By: Spencer Piatt, Senior Notes Editor

The Third Circuit’s decision in United States v. EME Homer City Generation, L.P. (“Homer City”)[1] is the most recent in a series of decisions from the U.S. Courts of Appeals that have undermined the Environmental Protection Agency’s (“EPA”) enforcement authority under the Clean Air Act (“CAA”). The Third Circuit joins the Seventh, Eighth, and Eleventh Circuits in holding that a violation of preconstruction permitting requirements applicable to a certain source is a one-time (rather than continuous) violation of the CAA for the purpose of applying the five-year statute of limitations.[2] The Third Circuit also agreed with previous Courts of Appeals decisions further limiting the EPA’s power by rejecting the EPA’s challenge to the validity of the Homer City Generation Power Plant’s (“Homer City Plant”) Title V permit for failing to include prevention of significant deterioration (“PSD”) requirements, holding that it lacked jurisdiction to hear the Title V claims outside of the statutorily proscribed permitting process.[3]

The PSD permit program at issue in Homer City requires operators of “major emitting facilities” in “attainment areas” to obtain a permit from the government before beginning construction on a facility.[4] The PSD program subjects major emitting facilities to the best available control technology (“BACT”) standard, which is a source-specific emission limitation “based on the maximum degree of reduction for each pollutant subject to regulation . . . taking into account energy, environmental, and economic impacts and other costs,” determined by the Administrator to be achievable.[5] The PSD permit and all other applicable CAA permits must be included in a single Title V operating permit, which the government must grant before a source may begin operation.[6] The Title V permit requirement does not impose additional substantive requirements on a source, but rather consolidates all of the CAA requirements applicable to the source into a single permit.[7]

Homer City arose in 2011 when the EPA sued the current and former owners of the Homer City Plant in Pennsylvania, seeking civil penalties and injunctive relief for violations of the PSD and Title V requirements.[8] EPA alleged that the former owners made major modifications to the Homer City Plant in 1991, 1994, 1995, and 1996 that should have triggered PSD permitting requirements.[9] According to the Third Circuit, however, the former owner’s failure to obtain a PSD permit before making the major modifications, and the current owner’s continued operation without obtaining a PSD permit, constituted only single violations of the CAA that ended upon completion of the final modification in 1996.[10] Accordingly, the court held that the statute of limitations had already expired on the EPA’s PSD claims against the Homer City Plant.[11]

The court also held that it did not have jurisdiction to hear EPA’s Title V permit claims. The court determined that Congress intended all objections to Title V permits to be raised during the administrative process, noting the “thoroughness” of the review process and provisions mandating the denial and revocation of permits under certain circumstances.[12] Thus, in the Third Circuit’s view, although EPA has the authority to bring enforcement actions against sources for operating in violation of, or without, a Title V Permit, the EPA can only challenge the permit itself by reopening the administrative review process.[13]

This decision and its predecessors arguably contravene the intent of Congress in passing the CAA, and may ultimately lead to the slow demise of one of EPA’s most successful enforcement initiatives to date. The nationwide enforcement initiative, which began in 1999, was designed to target four sectors believed to produce the most overall emissions and highest probability of past violations: coal-fired power plants, cement manufacturing facilities, sulfuric and nitric acid manufacturing facilities, and glass manufacturing facilities.[14] The Homer City Plant, a coal-fired power plant, is one of the largest pollution sources in the United States and contributes to a myriad of serious health issues.[15]

When Congress passed the CAA and its amendments, it did so under the assumption that the average operational lifetime of utility power plants was approximately thirty years, and thus most major emitting facilities in existence at that time would be subject to at least BACT-level controls within thirty years.[16] This assumption likely explains why Congress failed to meaningfully address the possibility of a facility’s construction and continued operation without a PSD permit.[17]

In a statutory scheme designed to “protect and enhance the quality of the Nation’s air resources so as to promote the public health and welfare,”[18] it is difficult to believe that Congress intended to incentivize violations of PSD requirements. Yet, courts continue to interpret the PSD language to severely limit EPA’s enforcement authority after five years of post-construction operation. With PSD violations safely in the past, and compliance heavily contingent on self-reporting, the Homer City Plant and others like it will likely avoid penalties and delay installation of pollution controls for the foreseeable future.