FILED

NOT FOR PUBLICATION MAR 31 2016

MOLLY C. DWYER, CLERK

UNITED STATES COURT OF APPEALS U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

PHOENIX CEMENT COMPANY, an No. 13-73383 enterprise division of the Salt River Pima- Maricopa Indian Community,

Petitioner, MEMORANDUM*

v.

U.S. ENVIRONMENTAL PROTECTION

AGENCY,

Respondent.

STATE OF ARIZONA, EX REL. HENRY No. 13-73393

R. DARWIN, DIRECTOR, ARIZONA

DEPARTMENT OF ENVIRONMENTAL

QUALITY,

Petitioner,

v.

U.S. ENVIRONMENTAL PROTECTION

AGENCY; GINA MCCARTHY,

Administrator, United States Environmental Protection Agency,

* This disposition is not appropriate for publication and is not precedent except as provided by 9th Cir. R. 36-3. Respondents.

ARIZONA MINING ASSOCIATION, No. 13-73401

Petitioner,

v.

U.S. ENVIRONMENTAL PROTECTION

AGENCY,

Respondent.

On Petition for Review of a Final Rule of the Environmental Protection Agency

Argued and Submitted March 9, 2015 San Francisco, California

Before: BERZON, BYBEE, and OWENS, Circuit Judges.

The facts of this case are known to the parties, and we do not repeat them

here. The State of Arizona, the Arizona Mining Association, and Phoenix Cement

Company petition for review of EPA’s final “Phase 2” rule approving Arizona’s

regional haze State Implementation Plan (“SIP”) in part and disapproving it in part.

We deny the petitions in all respects.

EPA’s conclusion that Sundt Unit 4 is Best Available Retrofit Technology

(“BART”)-eligible was not arbitrary and capricious. Section 169A provides that

2 “each major stationary source which is in existence on August 7, 1977, but which

has not been in operation for more than fifteen years” is subject to BART controls.

42 U.S.C. § 7491(b)(2)(A). The Regional Haze Rule defines a “BART-eligible

source” as “an existing stationary facility.” 40 C.F.R. § 51.301. “Existing

stationary facility” is, in turn, defined to include “any of [certain enumerated

categories of] stationary sources, including any reconstructed source, which was

not in operation prior to August 7, 1962, and was in existence on August 7, 1977.”

Id. Sundt Unit 4 was in existence in 1977 but not in 1962. The texts of both the

statute and the governing regulation are thus fully consistent with rendering Sundt

Unit 4 BART eligible.

One part of EPA’s BART Guidelines can be read to exempt sources

reconstructed after 1977 from BART. See 40 C.F.R. pt. 51, app. Y, Section II.A.2.

But Sundt Unit 4 is not covered by the Guidelines. And the Guidelines’ preamble

states that “sources reconstructed after 1977, which reconstruction had gone

through [New Source Review ("NSR")/Prevention of Significant Deterioration

("PSD")] permitting, are not BART-eligible,” indicating that EPA interprets

Section 169A and the Regional Haze Rule to exempt only those post-1977

reconstructed sources subject to PSD permitting. See Regional Haze Regulations

3 and Guidelines for Best Available Retrofit Technology (BART) Determinations,

70 Fed. Reg. 39,104, 39,111 n.9 (July 6, 2005).

Given the statutory and regulatory language and the limited usefulness of the

Guidelines as applied here, we defer to EPA’s reasonable construction of the

statute and its own regulations as exempting only those sources reconstructed after

1977 and subject to PSD permitting. See Auer v. Robbins, 519 U.S. 452, 461

(1997); Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, 467 U.S. 837, 842–44

(1984). Under this interpretation of Section 169A and the Regional Haze Rule,

EPA permissibly determined that Sundt Unit 4, which did not undergo PSD

permitting when it was reconstructed, remains BART-eligible.

EPA’s determination that the Nelson Lime Plant is subject to BART was

similarly not arbitrary and capricious. If an agency gives a “satisfactory

explanation for its action including a rational connection between the facts found

and the choice made,” it has not acted arbitrarily or capriciously, and we will not

“substitute [our] judgment for that of the agency.” Nw. Envtl. Def. Ctr. v.

Bonneville Power Admin., 477 F.3d 668, 687 (9th Cir. 2007) (quoting Motor

Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43

(1983) (internal quotation marks omitted)). Here, EPA’s final rule adequately

addressed why the State’s use of a three-year averaging approach to calculating the

4 impact of the plant’s emissions on visibility at Grand Canyon National Park was

inappropriate. EPA explained that the “subject-to-BART” inquiry is a screening

inquiry that should logically err on the side of being overinclusive and that using a

three-year average can obscure the fact that data from individual years indicate that

a source’s impact on visibility is problematic. This was a reasonable explanation

for EPA’s action.

EPA’s conclusion that a BART determination was required for NOX at both

the Miami and Hayden smelters was also not arbitrary and capricious. EPA

interprets the Regional Haze Rule to require a BART determination for any

pollutant at a source that exceeds the de minimis threshold, once that source has

been determined subject to BART. That interpretation is entitled to deference,

because it is not “plainly erroneous or inconsistent with the regulation,” Auer, 519

U.S. at 461 (citation and internal quotation marks omitted). The Regional Haze

Rule does not expressly provide for any exemption of specific pollutants from

BART determinations except through the 40-tons-per-year de minimis exception.

See 40 C.F.R. § 51.308(e)(1)(ii). EPA’s conclusion that the State had not shown

that NOX emissions from the two smelters were less than the de minimis threshold

was also not arbitrary and capricious, as EPA adequately explained that it could not

accept the petitioners’ assertions about the smelters’ potential to emit NOX in the

5 absence of evidence of physical or operational limitations that would keep the

smelters’ emissions under the de minimis threshold.

EPA’s conclusion that Arizona’s BART determination for SO2 at the two

copper smelters was inadequate was likewise not arbitrary and capricious. EPA

gave a reasoned explanation for this conclusion by pointing out that the State had

failed to consider whether certain new control technologies for SO2 could be

adapted for use at the smelters.

EPA’s disapproval of Arizona’s reasonable progress goals was not arbitrary

and capricious. As EPA noted in its final rule, after the State identified the

categories of sources that contributed most to NOX and SO2 emissions in the state,

the State deliberately chose not to conduct the four-factor analysis required by 42

U.S.C. § 7491(g)(1) and 40 C.F.R. § 51.308(d)(1)(i)(A) with respect to those

sources. It was not arbitrary and capricious for EPA to conclude that this

reasonable progress analysis was inadequate.

Finally, it was not arbitrary and capricious for EPA to determine that the

State’s four-factor reasonable progress analysis for the Phoenix Cement Plant was

unacceptable. EPA’s explanation for its disapproval of this analysis—i.e., that the

analysis incorporated flawed data that caused the State to overestimate the cost of

6 installing and operating additional pollution controls at the Phoenix plant—was

adequate to support its action.

The petitions for review are DENIED.

7

FILED

13-73383, 13-73393, 13-73401 MAR 31 2016

MOLLY C. DWYER, CLERK

Phoenix Cement Company v. U.S. EPA U.S. COURT OF APPEALS

BYBEE, Circuit Judge, concurring in part and dissenting in part:

I agree with the panel in every respect save one: I would hold that EPA’s

determination that Sundt Unit 4 is BART-eligible was arbitrary and capricious. On

that issue, I must dissent.

Section 169A of the Clean Air Act and the Regional Haze Rule both state

that only sources “in existence on August 7, 1977” are BART-eligible. 42 U.S.C.

§ 7491(b)(2)(A); 40 C.F.R. § 51.301. In the BART Guidelines, EPA explained

that the “‘in existence’ test[] appl[ies] to reconstructed sources,” which “are treated

as new sources as of the time of the reconstruction.” 40 C.F.R. pt. 51, app. Y, §

II.A.2. Thus, a source constructed before 1962 but reconstructed between 1962

and 1977 would be BART-eligible. “Similarly,” EPA explained, “any emissions

unit for which a reconstruction ‘commenced’ after August 7, 1977, is not

BART–eligible.” Id. This is a cogent interpretation of Section 169A and the

Regional Haze Rule, and on this interpretation, Sundt Unit 4—which was

reconstructed after August 7, 1977—is not BART-eligible.

EPA now contends, however, that a source reconstructed after August 7,

1977, is only exempted from BART if it went through Prevention of Significant

1 Deterioration (PSD) permitting, which the Clean Air Act requires for sources

constructed or modified after that date. See 42 U.S.C. § 7475(a). EPA says that

this requirement is necessary in order to give effect to Congress’s intent, in

enacting the Clean Air Act, that all sources be subject either to BART (if

constructed or reconstructed before August 7, 1977) or to PSD (if constructed or

reconstructed after that date).

The problem with EPA’s argument is that Sundt Unit 4 was exempted from

PSD permitting by a separate act of Congress—the Power Plant and Industrial Fuel

Use Act of 1978—that operated independently from the Clean Air Act. The Fuel

Use Act gave the Department of Energy the authority to require utilities to convert

oil- or natural gas-powered generating stations to burn coal as a means of reducing

America’s dependence on imported oil. Arizona Blue Br. 31. The Fuel Use Act

exempted units that were ordered to be converted from PSD permitting in order to

facilitate their speedy conversion. Id. at 32 (citing 42 U.S.C. § 7411(a)(8) and 40

C.F.R. § 60.14(e)(4)). Sundt Unit 4 was reconstructed in 1987 pursuant to the Fuel

Use Act—in fact, it appears to have been the only power plant in the country that

was ordered to be reconstructed under the FUA.

We thus have two statutory schemes in play and must give effect to both.

The Clean Air Act, as interpreted through EPA’s Guidelines, excluded sources

2 constructed or reconstructed after August 7, 1977, from BART, on the expectation

that they would be subject to PSD instead. A separate statute, the Fuel Use Act,

subsequently exempted Sundt Unit 4 from PSD. The unit’s exemption under the

Fuel Use Act is independent of its status under the Clean Air Act: as amicus

Tucson Electric Power Company puts it, “Sundt Unit 4’s exemption from PSD [in

the Fuel Use Act] does not change the fact that, for purposes of the [Clean Air Act]

and its visibility program, Sundt Unit 4 came into existence in 1987.” EPA thus

cannot point to Sundt Unit 4’s exemption from PSD as a reason why Sundt Unit 4

should be considered BART-eligible.

The majority upholds EPA’s determination by pointing out that Section

169A and the Regional Haze Rule are ambiguous on the question whether a source

in Sundt Unit 4’s unique situation is BART-eligible and then adverting to Auer and

Chevron deference. But I cannot go along with that reasoning. EPA’s litigation

position concerning Sundt Unit 4 is not a reasonable interpretation of the Clean Air

Act and the Regional Haze Rule; EPA is simply seeking a sui generis exception to

the general BART-eligibility framework found in the Act and the Rule in order to

prevent Sundt Unit 4 from, as EPA’s brief puts it, “escap[ing] both PSD review

and a BART analysis.” We need not and should not defer to such ad-hoc

reasoning.

3 I respectfully dissent.

4