Michigan Utility Seeks Supreme Court Review of EPA’s New Source Review Enforcement Authority

On July 31st, Michigan utility DTE Energy Company (DTE) filed a petition for a writ of certiorari seeking Supreme Court review of EPA’s New Source Review (NSR) enforcement authority as relates to DTE’s coal-fired power plant in Monroe, Michigan.  DTE seeks to overturn United States v. DTE Energy Co., 845 F.3d 735 (6th Cir. 2017) (“DTE II”), which addresses the issue of whether EPA’s NSR enforcement authority permits it to challenge a plant operator’s emissions projections for a project before construction and operation begin.  In its petition, DTE argues that NSR is triggered only when a physical change to an existing plant in fact significantly increases the plant’s pollution.

The Clean Air Act’s NSR program prohibits the construction of new sources of pollution without a permit.  42 U.S.C. § 7475.  In addition to new power plants, the NSR permitting requirements apply to existing sources of pollution that undergo “major modifications,” that is, any physical or operational change that would result in a significant increase in net emissions of a regulated pollutant.  40 C.F.R. § 52.21(b)(2)(i).  EPA regulations require plant operators to make pre-construction projections of whether and to what extent emissions will increase following construction.  While a NSR permit is required only if the operator projects that the project will cause a significant net emissions increase, 40 C.F.R. § 52.21(a)(2)(iii), reporting and monitoring obligations also attach for projects that create a “reasonable possibility” that the project may result in a significant emissions increase.  67 Fed. Reg. 80,186, 80,191 (Dec. 31, 2002).

DTE began a project to replace old boiler tubes in its Monroe 2 power plant in March 2010, and calculated that the project would create a reasonable possibility of an emissions increase.  The day before construction commenced, DTE submitted a notification to the Michigan Department of Environmental Quality (MDEQ) stating that it predicted an increase in post-construction emissions 100 times greater than the minimum necessary to constitute a “major modification” under the NSR program.  However, DTE characterized the project as routine maintenance, and also reported that the entire emissions increase was the result of consumer demand growth.  Both designations, if accurate, would exempt the project from NSR—though DTE did not provide any evidence supporting its decision to classify the project as such.

EPA filed an enforcement action in district court, arguing that the project required a permit under the NSR program.  DTE agreed that it had not obtained a NSR permit before beginning construction, but took the position that it did not have to.  Instead, DTE argued that it had satisfied all of its Clean Air Act obligations by projecting post-construction emissions, determining that they did not constitute a major modification, reporting those findings to the MDEQ, and continuing to monitor the project during construction.  So long as those pre-project requirements were met, DTE argued, EPA’s NSR enforcement authority would be triggered only if the project in fact caused a significant increase in emissions in its post-construction operations.

The district court initially granted summary judgment to DTE, finding that EPA’s enforcement action was premature because construction had not yet produced an actual increase in emissions.  The Sixth Circuit reversed and remanded in United States v. DTE Energy Co., 711 F.3d 643, 648 (6th Cir. 2013) (“DTE I”), holding that EPA is authorized to bring an enforcement action based on projected emissions increases, and without first demonstrating that emissions had actually increased as a result of the project.  The district court again entered summary judgment for DTE on remand.  Then, hearing the case a second time, the Sixth Circuit held that while DTE was not required to secure the EPA’s approval of its emissions projections or the Monroe 2 project before beginning construction, the Clean Air Act permitted EPA to challenge those predictions prior to the point at which the project is built.  The court commented, “applicability of NSR must be determined before construction commences and . . . liability can attach if an operator proceeds to construction without complying with the preconstruction requirements in the regulations.”  DTE II, 845 F.3d at 741.

DTE’s cert petition emphasizes its argument that EPA’s enforcement authority should not attach because the Monroe 2 project did not in fact cause a significant increase in emissions.  The petition asks the Court to rule on the question of “whether, contrary to the text of the statute and EPA’s regulations, the Government can treat a maintenance project that demonstrably has not caused a significant increase in emissions as a major modification that triggers NSR permitting requirements.”  DTE argues that the Court should hear the case because:

Left standing, the decision below threatens to paralyze substantial maintenance projects throughout the nation.  If NSR can be triggered, and penalties imposed, even when an operator correctly predicts that a project will not increase emissions, then operators are left with no way to meaningfully assess the costs and benefits of proceeding with such projects.

EPA’s response is due September 1st.

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D.C. Circuit Orders NSPS Litigation to Remain in Abeyance Indefinitely

Today the D.C. Circuit issued, on its own initiative, an order indefinitely holding in abeyance the litigation over the EPA’s New Source Performance Standards in North Dakota v. EPA.  The succinct order reads as follows:

It is ORDERED, on the court’s own motion, that these cases remain held in abeyance pending further order of the court.

Respondent is directed to file status reports at 90-day intervals beginning October 27, 2017.

The parties are directed to file motions to govern future proceedings in these cases within 30 days of the conclusion of EPA’s proceedings.

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DOE Releases Annual Wind Market Reports

On Tuesday, DOE released three reports covering wind-power trends and developments: the 2016 Wind Technologies Market Report, the 2016 Distributed Wind Market Report, and the 2016 Offshore Wind Technologies Market Report.

The eleventh annual Wind Technologies Report summarizes trends and new developments in utility-scale, land-based wind turbine installation, technology, manufacturing, and supply.  The report also summarizes trends and developments in wind power performance, costs, and pricing.  It also provides an overview of the market factors and federal and state policies that are impacting the sector, and forecasts potential near-term market developments.  Highlights of the report include that in 2016, 8,203 MW of new wind capacity was added to the nation’s energy portfolio representing the third largest source of new generating capacity in the US, wind power purchase agreement prices continue to be low, and the “federal production tax credit remains a core motivator for wind power deployment.”  A presentation on the report and associated data tables are posted here.

The Distributed Wind Market Report provides an overview of trends and developments in and drivers of the domestic distributed wind market.  Highlights of the report include that in 2016, 45.4 MW of distributed wind energy was installed across 25 states and Guam, and a combined $12.8 million in federal, state, and utility incentives were given out in 2016 to support the development of distributed wind projects. Data tables associated with the report are posted here.

The Offshore Wind Technologies Report provides a global overview of offshore wind projects that were operational by December 31, 2016, and quantitative information about domestic trends and developments through the second quarter of 2017.

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D.C. Circuit Orders West Virginia Case to Remain in Abeyance

Today, the D.C. Circuit issued, on its own initiative, an order extending the abeyance period of the consolidated cases challenging the Clean Power Plan for another 60 days.  The court also directed EPA to continue to file status reports at 30-day intervals.  In a concurring opinion, Judges Tatel and Millett observed that the Supreme Court’s stay, when combined with the D.C. Circuit’s abeyance, effectively relieves EPA of its affirmative statutory obligation to regulate greenhouse gases under Massachusetts v. EPA, 549 U.S. 497, 533 (2007) for the indefinite future.  The concurring opinion concludes that “[q]uestions regarding the continuing scope and effect of the Supreme Court’s stay, however, must be addressed to that Court.”

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California Releases Clean Power Plan Compliance Plan

While the federal government has slated the Clean Power Plan (CPP) for withdrawal, California continues to work toward compliance with the rule.  At the end of July, the California Air Resources Board released its CPP compliance plan, and expressed its belief that compliance with the CPP targets—namely the reduction of greenhouse gas emissions from affected electrical generating units by one third from 2005 levels—is readily achievable.  According to the report, the compliance plan is designed to meet the CPP’s requirements and to integrate the federal targets with California’s existing climate programs, including its Cap-and-Trade Program and Mandatory Greenhouse Gas Reporting Regulation.  To ensure seamless integration, the Board notes that it has coordinated its CPP compliance efforts with the regulatory process to develop the next phases of California’s Cap-and-Trade Program and Mandatory Greenhouse Gas Reporting Regulation. In the plan, the Board expresses the hope that California’s existing suite of climate and energy sector programs will complement the federal rule and assist the state in meeting and exceeding the CPP targets.  To that end, the plan proposes to comply with the CPP through the “state measures” approach, under which the CPP would act as a federal overlay to California’s existing Cap-and-Trade Program and Mandatory Greenhouse Gas Reporting Regulation, with the goal of making the requirements of those state programs federally enforceable for the participating affected electrical generating units (other participants in the Cap-and-Trade Program will continue to have only state-enforceable obligations).

Noting the pending litigation and the EPA’s indication that it may propose revisions to the CPP, the Board indicated that it will track and respond to any proposed changes to the CPP.

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