoFarm Bureau, 58 F.3d at 1405. Even though the agency’s

error was significant in Idaho Farm Bureau, we didn’t
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688 F.3d 989, *; 2012 U.S. App. LEXIS 15428, **;

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changed.” Allied-Signal, Inc. v. US. Nuclear Regulatory

Comm’n, 988 F.2d 146, 150-5 1, 300 U.S. App. D.C. 198

(D.C. Cir. 1993) [**6] (internal quotation marks omitted).

I. Alleged Errors

Petitioners allege two types of errors--procedural

and substantive.

A. Procedural Errors.

During the rulemaking process, the EPA didn’t dis

close certain documents in the electronic docket or list

them in the docket index. According to the petitioners,

those failures violated the notice-and-comment [*993]

requirements of the Administrative Procedure Act. See S

U.S.C. § 553(c).

Agencies must “give interested persons an oppor

tunity to participate in the rule making through submis

sion of written data, views, or arguments.” 5 U.S.C. §553(c). This means the agency must “identify and make

available technical studies and data that it has employedin reaching the decisions to propose particular rules.”

Kern Cnty. Farm Bureau v. Allen, 450 F.3d 1072, 1076(9th Cir. 2006) (internal quotation marks omitted).

EPA’s failure to include all documents in the elec

tronic docket was not an error. The E-Government Actrequires online disclosure only “to the extent practicable,

as determined by the agency in consultation with theDirector” of the Office of Management and Budget.

E-Governrnent Act of 2002, Pub L. No. 107-347, §

206(d)(2), 116 Stat. 2899, 2916 (2002) [**7] (emphasis

added). We defer to the EPA on what is practicable to

post on its online docket. See Heckler v. Chancy, 470

U.s. 821, 831-32, 105 S. Ct. 1649, 84 L. Ed. 2d 714(1985) (noting that agencies are better equipped thancourts to make certain choices, given their expertise and

their superior understanding of their own resources and

priorities).

EPA did misstate that all documents in the docket

were listed in the index. While this might violate an in

terested party’s right to meaningfully comment, see 5U.S.C. § 553(c), we need not decide that here. Assuming

procedural error

it was harmless as to the petitioners

Petitioners don’t dispute they had the documents in

hand; instead, they claim they had no way of knowing

which documents the EPA was reviewing. But petitioners knew that all documents weren’t listed [**8] in the

docket index before the comment period ended and they

were intimately familiar with the documents at issue.Finally, any disadvantage petitioners suffered can be

corrected on remand when they will have an opportunity

to comment meaningfully on the documents.

B. Substantive Errors

Petitioners argue that the EPA violated the Clean Air

Act in approving the District’s revision to its plan. TheEPA concedes that there are flaws in the reasoning

adopted for its final rule. Despite its concession, EPAmaintains its rule is not arbitrary and capricious and of

fers new reasoning to support its final rule. But “our re

view of an administrative agency’s decision begins and

ends with the reasoning that the agency relied on in

making that decision.” Safe Airfor Everyone v. EPA, 488

F.3d 1088, 1091 (9th Cir. 2007); see also SEC v.

Chenery Corp., 318 U.S. 80, 87, 63 S. Ct. 454, 87 L. Ed.

626 (1943). We therefore find that the EPA’s final rule isinvalid.

That the EPA’s final rule is invalid is not the end of

the analysis. In considering whether vacatur is warranted,

we must balance these errors against the consequences of

such a remedy.

II. Consequences of vacatur

The delay and trouble vacatur would cause are se

vere. Sentinel [**9] is scheduled to come on line in

November, but vacatur would pave the road to legal

challenges to Sentinel’s construction that could well delay a much needed power plant. [*994] Without Sen

tinel, the region might not have enough power next

summer, resulting in blackouts. Blackouts necessitate the

use of diesel generators that pollute the air, the very

danger the Clean Air Act aims to prevent. See 42 U.S.C.

§ 7401 (b)(1) (stating the purpose of the Clean Air Act is

“to protect and enhance the quality ofthe Nation’s air”).

Stopping construction would also be economically

disastrous. This is a billion-dollar venture employing 350

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688 F.3d 989, *; 2012 U.S. App. LEXIS 15428, **;

74 ERC (BNA) 2121

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struction harms are insignificant with mitigation. And

that mitigation doesn’t implicate the credits at issue.

While 101 we have only ordered remand with

out vacatur in limited circumstances, if saving a snail

warrants judicial restraint, see Idaho Farm Bureau, 58

F.3d at 1405-06, so does saving the power supply. Accordingly, we remand without vacatur so that construc tion of Sentinel may proceed without delay. This does not authorize commencement of Sentinel’s operation without a new and valid EPA rule in place. REMANDED without VACATUR.