Environmental Integrity Project v. EPA, No. 18-60384 (Haynes, Graves, Duncan)

Title V of the Clean Air Act requires certain stationary sources of air pollution to obtain operating permits. 42 U.S.C. § 7661b. The permit must include enforceable emissions standards and other conditions as “necessary to assure compliance with the Clean Air Act’s applicable requirements” for air pollution prevention and control. Id. § 7661c(a). The statute doesn’t define the term “applicable requirements,” however, so EPA defined it by regulation to include the terms and conditions of Title I preconstruction permits, which operators must obtain before the construction or modification of certain air pollution sources. 40 C.F.R. § 70.2.

Seeking to expand its Baytown, Texas plant, ExxonMobil requested a revised permit under Title V. When EPA didn’t object to ExxonMobil’s proposed revision to its permit, Petitioners Environmental Integrity Project and Sierra Club petitioned EPA to object, see 42 U.S.C. § 7661d(b)(2), arguing that ExxonMobil’s underlying Title I preconstruction permit for the expansion was invalid.

EPA rejected Petitioners’ arguments and declined to object. In so doing, EPA relied on the “Hunter Order.” See In the Matter of PacifiCorp Energy, Hunter Power Plant, Order on Petition No. VIII-2016-4, (Oct. 16, 2017). There EPA denied a petition to object to a Title V permit for a Utah power plant, explaining that it construes 40 C.F.R. § 70.2 to make the requirements of the operator’s underlying Title I permit the “applicable requirements” for purposes of Title V permitting “without further review.” As a result, EPA explained, a petition to object to a Title V permit is not a viable avenue for challenging the validity of the operator’s underlying Title I permits.

The Hunter Order marked EPA’s return to its original interpretation of § 70.2 shortly after Title V’s enactment in 1990. In the interim, however, EPA had abandoned that construction in favor of a broader reading of § 70.2 that permitted the agency to examine the validity of the permitting decisions underlying the operator’s related Title I permit.

Despite the fact that the Hunter Order and EPA’s order in this case both claimed to interpret EPA’s implementing regulation, 40 C.F.R. § 70.2—and not Title V of the Clean Air Act—the government defended it before the Fifth Circuit as a permissible interpretation of ambiguous statutory language, namely 42 U.S.C. § 7661c(a). Interestingly, while this case was pending, the same government lawyers were busy defending the Hunter Order in another case pending before the Tenth Circuit. See Sierra Club v. EPA, No. 18-9507 (10th Cir.). There, however, the government defended the Hunter Order not just as a permissible interpretation of ambiguous statutory language entitled to Chevron deference but also as a permissible interpretation of the regulation entitled to Kisor deference.

So, to sum up, we have an EPA order that purports to announce a return to an old interpretation of a regulation. When that order is challenged in the Tenth Circuit, the government invokes Kisor and Chevron in defending EPA’s view. Yet when that same interpretation is challenged in the Fifth Circuit, the government takes a different tack, resting its entire defense of EPA’s interpretation on Chevron. Pretend you’re a Fifth Circuit judge assigned to this panel. Do you:

  1. Go along with the government’s invocation of Chevron and simply apply the familiar two-step framework to the Hunter Order’s interpretation of a regulation?
  2. Reject the government’s attempt to invoke Chevron explaining that Chevron doesn’t apply to agency interpretations of regulations and apply Kisor or Skidmore instead? Or
  3. Reject the government’s attempt to invoke Chevron explaining that (a) Chenery I demands that the agency’s interpretation be upheld, if at all, for the reasons the agency gave when it announced the interpretation; (b) EPA in both the Hunter Order and the Order denying the petition to object in this case purported to justify its new interpretation as a permissible construction of its own regulation—not of the statute; and therefore (c) Chenery I requires the Court to uphold the agency’s interpretation only if it constitutes a permissible reading of a genuinely ambiguous regulation?

The Fifth Circuit’s answer? None of the above:

I’ll admit I didn’t know courts could avoid addressing Chevron’s applicability altogether when the appropriate level of deference is unclear. In any case, why do you suppose the panel concluded that the appropriate level of deference under Chevron was unclear? As far as I can tell, the opinion itself never answers that question.

The Court does clarify that while “[t]he Hunter Order is framed largely as an interpretation of 40 C.F.R. § 70.2,” it “[n]onetheless … analyze[d] [it] as a construction not only of § 70.2 but also of Title V and the Act as a whole.” In my view, that approach arguably raises the Chenery I problem I alluded to above—i.e., blessing the Hunter Order (and the EPA Order at issue in this case) for reasons other than those EPA itself gave in support of the Orders when it issued them.

In any event, the panel goes on to explain that it finds the government’s defense of EPA’s interpretation persuasive and therefore entitled to Skidmore deference even though the agency’s current interpretation is not “consisten[t] with [its] earlier … pronouncements” on the subject. (quoting Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944)).

On July 2nd, however, the Tenth Circuit reached the opposite conclusion in Sierra Club v. EPA, rejecting EPA’s interpretation of 40 C.F.R. § 70.2 as incompatible with the unambiguous language of the regulation. As a result, the Court vacated the Hunter Order. Along the way, the Tenth Circuit addressed the Fifth Circuit’s opinion at some length. The panel flagged the Chenery I issue I’ve discussed here before vacating the very EPA policy that the Fifth Circuit’s opinion had just upheld. In the end, though, the Tenth Circuit emphasized that because it held only that the regulation precluded EPA’s interpretation, it didn’t “need [to] reach the statutory issue underlying the Fifth Circuit’s recent opinion.”

That’s all well in good. If you ask me, though, the conflict between the two opinions is undeniable. After all, the courts reach opposite conclusions regarding the validity of the same EPA policy. They address different defenses of that policy not because they secretly agree with each other but because the government pursued inconsistent litigation strategies in the otherwise-parallel cases. What are the chances those strategic choices were unintentional? And if they were intentional, what do you think explains the government’s inconsistent approaches?

Petitioners in the Fifth Circuit have filed a petition for panel rehearing. I would keep a very close eye on this one. Despite the Tenth Circuit’s attempt to downplay the conflict, I wouldn’t be surprised if this issue ends up in front of the Supreme Court before it's all over.

Circuit Split Alert! EIP v. EPA, No. 18-60384 (5th Cir. May 29, 2020)
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