LUMINANT GENERATION COMPANY, L.L.C.; OAK GROVE MANAGEMENT

COMPANY, L.L.C.; BIG BROWN POWER COMPANY, L.L.C.; LUMINANT

MINING COMPANY, L.L.C.; SANDOW POWER COMPANY, L.L.C.; TEXAS

ASSOCIATION OF BUSINESS; TEXAS ASSOCIATION OF

MANUFACTURERS; TEXAS OIL & GAS ASSOCIATION; CHAMBER OF

COMMERCE OF THE UNITED STATES OF AMERICA; STATE OF TEXAS,

Petitioners, v. UNITED STATES ENVIRONMENTAL PROTECTION AGENCY,

Respondent.

No. 10-60891

UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

675 F.3d 917; 2012 U.S. App. LEXIS 6387; 74 ERC (BNA) 1417; 42 ELR 20072

March 26, 2012, Filed

SUBSEQUENT HISTORY: [**1]

As Revised, March 29, 2012.

Related proceeding at Luminant Generation Co., LLC v. United States EPA, 2012 U.S. App. LEXIS 22129 (5th Cir.,

Oct. 24, 2012)

COUNSEL: For LUMINANT GENERATION COMPANY, L.L.C., SANDOW POWER CO LLC, Petitioners: Philip

Stephen Gidiere, III, Esq., David R. Boyd, Steven G. McKinney, Esq., Balch & Bingham, L.L.P., Birmingham, AL;

Harry Max Reasoner, Esq., Vinson & Elkins, L.L.P., Houston, TX; John Aloysius Riley, Attorney, Christopher Charles

Thiele, Esq., Bracewell & Giuliani, L.L.P., Austin, TX; Eric Alan White, Vinson & Elkins, L.L.P., Washington, DC.

For OAK GROVE MANAGEMENT COMPANY LLC, BIG BROWN POWER COMPANY, L.L.C., LUMINANT

MINING COMPANY, L.L.C., Petitioners: Philip Stephen Gidiere, III, Esq., David R. Boyd, Steven G. McKinney,

Esq., Balch & Bingham, L.L.P., Birmingham, AL; Harry Max Reasoner, Esq., Vinson & Elkins, L.L.P., Houston, TX;

John Aloysius Riley, Attorney, Bracewell & Giuliani, L.L.P., Austin, TX; Eric Alan White, Vinson & Elkins, L.L.P.,

Washington, DC.

For TEXAS ASSOCIATION OF BUSINESS, TEXAS ASSOCIATION OF MANUFACTURERS, TEXAS OIL &

GAS ASSOCIATION, Petitioners: Samara Lackman Kline, Van Beckwith, Anika Christine Stucky, Attorney, Baker

Botts, L.L.P., Dallas, TX; Matthew G. Paulson, Esq., Baker Botts, L.L.P., Austin, TX.

For CHAMBER OF COMMERCE OF THE UNITED STATES OF AMERICA, [**2] Petitioner: Samara Lackman

Kline, Van Beckwith, Anika Christine Stucky, Attorney, Baker Botts, L.L.P., Dallas, TX; Robin S. Conrad, National

Chamber Litigation Center, Washington, DC; Matthew G. Paulson, Esq., Baker Botts, L.L.P., Austin, TX.

Page 1
For STATE OF TEXAS, Petitioner: Jon Niermann, Esq., Assistant Attorney General, Office of the Attorney General for

the State of Texas, Austin, TX; John Reed Clay, Jr., Office of the Attorney General, Office of the Solicitor General,

Austin, TX.

For UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, Respondent: Daniel Pinkston, Esq., Senior

Litigation Attorney, U.S. Department of Justice, Environmental Defense Section, Denver, CO; Scott Fulton, Lisa P.

Jackson, Environmental Protection Agency, Washington, DC.

JUDGES: Before BARKSDALE, GARZA, and ELROD, Circuit Judges*.

* Emilio M. Garza, Circuit Judge, concurs in the judgment only.

OPINION BY: JENNIFER WALKER ELROD

OPINION

[*920] On Petition for Review of an Order of the United States Environmental Protection Agency

JENNIFER WALKER ELROD, Circuit Judge:

[*921] This case requires us to review the EPA's disapproval, more than three years after the time within which it

was statutorily required to act, of three regulations promulgated by the State of Texas. [**3] 30 Tex. Admin. Code §§

116.610(a), 116.610(b), and 116.617. Pursuant to Texas's duty under the Clean Air Act ("CAA" or "the Act"), 42 U.S.C.

§ 7401 et seq., to adopt and administer a statewide plan for implementing federal air quality standards, those regulations

provide for a standardized permit for certain projects that reduce or maintain current emissions rates. Because the EPA

had no legal basis on which to disapprove those regulations, we VACATE the agency's disapproval of Texas's

regulations and REMAND with instructions.

I. BACKGROUND

A. Statutory Background

An "experiment in cooperative federalism," Michigan v. EPA, 268 F.3d 1075, 1083, 348 U.S. App. D.C. 6, 348

U.S. App. D.C. 7 (D.C. Cir. 2001), the CAA "establishes a comprehensive program for controlling and improving the

nation's air quality through state and federal regulation." BCCA Appeal Group v. EPA, 355 F.3d 817, 821-22 (5th Cir.

2003). The Act assigns responsibility to the EPA for identifying air pollutants and establishing National Ambient Air

Quality Standards (NAAQS). 42 U.S.C. §§ 7408-7409. The states, by contrast, bear "the primary responsibility" for

implementing those standards. BCCA Appeal Group, 355 F.3d at 822; see also § 7407(a) ("Each State shall have [**4]

the primary responsibility for assuring air quality within [its] entire geographic area."); § 7401(a)(3) ("[A]ir pollution

prevention . . . is the primary responsibility of States and local governments.").

To implement the NAAQS, the states must adopt and administer State Implementation Plans (SIPs) that meet

certain statutory criteria. § 7410. The states have "wide discretion in formulating [their] plan[s]." Union Elec. Co. v.

EPA, 427 U.S. 246, 250, 96 S. Ct. 2518, 49 L. Ed. 2d 474 (1976). "[S]o long as the ultimate effect of a State's choice of

emission limitations is compliance with the national standards for ambient air, the State is at liberty to adopt whatever

mix of emission limitations it deems best suited to its particular situation." Train v. Natural Res. Def. Council, Inc. 421

U.S. 60, 79, 95 S. Ct. 1470, 43 L. Ed. 2d 731 (1975). With regard to implementation, the Act confines the EPA to the

ministerial function of reviewing SIPs for consistency with the Act's requirements. § 7410(k)(3) ("[T]he [EPA]

Administrator shall approve [a SIP or SIP revision] as a whole if it meets all of the applicable requirements of this

chapter." (emphasis added)); see also Fla. Power & Light Co. v. Costle, 650 F.2d 579, 587 (5th Cir. 1981) ("The great

flexibility [**5] accorded the states under the Clean Air Act is . . . illustrated by the sharply contrasting, narrow role to

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74 ERC (BNA) 1417; 42 ELR 20072
be played by EPA."); Michigan, 268 F.3d at 1083 (the EPA's "overarching role is in setting standards, not in

implementation"). This division of responsibility between the states and the federal government "reflects the balance of

state and federal rights and responsibilities characteristic of our federal system of government." Fla. Power & Light Co.,

650 F.2d at 581.

Under the Act, SIPs are not supposed to be static. States must periodically revise their SIPs as necessary to ensure

compliance with current NAAQS. 42 U.S.C. § 7410(a)(2)(H). With a narrow exception not relevant here, the EPA must

review and approve or disapprove a SIP revision within 18 months of submission. §§ 7410(k)(1)(B), 7410(k)(2), and

7410(k)(3). The EPA shall disapprove a SIP revision only if "the revision would [*922] interfere with any applicable

requirement concerning attainment" of the NAAQS "or any other applicable requirement" of the Act. § 7410(l). As with

SIP plans, if the revision meets all of the applicable CAA requirements, the EPA must approve it. § 7410(k)(3) (The

EPA "shall approve such submittal as [**6] a whole.").

Among other requirements, SIPs must include permitting programs for the construction or modification of

stationary sources. The EPA has termed these required permit programs "New Source Review" (NSR). 74 Fed. Reg.

51,418, 51,421 (Oct. 6, 2009). For "major" NSR, which applies to the construction or modification of stationary sources

that meet certain threshold emissions levels, the CAA sets forth the parameters for the permit programs in considerable

detail.1 See 42 U.S.C. §§ 7470-7503. The implementing regulations for major NSR are similarly extensive and complex,

spanning 88 pages in the Code of Federal Regulations. See 40 C.F.R. §§ 51.165-51.166, pt. 51 appendix S.

1 The CAA's requirements for major NSR differ depending on whether a region is designated "nonattainment,"

"attainment," or "unclassifiable." Part D of the Act, which governs nonattainment NSR, refers to "major

stationary sources." 42 U.S.C. § 7502(c)(5). The Act defines that term as sources that have the potential to emit

100 tons or more of a regulated pollutant. § 7602(j). Part C of the Act, which applies the prevention of

significant deterioration (PSD) program to attainment and unclassifiable regions, see [**7] § 7471, uses the

term "major emitting facility." § 7475. The Act defines that term as certain specified types of stationary sources

that have the potential to emit 100 tons or more of a regulated pollutant and all other stationary sources that have

the potential to emit 250 tons or more of a regulated pollutant. § 7479(1). For convenience, the EPA refers to

both statutory terms as "major sources." 74 Fed. Reg. 51,418, 51,421 n.11 (Oct. 6, 2009).

In stark contrast, the CAA prescribes only the barest of requirements for "minor" NSR, which governs the

construction or modification of stationary sources that do not meet the emissions thresholds for major NSR. For minor

NSR, the Act requires simply that each SIP "include . . . regulation of the modification and construction of any

stationary source within the areas covered by the plan as necessary to assure that [NAAQS] are achieved." 42 U.S.C. §

7410(a)(2)(C). The implementing regulations for minor NSR are likewise sparse, spanning less than two pages in the

Code of Federal Regulations. See 40 C.F.R. §§ 51.160-51.164. The EPA has recognized that because "the [**8] Act

includes no specifics regarding the structure or functioning of minor NSR programs" and because the implementing

regulations are "very general[,] . . . SIP-approved minor NSR programs can vary quite widely from State to State." 74

Fed. Reg. 51,418, 51,421 (Oct. 6, 2009).

B. Facts and Proceedings

The Texas standardized permit at issue here applies only to minor NSR,2 and then only to pollution control projects

(PCPs). The regulations governing this permit (the PCP Standard Permit) are found at 30 Tex. Admin. Code § 116.617.

Those regulations authorize the standard permit for PCPs "that reduce or maintain currently authorized emission rates

for facilities authorized by a permit."3 § 116.617(a)(1). [*923] Detailed registration requirements apply. See §§

116.617(d)(2)(A)-(F), 116.617(b)(1)(D) (incorporating the standard permit registration requirements of § 116.611). The

PCP Standard Permit is also subject to Texas's general conditions for standard permits, which impose additional

reporting, recordkeeping, and compliance requirements. See § 116.615. The executive director of the Texas

Commission on Environmental Quality (TCEQ) has the negative discretion to disallow the use of any PCP standard

[**9] permit if he "determines there are health effects concerns or the potential to exceed a [NAAQS] . . . until those

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74 ERC (BNA) 1417; 42 ELR 20072
concerns are addressed by the registrant to the satisfaction of the executive director." § 116.617(a)(3)(B). A "registration

must be submitted no later than 30 days after construction or implementation begins" only for replacement PCPs that

yield "no increases in authorized emissions of any air contaminant." § 116.617(d)(1)(A). By contrast, registration for

new PCPs and replacement projects that will yield any increase in emissions must be submitted 30 days before

construction or implementation. § 116.617(d)(1)(B). Construction or implementation may not begin until 30 days after

TCEQ receives the registration or until the executive director issues written acceptance. Id.

2 If a project's collateral emissions meet the threshold level for major NSR, it must obtain an individual permit

pursuant to Texas's major NSR permitting program. 30 Tex. Admin. Code § 116.617(b)(1)(C) (incorporating §

116.610(b)).

3 Although somewhat counterintuitive, PCPs can fall within the bailiwick of the CAA's regulations because

although the projects by definition reduce or maintain emissions of the [**10] primary pollutant, they have the

potential to cause incidental increases in the emissions of other regulated pollutants.

Texas's PCP Standard Permit is just one component of Texas's broader standard permits program. That program

originated in 1993, when Texas promulgated standard permits for PCPs that reduce emissions of volatile organic

compounds (VOCs) and nitrogen oxides (NOx). See 18 Tex. Reg. 8597 (Nov. 19, 1993) (VOC standard permit); 18

Tex. Reg. 3409 (May 28, 1993) (NOx standard permit). The next year, after notice and comment and a public hearing,

Texas adopted regulations that set forth the general requirements for Texas's standard permits program. 19 Tex. Reg.

3055 (Apr. 22, 1994). In that same rulemaking, Texas expanded the availability of standard permits to PCPs for any

regulated pollutant. Id. at 3064-65. Texas amended its standard permit program several times in the following years and

submitted those revisions to the EPA for approval into Texas's SIP. See 68 Fed. Reg. 64,543, 64,547 (Nov. 14, 2003)

(listing several SIP revision submissions from 1994 to 2002 concerning Texas's standard permits program).

In 2003, the EPA finally approved the standard permits program into [**11] Texas's SIP, explaining that the

program met the applicable requirements of the CAA and its implementing regulations. See id. at 64,546-64,547

(approving 30 Tex. Admin. Code §§ 116.601-116.606, 116.610, 116.611, 116.614, and 116.615).4 The EPA explicitly

declined to act on § 116.617, which allows for a standard permit for PCPs. Id. at 64,547. The EPA commented that

approval of § 116.617 was "not necessary" to its approval of the standard permits program and that § 116.617 would "be

addressed in a separate action." Id.

4 The EPA took no action on 30 Tex. Admin. Code § 116.610(d). 68 Fed. Reg. at 64,547.

Texas amended § 116.617 in 2006 to limit the availability of standard permits for PCPs to minor NSR only. See 31

Tex. Reg. 515, 516 (Jan. 27, 2006). At the same time, Texas made necessary conforming amendments, as well as

stylistic revisions, to SIP-approved §§ 116.610(a) and 116.610(b), which set forth general parameters for the

applicability of Texas's standard permits program. See id.; see also 30 Tex. Reg. 6183, 6205 (Sept. 30, 2005) (proposed

amendments). These amendments were necessary to bring Texas's PCP Standard Permit into compliance with federal

standards after the D.C. Circuit [**12] vacated, as contrary to the CAA, an EPA rule that had altogether exempted

PCPs [*924] from major NSR. New York v. EPA, 413 F.3d 3, 40-42, 367 U.S. App. D.C. 3 (D.C. Cir. 2005). After

adopting these amendments through notice and comment rulemaking, on February 1, 2006, Texas resubmitted its newly

amended versions of §§ 116.617, 116.610(a), and 116.610(b), among other provisions, to the EPA for approval into

Texas's SIP. See 74 Fed. Reg. 48, 467, 48,471 (Sept. 23, 2009). Thus, pursuant to the Act's eighteen-month deadline, the

EPA was required by statute to take action on Texas's submission by August 1, 2007, at the latest.

More than two years after the statutory deadline had passed, the EPA proposed disapproval of Texas's submission

on September 23, 2009. See id. at 48,467. In proposing disapproval of Texas's PCP Standard Permit (§ 116.617), the

EPA did not identify any provision of the CAA or its implementing regulations that Texas's program violated. See 74

Fed. Reg. at 48,475-76. Instead, the EPA asserted that "each minor NSR SIP Standard Permit . . . is required to be

applicable to narrowly defined categories of emission sources rather than a category of emission types." Id. at 48,476

(emphasis in original). [**13] The only authorities that the EPA cited for this purported requirement were several

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internal memoranda and guidance documents, and a handful of rulemakings in which the EPA took action or proposed

action concerning the adoption of general permit programs into other states' SIPs. Id. at 48,476 n.11. The EPA also

stated that "another major concern is that this Standard Permit is designed for case-by-case additional authorization,

source-specific review, and source-specific technical determinations." Id. at 48,476. The EPA explained its concern as

follows: "There are no replicable conditions in the PCP Standard Permit that specify how the [TCEQ] Director's

discretion is to be implemented for the individual determinations." Id. The EPA cited no authority to tether its concern

to any applicable provision of the CAA. See id. Moreover, as the EPA conceded in its brief, it provided no explanation

for why it proposed disapproval of §§ 116.610(a) and 116.610(b).

The EPA issued its final rule disapproving, inter alia, §§ 116.617, 116.610(a), and 116.610(b), on September 15,

2010, more than three years after the statutory deadline. 75 Fed. Reg. 56,424 (Sept. 15, 2010). Although the EPA

averred [**14] in its opening "Summary" section that it disapproved Texas's PCP Standard Permit "because it does not

meet the requirements of the CAA for a minor NSR Standard Permit program," id., the EPA again failed to identify a

single provision of the Act that Texas's program violated, let alone explain its reasons for reaching its conclusion.

Instead, in its discussion of Texas's PCP Standard Permit, the EPA stated no less than five times that it was

disapproving the permit because it "does not meet the requirements of the Texas Minor NSR Standard Permits

Program." Id. at 56,447 (emphasis added); see also id. at 56,444; id. at 56,445 (twice expressing the same conclusion);

id. at 56,447 (same). In other words, the EPA utilized Texas law as its benchmark in disapproving § 116.617, not the

CAA or its implementing regulations. Indeed, even when responding to comments that discussed whether § 116.617

meets the requirements of the CAA, the EPA did not address that question, but instead concluded that the PCP Standard

Permit does not meet the requirements of Texas's SIP-approved standard permits program. See 75 Fed. Reg. at 56,445

(EPA's response to Comments 2 and 3). The EPA also reiterated the objections [**15] from its proposed disapproval

that § 116.617 "does not apply to similar sources" and "lacks the requisite replicable standardized permit terms

specifying how the Director's discretion is to be implemented for the case-by-case determinations." [*925] Id. at

56,447. The EPA conceded in its brief that it again failed to provide any explanation for its disapproval of §§

116.610(a) and 116.610(b).

Invoking our jurisdiction under 42 U.S.C. § 7607(b), numerous petitioners timely filed petitions for our review.5

Only the EPA's disapproval of 30 Tex. Admin. Code §§ 116.610(a), 116.610(b), and 116.617 are presently before us.

5 Petitioners are Luminant Generation Company, LLC; Oak Grove Management Company, LLC; Big Brown

Power Company, LLC; Luminant Mining Company, LLC; Sandow Power Company, LLC; Texas Association

of Business; Texas Association of Manufacturers; Texas Oil & Gas Association; Chamber of Commerce of the

United States; and the State of Texas.

II. STANDARD OF REVIEW

When reviewing EPA action under the CAA, we apply the standard of review provided for in the Administrative

Procedure Act (APA). See Texas v. EPA, 499 F.2d 289, 296 (5th Cir. 1974). Under the APA, we must hold unlawful

and set aside [**16] agency action that is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance

with law." 5 U.S.C. § 706(2)(A). We must also set aside agency action that is "in excess of statutory . . . authority." §

706(2)(C). Agency action

is arbitrary and capricious "if the agency has relied on factors which Congress has not intended it to

consider, entirely failed to consider an important aspect of the problem, offered an explanation for its

decision that runs counter to the evidence before the agency, or is so implausible that it could not be

ascribed to a difference in view or the product of agency expertise."

Tex. Oil & Gas Ass'n v. EPA, 161 F.3d 923, 933 (5th Cir. 1998) (quoting Motor Vehicle Mfrs. Ass'n v. State Farm Mut.

Auto. Ins. Co., 463 U.S. 29, 43, 103 S. Ct. 2856, 77 L. Ed. 2d 443 (1983)).

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We must disregard any post hoc rationalizations of the EPA's action and evaluate it solely on the basis of the

agency's stated rationale at the time of its decision. See Burlington Truck Lines, Inc. v. United States, 371 U.S. 156,

168-69, 83 S. Ct. 239, 9 L. Ed. 2d 207 (1962) ("The courts may not accept appellate counsel's post hoc rationalizations

for agency action; Chenery requires that an agency's discretionary order be upheld, if at all, on [**17] the same basis

articulated in the order by the agency itself." (citing SEC v. Chenery Corp., 332 U.S. 194, 196, 67 S. Ct. 1575, 91 L. Ed.

1995 (1947))). "Review of agency action under § 706(2)'s 'arbitrary or capricious' standard is limited to the record

before the agency at the time of its decision." Geyen v. Marsh, 775 F.2d 1303, 1309 (5th Cir. 1985); see also Camp v.

Pitts, 411 U.S. 138, 142, 93 S. Ct. 1241, 36 L. Ed. 2d 106 (1973) ("[T]he focal point for judicial review should be the

administrative record already in existence, not some new record made initially in the reviewing court.").

III. DISCUSSION

The EPA concedes that it acted arbitrarily and capriciously by failing to supply any reason for its disapproval of §§

116.610(a) and 116.610(b) and consents to vacatur. We therefore vacate the EPA's disapproval of these provisions and

turn to § 116.617.

Petitioners contend that the EPA acted arbitrarily and capriciously and in excess of its statutory authority by

applying three different incorrect legal standards in disapproving 30 Tex. Admin. Code § 116.617. First, Petitioners

argue that the EPA improperly reviewed the PCP Standard Permit for compliance with Texas law, when the EPA's only

authorized function was to [*926] review the permit for compliance [**18] with the applicable requirements of the

CAA. Second, Petitioners argue that the EPA's so-called "similar source" requirement does not exist in any of the CAA

provisions governing minor NSR. Third, Petitioners argue that the applicable federal law imposes no "replicability"

requirement and, therefore, the EPA had no basis on which it could have properly determined that the TCEQ Director's

discretion under § 116.617 violated the Act. As we now explain, each of Petitioners' arguments is correct.

A. The EPA's Reliance on Texas Law

It is beyond cavil that the EPA may consider only the requirements of the CAA when reviewing SIP submissions.

The Act provides that the EPA "shall approve [a SIP] submittal as a whole if it meets all of the applicable requirements

of [the Act]." 42 U.S.C. § 7410(k)(3). This statutory imperative leaves the agency no discretion to do anything other

than ensure that a state's submission meets the CAA's requirements and, if it does, approve it before the passage of its

statutory deadline. Moreover, the provisions of the Act that govern minor NSR and the EPA's review of SIP revisions

make no allowance for the EPA to evaluate the submission for compliance with state [**19] law. See § 7410(a)(2)(C)

(the Act's only requirement for minor NSR is that each SIP "include . . . regulation of the modification and construction

of any stationary source within the areas covered by the plan as necessary to assure that [NAAQS] are achieved"); §

7410(l) (the EPA may disapprove a SIP revision only if "the revision would interfere with any applicable requirement

concerning attainment" of the NAAQS "or any other applicable requirement of [the Act]"). As the EPA itself has

recognized, nowhere does the Act authorize EPA review of SIP revisions for conformity with state law: "Section

[7410(l)] requires us to evaluate proposed SIP revisions in relation to applicable requirements of the CAA, not state

rules." 73 Fed. Reg. 60,957, 60,961 (Oct. 15, 2008) (emphasis in original) (approving a revision to Alabama's SIP).

In this case, the EPA overstepped the bounds of its narrow statutory role in the SIP approval process. As

mentioned, on five separate occasions the EPA gave as its reason for disapproving the PCP Standard Permit that it "does

not meet the requirements of the Texas Minor NSR Standard Permits SIP." 75 Fed. Reg. 56,424, 56,445 (Sept. 15,

2010) (emphasis added). This [**20] attempt by the EPA to enforce state law standards was ultra vires. It was "in

excess of statutory . . . authority," in contravention of 5 U.S.C. § 706(2)(C). In addition, because state law is a "factor[]

which Congress has not intended [the EPA] to consider," the EPA's reliance on it was arbitrary and capricious. State

Farm, 463 U.S. at 43.

The EPA now attempts to discount its repeated invocation of state law standards by pointing to its passing

assertions in its final rule that the "EPA is disapproving the [PCP Standard Permit] because it does not meet the

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requirements of the CAA," 75 Fed. Reg. at 56,424, and that the "EPA reviews a SIP revision submission for its

compliance with the Act and EPA regulations." Id. at 56,447. This will not do, however, because these bald assertions

are belied by the entirety of the EPA's discussion of the PCP Standard Permit. Nowhere in either the proposed or final

disapproval does the EPA explain how the PCP Standard Permit is inconsistent with any particular provision of the Act.

In addition to the EPA's five unambiguous statements that it relied on Texas law, a holistic review of the EPA's analysis

demonstrates that it evaluated the PCP Standard Permit [**21] for compliance with the features of Texas's

SIP-approved standard [*927] permits program, not the requirements of the CAA. See, e.g., id. at 56,445 (discussing at

length the ways in which the PCP Standard permit purportedly "does not meet the requirements of" Texas's standard

permits program). The EPA impermissibly treated Texas's standard permits program as if it were the applicable legal

standard.6

6 Nor could the EPA have lawfully treated Texas's SIP-approved standard permits program as a proxy for the

CAA's requirements in this case, as the EPA suggested at oral argument. That the standard permits program

meets the CAA's requirements does not mean that it supplants those requirements in the next case. It may be that

the program passed CAA muster with flying colors, and that the PCP Standard Permit could likewise satisfy the

Act even assuming, for argument's sake, that it does not meet the high standards of the standard permits program

and is significantly less environmentally protective (assumptions that Petitioners vigorously dispute and that

seem unlikely given that PCPs are, by definition, environmentally protective).

B. The So-Called "Similar Source" Requirement

In addition to disapproving [**22] the PCP Standard Permit for not complying with the EPA's interpretation of

Texas law, the agency also disapproved it on the grounds that its availability is not limited to "similar sources." 75 Fed.

Reg. at 56,447. According to the EPA's proposed disapproval, the "similar source" requirement limits the availability of

each standard permit to a "narrowly defined categor[y] of emission sources," such as "oil and gas facilities, asphalt

concrete plants, and concrete batch plants." 74 Fed. Reg. at 48,476 & n.10. Petitioners challenge the EPA's authority to

impose a "similar source" requirement, arguing that no such requirement exists in any applicable provision of the CAA

or its implementing regulations. The EPA parries that it has "properly tie[d] the requirement that general permits be

limited to similar sources to CAA section 110(a)(2) [42 U.S.C. § 7410(a)(2)] requirements that control measures be

enforceable." The EPA then points to several agency guidance documents that are said to "elucidate principles" relevant

to its interpretation of the Act--presumably out of the hope that we will apply Chevron deference in reviewing that

interpretation. See Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842-43, 104 S. Ct. 2778, 81 L.

Ed. 2d 694 (1984). [**23] Petitioners reply that the EPA's "similar source" requirement merits no deference and is

without support in the CAA.

We first address what level of deference, if any, we owe to the EPA's interpretation of § 7410(a)(2) as embracing a

"similar source" requirement. We do not owe any deference to that interpretation based on the EPA's insistence on a

"similar source" requirement in its proposed and final disapproval. That is because nowhere in the rulemaking record

does the EPA even hint that the "similar source" requirement reflects its interpretation of any applicable provision of the

CAA or its implementing regulations.7 There is thus no agency interpretation in the rulemaking record to which to

defer. See United States v. Mead Corp., 533 U.S. 218, 226-27, 121 S. Ct. 2164, 150 L. Ed. 2d 292 (2001) (setting forth

the framework for when and to what degree courts must defer to agency interpretation "of a particular statutory

provision"). For this same reason we owe [*928] no deference to the "similar source" requirement based on the EPA's

citation to agency guidance documents. See 74 Fed. Reg. at 48,476 n.11 (citing various agency guidance documents).

The EPA concedes that these documents do not interpret the relevant statutory [**24] provisions--that is, those that

govern SIP approval of minor NSR. See 75 Fed. Reg. at 56,447 ("The utility of these citations is not in the specific

subject matter they address, but in their discussion of the regulatory principles to be applied in reviewing permit

schemes that adopt emission limitations created through standardized protocols.").8

7 To the contrary, the EPA suggested in its final rule that the "similar source" standard derives from Texas law.

See, e.g., 75 Fed. Reg. at 56,444 ("Under the Texas Standard Permits Minor NSR SIP, an individual Standard

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Permit must be limited to new or existing similar sources."). Insofar as the "similar source" requirement reflects

the EPA's interpretation of Texas law, imposition of it here is ultra vires for the reasons discussed above in Part

III.A.

8 The EPA stated in its final disapproval that "[t]he memoranda cited in the proposal were cited for the purpose

of providing documentary evidence of how EPA has exercised its discretionary authority when reviewing

general permit programs similar to the Texas Standard Permits SIP." Id. (emphasis added). This statement

reflects a misapprehension by the EPA of its authorized role in the SIP-approval [**25] process. As discussed

above, the EPA does not possess any "discretionary authority" in that process. See 42 U.S.C. § 7410(k)(3). Only

the states enjoy discretion in implementing the dictates of the CAA. See, e.g., Union Elec. Co., 427 U.S. at 250

("Each State is given wide discretion in formulating its [SIP].").

Nevertheless, we must still consider whether we owe some measure of deference to the EPA's interpretation of the

Act in its appellate brief, which represents the first time it has argued that the CAA authorizes it to impose a "similar

source" requirement on minor NSR. Chevron deference is out of the question. See Pool Co. v. Cooper, 274 F.3d 173,

177 n.3 (5th Cir. 2001) (litigation briefs are not entitled to Chevron deference). Still, we ordinarily must afford a weaker

form of deference under Skidmore v. Swift & Co., 323 U.S. 134, 65 S. Ct. 161, 89 L. Ed. 124 (1944), to agency

interpretations of statutes they administer that do not carry the force of law and, therefore, do not command Chevron

deference. Mead, 533 U.S. at 234-35. The deference due under Skidmore varies with the persuasive force of the agency

interpretation. See id. at 228. In Mead, the Court described as "near indifference" the level of Skidmore [**26]

deference due "an interpretation advanced for the first time in a litigation brief." Id. (citing Bowen v. Georgetown Univ.

Hosp., 488 U.S. 204, 212-13, 109 S. Ct. 468, 102 L. Ed. 2d 493 (1988)). In discussing the deference question in Bowen,

the Court explained that "[d]eference to what appears to be nothing more than an agency's convenient litigating position

would be entirely inappropriate." Bowen, 488 U.S. at 213. Thus, it appears that although we are bound to extend some

modicum of deference to the EPA's appellate counsel's interpretation, that degree of deference is minimal. See Mead,

533 U.S. at 228 (the approach outlined in Skidmore "has produced a spectrum of judicial responses," with deference to

litigation briefs at the lowest end of that spectrum).

Even affording Skidmore deference to the EPA's interpretation of the CAA, we agree with the Petitioners that the

Act does not authorize the EPA to impose a "similar source" requirement on minor NSR.9 We have already made clear

that the Act empowers the EPA to disapprove a SIP revision only "if the revision would interfere with any applicable

requirement concerning attainment [of the NAAQS] . . . or any other applicable requirement of [the Act]." § 7410(l).

Otherwise [**27] the EPA must approve the revision. § 7410(k)(3).

9 We note that the interpretation advanced in the EPA's brief is not particularly persuasive because the agency's

brief merely asserts, without any statutory analysis or support, that the "EPA properly ties the requirement that

general permits be limited to similar sources to CAA section 110(a)(2) requirements that control measures be

enforceable."

[*929] We can quickly dispense with any supposition that inclusion of a "similar source" rule in the PCP Standard

Permit is necessary to prevent interference with the NAAQS. The Texas regulations governing the PCP Standard Permit

provide that "[t]his standard permit must not be used to authorize [any PCP] that . . . the [TCEQ] executive director

determines [has] the potential to exceed a [NAAQS]." 30 Tex. Admin. Code § 116.617(a)(3)(B). Given this provision,

which makes the PCP Standard Permit unavailable for any PCP that has even the potential to cause a breach of the

NAAQS, we cannot say that the permit "would interfere" with the NAAQS. 42 U.S.C. § 7410(l) (emphasis added).

Indeed, it is impossible for the PCP Standard Permit to cause interference with the NAAQS, provided that we assume,

as we ought, [**28] that Texas will enforce this provision of its own regulations. See City of Seabrook, Tex. v. EPA,

659 F.2d 1349, 1367 (5th Cir. 1981) (admonishing that the "EPA could assume [that the] state would implement [its

regulations and if it] fails to do so, then either the EPA or a concerned citizen may bring an enforcement action").

Nor can we accept the EPA's argument that its "similar source" requirement is an applicable provision of the Act.

First, the "similar source" requirement finds no purchase in the text of any applicable provision of the Act. See §

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7410(a)(2)(C) (each SIP minor NSR program need only "include . . . regulation of the modification and construction of

any stationary source within the areas covered by the plan as necessary to assure that [the NAAQS] are achieved").10 In

addition, the inclusion of a "similar source" requirement elsewhere in the Act is strong evidence that the requirement

does not apply to minor NSR. Title V of the CAA, which governs operating permits, explicitly imposes a "similar

source" limitation. Compare § 7661c(d) (operating permit rules) with § 7410 (containing the requirements for minor

NSR); see Keene Corp. v. United States, 508 U.S. 200, 208, 113 S. Ct. 2035, 124 L. Ed. 2d 118 (1993) [**29]

("'[W]here Congress includes particular language in one section of a statute but omits it in another . . . , it is generally

presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion.'" (quoting Russello v.

United States, 464 U.S. 16, 23, 104 S. Ct. 296, 78 L. Ed. 2d 17 (1983)). Finally, the structure of the CAA militates

against reading an extra-statutory requirement into the Act's limitations on state discretion. Because the states enjoy

"wide discretion" in implementing the Act, the imposition of newfound restrictions upsets the Act's careful balance

between state and federal authority. Union Elec. Co., 427 U.S. at 250; see also Fla. Power & Light Co., 650 F.2d at 587

("The great flexibility accorded the states under the Clean Air Act is . . . illustrated by the sharply contrasting, narrow

role to be played by EPA."). This structural principle applies with special force in this case because, as previously

discussed, the Act imposes only [*930] the most minimal of requirements on minor NSR.

10 The EPA also argues that a "similar source" limitation is necessary to ensure enforceability. The only

mention of enforceability in § 7410 is the requirement that SIPs "include enforceable emission [**30]

limitations and other control measures . . . as may be necessary or appropriate to meet the applicable

requirements of this chapter." § 7410(a)(2)(A). However, the only requirement in this chapter applicable to

minor NSR is that the SIP include "regulation of the modification and construction of any stationary source

within the areas covered by the plan as necessary to assure that [NAAQS] are achieved." § 7410(a)(2)(C). As

explained above, the PCP Standard Permit necessarily meets this requirement because it is unavailable for any

PCP that has even the potential to cause a breach of the NAAQS.

Because the so-called "similar source" requirement is neither necessary to safeguard the NAAQS nor warranted by

any applicable provision of the Act, we must conclude that the EPA's insistence upon it here was unjustified. Like the

EPA's reliance on its interpretation of Texas law, its imposition of a "similar source" standard was arbitrary and

capricious. See State Farm, 463 U.S. at 43 (agency action is "arbitrary and capricious if the agency has relied on factors

which Congress has not intended it to consider"). The EPA's attempt to graft a "similar source" rule onto the applicable

provisions [**31] of the CAA was also a violation of 5 U.S.C. § 706(2)(C), which requires reviewing courts to set

aside agency action that is "in excess of statutory . . . authority."

C. "Replicability"

Petitioners further argue that the EPA lacked the authority to disapprove the PCP Standard Permit based on its view

that the permit affords the TCEQ Director too much discretion under certain circumstances. The EPA took issue with

this provision of the permit because, in the EPA's view, it does not include any "replicable" limits on how the Director

is to exercise his discretion. In a different context, the EPA has defined "replicability" to mean "procedures [that] are

sufficiently specific and nonsubjective so that two independent entities applying the procedures would obtain the same

result." 57 Fed. Reg. 13,498, 13,568 (Apr. 16, 1992) (outlining guidelines for states when developing an overall SIP

control strategy). The EPA's proposed disapproval expressed its objection as follows: "There are no replicable

conditions in the PCP Standard Permit that specify how the Director's discretion is to be implemented." 74 Fed. Reg. at

48,476. The EPA explained in its final rule that one reason it was disapproving [**32] Texas's PCP Standard Permit is

that it "lacks the requisite replicable standardized permit terms specifying how the Director's discretion is to be

implemented for the case-by-case determinations." 75 Fed. Reg. at 56,447. Petitioners contend that the EPA's reliance

on this rationale was impermissible because there is no applicable provision of the Act or the EPA's implementing

regulations that requires a state's minor NSR program to include replicable permit conditions.11

11 Petitioners also point out that the lack of "replicable" conditions is not problematic here because the permit

only grants the Director the discretion to require more of registrants if he is concerned that a registration will

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threaten public health or the NAAQS. The provision at issue states: "This standard permit must not be used [if]

the executive director determines there are health effects concerns or the potential to exceed a [NAAQS] . . .

until those concerns are addressed by the registrant to the satisfaction of the executive director." 30 Tex. Admin.

Code § 116.617(a)(3)(B). We confess that we are at a loss to comprehend the EPA's concern. Subsection

116.617(a)(3)(B) in no way jeopardizes the NAAQS. Instead, [**33] it safeguards them. It provides a safety

valve procedure whereby, in the event a registration should present even the potential of threatening the NAAQS

or public health, the Director is authorized to intervene and require the registrant to take additional steps to

protect air quality.

Moreover, the EPA's concern about the Director's discretion is especially perplexing in light of its approval,

just seven months before it disapproved Texas's PCP Standard Permit, of similar Georgia regulations that are

less environmentally protective and afford the Georgia director far greater discretion than the Texas Director.

See 75 Fed. Reg. 6,309 (Feb. 9, 2010) (approving Ga. Comp. R. & Regs. 391-3-1-.03(6)(j) into Georgia's SIP).

Georgia's regulations exempt PCPs from minor NSR construction permitting. Ga. Comp. R. & Regs.

391-3-1-.03(6)(j). The EPA approved this provision because it "applies to minor sources only." 75 Fed. Reg. at

6,312. So too does Texas's PCP Standard Permit. 30 Tex. Admin. Code § 116.617(b)(1)(C). The Georgia

director has discretion whether or not to require certain ongoing monitoring and reporting requirements. See Ga.

Comp. R. & Regs. 391-3-1-.03(2)(c) ("As a condition for [**34] the issuance of an operating permit, the

Director may require the applicant to conduct performance tests and monitoring and provide reports concerning

operations."). By contrast, Texas's detailed reporting, recordkeeping, and monitoring requirements are

mandatory. See 30 Tex. Admin. Code §§ 116.617(b)(1), 116.617(e).

[*931] Petitioners are correct. The EPA had no legal basis to demand "replicable" limitations on the Director's

discretion. Not once in its proposed or final disapproval, or in its argument before this court, has the EPA pointed to any

applicable provision of the Act or its regulations that includes a "replicability" standard. Moreover, the EPA cannot

argue that the lack of replicable conditions would interfere with the NAAQS because, as we have explained, §

116.617(a)(3)(B) can only serve to protect the NAAQS. Thus, the EPA had no statutory basis under 42 U.S.C. § 7410(l)

to disapprove Texas's SIP revision because of "replicability" concerns.

This straightforward conclusion is unaffected by the EPA's invocation of an agency policy document, entitled the

"General Preamble for the Implementation of Title I of the Clean Air Act Amendments of 1990." 57 Fed. Reg. 13,498

(Apr. 16, 1992) [**35] [hereinafter General Preamble]. The only portion of the rulemaking record that discusses the

General Preamble is Section IV.A of the proposed rule, which begins with the heading: "What are the Requirements for

EPA's Review of a Submitted Major NSR SIP Revision?" 74 Fed. Reg. at 48,471-72 (emphasis added). The EPA's

discussion of the PCP Standard Permit appears pages later, in Section VII of the proposed rule, under the heading:

"Does the Submitted PCP Standard Permit Meet the Minor NSR SIP Requirements?" Id. at 48,475-76. Thus, it is post

hoc rationalization for the EPA now to argue that it relied on the General Preamble in concluding that §

116.617(a)(3)(B)--which indisputably applies only to minor sources--"lacks the requisite replicable standardized terms."

75 Fed. Reg. at 56,447 (final rule). We must disregard this post hoc rationale. See Burlington Truck Lines, 371 U.S. at

168-69. Moreover, even if we were to consider the 1992 General Preamble, it would not change our conclusion that the

CAA does not impose a "replicability" standard on minor NSR. We do not owe Chevron deference to the General

Preamble because, by its own terms, it does not carry the force of law. See Mead, 533 U.S. at 226-27 [**36] (Chevron

deference only due agency statutory interpretations "promulgated in the exercise of" the agency's delegated authority "to

make rules carrying the force of law"). The General Preamble states unequivocally that it represents only the "EPA's

preliminary interpretations, and thus do[es] not bind the States and the public as a matter of law." 57 Fed. Reg. at

13,498. Although Skidmore instructs us to defer to agency interpretations insofar as they are persuasive, see Mead, 533

U.S. at 234-35 (Skidmore deference due agency interpretations that do not qualify for deference under Chevron), in our

view the General Preamble's discussion of "replicability" does not reflect a persuasive interpretation of the provisions of

the CAA applicable to minor NSR. As the State of Texas correctly observes in its reply brief, the General Preamble

"does not expressly address Minor NSR SIP revisions" and was issued in response to CAA amendments "dealing with

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SIP requirements for major sources in nonattainment areas" (emphasis in original).

[*932] Like Texas law and the "similar source" limitation, "replicability" is not a legal standard that the Act

authorizes the EPA to enforce when reviewing a state's minor [**37] NSR program. Thus, the EPA acted "in excess of

statutory . . . authority," and thereby violated 5 U.S.C. § 706(2)(C), by disapproving the PCP Standard Permit based on

the want of replicable limitations in 30 Tex. Admin. Code § 116.617(a)(3)(B). Moreover, "replicability" was (yet

another) "factor[] which Congress has not intended [the EPA] to consider," meaning the EPA's reliance on it was (yet

again) arbitrary and capricious agency action. State Farm, 463 U.S. at 43.

IV. CONCLUSION

This chapter in regulatory history has lasted almost two decades. Texas submitted its first two standard permits for

PCPs to the EPA for approval in 1994. Texas made various amendments to these permits over the years, and promptly

submitted each amendment to the EPA. The most recently amended version is the PCP Standard Permit at issue in this

case. Despite an eighteen-month statutory deadline, the EPA did not take action on any of these submissions until

September 15, 2010. At that late date, the EPA disapproved the PCP Standard Permit--submitted four and a half years

earlier--based on its purported nonconformity with three extra-statutory standards that the EPA created out of whole

cloth. Moreover, the EPA [**38] did this in the context of a cooperative federalism regime that affords sweeping

discretion to the states to develop implementation plans and assigns to the EPA the narrow task of ensuring that a state

plan meets the minimum requirements of the Act. The EPA applied these unauthorized standards to disapprove of a

state program for projects that reduce air pollution and that, under the Act's plain terms, is subject to only the most

minimal regulation.

Because the EPA waited until more than three years after the statutory deadline to act on Texas's submission, we

order the EPA to reconsider it expeditiously. On remand, the EPA must limit its review of Texas's regulations to

ensuring that they meet the minimal CAA requirements that govern SIP revisions to minor NSR, as set forth in 42

U.S.C. § 7410(a)(2)(C) and § 7410(l). If Texas's regulations satisfy those basic requirements, the EPA must approve

them, as § 7410(k)(3) requires.12 That is the full extent of the EPA's authority in the SIP-approval process because that

is all the authority that the CAA confers. See La. Pub. Serv. Comm'n v. FCC, 476 U.S. 355, 374, 106 S. Ct. 1890, 90 L.

Ed. 2d 369 (1986) ("[A]n agency literally has no power to act . . . unless and until Congress [**39] confers power upon

it.").

12 It is difficult to conceive, and the EPA has not suggested, how it could disapprove the PCP Standard Permit

under the appropriate statutory factors. The provisions of the CAA that apply to minor NSR require state

regulation only insofar as is necessary to assure achievement of the NAAQS, see 42 U.S.C. §§ 7410(a)(2)(C),

7410(l), and Texas's regulations provide that "[t]his standard permit must not be used to authorize [any PCP]

that . . . the [TCEQ] executive director determines [has] the potential to exceed a [NAAQS]." 30 Tex. Admin.

Code § 116.617(a)(3)(B). In addition, we have already concluded that each of the EPA's grounds for disapproval

was unlawful. Finally, when pressed at oral argument, the EPA was unable to identify any legal deficiency with

the PCP Standard Permit--other than its supposed failure to meet the EPA's extra-statutory requirements that

today we hold unlawful--despite the half decade the EPA has had to evaluate it. Nevertheless, we defer to the

agency to reevaluate Texas's regulations in light of the proper CAA standards.

We VACATE the EPA's disapproval of 30 Tex. Admin. Code §§ 116.610(a), [*933] 116.610(b), and 116.617 and

REMAND with instructions [**40] that the EPA reconsider these regulations and approve or disapprove them most

expeditiously.

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