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Bluewater Network v. Environmental Protection Agency

June 22, 2004

BLUEWATER NETWORK, PETITIONER
v.
ENVIRONMENTAL PROTECTION AGENCY AND MICHAEL O. LEAVITT, ADMINISTRATOR, UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, RESPONDENTS



On Petition for Review of an Order of the Environmental Protection Agency

Before: Ginsburg, Chief Judge, Henderson, Circuit Judge, and Williams, Senior Circuit Judge.

The opinion of the court was delivered by: Karen Lecraft Henderson, Circuit Judge

Argued February 20, 2004

Petitioner Bluewater Network (Bluewater) challenges the Environmental Protection Agency's (EPA or Agency) final rule adopting a two-tiered approach to setting emissions standards for "Category 3" marine diesel engines which are "very large marine engines used primarily for propulsion power on ocean-going vessels such as container ships, tankers, bulk carriers, and cruise ships." Control of Emissions from New Marine Compression-Ignition Engines at or Above 30 Liters Per Cylinder, 68 Fed. Reg. 9746, 9747 (Feb. 28, 2003) (to be codified at 40 C.F.R. pts. 9 & 94). Bluewater claims that the rule fails to reduce emissions from those engines and entirely omits to regulate the emissions from foreign-flagged ships' engines, as required by section 213(a)(3) of the Clean Air Act (CAA). 42 U.S.C. § 7547(a)(3); see also id. § 7607(d)(9)(A). We conclude that the EPA reasonably interpreted and implemented the CAA and therefore deny Bluewater's petition for review.

I.

In 1970, the Congress enacted the CAA "to protect and enhance the quality of the Nation's air resources so as to promote the public health and welfare and the productive capacity of its population." Id. § 7401(b)(1). In 1990, it added section 213, which authorizes the EPA to establish emissions standards for "nonroad engines and nonroad vehicles." Id. § 7547(a)(1); see Husqvarna AB v. EPA, 254 F.3d 195, 197 (D.C. Cir. 2001); see also Engine Mfrs. Ass'n v. EPA, 88 F.3d 1075, 1080-81 (D.C. Cir. 1996). Section 213(a)(1) and (2) requires the EPA to determine whether the emissions from "new and existing nonroad engines or nonroad vehicles" are "significant contributors" to air pollution in areas with air quality problems. 42 U.S.C. § 7547(a)(1) & (2). Section 213(a)(3) in turn requires the EPA to promulgate emissions standards for all " new nonroad engines ... which in the Administrator's judgment cause, or contribute to, such air pollution." Id. § 7547(a)(3) (emphasis added). The standards must:

achieve the greatest degree of emission reduction achievable through the application of technology which the [EPA] Administrator determines will be available for the engines or vehicles to which such standards apply, giving appropriate consideration to the cost of applying such technology within the period of time available to manufacturers and to noise, energy, and safety factors associated with the application of such technology.

Id. The standards must also "take effect at the earliest possible date considering the lead time necessary to permit the development and application of the requisite technology, giving appropriate consideration to the cost of compliance within such period and energy and safety." Id. § 7547(b). Finally, the EPA must revise the standards from "time to time." Id. § 7547(a)(3).

In 1994, the EPA determined that nonroad engines and vehicles contribute significantly to air pollution in problem areas throughout the country and set about the process of setting emissions standards for various categories of engines, including marine diesel engines. See Control of Air Pollution; Determination of Significance for Nonroad Sources and Emission Standards for New Nonroad Compression-Ignition Engines at or Above 37 Kilowatts, 59 Fed. Reg. 31, 306 (June 17, 1994) (to be codified at 40 C.F.R. pts. 9 & 89); Control of Air Pollution; Emission Standards for New Gasoline Spark-Ignition and Diesel Compression-Ignition Marine Engines, 59 Fed. Reg. 55,930 (notice of proposed rulemaking) (Nov. 9, 1994). As noted above, the Category 3 marine diesel engines that are the subject of this rulemaking are some of the largest engines in the world, with greater than 30 liters displacement per cylinder. See 68 Fed. Reg. at 9747. The engines burn residual fuel oil - a byproduct of refining crude oil into higher-grade products - which tends to have higher ash, sulfur and nitrogen content than other fuels. See id. at 9767. Residual fuel oil also has a higher variability than other fuels, which makes engine emissions more difficult to control. See id. at 9763. The engines thus contribute to national ozone, carbon monoxide, nitrous oxide (NOx) and particulate matter levels, especially near commercial ports like New Orleans, LA and along coastal areas like Santa Barbara, CA. See id. at 9751. Existing diesel engine technologies, such as turbo- and super-charging, in-cylinder injection improvements and engine cooling, are used to increase the efficiency and reduce emissions from these engines. See id. at 9749. There are also new, advanced technologies, including systems that introduce water into the combustion process, selective catalytic reduction systems that add a reducing agent like ammonia into the engine's exhaust and the use of fuel cells. See id. at 9764-67.

The EPA's effort to set emissions standards for Category 3 engines coincided with similar action taken by the International Marine Organization (IMO).*fn1 See, e.g., Control of Air Pollution; Emission Standards for New Gasoline Spark-Ignition and Diesel Compression-Ignition Marine Engines; Exemptions for New Nonroad Compression-Ignition Engines at or Above 37 Kilowatts and New Nonroad Spark-Ignition Engines at or Below 19 Kilowatts, 61 Fed. Reg. 4600, 4618 (supplemental notice of proposed rulemaking; proposed revisions) (Feb. 7, 1996); 59 Fed. Reg at 55,934. In 1997, the IMO formally adopted Annex VI to the International Convention on the Prevention of Pollution from Ships, 1973, as Modified by the Protocol of 1978 Relating Thereto (MARPOL). Annex VI prescribes a NOx emissions limit for diesel engines on ships constructed on or after January 1, 2000 and for engines undergoing "major conversion" on or after that date. Regulation 13 to Annex VI of MARPOL. Annex VI has recently been ratified by the requisite number of IMO member countries and will take effect in May 2005. See http://www.imo.org/home.asp (last visited June 2, 2004).

Following the IMO's adoption of Annex VI, the EPA noticed its intent to set the CAA emissions standards for Category 3 engines at the same level set by Annex VI. See Control of Emissions of Air Pollution from New CI Marine Engines at or Above 37 Kilowatts, 63 Fed. Reg 28,309, 28,313 (advance notice of proposed rulemaking) (May 22, 1998). It reasoned that Category 3 engines "have only a minimal impact on U.S. air quality" because they operate in U.S. waters for "only a limited amount of time" and that any stricter standards could be applied to U.S. ships only, potentially compromising their competitiveness in the world shipping market. Id. Several months later, the EPA decided to postpone adopting emissions standards for these engines. Control of Emissions of Air Pollution from New CI Marine Engines at or Above 37 kW, 63 Fed. Reg. 68,508, 68,541-42 (notice of proposed rulemaking) (Dec. 11, 1998). Because it believed Annex VI's standards to be appropriate for Category 3 engines under the CAA based on its analysis of available control technologies, the EPA concluded that adopting those standards "would be unnecessary and redundant" because it expected U.S. vessels to comply with the Annex VI standards. Id. at 68,542. In the same notice, the EPA also proposed excluding smaller (categories 1 and 2) diesel engines on foreign-flagged vessels in U.S. waters from any emissions standards, id. at 68,516-17, because, relying in part on United States Treasury Department rulings and tariff schedules, it deemed foreign-flagged ships engaged in international trade not to have been imported into the United States. Id. The EPA's final rule adopted both positions: it did not set emissions standards for Category 3 engines and it defined the Category 1 and Category 2 engines to which its rule applied so as to exempt those aboard foreign-flagged ships. Control of Emissions of Air Pollution From New Marine Compression-Ignition Engines at or Above 37 kW, 64 Fed. Reg. 73,300, 73,302, 73,306 (Dec. 29, 1999) (codified at 40 C.F.R. pts. 89, 92, 94).

In 2000, Earth Island Institute, an environmental group, originally petitioned for review of that rule; Bluewater became the petitioner in 2002. As part of a settlement agreement in that matter, the EPA agreed to initiate the rulemaking that resulted in the rule now under review. Thus, in May 2002, the EPA proposed, among other things, to formally adopt the Annex VI emissions standards as the CAA standards for Category 3 engines. Control of Emissions of Air Pollution from New Marine Compression-Ignition Engines at or Above 30 Liters/Cylinder, 67 Fed. Reg. 37,548 (proposed rule) (May 29, 2002). It also invited comment on whether it should adopt stricter emissions standards in the future and expand those standards to cover Category 3 engines on foreign-flagged vessels entering U.S. territory. Id.

On February 28, 2003, the EPA issued the rule under review. Control of Emissions from New Marine Compression Ignition Engines at or Above 30 Liters Per Cylinder, 68 Fed. Reg. 9746 (Feb. 28, 2003) (to be codified at 40 C.F.R. pts. 9 & 94). The rule provides a two-step approach for setting emissions standards for Category 3 engines under the CAA. Id. at 9748-49. The first step, which the EPA referred to as its "near term Tier 1" standard, tracks Annex VI's emissions standards and took effect on January 1, 2004. Id. at 9749. The standards, the EPA explained, apply only to U.S.-flagged ships and are intended to "achieve a 20-percent reduction in the national Category 3 NOx inventory by 2030." Id. at 9757, 9762. The EPA also committed to a second step, imposing longer term "Tier 2 standards" in a rulemaking to be completed "no later than April 27, 2007." Id. at 9749-50. In the future rulemaking, the EPA promised to "consider the state of technology that may permit deeper emission reductions and the status of international action for more stringent standards" as well as "application of [these] standards to engines on foreign vessels that enter U.S. ports." Id. at 9746.

In establishing the Tier 1 emissions standards at the Annex VI level and postponing Tier 2 standards to the 2007 rule making, the EPA recognized that "manufacturers are generally already meeting the internationally negotiated standards" and thus "[t]he near term standards will require no additional development, design, or testing beyond what manufacturers are already doing to meet the ... Annex VI ... standards." Id. at 9761; see id. at 9749. The EPA explained, however, that the Tier 1 standards are "designed to be achievable immediately without additional research and development" and are thus "based on readily available emission-control technolog[ies]" - like "optimized turbocharging, higher compression ratios, and optimized fuel injection." Id. at 9748-49, 9761. Most importantly, the EPA explained, these standards will be almost immediately ...


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