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Monday, September 05, 2005

Ind. Decisions - Cinergy loses summary judgment motion in NSR case

Last Monday, August 29, 2005, Chief Judge McKinney issued an order denying Cinergy's motion for summary judgment, and granting the USA's motion, in the case of UNITED STATES of America, Plaintiff, STATE of New York, State of Connecticut, State of New Jersey, Plaintiff-Intervenors, and HOOSIER ENVIRONMENTAL COUNCIL, Ohio Environment Council, Third-Party Plaintiffs v. CINERGY CORPORATION; PSI Energy, Inc.; and Cincinnati Gas & Electric Co. Some quotes:

This matter is before the Court on the parties' request for the Court to decide the purely legal question of what test applies to determine whether an emissions increase occurs so as to trigger the Clean Air Act's ("CAA") New Source Review ("NSR") permit provisions. The United States of America (the "USA") filed a Motion for Partial Summary Judgment on Emissions Test. In response, defendants Cinergy Corporation; PSI Energy, Inc.; and Cincinnati Gas & Electric Co. (collectively, "Cinergy") filed a Motion for Summary Judgment on the Applicable Test for Emission Increases. The parties have fully briefed the issue and it is now ripe for ruling. For the reasons explained herein, the USA's motion is GRANTED, and Cinergy's motion is DENIED.

I. BACKGROUND

The USA has brought this action against Cinergy alleging, inter alia, that it violated NSR provisions when it made physical changes to its units that were "modifications" without first having obtained a pre-construction permit. The Prevention of Significant Deterioration ("PSD") program requires that: "No major emitting facility on which construction [or modification] is commenced after August 7, 1977, may be constructed [or modified] ··· unless (1) a permit has been issued for such proposed facility in accordance with this part ····" 42 U.S.C. § 7475(a). The Nonattainment New Source Review ("NNSR") program requires "permits for the construction or operation of new or modified major stationary sources anywhere in the nonattainment area." Id. § 7502(c)(5). Central to this lawsuit, then, is whether the changes Cinergy made to its emitting sources were modifications. * * *

III. DISCUSSION

The appropriate test for measuring emissions under the PSD program has been the subject of numerous judicial opinions over the years, including one from this Court, United States of America v. Southern Indiana Gas and Electric Co., No. IP 99-1692-C-M/F, 2002 WL 1629817 (S.D.Ind. July 18, 2002) (" SIGECO"), and from the Seventh Circuit Court of Appeals, Wisconsin Elec. Power Co. v. Reilly, 893 F.2d 901 (7th Cir.1990) (" WEPCO"). In SIGECO this Court held that the PSD program requires an owner or operator to determine whether a preconstruction permit is required before construction begins. SIGECO, at *3. In WEPCO the Seventh Circuit addressed inter alia, how to assess emissions increases for PSD purposes. Specifically, the court ruled that the EPA could not assume a unit would operate at its full potential after physical change, but must consider past operating conditions. WEPCO, at 917-18.

More recently the District of Columbia and Fourth Circuit Courts of Appeals have issued opinions that bear directly on this issue. In United States v. Duke Energy Corp., 411 F.3d 539 (4th Cir.2005), the Fourth Circuit Court of Appeals found that once Congress incorporated the statutory definition of "modification" from the NSPS program into the PSD statute, the EPA could not interpret the definitions differently. Duke Energy, 411 F.3d at 546-47. * * *

The Court disagrees with both Cinergy and the Duke Energy court that the EPA's definition of "actual emissions," means that " a net emissions increase can result only from an increase in the hourly rate of emissions." See Duke Energy, 278 F.Supp.2d at 640. * * *

[T]he plain meaning of the increased hours exclusion is that an increase in hours or production rate are not a "physical change" and thus cannot, alone, be a modification. Increased hours and production rate are not excluded from the definition of "modification"; that is, if a physical change results in an increase in hours of operation that causes a net emissions increase, a modification has occurred. Not only is this the plain and most logical reading of the regulation, it prevents the very situation about which Cinergy is concerned-that in which an increase in hours or production rate unrelated to any physical change would be considered a modification and subject the source to PSD review. The EPA confirmed this view by way of the "Clay Memorandum" issued on September 9, 1988. * * *

Cinergy argues that two statements Edward Reich, then-Director of EPA's Division of Stationary Source Enforcement, made in 1981 (the "Reich Memos") indicate otherwise, and also that the Reich Memos demonstrate an EPA interpretation that is contrary to its current litigation position. This Court agrees with the Southern District of Ohio's view that the Reich Memos are contrary to the plain language of the CAA and EPA's regulations. See United States v. Ohio Edison Co., 276 F.Supp.2d 829, 877 (S.D.Ohio.2003). The Reich Memos are not authoritative here.

I am hoping to provide at least a link to the complete opinion later this week; the SD Indiana's opinions page has been out of commission since late last week. Check back.

[Update 9/6/05] Here is the opinion.

Posted by Marcia Oddi on September 5, 2005 05:20 PM
Posted to Environment | Ind Fed D.Ct. Decisions