United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 25, 2008 Decided July 11, 2008

No. 05-1244

STATE OF NORTH CAROLINA,

PETITIONER

v.

ENVIRONMENTAL PROTECTION AGENCY,

RESPONDENT

UTILITY AIR REGULATORY GROUP, ET AL.,

INTERVENORS

Consolidated with

05-1246, 05-1249, 05-1250, 05-1251, 05-1252, 05-1253,

05-1254, 05-1256, 05-1259, 05-1260, 05-1262, 06-1217,

06-1222, 06-1224, 06-1226, 06-1227, 06-1228, 06-1229,

06-1230, 06-1232, 06-1233, 06-1235, 06-1236, 06-1237,

06-1238, 06-1240, 06-1241, 06-1242, 06-1243, 06-1245,

07-1115

On Petitions for Review of an Order of the 

Environmental Protection Agency

Robin L. Juni argued the cause for petitioners on SO2

Issues. Bart E. Cassidy argued the cause for petitioners on Title
2

IV Exempt Units Issues. With them on the briefs were Peter H.

Wyckoff, Jeffrey A. Knight, Lisa M. Jaeger, Brian J. McManus,

William H. Lewis Jr., Steven J. Shimberg, Deborah E. Jennings,

Meredith DuBarry Huston, Michael R. Barr, Sheldon A. Zabel,

Kathleen C. Bassi, Stephen J. Bonebrake, Sam Kalen, Kyle W.

Danish, and Alvin Bruce Davis. Carol F. McCabe entered an

appearance.

Marc D. Bernstein, Special Deputies Attorney General,

Attorney General’s Office of State of North Carolina, argued the

cause for petitioners on North Carolina Issues. With him on the

briefs were Roy Cooper, Attorney General, James C. Gulick,

Senior Deputy Attorney General, J. Allen Jernigan, Special

Deputies Attorney General, and John C. Evans, Assistant

Attorney General.

William M. Bumpers, Robert A. Manning, and Michael W.

Steinberg argued the causes for petitioners on Border State

Issues. With them on the briefs were David A. Savage, Michael

B. Heister, William H. Lewis Jr., and Alvin Bruce Davis. James

S. Alves and Winston K. Borkowski entered appearances.

Alvin B. Davis argued the cause for petitioners on FuelAdjustment Issues. With him on the briefs was David A.

Savage. Joshua B. Frank entered an appearance.

Sheldon A. Zabel, Kathleen C. Bassi, Stephen J. Bonebrake,

and Robert A. Manning were on the briefs of petitioners

Northern Indiana Public Service Company and Florida

Association of Electric Utilities on NOx-Related Claims. 

Angeline Purdy and Norman L. Rave, Jr., Attorneys, U.S.

Department of Justice, argued the cause for respondents. With

them on the brief were John C. Cruden, Deputy Assistant

Attorney General, and Steven E. Silverman and Geoffrey Wilcox,
3

Counsel, U.S. Environmental Protection Agency. Paul D.

Tanaka, Attorney, U.S. Department of Justice, entered and

appearance.

Andrew M. Cuomo, Attorney General, Attorney General’s

Office of the State of New York, Barbara D. Underwood,

Solicitor General, Daniel Chepaitis, Assistant Solicitor General,

J. Jared Snyder, Assistant Attorney General, Richard

Blumenthal, Attorney General, Attorney General’s Office of the

State of Connecticut, Stuart Rabner, Attorney General, Attorney

General’s Office of the State of New Jersey, Joseph R. Biden,

III, Attorney General, Attorney General’s Office of the State of

Delaware, Lisa Madigan, Attorney General, Attorney General’s

Office of the State of Illinois, Douglas F. Gansler, Attorney

General, Attorney General’s Office of the State of Maryland,

Martha Coakley, Attorney General, Attorney General’s Office

of the Commonwealth of Massachusetts, Kelly A. Ayotte,

Attorney General, Attorney General’s Office of the State of New

Hampshire, Gary K. King, Attorney General, Attorney General’s

Office fo the State of New Mexico, Patrick C. Lynch, Attorney

General, Attorney General’s Office of the State of Rhode Island,

and Linda Singer, Attorney General at the time the brief was

filed, Attorney General’s Office for the District of Columbia,

were on the brief of amici states in support of petitioner North

Carolina. Michael J. Myers, Assistant Attorney General,

Attorney General’s Office of the State of New York, Matthew

I. Levine, Assistant Attorney General, Attorney General’s Office

of the State of Connecticut, Jean P. Reilly, Ruth E. Carter, and

Kevin P. Auerbacher, Assistant Attorneys General, Attorney

General’s Office of the State of New Jersey, and James R.

Milkey, Assistant Attorney General, Attorney General’s Office

of the Commonwealth of Massachusetts, entered appearances.

Kristen M. Campfield, Attorney, was on the brief for amicus

curiae Commonwealth of Pennsylvania, Department of
4

Environmental Protection, in support of petitioner ARIPPA and

seeking remand. 

Sean H. Donahue, Vickie L. Patton, and John D. Walke

were on the joint brief of intervenors in support of respondent.

Peter Glaser, Harold P. Quinn, Norman W. Fichthorn, C.

Grady Moore III, P. Stephen Gidiere III, Claudia M. O’Brien,

and Nathan H. Seltzer were on the brief for industry intervenors.

Before: SENTELLE, Chief Judge, and ROGERS and BROWN,

Circuit Judges.

Opinion for the Court filed PER CURIAM.

PER CURIAM: These consolidated petitions for review

challenge various aspects of the Clean Air Interstate Rule.

Because we find more than several fatal flaws in the rule and the

Environmental Protection Agency (“EPA”) adopted the rule as

one, integral action, we vacate the rule in its entirety and remand

to EPA to promulgate a rule that is consistent with this opinion.

I. Background

A. Title I of the Clean Air Act

Title I of the Clean Air Act (“CAA”), 42 U.S.C. §§ 7401 et

seq., requires EPA to issue national ambient air quality

standards (“NAAQS”) for each air pollutant that “cause[s] or

contribute[s] to air pollution which may reasonably be

anticipated to endanger public health or welfare [and] the

presence of which in the ambient air results from numerous or

diverse mobile or stationary sources . . . ,” id. § 7408(a)(1)(A),

(B). It also requires EPA to divide the country into areas

designated as “nonattainment,” “attainment,” or “unclassifiable”
5

for each air pollutant, depending on whether the area meets the

NAAQS. Id. § 7407(c), (d). Title I gives states “the primary

responsibility for assuring air quality” within their borders, id.

§ 7407(a), and requires each state to create a state

implementation plan (“SIP”) to meet the NAAQS for each air

pollutant and submit it to EPA for its approval, id. § 7410. If a

state is untimely in submitting a compliant SIP to EPA, EPA

must promulgate a federal implementation plan (“FIP”) for the

state to follow. Id. § 7410(c)(1).

One provision of Title I requires SIPs to 

contain adequate provisions —(i) prohibiting, consistent

with the provisions of this subchapter, any source or

other type of emissions activity within the State from

emitting any air pollutant in amounts which

will—(I) contribute significantly to nonattainment in, or

interfere with maintenance by, any other State with

respect to any [NAAQS] . . . .

42 U.S.C. § 7410(a)(2)(D)(i)(I) (statutory provision to which we

refer throughout this opinion as “section 110(a)(2)(D)(i)(I)”). In

1998, EPA relied on this provision to promulgate the NOx SIP

Call, which imposed a duty on certain upwind sources to reduce

their NOx emissions by a specified amount so that they no longer

“‘contribute significantly to nonattainment in, or interfere with

maintenance by,’ a downwind State.” Finding of Significant

Contribution and Rulemaking for Certain States in the Ozone

Transport Assessment Group Region for Purposes of Reducing

Regional Transport of Ozone, 63 Fed. Reg. 57,356, 57,358 (Oct.

27, 1998) (“NOx SIP Call”). The NOx SIP Call created an

optional cap-and-trade program for nitrogen oxides (“NOx”). 

Id. at 57,359. Like the NOx SIP Call, the Clean Air Interstate

Rule—Rule To Reduce Interstate Transport of Fine Particulate

Matter and Ozone (Clean Air Interstate Rule); Revisions to Acid
6

Rain Program; Revisions to the NOx SIP Call, 70 Fed. Reg.

25,162 (May 12, 2005) (“CAIR”)—which is the rule at issue in

these consolidated petitions for review, also derives its statutory

authority from section 110(a)(2)(D)(i)(I). 

B. Title IV of the Clean Air Act

Title IV of the CAA, 42 U.S.C. §§ 7651–7651o, aims to

reduce acid rain deposition nationwide and in doing so creates

a cap-and-trade program for sulfur dioxide (“SO2”) emitted by

fossil fuel-fired combustion devices. Congress capped SO2

emissions for affected units, or electric generating units

(“EGUs”), at 8.9 million tons nationwide, id. § 7651b(a)(1), and

distributed “allowances” among those units. One “allowance”

is an authorization for an EGU to emit one ton of SO2 in a year.

Id. § 7651a(3). Title IV includes detailed provisions for

allocating allowances among EGUs based for the most part on

their share of total heat input of all Title IV EGUs during a

1985–87 baseline period. Id. §§ 7651a(4), 7651c, 7651d, 7651e,

7651h, 7651i. Whenever an EGU emits one ton of SO2 in a

year, it must surrender one allowance to EPA. See id.

§ 7651b(g). But Title IV also permits EGUs to transfer unused

allowances to deficient EGUs throughout the nation or to “bank”

excess allowances and use or sell them in future years. Id.

§ 7651b(b). 

Title IV exempts EGUs that are “simple combustion

turbines, or units which serve a generator with a nameplate

capacity of 25 Mwe [megawatt electrical] or less,” 42 U.S.C.

§ 7651a(8), those that are not fossil fuel-fired, id. § 7651a(15),

those that do not sell electricity, id. § 7651a(17)(A)(i), and those

that cogenerate steam and electricity unless they sell a certain

amount of electricity, id. § 7651a(17)(C). It also provides that

certain exempt units—“qualifying small power production

facilities” and “qualifying cogeneration facilities,” defined in 16
7

U.S.C. § 796(17)(C), (18)(B) (delegating power to FERC to

define the terms), and certain “new independent power

production facilities,” defined in 42 U.S.C. § 7651o(a)(1)—may

elect to become a part of Title IV. 42 U.S.C. § 7651d(g)(6)(A);

see id. § 7651i (detailing “electing-in” provisions). 

C. Clean Air Interstate Rule

Pursuant to its Title I authority to ensure that states have

plans in place that implement the requirements in section

110(a)(2)(D)(i)(I), EPA promulgated CAIR. CAIR, 70 Fed.

Reg. at 25,165. CAIR’s purpose is to reduce or eliminate the

impact of upwind sources on out-of-state downwind

nonattainment of NAAQS for fine particulate matter (“PM2.5”),

a pollutant associated with respiratory and cardiovascular

problems, and eight-hour ozone, a pollutant commonly known

as smog. Id. at 25,162. For the most part, EPA defines sources

at the state level. EPA determined that 28 states and the District

of Columbia (“upwind states”) contribute significantly to out-ofstate downwind nonattainment of one or both NAAQS. Id.

Because SO2 “is a precursor to PM2.5 formation, and NOx is a

precursor to both ozone and PM2.5 formation,” CAIR requires

upwind states “to revise their [SIPs] to include control measures

to reduce emissions” of SO2 and NOx. Id. CAIR requires

upwind states to reduce their emissions in two phases. Id. at

25,165. NOx reductions are to start in 2009, SO2 reductions are

to start in 2010, and the second reduction phase for each air

pollutant is to start in 2015. Id. at 25,162. To implement

CAIR’s emission reductions, the rule also creates optional

interstate trading programs for each air pollutant, to which, in

the absence of approved SIPs, all upwind sources are now

subject. Id.; see Rulemaking on Section 126 Petition from North

Carolina To Reduce Interstate Transport of Fine Particulate

Matter and Ozone; Federal Implementation Plans To Reduce

Interstate Transport of Fine Particulate Matter and Ozone;
8

Revisions to the Clean Air Interstate Rule; Revisions to the Acid

Rain Program, 71 Fed. Reg. 25,328, 25,328 (Apr. 28, 2006)

(“FIP”) (in the absence of approved SIPs for CAIR, applying the

rule’s model trading programs via EPA’s Federal

Implementation Plan to all sources in upwind states). In

addition, CAIR revises Title IV’s Acid Rain Program

regulations governing the SO2 cap-and-trade program and

replaces the NOx SIP Call with the CAIR ozone-season NOx

trading program. 

At issue in much of this litigation is the definition of the

term “contribute significantly.” In other words, in order to

promulgate CAIR, EPA had to determine what amount of

emissions constitutes a “significant contribution” to another

state’s nonattainment problem. See 42 U.S.C.

§ 7410(a)(2)(D)(i)(I). CAIR uses several factors to define

“contribute significantly,” including one state’s impact on

another’s air quality, the cost of “highly cost-effective”

emissions controls, fairness, and equity in the balance between

regional and local controls. CAIR, 70 Fed. Reg. at 25,174–75.

The air quality factor is the threshold step in the analysis,

determining whether an upwind state is subject to CAIR, and the

other factors help EPA determine the quantitative level of

emissions reductions required of upwind sources.

CAIR uses a different air quality threshold for each of the

two pollutants it regulates. A state meets the air quality

threshold for PM2.5 (and is therefore subject to CAIR) if it

contributes 0.2 micrograms per cubic meter (“μg/m3

”) or more

of PM2.5 to out-of-state downwind areas that are in

nonattainment. Id. at 25,174–75, 25,191. CAIR uses a more

complicated process to define the air quality threshold for ozone

NAAQS. CAIR first eliminates a state from inclusion in the

CAIR ozone program if it has the following characteristics:

(1) it contributes less than 2 parts per billion (“ppb”) to a
9

nonattainment area’s ozone concentration as measured using

either a “zero-out method” or a “source apportionment method,”

or (2) its relative contribution to the nonattainment area’s excess

ozone concentration (the number of particles exceeding 85 ppb)

is less than one percent. Id. at 25,191; see also Rule to Reduce

Interstate Transport of Fine Particulate Matter and Ozone (Clean

Air Interstate Rule): Reconsideration, 71 Fed. Reg. 25,304,

25,320 (Apr. 28, 2006) (“Reconsideration”). States that survive

the screening criteria are then assessed to determine if they

contribute significantly to ozone nonattainment in another state

using three metrics: (1) magnitude of contribution,

(2) frequency of contribution, and (3) relative amount of

contribution to the area’s ozone concentration that exceeds

attainment levels. CAIR, 70 Fed. Reg. at 25,191–92. 

States that “contribute significantly” to nonattainment for

ozone NAAQS are subject to CAIR’s ozone-season limits for

NOx and those that “contribute significantly” to nonattainment

for PM2.5 NAAQS are subject to CAIR’s annual limits for NOx

and SO2. The ozone-season NOx limits are a percentage

reduction in the annual limits for NOx calculated for PM2.5

contributors. In order to eliminate a state’s significant

contribution to PM2.5 NAAQS, CAIR sets an annual cap on NOx

and SO2 emissions in the region. Each state participating in

CAIR’s allowance-trading programs receives a budget of

allowances, calculated according to a different formula for SO2

and NOx. If a state develops a SIP that opts out of the trading

programs to which all its upwind sources are now subject in the

absence of an approved SIP, see FIP, 71 Fed. Reg. at 25,328, the

state must limit its emissions to a cap specified by CAIR.

CAIR sets each state’s NOx emissions budget by allocating

the regionwide NOx budget among CAIR states according to

each state’s proportion of oil-, gas-, and coal-fired facilities.

CAIR, 70 Fed. Reg. at 25,230–31. The regionwide budget is
10

equal to the upwind states’ average annual heat input for EGUs

from 1999 to 2002 multiplied by the uniform emissions rate if

EGUs were to use “highly cost-effective” emissions controls.

Id. at 25,231. For Phase One, which starts in 2009, the

multiplier is 0.15 pounds per million British thermal units

(“lb/mmBtu”) and for Phase Two, which starts in 2015, the

multiplier is 0.125 lb/mmBtu. Id. at 25,230. Even though EPA

determined that emissions controls in both phases are “highly

cost effective,” it only deemed Phase Two to eliminate the

upwind states’ “significant contribution” to downwind

nonattainment. Id. at 25,198. In 2009, EPA has supplemented

the budget of 1.5 million tons of NOx emissions with a one-time

Compliance Supplement Pool of 200,000 NOx allowances. Id.

at 25,231–32. Like SO2 allowances in Title IV, one CAIR NOx

allowance permits an EGU to emit one ton of NOx in one year.

State budgets are based on their average annual heat input,

adjusted by fuel type (coal, gas, oil) during the 1999–2002 time

period. Id. at 25,231. The use of fuel-adjustment factors means

states with higher percentages of gas- and oil-fired facilities

receive comparably fewer NOx allowances than states with

higher percentages of coal-fired facilities. States have discretion

to accomplish their NOx emissions caps as they see fit in their

SIPs, but if a state takes part in the EPA-administered trading

program for NOx, it must follow EPA’s rules for that program.

CAIR sets each state’s SO2 budget using a process similar

to the one used for NOx budgets; it allocates the regionwide SO2

budget among upwind states. However, EPA used a different

method to determine the regionwide budget for SO2. Instead of

using 1999–2002 data, the agency summed all the Title IV

allowances allotted to EGUs in the covered states and reduced

them by 50% for 2010 (Phase One) and 65% for 2015 (Phase

Two). Id. at 25,229. As stated above, Title IV allocates

allowances among EGUs based for the most part on their share

of the total heat input of all Title IV EGUs during a 1985–87
11

baseline period, not the later time period used for NOx

allowances in CAIR. 42 U.S.C. §§ 7651a(4), 7651c, 7651d,

7651e, 7651h, 7651i. States subject to CAIR may opt into the

EPA-administered trading program for SO2, but if they do not

opt in and at the same time choose to regulate EGUs, their SIPs

must include a mechanism for retiring Title IV SO2 allowances

in excess of the budget CAIR allocates to each state. CAIR, 70

Fed. Reg. at 25,259. A state not participating in CAIR’s trading

program but regulating other sources of SO2 in addition to

EGUs, does not need to surrender quite as many of its Title IV

SO2 allowances. Id. Any surrendered allowance may not be

used for Title IV compliance purposes and is forever out of

circulation. Id. at 25,291. A state does not have to surrender

any Title IV SO2 allowances if it adopts a SIP that regulates only

non-EGUs to accomplish its SO2 cap, id. at 25,295, but EPA

notes that EGUs are projected to contribute 70% of SO2

emissions in 2010, id. at 25,214, making such a scenario

unlikely. 

EPA issued two additional rules clarifying CAIR that are

also under review in this proceeding. One rule responds to

various petitions for reconsideration, which are discussed in

more detail below. Reconsideration, 71 Fed. Reg. 25,304.

Another rule, inter alia, sets forth a FIP to regulate EGUs until

upwind states implement EPA-approved SIPs that conform with

CAIR requirements. FIP, 71 Fed. Reg. 25,328.

D. Petitions for Review

Section 307 of the CAA requires petitions for judicial

review of CAIR to be filed within 60 days of the rule’s

publication in the Federal Register. 42 U.S.C. § 7607(b)(1). On

May 12, 2005, EPA published CAIR and on April 28, 2006,

EPA published its Reconsideration and FIP, which describes the

Federal Implementation Plan required of sources while states
12

formulate their SIPs. CAIR, 70 Fed. Reg. 25,162;

Reconsideration, 71 Fed. Reg. 25,304; FIP, 71 Fed. Reg. 25,328.

In the 60 days after EPA published CAIR and its

Reconsideration, several petitions for review were filed in this

Court. 

Among those petitions are North Carolina’s objections to

EPA’s trading programs, EPA’s interpretation of the “interfere

with maintenance” language in section 110(a)(2)(D)(i)(I), Phase

Two’s 2015 compliance date, the NOx Compliance Supplement

Pool, EPA’s interpretation of “will” in “will contribute

significantly,” and the air quality threshold for PM2.5. Several

electric utility companies (“SO2 Petitioners”) contest EPA’s

authority under Title I and Title IV to limit the number of Title

IV allowances in circulation, to set state SO2 budgets as

percentage reductions in Title IV allowances, and to require

units exempt from Title IV to acquire Title IV allowances.

Petitioners Entergy Corporation and FPL Group, to which we

refer as “Entergy,” contest EPA’s authority to base state NOx

budgets on the number of coal-, oil-, and gas-fired facilities a

state has compared to other states in the CAIR region. Electric

utilities operating in Texas, Florida, and Minnesota and one

municipality argue against the inclusion of all or part of those

States in CAIR. And Florida Association of Electric Utilities

petitions for review of EPA’s 2009 start date for Phase One of

NOx restrictions. We consider these petitions below. 

II. Analysis

Our jurisdiction derives from the CAA, which also

establishes our standard of review. We “may reverse any such

action found to be . . . arbitrary, capricious, an abuse of

discretion, or otherwise not in accordance with law; . . . [or] in

excess of statutory jurisdiction, authority, or limitations, or short

of statutory right . . . .” 42 U.S.C. § 7607(d)(9). We refer to the
13

review standard in 42 U.S.C. § 7607(d) instead of the similar

standard of review set forth in the Administrative Procedure Act

(“APA”) because the CAA directs that its review standard apply

to “such . . . actions as the Administrator may determine.” Id.

§ 7607(d)(1)(V); see Supplemental Proposal for the Rule To

Reduce Interstate Transport of Fine Particulate Matter and

Ozone (Clean Air Interstate Rule), 69 Fed. Reg. 32,684, 32,686

(June 10, 2004) (applying section 307(d), 42 U.S.C. § 7607(d),

“to all components of the rulemaking”).

The petitions under review involve EPA’s construction of

the CAA, a statute it administers. Where the statute speaks to

the direct question at issue, we afford no deference to the

agency’s interpretation of it and “must give effect to the

unambiguously expressed intent of Congress.” Chevron U.S.A.,

Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842–43

(1984). But where the statute does “not directly address[] the

precise question at issue, . . . the question for the court is

whether the agency’s answer is based on a permissible

construction of the statute,” and we only reverse that

determination if it is “arbitrary, capricious, or manifestly

contrary to the statute.” Id. at 843. An action is “arbitrary and

capricious” if it 

has relied on factors which Congress has not intended it

to consider, entirely failed to consider an important

aspect of the problem, offered an explanation for its

decision that runs counter to the evidence before the

agency, or is so implausible that it could not be ascribed

to a difference in view or the product of agency

expertise.

Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co.,

463 U.S. 29, 43 (1983); see Motor Vehicle Mfrs. Ass’n. v. EPA,

768 F.2d 385, 389 n.6 (D.C. Cir. 1985) (noting that “the
14

standard we apply (i.e., whether the EPA’s actions were in

excess of statutory authority or arbitrary and capricious) is the

same under” the CAA and the APA). 

A. North Carolina Issues

Petitioner North Carolina challenges CAIR’s programs for

pollution-trading, EPA’s interpretation of the “interfere with

maintenance” provision in section 110(a)(2)(D)(i)(I), the 2015

compliance deadline for Phase Two of CAIR, the NOx

Compliance Supplement Pool, EPA’s interpretation of the word

“will” that precedes “contribute significantly” in section

110(a)(2)(D)(i)(I), and EPA’s use of a 0.2 μg/m3 air quality

threshold for including upwind states in CAIR’s PM2.5 program.

We grant North Carolina’s petition as to the trading programs,

the “interfere with maintenance” language, and the 2015

compliance deadline, deny its petition as to its interpretation of

“will” and the air quality threshold, and take no action on the

NOx Compliance Supplement Pool issue.

1. Pollution-Trading Programs

North Carolina challenges the lawfulness of CAIR’s trading

programs for SO2 and NOx. North Carolina contests the lack of

reasonable measures in CAIR to assure that upwind states will

abate their unlawful emissions as required by section

110(a)(2)(D)(i)(I), but does not submit that any trading is per se

unlawful. EPA designed CAIR to eliminate the significant

contribution of upwind states, as a whole, to downwind

nonattainment. CAIR, 70 Fed. Reg. at 25,195. EPA did not

purport to measure each state’s significant contribution to

specific downwind nonattainment areas and eliminate them in

an isolated, state-by-state manner. Reasoning that capping

emissions in each state would not achieve reductions in the most

cost-effective manner, EPA decided to take a regionwide
15

approach to CAIR and include voluntary emissions trading

programs. 

In modeling the CAIR . . . EPA assumes interstate

emissions trading. While EPA is not requiring States to

participate in an interstate trading program for EGUs, we

believe it is reasonable to evaluate control costs

assuming States choose to participate in such a program

since that will result in less expensive reductions.

Id. at 25,196. In CAIR’s trading system, states are given initial

emissions budgets, but sources can choose to sell or purchase

emissions credits from sources in other states. As a result, states

may emit more or less pollution than their caps would otherwise

permit. 

Because EPA evaluated whether its proposed emissions

reductions were “highly cost effective,” at the regionwide level

assuming a trading program, it never measured the “significant

contribution” from sources within an individual state to

downwind nonattainment areas. Using EPA’s method, such a

regional reduction, although equivalent to the sum of reductions

required by all upwind states to meet their budgets, would never

equal the aggregate of each state’s “significant contribution” for

two reasons. State budgets alone, without trading, would not be

“highly cost effective.” And although EPA has measured the

“air quality factor” to include states in CAIR, it has not

measured the unlawful amount of pollution for each upwinddownwind linkage. “As noted earlier in the case of SO2, EPA

recognizes that the choice of method in setting State budgets,

with a given regionwide total annual budget, makes little

difference in terms of the levels of resulting regionwide annual

SO2 and NOx emissions reductions.” Id. at 25,230–31. Thus

EPA’s apportionment decisions have nothing to do with each

state’s “significant contribution” because under EPA’s method
16

of analysis, state budgets do not matter for significant

contribution purposes.

But according to Congress, individual state contributions to

downwind nonattainment areas do matter. Section

110(a)(2)(D)(i)(I) prohibits sources “within the State” from

“contribut[ing] significantly to nonattainment in . . . any other

State . . .” (emphasis added). Yet under CAIR, sources in

Alabama, which contribute to nonattainment of PM2.5 NAAQS

in Davidson County, North Carolina, would not need to reduce

their emissions at all. See CAIR, 70 Fed. Reg. at 25,247 tbl. VI8. Theoretically, sources in Alabama could purchase enough

NOx and SO2 allowances to cover all their current emissions,

resulting in no change in Alabama’s contribution to Davidson

County, North Carolina’s nonattainment. CAIR only assures

that the entire region’s significant contribution will be

eliminated. It is possible that CAIR would achieve section

110(a)(2)(D)(i)(I)’s goals. EPA’s modeling shows that sources

contributing to North Carolina’s nonattainment areas will at

least reduce their emissions even after opting into CAIR’s

trading programs. 71 Fed. Reg. at 25,344–45. But EPA is not

exercising its section 110(a)(2)(D)(i)(I) duty unless it is

promulgating a rule that achieves something measurable toward

the goal of prohibiting sources “within the State” from

contributing to nonattainment or interfering with maintenance

“in any other State.” 

 In Michigan v. EPA, 213 F.3d 663 (D.C. Cir. 2000), we

deferred to EPA’s decision to apply uniform emissions controls

to all upwind states despite different levels of contribution of

NOx to nonattainment areas caused by the differing quantities of

emissions produced in upwind states and the varying distances

of upwind sources to downwind nonattainment areas. Id. at 679.

We did so because these effects “flow[] ineluctably from the

EPA’s decision to draw the ‘significant contribution’ line on a
17

basis of cost differentials” and “[o]ur upholding of that decision

logically entails upholding this consequence.” Id. But the flow

of logic only goes so far. It stops at the point where EPA is no

longer effectuating its statutory mandate. In Michigan we never

passed on the lawfulness of the NOx SIP Call’s trading program.

Id. at 676 (“Of course we are able to assume the existence of

EPA’s allowance trading program only because no one has

challenged its adoption.”). It is unclear how EPA can assure

that the trading programs it has designed in CAIR will achieve

section 110(a)(2)(D)(i)(I)’s goals if we do not know what each

upwind state’s “significant contribution” is to another state.

Despite Michigan’s approval of emissions controls that do not

correlate directly with each state’s relative contribution to a

specific downwind nonattainment area, CAIR must include

some assurance that it achieves something measurable towards

the goal of prohibiting sources “within the State” from

contributing to nonattainment or interfering with maintenance in

“any other State.” 

Because CAIR is designed as a complete remedy to section

110(a)(2)(D)(i)(I) problems, as EPA claims, FIP, 71 Fed. Reg.

at 25,340, CAIR must do more than achieve something

measurable; it must actually require elimination of emissions

from sources that contribute significantly and interfere with

maintenance in downwind nonattainment areas. To do so, it

must measure each state’s “significant contribution” to

downwind nonattainment even if that measurement does not

directly correlate with each state’s individualized air quality

impact on downwind nonattainment relative to other upwind

states. See Michigan, 213 F.3d at 679. Otherwise, the rule is

not effectuating the statutory mandate of prohibiting emissions

moving from one state to another, leaving EPA with no statutory

authority for its action. Whether EPA could promulgate a

section 110(a)(2)(D)(i)(I) remedy that would bar alternate relief,

such as would be available under section 126, 42 U.S.C. § 7426,
18

is a question that is not before the court.

2. “Interfere With Maintenance” 

Section 110(a)(2)(D)(i)(I) requires EPA to ensure that SIPs

“contain adequate provisions” prohibiting sources within a state

from emitting air pollutants in amounts which will “contribute

significantly to nonattainment in, or interfere with maintenance

by, any other State with respect to any [NAAQS].” 42 U.S.C.

§ 7410(a)(2)(D)(i)(I) (emphasis added). North Carolina argues

that EPA unlawfully ignored the “interfere with maintenance”

language in section 110(a)(2)(D)(i)(I), divesting it of

independent effect in CAIR. It contends that instead of limiting

the beneficiaries of CAIR to downwind areas that were

monitored to be in nonattainment when EPA promulgated CAIR

and were modeled to be in nonattainment in 2009 and 2010,

when CAIR goes into effect, CAIR, 70 Fed. Reg. at 25,244,

EPA should have also included in CAIR upwind states, such as

Georgia, that send pollution into downwind areas that are

projected to barely meet attainment levels of NAAQS in 2010.

North Carolina only contests EPA’s interpretation of the

“interfere with maintenance” prong as applied to EPA’s

determination of which states are beneficiaries of CAIR for the

ozone NAAQS. 

North Carolina explains that even though all of its counties

are projected to attain NAAQS for ozone by 2010, several of its

counties are at risk of returning to nonattainment due to

interference from upwind sources. Specifically, it notes that

Mecklenburg County, which projections show will have ozone

levels of 82.5 ppb in 2010 (2.5 ppb below the 85.0 ppb NAAQS)

without help from CAIR, could fall back into nonattainment

because of the historic variability in the county’s ozone levels.

Technical Support Document for the Final Clean Air Interstate

Rule, Air Quality Modeling, at Appendix E (March 2005)
19

(“Technical Support Document”). EPA has stated that

“historical data indicates that attaining counties with air quality

levels within 3 ppb of the standard are at risk of returning to

nonattainment.” EPA, Corrected Response to Significant Public

Comments on the Proposed Clean Air Interstate Rule, at 148

(April 2005) (“Corrected Response”). “The information also

indicates that even if CAIR receptors were to [be] 3–5 ppb

below the standard, they would have a reasonable likelihood of

returning to nonattainment.” Id. And in the case of Fulton

County, Georgia, EPA determined that the “interfere with

maintenance” provision justified imposing controls on upwind

states in 2015 even though it is projected to attain the NAAQS

by a margin of 7 or 8 ppb because its ozone levels have varied

by at least that margin several times in the recent past. Id. at

150. North Carolina argues that EPA must utilize this “historic

variability” standard to determine which downwind areas suffer

interference with their maintenance in 2010, not just 2015. If it

did so, EPA would see that Mecklenburg County, North

Carolina, has varied by at least 3 ppb (the relevant margin

between attainment and nonattainment for that county in 2010)

six times in the recent past and consequently would include in

CAIR any state, such as Georgia, that is contributing an

unlawful amount of pollution to this downwind area. Id. at

1042. 

EPA contends that it interpreted “interfere with

maintenance” just as it did in the NOx SIP Call, in which it gave

the term a meaning “much the same as” the one given to the

preceding phrase, “contribute significantly to nonattainment.”

CAIR, 70 Fed. Reg. at 25,193 n.45. EPA maintains that “the

‘interfere with maintenance’ prong may come into play only in

circumstances where EPA or the State can reasonably determine

or project, based on available data, that an area in a downwind

state will achieve attainment, but due to emissions growth or

other relevant factors is likely to fall back into nonattainment.”
20

Id. In the NOx SIP Call, it meant that areas monitored to be in

attainment when that rule was promulgated but which were

modeled to be in nonattainment in 2007, when the rule went into

effect, were considered downwind areas with which upwind

sources’ emissions interfered. NOx SIP Call, 63 Fed. Reg. at

57,379. EPA states it gave effect to the “interfere with

maintenance” prong in CAIR by using it as a basis for

implementing further emissions reductions in Phase Two of

CAIR, by which time some downwind states will have attained

NAAQS. CAIR, 70 Fed. Reg. at 25,195. 

First, we note that we did not consider EPA’s interpretation

of “interfere with maintenance” in Michigan. Thus any

interpretation it used in that rulemaking cannot provide support

for EPA’s contention that its current interpretation, even if

identical to that in the NOx SIP Call, comports with the statute.

So we analyze EPA’s interpretation of “interfere with

maintenance” for the first time here. Despite using “interfere

with maintenance” as a justification for imposing further

emissions controls in 2015, CAIR gave no independent

significance to the “interfere with maintenance” prong of section

110(a)(2)(D)(i)(I) to separately identify upwind sources

interfering with downwind maintenance. Under EPA’s reading

of the statute, a state can never “interfere with maintenance”

unless EPA determines that at one point it “contribute[d]

significantly to nonattainment.” EPA stated clearly on two

occasions “that it would apply the interfere with maintenance

provision in section 110(a)(2)(D) in conjunction with the

significant contribution to nonattainment provision and so did

not use the maintenance prong to separately identify upwind

States subject to CAIR.” FIP, 71 Fed. Reg. at 25,337 (citing

CAIR, 70 Fed. Reg. at 25,193); see also Corrected Response, at

63. EPA reasoned that this interpretation “avoid[s] giving

greater weight to the potentially lesser environmental effect” and

strikes “a reasonable balance between controls in upwind states
21

and in-state controls.” FIP, 71 Fed. Reg. at 25,337. EPA stated

that an interpretation that permitted states that are able to attain

NAAQS on their own to benefit from CAIR “could even create

a perverse incentive for downwind states to increase local

emissions.” Id.

All the policy reasons in the world cannot justify reading a

substantive provision out of a statute. See Whitman v. Am.

Trucking Ass’ns, 531 U.S. 457, 485 (2001). Areas that find

themselves barely meeting attainment in 2010 due in part to

upwind sources interfering with that attainment have no recourse

under EPA’s interpretation of the interference prong of section

110(a)(2)(D)(i)(I). 2010 is not insignificant because that is the

deadline for downwind areas to attain ozone NAAQS. See 42

U.S.C. § 7511 (setting forth deadlines for attaining ozone

NAAQS). An outcome that fails to give independent effect to

the “interfere with maintenance” prong violates the plain

language of section 110(a)(2)(D)(i)(I). The provision at issue is

written in the disjunctive: SIPs must “contain adequate

provisions prohibiting . . . any source or other type of emissions

activity within the State from emitting any air pollutant in

amounts which will contribute significantly to nonattainment in,

or interfere with maintenance by, any other State . . . .” 42

U.S.C. § 7410(a)(2)(D)(i)(I) (emphasis added). “Canons of

construction ordinarily suggest that terms connected by a

disjunctive be given separate meanings, unless the context

dictates otherwise . . . .” Reiter v. Sonotone Corp., 442 U.S.

330, 339 (1979). There is no context in section

110(a)(2)(D)(i)(I) directing an alternate result; therefore EPA

must give effect to both provisions in the statute.

EPA contends in its brief that CAIR is just one step in

carrying out its section 110(a)(2)(D)(i)(I) duties, hinting that it

may later choose to give independent effect to the “interfere

with maintenance” language. There is some general language
22

in the record to support this contention. See CAIR, 70 Fed. Reg.

at 25,175 (“This overall plan is well within the ambit of EPA’s

authority to proceed with regulation on a step-by-step basis.”).

But more specific language in the rule belies this claim. “The

[section 110(a)(2)(D)(i)(I)] violation is eliminated once a State

adopts a SIP containing the CAIR trading programs (or a SIP

containing other emission reduction options meeting the

requirements specified in CAIR), or EPA promulgates a FIP to

achieve those same reductions.” FIP, 71 Fed. Reg. at 25,340.

Because EPA describes CAIR as a complete remedy to a section

110(a)(2)(D)(i)(I) violation and does not give independent

significance to the “interfere with maintenance” language to

identify upwind states that interfere with downwind

maintenance, it unlawfully nullifies that aspect of the statute and

provides no protection for downwind areas that, despite EPA’s

predictions, still find themselves struggling to meet NAAQS due

to upwind interference in 2010. For this reason, we grant North

Carolina’s petition on this issue. Although North Carolina

challenged CAIR on the “interfere with maintenance” issue only

with regard to ozone, the rule includes the same flaw with regard

to PM2.5. The court does not address North Carolina’s separate

contention that EPA failed to comply with notice-and-comment

requirements regarding its proposed test for an “interfere with

maintenance” violation, or the propriety of the test itself. 

3. 2015 Compliance Deadline

North Carolina argues that the 2015 deadline for upwind

states to eliminate their “significant contribution” to downwind

nonattainment ignores the plain language of section

110(a)(2)(D)(i), 42 U.S.C. § 7410(a)(2)(D)(i), contradicts EPA’s

goal of “balanc[ing] the burden for achieving attainment

between regional-scale and local-scale control programs,”

CAIR, 70 Fed. Reg. at 25,166, violates the Supreme Court’s

holding that EPA may not consider economic and technological
23

infeasibility when approving a SIP, Union Elec. Co. v. EPA, 427

U.S. 246 (1976), and departs from the contrary approach it took

in the NOx SIP Call without explanation, NOx SIP Call, 63 Fed.

Reg. at 57,449. 

North Carolina challenges the 2015 Phase Two deadline for

upwind states to come into compliance with CAIR as

incompatible with section 110(a)(2)(D)(i)(I)’s mandate that SIPs

contain adequate provisions prohibiting significant contributions

to nonattainment “consistent with the provisions of [Title I].”

42 U.S.C. § 7410(a)(2)(D)(i)(I). Title I dictates the deadlines for

states to attain particular NAAQS. PM2.5 attainment must be

achieved “as expeditiously as practicable, but no later than 5

years from the date such area was designated nonattainment . . .

except that the Administrator may extend the attainment date . . .

for a period no greater than 10 years from the date of

designation as nonattainment . . . .” 42 U.S.C. § 7502(a)(2)(A).

North Carolina, along with the rest of the CAIR states, must

meet PM2.5 NAAQS by 2010. See 40 C.F.R. § 81.301 et seq.

Ozone nonattainment areas must attain permissible levels of

ozone “as expeditiously as practicable,” but no later than the

assigned date in the table the statute provides. 42 U.S.C.

§ 7511. North Carolina’s statutory deadline is June 2010, but it

could be even sooner if EPA upon repromulgating its

regulations sets an earlier deadline. See S. Coast Air Quality

Mgmt. Dist. v. EPA, 472 F.3d 882 (D.C. Cir. 2006). North

Carolina argues that despite the statutory mandate that section

110(a)(2)(D)(i), 42 U.S.C. § 7410(a)(2)(D)(i), be consistent with

the rest of Title I, which requires compliance with PM2.5 and

ozone NAAQS by 2010, CAIR gives states that “contribute

significantly” to nonattainment until 2015 to comply based

solely on reasons of feasibility. CAIR, 70 Fed. Reg. at 25,177;

see also Corrected Response, at 58, 61; CAIR, 70 Fed. Reg. at

25,222–25 (citing feasibility restraints such as the difficulty of

securing project financing and the limited amount of specialized
24

boilermaker labor to install controls).

EPA contends that the phrase “consistent with the

provisions of [Title I]” does not require incorporating Title I’s

NAAQS attainment deadlines into CAIR. It argues that section

110(a)(2)(D)(i)(I) does not mandate any particular time frame

and that the language about consistency only requires EPA to

make a rule consistent with procedural provisions in Title I, not

substantive ones. It comes to this conclusion because the phrase

“consistent with the provisions of this title” follows the word

“prohibiting.” Due to this placement, EPA argues that the

phrase requiring consistency only modifies the word

“prohibiting.” EPA does not explain how it jumps from this

observation to the conclusion that a phrase modifying the word

“prohibiting” can only refer to procedural requirements. The

word “procedural” is simply not in the statute. If there were any

ambiguity as to Congress’s intent in excluding the limiting

language EPA proposes, an examination of the relevant

language in the context of the whole CAA dispels any doubts as

to its meaning. In the CAA, Congress differentiates between

requiring consistency with provisions in a title and requiring

consistency “with the procedures established” under a title.

Compare 42 U.S.C. § 7410(a)(2)(D)(i), with id. § 7661b(c)

(emphasis added). Section 110(a)(2)(D)(i), 42 U.S.C.

§ 7410(a)(2)(D)(i), is not limited to procedural provisions in

Title I; thus it requires EPA to consider all provisions in Title

I—both procedural and substantive—and to formulate a rule that

is consistent with them. 

Despite section 110(a)(2)(D)(i)’s requirement that

prohibitions on upwind contributions to downwind

nonattainment be “consistent with the provisions of [Title I],”

EPA did not make any effort to harmonize CAIR’s Phase Two

deadline for upwind contributors to eliminate their significant

contribution with the attainment deadlines for downwind areas.
25

42 U.S.C. § 7410(a)(2)(D)(i). As a result, downwind

nonattainment areas must attain NAAQS for ozone and PM2.5

without the elimination of upwind states’ significant

contribution to downwind nonattainment, forcing downwind

areas to make greater reductions than section 110(a)(2)(D)(i)(I)

requires. Because EPA ignored its statutory mandate to

promulgate CAIR consistent with the provisions in Title I

mandating compliance deadlines for downwind states in 2010,

we grant North Carolina’s petition challenging the 2015 Phase

Two deadline. We need not address petitioner’s other

arguments against this provision.

EPA justified the deadline partly on the basis that additional

reductions will be required through the year 2015 in order to

satisfy the “interfere with maintenance” provision of the statute.

Although this may be a valid reason to require maintenancebased emissions reductions beyond the year 2010, EPA does not

explain why it did not coordinate the final CAIR deadline to

provide a sufficient level of protection to downwind states

projected to be in nonattainment as of 2010.

4. NOx Compliance Supplement Pool

North Carolina contends that the NOx Compliance

Supplement Pool of 200,000 tons defies section

110(a)(2)(D)(i)(I)’s mandate to eliminate the significant

contribution of upwind sources to downwind NAAQS

nonattainment and that the Compliance Supplement Pool is an

arbitrary exercise of power that contradicts EPA’s own record

findings. 

Under CAIR without the Compliance Supplement Pool,

states can only begin to bank CAIR NOx allowances in 2009, the

year in which Phase One of the CAIR NOx limits go into effect.

The Compliance Supplement Pool gives states an incentive to
26

make emissions cuts early; states that can show “surplus” NOx

emissions reductions in 2007 and 2008 can receive bankable

(and tradeable) credits for those reductions. CAIR, 70 Fed. Reg.

at 25,285. The 200,000 NOx credits are apportioned to states in

accordance with their share of the 2009 regionwide NOx budget.

Id. at 25,286. States may distribute the credits to sources based

on “(1) [a] demonstration by the source to the State of NOx

emissions reductions in surplus of any existing NOx emission

control requirements; or (2) a demonstration to the State that the

facility has a ‘need’ that would affect electricity grid reliability.”

Id. EPA created the Compliance Supplement Pool to “mitigat[e]

some of the uncertainty regarding the EPA projections of

resources to comply with CAIR” and to “provide[] incentives

for early, surplus NOx reductions.” Id. 

North Carolina first argues that the Compliance Supplement

Pool is unlawful because it permits states to emit NOx in excess

of the 1.5 million ton annual regional NOx cap, which EPA

measured to be the upwind states’ significant contribution to

downwind nonattainment in the years 2009 to 2014. See CAIR,

70 Fed. Reg. at 25,210. EPA contends that North Carolina’s

argument is flawed. EPA based its measurement of upwind

states’ “significant contribution” on the level of reductions that

would be “highly cost effective” in 2015, not 2009. The Phase

One deadline is simply EPA’s measurement of the reductions

that would be feasible by 2009; it is not an independent

measurement of “significant contribution” in that year. See id.

at 25,177. Thus any emissions that exceed the 1.5 million ton

level due to the extra 200,000 allowances from the Compliance

Supplement Pool do not affect the elimination of upwind states’

“significant contribution.” The elimination of upwind states’

significant contribution will not happen until Phase Two’s 2015

deadline. 

Because we grant North Carolina’s petition that CAIR’s
27

Phase Two deadline of 2015 is unlawful, we will not pass

judgment on the lawfulness of the Compliance Supplement

Pool. As EPA explains, it created the Compliance Supplement

Pool under the assumption that 2015 was an appropriate

deadline for CAIR compliance. It is not. EPA does not argue

that it can set a level of emissions that is an upwind state’s

“significant contribution” and then allow that state to exceed it.

On remand, EPA must determine what level of emissions

constitutes an upwind state’s significant contribution to a

downwind nonattainment area “consistent with the provisions of

[Title I],” which include the deadlines for attainment of

NAAQS, and set the emissions reduction levels accordingly.

5. EPA’s Definition of “Will” in “Will Contribute

Significantly”

North Carolina contends that EPA altered its definition of

“will” from a term that meant certainty in the NOx SIP Call to

one that denotes the future tense in CAIR and that EPA made

this change without any explanation. See 42 U.S.C.

§ 7410(a)(2)(D)(i)(I). North Carolina also argues that EPA’s

interpretation of “will” violates the plain text of the statute. As

a result, EPA did not consider upwind states for consideration in

CAIR that contributed to monitored (or “certain”) nonattainment

in North Carolina counties at the time EPA promulgated CAIR;

EPA only included upwind states that contributed to projected

nonattainment in 2010.

In the NOx SIP Call, EPA stated “that the term ‘will’ means

that SIPs are required to eliminate the appropriate amounts of

emissions that presently, or that are expected in the future [to],

contribute significantly to nonattainment downwind.” NOx SIP

Call, 63 Fed. Reg. at 57,375. This isolated phrase provides

some support for North Carolina’s contention that EPA

considered upwind states that contributed to monitored
28

nonattainment at the time it was promulgating the NOx SIP Call

to be subject to the rule even if those states did not contribute to

projected nonattainment in 2007, the year the rule went into

effect. However, EPA later in the same rulemaking explained

its approach to measuring nonattainment in more detail:

In determining whether a downwind area has a

nonattainment problem under the 1-hour standard to

which an upwind area may be determined to be a

significant contributor, EPA determined whether the

downwind area currently has a nonattainment problem,

and whether that area would continue to have a

nonattainment problem as of the year 2007 assuming

that in that area, all controls specifically required under

the CAA were implemented, and all required or

otherwise expected Federal measures were implemented.

If, following implementation of such required CAA

controls and Federal measures, the downwind area

would remain in nonattainment, then EPA considered

that area as having a nonattainment problem to which

upwind areas may be determined to be significant

contributors.

Id. at 57,377. In the NOx SIP Call, EPA interpreted “will” to

indicate sources that presently and at some point in the future

“will” contribute to nonattainment. Because the NOx SIP Call

was to go into effect in 2007, that rule used 2007 as the relevant

future year for measuring nonattainment. This approach is

identical to the one EPA took in CAIR. Because CAIR goes

into effect in 2009 and 2010 respectively, those are the future

years used in the measurement. See CAIR, 70 Fed. Reg. at

25,241. North Carolina’s claims about an arbitrary change in

EPA’s interpretation of “will” are unfounded because there was

no change. And because “will” can mean either certainty or

indicate the future tense, it was reasonable for EPA to choose to
29

give effect to both interpretations of the word. Simply because

CAIR does not include states based upon present-day violations

that will be cured by 2010 does not mean that EPA may ignore

present-day violations for which there may be another remedy,

such as relief pursuant to section 126, 42 U.S.C. § 7426.

Therefore we deny North Carolina’s petition on this issue.

6. PM2.5 Contribution Threshold

North Carolina argues that EPA acted arbitrarily by

proposing an air quality threshold for PM2.5 at 0.15 μg/m3

 but

finally settling on an air quality threshold of 0.2 μg/m3

. The air

quality threshold for PM2.5 is the amount of PM2.5 that sources in

a state must contribute to a downwind nonattainment area to be

regulated as an upwind state in CAIR’s PM2.5 program. North

Carolina also challenges EPA’s decision to truncate, rather than

round, the numbers it compared to the threshold. As a result,

states that contributed 0.19 μg/m3 or less to a downwind

nonattainment area were not linked with North Carolina by

CAIR.

EPA contests North Carolina’s standing to raise this issue.

It notes that only two states would be affected if EPA were to

use the 0.15 μg/m3

 threshold. Illinois, which is already subject

to CAIR’s requirements for PM2.5 contributions, would be

subject to the exact same requirements for an additional

reason—its contributions to Catawba County, North Carolina.

Technical Support Document, at Appendix H. This additional

upwind-downwind “link” would not change any of Illinois’s

duties under CAIR; therefore it would not change any effects

felt by Catawba County, North Carolina. The lower threshold

would also subject Arkansas to CAIR’s PM2.5 controls. CAIR,

70 Fed. Reg. at 25,191; Technical Support Document, at 42 tbl.

VII-1. EPA states that Arkansas does not contribute at threshold

levels to nonattainment in North Carolina, but it cites no record
30

support for this assertion. 

North Carolina has standing to raise this issue for three

reasons. First, if in repromulgating CAIR to comply with

section 110(a)(2)(D)(i)(I), EPA removes or modifies its

interstate trading options, Illinois would be barred outright from

contributing significantly to North Carolina’s nonattainment

areas. Second, EPA does not provide support for its assertion

that Arkansas does not contribute to nonattainment areas in

North Carolina because it never modeled the State. North

Carolina claims that models for sources in Louisiana, Missouri,

and Texas, which are further from North Carolina than those in

Arkansas, show that Arkansas contributes at the 0.15 μg/m3

threshold to nonattainment areas in North Carolina. Third,

because EPA designed CAIR to be a complete statutory remedy,

whether North Carolina is linked with Illinois by CAIR under

section 110(a)(2)(D)(i)(I) is likely to affect related remedies that

North Carolina may have against Illinois, for example, pursuant

to section 126, 42 U.S.C. § 7426. Although we cannot

anticipate what a new rule will look like, there is a “substantial

probability” that a favorable decision by this court would redress

the injury North Carolina asserts.

Because North Carolina has demonstrated an injury-in-fact

caused by the rule it is challenging which a favorable decision

by this Court could likely remedy, we can turn to the merits of

North Carolina’s petition. North Carolina notes that EPA first

considered a threshold of 0.1 μg/m3

. NPR, 69 Fed. Reg. at

4584. In the Notice of Proposed Rulemaking, EPA stated that

a 0.1 μg/m3 threshold “is the smallest one that can make the

difference between compliance and violation of the NAAQS for

an area very near the NAAQS . . . .” Id. EPA then decided that

it is “on balance, more appropriate to adopt a small percentage

value of the standard level” and chose the percentage of the

NAAQS standard of 15.0 μg/m3

 that is closest to 0.1 μg/m3,
31

which was one percent. Id. One percent of 15.0 μg/m3

 is 0.15

μg/m3, so EPA initially chose that number as the threshold. Id.

However, EPA then “request[ed] comments on the use of higher

or lower thresholds for this purpose.” Id. In CAIR, EPA finally

settled on a threshold value of 0.2 μg/m3

. It did so because EPA

was “persuaded by commenters[’] arguments on monitoring and

modeling that the precision of the threshold should not exceed

that of the NAAQS,” which only measure PM2.5 concentration

to the tenths column. CAIR, 70 Fed. Reg. at 25,191; see id. at

25,190 (commenters). North Carolina believes it was arbitrary

for EPA to round 0.15 μg/m3

 up to 0.2 μg/m3 instead of

reverting to the earlier 0.1 μg/m3

 number that “is the smallest

one that can make the difference between compliance and

violation of the NAAQS.” See NPR, 69 Fed. Reg. at 4584. 

EPA did not explain why it chose the larger number instead

of the smaller number in the final rule; it only explained why it

chose a number that ended at the tenths column. CAIR, 70 Fed.

Reg. at 25,191. Based on EPA’s reasoning in the Notice of

Proposed Rulemaking, it may have made more sense to return

to the 0.1 μg/m3 threshold instead of “[r]ounding the proposal

value of 0.15,” which is what it did. See id. But EPA was

concerned that the 0.15 μg/m3 threshold it originally proposed

was too low, requesting comments on “the use of higher or

lower thresholds.” NPR, 60 Fed. Reg. at 4584. And in raising

the threshold number, EPA was responding to comments citing

concerns about the “measurement precision of existing PM2.5

monitors.” CAIR, 70 Fed. Reg. at 25,190. We cannot say in

this circumstance that EPA’s decision to round the 0.15 μg/m3

threshold to 0.2 μg/m3 instead of reverting to the original

threshold considered of 0.1 μg/m3

 was wholly unsupported by

the record. 

Likewise, we cannot say that EPA’s decision to truncate

rather than round the PM2.5 contribution levels it compared to
32

the 0.2 μg/m3

 threshold was arbitrary. The parties dispute which

C.F.R. provision applies to the number it compares to the

threshold—one mandating rounding, 40 C.F.R. pt. 50, App. N,

§ 4.3(a) (preferred by petitioner), or another mandating

truncating, 40 C.F.R. pt. 50, App. N § 3.0(b) (preferred by

EPA). The number EPA compares to the threshold, which is

measured as “the average of annual means [of PM2.5

contribution] from three successive years,” is the contribution of

PM2.5 from one upwind state to a nonattainment area. CAIR, 70

Fed. Reg. at 25,190. Section 4.3(a) applies to annual PM2.5

standard design values. Design values “are the metrics (i.e.,

statistics) that are compared to the NAAQS levels to determine

compliance.” 40 C.F.R. pt. 50 App. N § 1.0(c). Design values

are composed of the average of annual means of PM2.5 for three

consecutive years, 40 C.F.R. pt. 50 App. N § 4.1(b), but design

values are measurements of PM2.5 levels in a stationary

area—not levels of PM2.5 moving from one area to another.

Because the contribution level is not a design value, section

4.3(a)’s rounding mandate does not apply. Similarly, section

3.0(b)’s truncation mandate applies to PM2.5 hourly and daily

measurement data and says nothing about the contribution level

EPA is assessing in CAIR.

Without a rule mandating any particular method, EPA is

free to round or truncate the numbers it is comparing to the 0.2

μg/m3

 threshold as long as its choice is reasonable. EPA chose

to truncate numbers because the “truncation convention for

PM2.5 is similar to that used in evaluating modeling results in

applying the ozone significance screening criterion of 2 ppb in

the NOx SIP call and the CAIR proposal, as well as today’s final

action.” CAIR, 70 Fed. Reg. at 25,191 n.42 (internal citation

omitted). EPA’s choice to truncate the numbers is reasonable.

As a result, we deny North Carolina’s petition challenging the

0.2 μg/m3

 threshold and EPA’s choice to truncate the numbers

compared to it.
33

B. SO2 and NOx Budgets

SO2 Petitioners and petitioner Entergy challenge CAIR’s

budgets for the SO2 and NOx trading programs. EPA set states’

SO2 budgets for 2010 to 50% (35% in 2015) of the allowances

the states’ EGUs receive under Title IV. SO2 Petitioners argue

EPA never explained how these budgets related to section

110(a)(2)(D)(i)(I)’s mandate of prohibiting significant

contributions to downwind nonattainment. Therefore, they

claim, the budgets and the regionwide cap, are “arbitrary,

capricious, . . . or otherwise not in accordance with law,” 42

U.S.C. § 7607(d)(9)(A). As for NOx, EPA reduced states’

budgets to the extent their EGUs burned oil or gas. Entergy

claims EPA made this adjustment purely in the interests of

fairness—an improper reason under section 110(a)(2)(D)(i)(I).

We grant the petitions, agreeing EPA chose the budgetsfor both

pollutantsin an improper manner. In short, the fact that SO2 and

NOx are precursors to ozone and PM2.5 pollution does not give

EPA plenary authority to reduce emissions of these substances.

Section 110(a)(2)(D)(i)(I) obligates states to prohibit emissions

that contribute significantly to nonattainment or interfere with

maintenance downwind, and EPA must exercise its authority

under this provision to make measurable progresstowardsthose

goals.

1. SO2 Budgets

We first address EPA’s choice of SO2 budgets. EPA claims

to have based state budgets for SO2 and NOx on the amount of

emissions sources can eliminate by applying controls EPA

deems “highly cost-effective controls”—an approach EPA says

we approved in Michigan v. EPA, 213 F.3d 663 (D.C. Cir.

2000). We observe initially that state SO2 budgets are unrelated

to the criterion (the “air quality factor”) by which EPA included
34

states in CAIR’s SO2 program. Significant contributors, for

purposes of inclusion only, are those states EPA projects will

contribute at least 0.2 μg/m3 of PM2.5 to a nonattainment area in

another state. While we would have expected EPA to require

states to eliminate contributions above this threshold, EPA

claims to have used the measure of significance we mentioned

above: emissions that sources within a state can eliminate by

applying “highly cost-effective controls.” EPA used a similar

approach in deciding which states to include in the NOx SIP

Call, which Michigan did not disturb since “no one quarrel[ed]

either with its use of multiple measures, or the way it drew the

line at” the inclusion stage. 213 F.3d at 675. Likewise here, the

SO2 Petitioners do not quarrel with EPA drawing the line at

0.2 μg/m3 or its different measure of significance for

determining states’ SO2 budgets. Again, we do not disturb this

approach.

Even so, EPA’s method in setting the SO2 budgets is not

what Michigan approved. In that case, the petitioners argued

section 110(a)(2)(D)(i)(I) does not permit EPA to consider the

cost of reducing ozone. After reconciling petitioners’ shifting

(and somewhat conflicting) arguments, we answered a welldefined question: Could EPA, in selecting the “significant”

level of “contribution” under section 110(a)(2)(D)(i)(I), choose

a level corresponding to a certain reduction cost? Michigan, 213

F.3d at 676–77. Answering that question in the affirmative, we

held EPA may “after [a state’s] reduction of all [it] could . . .

cost-effectively eliminate[ ],” consider “any remaining

‘contribution’” insignificant. Id. at 677, 679.

Michigan also rejected claimsthat applying a uniform costcriterion across states was irrational because both smaller and

larger contributors had to make reductions achievable by the

same highly cost-effective controls. This, we said, “flow[ed]

ineluctably from the EPA’s decision to draw the ‘significant
35

contribution’ line on a basis of cost.” Id. at 679. Upholding that

decision “logically entail[ed] upholding this consequence.” Id.

And while EPA’s approach did not necessarily ensure

“aggregate health benefits” at roughly the lowest cost, EPA

researched alternatives, and found none that significantly

improved air quality or reduced cost. Id. Since no one offered

a “material critique” of this research, we did not upset EPA’s

judgment. Id.

Here, EPA did not use cost in the manner Michigan

approved. Even worse, EPA’s choice of SO2 budgets does not

track the requirements ofsection 110(a)(2)(D)(i)(I). That much

is evident from EPA’s decision to base the budgets on

allowances states’ EGUs receive under Title IV. Those

allowances are not, as EPA asserts, a “logicalstarting point” for

setting CAIR’s SO2 emissions caps, CAIR, 70 Fed. Reg. at

25,229. Congress designed the Title IV allowance scheme using

EGU data from 1985 to 1987 to address the national acid rain

problem. Nowhere does EPA explain how reducing Title IV

allowances will adequately prohibit states from contributing

significantly to downwind nonattainment of the PM2.5 NAAQS.

And while “Congress chose a policy of not revisiting and

revising these allocations and, apparently, believed that its

allocation methodology would be appropriate for future time

periods,” Reconsideration, 71 Fed. Reg. at 25,308, it is unclear

how the quantitative number of allowances created by 1990

legislation to address one substance, acid rain, could be relevant

to 2015 levels of an air pollutant, PM2.5.

EPA also explains that it chose Title IV as a starting point

“to preserve the viability and emissionsreductions of the highly

successful title IV program.” Id. This goal may be valid, but it

is not among the objectives in section 110(a)(2)(D)(i)(I). And

if it is somehow compatible with states’ obligations to include

“adequate provisions” in their SIPs, prohibiting emissions
36

1EPA briefly summarized a series of analyses and dialogues with

various stakeholder groups in which the participants considered

“regional and national strategies to reduce interstate transport of SO2

and NOx.” See CAIR, 70 Fed. Reg. at 25,199. The most recent of

these, EPA’s analysis in support of the proposed Clear Skies Act,

considered nationwide SO2 caps of, coincidentally, “50 percent and 67

percent from . . . title IV cap levels.” Id.

“within the State from . . . contribut[ing] significantly” to

downwind nonattainment, then EPA should explain how. It has

failed to do so. Apart from the arbitrary Title IV baseline, EPA

has insufficiently explained how it arrived at the 50% and 65%

reduction figures. Though unclear, these numbers appear to

represent what EPA thought would be “‘a cost-effective and

equitable governmental approach to attainment with the

NAAQS for [PM2.5].’” CAIR, 70 Fed. Reg. at 25,199 (quoting

Proposed CAIR, 69 Fed. Reg. 4566, 4612 (Jan. 30, 2004)).1

 As

with the need to “preserve the viability” of the Title IV program,

EPA’s notions of what is an “equitable governmental approach

to attainment” is not among the objectives of section

110(a)(2)(D)(i)(I). Nor does EPA even attempt to reconcile its

choice of “equitable” emissions caps with those objectives.

Having chosen these equitable caps for the CAIR region,

EPA then “ascertained the costs of these reductions and . . .

determine[d] that they should be considered highly cost

effective.” Id. at 25,176. EPA’s use of cost in this manner is

not what we approved in Michigan. Whereas Michigan permits

EPA to draw the “significant contribution” line based on the cost

of reducing that “contribution,” here EPA did not draw the line

at all. It simply verified sources could meet the SO2 caps with

controls EPA dubbed “highly cost-effective.” Nor would EPA

necessarily cure this problem merely by beginning its analysis

with cost. While EPA may require “termination of only a subset

of each state’s contribution,” by having states “cut[ ] back the
37

amount that could be eliminated with ‘highly cost-effective

controls,’” Michigan, 213 F.3d at 675 (emphasis added), EPA

can’t just pick a cost for a region, and deem “significant” any

emissions that sources can eliminate more cheaply. Such an

approach would not necessarily achieve something measurable

toward the goal of prohibiting sources “within the State” from

contributing significantly to downwind nonattainment.

Because EPA did not explain how the objectives in section

110(a)(2)(D)(i)(I) relate to its choice of SO2 emissions caps

based on Title IV allowances, we conclude that choice was

“arbitrary, capricious, . . . or not otherwise in accordance with

law,” 42 U.S.C. § 7607(d)(9)(A). 

2. NOx Budgets

Next, we address EPA’s use of “fuel factors” to allocate the

regional NOx cap among the CAIR states. EPA determined the

cap by multiplying NOx emissions rates (0.15 mmBtu in 2010

and 0.125 mmBtu in 2015) by the heat input of states in the

CAIR region. Then, EPA distributed to each state, as its budget

of NOx emissions allowances, its proportionate share of the

regional cap. But in determining these shares, EPA adjusted

each state’s heat input for the mix of fuels its power plants used:

while a coal-fired EGU contributed its full heat input to the state

total, an oil-fired EGU counted for only 60% of its heat input

and a gas-fired EGU only 40%. Entergy argues this fuel

adjustment was irrational because EPA made it purely for the

sake of sharing the burden of emissions reductions fairly. We

agree EPA’s notion of fairness has nothing to do with states’

section 110(a)(2)(D)(i)(I) obligations to prohibit significant

contributions to downwind nonattainment.

EPA’s NOx analysis began, inauspiciously, in a manner

similar to its SO2 decisions. But instead of beginning with “the
38

existing title IV annual SO2 cap,” it began with the existing NOx

SIP Call emissions rate of 0.15 pounds of NOx emitted per

mmBtu of heat input. CAIR, 70 Fed. Reg. at 25,205. It is not

clear why EPA considered this rate a useful starting point

beyond the fact that such an emissions rate had been “considered

in the past.” Id. So far as we can tell, these numbers represent,

like the SO2 caps, EPA’s effort “‘to set up a reasonable balance

of regional and local controls to provide a cost-effective and

equitable governmental approach to attainment.’” Id. at 25,199

(quoting Proposed CAIR, 69 Fed. Reg. at 4612). Thus, rather

than explaining how its planned emissions rates related to states’

significant contributions to downwind nonattainment, EPA

simply asserted they would create an equitable balance of

controls. As with the SO2 caps, EPA did not draw the

“significant contribution” line on the basis of cost, Michigan,

213 F.3d at 676–77, or, for that matter, draw the significance

line at all. Instead, EPA “determin[ed] the regionwide control

level” and then “evaluat[ed] it to assure that it is highly costeffective.” CAIR, 70 Fed. Reg. at 25,206.

Nevertheless, Entergy does not challenge the regional NOx

emissions rate. It argues that if EPA thinks a certain rate reflects

a state’s level of “significant contribution” to downwind

nonattainment, then section 110(a)(2)(D)(i)(I) requires EPA to

assign each state a budget equal to the emissions rate times the

state’s heat input. The fuel adjustment reduces a state’s budget

below that level if, say, its power plants use gas instead of coal,

without any justification besides fairness. Remarkably, EPA

does not deny that fairness is the only reason for the fuel

adjustment. According to EPA, “[t]he factors would reflect the

inherently higher emissions rate of coal-fired plants, and

consequently the greater burden on coal plants to control

emissions,” thereby creating “a more equitable budget

distribution.” Id. at 25,231. Instead, EPA criticizes Entergy’s

preferred method of distributing credits as being equally
39

unjustified. In the EPA’s view, assigning credits without the

fuel adjustment is just one of “a number of ways that EPA could

have distributed the regionwide NOx emissions budget,” among

which the fuel adjustment is another, equally valid method, and

EPA reasonably chose the fuel adjustment as the fairest method.

Resp’t’s Br. 105. 

Not all methods of developing state emission budgets are

equally valid, because an agency may not “trespass beyond the

bounds of its statutory authority by taking other factors into

account” than those to which Congress limited it, nor “substitute

new goals in place of the statutory objectives without explaining

how [doing so comports with] the statute.” Indep. U.S. Tanker

Owners Comm. v. Dole, 809 F.2d 847, 854 (D.C. Cir. 1987); see

also Lead Indus. Ass’n v. EPA, 647 F.2d 1130, 1150 (D.C. Cir.

1980). Section 110(a)(2)(D)(i)(I) addresses emissions “within

the State” that contribute significantly to downwind pollution.

Naturally we defer to EPA’s interpretation of the Clean Air Act

so far as it is reasonable, Chevron, 467 U.S. 837, and we have

recognized that significance may include cost, Michigan, 213

F.3d at 677–79. However, EPA’s interpretation cannot extend

so far as to make one state’s significant contribution depend on

another state’s cost of eliminating emissions.

Yet that is exactly what EPA has done. For example,

Louisiana’s EGUs use more gas and oil than most states’ EGUs.

Consequently, instead of the budget of 42,319 tons per year that

would be Louisiana’s proportional share of the regionwide cap

without fuel adjustment, the State only received 29,593 tons per

year. The rest of those credits went to states with more coalfired EGUs than average, which necessarily received “larger

NOx emissions budgets” than their unadjusted proportional

shares. Resp’t’s Br. 103. EPA favored coal-fired EGUs in this

way because they face a “greater burden . . . to control

emissions” than gas- and oil-fired EGUs. CAIR, 70 Fed. Reg.
40

2To be sure, the unadjusted shares would not correspond much

better to a state’s downwind contribution in 2010 and 2015 because

EPA based the regional cap on heat input data from 1999 to 2002

without accounting for the growth in states’ economies. See CAIR, 70

Fed. Reg. 25,230–31. In any case, a budget allocation based on such

shares would only be hypothetical at this point, so we express no

opinion as to its propriety. 

at 25,231. In essence, a state having mostly coal-fired EGUs

gets more credits because Louisiana can control emissions more

cheaply.

EPA responds by suggesting that any allocation of the NOx

cap would amount to equitable burden-sharing because EPA did

the analysis “on a regionwide basis,” and therefore not even the

unadjusted shares have any relation to states’ significant

contributions. Resp’t’s Br. 104; CAIR, 70 Fed. Reg. at 25,231.2

If so, that is a weakness of CAIR generally. Having chosen not

to evaluate contributing emissions on a state-by-state basis, EPA

cannot now rely on the resulting paucity of data to justify its ad

hoc approach to spreading the burden of reducing them. When

a petitioner complains EPA is requiring a state to eliminate more

than its significant contribution, it is inadequate for EPA to

respond that it never measured individual states’ significant

contributions. 

No doubt all this pother seems unnecessary to EPA, since

it believed “the choice of method in setting State budgets . . .

makes little difference in terms of the levels of resulting

regionwide annual SO2 and NOx emissions reductions.” CAIR,

70 Fed. Reg. at 25,230–31. Since EPA planned a market for

emissions credits, it assumed EGUs would trade credits as

necessary to achieve the “least-cost outcome,” which would not

depend “on the relative levels of individual State budgets.” Id.

at 25,231. As we noted in Michigan, the market would only
41

3 In focusing on the beneficial regionwide results from trading,

EPA completely ignores the fact that any state that elected not to

participate in the NOx trading program would receive a maladjusted

budget as a mandatory cap on its emissions. We do not focus on this

problem because EPA had, by the time it promulgated CAIR, already

found all the relevant states to have violated section 110(a)(2)(D), 42

U.S.C. § 7410(a)(2)(D), with respect to the CAIR pollutants, so that

EPA’s Federal Implementation Plan, incorporating the trading

program, covers all of them until they submit SIPs complying with

CAIR. FIP, 71 Fed. Reg. 25,328, 25,340 (Apr. 28, 2006); 70 Fed.

Reg. 21,147 (Apr. 25, 2005) (finding of violation).

bear out that assumption if the transaction costs of trading

emissions were small, which is hardly likely. 213 F.3d at 676 &

n.3. But even if the state budgets affect only the distribution of

the burden, not the regionwide aggregate of emissions, that

distribution is important.3

 EPA contends the greatest reductions

will take place where the greatest emissions are, because that is

where most cost-effective reductions are available. Resp’t’s Br.

168. Of course, those states with the greatest emissions are

those with mainly coal-fired EGUs, which are precisely the

states that get extra credits under EPA’s fuel-adjustment

method. See CAIR, 70 Fed. Reg. at 25,231 n.88 (“States

receiving larger budgets . . . are generally expected to be those

having to make the most reductions.”). Presumably those

EGUs will make their greater reductions and sell them to other

EGUs, in states the fuel-adjustment method docked, to recoup

their investment in reductions. The net result will be that states

with mainly oil- and gas-fired EGUs will subsidize reductions

in states with mainly coal-fired EGUs. Again, EPA’s approach

contravenes section 110(a)(2)(D)(i)(I); the statute requires each

state to prohibit emissions “within the State” that contribute

significantly to downwind pollution, not to pay for other states

to prohibit their own contributions.
42

EPA’s redistributional instinct may be laudatory, but

section 110(a)(2)(D)(i)(I) gives EPA no authority to force an

upwind state to share the burden of reducing other upwind

states’ emissions. Each state must eliminate its own significant

contribution to downwind pollution. While CAIR should

achieve something measurable towards that goal, it may not

require some states to exceed the mark. Because the fueladjustment factors shifted the burden of emission reductions

solely in pursuit of equity among upwind states—an improper

reason—the resulting state budgets were arbitrary and

capricious.

C. Title IV Allowances 

SO2 Petitioners and a trade association of waste-coal EGUs

(together “SO2 Petitioners”) also challenge EPA’s effort to

“harmonize” CAIR’s regulation of SO2 with the existing

program for trading SO2 emissions allowances under Title IV of

the CAA. Since EPA set states’ SO2 budgets for 2010 to 50%

(35% in 2015) of the allowances the states’ EGUs receive under

Title IV, EGUs in the region would emit significantly less SO2

under CAIR and could be expected to have substantial numbers

of excess Title IV allowances to emit SO2. Concerned about this

sudden excess, EPA structured CAIR so that EGUs in states

electing to trade give up 2 allowances per ton in 2010, and 2.68

allowances per ton in 2015. (Recall, a Title IV allowance gives

the holder the right to emit one ton of SO2 within the Title IV

program.) States electing not to trade must have SIP provisions

for retiring excess allowances. In addition, CAIR regulates

waste-coal EGUs that do not receive Title IV allowances

because they are exempt from Title IV. Thus, waste-coal EGUs

in trading states must acquire Title IV allowances by purchasing

allowances from EGUs in the Title IV program, or, as EPA

suggests, by opting into the program.
43

4 In view of EPA’s absence of authority to terminate or limit

Title IV allowances, we express no opinion on the meaning of “United

States” in this provision.

SO2 Petitioners argue EPA lacks authority to terminate or

limit Title IV allowances, either through a trading program

under section 110(a)(2)(D), 42 U.S.C. § 7410(a)(2)(D), or by

requiring that SIPs have allowance retirement provisions. We

agree and grant the petition on this issue. We do not, however,

consider whether CAIR unlawfully forces waste-coal EGUs into

the Title IV program, or irrationally includes waste-coal units

while excluding other waste-burning units. That argument

assumes EPA has the authority to terminate or limit Title IV

allowances.

In demonstrating EPA’s absence of authority, the SO2

Petitioners cite a variety of Title IV provisions supposedly

showing that Title IV allowances are fixed currency, the value

of which EPA may not manipulate. However, the allowances

are “limited authorization[s] to emit sulfur dioxide” and

“[n]othing . . . in any . . . provision of law shall be construed to

limit the authority of the United States to terminate or limit”

such authorizations. 42 U.S.C. § 7651b(f). While EPA and

petitioners quibble over whether EPA is the “United States” to

which § 7651b(f) applies, both agree that this section does not

grant EPA any authority.4

Thus, EPA claims section 110(a)(2)(D)(i)(I) gives it

authority to set up a program for trading SO2 emissions

allowances, and to require EGUs to use Title IV allowances as

currency. Once EGUs spend Title IV allowances in the CAIR

market, EPA says it can terminate the authorization the

allowances provide within the Title IV market. CAIR, 70 Fed.

Reg. at 25,292. But whatever authority EPA may have to

establish such a trading program, we find nothing in section
44

110(a)(2)(D)(i)(I) granting EPA authority to remove Title IV

allowances from circulation in the Title IV market.

Environmental groups, intervening in support of EPA, argue

section 301(a) of the CAA also provides EPA authority. That

provision authorizes EPA “to prescribe such regulations as are

necessary to carry out [its] functions under” the CAA. 42

U.S.C. § 7601(a). EPA does not rely on section 301(a), and for

good reason: EPA cannot claim retiring excess Title IV

allowances is “necessary” for EPA to ensure SIPs comply with

section 110(a)(2)(D)(i)(I). Nor does section 301(a), 42 U.S.C.

§ 7601(a), “provide [EPA] Carte blanche authority to

promulgate any rules, on any matter relating to the Clean Air

Act, in any manner that the [EPA] wishes.” Citizens to Save

Spencer County v. EPA, 600 F.2d 844, 873 (D.C. Cir. 1979). 

Lacking a statutory foundation, EPA appeals to “logic.”

Logically, says EPA, it was not “required to structure CAIR as

a stand-alone program without taking account whatsoever of the

effect this might have on the pre-existing” Title IV program.

Resp’t’s Br. 82. Environmental intervenors add some legal

flavoring here, analogizing EPA’s action to a court’s

interpretative obligation to “fit, if possible, all parts” of a statute

“into a harmonious whole,” FTC v. Mandel Bros., 359 U.S. 385,

389 (1959). Although it may be reasonable for EPA, in

structuring a program under section 110(a)(2)(D)(i)(I), to

consider the impact on the Title IV market, it does not follow

that EPA has the authority to remove allowances from that

market. Nor can EPA cure its absence of authority by foisting

onto SO2 Petitioners the burden of explaining why “two

independent programs . . . would produce a better result.”

Resp’t’s Br. 87. Lest EPA forget, it is “a creature of statute,”

and has “only those authorities conferred upon it by Congress”;

“if there is no statute conferring authority, a federal agency has

none.” Michigan v. EPA, 268 F.3d 1075, 1081 (D.C. Cir. 2001).
45

So too here: no statute confers authority on EPA to terminate or

limit Title IV allowances, and EPA thus has none. 

Similarly, EPA cannot require non-trading states to have

SIP provisions for retiring excess Title IV allowances. Although

such provisions are “related to harmonizing a State’s choice of

reduction requirements” with the Title IV program, Resp’t’s Br.

92, the CAA “gives [EPA] no authority to question the wisdom

of a State’s choices of emission limitations if they are part of a

plan which satisfies the standards of § 110(a)(2).” Train v.

Natural Res. Def. Council, 421 U.S. 60, 79 (1975) (emphasis

added). SIPs prohibiting emissions within a state from

contributing significantly to downwind nonattainment satisfy

section 110(a)(2)(D)(i)(I). Because provisions retiring Title IV

allowances are unrelated to achieving that goal, EPA cannot

require states to adopt them.

D. Border State Issues 

Under Title I of the CAA, there is a presumption of statelevel regulation generally, see, e.g., 42 U.S.C. § 7407(a); Union

Elec., 427 U.S. at 256, 267, and the text of section 110, 42

U.S.C. § 7410, establishes the state as the appropriate primary

administrative unit to address interstate transport of emissions.

To take action regarding a state pursuant to section

110(a)(2)(D)(i)(I) EPA need only have evidence that emissions

“within the State” contribute significantly to another state’s

nonattainment or interfere with its maintenance of a national

ambient air quality standard (“NAAQS”), unless there is

evidence that exculpates part of the upwind state from that

determination. See Michigan, 213 F.3d at 684. Thus, in

developing a rule, EPA may select states as the unit of

measurement. Id. The burden is on the party challenging

inclusion of part of a state to present “finer-grained

computations” showing that it is “innocent of material
46

5 Southwestern Public Service Company d/b/a Xcel Energy,

Occidental Permian Ltd., and the City of Amarillo, Texas petition

regarding the State of Texas. The Florida Association of Electric

Utilities and FPL Group, Inc. petition regarding the State of Florida.

Minnesota Power petitions regarding the State of Minnesota. In this

part, we refer to “petitioners” generally.

contributions” to the state’s overall downwind pollution. Id.;

see Appalachian Power Co. v. EPA, 249 F.3d 1032, 1050–51

(D.C. Cir. 2001). In response to such data, EPA must ensure

that the contested area makes a “measurable contribution,”

Michigan, 213 F.3d at 684, such that it is “part of the problem”

of the state’s aggregate downwind impact, Appalachian Power,

249 F.3d at 1050.

Various utilities and one municipality,5 but not the States

themselves, challenge inclusion in CAIR of the upwind States

of Texas, Florida, and Minnesota. The court denies all except

Minnesota Power’s petition.

1. Texas

The final rule included the State of Texas due to

its maximum downwind contribution of 0.29 μg/m3

 to PM2.5

nonattainment, which is above the air quality threshold of 0.2

μg/m3. Petitioners unsuccessfully sought reconsideration of

inclusion of that part of the State west of the north-south I-35/I37 corridor (“West Texas”), submitting modeling that showed

few emitting facilities were located in West Texas. Petitioners

contend that under Michigan, 213 F.3d at 681–85, EPA, on its

own initiative, should have excluded West Texas given the

State’s size, location, low emissions density, and logical

intrastate dividing line, and that EPA’s concern about “in-state

pollution havens” developing in West Texas is unfounded. See

Corrected Response, at 230. They also contend that EPA acted
47

unreasonably in denying reconsideration in view of the

modeling data showing that sources in West Texas

“demonstrably were not significant contributors to

nonattainment in downwind states.” Pet’rs’ Br. at 14. However,

the record establishes that EPA appropriately included all of the

State in CAIR.

The record includes data showing that the State of Texas

makes a maximum downwind contribution greater than the 0.2

μg/m3

 air quality threshold for inclusion. Petitioners have

neither challenged this threshold nor presented data that would

require EPA to determine whether West Texas makes a

“measurable contribution.” See Michigan, 213 F.3d at 684.

Instead, their comments on the proposed rule and the August

2004 Notice of Data Availability speculated that West Texas’s

contribution level was likely to be less than 0.05 μg/m3. Neither

did petitioners claim that they were unable to present modeling

without assistance from EPA and that such assistance was

refused. After EPA released updated data in November 2004,

petitioners did submit comments expressing concern about

EPA’s analysis, but again did not include any new modeling or

indicate that they could not do so without EPA assistance that

was denied. EPA effectively responded to petitioners’ concerns

by referring to the possibility that dividing the State could create

“in-state pollution havens” in West Texas where exclusion from

CAIR would lead to increased capacity with a consequent

increase in emissions, Corrected Response, at 230; there is at

least one western source connected to the eastern grid and a

possibility that more could be integrated through the Electric

Reliability Council of Texas. In these circumstances, EPA had

no duty to divide the State or to model West Texas separately.

In seeking reconsideration, petitioners for the first time

presented new modeling on West Texas. However, EPA found,

as the record shows, that petitioners had already had a
48

6 Although petitioners object that EPA has not defined the

“measurable contribution” standard, they do so only in their reply

brief and did not present this issue to EPA; therefore, the court does

not address it. See 42 U.S.C. § 7607(d)(7)(B); S. Coast Air Quality

Mgmt. Dist., 472 F.3d at 891. In any event, West Texas contributes

0.05 μg/m3

 of PM2.5 to downwind areas, which is one-quarter of the

amount of pollution needed for the State as a whole to meet the air

quality threshold, and thus should qualify at least as a “material”

amount “worthy of special concern.” See Michigan, 213 F.3d at 682,

684; Appalachian Power, 249 F.3d at 1050. 

meaningful opportunity to comment on the inclusion of West

Texas and had not shown that it was impracticable for them to

present the new modeling sooner or that a new issue arose

after the close of the comment period. See 42 U.S.C.

§ 7607(d)(7)(B). Although petitioners insist that they could not

satisfy their evidentiary burden without receiving data from

EPA, they do not explain why the data from August and

November 2004 on which they commented was insufficient to

allow them to do so. That they may have failed to realize that

EPA had not already conducted more detailed, subregional

modeling is beside the point; the lack of record discussion of

West Texas should have alerted them to the need to present data

to challenge its inclusion. Because petitioners did not request

assistance duplicating EPA’s modeling until after the final rule

was promulgated, they fail to advance a reason for

reconsideration or demonstrate prejudice due to EPA’s late

disclosure of data, see, e.g., West Virginia v. EPA, 362 F.3d 861,

869 (D.C. Cir. 2004); see also Am. Radio Relay League v. FCC,

524 F.3d 227, 237–38 (D.C. Cir. 2008), which they also have

not shown was any more than “supplementary” as to the State,

see Solite Corp. v. EPA, 952 F.2d 473, 484 (D.C. Cir. 1991).6
49

7 The average percent contribution of nonattainment metric is

calculated by dividing the concentration of total ozone in the

nonattainment area into the state’s contribution. See Reconsideration,

71 Fed. Reg. at 25,320 n.14.

2. Florida

The final rule included the State of Florida for ozone and

PM2.5. However, the proposed rule had included the State only

for PM2.5. Petitioners sought reconsideration contesting the

inclusion of the State as a whole for ozone and the inclusion

of southern subregions for ozone and for PM2.5. Upon

granting reconsideration as to ozone only, EPA affirmed its

determination that the State should be included in CAIR.

Petitioners now object to EPA’s use of rounding at an initial

screening stage for including the State for ozone as arbitrary and

capricious. See 42 U.S.C. § 7607(d)(9)(A). Alternatively they

contend that under Michigan, 213 F.3d 663, EPA was required

to exclude parts of Southern Florida (south of latitude 28.67 for

ozone and south of latitude 29.2 for PM2.5) that do not make a

significant contribution to nonattainment, or at least the

area south of latitude 26 for both ozone and PM2.5 because EPA

initially had no data for this area. The record supports EPA’s

reasoned explanation for including the entire State for ozone and

PM2.5.

As an initial screening indicator of whether to include a

state in CAIR for ozone, EPA considered whether the state’s

average contribution to ozone nonattainment in a downwind area

was “less than one percent of total nonattainment in the

downwind area.”7

 CAIR, 70 Fed. Reg. at 25,191. If so, then

EPA would not test the state further; if not, then EPA would

perform additional analysis to determine whether the state

should be included. EPA found the State of Florida’s average

percent of contribution to nonattainment in Fulton County,
50

8 Petitioners’ additional reasons not to include the State of

Florida are unpersuasive because they concede that the air quality

threshold is a lawful basis for inclusion in CAIR. That Fulton County,

Georgia may attain the ozone NAAQS by 2015 does not justify

excluding the State of Florida as 2010 is the determinative year in

CAIR to provide downwind relief.

Georgia to be 0.81 percent. Upon rounding up to one percent,

EPA determined after further analysis that the State makes

“large and frequent contributions . . . to elevated ozone

concentrations in Fulton Co[unty]” and should be included for

ozone. Reconsideration, 71 Fed. Reg. at 25,320. Although

petitioners characterize this rounding as “creating the nonsense

result of transforming a number . . . that is clearly ‘less than one

percent’ to one,” Pet’rs’ Br. at 28, the court owes substantial

deference to EPA’s technical expertise, see Appalachian Power,

249 F.3d at 1051–52, absent a showing of legal or factual error.

Because petitioners challenge only the initial screening

indicator and not the record evidence showing that the State of

Florida meets the air quality threshold,8 they can hardly protest

that rounding did not serve the appropriate purpose of

identifying the State for further analysis. EPA treated this State

no differently than others at the initial screening stage. Even

assuming the rounding convention were flawed, it was not

dispositive of the State’s inclusion in CAIR. Hence, no

prejudice could be shown on the basis of that error alone. EPA

reasonably explained that its use of the rounding convention is

“commonplace” and “customary” as well as a reasonable means

of creating a “conservative” initial indicator that “cast[s] a wider

net, with further winnowing to occur in subsequent steps when

more detailed analysis is applied.” Reconsideration, 71 Fed.

Reg. at 25,320. Petitioners neither identify error resulting from

use of rounding at the initial screening stage nor offer any

persuasive reason to question EPA’s choice of a technical
51

9 Petitioners did not present the issue of the “standard for a

portion-of-a-state’s contribution to nonattainment,” Reply Br. at 20,

to EPA; see supra note 6. In any event, their data does not show that

the area south of latitude 29.2 is “innocent of material contributions”

for PM2.5. See Michigan, 213 F.3d at 684. The northern part of the

State’s contributions range from 0.11 to 0.20 μg/m3

 and the

contributions from the southern area appear to be quite similar,

ranging from 0.09 to 0.15 μg/m3

, with even the minimum in the

convention that is reasonable on this record. See 42 U.S.C.

§ 7607(d)(9)(A).

Neither have petitioners shown that EPA should have

excluded any part of Southern Florida. EPA was not obligated

to measure pollution coming from each possible slice of the

State. See Michigan, 213 F.3d at 684. The lack of information

about a subregion conceivably might result in a miscalculation

of the downwind contribution of the State as a whole, see id. at

682, but alone could not exonerate a subregion and does not

undermine EPA’s inclusion of the area south of latitude 26

for either ozone or PM2.5. Given the rulemaking record, EPA

appropriately determined that the State of Florida as a whole

should be included. 

In regard to inclusion of the area south of latitude 29.2 for

PM2.5, petitioners submitted no modeling or data during the

comment period to show that it was “innocent” of contributing

to the State’s collective downwind pollution impact. See id. at

684; Appalachian Power, 249 F.3d at 1050–51. Instead, their

first request to EPA for assistance in duplicating EPA’s

modeling results came after the final rule was promulgated.

They offer no reason why they could not present such modeling

during the comment period. EPA thus properly

denied reconsideration on inclusion of the State for PM2.5. See

42 U.S.C. § 7607(d)(7)(B).9
52

southern range almost half the threshold for inclusion of the entire

State.

In regard to ozone, petitioners submitted data in support of

their request for reconsideration of inclusion of the area south of

latitude 28.67. EPA declined to exclude this area. First, EPA

found that the data was unpersuasive inasmuch as it has

authority to regulate an upwind area even if its “specific

contribution may appear insubstantial” as long as it contributes

a “measurable” amount of pollution to the State’s “collective

contribution to downwind nonattainment.” Reconsideration, 71

Fed. Reg. at 25,321. The court agrees; EPA was not required to

exclude an area that petitioners have drawn precisely in order to

avoid the significance threshold. See Michigan, 213 F.3d at

684; Appalachian Power, 249 F.3d at 1050. Second, EPA found

that the area south of latitude 28.67 is not “innocent of material

contribution” but “contribute[s] [a] substantial portion[] of the

total ozone loading from Florida to Fulton County[, Georgia].”

Reconsideration, 71 Fed. Reg. at 25,321 (citing Michigan, 213

F.3d at 683–84). As the contested area contributes almost onethird of the State’s entire downwind ozone contribution,

petitioners’ challenge to its inclusion fails. Petitioners’ other

concerns, such as the test for “measurable contribution” and the

alleged departure from EPA precedent, were not presented to

EPA and thus the court does not address them. See supra notes

6 & 9; 42 U.S.C. § 7607(d)(7)(B); S. Coast Air Quality Mgmt.

Dist., 472 F.3d at 891. 

3. Minnesota

In the proposed rule, EPA included the State of Minnesota

after determining that its downwind contribution of PM2.5 was

0.39 μg/m3

, well above the air quality threshold of 0.2 μg/m3

needed for inclusion in CAIR. In the preamble to the final rule,

however, EPA indicated that it had recalculated Minnesota’s
53

contribution to be 0.21 μg/m3

, and included the State in CAIR.

Upon reconsideration, EPA again recalculated and determined

that the State’s contribution was actually 0.20 μg/m3, the exact

threshold for inclusion. 

Minnesota Power challenges the inclusion of the State for

PM2.5 as resting on two types of unaddressed flawed data

resulting in an overstatement of emissions: (1) projecting units’

emissions as of 2010 to be at a significantly higher rate than as

of 2001, with some above the permitted level, and

(2) misallocating energy production or heat input projections

between units. In view of these claimed errors, Minnesota

Power contends that EPA has failed to provide a

“complete analytic defense,” Appalachian Power, 249 F.3d at

1054 (quotation omitted), of its model’s treatment of Minnesota.

The court grants the petition because EPA’s failure to address

the claimed errors was unjustifiable. Although EPA maintains

that this concern was not timely presented or with sufficient

specificity to satisfy CAA § 307(d)(7)(B), 42 U.S.C.

§ 7607(d)(7)(B), and thus the issue has been forfeited, see S.

Coast Air Quality Mgmt. Dist., 472 F.3d at 891, the record is to

the contrary.

Prior to the deadline for petitioning for reconsideration,

Minnesota Power raised its emissions overstatement concern,

and identified three units with disparities between 2001 actual

and 2010 projected emissions. After EPA released additional

analysis of the State that included changes based upon

comments received about the Metropolitan Emission Reduction

Proposal (“MERP”), Minnesota Power set forth by letter of May

10, 2005 to EPA claimed errors in the new analysis, including

emissions measurements for the Boswell Energy Center, and the
54

10 The May 2005 letter stated that “[t]he total SO2 emitted from

Boswell unit 4 appears to be overstated by a factor of two or 4000 to

5000 tons” and that “SO2 emissions from the Hibbard Energy Center

appear to be significantly overstated, by over 2000 tons. This appears

to be a result of how the units can burn a mix of wood waste, natural

gas and coal . . . . 80% to 90% of energy input is from wood waste,

making overstatement of emissions a prospect if coal combustion is

presumed.” Letter from Michael Cashin, Sr. Env’tl Eng’r, Minn.

Power, to Sam Napolitano, Ofc. of Air & Radiation, EPA (May 10,

2005), docketed as attachment to EPA-HQ-OAR-2003-0053-2284.2

(Jan. 13, 2006).

predominantly wood waste unit of Hibbard Energy Center.10

The final rule was promulgated on May 12, 2005, and

Minnesota Power timely petitioned for reconsideration to

challenge the “moving target” of EPA’s data and determination

regarding the State, and referred to its May 2005 letter. Minn.

Power, Pet. for Recon. at 7 (Aug. 5, 2005), docketed as EPAHQ-OAR-2003-0053-2211. In granting reconsideration in

December 2005, EPA again recalculated the State’s contribution

to be 0.20 μg/m3, after removing about 16,500 tons of NOx and

about 5,800 tons of SO2 emissions, and requested comments on

the corrected 2010 inputs. Minnesota Power submitted

comments on January 13, 2006, again raising the measurement

issue and attaching the May 10, 2005 letter describing as

examples the claimed errors at the Boswell and Hibbard units

and referring as well to error at the Sherco unit. Minnesota

Power also met with EPA officials on February 2, 2006

regarding its measurement concerns.

Nothing in the CAA requires a petitioner’s comments to be

more specific or to raise every potential explanation for claimed

disparities in order to receive a response to timely concerns. See

Appalachian Power Co. v. EPA, 135 F.3d 791, 817–18 (D.C.

Cir. 1998). EPA thus lacked discretion not to address the

claimed errors in view of the timely May 2005 letter, petition for
55

11 It is unclear why the May 2005 letter did not become part of

the rulemaking record until January 13, 2006 as EPA has not stated

that it did not receive the letter. Regardless, the letter was timely

presented with the reconsideration comments. 

reconsideration, and January 2006 comments. See 42 U.S.C.

§§ 7607(d)(6)(B), (7)(B). EPA’s suggestion that the May 2005

letter was part of a “data dump” in the reconsideration

comments, Resp’t’s Br. at 53, ignores that the comments

referred to the May 2005 letter on the first page. Even if EPA

had previously overlooked the May 2005 letter,11 as of January

2006 there was no need for EPA “to cull through” more than a

few pages of comments to confront the claimed errors. See

Nat’l Ass’n of Clean Air Agencies v. EPA, 489 F.3d 1221, 1231

(D.C. Cir. 2007) (quotation omitted). 

EPA twice reanalyzed Minnesota’s contribution to address

the MERP issue, but never addressed the claimed measurement

errors at the Boswell, Hibbard, or Sherco units. On

reconsideration, EPA explained that it was not responding

because it was “unable to find any [such] instances [of a double

value],” i.e., overstated emissions. Reconsideration, 71 Fed.

Reg. at 25,318. Yet a double value was identified by Minnesota

Power at the Boswell unit and other substantial disparities were

identified at the Hibbard and Sherco units in the May 2005 letter

and January 2006 comments. EPA’s suggestion that “many

other factors . . . may change in the future” leading to greater

projected than actual emissions, id., is insufficient in view of the

fact that these claimed errors, if confirmed by EPA, could affect

inclusion of the State in CAIR. See West Virginia v. EPA, 362

F.3d at 869. 

The inclusion of the State of Minnesota in CAIR was a

borderline call, and the State’s actual downwind contribution to

PM2.5 remains uncertain. EPA acknowledges on appeal that
56

even after two recalculations it is still an open question “whether

the information would . . . change[] [EPA’s] determination” to

include the State in CAIR. Resp’t’s Br. at 47. Minnesota Power

estimates that corrected inputs could remove 25,911.4 tons of

emissions and thus reduce the State’s contribution below the

threshold, to the amount of 0.1878 μg/m3. Contrary to EPA’s

suggestion, Minnesota Power is not challenging the Integrated

Planning Model itself, see Appalachian Power, 249 F.3d at

1052–53; rather, the claimed data disparities would require a

response regardless of methodology. The claims of error

involving the Boswell, Hibbard, and Sherco units, including the

treatment of Hibbard as a coal rather than predominantly

biomass unit, do not appear to be an improper request for a

“selective[]” rather than “holistic[]” methodological approach.

See Reconsideration, 71 Fed. Reg. at 25,318. Instead,

Minnesota Power has presented these units as examples to

illustrate that the overstatement objection requires a response

from EPA. A remand is therefore appropriate. See Appalachian

Power, 249 F.3d at 1054. On remand, EPA also should respond

to Minnesota Power’s concern about shifting of heat input

allocations between units. See Pet’rs’ Br. at 23–25.

E. Phase I Compliance Deadline

The Florida Association of Electric Utilities contends that

EPA failed to provide adequate notice of the nullification of

vintage 2009 NOx SIP Call allowances that resulted from its

acceleration of the first-phase NOx compliance deadline from

January 1, 2010 to January 1, 2009. However, in the NPRM

EPA requested comments on the timing of each phase of CAIR,

specifically asking “whether the first phase deadline should be

as proposed, or adjusted earlier or later, in light of [] competing

factors.” 69 Fed. Reg. at 4623. EPA’s Supplemental Proposal

made the same request. Id. at 32,690. Because the issue of what

allowances may be used in compliance with CAIR’s
57

NOx program is directly linked with the start of the program, see

CAIR, 70 Fed. Reg. at 25,285, the resulting nullification was a

“logical outgrowth” of changing the compliance deadline. Ne.

Md. Waste Disposal Auth. v. EPA, 358 F.3d 936, 951 (D.C. Cir.

2004). Petitioner has not demonstrated that it was impracticable

to raise such objection within the comment period or that the

grounds for such objection arose afterward, much less that such

objection is of central relevance. 42 U.S.C. § 7607(d)(7)(B).

Although petitioner vaguely alludes to EPA’s “incorrect factual

assumptions” as a reason mandating reconsideration of

the compliance deadline, NOx Br. at 8, it fails to support this

assertion. Therefore, petitioner fails to demonstrate a statutory

ground that would require reconsideration.

In any event, EPA’s change to the NOx compliance deadline

was not arbitrary. EPA explained that the earlier date is better

coordinated with the ozone and fine particulate attainment dates

mandated by the CAA. CAIR, 70 Fed. Reg. at 25,216. Having

determined that the earlier deadline is preferable, EPA

concluded that the change is consistent with its CAA obligation

“to require emission reductions for obtaining NAAQS to be

achieved as soon as practicable.” Id.

III. Remedy

The petitioners disagree about the proper remedy, with

positions ranging from Minnesota Power’s demand that we

vacate CAIR with respect to Minnesota to North Carolina’s

request that we vacate only the Compliance Supplement Pool

but remand most of CAIR for EPA to make changes to the

compliance date, the set of included states, and the trading

program. Unfortunately, we cannot pick and choose portions of

CAIR to preserve. “Severance and affirmance of a portion of an

administrative regulation is improper if there is ‘substantial

doubt’ that the agency would have adopted the severed portion
58

on its own.” Davis County Solid Waste Mgmt. & Energy

Recovery Special Serv. Dist. v. EPA, 108 F.3d 1454, 1459 (D.C.

Cir. 1997). Whether a regulation is severable “depends on the

issuing agency’s intent.” North Carolina v. FERC, 730 F.2d

790, 795–96 (D.C. Cir. 1984). EPA has been quite consistent

that CAIR was one, integral action. It developed both the SO2

and NOx programs assuming all states would participate in the

trading programs as implemented in CAIR’s Model Rule, and it

modeled the crucial cost-effectiveness of the caps “assum[ing]

interstate emissions trading.” CAIR, 70 Fed. Reg. at 25,196.

The model also took into account “the use of the existing title IV

bank of SO2 allowances.” Id. Moreover, EPA justified the SO2

and NOx portions of CAIR as complementary measures to

mitigate PM2.5 pollution. See id. at 25,184. In sum, CAIR is a

single, regional program, as EPA has always maintained, and all

its components must stand or fall together.

Indeed, they must fall. We have, in reviewing EPA actions

under 42 U.S.C. § 7607(d)(9), ordinarily applied the two-part

test of Allied-Signal, Inc. v. Nuclear Regulatory Comm’n, 988

F.2d 146, 150–151 (D.C. Cir. 1993), under which this answer

“depends on ‘the seriousness of the order’s deficiencies (and

thus the extent of doubt whether the agency chose correctly) and

the disruptive consequences of an interim change.’” See Davis

County, 108 F.3d at 1459 (applying Allied-Signal in

§ 7607(d)(9) review). We are sensitive to the risk of interfering

with environmental protection, which is one potential disruptive

consequence, see Nat’l Lime Ass’n v. EPA, 233 F.3d 625, 635

(D.C. Cir. 2000). But the threat of disruptive consequences

cannot save a rule when its fundamental flaws “foreclose EPA

from promulgating the same standards on remand,” Natural Res.

Def. Council v. EPA, 489 F.3d 1250, 1261–62 (D.C. Cir. 2007).

 

We must vacate CAIR because very little will “survive[ ]

remand in anything approaching recognizable form.” Id. at
59

12 EPA published its decision on North Carolina’s petition under

42 U.S.C. § 7426 in the same notice as the FIP, but that decision is

subject to challenge in a separate case still pending. Today’s decision

takes no action with respect to that petition.

1261. EPA’s approach—regionwide caps with no state-specific

quantitative contribution determinations or emissions

requirements—is fundamentally flawed. Moreover, EPA must

redo its analysis from the ground up. It must consider anew

which states are included in CAIR, after giving some

significance to the phrase “interfere with maintenance” in

section 110(a)(2)(D), 42 U.S.C. § 7410(a)(2)(D). It must decide

what date, whether 2015 or earlier, is as expeditious as

practicable for states to eliminate their significant contributions

to downwind nonattainment. The trading program is unlawful,

because it does not connect states’ emissions reductions to any

measure of their own significant contributions. To the contrary,

it relates their SO2 reductions simply to their Title IV

allowances, tampering unlawfully with the Title IV trading

program. The SO2 regionwide caps are entirely arbitrary, since

EPA based them on irrelevant factors like the existence of the

Title IV program. The allocation of state budgets from the NOx

caps is similarly arbitrary because EPA distributed allowances

simply in the interest of fairness. It is possible that after

rebuilding, a somewhat similar CAIR may emerge; after all,

EPA already promulgated the apparently similar NOx SIP Call

eight years ago. But as we have explained, the similarities with

the NOx SIP Call are only superficial, and CAIR’s flaws are

deep. No amount of tinkering with the rule or revising of the

explanations will transform CAIR, as written, into an acceptable

rule. Of course the Federal Implementation Plan EPA imposed

is intimately connected to CAIR, and we vacate the FIP as

well.12

Finally, we note that in the absence of CAIR, the NOx SIP

Call trading program will continue, because EPA terminated the
60

program only as part of the CAIR rulemaking. CAIR, 70 Fed.

Reg. at 25,317 (codified at 40 C.F.R. § 51.121(r)). The

continuation of the NOx SIP Call should mitigate any disruption

that might result from our vacating CAIR at least with regard to

NOx. In addition, downwind states retain their statutory right to

petition for immediate relief from unlawful interstate pollution

under section 126, 42 U.S.C. § 7426.

To summarize, we grant the petitions of Entergy, SO2

Petitioners, and Minnesota Power. We grant North Carolina’s

petition with respect to the “interfere with maintenance”

language, CAIR’s 2015 compliance date, and the unrestricted

trading of allowances; we deny it with respect to EPA’s

definition of “will” in “will contribute significantly,” and the

PM2.5 contribution threshold. We deny the petitions of the

Florida and Texas petitioners, and the Florida Association of

Electric Utilities. Accordingly, we vacate CAIR and its

associated FIP and remand both to the EPA.

So ordered.