Amicus Curiae Brief — Environmental Defense v. Duke Energy Corporation

Supreme Court of the Anited States

ENVIRONMENTAL DEFENSE, ET AL.,

Petitioners,

Vv.

DUKE ENERGY CORPORATION,

Respondent.

On Writ of Certiorari to the

United States Court of Appeals

for the Fourth Circuit

BRIEF OF ELECTRIC UTILITY INDUSTRY AS

AMICI CURIAE IN SUPPORT OF RESPONDENT

DUKE ENERGY CORPORATION

STEVEN G. MCKINNEY

MICHAEL D. FREEMAN

P. STEPHEN GIDIERE III *

BALCH & BINGHAM LLP

1901 Sixth Avenue North

Suite 2600

Birmingham, Alabama 35203

* Counsel of Record (205) 251-8100

Counsel for Amici Curiae American

Electric Power Company, Inc., Edison

Electric Institute, Southern Company,

September 15, 2006 and Utility Air Regulatory Group

_

WILSON-EPES PRINTING Co., lec. — (202) 789-0096 — WasHmcTon, D.C. 20001

TABLE OF CONTENTS

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INTERESTS OF AMICI CURTAE.......0ccc:eeseseeesesesesessees

SUMMARY OF THE ARGUMENT .............ccceeseeeeeees

EET Nee Dee ET TN

I.

II.

Il.

IV.

AIR QUALITY IS IMPROVING ................00000

“MODIFICATION” IS A TERM OF ART

WITH ONE MEANING UNDER THE

Se PU CUS iccnniecnnsicsvinticthicicinasinnnicinnbeeens

A. Congress Directed EPA to Use the Same

Definition of “Modification” Under NSR

EERSTE ELSE Restos aoe > Bt

B. Canons of Construction Support the Fourth

Ee PED icxiciutecnienintinittinmentintiisceninied

1. The Identical Term Maxim....................

2. The Presumption of Ratification............

CONGRESS INTENDED TO INCORPO-

RATE INTO NSR THE NSPS CONCEPT OF

ERNIE, ccreienicitsienitsitintnninetinabdennnanins

A. The Existing Regulatory Regime Supports

EE ALR Ty Sa

B. The Face of the Clean Air Act Supports

EIT: TEER Re Soe POPES

C. Contemporaneous EPA Action Supports

I ideitstcinnicinncisienpsiessitiiiteiniditiigstliniainie

THE STATUTE DOES NOT PROHIBIT AN

HOURLY RATE TEST FOR NSR AND

12

27

30

il

TABLE OF AUTHORITIES

CASES Page

Alabama Power Co. v. Costle, 636 F.2d 323

a RRs MUU Tiida stash ininitatilneihiaaiaal biting 23

Alaska Dep't of Envtl. Conservation v. Envitl.

Prot. Agency, 540 U.S. 461 (2004)... 4

ASARCO Inc. v. Envtl. Prot. Agency, 578 F.2d

ee etand Cl: Se ei cnncnichnitaeipascndanteinbeinacastbcieitinan 30

Atlantic Cleaners & Dyers v. United States, 286

Se ST I dicated inital itll ital tatliainsias 16

Bragdon v. Abbott, 524 U.S. 624 (1998)............... 18, 19

Chevron U.S.A., Inc. v. Natural Res. Def.

Council, 467 U.S. 837 (1984).................00cceeeeeee 14

Comm'n of Internal Revenue Serv. v. Keystone

Consol. Indus. Inc., 508 U.S. 150 (1993).......... 15, 18

Comm'n of Internal Revenue Serv. v. Lundy, 516

Ud Se EE bieciitariutthanbiatuneihtrinndnsietinateiiibacainasaii 14

Dep't of Hous. & Urban Dev. v. Rucker, 535

Ss I iain alin iaccnaetiiicilaatiatsilaaciaien 18

Dist. of Columbia v. Carter, 409 U.S. 362 (1973).... 16 .

Gen. Motors Corp. v. Tracy, 519 U.S. 278 (1997)... 2

Gen. Dynamics Land Sys., Inc. v. Cline, 540 U.S.

8 RE GEST RR ee NPAT OS ae 16

Goodyear Atomic Corp. v. Miller, 486 U.S. 174

1 EES ERE Caw eee ea Owe ee Meee eR eee 18

Gustafson v. Alloyd Co., Inc., 513 U.S. 561

RRR EEE Ren Aer A eNO ID or 15

Helvering v. Stockholms Enskilda Bank, 293 U.S.

Be crcintiseniincintedidintiiatednsitinsinapiuitimenmetintgegiciin 16

IBP, Inc. v. Alvarez, 126 S. Ct. 514 (2005)........... 15

Lorillard v. Pons, 434 U.S. 575 (1978)..............04 18, 26

Merrill Lynch, Pierce, Fenner & Smith, Inc. v.

Corn, S56 UB. FSe CBD Pecccccscesccescccccnsccsseees 18

Nat’! Labor Relations Bd. v. Bell Aerospace Co.,

I ic iniiha ita eicctldilicdiatitetinmeliat 25

iii

TABLE OF AUTHORITIES—Continued

Page

New York v. Envtl. Prot. Agency, 413 F.3d 3

icy Gam Cee icnidcnchpnninsnteuniicninenitetdenannienenens passim

Ratzlaf v. United States, 510 U.S. 135 (1994)....... 15

Robinson v. Shell Oil Co., 519 U.S. 337 (1997)..... 17

Sierra Club v. Georgia Power Co., 180 F.3d

Se CO le COO verpetarceeterncosammectstmnestoonnes 2

Sinclair Ref. Co. v. Atkinson, 370 U.S. 195

(1962), overruled in part on other grounds by

Boys Markets, Inc. v. Retail Clerks Union,

Local 770, 398 U.S. 235 (1970) ..........cceceereeeees 20

Sullivan v. Stroop, 496 U.S. 478 (1990)................ 15

Train v. Natural Resource Defense Council, Inc.,

SE ee I BOE crnedictserennnineeccsipasenitguceescasens 12

United States v. Alabama Power Co., No. 01-

0152, Order on United States’ Motion for

Clarification (N.D. Ala. Aug. 28, 2006)............ 16

United States v. Cinergy Corp., No. 06-1224 (7th

Sk : Be eR acriiicretcsiditnnticeni 10, 15, 16, 17

United States v. Giancola, 783 F.2d 1549 (11th

RE RS eT EEE ee ees Yee 12

United States v. Hartwell, 73 U.S. (6 Wall.) 385

FRESE PE ie FS DEST dar ae eae 8 14

United States v. Ohio Edison Co., 276 F. Supp.

ey Ie ED biiniiceticinttinsinctchtienentesine 4

Wachovia Bank v. Schmidt, 126 S. Ct. 941 (2006)... 16

STATUTES

a A I lta ctacnicircniat iil ta daidalih adits tialiniaaiaes 9

Se in UF SPIPEIED cininhcasthdusnihinticiicsbendiatinttivimadanneditsinendbe 7

ESE RTR S Seeaa 13

_ 4 ye nearer ee 13

A a 19

i 20

iv

TABLE OF AUTHORITIES—Continued

Page

ae aire Se Cte EE Aniscnescbintocecintcutdisiibiisieaaidha 13,17

og eM ey aw nw Sete 30

ee Ne Re ee 17

Se Ses Be PE deinteh tnctcccacesinibiigaiesnncinsiiinindtiiaindiaiie 25

RE eS Cee ae 25

Ee aise Te PE idtcinitisictnicanciapdlceingpasahenindaeinaniinn 25

Se Were OE PED chneconensnteeecocusertutsintsenintatenin 13

de Be Oi cicicenictnsccitiseensintsdbviinitedptndeatainins 25

ie as A SHEP scevvitseceesicicicinsiintiesnietntithiintiniinpinitidieats 7

SE Seiten: Sb. SUUIEE vicansitrntisertasscenisndintpstiilnehaha lanai hula 7

le Be Pe iitinicctncsassenchinsnevcentitlnieininesiidans 13, 28

te ers O FEED sticncinicencechiiniinibittityipiniedntitdetig 29

SE Cease Ue Fen ites cbsichetsccidantutintuipivapisiodectiniin 29

EE Sh aeey Ae FASE ee icicestnceveintnniptnintaidsiniee 29

ee ee | Le ee a

Ee Seereae EE IE wenntnctcbineinsutniiptnivtncintiitehicdetninteabiliad 10

Se as Be Pee iiinicniininisasetvisitivnsbiinaalientaladsiniliii 11

gS Ef ee a a ee 10

Pub. L. No. 95-190, 91 Stat. 1393 (1977) ............. 20

Pub. L. No. 101-549, 104 Stat. 2584 (1990) ......... 10

REGULATIONS

ar ee Be iecrerectnctecincntiniivhinniniiindain 23

Ge is BF Fe OE cence cca nntevintcininniciivnai 25

40 C.F.R. § 52.21(b)(7) (1974)...........cccccceceseesetenes 25

er te Se RD riteteesentepeitnrpencicnvininanaiintainl 21, 22, 24

PC is Be Oitehtnctevincenscrnncih thtcibittatstininipecilibie 19, 21, 22

Se te ie Ne ecocecnnsstccntcitnestnssctpintientninaninapine 21

SF GF ile OF I i ccnccceccvivintshntortenemntuininintentaniiins 30

N.Y. Comp. CopDEs R. & REGS. tit. 6, §§ 231-

edi kcsesicspitisennnniasaenaseciiieindninnintiibiaindnlddeiiailas 28

r~b Ws FE fh!) We aaee 28

rp, Me Tet) (| eee 28

Vv

TABLE OF AUTHORITIES—Continued

FEDERAL REGISTER Page

39 Fed. Reg. 36,946 (Oct. 15, 1974) ...........0.c0e 22, 28, 30

39 Fed. Reg. 42,510 (Dec. 5, 1974)..........ccccceeeeeeee 23, 24

40 Fed. Reg. 58,416 (Dec. 16, 1975)................. 19, 23, 30

43 Fed. Reg. 26,388 (June 19, 1978).................004. 26

49 Fed. Reg. 43,211 (Oct. 26, 1984) ..................... 27

57 Fed. Reg. 32,339 (July 21, 1992) ................c0008 30

63 Fed. Reg. 57,356 (Oct. 27, 1998) .............:0000 7,12

64. Fed. Reg. 35,713 (July 1, 1999) 00000. 7

68 Fed. Reg. 61,269 (Oct. 27, 2003) ..........ccccccceeee 12, 27

70 Fed. Reg. 25,162 (May 12, 2005)..................02. 7

70 Fed. Reg. 28,606 (May 18, 2005)...............00000 7,9

70 Fed. Reg. 39,104 (July 6, 2005) .................00002. 7

70 Fed. Reg. 61,081 (Oct. 20, 2005) ...............00000. passim

LEGISLATIVE MATERIALS

S. Rep. No. 95-127 (May 10, 1977) ..................000 3

S. Rep. No. 101-228 (1989), reprinted in 1990

ees AEE anciidinlintedsiennieccnnseecesensnes 10

H.R. Rep. No. 101-490 pt.1 (1990) ....................... 10

123 Cong. Rec. 36,252 (1977).........cseseseseceseceereeees 20

OTHER AUTHORITIES

Air Quality and Electricity: Enforcing New

Source Review, Larry B. Parker and John E.

Blodgett, CRS Resources, Science, and

Industry Division, RL30432 (Jan. 31, 2000),

available at ncseonline.org/nle/crsreports/air/

SEES Aas eee eae eae ee 6, 8

Department of Energy, Energy Information

Administration, Annual Energy Review 2005,

ayailable at www.cia.doe.gov/emeu/aer/pdf/

vi

TABLE OF AUTHORITIES——Continued

EEI Comments on 2005 Emission Increase Rule,

EPA-HQ-OAR-2005-0163-0122.1 (Feb. 17,

Nationa] Acid Precipitation Assessment Program

Report to Congress: An Integrated Assess-

ment, available at www.napap.noaa.gov/

SEED cccnmmrcnttariotensssnebingntnrmipiniptimmmpenieneeeene 8

NORMAN J. SINGER, STATUTES & STATUTORY

CONSTRUCTION § 53:01 (6th ed. 2000).............. 20

Regulatory Impact Analysis of the Clean Air

Interstate Rule: Final Report, 2060-AJ65 (Mar.

1, 2005), available at www.epa.gov/interstate

airquality/impact.htm#economiic .................2.+++- 8

Statement of Steve Johnson, Acting EPA

Administrator (Mar. 10, 2005), available at

www.epa.gov/interstateairquality/..................... 9

Testimony of William F. Tyndall, before the

Subcommittee on Clean Air, Wetlands, Private

Property, and Nuclear Safety, Committee on

Environmental Environment and Public Works,

United States Senate (Oct. 14, 1999), available

at epw.senate.gov/107th/tyn_1014.htm............... 8

U.S. Environmental Protection Agency, Air Emis-

sions Trends—Continued Progress Through

2005, available at www.epa.gov/airtrends/

2006/econ-emissions. Html .................ccecereeeeeeeeeees 7

INTERESTS OF AMICI CURIAE

This case is not just about one utility company. The theory

of the Clean Air Act advanced by Petitioners would subject a

large segment of the electric generating capacity in this

country—nearly 70% of it'—to costly, duplicative, and poten-

tially debilitating regulatory review requirements. And, de-

spite Petitioners’ rhetoric, such action is not necessary to

protect public health and the environment—the nation’s air

quality is improving and will continue to do so without accept-

ing Petitioners’ position on New Source Review (“NSR”).

This brief is filed by American Electric Power Company,

Inc. (“AEP”), Edison Electric Institute (“EEI”), Southern

Company, and Utility Air Regulatory Group (“UARG”) (col-

lectively, “Electric Utilities”)—entities with a vital interest in

both providing the nation with a reliable supply of electricity

and protecting and improving air quality.2, AEP and Southern

Company are two of the largest electric utility systems in the

United States. AEP owns nearly 36,000 megawatts of elec-

tric generating capacity and serves a 197,500 square-inile

service territory in Arkansas, Indiana, Kentucky, Louisiana,

Michigan, Ohio, Oklahoma, Tennessee, Texas, Virginia, and

West Virginia. Southern Company owns more than 40,000

megawatts of electric generating capacity and serves a

120,000 square-mile service territory in Alabama, Florida,

Georgia, and Mississippi. EEI is a trade association of United

States shareholder-owned electric utility companies, interna-

tional affiliates, and industry associates worldwide. UARG is

a non-profit, unincorporated trade association of individual

' About 50% of the nation’s electricity comes from coal-burning units

and about | 8% from natural gas units, all of which could be subject to these

requirements. See Department of Energy, Energy Information Administra-

tion, Annual Energy Review 2005, Table 8.2a, at 228, available at

www.cia.doe.gov/emeu/aer/pdf/aer.pdf (last accessed Sept. 11, 2006).

? All parties have consented to the filing of this brief. No person or

entity other than amici curiae made a monetary contribution to the prep-

aration or submission of this brief.

2

electric utilities located throughout the country and of related

industry trade associations.

Electric Utilities and their members operate steam electric

generating units that produce electricity for individuals, busi-

nesses, and government entities across the country. These

units are complicated machines consisting of thousands of

separate parts and components operated in an integrated

fashion to produce electricity. The failure of these parts—

from the smallest valve to the largest boiler components—can

result in unsafe and unreliable operation, including forced

(emergency) shutdown.

A reliable and affordable supply of electric power is

critical to public health and welfare.’ Utilities are under both

legal and practical obligations to maintain power plants and

equipment at optimum levels of reliability and efficiency. As

a result, the utility industry promptly repairs and replaces

deteriorating and broken components to assure an uninter-

rupted supply of electricity to the public.

Petitioners claim that repair and replacement activities, like

those Duke Energy did, are “major modifications” that trigger

NSR’s lengthy and burdensome permitting process solely

because they maintain the continued availability and relia-

bility of the units. That is not the law, and it is bad policy, too.

Congress enacted NSR—New Source Review*—to address

new emissions capacity, not to delay or to discourage

> See Gen. Motors Corp. v. Tracy, 519 U.S. 278, 306 (1997) (“[S)}tate

regulation of . . . sales to consumers serves important interests in health

and safety in fairly obvious ways, in that . . . individual buyers . . . are not

frozen out of their houses in the cold months.”); Sierra Club v. Georgia

Power Co., 180 F.3d 1309, 1311 (11th Cir. 1999) (“[A] steady supply of

electricity during the summer months, especially in the form of air

conditioning to the elderly, hospitals and day care centers, is critical.”).

* NSR is called Prevention of Significant Deterioration (“PSD”) in

areas that meet air quality standards and Non-attainment New Source

Review (“NNSR”) in areas that do not. For simplicity’s sake, this brief

uses the general term “NSR” except where a distinction is appropriate.

3

maintenance and repair work at existing units. Congress

explained in 1977 that NSR was being enacted in order to

create a “mechanism [ ] to assure that before new or expanded

facilities are permitted, a State demonstrate that these facil-

ities can be accommodated within its overall plan to provide

for attainment of air quality standards.” S. Rep. No. 95-127,

at 55 (May 10, 1977) (emphasis added).° To implement its

intent, Congress chose to use an existing term with an

established meaning—“modification”—to refer to the types

of activity that would subject an existing source to NSR.

That term meant at the time, and means today, a change that

increases a unit’s intrinsic capability to emit pollution (i.e., its

hourly emissions rate), not one that maintains the unit’s

ability to operate in the future as it was constructed and

permitted to do. The Fourth Circuit’s decision properly rec-

ognizes this distinction.

Not only does Petitioners’ theory fly in the face of congres-

sional intent, it makes no practical sense. Because existing

facilities are extensively regulated under the Clean Ai: Act

apart from NSR, and given the myriad factors that affect how

an existing facility is operated (including customer demand,

economic factors, weather, the availability of other units, grid

congestion, and fuel costs), EPA has never defined “modifi-

- cation” based on variations in hours of operation within

permitted capacity. Petitioners’ focus on hours of operation

thus ignores the practical reality of running a complex,

integrated electric generating and transmission system.

Further, Petitioners’ theory would have potentially debili-

tating effects on a significant portion of the nation’s electric

generating capacity. The activities being challenged by

Petitioners are performed every year at power plants—both

* This 1977 Senate Report used the term “expanded” synonymously

with “modified” in its discussion of the NNSR provisions of the reported

bill—Senate Bill 252, § 13-—-which required pre-construction review for

newly “constructed or modified” major emitting facilities.

4

old and new—across the country. Because NSR is a pre-

construction permitting program (i.e, a covered activity

cannot be undertaken until a permit is obtained) and one

round of permitting can last for years,° critical energy facil-

ities would either be shut down or in a state of perpetual

permitting if Petitioners had their way.’ Congress clearly did

not intend to condition the reliability of the country’s electric-

ity supply on a multi-year, overlapping permitting process.

SUMMARY OF THE ARGUMENT

I. The electric utility industry has invested and will

continue to invest billions of dollars to decrease air emissions

from existing power plants and to comply with non-NSR

provisions of the Clean Air Act. This investment has paid

off—air emissions in this country have decreased dramat-

ically and air quality has improved. Foisting Petitioners’

theory of NSR onto existing sources is unnecessary to con-

tinue these improvements and would, in fact, be counter-

productive. NSR is a program for controlling emissions

growth from new sources. It is an inefficient mechanism

for achieving significant emission reductions from existing

sources.

II. Congress expressly directed that the term “modifi-

cation” mean the same under NSR as under the existing New

Source Performance Standards (“NSPS”) program. In doing

so, Congress focused NSR on “new” or “expanded” facilities,

not existing ones that do not increase their constructed and

permitted capacity to emit pollution. Given Congress’ clear

direction, EPA is prohibited from interpreting “modification”

® Just the NSR permitting process itself (not the work) can take years

and cost hundreds of thousands of dollars. See Alaska Dep't of Envii.

Conservation v. Envil. Prot. Agency, 540 U.S. 461, 516-17 (2004)

(Kennedy, J., dissenting).

’ The sheer number of allegations made against the industry proves this

point. For example, in United States v. Ohio Edison Co., the government

alleged that a single plant should have applied for eleven NSR permits in

a fourteen-year span. 276 F. Supp. 2d 829, 823-33 (S.D. Ohio 2003).

5

differently for the two programs. The Fourth Circuit’s

decision to this effect thus follows the plain language of the

statute and, in addition, is supported by well-established

canons of statutory construction. Because Congressional

intent here is clear, that is the end of the matter.

III. All of Petitioners’ arguments to the contrary easily

yield upon scrutiny. For example, Petitioners’ argument that

Congress could not have intended to incorporate the NSPS

regulatory definition of “modification” into the statutory NSR

provisions is based on a misreading of the regulatory and

legislative record. Specifically, in 1977 there was but one

single meaning of “modification” under the NSPS and the

NSR rules in force at the time: it was (and is) a change that

increases a facility’s maximum emissions rate, unaffected by

hours of operation. The unique backdrop of the 1977

amendments—where Congress had before it EPA’s existing

NSR regulatory program and reviewed it provision by

provision, adopting some and changing others—provides

irrefutable evidence of Congress’ intent. Under the statuiory

NSR program, Congress wanted “modification” to mean the

same as under those pre-existing EPA rules. This conclusion

is confirmed by EPA’s own contemporaneous interpretation

of the statute, as set forth in the very first NSR rules enacted

after the 1977 amendments—an interpretation that EPA has

reaffirmed over the years.

IV. Finally, contrary to Petitioners’ claim, the hourly rate

test used to trigger both NSPS and NSR is based on “actual”

emissions, as EPA has explained. More fundamentally, that

test has been in the NSPS rules for thirty-five years. To

suggest now, as do Petitioners, that the NSR rules cannot use

the same test for “modification” as NSPS, when the statute

plainly requires the same definition of that term in NSR as in

NSPS, defies common sense.

6

ARGUMENT

1. AIR QUALITY IS IMPROVING

Despite the rhetoric of Petitioners and their supporters,®

reversal of the Fourth Circuit is not the sine qua non to

decreasing emissions and improving the nation’s air quality.

Irrespective of the outcome here, the trend of decreased

emissions and improved air quality that has occurred over

the past three decades will continue apace. As EPA has

acknowledged, NSR is not intended as a driver for decreasing

emissions from existing sources:

[T]he primary purpose of the major NSR program is not

to reduce emissions, but to balance the need for

environmental protection and economic growth. That is,

the goal of major NSR is to minimize emissions in-

creases from new source growth.

70 Fed. Reg. 61,081, 61,088/1 (Oct. 20, 2005) (emphasis

added). EPA is not alone in this view. Prior to this suit, the

Congressional Research Service explained that NSR was not

aimed at emission reductions from existing sources, nor is it

an effective means of achieving such reductions.”

® See, e.g., Pet. Br. at 26 (claiming the Fourth Circuit “immunized”

modernization projects from review, to the determent of local air quality),

New York Br. at 3 (claiming the Fourth Circuit’s decision will have “dire

ramifications” to public health); STAPPA & ALAPCO Br. at 5 (asserting

the Fourth Circuit’s decision will “exempt all . . . existing industrial

sources” from installing modern pollution controls).

* See Air Quality and Electricity: Enforcing New Source Review, Larry

B. Parker and John E. Blodgett, CRS Resources, Science, and Industry

Division, RL30432 (Jan. 31, 2000), available at ncseonline.org/nle/

crsreports/air/air-35.cfm (last accessed Sept. 11, 2006) [hereinafter CRS

Report} (“NSR was one approach that the Clean Air Act took to control

emissions from existing sources, but arguably more efficient and more

effective methods to ensure declining emissions from existing sources

over time have been developed since NSR provisions were added to the

CAA in 1977. For example, title IV of the CAA, enacted in 1990,

explicitly and substantially reduces SO2, and NO, emissions from existing

utility plants. . . . The ‘cap and trade’ program has had 100% compliance

7

Simply put, NSR is not, and was never intended to be, an

emissions reduction program; it is a growth management

program. Substantial emission reductions have been and will

continue to be achieved by subjecting existing sources (like

Duke Energy’s) to a host of other non-NSR Clean Air Act

programs, including: state implementation plans that are

specifically designed to meet or exceed federal air quality

standards, 42 U.S.C. § 7410; visibility protection programs,

id. §§ 7491-92;'° the Title IV Acid Rain Program, id. §§

7651-76510; regional NO, trading programs (“NO, SIP

call”), 63 Fed. Reg. 57,356 (Oct. 27, 1998); the Clean Air

Mercury Rule (““CAMR”), 70 Fed. Reg. 28,606 (May 18,

2005); and the Clean Air Interstate Rule (“CAIR”), 70 Fed.

Reg. 25,162 (May 12, 2005)—all of which are more efficient

at reducing emissions and improving air quality than NSR.

See 70 Fed. Reg. at 61,083/2 (describing “the substantial

emissions reductions from other CAA requirements that are

more efficient than major NSR”). These are the programs

that effectively control emissions from existing sources yet

Petitioners act as if they do not exist.

These non-NSR programs are working. Under them, the

utility industry has dramatically reduced emissions, while at

the same time satisfying the steadily increasing American

appetite for electricity. Recently, EPA documented this prog-

ress in a report entitled “Air Emissions Trends—Continued

Progress Through 2005.” According to EPA’s findings, since

1970, air emissions have decreased 53%. At the same time,

the country’s gross domestic product has risen 195%, and

energy consumption has increased 48%.'' EPA recognizes

(indeed, substantial over-compliance); the implicit logic of EPA’s law-

suits suggests NSR’s compliance has been near zero.”).

'° See also 64 Fed. Reg. 35,713 (July 1, 1999) (Regional Haze Regu-

lations); 70 Fed. Reg. 39,104 (July 6, 2005) (Clean Air Visibility Rule).

'' U.S. Environmental Protection Agency, Air Emissions Trends—

Continued Progress Through 2005, www.epa.gov/airtrends/2006/econ-

emissions.html (last accessed Sept. 11, 2006).

that the “reductions in national emissions for the utility sector

are especially significant considering that national capacity

continues to increase.” 70 Fed. Reg. at 61,087. Going

forward, the utility industry is on track to reduce its emission

rates by about 90% (compared to 1980) upon implementation

of CAIR, CAMR, and the Clean Air Visibility Rule.'? The

fact is, the nation’s air is getting cleaner—and it has nothing

to do with NSR. See CRS Report (“[T]itle [V reduced more

SO, emissions from coal-fired electric generating facilities in

its first year of implementation (1995) than NSR has in its 20

years of existence.”).

_ These reductions have not come without a price. The

utility industry has invested tens of billions of dollars in

advanced, state-of-the-art air pollution control technologies

over the past thirty years. For example, between 1976 and

1996, electric utilities spent over $32 billion for air pollution

control equipment.'? The utility industry continues to spend

billions of dollars just to comply with the Acid Rain

Program.'* The annual costs to comply with CAIR alone are

projected to be $2.9 billion by 2010 and $3.7 billion by

2015.'° EPA estimates the annual costs of CAMR to the

'2 See EEl Comments on 2005 Emission Increase Rule, EPA-HQ-

OAR-2005-0163-0122.1 (Feb. 17, 2006).

'S See Testimony of William F. Tyndall, before the Subcommittee on

Clean Air, Wetlands, Private Property, and Nuclear Safety, Committee on

Environmental Environment and Public Works, United States Senate

(Oct. 14, 1999), available at epw.senate.gov/107th/tyn_1014.htm (last

accessed Sept. 11, 2006). ,

'4 See National Acid Precipitation Assessment Program Report to

Congress: An Integrated Assessment, at 13, available at www.

. Napap.noaa.gov/reports (last accessed Sept. | 1, 2006).

'S See Regulatory Impact Analysis of the Clean Air Interstate Rule:

Final Report, 2060-AJ65 (Mar. 1, 2005), available at www.epa.gov/

interstateairquality/impact.htm#economic (last accessed Sept. 1 1, 2006).

9

power industry to be $160 million in 2010, $100 million in

2015, and $750 million in 2020. '°

Importantly, this lawsuit and others like it primarily

involve plants located in areas that are in attainment for

regulated pollutants—i.e., where air quality m.cets or exceeds

the National Ambient Air Quality Standards (“NAAQS”) set

by EPA to protect public health and the environment.'’ Not

only will the air quality in these areas be protected and

improved by existing non-NSR regulatory programs, but the

air quality in non-attainment areas will as well. For example,

in 1998, EPA promulgated rules (known as the “NO, SIP

Call”) that required twenty-one states in the eastern United

States (including North and South Carolina where Duke

operates) to reduce NO, emissions that contributed to non-

attainment in downwind states. The NO, SIP Call has

resulted in the installation of a large number of selective

catalytic reduction devices (“SCRs”) on existing coal-fired

boilers. See 70 Fed. Reg. at 61,084/2. Further, in May 2005,

EPA promulgated CAIR to reduce interstate transport o1 ooth

SO, and NO,. CAIR, according to EPA, “will result in the

largest pollution reductions and health benefits of any air rule

in more than a decade.”'® CAIR does so by establishing

statewide emission reduction requirements for SO: and NO,

in the eastern United States, which EPA expects to be

achieved through the installation of scrubbers and SCRs on

many existing sources. See id. at 61,085/2. EPA estimates

CAIR will result in emissions reductions from these sources

'® See 70 Fed. Reg. at 28,639.

'” And, if EPA ever concludes that the existing NAAQS are inadequate

to protect human health, it has the power and obligation to revise them

through rulemaking. See 42 U.S.C. § 7409.

'* Statement of Steve Johnson, Acting EPA Administrator (Mar. 10,

2005), available at www.epa.gov/interstateairquality/ (last accessed Sept.

11, 2006).

10

of roughly 73 percent for SO2 and 61 percent for NO, from

2003 levels.'°

The circumstances surrounding Congress’ adoption of just

-one of these non-NSR programs—the Acid Rain Program—

solidifies the fact that Congress never envisioned NSR as a

driver for the kind of significant emissions reductions

Petitioners say it must produce. The Acid Rain Program was

added to the Clean Air Act in 1990, more than a decade after

Congress passed NSR in 1977. Pub. L. No. 101-549, 104

Stat. 2584 (codified at 42 U.S.C. §§ 7651-76510). The stated

purpose of the legislation was to require significant emissions

reductions from existing coal-fired power plants, the so-called

“grandfathered” units. See 42 U.S.C. § 7651. \» Congress

referenced many of these units by name and established in the

statute new emissions limits reflecting a fundamental premise

that existing permitting requirements (i.e., NSR) could not be

expected to achieve the desired emissions reductions. /d.

§ 765lic. In fact, EPA itself told Congress that new legis-

lation was needed to deal with existing sources:

Some have suggested that the existing law is adequate to

deal with interstate air pollution. The most persuasive

argument that it is not, is the EPA’s own analysis of the

options available under existing law.

S. Rep. No. 101-228, at 288-89 (1989), reprinted in 1990

U.S.C.C.A.N. 3672-73 (emphasis added); see also H.R. Rep.

No. 101-490 pt.1 at 362-64 (1990).”° Following EPA’s advice,

'? See 70 Fed. Reg. at 61,085/2-3.

?° In United States v. Cinergy Corp., No. 06-1224, slip op. at 5 (7th Cir.

Aug. 17, 2006), the Seventh Circuit said, without any citation, that “there

is an expectation that old plants will wear out and be replaced by new

ones that will be subject” to more stringent new source controls. The lack

of citation is not surprising, given that nothing in the statutory language

indicates such an “expectation.” If there is any “expectation” reflected in

the statute, it is that Congress thought that something other than NSR was

required to mitigate acid-rain forming pollutants because the law does not

require existing plants to retire at any particular age.

11

Congress enacted Title IV to make specific power plants

(including the very ones at issue here) reduce SO) emissions

by 10 million tons per year and NO, emissions by 2 million

tons per year from 1980 levels. See 42 U.S.C. § 7651(b).

It is against this backdrop that Petitioners argue Congress

intended some radically new and different meaning be given

the term “modification” when it enacted NSR in 1977 that

would cure the nation’s alleged air quality woes. Forget for a

moment that Congress said explicitly in the statute that

“modification” was to mean the same as it always had under

the Clean Air Act (discussed below)—Petitioners’ propo-

sition does not square with the monumental efforts that

Congress, EPA, and the utility industry have undertaken to

reduce emissions from existing sources. Petitioners would

have this Court believe, for example, that at the same time

Congress enacted Title IV in 1990 (to achieve reductions

from power plants that existing law was not “adequate to deal

with”), both EPA and Congress knew that these same plants

should have been “un-grandfathered” under the NSR “r. udi-

fication” rule the first time a repair was made to maintain

reliability, and then repeatedly with every subsequent repair.

Their claim simply does not comport with the facts—or

common sensc.

Title IV and the other non-NSR programs are doing exactly

what EPA and Congress intended—dramatically reducing

emissions from existing sources. This progress should be

allowed to continue without disruption. Petitioners’ view of

the Clean Air Act would, as a practical matter, elevate NSR

above these other more effective and efficient programs.

What was intended as a mechanism to control emissions

growth from new sources, would, under Petitioners’ view, be

a dominant driver of emissions reductions from existing

sources. Given its lengthy and costly permitting process and

the realities of electricity generation, supra at 1-4, NSR is

ill-suited to this task.

12

This is the crux of the dispute here between the parties.

Under Petitioners’ interpretation, Congress enacted the ulti-

mate command-and-control program in 1977. Under their

view of NSR, every existing electric generating unit should

have long ago shut down or installed new source emissions

controls, regardless of cost or whether such controls are even

needed to meet or maintain EPA-established air quality

standards. This is utterly incompatible with the major policy

decisions that Congress and EPA have made for controlling

utility industry emissions—namely, controls as determined by

the states to meet local air quality concerns, see Train v.

Natural Resource Defense Council, Inc., 421 U.S. 60 (1975),

and market-based cap-and-trade programs to address broader

regional and national concerns, see, e.g., 42 U.S.C. §§ 7651-

76510; 63 Fed. Reg. at 57,356. Petitioners’ argument should

be rejected because, as EPA put it, an interpretation of the

modification provision under which “all major facilities

eventually trigger NSR . . . cannot be squared with the plain

language of the CAA.” 68 Fed. Reg. 61,269, 61,273/2

(Oct. 27, 2003).

ll. “MODIFICATION” IS A TERM OF ART WITH

ONE MEANING UNDER THE CLEAN AIR ACT

The Fourth Circuit properly concluded that Congress in-

tended NSR and NSPS to share a common definition of

“modification” and that EPA must interpret its NSR regu-

lations accordingly.”'

2! As the Fourth Circuit and the district court explained, EPA’s NSR

rules were, contemporaneously with their promulgation, interpreted con-

sistent with the existing NSPS rules. Pet. App. [5a n.7. It is, therefore,

not a matter of the rules’ validity, but of their interpretation consistent

with congressional intent. See United States v. Giancola, 783 F.2d 1549,

1552 (11th Cir. 1986) (“[Courts] do not construe a regulation in a man

ner that would place it in conflict with the statute by which it is authorized

ey

13

A. Congress Directed EPA to Use the Same

Definition of “Modification” Under NSR as

Under NSPS

There is but one statutory definition of “modification” for

all of the Clean Air Act’s new source programs.

The term “modification” means 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.

42 U.S.C. § 7411(aX(4). This definition was formulated by

Congress in 1970 when it enacted the first of the new source

programs under the Clean Air Act—the New Source Per-

formance Standards or “NSPS.” It is the only definition of

“modification” Congress has ever written for the statute’s

new source programs. From the beginning, this single defi-

nition has applied as a trigger both to the NSPS technology-

based standards and new source review, both of which were

required in the 1970 amendments (Petitioners conven:.ntly

ignore this latter point). See id. §§ 7410(a)(2)(D), (a)(4)

(1970) (establishing a program for the review of the location

of new sources, prior to their “construction or modification”).

The 1977 amendments continued to use this single term and

definition to trigger both the control technology and pre-

construction review portions of the new source programs.

When it enacted the statutory NSR program in 1977,

Congress did not rewrite the definition of “modification” or

change it in any way to reflect any different goals or pur-

poses. Nor did Congress simply repeat the statutory NSPS

definition of “modification” in the new NSR provisions.

Instead, Congress made the deliberate choice to cross-

reference and incorporate the existing definition of “modi-

fication” and specified that the term shall have but one

meaning. Id. § 7479(2)(C) (“The term ‘construction’ .. .

includes the modification (as defined in section 741 1(a)

... +); id. § 7501(4) (“The terms ‘modifications’ and ‘modi-

14

fied’ mean the same as the term ‘modification’ as used in

section 741 1(a)(4) of this title.”’).

The text of the Clean Air Act is clear and unambiguous:

“modification” for NSR is the same as defined for NSPS.

Canons of construction are not necessary to discern this

intent—the plain language is enough. See United States v.

Hartwell, 73 U.S. (6 Wall.) 385, 396 (1867) (“If the language

be clear it is conclusive. There can be no construction where

there is nothing to construe.”).

This case is thus altogether different from the typical

“identical term” case (on which the Petitioners and United

States focus), given that Congress directed that the same

meaning and usage of “modification” apply in NSR as in

NSPS. In other words, Congress made a deliberate textual

choice not “to spill more ink,” neither redefining “modifi-

cation” nor even repeating the same definition in NSR. That

choice must be given effect. The Fourth Circuit recognized

this when it held that the presumption of uniform usage was, in

this particular case, “effectively irrebutable.” Pet. App. at 17a.

B. Canons of Construction Support the Fourth

Circuit’s Decision

In determining Congress’ intent, reviewing courts may

employ, when necessary, traditional tools of statutory con-

struction. Chevron U.S.A., Inc. v. Natural Res. Def. Council,

467 U.S. 837, 843 n.9 (1984). Here, it is not necessary to

resort to any canons of construction or “presumptions” to

discern Congress’ intent. Congress said “modification” shall

mean that same under NSR as under NSPS—-period. But if

the Court were to employ such canons, it would find that

they, too, support the Fourth’s Circuit’s decision.

1. The Identical Term Maxim

It is a general rule of statutory construction that “identical

words used in different parts of the same act are intended to

have the same meaning.” Comm’n of Internal Revenue Serv. v.

Lundy, 516 U.S. 235, 250 (1996). This Court regularly relies

15

on this maxim to give words uniform meaning across a statute.

See, e.g. id. at 249-50 (giving the term “claim” a con-

sistent meaning under 28 U.S.C. §§ 6511 and 6512); Gustafson

v. Alloyd Co., Inc., 513 U.S. 561, 570 (1995) (construing

“prospectus” as having identical meaning under § 10 and § 12

of the Securities Act of 1933); Comm'n of Internal Revenue

Serv. v. Keystone Consol. Indus. Inc., 508 U.S. 150, 159 (1993)

(giving the term “sale or exchange” identical meaning under

different provisions of the Internal Revenue Code).

Thus, even if this were simply a case where Congress had

repeated the word “modification” in different parts of the

statute, or repeated the operative words in the definition of

“modification” elsewhere without further direction, the pre-

sumption would be in favor of identical meaning. But, this

case involves much more than simply the “same word” used

in two parts of the same statute.

Here, there is but a single formulation of the definition

of “modification,” making the case for identical meaning

stronger. Ratzlaf v. United States, 510 U.S. 135, 143 (19 4)

(“A term appearing in several places in a statutory text is

generally read the same way each time it appears. We have

even stronger cause to construe a single formulation . . . the

same way each time it is called into play.” (citations

omitted)). Further, there is a definitional cross-reference be-

tween two sections of the same Act, which heightens the

presumption of identical meaning. See /BP, Inc. v. Alvarez,

126 S. Ct. 514, 523-24 (2005) (recognizing heightened

presumption of identical meaning where term “principal

activities” explicitly referenced in separate section of the

Act); Sullivan v. Stroop, 496 U.S. 478, 484 (1990) (giving

uniform meaning to term “child support” in two sections of

same Act which cross-reference each other).

Nonetheless, Petitioners and the United States insist on

treating this case as a simple “identical term” case. Pet. Br. at

44-45; U.S. Br. at 39-46. The Seventh Circuit makes the

same mistake. Cinergy Corp., slip op. at 7-9. They do so in

16

order to invoke the caveat that “the same word might well be

used in one sense in one part of a statute and another sense in

another.” E.g., id. at 8. The cases they rely on, however, are

inapposite as none of them involve an express cross-reference

to a single definitional formulation as is the case here. See

Wachovia Bank v. Schmidt, 126 8. Ct. 941 (2006) (conclud-

ing that the undefined word “located,” for purposes of

national banks, was properly interpreted differently in venue

statute than in subject-matter jurisdiction statute); Gen.

Dynamics Land Sys., Inc. v. Cline, 540 U.S. 581 (2004)

(concluding that undefined word “age” could be interpreted

differently under different provisions of ADEA); Dist. of

Columbia v. Carter, 409 U.S. 362 (1973) (concluding that

whether District of Columbia included as a “state or territory”

depended upon particular statute at issue); Helvering v.

Stockholms Enskilda Bank, 293 U.S. 84 (1934) (concluding

that undefined word “obligations” could have different scope

in different sections of the Revenue Act of 1926).”7 The

present case stands apart from these typical “identical term”

cases because Congress has directly spoken to the issue. As

succinctly explained by one federal district court faced

recently with this very issue: “{Although] [t]he same word

can mean different things in the same statute[,}] when Con-

gress says the word is to be defined in the new part of the

statute as it was defined in the existing part of the statute,

that’s not vague. . . . Congress meant what it said, and a

reviewing court . . . should not substitute[] the agency’s

judgment for Congress’s.” United States v. Alabama Power

Co., No. 01-0152, Order on United States’ Motion for

Clarification, at 6-7 n.7 (N.D. Ala. Aug. 28, 2006).

22 This case is also not one where “the scope of the legislative power

exercised in one [section] is broader than that exercised in another,” so as

to justify different meaning as in Atlantic Cleaners & Dyers v. United

States, 286 U.S. 427, 433 (1932).

|

17

Further, none of the Fourth Circuit’s critics bother to explain

| how it is that Congress used “modification” in “one sense” in

NSPS and “another sense” in NSR, as they claim did it. See

Cinergy Corp., slip op. at 8. To the contrary, Congress used

“modification” in only one “sense”—viz. the “sense” in section

7411(a)(4), which it directed to be used for all subsequent new

source programs. This is, therefore, not a case where the

surrounding text or circumstances demand or even allow for a

different meaning, as in Robinson v. Shell Oil Co., 519 U.S.

337 (1997). In that case, the Court determined that the term

“employees,” defined generally under Title VII as “an

individual employed by an employer,” was broad enough to

include both current and former employees depending upon the

specific provision of Title VII using the term. As the Court

explained, “Insofar as § 704(a) expressly protects employees

from retaliation for filing a ‘charge’ under Title VII, and a

charge under § 703(a) alleging unlawful discharge would

necessarily be brought by a former employee, it is far more

consistent to include former employees within the scope ~f

‘employees’ protected by § 704(a).” Jd. at 345. There is no

such context in the present case that would warrant or permit

giving “modification” different meanings.

The only text of the statute identified by the United States

as supporting different meanings is the opening “Congres-

sional declaration of purpose” for the PSD provisions of NSR

found at 42 U.S.C. § 7470. U.S. Br. at 46-47. But this

general “goals and purposes” language is a far cry from the

sort of explicit statutory context that would be necessary to

overcome Congress’ specific direction that “modification”

mean the same in NSR as in NSPS. In fact, the United States

does not even try to explain how interpreting “modification”

the same for NSR as for NSPS would frustrate any goals or

purposes, like restricting the term “employees” to only

current employees would have done in Robinson. See id. at

47. The truth is that EPA does not believe it would—as

evidenced by its recent proposed action to clearly bring the

18

emissions rate tests for NSR into conformity with NSPS. See

70 Fed. Reg. at 61,083/1 (“The proposed regulations would

establish a uniform emissions test nationally under the NSPS

and NSR programs. ... We also do not believe the outcomes

produced by the approach we have been taking [i.e., in the

NSR enforcement initiative] have significant environmental

benefits compared with the approach we are proposing

today.”). Indeed, if NSR’s air quality purposes can be

achieved only by defining “modification” differently under

the two programs, it would have been odd, to say the least,

for Congress to have evinced such intent by explicitly

directing that “modification” under NSR is “as defined in”

and “the same as” NSPS.

2. The Presumption of Ratification

The presumption of ratification also supports the Fourth

Circuit’s decision. That canon of construction provides that

Congress is presumptively aware of an existing regulatory

definition of a term and is presumed to ratify that definition

when adopting the same term in subsequent legislation. See

Bragdon v. Abbott, 524 U.S. 624, 631 (1998).

The presumption of ratification is a fundamental canon of

construction often used in conjunction with canons regarding

identical meaning. See, e.g., Keystone Consol. Indus., 508

U.S. at 158-59. Congress is presumed to be aware of existing

statutory and regulatory law at the time it enacts new legis-

lation. Dep't of Hous. & Urban Dev. v. Rucker, 535 U.S.

125, 133 n.4 (2002) (Congress presumed to be aware of

HUD’s existing interpretation of statutory term); Goodyear

Atomic Corp. v. Miller, 486 U.S. 174, 184-85 (1988) (“We

generally presume that-Congress is knowledgeable about

existing law pertinent to the legislation it enacts.”). And,

when “Congress adopts a new law incorporating sections of a

prior law, Congress normally can be presumed to have had

knowledge of the interpretation given to the incorporated law

....” Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Curran,

456 U.S. 353, 382 n.66 (1982); Lorillard v. Pons, 434 U.S.

19

575, 581-82 (1978). It thus follows that “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.” Bragdon, 524

U.S. at 631.

The case for ratification here is compelling. At the time

Congress cross-referenced and incorporated into NSR the

existing definition of “modification” in section 7411 of the

statute, EPA had already established a definition of the

term—not simply for the NSPS rules—but for section 7411

of the Clean Air Act in general. EPA’s rules provided (and

still provide): }

(a) Except as provided under paragraphs (e) and (f) of

this section, any physical or operational change to an

existing facility which results in an increase in the

emission rate to the atmosphere of any pollutant to

which a standard applies shall be considered a modi-

fication within the meaning of section 111 of the Act [42

U.S.C. § 7411]....

(b) Emission rate shall be expressed as kg/hr of any

pollutant discharged into the atmosphere for which a

standard is applicable. . . .

40 C.F.R. § 60.14 (emphasis added); 40 Fed. Reg. 58,416,

58,419/1 (Dec. 16, 1975). Congress is thus presumed not

simply to know what EPA said “modification” means under

the NSPS rules, but also what EPA had determined

“modification” meant for section 7411 of the Clean Air Act—

specifically, an activity that increases the unit’s emission rate

in terms of kilograms per hour (i.e., its emission rate, unaf-

fected by operating hours). Against this backdrop, Congress

specifically cross-referenced and incorporated section 7411’s

definition of “modification” into NSR. This is above and

beyond “repetition of a well-established term,” which alone

would have been sufficient for congressional ratification.

The statute and the legislative record confirm, not con-

tradict, ratification in this case. As EPA concedes, one need

20

look no further than the statutory language to see that, when

Congress enacted NSR in 1977, it was well aware of the

existing new source regulatory programs, which defined

“modification” consistently for NSR and NSPS. See infra at

24-25. Further, Congress added “modification” to the list of

construction activity that could trigger NSR_ permitting

through a “technical and conforming” amendment some three

months after the principal 1977 amendments were enacted.

Pub. L. No. 95-190, 91 Stat. 1393, 1399 (1977). As Congress

explained in the legislative history of those technical and

conforming amendments: “It’s not the purpose of these

amendments to re-open substantive issues in the Clean Air

Act.” 123 Cong. Rec. 36,252 (1977). Instead, by its action,

Congress intended to “conform” the NSR definition of

modification to its “usage in other parts of the Act.” /d. at

36,331. The only “usage” at the time was that found in

section 7411(a), which EPA had interpreted in 40 C.F.R. §

60.14 and elsewhere to mean an increase in emission rate

unaffected by hours of operation.

Thus, rather than reinventing the wheel, Congress simply

incorporated an existing term and its usage into NSR. As the

Fourth Circuit held, this action “indicates congressional

concern with the same sort of simplicity and consistency that

the Rowan Court discerned from the legislative history

examined there.” Pet. App. at 15a. Congress’ deliberate

choice in this regard must be given effect. See Sinclair Ref.

Co. v. Atkinson, 370 U.S. 195, 215 (1962) (Black, J.) (“In

dealing with problems of interpretation and application of

federal statutes, we have no power to change deliberate

choices of legislative policy that Congress has made within

its constitutional powers. Where congressional intent is

discernible . . . we must give effect to that intent.”), overruled

in part on other grounds by Boys Markets, Inc. v. Retail

Clerks Union, Local 770, 398 U.S. 235 (1970); see also

NorRMAN J. SINGER, STATUTES & STATUTORY CONSTRUCTION

§ 53:01, at 322-23 (6th ed. 2000) (“Written law is the product

21

of a more specific structure involving deliberate choice. . . .

Harmony and consistency are positive values in a legal

system because they serve the interests of impartiality and

minimize arbitrariness. Construing statutes by reference to

others advances those values.”).

lil. CONGRESS INTENDED TO INCORPORATE

INTO NSR THE NSPS CONCEPT OF

“MODIFICATION”

Petitioners claim “there is [no] evidence” to support the

conclusion that Congress intended to incorporate into the

1977 amendments the meaning of “modification” as that term

had been implemented by EPA in the existing NSPS and NSR

rules. Pet. Br. at 45 & n.34. They are mistaken.

A. The Existing Regulatory Regime Supports

Incorporation

Petitioners’ argument against incorporation relies heavily

on the D.C. Circuit’s opinion in New York v. Environmental

Protection Agency, 413 F.3d 3 (D.C. Cir. 2005). The D.C.

Circuit’s conclusion in that case that the “proposition [in

Bragdon| does industry little good here,” however, is based

on two fundamental misperceptions: 1) “the NSPS regula-

tions adopted in 1975 and in force at the time of the 1977

CAA Amendments” contained “two different (and possibly

inconsistent) definitions of modification” and 2) “the regula-

tory definitions in the NSPS and PSD programs already

differed at the time of the 1977 amendments.” /d. at 19.

These two assumptions by the court are demonstrably wrong.

First, the NSPS rules in force in 1977 did not contain

“possibly inconsistent{] definitions of modification.” The

basis for this erroneous perception was that, as of 1977, 40

C.F.R. § 60.2(h) contained a general definition that tracked

the statutory definition, whereas 40 C.F.R. § 60.14 provided a

more detailed and specific definition. The court found it

particularly significant that § 60.14(b) specified that “emis-

22

sion rate” was to be “expressed as kg/hr of any pollutant

discharged into the atmosphere,” whereas § 60.2(h) contained

no such provision. /d at 19-20. According to the court,

“neither the 1975 regulation nor its preamble explained” what

the court termed “two separate glosses on” the term “modi-

fication.” /d. at 12.

To the contrary, EPA gave such an explanation when it

proposed § 60.14 in 1974, stating that the term “modifi-

cation” as “defined in [section 7411(a)(4)] of the Act as well

as in 40 C.F.R. 60.2(h)” included “several terms and phrases”

that were “not fully understood outside the Agency.” See 39

Fed. Reg. 36,946, 36,946/2 (Oct. 15, 1974) (emphasis added).

The purpose of the revisions, EPA said, was to “resolve any

confusion that may exist as to what constitutes a modifica-

tion,” id.—that is, simply to clarify these “terms and phrases”

in § 60.2(h).

In particular, EPA explained at considerable length that the

rationale behind paragraph (b) of § 60.14 was to “clarify the

phrase in the definition of modification ‘increases the amount

of any air pollutant.’” /d. at 36,946/3. In this respect, EPA

noted, the “units kg/hr automatically allow increases in

operating hours as intended by one of the existing exemptions

under 40 C.F.R. 60.2(h).” Jd. at 36,947/1 (emphasis added).

In other words, according to EPA, the existing exclusion for

increased “hours of operation” meant, by definition, that only

a project that increased a source’s hourly emission rate could

constitute an NSPS modification.

Thus, as explained by EPA, the provisions of § 60.2(h) and

§ 60.14 have from their inception existed in complete har-

mony with each other and do not in any way represent “two

separate glosses” on “modification.” EPA has recently affirmed

once again that “[w]e [EPA] did not create a new definition of

modification in codifying § 60.14.” 70 Fed. Reg. at 61,096/1 =

3 In this Federal Register notice, EPA highlighted the regulatory

history that the D.C. Circuit ignored and noted that it had “described the

23

Second, the regulatory definitions in the NSPS and PSD

programs did not “already differ{] at the time of the 1977

amendments.” 413 F.3d at 19.7* The regulatory definition of

“modification” in the PSD rules in force at the time of the 1977

amendments used an emission rate test just like NSPS and, just

like the NSPS test, excluded increased hours of operation. 40

C.F.R. § 52.01(d). In fact, 40 C.F.R. § 52.01(d)}—with its

requirement for an emission rate increase unaffected by hours

of operation—was, and continues to be, the only definition of

“modification” found in the PSD rules.

EPA explained when it adopted § 52.01(d) that its goal was

to create a “consistent” definition of “modification” for PSD

and NSPS: “The general definition of modified source in Part

52 [PSD] is changed slightly to be more specific and to be

consistent with the definition used in Part 60 [NSPS]. . . . It is

the Administrator’s intent to change the definition of

modification under Part 52 to be consistent with the final

definition of this term under Part 60.” 39 Fed. Reg. 42,510,

42,513/1 (Dec. 5, 1974). That “final” definition, as discuss!

above, clarified that an increase in the “amount” of emissions

is measured in terms of hourly emission rate. 40 Fed. Reg.

58,416 (Dec. 16, 1975).

Amici New York, ef ai., attempt to downplay this regu-

latory history by suggesting that the NSPS definition promul-

gated in 1971 and in effect at the time § 52.01(d) was adopted

“applied simply to ‘increases [in] the amount of any air

pollutant’ with no reference to hourly emission rates.” New

York Br. at 11 n. 9. That is misleading. The 1971 NSPS

relationship between the provisions contained in §§ 60.2 and 60.14 in a

1974 Federal Register notice” where it had “stated that the regulations

concerning modifications in § 60.14 clarify the phrase ‘increases the

amount of any air pollutant’ that appears in the definition of modification

in § 60.2.” 70 Fed. Reg. at 61,088 n.24.

** These PSD rules were part of EPA’s “pre-statutory” PSD program.

See Alabama Power Co. v. Costle, 636 F.2d 323, 346-49 (D.C. Cir. 1979).

24

rules also explicitly excluded increases in hours of operation

from activities that could “increase” the “amount of emis-

sions.” See 40 C.F.R. § 60.2(h). Further, in its 1974 PSD

rulemaking, EPA specifically referenced its contemporane-

ous, on-going NSPS rulemaking in which EPA had explained

that the existing hours of operation exclusion in § 60.2(h) is

equivalent to measuring an emissions increase in terms of

hourly rate. See 39 Fed. Reg. at 36,947.

Thus, EPA did not create “confusion” in 1974 when it

promulgated a definition of “modification” under its pre-

statutory PSD program that “closely tracked—but didn’t

precisely mirror—the NSPS regulatory definition” adopted in

1971. Cf New York, 413 F.3d at 12. Rather, EPA clearly

expressed its intention at the time of promulgation that the

regulatory PSD definition be “consistent with the definition”

of modification used in the NSPS rules. 39 Fed. Reg. at

42,513/1.

B. The Face of the Clean Air Act Supports

Incorporation

Petitioners also argue that Congress’ failure to incorporate

the “modification” rule into the statute by express reference

cuts against the presumption of incorporation. Pet. Br. at 46

n.35; see also New York, 413 F.3d at 19 (“Congress [in other

sections] did incorporate regulatory provisions expressly by

reference.”). To the contrary, Congress did expressly validate

the existing “modification” rule in 1977. Consider the unique

backdrop to the 1977 amendments: Congress had before it

EPA’s pre-statutory PSD regulatory program and reviewed

that e >ting program provision by provision, adopting some

elements and changing others, either immediately or at some

later date. One of the elements Congress did not change, and

thus adopted, was the definition of “modification.” The stat-

ute on its face demonstrates as much.”°

5 As EPA has observed, “[w]ith respect to NSR, there is no need to

speculate about whether Congress knew about EPA’s pre-existing regula-

25

Specifically, Congress expressly provided that, until such

time as an implementation plan was approved for any area,

the “applicable regulations under this chapter prior to August

7, 1977 [i.e., the 1974 rules using “emission rate” unaffected

by hours of operation] shall remain in effect,” except as those

rules were deemed automatically amended by operation of

section 7478(b). 42 U.S.C. § 7478(a). The definition of the

term “commenced” (a version of which was already in the

1974 rules, see 40 C.F.R. § 52.21(b)(7) (1974)) was one of

the items that Congress said must be immediately changed

to the new statutory definition. See 42 U.S.C. § 7478(b).

The existing definition of “modification” was not. See id.

Further, the definition of the phrase “best available control.

technology” (again, a version of which was already in the

1974 rules, see 40 C.F.R. § 52.01(f) (1974)) was changed in

the new statute, see 42 U.S.C. § 7479(3), but the change was

delayed until subsequent approval of an implementation plan.

See id. § 7478. Again, the existing regulatory definition of

“modification” was not. Repeatedly, Congress showed no*4-

ing but approval of, and an intention to continue, the existing

definition and usage of “modification,” while meticulously

changing and fine-tuning other aspects of the program.

“[W]here Congress has re-enacted the statute without per-

tinent change,” “congressional failure to revise or repeal the

agency's interpretation is persuasive evidence that the

interpretation is the one intended by Congress.” Nat'l Labor

Relations Bd. v. Bell Aerospace Co., 416 U.S. 267, 274-75

(1974) (emphasis added). Such is the case here. In 1977,

Congress effectively did “reenact” a portion of the Clean Air

Act “without pertinent change” when it defined “modifica-

tion” for NSR purposes to mean “modification” as defined in

section 7411(a). When it did so, Congress had squarely

tions because, on the face of the statute, CAA section 168 demonstrates

such awareness.” EPA’s Petition for Rehearing or Rehearing en Banc,

New York v. Envil. Prot. Agency, No. 03-1380, at 13 (May 1, 2006).

26

before it EPA’s contemporaneous interpretation of “modifica-

tion” as a change that increases an existing unit’s emission

rate unaffected by hours of operation. Congress chose not to

“revise or repeal” this aspect of the rules, and its choice must

be given effect. Cf Lorillard, 434 U.S. at 481. (The “pre-

sumption” that Congress “had knowledge of the interpretation

given to the incorporated law” is “particularly appropriate ©

[where] Congress exhibited both a detailed knowledge of the

[existing] provisions and their judicial interpretation and a

willingness to depart from those provisions regarded as

undesirable or inappropriate for incorporation.”).

C. Contemporaneous EPA Action Supports

Incorporation

EPA itself shares this view. For example, in the preamble

to the first set of NSR rules promulgated by EPA after the

1977 amendments, EPA explained that its proposal “not to

treat a voluntary fuel or raw material [switch] as a modi-

fication” had been opposed by environmental groups who

asserted that “Congress intended all such switches to be

treated as modifications.” See 43 Fed. Reg. 26,388, 26,396/3

(June 19, 1978). EPA “disagree[d] with this contention”

because “[section 7479(2)(C)] of the [Clean Air Act] by its

reference to [section 7411(a)] in effect adopts the definition

of ‘modification’ under [section 7411(a)] for the purposes of

PSD.” Jd. “In adding [section 7479(2)(C)] to the Act, Con-

gress indicated that it intended to conform the meaning of

‘modification’ to ‘usage in other parts of the Act.’” /d. (quot-

ing 123 Cong. Rec. H11957 (Nov. 1, 1977)). EPA found this

significant because, as of the 1977 amendments, “regulations

promulgated under section 7411 had defined ‘modification’

to exclude voluntary fuel switches” where the source had

been “designed to accommodate that alternative use.” /d.

(quoting 40 C.F.R. § 60.14(e)(4)) (emphasis added). “Con-

sequently,” EPA said, “it would appear that Congress did not

intend voluntary fuel switches to be treated as modifications

for PSD purposes.” /d. at 26,396-97.

27

In other words, within a year after enactment of the 1977

amendments, EPA determined that Congress intended “modi-

fication” under NSR to mean the same sort of activity that

constituted “modification” under the NSPS program. In the

case of voluntary fuel switches, EPA reasoned, because such

activity was excluded from the NSPS regulatory definition of

“modification,” Congress must have intended that it be

excluded from the definition of “modification” under the NSR

program. By the same token, in 1977, the NSPS rules

provided (and still today provide) that a change to an existing

source would not constitute a “modification” unless that

change increased the source’s emission rate measured on an

hourly basis. Accordingly, under EPA’s logic, Congress must

have intended that only such changes could trigger NSR.

EPA has repeatedly affirmed this view. For instance, in

1984, EPA said that the phrase “usage in other parts of the

Act” in the legislative history “most probably refers, not only

to section [7411(a)(4)], but also to the EPA regulations

implementing [section 7411] that were in effect at the tim ~

49 Fed. Reg. 43,211, 43,213/3 (Oct. 26, 1984). More recently,

EPA reiterated that, “by defining ‘construction’ in Part C to

conform to usage in other parts of the Act,” Congress in 1977

was referring to EPA’s “preexisting rules interpreting the term

‘modification’ in the NSPS context.” 68 Fed. Reg. at 61,269/2.

This Court should give great weight to EPA’s contempo-

raneous and consistent interpretation of the Clean Air Act.

IV. THE STATUTE DOES NOT PROHIBIT AN

HOURLY RATE TEST FOR NSR AND NSPS

Finally, Petitioners and their amici argue that the plain

statutory text “requires that EPA ‘apply NSR to changes that

increase actual emissions ....’” Pet. Br. at 49 (quoting New

York, 413 F.3d at 40). According to Petitioners, the

“maximum hourly rate test” (that has been part of the NSPS

definition of modification for over thirty years) “violates that

command.” /d. On that basis, Petitioners argue that the NSR

28

rules would “violate the plain text” of the statute if they were

read consistent with the NSPS rules to apply only to activity

that caused a facility’s hourly emissions rate to increase. Jd.

Petitioners are wrong.”°

As an initial matter, an hourly rate test is an actual test, as

EPA has unequivocally and consistently stated. See 70 Fed.

Reg. at 61,091 (“[A] test based on maximum achievable

hourly emissions is a test based on actual emissions.”); 39

Fed. Reg. at 36,946 (“[NSPS test] clarifies that for an existing

facility to undergo a modification there must be an increase in

actual emissions. . . . [TJhe proposed definition of modifi-

cation is limited to increases in actual emissions in keeping

with the intent of section [7411] of controlling facilities only

when they constitute a new source of emission.”). This is

why the United States does not support Petitioners’ argument

on this issue. U.S. Br. at 47-48 n.18.

But even if this Court concludes that the United States is

wrong and an hourly emissions test is not an “actual” test, it

does not follow that increased hours of operation must trigger

NSR permitting. Petitioners’ argument that the Clean Air

Act’s plain text requires a test for “modification” under which

an “increase” must be read as an increase in operating hours

within permit limits (or what Petitioners refer to as their

“actual” annual emissions test), see Pet. Br. at 40, is incorrect,

and to the extent New York supports such a conclusion, it is

wrong. The word “emitted” in section 741 1(a) simply does not

carry the water New York suggests it does. See 413 F.3d at

2° While the States of New York and Pennsylvania likewise argue that

the plain meaning of the Clean Air Act mandates what they call an

“actual” annual emissions test, see New York Br. at 8-9, 22-23, their own

state NNSR rules are based on “potential” and “allowable” emissions

tests. See N.Y. Comp. Copes R. & REGS. tit. 6, §§ 231-2.3(a), 231-

2.1(6 40); 25 Pa. Cope §§ 127.21 l(a), 127.211(c1). Because the

NNSR program shares an identical statutory definition of “modification”

as PSD and NSPS, see 42 U.S.C. § 7501(4), their argument calls into

question the validity of their own rules.

29

40.7” On its face, the word “emitted” in section 741 1(a)(4)

serves merely to modify the word “pollutant,” in order to

distinguish between those pollutants that the existing source

was already emitting prior to a change (and which would be

“increased” by the change) and pollutants that the source had

never “previously emitted” (but which it would emit following

the change). Thus, neither the word “emitted,” nor the entire

phrase “amount of any air pollutant emitted,” provides the

clear statutory directive that Petitioners claim.

Petitioners are also wrong to suggest that Congress’ use of

the terms “emit,” “potential to emit,” and “emissions limi-

tation” in other parts of the statute establishes Congress’

intent to equate the unqualified words “emit,” “emitted,” or

“emissions” to “actual” emissions. Pet. Br. at 49 (citing New

York, 413 F.3d at 39). If Congress had intended the term

“emit,” “emitted,” or “emission” to unambiguously refer to

actual emissions only, it would not have needed to explicitly

qualify references to emissions with the word “actual”

elsewhere in the statute. But Congress did so—in 1970, .n

1977, and again in 1990. For instance, in 1970, Congress

added section 7521(b)(1)(B), which specifically required

rules under section 7521(a) to include standards requiring “a

reduction of a least 90 percentum from the average of

emissions of oxides of nitrogen actually measured from

light duty vehicles . . . .” (Emphasis added.) Similarly, in

1977, Congress added section 7502(c)(3) (originally section

7502(b)(4)), which specified that a state’s emissions inven-

tory is to be based on “actual emissions.” (Emphasis added.)

In 1990, Congress amended the definition of “modification”

in the hazardous air pollution section in the statute, changing

it from a cross-reference to the § 7411 definition of

77 The United States has convincingly explained the D.C. Circuit’s

error in this regard. See U.S. Br. at 47-48 n.18; EPA’s Pet. for Rehearing

or Rehearing En Banc, New York v. Envtl. Prot. Agency, No. 02-1387

(Aug. 8, 2005).

30

“modification” to a new definition that explicitly references

“actual emissions.” See 42 U.S.C. § 7412(a)(5) (1990). If the

section 7411 definition already unambiguously referred to

“actual” emissions, there would have been no reason for

Congress to qualify the word “emission” with the word

“actual” as it did in these other provisions.

Finally and decisively, the very D.C. Circuit decision that

Petitioners and their amici rely on upheld an NSPS provision

using the maximum hourly emission test they find so

objectionable. Specifically, the court upheld a revision

adopted by EPA in 1992 defining “modification” as an

increase in the “maximum hourly emissions of any pollutant .

. . above the maximum hourly emissions achievable at that

unit during the 5 years prior to the change.” New York, 413

F.3d at 27 (“Environmental petitioners’ . . . contention that

the 1992 rule violates the statutory term ‘any’ by excluding

some emissions-increases changes from NSPS fails . . . .”);

see also 40 C.F.R. § 60.14(h); 57 Fed. Reg. 32,339 (July 21,

1992). In fact, for over thirty years “modification” under

NSPS has meant only activity that increases the hourly rate of

emissions, and that test has never been questioned by any

court. See 40 Fed. Reg. at 58,416-19; 39 Fed. Reg. at 36,946-

47.78 If such an hourly test is permissible for NSPS, it must

be permissible for NSR, as the two programs share the exact

same statutory definition of “modification.”

CONCLUSION

For the foregoing reasons, the judgment of the Fourth

Circuit should be affirmed.

® Many aspects of the 1975 NSPS rules were challenged in ASARCO

Inc. v. Envtl. Prot. Agency, 578 F.2d 319 (D.C. Cir. 1978). No one

in those rules.

* Counsel of Record

September 15, 2006

Respectfully submitted,

STEVEN G. MCKINNEY

MICHAEL D. FREEMAN

P. STEPHEN GIDIERE III *

BALCH & BINGHAM LLP

1901 Sixth Avenue North

Suite 2600

Birmingham, Alabama 35203

(205) 251-8100

Counsel for Amici Curiae American

Electric Power Company, Inc., Edison

Electric Institute, Southern Company,

and Utility Air Regulatory Group