# Opposition Brief — Environmental Defense v. Duke Energy Corporation

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0237%3A05

## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 2007
- **Citation:** 549 U.S. 561

## Text

public health and welfare with an adequate margin of safety.
42 U.S.C. §7409.7 The states, in turn, develop State
Implementation Plans (“SIPs’’), setting source-by-source
emissions limits to meet the NAAQS. /d. §74100 These
limits are premised on a permitted source operating at its
maximum emitting capacity (/.e., all year at maximum
production capacity) without exceeding the NAAQS.°

B. New Source Programs.

I. The New Source Performance Standards
(“NSPS”) program did not regulate existing
emissions capacity.

The 1970 Amendments also directed EPA to issue NSPS to
minimize the impact of adding new emissions capacity.’
Congress debated whether to subject existing emissions
capacity to NSPS, but chose not to do so." Thus, NSPS apply
only to new sources—i.e., newly-constructed emission units
or “modifications” of existing units. /d. §7411(a)(2) (“new
source” is one on which “construction or modification ...is
commenced after” a given date). Modification is defined 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.

* See also Train vy. NRDC, 421 U.S. 60, 66-67 (1975).

* See also Union Elec. Co. vy. EPA, 427 U.S. 246, 249-50 (1976).

" See, e.g., Cleveland Elec. IMluminating Co. v. EPA, 572 F.2d 1150,
1160 (6th Cir. 1978) (“The model |used to calculate required SIP limits] ts
operated on the assumption that the plants concerned operate 24 hours a
day at full capacity and predictions are made for every day of the year.”).

“The legislative history of §111 [NSPS] ... reveals that Congress was
most concerned that new plants—new sources of pollution-— would have
to be controlled to the greatest degree practicable if the national goal of a
cleaner environment was to be achieved.” Essex Chem. Corp. vy.
Ruckelshaus, 486 F.2d 427, 434 n.14 (D.C. Cir. 1973).

* See S. Rep. No. 91-1196, at 15-17 (1970), reprinted in Legal Compi-
lation: Statutes and Legislative History, EPA (1973) (noting the high cost
and difficulty of installing new control technologies on existing sources).

§741 1(a)(4).

The NSPS regulatory § definition of “modification”
promulgated in 1971 tracked the statutory definition almost
verbatim. 36 Fed. Reg. 24,876, 24,877 (Dec. 23, 1971). The
rules further specified that “[rJoutine maintenance, repair, and
replacement shall not be considered physical changes,” and a
“change in the method of operation” does not include: (1) an
“increase in the production rate ... [within the facility's]
operating design capacity;” (2) an “increase in hours of
operation,” or (3) the “use of an alternative fuel” that the
facility was “designed to accommodate” before a given date.
Id. (codifying 40 C.F.R. §60.2(h)). Thus, under these rules,
only activities that increase a facility’s design emitting
capacity triggered NSPS.”

In 1975, EPA revised the NSPS rules to “clarify the phrase
... ‘increases the amount of any air pollutant’” in the statutory
and general regulatory (40 C.F.R. §60.2) definition of
“modification.” EPA stated this phrase refers to an increase
“in emission rate,” which the regulations “expressed as
kg/hr.” 40 Fed. Reg. 58,416, 58,419 (Dec. 16, 1975). As
EPA explained, the use of this measurement unit clarified that
the modification rule would be sensitive to “increased
production capacity and to overall increases in total emissions
to the atmosphere” (/.e., to new capacity to emit), while
“automatically allowing] increases in operating hours as
intended by one of the existing exemptions under 40 C.F.R.
§60.2(h).” 39 Fed. Reg. 36,946, 36,947 (Oct. 15, 1974)
(emphasis added). Thus, EPA recognized, the existing
exclusion in the NSPS rule for increased “hours of operation”
by definition meant that only activity that increased the
facility’s existing hourly emissions rate—i.e., its actual
emitting capacity—is a “modification” under §111 of the Act.

” The NSPS provisions were “designed to prevent new air pollution
problems.” National Asphalt Pavement Ass'n v. Train, 539 F.2d 775, 783
(D.C. Cir. 1976); see also H.R. Rep. No. 1146, at 3 (1970), reprinted in
1970 U.S.C.C.A.N. 5356, 5358.

i)

2. The New Source Review (“NSR”) programs
adopted the NSPS concept of “modification.”

a. Congress adopted the NSPS “modification”
concept into the 1977 statutory NSR program.

In 1977, Congress further amended the CAA by enacting
two more new source programs: the PSD and Non-
Attainment New Source Review (NNSR) programs.'”
Basically, the 1977 Amendments codified a then-existing
1974 regulatory PSD program.'' In doing so, Congress
specifically considered the various provisions of the
regulatory program and decided to “tighten[]” some of them.
See Ala. Power, 636 F.2d at 349-50. Congress did not,
however, change the applicability provisions of these
regulations (which were the same as NSPS); it simply
incorporated the NSPS definition of modification into the
NSR definition of modification.

Thus, Congress defined “modification” under NNSR to
“mean the same as the term ‘modification’ as used in section
7411(ay(4) [NSPS].” 42 U.S.C. §7501(4) (emphasis added).

"PSD applies to all new emissions capacity in areas meeting the

NAAQS (attainment areas), while NNSR applies to all new emissions
capacity in areas not meeting the NAAQS (non-attainment areas). Here.
EPA had alleged violations of PSD because the areas in North and South
Carolina where Duke's plants operate were in attainment for all relevant
pollutants during the periods of interest. This brief refers to the NSPS,
PSD, and NNSR programs collectively as the “New Source programs.” It
refers to the PSD and NNSR programs together as “NSR.”

'' 42 U.S.C. §7478(a) (“Until such time as an applicable implemen-
tation plan is in effect ... which ... meets the requirements of this part ...
applicable regulations under this chapter prior to August 7, 1977 shall
remain in effect ... except as otherwise provided in subsection (b)"). Prior
to Congress’ amending the Act to include NSR requirements, EPA—
prompted by a court's preliminary injunction—had promulgated rules
adopting a PSD program. See generally Ala. Power Co. v. Costle, 636
F.2d 323, 346-49 (D.C. Cir. 1979) (describing the statutory and regulatory
history of PSD). EPA specified that the “general definition of modified
source” in its PSD rules was meant to be “consistent with the definition
used in Part 60 [/.e., NSPS]. 39 Fed. Reg. 42,510, 42.513 (Dec. 5, 1974).

As originally enacted, the PSD program reierred only to the
“construction” of major sources, and not to “modification” as
did the NNSR program. Three months later, Congress fixed
this oversight by adding “modification” as defined under
NSPS to the “construction” activity subject to PSD. See id.
§7479(2(C) (“The term ‘construction’ ... includes the
modification (as defined in section 7411(a) [NSPS] ...).”).

In support of this “technical amendment,” Congress
explained that it intended to incorporate the “usage” of the
NSPS definition of “modification.”'? EPA has repeatedly
acknowledged that “[t}he phrase ‘usage in other parts of the
Act’ ... refers, not only to section 111(a)(4), but also to the
EPA regulations implementing section 111] that were in effect
at that time.””

b. The 1980 PSD rules incorporated the NSPS
concept of “modification.”

EPA’s 1978 PSD rules defined “major modification” as a
“physical change [or] change in the method of operation”
which “increases the potential emission rate” (in tons per
year) of regulated pollutants from a “major stationary source.”

'? 123 Cong.Rec. 36331 (1977) (technical amendments “{ijmplement| |
conference agreement to cover ‘modification’ as well as ‘construction’ by
defining ‘construction’ in Part C to conform to usage in other parts of the
Act.”). Congress emphasized it was “not the purpose of these [technical]
amendments to re-open substantive issues in the [CAA].” 123 Cong.Rec.
36252 (1977). Congress had resolved the substantive issue of the
applicability of the new statutory NSR programs to existing units by
leaving the applicability provisions of the 1974 PSD regulations
unchanged and providing that “modification” under NSR is the same “as
used” under the pre-existing NSPS program.

' 49 Fed. Reg. 43.211, 43,213 (Oct. 26, 1984) ; see also 43 Fed. Reg.
26,380, 26,394 (Jun. 19, 1978); 68 Fed. Reg. 61,248, 61,269 (Oct. 27,
2003) (1977 CAA “refer|red] to our preexisting rules interpreting the term
‘modification’ in the NSPS context.”); Pet. App. 35a-36a. See also
Braydon v. Abbott, 524 U.S. 624, 631 (1998) Congress’ repetition of a
well-established term carries the implication that Congress intended the
term to be construed in accordance with pre-existing regulatory
interpretations.) (emphasis added).

43 Fed. Reg. at 26,403 (emphasis added). Because these rules
assumed the same “potential” hours of operation before and
after the change, only a change that increased an existing
unit’s hourly emissions rate (/.e., an NSPS “modification”)
could trigger NSR. Virtually all of the 1978 rules, except that
aspect of the definition of “major modification,” were
challenged. See Ala. Power Co., 636 F.2d 323. In
implementing the court’s remand requiring a “bubble”
concept for defining “source” under PSD,"* the final 1980
rules defined “major modification” as “any physical [or
operational} change ... of a major stationary source that would
result in a significant net emissions increase” in the source’s
“actual emissions” (in tons per year)."”

For there to be a “major modification,” the 1980 PSD rules
require that an increase in “actual emissions” in tons per year
result from the proposed change. For existing units that have
begun normal operations, “actual emissions” is defined by
reference to “actual operating hours [and] production rate” for
a historic (pre-change) period “which is representative of
normal source operation.” /d. §51.166(b)(21)(ii). That is, for
these units, only one period of “representative” conditions is
required to characterize those “normal source operations.”
Accordingly, post-project “actual emissions” must be
calculated using the same “representative” conditions of
operation (/.e., hours of operation) that existed before the
change. This is confirmed by the definition of “modification,”
which states that the “increase” in actual emissions must result
from the “physical [or operational] change.” which by
definition excludes “[a]n increase in the hours of operation or

'* Under the “bubble” concept, the “source” subject to NSR is an entire
plant, which may include several “emissions units.” By contrast, each
individual emissions unit is a separate “source” under NSPS.

" 40 C.P.R. §§51.166(b 21), (b3)i), (b21). The NSR rules
applicable here are the PSD rules adopted in the state SIPs, as approved by
EPA. The applicability provisions of the state rules are identical to the
federal 1980 PSD rules, 40 C.F.R. §51.166 (1987). All references to the
1980 PSD rules are to the 1987 C.F.R., except where otherwise noted.

in the production rate” (unless restricted by permit). /d.
§51.166(b)(2)(iii)(f) (emphasis added).'® Thus, as under all of
the prior modification rules, a change at an existing unit
would result in an increase in “actual emissions” on/y if it first
increases the unit’s hourly emissions rate—i.¢., only if itis a
“modification” under NSPS, 42 U.S.C. §741 1(a)(4)."”

By contrast, for units that have not begun normal operations
(e.g., new units or completely reconstructed units), the 1980
rules require a different assumption for post-change operating
hours: since the unit has no operating history, one must
assume the full “potential to emit” (8,760 hours, unless hours
were limited). /d. §51.166(b)(21)(iv). This different test for
units that have not begun “normal operation” is known as the
“actual-to-potential” test.

3. Implementation of the PSD program.

a. EPA’s contemporaneous interpretation of
“modification” in the PSD rules is consistent
with the NSPS definition of “modification.”

Shortly after finalizing the 1980 PSD rules, EPA confirmed
that the definition of “net emissions increase” meant just what
it said. See Pet. App. 58a-59a. In 1981, EPA confirmed that
“PSD applicability [at a previously operating unit] is
determined by evaluating any change in [hourly] emissions
rates caused by” the physical or operational change under
review. Letter of Reich, EPA, to Gill, General Elec. (June 24,
1981) (“GE Determination”), CA App. 234-41. Absent a
change in the per-hour emission rate, EPA concluded, actual
emissions “could increase only if there is an increase in tlie

The 1980 rules’ preamble explains, “The first step ... is to determine

whether the physical or operational change in question would i/se/f result
in an increase in ‘actual emissions.”” 45 Fed. Reg. 52,676, 52,698 (Aug.
7, 1980) (emphasis added). “|T]hose phrases do not encompass ... any
increase in the hours or rate of operation of a source, so long as the
increase would require no change in any ... permit condition.” /d.

'” Pet. App. 58a-60a: see WEPCo, 893 F.2d at 918 0.14.

production rate or hours of operation, both of which are
specifically exempt from PSD review.” Id. (citing 40 C.F.R.
§52.21(b)(2)(iii)(f))."" Therefore, the unit's production rate
and hours of operation are kept constant in calculating an
“emission increase” under the “actual-to-actual” test required
by the 1980 PSD rules. See 40 C.F.R. §51.166(b)(2)(iii(f).”

b. The WEPCo court rejected EPA’s attempt to
reinterpret the 1980 rules.

Only once in the 30-year history of new source programs
before EPA’s new “enforcement initiative” against coal-fired
utilities did EPA determine that a power plant repair and
replacement project would trigger PSD and NSPS.~” In 1988,
Wisconsin Electric Power Company (“WEPCo”) proposed a
“renovation” project at its Port Washington Plant, which had
operated over 10 years at a maximum achievable capacity
well below its original capacity. Mem. from Kee, EPA
Region V, to Emison, EPA (Mar. 25, 1988), CA App. 256-
57... EPA found the replacements WEPCo proposed to
increase “|p|lantwide capacity ... about 40 percent above
current levels to 400 megawatts,” id., “highly unusual, if not
unprecedented.” Initial WEPCo Determination, CA App. 807.
Given both the magnitude and uniqueness of these
replacements, EPA determined WEPCo’s project was not

'* This determination was consistent with a previous one dated January
22, 1981. Letter of Reich, EPA, to Whitmore, EPA Region VII Ulan. 22
1981), CA App. 242-43 (“Cargill Determination”). In both
determinations, physical and operational changes were being made to the
units; these were not mere stand-alone increases in operating hours.

” 40 CER. §51,166(b)( 211i F) is identical to §52.21(b\2 iii Mf) that
the GE Determination cites. See also Pet. App. 4lan.11.

° See Mem. from Clay, EPA, to Kee, EPA Region V (Sept. 9, 1988)
(“Initial WEPCo Determination”), CA App. 804-15; Letter trom Thomas,
EPA Adm’'r, to Boston, WEPCo (Oct. 14, 1988), CA App. 248-55; Letter
from Clay, EPA, to Boston, WEPCo (Feb. 15, 1989). CA App. 830-41.

*' Several years before the proposed project, the WEPCo units had been
formally “derated™ from their full capacity of 80 MW cach to operating
capacities ranging from 49 MW to 78 MW. CA App. 256.

10

“routine maintenance, repair and replacement” within the
exclusion provided under the NSPS rules and incorporated
into the NSR rules. /d. The Seventh Circuit upheld that
determination. WEPCo, 893 F.2d at 910-13.

Regarding emissions increase, EPA found an NSPS
emissions increase at three WEPCo units. EPA, however,
also found a PSD emissions increase at all five units, by
comparing their actual annual emissions during a pre-repair
representative period to their theoretical, maximum annual
emissions (/.¢., “potential to emit”), derived by multiplying
the units’ maximum emissions rates by a full year (8,760
hours )}—the “‘actual-to-potential” test.

The court upheld EPA’s NSPS finding, but reversed EPA’s
PSD determination. Under the rules, the “potential to emit”
concept plainly applies only to a “unit which has not begun
normal operations.” 40 C.F.R. §51.166(b)(21 iv). Refusing
to “defer to agency interpretations that ... appear to assume
what they seek to prove,” the court rejected EPA’s circular
reasoning—that, “in order to demonstrate that [WEPCo’s]
like-kind replacement project constitutes a modification,”
EPA “applies the potential to emit concept (to show an
increase in emissions),” and, “in order to apply the potential to
emit concept to like-kind replacement, the EPA assumes that
the plant is a ‘modified’ unit.” WEPCo, 893 F.2d at 917.

On remand, the court ordered EPA to determine “whether
the renovated plant would cause a significant net emissions
increase if it were operated under present hours and
conditions,” id. at 918 n.14 (emphasis added)—i.e., calculate
post-project emissions on the basis of the restored hourly
emissions rate of the repaired plant under the actual hours and
conditions of operation during the representative baseline
period. By holding pre- and post-project hours and conditions
constant at a level representative of normal operations, any
“net emissions increase” could be due only to an increase in
the units’ hourly rates, not a result of more hours of operation.
Thus, the court confirmed the rules’ actual-to-actual emissions

test promulgated in 1980 and applied by EPA in 1981.7>

c. EPA ignored the court’s remand instructions
in settling WEPCo.

On remand, EPA was precluded from applying the actual-
to-potential test for the WEPCo units that had “begun normal
operations.” But EPA refused to follow the court’s remand
instructions—that EPA determine on the basis of “present
hours and conditions” whether WEPCo’s project would result
in an annual emissions increase—summarily dismissing them
as “incorrect.””* Instead, for settlement purposes and with no
reference to the regulatory language whatsoever, EPA
devised an emissions calculation methodology comparing the
units’ representative baseline annual emissions (/.e., pre-
project emissions) to their “estimated future actual emis-
sions.” Remand WEPCo Determination, CA App. 271-72. In
the Initial WEPCo Determination, when WEPCo suggested
such a test as an alternative argument, EPA categorically
responded: “The [1980] PSD regulations provide no support
for” an actual-to-projected-actual test. CA App. 810 n.4.

In the 1992 “WEPCo Rule.” EPA promulgated a rule
containing the new actual-to-projected-actual methodology for
which the 1980 rules “provide no support.” Significantly,
EPA did not change the “base” 1980 rules governing
emissions increase, and EPA made this new 1992 “actual-to-

* After WEPCo, EPA abandoned its re-interpretation of the rule that
the Seventh Circuit had rejected, explaining that “|alt least for changes
that are ‘like kind replacements,” ‘normal operations’ have begun, and the
actual-to-potential test is impermissible” 57 Ved. Reg. 32,314, 32.317
(Jul. 21, 1992) (emphasis added). Yet, here, EPA returned in its summary
judgment papers to this discredited interpretation, only to abandon 1 again
at the summary judgment hearing. See Pet. App. 58a n.17.

** Letter. from Rosenberg, EPA. to Boston, WEPCo Gun. 8, 1990)
(“Remand WEPCo Determination”), CA App. 265-78.

* fd. at 270. Although EPA asked for an extension of time for tiling a
motion for clarification or reconsideration of the court's remand, sce Foote
Affidavit in WEPCo (CA App. 279-82), it never filed it, choosing instead
simply to ignore the court's clear instructions. See a/so Pet. App. 70a.

12

projected-actual”™ test available only to utilities that elect to
undertake additional reporting. 40 C.F.R. §§51.166(b)(21)(v)
& (b)(32) (1993).*° Otherwise, the activity would be eval-
uated using the emissions increase test of the 1980 rules.”°

4. EPA Reverses Course In 1999.

Throughout the last three decades, the utility industry's
maintenance practices—including component replacements
sometimes referred to as “life extension”—were a matter of
public knowledge. Before 1999, except for the unusual and
unprecedented WEPCo project, no federal or state agency, or
any environmental group for that matter, ever suggested that
such projects triggered NSR. Indeed, as the district court
recounted at length, EPA was fully aware of “life extension”
practices as early as the 1980s. Pet. App. 50a n.13. EPA-
directed studies, which were provided to Congress and formed
the basis of the Acid Rain Program enacted in the 1990 CAA
Amendments, assumed that existing coal-fired power plants
would continue to operate at original capacity for 55 to 65
years on average, being “refurbished” around age 30, without —
being subject to New Source programs. /d.”’ After WEPCo,
and throughout the 1990s, EPA continuously reaffirmed its

"Thus. the WEPCo Rule's actual-to-projected-actual test may be used
by electing utilities, even where a project increases an existing unit's
maximum hourly emissions rate. See 57 Fed. Reg. at 32,324-26 (explai-
ning the new test may be applied to any change at a utility, except the
construction of a “greenfield” unit or the replacement of an existing one).

Thus, after 1992. the NSR rules provided three emissions increase
tests: (1) “actual-to-actual™ for units that have begun normal operations; (ii)
“actual-to-potential” test for units that have not begun normal operations:
and (itt) “actual-to-projected actual.” which can be used by certain
operating utilities, provided they submit necessary reports. Recently, EPA
promulgated new rules rewriting the NSR emissions increase provisions.
See 67 Fed. Reg. 80,186 (Dec. 31, 2002). The parties agree this case ts
governed by the 1980 rules.

~' See also “1989 EPA Base Case Forecasts” (ICF for EPA), Appendix
C, CA App. 364-77; Letter trom K. Schweers. ICF, to R. Beck, Edison —
Elec. Institute July 26, 1989), CA App. 378-79.

13

position, telling industry and Congress most power plant
projects and activities would not trigger NSR. /d. at Sla-52a.

Starting in 1999, EPA reversed course. It filed nine actions
against midwestern and southern coal-fired utilities, including
Duke Energy, and an administrative action against the
Tennessee Valley Authority.” In the enforcement initiative,
EPA alleged near universal non-compliance with NSR,
claiming hundreds of utility repair and replacement projects
over the past twenty years violated NSR.~” According to EPA
and Petitioners, Duke Energy misunderstood (or misapplied)
the 1980 PSD rules for the past quarter of a century (and EPA,
the States, and organizations such as petitioners were all
asleep at the switch). Duke Energy defended on the ground
that EPA was seeking in this enforcement action to re-write
and apply, retroactively, new and unlawful interpretations of
the 1980 PSD rules.

Hl. FACTUAL AND PROCEDURAL BACKGROUND

The court of appeals’ and district court’s decisions and
orders state the relevant facts. See Pet. App. Sa-7a; 23a-3 1a,
50a-53a, 60a-62a; 87a-95a. These facts are summarized
briefly below.

Duke Energy has provided electricity to North and South
Carolina since the early 1900s. Its system includes nuclear,
hydroelectric, gas-fired combustion turbine, and coal-fired
plants. Duke Energy operates thirty coal-fired units at cight
plants in the Carolinas. /d. at 22a, 24a. Virtually all of Duke
Energy's coal-fired units are at tssuc here.

Each coal-fired unit consists of three primary components:
the boiler, the steam turbine, and the generator. The boilers
are large, building-like structures six to twenty stories tall,
containing thousands of steel tubes in which water is heated to
superheated steam with temperatures in excess of 9OO°F. In
general, a boiler consists of collections of tube assemblies. /d.

™ See Dist. Ct. App. DX48-55 (complaints filed by United States).
” See CA App. 493-511 (projects alleged to violate NSR in all actions).

14

at 24a. Because these tubes are subject to corrosion and
extreme pressures and temperatures, they periodically fail and
must be repaired or replaced so that the utility can meet its
statutory duty to provide the public a reliable electricity
supply. See, e.g., N.-C.GEN.STAT. §62-2.

Here, EPA alleged that Duke Energy modified generating
units at all eight of its coal-fired power plants without
obtaining necessary PSD pre-construction permits. The
earliest of the 29 targeted projects took place in 1988. Most
of the projects consisted of replacing one or more of four
boiler tube assemblies that had deteriorated due to normal
wear and tear (/.¢., economizers, portions of waterwalls,
superheaters and reheaters). See Pet. App. 24a-25a.

Most of the projects occurred during regularly-scheduled
planned outages. During such outages, maintenance, repair
and replacement tasks are performed inside the unit that
cannot be performed during operation. These outages occur
every 48-84 months, depending upon the unit's condition and
load requirements of the system. Typically, outages are plan-
ned for spring or fall when electricity demand is lower, and
they can last from several weeks to months. CA App. 518410.

The other projects at issue occurred during periods of
“extended cold shutdown” (“ECS”)—when the units were not
needed to meet demand, but during which Duke Energy
“made definitive plans for preserving and conditioning the
units so that they could be returned to service when demand
dictated.” Pet. App. 27a-28a.

Some time after the units were placed in ECS, Duke Energy
developed an enhanced maintenance program, the “Plant
Modernization Program” (“PMP”). While separate projects
were consolidated under PMP, the work was similar in nature
to the boiler and turbine component repair and replacements
commonly undertaken during regularly scheduled outages by
Duke Energy (and industry generally). CA App. 55999.

During this period, Duke Energy was in frequent contact
with state regulators and told them about the work to be done
at its units. State regulators, who were responsible for

1S

determining CAA compliance, regularly inspected Duke
Energy's plants while the units were in ECS and PMP, and
knew of the work being performed on them. The inspection
reports uniformly certified the plants were in compliance with
all applicable air quality regulations. CA App. 623-79
(collecting reports). For example, in the course of renewing
the state permits for Duke Energy's Buck plant in 1987, the
North Carolina regulator wrote that “Unit Nos. 3, 4 and 5 are
currently in the plant modernization project (PMP) until
1989,” and he explicitly noted "PSD, NSR, NSPS. and
NESHAP do not apply.” CA App. 654.

EPA was well aware of industry repair and replacement
practices, including “the utility industry practice of engaging
in life extension projects.” Pet. App. 50a n.13. Indeed, EPA
knew of specific Duke Energy life extension projects, and
raised no questions about them. See id. In the last two
decades, EPA conducted thousands of utility — plant
inspections.” EPA has visited plants while boiler component
replacements were ongoing, but EPA never cited them even as
potential violations of NSR. /d.

Although Duke Energy's existing units are not regulated as
“new sources, they are extensively regulated under the CAA.
They have emission limits set to protect public health (with an
adequate margin of safety) under the NAAQS, based on the
conservative assumption that the units would operate at
maximum capacity every hour in the year. Supra 3. In
addition, they are regulated under (1) the CAA “Acid Rain”
Program, which requires existing utilities to make further
reductions in sulfur dioxide (SO») and nitrogen oxides (NO,)
emissions; (2) the “NO, SIP Call Program” and the Clean Air
Interstate Rule, which require additional reductions in utility
SO, and NO, emissions in the eastern half of the U.S.. see
Michigan vy. EPA, 213 F.3d 663 (D.C. Cir, 2000), 70 Fed.

" See, e.g, EPA, Profile of the Fossil Fuel Electric Power Generation
Industry, 123, 125 (Sep. 1997) htp://www.epa.gov/compliance/resources/
publications/assistance/sectors/notebooks/fossil. him.

16

Reg. 25,162 (May 12, 2005); and (3) North Carolina’s 2002
Clean Smokestacks law, one of the nation’s most stringent air
emission control laws, N.C.GEN.STAT. §143-215.107D. Duke
Energy's program to meet this new state law alone involves
the installation of additional controls on most of its units at an
expected cost of $1.5 billion. CA App. 523-24 998-11.

None of Duke Energy’s units have violated any of the
emission limits or control requirements under these CAA and
state programs. The parties have stipulated that none of the
projects increased the maximum achievable hourly emission
rate of any of the units. Pet. App. 88a-89a. That is, none of
the projects at issue created any new or unregulated emissions
at any unit. Rather, Plaintiffs’ allegations below were “based
solely on their contention that the projects would have been
projected to result in increased utilization of the units at
issue.” /d. (emphasis added)."'

On cross-motions for summary judgment, the court had
before it three different interpretations of “actual emissions
increase” under the 1980 PSD rules. Each of these
interpretations had been advanced by EPA at one point in the
regulatory history: (1) EPA’s contemporaneous interpretation
of the rules providing an “actual-to-actual” test (see Pet. App.
58a-60a); (2) an “actual-to-potential” interpretation that EPA
announced as the basis for this enforcement action, but then
abandoned later in the district court (see id. at 58a n.17); and
(3) an “actual-to-projected-actual” interpretation, which EPA
then asserted in this action. The court upheld EPA’s actual-
to-actual interpretation, finding it compelled by the rules’
plain language.’ and consistent with EPA’s historic interpre-
tation of the rules, the statute, and precedent. /d. at S8a-72a.

After reviewing the two interpretations of the rules that the

' Duke Energy disputes this contention, and believes none of the
projects resulted in an emissions increase, even under Plaintiffs’ theories.

* Pet. App. 60a (also rejecting EPA's attempt “‘under the guise of
interpreting a regulation, to create de facto a new regulation."”) (quoting
Christensen v. Harris County, 529 U.S. 576, S88 (2000)), id. at 70a
(EPA’s enforcement interpretation is “{njowhere in the regulations.”’).

17

parties pressed on appeal, the Fourth Circuit agreed with EPA
that the “critical first ‘question at issue’ was “whether the
EPA ‘can interpret the statutory term “modification” under
PSD differently from how EPA interpreted that term’ in the
NSPS.” Pet. App. |0a-1 la (quoting U.S. Brief at 1). Because
the answer was no, and Plaintiffs’ litigation interpretation of
the 1980 PSD rules rendered those rules inconsistent with the
NSPS rules defining “modification,” the unanimous panel
(Judges Motz, Luttig, and Wilson—by designation) concluded
that interpretation must be rejected in favor of EPA’s
contemporancous interpretation that makes the two regulatory
programs consistent, as Congress intended.

REASONS FOR DENYING THE WRIT

I. THE FOURTH CIRCUIT’S CONSTRUCTION OF
THE RULES AND THE STATUTE IS NOT
INCONSISTENT WITH THOSE OF OTHER
COURTS OF APPEALS OR THIS COURT.

The Fourth Circuit construed in this case the 1980 PSD
rules, as applied to Duke Energy's existing units—units that
had long ago “begun normal operations.” The court rejected
the Plaintiff's litigation position, and affirmed instead EPA’s
own contemporancous interpretation of these rules (see supra
8-9). That construction is not contrary to any other court of
appeals’ construction of these rules.

Puerto Rican Cement Co. v. EPA, 889 F.2d 292 (Ist Cir.
1989) did not address the 1980 rules for units that fave begun
normal operations. The very first sentence of that opinion
explains, the “Company wishes to build a new cement kiln,
replacing older kilns ....° /d. at 293 (emphasis added). A new
kiln is a unit that has net begun normal operations, and for
which the actual-to-potential test plainly applies under the
1980 rules. As then-Judge Breyer observed, “[T]here ts no
logical contradiction in rules that, on the one hand, permit
firms using existing Capacity simply to increase their output
and, on the other, use the potential output of new capacity as a

18

basis for calculating an increase in emissions levels.” /d. at
298 (underlines added). But, that is neither disputed by the
Fourth Circuit nor contrary to its construction of the 1980
rules for units that have begun normal operations. Cf.
WEPCo, 893 F.2d at 917 n.12 (“unlike the case at issue here,
Puerto Rican Cement involved the construction of a new
emissions unit at an existing source.) (underlines added).

The Seventh Circuit in WEPCo rejected EPA’s attempt to
interpret the rules as requiring an actual-to-potential test for
units that had begun normal operations. /d. at 917. The
court’s remand instructions were clear: NSR is triggered for
existing units that have begun normal operations where “the
renovated plant would cause a significant net emissions
increase if it were operated under present hours and
conditions” —i.e., if hours of operation were held constant.
Id. at 918 n.14 (emphasis added). This is the actual-to-actual
test applied by EPA in 1981, adopted by the district court, and
affirmed by the Fourth Circuit. Indeed, given that the district
court discussed WEPCo at length and relied on it in part to
reach its construction of the 1980 rules, Pet. App. 67a-70a,
Petitioners’ argument that the decision below is contrary to
WEPCo defies credulity.

Contrary to Petitioners’ claim, nothing the D.C. Circuit said
in New York conflicts with the Fourth Circuit's construction
of the 1980 rules or the statute. The D.C. Circuit stated: “We
express no opinion as to whether Congress intended to require
that EPA use identical regulatory definitions of modification
across the NSPS and NSR programs. C/. [Duke Energy].”
New York, 413 F.3d at 20 (emphasis added).

Despite this express acknowledgement, Petitioners strain to
identify a conflict between Duke Energy and New York. They
fail. New York principally addressed the lawfulness of the
revised NSR rules promulgated by EPA in 2002, rules that
were not at issue in this case and to which the Fourth Circuit
did not speak at all. And while industry petitioners challenged
EPA’s contention in the preamble of the 2002 rule that,
“(prior to today, the [1980 PSD] regulations applied ... an

19

actual-to-potential applicability test for all ... emissions
units,’ the D.C. Circuit explicitly declined to reach that issue
as well, finding it not ripe for review and best addressed in a
more concrete factual setting. According to the court, “[i]f
there are still pending applications of the 1980 rule in which
EPA attempts to employ the disputed” interpretation, “judicial
proceedings addressed to the application could solve the
problem of any affected firm.” /d. at 21. That is precisely
what the Fourth Circuit did here. In short, the D.C. Circuit
did not adopt avy interpretation of the 1980 PSD rules, much
less one in “conflict” with the court’s decision here. — It
specifically left the debate over the meaning of the 1980 rules
for resolution in the local circuits in the enforcement context.
Unable to find a conflict between the Fourth Circuit and
otiier circuits on the actual issue before the court below (i.c.,
the meaning of the rules), Petitioners claim the court's reason-
ing (/.¢., its application of statutory construction principles)
presents such a conflict and is inconsistent with this Court's
teachings on statutory construction. Petitioners are wrong.
Both courts below recognized that, in some circumstances,
courts — indeed the Fourth Circuit itself — have agreed that
EPA may define the same term differently under PSD and
NSPS. See Pet. App. 16a-18a (discussing PEPCo v. EPA, 650
F.2d 509 (4th Cir. 1981) and Northern Plains Res. Council v.
EPA, 645 F.2d 1349 (9th Cir. 1981)): Pet. App. 64a-67a
(discussing Alabama Power Co. v. Costle, 636 F.2d 323, 401
(D.C.Cir. 1979) and Northern Plains). But they both
explained that these courts’ decisions turned on the fact that
Congress had defined the terms at issue there (“source™ in
PEPCO and Alabama Power, and “commenced” in Northern
Plains) differently under PSD than NSPS. Here, by contrast,
Congress explicitly “linked the PSD definition of the term

ae

See 67 Bed. Reg. at 80.199. Notably, that ts an interpretation
different from the actual-to- projected-actual interpretation EPA advanced
simultaneously before the Fourth Circunt, further undercutting Petitioners’
claim of the court's rejection of EPA’s “authoritative” interpretation.

20

[modification] to its use in the NSPS provisions of the
statute.” Pet. App. 17a.

Nor did the Fourth Circuit ignore or misconstrue this
Court’s precedents. The court recognized that the task of
statutory construction, as “holistic [an] endeavor” as it may
be, does not start with the court’s (or the parties’) conception
of the “different purposes” of PSD and NSPS. Rather, that
task starts with the language of the statute, see e.g., Barnhart
v. Sigmon Coal Co., 534 U.S. 438 (2002), and the “different
purposes of the NSPS and PSD programs cannot override
|{Congress’] mandate” as expressed in the statute.” Pet. App.
17a-18a; cf. FDA v. Brown & Williamson Tobacco Corp., 529
U.S. 120, 161 (2000) (“In our anxiety to effectuate the
congressional purpose of protecting the public, we must (ake
care not to extend the scope of the statute beyond the point
where Congress indicated it would stop.”) (internal quotation
and citation omitted).

The court below expressly recognized that while “the same
word or phrase will generally be presumed to have the same
meaning when used in different parts of the statute,” that
“presumption ... 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.” Pet. App. 17a (quoting
Gen. Dynamics Land Sys., Inc. v. Cline, 540 U.S. 581, 595
(2004)). Indeed, the court explained, decisions like PEPCO

* Koons Buick-Pontiac GMC vy. Nigh, 125 8. Ct. 560, 566-67 (2004),
quoted in Pet. at 25.

* The district court explained that construing the PSD and NSPS
modification rules congruently such that PSD is triggered only if there ts
NSPS modification activity at an existing unit, and then only if the source-
wide annual emissions exceed a de minimis threshold, is not only
consistent with the statutory text and intent but also effectuates the air
quality purposes of PSD and thus “does not ignore the objectives of each
program.” Pet. App. 64a. As EPA agrees, the structure of the CAA makes
clear that NSR is not an emission reduction program for existing sources,
but rather a program to manage emissions “growth” (.¢., new emissions).
69 Fed. Reg. 23,951, 23.986 (Apr. 30, 2004) (emphasis added).

et

and Northern Plains illustrate that principle. /d. But the court
looked here, as it must, at the particular statutory language at
issue, and it recognized that this language is different from the
language construed in those cases, and must be given cffect.
It correctly concluded that, as this Court’s decision in Rowan
illustrates, it means something when Congress does not
merely use the same term in different parts of the statute but
also defines that single term in substantially the same way.”
Pet. App. | la-15a (discussing Rowan Cos. v. United States,
452 U.S. 247 (1981)). It defies common sense to conclude in
such circumstances that despite Congress’ identical statutory
definition of that single term, the agency can give that term
two different meanings. This reasoning is even stronger here.

“ Contrary to Petitioners’ claim, the similarities between this case and
Rowan are not only that Congress defined the same term the same way in
two related parts of the statute. The Rowan Court noted that Congress
chose the concept of “wages” as the “base” for measuring tax obligations,
and used substantially the same language to define that concept—tirst in
1938 in FICA and FUTA, and then seven years later in the income tax
withholding statute. Here, in 1970, Congress chose the concept of
“modification” as the “base” for the type of activity that would transform
an existing unit into a new one under NSPS. Seven years later, Congress
made NSPS “modification” a trigger for pre-construction review of an
existing unit under NSR. As Rowan held, “|iJn view of this sequence of
consistency. the plain language of the statutes is strong evidence that
Congress i ~ded [the commonly defined term| to mean the same.” 452
U.S. at 255. Hf there is a difference between Rowan and this case, it is that
the plain language of the CAA, incorporating by reference the NSPS
definition of modification into NSR, is “even stronger evidence” that
Congress imended the term to be interpreted consistently. Pet. App. | 4a.

The court also contirmed the legislative history “does not in any way
suggest that Congress intended these identical statutory definitions to
receive different interpretation,” and “indicates congressional concern with
the same sort of simplicity and consistency” evident in Rowan. Id. at |4a-
15a. Finally, EPA’s contemporaneous construction of the statute's PSD
provisions is reflected in the 1978 rules, which defined “modification”
under PSD congruently with NSPS. see supra 6-7, as did EPA’s
comtemporancous construction of the L980 PSD rules, sce supra 8-9. Cf.
Rowan, 452 U.S. at 253 (discussing the agency's. contemporancous
interpretation of the statute ).

22

lt defies common sense even more for petitioners to argue that
by expressly stating in one part of the statute that a term
means the same as in another part of the statute, Congress
meant to authorize the agency to give that term different
meanings.

The language of the statute is plain: for an activity at an
existing unit to trigger PSD pre-construction review, it must
be a “modification [Jas defined in section 7411.” 42 U.S.C.
§7479(2)(C). It is only under these circumstances that the
Fourth Circuit held that if Congress” words in the statute are
to be given effect, the presumption of uniform usage had
become “effectively irrebutable.” Pet. App. 18a.

Despite the Fourth Circuit's invitation, Petitioners have still
failed to cite “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.” Pet.
App. 18a. Gen. Dynamic Land Systems and United States vy.
Cleveland Indians Baseball Co., 532 U.S. 200 (2001), plainly
do not fit that category. The fact is that only one other court
was squarely presented with the particular statutory
construction issue that the Fourth Circuit resolved.*’ That
court flatly refused to engage the issue. See New York, 413
F.3d at 20. There is no conflict for this Court to resolve,

Ht. CERTIORARI SHOULD NOT BE GRANTED BE-
CAUSE THIS CASE INVOLVES AN ISSUE THAT
IS PERCOLATING IN THE LOWER COURTS.

Petitioners’ claims that this case presents “recurring issues
of national importance” are based primarily on their assertions
that (1) the Fourth Circuit’s decision is inconsistent with that
of other circuits—an assertion that is clearly incorrect as
discussed in section |, supra; and (2) that the Fourth Circuit

” It is not surprising that there is no precedent addressing the particular
issue Of statutory construction presented here. The language of the CAA,
in which Congress explicitly and by cross-reference adopted a pre-existing
definition of a term (here “modification”) for a new program, is to our
knowledge umique. This fact also counsels against certiorari in this case.

23

exceeded its jurisdiction—an assertion that is also clearly
incorrect, as discussed in section III, infra.

Petitioners also note that EPA recently proposed a further
amendment of the PSD rules that would adopt provisions
consistent with the Fourth Circuit's construction of the rules.
70 Fed. Reg. 61,081 (Oct. 20, 2005). Contrary to Petitioners’
suggestion, see Pet. at 27-29, EPA’s recent action counsels
against this Court granting certiorari and devoting its own
scarce resources to reviewing the Fourth Circuit’s decision.
That is particularly true here because EPA’s legal rationale for
the proposed revision to the PSD rules does not rely on the
Fourth Circuit’s decision or reasoning (rather EPA reiterates
its disagreement with it). See 70 Fed. Reg. at 61,098-101,
61,090. Nor does EPA’s policy rationale for the proposed
rule rely on the Duke Energy decision. See id. at 61,093-95."
EPA’s proposed rule, once finalized, will rise or fall on EPA’s
legal and policy rationale for the rule, irrespective of whether
this Court decides to review the Duke Energy decision.

Petitioners nevertheless insist the meaning of the 1980 PSD
rules “will retain considerable importance” because these
rules will continue governing numerous projects undertaken
before their amendment. Pet. at 29 n.15. Even if that were
true, it is no reason for this Court to grant review. Petitioners
identify several pending actions in which the issues decided
by the Fourth Circuit in this case are squarely before district
courts in different circuits. To date, two of these courts have
issued interlocutory orders ruling on the issue here. United

* EPA explained: “We believe it is desirable to change the approach to
major NSR. The current approach discourages sources trom replacing
components, and encourages them to replace components with inferior
components or to artificially constrain production in other ways. This
behavior does not advance the central policy goals of the major NSR
program as applied to existing sources. ... We also do not believe the
outcomes produced by the approach we have been taking |/e.. the
interpretation reflected in the enforcement initiative} have significant
environmental benefits compared with the approach we are proposing
today.” 70 Fed. Reg. at 61,094.

24

States. v. Ala. Power Co., 372 F.Supp.2d 1283 (N.D. Ala.
2005), followed Duke Energy, adopting EPA’s contempora-
neous interpretation of the 1980 PSD rules. United States v.
Cinergy reached a contrary conclusion and adopted EPA’s
new actual-to-projected-actual test. The Seventh Circuit
recently granted Cinergy’s motion for interlocutory appeal.
384 F.Supp.2d 1272, 1274 (S.D. Ind. 2005), appeal docketed,
No. 06-8029 (7th Cir. Jan, 3, 2006). Accordingly, the issue
addressed by the Fourth Circuit is percolating in the different
circuits, though there is currently no conflict among them.
For this reason alone, even if Petitioners were correct that the
issue the Fourth Circuit decided is a “recurring” one, this fact
counsels against Supreme Court review in the context of this
case. Sec, e.g.. Brown v. Texas, 522 U.S. 940 (1997) (the
likelihood that the issue will be resolved correctly may
increase if this Court allows other tribunals to serve as
laboratories in which the issue receives further study before it
is addressed by this Court”) (internal quotation and citation
omitted).

Il. THE FOURTH CIRCUIT DECISION TO REJECT
EPA’S ENFORCEMENT INTERPRETATION OF
THE 1980 RULES AND AFFIRM INSTEAD THE
DISTRICT COURT'S APPLICATION OF EPA’‘S
CONTEMPORANEOUS INTERPRETATION OF
THESE RULES PRESENTS NO CONFLICT AND
WAS WITHIN THE COURT'S JURISDICTION.

Petitioners argue at length that the Fourth Circuit exceeded
its jurisdiction by “invalidat|ing]” the 1980 PSD rules. Pet. at
13. This argument is based on a false premise. The court did
not invalidate the rules. While 42 U.S.C. §7607(b) provides
that challenges to nationally applicable CAA rules may only
be brought in the D.C. Circuit, the enforcement action brought
by EPA against Duke Energy did not involve a challenge to
any rule. Rather, at issue was the permissibility of the
interpretation of the 1980 PSD rules on which EPA based its
claims of liability in a case brought in the Middle District of

25

North Carolina, an issue that, on appeal, may be resolved only
in the Fourth Circuit. 42 U.S.C. §7413(b); 28 U.S.C. § 1291.

The district court and the Fourth Circuit had before them
three different interpretations of “actual emissions increase”
under the PSD rules. These interpretations had ech been
advanced by EPA previously. See supra 8-12 & 1.26. Of
these interpretations, the Fourth Circuit, like the district court,
upheld the “actual-to-actual” interpretation, the interpretation
that EPA had announced almost contemporaneously with its
promulgation of 1980 PSD rules. The court explained: “Our
choice of this interpretation of the PSD regulations—as
required by statute—over the EPA’s interpretation is not an
invalidation of those regulations. The PSD regulations remain
fully intact and enforceable” under EPA’s contemporaneous
interpretation, which is fully consistent with the statute. Pet.
App. ISa n.7. Petitioners have presented no compelling
reasons for certiorari.

First, Petitioners halt-heartedly suggest a conflict, citing
myriad cases for the proposition that the court's decision here
is “an abrupt departure” from other courts of appeals that
“have held that contentions that CAA regulations are contrary
lo statute are cognizable in the D.C. Circuit, and are barred
from enforcement proceedings,” Pet. at 14 & n.7, 0.8. These
cases are inapposite. The vast majority of these cases did not
involve an agency's interpretation of the rule, as was the case
here.” None held an agency's interpretation of its rule ts

”

In their zeal to locate decisions from multiple circuits that
purportedly support their contention. Petitioners cite cases that are oardly
relevant to the issue here. Enviro Tech Intl, Inc. v. EPA, 371 F.3d 370
(7th Cir, 2004), was a FOIA case, involving no challenge to any rule or its
imterpretation. Several cases involved untimely. collateral attacks on
permits or final agency action, not a regulation or its interpretation. See
Chemical Weapons Working Group, Inc. vo U.S. Dep't of the Army, 111
F.3d 1485. 1492 (10th Cir, 1997) (collateral attack on RCRA permit):
Hawaiian Elec. Co. v. EPA, 723 F.2d 1440, 1445 (9th Cir, 1984) Cuntimely
challenge to PSD permit); Pan Am. Grain Mfg. Co., v. EPA, 9S &.3d LOL,
103 (ist Cir, 1996) (untimely challenge to nonattainment designation);
Greenpeace, lnc. v. Waste Tech. Indus... 9 F.3d 1174, 1180 (6th Cir. 1993)

26

reviewable only in the D.C. Circuit.” Petitioners fail to cite
the only other circuit decision that generally presents facts
similar to this case. That decision reached the same
conclusion as the Fourth Circuit below. See League of
Wilderness Defenders/Blue Mountains Biodiversity Project v.
Forsgren, 309 F.3d 1181, 1190 n.8 (9th Cir. 2002) (stating, in
response to an argument similar to Petitioners’ here, “we do
not invalidate the regulation. Rather, we reject the [agency's]
interpretation of the regulation and give it a construction
consistent with its administrative history, case law, and the
governing statute”): id. at 1190 (“An agency simply may not
interpret a regulation in a way that contravenes a statute.”).
For the same reason, the Fourth Circuit's decision here is
not in “tension,” much less conflict, with this Court’s decision
in Adamo Wrecking Co. v. United States, 434 U.S. 275
(1978), where the Court looked at the rule itself and held that
rule altogether outside the ambit of §7607(b). No claim that

(collateral attack on RCRA permit). Two cases involved direct attacks on
the validity of regulations and merely recognized. as did the Fourth Circuit
here, Pet. App. 1Sa n.7, that such attacks must be addressed to the D.C.
Circuit. See United States v. Kune-Shou Ho, 311 F.3d 589, 607-08 (Sth
Cir. 2002) (retusing to entertain a defendant's procedural challenge to a
regulation); United States v. Walsh, 8 F.3d 659, 664 (9th Cir. 1993)
(noting that defendant challenged the rules themselves and the limitation
on review set forth in 42 U.S.C. §7607(b)). Petitioners even misquote one
case, claiming that Siege/man v. EPA, 911 F.2d 499 (Lith Cir. 1990),
stands for the proposition that a “claim that “EPA’‘s regulation conflicts
with an act of Congress’ may not be entertained in enforcement
proceeding.” Pet. at 14.0.7. That case in fact says the opposite: “we do
have the jurisdiction to consider the argument that EPA’s regulation
conflicts with an act of Congress.” /d. at SO2 n.6.

” Petitioners cite only one case involving a challenge to an agency's
interpretation of the rules. While Petitioners cite that court's unremarkable
footnote noting the company in that case did not challenge the validity of
the NSPS rules and that the court. in that event. would not have had
jurisdiction to entertain such a challenge. see WEPCo, 893 F.2d at 914
n.6, they fail to note that defendant in that case challenged the interpre-
tation of the 1980 PSD rules that EPA sought to apply and the court set it
aside. See id. at 918 (rejecting EPA’s “actual-to-potential” interpretation).

the 1980 rules are not subject to §7607(b) has been made here.

Second, Petitioners’ attack on the court’s construction of
the 1980 rules in the course of their ostensible argument based
on §7607(b) reveals that argument for what it is: not a
jurisdictional argument, but merely a disagreement with the
Fourth Circuit’s decision on the merits. The fundamental
premise of Petitioners’ argument is found in a footnote: that
the district court’s construction of the rules that the Fourth
Circuit affirmed is inconsistent with the rules’ language. Pet.
at 17 n.9. According to Petitioners, the court effectively
invalidated the rules because they cannot be read consistently
with NSPS, which “targets ‘“cmissions rates’ measured in
kilogram per hour whereas the PSD regulations address
‘actual emissions’ in “tons per year.”” Pet. at 18.

Contrary to Petitioners’ contention, the Fourth Circuit did
not construe the 1980 rules as mandating a maximum hourly
emissions rate test to the exclusion of an annual emissions
test. See Pet. at 19. The court affirmed the district court's
(and EPA’s contemporaneous) construction, which explicitly
held that to be a PSD “modification,” “Duke|’s] projects
[must] cause|] an increase in annual net emissions, assuming
constant hours and conditions.” Pet. App. 83a (emphasis
added); see WEPCo, 893 F.2d at 918 n.14. Thus, an annual
net emissions increase can result only from an increase in the
hourly emissions rate, Pet. App. 58a-59a, and only NSPS
“modifications” can be also PSD “modifications.” This const-
ruction is required by the statute, as the Fourth Circuit held. It
is also consistent with the plain language of the rules and the
WEPCo remand instructions. See id. at S8a-60a, 67a-69a.

Regardless, that Petitioners disagree with the court below
on the merits is no reason for this Court to grant review, for
the reasons discussed earlier in Parts I and I.

Third, Petitioners are simply wrong on the merits. That the
Fourth Circuit relied primarily on the statute for its rejection
of EPA’s (and Petitioners’) interpretation of the 1980 rules in
favor of EPA’s own contemporaneous interpretation of these
rules does not turn the court's ruling into an “invalidation” of

28

the rules. Rather, it is a straightforward application of this
Court's “often stated” admonition that deference is due to an
agency's regulatory interpretation that is not plainly erroneous
or inconsistent with the rules “provided |that interpretation]
does not violate the Constitution or a federal statute.” Stinson
v. United States, 508 U.S. 38, 45 (1993) (emphasis added).
The Fourth Circuit, faced with multiple EPA interpretations of.
the 1980 PSD rules, thus recognized that the first step in
discharging its duty in this case — /.e., determining which EPA
interpretation might command the deference that this Court’s
decisions require — is to determine which of these interpreta-
tions is consistent with the statute.*' See Pet. App. 10a-1 la.
The court correctly deemed it unnecessary to proceed beyond
that first step when it determined that only one of EPA’s
interpretations—the contemporaneous interpretation upheld
by the district court—is consistent with the statute.”

In short, the court's review of EPA’s enforcement interpre-
tation falls squarely within its jurisdiction. Whereas the D.C.
Circuit has jurisdiction to review the validity of nationally
applicable CAA rules, the Fourth Circuit has jurisdiction to
review the validity of regulatory interpretations that EPA
asserts in actions arising in the Fourth Circuit.”

" Both EPA and Petitioners “expressly acknowledge[d| ... these
principles” in their briefs below, and EPA conceded that “the critical first
‘question at issue’” was the consistency of its interpretation of the
regulation with the statute. Pet. App. 10a-lla. It was not until the court
requested supplemental briefing that the Plaintiffs claimed that answering
that “critical first question” somehow violates 42 U.S.C. §7607(b).

© The district court also relied on the statute, see Pet. App. 63a-64a
(citing Stinson), but went on to explain EPA's enforcement interpretation
of the 1980 rules was inconsistent with their plain language, id. at S8a-60a.

* See United States y. Ohio Department of Highway Safety, 635 F.2d
1195, 1197 n.2 (6th Cir. 1980) ('[The rule] was not challenged by a
petition for review. Thus, we treat it as a lawful regulation and are
concemed only with the proper interpretation of the regulation ....°); see
also PEPCo v. EPA, 650 F.2d SOY, 513 (4th Cir, 1981) (This court ... has
jurisdiction to review only the EPA’s interpretation of those regulations
. h Forsgren, 309 F.3d at 1190 0.8.

29

Finally, Petitioners’ statement that “authoritative”
interpretations of the regulation are subject to §7607(b)(2) is
wide off the mark. First, if Petitioners’ argument is correct,
no district court would have any authority to engage in any
review of the agency's interpretation for that case; the court
must simply take the agency’s litigation position at face value
~ even if that interpretation is plainly inconsistent with the
regulatory language — and mechanically apply it to the case at
hand. That is not, and never has been, the law.

Second, what is EPA’s “authoritative” interpretation of the
1980 PSD rules? Petitioners ignore EPA’s contemporaneous
interpretation and blithely assert EPA’s “formal” interpreta-
tion was announced, and upheld, in the WEPCo matter. Pet.
at 7-8. In fact, the “actual-to-potential” interpretation that
EPA advanced in WEPCo was rejected by the Seventh Circuit
and was acknowledged by EPA itself as impermissible in
1992. Supra 10-11 & n.22. Moreover, the “locally
applicable” final agency action that was reviewed, and set
aside, in WEPCo was EPA’s PSD applicability determination
in that case.

Section 7607(b) requires prompt challenges to nationally
applicable CAA rules in the D.C. Circuit and other final
actions in the regional circuits. It does not provide a means
for EPA to promulgate ambiguous rules, change its interpreta-
tions at will, and claim that whatever interpretation it chooses
to apply in a given enforcement case is immune from review.

As the Fourth Circuit explained, it scrupulously followed
the requirements of the CAA, reviewing the interpretations
presented to it by the parties and not the validity of the rules.
Pet. App. 1San.7. This is a straightforward application of the
statute. Certiorari is not warranted.

CONCLUSION

The petition for writ of certiorari should be denied.

Respectfully submitted.

PAUL R. TOURANGEAU
GARRY S. RICE

DUKE ENERGY CORPORATION
Legal Department

526 South Church Street,
ECO3T

Charlotte, NC 28242

(704) 382-8111

DEAN M. MOESSER

DUKE ENERGY CORPORATION
5400 Westheimer Court
Houston, TX 77056-5310
(713) 627-5298

March 8, 2006

HENRY V. NICKEL
F. WILLIAM BROWNELL
(Counsel of Record)
MARK B. BIFRBOWER
MAKRAM B. JABER
HUNTON & WILLIAMS LLP
1900 K Street, N.W.
Washington, D.C. 20006
(202) 955-1500

T. THOMAS COTTINGHAM, III
NASH E, LONG, III

HUNTON & WILLIAMS LLP
101 South Tryon Street,
Suite 3500

Charlotte, NC 28280

(704) 378-4700

Counsel for Respondent

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0237%3A05. Public record. Not legal advice.