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State v. United States Environmental Protection Agency

United States Court of Appeals, Tenth Circuit

July 19, 2013

STATE OF OKLAHOMA; OKLAHOMA INDUSTRIAL ENERGY CONSUMERS, an unincorporated association, Petitioners,
v.
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, Respondent. SIERRA CLUB, Intervenor-Respondent, and PACIFICORP; AMERICAN COALITION FOR CLEAN COAL ELECTRICITY; NATIONAL PARKS CONSERVATION ASSOCIATION, Amici Curiae. OKLAHOMA GAS & ELECTRIC COMPANY, Petitioner,
v.
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, Respondent. SIERRA CLUB, Intervenor-Respondent, and PACIFICORP; AMERICAN COALITION FOR CLEAN COAL ELECTRICITY; NATIONAL PARKS CONSERVATION ASSOCIATION, Amici Curiae.

PETITION FOR REVIEW OF FINAL DECISION ISSUED BY THE UNITED STATES ENVIRONMENTAL PROTECTION AGENCY EPA-R06-OAR-2010-0190

E. Scott Pruitt, Oklahoma Attorney General, (P. Clayton Eubanks, Assistant Attorney General; Michael Graves and Thomas P. Schroedter of Hall Estill, Tulsa, Oklahoma, with him on the briefs), Oklahoma City, Oklahoma, for Petitioners State of Oklahoma and Oklahoma Industrial Energy Consumers.

Brian J. Murray of Jones Day, Chicago, Illinois, (Thomas E. Fennell of Jones Day, Dallas, Texas; Michael L. Rice of Jones Day, Houston, Texas; Charles T. Wehland of Jones Day, Chicago, Illinois, on the briefs), for Petitioner Oklahoma City Gas & Electric Company.

Stephanie J. Talbert, United States Department of Justice, Environment & Natural Resources Division, Environmental Defense Section, Washington, D.C. (Ignacia S. Moreno, Assistant Attorney General; M. Lea Anderson and Barbara Nann, Of Counsel, United States Environmental Protection Agency, with her on the brief), for Respondent.

Andrea Issod, (Elena Saxonhouse and Sanjay Narayan with her on the brief), San Francisco, California, for the Intervenor, Sierra Club.

Michael G. Jenkins, Assistant General Counsel, PacifiCorp Energy, Salt Lake City, Utah, and E. Blaine Rawson, Ray Quinney & Nebeker, P.C., Salt Lake City, Utah, filed an amicus curiae brief on behalf of PacifiCorp, Amicus Curiae.

Paul M. Seby and Marian C. Larsen of Moye White LLP, Denver, Colorado, filed an amicus curiae brief on behalf of the American Coalition for Clean Coal Electricity, Amicus Curiae.

Stephanie Kodish, Knoxville, Tennessee, filed an amicus curiae brief on behalf of the National Parks Conservation Association, Amicus Curiae.

Before BRISCOE, Chief Judge, KELLY and LUCERO, Circuit Judges.

BRISCOE, Chief Judge.

In these consolidated petitions for review, petitioners[1] challenge a final rule promulgated by the United States Environmental Protection Agency under the Clean Air Act. The petitioners argue that the EPA impermissibly rejected Oklahoma's plan to limit the emissions of sulfur dioxide at Oklahoma Gas and Electric Company power plants and replaced it with its own more stringent regulations, which petitioners contend usurped the state's authority and will require sizable expenditures on unnecessary technology. We conclude that the EPA has authority to review the state's plan and that it lawfully exercised that authority in rejecting it and promulgating its own. Exercising our jurisdiction under 42 U.S.C. § 7607(b)(1), we deny the petitions for review.

I

A. Statutory Background

The Clean Air Act "uses a cooperative-federalism approach to regulate air quality." U.S. Magnesium, LLC v. EPA, 690 F.3d 1157, 1159 (10th Cir. 2012). Under the Clean Air Act (CAA), the Environmental Protection Agency (EPA) must create and review national ambient air quality standards for certain pollutants. See 42 U.S.C. §§ 7408, 7409. States then have the responsibility to adopt state implementation plans (SIPs), "which provide[] for implementation, maintenance, and enforcement" of those primary and secondary air quality standards. § 7410(a)(1).

States, however, exercise this authority with federal oversight. The EPA reviews all SIPs to ensure that the plans comply with the statute. The EPA may not approve any plan that "would interfere with any applicable requirement" of this chapter of the United States Code. § 7410(l). The EPA has a duty to create its own federal implementation plan (FIP) if either: 1) it "finds that a State has failed to make a required submission or finds that the plan or plan revision submitted by the State does not satisfy the minimum criteria established under subsection (k)(1)(A) of this section"; or 2) it "disapproves a State implementation plan submission in whole or in part." § 7410(c)(1). The duty to promulgate a FIP exists "unless the State corrects the deficiency, and the Administrator approves the plan or plan revision, before the Administrator promulgates such Federal implementation plan." Id.

At issue in this case are the portions of the CAA that seek to protect visibility at certain national parks and wildlife areas. The CAA requires that the EPA promulgate regulations "to assure . . . reasonable progress toward" preventing any future and "remedying . . . any existing, impairment of visibility in mandatory class I Federal areas which impairment results from manmade air pollution." § 7491(a)(1), (a)(4). It also requires that the EPA ensure that each state plan "contain[s] such emission limits, schedules of compliance and other measures as may be necessary to make reasonable progress toward meeting the national goal." § 7491(b)(2).

Relevant in this case are the CAA's mandates regarding sources that contribute to visibility impairments. SIPs must include:

except as otherwise provided . . . a requirement that each major stationary source which is in existence on August 7, 1977, but which has not been in operation for more than fifteen years as of such date, and which, as determined by the State (or the Administrator in the case of a [FIP]) emits any air pollutant which may reasonably be anticipated to cause or contribute to any impairment of visibility in any such area, shall procure, install, and operate, as expeditiously as practicable (and maintain thereafter) the best available retrofit technology, as determined by the State (or the Administrator in the case of a [FIP]) for controlling emissions from such source for the purpose of eliminating or reducing any such impairment.

§ 7491(b)(2)(A). To simplify, a state—or the EPA, when promulgating a FIP—must: 1) determine which of the eligible major stationary sources in their state contributes to visibility impairment; and then 2) determine the "best available retrofit technology" for controlling the emissions causing that impairment at that source. Id. When determining "best available retrofit technology" (BART):

the State (or the Administrator in determining emission limitations which reflect such technology) shall take into consideration [1] the costs of compliance, [2] the energy and nonair quality environmental impacts of compliance, [3] any existing pollution control technology in use at the source, [4] the remaining useful life of the source, and [5] the degree of improvement in visibility which may reasonably be anticipated to result from the use of such technology.

§ 7491(g)(2).

The CAA requires that the EPA create guidelines for the states "on appropriate techniques and methods for implementing this section." § 7491(b)(1). For "a fossil-fuel fired generating powerplant having a total generating capacity in excess of 750 megawatts, the emission limitations required under this paragraph shall be determined pursuant" to the regulations promulgated by the EPA. § 7491(b). The EPA has promulgated these BART guidelines at 40 C.F.R. § 51.308(e).

B. Procedural Background

In 2005, the EPA issued an updated version of its Regional Haze Rule that required states to submit SIP revisions by December 17, 2007. See Regional Haze Program Requirements, 40 C.F.R. § 51.308(b). On January 15, 2009, the EPA took final action in finding that Oklahoma—along with 31 other states, the District of Columbia, and the U.S. Virgin Islands—failed to submit a SIP that addressed any of the Regional Haze elements by this deadline. See Finding of Failure To Submit State Implementation Plans Required by the 1999 Regional Haze Rule, 74 Fed. Reg. 2392-01 (Jan. 15, 2009). This triggered the EPA's duty to promulgate a federal implementation plan within two years. See 42 U.S.C. § 7410(c)(1).

Before the EPA promulgated a FIP, however, Oklahoma submitted its SIP. See Oklahoma Regional Haze State Implementation Plan, Joint Appendix (JA) at 55 (Feb. 17, 2010). At issue in this petition are the SIP's BART determinations with respect to two units at Oklahoma Gas & Electricity's (OG&E's) Muskogee Generating Station and two units at its Sooner Generating Station. The Oklahoma SIP set a sulfur dioxide (SO2) emissions limits of 0.65 lb/mmBtu (thirty-day average) and 0.55 lb/mmBtu (annual average) for each of these four units. See OG&E Muskogee Generating Station BART Review, JA at 187 (Jan. 15, 2010); OG&E Sooner Generating Station BART Review, JA at 221 (Jan. 15, 2010). The BART for each of these units included OG&E's continued use of low-sulfur coal. The SIP considered, but rejected, an emissions limit that would require the installation of so-called scrubbers to remove SO2. See Muskogee BART Review, JA at 213; Sooner BART Review, JA at 247. "The cost for [dry scrubbers] is too high, the benefit too low and these costs, if borne, further extend the life expectancy of coal as the primary fuel in the Sooner [and Muskogee] facilit[ies] for at least 20 years and beyond, " according to OG&E's BART analyses. See id.

On March 22, 2011, the EPA proposed a rule that would partially approve and partially disapprove Oklahoma's SIP. Proposed Rule, 76 Fed. Reg. 16, 168-01, 16, 169 (Mar. 22, 2011). The SO2 emission limitations for OG&E's four units were among the parts of the SIP that the EPA proposed disapproving. The EPA said that Oklahoma failed to follow the promulgated regulations in determining BART. Id. at 16, 182. Specifically, the EPA said that Oklahoma "did not properly 'take into consideration the costs of compliance' when it relied on cost estimates that greatly overestimated the costs of dry and wet scrubbing to conclude these controls were not cost effective." Id. (quoting 40 C.F.R. § 51.308(e)(1)(ii)(A)).

"Given that scrubbers are typically considered to be highly cost-effective controls for power plants such as those at issue, [the EPA] retained a consultant to independently assess the suitability and costs of installing these controls." Id. The EPA found the scrubbers to be substantially more cost effective than Oklahoma did. Id. at 16, 183. For example, Oklahoma estimated the cost of the scrubbers to be $7, 147 per ton of SO2 removed at one of the Sooner Generating Station units. Id. The EPA projected scrubbers at that same unit would cost $1, 291 per ton of SO2 removed. Id.

In addition to proposing the partial disapproval of the SIP, the EPA proposed creating its own federal implementation plan in the same action. Id. at 16, 168. The EPA proposed an SO2 emissions limit of 0.06 lb/mmBtu (thirty-day average). Id. at 16, 193-94. Based on this limit, the EPA believed the use of dry scrubbers would be cost effective. Id. at 16, 183. After notice and comment, the EPA published the final rule enacting these emissions limits. See Final Rule, 76 Fed. Reg. 81, 728-01 (Dec. 28, 2011).

On February 24, 2012, the state of Oklahoma and the Oklahoma Industrial Energy Consumers filed in this court a petition seeking review of the final rule (Case No. 12-9526). OG&E filed its petition for review the same day (Case No. 12-9527). We later issued an order granting a motion to consolidate these petitions.

The petitioners also took steps to stay the application of the rule. The same day they filed petitions for review, the petitioners filed with the EPA a motion for reconsideration and a request for an administrative stay.[2] The petitioners also filed a motion in this court seeking a stay pending a hearing on the merits. A two-judge panel of this court granted the petitioners' motion to stay the portion of the rule requiring the reduction of SO2 emissions at these four OG&E units. Oklahoma v. EPA, Nos. 12-9526 and 12-9527, at 1-2 (10th Cir. June 22, 2012). Meanwhile, appellate briefing progressed.

The petitioners raise a number of objections to the final rule, arguing that the EPA has usurped the state's authority in an effort to force OG&E to spend more than one-billion dollars to install unnecessary technology in the next five years. First, they argue that the EPA exceeded its statutory authority by disapproving Oklahoma's BART determination. Second, they argue that, even if the EPA had this authority, the EPA acted arbitrarily and capriciously by disapproving Oklahoma's SIP. Third, they argue that the EPA acted arbitrarily and capriciously in promulgating its FIP. Fourth, the petitioners argue that the EPA failed to provide them adequate notice of aspects of the final rule. Finally, the petitioners argue the EPA violated the CAA by promulgating the FIP in the same action in which it partially disapproved of the SIP and after the two-year deadline to promulgate a FIP had expired.

II

The petitioners argue that the EPA exceeded its statutory authority by rejecting Oklahoma's BART determinations and replacing them with its own. The petitioners say that the EPA's action tramples on the discretion that Congress afforded states to make these decisions. The CAA's cooperative-federalism policy supports this view, the petitioners say. More specifically, the petitioners point to the statute's legislative history and its language—mandating BART "as determined by the State." In the petitioners' view, this all indicates that the statute unambiguously prescribes a limited role for the EPA as regards BART determinations.

In interpreting the CAA, we must follow the guidance set forth in Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984). "If the statute is clear, we apply its plain meaning and the inquiry ends." Ariz. Pub. Serv. Co. v. EPA, 562 F.3d 1116, 1123 (10th Cir. 2009) (quotation omitted). "If the statute is silent or ambiguous about the question at issue . . . we defer to the authorized agency and apply the agency's construction so long as it is a reasonable interpretation of the statute." Id. (quotation omitted). "[A]dministrative implementation of a particular statutory provision qualifies for Chevron deference when it appears that Congress delegated authority to the agency generally to make rules carrying the force of law, and that the agency interpretation claiming deference was promulgated in the exercise of that authority." United States v. Mead Corp., 533 U.S. 218, 226-27 (2001).

We agree with the EPA that the statute provides the agency with the power to review Oklahoma's BART determination for these four units. The EPA may not approve any plan revision "if the revision would interfere with any applicable requirement concerning attainment and reasonable further progress . . . or any other applicable requirement of this chapter." 42 U.S.C. § 7410(l). And under § 7410(a)(2)(J) SIPs must "meet the applicable requirements of . . . part C of this subchapter"—which includes the provisions of the CAA related to visibility. See §§ 7491, 7492.

The visibility statute itself requires the EPA to promulgate regulations that "require each applicable implementation plan . . . to contain such emission limits, schedules of compliance and other measures as may be necessary to make reasonable progress toward meeting the national goal." § 7491(b)(2). That includes a requirement that the state make BART determinations. And while it is undoubtedly true that the statute gives states discretion in balancing the five BART factors, it also mandates that the state adhere to certain requirements when conducting a BART analysis. The state plan must include a BART determination for any eligible plant that "may reasonably be anticipated to cause or contribute to any impairment of visibility in any such area." § 7491(b)(2). In addition, § 7491(b) requires that the BART determination for units at power plants like those at issue here—having a total generating capacity of greater than 750 megawatts—"shall be determined pursuant" to the EPA regulations. See 42 U.S.C. § 7491(b) ("In the case of a fossil-fuel fired generating powerplant having a total generating capacity in excess of 750 megawatts, the emission limitations required under this paragraph shall be determined pursuant to guidelines, promulgated by the Administrator under paragraph (1)."); see also EPA Br. at 7.

As required by the statute, the EPA has promulgated regulations providing guidelines for making BART determinations. Like the statute, the regulations require that BART determinations at large power plants follow these guidelines. 40 C.F.R. § 51.308(e)(1)(ii)(B) ("The determination of BART for fossil-fuel fired power plants having a total generating capacity greater than 750 megawatts must be made pursuant to the guidelines appendix Y of this part (Guidelines for BART Determinations Under the Regional Haze Rule)."). The EPA rejected Oklahoma's SIP because the BART determinations failed to comply with these guidelines. See EPA Br. at 22 ("Specifically, EPA concluded that Oklahoma failed to reasonably consider the 'cost of compliance' factor by calculating costs as required by the BART guidelines, which led to an 'unreasoned and unjustified' BART determination."). Given that the statute mandates that the EPA must ensure SIPs comply with the statute, we fail to see how the EPA would be without the authority to review BART determinations for compliance with the guidelines.

The D.C. Circuit's opinion in American Corn Growers Ass'n v. EPA, 291 F.3d 1 (D.C. Cir. 2002), does not alter this conclusion. At issue in Corn Growers was a provision of the Regional Haze Rule that required states to make BART decisions based in part on the geographical location of a source, as opposed to its actual emissions. Id. at 4-5. The rule required BART-eligible sources be subject to BART "even absent empirical evidence of that source's individual contribution to visibility impairment in a Class I area so long as the source is located within a region that may contribute to visibility impairment." Id. at 5. When making the BART determination, the state needed to "analyze the degree of visibility improvement that would be achieved . . . as a result of the emission reductions achievable from all sources subject to BART located within the region that contributes to visibility impairment." Id. at 6 (quotation and emphasis omitted). The D.C. Circuit held the EPA's approach was "inconsistent" with the CAA. Id. at 7-8.

The D.C. Circuit cited two ways in which the rule was inconsistent with the statute. First, the EPA's approach "distort[ed] the judgment Congress directed the states to make for each BART-eligible source" by treating one of the five BART factors differently than the others. Id. at 6. The rule, for instance, prevented a state from "consider[ing] the degree to which new equipment at a particular source would help cure the haze in some distant national park." Id. at 7. "Under EPA's take on the statute, it is therefore entirely possible that a source may be forced to spend millions of dollars for new technology that will have no appreciable effect on the haze in any Class I area." Id.

Second, the D.C. Circuit said that the rule impermissibly "constrain[ed] authority Congress conferred on the states." Id. at 9. The court said that the statute and the legislative history suggested that the states had broad authority to weigh the statutory factors and make BART determinations. Id. at 8. The D.C. Circuit noted that the Conference Report on the 1977 amendments to the CAA specifically referenced "an agreement to reject the House bill's provisions giving EPA the power to determine whether a source contributes to visibility impairment and, if so, what BART controls should be applied to that source." Id. The agreement instead added the language delegating this authority to the state. Id. "The Conference Report thus confirms that Congress intended the states to decide which sources impair visibility and what BART controls should apply to those sources." Id. The Haze Rule, though, "ties ...


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