### ORAL ARGUMENT NOT SCHEDULED
UNITED STATES COURT OF APPEALS FOR THE DISTRICT OFCOLUMBIA CIRCUIT

SOUTHEASTERN LEGAL

FOUNDATION., ET AL., PETITIONERS, ) ) ) ) ) ) v. UNITED STATES ENVIRONMENTAL PROTECTION AGENCY,
RESPONDENT. ) ) ) ) ) ) ) ) ) ) ) No. 10-1131 (filing in consolidated case No. 10-1222) (CONSOLIDATED WITH Nos. 10-1131, 10-1132, 10-1145, 10-1147, 10-1148, 10-

1199, 10-1200, 10-1201, 10-1202, 10- 1203, 10-1205, 10-1206, 10-1207, 10- 1208, 10-1209, 10-1210, 10-1211, 10- 1212, 10-1213, 10-1215, 10-1216, 10- 1218, 10-1219, 10-1220, 10-1221)

STATE OF TEXAS’ MOTION FOR A STAY OF EPA’S GREENHOUSE GAS TAILORING RULE Case: 10-1222 Document: 1266086 Filed: 09/15/2010 Page: 1

### 1 The State of Texas hereby moves this Court, pursuant to Rule 18 of the Federal Rules of Appellate Procedure, to stay implementation by the respondent United States Environmental Protection Agency (“EPA”) of its “Prevention of Significant Deterioration and Title VI Greenhouse Gas Tailoring Rule,” 75 Fed. Reg. 31,514, Att. A (June 3, 2010) (“Tailoring Rule”), pending the Court’s review. The Tailoring Rule is contrary to the Clean Air Act, and its scheduled implementation is unlawful and will cause the State of Texas immediate and irreparable harm, without countervailing benefit to third parties or to the public interest.
I. INTRODUCTION EPA acknowledges that subjecting stationary sources of greenhouse gas emissions to permit requirements under the Clean Air Act is “absurd,” and yet it has made the decision to do just that. Tolessen the purported “absurd results” of that act, EPA has decided to abandon the explicit thresholds for regulation that Congress set in the Clean Air Act and to limit regulation to sources that emit greenhouses gas at rates between 400 and 750 times those thresholds. Without any lawful authority to do so, it now seeks to force the State of Texas to overhaul its permitting programs to adopt the same approach by January 2, 2011—an unprecedented and illegal schedule. EPA demands that the State of Texas short-circuit the statutory process and ignore its responsibilities to its

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### 2 citizens, its industry, and ultimately to itsenvironment. EPA would have the state adopt a new regulatory framework that, evenif it ultimately proves to have no legal basis, would be difficult or impossible to repeal—effectively stymieing this Court’s review of EPA’s action. If Texas is unwilling or proves unable to accede to this unlawful demand, the agency has threatened to impose a permit moratorium that would halt as many as 167 projects in its first year, costing the State jobs, business opportunities, and tax revenues. In effect, due to uncertainty resulting from the agency’s actions, a de factoconstruction ban is already in place. To avoid irreparable harm and to af ford this Court the opportunity to consider the legal basis of both the Tailoring Rule and EPA’s accelerated implementation schedule, the State of Texas respectfully requests that this Court stay implementation of the Rule pending its review.
II. BACKGROUND The Clean Air Act “establishes a partnership between EPA and the states for the attainment and maintenance of national air quality goals.” Natural Res. Def. Council, Inc. v. Browner, 57 F.3d 1122, 1123 (D.C. Cir. 1995). EPA sets air quality and emissions standards which the states, in turn, implement through the regulation of sources of emissions. For each state, this partnership is manifest in a State Implementation Plan (“SIP”), a compilation of state and local laws, regulations, and enforcement standards that comprise a state’s approach to

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### 3 complying with federal requirements, as well as scientific and technical evidence in support of that approach. States submit SIPs for approval in response to “calls” by EPA and are subject to penalties for failure to meet submission and implementation deadlines. If a state failsto submit an approvable SIP to EPA, the agency may directly administer air quality regulation, in whole or in part, within the state through a Federal Implementation Plan (“FIP”). In effect, a FIP “rescinds state authority to make the many sensitive technical and political choices that a pollution control regime demands.”Id. at 1124. On June 3, 2010, EPA published a final rule “tailoring” the Clean Air Act’s applicability to greenhouse gas (“GHG”) emissions under the Prevention of Significant Deterioration (“PSD”) preconstruction permitting program and the Title V operating permit program. This Tailoring Rule redefines the term “NSR regulated pollutant” to reference a new term, “subject to regulation.” That term is defined such that pollutants other than GHGsare “subject to regulation” if they are “subject to a provision in the Clean Air Act . . . that requires actual control.” 40 C.F.R § 51.166 (b)(48). GHGs, however, “shall not be subject to regulation except as provided” in the definition. § 51.166 (b)(48)(i). For GHGs, the definition provides that, beginning on January 2, 2011, PSD and Title V requirements will apply to (1) new sources that will emit or have the potential to emit in excess of 75,000 tons per year (“tpy”) of GHG and are

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### 4 otherwise classified as “major stationarysources” and (2) existing major stationary sources increasing emissions of a non-GHG pollutant while increasing GHG emissions by more than 75,000 tpy. OnJuly 1, 2011, coverage will expand to include all new sources that have the potential to emit in excess of 100,000 tpy of GHG and all existing sources that emit inexcess of 100,000 tpy of GHG and that undertake changes that increase GHG emissions in excess of 75,000 tpy. These tonnages must be calculated using a new formula set forth in the rule for determining “CO2

### equivalent emissions.”§ 51.166(b)(48)(ii). Under these new definitions, GHGs emitted below the Tailoring Rule thresholds are not a “regulated NSR pollutant” and so not subject to permitting requirements. EPA predicates this rule on the “absurd results” that would allegedly otherwise result from its determination that the PSD and Title V programs apply to GHG emissions.1


### The Rule further directs states to eitherreinterpret or revise their SIPs to incorporate this approach on or before January 2, 2011. Otherwise, affected GHGemitting sources “may have toput on hold their plans toconstruct or modify,” a result that “may have adverse consequences for the economy” of those states.2

1Reconsideration of Interpretation of Regulations That Determine Pollutants Covered by Clean Air Act Permitting Programs; Final Rule, 75 Fed. Reg. 17,004 (April 2, 2010) (“Timing Rule”). That rule is currently pending review in State of Texas, et al. v. Environmental Protection Agency, No. 10-1128 (D.C. Cir.). 275 Fed. Reg. 53,890. On September 2, 2010, EPA published a proposed “SIP call” finding thirteen states’ SIPs, including Texas’s, “substantially inadequate” because they do not already

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### 5 EPA also threatens to “move quickly toimpose a Federal Implementation Plan” on any state that is unable or unwilling to regulate GHG emissions immediately.3 

### The State of Texas, which disputes the legal basis of the Tailoring Rule, commenced this action on August 2, 2010. On August 2, 19, and 30, the State asked EPA to stay the Tailoring Rule pending resolution of the State’s petition for review of the Rule. SeeAtts. B-D. EPA refused to render a decision on those requests by the deadline EPA itself proposed for stay motions. SeeAtt. E; Respondent’s Mot. To Consolidate and To Amend the Schedule for Initial Filings, Aug. 20, 2010, at 4. The State now moves this Court for emergency relief.
III. ARGUMENT Under D.C. Circuit Rule 18, the movant must demonstrate four factors to obtain a stay pending review: “(i) the likelihood that the moving party will prevail on the merits; (ii) the prospect of irreparable injury to the moving party if relief is withheld; (iii) the possibility of harm to other parties if relief is granted; and (iv) the public interest.” See Washington Metropolitan Area Transit Comm’n v. Holiday Tours, 559 F.2d 841, 843 (D.C. Cir. 1977). “These factors interrelate on a sliding scale and must be balanced against each other.” Serono Laboratories, Inc. v. Shalala, 158 F.3d 1313, 1318 (D.C. Cir. 1998).

implement the Tailoring Rule and requiring those states to revise their SIPs accordingly. 75 Fed. Reg. 53,892. 3On September 2, 2010, EPA published a proposed FIP that would apply specifically to Texas and the other twelve states subject to the SIP call. 75 Fed. Reg. 53,883.

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### 6 All four factors favor a stay. The Tailoring Rule is contrary to law because it rewrites unambiguous threshold emission rates Congress specified in statutory text to solve a problem of EPA’s own creation. At the same time, the accelerated implementation schedule imposed by the Rule is itself contrary to the plain language of the Clean Air Act and EPA regulations. Accordingly, the State of Texas fully expects to prevail on the merits. In the meantime, the State suffers irreparable harm as the Rule casts a cloud of uncertainty over the State’s permitting programs that has effectively frozen construction for sources, compels the State to expend significant resources to fundamentally alter its own regulatory framework, and threatens a construction moratorium for both new and existing sources. There is no possibility that a stay would injure any party. Finally, the public interest in meaningful judicial review is strong, and at no point has EPA represented that implementation of the Rule would have any positive effect on public health or welfare. Under these circumstances, the Court should act to mitigate the harm caused by EPA’s unlawful actions by preserving the status quo pending its review. A. The Petitioner Will Prevail on the Merits. Because the Tailoring Rule is contraryto the Clean Air Act’s explicit requirements, the State is likely to prevail on the merits. The Act’s precise applicability thresholds wereintended to afford EPA no discretion. EPA proffers

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### 7 three theories as to why it can lawfully sidestep the Act’s plain text and the limits of its discretion under Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837 (1984), but none are availing where a statute is insusceptible to the gloss given it by an agency. Further, EPA’s implementation schedule for the Rule is itself contrary to law.
1. The Tailoring Rule Is Inconsistentwith the Plain Text of the Clean Air Act. An agency’s construction of a statute that it administers is due no deference where “Congress has directly spoken tothe precise question at issue.” Chevron, 467 U.S. at 842. Here, the Tailoring Rule contravenes “the unambiguously expressed intent of Congress.”Id. at 843. The Clean Air Act’s applicability thresholds for PSD regulated pollutants are defined in precise numerical terms inthe text of the Act. “Major emitting facilities” in Part C of the Act (the PSD program) are “stationary sources of air pollutants which emit, or have the potential to emit, one hundred tons per year or

moreof any air pollutant from[listed] types of stationary sources” and “any other source with the potential to emit two hundred and fifty tons per year or moreof any air pollutant.” 42 U.S.C. § 7479(1) (emphasis added). For Title V of the Act (the operating permit program), a “major source” is “any major stationary facility or source of air pollutants which directly emits, or has the potential to emit, one hundred tons per year or moreof any air pollutant.” §§ 7602(j), 7661(2)(B) (emphasis added).

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### 8 The Tailoring Rule sidesteps these statutory requirements by increasing the PSD applicability thresholds for GHG emissions to 75,000 tpy for some sources and 100,000 tpy for others. 75 Fed. Reg. at 31,606. The Tailoring Rule also takes the unprecedented step of defining GHG applicability thresholds in terms of “CO2 

### equivalent,” rather than mass emissions. Id. at 31,606. Thus, according to EPA, GHG emissions are not “subject to regulation” under the PSD and Title V programs if they amount to less thanthe Rule’s specified thresholds, even if the emissions exceed the limits specified in the statute

. EPA itself freely acknowledges that the Tailoring Rule is irreconcilable with the Clean Air Act’s applicability thresholds, admitting that it has abandoned the “literal meaning” of the statutory text that establishes these exact, numerical thresholds. 75 Fed. Reg. at 31,564. EPA claims, however, that adhering to “the literal statutory levels” would lead to “absurd results”—specifically, that many “small sources”4

### would be burdened by the costs of control technology and obtaining permits and that permitting agencies would face the burden of reviewing those permits. Id. at 31,516-17. Thus, EPA concludes, the statute must somehow be construed as being ambiguous as to the thresholds. But Congress could not have spoken more clearly: it specified precise, numerical emission rate thresholds—i.e., 100 tons/250 tons per year. These figures

4Notably, EPA uses the term “small sources” to refer to sources that the Clean Air Act expressly considers to be “major emitting facilities.” 42 U.S.C. § 7479(1).

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### 9 admit no ambiguity or vagueness. Indeed, they reflect the considered judgment of Congress to confer no discretionon EPA. See Whitman v. American Trucking Ass’n, Inc., 531 U.S. 457, 474-76 (2001) (discussing “the degree of agency discretion” conferred on EPA to set NAAQS). The interpretive approach adopted by EPA in the Tailoring Rule renders a central provision of the Clean Air Act mere surplusage. As the Supreme Court has observed, “The EPA may not construe the [Clean Air Act] in a way that completelynullifies textually applicable provisions meant to limit its discretion.” Whitman, 531 U.S. at 585.
2. The “Absurd Results” Doctrine Cannot Be Employed to Rewrite a Perfectly Unambiguous Statutory Command. EPA concedes that the Clean Air Act’s provisions specifying tonnage thresholds are not ambiguous. Nonetheless, it claims that applying those thresholds “by their terms” to GHG emissions would create “absurd results,” because PSD and Title V would then apply “to an extraordinarily large number” of “small” sources, that the sources would incur “unduly high compliance costs,” and that permitting authorities would face “overwhelming” administrative burdens. 75 Fed. Reg. at 31,541. Such coverage would, EPA claims, “severely undermine” Congress’ intentions. Id. at 31,542. Thus, the agency concludes, several statutory terms, though otherwise clear,“may be considered not to have [their] literal meaning as applied to GHG sources,” giving the agency the discretion to ignore the plain terms of the statute to resolve this conflict. Id. at 31,548.

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### 10 The absurd results doctrine applies where “words of general meaning are used in a statute, words broad enough to include an act in question, and yet a consideration of the whole legislation,or of the circumstances surrounding its enactment, or of the absurd results which follow from giving such broad meaning to the words, makes it unreasonable to believe that the legislator intended to include the particular act.” Public Citizen v. U.S. Dept. of Justice, 491 U.S. 440, 454 (1989) (quoting Church of the Holy Trinity v. United States, 143 U.S. 457 (1892)). For example, in Green v. Bock Laundry Machine Co., 490 U.S. 504, 510 (1989), the Supreme Court construed the broad term “the defendant” to exclude civil defendants, where refusing to drawthat distinction would “deny a civil plaintiff the same right to impeach an adversary’s testimony that [the law] grants [to] a civil defendant.” By contrast, the statutory tonnage thresholds are not general terms that are being applied to unforeseen factual situations. They are specific, objective commands that cannot be expanded or contracted through principles of statutory interpretation. As EPA correctly observes, in enacting the PSD program, Congress was aware of the burden of compliance and sought to exempt smaller sources through explicit tonnage thresholds. Asa result, Congress, in drafting what became the 1977 Clean Air Act Amendments, actually removed provisions granting EPA discretion to establish PSD coverage by regulation, replacing them

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### 11 with the specific numerical thresholds. See75 Fed. Reg. at 31,550. Aware of the costs of compliance versus the benefits of pollution control, Congress struck a balance by specifying explicit tonnage thresholds. At the same time, there arebroad terms in the Act that are relevant to PSD and Title V program coverage, particularly the term “pollutant.” The only tension that exists in the statute with respect to GHGs is between the specific, objective numerical tonnage thresholds and the general term “pollutant.” If EPA seeks to avoid what it has characterized as the “absurd results” of regulating GHG emissions under PSD and Title V, it is the general term “pollutant,” not the specific applicability thresholds, that must give way.
3. The “Administrative Necessity” Doctrine Does Not Justify the Tailoring Rule’s Inconsistency with the Clean Air Act. EPA’s second justification for its rule, the purported “administrative necessity” doctrine, is fundamentally flawed. This doctrine, if it exists at all outside of dicta, applies where immediate and complete implementation of congressional intent is infeasible, not where an agency has found that regulation would produce “absurd results” that are contrary to congressional intent. It is not “a revisory power inconsistent with the clear intent of the relevant statute.” Alabama Power v. Costle, 636 F.2d 323, 358 (D.C. Cir. 1980) (quoting NRDC v. Costle, 568 F.2d 1377 (1977)). And it is entirely unavailable where, as here, Congress has “restrain[ed] the agencyby mandating standards from which no

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### 12 variance is permitted.” Id. EPA may not rely upon it as license to act contrary to the plain language of the Clean Air Act.5


### 4. The “One-Step-At-A-Time” Doctrine Is Inapplicable and Contrary to the Statutory Requirements. EPA’s third and final justification, the so-called “one-step-at-a-time” doctrine, cannot excuse an agency’s failure to comply with governing statutory requirements and, in any case, fails even under EPA’s own generous formulation. EPA argues that it has inherent discretion to “implement statutory mandates one step at a time.” According to EPA, it is enough that the Tailoring Rule puts the agency “on track to full compliance with the statutory requirements.” 75 Fed. Reg. at 31,578. But the Tailoring Rule does not put EPA on track to compliance. Though several provisions of the Rule may commit the agency to future action, none require compliance with the Act by 2016 or at any time. Indeed, EPA disclaims any intention of eventual compliance with the Act’s textual

5While citing a number of cases mentioning the doctrine, EPA identifies no agency action that has ever been justified by or upheld on the basis of the administrative necessity doctrine. Rejecting necessity claims:N. Colo. Water Conservancy Dist. v. FERC, 730 F.2d 1509 (D.C. Cir. 1984). Pre-Chevroncases that do not uphold agency action on the basis of administrative necessity: Permian Basin Area Rate Cases, 390 U.S. 747 (1968),Morton v. Ruiz, 415 U.S. 199 (1973),NRDC v. Train, 510 F.2d 692 (D.C. Cir. 1974),Ala. Power Co. v. Costle, 636 F.2d 323 (D.C. Cir. 1980) (per curiam). Merely discussing the doctrine:New York v. EPA, 443 F.3d 880 (D.C. Cir. 2006) (per curiam);Ala. Power, 636 F.2d 323. Refusing to apply the doctrine: EDF v. EPA, 636 F.2d 1267 (D.C. Cir. 1980), Sierra Club v. EPA, 719 F.2d 436 (D.C. Cir. 1983); Pub. Citizen v. FTC, 869 F.2d 1541 (D.C. Cir. 1989). Cases unrelated to administrative necessity: United States v. Rylander, 460 U.S. 752 (1983), Evans v. Williams, 206 F.3d 1292 (D.C. Cir. 2000); Tinsley v. Mitchell, 804 F.2d 1254 (D.C. Cir. 1986), Wash. Metro. Transit Auth. v.Amalgamated Transit Union, 531 F.2d 617 (D.C. Cir. 1976), Chairs v. Burgess, 143 F.3d 1432 (11th Cir. 1998).

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### 13 requirements. See id. at 31,547 n.29 (“EPA may, infuture rulemaking, make a final determination that under the ‘absurd results’ doctrine, Congress did not intend for EPA to apply PSD to very small sources, that is, those, with emissions at or near the 100/250 tpy statutory levels.”). In essence, the “step-by-step” doctrine issimply an extension of the flawed “administrative necessity” doctrine. It would allow the agency to sidestep Congress’ unambiguously expressed will in the Clean Air Act, in violation of even Chevron’sgenerous limitations on agency discretion. It must be rejected.
5. The Tailoring Rule Violates the Clean Air Act by Authorizing SIP Revision by “Interpretation,” Requiring Retroactive SIP Revisions, and Imposing a Construction Permit Moratorium

. Apart from the obvious illegality of the Tailoring Rule, the State is likely to prevail on the merits because EPA has violated the Clean Air Act and its own regulations in its haste to rewrite the PSD and Title V programs. Under the Act, no revision to a SIP or FIP may be applied toa source unless EPA or the state has revised the plan in accordance with the rulemaking requirements set forth in 42 U.S.C. § 7410. In particular, § 7410(i) precludes giving legal effect to any purported SIP revision that was not approved under § 7410(a) or promulgated under § 7410(c). Accordingly, EPA’s command that states simply “interpret” existing SIPs to apply to sources runs afoul of the Act.

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### 14 Furthermore, 40 C.F.R. § 51.166(a)(6) gives states three years to submit revised SIPs following EPA changes toPSD requirements. This regulation enforces the states’ undisputed right to the first opportunity to address air quality management issues on a prospective basis. See Concerned Citizens of Bridesburg
v. EPA, 836 F.2d 777, 781 (3d Cir. 1987). EPA has ignored this rule, instead requiring implementation of its new program through SIP interpretation, SIP revision, or FIP promulgation beginning January 2, 2011. Texas and other states are entitled to rely on the three-year schedule until and unless it is revised by appropriate rulemaking. Finally, EPA’s decision to impose deadlines for implementation of the Tailoring Rule in state-approved PSDprograms beginning January 2, 2011 establishes a de factomoratorium on permitting GHG sources until SIPs can be revised to establish retroactive effective dates for GHG coverage. See 75 Fed. Reg. at 53,901 (“It must be emphasized that for any State that receives a deadline [for SIP revision] after January 2, 2011, the effected GHG-emitting sources in that State . . . will be unable to receive a federally approved permit.”). This is unprecedented and unlawful. Throughout the history of the PSD program, EPA has never imposed a new “minimum requirement” that had an effective date before the deadlines for SIP revisions. SIPs and FIPs are legislative rules that must be applied prospectively. See Bowen v. Georgetown University Hospital, 488 U.S.

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### 15 204 (1988). PSD is apre-construction permit program that Congress structured to assure no interruption in permitting associated with implementing new requirements. Cf. Citizens to Save Spencer County v. EPA, 600 F.2d 844 (D.C. Cir. 1979). Nothing in the Clean Air Act authorizes a moratorium on permitting pending SIP revisions. Indeed, by construing the 2011 effective dates as establishing a PSD permit moratorium, those rules unlawfully revise approved PSD SIPs contrary to 42 U.S.C. 7410(i).
B. The Petitioner Will Suffer Irreparable Harm Without a Stay. Until such time as this Court vacates the Tailoring Rule, the State will suffer irreparable harm. The Rule casts a cloud over the State’s permitting programs, causing economic harm; deprives the State of its right to manage its air resources; requires fundamental changes to State laws that may prove unnecessary or counterproductive; and forces the state to incur significant, unrecoupable expenses. First, EPA’s threats to impose a moratorium on permitting has placed the State’s permitting programs under a cloud of uncertainty, to the detriment of the State’s business environment. EPA is using the threat of a construction permit moratorium to intimidate states into immediately revising their SIPs, reinterpreting them, or turning over permitting authority to EPA. Absent one of these actions, EPA explains, “the affected GHG-emitting sources in that state ... will be unable to receive a federally approved permit authorizing construction or modification”

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### 16 after January 2, 2011. 75 Fed. Reg. 53,901 (emphasis added). As a result, EPA continues, “States’ affected sources confront the risk that they may have to put on hold their plans to construct or modify, a risk that may have adverse consequences for the economy” of affected states.Id. at 53,905 (emphasis added). The result is significant uncertaintyand harm to the State’s business environment, with the threat of worse to come. The Texas Commission on Environmental Quality (“TCEQ”) estimates that the construction ban could affect 167 projects within the first year. This would deprive Texans of jobs, deprive Texas industry of business opportunities, deprive the State of tax revenues, and place Texas at a competitive disadvantage tostates that have acceded to EPA’s demands. Hagle Decl., Att. F, at 14. When a business chooses to locate its facilities outside of Texas, thatinjury is irreparable. Second, the Tailoring Rule will deprive Texas of its right to manage and protect its own clean air resources. The Clean Air Act expressly provides that states shall have “primary responsibility” for “air pollution prevention . . . and air pollution control at its source.” 42 U.S.C. § 7401(a)(3). This includes a state’s right to develop its own SIP to meet federal air quality standards. See, e.g., 42 U.S.C. § 7410 (pertaining to adoption and submission of SIPs)

.While EPA has a right to call for revisions to SIPs it finds inadequate, it must allow the states a “reasonable” time in which to comply. 42 U.S.C. § 7410(k)(5).

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### 17 EPA, however, has decided to affordTexas no such opportunity. EPA’s recently published proposed SIP call, which it plans to finalize on December 1, 2010, would allow states up to twelve months to submit SIP revisions following an EPA finding of substantial inadequacy. See 75 Fed. Reg. 53,892 (Sept. 2, 2010) (the “SIP Call”). Because EPA intends toimpose new GHG controls on stationary sources beginning January 2, 2011, approximately eleven of those twelve months would be after the GHG requirements are to take effect. In Texas, this would mean that there would likely be no authority to issue GHG permits for months after such permits would be required. EPA proposes to cure this problem by allowing states to volunteer for a shorter deadline for submitting their SIP revisions, even as short as three weeks. 75 Fed. Reg. at 53,901. This would enable EPA to federalize the states’ GHG permitting programs “to ensure that there is no gap in PSD permitting.” Id. EPA presents a stark choice: (1) do without preconstruction permitting or (2) surrender to a FIP. Whatever Texas’ choice, the result is what this court has recognized to be a substantial injury to its interests. Natural Res. Def. Council,57 F.3d at 1124. Third, absent a stay, Texas will have to begin to revise its SIP before the Court rules on the validity of the Tailoring Rule. Texas cannot simply declare itself ready to require permits for greenhouse gas emissions from stationary sources, as EPA requests that it do, or adopt EPA’s definition of the term “subject

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### 18 to regulation.” See, e.g., Trimmer v. Carlton, 296 S.W. 1070 (Tex. 1927); Tex. Gov’t Code § 2001.023; 30 Tex.Admin. Code § 20.3. Rather, Texas will have to rewrite its statutes and regulations. While there is uncertainty about what the Texas Legislature might do, TCEQ will have to amend numerous rules to conform its SIP to EPA’s requirements. In each instance, TCEQ will be required to prepare a regulatory analysis, to draft and publish the proposed rules, to allow for public comment, to draft a response to the comments, to draft the final rules, and, finally, to adopt the rules. This process typically takes a year. Hagle Decl., at 8. If this Court ultimately finds the Rule to be invalid after the State has adopted EPA’s new legal framework, the State would then face the choice of rescinding the new legal framework—a task that may be difficult or impossible— or keeping it in place, also at considerable expense. Further, if EPA has approved the State’s revised SIP by that point, rescinding the new framework would require the agency’s approval, as well. In the likely case that EPA refuses, the State would have little choice but to enforce regulations that EPA unlawfully forced it to adopt. In either scenario, the expense to the state and affront to its rights are great. Fourth, Texas will incur significant, non-recoverable expenses if it is forced to implement the Tailoring Rule. TCEQ has undertaken a careful sector-by-sector and industry-by-industry analysis of regulated sources, examining air permitting

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### 19 information dating back a decade, to determine the increased demand for air permits for GHGs under the Tailoring Rule thresholds. Hagle Decl., at 10. TCEQ has projected that it would have to hire 91 new full-time employees to handle the workload that would result from the additional permitting actions. This would cost TCEQ approximately $4.1 million each year. In addition, TCEQ would spend $933,750 in startup costs and $1,092,631 each year for benefits costs. Sifuentez Decl., Att. G, at 1-2. TCEQ’s efforts tobuild capacity will become futile if the Court later vacates EPA’s GHG scheme; indeed, the State would then face the expense of unwinding its GHG permitting operations. C. A Stay Will Not Harm Other Parties While Texas and other states would beharmed if the Tailoring Rule were not stayed, no party would be harmed by staying the Rule. A stay would merely preserve the status quo and allow statesto apply their SIPs according to their terms, or to take other action as they see f it. It would not harm Texas’ sister states, and indeed would benefit those states bypreventing a moratorium on construction activities and fundamental restructuring of state air quality programs during the pendency of litigation. At the same time, if another state is lawfully able to revise its SIP to incorporate the Rule, it can do so without the Rule’s revisions to the Part 51 Regulations, subject to judicial review inthe Court of Appeals where the state is located. Case: 10-1222 Document: 1266086 Filed: 09/15/2010 Page: 20

### 20 D. A Stay Will Serve The Public Interest By Allowing Meaningful Judicial Review Of The Tailoring Rule The public has a substantial interest “in having legal questions decided on the merits, as correctly and expeditiously as possible.” Holiday Tours, 559 F.2d at 843. Absent a stay, EPA will move forward with implementation of the Tailoring Rule, forcing the states to adopt burdensome laws and regulations that cannot be easily repealed, even if the Rule is ultimately vacated. The public should not have to bear that burden. Nor should the public, as citizens of the states, be forced to bear the cost of developing new regulatory regimes that are likely to prove unnecessary or even detrimental. If the deadline is left in place, the public will also be denied the opportunity to participate and offer input into the creation of these new regimes. The public has an interest, as well, in the “orderly procedure” of important litigation, Virginia Petroleum Jobbers Ass’n v. Federal Power
Comm’n, 259 F.2d 921, 927 (D.C. Cir.1958), as opposed to the piling up of cases and multiplication of uncertainty. By contrast, at no point has EPA represented that implementation of the Tailoring Rule would have any positive effects on public health or welfare. EPA cannot now backtrack and argue that a stay would harm the public interest. SEC. v. Chenery Corp., 332 U.S. 194, 196 (1947). In effect, EPA has conceded that the public interestfavors the State of Texas’ position.
IV. CONCLUSION For the foregoing reasons, the motion should be granted. Case: 10-1222 Document: 1266086 Filed: 09/15/2010 Page: 21

### Dated: September 15, 2010 Respectfully submitted,
GREG ABBOTT Attorney General of Texas
DANIEL T. HODGE First Assistant Attorney General
BILL COBB Deputy Attorney General for Civil Litigation J. REED CLAY, JR. Special Assistant and Senior Counsel to the Attorney General Office of the Attorney General of Texas P. O. Box 12548, Capitol Station Austin, Texas 78711-2548 Telephone: (512) 936-2541 Facsimile: (512) 936-0545 Email: reed.clay@oag.state.tx.us

/s/ David B. Rivkin, Jr. David B. Rivkin, Jr. Mark W. DeLaquil Andrew M. Grossman Baker & Hostetler LLP Washington Square, Suite 1100 1050 Connecticut Avenue, N.W. Washington, D.C. 20036-5304 Phone: 202.861.1500 Facsimile: 202.861.1783 Email: mdelaquil@bakerlaw.com Counsel to Petitioners State of Texas, Rick Perry, Governor of Texas, Greg Abbott, Attorney General of Texas, Texas Commission on Environmental Case: 10-1222 Document: 1266086 Filed: 09/15/2010 Page: 22

### Quality, Texas Department of Agriculture, Texas Public Utilities Commission, Texas Railroad Commission, Texas General Land Office Case: 10-1222 Document: 1266086 Filed: 09/15/2010 Page: 23

### CERTIFICATE OF SERVICE I hereby certify that on September 15, 2010,I electronically filed the foregoing Motion with the Court by using the CM/ECF system. Participants in the case who are registered CM/ECF users will be served by the appellate CM/ECF system. I have also caused a copy of the foregoing document to be served on the following individuals who are not registered CM/ECF users via First-Class Mail, postageprepaid: Gordon R. Alphonso McGuire Woods LLP 1170 Peachtree Street, N.E. Suite 2100 Atlanta, GA 30309 Michael R. Barr Pillsbury Winthrop Shaw Pittman, LLP 50 Fremont Street San Francisco, CA 94105-2228
Sam Kazman Competitive Enterprise Institute 1899 L Street, NW, 12th Floor Washington, DC 20036 Patrick D. Traylor Hogan Lovells US LLP 555 13th Street, NW Washington, DC 20004-1109 Jon C. Bruning Office of Attorney General State of Nebraska 2115 State Capitol P.O. Box 98920 Lincoln, NE 68509-8920 Matthew W. Dukes Troutman Sanders LLP 401 9th Street, NW Suite 1000 Washington, DC 20004-2134 Charles E. James Office of the Attorney General Commonwealth of Virginia 900 East Main Street Richmond, VA 23219 Stephen P. Mahinka Morgan, Lewis & Bockius LLP 1111 Pennsylvania Avenue, NW Washington, DC 20004-2541 Gerald D. Reid Office of the Attorney General, State of Maine 6 State House Station Augusta, ME 04333-0006 Mr. Douglas Friend Gansler Assistant U.S. Attorney Office of the Attorney General, State of Maryland 200 St. Paul Place 20th Floor Baltimore, MD 21202-2021 Harry Moy Nq American Petroleum Institute 1220 L Street, NW Washington, DC 20005-4070 Case: 10-1222 Document: 1266086 Filed: 09/15/2010 Page: 24

### Karen R. Harned National Federation of Independent Business 1201 F Street, NW Suite 200 Washington, DC 20004 Warden (La Tuna Low) Federal Correctional Institute Federal Satellite Low P.O. Box 3000 Anthony, TX 88021 Troy King Office of the Attorney General State of Alabama 500 Dexter Avenue Montgomery, AL 36130 Robert J. Martineau Waller Lansden Dortch & Davis PLLC 511 Union Street Suite 2700 Nashville, TN 37219-9966 Federal Satellite Low P.O. Box 3000 Anthony, TX 88021 William Orr Federal Correctional Institute Thomas J. Ward Ward & Associates 2020 N Street, NW Washington, DC 20036-0000 Quentin Riegel National Association of Manufacturers 1331 Pennsylvania Avenue, NW North Tower - Suite 1500 Washington, DC 20004-1790 Wayne K. Stenehjem Office of the Attorney General State of North Dakota 600 East Boulevard Avenue Bismark, ND 58505-2210 Mark J. Bennett Office of Attorney General State of Hawaii Department of Agriculture 425 Queen Street Honolulu, HI 96813-0000 Mr. Kelvin Allen Brooks Office of the Attorney General, State of New Hampshire 33 Capitol Street Concord, NH 03301-6397 Mr. J. Allen Jernigan North Carolina Department of Justice PO Box 629 Raleigh, NC 27602-0629 John E. Milner Brunini, Grantham, Grower & Hewes, PLLC P.O. Box 119 Jackson, MS 39205
By: /s/ Mark W. DeLaquil Mark W. Delaquil

Case: 10-1222 Document: 1266086 Filed: 09/15/2010 Page: 25August 2, 2010
Hon. Lisa Jackson Administrator U.S. Environmental Protection Agency 1200 Pennsylvania Avenue, N.W. Washington, DC 20460 Mail Code: 1l01A
Dr. Alfredo "AI" Armendariz Regional Administrator U.S. Environmental Protection Agency, Region 6 1445 Ross Avenue, Suite 1200 Dallas, TX 75202 Mail Code: 6RA

Dear Administrators Jackson and Armendariz: Byfax (202.501.1450), email Oackson.lisa@epa.gov), Us. mail, andhanddelivery

Byfax (214.665.7113), email (armendariz.al@epa.gov). Us. mail, andhanddelivery

In order to deter challenges to your plan for centralized control of industrial development through the issuance ofpermits for greenhouse gases, you have called upon each state to declare its allegiance to the Environmental Protection Agency's recently enacted greenhouse gas regulations-regulations that are plainly contrary to United States law. 75 Fed. Reg. 31,514, 31,525 & 31,582 (June 3, 2010) (hereinafter, the "Tailoring Rule"). To encourage acquiescence with your unsupported findings you threaten to usurp state enforcement authority and to federalize the permitting program of any state that fails to pledge their fealty to the Environmental Protection Agency (EPA).
Onbehalfofthe State ofTexas, we write to inform you that Texas has neither the authority nor the intention of interpreting, ignoring, or amending its laws in order to compel the permitting ofgreenhouse gas emissions.
You have declared that EPA's decision to enact automobile tailpipe emission limits for greenhouse gases pursuant to Title II ofthe federal Clean Air Act renders such gases immediately "subject to regulation" for all purposes under that Act, including the Case: 10-1222 Document: 1266086 Filed: 09/15/2010 Page: 1Title I Prevention ofSignificant Deterioration (PSD) preconstruction permitting program and the Title V operating permit program. Simultaneously, however, you recognize that permitting greenhouse gases under the Act is "absurd." In the Tailoring Rule, EPA states: "Here, we have determined, through analysis ofburden and emissions data as well as consideration ofextensive public comment, that the costs to sources and administrative burdens to permitting authorities that would result from application ofthe PSD and title V programs for GHG emissions at the statutory levels as ofJanuary 2, 2011 should be considered 'absurd results.'" 75 Fed. Reg. at 31,517. We agree. In order to avoid the absurd results ofEPA's own creation, you have developed a "tailoring rule" in which you have substituted your ownjudgment for Congress's as to how deep and wide to spread the permitting burden. Notably absent from your rules is any evidence that they would achieve specific results; in fact, you assiduously (and correctly) avoid ascribing what environmental benefit may be achieved by mandating permits to emit a uniformly distributed, trace constituent ofclean air, vital to all life, that is emitted by all productive activities onEarth.
Instead of acknowledging that congressionally set emission limits preclude the regulation of greenhouse gases, you instead re-write those statutorily-established limits stating, "For our authority to take this action, we rely in part on the 'absurd results' doctrine, because applying the PSD and title V requirements literally (as previously interpreted narrowly by EPA) would not only be inconsistent with congressional intent concerning the applicability ofthe PSD and title V programs, but in fact would severely undermine congressional purpose for those programs. We also rely on the 'administrative necessity' doctrine, which applies because construing the PSD and title V requirements literally (as previously interpreted narrowly by EPA) would render it impossible for permitting authorities to administerthe PSD provisions." 75 Fed. Reg. at 31,541-42.
Because of your view that greenhouse gases become "subject to regulation" on the first day it becomes illegal to manufacture a car not meeting the newtailpipe emission limits for greenhouse gases (on January 2, 2011), you insist that states may not issue permits after that date without considering greenhouse gas emissions. Your view is not enough. Applicable law provides to the contrary. Texas' stationary source permitting program encompasses all "federally regulated new source review pollutants," including, "any pollutant that otherwise is subject to regulation under the [federal Clean Air Act]." 30 TEX. ADMIN. CODE § 116.12(14)(D). The rules ofthe Texas Commission on Environmental Quality (TCEQ), like the EPA's rules, do not define the phrase "subjectto regulation." In its Tailoring Rule, however, the EPA promulgated-without notice-a definition of the previously undefined term, "subject to regulation." This new definition (attached hereto) specifically relates to the regulation ofgreenhouse gases, spans several Federal Register columns, and is over 600 words in length. Specifically, in the EPA's first phase ofgreenhouse gas regulation, this new definition raises the PSD permitting threshold for new and modified "major" sources ofother pollutants from 100 tons per year to 75,000 tons per year (tpy) ofC02 equivalent (C02e) emissions. Case: 10-1222 Document: 1266086 Filed: 09/15/2010 Page: 2In the Tailoring Rule you have asked TCEQ to report to you by August 2, 2010, whether it would "interpret" the undefined phrase "subject to regulation" in TCEQ Rule 116.12 consistent with the newly promulgated definition in EPA Rule 51.166, in all its specifics and particulars. That is, you have effectively requested that Texas agree to regulate greenhouse gases in the exact manner and method proscribed by the EPA.
In other words, you have asked Texas to agree that when it promulgated its air quality permitting program rules for pollutants "subject to regulation" in 1993, that Texas really meant to define the term "subject to regulation" as set forth in the dozens of paragraphs and subparagraphs ofEPA Rule 51.166, first promulgated in 2010. The State ofTexas does not believe that EPA's "suggested" approach comports with the rule oflaw. The United States and Texas Constitutions, United States and Texas statutes, and EPA and TCEQ rules all preclude TCEQ from declaring itself ready to require permits for greenhouse gas emissions from stationary sources as you request.
We start with constitutional difficulties. As noted, Texas' stationary source permitting program encompasses all "federally regulated new source review pollutants," including "any pollutant that otherwise is subject to regulation under the [federal Clean Air Act]." 30 TEX. ADMIN. CODE § 116.12(14)(D). This delegation of legislative authority to the EPA is limited solely to those pollutants regulated when Texas Rule 116.12 was adopted (1993) and last amended (2006). As the Texas Supreme Court has explained, "The general rule is that when a statute is adopted by a specific descriptive reference, the adoption takes the statute as it exists at that time, and the subsequent amendment thereof would not be within the terms of the adopting act." Trimmer v. Carlton, 296 S.W. 1070 (1927). Thus, in order for Texas Rule 116.12 to pass constitutional muster, it must be limited to adopting by reference the definition of "subject to regulation" in existence when Rule 116.12 was last amended in 2006. In other words, Texas Rule 116.12 cannot delegate authority to the EPA to define "subject to regulation" in 2010 to include pollutants that were not "subjectto regulation" in 2006.
For example, the Texas Solid Waste Disposal Act defines "hazardous waste" as "solid waste identified or listed as hazardous waste by the administrator of the Environmental Protection Agency under the federal Solid Waste Disposal Act." When this delegation of legislative authority was challenged, it was upheld by Texas' highest court, but only because the court found that "the reference to the federal act in section 361.003(15) adopts by reference the act and the regulations promUlgated thereunder which were in effect on July 30, 1991, the date section 361.003(15) ofthe Texas Solid Waste Disposal Act was enacted

..." Ex parte Elliott, 973 S.W.2d 737, 741 (Tex. App.-Austin 1998, pet. refd). As the Elliott court explained, "We acknowledge that section 361.003(15) may be read to say that the legislature has delegated to the EPA the power to define hazardous waste under the THSC [Texas Health & Safety Code] and that definition may change from time to time at the will of EPA without intervention or guidance from the legislature." The court noted, however, that "[s]uch a construction would in fact place in doubt the constitutionality of this provision," and therefore, the Case: 10-1222 Document: 1266086 Filed: 09/15/2010 Page: 3court would "not construe, in this case, the adopting statute as attempting to adopt future laws, rules or regulations ofthe federal government." The same analysis applies here: TCEQ Rule 116.12 cannot delegate authority to the EPA to define "subject to regulation" in 2010 to include pollutants that were not "subjectto regulation" in 2006.
In addition to constitutional limitations, the TCEQ is also precluded from adopting the EPA's newly promulgated definition of "subject to regulation" pursuant to the express terms ofthe Texas Government Code, which requires public notice ofagency rulemaking. See, e.g., TEX. GOY'T CODE § 2001.023 ("A state agency shall give at least 30 days' notice of its intention to adopt a rule before it adopts the rule."). Likewise, TCEQ rules mandate notice and an opportunity to be heard when substantive rules are enacted. See, e.g., 30 TEX. ADMIN. CODE § 20.3. Like Texas law, federal law also requires notice and hearing before Texas can revise its State Implementation Plan (SIP). See Clean Air Act § 110(1); 42 U.S.C. § 7410(1) ("Each revision to an implementation plan submitted by a State under this chapter shall be adopted by such State after reasonable notice and public hearing."). When the TCEQ promulgated Rule 116.12 in 1993, or even when it last amended the rule in 2006, it had no intention of enacting a permitting program for greenhouse gases. Consequently, TCEQ had no reason to (nor did it) give public notice of any such intent. Obviously, Texans concerned with greenhouse gas permitting could not have known to participate and comment on the decision to require permits for pollutants "subject to regulation" in 2006, when the EPA first discovered greenhouse gases were "subject to regulation" in 2010. It should go without saying that the nearly infinite expansion of Texas' permitting programs to include greenhouse gases with no state-level rulemaking at all would not satisfy Texas or federal law requiring notice and an opportunity to be heard. Perhaps more fundamentally, however, the EPA itselfhas not undertaken a proper rulemaking to require all SIPs to include the definition of "subject to regulation" it has just promulgated. This revision to EPA's Part 51 rules-which layout the requirements for approvable SIPs-were preceded by no proposal whatsoever. Rather, this new requirement first appeared in the EPA's final notice announcing the "Tailoring Rule," and accordingly, has not been properly adopted. See Clean Air Act § 307(d)(1)(J); 42 U.S.C. § 7607(d)(1)(J) (requiring formal rulemaking procedures in order to establish any requirement under the PSD program).
And even ifEPA provided proper notice and the opportunity to comment, EPA cannot lawfully adopt any rule that directly and immediately changes Texas' permit program in any respect-much less to expand the reach ofthe program so far as to be deemed "absurd." Clean Air Act Section 166(a) sets forth the SIP revision process for "other pollutants" under the PSD program. The only sensible interpretation ofthe Clean Air Act is one that requires the EPA to promulgate a National Ambient Air Quality Standard (NAAQS) for greenhouse gases before the EPA can require PSD permitting of greenhouse gases. Thereafter, pursuant to the express terms ofthe Clean Air Act, states are provided with 21 months after EPA undertakes a proper rulemaking to add that new pollutant to their SIP. Clean Air Act § 166(b), 42 U.S.C. § 7476(b) ("Within 21 months after such date of promulgation such plan revision shall be submitted to the Case: 10-1222 Document: 1266086 Filed: 09/15/2010 Page: 4Administrator"). EPA, however, has not developed a NAAQS for greenhouse gases, has not undertaken a rulemaking to promulgate corresponding regulations, and has not allowed any time for a state response. In addition to circumscribing the statutory 21-month review and implementation process afforded the states, EPA is also circumventing the statutory one-year review and revision process afforded Congress, which specifically states, "Regulations referred to in subsection [166](a) of this section shall become effective one year after the date of promulgation." The purpose ofthis one-year delay is to allow Congress the opportunity to review (and approve or revise) new rules for "other pollutants" before states are required to implement them. 72 Fed. Reg. 54,112, 54,118 (Sept. 21, 2007); citing H.R. Conf. 95-564, at 151 (1977), 1977 U.S.C.C.A.N. 1502, 1532. The path proposed by EPA painstakingly avoids such congressional oversight.
Even under normal SIP revision procedures (those not involving new pollutants), the EPA has failed to provide Texas a reasonable time to submit a plan revision. Clean Air Act Section 110 sets forth EPA's authority to direct the requirements for approvable SIPs. Section 1l0(k)(5) allows states up to 18 months after proper adoption ofnew SIP expectations before requiring their implementation by the states. See 42 U.S.C. § 741O(k) ("The Administrator shall notify the State ofthe inadequacies, and may establish reasonable deadlines (not to exceed 18 months after the date of such notice) for the submission ofsuch plan revisions."). Instead, EPA has demanded (in the absence of statutory authority) that Texas submit a schedule for the completion ofstatutory and rule revisions. But notwithstanding the above-referenced statutory requirements regarding SIP revisions, EPA has declared that it will "ensure" all sources of greenhouse gases will be permitted under the final Tailoring Rule on January 2, 2011, by moving "quickly to impose a Federal Implementation Plan (FIP) for PSD through 40 CFR 52.21." 75 Fed. Reg. at 31,526. The federal Clean Air Act, however, clearly does not authorize such bureaucratic nimbleness. To the contrary, before EPA can implement a FIP, Section 110(c)(1) specifically requires the EPA to first make a finding that a state has failed to make a required submission, such as a revision under Section 110(k)(5), and even then, a FIP is not effective until after the state is afforded additional time to correct the deficiency identified by EPA. EPA has shown no intention of following the Clean Air Act procedures or allowing states a reasonable opportunity to change their rules.
Each ofthese objections to EPA's demand for a loyalty oath from the State of Texas would suffice to justify our refusal to make one. Indeed, it is an affront to the congressionally-established judicial review process for EPA to force states to pledge allegiance to its rules (or forfeit their right to permit) on the final day by which states must exercise their statutory right to challenge those same rules. Texas will not facilitate EPA's apparent attempt to thwart these established procedures and ignore the law. In the event a court concludes EPA's actions comport with the law, Texas specifically reserves and does not waive any rights under the federal Clean Air Act or other law with respect to the issues raised herein. Case: 10-1222 Document: 1266086 Filed: 09/15/2010 Page: 5We object to adopting the EPA's definition of "subject to regulation" without directly raising any of our substantive objections to each ofthe four EPA rulemakings that collectively comprise your greenhouse gas control initiative. Those objections will be resolved in litigation now pending in the D.C. Circuit Court ofAppeals. Given that you are unable to ascribe the benefits ofyour greenhouse permitting regime, it is difficult to see why you would refuse to stay the effectiveness ofyour greenhouse gas rules. We therefore ask you to stay the effectiveness ofyour rules until our challenge is resolved. Sincerely,

Bryan W. Shaw, Ph.D. Chairman Texas Commission onEnvironmental Quality Greg Abbott Attorney General ofTexas Case: 10-1222 Document: 1266086 Filed: 09/15/2010 Page: 6ATTORNEY GENERAL OF TEXAS GREG ABBOTT August 19,2010

Hon. Lisa Jackson Administrator U.S. Environmental Protection Agency 1200 Pennsylvania Avenue, N.W. Washington, DC 20460
RE: Application for a Stay ofthe Tailoring Rule, 75 Fed. Reg. 31,514 (June 3, 2010)
Dear Administrator Jackson:
The State ofTexas hereby requests that you stay the Prevention ofSignificant Deterioration and Title V Greenhouse Gas Tailoring Rule, 75 Fed. Reg. 31,514 (June 3,2010) ("Tailoring Rule") pending resolution of the State of Texas' petition for review of the Rule, which is currently pending in the United States Court ofAppeals for the District of Columbia Circuit. Perry v. EPA, No. 10-1222 (D.C. Cir. filed Aug. 2, 2010). Texas' request that EPA stay the Tailoring Rule is independent ofany other request that EPA reconsider or stay the Tailoring Rule, and the grounds set forth in this letter are in addition to those set forth in General Abbott and Chairman Shaw's letter to you ofAugust 2,2010. Texas has an undisputed right to address air quality management resources issues, including newly-regulated pollutants, on a prospective basis. EPA may not step in unless and until the states have been given full and fair opportunity to do so. In contravention ofthese fundamental principles, the Tailoring Rule requires that Texas and other states reinterpret or revise their state implementation plans ("SIP") on or before January 2, 2011. IfTexas does not do so, EPA has indicated that it will limit its approval ofthe Texas SIP and impose a federal implementation plan ("FIP"). Texas strongly disputes the legal and policy basis for the Tailoring Rule and EPA's assertion that it may adopt a FIP if Texas fails to revise immediately its SIP. In any event, it would not be possible for Texas to comply with EPA's unlawful and unprecedented deadline.
Texas' and the public's interests would be best served ifthe D.C. Circuit had the opportunity to review the Tailoring Rule before it went into effect. Texas should not be forced to choose between forfeiting the authority to operate its PSD program and spending significant resources, administrative and otherwise, to meet EPA's unlawful deadline. Moreover, EPA assiduously and correctly avoided ascribing any environmental benefit from the Tailoring Rule, so staying the Tailoring Rule until after Texas has had a full and fair opportunity to litigate its petition for review would likewise not adversely impact public health or welfare.

POST OFFICE Box 12548, AUSTIN, TEXAS 78711-2548 TEL:(512) 463-2100 WEB: WWW,TEXASATT6RNEYGENERAL,GOV An Equal Employment Opportunity Employer' Printed on RecycledPaper Case: 10-1222 Document: 1266086 Filed: 09/15/2010 Page: 11. EPA's Requirement That Texas Reinterpret Or Revise Its SIP By January 2, 2011, Is Impracticable And Unlawful
The Tailoring Rule revises EPA's Part 51 Regulations, which set forth the requirements for approvable SIPs, despite EPA's failure to propose this change in its Notice of Proposed Rulemaking, Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule ("Tailoring Rule Proposal"), 74 Fed. Reg. 55,292 (Oct. 27, 2009). In its haste to surreptitiously rewrite the Clean Air Act, EPA violated its own regulations: 40 C.F.R. § 51.166(a)(6) gives states, including Texas, three years to submit revised SIPs following EPA changes to the minimum standards for approvable SIPs:
Amendments. (i) Any State required to revise its implementation plan by reason of an amendment to this section, including any amendment adopted simultaneously with this paragraph (a)(6)(i), shall adopt and submit such plan revision to the Administrator for approval no later than three years after such amendment is published in the Federal Register.



### * * * (iii) Any revision to an implementation plan that an amendment to this section required shall take effect no later than the date of its approval and may operate prospectively.
EPA even purported to bypass Clean Air Act § 110(k)(5), 42 U.S.C. § 7410(k)(5), which unambiguously provides states with a minimum of 18 months to revise their SIPs following SIP call authorized by the Clean Air Act. See 75 Fed. Reg. at 31,583.
EPA's regulation allowing states three (3) years to revise their SIPs serves several purposes. First, it helps enforce the states' undisputed right to the first opportunity to address air quality management resources issues, including newly-regulated pollutants under the PSD and Title V programs, on a prospective basis. The Clean Air Act recognizes that "air pollution prevention

.. . and air pollution control at its sources is the primary responsibility of States and local governments," not ofEPA. Clean Air Act § 101(a)(3), 42 U.S.C. § 7401(a)(3). The Clean Air act "places primary responsibility on the states for [SIP] revision." Concerned Citizens of Bridesburg v. EPA, 836 F.2d 777,781 (3d Cir. 1987). EPA's role is limited. The Agency is not "a roving commission to achieve pure air or any other laudable goal," Michigan v. EPA, 268 F.3d 1075, 1084 (D.C. Cir. 2001), and its powers to revise SIPs are limited to those expressly enumerated in Clean Air Act § 110, see Concerned Citizens of Bridesburg, 836 F.2d at 797 n.12 Finally, 40 C.F.R. § 51.166(a)(6) reflects EPA's long-standing recognition that SIP revisions take significant resources, and that states (and EPA) have the responsibility to ensure ample opportunity for the public to participate in the SIP revision process.

Case: 10-1222 Document: 1266086 Filed: 09/15/2010 Page: 2EPA's threat to impose a FIP on Texas as ofJanuary 2,2011, is similarly unlawful. See 75 Fed. Reg. at 31,526 (announcing EPA's intention to "ensure" all sources ofgreenhouse gases will be permitted under the final Tailoring Rule on January 2, 2011, by moving "quickly to impose a [FIP] for PSD through 40 CFR 52.21 "). Clean Air Act § 11O(c)(1) specifically requires that EPA first make a finding that a state has failed to make a required submission, such as a SIP revision, and then to allow the state additional time to correct any ofEPA's perceived deficiencies. As described above, EPA may not consider a FIP until after the three-year period for SIP revisions described above and then only ifTexas defaults in submitting a revision at the end ofthat threeyear period. Beyond being unlawful, EPA's deadline ofJanuary 2, 2011 for states to reinterpret or revise their SIPs is impracticable. As we explained at length in our letter ofAugust 2, 2010, Texas would be unable to reinterpret its SIP to effect the Tailoring Rule. Instead, Texas would need to revise its SIP, a process that it would be difficult, ifnot impossible, to complete in the approximately five (5) months remaining before EPA's January 2, 2011 deadline. 2. A Stay Is Necessary To Preserve Texas' Ability To Operate Its PSD Program During The Pendency OfThe Petition For Review By imposing the unlawful five-month timetable for Texas to revise its SIP, the Tailoring Rule threatens Texas' ability to maintain its PSD program and issue permits to sources in its state. If EPA follows through on its threat to issue a FIP for Texas on January 2, 2011, Texas will lose its ability to operate its PSD program. EPA's attempt to use this deadline to allow the Agency to promulgate a FIP long before Texas could reasonably be determined to have defaulted on its obligations is contrary to EPA's past practice and state primacy. IfEPA were not to implement a FIP on January 2,2011, the Tailoring Rule would create a cloud on any permits issued by Texas between that time and the time at which EPA chose to act because ofEPA's suggestion that any later adoption ofthe Tailoring Rule through a FIP or SIP revision would apply retroactively. In either case, the Tailoring Rule will adversely affect Texas' ability to manage its air quality resources and to ensure "that economic growth will occur in a manner consistent with the preservation of existing clean air resources." Clean Air Act § 160(3), 42 U.S.C. § 7470(3). Texas is confident that the D.C. Circuit will ultimately vacate the Tailoring Rule, but during the pendency of this suit, the Tailoring Rule's vitiation of Texas' statutory right to operate its permitting program will cause the State irreparable harm. 3. A Stay Will Serve The Public Interest By Allowing Meaningful Judicial Review OfThe Tailoring Rule Before It Enters Into Force
Texas has petitioned the D.C. Circuit for review ofthe Tailoring Rule, as have numerous other petitioners. Texas and the other Petitioners will raise significant challenges to the Tailoring Rule's lawfulness as to the emission rate thresholds it sets for PSD and Title V applicability, EPA's plans to require SIP revisions or reinterpretations by January 2, 2011, and whether the Tailoring Rule is a logical outgrowth of EPA's Notice of Proposed Rulemaking. A stay is particularly apt given EPA's decision to predicate an economy-wide rule on the rarelyCase: 10-1222 Document: 1266086 Filed: 09/15/2010 Page: 3appropriate "absurd results" doctrine, which EPA has invoked because, unlike every other regulated pollutant, EPA has purported to find that regulation ofgreenhouse gases under the PSD program would produce results plainly inconsistent with congressional intent. See 75 Fed. Reg. at 31,542 (quoting UnitedStates v. Ron Pair Enters., 489 U.S. 235,242 (1989)).
While Texas and other States would be harmed ifthe Tailoring Rule were not stayed, no party would be harmed by staying the Rule. EPA has appropriately not represented that the Tailoring Rule would have any positive effects on public health or welfare. Staying the Tailoring Rule will not harm Texas' sister states. If another state is lawfully able to reinterpret its SIP to conform to the Tailoring Rule's requirements, it can do so without the Tailoring Rule's revisions to the Part 51 Regulations. In the event one ofTexas' sister states revises its SIP to incorporate the Tailoring Rule, it can submit the revision for EPA's approval, subject to judicial review in the Court ofAppeals where the state is located.



### * * 

### * Texas strongly disputes the legal and policy basis of each of EPA's actions regulating greenhouse gases under the Clean Air Act, including the Tailoring Rule. Texas' objections will be resolved in litigation now pending in the United States Court ofAppeals for the District of Columbia Circuit. In order to maintain the status quo regarding the proper allocation ofpowers between the States and EPA, and in light of EPA's inability to ascribe any public health or welfare benefits to the Tailoring Rule, EPA is obligated to stay the Tailoring Rule until Texas' challenge is resolved. Texas may seek immediate relieffrom the D.C. Circuit ifEPA denies or fails to respond to this request on or before August 24, 2010. Sincerely,

Jon Niermann Assistant Attorney General

cc: J. Reed Clay, Jr., Office ofthe Solicitor General ofTexas David B. Rivkin, Jr., Baker & Hostetler LLP Case: 10-1222 Document: 1266086 Filed: 09/15/2010 Page: 4Case: 10-1222 Document: 1266086 Filed: 09/15/2010 Page: 1Case: 10-1222 Document: 1266086 Filed: 09/15/2010 Page: 1THE STATE OF TEXAS
COUNTY OF TRAVIS § § §

AFFIDAVITIDECLARATION IN SUPPORT OFMOTION TO STAY
BEFORE ME, the undersigned authority, personally appeared Steve Hagle, and beingbyme duly sworn onhis oath states: "My name is Steve Hagle. I am over 21 years ofage and am fully competent and duly authorized to make this Declaration. The facts contained in this Declaration are based on personal knowledge and are true and correct.
I am employed by the Texas Commission on Enviromnental Quality ("TCEQ") as Director ofthe Air Permits Division in the Office ofPermitting and Registration. TCEQ is the Texas agency charged with implementing and enforcing the State's various environmental regulatoryprograms. This includes the permittingprograms for stationary sources under Titles I and V ofthe federal Clean AirAct ("CAA" or the "Act"), which are amongthe responsibilities ofthe AirPermits Division.
This Declaration addresses the harm that the Environmental Protection Agency's ("EPA's") recent rulemaking concerning the regulation of greenhouse gases ("GHGs") will inflict on the State ofTexas and the TCEQ ifthe various rules are . allowed to take effect while the Court hears Texas' appeals of the rules. The Declaration presents background information about TCEQ's stationary source air permitting programs and EPA's GHG rulemaking, as well as a discussion ofthe specific harm that will result should EPA's new rules be allowed to take effect. The discussion regarding permitting program impacts contains assumptions that· are based on currently available information and existing permitrequirements.

I. Background
A. TCEQ's Title I PSD and Title V Permitting Programs
Title I ofthe Act requires preconstruction permits for any new major source of, or major modification ofan existing sourc·e of, certain air pollutants. This permitting program is known as the New Source Review ("NSR") program. In the context of areas that have attained the national ambient air quality standard ("NAAQS") for a Page 1 of15 Case: 10-1222 Document: 1266086 Filed: 09/15/2010 Page: 1subject pollutant, or for which there is no standard, the NSR permitting requirements are known as the prevention of significant deterioration ("PSD") program. Since there is no NAAQS for GHGs, preconstruction permitting for GHGs would fall under the PSD program. To obtain a PSD permit, a source must comply with the applicable PSD requirements that are set forth in Texas' state implementation plan ("SIP"), including employing the "best available control technology" ("BACT") for the subject airpollutant.
Title V of the Act requires that major sources of speCific air pollutants obtain operating permits. Unlike Title I, which imposes emission control requirements for PSD sources, Title V generally.imposes no additional substantive requirements on the permittee. Instead, the Title V operating permits are intended to collectgenerally in a single document-all regulatory requirements relating to air emissions at the source. Title V does allow states to issue multiple operating permits at a single site, which Texas does in certain cases. TCEQ issues two types of Title V permits: site operating pennits ("SOPs"), which are tailored to a particular site, and general operating pennits ("Gaps"), which contain uniform conditions that cover all sites in a defined class. Processing applications for sOPs is far more labor intensive than for Gaps.
B. Current Capacity andLoad Currently, the TCEQ Air Permits Division receives approximately 27 PSD permit applications per year, and these project assignments are spread among the three NSR permit sections. A timely PSD project takes anywhere between 10 and 12 months frOlll the time a complete application is submitted to issuance ofthe final pennit. Typically, an NSRpermit reviewer will complete an average oftwo PSD projects peryear (in additionto their otherminorNSRworkload, whichis about 30 projects). We expect that the incoming GHG PSD permit applications would require that GHG permitting staff be strictly dedicated to PSD permitting to effectively manage the GHG PSD workload. Therefore, a permit reviewer only processing GHGPSD permittingprojects shouldbe able to complete about 10PSD projects eachyear. Regarding Title V applications, the TCEQ receives on average 500 Title V SOP applications and 200 Title V GOPapplications each year. Historical data indicates that one permit reviewer completes 15 Title V SOP projects or 65 Title V GOP projects, annually. Title V SOPs typically take between 6 to ·12 months to complete, and Gaps typically take between 2 and 6 months to complete. These timeframes represent the time required to process the application and issue the Page 2 of 15 Case: 10-1222 Document: 1266086 Filed: 09/15/2010 Page: 2

### permit. Because any FTEs hired for GHG Title Vpermitting would work solely on GOPs or SOPs, we could expect the same workload outputs, i.e., 15 Title V SOPs or 65 Title V GOPs eachyear. TCEQ currently has up to 50 FTEs involved with the processing ofPSD and Title V permit applications. TCEQ employs additional personnel in field operations, enforcement, and legal services in support ofthe PSD and Title V programs. It

### is important to note that TCEQ's legislative appropriations bill imposes a cap on the number ofTCEQ's FTEs. TCEQ cannot exceed the cap without further action by the Texas Legislature or until TCEQ receives approval from the Governor and the Legislative Budget Board and the necessary funding is identified. Without such approval, or legislation, TCEQ could not employ the staffrequired to handle GHG permitting unless staffwasredeployed from elsewhere withinthe agency. Texas allows an affected party to challenge a PSD permit before final issuance through both an administrative and ajudicial review process. Challenges to draft PSD permits are contested cases heard by administrative lawjudges at·the State Office ofAdministrative Hearings ("SOAH"). If a contested case is required, it will typically add 12 to 18 months to the times set forth above. After the administrative challenge, the public may also request that the Commission review its decision to issue the permit through a motion to overturn and may also request judicialreview ofthe Commission's decision in state district court Accordingly, it is not unusual for a .controversial PSDpermit application to take 30 months or more from the time the application is complete to final issuance following a contested case hearing, motionto overturn, andjudicialreview.
Federaland State law also provide for challenges to Title V permits. The public may submit comments and / or request a hearing about a draft Title V pennit, both ofwhich require a response by TCEQ's Executive Director. In addition, EPA will review the draft Title V permit and may object to it. IfEPA does not object to the draft Title V permit by its own initiative, the public has the right to petitionEPA to object to it. Recently, EPA has begun to object with regularity to draft Title V permits based on several concerns, both with underlying NSR requirements and other Title V program requirements. Finally, the public has a right ofjudicial review ofthe Commission's decision in state district court. These processes can add several months or even years to the time required for final issuance ofa Title V permit.

Page 3 of 15

Case: 10-1222 Document: 1266086 Filed: 09/15/2010 Page: 3

### C. EPA's Greenhouse Gas Regulations
EPA has promulgated four separate rules, which together result inthe regulation of greenhouse gases at stationary sources. They are as follows: 1) Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202(a) ofthe Clean Air Act; Final Rule, 74 Fed. Reg. 66,496 (December 15,2009) (the "EndangermentFinding"); 2) Reconsideration of Interpretation of Regulations That Determine Pollutants Covered by Clean Air Act Permitting Programs; Final Rule, 75 Fed. Reg. 17,004 (Apri12, 2010) (the "TimingRule"); 3) Light-Duty Vehicle Greenhouse Gas Emission Stapdards and Corporate Average Fuel Economy Standards; Final Rule, 75 Fed. Reg. 25,324 (May 7, 2010) (the "Tailpipe Rule"); and 4) Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule; Final Rule, 75 Fed. Reg. 31,514 (June 3, 2010) (the "Tailoring Rule" and, collectively, the "GHGRules").
In its Endangerment Finding, EPA determined that motor vehicles emISSIOns "contribute" to what it has defined as a single air pollutant-the aggregate group of "six-well mixed greenhouse gases" (C02, 

### CH4, 

### N2

### 0, HFCs, PFCs, and SF6)-and that this pollutant endangers public health and welfare. EPA has chosen to issue· emission standards for motor vehicles under CAA § 

### 202(a) to control these GHGs. EPA's Tailpipe Rule doesjustthatby establishing new fuel economy standards.
EPA's Timing Rule provides that a pollutant becomes "subject to regulation" for purposes of federal PSD and Title V permitting programs when it is subject to control under the CAA or its implementing regulations. This includes, for example, GHGs regulated under the Tailpipe Rule. The GHG control requirements inthe Tailpipe Rule take effect on January 2, 2011. Therefore, EPA has concluded that stationary sources ofGHGs become subject to regulation under the PSD and Title V permittingprograms on January 2,2011.
One ofthe problems presentedbyEPA's attempt to regulate GHGs under the CAA relates to the statutory thresholds for triggering PSD and Title V applicability. These thresholds are the same-l00 or 250 tons per year ("tpy")-no matter the pollutant. While these thresholds may make sense for sulfur dioxide or nitrogen Page 4of 15 Case: 10-1222 Document: 1266086 Filed: 09/15/2010 Page: 4oxides, EPA has determined that they are so low as to be "absurd" with regard to GHGs. EPA concludedthatthe programs would cover a very large number ofvery small sources of GHGs at a volume that would completely overwhelm the regulatory agencies and at a costthat cannotbejustified.
EPA purports to solve this problem with its Tailoring Rule. The Tailoring Rule amends EPA's Part 51 regulations, which set setting forth the minimum standards for approvable SIPs. The Rule raises the applicability thresholds for GHGs by orders of magnitude. Specifically, the Tailoring Rule would raise the PSD and Title V applicability thresholds for GHG sources to 100,000 tpy or, for purposes of PSD, modifications with net increases of75,000 tpy. Under the Tailoring Rule, sources already subjectto the PSD and Title V programs for otherpollutants would become subject to GHG regulation on January 2, 2011. This would include GHG BACT requirements for projects that increase net emissions of GHGs by 75,000 tpy. All other sources that exceed the GHG thresholds would become regulated on July 1,2011. Importantly, these thresholds are based on a new term-carbon dioxide equivalent ("C02e")-thatEPA created based on an analysis ofthe global warming potential ("GWP") of each ofthe six identified GHGs. Accordingly, pure carbon dioxide would trigger applicability at the nominal thresholds (75,000 or 100,000 tpy), while pure methane, which has a much greater GWP (i.e., 21 times that ofCO2), would trigger the thresholds at levels below 5,000 tpy. For mixed emissions, applicability determinations would be based on the sum ofthe mass emissions of eachconstituenttimes their GWPs.
In addition to promulgating these four rules, EPA has recently proposed two rules relating to the SIPs for the GHG Rules. They are: 5) Action to Ensure Authority to Issue Permits under the Prevention ofSignificant Deterioration Program to Sources of Greenhouse Gas Emissions: Finding of Substantial Inadequacy and SIP Call, 75 Fed. Reg. 53,892 (September 2, 2010) (the "SIP Call"); and 6) Action to Ensure Authority to Issue Permits under the Prevention ofSignificant Deterioration Program to Sources of Greenhouse Gas Emissions: Federal' Implementation Plan, 75 Fed. Reg. 53,883 (September 2,2010) (the "FIP Rule").
'The proposed SIP Call identifies thirteen states, including Texas, that apparently

lack authority to issue PSD permits in ,conformance with the Tailoring Rule's Page 5 of 15 Case: 10-1222 Document: 1266086 Filed: 09/15/2010 Page: 5requirements. Itproposes to find their respective SIPs "substantially inadequate" and to call on such states to submit SIP revisions to correct the inadequacy within 12 months ofthe rule becoming final. EPA will impose a federal implementation plan ("FIP"), such as the one proposed in the FIP Rule, on states that fail to submit a conforming SIP. This would allow EPA to assume permitting authority for GHGs in such states. Under the proposed SIP Call, a state may elect a deadline for sUbmitting corrective SIP revisions that is shorter than the full 12 months. The proposal contemplates deadlines as short as three weeks. EPA explains that the purpose ofestablishing a shorter deadline is to ensure that a FIP is available to prevent a gap in PSD permitting. For example, rather than waiting a full year before EPA undertakes to federalize the GHG permitting program, it may do so in a matter of weeks for those states that electa shorter deadline.
II. Impact to TCEQ of

### EPA's GHG Regulatory Scheme
Under EPA's scheme for GHG regulation, states will-as ofJanuary 2, 2011- necessarily fall into one ofthree categories: (1) those with EPA-approved SIPs for GHG permitting that retain GHG permitting authority; (2) those without approved SIPs that have "elected" (e.g., by requesting a short SIP-call deadline) to allow EPAto permit GHG permitting under the FIP; and (3) those that lack an approved SIP but have not "elected" early federalization of their permitting programs. Whatever Texas' category, TCEQ will be significantly impacted ifEPA's GHG Rules are allowedto take effect. Ifthe GHG Rules are allowed to take effect, TCEQ will be compelled to revise its SIP and prepare to implement a GHG permitting program. In order to permit major GHG sources under the PSD program in Texas, TCEQ would have to: (1) amend its regulations to conform to the GHG Rules and any future statutory changes enacted by the Texas Legislature; and (2) hire and train additional personnel to handle the burden of GHG permitting. Because of the lead times required to accomplish these tasks, these activities would necessarily begin while Texas' challenges to EPA's GHG Rules are pending.
While prompt federalization of GHG permitting may provide interim legal authority for EPA to issue GHG permits, TCEQ would nevertheless still have to

.revise its SIP and prepare a workforce to handle the burden ofpermitting GHGs. Moreover, given the significant requirements ofimplementing a GHG permitting program (as detailed in section II.B ofthis Declaration) it is questionable whether, Page 6 of 15 Case: 10-1222 Document: 1266086 Filed: 09/15/2010 Page: 6

### under a federalized program, EPA would have the resources necessary to issue and monitor GHG permits. It 

### is foreseeable that EPA would have the authority but lack the staff to run a GHG permitting program for Texas' stationary sources. Indeed, in the preamble to the proposed FIP, EPA acknowledges its inability to permit GHG sources by inviting states to accept delegation of its authority to implementthe FIP.
In short, if the GHG Rules are allowed to take effect, TCEQ will have to marshal-atconsiderable expense-thelegal authority and the personnel necessary to implement them. But EPA has given TCEQ inadequate time to obtain the authority and capacity. This wouldtherefore cause an effective constructionbanthat is, Texas facilities will be unable to obtain PSD permits for GHGs-until Texas could assemble the necessary authority and resources. Finally, in the event the Court ultimately finds EPA's GHG scheme to be invalid, TCEQ would bearthe additional cost of rescinding its SIP revisions and possibly terminating the recently-hiredpersonnel. Following is a discussion ofthe harm associated with GHG SIP revisions, staffing a GHG permittingprogram, andthe effective construction ban.
A. Impactto TCEQ ofGHG SIP Revisions
Celiain provisions of the Texas Clean Air Act ("TCAA") present potential conflicts with EPA's GHG scheme. For instance, Texas' fee system was not designed with GHGs in mind, and it is not clear whether existing law authorizes TCEQ to collect fees for GHG emission. Moreover, fees for Title V permits are based on annual emission rates without regard to the type of air pollutant. The cunent fee is $33.71 per ton per year. In addition, section 382.0621(d) of the TCAA prohibits the imposition of fees for emissions above 4,000 tpy-a small fraction ofthe Tailoring Rule thresholds. Accordingly, even ifexisting law does allow TCEQ to impose such fees, the statute would force each source to pay the same' amount-currently, $134,840 peryear. Whether or not the Texas Legislature would have to enact new statutes, TCEQ would have to amend its rules to confonn to EPA's GHG Rules. For example, TCEQ's definition of "unauthorized emissions," at 30 Tex. Admin. Code § 

### 101.1(107), expressly excludes two ofthe six GHGs, namely, carbon dioxide and methane. Until TCEQ amends its rules, they will be deficient under EPA's GHG scheme.

Page 7 of 15

Case: 10-1222 Document: 1266086 Filed: 09/15/2010 Page: 7

### Rule amendments such as these typically will take approximately 12 months to cOp1plete. This includes the time necessary for regulatory analysis, drafting and publication of the proposed rule, the notice and**~omment** 

### period, drafting the response to comments, drafting ofthe final rq.le, and, finally, the Commission's adoption of the final rule. Moreover, they represent an additional burden on TCEQ. Without a stay ofthe GHG Rules, TCEQ would have to begin its SIP revisions before the Court has determined the validity ofEPA's GHG Rules. And given the time required for rulemaking, Texas would be unable to conform its SIP to the GHG Rules until well afterJanuary 2,2011.
B. ImpacttoTCEQ ofStaffing GHGPermitting Program If

### EPA's GHG Rules were to take effect, the demands on TCEQ's resources would be significant. In order to assess the effects ofthe Tailoring Rule, TCEQ staff under my supervision has projected the effect ofthe GHG Rules by examining the effectthey would have had ifthey were in place over the past ten years. We began with a detailed examination ofthe sources that would likely have required permits in each ofTCEQ's four air permitting sectors: combustion, chemical, mechanical, and oil and gas. We determined the number of facilities likely to exceed the Tailoring Rule thresholds and the rate at which these facilities undertake projects that would require PSD and Title Vpermitting action.
1. Additional Air Permitting Actions Resulting from GHG Rules

1. Combustion Sector 

### The Combustion Sector includes power plants, cement kilns, and lime kilns. Of these, power plants are the most common source ofGHGs, particularly gas turbine plants, which represent well over halfofthe number of sources across all sectors that are likely to trigger the Tailoring Rule's PSD and Title V applicability thresholds. A significant number ofcoke or coal-firedpower plants are also likely to trigger the thresholds. The remainder of the combustion sources includes biomass power plants, integrated gasification combined cycle ("IGCC") power plants, as well as the cement and lime kilns.
If EPA's GHG Rules had been in place over the past ten years, TCEQ staff estimates that the construction or modification of 110 power plants and 9 cement

.or lime kilns would have triggered the Tailoring Rule thresholds ·as major GHG

sources. Stated differently, TCEQ's Combustion Sector would have handled 119 PSDpermitting actions for GHGs overthe last 10 years ifthe GHG Rules hadbeen Page 8of 15 Case: 10-1222 Document: 1266086 Filed: 09/15/2010 Page: 8

### in effect. Accordingly, we would expect 12 additional PSD permitting actions each year from the Combustion Sector ifthe GHG Rules are allowed to take effect and would expect the same number of Title V SOP applications to result from these PSD actions.

ll. ChemicalSector 

### The Chemical Sector includes petroleum refineries and chemical manufacturing plants. Based on available data relating to combustion processes at these facilities, we estimate that 150 of Texas' chemical manufacturing plants and all 27 ofits refineries would exceed the Tailoring Rule thresholds. Based on an examination of data from the past 10 years, we would expect to receive 48.6 PSD GHG permitting actions per year for chemical manufacturing plants and 16 PSD GHG actions per year for refineries. Combined, the Chemical Sector would likely have approximately 65 additional PSD permitting actions each year attributable to the GHG Rules and would expect the same number of Title V SOP applications to result from these PSD actions.
iii. MechanicalSector 

### The Mechanical Sector includes the following source categories: glass production, iron and steel production, and pulp and paper manufacturing, among others. We examined the airpermits ofapproximately 39 facilities withinthese categories. Of these,we determined that 7 iron and steel facilities, 3 pulp and paper mills, and 5 glass production facilities would exceed the GHG thresholds in the Tailoring Rule. Based on the review ofthe Mechanical Sector air permits and historical data for the past 10 years, we predict that 8 additional PSD permitting actions will result each year inthe Mechanical Sector from the GHG Rules and that the same number· ofTitle V SOP applications will result from these PSD actions.

IV. Oil & Gas Sector 

### The Oil & 

### Gas Sector includes crude oil production sites, gas plants, ,and CO2 

### plants. We also include municipal solid waste ("MSW") landfills with this sector because they are handled by the same air permitting section. We examined the types of sources in this sector that could potentially trigger the GHG thresholds. We determined that reboiler and heater units typically found in this sector were unlikely to trigger the GHG thresholds in any real-world configuration, but determined that crude oil production sites, natural gas sites, CO2 

### plants, and MSW landfills could all trigger applicability. Page 9 of 15 Case: 10-1222 Document: 1266086 Filed: 09/15/2010 Page: 9

### We reviewed a representative sample offacilities in each ofthese categories, and determined the number of sources likely to exceed the GHG thresholds. Further, by reviewing permitting actions over the last 1 0**ye~rs,** 

### we determined the frequency at which these sources undertake projects that would require PSD permitting actions under the new GHGRules.
Based on our analysis, TCEQ would expect to see 82 additional PSD permitting actions and 688 additional Title V permitting actions per year in the Oil & 

### Gas Sector as aresult ofthe GHG Rules. Ofthe Title V actions, we wouldproject 165 additional SOP applications and 523 additional GOP applications each year. This includes 23 additional GOP applications each year for MSW facilities. The projected breakdown between SOP and GOP applications is conservative, since it is likely that even more ofthese facilities would require or choose the more laborintensive SOP, which allows for more tailoredpermittingrequirements.

v. Summary


### To review, TCEQ staffunder my supervision have conducted a careful sector-bysector and industry-by-industry analysis, including an examination of air permitting information dating back a decade, to determine the additional number of permitting actions likely to result from EPA's new GHG Rules at the Tailoring Rule thresholds. As summarized in the table below, we expect to receive, across all sectors, 167 additional PSD permitting actions, 250 Title V SOP actions, and 523 Title V GOP permits each year.

Page 10 of 15 Case: 10-1222 Document: 1266086 Filed: 09/15/2010 Page: 10Additional Additional Additional TitleV Title V PSD Industries SOP GOP permitting considered permitting permitting actions \ actions actions peryear peryear peryear Group

### t- Power Plant's; Combustion 

### Cement Kilns; Lime 12 12 0 Sector 

### Kilns Group 2- 

### Refineries; Chemical Chemical 

### Plants 65 65 0 Sector Group 3- 

### Glass Mfg.; Iron & 

### Steel Mechanical 

### Production; 8 8 0 Sector 

### Pulp & 

### PaperMfg. Group 4- 

### Crude Oil Production Sites; Gas Plants; Oil & Gas 

### CO2

### Plants; MSW 82 165 523 Sector 

### Landfills Total additional PSD and Title V permitting actions attributable to 

### 167 250 523 GHGRules peryear 

### 2. Additional FTEs Required for Program Expansion for GHGs TCEQ would have to significantly expand its capacity across several different divisions to handle the workload that would result from EPA's GHG Rules. The additional demand from PSD and Title Vprograms would have the greatest impact on the Air Permits Division and the Field Operations Division, but would also impact the Enforcement Division, Litigation Division, and Environmental Law Division.
With regard to the Air Permits Division, and as stated above, one FTE is expected to process 10 PSD permitting applications or 15 Title V SOP permitting applications or 65 Title V GOP applications each year. Accordingly, it would take an additional 42 staffFTEs, with the support ofan additional 4 supervisory FTEs, just to process these additional permit applications anticipated to result from the GHGRules. Page 11 of15 Case: 10-1222 Document: 1266086 Filed: 09/15/2010 Page: 11Based on current staffing ratios and the types of inspections and investigations expected to be required in the context ofGHG permits, the demand on the Field Operations Division would increase primarily due to the nu,mber offacilities that would require a Title V permit based on the new GHG Rules. Specifically, it would take an additional 34 staffFTEs and 3 supervisory FTEs to complete the inspections and investigations necessary to monitor compliance with the anticipated permits. Of these, only 2 staff FTEs would be dedicated to PSD permits.
The estimated impact on the Enforcement, Litigation, and Enviromnental Law Divisions are similarly based on current staffing ratios and the type ofworkthat is expected to be generated from the GHG permitting work. TCEQ would likely need an additional 5 FTEs in its Enforcement Division to address GHG-related permit violations; 1 FTE in its Litigation Division to handle GHG enforcement

. matters; and 2 FTEs in the Environmental LawDivision to handle GHGpermitting and rulemaking. As summarized in the table below, TCEQ staffhas determined that it would take approximately 91 new FTEs to handle the workload that would result frOln the number ofadditional PSD and Title V permitting actions estimated to result from EPA's GHG Rules.

Additional Additional Total



### . Additional TCEQ Division FTEs for FTEs for FTEs by PSD Title V Division Staff 17 25 Air Permits I 46 Supervisors 2 2 Staff 2 32 Field Operations 37 Supervisors 0 3 Enforcement 5 5 Litigation 1 1 Environmental Law 2 2 Total 91
While it is impossible to definitively detennine how many additional FTEs would be necessary to administer EPA's proposed GHG regulatory program, the projections I have detailed are consistent with TCEQ's course ofbusiness in its Page 12 of 15 Case: 10-1222 Document: 1266086 Filed: 09/15/2010 Page: 12

### hiring practice and would serve as the basis for hiring planning. Finally, these employees could not be justified if the Court finds EPA's GHG scheme to be invalid.
3. Timing ofHiring
The demand for additional capacity and therefore any hiring relating to the GHG Rules would ramp up over time. TCEQ would normally begin hiring and training several months in advance ofthe new permitting requirements taking effect, and it wouldhire in phases, rather than all 91 at once. IfTCEQ were preparing to handle GHG permitting beginning on January 2, 2011, it would already be well behind schedule for hiring and training.
To cover the projected demand of a new GHG permitting program as would be required underEPA's GHG Rules, TCEQ wouldplanto hire as follows:

• On or before the effective date of the newGHG requirements, all Air Permits Division FTEs for PSD permitting, numbering 17 staff and 2 supervIsors;

• No later than 6 months after the effective date, half of the Air Permits Division FTEs for Title V permitting, numbering 12 staffand 1 supervisor, and all Field Operations Division FTEs, numbering 34 staff and 3 supervisors; and

• No laterthan 12 months afterthe effective date, the remaining halfofthe Air Permits Division FTEs for Title V permitting, numbering 13 .staff and 1 supervisor, and all FTEs for the Enforcement, Litigation, and Environmental Law Divisions, numbering atotal of8FTEs.
4. TCEQ Will Bear Cost ofGHG Permitting
Sections 1l0(a)(2)(L) and 502(b)(3) ofthe CAA require the cost ofPSD and Title V permitting programs to be covered by fees paid by the regulated entities. However, TCEQ would have to amend the regulations that pertain to stationary source fees before TCEQ can begin to shift the program costs to industry. Accordingly, TCEQ will have to bear the costs ofthe PSD and Title V permitting programs, at least in the near term. TCEQ will be unable to recover those costs from EPA or industry ifthe Courtrejects EPA's GHG scheme.

Page 13 of 15 Case: 10-1222 Document: 1266086 Filed: 09/15/2010 Page: 13

### C. ConstructionBan
EPA's GHG scheme deprives Texas ofthe time it would require to assemble the appropriate legal authority and the staffing capacity necessary to issue GHG permits. Moreover, even ifTexas allowed EPA to federalize its air program such thatthere would be interim legal authority for EPAto issue GHGpermits in Texas, this would not solve the staffing issue. Accordingly, EPA's GHG scheme causes a construction ban on any project in Texas that would exceed the Tailoring Rule's GHG thresholds until EPA approves Texas' revised SIP or is able to fulfill the statutory requirements to impose a FIP and 

### eitherEPA or TCEQ can assemble the staffnecessaryto review applications and issue permits.
Based on the information presented above, the construction ban could affect as many as 167 projects within the first year-some ofwhich would be built outside ofTexas and some not at all. This would deprive Texans ofjobs constructing or operating GHG sources, deprive Texas industry ofbusiness opportunities, deprive the State oftax revenues associated with projects, and place Texas at a competitive disadvantagedto states thathave the legal authority to issue GHG permits.
The threat ofan unmanageable backlog ofpermit applications, questions about the legality of the GHG Rules, and uncertainty even about what constitutes GHG BACT-all ofwhich flow from EPA's GHG Rules-only exacerbate the problems that a functional construction ban would cause. Setting aside the harm to Texas industry and Texans who rely on it, EPA's scheme deprives TCEQ ofthe ability to fulfill its obligation to provide regulatory certainty and air permitting services to

. Texas industry. It 

### will harm the State of Texas and its residents, and frustrate

TCEQ's mission. 

## * * *
EPA's GHG Rules will undermine TCEQ's mission and operations. Ifthey are not stayed during the pendency ofTexas' appeals, they will cause TCEQ to expend significantresources to revise its SIP and prepare aworkforce to meetthe demands ofa new, and potentially short-lived, GHG program. In addition, they will cause a construction ban unless or until Texas can marshal the legal authority and staffing resources to meetthe demand for GHG permits."

Page 14 of 15 Case: 10-1222 Document: 1266086 Filed: 09/15/2010 Page: 14

# ft~ Steve Hagle Director, AirPermitsDivision Office ofPermitting and Registration Texas Commission on Environmental Quality
C,lQ,V'- SWORN TO AND SUBSCRIBED before me on the l)

-- day of September, 2010, to certify which, witness myhand and official seal.**",~·;~:i~·i/;;..** Jacqueline FrancesDuckworth 

### /

..**~.-:::Jb::.to**

### '\ Notary PubIic**i"'{.~)*i** StateofTexas ,/---

. • ............",l My Commission Expires •.•... ..•.• April 25, 2011**No~~** 13 ic in and for the State ofTexas My commission expires:**ke~** 

# \**~** "'51

### W \. 1

Page 15 of15 Case: 10-1222 Document: 1266086 Filed: 09/15/2010 Page: 15THE STATE OF TEXAS
COUNTY OF TRAVIS § § §

AFFIDA VITIDECLARA TIONIN SUPPORT OFMOTIONTO STAY
BEFORE ME, the undersigned authority, personally appeared Elizabeth Sifuentez, and being by me duly sworn onher oath states: "My name is Elizabeth Sifuentez. I am over 21 years ofage and am fully competent and duly authorized to make this Declaration. The facts contained in this Declaration are based on personal knowledge and are true and correct.
I am employed by the Texas Commission on Environmental Quality ("TCEQ") as the Director of the Budget and Planning Division. In this capacity, I am knowledgeable about TCEQ's budgets and budget planning processes. This Declaration addresses the dollar-cost to TCEQ associated with employing, training, and equipping the personnel that would be necessary to implement the Environmental Protection Agency's ("EPA's") greenhouse gas rules ("GHG Rules"), as well as the current economic challenges facing TCEQ and the State.
I. Costs Associated with Employing, Training, and Equipping Personnel Necessary for the GHG PermittingProgram
Mr. Steve Hagle, Director ofTCEQ's Air Permits Division, has represented to me that EPA's GHG Rules would require the addition of91 new full-time employees ("FTEs") across various TCEQ Divisions, as shown in the table below. Based on the FTE numbers provided to me, I have calculated the dollar-cost to TCEQ of employing, training, and equipping these new employees. Using TCEQ's standard costs for employees in each of the various positions, I have identified a total cost of$4,116,227 annually, plus startup costs totaling $933,750. The ongoing annual figure includes employees' salaries and the costs associated with training, travel, and other operational overhead. Startup costs, which include computer equipment and furniture, are $6,500 per employee, plus $9,250 in vehicle costs for each Field Operations employee. Case: 10-1222 Document: 1266086 Filed: 09/15/2010 Page: 1Additional FTE TCEQ Division FTEs by Total Costs Division Air Staff 42 $43,397 Permits Supervisors 4 $68,597 $2,097,062
Field Staff 34 $42,497 Operations
,Supervisors 3 $70,097 $1,655,189
Enforcement 5 $40,997 $204,985 Litigation 1 $52,997 $52,997 EnvironmentalLaw 2 $52,997 $105,994 TotalAdditional Staff 91 $4,116,227 and CostPerYear StartUp Costs, $933,750
These numbers exclude $1,092,631 each year to coverthe cost ofemployee retirement contributions, insurance, and other fringe benefits for the 91 employees, which is a fund obligation to the agency but does not require direct appropriations. The numbers also exclude the cost ofoffice space for the new employees. Accordingly, the figures understatethe full cost. The costs for the new program will accelerate quickly during its first 6 months. According to the hiring schedule provided by Mr. Hagle, the new program would be at no less than 20% capacity by the effective date ofthe GHG requirements, no less than 75% within 6 months ofthe effective date, and fully staffed approximately 12 months after the effective date. Ifthe Court finds EPA's GHG program to be invalid, TCEQ may have to dismantle the program even more quickly. If TCEQ were forced to terminate its recently-hired employees, it would have to pay a portion ofthe unemployment benefits for every former employee who worked at TCEQ for 6 months or more. II. Texas and TCEQ'sEconomic Challeges
The prospect of a costly new air permitting program comes at an inopportune time for the State of Texas and for TCEQ. The Texas State budget is currently projecting a shortfall ofapproximately $18 billion for the upcoming biennium. TCEQ's budget is dependent on appropriations by the Case: 10-1222 Document: 1266086 Filed: 09/15/2010 Page: 2Texas Legislature. The Governor's Office andLegislative BudgetBoardhas requested TCEQ and other state agencies to provide a 5% budget cut for the current biennium and an additional recommended 10% cut for the upcoming biennium. TCEQ does nothave discretionary funds that couldbe divertedto meetthe demand ofa new GHG permittingprogram."

# ~fue~ Director, Budget andPlanningDivision Texas Commission on Environmental Quality

SWORN TO AND SUBSCRIBED before me on the

# 9.th. day of September, 2010, to certify which, witness my hand and official seal.**~"'~'-""** ""**/~~\;MAAGAA!'f** 'fJACKSON [**~{.'** )*}. NOTARY PUBLIC \.'

......_ • .,. •••

' State ofTexas**~~~** Comm. Exp. 12·21-2013

# ~~Quk Notary PubliU in and for the State ofTexas My commission expires: 

### I d,-3/- 

## '3 Case: 10-1222 Document: 1266086 Filed: 09/15/2010 Page: 3