                                                Filed:   May 9, 1996


                   UNITED STATES COURT OF APPEALS

                       FOR THE FOURTH CIRCUIT



                            No. 95-1052



Commonwealth of Virginia,

                                                          Petitioner,

          versus

Carol M. Browner, etc., et al,

                                                         Respondents.




                             O R D E R



     The Court further amends its opinion filed March 26 and

amended April 17, 1996, as follows:

     On page 5, second full paragraph, lines 1-2 -- the word
"plans" is corrected to read "programs" and the parenthetical
phrase "('State Implementation Plans' or 'SIPs')" is deleted.

     On page 5, second full paragraph, line 4, and third full

paragraph, line 1 (two instances); page 8, second full paragraph,
line 1; page 9, second full paragraph, lines 3 and 6; page 10,

third full paragraph, lines 2 and 3; page 18, first full paragraph,

line 1, and second full paragraph, line 2 -- the phrase "SIP" is

corrected to read "permit program."
                              - 2 -




     On page 9, third full paragraph, line 2; page 10, fourth full

paragraph, line 1; page 11, first full paragraph, line 1; page 13,
second full paragraph, line 6; page 19, footnote 6, lines 3, 5, and

6 -- the phrase "SIP" is corrected to read "state permit program."

     On page 8, first full paragraph -- the second sentence is

corrected to read "If the state does not gain approval for its

permit program, EPA develops and implements its own Title V
permitting program within the noncomplying state."

     On page 8, third full paragraph, section (1), line 1; section

(2), line 1; section (3), line 1; section (4), line 1; and section
(5), line 1 -- the word "plan" in each section is corrected to read

"proposed program."

     On page 19, first full paragraph, line 4 -- the comma after

the word "rules" is changed to a semicolon.

     On page 19, footnote 6, line 8 -- the phrase "violations of an
applicable implementation program" is corrected to read "violations

of . . . an approved permit program under subchapter [Title] V ."

     On page 19, footnote 6, lines 9-12 -- the sentence is

corrected to read "EPA has not approved Virginia's proposed Title

V program, so no 'approved permit program' yet exists to trigger

any § 113 sanctions against any Virginia official."
                             - 3 -




    On page 22, fourth full paragraph, line 1 -- the phrase "FIP"

is corrected to read "federal permit program."

    On page 24, first paragraph, lines 8-10 -- the sentence is

corrected to read "Instead, we interpreted the regulations as

authorizing EPA to implement a federal pollution control program

directly."
    On page 24, first paragraph, line 13 -- the phrase "the FIP"

is corrected to read "federal implementation."
    On page 24, second full paragraph, line 2 -- the phrase "State

Implementation Plan" is corrected to read " state permit program."

                                     For the Court - By Direction



                                        /s/ Bert M. Montague
                                                 Clerk
                                             Filed:    April 17, 1996


                  UNITED STATES COURT OF APPEALS

                      FOR THE FOURTH CIRCUIT



                            No. 95-1052



Commonwealth of Virginia,

                                                          Petitioner,

         versus

Carol M. Browner, etc., et al,

                                                         Respondents.




                             O R D E R



    The Court amends its opinion filed March 26, 1996, as follows:

    On page 3, section 1, lines 9-10 -- "Louis J. Schiffer" is

corrected to read "Lois J. Schiffer."

                                     For the Court - By Direction


                                          /s/ Bert M. Montague
                                                      Clerk
PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

COMMONWEALTH OF VIRGINIA,
Petitioner,

v.

CAROL M. BROWNER, Administrator,
U. S. Environmental Protection
Agency; ENVIRONMENTAL PROTECTION
AGENCY,
Respondents,

AMERICAN LUNG ASSOCIATION OF
NORTHERN VIRGINIA, AND AMERICAN
LUNG ASSOCIATION OF VIRGINIA;
CLEAN WATER ACTION;
FRIENDS OF THE RIVERS OF VIRGINIA;
                                     No. 95-1052
THE JAMES RIVER ASSOCIATION;
MOUNTAIN HERITAGE ALLIANCE;
VALLEY CONCERNED CITIZENS;
VIRGINIA CHAPTER OF THE SIERRA
CLUB; VIRGINIA CITIZEN ACTION;
VIRGINIA CONSORTIUM FOR CLEAN
AIR; VIRGINIA COUNCIL, TROUT
UNLIMITED; ENVIRONMENTAL DEFENSE
FUND, INCORPORATED; KATHLEEN F.
DERRICOTT; CLIFTON E. DERRICOTT;
ANDRE L. BROWN; CALEATA JOHNSON;
GWEN HEDGEPATH; AUDUBON
NATURALIST SOCIETY,
Intervenors.
VIRGINIA MANUFACTURERS
ASSOCIATION; WASHINGTON LEGAL
FOUNDATION; OGDEN MARTIN
SYSTEMS OF LANCASTER,
INCORPORATED; OGDEN MARTIN
SYSTEMS OF ALEXANDRIA,
INCORPORATED; NATIONAL
INDEPENDENT ENERGY PRODUCERS;
OGDEN MARTIN SYSTEMS OF
MONTGOMERY, INCORPORATED; OGDEN
MARTIN SYSTEMS OF FAIRFAX,
INCORPORATED; CHESAPEAKE BAY
FOUNDATION,
Amici Curiae.

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

Argued: December 4, 1995

Decided: March 26, 1996

Before MURNAGHAN and MICHAEL, Circuit Judges, and
MICHAEL, Senior United States District Judge for the
Western District of Virginia, sitting by designation.

_________________________________________________________________

Petition for review denied by published opinion. Circuit Judge
Michael wrote the opinion, in which Judge Murnaghan and Senior
District Judge Michael joined.

_________________________________________________________________

COUNSEL

ARGUED: Mary Jo Leugers, Assistant Attorney General, Richmond,
Virginia, for Petitioner. David Jay Kaplan, Environmental Defense

                   2
Section, Environment & Natural Resources Division, UNITED
STATES DEPARTMENT OF JUSTICE, Washington, D.C., for
Respondents. Katherine E. Slaughter, SOUTHERN ENVIRONMEN-
TAL LAW CENTER, Charlottesville, Virginia, for Intervenors. ON
BRIEF: James S. Gilmore, III, Attorney General, John Paul Wood-
ley, Jr., Deputy Attorney General, Roger L. Chaffe, Senior Assistant
Attorney General, John R. Butcher, Assistant Attorney General, Rich-
mond, Virginia; John P. Schmitz, Thomas Dilenge, MAYER,
BROWN & PLATT, Washington, D.C., for Petitioner. Lois J. Schif-
fer, Assistant Attorney General, Ronald Spritzer, Robin M. Richard-
son, Environmental Defense Section, Environment & Natural
Resources Division, UNITED STATES DEPARTMENT OF JUS-
TICE, Washington, D.C.; Michael W. Thrift, Office of General Coun-
sel, UNITED STATES ENVIRONMENTAL PROTECTION
AGENCY, Washington, D.C.; Cecil A. Rodrigues, Office of Regional
Counsel, UNITED STATES ENVIRONMENTAL PROTECTION
AGENCY, Philadelphia, Pennsylvania, for Respondents. Deborah
Murray Wassenaar, SOUTHERN ENVIRONMENTAL LAW CEN-
TER, Charlottesville, Virginia; David S. Bailey, LAWYERS COM-
MITTEE FOR CIVIL RIGHTS UNDER LAW, Washington, D.C.,
for Intervenors. Carol C. Raper, Vice President and General Counsel,
VIRGINIA MANUFACTURERS ASSOCIATION, Richmond, Vir-
ginia; George A. Somerville, MAYS & VALENTINE, Richmond,
Virginia, for Amicus Curiae Virginia Manufacturers Association.
Daniel J. Popeo, David A. Price, WASHINGTON LEGAL FOUN-
DATION, Washington, D.C., for Amicus Curiae Washington Legal
Foundation. Deborah E. Jennings, Michael C. Carter, Norman L.
Rave, PIPER & MARBURY, Baltimore, Maryland, for Amici Curiae
National Independent Energy Producers, et al. Roy A. Hoagland, Vir-
ginia Assistant Director/Staff Attorney, CHESAPEAKE BAY
FOUNDATION, INC., Richmond, Virginia, for Amicus Curiae Ches-
apeake Bay Foundation.

_________________________________________________________________

OPINION

MICHAEL, Circuit Judge:

The Commonwealth of Virginia petitions for review of the Envi-
ronmental Protection Agency's final action disapproving Virginia's

                   3
proposed program for issuing air pollution permits. Specifically, Vir-
ginia challenges EPA's finding that Virginia has failed to comply
with Title V of the 1990 Amendments to the Clean Air Act (some-
times "CAA" or the "Act"), CAA §§ 501-507, 42 U.S.C. §§ 7661-
7661f, because Virginia's proposal lacks adequate provisions for judi-
cial review of the Commonwealth's permitting decisions. Virginia
also challenges the constitutionality of Title V and its sanctions provi-
sions, CAA §§ 179(b) & 502(d), 42 U.S.C. §§ 7509(b) & 7661a(d).
According to Virginia, these provisions improperly commandeer the
legislative processes of the states, in violation of the Tenth Amend-
ment and the Spending Clause, U.S. Const. art. I § 8, cl. 1. We have
jurisdiction over all of Virginia's claims, see CAA § 307(b)(1), 42
U.S.C. § 7607(b)(1), and we find them to be without merit.

I.

A.

Because Virginia claims that the EPA has misinterpreted Title V
and that Title V is unconstitutional as well, a brief discussion of the
statute's structure and purposes is in order.

Title V's key provision, CAA § 502, 42 U.S.C. § 7661a, prohibits
major stationary sources of air pollution from operating either without
a valid permit or in violation of the terms of a permit.1 The permit is
crucial to the implementation of the Act: it contains, in a single, com-
prehensive set of documents, all CAA requirements relevant to the
particular polluting source. Clean Air Act Amendments of 1990:
Chafee-Baucus Statement of Senate Managers (Conf. Rep. No. 952,
101st Cong., 2d Sess.) ("Chafee-Baucus Statement"), reprinted in 136
Cong. Rec. S16933, S16983 (daily ed. Oct. 27, 1990). In a sense, a
permit is a source-specific bible for Clean Air Act compliance.
_________________________________________________________________

1 A "stationary source" is defined in CAA §§ 112(a)(1),
182(b)(1)(A)(ii)(I), 182(c), 182(d), 182(e), 302(j), & 501(2); 42 U.S.C.
§§ 7412(a)(1), 7511a(b)(1)(A)(ii)(I), 7511a(c), 7511a(d), 7511a(e),
7602(j), & 7661(2). Stationary sources, such as power plants and facto-
ries, are distinguished from mobile sources, such as automobiles.

                    4
Title V of the Act contemplates that states will administer and
enforce the permitting program:

        [T]he permit program is predicated on the principle that the
        primary responsibility for its day-to-day administration will
        rest squarely with state and local air pollution agencies.
        While EPA has an important role of providing guidance and
        general oversight, the agency should not unduly interfere
        with states' implementation of the permit program.

Chafee-Baucus Statement at S16983.

States are directed to submit for EPA approval their own programs
for issuing permits. CAA § 502(d)(1), 42 U.S.C. § 7661a(d)(1).
EPA may not approve a proposed permit program unless it meets
certain minimum criteria set out in CAA § 502(b), 42 U.S.C.
§ 7661a(b). Among other things, states must design a standard
permit application form (§ 502(b)(1)), adequately staff and
fund the permit program (§ 502(b)(4)), develop a plan to ensure
permit compliance (§ 502(b)(5)), provide public access to doc-
uments submitted in support of permit applications (§ 502(b)(8)), and
provide for review in state courts of permitting decisions
(§ 502(b)(6)).

If a state fails to submit a permit program, or submits a permit
program that EPA disapproves for failure to comply with CAA
§ 502(b), the state becomes subject to sanctions designed to
encourage compliance. CAA § 502(d), 42 U.S.C. § 7661a(d).2

One sanction deprives states of certain federal highway funds.
CAA § 179(b)(1), 42 U.S.C. § 7509(b)(1). However, the state loses
no funds that would be spent in regions that are in "attainment" within
_________________________________________________________________

2 We discuss the timing of sanctions in greater detail in our opinion in
a related case, Virginia v. United States (Virginia I), No. 95-2229 (4th
Cir. Feb. 2, 1996). Sanctions are mandatory, but they may be imposed
earlier than mandated by the statute if EPA finds, after holding a notice-
and-comment rulemaking proceeding, that early imposition of sanctions
is necessary to encourage compliance. See CAA §§ 502(d) & (i), 42
U.S.C. §§ 7661a(d) & (i).

                    5
the meaning of the Act.3 CAA § 179(b)(1)(A), 42 U.S.C.
§ 7509(b)(1)(A). And, even within "nonattainment" areas, funds
remain available for highway projects that "resolve a demonstrated
safety problem and likely will result in a significant reduction in, or
avoidance of, accidents." Id. Finally, federal funds may be spent on
many other types of transportation projects within nonattainment
areas, including:

        (i) capital programs for public transit;

        (ii) construction or restriction of certain roads or lanes
        solely for the use of passenger buses or high occupancy
        vehicles;

        (iii) planning for requirements for employers to reduce
        employee work-trip-related vehicle emissions;

        (iv) highway ramp metering, traffic signalization, and
        related programs that improve traffic flow and achieve a net
        emission reduction;

        (v) fringe and transportation corridor parking facilities
        serving multiple occupancy vehicle programs or transit
        operations;

       (vi) programs to limit or restrict vehicle use in down-
       town areas or other areas of emission concentration particu-
       larly during periods of peak use, through road use charges,
       tolls, parking surcharges, or other pricing mechanisms, vehi-
       cle restricted zones or periods, or vehicle registration pro-
       grams;
_________________________________________________________________

3 We explain the concepts of "attainment" and "nonattainment" in
greater detail in Virginia I. In brief, an area is in nonattainment with
respect to a pollutant if levels of that pollutant in the ambient (breath-
able) air exceed a threshold level set by EPA. An ozone nonattainment
area, for example, has what EPA has determined to be a sufficient
amount of ozone in the air to cause health problems.

                    6
        (vii) programs for breakdown and accident scene man-
        agement, nonrecurring congestion, and vehicle information
        systems, to reduce congestion and emissions; and

        (viii) such other transportation-related programs as the
        [EPA] Administrator, in consultation with the Secretary of
        Transportation, finds would improve air quality and would
        not encourage single occupancy vehicle capacity. In consid-
        ering such measures, the State should seek to ensure ade-
        quate access to downtown, other commercial, and
        residential areas, and avoid increasing or relocating emis-
        sions and congestion rather than reducing them.

CAA § 179(b)(1)(B), 42 U.S.C. § 7509(b)(1)(B).

A second sanction increases the pollution offset requirements
already imposed on private polluters within ozone nonattainment
areas. Normally, new major stationary sources of pollution may not
be operated within nonattainment areas (and existing stationary
sources may not be modified if the modification would increase emis-
sions) unless pollution from other sources is reduced to offset
increased pollution from the new or modified source. In regions of
"marginal" nonattainment with respect to ozone, 110 tons of old pol-
lution must be eliminated for every 100 additional tons of new pollu-
tion (a ratio of 1.1:1). CAA § 182(a)(4), 42 U.S.C. § 7511a(a)(4). In
regions of "moderate" nonattainment, 115 tons of old pollution must
be eliminated for every additional 100 tons of new pollution (a ratio
of 1.15:1). CAA § 182(b)(5), 42 U.S.C. § 7511a(b)(5). In regions of
"serious," "severe," or "extreme" nonattainment with respect to ozone,
120 tons of old pollution must be eliminated for every additional 100
tons of new pollution (a ratio of 1.2:1). CAA §§ 182(c)(10), (d), &
(e); 42 U.S.C. § 7511a(c)(10), (d), & (e). In regions of "severe" and
"extreme" nonattainment, higher ratios are mandated for certain pollu-
tants. See CAA §§ 182(d)(2) & (e)(1); 42 U.S.C. §§ 7511a(d)(2) &
(e)(1). The sanction supersedes these normal ratios by increasing the
ratio in all ozone nonattainment areas to 2:1, requiring 200 tons of old
pollutants to be eliminated for every 100 tons of new pollutants
allowed. CAA § 179(b)(2), 42 U.S.C. § 7509(b)(2). The offset sanc-
tion, therefore, could slow the rate of industrial development within
a noncomplying state.

                    7
A third sanction eliminates the state's ability to manage its own
pollution control regime. If the state does not gain approval for its
permit program, EPA develops and implements its own Title V permitting
program within the noncomplying state. CAA § 502(d)(3), 42 U.S.C.
§ 7661a(d)(3). The state is not required to do anything to assist EPA
in this effort; the federal government becomes wholly responsible.

B.

Virginia submitted a proposed Title V permit program to EPA on November
12, 1993, and January 14, 1994. EPA then opened a notice and com-
ment period. EPA published notice of its intent to disapprove Virgin-
ia's proposal on June 17, 1994, 59 Fed. Reg. 31183, and Virginia
responded to EPA's notice. After considering Virginia's comments,
as well as the comments of others, EPA took final action disapproving
Virginia's proposed Title V program on December 5, 1994. 59 Fed.
Reg. 62324.

EPA based its disapproval on five grounds:

       (1) the proposed program contained inadequate judicial review
       provisions, in violation of CAA § 502(b)(6) (42 U.S.C.
       § 7661a(b)(6)) and 40 C.F.R. § 70.4(b)(3)(x) & 70.7(h);

       (2) the proposed program would have allowed certain permits to
       be issued by default, in violation of § 505(b)(3) (42 U.S.C.
       § 7661d(b)(3)) and 40 C.F.R. § 70.8(e);

       (3) the regulations that would have implemented the proposed
       program had expired without being re-promulgated;

       (4) the proposed program did not "require issuance of permits to
       the proper universe of sources required by 40 CFR part 70"; and

       (5) the proposed program did not "contain regulations meeting
       the requirements of 40 CFR part 70 to ensure issuance of per-
       mits that contain all applicable Federal requirements," and

                   8
        did not "correctly delineate provisions only enforceable by"
        Virginia.

See id. at 62324-25.

Virginia filed a petition for review in this Court on January 9, 1995.4
Since that date Virginia has revised portions of its original proposal
and now claims that it has corrected defects (2) through (5). EPA has
not yet determined whether those defects have actually been cor-
rected.

The claims in Virginia's petition to us fall into three broad catego-
ries. First, Virginia argues that because it has corrected defects (2)
through (5) in its proposed permit program, we should remand the case
to EPA for a new determination of whether the corrected version complies
with the Act. Second, Virginia argues that EPA's disapproval of the
originally proposed permit program was arbitrary and capricious. Third,
Virginia argues that Title V of the CAA and its sanctions provisions
are unconstitutional because the Act represents an attempt by Congress
to coerce Virginia into exercising its sovereign legislative power. We
consider each claim in turn.

II.

Virginia suggests that we must remand this case to EPA because
four of the five defects in its originally proposed Title V state permit
program have been corrected. We believe, however, that a remand would be
inappropriate.

First, Virginia concedes that EPA properly disapproved its original
submission on the basis of defects (2) through (5). We may affirm the
agency on this basis, and this basis alone, if the CAA passes constitu-
tional muster. Although the EPA "Administrator may approve a pro-
gram [just] to the extent that the program meets the requirements of"
the Act, she is not required to do so, and she has the authority to dis-
_________________________________________________________________

4 Virginia simultaneously filed suit, Virginia I, in the district court for
the Eastern District of Virginia. In Virginia I we affirmed the district
court's decision to dismiss for lack of subject matter jurisdiction.

                     9
approve the entire program on the basis of one defect. CAA
§ 502(d)(1), 42 U.S.C. § 7661a(d)(1).

Second, EPA has not yet determined whether Virginia's new sub-
mission is adequate, because EPA has not completed the notice and
comment rulemaking proceeding required by CAA § 502(d)(1). And
absent any agency record, we have no way of knowing whether the
new submission in fact complies with the CAA, as Virginia claims.
See Federal Power Comm'n v. Transcontinental Gas Pipe Line Corp.,
423 U.S. 326, 331-34 (1976) (per curiam); cf. Virginia Agric. Grow-
ers Ass'n v. Donovan, 774 F.2d 89, 92 (4th Cir. 1985) ("the focal
point for judicial review should be the administrative record already
in existence, not some new record made initially in the reviewing
court") (quoting Camp v. Pitts, 411 U.S. 138, 143 (1973));
Deukmejian v. Nuclear Regulatory Comm'n, 751 F.2d 1287, 1325
(D.C. Cir. 1984) ("judicial reliance on an agency's stated rationale
and findings is central to a harmonious relationship between agency
and court"), aff'd in pertinent part sub. nom. San Luis Obispo Moth-
ers for Peace v. U.S. Nuclear Regulatory Comm'n, 789 F.2d 26 (D.C.
Cir. 1986) (en banc), cert. denied, 479 U.S. 923 (1986).

A remand would serve no useful purpose here, and accordingly we
reject Virginia's suggestion.

III.

Virginia claims that EPA erroneously determined that Virginia's
permit program contained inadequate judicial review provisions (defect (1)).
EPA's finding that Virginia submitted a deficient permit program must be
upheld unless that finding is "arbitrary, capricious, or otherwise not in
accordance with law." 5 U.S.C. § 706(2)(A). We find that EPA correctly
determined that Virginia's proposed judicial review provisions do not
comply with the Act. Therefore, even if EPA had based its disap-
proval solely on defect (1), such disapproval would not have been
arbitrary and capricious.

A.

CAA § 502(b)(6), 42 U.S.C. § 7661a(b)(6), provides that a state permit
program must contain:

                   10
        Adequate, streamlined, and reasonable procedures for
        expeditiously determining when applications are complete,
        for processing such applications, for public notice, including
        offering an opportunity for public comment and a hearing,
        and for expeditious review of permit actions, including
        applications, renewals, or revisions, and including an oppor-
        tunity for judicial review in State court of the final permit
        action by the applicant, any person who participated in the
        public comment process, and any other person who could
        obtain judicial review of that action under applicable law.

(Emphasis supplied.)

The emphasized portion of this provision is at issue here. A state permit
program will be disapproved unless the state submits a legal opinion stating
that the proposed Title V program allows state court review of permit-
ting decisions upon the request of "the [permit] applicant, any person
who participated in the public participation process. . . and any other
person who could obtain judicial review of such actions under State
laws." 40 C.F.R. § 70.4(b)(3)(x). EPA interprets the statute and regu-
lation to require, at a minimum, that states provide judicial review of
permitting decisions to any person who would have standing under
Article III of the United States Constitution. Notice of Proposed
Disapproval, 59 Fed. Reg. 31183, 31184 (June 17, 1994).

Virginia law grants standing to seek judicial review of permitting
decisions to "[a]ny owner aggrieved by" such decisions. Va. Code
§ 10.1-1318(A). This provision satisfies CAA § 502(b)(6)'s require-
ment that the permit "applicant" be allowed to seek judicial review.
But § 502(b)(6) also requires that states grant certain standing rights
to members of the public, and here is where Virginia's judicial review
provision falls short of the mark. Under Virginia's provision, a mem-
ber of the public "who is aggrieved by a final[permitting decision]
who participated, in person or by submittal of written comments, in
the public comment process" may only seek judicial review of a per-
mitting decision if he can establish that

        (i) [he] has suffered an actual, threatened, or imminent
        injury; (ii) such injury is an invasion of an immediate,
        legally protected, pecuniary and substantial interest which

                    11
        is concrete and particularized; (iii) such injury is fairly
        traceable to the [permitting decision] and not the result of
        the action of some third party not before the court; and (iv)
        such injury will likely be redressed by a favorable decision
        of the court.

Va. Code § 10.1-1318(B) (emphasis supplied).

According to EPA, this provision is too restrictive: limiting avail-
ability of review to those persons with "pecuniary and substantial"
interests violates CAA § 502(b)(6). We agree with EPA.

B.

1.

Virginia argues that the text of CAA § 502(b)(6) does not require
states to slacken their rules of judicial standing at all.

The critical language to be examined is: "an opportunity for judi-
cial review in State court of the final permit action by the applicant,
any person who participated in the public comment process, and any
other person who could obtain judicial review of that action under
applicable law."

As Virginia reads the statute, the final clause,"who could obtain
judicial review of that action under applicable[state] law," modifies
all three categories of persons earlier described as being allowed to
seek judicial review: "the applicant," "any person who participated in
the public comment process," and "any other person." Thus, accord-
ing to Virginia, § 506(b)(6) requires states to grant standing to partici-
pants in the public comment process only if those persons would
otherwise have standing under existing state law.

Virginia's proposed reading is contrary to ordinary principles of
statutory construction and to the rules of English usage. The clause,
"who could obtain judicial review of that action under applicable
law," modifies only the immediately preceding category, "any other
person." An elementary principle of statutory construction is the "last

                     12
antecedent" rule, which holds that ordinarily a clause modifies only
its nearest antecedent. In re Grewe, 4 F.3d 299, 302 (4th Cir. 1993),
cert. denied, 114 S. Ct. 1056 (1994). Furthermore, if the last anteced-
ent rule does not apply, and the clause modifies all three categories,
then there would have been no need for Congress to have included the
first two categories. The statute could have been written simply to say
that standing should be given to "any person" who complied with
state standing rules. A court should not -- and we will not -- con-
strue a statute in a manner that reduces some of its terms to mere sur-
plusage. See Arkansas Best Corp. v. Commissioner, 485 U.S. 212,
218 (1988).

Properly read, the final clause simply allows the states to grant
broader standing rights than those otherwise required under federal
law.

        This provision ensures that existing provisions of law gov-
        erning the availability of review of final actions on permit
        applications are in no way limited, and that interested per-
        sons who arguably are affected by permit decisions are
        guaranteed their day in court.

Chafee-Baucus Statement, 136 Cong. Rec. at S169941. In other
words, the clause "who could obtain judicial review of that action
under applicable law" creates a floor of rights, rather than a ceiling,
and ensures that the CAA does not inadvertently diminish standing
rights previously granted under state laws.

2.

A literal reading of the latter part of § 502(b)(6), then, would
require that a state allow "any person who participated in the public
comment process" to seek judicial review of permitting decisions.
EPA, however, does not require that states go that far in providing for
judicial review. EPA has determined that § 502(b)(6) is satisfied (and
that therefore a state permit program may be approved) if a state grants
standing only to those participants in the public comment process who would
have Article III standing to sue in federal court.5
_________________________________________________________________

5 For Article III standing purposes, a potential litigant must show (1)
actual or imminent injury that is concrete and particularized, (2) causal

                    13
This determination is justified by analysis of the opening portion
of § 502(b)(6), which requires that states provide "[a]dequate, stream-
lined, and reasonable procedures for expeditiously" making permit-
ting decisions. The two parts of the section must be harmonized, and
EPA has done that by creating a safe harbor keyed to Article III
standing.

But Virginia claims that because EPA agrees that § 502(b)(6),
when read in its entirety, is ambiguous, the states may propose any
Title V program that reasonably accommodates the statute's dishar-
monious provisions. Virginia claims that because its"pecuniary and
substantial interest" requirement is a reasonable way to resolve the
tension inherent in § 502(b)(6), EPA was arbitrary and capricious in
its decision to reject Virginia's proposal.

We disagree. EPA's interpretation, if reasonable, must take prece-
dence over any interpretation Virginia could offer or, indeed, even
over any alternative interpretation we could formulate. Chevron,
U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837, 844
(1984). We defer to EPA's definition of the bounds of the § 502(b)(6)
safe harbor because "[t]he power of an administrative agency to
administer a congressionally created . . . program necessarily requires
the formulation of policy and the making of rules to fill any gap left,
implicitly or explicitly, by Congress." Id. at 843 (quoting Morton v.
Ruiz, 415 U.S. 199, 231 (1974)).

EPA's interpretation of the judicial review portion of CAA
§ 502(b)(6) harmonizes it with the portion that requires states to pro-
vide "[a]dequate, streamlined, and reasonable procedures." We find
EPA's importation of Article III principles to resolve the slight ten-
sion within CAA § 502(b)(6) to be reasonable. The Article III test is
convenient to apply, primarily because a body of national caselaw
interpreting Article III standing requirements already exists. See, e.g.,
Sammon v. New Jersey Bd. of Medical Examiners, 66 F.3d 639, 642
(3d Cir. 1995); Chambers Medical Technologies v. Bryant, 52 F.3d
_________________________________________________________________

connection between the challenged conduct and the injury, and (3) likeli-
hood that the injury would be redressed by favorable judicial action.
Lujan v. Defenders of Wildlife, 112 S. Ct. 2130, 2136 (1992).

                    14
1252, 1265 (4th Cir. 1995); Williams v. Lambert , 46 F.3d 1275, 1278
(2d Cir. 1995); Ass'n for Retarded Citizens v. Dallas County Mental
Health & Mental Retardation Ctr. Bd. of Trustees, 19 F.3d 241, 243
(5th Cir. 1994); Adams v. Watson, 10 F.3d 915, 918 (1st Cir. 1993);
Banks v. Secretary of Indiana Family and Social Servs. Admin., 997
F.2d 231, 238 (7th Cir. 1993); Central Ariz. Water Conservation Dist.
v. United States EPA, 990 F.2d 1531, 1537-38 (9th Cir.), cert. denied,
114 S. Ct. 94 (1993). Because EPA's "answer is based upon a permis-
sible construction of the statute," we will follow EPA's choice of
interpretation. Chevron, 467 U.S. at 843; accord Monongahela Power
Co. v. Reilly, 980 F.2d 272, 278-79 (4th Cir. 1992).

Virginia argues that Chevron deference is inappropriate because
EPA's area of expertise is the environment, not jurisdictional rules.
See Hi-Craft Clothing Co. v. NLRB, 660 F.2d 910, 914-15 (3d Cir.
1981). Again, we disagree. "[C]onsiderable weight should be
accorded to an executive department's construction of a statutory
scheme it is entrusted to administer." Chevron, 467 U.S. at 844. Con-
gress has charged EPA with inducing the states to implement a per-
mitting program that satisfies certain judicial review requirements,
and if Congress has decided that EPA has sufficient expertise in the
area, it is not our place to say otherwise. See Cass R. Sunstein, Law
and Administration After Chevron, 90 Colum. L. Rev. 2071, 2097
(1990) ("an ad hoc inquiry into administrative competence would be
an exceptionally poor way to handle the question whether Chevron
applies").

Virginia also claims that Gregory v. Ashcroft, 501 U.S. 452 (1991),
mandates a different result. Virginia is again mistaken. Gregory sim-
ply stands for the proposition that when congressional intent is
unclear, a statute should be construed to avoid a constitutional ques-
tion. That principle has no relevance in this case because here it is
manifestly clear that Congress specifically intended that the states
conform their judicial standing rules to meet the § 502(b)(6) standard.
See Association of Community Orgs. for Reform Now (ACORN) v.
Edgar, 56 F.3d 791, 796 (7th Cir. 1995); United States v. Lot 5, 23
F.3d 359, 362 (11th Cir. 1994), cert. denied, 115 S. Ct. 722 (1995);
EEOC v. Massachusetts, 987 F.2d 64, 69 (1st Cir. 1993).

In Gregory the Supreme Court faced the question whether the Age
Discrimination in Employment Act (ADEA), 29 U.S.C. §§ 621-34,

                    15
applied to state judges. The ADEA contained no express reference to
state courts or judges, and therefore the Court concluded that the stat-
ute did not apply. If the statute did apply to state judges, the Court
reasoned, then an inquiry into key federalism concerns would be
required. Specifically, could Congress, under the guise of an
antidiscrimination statute, alter the qualifications for state judges, or
would doing so violate the Tenth Amendment? The Court held that
it would construe the ADEA in a manner that would allow it to avoid
the constitutional question. Because the statute did not expressly say
that it applied to state judges, and because a difficult constitutional
question would have been presented if the statute did in fact apply to
state judges, the statute was interpreted as not applying to state
judges.

The Clean Air Act contains no ambiguity of the kind present in
Gregory. Even if EPA's interpretation of CAA § 502(b)(6) can be
said to implicate Tenth Amendment concerns by intruding upon what
Virginia claims to be a core element of its sovereignty, see IV.A,
infra, that interpretation is specifically authorized by the "plain state-
ment" of Congress. Gregory, 501 U.S. at 461. In Gregory, the ques-
tion was whether the ADEA applied to the state judiciary at all. Here,
by contrast, Congress intended CAA § 502(b)(6) to apply to state
courts, and Congress made "its intention unmistakably clear in the
language of the statute." Atascadero State Hosp. v. Scanlon, 473 U.S.
234, 242 (1985). By its terms, § 502(b)(6) could apply to nothing but
state courts.

Here, EPA resolved the slight tension within § 502(b)(6) by inter-
preting the section to require that states, at a minimum, extend judi-
cial review rights to participants in the state public comment process
who satisfy the standard for Article III standing. This resolution is
both authorized by Congress and reasonable, and therefore we must
reject Virginia's alternative interpretation.

3.

Virginia also argues that even if the Article III test is proper, Vir-
ginia's "pecuniary and substantial interest" requirement satisfies it.
Again, we disagree.

                     16
A plaintiff need not show "pecuniary" harm to have Article III
standing; injury to health or to aesthetic, environmental, or recre-
ational interests will suffice. See, e.g., United States v. Students Chal-
lenging Regulatory Agency Procedures (SCRAP), 412 U.S. 669, 686-
87 (1973); Sierra Club v. Morton, 405 U.S. 727, 734 (1972).

In recent cases, Virginia courts have denied standing to plaintiffs
who would have met Article III's standing requirements. For exam-
ple, in Fries v. State Water Control Bd., 409 S.E.2d 634, 637 (Va. Ct.
App. 1991), it was held that a town lacked standing to seek judicial
review of the decision of the State Water Control Board to grant a
permit, even though the permit allowed a sewage treatment plant to
discharge waste directly upstream of the town. Standing also was
denied to individual riparian landowners. The court held that "an
anticipated public injury" was not "an immediate, pecuniary, and sub-
stantial interest" such that standing should be allowed. Id.; see also
Citizens for Clean Air v. Commonwealth, 412 S.E.2d 715, 719-21
(Va. Ct. App. 1991) (because unincorporated association was not an
"owner aggrieved" under Virginia law, association was denied stand-
ing to challenge permitting decision of State Air Pollution Control
Board, even though association members owned real estate near plant
granted permit, were bothered by foul odors emitted by plant, and
alleged decline in property values); Environmental Defense Fund v.
Virginia State Water Control Bd., 404 S.E.2d 728, 731-32 (Va. Ct.
App. 1991) (standing denied to association seeking review of water
pollution permit decision, even though association represented both
recreational users of a river and riparian landowners).

Virginia caselaw makes it clear that the "pecuniary and substantial
interest" requirement is more stringent than Article III's requirement
of concrete and particularized injury.

4.

Section 502(b)(6)'s requirement of broad availability of judicial
review is necessary to ensure that the required public comment period
serves its proper purpose. The comment of an ordinary citizen carries
more weight if officials know that the citizen has the power to seek
judicial review of any administrative decision harming him. EPA
recently recognized this principle in another context:

                     17
        When citizens are denied the opportunity to challenge exec-
        utive decisions in court, their ability to influence permitting
        decisions through other required elements of public partici-
        pation, such as through public comments and public hear-
        ings on proposed permits, may be seriously compromised.
        If citizens perceive that a state is not addressing their con-
        cerns about [ ] permits because the citizens have no recourse
        to an impartial judiciary, that perception also has a chilling
        effect on all the remaining forms of public participation in
        the permitting process.

Amendment to Requirements for Authorized State Permit Programs
Under Section 402 of the Clean Water Act, 60 Fed. Reg. 14588,
14589 (March 17, 1995) (notice of proposed rulemaking).

5.

Because Virginia's permit program did not provide the minimum judicial
review rights required under § 506(b)(6), it was not arbitrary and
capricious for EPA to disapprove Virginia's submission.

IV.

Having determined that EPA had a valid reason to disapprove Vir-
ginia's permit program, we now examine whether Title V and its
sanctions provisions are constitutional. Virginia claims that Title V
and its sanctions provisions are unconstitutional because they
impinge upon a fundamental element of state sovereignty, the state's
right to articulate its own rules of judicial standing. Even assuming
arguendo the accuracy of Virginia's assertion that its standing rules
are within the core of its sovereignty, we find no constitutional
violation because federal law "may, indeed, be designed to induce state
action in areas that otherwise would be beyond Congress' regulatory
authority." FERC v. Mississippi, 456 U.S. 742, 766 (1982). As we ex-
plain below, we believe that if Virginia chooses to change its rules
of judicial standing, it will make the change only because the CAA's
sanctions provisions induce it to do so, not because they coerce it.

A.

We agree that Congress lacks power to impinge upon "the core of
sovereignty retained by the States." New York v. United States, 112

                    18
S. Ct. 2408, 2419 (1992). We also agree that an important aspect of
a state's sovereignty is the administration of its judicial system. See
Gregory, 501 U.S. at 460. Thus, a state cannot be required to create
a court with power to decide federal claims, if no court otherwise
exists. Howlett v. Rose, 496 U.S. 356, 372 (1990). Similarly, a state
may apply neutral venue rules to require that federal claims be
brought in a particular state court. Herb v. Pitcairn, 324 U.S. 117, 123
(1945), overruled in part on other grounds by Michigan v. Long, 463
U.S. 1032 (1983). But the Supremacy Clause compels state judges to
apply federal law, if such law is applicable. U.S. Const. art. VI, cl. 2.
Furthermore, to require an existing state administrative body to adju-
dicate a dispute arising under federal law does not unreasonably inter-
fere with state sovereignty. FERC, 456 U.S. at 760; see also Testa v.
Katt, 330 U.S. 386 (1947) (state court must entertain civil action aris-
ing under federal Emergency Price Control Act); E.A. v. State, 623
P.2d 1210, 1215 n.13 (Alaska, 1981) (state court must exercise juris-
diction over actions brought pursuant to federal Indian Child Welfare
Act); cf. Mack v. United States, 66 F.3d 1025, 1029-30 (9th Cir. 1995)
(state law enforcement officials may be required to assist in operation
of federal law enforcement scheme).

We need not decide whether judicial standing rules fall within the
core of sovereignty identified in Gregory and Howlett, supra, because
we find that the CAA does not compel the states to modify their
standing rules; it merely induces them to do so. 6 The CAA is constitu-
_________________________________________________________________

6 In its brief and during oral argument Virginia claimed that CAA
§ 113, 42 U.S.C. § 7413, exposes the state and its elected officials to
civil and criminal liability for failure to promulgate a valid state
permit program. A careful reading of this section, however, discloses
that it provides for enforcement of an approved state permit program.
Sanctions under § 113 may not be used to force Virginia to promulgate
any state permit program, and EPA has not proposed invoking § 113 in
this case. Sanctions under this section are available only to redress
"violations of . . . an approved permit program under subchapter
[Title] V." CAA § 113(a)(2), 42 U.S.C. § 7413(a)(2). EPA has not ap-
proved Virginia's proposed Title V program, so no "approved permit
program" yet exists to trigger any § 113 sanctions against any Vir-
ginia official. In addition, EPA has expressed no intention to seek § 113
sanctions against Virginia officials in the future. For these reasons, a
constitutional challenge to § 113 is unripe. Renne v. Geary, 501 U.S.

                    19
tional because although its sanctions provisions potentially burden the
states, those sanctions amount to inducement rather than "outright
coercion." See New York 112 S. Ct. at 2423. We examine each sanc-
tion separately to explain how we reach this conclusion. See id. at
2425.

B.

Two sources of Congressional power allow use of the highway
sanction. Because the elimination of air pollution promotes the gen-
eral welfare, Congress may tie the award of federal funds to the
states' efforts to eliminate air pollution. "The Congress shall have
Power to lay and collect Taxes, Duties, Imposts and Excises, to pay
the Debts and provide for the common Defence and general Welfare
of the United States." U.S. Const. art. I § 8, cl. 1. Furthermore, the
Commerce Clause, U.S. Const. art. I, § 8, cl. 3, gives Congress the
power to regulate "activities causing air or water pollution, or other
environmental hazards that may have effects in more than one State."
Hodel v. Virginia Surface Mining & Reclamation Ass'n, 452 U.S.
264, 282 (1981).

Generally, Congress may use the power of the purse to encourage
states to enact particular legislation. New York, 112 S. Ct. at 2423.
This power, however, is not limitless. Exercise of the power to the
point of "outright coercion" violates the Constitution. Id. "[I]n some
circumstances the financial inducement offered by Congress might be
so coercive as to pass the point at which `pressure turns into compul-
sion.'" South Dakota v. Dole, 483 U.S. 203, 211 (1987) (quoting
Steward Machine Co. v. Davis, 301 U.S. 548, 590 (1937)).7 Also, it
has been suggested that federal funds may be subject to conditions
_________________________________________________________________

312, 321-22 (1991). The threat of such sanctions has not been "felt in a
concrete way by" any Virginia official. Reno v. Catholic Social Servs.,
Inc., 113 S. Ct. 2485, 2495 (1993) (quoting Abbott Labs., Inc. v.
Gardner, 387 U.S. 136, 148 (1967)); accord Lujan v. National Wildlife
Fed'n, 497 U.S. 871, 891 (1990).

7 In South Dakota the Supreme Court upheld an Act of Congress that
denied a percentage of highway funds to states that refused to enact a
minimum drinking age of 21.

                    20
"only in ways reasonably related to the purpose for which the funds
are expended." South Dakota, 483 U.S. at 213 (O'Connor, J., dissent-
ing); see also New York, 112 S. Ct. at 2426. No court, however, has
ever struck down a federal statute on grounds that it exceeded the
Spending Power. See Nevada v. Skinner, 884 F.2d 445, 448 (9th Cir.
1989), cert. denied, 493 U.S. 1070 (1990).

The highway sanction here does not rise to the level of "outright
coercion." First, a state does not lose any highway funds that would
be spent in areas of the state that are in attainment. CAA
§ 179(b)(1)(A), 42 U.S.C. § 7509(b)(1)(A). Second, even within non-
attainment areas, federal highway funds may be spent on projects
designed to promote safety or designed to reduce air pollution. CAA
§ 179 (b)(1), 42 U.S.C. § 7509(b)(1). More severe funding restrictions
than those at issue here have been upheld. See, e.g., New York, 112
S. Ct. at 2426-27; Skinner, supra (virtually all highway funds);
Oklahoma v. Schweiker, 655 F.2d 401 (D.C. Cir. 1981) (all Medicaid
funds); Nebraska, Dep't of Roads v. Tiemann, 510 F.2d 446 (8th Cir.
1975) (broad category of highway funds).

Virginia concedes that it is allowed to spend federal money on
safety projects, on projects that will reduce pollution, and on projects
within areas that are in attainment. The Commonwealth contends,
however, that because it is difficult to shift funds from one transporta-
tion project to another, these exemptions do not reduce the sanction's
coercive effect. According to Virginia, it simply lacks the time to
reallocate funds away from highway projects it has already planned
for nonattainment areas. To this argument we can only say that Title
V was enacted in 1990, and the states have had more than five years
either to comply or to prepare themselves for the consequences of
noncompliance.

And contrary to what Virginia claims, the conditions on spending
are reasonably related to the goal of reducing air pollution. The CAA
as a whole is a comprehensive scheme to cope with the problem of
air pollution from all sources. Congress may ensure that funds it allo-
cates are not used to exacerbate the overall problem of air pollution.
It is therefore of no consequence that a highway sanction, which will
have the effect of reducing emissions from mobile pollution sources,

                    21
is being used to induce compliance with a portion of the Act designed
to reduce emissions from stationary sources.

We hold that the highway sanction, CAA § 179(b)(1), is a valid
exercise of the Spending Power. As a valid exercise of that power, it
also comports with the requirements of the Tenth Amendment. New
York, 112 S. Ct. at 2427. Congress has not overstepped its bounds
here.

C.

The offset sanction, CAA § 179(b)(2), 42 U.S.C. § 7509(b)(2),
which limits new construction or modification of major stationary
sources of air pollution, is constitutional because it regulates private
pollution sources, not states.

The burden of the offset sanction falls on private parties. The more
stringent offset requirements will likely make it more difficult for
individual pollution sources (manufacturers, utilities, and the like) to
upgrade or modify existing plants and equipment or to open new
plants. Thus, although the sanction may burden some Virginia citi-
zens, it does not burden Virginia as a governmental unit. For this rea-
son, the sanction does not violate the principles of federalism
embodied in the Tenth Amendment. New York, 112 S. Ct. at 2427
(upholding a sanction because "any burden caused by a state's refusal
to regulate will fall on" private citizens); Hodel, 452 U.S. at 288
(harm to citizens of states does not create Tenth Amendment viola-
tion, absent direct harm to state governmental entities). The offset
sanction is constitutional.

D.

The final sanction, federal permit program implementation, CAA § 502(d)(3),
42 U.S.C. § 7661a(d)(3), also is constitutional. The essence of a Tenth
Amendment violation is that the state is commanded to regulate.
Here, Virginia is not commanded to regulate; the Commonwealth
may choose to do nothing and let the federal government promulgate
and enforce its own permit program within Virginia. Because "the full
regulatory burden will be borne by the Federal Government," the
sanction is constitutional. Hodel, 452 U.S. at 288.

                     22
Hodel, in fact, is the mirror image of this case and controls our
decision. In Hodel the federal government first implemented an envi-
ronmental regulatory regime within each state but then gave each
state the ability to end the federal program by implementing its own
state environmental regulations that met certain criteria. In the present
situation, the federal government gives the states the chance to enact
their own regulations before the federal plan is imposed. For purposes
of constitutional analysis, we cannot see how it makes a difference
whether the federal plan is imposed first, or whether the states are
given the chance to avoid imposition of the federal plan first. If any-
thing, the CAA's method -- to give the states a chance first to avoid
imposition of any federal plan by promulgating satisfactory regula-
tions -- seems less coercive than the program upheld in Hodel. The
CAA simply "establishes a program of cooperative federalism that
allows the States, within limits established by federal minimum stan-
dards, to enact and administer their own regulatory programs, struc-
tured to meet their own particular needs." Id. at 289.

Because Congress may choose to preempt state law completely, it
may also take the less drastic step of allowing the states the ability to
avoid preemption by adopting and implementing their own plans that
sufficiently address congressional concerns. Id. at 290; Mack, 66 F.3d
at 1029 ("The federal government may offer to preempt regulation in
a given area and permit the states to avoid preemption if they regulate
in a manner acceptable to Congress.").

In Maryland v. EPA, 530 F.2d 215 (4th Cir. 1975), vacated and
remanded for consideration of mootness sub nom. EPA v. Brown, 431
U.S. 99 (1977) (per curiam), this court examined regulations promul-
gated under the CAA that on their face would have directly required
Maryland to enact statutes and to administer an EPA plan. See also
District of Columbia v. Train, 521 F.2d 971, 983 (D.C. Cir. 1975),
vacated and remanded for consideration of mootness sub nom. EPA
v. Brown, 431 U.S. 99 (1977) (per curiam).

The regulations in Maryland provided that "the state of Maryland
shall" establish and implement certain pollution control programs.
530 F.2d at 219. EPA argued that the regulations' use of the word,
"shall," meant that if Maryland did not comply, EPA could seek to
impose civil and criminal penalties on the state for noncompliance. Id.

                    23
at 224. We rejected that proposed interpretation as "astonishing," id.,
and said it "would reduce the states to the puppets of a ventriloquist
Congress." Id. at 226 (quoting Brown v. EPA, 521 F.2d 827, 839 (9th
Cir. 1975), vacated and remanded for consideration of mootness, 431
U.S. 99 (1977) (per curiam)). Had we accepted EPA's proposed inter-
pretation, Maryland's legislature would have been directly compelled
to regulate, a result that would have offended the Tenth Amendment.
Maryland, 530 F.2d at 224. Instead, we interpreted the regulations as
authorizing EPA to implement a federal pollution control program
directly. Id. at 227-28. This interpretation of the regulations
did not offend the Tenth Amendment, even though Maryland was put
under some pressure to pass laws satisfying federal criteria in
order to avoid federal implementation. "Congress may induce a state
to act by offering favors or exacting financial penalties." Id. at
226. See also Train, 521 F.2d at 984-85 (this procedure is "quite
unremarkable"). In Maryland we sent Congress and EPA a signal that
they could constitutionally use sanctions such as those at issue
here.

Finally, the CAA's sanctions provisions maintain unity between
regulation and political accountability. If sanctions are imposed, it
will be "the Federal Government that makes the decision in full view
of the public, and it will be federal officials that suffer the conse-
quences if the decision turns out to be detrimental or unpopular." New
York, 112 S. Ct. at 2424. The sanctions provisions are constitutional.

V.

In sum, we conclude (1) that EPA correctly disapproved Virginia's
proposed state permit program because it did not satisfy the provi-
sions of the Clean Air Act and (2) that the sanctions Virginia faces
are constitutional. The petition for review is denied.

DENIED

                    24
