Husqvarna AB v. Environmental Protection Agency

• Decision Date: 29 June 2001
• Docket Number: No. 00-1270,00-1270
• Citation: 254 F.3d 195
• Parties: (D.C. Cir. 2001) Husqvarna AB; Husqvarna Forest and Garden Company; Frigidaire Home Products-Specialty Power, Petitioners v. Environmental Protection Agency, Respondent John Deere Consumer Products, Inc., Intervenor
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 195

254 F.3d 195 (D.C. Cir. 2001)

Husqvarna AB; Husqvarna Forest and Garden Company; Frigidaire Home Products-Specialty Power, Petitioners v. Environmental Protection Agency, Respondent

John Deere Consumer Products, Inc., Intervenor

No. 00-1270

United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued May 17, 2001

Decided June 29, 2001

On Petition for Review of an Order of the Environmental Protection Agency

Nancy S. Bryson argued the cause for the petitioners.

Pamela S. Tonglao, Attorney, United States Department of Justice, argued the cause for the respondent. John C. Cruden, Acting Assistant Attorney General, United States Department of Justice, and John T. Hannon and Michael W. Thrift, Attorneys, United States Environmental Protection Agency, were on brief for the respondent.

Richard E. Ayres argued the cause for the intervenor.

Before: Henderson, Tatel and Garland, Circuit Judges.

Opinion for the court filed by Circuit Judge Henderson.

Karen LeCraft Henderson, Circuit Judge:

The petitioners, Husqvarna AB et al. (Husqvarna), seek review of the Phase 2 Emission Standards for New Nonroad Spark-Ignition Handheld Engines promulgated by the respondent, the U.S. Environmental Protection Agency (EPA), under the authority of section 213 of the Clean Air Act (CAA), 42 U.S.C. 7547. Husqvarna contends that the final rule is arbitrary and capricious because the EPA failed to select the emission standards that represent the best balance of the factors identified in CAA section 213. It also maintains that the regulatory alternative chosen by the EPA is not supported by substantial evidence in the record. Finally, Husqvarna alleges procedural error stemming from inadequate notice and opportunity to comment. Because each of these arguments lacks merit, we deny Husqvarna's petition.

I. Background

In 1990 the Congress amended the CAA and added section 213, which authorizes the EPA to set emissions standards for "nonroad engines and vehicles." Pub. L. No. 101-549, 104 Stat. 2399 (1990). Section 213 required the EPA to adopt emission standards by 1993 and to revise them as appropriate thereafter. The EPA missed the statutory deadline and a lawsuit to enforce the statute was filed, which has resulted in the district court's monitoring of the EPA's compliance. See Sierra Club v. Whitman, Civ. No. 93-0124 (D.D.C. filed Jan. 19, 1993).

In establishing emission standards, the EPA created two categories of small spark-ignition (SI) engines: nonhandheld and handheld.¹ The EPA further divided handheld engines into three classes--Classes III, IV and V--based on engine size, with Class III encompassing the smallest and Class V the largest handheld engines. The domestic handheld engine industry includes 22 manufacturers, including Husqvarna, Stihl, John Deere, Shindaiwa, Kawasaski, Echo, Ryobi and Honda, which manufacture a total of 186 engine families.² These manufacturers primarily use two-stroke engines in handheld products because of their high power-to-weight ratios and low cost. A two-stroke engine is an internal combustion engine that accomplishes the operations of intake, compression, expansion and exhaust in two piston strokes rather than four.

The EPA has regulated emissions from handheld engines in two phases. See 58 Fed. Reg. 55, 033, 55,034 (Oct. 25, 1993). In Phase 1, the EPA proposed short-term new engine standards based in part on standards California had adopted for similar engines. In January 1998 the EPA proposed Phase 2 emission standards for handheld engines that were slightly more stringent than those in Phase 1. 63 Fed. Reg. 3950, 3953-55, 3958-59, 3964-71, 4009-4013 (Jan. 27, 1998). The proposed Phase 2 standards were expected to reduce hydrocarbons (HC) and oxides of nitrogen (NOx) emissions by 30 per cent beyond Phase 1 standards by the year 2025.³ 63 Fed. Reg. 4001. The proposal called for a reduction in emissions for Class III, IV and V engines to 210, 172 and 116 grams per kilowatt-hour (g/kWhr),⁴ respectively. In response to the proposal, the EPA received input from manufacturers indicating that lower emission levels were feasible. See 63 Fed. Reg. 66 081, 66,082-83 (Dec. 1, 1998).⁵ And in late 1998 a portion of the handheld engine industry suggested that it would support final HC+NOx standards of 72 g/kW-hr for Classes III and IV and 87 g/kW-hr for Class V (72-72-87).

On December 2, 1998 John Deere Consumer Products, Inc. (Deere), which appeared as an intervenor before this court, recommended that the EPA consider stricter Phase 2 standards in light of its recent development of "compression wave technology" (CWT), which promised to significantly reduce emissions from handheld engines. CWT uses compressed air to improve fuel injection in the combustion chamber of a twostroke engine, resulting in almost all of the fuel being combusted. Deere stated that CWT was adaptable to all sizes of two-stroke engines and could meet a 72 g/kW-hr HC+NOx standard in 2001.

On July 28, 1999 the EPA published a Supplemental Notice of Proposed Rulemaking (Supplemental Proposal), which proposed emission limits of 50 g/kW-hr for Classes III and IV with phase-in between 2002 and 2006 and an emission limit of 72 g/kW-hr for Class V with phase-in between 2004 and 2008. 64 Fed. Reg. 40,940 (July 28, 1999). In addition to CWT, the Supplemental Proposal identified three other technologies-stratified scavenging,⁶ miniature four-stroke engines⁷ and cat alysts⁸--that could be utilized by manufacturers to meet the Phase 2 standards. The Supplemental Proposal also contained an averaging, banking and trading (ABT)⁹ program to give handheld engine manufacturers flexibility in meeting the more stringent Phase 2 standards. 64 Fed. Reg. 40,951. Under the proposed program, manufacturers would declare a family emission limit (FEL) for each engine family. See supra note 2. Manufacturers need only ensure that average emissions from all of their engine families meet the emission standards for the given model year. They could also generate bankable emission credits based on the differences between the FEL and the Phase 2 standards for the applicable model year.

Many manufacturers, including Husqvarna, commented on the Supplemental Proposal. The public comment period closed on September 17, 1999, although the EPA agreed to consider additional comments filed within 30 days therefrom. It also continued to meet with interested manufacturers after the close of the comment period. The final Phase 2 emission standards for handheld SI engines were published on April 25, 2000. 65 Fed. Reg. 24,268. In the final rule, the EPA adopted the 50-50-72 HC+NOx emission standards proposed in the Supplemental Proposal, but with an implementation schedule of four years instead of the five as proposed. The decision rested on the EPA's determination that "rapid tech nological advances" in the handheld engine industry warranted a more expeditious implementation. 65 Fed. Reg. 24,274. While noting that "not all of the technologies ... have yet been demonstrated in mass-produced production engines operated under typical in-use conditions," the EPA identified the following technologies as likely to meet the newly adopted standards: Class III (CWT & low-medium efficiency catalyst; stratified scavenging with lean combustion & medium-high efficiency catalyst; four-stroke), Class IV (CWT; CWT & low efficiency catalyst; stratified scavenging with lean combustion & medium efficiency catalyst; four-stroke) and Class V (CWT; four-stroke; stratified scavenging with lean combustion). 65 Fed. Reg. 24,274-79. The EPA explained that changes in equipment design could allay safety concerns about the use of catalysts. 65 Fed. Reg. 24,278-79. It also determined that the Phase 2 standards were cost-effective. 65 Fed. Reg. 24, 296-300. Finally, the EPA revised the ABT program to avoid a delay in the shift to cleaner engines. 65 Fed. Reg. 24,282-84. Husqvarna challenges all of these parts of the final rule.

II. Analysis

"Our analysis is guided by the deference traditionally given to agency expertise, particularly when dealing with a statutory scheme as unwieldy and science-driven as the Clean Air Act." Appalachian Power Co. v. EPA, 135 F.3d 791, 801-02 (D.C. Cir. 1998); see Baltimore Gas & Elec. Co. v. NRDC, 462 U.S. 87, 103 (1983) (reviewing court must be "at its most deferential" when agency is "making predictions, within its area of special expertise, at the frontiers of science"). Under section 307(d)(9) of the CAA, we reverse agency action found to be "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 42 U.S.C. 7607(d)(9)(A). Questions of statutory interpretation are governed by the familiar two-step test set forth in Chevron, U.S.A., Inc. v. NRDC, 467 U.S. 837, 842-43 (1984). The court first asks "whether Congress has directly spoken to the precise question at issue," in which case it "must give effect to the unambiguously expressed intent of Congress." Id. If the "statute is silent or ambiguous with respect to the specific issue," the court moves to the second step and defers to the agency's interpretation as long as it is "based on a permissible construction of the statute." Id. at 843. We will strike down the rulemaking for procedural error "only if the errors were so serious and related to matters of such central relevance to the rule that there is a substantial likelihood that the rule would have been significantly changed if such errors had not been made." CAA 307(d)(8); 42 U.S.C. 7607(d)(8).

In challenging the EPA's handheld engine Phase 2 emission standards, Husqvarna raises three claims. First, it asserts that the EPA's choice of the 50-50-72 emission standards contravenes the best balance requirement of CAA section 213. Second, it maintains that the final rule is arbitrary and capricious because it is not supported by substantial evidence in the record. Finally, it argues that the EPA failed...