On July 3, 2014, the Fifth Circuit Court of Appeals issued a unanimous opinion which held that notices of violation issued by EPA to two coal-fired plants were not “final agency actions.” Luminant Generation Co., LLC, et al., v. United States Environmental Protection Agency, No. 12-60694. This ruling aligns with the precedents set by the Third and Ninth Circuit courts.

Luminant Generation Company,  L.L.C. (Luminant) operates two coal-fired plants in Texas. In 2008, EPA started sending Luminant requests to determine compliance with the Clean Air Act. In 2012, EPA issued a notice of violation (NOV) asserting that Luminant and its parent company violated the Clean Air Act’s Prevention of Significant Deterioration (PSD) provision; Texas’s State Implementation Plan (SIP); Texas’s PSD provisions; Title V of the Act; and Texas’s Title V program. Luminant filed petitions for review of the 2012 NOV; however, EPA moved to dismiss on the grounds that the NOV was not a “final action.” EPA issued a second NOV in 2013, purporting to amend the 2012 NOV to include only the allegations that Luminant violated the Clean Air Act’s PSD provisions and Texas’s PSD provisions. Luminant petitioned for review of the 2013 NOV and again EPA moved to dismiss on the grounds that the court lacked subject matter jurisdiction because the NOVs were not “final actions.”

The court explained that the term “final action” under section 7607(b)(1) has the same meaning as “final agency action” under the Administrative Procedures Act. Therefore, for the action to constitute a “final agency action,” the following two conditions must be met: “[f]irst, the action must mark the consummation of the agency’s decision making process – it must not be of a merely tentative or interlocutory nature. And second, the action must be one by which rights or obligations have been determined, or from which legal consequences will flow.”

The court concluded that the 2012 and 2013 NOVs issued by EPA did not meet either prong of the test and therefore did not constitute final agency actions. Specifically, the court reasoned that the NOV was simply an initial finding marking only the beginning of the EPA’s analysis and did not bind EPA to any specific course of action; the notice itself does not determine the rights or obligations for Luminant and no legal consequences flow from the issuance of the notice; orders, which are final agency actions, and notices are treated differently and are two distinct types of agency action; and lastly, the Fifth Circuit was reluctant to be the first circuit to treat NOVs as final agency actions. The court specifically mentioned the Third and Ninth Circuits as two circuits that did not recognize NOVs as final action and explained that Luminant did not offer any persuasive reason to create a circuit split. The court concluded by asserting that “[r]egulated entities have a full opportunity to challenge the adequacy or sufficiency of such notices on the EPA takes final action.”