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Duke-ing It Out at the High Court: The End of New Source Review?

To what extent can the EPA force utilities to update aging fleets with expensive pollution-control technology?

Fortnightly Magazine - February 2007

for a time, would revert to the hourly emissions test, giving utilities a small window across the country to modify their plants without repercussion. Utilities would have to act quickly, though, primarily because many states would scurry to change their state rules to prevent modifications from occurring. Even so, for a time, the electric industry would be almost entirely free of the New Source Review modification rule and its strenuous requirements.

If utilities are allowed to extend their fleet’s lives significantly, the environment will suffer, but reliability, safety, and efficiency will prosper. If they are forced to add pollution controls, many of these older plants likely will be retired. These retirements will put a strain on the grid and the ISOs, increasing the need for new baseload generation. For the next few months, then, utility investment and environmental protection hang in the balance, awaiting the high court’s pronouncement.



1. Charles Lane, “Justices to Hear Environmental Appeal on EPA Emissions Rule,” Wash. Post. A04 (May 16, 2006).

2. Nathaniel O. Keohane, Erin T. Mansur, & Andrey Voynov, Averting Enforcement: Strategic Response to the Threat of Environmental Regulation, Yale School of Management and School of Forestry and Environmental Studies Research Paper, available at; Bernard L. Weinstein & Terry L. Clower, Environmental Defense v. Duke Energy: How a Supreme Court Reversal on the Interpretation of New Source Review Could Imperil Rural America, Center for Economic Development and Research, available at

3. Hearing Before the Committee on Environment and Public Works, Health Impacts of PM2.5 Associated With Power Plant Emissions, 107th Congress, at 3 (Oct. 2, 2002).

4. See U.S. General Accounting Office (GAO), Air Pollution Emmissions from Older Electric-Generating Units 3 (2002) (GAO 02-709) available at

5. See 42 U.S.C. §§ 7501-7515, 7470-7492

6. See New York v. EPA, 443 F.3d 880 (D.C. Cir. 2006).

7. See, e.g., Robert N. Stavins, The Effects of Vintage-Differentiated Environmental Regulation, Resources for the Future Discussion Paper (05-12), 1 (March 23, 2005), available at

8. Meredith Fowlie, Emissions Trading, Electricity Industry Restructuring, and Investment in Pollution Abatement, Unive of Cal. Berkely Job Market Paper, at 22 (“An increase in the capital cost of a compliance option decreases the probability that the option will be chosen by a plant in a restructured electricity market.”).

9. See U.S. Supreme Court, Docket No. 05-848,

10. State of New York, et al. v. Cinergy Corp., No. 06-1224 (Aug. 17, 2006).

11. Environmental Defense Hails 7th Circuit Court Decision Supporting Its Suit to Stop Weakening of Clean Air Act, U.S. Newswire (Aug. 17, 2006) available at

12. Id. at 7.

13. Data taken from U.S. General Accounting Office (GAO), Air Pollution Emissions from Older Electric-Generating Units 3 (2002) (GAO 02-709) available at and Energy Information Administration Web site. The price data is from 2005 and the pre-1971 unit data is from 2000.

14. Prevention of Significant Deterioration (PSD), Nonattainment New Source Review (NSR), and New Source Performance Standards (NSPS): Emissions Test for Electric Generating Units, 70 Fed. Reg.