Opinion ID: 3180012
Heading Depth: 4
Heading Rank: 1

Heading: The SIP’s Cost Analysis

Text: As one of the BART factors, states must consider the “costs of compliance.” 42 U.S.C. § 7491(g)(2); 40 C.F.R. § 51.308(e)(1)(ii)(A). “States have flexibility in how they calculate costs.” Haze Regulations, 70 Fed. Reg. at 39,127. A state’s cost calculations are critical to determining a BART control’s “cost effectiveness,” where “‘effectiveness’ is measured in terms of tons of pollutant emissions removed, and ‘cost’ is measured in terms of annualized control costs.” Id. at 39,167. 26 ARIZONA EX REL. DARWIN V. USEPA After identifying control alternatives and achievable emissions performance levels, states are directed to “develop estimates of capital and annual costs.” Id. at 39,166. “The basis for equipment cost estimates also should be documented, either with data supplied by an equipment vendor . . . or by a referenced source (such as the [Office of Air Quality Planning and Standards] Control Cost Manual . . . ).” Id. The Guidelines instruct that the Cost Manual “addresses most control technologies in sufficient detail for a BART analysis,” and that “cost estimates should be based on the [Cost Manual] where possible” to “maintain and improve consistency.” Id. States are allowed by the Guidelines to include “additional information” — such as “any information supplied by vendors that affects your assumptions regarding purchased equipment costs, equipment life, [or] replacement of major components” — in their cost calculations, but require them to provide documentation for any “element of the calculation that differs from the . . . Cost Manual.” Id. n.15. Finally, the Guidelines indicate that “[t]he cost analysis should also take into account any site-specific design or other conditions . . . that affect the cost of a particular BART” option. Guidelines at 39,166. In its proposed rule, EPA found “certain aspects” of Arizona’s cost calculations “inconsistent” with the Guidelines and Cost Manual and “disagree[d] with the manner in which [Arizona] interpreted the cost-related information included in its [] SIP.” 77 Fed. Reg. at 42,841. With regard to Coronado, specifically, EPA noted in its proposed rule that SRP “provided summaries of total control costs, such as total annual operating and maintenance costs and total annualized capital cost, but did not provide cost information at a level of ARIZONA EX REL. DARWIN V. USEPA 27 detail that included line item costs.” Id. at 42,850. This omission meant that SRP did not provide Arizona “with control cost calculations at a level of detail that allowed for a comprehensive review.” Id. at 42,851. As a result, EPA explained, it “[did] not believe that [Arizona] was able to evaluate whether SRP’s control costs were reasonable.” Id. Arizona’s BART analysis was therefore inadequate because it “did not properly consider the costs of compliance for each control option.” Id. We conclude that EPA’s disapproval of the cost analysis underlying Arizona’s BART determination for Coronado on that basis was not “arbitrary, capricious, [or] an abuse of discretion.” 5 U.S.C. § 706(2)(A). Arizona simply relied on the cost data provided by SRP, despite the fact that the data failed to include sufficient detail for the State meaningfully to analyze the reasonableness of the costs of various control alternatives. States are required by statute to consider “costs of compliance” in making BART determinations. 42 U.S.C. § 7491(g)(2). When they are not presented with enough data to do so, EPA may reasonably conclude that their analysis is 28 ARIZONA EX REL. DARWIN V. USEPA inadequate.14 EPA’s decision to do so was not arbitrary or capricious.