SETTLEMENT AGREEMENT

WHEREAS,on August 11, 2004,the United States Environmental Protection Agency ( "EPA")reclassified the Imperial Valley Planning Area ( "Imperial Valley ")as a "serious" nonattainment area for coarse particulate matter( "PM 10")national ambient air quality standards ( "NAAQS")under the Clean Air Act, 69 Fed.Reg. 48,792 (Aug. 11, 2004),triggering the Clean Air Act requirement in 42 U.S.C. § 7513a(b)(1)(B)that the State ofCalifornia submit to EPA within four years a state implementation plan containing provisions for the implementation of best available control measures( "BACM")for the control ofPM 10; WHEREAS,in 2005 the Imperial County Air Pollution Control District( "Air District") adopted Rules 800 through 806 (known as "Regulation VIII")intended to limit emissions of PM 10 within Imperial County; WHEREAS,in 2006 the California Air Resources Board submitted the 2005 version of Regulation VIII to EPA as a revision to the state implementation plan; WHEREAS,on July 8, 2010,EPA published a final rule in the Federal Register approving in part and disapproving in part the 2005 version ofRegulation VIII, 75 Fed. Reg. 39,366 (July 8, 2010)

( "Final Rule"); WHEREAS,the Air District filed a petition for review ofthe Final Rule in the United States Court ofAppeals for the Ninth Circuit (Case No. 10-72709); WHEREAS,the California Department ofParks and Recreation ( "Parks")filed a petition for review ofthe Final Rule in the United States Court ofAppeals for the Ninth Circuit (Case No. 10-72729); WHEREAS,the petitions for review were consolidated (referred to hereinafter as "the Existing Litigation");WHEREAS, briefing on the Existing Litigation has concluded and oral argument was held on February 15, 2012; WHEREAS,on February 17, 2012 the United States Court ofAppeals for the Ninth Circuit issued an Order (Docket No. 83)that referred the Existing Litigation to mediation, vacated submission ofthe Existing Litigation to the Court until further order, and noted that in the event that mediation efforts fail, the panel will finalize a disposition ofthe Existing Litigation without further briefing or argument from the parties; WHEREAS,the Air District,Parks (hereinafter referred to together as "Petitioners"), and EPA (collectively, "the Parties")have a mutual interest in ensuring that the Air District's Regulation VIII satisfies the Clean Air Act's requirements for best available control measures for the control ofPM10 air pollution, 42 U.S.C. § 7513a(b)(1)(B); WHEREAS,EPA's determination ofwhether an exceedance ofthe PM10NAAQS is an "exceptional event" within the meaning ofsection 319 ofthe Act,42 U.S.C. § 7619, and EPA's regulations at 40 C.F.R. § §50.1 and 50.14 requires that EPA consider, among other criteria, whether the exceedance was "reasonably controllable or preventable" and EPA's consideration ofthis factor, evaluates, among other criteria, whether "reasonably available reasonable and appropriate measures" are in place to control anthropogenic PM10 sources and to abate or minimize the exposure ofthe public associated with the exceptional event (hereinafter referred to
as "reasonable control"); WHEREAS,the Air District intends to prepare and transmit to the California Air Resources Board for submittal to EPA a revision to the state implementation plan as required by Clean Air Act section 189(d), 42 U.S.C. § 7513a(d);

2WHEREAS,.in order to avoid the uncertainty, delay, and costs associated with continued

litigation, the Air District, Parks, and EPA wish to implement this Settlement Agreement; NOW THEREFORE,the Parties agree as follows: The parties to this Settlement Agreement( "Agreement")are the Petitioners and EPA. Nothing in this Agreement shall be construed to make any other person or entity not executing this Agreement athird-party beneficiary to this Agreement. 2. This Agreement applies to, is binding upon,and inures to the benefit ofthe Petitioners (and their successors, assigns, and designees)and EPA.

This Agreement shall not constitute an admission or evidence ofany fact, wrongdoing,misconduct, or liability on the part ofthe Parties, their officers, or any person affiliated with them. 4. Within fourteen days (14)after this Agreement is finalized pursuant to Paragraph 22 ofthis Agreement,the Parties shall file a motion and proposed order (attached hereto as Attachment A)in the Ninth Circuit Court ofAppeals requesting that the case continue to be withheld from submission to the panel pending completion of, and subject to, the terms ofthis Agreement. Any deadline stated herein that falls on a Saturday, a Sunday,or a legal holiday shall be extended to the next day which is not one ofthe aforementioned days. 6. Within 90 days after this Agreement is executed by all Parties, but before finalization pursuant to Paragraph 22 ofthis Agreement,the Air District shall submit to its Governing Board revisions to the Regulation VIII rules that are substantially the same in substance as set forth in Attachment B to this Agreement, and supporting documentation (including off

-highway vehicle BACM demonstration).

37. Within fourteen (14)days ofthe Governing Board's adoption ofthe revised

Regulation VIII rules, the Air District shall submit the revised Regulation VIII rules and supporting documentation (including off
-highway vehicle BACM demonstration)to the California Air Resources Board and request expedited submittal to EPA for incorporation into the California state implementation plan. 8. Within sixty (60)days ofthe California Air Resources Board's submittal ofthe revised Regulation VIII rules and supporting documentation (including off
-highway vehicle BACM demonstration)to EPA as a revision to the California state implementation plan, the EPA Region 9 Regional Administrator will sign for publication in the Federal Register a notice of proposed rulemaking that proposes taking action on the submittal pursuant to Clean Air Act section 110(k), 42 U.S.C. § 7410(k). Ifthe rules are substantially the same in substance as set forth in Attachment B to this Agreement,the notice to be signed by the Regional Administrator shall propose full approval ofthe submittal pursuant to Clean Air Act sections 110(k)and 189(b)(1)(B), 42 U.S.C. §§ 7410(k), 7513a(b)(1)(B)..EPA shall include in the notice of proposed rulemaking a statement that EPA's preliminary view is that the revised Regulation VIII rules constitute "reasonable control" ofthe sources covered by Regulation VIII for the purpose ofevaluating whether an exceedance ofthe PM10 NAAQS is an "exceptional event" including reasonable and appropriate control measures on significant contributing anthropogenic sources. This statement does not extend to exceedances ofNAAQS other than the PM10 NAAQS,or to events that differ significantly in terms ofmeteorology, sources, or conditions from the events that are at issue in the Existing Litigation. Once signed,EPA shall promptly deliver the notice of proposed rulemaking to the Office ofFederal Register for review and publication.

D9. Ifthe Regional Administrator proposes full approval ofthe submittal referenced

in Paragraph 8,then concurrently with signature ofthe notice in Paragraph 8,the Regional Administrator shall sign for publication in the Federal Register a notice making an interim final determination to defer imposition ofsanctions pursuant to the Administrative Procedure Act, 5 U.S.C. § 553(d)(1). However,as is standard for such determinations,EPA may lift the deferral ofsanctions ifEPA receives significant and substantive public comments that change its assessment described in the determination and the proposed approval ofthe revised Regulation VIII rules. 10. Within sixty (60)days ofthe close ofpublic comment on EPA's proposed rule referenced in Paragraph 8 ofthis Agreement,the EPA Region 9 Regional Administrator will sign for publication in the Federal Register a notice offinal rulemaking taking action pursuant to Clean Air Act section 110(k), 42 U.S.C. § 7410(k). Once signed,EPA shall promptly deliver the notice offinal rulemaking to the Office ofFederal Register for review and publication. 11. Within ninety (90)days after publication in the Federal Register ofEPA's notice offinal rulemaking on a section 189(d)plan for the Imperial Valley PM10 serious nonattainment area, the Petitioners shall act to terminate the Existing Litigation by filing motions to dismiss their petitions with prejudice pursuant to Fed. R.App.Pro. 42,with each party to bear its own costs and attorneys' fees. 12. IfEPA does not comply with any requirement ofParagraphs 8 through 10 ofthis Agreement,or ifthe final action required by Paragraph 10 does not finalize approval ofthe revised Regulation VIII rules, then the Air District and Parks may at their election, move to request that the Ninth Circuit Court ofAppeals submit the Existing Litigation to the panel and proceed to a decision on the Existing Litigation. The Parties agree that this Paragraph 12

5constitutes the Petitioners' sole remedy under this Agreement ifEPA does not comply with any

requirement ofParagraphs 8 through 10. 13. IfEPA takes any final action to require the State ofCalifornia, on behalfofthe Air District, to submit any plan required under Clean Air Act section 189(d), 42 U.S.C. § 7513a(d),prior to the dismissal described in Paragraph 11 ofthis Agreement,then the Air District may at its election, move to request that the Ninth Circuit Court ofAppeals submit the Existing Litigation to the panel and proceed to a decision on the Existing Litigation. The Parties agree that this Paragraph 13 constitutes the Petitioners' sole remedy under this Agreement if EPA takes any final action to require a section 189(d)plan from the State of California on behalf ofImperial County. 14. Ifthe California Air Resources Board does not submit the revised Regulation VIII rule submission to EPA within sixty (60)days after receiving it, then any ofthe Parties may at their election move to request that the Ninth Circuit Court ofAppeals submit the Existing Litigation to the panel and proceed to a decision on the Existing Litigation. 15. In any event,no later than four years after the implementation dates)within Imperial County for the revised Regulation VIII rules, the Petitioners shall act to terminate the Existing Litigation by filing motions to dismiss their petitions with prejudice pursuant to Fed. R. App.Pro. 42,with each party to bear its own costs and attorneys' fees. 16. This Agreement constitutes a full and final resolution ofall matters related to the Existing Litigation, subject to the rights ofthe Parties to terminate this Agreement as referenced herein. Petitioners agree to release, discharge, and covenant not to assert (by way ofthe commencement ofan action, the joinder ofEPA in an existing action or in any other fashion) any and all claims, causes ofaction, suits or demands ofany kind whatsoever in law or equity whichthey may have had, or may now or hereafter have, against the United States based upon matters

related to the Existing Litigation. 17. IfEPA's final action taken pursuant to Paragraph 10 ofthis Agreement is full approval,then Petitioners shall not bring a legal challenge to such action. Nothing in this Agreement shall preclude Petitioners from bringing a legal challenge to a final action taken pursuant to Paragraph 10 ofthis Agreement, other than full approval. 18. Nothing in this Agreement shall be construed to limit or modify the discretion accorded to EPA by the Clean Air Act, or by general principles ofadministrative law,nor shall it in any way be deemed to limit EPA's discretion in adopting any final rule. 19. Nothing in this Agreement shall be construed to limit or modify EPA's discretion to alter, amend,or revise any regulations, guidance,or interpretation EPA may issue in accordance with or on matters related to this Agreement from time to time or to promulgate or issue superseding regulations, guidance, or interpretations, or to limit any right that the Petitioners may have to seek judicial review in a subsequent case ofany such action by EPA. 20. The Parties agree that they do not waive or limit any defense relating to the Existing Litigation ifthe Ninth Circuit Court ofAppeals submits the Existing Litigation to the panel and the panel proceeds to a decision. EPA specifically reserves the right to argue that the Existing Litigation is moot in the event that any request to the Ninth Circuit Court ofAppeals to submit the Existing Litigation to the panel occurs after EPA's final rulemaking referenced in Paragraph 10 ofthis Agreement and such final rulemaking is a full approval ofthe revised Regulation VIII rules. 21. No provision ofthis Agreement shall be interpreted as or constitute a commitment
or requirement that EPA obligate or pay funds in contravention ofthe Anti-Deficiency Act, 31

7U.S.C. § 1341, or take actions in contravention ofthe Administrative Procedure Act, 5 U.S.C. §§

551 -559, 70~ -706,the Clean Air Act, or any other law or regulation, either substantive or procedural. 22. The Parties agree and acknowledge that before this Agreement is final, EPA must provide notice in the Federal Register and an opportunity for comment pursuant to Clean Air Act § 113(g), 42 U.S.C. § 7413(g). After this Agreement has undergone an opportunity for notice and comment,the Administrator and/or the Attorney General, as appropriate, shall promptly consider any such written comments in determining whether to withdraw or withhold consent to this Agreement, in accordance with section 113(g)ofthe Clean Air Act. Ifthe federal government elects to withdraw or withhold consent to this Agreement,Petitioners shall have the right to withdraw from this Agreement. This Agreement shall become final on the date that EPA provides written notice ofsuch finality to Petitioners. 23. The Parties may modify any deadline or other term ofthis agreement by written stipulation. 24. Any notices required or provided for by this Agreement shall be in writing, and shall be deemed effective (i)upon receipt if sent by U.S. Post or (ii) upon the date sent if sent by overnight delivery, facsimile, or email. In addition, to be effective, any such notice must be sent to the following:
For the Air District: Rick Rothman Bingham McCutchen LLP 355 South Grand Avenue, Suite 4400 Los Angeles, CA 90071 -3106 telex (213)680-6400 fax: (213)680-6499 email: rick.rothman@bingham.com E:3Michael Rood

County ofImperial Office ofthe County Counsel County Administration Center 940 Main Street, Suite 205 El Centro, CA 92243-2869 telex (760)482-4400 fax: (760)353-9347 email: michaelrood@co.imperial.ca.us
For Parks: Hayley Peterson Office ofthe Attorney General 110 West A Street, Suite 1 100 San Diego, CA 92101 telex (619)645-2540 fax: (619)645-2012 email: hayley.peterson

@doj.ca.gov Legal Office California Department ofParks and Recreation 1416 9th Street, 14th Floor Sacramento, CA 95814 For EPA: Christina L.Richmond Environmental Defense Section Environment and Natural Resources Division United States Department ofJustice P.O. Box 7611 Washington,D.C. 20026-3986 telex (202)514-3376 fax: (202)514-8865 email: christina.richmond2 @usdoj.gov Geoffrey L. Wilcox Office ofGeneral Counsel United States Environmental Protection Agency Ariel Rios Building 1200 Pennsylvania Avenue,N. W. Mail Code: 2344A Washington,DC 20460
Dparties. telex (202)564-5601

fax: (202)564-5603 email: wilcox.geoffrey

@epa.gov Kara Christenson Office ofRegional Counsel United States Environmental Protection Agency 75 Hawthorne Street San Francisco, CA 94105 telex (415)972-3881 fax: (415)947-3570 email: christenson.kara

@epa.gov
or such other person as any party may subsequently identify in writing to the other

25. The various terms,paragraphs, and sections contained herein shall be deemed separable and severable. If any provision ofthis Agreement is deemed invalid or unenforceable, the balance ofthe Agreement shall remain in full force and effect. 26. It is hereby expressly understood and agreed that this Agreement was jointly drafted by Petitioners and EPA. Accordingly,the Parties hereby agree that any and all rules of construction to the effect that ambiguity is construed against the drafting Party shall be inapplicable in any dispute concerning the terms,meaning, or interpretation ofthis Agreement. 27. Each undersigned representative ofthe Parties to this Agreement certifies that he
or she is fully authorized by the party to enter into and execute the terms and conditions ofthis Agreement,and to legally bind such party to this Agreement. 28. This Agreement may be executed in any number ofcounterpart originals, each of which shall be deemed to constitute an original agreement, and all ofwhich shall constitute one agreement. The execution of one counterpart by any party shall have the same force and effect
as ifthat party had signed all other counterparts.

10FOR THE AIR DISTRICT:

Date: MICHAEL W.KELLEY Chairman ofthe Board Imperial County Air Pollution Control District IOC~_~'~' `~

Date: RUTH COLEMAN Director California Department ofParks and Recreation FOR EPA:
Date: ~~ z 7 z~7~ CHRISTIN .RICHMOND,Trig Attorney Environmental Defense Section Environment and Natural Resources Division United States Department ofJustice

11FOR THE AIR DISTRICT: ;:

Date: / ,~1 %2 / r /~~
-~~~ ~~ MICHAEL W.KELLEY Chairman ofthe Board Imperial County Air Pollution Control District

Date;

FOR EPA:
Date: RUTH COLEMAN Director California Department ofParks and Recreation

CHRISTINA L. RICHMOND,Trial Attorney Environmental Defense Section Environment and Natural Resources Division United States Department ofJustice

11FOR THE AIR DISTRICT:

Date: MICHAEL W.KELLEY Chairman ofthe Board Imperial County Air Pollution Control District FOR PARKS:
Date: ~ 2

5 ~ 2 ~~ ~B



# ~~K~ ~~~ lifornia Departmen ofParks and Recreation FOR EPA:
Date: CHRISTINA L. RICHMOND,Trial Attorney Environmental Defense Section Environment and Natural Resources Division United States Department ofJustice

11