Ky. Energy and Env't Cabinet v. EPAKy. Energy and Env't Cabinet v. EPA
COUNSEL
ARGUED: Matthew F. Kuhn, OFFICE OF THE KENTUCKY ATTORNEY GENERAL, Frankfort, Kentucky, for Petitioner Commonwealth of Kentucky. Jarrod L. Bentley, KENTUCKY ENERGY AND ENVIRONMENT CABINET, Frankfort, Kentucky for Petitioner Kentucky Energy and Environment Cabinet. Jeffrey T. Hammons, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Respondents. Claiborne E. Walthall, OFFICE OF THE ATTORNEY GENERAL OF THE STATE OF NEW YORK, Albany, New York, for Amici Curiae. ON BRIEF: Matthew F. Kuhn, OFFICE OF THE KENTUCKY ATTORNEY GENERAL, Frankfort, Kentucky, for Petitioner Commonwealth of Kentucky. Jarrod L. Bentley, Joseph A. Newberg, II, KENTUCKY ENERGY AND ENVIRONMENT CABINET, Frankfort, Kentucky for Petitioner Kentucky Energy and Environment Cabinet. Jeffrey T. Hammons, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Respondents. Claiborne E. Walthall, Elizabeth A. Brody, OFFICE OF THE ATTORNEY GENERAL OF THE STATE OF NEW YORK, Albany, New York, Deena Tumeh, Kathleen Riley, Neil Gormley, EARTHJUSTICE, Washington, D.C., Shaun A. Goho, Hayden W. Hashimoto, CLEAN AIR TASK FORCE, Boston, Massachusetts, for Amici Curiae.
MURPHY,
OPINION
MURPHY, Circuit Judge. After the Environmental Protection Agency (EPA) changed its air-quality standard for ozone under the Clean Air Act, the States needed to amend their state plans to implement the new standard. To help the States with their plan revisions, the EPA issued two guidance memoranda. It told the States that they could use specific modeling to identify their emissions that cross state lines. And it told them that they presumptively need not worry about any interstate emissions that fall below a specific minimum threshold. This guidance led Kentucky to propose a plan that did not reduce its emissions further. But the EPA sat on Kentucky‘s proposed plan for some two years—well past the Clean Air Act‘s deadline for the agency to act. It then belatedly disapproved the plan. To Kentucky‘s surprise, this disapproval rested on different modeling that came out after the EPA‘s deadline and on a lower threshold than the one the EPA told Kentucky it could use. Kentucky petitioned our court to vacate the EPA‘s disapproval. In response, the EPA sought to transfer Kentucky‘s challenge to the D.C. Circuit because the EPA had disapproved Kentucky‘s plan in a rule that also rejected 20 other state plans.
We deny the EPA‘s motion to send this case to the D.C. Circuit. Kentucky properly sued in this court because the EPA‘s disapproval was not a “nationally applicable . . . final action” or one “based on a determination of nationwide scope or effect[.]”
We next hold that the EPA‘s disapproval of Kentucky‘s plan violated the Administrative Procedure Act (APA). The EPA acted in an “arbitrary” way by telling Kentucky one thing and then doing another.
I
A
Like most laws, the Clean Air Act represents a compromise of competing interests. Cf. Luna Perez v. Sturgis Pub. Schs., 598 U.S. 142, 150 (2023). Congress sought to reduce pollution.
The cooperative process begins at the federal level. The EPA must impose and periodically revise “national ambient air quality standards” for each air pollutant.
Once the State submits its plan, the EPA must approve or disapprove it within 18 months.
If the EPA disapproves a state plan, the agency must issue a “[f]ederal implementation plan” that meets the revised air-quality standard within the State.
B
This case concerns a specific requirement that state plans must meet: the “Good Neighbor Provision.” EME Homer, 572 U.S. at 495. Pollutants emitted from a source (say, a power plant) in one State often do not stop at that State‘s borders. Rather, the wind can carry the pollutants “over hundreds of miles” to one or more States. Id. at 496. This fact creates a classic “negative externality“: an upwind State can shift some of the cost of its activities (such as energy production) to downwind States. See id. at 495. Without national regulation, upwind States would have little incentive to take these external costs into account. See id. So downwind States might have to impose greater limits on their own activities to achieve acceptable pollution levels. See id.
Congress adopted the Good Neighbor Provision to create the national coordination required for States to “internalize” these harms. See
The Supreme Court has addressed the Good Neighbor Provision once when evaluating the “Cross-State Air Pollution Rule” (or “Transport Rule“) that the EPA issued in 2011. EME Homer, 572 U.S. at 500. The Transport Rule adopted a “two-step approach” for determining whether pollution sources in an upwind State “contribute[d] significantly to nonattainment” in a downwind State. Id. (citation omitted). First, the EPA asked whether the upwind State had sources linked to a downwind State‘s “receptor[s]” (places where the EPA measures air quality). Id. At this “screening” step, if an upwind State‘s sources contributed only a small part of the total pollutant at a downwind receptor (less than 1% of the air-quality standard for that pollutant), the Transport Rule decided that the State did not “contribute[] significantly” to the downwind State‘s pollution problems. Id. at 501. Second, the Transport Rule relied on a cost-benefit analysis to control emissions from States whose pollution contributions at a receptor exceeded this 1% threshold. Id. at 500-01. Ultimately, the Court relied on the now-overruled review scheme from Chevron U.S.A. Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984), to hold that the Good Neighbor Provision‘s text permitted this approach. See EME Homer, 572 U.S. at 495-96; cf. Loper Bright Enters. v. Raimondo, 144 S. Ct. 2244, 2273 (2024).
C
This case also concerns a specific pollutant: ozone. Although ozone in the atmosphere helps protect us “from the sun‘s radiation,” the pollutant at ground levels can harm human health (for example, by inflaming our lungs) and the earth‘s vegetation (for example, by reducing crop yields). Ohio, 603 U.S. at 284; National Ambient Air Quality Standards for Ozone,
March 2018 Memorandum. The EPA issued its first guidance in March 2018. It told the States that it planned to determine each State‘s good-neighbor obligations using the same approach from the Transport Rule (but the agency now divided this approach into four steps). Mar. Mem., J.A. 76-77. At Step 1, the relevant federal or state regulator should “identify downwind” locations that will struggle to attain or maintain the air-quality standard.
This March 2018 Memorandum also included “modeling” data to predict ozone problems in downwind States in 2023 and to identify the upwind contributors.
August 2018 Memorandum. Five months later, the EPA issued more “recommendations” for state plans. Aug. Mem., J.A. 98. These recommendations addressed “Step 2“—the “screening” step at which the EPA eliminates the upwind States that contribute only a small amount to downwind receptors.
D
Kentucky relied on these memoranda to draft its plan. It used the 2011 modeling from the March 2018 Memorandum and the 1 ppb threshold from the August 2018 Memorandum. State Plan, J.A. 151-52. At Step 2, these choices showed that Kentucky exceeded the screening threshold at only one maintenance receptor in Harford County, Maryland.
Turning to Step 3, Kentucky decided that it need not impose further emissions reductions despite the link to the Maryland receptor.
After this feedback, Kentucky formally submitted its plan in January 2019. State Plan, J.A. 129. When discussing the EPA‘s comments, Kentucky “concur[red] with EPA‘s” simplified proposal.
Under the Act, the EPA had until July 2020 to rule on Kentucky‘s plan.
Nearly 20 months after the deadline, the EPA proposed a rule to disapprove Kentucky‘s plan. Air Plan Disapproval,
A year later, the EPA disagreed with Kentucky‘s objections and issued a final rule disapproving its plan. Air Plan Disapprovals,
How did these fresh changes affect Kentucky? The 2016v3 modeling and 1% threshold continued to link Kentucky to
E
The EPA‘s disapproval of these 21 state plans triggered a flood of litigation. Many States sought review of the EPA‘s denials in their regional circuit courts. Kentucky and its Energy and Environment Cabinet (collectively, Kentucky) filed petitions for review in our court, asking us to vacate the EPA‘s disapproval of their plan. The EPA responded by moving to transfer Kentucky‘s case to the D.C. Circuit. Meanwhile, the Commonwealth moved to stay the EPA‘s disapproval of its plan pending our full review. In May 2023, a motions panel granted a short administrative stay while it considered these motions. The same month, other circuit courts also stayed the denials of other state plans. See Ohio, 603 U.S. at 288-89.
A few days after we granted our administrative stay, the EPA imposed its own federal implementation plan on Kentucky and 22 other States for the 2015 ozone standard. Federal “Good Neighbor Plan” for the 2015 Ozone National Ambient Air Quality Standards,
As litigation over the federal plan progressed, regional circuits continued to stay the EPA‘s disapproval of state plans. See id. In July 2023, we turned our administrative stay into a stay pending our full review. Kentucky v. EPA, 2023 WL 11871967, at *5 (6th Cir. July 25, 2023) (order). We also denied the EPA‘s motion to transfer the suit to the D.C. Circuit. See id. at *1-3.
A short time later, the EPA stayed its federal plan for the States that had obtained judicial stays. Federal “Good Neighbor Plan” for the 2015 Ozone National Ambient Air Quality Standards,
The Supreme Court‘s decision completes the backdrop against which we must review Kentucky‘s petitions here. Those petitions raise three questions. Did Kentucky sue in the right court? If so, did the EPA lawfully deny Kentucky‘s plan? If not, what is the proper remedy? Our short answers: Yes, No, and Vacatur. We will fill in the details to each answer in turn.
II. Did Kentucky Sue in the Right Court?
The EPA has renewed its request to transfer Kentucky‘s petitions to the D.C. Circuit. Kentucky responds that we should reject this request based solely on the motions panel‘s earlier order denying the EPA‘s motion to transfer. See Kentucky, 2023 WL 11871967, at *1-3. According to Kentucky, we must “defer[]” to “the decisions of motions panels” and “cannot simply” reject them. Wallace v. FedEx Corp., 764 F.3d 571, 583 (6th Cir. 2014). Yet we have never explained the amount of deference due these decisions. Indeed, why should we defer at all? We can (and sometimes
A. Background Law
The Clean Air Act allows a party injured by an EPA action to file a “petition for review” challenging the action in a circuit court of appeals.
A petition for review of action of the Administrator in promulgating any national primary or secondary ambient air quality standard, any emission standard or requirement under section 7412 of this title, any standard of performance or requirement under section 7411 of this title,[] any standard under section 7521 of this title (other than a standard required to be prescribed under section 7521(b)(1) of this title), any determination under section 7521(b)(5) of this title, any control or prohibition under section 7545 of this title, any standard under section 7571 of this title, any rule issued under section 7413, 7419, or under section 7420 of this title, or any other nationally applicable regulations promulgated, or final action taken, by the Administrator under this chapter may be filed only in the United States Court of Appeals for the District of Columbia.
A petition for review of the Administrator‘s action in approving or promulgating any implementation plan under section 7410 of this title or section 7411(d) of this title, any order under section 7411(j) of this title, under section 7412 of this title, under section 7419 of this title, or under section 7420 of this title, or his action under section 1857c-10(c)(2)(A), (B), or (C) of this title (as in effect before August 7, 1977) or under regulations thereunder, or revising regulations for enhanced monitoring and compliance certification programs under section 7414(a)(3) of this title, or any other final action of the Administrator under this chapter (including any denial or disapproval by the Administrator under subchapter I) which is locally or regionally applicable may be filed only in the United States Court of Appeals for the appropriate circuit.
Notwithstanding the preceding sentence a petition for review of any action referred to in such sentence may be filed only in the United States Court of Appeals for the District of Columbia if such action is based on a determination of nationwide scope or effect and if in taking such action the Administrator finds and publishes that such action is based on such a determination.
Our court has yet to decide on the nature of this provision. Does it impose a
B. Application
The EPA offers two reasons why this suit belongs in the D.C. Circuit. It first argues that its disapproval of the 21 state plans qualifies as a “nationally applicable . . . final action.” And even if the disapproval of Kentucky‘s plan was “locally or regionally applicable,” the EPA next argues that it was “based on a determination of nationwide scope or effect.” These claims have created a circuit split. Apart from Kentucky, several States have challenged the disapprovals of their plans in regional circuits. And most circuit courts have held that they (not the D.C. Circuit) represent the proper tribunal for the suits. See West Virginia v. EPA, 90 F.4th 323, 331 (4th Cir. 2024) (citing cases). The Tenth Circuit, by contrast, has sent challenges to the denial of Oklahoma‘s plan to the D.C. Circuit. See Oklahoma ex rel. Drummond v. EPA, 93 F.4th 1262, 1266-69 (10th Cir. 2024), cert. granted, 2024 WL 4529798 (U.S. Oct. 21, 2024). We agree with the courts that have rejected the EPA‘s two arguments for D.C. Circuit review.
1. Did the EPA take a “nationally applicable” action when denying Kentucky‘s plan?
The EPA argues that its rule disapproving the state plans qualifies as a single “nationally applicable... final action” rather than many “locally or regionally applicable” actions.
Nationally Applicable. The EPA first misconstrues the phrase “nationally applicable” in
Two canons of construction confirm this reading. The sentence in
Next, courts presume that Congress means to adopt “clear boundaries” in “jurisdictional statutes” to avoid wasteful litigation over the proper forum. Direct Mktg. Ass‘n v. Brohl, 575 U.S. 1, 11 (2015); see Miss. ex rel. Hood v. AU Optronics Corp., 571 U.S. 161, 172-73 (2014); Hertz Corp. v. Friend, 559 U.S. 77, 94 (2010). Even if
Final Action. The EPA also misconstrues the phrase “final action” in
We side with Kentucky in this debate. This time, though, the ordinary meaning of “action” does not help all that much. That word means simply a “thing done” or “something done.” Webster‘s Third, supra, at 21; Black‘s, supra, at 26. So these (circular) definitions leave the critical question unanswered: Did the EPA do 21 “things” or a single “thing” in the rule?
That said, Kentucky‘s approach better fits the “structure” of the judicial-review provision. Engine Mfrs. Ass‘n, 541 U.S. at 252. As a general matter,
Congress also knows how to refer to rules in the Federal Register when it wants to. Section 7607(b)(1) makes the “notice” of an EPA action “in the Federal Register” relevant to the 60-day limit for suing.
As a specific matter,
The EPA‘s contrary arguments do not convince us otherwise. The agency offers no textual theory for its view that the phrase “nationally applicable” can reach an
As for the remaining circuits, we disagree with their view that a regulation need not regulate the nation as a whole to be “nationally applicable.” Take the Tenth Circuit‘s decision in ATK Launch Systems, 651 F.3d at 1197. It did not try to interpret the phrase “nationally applicable.” Rather, it merely concluded that a regulation‘s reach “from coast to coast and beyond” suffices even if the regulation does not formally apply to the whole nation. Id. But the court did not say why. And it left many questions unanswered. How many States must a rule cover? How spread out must the covered States be? Nothing in the statute can answer these questions.
Next, the EPA suggests that we must consider the “face of [its] rule“—not the rule‘s “practical effect” as applied to Kentucky—to decide whether it is “nationally applicable.” Respondents’ Br. 32 (quoting ATK Launch Sys., 651 F.3d at 1197). This argument conflates the rule issued in the Federal Register (the EPA‘s words) with the “final action” that the EPA takes (the statute‘s words).
The EPA also argues that its disapprovals of the 21 plans represent a single “nationally applicable” action because the disapprovals rested on a “uniform legal interpretation and common, nationwide analytical methods[.]” Respondents’ Br. 35 (quoting
The EPA ends with policy. It suggests that Kentucky‘s view inefficiently requires many courts to “concurrently” review actions that rest on the “same legal
2. Is the denial of Kentucky‘s plan “based on a determination of nationwide scope or effect“?
The EPA alternatively claims that, even if its disapproval of Kentucky‘s plan was “locally or regionally applicable,” that disapproval was “based on a determination of nationwide scope or effect” under
Determination. The EPA argues that each analytical step in the chain of reasoning to its ultimate decision for a “final action” qualifies as an independent “determination” that triggers review in the D.C. Circuit if at least one step (considered in isolation) has a “nationwide scope or effect.”
This broad reading of “determination” lacks merit. We again start with the “ordinary meaning” of the text. Engine Mfrs. Ass‘n, 541 U.S. at 252. Admittedly, “determination” in the abstract could mean what the EPA says because it can refer to any academic resolution of a “question by argument or reasoning.” Webster‘s Third, supra, at 616. But the EPA‘s reading does not fit the context. When used to describe a ruling
The EPA‘s “unbounded interpretation,” by contrast, would upset Congress‘s “careful delineation” of the actions that parties should challenge in the D.C. Circuit and those that they should challenge in regional circuits. Fischer v. United States, 603 U.S. 480, 493 (2024). If “determination” covered each discrete choice the EPA makes en route to a final decision, every “final action” rests on a nationwide “determination.” After all, the EPA always must ground its actions in a “national rule or standard” in the Clean Air Act or its regulations. West Virginia, 90 F.4th at 328. The agency cannot haphazardly regulate parties by adopting one view of the law for some States and the opposite view for others. The EPA‘s reading thus would allow it to send every action to the D.C. Circuit despite Congress‘s presumptive choice to keep local actions local.
To be sure, the EPA‘s reading would not make Congress‘s choice entirely “superfluous.” Fischer, 603 U.S. at 493. Even if all local actions rest on nationwide determinations (as the EPA implies), the agency still must “publish[]” a finding to that effect.
This definition proves the EPA‘s error here. The agency suggests that its preliminary choices (such as its use of the four-step framework for the Good Neighbor Provision) were independent “determination[s]” under
We thus must ask whether this decision about Kentucky‘s plan had a “nationwide scope or effect” under
matter (de jure) or as a practical one (de facto). That is, a determination might have a nationwide “scope” if its formal “area” of operation covers the country. 14 Oxford English Dictionary, supra, at 672; see Webster‘s Third, supra, at 2035. And it might have a nationwide “effect” if its “operative influence” is felt everywhere. 5 Oxford English Dictionary, supra, at 79; see Webster‘s Third, supra, at 724.
Nothing about the EPA‘s decision to deny Kentucky‘s plan has this scope or effect. To the contrary, the agency decided that Kentucky‘s plan did not satisfy the Good Neighbor Provision due to “circumstances . . . unique” to that plan. West Virginia, 90 F.4th at 328. To start, the EPA found that Kentucky wrongly suggested at Step 2 of its framework that the Commonwealth‘s emissions sources were linked only to a Maryland receptor. See 87 Fed. Reg. at 9509. The EPA decided instead that Kentucky sources were linked to three Connecticut receptors. 88 Fed. Reg. at 9356; 2016v3 Modeling, J.A. 577. Next, the EPA disagreed with Kentucky‘s “particular arguments” for using the higher 1 ppb threshold (rather than the lower 1% threshold) to weed out the receptors with which it had an insufficient connection. 88 Fed. Reg. at 9373 (emphasis added). Because Kentucky‘s connection to the Connecticut receptors fell in between these thresholds, the EPA proceeded to Step 3. See id. at 9356. It lastly found that Kentucky did not adequately show at that step why it need not reduce any emissions to help the Connecticut receptors attain the ozone standard. Id. This logic applied only to Kentucky and had, at most, regional effects. So the EPA does not even try to argue that its final “determination” had any sort of nationwide scope or effect.
Based On. Apart from the EPA‘s overbroad reading of “determination,” it disregards that the final action must be “based on” the identified determinations.
This reading of “based on” independently dooms the EPA‘s reliance on two of the alleged “determinations” identified in the final rule. The agency suggested that its denial of Kentucky‘s plan rested on its decision to rely on the 2016v3 modeling and its use of “uniform” criteria to evaluate each State‘s request to use a 1 ppb threshold rather than a threshold of 1% of the ozone standard (.7 ppb). 88 Fed. Reg. at 9380. In this court, however, the EPA claims that it would have denied Kentucky‘s plan even if it had allowed Kentucky to use the 2011 modeling and 1 ppb threshold. Respondents’ Br. 56-57. Under that older modeling and higher threshold, Kentucky sources were still linked to a Maryland receptor. State Plan, J.A. 152. And the EPA argues that Kentucky did not adequately explain why it need not cut emissions to allow this receptor to meet the ozone standard. Respondents’ Br. 57-68. Yet if the EPA would have denied Kentucky‘s plan anyway, that denial could not have been “based on” the agency‘s use of the later modeling and lower threshold. So these decisions cannot allow the EPA to take this case to the D.C. Circuit.
The EPA‘s responses again lack merit. It makes two textual arguments to support its reading of “determination.” The agency first points out that the statute uses “a” to modify “determination” (“based on a determination of nationwide scope or effect“). This indefinite article allegedly implies that an action can rest on multiple determinations and that only one need have a “nationwide scope or effect.” But the EPA places too much weight on this article. Because “determination” is a “countable noun[],” basic grammar rules required Congress to use the article (nobody would say “based on determination“). Niz-Chavez v. Garland, 593 U.S. 155, 162-63 (2021). And the use of “a” says nothing about whether “determination” should reach each of the EPA‘s nonfinal interpretive choices or just its final decision. If anything, the decision to use a singular noun could just as well convey that the final action must rest on a “single” decision—not on many separate decisions. Id. at 163.
The EPA also suggests that our reading of “determination” suffers from the same problem as its reading: we allegedly strike this clause out of the statute because the final “applying-the-law-to-the-facts” decision that underlies any local action will never have the required nationwide scope or effect. Yet caselaw existing before Congress amended the key language in
Moving away from the text, the EPA argues that the legislative history supports its view. When discussing this judicial-review provision, a House Report agreed “with the comments” in a statement accompanying recommended amendments that had been proposed by the Administrative
The EPA also claims that we should use a “deferential standard” to review whether an agency action rests on “a determination of nationwide scope or effect” under
The EPA lastly makes a big-picture point. It says that any decision about the Good Neighbor Provision will always involve nationwide issues because this part of the Clean Air Act concerns pollution that crosses state lines. This argument all but confirms its error: it reads words like “nationally applicable” and “nationwide” to mean “regionally applicable” or “regional.” The Good Neighbor Provision regulates pollution as long as it is emitted from one “State” and travels to “any other State[.]”
III. Did the EPA Lawfully Disapprove Kentucky‘s Plan?
Because Kentucky sued in the right tribunal, we proceed to the merits. Our court has evaluated the EPA‘s disapprovals of state plans using the APA‘s general standards. See Navistar Int‘l Transp. Corp. v. EPA, 941 F.2d 1339, 1341 (6th Cir. 1991); Dressman v. Costle, 759 F.2d 548, 555 (6th Cir. 1985); cf.
When an agency departs from its prior position, the change creates unique “aspect[s] of the problem” that it must confront. Id.; Encino Motorcars, LLC v. Navarro, 579 U.S. 211, 221-22 (2016). To start, the agency must “display awareness” that it has, in fact, jettisoned its past views. FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515 (2009). This requirement does not compel the agency to meet a “heightened” reasonableness test as compared to when it adopts a policy from scratch. Id. at 514. Still, the agency must acknowledge the change and explain why it sees things differently. See Encino Motorcars, 579 U.S. at 221. So while the agency can make a “U-turn,” it cannot make an unexplained one. Casey v. Berryhill, 853 F.3d 322, 329 (7th Cir. 2017). Courts thus have found agency action arbitrary and capricious when it rested on an “[u]nexplained inconsistency” with past practice. Encino Motorcars, 579 U.S. at 222 (citation omitted).
Next, the agency must address how a change will affect those who have relied on its prior position. See Fox, 556 U.S. at 515; Smiley v. Citibank (S.D.), N.A., 517 U.S. 735, 742 (1996). The agency should identify these reliance interests and weigh them against the “policy” reasons supporting the change. Regents of the Univ. of Cal., 591 U.S. at 33. The Supreme Court has held, for example, that an agency arbitrarily adopted a more employee-friendly view of the wage-and-hour laws when the agency ignored that employers had structured their payment arrangements based on the agency‘s past interpretation. See Encino Motorcars, 579 U.S. at 222-24. And this mandate to address reliance interests applies just as much to an agency‘s departure from informal guidance as it does to its departure from formal regulations. See Perez v. Mortg. Bankers Ass‘n, 575 U.S. 92, 105-06 (2015).
The EPA failed to live up to these standards here. The agency‘s denial of Kentucky‘s plan departed from prior guidance in three respects. For one, the EPA‘s March 2018 Memorandum told the States (including Kentucky) that they “may consider using” the 2011 modeling to develop their plans for the first two steps of the EPA‘s four-step approach to the Good Neighbor Provision. Mar. Mem., J.A. 80. For another, the EPA‘s August 2018 Memorandum told the States that “it may be reasonable and appropriate for [them] to use a 1 ppb contribution threshold” when identifying the links to downwind receptors that require more scrutiny at the agency‘s later steps. Aug. Mem., J.A. 101. The EPA issued this memo to “provide[] recommendations” to States but added that this presumption of a 1 ppb threshold may not fit “the facts” of a particular State. Id. at 98. For a third, the EPA saw nothing about Kentucky‘s unique “facts” that warranted a departure from these recommendations. Id. To the contrary, the EPA told Kentucky during the Commonwealth‘s
The EPA threw out all this guidance when it disapproved Kentucky‘s plan. The EPA relied on the 2016v3 modeling—not the 2011 modeling that it had recommended—to identify Kentucky‘s links to downwind receptors. 88 Fed. Reg. at 9356. Even worse, this new modeling showed that Kentucky‘s highest contribution to a maintenance or nonattainment receptor was only “0.84 ppb,” which is below the 1 ppb threshold that the EPA had recommended. Id. Yet the EPA denied Kentucky‘s plan by using a lower threshold: 1% of the ozone standard (.7 ppb). See id.; see also id. at 9342. The EPA acted arbitrarily because it did not adequately explain either change.
Threshold Change. The EPA did not even “display awareness” that its switch from a 1 ppb threshold to a .7 ppb threshold changed anything. Fox, 556 U.S. at 515. The EPA‘s final rule reasoned that its August 2018 Memorandum had cautioned that the recommended 1 ppb threshold might not fit the “facts and circumstances” of all States. 88 Fed. Reg. at 9372. It then invoked this disclaimer to find that no State “made a sufficient showing” to use this threshold. Id. at 9373. Yet the EPA‘s logic flipped the key presumption. The August 2018 Memorandum treated the 1 ppb threshold as presumptively acceptable unless a State‘s unique facts made the threshold improper, but the final rule treated the 1 ppb threshold as presumptively unacceptable unless that threshold fit a State‘s facts. The August 2018 Memorandum had presumptively allowed States to use the 1 ppb threshold because it was “generally comparable” to a .7 ppb threshold in capturing upwind contributors to downwind receptors. Aug. Mem., J.A. 101. When departing from this presumption, did the EPA disagree that the thresholds were generally comparable in this way? Did it change for another reason? The EPA did not even acknowledge the change, let alone explain it. See Encino Motorcars, 579 U.S. at 221-22.
The EPA instead accused States like Kentucky of “misunderstanding” the August 2018 Memorandum by accepting at face value what it said. 88 Fed. Reg. at 9373. “That‘s a bit rich.” Mingo Logan Coal Co. v. EPA, 829 F.3d 710, 740 (D.C. Cir. 2016) (Kavanaugh, J., dissenting). It is especially rich in Kentucky‘s case. The EPA specifically told Kentucky that it could “rely” on the 1 ppb threshold. EPA Comments, J.A. 126. So by “disagree[ing] with Kentucky‘s arguments for” that threshold, the agency was disagreeing with itself. 88 Fed. Reg. at 9356.
Modeling Change. When deciding to switch to the 2016v3 modeling, by comparison, the EPA ignored the “serious reliance interests” that arose from its earlier assurance that States could use the 2011 modeling. Fox, 556 U.S. at 515. To justify the newer modeling, the EPA reasoned that it should be able to use “the best information available to it at the time it” decides on a plan‘s validity. 88 Fed. Reg. at 9366. This logic ignored an “important aspect of the problem“: Kentucky‘s reliance on the March 2018 Memorandum. State Farm, 463 U.S. at 43. Indeed, the EPA‘s briefing cites nothing in the rule that even acknowledged this reliance interest.
If the EPA had “considered” Kentucky‘s reliance, it might have chosen an alternative to its flat disapproval. Regents of the Univ. of Cal., 591 U.S. at 32. As Kentucky suggested, the EPA could have announced in advance that it
The EPA‘s defenses of these changes lack merit. First, the EPA rests on the disclaimer in the August 2018 Memorandum that its recommended 1 ppb threshold might not fit a State‘s facts. But this disclaimer does the EPA no good as applied to Kentucky. Again, the memorandum proposed the 1 ppb threshold because it captured a “generally comparable” amount of upwind contributions to downwind receptors as would a .7 ppb threshold. Aug. Mem., J.A. 101. So if the 1 ppb threshold was not “comparable” to a .7 ppb threshold for a particular State and receptor, this approach might give way. But the EPA has made no receptor-specific argument for Kentucky. Indeed, the memorandum itself listed all receptors to which Kentucky contributed over .7 ppb when finding the two thresholds comparable. Compare Aug. Mem., J.A. 102-03, with State Plan, J.A. 152. The EPA instead argues that Kentucky did not provide an adequate “technical justification” for the higher threshold. Respondents’ Br. 70. Yet the EPA does not explain what “technical” justification Kentucky needed beyond the one in the EPA‘s own prior memorandum.
Second, the EPA suggests that its comments about Kentucky‘s draft plan did not promise that Kentucky could rely on the 2011 modeling or 1 ppb threshold “without conducting further analysis and offering technical justification.” Respondents’ Br. 70. That is false. When discussing the modeling data in Kentucky‘s plan, the EPA stated: “An alternative, more straightforward approach would be to rely entirely upon the EPA‘s [2011 modeling] and apply the 1 ppb screening threshold” from the August 2018 Memorandum. EPA Comments, J.A. 126 (emphasis added). The EPA did not then warn that it might still reject the state plan despite this recommendation.
Third, the EPA says that Kentucky could not have relied on the two memoranda because the EPA did not have a “longstanding policy” of using only modeling data in existence when a State submitted a plan or a 1 ppb threshold. Respondents’ Br. 72, 88 (quoting Breeze Smoke, LLC v. FDA, 18 F.4th 499, 507 (6th Cir. 2021) (order)). This argument misunderstands the law. While “longstanding policies” suffice to create reliance interests, Encino Motorcars, 579 U.S. at 222, they are not necessary to do so. Such interests can arise in other ways—such as when an agency tells a party that it can do something during the rulemaking process. See EPA Comments, J.A. 126. A contrary holding would allow agencies to “pull a surprise switcheroo” by issuing a final action that flatly contradicts prior guidance, as long as the action does not depart from some traditional practice. Env‘t Integrity Project v. EPA, 425 F.3d 992, 996 (D.C. Cir. 2005).
The EPA‘s support for this alleged “longstanding policy” requirement—our decision in Breeze Smoke—is not to the contrary. There, we recognized that an agency‘s earlier guidance was not “longstanding,” so a party could not rely on caselaw refusing to defer to agency actions
Fourth, the EPA argues that Kentucky did not prove its reliance because it did not incur “substantial” monetary “costs” using the 2011 modeling. Respondents’ Br. 93. But Kentucky wasted the costs it incurred drafting its plan because the EPA evaluated that plan using a different yardstick from the one the agency promised. Regardless, as a sovereign entity, Kentucky possesses the “primary responsibility” to regulate pollution emitted from its borders and the discretion to decide how best to meet air-quality standards.
* * *
Even if the EPA acted arbitrarily and capriciously in the ways that we have explained, the agency claims that we should find its mistakes harmless. The EPA opines that it would have denied Kentucky‘s plan even if it had judged the plan using Kentucky‘s 2011 modeling and 1 ppb threshold. Under those datapoints, Kentucky still contributed to a Maryland monitor at Step 2. State Plan, J.A. 152. And the EPA now argues that Kentucky gave inadequate reasons at Step 3 as to why it need not cut emissions to keep this monitor in attainment. Respondents’ Br. 57-68. The problem? Under basic principles of administrative law, agencies may invoke in court only the grounds that they relied on at the time they took the challenged action. See Regents of the Univ. of Cal., 591 U.S. at 20. If those relied-upon reasons cannot sustain an agency action, neither a court nor an agency may salvage the action by invoking “better” reasons for it in litigation. See id. at 22-23; see also Calcutt v. FDIC, 598 U.S. 623, 628-29 (2023) (per curiam).
This principle renders the EPA‘s harmless-error arguments premature. The EPA did not rely on its current Step 3 claims to deny Kentucky‘s state plan. To be sure, its rule did state that Kentucky “did not conduct an adequate Step 3 analysis.” 88 Fed. Reg. at 9356. But the EPA‘s four-part approach raises distinct “steps” for a reason. The validity of a State‘s decision on what emissions to cut at Step 3 depends on the State‘s links at Step 2. And the EPA‘s rule used the 2016v3 modeling at Step 2 to
In short, we have no idea how the EPA would have acted if it had not committed the legal errors that we have identified. The agency thus has failed to show that the errors did not prejudice Kentucky. Yet nothing we have said in this opinion would prohibit the EPA from properly raising any new concerns in additional administrative proceedings on remand.
IV. What Is the Proper Remedy?
Despite the errors underlying its action, the EPA lastly asks us to remand to the agency without vacating its disapproval of Kentucky‘s plan. Substantial out-of-circuit caselaw underlies this request. Several courts have held that they may remand an illegal action to an agency without vacating the action—allowing the action to continue to have binding force in the meantime. See Black Warrior Riverkeeper, Inc. v. U.S. Army Corps of Eng‘rs, 781 F.3d 1271, 1290 (11th Cir. 2015) (collecting cases); see also 33 Charles A. Wright et al., Federal Practice and Procedure § 8382, at 289-93 (2d ed. 2018). Yet the parties cite only one of our own decisions that has remanded to an agency without vacating its action. See Sierra Club v. EPA, 60 F.4th 1008, 1021-23 (6th Cir. 2023). There, we did not find the action unlawful and instead remanded for additional proceedings at the agency‘s request. See id. at 1020-21. So the case says nothing about whether we may refuse to vacate illegal actions. The EPA asks us to break new ground. We need not do so to resolve this case. Even assuming that the APA permits this remand-without-vacatur remedy, it would not apply to the EPA‘s errors. The courts that have permitted remand-without-vacatur relief consider two primary factors when deciding on the propriety of that relief. See id. at 1022. They first ask how serious of an error the agency made. See id. If the agency committed a technical error that it could easily fix on remand, courts are more likely to keep its action in place. See id. If, by contrast, the agency committed a “fundamental” error—such as taking a substantively illegal action or ignoring notice-and-comment requirements—these courts will not let the action stand. See Long Island Power Auth. v. FERC, 27 F.4th 705, 717 (D.C. Cir. 2022); Allina Health Servs. v. Sebelius, 746 F.3d 1102, 1110-11 (D.C. Cir. 2014).
The courts that permit a remand-without-vacatur remedy next ask how disruptive their vacatur would be. See Sierra Club, 60 F.4th at 1022. If vacatur would, say, upend years of transactions entered in reliance on the agency‘s action, courts are more likely to keep it in place. See Am. Great Lakes Ports Ass‘n v. Schultz, 962 F.3d 510, 518-19 (D.C. Cir. 2020). If, however, an agency can point to just the normal uncertainty that follows every vacatur of agency action, courts are more likely to vacate the action. See Sierra Club, 60 F.4th at 1023; Nat. Res. Def. Council v. Wheeler, 955 F.3d 68, 85 (D.C. Cir. 2020).
Apart from these two factors, courts treat vacatur as the default and remand without vacatur as the “rare” remedy. United Steel, Paper & Forestry, Rubber, Mfg., Energy, Allied Indus. & Serv. Workers Int‘l Union v. Mine Safety & Health Admin., 925 F.3d 1279, 1287 (D.C. Cir. 2019); see Am. Great Lakes Ports Ass‘n, 962 F.3d at 518. And the two factors merely structure the inquiry because the proper remedy will depend on all the equities. See Sierra Club, 60 F.4th at 1022.
The EPA has failed to establish that the equities justify remand without vacatur here. For starters, while the EPA may try to rely on distinct grounds to fix its errors on remand, its current disapproval contains a “fundamental” defect. Allina Health Servs., 746 F.3d at 1110 (citation omitted). The agency‘s bait-and-switch tactics left Kentucky with the type of “deficient notice” that has justified vacatur in other cases. Id. If anything, this case warrants that relief even more because the EPA undercut the Clean Air Act‘s “cooperative federalism” structure. Sierra Club, 681 F.3d at 343 (quoting Ellis, 390 F.3d at 467). If we did not vacate its disapproval, the agency would have every “incentive” to take similar shortcuts in the future. Env‘t Def. Fund v. FERC, 2 F.4th 953, 976 (D.C. Cir. 2021).
The EPA has also not shown that vacatur would have any unusually disruptive effects. See Sierra Club, 60 F.4th at 1023. It asserts that vacatur will bar it from imposing its federal implementation plan on Kentucky and thus will delay that plan‘s emissions reductions. Yet the Supreme Court has already indefinitely stayed the federal plan. See Ohio, 603 U.S. at 300. So the agency could not enforce its emissions reductions even if we refused to vacate the disapproval of Kentucky‘s plan. And the EPA‘s long delay in acting on this state plan undercuts any claim that an urgent need exists to compel Kentucky to reduce its emissions. See Texas, 2023 WL 7204840, at *11. Besides, the EPA‘s arguments simply assume the conclusion on the merits: that Kentucky‘s current plan falls short of meeting its good-neighbor obligations. But “it is far from certain” that the EPA will reach that same conclusion on remand. Env‘t Def. Fund, 2 F.4th at 976.
All told, we deny the EPA‘s motion to transfer. We also grant Kentucky‘s petitions for review, vacate the EPA‘s disapproval of Kentucky‘s state implementation plan, and remand to the agency for further proceedings consistent with this opinion.
CONCURRENCE
MURPHY, Circuit Judge, concurring. Our holding that the Environmental Protection Agency (EPA) acted arbitrarily and capriciously and our assumption that the remand-without-vacatur remedy exists allow us to fully resolve this case. I write this separate concurrence to highlight two issues that we need not conclusively decide. First, the EPA‘s failure to timely act
I. Did the EPA‘s Untimely Disapproval of Kentucky‘s Plan Violate the APA?
Apart from barring arbitrary and capricious agency action, the APA also requires agencies to act “in accordance with law[.]”
Start with some statutory background. The Clean Air Act imposes two deadlines on the EPA after a State submits a plan. The EPA must first decide whether the plan contains the “information necessary to enable [the agency] to determine whether the plan submission complies with the” Act.
The parties agree on how this law applied here. Kentucky submitted its plan in January 2019. But the EPA never expressly found that this plan contained all the required information. By operation of law, therefore, that finding occurred in July 2019. See id.
Background principles help answer this question. Many statutes command public officials to act within a certain time. See United States v. James Daniel Good Real Prop., 510 U.S. 43, 63 (1993). The Supreme Court has repeatedly held that officials who miss these statutory deadlines do not automatically forfeit the power to act belatedly if the statute itself does not impose that penalty. See id.; Nielsen v. Preap, 586 U.S. 392, 411 (2019) (plurality opinion); Barnhart v. Peabody Coal Co., 537 U.S. 149, 158-63 (2003); Brock v. Pierce County, 476 U.S. 253, 259-62 (1986); see also McIntosh v. United States, 601 U.S. 330, 337-42 (2024). When a statute does not identify the consequence for a violation, the Court has explained, courts may not simply pick the remedy they think best as a common-law matter. See James Daniel Good, 510 U.S. at 63; Gen. Med., P.C. v. Azar, 963 F.3d 516, 526 (6th Cir. 2020) (Murphy, J., concurring).
These principles provide the first step in the analysis: The Clean Air Act says nothing about what should happen if the EPA misses its “[d]eadline for action” on a state plan.
As other background principles show, however, this conclusion does not allow the EPA to violate the Clean Air Act‘s timelines with impunity. Rather, additional sources of law can allow courts to enforce a statute‘s requirements even when the statute itself lacks its own remedy. As one example from the Supreme Court‘s caselaw, Article III gives courts the “inherent power” to sanction parties for violating court rules—even if no statute gives them this power. Id. at 37 (citing Chambers v. NASCO, Inc., 501 U.S. 32, 43-46 (1991)). So when a statute required plaintiffs to file complaints under seal, this background power allowed courts to punish plaintiffs who violated the sealing requirement despite the lack of a statutory remedy. See id. If courts rely on these other remedies, however, they must also respect the limitations that come with the remedies. In criminal cases, for instance, district courts must overlook all errors that do not harm the defendant. See Fed. R. Crim. P. 52(a); McIntosh, 601 U.S. at 338. This harmless-error rule covers the failure of courts or prosecutors to meet various statutory deadlines in criminal cases. See Dolan v. United States, 560 U.S. 605, 617 (2010); United States v. Montalvo-Murillo, 495 U.S. 711, 722 (1990).
These principles provide the second step in the analysis: Although the Clean Air Act does not explain what should happen if the EPA acts on a state plan after its deadline, the APA applies to this untimely action. And this second legal source does allow us to “set aside” (and issue an “injunction” against) an EPA “action” if it is “not in accordance with” the Clean Air Act‘s timelines.
That said, like the harmless-error rule in criminal cases, the APA requires us to give “due account” to “the rule of prejudicial error.”
For starters, the Clean Air Act notes that the EPA ”shall approve” a state plan within the required timeframe if the plan “meets all of the applicable requirements” of the Act.
A related provision confirms this point. The EPA admits that Kentucky could have sued back in July 2020 to obtain a court order requiring the EPA to timely act while Kentucky‘s plan remained pending with the EPA. See
A structural point reinforces the same idea. The Clean Air Act does not leave the EPA powerless to consider new information. It provides a remedy when new facts show that an approved state plan “is substantially inadequate to attain or maintain” an air-quality standard.
As far as I can tell, nothing in the EPA‘s briefing justifies its unlawful delay and prejudicial use of post-deadline data. The agency first cites caselaw holding that agencies might violate the APA‘s ban on arbitrary-and-capricious conduct if they “ignore new and better data.” Dist. Hosp. Partners, L.P. v. Burwell, 786 F.3d 46, 56-57 (D.C. Cir. 2015). The EPA thus suggests that it would have acted arbitrarily if it overlooked the 2016v3 modeling. Yet this caselaw has rejected arbitrary-and-capricious challenges when the EPA had good reasons to use older data. See Sierra Club v. EPA, 356 F.3d 296, 308 (D.C. Cir. 2004); see also Bd. of Cnty. Comm‘rs of Weld Cnty. v. EPA, 72 F.4th 284, 289-90 (D.C. Cir. 2023). The EPA perhaps had such reasons here: the Act required it to approve or disapprove the plan in a timely manner, not to wait on constantly updated modeling. See Sierra Club, 356 F.3d at 308. To be sure, I agree that this fact does not mean that the EPA should “ignore” this newer modeling. Dist. Hosp. Partners, 786 F.3d at 57. It just means that the EPA should follow the Clean Air Act‘s rules for how to use it: by issuing a call for the revision of an approved plan—not by unlawfully postponing its decision on a proposed one.
The EPA next relies on a decision that rejected the claim that the agency must rely on pollution conditions as they existed on the deadline for States to submit their plans. See Wisconsin v. EPA, 938 F.3d 303, 322 (D.C. Cir. 2019) (per curiam). The EPA places undue emphasis on Wisconsin. There, the EPA proposed a federal plan in 2016 using data about expected pollution conditions in 2017. See id. at 312, 321. This data revealed that a downwind State (Delaware) would have no problematic receptors. Id. at 321. But Delaware argued that the Good Neighbor Provision required the EPA to consider pollution conditions as they existed in 2011. Id. The State relied on the fact that the Act required upwind States to submit their plans for meeting the relevant air-quality standard at that time. Id. at 321-22. The D.C. Circuit rejected this view. Because the Good Neighbor Provision uses the future tense (covering States that “will” contribute to downwind nonattainment), the court interpreted the provision as regulating pollution conditions in future years—not as of the plan-submission date. Id. at 322 (quoting
When the EPA turns to the Clean Air Act‘s text, it concedes that the Act imposes a mandatory deadline for the agency to decide on a plan‘s validity. But the EPA calls the statutory deadline “procedural” and suggests that it is “not ‘central to the regulatory scheme.‘” Respondents’ Br. 80 (quoting Wisconsin, 938 F.3d at 322). The agency adds that it may freely disregard “procedural” rules in pursuit of achieving the “Act‘s central object“: attaining the air-quality standard. Id. (quoting Wisconsin, 938 F.3d at 316). I see three problems with this ends-justify-the-means logic. As an initial matter, the Constitution does not give agencies any prerogative power to “dispense” with statutory requirements that they find “unimportant.” See Michael W. McConnell, The President Who Would Not Be King 115-19 (2020). Next, because “no legislation pursues its purposes at all costs,” CTS Corp. v. Waldburger, 573 U.S. 1, 12 (2014) (quoting Rodriguez v. United States, 480 U.S. 522, 525-26 (1987) (per curiam)), the “limitations” on a statute‘s main goals are “often [its] price of passage[.]” Henson v. Santander Consumer USA Inc., 582 U.S. 79, 89 (2017). So courts must respect those limitations just as much as the primary provisions. See Kucana v. Holder, 558 U.S. 233, 252 (2010). Finally, Congress‘s findings reveal that it viewed respect for state authority as a central goal of the Clean Air Act. See
All told, the EPA‘s untimely disapproval of Kentucky‘s plan may have violated the APA for this independent reason. Given that it acted in an arbitrary and capricious way when disapproving that plan, though, we need not conclusively resolve the issue.
II. Does the APA Authorize a Remand-Without-Vacatur Remedy?
The EPA has asked us to remand its disapproval of Kentucky‘s plan to the agency for reconsideration without vacating that disapproval. In my view, its arguments about the availability of this remedy have broader ramifications. The correct answer might turn on a debate about whether the APA permits vacatur of an agency action as a remedy distinct from an injunction enjoining the action‘s enforcement. Compare Corner Post, Inc. v. Bd. of Governors of Fed. Rsrv. Sys., 144 S. Ct. 2440, 2460-70 (2024) (Kavanaugh, J., concurring), with United States v. Texas, 599 U.S. 670, 693-703 (2023) (Gorsuch, J., concurring in the judgment). The APA instructs courts that they “shall” “set aside” agency action found unlawful.
On the other hand, others have not read § 706
At day‘s end, our resolution of this case allows us to avoid these tricky issues. We need not decide whether we have the power to keep illegal action in place. Even if we did, the EPA has not justified that remedy on the facts here. So we also need not decide whether “vacatur” qualifies as a new remedy or as an injunction by another name. Nothing turns on that distinction here.