Law and the Environment : Environmental Lawyer & Attorney : Foley Hoag Law Firm : Boston, Washington D.C.

Earlier this week, the United States brought another NSR/PSD enforcement action, this time concerning the Homer City Plant, in Pennsylvania. The suit itself isn’t big news, though it’s helpful to have periodical reminders that the NSR enforcement initiative remains active at EPA and DOJ; it is a significant part of the government’s arsenal against traditional pollutants.

It’s also important to remember that, in the absence of comprehensive climate legislation, the NSR enforcement initiative has become part of the government’s climate strategy. The plant spokesman stated that the plant is “positioned quite well to succeed in whatever environment we might be looking at in the future." However, Randy Francisco, Pennsylvania representative for the Sierra Club's "Beyond Coal" campaign (and doesn’t the name say it all), had a different view: 

I don't think it's worth it to put the money into it to clean it up. This is one of the dirtiest plants in the country, and it really just needs to be put to bed.

Why do I describe this as a fine mess and how did we get here? To mix my comedic metaphors, we have met the enemy and he is us. It’s a mess, because the PSD/NSR program is a clunky, awkward, and vague program and, whatever the merits of the specific legal questions in the various suits, EPA can’t really deny that its interpretation of the program has not been a model of consistency. It’s a mess because it’s difficult to achieve programmatic results through enforcement. It’s a mess because using PSD enforcement to make coal more expensive so that coal plants will shut down and stop emitting GHGs is hardly an efficient way to regulate GHGs. 

Why are we the enemy? Simple. Because the environment would be cleaner and the economy stronger with comprehensive climate legislation combined with significant changes to the NSR/PSD program and we haven’t figured out a way to get there.

The result? No one’s happy (except, perhaps, some busy environmental lawyers and some politicians who can find opportunities for grandstanding). EPA and environmentalists aren’t happy, because we don’t have comprehensive climate legislation. Large emitters aren’t happy, because they are left with the collateral damage of PSD/NSR, a program that should be allowed to die a quiet death.

For those of us who live in the trenches of these battles, at least one detail in the complaint is worth noting.  The United States brought suit, not only against the current owner and operator of the Homer City plant, but also against New York State Electric and Gas Corporation and Pennsylvania Electric Co., both of which owned the plant prior to 1998. Why the emphasis? Because it’s more than six years ago and therefore outside the statute of limitations for the government’s penalty claims. Indeed, the government seeks penalties only from the current owner/operators. Nonetheless, it seeks injunctive relief against NYSEG and PENELEC, even though they’ve had no connection to the plant in more than 12 years. The complaint states that:

They can be ordered to fund and implement contracts with third-party vendors who design, fabricate, and install the air pollution control equipment at issue. They can also take various actions to mitigate their past illegal pollution such as purchasing air pollution credits known as “allowances.”

A fine mess we’ve gotten ourselves into.

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Those who operate industrial facilities or do development in Massachusetts often know far more than they would like about Chapter 214, § 7A, the environmental citizens’ suit provision of the Massachusetts General Laws. Chapter 214, § 7A, eliminates plaintiffs’ usual obligation to demonstrate standing and simply gives 10 citizens the right to sue to prevent or eliminate “damage to the environment.” The damage does have to constitute a violation of a statute, regulation, ordinance, or by-law, the major purpose of which is to prevent damage to the environment.

Chapter 214, § 7A, does not contain any statute of limitations. Does this mean that ten persons can sue any time, even if the conduct complained of is allowed under a permit and the permit was issued long ago, as long as the plaintiff alleges that the permit should not have been issued and the conduct in fact violates a statute or regulation? Thankfully, Judge Locke of the Superior Court recently answered that question, posed in EarthSource v. Burt, with an emphatic “No.”

Full disclosure time – this firm (including yours truly) represents Covanta, the private defendant, in EarthSource v. Burt.

Earthsource v. Burt deals with efforts by Covanta, which operates four municipal waste combustors in Massachusetts, to initiate a process at its SEMASS combustor in which it would take what are known as fats, oils, and grease (or FOGs) from restaurants, separate the FOGs from the associated wastewater, recycle the wastewater, and combust the FOGs at the SEMASS facility. EarthSource is a competitor of Covanta in the FOGs processing business. It and some citizens (many, if not all, of them affiliated with EarthSource or related entities) brought suit against MassDEP and Covanta, not just to stop the FOG project at SEMASS, but alleging wholesale violations by Covanta at all of its Massachusetts facilities. Routinely, the complaint alleged that DEP misinterpreted its own regulations, should not have issued the permits, and that the permits were void “ab initio.” 

Covanta and DEP both moved to dismiss those counts that involved claims related to permits issued outside the appeal period provided in either the applicable substantive statute or in the Massachusetts Administrative Procedure Act, ch. 30A, § 14. EarthSource argued that the APA does not limit the time in which suits can be brought under Chapter 214, § 7A. Judge Locke concluded otherwise, noting that:

a contrary rule would be disruptive to the permitting agencies and that G.L. c. 214, § 7A should not become a means to disturb otherwise settled permits whenever a group of plaintiffs chooses to file suit sometime in the future.

Truer words were never spoken. Going forward, the rule for persons who don’t like permits is going to be “speak now or forever hold your peace.”

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On August 12, in Sierra Club v. Otter Tail Power Co., the Eighth Circuit Court of Appeals dismissed the Sierra Club’s suit related to the Big Stone Generating Station, a coal fired power plant in South Dakota. In doing so, it disagreed with EPA and sided with what appears to be the majority on a question that has produced differing responses amongst the courts - whether the Prevention of Significant Deterioration (“PSD”) program prohibits only the construction or modification of a facility without a PSD permit, or whether it imposes ongoing operational requirements. Finding that PSD requirements are conditions of construction or modification, and not conditions of operation, the court held that violations related to the defendants’ failure to obtain PSD permits occurred at the time the modifications were made, and that the claims were thus barred by the statute of limitations.

The Sierra Club challenged three modifications undertaken at the Station: a 1995 change in fuel source from lignite coal to sub-bituminous coal; a 1998 boiler modification; and, 2001 changes which allowed the Station to supply steam to a nearby ethanol plant. In June 2008, the Sierra Club filed a citizen suit alleging, among other things, that the defendants violated and continued to violate the Clean Air Act in that they had failed to obtain PSD permits prior to the modifications and, as a result, were operating without appropriate permits and without abiding by best available control technology (“BACT”) limits that would have been imposed had PSD permits been obtained.

The Eighth Circuit upheld the district court’s dismissal of the case, basing its decision largely on the language of the PSD statute, which prohibit a facility from being “constructed” without meeting PSD requirements, and the citizen suit provision, which authorizes suit “against any person who proposes to construct or constructs,” as well as the related regulations.  Finding the language unambiguous, the court refused to defer to the contrary interpretation of EPA, which participated as an amicus party. The court rejected the argument that the CAA and PSD regulations should be interpreted as establishing operational duties based on the program’s purpose and the fact that PSD permits impose requirements on the operation of facilities, finding that such requirements are not enforceable independent of the permitting process. In addition to finding the Sierra Club’s civil penalty claims barred, the court held that its claims for equitable relief seeking to bring the Station into compliance with the Act were also barred. 

Under the Eighth Circuit’s reasoning, while a facility must obtain a PSD permit prior to construction or modification, and, having done so, must operate in accordance with the permit, if the operator fails to apply for such a permit, claims relating to its failure to obtain or operate pursuant to an appropriate PSD permit are barred unless brought within five years of the construction or modification. Given the potential difficulties involved in detecting PSD violations, the decision places a burden on plaintiffs seeking enforcement of PSD requirements to identify and file claims related to such violations as early as possible. Given that this issue has come up a number of times and there is some disagreement amongst the courts as to the right answer, it is possible that the Sierra Club will seek further review of this issue.

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Last week, Judge John Darrah handed the government a defeat in a PSD/NSR enforcement action, when he ruled that the requirement to obtain permits under the PSD program prior to making major modifications was solely a pre-construction obligation and did not constitute a continuing violation. 

United States v. Midwest Generation was one of the recent wave of government PSD/NSR actions, filed last summer. The problem with the government’s case was that Midwest Generation had purchased the six facilities at issue in the case from Commonwealth Edison in 1999 and all of the alleged changes but one were made prior to the purchase.

Although the court thoroughly reviewed the case law – and found it generally supportive of its conclusion – its major focus was on a plain reading of the statutory language (and we know how much this Supreme Court likes plain readings). The relevant statute provision provides that:

No major emitting facility … may be constructed in any area to which this part applies unless … a Permit has been issued…. 

To Judge Darrah,

the plain meaning of the statute’s introductory language … thus prohibits the construction of a “major emitting facility’ unless [the statutory requirements] are met…. On its face, nothing in § 7475 prohibits the subsequent operation of such a facility without a permit. (Emphasis in original.)

There are other counts in the government’s complaint, including claims of operating permit violations. However, the decision on the NSR/PSD claims is quite significant. The case does not simply dismiss, as some other decisions have done, penalty claims. This is not a statute of limitations decision (though the Judge did also follow most other cases in dismissing, on statute of limitations grounds, the penalty claims with respect to the one alleged modification that occurred after Midwest Generation bought the facilities). As Judge Darrah made clear, the government is not entitled to “any relief on those claims – injunctive or otherwise.” (Emphasis in original.)

Score one of generators – particularly merchant generators who bought facilities after modifications had already been made.

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I have never been a fan of specialized courts, but I have to admit that the Massachusetts Supreme Judicial Court’s MEPA jurisprudence is strong evidence for the other side. It’s almost hard to describe how badly the SJC has mangled MEPA. The most recent example is yesterday’s decision in Town of Canton v. Commissioner of the Massachusetts Highway Department. (Requisite disclaimer – this firm represented the Town of Canton in the case.)

In Canton, the SJC ruled that a party bringing suit to challenge the adequacy of the Certificate issued by the Secretary of Energy and Environmental Affairs an on EIR must do so within 30 days following issuance of the first permit issued to the project under review – even if the plaintiff doesn’t care about that permit. For example, in Canton, the case was dismissed because suit was not brought within 30 days of issuance of a sewer connection permit, even though Canton’s complaint was that the EIR did not adequately address traffic issues and the Highway Department had not yet acted on the necessary traffic approvals.

The basis for the decision is a plain language reading of the statute – 30 days of the first permit means 30 days. However, the Court’s policy logic is exactly backward. The SJC stated that it is necessary to adhere to the strict 30 day rule in order to make challenges to projects efficient and not unduly delay them. I fear that the development community will not be happy with the results of this case, however. The purpose of MEPA is consultative. Get all the information out there and make sure that the agency considers it before issuing approvals. The import of Canton, however, is to short-circuit the review process. The next time this fact pattern appears, plaintiffs will be forced to bring suit, without even giving the Highway Department a chance to get it right. How does encouraging litigation before it is known even to be necessary help citizen plaintiffs, developers, or agencies?

In fairness to this Court, while I think that they got the decision wrong, it is at least understandable given prior SJC MEPA jurisprudence. The problem is that the SJC began getting MEPA wrong in the Cummings and Enos cases, and they haven’t stopped since. The notion that parties challenging the adequacy of an EIR cannot sue the EEA Secretary – the person that approved the EIR – is just nuts. Put Enos and Cummings together with Canton and here’s the result, taking the agencies in play in the Canton case. 

1.         EEA approves an EIR

2.         DEP issues sewer connection permit

3.         Highway Department issues traffic approvals.

Where has the SJC left us? The citizen plaintiffs care about 1 and 3, and not 2, but suit is triggered when 2 happens, even though the plaintiffs don’t yet know whether the Highway Department will do the right thing or not.

Here’s another scenario likely to happen with some frequency. EEA secretary approves EIR. Citizen plaintiff believes that endangered species analysis was deficient. As is often the case, however, the Division of Fisheries and Wildlife takes some time to issue the needed permit. DEP, however, issues an unrelated permit. Once more, action by DEP triggers a need to sue, even though the plaintiff cares about the Secretary’s approval of the EIR and the DFW take permit, which hasn’t yet been issued – and may never be issued.

Which is going to come first, a legislative fix, the SJC revising the whole structure of MEPA jurisprudence, or hell freezing over?

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