DAIMLER TRUCKS NORTH AMERICA LLC, еt al., Petitioners v. ENVIRONMENTAL PROTECTION AGENCY, Respondent Navistar, Inc., Intervenor.
No. 12-1433.
United States Court of Appeals, District of Columbia Circuit.
Argued Oct. 22, 2013. Decided Dec. 11, 2013.
737 F.3d 95
Michele L. Walter, Attorney, U.S. Department of Justice, argued the cause for respondent. With her on the brief were Robert G. Dreher, Acting Assistant Attorney General, and Michael J. Horowitz, Attоrney Advisor, U.S. Environmental Protection Agency.
Cary R. Perlman and Laurence H. Levine were on the brief for intervenor Navistar, Inc. in support of respondent.
Before: HENDERSON, ROGERS and TATEL, Circuit Judges.
Opinion for the Court by Circuit Judge ROGERS.
To carry out the 1977 amendments to the Clean Air Act, the Environmental Protection Agency (“EPA“) promulgated a rule in 2001 requiring a 95% reduction in nitrogen oxide (“NOx“) emissions by heavy-duty motor vehicles by 2010. At the time, no technology existed to achieve these reductions. EPA regulations provide, as Congress has authorized, for nonconformance penalties (“NCPs“) to protect technological laggards by allowing them to pay a penalty for engines temporarily unable to meet a new or revised emission standard. In a 2012 rulemaking, EPA established NCPs, having determined that its three regulatory criteria for issuing these penalties were met for heavy heavy-duty diesel engines, including that one manufacturer, Navistar, Inc., was a technological laggard. Petitioners, who are
I.
In the 1977 amendments to the Clean Air Act, Congress required the Administrator of EPA to “prescribе . . . standards applicable to the emission of any air pollutant from any class or classes of new motor vehicles or new motor vehicle engines, which in [the Administrator‘s] judgment cause, or contribute to, air pollution which may reasonably be anticipated to endanger public health or welfare.”
Before introducing vehicles and engines into commerce, manufacturers are required to obtain certificates of conformity from EPA demonstrating compliance with relevant emission standards.
In 1985, EPA promulgated the Phase I Rule establishing the regulatory framework for NCPs. Control of Air Pollution from New Motor Vehicles and New Motor Vehiсle Engines; Nonconformance Penalties for Heavy-Duty Engines and Heavy-Duty Vehicles, Including Light-Duty Trucks, 50 Fed. Reg. 35,374 (Aug. 30, 1985) (to be codified at 40 C.F.R. pt. 86). This rule identified three criteria that must be met in order for a subclass of heavy-duty engines or vehicles to be eligible for NCPs. Id. at 35,388 (to be codified at
In 2001, EPA promulgated the rule requiring a 95% reduction in NOx emissions from heavy-duty engines by 2010. Control of Air Pollution from New Motor Vehicles: Heavy-Duty Engine and Vehicle Standards and Highway Diesel Fuel Sulfur Control Requirements, 66 Fed. Reg. 5002, 5002 (Jan. 18, 2001) (to be codified at 40 C.F.R. pts. 69, 80, and 86) (“2001 Rule“). Because compliance would require “a new technology solution,” id. at 5046, manufacturers were afforded several years to cоmply with the new 0.20 grams per brake-horsepower-hour (g/bhp-hr) standard, which was phased in for heavy-duty diesel engines between 2007 and 2010. Id. at 5005. By 2010, petitioners and other manufacturers had developed selective catalytic reduction aftertreatment technology (“SCR“) and had succeeded in meeting the 0.20 g/bhp-hr standard. Navistar, Inc. pursued an alternative path to compliance, relying on developing advanced exhaust gas recirculation technolоgy (“EGR“). When the new NOx standard became fully effective in 2010, Navistar, Inc. had not reached the 0.20 g/bhp-hr level using EGR, but continued to obtain certificates of conformity for its vehicles by using banked emission credits. In late 2011, Navistar, Inc. advised EPA that its supply of emission credits would be inadequate for its model year 2012 heavy heavy-duty engines.
On January 31, 2012, EPA promulgated an interim rule establishing NCPs for manufacturers of heavy heavy-duty diesel engines in model years 2012 and 2013 for the 0.20 g/bhp-hr NOx standard. Nonconformance Penalties for On-Highway Heavy Heavy-Duty Diesel Engines, 77 Fed. Reg. 4678 (to be codified at 40 C.F.R. pt. 86) (“Interim Final Rule“). This rule was vacated in Mack Trucks, Inc. v. EPA, 682 F.3d 87 (D.C. Cir. 2012) (“Mack Trucks“), because EPA lacked good cause to bypass notice-and-comment requirements.
The same day as it issued the Interim Final Rule, EPA published a notice of proposed rulemaking for a final rule. Nonconformance Penalties for On-Highway Heavy Heavy-Duty Diesel Engines, 77 Fed. Reg. 4736 (Jan. 31, 2012) (to be codified at 40 C.F.R. pt. 86) (“NPRM“). In the NPRM, EPA stated it believed that the threе NCP criteria had been met: (1) the “technology forcing” 0.20 g/bhp-hr NOx standard was more difficult to meet than the previous NOx emission standard; (2) “substantial work was required” to meet the 0.20 g/bhp-hr standard because all heavy heavy-duty diesel engines certified without relying on emission credits were using new aftertreatment systems to meet the standard; and (3) there was “a significant likelihood” that NCPs would “be needed by an engine manufacturer that ha[d] not yet met the requirements for technological reаsons” and was expected not “to have sufficient credits to cover its entire model year 2012 production.” NPRM, 77 Fed. Reg. at 4738 (emphasis added). EPA proposed NCPs on the basis of its existing formula, as modified to per-
EPA promulgated the final rule that petitioners now challenge on September 5, 2012. Nonconformance Penalties for On-Highway Heavy-Duty Diesel Engines, 77 Fed. Reg. 54,384 (to be codified at 40 C.F.R. pt. 86) (“2012 Rule“). EPA found the three criteria for NCPs had been met for NOx emissions from heavy heavy-duty diesel engines, id. at 54,388, and set NCPs accordingly, id. at 54,402. It also amended its regulations on upper limits, NCP payment procedures, and the “substantial work” criterion. Id. at 54,401-02. In response to comments, EPA stated that consistent with allowing technological laggards to be able to certify engines, the “substantial work” criterion “is to be evaluated based on the total amount of work needed to go from meeting the previous standard to meeting the current standard, regardless of the timing of such changes.” Id. at 54,389. Commenters had objected that although “substantial work” hаd been required to meet the NOx standard when it was introduced in 2001, this was no longer true because some manufacturers now had technology capable of meeting the standard. Id. EPA emphasized that “the important question is whether manufacturers who were using technology that met the previous standard would need to conduct significant work” to meet the new standard and that “[q]uestions about work that still needs to be done at the point EPA begins an NCP rulemaking” are irrelevant to the “substantial work” criterion. Id. at 54,390 (emphasis in original).
“To avoid this confusion for future NCPs,” EPA in the 2012 Rule “clarifi[ed] the regulatory text,” id., by amending
II.
Petitioners challenge the 2012 Rule on procedural and substantive grounds. They contend EPA failed to provide adequate notice and opportunity for comment before amending the regulatory definition of the “substantial work” criterion. They contend EPA did likewise before finding that after 2012 Navistar, Inc. would need to engage in “substantial work” to meet the NOx standard. They also contend that EPA erred in finding that Navistar, Inc. was a technological laggard, and that EPA‘s NCP calculation departed from past agency practice without rational explanation. For the following reasons we need only address the first contention.
“A final rule is a logical outgrowth of the proposed rule ‘only if interested parties should have anticipated that the change was possible, and thus reasonably should have filed their comments on the subject during the notice-and-comment period.‘” Int‘l Union, United Mine Workers of Am. v. Mine Safety & Health Admin., 626 F.3d 84, 94-95 (D.C. Cir. 2010) (quoting Int‘l Union, United Mine Workers of Am. v. Mine Safety & Health Admin., 407 F.3d 1250, 1259 (D.C. Cir. 2005)). Notice of agency action is “crucial to ‘ensure that agency regulations are tested via exposure to diverse public comment, . . . to ensure fairness to affected parties, and . . . to give affected parties an оpportunity to develop evidence in the record to support their objections to the rule and thereby enhance the quality of judicial review.‘” Id. at 1259. The court, however, will deem a final rule to be a logical outgrowth of a proposed rule “if a new round of notice and comment would not provide commentators with their first occasion to offer new and different criticisms which the agency might find convincing.” Id. (quoting Fertilizer Inst. v. EPA, 935 F.2d 1303, 1311 (D.C. Cir. 1991)). This avoids the “absurdity . . . that the agency can lеarn from the comments on its proposals only at the peril of starting a new procedural round of commentary.” Small Refiner Lead Phase-Down Task Force v. EPA, 705 F.2d 506, 546-47 (D.C. Cir. 1983).
In the NPRM, EPA proposed amendments to its regulations on the determination of upper limits,
The revisions to the “substantial work” criterion in
EPA maintains that the amendments to its “substantial work” criterion are consistent with its longstanding interpretation that it should “look[] forward from the point in time at which the new or revised standard is issued.” Resp‘t Br. 27. EPA fails, however, to acknowledge that the 2012 Rule is the first rulemaking in which an NCP has been proposed after the new emission standard took effect. The timing of the offering of these penalties differed from previous NCPs, which as demonstrated in the Phase II through VI Rules had been proposed before the relevant new emission standards became effective.1 By
EPA‘s position that the amendments to the “substantial work” criterion in the 2012 Rule were a logical outgrowth of the proposed rule relies heavily on its claim that petitioners had actual notice of the change. See Resp‘t Br. 30-31 (citing Small Refiner Lead Phase-Down Task Force, 705 F.2d at 549). For support, EPA points to three documents: a letter from EPA to heavy-duty diesеl engine manufacturers dated February 22, 2010; EPA‘s denial of a request by petitioners Daimler Trucks North America, LLC and Detroit Diesel Corporation for a stay of the Interim Final Rule published in January 2012; and the statement in the NPRM that “substantial work was required to meet the emission standard,” 77 Fed. Reg. at 4738. Each of these documents includes a statement by EPA finding that “substantial work” was required, or was likely required, to meet the NOx standard. Although EPA is correct that the documents placed petitioners on nоtice that EPA‘s measurement of “substantial work” included work completed in the past, they neither stated nor suggested that EPA was contemplating amending the text of the second criterion adopted in the Phase I Rule.
No more availing is EPA‘s suggestion that the briefing in Mack Trucks and comments submitted in response to the NPRM demonstrate that petitioners had actual notice of EPA‘s change to the “substantial work” regulation. Petitioners’ arguments in comments that EPA‘s interpretation conflicted with the regulatory text of
So too, EPA‘s position that the amended text of the “substantiаl work” criterion is consistent with twenty-seven years of agency practice ignores that the 2012 Rule is the first rulemaking in which EPA has proposed NCPs after the new emission standard went into effect. EPA‘s prior conclusion that “substantial work” includes work required to reach the new emission standard when that standard is to take effect in the future is distinguishable from its revised approach that this is also true when NCPs are proposed after the standard has taken effect. Contrary to EPA‘s suggestion that the 2002 Phase VI Rule, 67 Fed. Reg. at 51,464, supra note 1, which also proposed NCPs years after a new emission standard was announced, gave petitioners notice of its approach, the Phase VI Rule was promulgated before the standard announced in 1997 took effect in 2004. Control of Emissions of Air Pollution from Highway Heavy-Duty Engines, 62 Fed. Reg. 54,694 (Oct. 21, 1997) (to be codified at 40 C.F.R. pts. 9 and 86).
Consequently, we cannot conclude that petitioners, “ex ante, should have anticipated the changes to be made in the course of the [2012] rulemaking,” City of Waukesha v. EPA, 320 F.3d 228, 246 (D.C. Cir. 2003) (internal quotation omitted), to the “substantial work” criterion,
Accordingly, we grant the petition. Because the court typically vacates rules when an agency “entirely fail[s]” to provide notice and comment, Shell Oil Co. v. EPA, 950 F.2d 741, 752 (D.C. Cir. 1991), and especially in light of EPA‘s counsel‘s statement during oral argument that vacatur would not cause any harm because it has become clear that Navistar Inc.‘s engines will be in compliance with the NOx standard by the beginning of 2014, see Oral Argument at 25:55 (Oct. 22, 2013), we vacate the 2012 final rule. Sеe Chamber of Commerce v. Sec. & Exch. Comm‘n, 443 F.3d 890, 908 (D.C. Cir. 2006) (quoting Allied-Signal, Inc. v. Nuclear Regulatory Comm‘n, 988 F.2d 146, 150-51 (D.C. Cir. 1993)).