## Facts

- The Clean Air Act requires certain existing stationary sources to undergo New Source Review (NSR) and install pollution controls when a “modification” causes an emissions increase.
- EPA issued a 2002 rule revising core NSR applicability and implementation features for existing sources.
- The rule adopted an “actual-to-projected-actual” approach that lets sources project post-change emissions and, in specified circumstances, account for emissions increases attributed to demand growth unrelated to the change.
- The rule allowed sources to select a baseline “actual emissions” period using a lookback window (generally 10 years for electric generating units and 5 years for other sources).
- The rule created Plant-wide Applicability Limits (PALs), allowing a facility to make changes without NSR if total emissions remain below a facility-wide cap, with NSR triggered if the cap is exceeded.
- The rule also included “Clean Units” and “Pollution Control Projects” provisions and revised monitoring, recordkeeping, and reporting requirements relevant to verifying emissions projections.
- New York, other state and local governments, and aligned organizations petitioned for review in the D.C. Circuit, arguing the revisions unlawfully weakened NSR.

## Issues

1. Whether EPA’s “actual-to-projected-actual” test for determining a “significant emissions increase” is consistent with the Clean Air Act’s definition of “modification.”
2. Whether EPA’s baseline lookback periods for setting “baseline actual emissions” are lawful.
3. Whether excluding emissions increases attributable to independent demand growth is permissible under the statute.
4. Whether PALs are consistent with NSR’s statutory structure and constraints on modifications.
5. Whether the Clean Units and Pollution Control Projects provisions, and relaxed monitoring/recordkeeping/reporting requirements, were adequately justified and consistent with enforceable NSR administration.

## Decision

- The court applied Chevron and largely upheld EPA’s 2002 NSR reform rule.
- The court upheld the actual-to-projected-actual test as a permissible method for measuring emissions increases, given statutory silence on measurement methodology and EPA’s verification framework.
- The court upheld the 10-year/5-year baseline lookback approach as within EPA’s discretion where the statute does not dictate a baseline methodology.
- The court upheld the demand growth exclusion as a reasonable causation-based interpretation of emissions increases “resulting from” the change.
- The court upheld PALs as consistent with NSR so long as the plant-wide cap is binding and exceedances trigger NSR.
- The court vacated the Clean Units and Pollution Control Projects provisions.
- The court remanded aspects of the monitoring/recordkeeping/reporting revisions for further reasoned explanation to ensure enforceability.

## Legal Principles

- When the Clean Air Act does not specify a particular method for measuring emissions increases or selecting a baseline period, EPA may choose among reasonable approaches under Chevron.
- EPA may interpret NSR-triggering “increases” to require a causal relationship between the physical/operational change and the emissions increase, permitting exclusion of increases attributable to independent demand growth.
- NSR implementation may use facility-wide mechanisms (such as PALs) if structured to prevent net emissions increases above enforceable caps and to trigger NSR when caps are exceeded.
- Regulatory flexibility is permissible if consistent with statutory text and accompanied by enforceable monitoring and recordkeeping that allow verification and enforcement.
- Exemptions or enforcement-related relaxations lacking adequate, reasoned justification are subject to vacatur or remand under administrative law requirements.

## Conclusion

The D.C. Circuit sustained most of EPA’s 2002 NSR reforms as reasonable interpretations of statutory gaps and permissible implementation choices, but it vacated the Clean Units and Pollution Control Projects provisions and remanded certain monitoring and recordkeeping changes because EPA had not adequately justified them in a manner that preserved effective NSR enforcement.


New York v. EPA, 443 F.3d 880 (D.C. Cir. 2006)