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Environmental Law and Natural Click here for the full text of this decision FACTS: Primarily at issue is whether, pursuant to Title V of the Clean Air Act, 42 U.S.C. sec. sec. 7661-7661f, the Environmental Protection Agency (EPA) had authority to grant full approval to Texas’ operating permit program, notwithstanding program deficiencies; and, if so, whether it nonetheless was required by that Act to issue notices of deficiency for the claimed shortcomings. HOLDING: The petitions for review are denied. Petitioners seek review of two EPA final actions related to Texas’ Title V operating permits program: 1. the Dec. 6, 2001, full approval of the program; and 2. the Feb. 21, 2002, decision not to issue notices of deficiency related to four aspects of the program. Texas intervened in favor of the EPA, as did industry intervenors. Petitioners maintain the EPA, in December 2001, had no authority to grant Texas’ permit program full approval without finding that the program met the requirements of Title V and its implementing regulations. They further maintain that the EPA acted arbitrarily and capriciously in granting full approval because Texas had not corrected all deficiencies identified at interim approval. Under the EPA’s interpretation of the statutory provisions governing interim and full approval, CAA sec. 502g, 42 U.S.C. sec. 7661a(g) (governing interim approval), provides an alternate path to full approval. Full approval would otherwise be governed by CAA sec. 502(d), 42 U.S.C. sec. 7661a(d), and would not be permitted when the EPA determined (as it did) that the program did not meet all of Title V’s requirements. According to the EPA, if a state is granted interim approval, then to receive full approval it need only remedy deficiencies identified by the EPA at the time of interim approval. Because Congress did not unambiguously express its intent on this issue through the CAA, the EPA’s interpretation is entitled to deference under Chevron, U.S.A. Inc. v. Natural Res. Def. Council Inc., 467 U.S. 837 (1984). The court decides whether the EPA’s interpretation is based on a permissible construction of the CAA. The court holds that it is. First, CAA sec. 502(g), 42 U.S.C. sec. 7661a(g), provides that, in the notice of final rulemaking granting interim approval, the EPA must “specify the changes that must be made before the program can receive full approval.” This suggests the interim-approval notice must identify all of the changes required for full approval, and the making of those specified changes (not all possible changes) triggers full approval. Second, as the 2nd U.S. Circuit Court of Appeals noted in New York Pub. Interest Research Group v. Whitman, 321 F.3d 316 (2nd Cir. 2003): “[T]he EPA’s interpretation comports with the timetable established by Congress, if not adhered to by the EPA. Under sec. 502(g), interim approval expires after two years and is not renewable. 42 U.S.C. sec. 7661a(g). Changes identified at the time of interim approval may require modifications of state statutes or regulations and, therefore, may be time consuming. If a state were required, not only to make the changes identified at the start of interim approval but also to correct deficiencies arising during interim approval, a state’s efforts to receive full approval could be sabotaged by the identification of new deficiencies during or at the end of interim approval. Should these events occur it is doubtful whether the state could resubmit its plan for full approval since sec. 502(d) provides that any such submission must occur “[n]ot later than three years after November 15, 1990,” 42 U.S.C. sec. 7661a(d)(1), and the statute does not otherwise authorize re-submission.” Finally, the CAA provides a mechanism for correcting deficiencies in fully-approved programs the NOD process. Congress provided processes for making corrections to programs once they initially enter the approval process and are given at least interim approval. Petitioners maintain that, even if the EPA’s interpretation is not contrary to law, its full approval of Texas’ program was arbitrary and capricious because: two EPA memoranda support Petitioners’ view of the CAA; and the EPA’s interpretation is contrary to EPA regulations. The court must give substantial deference to the EPA’s interpretation of its regulations. Here, the EPA’s position that these regulations are not inconsistent with its interpretation of the CAA is not “plainly erroneous” and is thus entitled to “controlling weight.” Thomas Jefferson Univ. v. Shahala, 512 U.S. 504 (1994). The EPA’s interpretation of the CAA is reasonable, and the EPA’s acting pursuant to that interpretation was neither arbitrary nor capricious. The EPA concedes that, in providing guidance, it has stated that emissions limitations and standards should be restated on the face of the Title V permit and that incorporation by reference of the details should only occur after such a restatement. On the other hand, this guidance was not binding on the EPA and did not require it to determine Texas has not corrected its interim deficiencies. The EPA balanced the streamlining benefits of incorporation by reference against the value of a more detailed Title V permit and determined Texas’ deficiency had been cured to its satisfaction. In so doing, it properly considered petitioners’ concerns, such as the potential impact of incorporation-by-reference on the ability of the public to be informed of the requirements in the Title V permit and to comment on them. Contrary to petitioners’ assertions, neither the CAA nor its implementing regulations require more; and the EPA determination was neither arbitrary nor capricious. Concerning the adequacy of Texas’ enforcement authority, petitioners insist the Audit Privilege Act prevents Texas from being able to recover civil penalties for each violation of the Act because it has granted certain immunities. On the other hand, the EPA determined the immunities provided by Texas’ Audit Privilege Act did not deprive Texas of adequate enforcement authority. It reasoned the Act does not: limit Texas’ ability to seek declaratory or injunctive relief for violations disclosed by an audit; affect Texas’ ability to pursue criminal sanctions, if appropriate; or preclude actions seeking penalties for serious violations. This determination was not arbitrary and capricious. Petitioners note minor semantic differences between the federal penalty factors and those allowed consideration under the Audit Privilege Act. For example, Texas must be able to penalize violations resulting in substantial economic benefit; Texas’ Audit Privilege Act provides an exception to immunity for violations that “have resulted in a significant economic benefit which gives the violator a clear advantage over its business competitors.” Texas Revised Civil Statutes article 4447cc sec. 10(d)(5). Notwithstanding minor variations, the EPA reasonably determined that Texas’ statutory language allowed it to consider the appropriate factors in imposing punishments. Petitioners assert Texas’ Audit Privilege Act impermissibly makes audit documents privileged. The EPA responds that Texas addressed this concern by adding a section to the Audit Privilege Act that restored the authority of the state’s employees, “[n]otwithstanding the privilege established under this Act” to “review information that is required to be available under a specific state or federal law . . .” The EPA determined this section restored Texas’ authority to view any documents required to be collected, maintained, or reported under Title V, which it deemed sufficient to address the deficiency and for Texas to conduct civil and criminal investigations. This assessment was not arbitrary or capricious. OPINION: Barksdale, J.; Garwood, Smith and Barksdale, JJ.

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