Argument Preview: Environmental Defense v. Duke Energy on 11/1

The following argument preview was written by David Thompson, a student in the Stanford Supreme Court Litigation Clinic.

The Supreme Court will wrap up the first week of its November sitting on Wednesday, November 1 with Environmental Defense v. Duke Energy Corp. (05-848) followed by Whorton v. Bockting (preview here). As the title suggests, Duke Energy involves an environmental challenge to emissions at a power plant. Despite the environmental genesis of the case, the actual argument is likely to turn on gritty details of administrative law: what constitutes a challenge to the validity, rather than the interpretation, of a regulation? (The briefs are here.)

Sean H. Donahue, affiliated with the National Legal Scholars Law Firm, will argue on behalf of the petitioners. Mr. Donahue previously served as a visiting professor of environmental law at Washington & Lee University and holds the distinction of having clerked for both Justice Stevens (at the Supreme Court) and Justice Ginsburg (then at the Court of Appeals for the D.C. Circuit). Deputy Solicitor General Thomas G. Hungar will argue for the United States in support of petitioners. The argument of respondent, Duke Energy, will be conducted by Carter G. Phillips of Sidley Austin, LLP. Mr. Phillips has made more than 50 appearances before the Supreme Court, including nine as Assistant to the Solicitor General before joining Sidley Austin.

The case was spawned by the decision by Duke Energy (no relationship to Duke University) to perform substantial work on eight pre-1977 coal-fired power plants in North Carolina. The work included upgraded steam-carrying systems and bringing back online a generating unit that had been offline for years. The plants had been “grandfathered” into lower emissions standards under the Clean Air Act (CAA) amendments of 1977. The “grandfather” provisions allowed existing plants to undergo “routine maintenance” without triggering the new standards; however, upon “modification” the plants would be subjected to the new rules.

Litigation began in 2000 when the EPA—joined by, inter alia, Environmental Defense and the Sierra Club—filed a Clean Air Act enforcement action against Duke Energy, claiming that its work on the plants resulted in a “modification,” rather than merely “routine maintenance,” such that the new rules would apply. The Middle District of North Carolina granted summary judgment to Duke, and the Fourth Circuit unanimously affirmed. Although the EPA declined to petition for cert. (in fact, the Solicitor General opposed cert.), the private parties pushed forward. The Supreme Court granted cert., partly due to a conflicting D.C. Circuit decision issued only nine days after the Fourth Circuit decision in Duke Energy. After cert. was granted, the Solicitor General filed an amicus brief for the United States in support of petitioners.

Substantively, the parties dispute the definition of “modifications” that can turn an existing power plant into a “new source” under the Clean Air Act. The EPA contends that the term “modification” in the Prevention of Significant Deterioration (PSD) provisions should be measured in terms of tons of emissions per year. Duke Energy contends – and the Fourth Circuit held – that the definition of “modification” for PSD purposes should be identical to the New Source Performance Standards (NSPS) definition of “modification,” which includes only a change in the maximum hourly emissions capacity of a plant. The NSPS definition would not consider a change that allowed a plant to operate for a larger portion of the year to be a “modification” (even if that change would result in greater emissions overall) whereas the EPA’s definition would.

The primary question before the Court, however, is whether the Fourth Circuit had jurisdiction to address the definition of “modification” at all. Exclusive jurisdiction to review challenges to nationally applicable Clean Air Act regulations is vested with the D.C. Circuit, and statutory challenges cannot be brought during enforcement actions.

The parties have cast this question using very different frames. Petitioner claims that the correct place for Duke to question the validity of the EPA’s regulations was the D.C. Circuit, where Section 307 of the Clean Air Act requires challenges to nationally applicable regulations be brought. Respondent counters that it is not questioning the validity of the regulations per se, but rather the EPA’s interpretation of the regulations. The case is thus likely to turn on whether the Court views a challenge to the definition of “modification” as a challenge to the regulations (subject to review in the D.C. Circuit only) or a challenge to an interpretation of the regulations.

The EPA argued before the Fourth Circuit that it was free to define “modification” differently for PSD and NSPS and the courts are bound by its definitions. Petitioners before the Supreme Court argue that failing to give proper Chevron deference to the agency’s definition effectively invalidates the PSD regulations. The Fourth Circuit reasoned that it was merely “interpreting” the term in the PSD regulations, not invalidating the PSD regulations themselves. Petitioner alleges that the Fourth Circuit had no room to “interpret” the regulations as they were unambiguous on their face.

On a broader scale, petitioners make the argument that allowing each circuit to review the meaning of “modification” will cause the exact uncertainty that Congress sought to avoid by consolidating review of CAA regulations in the D.C. Circuit.

However, Duke counters that reversal would result in Duke being denied its day in court to challenge to the application of the PSD regulations to Duke’s power plants. CAA Section 307 requires that challenges to CAA regulations be brought within 60 days of the promulgation of the rule. The actual rules at issue have not changed since 1980, but Duke contends that the EPA’s interpretation did change in 1999 without the promulgation of a new rule. Duke reasons that in 1980 a challenge to the validity of the EPA’s 1999 interpretation would clearly have been impossible. Further, Duke would have been unable in 1980 to seek an advisory opinion that the power plant modifications that it had yet to make would have been held to be permissible. Thus, Duke concludes that the statutory procedure for review in the D.C. Circuit is entirely unavailable to challenge what Duke considers to be a modification of the interpretation of a rule promulgated years ago.

With two new Justices on the Court and a variety of frameworks of analysis, it will be difficult to predict the outcome of this case. While this particular case arises in the environmental context, its importance crosses all administrative agencies; reversal would enable more dispersed challenges to agency actions in the form of challenges to the “interpretation” of a rule rather than a challenge to the rule itself, possibly impacting the scope of Chevron in practice. On the other hand, this case could be cast as a case limiting the powers of government agencies to change the rules of the game without the “exercise of appropriate rulemaking powers.”

Perhaps ironically, this environmental case has consumed a small forest worth of paper. At the district court, both the Government and Duke each produced over two million pages of discoverable material. Before the Supreme Court, the case has sparked multiple amicus briefs, from an AFL-CIO affiliate union to two groups of states to a former EPA administrator to the former Chairman of the House Committee on Energy and Commerce. The Joint Appendix for the parties alone runs 509 pages split across two volumes.