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Justices Hear Challenge to EPA’s Authority to Regulate Greenhouse Gas Emissions

March 3, 2014

On February 24th, the U.S. Supreme Court heard oral argument in Utility Air Regulatory Group v. EPA,[1] a case that has the potential to narrow EPA’s authority to regulate emissions of greenhouse gases (GHGs) from stationary sources, such as power plants and factories, under the Clean Air Act. The case is the culmination of numerous challenges in the D.C. Circuit to EPA’s authority to regulate GHG emissions under the Clean Air Act. The Supreme Court limited review to a relatively narrow question –whether EPA was required to regulate GHG emissions from stationary sources through the Clean Air Act’s Prevention of Significant Deterioration (PSD) and Title V permitting programs once GHG emissions became “subject to regulation” under another portion of the Act. Support for EPA’s decision to regulate GHGs under these programs appeared to split along familiar lines during oral argument, with Justice Kennedy representing the most likely swing vote. While the Justices did not seem interested in revisiting EPA’s authority to regulate GHGs under the Clean Air Act, the continued viability of EPA’s effort to incorporate GHGs into the Act’s most widely applicable permitting programs hangs in the balance.

Background

The Utility Air case before the Supreme Court is the culmination of over four years of EPA GHG rulemakings that followed the Supreme Court’s April 2007 decision in Massachusetts v. EPA. In that case, a sharply divided Supreme Court held that carbon dioxide and other GHGs fell within the Clean Air Act’s “sweeping” and “unambiguous” definition of “air pollutant,” and remanded a rulemaking petition back to EPA with instructions to consider an endangerment finding.[2] EPA responded in December 2009, when it determined that GHG emissions from mobile sources endangered human health and welfare (the Endangerment Finding).[3] EPA and the National Highway Traffic Safety Administration subsequently issued a joint rule (the Tailpipe Rule) that established the nation’s first standards for GHG emissions and set new corporate average fuel efficiency (CAFE) standards for new passenger vehicles and light trucks for model years beginning in 2012.[4]

EPA determined that when the Tailpipe Rule went into effect, that automatically triggered permitting requirements for stationary sources under the Clean Air Act’s PSD and Title V programs. The PSD program’s provisions largely focus on maintaining national ambient air quality standards (NAAQS) and are found in Part C of Title I of the Act.[5] There are six NAAQS pollutants, which do not include carbon dioxide or the other GHG pollutants.[6] The PSD program applies to areas that are in “attainment” or “unclassifiable” for any of the NAAQS pollutants.[7] Section 165 of the Clean Air Act requires that a PSD permit be obtained before constructing or making major modifications to any “major emitting facility.”[8] Section 169(1) defines “major emitting facility” as a stationary source which emits either 100 tons (for certain listed source categories) or 250 tons per year of “any air pollutant.”[9] To obtain a PSD permit, a covered source must, among other things, install best available control technology (BACT) “for each pollutant subject to regulation under” the Act.[10] Since 1980, in defining what constitutes a “major source” for purposes of PSD permitting, EPA has construed “any air pollutant” to mean “any air pollutant regulated under the Clean Air Act.”[11] This interpretation was reaffirmed in EPA’s PSD regulations adopted in 2002.[12] Thus, under EPA’s long-standing interpretation of the Act, a PSD permit is required for sources that will emit more than the PSD threshold of any regulated air pollutant, not just a NAAQS pollutant. The Title V program does not generally impose new substantive emission limitations, but instead, requires major stationary sources to obtain a permit that ensures compliance with applicable requirements under the Clean Air Act, including limits that have been imposed through a PSD permit.

Literal application of the 100/250 ton statutory thresholds to GHGs would have vastly expanded the number of sources subject to PSD permitting. Thus, in May 2010 EPA finalized a rule (the Tailoring Rule) to “tailor” applicability of the PSD and Title V operating permit programs with respect to GHGs.[13] The Tailoring Rule established much higher thresholds for GHGs. During an initial six month period, the Tailoring Rule limited GHG permitting to sources already required to obtain a PSD or Title V operating permit due to their other air emissions. Those sources were only required to address GHGs in their permits if their GHG emissions exceeded 75,000 tons per year (for the PSD program, these would be new or increased GHG emissions). For two years after that, PSD and operating permits would also be required based only on a facility’s GHG emissions, even if not required due to emissions of other pollutants.

In March 2010, EPA also clarified precisely when pollutants become “subject to regulation” and subject to BACT and other requirements under the PSD program (the Timing Rule).[14] EPA reaffirmed its historical interpretation that a pollutant does not become “subject to regulation” until some rule or statutory provision requires actual control (as opposed to monitoring) of emissions of that pollutant. Thus, EPA instructed that a PSD permit must require BACT for each pollutant that is subject to some form of control under a provision of the Clean Air Act or a regulation issued under authority of the Act, and this requirement expands each time a new pollutant becomes subject to “actual controls.” Under this interpretation, the GHG emission standards for cars and trucks, which apply to 2012 model year vehicles, “take effect” on January 2, 2011, as that is the first date a manufacturer could legally sell a 2012 model year vehicle.

A number of states and industry groups filed at least 80 petitions variously seeking review in the D.C. Circuit of all four components of EPA’s GHG regime – the Endangerment Finding, the Tailpipe Rule, the Tailoring Rule, and the Timing Rule. On June 26, 2012, the D.C. Circuit upheld all aspects of EPA’s GHG rules in an 82-page per curiam decision.[15] Following the decision, the D.C. Circuit denied en banc review over the dissents of two judges, including Judge Kavanaugh. Nine separate petitions for certiorari were filed with the Supreme Court challenging a variety of issues in the D.C. Circuit’s decision. The Supreme Court granted six of the petitions, but limited consolidated review to a single question involving regulation of GHGs under the PSD and Title V programs:

Whether EPA permissibly determined that its regulation of greenhouse gas emissions from new motor vehicles triggered permitting requirements under the Clean Air Act for stationary sources that emit greenhouse gases.

Supreme Court Review

Petitioners’ Arguments

Although the six petitioners’ briefs make a myriad of arguments and sub-arguments, these generally break down along two major themes. The first asserts that the phrase “any air pollutant,” as used in the Clean Air Act’s PSD provisions, does not encompass GHGs. The second focuses on the geographic location of the major stationary source, arguing that the Clean Air Act’s PSD provisions only apply to a facility that is located in an attainment area and emits more than the threshold amount of the specific pollutant for which its area has been designated as in attainment, rather than one that is located in an area designated as in attainment for some pollutant and that emits any pollutant in excess of the emission threshold.

Although Massachusetts v. EPA held that GHGs were a pollutant for purposes of the mobile sources regulated under Title II, petitioners argue that that ruling does not control the definition of pollutant in Title I because the term “pollutant” need not have the exact same meaning in all parts of the Clean Air Act. Petitioners contend that Congress created different Clean Air Act programs for different purposes, and various PSD provisions within Title I demonstrate that the program seeks to remedy a range of pollutants that are more narrow than those addressed within Title II.

In support, petitioners explain that the PSD program seeks to prevent deterioration of air quality in a specific geographically defined area. More specifically, the program is designed to protect the quality of the ambient air within those areas to prevent exposure-related harms by reducing the pollutants that cause those harms. Petitioners argue that GHGs do not fit with this statutory scheme because the detrimental global effects of GHGs do not cause a deterioration of the ambient air quality in a geographically limited area – the harm that PSD program is designed to protect. Accordingly, petitioners assert that Congress did not intend to include GHGs as a pollutant subject to PSD regulation. For additional support, Petitioners highlight that application of the statutorily mandated PSD emission level triggers would produce absurd results, by the agency’s own admission, because a large stationary source often produces GHG levels that are orders of magnitude higher than the conventional pollutants the PSD program was designed to regulate.

The petitioners seek to draw a comparison between EPA’s regulation of GHGs under the PSD program to actions taken by the Food and Drug Administration (FDA) to regulate tobacco under the Federal Food, Drug, and Cosmetics Act (FDCA), which were struck down by the Supreme Court in FDA v. Brown & Williamson Tobacco Corp.[16] There, although the plain language of the FDCA seemed to require FDA to impose a nationwide ban on cigarettes, the FDA sought to avoid this result by creating an intermediate regulatory regime to restrict marketing tobacco products to children. According to petitioners, the Court struck down the FDA’s action because the agency attempted to “chart its own regulatory course when an unambiguous statutory provision required the agency to ban all ‘dangerous’ drugs or devices within its jurisdiction.”[17] The petitioners argue that EPA charted the same course here by including raising the statutorily mandated threshold emission levels for GHGs through the Tailoring Rule. By extension, the petitioners assert that the Court should strike down EPA’s interpretation including GHGs in the PSD program or force EPA to implement the statutorily mandated thresholds and seek corrective legislation from Congress.

The second main argument, advanced by the American Chemistry Council (ACC), asserts that the PSD permitting requirements are “pollutant-specific” – meaning the PSD requirements are only triggered when a facility emits threshold quantities of a NAAQS pollutant in an area that is in attainment for that individual pollutant. The argument focuses on the language of Section 165(a), which states that a “major emitting facility … in any area to which this part applies” is subject to PSD permitting.[18] According to ACC, the phrase “in any area to which this part applies” in isolation is subject to two interpretations. The first, adopted by EPA, counsels that a major emitting facility must obtain a PSD permit if it exceeds the threshold levels of any air pollutant in an area that is in attainment for any NAAQS, regardless of whether that facility emits the pollutant for which the area is in attainment. The second, urged by ACC, is that Part C “applies” only to an area with respect to the pollutant or pollutants for which the area is in attainment.[19]

ACC supports its reading by pointing out that because there are six NAAQS criteria pollutants, each with a different emission standard, an area may be in attainment for some NAAQS pollutants while in non-attainment for others. Part C’s PSD provisions govern pollutants for which the area is in attainment, while a different section of Title I, Part D, governs the pollutants for which an area in in non-attainment. According to ACC, this structure counsels that Part C “cannot ‘apply’ to other pollutants in an area that are subject to regulation under different parts of the Act.”[20] Thus, the applicability of the PSD’s provisions is necessarily “pollutant specific.” ACC argues that EPA’s interpretation renders the phrase an “area to which this part applies” superfluous, because all areas of the county have been in attainment for at least one NAAQS criteria pollutant since the Act was passed. ACC asserts that the phrase only has “practical import” if it is read to restrict major emitting sources to those that emit threshold quantities of a NAAQS pollutant in an attainment area for that pollutant.[21] ACC correlates this reading with the purpose of the PSD program – to promote compliance with the NAAQS and prevent deterioration in attainment areas. It notes that since all areas of the country have been in attainment for at least one NAAQS pollutant, EPA’s interpretation applies Part C in a nationwide fashion, not in the more limited way that Congress intended. ACC closes by arguing that EPA’s interpretation cannot be correct because, as the agency itself acknowledged through the Tailoring Rule, that interpretation has led to absurd results. Thus, ACC argues that its own interpretation should control because it is the only reasonable interpretation of the statute.[22]

Government’s Response

The United States, on behalf of EPA, raises two main arguments in response. First, that EPA permissibly concluded that PSD requirements, including the BACT requirement, apply to the GHG emissions of major stationary sources subject to the PSD program. Second, that EPA permissibly determined that GHG emissions standing alone could trigger the PSD and Title V permitting requirements to a major stationary source.

The United States leads by defending its conclusion that PSD requirements apply to GHG emissions for sources otherwise subject to the PSD program. It notes that when a facility is subject to the PSD program by virtue of emitting a NAAQS criteria pollutant in an attainment area, the statute requires that facility to implement BACT “for each pollutant subject to regulation under” the Clean Air Act.[23] Following the Supreme Court’s Massachusetts v. EPA decision, GHGs are considered a “pollutant” under the Act, which became “subject to regulation” through EPA’s Tailpipe and Timing Rules. The United States counters petitioners’ argument that the PSD program only applies to regulate the six NAAQS criteria pollutants, arguing that although some PSD provisions are limited to regulating those specific pollutants, other provisions, such as the BACT requirement, plainly apply to emissions of both criteria and non-criteria pollutants. It also opposes petitioners’ contention that GHGs fall outside the PSD program because they are not “local” pollutants that affect ambient air quality in a specific geographical area, pointing out that the Court rejected a similar contention in Massachusetts v. EPA. The United States also resists petitioners’ reliance FDA v. Brown & Williamson, arguing that Massachusetts v. EPA previously rejected the petitioners’ comparisons between the FDCA’s regulation of tobacco products and the Clean Air Act’s regulation of GHGs.

The United States’ second main argument supports EPA’s conclusion that GHG emissions alone could trigger PSD permitting requirements. The United States points to two determinations made by EPA in 1980 – first, the agency construed the phrase “any air pollutant” in the definition of major emitting source to include any pollutant subject to regulation under the Clean Air Act; second, it concluded that above-threshold emissions of a pollutant (even a non-criteria pollutant) other than the one for which an area was in attainment could trigger the PSD program’s permitting provisions. According to the United States, once the Tailpipe Rule imposed GHG emissions regulations under Title II, EPA could only have avoided regulating GHGs under the PSD program by “abandoning” one or both of these “long-standing interpretive principles.”[24]

The United States counters petitioners’ attempts to exclude GHGs from the definition of pollutant subject to the PSD program, arguing that EPA’s consistent adherence to the interpretation set forth in 1980 is entitled to deference, especially where a complex statute such as the Clean Air Act is involved. Characterizing the petitioners’ alternative interpretations as “recently crafted” to “produce a particular result in a particular case,”[25] the United States urges the Court to uphold EPA’s interpretation that above-threshold emissions of any regulated pollutant under the Clean Air Act could trigger the Act’s PSD provisions.

The government argues that a narrower interpretation would lead to anomalies in the broader context to regulate GHGs under the Act. For example, the United States points to the Court’s 2011 decision, American Electric Power Co., Inc. v. Connecticut, which held that EPA’s ability to regulate GHG emissions for stationary sources under the Act’s New Source Performance Standards (NSPS) displaced any “federal common law right to seek abatement of carbon-dioxide emissions from fossil-fuel fired power plants.”[26] According to the United States, should the Court conclude the term “pollutant” in the PSD program excludes GHGs, this would stand in stark contrast to the definitions that include GHGs in the Court’s instruction regarding the Act’s Title II (mobile sources) and the NSPS program.

Petitioners’ briefs made much of EPA’s determination in the Tailoring Rule that immediately applying the statutorily mandated emissions levels to GHG emissions would lead to absurd results. The United States counters these arguments by highlighting that the agency did not “disavow the goal of ultimately apply those thresholds alone.”[27] Rather, EPA sought to design a “phased-in implementation” of the statutory thresholds that would account for GHG emissions. According to the United States, the agency sought to “whittle away” to resolve a massive problem over time, by “refining [its] preferred approach as circumstances change and [it] develop[s] a more nuanced understanding of how best to proceed.”[28]

Finally, the United States rebuts ACC’s argument that the PSD program can be triggered only by the emission of a criteria pollutant by a source located in an area in attainment for that pollutant. The United States argues that under ACC’s interpretation, “no facility will be subject to the PSD program requirements unless it emits criteria pollutants.”[29] Yet if Congress had intended the PSD provisions to apply only to criteria pollutants, the United States posits that it would have enacted the House’s original version of the PSD provision, which defined “major emitting facility” by reference to NAAQS criteria pollutant emissions. According to the United States, ACC’s interpretation would cause “significant anomalies” and create “perverse incentives” for facilities that emit above-threshold amounts of a single criteria pollutant, encouraging them to locate in non-attainment areas for their single criteria pollutant to avoid BACT regulation on all their other regulated pollutants. The United States argues that Congress could not have plausibly intended such a regulatory scheme.

Oral Argument

The Court heard oral argument on the case on February 24th. Due to the complexity of the arguments, the Court allowed forty-five minutes for each side rather than the traditional thirty. Attorney Peter Keisler of Sidley Austin argued for the private party petitioners, and Jonathan Mitchell, the Solicitor General of Texas, argued for the state petitioners. Donald Verrilli, the Solicitor General of the United States, argued the case on EPA’s behalf.

Keisler began the argument by staking out the position that GHG should not be included in the PSD program at all, because the PSD program is focused on “area-specific quality impacts, and not on a globally undifferentiated phenomena.” Thus, according to Keisler, GHG emissions do not trigger the PSD program and cannot be subject to BACT requirements. Through lively questioning, Justices Sotomayor, Kagan, Ginsburg, and Breyer revealed skepticism of the argument. Justice Kagan posited that EPA seemed faced with two choices: “exempt a broad class of pollutants” (GHGs from the PSD program) or “fudge the numbers” (raise the emission limits through the Tailoring Rule). Kagan highlighted EPA’s consistent thirty year interpretation of what constitutes a pollutant in the PSD program as “the most reasonable interpretation of [the statutory] phrases” and seemed to reject petitioners’ argument that EPA should “junk” that reasonable interpretation because “there’s a new kind of emitted [] chemical … that makes the [threshold] numbers not work.”[30]

Responding to Justice Kennedy, Keisler sought to distinguish Massachusetts v. EPA’s holding that GHGs are a pollutant under Title II as controlling the pollutant definition in the PSD program. According to Keisler, the Massachusetts Court engaged in a two-step process, first determining whether GHGs were pollutants” under the Act and then asking whether application of that definition to Title II’s provisions would produce “extreme measures or counterintuitive results.”[31] He asserted that the second step of the analysis prevents “mechanically” applying the same pollutant definition to all parts of the Act “without some additional analysis of the context of those provisions.”[32] Keisler conceded that the Court held in American Elec. Power Co., Inc. v. Connecticut that EPA could regulate GHGs from stationary sources through the NSPS. However, he countered that NSPS, not the PSD program, was the logical avenue for EPA to regulate stationary source GHG emissions. His answer focused on the fact that, according to Keisler, the NSPS program would establish a national uniform emissions standard that the governed facilities would then decide how to meet, rather than the PSD program’s approach, under which 90 different state and local permitting authorities would need to “decide plant by plant what … each plant in their jurisdiction should do about global warming.”[33]

Keisler also reiterated the argument advanced by ACC in the petitioners’ briefing, that the PSD requirements are only triggered by emissions of above-threshold amounts of a pollutant for which the area is in attainment. Other than sparring with Justice Kagan over the differences between ACC’s argument and the argument advanced in Judge Kavanaugh’s dissent to the denial of en banc review, which Keisler represented as “similar” to ACC’s, this argument appeared to gain little traction.

Jonathan Mitchell, the Solicitor General of Texas, echoed Keisler’s argument that the term “air pollutant” is flexible to mean different things in different parts of the Act. He went further to argue that EPA should have construed the term air pollutant in the PSD program to exclude GHGs in order to avoid the absurdity that resulted from having to raise the emissions thresholds under the Tailoring Rule. In response to Mitchell’s characterization of raising emissions levels as “agency self-help,” Justice Kagan noted that the agency’s decision was at the “apex of Chevron deference.” In Kagan’s words, there’s “nothing that gets more deference than this Agency with respect to this complicated a statute.”[34]

Solicitor General Donald Verrilli represented the United States before the Court. Verrilli began with the premise that the Court held in American Elec. Power Co., Inc. v. Connecticut that EPA had the authority to regulate emissions of GHGs from stationary sources under the Clean Air Act’s NSPS program. He then explained that Congress designed the PSD and NSPS programs to work together, leading to the conclusion that if EPA could regulate GHGs through the NSPS, they should be an “air pollutant” for purposes of the PSD program as well. Verrilli argued that Congress added the PSD program seven years after creation of the NSPS, partly because it was dissatisfied with EPA’s progress for setting emission standards for various sources through the NSPS program. According to the Solicitor, Congress sought to have the PSD program “fill the breach” when there wasn’t an applicable standard under the NSPS. Further, reading GHG emissions out of the PSD program would further delay GHG stationary source regulation, because of the time needed to implement controls source by source under the NSPS program. This result would lead to the very problem – delay – that Congress attempted to avoid by adding the PSD program in the first place.

Responding to Justice Sotomayor’s question – if the government was going to lose the case, on what grounds should the Court base its decision – Verrilli theorized that carbon dioxide (CO2) should be excluded from the definition of “air pollutant” that triggers the PSD requirements. Verrilli explained that CO2 was the only GHG that required raised threshold levels and excluding that particular gas from the PSD permit trigger is the “least problematic [option] from EPA’s point of view.”[35] Justice Ginsberg pointed out that only the triggering provisions would exclude CO2 under this theory. Verrilli appeared to agree that CO2 would still be regulated for stationary sources that are otherwise subject to the PSD requirements through the BACT requirement – because it requires limitation technology “for each pollutant subject to regulation under” the Act.[36]

Near the end of Verrilli’s time at the lectern, Justice Kennedy asked a question that may foreshadow the strength of EPA’s arguments before the Court, given Kennedy’s key position as a possible swing vote: “I have to say in reading the brief for the States and reading your brief, I couldn’t find a single precedent that strongly supports your position. … [W]hat are the cases you want me to cite if I write the opinion to sustain your position?”[37] Verrilli acknowledged that “there aren’t a lot of cases,” but pointed Kennedy to Morton v. Ruiz, a decision that the United States failed to cite in its papers before the Court.[38]

Conclusion

Both EPA and the petitioners faced tough questioning from the bench, and no clear “winner” appeared during oral argument. While Justice Kennedy’s question regarding a lack of precedent supporting EPA’s position suggests he may not be willing to fully endorse EPA’s position, nothing in the Justices’ questions indicated that the Court is prepared revisit or overrule Massachusetts v. EPA.

For more information regarding United Air Regulatory Group v. EPA or GHG regulation under the Clean Air Act, contact any member of Marten Law’s Air Quality or Climate Change practice groups.

[1] United Air Regulatory Grp. v. Envtl. Prot. Agency, Docket Nos. 12-1146, 12-1248, 12-1254, 12-1268, 12-1269, 12-1272 (consolidated). The oral argument transcript is available here. The briefs are available here.

[2] Massachusetts v. E.P.A., 549 U.S. 497, 532 (2007).

[3] Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202(a) of the Clean Air Act; Final Rule, 74 Fed. Reg. 66496 (Dec. 15, 2009).

[4] Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards; Final Rule, 75 Fed. Reg. 25324 (May 15, 2010).

[5] See Clean Air Act Title I, Part C.

[6] See EPA, National Ambient Air Quality Standards.

[7] 42 U.S.C. § 7471.

[8] 42 U.S.C. § 7475(a).

[9] 42 U.S.C. § 7479(1).

[10] 42 U.S.C. § 7475(a)(4).

[11] Requirements for Preparation, Adoption, and Submittal of Implementation Plans; Approval and Promulgation of Implementation Plans , 45 Fed. Reg. 52,676, 52,711 (Aug. 7, 1980).

[12] Prevention of Significant Deterioration and Nonattainment New Source Review, 67 Fed. Reg. 80,186, 80,239-40, 80,264 (Dec. 31, 2002).

[13] Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule; Final Rule, 75 Fed. Reg. 31514 (June 3, 2010).

[14] Reconsideration of Interpretation of Regulations That Determine Pollutants Covered by Clean Air Act Permitting Programs, 75 Fed. Reg. 17004 (April 2, 2010).

[15] Coalition for Responsible Regulation, Inc. v. E.P.A., 684 F.3d 102 (D.C. Cir. 2012); see also EPA’s Greenhouse Gas Regulations Upheld By Federal Court of Appeal, Marten Law Environmental News (June 28, 2012).

[16] Food and Drug Admin. v. Brown & Williamson Tobacco Corp., 529 U.S.120 (2000).

[17] State Petitioners Brief at 6.

[18] ACC Brief at 15 (quoting 42 U.S.C. § 7475(a)).

[19] ACC Brief at 16.

[20] ACC Brief at 17 (emphasis in original).

[21] ACC Brief at 19.

[22] ACC Brief at 24-29.

[23] United States’ Response Brief at 25-26 (quoting 42 U.S.C. § 7475(a)(4)).

[24] United States’ Response Brief at 40.

[25] United States’ Response Brief at 44.

[26] Am. Elec. Power Co., Inc. v. Conn., 131 S. Ct. 2527, 2538 (2011).

[27] United States’ Response Brief at 50.

[28] United States’ Response Brief at 51 (quoting Massachusetts v. Envtl. Prot. Agency, 549 U.S. at 524).

[29] United States’ Response Brief at 54.

[30] Oral Argument Transcript (“Tr.”) at 17.

[31] Tr. at 20.

[32] Tr. at 20.

[33] Tr. at 23.

[34] Tr. at 44.

[35] Tr. at 68.

[36] Tr. at 68.

[37] Tr. at 72.

[38] Tr. at 72; see also id. at 81.

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