In the

United States Court of Appeals

For the Seventh Circuit

Nos. 09-1405 & 10-2123

NATURAL RESOURCES DEFENSE COUNCIL and

SIERRA CLUB, INC.,

Petitioners,

v.

LISA P. JACKSON, Administrator of the

Environmental Protection Agency,

Respondent.

AIR PERMITTING FORUM, et al.,

Intervening Respondents.

Petitions for Review of Orders of the

Environmental Protection Agency

ARGUED JUNE 3, 2011—DECIDED JUNE 16, 2011

Before EASTERBROOK, Chief Judge, and EVANS and

WILLIAMS, Circuit Judges.

EASTERBROOK, Chief Judge. Two sections of the Clean

Air Act provide that neither national nor state officials may make any changes that cause air quality to
2 Nos. 09-1405 & 10-2123

deteriorate in parts of the country that have yet to

attain the required standard. See sections 110(l) and 193,

codified at 42 U.S.C. §§ 7410(l), 7515. See also Environmental Defense v. Duke Energy Corp., 549 U.S. 561 (2007),

which discusses the new source review (NSR) program

against the background of the prevention-of-significantdeterioration (PSD or anti-backsliding) requirement. In

2002 the Environmental Protection Agency changed

the rules that determine when polluters need permits in

order to modify existing facilities—and, if they need

permits, what restrictions they carry. 67 Fed. Reg. 80,186

(Dec. 31, 2002). These new rules were challenged as

violations of §§ 7410(l) and 7515, among other statutes,

but the D.C. Circuit concluded that the new rules are

rational and consistent with the Act. New York v. EPA,

413 F.3d 3 (D.C. Cir. 2005). Along the way, the court

deemed unripe an argument that the agency’s new approach actually would lead to more emissions. 413 F.3d

at 43. The EPA’s models project that the new approach

will have neutral or beneficial effects on aggregate emissions; whether that is true, or instead backsliding

occurs, depends on data rather than lawyers’ arguments,

the court stated.

Businesses have argued that the new approach is

too strict rather than too lax. Our decision in United

States v. Cinergy Corp., 623 F.3d 455 (7th Cir. 2010), illustrates how one aspect of the current approach substantially limited the allowable emissions from aging coalfired power plants in need of major repairs—so much

so that a district court ordered an entire plant shut

down and emissions from other plants reduced. We
Nos. 09-1405 & 10-2123 3

reversed that decision, holding that the new approach

does not apply to the repair work in question, but our

opinion and the district court’s decision in Cinergy

show how the new approach can limit air pollution.

The Natural Resources Defense Council and the

Sierra Club, however, are convinced that the 2002 revisions will make pollution worse. Wisconsin’s latest implementation plan includes features from the 2002

federal regulations. The EPA approved Wisconsin’s plan.

72 Fed. Reg. 19,829 (Apr. 20, 2007); 73 Fed. Reg. 76,560

(Dec. 17, 2008); 75 Fed. Reg. 10,415 (Mar. 8, 2010) (denying

petition for reconsideration). The NRDC and the Sierra

Club have filed petitions for review, which repeat arguments that failed to persuade the D.C. Circuit in New

York. This proceeding is the first challenge to a specific

state plan that implements the 2002 changes; one other

is pending in the Sixth Circuit, and perhaps more are

in the works.

Three aspects of the 2002 revisions were contested in

New York and again here. First, the 2002 approach determines whether a modification requires a permit (and, if

so, what controls are necessary) by comparing actual

emissions in the past with projected actual emissions in

the future—rather than by comparing the maximum

potential emissions before the modification against maximum potential emissions after. The 2002 rules also

change the period in which these are compared, asking

about emissions over the course of a year rather than

emissions per hour. (The old approach favored repairs

that increased the number of hours a plant could operate
4 Nos. 09-1405 & 10-2123

while leaving emissions per hour unchanged; the new

approach treats more hours at the same level per hour

just like it treats holding constant the number of hours

but emitting more per hour.) It was the actual-to-projectedactual comparison that affected the electric utility in

Cinergy.

Second, the 2002 approach allows polluters to select

two years from a ten-year baseline to measure their past

emissions; the former approach used a shorter baseline.

Third, the 2002 approach allows a plantwide applicability limitations (PAL) calculation, similar to the “bubble” sustained in Chevron U.S.A. Inc. v. Natural Resources

Defense Council, Inc., 467 U.S. 837 (1984). Under PAL a

polluter can choose to treat its entire plant as the source

of emissions, which allows it to increase emissions

from one machine or process as long as it makes

offsetting reductions elsewhere in the plant. Under the

PAL program, a polluter needs a permit to make modifications or repairs only when they will increase

emissions from the plant as a whole.

The NRDC and the Sierra Club observe that all three

of these changes could lead to more pollution. Some,

such as the actual-to-projected-actual comparison, could

do this by making new permits so onerous that a firm

will choose to run an old plant into the ground without

repairs, avoiding a need to get a permit for modifications, even though old plants generally are dirtier

than new ones (or newly repaired ones). Others, such as

the ten-year baseline, could allow firms to choose their

two highest-emissions years from the decade, making it

seem as if their pollution has gone down even though
Nos. 09-1405 & 10-2123 5

today’s emissions are higher than the average from the

decade (or higher than the amount computed under the

shorter baseline under the former rules). Even the

plantwide limit could increase pollution, if emitters can

use reductions they would have made anyway to offset

increases elsewhere in a plant, increases that would have

required their own permits under pre-2002 rules.

These are not new arguments. They were presented

to the D.C. Circuit in New York, and that court sustained

the rules. See New York, 413 F.3d at 21–38. The D.C.

Circuit observed that the EPA was well aware of these

possibilities and took them into account when evaluating

the net effects of the 2002 revisions. The agency’s models

projected that the 2002 changes would either reduce

pollution or have no net effect. As the D.C. Circuit saw

things, scientific estimates, plus the presumption that

an agency’s estimates are rational, see FCC v. National

Citizens Committee for Broadcasting, 436 U.S. 775 (1978),

beat lawyers’ conjectures.

In the current litigation, NRDC and the Sierra Club

observe that the EPA is relying on the same models that

it used in 2002 and has no better reason now than it

did then to think that a concrete plan, such as Wisconsin’s, will curtail emissions. But if the EPA is in the

same position as 2002 (and 2005), so are petitioners. The

lineup is still: models on one side, lawyers’ talk on the

other. As in 2002 and 2005, the models supply substantial evidence for the EPA’s decision and show that it

is neither arbitrary nor capricious.

At oral argument, counsel for petitioners and the EPA

told us that about half of the states have changed
6 Nos. 09-1405 & 10-2123

their implementation plans to track the 2002 revisions.

We asked what effect these changes have had on aggregate emissions: neither side knew, and we have not

found any published studies on the subject. Counsel did

know, and debated the significance of, how many

permits have been issued in several of the states under

one or another feature of the 2002 approach. But the

statutes concern the quantity of emissions, not the

quantity of permits.

Petitioners rely on a prediction that the staff of Wisconsin’s Department of Natural Resources made in 2003,

a prediction that the state agency has since repudiated.

They complain that the EPA did not analyze this prediction adequately. But the way to test the EPA’s models is

not to compare them with someone else’s ballpark numbers. (The state agency’s staff did not have a model—at

least, did not reveal one—but made what seems to

have been a back-of-the-envelope calculation. The 2003

prediction comprises eight PowerPoint slides that give

conclusions without any supporting rationale, plus two

pages of tables that do not even hint at the method of

their derivation.) The way to test a model is to compare

its projection against real outcomes. Alternatively one

might validate a model by “retrodiction”—using the

model to “predict” past events. The two-in-ten rule, for

example, might allow a business to increase average

emissions, but does it? So far, we have no answer to that

question, either from actual experience in adopting

states or through efforts to test a model by retrodiction.

The experience in the states that have implemented

the 2002 revisions may vindicate the EPA or may refute
Nos. 09-1405 & 10-2123 7

it; as long as the judiciary remains behind the veil of

ignorance, it must accept the EPA’s projections. An

agency that clings to predictions rather than performing

readily available tests may run into trouble. See Bechtel

v. FCC, 10 F.3d 875 (D.C. Cir. 1993). At some point, preferring predictions over facts is no longer rational.

But challengers who fail to put data in the administrative record—likely because this record was assembled

before data from other states became available—cannot

complain that the agency continues to rely on models.

This conclusion makes it unnecessary to decide

whether §7515 applies to the 2002 regulation and state

plans that rely on it. The D.C. Circuit also ducked this

question. 413 F.3d at 43. Section 7515 says that a state

can’t change any “control requirement” that was “in effect

before November 15, 1990” in a nonattainment area,

unless “the modification insures equivalent or greater

emission reductions”. Intervenors have argued that the

new source review program is not a “control requirement”; resolution of that argument can await another day.

A few other subjects require brief attention.

Petitioners say that the EPA should have allowed

another round of comments after responding to their

comments on the Wisconsin plan. That’s not how

rulemaking works. An agency publishes draft rules;

private parties comment; the agency analyzes the comments and adopts a rule, making revisions as needed.

Unless the revisions materially change the text,

adding features that the commentators could not have

anticipated, there’s no need for another round of public
8 Nos. 09-1405 & 10-2123

comments. American Medical Association v. United States,

887 F.2d 760, 767–69 (7th Cir. 1989); Omnipoint Corp. v.

FCC, 78 F.3d 620, 631 (D.C. Cir. 1996). In other words, the

public gets to comment on the proposed rules, not on

the agency’s response to earlier public comments. The

EPA did not make any material change to Wisconsin’s

proposed implementation plan, so there was no need

for another round of comments.

Petitioners contend that Wisconsin’s plan contains a

technical error in its definition of “major modification.”

This was not pointed out to the EPA during the rulemaking and so has not been preserved for judicial review. Complainants must exhaust their administrative

remedies.

A final observation: If Wisconsin’s implementation of

the 2002 revisions turns out to allow more emissions, then

the state must do something else (or something more)

to curtail pollution. The EPA’s decision that Wisconsin

may put its plan into practice and find out what happens does not relieve the state of that statutory obligation.

The petitions for review are denied.

6-16-11