IN THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT

USCA Case #15-1308 Document #1573669 Filed: 09/17/2015 Page 1 of 17 IN THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT SOUTHEASTERN LEGAL FOUNDATION, INC. and WALTER COKE, INC., Petitioners, No. 15-1166 (and consolidated cases v. UNITED STATES ENVIRONMENTAL PROTECTION AGENCY et al., Respondents. BCCA APPEAL GROUP, Petitioners, No. 15-1300 v. UNITED STATES ENVIRONMENTAL PROTECTION AGENCY et al., Respondents. LUMINANT GENERATION COMPANY LLC, OAK GROVE MANAGEMENT COMPANY LLC, BIG BROWN POWER COMPANY LLC, and SANDOW POWER COMPANY LLC, Petitioners, No. 15-1301 v. UNITED STATES ENVIRONMENTAL

USCA Case #15-1308 Document #1573669 Filed: 09/17/2015 Page 2 of 17 PROTECTION AGENCY et al., Respondents. TEXAS OIL & GAS ASSOCIATION, Petitioners, No. 15-1302 v. UNITED STATES ENVIRONMENTAL PROTECTION AGENCY et al., Respondents. STATE OF TEXAS and TEXAS COMMISSION ON ENVIRONMENTAL QUALITY, Petitioners, No. 15-1308 v. UNITED STATES ENVIRONMENTAL PROTECTION AGENCY et al., Respondents. TEXAS PETITIONERS OPPOSITION TO EPA S MOTION TO CONSOLIDATE AND MOTION FOR AFFIRMATIVE RELIEF

USCA Case #15-1308 Document #1573669 Filed: 09/17/2015 Page 3 of 17 Petitioners in Case Nos. 15-1266, 15-1300, 15-1301, 15-1302, and 15-1308 (collectively Texas Petitioners 1 oppose the U.S. Environmental Protection Agency s ( EPA motion to consolidate the Texas petitions for review with twelve other petitions for review currently consolidated under Lead Case No. 15-1166. The Texas petitions for review present unique threshold issues involving the preclusive effect of the Fifth Circuit s prior decision in Luminant Generation Co. LLC v. EPA, 714 F.3d 841 (5th Cir. 2013 ( Luminant I, and those issues should be considered separately from the issues in the main consolidated cases. In Luminant I, the U.S. Court of Appeals for the Fifth Circuit held that the exact same provisions of the Texas State Implementation Plan ( SIP that are at issue here are consistent with the Clean Air Act ( CAA or Act, and the Court specifically rejected the only rationale that EPA puts forward here as the basis for its new position that those exact same provisions are now inconsistent with the Act. By virtue of the holding in Luminant I, there are threshold preclusion issues 1 The Texas Petitioners are the State of Texas and the Texas Commission on Environmental Quality (Case No. 13-1508; Luminant Generation Company LLC, Oak Grove Management Company LLC, Big Brown Power Company LLC, and Sandow Power Company LLC (collectively Luminant Petitioners (Case Nos. 15-1266 & 15-1301; BCCA Appeal Group (Case No. 15-1300; and Texas Oil & Gas Association (Case Nos. 15-1302. These petitions were transferred to this Court by the U.S. Court of Appeals for the Fifth Circuit in response to a motion filed by EPA to dismiss or, in the alternative, transfer the petitions. The petition in Case No. 15-1266 was filed in this Court as a protective petition in response to the that motion to dismiss Luminant Petitioners petition for review in the Fifth Circuit. 1

USCA Case #15-1308 Document #1573669 Filed: 09/17/2015 Page 4 of 17 regarding EPA s current action on the Texas SIP that are separate and distinct from the issues presented in the other consolidated cases. For this reason, consolidation of all petitions is not appropriate and would not further the efficient and timely resolution of these cases. Accordingly, Texas Petitioners oppose EPA s motion and instead request that these issues be considered separately from the merits issues in the main case and on an expedited basis. Specifically, Texas Petitioners move the Court to consolidate the petitions for review in Case Nos. 15-1300, 15-1301, 15-1302, and 15-1308 into a single docket; sever from the cases consolidated under Lead Case No. 15-1166 all issues identified below with respect to the Texas SIP and assign those issues to the new consolidated docket; and expedite proceedings in the new consolidated docket in accordance with the schedule and format set out below. BACKGROUND These cases stem from EPA s final rule calling for the revision of various provisions of different Clean Air Act ( CAA State Implementation Plans ( SIPs in 36 states. 80 Fed. Reg. 33,839 (June 12, 2015 ( Final Rule. The Final Rule does not involve any nationwide EPA regulation, but instead sets forth EPA s findings that certain specific and unique SIP provisions applicable in these 36 states are substantially inadequate to comply with the requirements of the 2

USCA Case #15-1308 Document #1573669 Filed: 09/17/2015 Page 5 of 17 CAA. Id. Each of the state provisions is different, and some of them take the form of affirmative defenses and some take the form of exemptions. In the Final Rule, EPA relies heavily on this Court s decision in NRDC v. EPA, 749 F.3d 1055 (D.C. Cir. 2014. Id. at 33,851. In NRDC, this Court held that the Clean Air Act did not give EPA authority to create an affirmative defense in a nationwide regulation issued under Section 112 that limited hazardous emissions from cement kilns. NRDC, 749 F.3d at 1064 (emphasis added. But in the course of reaching this conclusion, the Court specifically noted that affirmative defense provisions in SIPs present a different issue than those in EPA regulations, and recognized the Fifth Circuit s prior holding with respect to the Texas SIP: The Fifth Circuit recently upheld EPA s partial approval of an affirmative defense provision in a State Implementation Plan. See Luminant Generation Co. v. EPA, 714 F.3d 841 (5th Cir. 2013 [Luminant I]. We do not here confront the question whether an affirmative defense may be appropriate in a State Implementation Plan. Id. at 1064 n.2. Specifically, in Luminant I, the Fifth Circuit directly addressed and decided whether the affirmative defenses in the Texas SIP 2 were appropriate and authorized by the CAA. As specifically relevant here, in Luminant I, environmental petitioners argued that EPA s incorporation of the Texas affirmative defense into 2 These provisions are found at 30 Tex. Admin. Code 101.222(b, (c, (d, & (e. 3

USCA Case #15-1308 Document #1573669 Filed: 09/17/2015 Page 6 of 17 the SIP illegally limits the district courts jurisdiction to assess appropriate penalties in civil actions. Br. of Pet rs Sierra Club at 48 49, Luminant I, No. 10-60934 (5th Cir. May 11, 2011. In response, EPA vigorously defended its approval of the Texas provisions, on the ground that it is within the scope of a State s authority under the Act to design a limited affirmative defense... to define what constitutes an enforceable emission limitation. Br. of Resp t EPA at 18, 22, Luminant I, No. 10-60934 (5th Cir. July 12, 2011. Presented with EPA s and Texas s arguments, the Fifth Circuit held that the Texas provisions are consistent with the Act and that [t]he availability of the affirmative defense does not negate the district court s jurisdiction to assess civil penalties using the criteria outlined in section 7413(e, or the state permitting authority s power to recover civil penalties. Luminant I, 714 F.3d at 853 n.9 (emphasis added. Instead, the Fifth Circuit construed the provisions to simply provide[] a defense, under narrowly defined circumstances, if and when penalties are assessed. Id. On this point, the Fifth Circuit did not defer to any statutory interpretation by EPA, but applied a plain reading of the statute and the Texas provisions. Id.; see also id. at 851 ( [P]etitioners argue that the final rule conflicts with the plain language of the Act authorizing civil penalties in EPA and citizen suit enforcement actions, as well as the Act s requirement that the state permitting authority be able to assess civil penalties.. 4

USCA Case #15-1308 Document #1573669 Filed: 09/17/2015 Page 7 of 17 Despite having litigated this issue to final judgment in the Fifth Circuit, 3 EPA now seeks to advance a rationale directly contrary to the Fifth Circuit s holding as the sole basis for its new finding that the same Texas affirmative defense provisions are substantially inadequate to comply with the statute. 79 Fed. Reg. 55,920, 55,944 45 (Sept. 17, 2014. As the sole basis for its finding of inadequacy for the Texas SIP, EPA now asserts that these [Texas] provisions impermissibly purport to alter or eliminate the jurisdiction of federal courts to assess penalties for violations of SIP emission limits. Id. at 55,945. Thus, EPA s finding in the Final Rule as to the Texas SIP is based exclusively on an argument raised in Luminant I and decided by the Fifth Circuit contrary to EPA s current position. As discussed below, this raises unique threshold issues with respect to EPA s action on the Texas SIP that should be addressed separately by the Court. ARGUMENT I. EPA s Motion to Consolidate Should Be Denied The Court should deny EPA s motion requesting that the Texas petitions for review be consolidated with the twelve petitions challenging the Final Rule generally. EPA s only basis for its motion is that the Texas petitions seek review of the same final agency action as each of the twelve petitions[.] EPA Mot. at 5. But by virtue of the Fifth Circuit s decision and rationale in Luminant I and EPA s 3 Indeed, EPA and the Solicitor General defended the Fifth Circuit s holding in briefing before the Supreme Court urging the Court to deny a writ of certiorari. 5

USCA Case #15-1308 Document #1573669 Filed: 09/17/2015 Page 8 of 17 decision to disregard that decision, the Texas petitions present unique threshold issues not implicated in the other petitions involving other states. These issues include: 1. Whether EPA s finding of substantial inadequacy and SIP call regarding the Texas affirmative defenses is unlawful and arbitrary and capricious because EPA s only stated rationale for its decision that the Texas affirmative defenses alter or eliminate the jurisdiction of federal courts to assess penalties for violations of SIP emission limits, 79 Fed. Reg. at 55,945 is precluded under principles of res judicata, claim preclusion, and issue preclusion by the final decision of the U.S. Court of Appeals for the Fifth Circuit, which held that the same defenses do not negate the district court s jurisdiction to assess civil penalties using the criteria outlined in section 7413(e, or the state permitting authority s power to recover civil penalties. Luminant Generation Co. LLC v. EPA, 714 F.3d 841, 853 n.9 (5th Cir. 2013? 2. Whether EPA s finding of substantial inadequacy and SIP call regarding the Texas affirmative defenses is unlawful and arbitrary and capricious because EPA s action is in direct contravention of the lawfully-issued mandate of the U.S. Court of Appeals for the Fifth Circuit? 3. Whether EPA failed to meet its burden under 42 U.S.C. 7410(k(5 of demonstrating that the inclusion of the Texas affirmative defenses means the Texas SIP is substantially inadequate to comply with the requirements of the Clean Air Act, given that the Fifth Circuit has previously held that the Texas affirmative defenses are fully compliant with the Clean Air Act, including 42 U.S.C. 7413(e? 4. Whether EPA s nonaquiescence to the Fifth Circuit s decision in Luminant I is unlawful under this Court s decision in NEDACAP v. EPA, 755 F.3d. 999 (D.C. Cir. 2014, and EPA s regional consistency regulations? 5. Whether EPA may use the venue selection provisions in 42 U.S.C. 7607(b(1 and a finding of nationwide scope or effect to circumvent binding precedent of the Fifth Circuit that would otherwise preclude its final action on review? 6

USCA Case #15-1308 Document #1573669 Filed: 09/17/2015 Page 9 of 17 Given the Fifth Circuit s prior decision (which directly addressed only the Texas SIP provisions, the Texas petitions are unique in presenting these threshold issues, and thus consolidation with the twelve other petitions is not appropriate and would not further the efficient resolution of these issues. These preclusion issues exist separate and apart from whether EPA s actions in the Final Rule generally or with respect to any particular state (including Texas are otherwise unlawful and arbitrary and capricious on their merits, which is to be decided in the main case. 4 Indeed, resolution of these threshold issues would obviate the need to litigate the merits of EPA s action as to the Texas SIP, because EPA s only rationale for its Texas action would be precluded. The Texas petitions are different from the other petitions in this regard, and presumably EPA itself would agree that the Fifth Circuit s decision applies uniquely to the Texas SIP. 5 Texas s unique situation was evident in the underlying rulemaking process. Texas was not among the 39 states included in EPA s original proposed rule, 4 Thus, even if consolidated with the other petitions, briefing and argument on these Texas preclusion issues would appropriately be separate and distinct from the general merits briefing and any state-specific merits briefing, and Texas Petitioners would request a separate brief to jointly raise their distinct issues. 5 In recently proposing to amend its regional consistency regulations in response to this Court s decision in NEDACAP v. EPA, EPA explained that under the agency s new approach to intercircuit nonaquiescence, a federal court decision would apply to those areas or parties that are under the issuing court s jurisdiction in any regional actions going forward... even if doing so would mean [EPA regional offices] were acting inconsistently with... national policy. 80 Fed. Reg. 50,250, 50,254 (Aug. 19, 2015. 7

USCA Case #15-1308 Document #1573669 Filed: 09/17/2015 Page 10 of 17 which addressed an administrative petition for rulemaking by Sierra Club that did not include Texas. 78 Fed. Reg. 12,460 (Feb. 22, 2013; see also 80 Fed. Reg. at 33,846 (Tbl. 1 (listing states covered by EPA s ruling on the petition. Indeed, at that time, EPA was vigorously defending the legality of the Texas provisions in the Fifth Circuit. Instead, in a later supplemental proposal, EPA added Texas and attempted to justify its departure from the Luminant I holding. 80 Fed. Reg. at 33,856 57. Accordingly, in the Final Rule, EPA found the various components of its action to be severable for purposes of judicial review, further contradicting EPA s current argument that all petitions should be consolidated just because they involve the same Federal Register notice. 80 Fed. Reg. at 33,985 (emphasis added. Given the distinct and severable threshold issues presented by the Texas petitions, EPA s motion to consolidate should be denied. II. The Texas Issues Should Move Forward on an Expedited Basis in a Separate Consolidated Docket Instead of consolidating the Texas petitions with the other twelve petitions, Texas Petitioners request that the Court provide for expedited consideration of the preclusion and other issues that exist by virtue of the Fifth Circuit s decision in Luminant I. Specifically, Texas Petitioners request that the Court consolidate the petitions for review in Case Nos. 15-1300, 15-1301, 15-1302, and 15-1308 into a single docket; sever from the cases consolidated under Lead Case No. 15-1166 all 8

USCA Case #15-1308 Document #1573669 Filed: 09/17/2015 Page 11 of 17 issues identified above with respect to the Texas SIP and assign those issues to the new consolidated docket for those issues 6 ; and expedite proceedings in the new consolidated docket in accordance with the schedule and format below: 7 Initial Submissions... October 30, 2015 Certified List of Contents of Administrative Record... October 30, 2015 Texas Petitioners Joint Brief... December 4, 2015 (not to exceed 14,000 words 6 Any other petitioner in the cases consolidated under Lead Case No. 15-1166 should be permitted to participate in the new consolidated docket if they indicate their intent to do so prior to the deadline for initial submissions. 7 Counsel for Texas Petitioners contacted counsel for EPA and counsel for petitioners in the consolidated cases to determine their position on this affirmative relief. EPA is the only party that has stated it opposes this relief. Petitioners SSM Litigation Group (Case No. 15-1270; National Environmental Development Association s Clean Air Project (Case No. 15-1265; and Environmental Committee of the Florida Electric Power Coordinating Group, Inc. (Case No. 15-1239 responded that they support Texas Petitioners requested affirmative relief. Petitioners State of Tennessee (Case No. 15-1271; Southeastern Legal Foundation, Inc. and Walter Coke, Inc. (Case Nos. 15-1166 and 15-1216; Georgia Industry Environmental Coalition and Georgia Coalition for Sound Environmental Policy (Case No. 15-1272; and Southern Company Services, Inc., Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, and Southern Power Company (Case No. 15-1256 responded that they do not oppose the requested relief. Petitioners Utility Air Regulatory Group (Case No. 15-1243; State of Florida, State of Alabama, State of Arizona, State of Arkansas, State of Delaware, State of Georgia, State of Kansas, State of Louisiana, State of Mississippi, State of Missouri, State of Ohio, State of Oklahoma, State of South Carolina, State of South Dakota, State of West Virginia, Commonwealth of Kentucky, and North Carolina Department of Environment and Natural Resources (Case No. 15-1267; and Union Electric Company, doing business as Ameren Missouri (Case No. 15-1268 did not respond. 9

USCA Case #15-1308 Document #1573669 Filed: 09/17/2015 Page 12 of 17 Respondent EPA s Brief... January 8, 2016 (not to exceed 14,000 words Texas Petitioners Joint Reply Brief... January 29, 2016 (not to exceed 7,000 words Deferred Appendix... February 19, 2016 Final Briefs... February 26, 2016 This Court has utilized a similar procedure in other multi-party, multi-issue cases for resolving distinct and severable issues in an efficient and timely manner. See, e.g., Order, Util. Air Regulatory Grp. v. EPA, No. 12-1166 (Mar. 21, 2013 (severing issues, assigning to new docket, and setting briefing schedule; Order, White Stallion Energy Ctr., LLC v. EPA, No. 12-1100 (June 28, 2012 (severing issues, assigning to new docket, and expediting briefing. That same process should be followed here. These threshold Texas issues are easily severable (consistent with EPA s own severability finding in the Final Rule and do not depend on merits arguments that will be made in the main consolidated cases. Further, expedited consideration is appropriate on these threshold issues. In the main consolidated cases, no briefing schedule has even been proposed by the parties, much less entered by the Court. Given the deadlines in EPA s Final Rule, delay in review of these issues will cause irreparable harm to Texas Petitioners owners and operators of Texas sources and the State of Texas. The Texas provisions at issue are currently enforceable and relied upon by regulated entities 10

USCA Case #15-1308 Document #1573669 Filed: 09/17/2015 Page 13 of 17 in federal courts in Texas, consistent with the Fifth Circuit s decision. 8 EPA s new finding, contrary to the Fifth Circuit s holding, that the defenses are illegal will certainly be used by citizen plaintiffs in an attempt to avoid the application of the defenses that were previously held to be lawful. Additionally, the State of Texas and parties to Luminant I are bound by the Fifth Circuit s decision and rationale, yet EPA s Final Rule seeks to require the state to take action inconsistent with that decision by a deadline of November 22, 2016. 80 Fed. Reg. at 33,840. This places the State of Texas in particular in an untenable position having to decide whether to submit a SIP revision to EPA based on a finding that contradicts the duly-issued mandate of the Fifth Circuit, 9 or be subject to a potential Federal Implementation Plan by EPA for failing to respond. Further, Texas Petitioners have demonstrated that EPA s action on the Texas provisions is subject to substantial challenge. As discussed above, the Fifth 8 See, e.g., Sierra Club v. Energy Future Holdings Corp., No. W-12-cv-108, 2014 WL 2153913, at *18 23 (W.D. Tex. Mar. 28, 2014 (applying, consistent with Luminant I, both the criteria in Texas affirmative defenses and penalty criteria in 42 U.S.C. 7413(e. 9 Parties subject to the decision of a federal appellate court are without power to do anything which is contrary to either the letter or spirit of the mandate construed in the light of the opinion of [the] court deciding the case. Order on Mot. to Amend & Enforce J. at 4 5, Luminant Generation Co. LLC v. EPA, No. 10 60891 (5th Cir. Feb. 21, 2014 (quoting Am. Trucking Ass ns v. ICC, 669 F.2d 957, 960 (5th Cir. 1982 (emphases added; alteration in original. Thus, although the Fifth Circuit explained in its order transferring the petitions to this Court that Luminant I does not control the issue of venue for deciding the petitions, that does not relieve the parties from compliance with the court s prior mandate. 11

USCA Case #15-1308 Document #1573669 Filed: 09/17/2015 Page 14 of 17 Circuit s holding is directly contrary to EPA s only rationale for its action as to the Texas provisions. The law is clear that EPA may not, even in a subsequent proceeding in a new forum, relitigate the issue of whether the Texas affirmative defenses alter or eliminate the jurisdiction of federal courts to assess penalties for violations of SIP emission limits, 79 Fed. Reg. at 55,945. 10 That issue has been fully and finally decided by a Court of competent jurisdiction. The law is also clear that, without that sole basis for its action, EPA s action is arbitrary and capricious and due to be set aside. 11 CONCLUSION For these reasons, the Court should deny EPA s motion to consolidate and grant Texas Petitioners request for affirmative relief. 10 Under federal law, [i]ssue preclusion [] bars successive litigation of an issue of fact or law actually litigated and resolved in a valid court determination essential to the prior judgment, even if the issue recurs in the context of a different claim. Taylor v. Sturgell, 553 U.S. 880, 892 (2008 (quotation omitted; see also Davis v. Wakelee, 156 U.S. 680, 689 (1895 ( [W]here a party assumes a certain position in a legal proceeding, and succeeds in maintaining that position, he may not thereafter, simply because his interests have changed, assume a contrary position[.]. 11 See Pierce v. SEC, 786 F.3d 1027, 1034 (D.C. Cir. 2015 ( A reviewing court may not supply a reasoned basis for an agency action that the agency itself did not give in the record under review. (citing SEC v. Chenery Corp., 318 U.S. 80, 88, 93 94 (1943; Motor Vehicle Mfrs. Ass n v. State Farm Mutual Auto. Ins. Co., 463 U.S. 29, 50 (1983 ( It is well-established that an agency s action must be upheld, if at all, on the basis articulated by the agency itself.. 12

USCA Case #15-1308 Document #1573669 Filed: 09/17/2015 Page 15 of 17 September 17, 2015 Respectfully submitted, /s/ P. Stephen Gidiere III P. Stephen Gidiere III Counsel for Luminant Petitioners: P. Stephen Gidiere III Thomas L. Casey III Gretchen M. Frizzell Balch & Bingham LLP 1901 6th Ave. N., Ste. 1500 Birmingham, Alabama 35203 205-251-8100 sgidiere@balch.com Stephanie Z. Moore Vice President and General Counsel Luminant Generation Company LLC 1601 Bryan Street 22nd Floor Dallas, Texas 75201 Daniel J. Kelly Vice President and Associate General Counsel Energy Future Holdings Corp. 1601 Bryan Street 41st Floor Dallas, Texas 75201 /s/ Samara L. Kline Samara L. Kline Counsel for BCCA Appeal Group and Texas Oil & Gas Association: Samara L. Kline Baker Botts L.L.P. 2001 Ross Avenue Dallas, Texas 75201-2980 214-953-6825 samara.kline@bakerbotts.com 13

USCA Case #15-1308 Document #1573669 Filed: 09/17/2015 Page 16 of 17 /s/ Kellie E. Billings-Ray Kellie E. Billings-Ray Counsel for State of Texas and Texas Commission on Environmental Quality: Ken Paxton Attorney General of Texas Charles E. Roy First Assistant Attorney General James E. Davis Deputy Attorney General for Civil Litigation Jon Niermann Chief, Environmental Protection Division Kellie E. Billings-Ray Assistant Attorney General State Bar No. 24042447 kellie.billings-ray@texasattorneygeneral.gov Priscilla M. Hubenak Assistant Attorney General State Bar No. 10144690 Priscilla.hubenak@texasattorneygeneral.gov Office of the Attorney General of Texas Environmental Protection Division P.O. Box 12548, MC-066 Austin, Texas 78711-2548 512-463-2012 14

USCA Case #15-1308 Document #1573669 Filed: 09/17/2015 Page 17 of 17 CERTIFICATE OF SERVICE I hereby certify that on September 17, 2015, a copy of the foregoing document was served electronically through the Court s CM/ECF system on all registered counsel. /s/ P. Stephen Gidiere III Counsel for Luminant Petitioners /s/ Samara L. Kline Counsel for BCCA Appeal Group and Texas Oil & Gas Association /s/ Kellie E. Billings-Ray Counsel for State of Texas and Texas Commission on Environmental Quality 15