Opinion ID: 187215
Heading Depth: 3
Heading Rank: 1

Heading: SO2 Budgets

Text: We first address EPA's choice of SO2 budgets. EPA claims to have based state budgets for SO2 and NOx on the amount of emissions sources can eliminate by applying controls EPA deems highly cost-effective controlsan approach EPA says we approved in Michigan v. EPA, 213 F.3d 663 (D.C.Cir.2000). We observe initially that state SO2 budgets are unrelated to the criterion (the air quality factor) by which EPA included states in CAIR's SO2 program. Significant contributors, for purposes of inclusion only, are those states EPA projects will contribute at least 0.2 µg/m3 of PM2.5 to a nonattainment area in another state. While we would have expected EPA to require states to eliminate contributions above this threshold, EPA claims to have used the measure of significance we mentioned above: emissions that sources within a state can eliminate by applying highly cost-effective controls. EPA used a similar approach in deciding which states to include in the NOx SIP Call, which Michigan did not disturb since no one quarrel[ed] either with its use of multiple measures, or the way it drew the line at the inclusion stage. 213 F.3d at 675. Likewise here, the SO2 Petitioners do not quarrel with EPA drawing the line at 0.2 µg/m3 or its different measure of significance for determining states' SO2 budgets. Again, we do not disturb this approach. Even so, EPA's method in setting the SO2 budgets is not what Michigan approved. In that case, the petitioners argued section 110(a)(2)(D)(i)(I) does not permit EPA to consider the cost of reducing ozone. After reconciling petitioners' shifting (and somewhat conflicting) arguments, we answered a well-defined question: Could EPA, in selecting the significant level of contribution under section 110(a)(2)(D)(i)(I), choose a level corresponding to a certain reduction cost? Michigan, 213 F.3d at 676-77. Answering that question in the affirmative, we held EPA may after [a state's] reduction of all [it] could ... cost-effectively eliminate[ ], consider any remaining `contribution' insignificant. Id. at 677, 679. Michigan also rejected claims that applying a uniform cost-criterion across states was irrational because both smaller and larger contributors had to make reductions achievable by the same highly cost-effective controls. This, we said, flow[ed] ineluctably from the EPA's decision to draw the `significant contribution' line on a basis of cost. Id. at 679. Upholding that decision logically entail[ed] upholding this consequence. Id. And while EPA's approach did not necessarily ensure aggregate health benefits at roughly the lowest cost, EPA researched alternatives, and found none that significantly improved air quality or reduced cost. Id. Since no one offered a material critique of this research, we did not upset EPA's judgment. Id. Here, EPA did not use cost in the manner Michigan approved. Even worse, EPA's choice of SO2 budgets does not track the requirements of section 110(a)(2)(D)(i)(I). That much is evident from EPA's decision to base the budgets on allowances states' EGUs receive under Title IV. Those allowances are not, as EPA asserts, a logical starting point for setting CAIR's SO2 emissions caps, CAIR, 70 Fed.Reg. at 25,229. Congress designed the Title IV allowance scheme using EGU data from 1985 to 1987 to address the national acid rain problem. Nowhere does EPA explain how reducing Title IV allowances will adequately prohibit states from contributing significantly to downwind nonattainment of the PM2.5 NAAQS. And while Congress chose a policy of not revisiting and revising these allocations and, apparently, believed that its allocation methodology would be appropriate for future time periods, Reconsideration, 71 Fed.Reg. at 25,308, it is unclear how the quantitative number of allowances created by 1990 legislation to address one substance, acid rain, could be relevant to 2015 levels of an air pollutant, PM2.5. EPA also explains that it chose Title IV as a starting point to preserve the viability and emissions reductions of the highly successful title IV program. Id. This goal may be valid, but it is not among the objectives in section 110(a)(2)(D)(i)(I). And if it is somehow compatible with states' obligations to include adequate provisions in their SIPs, prohibiting emissions within the State from ... contribut[ing] significantly to downwind nonattainment, then EPA should explain how. It has failed to do so. Apart from the arbitrary Title IV baseline, EPA has insufficiently explained how it arrived at the 50% and 65% reduction figures. Though unclear, these numbers appear to represent what EPA thought would be `a cost-effective and equitable governmental approach to attainment with the NAAQS for [PM2.5].' CAIR, 70 Fed.Reg. at 25,199 (quoting Proposed CAIR, 69 Fed.Reg. 4566, 4612 (Jan. 30, 2004)). [1] As with the need to preserve the viability of the Title IV program, EPA's notions of what is an equitable governmental approach to attainment is not among the objectives of section 110(a)(2)(D)(i)(I). Nor does EPA even attempt to reconcile its choice of equitable emissions caps with those objectives. Having chosen these equitable caps for the CAIR region, EPA then ascertained the costs of these reductions and ... determine[d] that they should be considered highly cost effective. Id. at 25,176. EPA's use of cost in this manner is not what we approved in Michigan. Whereas Michigan permits EPA to draw the significant contribution line based on the cost of reducing that contribution, here EPA did not draw the line at all. It simply verified sources could meet the SO2 caps with controls EPA dubbed highly cost-effective. Nor would EPA necessarily cure this problem merely by beginning its analysis with cost. While EPA may require termination of only a subset of each state's contribution,  by having states cut[ ] back the amount that could be eliminated with `highly cost-effective controls,' Michigan, 213 F.3d at 675 (emphasis added), EPA can't just pick a cost for a region, and deem significant any emissions that sources can eliminate more cheaply. Such an approach would not necessarily achieve something measurable toward the goal of prohibiting sources within the State from contributing significantly to downwind nonattainment. Because EPA did not explain how the objectives in section 110(a)(2)(D)(i)(I) relate to its choice of SO2 emissions caps based on Title IV allowances, we conclude that choice was arbitrary, capricious, ... or not otherwise in accordance with law, 42 U.S.C. § 7607(d)(9)(A).