PA District Court Allows States' Clean Air Act Suit Against Reliant to Move Forward

December 8, 2009
Client Alert Newsletter December 2009

On September 30, 2009, the U.S. District Court for the Eastern District of Pennsylvania issued a ruling on several motions to dismiss in the Clean Air Act ("Act") litigation captioned State of New Jersey v. Reliant Energy Mid-Atlantic Power Holdings, LLC. The case involves Reliant's Portland Generating Station on the Pennsylvania side of the Delaware River in Northampton County. The States of New Jersey and Connecticut allege violations of the Act's New Source Review provisions due to modifications of the Portland Station conducted between 1985 and 2005. The States contend that the modifications in question required pre-construction permits under the Act that were never obtained, and which would have mandated the installation of pollution controls at the plant. The States also allege that both the current and former owners of the Portland Station violated the Act's permitting requirements by failing to include required information in the plant's permit application and renewals.

Reliant sought to have several counts dismissed on the basis that: the statute of limitation expired on all but the most recent modification at issue in the case; Reliant should not be held liable for the permitting actions of the previous owner/operator of the Portland Station, Metropolitan Edison ("Met Ed"); and, the District Court lacked subject matter jurisdiction over the States' claims related to the plant's permit. Met Ed also filed motions to dismiss echoing Reliant's statute of limitations and jurisdictional arguments and further arguing that the States' claims for injunctive relief against Met Ed should be dismissed because Met Ed no longer owned or operated the plant and, accordingly, could not fulfill any injunctive relief order by the Court.

While portions of the motions to dismiss by Reliant and Met Ed were granted, the Court rejected their primary arguments and allowed the majority of the States’ case to move forward. Key aspects of the opinion include the following determinations by the Court:

(1) The five-year statute of limitations found at 28 U.S.C. § 2462 only applies to claims for legal relief and not the States' claims for equitable relief. Defendants argued that the States' legal remedies for the older modifications were barred under the five-year statute of limitations, and that the States' equitable remedies were "concurrent" with their legal claims and therefore also time-barred under the concurrent remedy doctrine. The Court disagreed, and held that the injunctive relief claims were not subject to the five-year statute of § 2462.

(2) The "discovery rule" applies to those State claims for legal relief otherwise subject to the federal five-year statute of limitations. When applicable, the discovery rule delays the commencement of a statute of limitations for a cause of action until such time that an injured party discovers or reasonably should have discovered the injury, and can therefore significantly extend the period of time in which a suit can be filed. Defendants in Reliant argued that the discovery rule was not applicable in this matter and that the statute of limitation commenced at the time the modifications at issue were conducted; a position which would have barred the States' claims related to all but the most recent modification at the Portland Station. The Court rejected this argument and, applying the discovery rule, refused to dismiss the States' claims for legal relief even where those claims related to almost 25 year-old modifications because the date on which the States discovered those modifications was unclear on the face of the complaint.

(3) A current owner or operator of a facility can be held liable for the failure of a former owner or operator to comply with its obligation under the Act to obtain pre-construction permits prior to commencing certain modifications. The Portland Station's current owner/operator, Reliant, argued that it should not be liable for the alleged failure of the prior owner/operator, Met Ed, to secure a pre-construction permit prior to commencing the modifications at issue in the case. However, because the pre-construction permit would have required the installation of emission controls on the Portland Station, the Court determined that the use of those emission controls was a continuing permit obligation effective even after a modification is completed. In the context of ruling on motions to dismiss, Reliant was thus held liable for compliance with pre-construction permitting obligations pre-dating the company's involvement at the plant.

(4) The States' claims for injunctive relief against Met Ed were unfounded. This issue turned on the distinction between the legal relief sought by the States (e.g., money damages) and the injunctive relief sought (e.g., installation of pollution controls). Met Ed took the position that, as only a former owner of the plant, it could not effectuate or comply with any orders for injunctive relief requiring new control technologies at the Portland Station. In response, the States contended that Met Ed could be required to fund the installation of control technologies, and that such a funding requirement could be categorized as injunctive relief. The Court disagreed and dismissed the injunctive relief claims against Met Ed.

(5) The States' objections to the permit information submitted in the companies' initial permit application and subsequent applications for permit renewals were not properly before the District Court. The Act and its implementing regulations establish a process for commenting on and challenging permits. Through this required process, an objector must petition the U.S. Environmental Protection Agency ("EPA") Administrator and subsequently pursue any appeal of EPA's actions to the U.S. court of appeals for that jurisdiction. The Court therefore determined that there was no jurisdiction for a district court to hear the States' permitting challenges under the Act’s required process, and granted defendants' motions to dismiss those portions of the States' complaints.