United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued March 23, 2001 Decided June 8, 2001
No. 99-1268
Appalachian Power Company, et al.,
Petitioners
v.
Environmental Protection Agency,
Respondent
Commonwealth of Pennsylvania,
Department of Environmental Protection, et al.
Intervenors
Consolidated with
99-1270, 99-1274, 99-1276, 99-1277, 99-1279,
99-1280, 99-1281, 99-1286, 99-1287, 00-1169,
00-1187, 00-1189, 00-1190, 00-1191, 00-1192,
00-1194
On Petitions for Review of an Order of the
Environmental Protection Agency
---------
Norman W. Fichthorn argued the cause for the Industry
Petitioners on the Electric Generating Facility Issues. With
him on the briefs were Andrea Bear Field, James D. Elliott,
Mel S. Schulze, David M. Flannery, Kathy G. Beckett, Gale
R. Lea, Scott D. Goldman, and Jeff F. Cherry. Kyle W.
Danish entered an appearance.
Marc D. Bernstein, Assistant Attorney General, State of
North Carolina, argued the cause for the Petitioning States.
With him on the briefs were Michael F. Easley, Attorney
General, James C. Gulick and J. Allen Jernigan, Special
Deputy Attorneys General, James P. Longest, Jr. and Amy
R. Gillespie, Assistant Attorneys General, Betty D. Montgom-
ery, Attorney General, State of Ohio, Bryan F. Zima, Assis-
tant Attorney General, Bill Pryor, Attorney General, State of
Alabama, Tommy E. Bryan and Prudence A. Cash-Brown,
Assistant Attorneys General, Jennifer Granholm, Attorney
General, State of Michigan, Alan F. Hoffman, Assistant
Attorney General, Charles M. Condon, Attorney General,
State of South Carolina, Samuel L. Finklea and Thomas G.
Eppink, Attorneys, Mark L. Earley, Attorney General, Com-
monwealth of Virginia, Roger L. Chaffe, Senior Assistant
Attorney General, Stewart T. Leeth, Assistant Attorney Gen-
eral, and Thomas H. Zerbe, Senior Counsel, State of West
Virginia.
Theodore L. Garrett argued the cause for the Split State
Petitioners Kansas City Power & Light Company, et al.
With him on the briefs were Michael D. Hockley and Terry
W. Schackman.
Scott H. Segal argued the cause for the Non-Electric
Generating/Industrial Petitioners. With him on the briefs
were Lisa M. Jaeger, Charles S. Carter, Deborah Ann Hotel,
Kathy G. Beckett and Scott Goldman.
Andrew J. Doyle, Attorney, U.S. Department of Justice,
argued the cause for respondent. With him on the brief were
Lois J. Schiffer, Assistant Attorney General, and Sara
Schneeberg, Attorney, U.S. Environmental Protection Agen-
cy.
Robert A. Reiley and M. Dukes Pepper, Jr. were on the
brief of Intervenor Commonwealth of Pennsylvania. Thomas
Y. Au entered an appearance.
Before: Edwards, Chief Judge, Williams and Sentelle,
Circuit Judges.
Opinion for the Court filed by Circuit Judge Sentelle.
Sentelle, Circuit Judge: This case involves multiple chal-
lenges to "Technical Amendments" to the "NOx SIP Call"
rulemaking at issue in Michigan v. EPA, 213 F.3d 663 (D.C.
Cir. 2000), cert. denied, 121 S.Ct. 1225 (2001). At issue here
are revisions to the database used to establish state "budgets"
for emissions of nitrogen oxide ("NOx") which are regulated
by the Environmental Protection Agency ("EPA") under the
Clean Air Act ("CAA"). Petitioners include upwind states
subject to the NOx SIP Call and industries located therein.
The Commonwealth of Pennsylvania intervenes in support of
the EPA.
We hold that petitioners' challenges to the EPA's growth
factors are neither time-barred nor estopped by principles of
res judicata. On the merits, we remand the EPA's growth
factors for electric generating units for the same reasons as
in Appalachian Power Co. v. EPA, Nos. 99-1200, et al. (May
15, 2001). The remaining claims in the various petitions for
review are denied with two exceptions. We remand the
EPA's source definitions pending completion of further rule-
makings in accordance with Michigan, and remand and va-
cate the NOx emission budget for the state of Missouri as the
EPA continues to include portions of the state for which no
significant contribution findings have been made.
I. Background
A. Relevant Facts
In October 1998, the EPA issued the "NOx SIP Call"--a
final rule under CAA section 110(k)(5), 42 U.S.C. s 7410(k)(5),
requiring 22 states and the District of Columbia ("upwind
states") to revise their State Implementation Plans ("SIPs")
to impose additional controls on NOx emissions. See Finding
of Significant Contribution and Rulemaking for Certain
States in the Ozone Transport Assessment Group Region for
Purposes of Reducing Regional Transport of Ozone, 63 Fed.
Reg. 57,356 (Oct. 27, 1998) ("NOx SIP Call"). The EPA
concluded that emissions from the upwind states "contribute
significantly" to ozone nonattainment in downwind states, in
violation of CAA section 110(a)(2)(D)(i). 42 U.S.C.
s 7410(a)(2)(D)(i). Under the SIP Call, upwind states are
required to reduce NOx emissions by the amount accomplish-
able by "highly cost-effective controls," defined as those
controls capable of removing NOx at a cost of $2,000 or less
per ton.
Under the NOx SIP Call, each upwind state must limit its
summertime NOx emissions to a statewide emission "budget"
for the year 2007. "The budgets represent the amount of
allowable NOx emissions remaining after a covered state
prohibits the NOx amount contributing significantly to down-
wind nonattainment." Michigan, 213 F.3d at 686. Specifical-
ly, the NOx state budgets represent the EPA's projection for
what NOx emissions in 2007 would be for each state were
"highly cost-effective controls" implemented. Under the NOx
SIP Call, states have substantial flexibility in selecting combi-
nations of emission control measures to meet their respective
budgets, so long as they do so by the regulatory deadline.
In setting the NOx budgets, the EPA relied upon emission
inventory data collected by the Ozone Transport Assessment
Group, a working group comprised of federal, state, industry,
and environmental group representatives. See Findings of
Significant Contribution and Rulemaking on Section 126 Peti-
tions for Purposes of Reducing Interstate Ozone Transport,
64 Fed. Reg. 28,250, 28,253 (May 25, 1999); Michigan, 213
F.3d at 672. The EPA divided each state's NOx emissions
according to five source types or "sectors": electric generat-
ing units ("EGUs"), non-EGU stationary sources (such as
industrial boilers), area sources (smaller stationary sources),
highway mobile sources, and nonroad mobile sources. The
EPA calculated 2007 budget allocations for each sector. Un-
der the NOx SIP Call, the EPA assumed that emission
reductions would occur primarily in the EGU and non-EGU
sectors, representatives of which are petitioners here. In
developing their SIPs, however, states are free to achieve
emission reductions from other sources, so long as the SIP
provides for attainment of the requisite emission reduction
level.
To calculate the EGU emission budgets, the EPA obtained
source-specific "utilization" (heat-input) data for either 1995
or 1996. To this baseline, the EPA applied "growth factors"
derived from growth projections for the years 2001 through
2010 generated by the "Integrated Planning Model" ("IPM"),
a widely used utility planning model. Even though the EPA
had 2007 utilization projections from the IPM, the EPA
instead opted to apply the 2001-2010 growth factors to pro-
ject growth over the 1996-2007 period in each state. The
resulting 2007 emission projections were then reduced based
on the EPA's estimate of the amount of emission reductions
that could be achieved through "highly cost-effective" means.
The resulting 2007 budgets are at issue in this case.
On March 3, 2000 this Court upheld the bulk of the EPA's
NOx SIP Call. See Michigan, 213 F.3d 663. Relevant to
this case, we specifically upheld the EPA's ability to set state-
specific NOx budgets. At the same time, this Court remand-
ed the regulatory definition of EGU because the EPA failed
to provide an adequate explanation. This Court also partially
vacated and remanded the SIP call as it applied to Missouri
because the EPA included portions of Missouri in the SIP call
with no evidence that these areas contributed to downwind
nonattainment.
At the same time that it promulgated the NOx SIP Call,
the EPA also proposed a Federal Implementation Plan
("FIP") that would impose direct emission controls on EGUs
and non-EGUs in any state that failed to implement an
adequate SIP by the regulatory deadline--May 31, 2004. In
January 2000, the EPA also mandated specific NOx emission
controls on EGUs and non-EGUs in upwind states in re-
sponse to petitions filed by eight Northeastern states under
section 126 of the CAA. 42 U.S.C. s 7426. Both the FIP
and the section 126 rule seek NOx reductions in accordance
with the NOx budgets established for the NOx SIP Call, as
amended by the rules challenged in this case. Earlier this
year, this Court upheld the EPA's section 126 rule in most
respects, though some portions of that rule relevant to this
case were remanded to the EPA for additional consideration.
See Appalachian Power Co. v. EPA, Nos. 99-1200, et al. (May
15, 2001).
B. The Technical Amendments
In the final SIP Call rule promulgated on October 27, 1998,
the EPA reopened public comment on the accuracy of data
upon which the emission inventories and budgets were based.
See NOx SIP Call, 63 Fed. Reg. at 57,427. On December 24,
the EPA extended the comment period "for emission invento-
ry revisions to 2007 baseline sub-inventory information used
to establish each State's budget in the NOx SIP Call," and
further explained that it was seeking comment on the rele-
vant data and assumptions so the agency could correct errors
and update information used to compute the 2007 budgets.
See Correction and Clarification to the Finding of Significant
Contribution and Rulemaking for Purposes of Reducing Re-
gional Transport of Ozone, 63 Fed. Reg. 71,220 (Dec. 24,
1998) ("SIP Call Correction"). The EPA also announced that
it would reopen the comment period on equivalent inventory
data for the FIP and section 126 rulemakings as well because
all three rules relied upon the same inventories. Id.
Following this rulemaking, the EPA published two "Techni-
cal Amendments" ("TAs") revising the SIP Call NOx emission
budgets. In the first TA published May 14, 1999 ("May 1999
TA"), the EPA made some modifications to source-specific
emissions data, as well as to the 2007 baseline inventories.
Technical Amendment to the Finding of Significant Contribu-
tion and Rulemaking for Certain States for Purposes of
Reducing Regional Transport of Ozone, 64 Fed. Reg. 26,298
(May 14, 1999). In the second Technical Amendment publish-
ed March 2, 2000 ("March 2000 TA"), the EPA made addi-
tional "corrections" based upon additional public comments it
received and the EPA's own internal review of the accuracy
of its data and calculations. Technical Amendment to the
Finding of Significant Contribution and Rulemaking for Cer-
tain States for Purposes of Reducing Regional Transport of
Ozone, 65 Fed. Reg. 11,222 (Mar. 2, 2000). The EPA also
explained that the March 2000 TA was "necessary to make
the NOx SIP Call inventory consistent with the inventory
adopted" by the EPA in the final section 126 rule, as the two
rules were to be based upon the same inventory. Id. The
EPA also made "corrections to the growth rates of many non-
EGU sources" because it had "misapplied" these growth rates
in the May 1999 TA "version of the budget." Id. at 11,223.
These changes altered the 2007 baselines for some source
categories and some states.
II. Industry Petitioners--Electric Generating Issues
A. EGU Growth Factors
Industry Petitioners challenge the lawfulness of the NOx
emission budgets as set forth in the TAs, specifically, the
particular "growth factors" the EPA used to project future
utilization rates for EGUs in 2007. Petitioners allege that the
EPA's reliance upon these growth factors was arbitrary and
capricious because the growth factors were unsupported and
in conflict with state-based growth estimates. Petitioners
further contend that the EPA arbitrarily failed to determine
whether the resulting emission budgets could be achieved in a
cost-effective manner. Other petitioners raise similar chal-
lenges to the TAs. Before turning to the merits of these
arguments, we must first address several jurisdictional issues
raised by the EPA. Specifically, the EPA claims that peti-
tioners' claims are time barred and precluded by our Michi-
gan decision under principles of res judicata and collateral
estoppel.1
__________
1 The EPA's alternative claim that this Court should stay consid-
eration of these issues pending resolution of Appalachian Power
Co. v. EPA, Nos. 99-1200, et al. (May 15, 2001), is obviously moot.
1. Statute of Limitations
The EPA contends that petitioners' objections to the EGU
growth factor determinations are not properly before this
Court because they were resolved in the underlying NOx SIP
Call rulemaking, not in the TA proceeding. Therefore, the
growth factors were subject to challenge in Michigan, and
not here. The EPA outlined and finalized its method for
determining state emission budgets, including the use of
growth factors, in the NOx SIP Call rulemaking. See NOx
SIP Call, 63 Fed. Reg. at 57,405-39. The EPA argues that
under CAA section 307(b)(1), 42 U.S.C. s 7607(b)(1), petition-
ers had sixty days from the publication of the SIP Call in the
Federal Register to challenge the EPA's final growth factor
determinations. By these lights, petitioners may not chal-
lenge the growth factors because they did not raise their
challenges within sixty days of publication of the SIP Call.
In October 1998, the EPA reopened comment on "the
source-specific data used to establish each State's budget."
NOx SIP Call, 63 Fed. Reg. at 57,427. However, the EPA
maintains petitioners' claims are precluded because it did not
explicitly invite comments on growth rate methodology. In
other words, the EPA argues that it undertook the TA
rulemakings for the purpose of ensuring the accuracy of the
EPA's data inputs, and not to reconsider prior methodological
determinations, such as how to construct growth factors and
how to use those growth factors in determining 2007 emission
budgets. According to the EPA, "[c]omments related to the
use of growth factors in determination of State budgets" were
addressed "in the context of the final NOx SIP call." May
1999 Response to Comments at 47. Therefore, the agency
pleads, petitioners' growth factor arguments are time-barred
under National Ass'n of Reversionary Property Owners v.
Surface Transportation Board, 158 F.3d 135, 141 (D.C. Cir.
1998) ("NARPO") ("If NARPO's reopening theory does not
apply, we are without jurisdiction to consider NARPO's due
process claim.").
The TA proceedings are not as clear cut as the EPA
maintains, nor are our precedents so restrictive. The initial
TA rulemaking invited comment on both the source-specific
emission data used to calculate state budgets and the "2007
baseline sub-inventory information." NOx SIP Call, 63 Fed.
Reg. at 57,493. As the EPA recognizes, the 2007 baseline
sub-inventory information is nothing more than the product of
growth factors and the source-specific emission data used to
calculate state budgets. See SIP Call Correction, 63 Fed.
Reg. at 71,223 (noting that 2007 baseline inventory "is based
on the universe of sources in the 1995 inventory and a growth
factor ..." (emphasis added)). Therefore, insofar as the
EPA reopened comment on the 2007 baselines, it would seem
that the EPA reopened comment on the growth factors in
addition to the source-specific emission data used to calculate
state budgets. While the EPA did not reopen comment on
the broader issues of its authority to impose NOx emission
budgets on states, it did open comment on the budgets
themselves. Insofar as the agency was ambiguous on this
point, that only further supports petitioners' argument that
the growth factor issue was reopened. See NARPO, 158 F.3d
at 142 ("Ambiguity in an NPRM may also tilt toward a
finding that the issue has been reopened.").
Even accepting that the EPA did not explicitly reopen
growth factors for public comment, this does not preclude
petitioners' claim. Under Public Citizen v. NRC, "whether
an agency has in fact reopened an issue" is dependent upon
"the entire context of the rulemaking including all relevant
proposals and reactions of the agency," and not just on the
agency's stated intent. 901 F.2d 147, 150 (D.C. Cir. 1990).
Thus, "if an agency's response to comments 'explicitly or
implicitly shows that the agency actually reconsidered the
rule, the matter has been reopened.' " Panamsat Corp. v.
FCC, 198 F.3d 890, 897 (D.C. Cir. 1999) (citation omitted).
The EPA claims that the growth factors were completely
settled for the purposes of the NOx SIP Call by the time the
TA rulemaking began in October 1998. Yet this claim is
difficult to square with the EPA's purported justification for
the TA rulemakings--specifically to conform the emission
inventories of the NOx SIP Call and section 126 rules. The
TA rulemaking began in October 1998, but the first section
126 rule was not final until May 1999. Thus, if the EPA was
sincere in seeking to use the TA rulemaking to conform the
emission inventories of the two rules, then the EPA's various
growth factor methodologies must have been open for com-
ment for the purposes of the NOx SIP Call as they were
subject to revision in the section 126 rulemaking at least up
until the close of that proceeding.
Where a rulemaking notice is ambiguous "and could fairly
be read to 'suggest [ ] that the search for harmony might lead
to the rethinking of old positions' " this Court has "found that
the earlier decision was reopened." NARPO, 158 F.3d at 142
(citation omitted). This is an apt description of what hap-
pened here. Therefore, insofar as there are problems with
section 126 inventories and budgets, the EPA implicitly gave
petitioners an opportunity to identify the equivalent problems
with the NOx SIP Call inventories and budgets when the
EPA opened the TA rulemaking for the purpose of conform-
ing the inventories for the two rules.
2. Res Judicata and Collateral Estoppel
Res judicata "bars relitigation not only of matters deter-
mined in a previous litigation but also ones that a party could
have raised." NRDC v. Thomas, 838 F.2d 1224, 1252 (D.C.
Cir. 1988) (emphasis in EPA brief). Collateral estoppel fur-
ther bars parties from relitigating issues of law or fact
resolved in prior cases between those parties. Securities
Indus. Ass'n v. Bd. of Governors, 900 F.2d 360, 363 (D.C. Cir.
1990) ("When a court determines an issue of fact or law that
is actually litigated and necessary to its judgment, that
conclusion binds the same parties in a subsequent action.").
As the growth factor determinations were made as part of the
NOx SIP Call, the EPA maintains that petitioners should
have presented any challenge to the growth factors in Michi-
gan, where "there were actual legal and factual challenges on
budget and growth-related topics" and where "nearly all" of
the petitioners here were represented. Brief for Respondent
EPA at 24-25.
Petitioners' challenges are based upon the emission inven-
tories and budgets laid out in the TAs. As such, they present
issues not litigated in Michigan. Though it is true that
petitioners could have challenged the EPA's growth factor
methodologies in that litigation, we hold here that the EPA
reopened comment on that issue. Just as it would be absurd
for the EPA to argue that res judicata and collateral estoppel
would preclude review had the EPA decided to change its
growth factor methodologies in response to invited comments,
so too is it absurd for the EPA to argue here that res
judicata and collateral estoppel preclude review of its deci-
sion not to change in response to those same invited com-
ments.
3. Merits
On the merits, Industry Petitioners allege that the EPA's
emission budget determinations for EGUs are arbitrary and
unsupported on several grounds. First, they maintain that
the 2007 emission baselines reflect the unrealistic assump-
tions that utilization growth will be linear. Second, they
question the EPA's use of IPM-generated 2001-2010 growth
rates to estimate growth over the 1996-2007 period. Third,
they claim the EPA's reliance upon the growth factors result-
ed in unrealistic utilization estimates. For example, 1998
utilization rates in some states, such as Michigan and West
Virginia, are greater than the 2007 baselines estimated by the
EPA.
Petitioners contend that the arbitrariness of the growth
factors is compounded by the fact that more representative
growth estimates were available. In conducting its cost-
effectiveness analysis, the EPA used the IPM to generate
growth assumptions for 1996-2001, as well as to generate
state-by-state EGU utilization estimates for 2007. Yet the
EPA did not use this data for the purpose of developing its
growth factors for the 2007 baseline, and it offered no reason-
able explanation for its choice. Even if the EPA finds on
remand that its choice was the better one, failure to "examine
the relevant data and articulate a satisfactory explanation for
its action" either is arbitrary decisionmaking or at least
prevents a court from finding it non-arbitrary. Motor Vehicle
Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29,
43 (1983).
We confronted nearly identical challenges to the EPA's use
of growth factors to estimate baseline NOx emissions for 2007
in the section 126 litigation. See Appalachian Power Co. v.
EPA, Nos. 99-1200, et al. (May 15, 2001). Although the NOx
SIP Call covers more states than the section 126 rule, the
EPA's methodological choices and explanations (or lack there-
of) were the same. Therefore, we see no reason to depart
from our conclusions in that litigation.
There is no question that "[a]gency determinations based
upon highly complex and technical matters are 'entitled to
great deference.' " Id., slip op. at 32 (quoting Public Citizen
Health Research Group v. Brock, 823 F.2d 626, 628 (D.C. Cir.
1987)). The EPA has "undoubted power to use predictive
models," such as the IPM, but it must "explain the assump-
tions and methodology used in preparing the model" and
"provide a complete analytic defense" should the model be
challenged. Small Refiner Lead Phase-Down Task Force v.
EPA, 705 F.2d 506, 535 (D.C. Cir. 1983) (citations and inter-
nal quotation marks omitted). "Given the highly deferential
standard of review applied to such questions, and the EPA's
clear authority to rely upon computer models in place of
inconsistent, incomplete, or unreliable empirical data, the
Agency's decision to rely upon the IPM, rather than the
projections offered by individual states, was not arbitrary and
capricious." Appalachian Power Co., slip op. at 34. Howev-
er, this Court cannot excuse the EPA's reliance upon a
methodology that generates apparently arbitrary results par-
ticularly where, as here, the agency has failed to justify its
choice.
In the case at hand, the EPA adopted a particular method-
ology to estimate EGU utilization rates in 2007 that generat-
ed seemingly implausible results, such as a negative growth
forecast for some states in the coming decade. The EPA
adopted this methodology without offering any reasoned ex-
planation for its choice. The EPA's decision not to use the
IPM projections for 2007 that were used to estimate the cost-
effectiveness of emissions controls may well have been rea-
sonable. So too may have been the EPA's choice to rely upon
IPM projections for the 2001-2010 period in order to gener-
ate a growth factor for the 1996-2007 period. However,
there is no way for us to tell because the EPA never offered
an explanation. Merely asserting that the choice was "rea-
sonable" is not enough.
As we held in the section 126 litigation, so too here:
the EPA has not fully explained the bases upon which it
chose to use one set of growth-rate projections for costs
and another for budgets, nor has it addressed what
appear to be stark disparities between its projections and
real world observations. "With its delicate balance of
thorough record scrutiny and deference to agency exper-
tise, judicial review can occur only when agencies explain
their decisions with precision, for 'it will not do for a
court to be compelled to guess at the theory underlying
the agency's action ...' " American Lung Ass'n v.
EPA, 134 F.3d 388, 392 (D.C. Cir. 1998) (quoting SEC v.
Chenery Corp., 332 U.S. 194, 196-97 (1947)). As a result,
we have no choice but to remand the EPA's EGU growth
factor determinations so that the agency may fulfill its
obligation to engage in reasoned decisionmaking on how
to set EGU growth factors and explain why results that
appear arbitrary on their face are, in fact, reasonable
determinations.
Id. at 37-38.
4. Cost-Effectiveness
Industry Petitioners make the additional argument that the
EPA failed to find the 2007 budgets achievable at the $2,000/
ton significant-contribution cut-off established in the NOx
SIP Call rule. Essentially, petitioners contend that the bud-
gets the EPA analyzed for cost-effectiveness purposes were
different from the emission budgets imposed on the states.
This argument is without merit. The emission budget levels
themselves are based upon reductions deemed by the EPA to
be cost-effective. In the case of EGUs, the EPA concluded
that an average emissions rate of 0.15 lb/mmBtu could be
achieved at a cost of less than $2000/ton. NOx SIP Call, 63
Fed. Reg. at 57,399-403. Thus, insofar as the EPA properly
generates, and adequately explains, estimated 2007 utilization
rates, it need not repeat its cost-effectiveness analysis.
B. Significant Contribution
Industry petitioners also allege that the TAs are arbitrary
because they rely upon emission inventories that are substan-
tially different from those that were used to make the initial
"contribution" findings for the NOx SIP Call. Essentially,
petitioners argue that because the TAs changed the underly-
ing state emission inventories and budgets, thereby altering
the relative contributions of upwind states to downwind non-
attainment, the EPA was obligated to reevaluate its "signifi-
cant contribution" findings for each of the affected states.
For example, the TAs decreased the 2007 baseline emissions
for West Virginia, an upwind state, and increased baseline
emissions for New York, a downwind state. Due to this
change, petitioners contend, the EPA could not continue to
assume that West Virginia contributes to New York nonat-
tainment without additional analysis.
It is black-letter administrative law that "[a]bsent special
circumstances, a party must initially present its comments to
the agency during the rulemaking in order for the court to
consider the issue." Tex Tin Corp. v. EPA, 935 F.2d 1321,
1323 (D.C. Cir. 1991) (citing Eagle-Picher Indus. v. EPA, 822
F.2d 132, 146 (D.C. Cir. 1987)). Generalized objections to
agency action or objections raised at the wrong time or in the
wrong docket will not do. "An objection must be made with
sufficient specificity reasonably to alert the agency." Id. An
agency cannot be faulted for failing to address such issues
that were not raised by petitioners. Petitioners waived their
argument, and can cite no "special circumstances" to justify
their waiver.
Petitioners are able to cite no comments that were in the
relevant docket that raise the significant contribution issue.
For example, petitioners note that the West Virginia Manu-
facturers Association argued that "[i]f EPA has in fact made
adjustments to the inventories, we believe that this would
dramatically affect the modeled impact of the contribution of
upwind states and sources to downwind ozone nonattain-
ment." The problem is that this document was submitted to
the dockets for the section 126 and FIP rulemakings, and was
not part of the TA rulemaking. Petitioners do cite other
documents which were part of the relevant rulemaking, but
these documents do not address the significant contribution
argument. This is insufficient; notice does not operate by
osmosis. Having failed to raise their concern in the relevant
agency docket, petitioners could perhaps have cured their
waiver by seeking reconsideration before the EPA, but they
did not. Thus, petitioners waived their argument that the
EPA was required to revisit its significant contribution find-
ings.
III. State Petitioners
State Petitioners echo many of the arguments addressed
above. Their claims are unique insofar as they object to the
EPA's imposition of "erroneous projections of their economic
growth" on states through the NOx SIP Call. Joint Brief of
Petitioning States at 4. The State Petitioners' primary com-
plaint is with the EPA's reliance upon the IPM to generate
state-by-state growth rates without promulgating a mecha-
nism to review these projections based upon actual growth
rates. Petitioning states contend that the EPA's projections
underestimate actual growth in some affected states, but the
EPA refused to address this concern in the TA rulemaking.
While the EPA acknowledged some inconsistency between
IPM growth projections and those provided by individual
states, the EPA rejected the claim that the states' projections
are inherently more reliable. State Petitioners claim that it
was unreasonable for the EPA to reach this conclusion with-
out conducting any analysis of the state projections.
State Petitioners aver that deference to the EPA's findings
in this area is unwarranted because deference is only due
within an agency's area of expertise. See NRDC v. EPA, 194
F.3d 130, 136 (D.C. Cir. 1999). Were the EPA making
environmental projections, they concede, deference would be
warranted. Since, however, the growth projections are es-
sentially economic projections, this Court should give the
EPA no more deference "than it would to the agency's
predictions of 2007 interest rates or the level of the Dow
Jones Index." Joint Brief of Petitioning States at 10 (citing
Montana v. EPA, 137 F.3d 1135, 1141 (9th Cir. 1998)). While
the EPA has authority to impose emission limits on states,
they argue, it does not have the authority to regulate a state's
economic growth. Insofar as the EPA has done this through
its growth projections, it has adopted an "overly broad"
reading of the CAA that "usurps States' sovereign power to
manage their own economic growth." Id. at 12.
The EPA raises the same untimeliness arguments dis-
cussed above. See infra Part II.A.1-2. We reject them for
the same reasons. However, insofar as the State Petitioners
seek relief beyond that which is provided above, their com-
plaints are not well taken. The EPA has sufficient discretion
to use the IPM model in the first instance even if states
believe that some other state-specific modeling is more accu-
rate. When it comes to these sorts of technical matters, the
EPA is entitled to great deference. See Environmental
Action, Inc. v. FERC, 939 F.2d 1057, 1064 (D.C. Cir. 1991)
("[I]t is within the scope of the agency's expertise to make
such a prediction about the market it regulates, and a reason-
able prediction deserves our deference notwithstanding that
there might also be another reasonable view."). "[I]t is only
when the model bears no rational relationship to the charac-
teristics of the data to which it is applied that we will hold
that the use of the model was arbitrary and capricious."
Appalachian Power Co. v. EPA, 135 F.3d 791, 802 (D.C. Cir.
1998).
"That the EPA's projections depend, in large part, on
economic projections, rather than environmental factors,
makes little difference." Appalachian Power Co. v. EPA,
Nos. 99-1200, et al. (May 15, 2001), slip op. at 34. Congress
has delegated to the EPA the power to set emissions limits
under the Clean Air Act. Merely because this requires the
selection and utilization of complex computer models to fore-
cast future emissions does not change the standard with
which we evaluate the agency's actions, so long as the agen-
cy's actions are, as here, confined to those technical issues
that must be resolved for the agency intelligently to address
the matters over which Congress has given it authority. See
generally id.; Small Refiner Lead Phase-Down Task Force
v. EPA, 705 F.2d 506, 535 (D.C. Cir. 1983). State Petitioners'
hyperbolic suggestion that the EPA's choice of industry fore-
casting models is tantamount to stock market forecasting is
simply absurd.
Similarly, that the EPA's selection of a computer model
and forecasting methodology results in the imposition of
emission controls on states that crimp economic growth does
not change the underlying analysis. In Michigan, this Court
squarely upheld the EPA's authority to establish state-
specific NOx budgets against a claim that such authority
impermissibly intrudes on the statutory rights of states to
select their own emission control policies in the first instance.
Michigan v. EPA, 213 F.3d 663, 686-87 (D.C. Cir. 2000).
Acknowledging this point, State Petitioners seek to argue
that the Michigan holding somehow left open the claim that
the EPA's authority to set state emission budgets did not
entail authority to make the state-specific growth projections
upon which such emission budgets are inevitably based. This
is a distinction without a meaningful difference. Given the
regulatory structure created by the Clean Air Act, the former
authority clearly encompasses the latter, notwithstanding
State Petitioners' veiled appeals to federalism principles.
For these reasons, we hold that State Petitioners are not
entitled to any relief beyond that which is entailed by re-
manding the growth factor determinations for further pro-
ceedings in response to Industry Petitioners' claims.
IV. Non-Electric Generating Facility Issues
Non-Electric Generating Petitioners ("Non-EGU Petition-
ers") make two additional arguments against the EPA's TAs
to the NOx SIP Call. First, petitioners allege that the EPA
modified its methodology for calculating budgets for non-
EGUs in its final rule without providing non-EGUs with
adequate notice of the change. Second, Non-EGU Petition-
ers claim that insofar as the EPA's emission budgets for
Non-EGUs rely upon the source definitions remanded in
Michigan v. EPA, they are contrary to law and must be
remanded here as well, if not vacated in their entirety. We
conclude that the EPA's misapplication of non-EGU growth
factors constituted little more than clerical error, which the
EPA corrected without additional notice and comment.
While petitioners erroneously challenge the characterization
of the error as clerical, they do not challenge the power of the
EPA to correct clerical errors, compare Utility Solid Waste
Activities Group v. EPA, 236 F.3d 749 (D.C. Cir. 2001), and
we do not address that issue. The petitioners are therefore
not entitled to vacatur. However, petitioners are correct that
the EPA continues to rely upon source definitions that were
issued without adequate notice and comment and remanded
in Michigan. Therefore, we remand the source definitions
here as well.
A. Notice
The EPA began the budget-setting process with incomplete
data on emission sources upon which to base its 2007 projec-
tions. The EPA also began the process relying on one set of
growth factors, Non-EGU Petitioners charge, but then sub-
stituted other factors. The constant changes to the EPA's
methodology, "combined with the virtual inaccessibility of the
files containing the growth factors," made it impossible for
affected parties to determine whether the EPA's calculations
were reasonably accurate. Joint Brief of Non-Electric Gen-
erating/Industrial Petitioners at 6. As the aggregate non-
EGU budget changed over time, petitioners allege the EPA
did not maintain a consistent explanation for these revisions.
In the May 1999 TA, the EPA said that a fourteen percent
increase in the aggregate non-EGU budget was due to source
reclassifications. May 1999 TA, 64 Fed. Reg. at 26,299. In
the March 2000 TA, however, it claimed that the budget
change was due to the EPA's prior misapplication of the
proper growth factors. Rather than consistently modify its
estimates, Petitioners attest that the EPA should have ex-
plained how the growth factors were misapplied and specifi-
cally sought comment from affected parties. In failing to do
so, it disregarded regulated entities' rights to notice and
comment. Even if providing such opportunity to comment
would have delayed SIP implementation, Non-EGU Petition-
ers argue that this would not authorize the EPA to deprive
regulated entities of their rights to notice and comment.
The EPA responds that Non-EGU Petitioners allege no
more than a harmless procedural error. See 5 U.S.C. s 706
(instructing courts to take "due account ... of the rule of
prejudicial error."). The EPA merely adjusted inventory
data to fix clerical errors to ensure conformity between the
various rules. Petitioners had ample opportunity to comment
and yet have failed to identify "a single source that has not
been able to determine the growth factor assigned to it."
Brief for Respondent EPA at 42. The EPA readily admits
that it did not announce the correction of its previous misap-
plication of non-EGU growth factors until the March 2000
TA. Insofar as Non-EGU Petitioners challenge specific
changes in the Non-EGU portion of emission budgets, we
agree with the EPA. The record suggests that the changes
complained of here were little more than fixes to technical
errors, and not the sort of modifications that evince a change
in policy or methodology. Therefore, this portion of the
petition for review is denied. Petitioners' entreaty at oral
argument that their notice challenge was tantamount to an
unintelligible rulemaking challenge is likewise denied, as it
came too late.
B. Source Definitions
Non-EGU Petitioners further challenge the EPA's reliance
upon regulatory definitions of EGUs and non-EGUs that
were remanded by this Court in Michigan. There, we found
that the EPA changed the definition of "EGU" in the final
NOx SIP Call rule without providing sufficient notice and
opportunity to comment. Michigan, 213 F.3d at 692. The
altered definition reclassified some non-EGUs as EGUs.
This is significant because the EPA assumed that EGUs can
reduce more NOx emissions cost effectively, on a percentage
basis, than can non-EGUs. The EPA maintains that a new
source definition rulemaking is imminent, see Brief for Re-
spondent EPA at 51 ("EPA is, in fact, presently reconsidering
its EGU definition and intends to issue a proposed rule in the
near future, perhaps as early as December 2000."). However,
as of oral argument, a year had passed since the Michigan
remand and the EPA had yet to initiate new administrative
proceedings on source definitions.
Non-EGU Petitioners maintain that the EPA's continued
reliance on the remanded source definitions requires remand-
ing and vacating the TAs in their entirety because the EPA
cannot accurately apply growth factors and calculate state
budgets until source categories are final. The EPA contends
that Non-EGU Petitioners seek more relief here than they
were afforded in Michigan. As the EPA notes, we did not
vacate the budgets or any other portion of the NOx SIP Call
in Michigan. Instead, we left the budgets in place while
EPA reconsidered a handful of narrow issues, including the
proper delineation of what constitutes an EGU. It seems
that Non-EGU Petitioners are entitled to the same relief
here-no more and no less. Therefore, because the "EPA did
not provide sufficient notice and opportunity to comment for
its redefinition of EGUs," 213 F.3d at 693, we remand this
portion of the rulemaking to the EPA for further consider-
ation in light of this opinion and that in Michigan.
V. Missouri ("Split-State Petitioners")
A group of Missouri utilities and the City of Independence,
Missouri ("Split-State Petitioners") argue that the Technical
Amendments are unlawful insofar as they establish a budget
for the state of Missouri. In Michigan, this Court vacated
and remanded the NOx SIP Call insofar as it applied to
Missouri because the EPA's Missouri NOx budget was "calcu-
lated on the basis of hypothesized cutbacks from areas that
have not been shown to have made significant contributions."
213 F.3d at 684. Specifically, the EPA set a NOx emission
budget for the entire state of Missouri, even though the
computer models upon which the EPA relied only included
the eastern portion of the state. Before requiring a state or
portion thereof to control emissions that make a "significant"
contribution to downwind nonattainment, we held the EPA
"must first establish that there is a measurable contribu-
tion." Id. at 683-84 (emphasis in original). Where the
agency's own data "inculpate part of a state and not another,
EPA should honor the resulting findings." Id. at 684.
Even though the NOx emission budget for Missouri was
vacated and remanded in Michigan, the EPA included Mis-
souri's budget in the TAs. It is undisputed that insofar as
the TAs include a statewide Missouri emission budget they
are unlawful under Michigan. The only real dispute between
Split-State Petitioners and the EPA is on the proper remedy
for EPA's failure to address the Michigan holding.
Split-State Petitioners contend that this court must vacate
the entire Missouri budget, covering the budget for the "1-
hour" ozone standard as well as the "8-hour" ozone standard
at issue in American Trucking Ass'ns v. EPA, 175 F.3d 1027,
reh'g granted in part and denied in part, 195 F.3d 4 (D.C.
Cir. 1999), rev'd in part sub nom. Whitman v. American
Trucking Ass'ns, 121 S. Ct. 903 (2001). The EPA prefers a
more limited remand. In Michigan, this Court vacated the
budget for the 1-hour standard, but stayed addressing the
applicability of the 8-hour standard to the NOx SIP Call, at
the EPA's request, due to the pendency of the American
Trucking litigation. Michigan, 213 F.3d at 671. On this
basis, we only resolved issues involving the EPA's 1-hour
ozone standard, leaving issues related to the 8-hour standard
until another day.
Because we did not consider 8-hour issues in Michigan, the
EPA suggests, we should only vacate and remand Missouri's
budget under the 1-hour standard and stay consideration of a
statewide Missouri budget under the 8-hour standard pend-
ing completion of litigation. In other circumstances, we
might be inclined to offer the more modest remedy the EPA
suggests. After all, the EPA is simply asking that the
judgment in this case mirror that in Michigan, and that this
Court stay consideration of the 8-hour basis for Missouri's
budget until such time as the stay on the 8-hour standard is
lifted. Were there reason, any reason, to believe that the
EPA could justify a statewide Missouri budget based upon
existing record evidence, this would be a prudent step. As it
happens, the record and briefing in Michigan addressed both
standards, and the EPA offered no evidence that would
suggest western Missouri contributes significantly to down-
wind nonattainment of any ozone standard. The EPA as-
serts that "it is entirely possible that the EPA's record could
support including Missouri in the SIP Call under the 8-hour
standard and assigning it a budget." Brief for Respondent
EPA at 49. However, the EPA does not dispute that it has
never modeled western Missouri sources under any standard.
In other words, it is undisputed that the EPA has no more
analytical basis for setting a statewide Missouri NOx budget
under the 8-hour standard than it did for the 1-hour stan-
dard, for which it had no analytical basis at all. While there
may be areas for which the EPA could, with existing data and
analysis, justify setting an emission budget for purposes of
the 8-hour standard, but not for purposes of the 1-hour
standard, western Missouri is not among them.
So long as any statewide NOx budget remains in place,
Split-State Petitioners and other entities potentially subject
to emission controls in western Missouri must operate under
the cloud of potential future controls. Therefore, we find it
prudent to vacate and remand the TAs insofar as they include
a budget for Missouri under any ozone standard. While we
vacate and remand the statewide Missouri budget, it should
be clear that we take this step only upon the record proffered
to date. As noted above, the EPA concedes that it has never
conducted the analyses that would be required to impose a
statewide budget for Missouri. Should the agency ever con-
duct such analyses and, for instance, model the contribution
of facilities located in western Missouri to downwind nonat-
tainment of the 8-hour standard, it is quite possible that such
a budget could be justified. This decision should be read
neither to endorse nor to preclude such action. If the EPA
some day decides to impose a statewide NOx budget for
Missouri, that decision will be evaluated on its own merits at
that time.
VI. Conclusion
In accordance with the above, we remand the EPA's EGU
growth factors as well as the source definitions challenged by
Non-EGU Petitioners. We further remand and vacate the
NOx emission budget for Missouri. With respect to all other
issues, including those not discussed expressly herein, the
petitions are denied.