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Louisville Gas and Electric Co. v. Kentucky Waterways Alliance

Supreme Court of Kentucky

April 27, 2017

LOUISVILLE GAS AND ELECTRIC COMPANY APPELLANT
v.
KENTUCKY WATERWAYS ALLIANCE;, SIERRA CLUB; VALLEY WATCH; SAVE THE VALLEY; AND COMMONWEALTH OF KENTUCKY, ENERGY AND ENVIRONMENT CABINET APPELLEES AND COMMONWEALTH OF KENTUCKY, ENERGY AND ENVIRONMENT CABINET APPELLANT
v.
KENTUCKY WATERWAYS ALLIANCE;, SIERRA CLUB; VALLEY WATCH; SAVE THE VALLEY; AND LOUISVILLE GAS AND ELECTRIC COMPANY APPELLEES

         ON REVIEW FROM COURT OF APPEALS CASE NOS. 2013-CA-001695-MR AND 2013-CA-001742-MR FRANKLIN CIRCUIT COURT NO. 1 l-CI-01613

          COUNSEL FOR LOUISVILLE GAS AND ELECTRIC COMPANY: Sheryl G. Snyder Jason Patrick Renzelmann Frost Brown Todd, LLC John Clarence Bender Richard Clayton Larkin Dinsmore & Shohl, LLP

          COUNSEL FOR COMMONWEALTH OF KENTUCKY, ENERGY AND ENVIRONMENT CABINET: Christopher R. Fitzpatrick Anna Fletcher Office of General Counsel Energy and Environment Cabinet

          COUNSEL FOR KENTUCKY WATERWAYS ALLIANCE; SIERRA CLUB; VALLEY WATCH; AND SAVE THE VALLEY: Joe Francis Childers, Jr. Joe F. Childers & Associates Andrea Issod Nathaniel Shoaff Greg Wannier Sierra Club Environmental Law Program

          COUNSEL FOR AMICUS CURIAE THE KENTUCKY CHAMBER OF COMMERCE: Brent Robert Baughman Kelly Dant Bartley Bingham Greenebaum Doll, LLP

          OPINION

          HUGHES, JUSTICE

         In April 2010, the Commonwealth of Kentucky, Energy and Environment Cabinet's Division of Water (the Division) issued a permit to the Louisville Gas and Electric Company (LG&E) authorizing it to discharge certain pollutants into the Ohio River in conjunction with the operation of the company's recently expanded electricity generating facility near Bedford, Kentucky, in Trimble County. In subsequent proceedings, the Franklin Circuit Court vacated the permit, and a divided panel of the Court of Appeals affirmed that decision. We granted and consolidated LG&E's and the Cabinet's motions for discretionary review to consider their claims that in vacating the permit the lower courts misapplied controlling federal law. Upon review, we agree that federal law requires a different result, and accordingly we reverse the Court of Appeals' decision and reinstate LG&E's permit.

         RELEVANT FACTS

         The facts are not in material dispute. In 1990, LG&E commenced operation of what is referred to as a coal-fired steam electric generation and transmission facility near Bedford in Trimble County. At such a facility the combustion of coal is used to generate steam, which in turn propels electricity generating turbines. The combustion of coal releases gases that bear pollutants, including various compounds of sulfur. Under the federal Clean Air Act, LG&E is required to mitigate its sulfur emissions. It does so by means of a process called "flue gas desulfurization" (FGD) or "wet scrubbing, " which involves exposing the sulfur-bearing flue gas to a (usually) lime-containing spray or slurry that captures the sulfur, along with other pollutants, in a waste-water stream.

         Illustrating a recurring theme in the struggle to abate pollution, the waste-water stream that solves or mitigates an air-pollution problem becomes in turn a potential source of water pollution implicating the anti-pollution goals and provisions of the Clean Water Act. In 1982, the United States Environmental Protection Agency (EPA) addressed the water pollution concerns raised by steam electric generating facilities and issued a regulation, a Guideline (the 1982 Guideline), imposing limits for such facilities on certain so-called conventional pollutants. The 1982 Guideline acknowledged concerns about a long list of toxic pollutants, but deferred establishing limits for any of them because, according to the Administrator, the technology for effectively reducing the small amounts in which they occurred was not yet sufficiently developed.

         Under the 1982 Guideline, most such facilities met the imposed limits, in significant part at least, by storing their various low-volume waste-water streams in settling ponds. There, many of the conventional pollutants would settle out prior to the discharge of the remaining effluent liquid into a body of water, such as the Ohio River. That had long been the method LG&E employed at its Trimble County facility. There, waste-water, including the FGD effluent, was stored temporarily in a gypsum storage basin to allow various solids and non-dissolved metals to settle. The remaining liquid effluent was eventually discharged into the Ohio.

         In response to, among other things, public concerns about the toxic pollutants produced during electricity generation, the EPA, by the mid-2000s had begun studying that problem. Its studies confirmed that new regulatory measures were in order, and so in 2009 it began the lengthy process of creating a new Guideline regulation for the steam electricity generating class.[1]

         It was in that environment of pending regulatory change that, in 2007, LG&E launched plans to add a second, larger generating unit to its Trimble facility. Soon thereafter it applied to the Division for a revised permit that would accommodate its increased discharges. LG&E's application proposed that it would treat the new unit's FGD effluent in the same manner-gypsum settling pond prior to discharge into the Ohio River-as it had the original unit's FGD effluent under prior permits. During the public comment phase of the permit application process, environmental groups, including the Kentucky Waterways Alliance (KWA), opposed the permit on the ground (among others) that it did not require the removal of certain dissolved (and hence not susceptible to settling) toxic pollutants-in particular mercury, arsenic, and selenium-from the FGD waste-stream prior to its discharge into the river. This particular issue was among the concerns that the EPA itself had acknowledged and was in the process of studying.

         When, in April 2010, the Division approved LG&E's application and issued a renewed permit that did not include limits on certain toxic discharges, [2] KWA, along with the Sierra Club's Valley Watch and Save the [Ohio] Valley (collectively KWA or the Alliance), timely petitioned for administrative review before the Cabinet. The Alliance argued that under the federal Clean Water Act, LG&E was required to make use of technologies, currently available, whereby toxic metals, such as those mentioned above, could be removed from the FGD waste water. According to the Alliance, the permit writer's failure to include that requirement rendered the permit invalid.

         The Cabinet's hearing officer rejected the Alliance's reading of federal law. In the officer's view, the EPA's 1982 Guideline established what were and what remained the applicable effluent limits for FGD waste-water streams generated by coal-fired steam electric plants. Under that Guideline, according to the hearing officer, the Division was not required to include in LG&E's permit any technology-based limits on the toxic pollutants of concern to the Alliance. By administrative order entered in December 2010, the Cabinet's Secretary adopted the hearing officer's report and recommendation without amendment and thus affirmed the issuance of the permit.

         The Alliance thereupon timely filed an appeal from the Secretary's order in the Trimble Circuit Court. LG&E and the Cabinet (Appellants herein), insisting that Franklin Circuit Court had exclusive jurisdiction to address appeals from final Cabinet rulings, moved for dismissal of the appeal. After much debate between the parties, the Trimble Circuit Court decided (1) that venue rather than jurisdiction was at issue; (2) that under Kentucky Revised Statute (KRS) 224.10-470, the proper venue was Franklin Circuit Court; and (3) that both KRS 452.105, the venue transfer statute, and Dollar Gen. Stores, Ltd. v. Smith, 237 S.W.3d 162, 166 (Ky. 2007), made clear that the proper remedy in these circumstances was not dismissal of the Alliance's appeal, but rather transfer of it to the court-Franklin Circuit-where venue would lie.

         No sooner had the matter been transferred than LG&E and the Cabinet renewed their objection. Now, although agreeing that Franklin Circuit Court was where the Alliance's appeal should have been commenced, they argued that transfer was not a valid way for the appeal to arrive there. Because in Appellants' view Trimble Circuit Court lacked jurisdiction over the matter, its transfer order was, they insisted, void and so could not provide a legitimate foundation for the exercise of the Franklin Circuit Court's jurisdiction.

         Like its Trimble counterpart, the Franklin Circuit Court rejected this contention. It too read KRS 224.10-470 as assigning venue, not exclusive jurisdiction, to Franklin Circuit Court. The opposite reading, it worried, might run afoul of the Kentucky Constitution's Section 109, which establishes "a unified" Circuit Court. The court also observed that, in the circumstances of this case at any rate, the venue/jurisdiction distinction made no real difference, because even if Trimble Circuit had dismissed the Alliance's appeal for lack of jurisdiction, the savings statute, KRS 413.270, would have given the Alliance ninety days to refile its appeal in the Franklin Circuit. There seemed little doubt that that-a refiling of the appeal-is precisely what would have happened.

         Having thus determined that it was authorized to do so, the circuit court turned to the merits of the Alliance's appeal. It agreed with the Alliance that the absence from the permit of an appropriate technology-based effluent limit for the Alliance's specified toxic pollutants violated mandatory provisions of the Clean Water Act. It acknowledged the 1982 Guideline upon which the Cabinet relied, but in the circuit court's view, that Guideline did not meaningfully address toxic pollutants. It thus brought into play, the circuit court believed, statutory and regulatory provisions meant to guard against "gaps" in the EPA's guideline by requiring permitters who run up against such gaps in the Guidelines to use their "best professional judgment" (BPJ) to supply an appropriate, albeit permit-specific, technology-based effluent limit on their own. It also rejected, as not supported by the administrative record, the Cabinet's alternative contention that even if the permit writer were deemed obliged to conduct a BPJ analysis, she had in effect done so in this case. Accordingly, the circuit court vacated LG&E's permit and remanded the matter to the Cabinet for further proceedings.

         The Cabinet and LG&E both appealed to the Court of Appeals, and, as noted above, after the two appeals were consolidated, a divided appellate panel affirmed the circuit court's decision. The panel majority agreed with the circuit court as to both the limited scope of the 1982 Guideline and the nature of the permitter's duty to determine an appropriate technology-based effluent limit for toxic pollutants the Guidelines "fail" to address. It also agreed with the circuit court that the permit writer could not be said to have performed an adequate BPJ analysis.

         Dissenting, Judge Maze shared his colleagues' concern that the 1982 Guideline for the steam electric power generating class could be left unrevised for some thirty years, long enough for its "guidance" to become more hindrance than means of furthering the Clean Water Act's anti-pollution purposes. Nevertheless, Judge Maze understood the 1982 Guideline as clearly applying to the permit at issue under controlling federal law and thus as precluding the circuit court's and the panel majority's foray into essentially self-help regulation.

         We granted the Cabinet's and LG&E's motions for discretionary review to consider their joint claim that the courts below misconstrued the EPA's 1982 Guideline as well as the provisions-both statutory and regulatory- authorizing a permit writer's resort to his or her "best professional judgment" to supply a technology-based effluent limit not provided by the EPA guidelines. That claim is the focus of our analysis, but before we turn our attention in that direction, we must first address Appellants' renewed contention that the case should simply be dismissed because the Franklin Circuit Court's jurisdiction was never properly invoked.

         ANALYSIS

         I. The Jurisdiction of the Franklin Circuit Court Was Adequately Invoked.

         In pertinent part, KRS 224.10-470 provides that

(1) Appeals may be taken from all final orders of the Energy and Environment Cabinet. Except as provided in subsection (3) of this section[3] the appeal shall be taken to the Franklin Circuit Court within ...

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