Home » Case Summaries » 2015 » Association of Irritated Residents v. U.S. Environmental Protection Agency, 790 F.3d 934 (9th Cir. 2015)

 
 

Association of Irritated Residents v. U.S. Environmental Protection Agency, 790 F.3d 934 (9th Cir. 2015)

 

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In this case, the Association of Irritated Residents (AIR) filed a petition for review in the Ninth Circuit Court of Appeals. AIR challenged the United States Environmental Protection Agency’s (EPA)[1] promulgation of 40 C.F.R. § 52.245 under section 110(k)(6) of the Clean Air Act (CAA)[2]on two grounds. First, AIR alleged that EPA’s determination that EPA had mistakenly approved certain New Resource Review rules in 2004 as part of California’s State Implementation Plan (SIP) was not reasonable. Second, AIR alleged that, even assuming EPA’s error determination was reasonable, the measure that EPA used to correct the error was outside the scope of EPA’s statutory authority under the CAA. The Ninth Circuit denied the petition, finding that EPA did not act arbitrarily or capriciously in its error determination because EPA gave adequate consideration to relevant factors and arrived at a rational conclusion. The Ninth Circuit analyzed EPA’s interpretation of section 110(k)(6) of the CAA under the Chevron[3] two-step, and found that EPA’s interpretation was permissible.

Under the CAA, states have the primary responsibility to develop emission limits.[4] This responsibility involves creating a SIP,[5] which sets out how the state intends to achieve the National Ambient Air Quality Standards (NAAQS) set by EPA at levels necessary to protect the public health and welfare.[6] The state then submits the SIP to EPA for approval. Before EPA can accept a SIP, the state must give EPA necessary assurances that state law authorizes the air control districts to carry out the SIP.[7] Once the SIP is accepted it has “the force and effect of federal law.”[8] In this case, California delegated its responsibility to the San Joaquin Valley Unified Air Pollution Control District (the District).

In 1977, Congress enacted the CAA’s New Source Review (NSR) program.[9]At the time, California had a law exempting agricultural operations, both major and minor, from NSR obligations. A major source is a source that emits above a threshold level of any air pollutant. The NSR added a requirement that new and modified major sources in nonattainment areas must, among other things, acquire NSR construction permits and purchase offset credits.[10] This additional requirement does not extend to minor sources.[11] In 2004, EPA designated the San Joaquin Valley as a nonattainment area, triggering the NSR’s requirement that major sources acquire NSR permits and purchase offset credits. Because California’s agricultural exemption was now in conflict with the NSR requirements, any SIP the District proposed to EPA would be rejected because the District could not give the requisite necessary assurances that it could carry out an SIP under California state law.

In order to resolve this conflict California passed SB 700,[12]which required major sources to acquire NSR permits and purchase offset credits, but exempted minor sources from the permit and offset requirements. At around the same time SB 700 was passed, the District proposed and approved its 2004 NSR Rules, which required NSR permits and offset requirements for major and minor sources. AIR then filed lawsuits against minor sources for their noncompliance of the District’s newly approved 2004 NSR Rules. In defense, these minor sources contended they were following applicable state law under SB 700. Ultimately, a district court granted summary judgment to AIR because the minor sources had violated the 2004 NSR Rules.[13] EPA then realized its error in approving the 2004 NSR Rules. To resolve the conflict between the 2004 NSR Rules and SB 700, California submitted SIP revisions in 2010 to amend the 2004 NSR Rules retroactively. However, to eliminate the mismatch between the SIP and state law that had existed between the 2004 approval and the 2010 amendments, EPA relied on section 110(k)(6) of the CAA, and proposed amending its 2004 NSR Rules approval to be consistent with SB 700. AIR then filed this lawsuit challenging EPA’s error determination and EPA’s error-correcting method under section 110(k)(6). AIR requested that the Ninth Circuit vacate the proposed amendment, 40 C.F.R. § 52.245. The Ninth Circuit reviewed EPA’s error determination under an arbitrary or capricious standard. The Ninth Circuit reviewed EPA’s interpretation of section 110(k)(6) under the Chevron two-step analysis.

With this background in mind, the court first considered whether EPA acted arbitrarily or capriciously, abused its discretion, or contradicted the CAA in finding it had made an error. The parties’ dispute centered on differing interpretations of SB 700’s offset provision and savings clause provision. Because the court determined these provisions were ambiguous, the court looked to whether EPA’s interpretation of these provisions was reasonable. The court noted that if EPA’s interpretation was reasonable, that interpretation would govern.

EPA interpreted the offset provision of SB 700 to apply to both offset credits and SIP credits. This interpretation was based in large part on the California Attorney General’s interpretation of the statute, which AIR had requested EPA seek. The Attorney General read the statute’s language as exempting minor sources because “real, permanent, quantifiable, and enforceable emission reductions” referred to the CAA’s offset credit.[14] AIR contended that the offset provision of SB 700 only applied to SIP credits and EPA’s interpretation was unreasonable on two grounds. First, AIR argued that since EPA had approved SIP credits for emission reductions for minor sources, EPA could not argue that SB 700 exempted minor sources from SIP credits. The court rejected this argument, noting that EPA’s interpretation required both SIP credits and offset credits to be issued. Evidence of only SIP credits being issued was not enough. Second, AIR argued that the court should not defer to the Attorney General’s interpretation and cited two cases in support.[15] The court rejected this argument, distinguishing the two cases on the grounds that they were facial challenges to statutes requiring judicial review rather than review of an agency’s interpretation of a statute. In addition, the court noted that other Circuits have concluded that EPA’s reliance on an attorney general’s interpretation of a state law is appropriate.[16] Accordingly, EPA’s interpretation of the offset provision of SB 700 was reasonable.

The Savings Clause in SB 700 stated that “[a]ny district rule or regulation affecting stationary sources on agricultural operations adopted on or before January 1, 2004, is applicable to an agricultural source.”[17] AIR contended that the savings clause preserved the District’s authority to apply the 2004 NSR Rules to minor agricultural sources. EPA argued that the savings clause was limited to a preservation of the District’s authority to regulate newly labeled agricultural sources under SB 700’s new definition of agriculture. In addition, EPA did not believe that the savings clause limited a district’s authority, but concluded that other provisions of the SB 700 might. This interpretation was, once again, based in large part on the California Attorney General’s interpretation of SB 700. The court ultimately found that it was reasonable for EPA to rely on the Attorney General’s interpretation.

Finally, the court noted that EPA’s desire to correct the 2004 approval was not arbitrary and that EPA properly considered the purpose and structure of the CAA. EPA’s role as enforcer of the NAAQS is secondary to the state’s responsibility for developing a SIP to achieve the NAAQS. Because California had a blanket exemption for agricultural sources from the CAA’s NSR requirements prior to the enactment of SB 700, it was likely that California intended some exemptions to continue in its new SIP. Therefore, the court accepted EPA’s interpretation of SB 700, and held EPA was reasonable in its error determination.

The second issue the court considered was whether EPA had the authority under section 110(k)(6) of the CAA to correct the error in the way that it did. For EPA to correct an error, section 110(k) requires EPA to determine it has made an error and then revise that error “in the same manner as the approval, disapproval, or promulgation . . . as appropriate without requiring further submissions from the State.”[18] Because the court had already determined that EPA was reasonable in finding an error, the court focused on each party’s interpretations of two key phrases in the statutory language: “in the same manner” and “appropriate.” To resolve whose interpretation to adopt, the court conducted the Chevron two-step analysis.

AIR argued that the phrase “in the same manner” limits EPA’s error-correcting actions to either an approval or disapproval of a state submitted plan because those were the only actions available to EPA when it was presented with the SIP. EPA countered that “in the same manner” refers to procedural processes, and only requires EPA to use the same process as used to approve the 2004 NSR Rules into the SIP. The court first noted that the statute was silent on the meaning of “in the same manner,” and so the court would defer to EPA’s interpretation so long as it was reasonable. In finding that EPA’s interpretation was reasonable, the court made three observations. First, EPA’s interpretation of “in the same manner” as referencing procedural processes was consistent with the context of the statute because the same subsection contains two other procedural requirements. Second, EPA’s interpretation was reasonable because EPA has always interpreted “in the same manner” as referring to procedure. Third, the United States Supreme Court found that the phrase “in the same manner” refers to procedure in the context of the Affordable Care Act.[19] Because EPA’s interpretation was reasonable, the court accepted EPA’s interpretation of “in the same manner.”

AIR also argued that “appropriate” does not allow EPA to promulgate regulation to amend or limit a SIP sua sponte, and that the method EPA could use to error correct was limited to those actions enumerated in section 110(k). EPA argued that section 110(k)(6) both allowed EPA to error correct sua sponte and to use actions beyond those enumerated in section 110(k). Because the statue was silent on the meaning of appropriate, the court noted that it would defer to EPA’s interpretation so long as it was reasonable. The court found EPA’s interpretation reasonable for four reasons. First, EPA’s chosen method of error correcting was selected only after considering alternatives such as retroactive disapproval. Second, EPA considered each action listed in section 110(k) and found that none of these methods would appropriately remedy the situation.[20] Third, EPA’s interpretation respected state law. In the wake of the lawsuits following the 2004 NSR Rules, California submitted new NSR Rules adopting the explicit limitations from SB 700. By correcting the SIP to reflect these changes, EPA respected California’s role in achieving NAAQS. Fourth, it was reasonable to understand Congress’s amending section 110(k) to add section 110(k)(6) as giving the agency authority to act in ways not enumerated in section 110(k). Because the interpretation was reasonable, the court accepted EPA’s interpretation of appropriate.

In sum, the court held that EPA reasonably determined it had made an error in approving the District’s 2004 NSR Rules. The court also held EPA had authority under section 110(k)(6) of the CAA to correct its error in the way it had chosen. Accordingly, the court denied AIR’s petition for review.

 

 

 

Footnotes    (↵ returns to text)

  1. Respondent-intervenors included Air Coalition Team, Dairy Cares, Foster Farms, LLC, Foster Poultry Farms, and San Joaquin Valley Unified Air Pollution Control District.
  2. 42 U.S.C. §§ 7401–7671q (2012). Section 110(k)(6) is codified at 42 U.S.C. § 7410(k)(6) (2012).
  3. Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 842–43 (1984).
  4. 42 U.S.C. § 7407(a) (2012).
  5. Id.
  6. Id. § 7409.
  7. Id. § 7410(a)(2)(E).
  8. Safe Air for Everyone v. U.S. Envtl. Prot. Agency, 488 F.3d 1088, 1091 (9th Cir. 2007) (internal quotation marks and citation omitted).
  9. Clean Air Act Amendments of 1977, Pub. L. No. 95-95, § 129, 91 Stat. 685, 745–51 (codified as amended at 42 U.S.C. §§ 7501–7508 (2012))
  10. A nonattainment area is an area designated by the EPA that does not meet the EPA-set pollutant level. 42 U.S.C. § 7407(d)(1)(A)(i) (2012).
  11. See id. § 7502(c)(5) (only requiring permits for major sources).
  12. Act of Sept. 22, 2003, 2003 Cal. Legis. Serv. ch. 479 (West) (codified at scattered sections of Cal. Health & Safety Code).
  13. Ass’n of Irritated Residents v. C & R Vanderham Dairy, No. 1:05-CV-01593 OWW SMS, 2007 WL 2815038, at *22 (E.D. Cal. Sept. 25, 2007).
  14. Cal. Health & Safety Code § 42301.18(c) (West 2013)).
  15. Virginia v. Am. Booksellers Ass’n, 484 U.S. 383 (1988); Maldonado v. Harris, 370 F.3d 945 (9th Cir. 2004).
  16. Def. of Wildlife v. U.S. Envtl. Prot. Agency, 415 F.3d 1121, 1124 (10th Cir. 2005); Ohio Envtl. Council v. U.S. Envtl. Prot. Agency, 593 F.2d 24, 28 (6th Cir. 1979).
  17. Act of Sept. 22, 2003, 2003 Cal. Legis. Serv. ch. 479, sec 2, § 39011.5(3)(b) (West) (codified at Cal. Health & Safety Code § 39011.5(3)(b) (West 2013)).
  18. CAA, 42 U.S.C. § 7410(k)(6) (2012).
  19. Patient Protection and Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119 (2010) (codified as amended in scattered sections of 25, 26, and 42 U.S.C.); Nat’l Fed’n of Indep. Bus. v. Sebelius, 132 S. Ct. 2566, 2583–84 (2012).
  20. Partial approval or disapproval would be inappropriate because NSR Rules are not separable. Limited approval or disapproval would be inappropriate because it would incorporate the entire rule into the SIP and not eliminate the mismatch. Conditional approval or disapproval would be inappropriate because it would not retroactively correct the mistake. A SIP call for plan revisions pursuant to 42 U.S.C. § 7410(k)(5) (2012) would also be inappropriate because it would not retroactively correct the mistake.
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