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Oct 2013
October 16, 2013

Court Rulings Limit USEPA Clean Air Act Enforcement

The Prevention of Significant Deterioration (“PSD”) provisions of the federal Clean Air Act (“CAA”), enacted in 1977, have required major sources of air pollutants to obtain from USEPA or authorized state authorities pre-construction permits requiring the application of “best available control technology” or “BACT” prior to beginning construction of a new source or certain modifications at a exiting source. Beginning under the Clinton Administration and continuing to the present, USEPA and the Department of Justice (DOJ) have followed an enforcement strategy asserting that many large industrial sources such as electric generation plants, oil refineries, glass refractories, and cement kilns have been “modified” since 1977 without the required pre-construction permit, in violation of the CAA. USEPA and DOJ have threatened or initiated enforcement lawsuits which, in the main, have resulted in either settlements or court judgments requiring significant emission reductions through installation of emission controls or mandated shutdowns of certain sources. In parallel with governmental actions, national environmental organizations have brought similar citizen enforcement suits against industrial sources seeking emission reductions or plant shutdowns.

The statute of limitations applicable to enforcement of violations of the CAA is 5 years under the generically applicable provisions of 28 U.S.C. § 2462.  The U.S. Supreme Court has clarified that the statute begins to run upon the violation and not when the violation is discovered or reasonably could have been discovered.  For the last several decades, USEPA and DOJ have maintained that violations of PSD permitting requirements are continuous, effectively eliminating the application of the statute of limitations. USEPA and DOJ have advanced this position to support enforcement claims against sources that may have “modified” without the required permit years earlier and even under different ownership. Two recent federal appellate decisions, however, seriously weaken the federal enforcement strategy.

In United States v. Midwest Generation, LLC, No. 12-1026, 2013 WL 3379319 (7th Cir. July 8, 2013), a three-judge panel unanimously concluded that PSD violations occur at the time of the construction or modification without the required permit and that such a violation is not continuing. The Midwest Generation decision is significant because it is the first federal appellate ruling directly curtailing a USEPA enforcement action seeking to directly apply federal PSD requirements.  The court concluded that not only could the United States not obtain punitive sanctions but also concluded that equitable relief to correct any harm arising from the violation was also time-barred.  In August 2013, the Third Circuit, in United States v EME Homer City Generation L.P. similarly concluded that an enforcement claim for civil penalties was time barred because it was brought more than 5 years after modification allegedly made without the requirement permit.  However, the Third Circuit left open the question of whether equitable remedies could still be available to address the violation.

Both the Third and Seventh Circuit decisions are consistent with the decisions in Nat'l Parks & Conservation Ass'n, Inc. v. Tennessee Valley Auth., 502 F.3d 1316 (11th Cir. 2007) and Sierra Club v. Otter Tail Power Co., 615 F.3d 1008 (8th Cir. 2010) which had held that citizen suits seeking to enforce PSD requirements were time barred. Only the Sixth Circuit has adopted the premise that a failure to obtain a PSD permit with BACT requirements can be held to be continuing violation.  Nat'l Parks Conservation Ass'n, Inc. v. Tennessee Valley Auth., 480 F.3d 410 (6th Cir. 2007).  But all the other circuits have distinguished the Sixth Circuit’s decision as relying upon distinct provisions in Tennessee law intended to implement federal CAA requirements under state law. 

Given the absence of a direct conflict between federal appellate courts interpreting federal law, US Supreme Court consideration of the issue is unlikely in the near term. USEPA and DOJ have requested reconsideration of the 7th Circuit’s decision and will probably seek the same relief in the Third Circuit. Barring success on obtaining rehearing in these courts, it is probable that the federal government will continue to pursue enforcement in other federal circuits with the hope of obtaining a conflicting appellate decision which might then trigger Supreme Court review to resolve the issue on a national basis. Where the applicability of the statute of limitations may be at issue, it remains to be seen if USEPA will adjust its settlement position to account for the legal risk that its claims may be time-barred.  

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