Opinion ID: 768833
Heading Depth: 3
Heading Rank: 2

Heading: Council of Industrial Boiler Owners

Text: 104 In the rulemaking, EPA distinguished between electricity generating units (EGUs) and non-electricity generating units (non-EGUs). Council of Industrial Boiler Owners (CIBO), a trade association whose membership consists of companies and universities operating industrial boilers and turbines (industrial boilers), which constitute one category of non-EGUs, challenges the NOx SIP call for being based on the following arbitrary and capricious actions by EPA: EPA's failure to determine whether non-EGUs are significant contributors, EPA's flawed cost assumptions in its determination of cost-effective control measures for non-EGUs, EPA's erroneous calculation of non-EGU budgets, and EPA's arbitrary redefinition of the term EGU. We agree only that EPA's redefinition of EGUs was arbitrary and capricious. 105
106 CIBO challenges EPA's decision to include non-EGU boilers in the rule without having isolated non-EGU emissions to determine whether they significantly contribute to the interstate ozone transport problem and whether implementing highly cost-effective emissions reduction measures on industrial boilers would ameliorate nonattainment in downwind states. CIBO maintains that non-EGU boilers typically have significantly shorter stacks than EGUs and that their emissions, as a result, fall below the mixing layer that promotes long-range NOx transport. Therefore, CIBO contends, industrial boilers as a group can have no impact on long-range ozone transport. However, this factual claim fails in view of contrary evidence in the record. OTAG's Executive Report states as one of its major conclusions that [b]oth elevated (from tall stacks) and low-level NOx reductions are effective. Executive Report at 4. EPA reiterated this finding by OTAG in the NPRM, see Proposed Rule, 62 Fed. Reg. at 60,332, it relied on the finding, and it appears that members of CIBO never challenged it during the comment period. Therefore, we cannot say EPA's inclusion of non-EGUs in the group of significantly contributing sources was arbitrary. 107
108 CIBO also challenges EPA's conclusion that industrial boilers could achieve a 60% emissions reduction using highly cost-effective control measures, see Final Rule, 63 Fed. Reg. at 57,418, as based on flawed cost calculations. More specifically, CIBO lists the following alleged problems in EPA's cost assumptions: 109 EPA's assumption of 10 years as the lifetime of all control measures for industrial boilers, except for selective catalytic reduction and selective non-catalytic reduction controls, for which 20 years was assumed. 110 EPA's use of a 10% discount rate, not 7%, in its costeffectiveness analysis. 111 EPA's failure to take into account the fact that control effectiveness can vary by as much as 10% to 20%. 112 EPA's failure to take into account cost and feasibility implications of load variability and firing of multiple fuels. 113 EPA's assumption of NOx emission allowance costs of $2,000 per ton, when emission allowances trade for $5,500 to $6,300 per ton. 114 The general problem of these criticisms is that CIBO merely lists several items as problems and labels all of them irrational without explaining why its claims should concern the court. Given that almost all of CIBO's challenges involve technical details on which the court generally defers to the agency's expertise, CIBO's failure to explain why the socalled problems it identifies amount to an arbitrary and capricious decisionmaking is fatal to its claims. 7 Therefore, we reject CIBO's claims regarding EPA's underlying cost assumptions about industrial boilers. 115
116 CIBO contends that EPA's calculation of the non-EGU component for the State NOx budget lacks adequate support in the record and lists the following as problems: 117 Non-EGU inventories had errors. 118 EPA's use of Bureau of Economic Analysis growth factor to project 2007 emission levels have inherent error. 119 EPA employed crude extrapolations to identify large non-EGU boilers. 120 The default boiler capacity file is not in the record and the record does not reveal how EPA manipulated the data. 121 The source of Bureau of Economic Analysis growth factors is not identified in the record, and the record does not show how EPA manipulated the data. 122 It is unknown whether EPA credited NOx reductions from fluidized-bed combustion technology. 123 Again, CIBO merely presents a list of problems without explaining why these alleged errors render EPA's rulemaking arbitrary or capricious. In addition, CIBO members had repeated opportunities to provide correct information for some of these items during the rulemaking process. CIBO's poorly articulated, blanket accusations at this late stage contribute little to improve the quality of agency rulemaking; therefore, we reject CIBO's challenges regarding EPA's calculation of NOx budgets for non-EGUs.
124 More persuasively, CIBO contends that EPA revised the definition of EGU without adequate notice. Throughout the rulemaking, EPA defined an EGU as it did under the acid rain program, which excludes from the category of utility units those cogeneration units that sell less than one-third of their potential electrical output capacity or less than 25 MW per year. See 42 U.S.C. S 7651a(17)(C). However, two months after the promulgation of the rule, EPAredefined an EGU as a unit that serves a large generator (greater than 25MW) that sells electricity. CIBO contends that EPA did not provide sufficient notice and opportunity to comment on this revision, especially considering that the industrial boilers have relied on the previous definition for a number of years. We agree. 125 EPA maintains that it provided adequate notice in the May 1998 supplemental notice, stating that deregulation of electric utilities means that it is not clear how ownership of the electricity generating facilities will evolve. Supplemental Notice of Proposed Rule, 63 Fed. Reg. at 25,923. Given that there is no relevant physical or technological difference between utilities and other power generators, EPA proposed, all large electricity generating sources, regardless of ownership, should be treated the same. Id. There are several problems with EPA's response. First, it is undisputed that EPA was departing from the definition of EGUs as used in prior regulatory contexts, and EPA was not explicit about the departure from the prior practice until two months after the rule was promulgated. Neither the proposed rulemaking in November 1997 nor the final rule in October 1998 introduced the new definition. EPA waited until the December 1998 correction notice to announce that it will classify as an EGU any boiler ... that is connected to a generator greater than 25 M We from which any electricity is sold.Correction and Clarification to the Finding of Significant Contribution and Rulemaking for Purposes of Reducing Regional Transport of Ozone (Correction Notice to Final Rule), 63 Fed. Reg. 71,220, 71,223 (1998). After the December correction notice, EPA reopened the comment period for sixty days for comments on this and other issues. In EPA's May 1999 response to the comments, EPA, for the first time, discussed why the change was necessary and offered a justification largely based on recent changes in the electric power industry. See Responses to the 2007 Baseline Sub-Inventory Information and Significant Comments for the Final NOx SIP Call 10-12 (May 1999) (Responses to Final Comments). 126 As to the statement in the May 1998 supplemental notice that EPA claims constitutes notice, this statement was given in EPA's discussion of how the core group of sources for the model trading rule should be defined, and not in the context of a discussion about the general distinction between EGUs and non-EGUs for the purposes of calculating state budgets. Cf. Small Refiner Lead Phase-Down Task Force v. EPA, 705 F.2d 506, 550 (D.C. Cir. 1983). Moreover, EPA also explicitly observed in the same May notice discussion about the model trading rule that [m]any of the definitions ... are the same as those used in ... the Acid Rain Program regulations, in order to maintain consistency among programs. Supplemental Notice of Proposed Rule, 63 Fed. Reg. at 25,923.Given the vague and conflicting signals that EPA was sending, it is an exaggeration to state that some general theme of the regulatory consequences of deregulation of the utility industry throughout rulemaking meant that EPA's lastminute revision of the definition of EGU should have been anticipated by industrial boilers as a logical outgrowth of EPA's earlier statements. See American Water Works Ass'n. v. EPA, 40 F.3d 1266, 1274-75 (D.C. Cir. 1994). 127 EPA contends that even assuming that CIBO did not have adequate notice and opportunity to comment on the EGU definition, the error has been cured because it reopened the comment period on this issue after its announcement of the revision. See Correction Notice to Final Rule, 63 Fed. Reg. at 71,221-23. This response is to no avail. During the new comment period, some commenters complained that there had not been sufficient notice and opportunity to comment on the EGU redefinition. See Responses to Final Comment, at 12. EPA's response to this charge primarily relied on the claim that there had beenadequate notice prior to the redefinition, see id., and we have already rejected that argument. 128 Therefore, we conclude EPA did not provide sufficient notice and opportunity to comment for its redefinition of EGUs and remand the rulemaking to EPA for further consideration in light of this opinion.