(CN) - The 7th Circuit on Tuesday reversed a jury's finding that Duke Energy's predecessor violated the Clean Air Act by making changes to a coal-fired energy plant in Indiana that increased annual pollution without a federal permit.
Cinergy Corp., which was purchased by Duke Energy in 2006, argued that the plant modifications did not violate federal law because they didn't increase the hourly rate of pollution, even if they increased the plant's annual emissions.
U.S. District Judge Larry McKinney rejected this interpretation and said Cinergy faced being shut down or ordered to pay civil penalties of $25,000 for each day it violated the permit requirement.
Cinergy appealed this intermediate ruling, but lost in the 7th Circuit, which backed the government's actual-emissions standard rather than an hourly capacity rate.
"Cinergy's hourly-capacity interpretation would if adopted give a company that had a choice between making a physical modification that would increase the hourly emissions rate and one that would enable an increase in the number of hours of operation an incentive to make the latter modification even if that would produce a higher annual level of emissions," Circuit Judge Richard Posner explained.
The case then went to a jury, which found Cinergy liable for modifying four generating units at its plant in Wabash, Ind., between 1989 and 1992.
Cinergy insisted that its modifications required no permits because they didn't increase the hourly rate of sulfur dioxide emissions. It pointed out that, when the plants were modified, this hourly capacity interpretation was included in the state plan for implementing the Clean Air Act, which the Environmental Protection Agency approved.
The EPA acknowledged that it approved the plan, but noted that Indiana had agreed to update its definitions to conform to the actual-emissions standard later adopted by the EPA.
Posner called the agency's argument "untenable."
"The Clean Air Act does not authorize the imposition of sanctions for conduct that complies with a State Implementation Plan that the EPA has approved," he wrote.
He said the agency "should have disapproved" the state plan, but didn't.
"The blunder was unfortunate, but the agency must live with it," he wrote for the three-judge panel in Chicago.
The court also reversed Cinergy's liability for nitrogen oxide emissions because it was based on EPA expert witness testimony that "should not have been admitted" at trial.
Judge McKinney last year ordered Duke Energy to shut down certain Wabash River units due to an alleged increase in sulfur dioxide emissions.
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