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

United States Court of Appeals, Third Circuit

August 21, 2013

UNITED STATES OF AMERICA, COMMONWEALTH OF PENNSYLVANIA, DEPARTMENT OF ENVIRONMENTAL PROTECTION; STATE OF NEW YORK; STATE OF NEW JERSEY, (Intervenors in District Court)
v.
EME HOMER CITY GENERATION, L.P.; HOMER CITY OL1, LLC; HOMER CITY OL2, LLC; HOMER CITY OL3, LLC; HOMER CITY OL4, LLC; HOMER CITY OL5, LLC; HOMER CITY OL6, LLC; HOMER CITY OL7, LLC; HOMER CITY OL8, LLC; NEW YORK STATE ELECTRIC AND GAS CORPORATION; PENNSYLVANIA ELECTRIC COMPANY United States of America, Appellant UNITED STATES OF AMERICA COMMONWEALTH OF PENNSYLVANIA, DEPARTMENT OF ENVIRONMENTAL PROTECTION; STATE OF NEW YORK; STATE OF NEW JERSEY, (Intervenors in District Court)
v.
EME HOMER CITY GENERATION, L.P.; HOMER CITY OL1, LLC; HOMER CITY OL2, LLC; HOMER CITY OL3, LLC; HOMER CITY OL4, LLC; HOMER CITY OL5, LLC; HOMER CITY OL6, LLC; HOMER CITY OL7, LLC; HOMER CITY OL8, LLC; NEW YORK STATE ELECTRIC AND GAS CORPORATION State of New York, Appellant UNITED STATES OF AMERICA, COMMONWEALTH OF PENNSYLVANIA, DEPARTMENT OF ENVIRONMENTAL PROTECTION; STATE OF NEW YORK; STATE OF NEW JERSEY, (Intervenors in District Court)
v.
EME HOMER CITY GENERATION, L.P.; HOMER CITY OL1, LLC; HOMER CITY OL2, LLC; HOMER CITY OL3, LLC; HOMER CITY OL4, LLC; HOMER CITY OL5, LLC; HOMER CITY OL6, LLC; HOMER CITY OL7, LLC; HOMER CITY OL8, LLC; NEW YORK STATE ELECTRIC AND GAS CORPORATION Commonwealth of Pennsylvania, Department of Environmental Protection; State of New Jersey, Appellants

Argued May 15, 2013

On Appeal from the United States District Court for the Western District of Pennsylvania District Court No. 2-11-cv-00019 District Judge: The Honorable Terrence F. McVerry

David J. Hickton Paul E. Skirtich Office of United States Attorney Robert J. Lundman [ARGUED] United States Department of Justice Environment & Natural Resources Division John Sither L. Katherine Vanderhook-Gomez United States Department of Justice Environmental Enforcement Section Counsel for Appellant United States of America.

Richard P. Dearing Claude S. Platton [ARGUED] Monica B. Wagner Michael Heilman Commonwealth of Pennsylvania Department of Environmental Resources Michael J. Myers Office of Attorney General Jon C. Martin Office of Attorney General of New Jersey Division of Law Richard J. Hughes Justice Complex Lisa J. Morelli Office of Attorney General of New Jersey Division of Law Counsel for Appellants.

Stephen J. Bonebrake Andrew N. Sawula Schiff Hardin Kevin P. Holewinski Jones Day James J. Jones Rebekah B. Kcehowski Jones Day Pittsburgh, PA 15219 Brian J. Murray Jones Day Beth M. Kramer Jeffrey Poston Chet M. Thompson [ARGUED] Crowell & Moring Peter T. Stinson W. Alan Torrance Dickie, McCamey & Chilcote John P. Elwood [ARGUED] Kevin A. Gaynor Benjamin S. Lippard Jeremy C. Marwell Vinson & Elkins Paul D. Clement David Z. Hudson Bancroft Paul E. Gutermann Akin, Gump, Strauss, Hauer & Feld Counsel for Appellees.

Before: SMITH, FISHER, and CHAGARES, Circuit Judges.

OPINION

SMITH, Circuit Judge.

The owners of a coal-fired power plant failed both to obtain a preconstruction permit and to install certain pollution-control technology before making changes to the plant. The Environmental Protection Agency and several states say the owners were required to do so. But the EPA[1] did not cry foul until more than a decade after the changes, well after the owners had sold the plant. Now the EPA wants to force the former owners to obtain the missing preconstruction permit and to 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 relief now sought would require us to distort plain statutory text to shore up what the EPA views as an incomplete remedial scheme. That we cannot do, and so we will affirm the District Court's dismissal of their claims.

I.

A. The Homer City Generation Power Plant goes online in 1969, and Congress enacts the Clean Air Act.

In the 1960s, the Pennsylvania Electric Company (Penelec) and the New York State Electric & Gas Corporation (NYSEG) built the Homer City Generating Station ("the Plant"), a coal-burning power plant in Indiana County, Pennsylvania. JA66. The Plant's first two burners went online at the end of the decade. Id. At that time, the Clean Air Act was little more than a federally funded research program on air pollution, the EPA did not exist, and the few enforceable standards in place did not affect the Plant's construction and operation. See Air Quality Act of 1967, Pub. L. No. 90-148, 81 Stat. 485–507 (expanding studies into air pollutants, emissions, and control techniques); Clean Air Act Amendments of 1966, Pub. L. No. 89-675, 80 Stat. 954–55; Clean Air Act of 1963, Pub. L. No. 88-206, 77 Stat. 392–401; Air Pollution Control Act of 1955, Pub. L. No. 84-159, 69 Stat. 322 (providing funds for federal research into air pollution).

B. Congress enacts the Clean Air Act, which grandfathers pre-existing pollution sources (like the Plant) out of its requirements until they are "modified."

1. The Clean Air Act of 1970 sets up the modern federalism-based framework.

While the Plant ramped up operations over the next two decades, Congress enacted three amendments to the Clean Air Act transforming it into the comprehensive regulatory scheme it is today. It is necessary, then, to take a minor detour through those legislative changes.

These amendments reach back to 1970 when Congress converted the Act from a federal research program on air pollution into the federalist enforcement framework still in place today. Clean Air Act of 1970, Pub. L. No. 91-604. The 1970 version charged the soon-to-be[2] EPA with setting national maximum permissible levels of common pollutants for any given area—called National Ambient Air Quality Standards, or NAAQS (pronounced "knacks"). See 42 U.S.C. § 7409(a)–(b) (requiring the EPA to choose levels that "allow[] an adequate margin of safety" required "to protect the public health" (quoting 42 U.S.C. § 7409(b)(1)). The EPA designates "nonattainment" areas within each state where a regulated pollutant levels exceeds the NAAQS (so called because the areas are not attaining the EPA's standards). 42 U.S.C. § 7407(d).

The states then take primary responsibility (if they want it[3]) for choosing how to meet the NAAQS within their borders. See Train v. Natural Res. Def. Council, Inc., 421 U.S. 60, 63–67 (1975). They do so by creating State Implementation Plans, or SIPs. In their SIPs, states "choose which individual sources within [their borders] must reduce emissions, and by how much." EME Homer City Generation L.P. v. EPA, 696 F.3d 7, 13 (D.C. Cir. 2012). For instance, a state "may decide to impose different emissions limits on individual coal-burning power plants, natural gas-burning power plants, and other sources of air pollution, such as factories, refineries, incinerators, and agricultural activities." Id. A state must submit its SIP to the EPA for review and approval whenever the NAAQS are updated, see 42 U.S.C. § 7410(a)(1), and each SIP must meet certain requirements, see id. §§ 7410(a)(2), 7471.

2. The 1977 amendments create the Prevention of Significant Deterioration (PSD) pre-construction permit program.

The 1970 framework merely prevented pollution sources from exceeding the NAAQS. It did not prevent new construction or modifications that would "gray out" areas with clean air as long as the pollution did not exceed the NAAQS. See Craig N. Oren, Prevention of Significant Deterioration: Control-Compelling Versus Site-Shifting, 74 Iowa L. Rev. 1, 9 (1988). At least that was the consensus before federal courts interpreted the Clean Air Act as requiring the EPA to "prevent deterioration of [the nation's] air quality, no matter how presently pure that quality in some sections of the country happens to be." Sierra Club v. Ruckelshaus, 344 F.Supp. 253, 255 (D.D.C. 1972), aff'd, 41 U.S.L.W. 2255 (D.C. Cir. Nov. 1, 1972) (per curiam), aff'd by an equally divided court sub nom. Fri v. Sierra Club, 412 U.S. 541 (1973) (per curiam) (Powell, J., recused). To enforce that interpretation, Congress created a program for reviewing the effect of new pollution sources on existing air quality before they are constructed. Oren, Prevention of Significant Deterioration, 74 Iowa L. Rev. at 10.

Congress divided this aptly named New Source Review program into two permit programs. For areas with unclean air—called "nonattainment" areas because they are not attaining the NAAQS—the Nonattainment New Source Review program ensures that new emissions will not significantly hinder the area's progress towards meeting the NAAQS. For areas with clean air— "attainment" areas—the Prevention of Significant Deterioration (PSD) program ensures that any new emissions will not significantly degrade existing air quality.[4] The PSD program stands at the center of this case.

The PSD program requires operators of pollution sources in attainment areas to obtain a permit from the state or the EPA before constructing or modifying a "major emitting facility" (which emits significant air pollution even with pollution controls installed). See 42 U.S.C. §§ 7475(a) (setting permitting requirements), 7479(1) (defining "major emitting facility"). This "case-by-case" permitting process "tak[es] into account energy, environmental, and economic impacts and other costs, " 40 C.F.R. § 52.21(b)(12); 42 U.S.C. §§ 7479, 7602(k), to determine the "best available control technology" (BACT)[5] for controlling every regulated pollutant at the facility to a specified limit, 42 U.S.C. § 7475(a)(4).[6] In keeping with the Clean Air Act's federalist framework, Congress required states to implement the PSD program in their SIPs. See 42 U.S.C. § 7410(a)(2)(D)(i)(II), (a)(2)(J).

3. The 1990 amendments add an operating- permit program.

Such was the Clean Air Act until 1990. That year, Congress passed its third and latest round of major amendments. In addition to other practical problems that arose after the 1977 amendments, citizens, regulators, and even the owners and operators of pollution sources had difficulty knowing which of the Clean Air Act's many requirements applied to a particular pollution source. Sierra Club v. Johnson (Sierra Club 11th Cir.), 541 F.3d 1257, 1261 (11th Cir. 2008); Hon. Henry A. Waxman, An Overview of the Clean Air Act Amendments of 1990, 21 Envtl. L. 1721, 1747 (1991). After all, the only requirements easily discoverable were those expressly listed in the preconstruction permits issued under the New Source Review program; any other applicable requirements under the Clean Air Act were scattered among separate records, permits, and other documents, if they were recorded at all. Sierra Club 11th Cir., 541 F.3d at 1261; Waxman, An Overview of the Clean Air Act Amendments of 1990, 21 Envtl. L. at 1747.

Congress fixed that problem by enacting Title V. See Operating Permit Program, 57 Fed. Reg. at 32, 351 (explaining that Title V's goals are "[i]ncreased source accountability and better enforcement"). Title V "requires all major sources of air pollution to obtain operating permits" that "'consolidate into a single document (the operating permit) all of the clean air requirements applicable to a particular source of air pollution.'" Sierra Club 11th Cir., 541 F.3d at 1260 (quoting Sierra Club v. Ga. Power Co., 443 F.3d 1346, 1348–49 (11th Cir. 2006)); see Pub. L. No. 101-549, §§ 501–02, 104 Stat. 2399, 2635–36 (codified at 42 U.S.C. § 7661a(a)). Title V "does not generally impose new substantive air quality control requirements, " Sierra Club 11th Cir., 541 F.3d at 1260, but does require the source to obtain an operating permit that "assures compliance . . . with all applicable requirements, " 40 C.F.R. § 70.1(b). Among the many requirements included in an operating permit are PSD emission limits (if applicable). Sierra Club 11th Cir., 541 F.3d at 1260. As with the PSD program, Title V's operating permit program became a required element of SIPs. See 42 U.S.C. § 7661a.

C. Penelec and NYSEG modify the Plant during the 1990s but do not apply for a PSD permit, though they later apply for a Title V permit.

None of these comprehensive reforms initially affected the operation of the Homer City Generation Power Plant by Penelec and NYSEG. Congress had grandfathered pre-existing pollution sources, including the Plant, out of the PSD requirements "until those sources [we]re modified in a way that increases pollution." Sierra Club 11th Cir., 541 F.3d at 1261; see also United States v. Cinergy Corp., 458 F.3d 705, 709 (7th Cir. 2006).

But the Plant's sidelined status came to a halt in the 1990s. In 1991, 1994, 1995, and 1996, Penelec and NYSEG allegedly made various changes to the Plant's boilers that increased net emissions of sulfur dioxide and particulate matter.[7] Those changes were allegedly "major modifications" triggering the PSD permitting requirements and requiring the use of BACT. JA66-67, 81-82, 84-85. But at the time, Penelec and NYSEG believed their changes were "routine maintenance" exempted from the PSD program. Oral Arg. Tr. at 36:5– 11; see 40 C.F.R. § 60.14(e)(1) ("The following shall not, by themselves, be considered modifications under this part: (1) Maintenance, repair, and replacement which the Administrator determines to be routine for a source category . . ."). So they did not apply for a PSD permit and instead continued to operate the modified Plant as though it were still exempt from the PSD program and BACT-based emissions controls. In 1995, Penelec and NYSEG applied for an operating permit as required by Title V. Because they never received a PSD pre- modification permit containing BACT-based emissions limits for the Plant their Title V operating permit application did not include any PSD-based requirements or BACT-based emissions limits. JA83–84, 86–87.

D. EPA announces an "unprecedented" initiative to enforce the Clean Air Act. Meanwhile, the Former Owners sell the Plant to the Current Owners, after which Pennsylvania approves the Plant's Title V permit.

While Penelec and NYSEG waited for Pennsylvania and the EPA to issue its Title V operating permit, the EPA rolled out a new enforcement initiative that eventually ensnared the Plant's operations. In 1999, the EPA "jointly announced what they called an 'unprecedented action'"—civil enforcement actions against seven electric utility companies and the Tennessee Valley Authority for Clean Air Act violations dating back more than twenty years at thirty-two power plants across ten states. Margaret Claiborne Campbell & Angela Jean Levin, Ten Years of New Source Review Enforcement Litigation, 24 Nat. Resources & Env't 16 (2010). That action was merely the first in what would become ...


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