Supreme Court Rules in Duke Energy Case

May 16, 2007
Client Alert Newsletter May 2007

On April 2, the U.S. Supreme Court issued its long-awaited opinion in Environmental Defense v. Duke Energy Corp. This case centered on the U.S. Environmental Protection Agency's ("EPA's") ability, in enforcing the Clean Air Act's Prevention of Significant Deterioration ("PSD") provisions, to utilize a definition of "modification" at odds with the definition of the term used under the Clean Air Act New Source Performance Standards ("NSPS").

EPA sued Duke Energy in 2000, alleging that Duke violated PSD requirements in 29 boiler tube replacement or redesign projects on various coal-fired electric generating units ("EGUs"). EPA stated that the projects constituted "major modifications" under relevant PSD regulations resulting in annual emission increases requiring PSD permits. Duke argued that none of the projects constituted a "major modification" because none increased hourly emission rates from the affected units. The district court granted Duke's motion for summary judgment and the Fourth Circuit affirmed, reasoning that Congress intended to create identical statutory definitions of the term "modification" in the NSPS and PSD provisions. Thus, the term also must be interpreted identically in the NSPS and PSD regulations to require, consistent with NSPS provisions, an increase in hourly emission rate to trigger PSD permitting.

The Supreme Court vacated and remanded the Fourth Circuit's decision, holding that the court implicitly invalidated the PSD regulations in contravention of statutory limitations against challenging the validity of regulations in enforcement proceedings. On April 16, the Supreme Court denied certiorari in a Seventh Circuit case, Cinergy Corp. v. United States, which had upheld EPA's use of an annual emissions increase evaluation in determining whether a significant net emission increase resulted from facility modifications. The case originated as an enforcement proceeding against Cinergy for NSR review violations.