This case, brought by the United States against Alabama Power Company for alleged violations of the Clean Air Act, 42 U.S.C. § 7401 et seq., has lasted for over a decade, lending some literal support to Justice Holmes' quip that "[l]awyers spend their professional careers shoveling smoke."
In support of its case, the government sought to introduce the expert testimony of Robert Koppe, a power plant reliability engineer, and Dr. Ranajit Sahu, an environmental permitting engineer. The testimony of these two experts, according to the government, would show that Alabama Power should have expected the modifications to significantly increase pollutant emissions at the plants, in violation of the Act. The district court, relying on United States v. Cinergy Corp., 623 F.3d 455 (7th Cir.2010), excluded the testimony of Mr. Koppe and Dr. Sahu, agreeing with Alabama Power that their methodology relied on incorrect and unrealistic assumptions about the operation of Alabama Power's generating units. See United States v. Alabama Power Co., 773 F.Supp.2d 1250 (N.D.Ala.2011) ("Alabama Power I"). The district court also struck, as an untimely new expert opinion, additional statements and calculations made by Dr. Sahu in his supplemental declaration. See United States v. Alabama Power Co., 274 F.R.D. 686 (N.D.Ala.2011) ("Alabama Power II"). Because the government indicated that it could not proceed without the expert testimony excluded in Alabama Power I, the district court entered summary judgment in favor of Alabama Power. See Alabama Power II, 274 F.R.D. at 686.
The government and the Alabama Environmental Council, an intervenor, now appeal. Following review of the voluminous record, and with the benefit of oral argument, we affirm without further discussion the district court's ruling in Alabama Power II. That ruling, in our view, was not an abuse of discretion. We reverse, however, the district court's wholesale exclusion of the expert testimony of Mr. Koppe and Dr. Sahu in Alabama Power I, vacate the judgment in favor of Alabama Power, and remand for further proceedings. The Koppe-Sahu model, as utilized here, is sufficiently reliable to establish a relationship between potential generation of electricity and expected pollutant emissions at Alabama Power's modified plants. The Seventh Circuit's decision in Cinergy Corp., moreover, does not preclude admission of the expert testimony.
The Clean Air Act seeks to protect the nation's air resources and promote public health through the prevention and control of air pollution. See 42 U.S.C. § 7401(b). The Act directs the Environmental Protection Agency to develop national standards regulating the emission of certain hazardous airborne pollutants. Id. at § 7409. The Act also tasks the EPA with overseeing each State's adoption of control measures and policies, i.e., the State Implementation Plan, to ensure that each State achieves the required air quality standards. Id. at § 7410. In its enforcement role, the EPA may bring suit directly against any operator of a pollution source for violation of the Act, regulations promulgated
Under the Act's Prevention of Significant Deterioration ("PSD") Program, enacted in 1977, major new sources of air pollution must limit their emissions to preserve the country's air quality and protect human health. Sources built before 1977 are exempt from this requirement unless they undergo a "major modification." See 42 U.S.C. § 7475; 40 C.F.R. § 52.21(b)(2)(i). A "major modification" includes physical or operational changes to a power plant that would result in a "significant net emissions increase" in sulfur dioxide and nitrogen oxide. See 40 C.F.R. § 52.21(b)(2)(i). A net emissions increase for either of these pollutants is "significant" if it is greater than 40 tons per year. See 40 C.F.R. § 52.21(b)(23)(i); Ala. Adm. Code § 335-3-14-.04(1)(a).
When a coal-fired power plant is operating, it burns coal to fuel an intense fire that converts water to steam. The steam passes over and turns the blades of a turbine; the kinetic energy of the turning blades is then converted into electricity by a generator. The process involves numerous mechanical components working in concert in an extremely inhospitable environment. A power-plant operator might schedule ahead to shut down a plant and complete regular maintenance and repair components. A shut-down, however, may also be unscheduled (e.g., when there is a sudden catastrophic failure).
A plant does not generate electricity when it is shut down and, therefore, does not need to burn coal during periods of inactivity. If the repair or replacement of a problematic component renders a plant more reliable and less susceptible to future shut-downs, the plant will be able to run consistently for a longer period of time. Assuming that the operator wishes to exploit this extra availability to generate more electricity, more coal will need to be burned. Because coal-fueled combustion produces sulfur dioxide and nitrogen oxide, such increased plant operations may result in increased pollutant emissions.
In 1985, Alabama Power conducted an air-flow conversion of Unit 10 at its Gorgas plant from a "forced draft" system to a "balanced draft" system. In 1989, Alabama Power completely replaced the primary reheaters (a major boiler component) of Unit 2 at its Greene County plant. Similarly, in 1997, Alabama Power replaced a reheater section of Unit 2 at its Barry plant. Alabama Power did not obtain permits under the Clean Air Act for these projects.
These modifications, according to the government, were performed to reduce the amount of time each plant would spend shut down for future maintenance and repairs. By replacing older infrastructure, prone to failure, with newer, more reliable components, Alabama Power intended to improve the reliability of its plants. As a consequence of this improved reliability, the government asserted, the modified power plants would be able to generate electricity for longer intervals throughout the year than before the modifications.
To satisfy its burden under the Act, the government had to show that at the time of the projects Alabama Power expected, or should have expected, that its modifications would result in a "significant net emissions increase" of sulfur dioxide or nitrogen oxide at each plant. See Cinergy Corp., 623 F.3d at 459 ("the permit must be obtained before the modification is made, and so the effect on emissions is a prediction rather than an observation"); United States v. Ohio Edison Co., 276 F.Supp.2d 829, 865 (S.D.Ohio 2003) ("the determination of whether a given project will cause a significant net pollution increase requires a pre-construction determination as to the additional pollutants projected to be emitted as a result of the proposed physical change"). The expert testimony of Mr. Koppe and Dr. Sahu, which we explain later, was critical to the government's ability to make that showing.
As noted earlier, the district court struck the expert testimony of Mr. Koppe and Dr. Sahu because it concluded that their methodology was unreliable within the meaning of Daubert v. Merrell Dow Pharms., 509 U.S. 579, 595, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993), and its progeny. We review that ruling for abuse of discretion. See, e.g., Toole v. Baxter Healthcare Corp., 235 F.3d 1307, 1312 (11th Cir.2000). "A district court abuses its discretion if it applies an incorrect legal standard, follows improper procedures in making the determination, or makes findings of fact that are clearly erroneous." Chicago Tribune Co. v. Bridgestone/Firestone, Inc., 263 F.3d 1304, 1309 (11th Cir.2001).
Under Rule 702, a district court acts as a gatekeeper to keep out irrelevant or unreliable expert testimony. See Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 145, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999); Daubert, 509 U.S. at 596, 113 S.Ct. 2786. This gatekeeping role, however, "is not intended to supplant the adversary system or the role of the jury: `vigorous cross-examination, presentation of contrary evidence, and careful instruction on the burden of proof are the traditional and appropriate means of attacking shaky but admissible evidence.'" Allison v. McGhan Med. Corp., 184 F.3d 1300, 1311-12 (11th Cir.1999) (citing Daubert, 509 U.S. at 596, 113 S.Ct. 2786). In evaluating the reliability of scientific expert testimony, a district court "must assess whether the reasoning or methodology underlying the testimony is scientifically valid and whether the reasoning or methodology properly can be applied to the facts in issue." United States v. Frazier, 387 F.3d 1244, 1261-62 (11th Cir.2004) (en banc) (internal quotation marks and ellipsis omitted).
With these standards in mind, we turn to the expert testimony of Mr. Koppe and Dr. Sahu, and the reasons the district court gave for its exclusion.
The Koppe-Sahu model consists of two parts. The first is an analysis of each modification's expected effect on the power plant's availability and capacity to generate additional electricity. The second is a calculation of the marginal increase of pollutant
Mr. Koppe's analysis constituted the first part of the model. Mr. Koppe examined Alabama Power's rationale for its projects and how each project addressed certain problematic components prone to failure. Mr. Koppe also analyzed the historical operating data and records of each unit to determine the number of hours it spent shut down due to that specific, faulty component. The replacement of that component, Mr. Koppe opined, would preclude similar shutdowns in the future, thereby increasing the unit's overall availability to generate electricity.
In the case of Gorgas Unit 10, however, the balanced draft conversion project addressed a system design flaw that led to numerous component failures and limited the unit's overall reliability and performance. Because the scope of that project was larger than the replacement of a single component, Mr. Koppe was unable to perform his standard availability analysis. Instead, he reviewed the records of nine other units owned by Southern Company (the parent of Alabama Power) that had undergone balanced draft conversions before Gorgas Unit 10. He found that, on average, the modified units suffered fewer outages and, therefore, experienced greater availability than before their modifications. Notably, Southern Company had also conducted the same analysis of those nine units in September of 1982, three years before the modification of Gorgas Unit 10. See D.E. 321, Ex. 4 at 93-94. Southern Company's own study concluded, as did Mr. Koppe, that a balanced draft conversion should be expected to improve a unit's availability. Id.
Additionally, Mr. Koppe cited to another Alabama Power study (this one conducted in September of 1983) which estimated a significant increase in Gorgas Unit 10's maximum capacity for electricity generation following a balanced draft conversion. See id. at 96-97. That study also projected the number of hours per year the unit would operate at this increased capacity. See id. Because these estimates came directly from Alabama Power, and could reasonably be imputed as the company's expectations for the modification at Gorgas Unit 10, Mr. Koppe incorporated these estimates in his calculations.
As to all three modifications, Mr. Koppe reviewed the pre-project operation records of each unit to analyze its utilization by Alabama Power. Based on these records and his analysis, Mr. Koppe was confident that any additional hours made available to the power plants due to the modifications would actually be utilized by Alabama Power to generate additional electricity. Based on this analysis, Mr. Koppe calculated the expected increase in electricity generation at each modified plant. These estimates were then passed along to Dr. Sahu for the second stage of the model.
Because the emission of pollutants accompanies the generation of electricity at a coal-fired power plant, Dr. Sahu constructed an algorithm to convert Mr. Koppe's estimates of increased generation into the associated increase in pollutant emissions. The actual conversion factors employed by Dr. Sahu were specific to each power plant because the distinctive physical and operational attributes of each power plant will affect its emission of pollutants.
The district court held that the model's "presumption that an increase in a facility's annual capacity will result in a proportionately equal increase in its output is only valid if the facility is operated virtually continuously at the highest level of output possible." Alabama Power I, 773 F.Supp.2d at 1258. In other words, the district court held that the Koppe-Sahu methodology was only valid for "baseload" units, which it defined as facilities which "operate[ ] `virtually continuously' at `full capacity.'" Id. at 1256 (quoting Cinergy Corp., 623 F.3d at 459-60).
We disagree with the district court's legal rationale and analysis, and conclude that the exclusion of the expert testimony of Mr. Koppe and Dr. Sahu constituted an abuse of discretion. Although the Koppe-Sahu model can certainly be used to estimate pollutant emissions from baseload
In Cinergy Corp., the Seventh Circuit held that expert testimony similar to that provided by Mr. Koppe and Dr. Sahu could not reliably predict how modifications would affect the generation of electricity and, consequently, emissions for cycling facilities. See id. The Seventh Circuit noted that the "formula" before it carried a presumption of reliability when estimating a baseload unit's emissions, but concluded that such a presumption was not valid for a cycling unit. See id. at 460 ("There can be no presumption that an increase in [a cycling plant's] annual capacity would result in a proportionately equal increase in its output ... In contrast, if a baseload plant is modified to enable it to produce more electricity, there is a presumption that it will produce at the higher rate enabled by the modification").
"The rules relating to Daubert issues are not precisely calibrated and must be applied in case-specific evidentiary circumstances that often defy generalization." United States v. Brown, 415 F.3d 1257, 1266 (11th Cir.2005). Assuming that Cinergy Corp. is persuasive, the district court misconstrued the reach of the Seventh Circuit's decision. Simply because a model cannot be presumed reliable in a specific context, as Cinergy Corp. held, does not mean that it is per se unreliable in that context. The district court therefore erred in ruling that under Cinergy Corp. the Koppe-Sahu model is "reliable only when used with `baseload' electric generating units" and "works only if the unit is operated as a baseload unit." Alabama Power I, 773 F.Supp.2d at 1256.
What the Seventh Circuit actually held in Cinergy Corp. is that testimony like the Koppe-Sahu methodology "doesn't work for a cycling facility ... [w]ithout expert testimony to support an estimate of actual emissions caused by the modifications." Cinergy Corp., 623 F.3d at 460 (emphasis added). Although the government lacked sufficient expert testimony to support the use of its theory in Cinergy Corp., here it submitted ample evidence to support the Koppe-Sahu model.
At the Daubert hearing, Mr. Koppe testified that the model was robust enough to predict emission increases for either cycling or baseload units. See D.E. 370 at 44:23-25. The model, according to Mr. Koppe, would be valid for cycling units so long as three underlying conditions were satisfied: (1) that the unit, assuming the modification provides additional hours of unit availability, will actually use the additional available hours; (2) that the unit will not spend more time in reserve shutdown in the future that it did in the past; and (3) that the output factor for the unit will not decrease. Id. at 43:10-15. Mr. Koppe affirmed that each of the three relevant units, based on his review and analysis, satisfied these conditions. See id. at 44:18-22.
The district court rejected the applicability of these conditions because of an ostensible lack of supporting evidence. See Alabama Power I, 773 F.Supp.2d at 1259 n. 14 ("Daubert does not permit the Court to admit opinion evidence which is connected to existing data only by the ipse dixit of the expert").
In sum, there was a sufficient evidentiary basis under Rule 702 — including Alabama Power's own records and predictions — to support Mr. Koppe's assertions that the three initial conditions were satisfied and that the Koppe-Sahu methodology applied to Barry Unit 2, Greene County Unit 2, and Gorgas Unit 10, even if those units are deemed cycling rather than baseload. Cf. Louisiana Generating, 929 F.Supp.2d at 595-96, 2012 WL 1676706, at *4 ("Cinergy is not controlling on this court, of course, and the court finds that the failure of La-Gen to seriously contend there is another
The district court was also critical of the rigor of the evaluation performed by Mr. Koppe because he admitted that, if any of the units in question spent a lot of time on reserve shutdown, he would have to conduct further investigation to determine whether the three conditions had been met. Given this admission, the district court believed that it could not rely on the assertion by Mr. Koppe that he had conducted sufficient investigation to determine whether the conditions had in fact been satisfied. See Alabama Power I, 773 F.Supp.2d at 1259 n. 13. But Mr. Koppe's admission was largely irrelevant, and did not support wholesale exclusion of the Koppe-Sahu model, for the district court itself found (or noted without contradiction in the record) that the three units spent little time on reserve shutdown.
Alabama Power may have a number of reasons why the Koppe-Sahu methodology should not be accepted as persuasive at trial, but it offers no persuasive argument to support the notion that Daubert and its progeny require all-out exclusion of the expert testimony of Mr. Koppe and Dr. Sahu prior to trial. That the Koppe-Sahu model always predicts an increase in pollutant emissions as a result of increased unit availability is not a fatal Daubert flaw, as Alabama Power suggests, but rather a natural outcome of the model's deterministic nature. Although a court may certainly evaluate the mathematical rigor of a model, the possible existence of a more thorough, more complex model is not a basis for wholesale exclusion. See Allison, 184 F.3d at 1311-12.
We affirm the district court's striking of the additional statements and calculations contained in Dr. Sahu's supplemental declaration in Alabama Power II, reverse the district court's exclusion of the expert testimony of Mr. Koppe and Dr. Sahu in Alabama Power I, vacate the judgment in favor of Alabama Power, and remand for further proceedings.
HODGES, District Judge, dissenting:
Technical skill and effectiveness is best demonstrated by the ability to isolate, simplify, and analyze the individual components of complex problems. Precision and brevity in doing so are the hallmarks of excellence. Judge Jordan's opinion for the court reflects those qualities in cogently explaining the regulatory scheme and technical background that produces the Daubert issue to be decided on this appeal. I dissent, with utmost respect, only from the ultimate conclusion reversing the district court's ruling on the Daubert issue excluding the expert testimony of Mr. Koppe and Dr. Sahu. My specific disagreement relates to the court's application of the governing standard of review — abuse of discretion — under which I would affirm the district court in all respect.
The district court heard testimony that electrical generating facilities are generally referred to as either baseload or cycling in character. Mr. Koppe testified that the term "baseload" means that the facility is one that is operated continuously when available. 773 F.Supp.2d at 1257, n. 8. A "cycling" unit is one that is used at different levels intermittently depending upon the peaks and valleys of demand. With respect to baseload units, Mr. Koppe testified that his method of calculating increased output (and, ultimately, increased emissions) can be applied as a "no brainer" to baseload units "because the units are used [by definition] all the time when available." See D.E. 370, p. 44. With respect to cycling units, however, Mr. Koppe testified that in order to properly apply his method, particularized investigation would be required concerning three anticipated conditions:
Later during the hearing the district court questioned Mr. Koppe about his investigation of those three factors with respect to the remaining units in dispute:
In its decision the district court concluded that each of the three facilities in issue (Barry Unit 2, Greene County Unit 2 and Gorgas Unit 10) were not baseload units and, therefore, that the Koppe/Sahu method of determining increased emissions could not reliably be applied, according to Mr. Koppe's own admission, absent additional investigation concerning the assumptions upon which the method rested. On this record, in my view, that conclusion was within the "range of choice" available to the district court in its discretion. Or, stated another way, the choice it made was not a clear error in judgment.
The majority opinion makes the best case possible for a contrary result based upon other evidence upon which the district court might have relied in reaching
Daubert v. Merrell Dow Pharmaceuticals Inc., 509 U.S. 579, 597, 113 S.Ct. 2786, 2798-99, 125 L.Ed.2d 469 (1993).
Cinergy Corp., 623 F.3d at 459-60 (internal quotation marks omitted and emphasis added). See also United States v. Louisiana Generating, LLC, 929 F.Supp.2d 591, 594-96, 2012 WL 1676706, at *3-4 (M.D.La.2012) ("Unsurprisingly, economic principles dictate how a plant is used. The Cinergy Corp. court... determined that because the plant in question was old and expensive to run it was a cycling unit.... The capacity at which a plant operates is a function of its status as baseload or cycling, not the other way around.").