ORAL ARGUMENT NOT YET SCHEDULED
IN THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

) CALIFORNIA COMMUNITIES AGAINST ) TOXICS, et al. , ) ) Petitioners, ) )
v. ) No. 11

- 71127 ) UNITED STATES ENVIRONMENTAL ) PROTECTION AGENCY , et al. , ) ) Respondents

. ) )

EPA’S MOTION FOR A VOLUNTARY REMAND OF THE RECORD , TO VACATE THE BRIEFING SCHEDULE , AND TO STAY THE

PROCEEDINGS DURING REMAND

IGNACIA S. MORENO Assistant Attorney General Environment and Natural Resources Di vision AMY J. DONA United States Department of Justice Environmental Defense Section P.O. Box 23986 Washington, D.C. 20026

- 3986 Attorney s for Respondents Case: 11-71127 09/14/2011 ID: 7892873 DktEntry: 28-1 Page: 1 of 21P ursuant to Rule 27, Federal Rules of Appellate Procedure, Respondent s

United States Environme ntal Protection Agency, Administrator Lisa P. Jackson, and Regional Administrator Jared Blumenfeld (collectively “EPA” or the “Agency” ) , respectfully move the Court for a n order remand ing to the Agency the record for the final rule under review in this case, va cating all pending procedural deadlines , including due dates for remaining briefs, and holding this case in abeyance during the
time of remand to allow EPA to address three specific issues in the final rule and to provide a more complete explanation of the decision being challenged in this case

. Counsel for all other parties have been contacted regarding this motion. Counsel for Petitioners California Communities Against Toxics and Communities for a Better Environment (collectively “Petitioners”) have i ndicated that their clients intend to file a memorandum in opposition to the motion . Counsel for Intervenor CPV Sentinel Energy Project has indicated that his client does not oppose the motion,
but reserves the right to file a response . Counsel for Inte rvenor South Coast Air Quality Management District has indicated that its client supports the motion and
does not intend to file a response.
INTRODUCTION Petitioners challenge EPA’s final rule entitled “Revision to the South Coast
Portion of the California State Implementation Plan, CPV Sentinel Energy Project, AB 1318 Tracking System,” 76 Fed. Reg. 22 , 038 (April 20, 2011) (hereinafter “AB 1318 Rule”). The AB 1318 Rule , promulgated by the State of California under the Case: 11-71127 09/14/2011 ID: 7892873 DktEntry: 28-1 Page: 2 of 212

authority of the Clean Air Act (“CAA” or the “Act”), 42 U.S.C. §§ 7401

- 7671 q , incorporates enabling language into the South Coast portion of the California State Implementation Plan (“ SIP ”), and by that incorporation, approves as meeting federal
CAA requirements the transfer of specifically i dentified emission reduction credits for coarse particulate matter ( PM 10 ) and sulfur oxides ( SO x

). Th ese emission reduction
credits accru ed when specific emission sources shut down or curtailed their operations. The se emission reduction credits were then tracked by the South Coast Air Quality Management District (“SCAQMD”) and transferred into a specific tracking system for the use of the CPV Sentinel Energy Project to offset increases in the emissions of these two pollutants due to that project

. Petition ers ’ Corrected Opening Brief asserts that EPA’s rulemaking was both procedural ly and substantively flawed , and for the first time, provides important details in support of their substantive arguments

. As explained in further detail below, based on the Age ncy’s examination of those arguments and additional review of the record in light of those arguments, EPA now concedes that its reasoning in approving
the AB 1318 Rule contains errors that sho uld be corrected before this Court considers the challenges to E PA’s action

. In addition, EPA believes that it can provide a more detailed and accurate explanation of how it determined that t he emission reduction credits listed in the Final Rule satisfy the federal offset requirements set forth at 40 Case: 11-71127 09/14/2011 ID: 7892873 DktEntry: 28-1 Page: 3 of 213

C

. F

. R § 51.165(a) (3)(ii)(C)(1)(i)

- (ii) , which will then be of aid to the Court in assessing the validity of EPA’s action

. EPA seeks a voluntary remand of the record to allow it the opportunity to reconsider certain of its responses to comments and provide additional info rmation in the record of approving the AB 1318 Rule

. T hough EPA disagrees with Petitioners’
contention that the rulemaking was procedurally flawed , the process proposed by EPA on remand will allow for additional opportunity for notice and comment, mooting Petitioners’ procedural claim. Ultimately, granting this motion may conserve the Court’s and the parties’ resources, as it would allow EPA to address acknowledged deficiencies in its SIP approval without the need for further briefing, oral argument, or

a Court decision, and avoid the possibility of a second round of litigation in the future to address the merits once the Agency has better explained its decision.
BACKGROUND
A. Statutory and Regulatory Background

. The CAA establishes a comprehensive program f or controlling and improving
the United States ’ air quality through state and federal regulation. Since its inception in 1970, the CAA has depended upon federa l and state cooperation to protect and improve the nation’s air quality. Under the CAA, EPA mus t identify air pollutants that endanger the public health and welfare and promulgate National Ambient Air Quality Standards (“NAAQS”) that specify the maximum permissible concentrations Case: 11-71127 09/14/2011 ID: 7892873 DktEntry: 28-1 Page: 4 of 214

for those air pollutants in the ambient air. 42 U.S.C. §§ 7408, 7409. In turn, States must implement NAAQS through state implementation plans, or SIPs, which establish specific control measures that apply to particular sources of air pollution within a State and are designed to attain, maintain, and enforce NAAQS. Id . §
7 410(a)(1). States are required to adopt each SIP in a legally enforceable form after notice and a public hearing, and must submit the adopted SIP to EPA for approval within three years of EPA’s promulgation or revision of a NAAQS. 42 U.S.C. § 7410(a)(1)

. The SIP approval process is not static; States routinely submit SIP revisions to EPA for approval consistent with the requirements of the CAA, such as when changes to federal or state law occur and the State seeks to incorporate those changes into the
S IP. See id

. § 7410(a)(2)(H) (requiring that SIPs provide for regular revisions to reflect evolving air quality conditions and standards). Once submitted for approval, EPA conducts a completeness review of the SIP.
Id. § 7410(k)(1)(B). If EPA determine s the submission is complete, “the Administrator shall approve” the SIP within 12 months of such determination “if it meets all of the applicable requirements” of the CAA. Id. § 7410(k)(2) & (3). With regard to SIP revisions, EPA must disapprove a revision if it “would interfere with any applicable requirement concerning attainment and reasonable further progress .

. . or any other applicable requirement” under the CAA. Id. § 7410( l ). Case: 11-71127 09/14/2011 ID: 7892873 DktEntry: 28-1 Page: 5 of 215

All SIPs, including SIP revisions, are subject to certain statutory and regulatory requirements, including CAA Part D, Sections 171

- 193, for non attainment pollutants.
Id . §§ 7410(a)(2) , 7501

- 15. CAA sections 172(c )(6) and 173 require that SIPs establish a permitting program for new and modified major stationary sources loca ted in
nonattainment area s ; that program must include provisions requiring that emission
increases be offset by corresponding emission reductions

. Id . §§ 7502(c)(6), 7503. Section 173(c) requires that o ffsetting emissions reductions be “in effect and
enf orceable” when a new source begins operations and the resulting increases in
emissions be “offset by an equal or greater reduction” tha t was not “otherwise required.” Id

. § 7503(c)
EPA has elaborate d on the “ integrity ” criteria set forth in CAA section 17 3(c)
in its implementing regulation s , 40 C

. F

. R . § 51.165(a)(3)(ii)(C)(1)(i) and 40 CFR pt. 51, App. S IV(C)(3)(i)(1) , stating that emission reductions are generally creditable for use
as offsets if the reductions are surplus, permanent, quantifiable, and f ederally
enforceable. EPA has also established by regulation a “base year” requirement for
emission reductions result ing from past shutdowns and curtailments to be credited as offsets, 40 C

. F

. R . § 51.165(a)(3)(ii)(C)(1) (ii) and 40 CFR pt. 51, App. S IV(C )(3)(i)(2).
These “base year” provision s provide that such emission reductions may generally be
creditable for use as an offset if “ t he shutdown or curtailment occurred after the last day of the base year for the SIP planning process , ” with the caveat tha t emission Case: 11-71127 09/14/2011 ID: 7892873 DktEntry: 28-1 Page: 6 of 216

reductions from a prior shutdown or curtailment may be considered “ to have occurred after the last day of the base year if the projected emissions inventory used to develop the attainment demonstration explicitly includes the emissions from such previously shutd own or curtailed emission units

. ” Id. (emphasis added.) Of particular relevance to this motion, the regulatory language at 4 0 C.F.R. § 51.165(a)(3)(ii)(C)(1) has been the subject of recent regulatory revision and judicial
review. See NR

DC v. EPA , 571 F.3d 1245, 1263

- 67 (D.C. Cir. 2009). This regulatory provision was revised as a part of comprehensive rulemaking that was finalized after
reconsideratio n in 2007. See Phase 2 of the Final Rule To Implement the 8

- Hour Ozone National Air Qu ality Standard

— Notice of Reconsideration , 72 Fed. Reg. 31 , 727, 31 , 738

- 43 ( June 8, 2007)

. In that rulemaking, EPA restructured the regulation, subdivid ing the “integrity” criteria and the “base year” requirement, and eliminating a previously

imposed requir ement that an approved attainment demonstration be in place to allow

new and m odified sources to meet the offset requirement

. 1 See id

. This revision of

1 Prior to the rulemaking that concluded in 2007, 40 C

. F

. R . § 51.165(a)(3)(ii)(C)(1) stated: Emissions reductions achieved by shutting down an existing source or curtailing production or operating hours below baseline levels may be generally credited if such reductions are permanent, quantifiable, and federally enforceable, and if the area has an EPA

- approved attainment plan. In addition, the shutdown or curtailment is creditable only if it occurred on or after the date speci fied for this purpose in the plan, and if such date is on or after the date of the most recent emiss ions inventory used in the plan’ s demonstration of Case: 11-71127 09/14/2011 ID: 7892873 DktEntry: 28-1 Page: 7 of 217

the regulation was subsequently challenged in the Court of Appeals for the District of
Columbia Circui t . That court held that the elimination of the “fully

- approved SIP requirement” was arbitrary and capricious , and remanded that portion of the 2007 rulemaking without vacatur

. NRDC , 571 F.3d at 1267 , 1276

. The Agency has not revised the regulatory langu age of the “ base year ” requirement following the NRDC v.
EPA decision

. B. Factual Background

. The South Coast Air Quality Management District (“SCAQMD”) is the state entity responsible for managing the air quality in the South Coast Air Basin and the
River side portions of the Salton Sea Air Basin. Cal. Health & Safety Code § 40412 ; Cal. Code Regs. tit. 17, §§ 60614, 60114

. The South Coast Air Basin and the
Coachella Valley planning area , one of the areas within the Riverside portion of the
Salton Sea Air Basin, have been designated as nonattainment for PM 10 . 40 C

. F

. R

. §
81.305

. S ulfur oxides are a precursor to PM 10 , and therefore , are also treated as a
PM 10 nonattainment pollutant

. 42 U.S.C. § 7513a(e). SCAQMD has been operating
an internal bank of e mission offsets , including PM 10 and SO x offsets, for over 15 years

attainment. Where the plan does not specify a cutoff date for shutdown credits, the date of the most rece nt emissions inventory or attainment demonstration, as the case may be, shall apply.

. . . Requirements for Implementation Plans; Air Quality New Source Review , 54 Fed. Reg. 27 , 286, 27, 299 (June 28, 1989)

. Case: 11-71127 09/14/2011 ID: 7892873 DktEntry: 28-1 Page: 8 of 218

in conjunction with SCAQMD New Source Review r ules that were approved by EPA
in 1996. See Approval and Promulgation of Implementation Plan for [SCAQMD] , 61 Fed. Reg. 64 , 291 (Dec. 4, 1996). Generally, SCAQMD’s internal bank is used to provide offsets for sources that are exempted from offsetting rules by SCAQMD Rule 1304 and for sources that are considered “priority sources” under SCAQMD Rule 1309.1.
See id

. at 64,292.
The CPV Sentinel E nergy Project is designed to be a 850

- megawatt electrical generating facility in Riverside County, California

. See 76 Fed. Reg. 22038

. SCAQMD adopted the CPV Sentinel Energy Project AB 1318 Tracking System (hereinafter “AB 1318 Tracking System”) on July 9, 2010, and the California Air Resources Board (CARB) submitted the AB 1318 Tra cking System to EPA as a source

- specific SIP revision on September 10, 2010. See Proposed Rule

— Revision to the South Coast Portion of the Cal. [SIP]CPV Sentinel Energy Project AB 1318 Tracking System, 76 Fed. Reg. 2294 (Jan. 13, 2011)

. The proposed SIP revision consists of text to be included as a
revision to the South Coast portion of the California SIP, and the AB 1318 Tracking System created to implement this new SIP provis ion. See id

. The A B 1318 Tracking System transfer s credits from the SCAQMD internal bank to a new internally
maintained “account” from which the CPV Sentinel Energy Project can purchase
credits of PM 10 and SO x to offset emission increases of these pollut ants resulting from the project’s operation. See id

. at 2295. Case: 11-71127 09/14/2011 ID: 7892873 DktEntry: 28-1 Page: 9 of 219

EPA published its proposed approval of the SIP revision on January 13 , 201 1 , and provided a 30

- day public comment period. See id

. Petitioners jointly submitted

comments that, in addition to other arguments, asserted that approval of the proposed SIP revision would violate CAA section 173(c) and 40 C

. F

. R . § 51.165(a)(3)(ii)(C)(1)(i)

- (ii) , as well as the Administrative Procedures Act (“APA”)

. See 76 Fed. Reg. 22,038

. Petitioners’ comments and EPA’s responses in regard to three offset requirements under 40 CFR 51.165(a)(3)(ii)(C)(1)(i)

- (ii) are of particular relevance to the present motion. First, Petitioners asserted that the emission reductions were not “surplus” and thus could not be used for offsets, but in making this assertion,
Petitioners did not identify a ny new rule or standard that would require recalculation or adjustment of the credits listed in the AB 1318 Tracking System. See id . at 22 , 041.
EPA thus rejected Petitioners’ conten tion , stating that “[SCAQMD] has not promulgated new rules or standards that would apply to these types of sources, and thus no adjustments to the credits were required.” Id

. Second, Petitioners argued that the emission reductions listed in the AB 1318
T racking System were not “ quantifiable ” and thus could not be used for offsets, but they did not specify any particular emission reductions that violated the “quantifiable” requirement. Id

. Instead, Petitioners referenced the lack of SCAQMD supporting
do cuments in the electronic docket

. See id

. EPA responded that SCA QMD had Case: 11-71127 09/14/2011 ID: 7892873 DktEntry: 28-1 Page: 10 of 2110

provided detailed background documentation about the emission reductions , id

. , and
that EPA “examined each of the specific emission reduction actions that are the basis
for the credi ts being transferred pursuant to this SIP revision and found a sufficient quantity

— compared to the amount needed for the CPV Sentinel Energy Project, to meet the CAA offset requirements.” Id . at 22 , 039. Third, Petitioners argued that the proposed SIP rev ision violates the “base year” requirement of 40 C

. F

. R . § 51.165(a)(3)(ii)(C)(1)(ii). See id . at 22 , 041

- 42.
Petitioners stated that under the SCAQMD’s 2007 Air Quality Management Plan ( “ AQMP ” ), the applicable base year was 2002 , and since the 2007 AQMP di d not include emission reductions pre

- dating 2002 in the emissions inventory , certain emission reductions listed in the AB 1318 Tracking System were not creditable as
offsets

. See id

. In response, EPA also referenced the 2007 AQMP, noting the 2002
basel ine, but stating its belief that because S CAQMD adds a portion of pre

- baseline
emission reductions into the emissions inventory for each future year , SCAQMD complies with the “base year” requirement. See id

. Regarding the alleged procedural violation of the APA, Petitioners highlighted
the fact that supporting documentation provided by SCAQMD was not provided in
the electronic docket or listed in the administrative index of materials accompanying the proposed rule

. See id

. at 22 , 040. Petitioners argued that this failure , combined
with certain confusing language in the proposed rule, deprived the public of a Case: 11-71127 09/14/2011 ID: 7892873 DktEntry: 28-1 Page: 11 of 2111

meaningful opportunity to review and comment on the proposed rule. See id

. EPA rejected the allegation of procedural error, noting that the docum entation was provided in the docket and was available at the hard copy location

. See id

. EPA also
noted that the same records had previously been provided to Petitioner California
Communities Against Toxics by SCAQMD before the proposed rule was publishe d.
See id

. EPA ultimately conclud ed that the SIP revision complie d with all relevant CAA requirements , and it fully approved the SIP revision into the California SIP on April 20, 2011. See id

. at 22 , 043. Petitioners promptly filed this petition for revi ew, and in
their Corrected Opening Brief renewed their arguments that the SIP revision violates
certain requirements set forth in 40 C

. F

. R . § 51.165(a)(3)(ii)(C)(1)(i)

- (ii) with greater specificity, and also argued that the rulemaking violates the APA. EP A’s Response Brief is currently due September 23, 2011.
ARGUMENT
A. Standard for Granting a Voluntary Remand

. “A reviewing court has inherent power to remand a matter to the administrative agency.” Loma Linda Univ. v. Schweiker , 705 F.2d 112 3 , 1127 (9 th Ci r. 1983). “[I]t is generally accepted that in the absence of a specific statutory limitation, an administrative agency has the inherent authority to reconsider its decisions.”
Macktal v. Chao , 286 F.3d 822, 825

- 26 (5th Cir. 2002) ; see also Trujillo v. G en. Elec. Co. , Case: 11-71127 09/14/2011 ID: 7892873 DktEntry: 28-1 Page: 12 of 2112

621 F.2d 1084, 1086 (10th Cir. 1980) (noting that “the power to decide in the first instance carries with it the power to reconsider”) . This authority includes the right to seek voluntary remand of a challenged agency decision, without conf essing error. SKF USA Inc., v. United States , 254 F.3d 1022, 1029 (Fed. Cir. 2001). For example, the agency may seek remand because it wishes to reconsider its interpretation of the governing statute, the procedures it followed in reaching its decision, or the decision’s relationship to other agency policies. Id

. “Where the agency has failed to consider important evidence, the proper course is to remand for reconsideration rather than [having the court] undertake its own inquiry into the merits.” Loma Linda Univ. , 705
F.2d at 1127.
W hile the reviewing court has discretion over whether to remand, voluntary remand is appropriate where the request is reasonable and timely. Macktal , 286 F.3d
at 826

. “Administrative reconsideration is a more expeditious and efficient means of achieving adjustment of agency policy than is resort to the federal courts.” B.J. Alan Co., Inc. v. ICC

, 897 F.2d 561, 562 n.1 (D.C. Cir. 1990) (quoting Commonwealth of Pennsylvania v. ICC

, 590 F.2d 1187, 1194 (D.C. Cir. 1978))

. As the Court of Appeals for the District of Columbia Circuit has stated, “[w]e commonly grant such motions, preferring to allow agencies to cure their own mistakes rather than wasting the courts’ and the parties’ resources reviewing a record that both side s acknowledge to be incorrect or incomplete.” Ethyl Corp. v. Browner , 989 F.2d 522, 524 (D.C. Cir. 1993); Case: 11-71127 09/14/2011 ID: 7892873 DktEntry: 28-1 Page: 13 of 2113

s ee also Anchor Line Lt

d

. v. Fed. Maritime Comm’

n , 299 F.2d 124, 125 (D.C. Cir. 1962) (“[W]hen an agency seeks to reconsider its action, it should mo ve the court to remand or to hold the case in abeyance pending reconsideration by the agency”). In determining whether to remand to the agency or to vacate the agency’s decision, the court considers “the seriousness of the . . . 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. U.S. Nuclear Regulatory Comm’n , 988 F.2d 146, 15 0

- 5 1 (D.C. Cir. 1993); see also Cook Inletkeeper v

. EPA , 400 F. App’x 239, 241 (9 th Cir. 2010) (granting EPA’s motion for voluntary remand, leaving the disputed permit in place during remand to avoid the disruptive consequences that would flow from vacating the permit) ; W. Oil & Gas Assoc. v. EPA , 633 F.2 d 803, 813 (9 th Cir. 1980) (remanding a procedurally flawed CAA rulemaking without vacatur in order to avoid possibility of unforeseen, undesirable consequences)

. Where the deficiency in the challenged agency action is one of inadequate explanation, and w here there is the possibility that the agency may cure that deficiency and thus aid proper judicial review by offering additional explanation, past courts have ordered remand of the record to allow the agency time and opportunity to provide that better exp lanation, with the court retaining jurisdiction during the remand. See , e.g. , Public Service Comm’n of Kentucky v. FERC , No. 03

- 1092, 2004 WL 222900 (D.C. Case: 11-71127 09/14/2011 ID: 7892873 DktEntry: 28-1 Page: 14 of 2114

Cir. Jan. 21, 2004) (granting FERC’s motion to remand the record and hold the case in abeyance to “p rovide further explanation of the basis for its decision to use the midpoint approach in calculating” rates of return); OZ Technology Inc. v. EPA , 129 F.3d 631, 634 (D.C. Cir. 1997) (noting prior order granting EPA’s request for remand of the record, and t he Agency’s action during that remand to better address documentation that had been submitted to EPA); State of Ohio v. Dept

. of Interior , 880 F.2d 432, 438 (D.C. Cir. 1989) (remanding record to DOI for “clarification of its interpretation of its own regul ations”).
B. Remand of the Record to EPA is Appropriate in this Case

. EPA asks the Court to remand the record to the Agency so that EPA may
reconsider how the “surplus” and “quantifiable” requirement s of 40 C

. F

. R . § 51.165(a)(3)(ii)(C)(1)(i) affect the em ission reductions listed in the AB 1318 Tracking System, and whether its analysis of the “base year” requirement of 40 C.F.R. § 51.165(a)(3)(ii)(C)(1)(ii) is premised on a flawed interpretation of the regulation. In accordance with the cases noted above, EPA also requests that the case be held in abeyance pending reconsideration by EPA

. In relation to the regulatory requirement that emission reductions must be

“ surplus ” to be creditable as offsets, Petitioners ’ Corrected Opening Brief for the first
time pointed to two SCAQMD Rules that they argue require reductions in PM 10 and
SO X and that thus would render at le ast some emission reductions “no n

- surplus”: Case: 11-71127 09/14/2011 ID: 7892873 DktEntry: 28-1 Page: 15 of 2115

Rule 1156 and Rule 1157. Pet’rs’ Br. at 21

- 22. After further review, EPA now
believe s that SCAQMD Rule 1157, and possibly an other SCAQMD Rule not cited by
Petitioners in their comments or Corrected Opening Brief , a pply to some of the
emission reductions listed in the AB 1318 Tracking System. This is contrary to EPA’s

statement i n the Final Rule that “ [SCAQMD] has not promulgated new rules or standards that would apply to these types of sources, and thus no adjustments to the credits were required.” 76 Fed. Reg. at 22 , 041

. To correct this likely error, EPA
intends to solicit additional information fro m SCAQMD regarding new rules and standards that apply to the emission reductions listed in the AB 1318 Tracking System

. With this additional information, EPA will be able to consider what quantity
of emissions reduction s , if any, should be removed from th e credit s listed in the A B 1318 Tracking System because they are not surplus as required by 40 C.F.R. § 51.165(a)(3)(ii)(C)(1)(i). EPA believes that the “non

- surplus” number of emission reductions listed in the AB 1318 Tracking System is relatively small and that the total
amount of emission reduction credits in the AB 1318 Tracking S ystem will continue to exceed the amount required for the CPV Sentinel Energy Project

. EPA also wishes to address on remand of the record which of the emission
reductions li sted in the AB 1318 Tracking System satisfy the “quantifiable”
req uirement. As noted above, Petitioners did not identify any particular emission
reductions as non

- quantifiable in their comments to the Agency , and EPA’s response Case: 11-71127 09/14/2011 ID: 7892873 DktEntry: 28-1 Page: 16 of 2116

to the comments likewise sp oke in generalities, merely stating that the AB 1318 Tracking System contains “sufficient ” credits

. Petitioners subsequently identify in
their Corrected Opening Brief one source for which the emission reductions are not quantifiable , and additionally, ar gue that the SCAQMD supporting documentation is insufficient for 69 additional pieces of equipment. See Pet’rs’ Br. at 22

- 26. EPA
concedes that some of the emission reductions referenced by Petitioners are not quantifiable , but disagrees with the scope o f Petitioners’ assertions. The Agency recognizes that the reasoning in the AB 1318 R ule on this issue should have been more complete, specifically in terms of identifying which emission reductions it
verified as “ quantifiable

. ” On remand of the record , E PA would intend to specifically identify those emission reductions that can be verified as quantifiable and those that

cannot , and explain the basis f or its conclusions. Finally, EPA intends to reconsider its discussion of the “base year” requirement of 40 C.F.R. § 51.165(a)(3)(ii)(C)(1)(ii). Petitioners presumed in both
their comments and in the Corrected Opening Brief that the base year should be
assessed in relation to the 2002 baseline set forth in the 2007 AQMP. See 76 Fed. Reg. at 22 , 042 and Pet’rs’ Br. at 26

- 28. EPA , likewise, presumed that the 2007 AQMP
was the appropriate attainment demonstration to consider in assessing the base year
when it issued the Final Rule

. EPA is now, however, reevaluating this assumption in light of the fact that the 2 007 AQMP has not been approved by EPA as a SIP Case: 11-71127 09/14/2011 ID: 7892873 DktEntry: 28-1 Page: 17 of 2117

requirement. As discussed above, the Court of Appeals for the District of Columbia
Circuit in NRDC v. EPA recently h eld that the elimination of the “fully

- approved SIP requirement” from the federal offset req uirements was arbitrary and capricious. 571
F.3d at 1267. EPA now believes the better interpretation of 40 C

. F

. R . § 51.165(a)(3)(ii)(C)(ii) is that the base year should be evaluated by reference to the base year used in the most recently approved attain ment demonstration. T he most recently approved attainment demonstration for PM 10 for this area was submitted in 2003 and approved by EPA in 2005

. See Approval and Promulgation of [SIPs] for Air Quality Planning Purposes; Cal.

— South Coast and Coachella , 70 Fed. Reg. 69 , 081 (Nov. 14, 2005)

. The base year in the 2003 AQMP is 1997 , which would affect the Agency’s
ultimate conclusion of whether certain emission reductions listed in the AB 1318 Tracking System are pre

- base year emission reductions , as require d by EPA’s offset regulations

. EPA believes t hat establishing the appropriate attainment demonstration

to be use d in determining the correct base year is a significant matter , and thus,
should be remanded for reconsideration to the Agency

. O n remand of t he record , EPA thus intends to provide additional notice and seek comments on this specific
issue.
EPA notes that Petitioners also assert that SCAQMD’s internal bank has a negative balance. This argument does not relate to the federal offset requiremen ts that EPA wishes to address on reconsideration, and EPA continues to disagree with Case: 11-71127 09/14/2011 ID: 7892873 DktEntry: 28-1 Page: 18 of 2118

this contention for the reasons set forth in the Final Rule. Though EPA does not intend to address this issue during remand , this argument should not be treated as a

seve rable claim since it does not relate to a n independent portion of the AB 1318
Rule

. Accordingly, EPA requests a full remand of the record for EPA’s decision to approve the AB 1318 Rule while the Court holds the case in abeyance. EPA requests
that the Cou rt vacate the current briefing schedule, stay the proceedings, and direct the parties to propose a new briefing schedule when EPA has completed its proceedings on remand of the record

. If remand of the record is granted, EPA intends to act with all due sp eed to propose, take comment on, and take final action concerning the AB 1318 Rule

. During the remand, EPA intends to re

- open the comment period for an additional 30 day s . Petitioners will have the opportunity to provide for the record specific data in

s upport of their contention s that the emission reductions listed in the rule do not meet the offset requirements set forth at 40 C

. F

. R . § 51.165(a)(3)(ii)(C)(1)(i)

- (ii) , along with any other information that Petitioners desire to provide on this issue. EPA will then be able to fairly evaluate Petitioners’ comments , any additional public comments , and other, additional information relevant to this issue in its final decision , resulting in a more constructive and effective agency review

. While EPA has identi fied the three specific areas described above that it wishes to address on remand of the record , the Agency may reconsider other issues discussed in AB 1318 Rule if it deems Case: 11-71127 09/14/2011 ID: 7892873 DktEntry: 28-1 Page: 19 of 2119

reconsideration warranted. Judicial review can then go forward on a more fully
de veloped record. The timing of this remand request is reasonable. EPA does not anticipate any unnecessary disruption or prejudice to any party resulting from this remand , as the CPV Sentinel facility at issue in this case is still under construction and has not yet begun operation . Moreover, r emand at this juncture will serve the interests of judicial economy because the issues that Petitioners have raised in this litigation may become moot or significantly narrowed upon remand. Finally, EPA and Interv enors agree that the Court may order the requested
record remand , rather than vacat ing EPA’s action

. Based on the information currently available to the Agency, EPA continues to believe that a sufficient number
of the credits listed in the AB 1318 Trackin g System satisfy the federal offset requirements to meet the requirements of the CPV Sentinel Energy Project

. EPA does not currently anticipate that Petitioners or other members of the public will submit any information that would cause EPA to reverse it s approval of the SIP
revision. The remand will not change the current level of regulation and will not prejudice Petitioners or any other person. See A.L. Pharma, Inc. v. Shalala , 62 F.3d 1484, 1492 (D.C. Cir. 1995) (remand without vacatur is appropriat e where no significant harm would result from allowing the decision to remain in effect). Case: 11-71127 09/14/2011 ID: 7892873 DktEntry: 28-1 Page: 20 of 2120

For the reasons set forth above, EPA seeks a voluntary remand of the record so that it may provide a more complete description of how the emission reduction
credits l isted for transfer to the AB 1318 Tracking System do or do not meet regulatory requirements, and correct the reasoning in the Final Rule. T his request is reasonable and should be granted , and this case should be held in abeyance pending EPA’s completion of proceedings on remand of the record

. Pursuant to Circuit Rule
27

- 11, the briefing schedule should be stayed pending the Court’s disposition of this
motion.
Respectfully Submitted,

IGNACIA S. MORENO Assistant Attorney General Environment and N atural Resources Division

Dated: September 14 , 2011 s/ Amy J. Dona AMY J. DONA United States Department of Justice Environmental Defense Section P.O. Box 23986 Washington, D.C. 20026

- 3986 Tel: (202) 514

- 0223 Fax: (202) 514

- 8865 amy.dona@usdoj.go v Attorneys for Respondents Case: 11-71127 09/14/2011 ID: 7892873 DktEntry: 28-1 Page: 21 of 21