BEFORE THE ADMINISTRATOR 

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

In the Matter of: 

Implementation of the 2008 National 

Ambient Air Quality Standards for Ozone: 

State Implementation Plan Requirements – 

Final Rule, 80 Fed. Reg. 12,264 (Mar. 6, 

2015) 

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RIN 2060-AR34 

EPA-HQ-OAR-2010-0885 

PETITION FOR RECONSIDERATION 

 Pursuant to Section 307(d)(7)(B) of the Clean Air Act (“CAA” or “the Act”), 42 U.S.C. 

§ 7607(d)(7)(B), Sierra Club, Conservation Law Foundation, Downwinders at Risk, and 

Physicians for Social Responsibility-Los Angeles (“petitioners”) petition the Administrator of 

the Environmental Protection Agency (“the Administrator” or “EPA”) to reconsider the final rule 

captioned above and published at 80 Fed. Reg. 12,264 (Mar. 6, 2015) (“NFRM” or “final rule”). 

The grounds for the objections raised in this petition arose after the period for public comment 

and are of central relevance to the outcome of the rule. The Administrator must therefore 

“convene a proceeding for reconsideration of the rule and provide the same procedural rights as 

would have been afforded had the information been available at the time the rule was proposed.” 

42 U.S.C. § 7607(d)(7)(B). 

INTRODUCTION 

 This petition raises objections to the final rule captioned above. Each objection is “of 

central relevance to the outcome of the rule,” 42 U.S.C. § 7607(d)(7)(B), in that it demonstrates 

that the rule is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with 

law.” Id. § 7607(d)(9)(A). With respect to each objection, moreover, the regulatory language 

and EPA interpretations that render the rule arbitrary, capricious, an abuse of discretion, or 

otherwise not in accordance with law appeared for the first time in the NFRM published on 

March 6, 2015. 80 Fed. Reg. at 12,288-89, 12,317-18. The Federal Register notice soliciting 

comment on the rule was published on June 6, 2013, 78 Fed. Reg. 34,178, and the public 

comment period thereon closed September 4, 2013. Id. at 34,178/1. The grounds for the 

objections raised in this petition thus “arose after the period for public comment.” 42 U.S.C. 

§ 7607(d)(7)(B). Because judicial review of the rule is available by the filing of a petition for 

review within sixty days of the rule’s March 6, 2015 publication date – that is, by May 5, 2015 – 

the grounds for the objections arose “within the time specified for judicial review.” Id. 
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OBJECTIONS 

I. Interprecursor Offset Substitution 

The final rule unlawfully and arbitrarily authorizes interprecursor offsetting1 (i.e., 

offsetting of VOC emissions increases by NOx emission decreases, and vice versa) for purposes 

of meeting the Act’s offset requirements for new and modified major sources in ozone 

nonattainment areas. Provisions authorizing such interprecursor offsetting, and justifications 

therefor, were added to the rule after the close of the public comment period. Thus, the grounds 

for our objections arose after the period for public comment, and the raising of those objections 

during the public comment period was impracticable. See 42 U.S.C. § 7607(d)(7)(B). Those 

objections are of central relevance to the rule, see id., because they go to the core procedural and 

substantive validity of the interprecursor offsetting provisions of the rule – including the public’s 

opportunity to comment on those provisions, and the consistency of those provisions with the 

Act and with fundamental standards of reasoned agency decision-making. 

A. EPA Unlawfully and Arbitrarily Failed to Seek Public Comment on the Final 

Rule's Authorization of Interprecursor Offsetting 

 Under § 307(d) (which EPA has found applicable to this proceeding), EPA must present 

for public comment “the major legal interpretations and policy considerations underlying the 

proposed rule.” 42 U.S.C. § 7607(d)(3)(C). The same requirement would apply under the 

Administrative Procedure Act. 5 U.S.C. § 553. Here, EPA unlawfully failed to present the rule 

authorizing interprecursor offsetting and accompanying rationales to the public for comment. 

Neither the rule nor the rationale therefor appeared in the rulemaking proposal, nor did EPA 

otherwise present them to the public for comment. Although the proposal notice contained a 

very brief reference to the practice of interpollutant offset substitution and the flexibility it can 

provide, 78 Fed. Reg. at 34,201/2, it did not propose to authorize such substitution or propose 

any regulatory language on the matter. At the time of the proposal, EPA’s rules prohibited 

interprecursor offsetting except for PM2.5, and EPA did not propose any amendment to those 

prohibitions. 40 C.F.R. § 51.165(a)(11) (2013); 40 C.F.R. Pt. 51, App. S § IV.G.5 (2013). 

 In the notice of final rulemaking, EPA asserted that the final rule authorizing 

interprecursor offsetting was a logical outgrowth of the proposal because EPA had issued 

previous Economic Incentive Program guidance (“EIP Guidance”)2

 purportedly allowing for 

such interprecursor trading, and the proposal purportedly indicated EPA’s intent to continue to 

allow such trading. 80 Fed. Reg. at 12289/1. But the proposal did not cite the referenced 

guidance as a basis for authorizing such trading, much less assert that EPA intended to codify or 

follow it. These citations and rationales were presented for the first time in the final rule.3 

 

1

 Throughout this petition, the phrases “interprecursor offsetting,” “interprecursor trading,” “interpollutant 

offsetting,” “interpollutant offset,” and “interpollutant offset substitution” are used interchangeably. 

2 EPA, Improving Air Quality with Economic Incentive Programs (Jan. 2001), available at

http://www.epa.gov/airquality/advance/pdfs/eipfin.pdf. 3

 A footnote to the notice of final rulemaking also referred the reader to a web link, 

www.epa.gov/region7/air/nsr/nsrindex.htm, “for additional memoranda and guidance documents.” 80 Fed. Reg. at 

12,289/1 n.59. Again, the proposal notice did not include this citation as supporting interpollutant offsetting in the 
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Moreover, contrary to EPA’s suggestion, the EIP Guidance did not override the bar on 

interprecursor trading in EPA’s rules. To the contrary, the EIP Guidance made clear that it is 

“non-binding policy,” non-final action and does not supersede the statute or EPA’s NSR rules. 

EIP Guidance at 5, 10, 12. Among other things, the EIP Guidance specifically stated as follows: 

 [T]his EIP guidance does not supersede the established requirements of 

the new source Review (NSR) program. The CAA and the EPA’s rules and 

guidance describe the kinds of emissions reductions that may be used for NSR 

offsets and NSR netting in a number of ways that are different from the 

requirements for generating and using EIP emissions reductions that are set forth 

in this guidance. The NSR requirements continue, and they may not be lifted 

by the State’s adoption of an EIP or by the approval of that EIP into a SIP.

Id. at 10 (emphasis added). The EIP Guidance reiterated the above point at page 254. 

 Nor did EPA’s proposal otherwise state an intent to adopt a rule authorizing 

interprecursor offsetting. The proposal stated only the following: 

b. Interpollutant Offset Substitution – States can make it easier for new or 

modified major sources to satisfy the offset requirements in an area by 

establishing interpollutant offset substitution provisions. Such provisions create 

additional flexibility in meeting offset requirements by allowing NOx emissions 

reductions to satisfy VOC offset requirements and vice versa. The appropriate 

exchange rate for substitution is determined by the state for each area consistent 

with the attainment needs of the area and must be approved by the EPA. 

78 Fed. Reg. at 34,201/2. At most, the above text merely describes the flexibility that can be 

provided by interpollutant offset substitution provisions, and existing practices regarding 

determination of the exchange rate. Nowhere does the text state that EPA is actually proposing 

to amend its rules so as to authorize such offset substitutions. 

 Nor did the proposal contain any of the actual rule amendment language included in the 

final rule. The final rule amended 40 C.F.R. §51.165(a)(11) to read as follows: 

(11) The plan shall require that in meeting the emissions offset requirements of 

paragraph (a)(3) of this section, the emissions offsets obtained shall be for the 

same regulated NSR pollutant unless interprecursor offsetting is permitted for a 

particular pollutant as specified in this paragraph. 

 proposal, much less propose to codify the memoranda and guidance documents listed on the referenced web page. 

Moreover, the cited web page is a listing of more than 670 documents on a wide variety of issues relating to the 

NSR program. EPA did not identify which, if any, of these hundreds of documents purportedly supported its action. 

Thus, it is absurd for EPA to imply that this web page somehow put the public on notice that EPA intended to codify 

any particular rule, memoranda or guidance at all, much less a rule authorizing interpollutant offsetting for ozone 

precursors. 
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(i) The plan may allow the offset requirement in paragraph (a)(3) of this 

section for emissions of the ozone precursors NOX and VOC to be 

satisfied by offsetting reductions in emissions of either of those 

precursors, if all other requirements for such offsets are also satisfied. 

(ii) The plan may allow the offset requirements in paragraph (a)(3) of this 

section for direct PM2.5 emissions or emissions of precursors of PM2.5 to 

be satisfied by offsetting reductions in direct PM2.5 emissions or 

emissions of any PM2.5 precursor identified under paragraph 

(a)(1)(xxxvii)(C) of this section if such offsets comply with the 

interprecursor trading hierarchy and ratio established in the approved plan 

for a particular nonattainment area. 

80 Fed. Reg. at 12,318/1-2 (new language underlined). 

 An amendment identical in substance was adopted to rule language in 40 C.F.R. Part 51 

Appendix S §IV.G.5. Id. at 12,317/3 Not only was the new regulatory language completely 

absent from the proposal, but also the proposal nowhere hinted at vagueness and potential 

breadth of the language ultimately adopted. As phrased, the new language places no explicit 

restrictions on interprecursor offsetting other than to require that “all other requirements for such 

offsets are also satisfied.” Id. at 12,317/3, 13,318/1. The rule language does not explain what 

“other requirements” are being referred to: Are they requirements for offsets generally – 

whether interprecursor or not; provisions in EPA’s EIP Guidance document; requirements in 

other guidance documents or memoranda; or some other requirements? The rule language does 

not answer these questions. To the extent EPA intends to limit interprecursor offsetting to 

situations where the ratios of VOC to NOx reductions (or vice versa) assure equivalent or greater 

ozone reduction benefits, the rule text nowhere so states. To the extent EPA intended to 

incorporate its EIP Guidance on such offsetting, the rule text itself also does not so state.4

 Had EPA proposed the above rule language, petitioners and others would have had the 

opportunity to raise these and other concerns with the language. They would also have had the 

opportunity to argue (as petitioners do below), that the trading as authorized by the rule language 

is unlawful and arbitrary. As things stand now, however, the specific rule language that EPA 

ultimately adopted and the agency’s stated rationale therefor has never been subjected to public 

notice and comment as required by the Act. 

 For all the foregoing reasons, EPA committed a procedural violation (see 42 U.S.C. 

§ 7607(d)(9)(D)) by failing to solicit public comment on its authorization of interprecursor 

offsetting and on specific rule amendment language to facilitate such offsetting. That procedural 

 

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 The preamble to the final rule asserts that the changes in the regulatory text “are intended to clarify that 

interprecursor trading continues to be an option for the ozone precursors VOC and NOx as long as such trades are 

consistent with existing policy and legal requirements.” 80 Fed. Reg. at 12,289/1. But the rule text contains no 

reference to requiring consistency with “existing policy and legal requirements” – it refers only to “all other 

requirements” – and, in any event, EPA does not explain what it views the applicable “policy requirements” to be. 

To the extent EPA means to refer to the EIP Guidance, the rule does not so state, and in any case that document by 

its terms does not set out “requirements” because it is a non-final, non-binding document. To the extent EPA is 

referring to other policy statements it may have made on interprecursor trading, the rule does not identify them. 
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violation meets the criteria set forth in § 307(d)(9)(D) for reversal based on procedural 

violations. First, EPA’s procedural dereliction is arbitrary and capricious. See id.

§ 7607(d)(9)(D)(i). The agency has adopted a final rule authorizing interprecursor offsetting that 

was not proposed at the time of public notice and comment. EPA has further adopted final 

regulatory language that was never subjected to public notice and comment, and that differs 

materially from the pre-existing regulatory language. 

 Second, via the present petition, petitioners have satisfied the requirements of § 307(d). 

See id. § 7607(d)(9)(D)(ii). 

 Third, the challenged errors “were so serious and related to matters of such central 

relevance to the rule that there is a substantial likelihood that the rule would have been 

significantly changed if such errors had not been made.” See id. § 7607(d)(8), cited in id. 

§ 7607(d)(9)(D)(iii). Had EPA obeyed the law by soliciting public comment, it would have 

learned of the serious substantive objections detailed below – objections that address the lack of 

statutory basis for the challenged provisions, and those provisions’ inconsistency with 

fundamental principles of reasoned agency decision-making. 

B. EPA’s Authorization of Interpollutant Offsetting is Unlawful and Arbitrary 

 The Act unambiguously bars the interprecursor offset trading authorized by EPA’s rule. 

Section 173(c) of the Act provides as follows: 

(c) Offsets. – (1) The owner or operator of a new or modified major stationary 

source may comply with any offset requirement in effect under this part for 

increased emissions of any air pollutant only by obtaining emission reductions of 

such air pollutant from the same source or other sources in the same 

nonattainment area, except that the State may allow the owner or operator of a 

source to obtain such emission reductions in another nonattainment area if (A) the 

other area has an equal or higher nonattainment classification than the area in 

which the source is located and (B) emissions from such other area contribute to a 

violation of the national ambient air quality standard in the nonattainment area in 

which the source is located. Such emission reductions shall be, by the time a new 

or modified source commences operation, in effect and enforceable and shall 

assure that the total tonnage of increased emissions of the air pollutant from the 

new or modified source shall be offset by an equal or greater reduction, as 

applicable, in the actual emissions of such air pollutant from the same or other 

sources in the area. 

 

42 U.S.C. § 7503(c) (emphasis added). The statutory language could not be clearer that the 

offset requirement can only be satisfied by securing reductions in the same pollutant that will be 

emitted by the new or modified source. Congress was emphatic on this point: a source can 

comply with the offset requirement “for increased emissions of any air pollutant only by 

obtaining emission reductions of such air pollutant.” Id. (emphasis added). And there must be 

assurance that “increased emissions of the air pollutant...shall be offset by an equal or greater 

reduction...in the actual emissions of such air pollutant....” Id. (emphasis added). There is 
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simply no way that this language can be read as allowing the offset requirement for an air 

pollutant to be satisfied by anything other than reductions in actual emissions of that same air 

pollutant. 

 The Act’s ozone-specific provisions likewise make clear that offsetting emission 

reductions must be of the same pollutant whose emissions are being offset. For example, section 

182(a)(4), governing SIP requirements for marginal ozone nonattainment areas, states: 

(4) General offset requirement. – For purposes of satisfying the emission offset 

requirements of this part, the ratio of total emission reductions of volatile 

organic compounds to total increased emissions of such air pollutant shall be 

at least 1.1 to 1. 

42 U.S.C. § 7511a(a)(4) (emphasis added). Pertinent language governing offset requirements for 

moderate, serious, severe, and extreme areas is substantively identical to the above. Id.

§§ 7511a(b)(5), 7511a(c)(10), 7511a(d)(2), 7511a(e)(1). In each case, the statute specifies that 

the offsets to be obtained for increased emissions of an air pollutant must consist of emission 

reductions “of such air pollutant.” Other provisions of the Act relating to NSR offsets likewise 

require that emissions increases subject to the offset requirement must be offset by emission 

reductions for the same pollutant. E.g., id. §§ 7511a(c)(7), 7511a(c)(8), 7511a(e)(2). 

 Where Congress has intended to allow substitution of NOx reductions for VOC 

reductions, it has expressly said so. For 3% annual reasonable further progress plans in serious 

and above ozone nonattainment areas, section 182(c)(2)(C) of the Act expressly authorizes EPA 

to provide for such substitution under limited circumstances. Id. § 7511a(c)(2)(C). It is 

therefore particularly telling that Congress provided no such substitution authority for the 

purpose of satisfying the Act’s nonattainment NSR offset requirement. Indeed, EPA itself has 

cited the substitution authority in § 182(c)(2)(C) as grounds for concluding that EPA does not 

have discretion to authorize substitution in other circumstances. EPA, Response to Comments 

on Implementation of the 2008 National Ambient Air Quality Standards for Ozone: State 

Implementation Plan Requirements at 188, Feb. 13, 2015, EPA-HQ-OAR-2010-0885-0191 

(“RTC”). 

 EPA’s final action authorizing interprecursor offsetting also violates the Act’s 

antibacksliding requirements. The rule allows construction of major new sources and 

modifications under circumstances that were not previously allowed under EPA’s rules, and 

allows increased emissions of a given ozone precursor that are not offset by greater reductions in 

emissions of that pollutant as required by the Act. The result is to unlawfully and arbitrarily 

authorize controls for that pollutant that are less stringent than required under the pre-existing 

NAAQS. 

 Even if they were not otherwise flatly barred by the Act, EPA’s authorization of 

interprecursor offsetting in the final rule is unlawfully and arbitrarily vague and overbroad. 

Under the final rule, a SIP “may allow the offset requirement...for emissions of the ozone 

precursors NOx and VOC to be satisfied by offsetting reductions in emissions of either of those 

precursors, if all other requirements for such offsets are also satisfied.” 80 Fed. Reg. at 12,317/3, 
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12,318/1. The rule text itself fails to identify any specific requirements for or limitations on such 

offsetting. For example, the rule text does not specify limitations on setting the ratio of NOx to 

VOC reductions for such offsetting, and indeed EPA expressly refused to state any such 

limitations in responding to comments. Thus, states and sources may argue that the rule allows 

states discretion to set whatever ratios they deem reasonable, even if they result in higher ozone 

levels than would have been allowed in the absence of such substitution. Such an outcome 

would arbitrarily flout the purposes of nonattainment NSR. The preamble to the final rule cites 

the EIP Guidance, but as noted above, that Guidance is by its terms nonbinding and is not cited 

in the rule text. Moreover, the EIP Guidance is unlawful and arbitrary for reasons including, but 

not limited to the following: 

 The EIP Guidance purports to allow inter-precursor trading if the state shows “that 

anticipated trades will either reduce emissions, or not increase emissions.” EIP Guidance 

at 243. That authorization conflicts with the Act’s offset requirements for ozone 

nonattainment areas, which expressly require that emissions increases be offset by 

greater reductions in emissions: It is not enough to merely avoid a net increase in 

emissions. 42 U.S.C. §§ 7511a(b)(5), 7511a(c)(10), 7511a(d)(2), 7511a(e)(1). Further, 

the above-quoted language from the Guidance fails to comport with the Act’s 

requirement that offsets assure that – by the time the new source is to commence 

operation – total emissions are sufficiently less than emissions prior to the application for 

the NSR permit so as to represent reasonable further progress. Id. §7503(a)(1)(A). 

Again, it is not enough to merely require a showing that emissions will not increase. 

 The EIP Guidance further states that the “best way” to determine if a plan will reduce 

emissions or not increase emissions is by using air quality modeling. EIP Guidance 243. 

The Guidance goes on to say, however, that air quality modeling for individual ozone 

interprecursor trades is not required if the state includes provisions in its plan that apply 

to all ozone interprecursor trades. Id. These provisions of the Guidance are not 

rationally explained or supported. Although modeling is almost certainly essential to 

determine the relative ozone reduction benefits of VOC versus NOx reductions, it does 

not demonstrate whether emissions will be reduced or stay the same. The latter requires a 

separate comparison of pre-application emissions with emissions at the time the source 

will commence operation. Moreover, EPA fails to offer any explanation as to why 

inclusion of provisions in the state’s plan applicable to all ozone interprecursor trades 

justifies foregoing modeling for individual trades. The Guidance fails to specify what 

sort of provisions in the state’s plan would suffice for this purpose, much less explain 

how such provisions would be sufficient to ensure that each and every trade will reduce 

emissions as the Act requires. 

 The EIP Guidance says that the state needs to perform modeling to determine whether 

VOC or NOx reductions are most effective and the correct ratio for inter-precursor trades 

if the state determines that a trade of one ton of VOC (or NOx) for one ton of NOx (or 

VOC) does not reduce or maintain ozone levels. Id. This statement is facially irrational. 

EPA does not explain how the state can rationally determine – without doing modeling – 

that a one for one trading ratio will not reduce or maintain ozone levels. As EPA itself 

acknowledges, the relationship between these pollutants and ozone formation is complex 
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such that modeling is essential to determining the impacts of reductions of VOCs versus 

NOx. Moreover, as noted above, to comply with the Act’s offset requirements for ozone 

precursors, it is plainly not sufficient for a trade to merely maintain ozone levels. 

 The EIP Guidance asserts that for certain trades in certain areas, the state may assume a 

reduction or no change in ozone levels by doing minimal or no additional modeling. The 

guidance says that additional modeling may not be required for: i) sources using VOC 

reductions to satisfy NOx emission reduction obligations when the user and generator are 

both located in the same urbanized area if the state shows the area is VOC limited; and 

ii) sources using NOx emission reductions to satisfy VOC emission reduction obligations 

when the user and generator are both located in the same rural area if the state shows that 

the area is NOx limited. Id. at 243-44. EPA fails to provide a reasoned justification for 

these exceptions. First, EPA fails to explain how a state can show without modeling that 

an area is VOC limited or NOx limited. Second, EPA fails to explain how the state is to 

determine without modeling the correct trading ratio in areas that meet the criteria for 

these exceptions. Nor does EPA explain why the exceptions are justified under the 

conditions stated. 

 EPA also fails to rationally explain or justify the process for approving trading ratios. In 

the proposal notice, EPA asserted: “The appropriate exchange rate for substitution is determined 

by the state for each area consistent with the attainment needs of the area and must be approved 

by the EPA.” 78 Fed. Reg. at 34,201/2. The final rule contains no such language, and EPA fails 

to state whether formal EPA approval of exchange rates will or will not be required under the 

final rule, and if so at what stage of the process. 

 Finally, as noted in Part I.A. above, the final rule is arbitrarily vague as to what specific 

requirements apply to interpollutant offsetting. The final rule language authorizes such 

offsetting “if all other requirements for such offsets are also satisfied,” without specifying what 

those “other requirements” are. The failure to specify the “other requirements” not only renders 

the rule language itself arbitrarily vague, but also leaves the rule without a rational basis. There 

is no way to determine, and EPA fails to explain, how the “other requirements” EPA refers to are 

rationally related to ensuring compliance with the Act and consistency with its purposes. 

II. Conclusion 

 For all the foregoing reasons, EPA must reconsider and withdraw the portions of the 

final rule authorizing interprecursor offsetting. 

DATED: May 5, 2015 /s/ David S. Baron___________ 

David S. Baron 

Seth L. Johnson 

Earthjustice 

1625 Massachusetts Avenue, N.W. 

Suite 702 

Washington, D.C. 20036-2212 

(202) 667-4500 
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dbaron@earthjustice.org 

sjohnson@earthjustice.org

Counsel for Petitioners