Is the NSR Enforcement Initiative Dead Yet? Injunctive Relief Claims Dismissed Against U.S. Steel

Posted on April 29, 2014 by Seth Jaffe

On April 18, EPA lost another NSR enforcement case. Not only that, but this was a case EPA had previously won. As we noted last August, Chief Judge Philip Simon of the Northern District of Indiana, had previously ruled that the United States could pursue injunctive relief claims against United States Steel with respect to allegations by EPA that US Steel had made major modifications to its plant in Gary, Indiana, in 1990 without complying with NSR requirements.

Having reread the 7th Circuit opinion in United States v. Midwest Generation, Judge Simon has had a change of heart and now has concluded that injunctive relief claims (as well as damages) are barred by the statute of limitations, even where the same entity that allegedly caused the original violation still owns the facility. Judge Simon concluded that the Court of Appeals had spoken with sufficient clarity to bind him. The language he cited was this:

"Midwest cannot be liable when its predecessor in interest would not have been liable had it owned the plants continuously. (Italics supplied by Judge Simon.)"

Judge Simon seems to have felt more compelled than persuaded.

"Candidly, it is a little difficult to understand the basis for the statements in Midwest Generation that even claims for injunctions have to be brought within five years. But that is what Midwest Generation appears to mandate. And in a hierarchical system of courts, my job as a trial judge is to do as my superiors tell me.

So while the basis for applying a limitations period to the EPA’s injunction claim under §§ 7475 and 7503 is thinly explained in Midwest Generation, upon reconsideration I do think that’s the outcome required of me here."

One final note. In his original opinion, Judge Simon ruled against US Steel, in part, because the concurrent remedy doctrine, which US Steel argued barred injunctive relief where damages were not available, could not be applied against the United States. As Judge Simon noted, the 7th Circuit Court of Appeals did not discuss the concurrent remedy doctrine, so we don’t know the basis of its holding that a party continuously owning a facility that is alleged to have violated the NSR provisions of the CAA more than five years ago is not subject to injunctive relief. However, it is worth pointing out, as we discussed last month, that Judge James Payne, of the Eastern District of Oklahoma, dismissed injunctive relief claims brought by the Sierra Club (not the government, of course), relying on the concurrent remedy doctrine.

Something tells me that the United States isn’t quite ready to give up on these cases, notwithstanding a string of recent defeats. The NSR enforcement initiative may be in trouble, but it’s not quite dead yet.

 

More on Daubert: The 11th Circuit Allows EPA’s Experts to Testify on NSR Violations

Posted on September 27, 2013 by Seth Jaffe

Last spring, my colleague Robby Sanoff complained on our firm’s blog about the problem resulting from appellate courts’ refusal to give appropriate discretion to district judges in performing their gatekeeping function under Daubert.  As Robby put it:

"The difference between “shaky but admissible” and unreliable and inadmissible evidence would seem to be entirely in the eye of the beholder."

Robby will not be pleased by last’s week’s decision by the 11th Circuit Court of Appeals in United States v. Alabama Power, reversing a district court order excluding EPA’s expert testimony in support of its NSR enforcement action against Alabama Power.  The Court majority performed an extensive review of the testimony provided in the Daubert hearing below, and concluded that the district court’s decision was clearly erroneous.  (For those of you concerned with the merits of these cases, the question was whether EPA’s model, which clearly applied to determinations of emissions increases for baseload plants, could be applied as well to cycling plants generally and the plants at issue in the case in particular.)

The case is particularly interesting because Judge Hodges, taking Robby’s view, dissented.  As Judge Hodges noted, prior to the Supreme Court decision in General Electric v. Joiner, appellate courts did not grant significant discretion to district courts in exclusion rulings.  However, Joiner made clear that the abuse of discretion standard applies even in outcome-determinative exclusion rulings.

Next, Judge Hodges noted that, in Daubert rulings, there should be a “heavy thumb – really a thumb and a finger or two – that is put on the district court’s side of the scale.”  He then rehearsed the actual statistics on Daubert reversals in the 11th Circuit:  3 reversals out of 54 cases.

Finally, Judge Hodges conducted a brief review of evidence tending to support the district court’s conclusion and determined that its decision was not “a clear error in judgment.”  Concluding that a different result might be appropriate if review were de novo, Judge Hodges quoted Daubert itself:

"We recognize that, in practice, a gatekeeping role for the judge, no matter how flexible, inevitably on occasion will prevent the jury from learning of authentic insights and innovations. That, nevertheless, is the balance that is struck by Rules of Evidence designed not for the exhaustive search for cosmic understanding but for the particularized resolution of legal disputes."

Decisions such as this have to be discouraging to district court judges, as Robby noted.  It’s worth pointing at that Judge Hodges is actually a district court judge, sitting on the court of appeals by designation.  It seems fitting that the district judge on the panel would be the judge vainly trying to protect the discretion of district judges in Daubert matters.

Is Combined-Cycle the New Simple Cycle BACT?

Posted on October 17, 2012 by Deborah Jennings

By Deborah Jennings and Andrew Schatz

If California regulators approve a proposed AES combined-cycle natural gas-fired peaking power plant, it could blur the standard for Best Available Control Technology (BACT) for greenhouse gas (GHG) emissions from gas-fired electric generating facilities.  EPA expressly excluded simple cycle peaking units from its recently proposed New Source Performance Standards (NSPS) for GHGs because combined cycle units, which are GHG lower-emitting, were presumed not to be useable as peakers.  By virtue of AES’s proposed combined-cycle peaking plant, EPA may be moved to change its view. Low-emitting combined cycle may set the BACT standard for future, gas-fired peaking units as a result. 

AES is proposing to use a combined-cycle system in a peaking capacity at its Huntington Beach Energy Project (HBEP) in Huntington Beach, California.  See AES Southland Development, LLC, BACT Determination for the Huntington Beach Energy Project (June 2012).  The HBEP will consist of two combined cycle power blocks with a net capacity of 939 MW to be used for peaking and supplying local capacity.  AES’s proposal to use combined-cycle for a peaking unit is notable because typically peakers have been simple cycle systems.  The combined-cycle system is more efficient than simple cycle systems and has lower GHG emission rates.  Whereas simple cycle systems combust natural gas to generate electricity, combined cycle-systems also capture lost heat from the combustion process to generate additional electricity through a steam turbine (i.e. a heat recovery steam generator).  Accordingly, BACT for GHG emissions at the HBEP project results in an GHG emissions rate of 1,082 pounds of CO2 per megawatt-hour (lbs CO2/MWh).  In contrast, a recent BACT determination for the simple cycle “peaking” power plant at the Pio Pico Energy Center in San Diego was 1,181 lbs CO2/MWh.

Regulatory agencies have struggled to determine what constitutes GHG BACT for natural gas (and other fossil-fuel) fired power plants.  Regulatory authorities have declined to require natural gas-fired power plant projects to consider GHG lower emitting combined-cycle technologies in a BACT analysis.  For example, in June 2012, Wisconsin authorities declined EPA Region V’s request to consider the use of combined-cycle gas turbines in a GHG permit for a wastewater utility fuelled by landfill gas. 

EPA has sent conflicting signals on the issue.  In the past, EPA has suggested from time to time that combined cycle be considered in the BACT analysis for natural gas plants.   However, in drafting its New Source Performance Standards (NSPS) for GHG Emissions for New Stationary Sources: Electric Utility Generating Units (EGUs), EPA concluded that it cannot require proposed simple cycle facilities to meet the NSPS designed for combined-cycle natural gas facilities based on functional differences in peaking plants.  77 Fed. Reg. 22392 (April 13, 2012). 

Specifically, EPA declined to include simple cycle facilities as an affected source in the proposed 40 CFR part 60, subpart TTTT for GHG emissions from new facilities governing combined-cycle plants and coal-fired plants.  Id. at 22411.  In its NSPS proposal, EPA required new fossil fuel-fired EGUs greater than 25 MW to meet an output-based standard of 1,000 lb CO2/MWh, representing the performance of widely used natural gas combined cycle technology.  Id. at 22392.  (Interestingly, in setting the NSPS at 1,000 lb CO2/MWh, EPA proposes a more stringent threshold for GHG emissions from new facilities than even HBEP).  In choosing to exclude simple-cycle facilities from this standard, EPA reasoned that unlike combined-cycle plants (which are typically designed to provide baseload power and are able to emit CO2 at similar levels), simple-cycle plants are typically designed to provide peaking power, operate less, and “it would be much more expensive to lower their emission profile to that of a combined cycle power plant.”  Id. at 22411.

In proposing a relatively lower emitting combined-cycle for a peaking unit, the AES project casts doubt on EPA’s conclusion that simple cycle is different.  Accordingly, EPA may come to impose combined-cycle BACT limits on future natural gas combustion peaking facilities.

EPA's Roll-Back of Bush-Era Rules Appears to Begin in Earnest

Posted on February 13, 2010 by Seth Jaffe

While a lot of attention has been paid to whether EPA would reverse the Bush EPA decision denying California’s petition to regulate greenhouse gas emissions from mobile sources,  it is now clear even outside the climate change arena that life at EPA is going to be substantially different under the current administration.  As if evidence were really needed for that proposition, EPA announced this week that it was putting on hold the NSR aggregation rule that EPA had promulgated on January 15, 2009.

The rule, which had been long sought by industry, would have provided that nominally separate projects would only have to be combined – aggregated for NSR/PSD purposes – if  they are “substantially related.” It also would have created a rebuttable presumption that projects more than three years apart are not substantially related. Responding to a request from NRDC and the OMB memo asking agencies to look closely at rules promulgated before the transition but not yet effective, EPA concluded that the rule raises “substantial questions of law and policy.” Therefore, EPA postponed the effective date of the rule until May 18, 2009 and also announced that it was formally reconsidering the rule in response to the NRDC petition.

To those in industry, the aggregation rule was not a radical anti-environmental roll-back of environmental protection standards.  Rather, it was more of a common-sense approach towards making the NSR program simpler and clearer.  It is one of my pet peeves with the prior administration, however, that it gave regulatory reform a bad name.  

In any case, I feel as though I should open a pool regarding what will be the next Bush-era rule to be tossed overboard.  We surely won’t have to wait long for it to happen.

EPA's Roll-Back of Bush-Era Rules Appears to Begin in Earnest

Posted on February 13, 2009 by Seth Jaffe

While a lot of attention has been paid to whether EPA would reverse the Bush EPA decision denying California’s petition to regulate greenhouse gas emissions from mobile sources,  it is now clear even outside the climate change arena that life at EPA is going to be substantially different under the current administration.  As if evidence were really needed for that proposition, EPA announced this week that it was putting on hold the NSR aggregation rule that EPA had promulgated on January 15, 2009.

The rule, which had been long sought by industry, would have provided that nominally separate projects would only have to be combined – aggregated for NSR/PSD purposes – if  they are “substantially related.” It also would have created a rebuttable presumption that projects more than three years apart are not substantially related. Responding to a request from NRDC and the OMB memo asking agencies to look closely at rules promulgated before the transition but not yet effective, EPA concluded that the rule raises “substantial questions of law and policy.” Therefore, EPA postponed the effective date of the rule until May 18, 2009 and also announced that it was formally reconsidering the rule in response to the NRDC petition.

To those in industry, the aggregation rule was not a radical anti-environmental roll-back of environmental protection standards.  Rather, it was more of a common-sense approach towards making the NSR program simpler and clearer.  It is one of my pet peeves with the prior administration, however, that it gave regulatory reform a bad name.  

In any case, I feel as though I should open a pool regarding what will be the next Bush-era rule to be tossed overboard.  We surely won’t have to wait long for it to happen.