Opinion ID: 185450
Heading Depth: 1
Heading Rank: 2

Heading: Industry Petitioners--Electric Generating Issues

Text: 12 Industry Petitioners challenge the lawfulness of the NOx emission budgets as set forth in the TAs, specifically, the particular growth factors the EPA used to project future utilization rates for EGUs in 2007. Petitioners allege that the EPA's reliance upon these growth factors was arbitrary and capricious because the growth factors were unsupported and in conflict with state-based growth estimates. Petitioners further contend that the EPA arbitrarily failed to determine whether the resulting emission budgets could be achieved in a cost-effective manner. Other petitioners raise similar challenges to the TAs. Before turning to the merits of these arguments, we must first address several jurisdictional issues raised by the EPA. Specifically, the EPA claims that petitioners' claims are time barred and precluded by our Michigan decision under principles of res judicata and collateral estoppel. 1
13 The EPA contends that petitioners' objections to the EGU growth factor determinations are not properly before this Court because they were resolved in the underlying NOx SIP Call rulemaking, not in the TA proceeding. Therefore, the growth factors were subject to challenge in Michigan, and not here. The EPA outlined and finalized its method for determining state emission budgets, including the use of growth factors, in the NOx SIP Call rulemaking. See NOx SIP Call, 63 Fed. Reg. at 57,405-39. The EPA argues that under CAA section 307(b)(1), 42 U.S.C. 7607(b)(1), petitioners had sixty days from the publication of the SIP Call in the Federal Register to challenge the EPA's final growth factor determinations. By these lights, petitioners may not challenge the growth factors because they did not raise their challenges within sixty days of publication of the SIP Call. 14 In October 1998, the EPA reopened comment on the source-specific data used to establish each State's budget. NOx SIP Call, 63 Fed. Reg. at 57,427. However, the EPA maintains petitioners' claims are precluded because it did not explicitly invite comments on growth rate methodology. In other words, the EPA argues that it undertook the TA rulemakings for the purpose of ensuring the accuracy of the EPA's data inputs, and not to reconsider prior methodological determinations, such as how to construct growth factors and how to use those growth factors in determining 2007 emission budgets. According to the EPA, [c]omments related to the use of growth factors in determination of State budgets were addressed in the context of the final NOx SIP call. May 1999 Response to Comments at 47. Therefore, the agency pleads, petitioners' growth factor arguments are time-barred under National Ass'n of Reversionary Property Owners v. Surface Transportation Board, 158 F.3d 135, 141 (D.C. Cir. 1998) (NARPO) (If NARPO's reopening theory does not apply, we are without jurisdiction to consider NARPO's due process claim.). 15 The TA proceedings are not as clear cut as the EPA maintains, nor are our precedents so restrictive. The initial TA rulemaking invited comment on both the source-specific emission data used to calculate state budgets and the 2007 baseline sub-inventory information. NOx SIP Call, 63 Fed. Reg. at 57,493. As the EPA recognizes, the 2007 baseline sub-inventory information is nothing more than the product of growth factors and the source-specific emission data used to calculate state budgets. See SIP Call Correction, 63 Fed. Reg. at 71,223 (noting that 2007 baseline inventory is based on the universe of sources in the 1995 inventory and a growth factor ... (emphasis added)). Therefore, insofar as the EPA reopened comment on the 2007 baselines, it would seem that the EPA reopened comment on the growth factors in addition to the source-specific emission data used to calculate state budgets. While the EPA did not reopen comment on the broader issues of its authority to impose NOx emission budgets on states, it did open comment on the budgets themselves. Insofar as the agency was ambiguous on this point, that only further supports petitioners' argument that the growth factor issue was reopened. See NARPO, 158 F.3d at 142 (Ambiguity in an NPRM may also tilt toward a finding that the issue has been reopened.). 16 Even accepting that the EPA did not explicitly reopen growth factors for public comment, this does not preclude petitioners' claim. Under Public Citizen v. NRC, whether an agency has in fact reopened an issue is dependent upon the entire context of the rulemaking including all relevant proposals and reactions of the agency, and not just on the agency's stated intent. 901 F.2d 147, 150 (D.C. Cir. 1990). Thus, if an agency's response to comments 'explicitly or implicitly shows that the agency actually reconsidered the rule, the matter has been reopened.'  Panamsat Corp. v. FCC, 198 F.3d 890, 897 (D.C. Cir. 1999) (citation omitted). 17 The EPA claims that the growth factors were completely settled for the purposes of the NOx SIP Call by the time the TA rulemaking began in October 1998. Yet this claim is difficult to square with the EPA's purported justification for the TA rulemakings--specifically to conform the emission inventories of the NOx SIP Call and section 126 rules. The TA rulemaking began in October 1998, but the first section 126 rule was not final until May 1999. Thus, if the EPA was sincere in seeking to use the TA rulemaking to conform the emission inventories of the two rules, then the EPA's various growth factor methodologies must have been open for comment for the purposes of the NOx SIP Call as they were subject to revision in the section 126 rulemaking at least up until the close of that proceeding. 18 Where a rulemaking notice is ambiguous and could fairly be read to 'suggest [ ] that the search for harmony might lead to the rethinking of old positions'  this Court has found that the earlier decision was reopened. NARPO, 158 F.3d at 142 (citation omitted). This is an apt description of what happened here. Therefore, insofar as there are problems with section 126 inventories and budgets, the EPA implicitly gave petitioners an opportunity to identify the equivalent problems with the NOx SIP Call inventories and budgets when the EPA opened the TA rulemaking for the purpose of conforming the inventories for the two rules.
19 Res judicata bars relitigation not only of matters determined in a previous litigation but also ones that a party could have raised. NRDC v. Thomas, 838 F.2d 1224, 1252 (D.C. Cir. 1988) (emphasis in EPA brief). Collateral estoppel further bars parties from relitigating issues of law or fact resolved in prior cases between those parties. Securities Indus. Ass'n v. Bd. of Governors, 900 F.2d 360, 363 (D.C. Cir. 1990) (When a court determines an issue of fact or law that is actually litigated and necessary to its judgment, that conclusion binds the same parties in a subsequent action.). As the growth factor determinations were made as part of the NOx SIP Call, the EPA maintains that petitioners should have presented any challenge to the growth factors in Michigan, where there were actual legal and factual challenges on budget and growth-related topics and where nearly all of the petitioners here were represented. Brief for Respondent EPA at 24-25. 20 Petitioners' challenges are based upon the emission inventories and budgets laid out in the TAs. As such, they present issues not litigated in Michigan. Though it is true that petitioners could have challenged the EPA's growth factor methodologies in that litigation, we hold here that the EPA reopened comment on that issue. Just as it would be absurd for the EPA to argue that res judicata and collateral estoppel would preclude review had the EPA decided to change its growth factor methodologies in response to invited comments, so too is it absurd for the EPA to argue here that res judicata and collateral estoppel preclude review of its decision not to change in response to those same invited comments.
21 On the merits, Industry Petitioners allege that the EPA's emission budget determinations for EGUs are arbitrary and unsupported on several grounds. First, they maintain that the 2007 emission baselines reflect the unrealistic assumptions that utilization growth will be linear. Second, they question the EPA's use of IPM-generated 2001-2010 growth rates to estimate growth over the 1996-2007 period. Third, they claim the EPA's reliance upon the growth factors resulted in unrealistic utilization estimates. For example, 1998 utilization rates in some states, such as Michigan and West Virginia, are greater than the 2007 baselines estimated by the EPA. 22 Petitioners contend that the arbitrariness of the growth factors is compounded by the fact that more representative growth estimates were available. In conducting its costeffectiveness analysis, the EPA used the IPM to generate growth assumptions for 1996-2001, as well as to generate state-by-state EGU utilization estimates for 2007. Yet the EPA did not use this data for the purpose of developing its growth factors for the 2007 baseline, and it offered no reasonable explanation for its choice. Even if the EPA finds on remand that its choice was the better one, failure to examine the relevant data and articulate a satisfactory explanation for its action either is arbitrary decisionmaking or at least prevents a court from finding it non-arbitrary. Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983). 23 We confronted nearly identical challenges to the EPA's use of growth factors to estimate baseline NOx emissions for 2007 in the section 126 litigation. See Appalachian Power Co. v. EPA, Nos. 99-1200, et al. (May 15, 2001). Although the NOx SIP Call covers more states than the section 126 rule, the EPA's methodological choices and explanations (or lack thereof) were the same. Therefore, we see no reason to depart from our conclusions in that litigation. 24 There is no question that [a]gency determinations based upon highly complex and technical matters are 'entitled to great deference.'  Id.,249 F.3d at 1051-52 (quoting Public Citizen Health Research Group v. Brock, 823 F.2d 626, 628 (D.C. Cir. 1987)). The EPA has undoubted power to use predictive models, such as the IPM, but it must explain the assumptions and methodology used in preparing the model and provide a complete analytic defense should the model be challenged. Small Refiner Lead Phase-Down Task Force v. EPA, 705 F.2d 506, 535 (D.C. Cir. 1983) (citations and internal quotation marks omitted). Given the highly deferential standard of review applied to such questions, and the EPA's clear authority to rely upon computer models in place of inconsistent, incomplete, or unreliable empirical data, the Agency's decision to rely upon the IPM, rather than the projections offered by individual states, was not arbitrary and capricious. Appalachian Power Co., 249 F.3d at 1052-53. However, this Court cannot excuse the EPA's reliance upon a methodology that generates apparently arbitrary results particularly where, as here, the agency has failed to justify its choice. 25 In the case at hand, the EPA adopted a particular methodology to estimate EGU utilization rates in 2007 that generated seemingly implausible results, such as a negative growth forecast for some states in the coming decade. The EPA adopted this methodology without offering any reasoned explanation for its choice. The EPA's decision not to use the IPM projections for 2007 that were used to estimate the costeffectiveness of emissions controls may well have been reasonable. So too may have been the EPA's choice to rely upon IPM projections for the 2001-2010 period in order to generate a growth factor for the 1996-2007 period. However, there is no way for us to tell because the EPA never offered an explanation. Merely asserting that the choice was reasonable is not enough. 26 As we held in the section 126 litigation, so too here: 27 the EPA has not fully explained the bases upon which it chose to use one set of growth-rate projections for costs and another for budgets, nor has it addressed what appear to be stark disparities between its projections and real world observations. With its delicate balance of thorough record scrutiny and deference to agency expertise, judicial review can occur only when agencies explain their decisions with precision, for 'it will not do for a court to be compelled to guess at the theory underlying the agency's action ...'  American Lung Ass'n v. EPA, 134 F.3d 388, 392 (D.C. Cir. 1998) (quoting SEC v. Chenery Corp., 332 U.S. 194, 196-97 (1947)). As a result, we have no choice but to remand the EPA's EGU growth factor determinations so that the agency may fulfill its obligation to engage in reasoned decisionmaking on how to set EGU growth factors and explain why results that appear arbitrary on their face are, in fact, reasonable determinations. 28 Id. at 37-38.
29 Industry Petitioners make the additional argument that the EPA failed to find the 2007 budgets achievable at the $2,000/ ton significant-contribution cut-off established in the NOx SIP Call rule. Essentially, petitioners contend that the budgets the EPA analyzed for cost-effectiveness purposes were different from the emission budgets imposed on the states. This argument is without merit. The emission budget levels themselves are based upon reductions deemed by the EPA to be cost-effective. In the case of EGUs, the EPA concluded that an average emissions rate of 0.15 lb/mmBtu could be achieved at a cost of less than $2000/ton. NOx SIP Call, 63 Fed. Reg. at 57,399-403. Thus, insofar as the EPA properly generates, and adequately explains, estimated 2007 utilization rates, it need not repeat its cost-effectiveness analysis.
30 Industry petitioners also allege that the TAs are arbitrary because they rely upon emission inventories that are substantially different from those that were used to make the initial contribution findings for the NOx SIP Call. Essentially, petitioners argue that because the TAs changed the underlying state emission inventories and budgets, thereby altering the relative contributions of upwind states to downwind nonattainment, the EPA was obligated to reevaluate its significant contribution findings for each of the affected states. For example, the TAs decreased the 2007 baseline emissions for West Virginia, an upwind state, and increased baseline emissions for New York, a downwind state. Due to this change, petitioners contend, the EPA could not continue to assume that West Virginia contributes to New York nonattainment without additional analysis. 31 It is black-letter administrative law that [a]bsent special circumstances, a party must initially present its comments to the agency during the rulemaking in order for the court to consider the issue. Tex Tin Corp. v. EPA, 935 F.2d 1321, 1323 (D.C. Cir. 1991) (citing Eagle-Picher Indus. v. EPA, 822 F.2d 132, 146 (D.C. Cir. 1987)). Generalized objections to agency action or objections raised at the wrong time or in the wrong docket will not do. An objection must be made with sufficient specificity reasonably to alert the agency. Id. An agency cannot be faulted for failing to address such issues that were not raised by petitioners. Petitioners waived their argument, and can cite no special circumstances to justify their waiver. 32 Petitioners are able to cite no comments that were in the relevant docket that raise the significant contribution issue. For example, petitioners note that the West Virginia Manufacturers Association argued that [i]f EPA has in fact made adjustments to the inventories, we believe that this would dramatically affect the modeled impact of the contribution of upwind states and sources to downwind ozone nonattainment. The problem is that this document was submitted to the dockets for the section 126 and FIP rulemakings, and was not part of the TA rulemaking. Petitioners do cite other documents which were part of the relevant rulemaking, but these documents do not address the significant contribution argument. This is insufficient; notice does not operate by osmosis. Having failed to raise their concern in the relevant agency docket, petitioners could perhaps have cured their waiver by seeking reconsideration before the EPA, but they did not. Thus, petitioners waived their argument that the EPA was required to revisit its significant contribution findings.