California Communities Against Toxics v. United States Environmental Protection Agency

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
CALIFORNIA COMMUNITIES AGAINST 
TOXICS, an unincorporated
association; COMMUNITIES FOR A
BETTER ENVIRONMENT, a California
non-profit organization,
Petitioners,
v.

UNITED STATES ENVIRONMENTAL No. 11-71127
PROTECTION AGENCY; LISA JACKSON, OPINION
Administrator, U.S. Environmental
Protection Agency; JARED
BLUMENFELD,
Respondents,
CPV SENTINEL LLC; SOUTH COAST
AIR QUALITY MANAGEMENT DISTRICT,
Respondents-intervenors.

On Petition for Review of a Final Rulemaking
of the United States Environmental Protection Agency
Argued and Submitted
June 5, 2012—Pasadena, California
Filed July 26, 2012
Before: Alex Kozinski, Chief Judge, Stephen S. Trott and
Sidney R. Thomas, Circuit Judges.
Per Curiam Opinion
8491
CALIFORNIA COMMUNITIES AGAINST TOXICS v. EPA 8493
COUNSEL
Angela Johnson Meszaros and Timothy R. Grabiel, Law
Offices of Angela Johnson Meszaros, South Pasadena, Cali-
fornia, for petitioner California Communities Against Toxics.
Shana Lazerow and Maya Golden-Krasner, Communities for
a Better Environment, Oakland, California, for petitioner
Communities for a Better Environment.
Ann Lyons, United States Environmental Protection Agency,
Office of Regional Counsel, San Francisco, California; Scott
Jordan, United States Environmental Protection Agency,
Office of General Counsel, Washington, D.C.; Ignacia S.
Moreno, Assistant Attorney General; and Amy J. Dona, Envi-
ronmental Defense Section, Environment & Natural
8494 CALIFORNIA COMMUNITIES AGAINST TOXICS v. EPA
Resources Division, United States Department of Justice,
Washington, D.C., for respondents United States Environ-
mental Protection Agency, Lisa Jackson and Jared Blumen-
feld.
Michael J. Carroll and Joshua T. Bledsoe, Latham & Watkins
LLP, Costa Mesa, California, for respondent-intervenor CPV
Sentinel, LLC.
Kurt R. Wiese, Barbara Baird, Lauren B. Nevitt and Megan
E. Lorenz, South Coast Air Quality Management District,
Diamond Bar, California, for respondent-intervenor South
Coast Air Quality Management District.
OPINION
PER CURIAM:
Two environmental groups petition for review of a final
rulemaking by the EPA. The groups and the EPA agree this
case should be remanded, so the only dispute is whether vaca-
tur is appropriate.
Background
The Clean Air Act requires the EPA to set national ambient
air quality standards for air pollutants. 42 U.S.C. § 7409.
States are responsible for developing plans to implement
those standards. § 7410(a)(1). The states’ plans, and any revi-
sions, must be approved by the EPA. § 7410(k). As part of the
plans, states must establish a permitting program for new pol-
luters in areas that don’t meet the EPA’s standards.
§§ 7502(c)(5), 7503(c). Those programs must ensure any
emission increases be offset by corresponding emission
reductions. § 7503(c).
CALIFORNIA COMMUNITIES AGAINST TOXICS v. EPA 8495
The South Coast Air Quality Management District (“the
District”) regulates the air quality in the South Coast Air
Basin and the Riverside portions of the Salton Sea Air Basin.
Cal. Health & Safety Code § 40412; Cal. Code Regs. tit. 17,
§§ 60104, 60114. Because these areas don’t meet the EPA’s
air quality standards, the District is responsible for developing
a plan that ensures new emission increases are offset by
reductions. See 40 C.F.R. § 81.305; 42 U.S.C. § 7410(a)(1).
When reductions exceed increases, the excess reductions take
the form of “credits,” which are traded in an open market to
entities seeking to meet their offset requirements. The District
maintains a stock of these credits in an internal bank for dis-
tribution to entities like schools and hospitals.
In 2009, California passed Assembly Bill 1318, which
requires the District to transfer credits to a soon-to-be com-
pleted power plant named Sentinel. 2009 Cal. Legis. Serv.
3402-07 (West). Since the Bill changed the state plan, the
District sought the EPA’s approval.
Petitioners challenge the EPA’s final rule approving the
District’s revision. See Revision to the South Coast Portion of
the California State Implementation Plan, CPV Sentinel
Energy Project AB 1318 Tracking System, 76 Fed. Reg.
22,038 (Apr. 20, 2011). They allege that the EPA committed
procedural errors during the rulemaking process and that the
substance of the revised state plan violates the Clean Air Act.
Analysis
[1] We review agency action to see if it’s arbitrary and
capricious. Sacora v. Thomas, 628 F.3d 1059, 1068 (9th Cir.
2010); 5 U.S.C. § 706(2)(A). Here, the EPA has admitted that
the reasoning adopted for its final rule was flawed and volun-
tarily seeks remand. A federal agency may request remand in
order to reconsider its initial action. See, e.g., SKF USA Inc.
v. United States, 254 F.3d 1022, 1029 (Fed. Cir. 2001). That’s
what the EPA has done here. It seeks to explain on remand
8496 CALIFORNIA COMMUNITIES AGAINST TOXICS v. EPA
how credits earmarked for Sentinel meet certain regulatory
requirements, see 40 C.F.R. § 51.165(a)(3)(ii)(C)(1)(I), and to
revisit its calculations of the District’s available credits.
[2] Generally, courts only refuse voluntarily requested
remand when the agency’s request is frivolous or made in bad
faith. SKF USA Inc., 254 F.3d at 1029. Compare Sw. Bell Tel.
Co. v. FCC, 10 F.3d 892, 896 (D.C. Cir. 1993) (discussing the
court’s previous decision to grant the agency’s request for a
remand) with Lutheran Church-Mo. Synod v. FCC, 141 F.3d
344, 349 (D.C. Cir. 1998) (refusing to remand because the
agency just wanted to avoid judicial review). Because the
EPA has recognized the merits of the petitioners’ challenges
and has been forthcoming in these proceedings, there is no
evidence that the EPA’s request is frivolous or made in bad
faith. We therefore grant the EPA’s request for remand.
[3] That brings us to whether we must vacate the EPA’s
final rule. A flawed rule need not be vacated. See Idaho Farm
Bureau Fed’n v. Babbitt, 58 F.3d 1392, 1405 (9th Cir. 1995);
W. Oil & Gas Ass’n v. EPA, 633 F.2d 803, 813 (9th Cir.
1980). Indeed, “when equity demands, the regulation can be
left in place while the agency follows the necessary proce-
dures” to correct its action. Idaho Farm Bureau, 58 F.3d at
1405. Even though the agency’s error was significant in Idaho
Farm Bureau, we didn’t vacate the agency’s rule because that
could have wiped out a species of snail. Id. at 1405-06. Simi-
larly, in Western Oil and Gas, we didn’t order vacatur
because doing so would have thwarted “the operation of the
Clean Air Act in the State of California during the time the
deliberative process [was] reenacted.” 633 F.2d at 813.
[4] Whether agency action should be vacated depends on
how serious the agency’s errors are “and the disruptive conse-
quences of an interim change that may itself be changed.”
Allied-Signal, Inc. v. U.S. Nuclear Regulatory Comm’n, 988
F.2d 146, 150-51 (D.C. Cir. 1993) (internal quotation marks
omitted).
CALIFORNIA COMMUNITIES AGAINST TOXICS v. EPA 8497
I. Alleged Errors
Petitioners allege two types of errors—procedural and sub-
stantive.
A. Procedural Errors.
During the rulemaking process, the EPA didn’t disclose
certain documents in the electronic docket or list them in the
docket index. According to the petitioners, those failures vio-
lated the notice-and-comment requirements of the Adminis-
trative Procedure Act. See 5 U.S.C. § 553(c).
Agencies must “give interested persons an opportunity to
participate in the rule making through submission of written
data, views, or arguments.” 5 U.S.C. § 553(c). This means the
agency must “identify and make available technical studies
and data that it has employed in reaching the decisions to pro-
pose particular rules.” Kern Cnty. Farm Bureau v. Allen, 450
F.3d 1072, 1076 (9th Cir. 2006) (internal quotation marks
omitted).
[5] EPA’s failure to include all documents in the electronic
docket was not an error. The E-Government Act requires
online disclosure only “to the extent practicable, as deter-
mined by the agency in consultation with the Director” of the
Office of Management and Budget. E-Government Act of
2002, Pub L. No. 107-347, § 206(d)(2), 116 Stat. 2899, 2916
(2002) (emphasis added). We defer to the EPA on what is
practicable to post on its online docket. See Heckler v.
Chaney, 470 U.S. 821, 831-32 (1985) (noting that agencies
are better equipped than courts to make certain choices, given
their expertise and their superior understanding of their own
resources and priorities).
EPA did misstate that all documents in the docket were
listed in the index. While this might violate an interested
party’s right to meaningfully comment, see 5 U.S.C. § 553(c),
8498 CALIFORNIA COMMUNITIES AGAINST TOXICS v. EPA
we need not decide that here. Assuming procedural error, it
was harmless as to the petitioners because they had the docu-
ments in their possession from earlier proceedings. And,
where a party has actual notice and was able to submit its
views to the agency prior to the challenged action, no proce-
dural harm is suffered by failure to provide notice. Cal-
Almond, Inc. v. U.S. Dep’t of Agric., 14 F.3d 429, 441-42 (9th
Cir. 1993); see 5 U.S.C. § 706 (“[D]ue account shall be taken
of the rule of prejudicial error.”).
[6] Petitioners don’t dispute they had the documents in
hand; instead, they claim they had no way of knowing which
documents the EPA was reviewing. But petitioners knew that
all documents weren’t listed in the docket index before the
comment period ended and they were intimately familiar with
the documents at issue. Finally, any disadvantage petitioners
suffered can be corrected on remand when they will have an
opportunity to comment meaningfully on the documents.
B. Substantive Errors.
[7] Petitioners argue that the EPA violated the Clean Air
Act in approving the District’s revision to its plan. The EPA
concedes that there are flaws in the reasoning adopted for its
final rule. Despite its concession, EPA maintains its rule is not
arbitrary and capricious and offers new reasoning to support
its final rule. But “our review of an administrative agency’s
decision begins and ends with the reasoning that the agency
relied on in making that decision.” Safe Air for Everyone v.
EPA, 488 F.3d 1088, 1091 (9th Cir. 2007); see also SEC v.
Chenery Corp., 318 U.S. 80, 87 (1943). We therefore find that
the EPA’s final rule is invalid.
That the EPA’s final rule is invalid is not the end of the
analysis. In considering whether vacatur is warranted, we
must balance these errors against the consequences of such a
remedy.
CALIFORNIA COMMUNITIES AGAINST TOXICS v. EPA 8499
II. Consequences of vacatur
[8] The delay and trouble vacatur would cause are severe.
Sentinel is scheduled to come on line in November, but vaca-
tur would pave the road to legal challenges to Sentinel’s con-
struction that could well delay a much needed power plant.
Without Sentinel, the region might not have enough power
next summer, resulting in blackouts. Blackouts necessitate the
use of diesel generators that pollute the air, the very danger
the Clean Air Act aims to prevent. See 42 U.S.C. § 7401(b)(1)
(stating the purpose of the Clean Air Act is “to protect and
enhance the quality of the Nation’s air”).
Stopping construction would also be economically disas-
trous. This is a billion-dollar venture employing 350 workers.
In addition, vacatur would likely require the California legis-
lature to pass a new bill to allow the District to transfer credits
from its internal bank to Sentinel, which would create need-
less and duplicative legislative effort.
Petitioners claim that failure to vacate the EPA’s rule will
allow Sentinel to continue construction, and that construction
will pollute the air. But the California Energy Commission
has already found that Sentinel’s construction harms are insig-
nificant with mitigation. And that mitigation doesn’t implicate
the credits at issue.
[9] While we have only ordered remand without vacatur in
limited circumstances, if saving a snail warrants judicial
restraint, see Idaho Farm Bureau, 58 F.3d at 1405-06, so does
saving the power supply. Accordingly, we remand without
vacatur so that construction of Sentinel may proceed without
delay. This does not authorize commencement of Sentinel’s
operation without a new and valid EPA rule in place.
REMANDED without VACATUR.