Federal Courts Tackle Clean Air Act Liability, Cross-State Emissions

Last week, the U.S. Court of Appeals for the Seventh Circuit upheld an earlier district court decision that Clean Air Act liabilities do not transfer to new owners when a facility is sold, while the Third Circuit upheld an Environmental Protection Agency (EPA) rule to limit sulfur dioxide emissions from a Pennsylvania coal-fired power plant on request of New Jersey, a downwind state.

Seventh Circuit: Liabilities Do Not Transfer

In the case USA v. Midwest Generation, LLC, the three-judge panel for the Seventh Circuit noted that under law, any “major emitting facility” built or substantially modified after Aug. 7, 1977, in parts of the country subject to the rules about prevention of significant deterioration (PSD), needs a construction permit (in addition to the operating permits required under the Clean Air Act). A condition to a construction permit is installation of the "best available control technology (BACT)" for each regulated pollutant.

Between 1994 and 1999, Commonwealth Edison Co. modified, without permits, five Illinois coal-fired power plants (Crawford and Fisk in Chicago; Powerton in Pekin; Waukegan Station in Waukegan; and Joliet in Joliet), all which began operating in Aug. 7, 1977 and were grandfathered until the modification. The court assumed the plant modifications needed permits, but it pointed out: "The question ‘how much repair or change requires a permit?’ has been contentious and difficult." Commonwealth Edison alleged, however, it did not need permits and was therefore not obliged to install BACT.

In 2009, more than a decade after the first modifications had been completed, Commonwealth Edison sold the five plants to Midwest Generation, prompting the EPA and the state of Illinois to file suit. The plaintiffs contended that Midwest is liable for the permits as Commonwealth Edison’s successor. In their appeal to the federal court, the plaintiffs also "accuse the district court of allowing a corporate restructuring to wipe out liability for ongoing pollution," the Seventh Circuit notes.

However, notwithstanding that Midwest and parent company Edison Mission Energy filed petitions under the Bankruptcy Code after the appeal was argued, the court decided it did not "need to worry about whether the sale had any effect on liability, and if so who would be responsible today." It ruled: "Midwest cannot be liable when its predecessor in interest would not have been liable had it owned the plants continuously."

One reason is that the plaintiffs’ contention that "a continuing injury from failure to get a preconstruction permit (really, from failure to use BACT) makes this suit timely is unavailing,” it said.

"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. Once the statute of limitations expired, Commonwealth Edison was entitled to proceed as if it possessed all required construction permits," the court ruled.

EPA Cross-State Rule Valid, Third Circuit Rules

On July 12, the two-judge panel at the Third Circuit ruled in the case GenOn REMA LLC v. EPA that the EPA had the authority under the Clean Air Act to limit sulfur dioxide from the GenOn’s 427-MW coal-fired Portland Generating Station in Northampton County, Pa.—directly across the Delaware River within 500 feet of Knowlton Township in Warren County, N.J.

New Jersey’s Department of Environmental Protection (DEP) filed a petition with the EPA in September 2010 claiming more than 30,000 tons of SO2 emissions, as well as mercury and other contaminants, were being carried by wind and weather across the Delaware River and negatively impacting air quality in Morris, Sussex, and Hunterdon counties, the state claimed. DEP Commissioner Bob Martin told the EPA at a hearing that it was unacceptable to have “a single power plant on New Jersey’s border emitting more sulfur dioxide and mercury than all of New Jersey’s coal-, oil- and gas-fired power plants combined.”

In November 2011, the EPA granted New Jersey’s petition and issued a rule imposing direct limits on Portland’s emissions (including a mandated reduction of 81% SO2 emissions) and a schedule of restrictions to reduce its contribution to air pollution within three years.

But GenOn challenged the EPA’s rule in federal court, arguing it was "arbitrary and capricious," and that it was inconsistent with the agency’s authority under the Clean Air Act. The EPA had no authority to impose direct regulations on Portland before the time that Pennsylvania is required to complete its Section 110 state implementation plan process for the 1-hour SO2 NAAQS, GenOn said.

On July 12, however, the Third Circuit found that the EPA "set forth ample support that explains its rationale in promulgating the Portland Rule, establishing a rational connection between the facts that it found and the choice that it made. For these reasons, we hold that the EPA’s action of promulgating the Portland Rule was neither an abuse of discretion nor arbitrary or capricious."

Sources: POWERnews, Seventh Circuit, Third Circuit

Sonal Patel, Senior Writer (@POWERmagazine, @sonalcpatel)

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