Supreme Court to review Duke Energy Clean Air Act ruling

Supreme Court to review Duke Energy Clean Air Act ruling

Washington (Platts)--15May2006

The US Supreme Court on Monday said it would hear a lawsuit alleging that
Duke Energy violated the "New Source Review" provisions of the Clean Air Act.

The decision is considered a setback for the power sector and the Bush
administration, both of which had urged the high court not to take the case.
The outcome of the case likely will have major policy and economic
implications for power companies across the country.

The case began in 2000, when the Clinton administration sued Duke for
modifying several of its power plants without going through NSR. Duke argued
that it was not subject to the program because its post-modification emissions
did not increase on an "hourly" basis. The Clinton administration said that
was irrelevant, because the modifications allowed the plants to operate for
longer periods of time, thereby increasing their "annual" emissions levels.

The Bush administration, which inherited the case when it assumed power
in 2001, agreed -- at least for a while.

Duke won the first round of the convoluted legal battle in 2003, when a
federal district court in North Carolina sided with the company and against
the Bush administration. Duke scored an even bigger victory last June, when a
three-judge panel of the Fourth Circuit Court of Appeals in Richmond,
Virginia, affirmed the district court's ruling. The Bush administration
appealed that ruling to the full Fourth Circuit, but the court refused to
rehear the case.

At that point, a host of states and environmental groups urged the
administration to appeal the case to the Supreme Court, but the administration
refused. Instead -- much to the chagrin of the states and groups -- it
proposed last fall to revise the NSR program so that any power company could
use the hourly emissions test that it had argued was illegal in the Duke case.

The environmental groups appealed the case to the Supreme Court in
December, and the states sided with them last month. The following day, both
Duke and the Bush administration filed papers urging the court to reject the
case. The administration said no further review is necessary because it
"believes it can address any difficulties" stemming from the Fourth Circuit's
ruling through the rulemaking process that the US Environmental Protection
Agency launched last October.

The groups and the states argued that the high court needed to take the
case in order to resolve the discrepancies between the Fourth Circuit's ruling
and another NSR decision handed down last summer by the US Circuit Court of
Appeals in Washington. The groups say the DC Circuit ruling makes it clear
that the hourly emission test that is favored by Duke -- and now, the
administration -- is illegal.

The high court's decision to take the case opens the door to a host of
possible outcomes. Should the court rule against Duke, the Bush administration
would be hard-pressed to promulgate a rule based on the industry-backed hourly
emissions test. If Duke prevails, the Clinton-era NSR enforcement initiative
could be left in shambles.
---Brian Hansen, brian_hansen@platts.com

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