7th Circuit Court of Appeals Upholds Statute of Limitation in NSR Enforcement Case

In a very interesting ruling that, at first glance, would appear to have major ramifications to how U.S. EPA pursues New Source Review (NSR) enforcement cases, the United States Court of Appeals for the Seventh Circuit (Court) ruled on July 8, 2013 that a five (5) year statute of limitation applies in NSR enforcement cases involving preconstruction permits and that the requirements of 42 USC § 7475 (CAA §165) relate only to construction or modification of a source.  The decision can be viewed here. The case involved the modification of five of the defendant’s (Commonwealth Edison) “grandfathered” coal-fired power plants between 1994 and 1999.  The defendant took the position that a preconstruction permit was not required. Based on that position, they did not obtain a permit and did not install best available control technology (BACT) in accordance with §165.  The plaintiffs sued the defendant in district court after 10 and 15 years had passed since the modifications were finished, and the district court dismissed the suit as untimely.  The district court decision was appealed by the plaintiffs.

The Court, citing Gabelli v. SEC, 133 S. Ct. 1216 (2013), indicated that “a claim accrues when the plaintiff has a complete and present cause of action” and that the statute of limitations begins to run when the claim accrues.  In this case, the Court determined that the claim accrued at the time of the violation (e.g., between 1994 and 1999).  The plaintiffs argued that the lack of a construction permit was a “continuing violation” (e.g., every day a plant operates without a §165 permit is a fresh violation of the Clean Air Act).   The Court disagreed indicating that the §165 text specifies a step the operator must take before constructing or modifying a “major emitting facility” and stated that “the violation is complete when construction commences without a permit in hand”.  The Court added that there is nothing in the text of §165 indicating that a fresh violation occurs every day that a plant operates without a construction permit.  The statute specifies what must be built, not how the source operates after construction.  The Court cited two other court of appeals decisions[1] in support of their decision regarding operation of a new or modified plant without obtaining a construction permit.

The plaintiffs also contended that newly built or modified sources are subject to BACT (i.e., the operational component of a construction permit) which is a continuing obligation.  The plaintiffs cited a decision[2] contrary to the 8^th and 11^th circuit court decisions cited by the Court.  The Court clarified that the decision[3] cited by the plaintiffs was based on Tennessee statutes and implementation plans that require certain sources to use the best available control technology whereas §165 relates only with conditions associated with construction or modification.  The Court indicated the possibility that an Illinois statute, regulation, or implementation plan may require that a plant “subject to” BACT use it in operation, but deferred any such consideration to district court for resolution.  The plaintiff cited an Illinois statute[4] (§5/9.1(d)(2)) that they contend was analogous to the Tennessee requirement considered by the 6^th circuit, which the Court deferred to district court.  Within the context of the appeal, the Court disagreed that the defendant violated the Illinois statute[5] because of the earlier violation of §165.  The Court surmised that “Commonwealth Edison’s violations of §7475 during the 1990s do not make its current operations a violation of federal law, so they do not derivatively violate §5/9.1(d)(2)”.  Finally, the Court stated that “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”.

While some parties may well be applauding this court decision that limits the time of permitting liability, every significant court decision like this has potential consequences as to how the U.S. EPA will act in the future.  This reminds us of the landmarked air quality court decision in the late 1980s known as “United States v. Solar Turbines, Inc.”  In that decision the court basically found that U.S. EPA could not overturn a prevention of significant deterioration (PSD) permitting decision on Best Available Control Technology that had been made by a state agency that had been delegated authority to implement PSD permitting.  That decision led to significant provisions in the 1990 Clean Air Act that strengthened the U.S. EPA’s authority for oversight in major source permitting.  It has also lead to significantly more review of preconstruction permits by the U.S. EPA prior to a state/local agency (“Agency”) issuing any permit to revise a major source permit even for instances of a minor permit action at a major source facility.  It now takes significantly longer to obtain a preconstruction permit at a major facility than it did in the 1980s as a direct consequence of this additional permitting oversight.  Therefore, this court decision could similarly result in additional U.S. EPA rules or permitting requirements to mitigate their shortened window for taking legal action.