United States v. Duke Energy Corp.

• Decision Date: 06 November 2013
• Docket Number: No. 1:00CV1262.,1:00CV1262.
• Citation: 981 F.Supp.2d 435
• Court: U.S. District Court — Middle District of North Carolina
• Parties: UNITED STATES of America, Plaintiff, Environmental Defense, North Carolina Sierra Club, and North Carolina Public Interest Research Group, Plaintiff–Intervenors, v. DUKE ENERGY CORPORATION, Defendant.

981 F.Supp.2d 435

UNITED STATES of America, Plaintiff,Environmental Defense, North Carolina Sierra Club, and North Carolina Public Interest Research Group, Plaintiff–Intervenors,

v.DUKE ENERGY CORPORATION, Defendant.

No. 1:00CV1262.

United States District Court, M.D. North Carolina.

Nov. 6, 2013.

Deborah N. Behles, James A. Lofton, James R. Macayeal, Jason Dunn, John C. Cruden, U.S. Department of Justice, Washington, DC, Joan Brodish Binkley, Lynne P. Klauer, Office of U.S. Attorney, Greensboro, NC, for Plaintiff.

James Blanding Holman, IV, Charleston, SC, Jeffrey M. Gleason, Southern Environmental Law Ctr., Charlottesville, VA, for Plaintiff–Intervenors.

Peter G. Pappas, Robert Harper Heckman, Nexsen Pruet, PLLC, Greensboro, NC, T. Thomas Cottingham, III, Winston & Strawn LLP, Charlotte, NC, Frank R. Volpe, Mark D. Hopson, Samuel B. Boxerman, Sidley Austin LLP, Washington, DC, for Defendant.

MEMORANDUM OPINION AND ORDER

OSTEEN, JR., District Judge.

Presently pending and ripe for ruling are Defendant's Motions in Limine (Docs. 421, 422, 423, 424); Defendant's Motion for Summary Judgment (Doc. 432); and Plaintiff's Motion for Summary Judgment (Doc. 434). For the reasons set forth in this Memorandum Opinion and Order, Defendant's Motions in Limine (Docs. 421, 422, 423, 424) will be granted in part and denied in part. Relatedly, Defendant's Motion for Summary Judgment (Doc. 432) will be denied. Plaintiff's Motion for Summary Judgment (Doc. 434) remains under advisement and will be addressed by a separate opinion and order to be issued subsequently.

I. BACKGROUND

This case is a civil action brought against Duke Energy (“Duke”) by the United States “pursuant to Sections 113(b) and 167 of the Clean Air Act [“CAA”], 42 U.S.C. § 7413(b)(2) and 7477, for injunctive relief and the assessment of civil penalties for violations of the Prevention of Significant Deterioration (“PSD”) provisions of the Act, 42 U.S.C. §§ 7470–7492.” (Complaint (Doc. 1) ¶ 1.) In this suit, the Government claims that Duke made modifications to its “coal-fired electrical generating plants” without obtaining permits, in violation of the PSD provisions of the CAA. United States v. Duke Energy Corp. (“ Duke IV ”), No. 1:00CV1262, 2010 WL 3023517, at *1 (M.D.N.C. July 28, 2010); see id. at *5 (“The Court follows ... the holding and supporting rationale of Duke III, which makes clear that the plain language of the regulations requires a utility to obtain a pre-construction permit when proposed changes ‘would increase the actual annual emission of a pollutant above the actual average for the two prior years.’ ”) (quoting Envtl. Def. v. Duke Energy Corp. (“ Duke III ”), 549 U.S. 561, 570, 127 S.Ct. 1423, 167 L.Ed.2d 295 (2007)). Only thirteen of Duke's units, all of which were located in North Carolina, kept in Extended Cold Shutdown (“ECS”), and subject to Duke's Plant Modernization Program (“PMP”), are still at issue in this suit.

The parties agree that this case is governed by the 1980 PSD regulations ¹, 40 C.F.R. § 51.24(b) (1981) ², as adopted by North Carolina and incorporated into North Carolina's State Implementation Plan (“SIP”). (Pl.'s Consol. Opp'n to Duke Energy's Mots. in Limine (“Pl.'s Opp'n Br.”) (Doc. 436) at 30 n. 25 (citing Jan. 31, 2003 Duke Summary Judgment Brief (Doc. 129 at 30)) ³; see15A N.C. Admin. Code 2D.0531. Under these regulations, PSD review is limited to “major” modifications—“any physical change in or change in the method of operation of a major statutory source that would result in a significant net emissions increase of any pollutant subject to regulation under the [CAA].” Duke IV, 2010 WL 3023517, at *2 (citing 40 C.F.R. § 51.166(b)(2)(i)). According to the Duke IV opinion, “to trigger [the] PSD permitting requirement, there must be (1) a ‘physical change’ and (2) a ‘significant net emissions increase.’ ” Duke IV, 2010 WL 3023517, at *2 (citing Duke III, 549 U.S. at 578, 127 S.Ct. 1423). Because it is necessary for a utility such as Duke “to make a pre-project projection of what actual emissions will be before construction begins,” an “actual-to-projected-actual test will be used to determine whether Duke Energy should have sought a pre-project permit for any of the projects at issue.” Id. at *18. “[T]he regulations do not require the company to be prescient, rather they require a utility to undertake a reasonable estimate of what post-project emissions would be.” Id. at *6.

In its motions in limine, Duke moves to exclude the testimony of the Government's expert witnesses ⁴ based on Federal Rules of Evidence 402 (Relevance), 702 (Expert Witnesses), and Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993). Additionally, Duke moves for summary judgment or, in the alternative, for partial summary judgment on the six PMP units where either the GADS or PROMOD methodologies at issue projected no significant net emissions increase. (Doc. 432.) The Government also moves for summary judgment. (Doc. 434.)

Recognizing that the issue is whether Duke reasonably should have projected a significant increase in emissions caused by its PMP, this court reviews the undisputed facts in this case. The undisputed historical facts are generally set forth in the original summary judgment opinion, United States v. Duke Energy Corp. (“ Duke I ”), 278 F.Supp.2d 619 (M.D.N.C.2003), and those facts are incorporated by reference here. Id. at 622–25.⁵ The one exception to the incorporation is that, as noted earlier, only thirteen of the original plants are still at issue in this case.

In addition to the general overview and undisputed facts set forth in that opinion, the following additional facts are relevant to this opinion.

Duke's Chairman of the Board and Chief Executive Officer, William S. Lee, testified before the North Carolina Utilities Commission ⁶ on July 15, 1985, regardingtwelve of Duke's units ⁷ that had been placed in ECS. When questioned about whether the 997 megawatts of power from the extended cold shutdown plants were actually available, although the reliability of the plants was suspect, Lee responded,

No, sir. On those 12 units—those 12 units are not available for the dispatcher to use, and nine of them he can't even touch. Three of them he could call on in an emergency, but nine of them simply cannot be run. It isn't a matter of reliability that caused us to remove them. It's the fact that they're broke and they've got to be fixed.

(Pl.'s Br., Ex. 15 (Doc. 435–16) at 12; see also id., Ex. 16 (Doc. 435–17) at 23 (explaining that the twelve ECS units “had to come out or they were going to fly apart. There were some serious problems with the turbines and with the generators. I don't want to wreck the units; therefore, they are out of service until they can be restored.”); id. at 27 (explaining that some plants' cracked rotor forgings could eventually burst and throw pieces of rotor up to half a mile).) He also explained, however, that it would take about three years to know what Duke was going to do with all twelve of the units. ⁸ ( Id.)

On July 16, 1985, Lee continued his testimony, and in general, he described the units in ECS as deteriorating and requiring “major rehabilitation” to make them “available to last into the next century for service.” (Pl.'s Br., Ex. 14 (Doc. 435–15) at 48–49; see id. at 54–55 (“It became clear that this group of twelve units would not last until an expected retirement date, but rather had to be taken out of service and rehabilitated in a major way [“total rehabilitation”]....”).) He then outlined the state of each unit in particular.

According to Lee, Allen 1 was not available and could not be made available for service. He explained, “Allen 1 must have a precipitator replaced. Two of the turbine rotors must be repaired or replaced.... The feed water heaters need to be replaced. The generator rotor requires reinsulation of the copper, and the boiler has to be modified and upgraded in several areas.” ( Id. at 49.) Like Allen 1, Allen 2 required replacement of the precipitator and feed water heaters, reinsulation of the generator rotor, and modification and upgrade of the boiler. Allen 2 also needed a complete rewinding of the stator (requiring “new copper coils, insulation, and the works”), and was “not available for service at all.” ( Id.)

Buck 3's stator required rewinding, and the boiler required major replacements. In addition, it had a “condemned generator rotor,” which meant that it was “too dangerous to operate under any circumstances” and was therefore also not available for service. ( Id. at 49–50.) Buck 4, which was also “not available for service at all,” required rewinding of the stator, reinsulation of the generator rotor, replacement of major portions of the boiler superheater water walls and the drum circulation system, and replacement of condenser tubes. ( Id.) Buck 5 had indications of cracking in the generator rotor forging and the rotor itself, requiring both to be replaced. ( Id.) Additionally, according to Lee, “[m]ajor portions of the boiler's water walls, tubes, and the reheater tubes have got to be replaced.” ( Id.) Buck 5 “could be made available for limited duty for emergencies only.” ( Id. at 51.)

Cliffside 1 required retubing of the condenser, replacement of the feed water heaters, rewinding of the generator stator, and was “not available for service at all.” ( Id.) Cliffside 2 had the same problems as Cliffside 1, but also required a rewinding of the generator rotor. ( Id.) Consequently, it, too, was “not available for service at all.” ( Id.) Cliffside 3 needed rewinding of the generator stator, reinsulation of the rotor, and replacement of the feed water heaters and the cracked high-pressure turbine shell. ( Id. at 51–52.) Cliffside 3 was “not available for service at all.” Cliffside 4 required many of the same repairs and was also not available for service at all. ( Id. at 52.)

Finally, Riverbend 6 required...