Sierra Club Suit Alleging Failure To Obtain PSD Permits Dismissed as Untimely

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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