As applied to a major modification made to a cycling or peaking — as opposed to a baseload — power plant, a three-judge panel of the US Court Appeals for the Seventh Circuit in United States v. Cinergy Corp. ruled inadmissible the Environmental Protection Agency’s customary Clean Air Act (CAA) measure to determine whether the modification increases potential polluting emissions and therefore requires a pre-construction permit under the CAA’s New Source Review (NSR). This unprecedented ruling may have the effect of exempting many, if not most, non-baseload plants from pre-modification permitting, including the requirement that plant owners install the best-available control technology in connection with a major modification.

The panel’s October 12 decision grew out of EPA’s 1999 lawsuit alleging that the electric utility company Cinergy Corp. violated the pre-construction permitting requirement of NSR when it undertook several equipment replacement projects at the company’s power plants in Indiana. Following an initial appeal to the Seventh Circuit that confirmed that the relevant measure of emissions under NSR is the actual annual emission as opposed to the rate of emissions, the case was tried to a jury. On the basis of EPA expert witness testimony showing that four equipment replacements at Cinergy’s Wabash, Indiana, plant increased the Wabash plant’s potential to emit nitrogen oxide, the jury found Cinergy liable for four NSR pre-construction permit violations, and the trial court ordered the plant shut down and assessed Cinergy civil penalties of $25,000 for every day that the plant was operated in violation of NSR.

The Seventh Circuit reversed on appeal because, according to the three-judge panel, EPA’s expert witnesses used the wrong formula for measuring the increase in the actual potential to emit resulting from a major modification to a cycling plant, such as Wabash. That formula assumed that the actual potential to emit nitrogen oxide increased in proportion to the amount of generating capacity that Cinergy added in connection with each of the four equipment replacements at the Wabash plant. That assumption is appropriate for a baseload power plant that is operated at or near capacity, but, according to the panel, is impermissible as applied to cycling or peaking plants that are operated only periodically. Without specifying what formula EPA’s experts should have used, the panel’s decision implies that, in the case of a cycling or peaking plant, the increase in actual potential to emit should be projected at only some fraction of the capacity added by a major modification, with that fraction approximating the extent to which the plant is operated (i.e., its capacity or load factor).