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A federal appeals court Aug. 21 sided with the current and former owners of a Pennsylvania power plant accused of modifying the facility without required permits and emissions controls, saying the Environmental Protection Agency had just five years to bring the case (United States v. EME Homer City Generation LP, 3rd Cir., No. 11-4406, 8/21/13).
The modifications at the coal-fired plant operated by EME Homer City Generation LP were one-time violations that occurred more than a decade before EPA brought legal action. The U.S. Court of Appeals for the Third Circuit rejected EPA's arguments that continuing to operate the plant without valid permits and required pollution-control technology constitutes ongoing violations.
The Third Circuit is the latest court to agree that EPA is subject to a five-year statute of limitations for bringing prevention of significant deterioration (PSD) and new source review cases under the Clean Air Act.
The Seventh Circuit on July 8 sided with another utility, Midwest Generation LLC, saying modifications to coal-fired plants were made at least 10 years before EPA filed the case (United States v. Midwest Generation LLC, 7th Cir., Nos. 12-1026 and 12-1051, 7/8/13; 44 ER 2049, 7/12/13).
The Eighth and Eleventh Circuits also have issued similar rulings (Sierra Club v. Otter Tail Power Co., 8th Cir., No. 09-2862, 8/12/10; Nat'l Parks & Conservation Ass'n v. TVA, 11th Cir., No. 06-10729, 10/4/07).
In the latest case, the Third Circuit emphasized that the modification or construction project triggers the five-year statute of limitations clock and merely operating the plant does not constitute an ongoing violation.
“The claims against the Current Owners … rise or fall on the answer to a single question: Does the PSD program prohibit operating a facility without [best available control technology] or a PSD permit?” the Third Circuit wrote in a 68-page opinion. “We agree with the unanimous view of the other courts of appeals that have addressed this question. The PSD program's plain text requires the answer to be 'no.' ”
When new owners buy a facility on which construction has been completed for more than five years, “the Clean Air Act protects their reasonable investment expectations,” the court said.
In addition to the Third, Seventh, Eighth, and Eleventh Circuits, the Sixth Circuit also has ruled on the issue. And while the Sixth Circuit found air pollution control requirements to be ongoing obligations, it based its decision specifically on requirements in a Tennessee state implementation plan (Nat'l Parks Conservation Ass'n v. TVA, 6th Cir., No. 05-6329, 3/2/07).
EPA had asked the Third Circuit to require the former owners to obtain a preconstruction permit and install pollution controls on the plant and to impose an injunction and damages on the current owners.
“[T]he EPA did not cry foul until more than a decade after the changes, well after the owners had sold the plant,” the Third Circuit wrote. “…The relief now sought would require us to distort plain statutory text to shore up what the EPA views as an incomplete remedial scheme. That we cannot do.”
Jonathan Martel, an attorney with Arnold and Porter LLP who was not involved in the case, told BNA Aug. 21 that unlike the other circuit courts, the Third Circuit case addresses the liability of former owners as well as current owners.
The Third Circuit said courts cannot require compliance from a company that is not currently violating the Clean Air Act and that cannot violate the law in the future because it no longer owns the facility. It also said it cannot order former owners to install pollution controls on a plant they no longer own or to which they no longer have access.
The power plant's former owners--New York State Electric and Gas Corp. and Pennsylvania Electric Co.--modified two electric generating units in 1991, 1994, 1995, and 1996 but did not apply for prevention of significant deterioration permits.
Under the Clean Air Act's new source review permitting program, new and modified industrial sources in areas that meet air quality standards must obtain prevention of significant deterioration permits to demonstrate that their emissions would not significantly degrade air quality, and they must control those emissions using best available control technology.
The former owners sold the plant in 1999. EME Homer City Generation LP now operates the plant in Indiana County, Pa., and eight limited liability corporations own it.
In 2008, EPA began issuing notices of finding and violation to the current and former owners, and the government filed a lawsuit in the U.S. District Court for the Western District of Pennsylvania in 2011 (United States v. EME Homer City Generation LP, W.D. Pa., No. 11-19, 10/12/11).
The district court said in October 2011 that the statute of limitations had passed for the government to seek civil penalties, and the government cannot hold the current owners liable for alleged Clean Air Act violations by the former owners (42 ER 2333, 10/21/11).
The Third Circuit's decision Aug. 21 affirms the district court's dismissal of the case.
The case is part of a coal-fired power plant enforcement initiative that EPA launched in 1999 to address new source review compliance.
In other new source review cases, the circuit courts' decisions could begin “to shift the leverage to the companies and away from EPA,” Martel said. “It limits EPA's ability to achieve its objectives through these enforcement cases. These are wins for industry.”
EPA may appeal the Third and Seventh Circuit cases, either to the circuit courts for rehearing or to the U.S. Supreme Court. The agency faces a Sept. 3 deadline to decide whether to seek rehearing in the Seventh Circuit case.
EPA and the Justice Department declined to comment about appeal options and the decision's effect on future cases.
The opinion by the U.S. Court of Appeals for the Third Circuit in United States v. EME Homer City Generation LP is available at http://www.bloomberglaw.com/public/document/USA_v_EME_Homer_City_Generation_LP_et_al_Docket_No_1104406_3d_Cir/1.
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