Is the NSR Enforcement Initiative Dead Yet? Injunctive Relief Claims Dismissed Against U.S. Steel

Last Friday, EPA lost another NSR enforcement case. Not only that, but this was a case EPA had previously won. As we noted last August, Chief Judge Philip Simon of the Northern District of Indiana, had previously ruled that the United States could pursue injunctive relief claims against United States Steel with respect to allegations by EPA that US Steel had made major modifications to its plant in Gary, Indiana, in 1990 without complying with NSR requirements.

Having reread the 7th Circuit opinion in United States v. Midwest Generation, Judge Simon has had a change of heart and now has concluded that injunctive relief claims (as well as damages) are barred by the statute of limitations, even where the same entity that allegedly caused the original violation still owns the facility. Judge Simon concluded that the Court of Appeals had spoken with sufficient clarity to bind him. The language he cited was this:

Midwest cannot be liable when its predecessor in interest would not have been liable had it owned the plants continuously. (Italics supplied by Judge Simon.)

Judge Simon seems to have felt more compelled than persuaded.

Candidly, it is a little difficult to understand the basis for the statements in Midwest Generation that even claims for injunctions have to be brought within five years. But that is what Midwest Generation appears to mandate. And in a hierarchical system of courts, my job as a trial judge is to do as my superiors tell me.

So while the basis for applying a limitations period to the EPA’s injunction claim under §§ 7475 and 7503 is thinly explained in Midwest Generation, upon reconsideration I do think that’s the outcome required of me here.

One final note. In his original opinion, Judge Simon ruled against US Steel, in part, because the concurrent remedy doctrine, which US Steel argued barred injunctive relief where damages were not available, could not be applied against the United States. As Judge Simon noted, the 7th Circuit Court of Appeals did not discuss the concurrent remedy doctrine, so we don’t know the basis of its holding that a party continuously owning a facility that is alleged to have violated the NSR provisions of the CAA more than five years ago is not subject to injunctive relief. However, it is worth pointing out, as we discussed last month, that Judge James Payne, of the Eastern District of Oklahoma, dismissed injunctive relief claims brought by the Sierra Club (not the government, of course), relying on the concurrent remedy doctrine.

Something tells me that the United States isn’t quite ready to give up on these cases, notwithstanding a string of recent defeats. The NSR enforcement initiative may be in trouble, but it’s not quite dead yet.

Cement Kiln Operators Better Hope that Their Control Technology Works: D.C. Circuit Vacates EPA’s Affirmative Defense Rule

Last week was hazardous air pollutant regulation week at the D.C. Circuit Court of Appeals. First, as we reported, the Court affirmed EPA’s mercury air toxics rule, determining that EPA need not take cost into account in promulgating rules for electric generating units (EGUs) under § 112(n) of the CAA. On Friday, the Court affirmed the substance of EPA’s revised hazardous air pollutant rules for cement kilns, but vacated EPA’s affirmative defense based on unavoidable malfunctions. The decision is notable for two issues that will be of concern even outside the universe of cement kiln operators.

First, on the relevance of cost to EPA’s standard-setting, the decision is a useful bookend to the mercury toxics decision for EGUs. Unlike § 112(n), § 112(d) specifically provides that EPA should take into account “the cost of achieving such emission reduction….” The environmental NGOs argued that EPA may only take cost into account if, as the Curt put it, compliance “would bankrupt the industry.” The court wasn’t buying it. To the Court, this was a simple Chevron question. Given that the statute allows consideration of cost, and that it does not specify how EPA must take cost into account, Chevron requires that the Court defer to EPA’s interpretation.

The second issue of general concern is the Court’s rejection of EPA’s attempt to provide an affirmative defense to civil penalties where violations are based on unavoidable malfunctions. Importantly, the defense does not purport to be a defense to liability, but rather only to the imposition of civil penalties which would otherwise be available under § 304(a) of the CAA. Unfortunately for EPA and cement kiln operators – and other sources who might be looking for similar protection – the court concluded that EPA may not, by rule, eliminate a source of relief specifically authorized by statute.

As the Court noted:

Section 304(a) creates a private right of action, and as the Supreme Court has explained, “the Judiciary, not any executive agency, determines ‘the scope’ – including the available remedies – ‘of judicial power vested by’ statutes establishing private rights of action.”

This aspect of the decision certainly has potential relevance beyond cement kilns. In fact, one of EPA’s arguments in favor of the defense was that:

an affirmative defense for malfunctions is necessary to account for the tension between requirements that emissions limitations be “continuous” and the practical reality that control technology can fail unavoidably.

The Court’s response?

That is a good argument for EPA to make to the courts – and for the courts to then consider – in future civil cases when this issue arises. But it does not suffice to give EPA authority to create an affirmative defense.

As continuous emissions monitors, or CEMS, become more and more routine, the “tension” EPA noted will only become of increasing concern. While the Court noted that EPA could intervene or file an amicus brief in individual cases to oppose imposition of civil penalties, how many of us private practitioners expect that ever to happen?

D.C. Circuit Affirms EPA’s Utility Air Toxics Rule: An “Appropriate” Rule Need Not Be Justified By Cost-Benefit Analysis

Yesterday, the D.C. Circuit Court of Appeals affirmed EPA’s rule setting limits for emissions of mercury and other air toxics from fossil-fuel-fired electric steam generating units.  The focus of the decision – and the issue on which Judge Kavanaugh dissented – was whether EPA was required to consider the costs that would be imposed by the rule.  EPA said no and the majority agreed.

Section 112(n) of the Clean Air Act required EPA to perform a study of the health hazards related to hazardous emissions from EGUs prior to regulating them.  How was EPA to utilize the results of the study?

The Administrator shall regulate [EGUs] under this section, if the Administrator finds such regulation is appropriate and necessary after considering the results of the study required by this subparagraph.

The industry petitioners and Judge Kavanaugh took the position that Congress’s use of the word “appropriate” evidenced an intent to require EPA to consider costs.  To Judge Kavanaugh, “that’s just common sense and sound government practice.”  However, persuasive Judge Kavanaugh may be as a matter of policy, the majority was not persuaded that the law requires a consideration of cost.

As the majority noted, nothing in section 112(n) requires that EPA consider cost.  Indeed, the word “cost” is not mentioned in section 112(n).  Moreover, Congress required EPA to make the “appropriate and necessary” determination based on a study of health impacts, not a study of costs.  Finally, as EPA and the majority noted, the Supreme Court, in Whitman v. American Trucking Ass’ns, cautioned against finding authority – let alone a mandate – to consider costs in ambiguous provisions of the CAA, given that there are sections of the Act which do address costs.

I’m with Judge Kavanaugh as a matter of policy (though it’s worth noting that EPA in fact did a cost-benefit analysis and found that the benefits of the rule substantially outweigh its costs).  On the law, however, the dissent seems pretty much a case of ipse dixit.  When the rule was promulgated, I said that I would be “stunned” if the rule was not upheld on judicial review.  Notwithstanding the dissent, I’d be equally stunned if the Supreme Court flips this decision.  I don’t think that there’s anything here warranting Supreme Court review.

Enforcement of Municipal Stormwater Ordinances Is Tricky Business: Failure to Enforce an Ordinance Required Under a Permit Is Not a Violation of the Permit

Stormwater pollution has become an increasingly important problem.  Part of the difficulty in solving it is that it’s not obvious who should be responsible.  Should cash-strapped municipalities be on the hook or should it be developers and others who own and maintain large properties with acres of impermeable surfaces?  Often, the answer given by EPA and state regulators is that municipal separate stormwater sewer systems, or MS4s are responsible, but they have the authority – and sometimes the obligation – to impose appropriate requirements on property owners.

That was the case in Citizens for Pennsylvania’s Future v. Pittsburgh Water and Sewer Authority.  Pennsylvania DEP issued an NPDES permit to the PWSA.  The permit required that the City of Pittsburgh and the PWSA enact ordinances:

to address (1) illicit discharge detection and elimination; (2) construction site runoff control; and (3) post-construction stormwater management in new development and redevelopment.

They did so.  However, according to the plaintiffs, the City failed to enforce the ordinance in the case of what appears to be a large urban renewal project in Pittsburgh.  The plaintiffs sued the PWSA and the City, alleging that the failure to enforce the ordinance constituted a violation of the NPDES permit.

The Court was having none of it.  After noting that NPDES permits are a form of contract and must be interpreted according to their plain meaning, the Court reviewed the permit and found that:

it in no way imposes a condition that if the ordinances are violated that this results in a violation of the permit itself.  Nowhere in the permit does it explicitly say that it is a violation for a failure to enforce an ordinance enacted pursuant to the permit’s terms. We will not implicitly read this requirement into the permit, which sets forth various ways in which the permit is violated or the action or inaction of the permittee would impose penalties on the permittee.

That’s the end of this battle, but it’s almost certainly not the end of the war.  As EPA, state agencies, and citizen groups all continue to focus on stormwater issues, we can expect to see more cases in which municipalities, federal and state regulators, and courts are forced to figure out who bears ultimate responsibility for solving this seemingly intractable issue.

Fasten your seatbelts.  It’s going to be a bumpy night.

What’s the Difference Between ExxonMobil and Shell When It Comes To Climate Change? What’s A Trillion Tons (or Tonnes) Among Friends?

Earlier this week, I posted about ExxonMobil’s shareholder disclosure.  The bookend to ExxonMobil’s disclosure is the release of the Trillion Tonne Communique by the Prince of Wale’s Corporate Leaders Group.  The Communique calls for total carbon emissions to be capped at one trillion tons, a level at which the signers have confidence that global temperature increases can be kept at or below two degrees Celsius.

In order to attain the one trillion ton cap, the Communique calls for a transition over the course of the century to planet-wide net zero carbon emissions.  In order to reach net zero emissions, according to the signers, there will have to be a “robust carbon price.”

Although the Communique does not define robust, something tells me that such a robust price is where the Communique’s signers and ExxonMobil probably part ways.  I don’t see ExxonMobil supporting a robust carbon price, enforced by regulation, any time soon.

One final note.  The Communique web site shows where its signers are located.  To date, there are 61 in Europe and 8 in North America – none of the North American signers is a large energy resource company.  Until that changes, I think that the Communique faces an uphill battle in the US.

ExxonMobil Admits Climate Change Is Real. It also Imposes an Internal Cost on Carbon. Still Not Enough to Get Any Love From the Greens (Interesting Reading, Though)

Last week, in response to shareholder requests that it disclose information regarding how climate change might affect it in the future, ExxonMobil released two reports, one titled Energy and Climate, and one titled Energy and Carbon – Managing the Risks.  They actually make fascinating reading and seem to represent a new tack by ExxonMobil in its battle with those seeking aggressive action on climate change.

The reports do not deny the reality of climate change.  Indeed, the reports acknowledge climate change, acknowledge the need for both mitigation and adaptation, acknowledge a need to reduce fossil fuel use (at some point), acknowledge the need to set a price on carbon, and acknowledge that ExxonMobil in fact already is making future planning decisions utilizing an internal “proxy” price on carbon that is as high as $80/ton of CO2 in the future.

The reaction of the shareholder activists who pushed for the disclosures?  They are not happy.  Why not?

Because ExxonMobil has said explicitly that it doesn’t believe that there will be sufficient worldwide pressure – meaning government regulations imposing very high carbon prices – to reduce fossil fuel use sufficiently quickly enough to limit global temperature rise to 2 degrees Celsius.  It also does not believe that worldwide carbon regulation will leave it with any “stranded assets.”

I understand the moral case against fossil fuel use.  Personally, however, I’d rather rely on a carbon price that provides the appropriate incentives to get the reductions in CO2 emissions that we need to mitigate climate change.  On that score, sadly, it’s not obvious to me at this point that ExxonMobil’s analysis of likely outcomes is actually wrong.

My biggest complaint with the reports is the refusal to recognize that markets react dynamically to new regulatory requirements.  The history of big regulatory programs is that they pretty much always cost less than the predictions made before the regulations are implemented.  The lesson then is that the current projections of energy cost increases resulting from a high cost of carbon are likely to be overestimated.

Time will tell.  At least I hope so.