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Montana Sulphur & Chemical v. United States Environmental

January 19, 2012

MONTANA SULPHUR & CHEMICAL COMPANY, PETITIONER,
v.
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, RESPONDENT. MONTANA SULPHUR & CHEMICAL COMPANY, PETITIONER,
v.
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, RESPONDENT.



EPA No.EPA-R08-OAR-2006-0098 On Petition for Review of an Order of the Environmental Protection Agency

The opinion of the court was delivered by: Hawkins, Senior Circuit Judge:

FOR PUBLICATION

OPINION

Argued and Submitted August 31, 2011-Seattle, Washington

Before: Michael Daly Hawkins and M. Margaret McKeown, Circuit Judges, and John W. Sedwick, District Judge.*fn1

Opinion by Judge Hawkins

OPINION

In these appeals, consolidated for decision,*fn2 we address the propriety of various actions taken by the United States Environmental Protection Agency ("EPA") under the Clean Air Act with respect to Montana air quality from 1993 to 2008. In No. 02-71657, Montana Sulphur & Chemical Company ("Montana Sulphur") seeks review of the EPA's final rule which partially disapproved a proposed revision to Montana's State Implementation Plan ("SIP") governing sulfur dioxide ("SO2") emissions. 67 Fed. Reg. 22,168 (May 2, 2002). Montana Sulphur also seeks review of a prior EPA action in 1993 known as a "SIP Call," which preceded the formal SIP revision and started the review process. 58 Fed. Reg. 41,430 (Aug. 4, 1993). The final agency action incorporated documents supporting its SIP Call-in particular EPA reliance on various modeling calculations-into the administrative record for partial disapproval of the SIP.

In No. 08-72642, Montana Sulphur seeks review of the EPA's April 2008 final rule promulgating a Federal Implementation Plan ("FIP") for the State of Montana's SO2 emissions. 73 Fed. Reg. 21,418 (April 21, 2008). The FIP is designed to fill perceived gaps the EPA identified in the SIP. This later appeal focuses on the EPA's authority to promulgate the FIP and the reasonableness of certain specific requirements set forth therein. Because we conclude that the agency did not act arbitrarily or capriciously with respect to either the SIP or FIP, we deny both petitions for review.

STATUTORY BACKGROUND

The Clean Air Act directs states to develop implementation plans-SIPs-that "assure" attainment and maintenance of national ambient air quality standards ("NAAQS") through enforceable emission limitations. 42 U.S.C. §§ 7407(a), 7410(a)(2)(A). The EPA has developed a list of pollutants that cause or contribute to air pollution that "may reasonably be anticipated to endanger public health or welfare." 42 U.S.C. § 7408(a)(1)(A). For each criteria pollutant, the EPA sets NAAQS sufficient to protect public health with an adequate margin of safety and to protect the public welfare, 42 U.S.C. § 7409(b), pursuant to which it has promulgated NAAQS for SO2, 40 C.F.R. §§ 50.4 & 50.5.

A SIP must "provide for the performance of such air quality modeling as the Administrator may prescribe for the purpose of predicting the effect on ambient air quality of any emissions of any [NAAQS-regulated] air pollutant." 42 U.S.C. § 7410(a)(2)(K)(i). As reflected in relevant regulations, emissions limitations may be demonstrated through modeling. 40 C.F.R. § 51.112(a)(1) ("adequacy of a control strategy shall be demonstrated by means of applicable air quality models, data bases, and other requirements specified in appendix W . . . (Guideline on Air Quality Models)"). There is also a Federal Reference Method for measuring ambient levels of SO2 pollutants. 40 C.F.R. § 58.1. The EPA uses this data and engages in formal notice-and-comment rulemaking to designate "attainment areas," "nonattainment areas," and areas that are not classifiable. 42 U.S.C.§ 7407(d).

The Clean Air Act gives the EPA significant national oversight power over air quality standards, to be exercised pursuant to statutory specifications, and provides the EPA with regulatory discretion in key respects relevant to SIP calls and determinations about the attainment of NAAQS. Yet, the Act also anticipates states' shared responsibility for air quality control. 42 U.S.C. §§ 7407(a), 7410 (giving states duty of developing implementation plans). The Clean Air Act "left with the states, so long as the [NAAQS] were met, the power to determine which sources would be burdened by regulation and to what extent." Union Elec. Co. v. EPA, 427 U.S. 246, 269 (1976) (emphasis added); see also Train v. Natural Res. Def. Council, Inc., 421 U.S. 60, 98 (1975). A state must develop implementation plans that will satisfy national standards; if it does so, it may "adopt whatever mix of emissions limitations it deems best suited to its particular situation." Train, 421 U.S. at 79. But when the state plan is inadequate to attain and maintain NAAQS, then the EPA is empowered to step in and fill any deficiencies with a FIP. 42 U.S.C. § 7410(c).

PROCEDURAL BACKGROUND

The dispute between Montana Sulphur and the EPA is long-standing, spanning over seventeen years and centering on regulations governing emissions from industrial facilities located near Billings, Montana. Montana Sulphur operates a sulfur recovery plant northeast of Billings. The plant is located next to a petroleum refinery owned by ExxonMobil. Pipes from the refinery bring a continuous stream of high sulfur gas-a by-product of the refining process-to Montana Sulphur. Montana Sulphur recovers 95-98% of the sulfur as a marketable product. The remainder is emitted in the form of SO2. SO2 is a "highly reactive colorless" gas primarily derived from fossil fuel combustion, "best known for causing 'acid rain' at elevated concentrations in the ambient air." American Lung Ass'n v. EPA, 134 F.3d 388, 389 (D.C. Cir. 1998).

In 1978, the EPA made a formal determination that the Billings area met the primary standards for SO2. 43 Fed. Reg. 40,412 (Sept. 11, 1978). Neighboring Laurel was designated "nonattainment" in 1978, due to measured and modeled violations of the primary SO2 standards. 43 Fed. Reg. 8,962 (Mar. 3, 1978). Dispersion modeling conducted by the EPA during the 1970s, however, indicated that potential violations of the SO2 standards were also occurring in the Billings area due to SO2 emissions from a variety of sources, including Montana Sulphur.

In 1980, the EPA approved Montana's SIP for attaining and maintaining SO2 NAAQS in the Billings/Laurel area. 45 Fed. Reg. 2,034 (Jan. 10, 1980). Actual monitoring subsequent to that approval showed some individual "exceedances" of the 24-hour SO2 standard and one 3-hour "violation" in 1985. Based on monitored emissions, SO2 levels remained relatively constant throughout the 1980s, decreasing slightly in 1983-86, then rising again in 1989.

In 1990, the City of Billings ("Billings" or the "City") hired a contractor to perform dispersion modeling for the Billings area. The Montana Department of Health and Environmental Sciences ("MDHES") reviewed the contractor's report, which indicated "potential violations of federal SO2 standards at both actual and allowable emissions levels" and predicted "high concentrations in areas where ambient monitoring had not been conducted." One year later, Yellowstone Energy Limited Partnership performed dispersion modeling for its permit application and similarly identified potential violations of national SO2 standards in the Billings area.

Citing these studies, the EPA advised MDHES in 1992 that its SIP might be inadequate and in need of revision. MDHES in turn notified the City that the emissions from industrial process units were not adequately regulated by the existing SIP. It also noted that "current monitoring sites are not at the highest predicted locations, nor could we locate enough monitors to provide the spatial coverage represented in the model." A revised SIP, it noted, would ease permitting of new industries in the Billings/Laurel area.

The EPA then issued a formal SIP Call in 1993, finding the existing SIP "substantially inadequate" to attain and maintain NAAQS and asking MDHES to submit revisions within eighteen months; the EPA noted that the SIP Call was "a preliminary step in an ongoing process" and "not subject to judicial review." Notice of the SIP Call was published August 4, 1993. 58 Fed. Reg. at 41,430.

MDHES thereafter developed a protocol for the SIP revisions that incorporated EPA-approved models. MDHES submitted various revisions of the SIP to the EPA in 1996, 1997, 1998, and 2000. 67 Fed. Reg. at 22,171, 22,175.

In 1999, the EPA proposed action on the SIP revisions, 64 Fed. Reg. at 40, 791, and took final actions on the SIP on May 2, 2002 (67 Fed. Reg. 22,168) and May 22, 2003 (68 Fed. Reg. 27, 908), approving most of the SIP, but disapproving a number of specific items affecting Montana Sulphur, including (1) the attainment demonstration due to issues with emission limits, inappropriate stack height credit, and lack of submitted emission limits on flares; (2) the emission limits for Montana Sulphur's Sulfur Recovery Unit 100-meter stack and the stack height credit supporting those limits; and (3) the emission limits for Montana Sulphur's 30-meter and auxiliary vent stacks.

Montana Sulphur petitioned for review of the EPA's May 2, 2002 SIP action. That case, No. 02-71657, was stayed pending the EPA's promulgation of a FIP to remedy the SIP. In 2006, the EPA published its proposed FIP. 71 Fed. Reg. 39,259 (July 12, 2006). Montana Sulphur and others commented on that proposal. In 2008, the EPA promulgated its final FIP. 73 Fed. Reg. at 21,418. In case No. 08-72642, Montana Sulphur challenges, among other things, the timeliness of the FIP, the limits on flares, and the feasibility of flare monitoring technology required by the FIP. Neither the State of Montana nor any party other than Montana Sulphur has challenged the SIP Call or the EPA's SIP or FIP actions.

STANDARDS OF REVIEW

When reviewing the EPA's decision regarding a SIP or its promulgation of a FIP:

[T]he court may reverse any such action found to be -(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; (B) contrary to constitutional right, power, privilege, or immunity; (C) in excess of statutory jurisdiction, authority, or limitations or short of statutory right . . . .

42 U.S.C. § 7607(d)(9)(A)-(C). We afford Chevron*fn3 deference to issues of statutory construction; if the statute is ambiguous, we ask whether the agency's answer is based on a permissible construction of the statute. MacClarence v. EPA, 596 F.3d 1123, 1130 (9th Cir. 2010).

We also give deference to an agency's interpretation of its own regulations, Wickland Oil Terminals v. Asarco, 792 F.2d 887, 891-92 (9th Cir. 1986), and to the evaluation of complex scientific data within its area of expertise, Envtl. Def. Ctr., Inc. v. EPA, 344 F.3d 832, 869 (9th Cir. 2003). However, we do not simply rubber stamp an agency's decision, but "must carefully review the record to ensure that agency decisions are founded on a reasoned evaluation of the relevant factors." Vigil v. Leavitt, 381 F.3d 826, 833 (9th Cir. 2004) (citation omitted).

DISCUSSION

I. The SIP Call

A. Justiciability

[1] One of Montana Sulphur's primary arguments concerns the EPA's authority to make the SIP Call in the first place, because, in its view, the existing SIP was not substantially inadequate because there were no monitored violations of NAAQS in the area, only predicted violations based on computer modeling. This issue, however, raises a number of threshold justiciability concerns. The SIP Call is not a final agency action and did not impose any specific obligations on Montana Sulphur. The SIP Call was only an "act of limited consequence preliminary to other events anticipated by the [Clean Air] Act." Illinois v. EPA, 621 F.2d 259, 261 (7th Cir. 1980). As the Sixth Circuit has elaborated:

[T]he issuance of notice of deficiency and the request for a revised SIP is not final agency action subject to judicial review. It in no way alters the obligations of the parties in either a practical or legal sense. It is impossible to anticipate which of the many available alternative strategies the State and the EPA will pursue. . . . Until the State responds to the EPA's request for revision, and the EPA's subsequent actions become real rather than merely speculative, no legally cognizable harm has been visited.

Greater Cincinnati Chamber of Commerce v. EPA, 879 F.2d 1379, 1383 (6th Cir. 1989).

[2] Thus, the EPA is correct to the extent it argues that at the time of the SIP Call there was no final agency action, see Bennett v. Spear, 520 U.S. 154, 177-78 (1997), the issue was not yet ripe, see Abbott Labs. v. Gardner, 387 U.S. 136, 148-49 (1967), and Montana Sulphur had not suffered an "actual or imminent" as opposed to a "conjectural or hypothetical" injury that would suffice for standing, see Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 180 (2000); see also Bova v. City of Medford, 564 F.3d 1093, 1095-96 (9th Cir. 2009) (noting how ripeness and the injury prong of standing are interrelated).

[3] This does not, however, mean that the alleged problems with the SIP Call are forever beyond challenge. Montana Sulphur filed its petition for review after the EPA both made the SIP Call and issued its partial approval/partial disapproval of the SIP. There is no dispute that the SIP disapproval was a final agency action and that Montana Sulphur has standing to challenge this action.

[4] The EPA's 2002 disapproval, in turn, is necessarily predicated on the validity of the initial SIP Call and the modeling assumptions made therein, which Montana Sulphur also seeks to challenge. Compare 58 Fed. Reg. at 41,430 with 67 Fed. Reg. at 22,173, 22,183-22,189. Because Montana Sulphur's claim that the EPA exceeded its statutory authority by issuing the SIP Call in the first place would necessarily invalidate the 2002 SIP disapproval as well, its challenge to the SIP Call may be brought at this time. See Virginia v. EPA, 108

F.3d 1397, 1414 (D.C. Cir. 1997), as modified, 116 F.3d 499 (D.C. Cir. 1997) (striking down a SIP Call which was based on a final agency rule that exceeded the EPA's authority under the Clean Air Act); see also Greater Cincinnati, 879

F.2d at 1382 (holding claim regarding SIP Call was premature "[u]ntil the State responds to the EPA's request for revision, and the EPA's subsequent actions become real ...


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