Beveridge & Diamond
 
Related Practices
Related Practices

Cinergy Exonerated on Ten Projects

Beveridge & Diamond, P.C., June 11, 2008

On May 22, 2008, a federal jury found that ten of fourteen projects undertaken by Cinergy Corporation (“Cinergy”) did not trigger New Source Review (NSR).  While the jury rejected Cinergy’s “routine maintenance and repair” (RMRR) defense across the board, it found that the government had not met its burden of proving that the projects resulted in a net emissions increase, when the “demand growth exclusion” was considered. 

The May 22 decision represents the culmination of a longstanding EPA enforcement action, which alleged that a variety of projects over the years triggered NSR, and which generated a variety of published opinions.  In 2006, the government won a significant victory when the court held that Cinergy’s RMRR defense must be based on whether a project was routine for a particular unit, and not on whether it was “prevalent within the industry as a whole.”  United States v. Cinergy Corp., 2006 U.S. Dist. LEXIS 8774, *8-10 (S.D. Ind. 2006) (explaining that the frequency of similar projects within the industry may only be used to inform a “common sense” application of the RMRR factors to a project at a given unit).  Then, in June 2007, the court applied this interpretation and dismissed Cinergy’s RMRR defense on a number of projects.  United States v. Cinergy Corp., 495 F. Supp. 2d 909 (S.D. Ind. 2007).  Later that year, the court granted summary judgment to Cinergy on several projects, finding that the government had not demonstrated a significant emissions increase resulting from the projects at issue.  United States v. Cinergy Corp., 2007 U.S. Dist. LEXIS 76941 (S.D. Ind. 2007).  The fourteen projects at issue here represent those projects that remained after the court’s prior decisions. 

In light of the court’s prior interpretation of the RMRR exemption, it should not be surprising that the jury rejected Cinergy’s RMRR defense for all six of the projects that the court allowed to proceed to trial.  The types of projects at issue were common within the industry, but infrequently performed at individual units.  Thus, the court’s narrow interpretation of the RMRR exemption rendered the jury’s conclusion all but inevitable.    

Notwithstanding the government’s success on the RMRR issue, the jury nevertheless entered a verdict in favor of Cinergy on ten of the fourteen projects, finding that a reasonable plant owner or operator would not have anticipated a net emissions increase as a result of the projects, taking into consideration any demand growth exclusion.  The remaining four projects all occurred at the Wabash River Station (replacing a front wall radiant superheater; replacing high temperature superheater tubes and upper reheating superheater tubing assemblies; replacing finishing, intermediate, and radiant superheater tubes and upper reheat tube bundles; replacing a boiler pass and heat recovery actions).  For each of these projects, the jury found that Cinergy should have anticipated a significant net emissions increase.

For further information, please contact Bethany French at (202) 789-6042 or bfrench@bdlaw.com, or Laura McAfee at (410) 230-1330 or lmcafee@bdlaw.com.

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