EPA Loses Clean Air Case against TVA

Published July 1, 2004

The U.S. Supreme Court has refused to review an appellate court’s determination that the Environmental Protection Agency (EPA) exceeded its authority in seeking to enforce a controversial interpretation of the Clean Air Act (CAA) against the Tennessee Valley Authority (TVA).

Clinton EPA Launched Retroactive Interpretation
In 1999, the Clinton administration EPA decided to retroactively enforce against TVA a new interpretation of New Source Review (NSR) requirements of the Clean Air Act. EPA claimed TVA violated NSR 14 times between 1982 and 1996 when it performed work on nine of its power plants.

At the time TVA performed its contested maintenance, the federal government’s longstanding interpretation of NSR did not require TVA to obtain an EPA permit or install best-available pollution abatement technology. Nevertheless, EPA filed an “administrative compliance order” in 1999 ordering TVA to install expensive new equipment and pay hefty fines for the maintenance work it had done.

TVA objected to retroactive enforcement of the new NSR interpretation and ultimately filed a federal suit seeking to prevent EPA from enforcing its compliance order. According to TVA, EPA had acted in an “arbitrary and capricious” manner in interpreting NSR and issuing its compliance order.

Eleventh Circuit Blasts Enforcement Action
In a June 2003 decision, the Eleventh Circuit Court of Appeals ruled the Clinton administration had used an unconstitutional enforcement scheme in its action against TVA. The scheme was “employed on the fly, entirely ignoring the concept of the rule of law,” observed the court.

Specifically, the court determined EPA administrative compliance orders may not impose the severe civil and criminal penalties EPA attempted to impose on TVA. Stated the court, “EPA must prove the existence of a CAA violation in district court; until then, TVA is free to ignore the ACO without risking the imposition of penalties for noncompliance with its terms.” EPA could still, if it so desired, seek to enforce a compliance order against TVA, but to do so it must initiate a new action in federal district court.

Supreme Court Declines to Review
EPA, with the backing of Bush administration Solicitor General Ted Olson, filed a writ of certiorari, asking the U.S. Supreme Court to review and ultimately reverse the Eleventh Circuit’s decision. On May 3, however, the Supreme Court issued a one sentence statement declining to review the case.

As a result of the Supreme Court’s decision, it appears unlikely EPA or the Bush administration will pursue new action against TVA for its 1982-to-1996 maintenance work. Bush has decided not to follow the Clinton administration’s NSR interpretation, and he has approved new guidelines that interpret NSR provisions in a manner largely consistent with EPA’s interpretation before the Clinton administration.

Although the Bush EPA will not abandon pre-existing enforcement actions imposed under the Clinton administration’s interpretation of NSR, the agency has stated it will not pursue any new actions seeking to enforce the Clinton interpretation.

Importance of TVA Ruling
The TVA suit was among the most significant of the NSR enforcement actions begun under the Clinton administration. TVA is the nation’s largest public utility and the nation’s fourth largest power supplier, serving 8 million people in seven Southeastern states. Court documents had suggested complying with the EPA directive would force a rate hike for TVA customers of up to 14 percent.

“The case against TVA was one of the strongest of those filed in 1999 against all of the utilities,” lamented Stephen Smith of the Southern Alliance for Clean Energy. “We’re back to ground zero, and EPA has got to start all over again, if they’re going to start at all.”

“The facts never supported application of the New Source Review program to these maintenance projects,” countered Scott Segal, director of the Electric Reliability Coordination Council (http://www.electricreliability.org).

“We’ve spent five years of TVA ratepayer money and EPA’s taxpayer money suing each other over these procedural issues,” added TVA Director Bill Baxter. “The primary goal should be to clean up the air. TVA and EPA are on the same team in that effort.”

Dana Perino of the White House’s Council on Environmental Quality said the Supreme Court ruling underscores the appropriateness of the Bush administration’s decision to promulgate a rule that clarifies the federal government’s NSR interpretation in a manner consistent with the longstanding, pre-Clinton interpretation of the statute.

Said Perino, “This litigation-driven approach is slow and for the very reason that no one’s air gets any cleaner when you’re fighting in court, the Bush administration is working on regulations that will mandate a 70 percent cut in power plant emissions from all power plants rather than a piecemeal litigation approach.”

Baxter said the court rulings were an appropriate response to enforcement actions initiated by the Clinton administration that reversed 20 years of accepted interpretation of NSR. Power suppliers such as TVA need assurance that compliance with accepted federal interpretations of NSR will not later be subjected to retroactive enforcement based on new interpretations.

Improving Air Quality
Baxter also asserted the EPA action was unnecessary because air quality is improving.

“We have a goal that by the end of the decade, we will have reduced our nitrogen oxide emissions by 85 percent and our sulfur dioxide emissions by 75 percent (from 1970s peak),” Baxter said. “We’re going to stay focused on those goals.”

“Power companies face about a dozen major federal air quality programs, in addition to state requirements, designed to address various public health and environmental issues,” said Bill Brier, Edison Electric Institute’s (EEI) vice president for policy and public affairs. “We have cut nitrogen oxides and sulfur dioxide emissions–associated with smog and acid rain–by about 40 percent so far. Under new regulations proposed by EPA, we will cut emissions of these two pollutants–plus mercury–by about two-thirds from current levels over the next decade.” (See accompanying figure.)

Those emissions cuts have been achieved, EEI reported, despite a 93 percent increase in gross domestic product and a 75 percent increase in electricity use since 1980. EPA’s most recent air trends report found emissions of six primary air pollutants have been cut 48 percent since enactment of the federal Clean Air Act in 1970.

Northeastern AGs Threaten More Suits
Despite the rulings by the Eleventh Circuit and U.S. Supreme Court, attorneys general for three northeastern states have hinted they might initiate their own suit against TVA. All three are Democrats, fueling speculation that the suits are more about embarrassing the Bush administration than cleaning the air.

Such suits are becoming commonplace. Democratic attorneys general Eliot Spitzer of New York and Peter Harvey of New Jersey have joined the federal government in a suit against Ohio Edison. Also, Spitzer, Harvey, and six other northeastern attorneys general have joined the federal government in a suit against American Electric Power. Spitzer has led a group of Democratic state attorneys general threatening to sue the federal government for rescinding the Clinton administration’s NSR interpretation.

Regarding the potential suit against TVA, a source close to the state attorneys general told Energy & Environment Daily, “The work has already been done in putting together the case. It’s sort of low-hanging fruit with a very big payoff given the magnitude of the emissions associated with that system.”

Ulla Reeves, regional program director for the Southern Alliance for Clean Energy, said her group was eagerly anticipating the northeastern states initiating a new suit against TVA. “It takes an enormous amount of resources for an environmental organization to bring a civil suit,” she said. “It’s incredibly appealing to have the states interested in this.”

James M. Taylor is managing editor of Environment & Climate News. His email address is [email protected].

For more information …

The decisions of the Eleventh Circuit Court of Appeals and U.S. Supreme Court are available online at http://www.ca11.uscourts.gov/opinions/ops/200015936.pdf and http://www.supremecourtus.gov/orders/courtorders/050304pzor.pdf, respectively.