Exxon Mobil Corporation (Exxon Mobil) challenged the Environmental Protection Agency's (EPA) final rule approving Nevada's revised state implementation plan (SIP), which required an oxygenated fuel standard of 3.5 percent for all gasoline sold in winter. Exxon Mobil claimed that the Clean Air Act (CAA)[1] does not allow for a level beyond the 2.7 percent minimum set by Congress in section 211(m).[2] EPA interpreted this section as setting a floor, not a ceiling, meaning that states could require more stringent controls in their SIPs in order to attain national ambient air quality standards (NAAQS).[3] The Ninth Circuit affirmed EPA's interpretation.

As a serious nonattainment area for carbon monoxide, Clark County, Nevada began an oxygenated fuel program in 1988, which required fuel sold in winter to have at least a 2.5 percent oxygen content. The county increased the required oxygen content to 2.6 percent in 1989 and to 2.7 percent in 1991. Because the county still remained in nonattainment for carbon monoxide, in 1998 it submitted to EPA a SIP revision to increase the oxygen content of gasoline sold in winter to 3.5 percent. EPA proposed a rule approving the revision and received only one comment on the proposed rule, from Western States Petroleum Association (WSPA). WSPA argued that states were barred from adopting an oxygenation level beyond the 2.7 percent required by the CAA for serious nonattainment areas. In its final rule approving Nevada's revised SIP, EPA interpreted section 211(m) of the CAA to require only a minimum level of 2.7 percent fuel oxygen content, leaving the states free to satisfy this requirement by setting a higher minimum oxygen content.[4]

Exxon Mobil sought review of EPA's final determination based on two arguments. First, Exxon Mobil argued that Congress did not intend the states to be able to set a higher minimum requirement, as evidenced by the placement of section 211(m) in the CAA's "comprehensive scheme for federal regulation of fuel and fuel additives standard"[5] and by the inclusion of the waiver provision, which allows states to permit oxygen requirements lower than 2.7 percent. Second, Exxon Mobil argued that section 211(c)(4)(A)[6] preempts Clark County's oxygenated fuel regulation because EPA regulations for reformulated gasoline are applicable to oxygen content.

The Ninth Circuit held that EPA's interpretation of section 211(m) was a permissible construction of the statute. The 1990 amendments to the CAA set out in section 211(m) that nonattainment areas for carbon monoxide must require gasoline "to contain not less than 2.7 percent oxygen by weight."[7] The CAA also contains a companion provision that serious nonattainment areas shall submit SIP revisions setting "fuels containing such level of oxygen as is necessary . . . to provide for attainment of the carbon monoxide national ambient air quality standard."[8] The Ninth Circuit did not determine that this statutory language was conclusive as to congressional intent, but noted that "it appears that the states retain the authority to require a minimum oxygenate standard greater than 2.7 percent under the Act."[9] The legislative history also supported EPA's reading of the statute. The Ninth Circuit concluded that although the statutory language and legislative history did not conclusively resolve the ambiguity of the provision, "they are sufficiently persuasive evidence that EPA's final rule was a reasonable construction of the statute and should therefore be entitled to Chevron deference."[10]

The Ninth Circuit also determined that Clark County's oxygen standard was not preempted by section 211(c)(4)(A). To preempt an area of law that is traditionally left to the states--such as pollution control--Congress must show a clear and manifest intent to do so.[11] Section 211(c)(4)(A)(ii) provides that a state cannot prescribe any control of a fuel or fuel additive "if the Administrator has prescribed under paragraph (1) a control or prohibition applicable of a fuel or fuel additive, unless State prohibition or control is identical to the prohibition or control proscribed by the Administrator."[12] Exxon Mobil argued that because EPA has set standards for reformulated gasoline, which include a standard for oxygen content, Nevada was precluded from setting stricter standards. However, the Ninth Circuit determined that the CAA protects the states' authority to regulate air pollution in several provisions. Further, section 211(c)(4)(A) focuses on the regulation of gasoline additives, not oxygenate levels in gasoline. The Ninth Circuit held that this does not "demonstrate such a clear and manifest purpose to preempt state regulation of oxygenate levels."[13] Therefore, the Ninth Circuit affirmed EPA's final ruling approving Nevada's revised SIP for Clark County requiring fuel oxygen levels of at least 3.5 percent during the winter.