Court finds in favor of EPA in Cinergy new source review case

Court finds in favor of EPA in Cinergy new source review case

Washington (Platts)--17Aug2006

The Seventh Circuit Court of Appeals on Thursday ruled that the US
Environmental Protection Agency can best determine if emissions have increased
after a power plant is upgraded and thus trigger new source review
requirements under the Clean Air Act.

The decision comes in response to an interlocutory appeal by Cinergy,
which was sued by EPA during the Clinton administration for allegedly
modifying its coal-fired power plants without meeting NSR requirements for
permits and pollution controls.

Cinergy, which has since merged into Duke Energy, argued that the plant
upgrades were outside NSR because the units' hourly emissions rate did not
rise. EPA said the plant changes resulted in an increase in annual emissions
and so were in violation of NSR.

The Seventh Circuit concluded that the argument made by Cinergy, now Duke
Energy, "is unconvincing." The NSR provisions in the Clean Air Act "are at one
in defining a modification as a physical change in a plant that results in an
increase in emissions, but are silent on whether the increase is in the hourly
rate or emissions or in some other rates," the three-judge panel wrote. "The
task of deciding was left to EPA."

Duke Energy said it was "disappointed" with the Seventh Circuit's ruling,
but believes that the decision on emission increases will ultimately be
decided by the Supreme Court.

In 2005, Duke Energy prevailed in the Fourth Circuit Court of Appeals
over a similar lawsuit filed by EPA in 2000 involving changes at its North
Carolina fleet of coal-fired power plants.

The underlying case involving the former Cinergy coal plants will be
returned to the US District Court for the Southern District of Indiana for a
decision on whether emissions increased at the upgraded plants and whether the
plants qualified for a "routine maintenance" exclusion from NSR. The district
court had agreed with EPA's position, but allowed the company to seek the
provisional appeal.

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