Mirant Potomac River, LLC v. United States Environmental Protection Agency

PUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

MIRANT POTOMAC RIVER, LLC, 
Petitioner,
v.
THE UNITED STATES
ENVIRONMENTAL PROTECTION
AGENCY; LISA P. JACKSON,
Administrator, U.S. Environmental  No. 08-1277
Protection Agency,
Respondents,
COMMONWEALTH OF VIRGINIA ex rel.
ROBERT F. MCDONNELL,
Intervenor.

On Petition for Review of an Order of the
United States Environmental Protection Agency.
(EPA-R03-OAR-2007-0381; FRL-8510-3)

Argued: May 12, 2009

Decided: August 12, 2009

Before MOTZ, GREGORY, and DUNCAN, Circuit Judges.

Dismissed by published opinion. Judge Duncan wrote the
opinion, in which Judge Motz and Judge Gregory joined.
2 MIRANT POTOMAC RIVER v. EPA
COUNSEL

ARGUED: Jeffrey R. Holmstead, BRACEWELL & GIULI-
ANI, LLP, Washington, D.C., for Petitioner. Jon Michael Lip-
shultz, UNITED STATES DEPARTMENT OF JUSTICE,
Environmental Defense Section, Washington, D.C., for
Respondents. Carl Josephson, OFFICE OF THE ATTORNEY
GENERAL OF VIRGINIA, Richmond, Virginia, for Interve-
nor. ON BRIEF: Sonja Rodman, EPA Office of General
Counsel, Washington, D.C., Neil Bigioni, EPA Office of Gen-
eral Counsel, Philadelphia, Pennsylvania; Ronald J. Tenpas,
Assistant Attorney General, John C. Cruden, Deputy Assistant
Attorney General, UNITED STATES DEPARTMENT OF
JUSTICE, Environmental Defense Section, Environmental
and Natural Resources Division, Washington, D.C., for
Respondents. William E. Thro, State Solicitor General, Ste-
phen R. McCullough, Deputy State Solicitor General, Roger
L. Chaffe, Senior Assistant Attorney General, OFFICE OF
THE ATTORNEY GENERAL OF VIRGINIA, Richmond,
Virginia, for Intervenor.

OPINION

DUNCAN, Circuit Judge:

Mirant Potomac River, LLC ("Mirant") appeals the Envi-
ronmental Protection Agency’s ("EPA") approval of Virgin-
ia’s Clean Air Interstate Rule State Implementation Plan
("CAIR SIP"). Mirant’s alleged injury, however, flows from
Virginia’s Nonattainment Provisions, which are separate
emissions standards adopted by Virginia’s Air Pollution Con-
trol Board ("Virginia Board") under the authority of the Vir-
ginia legislature. Because Mirant’s injury cannot fairly be
traced to EPA’s approval of Virginia’s CAIR SIP, we dismiss
for lack of standing.1
1
Since we find no subject matter jurisdiction, we need not evaluate a
recent decision by Virginia’s Court of Appeals that invalidated a portion
 MIRANT POTOMAC RIVER v. EPA 3
I.

Mirant, which operates a coal-fired power plant in Alexan-
dria, Virginia, challenges EPA’s approval of Virginia’s CAIR
SIP as unlawful under the Clean Air Act ("CAA"), 42 U.S.C.
§§ 7401 et seq., and the Administrative Procedure Act
("APA"), 5 U.S.C. §§ 500 et seq. While a State Implementa-
tion Plan ("SIP") is a state’s compliance program under the
CAA, a "CAIR SIP" is a modification of a SIP that incorpo-
rates EPA’s recently promulgated Clean Air Interstate Rule
("CAIR"). Virginia’s CAIR SIP permits power plants to meet
CAIR compliance obligations through the trading of emis-
sions allowances2 with other power plants.

However, Mirant’s power plant must also meet the emis-
sions standards promulgated under Virginia’s Nonattainment
Provisions because of the plant’s geographic location in a
nonattainment area. These Provisions do not permit allowance
trading to meet state compliance obligations. Mirant claims
that the Nonattainment Provisions are practically and legally
a fundamental part of Virginia’s CAIR SIP.

Mirant further argues that the Nonattainment Provisions
interfere with its ability to meet its CAIR compliance obliga-
tions because these Provisions purportedly prohibit allowance
trading to meet CAIR obligations. Because of space con-
straints at its power plant that allegedly limit Mirant’s ability
to install emissions controls, Mirant argues that it will ulti-
mately be forced to close the plant if it is not permitted to
meet its CAIR compliance obligations through allowance
trading.

of the Nonattainment Provisions, 9 Va. Admin Code § 5-140-1061. Mirant
Potomac River, LLC v. Commonwealth of Virginia, State Air Pollution
Control Board, 2009 WL 1748524 (Va. Ct. App. June 23, 2009) (unpub-
lished).
2
An "allowance" is a permit to emit one ton of a given pollutant in a
given year.
4 MIRANT POTOMAC RIVER v. EPA
Mirant raises three issues on appeal, all grounded in alleged
violations of the APA. First, Mirant challenges EPA’s
approval of Virginia’s CAIR SIP without providing notice or
the opportunity to comment on Virginia’s Nonattainment Pro-
visions. Second, Mirant argues that EPA acted arbitrarily and
capriciously when it reviewed and approved the Nonattain-
ment Provisions outside its public process. Third, Mirant
alleges that EPA acted arbitrarily and capriciously in approv-
ing Virginia’s CAIR SIP because the Nonattainment Provi-
sions are both a part of the CAIR SIP and fundamentally
incompatible with EPA’s CAIR program. Mirant requests that
we "vacate EPA’s rule approving Virginia’s CAIR SIP and
direct the Agency to prohibit Virginia from implementing and
enforcing the Nonattainment Provisions unless and until Vir-
ginia modifies its rules governing emissions from power
plants to be consistent with federal requirements." Petr.’s Br.
at 41. In the alternative, "Mirant requests that [we] remand the
rule and require EPA to allow for public notice and comment
on the full Virginia CAIR program, including the provisions
at issue [i.e. the Nonattainment Provisions] in this case." Id.
at 41-42.

II.

EPA challenges Mirant’s standing to bring this suit and
argues that Mirant has failed to show an injury fairly traceable
to EPA’s actions. EPA maintains that Mirant’s alleged injury
does not flow from EPA’s approval of Virginia’s CAIR SIP,
but instead flows from Virginia’s independently promulgated
and administered Nonattainment Provisions. Because we must
satisfy ourselves of our jurisdiction, we address this question
first. See Pye v. United States, 269 F.3d 459, 466 (4th Cir.
2001).

In order to demonstrate standing, a party must show that
"(1) it has suffered an injury in fact; (2) the injury is fairly
traceable to the defendants’ actions, and (3) it is likely, and
not merely speculative, that the injury will be redressed by a
 MIRANT POTOMAC RIVER v. EPA 5
favorable decision." Long Term Care Partners, LLC v. United
States, 516 F.3d 225, 231 (4th Cir. 2008) (citing Lujan v.
Defenders of Wildlife, 504 U.S. 555, 560-61 (1992)). To meet
the injury in fact requirement, the party must demonstrate an
injury that is "concrete and particularized, and actual or immi-
nent, as opposed to conjectural or hypothetical." Id. (citing
Lujan, 504 U.S. at 560-61). An injury sufficient to meet the
causation and redressability elements of the standing inquiry
must result from the actions of the respondent, not from the
actions of a third party beyond the Court’s control. See Frank
Krasner Enters. Ltd. v. Montgomery County, 401 F.3d 230,
234-35 (4th Cir. 2005) (citation omitted). Finally, the burden
of establishing standing "lies squarely on the party claiming
subject-matter jurisdiction." Id. at 234.

In challenging EPA’s approval of Virginia’s CAIR SIP,
Mirant argues that its injury stems from the Nonattainment
Provisions’ alleged prohibition on allowance trading, which
Mirant argues prevents it from meeting its CAIR compliance
obligations. Mirant attempts to establish the causal link
between its alleged injury and the federally required SIP
approved by EPA by arguing both that the "Nonattainment
Provisions are a fundamental part of Virginia’s CAIR pro-
gram, both legally and practically," Petr.’s Br. at 18, and that
these Provisions impermissibly interfere with EPA’s CAIR
program, see Petr.’s Br. at 16. For the reasons that follow, we
disagree.

We describe below the relevant regulatory regimes—the
SIP, grounded in federal law, and the Nonattainment Provi-
sions, grounded in Virginia state law—and explain why
Mirant has failed to establish an injury in fact that is fairly
traceable to EPA’s approval of Virginia’s CAIR SIP.

A.

We begin with an analysis of the federal regulatory scheme.
Title I of the CAA requires EPA to issue national ambient air
6 MIRANT POTOMAC RIVER v. EPA
quality standards ("NAAQS") for each air pollutant that
endangers, or may reasonably be anticipated to endanger,
public health or welfare. 42 U.S.C. § 7408(a)(1)(A). The
CAA also requires EPA to divide the country into areas desig-
nated as "nonattainment," "attainment," or "unclassified,"
based on whether the area meets the NAAQS. 42 U.S.C.
§§ 7407(d).

Under Title I, states have the primary responsibility for
assuring that air quality within their borders meets the
NAAQS. Title I requires each state to create a State Imple-
mentation Plan ("SIP") to meet the NAAQS. The SIP is then
submitted to EPA for approval. See 42 U.S.C. § 7410. Upon
approval by EPA, the SIP becomes a binding federal regula-
tion. 42 U.S.C. § 7413; see also Union Elec. Co. v. E.P.A.,
515 F.2d 206, 211 (8th Cir. 1975) ("Upon approval or pro-
mulgation of a state implementation plan, the requirements
thereof have the force and effect of federal law and may be
enforced by the Administrator in federal courts.").

Under the so-called "good neighbor" provisions of the
CAA, states are also responsible for preventing in-state emis-
sions "in amounts which will . . . contribute significantly to
nonattainment in, or interfere with maintenance by, any other
State." 42 U.S.C. § 7410(a)(2)(D). To address this concern,
EPA promulgated the Clean Air Interstate Rule ("CAIR") in
2005. 70 Fed. Reg. 25,162 et seq. (May 12, 2005). CAIR
applies to 28 states (plus the District of Columbia) that con-
tribute significantly to other states’ nonattainment.

CAIR gives these states the option of participating in a
regional cap and trade program. Under this program, EPA sets
an annual cap on the total number of tons of a pollutant (i.e.,
emissions allowances) that a state may emit. Each state then
distributes emission allowances to individual power plants.
These allowances establish each plant’s maximum emissions
for CAIR compliance purposes. Power plants can then
trade—buy or sell—allowances for a variety of purposes,
 MIRANT POTOMAC RIVER v. EPA 7
including to meet current year CAIR compliance obligations,
to use in the future, to invest, or to raise money. The program
improves air quality by reducing the total emissions allowed
over time.

All states subject to CAIR, including Virginia, have chosen
to participate in this cap and trade program and have modified
their SIPs accordingly. One important implication for these
states is that, under CAIR, neither a state’s SIP nor any inde-
pendent state laws can directly interfere with EPA’s cap and
trade program; that is, they cannot place restrictions on a
power plant’s ability to engage in allowance trading to meet
CAIR obligations. Power plants in these states are subject to
specific federal penalties for failure to meet CAIR compliance
obligations.3 Virginia submitted its CAIR SIP to EPA early in
2007, and EPA approved it in December 2007.

B.

In addition to requiring states to propose and implement
SIPs, the CAA expressly authorizes states to adopt unilateral
emissions regulations as long as those regulations are no less
stringent than those adopted in the state’s SIP. The relevant
portion of the CAA states:

Except as otherwise provided . . . nothing in this
chapter shall preclude or deny the right of any State
or political subdivision thereof to adopt or enforce
(1) any standard or limitation respecting emissions
of air pollutants or (2) any requirement respecting
control or abatement of air pollution; except that if
3
In particular, CAIR provides that any source that exceeds its emissions
allowance must surrender allowances sufficient to offset the excess emis-
sions as well as allowances from the next control period equal to three
times the excess emissions. 70 Fed. Reg. at 25,274; see also 9 Va. Admin.
Code 5-140-1060(D)(1)-(2) (providing identical penalties for excess emis-
sions under Virginia’s CAIR SIP).
8 MIRANT POTOMAC RIVER v. EPA
an emission standard or limitation is in effect under
an applicable implementation plan . . . such State or
political subdivision may not adopt or enforce any
emission standard or limitation which is less strin-
gent than the standard or limitation under such plan.

42 U.S.C. § 7416. As the Supreme Court has observed, "Con-
gress, consistent with its declaration that ‘[e]ach State shall
have the primary responsibility for assuring air quality’ within
its boundaries, § 107(a), left to the States considerable latitude
in determining specifically how the standards would be met."
Train v. Natural Res. Def. Council, Inc., 421 U.S. 60, 86-87
(1975).

Virginia has adopted such additional standards. Virginia’s
Nonattainment Provisions impose emissions caps on individ-
ual power plants located within the state’s nonattainment
areas. See 9 Va. Admin. Code §§ 5-140-1061, -1062, -2061,
-2062, -3061, -3062. Power plants may not trade allowances
to meet their emissions caps under the Nonattainment Provi-
sions. See 9 Va. Admin. Code §§ 5-140-1061(C), -2061(C),
-3061(C). Virginia statutes provide a wide array of discretion-
ary penalties for failure to comply with its emissions caps.4
Like the state compliance obligation, this penalty regime is
distinct from, and in addition to, the federal penalty regime
under CAIR. Consistent with CAIR requirements, the Nonat-
tainment Provisions explicitly prohibit restrictions on allow-
ance trading to meet CAIR compliance obligations under the
EPA administered cap and trade program. See 9 Va. Admin.
Code §§ 5-140-1061(D), -2061(D), -3061(D).

Virginia originally planned to include its Nonattainment
Provisions as part of its CAIR SIP. Consequently, the statu-
4
See Va. Code § 10.1-1316 (providing for penalties of fines, injunction,
mandamus, or "other appropriate remedy"); Va. Code § 10.1-1320 (pro-
viding for a penalty of fines). Individual plant permits may provide for
additional penalties.
 MIRANT POTOMAC RIVER v. EPA 9
tory subsection authorizing the promulgation of the Nonat-
tainment Provisions is part of the same statute that authorizes
promulgation of Virginia’s CAIR regulations (i.e., the set of
regulations that modify Virginia’s SIP to make it a CAIR
SIP), and the Nonattainment Provisions themselves are
numerically interspersed throughout these CAIR regulations.

Virginia eventually decided, however, to remove the Non-
attainment Provisions from its CAIR regulations, making
them independent state regulations. When Virginia submitted
its CAIR regulations to EPA, it attached the Nonattainment
Provisions with the explanation that it did so for informational
purposes only. Virginia clarified during the public comment
period on its CAIR regulations that, although the Nonattain-
ment Provisions would set emissions limits for each power
plant in nonattainment areas at levels equivalent to that power
plant’s CAIR allowances, the Provisions "place[ ] no restric-
tion on participation by any affected unit in the EPA trading
program" and "will not interfere with operation of the EPA
CAIR trading program." J.A. 199; accord 9 Va. Admin. Code
§§ 5-140-1061(D), -2061(D), -3061(D). Virginia also empha-
sized that its proposed CAIR SIP segregated "[1] compliance
under the nonattainment area provisions from [2] compliance
under the EPA trading program."5 J.A. 199; accord 9 Va.
Admin. Code §§ 5-140-1061(D), -2061(D), -3061(D). A
power plant can therefore meet its federal emissions obliga-
tions under CAIR through allowance trading, even though it
cannot use such trading to meet its state-imposed obligations
under the Nonattainment Provisions.

Approximately six months after receiving Virginia’s CAIR
SIP and supporting documentation, EPA published a notice in
5
As the Virginia regulations state, compliance with Virginia’s Nonat-
tainment Provisions (i.e., its state-mandated emissions caps) and compli-
ance with the CAIR SIP "shall be determined separately and in accordance
with the terms and provisions of each." 9 Va. Admin. Code 5-140-
1061(D).
10 MIRANT POTOMAC RIVER v. EPA
the Federal Register proposing to approve it. 72 Fed. Reg.
54,385 (Sept. 25, 2007). One of the documents that EPA
included with its notice was an EPA Technical Support Docu-
ment dated September 17, 2007. That document stated that
EPA concluded that Virginia’s Nonattainment Provisions did
not impermissibly interfere with the federal cap and trade pro-
gram. EPA noted:

Virginia has established an emissions cap for EGUs
[i.e., power plants] in the northern Virginia portion
of the DC Nonattainment area. Such a cap is within
the flexibilities of CAIR. The cap limits emissions of
sources to the amount of allowances originally allo-
cated by the Commonwealth. During the proposal
phase of Virginia’s rulemaking, EPA commented on
the nonattainment area provisions, and Virginia
modified the language pertaining to the emissions
cap to address EPA’s comments. However, Virginia
has chosen not to submit its nonattainment provi-
sions as part of its CAIR SIP revision, and EPA is
not taking action on this portion of regulation [9 Va.
Admin. Code § 5-140]. It is only mentioned here to
note that the state-only provision does not interfere
with the trading program under CAIR.

J.A. 397 (emphases added).

During the public comment period on EPA’s proposed
approval of Virginia’s CAIR SIP, the Virginia Board held its
own public proceedings on Virginia’s Nonattainment Provi-
sions at the state level. Mirant fully participated in the state
proceedings but chose not to participate in the EPA proceed-
ings. On December 28, 2007, EPA published a final rule
approving the Virginia CAIR SIP. 72 Fed. Reg. 73,602 (Dec.
28, 2007).
 MIRANT POTOMAC RIVER v. EPA 11
C.

Having laid out the underlying statutory and regulatory
framework, we now consider whether Mirant has met its bur-
den of establishing standing to sue EPA for approving Virgin-
ia’s CAIR SIP. Mirant claims that Virginia’s Nonattainment
Provisions prohibit covered plants from purchasing emissions
allowances to comply with CAIR obligations. Because, in
Mirant’s view, the Nonattainment Provisions work in tandem
with the CAIR SIP to circumscribe its options for meeting its
CAIR obligations, the Nonattainment Provisions are an inte-
gral part of the CAIR SIP. Consequently, Mirant argues that
EPA’s approval of the CAIR SIP caused the injury of which
it complains.6 Mirant’s arguments are fundamentally flawed
for several reasons.

First, Mirant claims that the Nonattainment Provisions
impermissibly interfere with Virginia’s CAIR SIP. This claim
is contradicted by the plain language of the Nonattainment
Provisions. These Provisions, as we have pointed out, prohibit
Mirant from allowance trading to meet its state compliance
obligations, established under Virginia’s independent emis-
sions cap. See 9 Va. Admin. Code §§ 5-140-1061(C),
-2061(C), -3061(C). The Nonattainment Provisions do not,
however, directly interfere with Mirant’s ability to trade
allowances to meet its CAIR obligations. On the contrary,
these Provisions explicitly prohibit any restrictions on trading
to meet CAIR compliance obligations. See 9 Va. Admin.
Code §§ 5-140-1061(D), -2061(D), -3061(D).

Second, Mirant argues that the Nonattainment Provisions
are a fundamental part of Virginia’s CAIR SIP. However, its
arguments in this regard are also unpersuasive. For instance,
6
Of course, any alleged injury that accrues to Mirant directly on account
of the Nonattainment Provisions does not establish standing because such
an injury does not arise out of EPA’s decision to approve Virginia’s CAIR
SIP.
12 MIRANT POTOMAC RIVER v. EPA
although Mirant points out that Virginia’s CAIR SIP and its
Nonattainment Provisions were authorized by the same state
statute and proposed in the same legislative action, the expla-
nation for these commonalities is straightforward and does not
support Mirant’s position. As noted above, the Nonattainment
Provisions were once a part of Virginia’s CAIR program and
both programs have the same general goal of preventing air
pollution. Mirant’s emphasis on the common history and
common subject matter of Virginia’s Nonattainment Provi-
sions and its CAIR SIP do not support a conclusion that the
Nonattainment Provisions are now a fundamental part of that
CAIR SIP.

Our analysis of the two regulatory schemes supports a con-
clusion that the two are separate. As discussed, each received
final approval from different sovereigns through different pro-
cesses; each has different compliance obligations that are
enforced by these different sovereigns; each provides a sepa-
rate penalty regime for noncompliance. As we have noted, the
Nonattainment Provisions, as separate state regulations, do
not place any restrictions on participation in the EPA trading
program by any affected power plant. To meet federal com-
pliance obligations, any power plant can buy, sell, trade, or
use allowances without restriction. To meet state compliance
obligations, no power plant located in a nonattainment area
can exceed its independent state emissions cap without facing
state penalties.

In summary, there is no connection–-much less one that is
"fairly traceable"–-between Mirant’s claimed injury and
EPA’s approval of Virginia’s CAIR SIP because Virginia’s
Nonattainment Provisions and its CAIR SIP are separate regu-
latory schemes. Virginia’s Nonattainment Provisions are state
regulations. They are not part of, and do not directly interfere
with, the CAIR SIP approved by EPA.7 Consequently, Mirant
7
To be sure, fines or other penalties issued under the Nonattainment
Provisions might indirectly impact the affected power plant’s capacity to
 MIRANT POTOMAC RIVER v. EPA 13
has failed to demonstrate a causal link between its alleged
injury and EPA’s approval of Virginia’s CAIR SIP. Mirant
has failed to carry its burden of establishing standing.

III.

Because Mirant lacks standing, this petition for review is

DISMISSED.

fully engage in the trading program. For example, the fines might curtail
a power plant’s ability to purchase excess CAIR allowances for future use
or for investment, or even make it unprofitable to continue operating the
plant. Such indirect effects, as opposed to direct interference with the trad-
ing program or direct restriction on trading to meet CAIR obligations, are
not fatal to the conclusion that the regulatory regimes are separate. Indeed,
any time a state adopts regulations more stringent than required by CAIR,
the regulations may have some impact on the CAIR trading program.
CAIR is not intended to supplant these regulations. Accord EPA Technical
Support Document at 7 (Sept. 17, 2007); reproduced at J.A. 397. At any
rate, the precise point at which indirect impacts become unacceptable
interference, if ever, is not an issue we need to resolve in this case. Virgin-
ia’s regulatory scheme provides a diverse array of remedies and explicitly
prohibits direct interference with the CAIR Annual Trading Program.