Justia Federal District Court Opinions

Ridgway M. Hall, Jr., Washington, D.C., with whom John A. Macleod, Timothy M. Biddle and John T. Scott, III, Washington, D.C., were on the brief for intervenor, National Coal Ass'n in No. 79-1565.

George C. Freeman, Jr., Richmond, Va., Henry V. Nickel and Michael B. Barr, Washington, D.C., also entered appearances for intervenor, Alabama Power Co., et al. in No. 79-1565.

Christopher S. Bond and Charles A. Blackmar, Jefferson City, Mo., also entered appearances for intervenor, Missouri Ass'n of Municipal Utilities in No. 79-1719.

                               Table of Contents
                                                                           Page
            I.                                                              312
  INTRODUCTION
                A. The Challenged Standards                                 312
                B. The Parties                                              312
                C. Background                                               313
                D. Procedural History                                       314
       II.  THE                                                              316
      VARIABLE
    PERCENTAGE
     REDUCTION
        OPTION
                A. EPA's Authority Under Section 111 to Issue a Variable    318
                  Standard
                 1. The Statutory Language                                  318
                 2. The Legislative History                                 319
                B. The Reasonableness of EPA's Decision to Issue a          322
                  Variable Standard
                 1. Technical Background                                    323
                 2. EPA's Explanation for the Variable Standard             325
                  (a) The Factors Considered by EPA                         325
                  (b) EPA's Regulatory Analysis                             326
                  (c) EPA's Stated Rationale for the Variable Standard      327
                 3. An Examination of EPA's Rationale for the Variable      328
                  Standard
                  (a) The Lengitimacy of EPA's Regulatory Analysis          329
                   (1) EPA's Authority to Analyze Long Term National and    329
                  Regional Impacts
                   (2) The Reliability of EPA's Econometric Computer        332
                  Model
                  (b) The Reasonableness of EPA's Conclusions               336
                   (1) The Reasonableness of EPA's Conclusion that          336
                  Variable Control Reflects a Better Balance of the
                  Section 111 Factors Than Uniform Control
                   (2) The Reasonableness of EPA's Conclusion that          338
                  Variable Control Promotes the Policies of the Act
                C. The Dry Scrubbing Controversy                            340
                 1. The Role of Dry Scrubbing Technology in EPA's           340
                  Rationale for the Variable Standard
                 2. The Legitimacy of Considering Emerging Technology in    346
                  Setting Section 111 Standards
                 3. The Adequacy of the Record for Dry Scrubbing's Role     352
                  in EPA's Rationale
                D. The Adequacy of Notice and the Opportunity to Comment    352
                  on the Rationale for the Variable Standard
   III.  THE 90                                                              356
       PERCENT
       REMOVAL
      STANDARD
                A. Notice As to the Basis of the 90 Percent Standard        356
                 1. The Basis of the Final Standard                         356
                 2. Notice that the Basis of the Standard Had Changed       358
                  Since Proposal
                B. The Achievability of the 90 Percent Standard             360
                 1. The Support For EPA's Conclusions About FGD             360
                  Performance
                  (a) The Achievability of 92 Percent Long Term Removal     361
                  Efficiency
                  (b) The Reasonableness of EPA's Assumption About FGD      364
                  Variability
                 2. The Support for EPA's Conclusion that the 90 Percent    367
                  Standard Was Achievable by the Use of Coal Washing in
                  Conjunction with Scrubbing
                  (a) Description of the Coal Washing Process               368
                  (b) The Percentage Reduction Achieveable by Washing       369
                  High Sulfer Coal
       IV.  THE                                                              374
  STANDARD FOR
   EMISSION OF
   PARTICULATE
        MATTER
                A. Technical Background                                     374
                 1. ESP Control Technology                                  374
                 2. Baghouse Control Technology                             375
                B. The Evolution of the Particulate Standard                376
                C. The Achievability of the Standard                        377
                 1. EPA's ESP Data                                          377
                 2. EPA's Baghouse Data                                     380
    V. THE 1.2                                                              384
     LBS./MBTU
      EMISSION
       CEILING
                A. EPA's Rationale for the Emission Ceiling                 384
                B. EDF's Procedural Attack                                  386
                 1. Late Comments                                           387
                 2. Meetings                                                387
                C. Standard for Judicial Review of EPA Procedures           391
                D. Statutory Provisions Concerning Procedure                392
                E. Validity of EPA's Procedures During the the              396
                  Post-Comment Period
                 1. Written Comments Submitted During the Post-Comment      397
                  Period
                 2. Meetings Held with Individuals Outside EPA              400
                  (a) Intra-Executive Branch Meetings                       404
                  (b) Meetings Involving Alleged Congressional Pressure     408
VI.  CONCLUSION                                                              410
      APPENDIX                                                              411

Before ROBB, WALD and GINSBURG, Circuit Judges.

Opinion for the Court filed by Circuit Judge WALD.

Circuit Judge ROBB concurs in the result.

WALD, Circuit Judge:

This case concerns the extent to which new coal-fired steam generators that produce electricity must control their emissions of sulfur dioxide and particulate matter into the air. In June of 1979 EPA revised the regulations called "new source performance standards" ("NSPS" or "standards") governing emission control by coal burning power plants. On this appeal we consider challenges to the revised NSPS brought by environmental groups which contend that the standards are too lax and by electric utilities which contend that the standards are too rigorous. Together these petitioners present an array of statutory, substantive, and procedural grounds for overturning the challenged standards. For the reasons stated below, we hold that EPA did not exceed its statutory authority under the Clean Air Act1 in promulgating the NSPS, and we decline to set aside the standards.

The Clean Air Act provides for direct federal regulation of emissions from new stationary sources of air pollution by authorizing EPA to set performance standards for significant sources of air pollution which may be reasonably anticipated to endanger public health or welfare.2 In June 1979 EPA promulgated the NSPS involved in this case.3 The new standards increase pollution controls for new coal-fired electric power plants⁴ by tightening restrictions on emissions of sulfur dioxide and particulate matter.⁵ Sulfur dioxide emissions are limited to a maximum of 1.2 lbs./MBtu⁶ (or 520 ng/j)⁷ and a 90 percent reduction of potential uncontrolled sulfur dioxide emissions is required except when emissions to the atmosphere are less than 0.60 lbs./MBtu (or 260 ng/j). When sulfur dioxide emissions are less than 0.60 lbs./MBtu potential emissions must be reduced by no less than 70 percent. In addition, emissions of particulate matter are limited to 0.03 lbs./MBtu (or 13 ng/j).

Petitioners in this case are Sierra Club and the State of California Air Resources Board ("CARB"), which oppose the variable 70 to 90 percent reduction requirement of the NSPS; Appalachian Power Co. ("APCO"), et al., a group comprised of APCO, the Edison Electric Institute, the National Rural Electric Cooperative Association, and 86 individual utilities ("Electric Utilities"), which challenge both the maximum 90 percent reduction requirement and the 0.03 lbs./MBtu limit on emissions of particulate matter; and, the Environmental Defense Fund ("EDF"), which challenges the 1.2 lbs./MBtu ceiling imposed by the NSPS.

Intervenor-respondents filing briefs in these consolidated actions are the Electric Utilities and the Missouri Association of Municipal Utilities ("MAMU"), aligned in favor of both the variable percentage reduction standard and the 1.2 lbs./MBtu emissions ceiling; and the National Coal Association ("NCA"), which opposes EDF's claim that the 1.2 lbs./MBtu ceiling is invalid due to procedural impropriety.

Respondents are the United States Environmental Protection Agency ("EPA") and its Administrator, Douglas M. Costle.

The importance of the challenged standards arises not only from the magnitude of the environmental and health interests involved, but also from the critical implications the new pollution controls have for the economy at the local and national levels. Further heightening the significance of this controversy is the crucial role coal burning power plants are expected to play in our nation's effort to cope with the problems associated with energy scarcity.⁸

Coal is the dominant fuel used for generating electricity in the United States.⁹ When coal is burned, it releases sulfur dioxide and particulate matter into the atmosphere. At the very least these pollutants are known to cause or contribute to respiratory illnesses.¹⁰ In 1975 alone electric power plants emitted 18.6 million tons of sulfur dioxide. If the former NSPS had not been changed the total annual national sulfur dioxide emissions could have exceeded 23 million tons by 1995: a 27 percent increase.¹¹ The increase in emissions which could be expected if the former standards continued in effect would be more dramatic on a regional basis. For example, utility sulfur dioxide emissions could be expected to increase 1300 percent by 1995 in the West South Central region of the country (Texas, Oklahoma, Arkansas, and Louisiana).¹² In 1976 power plant emissions accounted for 64 percent of the total estimated sulfur dioxide emissions and 24 percent of the total estimated particulate matter emissions in the entire country.¹³

EPA's revised NSPS are designed to curtail these emissions. EPA predicts that the new standards would reduce national sulfur dioxide emissions from new plants by 50 percent and national particulate matter emissions by 70 percent by 1995.¹⁴ The cost of the new controls, however, is substantial. EPA estimates that utilities will have to spend tens of billions of dollars by 1995 on pollution control under the new NSPS.¹⁵ Consumers will ultimately bear these costs, both directly in the form of residential utility bills, and indirectly in the form of higher consumer prices due to increased energy costs.¹⁶ Coinciding with these trends the utility industry is expected to have continued and significant growth. Under the new NSPS EPA projects that overall utility capacity should increase by about 50 percent with approximately 300 new fossil-fuel fired power plants to begin operation within the next ten years.¹⁷ And approximately 350 new plants (capable of generating 250 Gigawatts ("GW")) are expected to be constructed by 1995.¹⁸ Present levels of national coal production and consumption will triple by 1995.¹⁹ With oil scarce, the future of nuclear and solar energy uncertain, and hydro limited, "the nation's rich and cheap coal reserves call for exploitation."²⁰ Not surprisingly, coal burning power plants' already preeminent share of electric power produced in the United States will grow over the remainder of this century.²¹

While the volume and technical complexity of the material necessary for our review is daunting,²² we have endeavored to consider thoroughly the claims and myriad arguments proffered by the parties. We will discuss the basis of our decision on the principal challenges of the parties. We will not attempt, however, to discuss each and every point briefed, nor do we feel compelled to adhere religiously to the analytic framework devised by the parties.

In 1970 Congress for the first time authorized the federal government to set performance standards limiting emissions from newly built or modified sources of air pollution.²³ These sources to be controlled were those that EPA determined emitted pollution contributing substantially to the endangerment of the public health or welfare.²⁴ EPA decided that large coal-fired generators fell within that category.²⁵ In December 1971 EPA issued a NSPS for these sources.²⁶ That first NSPS applied to units capable of firing more than 250 MBtu per hour, and limited sulfur dioxide emissions to 1.2 lbs./ MBtu and particulate matter emissions to 0.10 lbs./MBtu.²⁷ Under this standard it was possible to satisfy the emission limitations simply by burning coal with a low sulfur content.²⁸

In 1976 the Sierra Club and the Oljato and Red Mesa Chapters of the Navajo Tribe petitioned EPA to revise the NSPS so as to require a 90 percent reduction in sulfur dioxide emissions.²⁹ The petition claimed that advances in technology since 1971 justified a revision of the standard. In response to the petition EPA began an investigation of whether the standard should be changed.³⁰

While EPA's decision was pending the Clean Air Act Amendments of 1977 were signed into law. Section 111 of the amendments, discussed more fully below, required EPA to revise the standards of performance for electric power plants within one year after the August 1977 enactment date.³¹ When it appeared that EPA would not meet this deadline, the Sierra Club filed a complaint in the District Court for the District of Columbia. The court approved a stipulation requiring the proposed regulations to issue in September 1978, and promulgation of final regulations within six months after the proposal. Eventually, after further delay, the final NSPS were promulgated in June 1979.³²

Several parties petitioned EPA for reconsideration of the revised NSPS. In February of 1980 EPA denied all the petitions for reconsideration.³³

The present appeal followed. Petitions for review of the NSPS were filed in this court by the Electric Utilities (No. 79-1719), Sierra Club (No. 79-1565), EDF (No. 79-1874), and CARB (No. 79-1867). In addition, petitions to review EPA's denial of the requests for reconsideration of the final NSPS were filed by the Electric Utilities (No. 80-1187), Sierra Club (No. 80-1201), EDF (No. 80-1213), and CARB (No. 80-1338). All of these cases have been consolidated.

We have already noted that the final NSPS adopted by EPA include an optional variable percentage reduction standard. Under this optional standard a utility plant can permissibly reduce its sulfur dioxide emissions by less than 90 percent of potential uncontrolled emissions if the amount of sulfur dioxide emitted following the use of pollution control technology is less than 0.60 lbs./MBtu.³⁴ In no instance, however, can a plant reduce emissions by less than 70 percent of potential uncontrolled emissions.³⁵ As a result of this option, the NSPS requirements for percentage reduction of sulfur dioxide removal vary on a sliding scale ranging from a minimum of 70 percent to a maximum of 90 percent.³⁶ There is no dispute that the 70 percent floor in the standard necessarily means that, given the present state of pollution control technology, utilities will have to employ some form of flue gas desulfurization ("FGD" or "scrubbing") technology.³⁷

Sierra Club contests EPA's authority under section 111 of the Act to vary from a uniform national percentage reduction standard ("uniform standard" or "full control")³⁸ and the reasonableness of EPA's justification for doing so in light of the administrative record.³⁹ Additionally, Sierra Club argues that the variable standard is fatally flawed and must be set aside regardless of supporting evidence on the record because the rulemaking was procedurally defective.⁴⁰ The procedural objections to the variable control component of the NSPS stem from Sierra Club's assertion that EPA did not give adequate notice of the basis for the variable standard or provide sufficient opportunity for adversarial comment on the agency's purported justification for the rule. We turn to the question of EPA's statutory authority first.

A. EPA's Authority Under Section 111 to Issue A Variable Standard

Sierra Club's challenge to variable control raises the fundamental issue of whether EPA violated section 111 of the Clean Air Act by establishing a sliding scale for the reduction of sulfur dioxide emissions based on the sulfur content of coal burned in new utility plants. We find that section 111 of the Act authorizes such a variable standard.⁴¹

To evaluate the competing interpretations of section 111 we turn first to its text.⁴² Initially we find that the language of section 111 neither imposes a single, nationally uniform, percentage reduction standard nor prohibits EPA from varying the standard. Rather, section 111 merely requires inter alia :

(T)he achievement of a percentage reduction in the emissions from such category of sources (like new coal burning utility plants) from the emissions which would have resulted from the use of fuels which are not subject to treatment prior to combustion....⁴³

The absence of any express mandate in this language to adhere to a single percentage reduction standard critically undercuts Sierra Club's arguments that EPA could not vary the standard below the level which is technologically feasible.

In fact, EPA is expressly authorized by section 111 to "distinguish among classes, types and sizes within categories of new sources for the purpose of establishing ... standards."44 Thus, the statute provides on its face that EPA does not have to set a uniform percentage reduction requirement for an entire category of emission sources. On the basis of this language alone, it would seem presumptively reasonable for EPA to set different percentage reduction standards for utility plants that burn coal of varying sulfur content.45 Certainly the text of the statute nowhere forbids a distinction based on sulfur content.

Other provisions of section 111 also belie the notion that EPA lacks discretion to vary the percentage reduction requirement according to the sulfur content of coal. For example, section 111(a) explicitly instructs EPA to balance multiple concerns when promulgating a NSPS:

(A) standard of performance shall reflect the degree of emission limitation and the percentage reduction achievable through application of the best technological system of continuous emission reduction which (taking into consideration the cost of achieving such emission reduction, any nonair quality health and environmental impact and energy requirements) the Administrator determines has been adequately demonstrated.⁴⁶

(Emphasis supplied.) Having given EPA this mandate, Congress surely could not have meant to bind the agency to issuance of a uniform standard even though the agency's balancing of cost, energy, and nonair quality health and environmental factors indicated that the percentage standard should vary according to the sulfur content of coal.

Furthermore, reading section 111 to permit a variable standard based on the sulfur content of coal comports with common sense which suggests that the amount of sulfur in coal is the most relevant factor in designing standards to reduce emissions of sulfur in the gaseous wastes of coal combustion. Quite obviously, the "best technological system," considering cost, energy, and nonair health and environmental factors may well vary depending on the sulfur content of the coal that is burned.

Sierra Club relies on portions of the legislative history of the 1977 Amendments to the Clean Air Act to demonstrate that, no matter how logical it may seem to permit the percentage reduction standard to vary according to the sulfur content of coal burned by utilities, Congress nevertheless meant to forbid such variable control levels. But the statements in the legislative history Sierra Club cites to us, even assuming that they are entitled to substantial weight in the face of a relatively clear text, do not adequately support Sierra Club's interpretation of the Act.

We note initially that a specific percentage reduction requirement was added to the text of section 111 only by the Conference Committee after the bills had passed both Houses of Congress.⁴⁷ The Conference Committee Report explaining the requirement clearly contemplated the adoption of a variable standard:

(T)he Conferees agreed that the Administrator may, in his discretion, set a range of pollutant reduction that reflects varying fuel characteristics. Any departure from the uniform national percentage reduction requirement, however, must be accompanied by a finding that such a departure does not undermine the basic purposes of the House provision and the other provisions of the act, such as maximizing the use of locally available fuel.⁴⁸

(Emphasis supplied.) Subsequently, during the House consideration of the Report the Conference Committee submitted a "Clarifying Statement" which stated that it was only fuel characteristics that could justify a departure from uniform control:

While the Conferees agreed that the Administrator may set the percentage reduction requirement as a percentage range, the Conferees expect the Administrator to be exceedingly cautious if he should elect to do so. Any such range of percent reduction would be allowed only to reflect varying fuel characteristics, and must be based on a carefully and completely documented finding by the Administrator that such departure from the strict requirement does not undermine the basic purposes of the House provision as expressed on pages 183 through 195 of the House Report number 95-294.⁴⁹

(Emphasis supplied.) Similarly, Senate consideration of the Report included a Clarifying Statement by Senator Muskie, that recognized a variable range of percentage reduction was permissible:

EPA's Administrator is given the flexibility to set a range of pollutant removal based on varying fuel characteristics if he finds that the NSPS objectives (of the Act) are not undermined.⁵⁰

(Emphasis supplied.)

Even in the face of this legislative history, however, Sierra Club contends that "it is crystal clear that sulfur content of coal was not to be one of the 'varying fuel characteristics' which would justify a departure from a uniform standard."⁵¹ We are frankly at a loss to understand this statement. Neither the remarks of Representative Rogers, the House manager,⁵² nor Senator Muskie, the Senate manager,⁵³ when introducing the Conference Committee Reports to their respective Houses, supports Sierra Club's narrow interpretation of the phrase "fuel characteristic" to exclude sulfur content. Sierra Club relies on Senator Domenici's "additional statement" submitted after the close of the floor debate on the Senate version of the bill (S. 252) before the bill went to Conference which reads in part:

The House amendments to the Clean Air Act (H.R. 6161) contain a provision section 111 that effectively requires all new coal-fired powerplants to meet the same percentage reduction of pollution removal on new powerplants regardless of the sulfur content of the coal burned. Any doubts on this matter are dispelled by the explicit report language.⁵⁴

(Emphasis supplied.) When read in context, however, it is clear that Senator Domenici was arguing that the Senate should not acquiesce in Conference to any demand for a uniform percentage reduction applied to all coals which he believed was implied in the House bill. Sierra Club's reliance on this statement is misplaced because the statement was made before the Conference Committee met at a time when neither the House nor the Senate bill contained any express provision for a percentage reduction. In fact, Senator Domenici's views opposing a uniform standard based on sulfur content can be viewed as a motivating factor in the Conference Committee's adoption of a more flexible standard in the final bill that allowed such a variation.⁵⁵ Nothing else in the legislative history comes close to a directive that sulfur content is not a relevant fuel characteristic for setting a variable standard.⁵⁶

Sierra Club also argues that even if section 111 permits the standard to vary depending on the sulfur content of coal, its language was designed to permit a nonuniform standard only in the limited circumstance where a "best technological system" could not achieve the national percentage on certain types of coal. That is, EPA could vary the standard only to reflect the different maximum feasible percentage reductions achievable for different sulfur content coals. Under this view EPA could not relax the standard when a higher percentage reduction is technologically feasible. Thus, in this case because it is not disputed that wet scrubbing could achieve 90 percent reduction on low sulfur coal, EPA has no authority to vary the standard below the 90 percent level.

We do not believe that this interpretation of section 111 is warranted by a fair reading of the Act or the underlying legislative history. The text gives EPA broad discretion to weigh different factors in setting the standard. The legislative history indicates that EPA should be "exceedingly cautious" in allowing the standard to vary, but nevertheless, recognizes that such a determination is within the range of EPA's discretion.⁵⁷ The required finding that must underlie a variable standard is much broader than a mere determination that uniformity is not achievable. Rather, EPA has the discretion to vary the standard upon finding "that such a departure (from uniform control) does not undermine the basic purposes of the Act."⁵⁸ Here EPA has made such a finding. While the reasonableness of this finding is challenged on this appeal and will be reviewed below,⁵⁹ here it cannot be said that in making the determination EPA acted beyond its statutory authority.⁶⁰

In addition to its arguments about the proper interpretation of section 111, Sierra Club maintains that variable control violates the total statutory scheme of the Clean Air Act because it is irreconcilable with other important features of the 1977 Amendments to the Act.⁶¹ In particular, Sierra Club contends that variable control is inherently inconsistent with the provisions in the Act designed to prevent the deterioration of air quality⁶² and visibility⁶³ in designated areas, primarily in the Southwest. EPA responds first that, in fact, the variable standard is consistent with the other programs established by the Clean Air Act. This argument is grounded in the extensive regulatory analysis performed by EPA which showed that variable control served the interests of air quality and visibility as well as any uniform standard. We save for later our review of the legitimacy of that regulatory analysis and the reasonableness of EPA's conclusion that the variable standard actually promotes improved air quality and visibility.⁶⁴ At this point, we note that if its analysis is reasonable, then EPA is right and the variable standard does not conflict with other goals. Second, EPA argues convincingly that the variable standard does not infringe the other special programs of the Act, even if variable control would result in some decreases in air quality and visibility in certain parts of the country. This is because the NSPS authorized in section 111(a) are but one of many Clean Air Act requirements that might be applied by EPA or state agencies to new plants.⁶⁵ To the extent that there are localized problems with air quality and visibility under national NSPS, the Act permits more stringent requirements to be applied in problem areas in addition to the NSPS. Thus, accepting arguendo Sierra Club's view of the facts that the new NSPS would not foster air quality and visibility in certain specially protected areas it still cannot be held as a matter of law that the standard must fail because it impedes the other statutory mechanisms for coping with these local problems.

We find, in sum, that EPA has the authority under section 111 of the Act to promulgate the variable standard and now turn to a consideration of whether EPA's decision to adopt the variable standard was reasonable and supported by the record.

B. The Reasonableness of EPA's Decision to Issue a Variable Standard

In reviewing the merits of EPA's variable standard, our function is to ensure that "the agency, given an essentially legislative task to perform, has carried it out in a manner calculated to negate the dangers of arbitrariness and irrationality in the formulation of rules ... for the future."⁶⁶ If we find EPA's choice of variable control to be arbitrary and capricious then we will set the standard aside.⁶⁷ We do not consider the policy issues de novo, substituting our judgment for that of the agency, but evaluate whether the agency has exercised reasoned discretion. This means that the agency must consider all of the relevant factors and demonstrate a reasonable connection between the facts on the record and the resulting policy choice.⁶⁸

The controversy over EPA's justification for variable control centers on two processes for flue gas desulfurization ("FGD" or "scrubbing") referred to by the parties as wet scrubbing and dry scrubbing.⁶⁹ Scrubbing, in contrast to other techniques for reduction of sulfur emission from coal combustion,⁷⁰ involves the maintenance of a large scale chemical reaction to clean the smoke produced by coal combustion.⁷¹ Typically, as exhaust gases flow up a power plant smokestack, they are exposed to an absorbent medium that is sprayed in their path. Sulfur dioxide in the gas reacts with the chemical absorbent and takes a form which can be collected and removed from the exhaust.⁷²

The type of wet scrubbing process relied on by EPA during this rulemaking was a "properly designed, installed, operated and maintained" lime or limestone FGD system.⁷³ This wet scrubbing system requires that large quantities of lime or ground limestone be mixed with water to form a slurry. The slurry is sprayed into flue gas and absorbs sulfur dioxide which reacts with the slurry to form precipitates (predominantly calcium sulfite and calcium sulfate), which are in turn removed, dewatered, and disposed of in the form of sludge.⁷⁴ A simplified flow diagram of a wet lime/limestone system is shown as Figure 1 in the appendix to this opinion.

Dry scrubbing is a newer and relatively less established technological alternative to wet lime/limestone scrubbing systems.⁷⁵ Interest in developing dry scrubbing has been stimulated by perceived advantages over wet scrubbing.⁷⁶ The dry scrubbing design which EPA focused on during the rulemaking⁷⁷ removes sulfur dioxide in two stages which incorporate the use of a spray dryer and a baghouse.⁷⁸ In this system a spray dryer (similar to a wet scrubber) is used with lime, soda ash, or other reagents to scrub sulfur dioxide from flue gases. Unlike wet scrubbing systems, since the flue gas leaving the spray dryer is "hot" (150-180o F) due to the minimal use of water in the spray dryer (by design), no additional reheating of the exhaust plume is required.⁷⁹ Following the spray dryer, a baghouse is used to collect all particulate matter (including sulfur dioxide reactants).⁸⁰ Simplified flow diagrams of typical dry scrubbers are shown as Figures 2 and 3 in the appendix to this opinion.

2. EPA's Explanation for the Variable Standard

(a) The Factors Considered By EPA

While the parties dispute the proper analytic method for balancing the relevant factors, they agree, with one exception, on the factors themselves which are relevant to EPA's decision to issue the variable standard. These factors are enumerated in section 111 of the Act and in the legislative history.

Section 111(a)(1), as revised in 1977, requires EPA to weigh cost, energy, and nonair quality health and environmental factors in setting a percentage reduction standard achievable by the best technological system of continuous emission reduction.⁸¹ During its passage through Congress the Conferees issued a clarifying statement that EPA may promulgate a variable percentage reduction standard so long as the agency determines that the standard does not undermine the essential purposes of the Act.⁸² The parties agree that these purposes are as follows:

1. The standards must not give a competitive advantage to one State over another in attracting industry.

2. The standards must maximize the potential for long-term economic growth by reducing emissions as much as practicable. This would increase the amount of industrial growth possible within the limits set by the air quality standards.

3. The standards must to the extent practical force the installation of all the control technology that will ever be necessary on new plants at the time of construction when it is cheaper to install, thereby minimizing the need for retrofit in the future when air quality standards begin to set limits to growth.

4 and 5. The standards to the extent practical must force new sources to burn high-sulfur fuel thus freeing low-sulfur fuel for use in existing sources where it is harder to control emissions and where low-sulfur fuel is needed for compliance. This will (1) allow old sources to operate longer and (2) expand environmentally acceptable energy supplies.

6. The standards should be stringent in order to force the development of improved technology.⁸³

Sierra Club objects that EPA also took account of the impact of alternative standards on future national levels of sulfur dioxide emissions. Paradoxically, Sierra Club argues that "EPA may not consider total air emissions in deciding on a proper NSPS."⁸⁴ Sierra Club reasons that by specifying only nonair quality health environmental considerations in section 111 Congress meant to exclude EPA's discretion to consider air quality effects of different standards.

We find this position untenable given that one of the agreed upon legislative purposes, set out above, requires that the standards must maximize the potential for long term economic growth "by reducing emissions as much as practicable."⁸⁵ (Emphasis supplied.) In any event, we can think of no sensible interpretation of the statutory words "best technological system" which would not incorporate the amount of air pollution as a relevant factor to be weighed when determining the optimal standard for controlling sulfur dioxide emissions. Control technologies cannot be "best" if they create greater problems than they solve.⁸⁶ In fact, we do not see how we could uphold a variable standard if EPA had not evaluated its effect on air emissions.

(b) EPA's Regulatory Analysis

EPA performed a regulatory analysis in three phases to evaluate alternative standards. Phase one of the analysis began before EPA published its proposed standards. Prior to framing alternative standards for consideration, EPA evaluated different control technologies in terms of performance, costs, energy requirements and environmental impacts. EPA also performed a preliminary study of these factors at the national, regional and plantsite levels and toward this end employed econometric computer models to forecast the nature of the utility industry in future years. The initial modeling effort was completed in April 1978 and revised in August 1978.

After this preliminary analysis EPA proposed a uniform 85 percent reduction standard while reserving judgment on whether the uniform percentage reduction standard was preferable to several alternative standards. EPA announced that the final decision would await additional analysis and public comment on the proposal.⁸⁷ At that time the agency also announced that five methods of "wet" scrubbing were adequately demonstrated and that these technologies could all attain the proposed 85 percent limitation.⁸⁸ The ensuing rulemaking thus focused not on which technology should be employed, but on the appropriate level of control.⁸⁹

The regulatory analysis entered phase two following the September 1978 proposal. EPA conducted additional analyses of the impacts of alternative sulfur dioxide standards. The impacts analyzed included total air emissions, utility investment in new plant and pollution equipment, consumer costs, energy production and consumption, coal use, utility consumption of oil and natural gas, and the amount of western low sulfur coal shipped East.⁹⁰ In addition, supplementary analyses were performed to assess the impact of alternative emission ceilings on specific regional coal reserves, to verify the performance characteristics of alternative scrubbing technologies, and to assess the sulfur reduction potential of coal preparation techniques. As part of the phase two analysis, a joint working group comprised of representatives from EPA, the Department of Energy, the Council of Economic Advisors, the Council on Wage and Price Stability, and others reviewed the underlying assumptions of the econometric model used in the August 1978 analysis and worked to develop new standards for testing in the computer model. As a result of the joint working group's efforts some assumptions were changed⁹¹ and a number of alternative standards were defined and considered.⁹² During phase two EPA also considered public comments on the proposal, identified critical parameters of uncertainty in the model, and revised the model so as to incorporate new considerations such as credits for coal washing which previously had not been properly accounted for in the model. The results of the phase two analysis were published⁹³ and discussed at a public hearing in December 1978.⁹⁴

Phase three of EPA's regulatory analysis occurred after the public hearing and after the close of the formal comment period on the proposed NSPS. This third stage featured for the first time EPA's formal consideration through its computer model of the impacts of dry scrubbing technology, a subject which will be discussed at length below.⁹⁵ During phase three the model was run to forecast the impacts of each potential standard, first assuming the use of wet scrubbers only, and then assuming that utilities would use dry scrubbers in situations where it was economically and technologically feasible to do so.⁹⁶ EPA obtained separate results under the alternative wet scrubbing and dry scrubbing assumptions.⁹⁷ In brief, the phase three modeling analysis indicated that "(t)he variable control option produces emissions that are equal to or lower than the other options under both the wet scrubbing and dry scrubbing assumptions." Further, under the wet and dry assumptions, variable control as compared to uniform control was predicted to result in more coal capacity in newer and "cleaner" utility plants, to have a clear cost advantage, to use less oil, and to have an equivalent impact on coal production.⁹⁸

(c) EPA's Stated Rationale for the Variable Standard

EPA's explanation for the adoption of the variable standard is contained in a long preamble accompanying the publication of the final NSPS.⁹⁹ EPA stated that comments received from advocates of variable control supported a departure from uniform control principally on the basis that variable control "best satisfies the statutory language of Section 111 because it would achieve virtually the same emission reductions at a national level as a uniform approach but at substantially lower costs."¹⁰⁰ "In addition (the commentators) argue that a variable control option would provide a better opportunity for the development of ... dry SO 2 control systems which they felt held considerable promise for bringing about SO 2 emission reductions at lower costs and in a more reliable manner."¹⁰¹ These comments, EPA explained, were the impetus for the phase three modeling analysis. EPA concluded that the results of this further analysis, as reported in the preamble and scrutinized below,¹⁰² demonstrated that the variable control option was best. EPA justified the variable standard in terms of the policies of the Act as follows:

The standard reflects a balance in environmental, economic, and energy consideration by being sufficiently stringent to bring about substantial reductions in SO 2 emissions (3 million tons in 1995) yet does so at reasonable costs without significant energy penalties. When compared to a uniform 90 percent reduction, the standard achieves the same emission reductions at the national level. More importantly, by providing an opportunity for full development of dry SO 2 technology the standard offers potential for further emission reductions (100 to 200 thousand tons per year), cost savings (over $1 billion per year), and a reduction in oil consumption (200 thousand barrels per day) when compared to a uniform standard. The standard through its balance and recognition of varying coal characteristics, serves to expand environmentally acceptable energy supplies without conveying a competitive advantage to any one coal producing region. The maintenance of the emission limitation at 520 ng/J (1.2 lb SO 2 million Btu) will serve to encourage the use of locally available high-sulfur coals. By providing for a range of percent reductions, the standard offers flexibility in regard to burning of intermediate sulfur content coals. By placing a minimum requirement of 70 percent on low-sulfur coals, the final rule encourages the full development and application of dry SO 2 control systems on a range of coals. At the same time, the minimum requirement is sufficiently stringent to reduce the amount of low-sulfur coal that moves eastward when compared to the current standard. Admittedly, a uniform 90 percent requirement would reduce such movements further, but in the Administrator's opinion, such gains would be of marginal value when compared to expected increases in high-sulfur coal production. By achieving a balanced coal demand within the utility sector and by promoting the development of less expensive SO 2 control technology, the final standard will expand environmentally acceptable energy supplies to existing power plants and industrial sources.

By substantially reducing SO 2 emissions, the standard will enhance the potential for long term economic growth at both the national and regional levels. While more restrictive requirements may have resulted in marginal air quality improvements locally, their higher costs may well have served to retard rather than promote air quality improvement nationally by delaying the retirement of older, poorly controlled plants.

The standard must also be viewed within the broad context of the Clean Air Act Amendments of 1977. It serves as a minimum requirement for both prevention of significant deterioration and non-attainment considerations. When warranted by local conditions, ample authority exists to impose more restrictive requirements through the case-by-case new source review process. When exercised in conjunction with the standard, these authorities will assure that our pristine areas and national parks are adequately protected. Similarly, in those areas where the attainment and maintenance of the ambient air quality standard is threatened, more restrictive requirements will be imposed.¹⁰³

Sierra Club insists that EPA's conclusions about dry scrubbing technology are in effect the "cornerstone" of the variable standard. Therefore, Sierra Club argues, the standard must be judged solely on the basis of the validity of EPA's so-called dry scrubbing rationale. We do not agree and believe that it is appropriate to focus on the statutory, substantive, and procedural issues surrounding the dry scrubbing controversy in a later section of this opinion. For now we address Sierra Club's challenges to the standard which are independent of the questions raised about the role of dry scrubbing in the outcome of the final rule.

3. An Examination of EPA's Rationale for the Variable Standard

Sierra Club challenges both EPA's findings about the relative national and regional impacts of alternative standards and the conclusions the agency drew from these findings. First, Sierra Club raises a number of overlapping arguments in support of its view that the findings themselves are methodologically defective. Sierra Club's position, as we understand it, is that the findings cannot amount to substantial evidence because the agency's regulatory analysis which generated the findings was ill-conceived and impermissible under the Act. Specifically, Sierra Club objects to the conceptual framework by which EPA took account of the cost, energy, and environmental considerations mandated by section 111 of the Act. In addition, Sierra Club asserts that the econometric model employed by EPA was so speculative and otherwise unreliable that the modeling results are not substantial evidence. Finally, even accepting EPA's findings, Sierra Club contests EPA's judgment that the variable standard promotes the objectives of the Act. We address these questions seriatim.

(a) The Legitimacy of EPA's Regulatory Analysis

(1) EPA's Authority to Analyze Long Term National and Regional Impacts

Sierra Club argues that section 111 only allows EPA to weigh the cost, energy, and nonair quality health and environmental impacts specified in the statute in order to identify the "best technology." Once that technology is selected, according to Sierra Club, the standard must be set at whatever level is "achievable" by such technology, i. e., the maximum technologically feasible level of control. In this case, since EPA designated wet scrubbing as the technology of choice, the standard must be set at the maximum control level achievable by wet scrubbing. Sierra Club maintains that the kind of macrobalancing EPA has performed has already been done by Congress, and that Congress decided, as reflected in the language of section 111, to require the fullest degree of control that is achievable by the "best technological system" in this case, a uniform reduction standard of at least 90 percent. The only comparison of aggregate impacts by EPA which Sierra Club believes would have been legitimate under section 111 is a comparison between the impacts of full scrubbing low sulfur coal and the impacts of full scrubbing high sulfur coal. Since there is no doubt that wet scrubbing low sulfur coal is more economical, uses less energy and has fewer other detrimental consequences than wet scrubbing high sulfur coal, Sierra Club argues that this comparison, if anything, demonstrates that the percentage reduction standard should be higher for low sulfur coal than for high sulfur coal. Sierra Club also objects that EPA improperly projected long range future impacts of alternative standards and "insists that the only factors which may be considered by EPA are the technological, economic, environmental, and energy impacts of presently existing technology."¹⁰⁴

We reject Sierra Club's restrictive reading of the balancing exercise mandated by section 111 as too narrow to accomplish the purposes of the Act. This is so for several reasons.

1. Sierra Club's interpretation of section 111 is internally inconsistent. Sierra Club would permit EPA to consider the enumerated statutory factors only for the purpose of defining the best technology. This exercise, however, would necessarily involve evaluating the cost, energy, and environmental impacts of different technological systems not in the abstract but at some given level of operation. Thus, even the limited determination that Sierra Club would allow EPA to make would logically involve determining at what level a particular control system was "best" in terms of cost, environment, and energy. And so Sierra Club's argument that section 111 requires the standard to be set at 90 percent or higher in the case of wet scrubbing (if technologically achievable) would not follow if wet scrubbing at 85 percent removal efficiency was the "best" in terms of the statutory factors. In short, there is simply no way to set the standard at the level of maximum technological feasibility while simultaneously responding to the cost, energy, and environmental concerns that Congress wrote upon the face of the statute.

2. The language of section 111 not only authorizes variable control but also gives EPA authority when determining the best technological system to weigh cost, energy, and environmental impacts in the broadest sense at the national and regional levels and over time as opposed to simply at the plant level in the immediate present.¹⁰⁵ The pertinent portion of section 111 reads:

(A) standard of performance shall reflect the degree of emission limitation and the percentage reduction achievable through application of the best technological system of continuous emission reduction which (taking into consideration the cost of achieving such emission reduction, any nonair quality health and environmental impact and energy requirements) the Administrator determines has been adequately demonstrated.¹⁰⁶

The extraordinary clumsiness of the phrasing of this section does not ease our task of interpretation. Nevertheless, we believe it is clear that this language is far different from the words Congress would have chosen to mandate that EPA set standards at the maximum degree of pollution control technologically achievable. Parsed, section 111 most reasonably seems to require that EPA identify the emission levels that are "achievable" with "adequately demonstrated technology." After EPA makes this determination, it must exercise its discretion to choose an achievable emission level which represents the best balance of economic, environmental, and energy considerations. It follows that to exercise this discretion EPA must examine the effects of technology on the grand scale in order to decide which level of control is best. For example, an efficient water intensive technology capable of 95 percent removal efficiency might be "best" in the East where water is plentiful, but environmentally disastrous in the water-scarce West where a different technology, capable of only 80 percent reduction efficiency might be "best." We cannot believe that Congress meant for EPA to ignore such future aggregate impacts of alternative standards. The standard is, after all, a national standard with long-term effects.

It seems likely that if Congress meant to require a monolithic standard and to curtail EPA's discretion to weigh various policy considerations it would have explicitly said so in section 111, as it did in other parts of the statute. For instance, in prescribing standards for areas that have not succeeded in meeting national ambient air quality standards ("nonattainment areas") Congress required that the standard be the "lowest achievable emission rate," and stressed that cost factors, while still cognizable, were not to play as important a role as they do in selecting the "best" system under section 111.¹⁰⁷

3. In addition, when section 111 was amended in 1977 Congress did not narrow EPA's discretion to perform broad based analysis of potential impacts of a standard, even though Congress was aware that previous administrative and judicial interpretations of the former version of section 111 permitted the assessment of the long term costs to industry, consumers, and the environment.¹⁰⁸ In Essex Chemical Corp. v. EPA,¹⁰⁹ and in Portland Cement Co. v. EPA¹¹⁰ this court specifically endorsed a broad interpretation of "costs" when it held that section 111 did not require a National Environmental Policy Act impact statement. Essential to the court's reasoning was the understanding that "section 111 of the Clean Air Act, properly construed, requires the functional equivalent of a NEPA impact statement."¹¹¹ The court explained:

The standard of the "best system" is comprehensive, and we cannot imagine that Congress intended that "best" could apply to a system which did more damage to water than it prevented to air.¹¹²

Largely as a result of Portland Cement, the "cost" considerations of former section 111 were specifically supplemented by Congress in the 1977 Amendments to cover considerations of nonair quality health and environmental impacts and energy requirements. In so doing, Congress made no attempt to cut back on EPA's ability to apply the new terms broadly nor did Congress reduce the range of discretion that had been read previously into the "cost" factor.

4. The legislative history clearly supports our reading of amended section 111 as authorizing EPA to balance long term national and regional impacts of alternative standards. The Conferees defined the best technology in terms of "long-term growth," "long-term cost savings," effects on the "coal market," including prices and utilization of coal reserves, and "incentives for improved technology."¹¹³ Indeed, the Reports from both Houses on the Senate and House bills illustrate very clearly that Congress itself was using a long-term lens with a broad focus on future costs, environmental and energy effects of different technological systems when it discussed section 111.¹¹⁴

5. Broad analysis of alternative standards promotes the several purposes of the Act articulated in the legislative history which Sierra Club recognizes are relevant to the decision to adopt the variable standard. In stating those purposes, Congress indicated that it wanted assurances from EPA that the new standards would not exacerbate existing problems, e. g., produce adverse effects on the coal market, impediments to long term growth, and inhibition of technological innovation. Congress could not have expected such complex interconnecting goals to be satisfied or even approximated without affording EPA a great deal of elbow room to react to and plan for changing events. If EPA was to do as Sierra Club suggests, and set the standard according to the single factor of technological achievability then EPA could not even begin to intelligently balance the stated purposes of the Act.

6. Finally, it is sensible for EPA to assess the likely impacts of the NSPS in 1995 as opposed to an earlier time. Since the standard is only applicable to "new sources" the standard will not have a measurable effect until there are a significant number of new plants in operation. EPA found that this will not occur until 1995 and explained:

Beyond 1995, our data show that many of the power plants on line today will be approaching retirement age. As utilization of older capacity declines, demand will be picked up by newer, better controlled plants. As this replacement occurs, national SO 2 emissions will begin to decline. Based on this projection, the Administrator believes that the 1990-1995 time frame will represent the peak years for SO 2 emissions and is, therefore, the relevant time frame for this analysis.¹¹⁵

For all of these reasons we conclude that EPA was justified in relying on long term analysis of national and regional cost, environmental, and energy impacts of alternative percentage reduction standards in order to select the "best technological system" upon which to base the NSPS.

(2) The Reliability of EPA's Econometric Computer Model

We are more sympathetic to Sierra Club's complaint about the reliability of EPA's econometric model. Such models, despite their complex design and aura of scientific validity, are at best imperfect and subject to manipulation as EPA forthrightly recognizes.¹¹⁶ The results ultimately are shaped by the assumptions adopted at the outset, and can change drastically for a given range of input data if key assumptions are adjusted even slightly.¹¹⁷ The accuracy of the model's predictions also hinges on whether the underlying assumptions reflect reality, which is no small feat in this volatile world.¹¹⁸

Still we cannot agree with Sierra Club that it was improper for EPA to employ an econometric computer model, or hold as a matter of law that EPA erred by relying on the model to forecast the future impacts of alternative standards fifteen years hence.¹¹⁹

Realistically, computer modeling is a useful and often essential tool for performing the Herculean labors Congress imposed on EPA in the Clean Air Act. In addition to the competing objectives that EPA must satisfy under section 111, the Act explicitly requires EPA to prepare an Economic Impact Statement before promulgating NSPS. The assessment of potential impacts in this statement must be as "extensive as practicable" and must determine the potential inflationary or recessionary effects of the standard, the effects on competition, consumer costs, and energy use.¹²⁰ Given the complexity and magnitude of the analyses EPA must perform on economic impacts alone, computer modeling, for all its flaws, is invaluable.

Even absent such statutory requirements, we would deem it reasonable to use computer modeling, and to design the model to consider not just "present day" factors, but the consequences over time of the proposed agency action. In American Public Gas Ass'n v. FPC, a challenge was raised that the results of economic modeling, similar to that used here, did not rise to the level of "substantial evidence" necessary to support the agency's findings and conclusions.¹²¹ This court disagreed, stating that "(r)easoned decisionmaking can use an economic model to provide useful information about economic realities...."¹²² However, the agency must sufficiently explain the assumptions and methodology used in preparing the model; it must provide a "complete analytic defense of its model (and) respond to each objection with a reasoned presentation."¹²³ The technical complexity of the analysis does not relieve the agency of the burden to consider all relevant factors and to identify the stepping stones to its final decision. There must be a rational connection between the factual inputs, modeling assumptions, modeling results and conclusions drawn from these results.¹²⁴

In this case, the utility model itself and its key assumptions were discussed in the proposed rule and background documents.¹²⁵ EPA invited public comments on the model and its assumptions, with the agency recognizing the sensitivity of the model to a "few key initial assumptions." The joint interagency working group reviewed results of model runs, revised assumptions, and required new runs of the model when it was deemed appropriate. The principal comments received by EPA on the model and the initial assumptions were discussed, together with the results of the three phases of the modeling and the major post-proposal changes to the model, in the preamble to the final NSPS.¹²⁶ In reviewing this record on the use of the econometric model we have carefully examined, within the limits of our competence, EPA's explanation for the model's premises, the results, and the conclusions drawn therefrom to test them for internal consistency and reasonableness. Although EPA has the benefit of the presumption of good faith and regularity in agency action, we have attempted to ascertain whether the results have been improperly skewed by the modeling format. We conclude that EPA's reliance on its model did not exceed the bounds of its usefulness and that its conduct of the modeling exercise was proper in all respects. We are in fact reassured by EPA's own consciousness of the limits of its model,¹²⁷ and its invitation and response to public comment on all aspects of the model.¹²⁸ The safety valves in the use of such sophisticated methodology are the requirement of public exposure of the assumptions and data incorporated into the analysis and the acceptance and consideration of public comment,¹²⁹ the admission of uncertainties where they exist,¹³⁰ and the insistence that ultimate responsibility for the policy decision remains with the agency rather than the computer.¹³¹ With these precautions the tools of econometric computer analysis can intelligently broaden rather than constrain the policymaker's options and avoid the "artificial narrowing of options that (can be) arbitrary and capricious."¹³²

Sierra Club has not only challenged the use of the model itself, but has also questioned here, as it has throughout the rulemaking, some of the specific assumptions built into the model. In some instances EPA actually adjusted the model to account for Sierra Club's objections and demonstrated that the outcome of the final rule would not have changed. EPA did this, for example, by responding to Sierra Club's recommendations for changes in estimated oil prices and nuclear capacity. EPA's findings and conclusions after adopting Sierra Club's assumptions for future oil prices and nuclear capacity are detailed below.¹³³ The most critical assumptions Sierra Club still objects to are those concerning utility behavior which incorporate what it terms a "perverse hypothesis" that less stringent controls can result in lower total emissions. EPA answered that charge by explaining why variable control could promise equivalent or better reduction of emissions than the stricter full control option:

One finding that has been clearly demonstrated by the two years of analysis is that lower emission standards on new plants do not necessarily result in lower national SO 2 emissions when total emissions from the entire utility system are considered. There are two reasons for this finding. First, the lowest emissions tend to result from strategies that encourage the construction of new coal capacity. This capacity, almost regardless of the alternative analyzed, will be less polluting than the existing coal- or oil-fired capacity that it replaces. Second, the higher cost of operating the new capacity (due to higher pollution costs) may cause the newer, cleaner plants to be utilized less than they would be under a less stringent alternative. These situations are demonstrated by the analyses presented here.¹³⁴

The crucial assumption leading to these findings is that utilities are "cost minimizers."¹³⁵ The cost minimization assumption implies that when faced with a decision the utility will choose the low-cost option, if risks between the options are neutral. Under the cost minimization model the higher the costs of pollution controls required by the NSPS, the more utilities will delay the retirement of older plants which do not have to comply with the NSPS, and the more utilities will be discouraged from building and operating new plants which must meet the NSPS. Since uniform control is costlier than variable control, uniform control is expected to result in greater reliance on old plants and less utilization of new plants than will variable control, which in turn leads to higher emissions.¹³⁶ We see no basis for concluding that the adoption of this assumption about utility preferences constituted a clear error of judgment; indeed we are hard pressed to conjure up an alternative assumption about utility behavior that could be put into the computer model.¹³⁷

(b) The Reasonableness of EPA's Conclusions

(1) The Reasonableness of EPA's Conclusion That Variable

Control Reflects a Better Balance of the Section

111 Factors Than Uniform Control

According to EPA, the variable standard strikes the proper balance between environmental, economic, and energy considerations, whether or not wet scrubbing or dry scrubbing technology is used. We agree because the findings of EPA's regulatory analysis made under the assumption that wet scrubbing technology would be utilized, listed in Tables 2 through 5 from the preamble to the final rule (shown as Figures 5 through 8 in the appendix to this opinion), show clear advantages for adoption of the variable control option over the full control option favored by Sierra Club apart from any considerations as to the use or savings emanating from the emergent dry scrubbing technology.

Table 2 details EPA's projections for the national levels of sulfur dioxide emissions in 1995. The expected total national emissions for wet scrubbing under both variable control and full control are the same approximately 20.6 million tons. However, Table 2 reveals that variable control achieves this level of emission with greater utility plant capacity burning more coal, while at the same time generating less sludge. The total projected capacity of plants burning coal in 1995 is 533 GW for the variable control option and 521 GW for the full control option. Wet scrubbing at levels permitted by variable control will result in only 50 million tons of sludge while full control is predicted to generate 55 million tons.

Table 3 details projections of 1995 regional sulfur dioxide emissions. A comparison of the figures listed in Table 3 for wet scrubbing at the variable control and full control levels indicates that there are trade-offs of the different regional impacts of the two standards. The figures show that the East is better off under variable control while the West is better off under full control. With variable control the East will have 300,000 tons less emissions than under full control, but variable control will allow 200,000 tons more emissions in the West than would be experienced with full control in the West. The other two regions the Midwest and West South Central can expect roughly the same levels of emissions under either level of control.

Table 4 illustrates the effect of the proposed standards on 1995 coal production, western coal shipped East, and oil consumption by utilities. With regard to these energy impacts the comparative performance of variable control and full control is mixed. National coal production is expected to triple regardless of the level of the percentage reduction standard, from 647 million tons in 1975 to almost 1800 million tons by 1995. Although more western coal will be shipped East under variable control than under full control, 71 million tons versus 59 million tons, both levels of control will result in much lower shipments of coal eastward than the 122 million tons expected under the former standards. In addition, the local production of coal in the East will be slightly greater under variable control than under full control, 470 million tons versus 463 million tons, despite the fact that variable control will result in greater shipments of western coal to the East. Finally, variable control is estimated to involve consumption of 200,000 fewer barrels per day of oil than will full control.

Table 5 shows the expected economic impacts in 1995. Since, as has been noted, the model estimates greater plant capacity under variable control than under full control, the cost of this extra capacity makes the cumulative utility capital expenditures 6 billion dollars higher under variable control than under full control.

Capital expenditures are, however, only part of the overall cost under alternative standards. Annualized cost, for example, includes capital charges, fuel costs, and operation and maintenance costs associated with utility equipment including pollution control equipment. Table 5 lists annualized cost under different standards as increments over the cost which could be expected under the former standard. EPA projects that despite the greater capital costs, the annual cost of variable control will be half a billion dollars less than the annual cost of full control. In other words, variable control is expected to cost 3.6 billion dollars a year more than the former standard, while full control will cost 4.1 billion dollars a year more than the former standard.

Table 5's figures also demonstrate that variable control is more cost effective than full control. One measure of cost effectiveness is the incremental cost per ton of sulfur dioxide removal. The stated figures for the incremental cost per ton of sulfur dioxide removal are obtained by dividing the expected increase in annual cost by the expected decrease in emissions, as compared to the projected cost and emissions for the former standard. Since both variable control and full control should reduce emissions by 3.1 million tons, variable control is more cost effective than full control because the increased annual cost of variable control is 3.6 billion dollars while the increased annual cost of full control is 4.1 billion dollars, or half a billion dollars more. The incremental cost of sulfur dioxide removal, which is the ratio of the cost figures over the 3.1 million tons of increased emission reduction, is 1,161 dollars/ton for variable control and 1,323 dollars/ton for full control.

Finally, EPA's analysis of wet scrubbing predicted that consumers would incur both lower direct costs (in the form of monthly residential energy bills) and lower indirect costs (reflecting price increases due to higher energy costs) under variable control as opposed to full control.

Results of subsequent selective modeling conducted after the publication of the final NSPS during the pendency of the petitions for reconsideration do not contradict the earlier results discussed above (the results are listed in tables shown as Figures 9 through 11 in the appendix to this opinion). Sierra Club's petition for reconsideration criticized EPA's econometric model because the assumed future oil prices were too low and the assumed growth rate of nuclear power plants was too high. To evaluate the petition EPA reran the computer model, performing what the agency called two "sensitivity tests." These sensitivity tests first assumed higher oil prices and then assumed both higher oil prices and a lower nuclear growth rate, while holding the other modeling assumptions constant. Sierra Club claims "that when EPA ran the model ... with more realistic assumptions concerning oil prices and nuclear power growth, full control showed lower total emissions (than variable control)."¹³⁹ (Emphasis in original.) But we find that the results of the rerun analysis are entirely consistent with the adoption of a variable standard. The first sensitivity test which assumed only higher oil prices produced no significant changes in the relative advantages of the alternative control options, and both sensitivity tests indicated that variable control was the most attractive option.¹⁴⁰ Even though the sensitivity test which assumed both higher oil prices and lower nuclear capacity showed, for the first time during the modeling analysis, that full control would produce lower national emissions than variable control, the difference in total emissions between the two options was only 100,000 tons. "(T)he cost of this additional 100,000 tons of control was estimated at.$1.8 billion, which represents more than a 40 percent increase in the ... cost."¹⁴¹ EPA further explained:

The principal environmental benefit of full control (assuming both higher oil prices and lower nuclear capacity) would be felt in the West and West South Central. Through case-by-case new source review ample authority exists (under the Clean Air Act) to require more stringent controls as necessary to protect our pristine areas and national parks.... As a result, the Administrator continues to believe that the flexibility offered by the variable standard will lead to the best balance of energy, environmental, and economic impacts....¹⁴²

For these reasons we do not believe that the post-promulgation modeling analysis provides convincing evidence that full control is preferable to variable control.

In sum, the results of EPA's econometric modeling which forecast substantial benefits to be obtained by adopting the variable standard, provide adequate support for EPA's decision to select that course on the basis of the environmental, energy, andcost factors specified in section 111.

(2) The Reasonableness of EPA's Conclusion That Variable

Control Promotes the Policies of the Act

The results of EPA's regulatory analysis also persuade us that the variable standard does indeed advance policies of the Act other than those specifically incorporated in section 111.

First, variable control is not as Sierra Club alleges inconsistent with the purposes underlying the Act's programs for the prevention of significant deterioration of air quality, and the provisions for eliminating the impairment of visibility in certain designated areas.¹⁴³ Specifically, because EPA predicts that variable control will produce equivalent or lower total emissions of sulfur dioxide than any other control option, variable control protects air quality and visibility at least as well as any other standard.¹⁴⁴ Regionally, all the control options produce about the same emissions in the Midwest and West South Central regions.¹⁴⁵ Although variable control might result in higher annual emissions in the West than would be expected under full control, full control might yield even a greater increment of air pollution in the East.¹⁴⁶ We agree that "it would not have been a reasonable exercise of discretion to impose additional costs of over a billion dollars per year merely in order to transfer several hundred thousand tons of sulfur dioxide annually from the West to the East."¹⁴⁷ Nonetheless, we are not insensitive to possible regional hardships and do not mean to imply that they may be ignored. The NSPS, as EPA recognizes, are only a minimum national standard, and there are other mechanisms provided in the Clean Air Act which should be activated in appropriate circumstances to protect troubled areas.¹⁴⁸

Second, the findings also support EPA's determination that variable control serves what the parties agree are the relevant purposes of section 111, which the legislative history says must be accommodated whenever EPA chooses to vary the percentage reduction standard. For example, the competitive advantage previously enjoyed by some states under former standards will be eased, since all new coal-fired sources are subject to the same emissions ceiling and all must apply some level of continuous emission reduction technology to control sulfur dioxide emissions. Consequently the standards assist in eliminating the advantage of using only low sulfur coal throughout the country or of relocating to areas where scrubbing was not previously required because low sulfur coal was available locally. The advantage of the lower percentage reduction requirement available to plants burning low sulfur coal is offset to a degree by countervailing considerations, such as the costs of mining, transportation, and relocation, competition for supply, and state regulations.

Other purposes of section 111 also appear to be well served. One highlighted in the Conference Committee Report was "maximizing the use of locally available fuels."¹⁴⁹ EPA found that the 70 percent minimum floor was "sufficiently stringent to reduce the amount of low-sulfur coal that moves eastward when compared to the (former) standard. Admittedly, a uniform 90 percent requirement would reduce such movements further, but ... such gains would be of marginal value when compared to expected increases in high-sulfur c