USA v. DTE Energy

Friday, March 29, 2013

USA v. DTE Energy

Mar 28: In the U.S. Court of Appeals, Sixth Circuit, Case No. 11-2328. Appealed from the United States District Court for the Eastern District of Michigan at Detroit. In this split decision the majority indicates that U.S. Environmental Protection Agency (EPA) regulations implementing the Clean Air Act require owners and operators of any major pollutant emitting source who plan construction projects at the source to make a preconstruction projection of whether and to what extent emissions from the source will increase following construction. That projection determines whether the project constitutes a "major modification" and thus requires a permit.

The majority Appeals Court said, "This appeal raises a single question: can EPA challenge that projection before there is post-construction data to prove or disprove it?" The district court held that it cannot and granted summary judgment to defendants DTE Energy and Detroit Edison. However, the majority concluded, "While the regulations allow operators to undertake projects without having EPA second-guess their projections, EPA is not categorically prevented from challenging even blatant violations of its regulations until long after modifications are made. The district court's sweeping reading of the regulations to that effect is at odds with the Clean Air Act. It is therefore necessary to reverse and remand."

After recounting the changes in the regulations over time, and the three steps involved in determining whether a planned project requires a permit, the majority indicates, "Whether a permit is ultimately required is a high stakes determination. If the operator needs to obtain a permit, the source loses grandfathered status under the Clean Air Act. This means the operator must install modern pollution controls such as flue gas desulfurization for sulfur dioxide and selective catalytic reduction for nitrogen oxides. These pollution controls lead to enormous emissions reductions. For example, EPA's expert estimated that installation of these modern pollution controls at DTE's Monroe Unit #2, the source at issue in this case, would reduce the plant's sulfur dioxide emissions by at least 95% and its nitrogen oxide emissions by at least 90%. However, installing these complex technologies is very expensive for operators. According to DTE, it is spending $1.7 billion to install these technologies at Monroe [Monroe Power Plant in Monroe, MI]."

The Appeals Court indicates that, DTE performed the required emissions calculations and projected a post-project emissions increase of 3,701 tons per year of sulfur dioxide and 4,096 tons per year of nitrogen oxides. According to the regulations, an increase of 40 tons per year of either sulfur dioxide or nitrogen oxides is significant. 40 C.F.R. § 52.21(b)(23)(i). However, DTE determined that the entire emissions increase fell under the demand growth exclusion. DTE submitted these calculations to its reviewing authority, the Michigan Department of Environmental Quality, noting that DTE "continues to believe there is no reasonable possibility that the proposed project will result in a significant emissions increase and thus [notification, recordkeeping, and reporting] requirements do not apply." MDEQ did not take any action in response to DTE's submission.

EPA learned of the construction project in May of 2010, two months after the project began. On June 4, 2010, EPA issued a notice of violation. The notice stated that the project "resulted in a significant net emissions increase" and therefore "constitutes a 'major modification.'" After attempts to resolve its disagreement with DTE without litigation failed, the United States filed a complaint against DTE and moved for a preliminary injunction.

The majority somewhat summarizes the dispute in a paragraph when it says, "Over several decades of regulation and litigation, EPA has created a system intended to protect air quality, conserve environmental agencies' scarce resources, and minimize costs for regulated industries. The system depends on operators' making accurate projections before embarking on construction projects. If operators had to defend every projection to the agency's satisfaction, companies would hesitate to make any changes, including those that may improve air quality. On the other hand, if EPA were barred from challenging preconstruction projections that fail to follow regulations, New Source Review would cease to be a preconstruction review program. The 1992 and 2002 changes to New Source Review regulations take a middle road by trusting operators to make projections but giving them specific instructions to follow."

The majority notes and concludes, "EPA warns, however, that after the five-year monitoring period is over, DTE could surreptitiously increase its emissions, having permanently avoided permitting for that change. . . While EPA does presume that emissions increases after five years are unrelated to the project, id. at 80,197, that presumption can be overcome, for example, by demonstrating that the preconstruction facility could not handle such an increase. Neither the statute nor the regulations create a time barrier. EPA can bring an enforcement action whenever emissions increase, so long as the increase is traceable to the construction. See 40 C.F.R. § 52.21(a)(2)(iv)(b). In light of this, EPA's warnings ring hollow.

"Our reversal does not constitute endorsement of EPA's suggestions. A preconstruction projection is subject to an enforcement action by EPA to ensure that the projection is made pursuant to the requirements of the regulations. The district court having ruled to the contrary, we must reverse and remand. But we make no determination as to whether defendants have complied with those projection regulations. The district court's order is reversed, and this matter is remanded for further proceedings consistent with this opinion."

In the dissenting opinion, the Justice says, "The majority holds that the USEPA may challenge the operator's preconstruction emissions projection, regardless of the actual emissions, and remands for USEPA to pursue such proceedings. While I agree with much of the majority opinion, I must ultimately dissent . . ." The dissent indicates, "This project caused no emissions increase and, in fact, resulted in an emissions decrease. All of which begs the question: what exactly does the majority anticipate the district court

will do with this on remand? Allow the USEPA to challenge preconstruction projections that actual events have already proven correct? I would hold that these subsequent actual results render the present dispute moot. . . I would be inclined to dismiss this appeal as moot. Barring that, I would affirm the judgment of the district court."

Access the complete opinion and dissent (click here). [#Air, #MIAir, #CA6]

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