Opinion ID: 796659
Heading Depth: 3
Heading Rank: 5

Heading: Definitions of New Facility and Existing Facility

Text: 102 The environmental petitioners challenge the reclassification in the Phase II Rule preamble of certain new constructions as existing facilities, thereby rendering them subject to the Phase II Rule rather than the more stringent Phase I requirements that apply to new facilities. We agree with the petitioners that the Agency interpretively modified a definition appearing in the Phase I Rule via statements in the preamble to the Phase II Rule without providing interested parties notice and an opportunity for comment. 103 An agency's interpretation of its own ... regulation must be given controlling weight unless it is plainly erroneous or inconsistent with the regulation. Fowlkes v. Adamec, 432 F.3d 90, 97 (2d Cir.2005) (citations and internal quotation marks omitted). Although we typically owe considerable deference to an agency's construction of its own regulation, Udall v. Tallman, 380 U.S. 1, 16, 85 S.Ct. 792, 13 L.Ed.2d 616 (1965), [u]nder settled principles of statutory and rule construction, a court may defer to administrative interpretations of a statute or regulation only when the plain meaning of the rule itself is doubtful or ambiguous, Pfizer, Inc. v. Heckler, 735 F.2d 1502, 1509 (D.C.Cir. 1984) (emphasis in original). Deference to agency interpretations is not in order if the rule's meaning is clear on its face. Id. Implicit in the rule that an agency cannot interpret a regulation contrary to its unambiguous meaning is the requirement that an agency must adhere to its own rules and regulations. Reuters Ltd. v. FCC, 781 F.2d 946, 950 (D.C.Cir.1986). An agency may modify a regulation that has already been promulgated, therefore, only through the process of notice and comment rulemaking. See Alaska Prof'l Hunters Ass'n, Inc. v. FAA, 177 F.3d 1030, 1034 (D.C.Cir.1999); see also 5 U.S.C. § 551(5) (defining rule making, which is governed by the notice and comment requirements of 5 U.S.C. § 553, as the agency process for formulating, amending, or repealing a rule); Shalala v. Guernsey Memorial Hosp., 514 U.S. 87, 100, 115 S.Ct. 1232, 131 L.Ed.2d 106 (1995) (noting in dicta that APA rulemaking is required where an agency interpretation adopt[s] a new position inconsistent with ... existing regulations). 104 The Phase I Rule defined new facility as any structure whose construction commenced after January 17, 2002 that meets both the definition of new source in 40 C.F.R. § 122.29 (discussed below) and one of two other requirements: the structure must use either (1) a newly constructed cooling water intake structure or (2) an existing cooling water intake structure whose design capacity is increased to accommodate the intake of additional cooling water. See 40 C.F.R. § 125.83. A new source under section 122.29 is a facility that (1) is constructed at a site at which no other source is located, (2) totally replaces the process or production equipment that causes the discharge of pollutants at an existing source, or (3) undertakes processes ... substantially independent of an existing source at the same site. 28 40 C.F.R. § 122.29(b) (emphasis added). Section 122.29(b) provides further that, in determining whether a facility is substantially independent of an existing source, the director should consider the extent to which the new facility is integrated with the existing plant; and the extent to which the new facility is engaged in the same general type of activity as the existing source. 40 C.F.R. § 122.29(b)(iii). 105 In determining whether a new construction qualifies as a new facility for purposes of the Phase I Rule, therefore, the permitting authority must perform a two-part, but not necessarily sequential, analysis. It must determine whether the construction uses a new cooling water intake structure or an existing structure whose capacity has been increased. The permitting authority must also determine whether the new construction qualifies as a new source. Failure to meet either part of this analysis precludes the new construction from qualifying as a new facility, and thus from falling under the Phase I Rule's purview. 106 The Phase I Rule stated that new facilities meeting the foregoing requirements include a stand-alone facility, which the Phase I Rule defined as a new, separate facility that is constructed on property where an existing facility is located and whose processes are substantially independent of the existing facility at the same site. Id. § 125.83. This is because such a facility, by definition, essentially qualifies as a new source. Compare id. with § 122.29 (defining new source as including a facility that undertakes processes ... substantially independent of an existing source at the same site). The Phase I Rule clarified, however, that new facility does not include new units that are added to a facility for purposes of the same general industrial operation (for example, a new peaking unit at an electrical generating station). Id. § 125.83. This is presumably because such units do not qualify as new sources in that they are not substantially independent of existing sources. See id. § 122.29(b)(1)(iii) (setting forth the factors to be considered in determining substantial independence, including the extent to which the new facility is integrated with the existing plant; and the extent to which the new facility is engaged in the same general type of activity as the existing source). The Phase I Rule thus appears to have left regulation over the following to a subsequent rulemaking phase: (1) new stand-alone facilities that use existing intake structures whose design capacity is not increased and (2) new units that are added to a facility for purposes of the same general industrial operation even if they require either an increase in the intake structure design capacity or the construction of a new cooling water intake structure altogether. Id. 29 107 The Phase II Rule defines existing facility as any facility whose construction commenced on or before January 17, 2002, and any modification of, or any addition of a unit at such a facility that does not meet the definition of a new facility at § 125.83. Id. § 125.93. Thus, from this definition, it appears that new stand-alone facilities that use existing, unmodified intake structures and new units added to a facility for purposes of the same industrial operation, regardless of their impact on the facility's cooling water intake structure, (i.e., the two kinds of new constructions left unregulated by the Phase I Rule) are considered existing facilities and governed by the Phase II Rule. 108 The parties' dispute concerns statements in the preamble to the Phase II Rule that purportedly narrow, by way of interpretation, the Phase I Rule's definition of new facility 30 without the required procedures of notice and comment. In the preamble to the Phase II Rule, the EPA states that the Phase I[R]ule treated almost all changes to existing facilities for purposes of the same industrial operation as existing facilities. 69 Fed.Reg. at 41,579. The preamble then appears to distinguish stand-alone facilities from new units that are part of the same industrial operation, thereby defining the latter as existing facilities without reference to the definition of new source or the substantial independence test of 40 C.F.R. § 122.29. Id. at 41,579 n. 2a. The preamble states that the substantial independence test does not apply where there is an addition to an existing facility for purposes of the same industrial operation, such as the addition of new generating units at the same site as an existing facility, id. at 41,579, because such additions are categorically treated as `existing facilities' regardless of any other considerations unless they completely replace an existing facility and its cooling water design intake capacity is increased, id. at 41,579 n. 2a. These comments are contrary to the plain meaning of the relevant portion of the Phase I Rule. 109 The Phase I Rule unambiguously stated that new facility means any structure that is a new source, as defined by 40 C.F.R. § 122.29, subject to certain other requirements. Under this provision, a source is considered new if, inter alia, [i]ts processes are substantially independent of an existing source at the same site. 40 C.F.R. § 122.29(b)(1)(iii). A permitting authority could not classify a source constructed at the site of an existing source as new or existing for purposes of the Phase I Rule, therefore, without reference to the substantial independence test. It is plain, then, that the Phase I Rule distinguished between stand-alone facilities and new units, where the new construction is not built at an empty site and does not totally replace an existing source, by reference to the definition of a new source. A stand-alone facility is substantially independent of an existing facility, and therefore a new source; a new unit that is part of the same industrial operation as an existing facility is not substantially independent of an existing facility, and therefore not a new source. It is impossible to determine which classification applies to a particular construction under the Phase I Rule without referring to the definition of new source, i.e., whether it satisfies the substantial independence test. Put differently, the touchstone of the definition of new facility in the Phase I Rule is whether a source is a new source. The Phase I Rule's plain terms thus indicate that a unit that is substantially independent of an existing facility is not part of the same general industrial operation as the existing facility. Any elimination of the substantial independence inquiry, therefore, strikes at the heart of the Phase I Rule and its classification of what facilities are subject to its requirements. 110 The EPA claims that the Phase II Rule has in no way eliminated the substantial independence test and that the Rule's preamble merely makes clear that the fifth sentence in section 125.83 exempts new units from regulation under the Phase I Rule. This argument fails because the Phase I Rule provides no way to distinguish between stand-alone facilities and new units where the construction is built on a site where a source is already located and does not totally replace the existing source except by reference to the substantial independence test, i.e., without assessing the factors set forth at 40 C.F.R. § 122.29(b)(1)(iii) in order to determine whether the source is new or existing. Just as stand-alone facility has no intrinsic meaning, neither does new unit. The Phase I Rule defines each by reference to the substantial independence test of section 122.29(b). Thus, while an existing facility can be repowered with new generating units and remain an existing facility for regulatory purposes under section 316(b), the determination can only be made by reference to whether a particular new generating unit is a stand-alone facility or a new unit that is part of the same general industrial operation as an existing facility. In fact, a permitting authority must first determine whether a source is new within the meaning of 40 C.F.R. § 122.29(b) before it can conclude that the source is a stand-alone facility or a new unit added to an existing facility for purposes of the same general industrial operation. 111 Because the Phase I Rule was not ambiguous, we do not owe deference to the Agency's interpretation of the Phase I Rule in the preamble to the Phase II Rule. See Fowlkes, 432 F.3d at 97; Pfizer, 735 F.2d at 1509. By permitting the Agency to determine that a new construction is not subject to the Phase II Rule without any definitional guidance and in contravention of the Phase I Rule, the EPA has expanded the scope of what may be classified as a new unit while narrowing the Phase I definition of stand-alone facility. Moreover, by including a potentially expansive definition of new unit in the preamble to the Phase II Rule, the EPA has interpretively modified the definitions that appeared in the Phase I Rule without providing interested parties an opportunity for notice and comment. 112 Accordingly, we direct the EPA on remand to adhere to the definitions set forth in the Phase I Rule, see Reuters, 781 F.2d at 950-52, or to amend those definitions following notice and comment, see Alaska Prof'l Hunters, 177 F.3d at 1034.