Appendix — Environmental Defense v. Duke Energy Corporation
Supreme Court brief2007
Ask Donna
What actually matters in this document.
Text
United States Court of Appeals,
Fourth Circuit
UNITED STATES OF AMERICA, Plaintiff-Appellant,
ENVIRONMENTAL DEFENSE; NORTH CAROLINA
SIERRA CLUB; NORTH CAROLINA PUBLIC INTEREST
RESEARCH GROUP CITIZEN LOBBY/EDUCATION
FUND, Intervenors/Plaintiffs-Appellants,
v.
DUKE ENERGY CORPORATION, Defendant-Appellee.
No. 04-1763.
Argued and Submitted February 3, 2005.
Filed June 15, 2005.
Todd Sunhwae Kim, United States Department of Justice,
Environment & Natural Resources Division, Washington,
D.C., for the United States.
James Blanding Holman, [V, Southern Environmental Law
Center, Chapel Hill, NC, for Appellants Environmental
Defense, North Carolina Sierra Club, and North Carolina
Public Interest Research Group Citizen Lobby/Education
Fund.
F. William Brownell, Hunton & Williams, Washington, D.C.,
for Appellee.
Before LUTTIG and MOTZ, Circuit Judges, and Samuel G.
WILSON, United States District Judge for the Western
District of Virginia, sitting by designation.
MOTZ, Circuit Judge:
The United States brought this enforcement action
against Duke Energy Corporation, which provides North
Carolina and South Carolina with electricity generated from
eight plants located throughout the two states. The United
la
States maintains that Duke Energy on numerous occasions
modified these plants without first obtaining appropriate
permits in violation of the Clean Air Act. 42 U.S.C. §§ 7401
et seq. (2000). The district court granted summary judgment
to Duke Energy. See United States v. Duke Energy Corp., 278
F. Supp. 2d 619 (M.D.N.C. 2003). We affirm, albeit for
somewhat different reasons than those relied on by the district
court.
I.
The Clean Air Act is a complex statute supported by
an elaborate regulatory scheme; both have a complicated
history. This case involves two different, but complementary
provisions of the Act: the New Source Performance Standards
(“NSPS”) provisions, 42 U.S.C. § 7411, and the Prevention
of Significant Deterioration (“PSD”) provisions, 42 U.S.C. §§
7470-92.
In order to “protect and enhance the quality of the
Nation's air resources” and “promote the public health and
welfare,” 42 U.S.C. § 7401(b)(1), the Clean Air Amendments
of 1970 directed the Environmental Protection Agency
(“EPA”) to devise National Ambient Air Quality Standards
establishing the maximvm concentrations of certain air
pollutants allowable in each region of the United States. 42
U.S.C. § 7409. The Act then directed each State to design a
State Implementation Plan to effect compliance with its air
quality standards. 42 U.S.C. § 7410.
To help attain and thereafter maintain these air quality
standards, the 1970 amendments enacted the NSPS
provisions, which required the EPA to promulgate standards
regulating emissions from both newly constructed and
modified sources of pollution at power plants. 42 U.S.C. §
7411. Congress defined “modification” in the NSPS
provisions as “any physical change in, or change in the
method of operation of, a stationary source which increases
the amount of any air pollutant emitted by such source or
2a
which results in the emission of any air pollutant not
previously emitted.” 42 U.S.C. § 7411(a)(4).
Since 1971, the EPA has promulgated NSPS
regulations that define “modification” in virtually the same
words as the statute. See, e.g., 36 Fed. Reg. 24,876, 24,877
(Dec. 23, 1971); 40 C.F.R. § 60.2 (1976); 40 C.F.R. § 60.2
(2004). In 1975, the EPA added a regulation elaborating on
this definition and further defining “modification” by
reference to an increase in the hourly emission rate: a
modification includes “any physical or operational change to
an existing facility which results in an increase in the
emission rate to the atmosphere of any [regulated] pollutant,”
measured not in tons per year, but in kilograms per hour. 40
Fed. Reg. 58,416, 58,419 (Dec. 16, 1975) (codified at 40
C.F.R. § 60.14(a) & (b)). Modified equipment becomes
subject to the NSPS’s “technology-based” standards,
Alabama Power Co. v. Costle, 636 F.2d 323, 346 (D.C. Cir.
1980), which mandate the installation of the “best
demonstrated pollution control technology.” Potomac Elec.
Power Co. v. EPA, 650 F.2d 509, 518 (4th Cir. 1981)
{hereinafter PEPCo]}.
The NSPS program was not entirely successful. See
Wisconsin Elec. Power Co. v. Reilly, 893 F.2d 901, 904 (7th
Cir. 1990). In 1972, the United States District Court for the
District of Columbia issued a preliminary injunction directing
the EPA to promulgate regulations to supplement the NSPS
program and protect air quality from deterioration in areas
that had met or exceeded the relevant ambient standards. See
Sierra Club v. Ruckelshaus, 344 F. Supp. 253 (D.D.C. 1972),
affd 4 E.R.C. 1815 (D.C. Cir. 1972), affd by an equally
divided court sub nom. Fri v. Sierra Club, 412 USS.
541(1973). The EPA duly disseminated the first PSD
regulations in 1974. See 39 Fed. Reg. 42,510 (Dec. 5, 1974).
Congress thereafter enacted a PSD program in the Clean Air
Act Amendments of 1977. See 42 U.S.C. § 7470(1).
3a
As originally enacted, the PSD permit provisions in
the Clean Air Act applied only to the “construction” of major
emitting facilities. See Clean Air Act Amendments of 1977,
Pub. L. No. 95-95, 91 Stat. 685, 735 (1977) (“No major
emitting facility on which construction is commenced after
the date of the enactment of this part, may be constructed in
any area to which this part applies unless . . . a permit has
been issued .. . .”). However, in November 1977, a few
months after the original enactment became effective,
Congress passed the “Clean Air Act Technical and
Conforming Amendments.” Pub. L. No. 95-190, 91 Stat.
1393, 1399 (1977). These amendments added to the
“Definitions” section of the PSD provisions in 42 U.S.C. §
7479 a subparagraph that provides: “The term ‘construction’
when used in connection with any source or facility, includes
the modification (as defined in [section 7411(a)]) of any
source or facility.” /d. at 1402. This amendment thus
incorporated the NSPS statutory definition of “modification,”
§ 7411(a)(4), into § 7479 of the PSD statute.
The PSD program imposes, inter alia, preconstruction
review and permit requirements on new or modified sources
in areas that have attained or exceeded their air quality
standards. 42 U.S.C. § 7475. Unlike the NSPS program, the
PSD program does not focus primarily on technology-based
controls, but on the “net emissions from an entire plant
resulting from construction or modification of one or more
emitting sources within the plant.” PEPCo, 650 F.2d at 518
(emphasis omitted). And so, while NSPS centers on
technological controls at an individual pollution-emitting
apparatus, PSD fixes on the actual emissions from a site. See
N. Plains Res. Council v. EPA, 645 F.2d 1349, 1356 (9th Cir.
1981) (“The NSPS program is . . . equipment oriented. On the
other hand, the PSD program ... is . . . site oriented.”).
The EPA promulgated regulations under the PSD
da
provisions of the statute in 1978, see 43 Fed. Reg. 26,380
(June 19, 1978), and amended them in 1980, see 45 Fed. Reg.
52,676 (Aug. 7, 1980). Under the 1980 PSD regulations, a
plant cannot engage in a “major modification” of equipment
without first undergoing the EPA's permit process and
acquiring a permit. 45 Fed. Reg. 52,676. The EPA's PSD
regulations define a “major modification” as “any physical
change in or change in the method of operation of a major
stationary source that would result in a significant net
emissions increase of any pollutant subject to regulation
under the Act.” 40 C.F.R. § 51.166(b)(2)(i) (1987).° A “net
emissions increase” is “any increase in actual emissions from
a particular physical change or change in the method of
operation” of a unit. 40 C.F.R. § 51.166(b)(3)(i). The PSD
regulations measure emissions increases relative to a baseline
calculation of “actual emissions,” i.e., “the average rate, in
tons per year, at which the unit actually emitted” the regulated
pollutant for, usually, the two years prior to date of
measurement, “using the unit's actual operating hours,
production rates, and types of materials processed, stored, or
combusted during the selected time period.” 40 C.F.R. §
51.166(b)(2 1) (ii).
Il.
A.
Duke Energy’s eight plants in the Carolinas include
thirty coal-fired generating units that were placed in service
between 1940 and 1975. Each unit contains, as one of its
' The 1980 regulations, which the parties agree control the
projects at issue here, were recodified in the 1987 Code of
Federal Regulations. None of the relevant PSD or NSPS
provisions were revised during the period pertaining to this
dispute. All subsequent references herein are to the 1987
C.F.R. unless otherwise noted.
Sa
three major components, a boiler, which is a large structure
from six-to twenty-stories tall containing thousands of steel
tubes. The tubes are arranged into sets of tube assemblies,
including economizer tubes, in which water is initially heated;
furnace waterwall tubes, in which water evaporates to steam;
superheater tubes, in which the temperature of the steam is
raised before being released into a turbine; and reheater tubes,
in which steam released from the turbine is reheated and
returned to the turbine.
Between 1988 and 2000, as part of a plant
modernization program, Duke Energy engaged in twenty-nine
projects on the coal-fired generating units, most of which
consisted of replacing and/or redesigning one or more of the
boiler tube assemblies. These projects would both extend the
life of the generating units and allow the units to increase
their daily hours of operation. Duke Energy did not apply for
or acquire new permits from the EPA for these projects, some
of which, according to the Government, cost “more than
seven times the original cost of the unit.” Brief of United
States at 14.
In December 2000, at the direction of the
Administrator of the EPA, the Attorney General brought this
enforcement action against Duke Energy, alleging that the
life-extension projects violated, inter alia, the Clean Air Act's
PSD provisions. In September 2001, the district court granted
Environmental Defense, the North Carolina Sierra Club, and
the North Carolina Public Interest Research Group Citizen
Lobby/Education Fund leave to intervene as plaintiffs, and
these groups filed a complaint against Duke Energy alleging
similar violations.
The EPA and the Intervenors maintain that these life-
extension projects constitute “major modifications” of Duke
Energy’s furnaces as defined in the PSD statutory and
regulatory provisions — that is, physical changes leading to a
6a
significant net emissions increase — and thus Duke Energy
was required to obtain permits for them. The EPA does not
contend that the post-project hourly rate of emissions
increased. Rather, it argues that the PSD _ requires
measurement of the net emissions increase by using an
“actual-to-projected-actual” test, comparing the actual pre-
project emissions from a unit to the projected post-project
emissions, which takes into account a unit’s ability to operate
for more hours. Because the Duke Energy projects enable the
units to operate for more hours each day, they will lead to an
increase in actual yearly emissions.
Duke Energy counters that its projects do not
constitute modifications subject to PSD because they did not
increase the units’ levels of emissions. The company
maintains that, under the PSD program, a net emissions
increase will result only if there is an increase in the hourly
rate of emissions. Because none of its projects increased a
unit’s hourly capacity to emit pollution (but increased only
the number of hours the unit could operate), the projects did
not increase emissions from pre-project levels, and so,
according to Duke Energy, it did not have to obtain permits.
The district court agreed with Duke Energy. It held
that a modification subject to PSD exists only if there is a
post-project increase in the hourly rate of emissions from a
unit. Duke Energy Corp., 278 F. Supp. 2d at 640.2 In
? Duke Energy asserted in the alternative that its projects
constitute maintenance, repair and replacement that is routine
in the utility industry and, for this reason, were exempt from
the permit requirements. See The EPA and the Intervenors
disagreed, contending that this regulatory exemption only
applies to repairs and 40 C.F.R. 51.166(b)(2)(iii)(a).
Ta
reaching this conclusion, the district court relied on the
language of the PSD _ regulations, “contemporaneous
interpretations” of the regulations by the EPA, and “the
statutory language incorporating the NSPS concept of
modification into PSD.” Jd.
One regulation promulgated by the EPA pursuant to
the PSD statute, 40 C.F.R. § 51.166(b)(2)(i), characterizes a
“major modification” as “any physical change in or change in
the method of operation . . . that would result in a significant
net emissions increase”; another, 40 CFR. §
51.166(b)(2)(i1i)(f), excludes “an increase in the hours of
operation or in the production rate” from the definition of
“physical change or change in the method of operation.”
Reading these two provisions in conjunction, the district court
determined that an emissions increase traceable to increased
hours of operation cannot trigger the PSD provisions because
an increase in hours is not a physical change. Put another
way, because increased hours are not a physical change under
the PSD regulations, calculation of post-project net emissions
cannot take into account increased hours of operation, but
rather must be based on pre-project hours of operation and
rates of production. Therefore, the court concluded, only if
the hourly rate of emissions increases can there be a net
emissions increase under the PSD regulations. Duke Energy,
278 F. Supp. 2d at 640-41.
The district court recognized that the EPA interpreted
replacements routine within the life of a generating unit and,
therefore, Duke Energy's life-enhancing projects did not
qualify for this exemption. The district court again agreed
with Duke Energy's interpretation, but held that there was
insufficient evidence to grant summary judgment to Duke
Energy on this claim. Duke Energy, 278 F. Supp. 2d at 638.
Given our resolution of this case, we need not reach this
question.
8a
its PSD regulations differently, excluding a much smaller
group of projects from the definition of “major modification.”
The EPA would exclude only those projects that increase
hours of operation and involve no construction. /d. at 641.
According to the interpretation pressed by the EPA, whenever
there is an increase “in utilization coupled with a physical
change, any increase in hours of operation . . . may be
considered in the emissions calculus.” /d. The district court
concluded that it could not defer to the EPA's interpretation
because in addition to being, in the court's view, belied by the
plain language of the PSD regulations, the present EPA
interpretation was “clearly contrary to earlier [EPA]
interpretations” of the regulations. /d. Specifically, the court
noted that “immediately after the promulgation of the PSD
regulations in 1980, the EPA’s Director of the Division of
Stationary Source Enforcement . . ., Edward E. Reich,
confirmed in two separate applicability determinations that
the requirements of PSD would be implicated only by an
increase in the hourly rate of emissions.” /d.
Finally, the court determined that its interpretation of
the PSD regulation was “also consistent with the NSPS
[statutory] definition of ‘modification’” found in 42 U.S.C. §
7411(a), “which was incorporated by explicit reference into
PSD” in 42 U.S.C. § 7479(2)(C) (defining “construction” to
include “the modification (as defined in section 7411(a) . . .)
of any source or facility”). Jd. at 642. The interpretation of
PSD regulations urged by the EPA in this suit would, the
district court concluded, be “inconsistent with the
congressional design of defining PSD construction in terms of
NSPS modification and should therefore be accorded little
deference.” /d. at 643.
After resolution of this legal issue, the parties
stipulated that the Duke Energy projects would not result in
an increase in the hourly rate of emissions. The court then
entered summary judgment for Duke Energy.
9a
Il.
In cases in which an agency”s interpretation of its
regulations are at issue, a court engages in a modified
Chevron analysis. See Chevron U.S.A., Inc. v. Natural Res.
Def. Council, 467 U.S. 837 (1984); United States v. Deaton,
332 F.3d 698, 708-09 (4th Cir. 2003). First, as in the usual
Chevron analysis, a court must determine “whether Congress
has directly spoken to the precise question at issue.” Chevron,
467 U.S. at 842. “The judiciary is the final authority on issues
of statutory construction” and “if a court, employing
traditional tools of statutory construction, ascertains that
Congress had an intention on the precise question at issue,
that intention is the law and must be given effect.” /d. at 843
n.9. Only if the statute is silent or ambiguous on the point is
Congress deemed to have delegated authority to the agency to
clarify the point in its regulations. Jd. at 843-45. Thus, only in
such cases does a court examine the regulation itself,
determining its legitimate meaning, asking whether the
regulation is based on a permissible construction of the
statute, and, if so, deferring to it. See id. at 843; Deaton, 332
F.3d at 708-09.
The EPA and the Intervenors expressly acknowledge
that these principles govern our review in the case at hand.
See Brief of United States at 14-15; Brief of Intervenors at 7-
9. They fail to understand, however, that straightforward
application of these principles can lead to only one
conclusion: affirmance of the judgment of the district court.
This is so because Congress has indeed “directly
spoken to the precise question at issue.” Chevron, 467 U.S. at
842. As the EPA itself concedes, the critical first “question at
issue” here is whether the EPA “can interpret the statutory
term ‘modification’ under PSD differently from how EPA
interpreted that term” in the NSPS. Brief of United States at
10a
1. As the EPA also concedes, see id. at 4, Congress expressly
defined “modification” in the NSPS provisions of the Clean
Air Act, 42 U.S.C. § 7411(a), and then expressly directed
that the PSD provisions of the Act employ this same
definition. See 42 U.S.C. 7479(2)(C) (providing that
“construction” in the PSD includes “modification . . . as
defined in section 7411(a)”). When Congress mandates that
two provisions of a single statutory scheme define a term
identically, the agency charged with administering the
statutory scheme cannot interpret these identical definitions
differently. Thus, because Congress mandated that the PSD
definition of “modification” be identical to the NSPS
definition of “modification,” the EPA cannot interpret
“modification” under the PSD inconsistently with the way it
interprets that term under the NSPS.’
Common sense would seem to dictate this result.
Supreme Court precedent certainly does. See Rowan Cos. v.
United States, 452 U.S. 247 (1981). In Rowan, the Court
faced a situation strikingly similar to the one at hand, and held
that when Congress itself provided “substantially identical”
statutory definitions of a term in different statutes, the agency
charged with enforcing the statutes could not interpret the
statutory definitions “differently.” Jd. at 257.‘
3 Since Congress has "directly spoken to the precise question
at issue . . ., that is the end of the matter." Chevron, 467 U.S.
at 842. A court need not, indeed cannot, go further. Thus, the
language and various interpretations of the PSD regulations,
on which the district court partially based its holding and
which the parties exhaustively discuss, are largely irrelevant
to the proper analysis of this case.
* Because none of the parties or the thirty amici cited Rowan
in their original briefs or reply briefs, we requested
supplemental briefing addressing the case. Predictably (but
inexplicably in view of its original failure to cite Rowan),
Duke Energy asserts that Rowan strongly supports its
lla
The question presented in Rowan was whether the
Commissioner of the Interna] Revenue Service could interpret
the statutory term “wages” differently for, on the one hand,
the Federal Insurance Contributions Act (“FICA”) and the
Federal Unemployment Tax Act (“FUTA”), and, on the other,
the statute governing income-tax withholding. /d at 250.
Congress had defined the term “wages” in these statutes in
substantially the same language: for both FICA and FUTA,
“wages” were defined as “all remuneration for employment,
including the cash value of all remuneration paid in any
medium other than cash”; for income tax withholding,
“wages” were defined as “all remuneration (other than fees
paid to a public official) for services performed by an
employee for his employer, including the cash value of all
remuneration paid in any medium other than cash.” Rowan,
452 U.S. at 249 n.4.° The Commissioner, however, issued
regulations interpreting “wages” under FICA and FUTA to
include the value of meals and lodging provided to employees
for the convenience of the employer, and “wages” under the
income-tax withholding statute to exclude this value. See
Rowan, 452 U.S. at 250.
position. More significantly, although the United States and
Intervenors attempt to counter Rowan in various ways (which
we address within), they do not contend that the Rowan
analysis is no longer good law.
> In 1983, Congress amended two of the statutes at issue in
Rowan. See Pub. L. No. 98-21 § 327(b)(1), 97 Stat. 65, 127
(1983) (adding to 26 U.S.C. § § 3121(a)(21) and 3306(b)(17)
a paragraph stating, “Nothing in the regulations prescribed for
purposes of . . . income tax withholding . . . which provides
an exclusion from ‘wages’ as used in such chapter shall be
construed to require a similar exclusion from ‘wages’ in the
regulations prescribed for purposes of this chapter”).
12a
In holding the Commissioner’s interpretation
impermissible, the Court relied on the plain language of the
statutes and their legislative history. First, the Court noted
that when Congress enacted the precursors to FICA and
FUTA as part of the Social Security Act of 1935, it chose
“wages” as the basis for employer taxation and then
statutorily defined the term. Jd. at 255. Similarly, seven years
later, when Congress enacted the original income-tax
withholding statute, it chose “wages” as the basis for taxation
and statutorily defined the term “in substantially the same
language that it used in FICA and FUTA.” Jd. The Rowan
Court held that, “in view of this sequence of consistency, the
plain language of the statute is strong evidence that Congress
intended ‘wages’ to mean the same thing under FICA, FUTA,
and income-tax withholding.” /d.° The Court then examined
the statutes’ history, finding indications that Congress
intended to “coordinate the income-tax withholding system
© We note that the standards of judicial review followed in
Rowan differ somewhat from those established three years
later in Chevron. The most significant change for the case at
hand is that Chevron abolished judicial deference to agency
interpretation of a statute in step one. See John F. Coverdale,
Chevron's Reduced Domain: Judicial Review of Treasury
Regulations and Revenue Rulings After Mead, 55 Admin. L.
Rev. 39, 77 (2003); cf. United States v. Mead Corp., 533 U.S.
218, 229 (2001); Christensen v. Harris County, 529 U.S. 576,
582-83 (2000). This difference does not in any way lessen the
precedential value of Rowan here. Indeed, if anything, it
strengthens Rowan’'s support for our holding because even
though in Rowan the Court gave some deference to the
agency’s interpretation of the statutes (rather than examining
the statutes de novo as Chevron step one directs), the Court
nevertheless rejected the agency’s position that it could
interpret very similar statutory language differently.
l3a
with FICA and FUTA . . . to promote simplicity and ease of
administration,” and concluding that “contradictory
interpretations of substantially identical definitions do not
serve that interest.” Jd. at 257.
The plain language of the Clean Air Act provides even
stronger evidence that Congress intended the statutory
definitions of “modification” in the PSD and NSPS provisions
to be interpreted identically. While Congress used only
“substantially the same language” in the statutory definitions
at issue in Rowan, id. at 255, here Congress mandated that the
definition of “modification” in the PSD provisions precisely
mirror the definition of “modification” in the NSPS provision.
Congress did this by directly incorporating the NSPS
definition, which it had enacted in 1970, into the PSD
provisions, which it enacted seven years later. See Pub. L. No.
95-190, 91 Stat. 1393, 1402 (1977) (“The term ‘construction’
when used in connection with any source or facility, includes
the modification (as defined in [section 7411(a)]) of any
source or facility.”); 42 U.S.C. § 7479(2)(C).
Moreover, as in Rowan, the legislative history of the
statutes at issue here does not in any way suggest that
Congress intended these identical statutory definitions to
receive different interpretations. Notwithstanding the EPA's
contentions to the contrary, the fact that the PSD definition of
modification became part of the statute through “Technical
and Conforming Amendments” does not change the fact that
the definition is a statutory enactment, entitled to be treated as
such. See United States v. R.L.C., 503 U.S. 291, 305 n.5
(Opinion of Souter, J.) (“[A] statute is a statute, whatever its
label,” and must be interpreted using “the usual tools of
statutory construction.”). Indeed, the expressed intent in the
congressional summary of the legislative amendments to
“conform” the definition of modification in the PSD
provisions “to usage in other parts of the Act,” 123 Cong.
Rec. 36,253 (Nov. 1, 1977), indicates congressional concern
l4a
with the same sort of simplicity and consistency that the
Rowan Court discerned from the legislative history examined
there. As the Court explained in Rowan, “it would be
extraordinary for a Congress pursuing this interest to intend,
without ever saying so, for identical definitions to be
interpreted differently.” 452 U.S. at 257.’
” Confronted with FICA and FUTA regulations that directly
contradicted established rules developed under income
taxation, see Rowan, 452 U.S. at 258, the Court invalidated
the FICA and FUTA regulations, id at 263. In contrast,
notwithstanding the contentions of the United States and
Intervenors in their supplemental briefs, no question as to the
validity of the PSD regulations is (or could be, see 42 U.S.C.
§ 7607(b)) presented here. Unlike the FICA and FUTA
regulations at issue in Rowan, the PSD regulations can be
interpreted consistently with pre-existing principles — the
NSPS regulations ~ as the district court demonstrated and as
the EPA’s Director of the Division of Stationary Source
Enforcement twice opined shortly after promulgation of the
PSD regulations. Our choice of this interpretation of the PSD
regulations — as required under the statute —- over the EPA’s
interpretation is not an invalidation of those regulations. The
PSD regulations remain fully intact and enforceable and,
indeed, could even be enforced as the EPA urges provided
that, as long as the PSD and NSPS statutes define
“modification” identically, the NSPS regulations are similarly
interpreted and enforced. Thus, the only question that we
need resolve is one properly before us, indeed one that EPA
itself poses, i.e., whether it “can interpret the statutory term
modification under PSD differently from how” it has
interpreted that term under NSPS. See Brief of United States
at 1, 22-30; Reply Brief of United States at 2. Given that the
EPA expressly asks that we resolve this question, we have
difficulty understanding its suggestion in its supplemental
brief that Duke Energy “waived” resolution of this question.
1Sa
The EPA points to Senator Muskie’s statement that it
was “not the purpose of these amendments to re-open
substantive issues” in the Act, 123 Cong. Rec. 36,252, as
evidence that Congress was merely using an expedient
method to correct the inadvertent omission of the word
“modification” from the PSD provisions. To the extent that
Senator Muskie’s remarks demonstrate Congress’ intent, see
Runnebaum v. NationsBank of Maryland, N.A., 123 F.3d 156,
169 n.7 (4th Cir. 1997) (en banc), they do not support the
EPA’s position. The assertion that the Technical and
Conforming Amendments were not “designed to resolve
issues that were not resolved” in the debate and passage of the
Act, see 123 Cong. Rec. 36,252 (statement of Sen. Muskie),
says nothing about whether Congress had previously resolved
the issue of whether the interpretation of “modification” was
to be congruent under the PSD and NSPS statutory
provisions.
The EPA and Intervenors also emphasize the “vital
differences” between PSD and NSPS. Brief of United States
at 22; see also id. at 4-6; Brief of Intervenors at 13-21. We do
not ignore or minimize those differences. Although both
statutes are part of the Clean Air Act and designed to serve its
purpose “to protect and enhance the quality of the Nation’s air
resources so as to promote the public health and welfare and
the productive capacity of its population,” 42 U.S.C. §
7401(b)(1), they address somewhat different problems. PSD
exists primarily to prevent significant deterioration of ambient
air quality in areas meeting clean air standards, see 42 U.S.C.
§ 7470(1), while NSPS requires new sources to implement
particular technologies to limit their own emissions. /d. §
7411. These differences have led us and other courts to
approve different regulatory definitions for an identical
statutory term in the two statutes. In PEPCo, for example, we
held that “significant differences between the PSD and NSPS
programs” justified a different interpretation of the statutory
16a
term “stationary source.” 650 F.2d at 518. But in PEPCo,
although Congress had defined the term “stationary source” in
the NSPS provisions, see 42 U.S.C. § 7411(a)(3), it had not
defined that term in the PSD provisions. Thus, while in
PEPCo both statutes contained the same term, the statutes did
not define that term in the same manner; nor was the use of
the term in the PSD provisions linked to the statutory
definition of the term in the NSPS provisions. Similarly, in
Northern Plains Resource Council, the Ninth Circuit allowed
the EPA to interpret the statutory term “commenced”
differently in the NSPS and PSD reguiations. 645 F.2d at
1357. But again, although one statute — there the PSD
provisions — defined the term, see 42 U.S.C. § 7479(2)(A),
the other — the NSPS provisions — did not. And, Congress had
not linked the PSD definition of the term to its use in the
NSPS provisions of the statute.
PEPCo and Northern Plains Resource Council
illustrate the principle that the same word or phrase will
generally be presumed to have the same meaning when used
in different parts of the statute, but this “presumption of the
uniform usage . . . relents” when there is “a variation in the
connection in which the words are used as reasonably to
warrant the conclusion that they were employed in different
parts of the act with different intent.” Gen. Dynamics Land
Sys., Inc. v. Cline, 540 U.S. 581 (2004) (internal quotation
marks and citation omitted). Thus, in PEPCo and Northern
Plains Resource Council, the difference in purpose between
the NSPS and PSD programs justified the conclusion that the
same words had different meanings in the two sections of the
statute. See N. Plains Res. Council, 645 F.2d at 1355-56.
In the case before us, however, the presumption of
uniform usage has become effectively irrebutable because
Congress’ decision to create identical statutory definitions of
the term “modification” has affirmatively mandated that this
term be interpreted identically in the two programs. The
17a
different purposes of the NSPS and PSD programs cannot
override that mandate. Neither the United States nor the
Intervenors have cited a single case in which any court has
held that identical statutory definitions can be interpreted
differently by the agency charged with enforcement of the
statute. Moreover, in Rowan the Supreme Court expressly
rejected the argument, which was successful in the Fifth
Circuit, that the different purposes of FICA/FUTA and
income-tax withholding justified the different regulatory
interpretations of the same statutory definition. See Rowan,
452 U.S. at 250, 257-58. The Rowan Court concluded that to
permit the Commissioner to interpret the same statutory terms
differently would “fail to implement the congressional
mandate in a consistent and reasonable manner.” /d. at 253.
So it is here. Congress mandated that the PSD statute
incorporate the NSPS statutory definition of “modification.”
No one disputes that prior to enactment of the PSD statute,
the EPA promulgated NSPS regulations that define the term
“modification” so that only a project that increases a plant’s
hourly rate of emissions constitutes a “modification.” The
EPA must, therefore, interpret its PSD regulations defining
“modification” congruently. Of course, this does not mean
that this regulatory interpretation must be retained
indefinitely. The EPA retains its authority to amend and
revise this and other regulations “through exercise of
appropriate rulemaking powers.” Helvering v. Wilshire Oil
Co., 308 U.S. 90, 100-01 (1939) (noting that “the contrary
conclusion would . . . drastically curtail the scope and
materially impair the flexibility of administrative action”);
McCoy v. United States, 802 F.2d 762, 766 (4th Cir. 1986).
Indeed, the parties point out that the EPA has already
amended some of the regulations at issue here. See Brief of
Duke Energy at 62-63; Reply Brief of United States at 17-18.
As long as Congress mandates that “modification” be defined
identically in the NSPS and PSD statutes, however, EPA must
interpret that term in a consistent manner in the NSPS and
18a
PSD regulations.
IV.
For the foregoing reasons, the judgment of the district
court is AFFIRMED.
19a
United States Court of Appeals,
Fourth Circuit
UNITED STATES OF AMERICA, Plaintiff-Appellant,
ENVIRONMENTAL DEFENSE; NORTH CAROLINA
SIERRA CLUB; NORTH CAROLINA PUBLIC INTEREST
RESEARCH GROUP CITIZEN LOBBY/EDUCATION
FUND, Intervenors/Plaintiffs-Appellants,
v.
DUKE ENERGY CORPORATION, Defendant-Appellee.
No. 04-1763.
On Petition for Rehearing and
Rehearing En Banc
Filed August 30, 2005
The Appellants' petitions for rehearing and rehearing
en banc were submitted to this Court. As no member of this
Court or the panel requested a poll on the petitions for
rehearing en banc, and
As the panel considered the petitions for rehearing and
is of the opinion that they should be denied,
IT IS ORDERED that the petitions for rehearing and
rehearing en banc are denied.
Entered for a panel composed of Judge Luttig, Judge
Motz, and U. S. District Judge Wilson.
For the Court
/s/ Patricia S. Connor
CLERK
20a
United States Court of Appeals,
Fourth Circuit
UNITED STATES OF AMERICA, Plaintiff-Appellant,
ENVIRONMENTAL DEFENSE; NORTH CAROLINA
SIERRA CLUB; NORTH CAROLINA PUBLIC INTEREST
RESEARCH GROUP CITIZEN LOBBY/EDUCATION
FUND, Intervenors/Plaintiffs-Appellants,
v. .
DUKE ENERGY CORPORATION, Defendant-Appellee.
No. 04-1763.
FILED: May 2, 2005
ORDER
The parties are directed to serve and file in the office
of the Clerk, on or before May 9, 2005, supplemental briefs
not to exceed five (5) pages addressing the relevance of
Rowan Cos. v. United States, 452 U.S. 247 (1981) to the
above entitled case.
For the Court
/s/ Patricia S. Connor
CLERK
2la
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF
NORTH CAROLINA
UNITED STATES OF AMERICA,
Plaintiff and Counter-Defendant, and
ENVIRONMENTAL DEFENSE; NORTH CAROLINA
SIERRA CLUB; and NORTH CAROLINA PUBLIC
INTEREST RESEARCH GROUP CITIZEN
LOBBY/EDUCATION FUND,
Intervenor- Plaintiffs,
Vv.
DUKE ENERGY CORPORATION,
Defendant and Counter-Claimant.
Civil No. 1:00CV01262
MEMORANDUM OPINION
BULLOCK, District Judge:
On December 22, 2000, the Attorney General of the
United States acting at the request of the Administrator of the
United States Environmental Protection Agency (“EPA”)
filed this action against Defendant Duke Energy Corporation
(“Duke Energy”). The EPA alleges that Duke Energy made
modifications to and operated eight coal-fired electrical
generating plants in North Carolina and South Carolina in
violation of the Clean Air Act (the “CAA” or “Act”), 42
U.S.C. § 7401 ef seqg., specifically the Prevention of
Significant Deterioration (“PSD”) provisions of the Act, 42
U.S.C. §§ 7470-92, and for violations of State
Implementation Plans approved under the Act for the States
of North Carolina and South Carolina. On May 8, 2001, the
22a
following groups, Environmental Defense, North Carolina
Sierra Club, and North Carolina Public Interest Research
Group Citizen Lobby/Education Fund (hereinafter
collectively referred to as “Intervenor-Plaintiffs”) moved to
intervene as plaintiffs. On September 6, 2001, the court
granted these groups’ motion to intervene, United States v.
Duke Energy Corp., 171 F. Supp. 2d 560 (M.D.N.C. 2001),
and on the same date the Intervenor-Plaintiffs filed a
complaint against Duke Energy alleging similar violations as
those in the original complaint.
After a lengthy discovery period, which produced
approximately 4.6 million pages of documents, extensive
discovery disputes, and numerous pretrial motions, the parties
now move for summary judgment. The EPA, Intervenor-
Plaintiffs, and Duke Energy have submitted lengthy briefs,
accompanied by thousands of pages of exhibits, and the
motions for summary judgment are ripe for resolution. For the
reasons that follow, the court will deny Duke Energy’s
motion for summary judgment, grant in part and deny in part
the EPA’s motion for partial summary judgment in which
Intervenor-Plaintiffs join, deny Intervenor-Plaintiffs’ motion
for partial summary judgment on Duke Energy’s “fair notice”
defense, and deny Duke Energy’s motion for partial judgment
on the pleadings.
FACTS'
' The issues the court will resolve at this stage involve
questions of law, i.e., (1) whether the correct standard for
determining routine maintenance, repair, and replacement is
“routine in the industry” or “routine at a particular generating
unit”; (2) whether a post project net emissions increase should
be calculated assuming constant hours of operation or
increased utilization; and (3) whether certain claims for
statutory penalties and injunctive relief are barred by the
23a
Duke Energy is an international energy company
headquartered in Charlotte, North Carolina, and has provided
electricity to North Carolina and South Carolina since the
early 1900s. Duke Energy’s system of electrical generating
facilities includes nuclear, hydroelectric, gas-fired
combustion turbine, and coal-fired generating plants. Duke
Energy currently operates thirty coal-fired electric generating
units at eight plants located throughout North Carolina and
South Carolina. It is these coal-fired units which are the
subject of this litigation.
Duke Energy’s coal-fired generating units were placed
in service between 1940 and 1975. These units have net rated
generating capacities from 38 MW (for some of the oldest
units) to 1120 MW (for the newest units). Each unit of a coal-
fired generating plant consists of three primary components:
the boiler, the steam turbine, and the electric generator.
The boiler on these units is a large, building-like
structure ranging from six to twenty stories tall and contains
thousands of steel tubes in which water is heated to
superheated steam with temperatures in excess of 900 °F.
While the specific design of each boiler at issue may differ
slightly, in general the boiler consists of collections of tube
assemblies, including the economizer tubes, where water is
initially heated; the furnace waterwall tubes, where water
evaporates to steam; the superheater tubes, where the
temperature of the steam is raised just before the steam exits
the boiler and reaches the turbine; and the reheater tubes,
where steam from the turbine is reheated and returned to the
turbine. The furnace waterwall tubes form the walls of the
statute of limitations. Because these legal determinations are
not necessarily dependent on any particular facts, only a
general overview of the facts giving rise to this action is
provided.
24a
boiler and provide an envelope for coal combustion while
also absorbing heat.
A coal-fired unit operates by converting the chemical
energy contained in coal into electricity. Pulverized coal is
fed into the boiler and combusted. “Flue gas” is created with
temperatures of up to 3000 °F when the ground coal is ignited
in the boiler’s furnace. The flue gas, which contains sulfur
dioxide, ash particles or particulate matter, and nitrogen
oxides, passes around the tubes and tube assemblies. This
combustion process heats water that flows continuously
through the tubes and tube assemblies making up the walls,
roof, and floor of the boiler. The water in the tubes is thus
converted to high pressure steam, which then flows through
additional panels or assemblies of tubes to become
superheated. The superheated steam enters the turbines where
the pressure of the steam against a series of blades turns the
turbine shaft. The turbine shaft turns the shaft of a generator,
which transforms the mechanical energy into electric energy.
After passing through the turbine, the steam is converted to
water in condensers and pumped through feedwater heaters
back to the economizer where it begins the entire steam cycle
process again. Once the flue gas used to heat the water passes
through the boiler, it passes through pollution control devices,
if any, and exits through a stack into the atmosphere.
The EPA alleges that Duke Energy modified and
subsequently operated its seven coal-fired generating plants in
North Carolina and its one coal-fired generating plant in
South Carolina in violation of the PSD provisions of the
CAA. The EPA’s allegations stem from twenty-nine projects
Duke Energy engaged in between 1988 and 2000.7 (Compl. at
? The following plants, units, and projects are the subject of
this lawsuit: (1) Allen, Unit No. 5, 2000 Project; (2) Allen,
Unit No. 5, 1996 Project; (3) Allen, Unit No. 4, 1996 Project;
(4) Allen, Unit No. 4, 1998 Project; (5) Allen, Unit No. 2,
25a
PP 31-292.) A detailed description of the work performed at
each plant and unit would be lengthy and ultimately
unnecessary.” However, the majority of the projects consisted
1988 Project; (6) Allen, Unit No. 1, 1989 Project; (7) Belews
Creek, Unit No. 2, 1999 Project; (8) Belews Creek, Unit No.
2, 1996 Project; (9) Belews Creek, Unit No. 1, 2000 Project;
(10) Buck, Unit No. 5, 1991 Project; (11) Buck, Unit No. 4,
1994 Project; (12) Buck, Unit No. 3, 1994 Project; (13)
Marshall, Unit No. 4, 1990 Project; (14) Marshall, Unit No. 3,
1999 Project; (15) Marshall, Unit No. 2, 1989 Project; (16)
Marshall, Unit No. 2, 1996 Project; (17) Cliffside, Unit No. 2,
1993 Project; (18) Cliffside, Unit No. 3, 1990 Project; (19)
Cliffside, Unit No. 4, 1990 Project; (20) Cliffside, Unit No. 5,
1992/1995 Project; (21) Cliffside, Unit No. 1, 1993 Project;
(22) Dan River, Unit No. 3, 1988 Project; (23) Allen, Unit
No. 3, 1994 Project; (24) W.S. Lee, Unit No. 3, 1989-90
Project; (25) Riverbend, Unit No. 4, 1990 Project; (26)
Riverbend, Unit No. 6, 1991 Project; (27) Riverbend, Unit
No. 7, 1992 Project; (28) Buck, Unit No. 6, 1990 Project; and
(29) Marshall, Unit No. 1, 1992 Project.
3 The only unit that warrants a detailed description of the
work performed during the alleged “modification” is Buck,
Unit No. 4 (“Buck 4”), which the EPA has moved for
summary judgment on. The extent and scope of the Buck 4
project, however, is disputed by Duke Energy and the EPA.
The EPA describes the work performed at Buck 4 as
involving the replacement of the “entire boiler backpass
(including the screen tubes, generating banks, and
superheater) at Buck 4 (Boiler 7) with a completely
redesigned configuration.” (EPA Mem. Supp. Mot. Partial
Summ. J. at 7.) In replacing the entire backpass, Duke Energy
installed approximately 1,070 new tubes or approximately
7,132 feet of new tubing. In addition, the EPA contends that
Duke Energy “replaced all of the waterwall tubes, floor
screen tubes, and roof tubes.” (/d. at 8.) This work involved
26a
of replacement and/or redesign of one or more of four sets of
boiler tube assemblies--economizers, portions of waterwalls,
superheaters, and reheaters. (/d.)
In 1984, Duke Energy placed several of the units at
issue, including Buck 4, into “Extended Cold Storage”
(“ECS”).* During the period of ECS, dehumidified air was
circulated through the water, steam, air, and gas passages in
order to protect the units. The reason behind Duke Energy’s
decision to place its units in ECS is disputed. Duke Energy
contends that it placed these units into ECS because it
increased its system generating capacity by adding additional
generating plants, which in turn led to less use of its coal-fired
units.’ Duke Energy also asserts that when it placed these
the installation of approximately 10,700 feet of tubing. Duke
Energy asserts that its boiler backpass work did not involve
the replacement of the entire backpass. According to Duke
Energy, the backpass work involved “replacing tubular
pressure parts rather than the heavy-walled components such
as the’drums and headers.” (Duke Energy Am. Br. Opp'n Mot.
Partial Summ. J. at 3.) Furthermore, Duke Energy takes
exception to the EPA’s description that “all the waterwall
tubes” were replaced. Duke Energy contends that the side
waterwall header supply tubes were not removed and
replaced. (/d. at 3-4.)
* These project were: Allen, Unit Nos. 1 & 2; Buck, Unit
Nos. 3, 4, & 5; Cliffside, Unit Nos. 1, 2, 3, & 4; Dan River,
Unit No. 3; Riverbend, Unit Nos. 4, 6, & 7.
> Beginning in the mid-1970s, Duke Energy brought online
Belews Creek, Unit Nos. 1 & 2 (2200 MW of coal-fired
capacity), and Oconee, Unit Nos. 1, 2 & 3 (2600 MW of
nuclear capacity). During the 1981-1986 period, Duke Energy
added four more nuclear units, McGuire, Unit Nos. 1 & 2,
and Catawba, Unit Nos. | & 2 (4800 MW of nuclear
27a
units into ECS, it made definitive plans for preserving and .
conditioning these units while in ECS so that they could be
returned to service when demand dictated. (Knudsen Decl. P
5 (Duke Energy Ex. 59); Kinsey Decl. P 6 (Duke Energy Ex.
69).) The EPA, however, contends that Duke Energy removed
these units from service due to their advanced age and
condition. William S$. Lee, Chairman of the Board and CEO
of Duke Energy, testified before the South Carolina state
public utility regulators in 1985 that the units placed into ECS
were “no longer reliable because of their age and because
their use as peaking units in the past few years had stressed
the units, which originally were designed for base load use ...
Historically, units of this age and condition would be retired
and scrapped.” (Lee Test. at 90 (EPA Ex. 13).) Lee further
explained that Duke Energy had plans to rehabilitate the units,
but if it continued to operate the units in their current
condition they would “simply fall apart, or damage
themselves in a very serious way.” (Lee Test. at 41 (EPA Ex.
15).)
Shortly after placing its units into ECS, Duke Energy
developed a “Plant Modernization Program” (“PMP”). Based
on information gathered during inspection of the units, Duke
Energy developed plans to address a variety of maintenance,
repair, and replacement needs. According to Duke Energy,
the purpose for PMP was “to conduct maintenance and
upgrade to selected fossil generating units so that they operate
safely, reliably and cost effectively for an additional 20
years.” (Plant Modernization Project Review (Apr. 24, 1989)
at 2 (EPA Ex. 23).) According to Duke Energy’s “PMP
Strategy Statement,” the “extended operating life of the
rehabilitated units is a cost-effective alternative to the
addition of new capacity.” (Mem. from Parker to Owen, et al.
(Feb. 13, 1986) (EPA Ex. 25).)
capacity).
28a
Any work performed at the units not placed into ECS
was undertaken during regularly scheduled planned turbine
outages.° Regularly scheduled outages typically occur at a
unit every forty-eight to eighty-four months depending on the
particular unit's condition and other system requirements.
On December 22, 2000, approximately twelve years
after the completion of Duke Energy’s earliest PMP project,
the United States on behalf of the EPA filed the present suit
against Duke Energy. The EPA contends that Duke Energy’s
projects at its coal-fired units were “modifications” and thus
triggered the requirements of PSD. A unit that is subject to
PSD must obtain a preconstruction review and permit. If it is
determined during this review that a proposed project will
modify an existing unit and thereby increase the level of
emissions, the operator of the unit is required to install the
best available control technology for pollutants emitted by the
particular unit.
As noted previously, Duke Energy, the EPA, and
Intervenor-Plaintiffs have all moved for summary judgment
or partial summary judgment. Duke Energy seeks summary
judgment dismissing all claims of the EPA and Intervenor-
Plaintiffs. It argues that the EPA cannot establish that the
projects undertaken at its coal-fired generating units were
non-routine maintenance, repair, and replacement activities or
® These projects were: Allen, Unit No. 3, 1994 Project; Allen,
Unit No. 4, 1996 & 1998 Projects; Allen Unit No. 5, 1996 &
2000 Projects; Belews Creek, Unit No. 1, 2000 Project;
Belews Creek, Unit No. 2, 1996 & 1999 Projects; Buck, Unit
No. 6, 1990/1991 Project; Cliffside, Unit No. 5, 1992/1995
Project; W.S. Lee, Unit No. 3, 1989/1990 Project; Marshall,
Unit No. 1, 1992 Project; Marshall, Unit No. 2, 1989 & 1996
Projects; Marshall, Unit No. 3, 1999 Project; Marshall, Unit
No. 4, 1990 Project.
29a
that the projects caused a net emissions increase.
As to the issue of whether Duke Energy’s projects
were routine maintenance, repair, and replacement, Duke
Energy contends that the established interpretation of what is
routine “‘must be based on the evaluation of whether that type
of equipment has been repaired or replaced by sources within
the relevant industrial category.’” (Duke Energy Br. Supp.
Mot. Summ. J. at 35 (quoting 57 Fed. Reg. 32,314, 32,326
(July 21, 1992)).) Under this standard, according to Duke
Energy, its component repair and replacement projects were
not modifications because they consisted of repairs and
replacements that are common in the utility industry.
Duke Energy similarly argues that its component
repair and replacement projects were not modifications
because they did not increase the units’ levels of emissions.
Duke Energy contends that under the 1980 PSD regulations, a
net emissions increase will result only if there is an increase
in the hourly rate of emissions. It acknowledges that for
purposes of PSD, emissions are measured in annual tons per
year. Yet Duke Energy argues that in calculating post-project
actual emissions, the regulations require that the hours and
conditions of operation be held constant. Accordingly,
because none of the projects increased a unit’s hourly
capacity to emit pollution, there is no increase in emissions
from pre-project levels.
The EPA and Intervenor-Plaintiffs move for partial
summary judgment on similar grounds. They, too, seek a
legal determination as to the appropriate standard for
determining what is routine maintenance, repair, and
replacement. The EPA and Intervenor-Plaintiffs argue that the
standard is not the industry or source category standard
advanced by Duke Energy. Rather, they contend that whether
a particular project is routine maintenance, repair, and
replacement must be determined based on whether that type
30a
of project is routine within the life of a generating unit. The
EPA and Intervenor-Plaintiffs also request partial summary
judgment that the “comprehensive renovation” at Buck 4 was
a physical change that does not qualify as routine
maintenance and repair. Furthermore, the EPA and
Intervenor-Plaintiffs move for partial summary judgment as
to Duke Energy’s defense that it did not have fair notice of
the EPA’s interpretation of the PSD regulations.
The EPA and Intervenor-Plaintiffs, similar to Duke
Energy, also seek a legal determination as to how post-project
emissions should be calculated. The EPA argues that PSD
requires that the source predict annual emissions increases
prior to construction. In predicting an increase in emissions,
the EPA asserts, the source operator must consider the hourly
rate of emissions and the increased utilization of the unit
following the project. As to Buck 4 specifically, the EPA
argues that because the project enabled Duke Energy to
utilize a previously inoperable unit, the project resulted in a
net increase in emissions.
Finally, the EPA and Intervenor-Plaintiffs seek partial
summary judgment that the claims for penalties and
injunctive relief with respect to modifications that were
completed more than five years before this suit was filed are
not barred by the statute of limitations. Duke Energy
previously moved for partial judgment on the pleadings
arguing that such claims were barred by the statute of
limitations. The court deferred ruling on Duke Energy’s
motion in order to allow the record to develop more fully.
Duke Energy’s motion for partial judgment on the pleadings,
as well as the EPA and Intervenor-Plaintiffs’ motion for
partial summary judgment, is ripe for resolution.
3la
DISCUSSION
1. Standard of Review
Summary judgment must be granted if there is no
genuine issue as to any material fact and the moving party is
entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c).
The moving party bears the burden of persuasion on the
relevant issues. Celotex Corp. v. Catrett, 477 U.S. 317, 323
(1986). The non-moving party may survive a motion for
summary judgment by producing “evidence from which a
[fact finder] might return a verdict in [its] favor.” Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 257 (1986). When the
motion is supported by affidavits, the non-moving party must
set forth specific facts showing that there is a genuine issue
for trial. See Fed. R. Civ. P. 56(e); see also Cray
Communications, Inc. v. Novatel Computer Sys., Inc., 33 F.3d
390, 393-94 (4th Cir. 1994) (moving party on summary
judgment motion can simply argue the absence of evidence
by which the non-movant can prove its case). In considering
the evidence, all reasonable inferences are to be drawn in
favor of the non-moving party. Anderson, 477 U.S. at 255.
However, “the mere existence of a scintilla of evidence in
support of the plaintiffs position will be insufficient; there
must be evidence on which the [fact finder] could reasonably
find for the plaintiff.” Jd. at 252.
In general, reviewing courts typically grant substantial
deference to the EPA’s interpretation of the CAA
Amendments and its implementing regulations. The reasoning
behind this deferential review is that “considerable weight
should be accorded to an executive department’s construction
of a statutory scheme it is entrusted to administer.” Chevron
U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467
U.S. 837, 844 (1984). Deference to agency interpretation is
particularly appropriate where the subject being regulated is
32a
technical and complex. Aluminum Co. of Am. v. Central
Lincoln Peoples’ Util. Dist., 467 U.S. 380, 390 (1984). An
agency’s interpretation of its own regulations must be given "
““controlling weight unless it is plainly erroneous or
inconsistent with the regulation.”” Udall v. Tallman, 380 U.S.
1, 16-17 (1965) (quoting Bowles v. Seminole Rock & Sand
Co., 325 U.S. 410, 413-14 (1945)). However, “this standard
does not give the EPA unbridled discretion to construe the
[CAA] Amendments free from judicial oversight. [The court]
must consider whether the EPA’s construction comports with
its statutory mandate and Congress's intent in enacting clean
air legislation.” Wisconsin Elec. Power Co. v. Reilly, 893 F.2d
901, 907 (7th Cir. 1990) (“WEPCO”).
II. Statutory and Regulatory Background
One of the primary purposes of the CAA is to “speed up,
expand, and intensify the war against air pollution in the
United States with a view to assuring that the air we breathe
throughout the Nation is wholesome once again.” H.R. Rep.
No. 91-1146, at 1 (1970), reprinted in 1970 U.S.C.C.A.N.
5356, 5356. In order to accomplish the congressional
objective of “protecting and enhancing the quality of the
Nation's air resources,” 42 U.S.C. § 7401(b)(1) (1995),
Congress directed the EPA to develop National Ambient Air
Quality Standards (“NAAQS”) which specify the maximum
allowable concentrations of air pollutants for different areas
of the country. /d. § 7409. Based on the levels of pollution
established by the EPA, the states were required to develop
State Implementation Plans (“SIPs”) that defined source-by-
source emissions limits so that each state could meet the
NAAQS. Id. § 7410; Train v. Natural Res. Def. Council, Inc..,
421 U.S. 60, 66-67 (1975). Areas that meet the NAAQS for a
particular pollutant are designated as “attainment” areas and
areas that do not meet the NAAQS are designated “non-
attainment” areas. 42 U.S.C. § 7407(d) (1995).
33a
As part of the 1970 CAA Amendments, Congress
required the EPA to promulgate New Source Performance
Standards (“NSPS”) in order to regulate and minimize the
environmental impact from the emission of air pollutants
from “new sources.” The NSPS regulates hourly emission
rates (expressed as kg/hr) and applies to both newly
constructed sources and to “modifications” of existing
facilities that create new or increased pollution. Under NSPS,
Congress defined “new source” as “any stationary source, the
construction or modification of which is commenced after the
publication of regulations (or, if earlier, proposed regulations)
prescribing a standard of performance under this section
which will be applicable to such source.” /d. § 7411(a)(2)
(emphasis added). Congress then defined “modification” as
“any physical change in, or change in the method of operation
of, a stationary source which increases the amount of any air
pollutant emitted by such source or which results in the
emission of any air pollutant not previously emitted.” /d. §
7411(a)(4).
Due to the cost and difficulty of installing new
pollution control technologies on existing sources, the EPA
provided exemptions from the “modification” rule for certain
activities undertaken at already operating sources. The
regulations initially provided that “routine maintenance,
repair, and replacement shall not be considered physical
changes.” 40 C.F.R. § 60.2(h)(1) (Duke Energy Ex. 4). This
standard was later clarified to mean that a modification shall
not include “maintenance, repair, and replacement which the
Administrator determines to be routine for a source category.”
40 C.F.R. § 60.14(e)(1) (1975) (Duke Energy Ex. 6). The
regulations also provided that increases in hours of operation
or production rates within the operating design capacity of a
facility are not considered modifications. 40 C.F.R. §
60.2(h)(2)(ii) (1971) (Duke Energy Ex. 4); 40 C.F.R. §
60.14(e)(2), (3) (1975) (Duke Energy Ex. 6).
34a
In 1977 Congress again amended the CAA by
enacting a program called New Source Review (“NSR”). The
NSR had provisions for the protection of areas with relatively
clean air, Prevention of Significant Deterioration (“PSD”),
and for areas that did not meet certain air quality standards,
Non-Attainment New Source Review (“NNSR”).’ PSD was
designed to ensure that the air quality of relatively unpolluted
areas, i.e., attainment areas, did not decline to the minimum
levels permitted by NAAQS due to increases in total annual
emissions. To prevent significant deterioration of air quality,
operators of regulated sources in attainment areas are required
to limit emissions to a “baseline rate” and obtain a permit
before constructing or modifying facilities. 42 U.S.C. §
7475(a)(1)(1995).
When Congress enacted the PSD program, it
incorporated by explicit reference the NSPS definition of
modification into the NSR definition of
construction/modtiication. Jd. § 7479(2)(C) (PSD) (“The
term ‘construction’ ... includes the modification (as defined in
section 7411l(a) of this title [NSPS]) of any source or
facility.”); id. § 7501(4) (NNSR) (“The terms ‘modifications’
and ‘modified’ mean the same as the term ‘modification’ as
used in section 7411(a)(4) of this title [NSPS].”). The PSD
statutory definition incorporated not only the NSPS statutory
definition of modification, but also the regulations
implementing the NSPS program. A _ House-Senate
Conference Committee report explained the congressional
intent “to conform” the NSR definition of modification to the
“usage in other parts of the Act.” 123 Cong. Rec. H11956,
’ PSD applies to emissions increases in attainment areas,
while NNSR applies to emissions increases in non-attainment
areas. The EPA has alleged violations of PSD because the
areas of North Carolina and South Carolina where Duke
Energy operates the units at issue are in attainment areas for
all relevant pollutants.
35a
3665 (daily ed. Nov. 1, 1977) (Duke Energy Ex. 13). The
EPA explained that “the phrase ‘usage in other parts of the
Act’ most probably refers, not only to section 111(a)(4)
[NSPS], but also to the EPA regulations implementing section
111 that were in effect at the time.” 49 Fed. Reg. 43,211,
43,213 (Oct. 26, 1984) (Duke Energy Ex. 14). In addition,
the Director of the Stationary Source Compliance Division,
Edward E. Reich, explained:
The Clean Air Act provides in Section 169(1)(c)
that for PSD purposes the term modification shall
be defined as that term is defined in Section
111(a) of the Act relating to NSPS. EPA has
interpreted this to mean that for PSD purposes
Congress intended the term modification to
include all exemptions included in the NSPS
regulations promulgated under Section 111 of the
Act prior to the date of enactment of Section 169.
(Mem. from Reich to Davis (Apr. 21, 1983) at 2 (Duke
Energy Ex. 16).
Subsequent to the congressional enactment of NSR,
the EPA promulgated regulations for PSD. The regulation at
the center of the controversy between the parties is the
regulation concerning the term “modification.” Under its
1980 PSD regulations, which the parties acknowledge as the
controlling regulations, the EPA defined modification as “any
physical change in or change in the method of operation of a
major stationary source that would result in a significant net
emissions increase of any pollutant subject to regulation
under the Act.” 40 C.F.R. § 51.166(b)(2)(i) (1987) (Duke
Energy Ex. 21). Accordingly, to trigger the PSD’s permitting
requirement and the requirement to install pollution controls,
two criteria must be satisfied: (1) there must be a “physical
change” and (2) there must be a “significant net emissions
increase.”
36a
The term “physical change” has been interpreted
broadly. “The most trivial activities--the replacement of leaky
pipes, for example--may trigger the modification provisions if
the change results in an increase in the emissions of a
facility.” WEPCO, 893 F.2d at 905. The EPA promulgated
under the PSD program regulatory exclusions from the
definition of modification using substantially the same terms
it used in the NSPS regulations. Specifically, the EPA created
an exemption for “routine maintenance, repair, and
replacement” (““RMRR”). 40 C.F.R. § 51.166(b)(2)(iii)(a)
(1987) (Duke Energy Ex. 21). The meaning and scope to be
afforded this exemption is one of the central disagreements
between Duke Energy and the EPA. The issue for the court to
decide is whether RMRR should be defined relative to an
industrial category or to a particular unit. The EPA’s PSD
relations also provided that a physical change or change in
th, .ethod of operation shall not include “an increase in the
hours of operation or in the production rate.” Jd §
51.166(b)(2)(iii)(f).
The second criteria necessary to trigger the PSD's
requirements is that the physical or operational change must
cause a “significant net emissions increase.” Under the PSD
regulations, a “net emissions increase” is defined as “any
increase in actual emissions from a particular physical change
or change in the method of operation at a stationary source.”
Id. § 51.166(b)(3)(i)(a). Unlike NSPS which measures
emissions increases based on an hourly rate, PSD measures
emissions based on total annual emissions. The second
primary issue of disagreement between the parties is the
appropriate emissions test that should be employed in
calculating the post-project emissions rates.
Ill. Routine Maintenance, Repair, and Replacement
37a
The court is presented with two different interpretations
of the RMRR exemption. As described by the Eleventh
Circuit, the “central disagreement between [the utility] and
EPA is whether ‘routine’ should be defined relative to an
industrial category or to a particular unit.” Tennessee Valley
Auth. v. United States EPA, 278 F.3d 1184, 1189 n.3 (11th
Cir. 2002). The EPA argues that the RMRR exemption
requires “a case-by-case determination of whether the activity
is routinely performed at an individual unit within the
relevant industrial category, considering common-sense
factors such as nature and extent, purpose, frequency, and
cost,” (EPA Mem. Supp. Mot. Partial Summ. J. at 1), and that
this has been the EPA's "long-standing interpretation.” (Jd. at
23.) Conversely, Duke Energy asserts that the “‘routine’
inquiry has as its ultimate purpose the determination of
® The EPA cites two recent decisions, In re Tenn. Valley
Auth., CAA Docket No. 00-6, 2000 EPA App. LEXIS 25
(Envt'l Appeals Bd., U.S. EPA Sept. 15, 2000) (EPA Ex.
100), and Detroit Edison Applicability Determination (May
23, 2000) (EPA Ex. 101), to strengthen its position that the
“routine at an individual unit” standard has consistently been
applied. (EPA Mem. Supp. Mot. Partial Summ. J. at 22-23.)
Both decisions, however, were issued following the EPA’s
decision in 1999 to initiate a number of enforcement
»roceedings. Further, with respect to the order issued in Jn re
Tenn. Valley Auth., the objectivity of this decision has been
brought into question because of the failure of the
proceedings to comply with the requirements of due process.
TVAv. Whitman, 2003 U.S. App. LEXIS 12830, 2003 WL
21452521 (11th Cir. June 24, 2003). The Eleventh Circuit,
therefore, held that the EPA must prove the existence of a
CAA violation in district court, and until that time the EPA’s
decision was “legally inconsequential.” Accordingly, given
the potentially self-serving nature of these decisions, they do
not evidence a long-standing interpretation.
38a
whether a project is routine in the industry, considering all
relevant facts--e.g., nature and extent, scope, frequency, and
cost.” (Duke Energy Am. Br. Opp'n Mot. Partial Summ. J. at
29.)
A. Legislative intent
The EPA has promulgated under its regulations an
RMRR exemption since the enactment of the NSPS. 40
C.F.R. § 60.2(h)(1)(1971) (Duke Energy Ex. 4) (“Routine
maintenance, repair, and replacement shall not be considered
physical changes.”). This exemption was designed to achieve
the congressional intent of not subjecting existing sources to
the costly requirements of installing advanced pollution
control devices.” Such a provision was necessary because of
the expansive meaning afforded "physical change" under the
definition of modification. In 1975, the EPA clarified that the
RMRR provision under NSPS excluded from the definition of
modification “maintenance, repair, and replacement ... routine
for a source category." 40 C.F.R. § 60.14(e)(1)(1975) (Duke
Energy Ex. 6); 40 Fed. Reg. 58,416, 58,419 (Dec. 16, 1975)
(Duke Energy Ex. 7).
Under this regulatory framework, Congress enacted the
PSD program in 1977. A generating facility is subject to the
° See S. Rep. No. 91-1196, Comm. on Public Works, 91st
Cong. 2d Sess. (1970), reprinted in Legal Compilation:
Statutes and Legislative History, Environmental Protection
Agency (Jan. 1975), at 15-16 (Duke Energy Ex. 3) (“The
overriding purpose of [NSPS is] to prevent new air pollution
problems, and towards that end, maximum feasible control of
new sources at the time of their construction is seen by the
committee as the most effective and, in the long run, the least
expensive approach.”).
39a
strictures of the PSD program if it undergoes “construction,”
which Congress defined by explicitly incorporating the
definition of “modification” under NSPS. 42 U.S.C. §
7479(2)(C (1995). In accordance with this statutory mandate,
the EPA defined the term “modification” as “any physical [or
operational] change ... that would result in a significant net
emissions increase of any pollutant subject to regulation
under the Act.” 40 C.F.R. § 51.166(b)(2)(i)(1987) (Duke
Energy Ex. 21). Also consistent with the NSPS definition of
modification, the EPA promulgated a provision excluding
from the definition of “modification” projects undertaken at a
facility that are “routine maintenance, repair, and
replacement.” Jd. § 51.166(b){2)(iii) (a). In order to give the
PSD RMRR exemption its proper scope, this provision must
be defined according to what is routine maintenance, repair,
and replacement within the relevant source category.” This
construction is compelled by the statutory mandate of the
PSD program and congressional intent.
When Congress enacted the NSR program, it
specifically stated its intent to incorporate the NSPS “usage”
‘0 The court in United States v. Southern Ind. Gas & Elec.
Co., 245 F. Supp. 2d 994, 1007-10 (S.D. Ind. 2003)
(“SIGECO”), granted summary judgment for the EPA as to
SIGECO's fair notice defense. As to the correctness of this
determination, this court expresses no opinion. The SIGECO
court also concluded that the EPA’s position that RMRR
should be defined relative to an individual unit was
reasonable and therefore entitled to deference. The court in
United States v. Ohio Edison Co., 276 F. Supp. 2d 829, 2003
U.S. Dist. LEXIS 13799, 2003 WL 21910738, at *24-26
(Aug. 7, 2003 S.D. Ohio), arrived at a similar conclusion. As
to that determination, this court, for the reasons contained
herein, respectfully disagrees.
40a
of the term “modification” into PSD, including the 1975
NSPS exclusion for maintenance, repair, and replacement
projects that are routine for a source category. 42 U.S.C. §
7479(2)(C)(1995) (“The term ‘construction’ ... includes the
modification (as defined in [NSPS]) of any source or
facility.”); 123 Cong. Rec. H11956, 3665 (daily ed. Nov. 1,
1977) (Duke Energy Ex. 13) (explaining Congress’s intent “to
conform” NSR definition of modification to the “usage” in
NSPS). The EPA confirmed this congressional design. (Duke
Energy Ex. 16 at 2) (“EPA has interpreted ... that for PSD
purposes Congress intended the term modification to include
all exemptions included in the NSPS regulations promulgated
... ptior to the date of [PSD’s} enactment ....”).'' Therefore, to
be consistent with the NSPS “usage” of RMRR, the RMRR
provision under PSD must be applied to cover those projects
'! Walter C. Barber, the former Director of EPA’s Office of
Air Quality Planning and Standards (““OAQPS”), explained:
OAOQPS carried over into the PSD and NNSR
regulations the general mindset regarding the
magnitude and scale needed to trigger a
modification developed under the NSPS
program and the specific NSPS definitional
terms of “modification,” “routine maintenance
repair and replacement,” and “increased hours
of operation” and our interpretations thereof.
Furthermore, as used in the PSD and NNSR
programs, OAQPS gave these terms the same
meaning and intent as in the NSPS program and
believed that the same order of magnitude and
scale needed to trigger NSPS would apply to the
PSD and NNSR programs.
Barber Expert Report at 8 (Duke Energy Ex. 10).
4la
that are routine for a source category. See INS v. Cardoza-
Fonseca, 480 U.S. 421, 448 (1987) (“If a court, employing
traditional tools of statutory construction, ascertains that
Congress had an intention on the precise question at issue,
that intention is the law and must be given effect.’” (quoting
Chevron U.S.A. 467 U.S. at 843 n.9)). The EPA
acknowledged this standard for the PSD’s RMRR exemption
in 1992 by:
clarifying that the determination of whether th.
repair or replacement of a particular item of
equipment is “routine” under the NSR
regulations, while made on a case-by-case basis,
must be based on the evaluation of whether that
type of equipment has been repaired or replaced
by sources within the relevant industrial
category.
57 Fed. Reg. 32,314, 32,326 (July 21, 1992).'2 The EPA
specifically referred to “electric utilities’ as a “source
category.” /d. at 32,317.
'2 This “clarification” was not a pronouncement of a new
rule. Indeed, the EPA stated that commentators had requested
that the EPA “define or provide guidance on ‘routine repair,
replacement and maintenance’ activities,” but the rules the
EPA was promulgating “did not deal with this aspect of the
regulations.” 57 Fed. Reg. at 32,326. The EPA recognized,
however, that the RMRR exemption could potentially affect
the rules it was issuing, and therefore stated its “plans to issue
guidance on this subject as part of a NSR regulatory update
package which EPA presently intends to propose by early
summer.” /d. The EPA went on to state that “in the
meantime” it would clarify the appropriate standard for
determining RMRR. /d The EPA, nonetheless, now argues
that what is routine within the “relevant industrial category”
42a
B. WEPCO applicability determination
Prior to this affirmation of the routine in the industrial
category standard for RMRR, the EPA issued an NSPS and
PSD applicability determination for a proposed project at
Wisconsin Electric Power Company's ("WEPCO") Port
Washington facility. The EPA explained that "in determining
whether proposed work at an existing facility is 'routine,' EPA
makes a case-by-case determination by weighing the nature,
extent, purpose, frequency, and cost of the work, as well as
other relevant factors, to arrive at a common-sense finding."
(Mem. from Clay to Kee (Sept. 9, 1988) at 3 (EPA Ex. 73).)
The EPA intended this determination, which was set forth in a
memorandum prepared by Don R. Clay, Acting Assistant
Administrator for Air and Radiation, to be used not only by
WEPCO, but also by other utilities which might seek to claim
the RMRR exemption. (/d. at 2.)
WEPCO proposed a project at its five-unit Port
Washington Power Plant that contemplated replacing rear
steam drums, each of which measured 60 feet in length, 50.5
inches in diameter, and 5.25 inches in thickness; plate-type air
heaters; and other components. (/d. at 4.) The five units at the
Port Washington plant were originally rated at "80 megawatts
electrical output capacity," but due to the deterioration of the
physical plant, the units had operated at a maximum
achievable capacity less than their original design capacity.
(/d. at 2; Mem. from Kee to Emison (Mar. 25, 1988) (Duke
Energy Ex. 31) (that units had been derated from their design
is inapplicable to PSD. It would be a _ nonsensical
interpretation of the EPA’s 1992 clarification of the PSD
RMRR exemption standard to assume that the EPA was
clarifying a standard that did not exist under the exemption in
the first instance.
43a
NIELS Eo BARONS SPR RRE SIE O O
capacity of 80 MW each to operating capacities ranging from
49 MW to 75 MW).) The EPA indicated that following the
proposed project "plantwide capacity would increase about 40
percent above current levels to 400 megawatts." (Duke
Energy Ex. 31 at 2.) Given this information, the EPA
determined that the "work proposed at Port Washington [was]
far from being a regular, customary, or standard undertaking."
(EPA Ex. 73 at 3.) "Rather, [it was] a highly unusual, if not
unprecedented, and costly project." (/d. at 4.).
In subsequent correspondence with WEPCO, the EPA
further indicated that based on an informal survey, it had
detected "no examples of steam drum replacement at aged
electric generating facilities." (Letter from Thomas to Boston
(Oct. 14, 1988) at 4 (Duke Energy Ex. 29).) Similarly, in
response to WEPCO's contention that forty other units had
replaced similar air heater elements, the EPA concluded that
"no units containing plate elements such as those on units 1-4
at Port Washington" had ever replaced air heaters. (Letter
from Clay to Boston (Feb. 15, 1989) at 7 (Duke Energy Ex.
30).) Accordingly, the EPA concluded that WEPCO's
proposed project was not RMRR and the projects were
therefore subject to NSPS and PSD.
WEPCO appealed the EPA's determination to the
Seventh Circuit Court of Appeals. The court affirmed the
EPA's determination that the project proposed at the Port
Washington plant was not RMRR. WEPCO, 893 F.2d at 910-
13. The court agreed with the EPA that "far from being
routine, the Port Washington project apparently was
unprecedented: "WEPCO did not identify, and EPA did not
find, even a single instance of renovation work at any electric
utility generating station that approached the Port Washington
life extension project in nature, scope or extent." /d. at 911
(quoting EPA Br. at 44). Although the record was silent, the
court "surmised" that the unprecedented character of the Port
Washington project "may reflect historical practice in the
44a
electric utility industry" to replace facilities once they have
reached their useful life. Jd.
Among its arguments before the Seventh Circuit,
WEPCO argued, as it had before the EPA, that its proposed
replacement of air heaters paralleled similar replacements of
air heaters at forty other plants. /d. In affirming the EPA's
determination that the forty other air heater replacements
were dissimilar, the court noted that "the plate-type air heaters
at issue in the Port Washington project must be replaced in
whole" while the air heaters at the forty other units, which
contained tubular type heaters, "permitt{ed] the replacement
of the heat transfer surface without requiring the removal of
the entire unit." /d.
The EPA and the Seventh Circuit both confirmed the
relevance of industry practice under the RMRR analysis. The
EPA gave considerable attention te WEPCO's contention that
the types of replacements it contemplated undertaking were
"routine" because others in the industry had undertaken
similar projects. While in the end the EPA disagreed, its
disagreement was with WEPCO's characterization of the
projects undertaken elsewhere, not with WEPCO's position
that what other utilities were doing should inform the EPA's
anaiysis. For example, in the Clay Memorandum, the EPA
stated that the "work called for under the project was rarely, if
ever, performed." (EPA Ex. 73 at 5.) This conclusion was
confirmed by WEPCO which stated: "Generally, the
renovation work items included in this application are those
that would normally occur only once or twice during a unit's
expected life cycle." (/d.) If the relevant inquiry under the
RMRR exemption is whether a particular activity is
"routinely performed at an individual unit" as the EPA now
asserts, the EPA in WEPCO could have simply concluded its
RMRR inquiry with the admission by WEPCO that the
proposed project would occur only once or twice during a
unit's expected life cycle
45a
The EPA, however, requested that WEPCO “submit
information regarding the frequency of replacement of steam
drums, the largest category of work item called for under the
project." (Id.) In response to this request, "WEPCO reported
that to date, no steam drums have ever been replaced at any of
its coal-fired electrical generating facilities." (/Jd.) WEPCO
was able to provide examples of other "headers" comparable
in design pressure and function, but the EPA distinguished
these headers on the ground that they were not comparable in
size. (Id. at 5-6 (stating that "the largest of these [headers]
was 16 inches in diameter, and EPA does not believe that they
are comparable in diameter, wall thickness, function, or
importance to the rear steam drums at Port Washington"). The
characteristic used to _ differentiate these "header"
replacements from the rear steam drum header replacements
proposed by WEPCO was not the extent to which the other
headers had or had not been replaced, but rather was the size
of the header and presumably the extent and cost of the work
required to replace them.
In addition, WEPCO argued to the EPA that its rear
steam drum replacements were routine, principally relying on
its identification of four other steam drum replacement
projects at other facilities. The EPA rejected WEPCO's
reliance on these steam drum projects, finding that they were
not "sufficiently similar to the Port Washington project."
(Duke Energy Ex. 29 at 3.) The EPA distinguished several of
the projects from WEPCO's project primarily on the ground
that they did not involve utility boilers, i.e., they were not in
the same source category. (/d. at 4.) Moreover, the EPA
indicated that the results of its informal survey revealed "no
examples of steam drum replacement at aged electric
generating facilities." (/d.) The fact that no other utilities
replaced steam drums can be relevant only if the appropriate
inquiry is what is routine within the industry. Otherwise, there
would be no need for the EPA to conduct an informal survey
46a
given that steam drums are replaced only once or twice in the
life of a generating unit.
The EPA attempts to bolster its current position that
the EPA did not apply a routine in the industry standard in
WEPCO by citing the EPA's conclusion as to the forty units
that WEPCO alleged engaged in similar air heater
replacement projects. The EPA concluded that the projects
performed at the forty units identified by WEPCO involved a
different type of air heater and were therefore "too dissimilar
to the plate-type elements in use at units 1-4 to support
WEPCO's contention that the work in question is routine."
(Duke Energy Ex. 30 at 7.) This conclusion was affirmed by
the Seventh Circuit. WEPCO, 893 F.2d at 911. The EPA
continued, however, and stated:
Further, even the list of air heater replacement
work submitted by WEPCO did not establish this
as routine repair work. Those 40 units comprise
only a small fraction of total operating utility
units, and even at the 40 units, air heater repair or
replacement appears to have been a one-time
occurrence, not routine repair.
(Duke Energy Ex. 30 at 7 n.6.) Contrary to the EPA's
position, this reference further supports the industry standard
for RMRR. Even if the replacement projects at these forty
units were similar to the WEPCO project, the EPA
determined that a particular project performed at forty units,
which "comprise only a small fraction of total operating
utility units," is not representative enough of the industry to
establish that the project was routine. Furthermore, the EPA
concluded in the alternative that this type of project could not
be considered routine for the industry because these forty
units did not undertake this type of project with enough
frequency. If the air heater replacements were frequently
performed at an individual unit and therefore "routine repair,"
47a
by implication air heater replacements would be “routine
repair" for the industry.
The EPA's continual reference to other projects within
the utility industry confirms Congress's intent to define
RMRR under PSD according to the relevant source category.
The EPA, however, continues to argue that the reference in
the WEPCO applicability determination to the fact that the
proposed replacements would be performed only once or
twice during the life of a unit reveals the appropriate standard
for RMRR to be routine at an individual unit and that its
interpretation is entitled to deference. To accept this
proposition would require that one completely ignore all
references in the WEPCO determination to what was done in
the industry Moreover, "an agency's interpretation of a
statute or regulation that conflicts with a prior interpretation is
entitled to considerably less deference than a consistently held
agency view.” Miller v. AT & T Corp., 250 F.3d 820, 832
(4th Cir. 2001) (quoting Thomas Jefferson Univ. v. Shalala,
512 U.S. 504, 515, 129 L. Ed. 2d 405, 114 S. Ct. 2381
(1994)).
The EPA further asserts that its position is supported
by the Seventh Circuit's decision, arguing that the court was
“particularly persuaded" by the fact that the proposed activity
occurred so infrequently at the particular units. (EPA's Mem.
Supp. Mot. Partial Summ. J. at 22.) Duke Energy rightly
points out, however, that the “opinion itself ... ascribes no
overriding importance to that fact." (Duke Energy's Am. Br.
Opp'n Mot. Partial Summ. J. at 17.) Indeed, the next sentence
of the opinion provides: "WEPCO reported that it had never
previously replaced a steam drum or ‘header’ of comparable
size at any of its coal-fired electrical generating facilities."
WEPCO, 893 F.2d at 912. The court's recognition of both the
frequency of a project at an individual unit and in the industry
confirms the relevant scope of the RMRR inquiry to be what
is routine within the industry.
48a
The only way in which both experience at a unit and
in the industry at large can be relevant is under a routine
within the industry standard. Projects that are repeatedly
performed at a particular unit will be routine in the industry,
as will projects performed at a number of units within the
industry. If the relevant inquiry were that proposed by the
EPA, namely that RMRR applies only to “activity routinely
performed at an individual unit," consideration of what
occurred within the utility industry is irrelevant. The EPA in
WEPCO could have simply dismissed WEPCO's attempt to
support the routineness of its proposed project by reference to
other projects, as it does with Duke Energy here, and relied
primarily on WEPCO's admission that the proposed project
would be performed only once or twice in the life of a unit.
Accordingly, applying its multi-factored test, the EPA could
have determined that the project did not qualify as RMRR.
Yet even if the EPA were to consider what occurred within
the industry, the relevant inquiry under a “routine for an
individual unit" standard would be the number of times a
particular project is undertaken at a unit. The focus of the
EPA's effort at distinguishing the projects identified by
WEPCO from the Port Washington project, however, was on
the type of equipment replaced, not the frequency with which
it was replaced.
The EPA's “routine for an _ individual unit"
interpretation of the WEPCO determination is certainly
consistent with its analysis of the Buck 4 project. Nowhere in
its discussion of the relevant factors as applied to this unit
does the EPA consider what other utilities have done or are
doing. This aspect of the WEPCO analysis has completely
disappeared. What has occurred within the industry, however,
is relevant and must inform the routine inquiry. This is
revealed by the EPA's careful consideration of the other
projects identified by WEPCO. This is also revealed by
Congress's intent to define the application of the PSD
49a
program according to the definitions and exemptions
provided under the NSPS program. The EPA confirmed this
intent in 1992 and must now apply the law as intended by
Congress and as previously applied.
C. EPA's post-WEPCO statements
The "routine in the industry" standard is also supported
by the EPA's statements that the WEPCO determination
would not affect utility life extension projects.'? In December
‘> The EPA was aware of the utility industry practice of
engaging in life extension projects as early as the 1980s. For
example, EPA inspection reports from the 1980s indicate that
projects were being performed that involved "major work
aimed at upgrading and extending the operating life of [the]
boilers" at an "estimated ... cost of $ 50 million." (Inspection
Report of Riverside Generating Station (Oct. 18, 1985) (Duke
Energy Ex. 78).) Another report stated that a unit was out for
a "13 week life extension major overhaul, estimated to cost
approximately $ 15 million." (Inspection Report of Beckjord
Generating Station (Mar. 14, 1988) (Duke Energy Ex. 78).)
Furthermore, a 1989 EPA-directed study designed to assess
future utility air emission trends assumed that existing coal-
fired power plants would continue to operate at original
capacity for fifty-five to sixty-five years, being "refurbished"
around age thirty. (1989 EPA Base Case Forecasts, App. C
(Duke Energy Ex. 40); Letter from Schweers to Beck (July
26, 1989) (Duke Energy Ex. 41).) In March 1986, three EPA
policy analysts published an article in which they listed ten
"life extension" projects of which they were aware, including
Duke Energy's PMP projects at the Dan River and Allen
Plants. (James DeMocker, Judith Greenwald, Paul
Schwengels, Extended Lifetimes for Coal-Fired Power Plants:
Effect Upon Air Quality, Pub. Util. Fortnightly 30, Mar. 20,
1986, at 32-33 (Duke Energy Ex. 79).) That same year, an
50a
1988, the Chairman of the House Subcommittee on Oversight
and Investigations, Congressman John Dingell, informed the
EPA Administrator, Lee Thomas, that his subcommittee had
requested the Government Accounting Office ("GAO") to
prepare a report on utility life extension issues. (Letter from
Dingell to Thomas (Dec. 21, 1988) (Duke Energy Ex. 88).)
The GAO issued its report in September 1990, stating that
"according to EPA policy officials, WEPCO’'s life extension
project is not typical of the majority of utilities’ life extension
projects and concerns that the agency will broadly apply the
ruling it applied to WEPCO's project are unfounded." (GAO
1990 Report at 30-31 (Duke Energy Ex. 42).) “Lending
evidence to the officials’ statements,” the report noted, "EPA's
1989 emission forecast assumed that the WEPCO decision
would not result in a significant number of additional power
plants having to comply with the NSPS and the PSD program
requirements."'* (Jd. at 31.)
EPA official attended an Electric Power Research Institute
("EPRI") conference on "Life Extension and Assessment of
Fossil Plants." (U.S. Resp. to Def.'s Req. for Admis. No. 223
(Excerpt at Duke Energy Ex. 81).) EPRI published the
proceedings of the conference in an |,100-page publication in
which utilities, including Duke Energy, presented detailed
descriptions of many “life extension" projects. (Conference
Proceedings: Life Extension and Assessment of Fossil Power
Plants, EPRI Pub. CS-5208 (1987) (Excerpt at Duke Energy
Ex. 82).)
'* Before the report was issued, GAO sent a fact sheet about
life extension listing most of the information to be included in
the report and asked for the EPA's comments. (See Mem.
from Tiber to Kete et al. (Apr. 10, 1990) (Duke Energy Ex.
93).) The fact sheet was widely distributed among the
personnel in the Office of Policy, Planning and Evaluation.
(See id.)
Sla
Chairman Dingell formally transmitted the report to the
EPA and asked the Administrator about WEPCO and the
GAO report's assessment. (Letter from Dingell to Watkins et
al. (Oct. 9, 1990) (Duke Energy Ex. 94).) Assistant
Administrator William Rosenberg responded for the EPA,
stating that "as indicated in the GAO report, it is expected that
most utility projects will not be similar to the WEPCO
situation" and that the "[WEPCO] ruling is not expected to
significantly affect power plant life extension projects."
(Letter from Rosenberg to Dingell (June 19, 1991) at 5-6
(Duke Energy Ex. 44).)
The EPA's position that life extension projects would
not be significantly affected was again acknowledged in
1995. The EPA's Assistant Administrator for Air and
Radiation stated in response to an industry proposal to add a
“restoration” exemption to the NSR programs that the EPA's
position was that the "routine maintenance exclusion already
included in the existing NSR regulations ... has the effect of
excluding ‘routine restorations” from the requirements of the
NSR programs. ("EPA's Response to Issues Raised by
Industry on Clean Air Act Implementation Reform,” attached
to Letter from Nichols to Lewis (May 31, 1995) at 19 (Duke
Energy Ex. 46).)
The EPA's position on WEPCO's life extension project
and life extension projects in general confirms the
understanding that projects which are routine in the industry
qualify as RMRR. To reconcile the EPA's previously stated
position with its litigation position that RMRR applies only to
routine activities performed at an individual unit, one must
assume that a generating unit routinely and repetitively
undergoes life extension projects. This assumption defies
common sense. Further, this is an assumption the EPA
52a
explicitly rejected when it assumed for the purpose of
assessing future utility air emission trends that coal-fired
generating utilities would undergo life extension
refurbishment once around age thirty. (Duke Energy Ex. 40 at
App. C.) Through the EPA's statements in the Federal
Register, its statements to the regulated community and
Congress, and its conduct for at least two decades the EPA
has established an interpretation of RMRR under which
routine is judged by reference to whether a particular activity
is routine in the industry. See Shell Offshore Inc. v. Babbitt,
238 F.3d 622, 629 (Sth Cir. 2001) ("existing practice”
evidence of current interpretation of regulation). Accordingly,
“once an agency gives its regulation an interpretation, it can
only change that interpretation as it would formally modify
the regulation itself: through the process of notice and
comment rulemaking.” Alaska Prof'l Hunters Ass'n v. FAA,
177 F.3d 1030, 1033-34 (D.C. Cir. 1999) (quoting Paralyzed
Veterans of Am. v. D.C. Arena, 117 F.3d 579, 586 (D.C. Cir.
1997)).
D. Application of the WEPCO multi-factor test
The EPA in the WEPCO applicability determination
identified a multi-factored test that must be used to evaluate
whether a proposed project qualifies as RMRR. The EPA
characterizes Duke Energy's RMRR test as providing that "if
a project has ever been done before, it is ‘routine
maintenance” and that "if a project has ever been performed
by another utility, it is exempt." (EPA Reply Br. Supp. Mot.
Partial Summ. J. at 4.) The WEPCO multi-factored test under
this characterization of the approach advocated by Duke
Energy would collapse the WEPCO test into a single inquiry--
has this type of project been performed before. Because the
WEPCO multi-factored test applies and is entitled to
deference, the determination of RMRR cannot tum
exclusively on whether a particular replacement project has
53a
ever occurred in the industry. If this were dispositive, it would
render the PSD program a nullity.
The frequency with which a component is repaired or
replaced within the industry, however, cannot be ignored. Nor
can the frequency with which a component is repaired or
replaced at a particular unit be conclusive. Rather, the
WEPCO factors--nature and extent, purpose, frequency, and
cost--must be analyzed and applied in reference to the source
or industry category. For example, if a proposed project were
estimated to cost $50 million dollars, that figure must be
analyzed against what other projects within the industry have
cost. If projects within the industry routinely cost $20 million,
the $50 million cost of the proposed project may be one
consideration in support of a finding that the project is not
RMRR. This inquiry must be performed for each WEPCO
factor.
The EPA has moved for partial summary judgment on
the Buck 4 project on the basis that the work performed was
not RMRR for that particular unit. At this stage in the
litigation, the court cannot conclude that there is no genuine
issue of material fact as to whether the project at Buck 4 was
non-RMRR. Insufficient evidence has been provided
regarding whether the project undertaken at Buck 4, given the
specific nature and extent, purpose, frequency, and cost of the
work, is routine in the electrical utility industry. The EPA
applied the WEPCO factors to Buck 4 in arriving at its
determination that the Buck 4 project does not qualify as
RMRR. That analysis, however, was focused only on Buck 4.
Consequently, a further analysis of the WEPCO factors must
be performed in order to characterize the project at Buck 4.
Once a case-specific analysis has been performed, it must be
determined whether a project of that character is routine or
not routine in the industry.
Duke Energy moves for summary judgment as to all
its units, contending that the projects at these units were
RMRR. Duke Energy, however, has not presented sufficient
evidence to persuade the court that no reasonable trier of fact
could conclude otherwise. Duke Energy has presented the
reports of its experts who conclude that Duke Energy's
projects involved RMRR. (Tuppeny Expert Report (Duke
Energy Ex. 62); Bishop Expert Report (Duke Energy Ex.
64).) These reports provide no specific information, however,
as to the number of units within the industry that have
engaged in similar work, whether the costs of Duke Energy's
projects were comparable to the costs of other similar
industry projects, etc. The EPA's expert did concede to Duke
Energy that other utilities within the utility industry were
performing work similar to that performed by Duke Energy.
(Koppe Dep. at 63 (Duke Energy Ex. 61).) This alone is not
sufficient to establish RMRR. If it were, the utility industry
would be the ultimate authority on what is and is not
permissible.
Because there are factual issues which remain for trial,
it is appropriate that the court provide the parties with
guidance as to who bears the burden of proving whether Duke
Energy's projects qualify as RMRR. As a general proposition,
the party claiming the benefit of a statutory or regulatory
exception bears the burden of proof. See United States v. First
City Nat'l Bank of Houston, 386 U.S. 361, 366 (1967); United
States v. Moore, 613 F.2d 1029, 1044-45 (D.C. Cir. 1979).
This general proposition is just that; it is not dispositive.
Rather, it is merely an interpretive aid to be used by the court
in evaluating and allocating burdens of proof. See United
States v. McArthur, 108 F.3d 1350, 1354 (11th Cir. 1997)
(characterizing rule as "merely [an] interpretative aid[]" to be
considered along with “other indications of legislative will
evident in the statute"). One court has expressed its view that
the issue should be approached by drawing a distinction
between an exception to a statutory prohibition and an
55a
exclusion from a statutory definition. EEOC v. Chicago Club,
86 F.3d 1423, 1429-31 (7th Cir. 1996) (stating that there is an
"important distinction between an exception to the prohibition
of a statute and an exclusion from the definition of entities
covered by [the] statute"). The court believes this approach to
be useful as it allows for the consideration of legislative
intent.
The requirements of PSD are triggered by any
physical change that results in an increase in emissions. 40
C.F.R. § 51.166(b)(2)(i) (1987) (Duke Energy Ex. 21). The
EPA has defined physical change expansively, such as the
simple repair of a leaky pipe. WEPCO, 893 F.2d at 905; 57
Fed. Reg. 32,314, 32,316 (July 21, 1992) (stating that the
EPA has “always recognized" that the definition of physical
change could "encompass the most mundane activities at an
industrial facility (even the repair or replacement of a leaky
pipe)"). The EPA's burden of proving a "physical change,"
therefore, is quite easy to satisfy. The EPA has also
recognized, however, "that Congress obviously did not intend
to make every activity at a source subject to new source
requirements" and therefore “defined ‘modification’ in the
NSPS and NSR regulations to include common-sense
exclusions from the ‘physical ... change’ component of the
definition." 57 Fed. Reg. at 32,316. For example, both NSPS
and PSD regulations "contain similar exclusions for routine
maintenance, repair, and replacement."'* Jd. Accordingly, the
'S This exclusionary view is consistent with the EPA's
historic understanding of the RMRR exemption. In the 1980
PSD regulations, the EPA stated, within a section entitled
"Final Definitions of 'Major Modification’ and ‘Net Emissions
Increase," that the statutory phrase “physical change’ ... [did]
not encompass certain specific types of events," including
"routine maintenance, repair and replacement." 45 Fed. Reg.
52,676, 52,698 (Aug. 7, 1980) (Duke Energy Ex. 22).
56a
1980 PSD regulations provide that "[a] physical change ...
shall not include ... routine maintenance, repair, and
replacement.” 40 C.F.R. § 51.166(b)(2)(iii) (a) (1987) (Duke
Energy Ex. 21).
In light of the legislative intent not to include in the
PSD requirements every activity and the EPA's exclusion of
RMRR from the definition of physical change, the EPA
should bear the burden of proving that Duke Energy's projects
do not fall within this exemption. See Chicago Club, 86 F.3d
at 1430-31 (explaining that where the "exclusion is
incorporated in the definition" the defendant should not bear
the burden of proving the exclusions application). To place
the burden on Duke Energy would be in effect to sanction an
almost de facto presumption of a PSD violation whenever a
utility performs any type of work. This is especially true if the
EPA applied the actual-to-potential emissions test, which
always results in a net emissions increase, given the trivial
showing necessary to prove a “physical change”.'° Congress,
however, did not provide a presumption or anything
approaching a presumption. The elements of a PSD violation,
therefore, entail more than proving a physical change, which
is no burden at all. It entails a showing that a utility engaged
in a non-routine physical change that resulted in an increase
in emissions. The EPA should appropri-tely bear the burden
of making this showing at trial.
'© The EPA elected not to seek application of this test,
although it did se not based on the validity of its position but
for other considerations unknown to the court. See infra n.17.
S7a
IV. Net Emissions Increase
Like the exemption for RMRR, the parties have
presented two competing methods for quantifying emissions
increases, both of which presumably stem from the 1980 PSD
regulations.'’ The EPA advances as the correct method the
"actual-to-projected-actual" test. Under this test, a source
must predict a project's impact on hourly emissions rates and
hours and rates of production, i.e., capacity utilization. Duke
Energy argues that the only method that can be applied to its
projects is the “actual-to-actual" test. It contends that this is
the test provided for under the 1980 regulations and that the
test requires a comparison of pre-project actual emissions and
future “actual” emissions, assuming constant hours and
conditions of operation. The court finds, based on the PSD
rules, the contemporaneous interpretations of the PSD rules,
and the statutory language incorporating the NSPS concept of
modification into PSD, post-project emissions must be
calculated on an annual basis, measuring emissions in tons
per year, and in calculating post-project emissions levels the
'’ The EPA in its briefing argued that a third test, the “actual-
to-potential" test should apply to Duke Energy's units. (EPA
Mem. Supp. Mot. Partial Summ J. at 33-35.) Under the
actual-to-potential test, the EPA assumes that a unit will
operate at its maximum hourly rate of emissions and will do
so continuously. Because no unit operates under these
conditions, an emissions increase will always result. During
the summary judgment hearing on July 18, 2003, the EPA
indicated that it would not seek application of the actual-to-
potential test but would rather pursue its contention that the
emissions test under PSD requires consideration of both
increased hourly rates and utilization. Accordingly, the court
will not address the potential application of the actual-to-
potential test.
58a
hours and conditions of operation must be held constant.
Accordingly, a net emissions increase can result only from an
increase in the hourly rate of emissions.
A. Plain language of increased hours exclusion
The permitting and pollution control requirements of
PSD are triggered by a non-routine physical change at a
source that results in a "significant net emissions increase." 40
C.F.R. § 51.166(b)(2)(i)(1987) (Duke Energy Ex. 21). In
order to prove a “net emissions increase," the EPA must show
an “increase in actual emissions from a particular physical
change or change in the method of operation at a stationary
source." /d. § 51.166(b)(3)(i)(a). For units that have begun
normal operations, such as the units at issue in the case at bar,
"actual emissions" is defined according to a pre-project (or
baseline) period that is "representative of normal source
operation." Jd. § 51.166(b)(21)(ii).'* Thus, a comparison
between the pre-project levels of emissions and post-project
levels of emissions is required to determine whether there has
been a net emissions increase above the baseline levels.
The key to this comparison is how to calculate the post-
project emissions levels. Because an increase in emissions
must result from a "physical [or operational] change," which
by definition excludes "an increase in the hours of operation
or in the production rate," id. § 51.166(b)(2)(iii)(f), post-
project emissions levels must be calculated assuming the
same pre-project "representative" conditions of operation, i.e.,
'8 “For any emissions unit which has not begun normal
operations ... actual emissions shall equal the potential to emit
of the unit ...." 40 C.F.R. § 51.166(b)(21)(iv) (1987) (Duke
Energy Ex. 21). Neither party seeks to apply this standard to
the units at issue.
59a
hours and rates of production. Under the 1980 PSD
regulations, therefore, only if the project increases the hourly
rate of emissions will there be an annual emissions increase.
The EPA asserts that the increased hours exclusion
applies only to exclude increased utilization where the
~ jncreased utilization is not associated with a construction
project. Thus, whenever there is an increase in utilization
coupled with a physical change, any increase in hours of
operation and production rates may be considered in the
emissions calculus. Such a limitation on-the application of
this exclusion, however, is not provided for in the plain text
of the regulations. Hughes Aircraft Co. v. Jacobson, 525 U.S.
432, 438 (1999). The only limitation on the increased hours
exemption provided for in the regulations is that any increase
in hours or rates cannot otherwise be prohibited by a federally
enforceable permit.'? 40 C.F.R. § 51.166(b)(2)(iii)(f) (1987)
(Duke Energy Ex. 21). Nevertheless, the EPA contends that
its interpretation of this exemption is reasonable and therefore
entitled to deference. The court, however, cannot simply defer
to the EPA's interpretation when that interpretation imposes
an additional condition on a regulatory exemption. See
Christensen v. Harris County, 529 U.S. 576, 588 (2000) ("To
defer to the agency's position would be to permit the agency,
under the guise of interpreting a regulation, to create de facto
a new regulation.").
B. EPA's historic interpretation of increased hours
exclusion
The court cannot defer to the EPA's interpretation
when it is clearly contrary to earlier interpretations.
'9 It is undisputed that Duke Energy's units are not subject to
permit limitations on hours or rates of production.
60a
Immediately after the promulgation of the PSD regulations in
1980, the EPA's Director of the Division of Stationary Source
Enforcement ("DSSE"), Edward E. Reich, confirmed in two
separate applicability determinations that the requirements of
PSD would be implicated only by an increase in the hourly
rate of emissions. In a June 24, 1981, applicability
determination, Reich wrote that "PSD applicability [at a
previously operating source] is determined by evaluating any
change in the [hourly] emissions rates caused by" the physical
or operational change being examined. (Letter from Reich to
Gill (June 24, 1981) (Duke Energy Ex. 23).) Because the
available data indicated that there would be no increase in the
hourly rate of emissions following the contemplated change,
Reich concluded that “actual emissions could increase only if
there [was] an increase in the production rate or hours of
operation, both of which are specifically exempt from PSD
review." (/d.) This determination reconfirmed an earlier PSD
applicability determination in which Reich stated that
increased hours of operation, even when coupled with a
physical or operational change, would not be considered a
modification. (Mem. from Reich to Whitmore (Jan. 22, 1981)
(Duke Energy Ex. 24).) Thus, absent an increase in the
maximum hourly rate of emissions, the mandates of PSD are
not implicated.
Once an agency issues a determination or ruling, it
“must either follow its own precedents or explain why it
departs from them.” Puerto Rican Cement Co. v. United
States EPA, 889 F.2d 292, 298 (ist Cir. 1989) (quoting
Shaw's Supermarkets, Inc. v. NLRB, 884 F.2d 34, 36 (1st Cir.
1989)). The EPA attempts to explain why it has not followed
its precedent by dismissing these determinations as
“erroneous” and mere "dicta." Reich as the Director of the
DSSE, however, was not a low-level employee from an
irrelevant division opining as to what he believed the
appropriate interpretation of the EPA regulations should be.
Rather, he was the head of the division at the EPA responsible
6la
for "providing guidance for interpretations which address the
implementation of [the PSD] regulations." (Mem. from Reich
to Devine (Feb. 13, 1978) (Duke Energy Ex. 143).) "[EPA]
policy required that DSSE... make the final recommendation
for interpretation of these requirements." (/d.) Accordingly,
these contemporaneous interpretations provide compelling
evidence of the rules' original meaning and cannot simply be
ignored out of blind deference to the EPA's current
interpretation. Ohio Dep't of Human Servs. v. United States
Dep't of HHS, 862 F.2d 1228, 1234-35 (6th Cir. 1988).
C. Legislative intent
The interpretation that requires an increase in the
hourly emissions rate and the exclusion of any increase in the
hours of operation is not only consistent with the plain
language of the regulations and the EPA's contemporaneous
interpretations, but is also consistent with the NSPS definition
of “modification” which was incorporated by explicit
reference into PSD.”” The PSD program provides that "no
major emitting facility on which construction is commenced
... May be constructed in any area to which this part applies
unless--(1) a permit has been issued." 42 U.S.C. § 7475(a)(1)
(1995) (emphasis added). The term "construction" is defined
to “include[] the modification (as defined in section 741 1(a)
20 See 123 Cong. Rec. H11956, 3665 (daily ed. Nov. 1, 1977)
(Duke Energy Ex. 13) (explaining that Congress intended "to
conform" the NSR definition of "modification" to the “usage
in other parts of the Act," namely NSPS). EPA interpreted
this reference to "usage" to "mean that for PSD purposes
Congress intended the term modification to include all
exemptions included in the NSPS regulations promulgated ...
prior to the date of [PSD's] enactment." (Duke Energy Ex.
16).
62a
of this title [NSPS]) of any source or facility." Jd. §
7479(2)(C). An NSPS modification requires a physical or
operational change and an increase in the unit's maximum
hourly rate of emissions. /d. § 7411(a)(4); 40 C.F.R. §
60.14(a) (1975) (Duke Energy Ex. 6). Thus, in order to
undergo "construction" as defined in PSD, an existing source
must also undergo a "modification" as defined in NSPS,” ice.,
to undergo PSD construction a physical change must result in
an increase in the hourly rate of emissions.
Under the emissions standard advanced by the EPA
under the 1980 regulations, however, a physical change at an
existing source that does not increase the source's hourly
emissions rate, thereby implicating NSPS, could nonetheless
trigger PSD based on a projected increase in hours of
operation. Accordingly, an existing source would be
considered modified under PSD even in the absence of an
NSPS modification at that source. This interpretation of the
regulations is inconsistent with the congressional design of
defining PSD construction in terms of NSPS modification and
should therefore be accorded little deference. See Stinson v.
United States, 508 U.S. 36, 45 (1993) (stating that no weight
21 In 1975, the EPA revised the NSPS regulations to clarify
that the modification definition applied to an increase "in
emissions rate," "expressed as kg/hr." 40 Fed. Reg. 58,416,
58,419 (Dec. 16, 1975) (Duke Energy Ex. 7). The EPA
explained that the unit of measurement would clarify that the
modification rule would be sensitive to "increased production
capacity and to the overall increase in total emissions to the
atmosphere," i.e., to new capacity to emit pollution, while
“automatically allowing increases in operating hours as
intended by one of the existing exemptions under 40 CFR
60.2(h)." 39 Fed. Reg. 36,946, 36,947 (Oct. 15, 1974) (Duke
Energy Ex. 8).
63a
can be given to a regulatory interpretation that would "violate
the Constitution or a federal statute").
The EPA contends that an emissions test for PSD that
excludes from its calculations any emissions caused by an
increase in the hours of operation ignores the critical
differences between NSPS and PSD. Further, the EPA argues,
this construction of the emissions test renders the PSD test
indistinguishable from the NSPS test. While NSPS is focused
on technology requirements for source categories, PSD
requirements focus on the location of the source and its
potential impact on air quality in that locality. Northern
Plains Res. Council v. United States EPA, 645 F.2d 1349,
1356 (9th Cir. 1981). An hourly emissions rate test, however,
contrary to the EPA's assertion, does not ignore the objectives
of each program and does not render the test for each program
indistinguishable.
PSD may be triggered if there is an increase in the
maximum hourly emissions rate. In this regard, the PSD and
NSPS emissions tests are similar. Unlike NSPS which is
always triggered whenever there is an increase in the hourly
rate of emissions, PSD is potentially triggered when there is
an increase in the hourly emissions rate but only if the
annualized emissions increase: (1) exceeds the significance
levels in 40 C.F.R. § 51.166(b)(23) and (2) is not offset by
contemporaneous decreases at the source, id. § 51.166(b)(3).
These two conditions for PSD applicability--significance
levels and netting--effectuate the air quality purpose of the
PSD program. See Alabama Power Co. v. Costle, 636 F.2d
323, 401 (D.C. Cir. 1979) (explaining that PSD is concerned
only with air quality and thus requires netting). These
conditions also explain why emissions under PSD must be
calculated on an annual basis: measuring emissions in tons
64a
per year makes possible netting (addition and subtraction) of
emissions rates between various units at a plant.”
While courts have construed some of the same terms
used in NSPS and PSD in different ways, these decisions do
not compel a similar result here. In fact, the explicit reference
by Congress incorporating the concept of NSPS modification
into the PSD concept of construction compels the result that
PSD is triggered only by an increase in a unit's hourly
emissions rate.
In Northern Plains, the court upheld the EPA's
interpretation of the term “commenced,” which was defined
” The netting provisions of PSD state:
The first step in determining whether a “net
emissions increase" would occur is to determine
whether the physical or operational change in
question would itself result in an increase in
“actual emissions." If it would not, then it could
not result in a “net emissions increase." If it
would, the second step is to identify and
quantify any other prior increases and decreases
in “actual emissions" that would be
contemporaneous with the particular change and
otherwise creditable. The third step, finally, is to
total the increase from the particular change
with other contemporaneous increases and
decreases. If the total would exceed zero, then a
"net emissions increase" would result from the
change.
45 Fed. Reg. 52,676, 52,698 (Aug. 7, 1980) (Duke Energy
Ex. 22).)
65a
differently under NSPS and PSD. 645 F.2d at 1354-57. The
court examined the regulatory history, statutory provisions,
and legislative history of the term and concluded that there
was “no manifest congressional intent" to apply the same
definition of "commenced" under both NSPS and PSD. /d. at
1355. Significantly, the court observed that "commenced"
was not defined in the 1970 CAA Amendments but was
instead defined in 1971 by an NSPS regulation. /d.
Accordingly, the court rejected the argument that the term
should be given the same meaning under both programs
because when Congress enacted PSD in 1977, it explicitly
defined "commenced" in the statute differently from the pre-
existing NSPS definition and "expressly limited [the PSD
definition] by the introductory phrase ‘For purposes of this
part--' to Part C of the Act, i.e., the statutory PSD program."
Id.
The court in Alabama Power similarly relied on the
statutory language in holding that the EPA had the authority _
to “adopt definitions of the component terms of ‘source’ that
are different in scope from those that may be employed for
NSPS ... due to differences in the purpose and structure of the
[NSPS and PSD] programs." 636 F.2d at 397-98. The
decision, however, was not based solely on the different
objectives of the two programs. Rather, it was based in large
measure on the differences in the statutory language used in
NSPS and PSD to describe the term "source." Compare 42
U.S.C. § 7411(a)(3) (1995) (NSPS) (defining the term
"source" to mean “any building, structure, facility, or
installation") with id. § 7479(1) (PSD) (defining the term
"source" to include “fossil-fuel fired steam electric plants ...,
coal cleaning plants (thermal dryers), kraft pulp mills,
Portland Cement plants, ... [and] iron and steel mill plants").
This reference to “entire plants" in PSD, according to the
court, demonstrated that “Congress clearly envisioned" that
the term "source" should be given a different construction
under PSD than NSPS, which applies to individual units.
Alabama Power, 636 F.2d at 397.
In stark contrast to these cases in which there was a
clear congressional intent to treat similar terms differently,
Congress clearly manifested its intent that the definition of
"modification" should be given the same construction under
NSPS and PSD. The CAA defines the term "modification" in
only one place: 42 U.S.C. § 7411(a)(4) (NSPS). Seven years
later, when Congress enacted PSD, it explicitly defined the
application of PSD according to the NSPS definition of
modification. Furthermore, Congress expressly stated that it
intended "to conform" the PSD definition of "modification" to
the “usage” of that term under NSPS. 123 Cong. Rec.
H11956, 3665 (daily ed. Nov. 1, 1977) (Duke Energy Ex. 13).
This court cannot envision a clearer indication of Congress's
intent to trigger PSD only when NSPS is likewise triggered
by an increase in the maximum hourly emissions rate.
D. WEPCO emissions test
The Seventh Circuit in WEPCO, the only appellate
court” to date that has considered this issue, similarly
concluded that for a source that has begun normal operations,
PSD is potentially triggered only when there is an increase in
the maximum hourly rate of emissions. WEPCO, 893 F.2d at
915-18. The EPA in WEPCO found that the replacements
WEPCO proposed would increase “plantwide capacity ...
3 The court in Ohio Edison rejected the position that PSD is
potentially triggered only by an increase in maximum hourly
rates of emissions. 2003 U.S. Dist. LEXIS 13799, 2003 WL
21910738, at *44-47. Instead, the court accepted the EPA's
position that emissions increases under PSD should be
calculated considering both an increase in the hourly rate of
emissions and an increase in utilization. /d. at *35-39. This
court respectfully disagrees with this conclusion.
67a
about 40 percent above current levels." (Duke Energy Ex. 31.)
As such, the EPA reasoned that to increase the capacity of
some WEPCO units in a way that increases their maximum
achievable hourly emissions rates triggered NSPS. (EPA Ex.
73 at 11.) The WEPCO court affirmed this determination.
WEPCO, 893 F.2d at 913-15.
In calculating the PSD emissions increases, the EPA
sought to apply the "actual-to-potential" test to units that had
undergone like-kind replacements. Under this approach, the
EPA compared the actual annual emissions of the units during
a pre-project representative period to the units’ theoretical,
total annual emissions, which presumes that the units operate
at their maximum hourly emissions rate, twenty-four hours a
day, 365 days a year. The EPA reasoned that because the
source “had not yet begun operations following the
renovation, "actual emissions” following the renovation
[were] deemed to be the source's “potential to emit.""
WEPCO, 893 F.2d at 916 (quoting Clay Mem. at 7).
The court rejected this approach and concluded that
there was “no support in the regulations for the EPA's
decision wholly to disregard past operating conditions at the
plant." /d. at 917. On remand, the court ordered the EPA to
determine “whether the renovated plant would cause a
significant net emissions increase if it were operated under
present hours and conditions." /d. at 918 n.14. This remand
instruction explicitly sets forth the "actual-to-actual" test
advocated by Duke Energy and previously applied by the
EPA. (See supra § IV.B.) This test requires that the hours
and conditions of operation be held constant and places the
focus on an increase in the hourly emissi ns rate.
The EPA contends that the WEPCO remand
instruction does not require application of the actual-to-actual
test. Instead, it asserts that if the WEPCO court agreed with
the formulation of the emissions test proposed by Duke
68a
Energy, there would have been no need to remand the case,
citing the court's acknowledgment that the EPA had
“assumed that emissions increases at Port Washington would
come not from an increase in emission rate, but rather from
increases in production rate or hours of operation.” WEPCO,
893 F.2d at 916 (quoting Supplemental Determination at 9).
Thus, the EPA argues, had the court agreed that the hours of
operation must be held constant, it would have decided, based
on the EPA's assumption about emissions rates, that PSD did
not apply.
While the court arguably may have ignored an
assumption by the EPA in providing its remand instruction, it
did not ignore the specific facts of the case. It was undisputed
that the WEPCO replacement projects resulted in the
restoration and increase in the maximum capacity (i.e., hourly
emissions rate) of the restored units. /d. at 910. Furthermore,
the court upheld the EPA's determination that NSPS applied
because of an increase in the units’ maximum hourly rate of
emissions. /d. at 913-15. However, even with the
determination that the renovation caused an increase in the
hourly rate of emissions a remand was necessary to determine
whether that increase in emissions would exceed the PSD
significance levels, and thereby trigger PSD.”
** The PSD's applicability could not be determined by the
court because "WEPCO never submitted pollutant-specific
data to the EPA. Consequently, the EPA could not, at the time
the matter was before it, conclude whether the renovated plant
would cause a significant net emissions increase if it were
operated under present hours and conditions." WEPCO, 893
F.2d at 918 n.14 (citation omitted). Accordingly, the court
directed that "WEPCO should make such data available so
that the EPA can determine on that basis whether the Port
Washington plant will be subject to the PSD program." Jd.
69a
Following the remand, the EPA failed to calculate the
PSD emissions levels as instructed by the Seventh Circuit.
Instead it calculated post-project emissions levels by
predicting future utilization of the plant. The EPA recognized
that the remand instruction could be interpreted to require that
hours of operation be held constant but dismissed this
interpretation as “incorrect.” (Letter from Rosenberg to
Boston (June 8, 1990) at 6 (Duke Energy Ex. 33).) Similarly,
an EPA attorney noted on an internal EPA memorandum
about the WEPCO remand instruction that "present hours’ is
absurd. EPA properly ignored it in [the] WEPCO remand."
(Mem. from Rivkin to Wakefield (Feb. 26, 1991) at 14 (Duke
Energy Ex. 140).)
Because the 1980 regulations do not provide for the
actual-to-projected-actual test, the EPA relies on _ its
interpretation of the WEPCO decision, in which the court
stated that the EPA could not “wholly ... disregard past
operating condition," WEPCO, 893 F.2d at 917, to support its
actual-to-projected-actual test. Based on its interpretation of
this language, the EPA asserts that its decision to include in
the PSD emissions test any increase in utilization should be
given deference. While deference to the EPA's interpretation
of the CAA's Amendments and its technical regulations is
typically substantial, Lyng v. Payne, 476 U.S. 926, 939
(1986); Chevron U.S.A., 467 U.S. at 844, a similar deference
in not warranted when what is being interpreted is the
language of a judicial opinion. This is a task the court is
equally able to perform.
The EPA does not rely on the language of the 1980
PSD regulations to support its method of calculating post-
project emissions. Nowhere in the regulations is there a
reference to an actual-to-projected-actual test or to increased
utilization. In fact, the EPA admitted as much in its WEPCO
applicability determination. WEPCO argued to the EPA that
the EPA should "compare representative actual emissions
70a
prior to the change with projected’ actual emissions after the
renovation." (EPA Ex. 73 at 7 n.4.) The EPA concluded that
"the PSD regulations provide no support for this view." (Id.)
More recently, the EPA's proffered expert on PSD regulations
indicated that the tests he applied, which are variations of the
actual-to-projected-actual test, were "not set forth in the 1980
rules" but were "plausible approaches." (Sahu Dep. at 156
(Duke Energy Ex. 66); Sahu Expert Report at 39, 41 (Duke
Energy Ex. 110).) The EPA, however, cannot lawfully apply
a standard not provided for in the regulations on the premise
that it is a plausible approach. See Panhandle Eastern Pipe
Line Co. v. FERC, 613 F.2d 1120, 1135(D.C. Cir. 1979) ("It
has become axiomatic that an agency is bound by its own
regulations. The fact that a regulation as written does not
provide [the agency] a quick way to reach a desired result
does not authorize it to ignore the regulation or label it
‘inappropriate."").
The fact that the 1980 PSD regulations do not provide
the methodology the EPA seeks to apply is further
highlighted by the EPA's decision to add through notice-and-
comment procedures the very methodology it now contends
the 1980 regulations provide. In 1992 the EPA promulgated
the "WEPCO mule."” See 40 C.F.R. § 51.166(b)(21)(v),
> The WEPCO Rule provisions providing an actual-to-
projected-actual test do not apply to the projects at issue. The
WEPCO Rule was not incorporated into the North Carolina
SIP until December 4, 1995, and into the South Carolina SIP
until July 8, 2002. See 60 Fed. Reg. 51,923 (Oct. 4, 1995)
(EPA Ex. 127); 67 Fed. Reg. 30,594 (May 7, 2002) (EPA Ex.
128). The EPA enforces the SIP's rule until the SIP is revised.
General Motors Corp. v. United States, 496 U.S. 530, 540
(1990). However, even for projects undertaken after the dates
in which the WEPCO Rule was adopted, Duke Energy "opted
out’ of the WEPCO calculus" by failing to satisfy the
Tla
(b)(32) (2002); 57 Fed. Reg. 32,314 (July 21, 1992). Under
this rule, post-project actual emissions for the purpose of
triggering PSD at utilities are equal to “representative actual
annual emissions," which are generally defined as "the
average rate, in tons per year, at which the source is projected
to emit a pollutant for the two-year period after a physical
change." 57 Fed. Reg. at 32,335. In calculating any increase
in emissions, the regulations require consideration of the
"effect any change will have on increasing or decreasing the
hourly emissions rate and on projected capacity utilization."
Id. The addition of the new WEPCO Rule appears to have
been unnecessary if the 1980 regulations already provided
this method.
In sum, the 1980 PSD regulations require that in
calculating post-project emissions, the EPA must hold the
pre-project and post-project hours and conditions of operation
constant. This is the formulation dictated by the plain
language of the 1980 regulations, the EPA's contemporaneous
interpretations of those regulations, and the statutory and
regulatory framework of the PSD program.
E. Application of the "actual-to-actual" emissions
test
Duke Energy contends that because the EPA does not
allege an increase in the hourly rate of emissions for any of its
units following the projects, the EPA cannot establish a "net
emissions increase" and it is therefore entitled to summary
judgment on all claims. The EPA has alleged, however, that
following the project at Buck 4 there was an increase in Buck
4's hourly rate of emissions above its baseline rate. This is
regulatory prerequisite of submitting emissions data for a
five-year period following the physical change. (EPA Mem.
Supp. Partial Summ. J. at 35 n.14.)
72a
principally due to the fact that Buck 4 was in ECS for
approximately ten years. Accordingly, the EPA asserts that its
baseline emissions rate is zero.
In calculating the baseline emissions rate, the
regulations provide that "in general, actual emissions as of a
particular date shall equal the average rate, in tons per year, at
which the unit actually emitted the pollutant during a two-
year period which precedes the particular date and which is
representative of normal source operation." 40 C.F.R. §
51.166(b)(21)(i1) (1987) (Duke Energy Ex. 21). Duke Energy
argues that because Buck 4 was shutdown for economic
reasons, the baseline period of normal source operation
occurs during the period of actual operation preceding the
shutdown. Therefore, because its post-project emissions rate
did not increase above this pre-project level, PSD is not
triggered.
Under the 1980 regulations, the EPA has historically
presumed that the two years immediately preceding a change
should be used to calculate the baseline. 45 Fed. Reg. 52,676,
52,705 (Aug. 7, 1980) (EPA Ex. 122). This interpretation has
been applied on previous occasions. (See, e.g., In re Monroe
Elec. Generating Plant, Petition No. 6-99-2 slip op. 14-16
(U.S. EPA 1999) (EPA Ex. 116) ("In calculating the net
emissions increase for reactivation of long-dormant sources
potentially subject to PSD, the source is considered to have
zero emissions as its baseline."); Letter from Howekamp to
Connery (Nov. 6, 1987) at 8 (Cyprus Casa Grande
Applicability Determination) (EPA Ex. 159).)*° For example,
in the Cyprus Casa Grande PSD applicability determination,
26 See also 61 Fed. Reg. 38,250, 38,254 (July 23, 1996) (EPA
Ex. 130) ("The EPA has historically used the 2 years
immediately preceding the proposed change to establish the
baseline. However, in some cases it has allowed use of an
earlier period." (citation omitted)).
73a
the EPA concluded that the emissions during the two-year
period preceding the start-up of the plant were zero and that
"this period !was] representative of normal operations, since
the emissions [had] been zero during each of the last ten years
while the plant [had] been shut down." (EPA Ex. 159 at 8.)
The regulations provide, however, that "the reviewing
authority may allow the use of a different time period upon a
determination that it is more representative of normal source
operation.” 40 C.F.R. § 51.166(6)(21)(ii) (1987) (Duke
Energy Ex. 21). The EPA has indicated that the discretion to
depart from the zero baseline presumption for long-dormant
facilities is narrow and generally limited to extraordinary
occurrences. Duke Energy argues that the agency
interpretation of the regulations that controls the baseline
level is the North Carolina Department of Environmental and
Natural Resources' ("NCDENR") interpretation.
In 1982, the EPA approved North Carolina's PSD
rules, thereby authorizing the State "to issue and enforce PSD
permits for sources located in [North Carolina]." 47 Fed. Reg.
7836 (Feb. 23, 1982) (Duke Energy Ex. 26). Duke Energy
argues, therefore, that the NCDENR's interpretation of North
Carolina's PSD rules governs what period should be used to
calculate pre-project baseline emissions levels. Accordingly,
Duke Energy refers to the testimony of John Evans, the head
of the NCDENR, in which he stated that, under North
Carolina PSD regulations, NCDENR considers the last two
years of operation preceding the shutdown as _ the
representative baseline period for any physical change that
might have occurred during the shutdown. (Evans Dep. at 11-
12 (Duke Energy Ex. 146).)
The EPA asserted during oral argument that this
evidence was irrelevant because Duke Energy never
requested from the appropriate authority a different baseline.
Thus, according to the EPA, Duke Energy cannot argue, ex
74a
post, that it should be allowed a different representative
period. Whether Duke Energy can request a different baseline
after the project has been completed and an enforcement
action has been initiated will not be decided by the court at
this time. Assuming only for purposes of summary judgment
that Duke Energy may make such an ex post request, there
exists at a minimum a question of fact as to whether Duke
Energy can make the necessary showing that a different
baseline is more representative of normal source operations.
If it is ultimately successful in making such a showing, the
EPA must then prove, as it must for all projects, that the Buck
4 project caused the unit's hourly emissions rate to increase
above its baseline rate. For this reason, the court cannot grant
either parties’ motion for summary judgment as to Buck 4. As
to the other twenty-eight projects, given the size and
complexity of the record, the court will defer ruling on
whether these projects resulted in an increase in emissions
above the baseline rate. To the extent the projects did not
increase the unit's maximum hourly rate of emissions,
however, these projects are not subject to PSD.
V. Statute of Limitations
The EPA, pursuant to 42 U.S.C. § 7413(b)(2), seeks
civil penalties up to $25,000.00 per day of violation for
violations occurring on or before January 30, 1997, and
$27,500.00 per day of violation for violations occurring after
January 30, 1997, and injunctive relief pursuant to 42 U.S.C.
§§ 7413(b), 7477. Duke Energy, on August 20, 2001, moved
for partial judgment on the pleadings. According to Duke
Energy, its alleged failure to comply with the preconstruction
permit requirements resulted in discrete violations that were
complete at the time of actual construction. Thus, any claim
for civil penalties resulting from alleged modifications that
occurred more than five years prior to the filing of this
lawsuit are barred by the applicable statute of limitations. The
EPA and Intervenor-Plaintiffs, on the other hand, contend that
75a
any civil penalties arising from these alleged modifications
are not time barred because Duke Energy's failure to obtain a
preconstruction permit and subsequent operation of the plants
constitute a continuing violation. They accordingly move for
summary judgment on this defense by Duke Energy. The
EPA and Intervenor-Plaintiffs also seek a determination as to
whether the applicable statute of limitations bars the
imposition of injunctive relief.
A. Civil penalties
The CAA does not provide a specific statute of
limitations applicable to alleged violations of its provisions.
Accordingly, the general federal statute of limitations for civil
enforcement actions applies. The general federal statute of
limitations provides in part that "except as otherwise provided
by Act of Congress, an action, suit or proceeding for the
enforcement of any civil fine, penalty, or forfeiture, pecuniary
or otherwise, shall not be entertained unless commenced
within five years from the date when the claim first accrued."
28 U.S.C. § 2462 (1994). The EPA filed its complaint on
December 22, 2000. Therefore, unless Duke Energy's alleged
modifications and subsequent operation of its generating
facilities constitute continuing violations, any civil penalties
arising from alleged violations of the CAA before December
22, 1995, are barred by the five-year statute of limitations.
Duke Energy argues that a claim "first accrues" under
28 '1.S.C. § 2462 on the date that a violation first occurs. See
3M Co. v. Browner, 17 F.3d 1453, 1462 (D.C. Cir. 1994)
("the term ‘accrued’ in § 2462 has been taken to mean that the
running of the limitations period in penalty actions is
measured from the date of the violation"). Duke Energy
further contends that it is well settled that violations of
preconstruction permitting requirements occur when actual
construction is commenced at the faciiity, and not at some
76a
later time.”’ See, e. g., United States v. Westvaco Corp., 144
F. Supp. 2d 439, 443 (D. Md. 2001); United States v. Murphy
Oil USA, Inc., 143 F. Supp. 2d 1054, 1083-84 (W.D. Wis.
2001); United States v. Louisiana-Pacific Corp., 682 F. Supp.
1122, 1130 (D. Colo. 1987). Therefore, according to Duke
Energy, any civil penalties arising from modifications
commenced before December 22, 1995, are time barred.
The Supreme Court has held that statutes of
limitations do not bar claims for continuing violations.
Havens Realty Corp. v. Coleman, 455 U.S. 363, 380 (1982)
("Statutes of limitations ... are intended to keep stale claims
out of the courts. Where the challenged violation is a
continuing one, the staleness concern disappears." (citation
omitted)). In order to determine whether Duke Energy's
alleged failure to obtain a preconstruction permit constitutes a
continuing violation, the court must determine whether these
alleged violations constitute a discrete, single violation (i.e.,
at the time of construction) or whether any aspect of "the
detrimental effect to the public and the advantage to the
[defendant] continue." United States v. ITT Continental
Baking Co., 420 U.S. 223, 231 (1975).
The preconstruction requirements of PSD provide in
part:
No major emitting facility on which construction
is commenced ... may be constructed in any area
to which this part applies unless--(1) a permit has
been issued for such proposed facility in
accordance with this part setting forth emission
limitations for such facility which conform to the
requirements of this part.
*7 This position has emerged as the majority rule. This court,
however, is not bound by the interpretation adopted by these
courts.
77a
42 U.S.C. § 7475(a)(1)(1995) (emphasis added). Courts
which have held that the statute of limitations operates to bar
claims more than five years old focus on the language
regarding construction. See, e.g., Westvaco, 144 F. Supp. 2d
at 444-45. They also rely on the fact that the PSD permitting
process entails conducting extensive impact analysis prior to
construction. See, e.g., United States v. Southern Ind. Gas &
Elec. Co., 2002 U.S. Dist. LEXIS 14039, 2002 WL 1760752,
at *5 (S.D. Ind. July 26, 2002). These courts, however, focus
on these aspects of the PSD permit process to the exclusion of
the language in the statute stating that the PSD permit shall
set forth emission limitations for that source following the
construction activity. Yet this aspect of the PSD permitting
process and compliance with these emission limitations is just
as integral to achieving the objectives of PSD as the
preconstruction analysis and review. Thus, facilities
contemplating undergoing a modification must obtain a PSD
permit prior to construction and, following construction,
operate in accordance with the terms of that permit.
In an earlier decision, this court held that obtaining a
preconstruction permit that sets forth emission limitations
amounts to a condition of operation in the context of
determining whether Intervenor-Plaintiffs were entitled to
intervene as a matter of right under 42 U.S.C. §
7604(b)(1)(B). United States v. Duke Energy Corp., 171 F.
Supp. 2d 560 (M.D.N.C. 2001). Although this court is not
limited by its earlier decision, there is no reason to depart
from this holding in deciding whether claims for civil
penalties for an alleged violation of PSD preconstruction
permitting requirements are barred by the statute of
limitations.
Determining the emission limitations involves the
application of best available control technology ("BACT") for
pollutants emitted by the particular facility. See 42 U.S.C. §
78a
7475(a)(4) (1995). This determination is done on a case-by-
case basis, taking into account “energy, environmental, and
economic impacts and other costs." Jd. § 7479(3). As such,
the implementation of BACT is a condition of operation and
the Administrator or State may bring an enforcement action
seeking injunctive relief for the alleged failure to apply best
available technology. See id. § 7477. Thus, the requirement
of obtaining a preconstruction permit amounts to a condition
of operation and establishes ongoing obligations.
The permitting process involves not only
preconstruction review but also the determination of BACT,
i.e., the setting of emission limitations, and absent the proper
implementation of BACT a source operator may be enjoined
from operating. This ability to enjoin an operator fulfills the
intended purpose of PSD by preventing the emission of
excess air pollutants which would otherwise be prohibited by
a PSD permit. See United States v. Ohio Edison Co., No.
2:99-CV-1181, at *12, 2003 U.S. Dist. LEXIS 2357 (S.D.
Ohio Jan. 17, 2003) (EPA Ex. 112) (holding that penalties for
failure to obtain a PSD permit were not time-barred because
"the PSD provisions contemplate not only certain
preconstruction obligations but also subsequent operation
after modification"); United States v. American Elec. Power
Serv. Corp., 137 F. Supp. 2d 1060, 1066 (S.D. Ohio 2001)
(stating that it is “illogical to conclude that a defendant may
only be held liable for constructing a facility, rather than
operating such facility, without complying with the [PSD]
permit requirements").
The difficulty courts have encountered in determining
whether the PSD permits contain both construction and
operation obligations stem in large part from the inclusion of
both types of permits under the CAA. The Fifth Circuit stated
that "the CAA statutory scheme contemplates at least two
different types of air permits unhappily named
‘preconstruction permits’ and ‘operating permits,’ with
79a
confusion easily resulting from the fact that preconstruction
permits often include limits upon a source's operations."
United States v. Marire Shale Processors, 81 F.3d 1329,
1355-56 (Sth Cir. 1996). But because the PSD permitting
provisions provide both preconstruction obligations and
subsequent obligations on operations, Duke Energy's alleged
violation of failing to undergo the PSD permitting process
does not terminate upon the completion ©! construction
activity. The violation continues because eacii day that Duke
Energy operates an allegedly modified plant and emits
pollutants into the atmosphere, it may be in violation of the
requirement to comply with the operation conditions, i.e., the
emission limitations, that would have been contained within a
PSD permit had Duke Energy submitted to the permitting
process.
Duke Energy argues, however, and several courts
have agreed, that any permits relating to conditions of
operation fall under Title V of the Act, 42 U.S.C. §§ 766la-
7661f, and that the PSD provisions address only construction
and modification requirements. Yet Duke Energy concedes
that "PSD permits can contain conditions relating to
operations of a source," but argues that this is not the
“asserted basis of liability in this case. Rather, the issue in this
case is whether Duke [Energy] was obligated to get permits
before undertaking the projects at issue." (Duke Energy Br.
Reply Supp. Mot. Partial Judge. on Pleadings Against
Plaintiff-Intervenors at 6.) Duke Energy contends, therefore,
that any PSD requirements that impose operating conditions
are displaced by the existence of operating permits under
Title V of the Act.
Despite Duke Energy's argument otherwise, the Title
V operating permit program does not supplant the PSD
program. Title V does not establish additional substantive
requirements, but merely brings together applicable
requirements, such as the PSD provisions, into one permitting
80a
scheme. 57 Fed. Reg. 32,250, 32,251 (July 21, 1992). Title V
explicitly states that compliance with a Title V permit is not
“deemed compliance with other applicable provisions" of the
Act unless a permit explicitly incorporates those other
provisions or those provisions have been formally determined
to be inapplicable. 42 U.S.C. § 7661c(f) (1995). Furthermore,
Title V states that "nothing in this subsection shall be
construed to alter the applicable requirements ... that a permit
be obtained before construction or modification." /d. §
7661a(a). In fact, sources that have applied for (but not yet
received) Title V permits are generally given temporary
protection with the exception of sources that are not in
compliance with applicable construction or modification
permit requirements. /d. § 7661b(d).
Courts adopting the majority view have
their position by relying on the fact that the SIP of a particular
state may have a separate construction and operation
permitting scheme. See, e.g, United States v. Campbell Soup
Co., 1997 U.S. Dist. LEXIS 3211, 1997 WL 258894, at *1-3
(E.D. Cal. Mar. 11, 1997). To the extent that this is relevant,
and the court has reservations that it is, that rationale has no
application to the case at bar. Both the SIP of North Carolina
and South Carolina contain an integrated construction and
operation permit. North Carolina's permit procedures provide
that "a new, modified, or existing facility or source shall not
begin construction or operation without first obtaining a
construction and operation permit."** N.C. Admin. Code tit.
15A, r.2Q.0301 (emphasis added). The SIP of South Carolina
= The requirement of a unitary or dual purpose permit for
PSD applicability was confirmed in a letter from the North
Carolina Chief of Air Quality to the EPA. It stated that "all
Air Quality Permits issued in North Carolina by the Division
of Environmental Management will be a combined
‘construction and operation’ permit." (Letter from Johnson to
Miller (Apr. 16, 1986) (EPA Ex. 113).)
states that "any owner or operator who constructs or operates
a source or modification not in accordance ... with the terms
of any approval," which includes emission limitations, is
subject to enforcement action. 61 S.C. Code Ann. Regs. 62.5,
No. 7(r)(1) (emphasis added).
Holding that Duke Energy's alleged failure to obtain a
preconstruction permit constitutes a continuing violation is
consistent with the purpose of the CAA and the PSD
provisions. The fundamental purpose of the CAA is to "speed
up, expand, and intensify the war against air pollution in the
United States." H.R. Rep. No. 91-1146, at 1 (1970), reprinted
in 1970 U.S.C.C.A.N. 5356, 5356. Yet Duke Energy's
position that a violation of PSD is a discrete act that occurs
only as long as the construction would not achieve these
objectives. Rather, it would convert the PSD program, which
is aimed at protecting air quality, into the "Prevention of
Significant Delay in construction™ program. (EPA Mem.
Supp. Mot. Partial Summ. J. at 39.) Because penalties could
be accessed only according to the duration of unpermitted
construction, it could in certain circumstances be more cost-
effective to avoid the permit obligations altogether and, if
challenged, litigate the claim endlessly with little incentive to
settle and no downside risk of an increasing fine.
Accordingly, because the requirement of obtaining a
preconstruction permit amounts to a condition of operation,
Duke Energy's alleged failure to obtain a preconstruction
permit under Section 7475 and applicable SIP provisions
constitutes a continuing violation and the EPA's claims for
civil penalties are therefore not barred.””
B. Injunctive relief
29 The EPA concedes that it "will not seek civil penalties
from Duke [Energy] for days of violation prior to December
22, [1995]--five years prior to the filing of this enforcement
action." (EPA Opp'n Mot. Partial Judg. on Pleadings at 2 n.1.)
82a
In addition to seeking summary judgment on Duke
Energy's defense that civil penalties for certain projects are
barred by the statute of limitations, the EPA and Intervenor-
Plaintiffs move for summary judgment on Duke Energy's
defense that the statute of limitations bars injunctive relief on
projects completed more than five years prior to the filing of
this suit. By its plain terms, the general federal statute of
limitations has no application to injunctive relief. It pertains
only to actions for “any civil fine, penalty, or forfeiture,
pecuniary or otherwise." 28 U.S.C. § 2462 (1994). The CAA,
moreover, specifically provides for both a "civil penalty" and
a separate "permanent or temporary injunction." 42 U.S.C. § §
7413(b), 7477 (1995). Courts have therefore held that Section
2462 does not bar injunctive relief as a matter of law. See
United States v. Telluride Co., 146 F.3d 1241, 1245 (10th Cir.
1998); United States v. Banks, 115 F.3d 916, 919 (11th Cir.
1997); Westvaco, 144 F. Supp. 2d at 443 n.2; Murphy Oil,
143 F. Supp. 2d at 1087. As previous courts have held and
according to the plain language of Section 2462, the statute of
limitations does not operate to bar the EPA and Intervenor-
Plaintiffs' claims for injunctive relief.
CONCLUSION
For the reasons set forth in this opinion, the court will
deny Duke Energy's motion for summary judgment, grant in
part and deny in part the EPA's motion for partial summary
judgment in which Intervenor-Plaintiffs join, deny Intervenor-
Plaintiffs’ motion for partial summary judgment on Duke
Energy's defense of "fair notice," and deny Duke Energy's
motion for partial judgment on the pleadings. Remaining for
trial will be the issues of whether Duke Energy's projects
were routine maintenance, repair, and replacement as defined
relative to the industrial category and whether Duke Energy's
projects caused an increase in annual net emissions, assuming
constant hours and conditions of operation.
83a
An order and judgment in accordance with this
memorandum opinion shall be entered contemporaneously
herewith.
Frank W Bullock, Jr.
United States District Judge
August 26, 2003
84a
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF
NORTH CAROLINA
UNITED STATES OF AMERICA,
Plaintiff and Counter-Defendant, and
ENVIRONMENTAL DEFENSE; NORTH CAROLINA
SIERRA CLUB; and NORTH CAROLINA PUBLIC
INTEREST RESEARCH GROUP CITIZEN
LOBBY/EDUCATION FUND,
Intervenor- Plaintiffs,
v.
DUKE ENERGY CORPORATION,
Defendant and Counter-Claimant.
Civil No. 1:00CV01262
ORDER AND JUDGMENT
BULLOCK, District Judge:
For the reasons set forth in the memorandum opinion
filed contemporaneously herewith,
IT IS ORDERED that Duke Energy's motion for
summary judgment [Doc. # 128] is DENIED.
IT IS FURTHER ORDERED that the United States’
motion for partial summary judgment [Doc. # 132] on the
applicable legal tests for "routine maintenance" and
calculation of emissions, and on Duke Energy's defenses of
"fair notice" and “routine maintenance,” in which Intervenor-
Plaintiffs join [Doc. # 130], is DENIED.
IT IS FURTHER ORDERED AND ADJUDGED that
85a
the United States’ motion for partial summary judgment [Doc.
# 132] on Duke Energy's defense that the statute of limitations
bars the United States’ claims arising from activities occurring
prior to December 22, 1995, in which Intervenor-Plaintiffs
join [Doc. # 130], is GRANTED.
IT IS FURTHER ORDERED that Intervenor-
Plaintiffs’ motion for partial summary judgment [Doc. # 130]
on Duke Energy's defense of "fair notice" is DENIED.
IT IS FURTHER ORDERED that Duke Energy's
motion for partial judgment on the pleadings [Doc. # 37] is
DENIED.
Remaining for trial are the issues of whether Duke
Energy's projects were routine maintenance, repair, and
replacement as defined relative to the industrial category and
whether Duke Energy's projects caused an increase in annual
net emissions, assuming constant hours and conditions of
operation.
Frank W Bullock, Jr.
United States District Judge
August 26, 2003
86a
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF
NORTH CAROLINA
UNITED STATES OF AMERICA,
Plaintiff and Counter-Defendant, and
ENVIRONMENTAL DEFENSE; NORTH CAROLINA
SIERRA CLUB; and NORTH CAROLINA PUBLIC
INTEREST RESEARCH GROUP CITIZEN
LOBBY/EDUCATION FUND,
Intervenor- Plaintiffs,
Vv.
DUKE ENERGY CORPORATION,
Defendant and Counter-Claimant.
Civil No. 1:00CV01262
ORDER AND FINAL JUDGMENT
BULLOCK, District Judge:
On August 26, 2003, the Court issued a Memorandum
Opinion in this action (Docket No. 234) addressing the
parties' motions for summary judgment (hereinafter the
"Summary Judgment Order"), in which the Court made
certain legal determinations to be applied in this case,
including the legal standard to be applied in determining
whether Defendant Duke Energy Corporation's ("Duke
Energy") projects were “routine maintenance, repair, and
replacement” and hence not subject to regulation under the
Prevention of Significant Deterioration ("PSD") provisions of
the Clean Air Act and related regulations, as well as the legal
standard for calculating whether Duke Energy's projects
caused an increase in annual net emissions triggering PSD. In
particular, with regard to the latter issue, the Court
87a
determined as a matter of law that, for purposes of
determining whether Duke Energy's projects resulted in a "net
significant emissions increase" triggering PSD requirements,
"post-project emissions must be calculated on an annual basis,
measuring emissions in tons per year, and in calculating post-
project emissions levels the hours and conditions of
operations must be held constant. Accordingly, a net
emissions increase can result only from an increase in the
hourly rate of emissions." (Docket No. 234 at 48.) The Court
deferred ruling on the issue of whether Duke Energy's
projects resulted in an increase in emissions above the
baseline rate until trial, but held as a matter of law that "to the
extent the projects did not increase the unit's maximum hourly
rate of emissions, however, these projects are not subject to
PSD." (Docket No. 234 at 70.) The Court subsequently
considered and denied Plaintiff United States' Motion for
Reconsideration of the Summary Judgment Order. (Docket
No. 294.)
Plaintiff United States and Piaintiff-Intervenors
Environmental Defense, ef al. and Duke Energy have
submitted a joint stipulation that obviates the need for a trial
under the legal standards applicable in this case under the
Summary Judgment Order, and that enables the Court to enter
an appealable final judgment under those legal standards,
thereby saving the parties and the Court the time and expense
of a trial. Specifically, the parties have made the following
stipulations:
1. Plaintiff and Plaintiff-Intervenors stipulate that their
contention that each of the projects at issue in this case
resulted in a significant net emissions increase within the
meaning of the relevant PSD regulations is based solely on
their contention that the projects would have been projected
to result in an increased utilization of the units at issue.
2. Plaintiff and Plaintiff-Intervenors stipulate that they
88a
do not contend that the projects at issue in this case caused an
increase in the maximum hourly rate of emissions at any of
Duke Energy's units.
3. Plaintiff and Plaintiff-Intervenors stipulate to t
This text is long and has been trimmed here. Open the source document for the complete record.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.