     Case: 10-60934   Document: 00512017929   Page: 1     Date Filed: 10/12/2012




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

                                                                   FILED
                                                                October 12, 2012

                                 No. 10-60934                     Lyle W. Cayce
                                                                       Clerk

LUMINANT GENERATION CO. LLC, ET AL.,

                                           Petitioners,
v.

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY,

                                           Respondent.



                 On Petitions for Review of a Final Rule of the
                United States Environmental Protection Agency


Before STEWART, Chief Judge, and BENAVIDES and GRAVES, Circuit
Judges.
CARL E. STEWART, Chief Judge:
        IT IS ORDERED that the opinion previously filed in this case,
Luminant Generation Co. L.L.C. v. U.S. E.P.A., No. 10-60934, 2012 WL
3065315 (5th Cir. July 30, 2012), is WITHDRAWN. The following opinion is
substituted therefore:
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                                      No. 10-60934

       Two sets of petitioners, hereinafter referred to as “Industry Petitioners”1
and “Environmental Petitioners,”2 seek review of the United States
Environmental Protection Agency’s (“EPA”) final rule partially approving and
partially disapproving the most recent revision to Texas’s State Implementation
Plan (“SIP”) submitted by the Texas Commission on Environmental Quality
(“TCEQ”) pursuant to the Clean Air Act (“CAA” or “the Act”), 42 U.S.C. § 7401
et seq.3 Because we find that the EPA did not act arbitrarily or capriciously, or
contrary to law, or in excess of its statutory authority, in its partial approval and
partial disapproval of Texas’s SIP revision, we deny both petitions for review.
                                  I. BACKGROUND
A. Statutory Background
       The CAA “establishes a comprehensive program for controlling and
improving the nation’s air quality through state and federal regulation.” BCCA
Appeal Grp. v. EPA, 355 F.3d 817, 821-22 (5th Cir. 2003). Under the CAA, the
EPA is responsible for identifying air pollutants and establishing National
Ambient Air Quality Standards (“NAAQS”) which specify maximum allowable
levels of certain types of pollutants in the air. Id. at 822; 42 U.S.C. §§ 7408-
7409. The states are then permitted, “within limits established by [the NAAQS],
to enact and administer their own regulatory programs, structured to meet their
own particular needs.” Hodel v. Virginia Surface Mining and Reclamation Ass’n,



       1
       Luminant Generation Co. LLC, Oak Grove Management Co. LLC, Big Brown Power
Co. LLC, and Sandow Power Co. LLC.
       2
        Environmental Integrity Project, Sierra Club, Environment Texas Citizen Lobby, Inc.,
Citizens for Environmental Justice, Texas Environmental Justice Advocacy Services, Air
Alliance Houston, and Community In-Power and Development Association.
       3
          Texas Oil & Gas Association of Business, Texas Association of Manufacturers, and
Texas Chemical Council have filed a brief in support of the EPA’s partial approval of Texas’s
SIP. The state of Texas has filed an amicus brief in support of Texas’s SIP, as submitted, in
its entirety.

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452 U.S. 264, 289 (1981). This federal-state partnership is often described as
“cooperative federalism.” Id.
      To comply with its responsibilities under the Act, each state must create
and administer a SIP which provides for the “implementation, maintenance, and
enforcement” of NAAQS by setting “emission limitations and other control
measures.” 42 U.S.C. § 7410(a)(1)-(2). The states have “wide discretion” in
formulating their SIPs, Union Elec. Co. v. EPA, 427 U.S. 246, 250 (1976),
including the “broad authority to determine the methods and particular control
strategies they will use to achieve the statutory requirements.” BCCA Appeal
Grp., 355 F.3d at 822 (citing Union Elec. Co., 427 U.S. at 266 (“So long as
national standards are met, the state may select whatever mix of control devices
it desires.”)). Once a state creates or revises a SIP, it is submitted to the EPA
for review. 42 U.S.C. §§ 7410(a)(1),(k)(1)-(2).
      The Act confines the EPA to the ministerial function of reviewing SIPs for
consistency with the Act’s requirements. Id. at § 7410(k)(3). The EPA must
approve the plan in its entirety if it meets the applicable requirements of the
Act. Id. at § 7410(k)(3); Fla. Power & Light Co. v. Costle, 650 F.2d 579, 587 (5th
Cir. 1981). If only “a portion of the [SIP] meets all the applicable requirements
of [the Act],” the EPA “may approve the [submittal] in part and disapprove the
[submittal] in part.”   42 U.S.C. § 7410(k)(3).       The EPA may also provide
“conditional approval” of a SIP, “based on a commitment of the State to adopt
specific enforceable measures by a date certain, but not later than 1 year after
the date of approval of the plan revision.” Id. at § 7410(k)(4).
      States must periodically revise their SIPs as necessary to ensure
continuing compliance with current NAAQS. Id. at § 7410(a)(2)(H). The EPA
must review and approve or disapprove a SIP revision within 18 months of
submission. Id. at §§ 7410(k)(1)(B),(2)-(3). The EPA shall disapprove a SIP
revision only if “the revision would interfere with any applicable requirement

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concerning attainment” of the NAAQS “or any other applicable requirement” of
the Act. Id. at § 7410(l). If the revision meets all of the applicable CAA
requirements, the EPA “shall approve such submittal as a whole.” Id. at §
7410(k)(3). Once approved by the EPA as meeting the requirements of the Act,
the SIP, or the approved portion thereof, is incorporated by reference into the
Code of Federal Regulations. See 40 C.F.R. § 52.02 (2011).
      The CAA provides for shared enforcement of SIPs. A state must include
in its SIP, a “program to provide for the enforcement” of the plan. 42 U.S.C.
§ 7410(a)(2)(C). The program must provide the state permitting authority power
to “recover civil penalties in a maximum amount of not less than $10,000 per day
for each violation.” Id. at § 7661a(b)(5)(E). Additionally, the EPA has the power
to enforce a SIP by commencing “a civil action for a permanent or temporary
injunction, or to assess and recover a civil penalty of not more than $25,000 per
day for each violation, or both[.]” Id. at § 7413(b). Such suit may be brought in
district court, “and such court shall have jurisdiction to restrain such violation,
to require compliance, to assess such civil penalty, to collect any fees owed to the
United States . . . and to award any other appropriate relief.” Id. Finally, any
person may commence a civil action on his own behalf against any person who
is alleged to have violated an emission standard or limitation in a SIP. Id. at
§ 7604(a). A citizen suit may be brought in district court, which shall have
jurisdiction to enforce such an emission standard or limitation and to apply any
appropriate civil penalties. Id.
      In assessing the amount of a civil penalty in either an EPA enforcement
action or a citizen suit, the court must consider the penalty assessment criteria
outlined in section 7413(e), i.e., the size of the business, the economic impact of
the penalty on the business, the violator’s full compliance history and good faith
efforts to comply, the duration of the violation as established by any credible
evidence (including evidence other than the applicable test method), payment by

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the violator of penalties previously assessed for the same violation, the economic
benefit of noncompliance, the seriousness of the violation, and “other factors as
justice may require.” Id. at § 7413(e).
B. Facts and Proceedings
         In its final rule4 which became effective on January 10, 2011, the EPA
partially approved and partially disapproved the most recent revision to Texas’s
SIP which was submitted by the TCEQ in 2006.5 The portion of the SIP at issue
creates an affirmative defense against civil penalties for excess emissions during
both planned and unplanned startup, shutdown, and maintenance/malfunction
(“SSM”) events. The EPA approved the portion of the SIP revision providing an
affirmative defense against civil penalties for unplanned SSM events and
disapproved the portion of the SIP revision providing an affirmative defense
against civil penalties for planned SSM events. See 75 Fed. Reg. 68,989, 68,991.
         Since the creation of its first SIP in 1972, Texas has provided for special
treatment of SSM activity.             See Tex. SIP § XIV, Rule 12 (Jan. 26, 1972)
(providing emissions during “upsets” and “start-up or shutdown . . . may not be
required to meet the allowable emission levels”). The revised SIP submitted by
Texas in 2000 provided that emissions from SSM activity were “exempt from
compliance with air emission limitations established in permits, rules, and
orders of the commission” so long as the owner or operator complied with certain
reporting, record keeping, and operational requirements. See General Air
Quality Rules, 25 Tex. Reg. 6727, at § 101.11(b) (July 14, 2000). Further, the
exceptions were limited to SSM emissions that “could not have been prevented



         4
         Approval and Promulgation of Implementation Plans; Texas; Excess Emissions
During Startup, Shutdown, Maintenance, and Malfunction Activities, 75 Fed. Reg. 68,989
(Nov. 10, 2010).
         5
             30 Tex. Reg. 4090 (July 15, 2005) (proposed), amended by 31 Tex. Reg. 422 (Jan 20,
2006).

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through planning and design,” that “were not part of a recurring pattern,” and
that did “not cause or contribute to a condition of air pollution.” See id.
       The EPA approved the 2000 SIP revision, determining that the exemptions
for emissions during SSM activity contained in the plan met the requirements
of the CAA. See Approval and Promulgation of Implementation Plans; Texas;
Excess Emissions During Startup, Shutdown, Malfunction and Maintenance, 65
Fed. Reg. 70,792 (Nov. 28, 2000). In its approval, the EPA noted that “under the
[CAA], all excess emissions during SSM episodes are violations of applicable
emission limitations [however,] we believe it would be inequitable to penalize a
source for occurrences beyond the company’s control. A source has the burden
of proving that the excess emissions were due to circumstances beyond the
control of the operator or the owner.” Id. at 70,793. Additionally, the EPA found
that the 2000 SIP revision comported with past EPA guidance contained in its
policy statements regarding emissions from SSM activity. Id. at 70,792–93.
These policy statements can be found in a collection of memos that we will refer
to as the “Bennett Memos” (19826 & 19837) the “Herman Memo” (19998). Id. at
70,792.

       6
          Mem. of Kathleen Bennett, “Policy on Excess Emissions During Startup, Shutdown,
Maintenance, and Malfunctions” (Sept. 28, 1982) (providing that “it is reasonable to expect
that careful planning will eliminate violations of emissions limitations during [startup and
shutdown] periods. . . . [s]imilarly, scheduled maintenance is a predictable event which can
be . . . made to coincide with maintenance . . . or other source shutdowns. Consequently,
excess emissions during periods of scheduled maintenance should be treated as a violation[.]”).
       7
        Mem. of Kathleen Bennett, “Policy on Excess Emissions During Startup, Shutdown,
Maintenance, and Malfunctions” (Feb. 15, 1983) (recognizing that, in certain situations, excess
emissions during startup and shutdown “need not be treated as a violation if the source can
show that the excesses could not have been prevented . . . and that bypassing was unavoidable
to prevent loss of life, personal injury, or severe property damage.”).
       8
         Mem. of Steven A. Herman, “State Implementation Plans (SIPs): Policy Regarding
Excess Emissions During Malfunctions, Startup, and Shutdown” (Sept. 20, 1999) (providing
that “because excess emissions might . . . prevent attainment or interfere with maintenance
of [NAAQS], EPA views all excess emissions as violations. . . . Nevertheless, . . . imposition of
a penalty for sudden and unavoidable malfunctions . . . may not be appropriate.”).

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      Additionally, in accordance with the EPA’s request, 28 Tex. Reg. 5787,
5787 (July 25, 2003) (proposed), Texas’s 2004 SIP revision omitted the language
indicating that SSM emissions were “exempt,” and substituted language that
such emissions would be “subject to an affirmative defense.” 29 Tex. Reg. 118,
120 (Jan. 2, 2004) (final). Further, as a result of changes in state law, Texas also
distinguished between emissions resulting from planned SSM activity and all
other emission events and proposed providing an affirmative defense for these
emissions. Id. at 134 (§ 101.222(b),(c)). The proposed affirmative defense for
scheduled SSM activity required the owner or operator prove “the period of
unauthorized emissions . . . could not have been prevented through planning and
design.” Id. at 134 (§ 101.222(c)(2)).       All other emissions would only be
protected if they were “caused by a sudden breakdown of equipment or process,
beyond the control of the owner or operator.” Id. at 134 (§ 101.222(b)(2)). The
proposed rules stated that the affirmative defense provision would expire on
June 30, 2005. Id. at 135 (§ 101.222(h)).
      The EPA ultimately gave Texas’s 2004 SIP revision “limited approval.”
See Limited Approval and Promulgation of Implementation Plans; Texas; Excess
Emissions During Startup, Shutdown and Malfunction Activities, 70 Fed. Reg.
16,129 (Mar. 30, 2005). The EPA explained that “the rule improves the SIP and
is largely consistent with the relevant requirements of the [CAA]” but noted that
the provisions allowing for an affirmative defense for scheduled SSM activity
were “ambiguous, at best, and inconsistent with the [CAA], at worst, and could
create problems with enforcing the underlying applicable emission limits.” 70
Fed. Reg. at 16,130. The EPA stated as follows:
            The EPA’s interpretation of [§ 7410] allows an
            affirmative defense to be asserted against civil
            penalties . . . for excess emissions activities which are
            sudden, unavoidable or caused by circumstances beyond
            the control of the owner or operator . . . . However, EPA


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               has determined that it is inappropriate to provide an
               affirmative defense for excess emissions resulting from
               scheduled maintenance . . . .

Id. at 16,131. Nevertheless, the EPA approved the 2004 provision, noting
section 101.222's expiration date of June 30, 2005, but in doing so, the agency
clarified that “if Texas revises its rules to include an affirmative defense for
excess emissions in the Texas SIP in the future, the State should ensure . . . that
the affirmative defense does not apply to excess emissions from scheduled
maintenance activities . . . .” Id. The EPA then granted a request from Texas to
extend the affirmative defense’s expiration date to June 30, 2006. See Limited
Approval and Promulgation of Implementation Plans; Texas; Excess Emissions
During Startup, Shutdown and Malfunction Activities, 70 Fed. Reg. 50,205,
50,206 (Aug. 26, 2005).
         On January 23, 2006, Texas submitted the revised SIP that is the subject
of this appeal. The 2006 SIP revision provides in part:
(1)      For any emission deemed excessive by the state executive director, no
         affirmative defense would be available. See 30 Tex. Admin. Code
         § 101.222(a).

(2)      For “unplanned maintenance, startup or shutdown activity,” an
         affirmative defense against civil penalties would be available if the “owner
         or operator proves . . . all” of the listed criteria, including that “(2) the
         periods of unauthorized emissions from unplanned [SSM] activity could
         not have been prevented through planning and design,” and “(3) the
         unauthorized emissions from unplanned [SSM] activity were not part of
         a recurring pattern,” and that the “(9) unauthorized emissions did not
         cause or contribute to an exceedance of the NAAQS . . . .” See 30 Tex.
         Admin. Code §§ 101.1(108), 101.222(c); see also id. §§ 101.1(109),
         101.222(b) (providing elements for “upset events”).

(3)      For “[p]lanned maintenance, startup, or shutdown activity,” an affirmative
         defense against civil penalties would be available if the “owner or operator
         proves all” of the criteria listed under the section for unplanned SSM
         activity, including that “(2) the periods of unauthorized emissions from


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      unplanned [SSM] activity could not have been prevented through planning
      and design,” that “(3) the unauthorized emissions from unplanned [SSM]
      activity were not part of a recurring pattern,” and that “(9) unauthorized
      emissions did not cause or contribute to an exceedance of the NAAQS . .
      . .” See 30 Tex. Admin. Code § 101.222(h) (emphasis added). The
      affirmative defense for planned SSM activity would expire after, at most,
      two years. See id. § 101.222(h)-(i).

      Thereafter, as mentioned above, the EPA partially approved and partially
disapproved the revisions. 75 Fed. Reg. at 68,991. In finalizing its approval of
the portion of the SIP revision containing an affirmative defense for unplanned
SSM activity, the EPA stated that section 101.222(a)-(g) “provides an affirmative
defense for certain emission events that is consistent with the interpretation of
the Act as set forth in our guidance documents.” Id. at 68,990. The EPA
explained that it has “recognized that sources may, despite good practices, be
unable to meet emission limitations during periods of startup and shutdown and,
that despite good operating practices, sources may suffer a malfunction due to
events beyond the control of the owner or operator.” Id. at 68,992.
      The EPA then finalized its disapproval of section 101.222(h)-(j), which
contained an affirmative defense for planned SSM activity, 75 Fed. Reg. at
68,991, relying on its past reasoning that “[b]ecause these events are planned,
we believe that sources should be able to comply with applicable emission limits
during these periods of time.” 75 Fed. Reg. 26,892, 26,896 (May 13, 2010). The
EPA further stated that it disapproved of the affirmative defense for planned
startup and shutdown activity contained in the SIP revision because it found the
provisions for such activity to be nonseverable from those for planned
maintenance. 75 Fed. Reg. at 68,991. Additionally, the EPA noted that a
“defect” in the wording of the affirmative defense, caused by cross-referencing
the section for unplanned SSM activity, rendered that defense far broader than
would be consistent with the requirements set forth in the Act. Id. at 68,991 n.5.


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      Environmental Petitioners seek review of the EPA’s final rule approving
the portion of the SIP revision providing an affirmative defense against civil
penalties for excess emissions resulting from unplanned SSM activity. Industry
Petitioners seek review of the EPA’s final rule disapproving the portion of SIP
revision providing an affirmative defense against civil penalties for excess
emissions resulting from planned SSM activity.
                         II. STANDARD OF REVIEW
      Pursuant to 42 U.S.C. § 7607(b), this court has jurisdiction to hear a
petition for review of the EPA’s approval of a SIP under 42 U.S.C. § 7410. A
petition to review the EPA’s approval or disapproval of a SIP is governed by the
Administrative Procedure Act. See 5 U.S.C. § 706; BCCA Appeal Grp., 355 F.3d
at 824. The EPA’s decision is valid unless it is “arbitrary, capricious, an abuse
of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A).
Agency action that is in excess of statutory authority will also be set aside. Id.
at § 706(2)(C).
      “An agency rule 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. U.S. E.P.A., 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)).
“If the agency’s reasons and policy choices conform to minimal standards of
rationality, then its actions are reasonable and must be upheld.” Tex. Oil & Gas
Ass’n, 161 F.3d at 934. Nonetheless, the reviewing court “may not supply a
reasoned basis for the agency’s action that the agency itself has not given.”
Motor Vehicle Mfrs. Ass’n, 463 U.S. at 43. “[T]he focal point for judicial review



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                                     No. 10-60934

should be the administrative record already in existence, not some new record
made initially in the reviewing court.” Camp v. Pitts, 411 U.S. 138, 142 (1973).
      “The court applies the two-step Chevron analysis to questions involving
the EPA’s interpretation of the statutes it administers,” including the CAA.
Chevron, U.S.A., Inc. v. NRDC, Inc., 467 U.S. 837, 842-43 (1984). “If Congress
‘has directly spoken to the precise question at issue,’ the agency and the court
‘must give effect to the unambiguously expressed intent of Congress.’” Chevron,
467 U.S. at 842-43. In performing this analysis, the court “employ[s] traditional
tools of statutory construction.” Chevron, 467 U.S. at 843 n.9. “[A] statutory
provision cannot be read in isolation, but necessarily derives its meaning from
the context provided by the surrounding provisions, as well as the broader
context of the statute as a whole.” Khalid v. Holder, 655 F.3d 363, 367 (5th Cir.
2011).
         “If the statute, however, is ‘silent or ambiguous with respect to the specific
issue,’ the court must first assess the administrative decision-making process to
determine whether the agency’s action is entitled to Chevron deference.” United
States v. Mead Corp., 533 U.S. 218, 226-31 (2001) (quoting Chevron, 467 U.S. at
843). “Under Mead, Congress must have ‘delegated authority to the agency
generally to make rules carrying the force of law,’ and that agency interpretation
claiming deference must have been promulgated in the exercise of that
authority.” BCCA Appeal Grp., 355 F.3d at 825 (quoting Mead, 533 U.S. at 226-
27). “If the agency’s decision is a result of a sufficiently formal and deliberative
process to warrant deference, the second step of Chevron requires the court to
assess whether the agency’s interpretation is ‘based on a permissible
construction of the statute.’” Mead, 533 U.S. at 230 (quoting Chevron, 467 U.S.
at 843). “If the agency’s interpretation is reasonable, it will be upheld.” Smiley
v. Citibank, N.A., 517 U.S. 735, 744-45 (1996). “Federal courts accord ‘great



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deference’ to the EPA’s construction of the [CAA].” Union Elec. Co., 427 U.S. at
266.
       Where an issue presented is a challenge to an agency’s interpretation of
its own regulation, the agency’s interpretation is controlling unless it is “plainly
erroneous or inconsistent with the regulation.” Auer v. Robbins, 519 U.S. 452,
461 (1997) (quoting Robertson v. Methow Valley Citizens Council, 490 U.S. 332,
359 (1989)).
                               III. DISCUSSION
A. Arguments Raised By Environmental Petitioners
       Environmental Petitioners argue that the EPA’s approval of the
affirmative defense for unplanned SSM events is in excess of the agency’s
statutory authority and is not in accordance with the Act.             Specifically,
petitioners argue that the final rule conflicts with the plain language of the Act
authorizing civil penalties in EPA and citizen suit enforcement actions, as well
as the Act’s requirement that the state permitting authority be able to assess
civil penalties.   Environmental Petitioners further argue that, even if the
affirmative defense against civil penalties for excess emissions resulting from
unplanned SSM activity is not contrary to the CAA, the EPA’s approval was
arbitrary and capricious. Finally, Environmental Petitioners argue that, in
approving the affirmative defense for unplanned SSM activity, the EPA altered
the meaning of the SIP as submitted by Texas. We address each of these
arguments in turn.
       1. In excess of statutory authority & not in accordance with law
       The EPA’s decision partially approving the SIP revision containing an
affirmative defense for unplanned SSM activity is invalid if it found by this court
to be, inter alia, “not in accordance with law” or in excess of the agency’s
statutory authority. 5 U.S.C. § 706(2)(A),(C). As stated above, the Act confines
the EPA to reviewing SIPs for consistency with the Act’s requirements. 42

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U.S.C. §§ 7410(k)(3); 7410(a)(1). The EPA “shall not approve a revision of a plan
if the revision would interfere with any applicable requirement concerning
attainment” or “or any other applicable requirement” of the Act. Id. at § 7410(l).
Further, as pointed out by petitioners, the CAA provides that, in the case of EPA
enforcement and citizen suits, a federal district court “shall have jurisdiction” to
assess a “civil penalty.” Id. at §§ 7413(b); 7604(a). In assessing the amount of
a civil penalty in either an EPA enforcement action or a citizen suit, the court
must consider the penalty assessment criteria outlined in section 7413(e). Id.
at § 7413(e).   Additionally, the CAA mandates that the state permitting
authority have the power to recover civil penalties for violations under the Act.
42 U.S.C. § 7661a(b)(5)(E).
      The EPA construes section 7413 of the Act as authorizing affirmative
defenses against civil penalties if the defense is “narrowly tailored” to address
unavoidable, excess emissions and consistent with the penalty assessment
criteria set forth in section 7413(e). Accordingly, this court must determine if
the EPA’s interpretation of section 7413 is entitled to Chevron deference.
Chevron, 467 U.S. at 843. We hold that it is.
      As an initial matter, we note that the EPA’s procedure of “notice-and-
comment rulemaking” and “adjudication” is generally a sufficiently formal and
deliberative process. Mead Corp., 533 U.S. at 229-30. Therefore, “[t]he court
applies the two-step Chevron analysis to questions involving the EPA’s
interpretation of the statutes it administers.” Chevron, 467 U.S. at 842-43. “If
Congress ‘has directly spoken to the precise question at issue,’ the agency and
the court ‘must give effect to the unambiguously expressed intent of Congress.’”
Id. If the statute, however, is “silent or ambiguous with respect to the specific
issue,” the court must assess whether the agency’s interpretation of the Act is
“based on a permissible construction of the statute” and, therefore, entitled to
Chevron deference. Chevron, 467 U.S. at 843.

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      Thus, under Chevron step one, we begin by looking at whether the statute
is silent or ambiguous with regard to the specific issue in dispute. Here, section
7413 does not discuss whether a state may include in its SIP the availability of
an affirmative defense against civil penalties for unplanned SSM activity. 42
U.S.C. § 7413. Accordingly, we turn to step two of Chevron and ask whether the
EPA’s interpretation of section 7413, as authorizing an affirmative defense for
unplanned SSM activity, is entitled to deference. Chevron, 467 U.S. at 843.
      The EPA submits that its “interpretation of the CAA is that it is not
appropriate for SIPs to exempt periods of startup, shutdown, maintenance or
malfunction from compliance with applicable emission limits.” 75 Fed. Reg. at
68,991-92. To support this interpretation, the agency relies on section 302(k) of
the Act which defines “emission limitation” and includes a requirement that
emissions be limited on a continuous basis. Id. at 68,992; 42 U.S.C. § 7602(k).
      Further, noting its authority to assess civil penalties under section 7413
of the Act, the agency reasons that an effective enforcement program must be
able to collect penalties to deter avoidable violations. 42 U.S.C. § 7413. The
EPA recognizes, however, that “sources may, despite good practices, be unable
to meet emission limitations during periods of startup and shutdown and, that
despite good operating practices, sources may suffer a malfunction due to events
beyond the control of the owner or operator.” Id. at 68,992. For this reason, the
agency submits that a SIP “should only provide [an affirmative defense against
civil penalties] for circumstances where it is infeasible to meet the applicable
limit and the criteria that the source must prove should ensure that the source
has made all reasonable efforts to comply.” Id. at 68,992-93; 42 U.S.C. § 7413(e).
      As a result, the EPA states that it has adopted an interpretation of section
7413 that would allow sources to assert an affirmative defense for periods of
unavoidable, excess emissions during certain SSM activity in an enforcement
action for penalties, though not in an action for injunctive relief. Id. at 68,992.

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                                  No. 10-60934

The agency concludes that this interpretation is consistent with the Act because
the criteria a source must prove when asserting the affirmative defense are
consistent with the penalty assessment criteria identified in section 7413(e),
which are considered by the courts and the EPA in determining whether or not
to assess a civil penalty for violations and, if so, the amount. Id. at 68,992; 42
U.S.C. § 7413(e). Thus, the affirmative defense criteria are tailored to ensure
that the source has made all reasonable efforts to comply with emission
limitations and remain in compliance with the Act. Id. at 68,992. Consequently,
the agency reasons that an appropriately crafted affirmative defense is one that
is narrowly tailored to address unavoidable, excess emissions and consistent
with the penalty assessment criteria in section 7413(e). Id. at 68,992; 42 U.S.C.
§ 7413.
      The approved portion of Texas’s SIP that contains an affirmative defense
for unplanned SSM activity provides, as an initial matter, that sources are
generally subject to enforcement actions for any “upset” events, i.e., an
unplanned and unavoidable malfunction that results in unauthorized emissions.
30 Tex. Admin. Code § 101.1(109).        If an “upset” event is considered an
“excessive” emission event based on a number of factors including frequency,
duration, impact on human health, and other measures, no affirmative defense
is available. Id. at § 101.222(a)-(b). If the violation is not deemed “excessive,”
and it occurred during unplanned SSM activity, and nine additional criteria are
met, including a demonstration that the unauthorized emissions “did not cause
or contribute to an exceedance of the NAAQS, PSD increments, or a condition of
air pollution,” and that the unauthorized emissions “could not have been
prevented through planning and design,” then the affirmative defense is
available. Id. at § 101.222(b),(c). Regardless, even if all nine required criteria




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                                          No. 10-60934

are met and the violator establishes the applicability of the approved affirmative
defense, injunctive relief is still available. 75 Fed. Reg. at 68,991 n.4.9
       The EPA submits that the above-mentioned affirmative defense for
unplanned SSM events is narrowly tailored to address unavoidable, excess
emissions and consistent with the penalty assessment criteria in section 7413(e).
Thus, it approved this portion of Texas’s SIP revision as being consistent with
section 7413 of the Act. 42 U.S.C. §§ 7413, 7410(l). We hold this to be a
permissible interpretation of section 7413, warranting deference. Chevron, 467
U.S. at 843. Accordingly, the EPA acted neither contrary to law nor in excess of
its statutory authority when it based its partial approval of the plan on this
construction. 5 U.S.C. § 706(2)(A),(C).
       2. Arbitrary and Capricious
       Environmental Petitioners argue that, even if the affirmative defense for
unplanned SSM activity is not contrary to the CAA, the EPA’s approval was
nonetheless arbitrary and capricious. They argue that the EPA failed to explain
why it approved the affirmative defense in light of (1) the EPA’s position that
affirmative defenses should not be available where a small group of sources
could cause exceedance of the NAAQS; (2) precedent indicating that civil
penalties serve to encourage compliance with the Act; and (3) the burden an
affirmative defense would place on citizen suits.
       The EPA’s decision is not valid if found by this court to be arbitrary or
capricious. 5 U.S.C. § 706(2)(A). “An agency rule 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,

       9
          Additionally, the availability of the affirmative defense does not negate the district
court’s jurisdiction to assess civil penalties using the criteria outlined in section 7413(e), or the
state permitting authority’s power to recover civil penalties, it simply provides a defense,
under narrowly defined circumstances, if and when penalties are assessed.

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                                    No. 10-60934

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, 161 F.3d at 933. “If the
agency’s reasons and policy choices conform to minimal standards of rationality,
then its actions are reasonable and must be upheld.” Id. at 934.
      With respect to their first argument, Environmental Petitioners are
correct that the EPA has stated in its past policy guidance that “[w]here a single
source or small group of sources has the potential to cause an exceedance of the
NAAQS or PSD increments . . . an affirmative defense approach will not be
adequate to protect public health and the environment . . . .”10 Petitioners are
also correct that the approved affirmative defense provision does not contain
specific language excluding emissions caused by “a single source or small group
of sources” that could potentially “cause an exceedance of the NAAQS or PSD
increments.” But, as pointed out by the agency in its brief, the affirmative
defense excludes all emissions that could “cause or contribute to an exceedance
of the NAAQS, PSD increments, or a condition of air pollution.” 30 Tex. Admin.
Code § 101.222 (b)(11), (c)(9). Thus, the approved portion of the affirmative
defense is not inconsistent with the agency’s past policy guidance.
      Environmental Petitioners’ remaining two arguments as to why the EPA’s
approval of the affirmative defense was arbitrary and capricious are also
unavailing. Environmental Petitioners are correct that the EPA has recognized
that the availability of civil penalties serves as an incentive for companies to
take actions to avoid excess emissions. 75 Fed. Reg. at 68,999. In its partial
approval of the SIP revision, however, the EPA further recognized that while
“the availability of civil penalties serves as an incentive for companies to be more
cautious, to take more preventative actions, and to seek to develop technologies
and management practices to avoid excess emissions[,] . . . the criteria a source

      10
        See infra Mem. of Steven A. Herman, “State Implementation Plans (SIPs): Policy
Regarding Excess Emissions During Malfunctions, Startup, and Shutdown” (Sept. 20, 1999).

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                                  No. 10-60934

would need to prove in order to successfully assert an affirmative defense will
encourage companies to take such caution.” Id. at 68,999.
      The EPA’s reasoning relies on the fact that the narrowly tailored
affirmative defense presents a high burden for any company seeking entitlement
to it. Assuming the violation is not deemed “excessive,” and it occurred during
unplanned SSM activity, nine additional criteria must be met, including a
demonstration that the unauthorized emissions “did not cause or contribute to
an exceedance of the NAAQS, PSD increments, or a condition of air pollution,”
and that the unauthorized emissions “could not have been prevented through
planning and design.” 30 Tex. Admin. Code § 101.222(c).            This reasoning
supports the EPA’s position that its approval of the affirmative defense for
unplanned SSM activity will not serve as a disincentive for companies to avoid
excess emissions.     Thus, there is no conflict with the agency’s previous
statements that civil penalties encourage compliance with the Act.
      Environmental Petitioners’ second argument that the affirmative defense
places an unreasonable burden on plaintiffs is also without merit.
Environmental Petitioners contend that the affirmative defense only requires a
“prima facie showing” by defendants, after which the burden will shift to the
plaintiffs to show that the affirmative defense does not apply. As pointed out by
the EPA, however, when a source asserts the affirmative defense, it has the
burden of proving the “enumerated factors, including that the period of excess
emissions was minimized to the extent practicable and that the emissions were
not due to faulty operations or disrepair of equipment.” 75 Fed. Reg. at 68,992
(citing see 30 Tex. Admin. Code § 101.222(b),(c)). The provision makes no
reference to a prima facie showing. Id. Accordingly, the burden remains on the
party seeking entitlement to the affirmative defense, not a plaintiff seeking relief
under the Act. Given these facts, we agree with the EPA’s position that the



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                                 No. 10-60934

approved affirmative defense for unplanned SSM activity does not place an
unreasonable burden on plaintiffs.
      Consequently, we hold that the EPA did not act arbitrarily or capriciously
in its partial approval of the SIP revision. The above-mentioned reasons and
policy choices provided by the EPA for approving the affirmative defense for
unplanned SSM activity “conform to minimal standards of rationality”;
therefore, they are reasonable and will be upheld by this court. Tex. Oil & Gas
Ass’n, 161 F.3d at 934.
      3. Alteration of the meaning of the SIP
      Environmental Petitioners’ final argument is that, by approving the
affirmative defense for unplanned SSM activity, the EPA impermissibly altered
the meaning of the SIP by making the defense potentially applicable to citizen
and EPA enforcement actions, thereby limiting injunctive relief available under
the Act and delaying the enforcement of excess emission violations.
Environmental Petitioners identify a statement by the TCEQ that “its rules are
not intended to nor do they impact citizens’ legal rights under the [CAA].” 30
Tex. Reg. at 8922.
      Environmental Petitioners are correct that, in partially approving a SIP,
the EPA may not “overid[e] state policy,” Bethlehem, 742 F.2d at 1036-37, and
alter the meaning of the SIP. In its partial approval of the SIP revision,
however, the EPA reasoned as follows: “[A]pproval of the provisions in sections
101.222(b), (c), (d), and (e) into the Texas SIP does not preclude citizen suits
under the Act. Rather, the affirmative defense may be raised in defense of a
claim brought by EPA, the State or a private citizen.” 75 Fed. Reg. at 68,999.
The EPA went on to state that “even where an affirmative defense is successfully
raised in defense to an action for penalties, it does not preclude other judicial
relief that may be available, such as injunctive relief or a requirement to
mitigate past harm or to correct the non-compliance at issue.” Id.

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      The above-mentioned reasoning provided by the EPA supports its position
that it did not alter the meaning of the SIP or broaden its application beyond
what Texas intended in its partial approval of the plan. We therefore reject
Environmental Petitioners’ argument.
B. Arguments Raised By Industry Petitioners
      Industry Petitioners argue that the portion of the SIP revision containing
the affirmative defense for planned SSM activity fully complies with the CAA
and should have been approved by the EPA and that the EPA’s disapproval was
contrary to law. They further argue that the EPA’s decision was arbitrary and
capricious. In the alternative, Industry Petitioners argue that the EPA should
have severed and approved the affirmative defense for planned startup and
shutdown activity, even if it disapproved the affirmative defense for planned
maintenance activity. Industry Petitioners also request that approval of the SIP
be backdated to June 30, 2006, so as to eliminate any gap between the expiration
of the previous affirmative defense and the current affirmative defense.
      1. Compliance with the CAA
      The EPA’s decision partially disapproving the SIP revision containing an
affirmative defense for planned SSM activity is invalid if it is found by this court
to be, inter alia, “not in accordance with law.” 5 U.S.C. § 706(2)(A). The Act
provides that the EPA “shall not approve a revision of a plan if the revision
would interfere with any applicable requirement concerning attainment” of
NAAQS or “or any other applicable requirement” of the Act. See 42 U.S.C. §
7410(l).
      The EPA interprets section 7413 of the Act as only authorizing affirmative
defenses that are narrowly tailored to address periods of unavoidable, excess
emissions during certain SSM activity, “where it is infeasible to meet the
applicable limit.” Consequently, the agency concludes that section 7413 does not
authorize an affirmative defense for planned SSM activity. Accordingly, this

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                                  No. 10-60934

court must determine if the EPA’s interpretation of section 7413 is entitled to
Chevron deference. Chevron, 467 U.S. at 843. We hold that it is.
      As stated, the EPA’s procedure of “notice-and-comment rulemaking” and
“adjudication” is generally a sufficiently formal and deliberative process. Mead
Corp., 533 U.S. at 229-30. Therefore, “[t]he court applies the two-step Chevron
analysis to questions involving the EPA’s interpretation of the statutes it
administers.” Chevron, 467 U.S. at 842-43. “If Congress ‘has directly spoken to
the precise question at issue,’ the agency and the court ‘must give effect to the
unambiguously expressed intent of Congress.’” Id. If the statute, however, is
“silent or ambiguous with respect to the specific issue,” the court must assess
whether the agency’s interpretation of the Act is “based on a permissible
construction of the statute” and, therefore, entitled to Chevron deference.
Chevron, 467 U.S. at 843.
      Thus, under Chevron step one, we begin by looking at whether the statute
is silent or ambiguous with regard to the specific issue in dispute. Here, section
7413 does not discuss whether a state may include in its SIP the availability of
an affirmative defense against civil penalties for planned SSM activity. 42
U.S.C. § 7413. Accordingly, we turn to step two of Chevron and ask whether the
EPA’s interpretation of section 7413, as not authorizing an affirmative defense
against civil penalties for planned SSM activity, is entitled to deference.
Chevron, 467 U.S. at 843.
      As stated, relying on the definition of “emission limitation” found in
section 302(k) of the Act, the EPA submits that its “interpretation of the CAA is
that it is not appropriate for SIPs to exempt periods of startup, shutdown,
maintenance or malfunction from compliance with applicable emission limits.”
75 Fed. Reg. at 68,991-92; 42 U.S.C. § 7602(k).
      Citing its authority to assess civil penalties under section 7413 of the Act,
the agency reasons that an effective enforcement program must be able to collect

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                                  No. 10-60934

penalties to deter avoidable violations. 42 U.S.C. § 7413. Further, while the
EPA acknowledges that “sources may, despite good practices, be unable to meet
emission limitations” during certain SSM activity, the EPA’s interpretation of
section 7413 only allows sources to assert an affirmative defense for periods of
unavoidable, excess emissions “where it is infeasible to meet the applicable
limit.” Id. at 68,992. For this reason, a SIP “should only provide [an affirmative
defense against civil penalties] for circumstances where it is infeasible to meet
the applicable limit and the criteria that the source must prove should ensure
that the source has made all reasonable efforts to comply.” Id. at 68,992-93; 42
U.S.C. § 7413. Consequently, the agency reasons that an appropriately crafted
affirmative defense is one that is narrowly tailored to address unavoidable,
excess emissions.
      The EPA submits that the portion of the SIP revision providing an
affirmative defense for planned SSM activity is inconsistent with section 7413
of the Act because it is not narrowly tailored to address unavoidable, excess
emissions. Id. at 68,992. The agency supports this position by submitting that
it does not “believe that it is infeasible for sources to meet applicable limits
during planned maintenance” activities. Id. at 68,993. The agency reasons that
because planned maintenance activities are predictable, a source can avoid
excess emissions from these activities by scheduling maintenance during
shutdown periods. Id. at 68,992. Consequently, the agency concludes that the
affirmative defense for planned SSM activity is inconsistent with section 7413
of the Act.
      The EPA contends that the provision is further inconsistent with section
7413 because it is potentially broadly applicable. This is because it contains a
“defect” that could be interpreted as not requiring a source to establish all
elements of the affirmative defense. See 75 Fed. Reg. at 68,9991 n.5. The
Industry Petitioners, joined by the State of Texas in its amicus brief, argue that

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                                   No. 10-60934

the EPA’s position that the provision contains a defect is “unfounded” and
“ignores [the SIP’s] express language.” They assert that “§ 101.222(h) is clear
that a source must prove ‘all’ of the criteria listed in the cross-referenced
sections, not just the ones it deems applicable.” We do not agree.
      The EPA’s interpretation of approved SIP regulations, and not the state’s,
is authoritative. See Am. Cyanamid Co. v. U.S. E.P.A., 810 F.2d 493 (5th Cir.
1987) (emphasis added). However, the portion of the SIP provision containing
an affirmative defense for planned SSM activity is not an approved SIP
regulation, and thus, is considered Texas law until it receives approval by the
EPA and is subsequently incorporated in the Code of Federal Regulations. See
40 C.F.R. § 52.02 (2011). Accordingly, the EPA’s authority under the CAA is
limited to determining whether the proposed SIP revision providing an
affirmative defense for planned SSM activity, as written, complies with the Act.
      The plain text of section 101.222(h), and referenced section 101.222(c),
supports the EPA’s reasoning that the provision, when applied, may not require
a source owner or operator to establish all elements of the affirmative defense.
If a source owner or operator who is conducting planned SSM activity seeks to
avail himself of the affirmative defense in section 101.222(h), the provision
states that he must prove “all of the criteria listed in subsection (c)(1)–(9) of this
section for emissions, or subsection (e)(1)–(9) of this section for opacity events .
. . .” See 30 Tex. Admin. Code § 101.222(h). Thus, in order to determine which
criteria he must prove, he must refer to section 101.222(c). Section 101.222(c),
however, refers to the elements that must be proved to establish an affirmative
defense for emissions or opacity resulting from unplanned SSM activity.
Further, with regard to emissions, the elements themselves are limited to
emissions from unplanned maintenance. The only elements in section 101.222(c)
not limited to emissions from unplanned SSM activity are those relating to
reporting, monitoring, a requirement to operate "in a manner consistent with

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                                  No. 10-60934

good practices for minimizing emissions," and a requirement that "unauthorized
emissions did not cause or contribute to an exceedance of the NAAQS, PSD
increments, or a condition of air pollution." See id. § 101.222(1),(5),(7),(9).
      As a result, a source owner or operator conducting planned SSM activity
applying the plain text of section 101.222(c) would find that the majority of the
criteria contained in the section refer to unplanned SSM activity, and
consequently, find those criteria not applicable to himself as a source owner or
operator conducting planned SSM activity.                 30 Tex. Admin. Code
§ 101.222(c)(2),(3),(4),(6),(8). Even if the source owner or operator conducting
planned SSM activity attempted to prove all nine criteria in subsection (c), he
could not do so since five of the nine criteria are specifically limited to
descriptions of unplanned SSM activity. Id. In reference to this section, the
EPA stated as follows:
            [I]nstead of identifying the criteria a source must meet
            to assert an affirmative defense for planned activities,
            the Texas rule cross-references the criteria that apply
            for unplanned events. Thus, sources might argue that
            many of the criteria would not apply and would not
            need to be proved when asserting an affirmative
            defense. The criteria that a source must prove in
            asserting a defense are critical for ensuring that the
            defense will not be abused.

75 Fed. Reg. at 68,991 n.5.
      In its partial disapproval of the SIP revision, the EPA relied on the above-
mentioned reasoning and concluded that the affirmative defense for planned
SSM activity was inconsistent with section 7413 of the Act because: (1) it was
potentially broadly applicable due to the cross-referencing in subsection (h) to
subsection (c); and, (2) not narrowly tailored to address unavoidable, excess
emissions because it provided a defense for SSM activities during which excess
emissions could be avoided. See 42 U.S.C. §§ 7413, 7410(l). We hold this to be


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                                  No. 10-60934

a permissible interpretation of section 7413 of the Act, warranting deference.
Chevron, 467 U.S. at 843; 42 U.S.C. § 7413. Accordingly, the EPA did not act
contrary to law when its based its partial disapproval of the plan on this
construction. 5 U.S.C. § 706(2)(A).
      2. Arbitrary and Capricious
      Industry Petitioners submit several arguments in support of their
assertion that the EPA’s partial disapproval of the SIP revision was arbitrary
and capricious. We address each of these in turn.
      As previously stated, the EPA’s decision is not valid if found by this court
to be arbitrary or capricious. 5 U.S.C. § 706(2)(A). On the other hand, “[i]f the
agency’s reasons and policy choices conform to minimal standards of rationality,
then its actions are reasonable and must be upheld.” Tex. Oil & Gas Ass’n, 161
F.3d at 934.
      Citing GHASP v. U.S. E.P.A., 289 F. App’x 745 (5th Cir. 2008), Industry
Petitioners argue that the EPA must approve any SIP revision that is more
stringent than the preexisting SIP. In 2000, the EPA approved a Texas excess
emissions rule that included an exemption for emissions from planned
maintenance. See 65 Fed. Reg. 70,792 (Nov. 28, 2000); 25 Tex. Reg. 6727-6751
(July 14, 2000). In its brief, however, the EPA points out that it has publicly
conceded that its approval of the Texas 2000 rule was erroneous.11 It is the
agency’s position that it should not be required to make the same mistake twice
for the sole purposes of consistency.
      An agency is not bound to follow a prior, incorrect interpretation of its own
policy.    Bowles v. Seminole Rock & Sand Co., 325 U.S. 410, 414 (1945).
Moreover, an agency is permitted to change its policy interpretations. FCC v.
Fox Tele. Stations, Inc., 556 U.S. 502, 514-15 (2009); National Cable &

      11
         Technical Support Document for 30 Tex. Admin. Code Chapter 101, General Air
Quality Rules, Rule Log Numbers 2001-075-101-AI & 2003-038-101-AI (March 2, 2004).

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                                 No. 10-60934

Telecommunications Ass’n v. Brand X Internet Services, 545 U.S. 967, 981 (2005).
Consequently, we hold that the EPA’s previous, admittedly erroneous, approval
of a prior Texas SIP provision, does not mandate its approval of the current SIP
revision at issue, simply because it is more stringent than the provision
previously approved in error.
      Industry Petitioners next argue that the EPA, in partially disapproving
the SIP revision, impermissibly made the SIP more stringent than what Texas
had intended, i.e., a SIP without any accommodation for planned SSM emissions.
We disagree.
      The EPA may approve or disapprove a provision in a SIP, but may not
require a state to add any provision to its proposal. See Fla. Power & Light Co.,
650 F.2d at 587-89. Further, the EPA may not exercise its power to partially
approve and disapprove portions of a SIP to make it more stringent than
intended by the state. See Bethlehem Steel, 742 F.2d at 1034-35.
      In its partial disapproval of the SIP, the EPA noted the following:
            The provisions being disapproved address completely
            separate activities . . . (planned activities) from those
            addressed by the provisions being approved (unplanned
            activities). The approved provisions will provide the
            exact limited relief intended by the State for sources
            covered by those provisions . . . . EPA's action
            disapproving similar relief for excess emissions during
            planned activities does not affect the stringency of the
            defense being approved for periods of excess emissions
            during unplanned activities.

75 Fed. Reg. at 68,993. This reasoning supports the EPA’s position that its
partial disapproval of the SIP did not make the remaining approved portions
more stringent than what Texas had intended.
      Industry Petitioners next argue that the EPA’s partial disapproval of the
SIP revision was in error because the agency never established that the


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                                   No. 10-60934

affirmative defense for planned SSM activity “would interfere” with NAAQS
attainment. 42 U.S.C. § 7410(l).
      With respect to this issue, the EPA stated that it does not interpret the Act
as requiring it to demonstrate that there will be a violation of NAAQS if it
disapproves a SIP revision. 75 Fed. Reg. at 68,994. The agency further noted
that “the language in section 110(l) provides that EPA must disapprove a SIP
revision if it ‘would interfere with any applicable requirement concerning
attainment.’ This is quite distinct from an obligation to prove that a violation
will occur.” Id.
      We agree with the EPA’s position that it is not required by the Act to prove
that a violation will occur as a prerequisite to disapproving the plan. However,
in disapproving a plan, the agency is required to provide reasoning supporting
its conclusion that the disapproved provision would interfere with an applicable
requirement of the Act. 42 U.S.C. § 7410(l). As stated, the agency has provided
sufficient reasoning supporting its conclusion that the affirmative defense for
planned SSM activity was inconsistent with section 7413 of the Act because: (1)
it was potentially broadly applicable due to improper cross-referencing; and, (2)
it was not narrowly tailored to address unavoidable, excess emissions because
it provided a defense for SSM activities during which excess emissions could be
avoided.   Consistent with our previous holding that this conclusion is a
permissible construction of the statute that is not contrary to law, we hold the
same conclusion to be a sufficient basis for the agency’s partial disapproval of the
plan pursuant to sections 7413 and 7410(l). 42 U.S.C. §§ 7413, 7410(l)
      Industry Petitioners also argue that the EPA was required to approve the
affirmative defense scheme as a necessary step to Texas’s transition to a
permitting scheme. In support of their argument, Industry Petitioners point to
the doctrines of “administrative necessity” and “one-step-at-a-time.” See Ala.
Power Co. v. Costle, 636 F.2d 323, 357-60 (D.C. Cir. 1979); U.S. Brewers Ass’n,

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                                  No. 10-60934

Inc. v. EPA, 600 F.2d 974, 982 (D.C. Cir. 1979). With respect to this issue, the
EPA provided the following response:
            [T]he State's submitted phased-in permitting process
            will not serve to modify any applicable requirement
            under the Texas SIP. Furthermore, our action
            disapproving the three provisions at issue . . . merely
            maintains the status quo and should have no effect on
            that permitting process.
                                   ....
            [S]ources have been obligated to comply at all times
            with the applicable emission limits with no enforcement
            discretion or affirmative defense provisions since the
            previous Texas rules expired from the Texas SIP on
            June 30, 2006 by their own terms. Thus there is no
            administrative necessity or “one step at a time”
            argument applicable in this situation.
75 Fed. Reg. at 69,899-900. This reasoning supports the EPA’s position that it
was not required to approve the provision containing an affirmative defense for
planned SSM activity in light of Texas’s transition to a permitting scheme.
      Consequently, we hold that the EPA did not act arbitrarily or capriciously
in its disapproval of the portion of the SIP revision containing an affirmative
defense for planned SSM activity. The above-mentioned reasons provided by the
EPA for disapproving the provision “conform to minimal standards of
rationality”; therefore, they are reasonable and will be upheld by this court. Tex.
Oil & Gas Ass’n, 161 F.3d at 934.
      3. Severability of planned startup and shutdown activity
      Industry Petitioners also argue that the EPA should have severed and
approved the affirmative defense for planned startup and shutdown activity,
even if it had determined that there should be no affirmative defense for planned
maintenance activity. We disagree.
      Congress, through the CAA, delegates authority to the EPA to partially
approve and partially disapprove a SIP. 42 U.S.C. § 7410(k)(3). The statutory

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                                  No. 10-60934

language indicates that the EPA’s exercise of its partial approval power is
discretionary, and the EPA may reject a SIP revision in its entirety if it believes
any portion violates “applicable requirements.” Id. (providing, “[i]f a portion of
the plan revision meets all the applicable requirements of this chapter,” the EPA
“may approve the plan revision in part and disapprove the plan revision in part”
(emphasis added)).
      The EPA has determined that the provisions relating to planned startup
and shutdown activities are not severable from the planned maintenance
provisions. 75 Fed. Reg. 68,991, 68,997. Additionally, as pointed out by the
EPA, the drafting defect attendant to the affirmative defense for planned
maintenance is also present for the affirmative defense for planned startup and
shutdown activity. The EPA expressly identified this deficit in rejecting the
affirmative defense for planned startup and shutdown activity. Id. at 68,991 n.5.
In its promulgation of the final rule, the EPA provided the following reasoning:
            [W]e interpret the CAA to allow EPA to approve a SIP
            revision submittal from a State that provides an
            affirmative defense for excess emissions during planned
            startup or shutdown activities, but the inclusion of
            planned maintenance activities and the failure to
            include appropriate criteria (due to improper
            cross-referencing) for planned startup and shutdown
            activities renders the submitted section 101.222(h)
            unapprovable.

Id. at 68,997.
      For the same reasons provided in our discussion above upholding the
EPA’s disapproval of the affirmative defense for planned maintenance activity
contained in 101.222(h), we uphold the EPA’s disapproval of the affirmative
defense as it applies to planned startup and shutdown activity. Regardless of
whether the activity at issue is planned maintenance or planned
startup/shutdown, the improper cross-referencing in subsection (h) to subsection


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  Case: 10-60934     Document: 00512017929       Page: 30    Date Filed: 10/12/2012


                                   No. 10-60934

(c) leads to an overly-broad applicability of the defense. In addition, as stated,
it is within the agency’s discretion to exercise its partial approval and
disapproval power with regard to SIP submittals. 42 U.S.C. § 7410(k)(3).
      Because we conclude that the above-mentioned reasoning provided by the
EPA “conform[s] to minimal standards of rationality,” Tex. Oil & Gas Ass’n, 161
F.3d at 934, we hold that the EPA was not arbitrary or capricious, or contrary
to law, in disapproving the provision as a whole.
      4. Backdating approval of the SIP
      In their final argument, Industry Petitioners request that approval of the
SIP be backdated to June 30, 2006. In light of our conclusion that the EPA was
not arbitrary, capricious, or contrary to law, when it disapproved the portion of
the SIP revision containing an affirmative defense for planned SSM activity, we
pretermit discussion of this issue.
                               IV. CONCLUSION
      For these foregoing reasons, we conclude that the EPA did not act
arbitrarily or capriciously, contrary to law, or in excess of its statutory authority,
in its partial approval and partial disapproval of Texas’s SIP revision. We
therefore deny the petitions for review submitted by both Environmental
Petitioners and Industry Petitioners.
PETITIONS DENIED.




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