Washington (Platts)--9Apr2010/540 pm EDT/2140 GMT

A victory for the Tennessee Valley Authority in a US court over a Clean Air Act lawsuit is likely to set a precedent for other courts attempting to define what constitutes exempt routine maintenance at coal-fired power plants.

Attorneys for coal-fired utilities see the March 31 decision by US District Court for Eastern Tennessee Judge Thomas Varlan for TVA as a bellwether for any future action against power plants under the Clean Air Act's New Source Review provisions. There are five pending court cases involving NSR and about 20 investigations of coal-fired units under way by the US Environmental Protection Agency.

"The fact of the matter is this is precedent," said Richard Alonso, counsel in Bracewell & Giuliani's Environmental Strategies Group in Washington.

Alonso called the judgment for TVA a "very big setback" for EPA under the Obama administration and "a very big win for industry."

"Industry is going to want to take the opinion and apply it everywhere it can," Alonso said. The federal government, however, "is going to try to limit its application."

William Moore, who represented the plaintiffs, said the groups are considering whether to appeal the ruling to the 6th US Circuit Court of Appeals.

TVA this week said "it is pleased by the ruling and that our interpretation of new source review was upheld by the court."

There have been dozens of NSR cases against utilities dating to the Clinton administration. Varlan's dismissal of the suit against TVA marks the first time a coal-fired plant owner successfully defended large projects as "routine maintenance, repair and replacement" and as such excluded from Clean Air Act permits and penalties.

The case involved a 2001 suit by the National Parks Conservation Association, Sierra Club and Our Children's Earth Foundation that claimed TVA's replacement of an economizer and a superheater at its Bull Run plant during a planned outage in 1998 violated NSR requirements. The 950 MW unit in Clinton, Tennessee, began operation in 1967.

Varlan said his ruling was based on the "nature and extent" of the projects, their purpose, the frequency of such projects both at the unit and across the industry, and their cost. Considering what is routine for an entire industry is seen as key by utilities.

"This court answers the question of whether a project at a particular unit is 'routine' by asking how frequently that type of project is done within the industry, as well as how frequently the project is performed at the particular unit," Varlan said.

"The court is not overly persuaded by the fact that the projects at issue are performed relatively infrequently at the units themselves, particularly given the court's finding of economizer and superheater replacements to be common in the industry and the frequency with which such elements have been replaced at units across the industry," he wrote.

--Cathy Cash, cathy_cash@platts.com