Natl Petrochem Refn v. EPA

• Court: Court of Appeals for the D.C. Circuit
• Decided: May 3, 2002
• Docket: 01-1052
• Status: Published

Opinion

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 26, 2002 Decided May 3, 2002

No. 01-1052

National Petrochemical & Refiners Association, Petitioner

v.

Environmental Protection Agency, Respondent

International Truck and Engine Corporation, et al., Intervenors

Consolidated with 01-1092, 01-1093, 01-1094, 01-1130, 01-1132, 01-1134, 01-1404, 01-1414

On Petitions for Review of Orders of the Environmental Protection Agency

Theodore L. Garrett argued the cause for petitioner Cum- mins Inc. With him on the briefs was Andrew J. Heimert.

Julie R. Domike argued the cause and filed the briefs for petitioner Volvo Truck Corporation.

Michael F. McBride argued the cause for petitioner Na- tional Petrochemical & Refiners Association, et al. With him on the brief were Maurice H. McBride, Bruce W. Neely, John W. Lawrence, John S. Hahn, Julie Anna Potts, Janice K. Raburn, David T. Deal, Thomas Sayre Llewellyn and Chet M. Thompson.

William A. Anderson, II, argued the cause for petitioners Alliance of Automobile Manufacturers and Association of International Automobile Manufacturers, Inc. With him on the briefs were Julie C. Becker, Ellen L. Shapiro, Charles H. Lockwood and Susan A. MacIntyre.

Jed R. Mandel and Timothy A. French were on the briefs for Engine Manufacturer petitioners.

Eric G. Hostetler, Kent E. Hanson and Norman L. Rave, Jr., Attorneys, U.S. Department of Justice, argued the causes for respondents. With them on the briefs were Kenneth C. Amaditz, Attorney, U.S. Department of Justice, John T. Hannon, Michael J. Horowitz and Steven E. Silverman, Attorneys, U.S. Environmental Protection Agency.

Howard I. Fox and John D. Walke were on the brief for intervenors American Lung Association, et al.

Janice K. Raburn, David T. Deal, Thomas Sayre Llewel- lyn, Michael F. McBride, Bruce W. Neely, John W. Lawrence and Maurice H. McBride were on the brief for intervenor American Petroleum Institute, et al.

Hope M. Babcock, Richard Blumenthal, Attorney General, State of Connecticut, Kimberly Massicotte, Assistant Attor- ney General, M. Jane Brady, Attorney General, State of Delaware, Kevin Maloney, Assistant Attorney General, J. Joseph Curran, Jr., Attorney General, State of Maryland, Kathy M. Kinsey, Assistant Attorney General, Thomas F. Reilly, Attorney General, Commonwealth of Massachusetts,

Kirsten H. Engel, Assistant Attorney General, Philip T. McLaughlin, Attorney General, State of New Hampshire, Maureen D. Smith, Assistant Attorney General, Eliot Spit- zer, Attorney General, State of New York, Peter H. Lehner, Assistant Attorney General, Robert A. Reiley, M. Dukes Pepper, Jr., Sheldon Whitehouse, Attorney General, State of Rhode Island, Tricia K. Jedele, Assistant Attorney General, Barbara Beth Baird and Jeri G. Voge were on the brief for intervenors State and Territorial Air Pollution Program Ad- ministrators, et al. and amicus curiae South Coast Air Quality Management District. Jennifer L. Wazenski, Assistant At- torney General, State of Maryland, entered an appearance.

Laurence H. Levine, Robert M. Sussman, Julia A. Hatch- er, William A. Anderson, II, Susan A. MacIntyre, Julie C. Becker and Ellen L. Shapiro were on the brief for intervenors International Truck and Engine Corporation, et al.

Before: Sentelle and Tatel, Circuit Judges, and Williams, Senior Circuit Judge.

Opinion for the Court filed PER CURIAM.

PER CURIAM:1 We have here a set of challenges to an EPA rule affecting diesel fuel and engines. The rule requires drastic reductions in exhaust emissions starting in 2007 (for some emissions 95% lower than current standards). To aid in the achievement of the new emission standards, the rule also requires a 97% reduction in the sulfur level in diesel fuel. Numerous parties, including engine manufacturers (including Cummins Inc.), automobile makers, and fuel refiners, chal- lenged the rule on various grounds, while others, including environmental groups and states, defended it. We deny the petitions.

I. The Regulations

Diesel engines emit nitrous oxides ("NOx"), non-methane hydrocarbons, and particulate matter ("PM"), all of which are

__________ 1 Parts I and II of the opinion are by Senior Judge Williams; part III is by Judge Sentelle; and parts IV and V are by Judge Tatel.

harmful to the environment and human health (as no party disputes). Fulfilling its duty under the Clean Air Act to set emission standards that "reflect the greatest degree of emis- sion reduction achievable" through cost-effective technology, 42 U.S.C. s 7521(a)(3), the EPA decided on dramatic reduc- tions of diesel engine emission standards, issuing a final rule on January 18, 2001: Control of Air Pollution from New Motor Vehicles: Heavy-Duty Engine and Vehicle Standards and Highway Diesel Fuel Sulfur Control Requirements, 66 Fed. Reg. 5002 (2001) (hereinafter "2007 Rule").

The 2007 Rule sets the following standards for diesel engines: 0.01 grams per brake-horsepower-hour (g/bhp-hr) for PM, 0.20 g/bhp-hr for NOx, and 0.14 g/bhp-hr for non- methane hydrocarbons. 66 Fed. Reg. at 5005; 40 C.F.R. s 86.007-11(a)(1), (3). For PM and NOx, the new standards are "90 percent and 95 percent below current standard levels, respectively." 66 Fed. Reg. at 5002. Engine emissions are to be measured by the Federal Test Procedure, see 40 C.F.R. s 86.1301-90 et seq., as well as two other test procedures that are not at issue in this case.

The standard for PM takes full effect in 2007. 66 Fed. Reg. at 5005. The standards for NOx and non-methane hydrocarbons, however, will be phased in as follows: 50% of a manufacturer's sales for 2007, 2008 and 2009 engines and 100% of sales for 2010 and following. Id.; 40 C.F.R. s 86.007-11(g). During the phase-in period, manufacturers will be allowed to participate in an averaging, banking, and trading ("ABT") program. This program allows the genera- tion of credits from engines that beat the standards; the credits can then be applied to engines that may not be able to meet the 2007 standards right away. 66 Fed. Reg. at 5109- 11; 40 C.F.R. s 86.007-15. A crucial distinction is made here: Averaging across service classes (e.g., between light heavy-duty engines and heavy heavy-duty engines) is allowed, but not banking or trading. 66 Fed. Reg. at 5110.

The 2007 Rule also eliminates a preexisting exception-- available only for turbocharged heavy-duty diesel engines-- for emissions from engine crankcases. 66 Fed. Reg. at 5040;

40 C.F.R. s 86.007-11(c). As a result, any crankcase emis- sions not eliminated count against a vehicle's emission limit.

High pollutant levels in fuel make it impossible or at least far more difficult to achieve low emissions. Thus, under its authority to regulate any fuel components that significantly impair "the performance of any emission control device or system," 42 U.S.C. s 7545(c)(1)(B), the EPA also decided to require "a 97 percent reduction in the sulfur content of diesel fuel." 66 Fed. Reg. at 5002. As of 2006, the maximum sulfur content of diesel fuel will be reduced from 500 ppm to 15 ppm. (Under a 15 ppm cap, the EPA predicts that the average sulfur level in diesel will actually be 7 ppm. Re- sponse to Comments at 3-50.) Under its "Temporary Com- pliance Option," the EPA actually requires that only 80% of fuel from any given refinery meet the 15 ppm cap in years 2006-08. Any overachieving refiner will generate credits, which it can then use to average with another refinery owned by that refiner, bank for future years, or sell to another refiner. 66 Fed. Reg. at 5065.

II. The Emissions Standards

We review the 2007 Rule under the arbitrary and capri- cious standard of 42 U.S.C. s 7607(d), which is indistinguish- able from the Administrative Procedure Act equivalent. See Ethyl Corp. v. EPA, 51 F.3d 1053, 1064 (D.C. Cir. 1995); Small Refiner Lead Phase-Down Task Force v. EPA, 705 F.2d 506, 519 (D.C. Cir. 1983). Deference is particularly great where EPA's decision is based on complex scientific or technical analysis. Appalachian Power Co. v. EPA, 251 F.3d 1026, 1035 (D.C. Cir. 2001).

A. Background on Emissions Control Technology

Diesel exhaust emissions can be controlled through the use of catalytic emission control devices in the vehicle's exhaust system. 66 Fed. Reg. at 5007. These resemble the familiar catalytic converters found on ordinary automobiles. Id. Current control devices for diesel engines work less well than they do for gasoline engines, because of diesels' "oxygen-rich and relatively cool ... exhaust environment." Id. at 5009.

PM emissions are also more difficult to control in diesel engines because of the soot formed during diesel combustion. Id. Compounding the difficulties is the fact that "historical diesel NOx control approaches tend to increase PM and vice versa, but both are harmful pollutants that need to be con- trolled." Id.

Thus, in order to achieve drastic--and simultaneous--re- ductions in PM, NOx, and non-methane hydrocarbons, engine manufacturers will need technical innovations in emission controls. The EPA predicts that two relatively new technolo- gies will aid in achieving the 2007 reductions: the catalyzed diesel particulate filter ("particulate filter") and the NOx adsorber. 66 Fed. Reg. at 5036. In the following para- graphs, we explain briefly--and to the best of our under- standing--how each technology works on the targeted emis- sions.

Particulate matter is made up of three things: Unburned carbon particles (or soot), unburned hydrocarbons (also called the "soluble organic fraction"), and sulfates (resulting from the oxidation of sulfur in the engine's exhaust). 66 Fed. Reg. at 5047. The majority of diesel PM is soot. Catalyzed particulate filters work by passing the exhaust through a ceramic or metallic filter that captures soot and other PM.

Particulate filters eventually become plugged up with par- ticulate matter, at which point the collected particles (mostly carbon) have to be burned off (or oxidized). Id. The burning-off process is called "regeneration," and the result (from oxidizing carbon) is of course carbon dioxide. Id. The EPA was convinced that precious metal catalysts would make regeneration possible at the low temperatures typical of diesel engines, and that such catalysts could thus be used on a continuous basis throughout the life of the trap. Id.; see also Regulatory Impact Analysis ("RIA") III-6.

NOx adsorbers do their work by storing NOx during the normal oxygen-rich conditions of diesel engine operation. RIA III-18. Over time, the adsorber becomes full of the stored NOx, thus requiring regeneration. During regenera- tion, the excess NOx is burned off; technically, it is reduced

to N2 by an interaction with carbon monoxide across a catalyst system that typically contains platinum and rhodium; the less-harmful gases that result are N2 and CO2. Id. Like NOx, sulfur from the fuel accumulates over time by bonding to the NOx adsorber's catalysts, and must be burned off during a "desulfation" process (more on that below). The EPA suggests the use of dual-bed NOx adsorbers (for a diagram, see RIA III-23), which involve splitting of the exhaust stream into two pipes, each of which has an adsorber bed. The benefit of such an arrangement is that regenera- tion and/or desulfation can be conducted in one bed while nearly all the exhaust stream is directed to the bed that is still in adsorbtion mode, thus maintaining a consistent level of performance. RIA III-22 to III-25.

Crankcase emissions are emitted from the vehicle's crank- case, having gotten there by leaking from the combustion chamber through the piston rings. 66 Fed. Reg. at 5040. The EPA's elimination of the previous exception for such emissions is a "performance requirement," leaving the solu- tion entirely up to manufacturers. Id. The EPA predicts that manufacturers will either filter crankcase gases and route them back into the engine intake, or route the gases into the exhaust stream (upstream of any emissions control devices). RIA III-78-79. Another option would be to vent crankcase gases directly to the atmosphere; this is an unlike- ly choice, because the combined emissions from exhaust and crankcase together would have to fall within the exhaust emissions standards. 66 Fed. Reg. at 5040.

B. Cummins's Challenges

1. Feasibility of NOx and PM Standards

Cummins argues that the EPA acted arbitrarily and capri- ciously in concluding that engine manufacturers will be able to develop emissions-control systems satisfying the new rule. According to Cummins, the EPA failed to make "reasonable extrapolations," Cummins's Opening Brief at 5 (quoting Nat- ural Resources Defense Council v. Thomas, 805 F.2d 410, 432 (D.C. Cir. 1986)), or to "provide a reasoned explanation for believing that its projection is reliable," id. (quoting National

Resources Defense Council, Inc. v. EPA, 655 F.2d 318, 328 (D.C. Cir. 1981)).

In reviewing these issues, we note that EPA was "not obliged to provide detailed solutions to every engineering problem," but had only to "identify the major steps" for improvement and "give plausible reasons for its belief that the industry will be able to solve those problems in the time remaining." Husqvarna AB v. EPA, 254 F.3d 195, 201 (D.C. Cir. 2001) (quoting NRDC, 655 F.2d at 333). Since the EPA is authorized to adopt "technology-forcing" regulations, see NRDC, 655 F.2d at 333; Sierra Club v. Costle, 657 F.2d 298, 364 (D.C. Cir. 1981), a petitioner's evidence that current technology is inadequate is not enough to show that the EPA was arbitrary in predicting future success.

a. Availability of Adequate NOx Adsorbers

In support of its assessment that manufacturers can feasi- bly meet the 2007 standards using NOx adsorbers, the EPA pointed to the successful results achieved already in various test programs. For example, the National Vehicle and Fuel Emission Laboratory ("NVFEL") program reached the fol- lowing conclusion: "This test program has shown that NOx adsorbers and [particulate filters] are capable of greater than 90% emission reductions ... after running approximately 200 hours on 5 ppm sulfur equivalent fuel, without a desulfation event. With reasonably expected desulfation, the expected NOx reduction efficiency would be higher." EPA, 2007 Diesel Emission Test Program, Initial Test Report at 31, IV-A-29 (Dec. 11, 2000) (hereinafter "NVFEL Study"); see also RIA III-35 to III-48 (discussing the NVFEL test program). The Department of Energy's Diesel Emission Control Sulfur Ef- fects ("DECSE") program produced several reports finding "NOx conversion efficiencies exceeding 90 percent...." RIA III-35. And ironically, Cummins's own researchers (cited by the EPA's Regulatory Impact Analysis) reported using a NOx adsorber that cut NOx emissions by 98% on the Federal Test Procedure, to a level of 0.055 g/bhp-hr (slightly more than a quarter of the 0.20 g/bhp-hr standard adopted for 2007).

Byron Bunker, Memo to File II-E-25, Handout 6 (Sept. 18, 2000) (Joint Appendix "J.A." III 1947); see also RIA III-34.

Other industry commenters agreed that NOx adsorber technology could be developed and available by 2007. See, e.g., Letter of Manufacturers of Emission Controls Associa- tion (April 5, 2000), II-G-60; Testimony of Johnson Matthey (June 22, 2000), IV-F-100; Testimony of the Engelhard Corp. (June 27, 2000), IV-F-188; Letter of Apyron Technolo- gies, Inc. (Aug. 10, 2000), IV-D-227; Letter of the Engelhard Corp. (Oct. 3, 2000), IV-G-38; Letter of Johnson Matthey (Oct. 19, 2000), IV-G-55. Of course it is no surprise that NOx adsorber manufacturers would support a regulation creating a potential for sales of their products. See, e.g., George J. Stigler, The Economic Theory of Regulation, 2 Bell J. Econ. & Management Sci. 3 (1971). But such a manufacturer would risk a considerable loss of reputation if its technology could not fulfill a mandate that it had persuaded EPA to adopt. So the submissions add something to the more direct experimen- tal evidence.

Cummins, however, asserts that no NOx control system will be capable of meeting the EPA's 2007 standards. It presents three reasons to support this conclusion; ultimately, we are convinced by none.

* * *

First, Cummins argues that though the EPA standards in effect require NOx adsorbers to operate at 90% efficiency, rapid degeneration will prevent them from lasting for any- where near the useful life of a heavy heavy-duty diesel engine. According to Cummins, the EPA's tests showing the requisite 90% efficiency were short-term rather than for extended periods.

Cummins fails, however, to give a full picture of the EPA's research. Whereas Cummins claims that a certain EPA test was only short-term, it actually involved a NOx adsorber system that had already accumulated "190 hours of opera- tion," the equivalent of "more than 13,000 miles of driving." RIA III-48. Moreover, the test did not include any desulfa-

tion events (see below), which likely reduced performance; even so, the NOx adsorber was almost able to meet the 2007 standard. Id. (Table III.A-4). Cummins also cites a test mentioned at 66 Fed. Reg. 5049 as showing that degradation happens after 600 miles. But that test used 150 ppm diesel fuel--10 times the maximum level allowed by the 2007 Rule (and 20 times what EPA believes the 15 ppm cap will yield in practice). Cummins also complains that the DECSE study cited by the EPA showed that 90% efficiency declined to 75% after only 40 hours--and that was using 3 ppm sulfur fuel to boot. Cummins's Opening Brief at 8 (citing RIA III-66 & Fig. III.A-15). Overall, NOx adsorber performance degraded by 2% per hour of operation, with higher degradation when higher sulfur fuel was used. Id. (citing RIA III-67). But the EPA never denied that degradation is currently something of a challenge; what matters is whether (as discussed below in regard to desulfation) the EPA was arbitrary or capricious in predicting that degradation could eventually be controlled.

In a closely-related argument, Cummins urges that the desulfation process is an intractable obstacle to long-lasting NOx adsorbers. As we've said, the NOx adsorber works primarily by adsorbing NOx on catalysts. 66 Fed. Reg. at 5059. Sulfur, however, bonds to the catalysts as well, clog- ging up the catalyst sites and degrading performance. Id. To prevent degradation, NOx adsorbers must periodically be subject to "desulfation," a process that removes sulfur. De- sulfation, however, requires that exhaust temperatures be increased--and this in turn poses a risk of so-called "sinter- ing," in which the catalysts are melted. Id. at 5060. Sinter- ing, unsurprisingly, degrades the device's future NOx adsor- bance. Id.

The result, according to Cummins, is a technical "catch-22" that pulls manufacturers in "conflicting directions." On one hand, desulfation should happen often and at high tempera- tures to prevent clogging by sulfur; on the other hand, frequent, high-temperature desulfation itself degrades NOx

adsorbance. As Cummins sees it, the EPA presents no reason to think that this technical obstacle will be overcome, other than "unsupported predictions of government and private-sector observers, who assert in conclusory fashion that technology that overcomes these inherent problems will develop in due time." Cummins's argument turns on its heavy discounting of the studies relied on by EPA.

Cummins says that the Ford Study (Mark A. Dearth et al., Sulfur Interaction with Lean NOx Traps (Oct. 1998) J.A. III 2187)) is not strictly relevant because it was performed using a "pulsator," a device that burns synthetic gases and injects pollutants to test catalyst performance. Cummins seems to regard it as self-evident that the use of a pulsator leads to inaccurate or inapplicable results. In making this assumption it overestimates our technical sophistication. The EPA ar- gues in response that the pulsator experiment does shed light on the ability of NOx adsorbers to withstand desulfation. As Cummins gives no articulable reason to doubt this conclusion, we cannot fault the EPA for having relied on the study.

As for Cummins's objection that further Ford experiments found significant degradation, the EPA observes that these further experiments were conducted at temperatures of 900 to 1000 degrees Celsius (see Ford Study, J.A. III 2192-93), whereas a "heavy-duty diesel engine in contrast rarely has exhaust gas temperatures in excess of 500