United States v. Cinergy Corporation , 458 F.3d 705 ( 2006 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 06-1224
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
and
STATE OF NEW YORK, et al.,
Plaintiffs-Intervenors/Appellees,
v.
CINERGY CORPORATION, et al.,
Defendants-Appellants.
____________
Appeal from the United States District Court
for the Southern District of Indiana, Indianapolis Division.
No. 1:99-CV-01693—Larry J. McKinney, Chief Judge.
____________
ARGUED JUNE 2, 2006—DECIDED AUGUST 17, 2006
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Before POSNER, EASTERBROOK, and ROVNER, Circuit Judges.
POSNER, Circuit Judge. The Environmental Protection
Agency sued the owner of a number of coal-fired electric
power plants claiming that the owner (Cinergy) had
violated section 165(a) of the Clean Air Act, 42 U.S.C.
§ 7475(a), by physically modifying the plants without
first obtaining from the EPA a permit that the agency
2 No. 06-1224
contends is required by EPA regulation 40 C.F.R. § 52.21 for
the type of modification that Cinergy made. (Other regula-
tions are applicable to some of Cinergy’s facilities but are
materially identical to section 52.21, see New York v. EPA,
413 F.3d 3, 13 (D.C. Cir. 2005) (per curiam), and so needn’t
be discussed separately.) The modifications produced
increases in the nitrogen oxides and sulfur dioxide annually
emitted by the plants. If the EPA prevails in the suit,
Cinergy will be required to retrofit the plants with costly
pollution-control equipment (“best available control
technology”). § 52.21(j)(3).
Cinergy argues that the regulation does not require
modifications that do not increase the hourly rate at
which a plant emits pollutants, even if the modifications
increase the annual rate. The EPA argues that Cinergy is
misreading the regulation. The district judge agreed
with the EPA but authorized Cinergy to take an inter-
locutory appeal from his ruling, and we have consented to
take the appeal. 28 U.S.C. § 1292(b).
The validity of the regulation is not in issue, just its
meaning. Only the U.S. Court of Appeals for the District
of Columbia Circuit has jurisdiction to review the validity
of nationally applicable regulations issued pursuant to the
Clean Air Act, 42 U.S.C. § 7607(b)(1); Wisconsin Electric
Power Co. v. Reilly, 893 F.2d 901, 914 n. 6 (7th Cir. 1990);
Natural Resources Defense Council, Inc. v. EPA, 194 F.3d
130, 135 (D.C. Cir. 1999), and 40 C.F.R. § 52.21 is such a
regulation.
It requires a permit for any “major modification,” defined
as “any physical change in or change in the method
of operation of a major stationary source that would
result in a significant net emissions increase of any pollutant
subject to regulation under the [Clean Air] Act.”
No. 06-1224 3
§ 52.21(b)(2)(i). (All our quotations are from the regulation
as it read before revisions in 2002 that are inapplicable to
this proceeding and, if applicable, would not affect our
analysis.) “Physical change” excludes among other things
“routine maintenance, repair and replacement,” which
Cinergy concedes its plant modifications were not. But
it also excludes “an increase in the hours of operation or
in the production rate.” §§ 52.21(b)(2)(iii)(a), (f). That is,
merely running the plant closer to its maximum capacity
is not a major modification because it does not involve
either a physical change or a change in the method of
operation. If, however, a physical change enables the
plant to increase its output, then, according to the EPA’s
interpretation, the exclusion for merely operating the plant
for longer hours is inapplicable.
“Net emissions increase” is defined, so far as bears on this
case, as “any increase in actual emissions from a partic-
ular physical change or change in method of operation.”
§ (b)(3)(i)(a). A “significant” net emissions increase is
measured by the “rate of emissions that would equal or
exceed” specified numbers of “tons per year” of the various
pollutants. § (b)(23)(i). “Actual emissions as of a particular
date shall equal the average rate, in tons per year, at which
the unit actually emitted the pollutant during a two-year
period…. Actual admissions shall be calculated using the
unit’s actual operating hours, production rates, and types of
materials processed, stored, or combusted during the
selected time period.” § (b)(21)(ii).
Since both the base emissions rate from which a sig-
nificant increase is calculated, and the amount of the
increase, are in terms of tons per year rather than per
hour, the natural reading of the regulation is that any
physical change or change in operating methods that
4 No. 06-1224
increases annual emissions is covered. Cinergy argues that
calculating “actual emissions . . . using . . . actual operating
hours,” § (b)(21)(ii), “means that an ‘emissions increase’ is
found only if the hourly rate of emissions increases as a
result of physical change.” But “actual operating hours” is
more naturally read to mean the total number of hours that
the plant is in operation. Suppose that before some physical
change the plant operated an average of 18 hours a day, and
the change enabled it to operate 24 hours a day. Since the
regulation is concerned with the “increase in actual emis-
sions” rather than with a potential increase in emissions,
§ 52.21(b)(21)(v); Wisconsin Electric Power Co. v. Reilly, supra,893 F.2d. at 916; New York v. EPA, supra, 413 F.3d at 15, the
plant could not automatically be assumed to operate 24 hours
a day after the modification was made—there might not be
enough demand to justify such continuous operation. But
suppose a reasonable estimate was that the plant would
operate an average of 20 hours a day with the modification;
then, as a first approximation, a reasonable estimate of the
contribution of the modification to pollution would be that
the modification had increased the plant’s annual emissions
by about 10 percent. This estimate would determine
whether the company needed a permit for the modification.
Cinergy’s suggested interpretation, besides not conform-
ing well to the language of the regulation, would if adopted
give a company that had a choice between making a
physical modification that increased the hourly emissions
rate and one that enabled an increase in the number of
hours of operation an incentive to make the latter change
even if that would produce a higher annual level of emis-
sions, because it would elude the permit requirement.
Cinergy’s interpretation would also distort the choice
between rebuilding an old plant and replacing it with a new
No. 06-1224 5
one. The Clean Air Act treats old plants more leniently than
new ones because of the expense of retrofitting pollution-
control equipment. Wisconsin Electric Power Co. v. Reilly,
supra, 893 F.2d at 909-10. But there is an expectation that old
plants will wear out and be replaced by new ones that will
be subject to the more stringent pollution controls that the
Clean Air Act imposes on new plants. One thing that
stimulates replacement of an old plant is that aging pro-
duces more frequent breakdowns and so reduces a plant’s
hours of operation and hence its output. Cinergy’s interpre-
tation would give the company an artificial incentive to
renovate a plant and by so doing increase the plant’s hours
of operation, rather than to replace the plant. For by going
the first route it could increase the plant’s output without
having to invest in preventing the enhanced output from
generating increased pollution.
The fact that the EPA’s interpretation avoids some bad
consequences doesn’t prove that it’s correct. But it does
scotch the argument that the interpretation produces
such outlandish consequences that it must be incorrect—
which is not to say that Cinergy’s interpretation must be
incorrect because it would produce outlandish results. It
would not, as suggested by the EPA’s having put out
for comment a proposal to change the regulation to the
hourly-emissions standard favored by Cinergy. See Preven-
tion of New Source Deterioration, Nonattainment New Source
Review, and New Source Performance Standards: Emissions
Test for Electric Generating Units, 70 Fed. Reg. 61081 (Oct. 20,
2005). Under the existing regulation as interpreted by the
EPA, Cinergy, rather than having to choose between re-
pair and replacement to enhance output, might decide
to buy electricity from other electric utilities, and their
plants might pollute more than Cinergy’s do. And while
Cinergy can determine a plant’s hourly rate of emissions
6 No. 06-1224
easily enough just by observing the plant in operation, it
cannot predict the plant’s annual emissions rate because
that depends on the number of hours of operation; and who
knows in advance how many hours a plant will operate? Of
course the company can always curtail those hours if it sees
itself approaching the ceiling. But that might complicate its
customer relations, as well as sacrificing significant revenue.
What is required for determining whether a construction
permit must be sought for a planned physical change in the
plant is not prescience, but merely a reasonable estimate of
the amount of additional emissions that the change will
cause; yet it may be a very difficult estimate to make.
Cinergy’s principal argument, however, has nothing to do
with the consequences of the alternative interpretations; it
is that Congress required that the regulation define “modi-
fication” as a change in the hourly emissions rate. Since the
regulation does not define it so, this seems an attack on the
validity of the regulation rather than an argument about its
meaning, and issues of validity, we pointed out, are beyond
the jurisdiction of a regional circuit to resolve. In any event,
the argument is unconvincing.
The Clean Air Act, as amended in 1970, required the EPA
to devise “New Source Performance Standards” (NSPS),
including standards for “modifications,” defined as physical
changes, or changes in operating methods, that increased
the amount of pollutants emitted. 42 U.S.C. § 7411(a)(4).
One of the standards that the agency adopted placed hourly
limits on emissions from coal-fired electric power plants.
After further amending the Act in 1977 to require the EPA
to take steps to prevent significant deterioration (PSD) in air
quality—it is pursuant to these amendments that the
regulation at issue in this case was promulgated, see 42
U.S.C. § 7477—Congress amended the amendments to
No. 06-1224 7
provide that “modifications” would bear the same meaning
in the PSD provisions as the word bore in the NSPS provi-
sions. § 7479(2)(C); Wisconsin Electric Power Co. v. Reilly,
supra, 893 F.2d at 905; New York v. EPA, supra, 413 F.3d at 13.
But the statutory definition of “modifications” to which
Congress was referring says nothing about hourly versus
annual emissions. § 7411(a)(4). The hourly-emission stan-
dard under the New Source Performance Standards is a
creature of regulation, 40 C.F.R. §§ 60.14(a)-(b), and the
“same meaning” statutory amendment does not purport to
incorporate the agency’s regulatory definition of modifica-
tions under the New Source Performance Standards into the
provisions relating to the Prevention of Significant Deterio-
ration program.
Cinergy’s argument was rejected by the D.C. Circuit in
New York v. EPA, supra, which upheld the EPA’s inter-
pretation of the regulation. But it was accepted by the
Fourth Circuit in United States v. Duke Energy Corp., 411 F.3d
539, 546-51 (4th Cir. 2005), cert. granted, 126 S. Ct. 2019(2006), creating a circuit conflict that the Supreme Court
presumably granted certiorari in the Duke Energy case to
resolve.
In so ruling, the Fourth Circuit stepped out of bounds,
as we have said in describing Cinergy’s argument. But in
any event the argument’s premise is incorrect. The same
word can mean different things in the same statute. See
General Dynamics Land Systems, Inc. v. Cline, 540 U.S. 581,
595-96 (2004); Robinson v. Shell Oil Co., 519 U.S. 337, 342-44
(1997); Indianapolis Life Insurance Co. v. United States, 115
F.3d 430, 434-35 (7th Cir. 1997), and with specific refer-
ence to the Clean Air Act Potomac Electric Power Co. v.
EPA, 650 F.2d 509, 518 (4th Cir. 1981); Northern Plains
Resource Council v. EPA, 645 F.2d 1349, 1355-56 (9th Cir.
8 No. 06-1224
1981). “There is a natural presumption that identical
words used in different parts of the same act are intended to
have the same meaning. But the presumption is not rigid
and readily yields whenever there is such variation in the
connection in which the words are used as reasonably to
warrant the conclusion that they were employed in different
parts of the act with different intent.” Atlantic Cleaners &
Dyers, Inc. v. United States, 286 U.S. 427, 433 (1932).
Because many words have multiple meanings, the same
word might well be used in one sense in one part of a
statute and another sense in another. That is certainly
the case with a vague word like “modification,” and all
the more when the statutory provisions that contain the
word were enacted by different Congresses for different
purposes. United States ex rel. Long v. SCS Business & Techni-
cal Institute, Inc., 173 F.3d 870, 881 n. 15 (D.C. Cir. 1999). The
New Source Performance Standards part of the Act, the
older part, imposes specific technical requirements on
polluters, and it is natural therefore that “modification” in
that part of the Act should refer to physical changes in the
plant. The Prevention of Significant Deterioration part of the
Act leans toward the more modern approach of limiting
output (pollution) rather than inputs (technology), and so it
is equally natural to interpret “modification” in that part
more broadly in order to prevent opening a loophole that
would allow pollution to soar unregulated. See Potomac
Electric Power Co. v. EPA, supra, 650 F.2d at 518; Alabama
Power Co. v. Costle, 636 F.2d 323, 402 (D.C. Cir. 1980) (per
curiam).
Furthermore, a vague statutory term in a regulatory
statute can operate as a delegation to the regulatory agency
to supply meaning. Washington State Dept. of Social & Health
Services v. Guardianship Estate of Danny Keffeler, 537 US. 371,
No. 06-1224 9
389-90 (2003); Smiley v. Citibank (South Dakota), N.A., 517
U.S. 735, 739 (1996); Chevron U.S.A., Inc. v. Natural Resources
Defense Council, Inc., 467 U.S. 837, 842-46 (1984). The New
Source Performance Standards and Prevention of Significant
Deterioration provisions of the Clean Air Act are at one in
defining a modification as a physical change in a plant that
results in an increase in emissions, but are silent on whether
the increase is in the hourly rate of emissions or in some
other rate. The task of deciding was left to the EPA. There
was nothing to require that it flesh out the vague statutory
meaning in the identical way in different parts of the Clean
Air Act adopted years apart and reflecting, to an extent
anyway, different philosophies of pollution control.
Cinergy’s other arguments are makeweights, and we
will not extend this opinion to discuss them.
AFFIRMED.
A true Copy:
Teste:
_____________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—8-17-06