Case 1:99-cv LJM-JMS Document 922 Filed 07/06/2006 Page 1 of 53 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF INDIANA

Transcription

1 Case 1:99-cv LJM-JMS Document 922 Filed 07/06/2006 Page 1 of 53 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF INDIANA UNITED STATES OF AMERICA, : Plaintiff, : v. : CINERGY CORPORATION, CINERGY SERVICES CORPORATION, PSI ENERGY, INCORPORATED, : CINCINNATI GAS & ELECTRIC COMPANY, : Civil Action No. IP C-M/S Defendants. STATE OF NEW YORK, STATE OF : CONNECTICUT, STATE OF NEW JERSEY, : Plaintiffs-Intervenors : v. : CINERGY CORP., CINERGY SERVICES, INC., : THE CINCINNATI GAS & ELECTRIC COMPANY and PSI ENERGY, INC., : Defendants : PLAINTIFF STATES SECOND AMENDED INTERVENOR COMPLAINT The State of New York, represented by and by authority of the Attorney General of the State of New York, the State of New Jersey, represented by and by authority of the Attorney

2 Case 1:99-cv LJM-JMS Document 922 Filed 07/06/2006 Page 2 of 53 General of the State of New Jersey, and the State of Connecticut, represented by and by authority of the Attorney General of the State of Connecticut, allege: NATURE OF THE ACTION 1. The States of New York, New Jersey and Connecticut (the plaintiff states) commence this civil action against Defendants, Cinergy Corp. (Cinergy), Cinergy Services, Inc. (Cinergy Services), The Cincinnati Gas & Electric (CG&E), and PSI Energy, Inc. (PSI)(collectively, the defendants), pursuant to section 304(a) of the Clean Air Act (the Act), 42 U.S.C. 7604(a), based on defendants construction and operation of modified major emitting facilities without the permits required by Part C of Title I of the Act, 42 U.S.C , the Prevention of Significant Deterioration (PSD) provisions, and nonattainment new source review (NSR) requirements of sections 172 and 173 of the Act, 42 U.S.C Defendants, either individually or in affiliation with one another, own and/or operate the W.C. Beckjord power plant (Beckjord plant) in New Richmond, Clermont County, Ohio, the Cayuga power plant (Cayuga plant) in Cayuga, Vermillion County, Indiana, the Gallagher power plant (Gallagher plant) in New Albany, Floyd County, Indiana, the Wabash River power plant (Wabash River plant) in West Terre Haute, Vigo County, Indiana, the Gibson power plant (Gibson plant) in East Mount Carmel, Gibson County, Indiana, and the Miami Fort power plant (Miami Fort plant) in North Bend, Ohio, Hamilton County (collectively, the plants), each of which utilize coal as their primary fuel source. At these plants, the defendants have undertaken capital projects that have had the effect of increasing the plants generation of electricity and emissions of pollutants.. The defendants undertook many of these construction projects in order -2-

3 Case 1:99-cv LJM-JMS Document 922 Filed 07/06/2006 Page 3 of 53 to extend the plants generating units operational lives at a time when the units at issue were nearing the end of their normal operational lives. 3. At no time did the defendants apply for or obtain the preconstruction permits required under the PSD and/or NSR provisions and their implementing regulations or any equivalent state program. To date, defendants operate the plants without applying best available control technology (BACT) or meeting the lowest achievable emission rate (LAER), as required by, respectively, the PSD and NSR requirements and without obtaining emission offsets at the facility. 4. Emissions of nitrogen oxides (NO x ) and sulfur dioxide (SO 2 ) from coal-fired power plants contribute extensively to public health and environmental damage. The NO x emissions from these sources contribute to the formation and transport of ozone (O 3) pollution. In the presence of sunlight, NO x reacts with volatile organic compounds (VOCs) in a complicated reaction that leads to the creation of ozone, a major component of urban smog. Ozone contributes to many respiratory health problems, including chest pains, shortness of breath, coughing, nausea, throat irritation and increased susceptibility to respiratory ailments such as asthma. The adverse health effects of ozone pollution are particularly severe in the New York City metropolitan area, where thousands of children suffer the debilitating effects of asthma, and where the rate of children suffering from asthma is markedly higher than the national average. 5. The release of ozone-creating pollutants in Ohio and Indiana, as well as a number of other upwind states, results in the formation of ozone in the plaintiff states. Because the prevailing winds are from the west/southwest, particularly in the summertime, they bring to the plaintiff states the NO x emitted from dozens of utilities and other industrial operations in the -3-

4 Case 1:99-cv LJM-JMS Document 922 Filed 07/06/2006 Page 4 of 53 Midwest. This effect is exacerbated by the fact that many power plants utilize extremely high stacks, which only serve to increase the mobility of the emissions. In recognition of this phenomenon, Congress singled out the migration of ozone and its precursors for special emphasis in the 1990 amendments to the Act: The bill reflects an increasing understanding of how ozone pollution is formed and transported. Because ozone is not a local phenomenon but is formed and transported over hundreds of miles and several days, localized control strategies will not be effective in reducing ozone levels. Senate Report No , reprinted 1990 U.S. Code Cong. and Admin. News at 3389, In response to petitions filed by New York and Connecticut under section 126 of the Act, 42 U.S.C. 7426, EPA has determined that NO x emissions from the Beckjord and Gallagher plants contribute significantly to ozone nonattainment in New York and Connecticut. See 64 Fed Reg. 28,250 (May 25, 1999); 65 Fed. Reg (January 18, 2000). That finding has been upheld by the United States Court of Appeals for the D.C. Circuit. See Appalachian Power Co., et al. v. Environmental Protection Agency, et al., No (D.C. Cir., May 15, 2001). 7. Furthermore, EPA has determined that NO x emissions originating in Indiana and Ohio contribute significantly to ozone nonattainment in New York, New Jersey and Connecticut. See 63 Fed. Reg. 57,356 (October 27, 1998). That determination has been also upheld by the United States Court of Appeals for the D.C. Circuit. See Michigan v. EPA, 213 F.3d 663 (D.C. Cir. 2000), cert denied, 532 U.S Emissions of NO x and SO 2 also lead to the creation of fine nitrate and sulfate particles, which, like ozone, are emitted in southern and midwestern states but are transported by prevailing winds to the plaintiff states. Inhalation of fine particulate matter causes respiratory distress, -4-

5 Case 1:99-cv LJM-JMS Document 922 Filed 07/06/2006 Page 5 of 53 cardiovascular disease and premature mortality. Fine particulate matter also contributes to impaired visibility. 9. NO x and SO 2 emissions also contribute to the formation of acid deposition -- acid rain, acid snowfall, and dry deposition of acidic particles. This acid deposition has caused hundreds of lakes and ponds in New York s Adirondack Park to become acidic. The percentage of lakes that are chronically acidic (i.e. corresponding to a ph of 5.28, a level at which many species of fish can no longer survive) now approaches 20%. This percentage is expected to increase in years to come, unless upwind power plants significantly reduce their emissions of NO x and SO 2. Many lakes, particularly those in the western Adirondacks, that were favored destinations of sportsmen just two generations ago, are now devoid of fish. For the same reasons, streams in New York s Catskill Park are also overly acidic. NO x emissions also cause eutrophication -- low dissolved oxygen levels -- of coastal waters in New York, New Jersey, Connecticut and elsewhere, reducing the diversity of fish and other life in these essential waters. Additionally, NO x emissions lead to ozone injury to vegetation. 10. Acid deposition also has adverse effects on human health. Acid rain causes mercury to leach from soil into waters, including drinking water supplies. Acidified water may also cause lead to leach out of residential water pipes, increasing exposure to lead in drinking water. Some of these effects, especially those related to mercury, can be damaging to wildlife as well. 11. In light of the extensive environmental harm attributable to the emissions from the plants, New York, New Jersey and Connecticut seek, inter alia, (a) an injunction prohibiting further operation of the plants until defendants implement BACT and/or LAER, as required, and otherwise comply with the Act and the laws and regulations promulgated thereunder; (b) an Order -5-

6 Case 1:99-cv LJM-JMS Document 922 Filed 07/06/2006 Page 6 of 53 requiring defendants to remedy, mitigate or offset the harm to public health and the environment and (c) civil penalties for defendants past and ongoing violations of the Act. JURISDICTION AND VENUE 12. This Court has jurisdiction of the subject matter of this action pursuant to section 304(a) of the Act, 42 U.S.C. 7604(a), and pursuant to 28 U.S.C. 1331, 1355 and Venue is proper in this District pursuant to 28 U.S.C. 1391(b) and (c), because defendant Cinergy and one or more of its subsidiaries may be found in this District. Additionally, upon information and belief, defendants market the electricity they produce in, among other places, this District. ALLEGATIONS COMMON TO ALL CLAIMS The Defendants 14. Upon information and belief, Cinergy was created on October 24, 1994, from the combination of CG&E and PSI. Upon information and belief, Cinergy is a corporation organized under the laws of the State of Delaware, with a principal place of business located at 139 East Fourth Street, Cincinnati, Ohio. Cinergy is a public utility holding company under the Public Utility Holding Company Act of 1935, 15 U.S.C. 79 et seq., as amended, that owns all outstanding common stock of its domestic electric utility subsidiaries, including defendant CG&E. Cinergy and its subsidiaries own and/or operate the facilities that are the subject of this action. -6-

7 Case 1:99-cv LJM-JMS Document 922 Filed 07/06/2006 Page 7 of Cinergy Services, Inc. ( Cinergy Services ) is a corporation organized under the laws of the State of Delaware, with a principal place of business located at 139 East Fourth Street, Cincinnati, Ohio. Cinergy Services is a wholly-owned subsidiary of Cinergy, providing, upon information and belief, management and professional services to, among others, the electric utility subsidiaries of Cinergy, including accounting, administrative, information systems, environmental, engineering, financial, legal, maintenance and other services. Upon information and belief, most or all of the directors and officers of Cinergy and each of the electric utility subsidiaries are employees of Cinergy Services. Cinergy Services is an operator of the facilities that are the subject of this action. 16. Upon information and belief, CG&E is an Ohio corporation, also with a principal place of business located at 139 East Fourth Street, Cincinnati, Ohio. Together with Cinergy, CG&E owns and/or operates the Beckjord plant. 17. Upon information and belief, PSI is an Indiana corporation, with a principal place of business at 1000 East Main, Plainfield, Indiana that owns and/or operates the Cayuga, Gallagher and Wabash River plants. 18. Cinergy, Cinergy Services, CG&E and PSI are each a "person" within the meaning of section 302(e) of the Act, 42 U.S.C. 7602(e). 19. Upon information and belief, Cinergy, either itself or through Cinergy Services, exercises complete dominion and control over, and manages and directs the environmental policy of CG&E with respect to the operation of CG&E s Ohio power plants, including the Beckjord and Miami Fort power plants. Upon information and belief, Cinergy, either itself or through Cinergy -7-

8 Case 1:99-cv LJM-JMS Document 922 Filed 07/06/2006 Page 8 of 53 Services, communicates directly with state and federal regulators with respect to environmental and other issues involving CG&E. 20. Upon information and belief, Cinergy, either itself or through Cinergy Services, exercises complete dominion and control over, and manages and directs the environmental policy of PSI with respect to the operation of PSI s Indiana power plants, including the Wabash River, Gibson, Gallagher and Cayuga power plants. Upon information and belief, Cinergy, either itself or through Cinergy Services, communicates directly with state and federal regulators with respect to environmental and other issues involving PSI. 21. At all times pertinent to this civil action, Defendant PSI has been and is the owner and operator of the Cayuga, Gibson, Gallagher and Wabash River plants, including all of the boilers at these facilities. At all times relevant to this civil action, Defendant CG&E has been and is an owner and operator of the Beckjord and Miami Fort Plants, including all of the boilers at these facilities. Since 1994, Defendant Cinergy, either itself or through Cinergy Services, has been and is an owner and/or operator of the Cayuga, Gallagher, Wabash River, Beckjord and Miami Fort plants, including all of the boilers at these facilities. 22. At all times pertinent to this civil action, the Cayuga, Gibson, Gallagher, Wabash River, Beckjord and Miami Fort plants were each, for purposes of PSD, a "major stationary source" and a major emitting facility, within the meaning of the Act for NOx and SO Upon information and belief, Cinergy, Cinergy Services, PSI, CG&E and Cinergy s other operating subsidiaries are essentially one enterprise entity, consisting of various interdependent corporations and affiliates, wholly owned, controlled, operated and managed by a -8-

9 Case 1:99-cv LJM-JMS Document 922 Filed 07/06/2006 Page 9 of 53 superior corporate entity -- Cinergy with the goal of accomplishing one general business purpose. 24. Upon information and belief, Cinergy is and has been subject to the requirements of the environmental statutes and regulations more particularly described below. Cinergy is liable for the impact of the emissions from its plants upon downwind locations such as New York, New Jersey and Connecticut. 25. Upon information and belief, Cinergy, either itself or through Cinergy Services, through its control over and manipulation of CG&E and PSI, has illegally and unjustly increased emissions from the plants without complying with relevant environmental statutes and regulations, and with full awareness of the impacts such increased emissions would have, and the injuries such increased emissions would cause, upon downwind states including New York, Connecticut and New Jersey. STATUTORY AND REGULATORY BACKGROUND National Ambient Air Quality Standards 26. The Clean Air Act establishes a regulatory scheme designed to protect and enhance the quality of the nation's air so as to promote the public health and welfare and the productive capacity of its population. 42 U.S.C. 7401(b)(1). 27. Section 109 of the Act, 42 U.S.C. 7409, requires the Administrator of United States Environmental Protection Agency (EPA) to promulgate regulations establishing primary and secondary national ambient air quality standards (NAAQS or ambient air quality standards) for certain criteria air pollutants, including ozone and SO 2. The primary NAAQS are to be adequate to protect the public health, and the secondary NAAQS are to be adequate to protect the public -9-

10 Case 1:99-cv LJM-JMS Document 922 Filed 07/06/2006 Page 10 of 53 welfare, from any known or anticipated adverse effects associated with the presence of the air pollutant in the ambient air. 28. Section 110 of the Act, 42 U.S.C. 7410, requires each state to adopt and submit to EPA for approval a State Implementation Plan (SIP) that provides for the attainment and maintenance of the NAAQS. 29. Under section 107(d) of the Act, 42 U.S.C. 7407(d), each state is required to designate those areas within its boundaries where the air quality is better or worse than the NAAQS for each criteria pollutant, or where the air quality cannot be classified due to insufficient data. An area that meets the NAAQS for a particular pollutant is termed an "attainment" area; one that does not is termed a "non-attainment" area. NAAQS Attainment Status for the Areas At Issue in the Action 30. At all times relevant to this Complaint, the Cayuga Plant in Cayuga, Indiana, Vermillion County, was in an area that the State of Indiana had classified as either in attainment, unclassified or unclassifiable for ozone, NO 2 and SO At all times relevant to this Complaint, the Gallagher Plant in New Albany, Floyd County, Indiana was in an area that the State of Indiana had classified as either in attainment, unclassified or unclassifiable for NO 2 and SO 2, but nonattainment for ozone from At all times relevant to this Complaint, the Wabash River Plant in West Terre Haute, Indiana was in an area that the State of Indiana had classified as either in attainment, unclassified or unclassifiable for ozone and NO 2, but nonattainment for SO 2 between 1980 and 1996 and in attainment for SO 2 since

11 Case 1:99-cv LJM-JMS Document 922 Filed 07/06/2006 Page 11 of At all times relevant to this Complaint, the Beckjord Plant in New Richmond, Clermont County, Ohio was in an area that the State of Ohio had classified as either in attainment or unclassifiable for NO 2, primary non-attainment for SO 2 from , attainment for SO2 from , and moderate nonattainment for ozone since At all times relevant to this Complaint, the Miami Fort Plant in North Bend, Hamilton County, Ohio was in an area that the State of Ohio had classified as either attainment or unclassifiable for NO 2 and SO 2, and nonattainment for ozone since Prevention of Significant Deterioration 35. Part C of subchapter 1 of the Act, 42 U.S.C , sets forth requirements for the prevention of significant deterioration (PSD) of air quality in those areas designated as attaining the NAAQS. These requirements are designed to protect public health and welfare, to assure that economic growth will occur in a manner consistent with the preservation of existing clean air resources and to assure that any decision to permit increased air pollution is made only after careful evaluation of all the consequences of such decision and public participation in the decision making process. 36. The PSD program is also designed to ensure that emissions from sources in one state will not interfere with efforts to prevent significant deterioration of air quality in another State. 42 U.S.C. 7470(4). To effectuate these goals, the PSD provisions of the Act provide that any decision to allow increased air pollution in any area be made only after careful evaluation of all consequences of such decision, including the interstate effects, and after adequate procedural opportunities for informed public participation in the decision-making process. 42 U.S.C. 7470(5). -11-

12 Case 1:99-cv LJM-JMS Document 922 Filed 07/06/2006 Page 12 of Section 165(a) of the Act, 42 U.S.C. 7475(a), prohibits the construction of a major emitting facility in an area designated as attainment unless a PSD permit has been issued. Section 169(1) of the Act, 42 U.S.C. 7479(1), defines "major emitting facility" as including, inter alia, any fossil-fuel fired steam electric plant with a heat input of more than 250 million British thermal units per hour (250mm Btu/hr.) that emits or has the potential to emit 100 tons per year (tpy) or more of any air pollutant or any other source with the potential to emit 250 tpy or more of any air pollutant. Section 169(1) of the Act, 412 U.S.C. 7479(1) defines construction to include modification which is defined to mean any physical change in, or change in the method of operation of, a stationary source which increases the amount of any air pollutant emitted by such source U.S.C. 7411I(a)(4). 38. Section 161 of the Act, 42 U.S.C. 7471, requires that each SIP contain emission limitations and such other measures as may be necessary, as determined under the regulations promulgated pursuant to these provisions, to prevent significant deterioration of air quality in attainment areas. 39. A state may comply with section 161 of the Act either by being delegated by EPA the authority to enforce the federal PSD regulations set forth at 40 C.F.R , or by having its own PSD regulations approved as part of its SIP by EPA, which must be at least as stringent as those set forth at 40 C.F.R EPA has duly promulgated regulations at 40 C.F.R to implement the PSD program. As set forth at 40 C.F.R (k), the PSD program generally requires a person who wishes to construct or modify a major emitting facility in an attainment area to demonstrate, before construction or modification is commenced, that construction or modification of the -12-

13 Case 1:99-cv LJM-JMS Document 922 Filed 07/06/2006 Page 13 of 53 facility will not cause or contribute to air pollution in violation of any ambient air quality standard or any specified incremental amount. 41. The provisions of 40 C.F.R (i) prohibit the construction or major modification of a major stationary source in any area that has attained the NAAQS, unless a PSD permit has been issued that meets the requirements of 40 C.F.R (j)-(r). The term "major stationary source" is defined at 40 C.F.R (b)(1)(i) to include, inter alia, any fossil-fuel fired steam electric plant of more than 250 million Btu/hr that emits or has the potential to emit 100 tpy or more of any air pollutant subject to regulation under the Act or any other facility that emits, or has the potential to emit, 250 tpy or more of any air pollutant subject to regulation under the Act, or any physical change that would occur at a stationary source not otherwise qualifying as a major stationary source, if the changes would constitute a major stationary source by itself. 42. "Major modification" is defined at 40 C.F.R (b)(2) as meaning any physical change in or change in the method of operation of a major stationary source that would result in a significant net emissions increase of any pollutant subject to regulation under the Act. Net emissions increase means the amount by which the sum of the following exceeds zero: (a) [a]ny increase in actual emissions [as defined by 40 C.F.R )(b)(21)] from a particular physical change or change in method of operation at a stationary source; and (b) [a]ny other increases and decreases in actual emissions [as defined by 40 C.F.R (b)(21)] at the source that are contemporaneous with the particular change and are otherwise creditable. 40 C.F.R (b)(3)(i). "Significant" is defined at 40 C.F.R (b)(23)(i) in reference to a net emissions increase or the potential of a source to emit any of the following pollutants at a rate of emissions that would equal or exceed any of the following: for ozone, 40 tpy of VOCs; for -13-

14 Case 1:99-cv LJM-JMS Document 922 Filed 07/06/2006 Page 14 of 53 NO x, 40 tpy; and for SO 2, 40 tpy. 43. As set forth at 40 C.F.R (j), a new major stationary source or a source making a major modification shall apply best available control technology (BACT) for each pollutant subject to regulation under the Act that it would have the potential to emit in significant quantities. BACT is the maximum degree of emission reduction achievable for each pollutant regulated under the Act, taking into consideration energy, environmental and economic impacts of the emission reductions. 40 C.F.R (b)(12). 44. Pursuant to 40 C.F.R (k), the owner or operator of the facility to be modified must demonstrate that the modified source would not contribute to violation of (a) a NAAQS in any air quality control region (including regions located downwind of the source); or (b) any allowable pollution increments. Nonattainment New Source Review 45. Sections 172 and 173 of the Act, 42 U.S.C , set forth New Source Review (NSR) requirements in those areas designated as nonattainment with the NAAQS standards. These requirements are designed to protect public health and welfare and to ensure that any new construction activity in nonattainment areas, including modification of existing facilities, results in improvements in air quality. 46. Section 172(c)(5) of the Act, 42 U.S.C. 7502(c)(5), provides that all SIPs shall include plan provisions that require permits, in accordance with section 173 of the Act, 42 U.S.C. 7503, for the construction and operation of new or modified stationary sources in nonattainment areas. In accordance with section 171(4) of the Act, 42 U.S.C (4), the terms modified: and modification as used in the NSR provisions, are governed by the definition of -14-

15 Case 1:99-cv LJM-JMS Document 922 Filed 07/06/2006 Page 15 of 53 modification in section 111(a)(4) of the Act, 42 U.S.C. 7411(a)(4), as meaning any physical change in, or change in the method of operation of, a stationary source which increases the amount of any air pollutant emitted by such source Section 173(a) of the Act, 42 U.S.C. 7503(a), provides for the issuance of NSR preconstruction permits if the following conditions, inter alia, are met: (a) by the time it has commenced operation, the source has obtained offsetting emissions in an amount such that the total emissions from all sources within the region are reduced in an amount to represent reasonable further progress (as defined in section 171 of the Act, 42 U.S.C. 7501); (b) the proposed source will comply with the lowest achievable emission rate (LAER [as required by section 173(a)(2) of the Act, 42 U.S.C. 7503(a)(2)]); and (c) the owner or operator of the proposed new or modified source has demonstrated that all sources it owns in that state are subject to, and in compliance with, emission limitations and standards applicable under the Act. 48. A state may comply with sections 172 and 173 of the Act either by being delegated by EPA the authority to enforce the federal NSR regulations set forth at 40 C.F.R , or by having its own NSR regulations approved as part of its SIP by EPA. 49. The provisions of 40 C.F.R (a) and (b) prohibit the construction or major modification of a major stationary source in any area that is in nonattainment with the NAAQS unless an NSR permit has been issued pursuant to a SIP that meets the requirements of 40 C.F.R The term "major stationary source" is defined at 40 C.F.R (f)(4) to include, inter alia, any fossil-fuel fired steam electric plant of more than 250 million Btu/hr that emits or has the potential to emit 100 tpy or more of any air pollutant subject to regulation under the Act or any other facility that emits, or has the potential to emit, 250 tpy or more of any air pollutant -15-

16 Case 1:99-cv LJM-JMS Document 922 Filed 07/06/2006 Page 16 of 53 subject to regulation under the Act, or any physical change that would occur at a stationary source not otherwise qualifying as a major stationary source, if the change would constitute a major stationary source by itself. 50. "Major modification" is defined at 40 C.F.R (f)(5) as meaning any physical change in or change in the method of operation of a major stationary source that would result in a significant net emissions increase of any pollutant subject to regulation under the Act. "Significant" is defined at 40 C.F.R (f)(10) in reference to a net emissions increase or the potential of a source to emit any of the following pollutants at a rate of emission that would equal or exceed any of the following: for ozone, 40 tpy of VOCs ; for NO x 40 TPY; for SO 2, 40 tpy. Ohio s PSD and NSR Regulatory History 51. On August 7, 1980, EPA disapproved Ohio s proposed PSD program. See 45 Fed. Reg (August 7, 1980). Accordingly, EPA incorporated by reference the PSD regulations of 40 C.F.R (b) through (w) into the Ohio SIP, 40 C.F.R , and delegated to Ohio the authority to implement the federal PSD program incorporated into the Ohio SIP. The federal PSD regulations appearing at 40 C.F.R are still incorporated into and are part of the Ohio SIP. 40 C.F.R (1998). 52. In October of 1980, EPA conditionally approved Ohio s nonattainment NSR SIP rules. 45 Fed. Reg , (Oct. 31, 1980), which were codified in the Ohio Administrative Code (OAC) at Chapters Fed. Reg , (October 31, 1980). On September 8, 1993, EPA approved revisions to Ohio s nonattainment NSR SIP rules. 58 Fed. Reg (Sept. 8, 1993); see 40 C.F.R (c)(83) and 1879 (1999). These nonattainment NSR SIP rules were promulgated pursuant to: (1) Section 107 of the 1970 Amendments to the -16-

17 Case 1:99-cv LJM-JMS Document 922 Filed 07/06/2006 Page 17 of 53 Act, 42 U.S.C. 1857, and 40 C.F.R , as re-promulgated at 36 Fed. Reg , (November 25, 1971); (2) the nonattainment NSR requirements of Part D of Title I of the 1977 Amendments to the Act, 42 U.S.C ; and (3) the 1990 Amendments to the Act, 42 U.S.C The SIP rules, as amended, are codified in the OAC at Chapter through See 40 C.F.R (c)(83) and 1879 (1999). 53. Under the Act and Ohio s approved nonattainment NSR SIP rules, no person may undertake a major modification of an existing major stationary source in a nonattainment area without first obtaining a nonattainment NSR Permit to Install from the Ohio Environmental Protection Agency (OEPA). 42 U.S.C ; OAC (A). 54. In order to obtain a nonattainment NSR permit, the Ohio SIP requires that the owner or operator of a source undertaking a major modification must, inter alia: (a) comply with the lowest achievable emission rate (LAER) as defined in Section 171(3) of the Act, 42 U.S.C. 7501(3); (b) obtain federally enforceable emission offsets at least as great as the new or modified source s emissions; (c) certify that all other major sources that it owns or operates within Ohio are in compliance with the Act; and (d) demonstrate that the benefits of the proposed source or modification significantly outweigh the environmental and social costs imposed as a result of its construction or modification. OAC Chapter through Major modification is defined by the Ohio nonattainment NSR SIP as any physical change or any change in the method of operation of a major stationary source that would result in a significant net emission increase of any pollutant subject to regulation under the Act. OAC Chapter through

18 Case 1:99-cv LJM-JMS Document 922 Filed 07/06/2006 Page 18 of Under Ohio s approved nonattainment NSR SIP rules, a "major stationary source" of NO x is one that emits or has the potential to emit 100 tpy or more. A "significant net emissions increase of NO x is one that results in increased emissions of 40 tpy or more of this pollutant. OAC through Net emissions increase means the amount by which the sum of the following exceeds zero: (a) [a]ny increase in actual emissions [as defined by the Ohio nonattainment NSR SIP rules, OAC Chapter ] from a particular physical change or change in method of operation at a stationary source; and (b) [a]ny other increases and decreases in actual emissions [as defined by the Ohio nonattainment NSR SIP rules, OAC Chapter ] at the source that are contemporaneous with the particular change and are otherwise creditable. See OAC (incorporating 40 C.F.R. Part 51, App. S). Indiana s PSD and NSR Regulatory History 57. On August 7, 1980, EPA disapproved Indiana s proposed PSD program, 40 C.F.R Fed. Reg , (August 7, 1980), subsequently incorporating by reference the PSD regulations of 40 C.F.R (b) through (w) into the Indiana SIP. 46 Fed. Reg. 9580, 9583 (January 19, 1981). The Federal PSD regulations appearing at 40 C.F.R are still incorporated into and part of the Indiana SIP. 40 C.F.R On February 16, 1982, EPA approved Indiana s nonattainment NSR SIP rules, which were incorporated into Section 19 of the Indiana Air Pollution Code (APC 19). 47 Fed. Reg (February 16, 1982). APC 19 governed the preconstruction review of modifications of facilities in nonattainment areas that occurred prior to December 6, 1994, when subsequent regulations went into effect. The definitions applicable to the APC 19 nonattainment NSR provisions were -18-

19 Case 1:99-cv LJM-JMS Document 922 Filed 07/06/2006 Page 19 of 53 codified at 325 Indiana Administrative Code (IAC) Fed. Reg (November 5, 1981), and became effective on December 6, On February 25, 1994, Indiana submitted revisions to its SIP to satisfy the new NSR requirements of the 1990 Clean Air Act Amendments. On October 7, 1994, EPA approved Sections 2-1 and 2-3 of Chapter 326 of the Indiana Administrative Code (326 IAC 2-1, 2-3) as SIP revisions replacing APC Fed. Reg (Oct. 7, 1994) (effective December 6, 1994). 40 C.F.R (c)(94). Included in the NSR SIP revisions were changes to the definitions previously codified at 325 IAC 1-1; the definitions now applicable to NSR in Indiana appear at 326 IAC For the construction or modification of any facility prior to December 6, 1994 in a nonattainment area, the Indiana nonattainment NSR SIP prohibits such construction or modification if it will result in a potential increase in emissions of 25 tons per year or more of any regulated pollutant, unless the owner or operator of the facility first obtains a permit in accordance with NSR requirements, which include the attainment of LAER. APC 19, 2, 4. In this context, modification is defined to include any physical change, or change in the method of operation of any facility which increases the potential or legally allowed emissions (whichever is more stringent) of any pollutant that could be emitted from the facility or which results in emission of any pollutant not previously emitted. 325 IAC 1.1-1, 43. Potential emissions are in turn defined as: Emissions of any one pollutant which would be emitted from a facility if that facility were operated without the use of pollution control equipment unless such control equipment... is necessary for the facility to produce its normal product or is integral to the normal operation of the facility. Potential emissions shall be -19-

20 Case 1:99-cv LJM-JMS Document 922 Filed 07/06/2006 Page 20 of 53 based on maximum annual rated capacity unless hours of operation are limited by enforceable permit conditions. 325 IAC 1.1-1, For construction or major modification of a major stationary source on or after December 6, 1994 in a nonattainment area, the Indiana nonattainment NSR SIP similarly prohibits such construction or modification without first obtaining a permit in accordance with NSR requirements, which include the achievement of LAER and offsetting emission reductions. 326 IAC 2-1. In this context, a major modification means any physical change in or change in the method of operation of a major stationary source that would result in a significant net emissions increase of any pollutant which is being regulated under the Clean Air Act. 326 IAC It does not, however, include routine maintenance, repair, and replacement. Id. A major stationary source is also defined in this context as any stationary source of air pollutants which emits, or has the potential to emit, one hundred (100) tpy or more of any air pollutant subject to regulation under the Clean Air Act. 326 IAC For major modifications undertaken on or after December 6, 1994, the Indiana nonattainment NSR SIP provides that a significant net emissions increase in emissions occurs when the rate of emissions equals or exceeds 40 tons per year of SO 2, 40 tons per year of NO x, or 25 tons per year of PM. 326 IAC A net emissions increase in emissions exists under the Indiana nonattainment NSR SIP if the sum of the following emission increases and decreases exceed zero tons per year: (a) any increase in actual emissions from a particular physical change or change in method of operation at a source; and (b) any other increases and decreases in actual emissions at the source that are contemporaneous with the particular change and are otherwise -20-

21 Case 1:99-cv LJM-JMS Document 922 Filed 07/06/2006 Page 21 of 53 creditable. Id. Actual emissions is then defined in the Indiana nonattainment NSR SIP as the average rate, in tons per year, at which the unit actually emitted the pollutant during a two (2) year period which precedes the particular date and which is representative of normal source operation. Id. If the emission unit has not yet begun normal operations, however, actual emissions are equal to the unit s potential emissions. Id. The Act s Enforcement Provisions 63. Section 304(a)(3) of the Act, 42 U.S.C. 7604(a)(3), authorizes any person to commence, in the United States District Courts, a citizen suit against any person who constructs a modified major emitting facility without a PSD or NSR permit, whichever is required. No notice must be provided before the commencement of a suit under section 304(a)(3). 64. Section 302(e) defines person to include corporations and states. 65. The States of New York, New Jersey and Connecticut are each a "person" within the meaning of section 302(e) of the Act. 66. Section 113(b) of the Act, 42 U.S.C. 7413(b), authorizes both injunctive relief and civil penalties of up to $25,000 per day for each violation occurring prior to January 30, 1997; up to $27,500 per day for each such violation between January 30, 1997 and March 15, 2004; and up to $32,500 per day for each such violation occurring after March 15, 2004, pursuant to the Federal Civil Penalties Inflation Adjustment Act of 1990, 28 U.S.C. 2461, as amended by 31 U.S.C NOTICES 67. Notwithstanding the fact that notice is not a prerequisite for suits brought under -21-

22 Case 1:99-cv LJM-JMS Document 922 Filed 07/06/2006 Page 22 of 53 section 304(a)(3) of the Act, the States of New York, New Jersey and Connecticut each provided notice of their claims with regard to the Beckjord plant. On September 15, 1999, on behalf of the state of New York, Eliot Spitzer, Attorney General of the State of New York, sent, by certified mail, notice of intent to sue to defendants Cinergy and CG&E. On November 3, 1999, on behalf of the state of Connecticut, Attorney General Richard Blumenthal, Attorney General of the State of Connecticut, sent, by certified mail, notice of intent to sue to defendants Cinergy and CG&E. On February 2, 2001, on behalf of the state of New Jersey, John J. Farmer, Jr., Attorney General of the State of New Jersey, sent, by certified mail, notice of intent to sue to defendants Cinergy and CG&E. 68. Each notice was served by certified mail on the EPA Administrator, the EPA Regional Administrator for the EPA Region in which the plant identified in the notice is located, the state in which the plant identified in the notice is located, Cinergy, and CG&E. Each notice provided sufficient information to permit the recipients to identify the activity alleged to be in violation, the person or persons responsible for the alleged violation (i.e., Cinergy and CG&E, its subsidiary), the location of the alleged violations, the date of the violations and the full name and address of the person giving the notice. 69. More than sixty days have elapsed since the foregoing notices were sent. FIRST CLAIM FOR RELIEF (PSD violations -- Beckjord Unit 1) 70. Defendants modified Unit 1 at the Beckjord plant beginning in or about Upon information and belief, the modifications included, inter alia, the replacement of the superheater, -22-

23 Case 1:99-cv LJM-JMS Document 922 Filed 07/06/2006 Page 23 of 53 economizer, reheater header, wall tubes and coal bunker. Upon information and belief, subject to further investigation and discovery, defendants may have made other modifications to Unit 1 in, or around, the same time period. 71. The modifications identified in the preceding paragraph, individually and/or collectively, resulted or would result in net emissions increases of more than 40 tpy of SO 2 and NO x. 72. The aforesaid modifications constitute, individually and/or collectively, as part of defendants project to upgrade and/or extend the life of Unit 1, a major modification, within the meaning of 40 C.F.R (b)(2), and construction of a major emitting facility within the meaning of sections 165 and 169(2)(C) of the Act, 42 U.S.C and 7479(2)(C), and each required that a PSD permit be obtained. 73. Defendants have not applied for a PSD permit for any of the modifications of Unit 1 the Beckjord plant identified in this claim for relief. 74. Prior to making the aforesaid modifications, defendants did not demonstrate that the emission increases resulting from the modifications would not contribute to nonattainment in any air quality control region, or comply with any other substantive requirements of 40 C.F.R (j) through (r). 75. Defendants have not implemented BACT for control of SO 2 and NO x emissions from Unit 1 of the Beckjord plant. 76. Therefore, since approximately 1986, defendants have been in violation of section 165(a) of the Act, 42 U.S.C. 7475(a), 40 C.F.R and the Ohio SIP. -23-

24 Case 1:99-cv LJM-JMS Document 922 Filed 07/06/2006 Page 24 of Following the issuance of the September 15 and November 3, 1999 notices and continuing to the present, defendants have not obtained PSD permits for the Beckjord plant, nor have they installed BACT for control of SO 2 and NO x emissions from Unit 1. will continue. 78. Unless defendants are restrained by an order of this Court, these violations of the Act 79. As provided in Section 113(b) of the Act, 42 U.S.C. 7413(b), and Section 167 of the Act, 42 U.S.C. 7477, the violations set forth above subject Defendants CG&E, Cinergy Services, and/or Cinergy to injunctive relief and civil penalties of up to $25,000 per day for each violation occurring prior to January 30, 1997; up to $27,500 per day for each such violation between January 30, 1997 and March 15, 2004; and up to $32,500 per day for each such violation occurring after March 15, 2004, pursuant to the Federal Civil Penalties Inflation Adjustment Act of 1990, 28 U.S.C. 2461, as amended by 31 U.S.C SECOND CLAIM FOR RELIEF (NSR violations -- Beckjord Unit 1) 80. Defendants modified Unit 1 at the Beckjord plant beginning in or about Upon information and belief, these modifications included, inter alia, the replacement of the superheater, economizer, reheater, wall tubes and coal bunker. Upon information and belief, subject to further investigation and discovery, defendants may have made other modifications to Unit 1 in, or around, the same time period. 81. The modifications identified in the preceding paragraph, individually and/or collectively, resulted or would result in a net emissions increase of more than 40 tpy of NO X. -24-

25 Case 1:99-cv LJM-JMS Document 922 Filed 07/06/2006 Page 25 of The aforesaid modifications constitute, individually and/or collectively, as part of defendants plan to upgrade and/or extend the life of Unit 1, a major modification, within the meaning of 40 C.F.R (f)(5) and OAC Chapter , for NO x, and each required that an NSR permit be obtained prior to the commencement of construction. 83. Defendants have not applied for NSR permits for any of the modifications of Unit 1 of the plant identified in this claim for relief. 84. Prior to making the aforesaid modifications, defendants did not obtain emission offsets or comply with any substantive requirements of 40 C.F.R and OAC Chapter Defendants have not implemented LAER for control of NO X emissions from Unit Therefore, since undertaking these modifications, defendants have been in violation of Sections 172 and 173 of the Act, 42 U.S.C , 40 C.F.R , and OAC Chapter through will continue. 87. Unless defendants are restrained by an order of this Court, these violations of the Act 88. As provided in Section 113(b) of the Act, 42 U.S.C. 7413(b), and Section 167 of the Act, 42 U.S.C. 7477, the violations set forth above subject Defendants CG&E, Cinergy Services, and/or Cinergy to injunctive relief and civil penalties of up to $25,000 per day for each violation occurring prior to January 30, 1997; up to $27,500 per day for each such violation between January 30, 1997 and March 15, 2004; and up to $32,500 per day for each such violation occurring after March 15, 2004, pursuant to the Federal Civil Penalties Inflation Adjustment Act of 1990, 28 U.S.C. 2461, as amended by 31 U.S.C

26 Case 1:99-cv LJM-JMS Document 922 Filed 07/06/2006 Page 26 of 53 THIRD CLAIM FOR RELIEF (PSD violations -- Beckjord Unit 2) 89. Defendants modified Unit 2 at the Beckjord plant in or around the time period. Upon information and belief, the modifications included, inter alia, replacement of the furnace wall tubes, superheater, reheater, and the coal bunker. Upon information and belief, subject to further investigation and discovery, defendants may have made other modifications to Unit 2 in, or around, the same time period. 90. The modifications identified in the preceding paragraph, individually and/or collectively, resulted or would result in net emissions increases of more than 40 tpy of SO 2 and NO x. 91. The aforesaid modifications constitute, individually and/or collectively, as part of defendants project to upgrade and/or extend the life of Unit 2, a major modification, within the meaning of 40 C.F.R (b)(2), and construction of a major emitting facility within the meaning of sections 165 and 169(2)(C) of the Act, 42 U.S.C and 7479(2)(C), and each required that a PSD permit be obtained prior to the commencement of construction. 92. Defendants have not applied for a PSD permit for any of the modifications of Unit 2 of the Beckjord plant identified in this claim for relief. 93. Prior to making the aforesaid modifications, defendants did not demonstrate that the emission increases resulting from the modifications would not contribute to nonattainment in any air quality control regions, or comply with any other substantive requirements of 40 C.F.R 52.21(j) through (r). -26-

27 Case 1:99-cv LJM-JMS Document 922 Filed 07/06/2006 Page 27 of Defendants have not implemented BACT for control of SO 2 and NO x emissions from Unit 2 of the Beckjord plant. 95. Therefore, since undertaking these modifications, defendants have been in violation of 165(a) of the Act, 42 U.S.C. 7475(a), 40 C.F.R and the Ohio SIP. 96. Following the issuance of the September 15 and November 3, 1999 notices and continuing to the present, defendants have not obtained PSD permits for the Beckjord plant, nor have they installed BACT for control of SO 2 and NO x emissions from Unit Unless restrained by an order of this Court, these violations of the Act will continue. 98. As provided in Section 113(b) of the Act, 42 U.S.C. 7413(b), and Section 167 of the Act, 42 U.S.C. 7477, the violations set forth above subject Defendants CG&E, Cinergy Services, and/or Cinergy to injunctive relief and civil penalties of up to $25,000 per day for each violation occurring prior to January 30, 1997; up to $27,500 per day for each such violation between January 30, 1997 and March 15, 2004; and up to $32,500 per day for each such violation occurring after March 15, 2004, pursuant to the Federal Civil Penalties Inflation Adjustment Act of 1990, 28 U.S.C. 2461, as amended by 31 U.S.C FOURTH CLAIM FOR RELIEF (NSR violations -- Beckjord Unit 2) 99. Defendants modified Unit 2 at the Beckjord plant in or around the time period. Upon information and belief, the modifications included, inter alia, replacement of the furnace wall tubes, superheater, reheater, and the coal bunker. Upon information and belief, subject to further investigation and discovery, defendants may have made other modifications to Unit 2 in, or around, the same time period. -27-

28 Case 1:99-cv LJM-JMS Document 922 Filed 07/06/2006 Page 28 of The modifications identified in the preceding paragraph, individually and/or collectively, resulted or would result in a net emissions increase of more than 40 tpy of NO X The aforesaid modifications constitute, individually and/or collectively, as part of defendants plan to upgrade and/or extend the life of Unit 2, a major modification, within the meaning of 40 C.F.R (f)(5) and OAC Chapter , for NO X, and each required that a NSR permit be obtained prior to the commencement of construction Defendants have not applied for NSR permits for any of the modifications of Unit 2 of the plant identified in this claim for relief Prior to making the aforesaid modifications, defendants did not obtain emission offsets or comply with any substantive requirements of 40 C.F.R and OAC Chapter Defendants have not implemented LAER for control of NO X emissions from Unit Therefore, since undertaking these modifications, defendants have been in violation of 172 and 173 of the Act, 42 U.S.C , 40 C.F.R , and OAC Chapter through will continue Unless defendants are restrained by an order of this Court, these violations of the Act 107. As provided in Section 113(b) of the Act, 42 U.S.C. 7413(b), and Section 167 of the Act, 42 U.S.C. 7477, the violations set forth above subject Defendants CG&E, Cinergy Services, and/or Cinergy to injunctive relief and civil penalties of up to $25,000 per day for each violation occurring prior to January 30, 1997; up to $27,500 per day for each such violation between January 30, 1997 and March 15, 2004; and up to $32,500 per day for each such violation -28-