Home » Case Summaries » 2011 » Montana Sulphur & Chemical Co. v. United States Environmental Protection Agency, 666 F.3d 1174 (9th Cir. 2012)


Montana Sulphur & Chemical Co. v. United States Environmental Protection Agency, 666 F.3d 1174 (9th Cir. 2012)



Petitioner, Montana Sulphur & Chemical Company (Montana Sulphur), brought separate suits challenging several steps taken by the United States Environmental Protection Agency (EPA) to promulgate regulations governing sulfur dioxide (SO2) emissions under the Clean Air Act (CAA)[1] to assure attainment and maintenance of national ambient air quality standards (NAAQS) through enforceable emissions limitations.[2] The United States Court of Appeals for the Ninth Circuit consolidated the suits on appeal. In the first, Montana Sulphur sought review of EPA’s final rule partially disapproving a proposed revision to the state implementation plan (SIP) for Montana (State) governing SO2, and of a review of a prior EPA action (SIP Call) preceding the formal SIP revision. In the second, Montana Sulphur sought review of EPA’s April 2008 final rule promulgating a final implementation plan (FIP) for the State’s SO2 emissions. The Ninth Circuit concluded that EPA did not act arbitrarily or capriciously in its actions regarding either the SIP or FIP and thus denied both petitions for review.

Each suit arose from a long-standing dispute surrounding regulations governing emissions from industrial facilities located near Billings, Montana. Montana Sulphur operates a plant northeast of Billings that recovers 95–98% of sulfur from nearby refineries as a marketable product. The remaining sulfur is emitted in the form of SO2, a highly reactive gas and known cause of acid rain. In 1978, EPA concluded that the Billings area met the primary standards for SO2.[3] In 1980, EPA approved the State’s SIP for attaining and maintaining SO2 NAAQS in the Billings area.[4] Subsequent monitoring, however, showed individual “exceedances” of SO2 levels, which remained fairly constant throughout the 1980s.

In 1990, the City of Billings (City) hired a contractor to conduct dispersion modeling for the Billings area, which revealed potential violations of federal SO2 standards. In 1991, another firm performed dispersion modeling and found results similar to the 1990 modeling. In 1992, EPA advised the Montana Department of Health and Environmental Services (MDHES) that the SIP did not adequately regulate emissions in the area and needed revision. MDHES notified the City in turn.

In 1993, EPA issued a formal SIP Call because the existing SIP was “substantially inadequate” to attain and maintain NAAQS.[5] EPA asked MDHES to submit revisions within 18 months, and MDHES submitted several revisions to EPA between 1996 and 2000. In 2002 and 2003, EPA took final action,[6] approving most of the SIP, but disapproving certain aspects of the SIP that directly affected Montana Sulphur, including: (1) the attainment demonstration; (2) the emission limits regarding Montana Sulphur’s 100-meter stack and its corresponding stack height credit; and (3) the emission limits for Montana Sulphur’s 30-meter and auxiliary vent stacks.

In the first case, Montana Sulphur petitioned the Ninth Circuit for review of EPA’s May 2, 2002 SIP action. The Ninth Circuit stayed the action pending EPA’s promulgation of a FIP to remedy the SIP pursuant to its authority under section 7401(c) of the CAA.[7] In the second case before the Ninth Circuit, Montana Sulphur challenged the timeliness of EPA’s 2008 FIP, as well as the FIP’s limits on flares, and the feasibility of flare monitoring technologies required by the FIP. The Ninth Circuit reviewed EPA’s decision to approve or disapprove a SIP, as well as EPA’s promulgation of a FIP, for arbitrariness and capriciousness under the CAA.[8] The court reviewed issues of statutory construction pursuant to Chevron deference.[9] The court also noted that it would afford EPA considerable deference in the interpretation of EPA regulations,[10] as well as in the evaluation of complex scientific data within EPA’s area of expertise.[11]

The Ninth Circuit first addressed Montana Sulphur’s challenges to the SIP Call. As a threshold matter, the court evaluated whether Montana Sulphur’s challenges were justiciable since a SIP Call is not a final agency action[12] and, accordingly, does not yet require any specific obligations from Montana Sulphur. The court concluded that the challenges were not ripe at the time the SIP Call occurred because Montana Sulphur had not suffered “actual or imminent” injury that would suffice for standing.[13] However, the court noted that Montana Sulphur filed its petition for review after EPA issued its partial disapproval of the SIP—a final agency action. The validity of that SIP disapproval was predicated on validity of the SIP Call initiating it. As a result, the court concluded that because a successful challenge to the SIP Call (not a final agency action) would necessarily invalidate the SIP disapproval (a final agency action), Montana Sulphur’s challenge of the SIP Call was justiciable at this time.

Having found Montana Sulphur’s challenges to the SIP Call justiciable, the Ninth Circuit moved on to the merits of the petitioner’s challenge. Montana Sulphur first argued that EPA exceeded its authority by issuing a SIP Call when the Montana SIP was not “substantially inadequate to attain or maintain” the SO2 NAAQS, and had also met all statutory requirements of a SIP.[14] Montana Sulphur further argued that EPA could not depend upon predicted violations of NAAQS that employed dispersion modeling that assumed worst-case scenarios.

The Ninth Circuit rejected these arguments because EPA did not ignore actual SO2 monitoring data when it issued the SIP Call, and EPA had explicitly dealt with the results and explained the modeling’s shortcomings. The EPA had further clarified that it was impractical to conduct actual monitoring given the complexity of SO2 sources, and that the data it collected prior to the Call came from a monitoring network on just a few sites that were not located in areas of maximum concentration. Furthermore, in its partial disapproval of the SIP in 2002, EPA had explained that actual monitoring is no more accurate than modeling.[15]

In reaching its conclusion, the court also relied on the CAA, which expressly acknowledges modeling as an adequate regulatory tool.[16] Furthermore, while Montana Sulphur argued that the 1990 amendments to the CAA illustrate that Congress intended to eliminate the use of modeling, the court cited legislative history providing that EPA may rely on any available “sound data” and “may rely on modeling or statistical extrapolation” where appropriate and necessary.[17] Thus, the Ninth Circuit concluded that EPA did not act arbitrarily or capriciously by relying on predictive modeling to make the SIP Call in 1993.

The court next addressed Montana Sulphur’s various challenges to the 2002 partial disapprovals of the State’s revised SIP. Montana Sulphur first argued that EPA’s stack height calculation was illogical for several reasons. The court noted that Congress adopted 42 U.S.C. § 7423 to regulate the use of tall stacks.[18] The court observed that while a raised pollution source lowers ground-level concentrations of pollution, it spreads around the pollution rather than actually reducing it.

The court then reviewed EPA’s formulas for calculating stack height, which restrict a source from receiving credit for a stack height that is higher than a Good Engineering Practice (GEP) figure.[19] The court explained that EPA regulations provide for three possible avenues for calculating GEP stack height. In the SIP, the State had approved a modeling demonstration for Montana Sulphur’s 100-meter stack under one of these options, but EPA rejected the State’s calculations and insisted that another option, resulting in a height of 65 meters, was the correct calculation. Montana Sulphur constructed a 100-meter high flue stack after the 1993 SIP Call. EPA later concluded the stack should only be 65 meters, and Montana Sulphur disagreed with several steps in the process that led EPA to this conclusion.

First, Montana Sulphur challenged EPA’s rejection of the State’s fluid modeling calculation of GEP stack height. EPA justified its decision by asserting that the SIP did not actually require Montana Sulphur to meet the new source performance standards (NSPS) emission rate.[20] Montana Sulphur contended that NSPS may not be used as a substantive emissions limit because EPA regulations state that the “allowable emission rate to be used in making demonstration[]” shall be prescribed by the NSPS.[21] 

The Ninth Circuit rejected Montana Sulphur’s position because EPA’s interpretation of its regulation was reasonable and “allowable emissions” is a term of art that refers to enforceable emissions limitations. Furthermore, EPA noted that if NSPS was merely a modeling assumption that regulated entities were not presumptively required to meet, that would obviate the NSPS regulations that allow sources to demonstrate that the NSPS emissions rate is “infeasible.”[22] Finally, the court noted that EPA’s interpretation was consistent with the preamble to EPA stack height regulations[23] as well as precedent from the United States Court of Appeals for the District of Columbia Circuit.[24] Accordingly, the Ninth Circuit concluded that it was neither arbitrary nor capricious for EPA to require the SIP to include NSPS limits consistent with the modeling demonstration.

Montana Sulphur next argued that section 51.100(kk)(1) permitted the use of Montana’s emission rates (MAAQS) as benchmarks for ambient air quality. Montana Sulphur noted that the broad language of the regulation—”an ambient air quality standard”—did not require the standard to be a NAAQS.[25] EPA insisted that only NAAQS should apply. The court found the language of the regulation itself to be ambiguous, but noted that the preamble to regulation spoke exclusively in terms of NAAQS with regard to stack height. The court found that EPA’s interpretation was not only reasonable, but was consistent with the purpose of 42 U.S.C. § 7423—to ensure that states from setting inadequate standards. Acknowledging the regulatory ambiguity, the court deferred to EPA’s judgment in technical matters and found that EPA did not act arbitrarily or capriciously in rejecting Montana’s stack height credit calculation.

Montana Sulphur next challenged EPA’s decision to partially disapprove the revised SIP due to the SIP’s failure to include numerical emissions limits on flares.[26] The revised SIP imposed a “best practice” work standard in lieu of numerical emissions limits. Under EPA’s regulations, a proposed SIP “must demonstrate that the measures, rules, and regulations contained in it are adequate to provide for the timely attainment and maintenance of the national standard that it implements.”[27] In this case, Montana had shown that the control strategies in the SIP would attain the NAAQS when combined with numerical limits on flare. But the court noted that the SIP itself did not contain those additional flare limits. Accordingly, the court agreed with EPA’s partial disapproval of the SIP for a failure to include flare emissions limitations. Especially where the SIP relies on emissions limits to demonstrate attainment, EPA could reasonably require those limits to actually appear in the SIP.

Additionally, Montana Sulphur challenged EPA’s disapproval of the SIP limitations on Montana Sulphur’s five auxiliary vent stacks and 30-meter stack. Despite the numerical limit on SO2 emissions from these stacks, EPA rejected the limit because it failed to control the sulfur content of fuel burned, and the SIP lacked monitoring methods to actually enforce the limit. The court concluded that EPA reasonably insisted that the State include monitoring measures to ensure that this limit was enforceable, especially where the State relied upon those limits in the SIP for attainment demonstration.

The court next addressed Montana Sulphur’s challenges to EPA’s final rule promulgating the FIP to fill perceived gaps in the SIP. Montana Sulphur first argued that EPA lacked authority to promulgate a FIP under 42 U.S.C. § 7410(c) because it failed to act within two years of its partial disproval. While the court identified the “explicit deadline” set out in the section, it noted that the United States Supreme Court has refused to treat this requirement as a strict jurisdictional limit that precludes later action.[28] The court further supported its conclusion by pointing to the CAA, which provides remedies for EPA inaction. Accordingly, the Ninth Circuit held that the failure to act within two years does not “utterly deprive” EPA of authority to promulgate the FIP.[29]

Montana Sulphur next argued that EPA acted arbitrarily and capriciously by placing numerical limits on flare emissions during startup, shutdowns, and maintenance (SSM) for several reasons: such an infeasible limit would certainly be violated; the limit is inconsistent with EPA’s history of exempting flaring during SSM; the limit is based on unsupported state modeling; the court should not defer to EPA’s internal excess emissions policy (EEP); and enforcement discretion does not compensate for infeasible requirements.

The court first observed that EPA must provide for NAAQS attainment at all times and adopted such a policy as early as 1993. EPA also clarified in a 1999 EEP that while there are no “outright exemptions” for SSM, states may “adopt an affirmative defense to penalties for unforeseeable and unavoidable exceedances.”[30] The court then found that the FIP in question had such an affirmative defense and that other circuits have endorsed EPA’s position that the CAA requires continuous compliance, including during SSM.[31] EPA recognized that regulated entities would inevitably violate this rule, but that the provision of an affirmative defense, combined with a judicious exercise of enforcement discretion would resolve those problems. The court held that because EPA had specifically promulgated an affirmative defense in its FIP, facilities would know what the requirements necessary to establish an infeasibility defense. As a result, the Ninth Circuit concluded that EPA reasonably interpreted the CAA to require continuous limits on emissions and that the actual numerical limits imposed by the FIP were not arbitrary and capricious.

Montana Sulphur next argued that EPA acted arbitrarily and capriciously by requiring installation of flare monitoring technology that exists only in pilot testing. While the court agreed that the monitoring technology was in pilot testing at the time of the FIP, it also observed that EPA revised the FIP to allow other methods to determine total sulfur concentration. The court thus concluded that Montana Sulphur had alternate approaches to measure sulfur and that Montana Sulphur failed to identify to any evidence on the record that such alternate means were technically infeasible.

Next, Montana Sulphur contended that EPA acted arbitrarily and capriciously by imposing fixed emissions limits on Montana Sulphur, but granting variable emissions limits to a nearby power plant and refinery. EPA explained that fixed emissions limits were easier to model, monitor, and enforce,[32] were used at virtually every other source in the country,[33] offered a reasonable explanation for why EPA selected a different type of emissions limit than the State had chosen, and addressed concerns about the State’s use of variable limits.[34] Accordingly, the court concluded that it was not arbitrary or capricious for EPA to select a different type of emissions limits than the State.

Montana Sulphur next argued that EPA acted arbitrarily and capriciously by imposing emissions limits and monitoring requirements for Montana Sulphur’s auxiliary stacks and 30-meter stack. In the FIP, EPA adopted the State’s mass emissions limits imposed in the SIP and added monitoring requirements to ensure compliance with the limits. The court found that it was reasonable for EPA to use the State’s original emissions limitations for consistency because they were part of the State’s overall control strategy supporting attainment, and EPA’s modeling assumption simplified monitoring and compliance for Montana Sulphur. Thus, the court concluded that specific emissions limits and monitoring requirements EPA imposed in the FIP, based on revised emission models and that allow Montana Sulphur to use existing technology, were not arbitrary or unreasonable.

The Ninth Circuit quickly dismissed Montana Sulphur’s next argument that EPA had acted arbitrarily or capriciously in using the 65-meter figure in the FIP. The court observed that it already concluded that EPA properly rejected Montana’s calculated stack height credit in the SIP and that it was proper to use the 65-meter figure instead.

Montana Sulphur next claimed that EPA acted arbitrarily and capriciously because the FIP failed to recognize that, in the time between SIP disapproval (2002) and FIP implementation (2006–2008), several regulated entities entered into consent decrees and agreed to permit changes which effectively reduced their emission limits. EPA gave three reasons why it did not consider those events. First, the purpose of the FIP was to fill gaps in Montana’s SIP, and Montana never revised its SIP to reflect those changes. Second, emissions limits necessary to achieve attainment must be federally enforceable and be pre-approved by EPA. This is accomplished by reflecting changes in the SIP or FIP, not by consent decrees with a “limited lifespan,” or with facility-specific permits conditions that a state may change without EPA approval. Finally, the emissions limits in the consent decrees and permit actions were substantively inconsistent with the three-hour and calendar-day averaging times of the NAAQS. The court found EPA’s position justified due to the specific procedures for SIP approval or disapproval and EPA’s responsibility to promulgate a FIP when the SIP is inadequate.

Finally, Montana Sulphur argued that EPA acted arbitrarily and capriciously because the FIP employed an outdated modeling method, the Industrial Source Complex (ISC), which was the preferred model at the time the State proposed its SIP. The court noted that EPA revised its Guidelines on Air Quality Models in 2005 to recommend a new dispersion model, but grandfathered ISC models for one year. However, EPA continued to defend its use of the ISC dispersion model in the final FIP in April 2008. The court concluded that EPA’s continued use of ISC modeling was not arbitrary or capricious because the FIP replaced only the limited portions EPA had disapproved, since using a different model may have yielded results inconsistent with the rest of the SIP.

In summary, the Ninth Circuit found that EPA did not act arbitrarily or capriciously or abuse its discretion by making the SIP Call, disapproving portions of the revised SIP, or promulgating the requirements set forth in the FIP. Thus, the Ninth Circuit denied Montana Sulphur’s petitions for review in both cases.

[1]Clean Air Act, 42 U.S.C. §§ 7401–7671q (2006).

[2]42 U.S.C. §§ 7407(a), 7410(a)(2)(A) (2006).

[3]Air Quality Control Regions, Criteria, and Control Techniques: Attainment Status Designations, 43 Fed. Reg. 40,412 (Sept. 11, 1978) (codified at 40 C.F.R. pt. 81).

[4]Final Rulemaking on Approval of the Montana State Implementation Plan, 45 Fed. Reg. 2,034 (Jan. 10, 1980) (codified at 40 C.F.R. pt. 52).

[5]Approval and Promulgation of State Implementation Plans; Call for Sulfur Dioxide SIP Revisions for Billings/Laurel, MT, 58 Fed. Reg. 41,430 (proposed Aug. 4, 1993) (codified at 40 C.F.R. pt. 52).

[6]Approval and Promulgation of Air Quality Implementation Plans; Montana; Billings/Laurel Sulfur Dioxide State Implementation Plan, 67 Fed. Reg. 22,168 (May 2, 2002) and 68 Fed. Reg. 27,908 (May 22, 2003) (codified at 40 C.F.R. pt. 52).

[7]42 U.S.C. § 7410(c) (2006).

[8]Id. § 7607(d)(9)(A)–(C).

[9]Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842–43 (1984).

[10]Wickland Oil Terminals v. Asarco, Inc., 792 F.2d 887, 891–92 (9th Cir. 1986).

[11]Envtl. Def. Ctr., Inc. v. U.S. Envtl. Prot. Agency, 344 F.3d 832, 869 (9th Cir. 2003).

[12]See Bennett v. Spear, 520 U.S. 154, 177–78 (1997) (describing the two conditions that must be satisfied for agency action to be ‘‘final’’).

[13]See Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. Inc., 528 U.S. 167, 180–81 (2000) (“[T]o satisfy Article III’s standing requirements, a plaintiff must show (1) it has suffered an ‘injury in fact’ that is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical; (2) the injury is fairly traceable to the challenged action of the defendant; and (3) it is likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.”).

[14]See Clean Air Act, 42 U.S.C. § 7410(a)(2) (2006) (outlining the minimum statutory requirements of a SIP).

[15]67 Fed. Reg. 22,168, 22,185 (May 2, 2002) (codified at 40 C.F.R. pt. 52).

[16]42 U.S.C. § 7410(a)(2)(K)(i) (2006).

[17]S. Rep. No. 101-228, at 15 (1989), reprinted in 1990 U.S.C.C.A.N. 3385, 3401.

[18]See Sierra Club v. U.S. Envtl. Prot. Agency, 719 F.2d 436, 441 (D.C. Cir. 1983) (discussing the congressional intent of 42 U.S.C § 7423).

[19]GEP calls for “the height necessary to ensure that emissions from the stack do not result in excessive concentrations of any air pollutant in the immediate vicinity of the source as a result of atmospheric downwash, eddies and wakes which may be created by the source itself, nearby structures or nearby terrain obstacles[.]” 42 U.S.C. § 7423(c) (2006).

[20]67 Fed. Reg. at 22,209.

[21]40 C.F.R. 51.100(kk)(1) (2011).


[23]Stack Height Regulation, 50 Fed. Reg. 27,892, 27,898 (July 8, 1985) (codified at 40 C.F.R. pt.51).

[24]See Natural Res. Def. Council, Inc. v. Thomas, 838 F.2d 1224, 1241 (D.C. Cir. 1988).

[25]40 C.F.R. 51.100(kk)(1) (2011) (emphasis added).

[26]Flares are incineration devices that capture gases released by equipment that are most often used in emergency situations but also during routine startup, shutdown and maintenance.

[27]40 C.F.R. § 51.112(a) (2010).

[28]Barnhart v. Peabody Coal Co., 537 U.S. 149, 158 (2003).

[29]See Nat’l Petrochemical & Refiners Ass’n v. U.S. Envtl. Prot. Agency, 630 F.3d 145, 155–56 (D.C. Cir. 2010) (holding that where Congress is silent on the effect of EPA’s delay in promulgating revised regulations, there is not a presumption that Congress intended EPA would lose authority to act).

[30]Mont. Sulphur & Chem. Co. v. U.S. Envtl. Prot. Agency, 666 F.3d 1174, 1191 (9th Cir. 2012).

[31]See, e.g., Mich. Dep’t of Envtl. Quality v. Browner, 230 F.3d 181 (6th Cir. 2000).

[32]Federal Implementation Plan for the Billings/Laurel, Montana, Sulfur Dioxide Area, 71 Fed. Reg. 39,259, 39,268 (proposed July 12, 2006) (to be codified at 40 C.F.R pt. 52).

[33]Federal Implementation Plan for the Billings/Laurel, MT, Sulfur Dioxide Area, 73 Fed. Reg. 21,444–45 (April 21, 2008) (codified at 40 C.F.R pt. 52).

[34]Approval and Promulgation of Air Quality Implementation Plans; Montana; Billings/Laurel Sulfur Dioxide State Implementation Plan, 67 Fed. Reg. 22,168, 22,207 (May 2, 2002) (codified at. 40 C.F.R pt. 52).

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