By Andrew H. Perellis, Jeryl L. Olson, and Craig B. Simonsen

The Third Circuit concludes that the U. S. Environmental Protection Agency may not force former facility owners to obtain missing preconstruction permits or to install missing pollution controls on a plant that they no longer own or operate — as it did not cry foul until more than a decade after the changes, well after the owners had sold the plant. Commonwealth of Pennsylvania, et al., v. EME Homer City Generation, L.P., No. 11-4406, 11-4407, and 11-4408 (3rd Cir. August 21, 2013).

We recently blogged about a related Seventh Circuit case that asked how much change can occur without a permit. In USA v. Midwest Generation, LLC, et al., No 12-1026 (7th Cir. July 8, 2013), the Seventh Circuit found that once the statute of limitations expires, and absent a specific state statute obligating the use of best available control technology (BACT), a source is free to proceed as if it possessed all required construction permits. “[E]nduring consequences of acts that precede the statute of limitations are not independently wrongful.”  USA v. Midwest Generation, at -7-8.

In this case, the Court states emphatically that: “[t]he 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 ….”

Factually the facility had allegedly made various changes to its boilers that increased net emissions of sulfur dioxide and particulate matter. The changes were allegedly “major modifications” triggering the Prevention of Significant Deterioration (PSD) permitting requirements and required BACT. At the time of the modifications, though, the operator believed that the changes were “routine maintenance,” and so was exempted from the PSD program.

 Consequently, in 2004, the Pennsylvania Department of Environmental Protection approved the facility Title V permit application and issued the Title V permit. However, because there was no PSD permit, the issued Title V permit did not include any PSD or BACT requirements.

In 2008, the EPA notified the current and former owners of the facility of the alleged violations, and in January 2011 sued in the Western District of Pennsylvania. EPA alleged the facility had violated the PSD program by modifying the facility without a PSD permit and without installing BACT-based emissions controls before modifying the facility, and had violated Title V by submitting an incomplete operating-permit application that omitted the facility’s modifications and proposed BACT controls.

The District Court had held that the five-year statute of limitations had expired on the civil-penalty PSD claims against the current owners because the PSD program imposed only prerequisites to construction and modification, not ongoing conditions of operation. Also, as the current owners were not the ones to modify the Plant, they could not be liable for violating the PSD requirements and thus injunctive relief was also unavailable against them. The District Court also declined to enjoin the former owners because they no longer owned or operated the Plant and thus posed no risk of violating the PSD program in the future.

As for the Title V operating permit claims, the current owners could not be liable because Title V does not transform the PSD requirements into operating duties and does not permit a collateral attack on a facility’s valid permit. In addition, the former owners could not be held liable because Title V prohibits an operating a source to be out of compliance with the operating permit. The former owners never owned or operated the facility after the Title V permit was issued.