On October 12, 2011, in a lengthy opinion that concludes with recognizing plaintiffs’ frustration, Judge Terrence McVerry, of the Western District of Pennsylvania, granted defendants’ motions to dismiss all claims brought by governmental plaintiffs against current and former owners of a coal-fired power plant. In United States v. EME Homer City Generation L.P., et al., the U.S. and state intervenors (Pennsylvania, New Jersey and New York) alleged that defendants violated the federal Clean Air Act (“CAA”)’s PSD (prevention of significant deterioration) and Title V requirements. The crux of plaintiffs’ arguments was that defendants failed to obtain necessary permits, and that more stringent CAA emissions standards applied to projects at the power plant’s modified units to reduce SO2 emissions.

While the Court noted the complexity of the legal issues involved, it methodically knocked out each of plaintiffs’ claims by adhereing to the CAA’s plain language as applied to the particular facts of the case. Plaintiffs were out of luck due primarily to changes in plant ownership, the separate and distinctive nature of the CAA programs purportedly violated, and the passage of time. The Court was persuaded that failure to secure a PSD permit is a one-time, not continuing, violation that starts and ends with failure to apply for a PSD permit; and that that violation does not carry forward to plant operations. The five-year statute of limitations window to bring claims against the former owners for alleged improper PSD permit determinations closed before the government asserted violations. The former owners thus were off the hook. Since the current owners had nothing to do with the former owners’ permit decisions, and no way of knowing about potential PSD violations when they did their due diligence, they could not have violated the PSD program nor be held responsible for the prior owners’ decisions not to secure permits. This analysis was a springboard to the Court’s rejection of the governments’ request for civil penalties and injunctive relief against the current and former owners for PSD violations.

The Court separately analyzed the Title V claims because, unlike the one-time nature of a PSD violation, Title V violations relate to operating permits and could give rise to a continunig violation. The Court rejected the Title V claims against the former owners simply because they sold the plant well before a Title V operating permit was issued. And the Title V claims against the current owners were unfounded because they properly obtained a Title V permit and no affirmative permit obligation was alleged to have been violated.

Plaintiffs did not seek leave to amend their complaint; and the Court posited that any effort to do so would be futile. But the Court added that it “appreciates Plaintiffs’ frustration that the expectations of the PSD program have not been achieved as to” this plant and “that society at large continues to bear the brunt of significant SO2 emissions from that grandfathered facility.” The government plaintiffs no doubt consider the wholesale dismissal of their claims a harsh, and frustrating, outcome. Whether this decision or others like it will incentivize the U.S. or state governments to investigate more thoroughly or act more quickly is questionable, particularly given the current economic climate and scaling back of agency resources. It would also be surprising if Congress, at least as presently comprised, amended the “plain text of the Clean Air Act” to close what some might consider a gap in responsibility potentially created when facilities are transferred. That said, facility owners and operators — former, prospective and current — should not take too much comfort in this fact-driven opinion and should remain mindful of their own thorough and prompt permitting analysis and due diligence responsibilities when determining when and what permits are necessary to secure.

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