On July 8, 2013, in United States v. Midwest Generation, et. al, the U.S. Court of Appeals for the Seventh Circuit ruled that the failure to obtain a prevention of significant deterioration (PSD) construction permit under the Clean Air Act (CAA) is not a “continuing violation” and, therefore, any government PSD claim based on the CAA must be filed within the five-year statute of limitations. No. 12-1026, 12-1051 (7th Cir.). According to the court, the statute of limitations begins to run “when construction commences without a permit in hand.”

The Seventh Circuit joins the Eighth and Eleventh Circuits in narrowly construing the statute of limitations for PSD claims. This ruling significantly affects the Environmental Protection Agency’s (EPA) future PSD enforcement initiatives in the Seventh Circuit, and will require the EPA to file its claims (or sign a tolling agreement) within five years of a facility beginning construction without a PSD permit. It may also affect the viability of many of EPA’s ongoing enforcement actions in the Seventh Circuit.

Procedural Background

The Seventh Circuit heard Midwest Generation on appeal from the U.S. District Court for the Northern District of Illinois, which had dismissed the government’s PSD claims against Midwest Generation, LLC, Edison Mission Energy, and Commonwealth Edison Company (collectively, Midwest Gen) in 2011.

Between 1994 and 1999, Commonwealth Edison Company (Commonwealth Edison) allegedly modified coal-fired power plants in Chicago, Pekin, Waukegan, and Joilet, Illinois. Under the CAA, any major emitting facility built or substantially modified after August 7, 1977 (in parts of the country subject to PSD) requires a PSD construction permit.

Commonwealth Edison did not obtain the PSD permits before commencing construction. After completing the modifications, Commonwealth Edison sold the plants to Midwest Generation. Ten to 15 years after the modifications of the various plants were finished, the United States and Illinois contended that Midwest Generation and its corporate parent Edison Mission Energy were liable as successors for Commonwealth Edison’s PSD and Title V violations.

Decision

The Seventh Circuit did not address the issue of successor liability under the CAA, finding that “Midwest cannot be liable when its predecessor in interest would not have been liable had it owned the plants continuously.” Instead, the Seventh Circuit focused on the District Court’s finding that claims based on the failure to obtain a PSD construction permit are barred by the five-year statute of limitations.

The Seventh Circuit relied heavily upon Gabelli v. SEC, a recent U.S. Supreme Court decision, which held that a “claim accrues when the plaintiff has a complete and present cause of action.” 133 S. Ct. 1216, 1220 (2013). Under this standard, the statute of limitations begins to run when the claim accrues, or when construction commences without a PSD permit. That occurred as early as 1994 for one plant and no later than 1999 for any of the other five plants. Thus, the latest the statute of limitations would have expired was 2004, and the United States did not bring suit until 2009.

The United States and Illinois contended that the failure to acquire a PSD permit was a “continuing violation” and that every day a plant operated without a PSD permit was a fresh violation. However, the Court found that “[n]othing in the text of [the CAA section at issue] even hints at the possibility that a fresh violation occurs every day until the end of the universe….” The Seventh Circuit cited Sierra Club v. Otter Tail Power Co. (2010) from the Eighth Circuit and National Parks and Conservation Association Inc. v. Tennessee Valley Authoring (2007) from the Eleventh Circuit for support.

The Seventh Circuit’s decision only addressed claims relating to the failure to obtain a PSD permit. Other claims, such as operating without best available control technology (BACT) or failure to meet BACT emissions limitations, were not addressed by the Seventh Circuit and remain to be resolved.