Federal Courts Tackle Clean Air Act Liability, Cross-State Emissions

Last week, the U.S. Court of Appeals for the Seventh Circuit upheld an earlier district court decision that Clean Air Act liabilities do not transfer to new owners when a facility is sold, while the Third Circuit upheld an Environmental Protection Agency (EPA) rule to limit sulfur dioxide emissions from a Pennsylvania coal-fired power plant on request of New Jersey, a downwind state.

In the case USA v. Midwest Generation, LLC, the three-judge panel for the Seventh Circuit noted that under law, any “major emitting facility” built or substantially modified after Aug. 7, 1977, in parts of the country subject to the rules about prevention of significant deterioration (PSD), needs a construction permit (in addition to the operating permits required under the Clean Air Act). A condition to a construction permit is installation of the "best available control technology (BACT)" for each regulated pollutant.

Between 1994 and 1999, Commonwealth Edison Co. modified, without permits, five Illinois coal-fired power plants (Crawford and Fisk in Chicago; Powerton in Pekin; Waukegan Station in Waukegan; and Joliet in Joliet), all which began operating in Aug. 7, 1977 and were grandfathered until the modification. The court assumed the plant modifications needed permits, but it pointed out: "The question 'how much repair or change requires a permit?' has been contentious and difficult." Commonwealth Edison alleged, however, it did not need permits and was therefore not obliged to install BACT.

In 2009, more than a decade after the first modifications had been completed, Commonwealth Edison sold the five plants to Midwest Generation, prompting the EPA and the state of Illinois to file suit. The plaintiffs contended that Midwest is liable for the permits as Commonwealth Edison's successor. In their appeal to the federal court, the plaintiffs also "accuse the district court of allowing a corporate restructuring to wipe out liability for ongoing pollution," the Seventh Circuit notes.

However, notwithstanding that Midwest and parent company Edison Mission Energy filed petitions under the Bankruptcy Code after the appeal was argued, the court decided it did not "need to worry about whether the sale had any effect on liability, and if so who would be responsible today." It ruled: "Midwest cannot be liable when its predecessor in interest would not have been liable had it owned the plants continuously."

One reason is that the plaintiffs’ contention that "a continuing injury from failure to get a preconstruction permit (really, from failure to use BACT) makes this suit timely is unavailing,” it said.

"What these plants emit today is subject to ongoing regulation under rules other than §7475. Today’s emissions cannot be called unlawful just because of acts that occurred more than five years before the suit began. Once the statute of limitations expired, Commonwealth Edison was entitled to proceed as if it possessed all required construction permits," the court ruled.

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