Opinion ID: 4020089
Heading Depth: 2
Heading Rank: 3

Heading: upper prediction limit

Text: Sections 7412 and 7429 create MACT-floor criteria that, for our purpose, are materially the same. Compare 42 U.S.C. 20 In its brief, the EPA argued that the Environmental Petitioners’ challenge was moot either because the challenged MACT standards had been remanded for other reasons or because inclusion of the allegedly dissimilar sources would not have affected the MACT standard. During oral argument, however, it conceded that it misunderstood the scope of the Petitioners’ argument, which argument challenges unremanded MACT standards that have in fact been affected by the EPA’s decision to omit certain high-performing sources from its MACT-floor analysis. See Oral Arg. Recording pt. B at 48:28-49:22. We believe that the Environmental Petitioners’ challenge is not moot and has not been waived. 85 § 7412(d), with id. § 7429(a)(2). In both provisions, the CAA mandates that MACT floors have maximum stringency but also be continuously achievable. See id. § 7412(d)(2), (k); id. § 7429(a)(2); id. § 7602(k). Satisfying the statutory criteria is no easy task, especially because no source emits any HAPs at a constant level. See Page Mem. 6. Rather, emissions levels fluctuate over time and for many reasons. See id. at 3.21 We have held, see Mossville Envtl. Action Now v. EPA, 370 F.3d 1232, 1242 (D.C. Cir. 2004), and recently reaffirmed, see NACWA, 734 F.3d at 1133-34, that the EPA can consider this variability when setting MACT floors. Further complicating the task is the way in which sources typically measure emissions. Virtually all of the data the EPA collects to set MACT floors come from the three-run stack test. Page Mem. 6. The three-run stack test, as the name suggests, involves three measurements of the source’s emissions taken over a short time period (i.e., no more than a few days) with each of the three test “runs” lasting from one hour to four hours. Id. at 3. Because the tests provide three “snapshots” of a source’s emissions performance, they cannot accurately represent the source’s full range of emissions over all times and under all conditions. Id. at 3-4. Because stack testing typically involves “three separate runs,” however, it “will in most cases show some of a particular source’s 21 See also Page Mem. 2-3 (“This variability occurs due to a number of factors, including measurement variability (both sampling and analysis) and short term fluctuations in the emission levels that result from short-term changes in fuels, processes, combustion conditions, and controls.”). 86 variability over the short period of time during which testing was conducted.” Id. at 6 (emphasis added).22
Based on the limitations inherent in stack testing, the EPA concluded that it could not set MACT floors based on that testing alone. It began using the UPL to account for the HAPs-emissions variety that stack-testing data do not reflect. See NACWA, 734 F.3d at 1122. The Agency did so in several rules promulgated in 2011, including not only the Major Boilers Rule and the CISWI Rule but also the Sewage Sludge Incinerator Rule addressed in NACWA. See id. In that case, the petitioners challenged the EPA’s UPL use, arguing that the Agency failed to establish that the UPL fairly represented the “average emissions limitation achieved” by the best performing sources to set the Sewage Sludge Incinerator MACT floors and, accordingly, was “unlawful and arbitrary.” Id. at 1130. We agreed in part. See id. at 1119. Specifically, we struggled to pin down the EPA’s precise interpretation of the phrase “average emissions limitation achieved by the best performing 12 percent of units.” Id. at 1142-43 (quoting 42 U.S.C. § 7429(a)(2)).23 As best we could tell, the EPA defended its use of the UPL as follows: “[b]ecause the [UPL] represents the value which [the EPA] 22 See also Page Mem. 5 (“[E]ven single three run tests, which are performed over a short period of time, typically show different emissions levels during each individual test run.”). 23 See also NACWA, 734 F.3d at 1142 (“[I]t seems EPA has adopted yet another interpretation of the phrase ‘average emissions limitation achieved by the best performing 12 percent of units.’” (emphasis added)). 87 can expect the mean (i.e., average) of three future observations (3-run average) to fall below, based upon the results of the independent sample size from the same population, the [UPL] reflects average emissions.” Id. at 1142 (quoting Standards of Performance for New Stationary Sources and Emission Guidelines for Existing Sources: Sewage Sludge Incineration Units, 76 Fed. Reg. 15,372, 15,389 (Mar. 21, 2011)) (emphasis added) (some alteration in original). In our view, however, “the word ‘average’ . . . seems to mean the average emissions limitation that the existing population of the best-performing 12 percent of incinerators has achieved.” Id. (emphases added). Despite these doubts, we reasoned that the EPA could have “plausibl[y]” concluded that the UPL represents the “average emissions limitation achieved” by the best performing sources. Id. at 1143. That said, we were not willing to assume the EPA’s responsibility of “supply[ing] a reasoned basis” for its UPL use. Id. (quoting Bowman Transp., Inc. v. Ark.-Best Freight Sys., Inc., 419 U.S. 281 (1974)). For that reason, we remanded—but did not vacate, see id. at 1161—the UPL portion of the Sewage Sludge Incinerator Rule and ordered the EPA to “clarify how the [UPL] represents the average emissions limitation achieved by the best performing 12 percent.” Id. at 1143 (internal quotation marks omitted).24 24 See also NACWA, 734 F.3d at 1151 (“[W]hile we determine that [the] EPA’s use of the [UPL] may be lawful, we are remanding this portion of its rulemaking for further explanation on the issue[] of how the upper prediction limit represents the average emissions limitation achieved . . . .” (internal quotation marks omitted)). 88 Because the EPA also used the UPL in the Major Boilers Rule and the CISWI Rule, the Agency moved for a limited remand of the current petitions so that it could include its revised UPL explanation in the administrative records of these two regulations.25 See Page Mem. 2. On July 14, 2014, the EPA published a fifteen-page memorandum authored by Stephen D. Page, the EPA Director of Air Quality Planning and Standards (Page Memorandum), in response to NACWA. See id. at 1. The EPA’s current explication of the UPL is now before us.26 25 In NACWA, we had other problems with the EPA’s use of the UPL. Specifically, the EPA had explained that “a smaller dataset may have greater variability, and thus a higher [UPL].” NACWA, 734 F.3d at 1144. We instructed the EPA not only to explain its use of the UPL in general but also to “explain why the [UPL] could still be considered accurate given a small dataset” in particular. Id. at 1144-45 (emphasis added). In its remand motion, the EPA represented that it could “adequately explain why [its] use of the UPL in general is consistent with Clean Air Act requirements through a remand of the record for a limited time” but that “the question of whether the UPL is an appropriate statistical method for small data sets requires more analysis . . . [along with] additional notice and comment rulemaking.” No. 11-1108 Mot. for Remand 9, 13 (Feb. 28, 2014). We agreed and, for this reason, the only issue we decide today is whether the EPA carried its burden of establishing, as a general matter, that the UPL reasonably estimates the average emissions level achieved by the best performing source or sources to set MACT floors. 26 The Environmental Petitioners urge us to ignore the Page Memorandum, insisting that it “provide[s] a series of new interpretations and assertions that, rather than ‘explaining’ the prior record, instead contradict and revise the agency’s earlier position,” in contravention of NACWA and the scope of the remand the Agency requested regarding the Major Boilers Rule and the CISWI 89
The Page Memorandum recognized our “concern about the interpretation [we] believed [the] EPA was taking” of the word “average.” Page Mem. 3. It clarified that the Agency “does not interpret the term ‘average’” to mean “the average of a future 3-run compliance test.” Id. (emphasis added) (quoting NACWA, 734 F.3d at 1143). Rather, it explained that the “EPA interprets the average to mean the average emissions over time,” based not only on the “average of all emissions test data from the best performing source or sources” but also on “information regarding the variability of emissions.” Id. (emphasis added). In the EPA’s judgment, “variability is a key factor in establishing” MACT standards because “[e]ach MACT standard is based on limited data from sources whose emissions are expected to vary over their long term Rule. No. 11-1108 Envtl. Pet’rs’ Br. 41. But our NACWA decision did not, as the Petitioners would have it, require the EPA to adopt our belief that the Agency construed “average” to mean “the average of a future 3-run compliance test.” See NACWA, 734 F.3d at 1143. Rather, we asked the EPA to clarify how, in its view, the UPL “represents the ‘average emissions limitation achieved by the best performing 12 percent.’” Id. (emphasis added). Nor do we think that the EPA altered its initial basis for using the UPL, which the EPA has consistently held out as “a statistical formula designed to estimate a MACT floor level that is equivalent to the average of the best performing sources based on future compliance tests.” 2011 Major Boilers Rule, 76 Fed. Reg. at 15,630 (emphasis added). What the EPA failed to do before NACWA was to explain how the UPL functions and why it is a reasonable way to calculate “average” emissions levels. The Page Memorandum does precisely that. 90 performance.” Id. Specifically, “[t]he available emissions data are generally in the form of short term, three-run stack tests, with each test run lasting for between 1 and 4 hours.” Id. For this reason, the EPA concluded that it did not have information “encompass[ing] the emissions performance of a source over time.” Id. (emphasis added). And because the “EPA interprets ‘emissions performance’ . . . to mean the emissions of a source over the long term, rather than just during a short-term stack test,” the EPA found it necessary to “appl[y] a methodology that predicts the actual emissions levels the source is achieving at times other than when stack testing was conducted.” Id. at 3-4 (emphases added). The UPL is the methodology the EPA selected to account for these limitations. Id. at 4. “[A] value derived from widely accepted and commonly used statistical principles,” the UPL “represents the upper end of a prediction interval.” Id. In layman’s terms, the UPL uses an equation that considers (1) the average of the best performing source or sources’ stack-test results (i.e., the mean); (2) the pattern the stack-test results create (i.e., the distribution); (3) the variability in the best performing source or sources’ stack-test results (i.e., the variance); and (4) the total number of stack tests conducted for the best performing source or sources (i.e., the sample size). Id. at 4-5. The UPL, however, cannot demonstrate with absolute certainty the average emissions levels achieved by the best performing sources at all times (indeed, certainty is impossible without continuous monitoring). See id. Instead, the UPL equation produces a range of values that is expected, given the variance in the relevant stack-test data, to encompass the average emissions levels achieved by the best performing sources a specified percentage of the time. Id. at 91 4. To establish the MACT floor, the EPA calibrated the UPL equation to produce a range in which the average emissions levels of the best performing source or sources would be expected to fall 99 per cent of the time, which is referred to as a 99 per cent confidence interval. Id. Once the EPA had this range, it set the MACT floor at the top level of that range— hence, the “upper” in “upper prediction limit”—to arrive at a figure that, 99 out of 100 times, it expected the average emissions levels of the best performing sources to “achieve.” Id. Or, in the EPA’s words, “the 99 percent UPL is the level of emissions that” the EPA is “99 percent confident is achieved by the average source represented in a dataset over a long-term period based on its previous, measured performance history as reflected in short term stack-test data.” Id. One of the equations the EPA used to calculate the UPL is as follows:27 27 The EPA used “one of several equations” to calculate the UPL depending on “certain characteristics of [the] dataset,” including the distribution of data within the dataset. Page Mem. 4. Here, we set out the equation the EPA used for a dataset with a “normal distribution.” Id. at 10. For our review, we need not recount the other, somewhat more complicated equations the EPA used in determining the UPL for datasets with, e.g., a “lognormal distribution.” See id. (“Even though they differ due to separate mathematical properties associated with each distribution, the UPL equations share a common format . . . .”); see generally id. at 11 (describing lognormal distribution equation). 92 NACWA, 734 F.3d at 1139. In this equation:  “x̄ ” is the mean;  “t(0.99, n-1)” is a value called the “t-statistic,” the statistical tool used to set the confidence interval (here, 99 per cent);  “n” is the sample size;  “m” is the number of stack tests that were run to calculate the mean (“x̄ ”); because most stack tests involve 3 “runs,” m usually equals 3;  “s” represents the “standard deviation.” See id.; see also Page Mem. 10-11.
After the EPA issued the Page Memorandum, the Environmental Petitioners renewed their argument that the UPL represents neither (1) the “average” emissions limit of the best performing source or sources in a subcategory, nor (2) the emissions levels “achieved” by the best performing sources in a subcategory. We believe that the EPA has carried its burden of demonstrating that the UPL “reflect[s] a reasonable estimate of the emissions achieved in practice by 93 the best performing sources.” Cement Kiln, 255 F.3d at 87172 (internal quotation marks omitted); see also NACWA, 734 F.3d at 1148 (“[H]aving decided to account for variability, and having decided to estimate that variability, EPA bears the burden of demonstrating with substantial evidence that its estimate is reasonable.”). Our conclusion is driven, in large part, by the deference we owe the EPA when it determines how best to meet the technical challenges in its area of expertise. Indeed, the EPA “typically has wide latitude in determining the extent of datagathering necessary to solve a problem” and, for that reason, we have “accorded Chevron deference to [its] interpretation of [the CAA] as allowing it to estimate MACT floors.” NACWA, 734 F.3d at 1131. Moreover, “the requirement that the existing unit floors not be less stringent than the average emissions limitation achieved by the best performing 12 percent of units does not, on its own, dictate how the performance of the best units is to be calculated,” id. (internal quotation marks omitted)—“[f]loors need not be perfect mirrors of the best-performers’ emissions,” Cement Kiln, 255 F.3d at 871. So long as the EPA “demonstrate[s] with substantial evidence—not mere assertions”—that the UPL “allows a reasonable inference as to the performance of the top 12 percent of units,” NACWA, 734 F.3d at 1131 (quotations omitted) (emphasis added), the EPA has conducted reasoned decision making. The Agency has done so here. The Page Memorandum explains the limitations of stack-test data—i.e., the “snapshots” cannot reflect the best performing source’s or sources’ average emissions levels at all times and under all operating conditions. Page Mem. 6. The Page Memorandum also explains that the Agency chose the UPL as a tool 94 “derived from widely accepted and commonly used statistical principles,” id. at 4, that “reasonably account[s] for variability in the emissions of . . . sources,” id. at 2. Finally, the Page Memorandum plugs the analytical gap we identified in NACWA—it thoroughly explains how and why the UPL accounts for the variance and therefore how and why it reasonably represents the emissions level “achieved by the average source” or sources. Id. at 3-5. In so doing, the EPA has “clarif[ied],” to our satisfaction, “how the upper prediction limit represents the average emissions limitation achieved.” NACWA, 734 F.3d at 1143 (internal quotation marks omitted). The Environmental Petitioners’ arguments to the contrary are unavailing. Their primary objection is that the UPL cannot reasonably estimate the “average” emissions level achieved by the best performing source or sources because the UPL represents “a level [the] EPA expects any future compliance test by any [source] in the top 12 percent to fall below.” No. 11-1108 Envtl. Pet’rs’ Br. 35 (emphases added) (internal quotation marks omitted).28 But the Page Memorandum counters the Environmental Petitioners’ mistaken understanding of what the UPL represents.29 According to the EPA, “the UPL does not represent the worst emissions performance of the best performing units at any 28 See also No. 11-1108 Envtl. Pet’rs’ Reply Br. 15 (“It is, as its name indicates, an upper limit—the emissions limitation that every member of the best-performing 12 percent will fall below . . . .” (emphasis in original) (quotation marks omitted)). 29 The Environmental Petitioners’ argument rests, at least in part, on their contention that we should not consider the Page Memorandum at all. We decline their invitation to ignore the explanation we ordered the EPA to provide. 95 time.” Page Mem. 4 (emphasis in original).30 It is instead “the average level expected to have been achieved over time” by the best performing source or sources. Id. (emphasis in original). “In other words, the 99 percent UPL is the level of emissions that [the EPA is] 99 percent confident is achieved by the average source . . . over a long-term period based on its previous, measured performance history as reflected in short term stack test data.” Id. (emphasis added). Next, the Environmental Petitioners criticize the Page Memorandum’s explanation that the UPL represents the longterm average emissions levels achieved because “the first element of the UPL equation is the average of the short-term emissions test data from the best-performing sources.” Id. In their view, the UPL is no different from “saying that, over time, the average of 1, 2, and 3 = 2 + 500 because the first element in the equation (2) is the average of 1, 2, and 3.” No. 11-1108 Envtl. Pet’rs’ Br. 48. But the UPL does not simply tack an arbitrary increase on top of the stack-test average of the best performing sources. Rather, the UPL “allows [the] EPA to use emissions test data and the data characteristics,” which include “the distribution and sample size, along with the intrinsic variability associated with those data,” to estimate “an emissions limit based on a specified level of confidence such that an average best performing existing 30 See also Page Mem. 5 (It is “generally . . . reasonable to establish a [MACT floor] standard that all the best performing 12 percent of existing sources can meet without any modification because the statute requires the Agency to establish the standard at the average level of performance of the best 12 percent of sources.” (emphasis in original)); id. at 14 (“[T]he MACT floor represents the average emission level achieved by the best performing sources, not the worst emission level achieved by those sources.” (emphases in original)). 96 source would not be expected to exceed the limit a specified number of times.” Page Mem. 6 (emphases added). In other words, the UPL does not simply add an arbitrarily chosen value but instead turns entirely on the features inherent in the stack-test data and how those features reflect the natural variance in emissions experienced by the best performing sources over time. See id. at 4 (“[T]he MACT floor calculation takes into account the inherent variability in emissions performance to more accurately reflect the range of the best performing sources’ emissions over time.” (emphasis added)).31 Thus, as the Page Memorandum amply demonstrates, see id., the EPA’s use of the UPL is not arbitrary. The Environmental Petitioners also attack the results produced by the UPL. They provide a series of charts that, in their view, demonstrate that the UPL sets MACT floors far too high to comport with the CAA’s mandate that floors represent “the maximum degree of reduction in emissions.” See 42 U.S.C. § 7412(d)(2). True, some of the charts show that the EPA has set a MACT floor above the highest emissions level recorded by the best performing sources’ stack testing. See No. 11-1108 Envtl. Pet’rs’ Br. 14-15; No. 11-1108 Envtl. Pet’rs’ Reply Br. 23. But this does not mean that the UPL is an arbitrary “average” proxy—for at least two reasons. 31 See also Page Mem. 6-7 (“[T]he UPL equation that is used to account for variability and [to] calculate the MACT floor standard depends on the distribution of the data.”); id. at 11 (“The UPL . . . is directly related to the confidence level and to the variance, meaning that as either of these values go up or down, so does the UPL value.”). 97 First, the charts selectively included are generated from data sets with considerable variance between the highest recorded stack test and the lowest. Unsurprisingly, if a handful of “snapshots” in a data set demonstrate that emissions levels experience high spikes and low plummets at discrete times, it is more likely that the average emissions level achieved by the best performing sources at all times might be high. This is because a data set with high variability will produce a higher UPL than a data set with low variability, even if the two sets share the same average. In other words, the UPL takes large variance into account and therefore naturally goes higher to arrive at the 99 per cent certainty the EPA thinks is appropriate.32 Second, where the UPL suggested a MACT floor higher than the results of the stack tests, it often did so by insubstantial amounts. Indeed, for at least one chart, “the limit is a mere 4 millionths of a pound per million Btu above the emissions test results of best performers, an unalarming amount given that the methodology is supposed to account for variable results.” No. 11-1108 Indus. Intervenors’ Br. 10 (emphases in original). For these reasons, the Environmental Petitioners have not convinced us that the EPA failed to satisfy the 32 The EPA “selected the 99 percent level in order to provide reasonable assurance that the limit can be met at all times by a source with emissions at the average level achieved by the best performing source or sources.” Page Mem. 10. The Environmental Petitioners have not challenged the EPA’s choice of a 99 per cent confidence level, as opposed to a lower level of certainty, and we express no opinion on that choice. And we reiterate that the more specific concerns we had with the UPL when we decided NACWA—in particular, the UPL’s accuracy “given a small dataset”—are not before us. 734 F.3d at 1144-45. 98 “minimal standard[] of rationality” that we require. Ethyl Corp. v. EPA, 541 F.2d 1, 36 (D.C. Cir. 1976) (en banc). Finally, the Environmental Petitioners insist that “[t]he UPL predicts a level that hypothetical future tests will fall below, rather than estimating what boilers actually achieved,” in contravention of the requirement that MACT floors “reflect what the best-performing sources achieved.” No. 11-1108 Envtl. Pet’rs’ Reply Br. 24 (internal quotation marks omitted). But the Environmental Petitioners ignore the Page Memorandum’s explanation that, because the UPL is not time-dependent, it “not only is a prediction of the emissions performance of those sources in tests conducted in the future, but is also an indication of the range of current average emissions performance of those units.” Page Mem. 3;33 see also No. 11-1108 Indus. Intervenors’ Br. 9 (“Because this statistical method is not time-dependent, it is equally valid for predicting past performance (i.e., the range of emissions levels expected to have been experienced in the past by the best performers during periods when actual emissions testing was not underway) and future performance.”). We believe that the UPL “reflect[s] a reasonable estimate of the emissions achieved in practice by the best-performing sources,” Cement Kiln, 255 F.3d at 871-72 (internal quotation marks omitted), and, accordingly, we reject the Environmental Petitioners’ challenge to it. 33 See also Page Mem. 4 (“[T]he 99 percent UPL is the emissions level that the source would be predicted to be below 99 out of 100 performance tests, including emissions tests conducted in the past, present, and future.”); id. at 10 (“The confidence level, in this case 99 percent, is the percentage of measurements (past, present, and future) that are predicted to fall at or below the UPL value.”). 99