United States v. Ala. Power Co.

• Decision Date: 19 September 2013
• Docket Number: No. 11–12168.,11–12168.
• Court: U.S. Court of Appeals — Eleventh Circuit
• Parties: UNITED STATES of America, Plaintiff–Appellant, Alabama Environmental Council, Intervenor–Appellant, v. ALABAMA POWER COMPANY, Defendant–Appellee.

730 F.3d 1278

UNITED STATES of America, Plaintiff–Appellant,

Alabama Environmental Council, Intervenor–Appellant,

v.ALABAMA POWER COMPANY, Defendant–Appellee.

No. 11–12168.

United States Court of Appeals,Eleventh Circuit.

Sept. 19, 2013.

James Blanding Holman, IV, ENRD, DOJ, Washington, DC, Gilbert B. Rogers, Southern Environmental Law Center, Atlanta, GA, for Intervenor–Appellant.

Michael D. Freeman, R. Bruce Barze, Jr., Philip Stephen Gidiere, III, Steven G. McKinney, Spencer M. Taylor, Balch & Bingham, LLP, Alice H. Martin, Lloyd C. Peeples, III, Joyce White Vance, U.S. Attorney's Office, Birmingham, AL, Daniel S. Reinhardt, Margaret Claiborne Campbell, Steven J. Hewitson, Troutman Sanders, LLP, Karl R. Moor, Southern Company, Atlanta, GA, Tracy Thomas Cottingham, III, Nash E. Long, III, Winston & Strawn, LLP, Charlotte, NC, George E. Hays, Law Office of George E. Hays, San Francisco, CA, James Beers, Jr., Andrew Carter Hanson, Kurt G. Kastorf, James R. Macayeal, David Rosskam, Justin Savage, U.S. Department of Justice, Washington, DC, for Defendant–Appellee.

Appeals from the United States District Court for the Northern District of Alabama. D.C. Docket No. 2:01–cv–00152–VEH.

Before BARKETT and JORDAN, Circuit Judges, and HODGES,^* District Judge.

JORDAN, Circuit Judge:

This case, brought by the United States against Alabama Power Company for alleged violations of the Clean Air Act, 42 U.S.C. § 7401 et seq., has lasted for over a decade, lending some literal support to Justice Holmes' quip that “[l]awyers spend their professional careers shoveling smoke.” ¹ The government's central allegation is that Alabama Power, contrary to the Act, made major modifications at three of its coal-fired power plants without obtaining a permit or installing modern pollution control devices.

In support of its case, the government sought to introduce the expert testimony of Robert Koppe, a power plant reliability engineer, and Dr. Ranajit Sahu, an environmental permitting engineer. The testimony of these two experts, according to the government, would show that Alabama Power should have expected the modifications to significantly increase pollutant emissions at the plants, in violation of the Act. The district court, relying on United States v. Cinergy Corp., 623 F.3d 455 (7th Cir.2010), excluded the testimony of Mr. Koppe and Dr. Sahu, agreeing with Alabama Power that their methodology relied on incorrect and unrealistic assumptions about the operation of Alabama Power's generating units. See United States v. Alabama Power Co., 773 F.Supp.2d 1250 (N.D.Ala.2011) (“Alabama Power I ”). The district court also struck, as an untimely new expert opinion, additional statements and calculations made by Dr. Sahu in his supplemental declaration. See United States v. Alabama Power Co., 274 F.R.D. 686 (N.D.Ala.2011) (“Alabama Power II ”). Because the government indicated that it could not proceed without the expert testimony excluded in Alabama Power I, the district court entered summary judgment in favor of Alabama Power. See Alabama Power II, 274 F.R.D. at 686.

The government and the Alabama Environmental Council, an intervenor, now appeal. Following review of the voluminous record, and with the benefit of oral argument, we affirm without further discussion the district court's ruling in Alabama Power II. That ruling, in our view, was not an abuse of discretion. We reverse, however, the district court's wholesale exclusion of the expert testimony of Mr. Koppe and Dr. Sahu in Alabama Power I, vacate the judgment in favor of Alabama Power, and remand for further proceedings. The Koppe–Sahu model, as utilized here, is sufficiently reliable to establish a relationship between potential generation of electricity and expected pollutant emissions at Alabama Power's modified plants. The Seventh Circuit's decision in Cinergy Corp., moreover, does not preclude admission of the expert testimony.

I

The Clean Air Act seeks to protect the nation's air resources and promote public health through the prevention and control of air pollution. See42 U.S.C. § 7401(b). The Act directs the Environmental Protection Agency to develop national standards regulating the emission of certain hazardous airborne pollutants. Id. at § 7409. The Act also tasks the EPA with overseeing each State's adoption of control measures and policies, i.e., the State Implementation Plan, to ensure that each State achieves the required air quality standards. Id. at § 7410. In its enforcement role, the EPA may bring suit directly against any operator of a pollution source for violation of the Act, regulations promulgatedunder the Act, or the relevant SIP. Id. at § 7413.

Under the Act's Prevention of Significant Deterioration (“PSD”) Program, enacted in 1977, major new sources of air pollution must limit their emissions to preserve the country's air quality and protect human health. Sources built before 1977 are exempt from this requirement unless they undergo a “major modification.” See42 U.S.C. § 7475; 40 C.F.R. § 52.21(b)(2)(i). A “major modification” includes physical or operational changes to a power plant that would result in a “significant net emissions increase” in sulfur dioxide and nitrogen oxide. See40 C.F.R. § 52.21(b)(2)(i). A net emissions increase for either of these pollutants is “significant” if it is greater than 40 tons per year. See40 C.F.R. § 52.21(b)(23)(i); Ala. Adm.Code § 335–3–14–.04(1)(a).² The permitting process requires an operator to adopt stringent pollutant emission controls at the plant, including the incorporation of costly equipment and procedures. See Nat'l Parks & Conservation Ass'n, Inc. v. Tennessee Valley Auth., 502 F.3d 1316, 1319 (11th Cir.2007). See also Alabama Power Co. v. Costle, 636 F.2d 323, 351 (D.C.Cir.1979).

A

When a coal-fired power plant is operating, it burns coal to fuel an intense fire that converts water to steam. The steam passes over and turns the blades of a turbine; the kinetic energy of the turning blades is then converted into electricity by a generator. The process involves numerous mechanical components working in concert in an extremely inhospitable environment. A power-plant operator might schedule ahead to shut down a plant and complete regular maintenance and repair components. A shut-down, however, may also be unscheduled (e.g., when there is a sudden catastrophic failure).

A plant does not generate electricity when it is shut down and, therefore, does not need to burn coal during periods of inactivity. If the repair or replacement of a problematic component renders a plant more reliable and less susceptible to future shut-downs, the plant will be able to run consistently for a longer period of time. Assuming that the operator wishes to exploit this extra availability to generate more electricity, more coal will need to be burned. Because coal-fueled combustion produces sulfur dioxide and nitrogen oxide, such increased plant operations may result in increased pollutant emissions.

B

In 1985, Alabama Power conducted an air-flow conversion of Unit 10 at its Gorgas plant from a “forced draft” system to a “balanced draft” system. In 1989, Alabama Power completely replaced the primary reheaters (a major boiler component) of Unit 2 at its Greene County plant. Similarly, in 1997, Alabama Power replaced a reheater section of Unit 2 at its Barry plant. Alabama Power did not obtain permits under the Clean Air Act for these projects.

These modifications, according to the government, were performed to reduce the amount of time each plant would spend shut down for future maintenance and repairs. By replacing older infrastructure, prone to failure, with newer, more reliable components, Alabama Power intended to improve the reliability of its plants. As a consequence of this improved reliability, the government asserted, the modified power plants would be able to generate electricity for longer intervals throughout the year than before the modifications. Additionally, the government alleged, the balanced draft conversion at Gorgas Unit 10 would not only increase the plant's availability, but also raise its maximum hourly capacity for electricity generation. In order to exploit this additional capacity, the plant would need to burn even more coal. More coal burned to exploit additional capacity, in the government's view, would also increase pollutant emissions. In short, the government believed that the Gorgas, Greene County, and Barry projects constituted “major modifications” under the Clean Air Act.

To satisfy its burden under the Act, the government had to show that at the time of the projects Alabama Power expected, or should have expected, that its modifications would result in a “significant net emissions increase” of sulfur dioxide or nitrogen oxide at each plant. See Cinergy Corp., 623 F.3d at 459 (“the permit must be obtained before the modification is made, and so the effect on emissions is a prediction rather than an observation”); United States v. Ohio Edison Co., 276 F.Supp.2d 829, 865 (S.D.Ohio 2003) (“the determination of whether a given project will cause a significant net pollution increase requires a pre-construction determination as to the additional pollutants projected to be emitted as a result of the proposed physical change”). The expert testimony of Mr. Koppe and Dr. Sahu, which we explain later, was critical to the government's ability to make that showing.

II

As noted earlier, the district court struck the expert testimony of Mr. Koppe and Dr. Sahu because it concluded that their methodology was unreliable within the meaning of Daubert v. Merrell Dow Pharms., 509 U.S. 579, 595, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993), and its progeny. We review that ruling for abuse of discretion. See, e.g., Toole v. Baxter Healthcare Corp., 235 F.3d 1307, 1312 (11th Cir.2000). “A district court abuses its discretion if it applies an incorrect legal standard, follows improper procedures in making the...