## In the 

# United States Court of Appeals

For the Seventh Circuit

____________

Nos. 07-3197, 07-3198 & 07-3199

C ITIZENSA GAINSTRUINING THE E NVIRONMENT , E NVIRONMENT I LLINOIS , P EOPLE OF THE S TATE

OF I LLINOIS , et al., Petitioners,

v.

E NVIRONMENTAL P ROTECTION A GENCY , Respondent,
and

M IDWEST G ENERATION , LLC, Intervening-Respondent

.

____________
Petitions for Review of Orders of the Environmental Protection Agency.

Nos. V-2005-1, V-2005-3, V-2006-2

____________
A RGUED M AY 29, 2008—D ECIDED J ULY 28, 2008

____________

Before F LAUM , M ANION , and E VANS , Circuit Judges

.
E VANS , Circuit Judge . In this consolidated appeal of three related administrative review proceedings, the petitioners, several environm ental protection groups and the attorney general of the State of Illinois, challenge the failure of the federal Environmental Protection Agency2 Nos. 07-3197, 07-3198 & 07-3199

(EPA) to object to certain operating permits proposed by
the Illinois Environmental Protection Agency (IEPA) pursuant to the Clean Air Act (CAA). The petitioners contend that the Administrator was obligated to object because they clearly “demonstrated” that the permits were not in compliance with the CAA. See42 U.S.C. § 7661d(b)(2). The EPA, on the other hand, maintainsthat the Administrator reasonably exercised his discretion in determining that the petitioners did not “demonstrate” a violation because their petitions called for further investigation and analys is, a task the Administrator found to be more appropriat ely carried out through the CAA’s enforcement process. The petitioners argue that the CAA grants the Administrator no such discretion.
Title V of the CAA requires major stationary sources of air pollution to obtain oper ating permits incorporating the CAA’s requirements and establishes a procedure for federal authorization of state-run Title V permitting

programs. See id. §§ 7661-7661f. Title V does not imposeadditional requirements on sources but rather consolidates all applicable requ irements in a single document to facilitate compliance. See id. § 7661a(a). In Illinois, a polluting source must apply to the IEPA for an operating permit. After negotiations between the IEPA and the source and an opportunity for public comment, the IEPA submits a draft permit to the EPA for review. See id. § 7661d. The EPA has 45 days to object. If the EPA does not object, within 60 days of the expiration of the 45-day review period any person ma y petition the EPA to object to the permit. The EPA then has 60 days to grant or deny the petition. The EPA must object to the permit “if the petitioner demonstrates to the Administrator that the permit is not in compliance wi th the requirements” of theNos. 07-3197, 07-3198 & 07-3199 3

CAA. Id. § 7661d(b)(2). The denial of a petition is then subject to judicial review. Id. §§ 7607(b)(1), 7661d(b)(2).
Permit applications must include a compliance plan “describing how the source w ill comply with all applicable requirements” of the CAA. Id. § 7661b(b)(1). If a source is in compliance, it must pr ovide a statement that it will continue to comply with the requirements of the CAAand will timely meet any additional applicable requirements that become effective during the permit term. 40C.F.R. § 70.5(c)(8)(ii)(A), (B). If a source is not in compliance, it must develop a “sched ule of compliance,” outlining how it plans to come into compliance with “all applicable requirements” of the CAA. Id. § 70.5(c)(8)(iii)(C). The schedule of compliance must be included in the permit itself. 42 U.S.C. § 7661c(a). And the permittee mustpromptly report any deviations from the permit’s requirements. Id. § 7661b(b)(2).
In addition to permitting authority, the CAA provides the EPA with enforcement powers. If the Administrator
finds that a source “has violat ed or is in violation of anyrequirement or prohibition of an applicable implementation plan or permit,” he must notify the source and the state by issuing a notice of violation (NOV). Id. § 7413(a)(1). The Administrator then has several options: (1) issue an order requiring compliance, (2) render an administrative penalty, or (3) bring a civil action. Id. Under the latter enforcement option, the United States, on behalf of the EPA, may sue for a permanen t or temporary injunction, to assess and recover a civil penalty, or both. Id. § 7413(b). In addition, a citizen’s suit provision generally authorizes “any person [to] commence a ci vil action . . . against any person . . . who is alleged to have violated . . . an emission
standard or limitation” of the CAA. Id. § 7604(a)(1).4 Nos. 07-3197, 07-3198 & 07-3199

1 The attorney general’s claims relate to all six power plants, whereas the environmental groups’ claims relate only to the
Fisk and Crawford stations.

2 Opacity, a measurement usually st ated as a percentage, is the amount of light that is blocke d by a medium such as smoke. See generally Sierra Club v. E.P.A. , 353 F.3d 976, 982 (D.C. Cir. 2004). Illinois has a 30 percent opacity limit for facilities generally, with an exception allowing em issions for greater than 30 percent for 8 minutes in any 60-minu te period, provided that this
occurs no more than three ti mes in any 24-hour period. Ill. Admin. Code tit. 35, § 212.123 ( 1996). A 20 percent opacity limit applies to emissions from power plants where construction or modification began after April 14, 1972. Id. § 212.122(a).

3 NSR consists of two programs: prevention of significant deterioration (PSD) and nonattainment NSR. Under the PSD program, no source that would emit substantial quantities of pollutants may be constructed or “modified” unless a permit prescribing emission limitations has been issued. See 42 U.S.C. (continued...) Midwest Generation is an op erator of multiple, large, coal-fired power plants in Illin ois. Our case involves six of those plants: the Fisk, Cr awford, Will County, Powerton, Joliet, and Waukegan stations. 1 Midwest’s predecessor, Commonwealth Edison, origin ally submitted applications to the IEPA for Title V operating permits back in 1995. The IEPA then proposed permits, which prompted petitions requesting that the Administrator object. After reviewing the proposed permits, the EPA concluded that the IEPA had failed to respond to significant public comments and directed it to respond to concerns about the need for compliance schedules for alleged opacity 2 and new source review (NSR) 3 violations. The IEPANos. 07-3197, 07-3198 & 07-3199 5

3 (...continued) §§ 7475(a)(1), 7479(1), (2). The preconstruction permit must impose the “best available control technology” (BACT). Id. § 7479(3).
In nonattainment areas (that is , where air quality standards
have not been met), new and “modifie d” sources are required to obtain preconstruction permits, to offset emissions increases with emissions reductions from other sources in the area, and to install the “lowest achievable emission rate” technology, which is more stringent than BACT. See id. § 7503.

4 Although the CAA provides that the Administrator “shall grant or deny such petition within 60 days after the petition is filed,” id . § 7661d(b)(2), it took 19 months—and a consent
decree—before a decision wa s reached in this case. responded and proposed revised permits, none of which contained a compliance schedule.
The EPA did not object to the IEPA’s revised permits within the 45-day period. The Illinois attorney general and the environmental groups then filed petitions requesting that the Administrator object to the permits. The petitions raised two grounds for objection: (1) Midwest’s power plants regularly exceed ed opacity limits, yet the IEPA’s proposed operating permits did not include a schedule of compliance; and (2) Midwest had “modified” its power plants, thereby maki ng NSR provisions “applicable requirements,” but the IE PA’s proposed operating permits failed to require compliance with NSR rules.
The Administrator denied the petitions in three orders,
the content of which is almost identical. 4 Regarding opacity requirements, the Administrator found that the petitioners failed to demons trate an ongoing violation requiring a schedule of compliance. His finding was6 Nos. 07-3197, 07-3198 & 07-3199

based on two facts: (1) the IEPA reviewed each source’s opacity data and did not find a sufficient basis to include a compliance schedule in the permits; and (2) each source submitted a compliance certification. The Administrator concluded that “the Title V petition process is notthe appropriate venue to drive discretionary enforcement decisions of the permitting authority, particularly when the petitioner fails to demonstrate that a violation
of the Act has occurred.”
Regarding NSR requirements , the Administrator found that the petitioners failed to demonstrate that the permits violated the CAA. His finding was based on the fact that Midwest had not applied for any NSR permits;therefore, there was no determination that NSR requirements applied to the plants at issue. In addition, nocourt had issued an order finding that Midwest violated the CAA by failing to apply for NSR permits. As a result, the Administrator found that “the allegations made by the Petitioners do not contain sufficient specific
information to demo nstrate that the . . . permits are
deficient.” He concluded thatthe issue called for further investigation, which the EPA prefers to do through its enforcement arm. Relatedly, the Administrator noted that the IEPA added a condition to the permits to ensure that they would not be “shielded” from an enforcement

action.
A short time after the Administrator denied the petitions to object, the EPA issued an NOV to Midwest and its predecessor, finding opacity and NSR violations at the six plants at issue here. The Illinois attorney generalsubsequently appealed the decisions denying her petitions to object (Nos. 07-3198 and 07-3199), seeking review of both the opacity and NSR issues. The environmental groups also appealed the decision denying theirNos. 07-3197, 07-3198 & 07-3199 7

petition to object (No. 07-3197) but only sought review of the opacity issue.
Because the CAA does not provide a standard of review,
we review the EPA’s decision under the Administrative Procedure Act (APA), which contemplates setting aside agency actions only if they are “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law[.]” 5 U.S.C. § 706(2)(A). Chevron deference also guides our analysis. It firs t instructs us to determine whether Congress has spoken directly to the issue—that is, whether the statute in question is unambiguous. Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc. , 467 U.S. 837,842-43 (1984). If Congress’s intent is clear from the statutory language, we must give effect to it. However, if the
statute is silent or ambi guous, we proceed to the second step and defer to an agency’s interpretation unless it fails the APA’s “arbitrary and capricious” test. Id. at 844.
The petitioners contend that because the CAA is unambiguous, we need not reac h the second step of the Chevron analysis. Even if we proceed to step two, however, theyargue that we cannot uphold the Administrator’s decision because his rationale does not purport to interpret the CAA but rather to implement an agency policy absent from and inconsistent with the CAA. The EPA, on the other hand, cautions that we should be especially mindful of the high level of deference an agency is owed when it interprets its own regulations. See Barnhart
v. Walton , 535 U.S. 212, 217 (2002). It directs us to the relevant statutory language in the permit-objection process: “The Administrator shall issue an objection within such period if the petitioner demonstrates to the Administrator that the permit is not in compliance with the requirements of this Act . . . .” 42 U.S.C. § 7661d(b)(2). The EPA contends that “demonstrates” is an ambiguous term,8 Nos. 07-3197, 07-3198 & 07-3199

5 The EPA does not challenge the environmental groups’standing, therefore Article III’s case-or-controversy requirement is satisfied. Rumsfeld v. Forum for Academic and Institutional Rights, Inc. , 547 U.S. 47, 52 n.2 (2006). However, as we previously noted, the environmental groups are only appealing the opacity issue, and their petition to object only concerns two of the six power plants. Thus, if we determine that the attorney general does not have standing, our review of the merits will be limited accordingly. which the Administrator reasonably interpreted in denying the petitioners’ claims.
Before turning to the merits, however, we must address the threshold jurisdictional question of whether the Illinois attorney general po ssesses standing to pursue
this action. 5 Standing consists of three elements: (1) injury-in-fact, (2) causat ion, and (3) redressability. Lujan v. Defenders of Wildlife , 504 U.S. 555, 560 (1992). Because we are reviewing the decision of an administrative agency, which is not subject to Article III, the petitioner’s burden of production on standing is the same as that of a plaintiff moving for summary judgment in the district court: she must support each element of her claim by
affidavit or other evidence. Sierra Club v. E.P.A. , 292 F.3d 895, 899 (D.C. Cir. 2002). While in many cases a petitioner’s standing is self-evident, when it is not, the petitioner must supplement the record to the extent necessary to establish her entitlement to judicial review at the first appropriate point in the proceeding. Id. at 899-
900.
Here, however, the petitioners’ opening brief devotes only one sentence to the issue of the attorney general’s standing, simply stating that “[t]he People of the State ofNos. 07-3197, 07-3198 & 07-3199 9

Illinois also have standing inthis matter concerning all six Illinois coal plants.” While the petitioners include alengthier discussion in their reply brief, the EPA contends that this attempt to secure standing comes too late. We agree. It is improper for a party to raise newarguments in a reply because it does not give an adversary adequate opportunity to respond. Moreover, the attorney general’s standing is far from self-evident because she is challenging permitting decisions made by the IEPA. Thus, we have a rather unusual antagonistic relationship between an office and an agency that are both part of the executive br anch of the state of Illinois. Because standing was clearly going to be an uphill battle,the attorney general needed to substantiate her entitlement to judicial review at the earliest possible point. She failed to do so and accordingly has not met her burden of production.
Even if we take the petition ers’ untimely arguments into consideration, we find an insufficient basis for standing. The petitioners assert that Illinois has standing as both a sovereign state and in a parens patriaecapacity. They rely

on Davis v. United States E.P.A. , 348 F.3d 772 (9th Cir. 2003), to support their argument fo r standing as a sovereign state. There, California Governor Gray Davis and the California Air Resources Board petitioned for review of an EPA order denying their request for a waiver of the oxygen level requirement under the federal reformulated gasoline program. The court found that California had standing because it “faces remedial and proprietary consequences that depend upon the outcome of this litigation.” Id. at 778. In other words, California had an interest in the litigation becaus e it was the direct recipient of the EPA’s denial. Here, by contrast, the IEPA issued permits to Midwest, which were reviewed (but not objected10 Nos. 07-3197, 07-3198 & 07-3199

6 We say “informally” to distinguish this kind of representation from the authority to represent the State in litigation, which is possessed exclusively by the Illinois attorney general when the State is the only real party in interest. See Scachitti v. UBS (continued...) to) by the EPA. Thus, the EPA’s actions were entirely consistent with Illinois’ positi on, as advanced by the IEPA.
The petitioners also argue that Illinois has standing in a

parens patriaecapacity. A state may not bring a parens patriae suit against the federal government, however, because there the United States, and no t the state, represents the people’s interests. Massachusetts v. Mellon , 262 U.S. 447, 485-86 (1923); Illinois Dep’t of Transp. v. Hinson , 122 F.3d 370, 373 (7th Cir. 1997). The petitioners respond by citing to
Massachusetts v. E.P.A. , 127 S. Ct. 1438 (2007), a decision inwhich the Supreme Court allowed a challenge by Massachusetts to the EPA’s decision not to regulate greenhouse gas emissions from motor vehicles. There, the Court drew
a distinction “between allowi ng a State to protect her citizens from the operation of federal statutes (which is
what Mellon prohibits) and allowinga State to assert its rights under federal law (which it has standing to do).” Id. at 1455 n.17 (internal quotatio n marks omitted). But theCourt also found that, according to the petitioner’s uncontested affidavits, the rise in sea levels associated with global warming already harmed and would continue to
harm Massachusetts “as a landowner.” Id. at 1456. In other words, the alleged “injury” was to the state itself. Here, the alleged injury is unclear, as there are no supporting declarations in the record. And any general interests of the people of the State of Illinois would seem to be represented (at least informally) 6 by the IEPA.Nos. 07-3197, 07-3198 & 07-3199 11

6 (...continued)
Fin. Servs. , 831 N.E.2d 544, 556 (Ill. 2005). In sum, the attorney general has failed to explain why we have jurisdiction over an internal conflict between an office and an agency under the executive branch of the same state government. Unde r these circumstances, itseems appropriate for the governor, rather than the federal courts, to resolve the controversy; yet, there is no evidence that the state has taken any steps internally to change the IEPA’s decision. The IEPA has the duty to make Title V permit decisions, so it appears to be the agency responsible for making Illinois policy in that arena.
See415 Ill. Comp. Stat. 5/4. And while the attorney general may have broad authorit y to protect public rights,
which indicates that she has capacityto sue, standingmust be independently established in every case. See Bd. of Educ. of City of Peoria, Sch. Dist. No. 150 v. Ill. State Bd. of Educ.

, 810 F.2d 707, 709-10 (7th Cir. 1987). The attorney general has not met her burden of establishing standing in this case. Accordingly, we dismiss her petition for review and turn to the merits, exam ining only the environmental groups’ challenge to the Administrator’s decision not to object to the Fiskand Crawford permits.
Both parties think that the Court of Appeals for the Second Circuit’s opinion in New York Public Interest Research Group, Inc. v. Johnson , 427 F.3d 172 (2d Cir. 2005) ( NYPIRG v. Johnson ), should inform our decision. There, New York’s permitting authority issued an NOV to two power plants indicating that they had been modified without obtaining the required PSD permits. When the EPA did not object to the draft operating permits, NYPIRG petitioned it to do so. Th e EPA denied NYPIRG’s peti-12 Nos. 07-3197, 07-3198 & 07-3199

7 Our case also differs from NYPIRG v. Johnson because there the permitting authority issued the NOV, whereas here the NOV
came from the EPA. See id. at 181 (“[W]e are not called on to
determine whether it is reasonable for the EPA to excludecontested PSD limits from permits when the permitting authority has not yet determined those limits applicable—this case does not presen t that problem.”). tion because (1) the source had not conceded that particular PSD limits applied; and (2) the permitting authority had discretion under Title V not to include in the permits PSD limits not yet determ ined to be applicable. The court of appeals, however, vacated the EPA’s decision and held that the permitting authority’s issuance of an NOV
and commencement of a CAA citizen’s suit “is a sufficient demonstration to the Administrator of non-compliance for purposes of the Title V permit review process.” Id.
at 180.
Not surprisingly, the petitioners encourage us to
follow NYPIRG v. Johnson and find that the issuance of asubsequent NOV indicates that their petitions demonstrated noncompliance. The EPA, on the other hand, argues that we should not follow NYPIRG v. Johnson because its reasoning is flawed. As we see it, however, our case differs significantly from NYPIRG v. Johnson
because the NOV here came afterthe Administrator’s decision and therefore was not part of the record he
reviewed. 7Thus, even if we were prepared to embrace the
rule in NYPIRG v. Johnson , it would not resolve the matter. For that reason, we reserve judgment on the question of whether a permitting authority’s prior issuance of an
NOV and the commencement of a citizen’s suit obligates the Administrator to object to an operating permit.Nos. 07-3197, 07-3198 & 07-3199 13

To repeat, Title V states that “[t]he Administrator shall issue an objection . . . if the petitioner demonstrates to the Administrator that the permit is not in compliance with the requirements” of the CAA. 42 U.S.C. § 7661d(b)(2). This language clearly obligates the Administrator to(1) determine whether the petition demonstrates noncompliance and (2) object if su ch a demonstration is made. N.Y. Pub. Interest Research Group v. Whitman , 321 F.3d 316, 332-33 (2d Cir. 2003). As we mentioned, however, neither the CAA nor its regulations define the term “demonstrates.” Thus, the EPA has discretion under the statute to determine what a petition must show in order to make an adequate “demonstration.” See id. at 333 (discussing the distinction between “the discretionary part of the statute (whether the petition demonstrates noncompliance) with the nondiscretionary part (if such a demonstration is made, objection must follow)”).
The petitioners, however, contend that the Administrator never really determined whether the petition demonstrated noncompliance but instead just deferred to the enforcement process. We disagree. While he notedseveral times that the EPA’s policy was to give information that may indicate nonc ompliance to its enforcement arm, he also explicitly stat ed that “Petitioner has notdemonstrated noncompliance at the time of permit issuance as required by the CAA . . . .” Thus, it is a bit of a stretch to argue that the Administrator failed to make the requisite threshold determination.
What the petitioners are really complaining about are the

reasons the Administrator gave for his decision. On the opacity issue, the Administrator determined that a
“demonstration” is not made when, among other things, alleged violations are contested by both the permitting authority and the source. The petitioners disagree. The14 Nos. 07-3197, 07-3198 & 07-3199

outcome therefore hinges on what is meant by the term “demonstrate.” But because “demonstrate” is undefined, we need only determine whether the Administrator’s interpretation is “based on a permissible construction
of the statute.” Chevron , 467 U.S. at 843.

Title V’s time line indicates that the Administrator acted reasonably. To repeat again, permitting authoritiesmust provide “streamlined” procedures for issuing permits. 40 C.F.R. § 70.4(d)(3)(ix). Within 45 days after receiving a copy of the proposed permit from the permitting authority, the Administrator must object if he determines that the permit is not in compliance with the CAA. 42 U.S.C. § 7661d(b)(1). If the Administrator does not object, any other person may petitionhim within 60 days after the expiration of the 45-day review period, and the agency is required to respond within 60 days. Id. § 7661d(b)(2). Thus, Congress deliberately gave the EPA a rather short time period to review proposed permits, resolve questions related to those permits, and decide whether to object. Because this limited time frame may not allow the EPA to fully investigate and analyze contested allegations, it is reas onable in this context for the EPA to refrain from extensive fact-finding.

The existence of the EPA’s broad enforcement authority
reinforces our belief that Congress did not intend the EPA to fully investigate and re solve all allegations in the permitting context. Section 113 states that, “on the basis of any information available,” the EPA may find that any person has violated its requirements. Id. § 7413(a)(1). After contacting the source and the state, the EPA may issue an order, render an administrative penalty, or bring a
civil action. Id. Section 114 allows the EPA to issue administrative information reques ts and to seek appropriateNos. 07-3197, 07-3198 & 07-3199 15

8 Certificates of compliance are not taken lightly. Filing a false compliance certification exposes the responsible corporateofficial and/or the source itself to potential criminal sanctions, among other thin gs. 42 U.S.C. § 7413(c). relief, including civil penalties, if they are not answered.
Id. §§ 7414(a)(1), 7413.
Moreover, Title V itself reserves the EPA’s ability to bring an enforcemen t action for violations of the CAA unless an express “shield” on the face of the permit bars
that action. Id. § 7661c(f). This provision would hardly be necessary if the EPA was supposed to resolve all alleged violations of the CAA in the permitting process. See United States v. East Ky. Power Co-op., Inc. , 498 F. Supp. 2d 1010, 1018 (E.D. Ky. 2007) (rejecting a defendant’s argument that the Title V permitting process was “the only remedy available to the EPA for an alleged deficient permit application” because of the EPA’s broad enforcement authority and the lack of a permit shield). In addition, unlike the permitting process, the enforcement process allows for discovery, hear ings, cross-examination of witnesses, and expert testimony—mechanisms designed to resolve disputed claims. Itis reasonable to interpretTitle V to complement, not to limit, the EPA’s enforcement authority.
Here, the Administrator’s finding that the petitioners
failed to demonstrate noncom pliance regarding opacity was based on the fact that (1) the IEPA reviewed each source’s opacity data and did not find a sufficient basis to include a compliance schedule in the permits; and (2) each source submitted a compliance certification. 8 Thus, he relied on representations made by the source and on the permitting authority’s review when he deter-16 Nos. 07-3197, 07-3198 & 07-3199

9 Contrary to the petitioners’ assertions, this does not mean that a petition can never make an adequate demonstration of noncompliance. The EPA, in its brief, provided several examplesof contexts in which petitioners will be able to make the required demonstration. And, to repeat, we have not decided whether a prior NOV issued by either the EPA or the permittingauthority constitutes an adequate demonstration of noncompliance.

USCA-02-C-0072—7-28-08 mined that the allegations were contested. This was not “arbitrary, capricious, an abus e of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A). Allowing the Administrator to place some reliance on these factorsis consistent with Title V’s time lines and the complementary enforcement and permitting authorities established by Congress. Accordingly, we conclude that where, as here, there is contested eviden ce of a potential violation requiring further investigation and analysis, the CAA
allows the EPA reasonable discretion to determine that the petition failed to demonstrate noncompliance and to refer the matter to the enforcement process. 9

For the foregoing reasons, the attorney general’s petitions for review (Nos. 07-3198 and 07-3199) are D ISMISSED , and the environmental groups’ petition for review (No. 07- 3197) is D ENIED

.