Court Rejects EPA NSR Position in Alabama Case

The Center's worst fears have come true in regards to New Source Review (NSR) gridlock and the failure of Congress to pass the Clear Skies Initiatives (CSI) in 2004. Instead of the contentious NSR, which has only produced litigation instead of pollution mitigation, we would have the equivalent of the Clean Air Interstate Rule (CAIR) and Clean Air Mercury Rule (CAMR)--both 'get-around-Congress regulations--have been overruled by the courts.In the decade-long, ongoing battle over the New Source Review program, industry won another significant victory over EPA. The North District of Alabama handed power companies and their customers another significant victory in the NSR enforcement dispute. The court rejected EPA approach to whether a repair or replacement project is "routine" (and thus not subject to NSR) must be determined by reference to similar projects "at the unit."

The court held that "routine" must be judged "with reference to the industry as a whole, not just the particular.unit at issue." This holding reaffirms an earlier ruling of this court, as well as decisions by district courts in North Carolina and Kentucky. Each of these courts has rejected the government's position on "routine" and confirmed industry's position that routine must be evaluated with reference to the projects conducted by the industry as a whole. The Alabama court also took note of "EPA's different statements about what kind or type of work at plants in the industry.was [routine] and what was not."The court went on to say in the ruling that "using a plant specific test for activities that occurred as far back as 1985, when it was patently obvious what [Alabama Power] was doing, and the EPA said and did nothing.strikes the court as a 'gotcha' test."

The court also emphasized that, in order to prevail in this dispute, "EPA will have to prove that there was a physical change that resulted in a net emissions increase." In the recent Cinergy case involving similar facts, a jury found that the government had failed to meet this burden of proving an emissions increase from virtually all the projects at issue, including so-called "life extension" projects. The combination of Cinergy's rejection of the government's position on emissions increase, and the rejection of the government's "routine" standard by the Alabama court and other courts, raises serious questions about the viability of EPA's enforcement cases.