IN THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
Case Nos. 14

- 73368, 14

- 73384, 14

- 73386, 14

- 73394
STATE OF ARIZONA, ex rel. Henry Darwin, Director, Arizona Department

of Environmental Quality, et al.,

Petitioners,

v. UNITED STATES ENVIRONMENTAL PROTECTION AGENCY and GINA MCCARTHY, Administrator, United States Environmental Protection Agency, Respo ndents.

ON PETITION FOR REVIEW OF FINAL AGENCY ACTION OF THE UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

PETITIONER PHOENIX CEMENT COMPANY’S

FINAL OPENING BRIEF

G EORGE A. T SIOLIS ATTORNEY AT LAW 351 Lydecker Street Englewood, N.J. 07631 (201) 408

- 4256 (phone) (201) 408

- 4622 (facsimile) gtsiolis@nj.rr.com M ARK W. D E L AQUIL A NDREW M. G ROSSMAN BAKER & HOSTETLER LLP Washington Square, Suite 1100 1050 Connecticut Avenue, N.W. Washington, D.C. 20036 (202) 861

- 1527 (phone) (202) 861

- 1783 (facsimile) mdelaquil@bakerlaw.com Counsel for Petitioner Phoenix Cement Company Case: 14-73368, 07/08/2015, ID: 9602043, DktEntry: 52, Page 1 of 35RULE 26.1 DISCLOSURE STATEMENT

Petitioner Phoenix Cement Company (“PCC”) is a division of the Salt
River Pima

- Maricopa Indian Community (“SRPMIC”) , a federally recognized Indian Tribe. PCC was created under tribal law in 1994 to engage in the business of manufacturing cement “to promote the economic self

- sufficiency of the SRPMIC so as to enable the Community to survive and prosper as an independen t Indian Community by earning profits to sustain the Community’s necessary governmental programs.” See SRO

- 172

- 94. PCC has no parent company, subsidiary, or affiliate that has issued shares or debt securities to the public. Case: 14-73368, 07/08/2015, ID: 9602043, DktEntry: 52, Page 2 of 35ii TABLE OF CONTENTS Page RULE 2 6.1 DISCLOSURE STATEMENT

................................ .............................. i TABLE OF CONTENTS

................................ ................................ ........................... ii TABLE OF AUTHORITIES

................................ ................................ .................... iv GLOSSARY

................................ ................................ ................................ .................. vi I. INTRODUCTION

................................ ................................ ........................... 1 II. JURISDICTIONAL STATEMENT

................................ ............................. 2 III. STATEMENT OF ISSUES

................................ ................................ ............ 3 IV. STATEMENT OF THE CASE

................................ ................................ ..... 3 A. Phoenix Cement Company

................................ ................................ .............. 3 B. The Clean Air Act Visibility Program

................................ ............................. 4 C. Arizona’s Visibility Protection SIP

................................ ................................ . 5 D. EPA’s Federal Plan for Visibility Protection

................................ ................. 6 E. Phoenix Cement Company Petitions for Review

................................ ....... 11 F. Phoenix Cement Company Petitions for Administrative Reconsideration and Stay

................................ ................................ ................................ ............. 12 V. SUMMARY OF ARGUMENT

................................ ................................ .... 14 VI. STANDARD OF REVIEW

................................ ................................ .......... 16 VII. ARGUMENT

................................ ................................ ................................ .. 17 A. The Dem onstration Project Is Arbitrary and Capricious Because It Was Enacted Without Adequate Notice

................................ ............................... 17 B. The Demonstration Project Is Arbitrary and Capricious Because EPA Failed To Provide a Reasoned Basis for It

................................ .................. 22 VIII. CONCLUSION

................................ ................................ ............................... 24 Case: 14-73368, 07/08/2015, ID: 9602043, DktEntry: 52, Page 3 of 35iii

STATEMENT OF RELATED CASES

................................ ................................ . 26 CERT IFICATE OF COMPLIANCE

................................ ................................ ..... 27 CERTIFICATE OF SERVICE

................................ ................................ ................ 28 Case: 14-73368, 07/08/2015, ID: 9602043, DktEntry: 52, Page 4 of 35iv TABLE OF AUTHORITIES Page(s) C ASES Appalachian Power Co. v. EPA , 135 F.3d 791 (D.C. Cir. 1998)

.............................. 22 Environmental Defense Center, Inc. v. EPA , 344 F.3d 832 (9th Cir. 2003)

............... 17 Environmental Integrity Project v. EPA , 425 F.3d 992 (D.C. Cir. 2005)

............. 17, 18 Ethyl Corp. v. EPA , 51 F.3d 1053 (D.C. Cir. 1995)

................................ ................. 16 Fertilizer Institute v. EPA , 935 F.2d 1303 (D.C. Cir. 1991)

................................ ..... 21 Motor Vehicles Manufactur

ers Association v. State Farm Mutual Automobile Insurance Co. , 463 U.S. 29 (1983)

................................ .......... 17, 23, 24 National Black Media Coalition v. FCC , 791 F.2d 1016 (2d Cir. 1986)

................... 21 NLRB v. Wyman

- Gordon Co. , 394 U.S. 759 (1969)

................................ .................... 1 NRDC v. Browner

, 57 F.3d 1122 (D.C. Cir. 1995)

................................ ..................... 4 NRDC v. EPA , 279 F.3d 1180 (9th Cir. 2002)

................................ ....................... 18 Small Refiner Lead Phase

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

................................ ................................ ...... 17, 21 S TATUTES 5 U.S.C. § 706

................................ ................................ ................................ ............... 16 42 U.S.C. § 7410

................................ ................................ ................................ ..... passim 42 U.S.C. § 7491

................................ ................................ ................................ ..... passim 42 U.S.C. § 7492

................................ ................................ ................................ ............ 4 42 U.S.C. § 7607

................................ ................................ ................................ ..... passim O THER A

UTHORITIES 40 C.F.R. § 51.308

................................ ................................ ................................ . passim Case: 14-73368, 07/08/2015, ID: 9602043, DktEntry: 52, Page 5 of 35v

40 C.F.R. § 52.145

................................ ................................ ................................ . passim 79 Fed. Reg. 9318 (Feb. 18, 2014)

................................ ................................ .......... 6, 7 79 Fed. Reg. 52,420 (Sept. 3, 2014)

................................ ................................ .... passim 79 Fed. Reg. 56,322 (Sept. 19, 2014)

................................ ................................ ........ 14 Attorney General’s Committee on Administrative Procedure, Final Report (1941)

................................ ................................ ................................ .. 1 Comments of Phoenix Cement Company (Mar. 31, 2014), EPA

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................................ ................................ .......... 8 Consent Decree, United States v. Ash Grove Cement Co. , No. 13

- 2299 (D. Kan. entered Aug. 14, 2013)

................................ ................................ ......... 11 Consent Decree, United States v. CalPortland Co. , No. 11

- 2064 (E.D. Cal. entered Feb. 8, 2012)

................................ ................................ .......... 11 EarthJustice Comments (Mar. 31, 2014), EPA

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................................ ................................ .... 8, 21 Letter from Jared Blumenfeld, Regional Administrator, EPA Region IX, to Ve rle C. Martz, Phoenix Cement Company (Jan. 16, 2015)

....................... 3, 13 Letter Petition to Administrator McCarthy (Nov. 3, 2014)

................................ .... 2 Technical Support Document (Jan. 27, 2013), EPA

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................................ ................................ .......... 7 Case: 14-73368, 07/08/2015, ID: 9602043, DktEntry: 52, Page 6 of 35vi GLOSSARY ADEQ Arizona Department of Environmental Quality CAA Clean Air Act CalPortland CalPortland Company PCC Phoenix Cement Company SNCR Selective Non

- Catalytic Reduction Technology Case: 14-73368, 07/08/2015, ID: 9602043, DktEntry: 52, Page 7 of 35I. INTRODUCTION

Public participation “in the rule

- making process is essential in order to permit administrative agencies to inform themselves and to afford adequate safeguards to private interests.” Attorney General’s Committee on Administrative Procedure, Final Report a t 103 (1941); see also NLRB v. Wyman

Gordon Co. , 394 U.S. 759, 777

- 78 (1969) (Douglas, J., dissenting). Affording an adequate opportunity for public participation is particularly critical where an agency considers technical regulations that command the wa y in which individual regulated entities must design and operate their facilities, as no one knows those facilities’ operations better than their owners and operators. In this case, EPA violated Phoenix Cement Company’s and the public’s right to comment wh en its federal plan for making reasonable progress toward the goal of achieving natural visibility in certain federal parks and wilderness areas in the State of Arizona included a “Demonstration Project” that was entirely absent from EPA’s regulatory propo sal. This Project is “not typically required as part of a regional haze plan,” see 79 Fed. Reg. at 52,456/1, and was
taken almost verbatim from consent decrees that EPA entered into to settle claims against cement manufacturers that were alleged to have v iolated the
Clean Air Act. In imposing the Demonstration Project, EPA failed to consider such fundamental questions as whether the Demonstration Project comports with Case: 14-73368, 07/08/2015, ID: 9602043, DktEntry: 52, Page 8 of 352

the statutory provisions of the Act’s visibility protection program and whether the Proje ct is justified under the Agency’s implementing regulations. These deficiencies demonstrate how the lack of appropriate notice impairs the quality of agency decisionmaking and renders EPA’s decision to include the Demonstration Project arbitrary and capri cious. For these reasons and those discussed below, the Court should vindicate Phoenix Cement Company’s and the public’s interest in administrative regularity by partially vacating the rule under review to remove the Demonstration Project.

II. JURISDICTIONAL STATEMENT The Court has jurisdiction over this petition for review of the final rule, Promulgation of Air Quality Implementation Plans; Arizona; Regional Haze and Interstate Visibility Transport Federal Implementation Plan; Final Rule , 79 Fed. Reg. 52,420 (Sept. 3, 2014) , J.A. 00315 , because it was filed within the sixty

- day jurisdictional period set forth in Clean Air Act § 307(b)(1), 42 U.S.C. § 7607(b)(1). Venue is appropriate because the rule under review is the promulgation of an “implementation pla n under section 7410 of this title” for the State of Arizona, which is located in this Circuit. CAA § 307(b)(1), 42 U.S.C. § 7607(b)(1). Although Phoenix Cement Company has filed a petition for administrative reconsideration, Letter Petition to Administra tor McCarthy Case: 14-73368, 07/08/2015, ID: 9602043, DktEntry: 52, Page 9 of 353

(Nov. 3, 2014), J.A. 02039 , and EPA has notified Phoenix Cement Company that it is reconsidering the Demonstration Project, Letter from Jared Blumenfeld, Regional Administrator, EPA Region IX, to Verle C. Martz, Phoenix Cement Company (Jan. 16, 2015), J.A. 02082 , neither the filing of a petition for reconsideration, CAA § 307(b)(1), 42 U.S.C. § 7607(b)(1), nor EPA’s grant of reconsideration, CAA § 307(d)(7)(B), 42 U.S.C. § 7607(d)(7)(B), postpones the effectiveness of the rule or otherwise renders the rule non

- final for purposes of judicial review.

III. STATEMENT OF ISSUES 1. Whether EPA’s decision to impose the Demonstration Project on Phoenix Cement Company is arbitrary and capricious because EPA provided no notice of the Project in its regula tory proposal?
2. Whether EPA’s decision to impose the Demonstration Project on Phoenix Cement Company is arbitrary and capricious because EPA failed to explain how the Project is consistent with the Act and justified under its regulations?
IV. STATEMENT OF T HE CASE A. Phoenix Cement Company Phoenix Cement Company is an enterprise division of the Salt River
Pima

- Maricopa Indian Community. In order to raise revenues for the Community, Phoenix Cement Company operates a portland cement plant, the Case: 14-73368, 07/08/2015, ID: 9602043, DktEntry: 52, Page 10 of 354

Phoenix Cement Plant, near Clarkdale, Arizona. The Phoenix Cement Plant is located approximately nine kilometers south of the Sycamore Canyon Wilderness Area. The Phoenix Cement Plant’s operations are regulated by a comprehensive air permit that includes facility

- wide limits on nitrogen oxides,
or NO x , emissions, 1 as well as applicable new source performance standards
and air toxics standards.
B. The Clean Air Act Visibility Program The Clean Air Act “establishes a partnership between EPA and the
states for the attainment and maintenance of national air quality goals.” NRDC
v. Browner , 57 F.3d 1122, 1123 (D.C. Cir. 1995). Among the Clean Air Act’s programs is the visibility program, see CAA §§ 169A

- 169B, 42 U.S.C. §§ 7491

- 7492, which “declares as a national goal the preve ntion of any future, and the remedying of any existing, impairment of visibility in [certain national parks and wilderness areas] which impairment results from manmade air pollution.” CAA § 169A(a)(1), 42 U.S.C. § 7491(a)(1). In the visibility program, Co ngress gave states the authority to devise “a long

- term . . . strategy for making reasonable progress towards meeting the

1 Nitrogen oxides are a class of chemical compounds that can impair visibility. Certain nitrogen oxide particles, notably nitrate, affect visibility by absorbing and scattering light. Case: 14-73368, 07/08/2015, ID: 9602043, DktEntry: 52, Page 11 of 355

national [visibility] goal,” CAA § 169A(b)(2)(B), 42 U.S.C. § 7491(b)(2)(B). In so doing, the state must consider four factors in an analysis that is often called
the four

- factor test: “[1] the costs of compliance, [2] the time necessary for compliance, and [3] the energy and nonair quality environmental impacts of compliance, and [4] the remaining useful life of any existing source su bject to such requirements.” CAA § 169A(g)(1), 42 U.S.C. § 7491(g)(1); see also 40 C.F.R. § 51.308(d)(1)(i)(A). EPA may promulgate a federal plan only if it disapproves a state visibility plan for failing to meet the requirements of the Act or if a state fails to make a required visibility plan submission. See CAA § 110, 42 U.S.C. § 7410.
C. Arizona’s Visibility Protection SIP Over the last decade, EPA and Arizona have had an ongoing dispute about how best to address visibility issues in the state. Because emissions from the Phoenix Cement Plant were found not to appreciably diminish or impair visibility in a national park or wilderness area, Arizona determined that it was not necessary for the Company to take any action regarding visibility in the
State’s v isibility improvement plan submissions. In its final submission, Arizona determined that, with respect to the factors listed at CAA § 169A(g)(1) and 40 C.F.R. § 51.308(d)(1)(i)(A), it was not reasonable to require PCC to implement emission controls. EPA disapproved that determination, which is the subject of Phoenix Cement Company’s challenge in Phoenix Cement Company Case: 14-73368, 07/08/2015, ID: 9602043, DktEntry: 52, Page 12 of 356

v. EPA , No. 13

- 73383, with oral argument set for March 9, 2015. If Phoenix Cement Company prevails in that action, the Court’s decision sh ould render the federal plan void and moot this case.
D. EPA’s Federal Plan for Visibility Protection Proposed Rule . After partially disapproving Arizona’s state plan, including its determination for the Phoenix Cement Plant, EPA proceeded to
propose a federal plan to address visibility impairment pursuant to Clean Air Act § 110(c), 42 U.S.C. § 7410(c). For the Phoenix Cement Plant, EPA conducted an analysis that considered whether several control options (including selective catalytic reduction, mixing air technology, mid

- kiln firing,
low NO x precalciner or calciners, and low NO x burners) would be “reasonable” under the criteria of CAA § 169A(g)(1) and 40 C.F.R. § 51.308(d)(1)(i)(A). The product of EPA’s analysis was its proposal that Phoenix Cement
Com pany must meet a nitrogen oxides, or NO x , emission limit of 2.12 pounds
of NO x per ton of clinker produced, based on a rolling 30

- kiln operating day
basis. See 79 Fed. Reg. at 9372/1. EPA proposed this limit because it was “equivalent” to the application of selective non

- catalytic reduction control Case: 14-73368, 07/08/2015, ID: 9602043, DktEntry: 52, Page 13 of 357

technology, or SNCR, 2 at the Phoenix Cement Plant. Id. at 9354/1. In its supporting technical materials, EPA explained that the 2.12 limit was derived from its assumption that the selective non

- catalytic red uction control device would operate at 50% control efficiency, which was the highest efficiency achieved by similar devices at four comparable cement kilns in the United States. Technical Support Document at 107 & Table IV.C

- 6 (Jan. 27, 2013),
EPA

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. The federal plan proposal did not indicate that EPA was considering a demonstration project, or any similar mechanism, for the Phoenix Cement Plant or any other source that EPA proposed to regulate. Comments on the Proposed R ule

. In response to EPA’s proposed federal plan, Phoenix Cement Company submitted timely comments. Phoenix Cement Company did not comment on the possibility that EPA would turn the Phoenix Cement Plant into a demonstration project because EPA did not
inc lude any notice that it was considering a demonstration project in the proposal. As it pertains to the 2.12 lb/ton NO x emission limit, Phoenix

2 Selective non

- catalytic reduction technology introduces ammonia into the exhaust stream for a cement kiln. The reaction between the exhaust gas and the ammonia reduces the amount of nitrogen oxides that are released to the atmosphere. Case: 14-73368, 07/08/2015, ID: 9602043, DktEntry: 52, Page 14 of 358

Cement Company supported EPA’s proposal, acknowledging that the “methodology” that EPA followed in arriving at t he limit is “based on empirical data and is not inconsistent with the balance of the EPA’s cost of compliance analysis.” Comments of Phoenix Cement Company at 7 (Mar. 31, 2014), EPA

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. The only other comments that are re levant to Phoenix Cement Company’s claims are those submitted by EarthJustice on behalf of several advocacy groups. EarthJustice did not urge EPA to include a demonstration project or any of its component requirements. Instead, based on several
demonstra tion projects located outside the United States, EarthJustice argued that EPA’s control efficiency estimates for SNCR were too low. EarthJustice Comments at 18 (Mar. 31, 2014), EPA

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. EarthJustice therefore requested th at “EPA .

. . reconsider its conclusion that 50% SNCR control is appropriate for precalciner kilns,” and urged “EPA to fully explore higher SNCR efficiencies” at PCC. Id. at 19.
Federal Plan . EPA issued its final federal plan, the rule under review, on
S eptember 3, 2014. In the plan, EPA took two actions that are relevant to Phoenix Cement Company’s claims. Case: 14-73368, 07/08/2015, ID: 9602043, DktEntry: 52, Page 15 of 359

First, EPA retained the 2.12 lbs/ton NO x emission limitation. 3 In response to comments by EarthJustice arguing that “SNCR can reach higher
control e fficiencies for NO x than the 50 percent control efficiency assumed by EPA,” the Agency explained that in “developing the SNCR control efficiency used in our analysis, we examined the most stringent level of control attributed
to SNCR at other similar facil ities (as a retrofit on preheater/precalciner kilns) in other regulatory actions.” 79 Fed. Reg. at 52,455/2

- 3. This analysis indicated that the required “50 percent control efficiency is the most stringent SNCR control efficiency that has been applied . . . in other actions.” Id. at 52,455/3. For that reason, EPA rejected EarthJustice’s proffered control technology examples and “used a 50 percent control efficiency as the basis for
cost and emission calculations for the Clarkdale Plant.” Id. Second, EP A imposed “a series of control technology demonstration requirements” that it has called the “Demonstration Project” on the Phoenix
Cement Plant. Id. EPA acknowledged that “this type of control technology

3 The final rule al so allowed Phoenix Cement Company the option of complying with an alternative means of compliance in the form of an annual NO x emissions cap. See 79 Fed. Reg. at 52,486/1 (codified at 40 C.F.R. § 52.145(k)(4)). Phoenix Cement Company intends to comply th rough the 2.12 lbs/ton limit, not the annual cap. See Martz Declaration, attached as Exhibit A to PCC’s Motion To Supplement Record, filed separately. Case: 14-73368, 07/08/2015, ID: 9602043, DktEntry: 52, Page 16 of 3510

demonstration is not typically required as part o f a regional haze plan,” but argued that it was “appropriate here, given the significant variability in control
efficiencies achievable with SNCR at cement kilns.” Id. at 52,456/1. The requirements of the Demonstration Project are set forth at 40 CFR § 52 .145(k)(3), (6) and in 40 C.F.R. § 52.145 Appendix A. The Demonstration Project establishes design criteria for an ammonia

- injection system that may exceed the requirements necessary to meet the 2.12 lbs/ton NO x emission limit, requires that PCC vary its operating parameters to essentially act as a laboratory facility for at least 165 days before installation of SNCR and 270 days after installation of SNCR, and requires that the owner propose a 30

- day kiln operating limit according to a specific statistica l equation for EPA’s consideration in a separate rulemaking. 79 Fed. Reg. at 52,495/1

- 52,496/1. EPA did not attempt to relate the Demonstration Project to any material included in its regulatory proposal. Similarly, EPA did not explain how imposition of the Demonstration Project was part of a strategy for improving visibility in any areas protected by Clean Air Act § 169A; whether imposition of the Demonstration Project was “reasonable” within the meaning of Clean Air Act § 169A(b)(2)(B), 42 U.S.C. § 7491 (b)(2)(B), or its implementing regulations at 40 C.F.R. § 51.308(d); or how the Demonstration Project derived from a consideration of the four factors specified at 40 C.F.R. § 51.308(d)(1)(i)(A). Instead, EPA stated that the Demonstration Project was prom ulgated “in Case: 14-73368, 07/08/2015, ID: 9602043, DktEntry: 52, Page 17 of 3511

response to concerns raised by Earthjustice and in order to ensure that performance of the SNCR system installed at the Clarkdale Plan is optimized.” 79 Fed. Reg. at 52,455/3. It was not, however, a mystery where EPA obtained the prescriptive requirements of the Demonstration Project. Although the federal plan did not explain its origin, it is a matter of public record that numerous consent decrees that EPA has entered into to settle claims against cement manufacturers that the Agency alleges have violated the Clean Air Act contain nearly identical provisions. See, e.g. , Consent Decree Appendix A, United States v. Ash Grove
Cement Co. , No. 13

- 2299 (D. Kan. entered Aug. 14, 2013); Consent Decree Exhibit A, United States v. CalPortland Co. , No. 11

- 2064 (E.D. Cal. entered Feb. 8, 2012). 4
E. Phoenix Cement Company Petitions for Review Phoenix Cement Company filed a timely petition for review of the federal plan on November 3, 2014. See Phoenix Cement Co. v. EPA , No. 1 4

- 7338 6 (9th Cir.), J.A. 02034

. Upon motion by EPA, to which Phoenix Cement Company consented, the Court consolidated Phoenix Cement Company’s

4 EPA’s federal plan likewise imposed demonstration project requirements on a cement kiln owned by CalPo rtland and a lime plant. Case: 14-73368, 07/08/2015, ID: 9602043, DktEntry: 52, Page 18 of 3512

challenge with those brought by the State of Arizona, CalPortland Company,
and Asarco LLC. See Order of December 11, 2014 [#9346656], J. A. 02080

. F. Phoenix Cement Company Petitions for Administrative Reconsideration and Stay Phoenix Cement Company filed a timely petition for administrative reconsideration and stay on November 3, 2014. Phoenix Cement Company did not request that EPA recons ider the federal plan in its entirety or that it reconsider the 2.12 lbs/ton NO x emission limit applicable to Phoenix Cement Company. Instead, Phoenix Cement Company requested that EPA reconsider the Demonstration Project set forth at 40 C.F.R. § 52.145(k )(3), (6) and 40 C.F.R. § 52.145 Appendix A for five reasons. First, EPA provided no notice and no opportunity for comment because its regulatory proposal did not indicate that EPA was considering the Demonstration Project and because the protocol is not t he logical outgrowth of the regulatory proposal. Second, the Demonstration Project is contrary to EPA’s statutory authority under Clean Air Act § 110(c), 42 U.S.C. § 7410(c), governing the issuance of federal plans, and Clean Air Act § 169A, 42 U.S.C. § 74 91, governing the visibility protection program. Case: 14-73368, 07/08/2015, ID: 9602043, DktEntry: 52, Page 19 of 3513

Third, EPA failed to comply with its own regulations by not considering whether the Demonstration Project was “reasonable” under the four criteria set forth at CAA § 169A and 40 C.F.R. § 51.308(d)(1)(i)(A). Fourth, the Demonstration Project is technically inappropriate for the Phoenix Cement Plant and could damage the quality of cement produced at the facility. Fifth, EPA imposed the Demonstration Project without following appropriate tribal consultation requ irements. On January 16, 2015, EPA issued a letter to Phoenix Cement Company stating that “[i]n response to your petition, EPA is granting reconsideration of the optimization requirements for the Phoenix Cement Plant.” Letter from Jared Blumenfeld, Region al Administrator, EPA Region IX, to Verle C. Martz, Phoenix Cement Company (Jan. 16, 2015), J.A. 02082 . EPA did not act on Phoenix Cement Company’s stay request. See id. As of the date of the filing of this brief, EPA has not published a notice
in the Federal Register commencing reconsideration proceedings. In a recent situation where EPA granted reconsideration of its action disapproving Arizona’s visibility plan and instituted a replacement federal plan, Case: 14-73368, 07/08/2015, ID: 9602043, DktEntry: 52, Page 20 of 3514

reconsideration proceedings have remained pend ing for years following the grant of reconsideration. 5

V. SUMMARY OF ARGUMENT EPA’s decision to include the Demonstration Project in its federal plan is arbitrary and capricious because it was made without adequate notice and without adequate explanation. C lean Air Act § 307(d), the statutory provision governing EPA’s actions, was intended to heighten the public’s ability to participate in EPA rulemakings. But EPA provided no notice of the Demonstration Project in its regulatory proposal, instead taking it directly from consent decrees that the Agency entered into with parties that were alleged to have violated the Clean Air Act. EPA’s decision to impose the Demonstration Project is unlawful and is inconsistent with fundamental values of openness and public participation that legitimize agency rulemaking.

5 In the case of the Apache Generating Station, for example, EPA disapproved the relevant state visibility plan in December 2012. Apache’s owner petitioned for reconsideration in February and May 2013, and its petition was granted in June 2013 . See Approval and Promulgation of Air Quality Implementation Plans; Arizona; Regional Haze State and Federal Implementation Plans; Reconsideration , 79 Fed. Reg. 56,322, 5,324/3

- 56,325/1 (Sept. 19, 2014). EPA proposed a rule to resolve the r econsideration petition and a subsequent state plan submission in September 2014, but that rule has not been finalized as of the filing of this brief. Case: 14-73368, 07/08/2015, ID: 9602043, DktEntry: 52, Page 21 of 3515

Additionally, EPA’s decision to impose the Demonstration Project is arbitrary and capricious. The inevitable product of inadequate notice is inadequate decisionmaking. This includes EPA’s failure to expla in how the Demonstration Project was “reasonable” within the meaning of EPA’s regulations or based on a consideration of the four relevant factors. It also includes EPA’s failure to identify its purported statutory authority to require design and operatio nal measures that are not related to visibility improvement, but that instead essentially require PCC to operate its facility as a laboratory for EPA’s further regulatory consideration. Thus, this provision was not only promulgated without notice, but is also unlawful. EPA’s failure to proceed in a procedurally regular manner has real

- world consequences. The Demonstration Project imposes burdensome substantive obligations that affect the design of pollution control devices and regulate the
manner in which Phoenix Cement Company must operate its kiln. Phoenix Cement Company operates the Phoenix Cement Plant for the benefit of the
members of the Salt River Pima

- Maricopa Indian Community, its sole owner. EPA’s decision to impose the Demonstration Project on Phoenix Cement Case: 14-73368, 07/08/2015, ID: 9602043, DktEntry: 52, Page 22 of 3516

Company directly imposes costs on the company that reduce the amount of revenue that it can return to the Community. The Court should vacate the federal plan in part to eliminate the Demonstration Project. 6

VI. STANDARD OF REVIEW EPA’s action promulgating a federal implementation plan under Clean Air Act § 110(c), 42 U.S.C. § 7410(c), is governed by the rulemaking requirements of Clean Air Act § 307(d), 42 U.S.C. § 7607(d). See CAA § 307(d)(1)(B), 42 U.S.C. § 7607(d)(7)(B). It is subject to review under the legal standards of Section 307(d)(9), including the standard proscribing agency action that is arbitrary, capricious, an abuse of discretion, or contrary to law.
Review unde r the CAA’s “arbitrary and capricious” standard is the same as under the Administrative Procedure Act. 5 U.S.C. § 706(2)(A); Ethyl Corp. v.
EPA , 51 F.3d 1053, 1064 (D.C. Cir. 1995). The Court ensures that EPA has “examine[d] the relevant data and articul ate[d] a satisfactory explanation,” that EPA’s “decision was based on a consideration of the relevant factors,” and that

6 To avoid duplication, Phoenix Cement Company joins the State of Arizona’s and CalPortland’s arguments w hy EPA’s reasonable progress federal plan is arbitrary and capricious and is contrary to law. Case: 14-73368, 07/08/2015, ID: 9602043, DktEntry: 52, Page 23 of 3517

EPA has made no “clear error of judgment.” Motor Vehicle Mfrs. Ass’n v. State
Farm Mut. Auto. Ins. Co. , 463 U.S. 29, 43 (1983) (quotat ions omitted).
VII. ARGUMENT A. The Demonstration Project Is Arbitrary and Capricious Because It Was Enacted Without Adequate Notice Public participation is the backbone of Clean Air Act rulemaking. Section 307(d), the rulemaking provision that governs EPA’s ac tions in promulgating a federal plan, ensures that EPA provides a full and fair opportunity for public participation by mandating meaningful notice

- and

comment rulemaking procedures. Compared to the rulemaking requirements
of the Administrative Procedure Act, “Congress intended agency notice under the Clean Air Act to be more, not less, extensive than under the APA.” See, e.g. , Small Refiner Lead Phase

- Down Task Force v. EPA , 705 F.2d 506, 518

- 19, 550 (D.C. Cir. 1983). In so doing, Congress intended to “ assure the opportunity for more extensive public participation in the rulemaking process.” Id. at 550 (quotation omitted). Accordingly, while a final rule may differ from a proposed rule, it must be the “logical outgrowth” of the proposal. See Envtl. In tegrity Project v. EPA , 425 F.3d 992, 996 (D.C. Cir. 2005); see also Envtl. Defense Ctr., Inc. v. EPA , 344 F.3d 832, 877

- 78 (9th Cir. 2003). In contrast, “[a] decision made without Case: 14-73368, 07/08/2015, ID: 9602043, DktEntry: 52, Page 24 of 3518

adequate notice and comment is arbitrary or an abuse of discretion.” NRDC v. EPA , 279 F.3d 1180, 1186 (9th Cir. 2002) (emphasis added). In this case, the Demonstration Project that EPA included in its federal plan for Phoenix Cement Company was not the logical outgrowth of its regulatory proposal. The “logical outgrowth doctr ine does not extend to a final rule that finds no roots in the agency’s proposal because [s]omething is not a logical outgrowth of nothing.” Envtl. Integrity Project , 425 F.3d at 996 (alteration in original) (quotations omitted). EPA never gave notice th at it was considering turning the Phoenix Cement Plant into a Demonstration Project, a substantive regulatory requirement that includes, among other things:

a. Design requirements for Phoenix Cement Company’s selective

non

- catalytic reduction system that m andate that the system deliver ammonia to exhaust gases at a molar ratio of 1.2:1;
b. Submission requirements for multiple reports to EPA on design and optimization activities over the course of several years;

c. Permit application requirements ensuring th at the selective non

catalytic reduction system be consistent with design reports submitted to EPA, regardless of whether doing so is necessary to meet the 2.12 lbs/ton NO x emission limit; Case: 14-73368, 07/08/2015, ID: 9602043, DktEntry: 52, Page 25 of 3519

d. The requirement that Phoenix Cement Company vary operating
param eters of the kiln for a minimum of 165 days before
installation of the selective non

- catalytic reduction system;

e. The requirement that Phoenix Cement Company operate the facility for 270 days after the installation of the selective non

catalytic reductio n system in a manner intended to provide data for EPA, not to make cement optimally;
f. The requirement to propose a new emission limit according to a specific statistical equation that was not included in the proposal, regardless of whether Phoenix Cement Company believes that the equation is appropriate:

79 Fed. Reg. at 52,494/1

- 52,496/1. While EPA did indicate in its regulatory proposal that it was considering the issue of control efficiency, that topic is different from the substantive requirements o f the Demonstration Project. Control efficiency concerns the
effectiveness of a selective non

- catalytic reduction system in removing NO x from exhaust gases. In contrast, the Demonstration Project mandate is a specific design and operational protocol that might (or might not) affect the Case: 14-73368, 07/08/2015, ID: 9602043, DktEntry: 52, Page 26 of 3520

control efficiency of a selective non

- catalytic reduction system. And even assuming arguendo that the concept of a Demonstration Project was tied to the issue of control efficiency, the individual components of the Demonst ration Project constitute burdensome substantive design and operational requirements of which EPA never gave proper notice. The fact that the Demonstration Project is the product of consent decrees, and is “not typically required as part of a regional haze plan,” 79 Fed. Reg. at 52,456/1, further evidences that it is not the logical outgrowth of EPA’s control efficiency analysis. The question of control efficiency arises in nearly all visibility plans, as it is a necessary input in a source

- specific ap plication of the
four

- factor reasonable progress analysis at 40 C.F.R. § 51.308(d)(1)(i)(A). If the Demonstration Project were the logical outgrowth of control efficiency, rather
than an eleventh

- hour addition to the federal plan, it would be a regular fe ature of visibility plans. EPA’s justification for the Demonstration Project confirms that it is not the logical outgrowth of its proposal. EPA states that the Demonstration Project was promulgated “in response to concerns raised by Earthjustice.” 79
Fe d. Reg. at 52,455/3. In other words, EPA did not justify the Demonstration Project by reference to any aspect of its regulatory proposal. EPA did not even state that it was based on the substantive material that EarthJustice submitted to EPA, which inclu des no mention of a Demonstration Project and no Case: 14-73368, 07/08/2015, ID: 9602043, DktEntry: 52, Page 27 of 3521

suggestion that any regulated entities should be required to take the specific actions required under the Demonstration Project. See EarthJustice Comments, EPA

- R09

- OAR

- 2013

- 0588

- 0015, J.A. 01857

. Even if EarthJustice had requested that EPA include the Demonstration Project mandate in the federal plan in its comments, adopting it on that basis would still be arbitrary and capricious. EPA may not “bootstrap notice from a comment” filed during the rulemakin g process. Fertilizer Inst. v. EPA , 935 F.2d 1303, 1312 (D.C. Cir. 1991) (quotation omitted). Instead, “EPA must itself provide notice of a regulatory proposal.” Small Refiner , 705 F.2d at 549. “T he fact that some commenters actually submitted comments” suggesting the outcome of the final rule “is of little significance.” Fertilizer Inst. , 935 F.2d at 1312; see also Nat’l Black Media Coal. v. FCC , 791 F.2d 1016, 1023 (2d Cir. 1986) (“[T]he comment s of other interested parties do not satisfy an agency’s obligation to provide notice.”). The federal plan’s Demonstration Project mandate imposes significant substantive burdens on Phoenix Cement Company. It may be appropriate as the product of the back

- and

- forth inherent in a consent decree. But it is arbitrary and capricious for EPA to impose it on Phoenix Cement Company
with no notice. Case: 14-73368, 07/08/2015, ID: 9602043, DktEntry: 52, Page 28 of 3522

B. The Demonstration Project Is Arbitrary and Capricious Because EPA Failed To Provide a Reasoned Basis for It One of the values that notice and public participation serve in the administrative system is to increase the quality of agency rulemaking. EPA’s
eleventh

- hour decision to transfer the Demonstration Project from consent decrees to its federal plan proves this poi nt, as EPA included the protocol without considering whether it met the statutory and regulatory criteria for visibility plans and whether it made technical sense to do so. These deficiencies in EPA’s reasoning and its explanation render the Demonstration Project’s inclusion in the federal plan arbitrary and capricious. EPA has an obligation “to examine key assumptions as part of its affirmative burden of promulgating and explaining a nonarbitrary, non

capricious rule” and “justify that assumption even if no one objects to it during the comment period.” Appalachian Power Co. v. EPA , 135 F.3d 791, 818 (D.C. Cir. 1998) (quotation omitted). 7 This duty is an inherent aspect of reasoned decisionmaking, which mandates that EPA’s “decision was based on a

7 Phoenix Cement Company’s position is that this presumption applies also to the question of whether EPA provided adequate notice of the Demonstration Project in its regulatory proposal. Case: 14-73368, 07/08/2015, ID: 9602043, DktEntry: 52, Page 29 of 3523

conside ration of the relevant factors.” State Farm , 463 U.S. at 43 (quotation omitted). The federal plan’s inclusion of the Demonstration Project fails this standard. For example, EPA failed to consider whether imposition of the Demonstration Project was “reas onable” within the meaning of 40 C.F.R. § 51.308(d). The Demonstration Project unquestionably imposes costs on Phoenix Cement Company, as it regulates the design of a selective non

- catalytic reduction system and requires Phoenix Cement Company to operate the Plant in a manner designed to generate data for EPA, not to make cement. But EPA failed entirely to consider whether imposing these costs was consistent with the
relevant four

- factor test for reasonableness set forth at CAA § 169A(g)(1) and
40 C.F.R. § 51.308(d)(1)(i)(A), which considers the costs of compliance, the time necessary for compliance, the energy and non

- air quality environmental impacts of compliance, and the remaining useful life of the source. Similarly, EPA failed to consider whether th e Demonstration Project was consistent with the Clean Air Act’s visibility protection program at all. “Reasonable progress” is not a standalone criterion that is applied to each source in a state, it is instead part of the requirement that states (and, in the absence of a satisfactory action by the state, EPA) devise “a long

- term (ten to fifteen years) strategy for making reasonable progress toward meeting the national goal” of natural visibility conditions. CAA § 169A(b)(2)(B), 42 U.S.C. Case: 14-73368, 07/08/2015, ID: 9602043, DktEntry: 52, Page 30 of 3524

§ 7491(b)(2)(B). The Demonstration Project effectively requires Phoenix Cement Company to operate the Plant as a laboratory facility to generate data that EPA could consider in future rulemakings. But those data do not inform the current “strategy,” which is the federal plan, and any future “strategy” would presumptively be the responsibility of the State of Arizona, not EPA. Similarly, more data about control efficiency is not relevant to any reasonable progress strategy unless EPA first determines that additional acti ons at the Plant could be beneficial in meeting visibility goals, which EPA never did. Where an agency acts arbitrarily, as EPA did in imposing the Demonstration Project on Phoenix Cement Company, “[t]he reviewing court should not attempt itself to make u p for .

. . deficiencies” in the agency’s reasoning. State Farm , 463 U.S. at 43. The Court should instead vacate the Demonstration Project so that EPA can judge these important considerations
that are absent from the rule under review.
VIII. CONCLUSION For th e reasons discussed above, the Court should vacate the Demonstration Project set forth at 40 C.F.R. § 52.145(k)(3), (6) and 40 C.F.R. § 52.145 Appendix A. The Court should also grant the relief requested in
Petitioners State of Arizona and CalPortland’s b riefs. Case: 14-73368, 07/08/2015, ID: 9602043, DktEntry: 52, Page 31 of 3525

Dated: February 10, 2015 Respectfully submitted,
/s/ Mark W. DeLaquil Mark W. DeLaquil Andrew M. Grossman BAKER & HOSTETLER LLP Washington Square, Suite 1100 1050 Connecticut Avenue, N.W. Washington, D.C. 20036

- 5304 Telephone: (202) 861

- 1527 Facsimile: (202) 861

- 1783 E

- mail: mdelaquil@bakerlaw.com George A. Tsiolis Attorney At Law 351 Lydecker Street Englewood, N.J. 07631 Phone: (201) 408

- 4256 Facsimile: (201) 408

- 4622 Email: gtsiolis@nj.rr.com
Counsel for Petitioner Phoenix Cement Company Case: 14-73368, 07/08/2015, ID: 9602043, DktEntry: 52, Page 32 of 3526 STATEMENT OF RELATED CASES Petitioner Phoenix Cement Company states that the following cases pending in this Circuit satisfy the definition of “related cases” under Ninth
Circuit Rule 28

- 2.6: State of Arizona, ex rel. Darwin v. U.S . Environmental Protection Agency et al. , No. 13

- 70366 (consolidated with Case Nos. 13

- 70396, 13

- 70409, 13

- 70410, 13

- 70425). Petitioner’s understanding, based on the Court’s online docket, is that all
other re lated cases have been consolidated with the instant action. Case: 14-73368, 07/08/2015, ID: 9602043, DktEntry: 52, Page 33 of 3527 CERTIFICATE OF COMPLIANCE This brief complies with the type

- volume limitations of Fed. R. App. P. 32(a)(7)(B) because it contains 4,91 9 words, excluding the parts of the brief exempted by Fed. R. App. P. 32(a)(7)(B)(iii). This brief complies with the typeface requirements of Fed. R. App. P. 32(a)(5) and the type style requirements of Fed. R. App. P. 32(a)(6) because it has been prepared in a proportionally spaced typeface using Microsoft Word in 1 4

- point Garamond typeface.
Dated: July 8, 2015 /s/ Mark W. DeLaquil Mark W. DeLaquil Case: 14-73368, 07/08/2015, ID: 9602043, DktEntry: 52, Page 34 of 3528 CERTIFICATE OF SERVICE I hereby certify that I electronically filed the foregoing Petitioner’s Final Opening Brief with the Clerk of the Court for the United States Court of Appeals for the Ninth Circuit by using the appellate CM/ECF system on July 8, 2015

. Participants in th e case who are registered CM/ECF users will be served by the appellate CM/ECF system.
Dated: July 8, 2015 /s/ Mark W. DeLaquil Mark W. DeLaquil Case: 14-73368, 07/08/2015, ID: 9602043, DktEntry: 52, Page 35 of 35IN THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
Case Nos. 14

- 73368, 14

- 73384, 14

- 73386, 14

- 73394
STATE OF ARIZONA, ex rel. Henry Darwin, Director, Arizona Department

of Environmental Quality, et al.,

Petitioners,

v. UNITED STATES ENVIRONMENTAL PROTECTION AGENCY and GINA MCCARTHY, Administrator, United States Environmental Protection Agency, Respondents.

ON PETITION FOR REVIEW OF FINAL AGENCY ACTION OF THE UNITED STA TES ENVIRONMENTAL PROTECTION AGENCY

PETITIONER PHOENIX CEMENT COMPANY’S

FINAL REPLY BRIEF

G EORGE A. T SIOLIS ATTORNEY AT LAW 351 Lydecker Street Englewood, N.J. 07631 (201) 408

- 4256 (phone) (201) 408

- 4622 (facsimile) gtsiolis@nj.rr.com M ARK W. D E L AQUIL A NDREW M. G ROSSMAN BAKER & HOSTETLER LLP Washington Square, Suite 1100 1050 Connecticut Avenue, N.W. Washington, D.C. 20036 (202) 861

- 1527 (phone) (202) 861

- 1783 (facsimile) mdelaquil@bakerlaw.com Counsel for Petitioner Phoenix Cement Company Case: 14-73368, 07/08/2015, ID: 9602048, DktEntry: 53, Page 1 of 32i TABLE OF CONTENTS Page TABLE OF CONTENTS

................................ ................................ ............................ i TABLE OF AUTHORITIES

................................ ................................ ..................... ii GL OSSARY

................................ ................................ ................................ .................. vi I. INTRODUCTION AND SUMMARY OF ARGUMENT

...................... 1
II. ARGUMENT

................................ ................................ ................................ .... 2
A. Section 307(d) Does Not Bar the Court from Considering Phoenix Cement’s Claims

................................ ................................ ................................ . 2
B. EPA’s Regulatory Proposal Did Not Provide Adequate Notice of the Demonstration Project

................................ ................................ ................... 14
C. EPA Did Not Engage in Reasoned Decisionmaking When It Included the Demonstration Project in the Federal Plan

................................ .......... 19
III. CONCLUSION

................................ ................................ ............................... 23
CERTIFICATE OF COMPLIANCE

................................ ................................ ..... 24
CERTIFICATE OF SERVICE

................................ ................................ ................ 25 Case: 14-73368, 07/08/2015, ID: 9602048, DktEntry: 53, Page 2 of 32ii TABLE OF AUTHORITIES C ASES Alaska Department of Environmental Conservation v. EPA , 540 U.S. 461 (2004)

....... 3 Altamirano v. Gonzales , 427 F.3d 586 (9th Cir. 2005)

................................ ............... 19 American Corn Growers Association v. EPA , 291 F.3d 1 (D.C. Cir. 2002)

............... 21 Appalachian Power Co. v. EPA , 135 F.3d 791 (D.C. Cir. 1998)

.......................... 9, 10 Bowen v. Georgetow n University Hospital , 488 U.S. 204 (1988)

................................ ... 11 Brown v. Valoff

, 422 F.3d 926 (9th Cir. 2005)

................................ ........................... 14 California Trout v. FERC

, 572 F.3d 1003 (9th Cir. 2009)

................................ ........ 20 Central Arizona Water Conservation District v. EPA , 990 F.2 d 1531 (9th Cir. 1993)

................................ ................................ ............ 8, 9 Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A. , 511 U.S. 164 (1994)

................................ ................................ ................................ . 6 Ciba

- Geigy Corp. v. EPA , 46 F.3d 1208 (D.C. Cir. 1995)

................................ .......... 8 Circuit City Stores, Inc. v. Adams , 532 U.S. 105 (2001)

................................ .............. 20 Citizens to Preserve Overton Park, Inc. v. Volpe , 401 U.S. 402 (1971)

......................... 19 Environmental Defense Fund, Inc. v. EPA , 82 F.3d 451 (D.C. Cir. 1996), as amended , 92 F.3d 1209

................................ ................................ .......................... 3 EPA v. EME Homer City Generation, L.P. , 134 S. Ct. 1584 (2014)

.......................... 5 ‘Ilio ‘ulaokalani Coalition v. Rumsfeld , 464 F.3d 1083 (9th Cir. 2006)

........................ 10 K Mart Corp. v. Cartier, Inc. , 486 U.S. 281 (1988)

................................ ....................... 7 Leedom v. Kyne , 358 U.S. 184 (1958)

................................ ................................ ........... 12 Michigan v. EPA , 268 F.3d 1075 (D.C. Cir. 2001)

................................ ................... 17 Motor Vehicle Manufacturers Association of United States, Inc. v. State Farm Mutual Automobile Insurance Co. , 463 U.S. 29 (1983)

................................ ....................... 10 Case: 14-73368, 07/08/2015, ID: 9602048, DktEntry: 53, Page 3 of 32iii

National Parks Conservation Association v. EPA , __ F.3d __, No. 12

- 73710, 2015 WL 3359149 (9th Cir. June 9, 2015)

................................ ......................... 21 Northeast Maryland Waste Disposal Authority v. EPA , 358 F.3d 936 (D.C. Cir. 2004)

................................ ................................ ............. 10 Northwest Resource Information Center, Inc. v. Northwest Power and Conservation Council , 730 F.3d 1008 (9th Cir. 2013)

................................ ................................ .............. 18 NRDC v. EPA , 863 F.2d 1420 (9th Cir. 1988)

................................ ....................... 16 NRDC v. E PA , 279 F.3d 1180 (9th Cir. 2002)

................................ ...... 9, 16, 18, 19 NRDC v. EPA , 638 F.3d 1183 (9th Cir. 2011)

................................ ......................... 3 Oklahoma v. EPA , 723 F.3d 1201 (10th Cir. 2013)

................................ ................... 5 Oklahoma Department of Environmental Quality v. EPA , 740 F.3d 185 (D.C. Cir. 2014)

................................ ................................ ............. 10 Oljato Chapter of Navajo Tribe v. Train , 515 F.2d 654 (D.C. Cir. 1975)

................ 7, 8 Presidio Golf Club v. National Park Service , 155 F.3d 1153 (9th Cir. 1998)

............. 19 Prudential Locations LLC v. United States Department of Housing and Urban Development

, 739 F .3d 424 (9th Cir. 2013)

................................ ........................... 20 Public Citizen v. Department of Justice , 491 U.S. 440 (1989)

................................ ........ 12 SEC v. Chenery Corp. , 332 U.S. 194 (1947)

................................ ................................ 20 Small Refiner Lead Phase

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

................................ ................................ ............. 11 Telecommunications Research and Actio n Center v. FCC , 750 F.2d 70 (D.C. Cir. 1984)

................................ ................................ ................ 12 Traynor v. Turnage , 485 U.S. 535 (1988)

................................ ................................ ....... 4 Utility Air Regulatory Group v. EPA , 744 F.3d 741 (D.C. Cir. 2014)

...................... 13 United States v. Granderson , 511 U.S. 39 (1994)

................................ ......................... 12 Wilson v. Commissioner of Internal Revnue , 705 F.3d 980 (9th Cir. 2013)

.................... 4 Case: 14-73368, 07/08/2015, ID: 9602048, DktEntry: 53, Page 4 of 32iv

S TATUTES 5 U.S.C. § 551

................................ ................................ ................................ ................. 4 8 U.S.C. § 1252

................................ ................................ ................................ ............... 6 28 U.S.C. § 1331

................................ ................................ ................................ ........... 12 42 U.S.C. § 7410

................................ ................................ ................................ ....... 3, 22 42 U.S.C. § 7414

................................ ................................ ................................ ..... passim 42 U.S.C. § 7491

................................ ................................ ................................ .... 21, 22 42 U.S.C. § 7601

................................ ................................ ................................ ............. 3 42 U.S.C. § 7607

................................ ................................ ................................ ..... passim 47 U .S.C. § 405

................................ ................................ ................................ ............... 7 O THER A

UTHORITIES 40 C.F.R. § 51.308

................................ ................................ ................................ ....... 21 40 C.F.R. § 52.145

................................ ................................ ................................ ....... 23 76 Fed. Reg. 28,318 (May 17, 2011)

................................ ................................ .......... 14 77 Fed. Reg. 960 (Jan. 6, 2012)

................................ ................................ ........... 13, 14 77 Fed. Reg. 52,554 (Aug. 29, 2012)

................................ ................................ ......... 13 77 Fed. Reg. 71,323 (Nov. 30, 2012)

................................ ................................ ........ 13 78 Fed. Reg. 2,210 (Jan. 10, 2013)

................................ ................................ ............. 13 78 Fed. Reg. 36,042 (June 14, 2013)

................................ ................................ ......... 13 79 Fed. Reg. 41,752 (July 17, 2014)

................................ ................................ .......... 13 79 Fed. Reg. 54,420 (Sept. 3, 2014)

................................ ................................ .......... 21 79 Fed. Reg. 56,322 (Sept. 19, 2014)

................................ ................................ ........ 13 Comments of Phoenix Cement Company (Mar. 31, 2014), EPA R09

- OAR

2013

- 0588

- 0021

................................ ................................ ................................ ...... 15 Case: 14-73368, 07/08/2015, ID: 9602048, DktEntry: 53, Page 5 of 32v

Final Brief of Respondent, Arizona v. EPA , No. 13

- 70366 (9th Cir. filed Mar. 12, 2014) [Dkt. #101]

................................ ................................ .............................. 4 H.R. 6161, 95th Congress, 1st Session (1977)

................................ .......................... 7 H.R. Rep. No. 95

- 294 (1977)

................................ ................................ ................. 7, 11 Case: 14-73368, 07/08/2015, ID: 9602048, DktEntry: 53, Page 6 of 32vi GLOSSARY ADEQ Arizona Department of Environmental Quality CAA Clean Air Act CalPortland CalPortland Company PCC Phoenix Cement Company SNCR Selective Non

- Catalytic Reduction Technology Case: 14-73368, 07/08/2015, ID: 9602048, DktEntry: 53, Page 7 of 321

I. I NTRODUCTION AND SUMM ARY OF ARGUMENT When EPA requested comment on the efficiency of pollution control devices at the Phoenix Cement Plant, Phoenix Cement could never have anticipated that the Agency would change course and impose design and operational req uirements from a consent decree that the Agency never stated was under consideration. This lack of notice is fatal to the federal plan’s Demonstration Project requirement for Phoenix Cement. In an attempt to keep this Court from scrutinizing its lapse, EP A has advanced an argument that would grant it nearly limitless authority: that the Agency can throw anything into a final Clean Air Act rule that requires immediate compliance

— even things that have nothing to do with the regulatory proposal or have no rea dily ascertainable legal basis

— and no court can review that decision for the months or years that it takes for EPA to conclude its reconsideration process. This argument is fundamentally contrary to Congress’s intent in enacting Section 307(d) of the Clea n Air Act, which requires EPA to provide more extensive notice to regulated entities affected by major Clean Air Act rulemakings than would otherwise be required under the
Administrative Procedure Act.
For these reasons and those discussed in Phoenix Cemen t’s opening brief, the Court should vacate the Demonstration Project. Case: 14-73368, 07/08/2015, ID: 9602048, DktEntry: 53, Page 8 of 322 II. ARGUMENT A. Section 307(d) Does Not Bar the Court from Considering Phoenix Cement’s Claims EPA’s argument that Section 307(d) bars this Court from considering
Phoenix Cement’s claims is meritless. To begin with, EPA’s post hoc litigation rationale for the Demonstration Project pleads this argument out of court, as the “information gathering” authority of Section 114 is not subject to Section 307(d) at all. Additionally, Section 307(d) was intended to increase the procedural rulemaking protections afforded stakeholders for certain Clean Air Act rulemakings, not as a shield behind which EPA can hide final rules that are entirely divorced from their precedent regulatory proposals. Interpr eting Section 307(d) as EPA suggests would undercut Congress’s statutory design by giving EPA carte blanche to circumvent the Act’s notice and comment requirements.
1. EPA argues that Section 114 is the source of EPA’s legal authority for the Demonstration Project, but rules promulgated to carry out EPA’s Section 114 authority are not subject to the rulemaking provisions of Section 307(d). EPA Br. 71

- 72. Accordingly, the Court need not consider the application of Section 307(d)(7)(B)’s claim

- processing pr ovisions to Phoenix
Cement’s claims. Case: 14-73368, 07/08/2015, ID: 9602048, DktEntry: 53, Page 9 of 323

The Clean Air Act includes a general grant of rulemaking authority. See CAA § 301(a)(1), 42 U.S.C. § 7601(a)(1). The Act does not, however, impose a uniform set of procedural requirements or legal standards to be appl ied in judicial review. Instead, two different standards govern, depending on the rulemaking. For certain actions specified in Section 307(d)(1), including federal plans promulgated by EPA pursuant to Section 110(c), the rulemaking provisions of Section 307(d) of the Clean Air Act govern. See 42 U.S.C. § 7607(d). For other actions, like those under Section 114, the Administrative Procedure Act governs. See NRDC v. EPA , 638 F.3d 1183, 1190 (9th Cir. 2011) (citing Alaska Dep’t of Envtl. Conservation v. E PA , 540 U.S. 461, 496

- 97 & n.18 (2004)). Thus, for those other actions, “the Clean Air Act .

. . does not .

. . require exhaustion of all available remedies,” and the absence of “a petition for reconsideration does not preclude” the court from considering a claim that was
not first raised in comments. Envtl. Def. Fund, Inc. v. EPA , 82 F.3d 451, 468 (D.C. Cir. 1996), as amended , 92 F.3d 1209. 1 The Demonstration Project, which imposes ongoing design and operational requirements on the Phoenix Cement Plant, constitutes a “rule”

1 Phoenix Cement’s opening brief did not discuss the Administrative Procedure Act standard of review because EPA never explained that the Demonstration Project was promulgated under Section 114 until its response brief in this case. Case: 14-73368, 07/08/2015, ID: 9602048, DktEntry: 53, Page 10 of 324

within the meaning of the Administrative Procedure Act. See 5 U.S.C. § 551(4) (defining a “rule” as “an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy.”). Accordingly, that aspect of the action under review is not subject to the procedural requirements of Section 307(d), and is exempt from the
reconsideration claim

- processing provisions of Section 307(d)(7)(B). There is nothing unusual about havi ng certain aspects of an action published in a single Federal Register entry being reviewed under the standards of Section 307(d), while others are reviewed under the Administrative Procedure Act. Indeed, this is precisely the situation that this Court fa ced in the Arizona visibility Phase 1 litigation. See Final Brief of Respondent 22, Arizona v. EPA , No. 13

- 70366 (9th Cir. filed Mar. 12, 2014) [Dkt. #101]. And were there any doubt as to whether dual standards govern, the Court should honor the “strong presumption that Congress intends judicial review of administrative action”
and decide Phoenix Cement’s claims. Traynor v. Turnage , 485 U.S. 535, 542 (1988) (quotation omitted); see also Wilson v. Comm’r of Internal Revenue , 705 F.3d 980, 996

- 97 (9th Cir. 2013).
2. Section 307(d) is not a comprehensive exhaustion provision that would defer judicial review of every objection to an action under Clean Air Act until after the Agency had considered it, whether in response to comments or a petition for reconside ration. Instead, Section 307(d)(7)(B) applies only to Case: 14-73368, 07/08/2015, ID: 9602048, DktEntry: 53, Page 11 of 325

certain objections to a rule or procedure that are properly raised through comments and does not extend to key assumptions underlying the action. Section 307(d)(7)(B) is a claim

- processing provision th at imposes procedural requirements on certain types of claims. See EPA v. EME Homer City Generation, L.P. , 134 S. Ct. 1584, 1602

- 03 (2014). 2 In this regard, Section 307(d)(7)(B) of the Clean Air Act provides that certain objections should be made during the comment period in order for them to be raised during a judicial review proceeding by stating that “[o]nly an objection to a rule or procedure which was raised with reasonable specificity during the period for public comment (including any public hearin g) may be raised during judicial review.” CAA § 307(d)(7)(B), 42 U.S.C. § 7607(d)(7)(B). Section 307(d)(7)(B) further provides that “[i]f the person raising an objection can demonstrate to the Administrator that it was impracticable to raise such objecti on within such time or if the grounds for such objection arose after the period for public comment (but within the time specified for judicial review) and if such objection is of central relevance to the outcome of the rule, the Administrator
shall convene a proceeding for reconsideration of the rule .

. . .” Id. In the

2 EME Homer definitively rejects the Tenth Circuit’s theory that Section 307(d)(7)(B)’s claim

- processing provisions are jurisdictional. See Oklahoma v. EPA , 723 F.3d 1201, 1214 (10th Cir. 2013). Case: 14-73368, 07/08/2015, ID: 9602048, DktEntry: 53, Page 12 of 326

event that the Administrator refuses to reconsider the rule, “such person may seek [judicial] review of such refusal.” Id. Section 307(d)(7)(B) is not a mandatory exhaustion requirement. By using the terms “rule” and “procedure” to classify certain types of objections that should be raised in the comment period, Congress unambiguously signaled its intent that not all objections to “action” must be raised in comments before being raised in judicial review. Compare CAA § 307(b)(1), 42 U.S.C. § 7607(b)(1) (requiring that all challenges to an “action” be brought by petition for review to the court of appeals). In contrast, Congress knows how to craft mandatory exhaustion provisions so that th ey are clear on their face. See, e.g. , Cent. Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A. , 511 U.S. 164, 176

- 77 (1994) (refusing to read aiding and abetting liability into Securities Exchange Act § 10(b) securities fraud suits because Con gress knew how to use such language but failed to do so). For example, the Immigration Code requires that “[a] court may review a final order of removal only if the alien has exhausted all administrative remedies available to the alien as of right,” 8 U.S .C. § 1252(d)(1), and the Telecommunication Act mandates that a petition for reconsideration is “a condition precedent to judicial review of any .

. . order, decision, report, or action” in certain circumstances, such as where a petitioner “relies on quest ions Case: 14-73368, 07/08/2015, ID: 9602048, DktEntry: 53, Page 13 of 327

of fact or law upon which the Commission .

. . has been afforded no opportunity to pass.” 47 U.S.C. § 405(a).
3. Section 307(d)(7)(B)’s claim

- processing provisions do not apply here because Phoenix Cement’s “logical outgrowth” claims do not fall with in the class of “objections to a rule or procedure” that must be vindicated through a petition for reconsideration prior to judicial review. The “plain meaning” of Section 307(d)(7)(B), rather, must be read in light of “the particular statutory language at issue, as well as the language and design of the statute as a whole.” E.g. , K Mart Corp. v. Cartier, Inc. , 486 U.S. 281, 291 (1988). In this regard, Section 307(d)(7)(B)’s claim

- processing and reconsideration provisions were intended to give EPA the fir st opportunity to consider substantive objections to its actions. See, e.g. , H.R. Rep. No. 95

- 294, at 323 (1977). 3 Specifically, the House Committee explained that Section 307(d)(7)(B) was intended to “confirm[]” the D.C. Circuit’s decision in Oljato
Cha pter of Navajo Tribe v. Train , 515 F.2d 654 (D.C. Cir. 1975), which construed the predecessor provision of the Act to require a petition to EPA where a party

3 Section 307(d) originated in the House of Representatives’ version of the Clean Ai r Act Amendments of 1977, H.R. 6161, 95th Cong., 1st Sess. (1977). The Senate version of that bill did not include a rulemaking provision, and the Conference adopted the House version with changes that are not relevant to Section 307(d)(7)(B). Case: 14-73368, 07/08/2015, ID: 9602048, DktEntry: 53, Page 14 of 328

intended to use new technical information and arguments to challenge an existing Clean Air Act sta ndard. Oljato Chapter was founded on concerns about the adequacy of the record and ensuring that the Agency had an opportunity to apply its expertise to issues before a reviewing court decided them. See 515
F.2d at 665

- 67. In other words, Oljato Chapter was founded on ripeness

concerns. See Ciba

- Geigy Corp. v. EPA , 46 F.3d 1208, 1210 (D.C. Cir. 1995). It had nothing to say about timely challenges to a rule based on a failure to provide appropriate notice. This reading of Section 307(d)(7)(B) as ensurin g an appropriate administrative record for review is consistent with how this Court interpreted that provision in Central Arizona Water Conservation District v. EPA , 990 F.2d 1531, 1543

- 44 (9th Cir. 1993). In that case, the Court denied the petitioners’

m otion to supplement the administrative record and petition for review based on the existence of a new technical study that the petitioners alleged EPA improperly failed to include in the administrative record and to consider in its
decision. The Court hel d that by directly raising a challenge based on the new technical study, “Petitioners ignore the route for administrative and judicial review of ‘new information’ and alleged ‘procedural errors’ in the creation of the administrative docket that Congress cr eated: 42 U.S.C. § 7607(d)(7)(B)’s mechanism for reconsideration by the agency.” Id. at 1544. Case: 14-73368, 07/08/2015, ID: 9602048, DktEntry: 53, Page 15 of 329

Unlike Central Arizona Water , which concerned an objection to an EPA rule based on a new study that was not presented to EPA in reconsideration
and that EPA lack ed a fair opportunity to consider, Phoenix Cement’s claims challenge a legal deficiency that is present on the face of the regulatory notice and final rule. Indeed, the crux of a logical outgrowth argument is that “[a]
decision made without adequate notic e and comment is arbitrary or an abuse of
discretion.” NRDC v. EPA , 279 F.3d 1180, 1186 (9th Cir. 2002) (emphasis added). And it is by definition impossible to raise a relevant comment concerning the adequacy of notice; the whole point of a logical outgr owth argument is that comment was impossible. Nor is there any purpose in giving EPA this question because the content of that final rule is uniquely in its control. To put it bluntly, Section 307(d)(7)(B) is an anti

- sandbagging provision, and Phoenix Ce ment has not sandbagged EPA.
4. Phoenix Cement’s challenges to EPA’s inadequate explanation for the Demonstration Project are likewise not subject to the claim

- processing provisions of Section 307(d)(7)(B) because they challenge the Agency’s failure

to exa mine a “key assumption” underlying its rule. Courts may hear objections to Section 307(d) rules raised during judicial review that challenge EPA’s abrogation of its duty “ to examine key assumptions as part of its affirmative burden of promulgating and expl aining a

non

- arbitrary, non

- capricious rule.” Appalachian Power Co. v. EPA , 135 F.3d Case: 14-73368, 07/08/2015, ID: 9602048, DktEntry: 53, Page 16 of 3210

791, 818 (D.C. Cir. 1998) (quotation omitted). This duty requires that “EPA must justify that assumption even if no one objects to it during the comment period.” Id. (q uotation omitted). See also Ne. Md. Waste Disposal Auth. v. EPA , 358 F.3d 936, 948 (D.C. Cir. 2004); Okla. Dep’t of Envtl. Quality v. EPA , 740 F.3d 185, 192 (D.C. Cir. 2014). Cf. ‘Ilio‘ulaokalani Coal. v. Rumsfeld , 464 F.3d 1083, 1092

- 93 (9th Cir. 2006) (applying similar standard to NEPA claims). In order for EPA to justify the Demonstration Project, whether as a measure necessary to assure reasonable progress towards the attainment of natural visibility, or as an “information gathering” tool pursuant to Section 114, EPA at the very least has an obligation to explain how the Demonstration Project fits the applicable statutory and regulatory criteria. Otherwise, EPA would have failed entirely to “explain why it has exercised its discretion in a given manne r.” See Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto.
Ins. Co. , 463 U.S. 29, 48 (1983). This kind of challenge is not within the ambit of Section 307(d)(7)(B).
5. EPA’s interpretation of Section 307(d)(7)(B) is unreasonable. 4
Section 307(d) was intended to increase, not decrease, the burdens on EPA

4 EPA appro priately does not argue that the Court should afford Chevron deference to its litigation arguments concerning the construction of Section Case: 14-73368, 07/08/2015, ID: 9602048, DktEntry: 53, Page 17 of 3211

during the rulemaking process to provide notice to stakeholders. See, e.g. , Small Refiner Lead Phase

- Down Task Force v. EPA , 705 F.2d 506, 518

- 19 (D.C. Cir. 1983). Indeed, “Congress intend ed agency notice under the Clean Air Act to be more, not less, extensive than under the [Administrative Procedure Act].”
Id. at 550. In so doing, Congress intended to “assure the opportunity for more extensive public participation in the rulemaking proce ss.” Id. (quotation omitted). See also H.R. Rep. No. 95

- 294, at 319 (“[A] ppropriately broad administrative discretion to promulgate regulations to protect health or the environment must be restrained by thorough and careful procedural safeguards
that ins ure an effective opportunity for public participation in the rulemaking process.”). It would frustrate Congress’s purposes in enacting Section 307(d) for that provision to provide less procedural protection for stakeholders who are aggrieved by violations of Section 307(d)’s notice requirements than those
stakeholders otherwise would have been afforded under the Administrative
Procedure Act. Moreover, under EPA’s interpretation of Section 307(d)(7)(B), there is
no limit to what material EPA could include i n a final Clean Air Act rule and make immediately effective. For example, EPA could regulate entities in a final

307(d)(7)(B), nor would such deference apply. See Bowen v. Georgetown Univ. Hosp. , 488 U.S. 204 (1988). Case: 14-73368, 07/08/2015, ID: 9602048, DktEntry: 53, Page 18 of 3212

rule that were not put on notice of impending action by the regulatory proposal, or EPA could regulate under an entirely different Clean Air A ct program in the final rule than it had proposed in the initial notice of rulemaking. EPA could likewise articulate no basis for its action, with this cornerstone of reasoned decisionmaking being left to the Agency’s response to a petition for reconsider ation. And under EPA’s construction of Section 307(d)(7)(B), regulated entities would be bound to the final rule during the lengthy pendency of the reconsideration, with a judicial stay unavailable and no relief until the conclusion of an administrative p rocess that regularly takes
years 5 (and occasionally takes decades) to conclude. 6 This interpretation of Section 307(d) would lead to absurd results and is entirely unreasonable. See
United States v. Granderson , 511 U.S. 39, 47 n.5 (1994) (dismissing an interpretation said to lead to an absurd result); Pub. Citizen v. Dep’t of Justice , 491 U.S. 440, 454 (1989) (“Where the literal reading of a statutory term would

5 As of the f

iling of this brief, EPA has not published a notice of reconsideration regarding Phoenix Cement’s petition in the Federal Register

. 6 Presumably, a party with a pending reconsideration petition could seek some type of relief through a writ to protect this Court’s future jurisdiction, pursuant to the teaching of Telecommunications Research and Action Center v. FCC , 750 F.2d 70 (D.C. Cir. 1984), or an action in the district court under 28 U.S.C. § 1331 and the federal courts’ inherent equitable a uthority. See Leedom v. Kyne , 358 U.S. 184 (1958). Case: 14-73368, 07/08/2015, ID: 9602048, DktEntry: 53, Page 19 of 3213

compel an odd result, we must search for other evidence of congressional
intent to lend the t erm its proper scope.”) (quotation and citation omitted). Finally, the effect of decisions construing Section 307(d)(7)(B) as requiring claims of inadequate notice to proceed through the reconsideration
process, see, e.g. , Utility Air Regulatory Group v. E PA , 744 F.3d 741, 746

- 47 (D.C. Cir. 2014), has been a breakdown in administrative regularity. In the case of the rule under review in this case, EPA has granted three petitions for
administrative reconsideration based on material included in the final rul e that was not the proper subject of notice (Phoenix Cement, CalPortland, and Lhoist). In the case of the Phase 1 visibility rule, EPA granted a petition for
administrative reconsideration for this reason. See 79 Fed. Reg. 56,322 (Sept. 19, 2014) (granti ng reconsideration of Apache Station BART determination). And major EPA rules regularly are forced into multiyear reconsideration processes, while remaining in effect in the meantime. See, e.g. , 79 Fed. Reg. 41,752 (July 17, 2014) (granting reconsiderati on of oil and natural gas sector NSPS) ; 78 Fed. Reg. 36,042 (June 14, 2013) (granting reconsideration of ethanol blend misfueling mitigation regulations); 78 Fed. Reg. 2,210 (Jan. 10, 2013) (granting reconsideration of Tribal New Source Review Rule) ; 77 Fe d. Reg. 71,323 (Nov. 30, 2012) (granting reconsideration of MATS and utility NSPS PM standard); 77 Fed. Reg. 52,554 (Aug. 29, 2012) (granting reconsideration of stationary combustion turbine NSPS); 77 Fed. Reg. 960 (Jan. Case: 14-73368, 07/08/2015, ID: 9602048, DktEntry: 53, Page 20 of 3214

6, 2012) (granting reconsideration of petroleum refinery NESHAP); 76 Fed. Reg. 28,318 (May 17, 2011) (granting reconsideration of portland cement NESHAP and NSPS). Both this pattern of introducing new material into final Clean Air Act rules, and the length of time that Phoenix Cement’s peti tion for reconsideration has been pending with no final action by EPA, implicate this Court’s rule that exhaustion provisions should not be construed in a manner that would abrogate effective judicial review. See, e.g. , Brown v. Valoff , 422 F.3d 926, 943 n.18 (9th Cir. 2005) (refusing to interpret the exhaustion and statute of limitations requirements in the Prison Litigation Reform Act so narrowly as to allow prison officials “to exploit the exhaustion requirement through indefinite delay in responding to grievances,” as a pattern of delay would “demonstrate that no administrative process is in fact available.”) (quotation omitted).
B. EPA’s Regulatory Proposal Did Not Provide Adequate Notice of the Demonstration Project In its opening brief, Phoenix Cemen t argued that the Demonstration Project was not the logical outgrowth of EPA’s regulatory proposal. PCC Br.
17

- 21. The only aspect of the proposed rule that conceivably related to Demonstration Project was EPA’s statement that it was considering the issu e of control efficiency. PCC Br. 19. But as Phoenix Cement explained, there was no way that it could reasonably have anticipated that EPA’s consideration Case: 14-73368, 07/08/2015, ID: 9602048, DktEntry: 53, Page 21 of 3215

of SNCR control efficiency at existing cement kilns would lead to a final rule
that turned the Phoen ix Cement Plant into a test laboratory, subject to proscriptive design and operational requirements, such as an ammonia

injection system that meets specific molar ratios in the injected ammonia, a minimum of 435 days of pre

- and post

- construction operation al restrictions for information collection purposes, and a provision that Phoenix Cement must propose a specific operating kiln limit according to a precise statistical formula.
EPA’s defense is meritless. First, EPA misstates the record when it suggests t hat Phoenix Cement’s claims are not properly before the Court because the Company “did not comment on control efficiency.” EPA Br. 67. In fact, Phoenix Cement responded to EPA’s request for comment regarding control efficiency by stating that, based on t he technical information in the docket, “it would appear that a SNCR control efficiency of 50% is reasonable for Kiln 4.” See Comments of Phoenix Cement Company at 6 (Mar. 31, 2014), EPA

- R09

- OAR

- 2013

- 0588

- 0021, J.A. 01910; see also id. at 7 (“If, for what ever reason, the EPA considers finding in a final FIP that a lbs/ton standard lower than 2.12 lbs/ton would be reflective of the use of SNCR at PCC, then, in that case, PCC would request and expect the opportunity to comment on the EPA’s reasoning in a sup plemental proposed rulemaking.”). Case: 14-73368, 07/08/2015, ID: 9602048, DktEntry: 53, Page 22 of 3216

Second, EPA argues that, because the proposed rule includes “emission limits consistent with SNCR control technology,” Phoenix Cement “can hardly be surprised that other parties also commented or that EPA would consider

co mments on whether SNCR could be optimized.” EPA Br. 68

- 69. But EPA did not solicit comments on an optimization process, such as the varied operational parameters of the Demonstration Project; it solicited comments only regarding SNCR control efficiency a t the regulated units in question. See
PCC Br. 6

- 8. Regardless, the question is not whether the issue of control efficiency is implicated in some manner in the proposed rule, the question is “‘whether interested parties reasonably could have anticipated t he final rulemaking from
the draft.’” NRDC

, 279 F.3d at 1186 (quoting NRDC v. EPA , 863 F.2d 1420, 1429 (9th Cir. 1988)). In this regard, the Demonstration Project did not appear out of thin air. It was taken nearly verbatim from consent decrees that the United States entered into with alleged Clean Air Act violators. “[N]uance and

s ubtlety are not virtues in agency notice practice,” as an agency should say “explicitly” what it is considering. NRDC , 279 F.3d at 1188. As the Demonstration Project was a known entity to EPA at the time of its regulatory proposal, EPA was obliged to inf orm Phoenix Cement and other stakeholders that it was considering requiring it, rather than just putting it in the final rule
with no notice. Case: 14-73368, 07/08/2015, ID: 9602048, DktEntry: 53, Page 23 of 3217

Third, EPA concedes that the Demonstration Project includes design and testing parameters that exceed those “necessary to install the underlying controls,” but argues that this fundamental deviation from the proposed rule should be excused because “these requirements are reasonable given the level of technical uncertainty.” EPA Br. 69. But the question is not whether EPA’s action is or is not reasonable, it is whether Phoenix Cement could have anticipated that EPA would have required the Demonstration Project in the final rule. After all, EPA’s “mission is not a roving commission to achieve pure air or any oth er laudable goal,” Michigan v. EPA , 268 F.3d 1075, 1084 (D.C. Cir. 2001), it is to implement the Clean Air Act consistent with the rulemaking requirements of the Administrative Procedure Act. Fourth, EPA argues that the fact that the Demonstration Project is unique to this visibility plan is not relevant to the logical outgrowth inquiry. EPA Br. 70. But the uniqueness of the Demonstration Project is unquestionably relevant. Stakeholders “reasonably anticipate” based, in part,
on how EPA treats similar is sues in similar rulemakings. The fact that all visibility plans consider the efficiency of emission control devices but that this federal plan, and this federal plan only, includes a Demonstration Project,
evidences that Phoenix Cement could not reasonabl y anticipate that EPA would choose the path it did. Case: 14-73368, 07/08/2015, ID: 9602048, DktEntry: 53, Page 24 of 3218

Fifth, EPA asserts that Phoenix Cement “ha[s] not come close to meeting the Act’s stringent standard of review for alleged procedural errors.” EPA Br. 70. But EPA never attempts to explain why Phoenix C ement does not meet the standard, which is necessary given that EPA bears the burden of proving that its error was not prejudicial. 7 See Nw. Res. Info. Ctr., Inc. v. Nw.
Power and Conservation Council , 730 F.3d 1008, 1019 (9th Cir. 2013) (rejecting
agency ’s harmless error argument where the agency failed to demonstrate that its mistake “clearly had no bearing on the .

. . substance of [the] decision reached”) (alteration in original) (quotation omitted). In any case, EPA’s suggestion that Phoenix Cement’s reconsideration petition concerning the Demonstration Project meets the “central relevance” standard of Section 307(d)(7)(B), a necessary prerequisite for EPA granting the petition, but not the “central relevance” standard of Section 307(d)(8), is entirel y arbitrary. Compare EPA Br. 33, with id. at 70. Moreover, EPA’s suggestion that failure to provide adequate notice is a procedural error is incorrect. In NRDC , this Court explained that such an
error is a substantive flaw: “[a] decision made without ade quate notice and

7 EPA may mistakenly believe that Phoenix Cement is asking the court to invalidate the entire rule under review, given its characterization of Section 307(d)(8). That assumption is incorrect, as Phoenix Cement has only asked the Court to vacate the Demonstration Project. Case: 14-73368, 07/08/2015, ID: 9602048, DktEntry: 53, Page 25 of 3219

comment is arbitrary or an abuse of discretion.” NRDC , 279 F.3d at 1186. In other words, the “process” of notice and comment was followed, but EPA’s decision to promulgate a final rule that is outside the bounds of a regulatory proposal results in a flawed regulation.
C. EPA Did Not Engage in Reasoned Decisionmaking When It Included the Demonstration Project in the Federal Plan In its opening brief, Phoenix Cement argued that EPA failed to satisfy its fundamental obligations of reasoned d ecisionmaking when it entirely failed to explain how the Demonstration Project was justified under the statutory and regulatory provisions that establish the criteria for visibility plans. PCC Br. 22

- 24. EPA tacitly acknowledges its failings by providing a post hoc litigation rationale for its decision: that the Demonstration Project is authorized under Section 114 of the Act. The Court should reject EPA’s last

- ditch effort to justify the Demonstration Project and vacate that provision of the rule.
1. “T he Supreme Court has forbidden .

. . courts from relying upon

. . . ‘ post hoc ’ rationalizations for agency action.” Presidio Golf Club v. Nat’l Park
Serv. , 155 F.3d 1153, 1164

- 65 (9th Cir. 1998) (citing Citizens to Preserve Overton Park, Inc. v. Volpe , 40 1 U.S. 402, 419 (1971)). In this regard, this Court will not affirm agency action when the agency justifies it under one legal theory, then flips its position in litigation. See Altamirano v. Gonzales , 427 F.3d 586, 595 (9th Cir. 2005). EPA never articu lated Section 114 as the basis for the Case: 14-73368, 07/08/2015, ID: 9602048, DktEntry: 53, Page 26 of 3220

Demonstration Project and the Court therefore cannot affirm the Demonstration Project on this basis. See SEC v. Chenery Corp. , 332 U.S. 194, 196 (1947) (a reviewing court may not supply a reasoned basis for the agenc y’s action that the agency itself has not given); see also Cal. Trout v. FERC , 572 F.3d 1003, 1021 (9th Cir. 2009). EPA’s failure to justify its actions by reference to the statutory criteria in Section 114 is unquestionably prejudicial, given that the
De monstration Project is not simply an information

- gathering mechanism but imposes ongoing design and operational restrictions. 8
2. EPA’s suggestion that the Demonstration Project is “necessary for achieving reasonable progress” is meritless. EPA Br. 72

- 73. This argument does not accurately characterize the Agency’s parsimonious explanation for the Demonstration Project, which is only that the Project was promulgated “in response to concerns raised by Earthjustice and in order to ensure that

8 Any rational construction of Section 114(a)(1)(G), which authorizes EPA to require regulated sources to “provide such other information as the Administrator may reasonably require,” mus t be construed consistent with the types of information gathering that are specifically enumerated in Section 114(a)(1)(A)

- (F), which are all passive types of information gathering that do not impose design or operational restrictions. See Prudential Loca tions LLC v. U.S. Dep’t of Hous. and Urban Dev. , 739 F.3d 424, 437 n.2 (9th Cir. 2013) (Berzon, C.J., dissenting) (“[A]pplication of the familiar ejusdem generis canon also suggests that the catch

- all term .

. . should be ‘construed to embrace only objects similar in nature to those objects enumerated by the preceding specific words.’”) (quoting Circuit City Stores, Inc. v. Adams , 532 U.S. 105, 114

- 15 (2001)). Case: 14-73368, 07/08/2015, ID: 9602048, DktEntry: 53, Page 27 of 3221

performance of the SNCR system installed at the [Phoenix Cement] Plant is optimized,” and that EPA believes it is “appropriate here, given the significant variability in control efficiencies achievable with SNCR at cement kilns.” 79 Fed. Reg. 54,420, 52,455/3

- 56/1 (Sept . 3, 2014), J.A. 00351 . None of these explanations relate to the four factors for reasonable progress set forth in Section 169A(g)(1), 42 U.S.C. § 7491(g)(1), or at 40 C.F.R. § 51.308(d)(1)(i)(A), or attempt to tie control efficiency to the issue of visib ility in any way. Moreover, the Demonstration Project imposes significant costs on Phoenix Cement but EPA drew no relationship between higher SNCR control efficiencies and actual visibility benefits. “[I]t is arbitrary and capricious for
EPA to force an emissions source ‘to spend millions of dollars for new technology that will have no appreciable effect on the haze in any Class I
area.’” Nat’l Parks Conservation Ass’n v. EPA , __ F.3d __, No. 12

- 73710, 2015 WL 3559149, at *10 (9th Cir. June 9, 2015) (quo ting Am. Corn Growers Ass’n v.
EPA , 291 F.3d 1, 7 (D.C. Cir. 2002)).
3. EPA’s new argument that “[i]nformation is the very basis for all
EPA decision

- making in the regional haze context,” so “EPA properly determined that a demonstration project was a reaso nable way to obtain that information,” is likewise flawed. EPA Br. 72. Information is the basis for all informed EPA decisionmakings, not just regional haze rules, which is why the Act includes Section 114’s information collection provisions. But the me ans by Case: 14-73368, 07/08/2015, ID: 9602048, DktEntry: 53, Page 28 of 3222

which EPA gathers information must still comport with law. EPA failed to provide any legal basis in in the rule under review why the Demonstration Project comports with the requirements of Section 114. Having failed to provide that explanation in the rule, EPA cannot defend it on that basis and Phoenix Cement should not be forced to argue this issue in a vacuum. Additionally, EPA’s suggestion that the Agency may require additional information in future visibility proceedings underscores the arbitra ry nature of its actions. Arizona, not EPA, has primary authority to implement the Clean Air Act’s visibility programs. CAA § 169A(b)(2)(B), 42 U.S.C. § 7491(b)(2)(B). And Arizona is Phoenix Cement’s primary regulator, with ample authority to request wh atever information it believes is necessary to fulfill its statutory obligations under the Clean Air Act and state law. EPA has the authority to regulate directly only if the state fails to make an approvable plan submission during the next planning perio d. See CAA § 110, 42 U.S.C. § 7410. It is arbitrary and capricious for EPA to anticipate supplanting the state’s authority before Arizona even devises its next visibility plan. Case: 14-73368, 07/08/2015, ID: 9602048, DktEntry: 53, Page 29 of 3223 III. CONCLUSION For the reasons stated in Phoenix Cement Company’s openin g brief and in this reply brief, the Court should vacate the Demonstration Project set forth at 40 C.F.R. § 52.145(k)(3), (6) and 40 C.F.R. § 52.145 Appendix A. The Court should also grant the relief requested in Petitioners State of Arizona and
CalPortla nd’s briefs.

Dated: June 24, 2015 Respectfully submitted, /s/ Mark W. DeLaquil Mark W. DeLaquil Andrew M. Grossman BAKER & HOSTETLER LLP Washington Square, Suite 1100 1050 Connecticut Avenue, N.W. Washington, D.C. 20036

- 5304 Telephone: (202) 861

- 1527 Facsimile: (202) 861

- 1783 E

- mail: mdelaquil@bakerlaw.com George A. Tsiolis Attorney At Law 351 Lydecker Street Englewood, N.J. 07631 Phone: (201) 408

- 4256 Facsimile: (201) 408

- 4622 Email: gtsiolis@nj.rr.com
Counsel for Petitioner Phoenix Cement Company Case: 14-73368, 07/08/2015, ID: 9602048, DktEntry: 53, Page 30 of 3224 CERTIFICATE OF COMPLIANCE This brief complies with the type

- volume limitations of Fed. R. App. P. 32(a)(7)(B) because it contains 5,139 words, excluding the parts of the brief exempted by Fed. R. App. P. 32(a)(7)(B)(iii). This b rief complies with the typeface requirements of Fed. R. App. P. 32(a)(5) and the type style requirements of Fed. R. App. P. 32(a)(6) because it has been prepared in a proportionally spaced typeface using Microsoft Word in 14

- point Garamond typeface.
Dated: July 8 , 2015 /s/ Mark W. DeLaquil Mark W. DeLaquil Case: 14-73368, 07/08/2015, ID: 9602048, DktEntry: 53, Page 31 of 3225 CERTIFICATE OF SERVICE I hereby certify that I electronically filed the foregoing Petitioner’s Final Reply
Brief with the Clerk of the Court for the United States Court of Appeals for the Ninth Circuit by using the appellate CM/ECF system on July 8, 2015. Participants in the case who are registered CM/ECF users will be served by the appellate CM/ECF
system. Dated: July 8 , 2015 /s/ Ma rk W. DeLaquil Mark W. DeLaquil Case: 14-73368, 07/08/2015, ID: 9602048, DktEntry: 53, Page 32 of 32