The DTE Energy Saga: Part 1 – District Court, First Round

One of the longest-running enforcement cases involving the post-NSR Reform PSD program is the United States v. DTE Energy Co. case in Michigan. Because of the significance of this case, the NSR Law Blog will undertake a series of articles examining the arguments presented by the parties and the responses by the district court judge and the Sixth Circuit. The case is currently pending certiorari before the U.S. Supreme Court.

BACKGROUND

DTE owns and operates the Monroe power plant in Michigan, which consists of four units. In March 2010, DTE shut down some of the Monroe units for what it characterized as maintenance. On March 12, 2010, DTE mailed a “pre-project notification letter” to the Michigan Department of Environmental Quality (MDEQ), informing MDEQ of the project, but asserting that an annual post-project emissions increase was unrelated to the project. MDEQ did not question the notification. The maintenance outage concluded on June 20, 2010 and the plant resumed operation. DTE began the required post-project monitoring. EPA filed an enforcement action, contending that DTE’s project required PSD review because it could result in thousands of tons of additional emissions and that the plant was operating without required permits.

ANALYSIS

In the district court, EPA contended that PSD is a “preconstruction review” program and that DTE was required to obtain a PSD permit from MDEQ because the project constituted a major modification. DTE defended on the basis that the project was not a major modification, as demonstrated in the March notice letter and post-project emissions monitoring. The district court agreed with DTE’s analysis, finding that the 2002 NSR Reform rules “provide source operators … with the option of either getting a permit before commencing their projects or measuring their emissions afterward and running the risk of the Government bringing an enforcement action.”

EPA next argued that DTE’s notice letter was deficient because it “provides no analysis specific to the project and no explanations of why any emissions were excluded” and argued that the notice must provide the “reason for excluding that amount.” DTE argued that this was an issue for MDEQ, which had not objected to the letter, and that the letter adequately explained the exclusion that “an existing unit could have accommodated … and that are also unrelated to the particular project” due to demand, market conditions or fuel quality. The court ultimately held that DTE’s notice letter was adequate. The court also held that EPA had not challenged the sufficiency of the notice letter in its Notice of Violation and hence was barred from pursuing that avenue of attack.

Accordingly, the district court granted DTE’s motion for summary judgment. EPA promptly appealed to the Sixth Circuit.

COMMENTARY

As construed by the district court, the 2002 NSR Reform Rule worked a major change in the PSD program by allowing a source to give notice, project that its emissions would remain below the thresholds (due in this case to excluded demand growth), and not go through PSD so long as subsequent emissions did not exceed the significant threshold. In essence, the court’s ruling could be read to allow a potential voluntary (as opposed to enforceable) restriction to keep an otherwise PSD-eligible change out of the PSD program. Unsurprisingly, given the extent of the change wrought by the opinion on EPA’s traditional approach to PSD enforcement, EPA appealed. EPA’s appeal and the Sixth Circuit’s ruling is the subject of the next installment.