Last month, the U.S. Court of Appeals for the Sixth Circuit reinstated an Environmental Protection Agency (EPA) enforcement action against DTE Energy (DTE) for violating the New Source Review (NSR) program under the Clean Air Act.  This case stems from capital projects undertaken at DTE’s Monroe Power Plant in Monroe, Michigan during a three-month scheduled outage in 2010.  DTE had characterized the projects performed during the 2010 outage as routine maintenance, repair and replacement activities, which, if accurate, would exempt them from NSR.

In 2010, EPA initiated an enforcement action challenging DTE’s routine maintenance designation. EPA also challenged DTE’s decision to exclude from its NSR emissions analysis projected emissions increases from the plant based on “demand growth.”  In a prior decision, the Sixth Circuit reversed and remanded a district court’s award of summary judgment to DTE, holding that EPA was authorized to bring an NSR enforcement action without first demonstrating that emissions actually had increased after the project.  However, while post-project increases were not required for enforcement, the Sixth Circuit indicated that any enforcement based solely on “second guessing” a company’s projections was not allowed because it would convert the NSR program into a prior approval program, which Congress did not authorize.  On remand, the district court again awarded summary judgment to DTE, finding in relevant part that EPA was indeed “second-guessing” DTE.

In the most recent decision, the Sixth Circuit again reversed and remanded the district court’s ruling in a split decision, with all three judges writing separate opinions.

The first opinion, penned by Judge Daughtrey, confirmed once again that EPA may bring a preconstruction enforcement action to challenge DTE’s emission projections, but then explained further that EPA is not confined to a “cursory review” of a company’s analysis.  Judge Daughtrey’s opinion also criticized what she views as a woefully inadequate record to support DTE’s emissions projection calculations, finding that DTE failed to explain or provide any support for why it applied the demand-growth exclusion to its entire projected emissions increase.  Finally, Judge Daughtrey clarified that, while DTE was not required by NSR regulations to secure EPA approval of its emissions projections (or the project) before beginning construction, the company proceeded at its own risk by not first obtaining a permit.  Judge Batchelder concurred in the judgment only because of the holding in the court’s prior decision in the case, from which she had dissented.  And Judge Rogers, who had authored the first Sixth Circuit decision, dissented from the most recent decision in an opinion that again explained why “second-guessing” a company’s projections results in an unauthorized prior approval scheme.

Although it is difficult to glean much direction from the fractured nature of the decision, read in combination, Judge Daughtrey’s opinion and Judge Batchelder’s opinion appear to grant EPA broad authority to second guess an entity’s pre-project emissions projections.  Given the split nature of the decision, further appeals may be forthcoming, including a request for review by the full Sixth Circuit panel.

A copy of the decision is available here: USA v. DTE Energy Co., Case Nos. 14-2274/2275 (6th Cir. Jan. 10, 2017).

For more information on this decision and its potential impacts, please contact Margaret Campbell, Angela Levin, Mack McGuffey or Andy Flavin.