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Internal Utility Industry Documents Reveal Conspiracy to Violate Clean Air Laws and Harm Public Health

NRDC Urges EPA Administrator to Resume Enforcement of Clean Air Act; Calls on Utility Industry to Come Clean About Its Deceit

WASHINGTON (January 13, 2004) -- Internal electric utility documents reveal the industry has known for more than a decade that massive air pollution increases from coal-fired power plants violate the Clean Air Act. According to a recent Justice Department brief, the documents contradict oft-repeated complaints by industry officials that they had no idea they had run afoul of the Environmental Protection Agency's interpretation of the law until the agency filed the first of several high-profile enforcement lawsuits in 1999. The disclosure also explodes one of the excuses the Bush administration has used to justify its recent retreat from Clean Air Act enforcement and its attempts to weaken clean air rules.

"Not since the tobacco industry's deceptions have we seen such a brazen corporate conspiracy to hide an intentional assault on public health," said John Walke, director of the clean air program at NRDC (the Natural Resources Defense Council). "This is smoking-gun evidence that the utility industry has been lying to the American people, its shareholders and the government for years."

After months of legal wrangling, the Justice Department obtained the documents last November from Duke Energy Corporation, one of several electric utilities that EPA determined were violating the Clean Air Act's "new source review" (NSR) program. The NSR program requires companies to install modern pollution control technologies in new plants, and in old plants when they make modifications that significantly increase emissions. The documents are memoranda to Duke Energy from the Utility Air Regulatory Group (UARG), an industry trade organization.

After obtaining the memoranda, Justice Department lawyers attached the documents -- still "sealed" from public scrutiny at Duke Energy's insistence -- to a December 23 brief to the federal court hearing the government's case against the company in North Carolina. According to the government's brief, the documents reveal "that UARG understood and told Duke from the beginning" that the EPA-created exemption from the Clean Air Act for "routine maintenance" at industrial facilities was too narrow to accommodate the substantial emissions-boosting renovations that utilities had been making at their plants.1 (The 18-page Justice Department brief is available from NRDC.)

For years, lawyers for Duke Energy and other UARG members have asserted that until the federal government began suing their clients in 1999 for illegal pollution increases, they had no idea that EPA's exemption for "routine maintenance" was a narrow one. The companies even accused EPA of adopting a narrow interpretation suddenly and without notice after years of interpreting the exemption broadly. As recently as March 2003, for instance, Duke lawyers told the federal court in North Carolina that "the interpretation that plaintiffs advance in this litigation . . . is inconsistent with . . . the meaning of the rule as established by two decades of Agency practice,"2 and that "the Court must conclude that Duke (and indeed the entire utility industry) was not on notice of the new interpretation of the modification rules that Plaintiffs discovered in 1999."3

Vigorous enforcement of the NSR program would make a significant difference for air quality. EPA's air enforcement office has estimated that if the government won its NSR cases against Duke Energy and other utility companies sued since 1999 they would have to cut their sulfur dioxide emissions by more than 5.5 million tons and nitrogen oxide emissions by more than 2.2 million tons -- which would amount to more than a 50 percent reduction for SO2 and nearly a 50 reduction for NOx from the nation's entire utility sector.4

The utilities' false claims about unfair EPA prosecutions led directly to Bush administration attempts to cripple NSR protections and enforcement. In May 2001, President Bush accepted a recommendation from Vice President Cheney's energy task force, directing the Justice Department to review EPA's cases against the utilities "to ensure that the enforcement actions are consistent with the Clean Air Act and its regulations."5 Although that review found that EPA's enforcement actions against coal-fired power plants were consistent with the Clean Air Act,6 the Bush administration continued citing industry's claim that it was sandbagged to justify broadening the "routine maintenance" exemption to accommodate massive pollution increases such as the ones that previously landed the utilities in court.7

The administration's support for this industry canard continues, despite the fact that EPA won the only enforcement case that went to trial and has proved coal-fired plant owners knew all along that their emissions-boosting overhauls violated clean air rules.8 For example, in a speech to the Edison Electric Institute on January 9, new EPA Administrator Michael Leavitt said that "[u]tilities are ready to go to the mat because they believed they were in compliance with the rules, then had the rules changed and applied retroactively."9 He had to know that the utilities' claim is false.

Moreover, it is ironic that Administrator Leavitt parroted the industry's claims that the rules were "changed and applied retroactively." The rules that landed the polluting utilities in court were in effect and well understood at the time the companies flouted them, but since Leavitt became EPA administrator, his agency has tried to change those rules retroactively to let polluters off the hook for past violations. This came in the form of an order that Assistant Administrator J.P. Suarez, who has since resigned as the head of enforcement, delivered to the agency's enforcement staff late last year. On November 4, Suarez directed the agency's enforcers to stop investigating and prosecuting past air pollution violations that would have been covered by a new, broader and illegal regulatory loophole that EPA had adopted on August 27 -- despite an assurance in the text of the August rule that "[t]oday's rule applies only to conduct that occurs after the rule's effective date" of December 26, 2003.10 EPA's unprecedented clean air enforcement reversal provoked an enormous public outcry and condemnations from EPA's own enforcement staff.11

Since the recently disclosed utility industry documents were handed over to the government on November 1, it is now clear that the Bush administration made its November 4 NSR enforcement reversal with full knowledge that it would essentially pardon an industry that had been lying to and harming the American public.

But the Bush administration's scheme to hobble its enforcement cases and enable utilities to continue ignoring clean air laws was dealt a major blow on Christmas Eve. A federal court in Washington, D.C., blocked the August rule just two days before it was due to take effect, concluding that it was likely unlawful and would cause irreparable harm to public health if allowed to take effect.12 The court's order has sparked new calls for Administrator Leavitt to drop EPA's plan to apply the new rule change retroactively. The recently retired director of EPA's air enforcement division, Bruce Buckheit, has said that there is "absolutely no justification" for EPA to continue refusing to prosecute NSR violations under the pre-existing NSR rules in light of the court's action.13

"Now that these smoking-gun documents have come to light, EPA has no more excuses," said NRDC's Walke. "It is long past time for the Bush administration's environmental cop to get out of the donut shop sipping coffee with industry and get back on the beat enforcing clean air protections on behalf of the American people."

NRDC is calling on the utility defendants in the enforcement cases14 to release relevant documents to the public and accept accountability for their decade-long campaign of deception. "The executives of the companies and their lawyers have a lot of explaining to do," said Walke, "to the courts, to their shareholders, and to the public."

The Natural Resources Defense Council is a national, nonprofit organization of scientists, lawyers and environmental specialists dedicated to protecting public health and the environment. Founded in 1970, NRDC has more than 1 million members and e-activists nationwide, served from offices in New York, Washington, Los Angeles and San Francisco.



Notes

1. Memorandum in Support of Plaintiff's Motion for Reconsideration of August 26, 2003, Summary Judgment Order or, in the Alternative, to Certify Orders for Interlocutory Appeal and for Stay Pending Appeal, United States, et al. v. Duke Energy Corp., Civil Action No. 1:00 CV 1262 (M.D.N.C), Dec. 23, 2003, p. 6.

2. Duke Energy's Brief in Opposition to Plaintiff-Intervenors' Motion for Partial Summary Judgment, United States, et al. v. Duke Energy Corp., Civil Action No. 1:00 CV 1262 (M.D.N.C), Mar. 31, 2003, p. 9.

3. Id. at 15. See also id. p. 3 ("[N]o one -- not EPA, not the states, not industry, and not environmental organizations -- thought the [routine maintenance] provision was so narrow as to exclude from NSR only minor activities repeatedly undertaken at an individual industrial facility -- Plaintiffs' 'routine at the unit' standard"); id. p. 26 n. 48 ("Duke could not and should not have understood 'routine' to mean what EPA is now suggesting in this litigation.").

4. Internal EPA Air Enforcement Division analysis, available upon request.

5. Report of the National Energy Policy Development Group, ch. 7, p. 14 (May 16, 2001).

6. U.S. Department of Justice, Office of Legal Policy, "New Source Review: An Analysis of the Consistency of Enforcement Actions with the Clean Air Act and Implementing Regulations," Jan. 15, 2002, p. 4.

7. 68 Fed. Reg. 61,248, 61,250/1 (Oct. 27, 2003).

8. United States, et al. v. Ohio Edison Co., et al., 276 F.Supp. 2d 829 (S.D. Oh. 2003).

9. http://yosemite.epa.gov/administrator/speeches.nsf/b1ab9f485b098972852562e7004dc686/ 137d40fb1715115d85256e1600656e30?OpenDocument.

10. 68 Fed. Reg. p. 61,264/1.

11. See, e.g., "EPA's Gift to Utilities Leaves Us All Choked Up," Atlanta Journal-Constitution, Nov. 7, 2003; "The Fruits of Secrecy," The New York Times, Nov. 8, 2003; "Deniability," Salt Lake Tribune, Nov. 9, 2003; "Clean Air Laws Go Up in Smoke," San Francisco Chronicle, Nov. 11, 2003; "Jumping Ship at the EPA," Grist Magazine, Jan. 7, 2004; "EPA Struggles with Response to Court Suspension of NSR Rule," Inside EPA, Jan. 8, 2004; "Exodus at EPA: 'Canaries' Are Flying the Coop," Herald Tribune, Jan. 12, 2004.

12. Order, State of New York, et al. v. EPA, Case No. 03-1380 (and consolidated cases) (D.C. Cir. Dec. 24, 2003), p. 2.

13. "EPA Struggles With Response To Court Suspension Of NSR Rule," Inside EPA, Jan. 8, 2004.

14. American Electric Power, Cinergy, Duke Energy (Duke Power), Dynergy (Illinois Power), First Energy (Ohio Edison), Southern (Alabama Power and Georgia Power), and Tennessee Valley Authority.

 

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