Sierra Club v. Douglas M. Costle, Administrator of the Environmental Protection Agency, National Coal Association, Alabama Power Company, Intervenors

This case concerns the extent to which new coal-fired steam generators that produce electricity must control their emissions of sulfur dioxide and particulate matter into the air. In June of 1979 EPA revised the regulations called “new source performance standards” (“NSPS” or “standards”) governing emission control by coal burning power plants. On this appeal we consider challenges to the revised NSPS brought by environmental groups which contend that the standards are too lax and *312 by electric utilities which contend that the standards are too rigorous. Together these petitioners present an array of statutory, substantive, and procedural grounds for overturning the challenged standards. For the reasons stated below, we hold that EPA did not exceed its statutory authority under the Clean Air Act 1 in promulgating the NSPS, and we decline to set aside the standards.

I. INTRODUCTION

A. The Challenged Standards

The Clean Air Act provides for direct federal regulation of emissions from new stationary sources of air pollution by authorizing EPA to set performance standards for significant sources of air pollution which may be reasonably anticipated to endanger public health or welfare. 2 In June 1979 EPA promulgated the NSPS involved in this case. 3 The new standards increase pollution controls for new coal-fired electric power plants 4 by tightening restrictions on emissions of sulfur dioxide and particulate matter. 5 Sulfur dioxide emissions are limited to a maximum of 1.2 lbs./MBtu 6 (or 520 ng/j) 7 and a 90 percent reduction of potential uncontrolled sulfur dioxide emissions is required except when emissions to the atmosphere are less than 0.60 lbs./MBtu (or 260 ng/j). When sulfur dioxide emissions are less than 0.60 lbs./MBtu potential emissions must be reduced by no less than 70 percent. In addition, emissions of particulate matter are limited to 0.03 lbs./MBtu (or 13 ng/j).

B. The Parties

Petitioners in this case are Sierra Club and the State of California Air Resources Board (“CARB”), which oppose the variable 70 to 90 percent reduction requirement of the NSPS; Appalachian Power Co. (“APCO”), et a/., a group comprised of APCO, the Edison Electric Institute, the National Rural Electric Cooperative Association, and 86 individual utilities (“Electric Utilities”), which challenge both the maximum 90 percent reduction requirement and the 0.03 lbs./MBtu limit on emissions of particulate matter; and, the Environmental Defense Fund (“EDF”), which challenges the 1.2 lbs./MBtu ceiling imposed by the NSPS.

*313 Intervenor-respondents filing briefs in these consolidated actions are the Electric Utilities and the Missouri Association of Municipal Utilities (“MAMU”), aligned in favor of both the variable percentage reduction standard and the 1.2 lbs./MBtu emissions ceiling; and the National Coal Association (“NCA”), which opposes EDP’s claim that the 1.2 lbs./MBtu ceiling is invalid due to procedural impropriety.

Respondents are the United States Environmental Protection Agency (“EPA”) and its Administrator, Douglas M. Costle.

C. Background

The importance of the challenged standards arises not only from the magnitude of the environmental and health interests involved, but also from the critical implications the new pollution controls have for the economy — at the local and national levels. Further heightening the significance of this controversy is the crucial role coal burning power plants are expected to play in our nation’s effort to cope with the problems associated with energy scarcity. 8

Coal is the dominant fuel used for generating electricity in the United States. 9 When coal is burned, it releases sulfur dioxide and particulate matter into the atmosphere. At the very least these pollutants are known to cause or contribute to respiratory illnesses. 10 In 1975 alone electric power plants emitted 18.6 million tons of sulfur dioxide. If the former NSPS had not been changed the total annual national sulfur dioxide emissions could have exceeded 23 million tons by 1995: a 27 percent increase. 11 The increase in emissions which *314 could be expected if the former standards continued in effect would be more dramatic on a regional basis. For example, utility sulfur dioxide emissions could be expected to increase 1300 percent by 1995 in the West South Central region of the country (Texas, Oklahoma, Arkansas, and Louisiana). 12 In 1976 power plant emissions accounted for 64 percent of the total estimated sulfur dioxide emissions and 24 percent of the total estimated particulate matter emissions in the entire country. 13

EPA’s revised NSPS are designed to curtail these emissions. EPA predicts that the new standards would reduce national sulfur dioxide emissions from new plants by 50 percent and national particulate matter emissions by 70 percent by 1995. 14 The cost of the new controls, however, is substantial. EPA estimates that utilities will have to spend tens of billions of dollars by 1995 on pollution control under the new NSPS. 15 Consumers will ultimately bear these costs, both directly in the form of residential utility bills, and indirectly in the form of higher consumer prices due to increased energy costs. 16 Coinciding with these trends the utility industry is expected to have continued and significant growth. Under the new NSPS EPA projects that overall utility capacity should increase by about 50 percent with approximately 300 new fossil-fuel fired power plants to begin operation within the next ten years. 17 And approximately 350 new plants (capable of generating 250 Gigawatts (“GW”)) are expected to be constructed by 1995. 18 Present levels of national coal production and consumption will triple by 1995. 19 With oil scarce, the future of nuclear and solar energy uncertain, and hydro limited, “the nation’s rich and cheap coal reserves call for exploitation.” 20 Not surprisingly, coal burning power plants’ already preeminent share of electric power produced in the United States will grow over the remainder of this century. 21

While the volume and technical complexity of the material necessary for our review is daunting 22 we have endeavored to con *315 sider thoroughly the claims and myriad arguments proffered by the parties. We will discuss the basis of our decision on the principal challenges of the parties. We will not attempt, however, to discuss each and every point briefed, nor do we feel compelled to adhere religiously to the analytic framework devised by the parties.

D. Procedural History

In 1970 Congress for the first time authorized the federal government to set performance standards limiting emissions from newly built or modified sources of air pollution. 23 These sources to be controlled were those that EPA determined emitted pollution contributing substantially to the endangerment of the public health or welfare. 24 EPA decided that large coal-fired generators fell within that category. 25 In December 1971 EPA issued a NSPS for these sources. 26 That first NSPS applied to units capable of firing more than 250 MBtu per hour, and limited sulfur dioxide emissions to 1.2 lbs./MBtu and particulate matter emissions to 0.10 lbs./MBtu. 27 Under this standard it was possible to satisfy the emission limitations simply by burning coal with a low sulfur content. 28

In 1976 the Sierra Club and the Oijato and Red Mesa Chapters of the Navajo Tribe petitioned EPA to revise the NSPS so as to require a 90 percent reduction in sulfur dioxide emissions. 29 The petition claimed that advances in technology since 1971 justified a revision of the standard. In response to the petition EPA began an inves *316 tigation of whether the standard should be changed. 30

While EPA’s decision was pending the Clean Air Act Amendments of 1977 were signed into law. Section 111 of the amendments, discussed more fully below, required EPA to revise the standards of performance for electric power plants within one year after the August 1977 enactment date. 31 When it appeared that EPA would not meet this deadline, the Sierra Club filed a complaint in the District Court for the District of Columbia. The court approved a stipulation requiring the proposed regulations to issue in September 1978, and promulgation of final regulations within six months after the proposal. Eventually, after further delay, the final NSPS were promulgated in June 1979. 32

Several parties petitioned EPA for reconsideration of the revised NSPS. In February of 1980 EPA denied all the petitions for reconsideration. 33

The present appeal followed. Petitions for review of the NSPS were filed in this court by the Electric Utilities (No. 79-1719), Sierra Club (No. 79-1565), EDF (No. 79-1874), and CARB (No. 79-1867). In addition, petitions to review EPA’s denial of the requests for reconsideration of the final NSPS were filed by the Electric Utilities (No. 80-1187), Sierra Club (No. 80-1201), EDF (No. 80-1213), and CARB (No. 80-1338). All of these cases have been consolidated.

II. THE VARIABLE PERCENTAGE REDUCTION OPTION We have already noted that the final NSPS adopted by EPA include an optional variable percentage reduction standard. Under this optional standard a utility plant can permissibly reduce its sulfur dioxide emissions by less than 90 percent of potential uncontrolled emissions if the amount of sulfur dioxide emitted following the use of pollution control technology is less than 0.60 lbs./MBtu. 34 In no instance, however, can a plant reduce emissions by less than 70 percent of potential uncontrolled emissions. 35 As a result of this option, the NSPS requirements for percentage reduction of sulfur dioxide removal vary on a sliding scale ranging from a minimum of 70 percent to a maximum of 90 percent. 36 There is no dispute that the 70 percent floor in the standard necessarily means that, given the present state of pollution control technology, utilities will have to employ some form of flue gas desulfurization (“FGD” or “scrubbing”) technology. 37

Sierra Club contests EPA’s authority under section 111 of the Act to vary from a uniform national percentage reduction standard (“uniform standard” or “full control”) 38 and the reasonableness of EPA’s *317 justification for doing so in light of the administrative record. 39 Additionally, Sierra Club argues that the variable standard is fatally flawed and must be set aside re *318 gardless of supporting evidence on the record because the rulemaking was procedurally defective. 40 The procedural objections to the variable control component of the NSPS stem from Sierra Club’s assertion that EPA did not give adequate notice of the basis for the variable standard or provide sufficient opportunity for adversarial comment on the agency’s purported justification for the rule. We turn to the question of EPA’s statutory authority first.

A. EPA’s Authority Under Section 111 to Issue A Variable Standard

Sierra Club’s challenge to variable control raises the fundamental issue of whether EPA violated section 111 of the Clean Air Act by establishing a sliding scale for the reduction of sulfur dioxide emissions based on the sulfur content of coal burned in new utility plants. We find that section 111 of the Act authorizes such a variable standard. 41

1. The Statutory Language

To evaluate the competing interpretations of section 111 we turn first to its text 42 Initially we find that the language of section 111 neither imposes a single, nationally uniform, percentage reduction standard nor prohibits EPA from varying the standard. Rather, section 111 merely requires inter alia:

[T]he achievement of a percentage reduction in the emissions from such category of sources [like new coal burning utility plants] from the emissions which would have resulted from the use of fuels which are not subject to treatment prior to combustion .... 43

The absence of any express mandate in this language to adhere to a single percentage reduction standard critically undercuts Sierra Club’s arguments that EPA could not vary the standard below the level which is technologically feasible.

In fact, EPA is expressly authorized by section 111 to “distinguish among classes, types and sizes within categories of new sources for the purpose of establishing . . . standards.” 44 Thus, the statute provides on its face that EPA does not have to set a uniform percentage reduction requirement for an entire category of emission sources. On the basis of this language alone, it would seem presumptively reasonable for EPA to set different percentage reduction *319 standards for utility plants that burn coal of varying sulfur content. 45 Certainly the text of the statute nowhere forbids a distinction based on sulfur content.

Other provisions of section 111 also belie the notion that EPA lacks discretion to vary the percentage reduction requirement according to the sulfur content of coal. For example, section 111(a) explicitly instructs EPA to balance multiple concerns when promulgating a NSPS:

[A] standard of performance shall reflect the degree of emission limitation and the percentage reduction achievable through application of the best technological system of continuous emission reduction which (taking into consideration the cost of achieving such emission reduction, any nonair quality health and environmental impact and energy requirements) the Administrator determines has been adequately demonstrated. 46

(Emphasis supplied.) Having given EPA this mandate, Congress surely could not have meant to bind the agency to issuance of a uniform standard even though the agency’s balancing of cost, energy, and non-air quality health and environmental factors indicated that the percentage standard should vary according to the sulfur content of coal.

Furthermore, reading section 111 to permit a variable standard based on the sulfur content of coal comports with common sense which suggests that the amount of sulfur in coal is the most relevant factor in designing standards to reduce emissions of sulfur in the gaseous wastes of coal combustion. Quite obviously, the “best technological system,” considering cost, energy, and nonair health and environmental factors may well vary depending on the sulfur content of the coal that is burned.

2. The Legislative History

Sierra Club relies on portions of the legislative history of the 1977 Amendments to the Clean Air Act to demonstrate that, no matter how logical it may seem to permit the percentage reduction standard to vary according to the sulfur content of coal burned by utilities, Congress nevertheless meant to forbid such variable control levels. But the statements in the legislative history Sierra Club cites to us, even assuming that they are entitled to substantial weight in the face of a relatively clear text, do not adequately support Sierra Club’s interpretation of the Act.

We note initially that a specific percentage reduction requirement was added to the text of section 111 only by the Conference Committee after the bills had passed both Houses of Congress. 47 The Conference Committee Report explaining the requirement clearly contemplated the adoption of a variable standard:

[T]he Conferees agreed that the Administrator may, in his discretion, set a range of pollutant reduction that reflects varying fuel characteristics. Any departure from the uniform national percentage reduction requirement, however, must be accompanied by a finding that such a departure does not undermine the basic purposes of the House provision and the other provisions of the act, such as maximizing the use of locally available fuel. 48

(Emphasis supplied.) Subsequently, during the House consideration of the Report the *320 Conference Committee submitted a “Clarifying Statement” which stated that it was only fuel characteristics that could justify a departure from uniform control:

While the Conferees agreed that the Administrator may set the percentage reduction requirement as a percentage range, the Conferees expect the Administrator to be exceedingly cautious if he should elect to do so. Any such range of percent reduction would be allowed only to reflect varying fuel characteristics, and must be based on a carefully and completely documented finding by the Administrator that such departure from the strict requirement does not undermine the basic purposes of the House provision as expressed on pages 183 through 195 of the House Report number 95-294. 49

(Emphasis supplied.) Similarly, Senate consideration of the Report included a Clarifying Statement by Senator Muskie that recognized a variable range of percentage reduction was permissible:

EPA’s Administrator is given the flexibility to set a range of pollutant removal based on varying fuel characteristics if he finds that the NSPS objectives [of the Act] are not undermined. 50

(Emphasis supplied.)

Even in the face of this legislative history, however, Sierra Club contends that “it is crystal clear that sulfur content of coal was not to be one of the ‘varying fuel characteristics’ which would justify a departure from a uniform standard.” 51 We are frankly at a loss to understand this statement. Neither the remarks of Representative Rogers, the House manager, 52 nor Senator Muskie, the Senate manager, 53 when introducing the Conference Committee Reports to their respective Houses, supports Sierra Club’s narrow interpretation of the phrase “fuel characteristic” to exclude sulfur content. Sierra Club relies on Senator Domenici’s “additional statement” submitted after the close of the floor debate on the Senate version of the bill (S. 252) — before the bill went to Conference — which reads in part:

The House amendments to the Clean Air Act (H.R. 6161) contain a provision — section 111 — that effectively requires all new coal-fired powerplants to meet the same percentage reduction of pollution removal on new powerplants regardless of the sulfur content of the coal burned. Any doubts on this matter are dispelled by the explicit report language. 54

(Emphasis supplied.) When read in context, however, it is clear that Senator Domenici was arguing that the Senate should not acquiesce in Conference to any demand for a uniform percentage reduction applied to all coals which he believed was implied in the House bill. Sierra Club’s reliance on this statement is misplaced because the statement was made before the Conference Committee met at a time when neither the House nor the Senate bill contained any express provision for a percentage reduction. In fact, Senator Domenici’s views opposing a uniform standard based on sulfur content can be viewed as a motivating factor in the Conference Committee’s adoption of a more flexible standard in the final bill that allowed such a variation. 55 Nothing else in the legislative history comes close to a directive that sulfur content is not a *321 relevant fuel characteristic for setting a variable standard. 56

Sierra Club also argues that even if section 111 permits the standard to vary depending on the sulfur content of coal, its language was designed to permit a nonuniform standard only in the limited circumstance where a “best technological system” could not achieve the national percentage on certain types of coal. That is, EPA could vary the standard only to reflect the different maximum feasible percentage reductions achievable for different sulfur content coals. Under this view EPA could not relax the standard when a higher percentage reduction is technologically feasible. Thus, in this case because it is not disputed that wet scrubbing could achieve 90 percent reduction on low sulfur coal, EPA has no authority to vary the standard below the 90 percent level.

We do not believe that this interpretation of section 111 is warranted by a fair reading of the Act or the underlying legislative history. The text gives EPA broad discretion to weigh different factors in setting the standard. The legislative history indicates that EPA should be “exceedingly cautious” in allowing the standard to vary, but nevertheless, recognizes that such a determination is within the range of EPA’s discretion. 57 The required finding that must underlie a variable standard is much broader than a mere determination that uniformity is not achievable. Rather, EPA has the discretion to vary the standard upon finding “that such a departure [from uniform control] does not undermine the basic purposes of the Act.” 58 Here EPA has made such a finding. While the reasonableness of this finding is challenged on this appeal and will be reviewed below, 59 here it cannot be said that in making the determination EPA acted beyond its statutory authority. 60

In addition to its arguments about the proper interpretation of section 111, Sierra *322 Club maintains that variable control violates the total statutory scheme of the Clean Air Act because it is irreconcilable with other important features of the 1977 Amendments to the Act. 61 In particular, Sierra Club contends that variable control is inherently inconsistent with the provisions in the Act designed to prevent the deterioration of air quality 62 and visibility 63 in designated areas, primarily in the Southwest. EPA responds first that, in fact, the variable standard is consistent with the other programs established by the Clean Air Act. This argument is grounded in the extensive regulatory analysis performed by EPA which showed that variable control served the interests of air quality and visibility as well as any uniform standard. We save for later our review of the legitimacy of that regulatory analysis and the reasonableness of EPA’s conclusion that the variable standard actually promotes improved air quality and visibility. 64 At this point, we note that if its analysis is reasonable, then EPA is right and the variable standard does not conflict with other goals. Second, EPA argues convincingly that the variable standard does not infringe the other special programs' of the Act, even if variable control would result in some decreases in air quality and visibility in certain parts of the country. This is because the NSPS authorized in section 111(a) are but one of many Clean Air Act requirements that might be applied by EPA or state agencies to new plants. 65 To the extent that theré are localized problems with air quality and visibility under national NSPS, the Act permits more stringent requirements to be applied in problem areas in addition to the NSPS. Thus, accepting arguendo Sierra Club’s view of the facts — that the new NSPS would not foster air quality and visibility in certain specially protected areas — it still cannot be held as a matter of law that the standard must fail because it impedes the other statutory mechanisms for coping with these local problems.

We find, in sum, that EPA has the authority under section 111 of the Act to promulgate the variable standard and now turn to a consideration of whether EPA’s decision to adopt the variable standard was reasonable and supported by the record.

B. The Reasonableness of EPA’s Decision to Issue a Variable Standard

In reviewing the merits of EPA’s variable standard, our function is to ensure *323 that “the agency, given an essentially legislative task to perform, has carried it out in a manner calculated to negate the dangers of arbitrariness and irrationality in the formulation of rules ... for the future.” 66 If we find EPA's choice of variable control to be arbitrary and capricious then we will set the standard aside. 67 We do not consider the policy issues de novo, substituting our judgment for that of the agency, but evaluate whether the agency has exercised reasoned discretion. This means that the agency must consider all of the relevant factors and demonstrate a reasonable conneetion between the facts on the record and the resulting policy choice. 68

1. Technical Background

The controversy over EPA’s justification for variable control centers on two processes for flue gas desulfurization (“FGD” or “scrubbing”) referred to by the parties as wet scrubbing and dry scrubbing. 69 Scrubbing, in contrast to other techniques for reduction of sulfur emission from coal combustion, 70 involves the maintenance of a large scale chemical reaction to clean the smoke produced by coal combustion. 71 Typically, as exhaust gases flow up *324 a power plant smokestack, they are exposed to an absorbent medium that is sprayed in their path. Sulfur dioxide in the gas reacts with the chemical absorbent and takes a form which can be collected and removed from the exhaust. 72

The type of wet scrubbing process relied on by EPA during this rulemaking was a “properly designed, installed, operated and maintained” lime or limestone FGD system. 73 This wet scrubbing system requires that large quantities of lime or ground limestone be mixed with water to form a slurry. The slurry is sprayed into flue gas and absorbs sulfur dioxide which reacts with the slurry to form precipitates (predominantly calcium sulfite and calcium sulfate), which are in turn removed, dewatered, and disposed of in the form of sludge. 74 A simplified flow diagram of a wet lime/limestone system is shown as Figure 1 in the appendix to this opinion.

Dry scrubbing is a newer and relatively less established technological alternative to wet lime/limestone scrubbing systems. 75 Interest in developing dry scrubbing has been stimulated by perceived advantages over wet scrubbing. 76 The dry scrubbing design which EPA focused on during the rulemaking 77 removes sulfur dioxide in two stages which incorporate the use of a spray dryer and a baghouse. 78 In this system a spray dryer (similar to a wet scrubber) is used with lime, soda ash, or other reagents to scrub sulfur dioxide from flue gases. Unlike wet scrubbing systems, since the flue gas leaving the spray dryer is “hot” (150-180° F) due to the minimal use of water in the spray dryer (by design), no additional reheating of the exhaust plume is *325 required. 79 Following the spray dryer, a baghouse is used to collect all particulate matter (including sulfur dioxide reactants). 80 Simplified flow diagrams of typical dry scrubbers are shown as Figures 2 and 3 in the appendix to this opinion.

2. EPA’s Explanation for the Variable Standard

(a) The Factors Considered By EPA

While the parties dispute the proper analytic method for balancing the relevant factors, they agree, with one exception, on the factors themselves which are relevant to EPA’s decision to issue the variable standard. These factors are enumerated in section 111 of the Act and in the legislative history.

Section 111(a)(1), as revised in 1977, requires EPA to weigh cost, energy, and non-air quality health and enviromental factors in setting a percentage reduction standard achievable by the best technological system of continuous emission reduction. 81 During its passage through Congress the Conferees issued a clarifying statement that EPA may promulgate a variable percentage reduction standard so long as the agency determines that the standard does not undermine the essential purposes of the Act. 82 The parties agree that these purposes are as follows:

1. The standards must not give a competitive advantage to one State over another in attracting industry.

2. The standards must maximize the potential for long-term economic growth by reducing emissions as much as practicable. This would increase the amount of industrial growth possible within the limits set by the air quality standards.

3. The standards must to the extent practical force the installation of all the control technology that will ever be necessary on new plants at the time of construction when it is cheaper to install, thereby minimizing the need for retrofit in the future when air quality standards begin to set limits to growth.

4 and 5. The standards to the extent practical must force new sources to burn high-sulfur fuel thus freeing low-sulfur fuel for use in existing sources where it is harder to control emissions and where low-sulfur fuel is needed for compliance. This will (1) allow old sources to operate longer and (2) expand environmentally acceptable energy supplies.

6. The standards should be stringent in order to force the development of improved technology. 83

Sierra Club objects that EPA also took account of the impact of alternative standards on future national levels of sulfur dioxide emissions. Paradoxically, Sierra Club argues that “EPA may not consider total air emissions in deciding on a proper NSPS.” 84 Sierra Club reasons that by specifying only nonair quality health environmental considerations in section 111 Congress meant to exclude EPA's discretion to consider air quality effects of different standards.

We find this position untenable given that one of the agreed upon legislative *326 purposes, set out above, requires that the standards must maximize the potential for long term economic growth “by reducing emissions as much as practicable.” 85 (Emphasis supplied.) In any event, we can think of no sensible interpretation of the statutory words “best technological system” which would not incorporate the amount of air pollution as a relevant factor to be weighed when determining the optimal standard for controlling sulfur dioxide emissions. Control technologies cannot be “best” if they create greater problems than they solve. 86 In fact, we do not see how we could uphold a variable standard if EPA had not evaluated its effect on air emissions.

(b) EPA’s Regulatory Analysis

EPA performed a regulatory analysis in three phases to evaluate alternative standards. Phase one of the analysis began before EPA published its proposed standards. Prior to framing alternative standards for consideration, EPA evaluated different control technologies in terms of performance, costs, energy requirements and environmental impacts. EPA also performed a preliminary study of these factors at the national, regional and plantsite levels and toward this end employed econometric computer models to forecast the nature of the utility industry in future years. The initial modeling effort was completed in April 1978 and revised in August 1978.

After this preliminary analysis EPA proposed a uniform 85 percent reduction standard while reserving judgment on whether the uniform percentage reduction standard was preferable to several alternative standards. EPA announced that the final decision would await additional analysis and public comment on the proposal. 87 At that time the agency also announced that five methods of “wet” scrubbing were adequately demonstrated and that these technologies could all attain the proposed 85 percent limitation. 88 The ensuing rulemaking thus focused not on which technology should be employed, but on the appropriate level of control. 89

The regulatory analysis entered phase two following the September 1978 proposal. EPA conducted additional analyses of the impacts of alternative sulfur dioxide standards. The impacts analyzed included total air emissions, utility investment in new plant and pollution equipment, consumer costs, energy production and consumption, coal use, utility consumption of oil and natural gas, and the amount of western low sulfur coal shipped East. 90 In addition, supplementary analyses were performed to assess the impact of alternative emission ceilings on specific regional coal reserves, to verify the performance characteristics of alternative scrubbing technologies, and to assess the sulfur reduction potential of coal preparation techniques. As part of the phase two analysis, a joint working group comprised of representatives from EPA, the Department of Energy, the Council of Economic Advisors, the Council on Wage and Price Stability, and others reviewed the underlying assumptions of the econometric model used in the August 1978 analysis and worked to develop new standards for testing in the computer model. As a result of the joint working group’s efforts some assumptions were changed 91 and a number of *327 alternative standards were defined and considered. 92 During phase two EPA also considered public comments on the proposal, identified critical parameters of uncertainty in the model, and revised the model so as to incorporate new considerations such as credits for coal washing which previously had not been properly accounted for in the model. The results of the phase two analysis were published 93 and discussed at a public hearing in December 1978. 94

Phase three of EPA’s regulatory analysis occurred after the public hearing and after the close of the formal comment period on the proposed NSPS. This third stage featured for the first time EPA’s formal consideration through its computer model of the impacts of dry scrubbing technology, a subject which will be discussed at length below. 95 During phase three the model was run to forecast the impacts of each potential standard, first assuming the use of wet scrubbers only, and then assuming that utilities would use dry scrubbers in situations where it was economically and technologically feasible to do so. 96 EPA obtained separate results under the alternative wet scrubbing and dry scrubbing assumptions. 97 In brief, the phase three modeling analysis indicated that “[t]he variable control option produces emissions that are equal to or lower than the other options under both the wet scrubbing and dry scrubbing assumptions.” Further, under the wet and dry assumptions, variable control as compared to uniform control was predicted to result in more coal capacity in newer and “cleaner” utility plants, to have a clear cost advantage, to use less oil, and to have an equivalent impact on coal production. 98

(c) EPA’s Stated Rationale for the Variable Standard

EPA’s explanation for the adoption of the variable standard is contained in a long preamble accompanying the publication of the final NSPS. 99 EPA stated that comments received from advocates of variable control supported a departure from uniform control principally on the basis that variable control “best satisfies the statutory language of Section 111 because it would achieve virtually the same emission reductions at a national level as a uniform approach but at substantially lower costs.” 100 “In addition [the commentators] argue that a variable control option would provide a better opportunity for the development of . . . dry SO2 control systems which they felt held considerable promise for bringing about S02 emission reductions at lower costs and in a more reliable manner.” 101 These comments, EPA explained, were the impetus for the phase three modeling analysis. EPA concluded that the results of this further analysis, as reported in the preamble and scrutinized below, 102 demonstrated that the variable control option was best. EPA justified the variable standard in terms of the policies of the Act as follows:

The standard reflects a balance in environmental, economic, and energy consideration by being sufficiently stringent to bring about substantial reductions in SO2 emissions (3 million tons in 1995) yet does so at reasonable costs without significant energy penalties. When compared to a uniform 90 percent reduction, the standard achieves the same emission reductions at the national level. More impor *328 tantly, by providing an opportunity for full development of dry S02 technology the standard offers potential for further emission reductions (100 to 200 thousand tons per year), cost savings (over $1 billion per year), and a reduction in oil consumption (200 thousand barrels per day) when compared to a uniform standard. The standard through its balance and recognition of varying coal characteristics, serves to expand environmentally acceptable energy supplies without conveying a competitive advantage to any one coal producing region. The maintenance of the emission limitation at 520 ng/j (1.2 lb SO2 million Btu) will serve to encourage the use of locally available high-sulfur coals. By providing for a range of percent reductions, the standard offers flexibility in regard to burning of intermediate sulfur content coals. By placing a minimum requirement of 70 percent on low-sulfur coals, the final rule encourages the full development and application of dry S02 control systems on a range of coals. At the same time, the minimum requirement is sufficiently stringent to reduce the amount of low-sulfur coal that moves eastward when compared to the current standard. Admittedly, a uniform 90 percent requirement would reduce such movements further, but in the Administrator’s opinion, such gains would be of marginal value when compared to expected increases in high-sulfur coal production. By achieving a balanced coal demand within the utility sector and by promoting the development of less expensive S02 control technology, the final standard will expand environmentally acceptable energy supplies to existing power plants and industrial sources.

By substantially reducing S02 emissions, the standard will enhance the potential for long term economic growth at both the national and regional levels. While more restrictive requirements may have resulted in marginal air quality improvements locally, their higher costs may well have served to retard rather than promote air quality improvement nationally by delaying the retirement of older, poorly controlled plants.

The standard must also be viewed within the broad context of the Clean Air Act Amendments of 1977. It serves as a minimum requirement for both prevention of significant deterioration and non-attainment considerations. When warranted by local conditions, ample authority exists to impose more restrictive requirements through the case-by-case new source review process. When exercised in conjunction with the standard, these authorities will assure that our pristine areas and national parks are adequately protected. Similarly, in those areas where the attainment and maintenance of the ambient air quality standard is threatened, more restrictive requirements will be imposed. 103

Sierra Club insists that EPA’s conclusions about dry scrubbing technology are in effect the “cornerstone” of the variable standard. Therefore, Sierra Club argues, the standard must be judged solely on the basis of the validity of EPA’s so-called dry scrubbing rationale. We do not agree and believe that it is appropriate to focus on the statutory, substantive, and procedural issues surrounding the dry scrubbing controversy in a later section of this opinion. For now we address Sierra Club’s challenges to the standard which are independent of the questions raised about the role of dry scrubbing in the outcome of the final rule.

3. An Examination of EPA’s Rationale for the Variable Standard

Sierra Club challenges both EPA’s findings about the relative national and regional impacts of alternative standards and the conclusions the agency drew from these findings. First, Sierra Club raises a number of overlapping arguments in support of its view that the findings themselves are methodologically defective. Sierra Club’s position, as we understand it, is that the findings cannot amount to substantial evidence because the agency’s regulatory anal *329 ysis which generated the findings was ill-conceived and impermissible under the Act. Specifically, Sierra Club objects to the conceptual framework by which EPA took account of the cost, energy, and environmental considerations mandated by section 111 of the Act. In addition, Sierra Clu