United States Court of Appeals
Fifth Circuit
F I L E D
August 15, 2003
IN THE UNITED STATES COURT OF APPEALS
Charles R. Fulbruge III
FOR THE FIFTH CIRCUIT Clerk
No. 02-60069
PUBLIC CITIZEN, INC.; SIERRA CLUB; GALVESTON-HOUSTON ASSOCIATION
FOR SMOG PREVENTION; HILTON KELLY,
Petitioners,
versus
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY; RICHARD E. GREENE,
ADMINISTRATOR UNITED STATES ENVIRONMENTAL PROTECTION AGENCY,
REGION 6; CHRISTINE T. WHITMAN, ADMINISTRATOR, UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY,
Respondents.
Petitions for Review of an Order of the
Environmental Protection Agency
Before GARWOOD, SMITH, and BARKSDALE, Circuit Judges.
RHESA H. BARKSDALE, Circuit Judge:
Primarily at issue is whether, pursuant to Title V of the
Clean Air Act, 42 U.S.C. §§ 7661-7661f, the Environmental
Protection Agency (EPA) had authority to grant full approval to
Texas’ operating permit program, notwithstanding program
deficiencies; and if so, whether it nonetheless was required by
that Act to issue notices of deficiency for the claimed
shortcomings. The petitions for review are DENIED.
I.
A.
The Clean Air Act (CAA), 42 U.S.C. §§ 7401-7671q, enacted in
1970 and extensively amended in 1977 and 1990, is a complex
regulatory regime intended “to protect and enhance the quality of
the Nation’s air resources so as to promote the public health and
welfare and the productive capacity of its population”. 42 U.S.C.
§ 7401(b)(1). “Primary responsibility” for enforcement of the CAA
is vested in state and local governments; but, the CAA also
provides for “Federal financial assistance and leadership ... for
the development of cooperative Federal, State, regional, and local
programs to prevent and control air pollution”. 42 U.S.C. §
7401(a)(3), (4). States satisfy their responsibility by developing
state implementation plans that specify emissions limitations and
other measures to attain and maintain national ambient air quality
standards. 42 U.S.C. § 7410(a)(2)(A)-(M).
In 1990, Congress enacted Title V for the CAA. Title V
requires major stationary sources of air pollution, such as
factories, to receive operating permits incorporating CAA
requirements and establishes a procedure for federal authorization
of state-run Title V permit programs. See 42 U.S.C. §§ 7661-7661f.
Title V permits do not impose additional requirements on sources
but, to facilitate compliance, consolidate all applicable
requirements in a single document. See 42 U.S.C. § 7661a(a); see
2
also Virginia v. Browner, 80 F.3d 869, 873 (4th Cir. 1996) (Title
V permit “is a source-specific bible for [CAA] compliance”), cert.
denied, 519 U.S. 1090 (1997).
Congress directed the EPA to promulgate regulations
establishing the minimum elements for a Title V operating permit
program. Those minimum elements were to include certain
requirements identified in the CAA. See 42 U.S.C. § 7661a(b)
(articulating ten minimum elements for state programs).
The CAA required each State to develop, and submit to the EPA
for approval, an operating permit program that met the requirements
of the Act and its regulations (Part 70 — pursuant to the
regulations implemented for the CAA). 42 U.S.C. § 7661a(d)(1).
Section 502(d)(1) of the CAA, 42 U.S.C. § 7661a(d)(1), authorized
the EPA to grant full approval to permit programs “to the extent”
that the program met the CAA’s requirements.
In the event a State was not eligible for full approval, but
“substantially” met the minimum requirements, the CAA authorized
the EPA to grant “interim approval”. 42 U.S.C. § 7661a(g). On
granting interim approval, the EPA had to identify deficiencies to
be addressed before the program could receive full approval; the
State was then required to revise and resubmit the program. Id.
Interim approval could only last for two years and could not be
renewed. Id.
3
Congress established firm deadlines for these processes. See
42 U.S.C. § 7661a. Pursuant to the statutory schedule: by
November 1993, States were to submit proposed permit programs; by
November 1994, the EPA had to either grant full or interim
approval, or deny approval; by November 1995, the EPA was to take
over state permit programs that did not meet federal requirements
and had not been granted interim approval; and by November 1996,
the EPA was to take over state permit programs that had been
granted interim approval but did not qualify for full approval. In
other words, compliant programs were to be operating no later than
November 1996, six years after Title V became law. See 46 U.S.C.
§ 7661a(b), (d)(1), (d)(3), and (g).
If a program was not fully approved before the deadline, or if
interim approval expired without the EPA’s having granted full
approval, the CAA mandated stiff sanctions, including exposure to
financial penalties (e.g., loss of highway funds). See 42 U.S.C.
§ 7661a(d)(2)(B) (incorporating 42 U.S.C. 7509(b)). Moreover, the
EPA would be required to implement a federal Title V permitting
program in that State, pursuant to EPA regulations. See 42 U.S.C.
§ 7661a(d)(3).
After the EPA approved a State’s Title V permit program, the
EPA was to maintain an oversight role. The CAA provides that,
whenever the EPA makes a determination that a State is not
adequately administering and enforcing its permit program in
4
accordance with Title V, it shall provide a notice of deficiency
(NOD) to the State. 42 U.S.C. § 7661a(i)(1). If the State does
not correct the deficiency within 18 months, it faces sanctions
and, eventually, EPA takeover of its program. 42 U.S.C. §
7661a(i)(2), (4).
B.
The EPA issued regulations providing minimum requirements for
state permit programs and, pursuant to those rules, began reviewing
and authorizing state permit programs. It issued numerous interim
approvals. Despite the statutory language that interim approval
was to last only two years and could not be renewed, the EPA also
extended those approvals for an additional ten months as the
November 1996 deadline approached. See Operating Permits Program
Interim Approval Extensions, 61 Fed. Reg. 56368 (31 Oct. 1996). It
subsequently extended interim approval three times. See Extension
of Operating Permits Program Interim Approvals, 62 Fed. Reg. 45732
(29 Aug. 1997); Extension of Operating Permits Program Interim
Approval Expiration Dates, 63 Fed. Reg. 40054 (27 July 1998);
Extending Operating Permits Program Interim Approval Expiration
Dates, 65 Fed. Reg. 7290 (14 Feb. 2000).
The EPA was sued for doing so. Sierra Club v. EPA, No. 00-
1262 (D.C. Cir. 2000). As part of the settlement of that action,
the EPA agreed: (1) to implement a federal permit program by 1
December 2001 in any State that did not have full approval; and (2)
5
to take and respond by 1 December 2001 to public comments regarding
deficiencies in state permit programs. Id. (Settlement Agreement).
Regarding such public comments, it committed to respond on the
merits to any claims of deficiency raised during the comment period
and either issue an NOD or explain why it did not do so.
C.
In 1993, Texas submitted its Title V program to the EPA for
approval. See Clean Air Act Final Interim Approval of Operating
Permits Program; the State of Texas, 61 Fed. Reg. 32693 (25 June
1996). In 1996, the EPA granted interim approval to Texas’
program. See id. The EPA identified numerous deficiencies in its
approval notice that Texas was required to correct before it could
obtain full approval. See id. at 32694-98; Clean Air Act Proposed
Interim Approval for the State of Texas, 60 Fed. Reg. 30037 (7 June
1995). Subsequently, Texas submitted program revisions for the
EPA’s review.
Pursuant to the Sierra Club Settlement Agreement, the EPA
published a Federal Register notice inviting public comments about
Texas’ program; Petitioners submitted comments in which they
objected to full approval, based on their belief that Texas had not
corrected all of the interim deficiencies and that additional
deficiencies existed that had not been identified previously. The
EPA determined, however, that Texas’ revisions satisfactorily
addressed the program deficiencies identified during interim
6
approval, Clean Air Act Proposed Full Approval for Texas, 66 Fed.
Reg. 51895 (11 Oct. 2001); accordingly, it granted Texas full
approval in December 2001, Clean Air Act Full Approval of Texas
Permits Program, 66 Fed. Reg. 63318 (6 Dec. 2001).
Regarding the deficiencies not identified by the time of
interim approval, the EPA concluded that newly identified
deficiencies did not prohibit full approval. It stated it would
respond to those alleged deficiencies in a separate, then
concurrently pending administrative proceeding. Id. at 63329-30.
In January 2002, based upon the EPA’s review of the public
comments, it issued an NOD that identified six deficiencies.
Notice of Deficiency for Clean Air Act Operating Permits Program;
State of Texas, 67 Fed. Reg. 732 (7 Jan. 2002).
In February 2002, the EPA issued a response letter explaining
its rationale for not issuing NODs for other deficiencies claimed
by Petitioners. See Operating Permits Program; Notice of Location
of Response Letters to Citizens Concerning Program Deficiencies in
Texas, 67 Fed. Reg. 16374 (5 Apr. 2002). The response explained
that the EPA agreed with Petitioners concerning some of the issues
and was working with Texas to ensure its program was being
implemented consistent with Title V; on other issues, it did not
agree with Petitioners. EPA Responses to Citizen Comments on State
Program Deficiencies (Texas) (21 Feb. 2002), at,
http://www.epa.gov/air/oaqps/permits/response/.
7
II.
Petitioners seek review of two EPA final actions related to
Texas’ Title V operating permits program: (1) the 6 December 2001
full approval of the program; and (2) the 21 February 2002 decision
not to issue NODs related to four aspects of the program. Texas
has intervened in favor of the EPA, as have BP America, Inc., et
al. (Industry Intervenors).
Where Congress has delegated authority to an agency to make
rules carrying the force of law and the agency’s interpretation of
its governing statute was promulgated in the exercise of that
authority, we apply the familiar two-step inquiry established by
Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S.
837, 942-43 (1984). United States v. Mead Corp., 533 U.S. 218,
226-27 (2001). Under Chevron, we will not defer to an agency’s
interpretation that contravenes Congress’ unambiguously expressed
intent. Chevron, 467 U.S. at 942-43. On the other hand, we must
defer to a reasonable agency interpretation when the question is
one to which the statute does not speak directly. See id.
Otherwise, our review of agency action is governed by the
familiar deferential standard established by the Administrative
Procedure Act, 5 U.S.C. §§ 701-706 (APA): we must set aside any
agency action that is “arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law”. 5 U.S.C. §
706(2)(A). Under this standard, we must assure ourselves that the
8
agency considered the relevant factors in making the decision, its
action bears a rational relationship to the statute’s purposes, and
there is substantial evidence in the record to support it; but, we
cannot substitute our judgment for that of the agency. Texas Oil
& Gas Ass’n v. EPA, 161 F.3d 923, 934 (5th Cir. 1998). We will
uphold an agency’s actions if its reasons and policy choices
satisfy minimum standards of rationality. Id. at 934. Moreover,
the EPA’s interpretations of its regulations are entitled to
substantial deference and are given “controlling weight” unless
“plainly erroneous or inconsistent with the regulation”. Thomas
Jefferson Univ. v. Shahala, 512 U.S. 504, 512 (1994).
A.
Petitioners first maintain the EPA, in December 2001, had no
authority to grant Texas’ permit program full approval without
finding that the program met the requirements of Title V and its
implementing regulations. They further maintain that the EPA acted
arbitrarily and capriciously in granting full approval because
Texas had not corrected all deficiencies identified at interim
approval.
1.
The first issue is a question of statutory interpretation
governed by the Chevron standard. Under the EPA’s interpretation
of the statutory provisions governing interim and full approval,
CAA § 502g, 42 U.S.C. § 7661a(g) (governing interim approval),
9
provides an alternate path to full approval. Full approval would
otherwise be governed by CAA § 502(d), 42 U.S.C. § 7661a(d), and
would not be permitted when the EPA determined (as it did) that the
program did not meet all of Title V’s requirements. According to
the EPA, if a State is granted interim approval, then to receive
full approval it need only remedy deficiencies identified by the
EPA at the time of interim approval.
Petitioners dispute this interpretation, contending that, when
the EPA is aware of deficiencies, it may not fully approve a
program (regardless of whether it becomes aware of the deficiencies
before or after interim approval). According to Petitioners:
there is but one path to full approval, that provided by CAA §
502d, 42 U.S.C. § 7661a(d); and only deficiency-free programs may
be approved. Petitioners urge that the EPA’s interpretation is
contrary to the clear and unambiguous intent of Congress; and, in
the alternative, that the approval was arbitrary and capricious
because it contradicts EPA regulations and memoranda.
a.
CAA § 502(d), 42 U.S.C. § 7661a(d)(1), relied upon by
Petitioners, provides:
Not later than 3 years after November 15,
1990, the Governor of each State shall develop
and submit to the Administrator a permit
program under State or local law or under an
interstate compact meeting the requirements of
this subchapter ... Not later than 1 year
after receiving a program, and after notice
and opportunity for public comment, the
10
Administrator shall approve or disapprove such
program, in whole or in part. The
Administrator may approve a program to the
extent that the program meets the requirements
of this chapter, including the regulations
issued under subsection (b) of this section.
If the program is disapproved, in whole or
part, the Administrator shall notify the
Governor of any revisions or modifications
necessary to obtain approval. The Governor
shall revise and resubmit the program for
review under this section within 180 days
after receiving notification.
CAA § 502(g), 42 U.S.C. § 7661a(g), which governs interim
approval, provides in part:
If a program (including a partial permit
program) submitted under this subchapter
substantially meets the requirements of this
subchapter but is not fully approvable, the
Administrator may by rule grant the program
interim approval. In the notice of final
rulemaking, the Administrator shall specify
the changes that must be made before the
program can receive full approval.
We agree with the Second Circuit that ambiguity exists in
these provisions. See New York Pub. Interest Research Group v.
Whitman, 321 F.3d 316, 328 (2nd Cir. 2003).
It arises because the text of § 502(g),
governing interim approval, does not clearly
describe the process by which a permit program
that has received interim approval receives
full approval. After making the changes
specified at the time of interim approval,
must the state resubmit its plan for
evaluation under the standards set forth in §
502(d), which would require the EPA to examine
the program’s compliance with Title V? Or
11
does a state’s program automatically qualify
for full approval when the state makes “the
changes” specified at the time of interim
approval?
Id. (emphasis added).
On fully approving Texas’ program, the EPA acknowledged this
ambiguity, finding an “apparent tension” between the requirement
that it grant full approval only to programs that meet minimum
requirements and the requirement that it grant full approval to any
program that has corrected interim deficiencies. 66 Fed. Reg. at
63319 (“Standing alone, § 502(d) appears to prevent EPA from
granting a state operating permit program full approval until the
state has corrected all deficiencies in its program no matter how
insignificant, and without consideration as to when such deficiency
was identified. Alternatively, § 502(g) appears to require that
EPA grant a state program full approval if the state has corrected
those issues that the EPA identified in the final [interim
approval].” (emphasis added)).
Therefore, the EPA had to decide “whether Texas by virtue of
correcting the deficiencies identified in the [interim approval
was] eligible ... for full approval, or whether Texas must also
correct any new or recently identified deficiencies as a
prerequisite to receiving full approval”. Id. at 63319-20
(emphasis added). The EPA concluded:
[T]he appropriate and more cohesive reading of
the statute recognizes the EPA’s authority to
grant Texas full approval [where interim-
12
approval deficiencies have been corrected]
while working simultaneously with the state,
in [the EPA’s] oversight capacity, on any
additional problems that were recently
identified. To conclude otherwise would
disrupt the current administration of the
state program and cause further delay in
Texas’s ability to issue operating permits to
major stationary sources.
Id. at 63320.
Because Congress did not unambiguously express its intent on
this issue through the CAA, the EPA’s interpretation is entitled to
deference under Chevron. As a result, we must decide whether the
EPA’s interpretation is “based on a permissible construction of the
[CAA]”. Chevron, 467 U.S. at 843.
We hold that it is. First, CAA § 502(g), 42 U.S.C. §
7661a(g), provides that, in the notice of final rulemaking granting
interim approval, the EPA must “specify the changes that must be
made before the program can receive full approval”. (Emphasis
added.) This suggests the interim-approval notice must identify
all of the changes required for full approval, and the making of
those specified changes (not all possible changes) triggers full
approval.
Second, as the Second Circuit noted:
[T]he EPA’s interpretation comports with the
timetable established by Congress, if not
adhered to by the EPA. Under § 502(g),
interim approval expires after two years and
is not renewable. 42 U.S.C. § 7661a(g).
Changes identified at the time of interim
approval may require modifications of state
statutes or regulations and, therefore, may be
13
time consuming. If a state were required, not
only to make the changes identified at the
start of interim approval but also to correct
deficiencies arising during interim approval,
a state’s efforts to receive full approval
could be sabotaged by the identification of
new deficiencies during or at the end of
interim approval. Should these events occur
it is doubtful whether the state could
resubmit its plan for full approval since §
502(d) provides that any such submission must
occur “[n]ot later than three years after
November 15, 1990,” 42 U.S.C. § 7661a(d)(1),
and the statute does not otherwise authorize
re-submission.
New York Pub. Interest Research Group, 321 F.3d at 329 (emphasis
added).
Finally, the CAA provides a mechanism for correcting
deficiencies in fully-approved programs — the NOD process
(discussed in detail infra). Like the Second Circuit, “[w]e
question whether Congress would have armed the EPA with this
arsenal if it believed that every deficiency would be corrected
during the interim approval period”. Id. at 329. Moreover, the
NOD process also applies to programs that have been granted interim
approval, providing a means to correct deficiencies not identified
at the time of interim approval. Thus, Congress provided processes
for making corrections to programs once they initially enter the
approval process and are given at least interim approval.
b.
Petitioners maintain that, even if the EPA’s interpretation is
not contrary to law, its full approval of Texas’ program was
14
arbitrary and capricious because: two EPA memoranda support
Petitioners’ view of the CAA; and the EPA’s interpretation is
contrary to EPA regulations.
Regarding the memoranda, Petitioners have not shown that the
views reflected in those two isolated memoranda are the official
policy of the EPA. These memoranda simply are not binding on the
EPA.
Regarding the EPA regulations that allegedly conflict with the
EPA interpretation, 40 C.F.R. § 70.10(a) states:
(1) ... [I]f an interim approval expires and
the Administrator has not approved a whole
part 70 program:
(i) At any time the Administrator
may apply any one of the sanctions
specified in section 179(b) of the
Act; and
(ii) Eighteen months after the date
required for submittal or the date
of disapproval by the Administrator
[sanctions will apply].
(2) If full approval of a whole part 70
program has not taken place within 2 years
after the date required for such submission,
the Administrator will [take over the
program].
The regulations define “whole program” as “a part 70 permit
program, or any combination of partial programs, that meet all the
requirements of these regulations and cover all the part 70 sources
in the entire State”. 40 C.F.R. § 70.2.
Petitioners maintain: these regulations suggest that the EPA
believes a program must meet all requirements for full approval;
15
they constitute EPA’s definitive interpretation of the CAA; and
they may be changed only through a formal modification of the EPA’s
rules. The EPA responds that this regulatory section addresses the
consequences that follow from expiration of interim approval in the
absence of a fully approved Title V program. The EPA points out
that 40 C.F.R. § 70.10 does not address the criteria for approving
State programs and, in particular, whether § 502(g) authorizes the
EPA to grant full approval to a State that corrects the
deficiencies identified at the time of interim approval. It
concludes: § 70.10 has no applicability here because interim
approval of the Texas program did not “expire” — full approval
superceded interim approval; and, for this situation, the relevant
regulation is 40 C.F.R. § 70.4(f)(2), which addresses requiring
States with interim approval to submit changes before expiration of
interim approval.
Again, we must give substantial deference to the EPA’s
interpretation of its regulations. Here, the EPA’s position that
these regulations are not inconsistent with its interpretation of
the CAA is not “plainly erroneous” and is thus entitled to
“controlling weight”. Thomas Jefferson Univ., 512 U.S. at 512. In
short, the EPA’s interpretation of the CAA is reasonable, and the
EPA’s acting pursuant to that interpretation was neither arbitrary
nor capricious.
16
2.
Petitioners nonetheless contend that the EPA acted arbitrarily
and capriciously in granting full approval to Texas because it had
not corrected three of the deficiencies identified at interim
approval. The EPA responds that it evaluated Texas’ response to
each deficiency and concluded that Texas had satisfactorily
addressed the EPA’s concerns.
We note that the EPA’s determinations were based on detailed,
technical evaluations of revisions to the Texas program to
determine whether that program complied with the CAA and the EPA’s
regulatory scheme. Again, the EPA is entitled to a substantial
deference in interpreting its regulations. E.g., Marine Shale
Processors v. EPA, 81 F.3d 1371, 1384 (5th Cir. 1996), cert.
denied, 519 U.S. 1055 (1997).
a.
The new source review (NSR) component of the CAA addresses
preconstruction review for new and modified stationary sources of
air pollution. All States must administer an EPA-approved program,
commonly referred to as “minor NSR”, that requires new sources and
existing sources subject to modification to obtain a
preconstruction authorization containing appropriate emission
limitations and standards. See 60 Fed. Reg. at 30039 (citing 40
C.F.R. § 70.2). Minor NSR permit terms and conditions are
17
applicable requirements of the Act that must be incorporated into
a Title V permit. See id.
During the interim approval process, the EPA identified as a
deficiency Texas’ failure to recognize the terms and conditions of
minor NSR permits as applicable requirements. See id. It stated
that, prior to full approval, Texas had to identify minor NSR as an
applicable requirement and revise its regulations to be consistent
with the federal regulations (Part 70). Id. Additionally, it
stated that Texas had to, upon or before the granting of full
approval, institute proceedings to reopen Title V permits issued
under interim approval to incorporate any excluded minor NSR
permits. Id.
Texas subsequently took a series of actions to correct the
deficiency, which the EPA determined met the minimum requirements,
66 Fed. Reg. at 51897-98: it amended its definition of applicable
requirements to include minor NSR, id. (citing 30 Tex. Admin. Code
§ 122.10(2)); and amended its rules to require new permit
applicants to list minor NSR permits in their applications and to
require that newly issued Title V permits incorporate minor NSR
permits, id. (citing 30 Tex. Admin. Code § 122.132(e)(11) and
122.142(b)(3)). For previously issued Title V permits, and those
for which the State had initiated public notice prior to the rule
changes, it amended its rules to require that, before 1 December
2001, the State would institute proceedings to reopen existing
18
Title V permits to incorporate minor NSR permits no later than
permit renewal (i.e., no later than the end of the five-year term
of the permit). Id. (citing Tex. Admin. Code § 122.231(c)).
Pursuant to an agreement with the EPA, it committed to incorporate
the permits on a faster schedule: for existing permits with two or
more years remaining until renewal, within three to four years of
initial issuance. Id. at 51897-98.
Petitioners contend Texas had not corrected its exclusion of
minor NSR permits from its requirements for Title V permits. They
assert: not all of Texas’ permits (including previously-issued
permits) incorporated minor NSR terms at the time of full approval;
Texas’ permits did not include minor NSR permit terms but merely
cross-referenced minor NSR permits; and Texas’ correction was
flawed because it allowed incorporation of minor NSR into existing
general operating permits.
i.
Petitioners insist that Texas’ schedule was too slow and
failed to assure sources’ compliance with minor NSR terms and
conditions upon full approval, in violation of Part 70. The EPA
determined Texas corrected the deficiency based on its rule changes
and its commitment to incorporate minor NSR permits into existing
Title V permits on an expedited schedule.
The relevant section of Part 70 provides that a program with
interim approval that excludes minor NSR as an applicable
19
requirement “must, upon or before granting of full approval,
institute proceedings to reopen part 70 permits to incorporate
excluded minor NSR permits as terms of the part 70 permits....” 40
C.F.R. § 70.4(d)(3)(ii)(D) (emphasis added). As the EPA
determined, Texas met this requirement. This determination was
neither arbitrary nor capricious.
ii.
Petitioners next maintain Texas did not correct the
deficiency, because Texas’ permits do not include minor NSR permit
terms — instead, they cross-reference the permit numbers of minor
NSR permits. The EPA contends it reasonably found that minor NSR
permits could be incorporated by reference (i.e., the minor NSR
permit number listed, together with a statement that the minor NSR
terms are included as applicable requirements).
Nothing in the CAA or its regulations prohibits incorporation
of applicable requirements by reference. The Title V and Part 70
provisions specify what Title V permits “shall include” but do not
state how the items must be included. See 42 U.S.C. § 7661c(a)
(“[e]ach permit issued under this subchapter shall include
enforceable emissions limitations and standards ... and such other
conditions as are necessary to assure compliance with applicable
requirements of this chapter”); 40 C.F.R. § 70.6(a)(1) (“[e]ach
permit issued under this part shall include [elements including
emissions limitations and standards]”).
20
The EPA concedes that, in providing guidance, it has stated
that emissions limitations and standards should be restated on the
face of the Title V permit and that incorporation by reference of
the details should only occur after such a restatement. On the
other hand, this guidance was not binding on the EPA and did not
require it to determine Texas has not corrected its interim
deficiencies. The EPA balanced the streamlining benefits of
incorporation by reference against the value of a more detailed
Title V permit and determined Texas’ deficiency had been cured to
its satisfaction. In so doing, it properly considered Petitioners’
concerns, such as the potential impact of incorporation-by-
reference on the ability of the public to be informed of the
requirements in the Title V permit and to comment on them. See 66
Fed. Reg. at 63324 & n.4. Contrary to Petitioners’ assertions,
neither the CAA nor its implementing regulations require more; and
the EPA determination was neither arbitrary nor capricious.
iii.
Finally, Petitioners contend that Texas’ changes are flawed
because they allow incorporation of minor NSR into general
operating permits (GOPs). GOPs are issued to cover numerous
similar sources in lieu of a specific Title V permit. 42 U.S.C. §
7661c(d); 40 C.F.R. § 70.6(d). Petitioners contend GOPs may not
incorporate minor NSR requirements because minor NSR requirements
vary by site.
21
This issue was not presented to the EPA during the full
approval process. Absent exceptional circumstances, a party cannot
judicially challenge agency action on grounds not presented to the
agency at the appropriate time during the administrative
proceeding. See Texas Oil & Gas Ass’n, 161 F.3d at 933 n.7.
(Also, Petitioners could have, but did not, challenge revisions to
the GOPs themselves. See 42 U.S.C. § 7661c(d); 40 C.F.R. §
70.7(e)(4).) We conclude that this issue is not properly before
us.
b.
Next, Petitioners point to Texas’ Audit Privilege Act as an
interim-approval-identified deficiency that had not been corrected.
They maintain the Audit Privilege Act prevents Texas from having
adequate authority to enforce its permit program.
Title V includes, as one of its minimum elements, the
requirement that the State have adequate authority to assure that
sources comply with all applicable requirements and to enforce
permits. 42 U.S.C. § 7661a(b)(5); see also 40 C.F.R. § 70.11(c)
(penalties must be “appropriate to the violation”). Texas, through
its Audit Privilege Act, provides for certain immunities and
privileges associated with information obtained through an
environmental audit of a facility. TEX. REV. CIV. STAT. art. 4447cc.
In the EPA’s interim approval notice for Texas, it noted its
concern that the Audit Privilege Act might prevent Texas from
22
having adequate enforcement authority. 61 Fed. Reg. at 32697. The
EPA stated that, to qualify for full approval, Texas would be
required to demonstrate that the Audit Privilege Act did not limit
Texas’ ability to adequately enforce and administer the operating
permit program. Id.
In response, Texas amended the Audit Privilege Act. According
to the EPA, these amendments: (1) eliminated the application of
immunity and privilege provisions to criminal actions; (2)
eliminated the application of immunity where a violation results in
a serious threat to health or the environment, or where the
violator has obtained a substantial economic benefit that gives it
a competitive advantage; (3) clarified that the law would not
sanction individuals who report violations of environmental laws to
government agencies; and (4) clarified that the privilege does not
impair access to information required to be made available under
federal or state law. See 66 Fed. Reg. at 51903.
Petitioners concede that Texas has made these changes to its
Audit Privilege Act since 1996, but insist that the law still:
prevents Texas from having adequate enforcement authority; prevents
it from being able to assess appropriate penalties; and improperly
makes audit documents privileged. The EPA responds that it
reasonably determined that limited immunity does not, per se,
preclude States from possessing adequate enforcement authority.
i.
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Concerning the adequacy of Texas’ enforcement authority,
Petitioners insist the Audit Privilege Act prevents Texas from
being able to recover civil penalties for each violation of the Act
because it has granted certain immunities. On the other hand, the
EPA determined the immunities provided by Texas’ Audit Privilege
Act did not deprive Texas of adequate enforcement authority. It
reasoned the Act does not: limit Texas’ ability to seek
declaratory or injunctive relief for violations disclosed by an
audit; affect Texas’ ability to pursue criminal sanctions, if
appropriate; or preclude actions seeking penalties for serious
violations. This determination was not arbitrary and capricious.
ii.
Regarding the Audit Privilege Act’s impact on Texas’ ability
to impose appropriate penalties, Title V and Part 70 require that
Texas have authority to recover penalties of up to $10,000 per day
in an amount “appropriate to the violation”. 40 C.F.R. § 70.11;
see also 42 U.S.C. § 7661a(b)(5)(E). The EPA has interpreted these
provisions to require that state law allow for the consideration of
the penalty factors identified in CAA § 113(e), 42 U.S.C. §
7413(e): the violator’s compliance history; the economic benefit
of noncompliance; and the seriousness of the violation.
Petitioners note minor semantic differences between the
federal penalty factors and those allowed consideration under the
Audit Privilege Act. For example, Texas must be able to penalize
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violations resulting in substantial economic benefit; Texas’ Audit
Privilege Act provides an exception to immunity for violations that
“have resulted in a significant economic benefit which gives the
violator a clear advantage over its business competitors”. TEX.
REV. CIV. STAT. Art. 4447cc § 10(d)(5). Notwithstanding minor
variations, the EPA reasonably determined that Texas’ statutory
language allowed it to consider the appropriate factors in imposing
punishments.
iii.
Petitioners assert Texas’ Audit Privilege Act impermissibly
makes audit documents privileged. The EPA responds that Texas
addressed this concern by adding a section to the Audit Privilege
Act that restored the authority of the State’s employees,
“[n]otwithstanding the privilege established under this Act” to
“review information that is required to be available under a
specific state or federal law....” TEX. REV. CIV. STAT. art. 4477cc,
§ 9(b). The EPA determined this section restored Texas’ authority
to view any documents required to be collected, maintained, or
reported under Title V, which it deemed sufficient to address the
deficiency and for Texas to conduct both civil and criminal
investigations. See 66 Fed. Reg. at 63329. This assessment was
not arbitrary or capricious.
c.
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Finally, Petitioners contend full approval was arbitrary and
capricious because Texas has not demonstrated that it has adequate
funding and personnel to administer a Title V program. 42 U.S.C.
§ 7661a(b)(4) requires States to so demonstrate, and Part 70
instructs that this demonstration must include a four-year estimate
of program costs and a description of how the State plans to cover
those costs. 40 C.F.R. § 70.4(b)(8)(v). The funding must be
collected as a fee from owners and operators of Title V sources and
must be sufficient to cover the cost of the Title V permit program,
including: granting/denying permits; enforcing permits; emissions
and ambient monitoring; preparing regulations and guidance; and
modeling and tracking emissions. 42 U.S.C. § 7661a(b)(3)(A)(i)-
(vi).
At the time of interim approval, the EPA identified as a
deficiency Texas’ failure to provide the four-year estimate. See
60 Fed. Reg. at 30044. Texas subsequently provided a four-year
estimate of costs and its projection that fee revenues would exceed
these costs. Texas estimated average annual costs of $34.3 million
and revenues of $36.8 million for the four-year projection period.
Petitioners maintain that Texas has not corrected the
deficiency because: this estimate includes an anticipated fee
increase in 2003 (from $26 to $30 per ton) that the Texas agency
staff stated it would recommend to the Commissioners of the Texas
Natural Resources Conservation Commission; and, although costs of
26
the program will increase, Texas has not budgeted for additional
staff.
i.
Regarding the proposed increase, the EPA responds that it had
no reason to believe an increase would not be adopted. Moreover,
it notes that, if for some reason Texas did not adopt the
recommended increases, it could then issue an NOD. This
determination was not arbitrary or capricious.
ii.
Regarding Petitioners’ assertion that the Texas agency faces
a significant amount of work in the next few years which will
increase costs, the EPA notes that Texas provided a spreadsheet
identifying permitting tasks, the number of permitting actions in
each category, and the number of staff members required to complete
the tasks. It questioned Texas concerning certain items and was
satisfied with Texas’ explanations. This was not arbitrary or
capricious.
3.
In sum, because the EPA’s interpretation of these CAA
provisions is a reasonable, and thus permissible, interpretation of
the statute and because the EPA’s determination that Texas
corrected interim deficiencies was not arbitrary and capricious,
Petitioners fail in their challenge to the EPA’s decision to fully
approve Texas’ program.
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B.
In the alternative, Petitioners challenge the EPA’s failure to
issue an NOD to the Texas program for its failure to satisfy
regulatory requirements regarding: (1) public participation; (2)
source monitoring and reporting; (3) enforcement authority; and (4)
the timely issuance of permits.
As described supra:
Whenever the Administrator makes a
determination that a permitting authority is
not adequately administering and enforcing a
program, or portion thereof, in accordance
with the requirements of this subchapter, the
Administrator shall provide notice to the
State....
42 U.S.C. § 7661a(i)(1). Upon issuance of an NOD, sanctions may be
imposed; and, if the State does not correct the deficiencies within
18 months, the EPA is required to take over and administer the
program. 42 U.S.C. § 7661a(i)(4).
Petitioners contend that essentially the same deficiencies
that should have prevented full approval obligated the EPA to issue
an NOD. (As noted, the EPA did issue an NOD for some, but not all,
issues requested by Petitioners.) The EPA asserts it has
discretion under the CAA to determine whether Texas’ commitment to
address the EPA’s concerns excused the need for a formal NOD.
Petitioners insist that the EPA was not entitled to rely on an
informal commitment by the State to address the deficiencies but
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was required by the CAA to utilize the formal NOD procedure because
it concluded Texas’ program was deficient.
In other words, the parties dispute whether § 502(i) obligates
the EPA to issue an NOD whenever it is made aware of deficiencies
(even minor ones) in a State’s permitting program or whether the
EPA has discretion to determine whether to engage its formal
enforcement mechanism.
Petitioners point out that the use of the word “shall”
suggests the EPA has no discretion. On the other hand, this is
preceded by, “[w]henever the Administrator makes a determination
[that a program is not being adequately administered]” — language
which clearly grants discretion. As the Second Circuit noted:
Presumably, Congress could have fashioned a
regime under which, for example, an interested
party could initiate the process leading to a
determination of whether “a permitting
authority is adequately administering and
enforcing a program.” Congress, however, took
a different path. Because the determination
is to occur whenever the EPA makes it, the
determination is necessarily discretionary.
New York Pub. Interest Research Group, 321 F.3d at 331 (emphasis
added). See also City of Seabrook v. Costle, 659 F.2d 1371, 1374
(5th Cir. Unit A 1981) (statutory authority to make finding of
violation creates discretionary duty to make findings when
violation is alleged). While the CAA requires the EPA to issue an
NOD when it has determined that a program is not being adequately
administered or enforced, this “nondiscretionary obligation arises
29
only after a discretionary determination by the EPA”. New York
Pub. Interest Research Group, 321 F.3d at 331 (emphasis added).
Under the APA, an agency’s decision not to invoke an
enforcement mechanism provided by statute is not typically subject
to judicial review. See 5 U.S.C. § 701(a)(2); Heckler v. Chaney,
470 U.S. 821, 832 (1985) (“[A]n agency’s decision not to take
enforcement action should be presumed immune from judicial review
under § 701(a)(2)”).
The presumption against judicial review of
such refusal avoids entangling courts in a
calculus involving variables better
appreciated by the agency charged with
enforcing the statute and respects the
deference often due to an agency’s
construction of its governing statutes....
New York Pub. Interest Research Group, 321 F.3d at 331; see also
Heckler, 470 U.S. at 831-2 (“[A]n agency decision not to enforce
often involves a complicated balancing of a number of factors which
are peculiarly within its expertise.... [T]he agency is far better
equipped than the courts to deal with many of the variables
involved in the proper ordering of its priorities.”).
The presumption against judicial review may be rebutted if the
statute “circumscribes agency enforcement discretion, and has
provided meaningful standards for defining the limits of that
discretion”, Heckler, 470 U.S. at 834-35. Such standards are not
present in this portion of Title V. The only limitation on the
EPA’s power in this context, contained in CAA § 502(i), 42 U.S.C.
30
§ 7661a(i), is that it must issue an NOD when it determines a
program is being inadequately administered. Here, the EPA has
concluded to the contrary, leaving us nothing to review.
The clear language of CAA § 502(i), 42 U.S.C. § 7661a(i),
undisputably grants the EPA the authority to initiate the NOD
process when it deems doing so appropriate. In other words,
Congress left the decision whether, and when, to issue an NOD “to
the institutional actor best equipped to make it”. New York Pub.
Interest Research Group, 321 F.3d at 332. Accordingly, the EPA’s
decision not to issue an NOD for the four grounds raised by
Petitioners is not subject to our review.
III.
For the foregoing reasons, the petitions for review are
DENIED.
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