BEIJING BOSTON BRUSSELS CHICAGO DALLAS FRANKFURT GENEVA HONG KONG HOUSTON LONDON LOS ANGELES NEW YORK PALO ALTO SAN FRANCISCO SHANGHAI SINGAPORE SYDNEY TOKYO WASHINGTON, D.C. What’s New with New Source Review? April 3, 2014
Prevention of Significant Deterioration PSD: Where the action is… . 2
PSD: Background Basics • CAA pre-construction permitting program – 42 U.S.C. §7475 – Applies to the construction of new, or to “major modifications” of existing, “major stationary sources” of air pollutants – Applies in areas that meet the National Ambient Air Quality Standard (NAAQS) for the pollutant in question – Triggered by “physical change” or “change in the method of operation” that causes a “significant net emissions increase” of a NAAQS pollutant – Imposes significant, expensive, and time-consuming obligations, including installation of best available control technology (BACT) 3
PSD/NSR Enforcement History • In the beginning … . – EPA brought suits in a number of industrial sectors (pulp & paper, petroleum, cement) – Hit its stride in 1999: EPA/ DOJ announced their Coal- Fired Power Plant PSD/ NSR Enforcement Initiative – Often, EPA asserts PSD/ NSR claims based on actions (alleged major modifications) that occurred decade(s) earlier – Has resulted in some of the largest fines and most costly corrective measures of any environmental enforcement program 4
PSD: Recent Developments • 2 lines of recent cases: – Statute of Limitations (“SOL”) – NSR Reform Rules 5
PSD SOL: Penalties • CAA does not have its own SOL • For Penalties: – Widespread consensus among courts that general federal 5 year SOL applies o 28 U.S.C. §2462: “Except as otherwise provided... An action, suit or proceeding for the enforcement of any civil fine, penalty, or forfeiture, pecuniary or otherwise, shall not be entertained unless commenced within five years from the date the claim first accrued … ” – Theory: violation is discrete, one-time failure to obtain preconstruction permit o See, e.g., U.S. v. Illinois Power Co.: “[ P] reconstruction permit violations do not constitute violations that continue past the completion of construction.” [ 245 F. Supp. 2d 951, 956 (S.D. Ill. 2003)] 6
PSD SOL: Injunctive Relief – Historically • For injunctive relief: – Private plaintiffs: o 5 year SOL bars injunctive relief o Majority view: based on concurrent remedy doctrine o Still holds true today; e.g., Sierra Club v. Otter Tail Power Co. , 615 F.3d 1008 (8 th Cir. 2010) Nat’l Parks and Conservation Ass’n, Inc. v. Tennessee Valley Auth. , 502 F.3d 1316 (11 th Cir. 2007) Sierra Club v. Duke Energy Indiana, Inc., 2010 WL 3667002 (S.D. Ind., Sept. 14, 2010) – Government plaintiffs: • Courts split, but majority held §2462 did not preclude government from seeking injunctive relief beyond 5 years – See, e.g., U.S. v. Murphy Oil, 143 F. Supp. 2d 1054, 1080 (W.D. Wis. 2001) 7
PSD SOL: Injunctive Relief Times, they are a-changin’… … 8
PSD SOL: Latest Cases U.S. v. Midwest Generation (7 th Cir. 2013) • PDEP v. EME Homer City Generation, et. al (3 rd Cir. • 2013) • Both bar government from seeking injunctive relief for alleged violations accruing more than 5 years earlier – But, in both, intervening transactions occurred o Former owners undertook modifications 9
SOL: Midwest Gen. • 2009/ 2010: US and IL sued current and former owners of several coal-fired power plants alleging PSD violations for modifications by former owner in 1990s without PSD permit* * Agencies also asserted a claim for a project undertaken by current owner; it was not before the Court so we won’t be discussing it. 10
SOL: Midwest Gen. District Court Decision 694 F.Supp.2d 999 (N.D. Ill. 2010) • Focuses on tolling of the 5 year SOL • Former owner: Dismisses claims in their entirety – Civil penalties: time-barred – Injunctive relief: former owner cannot be compelled to modify sources it no longer owns and has no right to access • Current owner: Dismisses most claims* – Civil penalties: time-barred – Injunctive relief: §7475 prohibits the construction of a major emitting facility without a permit; it does not prohibit subsequent operation of the facility 11
SOL: Midwest Gen. Seventh Circuit Appellate Decision 720 F.3d 644 (7 th Cir. 2013) • Affirms District Court, but doesn’t explain its reasoning • Critical holdings/ findings: – 5 year SOL applies for penalties and injunctive relief o “By the time the suit commenced, between 10 and 15 years passed since the modifications were finished, at least double the five-year period of limitations.” [ 720 F.3d at 646] Expiration of SOL cuts off liability and entitles defendant “to proceed as if it possessed all required construction permits” [ 720 F.3d at 648] SOL not tolled by any time period involved in discovering the alleged violations 12
SOL: Midwest Gen. Seventh Circuit Appellate Decision • Rejects “continuing violation” theory – “The violation is complete when construction commences without a permit in hand. Nothing in the text of §7475 even hints at the possibility that a fresh violation occurs every day until the end of the universe if an owner that lacks a construction permit operates a completed facility.” [ 720 F.3d at 647] • Rejects “continuing injury” theory – “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.” [ 720 F.3d at 648] 13
SOL: Homer City • 2011: States sued current and former owners of several power plants alleging PSD violations for modifications made by former owner in 1990s without PSD permit and without installing BACT 14
SOL: Homer City Third Circuit Appellate Decision 727 F.3d 274 (3d Cir. 2013) • Key holdings: – PSD is a pre-construction program imposing one-time requirements – No continuing violation for operating post-construction o “Nowhere do [ the PSD] provisions authorize enforcement against a person who ‘operates’ a source without satisfying applicable PSD requirements.” [ 727 F.3d at 285] 15
SOL: Homer City Third Circuit Appellate Decision • Current owner: – No relief available because did not violate anything • Former owner: – Penalties barred by 5 year SOL – No injunctive relief either o Purpose of injunctive relief is to enjoin or prevent a violation; here violation is complete so nothing to enjoin “CAA does not authorize an injunction against former owners or operators for a wholly past PSD violation, even if that violation causes ongoing harm.” [ 727 F.3d at 291] • Throughout: Discomfort with practical difficulties of ordering former owner to install BACT 16
SOL: Open Questions • How much did the fact that it was former owners who undertook the modifications matter to the Courts? • One-time versus on-going violation issue: – Nat’l Parks and Conserv. Assoc. v. Tenn. Valley Auth. , 480 F.3d 410 (6 th Cir. 2007) o Where state SIP requirements are worded differently so as to impose on-going requirements in their PSD programs (i.e., “may not construct or operate without permit… ”), violation is continuing and enforcement is possible 17
SOL: More Open Questions • Are Courts just trying to grapple with older cases? • How will agencies’ enforcement strategy change? – Time constraints for pursuing actions • What do these cases mean for other “one-time” claims like failure to submit notices? 18
NSR Reform • 2002 NSR Reform Rules: – Among other things, changed way sources can calculate “significant net emissions increases” – “Major modifications”: a change that causes an actual increase in emissions 19
NSR Reform: U.S. v. Detroit Edison • 2010: Utility undertook project; prior to construction, calculated “projected actual emissions” post-project; concluded NSR was not triggered • 2010: EPA sued utility alleging project was major modification – EPA disagreed with utility’s pre-project emissions projection and extent it relied on demand growth exclusion 20
NSR Reform: Detroit Edison Sixth Circuit Appellate Decision 711 F.3d 643 (6 th Cir. 2013) • Key holdings: – EPA cannot “second-guess” operator’s emissions projection – But, EPA is not categorically prevented from challenging violations o Can evaluate whether operator’s pre-project projection complied with the regulations “at a basic level” – Rejects EPA’s argument that operators may not control post- project emissions to avoid triggering NSR • Remands to District Court to determine whether operator complied with requirements “at a basic level” 21
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