Opinion ID: 185121
Heading Depth: 1
Heading Rank: 1

Heading: introduction

Text: Under the Clean Air Act the Environmental ProtectionAgency promulgates national ambient air quality standards(NAAQS) for air pollutants, and states must then adoptstate implementation plans (SIPs) providing for the implementation, maintenance, and enforcement of the NAAQS; such plans are then submitted to EPA for approval. SeeClean Air Act (CAA) s 110(a)(1), 42 U.S.C. s 7410(a)(1)(1994). Even after a SIP is approved, EPA may at a latertime call for SIP revisions if the Administrator finds a SIP__________  Judge Williams wrote Parts I.B-C and II.B; Judge Sentellewrote Parts I.A, II.A, II.C, and III.A; Judge Rogers wrote PartsIII.B and IV. inadequate to attain or maintain the NAAQS, to meet thedictates of pollutant transport commissions, or to otherwisecomply with any requirement of this chapter. CAAs 110(k)(5), 42 U.S.C. s 7410(k)(5). In October 1998 EPA issued a final rule mandating that 22states and the District of Columbia revise their SIPs tomitigate the interstate transport of ozone.1 See Finding ofSignificant Contribution and Rulemaking for Certain Statesin the Ozone Transport Assessment Group Region for Purposes of Reducing Regional Transport of Ozone (FinalRule), 63 Fed. Reg. 57,356 (1998). The statutory hook forEPA's action was a 1990 amendment to the Clean Air Actwhich requires that SIPs contain adequate provisions prohibiting any source or other type of emissions activity within the State from emitting any air pollutant in amounts which will ... contribute significantly to nonattainment in, or interfere with maintenance by, any other State with respect to any such national primary or secondary ambient air quality standard. CAA s 110(a)(2)(D)(i)(I), 42 U.S.C. s 7410(a)(2)(D)(i)(I)(1994). EPA uniformly required that each state reduce nitrogen oxides (NOx--an ozone precursor) by the amount accomplishable by what EPA dubbed highly cost-effective controls, namely, those controls EPA found capable of removingNOX at a cost of $2000 or less per ton. Numerous petitionsfor review challenge various aspects of EPA's decision. In Part I we reject the following claims: that EPA couldnot call for the SIP revisions without convening a transportcommission; that EPA failed to undertake a sufficientlystate-specific determination of ozone contribution; that EPAunlawfully overrode past precedent regarding significantcontribution; that EPA's consideration of the cost of NOx __________ 1 The states are Alabama, Connecticut, Delaware, Georgia, Illinois, Indiana, Kentucky, Maryland, Massachusetts, Michigan, Missouri, North Carolina, New Jersey, New York, Ohio, Pennsylvania,Rhode Island, South Carolina, Tennessee, Virginia, West Virginia,and Wisconsin. reduction violated the statute; that EPA's scheme of uniformcontrols is arbitrary and capricious; that CAAs 110(a)(2)(D)(i)(I) as construed by EPA violates the nondelegation doctrine. In Part II we hold that the record does not supportincluding Wisconsin in the SIP call, nor does it supportcreating NOx budgets based on the entire emissions of Missouri or Georgia. We reject the claim that South Carolinawas improperly included in the SIP call. In Part III we reject the claim that EPA impermissiblyintruded on the statutory rights of states to fashion theirSIPs. We also reject the claim that EPA violated the Regulatory Flexibility Act. In Part IV we reject the claim that EPA arbitrarily revisedthe definition of a NOx budget unit. We reject all of theclaims raised by the Council of Industrial Boilers save one: we hold that EPA failed to provide adequate notice of achange in the definition of an electric generating unit. Wealso hold that EPA did not provide adequate notice of achange in the control level assumed for large, stationaryinternal combustion engines, but we reject the claim thatEPA failed to follow its own standards in defining suchengines. Finally, we uphold EPA's limits on early reductioncredits, and EPA's use of a 15% multiplier for calculatingemissions from low mass emission units. We note at the outset that one challenge has been stayed. In 1979, EPA set the acceptable level for ozone in theambient air at 0.12 parts per million (ppm), averaged overintervals of one hour. This standard is commonly known asthe 1-hour standard. By 1997, EPA had concluded that the1-hour standard no longer adequately protected publichealth. See National Ambient Air Quality Standards forOzone, 62 Fed. Reg. 38,856 (1997). Pursuant to the agency'sstatutory mandate to review and revise NAAQS as appropriate, 42 U.S.C. s 7409(d)(1), EPA promulgated a new, morestringent 8-hour standard which limits ozone levels to 0.08ppm, averaged over an 8-hour period. See 62 Fed. Reg.38,856 (codified at 40 C.F.R. s 50.10). EPA has undertaken the phasing out of the 1-hour standard on an area-by-area basis, mandating that the standardwould no longer apply to an area once it is determine[d] thatthe area has air quality meeting the 1-hour standard. 40C.F.R. s 50.9(b). The call for SIP revisions in question hererequires the covered upwind states to submit SIP revisionspursuant to the 8-hour standard even though EPA was notdesignating any 8-hour nonattainment areas prior to July1999. See 63 Fed. Reg. at 57,370; Transportation Equity Actfor the 21st Century, Pub. L. No. 105-178, s 6103, 112 Stat.107, 465 (1998) (providing that states submit suggested designations no later than July 1999 and EPA finalize thosedesignations no later than July 2000). EPA maintains that ithas the authority to include the 8-hour standard in thecurrent s 110(a)(2)(D)-specific SIP call pursuant to its authority under s 110(a)(1). Section 110(a)(1) provides that [e]ach State shall ... adopt and submit to [EPA], within 3 years (or such shorter period as [EPA] may prescribe) after the promulgation of a national primary ambient air quality standard (or any revision thereof) ..., a plan which provides for implementation, maintenance, and enforcement of such primary standard in each air quality control region (or portion thereof) within such State. 42 U.S.C. s 7410(a)(1). State and Industry/Labor petitioners initially attacked thechallenged SIP call on the basis that EPA exceeded itsstatutory authority and acted arbitrarily in basing the SIPcall on the 8-hour standard when the agency had not yetdesignated any areas as being in nonattainment under thenew standard. After petitioners' final briefs were submitted,we held in American Trucking Ass'ns, Inc. v. EPA, 175 F.3d1027, reh'g granted in part, den'd in part 195 F.3d 4 (D.C.Cir. 1999), that the new NAAQS based on the 8-hour standard was derived from a construction of the Clean Air Actthat rendered the relevant provision an unconstitutional delegation of legislative power and remanded the case to theagency. See id. at 1033-40. Seizing on this holding, petitioners added in their reply briefs that if this court does not accept the contention in their original briefs as to why EPAimpermissibly relied on the 8-hour standard, then we shouldhold that American Trucking means that EPA cannot rely onthe 8-hour standard because it was promulgated in violationof the non-delegation doctrine. Regardless, EPA moved to stay consideration of the issuesinvolving the 8-hour standard because the agency has stayedthe 8-hour findings contained in the challenged SIP call. Wegranted the motion. Because EPA's stay removes the 8-hourfindings as a basis for the SIP call, we will resolve only theissues involving the 1-hour standard.

States have the primary responsibility to attain and maintain NAAQS within their borders. See CAA s 107(a), 42U.S.C. s 7407(a). When EPA concludes that an implementation plan for any area is substantially inadequate to attainor maintain the relevant [NAAQS], to mitigate adequately theinterstate pollutant transport described in section [176A] or[184], or to otherwise comply with any requirement of thischapter, the CAA requires EPA to order a state to reviseand correct its SIP as necessary (SIP call). CAAs 110(k)(5), 42 U.S.C. s 7410(k)(5). One such requirementof this chapter, is the good neighbor provision of section110(a)(2)(D). As amended, section 110(a)(2)(D) requires thata SIP contain adequate provisions (i) prohibiting, consistent with the provisions of this subchapter, any source or other type of emissions activity within the State from emitting any air pollutant in amounts which will ... contribute significantly to nonattainment in, or interfere with maintenance by, any other State with respect to any such national primary or secondary ambient air quality standard ... [and] (ii) insuring compliance with the applicable requirements of sections [126] and [115] ... (relating to interstate and international pollution abatement). 42 U.S.C. s 7410(a)(2)(D) (emphasis added). Section 126(b)enables an individual state or a political subdivision of a stateto petition EPA to make a finding that any major source orgroup of stationary sources emits or would emit any airpollutant in violation of the prohibition of [s 110(a)(2)(D)(ii)].42 U.S.C. s 7426(b). EPA may make or deny such a finding. See id. Section 115 pertains to petitions made by foreigncountries. See 42 U.S.C. s 7415. Title I, the subchapter referenced in section 110(a)(2)(D),also includes sections 176A and 184, the provisions referencedin section 110(k)(5). In 1990, Congress added a provision tosection 176A stating that EPA may establish an interstateair pollution transport region whenever EPA has reason tobelieve that the interstate transport of air pollutants from oneor more States contributes significantly to a violation of anational ambient air quality standard in one or more otherStates. 42 U.S.C. s 7506a(a). The section also providesthat whenever EPA establishes a transport region ...[EPA] shall establish a transport commission. 42 U.S.C.s 7506a(b)(1). Among other things, a section 176A commission is to assess the interstate transport situation in therelevant transport region, assess interstate pollution mitigation strategies, and recommend to EPA measures necessaryto ensure that the plans for the relevant States meet therequirements of [section 110(a)(2)(D)]. 42 U.S.C.s 7506a(b)(2). In addition, section 176A permits a transportcommission to request that EPA issue a finding under[section 110(k)(5)] ... that the implementation plan for one ormore of the States in the transport region is substantiallyinadequate to meet [section 110(a)(2)(D) requirements]. 42U.S.C. s 7506a(c). After public comment, EPA has the authority to approve, approve in part, or disapprove such arequest. See id. In part, section 184, an ozone-specific provision, establishesan ozone transport region in the northeast (NOTR) and setsthe deadline for convening the transport commission requiredas a result of NOTR's establishment. See 42 U.S.C.s 7511c(a). The section also requires that [i]n accordancewith [section 110] ... each State included [or subsequently included] within a transport region established for ozone shallsubmit a State implementation plan or revision regardingvehicle inspection programs and volatile organic compoundscontrol technology. 42 U.S.C. s 7511c(b). In addition, section184 contains provisions giving states within an establishedtransport region the opportunity to use their section176A-established transport commission to help develop additional ozone control measures. See 42 U.S.C. s 7511c(c). Efforts to control states' upwind contributions to ozonepollution continued to fall short during the early 1990s. In1995, upon the recommendation of the Environmental Councilof the States, thirty-seven states and representatives fromEPA, industry, and environmental groups formed a nationalwork-group called the Ozone Transport Assessment Group(OTAG) to study and devise solutions to the interstateozone transport problem. See 62 Fed. Reg. 60,318, at 60,319; EPA, Ozone Transport Assessment Group Executive Report,EPA Document No. A 95-56, Doc. No. II-G-05 (ExecutiveReport) at ii. More specifically, OTAG's purpose was toidentify and recommend a strategy to reduce transportedozone and its precursors, which, in combination with othermeasures, will enable attainment and maintenance of theozone standard in the OTAG region. Executive Report at ii. OTAG concluded that upwind states needed to reduce NOxemissions in order to address the transport problem. However, the OTAG members could not agree on specific controlmeasure recommendations. See 62 Fed. Reg. at 60,320. Inresponse to OTAG's efforts, EPA engaged in further analysisand devised the SIP call challenged here. Industry/Labor petitioners argue that the CAA requiredEPA to convene a transport commission pursuant to sections176A/184 prior to issuing the challenged SIP call. EPAconcedes that OTAG was not a statutorily-mandated 176A/184transport commission as defined in the CAA. If a transportcommission is required, EPA would be bound by statute tofollow certain procedures in establishing and executing itscommission obligation. However, we hold that the CAA doesnot require EPA to establish such a commission. Industry/Labor petitioners contend that the reference tothe transport commission provisions in section 110(k)(5) andthe mandate of section 110(a)(2)(D) that SIP requirements beconsistent with Title I provisions obligated EPA, prior toissuing the SIP call, to create a transport commission guidedby the terms in sections 176A and 184 of the statute.Industry/Labor petitioners also note that sections 176A and184 reference both sections 110(a)(2)(D) and 110(k)(5). See 42U.S.C. ss 7506a(b)(2), (c), 7511c(c)(5). From this hodgepodgeof largely unrelated cross-references, Industry/Labor petitioners argue that EPA can only issue a section 110(k)(5) SIPcall to enforce section 110(a)(2)(D)'s requirement after forming a 176A/184 transport commission. We disagree. As a threshold matter, subsections 176A(a) and (b)(1) makeclear that EPA must establish a transport commission if theagency exercises its discretion to create a transport regionpursuant to section 176A(a). See 42 U.S.C. ss 7506a(a),(b)(1). However, EPA can address interstate transport apartfrom convening a 176A/184 transport commission as subsection (a) provides that EPA may establish a transport regionand subsection (b)(1) only requires a transport commissionupon the establishment of a transport region because[w]henever the Administrator establishes a transport regionunder subsection (a) ..., the Administrator shall establish atransport commission. Moreover, the relevant section 184requirements apply to states within established transportregions. See 42 U.S.C. s 7511c(a)-(c). Thus, Industry/Laborpetitioners cannot reason around the determinative statutorylanguage contained in section 176A. Statutory construction isnot an exercise in picking apart a complex statute and piecingthe parts back togther in a manner to effect a particular end. Ideally, a statute's directive concerning a certain issue will beplain and clear. Just so here.
Section 110(a)(2)(D)(I)(i) requires that the relevant offending emissions be emissions activity within the State. Several petitioners charge that EPA did not sufficiently analyze each particular state in determining which states contributedunduly to ozone downwind. In issuing its Notice of Proposed Rulemaking (NPRM),EPA relied on data collected from OTAG. The data weremulti-state and regional in nature and were framed as amodel of how ozone was transported downwind from 12different regions that covered the eastern half of the UnitedStates. See Final Rule, 63 Fed. Reg. at 57,382. The OTAGregions do not track state boundaries, so several states aresplit between regions. EPA also relied upon the NOx emissions of the individual states. See id. at 57,383-84. Apotential shortcoming of the NPRM's approach was that itwas too multi-state in nature. EPA knew how much NOxeach state was emitting, but a state's emissions as a share oftotal emissions do not necessarily correspond proportionatelyto its share in the creation of ozone in downwind states. OTAG's multi-state modeling of such downwind transportation painted with a rather broad brush. We need not pass judgment on whether the evidence andapproach of the NPRM would have supported the final rule. After receiving comments regarding the insufficiently statespecific analysis of the NPRM, EPA performed state-specificmodeling. Id. at 57,384. According to EPA, this confirmedthe results of the regional modeling. Id. The two types of state-specific modeling go by the namesUAM-V and CAMx. In the UAM-V approach, the researchers model an affected downwind area to establish a base case,and then zero-out a particular source state. Thus withUAM-V it can be estimated what ozone concentrations wouldbe like if a particular state contributed no ozone or ozoneprecursors. The CAMx modeling, on the other hand, is asource apportionment analysis which tracks modeled ozonefrom its precursors (NOx and volatile organic compounds(VOCs)) through the formation of ozone and subsequentmigration. Whereas UAM-V tells modelers how much ozoneis missing when one state is zeroed out, CAMx models anozone concentration and provides apportionment, i.e., whosent what. An advantage of the CAMx model used by EPA was that, unlike the UAM-V modeling, with CAMx EPAcould isolate man-made emissions, or ozone creation based onreactions between man-made and biogenic emissions.UAM-V modeling was less discriminating. Petitioners really do nothing more than quibble with thestate-specific modeling. For example, Industry/Labor petitioners argue that zero-out modeling is inappropriate becauseit models an impossible scenario--the elimination of all manmade NOx emissions; but they do not suggest how much thischaracteristic is likely to distort the results. State petitionerscharge that sometimes the results of the two models wereinconsistent, with, for example, the CAMx showing a largermigration of ozone from a state than the UAM-V showed forall man-made NOx in that state. EPA itself noted thisinfrequent inconsistency. See id. at 57,385. Neither criticismaffords ground for non-expert judges to find a materiallikelihood of serious error. See Appalachian Power Co. v.EPA, 135 F.3d 791, 802 (D.C. Cir. 1998). Petitioners complain that EPA did not provide the datasooner. EPA made the new modeling available on the Internet six weeks prior to the final rule, published its availabilityin the Federal Register a month before the final rule, andduring that time received and responded to questions andcomments regarding the modeling. Other than what we havealready mentioned, petitioners have evidently not been able toidentify further flaws in the modeling used, and thus havefailed to show any prejudice from EPA's timetable. PersonalWatercraft Indus. Ass'n v. Department of Commerce, 48 F.3d540, 544 (D.C. Cir. 1995).
Section 110(a)(2)(D)(i)(I) applies only to states that contribute significantly to nonattainment in a downwind state. Petitioners make essentially four arguments challengingEPA's determination of significance: (1) EPA acted contrary to precedent; (2) EPA considered forbidden factors,namely, costs of reduction; (3) EPA irrationally imposeduniform NOx controls on the states; (4) EPA's determination was so devoid of intelligible principles as to violate thenondelegation doctrine.
Before the 1990 amendments to the Clean Air Act,s 110(a)(2)(E)(I) directed the EPA to insist on SIP provisionsadequate to prevent sources within a state from emitting airpollution that would prevent attainment or maintenance [ofprimary or secondary standards] by any other State. 42U.S.C. s 7410(a)(2)(E) (1982) (emphasis added). In a numberof decisions EPA found, with approval of the courts, thatvarious emissions of a particular state, having a proportionateimpact on some downwind state greater than the impactsinvolved here, did not meet that standard. See New York v.EPA, 852 F.2d 574 (D.C. Cir. 1988); Air Pollution ControlDist. of Jefferson County v. EPA, 739 F.2d 1071 (6th Cir.1984); New York v. EPA, 716 F.2d 440 (7th Cir. 1983); NewYork v. EPA, 710 F.2d 1200 (6th Cir. 1983); Connecticut v.EPA, 696 F.2d 147 (2d Cir. 1982). According to the states,these decisions, and what they claim to be Congress's implicitendorsement in the 1990 amendments, bar EPA from regarding the ozone emissions here as significant within themeaning of s 110(a)(2)(D)(i)(I). Thus the states would equatethe old standard--prevent attainment--with the new standard: contribute significantly to nonattainment. Nothing in the text of the new section or any otherprovision of the statute spells out a criterion for classifyingemissions activity as significant. Nor did EPA, under thethen-existing provision, bind itself to any criterion. Further,given EPA's finding as to the cumulative effects of thepollutants that generate ozone, EPA might well be able todistinguish this case from the sulfur dioxide cases that thestates have cited. See 63 Fed. Reg. at 57,359 (The chemicalreactions that create ozone take place while the pollutants arebeing blown through the air by the wind, which means thatozone can be more severe many miles away from the sourceof emissions than it is at the source.). But the states pointto nothing suggesting any prior adoption by EPA of any binding concept of how much was too much, so the claim fallsshort at the threshold.
Petitioners claim s 110(a)(2)(D)(i)(I) does not permit EPAto take into consideration the cost of reducing ozone. Thefull section provides that SIPs must contain provisions adequately prohibiting any source or other type of emissions activity within the State from emitting any air pollutant in amounts which will ... contribute significantly to nonattainment in, or interfere with maintenance by, any other State with respect to any such national primary or secondary ambient air quality standard. 42 U.S.C. s 7410(a)(2)(D)(i)(I) (emphasis added). Before reviewing the petitioners' attacks we must firstdescribe how EPA went about the business at hand. It firstdetermined that 23 jurisdictions are significant contributorsto downwind nonattainment. 63 Fed. Reg. 57,398. In making this listing EPA drew lines based on the magnitude,frequency, and relative amount of each state's ozone contribution to a nonattainment area. For example, in one calculationit looked at the number of NOx parts per billion (ppb) that acandidate state's emissions made to exceedances in specificdownwind locations (examined as a proportion of those exceedances). Indiana was found to contribute at least 2 ppb to4% of the 1-hour ozone exceedances in New York City, andwas deemed a significant contributor to nonattainmentthere. On the other hand, Alabama, Georgia, Massachusetts,Missouri, South Carolina, Tennessee, and Wisconsin were notdeemed significant contributors to New York City nonattainment because none of these states ever contributed morethan 2 ppb to a 1-hour exceedance in that area. AlthoughEPA looked at other measures, e.g., the percentage contribution of a state's emissions to total concentrations in a specifiedarea, no one quarrels either with its use of multiple measures,or with the way it drew the line at this stage. Although the dividing line was a very low threshold ofcontribution, in the end EPA's rule called for termination ofonly a subset of each state's contribution. EPA decided thatthe 23 significant contributors need only reduce their ozoneby the amount achievable with highly cost-effective controls. 63 Fed. Reg. at 57,403. Thus, once a state had beennominally marked a significant contributor, it could satisfythe statute, i.e., reduce its contribution to a point where itwould not be significant within the meaning ofs 110(a)(2)(D)(i)(I), by cutting back the amount that could beeliminated with highly cost-effective controls. EPA's design was to have a lot of states make what it consideredmodest NOx reductions, uniformly limited to ones that couldbe achieved (in EPA's estimate) for less than $2000 a ton. Asa result, naturally, the ultimate line of significance, whethermeasured in volume of NOx emitted or arriving in nonattainment areas, would vary from state to state depending onvariations in cutback costs. State and Industry/Labor petitioners argue that this approach runs afoul of s 110(a)(2)(D), which they read as prohibiting any consideration of costs or cost-effectiveness indetermining what contributions are significant. So far asappears, none of the states proposes that EPA, if reversed,must require complete extirpation of their NOx emissions. Rather, the gamble--at least of the small contributors--isevidently that if EPA were barred from considering costs, itwould never have included such states. Because the attacksfrom the states and Industry/Labor are somewhat dissimilarand have shifted back-and-forth between the opening briefs,reply briefs, and oral argument, a summary of the relevantdifferences and vacillations is in order. We note that noparty makes any claim that EPA was either confined toadopting rules whose benefits exceeded their costs, or permitted to use that criterion in selecting its final rule.2 Nor has it __________ 2 Indeed, accepting EPA's belief that ozone cannot be held responsible for mortality effects, see Proposed Rule, 62 Fed. Reg. at60,321 (not listing death as a health effect of groundlevel ozone); compare Final Rule, 63 Fed. Reg. at 57,359 (listing [p]ossible long- been argued that the term significant required consideration of costs. State petitioners initially argued that it was arbitrary andunlawful for EPA to make cost effectiveness a controllingfactor or linchpin in the determination of significant contribution under s 110(a)(2)(D). Thus EPA's error, as the stateswould have it, was in considering costs too much: PetitioningStates do not claim that there is no role for cost considerations; Petitioning States simply stress that EPA must establish a definition of significance that is dominated by airquality factors, as air quality is the sole factor mentioned inthe statute. Reply Br. of Petitioning States at 4. Insupport of this position, State petitioners cited our en bancdecision in Natural Resources Defense Council v. EPA, 824F.2d 1146, 1163 (D.C. Cir. 1987) (en banc), where we held thata statutory mandate for EPA to set a standard with anample margin of safety to protect the public health did notpreclude the consideration of costs and technological feasibility, but that these concerns could not be the primary consideration. At oral argument, counsel for the states abandoned thisposition and decided that the statute flatly prohibits EPAfrom considering costs at all. Transcript of Oral Argument at14-17. Indeed, counsel eventually went so far as to claimthat if faced with two states, one of which could eliminate allrelevant emissions at a trivial cost, while the other couldeliminate none at a cost of less than $5000 a ton, EPA mustmandate the same cutback for each. Id. at 16-17. __________ term damage to the lungs or even premature death as healtheffects), and mainly using EPA data, some outside observers havecalculated the benefit per ton of NOx reduction as ranging from ahigh of $750 per ton (for mobile sources in certain areas) to a low ofnegative $6 per ton (for other mobile sources). Alan Krupnick &Virginia McConnell, Cost-Effective NOx control in the EasternU.S. (Draft July 1999) (Table 4); see Krupnick & Anderson, ADilemma Downwind, 137 Resources for the Future 5, 7 (1999) (Ifone assumes that ozone does not cause deaths, the EPA's proposalis much too restrictive, incurring costs far out of proportion withthe benefits it would bring.). We should note here that the consequence of this positionis not so extreme as it sounds. EPA's rule allows ton-for-tonemissions trading between firms based on allowances determined by each state. See 63 Fed. Reg. 57,456. Obviously thefirms with the highest emission reduction costs will, if permitted by their states, buy up pollution allowances from firmsthat are granted allowances because they have overcontrolled for NOx--firms, obviously, with low reductioncosts. If transaction costs were zero, the only effect of theinitial assignment of cutbacks would be distributional: firmswould make only the cheaper cutbacks, but firms with highemission-reduction costs would buy allowances from thosewith low costs and thereby transfer wealth to them. SeeRonald H. Coase, The Problem of Social Cost, 3 J. L. & Econ.1 (1960). But transaction costs notoriously are not zero;3 sothe likely effect of the proposed statutory interpretationwould be that any aggregate cutback would be achieved atconsiderably higher cost than under EPA's reading ofs 110(a)(2)(D)(i)(I), with absolutely no offsetting environmental benefit to the public. Of course we are able to assume theexistence of EPA's allowance trading program only becauseno one has challenged its adoption. As the program seems tohave no rationale other than cost reduction, see 63 Fed. Reg.at 57,457, it would presumably be invalid under petitioners'proposed reading of s 110(a)(2)(D)(i)(I), in which case thestates' position really is as extreme as it sounds. Returning to the positions of the parties, we find Industry/Labor engaging in a migration comparable to that of thestates, though in the opposite direction. In its opening andreply brief Industry/Labor argued that s 110(a)(2)(D) requires consideration of only air quality impacts in determining the significance of any contribution. However, at oralargument Industry/Labor offered a construction of the statute that seemed to restore to EPA via s 110(k)(5) what itwould take away via s 110(a)(2)(D). Industry/Labor claimed __________ 3 A glance at EPA's regulations for allowance trading will convince any doubter that transaction costs can safely be expected tobe substantial. See 63 Fed. Reg. at 57,457-75. that costs could be considered when EPA determines if a SIPis adequate under s 110(k)(5). Transcript of Oral Argument at 28. The states actually offered this same reading ofs 110(k)(5) in their reply brief (back when they thought EPAcould consider costs) but appeared to abandon it at oralargument in favor of a flat prohibition on EPA cost considerations. The argument that costs may be considered unders 110(k)(5) seems to concede that the structure of the statutory scheme manifests no intention to bar the consideration ofcosts. And so we are indeed presented with the question whethers 110(a)(2)(D) bars consideration of costs, but it is presentedto us with the caveat that costs can be considered later on inthe process, and accompanied by a false start by the states,who initially said that EPA could consider costs, just not toomuch. Against this backdrop, it would be at the very leastironic for us to say there is clear congressional intent topreclude consideration of cost under s 110(a)(2)(D). SeeNatural Resources Defense Council v. EPA, 824 F.2d 1146,1163 (D.C. Cir. 1987) (en banc). For convenience we repeat the statutory language. Section110(a)(2)(D)(i)(I) provides that SIPs must contain provisionsadequately prohibiting any source or other type of emissions activity within the State from emitting any air pollutant in amounts which will ... contribute significantly to nonattainment in, or interfere with maintenance by, any other State with respect to any such national primary or secondary ambient air quality standard. 42 U.S.C. s 7410(a)(2)(D)(i)(I) (emphasis added). By itsterms the statute is focused on amounts of emissionsactivity that contribute significantly to nonattainment. The fundamental dispute is over the clarity of the phrasecontribute significantly. Must EPA simply pick some flatamount of contribution, based exclusively on health concerns, such that any excess would put a state in the forbidden zone of significance?4 Or was it permissible for EPA toconsider differences in cutback costs, so that, after reductionof all that could be cost-effectively eliminated, any remainingcontribution would not be considered significant? Indeciding on the permissible ceiling, EPA used significant inthe second way. The term significant does not in itself convey a thoughtthat significance should be measured in only one dimension-- here, in the petitioners' view, health alone. Indeed, significant is a very odd choice to express unidimensionality; consider the phrase significant other. In some contexts,significant begs a consideration of costs. In finding athreshold requirement of significant risk in s 3(8) of theOccupational Health and Safety Act, 29 U.S.C. s 652(8), aplurality of the Supreme Court understood a significant riskas something more than a mathematical straitjacket, andheld that [s]ome risks are plainly acceptable and others areplainly unacceptable. Industrial Union Dept., AFL-CIO v.American Petroleum Institute (Benzene), 448 U.S. 607, 655(1980) (plurality opinion). The plurality withheld judgmenton whether the Act required a reasonable correlation between costs and benefits, id. at 615, but the upshot ofinserting the adjective significant was a consideration ofwhich risks are worth the cost of elimination. OSHA hassince interpreted s 3(8) and regulation of significant risk torequire cost-effective protective measures and set standards with an eye toward the costs of safety standards[being] reasonably related to their benefits. See International Union v. OSHA (Lockout/Tagout II), 37 F.3d 665, 66869 (D.C. Cir. 1994) (quoting OSHA's final rule). OSHA'sreaction to the term significant seems to confirm what somecommentators have asked rhetorically: [C]an an agencysensibly decide whether a risk is 'significant' without alsoexamining the cost of eliminating it? Stephen G. Breyer, __________ 4 We deal below with a related question: Did EPA act irrationallyin setting the level of significance without regard for varying levelsof downwind impact? See part I.C.3 below. Richard B. Stewart, Cass R. Sunstein & Matthew L. Spitzer,Administrative Law and Regulatory Policy 65 (4th ed. 1999). Petitioners conspicuously fail to describe the intellectualprocess by which EPA would determine significance if itmay consider only health. EPA has determined that ozonehas some adverse health effects--however slight--at everylevel. See National Ambient Air Quality Standards forOzone, 62 Fed. Reg. 38,856 (1997). Without consideration ofcost it is hard to see why any ozone-creating emissions shouldnot be regarded as fatally significant unders 110(a)(2)(D)(i)(I). Perhaps EPA might (under such a rule)let the upwind states off at the stringency level of theprograms imposed on non-attainment areas, but petitionersdo not explain how significance can exclude cost but admitequity. Although the ambiguity of the word significant and theimplications of a health-only reading are potentially fatalflaws in petitioners' theory (aside from their own inability todiscern the plain language consistently), the most formidable obstacle is the settled law of this circuit. It is only wherethere is clear congressional intent to preclude considerationof cost that we find agencies barred from considering costs. NRDC, 824 F.2d at 1163; see also George E. Warren Corp. v.EPA, 159 F.3d 616, 622-24 (D.C. Cir. 1998), reh'g granted,164 F.3d 676 (D.C. Cir. 1999); Grand Canyon Air TourCoalition v. FAA, 154 F.3d 455, 475 (D.C. Cir. 1998), cert.denied, 119 S. Ct. 2046 (1999); NRDC v. EPA, 937 F.2d 641,643-46 (D.C. Cir. 1991); cf. International Bhd. of Teamstersv. United States, 735 F.2d 1525, 1528-29 (D.C. Cir. 1984)(construing mandate to adopt reasonable requirements forsafety as allowing consideration of cost). In NRDC we considered s 112 of the Clean Air Act,requiring EPA to set an air quality standard for hazardouspollutants with an ample margin of safety to protect thepublic health. We held that this phrase did not preclude aconsideration of costs. 824 F.2d at 1155, 1163. In George E.Warren Corp. we acknowledged that the statutory scheme forthe reformulated gasoline program had the overall goal of improving air quality and reducing air pollution. 159 F.3dat 622. But because there was nothing in the text orstructure of the statute to indicate that the Congress intended to preclude the EPA from considering the effects aproposed rule might have upon the price and supply ofgasoline, id. at 623, we found no such preclusion even thoughthe provision at issue contained no allusion whatever to sucheffects. Similarly, in Grand Canyon Air Tour the statuterequired the FAA to devise a plan for substantial restorationof the natural quiet in the Grand Canyon area, but we foundnothing impermissible in the FAA's consideration of costs tothe air tourism industry in deciding how substantial thatrestoration must be. 154 F.3d at 475. In NRDC v. EPA weconsidered whether EPA permissibly used cost-benefit analysis in refusing to classify a particular polluting source asmajor. The petitioners argued that cost considerationswere precluded, and we stated: [W]hile the statutory language and legislative history do not bar petitioners' construction, they provide little support and no necessity for it. 937F.2d at 645. We affirmed EPA's use of cost-benefit analysis. These cases are unexceptional in their general view thatpreclusion of cost consideration requires a rather expresscongressional direction. See Edward W. Warren & Gary E.Marchant, More Good Than Harm: A First Principle forEnvironmental Agencies and Reviewing Courts, 20 EcologyL.Q. 379, 421 (1993) (The need to compare benefits and costshas long played a role in judicial review of agency actionsregulating health and safety risks.); Cass R. Sunstein, Interpreting Statutes in the Regulatory State, 103 Harv. L. Rev.405, 487 (1989) (suggesting an interpretive principle drawnfrom case law, including NRDC v. EPA, 824 F.2d 1146, thatreviewing courts will read statutes as authorizing regulationswith benefits at least roughly commensurate with their costs,unless there is a clear legislative statement to the contrary). Three of the cases, moreover--the two NRDC cases andGrand Canyon--, involve statutory language with just thesame structure as here. A mandate directed to some environmental benefit is phrased in general quantitative terms(ample margin of safety, substantial restoration, and ma- jor), and contains not a word alluding to non-health tradeoffs; in each case we found that in making its judgments ofdegree the agency was free to consider the costs of demanding higher levels of environmental benefit. So too here. Petitioners point to no evidence of the requisite clearcongressional intent to preclude consideration of cost. NRDC, 824 F.2d at 1163. The text, we have already seen,works no such preclusion. As for the statutory structure,petitioners willingly concede that costs may be consideredunder s 110(k)(5) in determining the adequacy of a state plan. Why would a Congress intent on precluding cost considerations allow such an escape hatch? The petitioners cite nolegislative history suggesting that cost considerations shouldbe barred. In sum, there is nothing in the text, structure, or history ofs 110(a)(2)(D) that bars EPA from considering cost in itsapplication.
As we have seen, EPA required that all of the coveredjurisdictions, regardless of amount of contribution, reducetheir NOx by an amount achievable with highly cost-effectivecontrols. Petitioners claim that EPA's uniform controlstrategy is irrational in two distinct ways. First, they observe that where two states differ considerably in the amountof their respective NOx contributions to downwind nonattainment, under the EPA rule even the small contributors mustmake reductions equivalent to those achievable by highlycost-effective measures. This of course flows ineluctablyfrom the EPA's decision to draw the significant contribution line on a basis of cost differentials. Our upholding ofthat decision logically entails upholding this consequence. The second objection is that because of distance and thevagaries of pollutant migration and ozone formation, a molecule of NOx emitted in Indiana (for example) may cause farless adverse health impact than a molecule emitted in easternPennsylvania. EPA acknowledges that [s]ources that arecloser to the nonattainment area tend to have much larger effects on air quality than sources that are far away. 63Fed. Reg. at 25,919. While EPA's cost-effectiveness standardand emissions trading seem to mean that EPA will secure theresulting aggregate NOx reduction at roughly the lowestpossible cost, they do not necessarily mean that it will havesecured the resulting aggregate health benefits at the lowestcost. Petitioners ask, in effect, why EPA did not, by onemeans or another (e.g., in the emissions trading system),make reductions from sources near the nonattainment areas(or otherwise more damaging, molecule for molecule) morevaluable than ones from distant sources? EPA considered this approach, modeling the efficacy ofregional alternatives compared to its uniform strategy. SeeFinal Rule, 63 Fed. Reg. at 57,423. Its researchers foundthat non-uniform regional approaches by comparison did notprovide either a significant improvement in air quality or asubstantial reduction in cost. Id. The complaining statesoffer no material critique of EPA's methodology in reachingthis answer, which in fact some independent investigatorshave confirmed. See Krupnick & Anderson, A DilemmaDownwind, 137 Resources for the Future 5, 6 (1999) ([Evenwith] spatial differences, when viewed across the entire studyregion, RFF concluded that there was no clear benefit to anexposure-based trading system, compared with simple tonfor-ton NOx trading. Public health benefits would be approximately the same, and there would be no significant differencein costs to the utilities.). We have no basis to upset EPA'sjudgment.
In their opening brief and more prominently in their replybrief, state petitioners argue that EPA has not determinedsignificant contribution based on any intelligible principles. Petitioners rely heavily on our decision in American Trucking Ass'ns, Inc. v. EPA, 175 F.3d 1027, reh'g granted in part,den'd in part 195 F.3d 4 (D.C. Cir. 1999), essentially arguingthat nothing about EPA's analysis explains how much of aNOx contribution was too much (i.e., worthy of a SIP call). We must recognize here that EPA's cost-effectiveness criterion is a radically incomplete line-drawing device. EPA haseffectively ruled that each affected state must get down to theNOx emissions levels that would prevail if it removed all NOxemissions costing $2000/ton or less to remove. This satisfiesits cost-effectiveness criterion because (if states also seek tominimize costs subject to the EPA's constraint) only theserelatively low-cost tons will be removed. But while EPAindicates that it rested the $2000/ton figure on NOx emissions controls that are available and of comparable cost toother recently undertaken or planned NOx measures, FinalRule, 63 Fed. Reg. at 57,400, it neither rests that benchmarkon anything in the language or function of s 110(a)(2)(D)(i)(I),nor otherwise explains why the resulting cut-off point represents the right degree of cost-effectiveness (i.e., why highly cost-effective should be at that height). Accordingly, wemust read EPA as having understood that its selection of thecut-off point was essentially unbounded. But petitioners have ignored a limit to the nondelegationdoctrine that we relied on in American Trucking and evenmore emphatically in its immediate precursor, InternationalUnion, UAW v. OSHA (Lockout/Tagout I), 938 F.2d 1310(D.C. Cir. 1991). There we noted that the scope of theagency's claimed power to roam was immense, encompass-