Nos. 09-3351, 09-3344, 09-3350
IN THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT UNITED STATES OF AMERICA, Plaintiff-Appellee/Cross-Appellant , STATE OF NEW YORK, STATE OF NEW JERSEY, STATE OF CONNECTICUT, Plaintiff-Intervenor Appellees/Cross-Appellants , and HOOSIER ENVIRONMENTAL COUNCIL, OH IO ENVIRONMENTAL COUNCIL, Plaintiff-Intervenor Appellees , v. CINERGY CORPORATION, PSI ENERGY, INC., AND THE CINCINNATI GAS & ELECTRIC COMPANY, Defendant-Appellants

. Appeal from the United States District Co urt for the Southern District of Indiana, Indianapolis Division, case no. 1:99-cv-1693, the Honorable Judge Larry J. McKinney, presiding

DEFENDANT-APPELLANTS’ OPENING BRIEF

Marc E. Manly Catherine S. Stempien Dean M. Moesser Julie L. Ezell D UKE E NERGY C ORP

. 526 South Church Street Charlotte, NC 28202 (704) 382-8000 Mark D. Hopson Counsel of Record Peter D. Keisler Frank R. Volpe Peter C. Pfaffenroth Ryan C. Morris Lowell J. Schiller S IDLEY A USTIN LLP 1501 K Street, N.W. Washington, DC 20005 (202) 736-8000 tel. (202) 736-8711 fax Attorneys for Appellants December 11, 2009

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 1i CIRCUIT RULE 26.1 DISCLOSURE STATEMENT (1) The full name of every party that the attorney represents in the case (if the party is a corporation, you must provid e the corporate disclosure information required by Fed. R. App. P 26.1 by completing item #3): Cinergy Corp.; PSI Energy, Inc.; The Cincinnati Gas & Electric Company (2) The names of all law firms whose partne rs or associates have appeared for the party in the case (including proceedings in the district court or before an administrative agency) or are expected to appear for the party in this court: Sidley Austin LLP; Taft Stettinius & Hollister LLP; Porter Wright Morris & Arthur LLP; Sommer Barnard PC; Hoga n & Hartson, LLP; Plews, Shadley, Racher & Braun; Barn es & Thornburg LLP (3) If the party or amic us is a corporation: i) Identify all its parent corporations, if any; and Cinergy Corp. is a wholly-owned subsidiary of Duke Energy Corporation. PSI Energy, Inc (now known as Duke Energy Indiana, Inc.) and The CincinnatiGas & Electric Company (now known as Duke Energy Ohio) are both whollyowned subsidiaries of Cinergy Corp. ii) list any publicly held company that owns 10% or more of the party’s or amicus’ stock: Duke Energy Corporation owns 10% or more of the stock of Cinergy Corp. PSI Energy, Inc (now known as Duke Energy Indiana, Inc.) and The Cincinnati Gas & Electric Company (now known as Duke Energy Ohio) are both wholly-owned subsidiaries of Cinergy Corp.

Attorney’s Signature: _________ ________________________ Date: _________________ Attorney’s Printed Name: Mark D. Hopson Counsel of Record: Yes No Address: Sidley Austin LLP, 1501 K Street N.W. , Washington, D.C. 20005 Phone Number: (202) 736-8188 Fax Number: (202) 736-8711 E-Mail Address: mhopson@sidley.com

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 2ii CIRCUIT RULE 26.1 DISCLOSURE STATEMENT (1) The full name of every party that the attorney represents in the case (if the party is a corporation, you must provid e the corporate disclosure information required by Fed. R. App. P 26.1 by completing item #3): Cinergy Corp.; PSI Energy, Inc.; The Cincinnati Gas & Electric Company (2) The names of all law firms whose partne rs or associates have appeared for the party in the case (including proceedings in the district court or before an administrative agency) or are expected to appear for the party in this court: Sidley Austin LLP; Taft Stettinius & Hollister LLP; Porter Wright Morris & Arthur LLP; Sommer Barnard PC; Hoga n & Hartson, LLP; Plews, Shadley, Racher & Braun; Barn es & Thornburg LLP (3) If the party or amic us is a corporation: i) Identify all its parent corporations, if any; and Cinergy Corp. is a wholly-owned subsidiary of Duke Energy Corporation. PSI Energy, Inc (now known as Duke Energy Indiana, Inc.) and The CincinnatiGas & Electric Company (now known as Duke Energy Ohio) are both whollyowned subsidiaries of Cinergy Corp. ii) list any publicly held company that owns 10% or more of the party’s or amicus’ stock: Duke Energy Corporation owns 10% or more of the stock of Cinergy Corp. PSI Energy, Inc (now known as Duke Energy Indiana, Inc.) and The Cincinnati Gas & Electric Company (now known as Duke Energy Ohio) are both wholly-owned subsidiaries of Cinergy Corp.

Attorney’s Signature: _________ ________________________ Date: _________________ Attorney’s Printed Name: Julie L. Ezell Counsel of Record: Yes No Address: Duke Energy Shared Services, Inc., 1000 E. Main St., Plainfield, IN 46168 Phone Number: (317) 838-1100 Fax Number: (317) 838-6001 E-Mail Address: Julie.Ezell@duke-energy.com

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 3iii TABLE OF CONTENTS TABLE OF CO NTENTS ............................................................................................... iii TABLE OF AUTH ORITIES .......................................................................................... v JURISDICTIONAL STATEMENT ............................................................................... 1 STATEMENT OF ISSUE S PRESEN TED .................................................................... 2 STATEMENT OF THE CAS E ....................................................................................... 3 INTRODUCT ION .......................................................................................................... 3 STATEMENT OF FACTS ............................................................................................. 5 A. Statutory And Regulato ry Backgr ound. .................................................. 5 B. Factual Back ground . ................................................................................ 9 1. Cinergy’s Electricity Ge nerating Sy stem. .................................... 9 2. Cinergy’s Component Repl acement Proj ects. ............................. 12 C. Procedural Ba ckground . ......................................................................... 13 1. The NSR Enforcement Initiati ve. ............................................... 13 2. The Applicable NNSR Test . ........................................................ 14 3. The Rosen-Koppe Me thodolo gy. .................................................. 15 4. The Judgme nt. ............................................................................. 18 SUMMARY OF ARGUMEN T ..................................................................................... 20 ARGUMEN T ................................................................................................................ 22 I. The District Court Applied Th e Wrong Legal Standard . ................................ 22 A. Before 1994, Indiana’s SIP Impo sed A “Potential-To-Potential” NNSR Standard. ..................................................................................... 23 B. The NNSR Provisions Of The Indiana SIP In Place At The Time Of The Projects Govern Pl aintiffs’ NNSR Claims. ................................ 29 II. The District Court Erred In Admitting The Rosen And Koppe Testimon y. ......................................................................................................... 32 Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 4iv A. Rosen’s And Koppe’s Made-For-Litigation Methodology Is Presumptively Un reliable. ..................................................................... 34 B. The Rosen-Koppe Methodology Has Never Been Tested, Has No Known Error Rate, And Has No t Been Peer-R eviewed. ....................... 35 C. The Rosen-Koppe Methodology Is Biased And Un reliable. .................. 43 D. The Rosen-Koppe Methodology Is Irrelevant Under The CAA And EPA’s Implementing Regulati ons. ................................................. 52 CONCLUSION ............................................................................................................. 57

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 5v TABLE OF AUTHORITIES Page(s) C ASES Braun v. Lorillard Inc. , 84 F.3d 230 (7th Cir. 1996) .................................................................................... 34 Chapman v. Maytag Corp. , 297 F.3d 682 (7th Cir. 2002) ...................................................................... 33, 36, 43 Claar v. Burlington N. R.R. , 29 F.3d 499 (9th Cir. 1994) .................................................................................... 36 Corporate Assets, Inc. v. Paloian , 368 F.3d 761 (7th Cir. 2004) .................................................................................. 33 Daubert v. Merrell Dow Pharms., Inc. , 43 F.3d 1311 (9th Cir. 1995) ...................................................................... 34, 35, 38 Daubert v. Merrell Dow Pharms., Inc. , 509 U.S. 5 79 (1993) ......................................................................................... passim Fuesting v. Zimmer, Inc. , 421 F.3d 528 (7th Cir. 2005), vacated in part on other grounds , 448 F.3d 936 (7th Cir. 2006) .................................................................................................. 35 Johnson v. Manitowoc Boom Trucks, Inc. , 484 F.3d 426 (6th Cir. 2007) .................................................................................. 35 Gen. Motors Corp. v. United States , 496 U.S. 530 (1990) .................................................................................. 5, 6, 22, 30 Kempner Mobile Elecs., Inc. v. Sw. Bell Mobile Sys. , 428 F.3d 706 (7th Ci r. 2005) ............................................................................ 33, 52 Kumho Tire Co. v. Carmichael , 526 U.S. 137 ( 1999) ........................................................................ 32, 35, 36, 39, 40 Metro. Wash. Coal. for Clean Air v. Dist. of Columbia , 511 F.2d 809 (D.C. Cir. 1975) ................................................................................ 30 N. Ind. Pub. Serv. Co. v. Colo. Westmoreland, Inc. , 667 F. Supp. 613 (N.D. Ind. 1987), aff’d , 845 F.2d 1024 (7th Cir. 1988) ....................................................................................... 10, 11, 43, 47 Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 6vi In re Paoli R.R. Yard PCB Litig. , 35 F.3d 717 (3d Ci r. 1994) ...................................................................................... 49 People Who Care v. Rockford Bd. of Educ. , 111 F.3d 528 (7th Cir. 1997) .................................................................................. 44 Rosen v. Ciba-Geigy Corp. , 78 F.3d 316 (7th Cir. 1996) .................................................................................... 34 United States v. Ala. Power Co. , 372 F.Supp.2d 1283 (N.D. Ala. 2005) .................................................................... 13 United States v. Cinergy Corp. , 458 F.3d 705 (7th Cir. 2006) .................................................................................... 7 United States v. Disantis , 565 F.3d 354 (7th Cir. 2009) .................................................................................. 22 United States v. Ohio Edison Corp. , 276 F.Supp.2d 829 (S.D.Oh io 2003) ................................................................. 13, 29 Wis. Elec. Power Co. v. Reilly , 893 F.2d 901 (7th Ci r. 1990) .............................................................................. 8, 13 Zenith Elecs. Corp. v. WH-TV Broad. , 395 F.3d 416 (7th Cir. 2005) ...................................................................... 21, 39, 42 S TATUTES AND R EGULATIONS Pub. L. No. 95-95, §129(a)(1 ), 91 Stat. 685 (1977) ...................................................... 23 16 U.S.C. § 824d(a) ....................................................................................................... 10 42 U.S.C. § 7407(a) ......................................................................................................... 5 42 U.S.C. § 7408(a) ......................................................................................................... 5 42 U.S.C. §7409 .............................................................................................................. 5 42 U.S.C. §7410( a) ................................................................................................... 6, 31 42 U.S.C. § 7411(a)(4 ) ..................................................................................................... 6 42 U.S.C. §7413( b) ..................................................................................................... 5, 6 42 U.S.C. §§ 7470-7492 ................................................................................................... 5 42 U.S.C. §7475( a) ................................................................................................... 6, 22

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 7vii 42 U.S.C. § 7479(2)(C ) .................................................................................................... 6 42 U.S.C. §§7501-75 15 ......................................................................................... 5, 6, 30 42 U.S.C. §7502 ........................................................................................................ 6, 22 42 U.S.C. §7602( q) ................................................................................................... 5, 22 Ind. Code §8 -1-2-4 ........................................................................................................ 10 40 C.F.R. §51.24 (1979) ............................................................................................ 7, 24 40 C.F.R. §51.21 (1979) ............................................................................................ 7, 24 40 C.F.R. pt. 51, App. S (1979) ................................................................................ 7, 23 40 C.F.R. §52.21 (1981) ...................................................................................... 7, 45, 47 40 C.F.R. §52.24 (1981) .......................................................................................... 45, 48 40 C.F.R. §51.105 (1992) .......................................................................................... 6, 30 40 C.F.R. §51.165 (1992) .......................................................................................... 6, 31 40 C.F.R. §51.166 (1992) ................................................................................................ 6 40 C.F.R. §52.21 (1992) ...................................................................................... 6, 27, 52 40 C.F.R. §52.770 (1992) .................................................................................. 23, 25, 28 40 C.F.R. §52.770 (1995) .............................................................................................. 26 40 C.F.R. §52.793 (2009) .............................................................................................. 27 44 Fed. Reg. 3,274 (J an. 16, 1979) .............................................................................. 24 44 Fed. Reg. 20,372 (Apr. 4, 1979) .................................................................. 23, 24, 29 44 Fed. Reg. 38,583 (J uly 2, 1979) .............................................................................. 24 44 Fed. Reg. 51,924 (S ept. 5, 1979) ............................................................................. 24 44 Fed. Reg. 67,182 (N ov. 23, 1 979) ............................................................................ 24 45 Fed. Reg. 20,432 (Mar. 27, 1980) ............................................................................ 26 45 Fed. Reg. 52,676 (Aug. 7, 1980) .................................................................... 7, 24, 27

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 8viii 46 Fed. Reg. 54,941 (Nov. 5, 1981) .................................................................... 8, 26, 28 47 Fed. Reg. 6,621 (Feb. 16, 1982) .............................................................. 8, 23, 26, 27 47 Fed. Reg. 30,972 (J uly 16, 1982) ............................................................................ 25 54 Fed. Reg. 2,214 (Jan . 19, 1989) .......................................................................... 6, 29 57 Fed. Reg. 32,314 (July 21, 1992) ..................................................................... passim 59 Fed. Reg. 51,108 (Oct. 7, 1994) ..................................................................... 8, 26, 29 70 Fed. Reg. 61,081 (O ct. 20, 20 05) ............................................................................... 9 325 Ind. Admin. Code § 2-1.1-1 ( 1981) ........................................................................ 29 325 Ind. Admin. Code § 2-3-1 (1 981) ........................................................................... 29 326 Ind. Admin. Co de §2-3-1 ....................................................................................... 29 Ind. Air Pollution Control Regulation APC-1 (recodified as 325 Ind. Admin. Code §1.1-1) ............................................................................................ 7, 23, 25, 28 Ind. Air Pollution Control Regulation APC-19 (recodified as 325 Ind. Admin. Code §2-1) ............................................................................................... 8, 23, 25, 29 R ULES Fed. R. Civ. P. 50(a)(1) ................................................................................................. 23 Fed. R. Evid. 702, 2000 amend. ............................................................................. 33, 34 O THER A UTHORITIES Stephen L. Johnson, EPA Policy Statement, Peer Review and Peer Involvement at the U.S. Environmental Protection Agency (Jan. 31, 2006), http://www.epa.gov/peerreview/pdfs/ peer_review_policy_and_memo.pdf ............ 38 Department of Justice Press Release, U.S. Sues Electric Utilities In Unprecedented Action To Enforce The Clean Air Act (Nov. 3, 1999), http://www.jus-tice.gov/opa/pr /1999/November/ 524enr.htm .................................. 3 EPA, Guidance for Quality Assurance Project Plans for Modeling, EPA QA/G5 (Dec. 2002), http://www.epa .gov/quality1/qs-docs/g 5m-final.pdf ................. 37, 38 EPA, Guidance on Systematic Planning Using the Data Quality Objectives Process , EPA QA/G-4 (Feb. 2006), http ://www.epa.gov/QUALITY/qsdocs/g4-fina l.pdf ...................................................................................................... 38 Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 9-1- JURISDICTIONAL STATEMENT In 1999, the United States filed suit in the United States District Court for the Southern District of Indiana against Defe ndant-Appellants, alleging violations of Title I of the Clean Air Act. The district court had jurisdiction under 28 U.S.C. §§1331, 1345 and 42 U.S.C. §7413. On May 22, 2008, a jury found Defendant-Appellants liable on claims relating to four component replacement projects at the Wabash River generating station. On May 29, 2009, the district court entered part ial final judgment under Rule 54(b) as to those projects. On June 12, 2009, Defe ndant-Appellants moved for judgment as a matter of law or, in the alternative, a new trial, which the court denied on July 24, 2009. Separate claims concerning projects at other generating stations remain pending before the district court. This appeal reaches only the Wabash River projects on which the court entered partial judgment. On September 21, 2009, Cinergy timely filed a notice of appeal. This Court has jurisdiction under 28 U.S.C. §1291.

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 102 STATEMENT OF ISSUES PRESENTED 1. Whether the district court erred as a matter of law by instructing thejury to determine whether Cinergy was liable under the Clean Air Act’s nonattainment New Source Review provisions based on an incorrect legal standard that was not part of the only regulations enforceable under the Act, the approved Indiana State Implementation Plan. 2. Whether the district court erred in admitting the expert testimony of Richard Rosen and Robert Koppe when their predictive methodology was created solely for litigation, was never tested or peer-reviewed, has no known error rate, and disregards the factors that actually de termine the dispatch of electricity from power plants and the statutory and regulatory principles that govern this case.

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 113 STATEMENT OF THE CASE In 1999, the United States, on behalf of the Environmental Protection Agency (“EPA”), filed suit against Cinergy Corp., PSI Energy, Inc., and the Cincinnati Gas & Electric Company (collectively “Cinergy”). At trial, it claimed that Cinergy violated the New Source Review (“NSR”) pr ovisions of the Clean Air Act (“CAA”) by undertaking fourteen component replacement projects at its electrical generating units without first seeking a permit. It contended that these component replacement projects constituted “modificati ons” of the units because the projects should have been expected to cause emissi ons increases of 40 tons or more per year of certain pollutants. A jury found Ciner gy not liable with respect to most of the counts, but found that Cinergy violated the CAA with respect to four projects solely at its Wabash River station in Indiana in 1989, 1990, and 1992. As a remedy for these violations, the court then ordered Cinergy to retire the units and surrender Title IV emissions allowances. INTRODUCTION This case is one of several “unprecedented” enforcement actions under the NSR provisions of the CAA. Dep’t of Justice Press Release, U.S. Sues Electric Utilities In Unprecedented Action To Enforce The Clean Air Act (Nov. 3, 1999), http://www. justice.gov/opa/pr/1999/November/524enr.htm. It concerns a central question under the NSR program: whether and in what circu mstances a utility that merely replaces a component at one of its generating units , without changing the efficiency, coststructure, capacity, or other fundamental characteristics of the unit, has nonetheless “modified” that unit sufficient to subject it to regulation as a new or

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 124 modified source of emissions. Although EPA had for decades known that utilities maintain their plants through such repl acements, not until 1999 did it bring any enforcement actions involving any of the many such projects across the country (some of which had been completed a decade or more before). This sudden and massive change of course left the government with fundamental gaps in its theories and proof . The government’s improper efforts to circumvent those deficiencies led to tw o overarching errors in this case. First, the government relied upon the wrong legal standard for most of the claims on which Cinergy was found liable. Cinergy undertook and completed the projects at issue between 1989 and 1992, bu t the jury was instructed to apply a standard that the district court acknowledg ed did not become part of the governing State Implementation Plan (“SIP”) until 1994. The SIP, however, is the only regulation enforceable under the CAA for those claims. The government offered no evidence that Cinergy’s emissions increased under the standard actually contained in the SIP. Second, even under the standard the jury was instructed to apply, the only evidence supporting the claim that Cinergy should have predicted the 40-ton increase in emissions necessary to trigger liability was expert testimony that should never have been admitted. The experts’ me thodology was created in “brainstorming sessions” with the government’s counsel excl usively for this litigation and had never previously been used by EPA for any pu rpose. These experts never sought to validate their new theory through testing or an y other scientific process, asserting it

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 135 was “simple math,” A00913, that required no testing. Indeed, their methodology could not have withstood such scrutiny, be cause (among other dispositive flaws) it was designed consistently to predict gene ration increases without regard to how a utility actually allocates demand among its interdependent generating units, and it simply “assumed” away the statutory and regulatory causation requirement. STATEMENT OF FACTS A. Statutory And Regulatory Background. The 1970 Amendments to the CAA “made the States and the Federal Government partners” in regulating air quality. Gen. Motors Corp. v. United States , 496 U.S. 530, 532 (1990). They directed EPA to promulgate national ambient air quality standards (“NAAQS”) for certain pollutants. 42 U.S.C. §§7408(a), 7409. They then charged each State with developing a SIP that specifies how it will achieve and maintain the NAAQS. 42 U.S.C. §7407(a).The NSR program directs that State SIPs include provisions requiring preconstruction review and permitting for certain “new” and “modified” sources of air pollution. Areas designated as in “attainment” of the NAAQS for a pollutant fall under the Prevention of Significant De terioration (“PSD”) program, 42 U.S.C. §§7470-7492, as to that pollutant. Areas designated as in “nonattainment” for a pollutant fall under the Nonattainment New Source Review (“NNSR”) program, 42 U.S.C. §§7501-7515, for that pollutant. State SIPs are federally enforceable, but only after approval by EPA. See 42 U.S.C. §§7413(b), 7602(q). Likewise, revisions to a SIP are federally enforceable

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 146 only after EPA approves them. 40 C.F.R. §51.105; 1 see also Gen. Motors, 496 U.S. at 540. A utility that violates a State’s PSD SI P provisions faces liability both for the SIP violations themselves, 42 U.S.C. §7413( b)(1), and for violations of other CAA provisions, id. §7413(b)(2), including §7475(a), whic h prohibits construction without a PSD permit. The NNSR program, in contra st, does not directly impose obligations on utilities and subjects a utility to federal liability only for violating the terms of the EPA-approved SIP. Compare id. §7475(a), with id. §§7501-15; see also id. §7413(b)(1). Under either program, a pre-constructi on permit is required for certain “modification[s]” of an existing stat ionary source. 42 U.S.C. §7411(a)(4); see id. §§7475(a), 7479(2)(C) (PSD); id. §7502(c)(5) (NNSR). Because permitting decisions are made by States, the requirements fo r making the “modification” determination are contained within the relevant State’s approved SIP. See id. §7410(a)(2)(C) (PSD); id. §7502(c)(5) (NNSR). Nonetheless, EPA promulgates regulations that provide guidance to States and has the au thority to disapprove proposed SIPs that it deems inconsistent with that guidance. See, e.g. , 42 U.S.C. §741 0(a); 40 C.F.R. §§51.165, 51.166, 52.21. EPA’s regulatory guidance on the standard for a “modification” has shifted repeatedly over time, contributing to what EPA itself has called a “moving target syndrome” in the often lengthy SIP approval process. 54 Fed. Reg. 2,214, 2,217 (Jan. 19, 1989). After the 1977 CAA Amendments, co nstruction projects initially were

1 Unless specifically noted, all C.F.R. references are to the 1992 edition, see ADD-71–212. Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 157 deemed “modifications” if they caused an increase in “potential” emissions ( i.e. , increases in the unit’s maximum emissions capacity ) in excess of 100 tons per year for criteria pollutants such as sulfur dioxide (“SO 2 ”) or nitrogen oxides (“NO x ”)—a standard known as “potential-to-potential” because it required a comparison of the unit’s potential emissions before and after the project. See 40 C.F.R. §§51.24(b)(2),(3), 52.21(b )(2),(3) (1979) (PSD); id. pt. 51, App. S §II(A)(3), (5) (1979) (NNSR). In 1980, however, EPA promulgated new guidance providing that a “modification” instead occurs when a projec t would be expected to “result in” an increase in “actual” annual emissions above baseline levels. See 45 Fed. Reg. 52,676, 52,730-32, 52,746- 47 (Aug. 7, 1980); United States v. Cinergy Corp. , 458 F.3d 705, 708 (7th Cir. 2006). Relevant here, federal guidance provides that States’ PSD and NNSR permitting requirements should be triggered only when the projected increase in actual emissions of SO 2 or NO x is 40 tons or more per year above baseline levels. 45 Fed. Reg. at 52,7 32. Moreover, this increase in emissions must result directly from the project and not some other cause, such as responding to increased demand. 40 C. F.R. §52.21(2)(i) (1981). Indiana adopted the SIP applicable to this case during this period of shifting guidance. This SIP contained the “potential-to-potential” standard contained in then-current EPA regulations. Indiana Air Pollution Control Regulation APC-1; APC-19. EPA abandoned that test while the Indiana SIP was pending, but EPA nonetheless approved the SIP provisions containing this “potential-to-potential” Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 168 standard for Indiana’s NNSR program. 46 Fed. Reg. 54,941, 54,942 (Nov. 5, 1981); 47 Fed. Reg. 6,621 (Feb. 16, 1982). Althou gh EPA observed that Indiana had committed to update its SIP and EPA would “rulemake on these revised [SIP] regulations ... upon their submittal,” 46 Fe d. Reg. at 54,942, EPA did not actually approve such a revision until 1994, 59 Fed. Reg. 51,108 (Oct. 7, 1994). Such delays were not the only, or even the most important, problems that plagued the administration of the program. Even more significant were EPA’s highly general and ever-changing substant ive standards. For example, EPA began directing States to assess whether “lik e-kind” replacements (replacing worn components with newer versions of the same components) were “modifications” by comparing pre-project actual emissions with a source’s post-project potential to emit (known as the “actual-to-potential” test). Wis. Elec. Power Co. v. Reilly , 893 F.2d 901, 915-18 (7th Cir. 1990) (“ WEPCo ”). This would almost always show an emissions “increase” because coal-fired powe r plants are never run at full potential output for an entire year. In WEPCo , this Court rejected EPA’s approach, confirming that the determination of an increase must rest upon a realistic prediction of how the unit’s actual emissions will change as a result of the replacement. Id. at 915 n.8, 917-18. In 1992, EPA attempted to address the WEPCo decision and to “clarify” other aspects of its rules. EPA confirmed that where a utility undertakes a like-kind replacement, the States should compare “actual” emissions during a two-year “baseline” period pre-project with expect ed “actual” emissions for the two years

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 179 after the project. It also extended this “actual-to-future-actual” test to other projects. 57 Fed. Reg. 32,314, 32,314-17, 32,323, 32,326 (July 21, 1992). But EPA never published any formula illustrating how to apply it. See, e.g., A00680-84. Instead, EPA simply emphasized that States implementing this test should “[c]onsider all relevant information,” 57 Fe d. Reg. at 32,334, including “all available information regarding the unit’s likely post-change capacity utilization,” id. at 32,323. EPA, however, did conf irm that its rules required “a causal link between the proposed change and any post-change increase in emissions.” Id. at 32,326. And to ensure that the pre-project “baseline” is “representative,” EPA emphasized that State reviewing authorities should look to years when a “source’s capacity was [not] reduced due to physical problems.” Id. at 32,323. In 2005, EPA conceded that “[u]ncertainties inherent in the current major NSR permitting approach” had adversely affected utilities, because “it can be difficult for the owner or operator to know with reasonable certainty whether a particular activity would trigger major NSR.” 70 Fed. Reg. 61,081, 61,093 (Oct. 20, 2005). EPA accordingly proposed a new emissions test designed to provide greater clarity (and which is substantially different from that applied below). Id. at 61,094. B. Factual Background. 1. Cinergy’s Electricity Generating System. Cinergy is a public utility that serves Indiana and other Midwestern states. It does so through conventional plants and renewable energy resources, including wind. A01170-71. To address future electricity needs, Cinergy also promotes conservation and is developing smart grids. Id. Cinergy places the highest priority Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 1810 on environmental compliance, and has co nsistently secured NSR permits when constructing new generating capacity. A00998. Cinergy is obligated to generate an adeq uate and reliable supply of electricity to meet customer needs. Ind. Code §8-1-2-4. Ma ny of the issues in this case turn upon the ways in which utilities meet those oblig ations. Specifically, because electricity cannot be stored, “the load on the system [ i.e. , customer demand] and the amount of power generated must balance.” N. Ind. Pub. Serv. Co. v. Colo. Westmoreland, Inc. , 667 F. Supp. 613, 618 (N.D. In d. 1987) (Easterbrook, J.) (“ NIPSCo ”); see also A00987; A01145-46. Utilities must therefore adjust in real time the amount of electricity generated as customer de mand fluctuates. A 00987; A01136; A01146. Electricity generating units are connected to customers through a common grid. A00986-87; A01144-45. These uni ts are interdependently responsible for meeting customer demand, and not all units ar e operated continuously. A01140. The “availability” of these units—the amount of time they are capable of generating electricity—exceeds the actual time they are called upon for generation. To determine which combinations of units are dispatched to meet current demand (and to what degree), utilities balance well-established economic and engineering considerations, as described in detail in NIPSCo, supra . A00815-16; A00992. To produce electricity “as cheaply as possible,” NIPSCo , 667 F. Supp. at 616; 16 U.S.C. §824d(a); Ind. Code §8-1-2-4, Cinergy ende avors to dispatch its most economical units first, A01138-39, but also purchases power from other utilities when doing so is cheaper than using its own units, A01048. Numerous factors affect the cost of

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 1911 producing electricity from a unit, including fluctuating fu el prices, fuel contracts, and other variable operating and maintenance costs. A01138-39; see also NIPSCo , 667 F. Supp. at 617. Engineering, voltage and other transm ission-related considerations also influence how Cinergy dispatches its generating units. To ensure reliability of dispatch and transmission, Cinergy operates numerous units simultaneously to meet demand, rather than running one unit at its maximum before turning to the next unit. A01140. A dozen Cinergy units are typically online simultaneously, with the output of each rising and falling with demand; some units are being actively run, while others are at-the-ready for quick dispatch should demand increase suddenly. A00990; A01140. Which units are used depends in part on the amount of time necessary to turn them on and off, which varies among units, as does the minimum electricity they must generate once activated. A01138-39. Relatedly, Cinergy must maintain “spinning reserves”—unused, but available, capacity from its presently-online units—to respond immediately to emergencies either on Cinergy’s system or elsewhere on the grid. A01140; A01151-52; NIPSCo , 667 F. Supp. at 618. Thus, Cinergy’s engineers continuously make dispatch decisions based on short-term shifts in demand, cost and ot her operational considerations. A01132-38; A01146; A01154. The mixture of dispatched units also varies with structural changes within Cinergy’s operations. A01148. Like other utilities, Cinergy employs

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 2012 skilled professionals who use computer mode ls to balance these considerations. A0992-93.
2. Cinergy’s Component Replacement Projects. To maximize the availability of its ge nerating units and satisfy its legal obligations to provide reliable service, Cinergy constantly maintains and repairs its units. A01012-15; A01037; A01 050; A01054; A01070; A0 1080; A01123; A01153-54. Coal-fired generating units are large an d complex facilities that experience numerous problems that affect their avail ability. These problems generally affect the unit in one of two ways: by forcing it offline and completely unavailable to provide service (a “forced outage”), A00801-02, or by causing a reduction in its available power output (a “derate”), A00843; A00849a; A01 012; A01014. Forced outages and derates are random. A00866; A01011-12; A01019; A01037; A01080; A00713-14. Cinergy generally predicts a unit’s future availability based on an average of the unit’s availability over the previous five years. A00615-16; A00620- 21; A00599-608. As part of its repair an d maintenance program, Cinergy regularly replaces worn or aged components with new versions of these components, so-called “like kind replacements.” A01019; A01028; A01032. Such changes do not alter the fundamental characteristics of the unit or change the way in which the units are dispatched. A01028; A01033-34; A01092- 93; A01141-42; A01144. For instance, Cinergy would often replace the tubes that carry steam within a coal-fired plant, because they deteriorate under extreme conditions within a plant. A01075a.

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 2113 C. Procedural Background. 1. The NSR Enforcement Initiative. EPA has long known that utilities were maintaining their units through likekind replacement projects, A00205, ye t for decades the agency “avoided a fundamental issue addressed in the [CAA], that is, at what point plants built before 1970 must comply with new air pollution standards.” United States v. Ohio Edison Co. , 276 F. Supp. 2d 829, 832 (S.D. Ohio 2003); see United States v. Ala. Power Co. , 372 F. Supp. 2d 1283, 1306 (N.D. Ala. 2005) (“EPA admits, as it must, that it has not spoken with one voice, or a consistent voice, or even a clear voice, on this issue.”). Not until 1999, when the presen t initiative against numerous utilities began, did EPA bring any enforcement action under NSR for like-kind replacements. A00203-04. Indeed, in more than two decades under the NSR program, EPA had only found NSR to appl y to one like-kind project, and it was “massive” and “unprecedented.” See WEPCo , 893 F.2d at 911. In pursuing this initiative, government litigators participated in six months of “brainstorming sessions” with their futu re witnesses in these cases, including Richard Rosen and Robert Koppe, to devise a method that would calculate whether a replacement project would result in a significant net emissions increase. A00629; A00670; A00685-86; A0068 9; A00942-43. According to Ro sen, the purpose of these sessions was to develop a “mathematical interpretation” of the NSR regulations, and the meetings were “in the spirit of ... think[ing] about what’s the best way to make these computations at this point in time.” A00938-39; A00943; A00947;

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 2214 A00670. Rosen conceded he did not even consider how EPA had previously determined emissions changes. A00668. Based on these new regulatory interpretations, EPA filed suit against Cinergy. It alleged that 55 component replacement projects at Cinergy’s units were “modifications” for which Cinergy had not obtained permits required by the CAA and the SIP. A00130-200 (¶¶106, 127, 145, 163, 172, 203). Those projects included four like-kind replacements of steam tubes at Cinergy’s Wabash River station, which the government claimed should have been expected to result in significant net emissions increases of NO x , SO 2 , and particulate matter. Id. (¶¶145, 150, 155). The projects replaced sections of steam tubes that were deteriorating with new tubing, but without otherwise changing the design or operating characteristics of the unit. See, e.g. , A01066a; A01077-78 ; A01093-94; A01123. The Wabash River station is located in Vigo County, Indiana, which, at the time of the projects at issue, was in attainment or unclassifiable for NO 2 but in non-attainment for SO 2 . See A00281. Accordingly, whereas the NO x claims were governed by the PSD regulations, NNSR applied to the SO 2 claims.
2. The Applicable NNSR Test. Prior to trial, Cinergy requested that the court instruct the jury that for projects before 1994, Indiana’s SIP for NNSR looked to a unit’s “potential” to emit, not “actual” emissions, to determine wh ether a project was a “modification.” See A00207-10. Reversing course from its Complaint, see A00147-49 (¶¶48-50), the government opposed this instruction and argued that the same “actual” emissions test applied to all projects. A00211-17. The district court upheld the government’s

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 2315 changed position, explaining that “[e]ven though it appears that the EPA did not formally approve the new regulations until 1994,” it nonetheless would instruct the jury that “the same [actual-to-future-actual] test for emissions calculations should be applied for all projects.” A00002. The government introduced no evidence to establish that the projects at issue satisfied the SIP’s “potential” emissions standard.
3. The Rosen-Koppe Methodology. The sole evidence offered to demonstrat e that “actual” post-project emissions should have been expected to increase pa st the specific 40-ton threshold was the testimony of Dr. Rosen, who in turn relied on the testimony of Mr. Koppe. The fundamental theory behind the Rosen-Koppe methodology is that like-kind replacement projects increase the availab ility of the entire unit by reducing the number of forced outages and derates, and that an increase in the availability of a unit results in a proportionate increase in generation from that unit, thereby yielding greater emissions. Rosen’s and Ko ppe’s calculations attempt to quantify the precise increase in emissions that Cinergy should have predicted from the greater availability supposedly gained from each like-kind component replacement. Koppe first derived the increase in av ailability Cinergy would supposedly realize from the like-kind replacement. To do this, Koppe turned to the Generating Availability Data System (“GADS”) database, in which utilities record unit outages and derates, their duration, and the affect ed component. A00405. For each project, Koppe reviewed the GADS data for the sixty months preceding a component replacement, identifying the outages and derates associated with the replaced

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 2416 component. A00397; A00406. For the projects identified by the government, Koppe theorized that by replacing the component, Cinergy would gain back all the lost time associated with those outages or derates, and that the availability of the entire unit would increase by that recovered amount of time. A00401. Rosen then used Koppe’s “increased availability” assumption to derive the precise emissions increase expected from the project. Although his calculations formally proceeded in five “steps,” one central premise drove Rosen’s analysis—the “constant utilization” assumption he used to predict increased generation. Rosen multiplied the new annual number of hours of availability provided by Koppe for a two-year future period by the unit’s hist oric “utilization factor”—the percentage of time in the past baseline period that Cinergy had used the unit to generate electricity relative to the amount of ti me the unit had been available. A000523; A000534-35; A00726. Because the utilization factor is a meas ure of the percentage of time a unit generates electricity relative to its av ailability, any increase in availability multiplied by the historic utilization factor will always “predict” an increase in generation (the “capacity factor”) propor tionate to the increase in availability. See,

e.g. , A00708 (“[I]f the utilization factor is assu med to be constant, then an increase in availability will yield an increase in ca pacity factor”). For example, if the unit historically had a utilization factor of 60% (because it previously was used 60% of the time it had been available), and Kopp e predicted an increase in availability of 100 hours, then Rosen’s calculation would predict 60 more hours of generation in

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 2517 the future. Rosen would then use the remaining steps in his formula to determine the additional emissions that would result from the additional generation. A000534-
35. Cinergy moved to exclude Rosen’s and Ko ppe’s opinions under Fed.R.Evid. 702. Cinergy emphasized that their methodology bore none of the indicia of reliability identified in Daubert ; it had been developed solely for litigation, and had never been tested, published, peer-reviewed, or in any other way “supported by appropriate validation.” Daubert v. Merrell Dow Pharms., Inc. , 509 U.S. 579, 590 (1993). Cinergy further argued that the methodology could not withstand such scrutiny. Cinergy challenged the methodology for simply assuming that when the availability of a unit is presumed to increase, its actual utilization will increase proportionately. Cinergy contended that Rosen’s assumption completely ignored the economic and engineering factors that actually drive utilization decisions. Rosen acknowledged that a more accurate estimate of increased generation would be based upon a system-wide model that calculated changes in utilization factor based on all relevant factors. A00673; A00706. He furt her acknowledged that a dispatch model (such as those commonly used by utilities to determine how to allocate generation among its units) could perform this more a ccurate prediction, including projecting generation from each unit, A00673; A007 06; A00735; A00738, and that it would be “preferable” to use such models to forecast emissions increases, A00563. Nonetheless, Rosen stated that he was no t given sufficient time or resources to perform this preferred analysis. A00676-77.

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 2618 Cinergy further argued that Rosen’s anal ysis was inconsistent with the very EPA regulations that Rosen claimed he wa s “mathematically interpreting.” Cinergy noted Rosen’s failure to consider whether the repairs at issue “caused” an emissions increase. Cinergy demonstrated that, for ea ch of the Wabash River units at issue, the repairs did not change how Cinergy would dispatch the unit relative to normal, pre-repair operations, see, e.g. , A00385-86; A00294, and that each unit already had substantial excess availability, see, e.g. , A00319-24; A00346; A00393. Cinergy also contended that the court need not even reach the flaws in Rosen’s analysis because the “recovered availabili ty” data provided by Koppe was untested and unreliable. Specifically, Cinergy argued that Koppe’s approach was contrary to systems engineering theory and industrial pr actice, which recognize that for mature and complex systems like the generating units at issue here, repairing a particular component will not increase the overall av ailability of the unit because of the thousands of other components that could fail, including potentially the new component itself. See, e.g. , A000575-76; A00299. The district court denied Cinergy’s motion in a two-sentence order.
4. The Judgment. After a nine-day trial, the jury returned a non-liability finding on ten of the fourteen projects the government pursued, 2 finding Cinergy liable for only Wabash River Units 2, 3, and 5. See A00115-17. All these projects involved the like-kind replacement of steam tubes. The district court assigned PSD (NO x ) and NNSR (SO 2 )

2 Although the government challenged 55 proje cts in its various complaints, it ultimately proceeded to trial on fourteen projects.

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 2719 liability for the projects at Units 3 and 5, but only NNSR liability for the two projects at Unit 2. See id. The district court required Cinergy to shut down those units by September 30, 2009, reduce thei r operations prior to shutdown, and surrender certain CAA Title IV SO 2 emission allowances. See A00067. Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 2820 SUMMARY OF ARGUMENT As the government acknowledged, this case sought an “unprecedented” application of NSR. But the government’s dramatic new policy objectives exceeded what the law could support. The governme nt’s improper efforts to fill those fundamental gaps in its theories and proof ga ve rise to at least two errors below. First, the government successfully advoca ted a legal standard that did not apply in Indiana at the time the Wabash River projects were undertaken. The applicable SIP provision for NNSR at the time of th ese projects required a comparison between each unit’s “potential” to emit— i.e. , its maximum capacity—before and after the project, as the government initially admitted. The jury, however, was erroneously instructed to apply a different test, focusi ng on “actual” rather than “potential” emissions, that did not become part of the SIP for NNSR until long after these projects had been completed. Judgment should have been granted to Cinergy as to all NNSR claims because the government did not even attempt to show that Cinergy’s projects increased “potential” emissions. Second, to satisfy the “actual emissions” test, the government sponsored a new, made-for-litigation methodology of projected emissions increases that had never before been used by EPA and was instead created exclusively for these cases: it ensures that virtually every replacement of a component that was once associated with outages or derates will automatica lly be projected to cause an emissions increase, even though no such relationsh ip exists in the real world. Although Daubert and this Court’s decisions applying it have emphasized the importance of validating expert theories through testing, and although the government’s experts

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 2921 could have tested their newly-minted methodology, they never did so. Instead, remarkably, the experts claimed that their theory was so simple it did not require testing and that it could be “assumed” to have been tested because it had been subjected to rebuttal in other litigation from the same NSR enforcement initiative. But “there are important differences between the quest for truth in the courtroom and the quest for truth in the laboratory,” Daubert , 509 U.S. at 596-97, and it is elementary that experts must “follow scientific approaches normal to their disciplines,” Zenith Elecs. Corp. v. WH-TV Broad. Corp. , 395 F.3d 416, 419 (7th Cir. 2005). That did not remotely occur here. Indeed, this methodology could not have withstood any independent testing or other scientific scrutiny. It ignored th e economic and operational factors that actually drive dispatch decisions among interdependent units—factors the government’s expert conceded would have been “preferable” to take into account. It further ignored the causation requirement in the EPA’s regulations, which provides that the emissions increase must be the resu lt of the project at issue, and, again, simply “assumed” that causation was present. The testimony should have been excluded under Rule 702 as both unreliable and irrelevant. And because that testimony was the only evidence that claimed to quantify the expected emissions increase as exceeding the numerical threshold for liability, judgment should have been entered for Cinergy.

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 3022 ARGUMENT I. The District Court Applied The Wrong Legal Standard. The jury’s liability finding suffers fr om a threshold error: the jury was instructed to apply the wrong legal standard. 3 Whether the projects in question— which occurred between 1989 and 1992—were “modifications” subject to permitting requirements must be determined accord ing to the EPA-approved Indiana SIP. See 42 U.S.C. §§7475(a), 7502(c)(5), 7602(q); Gen. Motors , 496 U.S. at 540. Because the Wabash River station was in an area then designated as non-attainment for SO 2 , the NNSR rules applied to all of the Wabash River SO 2 claims. See supra p. 14. On the NNSR claims at issue, however, the ju ry was instructed to apply a standard that EPA had not then approved for Indi ana’s SIP, and did not approve until 1994. The district court acknowledged that “EPA did not formally approve the new regulations until 1994,” A00002, but nonethel ess applied the post-1994 standard to projects that had been compl eted several years earlier. Specifically, the jury was instructed to find Cinergy liable on each PSD and NNSR claim if it found that Cinergy should have predicted a project to result in an increase in “actual” emissions of 40 or more tons per year of the specific pollutant. See A00094; A00002. Yet at the time of th e Wabash River projects, the Indiana SIP provisions governing NNSR “modification s” used a different standard. They required a “potential-to-potential” analys is that looked to whether the project caused an increase in the unit’s “potential” to emit, i.e. , its maximum capacity, of 25

3 This Court “review[s] de novo a district court’s decision to give or refuse a jury instruction ‘when the underlying assignment of error implicates a question of law.’” United States v. DiSantis , 565 F.3d 354, 359 (7th Cir. 2009). Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 3123 tons or more per year. 325 Ind. Admin. Code (“IAC”) 1. 1-1; 325 IAC 2-1; 47 Fed. Reg. 6,621; 40 C.F.R. §52.770(c )(24). The government, however, presented no evidence that any of those projects caused an increase in a unit’s potential to emit SO 2 . To the contrary, the government only sought to demonstrate that the projects caused an increase in actual emissions. See, e.g. , A01162-63. Had the court applied the correct standard, Cinergy would have been enti tled to a directed verdict in its favor. See Fed.R.Civ.P. 50(a)(1). Accordingly, judgme nt on these claims should be reversed and the remedy order should be vacated. 4
A. Before 1994, Indiana’s SIP Imposed A “Potential-To-Potential” NNSR Standard. At the time of the Wabash River projec ts (1989-92), the Indiana SIP that EPA had approved provided that “modificat ions” under the NNSR program required a “potential-to-potential” analysis. See supra pp. 7-8. Although Indiana today requires an analysis of “actual” emissions, the regulatory landscape was far different when the projects occurred. When Congress amended the CAA in 1977, it provided that an EPA interpretive ruling, 40 C.F.R. Pt . 51 App. S, would initially apply as a placeholder NNSR regulation and would be re placed by States’ revised SIPs as EPA approved them. See Pub. L. No. 95-95, §129(a)(1), 91 Stat. 685, 745 (1977) (codified as note under 42 U.S.C. §7502); 44 Fed. Re g. 20,372, 20,379 & n.36 (Apr. 4, 1979).

4 The district court’s remedy rests predominant ly on the NNSR violations. First, the SO2 emission allowances surrender was intended to remedy only the NNSR violations. See A00060. Second, the jury found on ly NNSR liability at Unit 2. See supra pp. 18-19. Finally, even at Units 3 and 5, where the jury found both NNSR and PSD violations, the district court attributed substantially more harm to the NNSR violations than the PSD ones. A00050-51.

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 3224 If, however, a State’s plan failed to m eet the requirements of 42 U.S.C. §§7501-15 after June 30, 1979, the State would face draconian consequences—a prohibition on all new construction. See 44 Fed. Reg. at 20,379-80. To help States avoid this prohibition, EPA announced that instead of disapproving a deficient NNSR SIP, it could conditionally approve it, subject to the State’s commitment to correct the identified deficiencies in the future. See 44 Fed. Reg. 38,583 (July 2, 1979); 44 Fed. Reg. 67,182 (Nov. 23, 1979).At that time, the federal placeholder regulation for NNSR used a “potential-topotential” standard. EPA defined a “major modification” as “any physical change in, change in the method of operation of, or addition to a stationary source which increases the potential emission rate” of certain pollutants by 100 tons per year or more. 44 Fed. Reg. 3,274, 3,282 (Jan. 16, 1979) (emphasis added) (codifying App. S to 40 C.F.R. Pt. 51). A source’s “potential’ to emit” was defined as the capability at “maximum capacity to emit.” See id. Thus, an NNSR permit would not be required unless a project caused an increase in a source’s maximum capacity to emit a pollutant. (The same standard applied under the PSD program, see 40 C.F.R. §§51.24(b)(3), 52.21(b)(3 ) (1979)). This “potential-to-pot ential” standard remained in EPA’s rules until 1980, when EPA revised the federal NSR framework to make an increase in actual emissions the touchstone for permitting. See 44 Fed. Reg. 51,924, 51,934 (Sept. 5, 1979) (proposed rulemaking); 45 Fed. Reg. at 52,698-99 (final rules). That revised federal framework, however, did not become part of Indiana’s governing SIP for another 13 years. Instead, until 1994, the “potential-to-potential”

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 3325 standard governed. In June 1979—before EPA had proposed changing the federal “potential-to-potential” framework—Indian a submitted to EPA a revised SIP, APC19 (later recodified as 325 IAC 2-1), along with revisions to the SIP’s general definitions section, APC-1 (lat er recodified as 325 IAC 1.1-1). See 40 C.F.R. §52.770(c)(24), (26); 47 Fed. Reg. 30,972, 30,978 (July 16, 1982). Consistent with thethen-existing federal guidance, the revised Indiana SIP applied a “potential-topotential” test, requiring a pre-constructi on permit only for a “modification” that “will result in a potential increase in emissions of 25 tons per year or more.” 325 IAC 2-1 (APC-19), §§1(b) and 4. Nowhere di d Indiana’s rules suggest that a utility must calculate an increase in “actual” emissions. The general definitions submitted on the same day as APC-19 confirm that the regulations were written to require an analysis of potential emissions. A “modification” was defined as “any physical change, or change in the method of operation of any facility which increases the potential or legally allowed emissions (whichever is more stringent) of an y pollutant.” 325 IAC 1.1-1 (APC-1), §43 (emphasis added). “Potential emissions” were in turn defined as emissions “based on maximum annual rated capacity unless hours of operation are limited by enforceable permit conditions.” Id. §58. Similarly, “legally allowed emissions” meant “[t]he emission rate calculated using the maximum rated capacity of the facility ,” subject to such legally enforceable limitations as enforceable permit conditions. Id. §2 (defining “allowable emi ssions”) (emphasis added).

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 3426 In March 1980, EPA proposed to approve or approve conditionally the various definitions in APC-1 and to approve conditionally APC-19, all subject to Indiana revising portions not relevant here. See 45 Fed. Reg. 20,432, 20,433-35 (Mar. 27, 1980). Although EPA noted that revisions to the federal PSD regulations were underway and could affect the contents of Indiana’s PSD SIP provisions, it made no such reference to any similar NNSR revisions. See id. at 20,434-36, 20,447-48. Indeed, even as to PSD, EPA proposed to re view the plan “based upon its existing regulations,” then “advise Indiana of an y changes required in its plan” after promulgation of the new rules. Id. at 20,448. As requested, Indiana corrected the unrel ated deficiencies and, although the federal regulations had changed in the interim, EPA approved APC-1 and APC-19 in 1981 and 1982, respectively. See 46 Fed. Reg. at 54,943; 47 Fed. Reg. 6,621 (Feb. 16, 1982). These provisions remained in effect as Indiana’s NNSR SIP until 1994, when EPA finally approved a revision to Indiana’s SIP that employed an actual emissions standard. See 59 Fed. Reg. at 51,108; see also 40 C.F.R. §52.770(c)(94) (1995). 5 In its Complaint, the government acknowledged that the pre-1994 Indiana SIP applied an NNSR test that looked to potential emissions, and that this test was different from the actual emissions standard that applied to the other claims pursued in this action. See A00147-49 (¶¶48-50). Moreover, in explaining the standard in place at the time of the projec ts, the government quoted at length from

5 The new rules appear now at 326 IAC 2-3-1.

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 3527 both the regulations and definitions submitted in 1979, including the definition of potential emissions. Id. (¶48). Faced with an absence of evidence to meet the legal standard it had admitted applied to the Wabash River projects, however, the government changed tack before trial. Then, for the first time, the government argued that the actual emissions standard for post-1994 projects should be applied to all projects in its complaint. A00211-17. But this assertion is belied by EPA’s actions in approving Indiana’s SIP. Although EPA in 1980 revised both the federal PSD and NNSR regulation, it handled Indiana’s pending changes to each of these programs very differently. For Indiana’s PSD program, EPA expressly disapproved the SIP, then incorporated federal PSD regulations into the Indiana SIP by reference. See 45 Fed. Reg. at 52,740-41 (incorporating 40 C. F.R. §52.21(b) through (w) into the Indiana SIP). 6 These federal regulations are still incorporated today. See 40 C.F.R. §52.793 (2009). EPA did not do the same for Indiana’s NNSR rules. Instead, in February 1982, EPA approved APC-19 (325 IAC 2-1) to be implemented under the Indiana SIP. 47 Fed. Reg. 6,621 (Feb. 16, 1982). The only part of APC-19 not approved in this action was section 7, which dealt with the PSD pr ogram. Thus, sections 1(b) and 4, which provided that a pre-construction NN SR permit was only required for a “modification” that “will result in a potent ial increase in emissions of 25 tons per year or more,” became part of the applicable Indiana SIP. The government has

6 The federal provisions incorporated were drafted by EPA to apply “to any State implementation plan which has been disapproved with respect to prevention of significant deterioration of air quality [PSD].” 40 C.F.R. §52.21(a).

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 3628 never disputed the effectiveness of this approval, which rendered the SIP governing law under the CAA NNSR provisions. EPA also expressly approved Indiana’s ge neral definitions, APC-1 (325 IAC 1.1- 1), several months earlier. See 46 Fed. Reg. at 54,943; see also 40 C.F.R. §52.770(c)(26). In that approval, EPA acknowle dged that “[c]ertain of the definitions contained in 325 IAC 1.1-1 are inconsistent wi th EPA’s most recent definitions,” but it nonetheless approved the proposed de finitions, observing that “Indiana is currently revising its NSR regulations ... to be consistent with EPA’s most recent requirements.” 46 Fed. Reg. at 54,942. EPA noted that Indiana’s definitions met the requirements of the CAA “for purposes ot her than new source review,” explained that it would review Indiana’s new rule s and new definitions in a subsequent proceeding, and then expressly and unqualifiedly approved the definitions at 325 IAC 1.1-1 for the interim. Id. 7 Indeed, in quoting these definitions in its complaint, the government itself has admitted that they became part of the relevant NNSR SIP. See A00147-48 (¶48). Accordingly, the district court was simply incorrect when it held that “EPA explicitly rejected Indiana’s proposed definitions to the extent that they were contrary to federal law.” A00002. There is nothing unusual about how EP A handled the Indiana SIP. By its nature, the federal-state dynamic of the CAA creates the potential that a State may propose a SIP that conforms to the federal framework at the time it is proposed, but becomes outdated during EPA’s reviewing pr ocess or thereafter. Indeed, EPA’s SIP

7 EPA listed only a single exception: EPA disa pproved of Indiana’s definition of the term “state implementation plan,” noting that a definition for that term was not necessary.

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 3729 approval process suffered from this problem to such a degree that the agency coined a term for it: “moving target syndrome.” See 54 Fed. Reg. at 2,217 (noting frequency with which a SIP “conform[s] to the policy in place when it was submitted” but then a policy changes while the SIP is “under review” at EPA and the SIP thus “doesn’t conform to a newly evolved policy”). Here, ra ther than force a halt to all new plant construction in Indiana by rejecting portions of the SIP, see 44 Fed. Reg. at 20,379- 80, EPA reasonably chose to allow Indiana’s plan to go into effect pending the approval of revised regulations. Indiana promptly executed a revision, see 325 IAC §§2-1.1-1, 2-3-1(l), and 2-3-1( o) (1981), but EPA did not approve that revision until after the projects at issue here, see 59 Fed. Reg. at 51,108. That the government may now wish EPA had acted sooner cannot be the basis for imposing liability on Cinergy. Cf. Ohio Edison , 276 F. Supp. 2d at 832 (criticizing EPA’s “abysmal breakdown in the admi nistrative process”).

B. The NNSR Provisions Of The Indian a SIP In Place At The Time Of The Projects Govern Plaintiffs’ NNSR Claims. The district court not only misinterpreted the requirements of the SIP but also made a more fundamental mistake: it e rroneously held that even though the applicable SIP did not require Cinergy to analyze actual emissions until after 1994, Cinergy nonetheless could be held liable under such a standard because the standard could be found in other state and federal regulations. A00002. This decision is irreconcilable with the basic framework of the NSR program, under which a utility’s obligation to meet certain preconstruction requirements is defined by the applicable SIP.

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 3830 Because the CAA “made the States and the Federal Government partners” in regulating air quality, Gen. Motors , 496 U.S. at 532, the NSR program does not consist of a set of top-down federal regulations that impose direct requirements on utilities. Instead, such requirements by and large are imposed through SIPs, and a SIP is only applicable—and thus federally enforceable under §7413(b)(1)—to the extent it has been approved by EPA in ac cordance with §7410. Thus, “[r]evisions of a plan, or any portion thereof, will not be co nsidered part of an applicable plan until such revisions have been approved by th e Administrator ... .” 40 C.F.R. §51.105. See also Gen. Motors , 496 U.S. at 540 (“There can be little or no doubt that the existing SIP remains the ‘applicable implementation plan’ even after the State has submitted a proposed revision.”); Metro. Wash. Coal. for Clean Air v. Dist. of Columbia , 511 F.2d 809, 812 (D.C. Cir. 1975) (“re visions are not to be considered part of a plan until approved by th e Administrator”) (citation omitted). Accordingly, it is irrelevant to an assessment of federal CAA liability whether Cinergy complied with the provisions of an unapproved revision to Indiana’s SIP. As EPA itself has recognized, “there will al ways be a period during which a Stateproposed revision and a federally-approved SIP will differ.” Br. of United States at 36, General Motors v. United States, 496 U.S. 530 (1990). It is likewise irrelevant whether Cinergy complied with provisions of the federal NNSR regulations that differ from those of the approved version of the Indiana SIP. As noted supra pp. 5-6, the statutory NNSR program merely sets forth the requirements that a State’s SIP must contain. See 42 U.S.C. §§7501-15 (setting

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 3931 forth requirements for States); id. §7410(a)(2)(I) (a SIP must meet the statutory NNSR requirements). Moreover, there are no federal NNSR regulations that directly apply to Cinergy. Although Appe ndix S to 40 C.F.R. Part 51 would have applied directly to Cinergy at one time, it did so as a placeholder pending SIP approval; it ceased to apply in Indian a after EPA approved the 1979 revisions to Indiana’s NNSR SIP. See supra pp. 23-24. And the regulations at 40 C.F.R. §51.165 by their own terms provide conditions that each SIP must meet, not requirements directly applicable to utilities. See, e.g. , id. §51.165(a) (“State Implementation Plan ... provisions satisfying sections 172(b )(6) and 173 of the Act shall meet the following conditions ....”). The district court therefore erred when it judged Cinergy’s NNSR compliance based on state and federal regulations that were not incorporated into the applicable SIP until well after the relevant pre-construction permits would have needed to be obtained. Cinergy could not have been liable under §7413(b)(2) because no NNSR regulations outside the SIP applie d to it. And as to any assessment of liability under §7413(b)(1), any regulations never approved into the SIP are simply irrelevant.

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 4032 II. The District Court Erred In Admitti ng The Rosen And Koppe Testimony. Even if the “actual emissions” instru ction had been correct as to the NNSR claims, the government failed to offer admissible evidence to establish a violation under that standard. That failure likewise invalidated the PSD claims (to which the error described in Section I, supra , does not apply). Under Fed.R.Evid. 702, the district court’s “gatekeeper” function requires it to ensure that any expert “testimony or evid ence admitted is not only relevant, but reliable,” including “whether the reasoning or methodology underlying the testimony is scientifically valid.” Daubert , 509 U.S. at 589, 592-93. This gatekeeping role is particularly important in jury tria ls because for juries “[e]xpert evidence can be both powerful and quite misleading because of the difficulty in evaluating it.” Id. at 595 (citations omitted).
In Daubert , the Supreme Court provided a non-ex clusive set of factors to assist courts in deciding whether particular expert testimony is scientifically reliable: (1) whether the “‘theory or technique ... can be (and has been) tested’”; (2) whether “it ‘has been subjected to peer review and pu blication’”; (3) whether, “in respect to a particular technique, there is a high ‘known or potential rate of error’ and whether there are ‘standards controlling the techniques’ operation’”; and (4) whether “the theory or technique enjoys ‘general acce ptance’ within a ‘relevant scientific community.’” Kumho Tire Co. v. Carmichael , 526 U.S. 137, 149-50 (1999) (quoting Daubert , 509 U.S. at 592-94). Additional factor s were identified in the Advisory Committee Commentary that accompanied the 2000 revision to Rule 702 in light of Daubert , including (1) whether the expert developed the opinions outside of Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 4133 litigation or “‘whether [the expert] develope d [the] opinions expressly for purposes of testifying,’” and (2) whether “the expert has adequately accounted for obvious alternative explanations.” Fed. R. Evid. 702, 2000 amend.; see also Fuesting v. Zimmer, Inc. , 421 F.3d 528, 534 (7th Cir. 2005), vacated in part on other grounds , 448 F.3d 936 (7th Cir. 2006). “It is incumbent upon the trial court to ca refully consider [the reliability] factors before admitting any expert scientific evidence.” Chapman v. Maytag Corp. , 297 F.3d 682, 687 (7th Cir. 2002). Indeed, “[t]o sa tisfy its essential role, the gatekeeper must do more than just make conclusory statements. A more searching Daubert analysis is required.” Fuesting , 421 F.3d at 535. Here, the District Court’s ruling in its entirety was as follows: the Court finds that the parties’ experts are qualified in their respective fields by reason of knowledge, education, or experience and that the assumptions and methodologies underlying their opinions have been subjected to some type of testing or verification or are premised on assumpti ons generally accepted within the relevant community. Further, the Court concludes that the arguments in opposition to the experts go to the credibility and the weight to be given to the testimony. A00007. Had the court conducted the required analysis, the evidence could not have been admitted, and the district court abused its discretion in concluding otherwise. Fuesting , 421 F.3d at 534-37. 8

8 A “court abuses its discretion when it comm its ‘a serious error of judgment, such as reliance on a forbidden factor or failure to consider an essential factor,’” Kempner Mobile Elecs., Inc. v. Sw. Bell Mobile Sys. , 428 F.3d 706, 712 (7th Cir. 2005), or when it relies “on an incorrect legal principle or a cl early erroneous factual finding,” Corporate Assets, Inc. v. Paloian , 368 F.3d 761, 767 (7th Cir. 2004). Further, where, as here, the district court has failed to undertake the “searching ... analysis” required by Daubert , this Court has independently applied the Daubert reliability factors. See Fuesting , 421 F.3d at 536-37. Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 4234 A. Rosen’s And Koppe’s Made-For-Litigation Methodology Is Presumptively Unreliable. An important factor in assessing the relia bility of expert testimony is “‘whether [the expert] developed [the] opinions ex pressly for purposes of testifying.’” Fed.R.Evid. 702, 2000 amend. (quoting Daubert v. Merrell Dow Pharms., Inc. , 43 F.3d 1311, 1317 (9th Cir. 1995) (“ Daubert II ”)); see Fuesting , 421 F.3d at 537 (expert “developed his opinion expressly for this litigation”); Rosen v. Ciba-Geigy Corp. , 78 F.3d 316, 318 (7th Cir. 1996) ( Daubert requires judges to “distinguish between real and courtroom science”). The inquiry under Rule 702 and Daubert is designed specifically to stop the abu se of “hiring ... reputable scientists, impressively credentialed, to testify for a fee to propositions that they have not arrived at through the methods that they use when they are doing their regular professional work rather than being paid to give an opinion helpful to one side in a lawsuit.” Braun v. Lorillard Inc. , 84 F.3d 230, 235 (7th Cir. 1996); see also Daubert II , 43 F.3d at 1317 (expert’s “normal workpl ace is the lab or the field, not the courtroom or the lawyer’s office”). Because expert methodologies or theorems developed specifically for litigation lack key indicia of reliability, such as independent verification or objectivity, they are presumptively unreliable. Daubert II , 43 F.3d at 1316-17; id. at 1317-18 (requiring other objective evidence that the methodology is reliable when made for litigation). Methodologies and theories develo ped for litigation also suffer from the “‘potential for abuse in light of the incredible benefits of hindsight,’” that is, that the methodology serves no other purpose than to resolve after the fact the specific issue

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 4335 before the court. Johnson v. Manitowoc Boom Trucks, Inc. , 484 F.3d 426, 435 (6th Cir. 2007).Here, it is indisputable that Rosen and Koppe developed their emissionsincrease methodology specifically for this litigation. Both admitted that the formula was developed during “brainstorming” sessio ns with the litigators over a six-month period in the early stages of the enfo rcement initiative. A0 0629; A00670; A00685- 86; A00689; A00942-43. The meetings were “in the spirit of ... think[ing] about what’s the best way to make these computations at this point in time .” A00670 (emphasis added); A00682 (methodology developed “[i]n the litigation”); A00943. The methodology has never appeared in any government regulation or guidance, or any academic article or peer-reviewed do cument. A00680-84. Because it was created for litigation, it should have been treated as presumptively unreliable. See Kumho , 526 U.S. at 152 (an expert must “employ[ ] in the courtroom the same level of intellectual rigor that characterizes the practice of an expert in th e relevant field”). B. The Rosen-Koppe Methodology Ha s Never Been Tested, Has No Known Error Rate, And Has Not Been Peer-Reviewed. When expert theories or methods are cre ated specifically for litigation, an especially strong showing of objective re liability under other factors is necessary, but no such showing can be made here. See Daubert II , 43 F.3d at 1317-18; Johnson , 484 F.3d at 435. The Rosen-Koppe meth odology fails to satisfy the other Daubert factors: it has not been tested, has no known error rate, and has not been peer reviewed.

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 4436 A “key question” in assessing the reliab ility of expert testimony is whether “a theory or technique ... can be ( and has been ) tested.” Daubert , 509 U.S. at 593 (emphasis added). As this Court explai ned, the “‘first and most significant Daubert factor is whether the scientific theory has been subjected to the scientific method.’” Fuesting , 421 F.3d at 536 (citation omitted). The “absence of any testing indicates that [the expert’s] proffered opinions cannot fairly be characterized as scientific knowledge.” Chapman , 297 F.3d at 688. “Such insulation of [the] theory from the dispassionate crucible deeply, if not fatally, compromises [the] testimony’s reliability.” Fuesting , 421 F.3d at 536; accord Claar v. Burlington N. R.R. , 29 F.3d 499, 503 (9th Cir. 1994) (observing “scienti sts whose conviction about the ultimate conclusion of their research is so firm th at they are willing to aver under oath that it is correct prior to performing the nece ssary validating tests could properly be viewed by the district court as lacking th e objectivity that is the hallmark of the scientific method”). Closely related is whether the method has a “known or potential rate of error.” Daubert , 509 U.S. at 594 (citing United States v. Smith , 869 F.2d 348, 353-54 (7th Cir. 1989)). That is, in assessing the reliability of expert testimony, a court should understand how often the methodology has “produced erroneous results.” Kumho , 526 U.S. at 151. As noted, the key features of the Ro sen-Koppe methodology are the increased unit availability assumption ( i.e. , that all past availabilit y lost to an identified mechanical issue will be regained in the future) and the constant utilization

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 4537 assumption ( i.e. , that this increased availability will be utilized at the same rate as the lower availability was in the past). Both propositions can be tested, but neither were. A00702-03; see also A00695 (“Q. And did you compare those actual numbers to your projections to gauge reliability of your calculations? A. Not that I can remember, no.”); A00711-12; A00716-17; A00703- 04 (“I can’t think of any statistical tests that I have run certainly not on this case”); A00637 (Koppe conceding he did not have “any data” that verified his theory); see also A00632; A00640-42; A00651- 58. Similarly, neither Rosen nor Koppe even attempted to derive any error rate for their theorem. A00696-98; see also A00561 (“my equations do not require ‘error rates’ [because] they are generally ju st simple ratios or fractions”). Their failure to undertake any meaningful testing is particularly stark in light of the government’s assertion below that “test[ing]” rather than “theorem” should be relied upon when “actual data” are available. A00271. Indeed, although Rosen opined that nothing in EPA’s NSR regulati ons required that he and Koppe test the accuracy of their methodology, A00716-17, EPA, in fact, requires the testing of predictive models, places limits on “deci sion error,” and mandates the highest degree of rigor when models “involve potent ially large consequences,” such as use in litigation. EPA, Guidance for Quality Assurance Project Plans for Modeling , EPA QA/G-5M, EPA/240/R-02/007 at 1, 4-5, 14, 34-35 (Dec . 2002), http://www.epa.gov/ quality1/qs-docs/g5m-final.pdf; EPA, Guidance on Systematic Planning Using the Data Quality Objectives Process , EPA QA/G-4 at i (Feb. 2006), http://www.epa.gov/ QUALITY/qs-docs/g4-final.pdf (“quality objectives” include “potential decision

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 4638 errors” when “establishing the quality and quantity of data needed to support decisions”); id. at 45 (establishing process for setting “performance or acceptance criteria that the collected data will need to achieve in order to minimize the possibility of either making erroneous conc lusions or failing to keep uncertainty in estimates to within acceptable levels”). Nor was the Rosen-Koppe methodology subject to any peer review. “[S]ubmission to the scrutiny of the scie ntific community is a component of ‘good science,’ in part because it increases the likelihood that substantive flaws in methodology will be detected.” Daubert, 509 U.S. at 593-94. Publication in a peerreviewed journal is a particularly significant factor when a methodology is developed for litigation because subjecting that theory to “the usual rigors of peer review” “is a significant indication that it is taken seriously by other scientists, i.e., that it meets at least the minimal criteria of good science.” Daubert II , 43 F.3d at 1318. These principles apply with particular force here given the clear direction of EPA that peer review is “encouraged and expected” for “all scientific and technical information that is intended to inform or support Agency decisions.” Stephen L. Johnson, EPA Policy Statement, Peer Review and Peer Involvement at the U.S. Environmental Protection Agency (Jan. 31, 2006), http://www.epa.gov/peerreview/ pdfs/peer_review_policy_and_memo.pdf; see also EPA, Guidance for Quality Assurance Project Plans for Modeling at 1, 2, 14 (models that “create a prediction” should be “peer reviewed” at every st ep of the process). Remarkably, Rosen

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 4739 dismissed the relevance of peer review by asserting that his methodology “is such a simple application of mathematics that it does not require peer review.” A00559. When Rosen or Koppe attempted to defend their failure to test their theories, they confirmed how unscientific and unre liable their work is. Rosen “assume[d]” that his methodology had been tested because it was “tested by the rebuttal experts” in separate NSR enforcement lit igation. A00692. But “there are important differences between the quest for truth in the courtroom and the quest for truth in the laboratory,” Daubert , 509 U.S. at 596-97, and experts must “follow scientific approaches normal to their disciplines,” Zenith , 395 F.3d at 419; see also Fuesting , 421 F.3d at 536. A “critique” in litigation is hardly the same as statistical testing to establish a theory’s real-world reliability or error rate. Kumho , 526 U.S. at 152. Koppe claimed to have assessed the validity of his assumptions of increased unit availability from the replacement of a compo nent, but he conceded that he did so only during the course of litigation and only to the extent that time and resources permitted. A00651-58. Moreover, Koppe produc ed no evidence of any such testing, and could not even describe the tests he used or the results of his comparisons. A00637; A00651-58. Koppe further conceded that his method did not analyze the impact on availability of the numerous ot her outages that were occurring at the same time he was claiming an increase in availability. A00905-07. To the extent any such after-the-fact and undocumented “tes ting” occurred, it ha rdly rises to “the same level of intellectual rigor that characterizes the practice of an expert in the relevant field.” Kumho , 526 U.S. at 152. Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 4840 Rosen also claimed validation for his methodology from Cinergy itself, A00526; A00530, but the relevant Cinergy practices only underscore the flaws in Rosen’s approach. Cinergy uses computer dispatch mo dels to project future generation and to assist it in conducting operational studies and making fundamental decisions about, for example, future plans for the purchase of fuel and power, and whether and where to build a new plant or retire an old one. A0038 9; A00291 (¶¶16-17); see also A00924-31; A00951-52; A0 1155-56; A00260-67. These tools account for the realworld economic and engineering factors that determine how much an individual unit in an interdependent system will generate to satisfy demand. A00389; A00924- 31; A00735; A00738-39; A00260-67. They employ forecasts of future availability and make projections of future utilization—but unlike the Rosen-Koppe methodology, Cinergy engineers using the models, and the models themselves, do not assume either (a) that like-kind replacement projects recover all lost availability from outages, as Koppe assumed, or (b) that utilization is a constant percentage of availability, as Rosen assumed. A 00289 (¶13); A00291 (¶¶16-17); A00390; A00309-
311; see also A00954-55; A00703; A00706; A00735; A00738. These models do not make those assumptions because they ar e counterfactual and inconsistent with Cinergy’s real-world experience and practices. That is why Rosen was forced to acknowledge that, in comparison to his methodology, it would have been “preferable to use a computerized dispatch model ... for the purpose of forecasting the generation levels from a generating unit that has undergone a repair or replacement.” A00563; see also A00706; A00924-29 Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 4941 (describing the types of analyses that can be done by dispatch models). Indeed, Rosen repeatedly cited such models as the best way of reflecting the interdependence of generating units an d estimating accurately how utilization might change with an increase in av ailability. A00723; A00729; A00738-40. Despite these admissions, Rosen seized upon a different, inconsistent and far more rudimentary process that Cinergy used for the more limited purpose of comparing potential capital expenditure pr ojects. Specifically, in choosing among possible maintenance projects at different plants, only some of which Cinergy could undertake within its capital budget, Ciner gy would assign a monetary value to each based on potential costs and benefits for purposes of prioritizing among multiple possible projects. A00781; A00784; A00 791-95; A00579; A0 0977-78; A00982-83; A01105-06. Unlike Cinergy’s more sophisti cated predictive models, the simplified capital budgeting process, consistent with the Rosen-Koppe methodology, assigned “benefits” to projects that included, inter alia , cost savings that would be achieved ifavailability previously lost due to the replaced component was recovered and if prerepair utilization rates applied. Rosen’s reliance on this simplified cost-benefit analysis confirms the unscientific nature of his method. It was undisputed that these simplified calculations were never relied upon by Cinergy outside of th e capital budgeting context and thus not used by Cinergy to forecast future generation or make other critical decisions such as fuel purchases and unit construction. See supra pp. 10-12, 41. Nor did Cinergy use the economic “benefit” associated with each capital expense to project future

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 5042 revenue. See, e.g. , A00794-95. The cost-benefit analys is was nonetheless useful to Cinergy because it enabled the utility to compare different options for maintenance expenditures in a way that focused on the degree to which a component had caused outages in the past and the extent to whic h the particular unit had previously been utilized. Rosen, by contrast, used these simplif ied assumptions not to make comparative judgments, but instead to calculate prec ise increases in future generation at individual units taken in isolation. But any reliance on Cinergy’s cost-benefit analyses in this different context would be improper for the reasons given above. Further, as noted, the “most significant” inquiry under Daubert “is whether the scientific theory has been subjected to the scientific method. ” Fuesting, 421 F.2d at 536 (emphasis added, internal quotation marks omitted). Cinergy’s capital budgeting process was not subject to testing or validation as a method of predicting future generation, and the government cannot demonstrate the scientific reliability of its methodology by pointing to a process that likewise has never been scientifically validated for that purpose. Cf. Zenith Elecs. , 395 F.3d at 419 (experts must “follow scientific approaches normal to their disciplines”). Indeed, applying Rosen’s assumptions in order to predict actual generation increases produces impossible results. If Cinergy had actually authorized each of the hundreds of repair projects it considered during the period at issue in the Complaint, and the assumptions in its compara tive analysis were applied to predict future generation, the result would be to predict enormous generation increases at

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 5143 every generating unit in the system even if demand were flat or falling—an utterly implausible outcome. See NIPSCo , 667 F. Supp. at 618 (“the load on the system and the amount of power generated must balance”). Rosen ultimately conceded that the use of these cost-benefit calculations for ranking capital projects “does not mean th is methodology is correct for use under the NSR regulations.” A000526. Rather, he asserted that the capital ranking analysis was “correct” because it employed assumptions that were consistent with those he was using. Id. His untested methodology, however, was neither a reliable means for projecting future generation nor a “correct” application of the NSR regulations. C. The Rosen-Koppe Methodology Is Biased And Unreliable. Any independent scientific review would have exposed the Rosen-Koppe methodology as fatally flawed and unreliable. It ignores virtually all of the engineering and economic factors that ac tually determine how much electricity a unit will generate. Indeed, that methodology was a deus ex machina introduced to fill a critical gap in the government’s proof. It will always predict a generation increase whenever a component associated with prior outages is replaced—even though no such causal relationship exists in the real world. Such a biased methodology cannot be applied “reliably to the facts of the case” and should have been excluded under Fed. R. Evid. 702. See Chapman, 297 F.3d at 686-87. Rosen . Rosen conceded that his methodology would necessarily yield an increase in generation when applied to the repair projects at issue. See A00708; A00917-19. Rosen predetermined this result as a matter of mathematics by applying a unit’s

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 5244 pre-repair utilization factor to his (hypothesized) increased post-repair availability. See supra pp. 16-17. Rosen thus assumed that if a unit’s availability increases as a result of a repair project, some portion of that “recovered availability” will then be used to generate electricity. This analysis ignores the bases on wh ich the “dispatch” decisions allocate demand among the multiple generating units in a utility system. See supra pp. 10- 12; see also People Who Care v. Rockford Bd. of Educ. , 111 F.3d 528, 537-38 (7th Cir. 1997) (“[A] statistical study that fails to correct for salient explanatory variables ... has no value as causal explanation and is therefore inadmissible in federal court.”). An increase in availability , standing alone, does not mean that a unit will be dispatched more than it was historically. To the contrary, the fact that prior demand was satisfied by running a unit at a certain level in the past suggests strongly that increased generation from the unit is not necessary to satisfy the same level of demand in the future. This is espe cially true where, as here, the repairs at issue did not make any fundamental change s to generating units that would allow them to generate electricity at a lower cost or otherwise change their place in the dispatch order, A00294-95 (¶¶23-24); A00384-86; A01019-20; A01028; A01032-33; A01086; A01092; A01111- 12; A01114-15, and where units had substantial excess availability prior to the projects— i.e. , they were frequently not run even when available, A00321-22 & A00346; A01024- 26; A01096-97; A00959-67 (Rosen conceding that Cinergy’s units had substa ntial excess capacity). Nor can it be assumed that the unit will need to be run more in order to satisfy increased

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 5345 demand, because, as Rosen acknowledged, EPA’s rules expressly exclude consideration of demand growth in the prediction of emissions increases. A000527 (citing 40 C.F.R. §52.21(b)(33)(ii)); see also 57 Fed. Reg. at 32,327; 40 C.F.R. §§52.21(b)(2)(iii)( f ), 52.24(f)(5)(iii)( f ) (1981). A reliable assessment whether a unit will be run more as a result of a presumed increase in availability requires an analysis of the engineering and economic factors that guide how electrical generating units will be dispatched to determine whether, for that unit, there is reason to believe that increasing the unit’s availability will cause it to be dispatched more than it was in the past. But it is precisely those factors—such as the relative costs of th e units and other sources of electricity available to Cinergy, the operating characte ristics of Cinergy’s individual units, and the need to maintain “spinning reserves”—that were ignored in Rosen’s analysis. See supra pp. 10-12, 17, 44. Rosen conceded these real-world factors dictate how generating units are in fact dispatched. A00703-04; A00738-40; compare A00563 (“I agree that all of the complexities that Mr. Harris lists in Table 1 can affect how a generating unit operates”), with A00310. He also acknowledged that he never examined the dispatch order of Cinergy’s units. A 00720; A00775; A00970. And he admitted that he could have performed a more accurate prediction that took these factors into account (using a model like those regularly used by utilities) and that it would be “preferable” to use such models to forecast emissions increases, A00563; see also A00706; A00723; A00729; A00735; A00738-40. He testif ied simply that he lacked Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 5446 sufficient resources or time to do so. A00673; A00676-77; see also A00761-63 (stating he did not even ask the govern ment about calculating emissions using a dispatch model because he “just sort of assumed” that it was too expensive). These concessions confirm that Rosen’s analysis should have been excluded under Fed.R.Evid. 702. Without analyzing the factors that influence the decision to dispatch electricity from a unit, Rosen had no reliable basis from which to conclude that each project should have been predic ted to increase generation and emissions. Cf. A00308-10; A00317-20; A 00384-86; A00291 (¶¶16-17); A01015; A01019-21; A01027-28; A01037-38; A0105 7; A01086; A01092-93; A01112; A01114-15. Indeed, many of the relevant factors ignored by Rosen would have suggested that generation at the repaired units might decrease after a repair. A00702-03 (conceding that parameters ignored by hi s constant utilization factor could cause decrease in generation). For example, Rosen ignored binding constraints on how Cinergy units may be dispatched, such as thermal discharge permits limiting Cinergy’s use of the Wabash River units when temperatures are high. A01066; A01068; A01083-84. He also ignored that natural gas prices can decrease relative to coal prices and make coal plants more costly, and thus less likely to be dispatched. A01112; A01122; A01140; A0 1142. He ignored that during the time period at issue in the Complaint Cinergy constructed new generating units and increased the capability of Wabash River Unit 1, thereb y potentially decreasing the amount of energy that existing units need to prov ide. A00738 (acknowledging new capacity impacts utilization of existing units); see also A00998; A01087. And he failed to

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 5547 consider the fact that Cinergy was moving from relying predominantly on its own units for electricity in the 1980s to purcha sing electricity from neighboring utilities in the 1990s, thereby potentially reducing its own generation. A00738; A00766 (acknowledging off-system sales impacts utilization of generating units); see also A01148. Rosen’s decision to ignore the factors that actually drive electricity generation decisions led to an additional and es pecially basic error—he ignored the interdependence of generating units that comprise a single system. Cf. A00308-11; A00291 (¶¶16-17); A01140-41; A 1143; A01145-49. In assessing a possible change in interdependent systems, one cannot look at one unit and hold everything else constant as Rosen did. In particular, an individual generating unit is not like a manufacturing plant where, for example, if a broken assembly line conveyor is repaired, the plant might then be expected to produce more of its product. To the contrary, if one unit in an interdependent utility system is to generate more, another must generate less. That is particularly clear here because (a) the demand for electricity and the electricity generated “must balance,” see NIPSCo , 667 F. Supp. at 618, and (b) the demand must be assumed to be flat or falling because EPA’s regulations require that any potentia l growth in demand be excluded from the calculations, 57 Fed. Reg. at 32,327; 40 C.F.R. §§52.21(b)(2)(iii)( f ), 52.24(f)(5)(iii)( f ) (1981). One cannot, therefore, predict how much a single unit will generate without considering what other units will generate.

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 5648 Rosen ignored that reality. He analyzed a series of projects at different generating units and looked at each unit as if it were a stand-alone utility, without regard to what might be occurring at other generating units. See A000525-26; A000533-35. He did so even th ough he was predicting increases at multiple units during the same general period of time. A000539-40. It is, of course, physically possible for dispatch engineers to make substantial shifts of generation disproportionately toward units that have recently undertaken like-kind component replacements. But Rosen never attempted to show—and could not have shown— that any utility actually behaves in that way (or rationally would), rather than make decisions (as they do) on the bas is of cost considerations, operating characteristics, reserve needs, and similar factors. Indeed, in a hypothetical system in which each unit recently undertook a replacement of a component previously associated with outages, Rosen’s methodology would predict an outcome that could never occur: each unit, as well as the syst em as a whole, would increase generation even if demand were constant. Rosen’s failure to consider the relevant dispatch factors and unit interdependence is particularly stark given the government’s position that, “[f]or all of the Cinergy units” at issue, availabili ty “increased substantially” during the applicable period because of systemic improvements in maintenance, management and operating practices. A00414 (emphasis added); see also, e.g. , A00404; A00408- 09; A00411; A00388. Even assuming arguendo that a particular repair increased a given unit’s availability, as Rosen does, it was nonetheless the case that Cinergy’s

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 5749 other generating units likewise contemporaneously experienced substantial availability increases for independent reasons. But under Rosen’s theory, all these other units would also be predicted—nonsensically—to generate more electricity while demand remains flat. Testimony relying on such a manifestly illogical theory should not have been presented to the jury. Koppe . Although Rosen’s “constant utilization” assumption by itself renders the methodology unreliable, it is not the methodology’s only such failing. The “recovered availability” theory propound ed by Koppe is likewise fundamentally flawed, and independently renders the analysis biased and unreliable. See In re Paoli R.R. Yard PCB Litig. , 35 F.3d 717, 745 (3d Cir. 1994) (“any step that renders the analysis unreliable ... renders the expert’s testimony inadmissible ” (emphasis added)). This theory assumed that the entire generating unit recovers, for a two-year period, the precise number of hours previously lost to outages and derates associated with the replaced component in a pre-project two-year “baseline” period. A00397; A00523. This assumption was demons trably wrong. Koppe’s own data show that, in many cases, numerous and substantial outages and derates associated with the repaired component itself continued to occur after the repair. See, e.g. , A00430; A00434; A00437; A00439- 40; A00443; A00445-46; A00449; A00452; A00461-62; A00465; A000575-76. If the repairs did not ev en stop the outages at issue—let alone address the thousands of other randomly-failing components in the units—one cannot reliably predict that these projec ts will “recover” all previously “lost”

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 5850 availability. Indeed, in an independent 1982 report, Koppe acknowledged that a replacement may “not provide the full gain or perhaps creates a worse situation” and that “the risk of not achieving higher levels of productivity as a result of the improvement must be considered and treated accordingly.” A00235; see A00826-27 (Koppe conceding that a repair itself may fail or not be completely effective); A00846-47 (Koppe “at a loss” for why outa ges continued seven months post-repair); see also A00861-63; A00882-83; A01016-18. Koppe’s testimony at trial only further underscored that his analysis was unreliable and contrary to EPA’s NSR rules. At trial, Koppe asserted that these “clusters” of problems that can occur s oon after a replacement could be ignored because in “the long term after the project” and “many years in the future” these problems will be eliminated. A00826-27; see also A00861-63; A00882-83. But that is irrelevant. EPA’s test requires a determin ation of how much emissions are projected to change in the two years following the project, 57 Fed. Reg. at 32,323; see alsoA00910, not “many years in the future,” and Rosen improperly used Koppe’s “longterm” calculations of recovered availability to predict emissions increases for those two-year periods. Moreover, even if one could assume th at utility component repairs are always effective, it is undisputed that forced outages at coal-fired units are random events and can occur at any time from hundreds of different factors. A00302-07; A00287 (¶8); A00589-94; A00713-15; A00808-09; A00866; A01007-08; A01019; A01037; A01042; A01080; A01126. It is also undisputed that such outages are extremely

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 5951 frequent. See, e.g. , A00865; A01069; A01008; A01011; A01107-08. Thus, as Koppe acknowledged, one of the thousands of ot her components that make up complex generating systems and that was not re placed could fail and cause an outage, A00479; A00830; A0 0852-53; A00868; see also A00287-89 (¶¶8-11); A00299-302; A01011-12. In aggregate, the outages caus ed by these other component failures are significant and can exceed the outages ca used by the steam tube replacements challenged by the government. See, e.g. , A00868-75; A00877-99; A01011-12. This is particularly true because as a coal-fired gene rating plant ages, it is to be expected that many of its older parts will wear out. A00884; see also A00479 (hundreds of components can be replaced during a shutdown); A01001; A01039 (tens of thousands of component repair projects occu rred during this period). As such, there was no basis to presume that the handful of repair projects analyzed by Koppe would somehow boost unit availability well in excess of historical levels. This is why, rather than assume as Koppe did that a repair will restore the amount of unit availability previously lost as a result of the component being fixed, Cinergy—like other utilities, A00523-25—use d a several-year average of the unit’s historic availability as the best proxy for future availability in generation forecasting models, A00615-16; A00620-21; A00599-604; A00607-08; A01037. Such a long-term average reflects any sustained and verifiable improvement in overall unit availability while accounting for the fact that generating units are complex machines consisting of hundreds of subsystems subject to frequent and random failures—the reality that Koppe’s a ssumptions improperly ignored.

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 6052 D. The Rosen-Koppe Methodology Is Irrelevant Under The CAA And EPA’s Implementing Regulations. The Rosen-Koppe methodology should also have been excluded under Rule 702 for an additional reason: the methodology does not show that the predicted emissions increases are caused by the repair projects. Its predictions of emissions increases were therefore irrelevant to whether the projects at issue were “modifications” that triggered NSR. See Daubert , 509 at 591-92 (“Rule 702’s ‘helpfulness’ standard requires a va lid scientific connection to the pertinent inquiry as a precondition to admissibility”) (emphasis added); Kempner Mobile Elecs., Inc. v. Sw. Bell Mobile Sys. , 428 F.3d 706, 713 (7th Cir. 2005) (affirming exclusion of plaintiff’s expert testimony “as irrelevant and inapplicable to [plaintiff’s] theory of liability”). The CAA and implementing regulations require a showing that each like-kind change would be expected to “result in” significant emissions increases. See, e.g. , 40 C.F.R. §52.21(2)(i). As EP A has concluded, this means that “NSR will not apply unless EPA finds that there is a causal link between the proposed change and any post-change increase in emission s.” 57 Fed. Reg. at 32,326. Thus, for example, where an increase in emissions will be a result of “independent factors” other than the physical change in the plant (such as a growth in demand) and the unit would “have been able to accommodate” that projected increase “even absent the particular change,” the increase must be “excluded from the projection of future actual emissions.” Id. By contrast, for example, if a physical change “significantly alters the efficien cy of the plant” and is “the predominant

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 6153 cause of the change in emissions”—because it will make the plant less costly to run and the plant will therefore be dispatched more often—the resulting increase can trigger NSR. Id. at 32,326-27. But even where a project will improve a unit’s efficiency, EPA emphasized, causation “must be resolved on a case-by-case basis and is dependent on the individual facts an d circumstances of the change at issue.” Id. at 32,327.

Rosen never conducted any causation analysis, much less a factual and casespecific one, to demonstrate that increas ing the availability of a unit will cause an increase in generation. He provided no basis for concluding that like-kind component replacements, which are not inte nded or expected to alter the unit’s efficiency or otherwise change its place in the dispatch order, would nonetheless lead the unit to be dispatched more often. The government did not deny below that Rosen was required to show causation for his predictions. Instead, the government asserted that his analysis satisfied that requirement because it: by design, isolates the emissions expected to result from the project itself. Dr. Rosen assumes that post -project Cinergy will operate the unit for the same percentage of available hours as it did before the project. This excludes the impact of increases in operation attributable to increases in demand and isolates the effect of the project. By definition then, an increase calculated by Dr. Rosen cannot be “unrelated” to the project. Thus, even if one assumes that the unit could have generated emissions equal to the post-project emissions, the calculated increase attributable to the project is an increase that can trigger New Source Review. A00277 (citations omitted). This is no defe nse at all. To the contrary, it confirms that Rosen merely “assume[d]” that ge neration increases would follow from

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 6254 availability increases, and that those increases would therefore satisfy the causation requirement only “by definition.” That explanation begs the question, because it acknowledges that this assu mption was critical without providing any basis for thinking it valid. Rosen’s entire formula was driven by his assumption that a utilization rate that had applied to a unit in the past, at one level of availability, would also apply to that unit in the future , at a different presumed level of availability—even though the availability of the other, interdependent units in the system was increasing at the same time. But Rosen never sought or was able to justify that essential assumption. The absence of a causation analysis was particularly glaring here for at least two reasons. First, none of the units at i ssue had ever been called upon to generate at anything near the full extent of their availability. As Rosen conceded, all the units had extensive “headroom”—excess availability that was never actually utilized—and could have accommodated substantial increases in generation even if the projects in question had never been done. A00959-67; see also A01024-26; A01096-98. For example, Rosen’s calculat ions predicted a 1.54% increase in generation from the 1989 project at Wabash River Unit 2; however, Unit 2 already could have accommodated a 27.9% increase in generation without the project. The other Wabash River units could have similarly accommodated Rosen’s projected generation increase without making the replacement. A01096-97; A000580 & A000582-84; A00319-24; A00346; see also A00959. There was no basis to assume that a modest addition of availability would suddenly be used when the ample

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 6355 extant availability had not been. This is particularly true under EPA’s requirement that growth in demand be excluded given that any assumed generation increase by one unit must therefore be accompanied by corresponding generation decreases in Cinergy’s other interconnected units. Second, even accepting arguendo that a unit becomes more available as a result of a single like-kind replacement, but see supra pp. 49-51, other aspects of EPA’s rules establish that such an alleged availability increase does not cause an emissions increase within the meaning of NSR. In addressing the selection of the “baseline emissions period”— i.e. the two-year pre-project period from which a projected emissions “increase” is measur ed—EPA has explained that periods in which “the source’s capacity was reduced du e to physical problems” should not be used as baselines because such periods do not represent “normal operations.” 57 Fed. Reg. at 32,323. 9 The entire Rosen-Koppe theory, by contrast, is that “normal operations” include the periods in which the particular component at issue is causing forced outages, and that repairin g that component causes an emissions increase within the meaning of NSR. As Ro sen conceded, use of a baseline that did not reflect “reduct[ions] due to physical problems” would produce results “less favorable to the government.” A00727. Beca use their theory is inconsistent in this and other respects with the legal framework it purports to apply in a manner that

9 EPA thus concluded on remand from WEPCo that it would be inappropriate to evaluate WEPCo’s life extension project by using the peri od immediately prior to the project because an earlier period “prior to the source curtailm ents due to [WEPCo’s] discovery of cracks in the rear steam drums” was “more representati ve of normal source operations.” A00254. EPA later reaffirmed that “normal source oper ations” means operations when the replaced components were not yet causing problems. A00240-41.

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 6456 produces inflated emissions results, it should have been excluded as irrelevant to the issues the jury was charged with deciding.

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 6557 CONCLUSION For the foregoing reasons, this Court should reverse the district court’s judgment and remand with instructions to enter judgment in Cinergy’s favor.

Respectfully submitted,

Marc E. Manly Catherine S. Stempien Dean M. Moesser Julie L. Ezell D UKE E NERGY C ORP

. 526 South Church Street Charlotte, NC 28202 (704) 382-8000 Mark D. Hopson Counsel of Record Peter D. Keisler Peter C. Pfaffenroth Ryan C. Morris Lowell J. Schiller S IDLEY A USTIN LLP 1501 K Street, N.W. Washington, DC 20005 (202) 736-8000 tel. (202) 736-8711 fax Attorneys for Appellants December 11, 2009

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 6658 CERTIFICATE OF COMPLIANCE 1. This brief complies with the type-volume limitation of Fed. R. App. P. 32(a)(7)(B) because it contains 13,855 word s, excluding the parts of the brief exempted by Fed. R. A pp. P. 32(a)(7)(B)(iii).

2. This brief complies with the typeface re quirements of Fed. R. App. P. 32(a)(5) and Circuit Rule 32, and the type style requirements of Fed. R. App. P. 32(a)(6), because it has been prepared in a propor tionally spaced typeface using Microsoft Word in twelve point Century Schoolbook font.

____________________________ December 11, 2009 Mark D. Hopson

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 6759 CERTIFICATE OF COMPLIANCE WITH CIRCUIT RULE 30(d)
Pursuant to Circuit Rule 30(d), the undersigned counsel hereby certifies that all materials required by Circuit Rules 30(a) and 30(b) are included in the Required Short Appendix.

____________________________ December 11, 2009 Mark D. Hopson

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 6860 CERTIFICATE OF COMPLIANCE WITH CIRCUIT RULE 31(e)(1)
Pursuant to Circuit Rule 31(e)(1), the undersigned counsel hereby certifies that appendix materials required by Circu it Rules 30(a) and 30(b) are not available in searchable digital format.

____________________________ December 11, 2009 Mark D. Hopson

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 6961 CERTIFICATE OF SERVICE Pursuant to Federal Rules of Appellate Procedure 25 and 27, I, Peter C. Pfaffenroth, hereby certify that on Decemb er 11, 2008, I served two copies of this brief by first class mail, postage pre-paid, to the following counsel at the following addresses: PHILLIP A. BROOKS JUSTIN A. SAVAGE JAMES A. LOFTON JASON A. DUNN THOMAS A. BENSON LOREN A. REMSBERG Environmental Enforcement Section Environment & Natural Resources Div. U.S. Department of Justice P.O. Box 7611 Washington, D.C. 20530 (202) 514-5293 MICHAEL MYERS Assistant Attorney General, Environmental Protection Bureau The Capitol Albany, NY 12224 (518) 402-2594 Attorney for State of New York JON MARTIN Deputy Attorney General Richard J. Hughes Justice Complex 25 Market Street, P.O. Box 093 Trenton, NJ 08625-4503 (609) 984-2845 Attorney for State of New Jersey TIMOTHY M. MORRISON United States Attorney Southern District of Indiana THOMAS E. KIEPER Assistant United States Attorney Southern District of Indiana 10 West Market Street, Suite 2100 Indianapolis, IN 46204-3048 Attorneys for the United States of America SCOTT N. KOSCHWITZ Assistant Attorney General 55 Elm Street P.O. Box 120 Hartford, CT 06141-0120 (860) 808-5101 Attorney for State of Connecticut KEITH GUTHRIE 13242 South 600 East Elizabethtown IN 47232 (812)579-5926 Attorney for the Hoosier Environmental Council and the Ohio Environmental Council

Peter C. Pfaffenroth

Case: 10-1131 Document: 1274376 Filed: 10/28/2010 Page: 70