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Court holds DTE Energy parent companies liable for Zug Island pollution

Court holds DTE Energy parent companies liable for Zug Island pollution

Rule Changes
By Newzino Staff |

A federal judge's $100 million penalty maps how corporate control translates into Clean Air Act liability

February 17th, 2026: Judge Orders $100M Penalty and Compliance Overhaul

Overview

EES Coke Battery has no employees. Every worker at the Zug Island coke plant near Detroit is on the payroll of a DTE Energy subsidiary. For years, that corporate arrangement helped DTE argue it wasn't responsible for the facility's sulfur dioxide pollution. On February 17, a federal judge disagreed—and used that very arrangement as evidence to hold three DTE parent entities liable as "operators" under the Clean Air Act, ordering them to pay $100 million.

In This Story

3 Videos
3 People
Gershwin A. Drain Theresa Landrum Jill Wilmot
4 Orgs
DTE Energy Company
EE
U.S. Environmental Protection Agency (EPA)
+1
11 Events
4 Key Stats
$100M
4 Scenarios
Sixth Circuit Upholds Ruling, DTE Pays Full Penalty
3 Context
United States v. Bestfoods (1998)

Key Indicators

$100M
Civil penalty
Based on $70 million in estimated compliance savings, multiplied by 1.5 as a deterrent
14,180 tons
Excess sulfur dioxide emitted (2019–2023)
The facility consistently exceeded its permitted baseline of under 2,100 tons per year
$20M
Community air-quality fund
Includes air purifiers for homes and schools in surrounding neighborhoods
4
DTE entities held liable
EES Coke Battery plus three parent entities found to be "operators" of the facility

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Debate Arena

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People Involved

Gershwin A. Drain
Gershwin A. Drain
Senior U.S. District Judge, Eastern District of Michigan (Issued ruling; presiding over compliance phase)
Theresa Landrum
Theresa Landrum
Environmental justice advocate, Detroit zip code 48217 (Community organizer in the area affected by Zug Island emissions)
Jill Wilmot
Jill Wilmot
Director of Corporate Communications, DTE Energy (Spokesperson announcing DTE's intent to appeal)

Organizations Involved

DTE Energy Company
DTE Energy Company
Regulated Utility / Parent Corporation
Status: Found liable as operator; appealing ruling to Sixth Circuit

Michigan's largest electric and gas utility, serving 2.3 million electric and 1.3 million gas customers, with a $30 billion market capitalization.

EE
EES Coke Battery LLC
Industrial Subsidiary
Status: Found liable as owner and operator; must obtain new permits

A DTE-owned coke plant on Zug Island that converts coal into metallurgical coke for steelmaking, with no employees of its own.

U.S. Environmental Protection Agency (EPA)
U.S. Environmental Protection Agency (EPA)
Federal Agency
Status: Plaintiff; secured $100M penalty after seeking $140M

The federal agency that brought the original 2022 lawsuit alleging EES Coke violated the Clean Air Act's New Source Review requirements.

Sierra Club Michigan Chapter
Sierra Club Michigan Chapter
Environmental Advocacy Organization
Status: Intervenor in the lawsuit; represented by Earthjustice

Intervened in the federal lawsuit alongside Earthjustice and the Great Lakes Environmental Law Center, representing community members in Southwest Detroit and River Rouge.

Timeline

  1. Judge Orders $100M Penalty and Compliance Overhaul

    Legal

    Judge Drain orders a $100 million civil penalty, finds all four DTE entities liable as operators, requires new New Source Review permitting, and establishes a $20 million community air-quality fund. DTE announces it will appeal to the Sixth Circuit.

  2. Trump Administration Grants Two-Year Emission Exemption

    Regulatory

    President Trump signs a proclamation exempting all 11 U.S. coke oven facilities, including EES Coke Battery, from Biden-era emission standards for two years, citing cost and technology concerns.

  3. Bench Trial on Penalties and Remedies

    Legal

    A federal bench trial determines penalties. The EPA requests $140 million; DTE and EES Coke propose $5 million. An EES Coke executive testifies that full pollution controls would cost more than the facility is worth.

  4. Court Rules EES Coke Violated Clean Air Act

    Legal

    Judge Drain finds EES Coke Battery violated the Clean Air Act by making a major modification to operations without obtaining required New Source Review permits, rejecting the company's argument that the 2014 changes were minor.

  5. Judge Adds Three DTE Parent Entities as Defendants

    Legal

    Judge Drain allows the DOJ to amend its complaint, adding DTE Energy Company, DTE Energy Services, and DTE Energy Resources as defendants after discovery reveals their involvement in environmental decision-making at the facility.

  6. DOJ Files Clean Air Act Lawsuit Against EES Coke

    Legal

    The Department of Justice, on behalf of the EPA, sues EES Coke Battery for violating the Clean Air Act's New Source Review program. Sierra Club and community groups intervene through Earthjustice.

  7. EPA Issues Notice of Violation

    Enforcement

    The Environmental Protection Agency formally notifies EES Coke Battery that it is violating the Clean Air Act by operating with significantly increased emissions without proper New Source Review permits.

  8. Sulfur Dioxide Emissions Spike to 3,200 Tons

    Violation

    The facility emits over 3,200 tons of sulfur dioxide, more than 50% above its permitted baseline of under 2,100 tons per year, demonstrating the 2014 modification was a major change requiring stricter New Source Review permitting.

  9. EES Coke Obtains Permit Changes from Michigan Regulators

    Regulatory

    EES Coke secures state permit modifications from the Michigan Department of Environment, Great Lakes, and Energy allowing it to burn unlimited coke oven gas, claiming this would not significantly increase emissions. The change is classified as a minor modification rather than a major one.

  10. National Steel Sells Coke Battery to EES Coke

    Ownership

    National Steel Corporation sells the coke battery to EES Coke but continues managing operations. EES Coke is structured as a subsidiary with no employees of its own.

  11. EES Coke Battery Begins Operations on Zug Island

    Background

    National Steel Corporation builds an 85-oven coke battery on Zug Island in River Rouge, Michigan, to produce metallurgical coke for steelmaking.

Scenarios

1

Sixth Circuit Upholds Ruling, DTE Pays Full Penalty

Discussed by: Environmental law analysts at Earthjustice and the Great Lakes Environmental Law Center, who note the factual record is strong

The Sixth Circuit Court of Appeals upholds Judge Drain's ruling on both liability and penalty. DTE pays $100 million, begins the New Source Review permitting process, and funds the community air-quality program. The operator-liability framework from this case becomes a template for federal enforcement against parent companies that manage polluting subsidiaries through shared-services agreements. Other utilities with similar corporate structures begin restructuring their environmental oversight to reduce exposure.

2

Appeals Court Reduces Penalty but Sustains Liability Finding

Discussed by: Legal analysts at K&L Gates and environmental law firms who have flagged the penalty calculation as a potential appellate issue

The Sixth Circuit agrees that DTE parent entities qualify as operators but finds the 1.5x multiplier on the $70 million in compliance savings was too high, reducing the civil penalty to a figure closer to DTE's estimated savings. The operator-liability precedent still stands, but with a lower financial deterrent. DTE complies with the revised order while the community air-quality fund and permitting requirements proceed.

3

DTE Closes Zug Island Facility Rather Than Comply

Discussed by: DTE's own trial testimony, where an EES Coke executive said full pollution controls would cost more than the facility is worth

Facing the cost of new pollution controls on top of the penalty, DTE decides to shut down the EES Coke Battery rather than invest in compliance. This removes a major sulfur dioxide source from one of Michigan's most polluted areas but eliminates a domestic supplier of metallurgical coke, forcing steelmakers to import coke or find alternatives. DTE frames the closure as a consequence of regulatory overreach.

4

Federal Enforcement Stalls as Administration Priorities Shift

Discussed by: Environmental advocates concerned about the Trump administration's November 2025 coke oven exemptions and broader deregulatory stance

While the court order stands as a judicial ruling independent of executive branch policy, enforcement of compliance timelines slows if the EPA under the current administration deprioritizes follow-through. The permitting process through Michigan's Department of Environment, Great Lakes, and Energy could face delays. The $100 million penalty, already ordered by a federal court, would still be owed regardless of enforcement priorities.

Historical Context

United States v. Bestfoods (1998)

June 1998

What Happened

The U.S. Supreme Court ruled on when a parent corporation can be held liable for the environmental contamination of a subsidiary's facility. CPC International's subsidiary, Ott Chemical, had contaminated a Michigan chemical plant. The Court held that a parent company can be directly liable as an "operator" if it actually managed, directed, or conducted the subsidiary's pollution-related operations—not just if it controlled the subsidiary generally.

Outcome

Short Term

The ruling drew a clear line: a parent corporation's general oversight of a subsidiary was not enough for operator liability, but active involvement in environmental decisions was.

Long Term

Bestfoods became the foundational test for parent-company environmental liability across federal statutes. The DTE ruling applies this framework to the Clean Air Act, using evidence of shared-services agreements and environmental decision-making control to meet the Bestfoods standard.

Why It's Relevant Today

Judge Drain's ruling explicitly builds on Bestfoods, using management-services agreements and shared officers as evidence that DTE met the threshold of actual operational control—extending this precedent from Superfund cleanup cases into Clean Air Act enforcement.

American Electric Power New Source Review Settlement (2007)

October 2007

What Happened

The Department of Justice reached what was then the largest environmental enforcement settlement in U.S. history with American Electric Power. AEP had modified 46 coal-fired power plant units across five states without obtaining required New Source Review permits—the same type of violation at the center of the EES Coke case. AEP agreed to spend $4.6 billion on pollution controls, pay a $15 million penalty, and fund $60 million in environmental mitigation.

Outcome

Short Term

AEP installed pollution controls at 16 plants and cut 813,000 tons of annual emissions. The $15 million civil penalty was the largest any electric utility had paid in a New Source Review case at the time.

Long Term

The settlement established that New Source Review violations carried serious financial consequences for large utilities, though the $15 million penalty was modest relative to AEP's size. The EES Coke penalty of $100 million for a single facility represents a significant escalation.

Why It's Relevant Today

Both cases involve major utilities that modified facilities without required New Source Review permits. But while AEP settled, DTE fought to trial—and the resulting penalty for a single facility dwarfs the per-facility penalty AEP paid, signaling that courts may impose much steeper penalties when companies contest rather than settle.

Volkswagen Dieselgate Clean Air Act Settlement (2016)

June 2016

What Happened

Volkswagen agreed to pay $14.7 billion after the EPA discovered the company had installed software in 590,000 diesel vehicles to cheat federal emissions tests. The vehicles emitted up to nine times more nitrogen oxide pollution than standards allowed. The settlement included $10 billion for consumer buybacks, $2.7 billion for environmental mitigation, and a $1.45 billion civil penalty.

Outcome

Short Term

Volkswagen paid the largest auto-industry civil penalty in U.S. history and recalled or bought back hundreds of thousands of vehicles.

Long Term

Dieselgate demonstrated that deliberate evasion of Clean Air Act requirements carries existential financial risk. The case shifted the cost-benefit calculation for companies considering whether to invest in compliance or absorb potential penalties.

Why It's Relevant Today

Like Volkswagen, DTE's subsidiary avoided compliance costs—saving an estimated $70 million—while exceeding permitted emission levels. Judge Drain applied a 1.5x multiplier to those savings, explicitly designed to ensure that noncompliance is more expensive than compliance, echoing the economic deterrence logic from Dieselgate.

Sources

(12)
+6
U.S. Department of Justice Planet Detroit BridgeDetroit The Detroit News Sierra Club Earthjustice U.S. Environmental Protection Agency HBC Law Mondaq / K&L Gates Planet Detroit Planet Detroit Planet Detroit