11/14/2013 Litigation Trends: What Businesses Need to Know - PDF document

11/14/2013 Litigation Trends: What Businesses Need to Know Wisconsin Manufactures and Commerce Clean Air Act Update 2013 Attorney Todd Palmer Michael Best & Friedrich LLP One South Pinckney Street, Suite 700 Madison, WI 53703 (608) 283-4432 tepalmer@michaelbest.com www.michaelbest.com Overview  New Source Review - Legacy Liability  New Source Review – Future Projections  Title V Petitions  Permitting Issues  SIP  Enforcement  Interstate Pollution Transport 2 1

11/14/2013 Legacy Liability - New Source Review  Is the failure to obtain a pre-construction permit a one- time violation, or do violations occur every day the facility operates?  Four federal appellate courts, including the 7th Cir., and a majority of district courts have held such a failure is a one-time violation and the five year Statute of Limitations begins at the commencement of construction.  Wisconsin district courts still split on the question  The Sixth Circuit and a minority of district courts have held that such failure constitutes an ongoing violation. 3 Legacy Liability – One Time Violation  United States v. Murphy Oil USA, Inc . (W.D. Wis. 2001)  United States v. Midwest Generation LLC (7th Cir., July 2013)  The discovery rule does not operate to extend the statute of limitations in CAA actions; and  the failure to obtain a PSD permit is a one-time violation  United States v. EME Homer City Generation LP ( 3rd Cir. August 2013)  Sierra Club v. Otter Tail Power Co. (8th Cir. August 2010)  N at'l Parks & Conservation Ass'n v. TVA ( 11th Cir. Oct. 4 2007) 2

11/14/2013 Legacy Liability – Continuing Violation  Sierra Club v. Dairyland Power Cooperative (W.D. Wis. Oct 2010)  Decision issued prior to 7th Cir. Midwest Generation  Court pointed to Wisconsin SIP language to conclude failure to obtain PSD permit is an ongoing violation  Overturned prior decision in Murphy Oil  Nat'l Parks Conservation Ass'n v. TVA (6th Cir. March 2007)  6th Circuit relied on specific language in the Tennessee SIP that requires sources to obtain pre-construction permits 5 Legacy Liability - New Source Review  Does Midwest Generation overrule Dairyland?  To the extent Dairyland relied upon CAA policy principles, case law from other jurisdictions and its own interpretation of §7475 to conclude that PSD violations are ongoing, Dairyland is overruled by Midwest Generation .  It is not so clear whether Dairyland’s analysis of the Wisconsin SIP would also be overruled by Midwest Generation .  Sierra Club and others will likely tee up the next case for the 7th Circuit to opine on the specific provisions of the Wisconsin SIP.  One case appears to be heading that direction. 6 3

11/14/2013 EPA/ENGO Tactics To Avoid SOL  Alternative tactics that may be used to avoid the preclusive effect of these SOL decisions:  Rely on SIP specific language that might suggest that BACT is an on-going requirement for operating a facility  Raise PSD issues in objections to Title 5 permits  ENGOs may rely on the discovery rule  EPA and ENGOs may promptly pursue NSR claims  EPA may appeal one or more of the Courts of Appeals rulings to the United States Supreme Court 7 Collateral Permitting Impacts of Midwest Generation?  One paragraph from the decision is worth particular attention: "Plaintiffs’ contention that a continuing injury from failure to get a preconstruction permit (really, from failure to use BACT) makes this suit timely is unavailing. What these plants emit today is subject to ongoing regulation under rules other than §7475. Today’s emissions cannot be called unlawful just because of acts that occurred more than five years before the suit began. Once the statute of limitations expired, Commonwealth Edison was entitled to proceed as if it possessed all required construction permits. That’s the point of decisions such as United Air Lines, Inc. v. McMann, 434 U.S. 192 (1977), and Ledbetter v. Goodyear Tire & Rubber Co., 550 U.S. 618 (2007), which hold that enduring consequences of acts that precede the statute of limitations are not independently wrongful." 8 4

11/14/2013 Legacy Liability of New Owners  New owner liability for prior CAA violations?  Midwest Generation – District Court  Held an asset transfer does not result in the transfer of CAA liability to the purchaser.  Noted that sec. 113 only provides enforcement against a person, not a source, and the “person” who violated the CAA in this case was no longer the owner of the facility.  Court did not hold one way or another about the ability of a transaction to transfer liability to a new owner, and instead noted that the allegations did not support such a transfer. 9 Legacy Liability New Owners  New owner liability for prior CAA violations?  Midwest Generation – 7th Cir  New owner liability issue was presented to the 7th Cir. but the court did not answer the question  Court concluded that because the prior owner couldn’t be held liable due to the one-time violation and statute of limitations, the subsequent owner couldn’t be liable 10 5

11/14/2013 Legacy Liability of New Owners  New owner liability for prior CAA violations?  EME Homer City - 3 rd Cir .  This issue was also raised, but the court did not address successor liability because:  EPA did not argue that the CAA imposes successor liability on the current owner,  Nor did EPA argue that the former owners’ liability transferred to the current owner by operation of the sale transaction documents 11 Legacy Liability of Prior Owners  Prior owner liability for prior CAA violations?  EME Homer City  Held “The text of the Clean Air Act does not authorize an injunction against former owners and operators for a wholly past PSD violation, even if that violation causes ongoing harm.” 12 6

11/14/2013 New Source Review – US v. Detroit Edison  Can an NSR enforcement action can be maintained based on EPA’s pre-project emission projections?  District Court ruled in favor of industry on summary judgment, holding that NSR enforcement actions cannot be initiated based on EPA’s pre-project emission projections.  6th Cir. reversed and remanded, concluding the district court’s sweeping reading of the regulations is inconsistent with the CAA.  6th Cir. held EPA is not categorically prevented from challenging even blatant violations of its regulations until long after modifications are made. 13 New Source Review – US v. Detroit Edison  May be a pyric victory for EPA.  Court suggests that a company can intentionally limit emissions in the future – without a synthetic minor limit – to avoid triggering PSD.  Directly contrary to the position taken by EPA with respect to the WPL - Columbia Power Plant.  Court warned EPA that it was not endorsing a pre- construction enforcement approach. 14 7

11/14/2013 Title V Petitions  Citizens can ask EPA to object to Title 5 permits that are proposed for issuance by the WDNR  EPA has a large backlog.  Processes 12- 15 petitions per year.  Delay often leads to “deadline lawsuits.” 15 Title V Petitions  Lack of modeling.  Improper modeling.  Sources causing “air pollution”.  Legacy NSR projects.  PM 2.5 precursor emissions.  Averaging of emission rates. 16 8

11/14/2013 Title V Petitions – Georgia Pacific  Sierra Club Title V petition focusing on legacy boiler projects.  WDNR had concluded that the projects were RMRR or lacked evidence to suggest that PSD had been triggered.  Increment analysis improperly performed in 2004 PSD permit.  EPA order denied the petition citing Sierra Club’s failure to develop an adequate demonstration that PSD had been triggered:  Lacked a netting analysis.  Lacked an adequate project emission baseline. 17 Title V Petitions – Georgia Pacific  Midwest Environmental Defense Center and Clean Water Act Council appealed the EPA Order to the Seventh Circuit.  Appeal limited to the single issue of whether DNR correctly calculated increment consumption when it issued a PSD permit in 2004.  Oral arguments held in August 2013.  Decision expected early 2014.  Industry argued that Title 5 is not a proper mechanism to challenge older PSD permitting actions. 18 9

11/14/2013 Title V Petitions –Legacy PSD Arguments  On October 30, 2013, Sierra Club and others petitioned EPA to object to a Title V permit, citing incorrect RMRR determinations by DNR in 2005.  EPA was asked to provide its opinion in 2005.  EPA responded in 2012.  EPA has 60 days to respond to the Title V petition, but historically takes much longer to respond.  Appears to be an effort by the Sierra Club to avoid the preclusive effect of the 7 th Circuit’s Midwest Generation decision barring enforcement actions under the five year statute of limitations. 19 Title V Petitions - Emission Limit Averaging  Issue: Whether compliance with an emission rate expressed as “lbs. per unit” is determined on an instantaneous or average basis?  WDNR has successfully argued that compliance with NR 415 PM limits is instantaneous.  Utility has petitioned EPA challenging its own Title 5 permits arguing that an averaging period must be included in the permit.  Open question as to averaging of BACT, NSPS and other limits. 20 10