No. -XXXX


# I n the Supreme Court of the United State s

**U NITED**  **S TATES**  **E NVIRONMENTAL**  **P ROTECTION**  **A GENCY** 
**, ET AL** 
**., PETITIONERS** 

v.

**EME H**  **OMER C**  **ITY G**  **ENERATION**
**, L.P.,**  **ET AL**

**.**

ON PETITION FOR A WRIT OF CERTIORAR I

TO THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

PETITION FOR A WRIT OF CERTIORARI

**B RENDA**  **M ALLORY** 

Acting General Counsel
**S ONJA**  **R ODMAN** 

Attorney Environmental Protection Agency Washington, D.C. 20460 **D ONALD**  **B. V**  **ERRILLI ,**  **J R** 

**.** Solicitor General

Counsel of Record

**I GNACIA**  **S. M**  **ORENO**

Assistant Attorney General
**M ALCOLM**  **L. S**  **TEWART**

Deputy Solicitor General
**J OSEPH**  **R. P**  **ALMORE**

Assistant to the Solicitor General
**J ON**  **M. L**  **IPSHULTZ N**  **ORMAN L.**  **R AVE** 
**, J**  **R**

**.**

Attorneys
Department of Justice Washington, D.C. 20530-0001 SupremeCtBriefs@usdoj.gov (202) 514-2217**(I)** QUESTIONS PRESENTED
**The Clean Air Act, 42 U.S.C. 7401** et seq. **(Act or CAA), requires the Environmental Protection Agency**  **(EPA) to establish National Ambient Air Quality Stand**  **ards (NAAQS) for particular pollutants at levels that**  **will protect the public health and welfare. 42 U.S.C. 7408, 7409. “[W]ithin 3 years”**  **of “promulgation of a [NAAQS],” each State must adopt a state implementa**  **tion plan (SIP) with “adequ ate provisions” that will,** 
inter alia **, “prohibit[]” pollution that will “contribute**  **significantly” to other States ’ inability to meet, or main**  **tain compliance with, the N AAQS. 42 U.S.C. 7410(a)(1),**  **(2)(D)(i)(I). If a State fails to submit a SIP or submits**  **an inadequate one, the EPA must enter an order so finding. 42 U.S.C 7410(k). Af**  **ter the EPA does so, it “shall promulgate a [f]ederal**  **implementation plan” for that State within two year**  **s. 42 U.S.C. 7410(c)(1). The questions presented are as follows:**  **1. Whether the court of appe als lacked jurisdiction to**  **consider the challenges on which it granted relief. 2. Whether States are excused from adopting SIPs**  **prohibiting emissions that “con tribute significantly” to**  **air pollution problems in ot her States until after the** **EPA has adopted a rule quantifying each State’s inter state pollution obligations.**  **3. Whether the EPA permissibly interpreted the statutory term “contribute significantly” so as to define**  **each upwind State’s “significant” interstate air pollution contributions in light of the cost-effective emission re**  **ductions it can make to impr ove air quality in polluted**  **downwind areas, or whether the Act instead unambigu**  **ously requires the EPA to co nsider only each upwind**  **State’s physically proportion ate responsibility for each**  **downwind air quality problem. (II)**  PARTIES TO THE PROCEEDINGS
**Petitioners are the United States Environmental Protection Agency and Acti**  **ng EPA Administrator Rob ert Perciasepe.** **Respondents who were petitioners in the court of ap peals are: City of Ames, Iowa**  **; City of Springfield, Illi nois, Office of Public Utilit**  **ies, doing business as City Water, Light & Power; Louisi**  **ana Department of Envi ronmental Quality; Louisi**  **ana Public Service Commis sion; Mississippi Public Se**  **rvice Commission; Public Utility Commission of Texas;**  **Railroad Commission of Texas; State of Alabama; St**  **ate of Florida; State of Georgia; State of Indiana;**  **State of Kansas; State of Louisiana; State of Michigan; State of Nebraska; State**  **of Ohio; State of Oklahoma ; State of South Carolina;**  **State of Texas; State of Virginia; State of Wisconsin; Texas Commission on Environmental Quality; Texas**  **General Land Office; AEP Texas North Co; Alabama Power Co.; American Coal Co**  **.; American Energy Corp.; Appalachian Power Co.; ARIPPA; Big Brown Lignite**  **Company LLC; Big Brown Power Company LLC; Co**  **lumbus Southern Power Co.; Consolidated Edison Com**  **pany of New York, Inc.; CP I USA North Carolina LLC;**  **Dairyland Power Cooperat ive; DTE Stoneman, LLC;**  **East Kentucky Power Coop erative, Inc.; EME Homer**  **City Generation, LP.; Enter gy Corp.; Environmental**  **Committee of the Florida Electric Power Coordinating Group, Inc.; Environmental Energy Alliance of New**  **York, LLC; GenOn Energy, Inc.; Georgia Power Co.; Gulf Power Co.; Indiana Mi**  **chigan Power Co.; Interna**
**tional Brotherhood of Elec trical Workers, AFL-CIO;**  **Kansas City Board of Public Utilities, Unified Govern**  **ment of Wyandotte County, Kansas City, Kansas; Kan**  **sas Gas and Electric Co.; Ke namerican Resources, Inc.;**  **Kentucky Power Co.; Lafaye tte Utilities System; Loui-** **III siana Chemical Association;**  **Luminant Big Brown Min ing Company LLC; Luminant Energy Company LLC;** **Luminant Generation Company LLC; Luminant Hold ing Company LLC; Luminant Mining Company LLC;**  **Midwest Food Processors Association; Midwest Ozone Group; Mississippi Power Co**  **.; Municipal Electric Au thority of Georgia; Murray Energy Corp.; National**  **Mining Association; National Rural Electric Cooperative**  **Association; Northe rn States Power Co. (a Minnesota**  **corporation); Oak Grove Management Company LLC; Ohio Power Co.; Ohio Valley**  **Coal Co.; Ohio American Energy, Inc.; Peabody Energy Corp.; Public Service**  **Company of Oklahoma; Sa ndow Power Company LLC;**  **South Mississippi Electric Power Ass’n; Southern Com**  **pany Services, Inc.; Southe rn Power Co.; Southwestern**  **Electric Power Co.; Southwes tern Public Service Co.;**  **Sunbury Generation LP; Su nflower Electric Power**  **Corp.; Utility Air Regulatory Group; United Mine Workers of America; Utah American Energy, Inc.;**  **Westar Energy, Inc.; Wester n Farmers Electric Coop**  **erative; Wisconsin Cast Metals Association; Wisconsin Electric Power Co.; Wisconsi**  **n Paper Council, Inc.; Wis consin Manufacturers and Commerce; Wisconsin Public**  **Service Corp. Respondents who were interve**  **nors in support of the court of appeals petitioners**  **are: San Miguel Electric Cooperative; City of New**  **York (Nos. 11-1388 and 11- 1395 only); State of New**  **York (Nos. 11-1388 and 11-1395 only).**  **Respondents who were interve nors in support of the**  **court of appeals re spondents are: American Lung Asso** **ciation; Calpine Corporation; Clean Air Council; Envi ronmental Defense Fund; Exelon Corporation; Natural**  **Resources Defense Council; Public Service Enterprise Group, Inc.; Sierra Club; City of Bridgeport, Connecti-** **IV cut; City of Chicago; City**  **of New York (all but Nos. 11- 1388 and 11-1395); City of Phil**  **adelphia; Mayor and City Council of Baltimore; State of Connecticut; State of**  **Delaware; District of Columbia; State of Illinois; State of Maryland; Commonwealth of Massachusetts; State of**  **New York (all but Nos. 11-1388 and 11-1395); State of** **North Carolina; State of Rhode Island; State of Ver**

**mont. (V)**  TABLE OF CONTENTS
**Page**

**Opinions below ................................................................................ 1** 
**Jurisdiction ...................................................................................... 1 Statutory provisio**  **ns involved ....................................................... 2**
**Statement ......................................................................................... 2 Reasons for granting**  **the petition ............................................... 11 A. The court of appeals both exceeded its**  **jurisdiction and erred on the merits by effectively invalidating**  **prior SIP orders ......................... 12 B. The court of appeals**  **erred in adjudicating unpreserved challenges to**  **the EPA’s “significant contribution” analysis, and in failing to defer**  **to the agency’s reasonable interpretation of ambiguous statutory terms ............................................... 18**  **C. The court of appeals’ decision will seriously disrupt the EPA’s implementation of the CAA,**  **and it threatens serious harm to the public health ........ 28**
**Conclusion ...................................................................................... 32**

TABLE OF AUTHORITIES

**Cases:**

Barnhart **v.** Sigmon Coal Co **., 534 U.S. 438 (2002) ............. 16**

Chevron U.S.A. Inc. **v.** NRDC, Inc., **467 U.S. 837**

**(1984) ................................................................................ 21, 24**

DOT **v.** Public Citizen **, 541 U.S. 752 (2004) ......................... 19** Entergy Corp. **v.** Riverkeeper, Inc **., 556 U.S. 208**

**(2009) ...................................................................................... 25** McCarthy **v.** Madigan **, 503 U.S. 140 (1992) ......................... 19** Michigan **v.** EPA **, 213 F.3d 663 (D.C. Cir. 2000),**

**cert. denied, 532 U.S. 903, and 532 U.S. 904 (2001) ........................................................................ 4, 9, 21, 24** 

National Cable & Telecomms. Ass’n **v.** Gulf Power

Co., **534 U.S. 327 (2002) ........................................................ 24 VI** 

**Cases—Continued: Page**

North Carolina **v.** EPA **(D.C. Cir.):**
**531 F.3d 896 (2008) ................................................. 5, 10, 21**
**550 F.3d 1176 (2008) ........................................................... 5** Vermont Yankee Nuclear Power Corp. **v.** NRDC

**,**

Inc. **, 435 U.S. 519 (1978) ...................................................... 19**

Whitman **v.** American Trucking Ass’ns **, 531 U.S. 457**

**(2001) ...................................................................................... 25**

**Statutes:**

**Clean Air Act, 42 U.S.C. 7401** et seq.

**...........................** passim

**42 U.S.C. 7408 ...................................................................... 2**

**42 U.S.C. 7409 ...................................................................... 2**
**42 U.S.C. 7410(a) ............................................................... 31**
**42 U.S.C. 7410(a)(1) .................................................... 15, 16**
**42 U.S.C. 7410(a)(2) .................................................... 15, 16**
**42 U.S.C. 7410(a)(2)(D)....................................................... 4**
**42 U.S.C. 7410(a)(2)(D)(i)(I) ...................................** passim **42 U.S.C. 7410(a)(2)(E) (Supp. II 1977) ........................... 3**
**42 U.S.C. 7410(a)(2)(K)(i) ................................................. 18**
**42 U.S.C. 7410(c) ............................................................... 15**
**42 U.S.C. 7410(c)(1) ......................................................... 2, 6**
**42 U.S.C. 7410(k) ............................................................... 15**

**42 U.S.C. 7426 .................................................................... 27**
**42 U.S.C. 7426(b) ............................................................... 27**
**42 U.S.C. 7511(a)(1) .......................................................... 17**
**42 U.S.C. 7607(b) ............................................................... 14**
**42 U.S.C. 7607(d)(7)(B) ......................................... 18, 19, 20**
**42 U.S.C. 7607(d)(10) ........................................................ 27**
**42 U.S.C. 1857c-5(a)(2)(E) (1970) ............................................ 2 VII** 

**Miscellaneous:**

**136 Cong. Rec. 6420 (1990),** reprinted in

**1 S. Comm. on Environment & Public Works,** A Legislative History of the Clean Air Act Amendments of 1990 **(1998) ............................................................... 3**

**EPA:** Air Quality Modeling Final Rule Technical Support Document **, Appendices D, E, and F (2011), http://www.epa.gov/airtransport/pdfs/**  **AQModeling.pdf ............................................................ 9**

Clean Air Markets **(2010), http://www.epa.gov/ airmarkets/progsregs/index.html ............................... 5**  **63 Fed. Reg. 57,356 (Oct. 27, 1998) ......................................... 5 69 Fed. Reg. (Jan. 30, 2004):** 
**p. 4566 ................................................................................... 8**
**p. 4575 ................................................................................... 8 70 Fed. Reg. 25,162 (May 12, 2005) ......................................... 5**  **76 Fed. Reg. (July 20, 2011):**
**p. 43,175 .............................................................................. 14**
**p. 43,177 .............................................................................. 14 77 Fed. Reg. 1027 (Jan. 9, 2012) ............................................ 18**  **78 Fed. Reg. 3086 (Jan. 15, 2013) ............................................ 6 H.R. Rep. No. 294, 95th Cong., 1st Sess. (1977),**  reprinted in **4 S. Comm. on Environment & Public Works,**  A Legislative History of the Clean Air Amendments of 1977 **(1978) .................................................. 3 S. Rep. No. 127, 95th Cong., 1st Sess. (1977),**  reprinted in **3 S. Comm. on Environment & Public Works,**A Legislative History of the Clean Air Amendments of 1977 **(1978) ............................................................... 3 VIII** 

**Miscellaneous—Continued: Page**

**S. Rep. No. 228, 101st Cong., 1st Sess. (1989),**

reprinted in **5 S. Comm. on Environment & Public Works,**  A Legislative History of the Clean Air Act Amendments of 1990 **(1998) ........................ 3 (1)**  

# I n the Supreme Court of the United State s

**No. X- XX** 

**U NITED**  **S TATES**  **E NVIRONMENTAL**  **P ROTECTION**  **A GENCY** 
**, ET AL** 
**., PETITIONERS** 

v.

**EME H**  **OMER C**  **ITY G**  **ENERATION**
**, L.P.,**  **ET AL**

**.**

ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

PETITION FOR A WRIT OF CERTIORARI

**The Solicitor General, on be half of the United States**  **Environmental Protection Agency (EPA) and the Acting Administrator of the EPA, re**  **spectfully petitions for a writ of certiorari to review the judgment of the United**  **States Court of Appeals for the District of Columbia**
**Circuit in this case.**

OPINIONS BELOW **The opinion of the co urt of appeals (App.,**  infra **, 1a 116a) is reported at 696 F.3d**  **7. The final rule of the EPA (App. 117a-1458a) is reported at 76 Fed. Reg.**  **48,208.**

JURISDICTION **The judgment of the court of appeals was entered on August 21, 2012. Petitions fo**  **r rehearing were denied on January 24, 2013 (App. 1459a-1462a).**  **The jurisdiction of**
**this Court is invoked under 28 U.S.C. 1254(1).** **2**

STATUTORY PROVISIONS INVOLVED **Pertinent statutory provisions are set forth in the appendix to this peti**  **tion. App. 1463a-1498a.**

STATEMENT **1. a. The Clean Air Act (C AA, or the Act), 42 U.S.C.** 

**7401** et seq. **, creates a federal-state partnership to control air pollution in the**  **United States. The Act re quires the EPA to establis**  **h National Ambient Air Quality Standards (NAAQS) for particular pollutants at**  **levels that will protect the pu blic health and welfare.**  **42 U.S.C. 7408, 7409. The Act then obligates States to**  **adopt state implementation plans (SIPs) that,** inter alia

**, assure both that States**  **will meet the NAAQS within**
**their own borders and that th ey will not emit pollutants**  **in amounts that “contribute significantly” to other States’ NAAQS nonattainment**  **or inability to maintain compliance with NAAQS.**  **42 U.S.C. 7410(a)(2)(D)(i)(I). If the EPA finds that a State has failed to adopt a SIP**  **meeting these or other CAA requirements, the EPA “shall” issue a federal implementation plan (FIP) for**  **that State within two years of that finding. 42 U.S.C. 7410(c)(1).** 
**This case involves the in terstate component of these**  **SIP requirements, commonly referred to as the “good neighbor” provision. 42 U.S.**  **C. 7410(a)(2)(D)(i)(I). The original version of that provision required only that**  **SIPs include provisions for “intergovernmental coopera** 
**tion” to assure that emissi ons would not interfere with** 
**attainment or maintenanc e of the NAAQS in other**  **States. 42 U.S.C. 1857c-5(a)(2 )(E) (1970). Because this**  **“cooperation” approach prov ed ineffectual, Congress**  **amended the CAA in 1977 to requ ire, more directly, that**  **all SIPs contain provisions prohibiting emissions from particular stationary sources th**  **at “will * * * prevent”****3**

**attainment or maintenance of the NAAQS in downwind**  **States. 42 U.S.C. 7410(a)(2) (E) (Supp. II 1977). In**  **adding these (and related) new provisions in 1977, Con**  **gress recognized that upwind States had little incentive**  **to control pollution whose effe cts would be felt principal**  **ly in other States, and Congress made clear its intent that the burdens of air polluti**  **on control be shared more equitably among upwind and downwind States.**  **1 In 1990, Congress decided th**  **at even the strength ened interstate-pollution prov**  **ision in the CAA had been inadequate.**  **2 In particular, the EPA had found in sever-** 

**1 For example, a House report concluded that existing law was “an**  **inadequate answer to the problem of interstate air pollution.” H.R. Rep. No. 294, 95th Cong., 1st Sess. 330 (1977),**  reprinted in **4** A Legislative History of the Clean Air Amendments of 1977 **(1977 Legis. Hist.), at 2797 (1978). The report stressed that one of the**  **problems under the existing law was that its effectiveness depended largely on “prevention or abatement” by upwind States that in reality** 
**had little “incentive and need to act.”** Ibid. **Similarly, a Senate report criticized the lack of effective “interstate abatement proce**  **dures” and “interstate enforcement actions” under existing law, which it viewed as “resulting in**  **serious inequities among several States, where one State may have more stringent implementation**  **plan requirements than another State.” S. Rep. No. 127, 95th Cong.,**  **1st Sess. 41-42 (1977),** reprinted in **3 1977 Legis. Hist., at 1415. Accordingly, the new provisions were “intended to equalize the**  **positions of the States with respect to interstate pollution by making a source at least as responsible for polluting another State as it would**  **be for polluting its own State.”** Id. **at 1416.**

**2 See S. Rep. No. 228, 101st Cong., 1st Sess. 48 (1989),**  reprinted in

**5** A Legislative History of the Clean Air Act Amendments of 1990 **(1990 Legis. Hist.), at 8388 (1998); see also 136 Cong. Rec. 6420 (1990),**  reprinted in **1 1990 Legis. Hist., at 1106 (statement of Sen. Lautenberg) (“In New Jersey, the Department of Environmental**  **Protection says that on some days even if we shut down the entire State, we would be in violation of**  **some health standards because of pollution coming over from other States.”); S. Rep. No. 228, 101st** **4**

**al decisions that pollution contributions by particular upwind sources could not**  **be shown to have “pre vent[ed]” NAAQS attainment downwind. See**  Michigan

**v.** EPA **, 213 F.3d 663, 674 (D.C. Ci r. 2000) (per curiam)**  **(discussing this history), ce rt. denied, 532 U.S. 903, 904**  **(2001). For these reasons, Congre**  **ss in 1990 revised a num ber of provisions relating to interstate pollution**  **transport, including (as relevant here) 42 U.S.C. 7410(a)(2)(D). That amendment made the good neighbor**  **provision stronger and more flexible by extending its** **reach beyond a single stationary source to cover multi ple sources, and by requiring States to prohibit emis**  **sions that “contribute signif icantly” to downwind nonat** 
**tainment or maintenance problems, whether or not** 
**those emissions could be show n, on their own, to “pre**  **vent” attainment. See App.,** infra **, 25a n.14; 42 U.S.C. 7410(a)(2)(D)(i)(I). The good neighbor provision now**  **requires SIPs to contain measures “(i) prohibiting** *** * * any source or other type of emissions activity** **within the State from emitting any air pollutant in amounts which will—(I) contribute significantly to non**  **attainment in, or interfere with maintenance by, any other State with respect to any such national primary or**  **secondary [NAAQS].” 42 U.S. C. 7410(a)(2)(D)(i)(I); see**  **App.,** infra **, 8a (“To put it colloq uially, the good neigh**  **bor provision requires upwind States to bear responsi**  **bility for their fair share of the mess in downwind States.”).**  **b. Following enactment of the 1990 amendments, the EPA began a series of rulemakings to address the re**  **vised interstate pollution transport requirements. The**

**Cong., 1st Sess. 49 (1989),** reprinted in **5 1990 Legis. Hist., at 8389 (similar statement regarding New York City).** **5**

**first was the “NO**

**x SIP Call,” which in 1998 established a**  **cap-and-trade program 3**  **for nitrogen oxide (NO**

**x ) emis**  **sions to address ozone nonattainment. 63 Fed. Reg. 57,356 (Oct. 27, 1998). The NO** 

**x SIP Call was upheld by**  **the D.C. Circuit in most significant respects in** Michigan

**. In 2005, the EPA issued**  **the Clean Air Interstate Rule (CAIR), which extended the basic approach of the** 
**NO**

**x SIP Call to “reduce or eliminate the impact of up** 
**wind sources on out-of-state downwind nonattainment of**  **NAAQS for fine particulate matter (‘PM 2.5**  **’)” and ozone.**
North Carolina **v.** EPA **, 531 F.3d 896, 903 (D.C. Cir. 2008) (**  North Carolina **) (per curiam); see 70 Fed. Reg. 25,162 (May 12, 2005). CAIR was initially vacated by** 
**the D.C. Circuit in** North Carolina **. In a later decision on rehearing, however, the co**  **urt modified the remedy to remand without vacatur, thus**  **allowing the EPA to con tinue to administer CAIR pe**  **nding further rulemaking.**
North Carolina **v.** EPA **, 550 F.3d 1176 (D.C. Cir. 2008) (per curiam).** 
**c. The EPA rule at issue in this case is the Cross** 
**State Air Pollution Rule, commonly referred to as the**  **Transport Rule. App. 117a- 1458a. The Transport Rule** 

**3 In simple terms, a cap-and-trade program establishes an aggre**  **gate emission “cap” for each set of covered sources and provides**  **regulated entities significant flexib ility to determine how the cap is**  **met. Sources comply by holding allo wances equal to their emissions,**  **and they can purchase allowances fr om other sources that are able to**  **reduce their emissions less expensively. Allowances are traded much like other commodities. This give**  **s sources the flexibility to secure required emission reductions in the most feasible and least expensive**  **manner, while still assuring that the overall pollution-control targets**
**are met. General information about the EPA’s clean air markets programs can be found at EPA,**  Clean Air Markets **(2010), http:// www.epa.gov/airmarkets/progsregs/index.html.** **6**

**responded to the remand in** North Carolina **and ad dressed the emission of pollu**  **tants in 28 upwind States that significantly contribute**  **to downwind States’ prob lems attaining or maintain**  **ing the NAAQS for ozone and fine particulate matter (PM**  **2.5 ).**  **4 For each State subject**  **to the Transport Rule, the EPA had previously made a**  **finding (in separate administrative proceedings) that the**  **State either had failed to submit a SIP addressing the good neighbor requirement,**  **or had submitted an inade quate one, thus triggering**  **the statutory requirement for the EPA to promulgate a FIP within two years.**  **42 U.S.C. 7410(c)(1); see App. 171a-172a. In the Transport Rule, the EPA th**  **erefore promulgated FIPs**
**for those States.**
**d. While the NO**

**x SIP Call, CAIR, and the Transport** 
**Rule varied somewhat in th eir details, all three rules**  **were premised on the same basic framework, using a two-part analysis that cons**  **idered both air quality and cost factors. The first step**  **was the Screening Analysis, in which the EPA identified those States potentially**  **subject to the rule (pending further analysis). The**  **Screening Analysis used air quality modeling to deter** 
**mine whether each State’s emissions increased ambient**

**4 The Transport Rule actually addressed three distinct NAAQS:**  **(1) the 1997 PM 2.5**  **annual NAAQS; (2) the 2006 PM 2.5**  **daily NAAQS; and (3) the 1997 8-hour ozone NAAQS. App. 168a. Because the**  **differences in the EPA’s analysis for the two PM 2.5**  **NAAQS are largely irrelevant to the issues addressed in this petition, the petition**  **refers simply to the PM 2.5**  **NAAQS except as specifically noted. In 2008, the 8-hour ozone NAAQS was**  **revised to be somewhat more stringent,**  id. **at 169a, and in January 2013, the EPA revised its suite of PM NAAQS, making the annual PM**  **2.5 more stringent but retain**  **ing the same standard for daily PM 2.5**  **. 78 Fed. Reg. 3086 (Jan. 15, 2013). The Transport Rule**  **does not address either of these recently revised NAAQS.** **7**

**concentrations of pollutants by greater than a defined** 
**threshold level in at least one downwind area with a**  **NAAQS nonattainment or maintenance problem. App.**

**255a. In the second part of the**  **analysis (the Control Analy sis), the EPA established th**  **e emission-control obliga tions for each upwind State that had been made subject**  **to the rule by the Screening Analysis. The obligations of**  **each such State were defined by reference to the amount**
**of emission reductions that ca n be achieved in that State**  **at a specific cost threshold. The cost thresholds were**  **selected by evaluating how much emission control is necessary to address the up**  **wind component of down**
**wind nonattainment and mainten ance problems. In this**  **way, the agency considered both the air quality impacts**  **and the cost to the regulated community of increasingly stringent levels of emission**  **control. App. 316a-323a. EPA’s rationale for using th**  **is two-part approach is largely based on the nature**  **and technical complexity of the interstate pollution proble**  **m. For decades, air quali ty modeling has shown that ozone and PM**  **2.5 nonattain**  **ment and maintenance problems are caused by the** collective **contribution of NO**

**x and sulfur dioxide (SO**  **2 ) from**  **numerous upwind States to particular downwind areas,** 
**combined with local emission s from the affected down** 
**wind areas themselves. 5**  **Further complicating matters**

**5 The underlying chemical mech**  **anisms are complex but can be summarized in general terms as follows. In the case of ozone pollu**  **tion, emissions of NO**

**x and volatile organic compounds (VOCs) mix in** **the atmosphere in the presence of sunlight to form ozone. According ly, ozone nonattainment is primarily a seasonal, warm-weather prob** **lem. Because VOC emissions generally are local in nature, the inter state component of ozone pollution is due primarily to NO** 

**x emissions**  **that can be transported in the atmosphere over very long distances (hundreds of miles or**  **more). App. 185a-187a. Fine particulate mat- 8** 

**is the fact that many States that are upwind contribu**  **tors to pollution problems in other States also have NAAQS nonattainment and maintenance problems of**  **their own (** i.e. **, they are both “upwind” and “downwind”), and most upwind States cont**  **ribute, in varying degrees, to nonattainment and maintenance problems in many**  **downwind areas. In short, at least in the eastern half of the United States (which for demographic and meteoro**  **logical reasons is the portion of the country most affect**  **ed), the interstate pollution problem is best understood**  **as a dense, spaghetti-like matrix of overlapping up**  **wind/downwind “linkages” am ong many States, rather**  **than a neater and more limited set of linkages among just a few.**  **To illustrate these points more concretely, the EPA’s**  **air quality modeling for th e Transport Rule evaluated**  **2479 potential contribution linkages among 37 upwind** 
**States and 67 ozone and PM 2.5**  **downwind nonattainment**
**and maintenance areas. Of these linkages, 565 were**  **above the one-percent threshold for the rule’s Screening Analysis (88 for ozone and 477 for PM**  **2.5 ). For each** **downwind nonattainment and maintenance area, be tween 25 and 32 upwind States**  **contribute some amount of pollution, with between**  **five and 12 (and a mean of eight) being substantial enough to exceed the screening**  **threshold. For ozone, four out of 25 contributing States**  **are both upwind contributors and downwind receptors,** 

**ter (** i.e. **, PM 2.5**  **) can be emitted directly or formed secondarily in the atmosphere. The interstate air pollution component of PM**  **2.5 pollu**  **tion is primarily attributable to the formation of sulfates from SO 2**  **emissions from power plants and in dustrial facilities and nitrates** 
**from NO**

**x emissions from power plants, automobiles, and other com**  **bustion sources. These precursors, as well as the fine particles themselves, also can be transported long distances in the atmosphere.**  **69 Fed. Reg. 4566, 4575 (Jan. 30, 2004). 9** 

**while for PM 2.5**  **, this figure is nine out of 23. Many up wind States, especially those located in the industrial**  **Midwest, make downwind co ntributions exceeding the**  **screening threshold to a la rge number of downwind**  **areas. For example, Kentucky contributes above the**
**threshold to 40 out of 41 do wnwind receptor areas for**  **the daily PM 2.5**  **NAAQS, and to all 16 downwind recep** 
**tors for the annual PM 2.5**  **NAAQS. 6** 

**2. a. In** Michigan **, the D.C. Circuit reviewed the**
**NO**

**x SIP Call and upheld the EPA’s two-step analytical**  **approach. 213 F.3d at 677-680. The court held that the term “significant” (as used in the good neighbor provi**  **sion) is ambiguous, and that the EPA can permissibly**
**determine the amount of a St ate’s “significant” contribu**  **tion by reference to the amou nt of emissions reductions**  **achievable through applicatio n of “highly cost-effective”** 
**controls.** Id. **at 677-679. The court observed that “[t]he**  **term ‘significant’ does not in itself convey a thought that**  **significance should be measur ed in only one dimension—**  **here, in the petitioners’ view, health alone.”**  Id. **at 677. The EPA used the same basic analytical approach for**  **CAIR, which was the subject of the D.C. Circuit’s deci** 
**sion in** North Carolina **. Although the court of appeals ultimately remanded CAIR on**  **other grounds, the court**
**reaffirmed** Michigan **’s general acceptance of a cost effectiveness analysis to he**  **lp determine the amount of each State’s “significant” contribution, and it expressly** 

**6 The figures discussed in this pa**  **ragraph are derived from data in the EPA’s air quality modeling technical support document (Air** **Quality TSD) for the Transport Rule, which was part of the adminis trative record for the Rule. See EPA,**  Air Quality Modeling Final Rule Technical Support Document **, Appendices D, E, and F (2011), http://www.epa.gov/airtransport/pdfs/AQModeling.pdf.** **10**

**declined to disturb the agency’s basic two-step analyti cal approach.**  North Carolina **, 531 F.3d at 916-917.**
**b. In the order at issue he re, the EPA again used the**  **same basic analytical approa ch, but a divided panel of**  **the court of appeals rejected it. App.,**  infra **, 1a-116a. 7**  **The court of appeals concluded for three reasons that the Transport Rule was unambiguously foreclosed by**  **the good neighbor provision. First, the court found that** **the rule could theoretically result in a State being com pelled to reduce emissions**  **below the threshold level for determining whether that State was subject to the**  **Transport Rule. Second, the court believed that, where**  **multiple upwind States co ntribute to a common down** **wind nonattainment problem, the rule did not sufficient ly assure that upwind States**  **’ emission reduction obliga tions were proportional to**  **their share of modeled down wind contribution. Third,**  **the court concluded that the rule did not sufficiently assu**  **re that cumulative upwind State obligations would be no more than the minimum**  **amount necessary to enable affected downwind areas to**  **meet the NAAQS. App.,** infra **, 31a-41a. The court of appeals also held that the EPA lacked** **statutory authority to promulgate FIPs under the cir cumstances presented here. The EPA is required to** 

**7 To the extent that the EPA’s two-step regulatory approach for**  **the Transport Rule differed in any si gnificant way from that used in** 
**the NO**

**x SIP Call and CAIR, it was to place**  greater **emphasis on air quality factors. Most notable in this respect was the agency’s deci** 
**sion to create two different cost thresholds for SO 2**  **controls to apply to different groups of States depending on the severity of the associ** 
**ated downwind PM 2.5**  **nonattainment problems . See App. 314a, 316a**  **323a. Where the downwind problems were less severe, upwind States**  **were required only to make reduct ions available at $500 per ton, a**  **relatively low cost threshold compared to the $2000 per ton threshold**
**used in the NO**

**x SIP Call and CAIR.** **11**

**promulgate a FIP only when it has made a finding that a**  **State has breached its obligation to submit an adequate SIP in a timely fashion. In**  **the court’s view, no such state non-compliance had been**  **demonstrated because no State was obligated to submit a SIP addressing inter**  **state transport until the EPA had defined that State’s significant contribution to**  **nonattainment or interference with maintenance in other States. App.,**  infra **, 42a-61a. Judge Rogers dissented.**  **She concluded that the court did not have jurisdiction to decide either the**  **significant-contribution or FI P question. On the merits,** **she would have held that the Transport Rule was a per missible exercise of the EPA’s authority under the CAA.**  **App.,** infra **, 65a-116a; see** id. **at 114a (“The court ignores Congress’s limitations on the court’s jurisdiction and**  **decades of precedent strictly enforcing those limitations**  **and proceeds to do violence to the plain text**  **of the CAA and EPA’s permissible interp**  **retations of the CAA.”). “The result,” Judge Rogers concluded, “is the endorse**  **ment of a ‘maximum delay’ strategy for regulated enti** 
**ties.”** Ibid.

REASONS FOR GRANTING THE PETITION **The court of appeals commit ted a series of fundamen**  **tal errors that, if left un disturbed, will gravely under** 
**mine the EPA’s enforcement of the Clean Air Act. As Judge Rogers explained in dissent, the court should not**  **even have decided either ques tion presented. The court**  **of appeals’ determination that the EPA could not pass judgment on SIPs until it**  **had quantified States’ good neighbor obligations was, in substance, a collateral in**  **validation of separate orders not before the court. T**  **hose challenging the Transport Rule**  **likewise had waived any statutory objection to the ag**  **ency’s approach to “signifi- 12** 

**cant contribution” by failing to raise it in the adminis**  **trative proceedings. The court of appeals’ merits**  **holdings were likewise**
**erroneous. The court disr egarded mandatory statutory** 
**deadlines for States to adopt SIPs with good neighbor**  **provisions and for the EPA to issue FIPs when it finds** 
**that a State has failed to do so (or has done so inade**  **quately). The court then read several statutory com**  **mands of its own invention into the ambiguous term “significant contribution” an**  **d faulted the EPA for not complying with those directives.**  **If not corrected, the decisi on below will**  **have serious adverse consequences. Its**  **imposition of non-textual barriers to implementation of** **the good neighbor provi sion could delay by years the**  **ability of downwind States to comply with NAAQS, and co**  **uld in some cases make it impossible for those States**  **to meet statutory deadlines for doing so. Because the EPA had planned to use the**  **Transport Rule as a model fo r enforcement of additional**  **NAAQS, the court’s decision also creates serious uncer** **tainty about implementation of other CAA require ments. Most fundamentally,**  **the court of appeals’ errors will seriously impede the EP**  **A’s ability to deal with a grave public health problem. The petition for a writ of**  **certiorari should be granted.**

A. The Court Of Appeals Both Exceeded Its Jurisdiction
And Erred On The Merits By Effectively Invalidating

Prior SIP Orders **1. In June 2010 and July 2011 (before the Transport Rule had calculated any State’s good neighbor obliga**  **tions), EPA issued final orde rs finding that 29 States** 
**and territories had failed to satisfy their statutory obli**  **gation to submit SIPs with good neighbor provisions for** 
**the 2006 24-hour PM 2.5**  **NAAQS. App.,** infra **, 71a-73a & 13** 

**n.2 (Rogers, J., dissenting). No party sought judicial**
**review of those orders.** Id. **at 73a (Rogers, J., dissent ing). Also in July 2011,**  **EPA issued separate final or ders disapproving as inad**  **equate the good neighbor provisions of SIPs submitted by ten other States. See** 
id. **at 73a & n.3 (Rogers, J., dissenting). Only three of those States sought judicial**  **review (two in the D.C. Circuit and one in the Sixth Circuit), and those petitions** 
**were not consolidated with the case below. See**  id. **at 73a-74a & n.3 (Rogers,**  **J., dissenting). The court of appeals in th**  **is case held that “EPA’s many SIP disapprovals and findings of failure to submit**  **share one problematic feature: EPA made all of those**  **findings** before **it told the States what emissions reduc tions their SIPs were supposed to achieve under the**  **good neighbor provision.” App.,** infra **, 49a. That state ment starkly demonstrates that the Court’s invalidation**  **of the Transport Rule rested on its conclusion that the** 
**EPA’s antecedent June 2010 an d July 2011 final orders** **were premature and therefore erroneous. But the prop er avenue for challenging the**  **prior orders was via direct petitions for review of thos**  **e orders, not through a later challenge to the Transport Ru**  **le. As Judge Rogers ex plained, “[i]f a State wished**  **to object that under section [7410(a)] it had no obligation**  **to include ‘good neighbor’ provisions in its SIP until EPA quantified its ‘significant** 
**contribution’ in emission re duction budgets, then the**  **CAA required it to do so at the time EPA found it had**  **not met its SIP ‘good neighbor’ obligation.”** Id **. at 75a. 8** 

**8 Indeed, in the 2011 order disappro**  **ving the good neighbor provi sion of Indiana’s SIP, EPA rejected**  **the very argument on which the court below later relied in invalidating the Transport Rule,**  i.e. **, that “EPA ‘should provide [the State] th**  **e opportunity to revise its [] SIP once the Transport Rule is completed.’**  **” App.,** infra **, 77a (Rogers, J., 14** 

**To obtain judicial review of EPA action under the CAA, a challenger must file a petition for review within**  **60 days after that action is published in the** Federal Register **. 42 U.S.C. 7607(b). Th e court of appeals there**  **fore exceeded its jurisdiction by permitting those chal**  **lenging the Transport Rule to collaterally attack sepa** 
**rate final orders for which th e time to seek review had**  **passed. See App.,** infra **, 65a-66a, 70a-82a (Rogers, J., dissenting). In determin**  **ing the propriety of the Transport Rule, the court be**  **low therefore was required to accept as valid the antecedent SIP disapprovals and**  **findings of failure to submit.**
**2. Even if the court of appeals had been authorized** 
**to review the June 2010 and July 2011 orders, the** 
**court’s determination that th e orders were invalid con**  **flicts with the text of the Act. See App.,** infra **, 83a-95a (Rogers, J., dissenting). The CAA’s “plain text and** 
**structure establish a clear chronology of federal and**  **State responsibilities” that do not include the extra**  **steps mandated by the court of appeals.** Id. **at 86a (Rogers, J., dissenting).**  **The CAA provides:**

**Each State shall, after reasonable notice and pub**  **lic hearings, adopt and submit to the Administrator,** within 3 years **(or such shorter period as the Admin istrator may prescribe)**  after the promulgation of a national primary ambient air quality standard **(or any revision thereof) unde**  **r section 7409 of this title for any air pollutant, a pl**  **an which provides for im plementation, maintenance,**  **and enforcement of such**

**dissenting) (quoting 76 Fed. Reg. 43,175, 43,177 (July 20, 2011)). Indiana did not file a petition for review to challenge that conclusion.** 
Id. **at 78a (Rogers, J., dissenting). 15** 

**primary standard in each air quality co**  **ntrol region (or portion thereof) within such State.** 

**42 U.S.C. 7410(a)(1) (emphases added). The Act further provides:** 

**Each such [state implementa** **tion] plan shall * * ***

**(D) contain adequa te provisions—** 

**(i) prohibiting, consistent with the provisions of this**  **subchapter, any source or ot her type of emissions ac**  **tivity 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 such nation al primary or secondary**  **ambient air qual ity standard.** 

**42 U.S.C 7410(a)(2). If a State fails to submit a SIP, or submits an inade**  **quate one, the EPA must make a finding of failure to**  **submit or disapprove the submission. 42 U.S.C 7410(k). The EPA is then required to promulgate a FIP within**  **two years of making such a fi nding or disapproval unless**  **the State has addressed the problem and the EPA has approved the SIP. 42 U.S.C.**  **7410(c). As noted above, for every State for whic**  **h the EPA promulgated a Transport Rule FIP, the agen**  **cy either had found that the State’s submission was overdue or had disapproved** 
**a submitted SIP. Under the plain terms of the statute,** 
**the EPA therefore had a mand atory duty to promulgate** 
**FIPs for those States.** Ibid

**. Notwithstanding the clear statutory mandate, the**  **court of appeals held that th e EPA lacked authority to**  **promulgate the FIPs because, in that court’s view, States have no obligation under the good neighbor pro-** **16**

**vision to submit SIPs addr essing interstate transport** 
**until after the EPA has define d their significant contri**  **bution. App.,** infra **, 42a-61a. The court did not find that the language of Section 7410(a)(1)—**  i.e **., that States “shall” submit a SIP within three years after the EPA**  **has promulgated a NAAQS—makes a State’s obligation to act contingent on its re**  **ceipt of guidance from the EPA. Rather, the court thought that “contextual and**  **structural factors” supported its approach.** Id. **at 54a. The court of appeals’ analys**  **is violated the core prin ciple of statutory interpretati**  **on that “courts must pre sume that a legislature says**  **in a statute what it means**
**and means in a statute wh at it says there.”**  Barnhart **v.** Sigmon Coal Co **., 534 U.S. 438, 461-462 (2002) (citation**  **omitted). The statutory la nguage here could not be**  **clearer. Under the Act, each State “** shall **” submit a SIP to the EPA within three year**  **s after the promulgation of a new or revised NAAQS, and “[e]ach such plan**  shall **” contain adequate provisions to control emissions from** **the State that significantly contribute to nonattain**
**ment or interfere with maintenance in another State. 42 U.S.C. 7410(a)(2) (emphases added). Nothing in the**  **CAA makes that obligation cont ingent on prio**  **r action by the EPA to define a particul**  **ar State’s contribution to downwind nonattainment. “The Act does not require**  **EPA to promulgate a rule or issue guidance regarding the specific requirements of**  **section [7410(a)(2)(D)(i)(I)] in advance of the SIP submittal deadline, much less**  **require EPA to promulgate such a rule a specific**
**amount of time before the SIP submittal deadline.” App. 175a.**  **The court of appeals’ inter pretation is also incon**  **sistent with the statute’s emph asis on timely attainment**  **of the NAAQS. The statute establishes specific dead-** **17**

**lines by which the NAAQS must be achieved, which can be as short as three years after**  **an area is designated as nonattainment. 42 U.S.C. 7511(**  **a)(1). As Congress rec ognized in enacting and then strengthening the inter**  **state transport provision of the Act, some States need**  **emission reductions from up wind States (in conjunction** 
**with emission reductions wi thin their own borders) in** 
**order to achieve attainment. Thus, the timely submis**  **sion of interstate transport SIPs and the consequent implementation of control measures are integral to the**  **ability of all States to achi eve the statutor**  **y deadlines for attainment. By effectively eliminating the statutory**  **deadline for the submission of transport SIPs, the court of appeals’ decision disrupts this integrated statutory**  **scheme for achieving attainment. By contrast, the EPA’s Transport Rule, which included statutorily** 
**mandated FIPs but stressed that States were free to**  **replace them by later submit ting SIPs to the EPA for**  **approval, see App. 669a-682a, was true to the statutory design.**  **Finally, the court of appeal s erred in asserting that**  **States are incapable of submitting transport SIPs until**
**the EPA has established their significant contribution.**  **The court cited nothing to su pport this assumption ex**  **cept statements by the EPA to the effect that determin**  **ing interstate contribution is complex. App.,**  infra **, 51a 52a. In implementing the**  **CAA, however, States rou** **tinely undertake technically complex air quality deter minations. SIPs addressing**  **in-state emissions are based on complex modeling to pr**  **edict how emissions of nu merous pollutants will interact with atmospheric con**  **ditions to create, often in areas far from the sources,** 
**concentrations of ozone and PM 2.5**  **. States are capable of producing the air qual**  **ity modeling and inform- 18** 

**ation needed to submit transport SIPs. See**  id. **at 89a 95a (Rogers, J. dissenti**  **ng); see also 42 U.S.C. 7410(a)(2)(K)(i) (States must “per**  **form[] * * * such air** **quality modeling as [EPA] may prescribe for the pur**  **pose of predicting the effect on ambient air quality of**  **any emissions of any air po llutant for which [EPA] has**  **established a [NAAQS].”). In addition, the necessary emissions information from all States is publicly availa**  **ble, see App.,**  infra **, 90a & n.12 (Rogers, J., dissenting), and States not covered by**  **CAIR or the Transport Rule have complied with the requ**  **irement to submit transport**
**SIPs.** E.g. **, 77 Fed. Reg. 1027 (Jan. 9, 2012) (EPA ap proval of Colorado’s interstate transport SIP).** 

B. The Court Of Appeals Erred In Adjudicating Unpreserved Challenges To The EPA’s “Significant Contribution” Analysis, And In Failing To Defer To The Agency’s
Reasonable Interpretation Of Ambiguous Statutory

Terms **The court of appeals also erred in invalidating the Transport Rule based on its conclusion that the EPA’s**  **“significant contribution” anal ysis was foreclosed by the**  **CAA. No statutory objection to that effect was made in the administrative proceedings**  **. In any event, the EPA’s analysis of that issue reflected a reasonable construction**  **of the CAA’s broad and ambiguous terms. 1. The CAA specifies that “[o]nly an objection to a**  **rule or procedure which was raised with reasonable specificity during the period fo**  **r public comment * * *** **may be raised during judi cial review.” 42 U.S.C.** **7607(d)(7)(B). That statutory requirement codifies long recognized exhaustion rules.**  **Enforcement of such rules helps to ensure that an agency will have the opportunity**  **to modify its proposed course of action if it concludes that particular objections ha**  **ve merit; enables the agen- 19** 

**cy to explain why it views particular objections as un meritorious if it reaches that conclusion; and promotes**  **better-informed judicial review by allowing the court to**  **focus on the agency’s actual responses to actual objec**  **tions. See,** e.g. **,** DOT **v.** Public Citizen **, 541 U.S. 752, 764-765 (2004);**  Vermont Yankee Nuclear Power Corp. **v.** NRDC, Inc. **, 435 U.S. 519, 553-554 (1978). “Exhaustion concerns apply with particul**  **ar force when,” as here,** **“the agency proceedings * * * allow the agency to** **apply its special expertise.”** McCarthy **v.** Madigan

**, 503 U.S. 140, 145 (1992).** 
**The court below failed to honor Section 7607(d)(7)(B)’s requirement**  **that objections to EPA action must be “raised with reasonable specificity” dur** **ing the administrative proceedings in order to be pre served for judicial review. See App.,**  infra **, 95a-110a (Rogers, J., dissen**  **ting); see also** id. **at 96a (noting that the waiver “question is not**  close **”). In concluding that the EPA’s methodology was inconsistent with the CAA,**  **the court of appeals expres sed concern that the EPA’s**  **Control Analysis could theoretically require a State to**
**reduce its emissions below th e air quality threshold used**  **for the Screening Analysis (** i.e. **, one percent of the appli cable NAAQS for at least on**  **e upwind-to-downwind link age).**  Id. **at 31a-38a. Such a result, the court believed,**
**would exceed the EPA’s statut ory authority to regulate**  **only “significant” contributions. See** ibid. **As Judge Rogers’s dissent thoroughly demonstrated, however, this statutory obje**  **ction was not asserted in any rulemaking comments. App.,**  infra **, 98a-101a. Be cause of that failure, there**  **was no evidence before the court of appeals that the fa**  **ctual scenario the court hy pothesized would ever actually occur.**  Id. **at 95a & n.15 (Rogers, J., dissenting). Likewise, the court of appeals’** **20**

**conclusion that the CAA requir ed a strictly proportional**  **approach to upwind States’ emission-reduction obliga**  **tions was not even advanced in the court of appeals by those challenging the Transport Rule.**  Id. **at 111a (Rog ers, J., dissenting). The cour**  **t nevertheless viewed those questions as properly before**  **it because concerns of this**
**sort had been raised in the years-old and separate**  CAIR **rulemaking, and because EP A had discussed (but pro**  **posed not to pursue) alternative regulatory approaches in the Transport Rule proposal.**  Id. **at 32a n.18. The**
**court therefore believed that the agency was sufficiently**  **“on notice that its disregard of the significance floor was**  **a potential legal infirmity in its approach.”** Ibid.**Under the plain language of the CAA’s judicial re view provision, however, th**  **e relevant question is not**
**whether the EPA was** aware **of a potential issue or ob**  **jection, but whether the objection asserted in court was “raised with reasonable specif**  **icity during the period for public comment” on the particular agency action that is**  **the subject of the petitioner ’s challenge.**  **42 U.S.C. 7607(d)(7)(B). The court of a**  **ppeals’ casual approach to**
**waiver and exhaustion issues would require agencies to**  **intuit unstated objections to proposed rules based on any issue of which a court might later find the agency**  **was “on notice.” In particular, the court’s approach would require agencies to guess whether objections**  **raised in one agency proceedi ng, but never asserted as a**  **ground for judicial review of the resulting agency action,**  **must be addressed again in a subsequent rulemaking even though no commenter has pressed them. The**  **court’s approach also permits courts to adjudicate very**  **complex regulatory issues without the benefit of agency**  **responses to focused rulemaki ng comments. Indeed, the**  **manner in which the court of appeals proceeded to ana- 21** 

**lyze the significant contribution claims in this case is a**  **striking illustration of this problem. See pp. 21-28,** infra

**. 2. On the merits, the court**  **of appeals erred in invali dating the EPA’s approach to**  **the “significant contribu tion” question.**  **Agencies are entitl ed to deference in construing stat**  **utes they administer.** Chevron U.S.A. Inc. **v.** NRDC,
Inc. **, 467 U.S. 837, 842-845 (1984) . If Congress has “di**  **rectly spoken to the precis e question at issue,” that**  **intent must be given effect.** Id. **at 842-843. However, “if the statute is silent or ambiguous with respect to the**  **specific issue, the question for the court is whether the**  **agency’s answer is based on a permissible construction** 
**of the statute.”** Id. **at 843. “The court need not conclude that the agency construction was the only one it permis**  **sibly could have adopted to uphold the construction, or**  **even the reading the court would have reached if the question initially had arisen in a judicial proceeding.”** 
Id. **at 843 n.11. In 2000, the D.C. Circuit he**  **ld that the term “signifi cant” is ambiguous as used in**  **the statutory phrase “con tribute significantly to**  **nonattainment,” 42 U.S.C. 7410(a)(2)(D)(i)(I).**  Michigan **v.** EPA **, 213 F.3d 663, 677- 680 (D.C. Cir. 2000), cert. denied, 532 U.S. 903, 904**  **(2001). The court further held that it was reasonable for**  **the EPA to determine the “sig nifican[ce]” of particular**  **state contributions by reference to the amount of highly**  **cost-effective pollution contro ls available in each upwind**  **State, and without regard to the amount of each State’s** 
**downwind contribution.** Ibid. **; see** North Carolina **v.** EPA **, 531 F.3d 896, 916-917 (D.C. Ci r. 2008) (declining to**  **disturb CAIR’s similar approach to significant contribu**  **tion). In this case, however, the court below changed 22** 

**course and held that the EP A’s approach violated the**  **CAA’s plain terms. a. In particular, the court of appeals perceived a**  **strict statutory requirement that the emission-reduction obligations for each upwind**  **State be “proportional” to**
**its modeled amount of down wind air quality contribu**  **tions. App.,** infra **, 31a-41a. The court did not make**
**clear whether it found these to be unambiguous statuto**  **ry requirements (** Chevron **step one) or merely a neces sary component of any “permi**  **ssible” construction of the statute (**  Chevron **step two). The co urt of appeals erred**  **in either event because Congress did not address these specific issues, and the EPA’**  **s approach is reasonable. The court of appeals’ prop**  **ortionality requirement is an unrealistically simplistic**  **response to a highly com plex problem. To illustrate,**  **first consider a downwind nonattainment area (Area A)**  **that receives relatively equal amounts of pollution contributions from three**  **upwind States, X, Y, and Z. A strict proportionality requirement would compel th**  **e EPA to identify the por tion of the problem attribut**  **able to each upwind State and then divide the upwind share among States X, Y,**  **and Z “in proportion to the si ze of their contributions to**  **the downwind State’s nonattainment.” App.,** infra **, 25a. In reality, however, inter**  **state pollution transport problems are far more complex. In the scenario de**  **scribed above, for example, assume that States Y and Z** **also contribute relatively higher amounts to nonattain ment in other areas (Areas B**  **and C, respectively), while State X contributes a relatively**  **small (but still “signifi cant”) amount to nonattainment in a fourth area (Area**  **D). These facts may require States Y and Z to make relatively larger emission reductions to address their** 
**contributions to Areas B and C. With respect to Area A,** **23**

**however, where States Y and Z constitute two-thirds of**  **the upwind contribution, the li kely result of such larger** 
**reductions would be some degree of incidental**  **“overcontrol,” as well as a lack of “proportionality” among States X, Y, and Z.**  **Similarly, because State X is a relatively small contributo**  **r to nonattainment in Area D, the relatively la**  **rger reductions it would have to make**  **to satisfy its share of the up wind contribution to Area A**  **would likely cause some lack of proportionality and some over-control with respect to Area D.** 
**As discussed abov e, further techni**  **cal complications and cost implications arise**  **out of other typical real world circumstances, such as**  **the fact that many down**
**wind nonattainment areas are also upwind contributors,**  **and that there is often a wide disparity among the States with regard to the**  **pollution-control investments they have already made (and**  **the consequent disparities in expenditures needed to**  **make additional emission reductions). Moreover, in a typical real-world case, a**  **downwind area will have far more than the three upwind**
**contributors used in the ab ove examples; these upwind**  **contributions will vary wide ly in degree; and each up**  **wind State will typically co ntribute in varying amounts** 
**to downwind nonattainment and maintenance problems**  **in numerous areas, not just one or two. Especially when viewed against this background,**  **Congress is unlikely to have intended—and it surely did not unambiguously determine**  **—to impose the court of appeals’ simplistic and inflexible quantitative propor**  **tionality restrictions on the EPA (and the States) in addressing this sprawling and complex problem. Rather**  **than prescribing a specific re gulatory solution, Congress**  **instead simply required each State’s SIP to prohibit emissions in amounts that “contribute significantly” to** **24**

**downwind nonattainment or maintenance problems,**  **42 U.S.C. 7410(a)(2)(D)(i)(I), without sp**  **ecifying any technical or policy factors th**  **at the EPA should take into account in enforcing this requirement. This is a classic**  **delegation of gap-filling authority warranting** Chevron**deference in a highly technical area that demands spe cialized expertise.**  Chevron **, 467 U.S. at 843;** National
Cable & Telecomms. Ass’n **v.** Gulf Power Co. **, 534 U.S. 327, 339 (2002).** 
**b. The EPA’s construction of the CAA to allow its mixed air-quality and cost-eff**  **ectiveness approach to the “contribute significantly” cr**  **iterion, unencumbered by the restrictions enunciated by**  **the court of appeals, is a**
**reasonable one. As the D. C. Circuit had previously**  **recognized, see** Michigan **, 213 F.3d at 677, the term “significant,” in and of itself**  **, does not dictate an exclu sive or even primary focus on**  **air quality impacts to the**
**exclusion of costs. Nor is such a focus required by the** 
**CAA’s references to the “amounts” of emissions that “contribute significantly,” as the court below appeared**  **to believe. See App.,** infra **, 22a-23a; 42 U.S.C. 7410(a)(2)(D)(i)(I).**  **To be sure, the statutory re ference to “amounts” can** 
**be read as an indication that Congress expected SIPs to** 
**address the interstate tran sport requirement through**  **quantitative emission limits ; but the Transport Rule did** 
**that. It is the term “cont ribute significantly” that**  **guides the** substance **of those limits, however, and that key term was not defined by Congress. While the EPA’s**  **approach may not be the** only **permissible way to define the “significant” amount of up**  **wind emissions, it is (for all the reasons discussed above)**  one **permissible ap proach, as it achieves the ai**  **r quality results desired by 25** 

**Congress in a simp ler, more feasible, and less costly** 
**manner than other alternatives. The EPA’s approach to significant contribution is al**  **so consistent with applicable guidance from this Court.**  **The Court has recently stre ssed that, except where**  **consideration of costs is expr essly precluded by statute,**  **the EPA and other agencies should be allowed to con**  **sider costs in construing broad qualitative standards similar to that at issue here,**  **in order to allow the agency to identify the most efficient and least burdensome**  **mechanisms to achieve a statutory goal. See** Entergy Corp. **v.** Riverkeeper, Inc **., 556 U.S. 208, 218 (2009) (con sidering a Clean Water Act “b**  **est technology available” standard and observing that, while the technology that** 
**achieves the maximum environmental benefit could be viewed as the “best,” the ter**  **m also could be used to describe the technology that is “**  most efficient[] **” from a cost-benefit perspective). And, citing**  Michigan **, this Court has specifically noted**  **the D.C. Circuit’s conclu sion that Section 7410(a)(2)(**  **D)(i)(I), unlike the Act’s NAAQS provisions, does**  not **preclude the consideration**
**of costs.** Whitman **v.** American Trucking Ass’ns

**, 531 U.S. 457, 469 n.1 (2001).**  **c. The court of appeals also erred in opin**  **ing that its proportionality requirement**  **was necessary to assure that upwind contributors were required to do no more** 
**than their “fair share” to address downwind nonattain**  **ment problems. App.,** infra **, 25a. To begin with, the CAA itself does not specify**  **any single most equitable and appropriate manner to divide emission-control re**  **sponsibility among multiple upwind and downwind con** 
**tributors. In the absence of any such statutory specifi**  **cation, the responsibility of balancing the relevant equi-** **26**

**ties is a quintessential po licy judgment on which the** 
**EPA should be afford ed deference.**  **In the D.C. Circuit’s view, each upwind contributor’s**
**“fair share” must be measur ed exclusively by its mod**  **eled air quality contribution to a single do**  **wnwind nonat tainment area, relative to ot**  **her upwind contributors to the same area. App.,**  infra **, 25a. The court of appeals even specified a proportionality**  formula **(illustrated with a hypothetical example involving three upwind** 
**contributors to a si ngle downwind area)**  **that it believed the statute required.**  Id. **at 25a-26a & n.15. The hypo**
**thetical foundation of this formula bears so little resem**  **blance to reality that it wo uld be difficult if not impossi**  **ble to apply even in the single -area context on which it is**  **premised. 9**  **More importantly, however, most States subject to the rule**  **are contributors to** multiple **down wind nonattainment and maintenance problems, with**  **their relative degree of air quality culpability for each** 

**9 For example, the court’s hypothetical was premised on an invent**  **ed and otherwise-unknown unit of measure—so-called NAAQS**
**“units”—which the court used to describe** both **the quantity of upwind and downwind emissions and the air quality of the affected downwind**  **area. The court depended on this unrealistic device to create an**
**artificial world in which its mathem atical construct could easily be**  **applied. App.,** infra, **26a (assuming that the NAAQS is “100 units,” the downwind area has air quality**  **of “150 units,” the downwind State contributes “90 units” and three upwind States contribute “20 units”**  **each). In reality, of course, emi ssions are measured in actual quanti**  **ties (** e.g. **, tons per year), and the effect of any given quantity of emis**  **sions on air quality and NAAQS attainment in downwind areas is highly variable and can be accurate**  **ly estimated only through sophis ticated computer modeling that takes into account geographic, mete**  **orological, and a host of other technical factors—not through simple**
**addition and subtraction as the court of appeals suggests. See note 5,** 

supra **(discussing formation of ozone and PM 2.5**  **from precursor NO**

**x and SO**  **2 emissions).** **27**

**upwind-to-downwind linkage varying considerably. The**  **court of appeals therefore wa s hopelessly unrealistic in**  **assuming that each State coul d be assigned a precise air**  **quality-based “fair share” with respect to** all **of its “sig nificant” linkages.**  **10 d. The court of appeals’ fair**  **-share policy rationale al**
**so does not take into accoun t a separate but highly rele**  **vant consideration, namely that different States (both**  **upwind and downwind) had ma de widely varying pollu** 
**tion-control investments at the time the Transport Rule**  **was promulgated. To illustra te, again consider the sim**  **ple hypothetical discussed abov e, where States X, Y, and**  **Z contribute equal amounts to downwind nonattainment**
**in Area A. Under the cour t of appeals’ proportional**  **approach, each of the three St ates must be required to**  **make one-third of the total needed “upwind” emission reductions with resp**  **ect to Area A. However, if States X and Y already have made su**  **bstantial pollution-control**

**10 The decision below also creates a possible conflict with another**  **CAA interstate transport provision, 42 U.S.C. 7426.** Inter alia

**, that provision allows a downwind State to petition the EPA to make**  **a finding that a specific source (or multiple sources)**  **in upwind States violate the prohibition on signif**  **icant contribution in Section 7410(a)(2)(D)(i)(I) with respect to the downwind State. 42 U.S.C.**  **7426(b). The statute requires the EP A to respond to any such peti** **tion within 60 days, while authorizing the EPA to extend that dead line for up to six months.**  Ibid. **; 42 U.S.C. 7607(d)(10). Under the court of appeals’ view of Section 7410(a)(2)(D)(i)(I), however, the**  **EPA would typically be unable to quantify the emissions of upwind sources that contribute significantly to NAAQS nonattainment or**  **maintenance problems unless it fi rst undertook a full-blown, multi** **state air quality modeling analysis that addressed the court’s propor tionality requirements with respect to all other potential contribu**  **tors. Such an onerous requirement is incompatible with Congress’s** **express expectation that the EPA could act, and act relatively quick ly, on Section 7426 petitions.** **28**

**investments, but State Z’s investments have to date been negligible, the EPA could**  **reasonably take that fact into account in defining each**  **State’s obligations, even if the effect of that approach**  **was to reduce State Z’s emis sions by somewhat more than one-third of the total**  **upwind contributions to Area A. This is especially true since, in the real world, Stat**  **e Z would likely contribute**  **to NAAQS nonattainment and maintenance problems in**  **other downwind areas as well, and might even have NAAQS nonattainment and maintenance problems of its**  **own. In this respect, the EPA’s cost-effectiveness ap**  **proach provides a rough but objective means of equita**  **bly distributing pollution-con trol burdens among a criss**  **crossing patchwork of upwi nd and downwind States.**  **e. Finally, the court of appeals expressed concern**  **that the Transport Rule “cou ld require upwind States to**  **reduce emissions by more th an the amount” of pollution**  **that subjected them to the rule in the first place. App.,** infra **, 34a-35a. That concern, however, was entirely**  **hypothetical. The court cited no basis in the record for**  **believing that such a scenario was a realistic possibility,** 

**see** id. **at 95a n.15 (Rogers, J. , dissenting), and because**  **no party advanced that argument in the administrative proceedings, the EP**  **A did not address it in the rulemak**  **ing. If such a scenario ever occurs, it will provide at most a basis for a targeted challenge by the affected**  **State; but it affords no so und justification for facial**  **invalidation of the Transport Rule.**

C. The Court Of Appeals’ Decision Will Seriously Disrupt
The EPA’s Implementation Of The CAA, And It Threatens Serious Harm To The Public Health **Review of the court of appe als’ decision is warranted** 
**because it creates a substa ntial impediment to the**  **EPA’s ability to implement the CAA. In particular, it 29** 

**hobbles the agency with resp ect to the aspect of the**  **Act’s administration (regulat ion of interstate pollution**  **that upwind States often have little incentive to police on**  **their own) where the need for a strong federal role is the** 
**most critical. 1. The court of appeals’ decision will substantially**  **delay emission reductions by upwind States that are necessary for downwind States to attain and maintain**  **the NAAQS. Indeed, the compliance dates in the Transport Rule were “aligned**  **with the attainment dead lines for the relevant NAAQS.**  **” App. 449a. That rule and its compliance dates are now vacated, but the at** 
**tainment deadlines remain.**
**If the decision below is no t corrected, the EPA will be**  **required to determine each State’s significant contribu** 
**tion in accordance with the new restrictions announced by the court of appeals. That task would presumably be**  **undertaken through notice and comment rulemaking**  **that would likely take at le ast two years, and that might**  **itself be subject to judicial review. The EPA would then be required to give each affected State an opportunity,**  **probably again for a period of years, to develop a strate**  **gy for implementing the re quirements in the State**  **through its SIP process. The resulting SIPs would then**
**be submitted to the EPA for re view. If a State fails to** **submit a SIP, or if the EPA disapproves a SIP submis sion, the EPA would promulgate a FIP, again through** 
**notice-and-comment rulemaki ng. Only then would the**  **EPA be back at the point it had previously reached by**  **promulgating the Transport Rule. Cumulatively, these**  **processes would like ly take many years to complete, and** **would no doubt generate time-consuming legal challeng es of their own. Under the court of appeals’ decision,**  **the time required for contro ls to be implemented in** **30**

**upwind States would extend far beyond that contem plated by the CAA, to the detriment of the public health** 
**in downwind States.**
**2. In addition to establis hing extra-textual procedur** **al obstacles for the EPA to surmount, the court of ap peals placed onerous and un**  **warranted restrictions on the manner in which the agency may permissibly identi**  **fy “significant” contributi ons to downwind nonattain** 
**ment. As discusse d above, given the multiple, overlap**  **ping linkages involved in the interstate pollution prob**  **lem, it may well be nearly im possible to meet the court’s**  **proportionality requirement wi th respect to all upwind**  **to-downwind linkages. To be sure, the court of ap**  **peals’ opinion acknowledg**
**es that the EPA has “some di scretion” in applying these** **requirements when it faces “truly unavoidable” tech nical complications, App.,**  infra, **28a, and that the agency has some additional degree of**  **discretion to consider costs (but, in the court of**  **appeals’ view, only to** reduce **regulatory burdens),** id. **at 27a. This may leave the EPA enough latitude to at least**  **attempt to craft a new regula tory approach that meets the court’s requirements.**  **Because the EPA’s ability to consider cost-effectiveness and the impact of collective contributions in crafting**  **such a rule would be vastly diminished, however, any**  **resulting rule would likely be much more costly and**  **burdensome in its application to certain States. There is** 
**no basis in the statute to re quire such an inflexible and** 
**unwise result. 3. The court of appeals’ decision also severely im**  **pedes the EPA’s efforts to combat the serious health**  **risks posed by fine particles and ozone. Fine particles**
**“are associated with a number of serious health effects including premature mortality,**  **aggravation of respirato- 31** 

**ry and cardiovascular disease, * * * lung disease,***** * * asthma attacks, and certain cardiovascular prob** **lems.” App. 165a; see** id. **at 165a-166a (discussing nega tive impact on environment and agriculture). Short**  **term exposure to ozone at su fficient concentrations “can**  **irritate the respiratory sy stem” and aggravate asthma,**  **while long-term exposure “can inflame and damage the lining of the lungs, which may lead to permanent chang**  **es in lung tissue and irreve rsible reductio**  **ns in lung**
**function.”** Id. **at 166a-167a; see** id. **at 167a (discussing negative impact on envi**  **ronment and agriculture). An EPA analysis on which the agency relied in issu**  **ing the Transport Rule estimated that “1 in 20 deaths in**
**the U.S. is attributable to PM 2.5**  **and ozone exposure.” App. 602a; see**  ibid. **(“This same analysis attributed almost 200,000 non-fatal hear**  **t attacks, 90,000 hospital admissions due to respiratory**  **or cardiovascular illness, 2.5 million cases of aggrava**  **ted asthma among children, and many other human health**  **impacts to exposure to these two air pollutants.”).**  **The EPA estimated that the Transport Rule would “annu**  **ally reduce between 13,000 and 34,000 PM**  **2.5 -related premature deaths, 15,000 non** **fatal heart attacks, 8,700 incidences of chronic bronchi tis, 8,500 hospital admissio**  **ns, and 400,000 cases of ag gravated asthma,” while the**  **rule’s “annual ozone related health benefits” would include “160,000 fewer days with**  **restricted activity levels , and 51,000 fewer days where** 
**children are absent from sc hool due to illnesses.”**  Id. **at 602a-603a. By vacating the**  **Transport Rule, while im peding any EPA effort to repl**  **ace it, the court of appeals’ decision will directly and ne**  **gatively affect the public**
**health. 4. Because the opinion below broadly interprets the**  **requirements of Section 7410(a) , it will affect the EPA’s** **32**

**ability to address transported pollution with respect to all NAAQS, not just those di**  **rectly at issue here. In deed, when it issued the Transport Rule, the agency**  **described the Rule as “a pr ecedent for quantifying up** 
**wind state emission reductio n responsibilities with re**  **spect to potential future NAAQS.” App. 138a; see**  id. **at 310a, 314a. Because the analysis that produced the**  **Transport Rule was intended to serve as a model for** 
**future efforts to limit interst ate pollution, its importance**  **transcends the rulemaking at issue here. Review is**
**warranted for that re ason as well.** 

CONCLUSION**The petition for a writ of certiorari should be grant**
**ed.**

**Respectfully submitted.**

**B RENDA**  **M ALLORY** 

Acting General Counsel
**S ONJA**  **R ODMAN** 

Attorney Environmental Protection Agency **D ONALD**  **B. V**  **ERRILLI ,**  **J R** 

**.** Solicitor General

**I GNACIA**  **S. M**  **ORENO**

Assistant Attorney General

**M ALCOLM**  **L. S**  **TEWART**

Deputy Solicitor General
**J OSEPH**  **R. P**  **ALMORE**

Assistant to the Solicitor General
**J ON**  **M. L**  **IPSHULTZ N**  **ORMAN L.**  **R AVE** 
**, J**  **R**

**.**

Attorneys

**M ARCH**  **2013 (1a)**  APPENDIX A

**UNITED STATES COURT OF APPEALS**

**FOR THE DISTRICT OF COLUMBIA CIRCUIT**

**No. 11-1302**

**EME H**  **OMER C**  **ITY G**  **ENERATION**
**, L.P.,**  **PETITIONER**

v.
**E NVIRONMENTAL**  **P ROTECTION**  **A GENCY** 
**, ET AL** 
**., RESPONDENTS** 

**S AN**  **M IGUEL**  **E LECTRIC**  **C OOPERATIVE** 
**, ET AL** 
**., INTERVENORS** 

**Consolidated with 11-1315, 11-1323, 11-1329, 11-1338,**  **11-1340, 11-1350, 11-1357, 11-1358, 11-1359, 11-1360,**  **11-1361, 11-1362, 11-1363, 11-1364, 11-1365, 11-1366,**  **11-1367, 11-1368, 11-1369, 11-1371, 11-1372, 11-1373,**  **11-1374, 11-1375, 11-1376, 11-1377, 11-1378, 11-1379,**  **11-1380, 11-1381, 11-1382, 11-1383, 11-1384, 11-1385,**  **11-1386, 11-1387, 11-1388, 11-1389, 11-1390, 11-1391,**  **11-1392, 11-1393, 11-1394, 11-1395** 

**A rgued: Apr. 13, 2012**  **Decided: Aug. 21, 2012 2a** 

On Petitions for Review of a Final Rule of the Environmental Protection Agency

**Before: R OGERS** 
**, G**  **RIFFITH , and K**  **AVANAUGH**
**,** Circuit Judges

**. Opinion for the Court filed by**  Circuit Judge **K AV** 

**** **ANAUGH , with whom**  Circuit Judge **G RIFFITH**  **joins.**

**Dissenting opinion filed by** Circuit Judge **R OGERS** 

**. K**  **AVANAUGH**
**,** Circuit Judge **: Some emissions of air pollutants affect air quality in the States where the**  **pollutants are emitted. Some emissions of air pollu** 
**tants travel across State boundaries and affect**  **air quality in downwind Stat es. To deal with that**  **complex regulatory challenge, Cong**  **ress did not au thorize EPA to simply adopt limits on emissions as**  **EPA deemed reasonable. Rather, Congress set up a federalism-based system of**  **air pollution control. Under this cooperative fede**  **ralism approach, both the**
**Federal Government and the States play significant** 
**roles. The Federal Gove rnment sets air quality**  **standards for pollutants. The States have the pri**  **mary responsibility for de termining how to meet those**  **standards and regulating sour ces within their borders.** 

**In addition, and of primary relevance here, upwind**  **States must prevent sources within their borders from**  **emitting federally determine d “amounts” of pollution** 
**that travel across State li nes and “contribute signifi**  **cantly” to a downwind Stat e’s “nonattainment” of fed-** **3a**

**eral air quality standards. That requirement is some**  **times called the “good neighbor” provision.**

**In August 2011, to implem ent the statutory good**  **neighbor requirement, EPA promulgated the rule at issue in this case, the Tran**  **sport Rule, also known as the Cross-State Air Pollution Rule. The Transport** 
**Rule defines emissions reduct ion responsibilities for 28**  **upwind States based on thos e States’ contributions to**  **downwind States’ air qual ity problems. The Rule**  **limits emissions from upwind States’ coal-and natural gas-fired power plants, amon**  **g other sources. Those power plants generate the majority of electricity used**  **in the United States, but they also emit pollutants that**  **affect air quality. The Tr ansport Rule targets two of**  **those pollutants, sulfur dioxide (SO 2**  **) and nitrogen oxides (NO** 

**x ).** 

**Various States, local governments, industry groups, and labor organizations have**  **petitioned for review of the Transport Rule. Although the facts here are**  **complicated, the legal principl es that govern this case**  **are straightforward: Absent a claim of constitutional**  **authority (and there is none here), executive agencies may exercise only**  **the authority conferred by statute, and agencies may not transg**  **ress statutory limits on that authority.** 

**Here, EPA’s Transport Rule exceeds the agency’s**  **statutory authority in tw o independent respects.** 
First **, the statutory text gran ts EPA authority to re**  **quire upwind States to redu ce only their own signifi** 
**cant contributions to a do wnwind State’s nonattain**  **ment. But under the Transp ort Rule, upwind States** **4a**

**may be required to reduce emissions by more than**  **their own significant cont ributions to a downwind**  **State’s nonattainment. EPA has used the good neighbor provision to impose massive emissions reduc**  **tion requirements on upwind States without regard to**  **the limits imposed by the statutory text. Whatever**  **its merits as a policy ma tter, EPA’s Transport Rule** 
**violates the statute.** Second **, the Clean Air Act af fords States the initial opportunity to implement re**  **ductions required by EPA under the good neighbor**  **provision. But here, when EPA quantified States’ good neighbor obligations, it did not allow the States** **the initial opportunity to implement the required re ductions with respect to sour**  **ces within their borders. Instead, EPA quantified Stat**  **es’ good neighbor obliga**
**tions and** simultaneously **set forth EPA-designed Federal Implementation Plans, or FIPs, to implement**  **those obligations at the St ate level. By doing so,**  **EPA departed from its consistent prior approach to implementing the good neighb**  **or provision and violated**
**the Act.**

**For each of those two in dependent reasons, EPA’s**  **Transport Rule violates fede ral law. Therefore, the** 
**Rule must be vacated.**

**In so ruling, we note that this Court has affirmed**
**numerous EPA clean air de cisions in recent years**  **when those agency decision s met relevant statutory**  **requirements and complied wi th statutory constraints.**  See, e.g.

**,** National Environmental Development Association’s Clean Air Project v. EPA **, No. 10-1252 (D.C. Cir. July 20, 2012);**  API v. EPA **, No. 10-1079 (D.C. Cir. 5a** 

**July 17, 2012);** ATK Launch Systems, Inc. v. EPA **, 669 F.3d 330 (D.C. Cir. 2012);**  NRDC v. EPA **, 661 F.3d 662 (D.C. Cir. 2011);**  Medical Waste Institute & Energy Recovery Council v. EPA **, 645 F.3d 420 (D.C. Cir. 2011);**  American Trucking Ass’ns v. EPA **, 600 F.3d 624 (D.C. Cir. 2010). In this**  **case, howeve r, we con** **clude that EPA has transgressed statutory bounda ries. Congress could well de**  **cide to alter the statute to permit or require EPA’s**  **preferred approach to the good neighbor issue. Unless and until Congress does**  **so, we must apply and enforce the statute as it’s now written. Our decision today should not be interpreted** 
**as a comment on the wisdom or policy merits of EPA’s** **Transport Rule. It is not our job to set environmen tal policy. Our limited but**  **important role is to inde pendently ensure that the agency stays within the**  **boundaries Congress has se t. EPA did not do so** 
**here. 1** 

**1 The dissent argues that peti**  **tioners’ challenge to EPA’s ap proach to the significant contributi**  **on issue is not properly before us because that issue was not sufficiently raised before the agency**  **in the rulemaking proceeding. We fundamentally disagree with the dissent’s reading of th**  **e record on that point.**

**The dissent also claims that petitioners’ challenge to EPA’s issu ance of the FIPs is not properly before us because the affected**  **States should have raised such a challenge earlier in the process. We again disagree. The dissent’s analysis on the FIPs issue con**  **flates (i) EPA’s rejection of certain States’ SIPs and (ii) EPA’s decision in the Transport Rule to set States’ “good neighbor” obli**  **gations and emissions budgets and simultaneously issue FIPs.**

**The States here are challenging only the latter issue, and they have done so in a timely fashion.**  **Indeed, they could not have done 6a** 

**I**

**A**

**Under the Clean Air Act, the Federal Government**  **sets air quality standards, but States retain the pri**  **mary responsibility (if the St ates want it) for choosing** 
**how to attain those standard s within their borders.** 
See Train v. NRDC **, 421 U.S. 60, 63-67 (1975);** Virginia v. EPA **, 108 F.3d 1397, 1406-10 (D.C. Cir. 1997).**
**The Act thus leaves it to th e individual States to de**  **termine, in the first instan ce, the particular restric**  **tions that will be imposed on particular emitters within**  **their borders. (If a State refuses to participate, the**  **Federal Government regulate s the sources directly.)** 

**To spell this out in more detail: The Clean Air Act** **charges EPA with setting National Ambient Air Qual ity Standards, or NAAQS, which prescribe the maxi**  **mum permissible levels of common pollutants in the** 
**ambient air.** See **42 U.S.C. § 7409(a)-(b). EPA must choose levels which, “allowing an adequate margin**  **of safety, are requisite to pr otect the public health.”**  **42 U.S.C. § 7409(b)(1).**

**After a lengthy process, the details of which are not relevant here, EPA design**  **ates “nonattainment” are as—that is, areas within ea**  **ch State where the level**

**so until EPA, in the Transport Ru le, simultaneously set the States’** 
**individual emissions bu dgets and issued FIPs.** 

**We will explain both points more below. Suffice it here to say that, much as we might like to do so, we respectfully do not believe**  **we can avoid the merits of this complex case, as the dissent urges. 7a** 

**of the pollutant exceeds the NAAQS.** See **42 U.S.C. § 7407(d).** 

**Once EPA sets a NAAQS and designates nonat**
**tainment areas within the Stat es, the lead role shifts to**  **the States. The States implement the NAAQS within their borders through State**  **Implementation Plans, or SIPs. (As the experienced re**  **ader knows, there is no shortage of acronyms in EP**  **A-land.) In their SIPs,**
**States choose which individu al sources within the State**  **must reduce emissions, an d by how much. For exam**  **ple, a State may decide to impose different emissions** 
**limits on individual coal-b urning power plants, natural**  **gas burning power plants, an d other sources of air pol**  **lution, such as factories, refineries, incinerators, and**  **agricultural activities.**

**States must submit SIPs to EPA within three years of each new or revised NAAQS.**  See **42 U.S.C. § 7410(a)(1). Section 110(a)(2) of the Act lists the re**  **quired elements of a SIP submission.**

**Section 110(a)(2)(D)(i)(I), the “good neighbor” pro** 
**vision at issue in this case , is one of the required ele** **ments of a SIP. The good neighbor provision re quires that SIPs:** 

**(D) contain adequa te provisions—** 

**(i) prohibiting, consistent with the provisions of this subchapter, any source**  **or other type of emis sions 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** **8a**

**State with respect to an y such national primary**  **or secondary ambient air quality standard.**

**. . . 42 U.S.C. § 7410(a)(2)(D).** 

**The good neighbor provision recognizes that emis sions “from ‘upwind’ regions may pollute ‘downwind’**  **regions.”** Appalachian Power Co. v. EPA **, 249 F.3d 1032, 1037 (D.C. Cir. 2001). To**  **put it colloquially, the good neighbor provision re**  **quires upwind States to bear responsibility for their fair share of the mess in**  **downwind States. By plac ing the good neighbor re**  **quirement in Section 110(a )(2), Congress established**  **the upwind State’s SIP as the vehicle for implementing the upwind State’s good ne**  **ighbor obligation. Of course, an upwind State will**  **not know what it needs to do to meet its good neighbor obligation until it learns**  **the level of air pollution in downwind St**  **ates, and fur**
**ther learns how much it is contributing to the problems**  **in the downwind States. EPA plays the critical role in gathering information abou**  **t air quality in the down wind States, calculating ea**  **ch upwind State’s good neighbor obligation, and tran**  **smitting that information to the upwind State. With**  **that information, the up**
**wind State can then determi ne how to meet its good**  **neighbor obligation in a new SIP or SIP revision.** See **42 U.S.C. § 7410(k)(5).**

**After EPA quantifies a Sta te’s good neighbor obli**  **gation, if a State does not timely submit an adequate SIP (or an adequate SIP revision) to take account of** **the good neighbor obligation as defined by EPA, re sponsibility shifts back to**  **the Federal Government. 9a** 

**Within two years of disapp roving a State’s SIP sub**  **mission or SIP revision, or determining that a State**
**has failed to submit a SI P, EPA must promulgate a**  **Federal Implementation Plan to implement the NAAQS within that State.**  See **42 U.S.C. § 7410(c)(1).**

**B**

**The good neighbor provision—and EPA’s attempts to implement it—are familiar**  **to this Court from past**

**cases.**

**In** Michigan v. EPA **, 213 F.3d 663 (D.C. Cir. 2000), we considered a challenge to EPA’s 1998 NO** 

**x Rule,**  **commonly referred to as the NO** 

**x SIP Call, which**  **quantified the good neighbor obligations**  **of 22 States with respect to the 1997 ozone NAAQS.**  See **63 Fed. Reg. 57,356, 57,358 (Oct. 27, 1998).** 

**The 1998 NO**

**x Rule did not defi**  **ne “amounts which will . . . contribute significantly to nonattain**  **ment” solely on the basis of downwind air quality im**  **pact, as one might have ex pected given the statutory**  **text. Rather, EPA also considered how much NO**

**x could be eliminated by sour**  **ces in each State if those sources installed “highly cost-effective” emissions** 
**controls.** See Michigan **, 213 F.3d at 675. On review, some States argued**  **that the statutory text required**
**EPA to order reductions ba sed on air quality impact**  **alone, not cost of reduction. But the** Michigan **Court found no “clear congressio**  **nal intent to preclude con**
**sideration of cost.”** Id. **at 677 (citation omitted). The Court thus held that EPA may “consider differ**  **ences in cutback costs, so that, after reduction of all** 
**that could be cost -effectively eliminated, any remain-** **10a**

**ing ‘contribution’ would not be considered ‘signifi**
**cant.’ ”**  Id. **at 677;** see also id. **at 677-79. In other words, EPA could use cost co**  **nsiderations to lower an upwind State’s obligations**  **under the good neighbor provision.**  **2**

**In** North Carolina v. EPA **, 531 F.3d 896 (D.C. Cir. 2008), we considered a cha**  **llenge to EPA’s 2005 Clean Air Interstate Rule, or CAIR.**  See **70 Fed. Reg. 25,162 (May 12, 2005). CAIR built on the 1998 NO** 

**x Rule and defined 28 States’ good neighbor obligations**  **with respect to the 1997 ozone NAAQS and the 1997**  **NAAQS for annual levels of fine particulate matter, or** 
**annual PM 2.5**  **.** See id.

**CAIR employed two differe nt formulas—both of**  **which incorporated cost considerations—to quantify each State’s obligations for**  **the pollutants covered by CAIR, SO**  **2 and NO** 

**x . The**  North Carolina **decision held that the formulas went beyond**  Michigan **’s au**
**thorization to use cost and that the formulas therefore**  **exceeded EPA’s statutory authority. EPA may use**  **cost to “require termination of only a subset of each**  **state’s contribution,” the Court explained, but “EPA**  **can’t just pick a cost for a region, and deem ‘signifi-** 

**2 Judge Sentelle dissented. In his view, the statutory text un**  **ambiguously “set forth one criterion: the emission of an amount of pollutant sufficient to contribute significantly to downwind** 
**nonattainment.”** Id. **at 696 (Sentelle, J., dissenting);** cf. Whitman v. American Trucking Ass’ns **, 531 U.S. 457, 467 (2001) (“We have therefore refused to find implicit in ambiguous sections of the CAA**  **an authorization to consider costs that has elsewhere, and so often, been expressly granted.”).** **11a**

**cant’ any emissions that so urces can eliminate more**  **cheaply.” 531 F.3d at 918 (citation, emphasis, and**  **some internal quotation ma rks omitted). The Court**  **also held that “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.”** Id. **at 921. The Court empha sized that EPA “may not requ**  **ire some states to exceed**
**the mark.”** Id.

North Carolina **thus articulated an important cave**

**at to** Michigan **’s approval of cost considerations. The statute permits EPA to use cost to lower an upwind**  **State’s obligation under the good neighbor provision.** See Michigan **, 213 F.3d at 675, 677. But EPA may not use cost to increase an upwind State’s obligation**  **under the good neighbor provision—that is, to force an upwind State to “exceed the mark.”**  North Carolina

**, 531 F.3d at 921. Put simp**  **ly, the statute requires every upwind State to clean up at most**  its own **share of the air pollution in a**  **downwind State—not other**
**States’ shares.**

**C**

**The** North Carolina **Court remanded CAIR without vacatur, leaving CAIR in place**  **“until it is replaced by a rule consistent with our opinion.”**  North Carolina v.
EPA **, 550 F.3d 1176, 1178 (D.C. Cir. 2008) (on rehear**  **ing).**

**The Transport Rule is EPA’s attempt to develop a rule that is consistent with our opinion in**  North Carolina **. EPA proposed the Transport Rule in August 12a** 

**2010 and finalized it in August 2011.** See **75 Fed. Reg. 45,210 (Aug. 2, 2010) (propo**  **sed); 76 Fed. Reg. 48,208 (Aug. 8, 2011) (final). The Transport Rule addresses**  **States’ good neighbor obliga tions with respect to three**  **NAAQS: the 1997 annual PM 2.5**  **NAAQS, the 1997 ozone NAAQS, and the 2006 24-hour PM**  **2.5 NAAQS.** 
See id. **at 48,209. 3** 

**The Transport Rule contains two basic components. First, the Rule defines each State’s emissions reduc**  **tion obligations under the good neighbor provision. Second, the Rule prescribes Federal Implementation**  **Plans to implement those obligations at the State level. We describe each componen**  **t here in some detail.**

**EPA began by quantifying the “amounts” of pollu** 
**tion that each State must prohibit under the good**  **neighbor provision—that is, “amounts which will**  **. . . contribute significantly to nonattainment” or**
**“interfere with maintenanc e” of the three NAAQS in**  **other States. 42 U.S.C. § 7410(a)(2)(D)(i). 4** 

**3 The 2006 24-hour PM**  **2.5 NAAQS post-dated and therefore was**  **not covered by CAIR.**

**4 EPA bases different aspects of the Transport Rule on distinct** **sources of statutory authority. EPA relied on its general rule making authority under Section 301(a)(1) of the Clean Air Act, 42**  **U.S.C. § 7601(a)(1), to construe Section 110(a)(2)(D)(i)(I) and to**  **quantify the States’ obligations to reduce emissions.** See **Trans port Rule, 76 Fed. Reg. at 48,217;**  see also Michigan **, 213 F.3d at 687. EPA relied on its authority under Section 110(c)(1),**  **42 U.S.C. § 7410(c)(1), to issue the Transport Rule FIPs.** See **Transport Rule, 76 Fed. Reg. at 48,217. 13a** 

**EPA used a two-stage approach to quantify each State’s obligations under the**  **good neighbor provision.**

**In the first stage, EPA determined whether a State**
**emits “amounts which will . . . contribute sig**  **nificantly” to a downwind St ate’s nonattainment of any**  **of the three NAAQS. EPA id entified the significantly** **contributing upwind States based on “linkages” be tween each upwind State an**  **d specific do wnwind “non** 
**attainment” or “maintenan ce” areas—that is, down** 
**wind areas that EPA mode ling predicted would not**  **attain, or absent regulation would not maintain, the NAAQS. Transport Rule, 76**  **Fed. Reg. at 48,236. An upwind State was linked**  **to a downwind nonattain**
**ment or maintenance area for a given NAAQS if EPA**  **modeling showed that the up wind State’s contribution** **to that downwind area exceeded a numerical “air qual ity threshold”—that is, a spec**  **ific amount of air pollu tion sent from the upwind State into the downwind** 
**State’s air.** Id. **EPA set the air quality threshold for each pollutant at an amount**  **equal to 1% of the relevant NAAQS. The resulting thre**  **sholds were (i) 0.8 ppb for ozone, (ii) 0.15**  μ **g/m 3**  **for annual PM 2.5**  **, and (iii) 0.35**

μ **g/m 3**  **for 24-hour PM 2.5**  **.** Id. **If modeling showed that an upwind State wou**  **ld send more than those amounts into a downwind State’s air, as measured at a**  **receptor site in a downwind State, the upwind State** **was deemed a “significant contributor” to the down wind State’s air po**  **llution problem.**

**Those numerical air qualit y thresholds determined**  **which upwind States ha d to reduce their SO**  **2 and NO** 

**x emissions and which upwind**  **States did not—that is, 14a** 

**the thresholds determined wh ich upwind States’ emis**  **sions “contribute significantly” to downwind States’ air pollution problems. Upwind**  **States “whose contribu tions are below these thresholds,” EPA found, “do not**  **significantly contribute to nonattainment or interfere** 
**with maintenance of the re levant NAAQS” in down** 
**wind States.** Id. **Because their emissions did not “contribute significantly,”**  **those States were not re quired to cut their emission**  **s for purposes of the good neighbor provision.** 

**As one would expect, this “significant contribution” threshold produced some clos**  **e cases at the margins. For example, Maryland and Texas were covered for** 
**annual PM 2.5**  **based on downwind co ntributions of 0.15** 
**and 0.18** μ **g/m 3**  **, respectively—just barely meeting the**

**0.15** μ **g/m 3**  **threshold.** See id. **at 48,240. And Texas**
**exceeded the annual PM 2.5**  **threshold at just a single downwind receptor, in**  **Madison, Illinois.** See id. **at 48,241.**  **5 By contrast, Minnesota and Virginia, with** 
**maximum downwind contribu tions of 0.14 and 0.12** 

μ **g/m 3**  **, respectively, just missed being covered for**
**annual PM 2.5**  **.** See id. **at 48,240.**

**For annual PM 2.5**  **, a total of 18 States 6**  **exceeded the threshold and were therefore deemed “significant** 

**5 Texas also narrowly exceeded the 0.35**  μ **g/m 3**  **threshold for**
**24-hour PM 2.5**  **; its maximum downwind contribution was 0.37** μ **g/m 3** 

**.** See **Transport Rule, 76 Fed. Reg. at 48,242.**

**6 Those States were: Alabama, Georgia, Illinois, Indiana, Iowa,** **Kentucky, Maryland, Michigan, Missouri, New York, North Caro lina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, West** **15a**

**contributors.” For 24-hour PM 2.5**  **, a total of 22 States 7** 

**exceeded the threshold.** See id. **at 48,241-42. Those States were thus included in the Rule’s reduction pro**  **grams for SO 2**  **and annual NO**

**x , pollutants that con** 
**tribute to PM 2.5**  **formation.** See id. **at 48,210. For ozone, a total of 26 States**  **8 exceeded the threshold.** 
See id. **at 48,245. Those States were thus included in**  **the Rule’s reduction program for ozone-season NO**

**x ,**  **which contributes to ozone formation.** See id. **at 48,210;**  see also **76 Fed. Reg. 80,760 (Dec. 27, 2011) (finalizing six States’ inclus**  **ion in the Transport Rule**
**for ozone-season NO**

**x ).** 

**At the second stage, ho wever, EPA ab**  **andoned the air quality thresholds—that**  **is, the stage one standard for whether an upwind Sta**  **te’s emissions “contribute significantly” to a downwind**  **State’s nonattainment of air quality standards. Instead, at stage two, EPA** 
**used a cost-based standa rd: EPA determined how**  **much pollution each upwind State’s power plants could** 

**Virginia, and Wisconsin.** See **Transport Rule, 76 Fed. Reg. at 48,240.** 

**7 Those States were: Alabama, Georgia, Illinois, Indiana, Iowa,**  **Kansas, Kentucky, Maryland, Mi chigan, Minnesota, Missouri,** **Nebraska, New Jersey, New York, North Carolina, Ohio, Pennsyl vania, Tennessee, Texas, Virginia, West Virginia, and Wisconsin.** 
See **Transport Rule, 76 Fed. Reg. at 48,242.**

**8 Those States were: Alabama, Arkansas, Florida, Georgia, Il**  **linois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Michigan, Mississippi, Missouri, New Jersey, New York, North**  **Carolina, Ohio, Oklahoma, Pennsy lvania, South Carolina, Tennes**  **see, Texas, Virginia, West Virginia, and Wisconsin.** See **Transport Rule, 76 Fed. Reg. at 48,245.** **16a**

**eliminate if the upwind State’s plants applied all con**
**trols available at or below a given cost per ton of pollu**  **tion reduced. The cost-per -ton levels applied without**  **regard to the size of each State’s “signifi**  **cant contribu tion” at stage one. In ot**  **her words, ho w much pollu**  **tion each upwind State was required to eliminate was**  **not tied to how much the upwind State contributed to**
**downwind States’ air pollution problems.** 

**EPA predicted how far emissions would fall if pow er plants throughout the Stat**  **e were required to install**
**controls available at or belo w various cost levels. The**  **cost levels, or thresholds, were expressed in terms of**  **cost per ton of pollutant re duced, with the idea being**  **that plants would install all co ntrols that co**  **st less than the designated threshold.**  **9**

**EPA then added up the emissions from all of the covered States to yield tota**  **l regionwide emissions fig ures for each pollutant, at**  **each cost threshold.** See

**9 For example, a technology that cost $1,000 to install and elimin** 
**ated 2 tons of NO**

**x from a power plant’s emissions would cost**  **$500/ton. In effect, EPA predicte d how far emissions would fall if**  **plants installed all of the controls from $1/ton to $500/ton.**

**EPA used a computer model to predict the reductions that would**
**occur in each State at va rious cost thresholds.**  See **EPA, Docu mentation for EPA Base Case v.4.10, at 2-1 (Aug. 2010), J.A.**  **2339. For example, for annual NO**

**x , EPA modeled cost levels of**  **$500, $1,000, and $2,500/ton.** See **Transport Rule, 76 Fed. Reg. at 48,249-50. EPA went as high as**  **$5,000/ton for ozone-season NO**

**x .**  See id. **at 48,250. For SO 2**  **, EPA modeled emissions at cost levels of $500, $1,600, $2,300, $2,800, $3,300, and $10,000 per ton.**  See id. **at 48,251. At a later stage in th e process, EPA used those predic** 
**tions to decide how much each State would have to cut. 17a** 

**Transport Rule, 76 Fed. Reg. at 48,250-53. The high**  **er the cost level selected, the greater the reduction of**  **emissions, but also the gr eater the costs and burdens**  **imposed on sources within the States.**

**Next, EPA used computer modeling to estimate the**  **downwind air quality effect s of imposing different**  **cost-per-ton levels on the upwind States.**  Id. **at 48,253. EPA modeled the ai**  **r quality effects of ap plying a $500/ton cost level for NO** 

**x and ascending**  **cost-per-ton levels for SO 2**  **.** See id. **At 48,255; EPA, Analysis to Quantify Sign**  **ificant Contribution Tech nical Support Document 15**  **& n.9 (July 2010), J.A.**

**2177.**

**Armed with those two sets of modeling data, EPA**  **proceeded to choose which regionwide cost-per-ton**  **threshold to apply for each of the three pollutants—** 
**SO 2**  **, annual NO**

**x , and ozone-season NO** 

**x . EPA con**  **sulted both its cost-of reduction modeling and its air quality modeling and identified what it termed “signif** 
**icant cost thresholds”—that is, cost-per-ton levels at**  **which steep drops in upwind emissions or jumps in**  **downwind air quality would occur. Transport Rule,**  **76 Fed. Reg. at 48,255;** see also id. **at 48,255-56. EPA then weighed both air qualit**  **y and cost concerns in a**
**“multi-factor assessment” to choose the final cost-per** 
**ton levels.** Id. **at 48,256. The “multi-factor assess ment” did not employ any ha**  **rd formula to weigh those**
**factors.**

**In the end, EPA settled on a single $500/ton thres** 
**hold for ozone-season and annual NO**

**x .**  See id. **at 48,256-57.** **18a**

**For SO 2**  **, instead of using a single cost threshold for**
**all of the SO 2**  **States, EPA divided the upwind States**  **into two groups for the 2014 program year (that is, the**  **emissions cuts required in 2014). EPA modeling**  **showed that applying a $500/ton cost threshold re**  **solved the attainment proble ms in the downwind areas**  **to which seven upwind States were linked.**  See id. **at 48,257. Those seven upwind**  **States became the Group 2 States, which were subj**  **ect to a $500/ton threshold**
**for SO 2**  **.** See id. **But $500/ton did not resolve attain ment problems in the down**  **wind areas to which 16 other upwind States were**  **linked. Those 16 upwind States became the Group 1**  **States, which were subject to a stricter $2,300/ton**  **cost threshold for SO 2**  **.** See id. **at 48,259.**

**EPA determined the amount of SO 2**  **, annual NO**

**x , or**  **ozone-season NO**

**x that each covered State could elim**  **inate if its power plants in stalled all cost-effective**  **emissions controls—that is, th ose controls available at**  **or below the applicable cost-per-ton thresholds.** See
id. **at 48,260. EPA then used those figures to gener**  **ate 2012, 2013, and 2014 emissi ons “budgets” for each**  **upwind State, for each poll utant for which that State** 
**was covered.** See id. **at 48,259-63. The budget is the**
**maximum amount of each pollutant that a State’s**  **power plants may collectively emit in a given year, beginning in 2012.**  **10**

**10 States may augment their budgets somewhat by buying out-of** 
**state allowances.** See **Transport Rule, 76 Fed. Reg. at 48,263-68. 19a** 

**EPA did not stop there and le ave it to the States to**  **implement the required reductions through new or revised State Implementati**  **on Plans, or SIPs.** Cf. **42 U.S.C. § 7410(k)(5). Instead, EPA simultaneously**  **promulgated Federal Implementation Plans, or FIPs.**

**The FIPs require power pl ants in covered upwind** 
**States to make the SO 2**  **and NO**

**x reductions needed to**  **comply with each upwind St ate’s emissions budget, as**  **defined by EPA. The FIPs also create an interstate trading program to allow cove**  **red sources to comply as cost-effectively as possible.**  See **Transport Rule, 76 Fed. Reg. at 48,271.** 

**The FIPs convert each State’s emissions budget into “allowances,” which are allocated among power**  **plants in the State. Under the FIPs, it is EPA, and not the States, that decides**  **how to distribute the al lowances among the power plants in each State.**  See
id. **at 48,284-88. 11** 

**11 Each power plant is “required to hold one SO**  **2 or one NO** 

**x allowance, respectively, for every ton of SO**  **2 or NO** 

**x emitted”**  **during the relevant year. Transport Rule, 76 Fed. Reg. at 48,271;**
see also id. **at 48,296-97 (describing pena lties for noncompliance).**  **Sources were required by the Rule to begin complying with the**
**annual SO 2**  **and NO**

**x requirements by January 1, 2012 for the**  **2012-13 budgets and by January 1, 2014 for the post-2014 budgets.**
See id. **at 48.277. (This Court stayed the Rule before it took effect.) The ozone-season NO** 

**x requirements would kick in on**  **May 1 of those years.** See id. **EPA chosethose compliance deadlines in light of this Court’s holding in**  North Carolina **that the deadlines must be “consistent with the provisions in Title I man**  **dating [NAAQS] compliance deadli nes for downwind states.” 531**  **F.3d at 912;** see also **Transport Rule, 76 Fed. Reg. at 48,277-78. 20a** 

**The Rule retains a limited, secondary role for SIPs.**  **States have the option of su bmitting SIPs that modify** 
**some elements of the FIPs.** See id. **at 48,327-28. The first program year for**  **which States can submit**
**such SIPs is 2014.** See id. **States may also seek to replace the FIPs wholesale,**  **as long as the SIP prohib**
**its the amounts of NO**

**x and SO**  **2 emissions that EPA**  **specified.** See id. **at 48,328. EPA says it would “re view such a SIP on a case-by-case basis.”**  Id. **But, im portantly, the States do**  **not have a post-Rule oppor tunity to avoid FIPs by su**  **bmitting a SIP or SIP revi**
**sion: The FIPs “remain full y in place in each covered** 
**state until a state’s SIP is submitted and approved by**  **EPA to revise or replace a FIP.”** Id.

**Since it issued the final rule in August 2011, EPA**  **has taken several subsequent regulatory actions re**  **lated to the Transport Rule.** See **76 Fed. Reg. 80,760 (Dec. 27, 2011) (finalizing si**  **x States’ inclusion in the**
**Rule for ozone-season NO**

**x ); 77 Fed. Reg. 10,324 (Feb.**  **21, 2012) (making technical adjustments to modeling**  **and delaying assurance pena lty provisions until 2014);**  **77 Fed. Reg. 34,830 (June 12, 2012) (revising budgets**  **for 13 States).**

**The FIPs use allowance trading to enable covered plants within the States to comply as cost-effectively as possible. The program**  **creates four allowance trading markets: one for annual NO**

**x , one**  **for ozone-season NO**

**x , one for Group 1 SO**  **2 States, and one for**  **Group 2 SO 2**  **States.** See **Transport Rule, 76 Fed. Reg. at 48,271. Power plants in Group 1 SO**  **2 States may not purchase Group 2 SO**  **2 allowances, and vice versa.**  See id **. at 48,271-72. Otherwise, in terstate trading is generally permitted.** **21a**

**D**

**An array of power companie s, coal companies, labor** **unions, trade associations, States, and local govern ments petitioned for review**  **of EPA’s Transport Rule.**

**On December 30, 2011, this Court stayed the Rule**  **pending a decision on the merits.** See **Order, No. 11-1302, slip op. at 2 (D.C.**  **Cir. Dec. 30, 2011). The**
**Court’s order instructed EPA to “continue adminis tering the Clean Air Interstate Rule pending the** 
**court’s resolution of thes e petitions for review.”**  Id.

**In Part II of this opinion, we address whether the**
**Rule exceeds EPA’s authorit y to order upwind States** 
**to reduce “amounts which wi ll . . . contribute**  **significantly to nonattainment” in downwind States. In Part III, we address**  **whether the statute permits EPA to issue FIPs without giving the States an initial**  **opportunity to implement the required reductions through SIPs or SIP revisions. In Part IV, we con**  **sider the remedy.**

**II**

**In this Part, we analyze petitioners’ argument**
**that EPA exceeded its st atutory authority under**  **the “good neighbor” provisio n. Under the statute,**  **EPA is limited to ordering upwind States to reduce** 
**“amounts which will . . . contribute significantly** 
**to nonattainment” in down wind States. 42 U.S.C.**  **§ 7410(a)(2)(D)(i).**

**A 22a** 

**The Transport Rule defines States’ obligations un der Section 110(a)(2)(D)(i)(I) of the Clean Air Act, a**  **provision sometimes describe d as the “goo**  **d neighbor” provision.**  See **42 U.S.C. § 7410(a)(2)(D)(i)(I);** Michigan v. EPA **, 213 F.3d 663, 671 (D.C. Cir. 2000). The good neighbor provision requires that a State Imple**  **mentation Plan, or SIP:**

**(D) contain adequate provisions—**

**(i) prohibiting, consistent with the provisions of**  **this subchapter, any source or other type of emis**  **sions activity within the State from emitting any air pollutant in amounts which will—** 

**(I) contribute signific antly to nonattainment**  **in, or interfere with maintenance by, any other State with respect to an**  **y such national primary or secondary ambient air quality standard.** 

**. . . 42 U.S.C. § 7410(a)(2)(D).**  **The good neighbor provi sion recognizes that not all**  **air pollution is locally gen**
**erated: Some ambient air pollution “is caused or**  **augmented by emissions fr om other states. Emis**  **sions from ‘upwind’ region s may pollute ‘downwind’**  **regions.”** Appalachian Power Co. v. EPA **, 249 F.3d 1032, 1037 (D.C. Cir. 2001).** 

**Although the statute grants EPA significant discre**  **tion to implement the good neighbor provision, the**
**statute’s text and this Court’s decisions in**  Michigan
**and** North Carolina **establish severa l red lines that**  **cabin EPA’s authority. Thos e red lines are central to** 
**our resolution of this case.** **23a**

First **, and most obviously, the text of Section**  **110(a)(2)(D)(i)(I) tells us that the “amounts which will** 
**. . . contribute” to a downwind State’s nonattain**
**ment are at most those amou nts that travel beyond an**  **upwind State’s borders an d end up in a downwind** 
**State’s nonattainment area. 12**  **The statute is not a**
**blank check for EPA to addr ess interstate pollution on**  **a regional basis without regard to an individual upwind** 
**State’s actual contribution to downwind air quality.** 

**Moreover, the statutory tex t and this Court’s deci** 
**sion in** North Carolina v. EPA **demonstrate that EPA may not force a State to el**  **iminate more than its own**

**“** significant **” contribution to a downwind State’s non**  **attainment area—that is, to “exceed the mark,” as we**  **put it in** North Carolina **. 531 F.3d 896, 921 (D.C. Cir. 2008). Thus, once EPA reas**  **onably designates some**
**level of contribution as “i nsignificant” under the stat**  **ute, it may not force any up wind State to reduce more** 
**than its own contribution to that downwind State mi**  **nus the insignificant amount. 13** 

**12 At oral argument, EPA’s counsel refused to concede this**  **point.**

**13 For example, suppose that EPA determined that any upwind** 
**State whose contribution to a downwind State was less than 3 units did not “contribute significantly to nonattainment.” That would** 
**mean EPA had established 3 units as the significance floor. Other**  **upwind contributors to that downwind State could not be required**
**to reduce their downwind contributions below that floor. So an upwind State whose contribution to that downwind State is 30 units**  **could be required to reduce its contribution by** at most **27 units.**

**Of course, that is not the** only **constraint on EPA’s authority to force the State to reduce its emissions. The other legal con-** **24a**

Second **, under the terms of the statute and as we explained in**  North Carolina **, the portion of an upwind**
**State’s contribution to a downwind State that “con**  **tribute[s] significantly” to that downwind State’s “non**  **attainment” necessarily depe nds on the relative con**  **tributions of that upwind St ate, of other upwind State**  **contributors, and of the downwind State itself. Each**  **upwind State may be required to eliminate**  **only its own**
**“amounts which will . . . contribute significant** **ly” to a downwind State’s “nonattainment.” As ex plained in**  North Carolina **, EPA may not require any upwind State to “share the**  **burden of reducing other upwind states’ emissions.”**  Id. **In other words, the statutory text—which refers**  **to “amounts” which will “contribute significantly” to**  **a downwind State’s “non**  **attainment”—contains not ju st an absolute component**  **(meaning that an upwind St ate’s insignificant amounts** **are not covered) but also a relative component (mean ing that each State’s rela**  **tive contribution to the**
**downwind State’s nonattainme nt must be**  **considered).**

**Moreover, the end goal of the statute is attainment**  **in the downwind State. EPA’s authority to force reductions on upwind States ends at the point where** 
**the affected downwind State achieves attainment.**

**Therefore, if the downwind State would attain the NAAQS but for upwind States**  **’ contributions—that is, if the entire above-NAAQS am**  **ount is attributable to upwind States’ emissions—**  **then the upwind States’**

**straints described in this Part can further lower a State’s maximum obligation.** **25a**

combined **share is the entire amount by which the**
**downwind State exceeded the NAAQS. And as we** 
**said in** North Carolina **, when EPA allocates that bur**
**den** among **the upwind States, EPA may not force any upwind State to “share the**  **burden of reducing other upwind states’ emissions.”**  Id. **Each upwind State must bear its own fair share. Therefore, the “signifi**  **cance” of each upwind Stat e’s contribution cannot be**  **measured in a vacuum, divorc ed from the impact of the**  **other upwind States. Rath er, the collective burden**  **must be allocated among the upwind States in propor** 
**tion to the size of their co ntributions to the downwind**  **State’s nonattainment. Otherwise, EPA would violate**
**the statute and our decision in** North Carolina

**. 14** 

**14 Before Congress adopted the current text in the Clean Air Act**  **Amendments of 1990, the statutory text targeted amounts from an upwind State that would “**  prevent **attainment” in a downwind State. 42 U.S.C. § 7410(a)(2)(E) (1988) (emphasis added);**  cf. **Pub. L. No. 101-549, § 101(b), 104 Stat. 2399, 2404 (1990). Under the**  **“prevent attainment” standard, none of the three upwind States in that hypothetical would by itself be a but-for cause of the downwind**  **State’s nonattainment. By moving from “prevent attainment” to “contribute significantly to nonattainment,” the 1990 Amendments**  **dropped the requir ement that an individual upwind State’s emis** 

**sions** on their own **prevent downwind attainment or maintenance.**
See **S. R EP**  **N O**  **. 101-228, at 21 (1989) (“Since it may be impossible to say that any single source or group of sources is the one which**  **actually prevents attainment, the bill changes ‘prevent attainment** **or maintenance’ to ‘contribute significantly to nonattainment or in terfere with maintenance by,’ thus clarifying when a violation oc** **curs.”). Instead, it now suffices if EPA identifies upwind emis sions that,**  together with emissions from other upwind contributors **, push a given downwind maintenance area above the NAAQS. 26a** 

**A specific example helps illustrate that point. Suppose the NAAQS is 100 un**  **its, but the downwind**
**State’s nonattainment area contains 150 units. Sup**  **pose further that the down wind State contributes 90**  **units, and three upwind States contribute 20 units each. Because the upwind**  **States are responsible for**
**the downwind State’s exce eding the NAAQS by 50**  **units, the downwind State is entitled to at most 50**  **units of relief from the up wind States so that the** 
**downwind State can achieve a ttainment of the NAAQS.** **Distributing those obligations in a manner proportion al to their contributions,**  **each of the three upwind States’ significant contribution would be, at most, 16**  2⁄3 **units. Or suppose instead that the three upwind States contribute 10, 20, an**  **d 30 units respectively. Distributing those obligations in a manner proportion**  **al to their contributions, th ose three States’ significant** 
**contributions would be at most 8** 1⁄3 **, 16** 2⁄3 **, and 25 units, respectively, leading to the**  **combined reduction of 50**
**units needed for the downwi nd State to reach attain** 

**ment. 15** 

**15 If the downwind State’s contribution alone would push it**  **above the NAAQS, then the entire above-NAAQS amount cannot**
**be attributed** only **to upwind States. The downwind State is responsible for its own share of the above-NAAQS amount. In**  **that scenario, upwind States that contribute to the downwind State are collectively on the hook for that share of the above-NAAQS**  **amount that is attributable to upwind States’ contributions. And, again, that collective burden must be allocated among the upwind** **States in proportion to the size of their contributions to the down wind State. Otherwise, one upwind State would be forced to** **27a**

**In addition, our decisions in** Michigan **and** North
Carolina **establish that EPA may consider cost, but only to further lowe**  **r an individual Stat e’s obligations.**  See Michigan

**, 213 F.3d at 675;**  North Carolina **, 531**
**F.3d at 918. Under** Michigan **, moreover, EPA may do so in a way that benefits**  **some upwind States more**
**than others.** See **213 F.3d at 679. In other words, in order to prevent exorbitant costs from being**  **imposed on certain upwind Sta**  **tes, EPA may lower the obliga**  **tions imposed on those States.**

Third **, to conform to the text of the statute, EPA** 
**must also ensure that the combined obligations of the**  **various upwind States, as aggregated, do not produce more than necessary “over-**  **control” in the downwind States—that is, that the obli**  **gations do not go beyond what is necessary for the do**  **wnwind States to achieve the NAAQS.** 

**Even when EPA carefully conforms to the above limits on its authority, the po**  **ssibility of over-control in**
**downwind States st ill arises because**  **multiple upwind States may affect a single**  **downwind State and, con-**

**“share the burden of reducing other upwind states’ emissions,” in**
**violation of the statute.** North Carolina **, 531 F.3d at 921.**

**An example helps illustrate that point. Suppose the NAAQS is 100 units, and the downwind State’s air contains 180 units. The**  **downwind State contributes 120 units, and three upwind States**
**contribute 20 units each. The downwind State is 80 units over the NAAQS—but 20 units of that is its own responsibility. The up**  **wind States must therefore provide at most 60 units of relief. Distributing those obligations proportionally, each of the three**  **upwind States’ significant contribution would be, at most, 20 units. 28a** 

**versely, a single upwind State may affect multiple**  **downwind States. The requ irement to prevent such** **over-control comes directly from the text of the stat ute: The good neighbor provision of the statute tar**  **gets those emissions from upwind States that “con**  **tribute significantly** to nonattainment **” of the NAAQS. EPA may require only those**  **reductions that are nec essary for downwind States**  **to attain the NAAQS. The good neighbor provision is not a free-standing tool** 
**for EPA to seek to achieve air quality levels in down** 
**wind States that are** well below **the NAAQS. There fore, if modeling shows that**  **a given slate of upwind reductions would yield mo**  **re downwind air quality benefits than necessary for**  **downwind areas to attain the NAAQS, EPA must attem**  **pt to ratchet back the upwind States’ obligations to**  **the level of reductions necessary and suffici**  **ent to produce attainment in the**
**downwind States. 16** 

**To be sure, as even peti tioners acknowledge, there**  **may be some truly unavoida ble over-control in some** 
**downwind States that occu rs as a byproduct of the**  **necessity of reducing upwind States’ emissions enough** 

**16 For example, suppose that under the proportional approach**  **explained above, State A would have to cut 5,000 tons of NO**

**x to**  **achieve its largest downwind obligation, while State B would have to cut 2,000 tons to achieve its largest downwind obligation. If**  **EPA modeling showed that all do wnwind nonattainment would be** **resolved if those two upwind States’ combined reduction obliga tions were, say, 10% lower, EPA would have to ratchet back the up**  **wind States’ reduction obligations by a total of 10%. That would** **ensure that upwind States were only forced to prohibit those emis sions that “contribute significantly to nonattainment.”** **29a**

**to meet the NAAQS in other downwind States.** See **Industry & Labor Reply Br . 11 n.2. For those rea**  **sons, EPA must have some discretion about how to reasonably avoid such over-control. Moreover, be**  **cause multiple upwind States may affect a single downwind State, and becaus**  **e a single upwind State may affect multiple downwi**  **nd States, it may not be possible to accomplish the ratcheting back in an en**  **tirely proportional manner among the upwind States. Our cases recognize as much.**  See Michigan **, 213 F.3d at 679;**  North Carolina **, 531 F.3d at 908. But the point remains: EPA must avoid using the good**  **neighbor provision in a mann er that would result in**  **unnecessary over-control in the downwind States. Otherwise, EPA would be exceeding its statutory**  **authority, which is expressl y tied to achieving attain** 
**ment in the downwind States.**

**B**

**We now apply those principles to the EPA Transport Rule. “It is axio**  **matic that an administra tive agency’s power to prom**  **ulgate legislative regula tions is limited to the authority delegated by Con**  **gress.”** Bowen v. Georgeto wn Univ. Hosp. **, 488 U.S. 204, 208 (1988);**  see also Michigan v. EPA **, 268 F.3d 1075, 1081 (D.C. Cir. 2001) (“**  **EPA is a federal agency —a creature of statute,” an**  **d may exercise “only those authorities conferred upon it by Congress.”). An**  **agency may not exceed a statute’s authorization or**
**violate a statute’s limits. If a statute is ambiguous, an**  **agency that administers the statute may choose a**  **reasonable interpretation of that ambiguity—but the** **30a**

**agency’s interpretation must still stay within the**  **boundaries of the statutory text.** See Chevron U.S.A.
Inc. v. NRDC **, 467 U.S. 837, 842-44 (1984). 17** 

**In the Transport Rule, EPA used a two-stage ap proach to define “amounts**  **which will . . . con tribute significantly” to downwind attainment prob**  **lems. The first stage identi fied those upwind States**  **that were “significant cont ributors” to downwind at**  **tainment problems. EPA determined that a State’s**
**contribution to a downwind nonattainment or mainte**  **nance area was significant if it exceeded a numerical**  **“air quality threshold” of 0.8 ppb for ozone, 0.15** μ **g/m 3** 

**for annual PM 2.5**  **, and 0.35** μ **g/m 3**  **for 24-hour PM 2.5**  **. Transport Rule, 76 Fed. Re**  **g. 48,208, 48,236 (Aug. 8, 2011). States “whose cont**  **ributions are below these thresholds,” EPA fo**  **und, “do not significantly contrib**
**ute to nonattainment or inte rfere with maintenance of**  **the relevant NAAQS.”** Id. **Those upwind States were off the hook altogether.** 

**But an upwind State that exceeded the significance**
**threshold at even one down wind State’s receptor was** **drawn wholesale into the Rule’s second stage—cost**
**based emissions redu ctions. At that second stage,** 

**17 We set aside EPA’s action here**  **if “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law,” or if**  **“in excess of statutory jurisdiction, authority, or limitations, or short of statutory right.” The standard we apply “is the same”**  **under the judicial review provision of the Clean Air Act, 42 U.S.C. § 7607(d)(9), as under the Administrative Procedure Act, 5 U.S.C.**  **§ 706(2).** Motor Vehicle Manufacturers Ass’n v. EPA **, 768 F.2d 385, 389 n.6 (D.C. Cir. 1985).** **31a**

**EPA abandoned the previous measure of significance**  **—the numerical air qualit y thresholds, which were**  **based on the quantity of poll ution an upwind State sent** 
**to a downwind area. Instea d, EPA switched over to**  **relying on cost of reduct ion alone. EPA required**  **each State’s power plants to cut all of the emissions**  **they could eliminate at a give n cost per ton of pollution**  **reduced—regardless of the “amounts” of the State’s** 
**emissions EPA deemed to “c ontribute significantly” at**  **stage one and regardless of the relative contributions**  **of the other upwind States and the downwind State.** 

**We perceive at least three independent but inter twined legal flaws in EPA’**  **s approach to the good neighbor provision. Those flaws correspond to the**  **three requirements we outlin ed above that come from**  **the statutory text.**

First **, and most fundamentally, the Transport Rule is flawed because the requirement that EPA imposed**  **on upwind States was not ba sed on the “amounts” from**  **upwind States that “contrib ute significantly to nonat**  **tainment” in downwind States, as required by the**
**statute and our decision in** North Carolina

**. Petitioners claim that th**  **e initial stage of EPA’s analysis—the numerical air**  **quality thresholds, which used a bright-line test for whether a State’s downwind**  **emissions “contribute significantly”—created a “‘floor’ below which any contribution**  **is, by definition, viewed as insignificant.” Industry & Labor Br. 20. Peti**  **tioners argue that EPA has no statutory authority to compel States to reduce am**  **ounts of pollution that are “insignificant.” Therefore,**  **petitioners contend that 32a** 

**EPA could not ignore that floor at the later stage,** 
**when it calculated each St ate’s “significant contribu** 
**tion” based on cost. 18** 

**18 The dissent contends that this point was not preserved for**  **judicial review and that the agency was not aware of this issue during the agency proceedings.**  See **42 U.S.C. § 7607(d)(7)(B). For several reasons, we are convinced EPA had more than “ade**  **quate notification of the general substance” of petitioners’ argu** 

**ment.** NRDC v. EPA **, 571 F.3d 1245, 1259 (D.C. Cir. 2009) (quot ing**  South Coast Air Quality Mgmt. Dist. v. EPA **, 472 F.3d 882, 891 (D.C. Cir. 2006)). Indeed, one of the central questions in the long**  **history of EPA’s efforts to implement the good neighbor provision has been whether EPA has complied with the basic statutory limits**  **on its authority. So it is here.**

**First, the Transport Rule proceeding arose out of this Court’s**
**decision in** North Carolina **, on which petitioners’ argument relies.**
See **Transport Rule, 76 Fe d. Reg. at 48,211 (“EPA is promulgating**  **the Transport Rule in response to the remand of the Clean Air Interstate Rule (CAIR) by the U.S. Court of Appeals for the Dis**  **trict of Columbia Circuit”). In** North Carolina v. EPA **, this Court explained the applicable statutory limitations and instructed EPA**  **on remand to craft a new rule “consistent with our opinion.” 550 F.3d 1176, 1177 (D.C. Cir. 2008) (on rehearing). Instructing EPA**  **to proceed in a manner “consistent with”** North Carolina **presup poses that EPA is**  aware **of the Court’s opinion. And the opinion made clear that once EPA defines each upwind State’s “significant**  **contribution,” it may not “require some states to exceed the mark.” 531 F.3d at 921. In sum, EPA knew from the beginning that it**  **was required to comply with** North Carolina **, including that part of the Court’s holding on which petitioners rely here.** 

**Second, EPA considered—and reje cted—precisely the same ar**  **gument in CAIR. EPA first acknowledged the comment: “Some commenters stated, more broadly, that the threshold contribution**  **level selected by EPA should be considered a floor, so that upwind States should be obliged to reduce their emissions only to the level** **33a**

**at which their contribution to downwind nonattainment does not**  **exceed that threshold level.” CAIR, 70 Fed. Reg. 25,162, 25,176-77 (May 12, 2005). It then dismissed that argument:**  **“Most important for present purposes, as long as the controls yield downwind benefits needed to reduce the extent of nonattainment,**  **the controls should not be lessened simply because they may have the effect of reducing the upwind State’s contribution to below the** 
**initial threshold.”** Id. **at 25,177. EPA’s rejection of the same ar gument in a prior rulemaking—indeed, in a prior rulemaking that**  **is the direct progenitor of the current one—is highly relevant to whether the argument is preserved here.**  See, e.g.

**,** American
Petroleum Institute v. EPA **, 52 F.3d 1113, 1120 n.1 (D.C. Cir. 1995);**  NRDC v. EPA **, 824 F.2d 1146, 1151 (D.C. Cir. 1987) (en banc);**  see also Appalachian Power Co. v. EPA **, 135 F.3d 791, 818 (D.C. Cir. 1998) (“The purpose of the exhaustion requirement is to**  **ensure that the agency is given the first opportunity to bring its expertise to bear on the resolution**  **of a challenge to a rule.”). EPA’s prior rejection of the same argument in CAIR, together** 
**with this Court’s opinion in**  North Carolina **, show that EPA “had**
**notice of this issue and could, or should have, taken it into account.”** 
NRDC **, 824 F.2d at 1151.**

**Third, EPA’s statements at the proposal stage indicated EPA was not open to reconsidering CAIR’s earlier rejection of petitioners’**  **argument.** See **Proposed Transport Rule , 75 Fed. Reg. 45,210,**  **45,299 (Aug. 2, 2010) (“EPA evalua ted a number of alternative**  **approaches to defining significan t contribution and interference**  **with maintenance in addition to the approach proposed in this rule. Stakeholders suggested a variety of ideas. EPA considered all**  **suggested approaches. . . . EPA is not proposing any of the alternative approaches listed here.”). By that point, EPA had**  **already dismissed the two air quality-only approaches it considered**
**and had indicated its firm commitme nt to the cost-based approach.** 
See **EPA, Alternative Significant Co ntribution Approaches Evalu**  **ated Technical Support Document 7 (July 2010) (EPA, Significant**  **contribution TSD), J.A. 2312 (uniform cost-per- ton approach “has been successfully implemented before, with excellent environmen-** **34a**

**We agree with petitioners. The Transport Rule includes or excludes an upwind State based on the**  **amount of that upwind Stat e’s significant contribution** 
**to a nonattainment area in a downwind State. That**
**much is fine. But under the Rule, a State then may**  **be required to reduce its em issions by an amount grea-** 

**tal results”);** see also id. **at 3-7, J.A. 2308-12. In light of the indi cations that EPA was aware of their objection but had no intention** **to revisit its approach (and indeed had already rejected the objec tion), the specificity of commente**  **rs such as Wisconsin and Tennes**
**see was “reasonable” under the circumstances. 42 U.S.C. § 7607(d)(7)(B);**  see, e.g. **, Wisconsin Cmt., J.A. 1293 (“EPA needs to primarily depend on air quality results instead of control costs in**  **defining” significant contribution s); Tennessee Cmt., J.A. 556 (“A**  **lower cost threshold should be considered for any State that can reduce their contribution below 1% significance using cost thresh**  **olds below the maximum values ($2,000/ton for SO 2**  **and $500/ton for**
**NO**

**x ), if applicable. . . . We would like to see a summary for**  **each State and pollutant that indicates, independently of cost, the amounts necessary to eliminate th**  **e significant contribution and interference with maintenance from upwind States.”); Delaware**  **Cmt., J.A. 1756 (challenging EPA’s decision to depart from the air quality thresholds used for inclusio**  **n and to quantify States’ signif icant contributions based on cost considerations, not air quality);** 
see also Appalachian Power **, 135 F.3d at 817 (“the word ‘reasona ble’ cannot be read out of the statute in favor of a hair-splitting**  **approach”);** id. **at 818 (an objection need no t be “phrased in exactly**  **the same way in each forum”);** South Coast **, 472 F.3d at 891 (peti tioners have “some leeway in developing their argument” on re**  **view).**

**In sum, we are confident here th at EPA had more than “adequate**  **notification of the general substance of the complaint.”** South
Coast **, 472 F.3d at 891. EPA was plainly on notice that its disre gard of the significance floor was**  **a potential legal infirmity in its approach.** **35a**

**ter than the “significant co ntribution” that brought it**  **into the program in the first place. That much is not**
**fine.**

**Put more plainly, EPA determined that a State was subject to the good neighbor**  **provision if it contributed**
**at least a certain threshold am ount to air po**  **llution in a**
**downwind State. But EPA then imposed restrictions**  **based on regionwide air qual ity modeling projections;**  **those restrictions could requ ire upwind States to re**  **duce emissions by more than the amount of that con** 
**tribution.**

**EPA’s approach poses a fundamental legal problem**
**—one that derives from th e text of the statute and**  **from our precedents. Our decision in** Michigan **held that EPA may use cost consid**  **erations to require “ter mination of only a subset of each state’s contribution.”** 
**213 F.3d at 675. And our decision in** North Carolina **made clear that EPA may not use cost to force an upwind State to “exceed the mark.” 531 F.3d at 921.**  **19**

**19 The Court in**  North Carolina **reached these conclusions in its discussion of EPA’s use of power plant fuel mix to distribute NO** 

**x reduction obligations among the CAIR States.**  See **531 F.3d at 904, 918-21. EPA claims that the re**  **asoning of that analysis is not relevant here because it did not relate to “general significant con**  **tribution issues,” but rather to the manner of calculating each State’s emissions budget. EPA Br. 23.** 

**That is a distinction without a di fference. The fuel mix analysis**  **increased some States’ obligations and reduced others’. EPA’s argument overlooks that no step in its analysis—however the step**  **is labeled—may impose burdens on States or private entities unless those burdens are anchored in statutory authority. Under the**  **statute, States are required to prohibit only those “amounts which 36a** 

**By using a numerical threshold at the initial stage— and thereby creating a floor below which “amounts” of**  **downwind pollution were not significant—EPA defined the “mark,” to use th**  **e term employed in** North Carolina **. EPA could not then ignore that mark and rede fine each State’s “significant**  **contribution” in such a way that an upwind State’s**  **required reductions could**
**be** more **than its own significan t contribution to a** 
**downwind State. 20** 

**EPA now claims that the Ru le’s air quality thresh** 
**olds were established for a “limited analytical pur**  **pose” and “otherwise say nothing about what part** 
**of each State’s contribution should be considered ‘sig** 
**nificant.’ ” EPA Br. 33. That claim rings hollow.** 
**EPA itself said in the final rule that “states whose**
**contributions are below thes e thresholds do not signif**  **icantly contribute to nonatt ainment or interfere with**  **maintenance of the relevant NAAQS.” Transport Rule, 76 Fed. Reg. at 48,236. EPA therefore acknow**  **ledged that amounts belo w the threshold are not** 

**will . . . contribute significantly to nonattainment” or “inter fere with maintenance.” 42 U.S.C. § 7410(a)(2)(D)(i);**  see also
North Carolina **, 531 F.3d at 919.**

**20 This particular issu**  **e was not presented in** Michigan **. In the**
**1998 NO**

**x Rule, EPA balanced various air quality factors using a**  **“weight-of-evidence approach.” 63 Fed. Reg. 57,356, 57,381 (Oct. 27, 1998). Unlike the Transport Rule, the 1998 NO** 

**x Rule did not**  **employ a numerical threshold, nor any other “bright line criterion,” to screen out States at the first stage.**  Id. **at 57,383. 37a** 

**“amounts which will . . . contribute significant**  **ly” to downwind a ttainment problems.**  **21**

**In short, EPA used the ai r quality thresholds to**  **establish a floor below which “amounts” of air pollution do not “contribute significantly.”**  **22 The statute re**  **quires a State to prohibit at most those “amounts” which will “contribute signif**  **icantly”—and no more.**
**If amounts below a numeri cal threshold do not con** **tribute significantly to a downwind State’s nonattain ment, EPA may not require**  **an upwind State to do more. The Transport Rule does not adhere to that** 

**21 EPA cannot avoid**  North Carolina **by declining to quantify the “amount” of each State’s downwind contribution, “beginning its**  **analysis with cost,” 531 F.3d at 918, and simply designating the**  **output of that cost-based analysis each State’s “significant contri** **bution.” The statutory term “amounts which will . . . con tribute significantly” is not so elastic.**  See id. **at 920 (“When a petitioner complains EPA is requiring a state to eliminate more**  **than its significant contribution, it is inadequate for EPA to re**  **spond that it never measured indi vidual states’ significant contri**  **butions.”). As explained above, “amounts which will . . . contribute” logically cannot exceed**  **the amount of a pollutant that**
**leaves a State’s borders and reaches a nonattainment area. And insignificant amounts must be ex**  **cluded. Moreover, the “signifi cance” of an upwind State’s emissions for a downwind area’s at**  **tainment problem cannot be divorced from the relative impact of other States’ contributions to that problem.** 

**22 EPA protests that it used the numerical thresholds only to** **determine “which upwind State contributions to downwind prob**
**lems are so small as to warrant exclusion.” EPA Br. 31. But**
**that must mean those “amounts” th at are “so small as to warrant**  **exclusion” are not “significant.” (It would be illogical to carve out a de minimis exception for emissions that are statutorily “signifi**  **cant.”) 38a** 

**basic requirement of the st atutory text and our prece** 
**dents. 23** 

Second **, EPA’s Transport Rule also runs afoul of the statute’s proportionality requirement as described** 
**in our decision in** North Carolina **: EPA has “no authority to force an upwind**  **state to share the burden of reducing other upwind st**  **ates’ emissions.” 531 F.3d at 921;**  see **Industry & Labor Br. 33 (in imposing SO 2**  **budgets, EPA “did not even consider the** relative **con tributions of the various St**  **ates”). EPA’s “redistribu tional instinct may be laudatory,”**  North Carolina **, 531 F.3d at 921, but it cannot tr**  **ump the terms of the stat ute. Under the statute, each upwind State that con** 
**tributes to a downwind nona ttainment area is respon** 
**sible for no more than its own “amounts which will . . . contribute significantly” to the downwind**  **State’s pollution problem. To be sure, under** Michigan **, EPA may rely on cost-effectiveness factors in order to allow some up**  **wind States to do** less **than their**
**full fair share.** See **213 F.3d at 675;** cf. **Petitioning States’ Br. 17,**  Michigan **, 213 F.3d 663 (No. 98-1497).**

**23 EPA seems reluctant to acknowledge any textual limits on its**  **authority under the good neighbor provision. At oral argument, EPA suggested that “reasonableness” is the only limit on its au**  **thority to use cost-effectiveness to force down States’ emissions. Tr. of Oral Arg. at 44-45. EPA would not rule out the possibility**  **that under the good neighbor provis ion, it could require a State to** 
**reduce** more than the State’s total emissions that go out of State

**.** See id. **at 43-45. But such a claim of authority does not square with the statutory text—“amounts” of pollution obviously cannot**  **“contribute” to a downwind State’s pollution problem if they don’t**
**even reach the downwind State. 39a** 

**But when EPA asks one upwind State to eliminate**

more **than its statutory fair share, that State is neces sarily being forced to clea**  **n up another upwind State’s**
**share of the mess in the downwind State. Under the**
**statute and** North Carolina **, that is impermissible.**

**Here, EPA’s Transport Rule violated the statute because it made no attempt**  **to calculate upwind States’ required reductions on a proportional basis that took** 
**into account contributions of other upwind States to**  **the downwind States’ nonattainment problems.**

**In the same vein, EPA’s Transport Rule failed to**
**take into account the downwi nd State’s own fair share**  **of the amount by which it exceeds the NAAQS.** See **Industry & Labor Br. 24-25. How “significantly” an upwind State contributes to**  **a downwind State’s non attainment also depends in part on how much of the**  **above-NAAQS amount comes from the downwind State itself. As we expl**  **ained above, EPA therefore must factor in the downwind State’s own contribution,**  **alongside those of the various upwind States. But**
**EPA did not do that here.** 

Third **, and relatedly, EPA also failed to ensure that**  **the collective obligations of the various upwind States,**  **when aggregated, did not produce unnecessary over** 
**control in the downwind St ates. EPA’s statutory au**  **thority, once again, is li mited to attaining the NAAQS** 
**in the downwind States. EPA may not require up** 
**wind States to do more th an necessary for the down-** **40a**

**wind States to achieve the NAAQS. Here, EPA did not try to take steps to avoid such over control.**  **24**

**In sum, EPA’s authority derives from the statute and is limited by**  **the statutory text. 25**  **EPA’s reading of Section 110(a)(2)(D)(i**  **)(I)—a narrow and limited provision—reaches far beyond**  **what the text will bear.**

**24 At the proposal stage in the proceeding that culminated in the**  **Transport Rule, EPA considered a proportional approach that reflected many of the essential principles described above.**  See **EPA, Significant Contribution TSD at 6-7, J.A. 2311-12. Under that approach, the upwind contributors to a given downwind area** **would collectively have to provide a “defined air quality improve ment” to the downwind State, in the amount by which the down**  **wind State exceeded the NAAQS.** Id. **at 6, J.A. 2311. And the upwind States’ individual shares**  **of that collective duty would be defined “in direct proportion to their original contribution[s]” to** 
**the downwind State.** Id. **EPA ultimately chose not to adopt that approach, however.** 

**25 The statute also requires upwind States to prohibit emissions** **that will “interfere with maintenance” of the NAAQS in a down wind State. “Amounts” of air pollution cannot be said to “inter**  **fere with maintenance” unless they leave the upwind State and reach a downwind State’s maintenance area. To require a State to**  **reduce “amounts” of emissions pursuant to the “interfere with maintenance” prong, EPA must show some basis in evidence for**  **believing that those “amounts” from an upwind State, together with amounts from other upwind contributors, will reach a specific** 
**maintenance area in a downwind State and push that maintenance**  **area back over the NAAQS in the near future. Put simply, the “interfere with maintenance” prong of the statute is not an open**  **ended invitation for EPA to impose reductions on upwind States. Rather, it is a carefully calibrated and commonsense supplement to**  **the “contribute significantly” requirement. 41a** 

**Although the statutory text alone prohibits EPA’s Rule the statutory context pr**  **ovides additional support for our conclusion. The Supreme Court, in analyzing** 
**Section 109 of the Clean Air Act, rejected the premise**  **that Congress would “alter the fundamental details of**  **a regulatory scheme” in “a ncillary provisions”—in**  **other words, that Congress would “hide elephants in** 
**mouseholes.”** Whitman v. American Trucking
Ass’ns **, 531 U.S. 457, 468 (2001). The good neighbor provision is one of more th**  **an 20 SIP requirements in Section 110(a)(2). It seem**  **s inconceivable that Con gress buried in Section**  **110(a)(2)(D)(i)(I)—the good neighbor provision—an open**  **-ended authorization for EPA to effectively force ev**  **ery power plant in the up**
**wind States to install ev ery emissions control technol**  **ogy EPA deems “cost-effective.” Such a reading**
**would transform the narrow good neighbor provision** 
**into a “broad and unusual au thority” that would over**  **take other core provisions of the Act.** Gonzales v. Oregon **, 546 U.S. 243, 267 (2006). We “are confident**  **that Congress could not have intended to delegate a decision of such economic and political significance to**  **an agency in so cryptic a fashion.”** FDA v. Brown &
Williamson Tobacco Corp. **, 529 U.S. 120, 160 (2000).**

*** * ***

**States are obligated to prohibit only those “amounts” of pollution “which**  **will . . . contrib ute significantly” to downwi**  **nd attainment problems— and no more. Because the Transport Rule exceeds**  **those limits, and indeed do es not really try to meet**  **those requirements, it cannot stand. 42a** 

**III**

**There is a second, entirely independent problem with the Transport Rule. EPA did not stop at simply** **quantifying each upwind State’s good neighbor obliga tions. Instead, in an unprecedented application of the**  **good neighbor provision, EPA also simultaneously issued Federal Implementati**  **on Plans, or FIPs, to implement those obligations on**  **sources in the States.**
**EPA did so without giving the States an initial oppor**  **tunity to implement the obligations themselves through their State Implementation Plans, or SIPs.** 

**The Clean Air Act ordinarily gives States the initial**  **opportunity to implement a new air quality standard** 
**on sources within their bord ers; States do so by sub**  **mitting SIPs.** See **42 U.S.C. §§ 7407(a), 7410(a)(1). Here, by preemptively issu**  **ing FIPs, EPA denied the States that first opportunity to implement the reduc**  **tions required under their good neighbor obligations. EPA justifies its “FIP-first”**  **approach by pointing to its earlier findings that the**  **States had failed to meet their good neighbor obligations. But those findings** 

**came** before **the Transport Rule quantified the States’ good neighbor obligations.**  **EPA’s approach punishes the States for failing to meet a standard that EPA had**  **not yet announced and the States did not yet know.**

**Under the Act, EPA has auth ority to set standards,**  **but the statute reserves the first-implementer role for**
**the States. That division of labor applies not just to**  **the NAAQS but also to the good neighbor provision, Section 110(a)(2)(D)(i)(I), as**  **EPA itself has recognized several times in the past.**  **When EPA defines States’ 43a** 

**good neighbor obligations, it must give the States the first opportunity to implem**  **ent the new requirements.**

**A**

**“Under the Clean Air Act, both the Federal Gov**
**ernment and the States exer cise responsibility for**  **maintaining and improving air quality.”** American Trucking Ass’ns v. EPA **, 600 F.3d 624, 625 (D.C. Cir. 2010). The Act sets forth a ba**  **sic division of labor:**
**The Federal Government esta blishes air quality stan**  **dards, but States have prim ary responsibility for at**  **taining those standards within their borders.** See
Train v. NRDC **, 421 U.S. 60, 63-67 (1975);** American Trucking **, 600 F.3d at 625-26;** Virginia v. EPA **, 108 F.3d 1397, 1406-10 (D.C. Cir. 1997);**  see also **42 U.S.C. § 7401(a) (“The Congress finds . . . that air pol**  **lution prevention (that is, th e reduction or elimination,**  **through any measures, of th e amount of pollutants**  **produced or created at th e source) and air pollution** 
**control at its source is th e primary responsibility of**  **States and local governments. . . . ”); 42 U.S.C. § 7407(a) (“Each State shall**  **have the primary respon sibility for assuring air quality within the entire geo**  **graphic area comprising such State. . . .”) 26** 

**26 The 1970 Amendments, which “s**  **harply increased federal au thority” in**  setting **air quality standards, at the same time “explicit ly preserved the principle” of State primacy in**  implementing **pol**
**lution controls.** Train **, 421 U.S. at 64. The 1990 Amendments, which enacted the current text of Section 110(a)(2)(D)(i)(I), “did not**  **alter the division of responsibilities between EPA and the states in the section 110 process.”**  Virginia **, 108 F.3d at 1410. 44a** 

**That statutory division of authority is strict. This**
**Court has described the** Train

**-** Virginia **line of cases as erecting a statutory “fed**  **eralism bar” under Section**
**110 of the Act.** See Appalachian Power Co. v. EPA

**, 249 F.3d 1032, 1046 (D.C. Cir. 2001) (citing**  Train **, 421 U.S. 60;**  Virginia **, 108 F.3d 1397);** Michigan v. EPA

**, 213 F.3d 663, 687 (D.C. Cir.**  **2000). That statutory federalism bar prohibits EPA from using the SIP**  **process to force States to adopt specific control mea** 

**sures.** See Michigan **, 213 F.3d at 687;** Virginia **, 108**
**F.3d at 1410.**

**In** Train **, the Supreme Court invoked that statutory**
**division of labor in holding that the Clean Air Act gives**  **EPA “no authority to question the wisdom of a State’s choices of emission limitations,” so long as the State’s** 
**SIP submission would result in “compliance with the** 
**national standards for ambien t air.” 421 U.S. at 79.** 
**The Court stated:**

**The Agency is plainly char ged by the Act with the**  **responsibility for setting the national ambient air**  **standards. Just as plainly, however,** it is relegated by the Act to a secondary role **in the process of determining and enforcing**  **the specific, source-by**
**source emission limitation s which are necessary if** 
**the national standards it has set are to be met.** 

Id. **(emphasis added);** see also Union El ectric Co. v.
EPA **, 427 U.S. 246, 256, 269 (1976) (EPA may not reject a SIP on grounds of** **technical or economic in feasibility; that “would permit the Administrator or a**  **federal court to reject a St ate’s legislative choices in**  **regulating air pollution, ev en though Congress plainly** **45a**

**left with the States, so long as the national standards**  **were met, the power to d etermine which sources would**  **be burdened by regulation and to what extent”).**

**Similarly, in** Virginia **, this Court held that EPA had no authority under Section**  **110 to condition its approv al of northeastern States’ SIPs on the States’ adoption** 
**of California’s vehicle em ission control measures.**  See
**108 F.3d at 1401-10. The Court relied on the basic principle that the States,**  **not EPA, are the primary implementers under Section 110.**  See id. **at 1410 (“section 110 does not enable EPA to force particular**  **control measures on the states”).**

**In sum, Title I of the Act establishes a “partnership** 
**between EPA and the states.”** NRDC v. Browner **, 57 F.3d 1122, 1123 (D.C. Cir. 1995**  **). The terms of that partnership are clear: EPA sets the standards, but**  **the States “bear primary resp onsibility for attaining,**  **maintaining, and enforcing these standards.”** American Lung Ass’n v. EPA **, 134 F.3d 388, 389 (D.C. Cir. 1998).** 

**B**

**With that basic structure in mind, we consider the question presented here:**  **whether EPA may use its rulemaking authority to qu**  **antify States’ obligations under Section 110(a)(2)(D)(i)(I) and**  simultaneously **issue Federal Implementation Plans, without giving**  **the States a first opportunity to comply.**

**We begin by briefly descri bing the set of statutory**  **provisions on whic h EPA relies here.** **46a**

**EPA is the first mover in regulating ambient air pollution in Title**  **I of the Clean Air Act. Section 109**  **requires EPA to promulgate NAAQS for common air pollutants.**  See Whitman v. American Trucking
Ass’ns **, 531 U.S. 457, 462 (20 01) (citing 42 U.S.C.**  **§ 7409(a)). But once EPA sets a NAAQS, “responsi**  **bility under the Act shifts from the federal govern** 
**ment to the states.”** Lead Industries Ass’n v. EPA

**, 647 F.2d 1130, 1137 (D.C. Cir. 1980).** 

**Section 110 governs State Implementation Plans.**  **Section 110(a)(1) requires States to submit SIPs to implement each new or revised NAAQS.**  See **42 U.S.C. § 7410(a)(1). Section 110(a)(2) lists many** 
**elements that a SIP must co ntain in order to ensure**  **that the Plan will be compre hensive enough to enable**  **the State to attain the NAAQS.** See **42 U.S.C. § 7410(a)(2).**  **27 The good neighbor provision, Section**  **110(a)(2)(D)(i)(I), is one of those required elements.** 

**27** See, e.g. **, 42 U.S.C. § 7410(a)(2)(A) (SIP shall “include en forceable emission limitations and other control measures,” “as** 
**well as schedules and timetables for compliance”), 7410(a)(2)(B)**  **(SIP shall provide for means to “m onitor, compile, and analyze data**  **on ambient air quality” and provide the data to EPA upon request), 7410(a)(2)(C) (SIP shall “include a**  **program to provide for the en**
**forcement of ” the control measures required by subparagraph (A)),**  **7410(a)(2)(E) (SIP shall provide assurances that State and local authorities “will have adequate pe**  **rsonnel, funding, and authority” under State and local law “to carry out such implementation plan”),**  **7410(a)(2)(F) (SIP shall require “the installation, maintenance, and** **replacement of equipment” by “stationary sources to monitor emis sions from such sources”).** **47a**

**Section 110(c)(1) creates a federal backstop if the States fail to submit adequate SIPs. When EPA finds** 
**that a State “has failed to make a required submission”**  **or “disapproves a State im plementation plan submis**  **sion in whole or in part” be cause of a SIP “deficiency,”**  **EPA must “promulgate a Federal implementation plan” within two years, “u**  **nless the State corrects the deficiency” in the meantime**  **in a manner approved by EPA. 42 U.S.C. § 7410(c)(1).**  **In essence, the issue**
**here is whether a State’s im plementation of its good**  **neighbor obligation can be considered part of the**  **State’s “required submission” in its SIP (or whether the SIP can be deficient for failing to implement the**  **good neighbor obligation) even before EPA quantifies the State’s good neighbor ob**  **ligation. We think not. EPA’s quantifying of a State’s good neighbor obliga**  **tion and setting of a State’ s emissions budget is what**  **“require[s]” the State to make a “submission” imple**  **menting that obligation on sources within the State.** 
**After EPA has set the releva nt emissions budgets for**  **each State, EPA may requir e States to submit new**  **SIPs under Section 110(a)(1) or to revise their SIPs**  **under Section 110(k)(5). Th at is the approach EPA**  **has used in the past. In short, once EPA defines or**  **quantifies a State’s good neighbor obligation, the State must have a reasonable time to implement that re**  **quirement with respect to sources within the State. 28** 

**28 Section 110(k)(5), the SIP call provision, authorizes EPA to** 
**“establish reasonable deadlines” not to exceed 18 months for SIP revisions, once notice is given. 42 U.S.C. § 7410(k)(5);**  cf. **1998 NO**

**x Rule, 63 Fed. Reg. at 57,451 (12-month deadline).** **48a**

**In short, the triggers for a FIP are EPA’s finding**
**that the SIP fails to contai n a “required submission” or**  **EPA’s disapproving a SIP because of a “deficiency.” But logically, a SIP cannot**  **be deemed to lack a re quired submission or be deem**  **ed deficient for failing to implement the good neighbor**  **obligation until after EPA has defined the State’s g**  **ood neighbor obligation. Once it defines the obliga**  **tion, then States may be**
**forced to revise SIPs un der Section 110(k)(5) or to** 
**submit new SIPs under Se ction 110(a)(1). Only if** 
**that revised or new SIP is properly deemed to lack a**  **required submission or is properly deemed deficient**  **may EPA resort to a FIP for the State’s good neighbor obligation.** 

**C**

**1**

**In light of Section 110(c )(1), EPA here made “a**  **finding of failure to submit and/or disapproved a SIP**  **submission” for each State with respect to each NAAQS for which that State**  **would be cove red. EPA**  **Br. 44 (citing 42 U.S.C. § 7410(c)(1));** see also **EPA, Status of CAA 110(a)(2)(D)(i)(I) SIPs Final Rule**  **Technical Support Document (July 2011) (EPA, SIPs**  **TSD), J.A. 3167. 29**  **On the basis of those findings,**

**29 EPA was cognizant of another potential obstacle: its own**  **past approval of CAIR SIPs. CAIR covered the 1997 ozone and**
**annual PM 2.5**  **NAAQS, two of the three NAAQS at issue here.** See **70 Fed. Reg. 25,162, 25,165 (May 12, 2005). Many covered States** 
**had submitted and received EP A approval of CAIR SIPs.**  See **EPA, SIPs TSD, J.A. EPA apparently was concerned that those 49a** 

**EPA asserted authority to issue the Transport Rule** 
**FIPs.**

**But EPA’s many SIP disapp rovals and findings of**  **failure to submit share one problematic feature: EPA made all of those findings**  before **it told the States what**
**emissions reductions their SIPs were supposed to**  **achieve under the good neighbor provision.**  See **EPA, SIPs TSD, J.A. 3167.** 

**EPA sees no problem with that. In EPA’s view,** 
**there is no differ ence between a Stat**  **e’s obligation to comply with the NAAQS and**  **a State’s good neighbor**

**approved CAIR SIPs might deprive EPA of authority under Sec tion 110(c)(1) to issue Transport Rule FIPs for those two NAAQS.** 

**EPA tried to address this in the final rule. It claimed that be**

**cause** North Carolina **invalidated CAIR, approved CAIR SIPs no longer fulfilled States’ Section 110(a)(2)(D)(i)(I) obligations.**  See **Transport Rule, 76 Fed. Reg. 48,208, 48,219 (Aug. 8, 2011). It bears noting, however, that EPA continued to approve CAIR SIPs** 
**after** North Carolina

**.** See, e.g. **, 74 Fed. Reg. 65,446 (Dec. 10, 2009).** 

**But to try to make sure, in the final Transport Rule EPA retro spectively “corrected” its past approvals of CAIR SIPs, to clarify**  **its view that an approved CAIR SIP did not shield a State from the Transport Rule FIPs.**  See **76 Fed. Reg. at 48,219;** see also **42 U.S.C. § 7410(k)(6) (EPA may “revise” any approval the Adminis**  **trator determines “was in error”). EPA made those “corrections” without using notice and comment**  **rulemaking, despite the statu tory requirement that EPA make any corrections “in the same**  **manner as the approval.” 42 U.S.C. § 7410(k)(6).**

**Because the Transport Rule must be vacated in any event, we**
**need not address here whether EPA’s “corrections” of CAIR SIP approvals exceeded its authority under Section 110(k)(6).** **50a**

**obligation: States must su bmit SIPs addressing both**  **within three years of a NAAQS or face FIPs.** 

**But there is a difference—a glaring one—between the two obligations. A N**  **AAQS is a clear numerical target. For example, the NAAQS for annual PM**  **2.5 is** 
**15** μ **g/m 3**  **. Every State knows precisely what nu merical goal its SIP must ac**  **hieve. If a State misses that clear numerical target, it**  **has only itself to blame.**

**By contrast, the good neighb or obligation is not a**  **clear numerical target—far from it—until EPA defines the target. Even after EPA sets a NAAQS, an up**  **wind State’s good neighbor obligation for that pollu** 
**tant is nebulous and unkn own. The statutory stand** 
**ard is “amounts” of pollution whic**  **h will “contribute significantly to nonattainment” or “interfere with**  **maintenance” of the new NAAQS in a downwind State. There is no way for an upwi**  **nd State to know its obli gation without knowing levels**  **of air pollut ion in down**  **wind States and then apport ioning its responsibility**  **for each downwind State’s nonattainment. Therefore, the upwind State’s obligati**  **on remains impossible for the upwind State to determine**  until EPA defines it

**. 30** 

**30 As EPA itself has recognized in the past: “The precise na**  **ture and contents of such a submission is [sic] not stipulated in the**
**statute. EPA believes that the contents of the SIP submission required by section 110(a)(2)(D)(i) may vary depending upon the**  **facts and circumstances related to the specific NAAQS.” EPA, Guidance for State Implementation**  **Plan Submissions to Meet Cur rent Outstanding Obligations Under Section 110(a)(2)(D)(i) for the** 
**8-Hour Ozone and PM 2.5**  **National Ambient Air Quality Standards 3 (Aug. 15, 2006) (EPA, 2006 Guidance).** **51a**

**Without further definition by EPA, a prohibition on**
**“amounts which will . . . contribute significant**  **ly” is like a road sign that tells drivers to drive “care**  **fully.” The regulated entities—here, the upwind States—need more precise gu**  **idance to know how to conform their conduct to the law. A SIP logically** 
**cannot be deemed to lack a “required submission” or** 
**deemed to be deficient for failure to meet the good**  **neighbor obligation before EPA quantifies the good**  **neighbor obligation.**

**EPA faults the States for not hitting that impossible-to-know target wi**  **th their SIP submissions. In effect, EPA’s view is th**  **at the only chance States have to hit the target is**  before **EPA defines the target. By the time EPA makes the target clear, it’s already**  **too late for the States to comply.**

**Interestingly, outside of th is litigation, EPA has it**  **self recently and repeatedly recognized that it makes** 
**no sense for States to act un til EPA defines the target.**  **Just a few weeks ago, for example, in a separate pro**  **ceeding EPA said that whil e some elements of a SIP**  **submission are “relatively straightforward,” “others clearly require interpretati**  **on by EPA th rough rule** **making, or recommendations through guidance, in or der to give specific meaning for a particular NAAQS.”** **77 Fed. Reg. 46,361, 46,363 (Aug. 3, 2012). “For ex ample, section 110(a)(2)(D)(i)**  **requires EPA to be sure**
**that each state’s SIP contai ns adequate provisions to**  **prevent significant contribution to nonattainment of the NAAQS in other states.**  **This provision contains numerous terms that requir**  **e substantial rulemaking 52a** 

**by EPA in order to determi ne such basic points as**  **what constitutes significant contribution.”** Id. **at n.7. Thus, EPA has said that the good neighbor provision**  **“clearly require[s] interpr etation by EPA through**  **rulemaking, or recommendatio ns through guidance, in**  **order to give specific meaning for a particular NAAQS.”**  Id. **;** see also, e.g. **, 77 Fed. Reg. 45,320, 45,323 & n.7 (July 31, 2012)**  **(same); 77 Fed. Reg. 43,196, 43,199 & n.7 (July 24,**  **2012) (same); 77 Fed. Reg. 22,533, 22,536 & n.7 (Apr. 16, 2012) (same); 76**  **Fed. Reg. 40,248, 40,250 & n.5 (July 8, 2011) (same).** 

**In this litigation, however, EPA insists that the text**  **of Section 110(c)(1) compels its FIP-first approach.**  **But EPA pursues its readin g of the statutory text** 
**down the rabbit hole to a wonderland where EPA**  **defines the target** after **the States’ chance to comply with the target has already passed.**  Cf. FCC v. Fox Television Stations, Inc. **, 132 S. Ct. 2307, 2317 (2012) (“A fundamental principle in**  **our legal system is that laws which regulate persons or**  **entities must give fair notice of conduct that is forbidden or required.”);**  id. **(“regulated parties should kn ow what is required of**  **them so they may act accordingly”);** Christopher v. SmithKline Beecham Corp. **, 132 S. Ct. 2156, 2168 (2012) (“It is one thing to**  **expect regulated parties to**
**conform their conduct to an agency’s interpretations**  **once the agency announces th em; it is quite another to** **require regulated parties to divine the agency’s inter pretations in advance. . . .”).** 

**We take a different view. Statutory text “cannot**
**be construed in a vacuum. It is a fundamental canon** **53a**

**of statutory construction th at the words of a statute** 
**must be read in th eir context and with a view to their**  **place in the overall statutory scheme.”** Roberts v. Sea-Land Services, Inc. **, 132 S. Ct. 1350, 1357 (2012) (quoting**  Davis v. Michigan Dep’t of Treasury **, 489 U.S. 803, 809 (1989)).** 

**Title I’s core two-step pr ocess is that the Federal**  **Government sets end goals and the States choose the**  **means to attain those goals.** See Michigan **, 213 F.3d at 687;**  see also Virginia **, 108 F.3d at 1410. EPA’s theory—that EPA can define the end goals for the**  **good neighbor provision and** simultaneously **issue federal plans to implement them—upends that process**  **and places the Federal Govern ment firmly in the driv**  **er’s seat at both steps. The FIP-first approach is incompatible with the basic**  **text and structure of the**
**Clean Air Act.**

**In our view, determining th e level of reductions re**  **quired under Section 110(a)(2 )(D)(i)(I) is analogous to**  **setting a NAAQS. And deter mining the level of re**  **ductions under the good neighbor provision triggers a period during which States may submit appropriate**  **SIPs under Section 110(a)(1 ) or SIP revi**  **sions under Section 110(k)(5).** 

**That approach fits comforta bly within the statutory**  **text and structure. In both situations—setting a NAAQS and defining States’ good neighbor obligations**  **—EPA sets the numerical end goal. And in both cases, once the standards**  **are set, “determining the particular mix of controls**  **among individual sources to attain those standards” remains “a State responsibil-** **54a**

**ity.” 1998 NO**

**x Rule, 63 Fed. Reg.**  **57,356, 57,369 (Oct. 27, 1998).** 

**2**

**Other contextual and struct ural factors also support** 
**our conclusion that Sectio n 110(a)(2)(D)(i)(I) preserves** **the basic principle that States, not the Federal Gov ernment, are the primary implementers after EPA has**  **set the upwind States’ good neighbor obligations.**

**Section 110’s particular fu nction in the statutory**  **scheme is to give the Stat es the first opportunity to**  **implement the national standards EPA sets under**
**Title I.** See **42 U.S.C. § 7410(a)-(c);** see also Train

**, 421 U.S. at 79;**  Virginia **, 108 F.3d at 1410;** Michigan

**, 213 F.3d at 686-87. The good**  **neighbor requirement’s placement in Section 110(a)—a provision calling for**  **State-level regulation—str ongly suggests that Con**  **gress intended** States **to implement the obligations set forth in Section 110(a)(2)(D**  **)(i)(I). By contrast, if EPA’s FIP first interpretation**  **were to prevail, Section 110(a)(2)(D)(i)(I) would not fi**  **t well in Section 110(a).**

**Moreover, Title I contains a separate provision,**  **Section 126, that explicitly contemplates direct EPA**  **regulation of specific source s that generate interstate**  **pollution.** See **42 U.S.C. § 7426(b)-(c);** see also Appalachian Power **, 249 F.3d at 1046. Section 126(b) permits a State to petition EPA for a finding that a**  **source in a neighboring Sta te emits pollution in viola**  **tion of Section 110(a)(2)(D)(i). 31**  See **42 U.S.C.**

**31 Section 126(b)’s text refers to**  **“section 7410(a)(2)(D)(ii).” 42 U.S.C. § 7426(b). This Court has**  **identified the cross-reference to 55a** 

**§ 7426(b). Section 126(c) give s EPA discretion to im**  **pose severe sanctions, including “emission limitations and compliance sc**  **hedules,” on a so urce for which a**  **finding has been made. 42 U.S.C. § 7426(c);** see also **42 U.S.C. § 7509. The fact that Congress explicitly** 
**authorized EPA to use dire ct federal regulation to** **address interstate pollution suggests it did not con template direct Federal**  **regulation in Section 110(a)(2)(D)(i)(I).**  Cf. Whitman **, 531 U.S. at 467-68;**
General Motors Corp. v. United States **, 496 U.S. 530, 541 (1990). And as this Co**  **urt has previously held, that Section 126 imposes “ext**  **rinsic legal constraints” on State autonomy “**  does not affect a state’s discretion under § 110.” Appalachian Power **, 249 F.3d at 1047 (emphasis added).** 

**In sum, the text and contex t of the statute, and the**  **precedents of the Supreme Court and this Court, es** **tablish the States’ first-implementer role under Sec**
**tion 110. We decline to adopt a reading of Section**  **110(a)(2)(D)(i)(I) that would bl ow a hole in that basic**  **structural principle. 32** 

**3**

**The novelty of EPA’s a pproach underscores its**  **flaws. In the past, EPA has applied the good neigh-** 

**paragraph (ii), instead of paragraph (i), as scrivener’s error.** See Appalachian Power **, 249 F.3d at 1040-44.**

**32 We conclude that EPA’s interpretation on the FIPs issue is**  **contrary to the text and context of the statute (a** Chevron **step 1 violation), in the alternative is absurd (a**  Chevron **step 1 violation), and again in the alternative is**  **unreasonable (thus failing** Chevron **step 2 if we get to step 2). 56a** 

**bor provision in the States- first way we have outlined** 
**here.**

**The 1998 NO**

**x Rule (which we addressed in**  Michigan **) quantified each State’s good neighbor obligation but then gave the States 12**  **months to submit SIPs to implement the required reductions.**  See **63 Fed. Reg. at 57,358, 57,450-51; 42 U.S.C.**  **§ 7410(k)(5). Indeed, EPA explicitly assured Stat**  **es that the Rule did not intrude on their authority**  **to choose the means to achieve the EPA-defined end goal.**  See **1998 NO**

**x Rule, 63 Fed. Reg. at 57,369.**  **EPA then explained, persuasively,**  **why it made sense no t to deviate from**  **Title I’s standard division of labor in the good neighbor**

**context:**

**The task of determining the reductions neces sary to meet section 110(a)(2**  **)(D) involves allocating**
**the use of the downwind States’ air basin. This**
**area is a commons in th e sense that the contrib**  **uting State or States ha ve a greater interest in**  **protecting their local interests than in protecting**
**an area in a downwind Stat e over which they do not**  **have jurisdiction and for which they are not politi**  **cally accountable. Thus, in general, it is reasona** 
**ble to assume that** EPA may be in a better position

to determine the appropriate goal **, or budget, for the contributing States,**  while leaving [it] to the contributing States’ discretion to determine the mix of controls **to make the necessary reductions.**

Id. **at 57,370 (emphases added).**

**In** Michigan **, this Court held th at the 1998 Rule did**  **not transgress the** Train-Virginia **federalism bar. 57a** 

**But the terms of the** Michigan **Court’s approval high light how flagrantly the ne**  **w Transport Rule crosses**
**that line. We said: “EPA does not tell the states**  **how to achieve SIP compli ance. Rather, EPA looks**  **to section 110(a)(2)(D) and** merely provides the levels to be achieved by state-determined compliance mechanisms **.” 213 F.3d at 687 (emphasis added). We emphasized that States had a “real choice” how to**  **implement the required reductions.** Id. **at 688.**

**Like the 1998 NO**

**x Rule, the 2005 Clean Air Inter**  **state Rule gave States the first crack at implementing**  **the reductions required by EPA.** See **70 Fed. Reg. 25,162, 25,263 (May 12, 2005) (r**  **equiring SIPs within 18 months). When EPA issu**  **ed CAIR FIPs in April 2006, about a year after it**  **promulgated C AIR, it clari** 
**fied that it intended the FIPs to serve as a “Federal backstop” to the ongoing SIP process, and did not**  **intend to “take any other steps to implement FIP** **requirements that could impact a State’s ability to reg**
**ulate their sources in a diff erent manner” until “a year** 
**after the CAIR SIP submission deadline.”** See **CAIR FIPs, 71 Fed. Reg. 25,328,**  **25,330 (Apr. 28, 2006). That timetable, EPA assure**  **d the States, would allow EPA “to approve timely SIPs**  before **implementation of FIP requirements occurs.”**  Id. **at 25,331 (emphasis added).** 

**In both the 1998 NO**

**x Rule and the 2005 CAIR, EPA** 
**was therefore careful not to infringe the States’**  **first-implemented role. EPA’s own past practice and**
**statements illustrate the an omaly of its new FIP-first**  **approach. 58a** 

**D**

**On a separate tack, EPA do es not concede that it**  **denied the States their rightful chance to implement their good neighbor obligations. It contends States** 
did **have an opportunity to submit SIPs. In EPA’s view, once it issued the 2006 24-hour PM**  **2.5 NAAQS,**  **States had three years unde r Section 110(a)(1) to seek**  **and obtain EPA approval of SIPs addressing their**  **good neighbor obligations.**

**But to reiterate, the proble m is that the three-year**  **period expired** before **EPA issued the Transport Rule and defined the good neighbor obligations of upwind** 
**States. EPA has an answer for that—one we find ex**  **traordinarily unpersuasive. In its view, each State should have come up with**  **(i) its own definition of**
**“amounts which will . . . contribute significant**  **ly” and (ii) its own modeli ng and methodology for ap**  **plying that definition.** See **EPA Br. 48 (“EPA has never stated that its methodology is the only way”)**  **(emphasis omitted).**

**In effect, EPA claims th e statute requires each** 
**State to take its own stab in the dark at defining** 
**“amounts which will . . . contribute significant**  **ly” to a downwind State’s nonattainment. The State**  **would then have to apply that homemade definition using its own homemade methodology.**  **33**

**33 EPA points to guidance documents it issued in 2006 and 2009.** 
**Those documents further undermine EPA’s contention that the stab in the dark was a realistic opportunity for States to avoid**  **being pulled into the Transport Rule FIPs. 59a** 

**Of course, once a State takes its stab, EPA could disapprove it—especially if the State defined its own** 

**The 2006 document, published after CAIR but before** North
Carolina **, did not apply to CAIR States.** See **EPA, 2006 Guidance at 4. It told non-CAIR States that “EPA anticipates, based upon**  **existing information developed in connection with the CAIR, that**  **emissions from sources in States not covered by the CAIR do not contribute significantly to nonattainment or interfere with mainte** 
**nance of the 8-hour ozone or PM 2.5**  **NAAQS in any other State.”**
Id. **at 5. The 2009 guidance document**  **concerned the 2006 24-hour PM 2.5** **NAAQS, which was not covered by CAIR. The seven-page docu ment included three paragraphs of vague guidance on “significant**  **contribution” under Section 110(a)(2)(D).** See **EPA, Guidance on SIP Elements Required Under Sections 110(a)(l) and (2) for the**  **2006 24-Hour Fine Particle (PM 2.5**  **) National Ambient Air Quality Standards (NAAQS) 3 (Sept. 25, 2009) (EPA, 2009 Guidance) (“The**  **state’s conclusion must be supporte d by an adequate technical anal** **ysis. Information to support the state’s determination with re spect to significant contribution to nonattainment might include,**  **but is not limited to, information concerning emissions in the state, meteorological conditions . . . , monitored ambient concen** **trations . . . , the distance to the nearest area that is not at taining the NAAQS in another state, and air quality modeling.”);**  cf.
**1998 NO**

**x Rule, 63 Fed. Reg. at 57,370 (i**  **f EPA does not identify the “acceptable level of NO** 

**x reductions, the upwind State would not**  **have guidance as to what is an acceptable submission”). The 2009 document ordered the States, equipped with**  **that vague guidance, to submit SIPs to address Section 110(a)(2)(D)(i)(I) for 24-hour PM**  **2.5 . But in the same breath, it** **warned them that EPA itself intended to “complete a rule to ad dress interstate pollution transport in the eastern half of the conti**  **nent and United States.” EPA, 2009 Guidance at 3. EPA did not say what would happen if a State’s approach did not coincide with**  **the approach EPA was developing for its own rule, but experience**
**tells the tale. 60a** 

**obligation to be le ss than what EPA d**  **eemed it to be. Experience appears to bear**  **that out: Petitioners point out that every Transp**  **ort Rule State that sub mitted a good neighbor**  **SIP for the 2006 24-hour PM 2.5**  **NAAQS was disapproved.** See **State & Local Br. 29-31; State & Local Reply Br. 5-7.** 

**That should not come as a surprise. In the 1998** 
**NO**

**x Rule, EPA acknowledged that pre-Rule stabs in** 
**the dark were bound to fail . “Without determining an**  **acceptable level of NO**

**x reductions,” EP**  **A warned, “the upwind State would not have gu**  **idance as to what is an acceptable submission.” Fe**  **d. Reg. at 57,370. And States would incur signific**  **ant costs developing those**
**SIP submissions.**

**As EPA repeatedly remind s this Court, interstate**  **pollution is a colle ctive problem that requires a com**  **prehensive solution.** See **EPA Br. 5 (“Absent effec tive federal control, individu**  **al States often have little economic or political incentive to self-impose regula**  **tory controls (and attendant costs) within their States**  **solely to address air qu ality problems in other**  **States.”). And EPA itself has recognized that having**  **each State independently gu ess at its ow**  **n good neigh bor obligations is not a plausible solution to interstate**  **pollution: “It is most efficient—** indeed necessary— **for the Federal government to establish the overall** 
**emissions levels for the various States.” 1998 NO** 

**x Rule, 63 Fed. Reg. at**  **57,370 (emphasis added).**

**Yet EPA now encourages us to suspend disbelief** 
**and conclude that under th e statute, a State’s only** 
**chance to avoid FIPs is to make a successful stab in** **61a**

**the dark—a feat that not one Transport Rule State**  **managed to accomplish. EPA clearly does not believe the stab-in-the-dark approach would really permit**  **States to avoid FIPs—its own past statements show that. But EPA’s authority**  **to issue these FIPs rests on our accepting its rickety statutory logic.** 

**We decline the invitation. Our duty is to “inter pret the statute as a symme**  **trical and coherent regu latory scheme and fit, if**  **possible, all parts into an**
**harmonious whole.”** FDA v. Brown & Williamson Tobacco Corp. **, 529 U.S. 120, 133 (2000) (citations and**  **internal quotation marks omitted). EPA’s FIP-first approach fails that test.** 

**When EPA quantifies States’ good neighbor obliga tions, it must give the Stat**  **es a reasonable first oppor tunity to implement those obligations. That approach**  **reads Section 110(a)(2)(D)(i)(I ) in harmony with the** 
**rest of Section 110. It preserves Title I’s Federal** 
**State division of labor—a division repeatedly rein**  **forced by the Supreme Court and this Court. And it**  **accords with the commonsense notion that Congress did not design the good neig**  **hbor provision to set the States up to fail.**  **34**

**34 The dissent contends that the States’ challenge on this issue**  **comes too late. We disagree. The dissent conflates (i) EPA’s prior disapproval of certain States’ SIPs and (ii) EPA’s decision to**  **quantify the good neighbor obligation and to simultaneously issue FIPs rather than to issue a SIP call for SIP revisions (or to allow**  **new SIPs). Petitioners are challenging only the latter point.**
**And EPA announced its final decisi on to proceed that way in the**  **Transport Rule itself. Put another way, the statute says that 62a** 

**IV**

**The decision whether to va cate a flawed rule “de**  **pends 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 that may itself be changed.”** AlliedSignal, Inc. v. NRC **, 988 F.2d 146, 150-51 (D.C. Cir. 1993) (internal quotat**  **ion marks omitted);** see also Davis County Solid Waste Mgmt. v. EPA **, 108 F.3d 1454, 1459 (D.C. Cir. 1997).** 

**Here, we have no doubt that the agency chose in correctly. The Transport Rule stands on an unsound**  **foundation—including EPA’s flawed construction of the statutory term “amounts which will . . .**  **contribute significantly to nonattainment.” 42 U.S.C. § 7410(a)(2)(D)(i). That defi**  **ciency is too fundamen tal to permit us to “pick**  **and choose portions” of the rule to preserve.**  North Carolina v. EPA **, 531 F.3d 896, 929 (D.C. Cir. 2008). An**  **d as with the Clean Air Interstate Rule, the Transport Rule’s “fundamental** 
**flaws foreclose EPA from promulgating the same** 
**standards on remand.”** Id. **(internal quotation marks omitted). EPA’s chosen manner of implementing the** 

**EPA must issue a FIP within two years after a State fails to make a “required submission” or submits a deficient SIP. But a State**  **cannot be “required” to implement its good neighbor obligation in a**
**SIP “submission”—nor be deemed to have submitted a deficient SIP for failure to implement the good neighbor obligation—until it**  **knows the target set by EPA. In this case, EPA set the relevant target in the Transport Rule. Petitioners’ challenge to the Trans**  **port Rule’s FIPs is entirely timely. 63a** 

**Rule—issuing FIPs without gi ving the States a post**  **Rule opportunity to submit SIPs—also rests on a mis**  **reading of the statute.**

**We therefore vacate the Tr ansport Rule rulemaking**  **action and FIPs, and remand to EPA.**

**The remaining question is the status of CAIR. In** 
North Carolina **, this Court initially held that CAIR’s**
**“fundamental flaws” required vaca**  **tur. 531 F.3d at 929. On rehearing, the**  **Court reconsidered its initial**
**decision and modi fied its order**  **to remand CAIR with**

**out vacatur.** North Carolina v. EPA

**, 550 F.3d 1176,**  **1178 (D.C. Cir. 2008). The Court noted that under**  **our precedents, it is appropriate to remand without vacatur “where vacatur would at least temporarily** 
**defeat the enhanced protection of the environmental**  **values covered by the EPA rule at issue.”**  Id. **(inter nal quotation marks,**  **brackets, and ellipsis omitted).**
**The Court was “convinced that, notwithstanding the**  **relative flaws of CAIR, allowing CAIR to remain in**  **effect until it is replaced by a rule consistent with our**  **opinion would at least temporarily preserve the envi**  **ronmental values covered by CAIR.”** Id.

**In accordance with our Order granting the motions to stay**  **the Transport Rule, EPA has continued to**
**administer CAIR.** See **Order, No. 11-1302, at 2 (D.C. Cir. Dec. 30, 2011);**  see also **http://www.epa.gov/cair. Vacating CAIR now would**  **have the same consequenc**
**es that moved the** North Carolina **Court to stay its hand—and indeed might be more severe**  **now, in light**
**of the reliance interests accumulated over the inter**  **vening four years. We th erefore conclude, as did the** **64a**

**Court in** North Carolina **, that the appropriate course**
**is for EPA to continue to admi**  **nister CAIR pending its development**  **of a valid replacement. 35** 

*** * ***

**We vacate the Transport Rule and the Transport** 
**Rule FIPs and remand this proceeding to EPA. EPA** 
**must continue administer ing CAIR pending the prom**  **ulgation of a valid replacement.**

So ordered

**.**

**35 The**  North Carolina **Court did “not intend to grant an indefi nite stay of the effectiveness” of its decision. 550 F.3d at 1178.**  **We likewise expect that EPA will proceed expeditiously on remand. 65a** 

**R OGERS** 
**,** Circuit Judge **, dissenting: To vacate the Transport Rule, the court di**  **sregards limits Congress placed on its jurisdiction,**  **the plain text of the Clean Air Act (“CAA”), and this court’s settled precedent**  **interpreting the same statut ory provisions at issue**  **today. Any one of these ob stacles should have given**  **the court pause; none did. The result is an unsettling**  **of the consistent precedent of this court strictly en**  **forcing jurisdictional limits , a redesign of Congress’s**  **vision of cooperative federalism between the States and the federal government in implementing the CAA**  **based on the court’s own notions of absurdity and logic that are unsupported by a**  **factual record, and a tram pling on this court’s precedent on which the Environ**  **mental Protection Agency (“EPA”) was entitled to rely in developing the Transport Rule rather than be blind**  **sided by arguments raised fo r the first time in this** 

**court.**

**Congress has limited the avai lability of judicial re**  **view of challenges to fina l rules promulgated by the**  **EPA in two ways that are relevant here. Under CAA**  **section 307(b)(1), 42 U.S.C. § 7607(b)(1), petitions for**  **judicial review must be fi led within sixty days of**  **promulgation of a final rule, and under CAA section 307(d)(7)(B), 42 U.S.C. § 7607(**  **d)(7)(B), “[o]nly an ob jection to a rule or proced**  **ure which was raised with reasonable specificity duri**  **ng the period for public comment . . . may be raised during judicial**  **review.” The court has, unti l today, strictly enforced**  **these requirements, which exist for two important**
**reasons: to enfo rce repose so that**  **the rulemaking process is not crippled by**  **surprise challenges to mat- 66a** 

**ters that were rightfully presumed settled, and to guarantee an agency’s expe**  **rt consideration and possi ble correction of any flaws in its rules**  before **the mat**
**ter reaches a court. Instead the court casts aside both jurisdictional provisio**  **ns, upending these two fun damental principles. In so**  **doing, the court thus fails to “maintain uniformity of the court’s decisions” on**  **these “question[s] of exceptional importance.” F ED** 

**. R.**  **A PP** 

**. P. 35(a)(1) & (2).** 

**As one basis underlying it s vacatur of the Transport**  **Rule, the court permits a collateral attack on prior final rules in which EPA disapproved state implemen**  **tation plan (“SIP”) submis sions with respect to the**  **“good neighbor provision,” CAA § 110(a)(2)(D)(i)(I), 42 U.S.C. § 7410(a)(2)(D)(i)(I),**  **or found States failed**
**to submit such a SIP at all. In those Final SIP Rules,**  **EPA unambiguously stated its interpretation that States had an independent**  **obligation under section 110(a) to submit “good neig**  **hbor” SIPs regardless of whether EPA first quantifie**  **d each State’s emission reduction obligations.**  **Under section 307(b)(1), States had sixty days to seek judicial review of those**  **Final SIP Rules to challeng e EPA’s interpretation of**  **section 110(a). EPA’s auth ority to promulgate the**  **federal implementation plans (“FIPs”), pursuant to section 110(c), in the**  **Transport Rule was** triggered **by EPA having published thos**  **e Final SIP Rules, and under section 307(b)(1) States may not collaterally**  **attack the propriety of th ose Final SIP Rules now.**  **This is not a mere technicality—EPA developed and promulgated the Transport Rule with the knowledge** 
**that all but three States did not seek judicial review of** **67a**

**its interpretation of section 110(a) and in light of this**  **court’s opinion in** North Carolina v. EPA **, 531 F.3d 896 (D.C. Cir. 2008). The court**  **therefore lacks jurisdic tion under section 307(b)(1) to**  **consider States’ belated challenge to EPA’s interpreta**  **tion of section 110(a) as part of its review of the**  **Transport Rule; the petitions challenging the Final SIP Rules filed by three States** 
**are not consolidated with th e petitions challenging the**  **Transport Rule, as they involve separate provisions of**
**the CAA and different final rules. The court glosses**  **over the plain text and stru cture of section 110 to avoid**  **that reality, and in the process rewrites sections 110(a) and 110(c), altering the triggering mechanism for**  **States’ obligations to submit “good neighbor” SIPs and**  **EPA’s obligation to promulga te FIPs, based on its own**  **speculative conclusion that the process Congress adop**  **ted is “impossible” for States to follow. To reach its**  **conclusion, the court today holds that the CAA** requires **what it previously he ld the CAA ambiguously**  permits **EPA to do.**

**As another ground to vacate the Transport Rule, the court concludes that, under EPA’s two-step ap**  **proach to defining “significant contribution” under the “good neighbor” requirement in section**  **110(a)(2)(D)(i)(I), a State “may be required to reduce**  **its emissions by an amount greater than the ‘signifi** 
**cant contribution’ that brou ght it into the program in**  **the first place.” Op. at 34. No objection was made during the Transport Rule administrative proceedings**  **to EPA’s approach, let alone its** statutory authority **, to use different, unrelated meas**  **ures of significance for inclusion and budget-setti**  **ng. Acknowledging this, 68a** 

**the court reaches beyond the Transport Rule adminis trative record, despite sect**  **ion 307(d)(7)(B)’s clear com mand, to find jurisdiction.**  **But the three reasons it offers do not add up. By**  **suggesting that EPA acted inconsistently with**  North Carolina **in adopting a two step approach, with differe**  **nt, unrelated measures of “significant contribution”**  **for inclusion and budget setting, the court ignores that in**  North Carolina **this court expressly declined to**  **disturb that same ap proach. 531 F.3d at 916-17. In relying on a com**  **ment expressing a policy pr eference made during the**  **administrative proceedings of the predecessor of the**  **Transport Rule (to which peti tioners failed to alert the** 
**court until** rebuttal **oral argument), the court ignores**
**that the comment does not challenge EPA’s statutory**  **authority to pursue its two- step approach, and the fact**  **that no one petitioned the court in** North Carolina **for judicial review based on**  **that comment, which is why**
**the court in** North Carolina **left that approach undis turbed,**  see id. **The court also ignores that the prior rulemaking docket was not**  **incorporated into the Transport Rule administrative proceedings. Togeth**  **er, these “ignored” facts de monstrate that EPA had no**  **reason to suspect any party before it in the Transport**  **Rule administrative proceedings subscribed to the objection stated in the old**  **comment, nor even to locate**
**and consider that comment. Finally, EPA’s rejection**  **on technical grou nds of alternative approaches for**  **measuring “significant cont ribution” based solely on**  **air quality, not cost and ai r quality, during the Trans**  **port Rule administrative proceedings says nothing** 
**about whether EPA would ha ve refused to entertain** **69a**

**petitioners’ new objection in this court that EPA was**  **statutorily required to modify its two-step approach by**  **making the inclusion threshold of step-one a floor for**
**reductions under the cost a pproach of step-two. The**  **alternative approaches EPA considered and rejected are not even the approaches**  **petitioners now endorse, and, in any event, cannot ex**  **cuse a failure to state their objection with “reasonable specificity” during the**  **Transport Rule administrative proceedings.**

**The court’s remaining reasons for vacatur lack mer it. First, the court conclu**  **des EPA violated the “good neighbor” provision’s “propo**  **rtionality” requirement, but petitioners presented no**  **such statutory authority argument in their briefs, instead challenging EPA’s**  **grouping of States for purposes of SO 2**  **reduction as arbitrary and capricious. Ev**  **en if they had, the court lacks jurisdiction because th**  **e argument is premised on speculation that EPA’s two-**  **step approach to measur ing “significant contribution**  **” might require States to reduce emissions by**  more **than the amount that trig gered their inclusion in the**  **Transport Rule in the first place—the same argument over which the court lacks**  **jurisdiction due to petition ers’ failure to challenge**  **EPA’s statutory authority for its approach during the Transport Rule administrative proceedings. On the**  **merits, the court’s “proport ionality” conclusion con** 
**tradicts the court’s o pposite conclusion in**  North Carolina **that EPA’s measurement of a State’s “significant** 
**contribution” did not have to correlate directly with its**  **air quality impact “relative to other upwind states.”**  **531 F.3d at 908 (citing** Michigan v. EPA **, 213 F.3d 663, 679 (D.C. Cir. 2000)). Similarly, the court’s holding** **70a**

**that EPA failed to consider the effect of in-state emis** **sions is likewise premised on the subthreshold argu ment. Further, the court’s “in-State emissions” and** 
**its “over-control” conclusion s are contradicted by the**  **Transport Rule administrative record.**

I.

**Section 307(b)(1) of the CAA, 42 U.S.C.**  **§ 7607(b)(1), requires a petiti on for judicial review of** 
**EPA final actions to be filed within sixty days of pub**  **lication in the Federal Regist er. “The filing period in**  **the Clean Air Act ‘is jurisdic tional in nature’; if the**  **petitioners have failed to comply with it, we are pow** 
**erless to address their claim.”** Med. Waste Inst. & Energy Recovery Council v. EPA **, 645 F.3d 420, 427 (D.C. Cir. 2011) (quoting**  Motor & Equip. Mfrs. Ass’n
v. Nichols **, 142 F.3d 449, 460 (D.C. Cir. 1998)).**

**The Supreme Court has expl ained that “judicial re**  **view provisions are jurisd ictional in nature and** 
**must be construed with strict fidelity to their terms.**  **This is all the more true of statutory provisions specifying the timing of re**  **view, for those time limits are, as we have often st**  **ated, mandatory and juris dictional, and are not subj**  **ect to equitable tolling.”**

Slinger Drainage, Inc. v. EPA **, 237 F.3d 681, 682 (D.C. Cir. 2001) (quoting**  Stone v. Immigration & Naturalization Serv. **, 514 U.S. 386, 405 (1995) (internal quota tion marks, alterations, an**  **d citation omitted)). Ac cordingly, in**  Medical Waste **this court dismissed a challenge to a final rule for**  **lack of jurisdiction where petitioners failed to seek**  **judicial review when EPA**

**“** first use[d] **”its statutory approa ch, 645 F.3d at 427** **71a**

**(emphasis added)**

. **“An objection is considered a col lateral attack only if ‘a reason**  **able [petitioner] . . . would have perceived a very**  **substantial risk that the [rule] meant what the [agenc**  **y] now says it meant.”** S. Co. Servs., Inc. v. FERC **, 416 F.3d 39, 45 (D.C. Cir. 2005) (internal quotations ma**  **rks, citation, and altera tions omitted).** 

**The Transport Rule, responding to States’ failures to submit adequate “good**  **neighbor” SIPs, is a FIP**
**that addresses the interstate transport of emissions in**  **twenty-seven States in th e eastern United States**  **for three national ambient air quality standards (“NAAQS”): the 1997 8-ho**  **ur ozone NAAQS, the 1997**
**annual PM 2.5**  **NAAQS, and the 2006 24-hour PM 2.5**  **NAAQS. 1**  See **Transport Rule, 76 Fed. Reg. 48,208**  **(Aug. 8, 2011). In the Tr ansport Rule, EPA deter** 
**mined that the same level of emission reduction obli**  **gations would apply for each of these three NAAQS.** 
See id. **at 48,264. Over a year prior to promulgating**  **the Transport Rule, EPA promulgated Final SIP Rules publishing findings that twenty-nine States and** 

**1 Section 110(a)(1) of the CAA pr**  **ovides that States must submit SIPs within three years (or less, if set by EPA) of promulgation of**  **a NAAQS. Section 110(a)(2)(D), in turn, requires States to submit SIPs with “adequate provisions”**  **(i) prohibiting, consistent with the provisions of this subchap**  **ter, any source or other type of emissions activity within the State from emitting any air po**  **llutant in amounts which will— (I) contribute significantly to nonattainment in, or interfere**  **with maintenance by, any other St ate with respect to any such**  **national primary or secondary ambient air quality standard.** 
**42 U.S.C. § 7410(a)(2)(D)(i)(I). 72a** 

**territories had failed to subm it SIPs with the required**  **“good neighbor” provisio ns for the 2006 24-hour PM**  **2.5 NAAQS.**  **2** See **Failure to Submit Good Neighbor SIP Finding, 75 Fed. Reg. 32,673 (June 9, 2010); Tennessee** 
**Failure to Submit Good Ne ighbor SIP Finding, 76**  **Fed. Reg. 43,180 (July 20, 2011). In these Final SIP**  **Rules, EPA stated:**

**This finding establishes a 2-year deadline for prom ulgation by EPA of a FIP,**  **in accordance with sec tion 110(c)(1), for any stat**  **e that either does not submit or EPA cannot approve a SIP as meeting**  **the attainment and maintenance requirements of [the “good neighbor” pr**  **ovision] for the 2006 24-**
**hour PM 2.5**  **NAAQS. . . . This action . . . does not pertain to . . . a SIP Call pursuant**  **to section 110(k)(5).**

Id. **at 32,674;** see also **76 Fed. Reg. at 43,180-81 (Ten nessee). The Final SIP Rules further state that the**  **findings of failure to submit were of nationwide scope**

**2 The States and territories were: Alaska, Colorado, Hawaii,**  **Idaho, Illinois, Iowa, Louisiana, Maryland, Michigan, Minnesota, Montana, Nebraska, North Dakota, Oklahoma, Oregon, Pennsyl**  **vania, South Dakota, Utah, Virginia, Washington, West Virginia, Wisconsin, Wyoming, the District of Columbia, American Samoa,** **the Commonwealth of the Northern Mariana Islands, Guam, Puer to Rico, and the U.S. Virgin Islands.**  See **Failure to Submit Good Neighbor SIP Findings, 75 Fed. Reg. at 32,674. (On July 20, 2011,**  **EPA published an additional finding that Tennessee had failed to submit a “good neighbor”**  **SIP for the 2006 24-hour PM 2.5**  **NAAQS.**
See **Tennessee Failure to Submit Good Neighbor SIP Finding, 76 Fed. Reg. 43,180 (July 20, 2011).**  **Tennessee is no t a petitioner** 
**here. 73a** 

**and effect, and therefore purs uant to section 307(b)(1),**  **42 U.S.C. § 7607(b)(1), a petition for**  **judicial review**
**had to be filed with the D.C. Circuit within sixty days** **of the publication of the findings in the Federal Reg**
**ister.** See **Failure to Submit Good Neighbor SIP Finding, 75 Fed. Reg. at**  **32,675-76; Failure to Submit Good Neighbor SIP Finding**  **(Tennessee), 76 Fed. Reg. at 43,182-83. No State filed**  **a petition for judicial**
**review.**

**Other States subm itted 2006 24-hour PM**  **2.5 SIPs**  **with “good neighbor” provis ions, but EPA disapproved**  **that portion of the SIP subm issions of ten States cov**  **ered by the Transport Rule : Alabama, Georgia, In**  **diana, Kansas, Kentucky, Missouri, New Jersey, New**  **York, North Carolina, and Ohio. 3**  **In the Final SIP Rules, EPA rejected objections that States had no**  **obligation to submit SIPs until EPA had quantified the** 
**States’ amount of “significant contribution” and that**  **EPA was required to permit States to revise their SIPs prior to imposing a FIP pursuant to 42 U.S.C.**  **§ 7410(c)(1). 4**  **The Final SIP Rules disapproving the**

**3** See **Approval and Promulgation of Air Quality Implementation Plan; Alabama; Disapproval of Interstate Transport Submission for** 
**the 2006 24-Hour PM 2.5**  **Standards, 76 Fed. Reg. 43,128 (July 20, 2011); 76 Fed. Reg. 43,159 (Georgia); 76 Fed. Reg. 43,175 (Indiana** **& Ohio); 76 Fed. Reg. 43,143 (Kansas); 76 Fed. Reg. 43,136 (Ken tucky); 76 Fed. Reg. 43,156 (Mi**  **ssouri); 76 Fed. Reg. 43,153 (New Jersey & New York); 76 Fed. Reg. 43,167 (North Carolina).** 

**4** See **76 Fed. Reg. at 43,131-33 (Alabama); 76 Fed. Reg. at 43,162-64 (Georgia); 76 Fed. Reg. at 43,176-79 (Indiana & Ohio); 76** **Fed. Reg. at 43,145-47 (Kansas); 76 Fed. Reg. at 46,139-41 (Ken tucky); 76 Fed. Reg. at 43,170-72 (N**  **orth Carolina). No comments 74a** 

**“good neighbor” SIP submissi ons alerted the affected**  **States that “petitions for judicial review must be filed**
**in the United States Cour t of Appeals for the appro**  **priate circuit by September 19, 2011,”** see, e.g. **, 76 Fed. Reg. at 43,136 (Alabama), th**  **e sixty day deadline pre scribed by CAA section**  **307(b)(1), 42 U.S.C. § 7607(b)(1). Only Georgia,**  **Kansas, and Ohio filed petitions for judicial review**  **of EPA’s disapproval ac tion and their petitions are not consolidated with the**  **petitions now under review, as they challenge different**
**final rules. 5** 

**A**

. **Now that EPA has, as it warned, promulgated FIPs**  **for States covered by the Transport Rule, State peti** 
**tioners contend that EPA lack ed authority to do so for** 

**were submitted to the proposed disapproval of Missouri’s “good neighbor” SIP submission,**  see **76 Fed. Reg. at 43,156, and only one**
**unrelated comment was submitted to New York and New Jersey’s**  **proposed disapproval,** see **76 Fed. Reg. at 43,154. None of these three States is a petitioner here.** 

**5** See Ohio v. EPA **, No. 11-3988 (6th Cir.);** Westar Energy, Inc.
v. EPA **, No. 11-1333 (D.C. Cir.);** Kansas v. EPA **, No. 12-1019 (D.C.**  **Cir.);** Georgia v. EPA **, No. 11-1427 (D.C. Cir.). The court consoli** 
**dated the two Kansas cases (Nos. 11-1333 and 12-1019) on**  **Janu ary 10, 2012.**  See **Order Case No. 12-1019 (Jan. 10, 2012). The**
**court also severed from Kansas’s Transport Rule petition, Case No.**  **11-1329, its challenge to EPA’s disapproval of its “good neighbor”**
**SIP submission.** See id. **On January 10, 2012, the Sixth Circuit granted the parties’ joint motion to hold the case in abeyance**  **pending the outcome of the instant case. On January 18, 2012, the** 
**D.C. Circuit issued orders holding the Kansas and Georgia cases in**  **abeyance pending the outcome of the appeal in the present case.** **75a**

**the 2006 24-hour PM 2.5**  **NAAQS because “a FIP can cure a deficiency only in a**  required **submission, and States were not required to include SIP provisions to**  **eliminate ‘significant contri butions’ not yet defined by**  **EPA legislative rule.” Stat e Petrs’ Br. at 31. If a**  **State wished to object that under section 110(a) it had**  **no obligation to include “good neighbor” provisions in its SIP until EPA quantified its “significant contribu**  **tion” in emission reduction budgets, then the CAA required it do so at the ti**  **me EPA found it had not met its SIP “good neighb**  **or” obligation. State petitioners offer no response in their re**  **ply brief to EPA’s position that this argument is a**  **collateral attack barred by section 307(b)(1).**  See **Resp.’s Br. at 46-47.**

**Ignoring the plain terms of section 307(b)(1) as well**  **as this court’s long-settled precedent, the court reach** 
**es the merits of this issue despite its lack**  **of jurisdic**
**tion. In the Final SIP Rule s finding States had failed**  **to submit “good neighbor” SIPs, EPA put covered States on unambiguously “s**  **ufficient notice” that it interpreted the CAA as plac**  **ing an independent obliga**
**tion on each State to incl ude adequate “good neighbor”**  **provisions in its SIP rega rdless of whether EPA had**  **prospectively quantified its amount of “significant** 
**contribution.”** S. Co. Servs., **416 F.3d at 44. By the very nature of the Final**  **SIP Rules, EPA was inform ing States that they had no**  **t met their obligation to submit “good neighbor” SIPs,**  **an obligation States now contend they never had.**  **Furthermore, EPA warned that its findings of failur**  **e to submit triggered the two-year FIP clock of sect**  **ion 110(c)(1), and not the SIP Call provision of**  **section 110(k)(5).** See **Failure to 76a** 

**Submit Good Neighbor SIP Fi nding, 75 Fed. Reg. at**  **32,673-74; Failure to Subm it Good Neighbor SIP**  **Finding (Tennessee), 76 Fe d. Reg. at 43,180-81. In**  **alerting States to the judi cial review deadline, EPA** 
**reiterated that States had sixty days to file “**  any **peti tions for review . . . related to [] findings of** 
**failure to submit SIPs** related to the requirements of **[the ‘good neighbor’ provision].” Failure to Submit Good Neighbor SIP Finding, 75 Fed. Reg. at 32,676;** 
**Failure to Submit Good Ne ighbor SIP Finding (Ten**  **nessee), 76 Fed. Reg. at 43,183 (emphases added).**  **Not having sought judicial review of the Final SIP**  **Rules determining that they failed to submit** required **“good neighbor” SIPs, States may not now object that**  **they were** not required **to submit “good neighbor” SIPs until EPA first quanti**  **fied their reduction obliga tions. “The sixty day window provided by statute**  **has long since closed, and we may not reopen it and**  **entertain a belated challenge . . . now.”** Med.
Waste **, 645 F.3d at 427. Ther efore, the court lacks**  **jurisdiction over the collater al attacks by petitioners**  **Louisiana, Michigan, Nebra ska, Oklahoma, Virginia,**  **and Wisconsin, as part of th e Transport Rule petitions,**  **on EPA’s interpretation of se ction 110(a) stated in the**  **Final SIP Rules finding they failed to submit required**  **“good neighbor” SIPs.**

**Similarly on notice, neit her Alabama nor Indiana**  **petitioned for judicial revi ew of EPA’s disapproval of** **their SIP submissions. In the Final SIP Rule disap proving Alabama’s SIP submission, EPA quotes one**  **commenter as stating: 77a** 

**EPA has not stated the am ount of reduction they** 
**believe is needed to sati sfy the transport require** **ments. . . . [T]he finish line isn’t even knowa ble (because EPA refuses to inform the states how** **much reduction is enough to satisfy the require ments). EPA seems to say that it has to be what**  **ever the final Transport Rule says, even though there is no final Transport Rule.** 

**76 Fed. Reg. at 43,131. EPA responded that “the state obligation stems from**  **the CAA itself. . . .**
States had an opportunity to cond uct their own analyses regarding interstate transport **.”** Id. **(emphasis added). EPA also warned**  **that it was obligated to promulgate a FIP within**  **two years of disapproving Alabama’s SIP,**  see id. **at 43,132, and rejected com**
**ments that the SIP Call revi sion process of section**  **110(k)(5) should apply, becaus e, in its view, that provi**  **sion applies only where ther e is an existing, approved**  **SIP,** see id. **at 43,133. In its su mmary of Indiana’s**  **comments on the proposed di sapproval of its SIP sub**  **mission, EPA noted that Indi ana took the position that**  **EPA “should provide [the St ate] the opportunity to**  **revise its [] SIP once the Transport Rule is completed” and that a “FIP is [] contra**  **ry to the spirit of the CAA by unnecessarily limiting [S**  **]tate authority.” 76 Fed. Reg. at 43,177. EPA respon**  **ded, relying on the CAA’s plain text, that Indiana was**  **required by section 110(a) to submit SIPs with adeq**  **uate “good neighbor” provi sions, and that upon disapproving its submission, EPA**  **had a legal obligation under the CAA to promulgate a**
**FIP.** See id. **Alabama and Indiana’s comments, along with EPA’s responses,**  **demonstrate that the two 78a** 

**States were on clear notice of EPA’s interpretation of**  **the CAA as imposing an inde pendent obligation on the**  **States to submit “good ne ighbor” SIPs, even in the**  **absence of EPA-quantified amounts of “significant** 
**contribution.” Yet neit her Alabama nor Indiana**  **sought judicial review of EPA’s Final SIP Rules dis**  **approving their SIP submis sions, and their attempt**  **now to collaterally attack those Final SIP Rules is** 
**barred.** See Med. Waste **, 645 F.3d at 427.**

**Given EPA’s clear statements in its Final SIP Rules disapproving States’ SIP subm**  **issions and finding they failed to submit required “good neighbor” SIPs, there** 
**is no basis to conclude th at State petitioners might**  not **have perceived a substantial risk that EPA** meant **what it** said. See S. Co. Servs. **, 416 F.3d at 45. The instant case, involving consolidated petitions chal**  **lenging the Transport Rule, is therefore not the ap**  **propriate forum to decide whether**  **, under section 110(a), States have an inde**  **pendent obligation to sub mit “good neighbor” SIPs**  **when EPA has not first quantified amounts of “significant contribution.”**  **EPA promulgated Fina l SIP Rules in wh**  **ich it made its interpretation clear; judicial**  **challenge to those rules is the proper forum to**  **decide the question. 6** 

**6 The same is true for Ohio, Georgia, and Kansas, which peti**  **tioned for judicial review of EPA’s disapproval of their “good neighbor” SIP submissions. The court’s “review in th[e] [instant]**  **case is limited to” the Transport Rule, and the court thus “lack[s] jurisdiction over” challenges to those States’ SIP disapprovals** **premised on whether they have an independent obligation to sub mit “good neighbor” SIPs.**  Coalition for Responsible Regulation,**79a**

**Indeed, the court itself fo recasts this conclusion:**  **“EPA’s many SIP disapprovals and findings of failure to submit share one problematic feature: EPA made**  **all of those findings** before **it told the States what**
**emission reductions their SIPs were supposed to**  **achieve under the “good neighbor” provision.” Op. at 47 (emphasis in original). However “problematic” the** 
**court views this “feature” of those Final SIP Rules,**  **this is a “problem” this th ree-judge pane**  **l is powerless**
**to resolve because it lack s jurisdiction under CAA**  **section 307(b)(1) to entertain State petitioners’ “back**  **door challenge” to EPA’s interpretation of section 110(a) stated in those Final SIP Rules.**  Natural Res. Def. Council v. EPA **, 824 F.2d 1146, 1150 (D.C. Cir. 1987) (internal quotation marks omitted).** 

Inc. v. EPA **, 684 F.3d 102, 149 (D.C. Cir. 2012). The petitions filed by those States challenging thei**  **r SIP disapprovals are not consoli dated with the petitions before the court today,**  see supra **n.5, and Ohio’s petition is pending in the Sixth Circuit. The court must**  **therefore “decline [State] [p]etitioners’ invitation to rule on the merits of cases which are properly before different panels.”**  Id. **This is all the more important here, where EPA has not yet been afforded the opportunity to assert an improper venue defense in**  **the two cases pending before the D.C. Circuit.** See Tex. Mun. Power Agency v. EPA **, 89 F.3d 858, 867 (D.C. Cir. 1996); 42 U.S.C. § 7607(b)(1) (petitions for review of SIP disapprovals may be**  **brought only in the court of appeals “for the** appropriate **circuit”) (emphasis added). If Georgia,**  **Kansas, and Ohio wish to avoid enforcement of the Transport Rule FIPs because they contend**  **EPA’s SIP disapprovals were in error, the proper course is to seek a stay of EPA’s disapprovals in their pending cases; if granted, a**  **stay would eliminate the basis upon which EPA may impose FIPs**
**on those States.** See **42 U.S.C. § 7410(c)(1)(B). 80a** 

**The court responds that the dissent “conflates” State petitioners’ collateral attack on the Final SIP**  **Rules announcing their Sect ion 110(a) SIP obligations**  **with State petitioners’ supp osedly distinct argument**  **that EPA cannot promulgate a FIP simultaneously with its quantification of**  **a State’s emission reduction obligations.**  See **Op. at 8 n.1, 58 n. 34. This response**  **misleadingly quotes the stat ute, and in the process,**  **proves the dissent’s point. The court states “the sta**  **tute says that EPA must issue a FIP within two years after a State fails to make a ‘required submission’ or** 
**submits a deficient SIP. But a State cannot be ‘re**  **quired’ to implement its “goo d neighbor” obligation in** 
**a SIP ‘submission’ . . . until it knows the target**  **set by EPA.”** Id. **at 58 n.34. 7**  **That is** not **what the statute says. Section 110(c) provides that:** 

**(1) The Administrator** shall **promulgate a Federal implementation plan**  at any time **within 2 years af**

**ter** the Administrator

— **(A)** finds **that a State has failed to make a required**
**submission . . . or**

**(B)** disapproves **a State implementation plan sub mission in whole or in part;** 

**7 Notice the circularity in the court’s statement. The court**  **says State petitioners’ “simultaneity” argument can be “[p]ut another way,” Op. at 58 n.34, as an**  **argument that States had no section 110(a) SIP requirements until EPA quantified their emis**  **sion reduction budgets. Under section 307(b)(1), that is exactly the argument that States were required to make in petitions for**  **judicial review of the Final SIP Rules setting forth EPA’s section**  **110(a) interpretation. 81a** 

**unless the State corrects the deficiency, and the**  **Administrator approves the plan or plan revision,**  before **the Administrator promulgates such Federal implementation plan.** 

**42 U.S.C. § 7410(c)(1) (empha ses added). EPA’s FIP**  **obligation is therefore not triggered, without more, by**  **a State’s mere failure to submit a SIP required by section 110(a), but instead by an**  explicit **EPA Final**
**Rule** finding **that the State either failed to submit a required SIP or an adequa**  **te SIP. A challenge to EPA’s interpretation of sect**  **ion 110(a) must therefore be brought as a petition fo**  **r judicial review of those Final SIP Rules announcing th**  **at States failed to meet their section 110(a) “good ne**  **ighbor” SIP obligations.**
See Med. Waste **, 645 F.3d at 427. Under the plain terms of the CAA, EPA’s obli**  **gation (and authority) to promulgate a FIP is**  triggered **by those Final SIP Rules, and the process by**  **which EPA must promulgate a FIP is governed by sectio**  **n 110(c), not, as the court posits, by section 110(a). The court therefore, and**  **not the dissent, does the co nflating by turning what**  **should be a challenge to EPA’s FIP authority under** **section 110(c) into a collateral attack on EPA’s inter pretation of section 110(a) s**  **et forth in the prior Final**
**SIP Rules.**

**The plain text of section 110(c)(1) obligates EPA to**  **promulgate a FIP “at any ti me” within two years of**  **disapproving a SIP submission or finding a State failed** 
**to submit a SIP. 42 U.S.C. § 7410(c)(1). Moreover,**  **nothing in section 110(c) re quires EPA to reveal to** 
**States the** content **(i.e., the emission reduction budg- 82a** 

**ets) it intends to include in its FIP**  prior **to** proposing **a FIP. Although the CAA allows States to submit**  **SIPs to “correct[] the deficie ncy,” they must do so “be**  **fore” EPA’s promulgation of a FIP, which may occur “at any time” within two years.**  Id.

**The court thus rewrites section 110(c)(1)’s unam** **biguous grant of authority to EPA (and ultimate obli gation of EPA) to**  **promulgate a FIP** at any time **with in the two year window to read: “unless**  but not until**the State corrects the deficiency and the Administra tor approves the [SIP] or**  **[SIP] revision, before** may **the Administrator promulgates such [FIP].” “[A]s the Supreme Court has emphasized time and again,**  **courts have no authority to rewrite the plain text of a** 
**statute.”** Kay v. FCC **, 525 F.3d 1277, 1279 (D.C. Cir. 2008). Because the CAA “mea**  **ns what it says,” EPA was required, after publishing disapprovals and find**  **ings of failure to submit SIPs, to promulgate FIPs**  **within two years, and it wa s not required to wait for** 
**States first to submit SIPs.** Landstar Express Am. v. Fed. Maritime Comm’n, **569 F.3d 493, 498 (D.C. Cir. 2009). The court’s attempt to**  **ferret out an argument about “simultaneity” as a di**  **stinct challenge properly brought against the Transport Rule based on EPA’s**  **interpretation of section 110(a) is thus a straw man for**  **its endorsement of State peti tioner’s collateral attack**  **on EPA’s interpretation of section 110(a) in the Final**  **SIP Rules. Its rewriting of section 110(c) is made all**  **the more remarkable by its recognition that “we must**  **apply and enforce the statute as it’s now written.” Op. at 8.** **83a**

B.

**Even if the court had juri sdiction over State peti**  **tioners’ challenge to their independent obligation to**  **submit “good neighbor” SIPs under CAA section 110(a), its statutory analysis**  **proceeds with no regard for the plain text and structure of the CAA or for the**  **deference owed to permissi ble agency interpretations**  **of statutes they administer where Congress**  **has left a gap for the agency to fill or**  **the statute is ambiguous.**

**“As in all statutory construction cases,” the court must “begin with the lang**  **uage of the statute.”** Barnhart v. Sigmon Coal Co., Inc. **, 534 U.S. 438, 450 (2002). “[C]ourts must presume that a legislature says in a** 
**statute what it means and me ans in a statute what it** **says there. When the words of a statute are unam biguous, then, this first canon is also the last: judicial**  **inquiry is complete.”** Id. **at 461-62 (quoting** Connecticut Nat. Bank v. Germain **, 503 U.S. 249, 253-54 (1992) (internal quotation marks and citation omitted)).**  **Thus, under** Chevron U.S.A. Inc v. Natural Res. Def.
Council **, 467 U.S. 837, 842-44 ( 1984), the first step in**  **statutory interpretation requ ires a determination of**  **“whether Congress has direct ly spoken to the precise**  **question at issue. If the in tent of Congress is clear,**  **that is the end of the mater; for the court, as well as**  **the agency, must give effect to the unambiguously ex**  **pressed intent of Congress,”** id. **If, after applying tra ditional tools of statutory**  **construction, the court de termines “the statute is silent or ambiguous with re**  **spect to the specific issue, ” then, under step two, the**  **court will defer to an agen cy’s statutory interpretation** **84a**

**if it “is based on a permissible construction of the**
**statute.”** Id. **at 843.**

**The questions regarding States’ obligations to sub mit “good neighbor” SIPs are straightforward:**  **(1) Do States have an inde pendent obligation to sub**  **mit SIPs with adequate “g ood neighbor” provisions;**  **(2) if so, what triggers that obligation; (3) if there is**  **an obligation, what is the deadline for the SIP submis**  **sion; and (4) must EPA pros pectively quantify each**  **States’ amount of “significa nt contribution” to down**  **wind nonattainment? The pl ain text of the statute**  **provides equally straightforward answers: (1) Yes; (2) promulgation of a NAAQS; (3) within three years**  **of promulgation of a N AAQS (unless the EPA Admin**  **istrator prescribes a shorte r deadline); and (4) no, but** 
**EPA** may **do so if it chooses.**

**Section 109 of the CAA requires EPA to promul gate NAAQS, a national health-based standard.**  See **42 U.S.C. § 7409. Section 110, in turn, provides that** 

**(a)(1) Each State** shall **. . . adopt and submit to the Administrator, within**  **3 years (or such shorter period as the Administrator may prescribe)**  after the promulgation of a national primary air quality
standard **(or any revision thereof) . . . a plan which provides for implementation, maintenance,** **and enforcement of such [] standard . . . with**
**in such State.**

**(2) Each implementation plan submitted by a State under this chapter . . .**  shall

**. . . 85a** 

**(D) contain adequate provisions—**

**(i) prohibiting, consistent with the provi sions of this subchapter, any source or other**  **type of emissions acti vity within the State**  **from emitting any air pollutant in amounts** 
**which will—**

**(I) contribute signifi cantly to nonattain**  **ment in, or interfere with maintenance by, any other State wi**  **th respect to any such [NAAQS].** 

Id. **§§ (a)(1) & (a)(2)(D)(i)(I) (emphases added). The plain text requires that wi**  **thin three years of EPA’s promulgation of a NAAQS, States**  shall **submit SIPs,**
**and those SIPs** shall **include** adequate **“good neighbor” provisions. This is the unambiguous obligation and**  **chronology established by Congress. EPA has the**  **first duty to set the NAAQ S, and then States have**  **series of follow-up duties, listed in section 110(a), to** 
**ensure attainment of the NAAQS. Among the duties**  **clearly assigned to States is the inclusion in SIPs of**  **adequate “good neighbor” provisions.**

**The court views this “interpretation”—that is,** reading the actual text of the statute **—as a scene from**
Alice in Wonderland

**.** See **Op. at 50. It concludes that “[i]n our view, determini**  **ng the level of reductions required under Section 110(**  **a)(2)(D)(i)(I) is analogous to setting a NAAQS. And d**  **etermining the level of re**
**ductions under the “good neighbor” provision triggers**  **a period during which States may submit SIPs.”** Id.**86a**

**at 51. Even if the co urt’s analogy were sound,**  **8 the**  **premise of its analogy does not support its conclusion**
**that EPA’s determination of emission reduction obli gations triggers States’ obligations to submit “good**  **neighbor” SIPs. Rather, the court rewrites a**
**decades-old statu te whose plain text and structure**  **establish a clear chronology of federal**  **and State re sponsibilities. Nowhere**  **does the CAA place a re quirement on EPA to quantify**  **each State’s amount of “significant contribution” to be eliminated pursuant to**  **the “good neighbor” provisio n, let alone include any**  **provision relieving States of their “good neighbor” SIP**  **obligations in the event EPA does not first quantify emission reduction obligations.**  **9 The court’s “view”**  **that EPA “determining the le vel of reductions under**  **the “good neighbor” provision triggers the period**

**8 NAAQS are determined based on what is “requisite to protect**  **the public health” and “public we lfare,” 42 U.S.C. §§ 7409(b)(1) &**  **(2), and are a uniform national standard. The “good neighbor”**  **provision, on the other hand, is not a separate national standard, but instead is simply one of the CAA’s State-specific mechanisms**  **to ensure attainment of the NAAQS.** See **42 U.S.C. § 7410(a)(2)(D)(i)(I).** 

**9 The court’s comparison of**  **section 110 to section 126,** see **Op. at 52, conflates direct federal regulation of**  sources **with EPA’s sta**  **tutory authority to enforce requirements that** States **comply with their “good neighbor” SIP obligations. Given that Congress in** 
**cluded a**  specific **provision obligating EPA to promulgate FIPs if**
**States fail to submit adequate SIPs within three years of promul**  **gation of a NAAQS,**  see **CAA § 110(c)(1); 42 U.S.C. § 7410(c)(1), and**
**EPA relies on it in the Transport Rule, section 126's federal au** 
**thorization to regulate specific**  sources **of emissions has no bearing**
**on the statutory analysis here.** **87a**

**during which States may subm it SIPs” is irrelevant in**  **view of the unambiguousl y plain text of section**  **110(a)(1) and (a)(2)(D)(i)(I), and, if the statute were**  **ambiguous, the court would be required to defer to**  **EPA’s interpretation that St ates have an independent**  **obligation to submit “good neighbor” SIPs within three years of promulgation of the NAAQS because**  **that interpretation is perm issible under the statute,** 
see Chevron **, 467 U.S. at 843. The court’s “role is ‘not** 
**to ‘correct’ the text so that it better serves the stat**  **ute’s purposes ’; nor under**  Chevron **may [the court] ‘avoid the Congressional in**  **tent clearly expressed in the text simply by asserting that [the court’s] pre**  **ferred approach would be better policy. The Con**  **gress has spoken plainly. . . . ”** Virginia Dep’t of Med. Assistance Servs. v. Dep’t of Health & Human
Servs. **, 678 F.3d 918, 926 (D.C. Cir. 2012) (quoting**  Engine Mfrs. Ass’n v. EPA **, 88 F.3d 1075, 1089 (D.C. Cir. 1996)).** 

**Furthermore, the court’s holding is entirely at odds with the holding in**  Michigan v. EPA **, 213 F.3d 663 (D.C. Cir. 2000),**  see LaShawn A. v. Barry **, 87 F.3d 1389, 1395 (D.C. Cir. 1996) (en banc). In**  Michigan

**, State petitioners contende**  **d that EPA violated the CAA by prospectively info**  **rming States what their nitrogen oxides (NO** 

**x ) emission reduction budgets**  **needed to be to adequately eliminate their amounts of “significant contribution” under the “good neighbor”**  **provision, thus acknowledg ing their independent obli**  **gation to submit adequate “good neighbor” SIPs,** see **213 F.3d at 686-87. St ate petitioners in**  Michigan **argued that EPA had** no authority **to do what the 88a** 

**State petitioners now befo re the court contend EPA** 
**has** no authority not to do **. In** Michigan **the court deferred, pursuant to**  Chevron **step two, to EPA’s interpretation it could set State emissions budgets**  **prospectively, given sectio n 110’s “silence” on the**  **question, as a permissible exercise of EPA’s general**  **rulemaking authority under CAA section 301(a)(1), 42**  **U.S.C. § 7601(a)(1). 10**  **Inverting** Michigan **’s analysis of section 110, the co**  **urt holds that under** Chevron **step**

**one,** see **Op. at 53 n.32, section 110 itself** unambiguously requires **EPA to prospectively inform States of their “good neighbor” emission reduction require** 

**ments.** See id. **at 46-53. Nothing in section 110, sec**  **tion 301, or any ot her section of the CAA requires** 
**EPA to do this. Instea d the court today turns**  **“may” into “must,” and holds that if EPA does not exercise its general rulema**  **king authority in the man**
**ner of the court’s design, then section 110(a)(1)’s and** **110(a)(2)(D)(i)(I)’s mandatory, unambiguous require**
**ments that States submit adequate “good neighbor”**  **SIPs within three years of the promulgation of a**  **NAAQS are** erased from the statute **by judicial fiat —relieving States of th**  **e duty Congress imposed. 11** 

**10 Section 301(a)(1) of the CAA provides that “[t]he Adminis**  **trator is authorized to prescribe such regulations as are necessary to carry out his functions under this chapter.” 42 U.S.C.**  **§ 7601(a)(1).**

**11 Suffice it to say, it is extraordinarily unusual for a court to**  **conclude, at** Chevron **step one, that it must delete mandatory obligations from a statute in order to accord with Congress’s plain** 
**intent.** See **Op. at 53 n.32. It is all the more unusual to suggest 89a** 

**The court offers no explanat ion for how its holding can**  **be squared with** Michigan **in this regard.**

**The court’s rationale for rewriting the CAA’s plain**
**text is its** own **conclusion that “the upwind State’s obligation remains**  impossible **for the upwind State to**
**determine** until EPA defines it.” Id. **at 48 (first emphasis added). In its wo**  **rds, the statute “requires**
**each State to take its own st ab in the dark . . .**  **[and] apply [a] homemade definition using its own homemade methodology.”**  Id. **at 55. The court con cludes EPA’s interpretation**  **(that is, following the statute’s plain text) produces absurd results,**  see id. **at 53 n.32. Pretermitting whether there is a shred of** 
**record evidence to show such an impossibility, a statu**  **tory outcome is absurd [only] if it** defies rationality **[;]**

**. . . an outcome** so contrary to perceived social
values **that Congress could not have intended it.”**
Landstar Express **, 569 F.3d at 498-99 (internal quota tion marks and citations omitted) (emphases added).** 
**To the extent the court’s ra tionale hinges on its specu** **lation that States lack technical capability and infor mation, this blinks at reality. As counsel for EPA**  **emphasized at oral argument,** see **Tr. Oral Arg. at 59, 61, without contradiction by any petitioners’ counsel**  **during rebuttal oral argument , States are fully capable**  **of measuring interstate tran sport of emissions by con**  **ducting modeling, and they have done so before and** 
**continue to do so: “The st ates can make that effort,**  **and they can submit SIPs to EPA. Again, that is how** 

**that an agency’s interpretation is “impermissible” at** Chevron **step two when the interpretation parrots the text of the statute.** **90a**

**the process works in the states that aren’t included in**  **these transport regions.”** Id. **at 61**

. **Indeed, as this court has recognized, States**  **are charged with operat ing air quality monitors; “[e]xhaustive technical speci**  **fications regulate the States ’ operation of a network of** 
**air monitors that collect ai r quality data for any given** 
**area.”** Catawba Cnty., N.C. v. EPA **, 571 F.3d 20, 30 (D.C. Cir. 2009);**  cf. ATK Launch Sys. v. EPA **, 669 F.3d 330, 334 (D.C. Cir. 2012)**  **. The air quality moni toring data collected by the**  **States is publically availa ble in the National Emissions Inventory.**  **12 That is,**  **State air quality divisions ar e no strangers to complex**  **air quality and meteorologica l modeling of interstate**  **transport of emissions. 13** 

**12** See **U.S. EPA, Technology Transfer Network Clearinghouse for Inventories & Emissions Factors,**  available at **http://www.epa. gov/ttnchie1/eiinformation.html**  **(last visited July 23, 2012);** see also**U.S. EPA, Technology Transfer Network Clearinghouse for Regu latory Atmospheric Modeling,**  available at **http://www.epa.gov/ttn/ scram/aqmindex.htm (last visited**  **July 23, 2012) (providing model ing tools).** 

**13 To cite one example: the State of Texas. The Texas Council**  **on Environmental Quality (“TCEQ”) has published an extensive description of its air qu**  **ality modeling activities and capabilities on its website. “The TCEQ uses state of the art computer models to**  **simulate the meteorological condit ions and chemical reactions that** **contribute to the formation of air pollutants.” TCEQ, Introduc tion to Air Quality Modeling,**  available at **http://m.tceq.texas.gov/ airquality/airmod/overview/am_intro.html (last visited July 23,**  **2012). Furthermore, “TCEQ uses state-of-the-science, four** **dimensional computer models that incorporate atmospheric physi**
**cal laws and measured observations to predict weat**  **her conditions over space and time.” TCEQ, Introduction to Air Quality Model-** **91a**

**No petitioner suggests that States lack the capabil ity to measure their interstat**  **e emissions of pollutants**
**or to access that information from other States to independently determine emission reduction budgets,**  **much less that they have not had time to do so; rather their reason for not doing**  **so appears to stem from insistence (supported by in**  **dustry sources) that their**
**reduction of emissions not be one iota greater than is**  **necessary for downwind States to attain and maintain NAAQS and that it is easier (and presumably less**  **costly,** see **Oral Arg. Tr. 58) for EP A to figure this out** 
**than it is for the individual States to do so, working**  **cooperatively and using any EPA guidance. This may** 
**be so but it does not de monstrate that Congress’s**  **scheme, protecting States’ choices about how to meet NAAQS requirements, in part by independently de** **termining ways to meet their “good neighbor” obliga tion as the States argued in**  Michigan **, is absurd.**

**It is true, as the court notes,** see **Op. at 53-55, that in two previous “good neig**  **hbor” rulemakings EPA af forded States the opportunit**  **y to submit SIPs after an nouncing emission reductio**  **n budgets. But an agency**
**is not forever restri cted to its previo**  **us policy choices or statutory interpretation**  **s; instead, it may change course provided it acknowle**  **dges it is doing so, pre-** 

**ing: Meteorological Modeling, http://m.tceq.texas.gov/airquality/ airmod/overview/am_met.html (last visited July 23, 2012. Indeed,**  **TCEQ uses the same model EPA used to model emission contributions—CAMx. EPA notes in its brief that Texas provided** 
**some of the technical data that led to its inclusion in the final Transport Rule.**  See **EPA Br. at 109. These are far from “home made” methodologies.**  See **Op. at 55. 92a** 

**sents “good reasons” for doin g so, and its approach is**  **“permissible under the statute.”**  FCC v. Fox Television Stations, Inc. **, 556 U.S. 502, 515 (2009). Agen**
**cies “need not demonstrate to a court’s satisfaction** 
**that the reasons for the new policy are**  better **than the**
**reasons for th e old one.”**  Id. **The discretion agencies enjoy in modifying their poli**  **cy approaches is particu larly**  **expansive where the agency declines to exercise**
**its** discretionary **rulemaking authority, as EPA did here. “It is only**  **in the rarest and mo st compelling of** 
**circumstances that this court has acted to overturn an**  **agency judgment not to institute rulemaking.”**  WWHT, Inc. v. FCC **, 656 F.2d 807, 818 (D.C. Cir. 1981).** 

**Here, EPA acknowledged its previous approach,** see **Transport Rule, 76 Fed. Reg. at 48,217; NPRM, 75**  **Fed. Reg. at 45,222-223, and explaine**  **d its decision in response to comments**  **requesting States be given time**
**to submit SIPs before EPA imposed the Transport**  **Rule FIPs. EPA stated, first, that it had no authority**  **to alter the statutory deadlines for SIP submissions**
**and that the CAA did not re quire it to issue a rule**  **quantifying States’ “good neighbor” obligations,**  see **Transport Rule, 76 Fed. Reg. at 48,220; second, that** 
**the court in** North Carolina **, in remanding rather than**  **vacating CAIR, “emphasized EPA’s obligation to**  **remedy [CAIR’s] flaws ex peditiously” and thus**  **“EPA d[id] not believe it would be**  **appropriate to establish a lengthy transition period to**  **the rule which is to replace CAIR,”**  **Transport Rule, 76 Fed. Reg. at 48,220; and third, that in**  North Carolina **this court also required EPA to align upwind States’**  **emission reduction dead- 93a** 

**lines with the NAAQS atta inment dates of “2015 or**  **earlier,”** see North Carolina **, 531 F.3d at 930. 14**  **EPA’s decision to adhere to the pl**  **ain text of the statute, and**
**not to exercise its discre tionary general rulemaking**  **authority,** see Michigan **, 213 F.3d at 686-87, was thus well-explained by the time pressures imposed**  by this

court

**.** See Fox Television **, 556 U.S. at 515. Inas much as those time pressure**  **s were animated as well by concern for the public health and welfare—**  **Congress required that attainment with the NAAQS occur “as expeditiously as**  **practicable.” 42 U.S.C. §§ 7502(a)(2)(A) & 7511;**  see North Carolina **, 531 F.3d**
**at 930—the instant ca se is particularly ill-suited for**  **overturning EPA’s exercise of its discretion in not**  **adding an additional rulemaki ng step to the process.**  **Given that the court “will overturn an agency’s deci-**

**14 That EPA may, under different circumstances, view it as**  **preferable to prospectively quantify States’ emission reduction obligations,**  see **Op. at 49, is irrelevant to whether EPA’s stated reasons for departing, in the Transport Rule from its previous**  **approach are adequate, given the court’s instruction in** North Carolina **to expeditiously replace the flawed CAIR and align NAAQS attainment dates. The context of the federal register citations is,**  **EPA’s points out, EPA’s review of a submitted SIP; the preamble does not state EPA must engaged in detailed interstate transport**  **analysis before States must meet their statutory SIP obligations. Furthermore, consistent with the federal register citations noted**  **by the court, EPA has traditionall y issued guidance to States on**  **calculating their “good neighbor” emission reduction obligations**  **and it did so here,** see **,** e.g **., EPA Guidance on SIP Elements Re quired Under Sections 110(a)(1)**  **and (2) for the 2006 24-hour Fine Particle (PM**  **2.5 ) National Ambient Air Qu**  **ality Standards (NAAQS) (Sept. 25, 2009).** **94a**

**sion not to initiate a rule making only for compelling**  **cause,” and one of those few compelling reasons is**
**when the decision** declining **to promulgate a rule ex acerbates “grave health an**  **d safety problems for the**
**intended beneficiaries of the statutory scheme,”**  Midwest Indep. Transmission Sys. Operator, Inc. v.
FERC **, 388 F.3d 903, 911 (D.C. Cir. 2004) (internal quotation marks and citation**  **omitted), it hardly makes**
**sense for the court to** require **EPA to promulgate a**
**rule when the effect will be to** delay **health benefits. Indeed, the court is**  most **reluctant to require agencies to promulgate rules “when**  **the interests at stake are primarily economic,”**  id., **and the court’s view that it is “impossible” for States to**  **comply with their indepen dent “good neighbor” obligati**  **on under section 110(a) is animated by the burdens th**  **at obligation imposes on States and industry sources,**  see **Oral Arg. Tr. 58.**

**In sum, the court’s conclusion that it would have**
**been a “homemade” “stab in the dark” for the States to** **submit adequate “good neighbor” SIPs prior to prom ulgation of the Transport Ru**  **le lacks a basis in fact, and the court’s speculation**  **that EPA would have inev itably disapproved such submissions,**  see **Op. at 56-57, is just that—speculation. And if that happened,**  **States could judicially ch allenge the disapprovals,**  **seeking a stay to avoid ap plication of the Transport** 
**Rule FIPs. Absent record evidence to suggest that**  **the plain text of the CAA’ s “good neighbor” SIP obli**  **gation on States leads to “an outcome** so contrary to perceived social values **that Congress could not have intended it,”**  Landstar Express **, 569 F.3d at 498-99 (internal quotation marks and citations omitted) (em-** **95a**

**phasis added), the court is boun d, in view of the host of**  **responsibilities placed on St ates in the CAA, to enforce**  **the statute as Congress wrote it in plain terms, to give**  **deference to EPA’s permissible interpretations where the CAA is silent or ambigu**  **ous, and to adhere to the court’s interpretation of EPA’s authority in**  Michigan

**, as well as acknowledge, as**  **the expert agency has ad vised without contradiction,**  **that States have demon strated competence to sati**  **sfy their plain statutory “good neighbor” obligations.** 

II.

**The court also is without jurisdiction to hold that EPA lacked statutory auth**  **ority to use a different measure of “significant cont**  **ribution” for setting emis sion reduction budgets, un**  **related to its measure of “significance” for purposes**  **of threshold inclusion of individual States in the Transport Rule. Op. at 34-37.**  **Petitioners contended that there was a hypothetical possibility that “appl**  **ication of cost-effective controls []**
**could drive a State’s emissi ons below the point that,**  **under phase one, would have excluded the State from any regulation whatsoever.” State Petrs’ Br. at 35;**  **Industry & Labor Petrs’ Br. at 22-24. 15**  **Because no**

**15 As EPA responded, nothing in the record suggests this hypo**  **thetical possibility actually would occur as a result of the Transport**  **Rule,** see **Resp.’s Br. at 33-34 & n.20;** id. **at 32 n.18, and the point of choosing a “cost” that is “effective” for each State assumes only a** 
**reasonable subset of emissions will be reduced.** See **Oral Arg. Tr. at 44-46. Furthermore, contrary to the court’s suggestion,**  see **Op. 37 n.23, EPA explained that selecting a cost below $500/ton of**  **emissions would permit States to stop operating existing controls, 96a** 

**objection was made during the Transport Rule admin istrative proceedings to EPA’s statutory authority**  **to adopt its two-step approach, the court thus lacks jurisdiction to**  **decide this issue.** See **CAA § 307(d)(7)(B), 42 U.S.C.**  **§ 7607(d)(7)(B). The juris dictional question is not**  close **; the court’s effort to**
**avoid this court’s well-settl ed precedent fails clearly.** 

A.

**Section 307(d)(7)(B) of the CAA provides that**  **“[o]nly an objection to a rule or procedure which was raised with reasonable specificity**  during the period for public comment **. . . may be raised during judi**
**cial review.” 42 U.S.C. § 7607(d)(7)(B) (emphasis**  **added). The court has “ ‘strictly’ enforce[d] this re**  **quirement,”** Mossville Envtl. Action Now v. EPA **, 370 F.3d 1232, 1238 (D.C. Ci**  **r. 2004) (quoting** Motor & Equip. Mfrs. Ass’n v. Nichols **, 142 F.3d 449, 462 (D.C. Cir. 1998));**  see also Natural Res. Def. Council v. EPA

**, 571 F.3d 1245, 1259 (D.C. Cir. 2009). The court also**  **has made clear that “[r]easo nable specificity requires**  **something more than a general challenge to EPA’s approach.”**  Mossville **, 370 F.3d at 1238 (internal quo tation marks and alteration omitted). The court’s en**  **forcement of this requiremen t has been most strict in** 
**the context of statutor y authority objections:** 

**While there are surely limits on the level of congru**  **ity required between a party’s arguments before an administrative agency and the court, respect for** 

**thus increasing, rather than decreasing, pollution.** See **Transport Rule, 76 Fed. Reg. at 48,256-57.** **97a**

**agencies’ proper role in the** Chevron **framework requires that the court be**  particularly careful **to ensure that challenges to an agency’s interpretation**  **of its governing statute ar e first raised in the ad** 
**ministrative forum.**

Cement Kiln Recycling v. EPA **, 255 F.3d 855, 860 (D.C. Cir. 2001) (quoting**  Natural Res. Def. Council,
Inc. v. EPA **, 25 F.3d 1063, 1074 (D.C. Cir. 1994)) (em phasis added). Consistently**  **, until now, the court has held that failure to object sp**  **ecifically to EPA’s lack of** statutory authority **is grounds for dismissal of such objections in this court.**  See, e.g.

**,** Natural Res. Def.
Council v. EPA **, 559 F.3d 561, 563-64 (D.C. Cir. 2009);** Engine Mfrs. Ass’n v. EPA **, 88 F.3d 1075, 1097 (D.C. Cir. 1996);**  Ohio v. EPA **, 997 F.2d 1520, 1528 (D.C. Cir. 1993);**  Linemaster Switch Corp. v. EPA **, 938 F.2d 1299, 1308 (D.C. Cir. 1991);**  Natural Res. Def. Council v.
Thomas **, 805 F.2d 410, 427 (D.C. Cir. 1986).**

**Notably on point, in** Cement Kiln **the court held that comments stating a policy preference to EPA** **were insufficient to preserve for judicial review objec tions that the preferred a**  **pproach was statutorily re quired, 255 F.3d at 860-61.**  **“[T]hese comments mere ly argued that EPA could permissibly**  consider **[the approach], not (as petitioners now argue) that [the**  **CAA]** requires **[the approach].”** Id. **at 860 (internal quotation marks and citation omitted) (emphases in**  **original). And “the parties were not saved by the fact that they had made other technical, policy, or legal**  **arguments before the agency. Indeed, if such were the rule, a party could neve**  **r waive a legal claim as 98a** 

**long as the party in fact appeared and argued** something **before the agency.”** Nat. Res. Def. Council **, 25 F.3d at 1074 (internal quotation marks omitted) (em**  **phasis added).**

**Petitioners rely on two comments in an attempt to show a challenge to EPA’s**  **statutory authority to the approach it adopted was presented during the Trans**  **port Rule administra tive proceedings.**  See **Industry & Labor Petrs.’ Reply Br. at**  **6, n.1. Neither is suf**
**ficient. Tennessee commented that “[a] lower cost**  **threshold should be considered for any State that can**
**reduce their contribution be low 1% significance using** 
**cost thresholds below the maximum values ($2,000/ton** 
**for SO 2**  **and $500/ton for NO**

**x ), if applicable.” Ten** 
**nessee Comments on 2010 Pr oposed Transport Rule,**  **Attachment 1, at 1 (Aug. 27, 2010). But this comment**  **does not suggest that EPA is statutorily barred from**  **following its approach.** See Cement Kiln **, 255 F.3d at 860-61;**  Natural Res. Def. Council **, 25 F.3d at 1073-74. Furthermore, Tennessee’s comment does not even**  **suggest a policy preference that the one percent of** **NAAQS threshold level be a floor. Rather, Tennes see’s comment specifically**  **mentions States reducing**
**contributions** below **the threshold without suggesting**
**that result would violate the CAA. Thus, the only**  **thing Tennessee commented on with “reasonable spec**  **ificity” was that EPA consider not using a uniform cost**
**threshold for all States.**

**Wisconsin’s comment also does not demonstrate the statutory authority challeng**  **e now advanced by peti tioners in this court was preserved. First, Wisconsin** **99a**

**stated that it “support[ed] the 1% contribution thresh**  **old . . . for identifying states that are significant**
**contributors to downwind state’s air quality nonat** 
**tainment and maintenance problems.” Wisconsin**  **Comments, at 1 (Oct. 1, 2010). Wisconsin further** 
**stated:**

**State final emission budget s (2014) need to be set**  **with a stronger linkage to residual air quality im**  **pact from the [electricity generating unit (“EGU”)]** **on downwind sites compared to the current pro posed linkage of limiting**  **emission reductions by**

**an** arbitrarily low cost threshold **. EPA has set**
**which states have contribu tion reduction responsi**  **bility based on air quality impact, but appears to default to a modeling of th**  **e most efficient regional EGU control program base**  **d exclusively on cost**
**effectiveness.**

**In defining signific ant contribution, EPA**  should **place a** greater emphasis **on air quality impact (con tribution) remedy than th**  **e assessed state-by-state marginal control cost-eff**  **ectiveness of proposed remedy in the setting of**  **the 2014 state budgets for EGU reductions. Issues are both legal and a con** 
**cern for some level of EG U system control installa**  **tion equity between nearby states and between fa** **cilities with differing coal types which are dis patched within the same electricity markets.** 

Id. **at 7 (emphases added). Wisconsin nowhere sug gested that EPA is statutor**  **ily required to use the one percent inclusion threshold as**  **a floor for emission re ductions; it simply urged**  **that EPA “should” put a 100a** 

**“greater emphasis” on ai r quality impacts at the**  individual EGU **level. Indeed, Wisconsin commented**
**that the cost threshold was** too low **, the exact opposite of what petitioners now claim.**  See **Industry & Labor**
**Petrs.’ Br. at 31-34. The closest Wisconsin comes to**  **raising a statutory authority argument is its statement**  **that the “issues are [] legal;” but that vague comment is in a sentence indicating**  **the State’s preference that EPA regulate at the EGU, rath**  **er than the State level, in order to achieve “EGU sy**  **stem control installation equity.” Wisconsi**  **n Comments, at 7.**

**Consequently, neither Tenn essee’s nor Wisconsin’s**  **comments argued “with reasonable specificity” that EPA was statutorily required**  **to treat the threshold**
**inclusion level in its two- step approach to defining**  **“significant contribution” as a floor in calculating emission reduction requirements.**  **16 Nor do they even**  **present a policy preference for such an approach and, indeed, can be interpreted as**  supporting **sub**
**threshold reductions. Even if the comments** implied **a challenge, which they do no t, an implied challenge is** 
**insufficient because**

**that is not the way the re gulatory system is struc** 
**tured. Such a standard would require agencies to** 

**16 The court adds a cite,**  see **Op. at 34 n.18, to a comment from Delaware: “It is Delaware’s opin**  **ion that an upwind state’s emis sions contribution is significant . . . based on the emissions**  **and their effect on air quality, an d is independent of cost considera**  **tions.” This is not a statutory authority objection to the two-step approach, and in any event EPA’s rejection of Delaware’s “opinion”** 
**was sustained in** Michigan **, 213 F.3d at 679. 101a** 

**review perpetually all of the ‘implied’ challenges in any challenge they receiv**  **e. We will not impose such a burden on the agency. All that [petitioner]** 
**had to do was draft one se ntence that specifically**  **challenged EPA’s decision. It did not, and that**  **specific challenge is thus not preserved.** 

**. . . [T]he only way [the comments] could be read as**  **placing the EPA on notice is to place the burden on**  **EPA to cull through all the letters it receives and**  **answer all of the possible implied arguments.**
**Such a rule would defeat the statutory requirement**  **for “reasonable specificity.”**

Mossville **, 370 F.3d at 1239-40. None of the com ments during the Transport**  **Rule administrative pro ceedings approaches the le**  **vel of “reasonable specifici ty” required for this court**  **to have jurisdiction over petitioners’ new statutory authority argument.** 

B.

**Acknowledging this, the court nonetheless con cludes that it has jurisdicti**  **on to address this new issue because “EPA was on notice that its disregard of the**  **significance floor was a potential legal infirmity in its approach.” Op. at 34 n.18. None of the three rea** 
**sons the court offers for its conclusion that there need**  **not be objections raised “w ith reasonable specificity**  **during the period for pu blic comment,” 42 U.S.C.**  **§ 7607(d)(7)(B), is convincing.**

First **, the court states that EPA was required “to craft a new rule consistent with [**  North Carolina **],” Op. 102a** 

**at 32 n.18 (internal quotatio n marks and citation omit**  **ted), and thus should have be en alerted to petitioners’**  **new objection, raised for the first time now in this**
**court. But in** North Carolina **the court specifically permitted the exact same**  **approach in CAIR. Dis cussing this approach, the court explained:** 

**[S]tate SO 2**  **budgets are** unrelated **to the criterion (the “air quality factor”) by which EPA included** 
**states in CAIR’s SO 2**  **program. Significant con tributors,**  for purposes of inclusion only **, are those states EPA projects will**  **contribute at least 0.2** μ **/m 3** 

**of PM 2.5**  **to a nonattainment area in another state.**  **While we would have expected EPA to require**
**states to eliminate contributions above this thresh old, EPA claims to have used [as its] measure** 
**. . . emissions that sources within a state can eliminate by applying “highly cost-effective con**  **trols.” EPA used a similar approach in deciding**
**which states to include in the NO**

**x 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 incl usion stage. 213 F.3d at**  **675. Likewise here, the SO 2**  **Petitioners do not quarrel with EPA draw**  **ing the line at 0.2** μ **/m 3**  **or its** different measure **of significance for determining**
**states’ SO 2**  **budgets. Again,** we do not disturb this approach.

North Carolina **, 531 F.3d at 916-17 (emphases added).**
**There is no basis to conclude that EPA acted incon**  **sistently with** North Carolina **by replicating the ap proach the court left undisturbed. It is true that in** **103a**

North Carolina **the court rejected EPA’s use of fuel**  **factors in allocating allo wances for the CAIR trading**  **program because doing so redistributed reduction responsibilities to the bene**  **fit of States with more**
**coal-fired electricity generation,**  see id. **at 920-21.**
**The court stated that EPA** 

**may not require some states to** exceed the mark

**. Because the fuel-adjustment 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.

Id. **at 921 (emphases added). But a holding that EPA** 
**had acted** arbitrarily **in designing its trading program cannot fairly be deemed to alert EPA that it might** 
**exceed its** statutory authority **in using an approach to measuring “significant contribution” that the court**  specifically **declined to disturb.** Cf. Natural Res. Def.
Council v. EPA **, 571 F.3d 1245, 1259 (D.C. Cir. 2009) (“EPA cannot be expected to take [an] argument,**  **raised in support of one spec ific objection, and apply it**  **sua sponte to another provis ion.”). EPA was entitled,** 
**in the absence of objection in the Transport Rule ad**  **ministrative proceedings, to rely in promulgating the Transport Rule upon the cour**  **t’s decision not to disturb its approach. And the fact that after**  North Carolina **no comment in the Transpor t Rule administrative pro**  **ceedings objected that EP A was exceeding its stat**  **utory authority in adopting its approach underscores the fact that EPA was not acting inconsistently with** **104a**

North Carolina **in light of a few sentences about fuel factors plucked out of context.** 

Second **, reaching farther afield, the court points to a**  **comment submitted during the CAIR rulemaking that**  **it deems sufficient, when combined with the holding in**
North Carolina **, to “show that EPA ‘h ad notice of this**  **issue and could, or should ha ve, taken it into account.’**  **” Op. at 33 n.18 (quoting**  Natural Res. Def. Council v.
EPA **, 824 F.2d at 1146, 1151 (D.C. Cir. 1987)). 17**  **The**
**CAIR comment stated “that th e threshold contribution**  **level selected by EPA should be considered a floor, so**  **that upwind States should be obliged to reduce their**  **emissions only to the level at which their contribution** 
**to downwind nonattainment does not exceed that threshold level.” CAIR,**  **70 Fed. Reg. 25,162, 25,176-77 (May 12, 2005). Th**  **is comment, which was not cited in any petitioners’**  **brief to this court but first mentioned by industry petiti**  **oners during rebuttal oral argument, cannot carry the we**  **ight the court assigns to it particularly in light of the holding in**  North Carolina **. The court generally does not entertain argu**
**ments raised for the first time in a reply brief,**  see Altman v. SEC **, 666 F.3d 1322, 1329 (D.C. Cir. 2011);**
North Carolina **, 531 F.3d at 924 n. 6, let alone for the**  **first time at oral argument,** see Roth v. U.S. Dep’t of
Justice **, 642 F.3d 1161, 1181 (D.C. Cir. 2011);** Ark Las Vegas Rest. Corp. v. NLRB **, 334 F.3d 99, 108 n.4 (D.C.**

**17 Remarkably, the court quotes a**  **case in which the common law exhaustion doctrine, rather than CAA section 307(d)(7)(B), applied:**  **the rule at issue was promulgated prior to enactment of section 307(d)(7)(B).**  See Natural Res. Def. Council **, 824 F.2d at 1150-51. 105a** 

**Cir. 2003), much less during** rebuttal **oral argument,** see Coalition of Battery Recyclers Ass’n **, 604 F.3d at 623;**  Old Dominion Dairy Products, Inc. v. Sec. of Defense **, 631 F.2d 953, 961 n.17 (D.C. Cir. 1980). The**  **reason is simple: “in order to prevent ‘sandbagging of appellees and respondent**  **s,’ we do not consider arguments that were raised neither in the opening**  **brief nor by respondents.”** S. Coast Air Quality Mgmt. Dist. v. EPA **, 554 F.3d 1076, 1081** **n.* (D.C. Cir.** **2009) (quoting** Sitka Sound Seafoods, Inc. v. NLRB

**, 206 F.3d 1175, 1181 (D.C. Cir. 2000)). Here that**  **reason has particular re sonance because EPA was**  **relying on the court’s decision in** North Carolina **, 531 F.3d at 916-17, to “not dist**  **urb” its two-st ep approach**  **to defining “significant co ntribution,” and no one ref** 
**erenced the CAIR comment du ring the Transport Rule**  **administrative proceedings.**

**Even setting aside the starkly novel forfeiture stan dard the court has chosen to apply to industry peti**  **tioners, the cited CAIR comm ent is insufficient to** 
**establish that the issue of EPA’s statutory authority** **was properly preserved for the court to have jurisdic**
**tion to address it. The co urt relies on a footnote in** 
American Petroleum Institute v. EPA **, 52 F.3d 1113, 1120 n.1 (D.C. Cir. 1995), for th**  **e proposition that it is “highly relevant” if an agency**  **previously “reject[ed] [] the same argument in a prior rulemaking,” Op. at 33**  **n.18. Although the C AIR comment communicates a**  **policy preference, this cour t has distinguished between**  **comments presenting policy preferences and those**  **presenting statutory authority objections,** see, e.g. **,** Cement Kiln **, 255 F.3d at 860-61, and technical and 106a** 

**policy arguments are insufficient to preserve objec tions to EPA’s statutory authority.**  See Nat. Res. Def. Council **, 25 F.3d at 1074. The CAIR comment**  **that EPA rejected in the ot her rulemaking is therefore**  **not “the same argument” that petitioners belatedly attempt to raise now. Furthermore, in**  American
Petroleum **, the court concluded th at the jurisdictional**  **question was “close” inasmuch as EPA had** explicitly **incorporated the docket from the previous rulemaking**  **in the second rulemaking, an d the previous rulemaking**  **had been aborted, such that there was no intervening opportunity for judicial review.**  See Am. Petroleum

**, 52 F.3d at 1120 n.1. Neithe**  **r of those fa ctors that** 
**made** American Petroleum **a close case is present here. The Transport Rule was promulgated to re**  **place CAIR, but the CAIR docket was never incorpo**  **rated into the Transport Rule docket—perhaps be** 
**cause of the court’s instruction in** North Carolina **that EPA “redo its analysis from**  **the ground up.” 531**
**F.3d at 929. EPA would have had no reason to** 
**reexamine the voluminous CAIR docket in search for objections that were not ra**  **ised before the court in**
North Carolina **. Also, unlike the aborted rule whose docket EPA incorporated in**  American Petroleum **, in**
**CAIR there was an interveni ng opportunity for judi**  **cial review. Yet no one sought judicial review of**
**CAIR on the basis of the C AIR comment now relied on**  **by the court. This precise circumstance was relied upon by the court in**  North Carolina **in declining to disturb EPA’s approach.**  See id. **at 917;**  see Med.**107a**

Waste **, 645 F.3d at 427. 18**  **Once the court in** North
Carolina **declined to disturb EPA’s approach, because**

**no objection to EPA’s authority to adopt its approach** 
**had been raised to the court, pe**  **titioners were required**
**to inform EPA during the Transport Rule administra**  **tive proceedings that they objected to EPA’s statutory**  **authority to pursue that approach.** See **42 U.S.C. § 7607(d)(7)(B). If**  American Petroleum **presented a “close” jurisdictional question, then the**  **jurisdictional question here is easily decided.** 

Third **, the court concludes that “EPA’s statements at the proposal stage indi**  **cated EPA was not open to reconsidering CAIR’s earlier**  **rejection of petitioners’ argument,” and that becaus**  **e EPA had dismissed “the two air quality-only approa**  **ches it considered,” the comments of Tennessee,**  **Wisconsin, and Delaware**

**18 The fact that Kansas, Nebraska, and Oklahoma were**  not **reg ulated under CAIR, and thus would have a newly ripened claim,**  see Coalition for Responsible Regulation **, 684 F.3d at 129-32, does not** 
**mean that those States are relieved from** making **that claim during the Transport Rule administrative proceedings, as CAA section**  **307(d)(7)(B) requires. This is all the more true here because the**  **petitioners who** were **subject to CAIR** abandoned **the CAIR com ment now relied on by the court when they sought judicial review.**  **To suggest that EPA should have foreseen that Kansas, Nebraska, and Oklahoma, despite**  not making **an objection to the proposed Transport Rule on this ground, secretly**  did **object on the basis of a comment made during a rulemaking to which they were not parties,**  **and was abandoned on judicial re view by those who made it, dis** **torts the ripeness and CAA exhaustion doctrines beyond recogni tion and “give[s] parties to Clean Air Act proceedings a powerful**  **weapon for delaying and sandbagging Agency action.”** Lead
Indus. Ass’n Inc. v. EPA **, 647 F.2d 1130, 1173 (D.C. Cir. 1980). 108a** 

**were “ ‘reasonable’ under the circumstances,” Op. at**  **33, n.18. But there was no such “earlier rejection of**  **petitioners’ argument” in CAIR because the CAIR**  **comment did not suggest that EPA** exceeded its statutory authority **by following its two-step approach to defining “significant contribution.”**  See Cement Kiln

**, 255 F.3d at 860-61. Furtherm**  **ore, industry petition ers acknowledge in their Re**  **ply Brief that they “are not advocating an ‘air quality-only’ approach,” but**  **instead a cost-based approach with a floor for emission**  **reduction obligations. In dustry & Labor Petrs’ Re**  **ply Br. at 10. So, EPA’s re jection of two alternative**  **air quality only approaches has no bearing on whether**  **EPA would have been willing to entertain an objection during the Transport Rule administrative proceedings**  **that the “good neighbor” prov ision required it to use** 
**the threshold level for a Sta te’s inclusion in the Trans**  **port Rule as a floor for emis sion reduction obligations.** 

**Nothing in this court’s precedent on CAA section**  **307(d)(7)(B), 42 U.S.C. § 7607(d)(7)(B), supports the**
**court’s tortured efforts to avoid the jurisdictional** **limits in the CAA and seize jurisdiction where peti tioners clearly fall far shor**  **t of preserving their claim by objecting to EPA’s stat**  **utory authority during the Transport Rule administrative proceedings with “rea**  **sonable specificity.” The court does not acknowledge this court’s precedent setting a strict standard for**  **preservation of statutory authority objections, which**  **demonstrates the inconsistency of the court’s exercise**  **of jurisdiction today.** See, e.g. **,** Natural Res. Def.
Council **, 559 F.3d at 563-64;** Am. Farm Bureau Fed’n
v. EPA **, 559 F.3d 512, 538 (D.C. Cir. 2009);** Natural**109a**

Res. Def. Council v. EPA **, 571 F.3d 1245, 1259 (D.C. Cir. 2009);**  Mossville **, 370 F.3d at 1238;** Cement Kiln

**, 255 F.3d at 860-61;**  George E. Warren Corp. v. EPA

**, 159 F.3d 616, 629 (D.C. Cir. 1998);**  Motor & Equip. Mfrs. Ass’n **, 142 F.3d at 462;** Natural Res. Def. Council **, 25 F.3d at 1074;** Ohio v. EPA **, 997 F.2d at 1528-29;** Natural Res. Def. Council v. EPA **, 937 F.2d 641, 647-48 (D.C. Cir. 1991);**  Linemaster Switch Corp. **, 938 F.2d at 1308;**  Thomas **, 805 F.2d at 425-27;** Lead Indus.
Ass’n **, 647 F.2d at 1173.**

**Rather than confront the force of this precedent, the court relies on phrase**  **s from a few opinions sug gesting a more flexible standard,**  see **Op. at 31-34 n.18, but tellingly omits any discussion of the analyses** 
**or outcomes in those cases. This is because even** **where the court has mentioned flexibility, the com ments at issue were either significantly more specific**  **than the comments of Tennessee and Wisconsin, and were thus sufficient, or we**  **re more specific but none theless deemed Wanting. For example, in**  Natural Resources Defense Council v. EPA **, 571 F.3d 1245, 1259 (D.C. Cir. 2009), the co**  **urt suggested there is “leeway” but concluded, in**  **words that resonate here, that “EPA cannot be expected to take [an] argument,**  **raised in support of one spec ific objection, and apply it**  **sua sponte to another provision.”** Id. **at 1259-60. The irony in the court’s reliance**  **on this case is that it expects EPA to read**  North Carolina **in precisely the opposite manner—it conclude**  **s EPA should have taken a holding about “exceeding the mark” in the CAIR**  **trading allowance program and** sua sponte **applied it to the methodology for calculating “significant contribu-** **110a**

**tion,” even though the court explicitly declined to disturb that methodology.**  See supra **Pt. II.B. In** Appalachian Power **, 135 F.3d 791, 817 (D.C. Cir. 1998), the court concluded the “argument . . .**  **during the comment period [w as]—in substance, if not**  **in form, the same objection” raised before the court,** 
**whereas here the comments of Tennessee and Wiscon** 
**sin did not raise the statut ory authority objection now**  **urged upon the court in either form** or **substance.**
**The court also relies on** Natural Resources Defense
Council v. EPA **, 824 F.2d 1146, 1150-51 (D.C. Cir. 1987) (en banc), which invo**  **lved common law exhaus tion, not CAA section 307(d)(7)(**  **B), and in that case the issue was “explicitly raised . . . in comments”**  **before the EPA,** id. **at 1151. And although observing**
**in** South Coast Air Quality Management District v.
EPA **, 472 F.3d 882, 891-92 (D.C. Cir. 2009), that peti**  **tioners have “some leeway,” the court concluded that leeway did not permit the pe**  **titioner to rely upon a general procedural preference**  **stated in a cover letter**
**to its comments to alert EP A to the details of the ob**  **jections to a final rule.**

**None of the court’s proffered reasons for ignoring section 307(d)(7)(B)’s jurisd**  **ictional limitations has merit on its own, nor in co**  **mbination. “[Z]ero plus zero [plus zero]**  **equals zero.”** U.S. v. Clipper **, 313 F.3d 605, 609 (D.C. Cir. 2002).** 

III.

**The court’s remaining reasons for vacating the Transport Rule are also either beyond its jurisdiction**  **or unpersuasive. 111a** 

**First, the court conclude s that EPA violated the** **CAA by not calculating the required emission reduc tions “on a proportional basi**  **s that took into account contributions of other upwind**  **States to the downwind States’ nonattainment problems.” Op. at 38. This is**  **so, the court says, because in** Michigan **the court only permitted cost to be considered as a way “to allow**  **some upwind States to do** less **than their full fair share,” not more.**  Id. **Petitioners have not argued that EPA violated the CAA by not calculating emission** **reductions on a proportional basis, as the court sug gests.**  See Anna Jaques Hosp. v. Sebelius **, 583 F.3d 1, 7 (D.C. Cir. 2009). The st**  **atement in industry peti tioners’ brief that the court quotes,**  see **Op. at 37, in**
**stead maintains that EPA was** arbitrary and capricious **in the way it grouped States for 2014 sulfur dioxide (SO**  **2 ) budgets because, they claimed, EPA did**  **so without “consider[ing]** relative **contributions of the various States,” Industry & Labor Petrs’ Br. at 33.**  **This challenge is limited to the asserted** arbitrariness
**of how certain States were categorized for one pollu** **tant’s budget for one year. The court lacks jurisdic**
**tion to consider** sua sponte **an objection to EPA’s stat utory authority not raised**  **by petitioners within the sixty day period required**  **under CAA section 307(b)(1), 42 U.S.C. § 7607(b)(1);**  see Med. Waste **, 645 F.3d at 427. As this court has prev**  **iously said, “[t]o rely on relief plaintiffs never reques**  **ted on a claim they never**
**made would be to conclude th at zero plus zero equals** 
**more than zero.”** NAACP, Jefferson Cnty. Branch v. U.S. Sugar Corp. **, 84 F.3d 1432, 1438 (D.C. Cir. 1996). 112a** 

**Second, even if petitioners** had **raised a “propor tionality” statutory authority objection, this objection** 
**and the court’s conclusion are premised on the specu**  **lative possibility that th e Transport Rule might re**  **quire States to reduce emissions to a level below the one percent of NAAQS inclusion threshold of EPA’s**  **two-step approach to defini ng “signification contribu**  **tion,” and thus** more **than their statutory fair share —an argument over which th**  **e court also lacks juris**
**diction.** See supra **Part II. Further, the court’s**
**conclusion is at odds with** North Carolina **where the**
**court concluded that EPA’ s measure of significant**  **contribution need not “directly correlate with each State’s individualized air qu**  **ality impact on downwind**
**nonattainment** relative to other upwind states **.” 531 F.3d at 908 (emphasis added);**  see LaShawn A. **, 87**
**F.3d at 1395. It al so ignores that in**  Michigan **the court expressly permitted**  **the use of uniform cost thresholds to measure “sig**  **nificance,” and likewise permitted the “ineluctabl[e]”**  **result of small and large contributors being required**  **to make the same amount**
**of reductions. 213 F.3d at 679. Without jurisdiction**  **to reach an argument on whether the Transport Rule**  **requires States to reduce** more **than their statutory fair share,**  Michigan **requires the conclusion that**
**EPA’s choice of cost thresh olds in the Transport Rule**  **was permissible.**

**Next, the court concludes that EPA failed to con** 
**sider the effect of in-Sta te emissions of downwind** 
**States on their own nonattainment and interference with maintenance problems,**  see **Op. at 38. Petition ers conceded at oral argume**  **nt that this “in-State con- 113a** 

**tribution” contention was “n ot actually an independent**  **statutory authority argument,” Oral Arg. Tr. at 32, but**  **merely a repackaged versio n of the objection to the**  **possibility of reductions below the one percent of**  **NAAQS inclusion threshold, an argument over which**  **the court lacks jurisdiction,** see supra **Part II. Even if the court had jurisdiction to address it, the court’s**  **conclusion is unsupported by the record. EPA ex** 
**amined the various cost thre shold for each State, and**  **in so doing considered**

**how much air quality improvement in downwind states result[ed] from up**  **wind state emission reduc tions at different levels; whether, considering up** 
**wind emission reductions and** assumed local (instate) reductions **, the downwind air quality prob lems would be resolved; an**  **d the components of the remaining downwind air**  **quality problem (e.g.,**
**whether it is** a predominantly local or in-state problem **, or whether it still co ntains a large upwind**  **component).**

**Transport Rule, 76 Fed. Reg. at 48,256 (emphases**  **added);** see id. **at 48,259 (concluding remaining nonat tainment problem in**  **Liberty-Clairton wa s the result of**  **local emissions). EPA thus in fact examined the** 
**contribution of downwind States to their own nonat**  **tainment problems.**

**Finally, the court concludes that EPA “did not try to take steps to avoid” co**  **llective over-control, Op. at**
**39. This conclusion too is unsupported by the record.**  **The Transport Rule was not projected to achieve at** 
**tainment of all downwind nonattainment and mainte-** **114a**

**nance problems attributed to upwind States.** See id. **at 48,210, 48,232, 48,247-48; Resp.’s Br. at 38 n.24.**  **Because EPA’s analysis de monstrated instances of**  **“remaining downwind air qu ality problems,” Transport**  **Rule, 76 Fed. Reg. at 48, 256, there is no support for** 
**the court’s conclusion that the Transport Rule resulted** 
**in collective overcontrol.**

IV.

**The Transport Rule, as EPA observes, represents**
**“the culmination of decade s of Congressional, admin**  **istrative, and judicial efforts to fashion a workable, comprehensive regulatory ap**  **proach to interstate air pollution issues that have**  **huge public health implica tions.” Resp.’s Br. at 12. The legislative history to** 
**amendments of the CAA do cuments Congress’s frus**  **tration with the upwind States ’ historic failure to take** 
**effective action on their ow n to curtail their contribu**  **tions to problems of pollu tion in downwind States,**  **leading to amendments to strengthen EPA’s hand. The court ignores Congress’s**  **limitations on the court’s jurisdiction and decades of**  **precedent strictly enforc ing those limitations and proc**  **eeds to do violence to the plain text of the CAA an**  **d EPA’s permissible inter pretations of the CAA, all while claiming to be “ap**  **ply[ing] and enforc[ing] the statute as it’s now writ**  **ten.” Op. at 8. The result is the endorsement of a “maximum delay” strategy for regulated entities,**  **rewarding States and indust ry for cloaking their ob**  **jections throughout years of administrative rulemak**  **ing procedures and blindsiding the agency with both a**
**collateral attack on its in terpretation of section 110(a)** **115a**

**and an objection raised for th e first time in this court,**  **despite the court’s previous decisions declining to**  **disturb the approach EPA adopted in the Transport**
**Rule.**

**To reach the result—vacat ing the Transport Rule—** 
**the court does several remark able things. It seizes**  **jurisdiction over the issue of States’ independent “good neighbor” obligation by**  **allowing St ates to pur**  **sue a collateral attack on Final SIP Rules from which**  **they either failed timely to file petitions for review or**  **their petitions challenging those rules have not been consolidated with the peti**  **tions challenging the Trans port Rule that are before th**  **is three-judge panel. It asserts jurisdiction over industry’s challenge to EPA’s** **two-step approach to defining “significant contribu tion” by excusing industry fr**  **om its failure to preserve the issue by first presenting**  **it to EPA and then rest ing jurisdiction on a comme**  **nt in anothe r rulemaking**  **that was first cited by industry in** rebuttal **oral argu ment and cannot bear the weig**  **ht the court assigns to it**
**because it did not challenge EPA’s statutory authority**  **to adopt its two-step approach . All this is contrary to**  **Congress’s limitations on the court’s jurisdiction and this court’s precedent enforcing those limitations.** 
**The rest of the court’s anal ysis recalibrat**  **es Congress’s statutory scheme and vision of cooperative federalism**  **in the CAA. Along the way, the court abandons any consideration that an agency**  **is entitled to repose, absent objection during its administrative proceedings,**  **when a court, here on** two **occasion, expressly leaves undisturbed its two-step appr**  **oach to enforcing a stat ute it administers and no obje**  **ction is raised during the 116a** 

**Transport Rule administrative proceedings. Then, in dictum, the court offers suggestions as to how EPA**  **might fix the problems th e court has created upon** **rewriting the CAA and trampling on this court’s prec**
**edent in** North Carolina **and** Michigan

**. None of this is**  **to suggest that EP A should be ex**  **cused from the statutory limi ts on its authority or any**  **material procedural misste ps under the CAA or the**  **APA. But neither can the court ignore jurisdictional limits or substantive provisions that Congress wrote in**  **clear terms and EPA’s permis sible interpretations of**  **the CAA in addressing statut ory silence or ambiguity.** 
**Rather it underscores wh y, as a programmatic and**  **public health matter, Congress concluded there are important reasons for jurisd**  **ictional limits and admin**
**istrative exhaustion that this court heretofore has**  **steadfastly acknowledged in recognizing both the limits of its jurisdiction and**  **of its role in enforcing the CAA as Congress wrote it.** 

**Accordingly, I respectfully dissent.**