     Case: 10-60891      Document: 00511801258        Page: 1     Date Filed: 03/26/2012




            IN THE UNITED STATES COURT OF APPEALS
                     FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                     Fifth Circuit

                                                                            FILED
                                                                           March 26, 2012

                                        No. 10-60891                       Lyle W. Cayce
                                                                                Clerk

LUMINANT GENERATION COMPANY, L.L.C.; OAK GROVE
MANAGEMENT COMPANY, L.L.C.; BIG BROWN POWER COMPANY,
L.L.C.; LUMINANT MINING COMPANY, L.L.C.; SANDOW POWER
COMPANY, L.L.C.; TEXAS ASSOCIATION OF BUSINESS; TEXAS
ASSOCIATION OF MANUFACTURERS; TEXAS OIL & GAS
ASSOCIATION; CHAMBER OF COMMERCE OF THE UNITED STATES
OF AMERICA; STATE OF TEXAS,

                                                   Petitioners,
v.

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY,

                                                   Respondent.



                        On Petition for Review of an Order of
                 the United States Environmental Protection Agency


Before BARKSDALE, GARZA, and ELROD, Circuit Judges.*
JENNIFER WALKER ELROD, Circuit Judge:
        This case requires us to review the EPA’s disapproval, more than three
years after the time within which it was statutorily required to act, of three
regulations promulgated by the State of Texas.                    30 Tex. Admin. Code
§§ 116.610(a), 116.610(b), and 116.617. Pursuant to Texas’s duty under the



       *
           Emilio M. Garza, Circuit Judge, concurs in the judgment only.
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                                  No. 10-60891

Clean Air Act (“CAA” or “the Act”), 42 U.S.C. § 7401 et seq., to adopt and
administer a statewide plan for implementing federal air quality standards,
those regulations provide for a standardized permit for certain projects that
reduce or maintain current emissions rates. Because the EPA had no legal basis
on which to disapprove those regulations, we VACATE the agency’s disapproval
of Texas’s regulations and REMAND with instructions.
                              I. BACKGROUND
A. Statutory Background
      An “experiment in cooperative federalism,” Michigan v. EPA, 268 F.3d
1075, 1083 (D.C. Cir. 2001), the CAA “establishes a comprehensive program for
controlling and improving the nation’s air quality through state and federal
regulation.” BCCA Appeal Group v. EPA, 355 F.3d 817, 821–22 (5th Cir. 2003).
The Act assigns responsibility to the EPA for identifying air pollutants and
establishing National Ambient Air Quality Standards (NAAQS). 42 U.S.C.
§§ 7408–7409. The states, by contrast, bear “the primary responsibility” for
implementing those standards. BCCA Appeal Group, 355 F.3d at 822; see also
§ 7407(a) (“Each State shall have the primary responsibility for assuring air
quality within [its] entire geographic area.”); § 7401(a)(3) (“[A]ir pollution
prevention . . . is the primary responsibility of States and local governments.”).
      To implement the NAAQS, the states must adopt and administer State
Implementation Plans (SIPs) that meet certain statutory criteria. § 7410. The
states have “wide discretion in formulating [their] plan[s].” Union Elec. Co. v.
EPA, 427 U.S. 246, 250 (1976). “[S]o long as the ultimate effect of a State’s
choice of emission limitations is compliance with the national standards for
ambient air, the State is at liberty to adopt whatever mix of emission limitations
it deems best suited to its particular situation.” Train v. Natural Res. Def.
Council, Inc. 421 U.S. 60, 79 (1975). With regard to implementation, the Act
confines the EPA to the ministerial function of reviewing SIPs for consistency

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with the Act’s requirements. § 7410(k)(3) (“[T]he [EPA] Administrator shall
approve [a SIP or SIP revision] as a whole if it meets all of the applicable
requirements of this chapter.” (emphasis added)); see also Fla. Power & Light Co.
v. Costle, 650 F.2d 579, 587 (5th Cir. 1981) (“The great flexibility accorded the
states under the Clean Air Act is . . . illustrated by the sharply contrasting,
narrow role to be played by EPA.”); Michigan, 268 F.3d at 1083 (the EPA’s
“overarching role is in setting standards, not in implementation”). This division
of responsibility between the states and the federal government “reflects the
balance of state and federal rights and responsibilities characteristic of our
federal system of government.” Fla. Power & Light Co., 650 F.2d at 581.
      Under the Act, SIPs are not supposed to be static.           States must
periodically revise their SIPs as necessary to ensure compliance with current
NAAQS. 42 U.S.C. § 7410(a)(2)(H). With a narrow exception not relevant here,
the EPA must review and approve or disapprove a SIP revision within 18
months of submission. §§ 7410(k)(1)(B), 7410(k)(2), and 7410(k)(3). The EPA
shall disapprove a SIP revision only if “the revision would interfere with any
applicable requirement concerning attainment” of the NAAQS “or any other
applicable requirement” of the Act. § 7410(l). As with SIP plans, if the revision
meets all of the applicable CAA requirements, the EPA must approve it.
§ 7410(k)(3) (The EPA “shall approve such submittal as a whole.”).
      Among other requirements, SIPs must include permitting programs for the
construction or modification of stationary sources. The EPA has termed these
required permit programs “New Source Review” (NSR). 74 Fed. Reg. 51,418,
51,421 (Oct. 6, 2009). For “major” NSR, which applies to the construction or
modification of stationary sources that meet certain threshold emissions levels,
the CAA sets forth the parameters for the permit programs in considerable




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detail.2 See 42 U.S.C. §§ 7470–7503. The implementing regulations for major
NSR are similarly extensive and complex, spanning 88 pages in the Code of
Federal Regulations. See 40 C.F.R. §§ 51.165–51.166, pt. 51 appendix S.
       In stark contrast, the CAA prescribes only the barest of requirements for
“minor” NSR, which governs the construction or modification of stationary
sources that do not meet the emissions thresholds for major NSR. For minor
NSR, the Act requires simply that each SIP “include . . . regulation of the
modification and construction of any stationary source within the areas covered
by the plan as necessary to assure that [NAAQS] are achieved.” 42 U.S.C.
§ 7410(a)(2)(C). The implementing regulations for minor NSR are likewise
sparse, spanning less than two pages in the Code of Federal Regulations. See 40
C.F.R. §§ 51.160–51.164. The EPA has recognized that because “the Act includes
no specifics regarding the structure or functioning of minor NSR programs” and
because the implementing regulations are “very general[,] . . . SIP-approved
minor NSR programs can vary quite widely from State to State.” 74 Fed. Reg.
51,418, 51,421 (Oct. 6, 2009).




       2
         The CAA’s requirements for major NSR differ depending on whether a region is
designated “nonattainment,” “attainment,” or “unclassifiable.” Part D of the Act, which
governs nonattainment NSR, refers to “major stationary sources.” 42 U.S.C. § 7502(c)(5). The
Act defines that term as sources that have the potential to emit 100 tons or more of a
regulated pollutant. § 7602(j). Part C of the Act, which applies the prevention of significant
deterioration (PSD) program to attainment and unclassifiable regions, see § 7471, uses the
term “major emitting facility.” § 7475. The Act defines that term as certain specified types of
stationary sources that have the potential to emit 100 tons or more of a regulated pollutant
and all other stationary sources that have the potential to emit 250 tons or more of a regulated
pollutant. § 7479(1). For convenience, the EPA refers to both statutory terms as “major
sources.” 74 Fed. Reg. 51,418, 51,421 n.11 (Oct. 6, 2009).

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B. Facts and Proceedings
       The Texas standardized permit at issue here applies only to minor NSR,3
and then only to pollution control projects (PCPs). The regulations governing
this permit (the PCP Standard Permit) are found at 30 Tex. Admin. Code
§ 116.617. Those regulations authorize the standard permit for PCPs “that
reduce or maintain currently authorized emission rates for facilities authorized
by a permit.”4 § 116.617(a)(1). Detailed registration requirements apply. See
§§ 116.617(d)(2)(A)–(F), 116.617(b)(1)(D) (incorporating the standard permit
registration requirements of § 116.611). The PCP Standard Permit is also
subject to Texas’s general conditions for standard permits, which impose
additional reporting, recordkeeping, and compliance requirements.                       See
§ 116.615. The executive director of the Texas Commission on Environmental
Quality (TCEQ) has the negative discretion to disallow the use of any PCP
standard permit if he “determines there are health effects concerns or the
potential to exceed a [NAAQS] . . . until those concerns are addressed by the
registrant to the satisfaction of the executive director.” § 116.617(a)(3)(B). A
“registration must be submitted no later than 30 days after construction or
implementation begins” only for replacement PCPs that yield “no increases in
authorized emissions of any air contaminant.” § 116.617(d)(1)(A). By contrast,
registration for new PCPs and replacement projects that will yield any increase
in emissions must be submitted 30 days before construction or implementation.
§ 116.617(d)(1)(B). Construction or implementation may not begin until 30 days


       3
        If a project’s collateral emissions meet the threshold level for major NSR, it must
obtain an individual permit pursuant to Texas’s major NSR permitting program. 30 Tex.
Admin. Code § 116.617(b)(1)(C) (incorporating § 116.610(b)).
       4
        Although somewhat counterintuitive, PCPs can fall within the bailiwick of the CAA’s
regulations because although the projects by definition reduce or maintain emissions of the
primary pollutant, they have the potential to cause incidental increases in the emissions of
other regulated pollutants.

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after TCEQ receives the registration or until the executive director issues
written acceptance. Id.
      Texas’s PCP Standard Permit is just one component of Texas’s broader
standard permits program. That program originated in 1993, when Texas
promulgated standard permits for PCPs that reduce emissions of volatile organic
compounds (VOCs) and nitrogen oxides (NOx). See 18 Tex. Reg. 8597 (Nov. 19,
1993) (VOC standard permit); 18 Tex. Reg. 3409 (May 28, 1993) (NOx standard
permit). The next year, after notice and comment and a public hearing, Texas
adopted regulations that set forth the general requirements for Texas’s standard
permits program. 19 Tex. Reg. 3055 (Apr. 22, 1994). In that same rulemaking,
Texas expanded the availability of standard permits to PCPs for any regulated
pollutant. Id. at 3064–65. Texas amended its standard permit program several
times in the following years and submitted those revisions to the EPA for
approval into Texas’s SIP. See 68 Fed. Reg. 64,543, 64,547 (Nov. 14, 2003)
(listing several SIP revision submissions from 1994 to 2002 concerning Texas’s
standard permits program).
      In 2003, the EPA finally approved the standard permits program into
Texas’s SIP, explaining that the program met the applicable requirements of the
CAA and its implementing regulations. See id. at 64,546–64,547 (approving
30 Tex. Admin. Code §§ 116.601–116.606, 116.610, 116.611, 116.614, and
116.615).5 The EPA explicitly declined to act on § 116.617, which allows for a
standard permit for PCPs. Id. at 64,547. The EPA commented that approval of
§ 116.617 was “not necessary” to its approval of the standard permits program
and that § 116.617 would “be addressed in a separate action.” Id.
      Texas amended § 116.617 in 2006 to limit the availability of standard
permits for PCPs to minor NSR only. See 31 Tex. Reg. 515, 516 (Jan. 27, 2006).


      5
          The EPA took no action on 30 Tex. Admin. Code § 116.610(d). 68 Fed. Reg. at 64,547.

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At the same time, Texas made necessary conforming amendments, as well as
stylistic revisions, to SIP-approved §§ 116.610(a) and 116.610(b), which set forth
general parameters for the applicability of Texas’s standard permits program.
See id.; see also 30 Tex. Reg. 6183, 6205 (Sept. 30, 2005) (proposed amendments).
These amendments were necessary to bring Texas’s PCP Standard Permit into
compliance with federal standards after the D.C. Circuit vacated, as contrary to
the CAA, an EPA rule that had altogether exempted PCPs from major NSR.
New York v. EPA, 413 F.3d 3, 40–42 (D.C. Cir. 2005). After adopting these
amendments through notice and comment rulemaking, on February 1, 2006,
Texas resubmitted its newly amended versions of §§ 116.617, 116.610(a), and
116.610(b), among other provisions, to the EPA for approval into Texas’s SIP.
See 74 Fed. Reg. 48, 467, 48,471 (Sept. 23, 2009). Thus, pursuant to the Act’s
eighteen-month deadline, the EPA was required by statute to take action on
Texas’s submission by August 1, 2007, at the latest.
      More than two years after the statutory deadline had passed, the EPA
proposed disapproval of Texas’s submission on September 23, 2009. See id. at
48,467. In proposing disapproval of Texas’s PCP Standard Permit (§ 116.617),
the EPA did not identify any provision of the CAA or its implementing
regulations that Texas’s program violated. See 74 Fed. Reg. at 48,475–76.
Instead, the EPA asserted that “each minor NSR SIP Standard Permit . . . is
required to be applicable to narrowly defined categories of emission sources
rather than a category of emission types.” Id. at 48,476 (emphasis in original).
The only authorities that the EPA cited for this purported requirement were
several internal memoranda and guidance documents, and a handful of
rulemakings in which the EPA took action or proposed action concerning the
adoption of general permit programs into other states’ SIPs. Id. at 48,476 n.11.
The EPA also stated that “another major concern is that this Standard Permit
is designed for case-by-case additional authorization, source-specific review, and

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source-specific technical determinations.” Id. at 48,476. The EPA explained its
concern as follows: “There are no replicable conditions in the PCP Standard
Permit that specify how the [TCEQ] Director’s discretion is to be implemented
for the individual determinations.” Id. The EPA cited no authority to tether its
concern to any applicable provision of the CAA. See id. Moreover, as the EPA
conceded in its brief, it provided no explanation for why it proposed disapproval
of §§ 116.610(a) and 116.610(b).
      The    EPA    issued    its    final   rule   disapproving,    inter   alia,
§§ 116.617, 116.610(a), and 116.610(b), on September 15, 2010, more than three
years after the statutory deadline.      75 Fed. Reg. 56,424 (Sept. 15, 2010).
Although the EPA averred in its opening “Summary” section that it disapproved
Texas’s PCP Standard Permit “because it does not meet the requirements of the
CAA for a minor NSR Standard Permit program,” id., the EPA again failed to
identify a single provision of the Act that Texas’s program violated, let alone
explain its reasons for reaching its conclusion. Instead, in its discussion of
Texas’s PCP Standard Permit, the EPA stated no less than five times that it was
disapproving the permit because it “does not meet the requirements of the Texas
Minor NSR Standard Permits Program.” Id. at 56,447 (emphasis added); see
also id. at 56,444; id. at 56,445 (twice expressing the same conclusion); id. at
56,447 (same). In other words, the EPA utilized Texas law as its benchmark in
disapproving § 116.617, not the CAA or its implementing regulations. Indeed,
even when responding to comments that discussed whether § 116.617 meets the
requirements of the CAA, the EPA did not address that question, but instead
concluded that the PCP Standard Permit does not meet the requirements of
Texas’s SIP-approved standard permits program. See 75 Fed. Reg. at 56,445
(EPA’s response to Comments 2 and 3). The EPA also reiterated the objections
from its proposed disapproval that § 116.617 “does not apply to similar sources”
and “lacks the requisite replicable standardized permit terms specifying how the

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Director’s discretion is to be implemented for the case-by-case determinations.”
Id. at 56,447. The EPA conceded in its brief that it again failed to provide any
explanation for its disapproval of §§ 116.610(a) and 116.610(b).
      Invoking our jurisdiction under 42 U.S.C. § 7607(b), numerous petitioners
timely filed petitions for our review.6 Only the EPA’s disapproval of 30 Tex.
Admin. Code §§ 116.610(a), 116.610(b), and 116.617 are presently before us.
                          II. STANDARD OF REVIEW
      When reviewing EPA action under the CAA, we apply the standard of
review provided for in the Administrative Procedure Act (APA). See Texas v.
EPA, 499 F.2d 289, 296 (5th Cir. 1974). Under the APA, we must hold unlawful
and set aside agency action that is “arbitrary, capricious, an abuse of discretion,
or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A). We must also set
aside agency action that is “in excess of statutory . . . authority.” § 706(2)(C).
Agency action
      is arbitrary and capricious “if the agency has relied on factors which
      Congress has not intended it to consider, entirely failed to consider
      an important aspect of the problem, offered an explanation for its
      decision that runs counter to the evidence before the agency, or is so
      implausible that it could not be ascribed to a difference in view or
      the product of agency expertise.”

Tex. Oil & Gas Ass’n v. EPA, 161 F.3d 923, 933 (5th Cir. 1998) (quoting Motor
Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)).
      We must disregard any post hoc rationalizations of the EPA’s action and
evaluate it solely on the basis of the agency’s stated rationale at the time of its
decision. See Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168–69


      6
        Petitioners are Luminant Generation Company, LLC; Oak Grove Management
Company, LLC; Big Brown Power Company, LLC; Luminant Mining Company, LLC; Sandow
Power Company, LLC; Texas Association of Business; Texas Association of Manufacturers;
Texas Oil & Gas Association; Chamber of Commerce of the United States; and the State of
Texas.

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(1962) (“The courts may not accept appellate counsel’s post hoc rationalizations
for agency action; Chenery requires that an agency’s discretionary order be
upheld, if at all, on the same basis articulated in the order by the agency itself.”
(citing SEC v. Chenery Corp., 332 U.S. 194, 196 (1947))). “Review of agency
action under § 706(2)’s ‘arbitrary or capricious’ standard is limited to the record
before the agency at the time of its decision.” Geyen v. Marsh, 775 F.2d 1303,
1309 (5th Cir. 1985); see also Camp v. Pitts, 411 U.S. 138, 142 (1973) (“[T]he focal
point for judicial review should be the administrative record already in
existence, not some new record made initially in the reviewing court.”).
                               III. DISCUSSION
      The EPA concedes that it acted arbitrarily and capriciously by failing to
supply any reason for its disapproval of §§ 116.610(a) and 116.610(b) and
consents to vacatur.     We therefore vacate the EPA’s disapproval of these
provisions and turn to § 116.617.
      Petitioners contend that the EPA acted arbitrarily and capriciously and
in excess of its statutory authority by applying three different incorrect legal
standards in disapproving 30 Tex. Admin. Code § 116.617. First, Petitioners
argue that the EPA improperly reviewed the PCP Standard Permit for
compliance with Texas law, when the EPA’s only authorized function was to
review the permit for compliance with the applicable requirements of the CAA.
Second, Petitioners argue that the EPA’s so-called “similar source” requirement
does not exist in any of the CAA provisions governing minor NSR. Third,
Petitioners argue that the applicable federal law imposes no “replicability”
requirement and, therefore, the EPA had no basis on which it could have
properly determined that the TCEQ Director’s discretion under § 116.617
violated the Act. As we now explain, each of Petitioners’ arguments is correct.




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A. The EPA’s Reliance on Texas Law
      It is beyond cavil that the EPA may consider only the requirements of the
CAA when reviewing SIP submissions. The Act provides that the EPA “shall
approve [a SIP] submittal as a whole if it meets all of the applicable
requirements of [the Act].” 42 U.S.C. § 7410(k)(3). This statutory imperative
leaves the agency no discretion to do anything other than ensure that a state’s
submission meets the CAA’s requirements and, if it does, approve it before the
passage of its statutory deadline. Moreover, the provisions of the Act that
govern minor NSR and the EPA’s review of SIP revisions make no allowance for
the EPA to evaluate the submission for compliance with state law.               See
§ 7410(a)(2)(C) (the Act’s only requirement for minor NSR is that each SIP
“include . . . regulation of the modification and construction of any stationary
source within the areas covered by the plan as necessary to assure that [NAAQS]
are achieved”); § 7410(l) (the EPA may disapprove a SIP revision only if “the
revision would interfere with any applicable requirement concerning
attainment” of the NAAQS “or any other applicable requirement of [the Act]”).
As the EPA itself has recognized, nowhere does the Act authorize EPA review
of SIP revisions for conformity with state law: “Section [7410(l)] requires us to
evaluate proposed SIP revisions in relation to applicable requirements of the
CAA, not state rules.” 73 Fed. Reg. 60,957, 60,961 (Oct. 15, 2008) (emphasis in
original) (approving a revision to Alabama’s SIP).
      In this case, the EPA overstepped the bounds of its narrow statutory role
in the SIP approval process. As mentioned, on five separate occasions the EPA
gave as its reason for disapproving the PCP Standard Permit that it “does not
meet the requirements of the Texas Minor NSR Standard Permits SIP.” 75 Fed.
Reg. 56,424, 56,445 (Sept. 15, 2010) (emphasis added). This attempt by the EPA
to enforce state law standards was ultra vires. It was “in excess of statutory . . .
authority,” in contravention of 5 U.S.C. § 706(2)(C). In addition, because state

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law is a “factor[] which Congress has not intended [the EPA] to consider,” the
EPA’s reliance on it was arbitrary and capricious. State Farm, 463 U.S. at 43.
       The EPA now attempts to discount its repeated invocation of state law
standards by pointing to its passing assertions in its final rule that the “EPA is
disapproving the [PCP Standard Permit] because it does not meet the
requirements of the CAA,” 75 Fed. Reg. at 56,424, and that the “EPA reviews a
SIP revision submission for its compliance with the Act and EPA regulations.”
Id. at 56,447. This will not do, however, because these bald assertions are belied
by the entirety of the EPA’s discussion of the PCP Standard Permit. Nowhere
in either the proposed or final disapproval does the EPA explain how the PCP
Standard Permit is inconsistent with any particular provision of the Act. In
addition to the EPA’s five unambiguous statements that it relied on Texas law,
a holistic review of the EPA’s analysis demonstrates that it evaluated the PCP
Standard Permit for compliance with the features of Texas’s SIP-approved
standard permits program, not the requirements of the CAA. See, e.g., id. at
56,445 (discussing at length the ways in which the PCP Standard permit
purportedly “does not meet the requirements of” Texas’s standard permits
program). The EPA impermissibly treated Texas’s standard permits program
as if it were the applicable legal standard.7
B. The So-Called “Similar Source” Requirement
       In addition to disapproving the PCP Standard Permit for not complying
with the EPA’s interpretation of Texas law, the agency also disapproved it on the

       7
          Nor could the EPA have lawfully treated Texas’s SIP-approved standard permits
program as a proxy for the CAA’s requirements in this case, as the EPA suggested at oral
argument. That the standard permits program meets the CAA’s requirements does not mean
that it supplants those requirements in the next case. It may be that the program passed CAA
muster with flying colors, and that the PCP Standard Permit could likewise satisfy the Act
even assuming, for argument’s sake, that it does not meet the high standards of the standard
permits program and is significantly less environmentally protective (assumptions that
Petitioners vigorously dispute and that seem unlikely given that PCPs are, by definition,
environmentally protective).

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grounds that its availability is not limited to “similar sources.” 75 Fed. Reg. at
56,447. According to the EPA’s proposed disapproval, the “similar source”
requirement limits the availability of each standard permit to a “narrowly
defined categor[y] of emission sources,” such as “oil and gas facilities, asphalt
concrete plants, and concrete batch plants.” 74 Fed. Reg. at 48,476 & n.10.
Petitioners challenge the EPA’s authority to impose a “similar source”
requirement, arguing that no such requirement exists in any applicable
provision of the CAA or its implementing regulations. The EPA parries that it
has “properly tie[d] the requirement that general permits be limited to similar
sources to CAA section 110(a)(2) [42 U.S.C. § 7410(a)(2)] requirements that
control measures be enforceable.” The EPA then points to several agency
guidance documents that are said to “elucidate principles” relevant to its
interpretation of the Act—presumably out of the hope that we will apply
Chevron deference in reviewing that interpretation. See Chevron, U.S.A., Inc.
v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842–43 (1984). Petitioners reply
that the EPA’s “similar source” requirement merits no deference and is without
support in the CAA.
       We first address what level of deference, if any, we owe to the EPA’s
interpretation of § 7410(a)(2) as embracing a “similar source” requirement. We
do not owe any deference to that interpretation based on the EPA’s insistence on
a “similar source” requirement in its proposed and final disapproval. That is
because nowhere in the rulemaking record does the EPA even hint that the
“similar source” requirement reflects its interpretation of any applicable
provision of the CAA or its implementing regulations.8 There is thus no agency


       8
         To the contrary, the EPA suggested in its final rule that the “similar source” standard
derives from Texas law. See, e.g., 75 Fed. Reg. at 56,444 (“Under the Texas Standard Permits
Minor NSR SIP, an individual Standard Permit must be limited to new or existing similar
sources.”). Insofar as the “similar source” requirement reflects the EPA’s interpretation of
Texas law, imposition of it here is ultra vires for the reasons discussed above in Part III.A.

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interpretation in the rulemaking record to which to defer. See United States v.
Mead Corp., 533 U.S. 218, 226–27 (2001) (setting forth the framework for when
and to what degree courts must defer to agency interpretation “of a particular
statutory provision”). For this same reason we owe no deference to the “similar
source” requirement based on the EPA’s citation to agency guidance documents.
See 74 Fed. Reg. at 48,476 n.11 (citing various agency guidance documents). The
EPA concedes that these documents do not interpret the relevant statutory
provisions—that is, those that govern SIP approval of minor NSR. See 75 Fed.
Reg. at 56,447 (“The utility of these citations is not in the specific subject matter
they address, but in their discussion of the regulatory principles to be applied in
reviewing permit schemes that adopt emission limitations created through
standardized protocols.”).9
       Nevertheless, we must still consider whether we owe some measure of
deference to the EPA’s interpretation of the Act in its appellate brief, which
represents the first time it has argued that the CAA authorizes it to impose a
“similar source” requirement on minor NSR. Chevron deference is out of the
question. See Pool Co. v. Cooper, 274 F.3d 173, 177 n.3 (5th Cir. 2001) (litigation
briefs are not entitled to Chevron deference). Still, we ordinarily must afford a
weaker form of deference under Skidmore v. Swift & Co., 323 U.S. 134 (1944),
to agency interpretations of statutes they administer that do not carry the force
of law and, therefore, do not command Chevron deference. Mead, 533 U.S. at
234–35. The deference due under Skidmore varies with the persuasive force of


       9
         The EPA stated in its final disapproval that “[t]he memoranda cited in the proposal
were cited for the purpose of providing documentary evidence of how EPA has exercised its
discretionary authority when reviewing general permit programs similar to the Texas
Standard Permits SIP.” Id. (emphasis added). This statement reflects a misapprehension by
the EPA of its authorized role in the SIP-approval process. As discussed above, the EPA does
not possess any “discretionary authority” in that process. See 42 U.S.C. § 7410(k)(3). Only the
states enjoy discretion in implementing the dictates of the CAA. See, e.g., Union Elec. Co., 427
U.S. at 250 (“Each State is given wide discretion in formulating its [SIP].”).

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                                      No. 10-60891

the agency interpretation. See id. at 228. In Mead, the Court described as “near
indifference” the level of Skidmore deference due “an interpretation advanced
for the first time in a litigation brief.” Id. (citing Bowen v. Georgetown Univ.
Hosp., 488 U.S. 204, 212–13 (1988)). In discussing the deference question in
Bowen, the Court explained that “[d]eference to what appears to be nothing more
than an agency’s convenient litigating position would be entirely inappropriate.”
Bowen, 488 U.S. at 213. Thus, it appears that although we are bound to extend
some modicum of deference to the EPA’s appellate counsel’s interpretation, that
degree of deference is minimal. See Mead, 533 U.S. at 228 (the approach
outlined in Skidmore “has produced a spectrum of judicial responses,” with
deference to litigation briefs at the lowest end of that spectrum).
       Even affording Skidmore deference to the EPA’s interpretation of the CAA,
we agree with the Petitioners that the Act does not authorize the EPA to impose
a “similar source” requirement on minor NSR.10 We have already made clear
that the Act empowers the EPA to disapprove a SIP revision only “if the revision
would interfere with any applicable requirement concerning attainment [of the
NAAQS] . . . or any other applicable requirement of [the Act].” § 7410(l).
Otherwise the EPA must approve the revision. § 7410(k)(3).
       We can quickly dispense with any supposition that inclusion of a “similar
source” rule in the PCP Standard Permit is necessary to prevent interference
with the NAAQS. The Texas regulations governing the PCP Standard Permit
provide that “[t]his standard permit must not be used to authorize [any PCP]
that . . . the [TCEQ] executive director determines [has] the potential to exceed
a [NAAQS].” 30 Tex. Admin. Code § 116.617(a)(3)(B). Given this provision,



       10
          We note that the interpretation advanced in the EPA’s brief is not particularly
persuasive because the agency’s brief merely asserts, without any statutory analysis or
support, that the “EPA properly ties the requirement that general permits be limited to
similar sources to CAA section 110(a)(2) requirements that control measures be enforceable.”

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                                       No. 10-60891

which makes the PCP Standard Permit unavailable for any PCP that has even
the potential to cause a breach of the NAAQS, we cannot say that the permit
“would interfere” with the NAAQS. 42 U.S.C. § 7410(l) (emphasis added).
Indeed, it is impossible for the PCP Standard Permit to cause interference with
the NAAQS, provided that we assume, as we ought, that Texas will enforce this
provision of its own regulations. See City of Seabrook, Tex. v. EPA, 659 F.2d
1349, 1367 (5th Cir. 1981) (admonishing that the “EPA could assume [that the]
state would implement [its regulations and if it] fails to do so, then either the
EPA or a concerned citizen may bring an enforcement action”).
       Nor can we accept the EPA’s argument that its “similar source”
requirement is an applicable provision of the Act. First, the “similar source”
requirement finds no purchase in the text of any applicable provision of the Act.
See § 7410(a)(2)(C) (each SIP minor NSR program need only “include . . .
regulation of the modification and construction of any stationary source within
the areas covered by the plan as necessary to assure that [the NAAQS] are
achieved”).11    In addition, the inclusion of a “similar source” requirement
elsewhere in the Act is strong evidence that the requirement does not apply to
minor NSR. Title V of the CAA, which governs operating permits, explicitly
imposes a “similar source” limitation. Compare § 7661c(d) (operating permit
rules) with § 7410 (containing the requirements for minor NSR); see Keene Corp.
v. United States, 508 U.S. 200, 208 (1993) (“‘[W]here Congress includes
particular language in one section of a statute but omits it in another . . . , it is

       11
          The EPA also argues that a “similar source” limitation is necessary to ensure
enforceability. The only mention of enforceability in § 7410 is the requirement that SIPs
“include enforceable emission limitations and other control measures . . . as may be necessary
or appropriate to meet the applicable requirements of this chapter.” § 7410(a)(2)(A). However,
the only requirement in this chapter applicable to minor NSR is that the SIP include
“regulation of the modification and construction of any stationary source within the areas
covered by the plan as necessary to assure that [NAAQS] are achieved.” § 7410(a)(2)(C). As
explained above, the PCP Standard Permit necessarily meets this requirement because it is
unavailable for any PCP that has even the potential to cause a breach of the NAAQS.

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                                   No. 10-60891

generally presumed that Congress acts intentionally and purposely in the
disparate inclusion or exclusion.’” (quoting Russello v. United States, 464 U.S.
16, 23 (1983)). Finally, the structure of the CAA militates against reading an
extra-statutory requirement into the Act’s limitations on state discretion.
Because the states enjoy “wide discretion” in implementing the Act, the
imposition of newfound restrictions upsets the Act’s careful balance between
state and federal authority. Union Elec. Co., 427 U.S. at 250; see also Fla. Power
& Light Co., 650 F.2d at 587 (“The great flexibility accorded the states under the
Clean Air Act is . . . illustrated by the sharply contrasting, narrow role to be
played by EPA.”). This structural principle applies with special force in this case
because, as previously discussed, the Act imposes only the most minimal of
requirements on minor NSR.
      Because the so-called “similar source” requirement is neither necessary to
safeguard the NAAQS nor warranted by any applicable provision of the Act, we
must conclude that the EPA’s insistence upon it here was unjustified. Like the
EPA’s reliance on its interpretation of Texas law, its imposition of a “similar
source” standard was arbitrary and capricious. See State Farm, 463 U.S. at 43
(agency action is “arbitrary and capricious if the agency has relied on factors
which Congress has not intended it to consider”). The EPA’s attempt to graft a
“similar source” rule onto the applicable provisions of the CAA was also a
violation of 5 U.S.C. § 706(2)(C), which requires reviewing courts to set aside
agency action that is “in excess of statutory . . . authority.”
C. “Replicability”
      Petitioners further argue that the EPA lacked the authority to disapprove
the PCP Standard Permit based on its view that the permit affords the TCEQ
Director too much discretion under certain circumstances. The EPA took issue
with this provision of the permit because, in the EPA’s view, it does not include
any “replicable” limits on how the Director is to exercise his discretion. In a

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                                        No. 10-60891

different context, the EPA has defined “replicability” to mean “procedures [that]
are sufficiently specific and nonsubjective so that two independent entities
applying the procedures would obtain the same result.” 57 Fed. Reg. 13,498,
13,568 (Apr. 16, 1992) (outlining guidelines for states when developing an overall
SIP control strategy). The EPA’s proposed disapproval expressed its objection
as follows: “There are no replicable conditions in the PCP Standard Permit that
specify how the Director’s discretion is to be implemented.” 74 Fed. Reg. at
48,476. The EPA explained in its final rule that one reason it was disapproving
Texas’s PCP Standard Permit is that it “lacks the requisite replicable
standardized permit terms specifying how the Director’s discretion is to be
implemented for the case-by-case determinations.” 75 Fed. Reg. at 56,447.
Petitioners contend that the EPA’s reliance on this rationale was impermissible
because there is no applicable provision of the Act or the EPA’s implementing
regulations that requires a state’s minor NSR program to include replicable
permit conditions.12

       12
           Petitioners also point out that the lack of “replicable” conditions is not problematic
here because the permit only grants the Director the discretion to require more of registrants
if he is concerned that a registration will threaten public health or the NAAQS. The provision
at issue states: “This standard permit must not be used [if] the executive director determines
there are health effects concerns or the potential to exceed a [NAAQS] . . . until those concerns
are addressed by the registrant to the satisfaction of the executive director.” 30 Tex. Admin.
Code § 116.617(a)(3)(B). We confess that we are at a loss to comprehend the EPA’s concern.
Subsection 116.617(a)(3)(B) in no way jeopardizes the NAAQS. Instead, it safeguards them.
It provides a safety valve procedure whereby, in the event a registration should present even
the potential of threatening the NAAQS or public health, the Director is authorized to
intervene and require the registrant to take additional steps to protect air quality.
         Moreover, the EPA’s concern about the Director’s discretion is especially perplexing in
light of its approval, just seven months before it disapproved Texas’s PCP Standard Permit,
of similar Georgia regulations that are less environmentally protective and afford the Georgia
director far greater discretion than the Texas Director. See 75 Fed. Reg. 6,309 (Feb. 9, 2010)
(approving Ga. Comp. R. & Regs. 391–3–1–.03(6)(j) into Georgia’s SIP). Georgia’s regulations
exempt PCPs from minor NSR construction permitting.                   Ga. Comp. R. & Regs.
391–3–1–.03(6)(j). The EPA approved this provision because it “applies to minor sources only.”
75 Fed. Reg. at 6,312. So too does Texas’s PCP Standard Permit. 30 Tex. Admin. Code
§ 116.617(b)(1)(C). The Georgia director has discretion whether or not to require certain
ongoing monitoring and reporting requirements. See Ga. Comp. R. & Regs. 391–3–1–.03(2)(c)

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                                   No. 10-60891

      Petitioners are correct. The EPA had no legal basis to demand “replicable”
limitations on the Director’s discretion.      Not once in its proposed or final
disapproval, or in its argument before this court, has the EPA pointed to any
applicable provision of the Act or its regulations that includes a “replicability”
standard. Moreover, the EPA cannot argue that the lack of replicable conditions
would interfere with the NAAQS because, as we have explained,
§ 116.617(a)(3)(B) can only serve to protect the NAAQS. Thus, the EPA had no
statutory basis under 42 U.S.C. § 7410(l) to disapprove Texas’s SIP revision
because of “replicability” concerns.
      This straightforward conclusion is unaffected by the EPA’s invocation of
an agency policy document, entitled the “General Preamble for the
Implementation of Title I of the Clean Air Act Amendments of 1990.” 57 Fed.
Reg. 13,498 (Apr. 16, 1992) [hereinafter General Preamble]. The only portion of
the rulemaking record that discusses the General Preamble is Section IV.A of
the proposed rule, which begins with the heading: “What are the Requirements
for EPA’s Review of a Submitted Major NSR SIP Revision?” 74 Fed. Reg. at
48,471–72 (emphasis added). The EPA’s discussion of the PCP Standard Permit
appears pages later, in Section VII of the proposed rule, under the heading:
“Does the Submitted PCP Standard Permit Meet the Minor NSR SIP
Requirements?” Id. at 48,475–76. Thus, it is post hoc rationalization for the
EPA now to argue that it relied on the General Preamble in concluding that
§ 116.617(a)(3)(B)—which indisputably applies only to minor sources—“lacks the
requisite replicable standardized terms.” 75 Fed. Reg. at 56,447 (final rule). We
must disregard this post hoc rationale. See Burlington Truck Lines, 371 U.S. at



(“As a condition for the issuance of an operating permit, the Director may require the
applicant to conduct performance tests and monitoring and provide reports concerning
operations.”). By contrast, Texas’s detailed reporting, recordkeeping, and monitoring
requirements are mandatory. See 30 Tex. Admin. Code §§ 116.617(b)(1), 116.617(e).

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                                 No. 10-60891

168–69. Moreover, even if we were to consider the 1992 General Preamble, it
would not change our conclusion that the CAA does not impose a “replicability”
standard on minor NSR. We do not owe Chevron deference to the General
Preamble because, by its own terms, it does not carry the force of law. See Mead,
533 U.S. at 226–27 (Chevron deference only due agency statutory interpretations
“promulgated in the exercise of” the agency’s delegated authority “to make rules
carrying the force of law”). The General Preamble states unequivocally that it
represents only the “EPA’s preliminary interpretations, and thus do[es] not bind
the States and the public as a matter of law.” 57 Fed. Reg. at 13,498. Although
Skidmore instructs us to defer to agency interpretations insofar as they are
persuasive, see Mead, 533 U.S. at 234–35 (Skidmore deference due agency
interpretations that do not qualify for deference under Chevron), in our view the
General Preamble’s discussion of “replicability” does not reflect a persuasive
interpretation of the provisions of the CAA applicable to minor NSR. As the
State of Texas correctly observes in its reply brief, the General Preamble “does
not expressly address Minor NSR SIP revisions” and was issued in response to
CAA amendments “dealing with SIP requirements for major sources in
nonattainment areas” (emphasis in original).
      Like Texas law and the “similar source” limitation, “replicability” is not a
legal standard that the Act authorizes the EPA to enforce when reviewing a
state’s minor NSR program. Thus, the EPA acted “in excess of statutory . . .
authority,” and thereby violated 5 U.S.C. § 706(2)(C), by disapproving the PCP
Standard Permit based on the want of replicable limitations in 30 Tex. Admin.
Code § 116.617(a)(3)(B). Moreover, “replicability” was (yet another) “factor[]
which Congress has not intended [the EPA] to consider,” meaning the EPA’s
reliance on it was (yet again) arbitrary and capricious agency action. State
Farm, 463 U.S. at 43.



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                                       No. 10-60891

                                   IV. CONCLUSION
       This chapter in regulatory history has lasted almost two decades. Texas
submitted its first two standard permits for PCPs to the EPA for approval in
1994. Texas made various amendments to these permits over the years, and
promptly submitted each amendment to the EPA. The most recently amended
version is the PCP Standard Permit at issue in this case. Despite an eighteen-
month statutory deadline, the EPA did not take action on any of these
submissions until September 15, 2010. At that late date, the EPA disapproved
the PCP Standard Permit—submitted four and a half years earlier—based on
its purported nonconformity with three extra-statutory standards that the EPA
created out of whole cloth. Moreover, the EPA did this in the context of a
cooperative federalism regime that affords sweeping discretion to the states to
develop implementation plans and assigns to the EPA the narrow task of
ensuring that a state plan meets the minimum requirements of the Act. The
EPA applied these unauthorized standards to disapprove of a state program for
projects that reduce air pollution and that, under the Act’s plain terms, is subject
to only the most minimal regulation.
       Because the EPA waited until more than three years after the statutory
deadline to act on Texas’s submission, we order the EPA to reconsider it
expeditiously. On remand, the EPA must limit its review of Texas’s regulations
to ensuring that they meet the minimal CAA requirements that govern SIP
revisions to minor NSR, as set forth in 42 U.S.C. § 7410(a)(2)(C) and § 7410(l).
If Texas’s regulations satisfy those basic requirements, the EPA must approve
them, as § 7410(k)(3) requires.13 That is the full extent of the EPA’s authority


       13
         It is difficult to conceive, and the EPA has not suggested, how it could disapprove the
PCP Standard Permit under the appropriate statutory factors. The provisions of the CAA that
apply to minor NSR require state regulation only insofar as is necessary to assure
achievement of the NAAQS, see 42 U.S.C. §§ 7410(a)(2)(C), 7410(l), and Texas’s regulations
provide that “[t]his standard permit must not be used to authorize [any PCP] that . . . the

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                                      No. 10-60891

in the SIP-approval process because that is all the authority that the CAA
confers. See La. Pub. Serv. Comm’n v. FCC, 476 U.S. 355, 374 (1986) (“[A]n
agency literally has no power to act . . . unless and until Congress confers power
upon it.”).
       We VACATE the EPA’s disapproval of 30 Tex. Admin. Code §§ 116.610(a),
116.610(b), and 116.617 and REMAND with instructions that the EPA
reconsider these regulations and approve or disapprove them most expeditiously.




[TCEQ] executive director determines [has] the potential to exceed a [NAAQS].” 30 Tex.
Admin. Code § 116.617(a)(3)(B). In addition, we have already concluded that each of the EPA’s
grounds for disapproval was unlawful. Finally, when pressed at oral argument, the EPA was
unable to identify any legal deficiency with the PCP Standard Permit—other than its supposed
failure to meet the EPA’s extra-statutory requirements that today we hold unlawful—despite
the half decade the EPA has had to evaluate it. Nevertheless, we defer to the agency to
reevaluate Texas’s regulations in light of the proper CAA standards.

                                             22
