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Montana Power Co. v. EPA

Citation: 9 ELR 20667
No. Nos. 77-2521 et al., 608 F.2d 334/13 ERC 1385/(9th Cir., 07/16/1979) Rev'd

Reversing a district court's judgment and affirming a determination by the Environmental Protection Agency (EPA), the Ninth Circuit Court of Appeals holds that Units 3 and 4 of the Colstrip power plant in Montana are subject to the prevention of significant deterioration (PSD) review and permitting requirements of both EPA's 1975 PSD regulations and the 1977 Clean Air Act amendments. The district court ruled that the units were exempted from the PSD regulations because although actual on-site construction had not begun before June 1, 1975, the effective date of the regulations, the project sponsor had entered into contractual obligations before that date which would have cost more than $8 million to cancel. The court of appeals holds that the EPA's issuance of two interpretive memoranda clarifying the regulations' exemption for facilities upon which construction had commenced and the Agency's departure from two prior rulings applying the exemption did not mean that its decision to deny an exemption to Colstrip 3 and 4 was arbitrary. The court also rules that the lower court erroneously failed to give due deference to EPA's interpretation in the memoranda of the "contractual commitment" component of the grandfather exemption provided by its PSD regulations. The memoranda elaborate a substantial-loss test based on the ratio of unavoidable loss to total project cost rather than simply the absolute amount of the loss as the method for determining whether a project sponsor should be considered to have "commenced" construction before June 1, 1975 because of irrevocable contractual commitments. Turning to the second issue, the court upholds EPA's determination that the petitioner had not commenced construction before August 7, 1977, the effective date of the more stringent PSD provisions of the 1977 Clean Air Act amendments, and is thus not entitled to a grandfather exemption from those requirements either. The court concludes that the 1977 amendments require obtaining all necessary state and local preconstruction approvals and permits prior to August 7, 1977 as a prerequisite to an exemption based on the commencement of construction before that date. The court holds that the petitioner failed to fulfill this requirement because it did not obtain a permit under the Montana Clean Air Act before August 7, 1977.

Counsel for Plaintiffs-Petitioners
John L. Peterson
McCaffery & Peterson
27 W. Broadway St., Butte MT 59701
(406) 792-1221

Counsel for Defendants-Respondents
Earl Salo
Land and Natural Resources Division
Department of Justice, Washington DC 20530
(202) 633-2701

Thomas Olson, U.S. Attorney
P.O. Box 1478, Billings MT 59103
(406) 723-6561

Before MERRILL and WRIGHT, Circuit Judges, and SWEIGERT, District Judge.*