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Natural Resources v. South Coast Air

June 29, 2011

NATURAL RESOURCES DEFENSE COUNCIL, INC., A NON-PROFIT CORPORATION; COMMUNITIES FOR A BETTER ENVIRONMENT, A CALIFORNIA NON-PROFIT CORPORATION; COALITION FOR A SAFE ENVIRONMENT, A CALIFORNIA NON- PROFIT CORPORATION; DESERT CITIZENS AGAINST POLLUTION, A CALIFORNIA NON-PROFIT CORPORATION, PLAINTIFFS-APPELLANTS,
v.
SOUTH COAST AIR QUALITY MANAGEMENT DISTRICT; GOVERNING BOARD OF THE SOUTH COAST AIR QUALITY MANAGEMENT DISTRICT; BARRY WALLERSTEIN, EXECUTIVE OFFICER, DEFENDANTS-APPELLEES, AND ORANGE COUNTY SANITATION DISTRICT; SOUTHERN CALIFORNIA EDISON CO.; WALNUT CREEK ENERGY LLC; CPV SENTINEL LLC; COUNTY SANITATION DISTRICT NO. 2
OF LOS ANGELES COUNTY; EL
SEGUNDO POWER LLC; LOS PLA ANGELES AREA CHAMBER OF COMMERCE; LOS ANGELES COUNTY BUSINESS FEDERATION, INTERVENOR-DEFENDANTS-APPELLEES



Appeal from the United States District Court for the Central District of California George H. Wu, District Judge, Presiding D.C. No.2:08-cv-05403-GW

The opinion of the court was delivered by: Opinion by Judge Rymer

FOR PUBLICATION

Argued and Submitted June 8, 2011-Pasadena, California

Before: Stephen S. Trott and Pamela Ann Rymer, Circuit Judges, and Ralph R. Beistline, Chief District Judge.*

OPINION

*The Honorable Ralph R. Beistline, Chief District Judge for the U.S. District Court for Alaska, Anchorage, sitting by designation.

OPINION

RYMER, Circuit Judge:

The Natural Resources Defense Council and other groups (collectively, the NRDC) appeal the dismissal of their claims against the South Coast Air Quality Management District (SCAQMD). We have jurisdiction under 28 U.S.C. § 1291, and we affirm. The district court did not err in determining it lacked jurisdiction over the alleged violations of Clean Air Act § 173(c). Nor did it err in concluding that the NRDC otherwise failed to state a claim upon which relief can be granted: Regulation XIII does not contain validity requirements for SCAQMD's internal offsets, and Environmental Protection Agency (EPA) rules do not require SCAQMD to use a tracking system.

I The Clean Air Act (CAA) requires the EPA to establish National Ambient Air Quality Standards (NAAQS). 42 U.S.C. § 7409(a). States are required to maintain and enforce the NAAQS through State Implementation Plans (SIPs), which must be approved by the EPA and become federal law after such approval. Id. § 7410(a), (k). The EPA identifies air quality control regions that do not meet the NAAQS as nonattainment regions. Id. § 7407(d). In nonattainment regions, SIPs must include "new source review," which means they must require permits for the construction and operation of new or modified major stationary sources of pollution. Id. § 7502(c)(5).

Section 173 of the CAA provides that SIP permit programs must require new sources of pollution to obtain "offsetting emissions reductions." Id. § 7503(a)(1)(A). Section 173(c) establishes requirements for the offsets in these programs. Id. § 7503(c). Section 173(c) also includes validity requirements for offsetting emissions reductions, specifically that they be "in effect and enforceable" when a new source comes online and "offset by an equal or greater reduction" that was not "otherwise required." Id.

SCAQMD prepares and implements the SIP for the South Coast Air Basin, the air quality control region for much of Los Angeles, Riverside, San Bernardino, and Orange counties. The South Coast Air Basin is a nonattainment region for ozone and particulate matter. SCAQMD has set forth its new source review permit program in Regulation XIII, most of which the EPA has approved and incorporated into the SIP. See generally Approval and Promulgation of Implementation Plan for SCAQMD, 61 Fed. Reg. 64291 (Dec. 4, 1996).

One of the Regulation XIII rules, Rule 1303(b)(2), requires that most emission increases be offset in one of two ways. First, they may be offset by Emission Reduction Credits (ERCs) under Rule 1309. An applicant may obtain an ERC from SCAQMD when it has reduced its own emissions, and ERCs may also be traded on the market. Rule 1309(b), (d), (e).Rule 1309(b)(4) imposes five validity requirements on these reductions: they must be real, quantifiable, enforceable, permanent, and surplus beyond existing requirements. Second, certain priority sources may offset their emissions with allocations from the Priority Reserve under Rule 1309.1. Some other emissions are exempt under Rule 1304.

SCAQMD maintains an internal bank of credits known as "offset accounts" that it uses to provide allocations from the Priority Reserve and to offset exemptions under Rule 1304. SCAQMD allegedly deposited invalid credits ...


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