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Ormet Primary Aluminum Corp. v. Ohio Power Co.

Citation: 30 ELR 20457
No. Nos. 99-1419, -1454, 207 F.3d 687/(4th Cir., 04/05/2000) summary judgment affirmed

The court holds that an aluminum manufacturer is not entitled to a share of pollution emissions allowances allocated to an electric power plant under the Clean Air Act (CAA). The manufacturer claimed that it was entitled to an 89% proportionate share of the plant's allowances because its contractual relationship with the electric company that owned the power plant rendered it a joint owner of the plant. In order for the manufacturer to prevail on its claim, however, it must demonstrate that its contract with the power company amounts to a "life of the unit, firm power contractual arrangement" as specified by the CAA. There are four elements the manufacturer must satisfy in order to be considered a joint owner under the Act.

The court first holds that the manufacturer reserved or was entitled to receive a specified amount or percentage of capacity and associated energy under the contract and, thus, satisfied the first element. The court then holds, however, that the manufacturer failed to satisfy the second element, that is, that the energy must have been generated by a specific unit or units. The contract clearly contemplated that the power delivered to the manufacturer could be generated anywhere in the electric company's power system. Because the contract did not tie the company's supply obligations to a specified generating unit or units, the company bore the entire risk of loss of capacity at the power plant. This risk is an important burden of ownership, one that the contract imposed exclusively on the electric company. The court also holds that the contract does not require the manufacturer to pay its proportional amount of the power plant's total costs and, thus, does not satisfy the third element of joint ownership. The manufacturer's share of the costs of operating the power plant did not vary in proportion to its reservation of energy and did not bear a consistent relation to the total costs incurred by the electric company in operating the power plant. Last, because the contract does not satisfy at least two of the requirements for joint ownership, the court does not analyze the fourth element, namely, whether the arrangement covered a substantial length of time relative to the life of the power plant. Because the manufacturer does not qualify as a joint owner of the plant, the court affirms the lower court's decision that the manufacturer is not entitled to a proportionate share of pollution emissions allowances allocated to the power plant.

[A prior decision in this litigation is published at 27 ELR 20302.]

Counsel for Plaintiff
Charles E. Bachman
O'Sullivan, Graev & Karabell
30 Rockefeller Plaza, 41st Fl., New York NY 10112
(212) 408-2400

Counsel for Defendants
Janet J. Henry
Porter, Wright, Morris & Arthur
41 S. High St., 29th Fl., Columbus OH 43215
(614) 227-2000

Before Wilkins and Seymour, JJ.