Montana Sulphur & Chem. Co. v. United States Envtl. Prot. Agency

• Decision Date: 19 January 2012
• Docket Number: 08–72642.,Nos. 02–71657,s. 02–71657
• Citation: 666 F.3d 1174,12 Cal. Daily Op. Serv. 740,73 ERC 1961,2012 Daily Journal D.A.R. 725
• Parties: MONTANA SULPHUR & CHEMICAL COMPANY, Petitioner, v. UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, Respondent.Montana Sulphur & Chemical Company, Petitioner, v. United States Environmental Protection Agency, Respondent.
• Court: U.S. Court of Appeals — Ninth Circuit

12 Cal. Daily Op. Serv. 740

2012 Daily Journal D.A.R. 725

666 F.3d 1174

73 ERC 1961

MONTANA SULPHUR & CHEMICAL COMPANY, Petitioner,

v.UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, Respondent.Montana Sulphur & Chemical Company, Petitioner,

v.United States Environmental Protection Agency, Respondent.

Nos. 02–71657

08–72642.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Aug. 31, 2011.Filed Jan. 19, 2012.

Robert K. Baldwin, Goetz, Gallik & Baldwin, PC, Bozeman, MT, for the petitioner.

Martin F. McDermott, United States Department of Justice, Environment & Natural Resources Division, Washington, D.C., for the respondent.

Leslie Sue Ritts, Ritts Law Group, PLLC, Alexandria, VA, for Amicus National Environmental Development Association's Clean Air Project.Russell S. Frye, FryeLaw, PLLC, Washington, D.C., for Amicus American Petroleum Institute.On Petition for Review of an Order of the Environmental Protection Agency. EPA No. EPA–R08–OAR–2006–0098.Before: MICHAEL DALY HAWKINS and M. MARGARET McKEOWN, Circuit Judges, and JOHN W. SEDWICK, District Judge.^*

OPINION

HAWKINS, Senior Circuit Judge:

In these appeals, consolidated for decision,¹ we address the propriety of various actions taken by the United States Environmental Protection Agency (“EPA”) under the Clean Air Act with respect to Montana air quality from 1993 to 2008. In No. 02–71657, Montana Sulphur & Chemical Company (“Montana Sulphur”) seeks review of the EPA's final rule which partially disapproved a proposed revision to Montana's State Implementation Plan (“SIP”) governing sulfur dioxide (“SO2”) emissions. 67 Fed.Reg. 22,168 (May 2, 2002). Montana Sulphur also seeks review of a prior EPA action in 1993 known as a “SIP Call,” which preceded the formal SIP revision and started the review process. 58 Fed.Reg. 41,430 (Aug. 4, 1993). The final agency action incorporated documents supporting its SIP Call—in particular EPA reliance on various modeling calculations—into the administrative record for partial disapproval of the SIP.

In No. 08–72642, Montana Sulphur seeks review of the EPA's April 2008 final rule promulgating a Federal Implementation Plan (“FIP”) for the State of Montana's SO2 emissions. 73 Fed.Reg. 21,418 (April 21, 2008). The FIP is designed to fill perceived gaps the EPA identified in the SIP. This later appeal focuses on the EPA's authority to promulgate the FIP and the reasonableness of certain specific requirements set forth therein. Because we conclude that the agency did not act arbitrarily or capriciously with respect to either the SIP or FIP, we deny both petitions for review.

STATUTORY BACKGROUND

The Clean Air Act directs states to develop implementation plans—SIPs—that “assure” attainment and maintenance of national ambient air quality standards (“NAAQS”) through enforceable emission limitations. 42 U.S.C. §§ 7407(a), 7410(a)(2)(A). The EPA has developed a list of pollutants that cause or contribute to air pollution that “may reasonably be anticipated to endanger public health or welfare.” 42 U.S.C. § 7408(a)(1)(A). For each criteria pollutant, the EPA sets NAAQS sufficient to protect public health with an adequate margin of safety and to protect the public welfare, 42 U.S.C. § 7409(b), pursuant to which it has promulgated NAAQS for SO2, 40 C.F.R. §§ 50.4 & 50.5.

A SIP must “provide for the performance of such air quality modeling as the Administrator may prescribe for the purpose of predicting the effect on ambient air quality of any emissions of any [NAAQS-regulated] air pollutant.” 42 U.S.C. § 7410(a)(2)(K)(i). As reflected in relevant regulations, emissions limitations may be demonstrated through modeling. 40 C.F.R. § 51.112(a)(1) (“adequacy of a control strategy shall be demonstrated by means of applicable air quality models, data bases, and other requirements specified in appendix W ... (Guideline on Air Quality Models)”). There is also a Federal Reference Method for measuring ambient levels of SO2 pollutants. 40 C.F.R. § 58.1. The EPA uses this data and engages in formal notice-and-comment rulemaking to designate “attainment areas,” “nonattainment areas,” and areas that are not classifiable. 42 U.S.C. § 7407(d).

The Clean Air Act gives the EPA significant national oversight power over air quality standards, to be exercised pursuant to statutory specifications, and provides the EPA with regulatory discretion in key respects relevant to SIP calls and determinations about the attainment of NAAQS. Yet, the Act also anticipates states' shared responsibility for air quality control. 42 U.S.C. §§ 7407(a), 7410 (giving states duty of developing implementation plans). The Clean Air Act “left with the states, so long as the [NAAQS] were met, the power to determine which sources would be burdened by regulation and to what extent.” Union Elec. Co. v. EPA, 427 U.S. 246, 269, 96 S.Ct. 2518, 49 L.Ed.2d 474 (1976) (emphasis added); see also Train v. Natural Res. Def. Council, Inc., 421 U.S. 60, 98, 95 S.Ct. 1470, 43 L.Ed.2d 731 (1975). A state must develop implementation plans that will satisfy national standards; if it does so, it may “adopt whatever mix of emissions limitations it deems best suited to its particular situation.” Train, 421 U.S. at 79, 95 S.Ct. 1470. But when the state plan is inadequate to attain and maintain NAAQS, then the EPA is empowered to step in and fill any deficiencies with a FIP. 42 U.S.C. § 7410(c).

PROCEDURAL BACKGROUND

The dispute between Montana Sulphur and the EPA is long-standing, spanning over seventeen years and centering on regulations governing emissions from industrial facilities located near Billings, Montana. Montana Sulphur operates a sulfur recovery plant northeast of Billings. The plant is located next to a petroleum refinery owned by ExxonMobil. Pipes from the refinery bring a continuous stream of high sulfur gas—a by-product of the refining process—to Montana Sulphur. Montana Sulphur recovers 95–98% of the sulfur as a marketable product. The remainder is emitted in the form of SO2. SO2 is a “highly reactive colorless” gas primarily derived from fossil fuel combustion, “best known for causing ‘acid rain’ at elevated concentrations in the ambient air.” American Lung Ass'n v. EPA, 134 F.3d 388, 389 (D.C.Cir.1998).

In 1978, the EPA made a formal determination that the Billings area met the primary standards for SO2. 43 Fed.Reg. 40,412 (Sept. 11, 1978). Neighboring Laurel was designated “nonattainment” in 1978, due to measured and modeled violations of the primary SO2 standards. 43 Fed.Reg. 8,962 (Mar. 3, 1978). Dispersion modeling conducted by the EPA during the 1970s, however, indicated that potential violations of the SO2 standards were also occurring in the Billings area due to SO2 emissions from a variety of sources, including Montana Sulphur.

In 1980, the EPA approved Montana's SIP for attaining and maintaining SO2 NAAQS in the Billings/Laurel area. 45 Fed.Reg. 2,034 (Jan. 10, 1980). Actual monitoring subsequent to that approval showed some individual “exceedances” of the 24–hour SO2 standard and one 3–hour “violation” in 1985. Based on monitored emissions, SO2 levels remained relatively constant throughout the 1980s, decreasing slightly in 1983–86, then rising again in 1989.

In 1990, the City of Billings (“Billings” or the “City”) hired a contractor to perform dispersion modeling for the Billings area. The Montana Department of Health and Environmental Sciences (“MDHES”) reviewed the contractor's report, which indicated “potential violations of federal SO2 standards at both actual and allowable emissions levels” and predicted “high concentrations in areas where ambient monitoring had not been conducted.” One year later, Yellowstone Energy Limited Partnership performed dispersion modeling for its permit application and similarly identified potential violations of national SO2 standards in the Billings area.

Citing these studies, the EPA advised MDHES in 1992 that its SIP might be inadequate and in need of revision. MDHES in turn notified the City that the emissions from industrial process units were not adequately regulated by the existing SIP. It also noted that “current monitoring sites are not at the highest predicted locations, nor could we locate enough monitors to provide the spatial coverage represented in the model.” A revised SIP, it noted, would ease permitting of new industries in the Billings/Laurel area.

The EPA then issued a formal SIP Call in 1993, finding the existing SIP “substantially inadequate” to attain and maintain NAAQS and asking MDHES to submit revisions within eighteen months; the EPA noted that the SIP Call was “a preliminary step in an ongoing process” and “not subject to judicial review.” Notice of the SIP Call was published August 4, 1993. 58 Fed.Reg. at 41,430.

MDHES thereafter developed a protocol for the SIP revisions that incorporated EPA-approved models. MDHES submitted various revisions of the SIP to the EPA in 1996, 1997, 1998, and 2000. 67 Fed.Reg. at 22,171, 22, 175.

In 1999, the EPA proposed action on the SIP revisions, 64 Fed.Reg. at 40,791, and took final actions on the SIP on May 2, 2002 (67 Fed.Reg. 22,168) and May 22, 2003 (68 Fed.Reg. 27, 908), approving most of the SIP, but disapproving a number of specific items affecting Montana Sulphur, including (1) the attainment demonstration due to issues with emission limits, inappropriate stack height credit, and lack of submitted emission limits on flares; (2) the emission limits for Montana Sulphur's Sulfur Recovery Unit 100–meter stack and the stack height credit supporting those limits; and (3) the emission limits for Montana Sulphur's 30–meter and auxiliary vent stacks.

Montana Sulphur petitioned for review of the EPA's May 2, 2002 SIP action. That case, No. 02–71657, was stayed pending the EPA's promulgation of a FIP to remedy the SIP. In 2006, the EPA published its proposed FIP. 71 Fed.Reg. 39,259 (July 12, 2006). Montana Sulphur and others commented on that...