Treasure State Resource Industry Ass'n v. Environmental Protection Agency

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 16, 2015 Decided November 3, 2015
No. 13-1263
TREASURE STATE RESOURCE INDUSTRY ASSOCIATION,
PETITIONER
v.
ENVIRONMENTAL PROTECTION AGENCY AND GINA
MCCARTHY, ADMINISTRATOR, U.S. ENVIRONMENTAL
PROTECTION AGENCY, RESPONDENTS
Consolidated with 13-1264, 14-1093, 14-1164
On Petitions for Review of Actions of the
United States Environmental Protection Agency
William W. Mercer argued the cause for petitioner
Treasure State Resource Industry Association. Douglas A.
McWilliams argued the cause for petitioner United States
Steel Corporation. With them on the briefs were John D.
Lazzaretti, Emily C. Schilling, Marie Bradshaw Durrant, and
Michael P. Manning.
Norman J. Mullen, Special Assistant Attorney General,
Office of the Attorney General for the State of Montana, was
on the brief for amicus curiae State of Montana in support of
2
remedy of reversal urged by petitioner Treasure State
Resource Industry Association in 13-1263 and 14-1164.
Amanda Shafer Berman, Attorney, U.S. Department of
Justice, argued the cause for respondents. With her on the
brief were John C. Cruden, Assistant Attorney General, and
Mike Thrift, Counsel, U.S. Environmental Protection Agency.
Before: GRIFFITH and MILLETT, Circuit Judges, and
WILLIAMS, Senior Circuit Judge.
Opinion for the Court filed by Senior Circuit Judge
WILLIAMS.
WILLIAMS, Senior Circuit Judge: The Clean Air Act, 42
U.S.C. §§ 7401-7671q, directs the Environmental Protection
Agency to establish air concentration levels above which
certain pollutants may endanger public health and welfare,
called National Ambient Air Quality Standards (“NAAQS”),
id. §§ 7408-7409. On June 22, 2010 EPA exercised this
authority to issue a new standard for sulfur dioxide, SO2. 75
Fed. Reg. 35,520/1. The new NAAQS imposes a 1-hour
ceiling of 75 parts per billion, based on the 3-year average of
the annual 99th percentile of 1-hour daily concentrations. Id.
(Because the stringency of the changes derives largely from
the ways in which compliance is calculated rather than from
the raw concentration numbers, it is almost impossible to give
a meaningful statement of the degree by which the standard
increased stringency. See Sulfur Dioxide (SO2) Primary
Standards – Table of NAAQS, http://www3.epa.gov/ttn/
naaqs/standards/so2/s_so2_history.html.) States were then to
develop state implementation plans (“SIPs”) to guide them in
imposing requirements on pollution sources in order to
implement the NAAQS. 42 U.S.C. §§ 7502(c), 7503(a).
3
Within two years after a new NAAQS is established
(extendable as in this case to three for want of adequate data),
id. § 7407(d)(1)(B)(i), EPA must designate all parts of the
country as being in “attainment,” in “nonattainment,” or
“unclassifiable” with respect to the air quality standards, id.
§ 7407(d)(1)(A). “Nonattainment” areas either fail to satisfy
the NAAQS themselves or contribute to pollution in another
area that does not satisfy the NAAQS. “Attainment” areas
both satisfy the NAAQS and do not contribute to
nonattainment status for another area. In “unclassifiable”
areas, EPA lacks adequate information to make a
determination either way. Id. § 7407(d)(1)(A)(i)-(iii).
On August 5, 2013 EPA designated 29 areas as not
meeting its new SO2 standards. Air Quality Designations for
the 2010 Sulfur Dioxide (SO2) Primary National Ambient Air
Quality Standard, 78 Fed. Reg. 47,191/3 (“Final Rule”). Each
of the two petitioners now before us, Treasure State Resource
Industry Association and United States Steel Corporation,
challenges one of these 29 designations: the Association
attacks the one for part of Yellowstone County, Montana, and
U.S. Steel challenges the one for part of Wayne County,
Michigan. Each sought reconsideration by EPA,
unsuccessfully. 79 Fed. Reg. 18,248/3 (Apr. 1, 2014); 79 Fed.
Reg. 50,577/3 (Aug. 25, 2014).
We deny the petitions for review. Except insofar as both
are attacks on EPA’s August 2013 designations with respect
to the 2010 SO2 NAAQS, the two claims have virtually
nothing in common. We take Montana first, then Michigan.
* * *
The Association is “a trade association comprised of
natural resource industries and associations, labor unions,
consulting firms and law firms, and recreation organizations
4
located throughout Montana.” Petitioners’ Br. iii. Its
standing is clear and uncontested; its members are located
within the nonattainment area and are subject to regulations
resulting from the designation. The Association’s primary
arguments are: (1) that the data on which EPA relied were so
unreliable that its reliance was arbitrary and capricious, 42
U.S.C. § 7607(d)(9)(A), and (2) that EPA’s application of the
Act was retroactive within the meaning of Landgraf v. U.S.I.
Film Products, 511 U.S. 244 (1994), and thus, there being no
clear congressional intent to authorize retroactivity, not in
accord with the statute.
The Association claims that EPA failed to follow its
regulations because Montana, which collected the monitoring
data, had an “outdated” Quality Assurance Project Plan
(“QAPP”) for data collection. In particular, EPA regulations
require that states have a QAPP that
ensure[s] that the monitoring results: (a) Meet a well-
defined need, use, or purpose; (b) Provide data of
adequate quality for the intended monitoring objectives;
(c) Satisfy stakeholder expectations; (d) Comply with
applicable standards specifications; (e) Comply with
statutory (and other) requirements of society; and (f)
Reflect consideration of cost and economics.
40 C.F.R. § Pt. 58, App. A. Although the Association says
that Montana’s QAPP was “outdated” because it was
developed in 1996, it identifies only one respect in which
Montana’s failure to adjust the QAPP might have undermined
its usefulness or accuracy. Specifically it claims that the 1996
QAPP was aimed at an obsolete NAAQS standard, seeking
“to measure a standard set at more than six times the 2010
SO2 NAAQS and [it therefore] contains sub-optimal
equipment settings, range levels, and monitoring guidance”
for measuring satisfaction of the new NAAQS. Petitioners’
5
Br. 22. We can easily imagine a situation where a calibration
aimed at a different ambient pollution level would lead to
such questionable readings that agency acceptance of the data
would be arbitrary and capricious. But the Association
presents no evidence that the calibration to a prior standard
here has actually led, or was likely to lead, to faulty
measurement. In fact the record points the other way.
Montana conducted numerous audits of the monitor at levels
lower than the new standard, which showed the monitor’s
ability to record data properly at that level. There was nothing
unreasonable in EPA’s determination that the data from the
monitor were “robust enough to be reliable” for the 2010
NAAQS. Responses to Significant Comments on the State
and Tribal Designation Recommendations for the 2010 Sulfur
Dioxide National Ambient Air Quality Standards (NAAQS)
(July 2013) (“Responses to Comments”) at 45, Joint Appendix
(“J.A.”) 431.
The Association’s last data-quality claim is that EPA
inappropriately applied a “weight of evidence” standard in its
evaluation of the air quality monitoring data. Specifically, it
says, EPA’s regulation requiring use of the “weight of
evidence” was promulgated only weeks before comments
were due on EPA’s proposed SO2 designations and well after
issuance of the new NAAQS standard. 78 Fed. Reg. 3,086,
3,283/3-3,284/1 (Jan. 15, 2013). Given this timing, the
Association claims that the use of the new “weight of
evidence” standard was post hoc. But in its response to the
Association’s petition for reconsideration EPA observed that
in promulgating the standard it had merely codified its long-
established practice in review of data quality, EPA Denial
Letter to Treasure State at 6, J.A. 302, and the Association
offers only lame arguments to refute that contention.
As to retroactivity, the Association’s argument turns on
the fact that EPA used data from as far back as 2009 to make
6
the nonattainment designation under the June 2010 SO2
NAAQS regulation. Thus it imposed special regulatory
burdens on parties in Yellowstone County as a direct result of
activities that took place in 2009, and the first half of 2010,
before promulgation of the June 2010 NAAQS rule. The
regulatory burdens do not flow instantly from the
nonattainment designation, but they flow ineluctably.
Designation of an area as nonattainment triggers an obligation
for the state within which the area is located to modify its SIP
(or create one), with the goal of bringing the area into
attainment. To that end the SIP must require “all reasonably
available control measures as expeditiously as practicable
(including such reductions in emissions from existing sources
in the area as may be obtained through the adoption, at a
minimum, of reasonably available control technology).” 42
U.S.C. § 7502(c)(1). And the SIP also must impose special
permitting requirements on firms proposing construction of a
new source or modification of an existing one, id.
§ 7502(c)(5); the new or modified source must comply “with
the lowest achievable emission rate,” id. § 7503(a)(2). Thus
the challenged nonattainment designation leads to a regulatory
burden on parties in nonattainment areas such as the
Association’s members.
The Act and EPA’s enforcement strategy made it highly
likely that data pre-dating the final adoption of the new
NAAQS would be critical in causing some areas to be
designated nonattainment and to incur those burdens.
Combining to make that probable are (1) EPA’s decision to
measure compliance with the new NAAQS standard by a 3-
year average of various 1-hour readings, (2) the requirement
that EPA make its final designations within three years of
promulgation, 42 U.S.C. § 7407(d)(1)(B)(i), and (3)
conventional process delays and a general desire to use full
calendar years. The Association does not, however, challenge
the three-year averaging rule itself. Rather, it attacks the
7
actual designation in August 2013, which because of these
features in fact drew on data antedating the new NAAQS
standard.
The Supreme Court will refuse “to give retroactive effect
to statutes burdening private rights unless Congress ha[s]
made clear its intent.” Landgraf, 511 U.S. at 270. (The due
process clause also may place limits on retroactive burdens,
see, e.g., Usery v. Turner Elkhorn Mining Co., 428 U.S. 1
(1976), but is not in play here.) We have already found, in a
case involving a party’s attempt to have a nonattainment
designation made effective before EPA actually issued the
designation, that the sections of the Act relating to
nonattainment “contain no language suggesting that Congress
intended to give EPA the unusual ability to implement rules
retroactively.” Sierra Club v. Whitman, 285 F.3d 63, 68 (D.C.
Cir. 2002). 1 Thus a finding that EPA’s Final Rule had
retroactive effect (within the meaning of Landgraf) would
render it impermissible under the attainment designation
provisions of the Act.
Although Landgraf requires that courts evaluating a rule
for retroactivity ask “whether the new provision attaches new
legal consequences to events completed before its enactment,”
that is far from the end of the story; “[a] statute does not
operate ‘retrospectively’ merely because it is applied in a case
arising from conduct antedating the statute’s enactment.” 511
1
Furthermore, the APA prohibits retroactive rulemaking. See
Georgetown Univ. Hosp. v. Bowen, 821 F.2d 750, 756-58 & n.11
(D.C. Cir. 1987), aff'd, 488 U.S. 204 (1988) (citing 5 U.S.C.
§ 551(4), defining a “rule” as “an agency statement of general or
particular applicability and future effect” (emphasis added)). We
said in Celtronix Telemetry, Inc. v. FCC, 272 F.3d 585, 588 (D.C.
Cir. 2001), that the “tests formulated in Landgraf are indeed
pertinent to the APA issue.”
8
U.S. at 269-70. The most concrete factors are “considerations
of fair notice, reasonable reliance, and settled expectations,”
id. at 270 (citations omitted), to which we now turn.
The typical form of unfairness that retroactivity may
wreak is by radically undermining the value of costs that
parties incurred in reasonable reliance on continuation of the
status quo, or by discouraging parties from incurring costs that
by virtue of the new rule might have yielded net savings. An
example of the first would be decisions to build or improve a
plant for compliance with the old standards—changes that as a
result of the new rule and the nonattainment designation may
require costly retrofitting. A cost that knowledge of the new
rule and nonattainment classification might have encouraged
would be building to the resulting specifications—again in
order to avoid retrofitting costs that would stem from an
improvement that complied merely with the old regulatory
landscape. (A further advantage would have been the chance
of avoiding nonattainment designation—and its attendant
regulatory entanglement—by improving the area’s overall air
quality, but it’s hard to imagine a single source owner’s
employing such a strategy, which could easily be undermined
by the conduct of other source owners.) Here, in fact, the
record discloses no evidence of Yellowstone County source
owners’ taking any such steps in reliance on the old standards.
The absence of such evidence is hardly surprising in light
of the established rules governing nonattainment designation
and the ample public notice of the impending change in the
NAAQS. The Act itself requires that “at five-year intervals
. . . , the [EPA] Administrator shall complete a thorough
review of” the NAAQS and revise them as appropriate. 42
U.S.C. § 7409(d)(1). Moreover, these changes have moved
generally toward greater stringency over the life of the Act.
See links to historical NAAQS standards at
http://www3.epa.gov/ttn/naaqs/criteria.html. More
9
specifically, EPA had long given notice of the prospect of
more stringent SO2 regulations. (See the review of the history
in 75 Fed. Reg. at 35,522/2-35,523/3.) As early as 1988, it
requested public comment on a new 1-hour standard similar to
the one that was adopted in 2010. 53 Fed. Reg. 14,926/1
(Apr. 26, 1988). In 1998, this court held that a later decision
not to revise the standards had been inadequately reasoned.
American Lung Association v. EPA, 134 F.3d 388 (D.C. Cir.
1998). EPA embarked on further data collection, and in 2006
initiated the review of its SO2 air quality criteria, 71 Fed. Reg.
28,023/2 (May 15, 2006), a review that culminated in the
2010 standards. While of course divining the specifics of
EPA’s decision would have been impossible, firms had years
of notice that more stringency was possible. Accordingly, any
investment decisions taken in the expectation of stasis would
not have qualified as having been made in reasonable reliance
on preexisting law.
Finally, the Association challenges EPA’s denial of its
reconsideration petition. 79 Fed. Reg. 50,577/3. Its main
argument in its petition for reconsideration was that if EPA
had considered new data from 2013 it would have found that
Yellowstone County was no longer out of attainment. Petition
for Reconsideration or Repeal of a Portion of the Final Rule
and Request for an Administrative Stay Pending Agency
Proceedings at 7-8, J.A. 332-33. There are at least two
problems with this claim. First, the 2013 data were not
complete or certified at the time that the Association
suggested that they be used. Id. at 6 n.28. And using only
data for 2010-2012 would not have undone the county’s
violation of the NAAQS. Responses to Comments at 51, J.A.
437.
Second, a ruling that an agency’s disregard of data
gathered after final agency action was arbitrary and capricious
could make it difficult for many actions to go into effect.
10
Since new data may continue to pour in, reconsideration based
on such data could materially delay arrival at a final decision.
And the Act clearly did intend to produce final rules, since
“Congress imposed deadlines on EPA and thus clearly
envisioned an end to the designation process.” Catawba
County, N.C. v. EPA, 571 F.3d 20, 51 (D.C. Cir. 2009).
Further, parties in areas designated nonattainment aren’t
without recourse: Congress explicitly provided a re-
designation process in 42 U.S.C. §§ 7407(d)(3), 7505a.
Rejecting the petition for reconsideration, EPA explained this
recourse, as well as the possibility of submitting a request for
a “clean data determination,” which “would suspend certain
nonattainment planning requirements.” Treasure State Den.
Ltr. at 22-23, J.A. 318-19. Given the difficulties arising from
reconsideration of new data and the availability of other
avenues of redress, it was reasonable for EPA to deny
reconsideration of this claim.
The Association’s remaining arguments, alleging data
quality deficiencies that it claims the agency ignored in
finalizing the Montana designation, were not specifically
raised until reconsideration and were then fully and
reasonably disposed of by EPA in its denial.
We therefore uphold the Final Rule’s designation of part
of Yellowstone County as nonattainment.
* * *
We turn now to the Michigan designation. U.S. Steel has
a plant located in the nonattainment portion of Wayne County
and does not dispute the designation of that portion as
nonattainment. But it argues that it was not reasonable for
EPA to designate part of Wayne County as nonattainment
without simultaneously making the same determination for at
least that portion of neighboring Monroe County that includes
11
the Monroe Coal-Fired Power Plant (the “Monroe plant”).
Pointing to the statutory criteria for nonattainment
designation, § 107(d)(1)(A)(i), 42 U.S.C. § 7407(d)(1)(A)(i),
which require inclusion of any area “that contributes to
ambient area quality in a nearby area that does not meet” the
NAAQS, U.S. Steel says that SO2 from the Monroe plant
significantly contributes to SO2 levels in Wayne County and
that therefore designation of Wayne County without the
Monroe plant violates the statute and is arbitrary and
capricious.
U.S. Steel must first establish its standing by showing
satisfaction of the now-standard elements of injury in fact,
causation and redressability. Lujan v. Defenders of Wildlife,
504 U.S. 555, 560-61 (1992). Once we understand the
process for remedying nonattainment in an area so designated,
it is apparent that U.S. Steel meets those requirements.
U.S. Steel has suffered an injury in fact that is “concrete
and particularized” and “actual or imminent, not ‘conjectural’
or ‘hypothetical,’” id. at 560 (citations omitted), because the
designation of Wayne County as nonattainment without the
inclusion of the Monroe plant area subjects it to a markedly
higher risk of facing costly (or more costly) regulatory
pollution controls. EPA claims that there is little risk of such
an injury, since Michigan can elect to address nonattainment
in Wayne County by “impos[ing] emission reduction
requirements on all facilities that it determines are, in fact,
contributing to nonattainment.” Respondents’ Br. 40. Thus,
says EPA, the burden of reducing pollution could be shared
between U.S. Steel and the Monroe plant regardless of
whether the Monroe plant is included in the nonattainment
area. EPA’s contention is a considerable oversimplification.
The Act gives a kind of primacy to reductions from
sources in the nonattainment area itself, and we have read it as
12
sharply prioritizing reductions inside the nonattainment area.
Speaking of the SIP required for a nonattainment area, the Act
provides:
(1) In general
Such plan provisions shall provide for the implementation
of all reasonably available control measures as
expeditiously as practicable (including such reductions in
emissions from existing sources in the area as may be
obtained through the adoption, at a minimum, of
reasonably available control technology) and shall
provide for attainment of the national primary ambient air
quality standards.
Act, § 172(c)(1), 42 U.S.C. § 7502(c)(1) (emphasis added).
We considered this provision in NRDC v. EPA, 571 F.3d
1245 (D.C. Cir. 2009), where we reviewed an EPA rule
defining state SIP obligations for NOx over a 22-state region
and instituting a cap-and-trade program throughout the region.
Besides relying on the language of the parenthetical clause in
§ 172(c)(1), NRDC had expressed concern that EPA’s rule
allowed states to rely on sources not only outside
nonattainment areas but also on sources “in other states
hundreds of miles away.” Final Opening Brief of Natural
Resources Defense Council at 21, NRDC, 571 F.3d 1245 (No.
06-1045). We ruled that the parenthetical “calls for
reductions in emissions from sources in the area; reductions
from sources outside the nonattainment area do not satisfy the
requirement.” Id. at 1256. And we went on to say that
satisfaction of § 172(c)(1)’s “reasonably available control
technology” (“RACT”) mandate must “entail[] at least RACT-
level reductions in emissions from sources within the
nonattainment area.” Id. Thus, if Monroe County were
designated nonattainment (and if it is a significant enough
13
contributor, as U.S. Steel claims), then the Monroe plant
would be subject to RACT; without such designation, any
state pressure for cutbacks at the Monroe plant would be up to
Michigan (acting, of course, within the constraints of the Act).
And, while Michigan could impose restrictions on the Monroe
plant, as EPA assures us, under NRDC the resulting reductions
would “not satisfy the [§ 172(c)(1) RACT] requirement.” Id.
Given that understanding of § 172(c)(1), it might seem
that the cutbacks likely to be imposed on U.S. Steel will be
the same regardless of whether the Monroe plant is included
in the nonattainment area. But EPA’s concept of RACT is
such that inclusion of the Monroe plant (again assuming that
its contribution to SO2 exceedances in Wayne County is
significant) would likely reduce the stringency of the RACT
imposed on U.S. Steel. RACT takes into account “[t]he
necessity of imposing such controls in order to attain and
maintain a national ambient air quality standard.” 40 C.F.R.
§ 51.100(o)(1) (2009). Indeed, in its response to comments on
the regulation targeting U.S. Steel’s SO2 emissions, the State
of Michigan cites this definition. Proposed SIP, Appendix F:
Draft Rule 430 Comments/Responses at 1-2,
http://www.deq.state.mi.us/aps/downloads/SIP/SO2SIP.pdf.
Thus, expansion of the nonattainment area to include another
seriously contributing source would likely reduce the severity
of the RACT imposed on U.S. Steel; conversely, EPA’s
failure to add the Monroe plant area inflicts a substantial risk
of more severe controls on U.S. Steel, an imminent and non-
hypothetical injury, redressable by a mandate to include that
area.
EPA also argues that its Final Rule is not final within the
meaning of the APA, 5 U.S.C. § 704, with respect to this
challenge, because it expressly said that it had not completed
the designation process for Monroe County. Michigan
Technical Support Document at 7-8, J.A. 655-56. But this
14
misconceives U.S. Steel’s claim, which, to repeat, is that it
was unlawful to designate Wayne County without
simultaneously designating the area containing the Monroe
plant.
Reaching the merits, however, we find neither a violation
of the Act nor any arbitrariness in EPA’s action. For its SO2
rulemaking, EPA issued guidance to the states for making
their initial recommendations, indicating that “the perimeter
of a county containing a violating monitor would be the initial
presumptive boundary for nonattainment areas.” 78 Fed. Reg.
at 47,195/2. Nothing in the Act or its associated regulations
prevents EPA from presumptively following county
boundaries. Recall that the Act defines a nonattainment area
as “any area that does not meet (or that contributes to ambient
air quality in a nearby area that does not meet) the national
primary or secondary ambient air quality standard for the
pollutant.” 42 U.S.C. § 7407(d)(1)(A)(i). Assuming that the
portion of Monroe County containing the Monroe plant may
ultimately be found to contribute to nonattainment in Wayne
County, nothing in the definition requires a simultaneous
decision on both counties. (Nor does it require that a single
area be created. At oral argument EPA counsel told the court
that in the event of a later nonattainment designation of the
Monroe plant area because of its contributions to Wayne
County, “the measuring would ultimately be a collective one
of [whether] these counties collectively brought
[non]attainment at the monitoring site in Wayne County.”
Oral Argument at 58:27.)
Of course, EPA’s approach could still be arbitrary and
capricious even in the absence of a statutory or regulatory
mandate. Under the APA, EPA must “conform to ‘certain
minimal standards of rationality.’” Small Refiner Lead Phase-
Down Task Force v. EPA, 705 F.2d 506, 521 (D.C. Cir. 1983).
But EPA has offered many reasons that justify its decision to
15
defer a decision on Monroe County. Most importantly, there
was uncertainty over whether pollution from Monroe County
is, in fact, substantially contributing to air quality in Wayne
County. The Monroe plant is approximately 54 kilometers
away from the violating Wayne County monitor. Responses
to Comments at 27, J.A. 413; Michigan Technical Support
Document at 6, J.A. 654. Additionally, another monitor
located between the Monroe plant and the violating Wayne
County monitor—and significantly closer to the former than
to the latter—showed no exceedances. Responses to
Comments at 28, J.A. 414. Finally, EPA reasonably asserted
the need for further study on the effect of recently-installed
emission control scrubbers on the Monroe plant. Michigan
Technical Support Document at 6, J.A. 654. Given the
current uncertainty, postponement of the classification of
Monroe County was not arbitrary and capricious.
Finally, U.S. Steel’s challenge to the denial of its petition
for reconsideration fails. In denying that petition, EPA
thoroughly and reasonably addressed U.S. Steel’s arguments.
See EPA Denial Letter to U.S. Steel, J.A. 598-610.
* * *
The petitions for review of the Final Rule and EPA’s
denial of petitions for reconsideration are accordingly
Denied.