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P is a nonprofit corporation that owns and operates eighteen CCCs in seven states. The majority of its CCCs house only federal inmates. P provides an alternative to traditional incarceration and attempts to facilitate the successful transition of prisoners back into society. While in a CCC, offenders must obtain employment, pay fines, restitution, child support, and subsistence, establish a budget, save money, and, if applicable, seek treatment for substance abuse and mental health issues, as well as attend classes in life skills, anger management, and wellness. D chooses which inmates are sent to P facilities. Front-end placements usually involve offenders with relatively short sentences who serve their entire sentence at the CCC. Back-end designations involve prisoners who have served the majority of their sentences in prison but are sent to a CCC for a time before their release in order to provide a transition of the offender back into society. Section 3621(b) grants D discretion to designate a prisoner's place of incarceration in 'any available penal or correctional facility that meets minimum standards of health and habitability . . . .' D's Legal Counsel issued an opinion that interpreted §3621(b) to allow D unlimited authority to place prisoners in any appropriate facility for incarceration, including those operated by the private sector. On December 13, 2002, Legal Counsel changed its interpretation of § 3621(b). It concluded that § 3621(b) does not give D general authority to place an offender in community confinement from the outset of his sentence or to transfer the offender from prison to community confinement at any time D chooses during the course of the offender's sentence. Front-end placements were no longer authorized and back-end offenders are only eligible for confinement in CCCs for the lesser of (i) ten percent of their sentence or (ii) six months -- periods specifically authorized by 18 U.S.C. § 3624(c) (2000). The authority to transfer a prisoner to a CCC came solely from § 3624(c), which limits the time a prisoner may spend in a CCC to 'a reasonable part, not to exceed six months, of the last 10 per centum of the term.' The changes had a severe impact on P. The lost revenue amounted to $ 1,214,599. Under the new policy, only people sentenced to imprisonment for 60 months or more can benefit from six months in a CCC, and many prisoners with sentences of less than 60 months would not be able to stay at a CCC for the necessary 120 days. P sued D seeking declaratory and injunctive relief. P alleges that the new interpretation is arbitrary and capricious, and failed to abide by the notice and comment provisions contained in § 553 of the Administrative Procedure Act. P claimed it was a mere interpretation and notice and comment were not required. The district court found that P was not within the zone of interests protected by § 3621(b), and therefore lacked standing. It dismissed the suit and P appealed.

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