348 F.3d 772 (9th Cir. 2003), 01-71356, Davis v. U.S. E.P.A.

Docket Nº:01-71356
Citation:348 F.3d 772
Party Name:Davis v. U.S. E.P.A.
Case Date:July 17, 2003
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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348 F.3d 772 (9th Cir. 2003)

Gray DAVIS, Governor, of the State of California and the California Air Resources Board, Petitioner,

South Coast Air Quality Management District; Chevron U.S.A., Inc.; Western States Petroleum Association, Petitioner-Intervenor,

v.

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, Respondent,

National Corn Growers Association; Renewable Fuels Association, Respondent-Intervenor.

No. 01-71356.

United States Court of Appeals, Ninth Circuit

July 17, 2003.

Argued and Submitted Feb. 12, 2003.

Amended Oct. 30, 2003.

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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Russell B. Hildreth, Deputy Attorney General, Sacramento, CA, for petitioner.

Jeffrey Bossert Clark, Deputy Assistant Attorney General, Environment and Natural Resources Division, United States Department of Justice, Washington, DC, for respondents.

Barbara B. Baird, District Counsel, Jeri G. Voge, Senior Deputy District Counsel, South Coast Air Quality Management District, intervenor in support of petitioners, Diamond Bar, CA, for South Coast Air Quality Management District.

Jeri G. Voge, Fran M. Layton, Shute, Mihaly & Weinberger L.L.P., San Francisco, CA, for the petitioners-intervenors.

Michael E. Ward, Swindler, Berlin, Shereff, Friedman, L.L.P., Washington, DC, for the respondents-intervenors.

On Petition for Review of an Order of the Environmental Protection Agency. EPA No. EPA 420-S-01-008.

Before WILLIAM C. CANBY, JR., DIARMUID F. O'SCANNLAIN, and WILLIAM A. FLETCHER, Circuit Judges.

Opinion by Judge CANBY; Partial Concurrence and Partial Dissent by Judge O'Scannlain.

ORDER AND AMENDED OPINION

ORDER

The opinion filed in this case on July 17, 2003, and reported at 336 F.3d 965, is

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hereby amended as follows: The final sentence and citation in the section entitled "Standing," 336 F.3d at 970 (Beginning "In addition . . ." and ending ". . . (4th Cir. 2002)") is deleted.

With that amendment, Judges Canby and W. Fletcher have voted to deny the petition for panel rehearing, and Judge O'Scannlain has voted to grant the petition.

The petition for panel rehearing is denied.

OPINION

CANBY, Circuit Judge.

California Governor Gray Davis and the California Air Resources Board ("CARB") (collectively "California") petition for review of an order of the United States Environmental Protection Agency ("EPA") denying their request for a waiver of the oxygen level requirement under the federal reformulated gasoline program. The EPA denied the waiver on the ground that California had not clearly demonstrated that a waiver would have a beneficial effect on ozone pollution, and ruled that it was unnecessary to consider the effect a waiver would have on particulate matter pollution. We conclude that the EPA abused its discretion in refusing to consider and weigh the effect of the proposed waiver on particulate matter pollution along with its effect on ozone levels. We accordingly grant the petition for review, vacate the EPA's order, and remand for further proceedings. We reject, however, California's other technical and procedural challenges to the EPA's action.

FACTS AND AGENCY PROCEEDINGS

The Clean Air Act

The Clean Air Act, 42 U.S.C. §§ 7401-7671q, authorizes the EPA to set attainment standards (National Ambient Air Quality Standards, or "NAAQS") for several air pollutants, including ozone, carbon monoxide and particulate matter. See 42 U.S.C. § 7409. Each state is required to adopt an implementation plan to meet the NAAQS for each air quality control region within the state. See 42 U.S.C. § 7410.

In 1990, Congress established the reformulated gasoline ("RFG") program as part of its amendments to the Clean Air Act. The statutory scheme requires the use of only RFG in certain high smog-ozone areas designated as non-attainment areas for NAAQS. See 42 U.S.C. § 7545(k). As part of its program, Congress mandated that RFG contain at least two percent oxygen by weight. See 42 U.S.C. § 7545(k)(2)(B). The primary choices of oxygenates to add to RFG to reach the two percent oxygen level are ethanol and methyl tertiary butyl ether ("MTBE"). The Clean Air Act authorizes the Administrator of the EPA to waive the oxygen content requirement if the Administrator determines "that compliance with such requirement would prevent or interfere with the attainment by the area of a national primary ambient air quality standard." 42 U.S.C. § 7545(k)(2)(B).

California's RFG Waiver Request

After determining that seepage and other discharge of MTBE was threatening public drinking water supplies, California banned MTBE effective December 31, 2002. Approximately seventy percent of the state's gasoline, however, is subject to federal RFG standards. As a result of California's decision to ban MTBE, refiners faced the prospect of oxygenating approximately ten billion gallons of gasoline a year using ethanol in order to comply with the federal two percent oxygen requirement.

Studies by CARB revealed that using ethanol as the substitute oxygenate in California gasoline would have detrimental economic and environmental impacts on

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the state. California refiners would require 75,000 barrels of ethanol per day, out of the 80,000 barrels per day produced in the United States. In addition, CARB's studies suggested that maintaining the two percent oxygen mandate using ethanol would prevent or interfere with California's attainment of the federal ozone and particulate matter ("PM") NAAQS.

On the strength of these studies, Governor Davis wrote to the EPA in April 1999, requesting a waiver of the oxygen requirement pursuant to § 7545(k)(2)(B). Davis explained that California's Phase 3 reformulated gasoline ("CaRFG3") can be blended to meet air emission reduction requirements without a mandatory oxygen content. 1 Id. Davis further asserted that "a waiver of the federal RFG oxygen mandate in California would be necessary to avoid increases of ozone-forming emissions in the state." Id.

Between April 1999 and December 2000, EPA officials reviewed the materials submitted in support of California's waiver request and asked for additional information. CARB submitted further materials to the EPA supporting the waiver request, explaining that "revised California rules accommodating a federal RFG requirement for 2.0% wt. oxygen in the fuel year-round will necessarily be less effective in reducing vehicle emissions than would be the case if the rules could be based on oxygen-content flexibility." The data supplied by CARB demonstrated that a grant of the waiver request would result in 1.5% reduction of nitrogen oxides ("NOx") for CaRFG3, which translates to 2,920 tons of NOx reduction annually. 2 Id. If the two percent federal oxygen mandate were maintained, these NOx benefits would be lost. Because reductions in NOx emissions are part of California's implementation plan to attain the national ozone standard 3 and also are an important part of the state's efforts to attain the applicable NAAQS for PM, CARB advised the EPA that denial of the waiver request would undermine California's efforts to comply with federal clean air regulations.

The EPA's Response

On June 12, 2001, the EPA denied California's waiver request. In a letter addressed to Governor Davis, EPA Administrator Christine Todd Whitman stated that the agency had "carefully reviewed all the information and analysis submitted by California," and "performed [its] own comprehensive analysis to evaluate the possible emission effects of a waiver." The agency determined that it should not grant the waiver, "unless, at a minimum, it has been clearly demonstrated that granting a waiver would aid in attaining at least one NAAQS, and would not hinder attainment for any other NAAQS."

The EPA disagreed with CARB as to critical technical issues. It determined that granting the waiver would decrease NOx emissions, but would increase carbon

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monoxide ("CO") emissions. The EPA also determined there was substantial uncertainty relating to both the direction and the magnitude of changes in emissions of volatile organic compounds ("VOC"). This cloudy finding in turn created uncertainty whether the overall effect of a waiver would help or hinder ozone attainment. On the basis of all of the information before it, the EPA determined that California had not clearly shown what impact a waiver would have on achieving the ozone NAAQS for the affected areas. The EPA further concluded that "[s]ince we are denying California's request based upon uncertainty associated with the effect of a waiver on ozone, we need not decide whether the expected reduction in NOx from a waiver and the associated reduction in PM would support a determination of interference with the PM NAAQS."

California now petitions for review of the EPA's denial of its request for a waiver. 4 The South Coast Air Quality Management District ("SCAQMD") (the regional agency authorized under California law to coordinate air pollution control efforts for the South Coast Basin), Western States Petroleum Association, and Chevron, U.S.A., have intervened in support of California. The National Corn Growers Association and Renewable Fuels Association have intervened in support of the EPA. The National Petrochemical & Refiners Association, Natural Resources Defense Council, and the States of Maine, Massachusetts, New Hampshire, and New York have filed briefs as amici curiae.

We have jurisdiction pursuant to § 307(b)(1) of the Clean Air Act, 42 U.S.C. § 7607(b)(1).

DISCUSSION

Standing

As a preliminary matter, we reject the EPA's contention that California lacks standing to bring this appeal....

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