Court Orders Ameren to Install Controls at Two Plants

On September 30, 2019, the U.S. District Court for the Eastern District of Missouri entered judgment in the long-awaited remedy phase of United States v. Ameren Missouri. In a 157-page opinion, the court ordered Ameren to (1) apply for a PSD permit, including wet flue gas desulfurization (wet FGD) for SO2 control within 90 days for its Rush Island plant; (2) begin achieving an SO2 emission rate from Rush Island Units 1 and 2 “no less stringent than 0.05 lb SO2/mmBtu on a 30-day rolling average within four and one-half years; and (3) install emission controls on the Labadie plant units “as least as effective as dry sorbent injection” within three years and to operate such emission controls “until Ameren has achieved emissions reductions totaling the same amount as the excess emissions from Rush Island.” Ameren has said it will appeal.

BACKGROUND

As a reminder, the Rush Island Units 1 and 2 are pulverized coal units in Jefferson County, Missouri adjacent to the Mississippi River that were commissioned in 1976 and 1977, just prior to the Clean Air Act Amendments of 1977 that ratified the PSD program. The units were grandfathered and emit about 18,000 tons of SO2 a year and are currently uncontrolled. The court concluded that the natural life of these units was 30-40 years. By 2005, the units were experiencing performance problems related to leaks, slagging, fouling, plugging and similar issues, which caused both planned and unplanned outages. As a result, Ameren undertook a major overhaul of the units in 2007 and 2010. The overhauls involved extensive contractor labor, time and cost. The overhauls were also successful. The court found that Unit 1’s availability increased from 70-90% in the 1997 to 2007 time period to 96% in 2008. Unit 2’s availability showed a smaller increase, from about 94.5 to 97.4%.

In the liability phase, the court found that Ameren had failed to identify the overhaul projects were major modifications and that Ameren had not obtained the necessary PSD permits or installed best available control technology (BACT) required by the Clean Air Act. The liability phase is discussed in an earlier blog article.

ANALYSIS

In its remedy phase opinion, the court summarized its findings as follows:

In summary, I find that the EPA’s experts convincingly and credibly testified that wet FGD is the most effective control technology that could be used at Rush Island. Additionally, when considering the energy, environmental, and economic impacts, wet FGD is achievable at Rush Island. As a result, wet FGD is the Best Available Control Technology (BACT) for Rush Island. The EPA’s experts also convincingly and credibly testified that Ameren’s failure to install BACT at Rush Island has led to more than 162,000 tons of excess SO2 emissions and increased the risk of health problems and premature mortality in the exposed population. Considering this evidence, I conclude that ordering commensurate reductions at Labadie is a remedy that is closely tailored to the harm suffered, addresses irreparable injury that could not be compensated through legal remedies, serves the public interest, and is warranted when considering the balance of hardships in this case.

Historic BACT. In its detailed findings, the court found that “the pollution control experts in this case agree that an SO2 emission rate of 0.04 lb/mmBtu would be an achievable design emission rate for a wet FGD at Rush Island.” The court found that Ameren had internal plans showing it could install a wet FGD system in 4.5 years. The court found that wet FGD was BACT, rejecting Ameren’s expert testimony that it should be dry sorbent injection (DSI), finding that Ameren’s analysis relied too heavily on incremental cost effectiveness, included cost categories not included in MDNR evaluations, varied from past practice, and failed to adequately address what the court called “the NSR’s source category ‘cost presumption,’” which is a presumption that if one source in a category applies the control, it is achievable by others. The court ultimately found that “historic BACT” would have been 0.08 lb/mmBtu for Unit 1 and 0.06 lb/mmBtu for Unit 2, using 30-day rolling averages. Based on this analysis, the court found that Rush Island Units 1 and 2 had emitted 162,000 tons of “excess” SO2 after the time they should have applied BACT.

Current BACT. Having resolved historic BACT, the court turned to the “current BACT” to “identify the appropriate relief in this case.” The court found that the current SO2 BACT for both Units 1 and 2 is 0.05 lb/mmBtu.

Irreparable harm. The court then found that Rush Island Units 1 and 2 had caused “irreparable injury,” including increased risk of premature mortality due to excess emissions of SO2 and PM2.5. EPA presented a Harvard epidemiologist who presented testimony that PM2.5 is a “no threshold” pollutant and the court concluded that because there were excess SO2 emissions, SO2 leads to PM2.5 and PM2.5 is a “no threshold” pollutant, the increase in SO2 emissions would lead to adverse health effects. EPA also presented, and the court found, that Ameren’s emissions affected ambient PM2.5 concentrations across much of the Eastern United States, leading potentially to an additional 637 to 879 deaths during 2007-2016 and 62 to 86 additional deaths/year from 2017 and beyond, based on modeling.

Relief. The court then turned to the appropriate relief in light of the violation and the harm. First, it found that reductions could be made in SO2 emissions from Ameren’s Labadie plant. Second, it found that reductions at Labadie would benefit populations affected by the excess emissions from Rush Island and that this reduction would offset the increase in risk. The court accepted EPA’s contention that the societal benefits of reduced emissions would offset the control costs. The court rejected accepting a surrender of CSAPR emissions allowances as an offset and that such surrender would not result in actual emissions reductions benefitting surrounding populations. The court found various equitable factors also warranted requiring actual reductions, including Ameren’s awareness of its NSR risks, Ameren’s deferring wet FGD installation from a period of high demand and high cost to a period of lower demand and less cost, Ameren sold more power because it did not have wet FGD, and that the capital costs of installation (and subsequent operation) were less than Ameren’s dividend to its owners.

Legal conclusions. Turning to the law, the court rejected seven arguments presented by Ameren:

Ameren argued it could have obtained a minor permit for lower cost. The court rejected this because Ameren made, in fact, a major modification and must obtain a PSD permit.
Ameren argued that the court cannot establish BACT. The court rejected this, saying that it was merely ordering Ameren to proposed wet FGD as BACT; it remains up to the agency, following public notice and comment, to establish BACT.
Ameren argued that DSI should be used. The court rejected because DSI is less effective than wet FGD and therefore is not the “best” available control technology.
Ameren argued that the EPA’s requested relief did not comply with the eBay decision. The court rejected, finding that the relief was “narrowly tailored” to the harm.
Ameren argued that imposing reductions at Labadie were a “penalty” that EPA had waived at trial. The court rejected, finding that the Labadie relief is an equitable remedy.
Ameren argued that Sierra Club v. Otter Tail Power Co. means that emissions after failure to obtain a PSD permit are barred by the statute of limitations. The court rejected, finding that the United States had brought the case within the statute of limitations period and that the “excess emissions” were not from operation without a permit, but excess emissions that Ameren would not have emitted had it installed the BACT required by the PSD program.
Ameren argued it should be able to surrender allowances. The court rejected because Ameren did not show this would result in actual emissions reductions.

The court also held that it must apply the eBay factors, that it has no discretion not to impose injunctive relief, and that the relief must give “complete” relief to address the harm the statute sought to prevent.

Remedy at Rush Island. The court then turned to the remedy it should apply to the Rush Island plant. Based on the foregoing analysis, the court found that the downwind communities were “irreparably harmed,” that legal remedies are inadequate given the nature of the harm, that the balance of the hardships weighed in favor of ordering wet FGD at Rush Island, and that ordering Ameren to comply serves the public interest as set forth in a public interest statute. The court further held that wet FGD with an SO2 emission rate of 0.05 lb/mmBtu is achievable and ordered its installation.

Remedy at Labadie. The court then stated that:

injunctive relief at Rush Island will bring the plant into compliance with the PSD program, ending the release of excess SO2 emissions and PM2.5 there. However, BACT measures at Rush Island will not redress the harm from the last ten years. A balancing of the eBay factors leads me to conclude that injunctive relief is necessary at Labadie in order to remediate Rush Island’s excess emissions.

The court then reprised its arguments about the harm caused by the 162,000 tons of excess SO2 emissions. It found no adequate legal remedy and that downstream communities had suffered damage and that ordering emissions reductions at Labadie were “narrowly tailored” to address the harm. Finally, the court, citing United States v. Deaton, 332 F.3d 698, 714 (4th Cir. 2003), found that its remedies (1) “would confer [the] maximum environmental benefit” allowed, (2) as “achievable as a practical matter,” and (3) bears “an equitable relationship to the degree and kind of wrong it is intended to remedy.” Slip op. at 154. Accordingly, the court ordered Ameren to install DSI at Labadie until the emissions reductions at Labadie offset the excess from Rush Island (as an aggregate total).

The court did pause to address Ameren’s contention that issuance of the injunctive relief at Labadie was a penalty. The court dismissed this argument, stating “Installing DSI at Labadie will reduce SO2 pollution in the area commensurate with the volume of Rush Island’s excess emissions and will benefit the same communities burdened by the harm caused by the violations.”

COMMENTARY

The district court’s decision on the remedy in Ameren Missouri brings to a close a relatively rare, hotly litigated PSD enforcement action. Most such cases are resolved by settlement. As a result, the Ameren Missouri case has presented an opportunity to see into how a court might resolve claims of PSD violations.

The results are sobering: the court in Ameren Missouri showed relatively little concern for regulatory nuance after its finding of violation, focusing instead on the major themes of the Clean Air Act’s statutory scheme and the court's desire to vindicate those themes. The court bought into the Seventh Circuit’s Cinergy concept that the Clean Air Act is intended to force older plants out operation. Ameren Missouri is thus a cautionary case about the risks of making unpermitted modifications at older plants, especially when those plants are large emitters.

If Ameren appeals, which news reports indicate it will, we will see whether the appellate courts share the same broad view or whether they will delve more deeply into the regulatory scheme. Stay tuned for further developments.