Court Opinion

ID: 807072
Source: CourtListenerOpinion
Date Created: 2012-08-21 14:23:33+00
Date Added: 2024-06-11T12:17:36.997672
License: Public Domain

United States Court of Appeals
         FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 13, 2012             Decided August 21, 2012

                        No. 11-1302

           EME HOMER CITY GENERATION, L.P.,
                    PETITIONER

                            v.

      ENVIRONMENTAL PROTECTION AGENCY, ET AL.,
                  RESPONDENTS

       SAN MIGUEL ELECTRIC COOPERATIVE, ET AL.,
                    INTERVENORS

  Consolidated with 11-1315, 11-1323, 11-1329, 11-1338,
  11-1340, 11-1350, 11-1357, 11-1358, 11-1359, 11-1360,
  11-1361, 11-1362, 11-1363, 11-1364, 11-1365, 11-1366,
  11-1367, 11-1368, 11-1369, 11-1371, 11-1372, 11-1373,
  11-1374, 11-1375, 11-1376, 11-1377, 11-1378, 11-1379,
  11-1380, 11-1381, 11-1382, 11-1383, 11-1384, 11-1385,
  11-1386, 11-1387, 11-1388, 11-1389, 11-1390, 11-1391,
           11-1392, 11-1393, 11-1394, 11-1395

          On Petitions for Review of a Final Rule
          of the Environmental Protection Agency
                              2
     Bill Davis, Assistant Solicitor General, Office of the
Attorney General for the State of Texas, argued the cause for
Governmental Petitioners. With him on the briefs were Greg
Abbott, Attorney General, Jonathan F. Mitchell, Solicitor
General, Jon Niermann, Chief, Environmental Protection
Division, Luther J. Strange, III, Attorney General, Office of
the Attorney General for the State of Alabama, Leslie Sue
Ritts, Pamela Jo Bondi, Attorney General, Office of the
Attorney General for the State of Florida, Jonathan A.
Glogau, Chief, Complex Litigation, Samuel S. Olens,
Attorney General, Office of the Attorney General for the State
of Georgia, John E. Hennelly and Diane L. DeShazo, Senior
Assistant Attorneys General, Thomas M. Fisher, Solicitor
General, Office of the Attorney General for the State of
Indiana, Valerie Marie Tachtiris, Deputy Assistant Attorney
General, Jeffrey A. Chanay, Deputy Attorney General, Office
of the Attorney General for the State of Kansas, Henry V.
Nickel, George P. Sibley, III, James D. “Buddy” Caldwell,
Attorney General, Office of the Attorney General for the State
of Louisiana, Megan K. Terrell, Chief, Environmental
Section, Herman Robinson, Jackie Marie Scott Marve, Deidra
L. Johnson, Kathy M. Wright, Donald James Trahan, David
Richard Taggart, Jeffrey Winston Price, John Joseph Bursch,
Solicitor General, Office of the Attorney General for the State
of Michigan, Neil David Gordon, Assistant Attorney General,
Sean Peter Manning, Chief, Environmental, Natural
Resources, and Agriculture Division, Harold Edward
Pizzetta, III, Special Attorney, Office of the Attorney General
for the State of Mississippi, Jon Cumberland Bruning,
Attorney General, Office of the Attorney General for the State
of Nebraska, Katherine J. Spohn, Special Counsel, Dale T.
Vitale, Gregg H. Bachmann, and Chris Kim, Assistant
Attorneys General, Office of the Attorney General for the
State of Ohio, Thomas Bates, Chief, Public Protection Unit,
Office of the Attorney General for the State of Oklahoma,
                             3
Patrick Wyrick, Solicitor General, P. Clayton Eubanks,
Assistant Attorney General, Alan Wilson, Attorney General,
Office of the Attorney General for the State of South
Carolina, James Emory Smith, Jr., Assistant Deputy Attorney
General, Kenneth T. Cuccinelli, II, Attorney General, Office
of the Attorney General for the Commonwealth of Virginia,
E. Duncan Getchell, Jr., Solicitor General, and Thomas James
Dawson, Assistant Attorney General, Wisconsin Department
of Justice.

     Peter D. Keisler argued the cause for Non-Governmental
Petitioners. With him on the briefs were Roger R. Martella,
Jr., C. Frederick Beckner III, Timothy K. Webster, F. William
Brownell, Gregory G. Garre, Claudia M. O’Brien, Lori
Alvino McGill, Jessica E. Phillips, Katherine I. Twomey,
Stacey VanBelleghem, Janet J. Henry, Steven G. McKinney,
Terese T. Wyly, William M. Bumpers, Joshua B. Frank,
Megan H. Berge, P. Stephen Gidiere, III, Richard Alonso,
Jeffrey R. Holmstead, Gary C. Rikard, Robert J. Alessi, Chuck
D’Wayne Barlow, Peter P. Garam, Kyra Marie Fleming,
Richard G. Stoll, Brian H. Potts, Julia L. German, Robert A.
Manning, Joseph A. Brown, Mohammad O. Jazil, Eric J.
Murdock, Andrea Bear Field, Norman W. Fichthorn, E.
Carter Chandler Clements, James S. Alves, Gary V. Perko,
William L. Wehrum, Jr., David M. Flannery, Gale Lea
Rubrecht, Maureen N. Harbourt, Tokesha M. Collins, Bart E.
Cassidy, Katherine L. Vaccaro, Diana A. Silva, William F.
Lane, Jordan Hemaidan, Todd Palmer, Douglas E. Cloud,
David Meezan, Christopher Max Zygmont, Matthew J.
Splitek, Gary M. Broadbent, Michael O. McKown, Terry
Russell Yellig, Dennis Lane, Karl R. Moor, Margaret
Claiborne Campbell, Byron W. Kirkpatrick, Hahnah
Williams, Peter S. Glaser, Tameka M. Collier, Grant F.
Crandall, Arthur Traynor, III, Eugene M. Trisko, Jeffrey L.
                              4
Landsman, Vincent M. Mele, Elizabeth P. Papez, John M.
Holloway III, Elizabeth C. Williamson, and Ann M. Seha.

    Michael J. Nasi, Shannon L. Goessling, and Douglas A.
Henderson were on the brief for intervenor San Miguel
Electric Cooperative and amici Industrial Energy Consumers
of America, et al., in support of petitioners. Robert M. Cohan
entered an appearance.

    Norman L. Rave, Jr., David S. Gualtieri, and Jon M.
Lipshultz, Attorneys, U.S. Department of Justice, argued the
causes for respondent. With them on the briefs were Jessica
O’Donnell, Sonja Rodman, and Stephanie Hogan, Attorneys.

     Simon Heller, Assistant Solicitor General, Office of the
Attorney General for the State of New York, argued the cause
for State/City Respondent-Intervenors. With him on the brief
were Eric T. Schneiderman, Attorney General, Barbara D.
Underwood, Solicitor General, Andrew G. Frank and Michael
J. Myers, Assistant Attorneys General, Benna R. Solomon,
James B. Dougherty, Joseph R. Biden, III, Attorney General,
Office of the Attorney General for the State of Delaware,
Valerie M. Satterfield, Deputy Attorney General, Douglas F.
Gansler, Attorney General, Office of the Attorney General for
the State of Maryland, Mary E. Raivel, Assistant Attorney
General, Peter F. Kilmartin, Attorney General, Office of the
Attorney General for the State of Rhode Island, Gregory S.
Schultz, Special Assistant Attorney General, Martha Coakley,
Attorney General, Office of the Attorney General for the
Commonwealth of Massachusetts, Frederick D. Augenstern,
Assistant Attorney General, Scott J. Schwarz, William H.
Sorrell, Attorney General, Office of the Attorney General for
the State of Vermont, Thea J. Schwartz, Assistant Attorney
General, Lisa Madigan, Attorney General, Office of the
Attorney General for the State of Illinois, Gerald T. Karr,
                               5
Assistant Attorney General, Irvin B. Nathan, Attorney
General, Office of the Attorney General for the District of
Columbia, Amy E. McDonnell, Deputy General Counsel,
George Jepsen, Attorney General, Office of the Attorney
General for the State of Connecticut, Kimberly P. Massicotte,
Scott N. Koschwitz, and Matthew I. Levine, Assistant
Attorneys General, William R. Phelan, Jr., Roy Cooper,
Attorney General, Office of the Attorney General for the State
of North Carolina, James C. Gulick, Senior Deputy Attorney
General, Marc Bernstein and J. Allen Jernigan, Special
Deputies Attorney General, and Christopher King. William J.
Moore, III entered an appearance.

    Brendan K. Collins argued the cause for Industry
Respondent-Intervenors. With him on the brief were Robert
B. McKinstry, Jr. and James W. Rubin.

     Sean H. Donahue argued the cause for Public Health
Respondent-Intervenors. With him on the brief were David T.
Lifland, Vickie L. Patton, George Hays, Josh Stebbins, John
Walke, and David Marshall. Ann Brewster Weeks entered an
appearance.

    Before: ROGERS, GRIFFITH, and KAVANAUGH, Circuit
Judges.

   Opinion for the Court filed by Circuit Judge
KAVANAUGH, with whom Circuit Judge GRIFFITH joins.

    Dissenting opinion filed by Circuit Judge ROGERS.

     KAVANAUGH, Circuit Judge: Some emissions of air
pollutants affect air quality in the States where the pollutants
are emitted. Some emissions of air pollutants travel across
State boundaries and affect air quality in downwind States.
                              6
To deal with that complex regulatory challenge, Congress did
not authorize EPA to simply adopt limits on emissions as
EPA deemed reasonable.        Rather, Congress set up a
federalism-based system of air pollution control. Under this
cooperative federalism approach, both the Federal
Government and the States play significant roles. The Federal
Government sets air quality standards for pollutants. The
States have the primary responsibility for determining how to
meet those standards and regulating sources within their
borders.

     In addition, and of primary relevance here, upwind States
must prevent sources within their borders from emitting
federally determined “amounts” of pollution that travel across
State lines and “contribute significantly” to a downwind
State’s “nonattainment” of federal air quality standards. That
requirement is sometimes called the “good neighbor”
provision.

     In August 2011, to implement the statutory good
neighbor requirement, EPA promulgated the rule at issue in
this case, the Transport Rule, also known as the Cross-State
Air Pollution Rule. The Transport Rule defines emissions
reduction responsibilities for 28 upwind States based on those
States’ contributions to downwind States’ air quality
problems. The Rule limits emissions from upwind States’
coal- and natural gas-fired power plants, among other sources.
Those power plants generate the majority of electricity used
in the United States, but they also emit pollutants that affect
air quality. The Transport Rule targets two of those
pollutants, sulfur dioxide (SO2) and nitrogen oxides (NOx).

    Various States, local governments, industry groups, and
labor organizations have petitioned for review of the
Transport Rule. Although the facts here are complicated, the
                              7
legal principles that govern this case are straightforward:
Absent a claim of constitutional authority (and there is none
here), executive agencies may exercise only the authority
conferred by statute, and agencies may not transgress
statutory limits on that authority.

     Here, EPA’s Transport Rule exceeds the agency’s
statutory authority in two independent respects. First, the
statutory text grants EPA authority to require upwind States to
reduce only their own significant contributions to a downwind
State’s nonattainment. But under the Transport Rule, upwind
States may be required to reduce emissions by more than their
own significant contributions to a downwind State’s
nonattainment. EPA has used the good neighbor provision to
impose massive emissions reduction requirements on upwind
States without regard to the limits imposed by the statutory
text. Whatever its merits as a policy matter, EPA’s Transport
Rule violates the statute. Second, the Clean Air Act affords
States the initial opportunity to implement reductions required
by EPA under the good neighbor provision. But here, when
EPA quantified States’ good neighbor obligations, it did not
allow the States the initial opportunity to implement the
required reductions with respect to sources within their
borders. Instead, EPA quantified States’ good neighbor
obligations and simultaneously set forth EPA-designed
Federal Implementation Plans, or FIPs, to implement those
obligations at the State level. By doing so, EPA departed
from its consistent prior approach to implementing the good
neighbor provision and violated the Act.

    For each of those two independent reasons, EPA’s
Transport Rule violates federal law. Therefore, the Rule must
be vacated.
                                 8
      In so ruling, we note that this Court has affirmed
numerous EPA clean air decisions in recent years when those
agency decisions met relevant statutory requirements and
complied with statutory constraints. See, e.g., National
Environmental Development Association’s Clean Air Project
v. EPA, No. 10-1252 (D.C. Cir. July 20, 2012); API v. EPA,
No. 10-1079 (D.C. Cir. July 17, 2012); ATK Launch Systems,
Inc. v. EPA, 669 F.3d 330 (D.C. Cir. 2012); NRDC v. EPA,
661 F.3d 662 (D.C. Cir. 2011); Medical Waste Institute &
Energy Recovery Council v. EPA, 645 F.3d 420 (D.C. Cir.
2011); American Trucking Ass’ns v. EPA, 600 F.3d 624 (D.C.
Cir. 2010). In this case, however, we conclude that EPA has
transgressed statutory boundaries. Congress could well
decide to alter the statute to permit or require EPA’s preferred
approach to the good neighbor issue. Unless and until
Congress does so, we must apply and enforce the statute as
it’s now written. Our decision today should not be interpreted
as a comment on the wisdom or policy merits of EPA’s
Transport Rule. It is not our job to set environmental policy.
Our limited but important role is to independently ensure that
the agency stays within the boundaries Congress has set.
EPA did not do so here. 1

    1
        The dissent argues that petitioners’ challenge to EPA’s
approach to the significant contribution issue is not properly before
us because that issue was not sufficiently raised before the agency
in the rulemaking proceeding. We fundamentally disagree with the
dissent’s reading of the record on that point.
     The dissent also claims that petitioners’ challenge to EPA’s
issuance of the FIPs is not properly before us because the affected
States should have raised such a challenge earlier in the process.
We again disagree. The dissent’s analysis on the FIPs issue
conflates (i) EPA’s rejection of certain States’ SIPs and (ii) EPA’s
decision in the Transport Rule to set States’ “good neighbor”
obligations and emissions budgets and simultaneously issue FIPs.
                                 9
                                 I

                                 A

     Under the Clean Air Act, the Federal Government sets air
quality standards, but States retain the primary responsibility
(if the States want it) for choosing how to attain those
standards within their borders. See Train v. NRDC, 421 U.S.
60, 63-67 (1975); Virginia v. EPA, 108 F.3d 1397, 1406-10
(D.C. Cir. 1997). The Act thus leaves it to the individual
States to determine, in the first instance, the particular
restrictions that will be imposed on particular emitters within
their borders. (If a State refuses to participate, the Federal
Government regulates the sources directly.)

     To spell this out in more detail: The Clean Air Act
charges EPA with setting National Ambient Air Quality
Standards, or NAAQS, which prescribe the maximum
permissible levels of common pollutants in the ambient air.
See 42 U.S.C. § 7409(a)-(b). EPA must choose levels which,
“allowing an adequate margin of safety, are requisite to
protect the public health.” 42 U.S.C. § 7409(b)(1).

     After a lengthy process, the details of which are not
relevant here, EPA designates “nonattainment” areas – that is,
areas within each State where the level of the pollutant
exceeds the NAAQS. See 42 U.S.C. § 7407(d).

The States here are challenging only the latter issue, and they have
done so in a timely fashion. Indeed, they could not have done so
until EPA, in the Transport Rule, simultaneously set the States’
individual emissions budgets and issued FIPs.
      We will explain both points more below. Suffice it here to say
that, much as we might like to do so, we respectfully do not believe
we can avoid the merits of this complex case, as the dissent urges.
                                10
     Once EPA sets a NAAQS and designates nonattainment
areas within the States, the lead role shifts to the States. The
States implement the NAAQS within their borders through
State Implementation Plans, or SIPs. (As the experienced
reader knows, there is no shortage of acronyms in EPA-land.)
In their SIPs, States choose which individual sources within
the State must reduce emissions, and by how much. For
example, a State may decide to impose different emissions
limits on individual coal-burning power plants, natural gas-
burning power plants, and other sources of air pollution, such
as factories, refineries, incinerators, and agricultural activities.

    States must submit SIPs to EPA within three years of
each new or revised NAAQS. See 42 U.S.C. § 7410(a)(1).
Section 110(a)(2) of the Act lists the required elements of a
SIP submission.

     Section 110(a)(2)(D)(i)(I), the “good neighbor” provision
at issue in this case, is one of the required elements of a SIP.
The good neighbor provision requires that SIPs:

    (D) contain adequate provisions –
        (i) prohibiting, consistent with the provisions of this
        subchapter, 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 interfere with maintenance by, any other State
             with respect to any such national primary or
             secondary ambient air quality standard . . . .

42 U.S.C. § 7410(a)(2)(D).

    The good neighbor provision recognizes that emissions
“from ‘upwind’ regions may pollute ‘downwind’ regions.”
Appalachian Power Co. v. EPA, 249 F.3d 1032, 1037 (D.C.
                               11
Cir. 2001). To put it colloquially, the good neighbor
provision requires upwind States to bear responsibility for
their fair share of the mess in downwind States. By placing
the good neighbor requirement in Section 110(a)(2), Congress
established the upwind State’s SIP as the vehicle for
implementing the upwind State’s good neighbor obligation.
Of course, an upwind State will not know what it needs to do
to meet its good neighbor obligation until it learns the level of
air pollution in downwind States, and further learns how
much it is contributing to the problems in the downwind
States. EPA plays the critical role in gathering information
about air quality in the downwind States, calculating each
upwind State’s good neighbor obligation, and transmitting
that information to the upwind State. With that information,
the upwind State can then determine how to meet its good
neighbor obligation in a new SIP or SIP revision. See 42
U.S.C. § 7410(k)(5).

     After EPA quantifies a State’s good neighbor obligation,
if a State does not timely submit an adequate SIP (or an
adequate SIP revision) to take account of the good neighbor
obligation as defined by EPA, responsibility shifts back to the
Federal Government. Within two years of disapproving a
State’s SIP submission or SIP revision, or determining that a
State has failed to submit a SIP, EPA must promulgate a
Federal Implementation Plan to implement the NAAQS
within that State. See 42 U.S.C. § 7410(c)(1).

                               B

    The good neighbor provision – and EPA’s attempts to
implement it – are familiar to this Court from past cases.

     In Michigan v. EPA, 213 F.3d 663 (D.C. Cir. 2000), we
considered a challenge to EPA’s 1998 NOx Rule, commonly
referred to as the NOx SIP Call, which quantified the good
                                 12
neighbor obligations of 22 States with respect to the 1997
ozone NAAQS. See 63 Fed. Reg. 57,356, 57,358 (Oct. 27,
1998).

      The 1998 NOx Rule did not define “amounts which will
. . . contribute significantly to nonattainment” solely on the
basis of downwind air quality impact, as one might have
expected given the statutory text.          Rather, EPA also
considered how much NOx could be eliminated by sources in
each State if those sources installed “highly cost-effective”
emissions controls. See Michigan, 213 F.3d at 675. On
review, some States argued that the statutory text required
EPA to order reductions based on air quality impact alone, not
cost of reduction. But the Michigan Court found no “clear
congressional intent to preclude consideration of cost.” Id. at
677 (citation omitted). The Court thus held that EPA may
“consider differences in cutback costs, so that, after reduction
of all that could be cost-effectively eliminated, any remaining
‘contribution’ would not be considered ‘significant.’” Id. at
677; see also id. at 677-79. In other words, EPA could use
cost considerations to lower an upwind State’s obligations
under the good neighbor provision. 2

    In North Carolina v. EPA, 531 F.3d 896 (D.C. Cir. 2008),
we considered a challenge to EPA’s 2005 Clean Air Interstate
Rule, or CAIR. See 70 Fed. Reg. 25,162 (May 12, 2005).
CAIR built on the 1998 NOx Rule and defined 28 States’

    2
       Judge Sentelle dissented. In his view, the statutory text
unambiguously “set forth one criterion: the emission of an amount
of pollutant sufficient to contribute significantly to downwind
nonattainment.” Id. at 696 (Sentelle, J., dissenting); cf. Whitman v.
American Trucking Ass’ns, 531 U.S. 457, 467 (2001) (“We have
therefore refused to find implicit in ambiguous sections of the CAA
an authorization to consider costs that has elsewhere, and so often,
been expressly granted.”).
                              13
good neighbor obligations with respect to the 1997 ozone
NAAQS and the 1997 NAAQS for annual levels of fine
particulate matter, or annual PM2.5. See id.

     CAIR employed two different formulas – both of which
incorporated cost considerations – to quantify each State’s
obligations for the pollutants covered by CAIR, SO2 and NOx.
The North Carolina decision held that the formulas went
beyond Michigan’s authorization to use cost and that the
formulas therefore exceeded EPA’s statutory authority. EPA
may use cost to “require termination of only a subset of each
state’s contribution,” the Court explained, but “EPA can’t just
pick a cost for a region, and deem ‘significant’ any emissions
that sources can eliminate more cheaply.” 531 F.3d at 918
(citation, emphasis, and some internal quotation marks
omitted). The Court also held that “section 110(a)(2)(D)(i)(I)
gives EPA no authority to force an upwind state to share the
burden of reducing other upwind states’ emissions. Each state
must eliminate its own significant contribution to downwind
pollution.” Id. at 921. The Court emphasized that EPA “may
not require some states to exceed the mark.” Id.

     North Carolina thus articulated an important caveat to
Michigan’s approval of cost considerations. The statute
permits EPA to use cost to lower an upwind State’s obligation
under the good neighbor provision. See Michigan, 213 F.3d
at 675, 677. But EPA may not use cost to increase an upwind
State’s obligation under the good neighbor provision – that is,
to force an upwind State to “exceed the mark.” North
Carolina, 531 F.3d at 921. Put simply, the statute requires
every upwind State to clean up at most its own share of the air
pollution in a downwind State – not other States’ shares.
                                14
                                 C

    The North Carolina Court remanded CAIR without
vacatur, leaving CAIR in place “until it is replaced by a rule
consistent with our opinion.” North Carolina v. EPA, 550
F.3d 1176, 1178 (D.C. Cir. 2008) (on rehearing).

     The Transport Rule is EPA’s attempt to develop a rule
that is consistent with our opinion in North Carolina. EPA
proposed the Transport Rule in August 2010 and finalized it
in August 2011. See 75 Fed. Reg. 45,210 (Aug. 2, 2010)
(proposed); 76 Fed. Reg. 48,208 (Aug. 8, 2011) (final). The
Transport Rule addresses States’ good neighbor obligations
with respect to three NAAQS: the 1997 annual PM2.5
NAAQS, the 1997 ozone NAAQS, and the 2006 24-hour
PM2.5 NAAQS. See id. at 48,209. 3

     The Transport Rule contains two basic components.
First, the Rule defines each State’s emissions reduction
obligations under the good neighbor provision. Second, the
Rule prescribes Federal Implementation Plans to implement
those obligations at the State level. We describe each
component here in some detail.

    EPA began by quantifying the “amounts” of pollution
that each State must prohibit under the good neighbor
provision – that is, “amounts which will . . . contribute
significantly to nonattainment” or “interfere with
maintenance” of the three NAAQS in other States. 42 U.S.C.
§ 7410(a)(2)(D)(i). 4

    3
       The 2006 24-hour PM2.5 NAAQS post-dated and therefore
was not covered by CAIR.
     4
       EPA bases different aspects of the Transport Rule on distinct
sources of statutory authority.       EPA relied on its general
                               15
    EPA used a two-stage approach to quantify each State’s
obligations under the good neighbor provision.

     In the first stage, EPA determined whether a State emits
“amounts which will . . . contribute significantly” to a
downwind State’s nonattainment of any of the three NAAQS.
EPA identified the significantly contributing upwind States
based on “linkages” between each upwind State and specific
downwind “nonattainment” or “maintenance” areas – that is,
downwind areas that EPA modeling predicted would not
attain, or absent regulation would not maintain, the NAAQS.
Transport Rule, 76 Fed. Reg. at 48,236. An upwind State was
linked to a downwind nonattainment or maintenance area for
a given NAAQS if EPA modeling showed that the upwind
State’s contribution to that downwind area exceeded a
numerical “air quality threshold” – that is, a specific amount
of air pollution sent from the upwind State into the downwind
State’s air. Id. EPA set the air quality threshold for each
pollutant at an amount equal to 1% of the relevant NAAQS.
The resulting thresholds were (i) 0.8 ppb for ozone, (ii) 0.15
µg/m3 for annual PM2.5, and (iii) 0.35 µg/m3 for 24-hour
PM2.5. Id. If modeling showed that an upwind State would
send more than those amounts into a downwind State’s air, as
measured at a receptor site in a downwind State, the upwind
State was deemed a “significant contributor” to the downwind
State’s air pollution problem.

rulemaking authority under Section 301(a)(1) of the Clean Air Act,
42 U.S.C. § 7601(a)(1), to construe Section 110(a)(2)(D)(i)(I) and
to quantify the States’ obligations to reduce emissions. See
Transport Rule, 76 Fed. Reg. at 48,217; see also Michigan, 213
F.3d at 687. EPA relied on its authority under Section 110(c)(1),
42 U.S.C. § 7410(c)(1), to issue the Transport Rule FIPs. See
Transport Rule, 76 Fed. Reg. at 48,217.
                                16
     Those numerical air quality thresholds determined which
upwind States had to reduce their SO2 and NOx emissions and
which upwind States did not – that is, the thresholds
determined which upwind States’ emissions “contribute
significantly” to downwind States’ air pollution problems.
Upwind States “whose contributions are below these
thresholds,” EPA found, “do not significantly contribute to
nonattainment or interfere with maintenance of the relevant
NAAQS” in downwind States. Id. Because their emissions
did not “contribute significantly,” those States were not
required to cut their emissions for purposes of the good
neighbor provision.

     As one would expect, this “significant contribution”
threshold produced some close cases at the margins. For
example, Maryland and Texas were covered for annual PM2.5
based on downwind contributions of 0.15 and 0.18 µg/m3,
respectively – just barely meeting the 0.15 µg/m3 threshold.
See id. at 48,240. And Texas exceeded the annual PM2.5
threshold at just a single downwind receptor, in Madison,
Illinois. See id. at 48,241. 5 By contrast, Minnesota and
Virginia, with maximum downwind contributions of 0.14 and
0.12 µg/m3, respectively, just missed being covered for annual
PM2.5. See id. at 48,240.

     For annual PM2.5, a total of 18 States 6 exceeded the
threshold and were therefore deemed “significant

    5
      Texas also narrowly exceeded the 0.35 µg/m3 threshold for
24-hour PM2.5; its maximum downwind contribution was 0.37
µg/m3. See Transport Rule, 76 Fed. Reg. at 48,242.
    6
      Those States were: Alabama, Georgia, Illinois, Indiana, Iowa,
Kentucky, Maryland, Michigan, Missouri, New York, North
Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas,
West Virginia, and Wisconsin. See Transport Rule, 76 Fed. Reg. at
48,240.
                                 17
contributors.” For 24-hour PM2.5, a total of 22 States 7
exceeded the threshold. See id. at 48,241-42. Those States
were thus included in the Rule’s reduction programs for SO2
and annual NOx, pollutants that contribute to PM2.5 formation.
See id. at 48,210. For ozone, a total of 26 States 8 exceeded
the threshold. See id. at 48,245. Those States were thus
included in the Rule’s reduction program for ozone-season
NOx, which contributes to ozone formation. See id. at 48,210;
see also 76 Fed. Reg. 80,760 (Dec. 27, 2011) (finalizing six
States’ inclusion in the Transport Rule for ozone-season
NOx).

     At the second stage, however, EPA abandoned the air
quality thresholds – that is, the stage one standard for whether
an upwind State’s emissions “contribute significantly” to a
downwind State’s nonattainment of air quality standards.
Instead, at stage two, EPA used a cost-based standard: EPA
determined how much pollution each upwind State’s power
plants could eliminate if the upwind State’s plants applied all
controls available at or below a given cost per ton of pollution
reduced. The cost-per-ton levels applied without regard to the
size of each State’s “significant contribution” at stage one. In
other words, how much pollution each upwind State was

    7
        Those States were: Alabama, Georgia, Illinois, Indiana, Iowa,
Kansas, Kentucky, Maryland, Michigan, Minnesota, Missouri,
Nebraska, New Jersey, New York, North Carolina, Ohio,
Pennsylvania, Tennessee, Texas, Virginia, West Virginia, and
Wisconsin. See Transport Rule, 76 Fed. Reg. at 48,242.
      8
        Those States were: Alabama, Arkansas, Florida, Georgia,
Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland,
Michigan, Mississippi, Missouri, New Jersey, New York, North
Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina,
Tennessee, Texas, Virginia, West Virginia, and Wisconsin. See
Transport Rule, 76 Fed. Reg. at 48,245.
                                 18
required to eliminate was not tied to how much the upwind
State contributed to downwind States’ air pollution problems.

     EPA predicted how far emissions would fall if power
plants throughout the State were required to install controls
available at or below various cost levels. The cost levels, or
thresholds, were expressed in terms of cost per ton of
pollutant reduced, with the idea being that plants would install
all controls that cost less than the designated threshold. 9

     EPA then added up the emissions from all of the covered
States to yield total regionwide emissions figures for each
pollutant, at each cost threshold. See Transport Rule, 76 Fed.
Reg. at 48,250-53. The higher the cost level selected, the
greater the reduction of emissions, but also the greater the
costs and burdens imposed on sources within the States.

     Next, EPA used computer modeling to estimate the
downwind air quality effects of imposing different cost-per-
ton levels on the upwind States. Id. at 48,253. EPA modeled
the air quality effects of applying a $500/ton cost level for
NOx and ascending cost-per-ton levels for SO2. See id. at
    9
         For example, a technology that cost $1,000 to install and
eliminated 2 tons of NOx from a power plant’s emissions would
cost $500/ton. In effect, EPA predicted how far emissions would
fall if plants installed all of the controls from $1/ton to $500/ton.
      EPA used a computer model to predict the reductions that
would occur in each State at various cost thresholds. See EPA,
Documentation for EPA Base Case v.4.10, at 2-1 (Aug. 2010), J.A.
2339. For example, for annual NOx, EPA modeled cost levels of
$500, $1,000, and $2,500/ton. See Transport Rule, 76 Fed. Reg. at
48,249-50. EPA went as high as $5,000/ton for ozone-season NOx.
See id. at 48,250. For SO2, EPA modeled emissions at cost levels
of $500, $1,600, $2,300, $2,800, $3,300, and $10,000 per ton. See
id. at 48,251. At a later stage in the process, EPA used those
predictions to decide how much each State would have to cut.
                               19
48,255; EPA, Analysis to Quantify Significant Contribution
Technical Support Document 15 & n.9 (July 2010), J.A. 2177.

     Armed with those two sets of modeling data, EPA
proceeded to choose which regionwide cost-per-ton threshold
to apply for each of the three pollutants – SO2, annual NOx,
and ozone-season NOx. EPA consulted both its cost-of-
reduction modeling and its air quality modeling and identified
what it termed “significant cost thresholds” – that is, cost-per-
ton levels at which steep drops in upwind emissions or jumps
in downwind air quality would occur. Transport Rule, 76
Fed. Reg. at 48,255; see also id. at 48,255-56. EPA then
weighed both air quality and cost concerns in a “multi-factor
assessment” to choose the final cost-per-ton levels. Id. at
48,256. The “multi-factor assessment” did not employ any
hard formula to weigh those factors.

    In the end, EPA settled on a single $500/ton threshold for
ozone-season and annual NOx. See id. at 48,256-57.

     For SO2, instead of using a single cost threshold for all of
the SO2 States, EPA divided the upwind States into two
groups for the 2014 program year (that is, the emissions cuts
required in 2014). EPA modeling showed that applying a
$500/ton cost threshold resolved the attainment problems in
the downwind areas to which seven upwind States were
linked. See id. at 48,257. Those seven upwind States became
the Group 2 States, which were subject to a $500/ton
threshold for SO2. See id. But $500/ton did not resolve
attainment problems in the downwind areas to which 16 other
upwind States were linked. Those 16 upwind States became
the Group 1 States, which were subject to a stricter $2,300/ton
cost threshold for SO2. See id. at 48,259.

    EPA determined the amount of SO2, annual NOx, or
ozone-season NOx that each covered State could eliminate if
                                20
its power plants installed all cost-effective emissions controls
– that is, those controls available at or below the applicable
cost-per-ton thresholds. See id. at 48,260. EPA then used
those figures to generate 2012, 2013, and 2014 emissions
“budgets” for each upwind State, for each pollutant for which
that State was covered. See id. at 48,259-63. The budget is
the maximum amount of each pollutant that a State’s power
plants may collectively emit in a given year, beginning in
2012. 10

     EPA did not stop there and leave it to the States to
implement the required reductions through new or revised
State Implementation Plans, or SIPs.      Cf. 42 U.S.C.
§ 7410(k)(5). Instead, EPA simultaneously promulgated
Federal Implementation Plans, or FIPs.

    The FIPs require power plants in covered upwind States
to make the SO2 and NOx reductions needed to comply with
each upwind State’s emissions budget, as defined by EPA.
The FIPs also create an interstate trading program to allow
covered sources to comply as cost-effectively as possible. See
Transport Rule, 76 Fed. Reg. at 48,271.

     The FIPs convert each State’s emissions budget into
“allowances,” which are allocated among power plants in the
State. Under the FIPs, it is EPA, and not the States, that
decides how to distribute the allowances among the power
plants in each State. See id. at 48,284-88. 11

    10
        States may augment their budgets somewhat by buying out-
of-state allowances. See Transport Rule, 76 Fed. Reg. at 48,263-68.
     11
        Each power plant is “required to hold one SO2 or one NOx
allowance, respectively, for every ton of SO2 or NOx emitted”
during the relevant year. Transport Rule, 76 Fed. Reg. at 48,271;
see also id. at 48,296-97 (describing penalties for noncompliance).
                                21
     The Rule retains a limited, secondary role for SIPs.
States have the option of submitting SIPs that modify some
elements of the FIPs. See id. at 48,327-28. The first program
year for which States can submit such SIPs is 2014. See id.
States may also seek to replace the FIPs wholesale, as long as
the SIP prohibits the amounts of NOx and SO2 emissions that
EPA specified. See id. at 48,328. EPA says it would “review
such a SIP on a case-by-case basis.” Id. But, importantly, the
States do not have a post-Rule opportunity to avoid FIPs by
submitting a SIP or SIP revision: The FIPs “remain fully in
place in each covered state until a state’s SIP is submitted and
approved by EPA to revise or replace a FIP.” Id.

     Since it issued the final rule in August 2011, EPA has
taken several subsequent regulatory actions related to the
Transport Rule. See 76 Fed. Reg. 80,760 (Dec. 27, 2011)
(finalizing six States’ inclusion in the Rule for ozone-season
NOx); 77 Fed. Reg. 10,324 (Feb. 21, 2012) (making technical

Sources were required by the Rule to begin complying with the
annual SO2 and NOx requirements by January 1, 2012 for the 2012-
13 budgets and by January 1, 2014 for the post-2014 budgets. See
id. at 48,277. (This Court stayed the Rule before it took effect.)
The ozone-season NOx requirements would kick in on May 1 of
those years. See id. EPA chose those compliance deadlines in light
of this Court’s holding in North Carolina that the deadlines must be
“consistent with the provisions in Title I mandating [NAAQS]
compliance deadlines for downwind states.” 531 F.3d at 912; see
also Transport Rule, 76 Fed. Reg. at 48,277-78.
     The FIPs use allowance trading to enable covered plants
within the States to comply as cost-effectively as possible. The
program creates four allowance trading markets: one for annual
NOx, one for ozone-season NOx, one for the Group 1 SO2 States,
and one for the Group 2 SO2 States. See Transport Rule, 76 Fed.
Reg. at 48,271. Power plants in Group 1 SO2 States may not
purchase Group 2 SO2 allowances, and vice versa. See id. at
48,271-72. Otherwise, interstate trading is generally permitted.
                            22
adjustments to modeling and delaying assurance penalty
provisions until 2014); 77 Fed. Reg. 34,830 (June 12, 2012)
(revising budgets for 13 States).

                             D

     An array of power companies, coal companies, labor
unions, trade associations, States, and local governments
petitioned for review of EPA’s Transport Rule.

     On December 30, 2011, this Court stayed the Rule
pending a decision on the merits. See Order, No. 11-1302,
slip op. at 2 (D.C. Cir. Dec. 30, 2011). The Court’s order
instructed EPA to “continue administering the Clean Air
Interstate Rule pending the court’s resolution of these
petitions for review.” Id.

    In Part II of this opinion, we address whether the Rule
exceeds EPA’s authority to order upwind States to reduce
“amounts which will . . . contribute significantly to
nonattainment” in downwind States. In Part III, we address
whether the statute permits EPA to issue FIPs without giving
the States an initial opportunity to implement the required
reductions through SIPs or SIP revisions. In Part IV, we
consider the remedy.

                             II

     In this Part, we analyze petitioners’ argument that EPA
exceeded its statutory authority under the “good neighbor”
provision. Under the statute, EPA is limited to ordering
upwind States to reduce “amounts which will . . . contribute
significantly to nonattainment” in downwind States. 42
U.S.C. § 7410(a)(2)(D)(i).
                             23
                              A

    The Transport Rule defines States’ obligations under
Section 110(a)(2)(D)(i)(I) of the Clean Air Act, a provision
sometimes described as the “good neighbor” provision. See
42 U.S.C. § 7410(a)(2)(D)(i)(I); Michigan v. EPA, 213 F.3d
663, 671 (D.C. Cir. 2000). The good neighbor provision
requires that a State Implementation Plan, or SIP:

    (D) contain adequate provisions –
        (i) prohibiting, consistent with the provisions of this
        subchapter, 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 interfere with maintenance by, any other State
             with respect to any such national primary or
             secondary ambient air quality standard . . . .

42 U.S.C. § 7410(a)(2)(D). The good neighbor provision
recognizes that not all air pollution is locally generated:
Some ambient air pollution “is caused or augmented by
emissions from other states. Emissions from ‘upwind’
regions may pollute ‘downwind’ regions.” Appalachian
Power Co. v. EPA, 249 F.3d 1032, 1037 (D.C. Cir. 2001).

     Although the statute grants EPA significant discretion to
implement the good neighbor provision, the statute’s text and
this Court’s decisions in Michigan and North Carolina
establish several red lines that cabin EPA’s authority. Those
red lines are central to our resolution of this case.

    First, and most obviously, the text of Section
110(a)(2)(D)(i)(I) tells us that the “amounts which will . . .
contribute” to a downwind State’s nonattainment are at most
those amounts that travel beyond an upwind State’s borders
                                 24
and end up in a downwind State’s nonattainment area. 12 The
statute is not a blank check for EPA to address interstate
pollution on a regional basis without regard to an individual
upwind State’s actual contribution to downwind air quality.

     Moreover, the statutory text and this Court’s decision in
North Carolina v. EPA demonstrate that EPA may not force a
State to eliminate more than its own “significant” contribution
to a downwind State’s nonattainment area – that is, to “exceed
the mark,” as we put it in North Carolina. 531 F.3d 896, 921
(D.C. Cir. 2008). Thus, once EPA reasonably designates
some level of contribution as “insignificant” under the statute,
it may not force any upwind State to reduce more than its own
contribution to that downwind State minus the insignificant
amount. 13

    Second, under the terms of the statute and as we
explained in North Carolina, the portion of an upwind State’s
contribution to a downwind State that “contribute[s]
significantly” to that downwind State’s “nonattainment”
necessarily depends on the relative contributions of that
upwind State, of other upwind State contributors, and of the
     12
          At oral argument, EPA’s counsel refused to concede this
point.
     13
       For example, suppose that EPA determined that any upwind
State whose contribution to a downwind State was less than 3 units
did not “contribute significantly to nonattainment.” That would
mean EPA had established 3 units as the significance floor. Other
upwind contributors to that downwind State could not be required
to reduce their downwind contributions below that floor. So an
upwind State whose contribution to that downwind State is 30 units
could be required to reduce its contribution by at most 27 units.
     Of course, that is not the only constraint on EPA’s authority to
force the State to reduce its emissions. The other legal constraints
described in this Part can further lower a State’s maximum
obligation.
                              25
downwind State itself. Each upwind State may be required to
eliminate only its own “amounts which will . . . contribute
significantly” to a downwind State’s “nonattainment.” As
explained in North Carolina, EPA may not require any
upwind State to “share the burden of reducing other upwind
states’ emissions.” Id. In other words, the statutory text –
which refers to “amounts” which will “contribute
significantly” to a downwind State’s “nonattainment” –
contains not just an absolute component (meaning that an
upwind State’s insignificant amounts are not covered) but also
a relative component (meaning that each State’s relative
contribution to the downwind State’s nonattainment must be
considered).

     Moreover, the end goal of the statute is attainment in the
downwind State. EPA’s authority to force reductions on
upwind States ends at the point where the affected downwind
State achieves attainment.

     Therefore, if the downwind State would attain the
NAAQS but for upwind States’ contributions – that is, if the
entire above-NAAQS amount is attributable to upwind States’
emissions – then the upwind States’ combined share is the
entire amount by which the downwind State exceeded the
NAAQS. And as we said in North Carolina, when EPA
allocates that burden among the upwind States, EPA may not
force any upwind State to “share the burden of reducing other
upwind states’ emissions.” Id. Each upwind State must bear
its own fair share. Therefore, the “significance” of each
upwind State’s contribution cannot be measured in a vacuum,
divorced from the impact of the other upwind States. Rather,
the collective burden must be allocated among the upwind
States in proportion to the size of their contributions to the
                                26
downwind State’s nonattainment. Otherwise, EPA would
violate the statute and our decision in North Carolina. 14

     A specific example helps illustrate that point. Suppose
the NAAQS is 100 units, but the downwind State’s
nonattainment area contains 150 units. Suppose further that
the downwind State contributes 90 units, and three upwind
States contribute 20 units each. Because the upwind States
are responsible for the downwind State’s exceeding the
NAAQS by 50 units, the downwind State is entitled to at most
50 units of relief from the upwind States so that the
downwind State can achieve attainment of the NAAQS.
Distributing those obligations in a manner proportional to
their contributions, each of the three upwind States’
significant contribution would be, at most, 16 ⅔ units. Or
suppose instead that the three upwind States contribute 10, 20,

    14
        Before Congress adopted the current text in the Clean Air
Act Amendments of 1990, the statutory text targeted amounts from
an upwind State that would “prevent attainment” in a downwind
State. 42 U.S.C. § 7410(a)(2)(E) (1988) (emphasis added); cf. Pub.
L. No. 101-549, § 101(b), 104 Stat. 2399, 2404 (1990). Under the
“prevent attainment” standard, none of the three upwind States in
that hypothetical would by itself be a but-for cause of the
downwind State’s nonattainment. By moving from “prevent
attainment” to “contribute significantly to nonattainment,” the 1990
Amendments dropped the requirement that an individual upwind
State’s emissions on their own prevent downwind attainment or
maintenance. See S. REP. NO. 101-228, at 21 (1989) (“Since it may
be impossible to say that any single source or group of sources is
the one which actually prevents attainment, the bill changes
‘prevent attainment or maintenance’ to ‘contribute significantly to
nonattainment or interfere with maintenance by,’ thus clarifying
when a violation occurs.”). Instead, it now suffices if EPA
identifies upwind emissions that, together with emissions from
other upwind contributors, push a given downwind maintenance
area above the NAAQS.
                                27
and 30 units respectively. Distributing those obligations in a
manner proportional to their contributions, those three States’
significant contributions would be at most 8 ⅓, 16 ⅔, and 25
units, respectively, leading to the combined reduction of 50
units needed for the downwind State to reach attainment. 15

     In addition, our decisions in Michigan and North
Carolina establish that EPA may consider cost, but only to
further lower an individual State’s obligations. See Michigan,
213 F.3d at 675; North Carolina, 531 F.3d at 918. Under
Michigan, moreover, EPA may do so in a way that benefits
some upwind States more than others. See 213 F.3d at 679.
In other words, in order to prevent exorbitant costs from being
imposed on certain upwind States, EPA may lower the
obligations imposed on those States.

    15
        If the downwind State’s contribution alone would push it
above the NAAQS, then the entire above-NAAQS amount cannot
be attributed only to upwind States. The downwind State is
responsible for its own share of the above-NAAQS amount. In that
scenario, upwind States that contribute to the downwind State are
collectively on the hook for that share of the above-NAAQS
amount that is attributable to upwind States’ contributions. And,
again, that collective burden must be allocated among the upwind
States in proportion to the size of their contributions to the
downwind State. Otherwise, one upwind State would be forced to
“share the burden of reducing other upwind states’ emissions,” in
violation of the statute. North Carolina, 531 F.3d at 921.
     An example helps illustrate that point. Suppose the NAAQS is
100 units, and the downwind State’s air contains 180 units. The
downwind State contributes 120 units, and three upwind States
contribute 20 units each. The downwind State is 80 units over the
NAAQS – but 20 units of that is its own responsibility. The
upwind States must therefore provide at most 60 units of relief.
Distributing those obligations proportionally, each of the three
upwind States’ significant contribution would be, at most, 20 units.
                               28
    Third, to conform to the text of the statute, EPA must
also ensure that the combined obligations of the various
upwind States, as aggregated, do not produce more than
necessary “over-control” in the downwind States – that is, that
the obligations do not go beyond what is necessary for the
downwind States to achieve the NAAQS.

     Even when EPA carefully conforms to the above limits
on its authority, the possibility of over-control in downwind
States still arises because multiple upwind States may affect a
single downwind State and, conversely, a single upwind State
may affect multiple downwind States. The requirement to
prevent such over-control comes directly from the text of the
statute: The good neighbor provision of the statute targets
those emissions from upwind States that “contribute
significantly to nonattainment” of the NAAQS. EPA may
require only those reductions that are necessary for downwind
States to attain the NAAQS. The good neighbor provision is
not a free-standing tool for EPA to seek to achieve air quality
levels in downwind States that are well below the NAAQS.
Therefore, if modeling shows that a given slate of upwind
reductions would yield more downwind air quality benefits
than necessary for downwind areas to attain the NAAQS,
EPA must attempt to ratchet back the upwind States’
obligations to the level of reductions necessary and sufficient
to produce attainment in the downwind States. 16

    16
        For example, suppose that under the proportional approach
explained above, State A would have to cut 5,000 tons of NOx to
achieve its largest downwind obligation, while State B would have
to cut 2,000 tons to achieve its largest downwind obligation. If
EPA modeling showed that all downwind nonattainment would be
resolved if those two upwind States’ combined reduction
obligations were, say, 10% lower, EPA would have to ratchet back
the upwind States’ reduction obligations by a total of 10%. That
                               29
     To be sure, as even petitioners acknowledge, there may
be some truly unavoidable over-control in some downwind
States that occurs as a byproduct of the necessity of reducing
upwind States’ emissions enough to meet the NAAQS in
other downwind States. See Industry & Labor Reply Br. 11
n.2. For those reasons, EPA must have some discretion about
how to reasonably avoid such over-control. Moreover,
because multiple upwind States may affect a single downwind
State, and because a single upwind State may affect multiple
downwind States, it may not be possible to accomplish the
ratcheting back in an entirely proportional manner among the
upwind States. Our cases recognize as much. See Michigan,
213 F.3d at 679; North Carolina, 531 F.3d at 908. But the
point remains: EPA must avoid using the good neighbor
provision in a manner that would result in unnecessary over-
control in the downwind States. Otherwise, EPA would be
exceeding its statutory authority, which is expressly tied to
achieving attainment in the downwind States.

                                B

     We now apply those principles to the EPA Transport
Rule. “It is axiomatic that an administrative agency’s power
to promulgate legislative regulations is limited to the authority
delegated by Congress.” Bowen v. Georgetown Univ. Hosp.,
488 U.S. 204, 208 (1988); see also Michigan v. EPA, 268
F.3d 1075, 1081 (D.C. Cir. 2001) (“EPA is a federal agency –
a creature of statute,” and may exercise “only those
authorities conferred upon it by Congress.”). An agency may
not exceed a statute’s authorization or violate a statute’s
limits. If a statute is ambiguous, an agency that administers
the statute may choose a reasonable interpretation of that
ambiguity – but the agency’s interpretation must still stay

would ensure that upwind States were only forced to prohibit those
emissions that “contribute significantly to nonattainment.”
                                30
within the boundaries of the statutory text. See Chevron
U.S.A. Inc. v. NRDC, 467 U.S. 837, 842-44 (1984). 17

     In the Transport Rule, EPA used a two-stage approach to
define “amounts which will . . . contribute significantly” to
downwind attainment problems. The first stage identified
those upwind States that were “significant contributors” to
downwind attainment problems. EPA determined that a
State’s contribution to a downwind nonattainment or
maintenance area was significant if it exceeded a numerical
“air quality threshold” of 0.8 ppb for ozone, 0.15 µg/m3 for
annual PM2.5, and 0.35 µg/m3 for 24-hour PM2.5. Transport
Rule, 76 Fed. Reg. 48,208, 48,236 (Aug. 8, 2011). States
“whose contributions are below these thresholds,” EPA
found, “do not significantly contribute to nonattainment or
interfere with maintenance of the relevant NAAQS.” Id.
Those upwind States were off the hook altogether.

     But an upwind State that exceeded the significance
threshold at even one downwind State’s receptor was drawn
wholesale into the Rule’s second stage – cost-based emissions
reductions. At that second stage, EPA abandoned the
previous measure of significance – the numerical air quality
thresholds, which were based on the quantity of pollution an
upwind State sent to a downwind area. Instead, EPA
switched over to relying on cost of reduction alone. EPA
required each State’s power plants to cut all of the emissions

    17
       We set aside EPA’s action here if “arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance with law,” or if
“in excess of statutory jurisdiction, authority, or limitations, or
short of statutory right.” The standard we apply “is the same”
under the judicial review provision of the Clean Air Act, 42 U.S.C.
§ 7607(d)(9), as under the Administrative Procedure Act, 5 U.S.C.
§ 706(2). Motor Vehicle Manufacturers Ass’n v. EPA, 768 F.2d
385, 389 n.6 (D.C. Cir. 1985).
                               31
they could eliminate at a given cost per ton of pollution
reduced – regardless of the “amounts” of the State’s
emissions EPA deemed to “contribute significantly” at stage
one and regardless of the relative contributions of the other
upwind States and the downwind State.

     We perceive at least three independent but intertwined
legal flaws in EPA’s approach to the good neighbor provision.
Those flaws correspond to the three requirements we outlined
above that come from the statutory text.

     First, and most fundamentally, the Transport Rule is
flawed because the requirement that EPA imposed on upwind
States was not based on the “amounts” from upwind States
that “contribute significantly to nonattainment” in downwind
States, as required by the statute and our decision in North
Carolina.

     Petitioners claim that the initial stage of EPA’s analysis –
the numerical air quality thresholds, which used a bright-line
test for whether a State’s downwind emissions “contribute
significantly” – created a “‘floor’ below which any
contribution is, by definition, viewed as insignificant.”
Industry & Labor Br. 20. Petitioners argue that EPA has no
statutory authority to compel States to reduce amounts of
pollution that are “insignificant.” Therefore, petitioners
contend that EPA could not ignore that floor at the later stage,
when it calculated each State’s “significant contribution”
based on cost. 18

    18
        The dissent contends that this point was not preserved for
judicial review and that the agency was not aware of this issue
during the agency proceedings. See 42 U.S.C. § 7607(d)(7)(B).
For several reasons, we are convinced EPA had more than
“adequate notification of the general substance” of petitioners’
                                32

argument. NRDC v. EPA, 571 F.3d 1245, 1259 (D.C. Cir. 2009)
(quoting South Coast Air Quality Mgmt. Dist. v. EPA, 472 F.3d
882, 891 (D.C. Cir. 2006)). Indeed, one of the central questions in
the long history of EPA’s efforts to implement the good neighbor
provision has been whether EPA has complied with the basic
statutory limits on its authority. So it is here.
      First, the Transport Rule proceeding arose out of this Court’s
decision in North Carolina, on which petitioners’ argument relies.
See Transport Rule, 76 Fed. Reg. at 48,211 (“EPA is promulgating
the Transport Rule in response to the remand of the Clean Air
Interstate Rule (CAIR) by the U.S. Court of Appeals for the District
of Columbia Circuit”). In North Carolina v. EPA, this Court
explained the applicable statutory limitations and instructed EPA on
remand to craft a new rule “consistent with our opinion.” 550 F.3d
1176, 1177 (D.C. Cir. 2008) (on rehearing). Instructing EPA to
proceed in a manner “consistent with” North Carolina presupposes
that EPA is aware of the Court’s opinion. And the opinion made
clear that once EPA defines each upwind State’s “significant
contribution,” it may not “require some states to exceed the mark.”
531 F.3d at 921. In sum, EPA knew from the beginning that it was
required to comply with North Carolina, including that part of the
Court’s holding on which petitioners rely here.
      Second, EPA considered – and rejected – precisely the same
argument in CAIR. EPA first acknowledged the comment: “Some
commenters stated, more broadly, that the threshold contribution
level selected by EPA should be considered a floor, so that upwind
States should be obliged to reduce their emissions only to the level
at which their contribution to downwind nonattainment does not
exceed that threshold level.” CAIR, 70 Fed. Reg. 25,162, 25,176-
77 (May 12, 2005). It then dismissed that argument: “Most
important for present purposes, as long as the controls yield
downwind benefits needed to reduce the extent of nonattainment,
the controls should not be lessened simply because they may have
the effect of reducing the upwind State’s contribution to below the
initial threshold.” Id. at 25,177. EPA’s rejection of the same
argument in a prior rulemaking – indeed, in a prior rulemaking that
is the direct progenitor of the current one – is highly relevant to
                                 33

whether the argument is preserved here. See, e.g., American
Petroleum Institute v. EPA, 52 F.3d 1113, 1120 n.1 (D.C. Cir.
1995); NRDC v. EPA, 824 F.2d 1146, 1151 (D.C. Cir. 1987) (en
banc); see also Appalachian Power Co. v. EPA, 135 F.3d 791, 818
(D.C. Cir. 1998) (“The purpose of the exhaustion requirement is to
ensure that the agency is given the first opportunity to bring its
expertise to bear on the resolution of a challenge to a rule.”).
EPA’s prior rejection of the same argument in CAIR, together with
this Court’s opinion in North Carolina, show that EPA “had notice
of this issue and could, or should have, taken it into account.”
NRDC, 824 F.2d at 1151.
      Third, EPA’s statements at the proposal stage indicated EPA
was not open to reconsidering CAIR’s earlier rejection of
petitioners’ argument. See Proposed Transport Rule, 75 Fed. Reg.
45,210, 45,299 (Aug. 2, 2010) (“EPA evaluated a number of
alternative approaches to defining significant contribution and
interference with maintenance in addition to the approach proposed
in this rule. Stakeholders suggested a variety of ideas. EPA
considered all suggested approaches. . . . EPA is not proposing any
of the alternative approaches listed here.”). By that point, EPA had
already dismissed the two air quality-only approaches it considered
and had indicated its firm commitment to the cost-based approach.
See EPA, Alternative Significant Contribution Approaches
Evaluated Technical Support Document 7 (July 2010) (EPA,
Significant Contribution TSD), J.A. 2312 (uniform cost-per-ton
approach “has been successfully implemented before, with
excellent environmental results”); see also id. at 3-7, J.A. 2308-12.
In light of the indications that EPA was aware of their objection but
had no intention to revisit its approach (and indeed had already
rejected the objection), the specificity of commenters such as
Wisconsin and Tennessee was “reasonable” under the
circumstances. 42 U.S.C. § 7607(d)(7)(B); see, e.g., Wisconsin
Cmt., J.A. 1293 (“EPA needs to primarily depend on air quality
results instead of control costs in defining” significant
contributions); Tennessee Cmt., J.A. 556 (“A lower cost threshold
should be considered for any State that can reduce their
contribution below 1% significance using cost thresholds below the
                                 34
     We agree with petitioners. The Transport Rule includes
or excludes an upwind State based on the amount of that
upwind State’s significant contribution to a nonattainment
area in a downwind State. That much is fine. But under the
Rule, a State then may be required to reduce its emissions by
an amount greater than the “significant contribution” that
brought it into the program in the first place. That much is
not fine.

     Put more plainly, EPA determined that a State was
subject to the good neighbor provision if it contributed at least
a certain threshold amount to air pollution in a downwind
State. But EPA then imposed restrictions based on region-
wide air quality modeling projections; those restrictions could
require upwind States to reduce emissions by more than the
amount of that contribution.

maximum values ($2,000/ton for SO2 and $500/ton for NOx), if
applicable. . . . We would like to see a summary for each State and
pollutant that indicates, independently of cost, the amounts
necessary to eliminate the significant contribution and interference
with maintenance from upwind States.”); Delaware Cmt., J.A. 1756
(challenging EPA’s decision to depart from the air quality
thresholds used for inclusion and to quantify States’ significant
contributions based on cost considerations, not air quality); see also
Appalachian Power, 135 F.3d at 817 (“the word ‘reasonable’
cannot be read out of the statute in favor of a hair-splitting
approach”); id. at 818 (an objection need not be “phrased in exactly
the same way in each forum”); South Coast, 472 F.3d at 891
(petitioners have “some leeway in developing their argument” on
review).
      In sum, we are confident here that EPA had more than
“adequate notification of the general substance of the complaint.”
South Coast, 472 F.3d at 891. EPA was plainly on notice that its
disregard of the significance floor was a potential legal infirmity in
its approach.
                                 35
     EPA’s approach poses a fundamental legal problem – one
that derives from the text of the statute and from our
precedents. Our decision in Michigan held that EPA may use
cost considerations to require “termination of only a subset of
each state’s contribution.” 213 F.3d at 675. And our decision
in North Carolina made clear that EPA may not use cost to
force an upwind State to “exceed the mark.” 531 F.3d at
921. 19

     By using a numerical threshold at the initial stage – and
thereby creating a floor below which “amounts” of downwind
pollution were not significant – EPA defined the “mark,” to
use the term employed in North Carolina. EPA could not
then ignore that mark and redefine each State’s “significant
contribution” in such a way that an upwind State’s required
reductions could be more than its own significant contribution
to a downwind State. 20

    19
         The Court in North Carolina reached these conclusions in its
discussion of EPA’s use of power plant fuel mix to distribute NOx
reduction obligations among the CAIR States. See 531 F.3d at 904,
918-21. EPA claims that the reasoning of that analysis is not
relevant here because it did not relate to “general significant
contribution issues,” but rather to the manner of calculating each
State’s emissions budget. EPA Br. 23.
      That is a distinction without a difference. The fuel mix
analysis increased some States’ obligations and reduced others’.
EPA’s argument overlooks that no step in its analysis – however
the step is labeled – may impose burdens on States or private
entities unless those burdens are anchored in statutory authority.
Under the statute, States are required to prohibit only those
“amounts which will . . . contribute significantly to nonattainment”
or “interfere with maintenance.” 42 U.S.C. § 7410(a)(2)(D)(i); see
also North Carolina, 531 F.3d at 919.
      20
         This particular issue was not presented in Michigan. In the
1998 NOx Rule, EPA balanced various air quality factors using a
                                 36
     EPA now claims that the Rule’s air quality thresholds
were established for a “limited analytical purpose” and
“otherwise say nothing about what part of each State’s
contribution should be considered ‘significant.’” EPA Br. 33.
That claim rings hollow. EPA itself said in the final rule that
“states whose contributions are below these thresholds do not
significantly contribute to nonattainment or interfere with
maintenance of the relevant NAAQS.” Transport Rule, 76
Fed. Reg. at 48,236. EPA therefore acknowledged that
amounts below the threshold are not “amounts which will . . .
contribute significantly” to downwind attainment problems. 21

     In short, EPA used the air quality thresholds to establish a
floor below which “amounts” of air pollution do not

“weight-of-evidence approach.” 63 Fed. Reg. 57,356, 57,381 (Oct.
27, 1998). Unlike the Transport Rule, the 1998 NOx Rule did not
employ a numerical threshold, nor any other “bright line criterion,”
to screen out States at the first stage. Id. at 57,383.
      21
         EPA cannot avoid North Carolina by declining to quantify
the “amount” of each State’s downwind contribution, “beginning its
analysis with cost,” 531 F.3d at 918, and simply designating the
output of that cost-based analysis each State’s “significant
contribution.” The statutory term “amounts which will . . .
contribute significantly” is not so elastic. See id. at 920 (“When a
petitioner complains EPA is requiring a state to eliminate more than
its significant contribution, it is inadequate for EPA to respond that
it never measured individual states’ significant contributions.”). As
explained above, “amounts which will . . . contribute” logically
cannot exceed the amount of a pollutant that leaves a State’s
borders and reaches a nonattainment area. And insignificant
amounts must be excluded. Moreover, the “significance” of an
upwind State’s emissions for a downwind area’s attainment
problem cannot be divorced from the relative impact of other
States’ contributions to that problem.
                                 37
“contribute significantly.” 22 The statute requires a State to
prohibit at most those “amounts” which will “contribute
significantly” – and no more. If amounts below a numerical
threshold do not contribute significantly to a downwind
State’s nonattainment, EPA may not require an upwind State
to do more. The Transport Rule does not adhere to that basic
requirement of the statutory text and our precedents. 23

     Second, EPA’s Transport Rule also runs afoul of the
statute’s proportionality requirement as described in our
decision in North Carolina: EPA has “no authority to force
an upwind state to share the burden of reducing other upwind
states’ emissions.” 531 F.3d at 921; see Industry & Labor Br.
33 (in imposing SO2 budgets, EPA “did not even consider the
relative contributions of the various States”).        EPA’s
“redistributional instinct may be laudatory,” North Carolina,
531 F.3d at 921, but it cannot trump the terms of the statute.
Under the statute, each upwind State that contributes to a

    22
         EPA protests that it used the numerical thresholds only to
determine “which upwind State contributions to downwind
problems are so small as to warrant exclusion.” EPA Br. 31. But
that must mean those “amounts” that are “so small as to warrant
exclusion” are not “significant.” (It would be illogical to carve out
a de minimis exception for emissions that are statutorily
“significant.”)
      23
         EPA seems reluctant to acknowledge any textual limits on
its authority under the good neighbor provision. At oral argument,
EPA suggested that “reasonableness” is the only limit on its
authority to use cost-effectiveness to force down States’ emissions.
Tr. of Oral Arg. at 44-45. EPA would not rule out the possibility
that under the good neighbor provision, it could require a State to
reduce more than the State’s total emissions that go out of State.
See id. at 43-45. But such a claim of authority does not square with
the statutory text – “amounts” of pollution obviously cannot
“contribute” to a downwind State’s pollution problem if they don’t
even reach the downwind State.
                              38
downwind nonattainment area is responsible for no more than
its own “amounts which will . . . contribute significantly” to
the downwind State’s pollution problem. To be sure, under
Michigan, EPA may rely on cost-effectiveness factors in
order to allow some upwind States to do less than their full
fair share. See 213 F.3d at 675; cf. Petitioning States’ Br. 17,
Michigan, 213 F.3d 663 (No. 98-1497). But when EPA asks
one upwind State to eliminate more than its statutory fair
share, that State is necessarily being forced to clean up
another upwind State’s share of the mess in the downwind
State. Under the statute and North Carolina, that is
impermissible.

    Here, EPA’s Transport Rule violated the statute because
it made no attempt to calculate upwind States’ required
reductions on a proportional basis that took into account
contributions of other upwind States to the downwind States’
nonattainment problems.

     In the same vein, EPA’s Transport Rule failed to take
into account the downwind State’s own fair share of the
amount by which it exceeds the NAAQS. See Industry &
Labor Br. 24-25. How “significantly” an upwind State
contributes to a downwind State’s nonattainment also depends
in part on how much of the above-NAAQS amount comes
from the downwind State itself. As we explained above, EPA
therefore must factor in the downwind State’s own
contribution, alongside those of the various upwind States.
But EPA did not do that here.

     Third, and relatedly, EPA also failed to ensure that the
collective obligations of the various upwind States, when
aggregated, did not produce unnecessary over-control in the
downwind States. EPA’s statutory authority, once again, is
limited to attaining the NAAQS in the downwind States.
                                 39
EPA may not require upwind States to do more than
necessary for the downwind States to achieve the NAAQS.
Here, EPA did not try to take steps to avoid such over-
control. 24

     In sum, EPA’s authority derives from the statute and is
limited by the statutory text. 25 EPA’s reading of Section
110(a)(2)(D)(i)(I) – a narrow and limited provision – reaches
far beyond what the text will bear.

     24
        At the proposal stage in the proceeding that culminated in
the Transport Rule, EPA considered a proportional approach that
reflected many of the essential principles described above. See
EPA, Significant Contribution TSD at 6-7, J.A. 2311-12. Under
that approach, the upwind contributors to a given downwind area
would collectively have to provide a “defined air quality
improvement” to the downwind State, in the amount by which the
downwind State exceeded the NAAQS. Id. at 6, J.A. 2311. And
the upwind States’ individual shares of that collective duty would
be defined “in direct proportion to their original contribution[s]” to
the downwind State. Id. EPA ultimately chose not to adopt that
approach, however.
     25
        The statute also requires upwind States to prohibit emissions
that will “interfere with maintenance” of the NAAQS in a
downwind State. “Amounts” of air pollution cannot be said to
“interfere with maintenance” unless they leave the upwind State
and reach a downwind State’s maintenance area. To require a State
to reduce “amounts” of emissions pursuant to the “interfere with
maintenance” prong, EPA must show some basis in evidence for
believing that those “amounts” from an upwind State, together with
amounts from other upwind contributors, will reach a specific
maintenance area in a downwind State and push that maintenance
area back over the NAAQS in the near future. Put simply, the
“interfere with maintenance” prong of the statute is not an open-
ended invitation for EPA to impose reductions on upwind States.
Rather, it is a carefully calibrated and commonsense supplement to
the “contribute significantly” requirement.
                             40
     Although the statutory text alone prohibits EPA’s Rule,
the statutory context provides additional support for our
conclusion. The Supreme Court, in analyzing Section 109 of
the Clean Air Act, rejected the premise that Congress would
“alter the fundamental details of a regulatory scheme” in
“ancillary provisions” – in other words, that Congress would
“hide elephants in mouseholes.” Whitman v. American
Trucking Ass’ns, 531 U.S. 457, 468 (2001). The good
neighbor provision is one of more than 20 SIP requirements in
Section 110(a)(2). It seems inconceivable that Congress
buried in Section 110(a)(2)(D)(i)(I) – the good neighbor
provision – an open-ended authorization for EPA to
effectively force every power plant in the upwind States to
install every emissions control technology EPA deems “cost-
effective.” Such a reading would transform the narrow good
neighbor provision into a “broad and unusual authority” that
would overtake other core provisions of the Act. Gonzales v.
Oregon, 546 U.S. 243, 267 (2006). We “are confident that
Congress could not have intended to delegate a decision of
such economic and political significance to an agency in so
cryptic a fashion.” FDA v. Brown & Williamson Tobacco
Corp., 529 U.S. 120, 160 (2000).

                            ***

     States are obligated to prohibit only those “amounts” of
pollution “which will . . . contribute significantly” to
downwind attainment problems – and no more. Because the
Transport Rule exceeds those limits, and indeed does not
really try to meet those requirements, it cannot stand.

                             III

    There is a second, entirely independent problem with the
Transport Rule. EPA did not stop at simply quantifying each
upwind State’s good neighbor obligations. Instead, in an
                              41
unprecedented application of the good neighbor provision,
EPA also simultaneously issued Federal Implementation
Plans, or FIPs, to implement those obligations on sources in
the States. EPA did so without giving the States an initial
opportunity to implement the obligations themselves through
their State Implementation Plans, or SIPs.

     The Clean Air Act ordinarily gives States the initial
opportunity to implement a new air quality standard on
sources within their borders; States do so by submitting SIPs.
See 42 U.S.C. §§ 7407(a), 7410(a)(1). Here, by preemptively
issuing FIPs, EPA denied the States that first opportunity to
implement the reductions required under their good neighbor
obligations. EPA justifies its “FIP-first” approach by pointing
to its earlier findings that the States had failed to meet their
good neighbor obligations. But those findings came before
the Transport Rule quantified the States’ good neighbor
obligations. EPA’s approach punishes the States for failing to
meet a standard that EPA had not yet announced and the
States did not yet know.

     Under the Act, EPA has authority to set standards, but the
statute reserves the first-implementer role for the States. That
division of labor applies not just to the NAAQS but also to the
good neighbor provision, Section 110(a)(2)(D)(i)(I), as EPA
itself has recognized several times in the past. When EPA
defines States’ good neighbor obligations, it must give the
States the first opportunity to implement the new
requirements.

                               A

    “Under the Clean Air Act, both the Federal Government
and the States exercise responsibility for maintaining and
improving air quality.” American Trucking Ass’ns v. EPA,
600 F.3d 624, 625 (D.C. Cir. 2010). The Act sets forth a
                                42
basic division of labor: The Federal Government establishes
air quality standards, but States have primary responsibility
for attaining those standards within their borders. See Train
v. NRDC, 421 U.S. 60, 63-67 (1975); American Trucking, 600
F.3d at 625-26; Virginia v. EPA, 108 F.3d 1397, 1406-10
(D.C. Cir. 1997); see also 42 U.S.C. § 7401(a) (“The
Congress finds . . . that air pollution prevention (that is, the
reduction or elimination, through any measures, of the amount
of pollutants produced or created at the source) and air
pollution control at its source is the primary responsibility of
States and local governments . . . .”); 42 U.S.C. § 7407(a)
(“Each State shall have the primary responsibility for assuring
air quality within the entire geographic area comprising such
State . . . .”). 26

     That statutory division of authority is strict. This Court
has described the Train-Virginia line of cases as erecting a
statutory “federalism bar” under Section 110 of the Act. See
Appalachian Power Co. v. EPA, 249 F.3d 1032, 1046 (D.C.
Cir. 2001) (citing Train, 421 U.S. 60; Virginia, 108 F.3d
1397); Michigan v. EPA, 213 F.3d 663, 687 (D.C. Cir. 2000).
That statutory federalism bar prohibits EPA from using the
SIP process to force States to adopt specific control measures.
See Michigan, 213 F.3d at 687; Virginia, 108 F.3d at 1410.

     In Train, the Supreme Court invoked that statutory
division of labor in holding that the Clean Air Act gives EPA

    26
        The 1970 Amendments, which “sharply increased federal
authority” in setting air quality standards, at the same time
“explicitly preserved the principle” of State primacy in
implementing pollution controls. Train, 421 U.S. at 64. The 1990
Amendments, which enacted the current text of Section
110(a)(2)(D)(i)(I), “did not alter the division of responsibilities
between EPA and the states in the section 110 process.” Virginia,
108 F.3d at 1410.
                              43
“no authority to question the wisdom of a State’s choices of
emission limitations,” so long as the State’s SIP submission
would result in “compliance with the national standards for
ambient air.” 421 U.S. at 79. The Court stated:

         The Agency is plainly charged by the Act with the
    responsibility for setting the national ambient air
    standards. Just as plainly, however, it is relegated by the
    Act to a secondary role in the process of determining and
    enforcing the specific, source-by-source emission
    limitations which are necessary if the national standards
    it has set are to be met.

Id. (emphasis added); see also Union Electric Co. v. EPA, 427
U.S. 246, 256, 269 (1976) (EPA may not reject a SIP on
grounds of technical or economic infeasibility; that “would
permit the Administrator or a federal court to reject a State’s
legislative choices in regulating air pollution, even though
Congress plainly left with the States, so long as the national
standards were met, the power to determine which sources
would be burdened by regulation and to what extent”).

     Similarly, in Virginia, this Court held that EPA had no
authority under Section 110 to condition its approval of
northeastern States’ SIPs on the States’ adoption of
California’s vehicle emission control measures. See 108 F.3d
at 1401-10. The Court relied on the basic principle that the
States, not EPA, are the primary implementers under Section
110. See id. at 1410 (“section 110 does not enable EPA to
force particular control measures on the states”).

    In sum, Title I of the Act establishes a “partnership
between EPA and the states.” NRDC v. Browner, 57 F.3d
1122, 1123 (D.C. Cir. 1995). The terms of that partnership
are clear: EPA sets the standards, but the States “bear
primary responsibility for attaining, maintaining, and
                               44
enforcing these standards.” American Lung Ass’n v. EPA,
134 F.3d 388, 389 (D.C. Cir. 1998).

                               B

    With that basic structure in mind, we consider the
question presented here: whether EPA may use its rulemaking
authority to quantify States’ obligations under Section
110(a)(2)(D)(i)(I) and simultaneously issue Federal
Implementation Plans, without giving the States a first
opportunity to comply.

    We begin by briefly describing the set of statutory
provisions on which EPA relies here.

     EPA is the first mover in regulating ambient air pollution
in Title I of the Clean Air Act. Section 109 requires EPA to
promulgate NAAQS for common air pollutants. See Whitman
v. American Trucking Ass’ns, 531 U.S. 457, 462 (2001)
(citing 42 U.S.C. § 7409(a)). But once EPA sets a NAAQS,
“responsibility under the Act shifts from the federal
government to the states.” Lead Industries Ass’n v. EPA, 647
F.2d 1130, 1137 (D.C. Cir. 1980).

    Section 110 governs State Implementation Plans. Section
110(a)(1) requires States to submit SIPs to implement each
new or revised NAAQS. See 42 U.S.C. § 7410(a)(1). Section
110(a)(2) lists many elements that a SIP must contain in order
to ensure that the Plan will be comprehensive enough to
enable the State to attain the NAAQS. See 42 U.S.C.
§ 7410(a)(2). 27    The good neighbor provision, Section
110(a)(2)(D)(i)(I), is one of those required elements.

    27
       See, e.g., 42 U.S.C. § 7410(a)(2)(A) (SIP shall “include
enforceable emission limitations and other control measures,” “as
                                45
     Section 110(c)(1) creates a federal backstop if the States
fail to submit adequate SIPs. When EPA finds that a State
“has failed to make a required submission” or “disapproves a
State implementation plan submission in whole or in part”
because of a SIP “deficiency,” EPA must “promulgate a
Federal implementation plan” within two years, “unless the
State corrects the deficiency” in the meantime in a manner
approved by EPA. 42 U.S.C. § 7410(c)(1). In essence, the
issue here is whether a State’s implementation of its good
neighbor obligation can be considered part of the State’s
“required submission” in its SIP (or whether the SIP can be
deficient for failing to implement the good neighbor
obligation) even before EPA quantifies the State’s good
neighbor obligation. We think not. EPA’s quantifying of a
State’s good neighbor obligation and setting of a State’s
emissions budget is what “require[s]” the State to make a
“submission” implementing that obligation on sources within
the State. After EPA has set the relevant emissions budgets
for each State, EPA may require States to submit new SIPs
under Section 110(a)(1) or to revise their SIPs under Section
110(k)(5). That is the approach EPA has used in the past. In
short, once EPA defines or quantifies a State’s good neighbor
obligation, the State must have a reasonable time to

well as schedules and timetables for compliance”), 7410(a)(2)(B)
(SIP shall provide for means to “monitor, compile, and analyze data
on ambient air quality” and provide the data to EPA upon request),
7410(a)(2)(C) (SIP shall “include a program to provide for the
enforcement of” the control measures required by subparagraph
(A)), 7410(a)(2)(E) (SIP shall provide assurances that State and
local authorities “will have adequate personnel, funding, and
authority” under State and local law “to carry out such
implementation plan”), 7410(a)(2)(F) (SIP shall require “the
installation, maintenance, and replacement of equipment” by
“stationary sources to monitor emissions from such sources”).
                                46
implement that requirement with respect to sources within the
State. 28

     In short, the triggers for a FIP are EPA’s finding that the
SIP fails to contain a “required submission” or EPA’s
disapproving a SIP because of a “deficiency.” But logically, a
SIP cannot be deemed to lack a required submission or be
deemed deficient for failing to implement the good neighbor
obligation until after EPA has defined the State’s good
neighbor obligation. Once it defines the obligation, then
States may be forced to revise SIPs under Section 110(k)(5)
or to submit new SIPs under Section 110(a)(1). Only if that
revised or new SIP is properly deemed to lack a required
submission or is properly deemed deficient may EPA resort to
a FIP for the State’s good neighbor obligation.

                                 C

                                 1

     In light of Section 110(c)(1), EPA here made “a finding
of failure to submit and/or disapproved a SIP submission” for
each State with respect to each NAAQS for which that State
would be covered.         EPA Br. 44 (citing 42 U.S.C.
§ 7410(c)(1)); see also EPA, Status of CAA 110(a)(2)(D)(i)(I)
SIPs Final Rule Technical Support Document (July 2011)
(EPA, SIPs TSD), J.A. 3167. 29 On the basis of those

    28
        Section 110(k)(5), the SIP call provision, authorizes EPA to
“establish reasonable deadlines” not to exceed 18 months for SIP
revisions, once notice is given. 42 U.S.C. § 7410(k)(5); cf. 1998
NOx Rule, 63 Fed. Reg. at 57,451 (12-month deadline).
     29
        EPA was cognizant of another potential obstacle: its own
past approval of CAIR SIPs. CAIR covered the 1997 ozone and
annual PM2.5 NAAQS, two of the three NAAQS at issue here. See
70 Fed. Reg. 25,162, 25,165 (May 12, 2005). Many covered States
                                47
findings, EPA asserted authority to issue the Transport Rule
FIPs.

    But EPA’s many SIP disapprovals and findings of failure
to submit share one problematic feature: EPA made all of
those findings before it told the States what emissions
reductions their SIPs were supposed to achieve under the
good neighbor provision. See EPA, SIPs TSD, J.A. 3167.

    EPA sees no problem with that. In EPA’s view, there is
no difference between a State’s obligation to comply with the
NAAQS and a State’s good neighbor obligation: States must

had submitted and received EPA approval of CAIR SIPs. See EPA,
SIPs TSD, J.A. 3167. EPA apparently was concerned that those
approved CAIR SIPs might deprive EPA of authority under Section
110(c)(1) to issue Transport Rule FIPs for those two NAAQS.
      EPA tried to address this in the final rule. It claimed that
because North Carolina invalidated CAIR, approved CAIR SIPs no
longer fulfilled States’ Section 110(a)(2)(D)(i)(I) obligations. See
Transport Rule, 76 Fed. Reg. 48,208, 48,219 (Aug. 8, 2011). It
bears noting, however, that EPA continued to approve CAIR SIPs
after North Carolina. See, e.g., 74 Fed. Reg. 65,446 (Dec. 10,
2009).
      But to try to make sure, in the final Transport Rule EPA
retrospectively “corrected” its past approvals of CAIR SIPs, to
clarify its view that an approved CAIR SIP did not shield a State
from the Transport Rule FIPs. See 76 Fed. Reg. at 48,219; see also
42 U.S.C. § 7410(k)(6) (EPA may “revise” any approval the
Administrator determines “was in error”). EPA made those
“corrections” without using notice and comment rulemaking,
despite the statutory requirement that EPA make any corrections
“in the same manner as the approval.” 42 U.S.C. § 7410(k)(6).
      Because the Transport Rule must be vacated in any event, we
need not address here whether EPA’s “corrections” of CAIR SIP
approvals exceeded its authority under Section 110(k)(6).
                                48
submit SIPs addressing both within three years of a NAAQS,
or face FIPs.

     But there is a difference – a glaring one – between the
two obligations. A NAAQS is a clear numerical target. For
example, the NAAQS for annual PM2.5 is 15 μg/m3. Every
State knows precisely what numerical goal its SIP must
achieve. If a State misses that clear numerical target, it has
only itself to blame.

     By contrast, the good neighbor obligation is not a clear
numerical target – far from it – until EPA defines the target.
Even after EPA sets a NAAQS, an upwind State’s good
neighbor obligation for that pollutant is nebulous and
unknown. The statutory standard is “amounts” of pollution
which will “contribute significantly to nonattainment” or
“interfere with maintenance” of the new NAAQS in a
downwind State. There is no way for an upwind State to
know its obligation without knowing levels of air pollution in
downwind States and then apportioning its responsibility for
each downwind State’s nonattainment. Therefore, the upwind
State’s obligation remains impossible for the upwind State to
determine until EPA defines it. 30 Without further definition
by EPA, a prohibition on “amounts which will . . . contribute
significantly” is like a road sign that tells drivers to drive
“carefully.” The regulated entities – here, the upwind States –

    30
        As EPA itself has recognized in the past: “The precise
nature and contents of such a submission is [sic] not stipulated in
the statute. EPA believes that the contents of the SIP submission
required by section 110(a)(2)(D)(i) may vary depending upon the
facts and circumstances related to the specific NAAQS.” EPA,
Guidance for State Implementation Plan Submissions to Meet
Current Outstanding Obligations Under Section 110(a)(2)(D)(i) for
the 8-Hour Ozone and PM2.5 National Ambient Air Quality
Standards 3 (Aug. 15, 2006) (EPA, 2006 Guidance).
                              49
need more precise guidance to know how to conform their
conduct to the law. A SIP logically cannot be deemed to lack
a “required submission” or deemed to be deficient for failure
to meet the good neighbor obligation before EPA quantifies
the good neighbor obligation.

     EPA faults the States for not hitting that impossible-to-
know target with their SIP submissions. In effect, EPA’s
view is that the only chance States have to hit the target is
before EPA defines the target. By the time EPA makes the
target clear, it’s already too late for the States to comply.

     Interestingly, outside of this litigation, EPA has itself
recently and repeatedly recognized that it makes no sense for
States to act until EPA defines the target. Just a few weeks
ago, for example, in a separate proceeding EPA said that
while some elements of a SIP submission are “relatively
straightforward,” “others clearly require interpretation by
EPA through rulemaking, or recommendations through
guidance, in order to give specific meaning for a particular
NAAQS.” 77 Fed. Reg. 46,361, 46,363 (Aug. 3, 2012). “For
example, section 110(a)(2)(D)(i) requires EPA to be sure that
each state’s SIP contains adequate provisions to prevent
significant contribution to nonattainment of the NAAQS in
other states. This provision contains numerous terms that
require substantial rulemaking by EPA in order to determine
such basic points as what constitutes significant contribution.”
Id. at n.7. Thus, EPA has said that the good neighbor
provision “clearly require[s] interpretation by EPA through
rulemaking, or recommendations through guidance, in order
to give specific meaning for a particular NAAQS.” Id.; see
also, e.g., 77 Fed. Reg. 45,320, 45,323 & n.7 (July 31, 2012)
(same); 77 Fed. Reg. 43,196, 43,199 & n.7 (July 24, 2012)
(same); 77 Fed. Reg. 22,533, 22,536 & n.7 (Apr. 16, 2012)
                               50
(same); 76 Fed. Reg. 40,248, 40,250 & n.5 (July 8, 2011)
(same).

     In this litigation, however, EPA insists that the text of
Section 110(c)(1) compels its FIP-first approach. But EPA
pursues its reading of the statutory text down the rabbit hole
to a wonderland where EPA defines the target after the States’
chance to comply with the target has already passed. Cf. FCC
v. Fox Television Stations, Inc., 132 S. Ct. 2307, 2317 (2012)
(“A fundamental principle in our legal system is that laws
which regulate persons or entities must give fair notice of
conduct that is forbidden or required.”); id. (“regulated parties
should know what is required of them so they may act
accordingly”); Christopher v. SmithKline Beecham Corp., 132
S. Ct. 2156, 2168 (2012) (“It is one thing to expect regulated
parties to conform their conduct to an agency’s interpretations
once the agency announces them; it is quite another to require
regulated parties to divine the agency’s interpretations in
advance . . . .”).

    We take a different view. Statutory text “cannot be
construed in a vacuum. It is a fundamental canon of statutory
construction that the words of a statute must be read in their
context and with a view to their place in the overall statutory
scheme.” Roberts v. Sea-Land Services, Inc., 132 S. Ct. 1350,
1357 (2012) (quoting Davis v. Michigan Dep’t of Treasury,
489 U.S. 803, 809 (1989)).

     Title I’s core two-step process is that the Federal
Government sets end goals and the States choose the means to
attain those goals. See Michigan, 213 F.3d at 687; see also
Virginia, 108 F.3d at 1410. EPA’s theory – that EPA can
define the end goals for the good neighbor provision and
simultaneously issue federal plans to implement them –
upends that process and places the Federal Government firmly
                              51
in the driver’s seat at both steps. The FIP-first approach is
incompatible with the basic text and structure of the Clean Air
Act.

     In our view, determining the level of reductions required
under Section 110(a)(2)(D)(i)(I) is analogous to setting a
NAAQS. And determining the level of reductions under the
good neighbor provision triggers a period during which States
may submit appropriate SIPs under Section 110(a)(1) or SIP
revisions under Section 110(k)(5).

     That approach fits comfortably within the statutory text
and structure. In both situations – setting a NAAQS and
defining States’ good neighbor obligations – EPA sets the
numerical end goal. And in both cases, once the standards are
set, “determining the particular mix of controls among
individual sources to attain those standards” remains “a State
responsibility.” 1998 NOx Rule, 63 Fed. Reg. 57,356, 57,369
(Oct. 27, 1998).

                               2

    Other contextual and structural factors also support our
conclusion that Section 110(a)(2)(D)(i)(I) preserves the basic
principle that States, not the Federal Government, are the
primary implementers after EPA has set the upwind States’
good neighbor obligations.

     Section 110’s particular function in the statutory scheme
is to give the States the first opportunity to implement the
national standards EPA sets under Title I. See 42 U.S.C.
§ 7410(a)-(c); see also Train, 421 U.S. at 79; Virginia, 108
F.3d at 1410; Michigan, 213 F.3d at 686-87. The good
neighbor requirement’s placement in Section 110(a) – a
provision calling for State-level regulation – strongly suggests
that Congress intended States to implement the obligations set
                                 52
forth in Section 110(a)(2)(D)(i)(I). By contrast, if EPA’s FIP-
first interpretation were to prevail, Section 110(a)(2)(D)(i)(I)
would not fit well in Section 110(a).

     Moreover, Title I contains a separate provision, Section
126, that explicitly contemplates direct EPA regulation of
specific sources that generate interstate pollution. See 42
U.S.C. § 7426(b)-(c); see also Appalachian Power, 249 F.3d
at 1046. Section 126(b) permits a State to petition EPA for a
finding that a source in a neighboring State emits pollution in
violation of Section 110(a)(2)(D)(i). 31       See 42 U.S.C.
§ 7426(b). Section 126(c) gives EPA discretion to impose
severe sanctions, including “emission limitations and
compliance schedules,” on a source for which a finding has
been made. 42 U.S.C. § 7426(c); see also 42 U.S.C. § 7509.
The fact that Congress explicitly authorized EPA to use direct
federal regulation to address interstate pollution suggests it
did not contemplate direct Federal regulation in Section
110(a)(2)(D)(i)(I). Cf. Whitman, 531 U.S. at 467-68; General
Motors Corp. v. United States, 496 U.S. 530, 541 (1990).
And as this Court has previously held, that Section 126
imposes “extrinsic legal constraints” on State autonomy “does
not affect a state’s discretion under § 110.” Appalachian
Power, 249 F.3d at 1047 (emphasis added).

     In sum, the text and context of the statute, and the
precedents of the Supreme Court and this Court, establish the
States’ first-implementer role under Section 110. We decline

     31
       Section 126(b)’s text refers to “section 7410(a)(2)(D)(ii).”
42 U.S.C. § 7426(b). This Court has identified the cross-reference
to paragraph (ii), instead of paragraph (i), as scrivener’s error. See
Appalachian Power, 249 F.3d at 1040-44.
                                 53
to adopt a reading of Section 110(a)(2)(D)(i)(I) that would
blow a hole in that basic structural principle. 32

                                  3

     The novelty of EPA’s approach underscores its flaws. In
the past, EPA has applied the good neighbor provision in the
States-first way we have outlined here.

     The 1998 NOx Rule (which we addressed in Michigan)
quantified each State’s good neighbor obligation but then
gave the States 12 months to submit SIPs to implement the
required reductions. See 63 Fed. Reg. at 57,358, 57,450-51;
42 U.S.C. § 7410(k)(5). Indeed, EPA explicitly assured
States that the Rule did not intrude on their authority to
choose the means to achieve the EPA-defined end goal. See
1998 NOx Rule, 63 Fed. Reg. at 57,369. EPA then explained,
persuasively, why it made sense not to deviate from Title I’s
standard division of labor in the good neighbor context:

          The task of determining the reductions necessary to
     meet section 110(a)(2)(D) involves allocating the use of
     the downwind States’ air basin. This area is a commons
     in the sense that the contributing State or States have a
     greater interest in protecting their local interests than in
     protecting an area in a downwind State over which they
     do not have jurisdiction and for which they are not
     politically accountable. Thus, in general, it is reasonable
     to assume that EPA may be in a better position to
     determine the appropriate goal, or budget, for the

     32
        We conclude that EPA’s interpretation on the FIPs issue is
contrary to the text and context of the statute (a Chevron step 1
violation), in the alternative is absurd (a Chevron step 1 violation),
and again in the alternative is unreasonable (thus failing Chevron
step 2 if we get to step 2).
                              54
    contributing States, while leaving [it] to the contributing
    States’ discretion to determine the mix of controls to
    make the necessary reductions.

Id. at 57,370 (emphases added).

     In Michigan, this Court held that the 1998 Rule did not
transgress the Train-Virginia federalism bar. But the terms of
the Michigan Court’s approval highlight how flagrantly the
new Transport Rule crosses that line. We said: “EPA does
not tell the states how to achieve SIP compliance. Rather,
EPA looks to section 110(a)(2)(D) and merely provides the
levels to be achieved by state-determined compliance
mechanisms.” 213 F.3d at 687 (emphasis added). We
emphasized that States had a “real choice” how to implement
the required reductions. Id. at 688.

     Like the 1998 NOx Rule, the 2005 Clean Air Interstate
Rule gave States the first crack at implementing the
reductions required by EPA. See 70 Fed. Reg. 25,162, 25,263
(May 12, 2005) (requiring SIPs within 18 months). When
EPA issued CAIR FIPs in April 2006, about a year after it
promulgated CAIR, it clarified that it intended the FIPs to
serve as a “Federal backstop” to the ongoing SIP process, and
did not intend to “take any other steps to implement FIP
requirements that could impact a State’s ability to regulate
their sources in a different manner” until “a year after the
CAIR SIP submission deadline.” See CAIR FIPs, 71 Fed.
Reg. 25,328, 25,330 (Apr. 28, 2006). That timetable, EPA
assured the States, would allow EPA “to approve timely SIPs
before implementation of FIP requirements occurs.” Id. at
25,331 (emphasis added).

     In both the 1998 NOx Rule and the 2005 CAIR, EPA was
therefore careful not to infringe the States’ first-implementer
                                55
role. EPA’s own past practice and statements illustrate the
anomaly of its new FIP-first approach.

                                D

    On a separate tack, EPA does not concede that it denied
the States their rightful chance to implement their good
neighbor obligations.     It contends States did have an
opportunity to submit SIPs. In EPA’s view, once it issued the
2006 24-hour PM2.5 NAAQS, States had three years under
Section 110(a)(1) to seek and obtain EPA approval of SIPs
addressing their good neighbor obligations.

     But to reiterate, the problem is that the three-year period
expired before EPA issued the Transport Rule and defined the
good neighbor obligations of upwind States. EPA has an
answer for that – one we find extraordinarily unpersuasive. In
its view, each State should have come up with (i) its own
definition of “amounts which will . . . contribute
significantly” and (ii) its own modeling and methodology for
applying that definition. See EPA Br. 48 (“EPA has never
stated that its methodology is the only way”) (emphasis
omitted).

      In effect, EPA claims the statute requires each State to
take its own stab in the dark at defining “amounts which will
. . . contribute significantly” to a downwind State’s
nonattainment. The State would then have to apply that
homemade definition         using its       own    homemade
                33
methodology.

    33
        EPA points to guidance documents it issued in 2006 and
2009. Those documents further undermine EPA’s contention that
the stab in the dark was a realistic opportunity for States to avoid
being pulled into the Transport Rule FIPs.
                                 56
    Of course, once a State takes its stab, EPA could
disapprove it – especially if the State defined its own

     The 2006 document, published after CAIR but before North
Carolina, did not apply to CAIR States. See EPA, 2006 Guidance
at 4. It told non-CAIR States that “EPA anticipates, based upon
existing information developed in connection with the CAIR, that
emissions from sources in States not covered by the CAIR do not
contribute significantly to nonattainment or interfere with
maintenance of the 8-hour ozone or PM2.5 NAAQS in any other
State.” Id. at 5.
     The 2009 guidance document concerned the 2006 24-hour
PM2.5 NAAQS, which was not covered by CAIR. The seven-page
document included three paragraphs of vague guidance on
“significant contribution” under Section 110(a)(2)(D). See EPA,
Guidance on SIP Elements Required Under Sections 110(a)(l) and
(2) for the 2006 24-Hour Fine Particle (PM2.5) National Ambient
Air Quality Standards (NAAQS) 3 (Sept. 25, 2009) (EPA, 2009
Guidance) (“The state’s conclusion must be supported by an
adequate technical analysis. Information to support the state’s
determination with respect to significant contribution to
nonattainment might include, but is not limited to, information
concerning emissions in the state, meteorological conditions . . . ,
monitored ambient concentrations . . . , the distance to the nearest
area that is not attaining the NAAQS in another state, and air
quality modeling.”); cf. 1998 NOx Rule, 63 Fed. Reg. at 57,370 (if
EPA does not identify the “acceptable level of NOx reductions, the
upwind State would not have guidance as to what is an acceptable
submission”).
     The 2009 document ordered the States, equipped with that
vague guidance, to submit SIPs to address Section
110(a)(2)(D)(i)(I) for 24-hour PM2.5. But in the same breath, it
warned them that EPA itself intended to “complete a rule to address
interstate pollution transport in the eastern half of the continental
United States.” EPA, 2009 Guidance at 3. EPA did not say what
would happen if a State’s approach did not coincide with the
approach EPA was developing for its own rule, but experience tells
the tale.
                              57
obligation to be less than what EPA deemed it to be.
Experience appears to bear that out: Petitioners point out that
every Transport Rule State that submitted a good neighbor
SIP for the 2006 24-hour PM2.5 NAAQS was disapproved.
See State & Local Br. 29-31; State & Local Reply Br. 5-7.

    That should not come as a surprise. In the 1998 NOx
Rule, EPA acknowledged that pre-Rule stabs in the dark were
bound to fail. “Without determining an acceptable level of
NOx reductions,” EPA warned, “the upwind State would not
have guidance as to what is an acceptable submission.” 63
Fed. Reg. at 57,370. And States would incur significant costs
developing those SIP submissions.

     As EPA repeatedly reminds this Court, interstate
pollution is a collective problem that requires a
comprehensive solution. See EPA Br. 5 (“Absent effective
federal control, individual States often have little economic or
political incentive to self-impose regulatory controls (and
attendant costs) within their States solely to address air
quality problems in other States.”). And EPA itself has
recognized that having each State independently guess at its
own good neighbor obligations is not a plausible solution to
interstate pollution: “It is most efficient – indeed necessary –
for the Federal government to establish the overall emissions
levels for the various States.” 1998 NOx Rule, 63 Fed. Reg. at
57,370 (emphasis added).

     Yet EPA now encourages us to suspend disbelief and
conclude that under the statute, a State’s only chance to avoid
FIPs is to make a successful stab in the dark – a feat that not
one Transport Rule State managed to accomplish. EPA
clearly does not believe the stab-in-the-dark approach would
really permit States to avoid FIPs – its own past statements
                                 58
show that. But EPA’s authority to issue these FIPs rests on
our accepting its rickety statutory logic.

      We decline the invitation. Our duty is to “interpret the
statute as a symmetrical and coherent regulatory scheme and
fit, if possible, all parts into an harmonious whole.” FDA v.
Brown & Williamson Tobacco Corp., 529 U.S. 120, 133
(2000) (citations and internal quotation marks omitted).
EPA’s FIP-first approach fails that test.

     When EPA quantifies States’ good neighbor obligations,
it must give the States a reasonable first opportunity to
implement those obligations. That approach reads Section
110(a)(2)(D)(i)(I) in harmony with the rest of Section 110. It
preserves Title I’s Federal-State division of labor – a division
repeatedly reinforced by the Supreme Court and this Court.
And it accords with the commonsense notion that Congress
did not design the good neighbor provision to set the States up
to fail. 34

    34
        The dissent contends that the States’ challenge on this issue
comes too late. We disagree. The dissent conflates (i) EPA’s prior
disapproval of certain States’ SIPs and (ii) EPA’s decision to
quantify the good neighbor obligation and to simultaneously issue
FIPs rather than to issue a SIP call for SIP revisions (or to allow
new SIPs). Petitioners are challenging only the latter point. And
EPA announced its final decision to proceed that way in the
Transport Rule itself. Put another way, the statute says that EPA
must issue a FIP within two years after a State fails to make a
“required submission” or submits a deficient SIP. But a State
cannot be “required” to implement its good neighbor obligation in a
SIP “submission” – nor be deemed to have submitted a deficient
SIP for failure to implement the good neighbor obligation – until it
knows the target set by EPA. In this case, EPA set the relevant
target in the Transport Rule. Petitioners’ challenge to the Transport
Rule’s FIPs is entirely timely.
                              59
                              IV

     The decision whether to vacate a flawed rule “depends on
the seriousness of the order’s deficiencies (and thus the extent
of doubt whether the agency chose correctly) and the
disruptive consequences of an interim change that may itself
be changed.” Allied-Signal, Inc. v. NRC, 988 F.2d 146, 150-
51 (D.C. Cir. 1993) (internal quotation marks omitted); see
also Davis County Solid Waste Mgmt. v. EPA, 108 F.3d 1454,
1459 (D.C. Cir. 1997).

     Here, we have no doubt that the agency chose incorrectly.
The Transport Rule stands on an unsound foundation –
including EPA’s flawed construction of the statutory term
“amounts which will . . . contribute significantly to
nonattainment.”      42 U.S.C. § 7410(a)(2)(D)(i).       That
deficiency is too fundamental to permit us to “pick and
choose portions” of the rule to preserve. North Carolina v.
EPA, 531 F.3d 896, 929 (D.C. Cir. 2008). And as with the
Clean Air Interstate Rule, the Transport Rule’s “fundamental
flaws foreclose EPA from promulgating the same standards
on remand.” Id. (internal quotation marks omitted). EPA’s
chosen manner of implementing the Rule – issuing FIPs
without giving the States a post-Rule opportunity to submit
SIPs – also rests on a misreading of the statute.

     We therefore vacate the Transport Rule rulemaking
action and FIPs, and remand to EPA.

     The remaining question is the status of CAIR. In North
Carolina, this Court initially held that CAIR’s “fundamental
flaws” required vacatur. 531 F.3d at 929. On rehearing, the
Court reconsidered its initial decision and modified its order
to remand CAIR without vacatur. North Carolina v. EPA,
550 F.3d 1176, 1178 (D.C. Cir. 2008). The Court noted that
under our precedents, it is appropriate to remand without
                               60
vacatur “where vacatur would at least temporarily defeat the
enhanced protection of the environmental values covered by
the EPA rule at issue.” Id. (internal quotation marks,
brackets, and ellipsis omitted). The Court was “convinced
that, notwithstanding the relative flaws of CAIR, allowing
CAIR to remain in effect until it is replaced by a rule
consistent with our opinion would at least temporarily
preserve the environmental values covered by CAIR.” Id.

     In accordance with our Order granting the motions to stay
the Transport Rule, EPA has continued to administer CAIR.
See Order, No. 11-1302, at 2 (D.C. Cir. Dec. 30, 2011); see
also http://www.epa.gov/cair. Vacating CAIR now would
have the same consequences that moved the North Carolina
Court to stay its hand – and indeed might be more severe
now, in light of the reliance interests accumulated over the
intervening four years. We therefore conclude, as did the
Court in North Carolina, that the appropriate course is for
EPA to continue to administer CAIR pending its development
of a valid replacement. 35

                              ***

     We vacate the Transport Rule and the Transport Rule
FIPs and remand this proceeding to EPA. EPA must continue
administering CAIR pending the promulgation of a valid
replacement.

                                                     So ordered.

    35
        The North Carolina Court did “not intend to grant an
indefinite stay of the effectiveness” of its decision. 550 F.3d at
1178. We likewise expect that EPA will proceed expeditiously on
remand.
     ROGERS, Circuit Judge, dissenting: To vacate the Transport
Rule, the court disregards limits Congress placed on its
jurisdiction, the plain text of the Clean Air Act (“CAA”), and
this court’s settled precedent interpreting the same statutory
provisions at issue today. Any one of these obstacles should
have given the court pause; none did. The result is an unsettling
of the consistent precedent of this court strictly enforcing
jurisdictional limits, a redesign of Congress’s vision of
cooperative federalism between the States and the federal
government in implementing the CAA based on the court’s own
notions of absurdity and logic that are unsupported by a factual
record, and a trampling on this court’s precedent on which the
Environmental Protection Agency (“EPA”) was entitled to rely
in developing the Transport Rule rather than be blindsided by
arguments raised for the first time in this court.

      Congress has limited the availability of judicial review of
challenges to final rules promulgated by the EPA in two ways
that are relevant here. Under CAA section 307(b)(1), 42 U.S.C.
§ 7607(b)(1), petitions for judicial review must be filed within
sixty days of promulgation of a final rule, and under CAA
section 307(d)(7)(B), 42 U.S.C. § 7607(d)(7)(B), “[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.” The court has, until
today, strictly enforced these requirements, which exist for two
important reasons: to enforce repose so that the rulemaking
process is not crippled by surprise challenges to matters that
were rightfully presumed settled, and to guarantee an agency’s
expert consideration and possible correction of any flaws in its
rules before the matter reaches a court. Instead the court casts
aside both jurisdictional provisions, upending these two
fundamental principles. In so doing, the court thus fails to
“maintain uniformity of the court’s decisions” on these
“question[s] of exceptional importance.” FED. R. APP. P.
35(a)(1) & (2).
                                2

     As one basis underlying its vacatur of the Transport Rule,
the court permits a collateral attack on prior final rules in which
EPA disapproved state implementation plan (“SIP”) submissions
with respect to the “good neighbor provision,” CAA
§ 110(a)(2)(D)(i)(I), 42 U.S.C. § 7410(a)(2)(D)(i)(I), or found
States failed to submit such a SIP at all. In those Final SIP
Rules, EPA unambiguously stated its interpretation that States
had an independent obligation under section 110(a) to submit
“good neighbor” SIPs regardless of whether EPA first quantified
each State’s emission reduction obligations. Under section
307(b)(1), States had sixty days to seek judicial review of those
Final SIP Rules to challenge EPA’s interpretation of section
110(a).      EPA’s authority to promulgate the federal
implementation plans (“FIPs”), pursuant to section 110(c), in the
Transport Rule was triggered by EPA having published those
Final SIP Rules, and under section 307(b)(1) States may not
collaterally attack the propriety of those Final SIP Rules now.
This is not a mere technicality — EPA developed and
promulgated the Transport Rule with the knowledge that all but
three States did not seek judicial review of its interpretation of
section 110(a) and in light of this court’s opinion in North
Carolina v. EPA, 531 F.3d 896 (D.C. Cir. 2008). The court
therefore lacks jurisdiction under section 307(b)(1) to consider
States’ belated challenge to EPA’s interpretation of section
110(a) as part of its review of the Transport Rule; the petitions
challenging the Final SIP Rules filed by three States are not
consolidated with the petitions challenging the Transport Rule,
as they involve separate provisions of the CAA and different
final rules. The court glosses over the plain text and structure of
section 110 to avoid that reality, and in the process rewrites
sections 110(a) and 110(c), altering the triggering mechanism
for States’ obligations to submit “good neighbor” SIPs and
EPA’s obligation to promulgate FIPs, based on its own
speculative conclusion that the process Congress adopted is
“impossible” for States to follow. To reach its conclusion, the
                                3

court today holds that the CAA requires what it previously held
the CAA ambiguously permits EPA to do.

     As another ground to vacate the Transport Rule, the court
concludes that, under EPA’s two-step approach to defining
“significant contribution” under the “good neighbor”
requirement in section 110(a)(2)(D)(i)(I), a State “may be
required to reduce its emissions by an amount greater than the
‘significant contribution’ that brought it into the program in the
first place.” Op. at 34. No objection was made during the
Transport Rule administrative proceedings to EPA’s approach,
let alone its statutory authority, to use different, unrelated
measures of significance for inclusion and budget-setting.
Acknowledging this, the court reaches beyond the Transport
Rule administrative record, despite section 307(d)(7)(B)’s clear
command, to find jurisdiction. But the three reasons it offers do
not add up. By suggesting that EPA acted inconsistently with
North Carolina in adopting a two-step approach, with different,
unrelated measures of “significant contribution” for inclusion
and budget-setting, the court ignores that in North Carolina this
court expressly declined to disturb that same approach. 531
F.3d at 916-17. In relying on a comment expressing a policy
preference made during the administrative proceedings of the
predecessor of the Transport Rule (to which petitioners failed to
alert the court until rebuttal oral argument), the court ignores
that the comment does not challenge EPA’s statutory authority
to pursue its two-step approach, and the fact that no one
petitioned the court in North Carolina for judicial review based
on that comment, which is why the court in North Carolina left
that approach undisturbed, see id. The court also ignores that
the prior rulemaking docket was not incorporated into the
Transport Rule administrative proceedings. Together, these
“ignored” facts demonstrate that EPA had no reason to suspect
any party before it in the Transport Rule administrative
proceedings subscribed to the objection stated in the old
                                4

comment, nor even to locate and consider that comment.
Finally, EPA’s rejection on technical grounds of alternative
approaches for measuring “significant contribution” based solely
on air quality, not cost and air quality, during the Transport Rule
administrative proceedings says nothing about whether EPA
would have refused to entertain petitioners’ new objection in
this court that EPA was statutorily required to modify its two-
step approach by making the inclusion threshold of step-one a
floor for reductions under the cost approach of step-two. The
alternative approaches EPA considered and rejected are not even
the approaches petitioners now endorse, and, in any event,
cannot excuse a failure to state their objection with “reasonable
specificity” during the Transport Rule administrative
proceedings.

     The court’s remaining reasons for vacatur lack merit. First,
the court concludes EPA violated the “good neighbor”
provision’s “proportionality” requirement, but petitioners
presented no such statutory authority argument in their briefs,
instead challenging EPA’s grouping of States for purposes of
SO2 reduction as arbitrary and capricious. Even if they had, the
court lacks jurisdiction because the argument is premised on
speculation that EPA’s two-step approach to measuring
“significant contribution” might require States to reduce
emissions by more than the amount that triggered their
inclusion in the Transport Rule in the first place — the same
argument over which the court lacks jurisdiction due to
petitioners’ failure to challenge EPA’s statutory authority for its
approach during the Transport Rule administrative proceedings.
On the merits, the court’s “proportionality” conclusion
contradicts the court’s opposite conclusion in North Carolina
 that EPA’s measurement of a State’s “significant contribution”
did not have to correlate directly with its air quality impact
“relative to other upwind states.” 531 F.3d at 908 (citing
Michigan v. EPA, 213 F.3d 663, 679 (D.C. Cir. 2000)).
                                5

Similarly, the court’s holding that EPA failed to consider the
effect of in-state emissions is likewise premised on the sub-
threshold argument. Further, the court’s “in-State emissions”
and its “over-control” conclusions are contradicted by the
Transport Rule administrative record.

                                I.

     Section 307(b)(1) of the CAA, 42 U.S.C. § 7607(b)(1),
requires a petition for judicial review of EPA final actions to be
filed within sixty days of publication in the Federal Register.
“The filing period in the Clean Air Act ‘is jurisdictional in
nature’; if the petitioners have failed to comply with it, we are
powerless to address their claim.” Med. Waste Inst. & Energy
Recovery Council v. EPA, 645 F.3d 420, 427 (D.C. Cir. 2011)
(quoting Motor & Equip. Mfrs. Ass’n v. Nichols, 142 F.3d 449,
460 (D.C. Cir. 1998)).

         The Supreme Court has explained that “judicial review
         provisions are jurisdictional in nature and must be
         construed with strict fidelity to their terms. This is all
         the more true of statutory provisions specifying the
         timing of review, for those time limits are, as we have
         often stated, mandatory and jurisdictional, and are not
         subject to equitable tolling.”

Slinger Drainage, Inc. v. EPA, 237 F.3d 681, 682 (D.C. Cir.
2001) (quoting Stone v. Immigration & Naturalization Serv.,
514 U.S. 386, 405 (1995) (internal quotation marks, alterations,
and citation omitted)). Accordingly, in Medical Waste this court
dismissed a challenge to a final rule for lack of jurisdiction
where petitioners failed to seek judicial review when EPA “first
use[d]”its statutory approach, 645 F.3d at 427 (emphasis added).
“An objection is considered a collateral attack only if ‘a
reasonable [petitioner] . . . would have perceived a very
                                   6

substantial risk that the [rule] meant what the [agency] now says
it meant.” S. Co. Servs., Inc. v. FERC, 416 F.3d 39, 45 (D.C. Cir.
2005) (internal quotations marks, citation, and alterations
omitted).

     The Transport Rule, responding to States’ failures to submit
adequate “good neighbor” SIPs, is a FIP that addresses the
interstate transport of emissions in twenty-seven States in the
eastern United States for three national ambient air quality
standards (“NAAQS”): the 1997 8-hour ozone NAAQS, the
1997 annual PM2.5 NAAQS, and the 2006 24-hour PM2.5
NAAQS.1 See Transport Rule, 76 Fed. Reg. 48,208 (Aug. 8,
2011). In the Transport Rule, EPA determined that the same
level of emission reduction obligations would apply for each of
these three NAAQS. See id. at 48,264. Over a year prior to
promulgating the Transport Rule, EPA promulgated Final SIP
Rules publishing findings that twenty-nine States and territories
had failed to submit SIPs with the required “good neighbor”

        1
         Section 110(a)(1) of the CAA provides that States must
submit SIPs within three years (or less, if set by EPA) of promulgation
of a NAAQS. Section 110(a)(2)(D), in turn, requires States to submit
SIPs with “adequate provisions”

        (i) prohibiting, consistent with the provisions of this
        subchapter, 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
                interfere with maintenance by, any other State with
                respect to any such national primary or secondary
                ambient air quality standard.

42 U.S.C. § 7410(a)(2)(D)(i)(I).
                                   7

provisions for the 2006 24-hour PM2.5 NAAQS.2 See Failure to
Submit Good Neighbor SIP Finding, 75 Fed. Reg. 32,673 (June
9, 2010); Tennessee Failure to Submit Good Neighbor SIP
Finding, 76 Fed. Reg. 43,180 (July 20, 2011). In these Final SIP
Rules, EPA stated:

            This finding establishes a 2-year deadline for
            promulgation by EPA of a FIP, in accordance with
            section 110(c)(1), for any state that either does not
            submit or EPA can not approve a SIP as meeting the
            attainment and maintenance requirements of [the “good
            neighbor” provision] for the 2006 24-hour PM2.5
            NAAQS. . . . This action . . . does not pertain to . . . a
            SIP Call pursuant to section 110(k)(5).

Id. at 32,674; see also 76 Fed. Reg. at 43,180-81 (Tennessee).
The Final SIP Rules further state that the findings of failure to
submit were of nationwide scope and effect, and therefore
pursuant to section 307(b)(1), 42 U.S.C. § 7607(b)(1), a petition
for judicial review had to be filed with the D.C. Circuit within
sixty days of the publication of the findings in the Federal
Register. See Failure to Submit Good Neighbor SIP Finding, 75

        2
          The States and territories were: Alaska, Colorado, Hawaii,
Idaho, Illinois, Iowa, Louisiana, Maryland, Michigan, Minnesota,
Montana, Nebraska, North Dakota, Oklahoma, Oregon, Pennsylvania,
South Dakota, Utah, Virginia, Washington, West Virginia, Wisconsin,
Wyoming, the District of Columbia, American Samoa, the
Commonwealth of the Northern Mariana Islands, Guam, Puerto Rico,
and the U.S. Virgin Islands. See Failure to Submit Good Neighbor
SIP Findings, 75 Fed. Reg. at 32,674. (On July 20, 2011, EPA
published an additional finding that Tennessee had failed to submit a
“good neighbor” SIP for the 2006 24-hour PM2.5 NAAQS. See
Tennessee Failure to Submit Good Neighbor SIP Finding, 76 Fed.
Reg. 43,180 (July 20, 2011). Tennessee is not a petitioner here.
                                 8

Fed. Reg. at 32,675-76; Failure to Submit Good Neighbor SIP
Finding (Tennessee), 76 Fed. Reg. at 43,182-83. No State filed
a petition for judicial review.

     Other States submitted 2006 24-hour PM2.5 SIPs with “good
neighbor” provisions, but EPA disapproved that portion of the
SIP submissions of ten States covered by the Transport Rule:
Alabama, Georgia, Indiana, Kansas, Kentucky, Missouri, New
Jersey, New York, North Carolina, and Ohio.3 In the Final SIP
Rules, EPA rejected objections that States had no obligation to
submit SIPs until EPA had quantified the States’ amount of
“significant contribution” and that EPA was required to permit
States to revise their SIPs prior to imposing a FIP pursuant to 42
U.S.C. § 7410(c)(1).4 The Final SIP Rules disapproving the
“good neighbor” SIP submissions alerted the affected States that
“petitions for judicial review must be filed in the United States
Court of Appeals for the appropriate circuit by September 19,

        3
           See Approval and Promulgation of Air Quality
Implementation Plan; Alabama; Disapproval of Interstate Transport
Submission for the 2006 24-Hour PM2.5 Standards, 76 Fed. Reg.
43,128 (July 20, 2011); 76 Fed. Reg. 43,159 (Georgia); 76 Fed. Reg.
43,175 (Indiana & Ohio); 76 Fed. Reg. 43,143 (Kansas); 76 Fed. Reg.
43,136 (Kentucky); 76 Fed. Reg. 43,156 (Missouri); 76 Fed. Reg.
43,153 (New Jersey & New York); 76 Fed. Reg. 43,167 (North
Carolina).
        4
           See 76 Fed. Reg. at 43,131-33 (Alabama); 76 Fed. Reg. at
43,162-64 (Georgia); 76 Fed. Reg. at 43,176-79 (Indiana & Ohio); 76
Fed. Reg. at 43,145-47 (Kansas); 76 Fed. Reg. at 46,139-41
(Kentucky); 76 Fed. Reg. at 43,170-72 (North Carolina). No
comments were submitted to the proposed disapproval of Missouri’s
“good neighbor” SIP submission, see 76 Fed. Reg. at 43,156, and only
one unrelated comment was submitted to New York and New Jersey’s
proposed disapproval, see 76 Fed. Reg. at 43,154. None of these three
States is a petitioner here.
                                  9

2011,” see, e.g., 76 Fed. Reg. at 43,136 (Alabama), the sixty day
deadline prescribed by CAA section 307(b)(1), 42 U.S.C.
§ 7607(b)(1). Only Georgia, Kansas, and Ohio filed petitions
for judicial review of EPA’s disapproval action and their
petitions are not consolidated with the petitions now under
review, as they challenge different final rules.5

                               A.
     Now that EPA has, as it warned, promulgated FIPs for
States covered by the Transport Rule, State petitioners contend
that EPA lacked authority to do so for the 2006 24-hour PM2.5
NAAQS because “a FIP can cure a deficiency only in a required
submission, and States were not required to include SIP
provisions to eliminate ‘significant contributions’ not yet
defined by EPA legislative rule.” State Petrs’ Br. at 31. If a
State wished to object that under section 110(a) it had no
obligation to include “good neighbor” provisions in its SIP until
EPA quantified its “significant contribution” in emission
reduction budgets, then the CAA required it do so at the time
EPA found it had not met its SIP “good neighbor” obligation.
State petitioners offer no response in their reply brief to EPA’s

        5
           See Ohio v. EPA, No. 11-3988 (6th Cir.); Westar Energy,
Inc. v. EPA, No. 11-1333 (D.C. Cir.); Kansas v. EPA, No. 12-1019
(D.C. Cir.); Georgia v. EPA, No. 11-1427 (D.C. Cir.). The court
consolidated the two Kansas cases (Nos. 11-1333 and 12-1019) on
January 10, 2012. See Order Case No. 12-1019 (Jan. 10, 2012). The
court also severed from Kansas’s Transport Rule petition, Case No.
11-1329, its challenge to EPA’s disapproval of its “good neighbor”
SIP submission. See id. On January 10, 2012, the Sixth Circuit
granted the parties’ joint motion to hold the case in abeyance pending
the outcome of the instant case. On January 18, 2012, the D.C. Circuit
issued orders holding the Kansas and Georgia cases in abeyance
pending the outcome of the appeal in the present case.
                                10

position that this argument is a collateral attack barred by
section 307(b)(1). See Resp.’s Br. at 46-47.

     Ignoring the plain terms of section 307(b)(1) as well as this
court’s long-settled precedent, the court reaches the merits of
this issue despite its lack of jurisdiction. In the Final SIP Rules
finding States had failed to submit “good neighbor” SIPs, EPA
put covered States on unambiguously “sufficient notice” that it
interpreted the CAA as placing an independent obligation on
each State to include adequate “good neighbor” provisions in its
SIP regardless of whether EPA had prospectively quantified its
amount of “significant contribution.” S. Co. Servs., 416 F.3d at
44. By the very nature of the Final SIP Rules, EPA was
informing States that they had not met their obligation to submit
“good neighbor” SIPs, an obligation States now contend they
never had. Furthermore, EPA warned that its findings of failure
to submit triggered the two-year FIP clock of section 110(c)(1),
and not the SIP Call provision of section 110(k)(5). See Failure
to Submit Good Neighbor SIP Finding, 75 Fed. Reg. at 32,673-
74; Failure to Submit Good Neighbor SIP Finding (Tennessee),
76 Fed. Reg. at 43,180-81. In alerting States to the judicial
review deadline, EPA reiterated that States had sixty days to file
“any petitions for review . . . related to [] findings of failure to
submit SIPs related to the requirements of [the ‘good neighbor’
provision].” Failure to Submit Good Neighbor SIP Finding, 75
Fed. Reg. at 32,676; Failure to Submit Good Neighbor SIP
Finding (Tennessee), 76 Fed. Reg. at 43,183 (emphases added).
Not having sought judicial review of the Final SIP Rules
determining that they failed to submit required “good neighbor”
SIPs, States may not now object that they were not required to
submit “good neighbor” SIPs until EPA first quantified their
reduction obligations. “The sixty day window provided by
statute has long since closed, and we may not reopen it and
entertain a belated challenge . . . now.” Med. Waste, 645 F.3d
at 427. Therefore, the court lacks jurisdiction over the collateral
                               11

attacks by petitioners Louisiana, Michigan, Nebraska,
Oklahoma, Virginia, and Wisconsin, as part of the Transport
Rule petitions, on EPA’s interpretation of section 110(a) stated
in the Final SIP Rules finding they failed to submit required
“good neighbor” SIPs.

    Similarly on notice, neither Alabama nor Indiana petitioned
for judicial review of EPA’s disapproval of their SIP
submissions. In the Final SIP Rule disapproving Alabama’s SIP
submission, EPA quotes one commenter as stating:

         EPA has not stated the amount of reduction they
         believe is needed to satisfy the transport requirements.
         . . . [T]he finish line isn’t even knowable (because EPA
         refuses to inform the states how much reduction is
         enough to satisfy the requirements). EPA seems to say
         that it has to be whatever the final Transport Rule says,
         even though there is no final Transport Rule.

76 Fed. Reg. at 43,131. EPA responded that “the state
obligation stems from the CAA itself. . . . States had an
opportunity to conduct their own analyses regarding interstate
transport.” Id. (emphasis added). EPA also warned that it was
obligated to promulgate a FIP within two years of disapproving
Alabama’s SIP, see id. at 43,132, and rejected comments that the
SIP Call revision process of section 110(k)(5) should apply,
because, in its view, that provision applies only where there is
an existing, approved SIP, see id. at 43,133. In its summary of
Indiana’s comments on the proposed disapproval of its SIP
submission, EPA noted that Indiana took the position that EPA
“should provide [the State] the opportunity to revise its [] SIP
once the Transport Rule is completed” and that a “FIP is []
contrary to the spirit of the CAA by unnecessarily limiting
[S]tate authority.” 76 Fed. Reg. at 43,177. EPA responded,
relying on the CAA’s plain text, that Indiana was required by
                                 12

section 110(a) to submit SIPs with adequate “good neighbor”
provisions, and that upon disapproving its submission, EPA had
a legal obligation under the CAA to promulgate a FIP. See id.
Alabama and Indiana’s comments, along with EPA’s responses,
demonstrate that the two States were on clear notice of EPA’s
interpretation of the CAA as imposing an independent obligation
on the States to submit “good neighbor” SIPs, even in the
absence of EPA-quantified amounts of “significant
contribution.” Yet neither Alabama nor Indiana sought judicial
review of EPA’s Final SIP Rules disapproving their SIP
submissions, and their attempt now to collaterally attack those
Final SIP Rules is barred. See Med. Waste, 645 F.3d at 427.

     Given EPA’s clear statements in its Final SIP Rules
disapproving States’ SIP submissions and finding they failed to
submit required “good neighbor” SIPs, there is no basis to
conclude that State petitioners might not have perceived a
substantial risk that EPA meant what it said. See S. Co. Servs.,
416 F.3d at 45. The instant case, involving consolidated
petitions challenging the Transport Rule, is therefore not the
appropriate forum to decide whether, under section 110(a),
States have an independent obligation to submit “good
neighbor” SIPs when EPA has not first quantified amounts of
“significant contribution.” EPA promulgated Final SIP Rules in
which it made its interpretation clear; judicial challenge to those
rules is the proper forum to decide the question.6

        6
           The same is true for Ohio, Georgia, and Kansas, which
petitioned for judicial review of EPA’s disapproval of their “good
neighbor” SIP submissions. The court’s “review in th[e] [instant] case
is limited to” the Transport Rule, and the court thus “lack[s]
jurisdiction over” challenges to those States’ SIP disapprovals
premised on whether they have an independent obligation to submit
“good neighbor” SIPs. Coalition for Responsible Regulation, Inc. v.
EPA, 684 F.3d 102, 149 (D.C. Cir. 2012). The petitions filed by those
                                  13

     Indeed, the court itself forecasts this conclusion: “EPA’s
many SIP disapprovals and findings of failure to submit share
one problematic feature: EPA made all of those findings before
it told the States what emission reductions their SIPs were
supposed to achieve under the “good neighbor” provision.” Op.
at 47 (emphasis in original). However “problematic” the court
views this “feature” of those Final SIP Rules, this is a “problem”
this three-judge panel is powerless to resolve because it lacks
jurisdiction under CAA section 307(b)(1) to entertain State
petitioners’ “back-door challenge” to EPA’s interpretation of
section 110(a) stated in those Final SIP Rules. Natural Res. Def.
Council v. EPA, 824 F.2d 1146, 1150 (D.C. Cir. 1987) (internal
quotation marks omitted).

     The court responds that the dissent “conflates” State
petitioners’ collateral attack on the Final SIP Rules announcing
their Section 110(a) SIP obligations with State petitioners’
supposedly distinct argument that EPA cannot promulgate a FIP
simultaneously with its quantification of a State’s emission

States challenging their SIP disapprovals are not consolidated with the
petitions before the court today, see supra n. 5, and Ohio’s petition is
pending in the Sixth Circuit. The court must therefore “decline [State]
[p]etitioners’ invitation to rule on the merits of cases which are
properly before different panels.” Id. This is all the more important
here, where EPA has not yet been afforded the opportunity to assert
an improper venue defense in the two cases pending before the D.C.
Circuit. See Tex. Mun. Power Agency v. EPA, 89 F.3d 858, 867 (D.C.
Cir. 1996); 42 U.S.C. § 7607(b)(1) (petitions for review of SIP
disapprovals may be brought only in the court of appeals “for the
appropriate circuit”) (emphasis added). If Georgia, Kansas, and Ohio
wish to avoid enforcement of the Transport Rule FIPs because they
contend EPA’s SIP disapprovals were in error, the proper course is to
seek a stay of EPA’s disapprovals in their pending cases; if granted,
a stay would eliminate the basis upon which EPA may impose FIPs on
those States. See 42 U.S.C. § 7410(c)(1)(B).
                                 14

reduction obligations. See Op. at 8 n.1, 58 n.34. This response
misleadingly quotes the statute, and in the process, proves the
dissent’s point. The court states “the statute says that EPA must
issue a FIP within two years after a State fails to make a
‘required submission’ or submits a deficient SIP. But a State
cannot be ‘required’ to implement its “good neighbor”
obligation in a SIP ‘submission’ . . . until it knows the target set
by EPA.” Id. at 58 n.34.7 That is not what the statute says.
Section 110(c) provides that:

            (1) The Administrator shall promulgate a Federal
            implementation plan at any time within 2 years after
            the Administrator --

            (A) finds that a State has failed to make a required
            submission . . . or

            (B) disapproves a State implementation plan
            submission in whole or in part;

            unless the State corrects the deficiency, and the
            Administrator approves the plan or plan revision,
            before the Administrator promulgates such Federal
            implementation plan.

42 U.S.C. § 7410(c)(1) (emphases added). EPA’s FIP obligation
is therefore not triggered, without more, by a State’s mere

        7
          Notice the circularity in the court’s statement. The court
says State petitioners’ “simultaneity” argument can be “[p]ut another
way,” Op. at 58 n.34, as an argument that States had no section 110(a)
SIP requirements until EPA quantified their emission reduction
budgets. Under section 307(b)(1), that is exactly the argument that
States were required to make in petitions for judicial review of the
Final SIP Rules setting forth EPA’s section 110(a) interpretation.
                               15

failure to submit a SIP required by section 110(a), but instead by
an explicit EPA Final Rule finding that the State either failed to
submit a required SIP or an adequate SIP. A challenge to EPA’s
interpretation of section 110(a) must therefore be brought as a
petition for judicial review of those Final SIP Rules announcing
that States failed to meet their section 110(a) “good neighbor”
SIP obligations. See Med. Waste, 645 F.3d at 427. Under the
plain terms of the CAA, EPA’s obligation (and authority) to
promulgate a FIP is triggered by those Final SIP Rules, and the
process by which EPA must promulgate a FIP is governed by
section 110(c), not, as the court posits, by section 110(a). The
court therefore, and not the dissent, does the conflating by
turning what should be a challenge to EPA’s FIP authority under
section 110(c) into a collateral attack on EPA’s interpretation of
section 110(a) set forth in the prior Final SIP Rules.

    The plain text of section 110(c)(1) obligates EPA to
promulgate a FIP “at any time” within two years of disapproving
a SIP submission or finding a State failed to submit a SIP. 42
U.S.C. § 7410(c)(1). Moreover, nothing in section 110(c)
requires EPA to reveal to States the content (i.e., the emission
reduction budgets) it intends to include in its FIP prior to
proposing a FIP. Although the CAA allows States to submit
SIPs to “correct[] the deficiency,” they must do so “before”
EPA’s promulgation of a FIP, which may occur “at any time”
within two years. Id.

    The court thus rewrites section 110(c)(1)’s unambiguous
grant of authority to EPA (and ultimate obligation of EPA) to
promulgate a FIP at any time within the two year window to
read: “unless but not until the State corrects the deficiency and
the Administrator approves the [SIP] or [SIP] revision, before
may the Administrator promulgates such [FIP].” “[A]s the
Supreme Court has emphasized time and again, courts have no
authority to rewrite the plain text of a statute.” Kay v. FCC, 525
                                16

F.3d 1277, 1279 (D.C. Cir. 2008). Because the CAA “means
what it says,” EPA was required, after publishing disapprovals
and findings of failure to submit SIPs, to promulgate FIPs within
two years, and it was not required to wait for States first to
submit SIPs. Landstar Express Am. v. Fed. Maritime Comm’n,
569 F.3d 493, 498 (D.C. Cir. 2009). The court’s attempt to
ferret out an argument about “simultaneity” as a distinct
challenge properly brought against the Transport Rule based on
EPA’s interpretation of section 110(a) is thus a straw man for its
endorsement of State petitioner’s collateral attack on EPA’s
interpretation of section 110(a) in the Final SIP Rules. Its
rewriting of section 110(c) is made all the more remarkable by
its recognition that “we must apply and enforce the statute as it’s
now written.” Op. at 8.

                                 B.
     Even if the court had jurisdiction over State petitioners’
challenge to their independent obligation to submit “good
neighbor” SIPs under CAA section 110(a), its statutory analysis
proceeds with no regard for the plain text and structure of the
CAA or for the deference owed to permissible agency
interpretations of statutes they administer where Congress has
left a gap for the agency to fill or the statute is ambiguous.

     “As in all statutory construction cases,” the court must
“begin with the language of the statute.” Barnhart v. Sigmon
Coal Co., Inc., 534 U.S. 438, 450 (2002). “[C]ourts must
presume that a legislature says in a statute what it means and
means in a statute what it says there. When the words of a
statute are unambiguous, then, this first canon is also the last:
judicial inquiry is complete.” Id. at 461-62 (quoting Connecticut
Nat. Bank v. Germain, 503 U.S. 249, 253-54 (1992) (internal
quotation marks and citation omitted)). Thus, under Chevron
U.S.A. Inc v. Natural Res. Def. Council, 467 U.S. 837, 842-44
(1984), the first step in statutory interpretation requires a
                                17

determination of “whether Congress has directly spoken to the
precise question at issue. If the intent of Congress is clear, that
is the end of the mater; for the court, as well as the agency, must
give effect to the unambiguously expressed intent of Congress,”
id. If, after applying traditional tools of statutory construction,
the court determines “the statute is silent or ambiguous with
respect to the specific issue,” then, under step two, the court will
defer to an agency’s statutory interpretation if it “is based on a
permissible construction of the statute.” Id. at 843.

     The questions regarding States’ obligations to submit “good
neighbor” SIPs are straightforward: (1) Do States have an
independent obligation to submit SIPs with adequate “good
neighbor” provisions; (2) if so, what triggers that obligation; (3)
if there is an obligation, what is the deadline for the SIP
submission; and (4) must EPA prospectively quantify each
States’ amount of “significant contribution” to downwind
nonattainment? The plain text of the statute provides equally
straightforward answers: (1) Yes; (2) promulgation of a
NAAQS; (3) within three years of promulgation of a NAAQS
(unless the EPA Administrator prescribes a shorter deadline);
and (4) no, but EPA may do so if it chooses.

    Section 109 of the CAA requires EPA to promulgate
NAAQS, a national health-based standard. See 42 U.S.C.
§ 7409. Section 110, in turn, provides that

         (a)(1) Each State shall . . . adopt and submit to the
         Administrator, within 3 years (or such shorter period as
         the Administrator may prescribe) after the
         promulgation of a national primary air quality
         standard (or any revision thereof) . . . a plan which
         provides for implementation, maintenance, and
         enforcement of such [] standard . . . within such State.
                              18

         (2) Each implementation plan submitted by a State
         under this chapter . . . shall
         ...
             (D) contain adequate provisions–
                  (i) prohibiting, consistent with the provisions
                  of this subchapter, 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 interfere with
                       maintenance by, any other State with
                       respect to any such [NAAQS].

Id. §§ (a)(1) & (a)(2)(D)(i)(I) (emphases added). The plain text
requires that within three years of EPA’s promulgation of a
NAAQS, States shall submit SIPs, and those SIPs shall include
adequate “good neighbor” provisions. This is the unambiguous
obligation and chronology established by Congress. EPA has
the first duty to set the NAAQS, and then States have series of
follow-up duties, listed in section 110(a), to ensure attainment
of the NAAQS. Among the duties clearly assigned to States is
the inclusion in SIPs of adequate “good neighbor” provisions.

    The court views this “interpretation” — that is, reading the
actual text of the statute — as a scene from Alice in
Wonderland. See Op. at 50. It concludes that “[i]n our view,
determining the level of reductions required under Section
110(a)(2)(D)(i)(I) is analogous to setting a NAAQS. And
determining the level of reductions under the “good neighbor”
provision triggers a period during which States may submit
                                  19

      SIPs.” Id. at 51. Even if the court’s analogy were sound,8
the premise of its analogy does not support its conclusion that
EPA’s determination of emission reduction obligations triggers
States’ obligations to submit “good neighbor” SIPs. Rather, the
court rewrites a decades-old statute whose plain text and
structure establish a clear chronology of federal and State
responsibilities. Nowhere does the CAA place a requirement on
EPA to quantify each State’s amount of “significant
contribution” to be eliminated pursuant to the “good neighbor”
provision, let alone include any provision relieving States of
their “good neighbor” SIP obligations in the event EPA does not
first quantify emission reduction obligations.9 The court’s
“view” that EPA “determining the level of reductions under the
“good neighbor” provision triggers the period during which
States may submit SIPs” is irrelevant in view of the
unambiguously plain text of section 110(a)(1) and
(a)(2)(D)(i)(I), and, if the statute were ambiguous, the court

        8
         The NAAQS are determined based on what is “requisite to
protect the public health” and “public welfare,” 42 U.S.C. §§
7409(b)(1) & (2), and are a uniform national standard. The “good
neighbor” provision, on the other hand, is not a separate national
standard, but instead is simply one of the CAA’s State-specific
mechanisms to ensure attainment of the NAAQS. See 42 U.S.C.
§ 7410(a)(2)(D)(i)(I).
        9
           The court’s comparison of section 110 to section 126, see
Op. at 52, conflates direct federal regulation of sources with EPA’s
statutory authority to enforce requirements that States comply with
their “good neighbor” SIP obligations. Given that Congress included
a specific provision obligating EPA to promulgate FIPs if States fail
to submit adequate SIPs within three years of promulgation of a
NAAQS, see CAA § 110(c)(1); 42 U.S.C. § 7410(c)(1), and EPA
relies on it in the Transport Rule, section 126's federal authorization
to regulate specific sources of emissions has no bearing on the
statutory analysis here.
                                20

would be required to defer to EPA’s interpretation that States
have an independent obligation to submit “good neighbor” SIPs
within three years of promulgation of the NAAQS because that
interpretation is permissible under the statute, see Chevron, 467
U.S. at 843. The court’s “role is ‘not to ‘correct’ the text so that
it better serves the statute’s purposes’; nor under Chevron may
[the court] ‘avoid the Congressional intent clearly expressed in
the text simply by asserting that [the court’s] preferred approach
would be better policy. The Congress has spoken plainly . . . .”
Virginia Dep’t of Med. Assistance Servs. v. Dep’t of Health &
Human Servs., 678 F.3d 918, 926 (D.C. Cir. 2012) (quoting
Engine Mfrs. Ass’n v. EPA, 88 F.3d 1075, 1089 (D.C. Cir.
1996)).

     Furthermore, the court’s holding is entirely at odds with the
holding in Michigan v. EPA, 213 F.3d 663 (D.C. Cir. 2000), see
LaShawn A. v. Barry, 87 F.3d 1389, 1395 (D.C. Cir. 1996) (en
banc). In Michigan, State petitioners contended that EPA
violated the CAA by prospectively informing States what their
nitrogen oxides (NOx) emission reduction budgets needed to be
to adequately eliminate their amounts of “significant
contribution” under the “good neighbor” provision, thus
acknowledging their independent obligation to submit adequate
“good neighbor” SIPs, see 213 F.3d at 686-87. State petitioners
in Michigan argued that EPA had no authority to do what the
State petitioners now before the court contend EPA has no
authority not to do. In Michigan the court deferred, pursuant to
Chevron step two, to EPA’s interpretation it could set State
emissions budgets prospectively, given section 110's “silence”
on the question, as a permissible exercise of EPA’s general
rulemaking authority under CAA section 301(a)(1), 42 U.S.C.
                                   21

§ 7601(a)(1).10 Inverting Michigan’s analysis of section 110, the
court holds that under Chevron step one, see Op. at 53 n.32,
section 110 itself unambiguously requires EPA to prospectively
inform States of their “good neighbor” emission reduction
requirements. See id. at 46-53. Nothing in section 110, section
301, or any other section of the CAA requires EPA to do this.
Instead the court today turns “may” into “must,” and holds that
if EPA does not exercise its general rulemaking authority in the
manner of the court’s design, then section 110(a)(1)’s and
110(a)(2)(D)(i)(I)’s mandatory, unambiguous requirements that
States submit adequate “good neighbor” SIPs within three years
of the promulgation of a NAAQS are erased from the statute by
judicial fiat — relieving States of the duty Congress imposed.11
The court offers no explanation for how its holding can be
squared with Michigan in this regard.

      The court’s rationale for rewriting the CAA’s plain text is
its own conclusion that “the upwind State’s obligation remains
impossible for the upwind State to determine until EPA defines
it.” Id. at 48 (first emphasis added). In its words, the statute
“requires each State to take its own stab in the dark . . . [and]
apply [a] homemade definition using its own homemade
methodology.” Id. at 55. The court concludes EPA’s

        10
           Section 301(a)(1) of the CAA provides that “[t]he
Administrator is authorized to prescribe such regulations as are
necessary to carry out his functions under this chapter.” 42 U.S.C.
§ 7601(a)(1).
        11
           Suffice it to say, it is extraordinarily unusual for a court to
conclude, at Chevron step one, that it must delete mandatory
obligations from a statute in order to accord with Congress’s plain
intent. See Op. at 53 n.32. It is all the more unusual to suggest that an
agency’s interpretation is “impermissible” at Chevron step two when
the interpretation parrots the text of the statute.
                                 22

interpretation (that is, following the statute’s plain text)
produces absurd results, see id. at 53 n.32. Pretermitting
whether there is a shred of record evidence to show such an
impossibility, a statutory outcome is absurd [only] if it defies
rationality[;] . . . an outcome so contrary to perceived social
values that Congress could not have intended it.” Landstar
Express, 569 F.3d at 498-99 (internal quotation marks and
citations omitted) (emphases added). To the extent the court’s
rationale hinges on its speculation that States lack technical
capability and information, this blinks at reality. As counsel for
EPA emphasized at oral argument, see Tr. Oral Arg. at 59, 61,
without contradiction by any petitioners’ counsel during rebuttal
oral argument, States are fully capable of measuring interstate
transport of emissions by conducting modeling, and they have
done so before and continue to do so: “The states can make that
effort, and they can submit SIPs to EPA. Again, that is how the
process works in the states that aren’t included in these transport
regions.” Id. at 61. Indeed, as this court has recognized, States
are charged with operating air quality monitors; “[e]xhaustive
technical specifications regulate the States’ operation of a
network of air monitors that collect air quality data for any given
area.” Catawba Cnty., N.C. v. EPA, 571 F.3d 20, 30 (D.C. Cir.
2009); cf. ATK Launch Sys. v. EPA, 669 F.3d 330, 334 (D.C.
Cir. 2012). The air quality monitoring data collected by the
States is publically available in the National Emissions
Inventory.12 That is, State air quality divisions are no strangers

        12
          See U.S. EPA, Technology Transfer Network Clearinghouse
for Inventories & Emissions Factors, available at
http://www.epa.gov/ttnchie1/eiinformation.html (last visited July 23,
2012); see also U.S. EPA, Technology Transfer Network
Clearinghouse for Regulatory Atmospheric Modeling, available at
http://www.epa.gov/ttn/scram/aqmindex.htm (last visited July 23,
2012) (providing modeling tools).
                                   23

to complex air quality and meteorological modeling of interstate
transport of emissions.13

     No petitioner suggests that States lack the capability to
measure their interstate emissions of pollutants or to access that
information from other States to independently determine
emission reduction budgets, much less that they have not had
time to do so; rather their reason for not doing so appears to
stem from insistence (supported by industry sources) that their
reduction of emissions not be one iota greater than is necessary
for downwind States to attain and maintain NAAQS and that it
is easier (and presumably less costly, see Oral Arg. Tr. 58) for
EPA to figure this out than it is for the individual States to do so,
working cooperatively and using any EPA guidance. This may
be so but it does not demonstrate that Congress’s scheme,
protecting States’ choices about how to meet NAAQS

        13
           To cite one example: the State of Texas. The Texas Council
on Environmental Quality (“TCEQ”) has published an extensive
description of its air quality modeling activities and capabilities on its
website. “The TCEQ uses state of the art computer models to simulate
the meteorological conditions and chemical reactions that contribute
to the formation of air pollutants.” TCEQ, Introduction to Air Quality
M o d e l i n g ,                  a v a i l a b l e                 a t
http://m.tceq.texas.gov/airquality/airmod/overview/am_intro.html (last
visited July 23, 2012). Furthermore, “TCEQ uses state-of-the-science,
four-dimensional computer models that incorporate atmospheric
physical laws and measured observations to predict weather conditions
over space and time.” TCEQ, Introduction to Air Quality Modeling:
M e t e o r o l o g i c a l                    M o d e l i n g ,
http://m.tceq.texas.gov/airquality/airmod/overview/am_met.html (last
visited July 23, 2012. Indeed, TCEQ uses the same model EPA used
to model emission contributions — CAMx. EPA notes in its brief that
Texas provided some of the technical data that led to its inclusion in
the final Transport Rule. See EPA Br. at 109. These are far from
“homemade” methodologies. See Op. at 55.
                                24

requirements, in part by independently determining ways to
meet their “good neighbor” obligation as the States argued in
Michigan, is absurd.

     It is true, as the court notes, see Op. at 53-55, that in two
previous “good neighbor” rulemakings EPA afforded States the
opportunity to submit SIPs after announcing emission reduction
budgets. But an agency is not forever restricted to its previous
policy choices or statutory interpretations; instead, it may
change course provided it acknowledges it is doing so, presents
“good reasons” for doing so, and its approach is “permissible
under the statute.” FCC v. Fox Television Stations, Inc., 556
U.S. 502, 515 (2009). Agencies “need not demonstrate to a
court’s satisfaction that the reasons for the new policy are better
than the reasons for the old one.” Id. The discretion agencies
enjoy in modifying their policy approaches is particularly
expansive where the agency declines to exercise its
discretionary rulemaking authority, as EPA did here. “It is only
in the rarest and most compelling of circumstances that this
court has acted to overturn an agency judgment not to institute
rulemaking.” WWHT, Inc. v. FCC, 656 F.2d 807, 818 (D.C. Cir.
1981).

     Here, EPA acknowledged its previous approach, see
Transport Rule, 76 Fed. Reg. at 48,217; NPRM, 75 Fed. Reg. at
45,222-223, and explained its decision in response to comments
requesting States be given time to submit SIPs before EPA
imposed the Transport Rule FIPs. EPA stated, first, that it had
no authority to alter the statutory deadlines for SIP submissions
and that the CAA did not require it to issue a rule quantifying
States’ “good neighbor” obligations, see Transport Rule, 76 Fed.
Reg. at 48,220; second, that the court in North Carolina, in
remanding rather than vacating CAIR, “emphasized EPA’s
obligation to remedy [CAIR’s] flaws expeditiously” and thus
“EPA d[id] not believe it would be appropriate to establish a
                                  25

lengthy transition period to the rule which is to replace CAIR,”
Transport Rule, 76 Fed. Reg. at 48,220; and third, that in North
Carolina this court also required EPA to align upwind States’
emission reduction deadlines with the NAAQS attainment dates
of “2015 or earlier,” see North Carolina, 531 F.3d at 930.14
EPA’s decision to adhere to the plain text of the statute, and not
to exercise its discretionary general rulemaking authority, see
Michigan, 213 F.3d at 686-87, was thus well-explained by the
time pressures imposed by this court. See Fox Television, 556
U.S. at 515. Inasmuch as those time pressures were animated as
well by concern for the public health and welfare — Congress
required that attainment with the NAAQS occur “as
expeditiously as practicable.” 42 U.S.C. §§ 7502(a)(2)(A) &
7511; see North Carolina, 531 F.3d at 930 — the instant case is
particularly ill-suited for overturning EPA’s exercise of its
discretion in not adding an additional rulemaking step to the
process. Given that the court “will overturn an agency’s decision
not to initiate a rulemaking only for compelling cause,” and one
of those few compelling reasons is when the decision declining

        14
           That EPA may, under different circumstances, view it as
preferable to prospectively quantify States’ emission reduction
obligations, see Op. at 49, is irrelevant to whether EPA’s stated
reasons for departing, in the Transport Rule from its previous
approach are adequate, given the court’s instruction in North Carolina
to expeditiously replace the flawed CAIR and align NAAQS
attainment dates. The context of the federal register citations is,
EPA’s points out, EPA’s review of a submitted SIP; the preamble does
not state EPA must engaged in detailed interstate transport analysis
before States must meet their statutory SIP obligations. Furthermore,
consistent with the federal register citations noted by the court, EPA
has traditionally issued guidance to States on calculating their “good
neighbor” emission reduction obligations and it did so here, see, e.g.,
EPA Guidance on SIP Elements Required Under Sections 110(a)(1)
and (2) for the 2006 24-hour Fine Particle (PM2.5) National Ambient
Air Quality Standards (NAAQS) (Sept. 25, 2009).
                               26

to promulgate a rule exacerbates “grave health and safety
problems for the intended beneficiaries of the statutory scheme,”
Midwest Indep. Transmission Sys. Operator, Inc. v. FERC, 388
F.3d 903, 911 (D.C. Cir. 2004) (internal quotation marks and
citation omitted), it hardly makes sense for the court to require
EPA to promulgate a rule when the effect will be to delay health
benefits. Indeed, the court is most reluctant to require agencies
to promulgate rules “when the interests at stake are primarily
economic,” id., and the court’s view that it is “impossible” for
States to comply with their independent “good neighbor”
obligation under section 110(a) is animated by the burdens that
obligation imposes on States and industry sources, see Oral Arg.
Tr. 58.

     In sum, the court’s conclusion that it would have been a
“homemade” “stab in the dark” for the States to submit adequate
“good neighbor” SIPs prior to promulgation of the Transport
Rule lacks a basis in fact, and the court’s speculation that EPA
would have inevitably disapproved such submissions, see Op. at
56-57, is just that — speculation. And if that happened, States
could judicially challenge the disapprovals, seeking a stay to
avoid application of the Transport Rule FIPs. Absent record
evidence to suggest that the plain text of the CAA’s “good
neighbor” SIP obligation on States leads to “an outcome so
contrary to perceived social values that Congress could not have
intended it,” Landstar Express, 569 F.3d at 498-99 (internal
quotation marks and citations omitted) (emphasis added), the
court is bound, in view of the host of responsibilities placed on
States in the CAA, to enforce the statute as Congress wrote it in
plain terms, to give deference to EPA’s permissible
interpretations where the CAA is silent or ambiguous, and to
adhere to the court’s interpretation of EPA’s authority in
Michigan, as well as acknowledge, as the expert agency has
advised without contradiction, that States have demonstrated
                                  27

competence to satisfy their plain statutory “good neighbor” obligations.

                                  II.

      The court also is without jurisdiction to hold that EPA
lacked statutory authority to use a different measure of
“significant contribution” for setting emission reduction budgets,
unrelated to its measure of “significance” for purposes of
threshold inclusion of individual States in the Transport Rule.
Op. at 34-37. Petitioners contended that there was a hypothetical
possibility that “application of cost-effective controls [] could
drive a State’s emissions below the point that, under phase one,
would have excluded the State from any regulation whatsoever.”
State Petrs’ Br. at 35; Industry & Labor Petrs’ Br. at 22-24.15
Because no objection was made during the Transport Rule
administrative proceedings to EPA’s statutory authority to adopt
its two-step approach, the court thus lacks jurisdiction to decide
this issue. See CAA § 307(d)(7)(B), 42 U.S.C. § 7607(d)(7)(B).
The jurisdictional question is not close; the court’s effort to avoid
this court’s well-settled precedent fails clearly.

                             A.
    Section 307(d)(7)(B) of the CAA provides that “[o]nly an
objection to a rule or procedure which was raised with

        15
           As EPA responded, nothing in the record suggests this
hypothetical possibility actually would occur as a result of the
Transport Rule, see Resp.’s Br. at 33-34 & n.20; id. at 32 n.18, and the
point of choosing a “cost” that is “effective” for each State assumes
only a reasonable subset of emissions will be reduced. See Oral Arg.
Tr. at 44-46. Furthermore, contrary to the court’s suggestion, see Op.
37 n.23, EPA explained that selecting a cost below $500/ton of
emissions would permit States to stop operating existing controls, thus
increasing, rather than decreasing, pollution. See Transport Rule, 76
Fed. Reg. at 48,256-57.
                                28

reasonable specificity during the period for public comment . . .
may be raised during judicial review.” 42 U.S.C. § 7607(d)(7)(B)
(emphasis added). The court has “‘strictly’ enforce[d] this
requirement,” Mossville Envtl. Action Now v. EPA, 370 F.3d
1232, 1238 (D.C. Cir. 2004) (quoting Motor & Equip. Mfrs.
Ass’n v. Nichols, 142 F.3d 449, 462 (D.C. Cir. 1998)); see also
Natural Res. Def. Council v. EPA, 571 F.3d 1245, 1259 (D.C.
Cir. 2009). The court also has made clear that “[r]easonable
specificity requires something more than a general challenge to
EPA’s approach.” Mossville, 370 F.3d at 1238 (internal
quotation marks and alteration omitted).            The court’s
enforcement of this requirement has been most strict in the
context of statutory authority objections:

         While there are surely limits on the level of congruity
         required between a party’s arguments before an
         administrative agency and the court, respect for
         agencies’ proper role in the Chevron framework
         requires that the court be particularly careful to ensure
         that challenges to an agency’s interpretation of its
         governing statute are first raised in the administrative
         forum.

Cement Kiln Recycling v. EPA, 255 F.3d 855, 860 (D.C. Cir.
2001) (quoting Natural Res. Def. Council, Inc. v. EPA, 25 F.3d
1063, 1074 (D.C. Cir. 1994)) (emphasis added). Consistently,
until now, the court has held that failure to object specifically to
EPA’s lack of statutory authority is grounds for dismissal of
such objections in this court. See, e.g., Natural Res. Def. Council
v. EPA, 559 F.3d 561, 563-64 (D.C. Cir. 2009); Engine Mfrs.
Ass’n v. EPA, 88 F.3d 1075, 1097 (D.C. Cir. 1996); Ohio v. EPA,
997 F.2d 1520, 1528 (D.C. Cir. 1993); Linemaster Switch Corp.
v. EPA, 938 F.2d 1299, 1308 (D.C. Cir. 1991); Natural Res. Def.
Council v. Thomas, 805 F.2d 410, 427 (D.C. Cir. 1986).
                               29

     Notably on point, in Cement Kiln the court held that
comments stating a policy preference to EPA were insufficient
to preserve for judicial review objections that the preferred
approach was statutorily required, 255 F.3d at 860-61. “[T]hese
comments merely argued that EPA could permissibly consider
[the approach], not (as petitioners now argue) that [the CAA]
requires [the approach].” Id. at 860 (internal quotation marks
and citation omitted) (emphases in original). And “the parties
were not saved by the fact that they had made other technical,
policy, or legal arguments before the agency. Indeed, if such
were the rule, a party could never waive a legal claim as long as
the party in fact appeared and argued something before the
agency.” Nat. Res. Def. Council, 25 F.3d at 1074 (internal
quotation marks omitted) (emphasis added).

     Petitioners rely on two comments in an attempt to show a
challenge to EPA’s statutory authority to the approach it adopted
was presented during the Transport Rule administrative
proceedings. See Industry & Labor Petrs.’ Reply Br. at 6, n.1.
Neither is sufficient. Tennessee commented that “[a] lower cost
threshold should be considered for any State that can reduce their
contribution below 1% significance using cost thresholds below
the maximum values ($2,000/ton for SO2 and $500/ton for NOx),
if applicable.” Tennessee Comments on 2010 Proposed
Transport Rule, Attachment 1, at 1 (Aug. 27, 2010). But this
comment does not suggest that EPA is statutorily barred from
following its approach. See Cement Kiln, 255 F.3d at 860-61;
Natural Res. Def. Council, 25 F.3d at 1073-74. Furthermore,
Tennessee’s comment does not even suggest a policy preference
that the one percent of NAAQS threshold level be a floor.
Rather, Tennessee’s comment specifically mentions States
reducing contributions below the threshold without suggesting
that result would violate the CAA. Thus, the only thing
Tennessee commented on with “reasonable specificity” was that
EPA consider not using a uniform cost threshold for all States.
                                30

     Wisconsin’s comment also does not demonstrate the
statutory authority challenge now advanced by petitioners in this
court was preserved. First, Wisconsin stated that it “support[ed]
the 1% contribution threshold . . . for identifying states that are
significant contributors to downwind state’s air quality
nonattainment and maintenance problems.”               Wisconsin
Comments, at 1 (Oct. 1, 2010). Wisconsin further stated:

         State final emission budgets (2014) need to be set with
         a stronger linkage to residual air quality impact from
         the [electricity generating unit (“EGU”)] on downwind
         sites compared to the current proposed linkage of
         limiting emission reductions by an arbitrarily low cost
         threshold. EPA has set which states have contribution
         reduction responsibility based on air quality impact, but
         appears to default to a modeling of the most efficient
         regional EGU control program based exclusively on
         cost-effectiveness.

         In defining significant contribution, EPA should place
         a greater emphasis on air quality impact (contribution)
         remedy than the assessed state-by-state marginal
         control cost-effectiveness of proposed remedy in the
         setting of the 2014 state budgets for EGU reductions.
         Issues are both legal and a concern for some level of
         EGU system control installation equity between nearby
         states and between facilities with differing coal types
         which are dispatched within the same electricity
         markets.

Id. at 7 (emphases added). Wisconsin nowhere suggested that
EPA is statutorily required to use the one percent inclusion
threshold as a floor for emission reductions; it simply urged that
EPA “should” put a “greater emphasis” on air quality impacts at
the individual EGU level. Indeed, Wisconsin commented that
                                   31

the cost threshold was too low, the exact opposite of what
petitioners now claim. See Industry & Labor Petrs.’ Br. at 31-34.
The closest Wisconsin comes to raising a statutory authority
argument is its statement that the “issues are [] legal;” but that
vague comment is in a sentence indicating the State’s preference
that EPA regulate at the EGU, rather than the State level, in order
to achieve “EGU system control installation equity.” Wisconsin
Comments, at 7.

     Consequently, neither Tennessee’s nor Wisconsin’s
comments argued “with reasonable specificity” that EPA was
statutorily required to treat the threshold inclusion level in its
two-step approach to defining “significant contribution” as a
floor in calculating emission reduction requirements.16 Nor do
they even present a policy preference for such an approach and,
indeed, can be interpreted as supporting sub-threshold
reductions. Even if the comments implied a challenge, which
they do not, an implied challenge is insufficient because

             that is not the way the regulatory system is structured.
             Such a standard would require agencies to review
             perpetually all of the ‘implied’ challenges in any
             challenge they receive. We will not impose such a
             burden on the agency. All that [petitioner] had to do
             was draft one sentence that specifically challenged
             EPA’s decision. It did not, and that specific challenge
             is thus not preserved.

        16
           The court adds a cite, see Op. at 34 n.18, to a comment from
Delaware: “It is Delaware’s opinion that an upwind state’s emissions
contribution is significant . . . based on the emissions and their effect
on air quality, and is independent of cost considerations.” This is not
a statutory authority objection to the two-step approach, and in any
event EPA’s rejection of Delaware’s “opinion” was sustained in
Michigan, 213 F.3d at 679.
                                32

         ...
         [T]he only way [the comments] could be read as
         placing the EPA on notice is to place the burden on
         EPA to cull through all the letters it receives and
         answer all of the possible implied arguments. Such a
         rule would defeat the statutory requirement for
         “reasonable specificity.”

Mossville, 370 F.3d at 1239-40. None of the comments during
the Transport Rule administrative proceedings approaches the
level of “reasonable specificity” required for this court to have
jurisdiction over petitioners’ new statutory authority argument.

                                  B.
     Acknowledging this, the court nonetheless concludes that
it has jurisdiction to address this new issue because “EPA was
on notice that its disregard of the significance floor was a
potential legal infirmity in its approach.” Op. at 34 n.18. None
of the three reasons the court offers for its conclusion that there
need not be objections raised “with reasonable specificity
during the period for public comment,” 42 U.S.C. §
7607(d)(7)(B), is convincing.

     First, the court states that EPA was required “to craft a new
rule consistent with [North Carolina],” Op. at 32 n.18 (internal
quotation marks and citation omitted), and thus should have
been alerted to petitioners’ new objection, raised for the first
time now in this court. But in North Carolina the court
specifically permitted the exact same approach in CAIR.
Discussing this approach, the court explained:

         [S]tate SO2 budgets are unrelated to the criterion (the
         “air quality factor”) by which EPA included states in
         CAIR’s SO2 program. Significant contributors, for
         purposes of inclusion only, are those states EPA
                               33

         projects will contribute at least 0.2 µ/m3 of PM2.5 to a
         nonattainment area in another state. While we would
         have expected EPA to require states to eliminate
         contributions above this threshold, EPA claims to have
         used [as its] measure . . . emissions that sources within
         a state can eliminate by applying “highly cost-effective
         controls.” EPA used a similar approach in deciding
         which states to include in the NOx SIP Call, which
         Michigan did not disturb since “no one quarrel[ed]
         either with its use of multiple measures, or the way it
         drew the line at” the inclusion stage. 213 F.3d at 675.
         Likewise here, the SO2 Petitioners do not quarrel with
         EPA drawing the line at 0.2 µ/m3 or its different
         measure of significance for determining states’ SO2
         budgets. Again, we do not disturb this approach.

North Carolina, 531 F.3d at 916-17 (emphases added). There
is no basis to conclude that EPA acted inconsistently with North
Carolina by replicating the approach the court left undisturbed.
It is true that in North Carolina the court rejected EPA’s use of
fuel factors in allocating allowances for the CAIR trading
program because doing so redistributed reduction
responsibilities to the benefit of States with more coal-fired
electricity generation, see id. at 920-21. The court stated that
EPA
           may not require some states to exceed the mark.
           Because the fuel-adjustment factors shifted the burden
           of emission reductions solely in pursuit of equity
           among upwind states — an improper reason — the
           resulting state budgets were arbitrary and capricious.

Id. at 921 (emphases added). But a holding that EPA had acted
arbitrarily in designing its trading program cannot fairly be
deemed to alert EPA that it might exceed its statutory authority
in using an approach to measuring “significant contribution”
                               34

that the court specifically declined to disturb. Cf. Natural Res.
Def. Council v. EPA, 571 F.3d 1245, 1259 (D.C. Cir. 2009)
(“EPA cannot be expected to take [an] argument, raised in
support of one specific objection, and apply it sua sponte to
another provision.”). EPA was entitled, in the absence of
objection in the Transport Rule administrative proceedings, to
rely in promulgating the Transport Rule upon the court’s
decision not to disturb its approach. And the fact that after
North Carolina no comment in the Transport Rule
administrative proceedings objected that EPA was exceeding its
statutory authority in adopting its approach underscores the fact
that EPA was not acting inconsistently with North Carolina in
light of a few sentences about fuel factors plucked out of
context.

     Second, reaching farther afield, the court points to a
comment submitted during the CAIR rulemaking that it deems
sufficient, when combined with the holding in North Carolina,
to “show that EPA ‘had notice of this issue and could, or should
have, taken it into account.’” Op. at 33 n.18 (quoting Natural
Res. Def. Council v. EPA, 824 F.2d at 1146, 1151 (D.C. Cir.
1987)).17 The CAIR comment stated “that the threshold
contribution level selected by EPA should be considered a floor,
so that upwind States should be obliged to reduce their
emissions only to the level at which their contribution to
downwind nonattainment does not exceed that threshold level.”
CAIR, 70 Fed. Reg. 25,162, 25,176-77 (May 12, 2005). This
comment, which was not cited in any petitioners’ brief to this
court but first mentioned by industry petitioners during rebuttal

       17
          Remarkably, the court quotes a case in which the common
law exhaustion doctrine, rather than CAA section 307(d)(7)(B),
applied: the rule at issue was promulgated prior to enactment of
section 307(d)(7)(B). See Natural Res. Def. Council, 824 F.2d at
1150-51.
                                35

oral argument, cannot carry the weight the court assigns to it,
particularly in light of the holding in North Carolina. The court
generally does not entertain arguments raised for the first time
in a reply brief, see Altman v. SEC, 666 F.3d 1322, 1329 (D.C.
Cir. 2011); North Carolina, 531 F.3d at 924 n.6, let alone for
the first time at oral argument, see Roth v. U.S. Dep’t of Justice,
642 F.3d 1161, 1181 (D.C. Cir. 2011); Ark Las Vegas Rest.
Corp. v. NLRB, 334 F.3d 99, 108 n.4 (D.C. Cir. 2003), much
less during rebuttal oral argument, see Coalition of Battery
Recyclers Ass’n, 604 F.3d at 623; Old Dominion Dairy
Products, Inc. v. Sec. of Defense, 631 F.2d 953, 961 n.17 (D.C.
Cir. 1980). The reason is simple: “in order to prevent
‘sandbagging of appellees and respondents,’ we do not consider
arguments that were raised neither in the opening brief nor by
respondents.” S. Coast Air Quality Mgmt. Dist. v. EPA, 554
F.3d 1076, 1081 n.* (D.C. Cir. 2009) (quoting Sitka Sound
Seafoods, Inc. v. NLRB, 206 F.3d 1175, 1181 (D.C. Cir. 2000)).
Here that reason has particular resonance because EPA was
relying on the court’s decision in North Carolina, 531 F.3d at
916-17, to “not disturb” its two-step approach to defining
“significant contribution,” and no one referenced the CAIR
comment during the Transport Rule administrative proceedings.

     Even setting aside the starkly novel forfeiture standard the
court has chosen to apply to industry petitioners, the cited CAIR
comment is insufficient to establish that the issue of EPA’s
statutory authority was properly preserved for the court to have
jurisdiction to address it. The court relies on a footnote in
American Petroleum Institute v. EPA, 52 F.3d 1113, 1120 n.1
(D.C. Cir. 1995), for the proposition that it is “highly relevant”
if an agency previously “reject[ed] [] the same argument in a
prior rulemaking,” Op. at 33 n.18. Although the CAIR
comment communicates a policy preference, this court has
distinguished between comments presenting policy preferences
and those presenting statutory authority objections, see, e.g.,
                                36

Cement Kiln, 255 F.3d at 860-61, and technical and policy
arguments are insufficient to preserve objections to EPA’s
statutory authority. See Nat. Res. Def. Council, 25 F.3d at 1074.
The CAIR comment that EPA rejected in the other rulemaking
is therefore not “the same argument” that petitioners belatedly
attempt to raise now. Furthermore, in American Petroleum, the
court concluded that the jurisdictional question was “close”
inasmuch as EPA had explicitly incorporated the docket from
the previous rulemaking in the second rulemaking, and the
previous rulemaking had been aborted, such that there was no
intervening opportunity for judicial review. See Am. Petroleum,
52 F.3d at 1120 n.1. Neither of those factors that made
American Petroleum a close case is present here. The Transport
Rule was promulgated to replace CAIR, but the CAIR docket
was never incorporated into the Transport Rule docket —
perhaps because of the court’s instruction in North Carolina
that EPA “redo its analysis from the ground up.” 531 F.3d at
929. EPA would have had no reason to reexamine the
voluminous CAIR docket in search for objections that were not
raised before the court in North Carolina. Also, unlike the
aborted rule whose docket EPA incorporated in American
Petroleum, in CAIR there was an intervening opportunity for
judicial review. Yet no one sought judicial review of CAIR on
the basis of the CAIR comment now relied on by the court.
This precise circumstance was relied upon by the court in North
Carolina in declining to disturb EPA’s approach. See id. at
917; see Med. Waste, 645 F.3d at 427.18 Once the court in

        18
           The fact that Kansas, Nebraska, and Oklahoma were not
regulated under CAIR, and thus would have a newly ripened claim,
see Coalition for Responsible Regulation, 684 F.3d at 129-32, does
not mean that those States are relieved from making that claim during
the Transport Rule administrative proceedings, as CAA section
307(d)(7)(B) requires. This is all the more true here because the
petitioners who were subject to CAIR abandoned the CAIR comment
                               37

North Carolina declined to disturb EPA’s approach, because no
objection to EPA’s authority to adopt its approach had been
raised to the court, petitioners were required to inform EPA
during the Transport Rule administrative proceedings that they
objected to EPA’s statutory authority to pursue that approach.
See 42 U.S.C. § 7607(d)(7)(B). If American Petroleum
presented a “close” jurisdictional question, then the
jurisdictional question here is easily decided.

     Third, the court concludes that “EPA’s statements at the
proposal stage indicated EPA was not open to reconsidering
CAIR’s earlier rejection of petitioners’ argument,” and that
because EPA had dismissed “the two air quality-only
approaches it considered,” the comments of Tennessee,
Wisconsin, and Delaware were “‘reasonable’ under the
circumstances,” Op. at 33, n.18. But there was no such “earlier
rejection of petitioners’ argument” in CAIR because the CAIR
comment did not suggest that EPA exceeded its statutory
authority by following its two-step approach to defining
“significant contribution.” See Cement Kiln, 255 F.3d at 860-
61. Furthermore, industry petitioners acknowledge in their
Reply Brief that they “are not advocating an ‘air quality-only’
approach,” but instead a cost-based approach with a floor for
emission reduction obligations. Industry & Labor Petrs’ Reply

now relied on by the court when they sought judicial review. To
suggest that EPA should have foreseen that Kansas, Nebraska, and
Oklahoma, despite not making an objection to the proposed Transport
Rule on this ground, secretly did object on the basis of a comment
made during a rulemaking to which they were not parties, and was
abandoned on judicial review by those who made it, distorts the
ripeness and CAA exhaustion doctrines beyond recognition and
“give[s] parties to Clean Air Act proceedings a powerful weapon for
delaying and sandbagging Agency action.” Lead Indus. Ass’n Inc. v.
EPA, 647 F.2d 1130, 1173 (D.C. Cir. 1980).
                               38

Br. at 10. So, EPA’s rejection of two alternative air quality-
only approaches has no bearing on whether EPA would have
been willing to entertain an objection during the Transport Rule
administrative proceedings that the “good neighbor” provision
required it to use the threshold level for a State’s inclusion in
the Transport Rule as a floor for emission reduction obligations.

     Nothing in this court’s precedent on CAA section
307(d)(7)(B), 42 U.S.C. § 7607(d)(7)(B), supports the court’s
tortured efforts to avoid the jurisdictional limits in the CAA and
seize jurisdiction where petitioners clearly fall far short of
preserving their claim by objecting to EPA’s statutory authority
during the Transport Rule administrative proceedings with
“reasonable specificity.” The court does not acknowledge this
court’s precedent setting a strict standard for preservation of
statutory authority objections, which demonstrates the
inconsistency of the court’s exercise of jurisdiction today. See,
e.g., Natural Res. Def. Council, 559 F.3d at 563-64; Am. Farm
Bureau Fed’n v. EPA, 559 F.3d 512, 538 (D.C. Cir. 2009);
Natural Res. Def. Council v. EPA, 571 F.3d 1245, 1259 (D.C.
Cir. 2009); Mossville, 370 F.3d at 1238; Cement Kiln, 255 F.3d
at 860-61; George E. Warren Corp. v. EPA, 159 F.3d 616, 629
(D.C. Cir. 1998); Motor & Equip. Mfrs. Ass’n, 142 F.3d at 462;
Natural Res. Def. Council, 25 F.3d at 1074; Ohio v. EPA, 997
F.2d at 1528-29; Natural Res. Def. Council v. EPA, 937 F.2d
641, 647-48 (D.C. Cir. 1991); Linemaster Switch Corp., 938
F.2d at 1308; Thomas, 805 F.2d at 425-27; Lead Indus. Ass’n,
647 F.2d at 1173.

     Rather than confront the force of this precedent, the court
relies on phrases from a few opinions suggesting a more flexible
standard, see Op. at 31-34 n.18, but tellingly omits any
discussion of the analyses or outcomes in those cases. This is
because even where the court has mentioned flexibility, the
comments at issue were either significantly more specific than
                                39

the comments of Tennessee and Wisconsin, and were thus
sufficient, or were more specific but nonetheless deemed
wanting. For example, in Natural Resources Defense Council
v. EPA, 571 F.3d 1245, 1259 (D.C. Cir. 2009), the court
suggested there is “leeway” but concluded, in words that
resonate here, that “EPA cannot be expected to take [an]
argument, raised in support of one specific objection, and apply
it sua sponte to another provision.” Id. at 1259-60. The irony
in the court’s reliance on this case is that it expects EPA to read
North Carolina in precisely the opposite manner — it concludes
EPA should have taken a holding about “exceeding the mark”
in the CAIR trading allowance program and sua sponte applied
it to the methodology for calculating “significant contribution,”
even though the court explicitly declined to disturb that
methodology. See supra Pt. II.B. In Appalachian Power, 135
F.3d 791, 817 (D.C. Cir. 1998), the court concluded the
“argument . . . during the comment period [was] — in
substance, if not in form, the same objection” raised before the
court, whereas here the comments of Tennessee and Wisconsin
did not raise the statutory authority objection now urged upon
the court in either form or substance. The court also relies on
Natural Resources Defense Council v. EPA, 824 F.2d 1146,
1150-51 (D.C. Cir. 1987) (en banc), which involved common
law exhaustion, not CAA section 307(d)(7)(B), and in that case
the issue was “explicitly raised . . . in comments” before the
EPA, id. at 1151. And although observing in South Coast Air
Quality Management District v. EPA, 472 F.3d 882, 891-92
(D.C. Cir. 2009), that petitioners have “some leeway,” the court
concluded that leeway did not permit the petitioner to rely upon
a general procedural preference stated in a cover letter to its
comments to alert EPA to the details of the objections to a final
rule.

    None of the court’s proffered reasons for ignoring section
307(d)(7)(B)’s jurisdictional limitations has merit on its own,
                                40

nor in combination. “[Z]ero plus zero [plus zero] equals zero.”
U.S. v. Clipper, 313 F.3d 605, 609 (D.C. Cir. 2002).

                               III.

    The court’s remaining reasons for vacating the Transport
Rule are also either beyond its jurisdiction or unpersuasive.

     First, the court concludes that EPA violated the CAA by
not calculating the required emission reductions “on a
proportional basis that took into account contributions of other
upwind States to the downwind States’ nonattainment
problems.” Op. at 38. This is so, the court says, because in
Michigan the court only permitted cost to be considered as a
way “to allow some upwind States to do less than their full fair
share,” not more. Id. Petitioners have not argued that EPA
violated the CAA by not calculating emission reductions on a
proportional basis, as the court suggests. See Anna Jaques
Hosp. v. Sebelius, 583 F.3d 1, 7 (D.C. Cir. 2009). The
statement in industry petitioners’ brief that the court quotes, see
Op. at 37, instead maintains that EPA was arbitrary and
capricious in the way it grouped States for 2014 sulfur dioxide
(SO2) budgets because, they claimed, EPA did so without
“consider[ing] relative contributions of the various States,”
Industry & Labor Petrs’ Br. at 33. This challenge is limited to
the asserted arbitrariness of how certain States were
categorized for one pollutant’s budget for one year. The court
lacks jurisdiction to consider sua sponte an objection to EPA’s
statutory authority not raised by petitioners within the sixty day
period required under CAA section 307(b)(1), 42 U.S.C. §
7607(b)(1); see Med. Waste, 645 F.3d at 427. As this court has
previously said, “[t]o rely on relief plaintiffs never requested on
a claim they never made would be to conclude that zero plus
zero equals more than zero.” NAACP, Jefferson Cnty. Branch
v. U.S. Sugar Corp., 84 F.3d 1432, 1438 (D.C. Cir. 1996).
                               41

     Second, even if petitioners had raised a “proportionality”
statutory authority objection, this objection and the court’s
conclusion are premised on the speculative possibility that the
Transport Rule might require States to reduce emissions to a
level below the one percent of NAAQS inclusion threshold of
EPA’s two-step approach to defining “signification
contribution,” and thus more than their statutory fair share — an
argument over which the court also lacks jurisdiction. See
supra Part II. Further, the court’s conclusion is at odds with
North Carolina where the court concluded that EPA’s measure
of significant contribution need not “directly correlate with each
State’s individualized air quality impact on downwind
nonattainment relative to other upwind states.” 531 F.3d at 908
(emphasis added); see LaShawn A., 87 F.3d at 1395. It also
ignores that in Michigan the court expressly permitted the use
of uniform cost thresholds to measure “significance,” and
likewise permitted the “ineluctabl[e]” result of small and large
contributors being required to make the same amount of
reductions. 213 F.3d at 679. Without jurisdiction to reach an
argument on whether the Transport Rule requires States to
reduce more than their statutory fair share, Michigan requires
the conclusion that EPA’s choice of cost thresholds in the
Transport Rule was permissible.

      Next, the court concludes that EPA failed to consider the
effect of in-State emissions of downwind States on their own
nonattainment and interference with maintenance problems, see
Op. at 38. Petitioners conceded at oral argument that this “in-
State contribution” contention was “not actually an independent
statutory authority argument,” Oral Arg. Tr. at 32, but merely a
repackaged version of the objection to the possibility of
reductions below the one percent of NAAQS inclusion
threshold, an argument over which the court lacks jurisdiction,
see supra Part II. Even if the court had jurisdiction to address
it, the court’s conclusion is unsupported by the record. EPA
                              42

examined the various cost threshold for each State, and in so
doing considered

         how much air quality improvement in downwind states
         result[ed] from upwind state emission reductions at
         different levels; whether, considering upwind emission
         reductions and assumed local (in-state) reductions, the
         downwind air quality problems would be resolved; and
         the components of the remaining downwind air quality
         problem (e.g., whether it is a predominantly local or
         in-state problem, or whether it still contains a large
         upwind component).

Transport Rule, 76 Fed. Reg. at 48,256 (emphases added); see
id. at 48,259 (concluding remaining nonattainment problem in
Liberty-Clairton was the result of local emissions). EPA thus
in fact examined the contribution of downwind States to their
own nonattainment problems.

     Finally, the court concludes that EPA “did not try to take
steps to avoid” collective over-control, Op. at 39. This
conclusion too is unsupported by the record. The Transport
Rule was not projected to achieve attainment of all downwind
nonattainment and maintenance problems attributed to upwind
States. See id. at 48,210, 48,232, 48,247-48; Resp.’s Br. at 38
n.24. Because EPA’s analysis demonstrated instances of
“remaining downwind air quality problems,” Transport Rule, 76
Fed. Reg. at 48,256, there is no support for the court’s
conclusion that the Transport Rule resulted in collective over-
control.
                                 43

                                IV.

     The Transport Rule, as EPA observes, represents “the
culmination of decades of Congressional, administrative, and
judicial efforts to fashion a workable, comprehensive regulatory
approach to interstate air pollution issues that have huge public
health implications.” Resp.’s Br. at 12. The legislative history
to amendments of the CAA documents Congress’s frustration
with the upwind States’ historic failure to take effective action
on their own to curtail their contributions to problems of
pollution in downwind States, leading to amendments to
strengthen EPA’s hand. The court ignores Congress’s
limitations on the court’s jurisdiction and decades of precedent
strictly enforcing those limitations and proceeds to do violence
to the plain text of the CAA and EPA’s permissible
interpretations of the CAA, all while claiming to be “apply[ing]
and enforc[ing] the statute as it’s now written.” Op. at 8. The
result is the endorsement of a “maximum delay” strategy for
regulated entities, rewarding States and industry for cloaking
their objections throughout years of administrative rulemaking
procedures and blindsiding the agency with both a collateral
attack on its interpretation of section 110(a) and an objection
raised for the first time in this court, despite the court’s previous
decisions declining to disturb the approach EPA adopted in the
Transport Rule.

     To reach the result — vacating the Transport Rule — the
court does several remarkable things. It seizes jurisdiction over
the issue of States’ independent “good neighbor” obligation by
allowing States to pursue a collateral attack on Final SIP Rules
from which they either failed timely to file petitions for review
or their petitions challenging those rules have not been
consolidated with the petitions challenging the Transport Rule
that are before this three-judge panel. It asserts jurisdiction over
industry’s challenge to EPA’s two-step approach to defining
                               44

“significant contribution” by excusing industry from its failure
to preserve the issue by first presenting it to EPA and then
resting jurisdiction on a comment in another rulemaking that
was first cited by industry in rebuttal oral argument and cannot
bear the weight the court assigns to it because it did not
challenge EPA’s statutory authority to adopt its two-step
approach. All this is contrary to Congress’s limitations on the
court’s jurisdiction and this court’s precedent enforcing those
limitations. The rest of the court’s analysis recalibrates
Congress’s statutory scheme and vision of cooperative
federalism in the CAA. Along the way, the court abandons any
consideration that an agency is entitled to repose, absent
objection during its administrative proceedings, when a court,
here on two occasion, expressly leaves undisturbed its two-step
approach to enforcing a statute it administers and no objection
is raised during the Transport Rule administrative proceedings.
Then, in dictum, the court offers suggestions as to how EPA
might fix the problems the court has created upon rewriting the
CAA and trampling on this court’s precedent in North Carolina
and Michigan.

     None of this is to suggest that EPA should be excused from
the statutory limits on its authority or any material procedural
missteps under the CAA or the APA. But neither can the court
ignore jurisdictional limits or substantive provisions that
Congress wrote in clear terms and EPA’s permissible
interpretations of the CAA in addressing statutory silence or
ambiguity. Rather it underscores why, as a programmatic and
public health matter, Congress concluded there are important
reasons for jurisdictional limits and administrative exhaustion
that this court heretofore has steadfastly acknowledged in
recognizing both the limits of its jurisdiction and of its role in
enforcing the CAA as Congress wrote it.

    Accordingly, I respectfully dissent.