Additional Court Rulings on New Source Review Further Restrict Agency Enforcement

April 11, 2013
Bart E Cassidy
MGKF News Flash

In a pair of rulings issued during the close of March 2013, government agencies suffered additional setbacks in the long-running efforts to pursue enforcement under the New Source Review (“NSR”) provisions of the federal Clean Air Act.  First, in New Jersey v. RRI Energy-Mid-Atlantic Power Holdings (E.D. PA., No. 07-cv-05298) 3/28/13), the Eastern District of Pennsylvania agreed with multiple federal courts in imposing a strict five year statute of limitations to agency enforcement under NSR.  The States of New Jersey and Connecticut had alleged that the predecessors to Metropolitan Edison Company had undertaken modifications at the Portland Generating Station in Pennsylvania between 1983 and 1998, and that such modifications triggered significant net emission increases and therefore should have been subjected to NSR review.  The District Court, however, granted summary judgment to the defendant on the grounds that the states had not commenced their formal enforcement activity within five years of the alleged noncompliance, and therefore were barred by the general federal five year statute of limitations.  Like other courts before it, the Eastern District of Pennsylvania concluded that the “discovery rule” does not apply in such cases, and therefore the statute of limitations was not tolled pending the discovery by the agencies of the alleged noncompliance. 

In the second relevant NSR decision, EPA ostensibly succeeded in securing reversal, by the Sixth Circuit Court of Appeals, of a district court ruling under NSR.  EPA had initiated enforcement against DTE Energy Company, alleging that DTE had undertaken modifications to its facility in Michigan without properly determining that such modifications were subject to NSR.  At the time of the modification, DTE had projected the actual emission increase expected from the project, and concluded that such increase would not implicate NSR.  EPA subsequently filed suit in federal district court, alleging that DTE had improperly projected the resultant emission increase, which should have triggered NSR application.  Interestingly, EPA did not allege that the reported emission rate of the modified source reflected an emission increase above NSR significance thresholds; instead, EPA contended that, during the air permit application phase, DTE had prospectively understated the emission increase that would result from the project.  The District Court agreed with DTE that the Clean Air Act does not authorize EPA to bring an NSR enforcement action prior to determining that the emission increase resulting from the modification actually exceeded a significance level under NSR.  EPA objected to this interpretation, contending that such holding would preclude EPA from preventing the environmental harm likely to result from an NSR violation, and instead requires such harm to be actually realized.  The Sixth Circuit agreed, but only to a limited extent, with EPA’s analysis. 

Contrary to the District Court holding, the Sixth Circuit concluded that EPA is authorized under the Clean Air Act to initiate NSR enforcement prior to demonstrating that the modification caused an actual significant net emission increase.  The Court held that the statute authorizes EPA to challenge the determination that NSR would not apply in the first instance.  However, the Sixth Circuit severely limited EPA as to the scope of its evaluation of the source’s projected emission increase resulting from the proposed project.  In particular, the Circuit Court held that EPA may analyze only whether the facility had undertaken the proper procedural steps in performing the calculation of the projected emission increase pursuant to the regulations, but could not challenge the bases for or legitimacy of the actual projections.  Accordingly, although EPA prevailed on its appeal to the Sixth Circuit, the resulting ruling would appear to severely restrict EPA in a challenge to a facility’s determination that a proposed modification will not result in a significant net emission increase.