Court Opinion

ID: 185399
Source: CourtListenerOpinion
Date Created: 2011-02-05 02:31:31+00
Date Added: 2024-06-11T17:26:15.584506
License: Public Domain

United States Court of Appeals

               FOR THE DISTRICT OF COLUMBIA CIRCUIT

        Argued December 15, 2000     Decided May 15, 2001 

                           No. 99-1200

               Appalachian Power Company, et al., 
                           Petitioners

                                v.

                Environmental Protection Agency, 
                            Respondent

                  Commonwealth of Pennsylvania, 
         Department of Environmental Protection, et al., 
                           Intervenors

                         Consolidated with 99-1205, 
      99-1206, 99-1246, 99-1266, 99-1285, 99-1289, 99-1291, 
      99-1292, 99-1293, 99-1295, 99-1299, 99-1300, 99-1301, 
      99-1303, 99-1304, 99-1306, 99-1307, 00-1013, 00-1021, 
      00-1022, 00-1024, 00-1038, 00-1042, 00-1050, 00-1071, 

      00-1074, 00-1077, 00-1083, 00-1087, 00-1088, 00-1096, 
      00-1097, 00-1098, 00-1099, 00-1102, 00-1103, 00-1105, 
      00-1106, 00-1107, 00-1108, 00-1109, 00-1110, 00-1113, 
       00-1114, 00-1119, 00-1122, 00-1123, 00-1125, 00-1128

                             _______

            On Petitions for Review of Orders of the 
                 Environmental Protection Agency

     Norman W. Fichthorn, James C. Gulick, Special Deputy 
Attorney General, State of North Carolina, Lisa M. Jaeger, 
Brian J. Renaud and Anthony C. Sullivan argued the issues 
for petitioners.  Counsel appearing with them on the briefs 
were Andrea Bear Field, Mel S. Schulze, James D. Elliott, 
Allison D. Wood, Grant Crandall, Eugene M. Trisko, Jeff F. 
Cherry, Kathy G. Beckett, Scott D. Goldman, David M. 
Flannery, Jeffrey J. Lettrich, Gale R. Lea, Charles S. Carter, 
Deborah Ann Hotel, Theodore L. Garrett, Michael D. Hock-
ley, Terry W. Schackmann, Robert M. Sussman, Claudia M. 
O'Brien, Scott H. Segal, Charles E. Dunn, Rhonda Lee Ross, 
Robert L. Brubaker, Andrew S. Bergman, Alan H. McCon-
nell, Kurt E. Blase, J. Jeffrey McNealey, Michael F. Easley, 
Attorney General, Grayson G. Kelley, Senior Deputy Attor-
ney General, Thomas J. Ziko and J. Allen Jernigan, Special 
Deputy Attorneys General, Marc D. Bernstein, Assistant 
Attorney General, State of North Carolina, James M. Hauck, 
Gordon Alphonso, Stuart Pierson, Geoffrey K. Barnes, Scott 
T. Kragie, Lisa G. Dowden, Matthew W. Ward, Kathy G. 
Beckett, Scott Goldman, Eliot Spitzer, Attorney General, 
Peter H. Schiff, Senior Counsel, J. Jared Snyder and Michael 
J. Myers, Assistant Attorneys General, State of New York, 
Thomas F. Reilly, Attorney General, William L. Pardee, 
Assistant Attorney General, Commonwealth of Massachu-
setts, M. Dukes Pepper, Jr., Commonwealth of Pennsylvania, 
Jennifer M. Granholm, Attorney General, Thomas L. Casey, 
Solicitor General, Alan F. Hoffman, Assistant Attorney Gen-

eral, State of Michigan, John G. Horne, II, Jack B. Bates, 
Susan Rose Green, Commonwealth of Kentucky, Betty D. 
Montgomery, Attorney General, Bryan F. Zima, Assistant 
Attorney General, State of Ohio, Mark L. Earley, Attorney 
General, Steward T. Leeth, Assistant Attorney General, Com-
monwealth of Virginia, Karen M. Freeman-Wilson, Attorney 
General, Steven D. Griffin, Deputy Attorney General, State of 
Indiana, Thomas H. Zerbe, Office of Legal Services, State of 
West Virginia, Bill Pryor, Attorney General, Prudence A. 
Cash-Brown, Assistant Attorney General, State of Alabama. 
Thomas Y. Au and Gene E. Godley entered appearances.

     David J. Kaplan, Norman L. Rave, Jr. and Scott Williams, 
Attorneys, U.S. Department of Justice, argued the cause for 
respondents.  With them on the briefs were Lois J. Schiffer, 
Assistant Attorney General, Alexandra Teitz, Howard Hoff-
man and Dwight C. Alpern, Attorneys, U.S. Environmental 
Protection Agency.  Christopher S. Vaden, Attorney, entered 
an appearance.

     William L. Pardee, Assistant Attorney General, Common-
wealth of Massachusetts, argued the cause for intervenors 
Commonwealth of Massachusetts, et al. and amicus curiae 
State of New Jersey.  With him on the briefs were Thomas 
F. Reilly, Attorney General, Commonwealth of Massachu-
setts, Eliot Spitzer, Attorney General, J. Jared Snyder, Assis-
tant Attorney General, State of New York, Richard Blumen-
thal, Attorney General, Richard F. Webb, Assistant Attorney 
General, State of Connecticut, M. Dukes Pepper, Jr., Com-
monwealth of Pennsylvania, Philip McLaughlin, Attorney 
General, Maureen D. Smith, Assistant Attorney General, 
State of New Hampshire, William H. Sorrell, Attorney Gen-
eral, Dianne H. Sanford, Assistant Attorney General, State 
of Vermont, Sheldon Whitehouse, Attorney General, Tricia 
Jedele, Assistant Attorney General, State of Rhode Island, 
John J. Farmer, Jr., Attorney General, Howard Geduldig, 
Deputy Attorney General, State of New Jersey.  Roger L. 
Chaffe, Senior Assistant Attorney General, Commonwealth of 

Virginia, and Ronald A. Shems, Assistant Attorney General, 
State of Vermont, entered appearances.

     Andrea Bear Field, Norman W. Fichthorn and Mel S. 
Schulze appeared on the brief of Appalachian Power Compa-
ny, et al. as intervenors.

     David W. Marshall, Ann Brewster Weeks and David G. 
Hawkins appeared on the brief of intervenors Natural Re-
sources Defense Council, et al.  Raissa Griffin entered an 
appearance.

     David P. Novello was on the brief of the Electric Generator 
intervenors.

     Before:  Williams, Ginsburg and Sentelle, Circuit Judges.

             Opinion for the Court filed Per Curiam.*

                         TABLE OF CONTENTS
     
     I.   BACKGROUND                                              5
               
          A.   Statutory Framework                                     6
          B.   The NOx SIP Call                                        8
          C.   The Original Section 126 Rule-Conditional Findings           8
          D.   Revised Section 126 Rule-Final Findings            10
                    
     II.  COMMON AND GENERAL ISSUES                              12
          A.   Scrivener's Error                                           12
          B.   The NOx SIP Call and s 126                                  19
          C.   Significant Contribution                               27
          D.   Emission Limitation Determinations                     32
               1.   Standard of Review                                     32
               2.   The Integrated Planning Model                          33
               3.   EGU Growth Factors                                35
__________     
               
* Judge Williams wrote Parts II.C, III.B-C, and V;  Judge Gins-
burg wrote Parts II.A-B and II.D.5;  Judge Sentelle wrote Parts 
I, II.D.1-4, II.E-F, III.A., and IV.

               4.   Non-EGU Budget Determinations                     38
               5.   Local Regulation and Permit Trading               39
          E.   Regulation of "Future" Sources                         40
          F.   The Dorris Report                                           44
                    
     III. NON-ELECTRIC GENERATING UNIT ISSUES           47
          A.   Alleged Budget Allocation Errors                       47
          B.   Treatment of Cogenerators                                   48
          C.   Source-Specific Issues                                      53
               1.   AK Steel Corporation                                   53
               2.   New Boston Coke Corporation                       54
                         
     IV.  FACILITY-SPECIFIC ISSUES                               55
          A.   Midland Cogeneration Venture                           55
          B.   Indiana Municipal Power Agency                         56
                    
     V.   PITTSBURGH                                                  57
               
     VI.  CONCLUSION                                             60

     PER CURIAM.

     In response to petitions from several northeastern states 
that alleged that nitrogen oxide emitted in neighboring states 
was harming their local air quality, the Environmental Pro-
tection Agency promulgated a rule that requires many NOx- 
emitting facilities in several midwestern and southeastern 
states to conform to emission limits set by the EPA and to 
participate in an emissions trading program.  Numerous peti-
tioners challenge the rule as inconsistent with the Clean Air 
Act, arbitrary and capricious, and technically deficient.  We 
uphold most aspects of the rule but remand several particu-
lars to the Agency for reconsideration.

                          I. BACKGROUND

     On January 18, 2000, the Environmental Protection Agency 
("EPA") issued its final rule to control emissions of nitrogen 

oxide ("NOx") under section 126 of the Clean Air Act 
("CAA").  42 U.S.C. s 7426.  Under certain conditions, NOx 
combines with hydrocarbons in the atmosphere to create 
ozone, commonly known as "smog."  In the January rule, the 
EPA made final its findings that stationary sources of NOx 
emissions in twelve upwind states and the District of Colum-
bia contribute significantly to ozone nonattainment in north-
eastern states.  This finding triggers direct federal regulation 
of stationary sources of NOx in the upwind states.  The rule 
further established a "cap and trade" system for NOx emis-
sions within each upwind jurisdiction.  Covered sources must 
obtain NOx emission allowances to cover their emissions, 
adopt additional emission controls, or cease operations.  Nu-
merous petitions for review challenge various aspects of the 
rule.

A.   Statutory Framework

     Under the Clean Air Act, the EPA promulgates national 
ambient air quality standards ("NAAQS") for criteria air 
pollutants, including tropospheric ozone.  See 42 U.S.C. 
s 7409.  The EPA then designates those areas of the United 
States that fail to meet the various NAAQS.  42 U.S.C. 
s 7407(d).  States, in turn, are required to adopt state imple-
mentation plans ("SIPs") providing for the attainment of the 
NAAQS.  42 U.S.C. s 7410.  The SIPs are submitted to the 
EPA for approval, and may be revised at the EPA's insis-
tence if found to be inadequate to ensure maintenance of the 
NAAQS or public health.  States that fail to comply with 
these requirements are subject to various sanctions and the 
imposition of a Federal Implementation Plan ("FIP").  42 
U.S.C. s 7509.

     Much air pollution is a local or regional problem.  Some 
pollution, however, is caused or augmented by emissions from 
other states.  Emissions from "upwind" regions may pollute 
"downwind" regions.  Several provisions of the CAA are 
designed to address such transboundary air pollution.  In 

particular, section 110(a)(2)(D)(i)(I) of the Act requires states 
to prohibit emissions within the state in amounts that will 
"contribute significantly to nonattainment in, or interfere with 
maintenance by, any other State" of the NAAQS.  42 U.S.C. 
s 7410(a)(2)(D)(i)(I).

     CAA section 126 provides a mechanism whereby downwind 
states may petition the EPA to directly regulate upwind 
sources of pollution.  Under section 126(b), 42 U.S.C. 
s 7426(b), a downwind state "may petition the Administrator 
for a finding that any major source or group of stationary 
sources emits or would emit any air pollutant in violation" of 
CAA section 110(a)(2)(D).  Once the EPA makes a section 
126(b) finding, section 126(c) provides that:

     it shall be a violation of this section and the applicable 
     implementation plan in such State--
     
          (1) for any major proposed new (or modified) source 
          with respect to which a finding has been made under 
          subsection (b) of this section to be constructed or to 
          operate in violation [of this section or section 110], or
          
          (2) for any major existing source to operate more than 
          three months after such finding has been made with 
          respect to it.
          
42 U.S.C. s 7426(c).  The Administrator may allow the con-
tinued operation of existing sources beyond three months 
provided such sources comply with emission limitations and 
compliance schedules provided by the Administrator which 
"bring about compliance ... as expeditiously as practicable, 
but in no case later than three years after the date of such 
finding."  Id.

     At issue in this case is the extent of the EPA's authority to 
make findings and directly regulate sources in upwind states 
under section 126, and whether the EPA's section 126 rule 
was arbitrary and capricious or contrary to law.

B.   The NOx SIP Call

     In October 1998, the EPA issued a final rule calling upon 
twenty two states1 and the District of Columbia to revise 
their ozone SIPs to address interstate air pollution (aka 
"interstate transport").  See Finding of Significant Contribu-
tion and Rulemaking for Certain States in the Ozone Trans-
port Assessment Group Region for Purposes of Reducing 
Regional Transport of Ozone, 63 Fed. Reg. 57,356 (1998) 
("NOx SIP Call").  Concluding that upwind states contribute 
significantly to ozone nonattainment problems in downwind 
states, the EPA required each jurisdiction to promulgate a 
new SIP to reduce NOx emissions.  This "NOx SIP call" 
required states to reduce NOx emissions by the amount that 
could be accomplished by emission controls capable of reduc-
ing emissions at a cost of $2,000 or less per ton.  Under the 
rule, revised SIPs were due by September 30, 1999, and SIP 
provisions covering stationary sources had to be implemented 
by May 1, 2003.  Failure to submit an adequate NOx SIP by 
the deadline would result in implementation of a FIP by the 
EPA.  In other words, if the states do not submit a plan for 
meeting their CAA obligations, the EPA will impose one of its 
own.

C.   The Original Section 126 Rule-Conditional Findings

     In August 1997, eight states submitted petitions requesting 
that the EPA find that stationary sources in upwind states 
contribute significantly to downwind air pollution.  Specifical-
ly, the petitioning states sought findings pursuant to CAA 
section 126(b), 42 U.S.C. s 7426(b), that specified sources or 
categories thereof are the source of NOx emissions that 

__________
     1  The states are Alabama, Connecticut, Delaware, Georgia, 
Illinois, Indiana, Kentucky, Maryland, Massachusetts, Michigan, 
Missouri, New Jersey, New York, North Carolina, Ohio, Pennsylva-
nia, Rhode Island, South Carolina, Tennessee, Virginia, West Virgi-
nia, and Wisconsin.

contribute significantly to ozone nonattainment in the peti-
tioning states in violation of CAA section 110(a)(2)(D).  42 
U.S.C. s 7410(a)(2)(D).  Each petition further sought to have 
the EPA implement direct federal regulation of stationary 
sources in upwind states, primarily electric generating facili-
ties and fossil-fuel fired industrial boilers and turbines.  Be-
cause the section 126 petitions raised many of the same issues 
as the NOx SIP call, and would require comparable emission 
reductions, the EPA coordinated its response to the section 
126 petitions with the NOx SIP call rulemaking.

     In a final rule published on May 25, 1999, the EPA 
determined that NOx emissions in twelve states and the 
District of Columbia contribute significantly to non-
attainment of the one-hour ozone NAAQS in Connecticut, 
Massachusetts, New York, and Pennsylvania.  Findings of 
Significant Contribution and Rulemaking on Section 126 Peti-
tions for Purposes of Reducing Interstate Ozone Transport, 
64 Fed. Reg. 28,250 (May 25, 1999) ("May 1999 Rule").  The 
twelve states are Delaware, Indiana, Kentucky, Maryland, 
Michigan, New Jersey, New York, North Carolina, Ohio, 
Pennsylvania, Virginia, and West Virginia.

     Rather than make section 126 findings at that time, howev-
er, the EPA determined that it was appropriate to postpone 
such findings pending the resolution of the NOx SIP call 
process.  Accordingly, the EPA issued a rule providing that 
the findings would automatically be deemed made with re-
gard to sources from a given state should that state fail to 
comply with a NOx SIP call deadline.  The EPA based this 
decision on the judgment that full compliance with the NOx 
SIP call would obviate the need for section 126 findings.  
Once made, the section 126 findings would require covered 
sources to come into compliance no later than May 1, 2003.  
Sources that failed to comply by that date would be required 
to cease operations.

D.   Revised Section 126 Rule-Final Findings

     Subsequent to the completion of the section 126 rulemak-
ing,2 this court issued two orders which caused the EPA to 
change course.  First, on May 14, 1999 this court remanded 
the EPA's proposed revisions to the ozone NAAQS.  Ameri-
can Trucking Ass'ns v. EPA, 175 F.3d 1027, reh'g granted in 
part and denied in part, 195 F.3d 4 (D.C. Cir. 1999), rev'd in 
part sub nom. Whitman v. American Trucking Ass'ns, 121 S. 
Ct. 903 (2001).  Second, this court issued an order staying the 
NOx SIP call deadline.  Michigan v. EPA, No. 98-1497 (D.C. 
Cir. May 25, 1999) (order granting stay in part).

     In response to these orders, the EPA revised the section 
126 rule.  Findings of Significant Contribution and Rulemak-
ing on Section 126 Petitions for Purposes of Reducing Inter-
state Ozone Transport, 65 Fed. Reg. 2674 (Jan. 18, 2000) 
("Jan. 2000 Rule").  In particular, the EPA made the re-
quested findings of significant contributions, granting the 
relevant portions of the section 126 petitions and delinking 
the section 126 findings from compliance with the NOx SIP 
call.  The EPA explained that it was "implementing the 
requirements of section 126 of the CAA in the absence of any 
currently effective requirement for upwind States to address 
the interstate pollution transport problems themselves."  Id. 
at 2683.  Instead, the EPA's new rule contained a provision 
to withdraw the relevant findings upon approval of a NOx SIP 
in accordance with the October 1998 NOx SIP call.

     As with the NOx SIP call, the EPA considered both NOx 
emissions and the cost of control in determining which 
sources contribute significantly to downwind ozone nonattain-
ment.  Based upon its analysis of the cost of emissions 
controls, the EPA concluded that measures which can reduce 
NOx emissions for $2,000 or less per ton are highly cost-

__________
     2  Although published on May 25, the initial section 126 rule was 
signed by the Administrator on April 30, 1999.  See May 1999 Rule, 
65 Fed. Reg. at 28,318.

effective.  May 1999 Rule, 64 Fed. Reg. at 28,299.  The EPA 
then divided NOx emission sources into various categories and 
determined the level of emission reduction that would be 
highly cost-effective for each category.  Id. at 28,300-01.

     The section 126 rule also established an emission allowance 
"cap and trade" program, known as the Federal NOx Budget 
Trading Program.  Under this program, originally outlined in 
the May 1999 rule, regulated sources are allocated tradeable 
NOx emission allowances and are prohibited from emitting 
more NOx than the amount of allowances held.  If a facility 
emits more than its initial allowance allocation, it must pur-
chase additional allowances from another facility, reduce its 
emissions, or cease operations.  Jan. 2000 Rule, 65 Fed. Reg. 
at 2733.

     To determine the initial allocations, the EPA established a 
NOx emission cap for each upwind state.  Each state's cap is 
based upon expected emission reductions from highly cost-
effective controls in that state as of 2007.  Id. at 2698.  
Ninety-five percent of each state's cap is allocated proportion-
ally among existing sources based upon each facility's heat 
input.  Five percent of the cap is set aside for future, as-yet-
unproposed sources.  Id. at 2698-99.  These initial allocations 
will apply for the 2003-07 time period.  Id. at 2700.  The 
EPA will issue revised allocations for the 2008-12 time peri-
od, and every five years thereafter.  Id.

     Since the issuance of the final section 126 rule, this Court 
has ruled on various challenges to the EPA's NOx SIP call.  
In Michigan v. EPA, 213 F.3d 663 (D.C. Cir. 2000), we 
upheld the SIP call in most respects, remanding portions of 
the rule to the EPA.  Of greatest relevance to these proceed-
ings, we upheld the EPA's analyses of interstate transport of 
NOx emissions and its use of cost-effectiveness criteria in 
determining which upwind sources "contribute significantly" 
to nonattainment in downwind states.  Subsequently, we en-

tered an order amending the deadline for full implementation 
of NOx SIP revisions from May 1, 2003 to May 31, 2004.  
Michigan v. EPA, No. 98-1497, 2000 WL 1341477 (D.C. Cir. 
Aug. 30, 2000) (order denying motion to stay mandate pend-
ing petition for certiorari).

     After the EPA published the final section 126 rule in 
January 2000, numerous groups petitioned this Court for 
review.  Among the petitioners are a group of upwind states 
from the midwestern and southeastern United States ("MW 
& SE State Petitioners");  utilities and other operators of 
electric generating facilities ("Non-State Petitioners");  com-
panies that operate non-electric generating/industrial facilities 
("Non-EGU Petitioners");  and several individual companies 
that have facility-specific concerns ("Facility-Specific Peti-
tioners").  A group of northeastern states ("NE State Peti-
tioners") also petitioned for review alleging that the EPA's 
rule did not go far enough in controlling upwind NOx emis-
sions.  The northeastern states otherwise intervened in sup-
port of the EPA, as did a group of environmental organiza-
tions.  The various petitions for review were consolidated into 
this case.

                  II. COMMON AND GENERAL ISSUES

A.   Scrivener's Error

     The Clean Air Act Amendments of 1990 eliminated a 
subsection of s 110 of the Clean Air Act ("CAA"), causing 
s 110(a)(2)(E) to be renumbered as s 110(a)(2)(D).  See 
Clean Air Act, Pub. L. No. 101-549, sec. 101(b), 
s 110(a)(2)(D), 104 Stat. 2399, 2404 (1990) (codified at 42 
U.S.C. s 7410(a)(2)(D)).  The Amendments correspondingly 
updated several references to s 110(a)(2)(E)(i) that had ap-
peared in s 126 of the Clean Air Act, but changed them to 
read "section 110(a)(2)(D)(ii)."  See Clean Air Act, Pub. L. 
No. 101-549, sec. 109(a), s 126(b)-(c), 104 Stat. at 2469-70 
(codified at 42 U.S.C. s 7426).  The 1990 Amendments thus 
not only substituted "(D)" for "(E)" in s 126, as necessitated 

by the renumbering, but also substituted "(ii)" for "(i)."  The 
EPA, which contends that the Congress amended s 126 only 
in order to update the cross-references so as to preserve the 
status quo ante, claims that this substitution of "(ii)" for "(i)" 
was "inadvertent[ ]."  May 1999 Rule, 64 Fed. Reg. at 
28,267/3.  The agency therefore construes s 126 as if this 
"inadvertence" had not occurred, i.e., as if that section re-
ferred to s 110(a)(2)(D)(i).  See id.  The Non-State Petition-
ers, by contrast, argue that s 126 should be read as written, 
that is, to refer to s 110(a)(2)(D)(ii).

     Section 126 gives a state the right to petition the EPA to 
find "that any major source or group of stationary sources [in 
another state] emits or would emit any air pollutant in 
violation of the prohibition of" a subsection of s 110(a)(2)(D), 
the subsection here at issue.  42 U.S.C. s 7426(b).  As we 
have noted, the ability of such a source or group of sources to 
operate is severely constrained once such a finding is made.  
42 U.S.C. s 7426(c).  The constraints in s 126(c) are trig-
gered by the "prohibition" in whichever subsection of 
s 110(a)(2)(D) it is that s 126 cross-references.  Section 
110(a)(2)(D) provides that a state implementation plan 
("SIP"), which describes how a state plans to comply with the 
National Ambient Air Quality Standards ("NAAQS"), must

     (D) contain adequate provisions--

     (i) prohibiting ... any source or other type of emissions 
     activity within the State from emitting any air pollutant 
     in amounts which will--
     
          (I) contribute significantly to nonattainment in, or in-
          terfere with maintenance by, any other State with 
          respect [to the NAAQS] or
          
          (II) interfere with [various other] measures.
          
     (ii) insuring compliance with the applicable requirements 
     of sections 7426 [CAA s 126] and 7415 [CAA s 115] of 
     this title (relating to interstate and international pollution 
     abatement).
     
42 U.S.C. s 7410(a)(2)(D).  Thus, prior to the 1990 Amend-
ments, s 126 provided an avenue by which a state could 

compel the EPA to enforce emissions limitations upon a 
neighboring state the emissions from which contributed to its 
own nonattainment of the NAAQS.  The EPA argues that 
s 126 should still be read to have this effect, notwithstanding 
the substitution of "(ii)" for "(i)" therein.

     Reading a statute contrary to its seemingly clear meaning 
is permissible "[i]f 'the literal application of a statute will 
produce a result demonstrably at odds with the intentions of 
its drafters.' "  Mova Pharm. Corp. v. Shalala, 140 F.3d 1060, 
1068 (D.C. Cir. 1998) (quoting United States v. Ron Pair 
Enterprises, 489 U.S. 235, 242 (1989)).  We will not, however, 
invoke this rule to ratify an interpretation that abrogates the 
enacted statutory text absent an extraordinarily convincing 
justification:

     [T]he court's role is not to "correct" the text so that it 
     better serves the statute's purposes, for it is the function 
     of the political branches not only to define the goals but 
     also to choose the means for reaching them....  There-
     fore, for the EPA to avoid a literal interpretation at 
     Chevron step one, it must show either that, as a matter 
     of historical fact, Congress did not mean what it appears 
     to have said, or that, as a matter of logic and statutory 
     structure, it almost surely could not have meant it.
     
Engine Mfrs. Ass'n v. EPA, 88 F.3d 1075, 1089 (D.C. Cir. 
1996).  The EPA's reading of the reference in s 126 to 
s 110(a)(2)(D)(ii) to mean s 110(a)(2)(D)(i) meets this test.  
The cross-references to s 110(a)(2)(D)(ii) that appear in s 126 
clearly do not reflect the intent of the Congress.  Although 
the cross-references as written "point[ ] in one direction, all 
the other evidence from the statute points the other way," 
United States Nat'l Bank of Oregon v. Independent Ins. 
Agents of America, Inc., 508 U.S. 439, 455 (1993).  See 
Thomas W. Merrill, Golden Rules for Transboundary Pollu-
tion, 46 Duke L.J. 931, 955 n.124 (1997) ("[S]ection 126(b) 
contains what appears to be a typographical error which, if 
read literally, would render the EPA's obligation to make [a 
s 126] finding meaningless").

     For example, although s 126 twice refers to the "prohibi-
tion of section 7410(a)(2)(D)(ii) [CAA s 110(a)(2)(D)(ii)]," 
there is no literal "prohibition" in that section--whereas there 
is in s 110(a)(2)(D)(i) ("prohibiting ... any source").  The 
petitioners dismiss this point, arguing that "prohibition" is not 
a term of art and that it easily embraces the directive of 
s 110(a)(2)(D)(ii) to "insur[e] compliance with the applicable 
requirements of sections 7426 [CAA s 126] and 7415 [CAA 
s 115]."  For support, the petitioners note that the third and 
final reference to s 110 in s 126 refers to the "requirements 
contained in section 7410(a)(2)(D)(ii) [CAA s 110(a)(2)(D)(ii)]."  
42 U.S.C. s 7426(c).  Although the "requirements" of these 
sections certainly include some "prohibitions," the petitioners' 
argument that the two terms are "interchangeabl[e]" 
stretches the ordinary meaning of the term "prohibition."  It 
does not, however, stretch that meaning beyond recognition.  
Taken alone, therefore, the usage is insufficient to prove the 
agency's claim of scrivener's error;  in conjunction with the 
other evidence described below, however, it lends credence to 
the view that such an error indeed was made.

     A similar analysis applies to the observation that s 126 as 
written creates a circular cross-reference:  both s 126(b) and 
s 126(c) refer to the "prohibition" or "requirements" of 
s 110(a)(2)(d)(ii), which in turn mandates compliance with 
"the applicable requirements of [CAA s 126]."  Although a 
fully circular cross-reference would be absurd, the petitioners 
note that s 110(a)(2)(d)(ii) refers to s 126 in its entirety, 
rather than to ss 126(b) and (c) alone;  it thus includes the 
requirement of s 126(a) that a state's SIP provide for notify-
ing its neighbors of any major proposed new source that 
might affect their air quality adversely, see 42 U.S.C. 
s 7426(a).  This reading is not unreasonable.  Cf. Connecticut 
v. EPA, 656 F.2d 902, 907 (2d Cir. 1981) ("When [CAA 
s 110(a)(2)(D)(ii)] requires an SIP to insure compliance with 
s 126, it clearly refers to subsection (a) [of s 126] only and 
not to the petition procedure set forth in subsection (b)").  A 
statute that incorporates a cross-reference that is only par-
tially circular is not for that reason absurd, although--as in 
this case--such a reference may make the statute sufficiently 

convoluted to warrant searching for a less infelicitous con-
struction.

     It is impossible to accept, however, that the Congress 
intended simultaneously to repeal the regulatory regime that 
had existed before the 1990 Amendments and to replace it 
with the one that the petitioners describe.  See Nat'l Bank of 
Oregon, 508 U.S. at 454 (eschewing "purported plain-meaning 
analysis" of statute as written when scrivener's error has 
"distort[ed] a statute's true meaning");  id. at 461 n.10 (hold-
ing theory of scrivener's error constituted "best reading" of 
statute notwithstanding that statute as written could be co-
herently explained).  Before the 1990 Amendments--and still 
today, under the EPA's reading--s 126 provided a mecha-
nism by which a state could compel the EPA to control 
emissions from sources in a neighboring state that contribut-
ed to the complaining state's nonattainment of the NAAQS.  
See 42 U.S.C. s 7426(b)-(c).  The petitioners argue that, by 
substituting "(ii)" for "(i)" in the cross-references of s 126, 
the Congress intended to withdraw the state's right to force 
the hand of the EPA when emissions from a neighboring 
state contributed to its own violation of the NAAQS, and 
simultaneously to create a right by which a state may compel 
such enforcement when a neighboring state fails to meet "the 
requirements of [42 U.S.C. ss ] 7426 and 7415 of this title 
[CAA ss 126 and 115] (relating to interstate and international 
pollution abatement)."  42 U.S.C. s 7410(a)(2)(D)(ii).

     This reading makes no sense of either s 126 or s 115.  As 
we have noted, in order to avoid circularity, the petitioners 
suggest that the reference to s 126 in s 110(a)(2)(d)(ii) refers 
only to the notification requirements of s 126(a).  According 
to the petitioners' reading, the 1990 amendment of ss 126(b) 
and (c) gave each state the right to compel enforcement 
against another state that fails to provide notice of new 
sources and took away their right to compel enforcement 
against a state that actually pollutes the complaining state's 
air.  Even were we to assume that such a counterintuitive 
switch from substantive to procedural compliance could plau-
sibly reflect congressional policy, the petitioners' reading 
would still be flawed.  Section 126(b) permits a state to 

petition the EPA to find that "any major source or group of 
stationary sources emits or would emit any air pollutant in 
violation of the prohibition of section 7410(a)(2)(D)(ii) [CAA 
s 110(a)(2)(D)(ii)]."  42 U.S.C. s 7426(b).  The notice require-
ment of s 126(a), to which the petitioners claim this reference 
ultimately points, binds states only to warn their neighbors of 
proposed new and modified sources;  it does not restrict the 
behavior of sources or groups of sources, whose "violation" of 
s 110(a)(2)(D) is the predicate for a s 126(b) finding.  See id. 
s 7426(a).

     For s 126 to incorporate the reference of s 110(a)(2)(d)(ii) 
to s 115 is similarly anomalous.  Section 115 allows a foreign 
nation affected by a state's emissions to complain to the EPA, 
which can then require the state to revise its SIP.  42 U.S.C. 
s 7415.  According to the petitioners, the 1990 Amendments 
created a new right whereby a state may compel enforcement 
against a neighboring state polluting a foreign country, while 
simultaneously abrogating that state's preexisting right to 
compel enforcement against a neighboring state polluting the 
complaining state.  That any state would be empowered to 
trump the EPA's discretion in an international dispute to 
which it is not a party--even as it lost the power to address 
another state's pollution of its own air--cannot be taken to 
express congressional intent if there is any plausible alterna-
tive reading of the statute.

     The petitioners' suggestion that the enactment of ss 176A 
and 184, 42 U.S.C. ss 7506a, 7511c, as part of the 1990 
Amendments somehow mitigates these problems is without 
foundation.  Those sections authorize the EPA to designate a 
multistate "transport region" in a case where one state's 
emissions affect another state's attainment of the NAAQS;  
for each such region, the EPA must convene a "transport 
commission," including officials from each state within the 
region, to advise the EPA Administrator.  Id.  The petition-
ers correctly describe these new sections as establishing, at 
least in part, a new approach to interstate air pollution.  
Because the Congress did not repeal s 126, however, this new 
approach was clearly not meant to be exclusive;  and neither 

s 176A nor s 184 renders the change in s 126 from "(i)" to 
"(ii)" any less linguistically or substantively anomalous.

     Even if the Congress had simultaneously enacted ss 176A, 
184 and 126 as written, we might not embrace the petitioners' 
reading.  See Environmental Defense Fund, Inc. v. EPA, 82
F.3d 451, 468 (D.C. Cir. 1996) (refusing to construe a statute 
literally in order to avoid "absurd and futile results").  This 
case, however, is much clearer:  the EPA has demonstrated 
not only that s 126 as written is at odds with congressional 
intent;  it also offers a convincing account of how it came to be 
enacted nevertheless.  We find it quite plausible that the 
Congress substituted "(ii)" for "(i)" in s 126 inadvertently in 
the course of a routine renumbering of statutory cross-
references.  Cf.  In re Chateaugay Corp., 89 F.3d 942, 953-54 
(2d Cir. 1996) (accord regarding a post-amendment renum-
bering of the bankruptcy code).

     Because the EPA has established that the "seemingly clear 
statutory language does not reflect the 'unambiguously ex-
pressed intent of Congress,' " Mova, 140 F.3d at 1068 (quot-
ing Chevron U.S.A. Inc. v. Natural Resources Defense Coun-
cil, Inc., 467 U.S. 837, 842 (1984)), we proceed under Chevron 
step two to consider whether the EPA's construction of s 126 
is reasonable.  Lest it "obtain a license to rewrite the stat-
ute," id., however, we do not give an agency alleging a 
scrivener's error the benefit of Chevron step two deference, 
by which the court credits any reasonable construction of an 
ambiguous statute.  Rather, the agency "may deviate no 
further from the statute than is needed to protect congres-
sional intent."  Id.  By reading s 126 to refer to 
s 110(a)(2)(D)(i)--thus restoring it to the meaning it had 
before the 1990 Amendments, as the Congress almost certain-
ly intended--the EPA in no way overreaches;  we therefore 
accept its reading.3

__________
     3  In the alternative, the petitioners suggest that the reference 
in s 126 to s 110(a)(2)(D)(ii) may have stemmed from a different 
error than that posited by the EPA;  perhaps, they argue, the 
Congress intended to refer not to s 110(a)(2)(D)(i) but to 
s 110(a)(2)(D)(i)(II).  This construction is less plausible than the 

B.   The NOx SIP Call and s 126

     The Administrator of the EPA must require a state to 
revise its SIP "as necessary" whenever she finds such a plan 
"substantially inadequate to ... comply" with various re-
quirements of the Act, including the requirement that the 
plan "contain adequate provisions" to prevent sources within 
a state from contributing significantly to any other state's 
nonattainment or nonmaintenance of the NAAQS.  Id. 
ss 7410(a)(2)(D)(i)(I), 7410(k)(5).  Pursuant to this authority, 
in October 1998 the EPA issued a request for SIP revisions, 
or a "SIP call," that required 22 states and the District of 
Columbia to revise their SIPs in order to mitigate the inter-
state transport of ozone.  Michigan v. EPA, 213 F.3d 663, 
669 (D.C. Cir. 2000) (explicating NOx SIP Call, 63 Fed. Reg. 
at 57,358-59).  This court upheld the essential elements of the 
NOx SIP call in March 2000, although we remanded the rule 
for further proceedings with regard to three states and to 
certain types of sources.  Id. at 695.

     In August 1997, during the preparation of the NOx SIP call, 
eight states petitioned the EPA to find, pursuant to CAA 
s 126(b), that "major stationary sources or groups of sources" 
in specified states were contributing to the petitioning states' 
failure to meet the NAAQS for ozone.  42 U.S.C. s 7426(b).  
In the first of the two rules challenged here, the EPA 
announced that because it was "operating on basically the 
same set of facts" in making determinations under s 126 as it 
had when it issued the NOx SIP call--that is, facts showing 

__________
EPA's for the simple reason that the EPA's reading restores the 
statute to its unarguably coherent, pre-Amendment form.  In any 
event, when "there are multiple ways of avoiding a statutory 
anomaly, all equally consistent with the intentions of the statute's 
drafters (and equally inconsistent with the statute's text)," we 
accord standard Chevron step two deference to an agency's choice 
between such alternatives.  See Mova, 140 F.3d at 1068.

that upwind sources contributed to downwind nonattainment 
of the NAAQS--it would eschew making formal findings 
under s 126.  May 1999 Rule, 64 Fed. Reg at 28,274/3, 
28,275/2.  Instead, the agency made the "affirmative technical 
determination" that sources in upwind states were contribut-
ing to nonattainment in downwind states, and provided that a 
formal finding to that effect under s 126 would be

     deemed to be made for such sources in a state if by May 
     1, 2000, EPA has not either (a) approved a state's SIP 
     revision to comply with the NOx SIP call or (b) promul-
     gated implementation plan provisions meeting the [CAA] 
     section 110(a)(2)(D)(i) requirements.
     
Id. at 28,275/2.

     The EPA used this "automatic trigger mechanism," Jan. 
2000 Rule, 65 Fed. Reg. at 2679/1, as part of a "coordinated 
approach" to the SIP call and the s 126 petitions, May 1999 
Rule, 64 Fed. Reg. at 28,275/3:  s 126 findings would be 
withheld until the conclusion of the SIP call, but would be 
entered automatically should a state's response to the SIP 
call be either unsatisfactory or untimely.  May 1, 2000 was 
chosen as the date for triggering the s 126 finding because 
s 126(c) allows the EPA to permit sources found to contrib-
ute to another state's nonattainment to continue to operate 
for no more than three years after the date of such a finding.  
42 U.S.C. s 7426(c).  For findings made on May 1, 2000, the 
three-year clock would expire on May 1, 2003--the same date 
by which states were required to have implemented controls 
over sources of interstate ozone under the original NOx SIP 
call.  See NOx SIP Call, 63 Fed. Reg. at 57,308/1.

     The congruence between the two schedules was disrupted 
by an order of this court staying the EPA's original SIP call 

deadline.  See Michigan v. EPA, No. 98-1497 (D.C. Cir. May 
25, 1999);  see also Michigan v. EPA, No. 98-1497, 2000 WL
1341477 (D.C. Cir. Aug. 30, 2000) (ordering new deadline of 
May 31, 2004 for implementation of SIPs that are revised 
pursuant to the SIP call).  The extended timetable for the 
SIP call led the EPA to determine that "the circumstances 
under which the linkage between action on the section 126 
petitions and the NOx SIP call was appropriate are no longer 
present."  Jan. 2000 Rule, 65 Fed. Reg. at 2680/1;  see also 
id. at 2676/2.  The EPA therefore abandoned the automatic 
trigger mechanism and instead simply made the s 126 find-
ings.  See id. at 2679/1.

     The EPA maintains that its approach is necessitated by the 
"language and purposes of section 126" and that it is consis-
tent with "the language of section 110, the cooperative feder-
alism structure of title I of the CAA, [and this] court's 
decision to stay the deadlines for States to submit SIP 
revisions under the NOx SIP call."  Id. at 2680/1.  The MW & 
SE State and Non-State Petitioners disagree.  They argue 
that ss 110 and 126 require the agency to refrain from 
making any s 126 findings while the NOx SIP call is ongoing, 
and that a similar constraint is imposed by the doctrine of 
"cooperative federalism" that this court has recognized as 
being embodied in the Act.

     Once the "prohibition" to which s 126 refers is understood 
as the "functional prohibition" upon emissions of pollutants 
that subsequently cross state lines, the petitioners can find 
little support for their position by parsing ss 110 and 126.4  
The Non-State Petitioners argue that

__________
     4  The EPA may make findings under s 126 only if a major 
source or group of sources is in "violation of the prohibition of 
[s 110(a)(2)(D)(i)]."  42 U.S.C. s 7426(b).  The petitioners might 
have argued, therefore, that because s 110(a)(2)(D) requires a SIP 
to "contain adequate provisions prohibiting" interstate emissions, 

     [a]t a time when the relevant States were under a legal 
     obligation to adopt "adequate [SIP] provisions" to control 
     NOx emissions found by EPA to significantly contribute 
     to ozone nonattainment--and at a time when States had 
     not defaulted on that obligation--EPA lacked the author-
     ity to determine that those same States' NOx emission 
     sources were "in violation" of that same prohibition.
     
Non-State Petitioners Br. at 29.  This statement lacks a 
logical basis.  It is entirely reasonable for the EPA to regard 
a state that is under a legal obligation to revise its plan as 
being, in the meantime, in violation of a functional prohibition.

     The petitioners' primary argument, therefore, is that Title I 
of the Clean Air Act is animated by a commitment to "cooper-
ative federalism" under which the EPA is to determine what 
level of air quality is required but must defer in the first 
instance to the judgments of the states regarding how to 
achieve that level.  This principle, according to the petition-
ers, requires that a SIP call inviting states to respond to the 
problem of interstate transport be the preferred remedy, 
while direct federal regulation of sources, as authorized by 
s 126, must be a last resort reserved for cases in which states 
cannot or do not meet their SIP obligation.

     In Michigan this court assessed the legality of the emis-
sions budgets that the EPA assigned to each state as part of 

__________
the "prohibition of [CAA s 110(a)(2)(D)(i)]" in s 126 refers only to 
restrictions upon emissions incorporated into state or federal imple-
mentation plans prepared pursuant to s 110(a)(2)(D).  When this 
argument was raised during the rulemaking, the EPA rejected it in 
favor of the view that "prohibition" means "the actual functional 
prohibition of section 110(a)(2)(D)(i), which bars impermissible state 
transport, rather than the specific provisions through which states 
implement that prohibition ... in an approved SIP."  May 1999 
Rule, 64 Fed. Reg. at 28,272/2.  No petitioner, however, argued the 
former view in its opening brief, and we therefore need not decide 
it.

the NOx SIP call with respect to what we called the "Train-
Virginia federalism bar." 213 F.3d at 687.  We referred 
there to our holding in Virginia v. EPA, 108 F.3d 1397, 1408, 
modified on other grounds, 116 F.3d 499 (1997), that under 
s 110 each state retains the power, in its SIP, to determine 
how it will achieve the NAAQS, and that the EPA may not 
dictate to a state a particular "source-specific means" to that 
end, a proposition for which we relied upon Train v. Natural 
Resources Defense Council, Inc., 421 U.S. 60, 79 (1975).  This 
principle, of course, cannot be absolute in the face of s 126, 
which contemplates that in at least some circumstances the 
EPA will directly regulate sources within a state.  See 42 
U.S.C. s 7426(c).  Neither Train and Virginia nor Michigan 
considered the interaction of their holdings with s 126,5 but in 
its 1999 rule the EPA noticed the tension between s 126 and 
the Train-Virginia line of cases, and properly sought to 
accommodate the two:

     Section 126 is somewhat unusual in Title I [of the CAA] 
     in that it authorizes EPA to control sources directly, 
     rather than providing a means for EPA to encourage 
     states to control those sources.  In that sense, it is 
     similar to the provisions for federal implementation plans 
     in section 110(c).  With both of these provisions, Con-
     gress provided tools for direct federal action to address 
     serious failures of state action.  Nevertheless, Congress' 
     clear preference throughout Title I is that states are to 
     decide and plan how they will control their sources of air 
     pollution.
     
May 1999 Rule, 64 Fed. Reg. at 28,273/2.  This analysis led 
the EPA to adopt the automatic trigger approach during the 
pendency of the NOx SIP call.

     The petitioners contend that the delay in the NOx SIP call 
deadline, because it did not affect the "Congress' clear prefer-
ence" for state implementation decisions, should not have 

__________
     5  Train, of course, was decided before s 126 was enacted.

altered the EPA's determination that the SIP call takes 
precedence over s 126.  The EPA, however, is obligated not 
only to give to s 110 a meaning that is consistent with Train 
and Virginia, but also reasonably to construe s 126.  The 
EPA, which considers the two provisions to be "independent 
statutory tools to address the problem of interstate pollution 
transport" that the EPA may deploy either singly or in 
tandem, Jan. 2000 Rule, 65 Fed. Reg. at 2680/1, reasonably 
construes both provisions.

     The EPA's view accords with the position of the Second 
Circuit which, in Connecticut v. EPA, was presented with the 
converse of the question before us:  Do ss 110 and 126 
require the EPA to postpone its approval of SIP revisions 
pending its final action upon petitions for findings under 
s 126(b)? 656 F.2d at 906-08.  Although the Connecticut 
court suggested that "s 126(b) appears to have been primari-
ly designed as a means for resolving interstate pollution 
disputes in situations where an SIP is not being revised," id. 
at 907--a dictum in some tension with the EPA's view that 
s 126 is "independent" of the SIP revision process--the 
Second Circuit's point was only that the EPA need not, upon 
receipt of a s 126 petition, suspend the SIP revision process.  
The court therefore concluded, properly we think, that "[a]s 
the substantive inquiry for decision is the same in both [s 110 
and s 126] proceedings, an argument that one proceeding 
must be completed as a prerequisite to a final decision in the 
other makes no sense."  Id. at 907;  see also id. at 908 n.4 
(quoting statement of H.R. Rep. No. 95-249, at 331, reprinted 
in 4 A Legislative History of the Clean Air Act Amendments 
of 1977, at 2798 (1978), that "the s 126(b) process is designed 
to provide an 'entirely alternative method and basis for 
preventing and abating interstate pollution' ") (emphasis omit-
ted).

     By contrast, three critical provisions of s 126 would lose 
their force if, as the petitioners suggest, the lengthened 
timetable of the NOx SIP call were to suspend the s 126 
process.  First, s 126 emphatically requires that any source 

found to contribute to downwind nonattainment may in no 
event be permitted to operate for more than three years after 
such finding.  See 42 U.S.C. s 7426(c).  Second, under s 126 
"[r]elief does not depend upon any action by the upwind 
states, as is necessary for a SIP revision."  May 1999 Rule, 
64 Fed. Reg. at 28,264/2.  Third, relief under s 126 is inde-
pendent also of the discretionary policy preferences of the 
EPA;  the agency must act upon a request for a s 126 finding 
within 60 days.  See 42 U.S.C. s 7426(b).  Under the EPA's 
approach, of course, s 126 retains each of these features.  
See, e.g., Jan. 2000 Rule, 65 Fed. Reg. at 2681/1 ("Congress 
provided section 126 to downwind states as a critical remedy 
to address pollution problems ... otherwise beyond their 
control, and EPA has no authority to refuse to act under this 
section").

     The petitioners argue, however, that the EPA's construc-
tion deprives s 110 of its force because it constrains the 
development of the SIP:  sources subject to a s 126 finding 
will be bound by emissions limitations set by the agency, see 
42 U.S.C. s 7426(c), and by the emissions trading program, 
see Part II.D below, even if the state in which they are 
located prefers to regulate different sources or to use differ-
ent methods to mitigate downwind nonattainment.  The peti-
tioners argue that such constraints violate s 110 as interpret-
ed in Virginia, but they plainly do not.  In Virginia, this 
court disapproved the EPA's plan to reject SIPs that did not 
incorporate particular limits upon emissions from new cars;  
we held that the EPA may not, as part of the "section 110 
process," intervene in a state's choice of how to reach the 
NAAQS. 108 F.3d at 1410;  cf. id. at 1406 (question is what is 
permissible "under section 110").  We did not suggest that 
under s 110 states may develop their plans free of extrinsic 
legal constraints.  Indeed, SIP development, like any environ-
mental planning process, commonly involves decisionmaking 
subject to various legal constraints.  That s 126 imposes one 
such limitation--and it is surely not the only independent 
provision of federal law to do so--does not affect a state's 
discretion under s 110.

     The MW & SE State Petitioners argue in the alternative 
that, if ss 110 and 126 are independent, then the EPA may 
select either one but cannot impose s 126 findings and a SIP 
call simultaneously.  Neither the statute nor the states' brief 
offers support for this suggestion, and the states' suggestion 
that the EPA embraced it in the preamble to its second rule 
is without foundation.  Because it is reasonable, and because 
the "Congress provided both [ss 110 and 126] without indi-
cating any preference for one over the other," Jan. 2000 Rule, 
65 Fed. Reg. at 2680/1, the EPA's conclusion that these two 
provisions operate independently merits our deference under 
Chevron step two.  See Chevron, 467 U.S. at 843.

     Finally, we note that the MW & SE State Petitioners 
object to the EPA's construction of 40 C.F.R. s 52.34(i), 
which provides that s 126 findings will be withdrawn if the 
EPA takes "final action" to approve a SIP or impose a FIP 
that will control NOx emissions that contribute to downwind 
nonattainment.  See 40 C.F.R. s 52.34(i) (2000), promulgated 
at 65 Fed. Reg. at 2727.  Although the rule contains no date, 
the agency avers that it will apply the rule only to SIPs or 
FIPs adopted before May 1, 2003, the s 126 deadline.

     The Supreme Court recently held that we should not defer 
to an agency's interpretation imputing a limiting provision to 
a rule that is silent on the subject, lest we "permit the 
agency, under the guise of interpreting a regulation, to create 
de facto a new regulation."  Christensen v. Harris County, 
529 U.S. 576, 588 (2000).  The Court, however, carefully 
limited this principle to cases in which the agency's interpre-
tation postdated its adoption of the rule and was not itself 
"subject to the rigors of ... notice and comment."  Id. (citing 
Reno v. Koray, 515 U.S. 50, 61 (1995)).  We therefore contin-
ue to grant "a high degree of deference" to an interpretation 
that the agency promulgates contemporaneously with its own 
regulation, affirming it "unless it is plainly erroneous or 
inconsistent with the regulation."  Jersey Shore Broad. Corp. 
v. FCC, 37 F.3d 1531, 1536 (D.C. Cir. 1994).

     Here the agency contends that it imputed a date to 
s 52.34(i) not post hoc but "[t]hroughout the Section 126 
rulemaking."  Although the date might better have been 
made explicit in the preamble to the rule, the agency did 
clearly, albeit implicitly, assume that s 52.34(i) would apply 
only to SIPs promulgated before the s 126 deadline.  This is 
evident from the agency's express reservation for another 
rulemaking of the question whether it would "automatically 
withdraw the section 126 findings upon EPA approval of a 
later SIP revision."  Jan. 2000 Rule, 65 Fed. Reg. at 2683/2.  
A contrary interpretation, moreover, would apparently create 
a conflict between s 52.34(i) and the s 126 deadlines, the 
sanctity of which the EPA emphasized throughout its rule-
making.  Because the EPA appears ever since the rule was 
promulgated to have interpreted s 52.34(i) to apply only to 
SIPs approved before May 1, 2003, and because this interpre-
tation is not "plainly erroneous or inconsistent with the 
regulation," Jersey Shore, 37 F.3d at 1536, we defer to the 
agency's view.

C.   Significant Contribution

     Non-State Petitioners challenge the methodology by which 
EPA reached its findings of "significant contribution" to 
nonattainment of the "1-hour" ozone rule under s 126, 42 
U.S.C. s 7426.  EPA started with the two-step method that it 
had used in issuing the SIP call and that we upheld in 
Michigan v. EPA, 213 F.3d 663, 674-80 (D.C. Cir. 2000).  As 
we explained there, EPA first performed computer modeling 
to determine whether a state's manmade NOx emissions 
perceptibly hindered a downwind state's attainment.  Id. at 
675.  For any state exceeding EPA's threshold criteria, EPA 
then defined as "significant" those emissions that could be 
eliminated through application of "highly cost-effective" con-
trols, namely measures costing no more than $2,000 per ton of 
NOx removed.  Id.  Similarly, EPA relied here on the state-
wide threshold findings made in the SIP call and then applied 
the same cost-effectiveness criterion to determine which 
sources to include.  See Findings of Significant Contribution 
and Rulemaking on Section 126 Petitions for Purposes of 

Reducing Interstate Ozone Transport, 63 Fed. Reg. 56,292, 
56,301/3 (proposed Oct. 21, 1998) ("Oct. 1998 Rule").

     As discussed above, see supra Part II.B, both the SIP call 
and the s 126 rulemaking are directly linked to the require-
ment under s 110(a)(2)(D)(i) that SIPs contain provisions 
prohibiting "any source or other type of emissions activity 
within the State from emitting any air pollutant in amounts 
which will ... contribute significantly to nonattainment...." 
s 110(a)(2)(D)(i), 42 U.S.C. s 7410(a)(2)(D)(i).  But the neces-
sary determinations are different in at least two material 
respects.  First, whereas the SIP call exercise yielded a total 
amount of NOx cutback for each state, which the state was 
then free to achieve however it might, see Michigan, 213 F.3d 
at 687-88, here the mandate applies directly to sources.  
Second, whereas s 110(a)(2)(D)'s broad reference to "any 
source or other type of emissions activity" supported SIP call 
findings based on aggregate emissions from within each 
regulated state, s 126 demands that the significant contribu-
tion come from a "major source or group of stationary 
sources."  42 U.S.C. s 7426(b) (emphasis added).

     The Non-State Petitioners argue that this latter distinction 
renders EPA's reliance on the SIP call findings inadequate;  
the findings based on all emissions can't determine whether 
stationary source emissions are sufficient.  Instead of using 
those findings, petitioners argue, EPA needed first to make 
the more rigorous finding that the specified stationary 
sources within a given state independently met its threshold 
test for effect on downwind nonattainment.

     Petitioners find support for their view of the statute in 
Michigan, where we said that the first step in EPA's 
s 110(a)(2)(D)(i) finding must show a "measurable contribu-
tion" to downwind nonattainment. 213 F.3d at 683-84.  
Here, EPA did not purport to satisfy such a standard on the 
basis of the covered stationary sources alone.  Rather, it 

conceded, "[i]t is conceivable that modeling only the emissions 
from the section 126 sources would result in smaller ambient 
impacts downwind [compared to total man-made emissions], 
and....  those smaller impacts, if analyzed on the basis of 
the metrics and thresholds developed for State-wide [total 
man-made] emissions, may not exceed those thresholds."  
May 1999 Rule, 64 Fed. Reg. at 28,283/1.

     EPA defended its approach both as a recognition of the fact 
that the ozone problem is due to the accumulation of emis-
sions and as a sensible reconciliation of s 110(a)(2)(D)(i) and 
s 126.  See id. at 28,282-83.  On the need for some aggrega-
tion, of course, there can be no quarrel.  Congress's use of 
the phrase "group of ... sources" plainly reflected a decision 
to act against sources whose emissions, while harmless indi-
vidually, could become harmful when combined with others.  
And, given the relevant statutory provisions, it was reason-
able for EPA to link its stationary source findings to the 
significance of a state's total NOx emissions.  By speaking of 
stationary sources that emit pollutants "in violation of the 
prohibition of [s 110(a)(2)(D)(i)]," Congress clearly hinged the 
meaning of s 126 on that of s 110(a)(2)(D)(i).  EPA reasoned 
that if it treated any state's entire manmade emissions as the 
controlling aggregate for both purposes and found a "signifi-
cant contribution," "then the State's section 126 sources may 
be subject to SIP controls."  Id. at 28,282/3 (emphasis added).  
In other words, a source can be subject to s 126 controls only 
if it is at least at risk of being subject to SIP controls.  The 
effect, of course, is to displace the discretion the state would 
enjoy in the SIP process under s 110(a)(2)(D)(i).  But this 
displacement of state power seems not materially greater 
than is inherent in EPA's interpretation of s 126, which we 
uphold vis-A-vis the objections petitioners raised in their 
initial briefs.  See supra Part II.B.  EPA's current reading, 
to be sure, may not be the only possible or even the most 
compelling view of s 126.  Perhaps the EPA could reasonably 
read it as petitioners would, and require that stationary 
sources as a whole independently satisfy some "meaningful 
contribution" test before they may be subject to s 126 find-
ings.  But given s 126's silence on what it means for a 

stationary source to violate s 110(a)(2)(D)(i), EPA's approach 
is at least reasonable, and therefore entitled to deference 
under Chevron.

     Petitioners point to language we used in Michigan striking 
down part of what EPA had done there.  For certain states 
EPA had analyzed emissions data only from a portion of the 
state closest to the affected downwind areas, and, finding that 
portion to have made contributions exceeding the threshold, 
had made "contribution" findings for the entire state.  We 
held this extension to the whole state invalid because EPA 
might well have included areas that were "wholly innocent of 
material contributions."  Michigan, 213 F.3d at 681-85.  In 
that context, we said that a significant contribution finding 
required evidence of a "measurable contribution" and that 
"[i]nterstate contributions cannot be assumed out of thin air."  
Id. at 684.

     In the present case Non-State Petitioners do not dispute 
that emissions from affected s 126 sources actually contribute 
to total manmade NOx emissions that, at the statewide aggre-
gate level, meet the EPA criteria upheld in Michigan.  The 
process here does not involve sweeping up individual sources 
that might well not be part of the problem at all.  The 
concern that drove our discussion in Michigan is inapplicable.

     Non-EGU Petitioners, by contrast, suggest a point that 
might conceivably implicate Michigan's "measurable contri-
bution" concern.  They argue that because EPA failed to 
model the contribution of each particular source individually, 
its findings ignore the effects of industrial sources' having 
lower smoke stacks than utility sources.  If in fact NOx
emissions from stationary sources with low smoke stacks do 
not reach other states as easily as emissions from other 
sources, these petitioners might have a point as to the scope 
of what Michigan allows.  But the petitioners' vague claim 
that lower stack height "affects the downwind impact" in no 
way quantifies the effect, much less makes out a claim that 

certain sources do not measurably contribute to downwind 
nonattainment.  In Michigan we left "EPA free to select 
states as a unit of measurement," saying that "[i]n turn, 
states (or the areas of states that believed themselves inno-
cent of material contributions, or sources located therein), 
might respond by offering finer-grained computations." 213
F.3d at 684.  So, too, the low-stack sources might have come 
forward with such numbers, but they have not.  Or they 
might have shown that EPA's modeling bore "no rational 
relationship to the reality it purport[ed] to represent," Sierra 
Club v. EPA, 167 F.3d 658, 662 (D.C. Cir. 1999), thereby 
throwing the burden back on EPA, but they have not.

     A final challenge to the "contribution" findings is the Non-
State Petitioners' argument that for four states (Indiana, 
Kentucky, Michigan and New York) EPA used state-based 
aggregations to find the contribution but then applied con-
trols to sources in only part of each state.  This is a reverse 
of what we struck down in Michigan:  there extension from 
part to the whole, here, contraction from the whole to a part.  
EPA's explanation was that while the modeling was state-
wide, s 126 empowered it only to address sources named in 
the downwind states' petitions (which here they did by area).  
See Jan. 2000 Rule, 65 Fed. Reg. at 2685/1.  Petitioners do 
not contest EPA's legal assumption, but simply say that the 
process invalidates the finding.

     EPA questions whether this objection was raised with 
reasonable specificity, which under 42 U.S.C. s 7607(d)(7)(B) 
is a precondition for judicial review.  But in the rulemaking 
itself EPA plainly acknowledged a claim that it was wrong to 
rely on all manmade emissions from an entire state where the 
petitions sought relief "from sources located in only a portion 
of the upwind State."  May 1999 Rule, 64 Fed. Reg. at 
28,292/3.  Nonetheless, petitioners' claim leaves out a critical 
point.  Extension of a finding from an area responsible for 
pollution problems to another area, where the two are linked 
only by falling within state boundaries, raises obvious risks of 
burdening the innocent with the guilty.  That risk is far lower 
in moving from the whole to a part, at least in the absence of 

some reason to doubt that the part in question shared in the 
state's "contribut[ory]" role or that it had been rationally 
selected on the basis of relevant criteria.  Accordingly, the 
principle that we accepted above in the context of the broad 
claim (based on s 126's exclusive focus on stationary 
sources)--namely, that EPA may subject to s 126 controls 
any source that might have been subject to SIP controls 
properly adopted under s 110(a)(2)(D)(i), see id. at 28,282/3--
appears to cover this issue equally well--at least in the 
absence of any contention that the petitioning states were 
arbitrary or discriminatory in their designation of sources 
(whether they identified them by geographic category, as 
here, or otherwise).

D.   Emission Limitation Determinations

     In order to allocate NOx emission allowances to individual 
sources, the EPA made state-by-state emission projections 
for 2007.  The EPA based each state's NOx emission budget 
on projected 2007 heat input (or "utilization") for electric 
generating units ("EGUs") and projected 2007 emissions for 
non-electric generating, industrial facilities ("non-EGUs").  
The projections were developed with computer models work-
ing off of "baseline" emissions and heat input data from 1995 
and 1996.  Various petitioners challenge the EPA's budget 
allocations as arbitrary and capricious.  While we generally 
uphold the EPA's authority to make emission projections and 
set emission limitations accordingly, we do so only where the 
EPA adequately responded to comments and explained the 
basis for its decisions.  Thus, although we uphold the EPA's 
use of the Integrated Planning Model ("IPM") as against the 
specific challenges forwarded by MW & SE Petitioners, we 
conclude that at least one application of the model is suffi-
ciently unexplained that we must remand the EPA's IPM-
derived growth factors for further explanation.

     1.   Standard of Review
          
     Agency determinations based upon highly complex and 
technical matters are "entitled to great deference."  Public 
Citizen Health Research Group v. Brock, 823 F.2d 626, 628 

(D.C. Cir. 1987);  see also Huls Am., Inc. v. Browner, 83 F.3d
445, 452 (D.C. Cir. 1996) ("[W]e will give an extreme degree 
of deference to the agency when it 'is evaluating scientific 
data within its technical expertise.' " (citation omitted)).  In a 
prior case named Appalachian Power Co. v. EPA, 135 F.3d
791, 802 (D.C. Cir. 1998), we described statistical analysis as 
"perhaps the prime example" of an area

     of technical wilderness into which judicial expeditions are 
     best limited to ascertaining the lay of the land.  Although 
     computer models are "a useful and often essential tool 
     for performing the Herculean labors Congress imposed 
     on EPA in the Clean Air Act," their scientific nature 
     does not easily lend itself to judicial review....  [I]t is 
     only when the model bears no rational relationship to the 
     characteristics of the data to which it is applied that we 
     will hold that the use of the model was arbitrary and 
     capricious.
     
Id. at 802 (citation omitted).

     Under this standard, the EPA has "undoubted power to 
use predictive models" so long as it "explain[s] the assump-
tions and methodology used in preparing the model" and 
"provide[s] 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) ("SRLPTF") (cita-
tions and internal quotation marks omitted).  That a model is 
limited or imperfect is not, in itself, a reason to remand 
agency decisions based upon it.

     Ultimately, ... we must defer to the agency's decision on 
     how to balance the cost and complexity of a more elabo-
     rate model against the oversimplification of a simpler 
     model.  We can reverse only if the model is so oversim-
     plified that the agency's conclusions from it are unrea-
     sonable.
     
Id.

     2.   The Integrated Planning Model
          
     The MW & SE Petitioners contend that the EPA's emis-
sions growth projections were arbitrary and capricious be-

cause they relied upon a computer model--the "IPM"--that 
underestimated growth rates for electric power generation in 
some upwind states.  Several states, including North Car-
olina, submitted comments to the EPA arguing that they 
projected significantly greater growth in electric power gen-
eration than that predicted by the IPM.

     Rather than address the specific complaints of each com-
menting state, the EPA defended its reliance upon the IPM 
on three broad grounds.  First, all state NOx budget growth 
rates should be based upon the same methodology to ensure 
consistency in the NOx cap's application.  Responses to Sig-
nificant Comments on the Proposed Findings of Significant 
Contribution and Rulemaking on Section 126 Petitions for 
Purposes of Reducing Interstate Ozone Transport at 111 
(April 1999) ("April 1999 RTC").  Second, the IPM "has 
received extensive comment, review, and revision over the 
past several years" during the NOx SIP call and other 
proceedings.  Id.;  see also Appalachian Power, 135 F.3d at 
814-15 (upholding the EPA's use of the IPM).  Third, the 
IPM "provides a reasonable forecast of State growth rates 
because it carefully takes into account the most important 
determinants of electricity generation growth that are facing 
the power industry today."  April 1999 RTC at 112.

     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.  See Texas Mun. 
Power Agency v. EPA, 89 F.3d 858, 870 (D.C. Cir. 1996).  In 
the EPA's judgment, the IPM offered a more comprehensive 
and consistent means of allocating emission allowances than 
sorting through the various state-specific projections.  That 
the EPA's projections depend, in large part, on economic 
projections, rather than environmental factors, makes little 
difference.  "[I]t is within the scope of the agency's expertise 
to make such a prediction about the market it regulates, and 

a reasonable prediction deserves our deference notwithstand-
ing that there might also be another reasonable view."  Envi-
ronmental Action, Inc. v. FERC, 939 F.2d 1057, 1064 (D.C. 
Cir. 1991).  MW & SE State Petitioners may believe their 
projections are superior to the EPA's--and they may even be 
correct--but they have not proved their case.

     3.   EGU Growth Factors
          
     Accepting the EPA's general reliance upon the IPM, Non-
State Petitioners object to the EPA's use of growth rates 
generated by the IPM for 2001-2010 to estimate facility 
utilization growth for the period 1996-2007.  According to 
petitioners, this yielded estimates for facility utilization in 
2007 that not only fail to reflect the best information available 
to the Agency but that are flatly inconsistent with observed 
growth rates through 1998.  Such apparently anomalous esti-
mates, petitioners claim, are arbitrary and capricious, at least 
absent any explanation from the agency as to why they are 
appropriate.  As a result, Non-State Petitioners claim, at 
least some EGUs are subject to excessively stringent emis-
sion limitations.

     The EPA based its state-specific emission budget limita-
tions on projections of facility utilization for 2007.  This 
projection was calculated by taking a baseline utilization rate 
and applying a "growth factor" to project the 2007 utilization 
rate, upon which the emission budget limitation would then be 
imposed.  For the starting baseline utilization rate, the EPA 
used the actual EGU utilization rate for either 1995 or 1996, 
whichever was greater.  For the growth factors, the EPA 
relied upon the IPM facility utilization projections for the 
2001-2010 period to generate an average annual growth rate 
that was then applied to the 1996-2007 period.

     Petitioners contend that the EPA's resulting projections 
significantly underestimated growth rates in some states.  In 
Michigan and West Virginia, for example, actual utilization in 
1998 already exceeded the EPA's projected levels for 2007.  
This, on its face, raises questions about the reliability of the 
EPA's projections.  While courts routinely defer to agency 
modeling of complex phenomena, model assumptions must 

have a "rational relationship" to the real world.  See, e.g., 
Chemical Mfrs. Ass'n v. EPA, 28 F.3d 1259, 1265 (D.C. Cir. 
1994).  Future growth projections that implicitly assume a 
baseline of negative growth in electricity generation over the 
course of a decade appear arbitrary, and the EPA can point 
to nothing in the record to dispel this appearance.

     Despite the apparent disparity between the EPA's growth 
projections and observed growth rates, the EPA claims its 
growth factors were reasonable and due deference from this 
court.  Yet even in the face of evidence suggesting the EPA's 
projections were erroneous, the EPA never explained why it 
adopted this particular methodology.  The EPA claims it 
made a reasonable choice--and it may be right--but simply 
to state such a claim does not make it so.  There must be an 
actual reason articulated by the agency at some point in the 
rulemaking process.  There is none here.

     The EPA tries to defend its projections by claiming that 
they may, at least in some instances, actually inflate utiliza-
tion projections generating "slack" for affected EGUs.  Yet 
the fact that some petitioners may benefit from the inaccura-
cy of the EPA's projections does not make them reasonable.  
Faced with evidence that its projections for 2007 are lower 
than actual utilization rates in 1998 for some states, the EPA 
has little answer.  The EPA first claims that regulated 
facilities can always purchase additional allowances, albeit at 
their own expense.  This is no answer.  The EPA then 
suggests that facility utilization can fluctuate from year to 
year.  For example, the EPA found in some states that 
utilization rates were higher in 1995 than 1996.  This may be 
true from one year to the next, but the EPA offers no 
plausible explanation for how interannual variation can ex-
plain utilization rates in 2007 substantially lower than those 
observed in 1998.  Finally, the EPA claims that when the 
projections are considered on a region-wide level such dispari-
ties are likely to disappear.  As budgets are set on a state-by-
state level, this is small consolation to petitioners.  The EPA 
is well aware of its obligation to "examine the relevant data 
and articulate a satisfactory explanation for its action," yet it 
failed to discharge this obligation here.  Motor Vehicle Mfrs. 
Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 
(1983).

     The EPA had other ways of generating 2007 utilization 
projections.  The EPA readily admits that it had IPM projec-
tions for the 1996-2001 period, as well as for 2007.  The EPA 
makes no claim that these results, as opposed to the projec-
tions offered up by the states, are inherently less reliable or 
consistent than the growth projections the EPA used here.  
The EPA readily acknowledges it utilized one set of growth-
rate projections to set allowance budgets, another to assess 
emission reduction costs.  As it explained in its Response to 
Comments:

     The budgets were constructed using growth rates for 
     1996-2007 that were consistent with the growth rates in 
     IPM for 2001-2010, which may be higher or lower than 
     the growth rates for the years 1996-2001.  EPA's analy-
     sis of the costs of complying with these budgets, howev-
     er, was conducted using IPM, which incorporates inter-
     nally consistent growth assumptions--i.e., the growth for 
     1996 through 2001 is based on IPM assumptions for 1996 
     through 2001, and the growth for 2001 through 2010 is 
     based on IPM assumptions for 2001 through 2010.
     
April 1999 RTC at 112-13.  While admitting that two sets of 
growth rates were used, the EPA offers no cogent explana-
tion for this difference.  Instead, the EPA merely asserts, 
without adequate explanation, that each choice was reason-
able.  The EPA further offers no comprehensible explanation 
how relying upon erroneously low growth rates will not cause 
petitioners harm.

     As we discussed above, the EPA has "undoubted power to 
use predictive models" but only so long as it "explain[s] the 
assumptions and methodology used in preparing the model" 
and "provide[s] a complete analytic defense" should the model 
be challenged.  SRLPTF, 705 F.2d at 535 (citations and 
internal quotation marks omitted).  In this case, 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 observa-
tions.  "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.

     4.   Non-EGU Budget Determinations
          
     Non-State Petitioners allege that the EPA repeatedly mod-
ified the growth assumptions in its calculation of non-EGU-
sector NOx budgets in such a fashion as to preclude any 
meaningful opportunity to comment.  According to petition-
ers, when the EPA modified successive versions of its techni-
cal support document ("TSD") it did not include a complete 
set of non-EGU growth factors.  Then, when the EPA issued 
the final non-EGU growth budgets in December 1999, it 
released modified growth rates without any explanation.  The 
EPA explained that "corrections to the growth rates ... were 
made to reflect the growth rates misapplied in the May 14, 
1999 version of the budget."  Technical Amendment to the 
Finding of Significant Contribution and Rulemaking for Cer-
tain States for Purposes of Reducing Regional Transport of 
Ozone, 65 Fed. Reg. 11,222, 11,223 (Mar. 2, 2000).  Because 
these changes were made without notice or explanation, peti-
tioners contend they must be set aside.

     The EPA asserts petitioners waived this claim.  "[T]he 
procedural requirements of the Clean Air Act do not permit 
[petitioners] to raise this objection for the first time on 
appeal."  API v. Costle, 665 F.2d 1176, 1190-91 (D.C. Cir. 
1981).  Under section 307(d)(7)(B) of the Act, a reviewing 
court may only consider "an objection to a rule or procedure 

which was raised with reasonable specificity during the period 
for public comment."  42 U.S.C. s 7607(d)(7)(B).  The peti-
tioner is only excused from raising an objection where it is 
"impracticable ... or if the ground for such objection arose 
after the period for public comment."  Yet even then the 
petitioner must first seek a proceeding for reconsideration.  
Id.  Only then may petitioner seek judicial review.  This 
court "enforces this provision 'strictly.' "  MEMA v. Nichols, 
142 F.3d 449, 462 (D.C. Cir. 1998) (citation omitted).

     These objections were never raised during the notice and 
comment period, nor did petitioner ever seek reconsideration.  
Neither of these facts is contested by petitioners.  Thus, even 
if, as petitioners claim, it was impracticable for many facilities 
to determine their growth factors, they waived their claim.  
Moreover, the EPA notes that petitioners do not cite any 
facilities that were unable to determine their growth factors 
due to the EPA's alleged omissions, suggesting that there is 
no harm to redress.  Accordingly, the relevant petitions are 
denied.

     5.   Local Regulation and Permit Trading
          
     The MW & SE State Petitioners have also argued that the 
permit trading system contravenes CAA s 116, which allows 
a state to impose a local air quality standard more stringent 
than the corresponding NAAQS.  42 U.S.C. s 7416.  The 
petitioners' concern is that a source might purchase permits 
in excess of applicable local limits and then claim the right to 
pollute in excess of those limits, up to the full amount of its 
permits.  The EPA properly denies that the permit trading 
program would make such a claim viable.  Nothing in the 
challenged rules exempts from s 116 a source that has ac-
quired permits.

     Although they are unable to point to any provision of the 
rule that allows permit trading to trump a local rule autho-
rized by s 116, the petitioners worry in their reply brief that 
"other interpretations" might prevail in the future.  Perhaps 
so, but for now, and until such time as it may conduct a new 
rulemaking, the EPA is committed to the position that it 
espouses here.  The petitioners also suggest that the EPA 

might decline to approve a SIP that imposes stringent local 
limits because of its commitment to a market in emissions 
permits;  but non-approval of a SIP is subject to judicial 
review, and an argument based upon the incompatibility of 
EPA policy and s 116 may be raised when and if the EPA 
disapproves a SIP in order to advance the market for emis-
sions permits.

E.   Regulation of "Future" Sources

     The section 126 rule establishes a NOx budget for each 
upwind state found to contribute significantly to nonattain-
ment in the petitioning states.  Ninety-five percent of this 
budget is allocated in the form of NOx emission allowances to 
existing sources.  Five percent of each state's budget is set 
aside for future sources.  In this fashion, the rule caps 
emissions on existing and proposed sources, as well as 
sources to be proposed and built in the future.

     MW & SE State Petitioners challenge the EPA's authority 
to impose the NOx cap limits to future, as-yet-unproposed 
stationary sources under section 126.  Petitioners argue that 
the statute does not authorize the EPA to regulate future 
sources, and that the EPA's contrary interpretation of section 
126 is unreasonable.  We disagree.

     We review the EPA's interpretation under the two-part 
analysis established in Chevron U.S.A. Inc. v. Natural Re-
sources Defense Council, Inc., 467 U.S. 837 (1984).  "First, 
always," we must consider "whether Congress has directly 
spoken to the precise question at issue." An affirmative 
answer "is the end of the matter;  for the court, as well as the 
agency, must give effect to the unambiguously expressed 
intent of Congress."  Id. at 842-43.  If, on the other hand, 
"the statute is silent or ambiguous with respect to the specific 
issue," we must uphold "a reasonable interpretation made by 
the administrator of an agency."  Id. at 843, 844;  see also 
American Bus Ass'n v. Slater, 231 F.3d 1, 4 (D.C. Cir. 2000).

     Under section 126(b) a downwind state "may petition the 
Administrator for a finding that any major source or group of 
stationary sources emits or would emit any air pollutant" in 
an amount which contributes significantly to nonattainment in 
the petitioning state.  42 U.S.C. s 7426(b).  Once the EPA 
makes a section 126(b) finding, section 126(c) provides that:

     it shall be a violation of this section and the applicable 
     implementation plan in such State--
     
          (1) for any major proposed new (or modified) source 
          with respect to which a finding has been made under 
          subsection (b) of this section to be constructed or to 
          operate in violation [of this section or section 110], or
          
          (2) for any major existing source to operate more than 
          three months after such finding has been made with 
          respect to it.
          
Id. s 7426(c).  The Administrator may allow the continued 
operation of existing sources beyond three months provided 
such sources comply with emission reductions provided by the 
Administrator to "bring about compliance ... as expeditious-
ly as practicable, but in no case later than three years after 
the date of such finding."  Id.

     Petitioners argue that the EPA's interpretation fails at the 
first step of Chevron, contending that section 126(c) autho-
rizes the EPA to regulate existing and proposed sources but 
not future sources that are not as yet proposed.  In petition-
ers' view, the enumeration of two classes of sources that may 
be controlled--"major existing sources" and "proposed new 
(or modified) sources"--precludes the EPA's authority over a 
third class of sources--"future as-yet-unproposed" sources.  
Expressio unius est exclusio alterius.  Petitioners argue that 
irrespective of whether the EPA can make findings with 
regard to future, as-yet-unproposed sources, it is not empow-
ered to prohibit their construction or limit their emissions 
under section 126(c).

     We reject petitioners' contention that the statute unambig-
uously reflects congressional intent to limit the EPA to the 
two categories defined by petitioners.  Section 126 is at least 

subject to the interpretation that Congress intended to autho-
rize the regulation of emissions from future sources.  Under 
section 126(b), the EPA may find that "any major source or 
group of stationary sources emits or would emit" pollution in 
violation of section 110.  The inclusion of the future condition-
al phrase "would emit" arguably contemplates the EPA's 
intervention to prevent future emissions that would contrib-
ute significantly to nonattainment in downwind states.  Simi-
larly, as the EPA argues, section 126(c) explicitly bars the 
construction or operation of "any major new proposed 
sources."  By barring the construction of those sources, the 
statute clearly contemplates the imposition of controls on at 
least some facilities that do not yet exist.  These provisions, 
taken together, may not compel the regulation of future 
sources under section 126, but they do not unambiguously 
forbid it.  At the least, they introduce sufficient ambiguity 
into the statutory scheme to prevent resolution of this issue 
under Chevron step one.

     In the absence of an unambiguous expression of congres-
sional intent in the plain language of the statute, we advance 
to the second step of the Chevron analysis to determine 
whether the EPA's interpretation of section 126 is a reason-
able one.  We conclude that it is.  Prior to 1990, section 
126(b) only authorized EPA findings that "a major source 
emits or would emit any air pollutant" which contributes 
significantly to nonattainment in a downwind state.  42 
U.S.C. s 7426(b) (1977).  The 1990 Clean Air Act Amend-
ments expanded the scope of this provision by allowing EPA 
findings with regard to "any major source or group of sta-
tionary sources."  42 U.S.C. s 7426(b) (1994) (emphasis add-
ed).  Similarly, the EPA notes that the cross-referenced 
provision of the act, section 110(a)(2)(D)([i]) prohibits "type[s] 
of emissions activity" that contribute significantly.  42 U.S.C. 
s 7410(a)(2)(D)(i).  Like section 126, section 110 confers au-
thority based upon the kind of activity in question.  It does 
not impose any temporal limit.

     The statutory language allows the EPA to regulate facili-
ties in upwind states as a class or category, e.g. all coal-fired 
power plants in North Carolina.  If such facilities, as a class, 

contribute significantly to nonattainment in northeastern 
states, this is as true for as-yet-unbuilt plants as it is for 
existing ones.  Therefore, the EPA argues, it is reasonable to 
include future sources in the "group of stationary sources" 
found to contribute significantly to downwind nonattainment 
under section 126(b).  Indeed, it would be irrational to enable 
the EPA to make findings that a group of sources in an 
upwind state contribute to downwind nonattainment, but then 
preclude the EPA from regulating new sources that contrib-
ute to that same pollution.  As the EPA explained in its 
Response to Comments:

     Once EPA has determined that the emissions from the 
     existing sources in an upwind State already make a 
     significant contribution to one or more petitioning down-
     wind States, any additional emissions from a new source 
     in that upwind State would also constitute a portion of 
     that significant contribution, unless the emissions from 
     that new source are limited to the level of highly effective 
     controls.
     
April 1999 RTC at 39.  The EPA's construction of section 126 
avoids this result.

     The language of section 126(c) does not make the EPA's 
interpretation an unreasonable one.  Petitioners note that 
section 126(c) specifically identifies two classes of sources--
"major existing sources" and "proposed new (or modified) 
sources"--and makes no mention of future, as-yet-unproposed 
sources.  What petitioners ignore is that section 126(c), by its 
terms, defines what constitutes a violation of section 126.  
For a facility to violate the law, by definition it must either 
exist or be proposed.  Future, as-yet-unproposed sources are 
not mentioned because unproposed, unbuilt facilities cannot 
themselves be in violation of anything.  At the time they 
become subject to the section 126(c) limitation, however, they 
will either be an "existing" or "proposed new" source.  That 
is to say, section 126(c) has no direct effect on plants that 
have yet to be proposed for the precise reason that they have 
not yet been proposed.  This does not mean, however, that 
facilities proposed after the promulgation of the EPA's find-

ings are exempt from section 126(c).  Once they are pro-
posed, they become part of the regulated class.

     Perhaps it would be reasonable for the EPA to interpret 
the statute as urged by petitioners.  Section 126 is arguably a 
stop-gap provision designed to protect downwind states from 
upwind pollution by empowering the federal government to 
take direct action against those specific upwind facilities 
which cause downwind harm.  From a structural standpoint, 
this interpretation may seem intuitive:  States regulate all 
emitters;  the EPA only regulates those emitters shown to 
contribute significantly to downwind nonattainment despite 
the existence of a SIP.  Yet however rational this alternative 
interpretation of the Clean Air Act may be, under Chevron 
step two, the EPA's interpretation controls so long as it is 
based upon a permissible construction of the statute.  As we 
conclude that the EPA adopted a reasonable interpretation of 
section 126's somewhat ambiguous provisions, its interpreta-
tion is upheld.

F.   The Dorris Report

     In comments submitted on August 9, 1999, North Carolina 
requested that the EPA consider and comment upon "all 
materials submitted to it by Dr. Gary Dorris, Hagler-Bailly, 
or Stratus Consulting since July 1, 1998."  Dr. Dorris was 
hired by the EPA to conduct modeling work in conjunction 
with the NOx SIP call.  According to North Carolina, Dr. 
Dorris's "extensive" modeling "shows that North Carolina 
does not significantly contribute to nonattainment areas" 
and provides "a rational basis for determining significant 
contribution that considers cost effectiveness...."  In its 
comments, North Carolina identified numerous materials 
submitted by Dr. Dorris, including briefing documents and 
preliminary analytical results.  North Carolina states that it 
would have commented on these materials directly, however 
the EPA had denied North Carolina's FOIA requests for 
access to the studies.

     On November 24, 1999, Dr. Dorris submitted his final 
report to the EPA.  According to the EPA, the report used 
computer modeling to assess the relative cost-effectiveness of 

NOx emission reductions in upwind states in comparison to 
emission reductions in downwind states.  This report conclud-
ed, among other things, that the relative contribution of a ton 
of NOx emissions will vary due to "emission source location, 
stack elevation, and chemical species."  This, in turn, impacts 
the cost-effectiveness of emission reductions in upwind states.

     In promulgating its final section 126 rule, the EPA made no 
mention of the Dorris Report or any of Dr. Dorris' prelimi-
nary findings.  While the report was relevant to the signifi-
cant contribution issue, the EPA maintains that it made its 
final significant contribution determination with the May 1999 
section 126 rule.  When North Carolina submitted its com-
ments in August, the EPA was only considering narrow 
issues related to the stay of the SIP submission deadlines and 
the impact of American Trucking Ass'ns v. EPA, 175 F.3d
1027, reh'g granted in part and denied in part, 195 F.3d 4 
(D.C. Cir. 1999), rev'd in part sub nom. Whitman v. Ameri-
can Trucking Ass'n, 121 S. Ct. 903 (2001).

     North Carolina contends that the EPA erred in refusing to 
consider the Dorris Report in the section 126 rulemaking.  
There is no doubt that the EPA is required to examine the 
relevant data and articulate a sufficiently reasoned explana-
tion for its action.  See Motor Vehicle Mfrs. Ass'n, Inc. v. 
State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983).  This 
Court is obligated to "overturn a rulemaking as arbitrary and 
capricious where the EPA has failed to respond to specific 
challenges that are sufficiently central to its decision."  Inter-
national Fabricare Inst. v. EPA, 972 F.2d 384, 389 (D.C. Cir. 
1992).  An agency is not required to consider issues and 
evidence in comments that are not timely filed.  Personal 
Watercraft Indus. Ass'n v. Dept. of Commerce, 48 F.3d 540, 
543 (D.C. Cir. 1995) ("Agencies are free to ignore such late 
filings.").  Therefore, if North Carolina did not raise the 
Dorris Report at the appropriate time, the EPA may ignore 
the findings contained therein.

     Contrary to North Carolina's claims, the EPA was justified 
in ignoring the Dorris materials because they pertained to 
aspects of the section 126 rule which the EPA had already 
finalized by the time North Carolina submitted its regulatory 
comments.  It may well be true that the EPA had access to 
draft copies of the Dorris Report while the comment period 
was still open.  Yet the EPA was no longer considering the 
significant contribution issues when North Carolina first re-
quested review of the Dorris materials.  Significant contribu-
tion was considered in the prior rulemaking and finalized in 
the May 1999 rule.  Jan. 2000 Rule, 65 Fed. Reg. at 2684-85.

     Because North Carolina's request that the EPA consider 
the Dorris Report with respect to the significant contribution 
issues was not timely filed, the EPA did not arbitrarily and 
capriciously ignore the Dorris Report.  Instead of considering 
the Dorris Report as part of the section 126 rulemaking, the 
EPA treated North Carolina's submission as a petition for 
reconsideration.  See id. at 2676.

     Under CAA section 307(d), any documents "which become 
available after the proposed rule has been published and 
which the Administrator determines are of central relevance 
to the rulemaking shall be placed in the docket as soon as 
possible after their availability."  42 U.S.C. s 7607(d)(4)(B)(i).  
Under both the plain language of this provision and this 
Court's precedents, the Administrator enjoys substantial def-
erence in determining whether to consider material submitted 
after the close of the comment period.  See, e.g., Eastern 
Carolinas Broad. Co. v. FCC, 762 F.2d 95, 103 (D.C. Cir. 
1985) ("Courts normally reverse an agency's decision not to 
reopen the record only for abuse of discretion.").

     The EPA maintains its comments reveal that it carefully 
considered the report and its relevance to the section 126 
rule.  After such consideration, however, the EPA concluded 
that the report was too preliminary and limited to justify 
reopening the record and reconsidering its prior determina-
tion.  While the Dorris Report relates to issues at the core of 
the NOx SIP call and section 126 rulemaking, the EPA viewed 
the report as "preliminary" and its findings limited.  In its 

August 2000 Response to Comments, the EPA noted the 
report "has not undergone scrutiny through notice-and-
comment rulemaking" or "careful scientific and technical re-
view."  Rulemaking for Section 126 Petitions-Responses to 
Significant Comments Which are [sic] Outside the Scope of 
the June 24, 1999 Notice of Proposed Rulemaking at 8 (Aug. 
2000).  The EPA further noted that the approach put forward 
by the report conflicts with the implementation of a market-
based NOx emission trading program.  Given the deferential 
standard employed in this context, the EPA's refusal to 
reopen and reconsider its significant contribution findings 
must be upheld.

             III. NON-ELECTRIC GENERATING UNIT ISSUES

A.   Alleged Budget Allocation Errors

     Non-EGU Petitioners complain that the EPA made sub-
stantial errors in the allocation of emission allowances which 
can only be cured by a remand and reallocation of all 
emission allowances in the affected states.  Specifically, Non-
EGU Petitioners identify two facilities for which there is a 
great disparity between allocated emissions and actual emis-
sions.6  In one case, the EPA allocated a facility less than 
one-seventh what it should have been allocated because it 
used erroneous heat-input data.  In another, it grossly over-
estimated a facility's share of state-wide NOx emissions.  
These errors not only impact the facilities in question, peti-

__________
     6  Non-EGU Petitioners also argue that non-EGU sources that 
began operating between 1995 and May 1, 1997 were never allocat-
ed the required NOx allowances.  We do not consider this claim 
because the EPA addressed the claims of the three units identified 
that fell into this category.  See Appalachian Power Co. v. EPA, 
No. 99-1200, 2000 WL 1683469 (D.C. Cir. Oct. 13, 2000) (order, 
inter alia, severing claims of petitioners and holding them in 
abeyance pending implementation of settlement agreements).

tioners claim, but all facilities in the state due to the state-
wide NOx caps.

     The EPA argues that such claims are waived because they 
were not raised during the notice and comment period, nor 
does the record contain any indication that petitioners filed a 
motion for reconsideration.  The EPA allocated allowances 
based upon the heat input data it received from covered 
entities.  Where the EPA received information from covered 
facilities indicating an allocation error, it made corrections.  
Insofar as a covered facility failed to ensure that the EPA 
was making its allocation based upon proper data, the claim is 
waived and cannot be addressed via judicial review.  Of the 
two facilities cited by Petitioners in their brief, the EPA notes 
that one has settled its claim with the EPA, and the other 
was specifically identified in the EPA's rulemaking.  Oct. 
1998 Rule, 63 Fed. Reg. at 56,369.  The EPA's proposed rule 
also specified what sorts of units would be covered, irrespec-
tive of their inclusion on the proposed list of allocations.  Id. 
at 56,332.

     Petitioners nonetheless argue that the existence of any 
allocation error requires setting aside all allowance allocations 
for a given state because the EPA has imposed state-specific 
budgets.  Even were this claim to have merit, it too was 
waived. Under the CAA, "[o]nly an objection to a rule or 
procedure which was raised with reasonable specificity during 
the period for public comment ... may be raised during 
judicial review."  42 U.S.C. s 7607(d)(7)(B).  The general 
complaints raised by Non-EGU Petitioners during the rule-
making about errors in allowance allocations are insufficient 
to meet this requirement as they failed to provide the agency 
with enough information to address the alleged failing of the 
rule.

B.   Treatment of Cogenerators

     The world of significant stationary sources producing NOx 
can loosely be divided into two categories--electric generat-
ing units ("EGUs") and sources that do not generate electrici-
ty ("non-EGUs").  Cogenerators straddle these lines, as they 

serve two functions, electricity generation and some direct 
industrial activity.  We deal here with their classification.

     EPA concluded that the application of its $2000/ton cost-
effectiveness principle called for different standards for the 
two types of units.  First, for "large EGUs"--boilers and 
turbines that serve generators capable of producing greater 
than 25 megawatts ("MWe") and that produce electricity for 
sale to an electric grid (with different minimum sales levels 
depending on the generator's date), see May 1999 Rule, 64 
Fed. Reg. at 28,300-01--EPA imposed a ceiling of .15 pounds 
per million Btu per hour ("lb./mmBtu/hr.").

     Second, for "large non-EGUs" or "large boilers"--boilers 
and turbines with a heat input greater than 250 mmBtu/hr. 
that, in general, only generate steam and/or mechanical work 
or that produce electricity for internal use only, see Jan. 2000 
Rule, 65 Fed. Reg. at 2731 (40 C.F.R. s 97.4(a)(1)-(2))--EPA 
required a 60% reduction in NOx emissions, which it says 
corresponds to an average control level of approximately 0.17 
lb./mmBtu/hr., May 1999 Rule, 64 Fed. Reg. at 28,301/2.

     We do not know why EPA frames one limit in terms of NOx 
emissions per mmBtu and the other as a percentage reduc-
tion.  In the original SIP call, EPA stated a preference for a 
flat limit over a percentage reduction for EGUs, noting that a 
percentage reduction rule tended to benefit states that had 
made less effort.  62 Fed. Reg. at 60,351/1.  We've found, and 
the parties offer, no explanation for rejecting this logic for 
non-EGUs.  But here the concern is that large cogenerators 
selling electricity to the grid end up being treated as large 
EGUs (at least if they sell at the minimum levels specified), 
subject to the more stringent rule (evaluated in terms of 
maximum emissions per mmBtu/hour).

     Petitioners claim that EPA departed without adequate 
explanation from a long-standing agency and congressional 

policy favoring cogeneration, and also failed affirmatively to 
justify the new classification.  We do not find the historical 
policy concerns to be dispositive, but we agree on their 
second point.

     In previous regulatory contexts, EPA and Congress have 
treated cogenerators as non-EGUs if they sold to the grid 
less than one-third of their potential capacity, or less than 25 
MWe per year.  May 1999 Rule, 64 Fed. Reg. at 28,297/2.  In 
proposing its new definition of large EGUs in the preamble to 
the May 1999 rule, EPA offered two relevant responses to 
comments.  First it argued that when the agency began using 
the earlier division in 1978, it served broadly as "a proxy" to 
distinguish between units that were, or were not, owned by 
utilities.  But it reasoned that since 1990 deregulation had 
had a dramatic effect on the industry, allowing non-utilities 
increasingly to compete with utilities.  EPA believed that this 
effect obviated the need to differentiate between utilities and 
non-utilities.  See id.  In addition, EPA cited a supplemental 
notice of proposed rulemaking under the NOx SIP call for the 
proposition that "there is no relevant physical or technological 
difference between utilities and other power generators," id. 
at 28,297/3 (quoting 63 Fed. Reg. at 25,923), and stated that it 
"continue[d] to believe that cogeneration units can achieve 
similar NOx emission reductions as utility units," id. at 
28,298/1.

     The explanation by reference to electric utility deregulation 
may well explain abandonment of the old definition, although 
the point is hard to evaluate since the link between choosing 
suitable emissions limits and the degree of direct competition 
between the classes of regulated firms is unexplained and not 
self-evident.  In any event, the rationality of moving away 
from the prior classification in itself says nothing about why 
EPA chose the new one.  On that score, EPA's current 
reasoning, to the extent that we are able to discern it, 
supports the new classification as a means to implement the 
cost-effectiveness criteria.  While as we noted above the 

standard for large EGUs is more stringent than the one for 
large non-EGUs when evaluated in terms of emissions per 
mmBtu/hour heat input (.15 lb. as opposed to .17 lb.), a table 
in the preamble to the May 1999 rule indicates that the two 
control levels have virtually identical predicted incremental 
costs ($1,468 for the former, $1,467 for the latter, all in terms 
of estimated cost per ton in 1990 dollars in 2007).  See id. at 
28,300 (Table II-4).7

     If this analysis is correct (and EPA has presented no 
alternative), then the classification of cogenerators should 
turn on whether their NOx reduction costs best match those 
of EGUs or non-EGUs.  We note at the outset that the non-
EGU class includes cogenerators that produce electricity for 
internal purposes only.  Thus sources that apparently may be 
identical physically are subject to different standards--a di-
vergence hard to reconcile to the supposedly controlling 
criterion of cost.  To the extent that it is linked to EPA's 
former concern over competition with utilities, the agency's 
own abandonment of that concern renders it obsolete.  In-
deed, EPA does not even attempt to justify the distinction.  
It merely notes that "it may be appropriate at some time in 
the future to consider all units generating electricity, whether 
for sale or internal use, as a single category."  Id. at 28,298/1.

     EPA does assert that "there is no relevant physical or 
technological difference between utilities and other power 
generators."  Id. at 28,297/3 (quoting 63 Fed. Reg. at 25,923).  
If true, this similarity would support treating cogenerators as 
EGUs, but EPA cites no record support.  See id.  Otherwise, 
EPA merely claimed that "it continues to believe that indus-
trial cogeneration units can achieve similar NOx emission 
limitations reductions as utility units" and that selective cata-
lytic reduction and selective non-catalytic reduction are "prov-

__________
     7  The preamble to the final rule presents updated figures that 
are more divergent, estimating the large EGU controls to cost 
$1,432 per ton in 1990 dollars in 1997, and the large non-EGU 
controls to cost $1,589.  Jan. 2000 Rule, 65 Fed. Reg. at 2677.

en technologies demonstrated on industrial and utility units."  
Id. at 28,298/1.  But the point that cogenerators can imple-
ment these technologies hardly shows that they can do so at 
the same costs as other EGUs.

     In its brief, EPA claims that it "specifically reviewed the 
cost-effectiveness of controls for cogeneration facilities in 
response to comments" and "determined that the control 
technologies that EPA had determined to be highly cost-
effective for EGUs ..., had been successfully applied to 
cogeneration facilities, and, therefore, there was no technical 
reason to distinguish between generating facilities owned by 
utilities and other electric generators, including cogenera-
tors."  But, once again, neither this statement nor any of the 
record documents cited in support purports to assess the 
costs of "successfully" applying such controls to cogenerators.  
Additional materials cited in EPA's brief are equally silent on 
the subject.  See Office of Air and Radiation, U.S. Environ-
mental Protection Agency, "Analyzing Electric Power" (July 
1996);  62 Fed. Reg. at 60,349 (Table III-3), 
60,350/3.

     Finally, EPA's brief also notes that "EPA's analysis of 
which controls are highly cost-effective for EGUs included all 
cogeneration units that generated electricity for sale."  But 
the fact that all units currently classified as "EGUs" can, on 
average, cost-effectively implement the EGU cap, see May 
1999 Rule, 64 Fed. Reg. at 28,300 (Table II-4), says nothing 
about whether cogenerators, as a discrete subclass, can do so.  
Indeed, if cogenerators represented a small enough portion of 
the sample size, even astronomical control costs would have 
little effect on the average.  On the central question of 
whether EPA actually compared the costs of cogenerator 
controls to those of other EGUs, EPA does not speak and the 
documents it cites shed no light.

     As EPA has failed to explain its classification of cogenera-
tors, see, e.g., American Lung Ass'n v. EPA, 134 F.3d 388, 
392 (D.C. Cir. 1998), and its failure to respond to significant 
comments leaves us only to guess whether its decision was 

"based on a consideration of the relevant factors," see, e.g., 
Thompson v. Clark, 741 F.2d 401, 409 (D.C. Cir. 1984) 
(quoting Citizens to Preserve Overton Park v. Volpe, 401 U.S.
402, 416 (1971)), we vacate and remand that portion of the 
rule.

C.   Source-Specific Issues

     1.   AK Steel Corporation
          
     AK Steel, one of the Non-EGU Petitioners, claims that the 
final rule improperly subjected four of its waste heat boilers 
to regulation as large non-EGUs.  The regulations at issue 
apply to these boilers only if they (a) are "fossil fuel fired" 
boilers with a 1995 "heat input" comprised more than 50% of 
fossil fuel, Jan. 2000 Rule, 65 Fed. Reg. at 2728/3, 2731/1 (40 
C.F.R. s 97.2 (definitions of "unit" and "fossil fuel fired")), 
and (b) have a "maximum design heat input" greater than 250 
mmBtu/hr., id. at 2731/2 (40 C.F.R. s 97.4(a)(2)(i)).

     AK Steel argues initially that its four furnaces fail to meet 
the first criterion:  The waste heat input from its "slab heat 
furnaces" is great enough to render its fossil fuel input less 
than 50% of the total, so that its boilers are not "fossil fuel-
fired."  EPA argues that AK Steel failed to raise its objection 
with the necessary specificity.  See 42 U.S.C. s 7607(d)(7)(B) 
("Only an objection to a rule or procedure which was raised 
with reasonable specificity during the period for public com-
ment ... may be raised during judicial review.").  We think 
its submission adequate, though only barely so.  On the 
merits, however, AK Steel is mistaken;  it hasn't read the 
regulations carefully enough.

     EPA correctly notes that the regulation defines "heat 
input" as excluding "heat derived from preheated combustion 
air, recirculated flue gases, or exhaust from other sources."  
Jan. 2000 Rule, 65 Fed. Reg. at 2729/1 (40 C.F.R. s 97.2).  
The EPA asserts, and petitioners do not dispute, that the 
waste heat input that it invokes is precisely such "preheated 
combustion air" or "exhaust from other sources."  So those 
inputs do not prevent its boilers from satisfying the 50% 
fossil-fuel calculation.

     In their reply brief, petitioners raise a new issue.  There 
they argue that waste heat should be excluded from calcula-
tion of the 250 mmBtu/hr. threshold for "maximum design 
heat input," see id. at 2731/2 (40 C.F.R. s 97.4(a)(2)(i)), which 
if true would mean that their boilers would not exceed the 250 
mmBtu/hr standard.  AK Steel has no explanation for why 
waste heat should be counted in one context and not the 
other, but EPA does offer a defense of the opposite position, 
arguing that, unlike the definition for "heat input," the capaci-
ty-based definition of "maximum design heat input" does not 
exclude specific input types.  See Jan. 2000 Rule, 65 Fed. 
Reg. at 2729/1 (40 C.F.R. s 97.2) (defining maximum design 
heat input as "the ability of a unit to combust a stated 
maximum amount of fuel per hour ... on a steady state basis, 
as determined by the physical design and physical character-
istics of the unit").  But because of petitioners' failure to raise 
the issue in their opening brief, we do not address it on the 
merits.  See United States v. Wilson, 240 F.3d 39, 45 (D.C. 
Cir. 2001).

     2.   New Boston Coke Corporation
          
     New Boston Coke Corporation operates two regulated boil-
ers subject to the same set of regulations.  Its brief states 
that these boilers "are each designed with maximum heat 
capacity of 464 mmBtu/hr.," but claims that in actual opera-
tion the heat input of each is less than half that figure.  One 
boiler is usually kept in reserve while the other fires, and the 
one that fires usually does so at 40% of capacity or less.  
Thus, argues New Boston, the normal input capacity for the 
units is less than 232 mmBtu/hr., below the 250 mmBtu/hr. 
threshold.

     The EPA responds that New Boston has forfeited the claim 
because it never raised the objection before the agency, as 
required by s 307(d)(7)(B) of the Clean Air Act, 42 U.S.C. 
s 7607(d)(7)(B).  New Boston's rebuttal is that it never re-
ceived notice of the proposed rule, arguing that its name 
didn't appear in the appendix to that notice and denying that 
it was included by virtue of the notice's generic terms.  See 
Oct. 1998 Rule, 63 Fed. Reg. 56292, 56,332 (40 C.F.R. 

s 52.34(k) & Table F-1), 56,341 (40 C.F.R. s 97.4), 56,360-91. 
(This same defect in notice is raised by the Non-EGU 
Petitioners on behalf of an unspecified group of sources, but it 
is only for New Boston that petitioners claim that the sup-
posed defect had any adverse effect (from petitioners' per-
spective) on the ultimate regulation, and so we address the 
claim only in this connection.)

     Section 307(d)(7)(B) addresses the possibility of defective 
notice.  It excuses a party's failure to object in the course of 
the rulemaking where it was "impracticable to raise" the 
objection, and the agency's failure to give proper notice would 
plainly create such impracticality.  American Petroleum In-
stitute v. Costle, 665 F.2d 1176, 1190-91 (D.C. Cir. 1981).  
Section 307(d)(7)(B), however, explicitly makes the excuse 
conditional on the party's seeking relief before the agency by 
petition for reconsideration.  See id. at 1191-92.  As there is 
no evidence that any such petition was submitted, we cannot 
reach the merits of petitioners' claim, including even the claim 
of defective notice.

                   IV. FACILITY-SPECIFIC ISSUES

     Two petitioners raise facility-specific objections to the sec-
tion 126 rule.  In each case, we have no occasion to reach the 
merits of petitioners' arguments.  By failing to raise their 
objections to the EPA prior to seeking judicial review, peti-
tioners waived their claims.

A.   Midland Cogeneration Venture

     Petitioner Midland Cogeneration Venture ("MCV") oper-
ates a "combined cycle" cogeneration plant that produces 
electricity and steam in Midland, Michigan.  MCV alleges 
that the EPA was arbitrary and capricious in applying the 
section 126 rule to its facility because MCV is legally and 
operationally incapable of emitting in excess of the rule's 
"NOx Cap."8

__________
     8  MCV also challenges the EPA's treatment of cogeneration 
facilities.  This issue is addressed supra Part III.B.

     This Court has no jurisdiction to consider MCV's claims.  
Under section 307(d) of the Act, "[o]nly an objection to a rule 
or procedure which was raised with reasonable specificity 
during the period for public comment ... may be raised 
during judicial review."  42 U.S.C. s 7607(d)(7)(B).  MCV 
does not dispute that its comments did not address this issue.  
Its defense is that no such comments were possible because, 
as the EPA admits, the agency did not have sufficient data on 
cogenerators to develop an output-based approach to setting 
emission limits for given facilities.  This may be so, but "the 
procedural requirements of the Clean Air Act do not permit 
[MCV] to raise this objection for the first time on appeal."  
API v. Costle, 665 F.2d 1176, 1190 (D.C. Cir. 1981).  Rather, 
the CAA requires a petitioner to first raise its objection to the 
agency though a petition for reconsideration.  See id. at 1191 
("The statute states that before this court may review a 
procedural objection the parties must raise the objection on a 
petition for reconsideration before the EPA when the grounds 
for such objection 'arose after the period for public comment 
(but within the time specified for judicial review).' ");  Appala-
chian Power Co. v. EPA, 135 F.3d 791, 799 n.14 (D.C. Cir. 
1998) (same).  Because MCV never registered its objections 
with the agency, let alone filed a formal petition for reconsid-
eration, we cannot reach the merits of its claim.

B.   Indiana Municipal Power Agency

     Petitioner Indiana Municipal Power Agency ("IMPA") is a 
municipal power agency that operates four combustion tur-
bines that provide supplemental power on days with high 
power usage. IMPA alleges that the "25-ton exemption" in 40 
C.F.R. s 97.4(b) is arbitrary and capricious because it "ig-
nores actual emissions and instead calculates hypothetical 
maximum emissions" in determining whether a unit is eligible 
for the exemption.  By adopting a "worst-case-fuel assump-
tion," the exemption treats IMPA as if its emissions were 
nearly five times greater than the actual emissions rate 
during normal operating conditions.

     Like MCV, IMPA never raised its objection in comments 
before the agency.  Unlike MCV, however, IMPA cannot 

claim that it was caught by surprise by the EPA's final rule.  
While the specific contours of the 25-ton exemption were not 
identified in the EPA's Notice of Proposed Rulemaking 
("NOPR"), the NOPR did propose adopting the exemption 
contained in the NOx SIP regulations at 40 C.F.R. s 96.4(b).  
See Oct. 1998 Rule, 63 Fed. Reg. at 56,313.  The proposal 
used different language than s 97.4, but it similarly bases the 
exemption on a unit's "maximum potential hourly NOx mass 
emissions."  40 C.F.R. s 96.4(b)(1)(ii), (iii).  This satisfies the 
requirement that the final rule be a "logical outgrowth" of the 
proposed rule.  See Fertilizer Inst. v. EPA, 935 F.2d 1303, 
1311 (D.C. Cir. 1991).  Therefore, IMPA had ample opportu-
nity to comment on the proposed rule.  Because it did not, it 
waived its claim under section 307(d).  42 U.S.C. 
s 7607(d)(7)(B).

                          V. PITTSBURGH

     Like many of the affected states, Pennsylvania is both an 
"upwind" state subject to the s 126 regulation and a "down-
wind" state that has petitioned EPA under s 126 to regulate 
"upwind" contributions to Pennyslvania's own nonattainment 
problems.  Acting in its capacity as a downwind state, Penn-
sylvania objects to EPA's refusal to use ozone pollution in the 
Pittsburgh area as a basis for s 126 findings (thus, it argues, 
potentially failing to impose crackdowns on additional sources 
upwind of Pittsburgh).  The problems arise from two circum-
stances:  Pittsburgh appeared at the time of the rulemaking 
to be on the verge of being reclassified as in attainment of the 
1-hour standard, but also on the verge of being subject to the 
more stringent 8-hour rule.

     In its May 1999 Rule, EPA denied the portion of Pennsyl-
vania's s 126 petition that alleged upwind contribution to the 
nonattainment of the 1-hour ozone standard in the Pittsburgh 
area.  Having received preliminary data showing that Pitts-
burgh (and a number of other areas) were no longer in 
violation of that standard, and having taken steps to formally 
revoke its nonattainment determination, see 64 Fed. Reg. at 

28,257/2, EPA thought "it would not be appropriate" to 
consider whether the pertinent upwind areas were "signifi-
cantly contributing" to a nonattainment that was apparently 
non-existent, id. at 28,291/2.  Section 110(a)(2)(D)(i) also re-
quires that SIPs bar emissions that would "interfere with 
maintenance" of ambient standards, and petitioning states 
such as Pennsylvania asked for such a finding as to the 1-
hour standard.  EPA declined this too, explaining that its 
policy was to revoke the 1-hour standard for any area that 
attained it and replace it with the stricter 8-hour standard.  
See id. at 28,291-92.  But in January 2000, after this court's 
decision in American Trucking Ass'ns v. EPA, 175 F.3d 1027, 
reh'g granted in part and denied in part, 195 F.3d 4 (D.C. 
Cir. 1999), rev'd in part sub nom. Whitman v. American 
Trucking Ass'n, 121 S. Ct. 903 (2001), which remanded the 8-
hour standard, EPA moved to reimpose the 1-hour standard 
for all areas where it had been revoked and has yet to re-
introduce the 8-hour standard.  See Jan. 2000 Rule, 65 Fed. 
Reg. at 2678-79.  In its January 2000 rule, in which it 
converted its technical determinations into formal s 126 find-
ings, EPA recognized that the 1-hour standard might once 
again become the sole NOx standard.  But it didn't seize the 
occasion to revisit its rejection of the "interfere with mainte-
nance" portion of Pennsylvania's petition.  See id. at 2678/3.

     Pennsylvania's first objection is that the Pittsburgh attain-
ment data were only preliminary;  to this day they have not 
yielded a formal finding of attainment.  (In fact, data from 
the 1999 ozone season indicate renewed violations.)  More-
over, the statute provides that a region in "moderate" nonat-
tainment that fails to move into attainment will, at the very 
least, be reclassified as "serious" and thus subject to more 
stringent controls, see 42 U.S.C. ss 7511(b)(2), 7511a(c), and 
petitioners claim that such a fate awaits Pittsburgh.  Penn-
sylvania argues that if EPA had pursued the "substantial 
contribution" inquiry, Pennsylvania would get the benefit of 
upwind states' being forced to share some of burden of 
achieving ozone attainment in Pittsburgh.

     EPA responds that Pennsylvania suffered no prejudice and 
thus lacks the "injury in fact" necessary to claim Article III 
standing.  Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 
(1992).  It claims that had it granted Pennsylvania's petition 
with regard to Pittsburgh, EPA's modeling methods dictated 
that it would have found linkages with regard to North 
Carolina, Ohio, and West Virginia, all states on which EPA 
has imposed s 126 controls anyway, as a result of its findings 
as to the Philadelphia area.  But Pennsylvania observes that 
its s 126 petition had sought findings as to the contribution of 
a number of other upwind states, several of which were not 
ultimately subjected to s 126 findings.  EPA cannot, it ar-
gues, deflect judicial review of its refusal to inquire into 
effects on Pittsburgh simply by filing a brief asserting that, if 
it had done so, it would have found no more than it did when 
it focused on Philadelphia.  If EPA's ground for refusing to 
crunch the data for Pittsburgh is illegal, Pennsylvania has 
been wrongly denied potential benefits.  Thus Pennsylvania 
asserts a real injury that the court could redress.  See Lujan,
504 U.S. at 560-61.

     While Pennsylvania wins on the standing argument, it loses 
on the merits.  EPA observes that s 110(a)(2)(D)(i) speaks 
simply of emissions that "contribute significantly to nonattain-
ment ... in any other State," with no language suggesting, as 
the Act does in a number of places, that formal designation or 
reclassification is critical.  See 42 U.S.C. s 7407(d)(1)(A) (al-
lowing EPA to require state governors to supply EPA with a 
list designating areas as "attainment" or "nonattainment");  
s 7502 (framework for setting deadlines and plans for areas 
deemed "nonattainment");  s 7511(b)(2) (procedures for re-
classifying areas that fail to meet attainment deadlines).  It 
seems reasonable for EPA to refrain from investigating 
whether upwind emissions "significantly contribute" to nonat-
tainment that, according to evidently undisputed data, does 
not exist, rather than to march forward on the basis of a 
formal classification that it believed to be outdated and was in 
the process of revoking.  (In reaching this conclusion we 
express no opinion on the issue that intervenors Appalachian 
Power et al. tell us is raised in D.C. Cir. No. 00-1223, namely, 

whether EPA may make significant contribution determina-
tions for areas that have never been formally classified as 
nonattainment.).

     Developments in the Pittsburgh area after the close of the 
present rulemaking record of course cannot be a basis for 
faulting EPA's decision on that record.  Nor did its January 
2000 decision, converting its May 1999 technical determina-
tions into formal findings (without, as originally contemplated, 
conditioning such findings on the failure of the SIP process), 
require a reopening.  Pennsylvania may, of course, use later 
developments as the basis for another s 126 petition.

     Pennsylvania further argues that in light of EPA's rein-
statement of the 1-hour ambient standard, it should have 
addressed the "interfere with maintenance" portion of Penn-
sylvania's petition.  Here too EPA was reasonable.  Because 
the EPA policy in May 1999 was to supplant the 1-hour 
standard with the 8-hour standard as soon as an area met the 
1-hour standard, it made sense to decline all petitions seeking 
findings of interference with maintaining the 1-hour stan-
dard;  there was then every reason to suppose that such 
findings would almost immediately become obsolete.  Once 
again, Pennsylvania can respond to later developments by 
submitting another s 126 petition.

                          VI. CONCLUSION

     In summary, we remand the rules to the EPA to allow the 
agency to (1) properly justify either the current or a new set 
of EGU utilization growth factors to be used in estimating 
utilization in 2007, and (2) either alter or properly justify its 
categorization of cogenerators that sell electricity to the 
electric grid as EGUs.  With respect to all other issues, 
including those not discussed expressly herein, the petitions 
are denied.

                                                                 So ordered.