Air pollutant emitters and trade associations in Washington petitioned for judicial review of the conditional approval by the Environmental Protection Agency (EPA) of Washington's air operating permit program pursuant to Title V of the Clean Air Act (CAA). EPA conditioned final approval of Washington's program on the repeal of the exemption of insignificant emission units (IEUs) from Title V monitoring, reporting, and recordkeeping requirements. Washington intervened in this case to defend its program. The Ninth Circuit held that EPA abused its discretion because its decision conflicted substantially with numerous EPA decisions in other states and localities.
Title V created a centralized permitting program administered by the states with EPA oversight. EPA promulgated regulations at 40 C.F.R. Part 70 which set forth the criteria for EPA approval of state permit programs. These regulations allow each state, subject to EPA approval, to exempt insignificant activities and emission levels from certain permit requirements in order to reduce the regulatory burden on emitters. In November 1993, Washington submitted a proposed permit program to EPA including a number of IEUs, for example, emissions from roof vents and vehicle exhaust from repair shops. Washington's program exempted IEUs from the permit application requirements and the permit compliance requirements of the regulations.
In November 1994, EPA rejected Washington's IEU provisions, granting only interim approval of the permit program. For final approval, EPA required Washington to amend its IEU rules to disqualify any emission unit subject to federally enforceable applicable requirements. Petitioners filed a petition for review in January 1995, and Washington moved to intervene. The Ninth Circuit granted EPA's motion to vacate and remand the IEU portion of EPA's decision, and the court retained jurisdiction over the matter. After remand, EPA issued a final decision in November 1995. While EPA allowed Washington to exempt IEUs from the permit application requirements, it still disapproved of Washington's exemption of IEUs from permit monitoring, reporting, and recordkeeping requirements.
The court reviewed this final agency decision pursuant to the CAA under the same "arbitrary, capricious, or abuse of discretion" standard as in the Administrative Procedure Act. The court stated that it must give deference to EPA's reasonable interpretation of its own regulations. However, if EPA abused its discretion by failing to follow its own prior standards, the court need not defer to EPA's anomalous interpretation. While EPA identified two Title V programs that applied permit requirements to IEUs, it had also approved the exemption of IEUs from permit requirements in at least eight other state and local programs.
EPA argued that the Washington decision was the first thorough, well-reasoned discussion of whether IEUs may be exempted from permitting requirements. The Ninth Circuit recognized that EPA may have the power to adjust its policies and rulings in light of its experience, but stated that EPA may not depart, sub silentio, from its usual rules of decision to reach a different, unexplained result in a single case. In this case, EPA failed to provide any explanation for its anomalous Washington decision. The fact that EPA issued at least eight conflicting decisions both before and after the Washington decision refuted EPA's argument that the Washington decision marked a well-reasoned, lasting change of policy.
The Ninth Circuit reversed EPA's decision and remanded, ordering EPA to grant full approval to Washington's Title V program. In a question of first impression, the court addressed whether a financially able, nongovernmental party having no more than its own economic interests at stake is entitled to attorneys' fees under section 307(f) of the CAA. The petitioners attained sufficient success on the merits to be eligible for attorneys' fees. However, the court determined, based on the legislative history, that Congress had no intent to subsidize all CAA litigation for financially able parties who, out of their own economic interests, would have litigated anyway. Therefore, the court held the petitioners ineligible for a fee award.