United States v. Duke Energy Group
411 F.3d 539 (4th Cir. 2005)

  • As part of the Clean Air Act, (the New Source Performance Standards (NSPS)) EPA mandates a New Source Review (NSR) whenever a new facility is built that intends to release pollutants.
    • An NSR will usually result in the new facility being required to install expensive anti-pollution technologies.
  • An NSR is also triggered when an existing facility undergoes a substantial modification, and that modification results in higher emissions than the original design.
    • According to the original definition, "a source undertakes a modification when any physical change...or change in the method of operation...increases the amount of any air pollutant emitted by such source."
    • "Routine maintenance, repair and replacement" does not trigger an NSR.  Because of this, most factories argue that whatever work they are doing is just routine and does not rise to the level of a 'modification.'
    • There was some debate on how to calculate emissions.
  • EPA sued ten utilities companies (including Duke), claiming that they had in fact invested in major life-extending capital improvements to their power plants without going through NSR.
    • The utilities argued that they had just performed routine maintenance and were not required to perform a NSR.
    • Second, they argued that EPA had changed the standard, so even if what they were doing was a major modification according to the new standard, it was unfair for EPA to begin enforcing the new standard with no notice.
    • Third, they argued that the word 'routine' should be interpreted more broadly.  Instead of looking at what would be routine for a specific facility, EPA should be looking at what was the routine for the entire industry.
    • Fourth, they argued that an NSR should only be triggered when the hourly emissions rate goes up.  For most of these modifications, the amount of pollutants per hour remained the same, but the equipment was operated more hours per day, which only increased the yearly emissions rate.
      • Older plants were shut down a lot because of maintenance problems.  When they were retrofitted with new equipment, they were able to stay online for many more hours per year than they were able to before.
  • The Trial Court found for Duke.  EPA appealed.
    • The Trial Court found that Duke's arguments about what was routine in the industry was the correct standard.
    • The Trial Court found that NSRs should only be required when the hourly emissions rate increases.
  • The Appellate Court affirmed.
    • The Appellate Court pointed out that the costs of going through a NSR were estimated to be seven times the original cost to build Duke's coal plants.
    • The Appellate Court looked at how EPA had interpreted the term 'modifications' in their Prevention of Serious Deterioration Program (PSD), and decided that in the PSD, EPA had used as per hour standard for determining whether or not the emissions rate increased.  Therefore, EPA is bound to use that same standard in how they interpret all their regulations, regardless of whether the regulations have anything to do with one another!
      • PSD and NSPS are totally separate programs with totally separate goals, but for some reason, the Appellate Court found that they must both interpret the word 'modifications' the same way.
  • Basically, according to the Appellate Court, once EPA had interpreted one provision of the Clean Air Act to use a per hour standard, they could not interpret another provision of the same Act to use a per year standard.
  • In 2002, EPA changed the rule, and now allows a facility to use the highest 24-month average emission level over the previous 10 years to establish the baseline for whether or not an NSR is required.
  • This case was recently heard by the US Supreme Court in Environmental Defense v. Duke Energy Group (127 S. Ct. 1423 (2007))
    • The US Supreme Court overturned the Appellate Court.
      • The US Supreme Court found that the Appellate Court erred when it decided that the presumption that the same term has the same meaning when referred to in two places within the same Statute is irrebuttable.
        • It is presumed that they mean the same thing, but you might be able to make an effective argument as to why they don't.
      • Therefore, since there is no iron rule against regulating PSD and NSPS differently, EPA is free to interpret them differently, so long as their construction falls within the limits of what is reasonable.