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Sixth Circuit Opens the Door to Greater EPA Involvement in Modifications to Existing Emissions Sources

Environmental Law Update
March 29, 2013

In a case arising in Michigan, the Sixth Circuit Court of Appeals has held that the EPA possesses the ability to sue to prevent construction of a modification to an emissions source when it disputes the source's emissions projections. The District Court, whose decision was hereby overturned, had held that EPA must await actual emissions results before taking action against a source whose modifications in practice have resulted in significant increased emissions. This decision dramatically decreases regulatory certainty, and thus will likely cast a chill over planned facility upgrades.

The Clean Air Act's ("CAA") New Source Review program, established by the 1977 amendments to the Act, requires new sources of air pollution to receive a permit, and existing sources to obtain a permit if they undergo a "major modification." A major modification can be found to have been made when a significant emissions increase results. 

When proposing a project, the source's operator projects the post-change emissions and compares those projections to EPA-derived emission limits. How the projections relate to the EPA limits determine what regulatory requirements apply – from requiring a new permit and pollution control equipment, or new record keeping and reporting requirements, down to no additional regulatory requirements. If these projections prove to be wrong, EPA has enforcement authority to levy considerable fines and penalties against a facility whose emissions have significantly increased in ways not anticipated by their projections. 

In this case, DTE Energy Co. asserted that its projections, as reported to the Michigan DEQ and the U.S. EPA, did not trigger any additional regulatory requirements. Michigan did not disagree, but the U.S. EPA issued a Notice of Violation asserting that the proposed project would result in a significant emissions increase that constituted a "major modification." Litigation resulted, in the course of which, DTE moved for summary judgment on the argument that it had satisfied the recordkeeping requirements and unless and until EPA could demonstrate that actual emissions data showed DTE's projections to be incorrect, the agency could not bring an enforcement action. 

The District Court agreed with DTE and granted DTE's motion for summary judgment. However, the Sixth Circuit has now reversed, opening the way for EPA to challenge the accuracy of DTE's projections in district court, even in the absence of actual emissions data. As the dissent in this case points out, the result of this decision is almost indistinguishable from granting EPA prior approval authority before construction may begin – an authority that the 6th Circuit recognized that EPA does not have under the CAA. This decision has implications that go well beyond power plant construction, as the principles involved here apply to many emissions sources that undergo modifications. This ruling arguably opens the door to increased EPA involvement in the pre-construction phase during the modification of any existing emissions source – allowing the agency greater latitude to second-guess the facility's projections before construction even begins.

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