Case No. 11

- 71127 UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
CALIFORNIA COMMUNITES AGAINST TOXICS, et al.

Petitioners ,

v. UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, et al. Respondent s and SOUTH COAST AIR QUALITY MANAGEMENT DISTRICT
a nd CPV Sentinel LLC Respondent s
- Intervenor s
.
On Petition f or Review of a F inal A ction of the U.S. Environmental Protection Agency

BRIEF OF RESPONDENT

- INTERVENOR SOUTH COAST AIR QUALITY MANAGEMENT DISTRICT
Kurt R. Wiese, General Counsel (SBN 127251) B arbara Baird, District Counsel (SBN 81507) Lauren B. Nevitt, Dep uty Dist rict Coun sel (SBN 260297) SOUTH COAST AIR QUALITY MANAGEMENT DISTRICT 21865 Copley Drive, Diamond Bar, CA 91765 Telephone: (909) 396

- 3458 Facsimile: (909) 396

- 2961 bbaird@aqmd.gov lnevitt@aqmd.gov Attorneys for Respondent

- Intervenor , SOUTH COAST AIR QUALITY MANAGEMENT DISTRICT Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 1 of 51CORPORATE DISCLOSURE STATEMENT UNDER RULE 26.1 Respondent

- Intervenor South Coast Air Quality Management District is a political
subdivision of the Stat e of California and does not issue stock and is not a subsidiary or affiliate of any publicly owned corporation. January 27 , 2012 South Coast Air Quality Management District

s/ Lauren B. Nevitt Lauren B. Nevitt, Deputy District Counsel Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 2 of 51i TABLE OF CONTENTS
INTRODUCTION

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

................................ ................................ .......... 1
STATEMENT OF FACTS

................................ ................................ ........... 1

I. The District Plans for the Attainment of Air Quality Standards

................................ ................................ ........................... 1
II. Procedural History of the Sentinel Project

................................ ........ 4
ARGUMENT

................................ ................................ ................................ 7

I. Petitioners Had Actual Notice of the D ocumentation EPA R elied U pon and T herefore M ay N ot C laim P rocedural E rror
................................ ................................ ................. 7
A. Petitioners Examined the Do cuments in the CEC Licensing Proceeding

................................ .............................. 8
B. The Rulemaking Record Demonstrates that Petitioners Had Actual Notice that EPA Was Relying on the Same Supporting Documentation Litigated in the CEC Proceeding

................................ .......... 10
II. The Record Supports EPA’s Determination that the AB 1318 Tracking System Contains a Sufficient Number of Offsets

................................ ................................ .............................. 12
A. Alleged Violation s of the “Surplus” Requirement Do Not Impact EPA’s Determination that Sufficient Offsets are Available for the Sentinel Project

................................ ................................ ................... 14
B. Alleged Violations of the “Quantifiable” Requirement Have No Bearing on EPA’s Determination that Suf ficient Offsets Are Available for the Sentinel Project

................................ ......... 19 Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 3 of 51ii i. EPA Appropriately Relied on Emissions Data from Either the Previous One or Two Year Per iod for Each Source of Offsets

................................ 20
i i. Alleged Inaccuracies in the Docum entation for a Single Facility i s Not Emblematic of the Tracking System as a Whole and Does Not Affect EPA’s Ultimate Determination

.......................... 23
C. The District’s Internal Accounts Have a Positive Balance and, Therefore, the Transfer of Offsets to the AB 1318 Tracking System Was Proper

.......................... 24
D. Alleged Violations of the “Creditable” Requirement Must Fail Because the Offsets in the AB 1318 Tracking System Are Explicitly Incl uded i n the AQMP

................................ ................................ .......... 28
i. Petitioners’ Argument is Based on the Wrong AQMP

................................ ................................ ........... 28
ii. This Court Should Not Consider Petitioners’ Arguments Based on Specific Tables and Sentences in the 2007 AQMP and Alleged for the First Time in Their Opening Brief

.......................... 31
iii. Even if Considered, Petitioners’ Arguments Regarding the 2007 AQMP Must Fail Because They Misinterpret the Document

.................... 33
iv. This Court Should Affirm EPA’s Decision Rather than Remanding it Without Vacature

................ 37
CONCLUSION

................................ ................................ ......................... 39 Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 4 of 51iii TABLE OF AUTHORITIES
Federal Cases Alaska Dep’t of Env tl. Conservation v. EPA , 540 U.S. 461 , 124 S. Ct. 983 (2004)

................................ ............................ 13 Appalachian Power Co. v. EPA , 251 F. 3d 1026 (D.C. Cir. 2001)

................................ ................................ .... 31
Cal. Wilderness Coal. v. U.S. Dept. of Energy , 631 F.3d 1072 (9th Cir. 2011)

................................ .............. 13, 14, 15, 19, 24 Catawba County v. EPA , 571 F.3d 20 (D.C. Cir. 2009)

................................ ................................ ....... 1 2
Chae

- Sik Lee v. Kennedy , 294 F.2d 231 (D.C. Cir. 196 1)

................................ ................................ 29, 30
Latino Issues Forum v. EPA , 558 F.3d 936 (9th Cir. 2009)

................................ ................................ ......... 12 Motor & Equip. Mfrs. Ass’n. v. Nichols , 142 F.3d 449 (D.C. Cir. 1998)

................................ ................................ 32 , 33
Nat’l Petrochem. & Refiners Ass’n v. EPA , 287 F.3d 1130 (D.C. Cir. 2002)

................................ ................................ ...... 7

Nat ’ l Res

. Def

. Council v. South Coast Air Quality Mgmt Dist

. , 694 F. Supp. 2d 1092 (C.D. Cal. 2010)

................................ ........................... 4 Nat’l Res. Def. Council v. South Coast Air Quality Mgmt Dist. , 651 F.3d 1066 (9th Cir. 201 1)

................................ ................................ ......... 4

R

y
. Labor Execs .’ Ass’n v. Interstate Commerce Comm

. , 784 F. 2d 959 (9th Cir. 1986)

................................ ................................ ......... 30 Sagebrush Rebellion, Inc. v. Hodel , 790 F.2d 760 (9th Cir. 1986)

................................ ................................ ........ 13 Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 5 of 51iv Shea v. Director, Office of Worker s ’ Comp. Programs , 929 F.2d 736 (D.C. Cir. 1991)

................................ ................................ ...... 29
Shi nseki v. Sanders , 556 U.S. 396, 129 S. Ct. 1696 (2009)

................................ ..................... 13 , 23
Sierra Club v. EPA , 346 F.3d 955 (9th Cir. 2003)

................................ ................................ ......... 1 2
Silverton Snowmobile Club v. U.S. Forest Serv

. , 433 F. 3d 772 (10th Cir. 2006)

................................ ................................ ....... 3 1
SKF USA Inc. v. United States , 254 F.3d. 1022 (Fed. Ci r. 2001)

................................ ................................ .... 37 Small Refiner Lead Phase

- Down Task Force v. EPA , 705 F.2d 506 (D.C. Cir. 1983 )

................................ ................................ ........ 7 Union Oil Co. of Cal. & Beacon Oil Co. v. EPA , 821 F.2d 678 (D.C. Cir. 1987)

................................ ................................ ........ 7
Federal Statute s 5 U.S.C. § 706(2)(a)

................................ ................................ ...................... 12 42 U.S.C. § 7408

................................ ................................ ............................. 2 42 U.S.C. § 7409

................................ ................................ ............................. 2 42 U.S.C. § 7410(a)

................................ ................................ ......................... 2 42 U.S.C. § 7410(a)(1)

................................ ................................ .................... 2 42 U.S.C. § 7410(a)(2)(A)

................................ ................................ ............... 2 42 U.S.C. § 7502(c)(5)

................................ ................................ .................... 3 42 U.S.C. § 7503

................................ ................................ ........................... 2 0 42 U.S.C. § 7503(a)(1)(A)

................................ ................................ ............. 1 4 42 U.S.C. § 7503(c)

................................ ................................ ......................... 3 42 U.S.C. § 7503(c)(2)

................................ ................................ .................. 1 4 Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 6 of 51v Federal Regulations
57 Fed. Reg. 13,498 (Apr. 16, 1992 )

................................ ............................. 3 3 69 Fed. Reg. 27,837 (May 12, 2004)

................................ ............................. 1 5 70 Fed. Reg. 43 ,663 (July 28 , 2005)

................................ ............................. 29 70 Fed. Reg. 69,081 (Nov. 14, 2005 )

................................ ........................ 3, 2 8 7 2 Fed. Reg. 31,727 ( June 8, 2007 )

................................ .............................. 3 3 76 Fed. Reg. 22,038 (Apr

. 20, 2011)

................................ ............... 1, 6, 1 3 , 36 76 Fed. Reg. 69,928 (Nov. 9, 2011)

................................ .......................... 3, 29

Co de of Federal Regulations
40 C.F.R. § 51.165(a)( 1)(xxxv)

................................ ................................ ..... 20
40 C. F.R. § 51.165(a)(3)

................................ ................................ ............... 2 0 40 C.F.R. § 51.165(a)(3)(ii)(C)(1)(i)

................................ ....................... 1 4 , 19 40 C.F.R. § 51.165(a)(3)(ii)(C)(1)( i i)

................................ ...................... 3 2 , 38
40 C.F.R. Part 51 , Appendix S

................................ ................................ ...... 2 0
40 C.F.R. Part 51 , Appendix S (IV)(C)

................................ ......................... 21 Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 7 of 51vi S tate Cases Cal. Cmtys. Against Toxics v. So uth Coast Air Quality Mgmt. Dist. , No. BS 110792 (Cal. Super. Ct., County of Los Angeles, Sept. 7, 2011)

................................ ................................ ................................ . 25 Cal. Cmtys. Against Toxics v. S outh Coast Air Quality Mgmt. Dist

. , No. B226692, 2011 Cal. App. Unpub. LEXIS 5322 (Cal. Ct. App. July 9, 2011)

................................ ................................ ........... 26
State Statutes Cal. Health & Safety Code § 40402

................................ ................................ 2 Cal. Health & Safety Code § 40410

................................ ................................ 2 Cal. Health & Safety Code § 40440.13(c)(2)

................................ ................ 26 Cal. Health & Safety Code § 40440.14

................................ ........................... 4 Cal. Health & Safety Code § 40440.14(b)( 2)

................................ ................ 2 5 Cal. Health & Safety Code § 40440.14(d)

................................ ...................... 4 Cal. Health & Safety Code § 40460

................................ .......................... 2 , 34 Cal. Health & Safety Code § 40464

................................ .............................. 34 Cal. Health & Safety Code § 40913

................................ ................................ 2

State Regulations Cal. Code. Regs. tit. 20, § 1744.5 (2011)

................................ ........................ 5 Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 8 of 51vii GLOSSARY AER Annual Emissions Report APA Administrative Procedure Act, 5 U.S.C. §§ 551 et seq. AQMP Air Quality Management Plan CAA Federal Clean Air Act CARB California Air Resources Board CBE Communities for a Better Environment CCAT California Communities Against Toxics District South Coast Air Quality Management District EPA United States Environmental Protection Agency ERCs Emission Reduction Credits LCM Little Company of Mary Hospital NAAQS National Ambient Air Quality Standard s NSR New Source Review Nonattainment area An area designated by EPA as failing to meet a national ambient air quality standard. NO x Oxides of Nitrogen Offset requirements Requirements of 42 U.S.C. § 7503, applicable in nonattainment areas, to ensure that all new emissions are offset by emissions redu ctions. PM 10 Coarse Particulate Matter PM 2.5 Fine P articulate M atter SCAG Southern California Association of Governments Sentinel Project CPV Sentinel Energy Project SIP State Implementation Plan. A plan that identifies the actions and programs to be und ertaken by the state and its subdivisions to implement their responsibilities under the Clean Air Act. SO x Oxides of Sulfur Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 9 of 511 INTRODUCTION California Communities Against Toxics (“CCAT”) and Communities for a Better Environment (“CBE”) (collectively “Peti tioners”) have petition ed this Court
for review of EPA’s final rule entitled “Revision to the South Coast Portion of the California State Implementation Plan, CPV Sentinel Energy Project AB 1318 Tracking System,” 76 Fed. Reg. 22,038 (Apr. 20, 2011). The f inal rule revises the South Coast portion of the California State Implementation Plan (“SIP”) by providing for the transfer of specific emission offsets from the South Coast Air Quality Management District’s internal bank to a tracking system for use by th e CPV Sentinel Energy Project. Petitioners challenge EPA’s rulemaking as both procedurally and substantively flawed, raising many of their arguments for the first time in this judicial proceeding. Because Petitioners have failed to demonstrate why EPA’s
fi nal rule should not be upheld, Intervenor , the South Coast Air Quality Management District (“District ” ) , request s that the Court affirm EPA’s final rule in its entirety. STATEMENT OF ISSUES The District agrees with Respondents’ Statement of Issues.
S TATEMENT OF FACTS
I. T he District Plans for the Attainment of Air Quality Standards The Clean Air Act (“CAA”) requires each state to adopt a SIP containing
enforceable emissions limits and control measures that will achieve the federal Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 10 of 512 ambient air quality standards in each of the state’s air basins. CAA § 110, 42 U.S.C. § 7410(a)(2)(A). The federal air quality standards limit the concentration of “criteria” pollutants, including ozone, coarse particulate matter (“PM 10 ”), fine particulate matter (“PM 2.5 ”) , oxides of sulfur (“SO x ”) , and oxides of nitrogen (“NO x ”). CAA §§ 109, 110, 42 U.S.C. §§ 7408, 7409

. The District is the regional air pollution control agency charged with the primary responsibility to plan for and
attain the air quality standards in th e South Coast Air Basin, which consist s of all of Orange County, and the non

- desert portions of Los Angeles, Riverside, and San
Bernardino Counties as well as in the Salton Sea Air Basin, located within Riverside County. Cal. Health & Safety Code §§ 4040 2 , 40410, 40460, 40913

. Currently, the South Coast Air Basin and the Coachella Valley Planning Area, located within the Salton Sea Air Basin, are designated as nonattainment areas for
PM 10 . PER000018, 26. Additionally, SO x is a precursor to PM 10 and is a lso
treated as a PM 10 nonattainment pollutant. Id

. In coordination with the California Air Resources Board (“CARB”) and the
Southern California Association of Governments (“SCAG”) , the District periodically prepares an Air Quality Management Plan (“AQMP ”) designed to bring the South Coast Air Basin and the Salton Sea Air Basin into attainment

. Cal

. Health & Safety Code § 40460; CAA § 100 , 42 U.S.C. § 7410(a). Following approval of an AQMP by the District’s Governing Board, the AQMP is submitted
to CARB and then to EPA for approval and inclusion into the SIP. CAA § 110 , 42 U.S.C. § 7410(a)(1); PER000017

- 20. The most recently SIP

- approved AQMP containing an attainment demonstration for PM 10 in the South Coast Air Basin was Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 11 of 513 adopted by the District in 200 3 and approved by EPA in 2005. Approval and Promulgation of [SIPs] for Air Quality Planning Purposes; California

– South
Coast and Coachella , 70 Fed. Reg. 69,081 (Nov. 14, 2005 ). In 2007, t he District adopted an AQMP containing an attainment demonstratio n for PM 2.5 , a different
criteria pollutant, which was then SIP

- approved by EPA in 2011. Approval of Air Quality Implementation Plans; California; South Coast; Attainment Plan for 1997
PM 2.5 Standards , 76 Fed. Reg. 69 , 928 (Nov. 9, 2011).
T he Clean Air A ct also requires that SIPs establish a permitting program for new and modified major stationary sources located in nonattainment areas, as well

as provide that emissions increases of nonattainment pollutants or their precursors
be off set by corresponding e missions reductions. CAA §§ 172 , 173, 42 U.S.C. §§ 7502(c)(5 ), 7503 (c)

. EPA has authorized the District to implement its New Source Review Permitting Progr am as promulgated in Regulation XIII, which was initially approved into the D istrict’s portion of t he SIP in 1996. PER00001 8

. Regulation XIII includes those District rules governing emissions offsets. Id. District Rule 1303(b)(2) mandates that a permit to construct a new source or modify an existing source will not be issued by the District unless t he source is exempt from offset requirements pursuant to Rule 1304, emission increases are offset by the purchase of emission reduction credits (“ERCs”) pursuant to Rule 1309, or the source obtains allocations from the District’s Priority Reserve internal accounts pursuant to Rule 1309.1. Id.

/// Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 12 of 514 II
. Procedural History of the Sentinel Project The California Legislature passed AB 1318, effective January 1, 2010, which requires the District to transfer SO x and PM 10 emission offsets from its
internal bank t o eligible electric generating facilities. Cal. Health & Safety Code § 40440.14. 1

The emission reductions contained in the AB 1318 Tracking System were
identified from reductions of SO x and PM 10 occurring between 1999 and 2008 from permitted equipment that had permanently ceased operations in the Distr ict
and had reduced actual emissions. PER000024. These transferred emissions Prior to t he passage of this legislation, the CPV Sentinel Energy Project (“Sentinel Project”) , an 850

- megawatt electrical generating facility sited in Riverside County, w a s not eligible to obtain emissions offsets from the District’s Priority Reserve internal account

. PER000024. In accordance with state law requirements , t he District made the requisite finding that the Sentinel Project was an “eligible electric generating facility” pursuant to S ection 404401.14(d) of the
California Health & Safety Code

. PER000023

- 25. T he District then identified specific emissions reductions in its internal accounts to transfer to the Sentinel Project and named the newly created account t he AB 1318 Tracking System. Id

.

1 The District’s internal accounts consist primarily of emissions reductions from facilities that have shut

- down, but that did not receive ERCs which they could sell in the open market for use by other projects undergoing permitting and requir ing offsets. For a discussion of the internal accounts see the Distr ict Court and Ninth Circuit opinions in Natural Res. Def. Council v. South Coast Air Quality Mgmt. Dist. , finding and affirming that the District is not required to operate a tracking system for its internal accounts. 694 F. Supp. 2d 1092 (C.D. Cal. 2010) ; 651 F.3d 1066 (9 th Cir. 2011). Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 13 of 515 reductions ha d never been used as offsets by any other source and cannot be used as offsets for any other source in the future if they are used as offsets to obtain a permit to construct and to operate the Sentinel Project

. Id. After identifying the emissions reductions to be transferred into the AB 1318 Tracking System, the District reviewed supporting documentation for each offset
and compiled a set of the documents it used to verify that a sufficient amount of
offsets existed in the account. PER000019. The District then issued an Addendum
to the Determination of Compliance for the Sentinel Project on March 2, 2010, 2

Following the Determination of Compliance , Petitioners, who were also
Intervenors in the CEC licensing p roceeding for CPV Sentinel LLC (“Sentinel”) , submitted California Public Record s Act r equests to the District seeking information related to the offsets in the AB 1318 Tracking System. Respts’ RJN, Exhibit 1; District’s RJN, Exhibits 2, 3. In response to their request, the District provided Petitioners with electronic links to the documents supporting the offsets which included a determination that it complied with all applicable requirements of local, state, and federal air quality rules and regulations, and submitted the offset evaluation and AB 1318 Tracking System to the California Energy Commission (“CEC”)

. See Respondents’ Motion t o Take Judicial Notice, Exhibit 1 (hereafter
“Re sp t s ’ RJN”) (Log #55739); s ee South Coast Air Quality Management District’s
Motion to Take Judicial Notice, Exhibit 1 (hereafter “District’s RJN”)

.

2 The Determination of Compliance is a step in the licensing of a power plant by the California Energy Commission in which the applicable air pollution control district determines whether the project will comply with all air pollution rules and regulations. Cal. Code. Regs. tit. 20, § 1744.5 (2011). Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 14 of 516 in the AB 1318 Tracking S ystem. District’s RJN, Exhibit 4

. Over the next few months, the CEC requested briefing and expert testimon y on the issue of air quality

– a discussion which was informed entirely by the same set of offset
documentation. Respts’ RJN , Exhibit 1. 3

While the CEC licensing proceeding was pending , o n July 9, 2010, the District’s Governing Board adopted a resolution revising the District’s portion of the SIP to include the Sentinel Project AB 1318 Tracking System. P ER0000 17

- 18

. The Distric t submitted this SIP revision to CARB, which then submitted the
S entinel Project AB 1318 Tracking System to EPA as a source

- specific SIP revision on September 10, 2010

. PER000017

. EPA issued a completeness letter on October 27, 2010. Id. Following noti ce and comment in the Federal Register ,

o n April 20, 2011, EPA took final action to approve the source
- specific SIP revision for the District’s portion of the California SIP , providing a federally

approved and enforceable mechanism for the District to tran sfer the offsets in the AB 1318 Tracking System to Sentinel for use as offsets. See Revision to the South Coast Portion of the California State Implementation Plan, CPV Energy Project AB 1318 Tracking System , 76 Fed. Reg. 22,038 (Apr

. 20, 2011). The CEC approved Sentinel’s application for certification and issued a license on December 1, 2010. Respts’ RJN, E xhibit 2.

///

3 The supporting documentation for the offsets in the AB 1318 Tracking System was served on all parties to the CEC proceeding twice. On June 11, 201 0 , counsel for Sentinel se rved a copy of the documents and, on July 8, 2010, the District served a reorganized set of the documents. District’s RJN, Exhibits 5, 6. Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 15 of 517 ARG UMENT I. Petitioners Had Actual Notice of the D ocumentation EPA R elied U pon and T herefore M ay N ot C laim P rocedur al E rror Petitioners premise their allegation that EPA committed procedural error by failing to list support documents in the docket on their cl aim that they “had no way of knowing” what documents were relied upon by EPA. Petitioners’ Corrected Opening Brief at p. 18 (hereafter “ Pet’rs’ Br. ”). However, this claim is specious. Petitioners cannot allege defective notice when, in fact, they had act ual notice of the documentation supporting the AB 1318 Tracking System. Actual notice is sufficient to allow for meaningful commentary and thereby

cures any procedural notice defects during an agency’s rulemaking. Union Oil Co. of Cal. & Beacon Oil Co. v. EPA , 821 F.2d 678, 682

- 83 (D.C. Cir. 1987) (finding actual notice of a memorandum that EPA did not properly docket to be sufficient to permit petitioners to present their obj ections and, therefore, rejecting the procedural notice claim); see also Small Refiner Lead Phase

- Down Task Force v.
EPA , 705 F.2d 506, 549 (D.C. Cir. 1983) (actual notice renders alleged procedural defects harmless); Nat’l Petrochem. & Refiners Ass’n v. EPA , 287 F.3d 1130,
1148

- 49 (D.C. Cir. 2002) (holding that a petitioner has actu al notice even where it hears of a rulemaking proposal only through a “‘casual conversation’ with a competitor rather than directly from the agency”). In this case, Petitioners had actual notice of the exact content of the AB 1318 support documents befor e the rulemaking ever commenced and, during the rulemaking comment period, EPA reminded Petitioners that they had possession of the documents. Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 16 of 518 A. Petitioners Examined the Documents in the CEC Licensing Proceeding Despite their claims to the contrary, Petit ioners had actual notice of the documentation supporting the AB 1318 Tracking System because of their active involvement as intervenors in the CPV Sentinel Energy Project Power Plant
l icensing proceeding before the CEC. See Respts’ R JN , Exhibit 1. During the pendency of the CEC proceeding, Petitioners were provided with copies of all
documents supporting the AB 1318 Tracking System on three different occasions. First, these documents were the subject of two California Public Records Act requests submitt ed by CCAT to the District. On March 31, 2010, CCAT specifically asked the District to produce “records that show emission offsets in the internal account tracking system pursuant to AB 1318 for Sentinel Power Project meet the integrity criteria for quali fying as offsets” and “info[rmation] provided to [the District] re emissions offsets that formed the basis for det[ermining] [the] project complies [ with ] all requirements as referenced in [the] letter submitted to John Kessler of [CEC] dated 3/2/2010 for CPV Sentinel, ID 152707.” See District’s RJN, Exhibit s 2, 3. On May 12, 2010, the District provided CCAT with electronic links to the documents responsive to their Public Records Act requests.
District’s RJN, Exhibit 4. The documentation provided consi sted of Offset Source
Calculat ion/Verification forms and other supporting documents for each facility and piece of equipment listed in the AB 1318 Tracking System. Second, these same documents that were produced in response to CCAT’s
Public Records Act r equests became the evidentiary basis for the CEC’s air quality Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 17 of 519 hearings in the Sentinel licensing proceeding. On June 11, 2010, counsel for the applicant, Sentinel, served a CD copy of the documents on all parties to the CEC proceeding, including the Peti tioner groups in this case. District’s RJN, Exhibit 5 ; Respts’ RJN at Exhibit 1 (Log # 57122). Third, for the convenience of all of the parties in the CEC licensing proceeding, the District reorganized the offset documentation and, on July 8, 2010,

re
- served a CD of the documents to the CEC service list. District’s RJN, Exhibit 6 ; Respts’ RJN at Exhibit 1 (Log # 57573). This reorganized set of documents separated the offset documentation into 62 files sorted by facility, which match the
62 facilities listed in the AB 1318 Tracking System. The CD containing the documents was labeled “Backup Documentation for the Offsets in the AB 1318 Tracking Syste m” and was dated June 4, 2010. District’s RJN, Exhibit 6. As intervenors in the CEC proceedings, Petit ioners had the opportunity to
review the offset documentation . Petitioners submitted extensive expert testimony contesting the validity of the credits based upon their interpretation of that documentation. On June 15, 2010, both CBE and CCAT filed expert testimony from two separate expert witnesses and, on June 30, 2010, CCAT filed rebuttal expert testimony. Respts’ RJN, Exhibit 1 (Log #s 57807, 57244, 57451). Additionally, the CEC held a formal evidentiary hearing on July 19, 2010 that was entirely devoted to expert testimony on air quality. District’s RJN,
Exhibit 7. At the hearing, counsel for CCAT and CBE submitted their written expert testimony into evidence and cross

- examined the District’s witness regarding
the offset documentation. Counsel for CBE focused one of her lines of questioning Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 18 of 5110 on emissions factors used to calculate offsets for Elsinore Ready

- Mix Company and Chandler Aggregates. District’s RJN, Exhibit 7 , at 60

- 61. Even though Petitioners now claim that the information that they “ previously secured from the District has no relevance” to EPA’s rulemaking, the fact that they have mounted a renewed attack on offsets from these same two facilities in the present proceeding
demonstrates otherwise. Pet’rs’ Br. at 18, 21

- 22.
Counsel f or CCAT also questioned the District’s witness as to whether “the [D]istrict prepare[d] a SIP amendment that included this AB 1318 tracking system.” District’s RJN, Exhibit 7, at 70. When the District’s witness answered affirmatively, CCAT’s counsel then outlined the procedure by which the SIP package would be submitted to CARB and then to EPA. District’s RJN, Exhibit 7 , at 70

- 71. Thus, Petitioners knew, at that time, that the documents they were discussing were the same ones that supported the SIP revi sion. Yet, somehow Petitioners now maintain that they had “no way of knowing what ‘documents’ EPA received or was reviewing.” Pet ’ rs ’ Br. at 18. Given Petitioners’ extensive review of the documents and detailed public testimony as to the contents of the documents in the CEC proceeding, they cannot now claim that they did not have
actual notice of the offset documentation.
B
. The Rulemaking Record Demonstrates t hat Petitioners Had Actual Notice t hat EPA Was Relying o n t he Same Supporting Document ation Lit igated in the CEC Proceeding The rulemaking rec ord in the present action also makes clear that Petitioners were, in fact, aware that EPA was relying on the 62 documents in promulgating the Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 19 of 5111 ru lemaking. Although Petitioners claim that they first became awar e of the identity of the documents when EPA responded to their comments in the final rulemaking, this is not true. EPA’s January 28, 2011 , letter responding to Petitioners’ initial request for an extension of time to submit comments makes it
clear that EP A was relying on the same set of offset documentation. Pet’rs’ Br. at
14 ; PER 000038. In that letter, EPA denied the request for an extension and explained that Petitioners had more than enough time to review the AB 1318 Tracking System rule and supporti ng information because: The District provided you with a substantial amount of information regarding this project in response to your public records request in late May 2010. The rule language and supporting documents were available from the District at l east 30 days prior to the rule adoption hearing held by the District Board on July 9, 2010. The same information was available when CARB submitted the rule to EPA on September 10, 2010. Our proposed approval of the rule is based on information that has b een publicly available throughout the District and State adoption process. PER 000038. Petitioners cannot deny that they submitted the Public Records Act requests, were intervenors in the CEC proceeding, received copies of the full set of
documents no l ess than three times during the CEC proceeding, and submitted extensive testimony in that proceeding challenging the contents of the documents. Therefore, the EPA’s January 28, 2011 , letter makes it abundantly clear that the “supporting documents” were th e very same documents Petitioners had since May
2010. PER 000038. Further, Petitioners ’ own comments make reference to “[t]he AB 1318 Tracking System documents” and acknowledge that EPA explained that there “may be documents available at its offices tha t are not provided electronically or Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 20 of 5112 listed in the index.” SER00 09, 15. If, at any time, Petitioners wanted clarification regarding the documents that EPA was making publicly available at its offices, Petitioners could have contacted EPA to inquire. Pet itioners never did so , precisely because they already had the same set of documents. Respondents’
Corrected Answering Brief, p.15 (hereafter “ Respts’ Br. ” ). Regardless of whether EPA docketed the list of the 62 documents,
Petitioners had actual notice of the documents EPA relied on and had a meaningful opportunity to comment. Accordingly, the procedural notice claim must fail.
II. The Record Supports EPA’s Determination t hat the AB 1318 Tracking System Contains a Sufficient Number of Offsets Pursuant to Section 706 of the Administrative Procedures Act, 5 U.S.C. § 706(2)(a), agency actions shall be set aside by a reviewing court only if such action is found to be “arbitrary, capricious, an abuse of discretion, or otherwise not
in accordance with law.” As this court has held, an appellate court’s role is to ensure that EPA has made no “clear error of judgment” that would render its action arbitrary and capricious. Latino Issues Forum v. EPA , 558 F.3d 936 , 941 (9th Cir. 2009). Courts give an “extreme de gree of deference to EPA when it is evaluating
scientific data within i ts technical expertise...[s] uch deference is especially appropriate in [a court’s] review of EPA’s administration of the complicated provisions of the Clean Air Act.” Catawba County v. E PA , 571 F.3d 20, 41 (D.C. Cir. 2009) (internal quotations omitted); see also Sierra Club v. EPA , 346 F.3d 955, 961 (9th Cir. 2003) (recognizing in a Clean Air Act case that “where analysis of the relevant documents requires a high level of technical expert ise, [the court] Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 21 of 5113 must defer to the informed discretion of t he responsible federal agencies ”) (internal quotations omitted). Even when an agency explains its decision with “less than ideal clarity, a reviewing court will not upse t the decision on that acco unt if the agency’s path may reasonably be discerned.” Alaska Dep ’t of Envtl. Conservation
v. EPA , 540 U.S. 461, 497 , 124 S. Ct. 933, 1006 (2004) (internal quotations omitted)

. Moreover, if an agency relies on factual findings or assumptions which the

c ourt regards as in error, this Court has held that it will not overturn an administrative rulemaking decision where the error “clearly had no bearing on the procedure used or the substance of the decision reached.” Sagebrush Rebellion,
Inc. v. Hodel , 790 F.2d 760, 765 (9th Cir. 1986); see also Cal. Wilderness Coal. v. U.S. Dept. of Energy , 631 F.3d 1072, 1090 (9th Cir. 2011) (quoting Sagebrush
Rebellion for this rule). This Court also has clarified that “the burden of showing an error is harmful normally falls upon the party attacking the agency’s
determination.” Cal. Wilderness Coal. , 631 F.3d at 1091 ( quoting Shinseki v.
Sanders , 556 U.S. 396, 545, 129 S. Ct. 1696, 1706 (2009) )

. Here, Petitioners have failed to demonstrate that the alleged errors in EPA ’s rulemaking were harmful and would have had a bearing on the substance of EPA’s
decision. It is clear from the record that even if the challenged surplus and quantifiable offsets were removed from the AB 1318 Tracking System , EPA would
have reached the same decision

– that “a suf ficient quantity” of offsets in the Tracking System m e e t the requirements of the Clean Air Act. See PER 000006;
76 Fed. Reg. 22 , 038, 22 , 039 (April 20, 2011) (“EPA examined each of the specific Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 22 of 5114 emission reduction actions that are the basis for the credits being transferred pursuant to this SIP revision and found a sufficient quantity

– compared to the amount needed for the CPV Sentinel Energy Project, to meet the CAA offset requirements”). Although the maximum amount of offsets n eeded for the Sentinel Project i s 118,120 lbs/year of PM 10 and 13,928 lbs/year of SO x , the District transferred a total of 137,799 lbs/year of PM 10 and 25,438 lbs/year of SO x into the AB 1318 Tracking S ystem, creating an excess of 19,679 lbs/year of PM 10 a nd 11,418 lbs/year of SO x . PER0000 26, 32, 36. Petitioners have not demonstrated, and cannot demonstrate, that EPA would have determined that the AB 1318 Tracking System conta ined an insufficient number of offsets for the Sentinel Project had the alleged errors not been made. Therefore, the errors Petitioners allege clearly had no bearing on the “substance of the decision reached” and EPA’s rulemaking should be upheld. Cal. Wilderness Coal

. , 631 F.3d at 1090.
A. Alleged Violations of the “ Surplus ” Requir ement Do Not Impact EPA’s Determination t hat Sufficient Offsets are Available for the Sentinel Project
When new or modified sources “offset” their emission increases, sufficient offsetting emission reductions must be obtained “by the time the source is to commence operation ... so as to represent ... reasonable further progress.”
CAA § 173, 42 U.S.C. § 7503(a)(1) (A) . Emission reductions that are used as offsets must be “surplus” to any other federal requirement to reduce emissions. PER000021; CAA § 173, 42 U.S.C. § 7503(c)(2), 40 C.F.R. § 51.165(a)(3)(ii)(C)(1)(i). If a piece of equipment that has shut down would be Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 23 of 5115 subject to a subsequently adopted air quality regulation if the equipment were still in operation, the emissions reductions from that equipment must be adjusted downward to account for reductions that would be required by the new regulation.
PER000021. One basis of Petitioners’ challenge to EPA’s rulemaking is that several offsets in the AB 1318 Tracking System were not pro perly surplus

- adjusted to account for subsequently adopted air quality requirements that would reduce
emissions

. Petitioners raise their substantive challenge to the offsets subject to Rules 1156 and 1157 for the first time in their Opening Brief. Pet’rs’ Br. at 20

- 22.
D espi te the fact that Petitioners have deprived EPA of the opportunity to consider and respond to their specific comments during the administrative proceedings, the
record nevertheless supports EPA’s determination that a sufficient number of the
emissions reduc tions in the AB 1318 Tracking System meet the Clean Air Act offset requirements. As such, Petitioners have failed to meet their burden to demonstrate that the alleged errors had any bearing on the substance of the
decision reached. Cal. Wilderness Coal

. , 631 F.3d at 1090.
A lthough Petitioners claim that EPA violated the surplus requirement , they implicitly acknowledge that the surplus adjustment for the offsets in the AB 1318 Tracking System would not be contained in EPA’s rulemaking because “[s]urplus
is determined when the emission reductions are offered for use.” Pet’rs’ Br. at 20. In fact, it is EPA policy to defer t he surplus adjustment until offsets are offered for

use. See 69 F ed. R eg. 27 , 837 , 27 , 840 (May 12, 2004) . In prior rulemakings on the

s ubject, EPA has stated that the surplus value should be reconciled “no earlier than Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 24 of 5116 at the time of use when the permitting agency formally determines that an applicant meets Clean Air Act requirements for an authority to construct permit.”
Id.
At the ti me the District submitted the SIP revision for the Sentinel Project , it had not performed a surplus adjustment because the District had not yet formally
determined that Sentinel had met the requirements for final District authority to

construct . Rather, j ust prior to the issuance of Sentinel’s Permit to C onstruct and
the transfer of the emissions reductions into the AB 1318 Tracki ng System, the District surplus

- adjusted the emission reductions based on a review of rules that had been adopted or amended sin ce the sources identified in the AB 1318 Tracking System ceased operations. District’s RJN, Exhibit 7 , at 5 3

- 5 5 , 62

- 63

. Because the adjustments were made at the time the offsets were offered for use, and thus
months after the SIP revision was submitted t o CARB and EPA, the surplus adjustment was not and could not be contained in the rulemaking record. Additionally, Petitioners assert that District Rules 1156 and 1157 require
reductions in PM 10 and SO x and , thus , render some of the emission reductions i n the AB 1318 T racking S ystem non

- surplus. First, contrary to Petitioners’ claims, Rule 1156 does not apply to any of the facilities in the AB 1318 Tracking System. Rule 1156 seeks to reduce particulate matter emissions from cement manufacturing
faciliti es and applies to all operations, materials handling , and transport at cement manufacturing facilities. Petitioners’ Request for Judicial Notice, Exhi bit E (hereafter “Pet’rs’ RJN”); District’s RJN, Exhibit 8. Petitioners claim that two facilities provi ding credits for the AB 1318 Tracking System

– Elsinore Ready

Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 25 of 5117 Mix Co Inc. and Oldcastle Westile, Inc.

– fall under Rule 1156 for a total 1,436 lbs/year of PM 10 emission reductions. Pet’rs’ Br. at 22, n.6. However, neither facility is subject to Rule 1156 . A s the Staff Report to Rule 1156 states, the Rule applies to only two facilities, neither of which have emission reductions in the
AB 1318 Tracking System. District’s RJN, Exhibit 8 , at 1 (“ TXI [Riverside Cement] is one of the two facilities in the [D istrict’s] jurisdiction subject to Rule 1156; the other being California Portland Cement Company (CPCC) located in
Colton ”)

. Thus, contrary to Petitioners’ assertion, neither Elsinore Ready

- Mix Co. Inc. nor Oldcastle Westile, Inc. is subject to Rule 1156. Second, Petitioners exaggerate the surplus adjustment needed for Rule 1157.
Rule 11 57 is a housekeeping rule which seeks to reduce PM 10 emissions from aggregate and related operations

. 4

Petitioners assert that Rule 1157 applies to Matthews Internat ional Corp ., a facility with three pieces of equipment that account for 7,491 lbs/year of PM 10 . Rule 1157, adopted in January 2005, defines “aggregate operation s” as “operations that produce sand, gravel, crushed stone, and/or quarried rocks.” Pet’rs ’ RJN, Exhibit G ( Rule 1157(c)(1) )

. “Related operations,” which are also subject to the rule, are defined as “operations that use sand, gravel, cement, crushed ston e, and/or quarried rocks in their products, or crush miscellaneous base, and inert landfills that handle construction/demolition
debris.” Pet’rs ’ RJN, Exhibit G (Rule 1157(c)( 3 4 ))

.

4 Rule 1157 applies to Chandler Aggregates, Whitewater Rock & Supply, Oldcastle Westile, Inc., Ortiz Enterprises, Inc ., CDE Resources, Inc., and Elsinore Ready

- Mix Co. Inc. PER000028

- 32. Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 26 of 5118 Matthews International Corp. is a foundry that produces brass moldings

. SER0071

- 73. A s a brass foundry, Matthews International Corp. is not in the business of aggregat e operations or related operations per Rule 1157 because the foundry does not produce nor use sand, gravel, crushed stone or quarried rocks in its product s
. SER0071

- 88. Accordingly, there is no need to surplus

- adjust the 7,491 lbs/year of PM 10 credits fr o m Matthews International Corp. pursuant to
Rule 1157. Even at the extreme, if every offset from each of the six facilities were completely subtracted from the AB 1318 T racking S ystem (instead of performing
the required downward adjustment for the offse ts that are no longer surplus so that a percentage of the offset s would remain) , there would still be more than enough offsets to accommodate the Sentinel Project. The AB 1318 T rackin g S ystem currently contains 137,799 lbs/year of PM 10 emission credits , whil e t he Sentinel Project only requires 118,120 lbs/year of PM 10 . PER000026 , 32

. Therefore, 127,575 lbs/year of PM 10 will remain if the emission reductions (10,224 lbs/year of
PM 10 ) from the following facilities subject to Rule 1157 and identified by
Petiti oners are subtracted in their entirety: 2,907 lbs/year of PM 10 (Chandler Aggregates), 4,836 lbs/year of PM 10 (Whitewater Rock & Supply Co.), 1,962 lbs/year of PM 10 (Oldcastle Westile, Inc.), 464 lbs/year of PM 10 (Ortiz Enterprises Inc.), 28 lbs/year of PM 10 (CDE Resources Inc.), and 27 lbs/year of PM 10 (Elsinore Ready Mix)

. 5

5 As noted above, Petitioners incorrectly claim that some of the equipment at Elsinore Ready

- Mix and Oldcastle Westile is subject to Rule 1156. However, the PER000028

- 32. Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 27 of 5119 Thus, even after subtracting all of the emission credits from all of the facilities subject to Rule 1157, the total number of offsets in the AB 1318 Tracking System con tinue s to far exceed the amount required for the Sentinel Project. Accordingly, EPA’s misstatement in the final rulemaking that there were no new rules or standards that would require a surplus adjustment for aggregate and related sources “clearly had no bearing on” the validity of EPA’s determination that there
are sufficient offsets in the AB 1318 Tracking System for the Sentinel Project.
Cal. Wilderness Coal

. , 631 F.3d at 1090. Thus, EPA’s decision should be upheld.
B. Alleged Violations of the “ Quant ifiable ” Requirement Have No Bearing on EPA’s Determination that Sufficient Offset s Are Available for the Sentinel Project The federal requirement that offsets be “quantifiable” mandates that an accurate assessment is made of the quantity of emissions emit ted by a source prior to the modification or shutdown of the subject equipment. PER000021 ; 40 C.F.R. § 51.165(a)(3)(ii)(C)(1)(i)

. T he detailed emissions docume ntation contained in the record, and available to Petitioners, was entirely sufficient for EPA to use to quantify the emissions previously emitted by those facilities providing offsets to the AB 1318 Tracking System.

concrete batch equipment at Elsinore Ready

- Mix (1,290 lbs/year of PM 10 ) and the cement slurry system at Oldcastle Westile (146 lbs/year of PM 10 ) that Petitioners identify as being subject to Rule 1156 are in fact subject to Rule 1157

. PER000028

- 32. If the entirety of the offsets f rom these two pieces of equipment were also subtracted, the total number of offsets in the AB 1318 Track ing System would continue to exceed the amount needed for the Sentinel Project. Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 28 of 5120 i. EPA Appropriately Relied on Emissions Data f rom Either t he Previous One or Two Year Period f or Each Source of Offsets Without ci ting any authority to support their contention, Petitioners assert that EPA may not use only one year of emissions data to quantify offsets and, based on that unfounded assertion, argue that EPA’s determination that the emission reductions meet the quantif iable requirement is arbitrary and capricious.
Pet’rs’ Br. at 25

. In what appears to be an attempt to cherry

- pick the most favorable regulatory language, Petitioners completely ignore the relevant provision in Appendix S

– despite the fact that they cite Appendix S at several other points in
their brief

– and instead vaguely refer to the definition of “actual emissions,” an inapplicable term that has a separate 24

- month requirement. Pet’rs’ Br. at 4, 19,
25 ; 40 C.F.R. § 51.165(a)(1)(xxxv) (defining “actu al emissions” for the purpose of calculating emissions increases from modifications, not for calculating emission offsets)

. While neither the Clean Air Act nor EPA’s regulations define how to calculate actual emissions for purposes of providing emissions reductions, EPA’s
Emissions Offset I nterpretive Ruling, codified at 40 C.F.R. Part 51, Appendix S, clearly establishes that one year of emissions data may be used for purposes of calculating the baseline “ for deter mining credit for emission and air qualit y offsets. ” 40 C.F.R. Part 51, Appendix S (IV )( C ) ; s ee also 42 U.S.C. § 7503 (Section 173 of the Clean Air Act does not define how to calculate emissions for the provision of offsets); 40 C.F.R. § 51.165(a)(3) (EPA’s regulations regarding SIP requirements for emission credits also lacks a definition). Appendix S Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 29 of 5121 specifically states that “the baseline emissions for existing sources providing the offsets should be calculated using the actual annual operating hours for the previous one or two year period (or other appropriate period if warranted by cyclical business conditions).” 40 C.F.R. Part 51 , Appendix S (IV)(C).
Consistent with the requirement in Appendix S, the offset documentation for
all of the facilities in the A B 1318 Tracking System contain emi ssions data from either the previous one or two year period. 6

For a minor portion of the equipment, the data from the year immediately preceding the shutdown was not available. In these instances, a very conservative approach was taken and the baseline was determined by averaging the em issions from the twelve month period that occurred two years prior to the shutdown date (“year two”), with the emissions (which were assumed to be zero) from the twelve month period immediately preceding the shutdown (“year one”). In essence, the
offsets from all of the equipment that only had year two emissions data available

were cut in half. For example, to calculate the offsets from a turbine engine at Indeed, for the majority of the equipment, emissions from the two years prior to shutdown were averaged to determine the baseline emissions for purposes of crediting offsets. F or example , to calculate the offsets from a glass melting furnace at AAA Glass Corp. that shutdown in 2005, the emissions from 2004

- 2005 (609 lbs/year of PM 10 ) were averaged with the emissions from 2003

- 2004 (777 lbs/year of PM 10 ) to arrive at an
offset amount of 693 lbs /year of PM 10 . AQMD SER 0054

.

6 Contrary to the implication in Petitioners’ Opening Brief, there are n o facilities for which emissions reports are entirely lacking. Pet’rs’ Br. at 25. Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 30 of 5122 AES Huntington Beach that shutdown in 2002, the 2001

- 2002 emissions (conservatively assumed to be 0 lbs/year of PM 10 ) were averaged with the 2000

- 2001 emissions (588 lbs/year of PM 10 ) to arrive at an offset amount of 294 lbs/year
of PM 10 . AQMD SER0099

. This approach was taken to ensure that the reductions
were pro perly quantified and not over

- valued to account for a possible situation
where in the emissions for th ese particular facilities decreased to zero or near zero in the year immediately preceding shutdown. And, f or a very small fraction of the facilities (seven out of sixty

- two ) , 7

/// the
baseline e missions were calculated based on the emissions data from the year immediately preceding the shutdown date. PER000028

- 32. For these facilities, because the data from the twelve month period immediately preceding the shutdown was available, there was no p ossibility that the year one emissions over

estimated the actual emissions for the facility prior to shutdown. Because each of the three approaches used to determine the correct quantity of offsets in the AB 1318 Tracking System used either the previous o ne or two year period, consistent with EPA’s Emissions Offset Interpretative Ruling , the offset s were properly quantified.

7 These seven facilities are: Colorgraphics (40 lbs/yr of PM 10 ), Universal Die Casting Co. (393 lbs/yr of PM 10 ), Kraco Enterprises Inc. (206 lbs/yr of PM 10 ), CDE Resource s ( 204 lbs/yr of PM 10 ), US Postal Service (148 lbs/yr of PM 10 ), One Wilshire (16 lbs/yr of PM 10 ) and Whitewater Rock & Supply (4,8 36 lbs/yr of PM 10 ). PER000024

- 32. Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 31 of 5123 i i. Alleged Inaccuracies in the Documentation for a Single Facility i s Not Emblematic of the Tracking System a s a Whole and Doe s Not Affect EPA’s Ultimate Determination Finally, Petitioners claim that the documentation for the Little Company of Mary Hospital ( “ LCM ” ), a facility accounting for 388 lbs/year of PM 10 in the
AB 1318 Tracking System, is insufficient and de monstrates a pervasive lack of
offset documentation. PER 0 00072. First, simply alleging that one facility (with a very small number of emission reductions ) had insufficient documentation does not, as Petitioners claim, call into question all of the other facilities th at Petitioners
could not find error with. Pet’rs’ Br. at 2 2

- 26

. Shinseki , 556 U.S. at 545 (“the burden of showing that an error is harmful normally falls upon the party attacking the agency’s determination”)

. Second, the allegation that four LCM boilers generating 388 lbs/year of
PM 10 offsets have insufficient documentation falls far short of establishing that EPA might have reached a different result in this case

. PER000031. Assuming, as Petitioners claim, that the LCM offsets are not quantifiable, the re are still more than enough offsets for the Sentinel Project even if all of the LCM offsets are removed from the AB 1318 Tracking System. As discussed above, 127,575 lbs/year remain in the AB 1318 Tracking System if all of the emission reductions
from t he six facilities properly identified by Petitioners as being subject to Rule
1157 were removed from the T racking S ystem. If the additional 388 lbs/year of
PM 10 offsets generated from LCM are removed, 127,187 lbs/year in offsets will
still remain in the t racking system

– significantly more than the 118,120 lbs/year of
PM 10 required for the Sentinel Project. Thus, Petitioners have again failed to meet Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 32 of 5124 their burden of demonstrating that the AB 1318 Tracking System contains an
insufficient amount of valid of fsets for the Sentinel Project and that the alleged errors had any bearing whatsoever on the substance of the decision reached by
EPA. Cal. Wilderness Coal

. , 631 F.3d at 1090.
C. The District’s Internal Accounts Have a Positive Balance and , Therefore, the Transfer of Offsets to the AB 1318 Tracking System Was Proper Initially, Petitioners argue that there is no evidence that the District’s accounts have a positive balance. Pet’rs’ Br. at 35. They argue that evidence in
the record , such as the Annual Equi valency Determinations that the District performed , supports their claim that the balances are negative. P et’rs’ Br. at 35.
But , Petitioners fail to cite anything in those reports that supports their claim, and
indeed the balance of offsets in the intern al accounts is positive in the latest report cited (April 2, 2004) for both PM 10 and SO x . AQMD SER0039 , at Table 1 (PM 10 = 41.24 t ons p er d ay , and SO x = 18.76 t ons p er d ay )

. Moreover, in February 2011 , the District presented to its Governing Board an upd ated running balance , which
demonstrates that , as of the beginning of 2009 , there remained a positive balance
of 11.50 t ons per day of PM 10 and 2.11 tons per day of SO x , and that the balances were projected to remain positive through the end of 2011. Dist rict’s RJN, Exhibit
9 , at I

- 7

. 8

8 The balances in the 2011 report, which were included as an appendix to the Rule 1315 Staf f Report, include the use of minor source offsets, but Petitioners cannot identify any provision of state or federal law that prevents such use. District’s RJN, Exhibit 9. Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 33 of 5125 Petitioners incorrectly base their argument on the assum ption that state or federal law somehow prohibits the District’s use of minor source shutdowns until EPA approves the District’s Rule 1315

. 9 P et’rs’ Br. at 35

. Firs t , Petitioners fail to point out the relevant provisions of state law. 10

By the same token, SB 827, which authorizes the District to issue per mits for sources relying on the internal offset accounts starting in January 2010, contains These provisions make clear that the District is not only allowed, but is actually required to use minor source orphan shutdowns in its tracking system. AB 1318, which requires the D istrict to provide internal account offsets to the Sentinel power plant, specifically states that the District shall use the offset tracking system used prior to the adoption of Rule 1315
but , “ [ i ] n addition to using the prior offset tracking system, the d istrict shall also make use of any emission credits that have resulted from emission reductions and
shutdowns from minor sources since 1990.” Cal. Health & Saf ety Code § 40440.14(b)(2 ).

9 Rule 1315

– Federal New Source Review Tracking System, sets forth the requiremen ts for the operation of the District’s internal offset accounts. Following the readoption of Rule 1315 by the District’s Governing Board on February 4, 2011, the District submitted the Rule to EPA for approval as a SIP revision. EPA has not yet taken act ion on the SIP revision.

10 Petitioners argue that the state court previously ruled that the prior adoption of Rule 1315 in 2006 and 2007 violated state law (specifically the California Environmental Quality Act). Pet’rs’ Br. at 31. The state court has , however, since upheld the version of Rule 1315 that was readopted by the District’s Governing Board in February 2011 against a C alifornia Environmental Quality Act challenge, and Petitioners did not appeal. See Cal. Cmtys. Against Toxics v. So uth Coast A ir Quality Mgmt. Dist. , No. BS 110792 (Cal. Super. Ct., County of Los Angeles, Sept. 7, 2011) (unpublished decision). Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 34 of 5126 the same language, specifying that the District must use the tracking system in effect prior to the adoption of Rule 1315 until EPA approves a new tracking system, but also clearly stat es that : “ [i] n addition to using the prior offset tracking system, the district shall also make use of any emission credits that have resulted
from emission reductions and shutdowns from minor sources since 1990.” Cal.
Health & Safet y Code §40440.13(c)(2). Significantly, t he California Court of Appeal recently rejected Petitioners’ argument that AB 1318 and SB 827 were unconstitutional

. See Cal. Cmtys. Against Toxics v. S outh Coast Air Quality Mgmt.
Dist

. , No. B226692, 2011 Cal. App . Unpub. LEXIS 5322 (Cal. Ct. App. July 9, 2011). Furthermore, as a matter of federal law, the District may use minor source offsets in its internal accounts. Petitioners previously filed a “Petition” with EPA on this very issue on December 10, 2009

. P ER000006. The Petition asked EPA to “issue a written statement...informing the District that it will be in violation of the applicable State Implementation Plan...if the District issues new source review (“NSR”) permits that rely on the District’s internal ba nk of offsets. ” Id. ; AQMD
SER 0007

. Specifically, Petitioners argued that “ the District’s approved SIP does not allow the District to fund its internal bank with a category of offsets that are collected when “minor stationary sources’ cease or reduce ope rations without requesting emission reduction credits ....” AQMD SER 0007

- 8

. In r esponse to the Petition, the District explained that “ the existing , federally approved SIP allows it
to fund its internal bank with offsets that are collected from minor source orphan
shutdowns. ” AQMD SER 0008

. The EPA Administrator concluded that, “ [t] he Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 35 of 5127 Petition and the District’s Response persuade me that the existing SIP does not preclude the internal bank from operating and I deny the Petition

... .” Id.
Petitioners now seiz e upon this language to argue that just because the SIP does not “preclude” the use of minor source shutdowns does not mean that the SIP
allows such use. Pet’rs’ Br. at 34

- 35. Petitioners insist that EPA approval of the
revised Rule 1315 is a prerequisit e to the use of minor source shutdowns. Id. This argument misrepresents EPA’s position. EPA expressly reject ed Petitioners’ argument that EPA approval of the revised Rule 1315 is a prerequisite to use of minor source orphan shutdowns. AQMD SER 0018 ( “Th e EPA continues to encourage the District to submit Rule 1315 for adoption into the SIP to enhance transparency and reliability but not as a necessity to correct a deficiency in the existing SIP ”) (emphasis added). EPA made clear that it “ has consistently viewed minor orphan shutdowns as a legitimate source of offsets to fund the Dist rict’s
internal bank accounts... ” AQMD SER 0019

. Ultimately , EPA’s Petition Response expressly concluded that the existing SIP allows the use of minor source orphan shutdowns

. Id. ( “ B ecause the existing 1996 SIP allowed the District to collect and use minor source orphan shutdowns, the state legislation does not
constitute a SIP revision” ) (emphasis added). Thus, EPA agrees that the existing
SIP allows the use of minor source shutdowns. Finally, Petitioners argue that EPA’s Petition Response does not address the

same issue involved in this case. Pet’rs’ Br. at 34

- 35. However, t he Petition Response address es the specific issue involved here

– whether the internal accounts may include minor source offsets and thus whether the accounts have a Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 36 of 5128 positive balance. It is well established that the accounts , which currently include
minor source offsets in accordance with state and federal law, have a positive
balance.
D
. Alleged Viola tions of the “ Creditable ” Requirement Must Fail Because the Offsets in the AB 1318 Tracking System Are Explicitly Included i n the AQMP
i. Petitioners’ Argument is Based on the Wrong AQMP Petitioners allege that certain of the offsets are not creditable bec ause the equipment shutdown occurred prior to the end of 2002, whic h is the base year in the 2007 AQMP

. Pet’rs’ Br. at 27. As EPA has explained , the 2003 PM 10 SIP , rather than the 2007 AQMP, is the proper AQMP to look at for this rulemaking

. Respts’ Br. at 35

- 36. The most recently approved attainment demonstration for the
South Coast area and for the pollutant at issue in this case

– PM 10 – was adopted by the District in 2003 and approved by EPA in 2005. 11

11 Note that the only reason that SO x offsets are required for the Sentinel P roject is because SO x is a precursor to PM 10 . Respts’ Br. at 36 ; Approval and Promulgation o f [SIPs] for Air Quality Planning Purposes; California

– South
Coast and Coachella , 70 F ed. Reg. 69,081 (Nov. 14, 2005) (“EPA is taking final action to approve state implementation plan (SIP) revisions submitted by the State of California to provide for at tainment of the particulate matter (PM

- 10) national ambient air quality standards (NAAQS) in the Los Angeles

- South Coast Air Basin and the Coachella Valley Area...

. ”)

. Significantly, t he base year in the 2003 PM 10 SIP is 1997. See Proposed Approval and Pro mulgation of [SIPS] for Air Quality Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 37 of 5129 Planning Purposes; California

– SouthCoast and Coachella , 70 Fed. Reg. 43 ,663,
43 , 665 (July 28 , 2005).
N one of the offsets transferred to Sentinel have a shutdown date earlier than 1999, nor have Petitioners alleged th at there are any offsets transferred to Senti nel
with a shutdown date prior to 1999. PER000020; SER0015. Accordingly , Petitioners’ claim that the offsets are not creditable is erroneous because none of the offsets derive from shutdowns occurring before t he 1997 base year in the 2003
PM 10 SIP

. 12 Although EPA erroneously described the 2007 AQMP as the relevant document in the rulemaking, t he Court of Appeal s may uphold an agency action based on a reason different from that stated by the agency. An administr ative “order must be judged upon the grounds upon which action was based, unless the appellate court concludes that the decision already made...should properly be based on another ground within the power of the appellate court to formulate.”
Chae

- Sik Lee v. Kennedy , 294 F.2d 231, 234 (D.C. Cir. 196 1) (internal quotations omitted); s ee also Shea v. Director, Office of Worker s ’ Comp. Programs , 929 F.2d

12 Even t hou gh EPA has now approved the South Coast Air Basin attainment demonstration for PM 2.5 , which is part of the 2007 AQMP, the proper AQMP remains the one with a PM 10 attainment demonstration, which is the 2003 AQMP. See Approval of Air Quality Implementation P lans; California; South Coast; Attainment Plan for 1997 PM[2.5] Standards , 76 Fed. Reg. 69,928 (Nov. 9, 2011). PM 2.5 is not at issue here. The District’s PM 2.5 new source review rule, Rule 1325, does not require any offsets until the source has a potentia l to em it of 100 tons per year of PM 2.5 . District’s RJN, Exhib it 10 ( Rule 1325(a), (b)(5)). Sentinel’s required PM 10 offsets are 118,120 pounds per year , which is only approximately 59 tons per year (118,000 divided by 2,000). PER000026. Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 38 of 5130 736, 739 n.4 (D.C. Cir. 1991). The Ninth Circuit has also followed the principle
that a decision need not be judged on the grounds stated by the agency where the case involves a question of law. R y
. Labor Execs .’ Ass’n v. Interstate Commerce
Comm

. , 784 F. 2d 959, 969 (9th Cir. 1986). In the present case, the Court of Appeals may easily determine from the
propos ed and final rulemaking Federal Register notices and the Technical Support
Document that the proper attainment demonstration is the 2003 PM 10 SIP, which
contain s a 1997 base year. The determination of which attainment demonstration is proper is a question of law. And, t he factual evidence establishing that none of
the offsets transferred to the AB 1318 Tracking System derive from shutdowns occurring before 1999 is uncontroverted and is thus “ within the power of the appellate court to formulate

. ” Chae

- Sik Lee , 294 F. 3d at 234 ; PER00020 (the
emission reductions in the AB 1318 Tracking System were identified from reductions occurring between 1999 and 2008). Accordingly, there is no reason to remand to EPA to simply repeat the foregoing discussion. The Cour t should uphold the agency’s decision that the District complies with the regulation cited by Petitioners, even though it is on a different ground than the one cited by the
agency. While EPA’s brief indicates that it may conclude that the correct plan is t he
2003 PM 10 SIP , but that it is “not attempting to prejudge the issue , ” EPA makes clear, regardless of whether the proper plan is the 2003 PM 10 SIP or the 2007 AQMP, that t he offsets transferred to Sentinel meet EPA’s base year requirements. Respts’ Br. at 34

- 41. Th us , the rulemaking supports EPA’s determination that the Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 39 of 5131 credits in the AB 1318 Tracking System are “creditable” and there is no reason to
remand to EPA to reconsider the base year issue

. The District must therefore respectfully disagree with EPA regarding the proper outcome of this case. This court should uphold EPA’s decision in its entir ety without any need for remand

. i i. This Court Should Not Consider Petitioners’ Arguments Based on Specific Tables and Sentences in the 2007 AQMP and Alleg ed for the First Time in Their Opening Brief The District submits th e following discussion of the 2007 AQMP i n the
event the Court considers Petitioners’ detailed comments on the content of the 2007 AQMP. However, t he Court should not consider Petitioners ’ comments, since they were never made to the agency.
Court s should not consider arguments that were not “initially present[ed] to the agency during the rulemaking.” Appalachian Power Co. v. EPA , 251 F. 3d 1026, 1036 (D.C. Cir. 2001). As explained by th e court in Appalachian Power
Co

. , “[a]n objection must be mad e with sufficient specificity reasonably to alert the agency ” during the rulemaking, and “ [ g ] en eralized objections to agency action or objections raised at the wrong time or in the wrong docket w ill not do. ” Id

. (citations omitted) (emphasis added)

. Accordingly , “claims raised at the
administrative appeal and in the federal complaint must be so similar that the district court can ascertain that the agency was on no tice of, and had an opportunit y to consider and decide, the same claims now raised in federal court.” Silverton
Snowmobile Club v. U.S. Forest Serv

. , 433 F. 3d 772, 783 (10th Cir. 2006)

. Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 40 of 5132 In their brief, Petitioners argue for the first time that specific tables in the 2007 AQMP, App endix III, exclude pre

- base year offsets from the emissions inventory. Petitioners’ comment letter cursorily discusses the issue of pre

- base
year offsets and fails to pr ovide sufficient detail. Petitioners state: “A review of the 2007 AQMP reveals that t he emissions reductions pre

- dating 2002 have not been included in the emissions inventory and therefore violate 40 C.F.R. §51.165(a)(3)(C) ( 1)(ii).” SER0016. The citation s in the comment letter lack specificity, instead referring genera lly to the entire A QMP Appendix III , Appendix
V , and to part of the main volume. Id. In the proceedings before EPA, Petitioners never cited to the specific portions of Appendix III which they now claim support their argument. See Pet’r s ’ Br. at 28 ( citing Tables 2

- 11 and 2

- 12 of Appendix III to the AQMP, and specific sentences related thereto)

. In a similar situation, the Court of Appeals held that petitioners’ generic citation to “CAA Section 202” did not alert EPA that they were relying specifically on Section 202(b)( 1)(C), which they failed to cite in their comments. Motor & Equip. Mfrs. Ass’n. v. Nichols , 142 F.3d 44 9, 462 (D.C. Ci r. 1998). The Court held that the p etitioners ’ argument could not be raised in judicial review for the
first time. Id . Likewise, in th is case, Petitioners’ comment letter fails to provide any notice that they are relying on specific tables and sentences contained in Appendix III. SER00 15

- 16. Because Petitioners never made their specific argument to EPA, EPA can hardly be faulted for no t addressing in the rulemaking the specific sentences and tables that are cited for the first time in Petitioners ’ Opening Brief. Pet’r s ’ Br. at 28. Because Petitioners have deprived the Court of Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 41 of 5133 “the benefit of the agency’s expertise,” the Court should not consider Petitioners’ newly

- raised arguments. Motor & Equp. Mfrs. Ass’n , 142 F.3d at 462.
iii. Even if Considered, Petitioners’ Arguments Regarding the 2007 AQMP Must Fail Because They Misinterpret the Document Petitioners have lifted select sentence s and tables out of context to argue that the AQMP inventory “explicitly excluded” pre

- 2003 emission reductions. To support their contention, they cite an excerpt from the 2007 AQMP that states that
“the annual credits to the NSR account are sufficient fo r the debits [ so ] that there is no need to have debits from the pre

- 2002 credits. Therefore, no addition to the current baseline inventory is needed for this category.” SER 0121 , Pet’r s ’ Br. at 27

- 28. Petitioners misconstrue the AQMP and its explicit inc lusion of pre

- base year offsets in the plan’s growth projections

. As EPA has explained, the 2007 AQMP already includes pre

- base year offsets, to the extent they are expected to be needed, as grow th in Table 2

- 8 of Appendix III. SER0116; Respts’ Br. at 3 9

- 41. This is exactly what is required by EPA’s regulation codified at 40 C.F.R. § 51.165(a)(3)(ii)(C)(1)( ii )

. EPA has explained that its regulation , which allow s the use of pre

- base year offsets if they are explicitly included in the projected inventory , is consistent with its policy encouraging the use of “banked” ERCs as explained in EPA’s “General Preamble .” 72 Fed. Reg. 31 , 727 , 31 , 742 (June 8, 2007). The General Preamble states that such credits “must be treated as gr owth...to the extent that the S ta te expects that such
credits will be used...

. ” 57 Fed. Reg. 13 , 498, 13 , 508 (April 16, 1992). Therefore, Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 42 of 5134 if the emissions from pre

- base year shutdowns are included as growth in future year inventories, then they may be used as offsets. As noted by EPA, “[t ]here is no good rationale to support the removal of ERC[s] as a consequence to updating [the] inventory.” 72 Fed. Reg. at 31 , 741

. The District followed EPA’s recommended path by including the pre

- base year offsets in its future year inventory as growth.
As stated in the 2007 AQMP, “future year baseline inventories already include growth based on SCAG projections in the absence of NSR constraints.”
SER0123 ; see also Cal. Health & Safety Code §§ 40460, 40464 (noting that AQMP growth projections are based upon regional economic data provided by the
SCAG )

. In fact , all of the growth from new and modified sources included in the AQMP growth projections must necessarily be supported by offsets occurring before the base year of 2002 because offsets from facil ities that were not shut down until after the base year were assumed to still be operating and emitting during the base year. Therefore, those emissions from facilities that shut down after the base year are already included in the base year inventory. I f offsets are generated from sources that shut down after the base year, the most they can do is replace themselves; no growth would occur beyond what already existed in the base year. Accordingly, a ny offsets used to s u pport growth must necessarily be
pr e
- ba se year offsets . Thus, t he 2007 AQMP explicitly includ es pre
- base year
offsets in the future year inventory as growth. The maximum amount of growth is
shown in Ta ble 2

- 8

. SER 0116

. As a further check to make sure the growth projections were suffici ent to account for the possible future use of offsets, the District conducted an additional Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 43 of 5135 analysis looking at the past history of the use of private

- market ERCs and internal
account offsets. 13

Although EPA’s first opportunity to respond to Pe titioners’ specific comments on the 2007 AQMP was in their Respondents’ Brief, EPA’s response to Petitioners’ generic comment in the rulemaking was correct. EPA accurately described the District’s accounting for the use of offsets and its analysis of futu re demand for offsets that might go beyond the growth already accounted for in the The District compared the past use of private market ERCs wit h the past generation of ERCs

. SER 0121. T he District concluded that 3.2 tons per day of pre

- 2002 volatile organic compounds (“ VOC ”) would be needed, if demand and supply were the same as it had been in the past. But , this 3.2 tons per day is
less than t he projected growth for point sources as shown in Table 2

- 8

. SER 0116 (g rowth for VOC point sources is 47 tons per day minus 35 tons per day, or 12 tons per day)

. Therefore, no additions to the inventory would be needed beyond what
was alr eady include d as expected growth . The District similarly looked at past use of internal account offsets compared with past generation of such offsets and concluded that no additional pre

- 2002 ERCs would be needed

. SER 0122 (Table 2

- 11)

. Simply put , the past historical u sage was not as high as the projected growth. Therefore, no additions to the inventory would be needed because all reas onably expected use of pre

- base year offsets was already included in projected growth.

13 ERCs are issue d to facilities that shut down or permanently reduce d their emissions. District’s RJN, Exhibit 11 (Rule 1309). ERCs may be traded in the private market and ultimately submitted to the District to be used as offsets for future new or modified sources. Id

. Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 44 of 5136 future year inventories. 76 Fed. Reg. 22 , 038, 22 ,042 (April 20, 2011). Consistent with EPA’s explanation in the rulemaking , the 2007 AQMP concluded that no
“additions” to the existing inventories were needed because all potential use of pre

base year offsets was already included as growth. T he 2007 AQMP “accounts for growth from new and modified sources based on emissions offsets used and generated through AQMD’s New Sour ce Review Program.” SER 0119

. And , since the 2007 AQMP “future year baseline inventories already include emissions growth based on SCAG projections in the absence of NSR constraints, adding additional related emissions growth to the baseline inventories w ould be overstating potential growth.” SER 0123

. Should there be any remaining doubt that pre

- base year credits are clearly included in the 2007 AQMP , the District n otes that one ton per day of pre

- 2003
offsets for each pollutant is also “explicitly” incl u ded in the inventory as a “set
aside .” I d. (“ The 2007 AQMP “includes a set aside account of one ton per day for each criteria pollutant for the Offset Budget. This line item is to account for emissions that may not be included in the AQMP baseline inven tories.” ) This set
aside is expressly derived from pre

- base year offsets in the District’s internal account. The AQMP explains “ [t] he initial funding of the Offset Budget will be from expired minor source shutdown credits for the years 2000 through 2002.” Id.
T h ere are more than enough offsets set aside in the Offset Budget to account for
Sentinel’s demands

. PER000026 (Sentinel only needs 118,120 lbs/yr of PM 10 and 13,928 lbs/yr of SO x a nd the Offset Budget includes 73 0,000 lbs/yr for each pollutant ). Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 45 of 5137 Th erefore, even if the 2007 AQMP is the proper AQMP for the analysis of
pre
- base year offsets, Petitioners ’ claims regarding the “creditable” requirement
must fail

. And, i f the Court accepts the District’s position that the proper AQMP is

t he 2003 PM 10 SIP, the base year is 199 7 , and there are no pre

- base year offsets
transferred to Sentinel. Either way, the District has fully complied with EPA’ s regulation regarding pre

- base year offsets.
iv. T his Court Should Affirm EPA’s Decision Rather t han Remanding i t Without Vacature As discussed by EPA, a federal agency may request a remand, without confessing error, in order to reconsider its previous position. SKF USA Inc. v.
United States , 254 F. 3d. 1022, 1029 (Fed. Cir. 2001)

. However, i n such a case, the
“rev iewing court has discretion over whether to remand.” Id. We agree that remand would be appropriate where the agency has “doubts about the correctness
of its decision.” Id. Here, EPA has expressed no such doubts. To the contrary, EPA has made it quite clear that it continues to believe its decision was correct.
See Respts’ Br. at 34

- 41 ( “the ‘base year’ requirement of [EPA ’s regulation] would be satisfied when analyzed in reference to the 2003 AQMP” ( at 37) , and “ the requirem ents of [EPA ’s regulation] a re sa tisfied when the 2007 AQMP is
considered as the relevant attainment demonstration” ( at 41) )

. As noted above, th is Court should hold that Petitioners forfeited their specific arguments regarding the 2007 AQMP by failing to cite them in their

comments t o EPA. If th is C ourt agrees, P etitioners must lose on their claim, and there is no reason to remand. Moreover, EPA has already explained in its brief that Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 46 of 5138 if the proper plan is the 2007 AQMP, P etitioners must lose because the offsets comply with the regu lation

. Respts’ Br. at 37

- 41. EPA merely seeks a remand in order to consider yet another reason why Peti tioners should lose

– Petitioners likely cited the incorrect AQMP. While that very well may be true, it is not a sufficient basis for remanding the c ase, thus causing unwarranted delay which might potentially harm the Sentinel P roject. This Court may and should simply
affirm EPA’s deci si on in its entirety , noting that EPA now believes that the proper plan for comparison would likely be the 2003 PM 10 S IP, but that this does not in any way change the correctness of EPA’s decision. As demonstrated above, regardless of whether the proper plan for deriving the base year is the 2003 PM 10 SIP or the 2007 AQMP, the offsets transferred to Sentinel comply with t he EPA regulation codified at 40 C.F.R. §51.165(a)(3) (ii) (C) (1)(ii)

. ///
///
///
///
///
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/// Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 47 of 5139 CONCLUSION
For the foregoing reasons, the District respectfully requests that t he Court affirm EPA’s final rule in its entirety

.

DATED: January 27 , 201 2 KURT R. WIESE, General Counsel BARBARA BAIRD, District Counsel LAUREN B. NEVITT, Deputy District Counsel SOUTH COAST AIR QUALITY MANAGEMENT DISTRICT

s / Lauren B. Nevitt Lauren B. Nevitt, Deputy District Counsel South Coast Air Quality Management District 21865 Co pley Drive Diamond Bar, CA 91765 Phone: (909) 396

- 3458 Facsimile: (909) 396

- 2961 E

- mail: lnevitt@aqmd.gov Counsel for Respondent

- Intervenor South Coast Air Quality Management District Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 48 of 51STATEMENT OF RELATED CASES

Pursuant to Ninth Circuit Rule 28

- 2.6, Respondent

- Intervenor South Coast Air Quality Management District is not aware of any related cases currently pending before this C ourt.

DATED: January 27 , 2012

s/ Lauren B. Nevitt Lauren B. Nevitt, Deputy District Counsel South Coast Air Quality Management District 21865 Copley Drive Diamond Bar, CA 91765 Phone: (909) 396

- 3458 Facsimile: (909) 396

- 2961 E

- mail: lnevitt@aqmd.gov Counsel for Respondent

- Intervenor South Coast Air Qual ity Management District Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 49 of 51CERTIFICATE OF COMPLIANCE REGARDING WORD LIMITATION

Pursuant to Federal Rule of Appellate Procedure Rule 32(a)(7) (C) , I certify that the attached BRIEF OF RESPONDENT

- INTERVENOR SOUTH COAST AIR QUALITY MANAGEMENT DISTRICT is prop ortionately spaced, has a typeface of Times New Roman, 14 points, and contains 10, 3 21 words, including footnotes, but excluding this Certificate of Compliance, the Statement of Related Cases, the Corporation Disclosure Statement Under Rule 26.1, the Table of Authorities, the Table of Contents, and the Certificate of Service. I have relied on Microsoft Word’s word count feature for the calculation.

DATED: January 27 , 2012

s/ Lauren B. Nevitt Lauren B. Nevitt, Deputy District Counsel South Coast Air Quality Ma nagement District 21865 Copley Drive Diamond Bar, CA 91765 Phone: (909) 396

- 3458 Facsimile: (909) 396

- 2961 E

- mail: lnevitt@aqmd.gov Counsel for Res p ondent

- Intervenor South Coast Air Quality Manage ment District Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 50 of 51CERTIFICATE OF SERVICE I hereby certify that on January 27 , 2012 , I electronically filed the foregoing BRIEF OF RESPONDENT

- INTERVENOR SOUTH COAST AIR QUALITY MANAGEMENT DISTRICT with the Clerk of the Court for the United States Court of Ap peals for the Ninth Circuit by using the appellate CM/ECF system. I certify that all p articipants in the case are registered CM/ECF users and that service will be accomplished by the appellate CM/ECF system to the following participants

. Angela Johnson Meszaros Law Offices of Angela Johnson Meszaros 1107 Fair Oaks Avenue, Suite 246 South Pasadena, CA 91030 ajm_law@sbcglobal.net Attorney for Petitioner California Communities Against Toxics

Timothy R. Grabie l 15101 Tolman Drive Whittier, CA 90064 tgrabiel@defenseterre.org Shana Lazerow Communities for a Better Environment 1904 Franklin Street, Suite 600 Oakland, CA 94612 slazerow@cbecal.org Maya Golden

- Krasner 63 25 Pacific Boulevard, #300 Huntington Park, CA 90255 maya@cbecal.org Attorney for Petitioner California Communities Against Toxics

Attorney for Petitioner Communities for a Better Environment

Attorney for Petitioner Communities for a Better Enviro nment Amy J. Dona U.S. Department of Justice Environment & Natural Resources Div. P.O. Box 23986 Washington, D.C. 20026

- 3986 amy.dona@usdoj.gov Joshua Bledsoe Latham & Watkins LLP 650 Town Center Drive 20 th Floor Costa Mesa, CA 92626

- 1235 j os h ua.bledsoe@lw.com Attorneys for Respondent U.S. Environmental Protection Agency

Attorney for Intervenor CPV Sentinel

s

/ Lauren B Nevitt

Lauren B. Nevitt Case: 11-71127 01/27/2012 ID: 8048208 DktEntry: 52 Page: 51 of 51