More on Old NSR Claims: Injunctive Relief Remains Available Against Original Owners Foolish Enough Not to Have Sold

As we noted last week and last month, the 3rd and 7th Circuits have ruled that violations of the obligation to undertake NSR review prior to implementing major modifications are not continuing, but are instead one-time violations occurring at the time the facilities undertake the modification.  These holdings meant that EPA could not pursue either former owners – because they no longer control the facilities – or current owners – because they never violated the statute and have no ongoing obligation to correct the former owner’s violation.

However, what happens if the property has not been sold, so that the entity that committed the violation remains in the control of the facility?  Judge Philip Simon just answered that question in United States v. United States Steel, ruling that such facility owners remain subject to injunctive relief.  United States Steel had argued that the “concurrent remedy doctrine” bars injunctive, i.e., “equitable” relief, in a case where similar legal relief is barred by the statute of limitations.  Judge Simon rejected that position.  His reasoning was not surprising:

Can some creaky, esoteric doctrine of equity really prevent the government from enforcing basic public policy? At a minimum, shouldn’t the government always be able to bring an equitable action to bring a defendant into compliance with the law? Counseling in favor of this intuition is the fact that the most prominent equitable doctrine related to limitations periods – laches – does not apply to government action for this very reason.

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What is animating all of these cases in the end is the fundamental public policy principle expressed by the Supreme Court – that “the sovereign is exempt from the consequences of its laches”– because the government has to have enforcement power to enjoin violations of the law.  [A]s a matter of public policy, the government must be allowed to bring violators into compliance with its laws.

Thus, in those states that engaged in restructuring of energy markets, separating generation from transmission, and inviting merchant generators into the mix, claims of historic NSR violations will generally fail, for the reasons set forth in EME Homer City and Midwest Generation.  Where restructuring did not occur and regulated public utilities continue to hold their original assets, claims of NSR violations may still be viable.  It will be interesting to see if US Steel seeks interlocutory review of this decision and, if so, what the 7th Circuit does with it.

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