DTE and DOJ to settle Monroe Case

As many readers of NSR Law Blog are aware, DTE Energy (DTE), the U.S. Department of Justice (DOJ), and the Sierra Club have been litigating alleged violations of the PSD preconstruction program at DTE’s Monroe plant for many years. On May 14, 2020, DOJ filed a proposed consent decree that would resolve the case at Monroe. The proposed consent decree also addresses several other DTE facilities. In a reported side agreement, DTE and Sierra Club have reportedly agreed that DTE will shut down four of its five remaining coal-fired units.

ANALYSIS

The proposed consent decree begins with the standard recitations, but includes an unusual “Statement of the United States”:

The Complaints alleged major modifications at several of Defendants’ units, including a major modification at Monroe Unit 2 in 2010. While the Consent Decree resolves that claim and releases Defendants from any liability for it, none of the relief in this Consent Decree is attributable to the United States’ Monroe Unit 2 2010 claim. It is the position of the United States that this is an appropriate exercise of its prosecutorial discretion in light of the specific circumstances of this case. In 2017, EPA issued a policy memorandum noting that the 2013 and 2017 appellate decisions in this case “have created uncertainty regarding the applicability of NSR permitting requirements in circumstances where the owner or operator of an existing major stationary source projects that proposed construction will not cause an increase in actual emissions that triggers NSR requirements” and concluding that it would therefore no longer pursue cases factually similar to the 2010 Monroe Unit 2 claim. See EPA Administrator, Memorandum Regarding New Source Review Preconstruction Permitting Requirements (Dec. 7, 2017). The Department in its independent judgment as a matter of prosecutorial discretion, has decided to apply EPA’s rationale to the 2010 Monroe Unit 2 claim as well as take to heart the litigation history, which may implicate cases such as General Elec. Co. v. EPA, 53 F.3d 1324 (D.C. Circ. 1995). The specific circumstances described above are not raised by the other claims in the Complaints.

Proposed Consent Decree, ¶ C (hereinafter PCD). Accordingly, it does not appear that the DOJ sought relief specifically for its 2010 Monroe Unit 2 claims.

The PCD requires DTE to “Retrofit, Refuel, or Repower” its Belle River Units 1-2 by December 31, 2030; its River Rouge Unit 3, St. Clair Units 2-3, 6-7 and Trenton Channel Unit 9 by December 31, 2022, with an allowance to postpone the Trenton Channel 9 unit until December 31, 2023 if MISO designates it as a “System Support Resource” to address reliability issues. PCD ¶ 7. “Retrofit” requires installation of FGD and SCR, or equivalent technologies approved by EPA, and achieving a 30-day rolling average of 0.08 lb/mmBtu for NOx and 0.060 lb/mmBtu for SO2. “Refuel” requires changing to natural gas. “Repower” requires replacing the unit with a natural gas combined cycle unit.

In the interim until the Retrofit, Refuel or Repower is achieved, the PCD requires DTE to meet 30-day emissions limits for NOx ranging from 0.09 lb/mmBtu (Monroe Units 1-4) to 0.47 lb/mmBtu (St. Clair Units 2-3), with other units falling between. SO2 limits range from 0.1 lb/mmBtu (Monroe Units 1-4) to 1.2 lb/mmBtu (St. Clair units 6 and 7), with other units falling between. The PCD also requires Monroe Units 1-4 to install SCR and FGD, while the other units must install low NOx combustion systems including overfire air. In addition, the PCD establishes “system-wide” annual tonnage limits for NOx and SO2 as follows:

Interestingly, in determining compliance, while Part 75 CEMS are used, “emissions data need not be bias adjusted and the missing data substitution provisions” of Part 75 “shall not apply” to the compliance determination. If a unit is Refueled, then emissions are calculated using AP-42 or stack test.

The PCD prohibits DTE from using NOx or SO2 emissions credits to comply with these requirements, PCD ¶14, or selling, banking, trading or transferring interest in any credits outside of DTE, PCD ¶15. DTE must surrender any unused credits each year. PCD ¶176. A carve out of the general prohibition allows DTE to sell or transfer credits if the emission rate is below the PCD’s applicable 30-day rolling average rate and all other requirements are met.

The PCD then turns to particulate control, requiring DTE to use each section of each ESP and optimize their work, and establishes 24-hour rolling PM limits, generally ranging from 0.011 lb/mmBtu (Monroe) to 0.03 lb/mmBtu (all others). PCD ¶ 24. PM CEMS are used for compliance. PCD ¶ 25.

The PCD requires a civil penalty of $1.8 million and an environmental mitigation project of replacing school or municipal transit buses at a cost of at least $5.5 million. The PCD establishes stipulated penalties ranging from $2,500 to $10,000 per day per violation penalties for violating the 30-day or 24-hour rolling average NOx, SO2 and PM limits, $5000 for exceeding a system wide tonnage limit (up to 100 tons) and then $10,000 per additional ton and additional allowance surrender provisions, and a $10,000 to $37,500 penalty for failure to operate control devices. The PCD does allow an affirmative defense for malfunctions. PCD ¶ 64.

COMMENTARY

There are several interesting aspects of this case. First is the side agreement with Sierra Club where DTE reportedly has agreed to discontinue coal at most of the units. Second is the “Statement of the United States,” where DOJ states that in the exercise of its “independent prosecutorial discretion” it has agreed to follow the EPA Administrator’s memorandum that EPA “will not second guess” source decisions. In this regard, DTE has won a moral victory over its handling of the Monroe units. Also interesting is the invocation of United States v. General Electric, which is a “void for vagueness” case.

DTE’s moral victory at Monroe has come at a relatively heavy cost, including far more stringent interim control levels than those found at the other units. It is likely, as indicated by some of DTE’s press statements, that during the course of the litigation DTE chose largely to exit the coal-fired power business. If so, the burdens of the consent decree may be lighter than they appear.

Going forward, it will be interesting to see whether DOJ’s concession about United States v. General Electric presages more “void for vagueness” litigation. It will also be interesting to see whether EPA’s backing away from Part 75 for NSR consent decree purposes suggests that there is possible legal weakness in the Part 75 data, infused as it is with bias adjustments and data substitution that inflate the emissions values. Stay tuned!