USA v. CEMEX, Inc.

Filing 184

OPINION AND ORDER DENYING MOTION FOR PARTIAL SUMMARY JUDGMENT AND SUSTAINING OBJECTION TO ORDER OF THE MAGISTRATE JUDGE: The Governments' Motion for Partial Summary Judgment 169 is DENIED, but the Court finds no genuine dispute that CEM EX's modifications were not "routine," and thus, that the facility had not "begun normal operations" at the relevant time, such that assessment of any emissions increase resulting from the modification should consider the mod ified facility's "potential emissions". These facts shall be deemed established for purposes of trial. The Court SUSTAINS the Government's Objections 156 to the Magistrate Judge's August 11, 2011 Order (#152) and VACATES that portion of the Order that directs cost-sharing. The parties shall, within 10 days of the issuance of this order, contact chambers to set this matter for a Final Pretrial Conference and a Trial. by Judge Marcia S. Krieger on 9/24/12.(msksec, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Honorable Marcia S. Krieger
Civil Action No. 09-cv-00019-MSK-MEH
UNITED STATES OF AMERICA,
Plaintiff,
v.
CEMEX, INC.,
Defendant.
______________________________________________________________________________
OPINION AND ORDER DENYING
MOTION FOR PARTIAL SUMMARY JUDGMENT AND SUSTAINING OBJECTION
TO ORDER OF THE MAGISTRATE JUDGE
______________________________________________________________________________
THIS MATTER comes before the Court pursuant to the Government’s Objections
(#156) to the Magistrate Judge’s August 11, 2011 Order and Defendant CEMEX, Inc.’s
(“CEMEX”) response (# 157); and the Government’s Motion for Partial Summary Judgment
(#169), CEMEX’s response (#174), and the Government’s reply (#175).
FACTS
The Court has discussed the relevant facts and regulatory environment relevant to this
action in some detail in its Opinion and Order (# 178) of March 30, 2012, and to the extent
necessary, that discussion is incorporated herein.
In summary, and as elaborated upon below as appropriate to the Court’s analysis,
CEMEX operates a cement manufacturing plant in Lyons, Colorado. Between 1997 and 1999,
CEMEX undertook modifications to that plant that both increased its operating output and
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increased the amount of air pollutants it produced. The Clean Air Act required CEMEX to
obtain a “pre-construction permit” prior to undertaking the modifications. 42 U.S.C. § 7475(a).
Such a permit would have imposed upon CEMEX the obligation to employ the “best available
control technology” to limit any increase in regulated pollutants.
ISSUES PRESENTED
The claims asserted by the Government require it to prove, among other things, that
CEMEX’s modifications to the plant resulted in an increase in actual emissions of regulated
pollutants.
There are two general methods by which it is determined whether a modification has
resulted in an increase in actual emissions (and to quantify such increase): the “actual-to-futureactual” test, in which historic emissions rates are compared against predictions as to what future
expected actual emissions rates following modifications; and the “actual-to-potential” test, in
which historic actual emissions are compared against the maximum potential emissions that
could occur following modifications. The “actual-to-potential” test is applied when the
modifications are substantial enough to declare that “normal operations” of the facility (as
modified) cannot be said to have already “begun.”
Here, the Government moves for partial summary judgment (# 169) on an extremely
limited question: whether CEMEX’s modifications to the plant were such that it did not “begin
normal operations” prior to the modifications, such that application of the “actual-to-potential”
test is warranted.
Separately, the Court addresses the Government’s Objections (# 156) to an Order by the
Magistrate Judge that directed the parties to split the costs of making certain rebuttal expert

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disclosures.
ANALYSIS
A. Government’s summary judgment motion
1. Standard of review
Rule 56 of the Federal Rules of Civil Procedure facilitates the entry of a judgment only if
no trial is necessary. See White v. York Intern. Corp., 45 F.3d 357, 360 (10th Cir. 1995).
Summary adjudication is authorized when there is no genuine dispute as to any material fact and
a party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). Substantive law governs
what facts are material and what issues must be determined. It also specifies the elements that
must be proved for a given claim or defense, sets the standard of proof and identifies the party
with the burden of proof. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986);
Kaiser-Francis Oil Co. v. Producer’s Gas Co., 870 F.2d 563, 565 (10th Cir. 1989). A factual
dispute is “genuine” and summary judgment is precluded if the evidence presented in support of
and opposition to the motion is so contradictory that, if presented at trial, a judgment could enter
for either party. See Anderson, 477 U.S. at 248. When considering a summary judgment
motion, a court views all evidence in the light most favorable to the non-moving party, thereby
favoring the right to a trial. See Garrett v. Hewlett Packard Co., 305 F.3d 1210, 1213 (10th Cir.
2002).
If the movant has the burden of proof on a claim or defense, the movant must establish
every element of its claim or defense by sufficient, competent evidence. See Fed. R. Civ. P.
56(c)(1)(A). Once the moving party has met its burden, to avoid summary judgment the
responding party must present sufficient, competent, contradictory evidence to establish a

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genuine factual dispute. See Bacchus Indus., Inc. v. Arvin Indus., Inc., 939 F.2d 887, 891 (10th
Cir. 1991); Perry v. Woodward, 199 F.3d 1126, 1131 (10th Cir. 1999). If there is a genuine
dispute as to a material fact, a trial is required. If there is no genuine dispute as to any material
fact, no trial is required. The court then applies the law to the undisputed facts and enters
judgment.
If the moving party does not have the burden of proof at trial, it must point to an absence
of sufficient evidence to establish the claim or defense that the non-movant is obligated to prove.
If the respondent comes forward with sufficient competent evidence to establish a prima facie
claim or defense, a trial is required. If the respondent fails to produce sufficient competent
evidence to establish its claim or defense, the claim or defense must be dismissed as a matter of
law. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).
2. Regulatory environment
Because the question presented by the Government’s summary judgment motion is a
relatively narrow one, the Court will not indulge in an extensive discussion of the complex
regulatory environment that implements the Clean Air Act, nor will the Court recite all of the
elements of the Government’s claims. It is sufficient to note, for purposes of this decision, that
the Government’s motion is directed at the element of the Government’s claims that require it to
prove that CEMEX’s proposed modifications to its plant would result in a increase in actual
emissions. 42 U.S.C. § 7411(a)(4)
This requires consideration of the question of how to measure future “actual emissions.”

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There are two different methods of measuring what would have been a facility’s future1 “actual
emissions” after the modification occurred. This calculation is then be compared to historical
actual emissions rates to determine the magnitude of any increase anticipated by the
modification.
First, one may examine (future) emissions “using actual operating hours, production
rates, and the types of material stored or combusted during the selected time period” (i.e. “future
actual emissions”). 5 CCR 1001-5, Part A, I.B.8. Second, where it is impossible or impractical
to predict future actual emissions rates, one may assume that the modified facility will typically
run at its full potential, and thus, future emissions equate to the facility’s potential emissions,
that is “the maximum capacity of a stationary source to emit a pollutant under its physical and
operational design” (i.e. “potential emissions”). 5 CCR 1001-5, Part A, I.B.37.
The decision as to which formula to apply turns on the question of whether the facility
has (or has not) “begun normal operations” as of a specified date: future actual emissions are
used if the facility is deemed to have begun normal operations, and potential emissions are used
if the facility has not. 5 CCR 1001-5, Part A, II.A.1.a, c.
The phrase “begun normal operations” is not defined in either federal or state regulations.
However, the EPA has explained its interpretation of the phrase “normal operations” as follows:
changes to a unit . . . that are non-routine or not subject to [other]

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The ultimate question presented in this case is whether CEMEX was required to obtain a
preconstruction permit prior to undertaking its 1997-1999 modifications. The parties appear to
agree that this question must be answered according to the circumstances as they existed in 1997.
At that point in time, with the modifications yet to be constructed, calculation of “future”
emissions necessary carried with it a certain predictive element. The Court is cognizant that the
ensuing discussion is inconsistent, if not downright confusing, in its use of past-, present-, and
future-tense verbs, but such is the nature of a temporally-dislocated discussion of this sort.
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exemptions are deemed to be of such significance that pre-change
emissions for the affected units should not be relied on it
projecting post-change emissions. For such units, “normal
operations” are deemed not to have begun following the change,
and are treated like new units. Put another way, the regulatory
provision for units which have “not begun normal operations”
reflects an initial presumption that a unit that has undergone a nonroutine physical or operational change will operate at its full
capacity year-round. A source owner or operator may rebut the
presumption that the unit will operate at its full potential by
agreeing to limit its PTE through enforceable restrictions that limit
the unit’s ability to emit more than their pre-modification actual
emissions (plus an amount that is less than significant).
63 Fed. Reg. 39857-01, 39858 (Jul. 24, 1998). Thus, the EPA’s interpretation places the
concepts of “normal operations” and “non-routine” modifications in juxtaposition, such that a
non-routine modification gives rise to the presumption that the facility has “not begun normal
operations” for purposes of determining emission increases.
This, in turn, leads to the question of the meaning of the term “non-routine.” Again, such
term is not expressly defined, but EPA regulations and caselaw give some indication as to how it
should be interpreted. In Clean Air Act regulations, the EPA provides that the phrase “routine
maintenance, repair and replacement, includes, but is not limited to, the replacement of any
component of a process unit with an identical or functionally equivalent component(s), and
maintenance and repair activities that are part of the replacement activity.” 40 C.F.R. §
52.21(cc). In New York v. EPA, 443 F.3d 880, 883-84 (2d Cir. 2006), the court examined that
regulation, noting that the EPA “has for over two decades defined the [routine maintenance,
repair and replacement] exclusion [from certain emissions review procedures] as limited to de
minimis circumstances.” And in Wisconsin Elec. Power Co. v. Reilly, 893 F.2d 901, 910 (7th Cir.
1990), the court explained that “to determine whether proposed work at a facility is routine, EPA

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makes a case-by-case determination by weighing the nature, extent, purpose, frequency, and cost
of the work, as well as other relevant factors, to arrive at a common-sense finding.”
Collectively, these authorities suggest that “routine” modifications are those which, for example,
involve no functional modification to a component, or modifications that are de minimis in their
effects. See also U.S. v. Ohio Edison Co., 276 F.Supp.2d 829, 834 (S.D.Oh. 2003) (“Routine
maintenance, repair and replacement occurs regularly, involves no permanent improvements, is
typically limited in expense, is usually performed in large plants by in-house employees, and is
treated for accounting purposes as an expense”).
3. Application
The Government has not offered an extensive factual discussion regarding the nature,
purpose, or extent of CEMEX’s modifications, but what little evidence the parties have
presented on that point makes clear that the changes were something more than mere
replacement of machinery with functional equivalents or de minimis changes to operations.
CEMEX’s own evidence, including affidavits from its employees, makes clear that the
modifications involved: (i) “improvement” to the combustion chamber in order to “improve . . .
performance, mitigate burnover, and improve fuel efficiency”; (ii) “construction of an onsite
oxygen plant” that “enabled the Lyons facility to increase clinker production”; and (iii) addition
of a booster fan to “improve the stability of the kiln flame and operation, and to improve clinker
quality,” among others. No reasonable factfinder could conclude that modifications of these
types (whether taken individually or as aggregated components of a single project) could be
considered merely “routine” adjustments to the Lyons facility. Rather, each of them were
undertaken to achieve improvements or increases in the facility’s operations, not simply to

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constitute “routine maintenance” of current plant operations. Under these circumstances, the
Court finds no genuine dispute of fact as to the narrow issue on which the Government seeks
summary judgment: the modifications were not “routine,” and therefore, not a continuation of
the plant’s “normal operations.” This, in turn, establishes that the plant had not “begun normal
operations” until the modification was completed, and thus, calculation of any emissions
increase must be made using the “potential emissions” formula.
CEMEX argues that this case is similar to Reilly, supra., and that the Court should be
guided by that decision. In Reilly, the operator of a coal-fired, steam-generating electric power
plant undertook a “life extension” project, designed to renovate aging equipment to allow it to
remain “capable of generating at its designed capability” beyond its original lifespan. 893 F.2d at
906. The operator inquired of the EPA whether the proposed renovations would require a
preconstruction permit, and the EPA concluded that they would. The operator, believing that
determination to be erroneous, sought a judicial declaration that no permit was required. It
argued that “Congress did not intend for simple equipment replacement to constitute” a
modification requiring permitting. 893 F.2d at 908. The 7th Circuit disagreed, finding a
Congressional intent to exempt existing facilities from the Act’s requirements, but a concomitant
obligation for operators to include new pollution-control technology upon making modifications
to those existing facilities. Id. at 908-10. It also concluded that the EPA correctly rejected the
operator’s argument that its modifications fell within the “routine . . . maintenance” exception,
insofar as cost, magnitude, duration, and purpose of the expansion were all factors properly
considered by the EPA as indicating that the project was not merely “routine.” Id. at 910-14. In
this regard, then, Reilly more closely supports the Government’s position, rather than

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CEMEX’s.
CEMEX appears to rely on Reilly for a different proposition. After the discussion above,
the court turned to the question of whether the EPA’s “method of measuring emissions is
arbitrary and capricious.” Id. at 910. It noted that the EPA had concluded that the as-modified
facility had not “begun normal operations,” and thus, was subject to the “actual-to-potential
emissions” formula for determining whether the modification would result in increased
emissions. The 7th Circuit expressed discomfort with the EPA’s assumption that a modified
facility would run at its maximum potential, even if the absence of evidence that it had not done
so in the past or anticipated doing so in the future. Id. at 916-17. The court also considered
other authority that also suggested that potential emissions be based on intended future
operation levels, rather than maximum possible operational levels. Id. at 917, citing Alabama
Power Co. v. Costle, 636 F.2d 323, 353 (D.C.Cir.1979) (EPA must “take[ ] into account the
anticipated functioning of the air pollution control equipment designed into the facility” when
calculating the facility’s potential to pollute). Although conceding that “we certainly do not
suggest that the EPA may never subject replaced units to the potential to emit concept under its
regulations” (assuming it did so through proper notice-and-comment procedures), the 7th Circuit
ultimately held that “the EPA's reliance on an assumed continuous operation as a basis for
finding an emissions increase is not properly supported” under the then-existing regulations.
CEMEX’s invocation of this aspect of Reilly is premature in this case. Read most
favorably to CEMEX, Reilly does not stand for the proposition that it is inappropriate for the
EPA to consider potential emissions when assessing the possibility that modifications to a
facility will result in increased pollution; rather, Reilly simply suggests that measuring that

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“potential” does not necessarily entail simply adopting the maximum possible emissions, without
regard for the intended level of operation of the modified facility. In other words, Reilly takes
issue with the manner in which potential emissions are calculated or the facts that are used in
calculating that “potential.”
At this juncture, the Court is not being asked to calculate the “potential” emissions of
CEMEX as of 1997, nor could the Court make such a determination on the submitted record.
That determination will have to await trial, at which time the parties can more comprehensively
address how the Court should calculate CEMEX’s post-modification “potential” emissions (i.e.
whether it should be based on maximum operational levels, intended operational levels,
historical operational levels, and whether a variety of factors should or should not be included in
that calculation).
Because a trial will be required, the Government’s motion for summary judgment is
DENIED. However, the Court finds based on the undisputed facts that the modifications made
by CEMEX were not “routine” and that the facility cannot be said to have “begun normal
operations” – as that phrase is used in the regulations – at the time the modifications were
undertaken, such that any increase in the plant’s emissions level will be determined by an
“actual-to-potential emissions” formula. These facts are deemed established for purposes at trial.
Precisely how that formula is applied and what facts are used in calculating that increase are
questions that are not properly before the Court at this stage and must await presentation of
evidence and argument at trial.
C. Government’s Objections
The remaining matter to be resolved is the Government’s Objections to the Magistrate

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Judge’s Order. On August 11, 2011, the Magistrate Judge granted in part and denied in part
(#152) a motion by CEMEX seeking to strike certain rebuttal reports issued by the
Government’s experts. CEMEX argued that the reports exceeded the scope of proper rebuttal,
adding in new opinions, theories, and evidence not previously addressed.
The Magistrate Judge’s written order did not make any particular findings with regard to
CEMEX’s contentions. He noted that “it is permissible to include new experts or new
information in a rebuttal report, as long as the purpose of such inclusion is ‘intended solely to
contradict or rebut evidence on the same subject matter identified by another party’,” but made
no further determination as to whether the Government’s rebuttal reports did or did not meet this
standard. Instead, the Magistrate Judge immediately began a new paragraph, announcing that he
was “persuaded by [CEMEX’s] claim of prejudice, in that it now believes its ability to defend
itself against the material raised in the rebuttal expert reports at issue is compromised.” As a
remedy, he permitted CEMEX the opportunity “to submit limited surrebuttal reports” to “counter
the assertions raised by [the Government’s rebuttal].”
The Magistrate Judge then issued the portion of the Order that leads to the instant
Objections. In the interests of completeness, the Court sets forth the relevant passage in full:
Considering the scope and gravity of the rebuttal reports, the Court
finds that equity dictates cost-sharing of the surrebuttal reports.
Plaintiff and Defendant shall split the costs evenly. The court
emphasizes that the surrebuttal reports must conform to the
standard governing rebuttal reports.
The Government objects to the Magistrate Judge’s direction that it bear half the costs of
CEMEX obtaining surrebuttal reports. It contends that the cost-sharing requirement “upsets
[the] balance” that would otherwise exist – each party would pay the costs of two reports: its

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own original report and its own rebuttal/surrebuttal report – and further, that the Government
“has not ability to control the costs of the sur-rebuttal reports,” essentially giving CEMEX a
“blank check.”
Objections to a non-dispositive order of a Magistrate Judge are evaluated under Fed. R.
Civ. P. 72(a). Such rulings will be reversed only if they are “clearly erroneous or contrary to
law.” 28 U.S.C. § 636(b)(1)(A); Hutchinson v. Pfeil, 105 F.3d 562, 566 (10th Cir. 1997); Ariza
v. U.S. West Communications, Inc., 167 F.R.D. 131, 133 (D. Colo. 1996). Accordingly, the
Plaintiff’s Objections will be overruled unless the Court finds that the Magistrate Judge abused
his discretion or, if after viewing the record as a whole, the Court is left with a "definite and firm
conviction that a mistake has been made." Ariza, 167 F.R.D. at 133, citing Ocelot Oil Corp. v.
Sparrow Indus., 847 F.2d 1458, 1464 (10th Cir.1988).
This Court finds that the Magistrate Judge is vested with broad discretion to manage
discovery and enforce the Scheduling Order, as well as to impose sanctions for violations of
parties’ obligations with regard to those mattes. Fed. R. Civ. P. 16(f); Fed. R. Civ. P. 37.
However, the imposition of sanctions under either rule is permitted only upon a finding that a
party has failed to comply with a rule or order. Rule 16(f)(1)(C), (2); Rule 37(b). Thus, it is an
abuse of discretion by the Magistrate Judge to award costs or impose sanctions without first
making a finding that the party against whom the award is made has actually violated the rule or
order. The August 11, 2011 Order makes no finding that the Government violated the
Scheduling Order or some provision of Rule 26(b) in issuing its rebuttal reports (much less
identify what provision was violated and in what particular way); it merely finds that CEMEX
suffered some “prejudice” as a result of the contents of those reports. But “prejudice,”

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untethered to any particular violation of a rule or order, is meaningless: even a timely and
properly-disclosed expert report will presumably “prejudice” the other side. A finding that
CEMEX was “prejudiced” by disclosures in the Government’s rebuttal is simply a finding that
CEMEX should be given an opportunity to respond to those disclosures; it does not necessarily
imply that the Government engaged in any wrongdoing in making the rebuttal.
Thus, the Court finds that because the Magistrate Judge’s Order makes no finding that
the Government’s rebuttal violated any rule or order or was otherwise improper in any specific
respect, the Magistrate Judge’s decision to nevertheless award partial costs to CEMEX and
against the Government was an abuse of discretion. Accordingly, the Court sustains the
Government’s Objections and vacates that portion of the Magistrate Judge’s Order.
CONCLUSION
For the foregoing reasons, the Governments’ Motion for Partial Summary Judgment
(#169) is DENIED, but the Court finds no genuine dispute that CEMEX’s modifications were
not “routine,” and thus, that the facility had not “begun normal operations” at the relevant time,
such that assessment of any emissions increase resulting from the modification should consider
the modified facility’s “potential emissions,”. These facts shall be deemed established for
purposes of trial. The Court SUSTAINS the Government’s Objections (# 156) to the Magistrate

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Judge’s August 11, 2011 Order (# 152) and VACATES that portion of the Order that directs
cost-sharing. The parties shall, within 10 days of the issuance of this order, contact chambers to
set this matter for a Final Pretrial Conference and a Trial.
Dated this 24th day of September, 2012
BY THE COURT:

Marcia S. Krieger
United States District Judge

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