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New Source Review: Outstanding Legal Issues

New Source Review: Outstanding Legal Issues. Peter S. Glaser Troutman Sanders LLP Washington, DC American Coal Council March 15, 2006 Peter.Glaser@troutmansanders.com. NEW SOURCE REVIEW.

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New Source Review: Outstanding Legal Issues

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  1. New Source Review: Outstanding Legal Issues Peter S. Glaser Troutman Sanders LLP Washington, DC American Coal Council March 15, 2006 Peter.Glaser@troutmansanders.com

  2. NEW SOURCE REVIEW • Clean Air Act requires existing stationary sources to undergo New Source Review if they undertake a “major modification” • Modification = “any physical change” + “increases the amount of any air pollutant emitted” • Modification ≠ Routine Maintenance, Repair, Replacement (RMRR) • But does “routine” mean routine in the industry or routine at the particular plant at issue? • And does “increase emissions” = increase in hourly rate or increase in total emissions over year?

  3. WHY NSR MATTERS • Plants subject to NSR review must install Best Available Control Technology (BACT) • NSR fight is about the so-called “grandfathered” plants, those that were not required to install pollution controls by the 1977 CAA • Since 1990, CAA regulation in electricity industry has moved toward “cap and trade,” where not all plants are required to install controls • Perhaps the highest priority environmental matter for generator industry when Bush Administration took office in 2001.

  4. TWO FRONT WAR • Clinton Administration enforcement actions • Bush Administration NSR Regulatory Reforms

  5. New Source Review Litigation • Utilities Originally Sued by EPA in 1999 • American Electric Power • Cinergy • First Energy Corp. • Illinois Power Co. • Southern Company • Southern Indiana Gas & Electric Co. • Tampa Electric Co. • Tennessee Valley Authority

  6. New Source Review Litigation • Settlements • Tampa Electric (February 2000) • PSEG Fossil LLC (January 2002) • Virginia Electric (April 2003) • Wisconsin Electric (May 2003) • SIGECO (June 2003) • Illinois Power (May 2005) • Ohio Edison (July 2005)

  7. The Central Legal Issues • Scope of the RMRR Exclusion • Routine in the industry vs. • Routine at a particular unit • How to calculate emissions increases • Hourly emission rate as the first step vs. • Total annual tons only

  8. New Source Review Litigation:Key Decisions • Duke Energy (4th Cir.) • June 15, 2005: Fourth Circuit affirmed Trial Court’s favorable 2003 opinion on the emissions increase test • Aug. 30, 2005: Fourth Circuit denied government’s petition for rehearing • Certiorari petition submitted to the U.S. Supreme Court.

  9. New Source Review LitigationKey Decisions • Cinergy (S.D. Ind.) • August 29, 2005: Trial court adopted government’s position on legal test for emissions increases • Emissions increases determined on an annual tonnage basis • October 2005: Trial court granted interlocutory appeal of emissions increase ruling to the Seventh Circuit and briefing is already underway. • 7th Circuit decision expected later this year • February 2006: Trial court rules that RMRR that is routine in industry is one factor in determining whether there has been a major modification

  10. New Source Review Litigation:Key Decisions • Alabama Power (N.D. Ala.) • June 3, 2005: Court adopted Alabama Power’s position on the correct legal tests: • Routine maintenance = Routine in the industry • Emissions increases = Hourly emissions rate • Parties ordered to mediate; ongoing. • Case stayed pending mediation

  11. New Source Review Litigation • NCPA v. TVA (N.D. Ala.) • Citizen Suit • September 7, 2005: Trial court denied TVA’s motion for summary judgment on standing and denied environmental groups’ motion for summary judgment on liability citing decision in Alabama Power case. • Plaintiffs have appealed to the 11th Circuit. Briefing to begin in April. • Scope of appeal still unclear but could attack Alabama Power NSR decision.

  12. New Source Review Litigation • American Electric Power (AEP) (S.D. Ohio) • July 11, 2005: Liability trial completed • Liability decision expected anytime • Scope of RMRR • Emissions increase test • Same Judge as Ohio Edison

  13. New Source Review Rulemakings:2002 NSR Reform Rule • New York et al., v. EPA (D.C. Cir.) (“NSR I”) • June 24, 2005: D.C. Circuit upheld most of EPA’s 2002 NSR revisions and requests for rehearing were denied. • States now in the process of implementing the federal rules. Deadline was January 2, 2006. • Many states still working on finalizing rules

  14. New Source Review Rulemaking: 2003 NSR Reform Rule (ERP) • ERP Requirements • Identical or functionally equivalent equipment • Amends “routine maintenance, repair and replacement” exclusion and provides regulatory certainty with 20 percent cost threshold • Replacement must not change the process unit’s basic design parameters • Legal challenge: New York et al. v. EPA (D.C. Cir.) (“NSR II”) • Fully briefed and argued; decision expected this summer

  15. New Source Review Rulemaking: 2005 NSR Reform Rule EPA’s Proposed Emissions Increase Rule • Could extend the hourly emission rate test to all EGUs nationwide • Could eliminate annual tonnage test altogether or retain two step analysis • Comments were due in February 2005

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