U.S. v. Xcel Energy Inc.

• Decision Date: 27 September 2010
• Docket Number: Civil No. 10–2275 (PAM/JSM).
• Citation: 759 F.Supp.2d 1106
• Parties: UNITED STATES of America, Plaintiff,v.XCEL ENERGY, INC., Northern States Power Minnesota, and Xcel Energy Services, Inc., Defendants.
• Court: U.S. District Court — District of Minnesota

759 F.Supp.2d 1106

UNITED STATES of America, Plaintiff,

v.XCEL ENERGY, INC., Northern States Power Minnesota, and Xcel Energy Services, Inc., Defendants.

Civil No. 10–2275 (PAM/JSM).

United States District Court, D. Minnesota.

Sept. 27, 2010.

Friedrich A.P. Siekert, United States Attorney's Office, Minneapolis, MN, Justin A. Savage, Katherine L. Vanderhook, Thomas A. Benson, U.S. Department of Justice, Washington, DC, for Plaintiff.Molly Borg Thornton, Timothy R. Thornton, Briggs & Morgan, P.A., Minneapolis, MN, Debra Jezouit, William Bumpers, Baker Botts LLP, Washington, DC, for Defendants.

MEMORANDUM AND ORDER

PAUL A. MAGNUSON, District Judge.

This matter is before the Court on Plaintiff's Motion for Preliminary Injunction and Defendants' Motion to Dismiss. For the reasons that follow, Plaintiff's Motion is granted and Defendants' Motion is denied.

BACKGROUND1. Facts

Defendants include Xcel Energy, Inc., a multi-billion dollar, publicly traded utility holding company headquartered in Minneapolis, Minnesota. Xcel has four wholly owned subsidiaries, including Northern States Power–Minnesota (“NSP”) and Xcel Energy Services, Inc., which are named defendants in this case. NSP provides electric services to 1.4 million customers in Minnesota and the Dakotas. Xcel Energy Services, Inc. provides administrative and technical support for NSP and other subsidiaries.¹ (Kahal Decl. ¶¶ 15–17.)

Xcel owns several power plants across eight different states. Questions about alleged projects at two such plants, Sherburne County (“Sherco”) and Black Dog, located in Becker and Burnsville, Minnesota, respectively, are at issue in this case. At present, Sherco has three coal-fired units ranging from 750 to 900 megawatts in size, and Black Dog has two coal-fired units rated at 120 and 186 megawatts. Both plants emit vastly more pollutants than is necessary to be classified as “major emitting facilities” under the Clean Air Act (“CAA”), 42 U.S.C. § 7401 et seq. See 42 U.S.C. § 7479(1); Chatfield Decl. ¶¶ 11–12.

This action is centered on information requests issued by the Environmental Protection Agency (“EPA”) to Xcel pursuant to Section 114 of the CAA. EPA issued ten such information requests to Xcel and its subsidiaries on July 27, 2009. (Chatfield Decl. Ex. C.) Xcel responded adequately to eight of the ten requests; the two at issue here are requests 6 and 10. Request 6 sought, in part, documents regarding future capital projects at the Sherco and Black Dog plants within the next five years. Request 10 sought, in part, documents and a description of “planned additional generation capacity installations” within the next ten years. ( Id.) Xcel objected to the demands contained in requests 6 and 10, stating that

Xcel Energy is not producing documents related to projects that have not been implemented or completed at the [Black Dog and Sherco] Stations. EPA's request for such information exceeds the scope of EPA's authority under Section 114 of the CAA because it cannot assist EPA to determine whether Xcel Energy is in violation of the CAA.

( Id.)

Subsequently, on September 22, 2009, EPA again requested the information in requests 6 and 10. ( Id. Ex. D.) Xcel Energy refused to comply. ( Id. Ex. E.) EPA again contacted Xcel on January 8, 2010, and demanded that the company comply with requests for information concerning future capital projects. Additionally, EPA noted that it had learned, from information Xcel had provided EPA via the Minnesota Public Utilities Commission since the parties' previous exchange, that Xcel was planning a specific “uprate/capacity expansion” project on Unit 3 at the Sherco Plant. Thus, EPA also requested specific information on that project. ( Id. Ex. F.)

Xcel replied on January 28, 2010, and reiterated that it would not provide information on future capital projects at either Sherco or Black Dog. Xcel also stated that the Sherco uprate project remained uncommitted and therefore Xcel refused to submit documentation prior to commencing “actual construction.” Additionally, Xcel claimed that providing information on future projects would present an unreasonable burden. ( Id. Ex. G.)

EPA contacted Xcel again on March 2, 2010; this time, however, EPA narrowed its information request to only those capital projects planned for construction at Black Dog and Sherco two years hence. EPA also stated that Xcel could then provide periodic updates on projects planned for the remainder of the five-year period. EPA went on to explain that a two-year request window was reasonable because a permit application must be submitted prior to construction, and permit approvals take, at a minimum, eighteen months to two years.² ( Id. Ex. H.) In response, Xcel again rebuffed EPA, citing the fact that capital projects at Sherco and Black Dog were “potential projects” that “may never be implemented.” ( Id. Ex. I.) Yet EPA contends that Xcel had, just a few days earlier, told investors that it planned to spend $15 million in 2010 on Sherco and $10 million on Black Dog repowering in 2012. (Mem. Supp. Pl.'s Mot. for Prelim. Inj. at 11 [hereinafter “Pl.'s Supp. Mem.”].) The United States, on behalf of EPA, then filed suit to enjoin Xcel to produce the requested documentation and to order Xcel to pay a civil penalty fee of $37,500 per day for each violation, as authorized by statute. 42 U.S.C. § 7413(b); Federal Civil Penalties Inflation Adjustment Act of 1990, 28 U.S.C. § 2461, amended by 31 U.S.C. § 3701.

2. Statutory Authority

Congress enacted the CAA “to protect and enhance the quality of the Nation's air resources so as to promote the public health and welfare and the productive capacity of its population.” 42 U.S.C. § 7401(b)(1). The CAA required EPA to establish national ambient air quality standards (“NAAQS”) that specify the maximum permissible concentration of air pollutants in different areas of the country. Id. § 7409. States must then develop plans to comport with the NAAQS, called State Implementation Plans, that regulate individual sources of air pollution. Id. § 7410(a)(1)-(2).

The New Source Review (“NSR”) program was enacted to address newly constructed or modified pollutant-emitting facilities' impact on air quality. There are two parts to the NSR program; the first part encompasses those areas that have attained NAAQS standards, dubbed the Prevention of Significant Deterioration (“PSD”), id. §§ 7470–7479, while the second part addresses those areas that have failed to attain such standards. Id. §§ 7501–7515. Because Minnesota has attained NAAQS standards, only the PSD program applies in this case.

The PSD program prohibits major emitting facilities (such as Sherco and Black Dog, see id. § 7479(1)), from being constructed without first obtaining a PSD permit. Id. § 7475(a)(1). “Construction” is defined within the CAA as both newly constructed facilities and modifications to existing facilities. Id. § 7479(2)(C). Not all modifications are subject to the permitting requirements, however; EPA has required only those that constitute “major modifications” to obtain permits before construction commences. 40 C.F.R. § 52.21(a)(2). Construction “commences” when a major emitting facility has

(i) begun, or caused to begin, a continuous program of physical on-site construction of the facility or

(ii) entered into binding agreements or contractual obligations, which cannot be canceled or modified without substantial loss to the owner or operator, to undertake a program of construction of the facility to be completed within a reasonable time.

42 U.S.C. § 7479(2). Finally, a “major modification” is defined as “any physical change in or change in the method of operation of a major stationary source ³ that would result in: a significant emissions increase ... of a regulated NSR pollutant ... and a significant net emissions increase of that pollutant from the major stationary source.” 40 C.F.R. § 52.21(b)(2).

In order to enforce the PSD program, EPA “shall ... take such measures, including issuance of an order, or seeking injunctive relief, as necessary to prevent the construction or modification of a major emitting facility which does not conform to the requirements of [PSD].” 42 U.S.C. § 7477. To assist in enforcement, the CAA authorizes EPA to demand such information as it “may reasonably require” to “determin[e] whether any person is in violation of any such standard or any requirement of such a plan, or [to] carry[ ] out any provision of this chapter.” Id. § 7414(a). Additionally, EPA may seek an injunction or civil penalty for any source that refuses to comply with the foregoing demands for information. Id. § 7413(b).

DISCUSSION

This discussion will first address EPA's Motion for Preliminary Injunction, and then Defendants' Motion to Dismiss.

1. EPA's Motion for Preliminary Injunction

This Court must analyze whether EPA is entitled to preliminary injunctive relief. In determining whether to grant an injunction, the Court must consider the four Dataphase factors: (1) the threat of irreparable harm to the moving party, (2) the weight of this harm as compared to any injury an injunction would inflict on other interested parties, (3) the probability that the moving party will succeed on the merits, and (4) the public interest. Dataphase Sys., Inc. v. C L Sys., Inc., 640 F.2d 109, 114 (8th Cir.1981). Further, the Court recognizes that “[t]he burden on the movant ‘is a heavy one where, as here, granting the preliminary injunction will give [the movant] substantially the relief it would obtain after a trial on the merits.’ ” Sanborn Mfg. Co., Inc. v. Campbell Hausfeld/Scott Fetzer Co., 997 F.2d 484, 486 (8th Cir.1993) (quoting Dakota Indus., Inc. v. Ever Best Ltd., 944 F.2d 438, 440 (8th Cir.1991) (second alteration in original)). Because it entails the most detailed analysis, the Court will first consider the probability of success on the merits.

a. Likelihood of Success on the Merits

As the court in Dataphase noted,...