No. 11-71127

IN THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

CALIFORNIA COMMUNITIES AGAINST TOXICS, et al.

Petitioners,

v.

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, et al.

Respondents.

Petition for Review of a Final Rulemaking of 

the United States Environmental Protection Agency 

RESPONDENTS’ CORRECTED ANSWERING BRIEF

________________________________________

Of Counsel:

ANN LYONS

U.S. Environmental Protection 

Agency

Office of Regional Counsel

75 Hawthorne Street

San Francisco, CA 94105

SCOTT JORDAN

U.S. Environmental Protection

Agency

Office of General Counsel

1200 Pennsylvania Ave., N.W.

Washington, DC 20460

IGNACIA S. MORENO

Assistant Attorney General

AMY DONA

Environmental Defense Section

Environment & Natural Resources Div.

U.S. Department of Justice

P.O. Box 7611

Washington, DC 20044

Tel: (202) 514-0223

amy.dona@usdoj.gov

Attorneys for Respondents

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TABLE OF CONTENTS

Table of Authorities............................................................................................................. iv

Glossary ...................................................................................................................................x

Introduction ............................................................................................................................1

Statement of Jurisdiction .......................................................................................................1

Statement of the Issues..........................................................................................................2

Statement of the Case ............................................................................................................3

I. Statutory and Regulatory Background ..........................................................3

II. Factual Background ........................................................................................5

Standard of Review .............................................................................................................. 10

Summary of Argument ........................................................................................................ 12

Argument............................................................................................................................... 14

I. No Procedural Error Occurred During the Rulemaking ......................... 14

A. EPA Had No Obligation to Place Documentation in the Edocket or List Materials in an Administrative Index ..................... 16

B. Petitioners Had Notice of and Possessed the Documentation 

Before They Availed Themselves to the Opportunity to 

Comment ............................................................................................ 18

II. Petitioners Have Waived Issues Not Properly Presented to EPA 

During the Comment Period ....................................................................... 21

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A. Issues Not Raised in Comments Are Generally Waived.............. 21

B. Petitioners Failed to Raise Their Arguments Regarding the 

“Quantifiable” and “Surplus” Requirements With Sufficient 

Specificity During the Comment Period......................................... 23

III. The Record Supports EPA’s Conclusion that a Sufficient Number of 

the Credits Transferred Meet the CAA Offset Requirements................. 25

A. Petitioners Exaggerate the Need for Surplus Adjustment ........... 26

B. The Vast Majority of Emission Credits Transferred Are 

Quantifiable ........................................................................................ 29

C. Despite EPA’s Intent to Reconsider its Analysis of the “Base 

Year” Requirement, the Evidence Suggests that on 

Reconsideration, EPA Could Still Conclude that the Offset 

Credits Satisfy the “Base Year” Requirement ................................ 32

1. Upon Reconsideration, a Likely Alternative Analysis 

Could Conclude that the “Base Year” Requirement Is 

Satisfied.................................................................................... 34

2. Even if the 2007 AQMP Is Considered the Relevant 

Attainment Demonstration Document, the “Base 

Year” Requirement is Satisfied ............................................. 37

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IV. The Transfer of Emissions Credits from SCAQMD’s Internal 

Account Does Not Violate the CAA.......................................................... 41

A. Though EPA Is Not Required to Examine the Balance in 

SCAQMD’s Internal Bank, EPA Reasonably Concluded that 

the Balance Is Positive....................................................................... 41

B. Rule 1315 Does Not Need to Be Approved by EPA to 

Transfer Offset Credits from the Internal Bank to the AB 

1318 Tracking System ....................................................................... 44

C. EPA’s Reference to the Administrator’s Letter Was 

Appropriate......................................................................................... 46

V. Remand Without Vacatur Would Allow EPA to Address the 

Deficiencies in the Rulemaking and Avoid Potential Disruptive 

Effects............................................................................................................. 48

Conclusion............................................................................................................................. 53

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TABLE OF AUTHORITIES

CASES

A.L. Pharma, Inc. v. Shalala, 62 F.3d 1484 (D.C. Cir. 1995) ............................................. 49

Alaska Unemployment Comp. Comm'n v. Aragan, 329 U.S. 143 (1946)............................... 21

Allied-Signal, Inc. v. U.S. Nuclear Regulatory Comm'n, 988 F.2d 146 (D.C. Cir. 1993) ...... 50

Appalachian Power Co. v. EPA, 135 F.3d 791 (D.C. Cir. 1998).................................. 12, 21

Bennett v. Spear, 520 U.S. 154 (1997) ................................................................................... 48

Cal-Almond, Inc. v. US. Dep't of Agric., 14 F.3d 429 (9th Cir. 1993) ................................. 19

Cal. Cmtys. Against Texas v. SCAQMD, No. BS110792 (Cal. Super. Ct., County 

of Los Angeles, Sept. 7, 2011)(unpublished decision) ................................................ 44

Cal. Cmtys. Against Texas v. SCAQMD, No. B226692, 2011 WL 2937061 (Cal. 

App. 2d July 19, 2011)(unpublished opinion) ...................................................... 7,8,44

Cal. Wilderness Coal. v. U.S. Dep't of Energy, 631 F.3d 1072 (9th Cir. 2011) .................... 20

Checkosky v. SEC, 23 F.3d 452 (D.C. Cir. 1994)................................................................ 50

Cook Inletkeeper v. EPA, No. 07-72420, 2010 WL 4127976 (9th Cir. Oct. 21, 

2010).................................................................................................................................. 50

Exxon Mobil Corp. v. EPA, 217 F.3d 1246 (9th Cir. 2000) .............................................. 21

Gilbert v. Nat'l Transp. Safety Bd., 80 F.3d 364 (9th Cir. 1996).......................................... 11

Home Box Office, Inc. v. FCC, 567 F.2d 9 (D.C. Cir. 1977)................................................ 22

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Hydranautics v. FilmTec Corp., 204 F.3d 880 (9th Cir. 2000).............................................. 46

Kern County Farm Bureau v. Allen, 450 F.3d 10726 (9th Cir. 2006)................................... 16

League Of Wilderness Defenders Blue Mountains Biodiversity Project v. Allen, 615 F.3d 

1122 (9th Cir. 2010)......................................................................................................... 11

Loma Linda Univ. v. Schweiker, 705 F.2d 1123 (9th Cir. 1983).......................................... 48

Macktal v. Chao, 286 F.3d 822, 825-26 (5th Cir. 2002) ..................................................... 48

Marsh v. Ore. Natural Res. Council, 490 U.S. 360 (1989)..................................................... 11

Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983)............... 11

New Mexico Envtl. Improvement Div. v. Thomas, 789 F.2d 825 (10th Cir. 1986)................ 49

Northside Sanitary Landfill, Inc. v. Thomas, 849 F.2d 1516 (D.C. Cir. 1988)...................... 22

NRDC v. EPA, 571 F.3d 1245 (D.C. Cir. 2009) .............................................................. 35

NRDC v. EPA, 279 F.3d 1180 (9th Cir. 2002).................................................... 10, 11, 16

NRDC v. EPA, 966 F.2d 1292 (9th Cir. 1992)................................................................. 11

NRDC v. EPA, 863 F.2d 1420 (9th Cir. 1988)................................................................. 11

NRDC v. SCAQMD, 651 F.3d 1066 (9th Cir. 2011) ....................................................... 45

NRDC v. SCAQMD, 694 F. Supp. 2d 1092 (C.D. Cal. 2010) ........................................ 45

Ore. Natural Desert Ass'n v. U.S. Forest Serv., 465 F.3d 977 (9th Cir. 2006)..................... 48

Pacific Bell v. Pac-West Telecomm, Inc., 325 F.3d 1114 (9th Cir. 2003)................................ 49

Portland Gen. Elec. Co. v. Bonneville Power Admin., 501 F.3d 1009 (9th Cir. 2007) ........... 23

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Riverbend Farms, Inc. v. Madigan, 958 F.2d 1479 (9th Cir. 1992)....................................... 19

Sagebrush Rebellion, Inc. v. Hodel, 790 F.2d 760 (9th Cir. 1986).......................................... 19

Shinseki v. Sanders, 129 S. Ct. 1696 (2009) ................................................................... 19, 20

Sierra Pac. Indus. v. Lyng, 866 F.2d 1099 (9th Cir. 1989) ................................................... 11

SKF USA Inc., v. United States, 254 F.3d 1022 (Fed. Cir. 2001)................................ 48, 49

Small Refiner Lead Phase-Down Task Force v. EPA, 705 F.2d 506 (D.C. Cir. 1983)......... 21

Tex Tin Corp. v. EPA, 935 F.2d 1321 (D.C. Cir. 1991) .................................................... 22

United Mine Workers of Am. v. Fed. Mine Safety & Health Admin., 920 F.2d 960 

(D.C. Cir. 1990)................................................................................................................ 49

United States v. L.A. Tucker Truck Lines, Inc., 344 U.S. 33 (1952)..................................... 21

Universal Health Services, Inc. v. Thompson, 363 F.3d 1013 (9th Cir. 2004) ........................ 23

Vt. Yankee Nuclear Power Corp. v. NRDC, 435 U.S. 519 (1978) .......................... 17, 22, 23

W. Oil & Gas Ass'n. v. EPA, 633 F.2d 803 (9th Cir. 1980)............................................. 50

Whitman v. Am. Trucking Ass'ns, 531 U.S. 457 (2001)....................................................... 48

FEDERAL STATUTES

5 U.S.C. § 553........................................................................................................................ 10

5 U.S.C. § 553(b)(3).............................................................................................................. 10

5 U.S.C. § 553(c)................................................................................................................... 47

5 U.S.C. § 706........................................................................................................................ 19

5 U.S.C. § 706(2)(A) ............................................................................................................. 11

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42 U.S.C. §§ 7401-7671q .......................................................................................................1

42 U.S.C. § 7408 .....................................................................................................................3

42 U.S.C. § 7409 .....................................................................................................................3

42 U.S.C. § 7410(a)(1) ............................................................................................................3

42 U.S.C. § 7410(a)(2) ............................................................................................................4

42 U.S.C. § 7410(a)(2)(A)..................................................................................................... 45

42 U.S.C. § 7410(a)(2)(H) ......................................................................................................4

42 U.S.C. § 7410(k)(1)(B).......................................................................................................4

42 U.S.C. § 7410(k)(2)............................................................................................................4

42 U.S.C. § 7410(k)(3)............................................................................................................4

42 U.S.C. § 7501-7515............................................................................................................4

42 U.S.C. § 7502(c)(6) ............................................................................................................4

42 U.S.C. § 7503 ...............................................................................................................4, 30

42 U.S.C. § 7503(c)...........................................................................................................4, 36

42 U.S.C. § 7503(c)(1) .......................................................................................................... 52

42 U.S.C. § 7513a(e)...............................................................................................................6

44 U.S.C. § 3501 note........................................................................................................... 17

FEDERAL REGULATIONS

40 C.F.R. pt. 51, App. S IV(C)....................................................................................4, 5, 30

40 C.F.R. § 51.165(a)(1)(xxxv) ............................................................................................ 30

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40 C.F.R. § 51.165(a)(3) ....................................................................................................... 30

40 C.F.R. § 51.165(a)(3)(ii)..............................................................................................passim

40 C.F.R. § 81.305 ..................................................................................................................5

FEDERAL REGISTER NOTICES

54 Fed. Reg. 27,286 (June 28, 1989)................................................................................... 35

70 Fed. Reg. 43,663 (July 28, 2005).................................................................................... 37

70 Fed. Reg. 69,081 (Nov. 14, 2005).................................................................................. 36

71 Fed. Reg. 35,157 (June 19, 2006)................................................................................ 6, 7

72 Fed. Reg. 31,727 (June 8, 2007)..................................................................................... 34

76 Fed. Reg. 22,038 (Apr. 20, 2011).....................................................................................1

76 Fed. Reg. 69,928 (Nov. 9, 2011)............................................................................. 35, 36

STATE STATUTES AND REGULATIONS

Cal. Code Regis. Tit. 17, § 60104..........................................................................................5

Cal. Code Regis. Tit. 17, § 60114..........................................................................................5

Cal. Health & Safety Code § 40412......................................................................................5

Stats. 2009, c. 206 (SB 827), § 2............................................................................................7

Stats. 2009, c. 285 (AB 1318), § 3.........................................................................................8

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OTHER AUTHORITY

U.S. Dep’t of Justice, Att. Gen’s Manual on Admin. Procedure Act 110 (1947), 

reprinted in Admin. Conference of the U.S., Fed. Admin Procedure Sourcebook 67 

(2d ed. 1992)..................................................................................................................... 19

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GLOSSARY

APA Administrative Procedures Act

AB 1318 California Assembly Bill No. 1318

Act or CAA Clean Air Act

AQMP Air Quality Management Plan

CBE Communities for a Better Environment

CCAT California Communities Against Toxics

CEQA California Environmental Quality Act 

NAAQS National Ambient Air Quality Standards

NSR New Source Review

OSCV Offset Source Calculation/Verification Form

PM10 Coarse Particulate Matter

PM2.5 Fine Particulate Matter 

SB 827 Senate Bill No. 827

SCAQMD South Coast Air Quality Management District

SIP State Implementation Plan

SOx Sulfur Oxides

TSD Technical Support Document

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INTRODUCTION

California Communities Against Toxics (“CCAT”) and Communities for a 

Better Environment (“CBE”) (collectively “Petitioners”) challenge EPA’s final rule 

entitled “Revision to the South Coast Portion of the California State Implementation 

Plan, CPV Sentinel Energy Project, AB 1318 Tracking System,” 76 Fed. Reg. 22,038 

(Apr. 20, 2011) (hereinafter “Final Rule”). The Final Rule, promulgated by EPA

under the authority of the Clean Air Act (“CAA” or the “Act”), 42 U.S.C. §§ 7401-

7671q, incorporates enabling language into the South Coast portion of the California 

State Implementation Plan (“SIP”), and by that incorporation, approves as meeting 

federal CAA requirements the transfer of specifically identified emission reduction 

credits for coarse particulate matter (PM10) and sulfur oxides (SOx). 

Petitioners assert that EPA’s rulemaking was both procedurally and 

substantively flawed, and for the first time in their Opening Brief, provide specific 

details to support several of their substantive arguments. Respondents United States 

Environmental Protection Agency, Administrator Lisa P. Jackson, and Regional 

Administrator Jared Blumenfeld (collectively “EPA” or the “Agency”), seek remand 

of the rulemaking without vacatur in order to reconsider an aspect of its analysis that 

was not challenged by Petitioners. 

STATEMENT OF JURISDICTION

EPA agrees with Petitioners’ statement of jurisdiction. 

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STATEMENT OF THE ISSUES

1. Whether EPA satisfied the Administrative Procedure Act’s notice-andcomment rulemaking requirements when it provided certain background 

documents available in paper at the docket’s hardcopy location?

2. Whether Petitioners’ actual notice of the background documents rendered 

harmless any procedural error that might have occurred during the 

rulemaking?

3. Whether Petitioners waived the argument that certain emission credits are 

not surplus or not quantifiable by failing to raise the issues with sufficient 

specificity in their comments to the Proposed Rule?

4. Whether the record supports EPA’s conclusion that the AB 1318 Tracking 

System contains sufficient emission credits that meet the CAA’s offset 

requirements set forth at 40 C.F.R. § 51.165(a)(3)(ii)(C)(1)(i)-(ii)? 

5. Whether the CAA requires that EPA evaluate the balance in the South 

Coast Air Quality Management District’s internal offset bank, in addition to 

evaluating compliance with each of the CAA offset requirements set forth 

at 40 C.F.R. § 51.165(a)(3)(ii)(C)(1)(i)-(ii), prior to approving the SIP 

Revision?

6. In light of EPA’s request for a remand of its SIP approval decision to 

reconsider its analysis of the “base year” requirement, as well as the limited 

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impact of the deficiencies in the rule and the potential for disruptive effects 

that would flow from a vacatur of the rule during remand, is the proper 

remedy in this case remand without vacatur of the rulemaking?

STATEMENT OF THE CASE

I. Statutory and Regulatory Background

The CAA establishes a comprehensive program for controlling and improving 

the United States’ air quality through state and federal regulation. Since its inception 

in 1970, the CAA has depended upon federal and state cooperation to protect and 

improve the nation’s air quality. Under the CAA, EPA must identify air pollutants 

that endanger the public health and welfare and promulgate National Ambient Air 

Quality Standards (“NAAQS”) that specify the maximum permissible concentrations 

for those air pollutants in the ambient air. 42 U.S.C. §§ 7408, 7409. In turn, States 

must implement NAAQS through state implementation plans, or SIPs, which 

establish specific control measures that apply to particular sources of air pollution 

within a State and are designed to attain, maintain, and enforce NAAQS. Id. § 

7410(a)(1). 

States are required to adopt each SIP in a legally enforceable form after notice 

and a public hearing, and must submit the adopted SIP to EPA for approval within 

three years of EPA’s promulgation or revision of a NAAQS. 42 U.S.C. § 7410(a)(1). 

The SIP approval process is not static; States routinely submit SIP revisions to EPA 

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for approval consistent with the requirements of the CAA, such as when changes to 

federal or state law occur and the State seeks to incorporate those changes into the 

SIP. See id. § 7410(a)(2)(H) (requiring that SIPs provide for regular revisions to reflect 

evolving air quality conditions and standards).

Once submitted for approval, EPA conducts a completeness review of the SIP. 

Id. § 7410(k)(1)(B). If EPA determines the submission is complete, “the 

Administrator shall approve” the SIP within 12 months of such determination “if it 

meets all of the applicable requirements” of the CAA. Id. § 7410(k)(2) & (3). 

All SIPs, including SIP revisions, are subject to certain statutory and regulatory 

requirements, including CAA Part D, Sections 171-193, for nonattainment pollutants. 

Id. §§ 7410(a)(2), 7501-7515. CAA sections 172(c)(6) and 173 require that SIPs 

establish a permitting program for new and modified major stationary sources located 

in nonattainment areas; that program must include provisions requiring that emission 

increases be offset by corresponding emission reductions. Id. §§ 7502(c)(6), 7503. 

Section 173(c) requires that offsetting emissions reductions (“emission credits” or 

“offsets”) be “in effect and enforceable” when a new source begins operations and

the resulting increases in emissions be “offset by an equal or greater reduction” that

was not “otherwise required.” Id. § 7503(c)

EPA has elaborated on the criteria set forth in CAA section 173(c) in its 

implementing regulations, 40 C.F.R. § 51.165(a)(3)(ii)(C)(1)(i) and 40 C.F.R. pt. 51, 

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App. S IV(C)(3)(i)(1), stating that emission reductions from sources that are shutting 

down or curtailing operation are generally creditable for use as emission credits if the 

reductions are surplus, permanent, quantifiable, and federally enforceable. The terms 

surplus, permanent, quantifiable, and federally enforceable have not been defined by 

statute or regulation.

In addition, EPA has established by regulation a “base year” requirement for 

emission reductions to be credited as emission credits, 40 C.F.R. § 

51.165(a)(3)(ii)(C)(1)(ii) and 40 C.F.R. pt. 51, App. S IV(C)(3)(i)(2). These “base year” 

provisions provide that such emission reductions may generally be creditable for use 

as offsets if “the shutdown or curtailment occurred after the last day of the base year 

for the SIP planning process,” with the caveat that emission reductions from a prior 

shutdown or curtailment may be considered “to have occurred after the last day of the 

base year if the projected emissions inventory used to develop the attainment 

demonstration explicitly includes the emissions from such previously shutdown or 

curtailed emission units.” Id.

II. Factual Background

The South Coast Air Quality Management District (“SCAQMD”) is the 

California state entity responsible for managing the air quality in the South Coast Air 

Basin and the Riverside portions of the Salton Sea Air Basin. Cal. Health & Safety 

Code § 40412; Cal. Code Regs. tit. 17, §§ 60104, 60114. The South Coast Air Basin 

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and the Coachella Valley planning area, one of the areas within the Riverside portion 

of the Salton Sea Air Basin, have been designated as nonattainment for coarse 

particulate matter, PM10. 40 C.F.R. § 81.305. Sulfur oxides are a precursor to PM10, 

and therefore, are also treated as a PM10 nonattainment pollutant. 42 U.S.C. § 

7513a(e). 

SCAQMD has been operating an internal bank of emission credits, including 

PM10 and SOxemission credits, since the mid 1970’s. PER000019. In 1990, 

SCAQMD adopted a group of rules, known collectively as Regulation XIII, that 

address the use of emission credits. Id. In 1996, EPA approved SCAQMD’s 

Regulation XIII as a SIP Revision. Id. Under the SIP-approved SCAQMD Rules, 

SCAQMD’s internal bank is generally used to provide emission credits for sources 

that are exempted from offsetting rules by SCAQMD Rule 1304 and for sources that 

are considered “priority sources” under SCAQMD Rule 1309.1. PER000013. EPA

determined in 1996 that SCAQMD’s implementation of its internal tracking system 

met the requirements of Section 173(c) and reiterated that finding in 2006. See

Revisions to the California Sate Implementation Plan, [SCAQMD], 71 Fed. Reg. 35,157,

35,158 (June 19, 2006). The Final Rule challenged here provides an alternative 

mechanism for the transfer of specific emission credits from SCAQMD’s internal 

bank to a tracking system for the exclusive use of one facility, the CPV Sentinel 

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Energy Project (hereinafter “Sentinel”), which is neither exempt under Rule 1304 nor 

a priority source under SCAQMD Rule 1309.1. See id.

The background to the adoption of Final Rule is complicated but bears on a 

number of the issues raised by Petitioners. Petitioners have challenged SCAQMD’s 

use of its internal bank to provide emission credits on numerous occasions in recent 

years. In one such instance, Petitioners, with two other environmental groups, sued 

SCAQMD in California Superior Court, challenging amendments to District Rule 

1309.1 and a new District Rule 1315, which set forth the requirements for the 

operation of the SCAQMD’s internal bank of emission reduction credits. See Pet’rs’

Br. at 7. The Superior Court held that the SCAQMD violated the California 

Environmental Quality Act (“CEQA”) when it adopted the amendments and new 

rule and barred implementation of the rules. See Cal. Cmtys. Against Toxics v. 

SCAQMD, No. B226692, 2011 WL 2937061, at *4 (Cal. App. 2d July 19, 2011) 

(unpublished opinion) (discussing litigation and legislative history of challenges before 

ultimately dissolving injunction). The court enjoined SCAQMD “from undertaking 

any action to further implement these rules pending CEQA compliance.” See id. 

In response to the Superior Court’s decision, the California legislature enacted

Senate Bill No. 827 (“SB 827”), authorizing SCAQMD to issue permits under Rules 

1304 and 1309.1 in their pre-amended forms. Id. (citing Stats. 2009, c. 206 (SB 827), § 

2). At the same time, the California legislature also passed Assembly Bill No. 1318 

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(“AB 1318”), which directed SCAQMD to provide offsetting emission reductions for 

PM10 and SOx from the SCAQMD’s internal bank for the construction of the CPV 

Sentinel Energy Project, an 850-megawatt electrical generating facility in Riverside 

County, California. Id. at *5 (citing Stats. 2009, c. 285 (AB 1318), § 3).

In accordance with the legislative mandate set forth in AB 1318, SCAQMD

identified specific emission credits that had been tracked in its internal bank to 

transfer to Sentinel, naming the newly created account the AB 1318 Tracking System. 

SCAQMD adopted the AB 1318 Tracking System on July 9, 2010, and the California 

Air Resources Board submitted the AB 1318 Tracking System to EPA as a sourcespecific SIP revision on September 10, 2010. PER 000017. The proposed SIP 

revision consists of text to be included as a revision to the South Coast portion of the 

California SIP, and in the AB 1318 Tracking System created to implement this new 

SIP provision. See id. The text of the proposed SIP revision provides that 

“[SCAQMD] shall transfer sulfur oxides and particulate emission credits from the 

[AB 1318 Tracking System] . . . to eligible electrical generating facilities . . . (i.e., the 

CPV Sentinel Power Plant) in the full amounts needed to issue permits to construct 

and to meet requirements for sulfur oxides and particulate matter emissions.” See id. 

In effect, the SIP revision allows SCAQMD to transfer PM10 and SOx emission credits

out of its internal bank to Sentinel in sufficient amount to meet the projected needs of 

Sentinel. PER000007.

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EPA published its proposed approval of the SIP revision on January 13, 2011

(hereinafter “Proposed Rule”), and provided a 30-day public comment period. 

PER000012-15. Petitioners sought two extensions of the time to file comments, both 

of which were denied. PER000037-43. On February 14, 2011, Petitioners jointly 

submitted comments. See Corrected Supplemental Excerpts of R. (“SER”) 0005-24. 

On April 20, 2011, EPA addressed the comments in its Final Rule, and ultimately 

concluded that the SIP revision complied with all relevant CAA requirements. 

PER000005-11. In particular, EPA concluded that a sufficient number of the 

emission reductions that SCAQMD transferred into the AB 1318 Tracking System 

met the CAA offset requirements such that the number of credits in the AB 1318 

Tracking System would more than meet the projected need of Sentinel. PER000006-

7. Petitioners promptly filed this petition for review, and in their Corrected Opening 

Brief, asserted that EPA committed procedural error in the notice-and-comment 

rulemaking and that the SIP revision violates the CAA. 

After reviewing the Petitioners’ Opening Brief, EPA re-examined its rule and 

found an error in its reasoning that it desires to correct, and identified one 

interpretative issue that it would like to reconsider. EPA also noted that, in light of 

Petitioners’ arguments that for the first time challenged specific emission reductions, 

EPA could have provided in its SIP approval action a more detailed description of 

which specific emission reductions satisfied the CAA offset requirements and that it 

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believed this would aid ultimate judicial review. Accordingly, on September 14, 2011, 

EPA moved the Court to remand the record to the Agency so it could specifically 

describe how the “surplus” and “quantifiable” requirements of 40 C.F.R. § 

51.165(a)(3)(ii)(C)(1)(i) affect each of the emission reductions listed in the AB 1318 

Tracking System, and so that it could reconsider whether its description of the “base 

year” requirement of 40 C.F.R. § 51.165(a)(3)(ii)(C)(1)(ii) was premised on a flawed 

interpretation of the regulation. 

Petitioners opposed EPA’s Motion for Remand of the Record, primarily 

because EPA asked for remand without vacatur; Petitioners requested remand with

vacatur. On November 7, 2011, the Appellate Commissioner denied both Motions 

without explanation and ordered EPA to file this answering brief. 

STANDARD OF REVIEW

The APA provides the standard of review for both Petitioners’ procedural and 

substantive challenges to the AB 1318 Rule. The minimum notice-and-comment 

procedures required in informal rulemaking are set forth by the Administrative 

Procedures Act (“APA”), 5 U.S.C. § 553: The APA requires an agency to publish 

notice of a proposed rulemaking that includes “either the terms or substance of the 

proposed rule or a description of the subjects and issues involved.” Id. at § 553(b)(3). 

The EPA “must provide notice sufficient to fairly apprise interested persons of the 

subjects and issues before the Agency.” NRDC v. EPA, 279 F.3d 1180, 1186 (9th Cir. 

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2002) (quoting NRDC v. EPA, 863 F.2d 1420, 1429 (9th Cir. 1988)). “On a petition 

for review from an agency decision, [the Court] determine[s] in the first instance the 

adequacy of the agency’s notice and comment procedure, without deferring to an 

agency’s own opinion of the adequacy of the notice and comment opportunities it 

provided. A decision made without adequate notice and comment is arbitrary or an 

abuse of discretion.” 279 F.3d at 1186.

EPA’s substantive determinations are to be upheld unless “arbitrary, capricious, 

an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A). 

Review under this standard is narrow. A court will not substitute its judgment for 

that of the agency, especially where the challenged decision implicates substantial 

agency expertise. Marsh v. Ore. Natural Res. Council, 490 U.S. 360, 378 (1989); Motor 

Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983); Gilbert v. 

Nat’l Transp. Safety Bd., 80 F.3d 364, 368 (9th Cir. 1996). Courts, instead, must affirm 

agency action if the agency has considered the relevant factors and articulated a 

“rational connection between the facts found and the choice made.” NRDC v. EPA, 

966 F.2d 1292, 1297 (9th Cir. 1992)(quoting Sierra Pac. Indus. v. Lyng, 866 F.2d 1099, 

1105 (9th Cir. 1989), and citing State Farm, 463 U.S. at 43). “This deference is highest 

when reviewing an agency’s technical analyses and judgments involving the evaluation 

of complex scientific data within the agency’s technical expertise.” League Of 

Wilderness Defenders Blue Mountains Biodiversity Project v. Allen, 615 F.3d 1122, 1130 (9th

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Cir. 2010); Appalachian Power Co. v. EPA, 135 F.3d 791, 801-02 (D.C. Cir. 1998) (“Our 

analysis is guided by the deference traditionally given to agency expertise, particularly 

when dealing with a statutory scheme as unwieldy and science-driven as the Clean Air 

Act.”). 

SUMMARY OF ARGUMENT

Petitioners’ claims of procedural error lack merit. EPA satisfied the APA 

notice-and-comment procedural requirements. Moreover, Petitioners had actual 

notice of the documents they allege were not available during the rulemaking, which 

defeats their claim. 

Regarding the substance of the Final Rule, EPA acknowledges that its 

discussion of the “surplus” requirement in the Final Rule included a misstatement. In 

addition, EPA has re-examined its analysis of the “base year” requirement and has 

found that it may not have considered the appropriate attainment demonstration 

when analyzing the “base year” requirement. Because of this misstatement and 

potentially flawed analysis, as well as EPA’s desire to provide a specific accounting of 

its conclusions regarding the emissions reductions listed at each source, EPA 

recognized that judicial efficiency would be promoted by a remand of the record 

before the Court considered the merits of the case. EPA therefore expressly 

requested this relief by motion, which the Appellate Commissioner denied. Now that 

the merits of the case are before the Court, EPA again seeks a voluntary remand of 

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the rulemaking without vacatur, as EPA believes that its SIP approval is flawed but, 

based on the information presently before the Agency, is likely to be reaffirmed on 

other grounds following additional proceedings. 

Petitioners’ arguments do not provide a basis for vacatur of the rulemaking. 

An excess of emission reductions was transferred into the AB 1318 Tracking System,

and Petitioners’ allegations that specific emission reductions were not “surplus” or 

“quantifiable” do not undermine EPA’s conclusion that a sufficient number of 

emission reductions that meet the CAA offset requirements were transferred into the 

AB 1318 Tracking System to meet the needs of Sentinel. Similarly, the record 

supports EPA’s conclusion that the attainment demonstration cited in the Final Rule 

includes pre-base-year emission reductions. 

In addition, contrary to Petitioners’ assertions, EPA’s analysis of the balance of 

SCAQMD’s internal accounts was reasonable. Petitioners also challenge the method 

employed to quantify emission reductions and argue that EPA was required to engage 

in additional analysis of SCAQMD’s internal bank of emission offsets. There is no 

legal authority that supports either of these contentions, and thus, these challenges 

lack merit. 

Though the analysis in the Final Rule can be improved upon reconsideration, 

neither Petitioners’ arguments nor EPA’s acknowledged errors require vacatur of the 

rulemaking during remand, because (based on the information presently before EPA) 

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EPA believes the Final Rule is likely to be reaffirmed following additional agency 

proceedings. Moreover, a vacatur could have significant disruptive consequences for 

the Intervenors during the interim. Because the deficiencies in the rulemaking are 

relatively minor and likely to be corrected on remand, and because the disruptive 

consequences of a vacatur for Intervenors could be significant, the proper remedy in 

this case is remand without vacatur.

ARGUMENT

I. No Procedural Error Occurred During the Rulemaking.

As an initial matter, Petitioners assert that the omission from the electronic 

docket (“E-docket”) and as an item on the Administrative Index of supporting 

technical documents that describe in detail the sources and equipment that give rise to 

the AB 1318 Tracking System emission credits (hereinafter “Documentation”) was 

procedural error that violates the notice-and-comment procedural protections of the 

APA. But the record also shows that Petitioners received actual notice of the 

Documentation. This defeats their claim of procedural error. 

The Documentation at issue consists of Offset Source Calculation/Verification

Forms (“OSCVs”) and additional supporting documentation compiled by SCAQMD 

for each piece of equipment listed in the AB 1318 Tracking System. 1 See, e.g., 

 

1 These documents are listed in the Second Corrected List of Documents in the 

Administrative Record at II.D., “AB 1318 Tracking System Supporting 

Documentation, dated June 4, 2010.” PER 000002.

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PER000045-107; SER0031-88. SCAQMD provided the Documentation to EPA 

with its SIP submission, and EPA made the Documentation available in hard copy at 

its San Francisco office. PER000007. 

The Proposed Rule described how the amounts of emission reductions 

transferred were based on the emissions reported to SCAQMD according to its 

Annual Emissions Reporting Program, and then stated that “Documentation for each 

of these offsetting emission reductions is included in the docket for this proposal.” PER 

000013 (emphasis added). The Proposed Rule also noted that “EPA has reviewed the 

documents provided for each offsetting emission reduction.” PER 000014. 

EPA maintained the official docket, including the Documentation for each 

transaction, in hard copy at its San Francisco office, but it also made some materials in 

the docket available electronically. PER000012. The Proposed Rule provided contact 

information for inquires about scheduling an appointment to inspect the hard copy 

materials or further information. PER000012. 

As EPA noted in the Final Rule, “[Petitioners] did not try to contact any EPA 

staff to obtain a copy of the [Documentation] or request EPA to provide further 

specificity in the docket index.” PER00007. Though Petitioners realized at least a 

week before the comment period closed that the Documentation described in the 

Proposed Rule was not available electronically, PER000040, Petitioners made no 

attempt to contact EPA to access the Documentation. 

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EPA also provided an index to the docket, and in the introductory portion of 

the Proposed Rule, EPA erroneously stated that “all documents in the docket are 

listed in the index.” PER000012. The Documentation, however, was omitted as a 

line item from the index. EPA acknowledged this in its letter denying Petitioners’ 

second request for an extension of the comment period. PER000042. In that same 

letter, EPA reiterated that the Documentation was available in the docket, though

some information was available only at the hard copy location, and also noted that the 

Documentation had been publically available from other sources for at least six 

months. PER000042-43. 

EPA regrets that its docketing and communications were less than perfect but, 

as discussed below, EPA’s docketing fulfilled all relevant legal requirements. 

Furthermore, its misstatement was harmless as to the Petitioners because Petitioners 

were familiar with the Documentation from earlier proceedings and had actual notice 

that it was part of the record. 

A. EPA Had No Obligation to Place Documentation in the E-docket or 

List Materials in an Administrative Index.

Notice is adequate under the APA where it would “fairly apprise interested 

persons of the subjects and issues before the Agency.” NRDC, 279 F.3d at 1186. 

This notice requirement includes a duty to “identify and make available technical 

studies and data that it has employed in reaching the decisions to propose particular 

rules.” Kern County Farm Bureau v. Allen, 450 F.3d 1072, 1076 (9th Cir. 2006). The 

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courts will not force agencies to undertake procedural burdens unless a statute or a 

regulation imposes that burden on the agency. Vt. Yankee Nuclear Power Corp. v. 

NRDC, 435 U.S. 519, 543-44 (1978).

EPA satisfied the APA notice requirements in this rulemaking. The Proposed 

Rule clearly referenced the Documentation and described how it was used by EPA. 

The Proposed Rule also correctly stated that the Documentation was included in the 

docket. In addition, EPA made the Documentation available on request through the 

Agency contact. Thus, EPA fully described the technical documents it relied on and 

made them available to the public, and no procedural error occurred in regard to the 

availability of the Documentation. 

Petitioners erroneously contend that an agency must make all materials that are 

in its paper docket available online, citing section 206(d)(2) of the E-Government Act 

of 2002. Pet’rs’ Br. at 13, 17. In full, section 206(d)(2) of the E-Government Act 

states: 

Agency electronic dockets shall make publicly available online to the extent 

practicable, as determined by the agency in consultation with the Director—

(A) all submissions under section 553(c) of title 5, United States Code; 

and

(B) other materials that by agency rule or practice are included in the 

rulemaking docket under section 553(c) of title 5, United States Code, whether 

or not submitted electronically.

44 U.S.C. § 3501 note.

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Petitioners omit the key phrase “to the extent practicable, as determined by the 

agency in consultation with the Director,” fundamentally misconstruing its meaning. 

Pet’rs’ Br. at 17. Section 206(d)(2) of the E-Government Act clearly gives the agency 

discretion to determine what is practicable, rather than creating an affirmative 

requirement that the Agency post all the materials in its administrative docket online. 

Petitioners provide no other legal authority for their contention that EPA has a duty 

to provide the Documentation electronically. 

Petitioners also contend that once EPA represented that it was listing all 

documents in the docket in the index, it had an obligation to provide a complete 

index. Pet’rs’ Br. at 16. Petitioners, however, fail to provide any legal citation to 

support this assertion. As noted above, EPA met the APA notice requirement that

interested persons be fairly apprised of the subjects and issues before the Agency, and 

that they have access to technical documents relied on by the Agency. EPA’s 

omission of the Documentation as a line item on the docket index, while potentially 

confusing, does not undermine the sufficiency of the notice provided by the Proposed 

Rule, which expressly referred to the Documentation.

B. Petitioners Had Notice of and Possessed the Documentation Before 

They Availed Themselves of the Opportunity to Comment.

Even if EPA’s failure to publish the Documentation electronically or list it as a 

line item on the docket index could be construed as procedural error, Petitioners had 

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actual notice of the contents of the Documentation, and thus, to the extent any error 

occurred, it was harmless. 

Section 706 of the APA instructs courts that when reviewing agency action 

“due account shall be taken of the rule of prejudicial error.” 5 U.S.C. § 706. Section 

706 is an “administrative law . . . harmless error rule.” Shinseki v. Sanders, 129 S. Ct. 

1696, 1704 (2009) (internal quotations and citations omitted). This portion of the 

statute “sums up in succinct fashion the ‘harmless error’ rule applied by courts in the 

review of lower court decisions as well as of administrative bodies.” Id. (quoting U.S. 

Dep’t of Justice, Att. Gen.’s Manual on the Admin. Procedure Act 110 (1947),

reprinted in Admin. Conference of the U.S., Fed. Admin. Procedure Sourcebook 67, 

176 (2d ed. 1992)) (emphasis omitted). Where, as here, a complaining party had 

actual notice and was able to submit its views to the Agency prior to the challenged 

action, no procedural harm is suffered by failure to provide notice as required by the 

APA. See Cal-Almond, Inc. v. US. Dep’t of Agric., 14 F.3d 429, 441-442 (9th Cir. 1993); 

Riverbend Farms, Inc. v. Madigan, 958 F.2d 1479, 1487-88 (9th Cir. 1992); see also 

Sagebrush Rebellion, Inc. v. Hodel, 790 F.2d 760, 764, 765 (9th Cir. 1986) (failure to 

comply with statute’s procedural requirements in every respect was harmless error 

where the complaining party had sufficient notice of the subjects and issues involved

and was afforded a full and fair opportunity to be heard). “[T]he burden of showing 

an error is harmful normally falls upon the party attacking the agency’s 

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determination.” Cal. Wilderness Coal. v. U.S. Dep’t of Energy, 631 F.3d 1072, 1090-91 

(9th Cir. 2011) (citing Shinseki, 129 S. Ct. at 1706).

As EPA noted in the Final Rule, “the same records were provided to CCAT by 

[SCAQMD] long before our proposed approval was published.” PER 000007. 

Petitioners not only had requested the Documentation from SCAQMD many months 

before the Proposed Rule was published, they were also extremely familiar with 

Documentation from their participation in the California Energy Commission

(“CEC”) certification proceeding for the Sentinel facility. See Respt’s Request for 

Judicial Notice (“RJN”) at ¶¶ 1-2; see also SER0025 (SCAQMD comment letter noting 

that Petitioners raised similar challenges in CEC proceeding). On December 7, 2009 

and March 10, 2010, both Petitioners (California Communities Against Toxics and 

Communities for a Better Environment, respectively) intervened in the CEC

certification proceeding. Respt’s RJN at ¶ 1. During the proceeding, SCAQMD, 

Sentinel, and Petitioners presented expert testimony regarding the emission reduction 

credits that SCAQMD planned to transfer to the Sentinel project. See Respt’s RJN ¶

2.

Indeed, Petitioners do not dispute that they had the Documentation in their 

possession. See Pet’rs’ Br. at 18. Petitioners, instead, assert that that they had no way 

of knowing “what ‘documents’ EPA received or was reviewing.” Id. This assertion is 

disingenuous. First, it is evident that Petitioners were deeply familiar with the 

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Documentation from their participation in the CEC proceedings. Second, the 

Proposed Rule provided a contact at EPA who would have provided Petitioners with 

additional information about the Documentation if Petitioners had contacted that 

person. PER000012.

A docketing error is harmless if the petitioner had actual notice of the 

information and was able to comment on it in the record. See, e.g., Appalachian Power

Co., 135 F.3d at 814-15; Small Refiner Lead Phase-Down Task Force v. EPA, 705 F.2d 506,

540-41 (D.C. Cir. 1983). Here, Petitioners had actual notice of the Documentation

and were able to submit comments on the record, which EPA considered. SER0005-

24; PER00005-10. Petitioners have not and cannot meet their burden to demonstrate 

that any error that might have occurred caused them harm.

II. Petitioners Have Waived Issues Not Properly Presented to EPA During 

the Comment Period

A. Issues Not Raised in Comments Are Generally Waived.

It is well-settled that petitioners must raise issues during the comment process 

before raising them in litigation. See Exxon Mobil Corp. v. EPA, 217 F.3d 1246, 1249 

(9th Cir. 2000). Courts typically decline to consider issues not raised before an 

administrative agency because to do otherwise would “usurp[ ] the agency’s function” 

and would “deprive[ ] the [agency] of an opportunity to consider the matter, make its 

ruling, and state the reasons for its action.” Alaska Unemployment Comp. Comm’n v. 

Aragan, 329 U.S. 143, 155 (1946); United States v. L.A. Tucker Truck Lines, Inc., 344 U.S. 

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33, 37 (1952) (“[C]ourts should not topple over administrative decisions unless the 

administrative body. . . has erred against objection made at the time appropriate under 

its practice.”). 

As the Supreme Court has cautioned, 

administrative proceedings should not be a game or a forum to engage in 

unjustified obstructionism by making cryptic and obscure reference to matters 

that “ought to be” considered and then, after failing to do more to bring the 

matter to the agency’s attention, seeking to have that agency determination 

vacated on the ground that the agency failed to consider matters “forcefully 

presented.”

Vt. Yankee Nuclear Power Corp. v. NRDC, 435 U.S. 519, 553-54 (1978). 

Thus, courts have held that a commenter waives an issue not raised with 

sufficient specificity. See Tex Tin Corp. v. EPA, 935 F.2d 1321, 1323 (D.C. Cir. l991); 

see also Home Box Office, Inc. v. FCC, 567 F.2d 9, 35 n.58 (D.C. Cir. 1977) (“[C]omments 

which themselves are purely speculative and do not disclose the factual or policy basis 

on which they rest require no response. There must be some basis for thinking a 

position taken in opposition to the agency is true.”). Petitioners have a fundamental 

“burden of clarifying [their] position for the EPA.” Northside Sanitary Landfill, Inc. v. 

Thomas, 849 F.2d 1516, 1519-20 (D.C. Cir. 1988). “[T]he dialogue between 

administrative agencies and the public is a two-way street.” Id. at 1520 (citation and 

internal quotation omitted). Thus, although EPA has an obligation to give full 

consideration to significant comments, “it is still incumbent upon [commenters] who 

wish to participate to structure their participation so that it is meaningful, so that it 

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alerts the agency to the [commenters’] position and contentions.” Vt. Yankee, 435 

U.S. at 553.

A court may excuse waiver if it concludes that the issue was raised before the 

agency during the administrative process or in exceptional circumstances. See Portland 

Gen. Elec. Co. v. Bonneville Power Admin., 501 F.3d 1009, 1024 (9

th Cir. 2007). To 

determine whether exceptional circumstances exist, a court will “balance the agency’s 

interests in applying its expertise, correcting its own errors, making a proper record, 

enjoying appropriate independence of decision and maintaining an administrative 

process free from deliberate flouting, against the interests of private parties in finding 

adequate redress for their grievances.” Universal Health Services, Inc. v. Thompson, 363 

F.3d 1013, 1021 (9th Cir. 2004). 

B. Petitioners Failed to Raise their Arguments Regarding the “Quantifiable”

and “Surplus” Requirements With Sufficient Specificity During the 

Comment Period.

Petitioners’ comments on the CAA offset requirements consisted of general 

assertions of noncompliance. SER0005-24. At no point in their comments did 

Petitioners advance arguments related to any specific source or piece of equipment. 

In their comments regarding the “quantifiable” issue, Petitioners simply 

asserted that EPA had not made available the type of detailed information that is, in 

fact, in the Documentation and that EPA had not performed the individual analysis 

required to show that each of the emission reductions listed in the AB 1318 Tracking 

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System were “quantifiable.” SER0014. Petitioners’ comments regarding the 

“surplus” requirement were more specific, referencing compliance with BACT and 

the operation of SCAQMD’s internal account, but were equally unrelated to the 

arguments regarding specific sources that they now pursue in a judicial forum. 

SER0014-15. 

For the first time in their Brief, Petitioners identify specific sources or pieces of 

equipment for which they assert that the emission reductions are not quantifiable or 

not surplus. Pet’rs’ Br. at 21-26. Because neither Petitioners nor any other party 

raised these source-specific arguments in comments, the arguments have been waived. 

This is not a case where the arguments that Petitioners now advance were 

raised during notice-and-comment proceedings. Nor do exceptional circumstances 

support an excuse of waiver in this case. EPA attempted to provide concise yet 

complete responses to Petitioners’ vague and rambling comments. In this highly 

technical area of verification of emission reductions, Petitioners should not be 

permitted to omit any specific comment on the listed emission credits during the 

comment period, and then, cherry-pick particular emission credits that they later 

assert are questionable on judicial review. As noted above, Petitioners had access to 

the Documentation, yet did not make any references to the technical information that 

they now cite in their Opening Brief. Accordingly, Petitioners’ general comments 

regarding the “quantitative” and “surplus” requirements appeared speculative; thus, 

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EPA’s responses to those comments were general in nature. Petitioners’ failure to 

present specific arguments regarding the emission reductions from particular sources 

during the administrative proceeding deprived EPA of the opportunity to consider

and respond to them specifically. They cannot be presented for the first time to this 

Court without seriously undermining the administrative process. 

III. The Record Supports EPA’s Conclusion that a Sufficient Number of 

the Credits Transferred Meet the CAA Offset Requirements .

When EPA approved the Final Rule, rather than provide a source-by-source 

assessment of the emission credits, EPA simply stated that a sufficient amount of the 

emission reductions met the requirements to offset the amount of PM10 and SOx

emissions increases projected from Sentinel. PER000006-7. As set forth in the AB 

1318 Technical Support Document (“TSD”), the maximum amount of emission 

credits needed for Sentinel was 118,120 lbs/year of PM10 and 13,928 lbs/year of SOx

emissions reductions. See PER000026. SCAQMD transferred into the AB 1318 

Tracking System an amount of emission credits in excess of the maximum amount 

needed by Sentinel, a total of 137,799 lbs/year of PM10 and 25,438 lbs/year of SOx

emission reductions. PER000032, 36. Thus, there was an excess of 19,679 lbs/year 

of PM10 and 11,418 lbs/year of SOxemissions reductions transferred into the AB 

1318 Tracking System. 

As EPA noted in its earlier Motion for Remand of the Record, if Petitioners’ 

comments during the administrative process had included the new arguments raised 

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by Petitioners in their Opening Brief, the Agency’s explanation of its reasoning in 

approving the SIP revision could have been more detailed. Despite the lack of a welldeveloped record to address the substantive challenges now raised by Petitioners, the 

evidence in the administrative record supports EPA’s conclusion that a sufficient 

number of the AB 1318 Tracking System emission credits meet the CAA offset 

requirements. 

A. Petitioners Exaggerate the Need for Surplus Adjustment.

“Surplus” for the purposes of 40 C.F.R. § 51.165(a)(3)(ii)(C)(1)(i) requires that 

“emission reductions used as offsets [ ] be ‘surplus’ to any other federal requirement 

to reduce emissions.” PER0000021. Where emission reductions would be subject to 

a subsequently adopted air quality requirement that would reduce emissions, the 

amount of creditable emission reductions must be recalculated with a downward 

adjustment, when necessary, to account for any emission reductions that would be 

required by the new requirement. See id. This is a “surplus adjustment.” 

In addressing Petitioners’ comments regarding the “surplus” requirement, EPA 

stated that “[SCAQMD] has not promulgated new rules or standards that would apply 

to these types of sources, and thus no adjustments to the credits were required.” Id. 

EPA concedes that this absolute statement was incorrect, but believes that the 

number of credits affected by such new rules and standards is less than the number of 

excess emission reductions transferred into the AB 1318 Tracking System. 

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Petitioners’ Corrected Opening Brief for the first time asserts that two 

SCAQMD Rules, Rule 1156 and Rule 1157,

2

require reductions in PM10 and SOX, and 

thus, render at least some emission reductions “non-surplus.” 3 Pet’rs’ Br. at 21-22. 

Petitioners argue that Rule 1157 should have applied to seven sources listed in the AB 

1318 Tracking System, and Rule 1156 should have applied to two of these same 

sources. See id.

Rule 1156 does not apply to any of the emission reductions included in the AB 

1318 Tracking System. That rule, entitled “Further Reduction of Particulate 

Emissions from Cement Manufacturing Facilities,” only applies (as its name suggests)

to cement manufacturers, not to users of cement products. See Pet’rs’ RJN, Ex. F. 

The two facilities that Petitioners claim are subject to Rule 1156, Elsinore Ready-Mix 

Co., Inc. and Oldcastle Westile, Inc., use cement products but do not manufacture

cement. SER0031-32, 43-44, 45-47, 69-70. Therefore, Rule 1156 does not apply to 

 

2

 Petitioners also reference BCM-08 as a control measure that applies to PM10. Id. 

BCM-08 is simply a control strategy that is implemented through rules such as Rules 

1157 and 1156. See SER0089-90.

3

 Petitioners, in fact, only identify a single source, Chandler Aggregates, for which they 

assert that the emission reductions should have been adjusted downward, but were 

not. Pet’rs’ Br at 21. Petitioners merely identify the amount of emission reductions 

listed for each of the other six sources that they assert are subject to Rule 1157 and 

1156. Id. 

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those facilities, and for that reason, Rule 1156 does not require any surplus adjustment 

to the emission reductions from these facilities.

EPA agrees that SCAQMD Rule 1157 is a new rule that applies to some of the 

emission reductions listed in the AB 1318 Tracking System and that a surplus 

adjustment on the emission reductions from the applicable sources should have been 

calculated to account for any emission reductions that would have been required by 

the subsequently adopted Rule 1157. However, Petitioners overstate the impact of 

this error on the number of emission reductions transferred to the AB 1318 Tracking 

System. Rule 1157, entitled “PM10 Emission Reductions From Aggregate and 

Related Operations,” is a housekeeping rule that requires various techniques to be 

used throughout aggregate and related operations to minimize PM10 emissions. See

Pet’rs’ RJN, Ex. G. As such, Rule 1157 does not apply to Matthews International 

Corp., which as stated on its Offset Source Calculation/Verification Form, is a brass 

foundry. SER0071-73. A brass foundry and its sand reclamation system are not 

aggregate and related operations, and therefore, are not subject to Rule 1157. 

When Matthews International is removed from the sources listed by 

Petitioners, at the most extreme, if the total emission reductions from all sources 

subject to Rule 1157 were adjusted down to zero, a total of 10,224 lbs/year of the 

137,799 lbs/yr of PM10 transferred to the AB 1318 Tracking System would not meet 

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the surplus requirement.4 Even under this most extreme situation, there would still be 

a sufficient amount of PM10 credits transferred to the AB 1318 Tracking System to 

meet the maximum need of Sentinel: 118,120 lbs/year of PM10. 

B. The Vast Majority of Emission Credits Transferred Are Quantifiable.

“Quantifiable,” as set forth at 40 C.F.R. §51.165(a)(3)(ii)(C)(1)(i), “requires an 

accurate assessment of the quantity of emissions previously emitted by the source 

prior to modification or shutdown of the subject equipment.” PER 0000021. In 

their Opening Brief, for the first time, Petitioners identify particular sources or pieces 

of equipment and dispute whether the associated emission reductions identified in the 

AB 1318 Tracking system are quantifiable. See Pet’rs’ Br. at 23-25.

More broadly, Petitioners contend that portions of the Documentation are

insufficient because “69 pieces of equipment lacked either one or both Annual 

Emission Reports for the period that EPA claims to have reviewed.” Pet’rs’ Br. at 25. 

This argument is premised on the faulty assumption that two years of data are

required to quantify the emission reductions associated with the shutdown of a piece 

of equipment. See id. 

 

4 At a maximum, 10,224 lbs/year of PM10 emission reductions might be affected by a 

surplus adjustment to account for emission reductions required by Rule 1157, from 

the following sources: Chandler Aggregate (2,907 lbs/year of PM10), Whitewater 

Rock & Supply Co. (4,836 lbs/year of PM10), Oldcastle Westile, Inc.(1,962 lbs/year 

of PM10), Ortiz Enterprises Inc. (464 lbs/year of PM10), CDE Resources, Inc. (28 

lbs/year of PM10), and Elsinore Ready-Mix Co. Inc. (27 lbs/year of PM10)

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Neither the CAA nor its implementing regulations requires the use of two years 

of data to assess whether the emission reductions were quantifiable. Section 173 of 

the CAA does not define how to calculate actual emissions for purposes of providing 

emissions reductions. See 42 U.S.C. § 7503. EPA’s regulations setting forth SIP 

requirements for emission credits are also silent on this issue. See 40 C.F.R. § 

51.165(a)(3). EPA’s Emissions Offset Interpretative Ruling, codified at 40 C.F.R. Part 

51, Appendix S, however, establishes the procedure for calculating the “baseline for 

determining credit for emission and air quality offsets.” Appendix S provides:

When offsets are calculated on a tons per year basis, the baseline emissions for 

existing sources providing the offsets should be calculated using the actual 

annual operating hours for the previous one or two year period (or other appropriate 

period if warranted by cyclical business conditions). 

Id. at IV.C. (emphasis added).

It appears that Petitioners’ erroneous contention that SCAQMD must use two 

years of actual emissions to calculate emission credits is based on the definition of 

“actual emissions” in 40 C.F.R. § 51.165(a)(1)(xxxv). This definition of “actual 

emissions,” however, does not apply to quantification of emission offsets as it is 

provided for calculating emissions increases from modifications, not for determining 

offset credits.

Furthermore, even if Petitioners were correct in asserting that two years of 

emissions data were required for each piece of equipment, Petitioners fail to support 

their argument with evidence from the record. To support this argument, Petitioners 

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point to only a single source, Whitewater Rock & Supply Co., at which two pieces of 

equipment had been shut down, and they fail to identify or cite to any record evidence 

regarding the other alleged 67 pieces of equipment. See Pet’rs’ Br. at 25. 

With respect to the two pieces of equipment that Petitioners do discuss, the 

record does not support Petitioners’ contention that EPA considered only one year of 

emissions data. Instead, the record shows that SCAQMD, and subsequently EPA, 

adopted a conservative approach toward quantifying the emission reductions from the 

shutdowns. For both pieces of equipment at Whitewater Rock & Supply Co., 

SCAQMD assumed that the emissions for the missing year were zero, and that zero 

was averaged with the lbs/year of PM10 emissions reported for the second year. 

PER000095-000096. 5 Thus, under this conservative approach, only half of the 

possible emission reductions that might have been quantified based on a single year of 

data were transferred to the AB 1318 Tracking System. PER 0000032. 

Petitioners also identify one source, Little Company of Mary Hospital, for 

which the emission reductions are not quantifiable. See Pet’rs’ Br. at 23-25. EPA 

agrees that the emission reductions listed for Little Company of Mary Hospital, 388 

lbs/year PM10 and 32 lbs/year SOx, are not quantifiable. However, this very small

number of credits does not undermine EPA’s determination that the Documentation 

 

5 Petitioners’ Brief miscites the record; the relevant OSCVs are at PER 0000095-96, 

not PER 0000025. 

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provided by SCAQMD demonstrated that “a sufficient number of emission credits 

transferred met the [CAA offset requirements].” Pet’rs’ Br. at 23 (citing PER 000006-

000007). Even when these 388 lbs/year of PM10 emission reductions are added to 

the maximum amount of lbs/year of emission reductions that might be subject to 

surplus adjustment under Rule 1157 (10,224 lbs/year of PM10), the resulting sum of 

10,562 lbs/year of PM10 does not undermine EPA’s conclusion that a sufficient 

number of the credits transferred to the AB 1318 Tracking System meet the CAA 

offset requirements. 

C. Despite EPA’s Intent to Reconsider its Analysis of the “Base Year”

Requirement, the Evidence Suggests that on Reconsideration, EPA 

Could Still Conclude that the Offset Credits Satisfy the “Base Year” 

Requirement.

Under 40 C.F.R. § 51.165(a)(3)(ii)(C)(1)(ii), in general, emission reductions will

be creditable for use as an offset if “[t]he shutdown or curtailment occurred after the 

last day of the base year for the SIP planning process.” In addition, emission 

reductions from an earlier shutdown or curtailment may be credited as offsets “if the 

projected emissions inventory used to develop the attainment demonstration explicitly 

includes the emissions from such previously shutdown or curtailed emission units.” Id.

(emphasis added.) 

Petitioners assert that the Final Rule violates the “base year” requirement of 40 

C.F.R. § 51.165(a)(3)(ii)(C)(1)(ii). Pet’rs’ Br. at 26-28. In their comments, Petitioners 

stated that under the SCAQMD’s 2007 Air Quality Management Plan (“2007 

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AQMP”), the applicable base-year was 2002, and since the 2007 AQMP did not 

include emission reductions pre-dating 2002 in the emissions inventory, certain 

emission reductions listed in the AB 1318 Tracking System were not creditable as 

emission credits. SER0015-16, 18. In response, EPA also referenced the 2007 

AQMP, noting the 2002 baseline, and stated that because SCAQMD adds a portion 

of pre-baseline emission reductions into the emissions inventory for each future year, 

SCAQMD complies with the “base year” requirement. PER000008-9.

Petitioners in their Brief challenge EPA’s determination that the credits listed 

in the AB 1318 Tracking System meet the requirement of 40 C.F.R. § 

51.165(a)(3)(ii)(C)(1)(ii) that pre-baseline emission reductions must be explicitly 

included in the emissions inventory. Pet’rs’ Br. at 26. Petitioners specifically point to 

Table 2-12 in the 2007 AQMP, arguing that the information in the table shows that 

the pre-2002 emission reductions were excluded from the 2007 AQMP. Pet’rs’ Br. at 

27-28.

As set forth in greater detail below, EPA seeks to reconsider the assumption 

that the 2007 AQMP should be considered when assessing compliance with the “base 

year” requirement. Based on the information currently available to it, EPA believes 

that, upon reconsideration, it could conclude that, rather than the 2007 AQMP, a 

different attainment demonstration should be considered for this analysis. 

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1. Upon Reconsideration, a Likely Alternative Analysis Could Conclude 

that the “Base Year” Requirement Is Satisfied.

In EPA’s earlier Motion for Remand of the Record, EPA sought a remand so 

that it could reevaluate its presumption that the 2007 AQMP was the appropriate 

attainment demonstration to consider in assessing compliance with the “base year” 

requirement when it issued the Final Rule. As previously noted in that Motion, 40 

C.F.R. § 51.165(a)(3)(ii)(C)(1) was revised as a part of comprehensive rulemaking that 

was finalized after reconsideration in 2007. See Phase 2 of the Final Rule To Implement the 

8-Hour Ozone National Air Quality Standard—Notice of Reconsideration, 72 Fed. Reg. 

31,727, 31,738-43 (June 8, 2007). In that rulemaking, EPA restructured the 

regulation, subdividing the “federally enforceable, quantifiable, and surplus” 

requirements and the “base year” requirement, and eliminating a previously-imposed 

requirement that an approved attainment demonstration be in place to allow new and 

modified sources to meet the offset requirement.6 See id. This revision of the 

 

6

 Prior to the rulemaking that concluded in 2007, 40 C.F.R. § 51.165(a)(3)(ii)(C)(1) 

stated: 

Emissions reductions achieved by shutting down an existing source or 

curtailing production or operating hours below baseline levels may be generally 

credited if such reductions are permanent, quantifiable, and federally 

enforceable, and if the area has an EPA-approved attainment plan. In addition, 

the shutdown or curtailment is creditable only if it occurred on or after the date 

specified for this purpose in the plan, and if such date is on or after the date of

(footnote continued . . .)

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regulation was subsequently challenged in the Court of Appeals for the District of 

Columbia Circuit. That court held that the elimination of the “fully-approved SIP 

requirement” was arbitrary and capricious, and remanded that portion of the 2007 

rulemaking to EPA without vacatur. NRDC v. EPA, 571 F.3d 1245, 1267, 1276 (D.C. 

Cir. 2009). The Agency has not yet revised the regulatory language of the “base year” 

requirement following the NRDC v. EPA decision.

EPA wishes to reconsider whether the base-year for the purposes of 40 C.F.R. 

§ 51.165(a)(3)(ii)(C)(1)(ii) should be evaluated by reference to the base-year used in the 

most recent EPA-approved attainment demonstration for the relevant pollutant. 

Under this reasoning, the 2007 AQMP that formed the basis for the EPA SIP 

approval challenged here would not be the appropriate attainment demonstration to 

consult for two reasons. First, at the time the SIP Revision was approved in April 

2011, the 2007 AQMP had not been approved by EPA. The 2007 AQMP was not 

approved until November 9, 2011. See Approval of Air Quality Implementation Plans; 

California; South Coast; Attainment Plan for 1997 PM2.5 Standards, 76 Fed. Reg. 69,928 

(Nov. 9, 2011).

 

the most recent emissions inventory used in the plan’s demonstration of 

attainment. Where the plan does not specify a cutoff date for shutdown

credits, the date of the most recent emissions inventory or attainment 

demonstration, as the case may be, shall apply. . . . 

Requirements for Implementation Plans; Air Quality New Source Review, 54 Fed. Reg. 27,286, 

27,299 (June 28, 1989).

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Second, the 2007 AQMP was adopted to demonstrate attainment with the fine

particulate matter (“PM2.5”) and 8-hour Ozone NAAQS. Id. While the 2007 AQMP 

makes reference to PM10, it does not demonstrate attainment with the PM10 NAAQS. 

As the CAA offset provision is pollutant-specific, see 42 U.S.C. § 7503(c), upon 

reconsideration, it is possible that EPA will conclude that a PM10 attainment 

demonstration (rather than the 2007 AQMP) should be used in evaluating whether 

the PM10 emission reductions that SCAQMD transferred to the Sentinel AB 1318

Tracking System complied with 40 C.F.R. § 51.165(a)(3)(ii)(C)(1)(ii). 

The most recent EPA-approved attainment demonstration for PM10 for the 

South Coast and Coachella areas was submitted in 2003 and approved by EPA in 

2005 (hereinafter “2003 AQMP”). See Approval and Promulgation of [SIPs] for Air Quality 

Planning Purposes; California—South Coast and Coachella, 70 Fed. Reg. 69,081 (Nov. 14, 

2005). Thus, one possible outcome on reconsideration is that EPA will conclude that 

it is this 2003 AQMP that should be referenced when evaluating PM10 emissions 

reductions for the Sentinel AB 1318 Tracking System. 

Notably, at least based on the information presently before EPA, if the 2003 

AQMP is used to analyze compliance with 40 C.F.R. § 51.165(a)(3)(ii)(C)(1)(ii), it 

appears that all of the credits transferred to the AB 1318 Tracking System would, in 

fact, meet the requirements of 40 C.F.R. § 51.165(a)(3)(ii)(C)(1)(ii). The first sentence

of the provision provides that all emission reductions that occur after the last day of 

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the relevant base-year are generally creditable. The base-year of the emissions 

inventory in the 2003 AQMP is 1997. See Proposed Rule, Approval and Promulgation of 

[SIPs] for Air Quality Planning Purposes; California—South Coast and Coachella, 70 Fed. Reg. 

43,663, 43,665 (July 28, 2005). All emission credits included in the AB 1318 Tracking 

System occurred in 1999 and later. PER000006. Therefore, at least based on the 

information presently before the Agency, it appears that all potential emission 

reductions from shutdown equipment occurred after the last day of the base-year, and 

thus, that the “base year” requirement of 40 C.F.R. § 51.165(a)(3)(ii)(C)(1)(ii) would be

satisfied when analyzed in reference to the 2003 AQMP. Of course, EPA is not 

attempting to prejudge this issue; any final decision involving reevaluation of the SIP 

would occur only after notice and an opportunity for comment, and EPA would make 

its decision based on the information then before the Agency.

2. Even if the 2007 AQMP Is Considered the Relevant Attainment 

Demonstration Document, the “Base Year” Requirement is Satisfied.

Though EPA has stated its desire to reconsider its analysis of the “base year” 

requirement, Petitioners’ contentions that the 2007 AQMP explicitly excludes pre2002 credits is incorrect. The emissions inventory for the 2007 AQMP is set forth in 

Appendix III, Chapter Two of the 2007 AQMP, “Base and Future Year Emission 

Inventories,” a complicated, technical document, containing numerous subsections. 

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See generally Pet’rs’ RJN, Ex. B; see also SER0091-129.

7

 Petitioners refer to Table 2-12 

and related text that describe SCAQMD’s calculation of “Growth from New and 

Modified Sources.” See Pet’rs’ Br. at 28. This section of Appendix III presents 

SCAQMD’s evaluation of the minimum amount of emission credits necessary to 

account for growth from new and modified sources. See SER0119-122. While Table 

2-12 and the accompanying text state that pre-2002 credits are not needed for growth 

from new and modified sources for PM and SOx, see id., this portion of the 2007 

AQMP does not state that such credits were excluded, as Petitioners contend. 

Accordingly, the table and text cited by Petitioners are not determinative of whether 

pre-baseline emission reductions were included in the emissions inventory for the 

2007 AQMP. 

SCAQMD’s prior discussion of “Baseline Emission Inventories” in Appendix 

III, Chapter 2 of the 2007 AQMP, however, demonstrates that SCAQMD has, in fact,

included pre-baseline emission reductions in the 2007 AQMP emissions inventory.

SER0094-95, 116, 123. As set forth at the beginning of Appendix III, SCAQMD 

calculates future year baseline emissions by considering: 1) the base-year emissions, 

i.e. emissions in 2002; 2) the level of control due to regulations; and 3) the potential 

 

7 Petitioners have requested that the Court take judicial notice of the 2007 AQMP. 

The 2007 AQMP is part of the administrative record. See PER000008-9. The 

Corrected Certified List of Documents in the Administrative Record inadvertently 

omitted the 2007 AQMP, and this omission was corrected by the filing of the Second 

Corrected Certified List of Documents in the Administrative Record. Dkt No. 38.

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for growth of various categories of polluting sources. SER0094. Put differently, 

SCAQMD’s 2007 AQMP used a three-step analysis to develop the emissions 

inventory for the 2007 AQMP. First, SCAQMD started by including all emissions 

that were occurring in the base-year of 2002. Second, SCAQMD considered the 

amount by which those emissions would be affected by installation and operation of

pollution controls. Third, SCAQMD considered the amount by which emissions of 

each pollutant from various sources were expected to increase, and accounted for that 

anticipated growth in the future year emission data. It is at this step that, as noted in 

the Final Rule, SCAQMD “adds in a portion of pre-baseline banked credits into the 

inventory.” PER000009. 

Table 2-8 shows approximately how many tons/day of additional PM2.5 

SCAQMD included in the future year emission data beyond the base-year emissions, 

i.e., emissions in 2002. See SER0116. The “No Growth” category represents the 

2002 level of emissions, taking into account subsequent changes in the regulation of 

the pollutant. Id. The “With Growth” category specifically incorporates additional 

emissions added into the 2020 inventory to account for anticipated growth; these 

additional emissions are pre-base-year emissions, plus the limited amount of emissions 

growth from increased capacity by existing sources. Id. As shown in Table 2-8, 

SCAQMD added 1 ton/day of PM2.5 for point sources and 8 tons/day for area 

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sources to the emissions inventory from its internal bank of pre-base-year emissions 

reductions to account for growth in 2020. Id. 

In addition, the 2007 AQMP emissions inventory provides for an “Offset 

Budget,” an emissions account for use with Rule 1309.2. SER0123. To provide 

offset emissions for the Offset Budget, the 2007 AQMP included a set-aside account 

of one ton per day for each criteria pollutant in the Offset Budget. Id. Further, the 

2007 AQMP makes clear that this line item in the accounting is in addition to 

emissions already included in the AQMP baseline inventories, i.e., the addition of prebase-year emissions into the AQMP’s inventory for each pollutant for 2020 “With 

Growth” emissions. Id. (“This line item is to account for emissions that may not be 

included in the AQMP baseline inventories.”). The 2007 AQMP clearly states that 

the emissions bank would be funded with pre-base-year emission credits. Id. (“The 

initial funding of the Offset Budget will be from expired minor source shutdown 

credits for the years 2000 through 2002.”).

To comply with the requirement of 40 C.F.R. § 51.165(a)(3)(ii)(C)(1)(ii) that 

pre-base-year emission reductions be explicitly included, it is not necessary, as 

Petitioners contend, that pre-base-year emission reductions be listed by source. See

Pet’rs’ Br. at 26. 40 C.F.R. § 51.165(a)(3)(ii)(C)(1)(ii) requires simply that the 

emissions from the shutdown are explicitly included in the projected emissions 

inventory that is part of the relevant attainment demonstration. In other words, 40 

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C.F.R. § 51.165(a)(3)(ii)(C)(1)(ii) requires that when pre-base-year credits are used as 

emission credits, an examination of the projected emissions inventory used in the 

appropriate attainment demonstration must show that emissions from previously 

shutdown or curtailed emission units have been added to the emissions inventory. As 

discussed above, an examination of the 2007 AQMP shows that SCAQMD did 

include pre-base-year emissions in its emission inventory; thus, the requirements of 40 

C.F.R. § 51.165(a)(3)(ii)(C)(1)(ii) are satisfied when the 2007 AQMP is considered as

the relevant attainment demonstration. 

IV. The Transfer of Emission Credits from SCAQMD’s Internal Account 

Does Not Violate the CAA.

A. Though EPA is Not Required to Examine the Balance in SCAQMD’s 

Internal Bank, EPA Reasonably Concluded that the Balance Is Positive.

Petitioners also contend that the CAA requires that EPA engage in an 

additional step beyond assessing whether the emission reductions in the AB 1318

Tracking System meet the CAA offset requirements specifically set forth at 40 C.F.R. 

§ 51.165(a)(3)(ii)(C)(1)(i)-(ii). According to Petitioners, EPA must also assess whether 

SCAQMD’s internal bank has a positive balance. See Pet’rs’ Br. at 19. Petitioners do 

not point to any independent authority in the CAA that requires such an investigation, 

but rather, seem to assert that this additional requirement is intertwined with the CAA 

offset requirements. See Pet’rs’ Br. at 29 (“[A] positive account balance is . . . vital to 

the question of whether credits that are taken from the accounts are already used.”).

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EPA does not dispute that the balance of the internal bank is relevant to the 

limited extent that the balance of the account indicates that the credits have not 

already been used. See PER000006-7. As EPA stated in the Final Rule, EPA’s 

assessment of each of the emission reductions listed in the AB 1318 Tracking System 

encompassed the consideration of whether the credit had been previously “used” 

within the SCAQMD’s internal bank. See, e.g., PER000008 (“[T]he attainment plan 

has not relied on these emission reductions, thus they remain creditable for other 

purposes, such as NSR offsets.”). 

Furthermore, EPA addressed Petitioners’ contention that the balance in 

SCAQMD’s internal bank is negative. See, e.g., PER000008-9 (“We repeat that 

[SCAQMD] does not have a negative balance. . . . [SCAQMD’s] balance of credits 

from each pollutant is positive when credits from minor orphan shutdowns are 

included.”). EPA stated in the Final Rule that SCAQMD could replace the pre-1990 

credits that were removed from the internal bank with previously uncounted emission 

reductions from minor source orphan shutdowns.8 PER000008. Notably, Petitioners 

offer no argument or authority to the contrary. EPA concluded that SCAQMD’s 

“internal bank is adequately funded and does not have ‘negative balances.’” 

PER000008. 

 

8 Minor source orphan shutdowns are “a category of offsets that are collected when 

‘minor stationary sources’ cease or reduce operations without requesting emission 

reduction credits.” PER000123-24.

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As referenced in the Final Rule, these issues were also addressed in greater 

detail in a letter sent by Administrator Jackson to Petitioners on September 23, 2010,

in response to an administrative petition (hereinafter “Administrator’s letter”). 

PER000006-09. The Administrator’s letter described the process whereby SCAQMD 

removed pre-1990 emission credits for which SCAQMD did not have adequate 

documentation and added in credits from minor source orphan shutdowns that it had 

not previously counted. PER000007-10; PER0000128-136. In that letter, EPA 

concluded that the existing approved SIP regulation does not preclude the use of 

minor source orphan shutdown offsets and that after SCAQMD recalculated its 

running balances, SCAQMD’s internal bank is operating in compliance with the 

approved SIP and that the balance is positive. Id. 

In sum, EPA fully addressed Petitioners’ assertion that the emission reductions 

transferred to the AB 1318 Tracking System were not creditable based on Petitioners’ 

assertions that SCAQMD’s internal account had a negative balance. Though EPA 

responded to Petitioners’ comments regarding the balance of SCAQMD’s internal

bank in reference to the creditability of the offsets transferred to the AB 1318

Tracking System, the CAA does not impose any additional requirement that EPA 

validate the balance in SCAQMD’s accounts in the context of this rulemaking.

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B. Rule 1315 Does Not Need to Be Approved by EPA to Transfer Offset 

Credits from the Internal Bank to the AB 1318 Tracking System.

Petitioners also erroneously contend that the balance of SCAQMD’s internal

bank is necessarily dependent on whether EPA approves SCAQMD’s Rule 1315. See

Pet’rs’ Br. at 29-31, 35.9 Rule 1315 is one of several rules within SCAQMD’s 

Regulation XIII that address New Source Review (“NSR”) requirements within 

SCAQMD. Some of the rules in Regulation XIII have been submitted and approved

by EPA as SIP Revisions, but others have not. Rule 1315, entitled “Federal NSR 

Tracking System,” sets forth the structure and procedures for operation of 

SCAQMD’s internal bank. At present, Rule 1315 has been submitted by SCAQMD 

to EPA for approval as a SIP Revision, but EPA has not yet acted on the SIP 

submission.

Petitioners point to no authority that requires that the SCAQMD’s internal 

account be described and approved in an EPA SIP revision in order to use certain 

 

9

 Petitioners also reference, without any specific allegation, their challenges to the 

implementation of Rule 1315 in state court. See Pet’rs’ Br. at 32. To any extent that 

the state court litigation might be relevant, it has been resolved, and the validity of 

Rule 1315 under state law is not in question. In December 2009, Petitioners returned 

to California state court to challenge the SB 827 and AB 1318 legislation. CCAT v. 

SCAQMD, No. B226692, 2011 WL 2937061, at *6 (Cal. App. 2d July 19, 2011) 

(unpublished opinion). This litigation has subsequently been resolved. On June 11, 

2010, the trial court granted SCAQMD’s motion for judgment on the pleadings in its 

entirety. Id. On July 19, 2011, the California appellate court affirmed the trial court’s 

judgment, dismissing the case. Id. at *15. On writ of return, the trial court discharged 

its previously instituted writ of mandate and dissolved the accompanying injunction. 

CCAT v. SCAQMD, No. BS110792 (Cal. Super. Ct., County of Los Angeles, Sept. 7, 

2011) (unpublished decision).

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credits that are tracked in the internal bank. Indeed, the CAA contains no provision 

requiring that a SIP include an offset tracking system. See 42 U.S.C. § 7410(a)(2)(A). 

Moreover, this Court has recently held that the CAA and the California SIP do 

not require that SCAQMD use a tracking system to demonstrate a positive balance in 

its internal bank. See NRDC v. SCAQMD, 651 F.3d 1066, 1073 (9th Cir. 2011). In 

this most recent NRDC v. SCAQMD case, these same Petitioners joined with other 

environmental advocacy organizations to file a citizens’ suit against SCAQMD in 

federal court. NRDC v. SCAQMD, 694 F. Supp. 2d 1092 (C.D. Cal. 2010). They

claimed that SCAQMD was in violation of section 173(c) of the CAA and the SIP 

because SCAQMD did not have in place a tracking system whereby it could 

demonstrate that emission credits from SCAQMD’s internal bank meet the CAA 

offset requirements. NRDC, 694 F. Supp. 2d at 1104-05. The district court dismissed 

the case, holding, inter alia, that nothing in Subchapter 1 of the Clean Air Act or the 

South Coast portion of the California SIP “delineates any requirement that a SIP (or a 

permit program contained within the SIP) include a tracking system as to emission 

reduction credits or other offsets.” NRDC, 694 F. Supp. 2d at 1113. In affirming the 

district court’s dismissal of the case, the Ninth Circuit stated: “There is no ambiguity 

here. Nothing in the EPA-approved SIP even suggests a tracking system must be 

applied.” 651 F.3d at 1073. Thus, to the extent that Petitioners contend that 

SCAQMD is required to operate a tracking system as to its internal accounts by the 

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CAA or the California SIP, this Court has previously decided the issue against 

Petitioners, and Petitioners are precluded from re-litigating it. See Hydranautics v. 

FilmTec Corp., 204 F.3d 880, 885 (9th Cir. 2000) (“Under collateral estoppel, once a 

court has decided an issue of fact or law necessary to its judgment, that decision may 

preclude relitigation of the issue in a suit on a different cause of action involving a 

party to the first case.”) (internal quotations and citation omitted).

C. EPA’s Reference to the Administrator’s Letter Was Appropriate.

EPA appropriately incorporated the reasoning set forth in the Administrator’s 

letter in its response to comments in the Final Rule. Contrary to Petitioners’ 

assertion, the Administrator’s letter was relevant to Petitioners’ comments. In both 

their comments to the Agency and in their Opening Brief, Petitioners asserted that 

the SCAQMD’s internal bank has a negative balance. As EPA noted in the Final 

Rule, the Administrator’s letter “details the Agency’s determination that the District 

may use emissions reductions from previously shutdown sources, including minor 

source orphan shutdowns, to fund its internal accounts,” and “also disagrees with 

assertions that the District’s internal accounts have negative balances.” PER00007; see 

also PER000008. Thus, the Administrator’s letter is relevant to Petitioners’ 

comments.

The manner in which EPA incorporated the analysis set forth in the 

Administrator’s letter into the Final Rule is also appropriate. The APA requires that 

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an Agency responding to comments in informal rulemaking “incorporate in the rules 

adopted a concise general statement of their basis and purpose.” 5 U.S.C. § 553(c). 

EPA’s reference to and incorporation of the Administrator’s letter complies with this 

APA requirement. EPA both attached and incorporated the Administrator’s letter 

into its Response to Comments. PER000006-7, 8, 9-10. Then in making reference to 

the Administrator’s letter, EPA both summarized relevant portions of the 

Administrator’s letter and made specific references to sections of the letter. Id. After 

providing both a summary of and reference to the incorporated Administrator’s letter, 

EPA stated that “for all of the reasons set forth in the Administrator’s letter,” EPA 

disagreed with Petitioner’s various contentions. PER000007. This manner of 

referring to and incorporating the Administrator’s previous articulation of the same 

issues was entirely appropriate. 

While the Agency could have duplicated the contents of the Administrator’s 

letter in its response to comments in the Federal Register, rather than summarizing 

and incorporating that letter, it would merely have been duplicative of what had been 

communicated to Petitioners previously and was available through various sources. 

Neither the APA nor any other law or regulation imposes an obligation to restate the 

reasoning laid forth in the Administrator’s letter in full in the Federal Register 

preamble to the Final Rule. 

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Petitioners’ contention that EPA cannot make reference to the reasoning in the 

Administrator’s letter because the letter is not final agency action, Pet’rs’ Br. at 33, 

lacks any legal basis. The cases cited by Petitioners only support Petitioners’ first 

contention — that the Administrator’s letter is not final agency action, which EPA 

does not dispute. See Bennett v. Spear, 520 U.S. 154, 177-78 (1997) (discussing what 

constitutes “final agency action”); Whitman v. Am. Trucking Ass’ns, 531 U.S. 457, 478 

(2001) (same); Ore. Natural Desert Ass’n v. U.S. Forest Serv., 465 F.3d 977, 983-84 (9th

Cir. 2006) (same). But it is immaterial whether the Administrator’s letter was final 

agency action; EPA’s SIP approval undoubtedly is final agency action, and EPA’s 

incorporation in that approval of the letter’s contents renders that analysis final for 

the purposes of the APA. 

V. Remand Without Vacatur Would Allow EPA to Address the Deficiencies 

in the Rulemaking and Avoid Potential Disruptive Effects.

EPA seeks to reconsider its analysis in the rulemaking, and thus requests that 

the Court remand the Final Rule to the Agency without vacatur. “A reviewing court 

has inherent power to remand a matter to the administrative agency.” Loma Linda 

Univ. v. Schweiker, 705 F.2d 1123, 1127 (9th Cir. 1983). “[I]t is generally accepted that 

in the absence of a specific statutory limitation, an administrative agency has the 

inherent authority to reconsider its decisions.” Macktal v. Chao, 286 F.3d 822, 825-26 

(5th Cir. 2002). This authority includes the right to seek voluntary remand of a 

challenged agency decision, without confessing error. SKF USA Inc., v. United States, 

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254 F.3d 1022, 1029 (Fed. Cir. 2001). For example, the agency may seek remand 

because it wishes to reconsider its interpretation of the governing statute, the 

procedures it followed in reaching its decision, or the decision’s relationship to other 

agency policies. Id. A court should “not substitute [its] judgment for that of the 

agency on matters where the agency has not had an opportunity to make a factual

record or apply its expertise.” New Mexico Envtl. Improvement Div. v. Thomas, 789 F.2d 

825, 835 (10th Cir. 1986).

Where a court finds that an agency action is flawed, but believes the agency 

may be able to provide an explanation sufficient to sustain the agency decision, courts 

have often recognized that they have discretion to remand an agency decision without 

vacating it. See, e.g., A.L. Pharma, Inc. v. Shalala, 62 F.3d 1484, 1492 (D.C. Cir. 1995).

Courts may allow agency actions to remain in place pending completion of a remand, 

even where those actions have been found to be “arbitrary and capricious.” See, e.g., 

Pacific Bell v. Pac-West Telecomm, Inc., 325 F.3d 1114, 1122-23 (9th Cir. 2003); United 

Mine Workers of Am. v. Fed. Mine Safety & Health Admin., 920 F.2d 960, 966-67 (D.C. 

Cir. 1990). Although vacatur is sometimes necessary to remedy an alleged harm -

such as where the court determines conclusively that the agency lacks authority or a 

factual basis to regulate - vacatur is not always necessary and could have adverse 

consequences. In deciding whether to vacate an administrative action in conjunction 

with a remand, courts will balance the seriousness of the deficiencies in the 

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administrative action and the disruptive consequences of an interim change that may 

itself be changed. See, e.g., Allied–Signal, Inc. v. U.S. Nuclear Regulatory Comm’n, 988 F.2d 

146, 150–51 (D.C. Cir. 1993); Cook Inletkeeper v. EPA, No. 07-72420, 2010 WL 

4127976, at *2 (9th Cir. Oct. 21, 2010); Checkosky v. SEC, 23 F.3d 452, 464-65 (D.C. 

Cir. 1994) (separate opinion of Silberman, J.). A flawed rulemaking may be remanded 

without vacatur when a court perceives the possibility of unforeseen, undesirable 

consequences. W. Oil & Gas Ass’n. v. EPA, 633 F.2d 803, 813 (9th Cir. 1980). 

None of Petitioners’ challenges provides any ground for vacating the Final 

Rule. Petitioners have argued that (1) certain select credits that were transferred to 

the AB 1318 Tracking System did not meet the CAA offset requirements, and (2) 

more generally, challenged EPA’s notice-and-comment procedures, EPA’s analytic 

approach to quantification, EPA’s conclusion that the “base year” requirement was 

satisfied, and whether the CAA requires some extra action with respect to the tracking 

system for SCAQMD’s internal accounts. For the reasons set forth above, each of 

Petitioners’ more general arguments lacks merit, and thus, none requires that the 

rulemaking be set aside. 

With respect to Petitioners’ targeted challenge of specific emission reductions

listed in the AB 1318 Tracking System, EPA agrees that Petitioners have identified

some emission credits that are not quantifiable and others that should have been 

assessed for a surplus adjustment. This does not, however, undermine EPA’s 

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conclusion that AB 1318 Tracking System contains sufficient credits that meet the 

CAA offset requirements to meet the needs of Sentinel. The number of offset credits 

transferred exceeded the number needed. The AB 1318 Tracking System contains an 

excess of 19,679 lbs/year of PM10 offset credits and 11,418 lbs/year of SOx offset 

credits. Where the Petitioners’ assertions have merit, they place into question at most

10,562 lbs/year of PM10 and 32 lbs/year of SOx, amounts that are well within the 

surplus present in the AB 1318 Tracking System.10 Thus, to the extent that the 

Agency misspoke in its rulemaking when is stated that “[SCAQMD] has not 

promulgated new rules or standards that would apply to these types of sources, and 

thus no adjustments to the credits were required,” that misstatement does not 

undermine its ultimate conclusion. 

Similarly, with respect to the “base year” issue, though EPA now believes that, 

at least based on the information presently before it, it could conclude upon 

reconsideration that the 2003 AQMP is the appropriate AQMP when evaluating 

compliance with 40 C.F.R. § 51.165(a)(3)(ii)(C)(1)(ii), both the 2003 and the 2007 

 

10

 As discussed previously, the emission reductions listed for Little Company of Mary 

Hospital (388 lbs/year PM10; 32 lbs/year SOx) are not quantifiable. In addition, Rule 

1157 had the potential to affect a total of 10,224 lbs/year of PM10 emissions from the 

following sources: Chandler Aggregate (2,907 lbs/year of PM10), Whitewater Rock & 

Supply Co. (4,836 lbs/year of PM10), Oldcastle Westile, Inc.(1,962 lbs/year of PM10), 

Ortiz Enterprises, Inc. (464 lbs/year of PM10), CDE Resources, Inc. (28 lbs/year of 

PM10), and Elsinore Ready-Mix Co. Inc. (27 lbs/year of PM10). See PER000029-33. 

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AQMP emission inventories include emission credits from 1999 through 2008. Thus, 

upon reconsideration, it is possible that assessment of the “base year” requirement 

with the appropriate AQMP will satisfy the requirements of 40 C.F.R. § 

51.165(a)(3)(ii)(C)(1)(ii). Since the outcome of any reconsideration could be the 

same—approval of the submitted SIP—vacatur is not necessary to remedy any harm 

in this case. 

The extent of any disruptive effect of a vacatur is uncertain, but the potential 

for unnecessary disruption due to an interim change certainly exists. At present, 

Intervenor Sentinel has commenced construction of the Sentinel facility, and vacatur 

should not have a direct consequence on Sentinel’s ability to construct. However, 

depending on the timing of a decision in this case, a vacatur of the rule has the 

potential to have unforeseen, negative consequences for Intervenors. For example, a 

vacatur may have implications for Sentinel’s ability to commence operations after 

construction is completed. See 42 U.S.C. § 7503(c)(1) (providing that “[emission 

credits] shall be, by the time a new or modified source commences operation, in effect and 

enforceable . . . ”). Also, the AB 1318 legislation expires on January 1, 2012, and 

though the state law provides that any transferred credits remain in place after the 

sunset date, a vacatur might lead to further challenges to SCAQMD’s transfer of the 

offset credits. Because the deficiencies in the Final Rule do not cast doubt on the 

approval of the SIP revision, and because a change in the regulatory status quo could 

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have significant disruptive effects, the Final Rule should not be vacated during 

remand. 

CONCLUSION

For the foregoing reasons, the Court should remand the rulemaking without 

vacatur so that EPA can address the identified issues and determine whether the 

rulemaking may be reaffirmed on other grounds.

Respectfully Submitted, 

IGNACIA S. MORENO

Assistant Attorney General

Environment and Natural Resources Division

Dated: January 25, 2010 s/ Amy J. Dona

AMY J. DONA

United States Department of Justice

Environmental Defense Section

P.O. Box 7611

Washington, D.C. 20044

Tel: (202) 514-0223

Fax: (202) 514-8865

amy.dona@usdoj.gov

Attorneys for Respondents

Of Counsel for Defendant:

ANN LYONS

U.S. Environmental Protection Agency

Office of Regional Counsel

75 Hawthorne Street 

San Francisco, CA 94105 

Tel: (415) 972-3883

lyons.ann@epa.gov

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SCOTT JORDAN

U.S. Environmental Protection Agency

Office of General Counsel

1200 Pennsylvania Ave., N.W.

Washington, DC 20460

Tel: (202) 564-7508

jordan.scott@epa.gov

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STATEMENT OF RELATED CASES

Respondents know of no cases pending in this Court that are related to this 

case. 

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CERTIFICATE OF COMPLIANCE

In compliance with Federal Rule of Appellate Procedure 32(a)(7)(B), I certify 

that this brief, including headings, footnotes, and quotations, but excluding the table 

of contents, table of citations, and certificates of counsel, contains 12,806 words, 

which is in compliance with the type volume limitation of 14,000 words.

Respectfully submitted,

IGNACIA S. MORENO

Assistant Attorney General

Environment and Natural Resources Division

Dated: January 25, 2012 s/ Amy J. Dona

AMY J. DONA

United States Department of Justice

Environmental Defense Section

P.O. Box 7611

Washington, D.C. 20044

Tel: (202) 514-0223

Fax: (202) 514-8865

amy.dona@usdoj.gov

Attorneys for Respondents

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