Environmental Integrity Project v. E.P.A.

• Decision Date: 07 October 2005
• Docket Number: No. 04-1243.,No. 04-1083.,04-1083.,04-1243.
• Citation: 425 F.3d 992
• Parties: ENVIRONMENTAL INTEGRITY PROJECT, et al., Petitioners v. ENVIRONMENTAL PROTECTION AGENCY, Respondent Utility Air Regulatory Group, et al., Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 992

425 F.3d 992

ENVIRONMENTAL INTEGRITY PROJECT, et al., Petitioners v. ENVIRONMENTAL PROTECTION AGENCY, Respondent Utility Air Regulatory Group, et al., Intervenors.

No. 04-1083.

No. 04-1243.

United States Court of Appeals, District of Columbia Circuit.

Argued September 12, 2005.

Decided October 7, 2005.

Keri N. Powell argued the cause for petitioners. With her on the briefs were Howard I. Fox, David G. McIntosh, Michael C. Davis, Jennifer M. Wagman, Bradley A. Farrell, and Christine A. Fazio. John D. Walke and Kelly Haragan entered appearances.

David J. Kaplan, Attorney, U.S. Department of Justice, argued the cause for respondent. With him on the brief were John C. Cruden, Assistant Attorney General, and Kerry E. Rodgers, Counsel, U.S. Environmental Protection Agency. Christopher S. Vaden and Jon M. Lipshultz, Attorneys, U.S. Department of Justice, and Nancy A. Ketcham-Colwill, Counsel, U.S. Environmental Protection Agency, entered appearances.

William H. Lewis, Jr., Lauren E. Freeman, Leslie Sue Ritts, Julie C. Becker, Charles H. Knauss, and M. Elizabeth Cox were on the brief of intervenors Clean Air Implementation Project, et al. in support of respondent.

Before: GINSBURG, Chief Judge, and SENTELLE and ROGERS, Circuit Judges.

Opinion for the Court filed by Circuit Judge SENTELLE.

SENTELLE, Circuit Judge.

In these consolidated cases, the Environmental Integrity Project and other petitioners petition for review of the Environmental Protection Agency's Part 70 regulations, as well as the Agency's revised interpretation of its "periodic" and "umbrella" monitoring rules. Petitioners contend EPA's Part 70 regulations are arbitrary, capricious, and otherwise unlawful. In addition, petitioners claim EPA's actions in this case violate the notice-and-comment requirements of the Administrative Procedure Act (APA). Because we agree EPA's final rule was not a "logical outgrowth" of the Agency's proposed interim rule, we grant the petition for review in No. 04-1083, vacate the final rule, and remand the matter to the Secretary. We do not reach the issues presented in No. 04-1243.

I. Background

Title V of the 1990 Amendments to the Clean Air Act (CAA) requires that certain air pollution sources, including every major stationary source of air pollution, each obtain a single, comprehensive operating permit to assure compliance with all emission limitations and other substantive CAA requirements that apply to the source. See 42 U.S.C. §§ 7661a(a), 7661c(a) (2000); Virginia v. Browner, 80 F.3d 869, 873 (4th Cir.1996) (describing the Title V permit as "a source-specific bible for Clean Air Act compliance"). In addition, all sources with Title V permits must conduct monitoring of their emissions that is sufficient to assure compliance with applicable requirements under the CAA. See 42 U.S.C. § 7661c(a), (c) (2000).

To implement these statutory mandates, EPA has promulgated numerous monitoring regulations, which are codified at 40 C.F.R. Parts 70 and 71.¹ Two of Part 70's rules are relevant here. The "periodic monitoring" rule, 40 C.F.R. § 70.6(a)(3)(i)(B), requires that

[w]here the applicable requirement does not require periodic testing or instrumental or noninstrumental monitoring (which may consist of recordkeeping designed to serve as monitoring), [each Title V permit must contain] periodic monitoring sufficient to yield reliable data from the relevant time period that are representative of the source's compliance with the permit, as reported pursuant to [§ 70.6(a)(3)(iii)]. Such monitoring requirements shall assure use of terms, test methods, units, averaging periods, and other statistical conventions consistent with the applicable requirement. Recordkeeping provisions may be sufficient to meet the requirements of [§ 70.6(a)(3)(i)(B)].

The "umbrella" rule, 40 C.F.R. § 70.6(c)(1), requires that each Title V permit contain, "[c]onsistent with paragraph (a)(3) of this section [i.e., the "periodic monitoring" rule], compliance certification, testing, monitoring, reporting, and recordkeeping requirements sufficient to assure compliance with the terms and conditions of the permit." EPA must review and approve all Title V permits, and if a specific permit requires insufficient monitoring, EPA must reject it. See CAA § 505, 42 U.S.C. § 7661d (2000).

In November and December 2000, EPA rejected two Title V permits. See In the Matter of Pacificorp, Petition No. VIII-00-1 (Nov. 16, 2000), JA 410-34 ("Pacificorp"); In the Matter of Fort James Camas Mill, Petition No. X-1999-1 (Dec. 22, 2000), JA 435-69 ("Fort James"). In both decisions, EPA held the "umbrella" rule empowers state permitting authorities to review, on a case-by-case basis, the sufficiency of each permittee's monitoring requirements, independent of any other monitoring that might be imposed under the "periodic monitoring" rule. Thus, EPA concluded that where a permit requires no "periodic" monitoring at all, the "umbrella" rule is satisfied by meeting the more substantive requirements of the "periodic monitoring" rule. On the other hand, where there is some periodic monitoring but it is not sufficient to assure compliance, the umbrella rule's "separate regulatory standard" governs instead and requires case-by-case enhancement of existing monitoring "as necessary to be sufficient to assure compliance." Pacificorp at 18-19, JA 427-28 (emphasis added); see also Fort James at 7, JA 441.

On September 17, 2002, EPA published a proposed rule to clarify the monitoring required in Title V permits by "codifying" the interpretation of Part 70 that the Agency embraced in Pacificorp and Fort James. See 67 Fed.Reg. 58,561 (Sept. 17, 2002). Specifically, EPA proposed to remove the italicized prefatory language to § 70.6(c)(1) providing that all Title V permits contain, "[c]onsistent with paragraph (a)(3) of this section," monitoring "sufficient to assure compliance with the terms and conditions of the permit." EPA proposed that the deletion of the italicized language from its umbrella rule would clarify the fact that its Part 70 regulations operate independently of one another, and the "separate regulatory standard" of § 70.6(c)(1) requires case-by-case supplementation of permits with insufficient monitoring, regardless of whether the permit also requires periodic monitoring under § 70.6(a)(3). See 67 Fed.Reg. at 58,561. A contrary interpretation would render "superfluous" § 70.6(c)(1)'s sufficiency requirement. Id. at 58,564.

In its final rule, however, EPA decided not to amend Part 70, based on EPA's "interpretation of the [CAA], the plain language and structure of [the umbrella rule] and the policy considerations discussed in this preamble." 69 Fed.Reg. 3202, 3204 (Jan. 22, 2004). Instead of codifying Pacificorp and Fort James, EPA's final rule switched course and adopted the opposite position, holding §§ 70.6(a)(3) and 70.6(c)(1) are not "separate regulatory standard[s]," and permits that satisfy the former subsection cannot be supplemented with additional monitoring requirements under the latter. The upshot of EPA's final interpretation of its Part 70 rules is that state permitting authorities are now prohibited from adding new monitoring requirements under the "umbrella" rule if the Title V permit already contains some (albeit insufficient) monitoring under the "periodic monitoring" rule.

EPA explains its abandonment of the proposed rule (and its adoption of the inverse interpretation of its Part 70 regulations) on the basis of public comments, which insisted that source-specific, case-by-case reviews by permitting authorities would have been unduly time-consuming and wasteful of valuable regulatory resources. A better approach, EPA claims, is to bar all supplemental monitoring and case-by-case sufficiency reviews for permits that already require some periodic monitoring and to address any inadequacies in the current monitoring regime through a four-part nationwide rulemaking process. Petitioners argue that regardless of the corrective actions EPA has planned for the future, its Part 70 rules are presently unlawful and must be set aside.

II. Analysis

A.

This Court will uphold EPA's final agency action unless it was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. See 5 U.S.C. § 706(2)(A) (2000); Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512, 114 S.Ct. 2381, 129 L.Ed.2d 405 (1994); Air Transp. Ass'n of Am. v. FAA, 291 F.3d 49, 53 (D.C.Cir.2002). However, an interpretation of a legislative rule "cannot be modified without the notice and comment procedure that would be required to change the underlying regulation—otherwise, an agency could easily evade notice and comment requirements by amending a rule under the guise of reinterpreting it." Molycorp, Inc. v. EPA, 197 F.3d 543, 546 (D.C.Cir.1999); see also Paralyzed Veterans of Am. v. D.C. Arena L.P., 117 F.3d 579, 586 (D.C.Cir.1997).

B.

The Environmental Integrity Project and other petitioners raise four principal arguments in their petition for review. First, petitioners argue EPA's Part 70 regulations unlawfully, arbitrarily, and capriciously compel state permitting authorities to accept "inadequate but `periodic' monitoring ... without enhancement." 67 Fed.Reg. 58,529, 58,532 (Sept. 17, 2002). Second, petitioners argue the interpretation of Part 70 in EPA's final rule undermines the 1990 Amendments to the CAA by reinstating state-by-state variations in monitoring requirements and arbitrarily treating similarly situated sources differently. Third, petitioners argue the final rule violates CAA § 114(a)(3)'s "enhanced monitoring" requirements. See 42 U.S.C. § 7414(a)(3) (2000); Natural Res. Def. Council v. EPA, 194 F.3d 130, 135-36 (D.C.Cir.1999) (thrice suggesting the independent operation of Part 70's umbrella and periodic monitoring rules, combined with EPA's Compliance Assurance Monitoring Rule, constitute "enhanced monitoring"). Fourth and finally, p...