Reply Brief — Environmental Defense v. Duke Energy Corporation

© FILED

MAR 2 1 2006

No. 05-848 SUPREME CO ty

In the

Supreme Court of the United States

ENVIRONMENTAL DEFENSE, ET AL.,

Petitioners,

Vv.

DUKE ENERGY CorpP., ET AL.,

Respondents.

Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Fourth Circuit

REPLY BRIEF FOR THE PETITIONERS

JEFFREY M. GLEASON SEAN H. DONAHUE*

J. BLANDING HOLMAN, IV 2000 L Street, NW

CALEB JAFFE Suite 808

Southern Environmental Washington, D.C. 20036

Law Center (202) 466-2234

200 W. Franklin Suite 330

Chapel Hill, N.C. 27516

(434) 967-1450

VICKIE PATTON DAVID T. GOLDBERG

Environmental Defense 99 Hudson Street, 8" Floor

2334 North Broadway New York, N.Y. 10013

Boulder, Colorado 80304 (212) 334-8813

(303) 447-7215

*Counsel of Record Counsel for Petitioners

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TABLE OF CONTENTS

TABLE OF AUTHORITIES

CASES:

Adamo Wrecking Co. v. United States,

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Alabama Power v. Costle,

G36 F.26 S23 CD.C. Cle. 1979) oicccccccecsevicescencoccososoees 3,5,6

Chevron USA, Inc. v. NRDC, 467 U.S. 837 (1984)..........0000 5

National Cable & Telecommunications Ass’n v.

Brand X Internet Services, 125 S. Ct. 2688 (2005) ....... 7

New York v. EPA, 413 F.3d 3,

on denial of reh’g, 431 F.3d 801

Ee __, MESERE OTe gitar roan e raee” passim

New York v. EPA, 2006 WL 662746

(D.C. Cir. Marche 17, 2006) q.......0cseiccccsssivccscosccososcess 3,8,9

NRDC v. EPA, 983 F.2d 259 (D.C. Cir. 1993) ........ccesesseerereee 9

Puerto Rican Cement Co. v. EPA,

te Tig ERR nanos a rienaewes Sores 3,7

Rowan Cos., Inc. v. United States, 452 U.S. 257 (1981).....1,3

Wisconsin Electric Power Co. v. Reilly,

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STATUTES:

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ADMINISTRATIVE MATERIALS:

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52 Fed. Reg. 31162 (Aug. 19, 1987) .ccc.sccccsscessssssscesecssesseensee 9

55 Fed. Reg. 30798 (July 27, 1990).....cs.cc.scsessssssseseccesesenssssees 9

57 Fed. Reg, 13220 (April 15, 1992) ...sc...cssssssssesscsnesessueeecesees 9

61 Fed. Reg. 38249 (July 23, 1996) .....c.c.ccccecsecssscescsesecsensesees 9

62 Fed. Reg. 66182 (Aug. 18, 1999) ......cccsccscssssssssssesssecensseee 9

64 Fed. Reg. 54604 (Oct. 7, 1999).....ccccsccccccussecsssesssseeessessssees 9

67 Fed. Reg. 80186 (Dec. 31, 2002)...ccscsccccsssssssssessesusecsessssees 9

70 Fed. Reg. 61081 (Oct. 20, 2005)......scs.ccsssssscssseessenees passim

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ASPB

The petition demonstrated that the Fourth Circuit violated

Section 307(b) by invalidating national CAA regulations that

the D.C. Circuit, exercising its “exclusive” review authority

under the Act, upheld. See New York v. EPA, 413 F.3d 3

(D.C. Cir. 2005) (New York 1). As we also showed (Pet. 12,

22, 25-26), the court’s holding conflicts directly with New

York on a critical issue by construing the CAA

unambiguously to forbid EPA from using an actual, annual

emissions test for PSD emissions increases — the test New

York construed the Act unambiguously to require for PSD.

Neither brief in opposition seriously engages these points,

let alone rebuts them. Duke takes the Court on a meandering

tour of what it claims to be the regulatory history, the

apparent purpose of which is to make the basic issues of

statutory construction actually presented seem hopelessly

complex, and it tries to redraft a Fourth Circuit ruling that

declared the “wording” of the EPA’s NSR regulations

“largely irrelevant” in the face of an “effectively irrebuttable”

rule of statutory construction. See Pet. App. lla n.3, 18a.

Duke nowhere explains why it did not properly raise a

challenge based on Rowan Cos., Inc. v. United States, 452

U.S. 257 (1981), in the D.C. Circuit, the court with exclusive

authority to declare the regulations’ validity or invalidity

under the Act — nor why its failure to do so should expand the

authority of another court.

The United States’ brief is remarkable for its studied

failure even to address what its petition for rehearing en banc

acknowledged to be a direct conflict between New York I and

the Fourth Circuit’s decision: the former construes the Act’s

unambiguous text to command that PSD _ emissions

“increases” be measured by actual (as opposed to potential)

emissions, while the latter construes the statute to forbid it.

And despite having admitted that the Fourth Circuit’s

decision poses “serious consequences for EPA’s ability to

maintain a consistent and fair regulatory scheme,” and

“undermines critical aspects of the PSD rules,” U.S. En Banc

Pet., No. 04-1763 at 14, and having unsuccessfully sought

rehearing en banc review of New York I's ruling that the Act’s

plain text requires an actual emissions test for PSD, the

government now asserts that the decision below, however

wrong, is unworthy of review — because “the agency believes

it can address any difficulties caused by the court of appeals’

decision through rulemaking.” Opp. 9. But EPA’s bare

proposal to promulgate regulations “to establish a test

consistent with” a ruling it regards as a misconstruction of the

Act, see 70 Fed. Reg. 61081, 61083 & n.3 (Oct. 20, 2005),

only underlines the need for this Court’s review. The D.C.

Circuit’s New York I decision and the decision below bind

EPA to conflicting mandates on the “actual” versus

“potential” measures of emissions, each based on respective

courts’ readings of the Act’s unambiguous terms. EPA

cannot satisfy both as a matter of logic, and review by this

Court offers the only opportunity to remedy the systematic

disarray that the ruling below has caused and, unreviewed,

will continue to cause.

1. Although Duke insists that the court of appeals was

merely engaged in interpretation of the PSD regulations, the

court itself considered “the wording and _ various

interpretations of the PSD regulations” as “largely irrelevant

to the proper analysis of this case,” Pet. App. 1 la n.3, because

the Act’s “plain language” required that the components of

the Act’s definition of modification must “be interpreted

identically” in EPA’s regulations implementing the two

programs. Pet. App. 14a, 17a. See Pet. 8, 18-19; U.S. Opp. at

3 & n.1 (acknowledging that the NSPS regulations measure

emissions increases by reference to “maximum hourly

emissions rates” and the 1980 and 2002 PSD regulations turn

on “total annual emissions (tons per year)”). As the United

States correctly explained below, “requiring EPA to interpret

the PSD regulations to adopt the NSPS test for measuring

emissions increases is inconsistent with the plain language of

the regulations and thus is not ‘interpretation’ at all, but rather

invalidation.” U.S. En Banc Pet., No. 04-1763 at 12. See

also NPCA Amicus Br. 4-11.' The PSD regulations, which

nowhere mention maximum hourly rates, cannot be

“interpreted” to provide for the NSPS-style potential

emissions test; and even if their plain language did not rule it

out, such a move would directly contravene the D.C. Circuit’s

insistence that the Act precludes a test based on potential

emissions. New York, 413 F.3d at 38-40; Alabama Power v.

Costle, 636 F.2d 323, 353 (D.C. Cir. 1979). See also New

York v. EPA, 2006 WL 662746, *6 (D.C. Cir. March 17,

2006) (“New York IF’) (in striking down EPA’s 2003

Equipment Replacement Rule, observing that “[t]o the extent

industry intervenors [including Duke, and represented by

Duke’s counsel here] rely on the NSPS regime to reargue

their position that ‘modifications’ require an increase in

maXimum emissions rates, that issue was resolved in New

York I, 413 F.3d at 19-20, 40; see also New York v. EPA, 431

F.3d 801, 802-803 (D.C. Cir. 2005) (Williams, J., concurring

in denial of rehearing)”) .

Having called the Fourth Circuit’s action what it plainly

was — “invalidation” of national CAA regulations in an

enforcement action — and having foreseen “disarray” as a

result, U.S. En Banc Pet., No. 04-1763 at 15, the United

' Straining to resist Duke’s diversionary exercise in serial bamboozlement,

we pause to note that its account of the 1980 regulations (Opp. 7-8)

willfully conflates the separate “emissions increase” and “physical

change” prongs of the modification test. See 40 C.F.R. 51.166(bX2)

(1987); see also New York IJ, 2006 WL 662746, *6. The “increased hours

of operation” exemption provides that increased hours alone do not

constitute a physical change — not that where there Aas been a physical

change, increases in actual emissions resulting from more hours of

operation can be ignored, in violation of the D.C. Circuit’s repeated

holdings that increased actual emissions cannot be ignored by PSD, see

New York I, 413 F.3d at 38-40; see also Wisconsin Electric Power Co. v.

Reilly, 893 F 2d 901, 916 n.11 (7 Cir. 1990); Puerto Rican Cement Co. v.

EPA, 889 F.2d 292, 913-16 (1* Cir. 1990). As Duke concedes (Opp. 4),

an hourly rate test “automatically” ignores emissions from increased

hours. The hourly rate test imposed by the Fourth Circuit would deprive

the exemption of any meaning

States now says review is not warranted because of the

figleaf-shaped footnote, App. 15a n.7, in which the court

claimed to respect the limit on its jurisdiction. (The United

States ignores the court’s other, figleaf-removing footnote,

App. lla n.3.) But as this Court recognized in Adamo

Wrecking Co. v. United States, 434 U.S. 275, 285 (1978),

Section 307(b)’s strictures are not limited to acknowledged

usurpations, and a footnoted ipse dixit does not alter the

“disarray” that necessarily attends invalidation-in-deed of

national CAA rules upheld by the D.C. Circuit. States that

must administer complex pollution control programs in

conformity EPA’s regulations depend on the rules’ stability

and predictability. See States’ Amicus Br. at 12-15.

2. In New York J, the court rejected the argument

that EPA's 1980 and 2002 PSD/NNSR regulations violated

the Act by diverging from pre-1977 NSPS regulations that

allegedly used a “maximum hourly emissions” test. 413 F.3d

at 19-20. Thus, in a Section 307(b) “exclusive” review

proceeding, the D.C. Circuit upheld the same ations the

court below struck down as contrary to the CAA.

Respondents are left to point out that the D.C. Circuit did

* The conflict between the Fourth Circuit and the D.C. Circuit’s rulings is

already causing enormous confusion among regulators and regulated

alike. This confusion extends to the 2002 PSD regulations governing

current operations and planning, as well as the 1980 and 1992 regulations

applicable to the class of massive enforcement cases like this one, because

all use an actual, annual test, rather than the potential, hourly emissions

standard the Fourth Circuit required. See infra at 10; U.S. Opp. 3 n.1.

> Industry petitioners including Duke Energy unsuccessfully sought

rehearing in New York / on the basis that that “the reasoning and analysis”

of the Fourth Circuit’s decision “compel” that the D.C. Circuit strike

down the 1980 and 2002 regulations. Utility Air Regulatory Group En

Banc Pet., No. 02-1387 at 1; New York II, 2006 WL 662746, *6 (rejecting

industry intervenors’ (including Duke’s) effort to “reargue” their NSPS-

based argument). Duke’s plea for more “percolating” (Opp. 22) must be

understood as a euphemism for using enforcement proceedings to try to

bamboozle other courts into disregarding the D.C. Circuit’s role under

Section 307(b) and its repeated holdings on what the Act’s PSD

provisions unambiguously require

not address the argument based on Rowan because that

argument had been waived. Yet even they cannot deny that

the D.C. Circuit reached its opposite and irreconcilable result

construing the exact same statutory text construed by the

Fourth Circuit. Under Section 307(b), the D.C. Circuit’s

unqualified upholding of the 1980 and 2002 regulations on

PSD emissions increases is the definitive word on their

validity (absent review by this Court, for which the time has

now expired). The result is a very real conflict: national

regulations held valid by the D.C. Circuit were held invalid in

another circuit, on broad statutory grounds that apply to every

vintage of PSD regulations. As the United States noted below

(U.S. En Banc Pet. 11), these conflicting rulings are

“precisely” what Section 307(b) was “enacted to prevent.”

3. Respondents have no answer to the direct conflict (see

Pet. 8, 22, 25-26) between New York I's square holding that

the statute requires use of an “actual emissions” standard for

PSD, and the Fourth Circuit’s ruling that the same statutory

text forbids that test, or indeed any standard not identical to

the NSPS “potential” hourly emissions test. The Fourth

Circuit’s holding that EPA must use the NSPS maximum

hourly rate measure for the PSD program — based on that

court’s view that “‘Congress has directly spoken to the

precise question at issue,” App. 10a & App. 11a n.3 (quoting

Chevron, USA, Inc. v. NRDC, 467 U.S. 837, 842 (1984)) — is

directly inconsistent with the D.C. Circuit’s holding in New

York, also based on “Chevron Step 1,” “that the CAA

unambiguously defines ‘increases’ in terms of actual

emissions.” 413 F.3d at 39. See also id. at 40 (“the plain

language of the CAA indicates that Congress intended to

apply NSR to changes that increase actual emissions instead

of potential or allowable emissions”). Accord Alabama

Power, 636 F.2d at 400. The NSPS “maximum hourly rate”

* Contrary to Duke’s claim (Br. 19) the D.C. Circuit’s ruling in Alabama

Power that the term “source,” which occurs in both the NSPS and PSD

modification definitions, must be interpreted differently for PSD than

standard is a test of potential emissions, whereas the “actual,

annual” PSD test invalidated here is a test of actual emissions,

and the choice between them has enormous implications, in

many cases determining whether the PSD program will even

apply. See New York I, 413 F.3d at 14-15; 45 Fed. Reg. at

52680 (contrasting annual “‘actual emissions’” and hourly

“potential to emit” standards); U.S. Opp. Br. 3 & n.1, 7 n.3.

Indeed, the two courts’ divergent answers to how

Congress meant EPA to measure PSD emissions increases —

both “Chevron I” rulings based on the Act’s “unambiguous”

language — led the United States, in seeking rehearing en banc

in this case, to observe that the Fourth Circuit had held that

the Act “mandates” that EPA use the same test of emissions

increases in PSD regulations as it uses for NSPS, while the

D.C. Circuit held that the Act “mandates a contrary

interpretation.” U.S. En Banc Pet., No. 04-1763 at 10-11; id.

at 11 (quoting New York Is holding that “‘the CAA

unambiguously defines emissions increases in terms of actual

emissions”). EPA’s 2005 notice likewise acknowledges,

albeit less directly, the clash between the two courts’ rulings.

NSI’S did not turn on different language in the statutory definitions. In

fact, the court held, in conflict with the Fourth Circuit here, that, although

the statutory definition of “stationary source” applicable under PSD is the

same as the NSPS statutory definition found in 42 U.S.C. 7411(a)(3), EPA

could employ different regulatory definitions due to “differences in the

purpose and structure of the two programs.” 636 F.2d at 401-02.

Although Duke trumpets (Br. 22) that the Petitioners have “not found a

single case that allows an agency to interpret ‘identical statutory

definitions” differently, it needs look no further that Alabama Power,

which did so with respect to the very statutory definitions at issue. See

also New York, 413 F.3d at 19, 39-40; U.S. Opp. 8.

* Compare 70 Fed. Reg. at 61100 (New York / “held that the language of

the CAA indicates that Congress intended to apply NSR to changes that

increase actual emissions, instead of potential or allowable emissions.”)

and id. at 61098 (Fourth Circuit ruled CAA “mandated that the PSD

definition of ‘modification’ be identical to the NSPS definition of

‘modification’ * * * * [and that] for purposes of the PSD program,

emissions increases must be determined by comparing the pre- and post-

change maximum hourly emissions.”).

Rather than trying to refute our demonstration (Pet. 8, 22,

25-26), or recanting its own portrayal of New York and the

decision below as establishing diametrically opposed

statutorily-required “mandates” on how to measure emissions

increases, the United States now deems it the better part of

valor to omit all mention of that conflict. But its silence

should not obscure the enormous significance of the

conflicting judicial mandates on how EPA is to measure

emissions increases: the choice between them determines

whether PSD applies to projects that increase actual emissions

by thousands of tons per year (the actual annual test), or

exempts them (the maximum hourly rate test). See New York

I, 413 F.3d at 15 (discussing Puerto Rican Cement, 889 F.2d

at 293, 296-99); Pet. 9-10, 26-27; Pet App. 88a-89a

(stipulation that Duke’s Plant Modernization Program would

not cause emissions increase under maximum hourly rate

test); U.S. Opp 3 & n.1. Because the conflicting D.C. Circuit

and Fourth Circuit tests are based upon the respective courts’

understanding of the Act’s unambiguous commands, EPA

lacks discretion, whatever its “belief,” to depart from either

based on policy concerns. See National Cable &

Telecommunications Ass'n v. Brand X Internet Services, 125

S. Ct. 2688, 2700 (2005) (agencies’ discretion to re-interpret

statute limited when prior court decision “holds that its

construction follows from the unambiguous terms of the

statute and thus leaves no room for agency discretion”’).

4. EPA’s “belief” in its ability to handle “any difficulties”

by rulemaking, U.S. Opp. at 9, further emphasizes why this

Court’s review is warranted. In both this case and in New

York I, EPA pleaded for discretion to define emissions

“increases”; but both courts rejected that plea and endorsed

directly opposite tests based on unambiguous statutory

language. That even EPA cannot square the circle perhaps

explains the United States’ choice to ignore the conflicting

judicial mandates on actual versus potential emissions, but it

also defeats any argument for administrative cure.

Logic prevents EPA’s proposal from complying with both

the Fourth Circuit’s and D.C. Circuit’s readings of the Act,

but EPA’s proposal manages to violate both. First, EPA’s

proposal would manifestly fail the Fourth Circuit’s textually

mandated rule that the NSR and NSPS tests for emissions

increases must — because of the shared statutory definitions —

be “identical” and “the same.” See 70 Fed. Reg. at 61081

(noting that “there are differences in the two programs that

prevent a wholesale adoption of the NSPS modification

definition into the major NSR provisions” — the very rationale

that the Fourth Circuit rejected here, App. 16a-17a). Second,

and more significantly given the D.C. Circuit’s place under

Section 307, EPA’s proposal to transplant a slightly altered

version of NSPS “maximum hourly rate” standard into PSD is

directly inconsistent with the D.C. Circuit’s repeated

insistence that the Act demands a test based on “actual

emissions instead of potential or allowable emissions.” New

York I, 413 F.3d at 40. If EPA wanted to challenge the D.C.

Circuit’s construction of the Act, it needed to petition for

certiorari in New York I (which it did not).

Because the Fourth and D.C. Circuits’ decisions are

both “Chevron 1” rulings, EPA has no discretion to depart

from either based on policy considerations, such as EPA’s

newfound distaste for the PSD program (70 Fed. Reg. at

61093-95) as administered “to date,” id. at 61089, ie., for

more than a generation. The United States’ unsuccessful

petition for rehearing en banc in New York I recognized just

this point, urging that the D.C. Circuit “Panel’s holding that

the statute allows only tests based on actual emissions thus

restricts EPA’s ability to further reform the NSR program.”

See U.S. En Banc Pet., No 02-1387 at 2. However eager for

“reform” an agency may be, unambiguous congressional

intent (as determined by federal courts exercising lawful

jurisdiction) remains a constraint. See New York lI, 2006 WL

662746, *4 (invalidating as contrary to CAA’s text, and as

based on “Humpty Dumpty” approach to statutory

construction, EPA proposal that would have substantially

narrowed scope of PSD/NSR program).

EPA’s inchoate proposal to establish a maximum hourly

rate test “consistent with the Fourth Circuit’s holding in Duke

Energy,” 70 Fed. Reg. at 61083, must also be viewed in light

of the agency’s strenuous arguments below and elsewhere

that such a test would eviscerate the effectiveness of the PSD

program by exempting projects that increase pollutants by

hundreds of tons per year. E.g., EPA Opening Br. in No. 04-

1763 at 45; Reh. Pet. at 14. Courts bound to vindicate the

enacted will of Congress, see New York I, 314 F.3d at 39-40,

should not lightly step aside when an agency rushes to

-embrace what it acknowledges as an incorrect, ultra vires

judicial decision that weakens a statutory program.

There are further reasons why the prudential case for

“leaving it to the agency” must be at its absolute nadir here.

Even where EPA has not been confronted with directly

conflicting appellate holdings, proposed rulemakings often

languish,” and its history of rulemaking in this specific area is

particularly unpromising: Long-considered, then dropped,

EPA proposals delayed review of the 1980 rules for more

than two decades, see New York I, 413 F.3d at 14-15, and the

last NSR emissions test change took many years. See 61 Fed.

Reg. 38,249 (July 23, 1996); 67 Fed. Reg. 80,186 (Dec. 31,

2002). EPA’s 2005 Notice is notably undefined, since it

contains no actual regulatory language, and would be limited

in scope: (1) it would cover Electric Generating Units only,

leaving unaffected the larger class of industrial and other non-

EGU sources subject to PSD, and (2) would not affect

enforcement proceedings (see Pet. 29 n.15) underway or to be

© Compare, e.g. 62 Fed. Reg. 66182 (Dec. 17, 1997) (proposing

pretreatment standards for contro] of certain wastewater pollutants), with

62 Fed. Reg. 66182 (Aug. 18, 1999) (withdrawing proposed rule); 55 Fed.

Reg. 30798 (July 27, 1990) (proposing regulations on RCRA corrective

action), with 64 FR 54604, 54604 (Oct. 7, 1999) (withdrawing “most

provisions” of the 1990 proposal); 52 Fed. Reg. 31162 (Aug. 19, 1987)

(EPA’s proposing on-board refueling vapor recovery systems); with 57

Fed. Reg. 13220 (April 15, 1992) (final decision not to impose ORVR),

vacated by NRDC v. EPA, 983 F.2d 259 (D.C. Cir. 1993).

filed under the 1980, 1992 and 2002 rules — ai/ of which use

an actual emissions PSD test that violates the Fourth Circuit’s

construction of the statute, see U.S. Opp. 3 n.1, 7.3.’

5. Indeed, it is outright false to say (U.S. Opp. 7) that the

Fourth Circuit’s ruling is “of no continuing importance”

because it affects only the 1980 regulations. The court’s

construction of the Act also invalidates the emissions increase

test the 1992 PSD regulations, which applied to some of

Duke’s activities. See U.S. Opp. 3 n.1. And the latest PSD

regulations, enacted in 2002, share the precise feature (an

actual, annual test for emissions increases that is not identical

to NSPS) that the Fourth Circuit held contrary to the Act’s

plain language. Compare New York I, 413 F.3d at 19-20

(upholding 1980 and 2002 regulations against argument that

EPA violated the Act by using the actual test for PSD, rather

than the potential test used under NSPS). See U.S Opp. at 3

n.l, 4. Because it impugns the 2002 regulations governing

current operations and planning, the ruling below is causing

widespread confusion concerning the present and future

obligations of sources within and outside the Fourth Circuit,

and stands as a continuing invitation for collateral attacks on

those national, D.C. Circuit-validated rules.

CONCLUSION

The petition for a writ of certiorari should be granted.

Respectfully submitted.

? The states and citizens downwind from the old coal-burning plants

involved in these cases, involving millions of tons of pollutants and

massive federal and state enforcement resources, have strong interests in

ensuring these actions are not undermined by a reading of the CAA the

United States recognizes is entirely wrong. See State Amicus Br. 3.

10

JEFFREY M. GLEASON

J. BLANDING HOLMAN, [V

CALEB JAFFE

Southern Environmental

Law Center

200 W. Franklin Suite 330

Chapel Hill, N.C. 27516

(434) 967-1450

VICKIE PATTON

Environmental Defense

2334 North Broadway

Boulder, Colorado 80304

(303) 447-7215

*Counsel of Record

SEAN H. DONAHUE*

2000 L St., NW

Suite 808

Washington, D.C. 20036

(202) 466-2234

DAVID T. GOLDBERG

99 Hudson St., 8th Floor

New York, N.Y. 10013

(212) 334-8813

Counsel for Petitioners

No. 05-848

IN THE

Supreme Court of the United States

ENVIRONMENTAL DEFENSE, ET AL.,

Petitioners,

Vv.

DUKE ENERGY, ET AL,

Respondents.

On Petition for a Writ of Certiorari to

the United States Court of Appeals for the Fourth Circuit

BRIEF OF AMICI CURIAE NATIONAL PARKS

CONSERVATION ASSOCIATION

AND OUR CHILDREN’S EARTH FOUNDATION

IN SUPPORT OF PETITIONER

GEORGE E. Hays* MICHAEL A. COSTA

Attorney at Law Our Children’s Earth

236 West Portal Avenue Foundation

#110 100 First Street, Suite 100-367

San Francisco, CA 94127 San Francisco, CA 94105

(415) 566-5414 (415) 896-5289

*Counsel of Record

q *

TABLE OF CONTENTS

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DEA DEEECE CW PCMESE 6. ccc ccccewecvocvesess 1

SUMMARY OF ARGUMENT ........-.ccccecececes 2

EE ica Gekd sane vanes hddscaeeavheeweneees 3

A. The Underlying Issue in the Case .............. 3

B. The Fourth Circuit’s Interpretation Cannot Be

Supported by the Language of the Regulations ... 4

C. Allowing a Collateral Attack of an Environmental

Regulation in the Context of an Enforcement Action

Would Undermine the Enforcement Scheme of

Many Environmental Statutes ................ 1]

D. The Outcome in this Case Could Have Broad

Implications on the Air Quality in the Nation’s

I i de ate abet 14

SPEED SA ban bean badusanenetdeus Hes eaukes 18

TABLE OF AUTHORITIES

CASES:

Alabama Power Co. v. Costle,

eG OUD 6.4 v'kcvacudcsencws 16

American Paper Inst., Inc. v. EPA,

oe bogs fk || er rr ee 12

Commonwealth of Virginia v. United ates,

Pee eT Gs ED bib nn n.dostanvdecneaees 12

Dow Chemical Co. v. Costle,

484 F. Supp. 101 (D. Del. 1980)................. 13

Getty Oil Co. (Eastern Operations), Inc. v. Ruckelshaus,

467 F.2d 349 (3rd Cir. 1972), cert. denied,

Se CUED F555 fey bead wevente ewes 25 12

Longview Fibre Co. v. Rasmussen,

oe et og lk | re 12

Madison Gas & Electric v. U.S. E.P.A.,

PE I I i Vib dsc ccadecew des ss 12

Natural Resources Defense Council, Inc. v. Outboard

Marine Corp. 702 F. Supp. 690 (N.D. Ill. 1988) .... 13

New York v. Environmental Protection Agency,

ep Re | ee ere 7, 10

United States v. Ho,

311 F.3d 589 (5 Cir. 2002), cert. denied,

OU RR oe ee 12

United States v. Ohio Edison Company,

276 F. Supp. 2d 829 (S.D. Ohio 2003) .......... 4,17

United States v. Cinergy Corp.,

384 F. Supp. 2d 1272 (S.D. Ind. 2005) ............ 10

U.S. Ecology, Inc. v. Carlson,

Gow ©. BU, SES CD. TE. ISGS) . wc ccs ceccvcves 13

Wisconsin Electric Power Co. v. Reilly,

ee ee ee PS OED 6 iidcecscdsddvancese 7

STATUTES:

Pub. L. No. 95-95, 91 Stat. 685 (1977) ............... 15

a Do vchs cach ee eisies seh ne oe neees 14

PR EEE gneve dsucdveatsaseceseeees 13

eh roche kveeint es hee bet neuen ee 14

ED Cn acvncdn savas be seesdssetneneds 14

ED icc cndevvcenvesedesoeneuwne ba 3

— i TSR noe wen trary eer ayo e 15

eS a os iin cb pa ad dee owaas bok. ee a? 15

ey eT PE no bid koe chee bevbes’ Gackvienens 15

EE gc ckeckddcataadsestovesens passim

4 et rere rer rT errr rs 13

LEGISLATIVE MATERIALS:

H.R. Rep. 294, 95th Cong. (1977),

1977 U.S.C.C.A.N. 1077, 1283 (1977) ........... 15

3. Rap. Ne. 127, 95 Come. C1977)... ccc ccccecceces 16

ill

ADMINISTRATIVE MATERIALS:

DEORE: os iii passim

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MO Oe. fa ccccassaudcuneeuas 7

SOC PT BTID 5 vii cc sj ccidesadivess 6,7,8

DR oii civccse xn dcdcbaviadabened 3

CSI 5s 5 hin oo iiekvic rear ccee 3

45 Fed. Reg. 52676 (Aug. 7, 1980) ..........0.00ee0 ee 5

47 Fed. Reg. 7836 (Feb. 23, 1982) .......0..0ec eevee 5

47 Fed. Reg. 6017 (Feb. 10, 1982)..........00..0e00 es 5

57 Fed. Reg. 32314 (July 21, 1992) ..........00ee0eee. s

64 Fed. Reg. 35714 (July 1, 1999) ...........00.00ee. 16

69 Fed. Reg. 4566 (Jan. 30, 2004) ..........0eccee eens 2

70 Fed. Reg. 25162 (May 12,2005) .............00:. 16

70 Fed. Reg. 39104 (July 6, 2005) ...........00.0000. 16

ADDITIONAL MATERIALS:

National Parks Conservation Ass'n, et. al, “Code Red:

America's Five Most Polluted National Parks”

CO FED ob cess ccscugscdeenveceusens 15

National Research Council, “Protecting Visibility in National

Parks and Wilderness Areas” (1993) ...........55 15

U.S. Department of Justice, U.S. EPA, “U.S. Sues Electric

Utilities in Unprecedented Action to Enforce the Clean

Air Act,” Press Release, November 3, 1999 ........ 17

iV

STATEMENT OF INTEREST'

The National Parks Conservation Association (““NPCA”)

is a nonprofit citizen organization whose purpose is to protect

and enhance the natural and cultural resources of America’s

National Park System as well as forests, wilderness, and open

space areas through research, public education, advocacy, and

litigation. NPCA was founded in 1919 and today has over

450,000 members nationwide. NPCA, with its members, is

active in protecting air quality in natural areas of interest.

As part of its activities, NPCA is a plaintiff in two Clean

Air Act citizen suits against the Tennessee Valley Authority

alleging the same type of violations at issue in this case. Nat’!

Parks v. TVA, Case No. 05-6329 (6" Cir.) (pending) and

National Parks Conservation v. TVA, No. 06-10729-J (11"

Cir.) (pending). NPCA contends that these alleged violations

(from TVA plants located in Alabama and Tennessee) cause

hundreds of tons of needless pollution annually and are having

a significant adverse impact on protected federal lands,

including Great Smoky Mountains National Park.

Our Children’s Earth Foundation (“OCE”), a non-profit

membership organization, is dedicated to protecting the public,

especially children, from the health impacts of pollution and

other environmental hazards and to improving environmental

quality for the public benefit. OCE has members in Tennessee,

and to protect the interests of its members, particularly from the

impact of TVA’s alleged excessive emissions of sulfur dioxide

' Pursuant to Supreme Court Rule 37.6, no counsel for any party

authored this brief either in whole or in part. No persons other than amici

curiae or their counsel made any monetary contributions to its preparation

or submission. Both Petitioner and Respondent consented to this filing; their

letters of consent are being submitted with the brief.

(a precursor to fine particle pollution),’ OCE has joined NPCA

as a plaintiff in the Clean Air Act citizen suit in Tennessee.

Nat'l Parks v. TVA, Case No. 05-6329 (6" Cir.) (currently

pending).

SUMMARY OF ARGUMENT

The Fourth Circuit’s decision in this case did precisely

what the Clean Air Act’s enforcement scheme was designed to

prevent: permit a facial challenge to a regulation in the context

of an enforcement action. 42 U.S.C. § 7607(b)(2). This brief

in support of the petition focuses on the plain language of the

applicable regulations themselves and shows the Fourth

Circuit’s decision does not comport with that language.

Accordingly, this analysis shows that the Fourth Circuit failed

to analyze the regulatory text at all, but based its holding

instead on a theory that the regulations are inconsistent with the

statute. This invalidation of the regulations was proper only in

the D.C. Circuit, and that circuit has upheld the regulations.

Allowing this type of collateral attack on a validly promulgated

regulation would undermine the enforcement scheme created

by Congress for the Clean Air Act and many other

environmental statutes. Furthermore, given the serious air

pollution problems in national parks caused by power plants,

and the number of those plants that have allegedly violated the

regulations at issue here, this case is of compelling national

interest.

? See (Proposed) Rule To Reduce Interstate Transport of Fine

Particulate Matter and Ozone (Interstate Air Quality Rule), 69 Fed. Reg.

4566, 4572 (Jan. 30, 2004)(“Mass associated with ammonium sulfate

concentrations make up a significant portion (25 to 50 percent) of the annual

average PM,, mass. The largest sulfate contributions to PM, , mass occur

during the summer season mainly within a large multi-State area centered

near Tennessee and Southwest Virginia.”).

2

ARGUMENT

A. THE UNDERLYING ISSUE IN THE CASE.

Under the Clean Air Act’s Prevention of Significant

Deterioration program (“PSD”), 42 U.S.C. §§ 7470-79, if an

owner of a major stationary source makes a “major

modification,” then it becomes subject to emission limits

known as “Best Available Control Technology” (“BACT”). 40

C.F.R §§ 51.166 § (i) and (j). In this case, the plaintiffs alleged

that Duke Energy had undertaken 29 projects at eight coal-fired

power plants between 1988 and 2000, and each of these

projects met the definition of “major modification.” Pet. App.

25a-26a. Because these projects were “major modifications,”

Duke Energy should have obtained stringent BACT emission

limits for them, but it never did. The plaintiffs seek an order

requiring Duke Energy to obtain the emission limits and

operate under them, potentially leading to reductions in

hundreds of thousands of tons in sulfur dioxide and nitrogen

oxide emissions.

In order to have a “major modification” for the purposes of

the PSD program, there must be: (1) a physical change in or

change in the method of operation at a major stationary source

that would (2) result in a significant net emissions increase. 40

C.F.R. § 51.166(b)(2). The Fourth Circuit’s opinion focused

on this second element. The plaintiffs contended that in order

to have a modification, there must be an increase in annual

actual emissions. Pet. App. 6a-7a. The defendant utility

contended that there must be an increase in the Aourly rate of

emissions. Pet. App. 6a-7a. Which test applies has practical

real world consequences.

The measure of a power plant’s ability to generate power

in a particular hour is known as its “capacity.” Pet. App. 67a.

3

A power plant, as it ages, may be able to maintain its maximum

capacity when it is operating, but it may not be available to

generate power around the clock, particularly because

malfunctions, or “forced outages,” cause unplanned shutdowns.

United States v. Ohio Edison Company, 276 F. Supp. 2d 829,

838 (S.D. Ohio 2003). Accordingly, a power company can

undertake massive overhauls that eliminate forced outages,

significantly improving a plant’s availability, on an annual

basis, yet leave its “capacity” to generate power in any

particular hour when it is operating, unchanged. In this case,

Duke Energy argued that its projects did not trigger the PSD

regulations because the projects did not increase the facilities’

hourly capacity. Pet. App. 7a. Thus, if the applicable

regulations are interpreted to require an increase in annual

actual emissions, the projects, assuming they are found to be

non-routine, triggered the PSD regulations, but if the

regulations are interpreted to require an increase in the hourly

rate of emissions, they did not.

B. THE FOURTH CIRCUIT’S INTERPRETATION

CANNOT BE SUPPORTED BY THE LANGUAGE

OF THE REGULATIONS.

In this case, the Fourth Circuit, under the guise of

“interpreting” the applicable regulations, held that in order to

have a “major modification,” a project must lead to an increase

in the hourly rate of emissions, not just an increase in annual

actual emissions. Pet. App. 6a-7a. The language of the

applicable regulations cannot support the Fourth Circuit’s

interpretation, however. Accordingly, the only way the Fourth

Circuit could have achieved its holding was by invalidating the

regulation, something it had no jurisdiction to do. 42 U.S.C.

7607(b)(2). This brief, offered in support of the Petition,

closely examines the applicable regulations to show that they

cannot support the Fourth Circuit’s result.

4

In 1980, EPA issued regulations providing guidance to

States on how to structure PSD programs in their State

Implementation Plans (“SIPs”). 45 Fed. Reg. 52676 (Aug. 7,

1980). (EPA recodified these regulations into 40 C.F.R.

§ 51.166 in 1987). The states of North Carolina and South

Carolina incorporated these federal regulations into their SIPs

in 1982. See 47 Fed. Reg. 7836, 7837 (Feb. 23, 1982) (North

Carolina) and 47 Fed. Reg. 6017 (Feb. 10, 1982) (South

Carolina). Thus it is the language of 40 C.F.R. § 51.166 that

must be the focus in this case.

The regulations define “major modification,” subject to key

exceptions discussed below, as:

[A]ny physical change in or change in the method of

operation of a major stationary source that would result in

a significant met emissions increase of any pollutant

subject to regulation under the Act.

40 C.F.R § 51.166(b)(2)(T) (emphasis added). Pet. App. 103a.

“Net emissions increase” is defined as follows:

{T]he amount by which the sum of the following exceeds

zero: (a) [aJny increase in actual emissions from a

particular physical change or change in the method of

operation at a stationary source; and (b) [aJny other

increases and decreases in actual emissions at the source

that are contemporaneous with the particular change and

are otherwise creditable.

40 C.F.R § 51.166(b)(3)(i)(emphasis added). Pet. App. 104a.

The key analysis under this definition is whether the

particular “change” will lead to an increase in “actual

5

emissions.” This term “actual emissions” has a lengthy

definition:

(i) “Actual emissions” means the actual rate of emissions

of a pollutant from an emissions unit, as determined in

accordance with paragraphs (b)(21 )(ii)- (b)(21)(iv) of this

section.

(ii) 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. The reviewing

authority may allow the use of a different time period upon

a determination that it is more representative of normal

source operation. Actual emissions shall be calculated

using the unit’s actual operating hours, production rates,

and types of materials processed, stored, or combusted

during the selected time period.

(iii) The reviewing authority may presume that

source-specific allowable emissions for the unit are

equivalent to the actual emissions of the unit.

(iv) For any emissions unit which has not begun normal

operations on the particular date, actual emissions shall

equal the potential to emit of the unit on that date.

40 C.F.R § 51.166(b)(21) (emphasis added).

Given this language, to determine whether an increase in

“actual emissions” will occur, one generally looks to the

facility’s annual emissions for the two years preceding the

project, 40 C.F.R § 51.166(b)(21 (ii), and compares them to the

facility’s emissions after the project. This analysis, of course,

6

must occur before a project is undertaken, and so EPA, in

promulgating the regulation, had to develop some methodology

for estimating what actual emissions would be after the project.

EPA exercised its discretion and chose to define “actual

emissions” for a facility that had not begun “normal operations”

to be the facility’s “potential to emit” after the project. 40

C.F.R § 51.166(b)(21)(iv). The D.C. Circuit upheld EPA’s

decision to interpret the emissions increase test in this way in

New York v. Environmental Protection Agency, 413 F.3d 3, 18

(D.C. Cir. 2005).

This test is commonly known as the “actual to potential”

test, Pet. App. 57a, and it sweeps many sources into the PSD

program because of its inherent assumption that sources, after

making a modification, will operate “24 hours per day, 365

days per year.” Wisconsin Electric Power Co. v. Reilly, 893

F.2d 901, 916 (7th Cir. 1990). The Seventh Circuit, however,

rejected the application of this test, holding that if a power plant

is engaged in a “like-kind replacement,” then EPA cannot

properly say that the source making the modification has not

commenced normal operations. /d. (interpreting 40 C.F.R

§ 51.166(b)(21)(iv)).

After the Seventh Circuit’s 1990 ruling, EPA created a

special emissions increase test exclusively for power plants that

allows a plant owner to determine whether emission increases

* The regulations define “potential to emit” as: “the maximum capacity

of a stationary source to emit a pollutant under its physical and operational

design. Any physical or operational limitation on the capacity of the source

to emit a pollutant, including air pollution control equipment and restrictions

on hours of operation or on the type or amount of material combusted,

stored, or processed, shall be treated as part of its design if the limitation or

the effect it would have on emissions is federally enforceable. Secondary

emissions do not count in determining the potential to emit of a stationary

source.” 40 C.F.R § 51.166(b)(4).