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					     ENVIRONMENTAL DEFENSE v. DUKE ENERGY CORP.: WHY POLLUTION IS
             STILL POLLUTION DURING NON-BUSINESS HOURS

                                            PHILIP TERWILLIGER†




                                            I. INTRODUCTION



        Environmental Defense v. Duke Energy1 decided the question of whether Duke Energy

Corporation violated the New Source Performance Standards (NSPS)2 and the Prevention of

Significant Deterioration (PSD)3 amendments to the Clean Air Act (CAA)4 when it redesigned

several tube assemblies to allow the boilers of the coal-powered electric generation units in eight

of its plants to run longer each day.5 The controversy was ignited when the plaintiffs, United

States and intervener Environmental Defense brought suit against Duke Energy Corporation. 6

The suit alleged that Duke violated the PSD via operating power plants without the proper

permits for a modified stationary source of pollution.7

        This article examines the Supreme Court‟s decision in Environmental Defense v. Duke

Energy Corporation. First, this article explores the relevant facts of the case. Second, the article

examines the background information of the case. Next, the procedural history of the case is

provided. Finally, the issues presented are analyzed. The foregoing section discusses the history

†
  Philip Terwilliger, B.A. Economics, University of Iowa, Juris Doctorate Candidate, May 2009, University of South
Dakota School of Law.
1
  Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423 (U.S. 2007).
2
  Clean Air Act 42 U.S.C. § 7411 (2007).
3
  40 C.F.R. § 51.166.
4
  42 U.S.C.A. § 7401 (2007).
5
  Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1430 (U.S. 2007).
6
  Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1430 (U.S. 2007).
7
  Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1425 (U.S. 2007).
and purpose of the CAA and its applicable amendments. The article continues with a discussion

of the procedural history of the case, including an analysis of each court‟s reasoning in reaching

their conclusions. A discussion of the issues surrounding this controversy follows. The author

argues that the conclusions made by the Supreme Court were correct and the resolution of

Environmental Defense v. Duke Energy was well-founded.



                                                 II. FACTS



        Duke Energy Corporation (Duke) is a major power company based in South Carolina.8

Duke consists of eight plants with thirty coal-fired electricity generating units.9 The units were

put on line between the years of 1940 and 1975.10 Each unit includes a boiler with thousands of

steel tubes arranged in sets.11 Between 1988 and 2000, Duke changed the design of twenty-nine

tube assemblies.12 Duke initiated the modifications for the purpose of extending the operating

life of the assemblies and allowing the assemblies to run longer each day.13

        In the 1970s, Congress enacted two air pollution control amendments to the CAA. These

amendments included the NSPS and PSD.14 Both amendments explicitly bring modified and

new stationary sources of air pollution within the scope of the CAA.15 The NSPS requires the

EPA to establish emission standards for certain sources of air pollution.16 These regulations



8
  United States v. Duke Energy Corp., 411 F.2d 539, 544 (C.A.4 2005).
9
  United States v. Duke Energy Corp., 411 F.2d 539, 544 (C.A.4 2005).
10
   United States v. Duke Energy Corp., 411 F.2d 539, 544 (C.A.4 2005).
11
   United States v. Duke Energy Corp., 411 F.2d 539, 544 (C.A.4 2005).
12
   United States v. Duke Energy Corp., 411 F.2d 539, 544 (C.A.4 2005).
13
   United States v. Duke Energy Corp., 411 F.2d 539, 544 (C.A.4 2005).
14
   Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1425 (U.S. 2007).
15
   Clean Air Act 42 U.S.C. § 7411 (2007). and 40 CFR 51.166
16
   “New Source Performance Standards,” http://www.epa.gov/Region7/programs/artd/air/nsps/nsps.htm, January 21,
2008.
focus on certain pollutants and are not „region-specific.‟17 The NSPS calls on cooperation

among different levels of government in an effort to implement and encourage practices which

lead to cleaner and healthier air.18 The PSD‟s purpose is quite different.19 The PSD is not

intended to prevent emissions increases; instead, its provisions encourage the use of pollution-

limiting technology.20 The PSD does not set emission standards for sources of certain pollutants

(like the NSPS), but rather it creates special, more stringent requirements for certain areas.21 The

PSD uses a permit system with which pollution-emitting sources must comply.22


17
   “New Source Performance Standards,” http://www.epa.gov/Region7/programs/artd/air/nsps/nsps.htm, January 21,
2008.
18
   Generally, state and local air pollution control agencies are responsible for implementation, compliance
assistance, and enforcement of the new source performance standards (NSPS). EPA retains concurrent enforcement
authority and is also available to provide technical assistance when a state or local agency seeks help. EPA also
retains a few of the NSPS responsibilities -- such as the ability to approve alternative monitoring methods -- to
maintain a minimum level of national consistency. “New Source Performance Standards,”
http://www.epa.gov/Region7/programs/artd/air/nsps/nsps.htm, January 21, 2008.
19 PSD does not prevent sources from increasing emissions. Instead, PSD is designed to:

     1.   protect public health and welfare;
     2.   preserve, protect, and enhance the air quality in national parks, national wilderness areas, national
          monuments, national seashores, and other areas of special national or regional natural, recreational, scenic,
          or historic value;
     3.   insure that economic growth will occur in a manner consistent with the preservation of existing clean air
          resources; and
     4.   assure that any decision to permit increased air pollution in any area to which this section applies is made
          only after careful evaluation of all the consequences of such a decision and after adequate procedural
          opportunities for informed public participation in the decision making process.

“Prevention of Significan Deterioration (PSD) Basic Information,” http://www.epa.gov/nsr/psd.html, January 21,
2008.
20
   “Prevention of Significan Deterioration (PSD) Basic Information,” http://www.epa.gov/nsr/psd.html, January 21,
2008.
21
   These areas include national parks, wilderness areas, national seashores and other valued areas. “Prevention of
Significan Deterioration (PSD) Basic Information,” http://www.epa.gov/nsr/psd.html, January 21, 2008.

22
   PSD increment is the amount of pollution an area is allowed to increase. PSD increments prevent the air quality
in clean areas from deteriorating to the level set by the NAAQS. The NAAQS is a maximum allowable
concentration "ceiling." A PSD increment, on the other hand, is the maximum allowable increase in concentration
that is allowed to occur above a baseline concentration for a pollutant. The baseline concentration is defined for each
pollutant and, in general, is the ambient concentration existing at the time that the first complete PSD permit
application affecting the area is submitted. Significant deterioration is said to occur when the amount of new
pollution would exceed the applicable PSD increment. It is important to note, however, that the air quality cannot
deteriorate beyond the concentration allowed by the applicable NAAQS, even if not all of the PSD increment is
consumed.
As the amendments were created at different times and for different purposes, the NSPS and the

PSD define the word “modification” differently.23 NSPS defines “modification” as a “physical

change to a source in the method of its operation that increases the amount of a pollutant

discharged or emits a new one.”24 The NSPS regulations require a source to use the best

available pollution-limiting technology when a modification would increase the discharge of

pollutants measured in kilograms per hour.25 The PSD regulations, however, require a permit

only for a major modification, and only when it would increase the actual annual emissions

above the actual average for the two prior years.26

        Significantly, Duke made no technologically advanced changes to its generation units.27

If the changes satisfied the definitions of “modification” in the PSD and NSPS, Duke would have

been required to use the best pollution-limiting technology available. In this instance, the

changes made increased the actual annual emissions of the units, but did not increase the

discharge of pollutants measured in kilograms per hour.28 In sum, the changes by Duke did not

amount to a modification as defined under NSPS, but did satisfy the definition as utilized under

PSD. Thus, a permit would be required under PSD, but not under NSPS.



                                             III. BACKGROUND




“Prevention of Significant Deterioration (PSD) Basic Information,” http://www.epa.gov/nsr/psd.html, January 21,
2008.

23
   Clean Air Act Clean Air Act 42 U.S.C. § 7411 (2007).(a)(2) (2007), 40 CFR 51.166(b)(2)(iii)(f).
24
   Clean Air Act 42 U.S.C. § 7411 (2007).(a)(4) (emphasis added).
25
   40 CFR § 60.14(b).
26
   40 CFR § 51.166(b)(21)(ii).
27
   United States v. Duke Energy Corp., 411 F.2d 539, 544 (C.A.4 2005).
28
   United States v. Duke Energy Corp., 411 F.2d 539, 544 (C.A.4 2005).
         The CAA was enacted in 1963 and addressed the pollution brought about by the growth

of cities.29 In the decades leading up to the CAA, major population increases forced

metropolitan sprawl to cross local jurisdictional and state lines.30 The larger populations meant

larger numbers of automobiles, as well as increased industrialization—two of the most

significant sources of air pollution.31 The mounting sources of pollutants “had [resulted] in

mounting dangers to the public health and welfare, including injury to agricultural crops and

livestock, the deterioration of property, and hazards to air and ground transportation . . .”32 The

time had come for federal regulation of the Nation‟s air pollution.

         The CAA explicitly declared four main purposes behind the federal regulation of air

pollution:


         1) to protect and enhance the quality of the Nation‟s air resources; 2) to initiate
         and accelerate research and development of programs designed to prevent air
         pollution; 3) to provide financial and technical assistance to State and local
         governments in connection with the air pollution prevention and control
         programs; and 4) to encourage and assist the development and operation of
         regional air pollution prevention and control programs.33

These purposes implicitly strove toward a broad goal of the reduction of overall air pollution.

         The CAA was amended, rewritten, and bolstered in 1971 to include a notable air

pollution control addition called New Source Performance Standards.34 The NSPS accompanied

the National Ambient Air Quality Standards (NAAQS), which were devised by the

Environmental Protection Agency (EPA) to limit various pollutants.35 The NSPS amendments

required operators of stationary sources generating air pollutants to use the best available


29
   42 U.S.C. § 7401(a)(1) (2007).
30
   42 U.S.C. § 7401(a)(1) (2007).
31
   42 U.S.C. § 7401(a)(2) (2007).
32
   42 U.S.C. § 7401(a)(2) (2007).
33
   42 U.S.C. § 7401(b)(1),(2),(3),(4) (2007).
34
   Clean Air Act 42 U.S.C. § 7411 (2007).
35
   42 U.S.C. §§ 7409, 7410. (2007).
technology for limiting pollution.36 These requirements applied to both newly constructed

sources of pollution and those sources undergoing modification.37 “Modification” was defined

in the NSPS amendments of 1970 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.38

The 1970 amendment notably speaks to the overall „amount‟ of pollution rather than focusing on

the short-term increased rate of pollution.

        The EPA‟s 1975 regulations, which implemented the NSPS, identified a “modification”

as “any operational or physical change to an existing facility which results in an increase in the

emission rate to the atmosphere of any pollutant to which a standard applies.”39 The regulations

continued to define „emission rate‟ as “kg/hr of any pollutant discharged into the atmosphere for

which a standard is applicable.”40 Within the EPA regulations definition, there is a natural

inference of “modification” as being a change that increases the „emission rate.‟ The same

regulations, however, later offer a different definition of “modification:”


        Modification means any physical change in, or change in the method of operation
        of, an existing facility which increases the amount of any air pollutant (to which a
        standard applies) emitted into the atmosphere by that facility.41

There is no explanation in the NSPS indicating why the different meanings of „modification‟

appear in the same document.



36
   Chevron U.S.A. Inc., v. Natural Resources Defense Council, Inc., 467 U.S. 837, 846.
37
   Clean Air Act 42 U.S.C. § 7411 (a)(2) (2007).
38
   Clean Air Act 42 U.S.C. § 7411 (a)(4) (2007). Other relevant statutory definitions under NSPS are: “standard of
performance,” “new source,” “stationary source,” “owner or operator,” “existing source” and “technological system
of continuous emission reduction.” Clean Air Act 42 U.S.C. § 7411(a)(1) to (7) (2007).
39
   40 CFR § 60.14(b).
40
   40 CFR 60.14(b).
41
   40 CFR § 60.2(h); see also New York v. EPA, 413 F.3d 3, 11-12 (C.A.D.C.2005).
        The Clean Air Act Amendments of 1977 sought to bolster NSPS by including PSD

provisions.42 The amendments required a PSD permit before the commencement of construction

on a major emitting facility in an area covered by the scheme.43 The PSD required EPA approval

of both the applicants and their projects.44 Although PSD permits were originally required only

for newly constructed facilities, a technical amendment brought modifications to existing

facilities within the scope the PSD scheme.45 Under the new statutory regulations,

“modification” was defined as


        any physical change in, or change in the method of operation of, a stationary
        source which increases the emission rate of any pollutant for which a national
        standard has been promulgated.46

This definition notably contained the phrase “emission rate” as opposed to an overall increase in

the amount of emissions.

        In 1980, the EPA again modified the PSD regulations.47 This time, the application of

PSD review of modified sources was limited to “major modifications.”48 The new regulations

defined “major modifications” as


        any physical change in or change in the method of operation of a major stationary
        source 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.49

Further, the regulations defined “significant emissions increase” as “any increase in actual

emissions from a particular physical change or change in method of operation, net of other


42
   91 Stat. 685.
43
   42 U.S.C. § 7475(a) (2007).
44
   42 U.S.C. § 7475 (2007).
45
   91 Stat. 1402.
46
   39 Fed.Reg. 42514.
47
   40 CFR 51.66(b)(2)(i) (1987).
48
   40 CFR 51.166(b)(2)(i) (1987).
49
   40 CFR 51.166(b)(2)(i) (1987).
contemporaneous increases and decreases in actual emissions at the source.”50 „Actual

emissions‟ were measured in tons per year, over at least a two-year period.51 Additionally, under

the PSD changes, actual emission rates were to be calculated using the production rates and the

unit‟s actual operating hours.52 Finally, the term “significant” was expressed in terms of tons (of

pollutant emitted) per year.53

        The PSD amendments provided that an operational change which consisted only of an

increase in the hours of operation or in the rate of manufacture would not generally constitute a

physical change or change in the method of operation.54 When the language of the PSD

amendments are parsed, the statutory provisions of the PSD amendments do not require a permit

for an existing facility which increased only the hours of operation.55 Such a change would not

be considered a major modification unless that change resulted in a significant increase in

pollution emitted.56



                                    IV. PROCEDURAL HISTORY



        The United States brought suit against Duke in 2000, claiming that Duke violated the

PSD provisions by operating without obtaining the proper permits.57 Environmental Defense,

North Carolina Sierra Club, and North Carolina Public Interest Research Group Citizen

Lobby/Education Fund intervened and joined the United States as plaintiffs, charging similar



50
   40 CFR 51.166(b)(2)(iii)(f).
51
   40 CFR 51.166(b)(21)(ii).
52
   40 CFR 51.166(b)(21)(ii).
53
   40 CFR 51.166(b)(23)(i).
54
   40 CFR 51.166(b)(2)(iii)(f).
55
   40 CFR 51.166(b)(2)(iii)(f).
56
   40 CFR 51.166(b)(2)(iii)(f).
57
   United States v. Duke Energy Corp., 278 F.Supp.2d 619, 640-641 (M.D.N.C.2003).
violations.58 Duke moved for summary judgment on the ground that a PSD permit was never

required, due to the fact that none of its plants increased the hourly rate of emission.59 The

District Court of North Carolina sided with Duke.60 The court concluded that a “major

modification” can occur only if the project increases the hourly rate of emissions.61 To aid in its

interpretation of the PSD regulations, the district court cited a 1981 letter and memorandum

written by EPA‟s Director of the Division of Stationary Source Enforcement, Edward E. Reich.62

        Environmental Defense conceded that no increase in the hourly rate of emissions had

occurred, but argued that the increase in active pollution-generating hours constituted a major

modification.63 The District Court entered summary judgment for Duke on all claims.64 The

court‟s decision indicated that short-term emission rate increases were necessary for a major

modification to have taken place.

        Environmental Defense appealed to the Fourth Circuit Court of Appeals.65 The Fourth

Circuit affirmed, but on different grounds.66 The court concluded that the term „modification‟

was used by the legislature in both the PSD and NSPS.67 According to the court, since the NSPS

required the hourly rate of emissions to increase in order for a major modification to take place,




58
   United States v. Duke Energy Corp., 278 F.Supp.2d 619, 640-641 (M.D.N.C.2003).
59
   United States v. Duke Energy Corp., 278 F.Supp.2d 619, 640-641 (M.D.N.C.2003).
60
   United States v. Duke Energy Corp., 278 F.Supp.2d 619, 640-641 (M.D.N.C.2003).
61
   United States v. Duke Energy Corp., 278 F.Supp.2d 619, 640-641 (M.D.N.C.2003).
62
   United States v. Duke Energy Corp., 278 F.Supp.2d 619, 640-641 (M.D.N.C.2003).
         [T]he Clean Air Act provides in Section 169(1)(c) that for PSD purposes the term modification
         shall be defined as that term is defined in Section 111(a) of the Act relating to NSPS. EPA has
         interpreted this to mean that for PSD purposes Congress intended the term modification to include
         all exemptions included in the NSPS regulations promulgated under Section 111 of the Act prior
         to the date of enactment of Section 169. (Mem. from Reich to Davis (Apr. 21, 1983) at 2 (Duke
         Energy Ex. 16).
63
   Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1428, 1431 (U.S. 2007).
64
   Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1428, 1431 (U.S. 2007).
65
   United States v. Duke Energy Corp., 411 F.2d 539, 542 (C.A.4 2005).
66
   United States v. Duke Energy Corp., 411 F.2d 539, 542 (C.A.4 2005).
67
   United States v. Duke Energy Corp., 411 F.2d 539, 547 (C.A.4 2005).
the PSD‟s definition of „modification‟ should be interpreted similarly.68 The court reasoned that

if the EPA wished to abandon the hourly rate increase requirement for both the PSD and the

NSPS, it was free to do so.69 It had not done this, so the standard should not be interpreted to be

more restrictive in one instance than in another.70 The Fourth Circuit Court of Appeals‟ decision

signaled that the EPA‟s failure to proactively change its definition of “modification” was an

ongoing endorsement of the existing definition of the word.

        Finally, Environmental Defense applied for, and was granted, certiorari to the Supreme

Court of the United States where it sought a determination of which definition of “modification”

was applicable to Duke‟s plant alterations.71 Environmental Defense continued to assert that

Duke modified its operation when it changed the tube assemblies, allowing the plant to operate

and emit pollutants for more hours during the day; and even though the hourly rate of emissions

were unchanged, the changes amounted to major modifications under the PSD‟s specifications.72

Duke maintained that since the changes to the plants did not increase the hourly rate of emission,

the changes were not modifications under the PSD‟s specifications.73



                                              V. ANALYSIS



                                         A. THE DISTRICT COURT




68
   United States v. Duke Energy Corp., 411 F.2d 539, 547 (C.A.4 2005).
69
   United States v. Duke Energy Corp., 411 F.2d 539, 550-551 (C.A.4 2005).
70
   United States v. Duke Energy Corp., 411 F.2d 539, 550-551 (C.A.4 2005).
71
   Environmental Defense v. Duke Energy Corp., 126 S.Ct. 2019 (U.S. 2006).
72
   Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423 (U.S. 2007).
73
   Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423 (U.S. 2007).
        The District Court began its analysis by recognizing that EPA, like all regulatory

agencies, should be given considerable deference regarding interpretation and administrative

implementation of applicable amendments.74 Further, the court pointed out that it is especially

important that deference be given to an administrative agency when the process of interpretation

or implementation is particularly complex.75 The District Court also recognized that the

agency‟s interpretation of its own regulations should be given “controlling weight unless it is

plainly erroneous or inconsistent with the regulation.”76 Finally, the court qualified this highly

deferential standard of review by pointing out that “this standard does not give the EPA

unbridled discretion to construe the [CAA] Amendments free from oversight. [The court] must

consider whether the EPA‟s construction comports with its statutory mandate and Congress‟

intent in enacting clean air legislation.”77

        On August 26, 2003, the District Court applied the above rules of interpretation and

created a three-faceted holding.78 First, the test for determining whether the modification made

was repair, replacement or routine maintenance was whether such a modification was routine for

the industry.79 Second, a “net emissions increase” happens only when the hourly rate of

emission increases.80 Third, Duke‟s failure to obtain a PSD permit prior to its modifications

constituted a continuing violation for statute of limitations purposes.81 Accordingly, the suit was

not barred by a statutory limitation because the modifications, as determined to be in violation of

EPA‟s regulations, continued past the first instance of violation.82


74
   U.S. v. Duke Energy Corporation, 278 F.Supp.2d 619 (M.D.N.C.2003)(citing Chevron)
75
   Chevron U.S.A. Inc., v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43 (U.S. 1984).
76
   Udall v. Tallman, 380 U.S. 1, 16-17 (1965).
77
   Wisconsin Elec. Power Co. v. Reilly, 893 F.2d 901, 907 (7th Cir.1990).
78
   U.S. v. Duke Energy Corporation, 278 F.Supp.2d 619 (M.D.N.C.2003).
79
   U.S. v. Duke Energy Corporation, 278 F.Supp.2d 619 (M.D.N.C.2003).
80
   U.S. v. Duke Energy Corporation, 278 F.Supp.2d 619 (M.D.N.C.2003).
81
   U.S. v. Duke Energy Corporation, 278 F.Supp.2d 619 (M.D.N.C.2003).
82
   U.S. v. Duke Energy Corporation, 278 F.Supp.2d 619 (M.D.N.C.2003).
        The District Court‟s major evidentiary finding was that under the PSD provisions, a “net

increase” of emissions can result only from an increase in the hourly rate of emission.83 The

court reasoned that the PSD rules required a post-project emission level calculation, and such a

calculation can be obtained only by holding the hours and conditions of operation constant. 84

Since Duke had indisputably held the hourly emission rate at its plants constant while increasing

the hours of operation, a subsequent calculation that holds the hours of operation constant shows

no net increase of emission.85 With no net increase of emission, the court held that Duke had not

violated the PSD rules by its failure to obtain a permit for a major modification.86 The District

Court entered summary judgment for Duke on all PSD related claims.87



                                       B. THE COURT OF APPEALS



        The United States appealed to the Court of Appeals for the Fourth Circuit.88 The court

affirmed, but its reasoning differed from that of the District Court.89 The Fourth Circuit focused

on the inconsistent interpretations of the word “modification” proposed by the

plaintiffs/appellants.90 The court reasoned that various interpretations of the PSD regulations are

irrelevant because Congress mandated that the statutory definition of “modification” be the same




83
   U.S. v. Duke Energy Corporation, 278 F.Supp.2d 619, 640 (M.D.N.C.2003).
84
   U.S. v. Duke Energy Corporation, 278 F.Supp.2d 619, 640 (M.D.N.C.2003).
85
   U.S. v. Duke Energy Corporation, 278 F.Supp.2d 619 (M.D.N.C.2003).
86
   U.S. v. Duke Energy Corporation, 278 F.Supp.2d 619, 653 (M.D.N.C.2003).
87
   U.S. v. Duke Energy Corporation, 278 F.Supp.2d 619 (M.D.N.C.2003).
88
   United States v. Duke Energy Corp., 411 F.2d 539 (C.A.4 2005).
89
   United States v. Duke Energy Corp., 411 F.2d 539, 542 (C.A.4 2005).
90
   United States v. Duke Energy Corp., 411 F.2d 539, 547 (C.A.4 2005).
in the PSD as it was in the NSPS.91 Accordingly, EPA could not choose to interpret

“modification” differently in the PSD than it did in the NSPS.92

        The Fourth Circuit‟s conclusion was not without precedent. The court relied on the 1981

case of Rowan Cos. v. United States.93 Rowan also involved the Government‟s differing

interpretations of the key term “wages” in different tax provisions.94 In Rowan, the Supreme

Court concluded that the term “wages” must be interpreted similarly in different provisions of

the same regulation.95 The Fourth Circuit in the Duke pointed out that there is no requirement

that EPA interpret one definition of “modification” or the other for the duration of the NSPS and

PSD.96 There is a requirement, however, that the definitions be the same for both the NSPS and

the PSD.97

        Since the Fourth Circuit relied on Rowan sua sponte, Environmental Defense was

allowed to inject a new issue into the case.98 Environmental Defense argued that a claim that the

1980 PSD provision exceeded statutory authority would amount to an attack on the validity of

the regulation, and could not be raised in an enforcement proceeding.99 The court rejected this

assertion on the ground that the PSD regulations can be interpreted to require an increase in the

hourly rate of emission as an element of a major modification which triggers a permit

requirement.100



                                           C. THE SUPREME COURT

91
   United States v. Duke Energy Corp., 411 F.2d 539, 547 (C.A.4 2005).
92
   United States v. Duke Energy Corp., 411 F.2d 539, 547 (C.A.4 2005).
93
   Rowan Cos. v. United States, 452 U.S. 247 (U.S. 1981).
94
   Rowan Cos. v. United States, 452 U.S. 247 (U.S. 1981).
95
   Rowan Cos. v. United States, 452 U.S. 247 (U.S. 1981).
96
   United States v. Duke Energy Corp., 411 F.2d 539, 550-551 (C.A.4 2005).
97
   United States v. Duke Energy Corp., 411 F.2d 539, 550-551 (C.A.4 2005).
98
   United States v. Duke Energy Corp., 411 F.2d 539, 547 (C.A.4 2005).
99
   United States v. Duke Energy Corp., 411 F.2d 539, 547 (C.A.4 2005), in reference to 42 U.S.C. § 7607(b)(2)
100
    United States v. Duke Energy Corp., 411 F.2d 539, 549 (C.A.4 2005)
          The United States Supreme Court granted certiorari on appeal by Environmental

Defense.101 In an opinion written by Justice Souter, the Supreme Court unanimously vacated the

Fourth Circuit‟s decision.102 The Supreme Court‟s decision included three primary

determinations.103 First, the EPA was not required to apply the same definition to the term

“modification” in the NSPS as it applied to the PSD.104 Second, the Court of Appeals‟ decision

that the PSD regulations necessarily conformed to the NSPS regulations effectively invalidated

the PSD regulation.105 The PSD regulations should have comported with the CAA regulations on

judicial review of EPA regulations.106 Finally, Duke‟s claim that EPA had been inconsistent in

its interpretation of its regulations and had unfairly changed course on 20 years of accepted

practices could be addressed on remand to the District Court.107

          Justice Souter‟s opinion focused most of its discussion on the acceptability of the EPA

assigning different meanings to the term “modification” under PSD than it did under NSPS. The

Supreme Court ultimately disagreed with the Fourth Circuit‟s determination that the EPA‟s

definition of “modification” needed to mirror its definition in the NSPS.108 The Supreme Court

presumes an Act uses the same definition for a term in one instance that it does in another

instance, but this presumption is rebuttable when placed in the proper context.109 In other words,

there is no requirement that an Act use the same definition of even key terms throughout the Act

itself.

101
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423 (U.S. 2007).
102
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1428 (U.S. 2007).(concurrence by Justice
Thomas).
103
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423 (U.S. 2007).
104
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423 (U.S. 2007).
105
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423 (U.S. 2007).
106
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423 (U.S. 2007).
107
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423 (U.S. 2007).
108
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1432 (U.S. 2007).
109
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1432 (U.S. 2007).
        The Supreme Court relied heavily on precedent when concluding that an act may include

different meanings for the same words within the act.110 The Atlantic Cleaners case recognized

that

        [T]he natural presumption that identical words used in different parts of the same
        act are intended to have the same meaning … is not rigid and readily yields
        whenever there is such variation in the connection in which the words are used as
        reasonably to warrant the conclusion that they were employed in different parts of
        the act with different intent.111

Additionally, the Court cited Robinson v. Shell Oil Co., in which the Court heavily emphasized

the importance of contextualizing important terms in statutory provisions.112 Simply put, the

presumption of definitional uniformity may be overcome after an analysis of the language

surrounding the term.

        The Court combined the notion of contextualization and deference to administrative

agencies relying on United States v. Cleveland Indians Baseball.113 The case involved use of the

term “wages” in two different manners within the same tax statute.114 In Cleveland Indians, the

Internal Revenue Service was given deference regarding the “longstanding, reasonable, and

differing” interpretations of its own statutes.115 Similarly, here the Court implied that as long as

an administrative agency‟s interpretations are reasonable in a given context, great deference

should be given by the courts.116

        The Supreme Court discounted the claim that the PSD‟s referral to the NSPS created a

presumption of uniformity in definitions of key terms.117 The Court characterized administrative


110
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1432 (U.S. 2007), referring to Atlantic
Cleaners & Dryers, Inc. v. United States, 286 U.S. 427, 433 (U.S. 1932).
111
    Atlantic Cleaners & Dryers, Inc. v. United States, 286 U.S. 427, 433 (U.S. 1932).
112
    Robinson v. Shell Oil Co., 519 U.S. 337 (U.S. 1997).
113
    United States v. Cleveland Indians Baseball Co., 523 U.S. 200 (U.S. 2001).
114
    United States v. Cleveland Indians Baseball Co., 523 U.S. 200 (U.S. 2001).
115
    United States v. Cleveland Indians Baseball Co., 523 U.S. 200 (U.S. 2001).
116
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1433 (U.S. 2007).
117
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1433 (U.S. 2007).
agencies‟ discretion as customary, and difficult to disturb.118 Ultimately, the Court reasoned that

as long as the EPA‟s reasons for regulating the NSPS and PSD differently are reasonable, the

EPA‟s interpretation should not be disturbed.119

         The Court‟s deference to the EPA‟s interpretation was uncontroversial. The analysis

used to reach this deference follows the infamous “Chevron Two-Step.”120 The Chevron court

fashioned a two-step analysis to be used in interpreting regulatory statutes.121 In such cases, the

courts give considerable deference to the administrative agency which administers the statute if

Congress is silent on the issue.122

         After it resolved the first issue, the Supreme Court addressed the possibility that a

“modification” necessarily involved a change in the per hour rate of emission.123 The Court

noted that the 1980 PSD regulations made no indication that any kind of increase in emission

rate was necessary for a modification to have taken place.124 Further, when emission rates are

actually mentioned in regulatory terms, the rates are annual, not hourly. 125 Not only are

emissions thresholds described in tons per year, the regulations actually mandated that emissions



118
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1433 (U.S. 2007).
119
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1434 (U.S. 2007).
120
    Chevron U.S.A. Inc., v. Natural Resources Defense Council, Inc., 467 U.S. 837 (U.S. 1984).
121
    Chevron U.S.A. Inc., v. Natural Resources Defense Council, Inc., 467 U.S. 837 (U.S. 1984).
122
    When a court reviews an agency's construction of the statute which it administers, it is
confronted with two questions. First, always, is the question whether Congress has directly spoken
to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for
the court, as well as the agency, must give effect to the unambiguously expressed intent of
Congress. If, however, the court determines Congress has not directly addressed the precise
question at issue, the court does not simply impose its own construction on the statute, as would be
necessary in the absence of an administrative interpretation. Rather, if the statute is silent or
ambiguous with respect to the specific issue, the question for the court is whether the agency's
answer is based on a permissible construction of the statute. The judiciary is the final authority on
issues of statutory construction and must reject administrative constructions which are contrary to
clear congressional intent. Chevron U.S.A. Inc., v. Natural Resources Defense Council, Inc., 467
U.S. 837, 842-43 (U.S. 1984).
123
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1434 (U.S. 2007).
124
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1434 (U.S. 2007).
125
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1434 (U.S. 2007).
should be calculated using the unit‟s actual operating hours.126 The Supreme Court‟s

recognition of these requirements severely weakened Duke‟s contention that the hours of

operation should be held constant in an actual emissions calculation.127

        The Supreme Court separated itself from the Fourth Circuit by pointing out that the

Fourth Circuit‟s decision used the lack of an emissions rate specification as a mandate to use the

kilogram per hour rate from the NSPS, while the Supreme Court used an analysis of the

regulatory definition of “major modification” in the PSD itself.128 Quite simply, the definition of

“major modification” contains two components: “1) any physical change in or change in the

method of operation of a major stationary source that 2) would result in a significant net

emissions increase of any pollutant . . . ”129 This holding represented a departure from the short-

term emission rate increase requirement of the lower courts.

        The Supreme Court conceded that the preamble to the 1980 PSD regulations explained

that in the interest of allowing companies to take advantage of favorable market conditions, the

PSD does not require a permit for a mere increase in hours of operation.130 The Court, however,

explained that the District Court took the contents of the preamble too far.131 The District Court

made the mistake of interpreting the provisions of the preamble to allow companies to increase

hours of operation without obtaining a permit, notwithstanding a physical change or change in

the method of operation.132 In fact, an increase of emissions that is due to an increase in the

hours of operation, and that is made possible by construction-related activity is not immune from




126
    40 CFR 51.166(b)(21)(ii).
127
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423 (U.S. 2007).
128
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1435 (U.S. 2007).
129
    40 CFR 51.166(b)(2)(i).
130
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1435 (U.S. 2007).
131
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1435 (U.S. 2007).
132
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1435 (U.S. 2007).
PSD review.133 The Supreme Court based this lack of immunity on major decisions from two

different Courts of Appeals.134 The Seventh Circuit stated “If, however, a physical change

enables the plant to increase its output, then, according to the EPA‟s interpretation, the exclusion

[from the scope of PSD] for merely operating the plant for longer hours is inapplicable.”135 The

Court of Appeals for the First Circuit stated “the regulatory exclusion for increases in the hours

of operation was provided to allow facilities to take advantage of fluctuating market condition,

not construction or modification.”136 Essentially, the Supreme Court determined that PSD

permits must be obtained when an increase in hours of operation results from new

construction.137

        Next, the Supreme Court tackled Duke‟s alternative argument. Duke argued that before a

project can become a major modification under the PSD, it must meet the NSPS definition of

modification.138 The Court held that the language of the NSPS and PSD regulations did not

support the argument. 139 The provisions of the respective regulations should be treated as

complimentary, and not as though PSD was a subset of the NSPS.140 The Court further

discounted the claim by the pointing out that such a judicial review of the regulations could have

been obtained in the Court of Appeals for the District of Columbia within 60 days of the

rulemaking.141 The Court of Appeals did not believe that its analysis reached validity and it

declined to consider its applicability.142 Given the lack of judicial reasoning or occasion to



133
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1435 (U.S. 2007).
134
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1435 (U.S. 2007).
135
    Wisconsin Power Electric v. Reilly, 893 F.2d 901, 916 (C.A.7 1990).
136
    Puerto Rican Cement Co. v. EPA, 889 F.2d 292, 298 (C.A.1 1989).
137
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1435 (U.S. 2007).
138
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1436 (U.S. 2007).
139
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1436 (U.S. 2007).
140
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1436 (U.S. 2007).
141
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1436 (U.S. 2007).
142
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1436 (U.S. 2007).
review the significance of the provision which limits challenges of this sort, the Supreme Court

declined to do so.143

        The final argument that Duke presented to the Supreme Court was the notion that the

EPA‟s current treatment of a PSD “modification” is inconsistent with 20 years of alternative,

more favorable treatment.144 Since the District Court had not made a conclusion on this

argument, the Supreme Court suggested that it may be raised on remand.145 The Supreme Court

then vacated the Fourth Circuit‟s decision and remanded the case for further proceedings

consistent with the Supreme Court‟s opinion.146

        Justice Thomas joined in most of the court‟s opinion, but opined that the statutory cross-

reference between the NSPS and the PSD mandated a single regulatory construction.147 In

support of this contention, Justice Thomas referenced Atlantic Cleaners by pointing out that

there is a presumption that the same words repeated in different parts of the same statute have the

same meaning.148 In Thomas‟ estimation, this presumption had not been overcome by evidence

to the contrary.149



                                            VI. CONCLUSION



        This decision represents a resounding triumph of legislative intent over the manipulation

of technically confusing language. The expressly written intention of the CAA was to protect




143
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1436 (U.S. 2007).
144
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1436-1437 (U.S. 2007).
145
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1437 (U.S. 2007).
146
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1437 (U.S. 2007).
147
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1437 (U.S. 2007).
148
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1437 (U.S. 2007).
149
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1437 (U.S. 2007).
and enhance the quality of the Nation‟s air.150 The subsequent amendments to the Act

undoubtedly shared the original Act‟s intention. With all other variables held constant, an action

which drastically increases the emission of air pollutants in total offends the intentions of the

CAA.

        This case introduced the possibility that Duke, even after modifying its facilities and

increasing its hours of production, had operated beyond the scope of the CAA‟s regulation.151

Duke‟s most significant argument centered on the proposition that it had not modified its

facilities under the applicable definitions of “modification” under the NSPS and PSD.152 Duke

argued that since its changes enabled only longer hours of production and did not enable

increases in emissions per hour, the changes did not constitute “modifications” under the PSD

provisions.153

        Duke‟s arguments attempted to overreach the boundaries of the PSD‟s allowances for

increased hours of production.154 The preamble to the PSD provisions of 1980 intended to make

allowances for increased hours of production when market conditions favored increased

production.155 The provisions simply did not include allowances for companies that make

physical changes or changes in method of production.156 Duke inarguably made physical

changes to its plants, which allowed the plants to operate for more hours in a given day.157

Further, the changes in hours of operation were not in response to market changes.




150
    42 U.S.C. § 7401(b)(1) (2007).
151
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, (U.S. 2007).
152
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, (U.S. 2007).
153
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, (U.S. 2007).
154
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1435 (U.S. 2007).
155
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1435 (U.S. 2007).
156
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1435 (U.S. 2007).
157
    United States v. Duke Energy Corp., 411 F.2d 539, 544 (C.A.4 2005).
        The PSD allowed permit-free changes in hours of production so that companies could

take advantage of market conditions.158 The allowances are not environmentally friendly, but

they are well-founded. For instance, if a city is supplied with electricity by two major power

companies, and one of those companies experiences production problems and is unable to supply

one-half of the city‟s homes and businesses with power, a crisis is imminent. The PSD

allowances for permit-free increases in production are designed to allow the remaining power

company to take advantage of the 200 percent demand for electricity. It would be unreasonable

to require a company that promptly increases supply in the face of an immediate doubling of a

demand to obtain a PSD permit before doing so. Public policy and common sense encourage

such reactions to favorable market conditions.

        Duke was not faced with such a crisis. Duke made physical changes to its plants over a

period of twelve years.159 Such changes do not suggest a reaction to favorable market

conditions. Even if the changes were in response to some ongoing market shift, the changes

involved construction, and were thus “modifications” under the PSD provisions. Thus, the

changes required Duke to obtain a permit.

        The court‟s decision was not only analytically proper and in accord with public policy; it

was also compelled by precedent. Chevron presented a strikingly similar dispute over a key

phrase in a regulatory statute.160 The Chevron court laid out the “Chevron Two-Step” model,

which applies to cases such as Duke.161 Although the Duke court did not dwell on the guiding

force of Chevron, it stayed true to its holding. Perhaps relying heavily on a twenty-three year-




158
    Environmental Defense v. Duke Energy Corporation, 127 S.Ct. 1423, 1435 (U.S. 2007).
159
    United States v. Duke Energy Corp., 411 F.2d 539, 544 (C.A.4 2005).
160
    Chevron U.S.A. Inc., v. Natural Resources Defense Council, Inc., 467 U.S. 837 (U.S. 1984).
161
    Chevron U.S.A. Inc., v. Natural Resources Defense Council, Inc., 467 U.S. 837 (U.S. 1984).
old decision was undesirable to the court. The staying power of the “Two-Step” analysis

however, is clearly evidenced by the outcome of this dispute.

       The Supreme Court came to the proper conclusion in this case. Not only does the letter of

the law dictate the disposition of the case, but public policy and the general health of the nation

are satisfied by this decision. Duke‟s increases in production were not commanded by a public

crisis or a major change in market conditions. The changes were simply “modifications” as they

involved new construction and a change in method of operation. A company should not be

allowed to pollute significantly more without significantly more regulatory scrutiny. The

protection of the United States‟ citizens involves the protection of our air resources. A holding

for Duke in this case would have significantly endangered the quality of America‟s air, and that

is unacceptable. The holding, as it was, served the nation‟s interests and health. Pollution is still

pollution, even when the lights are out.

				
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