Opinion ID: 2761465
Heading Depth: 2
Heading Rank: 2

Heading: EPA’s Redesignations

Text: We will not overturn an EPA action unless we deem it to be “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A); Alaska Dept. of Envtl. Conservation v. EPA, 540 U.S. 461, 497 n.18 (2004). Review under the arbitrary and capricious standard is principally concerned with ensuring that EPA has examined the relevant data and articulated a satisfactory explanation for its action including a rational connection between the facts found and the choice made, that the Agency’s decision was based on a consideration of the relevant factors, and that the Agency has made no clear error of judgment. 18 Nos. 12-2853, 12-3142 & 12-3143 Bluewater Network v. EPA, 370 F.3d 1, 11 (D.C. Cir. 2004) (citation and internal quotation marks omitted). Under this highly deferential standard, an administrative decision should be upheld “as long as the agency’s path may be reasonably discerned.” Mt. Sinai Hosp. Med. Ctr. v. Shalala, 196 F.3d 706, 708 (7th Cir. 1999) (citation and internal quotation marks omitted). EPA’s redesignation can be considered arbitrary and capricious if the Agency relied on factors that “Congress did not intend for it to consider, entirely fails to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.” North Carolina v. EPA, 531 F.3d 896, 906 (D.C. Cir. 2008); see also Adventist GlenOaks Hosp. v. Sebelius, 663 F.3d 939, 942 (7th Cir. 2011) (citing Motor Vehicle Mfrs. Ass'n of U.S. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)). Before EPA may redesignate a nonattainment area, the CAA mandates, among other things, that it (1) determine that the area has attained the applicable NAAQS (i.e., that ozone has decreased sufficiently) and (2) determine that the improvement in air quality is due to permanent and enforceable reductions in emissions resulting from the SIP and applicable federal air pollutant control regulations and other permanent and enforceable reductions. 42 U.S.C. § 7407(d)(3)(E). After Congress amended the CAA in 1990, EPA articulated its interpretation of this provision of the statute in “State Implementation Plans: General Preamble for the Implementation of Title I of the Clean Air Act Amendments of 1990” (“General PreamNos. 12-2853, 12-3142 & 12-3143 19 ble”). 57 Fed. Reg. 13,498, 13,561–64 (Apr. 16, 1992). The Agency further interpreted the statutory requirements for redesignation in several guidance documents, the most relevant of which is entitled “Procedures for Processing Request to Redesignate Areas to Attainment,” J. Calcagni, EPA Dir. of Air Quality Mgt. Div. (Sept. 4, 1992) (“the Calcagni Memo”). According to EPA, these interpretations have served as the basis for evaluating redesignation requirements in numerous final rulemakings. The phrase “permanent and enforceable” is not de- fined in the statute. The General Preamble, however, sets forth EPA’s position that reductions in emissions are “temporary” if they result “from a suspension of industrial production or other temporary change in the industrial or economic activity in the area.” By contrast, “[r]eductions in emissions from shutdowns are considered permanent and enforceable to the extent those shutdowns have been reflected in the SIP, and all applicable permits have been modified accordingly.” The General Preamble also states that “[m]easures are enforceable when they are duly adopted, and specify clear, unambiguous, and measureable requirements. A legal means for ensuring that sources are in compliance with the control measure must also exist in order for a measure to be enforceable.” And the Calcagni Memo makes clear that the “State must be able to reasonably attribute the improvement in air quality to emission reductions which are permanent and enforceable” and that “[a]ttainment resulting from temporary reductions in emission rates (e.g., reduced production or shutdown due to temporary adverse economic conditions) or unusually favorable me20 Nos. 12-2853, 12-3142 & 12-3143 teorology would not qualify as an air quality improvement due to permanent and enforceable emissions reductions.” In making the “permanent and enforceable” determination, the Calcagni Memo counsels, the state seeking redesignation must “estimate the percent reduction . . . achieved from Federal measures such as the Federal Motor Vehicle Control Program and fuel volatility rules as well as control measures that have been adopted and implemented by the State.” The State’s estimate “should consider emission rates, production capacities, and other related information to clearly show that the air quality improvements are the result of implemented controls.” Sierra Club does not challenge the wisdom of the Calcagni Memo’s statutory interpretation. Instead, Sierra Club argues that EPA failed to observe its own guidance in determining that ozone reductions were due to permanent and enforceable measures. More specifically, Sierra Club argues that EPA is required to “determine whether ([and] to what extent) the observed reduction in [an] area’s ozone pollution resulted from newly adopted state and federal regulations—rather than from temporary fluctuations in weather or the economy, or from other similarly impermanent and unenforceable factors.” Pet’r Br. 36. What EPA did instead, Sierra Club claims, is (1) confirm the requisite drop in ozone levels, (2) determine that ozone precursors (NOx and VOCs) also dropped, (3) note the state and federal regulations that coincided with those decreases, and (4) draw a conclusion that (3) caused (1) and (2). Thus, Sierra Club contends that EPA identified a correlation, but failed to identify causation. Sierra Club argues that EPA should have undertaken an “analysis of the meteorology, [and] the Nos. 12-2853, 12-3142 & 12-3143 21 timing and location of precursor emissions, that produced the improved air quality.” Pet’r Br. 44. In Sierra Club’s view, EPA should have more closely considered the possible effects of the economic recession, fuel prices, weather, and “other impermanent conditions” on the reductions in ozone (and ozone precursor) levels; without quantifying the effect of each of these variables, EPA cannot meet the requirements of the statute, Sierra Club says. Pet’r Br. 47, 52. To Sierra Club, the spike in ozone levels in Sheboygan County and in St. Louis illuminates the inadequacy of EPA’s determination that ozone levels in Milwaukee-Racine and the Illinois portion of St. Louis were due to “permanent and enforceable” measures. EPA does not dispute that a causative connection is required. In fact, in its final approval of the MilwaukeeRacine redesignation, EPA echoed the Calcagni Memo’s interpretation of the CAA’s causation requirement: “the improvement in air quality necessary for the area to attain the relevant NAAQS must be reasonably attributable to permanent and enforceable reductions in emissions.” 77 Fed. Reg. at 45,258 (emphasis added). To EPA, the evidence demonstrated that the various state and regulatory measures enforced during the relevant periods “represent[ed] an adequate demonstration that the improvement in air quality can reasonably be attributed to the significant reduction in emissions resulting from permanent and enforceable emissions control programs.” Id. EPA defends its methodology, asserting that in each case it did more than simply draw a correlation in the absence of an adequate causative link. Specifically, EPA listed each state and federal measure that it deemed 22 Nos. 12-2853, 12-3142 & 12-3143 “permanent and enforceable” that had been implemented in each state. For example, in Milwaukee-Racine, EPA catalogued: (1) Wisconsin’s enhanced automobile inspection and maintenance programs; (2) Wisconsin’s regulations governing nitrogen oxide emissions at electric utilities and large industrial combustion sources and establishing emission standards for new sources; (3) federal standards for vehicles and gasoline sulfur that phased in between 2004 and 2009; (4) an EPA rule effective in 2004 that limits the sulfur content of diesel fuel; (5) EPA’s 2004 rule applying to diesel engines used in the construction, agriculture, and mining industries; (6) new source performance standards; (7) national emission standards for hazardous air pollutants, including maximum achievable control technology standards; and (8) control measures in upwind areas, such as the NOx SIP Call, which required twenty-two states in the region to reduce NOx emissions. See 77 Fed. Reg. at 6737. EPA made similar findings with respect to St. Louis and Chicago. See 76 Fed. Reg. at 79,586; 77 Fed. Reg. at 6754–55. For nearly all of these measures, EPA estimated the impact that each would have on emissions that cause ozone pollution. Regarding Milwaukee-Racine, for example, EPA noted that, with respect to Wisconsin’s regulation of stationary sources, such controls were estimated to achieve a 55-ton-per-day reduction of NOx by 2007. EPA estimated that federal rules designed to control VOCs and NOx emissions that phased in between 2004 and 2009 would reduce vehicle NOx emissions nationwide by 77% in passenger cars, 86% in light duty trucks, minivans, and SUVs, and between 69–95% in heavier trucks. EPA estimated that these regulations would reNos. 12-2853, 12-3142 & 12-3143 23 duce VOC emissions from 12–18%, depending on the class of vehicle, over the 2004 through 2009 period. And EPA believed that its 2004 rule applying to diesel engines in construction, agriculture, and mining would result in a 90% reduction in NOx emissions from nonroad diesel engines. Sierra Club counters that EPA failed to specifically determine how these reduction estimates affected ozone levels in just the Milwaukee-Racine area, and specifically for the 2005–2008 timeframe. In other words, Sierra Club believes that EPA’s analysis was too imprecise. EPA points out that there is no information in the record to support a conclusion that any of these reductions were temporary or that any temporary reductions contributed to the attainment of the NAAQS in the three geographic areas at issue. In light of the evidence, EPA contends that—in its experience, expertise, and professional judgment—it “reasonably attributed” the reductions to permanent and enforceable measures, which is all that its interpretation of the CAA requires. Nevertheless, Sierra Club insists that EPA should have done more. In its view, EPA could have conducted a more sophisticated analysis or utilized scientific modeling to rule out—with a higher degree of certainty—the other variables (wind, sunlight, economic conditions) that affect ozone levels. But, as EPA says, “[e]ven if it were scientifically possible” to do so, such an “elaborate analytical exercise is not required by the CAA.” We agree. At bottom, the CAA required EPA to confirm the nec- essary ozone reduction and tie it to a “permanent and enforceable” drop in precursor emissions (VOC and NOx) resulting from “permanent and enforceable” regulation. 24 Nos. 12-2853, 12-3142 & 12-3143 EPA did that. If estimating ozone conditions is as “tricky” as Sierra Club emphasizes throughout its briefing, then of course EPA’s determinations are not infallible. If, for example, a mixture of sunlight and wind can alter ozone levels in unexpected ways, no amount of scientific modeling employed by EPA in making its causation determination will preclude subsequent increases in ozone. Regardless, the CAA does not require EPA to prove causation to an absolute certainty. Rather, in accord with its own internal guidance (which, again, Sierra Club does not challenge) EPA had to “reasonably attribute” the drops in ozone to permanent and enforceable measures. Only if EPA’s path cannot “be reasonably discerned,” Mt. Sinai Hosp., 196 F.3d at 708, or if EPA relied on factors “that Congress did not intend it to consider” or “fail[ed] to consider an important aspect of the problem,” Adventist GlenOaks Hosp., 663 F.3d at 942, will we conclude that EPA acted arbitrarily or capriciously. In light of the above, we cannot conclude that EPA’s approach in making a reasonable attribution was not discernable, that EPA relied on errant factors, or that it failed to consider an important aspect of the problem. In addition to challenging EPA’s causation approach generally, Sierra Club objects to EPA’s use of actual emissions data from power plants in determining that the reductions were “permanent and enforceable.” Because “actual” emissions vary from year to year, those figures, by definition, are neither “permanent” nor “enforceable,” Sierra Club argues. The Calcagni Memo expressly instructs EPA to “assume that sources are operating at permitted levels (or historic peak levels) unless evidence is presented that such an assumption is unrealistic.” SierNos. 12-2853, 12-3142 & 12-3143 25 ra Club therefore argues that, by using “actual” emissions, EPA defied its own interpretative guidance. In EPA’s view, using maximum permissible emissions levels in its analysis would have been ill-advised, artificially inflating power plant emissions in a way that does not reflect reality. EPA maintains that it is the Agency’s “long-standing practice and EPA policy” to use actual emissions data for power plants “when demonstrating permanent and enforceable emission reductions.” Resp’t Br. 49. EPA has implemented this policy because “assuming that all sources would be operating at maximum capacity at once would result in a gross overestimation of emission levels.” Resp’t Br. 49–50. Sierra Club counters by pointing out that state regulations permitted power plants in Milwaukee-Racine to emit six times the nitrogen oxides that EPA ascribed to all stationary sources in the area, and more than four times the nitrogen oxides that were emitted during Milwaukee-Racine’s years of nonattainment. EPA does not refute those figures. Instead, EPA highlights that it considered emissions inventories from both periods of nonattainment and periods of attainment and scrutinized the control measures in the relevant SIPs and maintenance plans, in arriving at its conclusion that using maximum allowable emissions levels would be unrealistic in projecting ozone levels for the areas at issue. Resp’t Br. 50. Further, EPA contends that the Berry Memo, “Use of Actual Emissions in Maintenance Demonstrations for Ozone and CO Nonattainment Areas,” D. Kent Berry, Acting Dir., Air Quality Mgmt. Div. (Nov. 30, 1993), su26 Nos. 12-2853, 12-3142 & 12-3143 persedes the Calcagni Memo with respect to the use of actual emissions, expressly permitting the use of actual emissions in ozone maintenance projections. Resp’t Br. 51. The reason for the change, EPA says, is that the Agency uses actual emissions data for power plants in making nonattainment determinations. Therefore, EPA’s position is that “it would be akin to comparing apples and oranges to use . . . allowable emissions from an attainment year.” Resp’t Br. 51–52. Sierra Club disagrees, arguing that the Berry Memo only supersedes the Calcagni Memo—as the Berry Memo plainly states—with regard to “maintenance demonstrations for ozone and CO nonattainment areas seeking redesignation to attainment.” Though somewhat ambiguous from the face of the two Memos, Sierra Club appears to have the better of the argument here—the Calcagni Memo provides guidance on “maintenance plans” in a separate and distinct section from its guidance on making the “permanent and enforceable determination.” That said, both sections discuss redesignations from attainment to nonattainment, so EPA’s position is not entirely unreasonable. We need not decide definitively whether the Berry Memo trumps the Calcagni Memo on this point, however, because even if the Calcagni Memo governs (as Sierra Club argues), EPA followed its own interpretative guidance here. EPA has articulated a rational basis for its conclusion—consistent with the Calcagni Memo—that using maximum allowable emissions levels for power plants would have been unrealistic. Thus, EPA was free to rely on actual emissions data in concluding that ozone reductions resulted from “permanent and enforceable” emissions reductions. Nos. 12-2853, 12-3142 & 12-3143 27 Lastly, Sierra Club challenges EPA’s reliance, as one factor among many, on the effects of the NOx SIP Call trading program in making its “permanent and enforceable” determination. The NOx SIP Call, issued in October 1998, is an EPA rule that requires states to address interstate transport of air pollution. It is designed to prevent NOx that originates in an “upwind” state from causing or exacerbating nonattainment in a “downwind” state. The NOx SIP Call requires twenty-two states—including Illinois, and neighbors Indiana, Michigan, Missouri, and Kentucky—to reduce NOx emissions in an effort to reduce their contributions to downwind ozone nonattainment. The NOx SIP Call limitations were implemented in two phases. Illinois fulfilled the requirements of Phase I in November 2001 and met those of Phase II in June 2009. Important here, the NOx SIP Calls have been codified as enforceable state laws. And although Wisconsin was not one of the states included in the NOx SIP Call, EPA considers Wisconsin to be one of the “downwind” states that benefits from the restrictions imposed on its neighbors. Sierra Club criticizes EPA’s reliance on the NOx SIP Call, because that program is aimed at reducing pollution in the region as a whole and permits the twenty-two affected states to purchase pollution “allowances” from one another. Accordingly, Sierra Club believes that the effects on any one area in particular are not necessarily permanent or enforceable. It cites two D.C. Circuit cases—Natural Resources Defense Council v. EPA, 571 F.3d 1245 (D.C. Cir. 2009), and North Carolina v. EPA, 531 F.3d 896—in support of its position. 28 Nos. 12-2853, 12-3142 & 12-3143 In Natural Resources Defense Council, 571 F.3d at 1251 (“NRDC”), the petitioners challenged EPA’s conclusion that states could satisfy section 172(c)(1) of the CAA by participating in the NOx SIP Call. That section of the statute mandates that states’ SIPs for nonattainment areas “provide for the implementation of all reasonably available control measures as expeditiously as practicable (including such reductions in emissions from existing sources in the area as may be obtained through the adoption, at a minimum, of reasonably available control technology).” Id.; 42 U.S.C. § 7502(c)(1). Because section 172(c)(1) requires that nonattainment areas implement control measures through “reasonably available control technolog[ies]” (“RACT”) that reduce emissions “from existing sources in the area,” the D.C. Circuit held that the EPA may not use reductions from the NOx SIP Call— which does not require RACT-level reductions from sources in a given area—in its section 172(c)(1) analysis. 571 F.3d at 1256. In North Carolina, (as alluded to earlier) the D.C. Circuit invalidated CAIR, another measure designed to reduce interstate pollution, promulgated pursuant to Title I of the CAA. 531 F.3d at 902. Title I requires SIPs to “contain adequate provisions . . . prohibiting . . . any source . . . 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 [NAAQS].” Id. The D.C. Circuit invalidated CAIR because, although EPA issued initial emissions budgets to the states, the statute authorized pollution sources to purchase allowances from sources in other states, thus permitting states to exceed the caps imNos. 12-2853, 12-3142 & 12-3143 29 posed by the emissions budget. Id. at 906–07. CAIR was “designed as a complete remedy to [Title I] problems,” and for that reason, the court deemed the program incompatible with Congress’s directive in Title I. Id. at 908. EPA refutes the applicability of NRDC and North Carolina here. First, EPA points out that it relied on the NOx SIP Call as one of many bases for its “permanent and enforceable” determination. EPA estimated that the NOx SIP Call reduced NOx emissions by 68,000 tons in states subject to it, and that Illinois’s implementation of Phase II would reduce NOx emissions by 82% at the sources subject to it. Additionally, EPA noted that the NOx SIP Call has resulted in a downward trend in NOx emission rates (tons per hour of operation) for the Chicago area. Second, EPA points out that the observed benefits of the NOx SIP Call are much more static and predictable than Sierra Club acknowledges, and not just because the states have incorporated these requirements into their federally enforceable SIPs. As EPA explains, a state cannot merely “purchase” allowances with impunity. Rather, the NOx SIP Call is a cap-and-trade program, which permits some flexibility through the purchase of allowances, but also caps the total emissions from covered sources. Therefore, while some fluctuations may occur, EPA insists that it was reasonable to factor the reductions resulting from the program into its analysis. We agree. This case is materially different from both NRDC and North Carolina. In NRDC, the D.C. Circuit struck down EPA’s attempt to use the NOx SIP Call to satisfy Congress’s requirement that nonattainment areas implement control measures through RACT that reduce reductions 30 Nos. 12-2853, 12-3142 & 12-3143 “from existing sources in the area.” The NOx SIP Call was deficient in accomplishing that objective because it does not require the imposition of RACT-level reductions in a particular area, and, in any event, EPA never evaluated the NOx SIP Call’s effects in the areas at issue. 571 F.3d at 1256–57. Here, though, no specific type of control measure is required, emissions reductions need not result exclusively from sources in the nonattainment area, and EPA has estimated the relevant effects of the NOx SIP Call, as described above. And this case is different from North Carolina, where the Agency relied exclusively on CAIR to prevent pollution sources in one state from contributing to nonattainment in another state, because, here, the NOx SIP Call is not the sole basis for EPA’s determination that emissions reductions are “permanent and enforceable.” Moreover, because the program’s overall structure ensures a regional reduction in emissions—and because EPA avers (and Sierra Club does not challenge) that, in all practicality, the NOx SIP Call results in minimal fluctuation in precursor output at the area level—then it is reasonable to rely on the program as one basis, among many, for concluding that reduced emissions levels will persist. The overarching theme running through Sierra Club’s petition is that EPA could have done more. But the question before us concerns only whether EPA was required to do more. The CAA mandated that EPA determine that reduced ozone levels were “due to permanent and enforceable reductions in emissions resulting from implementation of the applicable implementation plan and applicable federal air pollutant control regulations and other permanent and enforceable reductions.” 42 U.S.C. § Nos. 12-2853, 12-3142 & 12-3143 31 7407(d)(3)(E)(iii). The Calcagni Memo interprets this causation provision to impose on EPA an obligation to “reasonably attribute” air quality improvement “to emission reductions which are permanent and enforceable,” not to prove causation with any higher degree of confidence than that. While the Calcagni Memo made clear that “[a]ttainment resulting from temporary reductions in emission rates (e.g., reduced production or shutdown due to temporary adverse economic conditions) or unusually favorable meteorology would not qualify,” that language cannot fairly be read to impose—as Sierra Club would prefer—an affirmative obligation on EPA to analyze, model, and scientifically quantify the effects of those variables on emissions reductions. Instead, the Memo instructed EPA to “estimate the percent reduction . . . achieved from Federal Measures . . . as well as control measures that have been adopted and implemented by the State . . . . to clearly show that the air quality improvements are the result of implemented controls.” EPA did that here. Accordingly, EPA has demonstrated that it “exam- ined the relevant data and articulated a satisfactory explanation for its action including a rational connection between the facts found and the choice made, that the Agency’s decision was based on a consideration of the relevant factors, and that the Agency has made no clear error of judgment.” Bluewater Network, 370 F.3d at 11 (citation and internal quotation marks omitted). For that reason, we cannot conclude that EPA’s actions were “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A). 32 Nos. 12-2853, 12-3142 & 12-3143