Document ID: EPA-HQ-OAR-2002-0068-2332
Agency: epa
Document Type: Supporting & Related Material
Title: 
Posted Date: 2004-01-16T05:00Z

BEFORE
THE
ADMINISTRATOR
UNITED
STATES
ENVIRONMENTAL
PROTECTION
AGENCY
__________________________________________
)
In
the
Matter
of
the
Final
Rule:
)
)
Approval
and
Promulgation
of
)
Implementation
Plans;
Prevention
of
)
RIN
2060­
AK28
Significant
Deterioration
(
PSD)
)
__________________________________________)

PETITION
FOR
RECONSIDERATION
Pursuant
to
Section
307(
d)(
7)(
B)
of
the
Clean
Air
Act,
42
U.
S.
C.
§
7607(
d)(
7)(
B),

the
undersigned
organizations1
petition
the
Administrator
of
the
Environmental
Protection
Agency
("
the
Administrator"
or
"
EPA")
to
reconsider
the
final
rule
captioned
above
and
published
at
68
Fed.
Reg.
74,483,
et
seq.
(
Dec.
24,
2003).
The
grounds
for
the
objections
raised
in
this
petition
arose
after
the
period
for
public
comment
and
are
of
central
relevance
to
the
outcome
of
the
rule.
The
Administrator
must
therefore
"
convene
a
proceeding
for
reconsideration
of
the
rule
and
provide
the
same
procedural
rights
as
would
have
been
afforded
had
the
information
been
available
at
the
time
the
rule
was
proposed."
42
U.
S.
C.
§
7607(
d)(
7)(
B).
2
On
October
27,
2003,
the
Federal
Register
published
notice
of
a
final
EPA
rule
entitled
"
Prevention
of
Significant
Deterioration
(
PSD)
and
Non­
Attainment
New
Source
Review
(
NSR):
Equipment
Replacement
Provision
of
the
Routine
Maintenance,
Repair
1
Petitioners
are:
Natural
Resources
Defense
Council,
Environmental
Defense,
Sierra
Club,
American
Lung
Association,
Communities
for
a
Better
Environment,
United
States
Public
Interest
Research
Group,
Clean
Air
Council,
Group
Against
Smog
and
Pollution,
Michigan
Environmental
Council,
and
Scenic
Hudson.

2
Petitioners
hereby
incorporate
by
reference
every
document
cited
in
this
petition.
2
and
Replacement
Exclusion."
68
Fed.
Reg.
61,248,
et
seq.
(
Oct.
27,
2003).
Although
the
preamble
to
the
October
27
notice
stated
that
the
rule
would
become
effective
automatically
on
December
26,
2003
in
all
areas
lacking
an
approved
PSD
program,
id.
at
61,276/
2,
none
of
the
regulatory
provisions
appearing
in
the
notice
actually
made
the
rule
effective
in
those
areas.

On
December
24,
2003,
the
undersigned
organizations
joined
three
others3
in
petitioning
the
Administrator
to
reconsider
the
rule
published
on
October
27.
That
same
day,
the
Federal
Register
published
notice
of
the
final
EPA
rule
captioned
above.
68
Fed.

Reg.
at
74,483,
et
seq.
The
December
24
notice
contained
regulatory
provisions
effectuating
that
which
the
October
27
notice
had
declared
only
in
preamble
language.

Specifically,
the
regulatory
provisions
published
on
December
24
made
the
October
27
rule
effective
as
of
December
26
in
all
areas
lacking
an
approved
PSD
program.
Id.
at
74,483/
3,
74,488­
91.
Also
on
December
24,
however,
the
United
States
Court
of
Appeals
for
the
District
of
Columbia
Circuit
issued
an
order
staying
the
October
27
rule
pending
judicial
review.
Order
in
State
of
New
York,
et
al.
v.
EPA,
No.
03­
1380
(
and
consolidated
cases)
(
D.
C.
Cir.
Dec.
24,
2003).

The
undersigned
organizations
submit
this
petition
to
ensure
that
the
reconsideration
requested
on
December
24
will
include
reconsideration
of
the
Administrator's
action
making
the
October
27
rule
effective
in
all
areas
lacking
an
approved
PSD
program.
Because
the
provisions
of
the
December
24
rule
incorporate
the
3
Three
of
the
organizations
that
joined
the
December
24
petition
concern
themselves
only
with
certain
areas
that
happen
to
have
approved
PSD
programs.
Accordingly,
those
organizations
do
not
join
this
petition.
3
provisions
of
the
October
27
rule
by
reference,
68
Fed.
Reg.
at
74,488­
91,
all
of
the
objections
raised
in
Petitioners'
petition
for
reconsideration
of
the
October
27
rule
are
applicable
to
the
December
24
rule.
Accordingly,
sections
I
through
III
of
this
petition,

infra,
are
identical
to
the
corresponding
sections
of
the
December
24
petition.
4
EPA
has
represented
to
Petitioners
that
unless
and
until
the
D.
C.
Circuit
lifts
its
December
24
stay,
the
December
24
rule's
incorporation
of
the
October
27
rule
into
federal
implementation
plans
for
areas
that
lack
an
approved
PSD
program
will
have
no
effect.
Petitioners
request
that,
in
order
to
avoid
confusion
in
the
regulated
community
and
the
general
public
regarding
the
December
24
rule's
effect,
EPA
publish
a
notice
in
the
Federal
Register
announcing
that
the
December
24
rule
is
stayed
pending
the
outcome
of
State
of
New
York,
et
al.
v.
EPA,
No.
03­
1380
(
and
consolidated
cases)
(
D.
C.
Cir.).

I.
EPA
is
Unable
to
Demonstrate
Legal
Authority
for
its
New
Interpretation
of
"
Any
Physical
Change
in
.
.
.
a
Stationary
Source."

EPA
acknowledges
that
it
has
reinterpreted
the
statutory
term,
"
any
physical
change
in
.
.
.
a
stationary
source,"
in
order
to
accommodate
the
breadth
of
the
exemption
that
the
new
rule
creates.
5
In
the
preamble
to
the
final
rule,
the
agency
puts
forward
a
4
As
Petitioners
noted
in
their
December
24
petition,
they
believe
that
their
extensive
comments
on
the
proposed
rulemaking,
published
at
67
Fed.
Reg.
80,290,
et
seq.
(
Dec.
31,
2002),
were
sufficiently
specific
to
put
EPA
on
notice
of
the
objections
raised
in
Sections
I
through
III.
However,
the
legal
rationale
offered
by
EPA
in
support
of
the
proposed
rule
was
sparse,
and
Petitioners
could
not
have
anticipated
the
array
of
new
legal
and
factual
justifications
asserted
by
EPA
in
the
preamble
to
the
October
27
final
rule.
Out
of
an
abundance
of
caution,
Petitioners
submitted
their
December
24
petition
(
and
now
submit
this
petition)
to
ensure
that
they
have
an
adequate
opportunity
to
raise
­­
and
that
EPA
has
an
adequate
opportunity
to
respond
to
­­
their
objections
to
the
rationales
that
appeared
for
the
first
time
in
the
preamble
to
the
October
27
rule.

5
"[
W]
e
have
previously
interpreted
'
change'
such
that
virtually
all
changes,
even
trivial
ones,
are
encompassed
by
the
CAA.
.
.
.
Upon
further
consideration
of
the
history
(...
footnote
continued
next
page)
4
number
of
new
rationales
(
covering
more
than
five
pages
in
the
Federal
Register)

intended
to
demonstrate
legal
authority
for
its
new
statutory
interpretation.
68
Fed.
Reg.

at
61,268/
3­
73/
3.
For
example,
EPA
argues
that
Congress
did
not
express
a
clear
intent
as
to
whether
the
activities
exempted
in
the
final
rule
should
trigger
NSR
and
claims
that
its
rule
represents
a
reasonable
interpretation
on
that
issue.
Id.

Although
Section
307(
d)(
3)(
C)
of
the
Act
requires
EPA
to
accompany
any
proposed
rule
with
"
the
major
legal
interpretations
and
policy
considerations
underlying
[
it],"
42
U.
S.
C.
§
7607(
d)(
3)(
C),
the
proposed
version
of
this
rule
made
no
mention
of
the
rationales
that
appeared
in
the
preamble
to
the
final
version.
6
The
grounds
for
Petitioners'

objections
to
those
rationales
thus
"
arose
after
the
period
for
public
comment"
and
are
appropriately
raised
in
this
petition.
See
id.
§
7607(
d)(
7)(
B).

Each
of
the
objections
set
forth
below
is
"
of
central
relevance
to
the
outcome
of
the
rule,"
id.,
because
each
one
demonstrates
that
the
rule
contravenes
the
Clean
Air
Act
and
is
arbitrary
and
capricious.
Id.
§
7607(
d)(
9)(
A).

A.
EPA's
Final
Rule
Contravenes
the
Plain
Intent
of
Congress.

There
is
no
merit
in
EPA's
claim
that
Congress
expressed
no
intent
on
the
question
at
issue.
To
the
contrary,
as
shown
below,
Congress
expressed
such
an
intent,

________________________________________
(...
footnote
continued
from
previous
page)
of
our
actions,
the
statute,
and
its
legislative
history,
EPA
believes
that
a
different
view
is
permissible,
and,
for
policy
reasons
discussed
above,
more
appropriate.
Therefore,
we
adopt
this
view
prospectively
in
today's
action."
68
Fed.
Reg.
at
61,272/
3.

6
In
the
notice
of
proposed
rulemaking's
"
Legal
Basis"
section,
which
was
only
two
paragraphs
long,
EPA
merely
asserted
that
"
Congress
did
not
intend
to
make
every
activity
at
a
source
subject
to
the
major
NSR
program,"
and
that
the
proposed
rule
"
will
improve
and
help
carry
out
the
purposes"
of
the
pre­
existing
regulatory
exemption
for
"
routine
maintenance,
repair
and
replacement."
67
Fed.
Reg.
at
80,296/
2.
5
and
EPA's
rule
contravenes
it.
Thus,
EPA's
claim
for
Chevron
deference
(
see,
e.
g.,
68
Fed.
Reg.
61270­
73)
must
be
rejected.
See
Cajun
Electric
Power
Cooperative
v.
FERC,

924
F.
2d
1132,
1136
(
D.
C.
Cir.
1991)
(
this
Court
"
ha[
s]
always
seen
the
first
step
[
of
Chevron]
as
one
conducted
under
de
novo
review,"
and
"[
a]
n
agency
is
given
no
deference
at
all
on
the
question
whether
a
statute
is
ambiguous")
(
emphasis
added);

Chevron,
U.
S.
A.
v.
Natural
Resources
Defense
Council,
467
U.
S.
837,
843
n.
9
(
1984)
(
if
Congress
has
expressed
an
intent
on
the
issue
at
hand,
that
intent
"
is
the
law
and
must
be
given
effect").
7
Section
111(
a)(
4).
The
Clean
Air
Act
requires
preconstruction
permits
for
new
major,
stationary
sources
of
air
pollution
as
well
as
modifications
of
such
sources.
See
42
U.
S.
C.
§
7475(
a)
(
Prevention
of
Significant
Deterioration,
or
"
PSD,"
permits
in
attainment
areas)
and
42
U.
S.
C.
§
§
7502(
c)(
5),
7503
(
Nonattainment
New
Source
Review,
or
"
NSR,"
permits
in
nonattainment
areas).
The
Act
defines
"
modification"
for
NSR
purposes
as
any
physical
change
in,
or
change
in
the
method
of
operation
of,
a
stationary
source
which
increases
the
amount
of
any
air
pollutant
emitted
by
such
source
or
which
results
in
the
emission
of
any
air
pollutant
not
previously
emitted.

Id.
§
§
7411(
a)(
4),
7479(
2)(
c),
7501(
4).
Thus,
the
Act
broadly
applies
NSR
to
"
any
physical
change,"
and
does
not
exempt,
or
authorize
exempting,
any
such
changes.

7
On
the
specific
issue
posed
in
Chevron,
the
Supreme
Court
held
that
Congress
had
not
expressed
a
clear
intent,
and
hence
reviewed
it
under
Step
Two.
However,
EPA's
apparent
attempt
to
infer
that
all
new
source
review
issues
are
therefore
within
Step
Two
is
meritless.
While
the
Chevron
Court
noted
the
paucity
of
statutory
guidance
on
the
meaning
of
the
term
"
stationary
source,"
see,
e.
g.,
467
U.
S.
at
859­
63,
here
EPA's
(...
footnote
continued
next
page)
6
Nonetheless,
EPA's
rule
unlawfully
purports
to
exempt
certain
physical
changes
from
NSR
based
on,
inter
alia,
their
cost
and
whether
they
alter
the
source's
original
design.

See,
e.
g.,
Sierra
Club
v.
EPA,
129
F.
3d
137,
140
(
D.
C.
Cir.
1997)
("
this
court
has
consistently
struck
down
administrative
narrowing
of
clear
statutory
mandates").

Indeed,
EPA
itself
confirms
in
the
preamble
to
the
final
rule
that
the
term
"
physical
change"
in
the
Act's
definition
of
"
modification"
could
"
encompass
a
range
of
activities
from
periodically
replacing
filters
in
production
machinery,
to
once­
in­

alifetime
anticipated
replacement
of
a
component,
to
complete
replacement
of
a
production
unit."
68
Fed.
Reg.
at
61,271/
3.
The
agency
acknowledges
that,
until
now,
it
has
always
read
"
any
physical
change"
to
refer
to
physical
activity
falling
anywhere
within
that
range.
Id.
at
61,272/
3
("
we
have
previously
interpreted
'
change'
such
that
virtually
all
changes,
even
trivial
ones,
are
encompassed
by
the
CAA").
But
now,
EPA
has
reinterpreted
"
any
physical
change"
to
refer
only
to
the
uppermost
end
of
that
range
 
the
narrow
domain
of
fundamentally
transforming
physical
changes
"
not
usually
seen
in
the
industry."
Id.
at
61,257/
3;
see
also
id.
at
61,255/
1
(
new
rule
"
automatically
excludes
from
major
NSR
functionally
equivalent
replacements
that
do
not
result
in
a
significant
change
to
the
fundamental
characteristics
of
the
process
unit").
This
violates
the
Act,

which
requires
NSR
for
"
any
physical
change"
that
increases
emissions
­­
not
just
for
some
of
them.
8
________________________________________
(...
footnote
continued
from
previous
page)
interpretation
transgresses
the
intent
of
Congress
expressed
in
Section
111(
a)(
4),
other
provisions
of
the
Act,
and
the
statutory
purposes.
8
EPA
argues
that
"'
any'
is
simply
a
modifier
that
does
not
change
the
meaning
of
the
word
it
modifies."
68
Fed.
Reg.
at
61,272/
3
n.
15.
But
EPA
itself
does
not
deny
that
the
plain
meaning
of
"
change"
encompasses
the
activities
exempted
by
the
October
2003
(...
footnote
continued
next
page)
7
Furthermore,
the
Seventh
Circuit's
decision
in
WEPCO
provides
strong
support
for
applying
§
111(
a)(
4)
as
written
­­
i.
e.,
to
"
any
physical
change"
that
increases
emissions.
In
WEPCO,
the
company
had
argued,
as
EPA
does
now,
that
"
a
unit
should
not
be
deemed
'
modified
as
a
result
of
the
replacement
of
equipment
with
equipment
similar
to
that
replaced
.
.
.
[
because]
such
like­
kind
replacement
does
not
'
change
or
alter'
the
design
or
nature
of
the
facility."
Wisconsin
Electric
Power
Co.
v.
Reilly,
893
F.
2d
901,
908
(
7th
Cir.
1990).
The
Seventh
Circuit
found
"
no
reason
to
believe"
that
Congress
intended
"
any
physical
change"
to
be
read
so
narrowly.
Id.
at
909:

[
W]
hether
the
replacement
of
air
heaters
and
steam
drums
is
a
'
basic
or
fundamental
change'
in
[
defendant's
facility]
is
irrelevant
for
our
purposes,
given
Congress's
directions
on
the
subject:
'
The
term
'
modification'
means
any
physical
change
.
.
.
.

Id.
at
908
(
emphasis
in
original).
See
also
id.
at
913
("
the
modification
provision
applies
to
any
physical
change,
without
regard
to
cost,
that
causes
an
increase
in
emissions")

(
emphasis
added).
Thus,
the
Seventh
Circuit
squarely
held
that
the
very
interpretation
of
"
any
physical
change"
that
EPA
now
advances
in
support
of
its
new
rule
contradicted
the
intent
of
Congress
clearly
expressed
in
the
language
of
the
statute.
9
________________________________________
(...
footnote
continued
from
previous
page)
rule.
Under
the
statutory
term
"
any,"
all
such
activities,
not
just
some
of
them,
constitute
modifications.

9
EPA
is
thus
incorrect
in
suggesting
that,
in
WEPCO,
the
Seventh
Circuit
simply
held
that
the
statute
did
not
require
the
interpretation
of
"
any
physical
change"
that
the
company
had
advanced.
68
Fed.
Reg.
at
61,273/
1.
What
the
Seventh
Circuit
actually
held
was
that
WEPCO's
interpretation
of
"
any
physical
change"
conflicted
with
the
intent
of
Congress
as
expressed
in
the
clear
language
of
the
statute.
WEPCO,
893
F.
2d
at
908­
09.
8
Statutory
Structure
and
Purpose.
Under
Step
One
of
Chevron,
467
U.
S.
at
843
n.
9,
agencies
and
courts
must
respect
the
intent
of
Congress
ascertained
through
"
traditional
tools
of
statutory
construction."
Among
those
tools
are
the
statutory
context.

See,
e.
g.,
Pilon
v.
USDOJ,
73
F.
3d
1111,
1122
n.
9
(
D.
C.
Cir.
1996)
("
A
provision
that
may
seem
ambiguous
in
isolation
is
often
clarified
by
the
remainder
of
the
statutory
scheme
­­
because
the
same
terminology
is
used
elsewhere
in
a
context
that
makes
its
meaning
clear,
or
because
only
one
of
the
permissible
meanings
produces
a
substantive
effect
that
is
compatible
with
the
rest
of
the
law.")
(
citation
and
internal
quotations
omitted).
And
of
course,
a
key
component
of
context
is
statutory
purpose.
Mova
Pharmaceutical
Corp.
v.
Shalala,
140
F.
3d
1060,
1067­
68
(
D.
C.
Cir.
1998)
("
We
are
not
quite
as
sanguine
as
the
district
court
that,
in
applying
the
first
prong
of
Chevron,
it
suffices
to
look
only
at
the
plain
language
of
the
statute.
In
expounding
a
statute,
we
must
not
be
guided
by
a
single
sentence
or
member
of
a
sentence,
but
look
to
the
provisions
of
the
whole
law,
and
to
its
object
and
policy.")
(
emphasis
added;
brackets,
citation
and
internal
quotations
omitted);
Sierra
Club
v.
EPA,
294
F.
3d
155,
161
(
D.
C.
Cir.
2002)

(
under
Chevron
Step
One,
Court
rejected
EPA
interpretation
that
would
"
subvert
the
purposes
of
the
[
Clean
Air]
Act"
by
allowing
delay
in
pollution
control
deadlines).

EPA
has
pointed
to
nothing
in
the
statutory
context
or
purpose
that
would
justify
interpreting
the
phrase
"
any
physical
change"
to
mean
anything
other
than
what
it
says.

To
the
contrary,
the
substantive
provisions
and
purposes
of
NSR
envision
careful
review,

and
application
of
specified
safeguards
(
such
as
BACT,
LAER,
and
offsets),
before
pollution
increases
are
allowed
from
new
or
modified
major
sources.
9
In
nonattainment
areas,
NSR
serves
as
a
key
component
of
the
statutory
program
for
attaining
health­
based
air
quality
standards
­­
an
objective
the
Supreme
Court
has
described
as
the
"
heart"
of,
and
"
central"
to,
the
Act.
Train
v.
Natural
Resources
Defense
Council,
421
U.
S.
60,
66
(
1975);
Union
Electric
Co.
v.
EPA,
427
U.
S.
246,
258
(
1976).

Thus,
in
Chevron
EPA
told
the
Supreme
Court
that
the
new
source
review
program
was
created
to
ensure
that
industrial
growth
did
not
worsen
air
quality.
As
the
Senate
Report
explained,
a
"
major
weakness
in
implementation
of
the
1970
Act
has
been
the
failure
to
assess
the
impact
of
emissions
from
new
sources
of
pollution
on
State
plans
to
attain
air
quality
standards
by
statutory
deadlines."
S.
Rep.
No.
95­
127,
supra,
at
55,
3
Leg.
Hist.
1429.
See
also
Hancock
v.
Train,
426
U.
S.
167,
194
(
1976).
Based
on
this
experience,
it
was
concluded
that
"[
s]
ome
mechanism
is
needed
to
assure
that
before
new
or
expanded
facilities
are
permitted,
a
State
demonstrate
that
these
facilities
can
be
accommodated
within
its
overall
plan
to
provide
for
attainment
of
air
quality
standards.
*
*
*
[
This
will]
assure
that
introduction
of
the
new
source
will
not
prevent
attainment
of
the
applicable
standard
by
the
statutory
deadline"
(
S.
Rep.
No.
95­
127,
supra,
at
55,
3
Leg.
Hist.
1429).
See
also
123
Cong.
Rec.
18018
(
1977)
(
remarks
of
Sen.
Muskie),
3
Leg.
Hist.
716;
123
Cong.
Rec.
18038
(
1977)
(
remarks
of
Sen.
Stafford),
3
Leg.
Hist.
771.
n.
33.

In
sum,
the
overarching
purpose
of
the
new
source
review
program
was
to
assure
that
new
plants
and
equipment
would
not
prejudice
the
transition
from
nonattainment
to
attainment.

EPA
Opening
Merits
Brief
in
Chevron,
U.
S.
A.
v.
NRDC,
S.
Ct.
82­
1005
(
Aug.
31,
1983),

1982
Lexis
U.
S.
Briefs
1005
(
emphasis
added).
Accord,
id.
(
NSR
program
"
is
designed
by
[
sic]
ensure
that
new
'
sources'
do
not
exacerbate
the
levels
of
pollution
and
thereby
prevent
reasonable
further
progress
and
timely
attainment")
(
emphasis
added);
id.
(
NSR
"
is
inextricably
tied
to
the
attainment
or
nonattainment
of
ambient
air
quality
standards")

(
emphasis
added);
EPA
Reply
Merits
Brief
in
Chevron
(
Feb.
17,
1984),
1982
Lexis
U.
S.
10
Briefs
1005
("
the
purpose
of
new
source
review
is
to
ensure
that
emissions
from
new
or
modified
sources
do
not
prejudice
the
transition
to
attainment")
(
emphasis
added);
id.

("
the
statutory
purpose
of
new
source
review"
is
"
to
ensure
that
emissions
resulting
from
economic
growth
and
industrial
expansion
do
not
interfere
with
the
goal
of
attainment")

(
emphasis
added).

In
the
1981
regulation
at
issue
in
Chevron,
EPA
provided
that
emissions
increases
at
a
source
did
not
constitute
a
modification
if
offset
with
contemporaneous
decreases
at
the
source,
but
at
the
same
time
the
agency
cautioned
that,
"[
i]
n
order
to
avoid
nonattainment
area
new
source
review,
a
major
plant
undergoing
modification
must
show
that
it
will
not
experience
a
significant
net
increase
in
emissions.
Where
overall
emissions
increase
significantly,
review
will
continue
to
be
required."
Chevron,
467
U.
S.
at
858
n.
30
(
quoting
rulemaking
preamble).
See
also
44
Fed.
Reg.
3,277
(
Jan.
16,
1979)

(
preamble
to
an
EPA
NSR
proposal,
quoted
by
EPA
in
its
Chevron
merits
brief,
stated
that
"
there
is
less
need
to
subject
a
modification
of
an
existing
facility
to
...
stringent
requirements
if
the
modification
is
accompanied
by
sufficient
intrasource
offsets
so
that
there
is
no
net
increase
in
emissions")
(
emphasis
added);
44
Fed.
Reg.
51,933
(
Sept.
5,

1979)
(
preamble
to
another
EPA
NSR
proposal,
quoted
by
EPA
in
its
Chevron
merits
brief,
stated:
"
If
the
level
of
emissions
allowed
in
the
SIP
is
low
enough
to
assure
reasonable
further
progress
and
attainment,
new
construction
or
modifications
with
enough
offset
credit
to
prevent
an
emission
increase
should
not
jeopardize
attainment.")

(
emphasis
added).

EPA
told
the
Supreme
Court
that
the
1981
regulation
"
allow[
ed]
industrial
growth
that
does
not
adversely
affect
air
quality
while
prohibiting
both
the
construction
of
all
11
new
facilities
and
the
renovation
of
existing
facilities
for
which
there
is
a
non­
de
minimis
emissions
increase."
EPA
Chevron
Reply
Br.
(
emphasis
added).
EPA
explained
that
the
1981
regulation
"
is
consistent
with
the
objectives
of
the
NSR
program,"
because
inter
alia
"[
i]
t
ensures
that
emissions
from
new
or
modified
sources
do
not
prejudice
attainment,"
it
"
holds
air
quality
harmless
on
the
road
to
attainment,"
and
"
it
requires
review
of
those
projects
that
could
interfere
with
achievement
of
national
air
quality
standards."
EPA
Chevron
Opening
Br.
(
emphasis
added).
Accord,
id.
("
The
plantwide
definition
is
well
suited
to
the
NSR
program
because
it
requires
new
source
review
in
those
instances
where
the
prospect
of
attainment
might
be
threatened
by
a
net
increase
in
emissions.")
(
emphasis
added).

The
October
2003
regulation
fails
these
very
tests.
A
physical
change
that
produces
no
net
increase
in
emissions
at
a
source,
or
even
one
that
produces
a
de
minimis
increase,
was
already
exempt
from
NSR
under
EPA's
preexisting
regulations.
In
sharp
contrast
to
that
approach,
the
October
2003
regulation
exempts
physical
changes
that
do
cause
significant
net
increases
in
emissions,
thus
jeopardizing
efforts
to
reach
attainment.

Accordingly,
the
October
2003
regulation
fundamentally
disserves
the
purposes
of
nonattainment
NSR.

With
respect
to
PSD
NSR,
the
same
analysis
holds
true.
In
PSD
areas,
NSR
is
"
the
principal
mechanism
for
monitoring
consumption
of
allowable
increments
and
for
preventing
significant
deterioration,"
Alabama
Power
Co.
v.
Costle,
636
F.
2d
323,
362
(
D.
C.
Cir.
1979)
(
emphasis
added),
thus
facilitating
achievement
of
PSD's
goals,
which
­­

as
repeatedly
emphasized
by
Congress
in
the
Act
itself
­­
encompass
air
quality.

The
purposes
of
th[
e
PSD]
part
are
as
follows:
12
(
1)
to
protect
public
health
and
welfare
from
any
actual
or
potential
adverse
effect
which
in
the
Administrator's
judgment
may
reasonably
be
anticipate[
d]
to
occur
from
air
pollution
or
from
exposures
to
pollutants
in
other
media,
which
pollutants
originate
as
emissions
to
the
ambient
air),
notwithstanding
attainment
and
maintenance
of
all
national
ambient
air
quality
standards;
(
2)
to
preserve,
protect,
and
enhance
the
air
quality
in
national
parks,
national
wilderness
areas,
national
monuments,
national
seashores,
and
other
areas
of
special
national
or
regional
natural,
recreational,
scenic,
or
historic
value;
(
3)
to
insure
that
economic
growth
will
occur
in
a
manner
consistent
with
the
preservation
of
existing
clean
air
resources;
(
4)
to
assure
that
emissions
from
any
source
in
any
State
will
not
interfere
with
any
portion
of
the
applicable
implementation
plan
to
prevent
significant
deterioration
of
air
quality
for
any
other
State;
and
(
5)
to
assure
that
any
decision
to
permit
increased
air
pollution
in
any
area
to
which
this
section
applies
is
made
only
after
careful
evaluation
of
all
the
consequences
of
such
a
decision
and
after
adequate
procedural
opportunities
for
informed
public
participation
in
the
decisionmaking
process.

42
U.
S.
C.
§
7470
(
emphasis
added).

By
allowing
physical
changes
to
escape
NSR
even
when
they
result
in
significant
emissions
increases,
EPA
fundamentally
disserves
each
and
every
one
of
these
purposes.

For
example,
the
unreviewed
emissions
increases
authorized
by
the
rule
manifestly
contravene
PSD
NSR's
purpose
"
to
assure
that
any
decision
to
permit
increased
air
pollution
in
any
area
to
which
this
section
applies
is
made
only
after
careful
evaluation
of
all
the
consequences
of
such
a
decision
and
after
adequate
procedural
opportunities
for
informed
public
participation
in
the
decisionmaking
process."
Id.
§
7470(
5)
(
emphasis
added).
13
Construing
other
Clean
Air
Act
provisions,
which
listed
air
quality
as
one
among
several
factors,
the
D.
C.
Circuit
has
indicated
that
air
quality
properly
dominates
the
task
of
interpretation.
Husqvarna
AB
v.
EPA,
254
F.
3d
195,
200
(
D.
C.
Cir.
2001)
(
construing
Section
213,
Court
holds:
"
The
EPA
did
not
deviate
from
its
statutory
mandate
or
frustrate
congressional
will
by
placing
primary
significance
on
the
'
greatest
degree
of
emission
reduction
achievable'
and
by
considering
cost,
noise,
energy
and
safety
factors
as
important
but
secondary
factors.
The
overriding
goal
of
the
section
is
air
quality
and
the
other
listed
considerations,
while
significant,
are
subordinate
to
that
goal.")
(
emphasis
added).
Accord,
American
Petroleum
Institute
v.
USEPA,
52
F.
3d
1113,
1120
(
D.
C.
Cir.

1995)
(
even
though
Section
211(
k)(
1)
authorizes
EPA
to
consider
non­
air­
quality
issues
such
as
"
cost"
and
"
energy
requirements,"
Court
held:
"
The
overriding
goal
is
air
quality,

and
the
other
listed
considerations
are
subordinate
to
that
goal.")
(
emphasis
added).
There
is
no
reason
to
conclude
that
air
quality
should
receive
any
less
weight
for
NSR
purposes
than
in
construing
these
other
provisions.
In
any
event,
whether
air
quality
is
the
dominant
factor,

it
clearly
is
an
important
one,
that
is
fundamentally
disserved
by
allowing
the
unreviewed
significant
emissions
increases
exempted
by
the
October
2003
rule.
Accordingly,
the
statutory
context
and
purpose
offer
no
basis
for
overriding
the
broad
applicability
of
Section
111(
a)(
4)
to
"
any
physical
change"
that
increases
emissions.
10
10
EPA
places
great
weight
on
Section
101(
b)(
1),
which
provides
that
among
the
Clean
Air
Act's
purposes
is
"
to
protect
and
enhance
the
quality
of
the
Nation's
air
resources
so
as
to
promote
the
public
health
and
welfare
and
the
productive
capacity
of
its
population."
42
U.
S.
C.
§
7410(
b)(
1),
cited
in
68
Fed.
Reg.
at
61,271/
1,
and
on
Section
160(
3),
which
provides
that
among
PSD's
purposes
is
"
to
insure
that
economic
growth
will
occur
in
a
manner
consistent
with
the
preservation
of
existing
clean
air
resources."
42
U.
S.
C.
§
7470(
3).
See
68
Fed.
Reg.
at
61,271/
1.
But
nothing
in
these
provisions
states
or
suggests
that
exemptions
should
be
carved
out
of
the
phrase
"
any
(...
footnote
continued
next
page)
14
By
allowing
massive
increases
in
actual
emissions,
with
the
meaningless
constraint
that
sources
not
exceed
potential
emissions
levels,
the
new
rule
actively
confounds
these
statutory
purposes.
EPA
has
noted
previously
that
such
actual
emissions
increases
­­
constrained
only
by
permitted
allowables
­­
would
interfere
with
the
assurance
of
economic
growth
in
a
manner
consistent
with
the
preservation
of
existing
clean
air
resources:

Finally,
one
of
the
most
troubling
side
effects
of
the
Exhibit
B
proposal
is
that
it
could
ultimately
stymie
major
new
source
growth
by
allowing
unreviewed
increases
of
emissions
from
modifications
of
existing
sources
to
consume
all
available
increment
in
PSD
areas.
After
the
minor
source
baseline
date
has
been
established
in
an
area,
all
increases,
whether
subject
to
major
NSR
or
not,
consume
increment.
As
illustrated
in
the
example
above,
under
the
CMA
Exhibit
B
test
an
old
grandfathered
source
could
experience
a
"
significant"
net
increase
in
annual
actual
emissions,
yet
it
would
not
necessarily
be
subject
to
review.
Since
increment
consumption
after
the
minor
source
baseline
date
is
calculated
based
on
actual
emissions
increases,
the
"
minor"
modification
of
the
grandfathered
source
would
still
consume
increment.
If
a
________________________________________
(...
footnote
continued
from
previous
page)
physical
change."
To
the
contrary,
Congress
believed
that
the
application
of
NSR
would
promote
economic
growth.
See
H.
R.
Rep.
No.
294,
95th
Cong.,
1st
Sess.
133
("
if
each
new
or
modified
source
is
located,
constructed,
and
operated
so
as
to
minimize
its
impact
on
available
clean
air
resources,
then
more
and
bigger
plants
will
be
able
to
locate
in
the
same
area
without
serious
air
quality
degradation").
With
regard
to
the
PSD
program
specifically,
the
four
statutory
purposes
that
EPA
conspicuously
ignores
express
Congress's
intent
to
protect
public
health
and
welfare
 
as
well
as
natural
resources
 
from
air
pollution
(
even
pollution
that
does
not
violate
national
air
quality
standards),
to
prevent
deterioration
of
air
quality,
and
to
ensure
careful
evaluation
of
"
any
decision
to
permit
increased
air
pollution"
in
clean
air
areas.
42
U.
S.
C.
§
7470(
1),
(
2),
(
4),
and
(
5).
EPA's
decision
to
allow
sources
to
undertake
emissions­
increasing
equipment
replacements
without
undergoing
NSR
contravenes
all
five
statutory
purposes
of
the
PSD
program.
In
any
event,
statutory
purposes
cannot
override
substantive
statutory
provisions
such
as
Section
111(
a)(
4).
See,
e.
g.,
Board
of
Governors
v.
Dimension
Financial
Corp.,
474
U.
S.
361,
373­
74
(
1986).
15
major
new
source
with
state­
of­
the­
art
emission
controls
proposes
to
locate
in
an
area
in
which
the
increment
has
been
consumed
in
this
manner,
it
would
be
barred
from
building
unless
and
until
the
increment
problem
was
resolved.
At
the
same
time,
older
plants
would
continue
to
be
able
to
make
changes
resulting
in
significant
unreviewed,
and
possibly
uncontrolled,
actual
emission
increases.

61
Fed.
Reg.
38250,
38270
(
July
23,
1996).

In
short,
the
plain
language
of
Section
111(
a)(
4),
buttressed
by
the
statutory
context
and
purposes,
express
Congressional
intent
that
NSR­
triggering
modifications
encompass
the
activities
exempted
by
EPA's
October
2003
rule.

B.
EPA
Has
Failed
to
Make
the
"
Extraordinary
Showing"
Necessary
to
Justify
Diverging
from
the
Act's
Plain
Meaning.

The
D.
C.
Circuit
has
held
that
an
agency
cannot
contravene
the
literal
meaning
of
statutory
language
unless
it
demonstrates
"
that,
as
a
matter
of
historical
fact,
Congress
did
not
mean
what
it
appears
to
have
said,
or
that,
as
a
matter
of
logic
and
statutory
structure,

it
almost
surely
could
not
have
meant
it."
Engine
Mfrs.
Assn.
v.
EPA,
88
F.
3d
1075,
1089
(
D.
C.
Cir.
1996).
In
this
case,
EPA
has
not
made
­­
and
cannot
make
­­
the
"
extraordinarily
convincing
justification"
needed
to
satisfy
that
test.
See
Appalachian
Power
Co.
v.
EPA,
249
F.
3d
1032,
1041
(
D.
C.
Cir.
2001).

1.
EPA
is
Unable
to
Demonstrate
That,
as
a
Matter
of
Historical
Fact,
Congress
Did
Not
Mean
to
Apply
NSR
to
"
Any
Physical
Change
in
.
.
.
a
Stationary
Source"
That
Increases
Emissions.

EPA
has
cited
no
evidence
that,
as
a
matter
of
historical
fact,
Congress
did
not
mean
NSR
to
encompass
"
any
physical
change"
that
increases
a
stationary
source's
16
emissions.
11
Its
assertions
concerning
congressional
purpose
are,
as
shown
below,

baseless.

2.
EPA
is
Unable
to
Demonstrate
That,
as
a
Matter
of
Logic
and
Statutory
Structure,
Congress
Could
Not
Have
Intended
to
Apply
NSR
to
"
Any
Physical
Change
in
.
.
.
a
Stationary
Source"
That
Increases
Emissions.

EPA
itself
characterizes
the
literal
interpretation
of
"
any
physical
change"
 
an
interpretation
that
lends
"
sweeping
coverage"
to
the
term,
Brief
for
Respondent
EPA
in
TVA
v.
EPA,
Case
No.
02­
1231­
E
(
11th
Cir.),
at
163
 
as
being
"
based
on
permissible
constructions
of
the
statute"
and
a
"
reasonable
accommodation
of
the
Clean
Air
Act's
competing
policies."
68
Fed.
Reg.
61272/
3
n.
14.
Moreover,
EPA
announces
that
it
"
shall
continue
to
seek
deference"
for
the
literal
interpretation
"
in
ongoing
enforcement
litigation."
Id.
The
agency
cannot
credibly
claim,
then,
that
a
literal
reading
of
"
any
physical
change"
would
lead
to
anomalous
or
absurd
results.

Moreover,
interpreting
"
any
physical
change"
in
accordance
with
its
plain
meaning
would
not
lead
to
anomalous
or
absurd
results.
The
determination
that
a
physical
change
has
occurred
within
the
meaning
of
Section
111(
a)(
4)
does
not,
by
itself,
trigger
NSR.
Instead,
NSR
applies
only
to
those
physical
changes
that
increase
emissions.

11
The
two
legislative
history
citations
offered
by
EPA
in
the
final
preamble,
see
68
Fed.
Reg.
61270/
1,
are
unavailing.
Both
of
them
relate
to
new
source
performance
standards,
not
NSR,
and
neither
supports
EPA's
attempt
to
limit
the
reach
of
the
statutory
phrase
"
any
physical
change."
See
H.
R.
Rep.
No.
294,
95th
Cong.,
1st
Sess.
185
("[
N]
ew
sources
must
minimize
emissions
in
order
to
maximize
growth
potential"),
id.
("
Building
control
technology
into
new
plants
at
the
time
of
construction
will
plainly
be
less
costly
then
requiring
retrofit
when
pollution
ceilings
are
reached.").
See
also
116
Cong.
Reg.
32918
(
September
21,
1970)
("
The
concept
is
that
wherever
we
can
afford
or
require
new
construction,
we
should
expect
to
pay
the
cost
of
using
the
best
available
technology
to
prevent
pollution.").
In
any
event,
EPA
cannot
"
resort
to
legislative
history
to
cloud
a
statutory
text
that
is
clear."
See
Ratzlaf
v.
United
States,
510
U.
S.
135,
147­
148
(
1994).
17
Furthermore,
under
EPA's
pre­
existing
NSR
regulations,
not
just
any
emissions
increase
triggers
NSR,
but
only
significant
increases
surpassing
specific
de
minimis
thresholds.
40
C.
F.
R.
§
§
51.165(
a)(
1)(
x)
and
52.21(
b)(
23)(
i)
(
establishing
significance
thresholds
for
five
pollutants;
e.
g.,
the
significance
threshold
for
nitrogen
oxides
emissions
is
set
at
40
tons
per
year);
68
Fed.
Reg.
61273/
3
("
An
existing
source
 
whether
grandfathered
or
not
 
triggers
NSR
only
if
it
makes
a
physical
or
operational
change
that
results
in
an
emissions
increase.
Thus,
a
facility
can
conceivably
continue
to
operate
indefinitely
without
triggering
NSR
 
making
as
many
physical
or
operational
changes
as
it
desires
 
as
long
as
the
changes
do
not
result
in
emissions
increases.
This
outcome
is
an
unavoidable
consequence
of
the
plain
statutory
language
....")
(
emphasis
added).
Since
changes
that
result
in
no
or
de
minimis
emissions
increases
are
already
exempt
from
NSR
under
EPA's
pre­
existing
regulations,
the
sole
effect
of
EPA's
new
regulation
is
to
exempt
physical
changes
that
do
produce
significant
emissions
increases.
It
is
utterly
implausible
to
argue
that
Congress
"
almost
surely
could
not
have
meant"
to
avoid
such
increases.

C.
EPA's
Attempts
to
Justify
Its
Interpretation
Are
Meritless.

In
an
effort
to
support
its
new
interpretation,
EPA
advances
several
meritless
arguments.
First,
EPA
claims
that
Congress
"
generally"
intended
existing
sources
to
escape
NSR.
Second,
EPA
argues
that
the
purpose
of
NSR
is
simply
to
define
the
opportune
time
for
sources
to
install
pollution
controls.
Third,
the
agency
invokes
a
congressional
ratification
argument.
All
of
these
arguments
are
baseless.

1.
EPA
Cannot
Shunt
Aside
the
Express
Terms
of
Section
111(
a)(
4)
in
Favor
of
an
Alleged
Congressional
Intent
that
Existing
Sources
"
Generally"
Avoid
NSR.
18
EPA
argues
that
a
literal
reading
of
"
any
physical
change"
would
"
fail
to
give
full
effect
to
Congress's
decision
that
existing
sources
generally
would
not
be
required
to
obtain
permits."
68
Fed.
Reg.
at
61,270/
1.
This
argument
must
be
rejected.

First,
the
word
"
generally"
appears
nowhere
in
Section
111(
a)(
4),
which
instead
prescribes
a
specific
test
defining
what
constitutes
a
"
modification"
triggering
NSR.
EPA
lacks
authority
to
shunt
that
test
aside
in
favor
of
a
presumption
of
the
agency's
choosing
­­
especially
one
that
lacks
any
support
in
the
statute,
legislative,
history
and
purposes,

and
indeed
contravenes
all
of
them.

Second,
Congress
made
clear
when
it
enacted
the
"
modification"
definition
in
1970
that
once
a
source
undertook
activity
meeting
that
definition,
it
no
longer
would
be
an
"
existing
source."
Specifically,
Congress
defined
"
new
source"
to
include
"
modification"
while
defining
"
existing
source"
simply
as
"
any
stationary
source
other
than
a
new
source."
Pub.
Law
91­
604
§
4(
a)
(
inserting
new
§
§
111(
a)(
2)
and
(
a)(
6));
see
also
Report
of
the
House
Committee
on
Interstate
and
Foreign
Commerce
on
the
Clean
Air
Act
Amendments
of
1970,
Rep.
No.
91­
1146,
91st
Cong,
2d
Sess.,
June
3,
1970
("
new
sources
may
take
the
form
either
of
entirely
new
facilities
or
expanded
or
modified
facilities
.
.
.
which
result
in
substantially
increased
pollution").
The
statutory
language
enacted
in
1970
reflects
Congress'
intent
that,
for
sources
already
in
operation,
as
opposed
to
"
entirely
new"
sources,
"
best
adequately
demonstrated
control
technology
is
considered
appropriate
when
any
physical
change
or
operational
change
is
made
which
causes
an
increase
in
emissions
to
the
atmosphere
(
this
is
a
modification)."
40
Fed.
Reg.

58,416,
58,417/
3
(
Dec.
16,
1975)
(
emphasis
added).
When
Congress
enacted
the
PSD
provisions
in
1977,
it
retained
the
distinction
between
"
modified"
sources
and
"
existing"
19
ones.
See
H.
R.
Rep.
No.
294,
95th
Cong.,
1st
Sess.
at
144
("
Only
new
or
modified
major
stationary
sources
are
required
to
obtain
a
State
permit
prior
to
construction.
(
No
permits
are
required
for
existing
sources
.
.
.)")
(
emphasis
added).
Thus,
even
if
Congress
had
expressed
an
intent
to
generally
shield
"
existing"
sources
from
"
new
source"

requirements,
that
intent
would
not
apply
to
sources
that
underwent
any
physical
or
operational
changes
that
increased
emissions.

2.
There
Is
No
Merit
to
EPA's
Claim
That
The
Purpose
Of
The
NSR
Provisions
Is
Simply
To
Require
The
Installation
Of
Controls
When
it
is
Opportune
For
a
Source
To
Do
So.

EPA
argues
that
Congress
could
not
have
meant
to
apply
the
NSR
requirements
to
"
any
physical
change"
that
increases
a
stationary
source's
emissions,
because,
"
with
respect
to
existing
sources,
the
purpose
of
the
NSR
provisions
is
simply
to
require
the
installation
of
controls
at
the
appropriate
and
opportune
time."
68
Fed.
Reg.
at
61,270/
3.

EPA
concedes
that
a
more
inclusive
definition
of
the
sources
subject
to
NSR
would
cause
many
sources
to
limit
their
emissions
to
avoid
an
NSR­
triggering
emissions
increase.
See
68
Fed.
Reg.
at
61270/
2.
However,
by
claiming
that
"
the
purpose
of
the
NSR
provisions
is
simply
to
require
the
installation
of
controls,"
id.
61270/
3,
EPA
untenably
argues
that
NSR
was
not
designed
to
encourage
sources
to
avoid
such
increases.
See
also
id.
61270/
2
("[
I]
t
is
[
not]
the
policy
of
the
CAA
to
seek
to
promote
emissions
reductions
by
forcing
new
limits
on
hours
of
operation
or
rates
of
production
of
existing
plants.").
EPA
claims
that
it
is
inopportune
for
sources
to
install
controls
when
they
are
undertaking
an
equipment
replacement
project
that
costs
no
more
than
twenty
percent
of
the
replacement
cost
of
the
affected
process
units,
and,
therefore,
that
Congress
could
not
have
intended
for
such
projects
to
be
subject
to
NSR.
Id.
EPA's
argument
is
baseless.
20
Initially,
it
bears
emphasis
that
EPA's
current
position
represents
a
dramatic
reversal
of
the
agency's
own
prior
recognition
that
nonattainment
NSR's
purpose
is
to
ensure
that
emissions
from
new
and
modified
sources
do
not
prejudice
efforts
to
attain
the
NAAQS.
See
pp.
7­
9,
supra.
Indeed,
the
October
2003
rule's
characterization
turns
on
its
head
the
approach
taken
by
EPA
in
the
1981
rule
at
issue
in
Chevron,
and
in
the
agency's
defense
of
that
rule
in
the
Supreme
Court.
The
predecessor
to
the
1981
rule
had
decided
that
the
trigger
for
NSR
should
be
set
so
as
to
encourage
installation
of
control
technology.
Specifically,
that
predecessor
rule
had
rejected
netting
in
nonattainment
areas,
arguing
that
by
doing
so
the
rule
"
will
bring
in
more
sources
and
modifications
for
review
and
will
require
better
pollution
control
technology
in
nonattainment
areas."
45
Fed.
Reg.
52,698
(
Aug.
7,
1980)
(
emphasis
added),
quoted
in
EPA's
Opening
Chevron
Brief.
The
1981
rule
rejected
that
control­
technology­
based
approach,
instead
opting
to
allow
netting
in
both
PSD
and
nonattainment
areas,
because
"
the
purpose
of
new
source
review
is
to
ensure
that
emissions
from
new
or
modified
sources
do
not
prejudice
the
transition
to
attainment."
EPA
Chevron
Reply
Br.
(
emphasis
added).
Accord,
pp.
7­
9,

supra
(
presenting
additional
quotes
to
similar
effect
from
EPA's
Chevron
briefs).

The
October
2003
rule
diametrically
contradicts
the
approach
embodied
in
the
1981
rule
and
EPA's
Chevron
briefs.
Specifically,
the
2003
rule
untenably
claims
that
emissions
in
nonattainment
areas
should
be
allowed
to
increase
without
benefit
of
NSR
safeguards,
simply
because
the
time
is
allegedly
not
opportune
for
installation
of
control
technology.
For
all
the
reasons
stated
below,
this
position
must
be
rejected.

Section
111(
a)(
4):
"
Increases
the
Amount
of
Any
Air
Pollutant
Emitted."
The
statutory
provision
that
EPA
purports
to
be
interpreting,
Section
111(
a)(
4),
does
not
even
21
mention
the
installation
of
controls.
See
42
U.
S.
C.
§
7411(
a)(
4)
(
requiring
NSR
for
"
any
physical
change
in,
or
change
in
the
method
of
operation
of,
a
stationary
source
that
increases
the
amount
of
any
air
pollutant
emitted.").
Rather,
the
words
that
Congress
actually
used
to
define
"
modification"
focus
expressly
on
whether
a
change
"
increases
the
amount
of
any
air
pollutant
emitted."
Id.
In
light
of
this
plain
statutory
language,
EPA's
argument
that
Congress
intended
for
NSR
to
apply
to
an
existing
source
only
when
it
is
"
appropriate
and
opportune"
for
that
source
to
install
controls
is
untenable.
12
Section
111(
a)(
4):
"
Change
in
the
Method
of
Operation."
By
claiming
that
Section
111(
a)(
4)
means
merely
that
sources
are
required
to
install
controls
when
it
is
opportune
for
them
to
do
so,
EPA
reads
the
term
"
or
change
in
the
method
of
operation"

out
of
the
statute.
Under
the
statute's
plain
terms,
any
change
in
the
method
of
operation
that
increases
emissions
triggers
NSR
as
a
"
modification"
even
if
the
operational
change
is
unaccompanied
by
a
physical
change.
An
operational
change
can
be
undertaken
without
any
significant
financial
expenditure
and
can
be
made
without
a
lengthy
shut
down
period.
Thus,
Congress
plainly
did
not
intend
for
Section
111(
a)(
4)
to
limit
NSR
applicability
to
circumstances
where
a
source
would
find
it
economically
"
opportune"
to
install
controls.
Rather,
the
plain
language
of
that
statutory
provision
makes
it
clear
that
Congress
intended
for
NSR
to
apply
whenever
a
source
undertakes
an
activity
that
increases
emissions,
regardless
of
whether
the
source
finds
it
opportune
to
install
controls
at
that
time.

12
In
any
event,
"
best
adequately
demonstrated
control
technology
is
considered
appropriate
when
any
physical
change
or
operational
change
is
made
which
causes
an
increase
in
emissions
to
the
atmosphere
(
this
is
a
modification)."
40
Fed.
Reg.
at
58,417/
3
(
emphasis
added).
22
NSR
Provisions
Demonstrating
that
Installation
of
Controls
Is
Not
Necessarily
Required,
Even
When
NSR
Is
Triggered.
EPA's
interpretation
of
the
statute
as
only
requiring
compliance
with
NSR
when
it
is
opportune
for
a
source
to
install
controls
is
also
unlawful
and
arbitrary
because
the
plain
language
of
the
statute
allows
a
source,

under
appropriate
circumstances,
to
comply
with
NSR
without
installing
controls.
The
"
best
available
control
technology"
("
BACT")
requirement
in
the
PSD
program
is
actually
"
an
emission
limitation,"
not
a
requirement
to
install
a
particular
type
of
pollution
control
equipment.
42
U.
S.
C.
§
7479(
3).
13
In
setting
a
BACT
emission
limit
for
a
source,
the
permitting
authority
must
consider
whether
the
limit
"
is
achievable
for
such
facility
through
application
of
production
processes
and
available
methods,
systems,

and
techniques,
including
fuel
cleaning,
clean
fuels,
or
treatment
or
innovative
fuel
combustion
techniques
for
control
of
each
such
pollutant."
Id.
(
emphasis
added).

Similarly,
the
statute
does
not
specify
a
particular
method
by
which
a
source
located
in
a
non­
attainment
area
is
to
attain
the
"
lowest
achievable
emissions
rate"
("
LAER").
See
id.

13
In
full,
the
statute
defines
BACT
as
"
an
emission
limitation
based
on
the
maximum
degree
of
reduction
of
each
pollutant
subject
to
regulation
under
this
chapter
emitted
from
or
which
results
from
any
major
emitting
facility,
which
the
permitting
authority,
on
a
case­
by­
case
basis,
taking
into
account
energy
environmental,
and
economic
impacts
and
other
costs,
determines
is
achievable
for
such
facility
through
application
of
production
processes
and
available
methods,
systems,
and
techniques,
including
fuel
cleaning,
clean
fuels,
or
treatment
or
innovative
fuel
combustion
techniques
for
control
of
each
such
pollutant.
In
no
event
shall
application
of
'
best
available
control
technology'
result
in
emissions
of
any
pollutants
which
will
exceed
the
emissions
allowed
by
any
applicable
standard
established
pursuant
to
section
7411
or
7412
of
this
title.
Emissions
from
any
source
utilizing
clean
fuels,
or
any
other
means,
to
comply
with
this
paragraph
shall
not
be
allowed
to
increase
above
levels
that
would
have
been
required
under
this
paragraph
as
it
existed
prior
to
enactment
of
the
Clean
Air
Act
Amendments
of
1990."
42
U.
S.
C.
§
7479(
3).
23
§
7501(
3).
14
In
light
of
the
plain
language
of
the
statute
envisioning
that
sources
can
comply
with
NSR
emissions
limits
without
necessarily
installing
pollution
control
technology,
Congress
plainly
did
not
intend
to
exclude
activities
from
NSR
on
the
basis
that
they
do
not
represent
an
opportune
time
to
install
controls.

Statutory
Provisions
Providing
for
Feasibility
Concerns
to
Be
Addressed
After
NSR
Has
Been
Triggered.
EPA's
decision
to
exclude
activities
from
NSR
based
on
the
economic
feasibility
of
installing
controls
also
ignores
other
provisions
in
the
statute
that
address
this
concern.
Specifically,
the
statute
explicitly
requires
that
the
BACT
limit
applied
to
a
new
or
modified
source
be
one
that
"
the
permitting
authority,
on
a
case­

bycase
basis,
taking
into
account
energy
environmental,
and
economic
impacts
and
other
costs,
determines
is
achievable
for
such
facility."
Id.
§
7479(
3).
Similarly,
the
CAA
exempts
a
new
or
modified
source
located
in
a
non­
attainment
area
from
having
to
achieve
"
the
most
stringent
emission
limitation
which
is
contained
in
the
implementation
plan
of
any
State
for
such
class
or
category
of
source"
if
"
the
owner
or
operator
of
the
proposed
source
demonstrates
that
such
limitations
are
not
achievable."
Id.
§
7501(
3).

The
legislative
history
of
the
1977
CAA
Amendments
indicates
that
Congress
intended
for
the
above
provisions
to
protect
a
source
from
being
made
to
adopt
cost­
prohibitive
14
The
statute
defines
LAER
as
"
for
any
source,
that
rate
of
emissions
which
reflects
 
(
A)
the
most
stringent
emission
limitation
which
is
contained
in
the
implementation
plan
of
any
State
for
such
class
or
category
of
source,
unless
the
owner
or
operator
of
the
proposed
source
demonstrates
that
such
limitations
are
not
achievable,
or
(
B)
the
most
stringent
emission
limitation
which
is
achieved
in
practice
by
such
class
or
category
of
source,
whichever
is
more
stringent.
In
no
event
shall
the
application
of
this
term
permit
a
proposed
new
or
modified
source
to
emit
any
pollutant
in
excess
of
the
amount
allowable
under
applicable
new
source
standards
of
performance."
42
U.
S.
C.
§
7501(
3).
24
control
strategies.
See
Conf.
Rep.
On
H.
R.
6161,
95th
Cong,
1st
Sess.
(
Aug.
3,
1977)
(
3
Leg.
Hist.
537)
("
If
the
cost
of
a
given
control
strategy
is
so
great
that
a
major
new
source
would
not
be
built
or
operated,
then
such
a
control
would
not
be
achievable
and
could
not
be
required
by
the
Administrator."),
H.
R.
Rep.
No.
294,
95th
Cong.,
1st
Sess.
215
(
same).
15
Indeed,
a
permitting
authority
theoretically
could
find
that
no
method
of
controlling
emissions
is
achievable
for
a
given
source.
16
Even
when
a
permitting
authority
concludes
a
source
is
unable
to
reduce
its
emissions
to
the
level
that
would
otherwise
be
required
by
BACT
or
LAER,
however,
the
statute
still
requires
the
source
to
comply
with
the
remaining
statutory
NSR
requirements.
For
example
a
source
located
in
a
non­
attainment
area
must
offset
any
emission
increase
with
emission
decreases
(
from
the
same
source
or
other
sources)
sufficient
to
ensure
that
overall
stationary
source
emissions
in
the
area
will
decrease.
42
U.
S.
C.
§
7503(
a)(
1)(
A).
Similarly,
a
source
15
By
applying
the
same
generic
twenty
percent
cost
threshold
to
sources
located
in
both
attainment
areas
and
non­
attainment
areas,
EPA's
new
rule
also
unlawfully
obviates
the
differences
between
the
statutory
PSD
and
non­
attainment
NSR
provisions.
Specifically,
while
CAA
Section
169(
3)
expressly
mentions
"
costs"
as
a
factor
to
be
taken
into
consideration
in
establishing
a
BACT
limitation,
no
express
mention
of
costs
appears
in
the
definition
of
LAER
set
forth
in
CAA
Section
171(
3).
Rather,
in
the
LAER
context,
the
legislative
history
indicates
that
Congress
only
intended
for
costs
to
be
taken
into
consideration
under
circumstances
where
the
cost
of
complying
with
a
particular
emission
limit
is
so
high
that
it
would
prevent
a
source
from
being
constructed
or
operated.
See
1977
Legislative
History
at
537
(
Conf.
Rept.);
H.
R.
Rep.
No.
95­
294
at
215.
EPA's
new
rule
unlawfully
and
arbitrarily
ignores
this
significant
difference
between
the
PSD
and
non­
attainment
NSR
provisions."

16
With
respect
to
LAER,
however,
if
the
permitting
authority
concludes
that
the
strictest
emission
limitation
contained
in
any
State
Implementation
Plan
is
unachievable,
the
source
still
is
required
to
comply
with
"
the
most
stringent
emission
limitation
which
is
achieved
in
practice
by
such
class
or
category
of
source,"
without
regard
to
whether
such
limit
is
achievable
by
the
individual
source.
See
42
U.
S.
C.
§
7501(
3).
25
located
in
an
area
with
relatively
unpolluted
air
must
ensure
that
increased
emissions
resulting
from
the
change
will
not
result
in
a
significant
deterioration
of
air
quality
or
cause
a
violation
of
the
NAAQS.
Id.
§
7475(
a)(
3).
Finally,
an
NSR
permit
cannot
be
issued
until
after
affected
members
of
the
public
are
notified
and
given
an
opportunity
to
comment.
Id.
§
7475(
a)(
2);
40
C.
F.
R.
§
§
51.160,
51.161
(
providing
for
a
30­
day
public
comment
period).

Because
Congress
specifically
required
that
concerns
about
achievability
of
emissions
limits
be
addressed
during
the
NSR
process
(
for
the
purpose
of
establishing
a
BACT/
LAER
emissions
limit),
Congress
could
not
have
intended
for
the
economic
feasibility
of
installing
controls
to
serve
as
a
basis
for
entirely
exempting
a
source
from
the
NSR
program.
Thus,
EPA
acted
unlawfully
and
arbitrarily
in
exempting
a
large
category
of
equipment
replacements
from
NSR
on
the
basis
that,
inter
alia,
these
activities
do
not
cost
enough
to
justify
the
expense
of
installing
controls.

Statutory
Provisions
Providing
for
Case­
by­
Case
Determination
of
Feasibility.

EPA's
blanket
determination
that
the
cost
of
installing
controls
is
infeasible
when
an
activity
costs
no
more
than
twenty
percent
of
the
replacement
cost
for
the
entire
process
unit
also
disregards
Congress'
statutory
directive
that
the
achievability
of
control
measures
be
determined
on
a
case­
by­
case
basis.
See
42
U.
S.
C.
§
7479(
3)(
requiring
the
permitting
authority
to
determine
"
on
a
case­
by­
case
basis,
taking
into
account
energy
environmental,
and
economic
impacts
and
other
costs"
what
is
achievable
by
a
particular
facility),
id.
§
7501(
3)
(
enabling
"
the
owner
or
operator
of
the
proposed
source
[
to]

demonstrate[]
that
such
limitations
are
not
achievable.")
By
EPA's
own
admission,
the
cost
of
installing
controls
varies
widely
from
source
to
source.
See
68
Fed.
Reg.
61,258/
1
26
(
Stating
that
"
20
percent
.
.
.
represents
the
approximate
cost
of
retrofitting
existing
[
electric
utility]
plants
with
state­
of­
the­
art
controls,"
and
admitting
that
"
the
relative
costs
of
air
pollution
controls
in
other
industries
vary
more
widely.").
Moreover,
EPA
admits
that
"[
t]
here
is
obviously
no
single
answer
to
the
question
of
at
what
point
[
the
cost
of
installing
controls]
becomes
the
deciding
factor
in
an
owner's
decision
whether
to
replace
a
piece
of
equipment."
Id.
Despite
this
admitted
variability,
EPA
concluded
that
it
was
justified
in
establishing
a
general
cost
threshold
for
NSR
applicability
because
"
the
costs
and
technical
issues
associated
with
retrofitting
air
pollution
controls
factor
significantly
into
equipment
replacement
decisions."
Id.
EPA's
establishment
of
such
a
threshold
disregards
the
statutory
language
providing
for
case­
by­
case
achievability
determinations.

1977
Legislative
History.
The
legislative
history
of
the
1977
CAA
Amendments
confirms
that
Congress
did
intend
to
further
the
air
quality­
based
purposes
of
the
Act
by
encouraging
sources
to
find
ways
to
limit
their
emissions
to
avoid
triggering
NSR.
See
H.
R.
Rep.
No.
95­
294,
95th
cong,
1st
Sess.
(
May
12,
1977),
at
217
(
4
Leg.
Hist.
2,684)
(
In
discussing
the
requirement
that
sources
pay
a
fee
to
obtain
an
NSR
permit,
stating
that
the
fee
"
should
create
further
incentive
for
the
development
of
nonpolluting
processes
that
would
not
require
a
permit.")(
emphasis
added).
That
intent
is
further
supported
by
the
legislative
history
demonstrating
that
Congress'
primary
goal
in
adopting
the
NSR
provisions
was
to
protect
public
health
from
the
dangers
posed
by
unhealthy
air
quality.

See
id.
at
208
(
4
Leg.
Hist.
2,675)
(
In
discussing
the
non­
attainment
NSR
provisions,

stating
that
"
protection
of
the
public
health
remains
the
predominant
goal
of
the
Clean
Air
Act.");
Conf.
Rep.
On
H.
R.
6161,
95th
Cong,
1st
Sess.
(
Aug.
3,
1977)
(
3
Leg.
Hist.
27
537)
(
declaring
that
in
administering
the
non­
attainment
NSR
provisions,
"
health
considerations
are
of
primary
importance.").

1990
Amendments.
The
1990
Amendments
further
confirm
the
error
in
EPA's
interpretation.
Those
amendments
enact
a
variety
of
detailed
provisions
carefully
calibrating
the
applicability
and
contours
of
NSR
in
various
kinds
of
nonattainment
areas
­­
including
not
only
provisions
specific
to
particular
pollutants
(
such
as
ozone
and
particulate
matter)
but
even
to
classifications
within
a
given
pollutant.
See,
e.
g.,
42
U.
S.
C.
§
§
7511a,
7512a,
7513a
(
including
provisions
governing
tonnage
thresholds
for
major
sources,
ratios
for
offsets,
and
netting
at
existing
sources).
These
carefully
crafted
provisions
show
that
Congress
intended
the
NSR
requirements
to
play
an
integral
role
in
the
statutorily
mandated
effort
to
clean
up
areas
violating
federal
health
standards.
EPA's
interpretation
undermines
that
intent
by
allowing
sources
to
undertake
physical
changes
without
an
obligation
to
either
avoid
the
resulting
significant
emissions
increases
or
undergo
NSR.

In
addition,
specific
aspects
of
these
amendments
further
undercut
EPA's
rationale.
For
example,
Congress
adopted
several
different
tonnage
thresholds
for
"
major
source,"
with
lower
thresholds
applicable
in
more
polluted
areas.
As
to
ozone
serious
areas,
for
example,
the
authors
described
these
lowered
thresholds
as
having
three
principal
effects,
first
of
which
is
that
"
new
or
modified
sources
emitting
50
tons
or
more
per
year
of
VOCs
will
be
subject
to
new
source
review
requirements."
H.
R.
Rep.
No.

101­
490
at
238
(
emphasis
added).
Similar
explanations
were
expressed
as
to
other
categories
of
nonattainment
areas.
Id.
at
242
(
major
source
definition
for
ozone
severe
areas
has
"
the
same
principal
effects
as
described
for
serious
areas");
243
(
same
for
ozone
28
extreme
areas);
267
(
similar
comment
addressing
particulate
matter
serious
areas).

Indeed,
Congress
emphasized
that
sources
emitting
less
than
the
Section
302(
j)
100­
ton
threshold
are
a
significant
part
of
the
emissions
inventory.
Id.
at
234.
This
emphasis
on
the
importance
of
sources
that
add
50,
25,
or
even
10
tons
of
pollutants
undercuts
EPA's
argument
that
avoiding
such
amounts
of
emissions
increases
is
not
a
statutory
purpose
of
NSR.

Likewise,
the
1990
Amendments
include
provisions
governing
the
practice
of
netting
to
avoid
triggering
modification­
based
NSR.
42
U.
S.
C.
§
§
7511a(
c)(
7),
(
e)(
2).

The
authors
explained
that
"[
t]
he
netting
process
allows
sources
making
modifications
that
would
otherwise
be
subject
to
the
new
source
review
requirements
of
the
Clean
Air
Act
to
escape
such
requirements
upon
a
showing
that
the
emissions
increase
associated
with
the
modification
is
'
netted
out'
to
a
'
de
minimis'
overall
level
by
emission
decreases
from
elsewhere
within
the
source."
H.
R.
Rep.
No.
101­
490,
at
234­
35
(
emphasis
added).

These
netting
provisions
and
their
authors'
explanation
further
refute
EPA's
argument
that
Congress
did
not
intend
sources
to
avoid
emissions
increases
that
might
otherwise
trigger
NSR.

Moreover,
by
establishing
important
limitations
on
the
availability
and
use
of
netting,
the
1990
Amendments
confirmed
the
importance
Congress
attached
to
pollution
increases
below
the
Section
302(
j)
100­
ton
threshold.
For
example,
Congress
deemed
below­
100­
ton
pollutant
increases
so
important
that
it
expressly
prescribed
a
25­
ton
maximum
de
minimis
level
for
determining
the
applicability
of
modification­
based
NSR
in
serious
and
above
areas.
42
U.
S.
C.
§
7511a(
c)(
6);
H.
R.
Rep.
No.
101­
490,
at
241.
29
Once
again,
these
amendments
undercut
EPA's
argument
that
avoiding
emissions
increases
of
that
magnitude
is
outside
Congress's
purposes.

Netting.
EPA's
claim
that
Congress
did
not
intend
to
encourage
sources
to
avoid
NSR
by
limiting
their
emissions
disregards
the
longstanding
agency
and
judicial
provisions
regarding
netting.
Specifically,
under
EPA's
longstanding
regulations,
and
Alabama
Power,
636
F.
2d
at
400­
03,
sources
can
avoid
an
NSR­
triggering
modification
by
avoiding
emissions
increases
through
netting.
Alabama
Power
stated
that
"
Congress
wished
to
apply
the
permit
process
...
only
where
industrial
changes
might
increase
pollution
in
an
area,
not
where
an
existing
plant
changed
its
operations
in
ways
that
produced
no
pollution
increase.
It
is
true
that
Congress
intended
to
generate
technological
improvement
in
pollution
control,
but
this
approach
focused
upon
rapid
adoption
of
improvements
in
technology
as
new
sources
are
built,
not
as
old
ones
were
changed
without
pollution
increase."
636
F.
2d
at
401
(
emphasis
added;
internal
quotations
and
footnote
omitted).

Likewise,
in
upholding
EPA's
netting
regulations,
Chevron
noted
that
EPA
had
advanced
a
"
reasonable
explanation
for
its
conclusion
that
the
regulations
serve
the
environmental
objectives"
of
the
Act.
467
U.
S.
at
863.
That
EPA
explanation
expressly
noted
that,
"[
i]
n
order
to
avoid
nonattainment
area
new
source
review,
a
major
plant
undergoing
modification
must
show
that
it
will
not
experience
a
significant
net
increase
in
emissions.
Where
overall
emissions
increase
significantly,
review
will
continue
to
be
required."
Id.
at
858
n.
30
(
emphasis
added)
(
quoting
EPA
rulemaking
preamble).
In
short,
the
very
concept
of
netting
is
one
based
on
limiting
emissions
increases
to
avoid
30
new
source
review
­­
precisely
the
conduct
that
EPA
now
says
is
outside
the
scope
of
Congress'
NSR
intent.

De
Minimis
Thresholds.
EPA's
claim
also
disregards
the
fundamental
basis
underlying
the
de
minimis
exemptions
defining
significance
levels,
below
which
emissions
increases
do
not
constitute
modifications
triggering
NSR.
Specifically,
EPA
based
those
exemptions
on
the
air
quality
impact
that
emissions
increases
cause.
45
Fed.

Reg.
52,705­
10
(
Aug.
7,
1980).

Concerning
criteria
pollutants,
for
example,
EPA
noted
that
"
extensive
health
and
welfare
information
has
been
developed
and
documented
in
the
respective
criteria
documents;"
that
"
it
appeared
reasonable
...
to
base
criteria
pollutant
de
minimis
cutoffs
on
air
quality
'
design
values,'"
and
that
"[
t]
he
primary
standard"
­­
i.
e.,
the
health­
based
NAAQS
­­
"
was
chosen
as
the
basis
for
design
values."
Id.
at
52,707.
Having
selected
design
values,
the
agency
went
on
to
choose
specific
significance
levels
within
the
resulting
range,
indicating
that
the
"
primary"
factor
guiding
the
selection
of
such
levels
was
"
the
cumulative
effect
on
increment
consumption
of
multiple
sources
in
an
area
each
making
the
maximum
de
minimis
emissions
increases
(
thereby
going
unreviewed
under
PSD
at
the
time
of
the
change)."
Id.

Considering
the
air
quality
impact
of
the
significance
levels
also
fits
within
the
rationale
articulated
by
Alabama
Power
for
de
minimis
exemptions
­­
i.
e.,
that
such
exemptions
may
be
appropriate
"
when
the
burdens
of
regulation
yield
a
gain
of
trivial
or
no
value,"
but
not
"
where
the
regulatory
function
does
provide
benefits,
in
the
sense
of
furthering
the
regulatory
objectives,
but
the
agency
concludes
that
the
acknowledged
benefits
are
exceeded
by
the
costs."
636
F.
2d
at
360­
61.
31
These
regulatory
and
judicial
authorities
flatly
contradict
EPA's
current
position
that
NSR's
statutory
purposes
do
not
encompass
avoiding
emissions
increases,
and
the
health
and
environmental
impacts
associated
with
such
increases.

Inconsistency
Between
Treatment
of
New
and
Modified
Sources.
EPA's
claim
that
NSR
only
addresses
installation
of
emission
controls,
not
avoiding
emissions
increases,
ignores
the
statutory
context
provided
by
Section
169(
1),
and
would
anomalously
create
inconsistency
between
the
requirements
governing
modified
sources
and
those
governing
new
sources.
Under
Section
169(
1),
a
new
source
must
undergo
NSR
if
its
emissions
or
potential
emissions
exceed
specified
thresholds.
Concerning
this
provision,
the
D.
C.
Circuit
has
stated:
"
The
purpose
of
Congress
was
to
require
preconstruction
review
and
a
permit
before
major
amounts
of
emissions
were
released
into
the
air."
Alabama
Power,
636
F.
2d
at
353
(
emphasis
added).

Thus,
new
sources
may
avoid
triggering
applicability
of
NSR
by
limiting
their
emissions
so
as
to
stay
beneath
the
Section
169(
1)
thresholds.
Indeed,
Alabama
Power
expressly
held
that
such
emissions
avoidance
must
be
taken
into
account
in
determining
whether
the
Section
169(
1)
potential
emissions
thresholds
have
been
met.
For
example,
a
source
whose
uncontrolled
emissions
were
100
tons,
would
­­
by
applying
99%
effective
particulate
matter
controls
­­
"
emit
in
actuality
less
than
one
ton
per
year."
Id.
at
354
(
emphasis
added).
Under
the
Alabama
Power
holding,
that
emission
reduction
must
be
considered
in
calculating
NSR
applicability
under
Section
169(
1).
Thus,
EPA's
approach
requires
the
assumption
that
avoiding
emissions
in
the
new
source
applicability
context
is
within
the
statutory
purposes,
but
avoiding
emissions
in
the
modified
source
applicability
32
context
is
not.
That
approach
is
a
truly
anomalous
reading,
and
one
that
creates
an
unnecessary
and
unwarranted
inconsistency
between
Sections
111(
a)(
4)
and
169(
1).

In
short,
EPA's
assertion
that
the
purpose
of
NSR
is
simply
to
identify
an
opportune
time
to
install
pollution
controls,
not
to
avoid
emissions
increases,
is
not
only
diametrically
opposite
to
the
agency's
own
prior
reading,
but
is
also
refuted
by
the
language
of
Section
111(
a)(
4),
as
well
as
the
statutory
context
and
purpose
and
the
legislative
history.

EPA
and
the
courts
have
long
recognized
that
one
of
the
central
policies
of
the
Clean
Air
Act
and
its
NSR
program
is
to
minimize
emissions
increases
associated
with
increased
utilization
 
whether
increases
in
production
or
production
time.
Indeed,
EPA
has
said
that
it
is
improper
to
exclude
modifications
that
are
likely
to
increase
utilization,

because
this
results
in
higher
levels
of
emissions.
These
statements
make
clear
that
it
is
very
much
the
policy
of
the
Clean
Air
Act
to
limit
emissions
increases
and
to
promote
emissions
reductions
by
regulating
emissions­
increasing
changes
that
increase
utilization:

 
"
Moreover,
virtually
any
major
capital
improvement
project
at
an
existing
source
is
designed
in
part
to
increase
efficiency
of
production,
and
this
will
in
turn
almost
always
have
the
collateral
effect
of
reducing
emissions
per
unit
of
production,
even
though
it
may
provide
an
economic
incentive
to
increase
total
production,
with
the
net
result
that
actual
emissions
of
air
pollution
to
the
atmosphere
could
increase
significantly.
There
is
nothing
in
the
statutory
terms
or
structure
or
in
EPA's
regulations
which
suggests
that
such
major
changes
should
be
accorded
exempt
status
under
the
NSR
program.
 
See
also
Puerto
Rican
Cement
Co.
v.
EPA,
889
F.
2d
292,
297­
98
(
1st
Cir.
1989)
(
modification
of
emissions
unit
that
decreases
emissions
per
unit
of
output,
but
may
result
in
sufficient
production
increase
such
that
actual
emissions
will
increase,
is
subject
to
PSD)."
Detroit
Edison
Applicability
Determination,
at
5­
6,
n.
1,
Enclosure
to
Letter
from
Francis
X.
Lyons,
EPA
Regional
Administrator,
to
Henry
Nickel,
33
Counsel
for
the
Detroit
Edison
Company
(
May
23,
2000)
(
emphasis
added).

 
"
The
argument
that
only
changes
that
increase
a
unit's
emissions
rate
can
trigger
the
NSR
modification
provisions
has
been
rejected
by
two
courts
of
appeals.
As
noted,
see
supra
note
1,
in
Puerto
Rican
Cement,
the
First
Circuit
rejected
a
claim
that
modifications
to
a
cement
kiln,
which
made
production
more
efficient
and
decreased
the
hourly
emissions
rate
but
could
increase
the
plant's
utilization
rate,
such
that
actual
emissions
to
the
atmosphere
might
increase,
were
exempt
from
PSD.
.
.
.
Similarly,
in
WEPCO,
where
the
company
was
making
"
like­
kind"
replacements
of
components
to
restore
the
original
design
capacity
of
the
plant,
there
was
no
increase
in
emissions
per
unit
of
output;
rather,
for
PSD
purposes,
the
emissions
increase
was
attributable
to
increased
utilization."
Id.
at
5­
6
&
12,
n.
9.

 
"
As
discussed,
EPA
considers
emissions
increases
due
to
increased
operations
that
could
not
be
physically
or
legally
accommodated
during
the
representative
baseline
period
but
for
the
proposed
physical
or
operational
change,
to
result
from
the
change.
 
Thus,
physical
or
operational
changes
that
improve
operational
characteristics
will
be
treated
in
the
same
manner
as
any
other
changes.
This
means
that
where
an
improvement
involves
a
routine
change,
it
is
excluded
from
the
NSR
definition
of
"
major
modification."
Alternatively,
where
an
improvement
is
not
routine
and
an
emissions
increase
results
from
the
improvement,
that
portion
of
the
emissions
increase
resulting
from
the
improvement
will
be
considered
in
determining
whether
the
proposed
change
subjects
the
unit
to
NSR
requirements."
57
Fed.
Reg.
32,314
(
July
21,
1992).

 
"
Adopting
a
policy
that
automatically
excludes
from
NSR
any
project
that,
while
lowering
operating
costs
or
improving
performance,
coincidentally
lowers
a
unit's
emissions
rate,
would
improperly
exclude
almost
all
modifications
to
existing
emissions
units,
including
those
that
are
likely
to
increase
utilization
and
therefore
result
in
overall
higher
levels
of
emissions."
"
Pollution
Control
Projects
and
New
Source
Review
(
NSR)
Applicability,"
Memorandum
from
John
S.
Seitz,
Director,
EPA
OAQPS,
to
EPA
Regional
Air
Directors
(
July
1,
1994),
at
11.
34
 
"
An
exclusion
of
projects
that
do
not
increase
a
source's
potential
to
emit
would
create
an
exclusion
that
could
considerably
reduce
the
effectiveness
of
the
NSR
program.
Almost
any
modernization
that
a
source
undertakes
has
the
incidental
effect
of
lowering
emissions.
A
new
emissions
unit
or
modernization
generally
has
fewer
emissions
than
one
built
40
years
earlier.
Since
these
types
of
changes
would
not
likely
increase
a
source's
potential
to
emit,
industry
would
claim
this
as
a
pollution
prevention
project
­
­
even
though
its'
pollution
prevention
aspects
are
likely
to
be
negligible
and
actual
emissions
may
increase
dramatically
due
to
increased
utilization."
"
Responses
to
Issues
Raised
by
Industry
on
Clean
Air
Act
Implementation
Reform,"
EPA
(
May
30,
1995),
at
20
(
Response
to
Issue
3:
Pollution
Prevention
Exemption).

In
a
similar
vein,
EPA
has
identified
and
extolled
the
benefits
provided
by
the
many
ways
in
which
the
NSR
program
causes
sources
to
limit
their
emissions
to
avoid
an
NSR­
triggering
emissions
increase.
Among
the
"
many
direct
and
indirect
environmental
benefits
that
the
PSD
program
provides,"
EPA
even
under
this
administration
has
identified
some
of
the
following:

 
"
reductions
that
the
environment
sees
by
source
owners
who
frequently
take
minor
source
limits
to
stay
below
the
major
source
cutoff
and
thereby
avoid
the
requirements
of
the
program."

 
"
emission
reductions
that
occur
when
source
owners
'
net
out'
of
review.
That
is,
source
owners
can
reduce
their
emissions
elsewhere
at
their
facilities
by
an
amount
that
compensates
for
emissions
increases
resulting
from
major
modifications,
such
that
there
is
no
net
increase
in
emissions,
and
as
a
result
lawfully
avoid
the
PSD
requirements."

 
"
how
the
PSD
[
and
nonattainment
New
Source
Review
(
NSR)]
program
has
pushed
technology
to
evolve
so
that
pollution
controls
now
are
more
effective
than
when
the
NSR
program
began,
or
how
the
costs
of
controls
typically
go
down
over
time
as
more
people
use
them."
35
 
"
the
benefits
to
air
quality
and
to
the
added
protection
of
Class
I
areas
which
have
occurred
by
helping
to
keep
these
national
treasures
pristine."
"
Benefits
of
the
Prevention
of
Significant
Deterioration
Program,"
Memorandum
from
Karen
L.
Blanchard,
Group
Leader,
Integrated
Implementation
Group
(
MD­
12),
to
William
T.
Harnett,
Director,
Information
Transfer
and
Program
Integration
Division
(
MD­
12),
October
17,
2001.

It
is
EPA's
revisionist
claims
in
the
preamble
to
the
final
rule
that
are
starkly
at
odds
with
these
consistently
held
views
and
the
purposes
and
policies
of
the
NSR
program.

3.
EPA's
Claim
of
Congressional
Ratification
Is
Meritless.

EPA
argues
that
Congress
ratified
a
"
flexible"
approach
to
interpreting
the
term
"
any
physical
change"
when
it
created
the
NSR
program
in
1977.
See
68
Fed.
Reg.
at
61,273/
3.
EPA
notes
that
the
CAA
§
111(
a)(
4)
definition
of
"
modification"
also
applies
to
the
Act's
New
Source
Performance
Standard
("
NSPS")
provisions,
and
that
NSPS
regulations
in
effect
when
Congress
adopted
the
NSR
program
already
provided
a
number
of
exceptions
from
the
definition
of
"
modification."
Id.
From
there
EPA
leaps
to
the
assertion
that
Congress
ratified
the
agency's
authority
to
carve
out
exceptions
from
the
plain
meaning
of
"
any
physical
change."
This
argument
is
meritless.

The
Supreme
Court
has
cautioned
that
it
exercises
"
extreme
care"
before
agreeing
to
recognize
a
claim
of
congressional
acquiescence
to
an
agency's
statutory
interpretation.

Solid
Waste
Agency
of
Northern
Cook
County
v.
United
States
Army
Corps
of
Engineers,

531
U.
S.
159,
169
(
2001).
In
order
to
demonstrate
that
its
interpretation
of
a
statute
was
congressionally
ratified,
an
agency
must
show
that
Congress
was
aware
of
that
interpretation
in
the
first
place.
"[
B]
ecause
the
rationale
of
[
this]
canon
must
be,
either
that
those
in
charge
of
the
amendment
are
familiar
with
existing
rulings,
or
that
they
36
mean
to
incorporate
them,
the
government's
argument
has
little
weight
absent
some
evidence
of
(
or
reason
to
assume)
congressional
familiarity
with
the
administrative
interpretation
at
issue."
Public
Citizen,
Inc.
v.
Dep't
of
Health
and
Human
Services,
332
F.
3d
654,
669
(
D.
C.
Cir.
2003)
(
internal
quotations
and
citations
omitted).
See
also
Securities
and
Exchange
Commission
v.
Sloan,
436
U.
S.
103,
121
(
1978)
(
even
where
legislative
history
indicates
some
degree
of
awareness
of
an
agency's
statutory
interpretation,
"
We
are
extremely
hesitant
to
presume
general
congressional
awareness
of
the
Commission's
construction
based
only
upon
a
few
isolated
statements
in
the
thousands
of
pages
of
legislative
documents.").
Moreover,
the
agency
must
show
that
Congress
expressed
approval
of
the
interpretation
at
issue.
See,
e.
g.,
Sloan,
436
U.
S.
at
121
("
Even
if
we
were
willing
to
presume
such
general
awareness
on
the
part
of
Congress,
we
are
not
at
all
sure
that
such
awareness
at
the
time
of
re­
enactment
would
be
tantamount
to
amendment
of
what
we
conceive
to
be
the
rather
plain
meaning
of
the
language
of
[
the
statutory
provision]."

EPA
cannot
tenably
argue
that
Congress
has
ever
ratified
anything
along
the
lines
of
the
broad
categorical
exemption
described
in
the
new
rule.
The
new
exemption
obviously
did
not
even
exist
in
the
NSPS
regulations
in
1977,
and
EPA
does
not
claim
otherwise.
Indeed,
such
a
sweeping
exemption
has
never
been
available
under
the
NSPS
program.
Congress,
therefore,
could
not
have
ratified
EPA's
ability
to
create
such
an
exemption.

Finding
itself
incapable
of
making
a
traditional
ratification
argument,
EPA
advances
the
novel
and
extraordinary
argument
that
what
Congress
ratified
was
not
a
specific
approach,
but
a
general
grant
of
discretion
to
carve
out
exemptions
from
the
37
statutory
term
"
any
physical
change."
See
68
Fed.
Reg.
at
61,273/
3.
This
argument
is
entirely
without
merit.

EPA's
argument
rests
on
the
implausible
assumption
that,
without
saying
a
single
word,
Congress
converted
a
clear
statutory
provision
(
i.
e.,
"
any
physical
change")
into
a
vague
standard
subject
to
broad
agency
discretion.
Not
surprisingly,
EPA
fails
to
identify
even
a
single
judicial
precedent
extending
the
ratification
doctrine
to
such
lengths.

Nor
does
EPA
cite
any
evidence
that
Congress
was
aware
of,
much
less
expressed
approval
of,
an
interpretation
of
"
any
physical
change"
that
would
allow
substantial
emission
increases
at
major
sources
to
escape
NSR.
Indeed,
EPA
itself
has
previously
recognized
that
"
the
purpose
of
new
source
review
is
to
ensure
that
emissions
from
new
or
modified
sources
do
not
prejudice
the
transition
to
attainment,"
See
p.
8,
supra
(
emphasis
added)
(
quoting
EPA's
Chevron
brief),
and
that
an
appropriate
NSR
regulation
"
allow[
s]
industrial
growth
that
does
not
adversely
affect
air
quality
while
prohibiting
both
the
construction
of
all
new
facilities
and
the
renovation
of
existing
facilities
for
which
there
is
a
non­
de
minimis
emissions
increase."
Id.
9
(
emphasis
added)
(
quoting
EPA's
Chevron
brief).
In
light
of
those
fundamental
tenets
of
NSR,
it
is
untenable
­­
and
unsupported
by
any
evidence
­­
to
claim
that
Congress
was
aware
of,
much
less
ratified,

an
interpretation
of
"
any
physical
change"
that
would
allow
substantial
emissions
increases
to
escape
review.

Certainly
the
RMRR
exemption
gave
no
signal
that
EPA
was
claiming
such
broad
exemption
authority.
EPA
itself
concedes
that
that
exemption
"
arguably
could
be
justified
as
de
minimis."
68
Fed.
Reg.
at
61,272/
1.
Moreover,
the
agency
has
previously
interpreted
the
exemption
narrowly,
so
as
to
give
"
sweeping
coverage"
to
the
statutory
38
phrase
"
any
physical
change."
EPA
TVA
Br.
at
163.
Thus,
the
mere
existence
of
the
RMRR
exemption
does
not
demonstrate
Congressional
awareness
of
the
far
broader
exemption
authority
claimed
by
the
October
2003
rule.
Nor
is
there
any
evidence
of
Congressional
intent
to
approve
such
a
broader
exemption.
17
Bereft
of
any
more
specific
basis
for
its
ratification
claim,
EPA
points
to
the
1977
drafters'
intent
"
to
conform
to
usage
in
other
parts
of
the
Act."
123
Cong.
Rec.
36331
(
daily
ed.)
(
Nov.
1,
1977)
(
emphasis
added),
cited
at
68
Fed.
Reg.
at
61,269/
2.
But
intent
to
conform
to
usage
in
other
parts
of
the
"
of
the
Act"
falls
far
short
of
ratifying
exemptions
that
appeared
only
in
NSPS
regulations.
In
any
event,
the
highly
general
observation
cited
by
EPA
falls
far
short
of
showing
Congress
knew
of
and
approved
either
a
general
agency
authority
to
flexibly
interpret
"
any
physical
change"
or
an
interpretation
of
that
phrase
that
allows
substantial
emissions
increases
to
escape
NSR.

In
short,
EPA's
argument
that
Congress
ratified
its
new
view
of
the
statute
as
granting
it
broad
discretion
to
exempt
activities
from
the
term
"
any
physical
change"
is
simply
untenable.

D.
EPA's
Attempt
to
Invoke
Chevron
Step
Two
Is
Unavailing.

Even
assuming
arguendo
that
the
issue
addressed
by
EPA's
October
2003
rule
is
one
to
which
Chevron
Step
Two
applies,
that
test
is
not
a
blank
check
for
EPA
to
adopt
17
Other
exemptions
alleged
by
the
October
2003
preamble
to
be
more
likely
associated
with
increases
in
emissions
(
such
as
for
increased
operating
hours
and
rate
of
production)
construe
the
statutory
phrase
"
change
in
the
method
of
operation,"
and
thus
do
not
support
EPA's
assertion
of
broad
interpretational
authority
over
the
phrase
"
any
physical
change."
Moreover,
EPA
has
pointed
to
no
evidence
that
Congress
was
aware
of,
or
expressed
approval
of,
those
other
exemptions
­­
much
less
invited
EPA
to
create
other
emissions­
increasing
exemptions.
39
any
interpretation
it
chooses,
but
rather
limits
the
agency
to
interpretations
that
are
"
reasonable."
467
U.
S.
at
845.
Post­
Chevron
jurisprudence
of
the
Supreme
Court
and
D.
C.
Circuit
has
not
hesitated
to
overturn
agency
interpretations
under
Step
Two
when
those
interpretations
transgress
the
bounds
of
reasonableness.

Here,
EPA's
interpretation
must
be
rejected
because
­­
for
reasons
discussed
above
­­
it
"
goes
beyond
the
limits
of
what
is
ambiguous
and
contradicts
what
in
our
view
is
quite
clear,"
and
is
"
at
odds
with
[
the
Act's]
structure
and
manifest
purpose."
See
Whitman
v.
American
Trucking
Assns.,
531
U.
S.
457,
481­
86
(
2001)
(
rejecting
EPA
Clean
Air
Act
interpretation
under
Chevron
Step
Two).
See
also
Natural
Resources
Defense
Council
v.
Daley,
209
F.
3d
747,
753
(
D.
C.
Cir.
2000)
(
under
Chevron
Step
Two,

court
rejected
agency
interpretation
that
"
diverges
from
any
realistic
meaning
of
the
statute");
Bluestone
Energy
Design
v.
FERC,
74
F.
3d
1288,
1295
(
D.
C.
Cir.
1996)
(
under
Chevron
Step
Two,
court
rejected
agency
interpretation
that
produced
result
"
contrary
to
Congress's
instructions");
Massachusetts
v.
U.
S.
Dep't
of
Transp.,
93
F.
3d
890,
893
(
D.
C.

Cir.
1996)
("
Because
the
range
of
permissible
interpretations
is
limited
by
the
extent
of
its
ambiguity,
an
agency
cannot
exploit
some
minor
unclarity
to
put
forth
a
reading
that
diverges
from
any
realistic
meaning
of
the
statute");
Natural
Resources
Defense
Council
v.
Reilly,
976
F.
2d
36,
44
(
D.
C.
Cir.
1992)
(
Silberman,
J.,
concurring)
(
agency
interpretation
"
fails
the
second
step
of
Chevron
because
the
agency
seeks
to
exploit
the
ambiguity
rather
than
resolve
it,
and
to
advance
its
own
policy
goals
rather
than
Congress'").

Moreover,
to
pass
muster
under
Chevron
Step
Two,
an
agency
interpretation
must
be
accompanied
by
a
reasoned
explanation.
See,
e.
g.,
Rettig
v.
Pension
Benefit
Guaranty
40
Corp.,
744
F.
2d
133,
151
(
D.
C.
Cir.
1984).
Here,
EPA
has
advanced
explanations
that
are
not
only
inconsistent
with
the
Act
and
its
legislative
history
and
purposes,
but
also
suffer
from
unexplained
contradictions
with
other
EPA
statements
in
this
very
rulemaking
as
well
as
in
prior
proceedings.
Likewise,
EPA's
explanations
are
unsupported
by,
and
indeed
affirmatively
contradicted
by,
the
rulemaking
record.
These
flaws
preclude
any
finding
that
the
October
rule
passes
muster
under
Step
Two.
18
In
addition
to
the
fundamental
flaws
in
reasoning
discussed
supra,
EPA's
interpretation
is
internally
inconsistent.
Though
EPA
asserts
that
an
equipment
replacement
that
does
not
alter
the
design
of
the
source
is
not
a
"
change,"
see
e.
g.,
68
Fed.
Reg.
at
61,253/
2,
the
new
rule
allows
such
a
replacement
to
be
treated
as
NSRtriggering
"
change"
if
it
costs
more
than
twenty
percent
of
the
replacement
cost
of
the
affected
process
unit.
See,
e.
g.,
id.
at
61,253/
3,
n.
7
("[
A]
lthough
such
activities
would
be
functionally
equivalent,
they
would
still
need
to
meet
other
criteria
to
qualify"
for
the
categorical
exemption.").
Thus,
EPA's
rule
asserts
at
one
and
the
same
time
that
the
phrase
"
any
physical
change"
has
one
meaning
for
projects
below
twenty
percent,
and
another
for
projects
above
it.
This
approach
not
only
contravenes
basic
principles
of
18
That
the
rule
at
issue
in
Chevron
passed
muster
under
Step
Two
does
not
establish
that
the
present
one
does.
Of
key
importance,
the
indicia
of
congressional
intent
were
far
sparser
than
they
are
here.
See
467
U.
S.
at
859­
63.
Moreover,
EPA's
explanation
emphasized
that
"[
i]
n
order
to
avoid
nonattainment
area
new
source
review,
a
major
plant
undergoing
modification
must
show
that
it
will
not
experience
a
significant
net
increase
in
emissions.
Where
overall
emissions
increase
significantly,
review
will
continue
to
be
required."
Id.
858
n.
30.
The
Court's
affirmance
of
that
rationale
does
not
support
­­
on
the
contrary,
undercuts
­­
EPA's
plea
for
deference
for
its
October
2003
interpretation
that
does
allow
significant
net
increases
in
emissions
to
escape
NSR
review.
41
statutory
interpretation,
but
represents
an
unexplained
internal
inconsistency
in
EPA's
rationale.
19
Second,
EPA
argues
that
"
existing
plants
should
not
have
to
install
new
control
technology
in
the
ordinary
course
of
their
operations,"
because
"[
t]
o
require
them
to
do
so"
would
inter
alia
"
subject
these
plants
and
the
consumers
who
rely
on
them
to
enormous
dislocation
and
expense."
68
Fed.
Reg.
at
61,270/
1
(
emphasis
added).
At
the
same
time,
however,
the
agency
claims
that
given
the
costs
and
technical
problems
associated
with
installing
state­
of­
the­
art
pollution
controls
at
existing
facilities,
we
do
not
believe
it
plausible
that,
if
faced
with
the
choice
of
replacing
equipment
that
has
a
value
less
than
20
percent
of
a
process
unit
and
having
to
install
those
controls,
or
coming
up
with
another
solution
 
such
as
repairing
the
existing
equipment
or
limiting
hours
of
operation
so
as
to
be
confident
that
activity
will
not
trigger
NSR
 
the
owner
of
a
source
would
elect
to
replace
the
equipment
if
he
also
has
to
install
the
state­
of­
the­
art
controls.
Rather,
we
believe
he
will
repair
the
existing
equipment
or
artificially
constrain
production.

Id.
at
61,270/
2
(
emphasis
added).
Thus,
EPA's
rationale
claims
that
a
literal
definition
of
"
any
physical
change"
should
be
rejected
because
(
1)
such
a
definition
will
"
require"

sources
to
install
pollution
controls
and
thereby
cause
"
enormous
dislocation
and
expense,"
and
(
2)
sources
will
"
not"
install
such
controls,
but
instead
will
"
repair
the
existing
equipment
or
artificially
constrain
production."
This
is
yet
another
internal
19
Conversely,
though
EPA
asserts
that
Congress
could
not
have
intended
for
an
equipment
replacement
that
costs
less
than
the
twenty
percent
threshold
to
be
subject
to
NSR,
see
68
Fed.
Reg.
at
61,270/
3,
EPA's
new
rule
allows
such
a
replacement
to
be
treated
as
a
"
change"
if
it
alters
the
source's
design.
EPA
fails
to
offer
a
reasoned
explanation
for
this
internally
contradictory
position.
42
contradiction
for
which
EPA
has
failed
to
offer
any
explanation,
much
less
a
reasoned
one.

Third,
EPA
claims
that
the
pre­
existing
rules
induced
source
owners
to
take
the
undesirable
step
of
limiting
plant
productivity
in
order
to
avoid
NSR:
"[
T]
he
owner
or
operator
may
curtail
the
plant's
productive
capacity
by
[
1]
replacing
components
with
less
than
the
best
technology
in
order
to
be
more
certain
that
the
replacement
is
within
the
RMRR
regulatory
bounds,
or
[
2]
he
or
she
may
[
a]
agree
to
limit
the
source's
hours
of
operation
or
capacity
or
[
b]
install
less
than
state­
of­
the­
art
air
pollution
controls
to
ensure
no
increase
in
emissions."
68
Fed.
Reg.
at
61,250/
2.
The
agency
does
not
suggest,
much
less
provide
any
basis
for
believing,
that
sources
will
chose
Option
1
over
Option
2.
See
id.
Within
Option
2,
moreover,
EPA
expressed
its
belief
in
the
rulemaking
proposal
that
source
owners
would
limit
emissions
by
installing
less
than
state­
of­
the
art
pollution
controls,
rather
than
by
limiting
utilization.
67
Fed.
Reg.
at
80,302/
2.
The
agency
is
thus
left
with
the
assertion
that
installing
less
than
state­
of­
the­
art
controls
will
"
result
in
loss
of
plant
productivity."
68
Fed.
Reg.
at
61,250/
2.
EPA
offers
no
evidence
whatsoever
to
support
that
assertion,
nor
could
it.
The
agency
is
thus
unable
to
shake
the
reality
that,
under
the
pre­
existing
NSR
rules,
owners
and
operators
could
undertake
plant
improvements,
take
advantage
of
the
increased
utilization
made
possible
by
those
improvements,
and
nevertheless
avoid
triggering
NSR
by
installing
less
than
state­
of­

theart
pollution
controls
without
hindering
plant
productivity.

Finally,
EPA
repeats
the
assertion,
made
in
its
June
2002
report
to
the
President,

"
that
the
NSR
program
has
impeded
or
resulted
in
the
cancellation
of
projects
that
would
have
maintained
and
improved
the
reliability,
efficiency,
or
safety
of
existing
energy
43
capacity."
Id.
at
61,250/
3.
That
conclusion
was
based,
however,
on
nothing
more
than
a
handful
of
unsubstantiated,
industry­
supplied
anecdotes.
The
General
Accounting
Office
("
GAO")
has
already
found
that
the
unverified
anecdotes
carried
no
statistical
validity,

and
that
EPA
lacked
substantial
evidence
for
the
conclusion
it
sought
to
draw
from
them:

Because
EPA
based
its
conclusion
that
NSR
discouraged
some
energy
efficiency
projects
on
anecdotal
information
rather
than
a
comprehensive
survey
or
representative
sample
of
industries
subject
to
the
program,
its
findings
are
not
necessarily
representative
of
the
program's
effect
on
energy
efficiency
projects
throughout
the
industries
subject
to
the
program.
In
addition,
EPA's
findings
that
some
foregone
energy
efficiency
projects
would
have
reduced
air
emissions
was
based
on
the
assumption
that
facilities
would
not
increase
their
production
levels
after
performing
the
projects.
However,
facilities'
future
levels
of
production
and
emissions
are
uncertain
because
they
may
fluctuate
in
response
to
economic
conditions,
and
other
factors.

General
Accounting
Office
Report
No.
GAO­
03­
947,
"
EPA
Should
Use
Available
Data
to
Monitor
the
Effects
of
Its
Revisions
to
the
New
Source
Review
Program,"
August
2003.
The
unsupported
and
discredited
finding
of
the
June
2002
report
thus
provides
no
rational
basis
for
the
final
rule.

Accordingly,
both
the
substantive
inconsistency
of
EPA's
interpretation
with
the
Act,
and
the
agency's
failure
to
offer
a
reasoned
explanation
for
that
interpretation,
would
­­
even
if
Chevron
Step
Two
applies
­­
preclude
a
finding
that
that
interpretation
is
reasonable.
Moreover,
to
the
extent
that
a
court
chose
to
review
EPA's
rationale
under
the
44
arbitrary
and
capricious
standard,
20
the
above­
noted
flaws
in
that
rationale
would
require
a
finding
that
the
October
2003
rule
is
arbitrary
and
capricious.

II.
EPA's
Selection
of
Twenty
Percent
of
Process
Unit
Replacement
Value
as
the
Ceiling
of
the
New
Exemption
is
Arbitrary
and
Capricious.

The
new
rule
identifies
twenty
percent
of
process
unit
replacement
value
as
the
ceiling
of
the
category
of
physical
activities
that
the
rule
purports
to
exclude
from
the
statutory
term,
"
physical
change
in
.
.
.
a
stationary
source."
68
Fed.
Reg.
at
61,277/
2
(
40
C.
F.
R.
§
51.165(
a)(
1)(
v)(
C)(
1)(
xlvi)(
h)(
1)).
In
the
preamble
to
the
final
rule,
EPA
puts
forward
a
number
of
arguments
intended
to
explain
and
justify
its
selection
of
twenty
percent
as
the
ceiling.
Id.
at
61,256/
3­
58/
1,
61,265/
3­
66/
1,
61,270/
1­
2.
None
of
these
arguments
appeared
in
the
preamble
to
the
proposed
rule.
21
The
grounds
for
Petitioners'

objections
to
them
thus
"
arose
after
the
period
for
public
comment."
42
U.
S.
C.
§
7607(
d)(
7)(
B).

Petitioners
set
forth
their
objections
below.
Each
of
them
is
"
of
central
relevance
to
the
outcome
of
the
rule,"
id.
§
7607(
d)(
7)(
B),
because
each
one
demonstrates
that
the
rule
contravenes
the
Clean
Air
Act
and
is
arbitrary
and
capricious.
Id.
§
7607(
d)(
9)(
A).

The
NSPS
provisions
of
the
Act
define
"
new
source"
as
"
any
stationary
source,

the
construction
or
modification
of
which
is
commenced
after
the
publication
of
regulations
.
.
.
prescribing
a
standard
of
performance
under
this
section
which
will
be
20
See,
e.
g.,
Natl.
Assn.
of
Regulatory
Utility
Commrs.
v.
ICC,
41
F.
3d
721,
726­
27
(
D.
C.
Cir.
1994)
(
discussing
overlap
between
Chevron
Step
Two
review
and
arbitrary
and
capricious
review).

21
In
fact,
nothing
in
the
notice
of
proposed
rulemaking
gave
any
indication
that
the
ceiling
promulgated
in
the
final
rule
would
be
twenty
percent,
as
opposed
to
some
other
figure
between
zero
and
fifty.
45
applicable
to
such
source."
Id.
§
7411(
a)(
2).
In
the
preamble
to
the
final
rule,
EPA
notes
that
"[
u]
nder
NSPS,
when
a
source
undertakes
a
replacement
activity
at
an
existing
affected
facility
that
constitutes
half
or
more
of
the
facility's
capital
replacement
value,

our
rules
require
a
case­
by­
case
determination
as
to
whether
such
replacements
constitute
construction."
68
Fed.
Reg.
at
61,256/
1.
EPA
then
argues
that
twenty
percent
of
unit
replacement
value
 
a
figure
"
less
than
one­
half
of
the
50­
percent
reconstruction
threshold"
 
is
an
appropriate
ceiling
above
which
to
"
require
case­
by­
case
consideration
of
the
question
whether
equipment
replacements
constitute
a
modification
of
an
existing
process
unit
under
major
NSR."
Id.
at
61,256/
1,
3.

Even
assuming
that
EPA
has
discretion
to
decide
that
replacement
activity
costing
less
than
fifty
percent
of
facility
replacement
value
does
not
qualify
as
"
construction"
 
a
proposition
Petitioners
reject
 
that
does
not
mean
that
EPA
has
discretion
to
decide
that
replacement
activity
costing
less
than
some
lower
percentage
does
not
qualify
as
a
"
modification."
For
whereas
the
text
of
the
Clean
Air
Act
does
not
define
"
construction,"

it
does
define
"
modification."
Moreover
it
defines
"
modification"
without
regard
to
cost.

42
U.
S.
C.
§
7411(
a)(
4)
(
defining
"
modification"
as
"
any
physical
change
in
.
.
.
a
stationary
source
which
increases
the
amount
of
any
air
pollutant
emitted
by
such
source");
WEPCO,
893
F.
2d
at
913.22
The
fact
that
twenty
percent
is
less
than
half
of
22
As
the
Seventh
Circuit
observed
in
WEPCO:
"
The
reconstruction
provision
applies
to
any
substantial
replacement
(
more
than
50%
the
cost
of
a
new
facility)
even
if
the
replacement
causes
no
subsequent
increase
in
emissions.
In
sharp
contrast,
the
modification
provisions
apply
only
when
a
physical
change
is
accompanied
by
an
increase
in
emissions.
To
argue,
therefore,
that
the
reconstruction
provision
is
the
exclusive
determinant
of
whether
the
cost,
nature,
and
magnitude
of
a
project
will
require
the
application
of
NSPS
is
to
ignore
the
substantially
different
objectives
of
the
reconstruction
and
modification
provisions:
The
reconstruction
provision
is
aimed
(...
footnote
continued
next
page)
46
EPA's
reconstruction
threshold
is
thus
no
explanation
 
much
less
a
reasoned
explanation
 
for
a
rule
that
ignores
the
Act's
definition
of
"
modification"
and
excludes
from
that
term
all
equipment
replacements
costing
no
more
than
twenty
percent
of
unit
replacement
value.

EPA
goes
on
to
claim
that
the
"
20­
percent
cost
threshold
would
be
consistent
with
the
decision
of
the
U.
S.
Court
of
Appeals
for
the
Seventh
Circuit
in
the
Wisconsin
Electric
Power
Company
v.
Reilly
("
WEPCO")
case,
to
the
extent
that
it
would
not
automatically
allow
the
activities
performed
there
to
constitute
RMRR."
68
Fed.
Reg.
at
61,256/
3.
But
the
Seventh
Circuit
did
not
hold,
or
even
suggest,
that
any
replacement
project
less
dramatic
than
those
at
issue
in
the
case
would
not
constitute
"
any
physical
change":

[
N]
othing
in
WEPCO
suggests
that
any
project
smaller
than
WEPCO
will
automatically
qualify
as
routine
maintenance,
or
that
WEPCO
was
some
type
of
baseline
for
companies
to
compare
its
projects
to
in
efforts
to
determine
if
they
would
qualify
for
routine
maintenance.
Rather,
WEPCO
was
an
easy
case
on
routine
maintenance
 
the
EPA
and
the
Seventh
Circuit
quickly
disposed
of
the
defendant's
arguments
that
it
qualified
for
routine
maintenance.

________________________________________
(...
footnote
continued
from
previous
page)
principally
at
'
discourag[
ing]
the
perpetuation
of
a
facility,
instead
of
replacing
it
at
the
end
of
its
useful
life
with
a
newly
constructed
affected
facility,'
without
regard
to
emissions,
39
Fed.
Reg.
36946,
36948
(
1974),
while
the
modification
provision
applies
to
any
physical
change,
without
regard
to
cost,
that
causes
an
increase
in
emissions.
See,
e.
g.,
ASARCO
Inc.
v.
EPA,
578
F.
2d
319
(
D.
C.
Cir.
1978);
United
States
v.
Narragansett
Improvement
Co.,
571
F.
Supp.
688,
695
(
D.
R.
I.
1983)
('
a
"
reconstruction"
of
an
existing
facility
would
occur
"
irrespective
of
any
change
in
emission
rate"
upon
the
replacement
of
a
"
substantial
portion
of
the
existing
facility's
components."')."
WEPCO,
893
F.
2d
at
913
(
emphasis
in
original).
47
U.
S.
v.
Southern
Indiana
Gas
&
Electric
Co.
("
SIGECO"),
245
F.
Supp.
2d
994,
1017
(
S.
D.
In.
2003);
see
also
U.
S.
v.
Ohio
Edison
Co.,
276
F.
Supp.
2d
829,
860
(
S.
D.
Ohio
2003)
(
quoting
SIGECO
and
reaching
same
conclusion).
23
So
EPA's
invocation
of
the
WEPCO
decision
does
not
constitute
an
explanation
 
much
a
reasoned
explanation
 
of
the
new
rule's
exemption
for
equipment
replacements
costing
no
more
than
twenty
percent
of
process
unit
replacement
value.

In
their
comments
on
the
proposed
rule,
Petitioners
demonstrated
that
the
new
rule
would
have
exempted
thirteen
Tennessee
Valley
Authority
("
TVA")
equipment
replacement
projects,
each
of
which
EPA
had
itself
found
to
qualify
as
"
any
physical
change
in
.
.
.
a
stationary
source."
In
response,
EPA
asserts
in
the
preamble
to
the
final
rule
that
the
NSR
program
"
has
in
fact
resulted
in
delay
or
cancellation
of
activities
that
would
have
maintained
and
improved
the
reliability,
efficiency,
and
safety
of
existing
energy
capacity."
68
Fed.
Reg.
at
61,257/
3­
58/
1.24
"[
T]
o
the
extent
the
activities
23
In
fact,
the
court
showed
no
hesitation
in
finding
a
project
to
be
"
any
physical
change"
even
if
the
project
was
presumed
to
cost
much
less
than
twenty
percent
of
unit
replacement
value.
WEPCO,
893
F.
2d
at
912­
13
("
the
air
heater
replacements
will
presumably
cost
less
than
six
percent
of
a
wholly
new
facility");
see
also
68
Fed.
Reg.
at
61,257/
1
("
In
the
case
of
a
steam
electric
generating
facility,
the
process
unit
definition
provided
in
today's
rule
is
nearly
identical
to
the
make­
up
of
the
'
comparable
new
facility'
that
was
used
in
the
NSPS
evaluation
of
the
WEPCO
renovation
project.").

24
EPA
fails
to
note,
of
course,
that
activities
that
"
maintain[]
and
improve[]
the
reliability,
efficiency,
and
safety
of
existing
energy
capacity"
would
only
implicate
the
NSR
program
if
those
activities
were
going
to
result
in
a
significant
net
emissions
increase.
Nor
does
EPA's
explanation
emphasize,
as
it
should
to
be
accurate,
that
those
activities
would
have
been
delayed
or
cancelled
only
as
a
result
of
source
owner
or
operator
decisions
not
to
decrease
emissions,
or
not
to
prevent
emissions
increases,
associated
with
these
activities
in
order
to
avoid
NSR
requirements.
Understandably
­­
and
tellingly
­­
EPA
never
claimed
that
such
activities
would
have
improved
the
environmental
performance
of
existing
energy
capacity.
The
agency
does
not
and
cannot,
of
course,
identify
any
statutory
provision
or
legislative
history
to
support
the
notion
that
(...
footnote
continued
next
page)
48
addressed
by
[
Petitioners]
qualify
for
the
ERP,"
EPA
continues,
"
we
now
believe
that
such
activities,
if
conducted
in
the
future,
should
be
excluded
from
major
NSR."
Id.
at
61,258/
1.

EPA
does
not
assert
that
the
thirteen
TVA
projects
"
maintained
and
improved
the
reliability,
efficiency,
and
safety
of
existing
generating
capacity."
Id.
Even
if
it
did
make
such
a
claim,
the
agency
would
not
be
able
to
erase
its
own
prior
finding
that
the
projects
nevertheless
increased
annual
releases
of
air
pollution
by
tens
of
thousands
of
tons.
What
is
more,
EPA
does
not
assert
that
any
of
the
thirteen
TVA
projects
are
outside
the
plain
________________________________________
(...
footnote
continued
from
previous
page)
accommodations
for
the
listed
concerns
can
supplant
or
supersede
the
air
quality
and
public
health
purposes
of
the
NSR
program.
Addressing
EPA's
statement
head
on,
the
administrative
record
accompanying
the
final
rule
reveals
no
verifiable
evidence
of
the
NSR
program
resulting
in
"
delay
or
cancellation
of
activities
that
would
have
maintained
and
improved
the
reliability,
efficiency,
and
safety
of
existing
energy
capacity,"
relying
only
upon
industry
anecdotes
and
complaints.
See
"
EPA
Should
Use
Available
Data
to
Monitor
the
Effects
of
Its
Revisions
to
the
New
Source
Review
Program,"
General
Accounting
Office,
GAO­
03­
947
(
Aug.
2003)
(
finding
that
EPA
relied
upon
industry
anecdotes
to
justify
its
fist
set
of
changes
to
NSR
program
requirements).
The
record
reveals
no
evidence
that
EPA
sought
to
verify
the
veracity
of
these
claims
with
any
source­
specific
inquiries
or
other
basic
probative
inquiries.
The
record
reveals
no
evidence
that
EPA
determined
that
the
anecdotal
projects
even
would
have
improved
energy
efficiency,
for
example,
or
would
have
improved
energy
efficiency
to
a
degree
equal
or
greater
than
activities
that
would
have
decreased
total
emissions.
The
administrative
record
reveals
no
record
of
maintenance
or
improvement
activities
outside
the
energy
sector
being
delayed
or
cancelled
allegedly
as
a
result
of
NSR
requirements,
notwithstanding
that
EPA's
final
rule
extends
the
exemption
to
all
industries
sectors
subject
to
NSR.
In
addition,
the
administrative
record
reveals
no
evidence
of
so­
called
maintenance
or
improvement
activities
(
within
any
industry
sector)
being
delayed
or
cancelled
where
such
activities
would
have
decreased
emissions
 
or
simply
failed
to
increase
emissions
by
significant
net
amounts.
Nor
does
the
record
explain
or
even
address
with
any
evidence
what
the
impact
on
local,
regional
or
national
air
quality,
public
health
or
ecosystems,
and
class
I
areas
would
be
from
allowing
emissions
increases
from
all
industry
sectors
to
occur
in
the
name
of
reliability,
efficiency,
and
safety,
without
requiring
those
emissions
increases
to
be
minimized
or
controlled
under
NSR.
For
all
of
the
foregoing
reasons,
EPA's
final
rule
is
arbitrary
and
capricious.
49
meaning
of
the
statutory
phrase,
"
any
physical
change
in
.
.
.
a
stationary
source,"
or
even
that
any
of
the
projects
were
"
routine,
maintenance,
repair
and
replacement."
The
agency
thus
fails
to
explain
 
much
less
justify
 
its
decision
to
set
the
ceiling
of
its
new
exemption
so
high
as
to
accommodate
projects
that,
according
to
EPA,
were
not
routine,

were
physical
changes,
and
did
increase
harmful
emissions
by
staggering
amounts.

In
its
comments
on
the
proposed
rule,
the
Utility
Air
Regulatory
Group
("
UARG")
presented
EPA
with
a
list
of
the
"
major
repair
and
replacement
activities
that
its
members
believe
must
be
undertaken
at
utility
generating
stations
in
order
to
keep
those
facilities
operational."
Id.
at
61,257/
3.
In
the
preamble
to
the
final
rule,
EPA
concedes
that
the
twenty­
percent
ceiling
of
the
new
rule's
exemption
is
so
high
that
would
exempt
not
only
the
individual
activities
identified
by
UARG,
but
also
"
groupings
of
these
activities."
Id.
What
the
rule
would
not
exempt,
according
to
EPA,
would
be
"
larger
groupings
of
these
activities
 
groupings
that
are
not
usually
seen
in
the
industry."

Id.
EPA
has
not
and
cannot
support
its
implicit
and
untenable
suggestion
that
anything
that
is
"
usually
seen"
in
an
industry
constitutes
an
activity
that
is
per
se
routine
at
each
individual
source
within
that
industry.
Moreover,
EPA
offers
no
support
whatsoever
for
the
assertion
that
the
exempted
UARG
activities
 
and,
in
particular,
the
exempted
groupings
of
activities
 
are
"
usually
seen"
in
the
utility
industry.
That
utter
absence
of
factual
support
alone
demonstrates
EPA's
failure
to
offer
a
reasoned
explanation
for
the
level
at
which
it
has
set
the
ceiling
of
the
new
exemption.

With
respect
to
"
other
industrial
sectors
beyond
electric
utilities,"
EPA
seeks
to
justify
the
twenty­
percent
ceiling
by
referencing
six
industry
case
studies
performed
by
a
contractor.
Id.
at
61,257/
2.
In
two
of
the
six
industries,
however,
the
contractor
was
50
unable
to
identify
any
equipment
replacement
activity
that
would
not
be
exempt
under
a
twenty­
percent
ceiling.
Appendix
C
to
RIA
(
automobile
manufacturing
and
carbon
black
manufacturing).
EPA
has
failed
to
explain
 
much
less
justify
 
exempting
as
"
routine"

all
equipment
replacement
activity
in
two
entire
industries
from
the
Clean
Air
Act's
requirement
of
NSR
for
"
any
physical
change
.
.
.
in
a
stationary
source."
25
Finally,
EPA
asserts
that,
at
an
electric
utility
station,
twenty­
percent
of
process
unit
replacement
value
"
represents
the
approximate
cost
of
retrofitting
existing
plants
with
state­
of­
the­
art
controls."
68
Fed.
Reg.
at
61,258/
1.
The
agency
then
claims
that
"
it
is
reasonable
to
assume
that
if
the
cost
of
the
controls
is
greater
than
the
cost
of
the
replaced
equipment,
it
is
likely
to
operate
as
a
substantial
deterrent
to
replacing
the
equipment
at
issue."
Id.

This
claim
fails
to
explain
 
much
less
justify
 
the
twenty­
percent
ceiling
in
the
final
rule.
First
of
all,
EPA
does
not
even
assert
that
twenty­
percent
of
unit
replacement
value
represents
the
cost
of
installing
emissions
controls
at
a
process
unit
that
is
not
a
steam
generating
unit,
so
the
claim
cannot
serve
to
explain
the
twenty­
percent
ceiling
in
the
vast
majority
of
the
industries
in
which
the
new
rule
applies
it.
Secondly,
EPA
offers
no
support
 
much
less
substantial
record
evidence
 
for
the
assertion
that
twenty
percent
25
In
one
of
the
remaining
industries,
the
contractor
had
to
assume
that
a
facility
would
spend
its
entire
annual
budget
for
repair,
maintenance,
and
replacement
on
a
single
activity
at
a
single
process
in
order
to
postulate
an
equipment
replacement
project
that
would
exceed
the
twenty­
percent
ceiling.
Appendix
C
to
RIA
(
pharmaceutical
manufacturing).
EPA
does
not
assert
that
such
a
project
would
be
routine
at
an
individual
facility,
or
even
in
the
industry
as
a
whole.
The
agency
thus
fails
to
explain
or
justify
applying
the
twenty­
percent
ceiling
to
this
industry
or
any
other
industry,
for
that
matter,
considering
the
extreme
lengths
to
which
the
agency
has
to
go
to
pretend
that
even
one
or
a
few
actual
industry
projects
would
be
potentially
subject
to
NSR
once
the
twenty
percent
exemption
is
available.
51
of
unit
replacement
value
represents
the
cost
of
retrofitting
a
steam
generating
unit
with
controls.
Third,
as
EPA
itself
admits,
the
cost
of
installing
controls
varies
widely
from
source
to
source.
See
supra
p.
24.
Fourth,
as
EPA
again
admits,
under
circumstances
where
it
is
infeasible
for
a
source
to
comply
with
NSR
through
adoption
of
pollution
control
measures,
the
owner
or
operator
simply
will
take
steps
to
avoid
NSR
applicability,
e.
g.,
by
ensuring
that
post­
change
emissions
do
not
exceed
the
NSR
significance
threshold.
See
68
Fed.
Reg.
61270/
2.

Finally,
EPA
makes
no
attempt
to
explain
its
anomalous
and
conclusory
assumption
that
"
if
the
cost
of
the
controls
is
greater
than
the
cost
of
the
replaced
equipment,
it
is
likely
to
operate
as
a
substantial
deterrent
to
replacing
the
equipment
at
issue."
There
is
no
reason
to
believe
that
EPA's
assumption
would
be
accurate.
As
the
agency
itself
recognized
in
the
notice
of
proposed
rulemaking,
it
is
the
financial
benefit
of
undertaking
a
physical
change
as
compared
to
the
cost
of
installing
pollution
controls
 
not
the
financial
cost
of
undertaking
the
change
as
compared
to
the
cost
of
installing
the
controls
 
that
can
be
expected
to
influence
a
firm's
decision.
67
Fed.
Reg.
at
80,302/
1.

If
a
source
owner
stands
to
reap
substantial
financial
benefit
from
a
given
project,
EPA
has
offered
no
basis
to
expect
(
much
less
a
reasoned
explanation
supported
by
substantial
evidence)
that
the
owner
would
forego
the
project
simply
because
of
a
requirement
to
install
pollution
controls.

For
all
the
forgoing
reasons,
the
final
rule
contravenes
the
Clean
Air
Act
and
is
arbitrary
and
capricious.
52
III.
EPA
is
Treating
the
New
Rule
As
Retroactive,
Notwithstanding
the
Agency's
Recognition
of
the
Fact
That
Such
Retroactivity
is
Unlawful.

EPA
must
also
reconsider
the
final
rule
on
additional
grounds
that
arose
after
the
period
for
public
comment
and
are
of
central
relevance
to
the
outcome
of
the
rule
 
namely,
the
agency's
unlawful
treatment
of
the
rule
as
retroactive.
This
agency
action
contradicts
EPA's
admission
that
such
retroactivity
is
illegal,
caselaw
bearing
out
this
illegality,
and
EPA's
prior
characterization
of
the
rule
as
non­
retroactive.
EPA's
retroactive
exemption
of
millions
of
tons
of
pollution
increases
from
the
utility
sector
alone
 
increases
that
violated
NSR
rules
on
the
books
at
the
time
of
the
violations,
and
rules
that
will
remain
on
the
books
for
the
next
three
years
and
beyond
 
represents
an
especially
egregious
and
objectionable
example
of
retroactive
rulemaking.

We
petition
the
Administrator
to
reconsider
the
final
rule
in
light
of
the
reversal
of
the
preamble's
assurance
that
the
rule
was
not
retroactive.
The
preamble
to
EPA's
final
rule
notes
the
following:

Today's
rule
provides
revisions
to
the
major
NSR
program
to
specify
categories
of
equipment
replacement
activities
that
we
will
consider
RMRR
in
the
future.
As
recognized
by
the
U.
S.
Supreme
Court,
an
agency
may
not
promulgate
retroactive
rules
absent
express
congressional
authority.
See
Bowen
v.
Georgetown
Univ.
Hosp.,
488
U.
S.
204,
208,
102
L.
Ed.
2d
493,
109
S.
Ct.
468
(
1988).
The
CAA
contains
no
such
expressed
grant
of
authority
and
we
do
not
intend
by
our
actions
today
to
create
retroactive
applicability
for
today's
rule.
42
U.
S.
C.
§
§
7401
et
seq.

68
Fed.
Reg.
at
61263­
64.

The
week
of
November
3rd,
however,
just
one
week
after
the
final
rule
was
published
in
the
Federal
Register,
word
of
EPA's
radical
decision
to
treat
the
final
rule
as
retroactive
leaked
out
of
the
agency,
and
EPA
spokespersons
were
forced
to
admit
that
53
the
agency
would
(
with
the
exception
of
cases
already
filed)
be
treating
the
rule
as
retroactive:

"
We
are
using
the
new
rule
to
see
if
they
are
in
violation.
Anything
that
is
filed
(
under
the
old
rule)
is
untouchable,
we
are
vigorously
enforcing
those,"
EPA
spokeswoman
Lisa
Harrison
told
the
AP
Thursday.

"
Cases
that
are
in
the
pipeline
that
have
not
been
filed
are
going
to
be
analyzed
to
see
if
they
should
be
pursued
or
set
aside.
There's
a
very
good
chance
that
a
number
of
them
will
be
set
aside,"
she
said.

"
NY
Atty
Genl
Wants
To
Take
Over
EPA
Investigations,"
Dow
Jones
International
News
(
Nov.
7,
2003).

"
New
enforcement
against
past
conduct"
will
be
undertaken
only
if
the
actions
were
"
inconsistent
with
the
new
rule,"
Bill
Wehrum,
counsel
in
EPA's
Office
of
Air
and
Radiation,
said
at
a
briefing
sponsored
by
the
Washington
Legal
Foundation.

"
The
new
rule
is
the
yardstick
to
measure
the
cases,"
Wehrum
said.

"
EPA
Air
Official
Confirms
Past
Actions
To
Be
Measured
Against
New
Pollution
Rule,"

BNA
Daily
Environment
Report
(
Nov.
13,
2003).

This
EPA
approach
violates
the
Clean
Air
Act
and
the
APA
(
including
the
requirement
to
seek
notice
and
comment
before
announcing
a
change
that
will
constrain
the
agency's
future
conduct),
26
and
runs
afoul
of
the
governing
Supreme
Court
decision
noted
by
the
agency
itself.
There
is
no
express
or
implied
authority
in
the
Act
to
undertake
such
retroactive
rulemaking,
and
EPA
spokespersons
or
materials
to
date
have
26
See,
e.
g.,
Alaska
v.
USDOT,
868
F.
2d
441,
446­
47
(
D.
C.
Cir.
1989);
McLouth
Steel
Products
Corp.
v.
Thomas,
838
F.
2d
1317,
1320­
22
(
D.
C.
Cir.
1988).
54
identified
no
such
authority.
EPA
has
failed
to
conduct
rulemaking
since
adoption
of
the
final
rule
to
seek
comment
on
retroactive
rulemaking,
and
has
instead
treated
the
rule
as
retroactive
through
agency
fiat,
contravening
the
Act,
APA
and
EPA's
own
stated
intentions
and
contemporaneous
understanding
of
Supreme
Court
caselaw.
27
Retroactive
rulemaking,
carried
out
so
arbitrarily
and
in
violation
of
governing
law,
provides
grounds
for
reconsideration
of
the
final
rule.

EPA
cannot
tenably
pretend
that
there
is
any
legal,
policy,
or
practical
difference
between
unlawful
retroactive
rulemaking,
on
the
one
hand,
and
treatment
of
the
final
rule
as
an
enforcement
"
yardstick,"
on
the
other.
The
only
way
in
which
a
newly
adopted
regulatory
exemption
like
the
final
rule
has
significance
retroactively,
with
respect
to
past
conduct,
is
with
respect
to
enforcement;
obviously,
because
a
future
rule
cannot
govern
past
source
behavior,
retroactivity
only
has
meaning
to
determine
whether
past
actions
that
violated
then­
existing
rules
will
be
deemed
unlawful,
investigated
and
enforced
against
or,
instead,
whether
newly
adopted
rules
will
retroactively
bless
those
violations.

Additionally,
EPA
cannot
justify
this
unlawful
final
agency
action
by
suggesting
that
it
lies
within
the
agency's
enforcement
discretion.
Such
discretion
does
not
extend
to
retroactive
rulemaking
in
violation
of
the
substantive
provisions
of
the
Clean
Air
Act
and
without
undertaking
notice
and
comment
rulemaking.
Permissible
enforcement
discretion
does
not
extend
to
inviting
and
accepting
wholesale
violations
of
governing
state
and
federal
law
now
and
for
the
indefinite
future.
Lawful
enforcement
discretion
does
not
encompass
the
ability
to
adopt
a
posture
of
total
abdication
of
enforcement
over
a
27
See
also
Paralyzed
Veterans
v.
D.
C.
Arena,
117
F.
3d
579,
586
(
D.
C.
Cir.
1997).
55
stronger
set
of
health
protections,
by
willfully
abandoning
the
ability
to
exercise
case­

bycase
enforcement
decisions
over
pre­
existing
and
continuing
violations
of
the
narrower
RMRR
exemption.
Case­
by­
case
review
of
potential
modifications
that
proceeds
bound
by
a
policy
not
to
enforce
against
modifications
below
the
20%
exemption
threshold
does
not
represent
enforcement
"
discretion";
it
represents
unlawful
retroactive
rulemaking,
as
well
as
an
across­
the­
board
abdication
of
EPA's
enforcement
authority.
28
EPA's
decision
to
treat
the
new
rules
as
retroactive
also
amounts
to
permission,

indeed
an
invitation,
for
source
owners
or
operators
to
violate
 
and
continue
to
violate
­­

governing
NSR
regulations
in
SIP­
approved
jurisdictions.
This
includes
all
nonattainment
NSR
programs
in
every
state
in
the
country
and
most
PSD
programs.

These
SIP­
approved
NSR
regulations
will
not
be
changed
by
states
in
many
instances
for
up
to
three
years
after
promulgation
of
the
final
rule,
as
they
are
allowed,
and
EPA
will
not
change
SIPs
as
a
matter
of
federal
law
for
well
after
that.
29
All
the
while,
the
governing
NSR
rules
under
state
and
federal
law
in
those
jurisdictions
will
remain
the
NSR
regulations
that
pre­
date
the
20%
exemption,
which
regulations
by
EPA's
own
admission
are
far
broader
in
covering
modifications
and
do
not
authorize
the
20%

exemption.

EPA's
retroactivity
decision
thus
means
that
the
agency
is
also
purporting
to
change
the
governing
law
prospectively
and
immediately
in
those
SIP­
approved
jurisdictions
as
well,
without
the
required
state
or
federal
rulemakings.
Such
rulemaking,

28
Heckler
v.
Chaney,
470
U.
S.
821,
833
(
1985).

29
Indeed,
if
history
is
any
guide,
there
are
instances
in
which
EPA
still
has
not
acted
on
SIP
submittals
from
states,
despite
holding
those
submittals
for
over
a
decade.
56
carried
out
so
arbitrarily,
without
notice
and
comment,
and
in
violation
of
the
Clean
Air
Act,
APA,
and
other
governing
state
and
federal
law,
provides
further
grounds
for
reconsideration
of
the
final
rule.

CONCLUSION
For
the
reasons
stated
above,
the
Administrator
must
"
convene
a
proceeding
for
reconsideration
of
the
rule
and
provide
the
same
procedural
rights
as
would
have
been
afforded
had
the
information
been
available
at
the
time
the
rule
was
proposed."
42
U.
S.
C.
§
7607(
d)(
7)(
B).

DATED:
January
16,
2004.

Respectfully
submitted,

_________________________
Keri
Powell
Howard
Fox
Earthjustice
1625
Massachusetts
Avenue,
NW
Suite
702
Washington,
DC
20036
(
202)
667­
4500
Counsel
for
Petitioners
American
Lung
Association,
Communities
for
a
Better
Environment,
Environmental
Defense,
Natural
Resources
Defense
Council,
Sierra
Club,
and
United
States
Public
Interest
Research
Group
57
_________________________
Ann
Weeks
Jonathan
Lewis
Clean
Air
Task
Force
77
Summer
Street
8th
Floor
Boston,
MA
02110
(
617)
292­
0234
Counsel
for
Petitioners
Clean
Air
Council,
Group
Against
Smog
and
Pollution,
Michigan
Environmental
Council,
and
Scenic
Hudson
_________________________
David
McIntosh
John
Walke
Natural
Resources
Defense
Council
1200
New
York
Avenue,
NW
Suite
400
Washington,
DC
20005
(
202)
289­
6868