## Facts

- Title IV of the Clean Air Act created an acid rain cap-and-trade program limiting SO₂ emissions from electric utilities, implemented in phases with allowance allocations tied to specified historical baseline years.
- The statute also authorized “extension allowances” for certain generating units that installed qualifying SO₂ scrubbers and met eligibility criteria, with the extension-allowance calculation referencing a unit’s 1988–1989 emissions.
- Indianapolis Power & Light Company (IPL) sought extension allowances for units that installed scrubbers.
- One IPL unit was out of service for a substantial portion of 1988–1989, producing low or zero recorded emissions for those years.
- EPA’s rule calculated extension allowances using the unit’s actual, unadjusted 1988–1989 emissions and did not provide a mechanism to adjust for extended outages.
- IPL petitioned for review, arguing EPA was required (or at least permitted) to adjust 1988–1989 emissions data for units that were offline to yield a more representative allowance amount.
- EPA responded that Title IV did not authorize such adjustments and that using actual emissions was consistent with the program’s administrable, historically based design.

## Issues

1. Whether Title IV of the Clean Air Act requires or authorizes EPA to adjust a unit’s 1988–1989 emissions data when the unit was out of service for a significant period, for purposes of calculating extension allowances.
2. If the statute is silent or ambiguous, whether EPA’s interpretation—relying on unadjusted actual 1988–1989 emissions—is a permissible construction entitled to Chevron deference.

## Decision

- The court denied IPL’s petition for review and upheld EPA’s rule.
- The court held the statute did not speak directly to adjustments for out-of-service periods in 1988–1989.
- Applying Chevron, the court concluded EPA’s decision to use unadjusted actual emissions was a permissible interpretation.
- The court accepted EPA’s administrability and market-stability rationale and rejected IPL’s fairness-based objections as insufficient to show illegality.
- A separate concurrence agreed in the judgment and did not change the result.

## Legal Principles

- When a statute is silent or ambiguous on a technical implementation detail, a court applies Chevron and defers to the administering agency if the agency’s interpretation is reasonable.
- In a complex cap-and-trade program built around fixed historical baselines, an agency may adopt rigid, administrable rules tied to actual historical data absent statutory direction to make individualized adjustments.
- Policy objections that an agency rule produces harsh results for particular regulated entities do not justify judicial revision of the statutory scheme where Congress left the issue unresolved and the agency’s approach is reasonable.

## Conclusion

The D.C. Circuit upheld EPA’s method for calculating Title IV extension allowances using unadjusted actual 1988–1989 emissions, holding that the Clean Air Act did not require baseline adjustments for extended outages and that EPA’s administrability-based choice was reasonable under Chevron.


Indianapolis Power & Light Co. v. EPA, 58 F.3d 643 (D.C. Cir. 1995)