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Michigan v. EPA

Citation: 30 ELR 20407
No. No. 98-1497, 213 F.3d 663/50 ERC 1161/(D.C. Cir., 02/10/2000)

The court largely upholds a U.S. Environmental Protection Agency (EPA) rule mandating that 22 states and the District of Columbia revise their state implementation plans (SIPs) to mitigate ozone transport by reducing nitrogen oxides (NOx) through the use of cost-effective controls. The court first holds that the Clean Air Act (CAA) does not require EPA to establish a transport commission prior to issuing the SIP call. CAA § 176A(a) and (b)(1) require EPA to establish a transport commission if the Agency creates a CAA § 176A transport region. However, EPA can address interstate ozone transport apart from convening a CAA § 176A transport commission. The court next holds that EPA sufficiently analyzed each particular state in determining which states contributed unduly to ozone downwind. The court then holds that EPA properly determined "significance" when calculating what states contribute significantly to nonattainment in downwind states. EPA did not unlawfully override past precedent relevant to significance. Further, there is nothing in CAA § 110(a)(2)(D)'s text, structure, or history that bars EPA from considering cost in determining which states have significant ozone contributions. Moreover, EPA's scheme of uniform controls is not arbitrary and capricious. In addition, EPA need not have based "significant contribution" to ozone transport on specific intelligible principles. When the scope of agency power encompasses all American enterprise, the standards must be correspondingly precise. In this case, CAA § 110(a)(2)(D)(I) nominally encompasses all American enterprise. But as a practical matter, EPA must make a number of threshold determinations that have so limited EPA's activity under CAA § 110(a)(2)(D)(I) as to make the rule in question the sole example of a rulemaking under the section.

The court next holds that EPA acted unlawfully in including Wisconsin in the SIP call. Despite, EPA's contention that the state contributes significantly to ozone over Lake Michigan, the Agency did not show on the record that the state's ozone contribution affects any onshore state nonattainment. The court then vacates EPA's final rule with respect to Missouri and Georgia because EPA failed to reasonably explain why NOx budgets based on every state source are the best stopping point with respect to states on the perimeter of the ozone problem. However, the court holds that the record supports EPA's decision to include South Carolina as a significant contributor to downwind nonattainment.

The court then holds that EPA's NOx budget program does not impermissibly intrude on states' statutory right to fashion their own SIP submissions. EPA reasonably interpreted CAA § 110 as providing it with the authority to determine a state's NOx significant contribution level. Further, EPA's NOx budget plan reasonably establishes reduction levels and leaves the control measure selection to the states. Moreover, states implementing alternative control measures will not be penalized with more stringent emission targets, and the NOx budget does not mandate specific source-by-source emissions limitations. The court also holds that EPA did not violate the Regulatory Flexibility Act by failing to prepare a regulatory flexibility analysis describing the impact of the proposed rule on small entities. Such an analysis is not required if an agency certifies that the rule will not have a significant effect on a substantial number of small entities. EPA made such a certification, and the SIP call regulates states, not individual emissions sources.

The court also holds that EPA did not arbitrarily revise the definition of a "NOx budget unit" to bring certain small sources within the scope of the core groups of emission-producing sources to which the NOx budget trading rule applies. However, EPA's redefinition of electricity-generating units was arbitrary and capricious because EPA did not provide sufficient notice and opportunity to comment on the redefinition. Likewise, EPA did not provide adequate notice and opportunity to comment on the control level assumed for large stationary internal combustion engines in its determination of state NOx budgets. Last, the court holds that EPA did not arbitrarily limit the number of early reduction credits.

Counsel for Petitioners
Susan E. Ashbrook, Ass't Attorney General
Attorney General's Office
State Office Tower
30 E. Broad St., Columbus OH 43266
(614) 466-3376

Counsel for Respondent
Jon M. Lipshultz, Patricia R. McCubbin
Environment and Natural Resources Division
U.S. Department of Justice, Washington DC 20530
(202) 514-2000

With Sentelle, J., dissenting