09-3344, 09-3350, 09-3351, U.S. v. Cinergy Corp, et al.

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Environmental Law
Clean Air Act; plant modification permits; expert testimony

The jury verdict regarding a plant’s emissions of sulphur dioxide related to modifications to coal-fired electric power plants made without obtaining permits must be reversed because the modifications did not increase the plants’ hourly-rate capacity for producing electricity, and under the Indiana Plan in effect at the time for implementing the Clean Air Act hourly capacity determined whether a permit was required; and the district court erred when it allowed expert testimony because the formula the two experts proposed to use was designed for use with baseload electric generating plants, but the Wabash plant at issue in this case operated as a cycling rather than a baseload plant.

“Section 43 of that plan defined ‘modification,’ so far as bears on this case, as ‘an addition to an existing facility or any physical change, or change in the method of operation of any facility which increases the potential . . . emissions . . . of any pollutant that could be emitted from the facility.’ 325 Ind. Admin. Code § 1.1-1, p. 5 (1980). Cinergy contends that ‘increases the potential . . . emissions . . . that could be emitted from the facility’ means increases the hourly rate at which the plant can, by generating more electricity, emit more pollution: a measure of capacity. That is the natural interpretation, the key words being ‘could be.’ To read them as modifying ‘pollutant’ (‘any pollutant which could be emitted from the facility’) would not make sense because reference to increased emissions presupposes that the plant already emits the pollutant in question. And whether Cinergy’s interpretation is correct or not, the EPA does not argue that section 43 can be read to define a modification as a change that increases only annual emissions. Rather, it argues that read as Cinergy reads it section 43 is unlawful because the statute and implementing regulation (as we said in our first opinion) define modification in terms of increasing actual emissions rather than hourly capacity. The agency adds that, bowing to the D.C. Circuit’s decision in Alabama Power Co. v. Costle, 636 F.2d 323, 400 (D.C. Cir. 1979), it had made clear, even before section 43 was adopted and approved by it as part of its approval of Indiana’s plan, that the statute and regulation required use of the actual emissions standard. Requirements for Preparation, Adoption, and Submittal of Implementation Plans; Approval and Promulgation of Implementation Plans, 45 Fed. Reg. 52676, 52700 (Aug. 7, 1980). And it had noted that Indiana had agreed (in the 1981 amendment to its plan, noted above) to update its definitions to conform to the EPA’s new interpretation and that the EPA had said it would ‘rulemake on these revised [state] regulations . . . upon their submittal.’ Approval and Promulgation of Implementation Plans: Indiana, 46 Fed. Reg. 54,941-01, 59,942 (Nov. 5, 1981). So, says the EPA, Cinergy was ‘on notice’ that section 43 did not mean what it said.
“The district court bought this argument. But it’s untenable. The Clean Air Act does not authorize the imposition of sanctions for conduct that complies with a State Implementation Plan that the EPA has approved. See 42 U.S.C. § 7413(a)(1). The EPA approved Indiana’s plan with exceptions that did not include Section 43, thinking that Indiana would submit a revised plan which the EPA would then approve. Which is what happened-only it took 12 years.”

With regard to the admissibility of expert testimony, “The main problem with the proposed testimony was that the formula that the two experts proposed to use for their forecast was one designed for use with baseload electric generating plants. …

“Cinergy’s Wabash plant is old; old plants are more costly to operate than new ones; the Wabash plant is therefore operated as a cycling rather than a baseload plant and so does not operate at full capacity. There can be no presumption that an increase in its annual capacity would result in a proportionately equal increase in its output. …

“The formula that the EPA’s experts used predicts that the effect of the modifications on generation would be proportionately equal to the increase in annual capacity. If capacity increased by 10 percent, generation would increase by 10 percent. The formula doesn’t work for a cycling facility. Other methods are used for predicting increased generation from increased standby capacity, but they are not the methods used by the EPA’s experts. Their evidence should not have been admitted.”

Reversed.

09-3344, 09-3350, 09-3351, U.S. v. Cinergy Corp, et al., Southern District of Indiana, Indianapolis Division, Mc Kinney, J., Posner, J.

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