“Stop playing Congress,” the D.C. Circuit told the U.S. Environmental Protection Agency (EPA) in an opinion issued July 1, 2011, and “assess nonattainment fees as the Clean Air Act [(CAA)] requires.” See NRDC v. EPA, D.C. Cir. No. 10-1056 (decided July 1, 2011). The result is likely to include higher fees in eight major metropolitan areas and further limitations on EPA’s ability to clarify policy details through the issuance of guidance documents.

The 1-Hour Standard v. the 8-Hour Standard

The opinion invalidates a January 2010 EPA guidance document concerning assessment of nonattainment fees for the 1-hour ozone ambient air quality standard that EPA revoked in 1997. The 1-hour standard was replaced with an 8-hour standard that generally is more stringent, though in some areas the old 1-hour standard can be violated despite attainment of the new 8-hour standard. The question is whether an anti-backsliding provision in CAA Section 172(e) requires continued assessment of nonattainment fees in areas that do not meet the 1-hour standard – even though that standard has now been revoked and the new 8-hour standard is attained.

In a series of efforts chronicled in the opinion, EPA has wrestled with this issue for over a decade. The January 2010 guidance allowed officials in severe ozone nonattainment areas two options instead of the fees: (1) adoption of alternative programs that are “not less stringent than” the fees (the “program alternative”); or (2) attaining the new 8-hour standard (the “attainment alternative”). The guidance stated that these would be applied to the existing severe nonattainment areas on a case-by-case basis, with a rulemaking in each case to determine the requirements finally applicable. The areas in question are in Baltimore, Baton Rouge, Houston, New York City, and in California, Sacramento, the San Joaquin Valley, the South Coast Air Basin and the Southeast Desert.

The court first addressed standing, holding that individual NRDC members who live in these areas have standing to bring the case because: (1) they could be injured in areas that do not attain the 1-hour standard even though the 8-hour standard is attained; and (2) a rulemaking for their area may not redress the injury because it would be limited to the two alternatives discussed in the guidance document; and (3) assessment of the fees as in the past could no longer be required. The court then turned to the question whether the guidance amounts to a “legislative rule” that requires notice-and-comment rulemaking under the Administrative Procedures Act. The court found that:

“because the Guidance binds EPA regional directors, it cannot be considered a mere statement of policy; it is a rule ... contrary to EPA’s argument, this rule is not interpretive; it is legislative. As we explained above, nothing in the statute, prior regulations, or case law authorizes EPA to accept alternatives to [the fees]. Likewise, nothing prior to the Guidance entitled a state to have EPA evaluate a proposed alternative for equivalency rather than reject it outright. Accordingly, the Guidance qualifies as a legislative rule that EPA had no authority to issue without notice and comment.”

Attainment Alternative Violates Anti-Backsliding Provision

In most cases, this would have ended the matter and the court would have revoked the guidance and remanded to EPA. Following an inconclusive review of precedent, the court went farther in this case and reviewed the merits of the alternatives presented in the guidance document, on the ground that such review might assist the agency in the next rulemaking. The court did not evaluate the program alternative, finding it more properly the subject of a future rule. However, the court invalidated the attainment alternative, holding that it violates the Act’s anti-backsliding provision and nothing would be gained by postponing a decision on the merits until after the next rulemaking has been competed.

In conclusion, the court recognized that assessment of fees for nonattainment of a revoked standard would unfairly penalize some sources. “But as we have said before, [i]f the Environmental Protection Agency disagrees with the Clean Air Acts’ requirements ... it should take its concerns to Congress. ... In the meantime, it must obey the Clean Air Act as written by Congress and interpreted by this court.”