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September 16, 2013
Past owner not liable in PSD case

The issue in United States v. EME Homer City Generation, L.P. is succinctly described by the U.S. Court of Appeals for the 3rd Circuit.  To paraphrase:

Ten years after the owners/operators of a power plant in Indiana County, Pennsylvania, made changes to the facility, the EPA and several states announced civil enforcement against the plant owners for undertaking major modifications of the plant without first obtaining a Prevention of Significant Deterioration (PSD) permit, as required by the Clean Air Act (CAA).  The same year that the EPA undertook its enforcement action, the plant was sold to EME Homer City Generation.

“Now,” says the 3rd Circuit, “the EPA wants to force the former owners to obtain the missing preconstruction permit and install the missing pollution controls on a plant they no longer own or operate.  And they seek damages and an injunction against the current owners who neither owned nor operated the plant when it was allegedly modified illegally.”

The 3rd Circuit’s three-judge panel ruled, unanimously, that EPA’s petition to the court distorts the plain text of the CAA to shore up what the EPA views as an incomplete remedial scheme.  “That we cannot do,” the court concluded.

1999 enforcement sweep

The case was triggered, at EPA’s end, in enforcement actions the Agency launched in 1999 against electric utility companies that allegedly made major modifications to their units—typically, replacement of boiler components —without obtaining PSD and new source review (NSR) permits.  By 2004, the Pennsylvania plant had become one of the country’s largest sources of air pollution, annually releasing nearly 100,000 tons of sulfur dioxide.   

According to the EPA, the plant’s former owners were in violation of the CAA by failing to obtain PSD and Title V permits, while the current plant owners were in violation because they were operating the source without those permits. 

In 2011, the EPA and the states of Pennsylvania, New Jersey, and New York filed their complaints in federal district court.  Among other things, the plaintiffs were seeking to fine the current owners up to $37,500 per day for each day the current plant owners operated the facility during the   5 years preceding the lawsuit.

District court findings

The district court held that the 5-year statute of limitations expired on the civil-penalty PSD claims against the current owners because the PSD program imposes only prerequisites to construction and modification, not ongoing conditions of operation.  Also, said the district court, the current owners were not the ones to modify the plant and could not be liable for violating the PSD requirements.  Finally, the district court declined to enjoin the former owners because they no longer owned or operated the plant and thus posed no risk of violating the PSD program in the future.  The EPA and the states appealed to the 3rd Circuit.

No violation in operations

The 3rd Circuit’s conclusions included the following:

  • The PSD requirement to install the best available control technology (BACT) does not “even hint 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.”  Other circuits have reached this same conclusion.  In should be noted by the regulated community that the EPA still apparently believes that other provisions in the CAA turn the PSD requirements into operational conditions.
  • The EPA also asked the district court to order the former owners to pay some type of penalty for the PSD violations.  For example, the Agency suggested that the former owners cooperate with the current owners to install BACT.  The EPA also proposed that the district court order the former owner to purchase and retire emissions credits to offset pollution elsewhere in the nation.  But both courts agreed that neither approach has a legal basis.  According to the 3rd Circuit, the current owners cannot be held liable for violating the PSD or BACT requirements.   “If the current owners cannot be held liable, then the district court has no authority to enjoin them at all,” stated the 3rd Circuit.  Furthermore, without the cooperation of the current owners, the former owners would not be able to comply with a court order directing them to install pollution control measures because they no longer control the plant. 
  • The appeals court also upheld the district court’s dismissal of the plaintiffs’ claims against the former and current owners for submitting an incomplete Title V permit application and operating without a complete Title V permit (i.e., lacking provisions for PSD compliance).  According to the court, in writing the CAA, Congress contemplated that deficiencies in Title V applications and proposed permits would come to light and be corrected through the administrative process, not through enforcement.

United States v. EME Homer City Generation, L.P.

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