Environmental Defense v. Duke Energy:

Today the Supreme Court hears oral arguments in the first of the term's big Clean Air Act (CAA) cases, Environmental Defense v. Duke Energy Corp.:. The case arises out of claims by the U.S. Environmental Protection Agency that Duke Energy Corporation violated the CAA when made modifications to a number of its power plants without first obtaining New Source Review permits. Duke claims that the modifications were exempt from such requirements under the CAA as it had been historically applied. The EPA argued that the modifications required permits because they extended the hours of the plants could operate, resulting in greater emissions.

Duke Energy won below in the U.S. Court of Appeals for the Fourth Circuit, and the Justice Department declined to file for certiorari. Indeed, the Solicitor General's office opposed certiorari when the intervenors, Environmental Defense, filed a petition arguing both that the Fourth Circuit was wrong on the substance and the the Fourth Circuit's opinion violated jurisdictional provisions of the Clean Air Act that grant the U.S. Court of Appeals for the D.C. Circuit exclusive jurisdiction over challenges to most nationally applicable CAA rules. (This latter argument is likely what led the Supreme Court to grant cert.)

The Supreme Court accepted cert on both the substantive question of when plant modifications trigger CAA permitting requirements and the jurisdictional question. In the latter case, Duke Energy and its amici (of which I am one) will argue that regulated entities must be able to challenge the EPA's regulatory interpretations inthe context of enforcement actions such as this, otherwise they could be denied any meaningful opportunity to challenge an agency's interpretation of a given regulation. Environmental Defense, the Justice Department (now back on the other side as a respondent supporting the petitioner), and their supporting amici counter that Duke is really challenging the EPA's regulations (or, at least, that the Fourth Circuit's opinion favoring Duke effectively invalidated the regulations), and that such challenges must be brought in the D.C. Circuit when the rules were issued.

Sound complicated? It is. I've oversimplified things quite a bit (though I hope not at the expense of accuracy). While the result will turn on questions of statutory interpretation and administrative law, it is an important case. Environmental Defense argues the outcome will determine whether thousands of facilities may continue polluting without effective controls. The electric power industry, on the other hand, points to this study indicating that a loss for Duke will result in dramatically higher electricity prices and reduced reliability for many communities around the nation

For more background, see SCOTUSBlog's preview here. Some of the briefs are also available here. I hope to blog more on this case in the coming days.

UPDATE: This WP report suggests things went well for Duke Power at the oral argument (as one commenter below suggests as well). The transcript is here. I hope to comment on it and the jurisdictional question later tonight or tomorrow.

Craig Oren (mail):
Let me add a little to what Jonathan has said.

Under the Clean Air Act, a new or modified plant needs to comply with strict requirements. A "modification" is defined, roughly, as a physical change that increases emissions.

Imagine a coal-fired power plant built in the 1950s or 1960s, before modern pollution control statutes were passed. That plant has deteriorated as an electricity-producer, and it now runs (say) 30% of the time. The owner would prefer not to replace it with a new plant. Instead, the owner wants to renovate the plant (I hope that's a neutral enough term). The renovation would not increase the plant's maximum possible emissions in any hour. But it would make the plant more efficient to operate so that it would run (say) 60% of the time.

The question: would that plant be "increasing emissions"? Under a separate program, known as NSPS, EPA says the answer would be "no." In 1977, Congress defined the term "modification" to be the same as the NSPS definition. Did that require EPA to use the same regulatory approach as in NSPS? Or is EPA free to use different regulatory definitions in one program than the other?

Note that, even if EPA is right, Duke has another potential defense. It can say that its renovation is "routine maintenance" and therefore exempt from being considered a "physical change." The courts below did not address this issue, and presumably it would come up on remand.

The case, as you can see, is very complex. I hope that this discussion makes it a little more understandable, although I doubt it!

For the sake of full disclosure, let me say that I did not sign any of the briefs, but I am inclined to side with EPA.
11.1.2006 9:56am
Houston Lawyer:
All this litigation came up because of a change in policy by the Clinton administration. I understand that no new laws were passed, but that the administration's interpretation of existing law was changed.

If these old plants are as harmful as claimed, we should have congress change the law and do away with their grandfathered status. They have been grandfathered for decades now, but there is no reason that they should be grandfathered forever.
11.1.2006 10:22am
byomtov (mail):
Craig Oren,

Doesn't the issue of whether the plant is "increasing emissions" depend on what other ways of generating the additional power are reasonably available? The extra power generated, in your example, has been coming, or could come, from elsewhere. It seems to me that looking at a plant in isolation is the wrong way to approach the question.
11.1.2006 10:23am
Craig Oren (mail):
Keep in mind, byomtov, that increases in emissions have local as well as regional effects. From the point of view of a region, emissions haven't changed if the increase at one plant is offset by another plant that might be hundreds of miles away. But they certainly have changed from the point of view of someone breathing near the plant that has made the increase.
11.1.2006 10:34am
Mr L:

I thought that it wasn't limited to changes that would 'increase' emissions. Wasn't there a big flap a while back about a law that would exempt some upgrades, because plants were putting off maintenence and replacement of outdated components for fear of giving up grandfathered emissions requirements?
11.1.2006 12:02pm
byomtov (mail):
Craig Oren,

No doubt it's a tricky issue. By "elsewhere" I was suggesting other plants or generating methods as much as other locations.

If you want more power in a certain area you have to generate it somehow, and any plan to minimize emissions has to recognize this, and also of course consider the social costs of increased emissions.
11.1.2006 12:19pm
Craig Oren (mail):
Mr. L, a physical change needs to comply with new source regulations only if it would increase emissions. But your underlying point is right. The operators of electricity-generating units say that, if the regulations are tough, they will comply by not engaging in projects that require compliance with new source regulations. They would rather let the existing plants deteriorate.
11.1.2006 1:34pm
countertop (mail):
There should also be a recognition though, that when modifications are made, in almost every case (and in the DUke case), the net result is a more environmentally sound power plant (or any other type of facility). While the modifications may allow it to operate longer, those additional operations are largely happening at significantly more efficient levels than they were pre-modification.

As to the ultimate underlying question as to whether more hourse in service equals an increase in emissions - I can go either way but think its a determination that Congress needs to make.

I think its pretty safe to say, that amongst the 6 justices who weighed in on the topic this morning, there seems to be a unanimous agreement that its unfair for a regulator to change their interpretation of the rules and provide no meaningful opportunity to challenge or revist the underlying rule.

As to teh oral argument itself, Carter Phillips was brilliant (once again) and Sean Donohue struck me as not ready for prime time. His assertion that the plain language of these regulatory standards was clear and concise is, as Justice Roberts remarked at the time "an outrageous suggestion" and I thought Donohue just spiraled down from there.

Deputy Solicitor General Thomas Hungar did a workmans job arguing EPA's case, but simply paled in comparison to a master like Carter Phillips.
11.1.2006 2:37pm
countertop (mail):
I should also add, for the sake of full disclosure, I represented some utility and industry interests on the development of the underlying Bush NSR rules but had no direct involvement in the case before the Court (former Client submitted an Amicus, but I have subsequently changed positions - and industry focus).
11.1.2006 2:40pm
Pub Editor (mail):
I think the Eleventh Circuit tackled a very similar case, TVA v. Whitman, 336 F.3d 1236 (11th Cir. Jun. 24, 2003), in which Duke Energy was a co-plaintiff with the Tennessee Valley Authority.

I think one of the Volokh Conspirators breiefly blogged about that case when it came out, but I can't find that post right now.
11.1.2006 2:41pm
Craig Oren (mail):
It's great to have a posting about the oral argument -- thanks, countertop!

The TVA case concerned a process issue -- whether it was fair to have EPA's Environmental Appeals Board hear the case. The court didn't get to the merits, as I recall.
11.1.2006 3:38pm
countertop (mail):
No problem, Prof. Oren.

My apologize on the typos - I don't get paid to proof read blog comments, and so my usual typos are there for all to see.

After posting, in retrospect, I may have been a little hard on Sean Donohue. He was certainly prepared (and was up there arguing, as opposed to me just sitting in the audience), and his brief was well done, he just wasn't nearly as polished (or commanding of a presence) as either Hungar or Phillips and too easily allowed questions from the bench to trip him up.

Its also worth noting that Justice Breyer sparred with Carter Phillips, and probed him on the procedural issue (which really did, take up the majority of the argument - perhaps 65/35 procedural concerns/statutory interpretation concerns) but Phillips is a master of the game.

Also worth noting that both Ginsberg and Scalia stumbled over the archane CAA acronyms (NSPS and PSD in particular)
11.1.2006 4:12pm
Craig Oren (mail):
Thanks for the additional info. If it makes you feel better, I was told by EPA officials at the time that the Chevron oral argument was a disaster; that none of the justices except perhaps Justice Stevens understood even a trace of the substance.

Incidentally, you mentioned six justices. Did all nine sit?
11.1.2006 4:39pm
countertop (mail):
All nine sat.

Thomas and Stevens didn't ask any questions, Alito asked one as I recall.

BTW, apparantly I mis-heard the chief justice. He didn't say "outragous suggestion." Transcript has this exchange instead:

MR. DONAHUE: Well, the regulations were clear on their face. I mean, to determine the effect of 307 --

CHIEF JUSTICE ROBERTS: That's an audacious statement.

Your thoughts on Chevron are interesting. Were those political or career officials at EPA? If I recall the dates correctly, it was a decided while Carter was in office. I assume they would be happy with the results, though it seems to me that Chevron might be exhibit A in any debate over well meaning rules embarking on a slippery slope to regulatory overreach.
11.1.2006 5:06pm
Craig Oren (mail):
Chevron was decided in the Reagan administration; it concerned a Reagan administration decision to overturn a rule promulgated in the Carter Administration. The official who spoke most to me about it had both a political and career background, if that makes any sense. As I remember, the career staff didn't like the rule upheld in Chevron.

thanks again for the oral argument info. I'll read the transcript with interest.
11.1.2006 5:26pm
Kovarsky (mail):
from what i hear, today's other case marked the demise of teague at the hands of 28 usc 2254.
11.1.2006 7:07pm
Brian Potts (mail):
If you want more information on this case, I have written an article dealing with the Fourth Circuit's decision and EPA's rulemaking response. It will be published soon in the Ecology Law Quarterly. You can get a copy at
11.1.2006 10:14pm
Read the briefs and transcripts:
A lot of mistakes in these postings. First, Stevens asked many questions. The transcript is available on the S CT website. Also, the statement that the issue is that the modifications make the plants run more "efficiently" is simply false. The issue is that the plants run more hours in a year, thereby (all else being equal) producing more pollution per year (and the regulations AND statute measure pollution in tons per year). This was directly addressed by the First Circuit in Puerto Rican Cement. Third, the bald statement that this is about a change in interpretation by EPA is misleading. This is a hotly contested point. You are disagreed with by Judges Posner and Easterbrook, aside from many others. Please read their opinion in U.S. v. Cinergy, on these same issues.
Do you guys always comment before reading the briefs and cases?
11.2.2006 10:46am
Craig Oren (mail):
You remark:

Also, the statement that the issue is that the modifications make the plants run more "efficiently" is simply false. The issue is that the plants run more hours in a year, thereby (all else being equal) producing more pollution per year.

My comment: Of course, the reason why the plants run more hours in a year is that it is now more efficient to operate them.

Of course, you are entitled to your view of the merits, but I think a less strident tone would be appropriate.
11.2.2006 11:01am