June 14, 2017

U.S. v. DTE Energy Co. (DTE II)

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U.S. v. DTE Energy Co. (DTE II), 845 F.3d 735 (6th Cir. 2017) (Posted 06/13/2017)

U.S. v. DTE Energy Co. (DTE II), 845 F.3d 735 (6th Cir. 2017)
By Carlos Evans (carlosrevans@gmail.com), Vice Chair of Membership

In U.S. v. DTE Energy Co. (DTE II), 845 F.3d 735 (6th Cir. 2017), the Court of Appeals for the Sixth Circuit reversed the district court’s grant of summary judgment to DTE.  The court concluded that there was a genuine dispute of material fact, precluding summary judgment for DTE, regarding DTE’s compliance with the NSR program’s statutory and regulatory preconstruction requirements.

Factual Background

In 2010, DTE planned a three-month-long overhaul of Unit 2 at DTE’s Monroe Facility, which was the largest coal-fired power plant in Michigan. The project required approximately 83 days, 600 construction workers, and $65 million. DTE projected a post-project emissions increase of 3,701 tons per year of sulfur dioxide and 4,096 tons per year of nitrogen oxides. DTE initially characterized the project as routine maintenance, repair and replacement activities, a designation that would have exempted the project from the NSR program. DTE also determined that the entire emission increase fell under the demand growth exclusion, which would have exempted the project from the necessity of a NSR pre-construction permit. EPA filed an enforcement action, arguing that the project was a major modification under the NSR program that required a preconstruction permit and challenging DTEs routine-maintenance and demand growth exclusion designations.  Post-project data showed that emissions decreased.

DTE I

In DTE I, 711 F.3d 643 (6th Cir. 2013), DTE moved for summary judgement in the district court, arguing that EPA could not bring a NSR enforcement action unless and until post-project emission data demonstrated that DTE’s projections were incorrect. The district court granted DTE’s motion for summary judgement. On appeal, the court reversed and remanded, holding that a “preconstruction projection is subject to an enforcement action by EPA to ensure that the projection is made pursuant to the requirements of the [NSR] regulations.” Id. at 652.  At the time of the remand, the court knew that post-project data showed an emissions decrease.

DTE II

In DTE II, 845 F.3d 735 (6th Cir. 2017), EPA argued that DTE violated NSR regulatory requirements by failing to base its predictions on “all relevant information” and ignoring its own modeling when claiming that any increase was due to demand increases. The district court granted summary judgment to DTE, holding that “EPA is only entitled to conduct a surface review of a source operator’s preconstruction projections” and that “[anything] beyond this cursory examination would allow EPA to ‘second-guess’ a source operator’s calculations” in violation of DTE I. Id. at 738.

In a 2-1 decision, the court reversed and remanded, concluding that there are still “genuine disputes of material fact that preclude summary judgment for DTE regarding DTE’s compliance with NSR’s statutory preconstruction requirements and with agency regulations implementing those provisions.” Id. at 740-741. Judge Daughtrey delivered the opinion of the court. Judge Batchelder delivered a separate opinion, concurring only in judgement. Judge Rogers delivered a dissenting opinion.

In analyzing EPA’s role in the NSR process, Judge Daughtrey explained that “EPA must engage in actual review” of an operator’s demand growth exclusion and projection-related claims, not in a surface review or cursory examination. Id. at 738. In order for EPA to conduct its review, an operator has the burden to demonstrate a factual basis for its claims, something that was not done by DTE. Instead, “[the] record before us is devoid of any support for [DTE’s] thoroughly superficial calculation.” Id. at 739.

Moreover, Judge Daughtrey concluded that DTE did not demonstrate that increased emissions were the product of demand growth. In order to successfully claim the demand growth exclusion, an operator “must establish (1) that the projected post-construction emissions could have been accommodated during the preconstruction period and (2) that the projected emissions are unrelated to the construction project.” Id. at 739-740. Judge Daughtrey concluded that DTE did not and could not prove either requirement. Id. at 740.

Judge Daughtrey also stated that EPA’s evaluation of emissions projections does not create a “de facto prior approval system.” Id. at 740. Once an operator submits the required information, “the operator does not have to delay construction….” Id. If the operator begins construction, however, without waiting for EPA’s determination and without a preconstruction permit, then “the operator risks penalties and injunctive relief requiring mitigation of illegal emissions, a possible shut down of the unit, or a retrofit with pollution controls to meet emissions standards.” Id.

Finally, Judge Daughtrey stated that, now that DTE I is the law of the circuit, “actual post-construction emissions have no bearing on the question of whether DTE’s preconstruction projections complied with the regulations.” Id. at 741. An “operator who begins construction without making a projection in accordance with the regulations is subject to enforcement, no matter what post-construction data later shows.” Id.

Judge Batchelder, concurring in judgment only, stated that she “would very much like to agree” with DTE, particularly given that the actual emissions data showed an actual emissions decrease. Id. at 741. However, “DTE I’ s inescapable actual holding was that USEPA may use its own expert’s preconstruction predictions to force DTE to get a PSD construction permit …” Id. at 744. Regarding the relevance of post-construction data, “DTE I still remanded for a ruling on the pre-construction projections” even though the court knew post-construction data showed an emissions decrease, “rendering the actual emissions legally irrelevant.” Id. at 744. Judge Batchelder concluded that the appeal did not present an open issue.