UNITED STATES COURT OF APPEALS 

FOR THE NINTH CIRCUIT 

No. 11-71127 

CALIFORNIA COMMUNITIES AGAINST TOXICS, an unincorporated 

association; COMMUNITIES FOR A BETTER ENVRIONMENT, a California 

non-profit organization 

Petitioners, 

v. 

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, LISA P. 

JACKSON, Administrator, U.S. Environmental Protection Agency, and JARED 

BLUMENFELD, Regional Administrator, Region IX, U.S. Environmental 

Protection Agency, 

Respondents. 

__________________________________________________________________ 

PETITIONERS’ OPENING BRIEF 

[CORRECTED]

__________________________________________________________________ 

Angela Johnson Meszaros, SBN 174130 

 angela@cleanairmatters.net 

Timothy R. Grabiel, SBN 231045 

 tgrabiel@defenseterre.org 

Law Offices of Angela Johnson Meszaros 

1107 Fair Oaks Avenue, Suite 246 

South Pasadena, CA 91030 

323-341-5868 office 

323-872-5212 fax 

Attorneys for Petitioner California 

Communities Against Toxics 

Shana Lazerow, SBN 195491 

 slazerow@cbecal.org 

Maya Golden-Krasner, SBN 217557 

 maya@cbecal.org 

Communities for a Better Environment 

1904 Franklin Street, Suite 600 

Oakland, CA 94612 

510-302-0430 office 

510-302-0437 fax 

Attorneys for Petitioner Communities for a 

Better Environment 

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CORPORATE DISCLOSURE STATEMENT 

 Pursuant to Federal Rule of Appellate Procedure 26.1, Petitioners California 

Communities Against Toxics and Communities for a Better Environment certify 

that they have no parent companies and that no publicly held corporations own 10 

percent or more of either of the organizations. 

Dated: July 28, 2011 

 _____/s__________________ 

 Shana Lazerow 

 

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TABLE OF CONTENTS 

CORPORATE DISCLOSURE STATEMENT .......................................................... i 

TABLE OF CONTENTS .......................................................................................... ii 

TABLE OF AUTHORITIES .................................................................................... iv 

GLOSSARY ........................................................................................................... viii 

INTRODUCTION ..................................................................................................... 1 

STATEMENT OF JURISDICTION.......................................................................... 1 

STATEMENT OF THE ISSUES............................................................................... 1 

STATEMENT OF THE CASE, COURSE OF PROCEEDINGS 

AND DISPOSITION BEFORE THE AGENCY ...................................................... 2 

STATEMENT OF FACTS ........................................................................................ 3 

SUMMARY OF THE ARGUMENT ........................................................................ 8 

STANDARD OF REVIEW ....................................................................................... 9 

STANDING ............................................................................................................. 11 

ARGUMENT ........................................................................................................... 13 

I. EPA’s Refusal to Include in its Docket the Documentation Upon Which it 

 Relied was Arbitrary and Capricious .................................................................. 13 

A. The Index and Docket Lacked Reference to the Technical Documents 

 Concerning Credit Validity ........................................................................... 14 

B. EPA’s Failure to Include the Technical Information Violated the APA ....... 16 

II. The Emission Reductions Transferred into the AB 1318 Tracking System 

Violate the Clean Air Act ................................................................................... 19 

A. The Emission Reductions Violate the Offset Requirements ......................... 19 

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1. The Emission Reductions from Aggregate Operations Violate 

the Surplus Requirement .............................................................................. 20 

2. The Emission Reductions Violate the Quantifiable Requirement ............... 22 

3. The Emission Reductions Are Not Creditable Because They Have 

Not Been Included in the Emissions Inventory ............................................ 26 

B. The Internal Accounts Are Inextricably Intertwined with the AB 1318 

Tracking System ............................................................................................... 28 

1. Internal Accounts Balance is Relevant to This Rulemaking ........................ 30 

2. EPA’s Reliance On a Letter to Support its Claim About the Account 

Balances is Improper .................................................................................... 33 

CONCLUSION AND RELIEF REQUESTED ....................................................... 36 

CERTIFICATE OF COMPLIANCE WITH WORD LIMIT .................................. 37 

STATEMENT OF RELATED CASES ................................................................... 38 

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TABLE OF AUTHORITIES 

FEDERAL CASES 

Akhtar v. Burzynski, 384 F.3d 1193 (9th Cir. 2004) .......................................... 10, 11 

Bennett v. Spear, 520 U.S. 154 (1997) .................................................................... 34 

Burlington Truck Lines v. United States, 371 U.S. 156 (1962) ............................... 10 

Center for Energy and Econ. Dev. v. EPA, 

 398 F.3d 653 (D.C. Cir. 2005) ......................................................................... 12 

Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 

 467 U.S. 837 (1984) ......................................................................................... 10 

Connecticut Light and Power Co. v. Nuclear Regulatory Commission, 

 673 F.2d 525 (D.C.Cir. 1982) ......................................................................... 17 

Covington v. Jefferson County, 358 F.3d 626 (9th Cir. 2004) ................................ 12 

Desert Citizens Against Pollution v. Bisson, 

 231 F.3d 1172 (9th Cir. 2000) ........................................................................ 10 

General Motors Corp. v. U.S., 496 U.S. 530 (1990) ................................................. 3 

Hunt v. Washington State Apple Advertising Comm’n, 

 432 U.S. 333 (1977) ......................................................................................... 11 

Kern County Farm Bureau v. Allen, 

 450 F.3d 1072 (9th Cir. 2006) ................................................................... 13, 14 

Motor Vehicles Mfrs. Ass’n v. New York State Dep’t of Envtl. Conservation, 

 17 F. 3d 521 (2nd Cir. 1994).............................................................................. 3 

Motor Vehicle Mfrs. Ass’n v. State Farm Mutual Automobile Ins. Co., 

 463 U.S. 29 (1983) ........................................................................................... 10 

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Natural Resources Defense Council v. EPA, 

 507 F.2d 905 (9th Cir. 1974) ........................................................................... 12 

Natural Resources Defense Council v. EPA, 

 966 F.2d 1292 (9th Cir. 1991) ......................................................................... 13 

Natural Resources Defense Council v. South Coast AQMD, 

 Los Angeles Super. Ct. Case No. BS105728 ..................................................... 7 

Natural Resources Defense Council v. South Coast AQMD, 

 Los Angeles Super. Ct. Case No. BS110792 ............................................... 7, 32 

Oregon Natural Desert Ass’n v. U.S. Forest Service, 

 465 F.3d 977 (9th Cir. 2006) ........................................................................... 34

Ranchers Cattleman Action Legal Fund v. U.S. Dep’t of Agric., 

 415 F.3d 1078 (9th Cir. 2005) ......................................................................... 10 

South Coast Air Quality Mgmt. Dist. v. EPA, 

 472 F. 3d 882 (D.C. Cir. 2007) .......................................................................... 4 

Vigil v. Leavitt, 381 F. 3d 826 (9th Cir. 2004) ........................................................... 9 

Whitman v. Am. Trucking Ass'n, 531 U.S. 457 (2001) ............................................ 34 

FEDERAL STATUTES 

5 U.S.C. § 553 ......................................................................................................... 13 

5 U.S.C. § 706(2)(A) ...................................................................................... 9, 10, 32 

5 U.S.C. § 706(2)(D) ................................................................................................ 32 

42 U.S.C. § 7407(d) ................................................................................................... 3 

42 U.S.C. § 7409(b) ................................................................................................... 3 

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42 U.S.C. § 7410(a)(1) ........................................................................................... 3, 5 

42 U.S.C. § 7410(a)(2) ................................................................................... 5, 19, 35 

42 U.S.C. § 7410(h)(2)............................................................................................... 4 

42 U.S.C. § 7410(k) ................................................................................................... 4 

42 U.S.C. § 7501 ........................................................................................................ 5 

42 U.S.C. § 7502(c) ................................................................................................... 4 

42 U.S.C. § 7502(c)(2) ............................................................................................. 35 

42 U.S.C. § 7502(c)(3) ............................................................................................. 35 

42 U.S.C. § 7502(c)(5) ........................................................................................ 6, 19 

42 U.S.C. § 7503(a)(1) ............................................................................................... 5 

42 U.S.C. § 7503(c) ............................................................................. 4, 6, 19, 20, 22 

42 U.S.C. § 7607(b)(1)............................................................................................... 1 

42 U.S.C. § 7401-7671 .............................................................................................. 5 

E–Government Act of 2002, Pub.L. No. 107–347, 

 116 Stat. 2899, 2916 (Dec. 17, 2002) .............................................................. 18 

FEDERAL REGULATIONS 

40 C.F.R. § 50 ............................................................................................................ 3 

40 C.F.R. § 51.112 ............................................................................................. 21, 26 

40 C.F.R. § 51.165(a)(3) ...................................................................................passim 

40 C.F.R. § 51.230 ................................................................................................... 21 

40 C.F.R. § 51.852 ..................................................................................................... 4 

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40 C.F.R. § pt. 51, App. S § IV(C)(3)(i)(l) .......................................................... 4, 19 

40 C.F.R. § 52.220 ..................................................................................................... 5 

76 Fed. Reg. 22038 (Apr. 20, 2011) ................................................................ 1, 3, 16 

76 Fed. Reg. 22039 (April 20, 2011) at fn. 1 ....................................................passim 

76 Fed. Reg. 22040 (April 20, 2011) ..................................................... 16, 23, 33, 36 

76 Fed. Reg. 22041 (April 20, 2011) ...............................................20, 23, 25, 27, 35 

76 Fed. Reg. 2294 (January 13, 2011) ........................................................... 2, 14, 15 

76 Fed. Reg. 2296 (January 13, 2011) ..................................................................... 14 

STATE CODE 

Cal.. Health & Safety Code § 40412.......................................................................... 5 

 

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GLOSSARY 

Act The federal Clean Air Act, 42 U.S.C. §§ 7410 et seq.

AER Annual Emissions Report 

APA Administrative Procedure Act, 5 U.S.C. §§ 551 et seq.

AQMP Air Quality Management Plan 

District South Coast Air Quality Management District 

EPA United States Environmental Protection Agency

LCM Little Company of Mary Hospital 

NAAQS National Ambient Air Quality Standard 

NSR New Source Review 

Nonattainment 

area 

An area designated by EPA as failing to meet a 

national ambient air quality standard. 

Offset 

requirements 

Requirements of 42 U.S.C. § 7503, applicable in 

nonattainment areas, to ensure that all new emissions 

are offset by emissions reductions. 

OSCV Forms Offset Source Calculation/Verification Forms 

Sentinel 

Revision 

CPV Sentinel Energy Project AB 1318 Tracking 

System 

SIP State Implementation Plan. A plan that identifies the 

actions and programs to be undertaken by the state 

and its subdivisions to implement their 

responsibilities under the Clean Air Act. 

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INTRODUCTION 

 Petitioners California Communities Against Toxics and Communities for a 

Better Environment (collectively “Communities”) challenge approval by the 

United States Environmental Protection Agency (“EPA”) of the Revision to the 

South Coast Portion of the California State Implementation Plan, CPV Sentinel 

Energy Project AB 1318 Tracking System (“Sentinel Revision”) because EPA 

violated the Administrative Procedure Act (“APA”), failing both to reveal the basis 

for its decision to the public, and to base its decision on facts in the record. 

Communities further challenge the Sentinel Revision because it fails to meet the 

requirements of the Clean Air Act (“Act”). 

 

STATEMENT OF JURISDICTION 

 This is a petition for review of a final action of EPA made under the Clean 

Air Act. This Court has jurisdiction pursuant to section 307(b)(1) of the Act, 42 

U.S.C. § 7607(b)(1), which provides that a petition for review of a final EPA 

action “which is locally or regionally applicable” may be filed “only in the United 

States Court of Appeals for the appropriate circuit.” The petition for review must 

be filed within 60 days from the date the notice of the final action appeared in the 

Federal Register. Id. The final EPA rule at issue was published in the Federal 

Register on April 20, 2011, and is locally or regionally applicable. 76 Fed. Reg. 

22038 (Apr. 20, 2011) [Petitioners’ Excerpts of Record (“PER”) 000005]. The 

petition for review was timely filed on April 20, 2011. 

STATEMENT OF THE ISSUES 

1. Whether EPA violated the APA in refusing, in both the index to its docket and 

its electronic docket, to include the documents upon which it based its decision; 

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2. Whether EPA violated the Clean Air Act in approving emission reductions as 

meeting federal offset requirements when the factual evidence upon which it 

purported to rely was absent, and the evidence that existed was contrary to such 

a finding; 

3. Whether EPA violated the Clean Air Act in approving reliance upon “offset 

credits” that do not meet the Clean Air Act requirements of 42 U.S.C. § 7502; 

and, 

4. Whether EPA violated the Clean Air Act in allowing a transfer of “offset 

credits” from an “offset account” that cannot be shown to have a positive 

balance. 

STATEMENT OF THE CASE, COURSE OF PROCEEDINGS, AND 

DISPOSITION BEFORE THE AGENCY 

On January 13, 2011, the U.S. Environmental Protection Agency (“EPA”) 

published a notice of proposed rulemaking, for an amendment to the California 

State Implementation Plan (“SIP”) that would create “offset credits” from emission 

reductions purportedly occurring between 1999 and 2008. The SIP amendment 

would allow transfer of these credits from South Coast Air Quality Management 

District’s (“District”) internal credit bank to a new powerplant, CPV Sentinel. 

PER 000012. On two occasions, Petitioners California Communities Against 

Toxics and Communities for a Better Environment (“Communities”) sought an 

extension of time to submit comments concerning the amendment, and both times 

EPA refused the extension requests. See PER 000002. On February 14, 2011, 

Communities commented on the proposed amendment. PER 000003. On April 

20, 2011, Communities filed a petition for review in this Court challenging EPA’s 

final action published in its April 20, 2011 “Revision to the South Coast Portion of 

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the California State Implementation Plan, CPV Sentinel Energy Project AB 1318 

Tracking System.” PER 000005. 

STATEMENT OF FACTS 

Statutory Background 

 The Clean Air Act is recognized as “one of the most comprehensive pieces 

of legislation in our nation’s history.” Motor Vehicles Mfrs. Ass’n v. New York 

State Dep’t of Envtl. Conservation, 17 F.3d 521, 524 (2nd Cir. 1994). Congress 

crafted, in meticulous detail, a statutory scheme that makes “the States and the 

Federal Government partners in the struggle against air pollution.” General 

Motors Corp. v. U.S., 496 U.S. 530, 532 (1990). 

Under the Act, EPA is responsible for establishing national ambient air 

quality standards (“NAAQS”) for air pollutants to “protect the public health” with 

“an adequate margin of safety.” 42 U.S.C. § 7409(b). EPA has established 

NAAQS for six criteria pollutants: carbon monoxide, lead, nitrogen dioxide, 

ozone, particulate matter, and sulfur dioxide. 40 C.F.R. § 50. EPA further 

designates all air basins in the country as “attainment” or “nonattainment” areas, 

depending on whether a basin meets the NAAQS for a particular pollutant. 42 

U.S.C. § 7407(d). 

The South Coast Air Basin and Salton Sea Air Basin have been designated 

as nonattainment for particulate matter, and thereby its precursors nitrogen oxides 

and sulfur oxides, as well as for ozone. See PER 000018. Under the Act, each 

state with a nonattainment area is responsible for developing a State 

Implementation Plan (“SIP”) to achieve and maintain NAAQS within its territory. 

42 U.S.C. § 7410(a)(1). The Act and federal regulations outline the requirements 

for a SIP. EPA reviews each SIP submission, and may approve a submission only 

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when the SIP complies with the Act and federal regulations. 42 U.S.C. § 7410(k); 

see also 42 U.S.C. § 7502(c); 42 U.S.C. § 7410(h)(2); 40 CFR § 51.165. 

Early versions of the Act gave states wide discretion in choosing the manner 

in which they would attain the NAAQS. After decades of little progress toward air 

quality goals, however, a frustrated Congress enacted significant amendments to 

the 1970 version of the Act in 1977 and again in 1990, mandating increasingly 

prescriptive requirements for nonattainment areas. See South Coast Air Quality 

Mgmt. Dist. v. EPA, 472 F.3d 882, 886-87 (D.C. Cir. 2007) (describing the history 

of Clean Air Act amendments). 

In the 1990 Amendments, Congress required, as a key strategy in the New 

Source Review (“NSR”) program, that new sources of pollution “offset” their 

emissions increases with emission reductions. 42 U.S.C. § 7503(c). Congress 

required that emission reductions used as offsets “be, by the time a new or 

modified source commences operation, in effect and enforceable.” Id. Congress 

further specified that “the total tonnage” of new emissions “be offset by an equal 

or greater reduction, as applicable, in the actual emissions of such air pollutant.” 

Id. In addition, “emission reductions otherwise required [under the Act] shall not 

be creditable as emission reductions for purposes of any such offset requirement.” 

Id. 

EPA, in its regulations implementing Congress’ offsetting mandate, has 

developed a shorthand for the requirements of § 7503, referring to them as real, 

surplus, enforceable, quantifiable, and permanent (collectively “offset 

requirements”). See, e.g., 40 C.F.R. §§ 51.165(a)(3)(ii)(C)(1)(i)(ii); 51.852; 40 

C.F.R. pt. 51, App. S § IV(C)(3)(i)(1). An emission reduction not in compliance 

with offset requirements is not valid, and may not be credited to offset emission 

increases at polluting facilities. 

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California State Implementation Plan 

The District is responsible for air quality in the South Coast Air Basin and 

Salton Sea Air Basin. Cal. Health & Safety Code § 40412. Its principal duty is to 

implement the Act, which requires the District to develop and submit a SIP to 

EPA. 42 U.S.C. §§ 7401-7671. The SIP must “include enforceable emission 

limitations and other control measures, means, or techniques..., as well as 

schedules and timetables for compliance, as may be necessary or appropriate to 

meet the applicable requirements of this chapter,” including the more stringent 

offsetting requirements for nonattainment areas. 42 U.S.C. § 7410(a)(2)(A), (I). 

The California SIP contains a NSR program for the South Coast Air Basin.1

 

See, e.g., 42 U.S.C. §§ 7410(a), 7501, 7503(a)(1)(A). As part of the NSR program, 

the District must compel pollution sources to offset emission increases with 

emissions reductions in the form of emission reduction credits (“credits” or 

“emission credits”). Emitters typically buy and sell credits on the open market. 

The District also maintains a bank of credits (“internal accounts”) for distribution 

to qualifying facilities through its Rule 1309.1 “Priority Reserve” and its Rule 

1304. 

Internal Bank Offset Credits and AB 1318

The District’s internal accounts are an integral part of the District’s 

offsetting program, ensuring that new emissions from “exempt” sources are offset 

by emission reductions. PER 000013, 000018, 000132-000133. These exempt 

sources—mostly small facilities and essential public services, such as schools and 

hospitals—rely on the District itself to provide offsets from its internal accounts, so 

that they need not turn to the market to purchase offset credits. Id. In its approval 

 

1

 EPA approved Regulation XIII, establishing the New Source Review (NSR) 

program for the District, in 1996. 61 Fed. Reg. 64291 (December 4, 1996) 

(codified at 40 C.F.R. § 52.220). 

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of the NSR portion of California’s SIP pertaining to the South Coast, EPA clarified 

that when the District provides these banked emission reductions to pollutiongenerating facilities, the District stands in the shoes of a private party selling 

credits and thus assumes the responsibility for ensuring that its emission reductions 

meet federal offset requirements. PER 000013, 00020-00021, 000125. This 

construct is intended to ensure that all emission increases, whether they occur at 

facilities subject to the offset market or at facilities the District has excused from 

that market, are offset with the emission reductions that are required for 

nonattainment areas. 42 U.S.C. § 7502(c)(5); 42 U.S.C. § 7503(c); 40 C.F.R. § 

51.165(a)(3)(ii)(C)(1)(i)-(ii). 

The District tracks offsets in its internal account in the aggregate, which 

means it does not associate a specific emission reduction with a specific emission 

increase. If the internal bank has a positive balance, as shown in an Annual 

Equivalency Report, the District’s program has demonstrated “equivalence” with 

federal requirements and is presumed to have offset credits to issue. Zero balance 

would indicate that all emission reductions are “in use,” and a negative balance 

would show that the District had allowed increases to exceed reductions, and the 

new emissions were not being offset. 

In 2000-2001, market manipulations and illegal pipeline shutdowns 

triggered the California energy crisis. In the panic that ensued, the District 

amended its Rule 1309.1, opening its internal bank for the first time to power plant 

developers. See PER 000130. In reviewing the expanded universe of recipients 

eligible for internal bank credits, EPA requested documentation to substantiate the 

accounts balance. Many of the emission reductions in the internal accounts lacked 

documentation, or failed to meet the Clean Air Act’s requirements. Petitioners’ 

Request for Judicial Notice (“RJN”) Exh. C, pp. 21-22. Therefore, in 2005, the 

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District eliminated those credits from its accounts’ balance sheet. Id.; see also

PER 000129. The internal accounts’ balances were now negative. See, generally,

RJN Exh. C, pp. 21-22; 25-27. 

Hoping to address its negative balance and establish a tracking system EPA 

would approve, the District adopted a new rule, Rule 1315. Rule 1315 would have 

added four additional classes of emission reduction credits, and applied those 

changes retroactively, to stock the internal bank. In adopting Rule 1315, the 

District failed to comply with state environmental law in 2006, and again in 2007. 

See, Natural Resources Defense Council v. South Coast AQMD, Los Angeles 

Super. Ct. Case No. BS105728 (demurrer denied February 21, 2007); Natural 

Resources Defense Council v. South Coast AQMD, Los Angeles Super. Ct. Case 

No. BS110792 (judgment entered November 3, 2008). In 2011, the District again 

adopted Rule 1315. PER 000006, ftnt 1. At present, it is under state-court review 

through a writ return. It has also been submitted to EPA as a SIP revision. Id. 

EPA has stated its intention to notice Rule 1315 for rulemaking. Id. Unless and 

until the Rule 1315 modifications to the existing tracking system are approved by 

EPA and a new account balance is determined, the District has a negative balance 

in its internal bank. The most recent Annual Equivalency Report approved by the 

South Coast AQMD Board that did not rely on the use of credits created by the not 

yet adopted Rule 1315 was for the balance in 2002 – over 9 years ago. PER 

000001; RJN Exh. C, pp. 21-22. 

In 2009, power plant developers and the District joined forces to lobby the 

California legislature for “a solution” – a new state law, Assembly Bill (“AB”) 

1318, mandating that the District issue credits from its internal bank. PER 000005-

000010. AB 1318 specified that the District would transfer credits from its internal 

bank to a new power plant, to be built by CPV Sentinel. PER 000017-000019. 

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The credits would be derived from emission reductions that purportedly occurred 

between 1999 and 2008. Id. The District adopted this SIP amendment, seeking 

EPA’s approval to change its approved NSR program so it could use the newlyminted credits it intended to credit to its internal account and transfer to CPV 

Sentinel. 

SUMMARY OF THE ARGUMENT 

EPA adopted a revision to the California SIP, the AB 1318 Tracking 

System, in violation of applicable law. In adopting the SIP revision, EPA violated 

mandatory APA requirements that are vital to meaningful public participation in 

the rulemaking process. In approving the AB 1318 Tracking System and the 

emission reductions transferred into it, EPA further violated bedrock Clean Air Act 

requirements for nonattainment plans and emission reductions. Each of these 

violations renders the SIP revision unlawful. 

The APA violations boil down to a single issue: whether EPA must disclose 

to the public the information upon which it relied in reviewing the SIP revision. 

Contrary to EPA assertions, the law requires this information to be disclosed and 

made available for public review and comment, both in the docket index and the 

electronic docket. These procedural protections were established to provide 

meaningful opportunity for the public to inform and improve agency decisions, 

especially those with implications for public health and well-being. To allow EPA 

to ignore these protections is to throw a blanket over the fundamental American 

value of government-in-the-sunshine. 

EPA approval of the Sentinel SIP revision also violates the Clean Air Act. 

The AB 1318 Tracking System was designed for a singular purpose: to provide 

emission credits from the District’s internal accounts, traditionally reserved for 

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small facilities and essential public services, to a power plant that successfully 

lobbied the California state legislature. Although this ill-advised policy decision is 

not at issue, the emission offsets transferred into the AB 1318 Tracking system 

must comply with federal offset requirements in the Clean Air Act – requirements 

designed to transcend political whims and ensure air quality improvements in 

nonattainment areas. EPA concluded that the emission offsets meet the offset 

requirements. However, this conclusion is flat out contradicted by the information 

that EPA waited until publication of the Final Rule to disclose (the information 

EPA now offers in support of its conclusion). Records show, with cold starkness, 

that the emission reductions are not surplus, are not quantifiable, and have not been 

included in emissions inventories, as required. The record also strongly suggests 

that EPA did not undertake a thorough analysis of the documents it claims to have 

reviewed before making its decision. Finally, even if the emissions offsets were 

transferrable, EPA cannot establish that the District’s internal accounts have credits 

available to transfer. The emission credits have not been shown to be valid, and 

EPA’s approval of them violates the Clean Air Act. 

STANDARD OF REVIEW 

The Clean Air Act does not specify a standard of review for challenges to 

EPA approvals of revisions to state implementation plans. Accordingly, this Court 

has applied the general standard of review for agency actions provided in section 

706 of the APA, 5 U.S.C. § 706(2)(A). See Vigil v. Leavitt, 381 F.3d 826, 833 (9th 

Cir. 2004). Section 706 of the APA provides in relevant part, “[t]he reviewing 

court shall . . . hold unlawful and set aside agency action, findings, and conclusions 

found to be . . . arbitrary, capricious, an abuse of discretion, or otherwise not in 

accordance with law.” 5 U.S.C. § 706(2)(A). Where an agency has “offered an 

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explanation for its decision that runs counter to the evidence before the agency,” 

the court will reverse an agency’s action under the arbitrary and capricious 

standard of review. Motor Vehicle Mfrs. Ass’n v. State Farm Mutual Automobile 

Ins. Co., 463 U.S. 29, 43 (1983). Further, the agency must articulate a “rational 

connection between the facts found and the choice made.” Burlington Truck Lines 

v. United States, 371 U.S. 156, 168 (1962). This Court has explained: 

This standard necessitates a judicial examination of the disputed decision's 

rationale and surrounding circumstances in order to carry out the “demand 

that courts ensure that agency decisions are founded on a reasoned 

evaluation ‘of the relevant factors.’” 

Desert Citizens Against Pollution v. Bisson, 231 F.3d 1172, 1180 (9th Cir. 2000) 

(citations omitted) quoting Marsh v. Oregon Nat. Res. Council, 490 U.S. 360, 378 

(1989). While this Court has recognized that the review of agency actions is 

deferential, it has also noted its responsibility to provide its own thorough review. 

See, e.g., Ranchers Cattleman Action Legal Fund United Stockgrowers of America 

v. U.S. Dep’t of Agric., 415 F.3d 1078, 1093 (9th Cir. 2005) (“[w]hile review is . . . 

deferential, it is not toothless; courts must conduct a ‘thorough, probing, in-depth’ 

inquiry into the validity of regulations”). 

 When reviewing EPA’s construction of a statute, this Court follows the twopart test established in Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467 

U.S. 837 (1984). The first step is to determine whether Congress has spoken 

directly to the precise question at issue. Akhtar v. Burzynski, 384 F.3d 1193, 1198 

(9th Cir. 2004) (citing Chevron, 467 U.S. at 842). If the intent of Congress is 

clear, the court must give effect to that unambiguously expressed intent. Akhtar, 

384 F.3d at 1198. If the statute is silent or ambiguous, a reviewing court will defer 

to an agency’s interpretation if found to be reasonable. Id. However, the Court 

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11 

owes no deference to agency interpretations that construe the statute “in a way that 

is contrary to congressional intent or that frustrates congressional policy.” Id.

STANDING 

California Communities Against Toxics (“CCAT”) and Communities for a 

Better Environment (“CBE”) have standing to challenge EPA’s approval of the 

Sentinel Revision. An organization has standing to bring an action on behalf of its 

members when: (1) neither the claim asserted nor the relief requested requires its 

members to participate directly in the lawsuit, (2) it is seeking to protect interests 

that are germane to its purpose, and (3) its members would have standing to sue 

individually. See Hunt v. Washington State Apple Advertising Comm’n, 432 U.S. 

333, 343 (1977).

 Here, direct participation of Communities’ members is not necessary either 

to make the claims asserted or for this Court to grant the relief requested. 

Moreover, the interests Communities seek to advance through this litigation fall 

squarely within each of their organization’s missions. Declaration of Robert 

Cabrales (“Cabrales Dec.”), ¶¶ 5-7; Declaration of Alfredo Figueroa (“Figueroa 

Dec.”), ¶ 4; Declaration of Oscar Gutierrez (“Gutierrez Dec.”), ¶ 3 and Declaration 

of Jane Williams (“Williams Dec.”), ¶ 4. 

CCAT and CBE each have members with standing to bring this suit 

individually because the members are injured by EPA’s approval of the Sentinel 

Revision and a favorable order from this Court would redress that injury. See 

generally Cabrales Dec., Figueroa Dec., Gutierrez Dec., and Williams Dec. A 

plaintiff “will suffer injury if compelled to breathe air less pure than that mandated 

by the Clean Air Act.” Natural Resources Defense Council v. EPA, 507 F.2d 905, 

910 (9th Cir. 1974). CCAT and CBE each has members who will be forced to 

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breathe air less pure than it would have been had the Sentinel Revision complied 

with the requirements of the Clean Air Act. Cabrales Dec., ¶¶ 15-17; Williams 

Dec., ¶ 7-12. In a Clean Air Act citizen suit alleging a procedural failure, plaintiffs 

need only show a “concrete interest” is at stake and need not show that substantive 

environmental harm is imminent. Covington v. Jefferson County, 358 F.3d 626, 

641 (9th Cir. 2004). Here, each organization has members who were deprived of 

the right, required by the APA, to participate in the rulemaking process that 

resulted in EPA’s decision. Williams Dec., ¶¶ 13-15; Cabrales Dec., ¶¶ 9-10, 15-

16.

 Had EPA disapproved the Sentinel Revision, the facility either would not be 

constructed at all or, at least, would not be adding pollution to the air basin that is 

not allowed under the Clean Air Act. Had EPA followed the notice and comment 

process required by the APA, CCAT and CBE would have provided critical 

analysis that EPA should have included in its decision-making.

 Finally, a favorable order by this Court will provide redress to CCAT and 

CBE members for the illegal and harmful effects of EPA’s violations of both the 

APA and the Clean Air Act. An order vacating EPA’s approval of the Sentinel 

Revision will prevent air emissions not allowed under the Clean Air Act and also 

will require EPA to provide an opportunity to participate in a new rulemaking. See 

Center for Energy and Econ. Dev. v. EPA, 398 F.3d 653, 657 (D.C. Cir. 2005) 

(holding that “the redressability requirement may be satisfied . . . by vacating the 

challenged rule and giving the aggrieved party the opportunity to participate in a 

new rulemaking”) (quotations omitted).

 For the above reasons, both California Communities Against Toxics and 

Communities for a Better Environment have standing to challenge EPA’s approval 

of the Sentinel Revision.

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ARGUMENT 

I. EPA’S REFUSAL TO INCLUDE IN ITS DOCKET THE 

DOCUMENTATION UPON WHICH IT RELIED WAS ARBITRARY 

AND CAPRICIOUS 

The APA requires an agency to “give interested persons an opportunity to 

participate in the rule making through submission of written data, views, or 

arguments...” 5 U.S.C. § 553(c). A critical part of this requirement is the agency’s 

“duty to identify and make available technical studies and data that it has employed 

in reaching the decisions to propose particular rules.” Kern County Farm Bureau 

v. Allen, 450 F.3d 1072, 1076 (9th Cir. 2006). These requirements apply in full 

force when EPA is considering a SIP amendment, which can be particularly 

technical. In a Clean Air Act-related rulemaking, EPA’s docket must include the 

documentation upon which it relies for its decision that the amendment satisfies the 

Clean Air Act requirements. See, e.g., NRDC v. EPA, 966 F.2d 1292, 1305 (9th 

Cir. 1991) (“without supportable facts, we are unable to rely on our usual 

assumption that EPA has rationally exercised the duties delegated to it by 

Congress”). To effectuate the APA’s public participation requirements, an 

agency’s electronic docket must include all materials submitted to the agency in 

the rulemaking, as well as all other materials ordinarily included in the agency 

docket.2

 E–Government Act of 2002, Pub.L. No. 107–347, 116 Stat. 2899, 2916 

(Dec. 17, 2002). 

 

2 Narrow exceptions exist for certain information, such as Confidential Business 

Information.

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“An agency commits serious procedural error when it fails to reveal portions 

of the technical basis for a proposed rule in time to allow for meaningful 

commentary.” Kern, 450 F.3d at 1076. 

A. The Index and Docket Lacked Reference to the Technical 

Documents Concerning Credit Validity 

In the Proposed Rule, EPA “propos[ed] to find that the PM10 and SOx

offsetting emission reductions transferred to the AB 1318 Tracking System meet 

the CAA Section 173 requirements that emission reductions used as offsets be 

‘real, quantifiable, surplus, permanent, and enforceable prior to use.’” PER 

000014. EPA explained that it “has reviewed the documents provided for each 

offsetting emission reduction the District has transferred to the AB 1318 Tracking 

System.” PER 000014. EPA provided a 30-day public comment for this Proposed 

Rule and described the information upon which it relied: 

Docket: The index to the docket for this action is available electronically at 

http://www.regulations.gov and in hard copy at EPA Region IX, 75 

Hawthorne Street, San Francisco, California. While all documents in the 

docket are listed in the index, some information may be publicly available 

only at the hard copy location (e.g., copyrighted material), and some may 

not be publicly available in either location (e.g., CBI). 

PER 000044. 

On January 21, 2011, Communities requested an extension of time to 

comment on the Proposed Rule. PER 000037. On January 28, EPA refused 

Communities’ request. PER 000038-000039. On February 7, Communities 

requested that EPA reconsider its denial, noting that: 

[A]lthough the Federal Register notice says “Documentation for each of 

these offsetting emission reductions is included in the docket for this 

proposal,” that documentation was not included as part of the record. The 

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failure to include in the docket information that is critical for commenting 

upon this proposed rule is yet another reason to extend the comment 

deadline. 

PER 000040-000041. EPA responded to Communities’ letter on February 11, 

three days before comments on the Proposed Rule were due. PER 000042-000043. 

There, EPA again suggested that it was relying upon “documentation” that was not 

listed in the Docket Index, but did not describe or otherwise disclose what that 

“documentation” was. EPA wrote: 

While the index posted on regulations.gov did not specifically list the 

support documents for each offset emission reduction as a line item, as you 

note in your letter, the FR notice states that such information is available in 

the docket. 

PER 000042. This statement is bewildering. The Proposed Rule stated that “all 

documents in the docket” are listed in the Docket Index. PER 000012. Further, 

the Docket Index includes two notes: (1) “All documents are available on internet 

at Regulations.gov under Docket # EPA-R09-OAR-2010-1078;” and (2) “Copies 

of the listed documents are located at EPA Region 9 offices.” PER 000044 

(emphasis added). Nowhere in the letter—nor in the Notice of Proposed Rule—

does EPA describe the documentation upon which it relied. See generally PER 

000042, 000005-000020. 

In the Notice of Final Rule, EPA continued its cat-and-mouse game. The 

Docket Index is again described as containing “all documents” in the docket: 

Docket: The index to the docket for this action is available electronically at 

http://www.regulations.gov and in hard copy at EPA Region IX, 75 

Hawthorne Street, San Francisco, California. While all documents in the 

docket are listed in the index, some information may be publicly available 

only at the hard copy location (e.g., copyrighted material), and some may 

not be publicly available in either location (e.g., CBI). 

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PER 000005 (emphasis added). Yet, in its response to Communities’ comment 

that “EPA did not include critical documents in the docket for this proposed 

rulemaking,” EPA wrote: 

CCAT appears to be criticizing the fact that scanned copies of voluminous 

records documenting the validity of each pound of emissions credits being 

transferred from the District bank to Sentinel were not provided in electronic 

form on the regulations.gov Web site. These documents consist of the 

“Offset Source Calculation/Verification Form” and supporting 

documentation for each form. The District’s submittal consisted of a CD, 

with 62 separate documents, comprising more than 1,000 pages. 

PER 000007. EPA is correct; Communities are criticizing the failure to make 

available the documents upon which EPA purports to base its decision. It was in 

this response to comments, published with its final decision on April 20, that EPA 

first disclosed any information at all about the documents upon which it relied. 

B. EPA’s Failure to Include the Technical Information Violated the 

APA 

EPA’s attempts to justify the omission of these documents from the index 

and docket are unavailing. First, EPA suggested it would have been onerous to list 

each document on which it relied in the Index. While EPA conceded that “the 

District’s submittal consisted of a CD... with 62 separate documents,” it implied 

that listing those documents in the Docket Index—or describing them in any way 

at all—was too burdensome and therefore EPA did not do so. See PER 000007. 

Second, EPA argued that “there is no legal requirement” to provide a Docket 

Index at all, and it was therefore entitled to provide an incomplete index. This 

argument ignores that, regardless of whether EPA was required to provide a 

Docket Index or not, since EPA did provide a Docket Index claiming “all 

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documents in the docket are listed in the index,” it had an obligation to provide a 

complete Docket Index.3

 EPA criticized Communities for not trekking to San 

Francisco to scrutinize the physical copies of documents, despite repeated 

published written assurances that all the documents in the docket were listed in the 

index. The APA emphatically prohibits such gamesmanship. See Connecticut 

Light and Power Co. v. Nuclear Regulatory Commission, 673 F.2d 525, 530-531 

(D.C.Cir. 1982), cert. denied, 459 U.S. 835 (the public is not required to “hunt the 

peanut” to ascertain the documents upon which an agency relied). 

Third, EPA claimed the 62 documents were available “in hard copy” despite 

not being listed in EPA’s Docket Index. This would mean that, in addition to not 

listing the documents it was given in electronic format (“a CD”) in its Docket 

Index, EPA decided to print out the “voluminous records” and stash those “hard 

cop[ies]” someplace in its San Francisco offices. EPA did this instead of simply 

posting the documents it received in electronic format in the electronic docket at 

regulations.gov. Such behavior is counterintuitive. 

EPA must post in the EDOCKET at regulations.gov the entire docket for this 

rulemaking, save a limited number of clearly identified documents not at issue 

here. See E–Government Act of 2002, Pub.L. No. 107–347, 116 Stat. 2899, 2916 

(Dec. 17, 2002.) The E-Government Act requires that “Agency electronic dockets 

shall make publicly available online ... (A) all submissions under section 553(c) of 

title 5, United States Code; and (B) other materials that by agency rule or practice 

are included in the rulemaking docket under section 553(c) of title 5, United States 

Code, whether or not submitted electronically.” EPA failed to post the 62 

documents on its docket. See PER 000002-000004. In essence, the documents 

 

3

 The Certified List of Documents Comprising the Administrative Record—the 

corrected version filed on July 20, 2011—also fails to list the 62 documents 

supporting the emission reductions. 

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upon which EPA based its decision were not simply omitted from the electronic 

index and the docket. The 62 electronic documents on which EPA purports to 

have relied were not in the Docket. 

Fourth, EPA argued, curiously, that, “the same records were provided to 

[Communities] by the District long before our proposed approval was published.” 

Id. Until EPA made this assertion in its approval of the final rule, Communities 

had no way of knowing what “documents” EPA received or was reviewing. 

Further, the general public neither had any way of knowing what documents EPA 

based its decision upon nor had access to those documents. What information 

Communities had previously secured from the District has no relevance at all for 

what the APA requires be included in EPA’s rulemaking docket. 

EPA never informed the public or Communities that it had the 62 documents 

until EPA approved the final rule. It omitted all mention of the documents from its 

purportedly complete index to the docket, and failed to post the electronic 

documents on its electronic docket. An agency that not only hides its technical 

documents from the public, but affirmatively misleads the public about what it has 

reviewed, has violated the letter and spirit of the APA. 

This failure renders this SIP approval unlawful under the Administrative 

Procedure Act, and requires this Court to vacate EPA’s rule adoption, and remand 

this rulemaking to EPA to undertake a properly noticed rulemaking process. 

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II. THE EMISSION REDUCTIONS TRANSFERRED INTO THE AB 

1318 TRACKING SYSTEM VIOLATE THE CLEAN AIR ACT 

The Clean Air Act requires all emission reductions to comply with federal 

offset requirements. In addition, within the context of this SIP revision, which is 

premised on a transfer of emission reductions from one account to another, the 

starting account must contain unused emission reductions—or have a positive 

balance—before emission reductions can be transferred from it into the AB 1318 

Tracking System.4

 EPA must therefore engage in a two-step inquiry: (i) whether 

the itemized emission reductions meet offset requirements, and, if so, (ii) whether 

the starting internal account has a positive balance. The answer to both is no. As a 

result, EPA approval is arbitrary and capricious, an abuse of discretion, and not in 

accordance with the law. 

A. The Emission Reductions Violate the Offset Requirements 

The Clean Air Act requires that nonattainment plans ensure, as a condition 

of SIP approval, that emission reductions comply with federal offset requirements. 

42 U.S.C. § 7502(c)(5); 40 C.F.R. 51.165(a)(3)(ii)(C)(1)(i); see also 42 U.S.C. § 

7410(a)(2)(D)(i) (EPA shall not approve a SIP revision if it would interfere with 

any applicable requirement, including the requirements on offsets). Emission 

reductions are not creditable as offsets unless they are real, surplus, permanent, 

quantifiable, and enforceable. 42 U.S.C. § 7503(c); 40 C.F.R. 

51.165(a)(3)(ii)(C)(1)(i); 40 C.F.R. pt. 51, App. S. Further, emission reductions 

can be used as offsets only if the “shutdown or curtailment occurred after the last 

 

4 By way of analogy, if one were to transfer money from a savings account to a 

checking account in order to cover a check written, the savings account must first 

have a positive balance. The balance of funds in the savings account is vital 

information that must be available before the transfer occurs. 

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day of the base year for the SIP planning process” unless those emissions are 

explicitly included in the emissions inventory. 40 C.F.R. 51.165(a)(3)(ii)(C)(1)(ii). 

The emission reductions used in the AB 1318 Tracking System violate several 

offset requirements, rendering this SIP revision unlawful. 

1. The Emission Reductions from Aggregate Operations Violate the 

Surplus Requirement 

The Clean Air Act requires emission reductions to be surplus. 42 U.S.C. § 

7503(c); 40 C.F.R. 51.165(a)(3)(ii)(C)(1)(i). Surplus means that, “an emission 

reduction is not required for compliance with a SIP, SIP-related program, other 

State air quality program not covered by a SIP, or federal rule that focuses on 

reducing precursors of criteria pollutants.” PER 00006 (emission reductions used 

as offsets must be “surplus” to any other federal requirement to reduce emissions). 

Surplus is determined when the emission reductions are offered for use, not when 

the emission reductions occur. Id. 

In the Notice of Final Rule in response to Communities’ comments, EPA 

agreed that “[e]mission credits would need to be adjusted to ensure they are surplus 

to any new or modified standards for PM10 and/or SOx emissions from ... 

aggregate operations.” PER 000008. It concluded, however, that the “District 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. This conclusion is 

arbitrary and capricious and not based on fact. 

In the South Coast Air Basin, the SIP planning process occurs through the 

Air Quality Management Plan (“AQMP”) which details control measures for 

demonstrating attainment with NAAQS. In the 2003 AQMP, the District listed 

“control measure BCM-08 - FURTHER EMISSION REDUCTIONS FROM 

AGGREGATE OPERATIONS (PM10)” as part of its PM10 attainment 

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demonstration for SIP planning purposes.5 RJN Exh. A, p. 4; see also RJN Exh. 

A., p. 3 (BCM-08 was “proposed in order to ensure that attainment with the federal 

PM10 standard is demonstrated by 2006”). 

In 2005, the District adopted “Rule 1157 – PM10 Emission Reductions from 

Aggregate and Related Operations” thereby creating a state and SIP-related 

program to reduce PM10 emissions, which is part of the District’s attainment 

demonstration for the SIP planning process. 40 C.F.R. § 51.112; 40 C.F.R. § 

51.230; RJN Exh. G, p. 63. 

Rule 1157 applies to several emission reductions identified in the Sentinel 

Revision. For example, the Technical Support Document lists 2,907 lbs/year of 

PM10 emission reductions from Chandler Aggregates in Corona, California. PER 

00029. Chandler Aggregates operated a massive aggregate processing system that 

ran several cones, conveyors, and crushers to crush stone and pulverize minerals. 

PER 00051-00053. It appears that Chandler Aggregates was issued its permit on 

April 4, 1996, ceased operation in 2005, and, ironically, applied for emission 

reduction credits but was rejected by the District. PER 00054, 00045. Rule 1157 

applies to Chandler Aggregates. Therefore, contrary to EPA assertions, the 

District has promulgated new rules and standards that require a downward 

adjustment of emission reductions associated with Chandler Aggregates. Yet the 

emissions credited for the Sentinel Revision represent all of the purported 

emissions for the entire operation, and no downward adjustment occurred.6

 See

 

5

 The control measures in the 2003 AQMP, including BCM-08, were incorporated 

into the SIP-adopted 2007 AQMP as “assumptions in developing AQMP’s future 

year inventories” thereby making “continued implementation ... essential in 

achieving clean air goals.” RJN Exh. B, pp. 4-59. 

6

 A companion rule, “Rule 1156 – Further Reductions of Particulate Emissions 

from Cement Manufacturing,” was adopted on November 4, 2005 and amended on 

March 6, 2009. Rule 1156 outlines measures to further reduce particulate matter 

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PER 00026-00036. The Technical Support Document lists at least six other 

companies that fall under Rule 1157, totaling 14,808 lbs/year of PM10 emission 

reductions that were transferred into the AB 1318 Tracking System.7

 

EPA’s determination that emission reductions from aggregate (and related 

operations) meet the surplus requirement is arbitrary and capricious and not based 

on fact. 

2. The Emission Reductions Violate the Quantifiable Requirement 

The Clean Air Act requires emission reductions to be quantifiable. 42 

U.S.C. § 7503(c); 40 C.F.R. 51.165(a)(3)(ii)(C)(1)(i). Quantifiable “requires an 

accurate assessment of the quantity of emissions previously emitted by the source 

prior to modification or shutdown of the subject equipment.” PER 000021. In 

comments, Communities noted that the record does not support the claim that the 

emission reductions are quantifiable for, among other things, insufficient 

documentation.” PER 000008. 

In the Notice of Final Rule, EPA stated that “[t]he District provided 

documents with the SIP revision showing precisely how many pounds of pollutant 

had been reduced or eliminated to support each emission credit.” PER 000008. 

 

emissions from cement manufacturing facilities. According to the District, the rule 

“partially implement[s] the 2003 AQMP Control Measure BCM-08 – Further 

Emission Reductions from Aggregate and Cement Manufacturing Operations.” 

See RJN, Exh. E, pp. 37-41. Two companies listed in the Technical Support 

Document at issue here, Elsinore Ready-Mix Co Inc and Oldcastle Westile, Inc. 

fall under Rule 1156, totaling 1,436 lbs/year of PM10 emission reductions. 

7 The companies are: Matthews International Corp (three pieces of equipment 

totaling 7,491 lbs/year of PM10); Whitewater Rock & Supply Co. (two pieces of 

equipment totaling 4,836 lbs/year of PM10); Oldcastle Westile, Inc. (two pieces of 

equipment totaling 1,962 lbs/year of PM10); Ortiz Enterprises Inc. (one piece of 

equipment totaling 464 lbs/year of PM10); CDE Resources, Inc. (two pieces of 

equipment totaling 28 lbs/year of PM10); and Elsinore Ready-Mix Co. Inc. (one 

piece of equipment totaling 27 lbs/year of PM10). PER 000029-000032.

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EPA further stated that “[t]hese amounts were based on actual emission inventory 

data or production records for each source” that contained the requisite 

information: 

The District’s documentation provides the name and location of the source 

that made the reduction, when the source was shutdown, verification that it 

was actually shutdown, the amount of the reduction, including 

documentation of actual emissions inventory data for each source for the two 

years prior to shutdown, and other supporting information. 

Id. EPA claimed to “have reviewed the documentation for the emission 

reductions,” stating that its “approval of the SIP revision relied on these documents 

to demonstrate that a sufficient number of emission credits the District transferred 

met the integrity criteria in [42 U.S.C. 7503].” PER 000006-000007. The facts on 

which EPA purports to have relied do not support, and in fact contradict, these 

conclusions. EPA’s approval is therefore arbitrary and capricious and not based on 

fact. 

One stark example of the facts contradicting EPA’s conclusion is 

documentation for the Little Company of Mary Hospital (“LCM”). LCM was 

founded by the Sisters of the Little Company of Mary to provide medical services 

in Torrance, California. See PER 000080. In 1959, LCM installed three large 

boilers (application numbers A05788, A05789, and A05790) and, in 1993, may 

have installed another boiler (application number 226646) although there is 

contradictory evidence on this point.8

 Nonetheless, there are four LCM boilers 

listed in the Technical Support Document as providing PM10 and SOx emission 

reductions to the AB 1318 Tracking System. PER 000031, 000035. 

 

8

The documents show that a permit was granted, but there is no evidence in the 

record that the boiler was actually installed. Instead the 2003 inspection report 

notes that the facility has active permits for three boilers. PER 000091.

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In 2010, the District created four Offset Source Calculation/Verification 

Forms (“OSCV Forms”) assuming four LCM boilers. PER 000072-000075. The 

LCM OSCV Forms purport to follow the standard calculation methodology for 

quantifying emission reductions. PER 000072-000075. For each supposed LCM 

boiler, the LCM OSCV Forms identify 97 lbs/year of PM10 emission reductions 

and 8 lbs/year of SOx emission reductions for a total of 388 lbs/year of PM10

emission reductions and 32 lbs/year of SOx emission reductions for transfer into 

the AB 1318 Tracking System. Id. These figures, however, are unsupported—

and, indeed, outright contradicted—by the OSCV Forms’ supporting 

documentation, which instead establishes that these emissions reductions violate 

the “quantifiable” requirement in at least three ways. 

First, the shutdown date for the LCM boilers is misstated. The LCM OSCV 

Forms—created in 2010—state that “[a]ll boilers shut down in 2005.” PER 

000072-000075. The supporting documentation, however, contains a field report 

from a District Inspector dated July 9, 2003. PER 000089-000091. The field 

report shows that, at time of inspection, the “three large boilers ha[d] been replaced 

by twelve identical Parker boilers ... and ten identical Patterson Kelley Hot Water 

Heaters.” PER 000091. There is no mention of the fourth boiler. PER 000091. It 

is therefore clear that the LCM boilers shut down before the July 9, 2003 

inspection, not in 2005 as stated on the LCM OSCV Forms. Compare PER 

000072-000075 with PER 000089-000091. The shutdown date, in other words, is 

unknown. 

Second, based on the erroneous 2005 shutdown date, the LCM OSCV Forms 

use the wrong dataset to calculate the emission reductions attributed to this facility. 

The documentation relied upon for the OSCV Form was the purported “Annual 

Emissions Report” for the years 2002-2004. To comply with the Act and SIP 

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rules, the correct dataset consists of the actual emissions for each source two years 

prior to shutdown. PER 000008 (EPA stating that it reviewed “documentation of 

actual emissions inventory data for each source for the two years prior to 

shutdown”). Since the field report shows that the LCM boilers shut down 

sometime before the July 9, 2003 inspection, the appropriate dataset would consist 

of the two years prior to shutdown—whenever that is—but certainly not 2002- 

2004. PER 000090. The emission reporting data for the LCM OSCV Forms is not 

for the equipment claimed. 

Third, a shut down boiler has no emissions. The LCM OSCV Forms claim, 

however, that four LCM boilers had emissions even after shutdown, which is 

simply untrue. PER 000072-000075. It is unclear what emissions the AERs were 

reporting or if the AERs were truly from LCM at all. It is clear, however, that the 

emissions reported on the LCM OSCV Forms EPA purports to have relied upon to 

support its decision on these 388 lbs/year of PM10 emission reductions and 32 

lbs/year of SOx emission reductions are not from the four boilers, which had shut 

down at some untold time earlier with emissions levels unknown. 

The failure to include proper documentation in the LCM file is emblematic 

of the pervasive lack of credit documentation for this rulemaking. Of the 153 

OSCV Forms, 69 pieces of equipment lacked either one or both Annual Emission 

Reports for the period that EPA claims to have reviewed. For example, the OSCV 

Form for Whitewater Rock & Supply Co. notes that, “of previous two years, only 

06-07 available, so use that as representative.” PER 000025. The AB 1318 

tracking system was then credited for 4,836 lbs/year of PM10 reductions. PER 

000032. EPA may not use one year of emissions data as “representative” of 

emissions from a facility, the Act requires actual emissions data to be used. 

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The actual documents belie EPA’s statement that the reductions in the 

Sentinel Revision were quantifiable in accordance with the requirements with the 

Act. These examples also raise serious questions as to whether and how EPA 

reviewed the documentation it claims to have reviewed. EPA’s determination that 

the emission reductions meet the quantifiable requirement is arbitrary and 

capricious and not based on fact. Further, EPA has not articulated a rational 

connection between the facts in the record and the decision made. 

3. The Emission Reductions Are Not Creditable Because They Have 

Not Been Included in the Emissions Inventory 

As noted above, in the South Coast Air Basin, the SIP planning process 

occurs through the AQMP, and its emission inventory serves as the baseline for 

control measures demonstrating attainment with NAAQS.9

 The emissions 

inventory plays an important role in limiting what reductions can act as offsets. 

The Clean Air Act prohibits offsetting with emission reductions that occurred 

before the last day of the base year of the emissions inventory unless explicitly

included. 40 C.F.R. § 51.165(a)(3)(ii)(C)(1)(ii); see 40 C.F.R. § 

51.165(a)(3)(ii)(C)(2)(outlining exceptions that are inapplicable in the current 

case). Another way of saying this is that a source of emissions must explicitly

appear in the emissions inventory in the AQMP for the reduction to be creditable. 

40 C.F.R. § 51.165(a)(3)(ii)(C)(1)(ii). 

In the Notice of Final Rule, EPA stated that “emission reductions are 

considered creditable if they have not been relied upon to demonstrate attainment, 

 

9

 An “attainment demonstration” is a formal demonstration, “by means of 

applicable air quality models, data bases, and other requirements specified in [the 

Code of Federal Regulations],” that the pollution control measures contained in an 

implementation plan are adequate to provide for the timely attainment and 

maintenance of NAAQS. 40 C.F.R. § 51.112(a)(1). 

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[reasonable further progress] or any other permit action.” EPA explained that 

“[t]he District accounts for the use of credits from their internal accounts by adding 

the average annual quantity of ERCs used over the last eight years to the projected 

inventory for years 2014 and 2020, i.e., the AQMP assumes that these emissions 

are in the air.” PER 000008. EPA therefore concluded that, “[b]y including such 

emissions in the inventory, the attainment plan has not relied on these emission 

reductions, thus they remain creditable for other purposes.” Id. EPA’s 

determination that the emission reductions have been explicitly included in the 

emission inventories is arbitrary and capricious and not based on fact. 

Under the 2007 AQMP, the base year for the emissions inventory is 2002. 

RJN Exh. B., pp. 7, 14. That means that a certain number of the shutdowns—and 

their associated emission reductions—occurred before the last day of the base year 

for the SIP planning process. PER 000020 (“[t]he new AB 1318 Tracking System 

includes specific offset credits that were identified from reductions of SOX and 

PM10 occurring between 1999 and 2008”); see also PER 000006 (“some of the 

emission credits that the District is transferring arose from events in 1999”). 

Therefore, unless the District explicitly included these emission reductions in its 

base and projected emissions inventory, any pre-2003 emission reductions are not 

creditable. 40 C.F.R. § 51.165(a)(3)(ii)(C)(1)(ii). 

In fact, according to the SIP, emission reductions pre-dating 2003 have been 

explicitly excluded from emissions inventories. RJN Exh. B, pp. 15- 18. In 

calculating emissions stemming from its internal accounts, the 2007 AQMP 

excludes all pre-2003 credits after finding them unnecessary: “[t]he annual credits 

to the NSR account are sufficient for the debits so that there is no need to have 

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debits from the pre-2002 credits. Therefore, no addition to the current baseline 

inventory is necessary for this category.”10 RJN Exh. B, pp. 17– 18. 

 (Tables 2-11 and 2-12 contain summaries of emission reductions). Table 2-12 in 

the 2007 AQMP makes clear that rather than including pre-2003 emission 

reductions in the inventory, those PM10 and SOx emission reductions were 

explicitly excluded: 

TABLE 2-12 

Total 2014 and 2020 NSR Emissions and Pre-2002 Credits Needed from New and 

Modified Sources 

(Tons per Day) 

 VOC NOx SOx PM10 

Total NSR 

Emissions 

6.5 5.5 0.8 2.1 

Total Pre-2002 

ERC/Debits 

Needed 

3.1 0 0 0 

RJN Exh. B, p. 18. Therefore, contrary to EPA assertions, the AQMP explicitly 

excludes pre-2003 emission reductions and those emission reductions may not be 

resurrected in this SIP revision. 

B. The Internal Accounts Are Inextricably Intertwined with the AB 

1318 Tracking System 

The Sentinel Revision transfers credits from the District’s internal accounts 

for the CPV Sentinel Project. PER 000005. The AB 1318 Tracking System 

therefore cannot be divorced from the internal accounts from which the emission 

 

10 The District mistakenly refers to the pre-baseline credits as pre-2002 when, in 

fact, the legal requirement includes shutdowns occurring before the last day of the 

base year. 

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reductions credits come.11 Unless and until EPA approves proposed Rule 1315, the 

internal accounts are empty, and in fact have negative balances. As a result, no 

credits can be transferred from them. 

In the Notice of Final Rule, EPA asserted that, “[f]or purposes of this SIP 

revision, the balance of the District’s internal accounts is not relevant.” PER 

000006. But a positive account balance is, in fact, vital to the question of whether 

credits that are taken from the accounts are already used. Once an emission 

reduction has been used to offset an emission increase it is unavailable for transfer. 

The emission reduction is spoken for. Whether the accounts hold any emission 

reductions that are not “in use” is a straightforward question – the internal account 

would have a positive balance. EPA has no rational basis to ignore this. A 

positive balance is sine qua non for this SIP revision to proceed. 

It is clear that this SIP revision is premised on transferring emission 

reductions from the internal accounts to the AB 1318 Tracking System. The SIP 

revision preamble references this transfer four times: 

...Notwithstanding District Rule 1303, this SIP revision provides a federally 

enforceable mechanism for transferring offsets from the AQMD's internal 

accounts to the CPV Sentinel Project. The Executive Officer shall complete 

the transfer of credits to an electrical generating facility pursuant to this 

provision upon the receipt of payment of the mitigation fees set forth in the 

South Coast District's Rule 1309.1, as adopted on August 3, 2007, regardless 

of the subsequent repeal of those provisions. This section shall remain in 

effect only until January 1, 2012, and sunsets as of that date. Such repeal 

does not affect the federal approvability of credits or the transfer of such 

credits that are transferred prior to the repeal. 

 

11 See footnote 4, supra.

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PER 000017-000018 (emphasis added). The relevance of the account balances 

should therefore be beyond question. 

Yet EPA questions it. The reason is to sidestep two insurmountable hurdles 

that further render this SIP approval unlawful: (i) the account balances are negative 

due to the elimination of substantial invalid emission reductions without 

documentation; and (ii) final adoption of Rule 1315 is a condition precedent to 

addressing the negative balance. EPA’s approval of the Sentinel Revision before 

the internal accounts’ house is in order—through adoption of Rule 1315—is 

arbitrary and capricious, an abuse of discretion, and not in accordance with the 

law. 

1. Internal Accounts Balance is Relevant to This Rulemaking 

The District maintains a tracking system for its internal bank. The purpose 

of the tracking system is to “track and compare” emission reductions and increases 

from the internal accounts to demonstrate equivalence with federal offset 

requirements on an aggregate basis. See RJN Exh. C. Positive balances should 

indicate this aggregate offsetting system is securing equivalent offsets as a system 

that would assign each individual emission reduction to a new source. Negative 

balances indicate that all emission reductions are “in use” and the District has 

allowed new emissions that are not being offset by reductions. The District 

demonstrates equivalence through Annual Equivalency Reports. 

In 2000-2001, market manipulations and illegal pipeline shutdowns 

triggered the California energy crisis. In the aftermath, the District adopted a rule 

allowing power plant developers to access its internal accounts for a limited period. 

See RJN Exh. H, pp. 80-81. The internal accounts soon came under intense public 

scrutiny. In response to EPA’s request for documentation to substantiate the 

emission reductions in the internal accounts, the District could not verify all of the 

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emissions reductions it claimed had occurred. RJN Exh. C. pp. 21-22. In addition, 

EPA determined that the District was crediting some emission reductions to its 

internal account that were precluded by the Clean Air Act. Id. Therefore, in 2005, 

the District agreed to remove these emission reductions from its account. RJN 

Exh. C. p. 28. The account balances were devastated: the starting balance for PM10

was reduced by 92% and the starting balance for SOx was reduced by 56%. RJN 

Exh. C. p. 27. In the aggregate, with the elimination of the unverifiable emission 

reductions, the accounts balances were now negative. Id. Upon making this 

discovery, EPA requested “a rule specifying how the tracking of debits and credits 

will occur in the future.”12 RJN Exh. C. p. 21. 

In 2006, the District adopted Rule 1315 titled “New Source Review 

Tracking System.” See PER 000111-112. Rule 1315 contained several 

controversial “modifications to the procedures used in the tracking system” that, if 

applied retroactively to 1990, would make the internal account balances positive.13

RJN Exh. C. pp. 21, 31-36. Environmental organizations twice filed state-court 

litigation on environmental-review grounds. PER 000006, ftnt. 1. In both 

instances, Rule 1315 adoption was held to violate state law and was rescinded. Id. 

 

12 It is for this reason that 2004, more than seven years ago, was the last time the 

District finalized an Annual Equivalency Report not relying on the yet to be 

approved methods contained in Rule 1315. RJN Exh. C. p. 21. 

13 The controversial mechanisms for generating emission reductions include, in 

particular, emission reductions from minor source orphan shutdowns. In 1996, at 

the time of SIP approval, the District only tracked major source orphan shutdowns. 

See RJN Exh. C. p. 9. (“AQMD’s NSR tracking system currently takes credit for 

orphan shutdowns from major sources only, but not from minor sources.”) To the 

extent the Rule 1315 modifications to the existing tracking system are lawful—an 

issue in dispute during the District’s administrative rulemaking that will be raised 

during formal EPA rulemaking—those emission reductions must first be allocated 

to offset the unlawful emission increases the District has allowed to date. 

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The state court found that the controversial modifications “expanded exponentially 

the universe of [emission reductions] available to entities needed to increase 

emissions,” further reaffirming that: 

Rule 1315 does significantly more than simply meet the EPA’s objections 

regarding the District’s treatment of pre-1990 credits from major shutdowns 

for which there are inadequate records. Rule 1315 proposes four additional 

classes of [emission reduction] credits – credits that by definition will (if 

used) translate clean air gains into pollution rights. These changes constitute 

matters of air pollution policy, not accounting, and it is the policy decision 

that has clear and unavoidable environmental consequences in degrading the 

quality of the air in the Basin over what would have existed in the absence of 

the revise rules, or had the District revised 1315 to deal only with the EPA’s 

objections regarding undocumented credits. 

PER 000120-000121. 

In 2011, the District again adopted Rule 1315. PER 000006. At present, the 

rule is under state-court review through a writ return. Natural Resources Defense 

Council v. South Coast AQMD, Los Angeles Super. Ct. Case No. BS110792. It 

has also been submitted to EPA as a SIP revision. PER 000006, fn. 1. EPA has 

stated its intention to notice Rule 1315 for rulemaking in short order. Id. Unless 

and until the Rule 1315 modifications to the existing tracking system are adopted 

and the account balance is determined, EPA approval of the AB 1318 Tracking 

System is arbitrary, capricious, an abuse of discretion, not in accordance with law, 

and without observance of procedure required by law. 5 U.S.C. § 706(2)(A), (D). 

// 

// 

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2. EPA’s Reliance On a Letter to Support its Claim About 

the Account Balances is Improper 

In its response to comments, EPA summarily “disagrees that ... the District’s 

internal accounts have negative balances.” PER 000007. To justify its 

disagreement, EPA referenced an unpublished letter dated September 2010, 

writing: 

The Administrator’s letter details the Agency’s determination that the 

District may use emission reductions from previously shutdown sources, 

including minor source orphan shutdowns, to fund its internal accounts. The 

Administrator’s letter also disagrees with assertions that the District’s 

internal accounts have negative balances. Thus, for all of the reasons set 

forth in the Administrator’s letter, EPA disagrees with [Communities] that 

this SIP revision constitutes codifying a new system of generating emission 

credits, that the District’s internal accounts have negative balances or that 

the emission credits are invalid because they were created more than two 

decades ago. 

Id. EPA’s reliance on this letter is inappropriate because, as described below, the 

letter itself states that for the Sentinel Revision, EPA would conduct an 

independent rulemaking, and the letter did not address matters related to the 

Sentinel Revision. Further, the letter is not a final agency action. Finally, even if 

it were relevant, the letter does not address the questions at issue here. 

 In December 2009, Communities, along with the Natural Resources Defense 

Council, petitioned the Administrator of EPA to: 

[P]roduce a written statement reiterating established law – that rules or laws 

enacted by the State of California, or any subdivision thereof, are not valid 

for purposes of meeting requirements of the Federal Clean Air Act (“the 

Act” or “CAA”) unless and until such rules or laws have received federal 

approval in a process compliant with the Act, its implementing regulations, 

the Administrative Procedures Act (“APA”), and case law. 

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PER 000108. The Administrator denied the Petition writing, inter alia, 

If the District and the California Air Resources Board submit [the AB 1318 

Tracking System] to the EPA as a SIP revision, the EPA will conduct further 

public notice and comment on the EPA’s proposed action. Accordingly, I 

do not consider the Petition ripe with respect to the offsets that the District 

will be providing to the Sentinel Energy Center and the Petition’s challenge 

to matters arising in connection with AB 1318. 

PER 000135. Therefore, by the letter’s own terms it is not relevant to this 

rulemaking. 

Further, the unpublished letter does not constitute final agency action, and 

EPA may not rely on it to dispose of any issues, let alone issues that it expressly 

excluded from consideration. See Bennett v. Spear, 520 U.S. 154, 177-78 (1997); 

Whitman v. Am. Trucking Ass'n, 531 U.S. 457, 478 (2001); see also Oregon 

Natural Desert Ass’n v. U.S. Forest Service, 465 F.3d 977, 984 (9th Cir. 2006). To 

be considered final agency action, the action “must not be of a merely tentative or 

interlocutory nature.” Bennett, 520 U.S. at 178. A court will look to see whether 

the agency “has rendered its last word on the matter” to determine whether an 

action is final and is ripe for judicial review. Whitman, 531 U.S. at 478; see also

ONDA, 465 F.3d at 984. The unpublished letter is not final, and anticipates further 

analysis both from the agency and the public, and is therefore without legal effect. 

Nor does the unpublished letter even resolve the issue of the internal 

accounts’ balances, but simply underscores the need for completing the rulemaking 

on Rule 1315. First, all parties agree that the tracking system used prior to 

adoption of Rule 1315 did not track minor source orphan shutdowns. See RJN 

Exh. C. pp. 21-36 (a primary Rule 1315 modification to the tracking system is the 

inclusion of minor source orphan shutdowns). The unpublished letter simply 

concludes that there is “nothing in Regulation XIII that would preclude the District 

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from using those offsets to demonstrate equivalency with federal NSR 

requirements.” PER 000133 (emphasis added). The issue, however, is not what 

may or may not have been precluded, but that the system did not track minor 

sources prior to proposal of Rule 1315. In other words, such a rule is not 

precluded, but it has not happened yet. 

Second, even assuming the District was not precluded from tracking minor 

sources, the fact is it did not track them and it acted accordingly for a decade. The 

sudden retroactive application of Rule 1315’s modifications to the tracking system 

raises serious Clean Air Act issues, including post hoc adjustment to emissions 

inventories, 42 U.S.C. § 7502(c)(3), inconsistencies with attainment 

demonstrations, 42 U.S.C. § 7410 (a)(2), and violations of reasonable further 

progress, 42 U.S.C. § 7502(c)(2). See also PER 000008 (EPA recognizing that 

“emission reductions are considered creditable if they have not been relied upon to 

demonstrate attainment, [reasonable further progress] or any other permit action”). 

The proper process through which these Rule 1315 issues are resolved is EPA Rule 

1315 rulemaking, not the source-specific SIP revision for a single power plant. 

Third, even assuming Rule 1315 may, once approved, have retroactive 

application, here, EPA alleges a positive balance with no support for such a claim 

because there is none. PER 000007. Instead, the evidence EPA attempts to add to 

the record—Annual Equivalency Determinations up to 2004—supports 

Communities’ position that absent EPA’s adoption of Rule 1315 through noticed 

rulemaking, the District’s internal accounts do not have a positive balance. See

PER 000002. Without completing the rulemaking process for Rule 1315 there are 

no credits available to be transferred out of the internal account. For all these 

reasons, the Rule 1315 horse must come before the AB 1318 Tracking System cart. 

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CONCLUSION AND RELIEF REQUESTED 

For the foregoing reasons, Communities respectfully request that the Court 

vacate EPA’s approval of the Sentinel Revision, both for failing to comply with the 

Administrative Procedure Act and as unlawful under the Clean Air Act. 

Communities recognize that a decision on the APA improprieties may obviate the 

need to resolve the statutory interpretation issues associated with the Clean Air Act 

offsetting requirements. The Clean Air Act issues, however, are ripe for judicial 

review, and a ruling on these questions is in the interest of judicial and 

administrative economies. Without the Court’s direction on the Clean Air Act 

issues, a vacature based only on procedural defects may lead EPA to pursue the 

same ends through proper rulemaking, which in turn will certainly lead to another 

round of legal challenge on these same issues. 

Dated: July 28, 2011 Respectfully submitted, 

s/ 

Shana Lazerow 

Attorney for Petitioner 

Communities for a Better 

Environment

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CERTIFICATE OF COMPLIANCE WITH WORD LIMIT 

 Pursuant to Circuit Rule 32-1, I hereby certify that this brief complies with 

the word limitations set forth in FRAP 32(a)(7)(B). This brief is proportionally 

spaced, has a typeface of 14 points and contains 10,457 words. 

DATED: July 28, 2011 

s/ 

Shana Lazerow 

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STATEMENT OF RELATED CASES 

Petitioners are unaware of any related cases pending in this Court.

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CERTIFICATE OF SERVICE 

I hereby certify that I electronically filed the foregoing with the Clerk of the Court 

for the United States Court of Appeals for the Ninth Circuit by using the appellate 

CM/ECF system on July 28, 2011. 

I certify that all participants in the case are registered CM/ECF users and 

that service will be accomplished by the appellate CM/ECF system. 

I certify under penalty of perjury that the foregoing is true and correct. 

Executed on July 28, 2011 in Oakland, California. 

 _______/s 

 Shana Lazerow 

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