By: Claire Brown, Associate

Recent decisions by the Court of Appeals for the Third, United States v. EME Homer City[1] and Seventh, United States v. Midwest Generation,[2] Circuits are the newest additions to the growing body of case law concerning the Environmental Protection Agency’s (EPA) enforcement power under the Clean Air Act’s Prevention of Significant Deterioration and New Source Review Program (PSD/NSR Program). The EPA alleges nearly identical claims in both cases; former operators made substantial modifications to the power plant more than five years before the enforcement action was brought without first obtaining the necessary PSD/NSR permit and installing Best Available Control Technology (BACT) at the plant. The Third and Seventh Circuits ruled in favor of the industry defendants and advanced a narrow interpretation of the EPA’s enforcement power, deciding mainly on statute of limitations grounds.

Background

Under the PSD/NSR Program, the operator of any “major emitting facility” built or substantially modified after August 7, 1977 must obtain a PSD/NSR permit.[3] This permit must include provisions requiring the emitter to install BACT at the facility.[4] When a facility is modified, the operator must determine whether the modification is “major,” thus triggering the obligation to obtain a PSD/NSR permit.[5] The EPA’s enforcement powers under the Clean Air Act, however, check potential abuse by operators. If the EPA determines that a substantial modification requiring a permit was made, but the permit was not obtained, it can sue the operator for civil penalties and injunctive relief. Notably, the Clean Air Act does not establish a statute of limitations for enforcement actions, but the general federal statute of limitations of five years applies to any enforcement action where the government seeks civil penalties,[6] including enforcement actions under the Clean Air Act.[7] In 1999, the EPA began its coal-fired power plant enforcement initiative to ensure that coal-fired power plants are complying with the PSD/NSR requirements. Actions brought under this initiative tend to have extremely high stakes,[8] and it has generated substantial litigation,[9] including these two cases.

The Statute of Limitations Issue 

At the heart of both cases was the tolling of the five year statute of limitations. The EPA argued that even though the modifications triggering the requirement to obtain a permit and install BACTs were outside the five year statute of limitations, the operation of the plant without the permit and BACTs was an ongoing violation. Thus, the EPA argued, civil penalties within five years were warranted for each day of operation without the permit.  The industry defendants, on the other hand, countered that failure to obtain a permit and install BACT was a one-time violation made at the time of the duty-triggering modification, and, therefore, the EPA did not have a claim since more than five years had passed. Both circuits unequivocally sided with the industry defendants and held that failure to obtain a PSD/NSR permit and install BACTs were a one-time violation at the time of the modification. Both circuits reasoned that the statutory language was clear and prohibited only the construction/modification of a plant, not the operation of a plant, without obtaining the appropriate permit and control technology. EME Homer City, the Third Circuit case, directly quoted from Midwest Electric, the Seventh Circuit case, when it stated that “[t]he violation is complete when construction [or modification] commences without a permit in hand.”

EPA’s Enforcement Power Now

With these opinions, the Third and Seventh Circuits join the Eighth[10] and Eleventh[11] Circuits in holding that failure to comply with PSD/NSR requirements is a one-time violation.[12] Thus, the EPA must bring an enforcement action within five years of a modification it believes triggers the PSD/NSR requirements. While five years may appear sufficient, to determine if a major modification has been made, the EPA must collect enormous quantities of records from the operator and have experts carefully comb through them and run data through several models to establish that the operator should have expected a net increase in emissions from the modification. This is a task easier said than done. The EPA’s ability to effectively combat violations of the PSD/NSR Program and ensure that more protective pollution control technology is installed has been severely hampered by these decisions.