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Kentucky Coal Ass'n, Inc. v. Tennessee Valley Authority

United States District Court, W.D. Kentucky, Owensboro Division

February 2, 2015


As Amended February 3, 2015.

Page 704

[Copyrighted Material Omitted]

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For Kentucky Coal Association, Inc., James Rogers, III, J.L. Rogers Family LLC, Talmage Rogers, Talmar of FL, LLC, Pat Early, Kirstine Early, Buckingham Hollow, LLC, Kevin Lawrence, Big Bucks, LLC, Plaintiffs: Courtney Ross Samford, Gregory Brian F. Wells, LEAD ATTORNEYS, Wyatt, Tarrant & Combs LLP - Lexington, Lexington, KY; Donald J. Kelly, Lisa Catherine DeJaco, LEAD ATTORNEYS, Wyatt, Tarrant & Combs LLP - Louisville, Louisville, KY.

For Tennessee Valley Authority, Defendant: Edwin W. Small, Frances R. Koho, Maria V. Gillen, LEAD ATTORNEYS, Tennessee Valley Authority, Knoxville, TN.

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Joseph H. McKinley, Jr, Chief United States District Judge.

This matter is before the Court on cross-motions for judgment on the administrative record [DN 32, DN 46]. Fully briefed, this matter is ripe for decision.


On February 16, 2012, the Environmental Protection Agency (EPA) issued regulations known as the Mercury and Air Toxics Standards (MATS) requiring operators of coal-fired power plants, including Tennessee Valley Authority, to reduce hazardous pollutants emitted from their plants by April 16, 2015, or by April 16, 2016, if an extension was granted. In August of 2012, TVA Board of Directors approved a budget that included the funding to upgrade the existing emission controls at Paradise Units 1 and 2 by installing pulse jet fabric filter systems to comply with MATS emission mandates. In April of 2013, TVA again indicated its intent to upgrade Paradise Units 1 and 2.

In August of 2013, in an effort to comply with MATS, TVA announced a change in its position regarding Paradise Units 1 and 2. TVA released a Draft Environmental Assessment (" EA" ) that proposed the following alternatives: (1) the No Action Alternative, under which TVA would allow the facility to operate out of compliance with the governing laws and regulations

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(Alternative A); (2) construction and operation of pulse jet fabric filter systems for emission control on Paradise Units 1 and 2 (Alternative B); and (3) retirement of Paradise Units 1 and 2 and construction and operation of a new natural gas-fueled power generating CT/CC plant (Alternative C). Unit 3 at Paradise would remain operational. According to the Draft EA, TVA also considered six other emission reduction alternatives, but eliminated them from detailed analysis because they were determined not to be technically or economically practical or feasible. TVA offered a 30-day comment period, which TVA notes was not required. TVA received 304 comments on the draft EA and most of those comments supported the second alternative.

In November of 2013, TVA issued a 153-page Final EA determining that Alternative C, the proposed action of retiring Paradise Units 1 and 2 and replacing them with a natural gas fueled power plant, was the preferred alternative. TVA determined that the proposed action would not significantly impact the environment and issued a Finding of No Significant Impact (" FONSI" ) in accordance with the National Environmental Policy Act (" NEPA" ), the Council on Environmental Quality (" CEQ" ) regulations, and TVA's procedures. TVA represents that the Paradise EA builds on or tiers from Environmental Impact Statements (" EIS" ) that TVA issued for its 1995 and 2011 Integrated Resource Plan (" IRP" ). An IRP is the culmination of a comprehensive utility planning process that evaluates the merits of using different kinds of energy resources to meet forecasted future demand for electricity with the goal of meeting demand reliably and cost effectively. According to TVA, tiering permits an agency to go from a broader NEPA review to a more site-specific NEPA review without readdressing issues or repeating information. TVA states that its decision to replace two coal-fired units with natural gas generation at its Paradise Plant is supported by two linked environmental reviews--the 2011 IRP and the Paradise Final EA.

On July 10, 2014, Plaintiffs, Kentucky Coal Association, Inc., James Rogers III, J.L. Rogers Family, LLC, Talmage Rogers, Talmar of FL., LLC, Pat Early, Kirstine Early, Buckingham Hollow, LLC, Kevin Lawrence, and Big Bucks, LLC, filed an eight-count complaint seeking a declaration that Defendant, Tennessee Valley Authority, violated the National Environmental Policy Act (NEPA), 42 U.S.C. § 4332, the Administrative Procedures Act, 5 U.S.C. § 555 et seq, and the TVA Act, 16 U.S.C. § 831n-4(f), by conducting a faulty EA, improperly issuing a FONSI, and failing to prepare and issue an EIS concerning the project. The Plaintiffs then filed a motion seeking a preliminary injunction enjoining TVA and its representatives from any activities that implementing TVA's November 13, 2013, decision to retire Paradise Units 1 and 2 and to construct a new gas-powered generating facility and accompanying gas transport infrastructure. On December 19, 2014, the Court denied the motion for preliminary injunction finding that Plaintiffs had not met their heavy burden to show that a preliminary injunction should be granted.

In September of 2014, Defendants moved for judgment on the administrative record arguing that TVA properly analyzed its decision to replace two coal-fired units at its Paradise Plant with natural gas generation under NEPA and that TVA's action was neither arbitrary nor capricious under NEPA or the Energy Policy Act of 1992. In November of 2014, Plaintiffs filed a cross-motion for judgment on the administrative record arguing that that TVA failed to undertake required environmental analysis under NEPA and failed to engage in least-cost planning under the TVA Act

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in connection with its decision to proceed with Alternative C. Plaintiffs contend that TVA should have conducted an EIS for this project which is required by NEPA, but instead TVA conducted only a more limited EA. According to Plaintiffs, because TVA failed to comply with its statutory mandates under NEPA and the TVA Act, the Court should find TVA's action arbitrary and capricious and enter judgment for Plaintiffs under both claims.


The National Environmental Protection Act " is 'our basic national charter for protection of the environment,' 40 C.F.R. § 1500.1(a), and is designed to 'declare a national policy which will encourage productive and enjoyable harmony between man and his environment[, and] to promote efforts which will prevent or eliminate damage to the environment and biosphere and stimulate the health and welfare of man.' 42 U.S.C. § 4321." Tennessee Environmental Council v. Tennessee Valley Authority, 32 F.Supp.3d 876, 2014 WL 3810740, *3 (E.D. Tenn. Aug. 1, 2014). NEPA requires federal agencies to take a " hard look" at the environmental consequences of their projects before taking action. Id. (citing Marsh v. Oregon Natural Res. Council, 490 U.S. 360, 374, 109 S.Ct. 1851, 104 L.Ed.2d 377 (1989); 42 U.S.C. § 4332(2)(C)). " NEPA also requires that federal agencies follow the necessary process in assessing the environmental effects of projects; it does not, however, mandate a specific result." Id. (quoting Robertson v. Methow Valley Citizens Council, 490 U.S. 332, 350, 109 S.Ct. 1835, 104 L.Ed.2d 351 (1989)); see also Strycker's Bay Neighborhood Council, Inc. v. Karlen, 444 U.S. 223, 227-28, 100 S.Ct. 497, 62 L.Ed.2d 433 (1980). " In other words, NEPA's mandate is essentially procedural." Id.

" A primary provision of NEPA is the requirement that all federal agencies prepare an EIS for 'major [f]ederal actions significantly affecting the quality of the human environment.'" Id. at *4 (citing 42 U.S.C. § 4332(2)(C); 40 C.F.R. § § 1502.1, 1508.15; Southwest Williamson County Community Ass'n, Inc. v. Slater, 243 F.3d 270, 274 n. 3 (6th Cir. 2001)). " Major" has no meaning independent of " significantly," and " actions" include " new and continuing activities, including projects and programs entirely or partly financed, assisted, conducted, regulated, or approved by federal agencies; new or revised agency rules, regulations, plans, policies, or procedures; and legislative proposals." 40 C.F.R. § 1508.18. An EIS is the most detailed and comprehensive level of review under NEPA regulations. Tennessee Environmental Council, 2014 WL 3810740, *4 (citing 40 C.F.R. § 1508.11; 40 C.F.R. Part 1502); Heartwood, Inc. v. Agpaoa, 628 F.3d 261, 264 (6th Cir. 2010).

" Prior to preparing an EIS, the agency may, however, prepare an EA as a preliminary step in determining whether the environmental impact of the proposed action is sufficiently significant to warrant an EIS." Tennessee Environmental Council, 2014 WL 3810740, *4; 40 C.F.R. § 1508.9(a)(1). " The EA is to be a 'concise public document' that '[b]riefly provide[s] sufficient evidence and analysis for determining whether to prepare an [EIS].'" Id. (quoting Department of Transp. v. Public Citizen, 541 U.S. 752, 757, 124 S.Ct. 2204, 159 L.Ed.2d 60 (2004) (alterations in original) (quoting 40 C.F.R. § 1508.9(a)). If, pursuant to an EA, " an agency determines that an EIS is not required under applicable [regulations issued by the Council on Environmental Quality (" CEQ" )], it must issue a '[FONSI]' which briefly presents the reasons why proposed agency action will not have a significant impact on the human environment.'" Id. (citing 40 C.F.R. § § 1501.4(e), 1508.13).

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Federal courts have jurisdiction to review NEPA claims pursuant to the Administrative Procedure Act (the " APA" ), 5 U.S.C. § 704. Sierra Club v. Slater, 120 F.3d 623, 630-31 (6th Cir. 1997). " It is well settled that a reviewing court grants substantial deference to an agency's determination under NEPA, including decisions regarding what level of environmental review is needed. Such a determination will be upheld so long as the determination was not arbitrary, capricious, or an abuse of discretion." Tennessee Environmental Council, 2014 WL 3810740, *4 (citing Kelley v. Selin, 42 F.3d 1501, 1518 (6th Cir. 1995); Kleppe v. Sierra Club, 427 U.S. 390, 410 n. 21, 412, 96 S.Ct. 2718, 49 L.Ed.2d 576 (1976); Marsh, 490 U.S. at 376)). See also Sierra Club v. Flowers, 526 F.3d 1353, 1361 (11th Cir. 2008)(" This standard requires substantial deference to the agency, not only when reviewing decisions like what evidence to find credible and whether to issue a FONSI or EIS, but also when reviewing drafting decisions like how much discussion to include on each topic, and how much data is necessary to fully address each issue." ). Thus, " an agency's decision must be 'reasonable under the circumstances' when reviewed 'in the light of the mandatory requirements and the standard set by (NEPA).'" Tennessee Environmental Council, 2014 WL 3810740, *4 (quoting Kelley, 42 F.3d at 1519). " 'When it is possible to offer a reasoned explanation, based on the evidence, for a particular outcome, that outcome is not arbitrary or capricious.'" Id. (quoting Davis v. Kentucky Fin. Cos. Ret. Plan, 887 F.2d 689, 693 (6th Cir. 1989) (citation omitted)).

In engaging in its review, " a court cannot 'substitute [its] judgment of the environmental impact for the judgment of the agency, once the agency has adequately studied the issue.'" Tennessee Environmental Council, 2014 WL 3810740, *5 (quoting Kelley, 42 F.3d at 1518). " A court must, however, 'determine whether the agency has, in fact, adequately studied the issue and taken a hard look at the environmental consequences of its decision.'" Id. (citation omitted). Ultimately, the review is a " narrow one." Id.

Initially, TVA argues that Plaintiffs waived any claims related to predetermination, cumulative impacts, and segmentation by failing to raise these claim to TVA during the public comment period. Plaintiffs disagree arguing that they satisfactorily gave notice to TVA by raising these claims in their motion for preliminary injunction that was filed during the public comment period of the EA. Given the Court's review of the administrative decision, the Court finds it unnecessary to address this issue because the additional claims raised do not render TVA's decision arbitrary and capricious.

A. Violation of TVA's NEPA Procedures

Plaintiffs maintain that TVA violated its own NEPA procedures by failing to prepare and issue an EIS concerning the project. TVA's NEPA procedures identify the types of actions that " normally require an environmental impact statement" to include (a) actions involving " [m]ajor power generating facilities; " (b) " any major action, the environmental impact of which is expected to be highly controversial; " (c) " any other major action which will have a significant effect on the quality of the human environment." See Tenn. Valley Auth., Procedures for Compliance with NEPA.

Plaintiffs argue that because TVA's preferred alternative is the construction and operation of a new 1,025 MW CT/CC gas plant and qualifies as a major power generating facility, the appropriate level of NEPA review under TVA's own procedures is an EIS, not an EA. Plaintiffs cite numerous cases in which TVA conducted

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Environmental Impact Statements for the construction and operation of new power generating facilities. Plaintiffs maintain that TVA's failure to conduct an EIS in light of its own procedures renders TVA's decision arbitrary and capricious.

TVA concedes its procedures list " major power generating facilities" as one of the " actions [that] normally will require an EIS." However, TVA argues that " normally" does not mean that an EIS is always required for major power generating facilities where the agency determines that an action will have no major environmental impacts. TVA states that such is the situation at Paradise. The Court agrees. As discussed in the Memorandum Opinion and Order denying Plaintiffs' motion for preliminary injunction, TVA has discretion to determine whether the " normal" preparation of an EIS is warranted under NEPA. As noted by the Tenth Circuit, " actions which an agency determines will normally require an EIS, do not always require an EIS." Committee to Preserve Boomer Lake Park v. Department of Transp., 4 F.3d 1543, 1555 (10th Cir. 1993). In the present case, TVA determined that the action would have no major environmental impacts and would actually have important environmental benefits, and therefore, determined that no EIS was necessary. Despite TVA's own procedures to normally conduct an EIS in actions involving major power generating facilities, TVA's decision to prepare an EA in the present case, as opposed to EIS, does not automatically warrant a finding that the review conducted by TVA was arbitrary and capricious. Instead, the Court will analyze TVA's decision under the appropriate CEQ regulations. Furthermore, the cases ...

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