U.S. v. Southern Indiana Gas and Elec. Co.

• Decision Date: 13 February 2003
• Docket Number: IP 99-1692-C-M/F.
• Citation: 245 F.Supp.2d 994
• Parties: UNITED STATES of America, Plaintiff, v. SOUTHERN INDIANA GAS AND ELECTRIC COMPANY, Defendant.
• Court: U.S. District Court — Southern District of Indiana

245 F.Supp.2d 994

UNITED STATES of America, Plaintiff, v. SOUTHERN INDIANA GAS AND ELECTRIC COMPANY, Defendant.

IP 99-1692-C-M/F.

United States District Court, S.D. Indiana, Indianapolis Division.

February 13, 2003.

COPYRIGHT MATERIAL OMITTED

Steven D. Ellis, Washington, DC, Thorn-Clean as E. Kieper, Indianapolis, IN, for Plaintiff.

Kevin A. Gaynor, Vison & Elkins LLP, Washington, DC, John R. Maley, Barnes & Thornburg, Indianapolis, IN, Angila M. Retherford, Vectren Corporation, Evansville, IN, for Defendant.

ORDER ON SOUTHERN INDIANA GAS AND ELECTRIC COMPANY'S MOTION FOR SUMMARY JUDGMENT ON FAIR NOTICE

McKINNEY, Chief Judge.

                TABLE OF CONTENTS
                PAGE
                I.  BACKGROUND...........................................................997
                A. RELEVANT PROVISIONS OF CLEAN AIR ACT........................997
                1. New Source Performance Standards..................................997
                2. Prevention of Significant Deterioration................................998
                3. Routine Maintenance Exemption .....................................998
                B. DISPUTE OVER SCOPE OF ROUTINE MAINTENANCE................999
                C. FACTS...............................................................999
                1. SIGECO's Projects................................................1000
                a. The 1991 Project...............................................1000
                b. The 1992 Project...............................................1001
                c. The 1997 Project...............................................1002
                2. Public Statements about Routine Maintenance.........................1002
                3. Industry Letters from Utility Air Regulatory Group....................1003
                4. The January 1998 Non-Applicability Determination....................1003
                5. Other Projects Throughout Industry.............:...................1004
                6. Depositions from State EPA Officials.................................1004
                II.  SUMMARY JUDGMENT STANDARD .....................................1006
                III.  DISCUSSION............................................................1007
                A. IS THE EPA'S INTERPRETATION REASONABLE....................1007
                B. FAIR NOTICE DOCTRINE...........................................1010
                C. APPLICATION OF FAIR NOTICE DOCTRINE ........................1012
                1. Notice Available for All Three Projects...............................1013
                a. Notice Provided by the Routine Maintenance Exemption Language ......................................................1013
                b. The WEPCO Decision..........................................1015
                1.—Comparison of WEPCO to SIGECO'S Projects.................1016
                2.—The Clay Memo............................................1018
                2. Additional Notice After the 1992 Project..............................1020
                

                a. Preamble from the Federal Register.........1020
                b. IDEM'S 1998 Non-Applicability Determination...........................1021
                IV.   CONCLUSION....................................................1024
                

This matter is before the Court on defendant Southern Indiana Gas and Electric Company's ("SIGECO") Motion for Summary Judgment on Fair Notice on the United States' ("the Government") claims that it violated the Clean Air Act ("CAA"), 42 U.S.C. § 7401, et seq. The parties have fully briefed their arguments, and the motion is now ripe for ruling.

I. BACKGROUND

A. RELEVANT PROVISIONS OF THE CLEAN AIR ACT

This motion does not require the Court to determine if SIGECO's projects actually violated the CAA. The Court need only determine whether SIGECO had fair notice of the Government's interpretation of the routine maintenance exemption. However, some discussion of the CAA provisions at issue in this case is necessary before turning to the substance of the motion.

The purpose of the CAA is "to protect and enhance the quality of Nation's air resources so as to promote the public health and welfare and productive capacity of its population." 42 U.S.C. § 7401(b) (1994). To accomplish this purpose, Congress required the Administrator of the Environmental Protection Agency (the "EPA") to identify and prepare air quality criteria for air pollutants, and promulgate national primary and secondary ambient air quality standards ("NAAQS") for each pollutant. Id. § 7408-09. States were then required to classify areas where the air quality was better or worse than the NAAQS for each pollutant. An area that meets the NAAQS for a particular pollutant is designated an "attainment" area, while areas that do not meet the NAAQS are called "non-attainment" areas. Id. § 7407(d). An area that cannot be classified due to insufficient data is "unclassifiable." Id. According to the Government, Culley Station, the area at issue in this action, was at all relevant times designated as either attainment or unclassifiable for the following pollutants: SO₂, NO₂, and PM/PM-10. Comp. § 17.

1. New Source Performance Standards

As part of the 1970 CAA Amendments, Congress required the EPA to promulgate New Source Performance Standards ("NSPS") in order to regulate emissions from new pollution sources. These standards applied not only to newly constructed pollution sources, but also to modifications of existing sources that created new or increased pollutant emissions.¹ Indeed, Congress defined "new sources," as:

Any stationary source, the construction or modification of which is commenced after the publication of regulations (or, if earlier, proposed regulations) prescribing a standard of performance under this section which will be applicable to such source.

42 U.S.C. § 7411(a)(2) (emphasis added). Congress defined modification as:

any physical change in, or change in the method of operation of, a stationary source which increases the amount of any air pollutant emitted by such source or which results in the emission of any air pollutant not previously emitted.

42 U.S.C. § 7411(a)(4) (emphasis added).

Owners or operators of new sources are prohibited from operating those sources in violation of NSPS after the effective date of the applicable NSPS to such source. 42 U.S.C. §§ 7411, 7414. Any owner or operator of an affected facility subject to NSPS must furnish written notice to the EPA of any physical change that may increase the emission rate to which a standard applies as soon as practicable before the change is commenced. 40 C.F.R. § 60.7(a)(4).

2. Prevention of Significant Deterioration Program

In an effort to prevent the relatively unpolluted areas (attainment or unclassifiable areas) from allowing emissions to increase to the maximum levels permitted by NAAQS, Congress included the Prevention of Significant Deterioration requirements ("PSD") in the 1977 CAA Amendments. Part C of Title I of CAA, 42 U.S.C. §§ 7470-7492. § 7471, in conjunction with § 7410(a), requires states to adopt state implementation plans ("SIP") that "contain emissions limitations and such other measures as may be necessary ... to prevent significant deterioration of air quality ..." According to the applicable SIP regulations, major stationary sources in an attainment or unclassifiable area must obtain a PSD permit from the state prior to constructing a major modification. 40 C.F.R. § 52.21(1). As with NSPS, these two elements constitute a major modification (which trigger PSD): (1) any physical change; and (2) a significant net emissions increase. The PSD program also requires sources contemplating a major modification to install and operate best available control technology ("BACT"), as defined in 40 C.F.R. § 52.21(b)(12) and 42 U.S.C. § 7479(3), for each pollutant regulated under the CAA.

The Court notes that the focus of the parties in this motion is on the physical change part of the modification definition. The parties have not briefed the issue of whether or not emissions have increased as a result of SIGECO's projects. Of course, the EPA has the burden to prove that SIGECO's projects satisfy both prongs of the CAA modification definition. When analyzing whether or not a project amounts to a modification, the most important difference between NSPS and PSD is the method by which the respective programs measure emissions. For the NSPS program, the EPA must determine whether a change increases the hourly rate of emissions at a facility. 40 C.F.R. § 60.14. For the PSD program, on the other hand, the EPA regulations provide that an increase in the total amount of annual emissions activates the modifications provisions. 40 C.F.R. § 52.21(b)(3). In short, the crucial issue of whether or not emissions have increased as a result of the SIGECO's projects remains an open question after this motion.

3. Routine Maintenance Exemption

As the Seventh Circuit observed in a landmark CAA decision, the definition of "any physical change" is broad: "Even at first blush, the potential reach of these modification provisions is apparent: the most trivial activities—the replacement of leaky pipes, for example—may trigger the modification provisions if the change results in an increase in the emissions of a facility." Wis. Elec. Power Co. v. Reilly, 893 F.2d 901, 905 (7th Cir.1990) ("WEPCO"). However, both NSPS and PSD contain a regulatory exemption to the "physical change" definition that may be relevant in this case. 42 C.F.R. § 52.21(b)(2)(iii) provides:

(iii) A physical change or change in the method of operation shall not include:

(a) Routine maintenance, repair, and replacement.

40 C.F.R. § 52.21(b)(2)(iii) (PSD program); see 40 C.F.R. § 60.14(e) (NSPS program). These regulations, and the statutes from which they derive, are the crux of this case.²

B. DISPUTE OVER SCOPE OF ROUTINE MAINTENANCE

To provide context for the evidence offered by the parties on the fair notice motion, the Court will first briefly outline the parties' positions. The Government claims that SIGECO's projects in 1991, 1992, and 1997 (the "projects") violated the CAA because they were modifications that triggered NSPS and PSD permitting and BACT provisions. As stated above, neither NSPS nor PSD is triggered unless the projects were (1) physical changes that (2) increased...