The Sixth Circuit Court of Appeals has determined that the U.S. Environmental Protection Agency (EPA) has the authority to challenge a facility’s calculation of emission increases under Clean Air Act (CAA) New Source Review (NSR) provisions. United States v. DTE Energy Co., No. 11-2328 (6th Cir. 3/28/13). Under the NSR program, “owners and operators of any major pollutant emitting source who plan construction projects” must make a preconstruction projection about “whether and to what extent emissions from the source will increase following construction.” This projection determines whether the project requires an NSR permit; if so, the source loses its grandfathered status under the CAA, and the operator must install current emission controls at plants that predate the enactment of the applicable control regulations. EPA regulations detail how emissions increases and decreases related to a particular project are to be tallied for purposes of determining whether a modification will result in a significant emission increase thus making it a “major modification.”

At issue was a $65-million project to replace tubing and equipment at a steam electricity generating unit. The plant’s owner projected future nitrogen oxide and sulfur dioxide emissions and compared that number to the plant’s pre-modification emissions. Because it calculated that increased future emissions were exempt from the calculation under the regulations’ “demand growth exclusion,” the owner concluded that the work was not a major modification. EPA learned of the project and issued a notice of violation, asserting that it was a major modification, and eventually sued the plant owner. The district court dismissed the claim, holding that EPA had no authority to second-guess the plant owner’s emission projections, but could pursue NSR enforcement if post-modification emission monitoring data show a significant emission increase.

The Sixth Circuit disagreed, finding that EPA’s duty under the CAA, “encompassing supervisory responsibility over the construction and modification of pollutant emitting facilities in areas covered by the [New Source Review] program,” included a right to investigate the calculation of emission projections and take enforcement action to force operators to make the projection and follow EPA requirements in doing so.

While it held that the CAA calls for facilities to project emissions and report the projection, the court also ruled that this “does not contemplate approval of the projection prior to construction,” which it found would amount to requiring prior approval contrary to statutory intent. EPA asserted concerns that regulated entities could manipulate post-modification emissions to keep them below significant increase levels, but the court found that “this is entirely consistent with the statute and regulations.” The Sixth Circuit did not determine whether the owner’s emission projections complied with the regulations, however, and instead remanded the matter for the district court’s consideration.