## Facts

- EPA promulgated Clean Air Act (CAA) § 111 new source performance standards and guidelines for emissions from municipal waste combustors (MWCs).
- In the proposal, EPA treated the “best system of emission reduction” as including both back-end stack controls and front-end waste separation/recycling requirements aimed at reducing pollutants such as dioxins.
- During interagency review under Executive Order 12,291, OMB objected to the proposed front-end requirements on cost-effectiveness grounds, and the President’s Council on Competitiveness provided criticisms in a “fact sheet.”
- In the final rule, EPA removed the proposed front-end separation/recycling provisions and relied on back-end controls.
- New York, Florida, and other petitioners sought review, arguing EPA’s change was arbitrary and capricious, conflicted with the rulemaking record and § 111’s “best system” mandate, and reflected improper political and economic pressure rather than EPA’s independent judgment.

## Issues

1. Whether EPA acted arbitrarily, capriciously, or contrary to CAA § 111 by abandoning proposed front-end separation/recycling requirements for MWCs in the final rule.
2. Whether OMB and President’s Council on Competitiveness involvement unlawfully tainted EPA’s decision-making so that the rule should be vacated.
3. Whether CAA § 111 permits EPA to balance costs and other nonair-quality impacts in selecting the “best system of emission reduction,” including choosing not to require front-end controls.

## Decision

- The court denied the petitions for review and upheld EPA’s decision to omit mandatory front-end separation/recycling requirements.
- The court held EPA’s change in position was adequately explained and supported by the administrative record under the APA arbitrary-and-capricious standard.
- The court held CAA § 111 allows EPA to consider costs, nonair-quality health and environmental impacts, and energy requirements in determining the “best system.”
- The court held executive branch participation (OMB and the Council) did not invalidate the rule where EPA’s final rationale fit statutory criteria and was supportable on the record.

## Legal Principles

- Under APA arbitrary-and-capricious review, a court will uphold agency rulemaking if the agency considered relevant factors and articulated a reasoned explanation supported by the record; the court does not substitute its policy judgment for the agency’s.
- CAA § 111’s “best system of emission reduction” inquiry expressly includes consideration of cost and nonair-quality impacts; EPA is not required to adopt the most stringent measures irrespective of those factors.
- An agency may change course between proposal and final rule if it provides a reasoned explanation and record support; preliminary conclusions in a proposal do not bind the agency.
- White House/OMB involvement in rulemaking is not unlawful per se; the controlling question is whether the final rule rests on a permissible, record-based rationale consistent with the statute.

## Conclusion

The D.C. Circuit upheld EPA’s MWC § 111 standards after EPA dropped proposed front-end recycling/separation mandates, concluding EPA permissibly balanced emissions benefits against costs and other impacts and that interagency and White House input did not invalidate a final rule justified on the administrative record.


State of New York v. Reilly, 969 F.2d 1147 (D.C. Cir. 1992)