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Sixth Circuit Issues Important Decision on Statute of Limitations for New Source Review Cases

Beveridge & Diamond, P.C., March 29, 2007

On March 2, 2007, the Sixth Circuit Court of Appeals held that the five-year statute of limitations does not apply to violations of New Source Review (“NSR”) requirements.  See National Parks Conservation Association v. Tennessee Valley Authority, 2007 U.S. App. LEXIS 4776, No. 05-6329 (6th Cir. Mar. 2, 2007).  This decision could have far-reaching effects on NSR enforcement by both citizens and EPA:  while the vast majority of district courts that have addressed this issue to date have held that the statute of limitations applies to penalty claims for NSR permitting violations, the Sixth Circuit is now the second federal appellate court to reach the opposite conclusion.

Factual and Procedural Background.  The focus of the National Parks decision was a 1988 “major overhaul” of a boiler at the Tennessee Valley Authority’s (“TVA’s”) Bull Run power plant.  Id. at *9.  In 1999, EPA concluded that this project constituted a “major modification” under the Prevention of Significant Deterioration (“PSD”) program, and issued an administrative compliance order (“ACO”) for the facility’s failure to obtain a permit or install the best available control technology (“BACT”).  Id. at *10.  After several rounds of negotiations and administrative appeals to EPA’s Environmental Appeals Board, the Eleventh Circuit overturned the ACO on due process grounds.  TVA v. Whitman, 336 F. 3d 1236 (11th Cir. 2003), 541 U.S. 1030 (2004).    

While EPA did not pursue the matter further, three citizens’ groups – National Parks Conservation Association, Sierra Club, and Our Children’s Earth Foundation (collectively, “National Parks”) – did.  In 2001, National Parks filed a complaint against TVA in District Court of the Eastern District of Tennessee, alleging that TVA violated the Clean Air Act and the Tennessee SIP by failing to obtain a PSD permit prior to beginning the 1988 project and by continuing to operate the boiler without such a permit and without BACT.  National Parks v. TVA, 2007 U.S. App. LEXIS 4776, at *11. 

The District Court dismissed these claims.  The court first held that the 5-year statute of limitations under 28 U.S.C. § 2462 had run on National Parks’ claim for penalties.  See National Parks v. TVA, 2005 U.S. Dist. LEXIS 44601 (E.D. Tenn. 2005) at *11.  Following the majority of courts that have addressed this issue, the court found that the failure to obtain a PSD permit is a discrete violation that accrues as of the date construction commences; because the project in question was constructed 13 years before suit was filed, the court found that the claim for penalties was barred.  Id. at *19-21.  The court then further held that the “concurrent remedy” doctrine barred any injunctive relief claims – a holding that was inconsistent with the majority of other federal courts to reach this issue.  Id. at *27-28.    

Sixth Circuit Decision.  The Sixth Circuit reversed the District Court.  In a 2 to 1 opinion, the court held that both the failure to apply BACT and the failure to obtain a PSD permit are discrete violations that manifest themselves anew each day that the plant operates without a permit or BACT.  National Parks v. TVA, 2007 U.S. App. LEXIS 4776, at *18-19.  Consistent with other courts that have reached this issue, the court found that the obligation to apply BACT created an ongoing obligation regardless of the terms of a preconstruction permit.  Id. at *23.  The court, however, went further, and also held that there is an ongoing obligation to obtain a PSD permit “even post-construction.”  Id. at *25.  According to the Sixth Circuit, the Tennessee SIP establishes a continuing duty to obtain a construction permit containing the proper emissions limitations.  Id.  Therefore, the court determined that the failure to obtain a preconstruction (or post-construction) permit with the appropriate emissions limitations is a violation that “manifests itself each day the plan[t] operates.”  Id. at *26.  Because the cause of action accrued anew each day, the statute of limitations did not bar the citizens’ claims; rather, it merely determined the time period for which penalties could be sought.  Id.

The dissenting judge disagreed with the majority.  Following the approach of the majority of other courts, the dissent argued that the obligation to obtain a permit was a discrete obligation, and that the violation of that obligation (if any) occurred on the day that TVA began construction without obtaining such a permit.  Id. at *27.  The dissent further argued that the majority improperly failed to distinguish between a continuing series of harms and continuing unlawful acts – a distinction that the Supreme Court itself has repeatedly relied upon.  Id. at *28-29.  The dissent further pointed out that the majority failed to distinguish between the obligations under operating permits and construction permits.  Id. at *29-30.  Tennessee law requires both construction and operating permits.  Id. at *27-28.  Logically, in such a bifurcated permitting scheme, the obligation to obtain a construction permit is merely a one-time requirement, whereas continuing obligations are imposed in the operating permit, which must be maintained and complied with for the life of the facility.  Thus, here, where no party had alleged any violation of the operating permit, and while the plaintiffs may have suffered a new harm each day the plant operated, TVA did not commit a new and discrete violation each time it operated the plant without a construction permit.  Id. at *29-30.   

Potential Impact.  The Sixth Circuit’s decision flatly contradicts the majority of district court cases, which held that the failure to obtain a preconstruction permit is a single discrete violation, and that the 5 year statute of limitations bars any later penalty claims.  See, e.g., New York v. Niagara Mohawk Power Corp., 263 F.Supp.2d 650, 660 (W.D.N.Y. 2003); United States v. Illinois Power Co., 245 F. Supp. 2d 951, 957 (S.D. Ill. 2003); United States v. Southern Indiana Gas & Elec. Co., 2002 U.S. Dist. LEXIS 14040 (S.D. Ind. 2002); United States v. Westvaco Corp., 144 F.Supp.2d 439, 443 (D. Md. 2001); United States v. Brotech Corp., 2000 U.S. Dist. LEXIS 13859, *11-12 (E.D. Pa. 2000); United States v. Campbell Soup Co., 1997 U.S. Dist. LEXIS 3211, *5-8 (E.D. Ca. 1997). 

Interestingly, the Sixth Circuit’s decision also departs from the reasoning of those few courts that have found that the failure to obtain an NSR permit is a continuing violation.  These minority courts have typically held that the failure to obtain a preconstruction permit is a continuing violation, without distinguishing between the obligation to obtain a construction permit as opposed to the obligation to comply with the terms of a permit once it is issued.  See,  e.g., United States v. Marine Shale Processors, 81 F.3d 1329 (5th Cir. 1996); United States v. Duke Energy Corp., 278 F. Supp. 2d 619, 651 (M.D.N.C. 2003); United States v. American Elec. Power Serv. Corp., 137 F. Supp. 2d 1060, 1066 (S.D. Ohio 2001).  The Sixth Circuit, on the other hand, explicitly conflates these two distinct requirements, finding that the obligation to obtain a construction permit implicitly includes the obligation to obtain and comply with legally-required permit terms.  At the same time, however, the court failed to address the distinction between the construction and operating permit programs, as described by the dissent, and as more explicitly set forth in Niagara Mohawk, supra

The Sixth Circuit did note that other courts have been reluctant to apply the “continuing violation” doctrine outside the context of Title VII discrimination and civil rights cases, and declined to reach a decision on whether this doctrine could apply to environmental cases.  National Parks v. TVA, 2007 U.S. App. LEXIS 4776, No. 05-6329 at *17-18.  The Court avoided this issue, however, by instead characterizing the violation as “a series of discrete violations rather than a single violation that may or may not be ‘continuing’ in nature.”  Id. at *18-19.  As the dissent noted, this approach appears to confuse the concept of a continuing harm (which is not a continuing violation) and a continuing unlawful act (which is).

The potential impact of this decision is tremendous, as the Sixth Circuit now represents the second appellate court to refuse to apply the statute of limitations to permitting violations.  In fact, the District Court of the Eastern District of Kentucky recently issued a decision that heavily relied upon the reasoning of National Parks, in spite of differences in the state SIPs.  In United States v. East Kentucky Power Coop., No. 04-34-KSF (E.D. Ky. Mar. 27, 2007), EPA sought penalties for East Kentucky’s modifications to its plant in the mid-1990s without the application of BACT and without obtaining a preconstruction permit.  The district court found that even though the Kentucky SIP did not contain the same terms as in National Parks, East Kentucky’s operation of the plant without a construction permit “is arguably a violation [of the requirement to] operate a modification . . . in accordance with [the] application for or approved construction permit.”  Id. at 8 (emphasis in original).  Therefore, the failure to obtain a construction permit is a violation that “manifests itself each day the plant operates.”[1]  Id.  Thus, EPA’s claim for penalties in East Kentucky was not barred by the statute of limitations, which only determines the time period for which penalties may be sought.  Id. at 6. 

If other courts follow the Sixth Circuit’s (and now Eastern District of Kentucky’s) analysis, then the potential for enforcement for long-past projects is potentially endless.    

For more information, please contact Laura McAfee (lmcafee@bdlaw.com, 410-230-1330) or Holli Feichko (hfeichko@bdlaw.com, 202-789-6077)


[1] The East Kentucky court also found that the plant’s failure to implement BACT was a violation that “manifests itself anew each day a plant operates . . . .”  Id. at 6.  And, therefore, the statute of limitations did not bar a claim for penalties; it does, however, determine the time period for which penalties may be sought.  Id

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