Third Circuit issues troika of significant environmental law decisions

Someone forgot to tell the Third Circuit that we are nearing the end of August.  Instead of binging on Danielle Steel novels at the beach, the court last week was busy turning out not one, not two, but three precedential opinions interpreting some of our bedrock environmental laws.  In one opinion issued on Tuesday, the court decided whether the Clean Air Act preempts source state common law tort claims. In another opinion issued the very same day, the court decided whether a settlement resolving liability under comparable state environmental cleanup laws can support a CERCLA contribution claim, as well as whether injunctive relief under RCRA is available when remediation is already underway.  And just when we were trying to catch our breath, in a third opinion issued on Wednesday, the court decided whether the Clean Air Act’s Prevention of Significant Deterioration program prohibits operating a facility with historical violations of its requirements.  Here is a brief run-down of the decisions.

Source state common law tort claims not preempted by the Clean Air Act

In Bell et al. v. Cheswick Generating Station, Genon Power Midwest, L.P., No. 12-4216 (3d Cir. Op. filed Aug. 20, 2013), plaintiffs filed a class action complaint against the operator of a 570-megawatt coal-fired power plant in Springdale, Pennsylvania, seeking compensatory and punitive damages and injunctive relief under Pennsylvania common law nuisance, negligence/recklessness, and trespass theories.  The plaintiffs alleged that the operators have knowingly allowed the plant to emit odors and particulates (fly ash and unburned coal combustion byproducts), which have resulted in damage to and the loss of the use and enjoyment of their properties.

After removing the case from the Allegheny County Court of Common Pleas to the Western District of Pennsylvania by invoking the latter court’s diversity jurisdiction, the plant operator moved to dismiss the complaint on the grounds that the state common law tort claims were preempted by the Clean Air Act.  The district court granted the motion, essentially concluding that allowing the claims to proceed would undermine the Clean Air Act’s comprehensive regulatory scheme.

Last Tuesday, the Third Circuit reversed and remanded the case for further proceedings.  In reaching that result, the court cited International Paper Co. v. Ouellette, in which the U.S. Supreme Court determined that the savings clauses in the Clean Water Act (which the Third Circuit found meaningfully indistinguishable from the savings clauses in the Clean Air Act) allow states to impose more stringent standards on sources within their own jurisdictions.  The Supreme Court concluded that “this authority may include the right to impose higher common-law as well as higher statutory restrictions.”

Even if correctly decided, the Bell opinion breeds significant uncertainty for operators of stationary air emission sources.  It is difficult enough to design a facility that complies with the relatively well-defined standards of the Clean Air Act and state statutory programs; it will be next to impossible to predict whether such a facility also complies with the often imprecise common law tort standards of its host state.

Settlement of liability under comparable state cleanup laws sufficient to support CERCLA contribution claims

In Trinity Indus., Inc., et al. v. Chicago Bridge & Iron Co., No. 12-2059 (3d Cir. Op. filed Aug. 20, 2013), the current owner of a contaminated industrial site in Greenville, Pennsylvania, filed a lawsuit against a former owner of the site alleged to have contributed to the contamination through its historical steel products manufacturing operations.  In order to discharge state liability for environmental contamination under Pennsylvania’s Hazardous Sites Cleanup Act (HSCA) and Land Recycling and Environmental Remediation Standards Act (often referred to as Act 2), the current owner had entered into a consent order with the Pennsylvania Department of Environmental Protection (PADEP) in which it agreed to fund and conduct certain “Response Actions” according to a specified schedule.

In the present litigation, the current owner is seeking contribution under Section 113(f)(3)(B) of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) from the former owner for its share of the remediation costs, as well as injunctive relief under the Resource Conservation and Recovery Act (RCRA) requiring the former owner to participate in the remediation.  The Western District of Pennsylvania granted summary judgment to the former owner of the facility on both the CERCLA and RCRA claims.  Last Tuesday, the Third Circuit affirmed in part and vacated and remanded in part.

With respect to the CERCLA claim, the district court had interpreted Section 113(f)(3)(B) of CERCLA as only allowing a person who had resolved its CERCLA liability (as opposed to comparable state cleanup law liability) to seek contribution from other potentially responsible parties.  The district court found support for its interpretation in the Second Circuit, which had determined in Consol. Edison Co. of N.Y., Inc. v. UGI Utils., Inc., that Section 113(f)(3)(B) claims “create a contribution right only when liability for CERCLA claims, rather than some broader category of legal claims, is resolved.”

The Third Circuit, at the urging of EPA, which had filed an amicus brief in support of the current owner, vacated the district court’s grant of summary judgment as to the Section 113(f)(3)(B) claim.  Parting ways with its Second Circuit counterpart, the court held that “§ 113(f)(3)(B) does not require resolution of CERCLA liability in particular.”  In reaching this result, the Third Circuit principally relied on the plain language of the provision, which does not expressly define liability to mean CERCLA liability.

The court also found support for its interpretation in an earlier decision.  In United States v. Rohm & Haas Co., the Third Circuit had allowed the government to recover its costs of overseeing waste removal under Section 107(a) of CERCLA even when that waste removal was undertaken pursuant to a statutory authority other than (but comparable to) CERCLA.  Although the comparable statutory authority in Rohm & Hass was RCRA, the Third Circuit found that HSCA and Act 2 also “bear a strong resemblance to CERCLA, and even make reference to [the Act].”

With respect to its RCRA claim, the current owner did not fare as well.  In relevant part, Section 7002(a)(1)(B) of RCRA allows a person to bring an action against any past generator who has contributed to the past handling of any hazardous waste “which may present an imminent and substantial endangerment to health or the environment.”  The provision permits a district court to order such a generator “to take such . . . action as may be necessary.”

Despite finding that all of the elements of a claim under Section 7002(a)(1)(B) of RCRA had been met, the district court held that the consent order with PADEP, which required the current owner to remediate all contamination at the site, made it impossible for the current owner to demonstrate that injunctive relief was “necessary.”  The Third Circuit agreed and affirmed the district court’s grant of summary judgement to the former owner as to the current owner’s request for an injunction under RCRA.  In reaching this result, the court distinguished its earlier decision in Interfaith Cmty. Org. v. Honeywell (a case that we have previously discussed here), in which a “substantial breakdown in the agency process” had rendered injunctive relief “necessary” under RCRA.

The Trinity decision should give parties who settle their liability under comparable state cleanup laws reasonable assurance that they will be able to pursue contribution claims under Section 113(f)(3)(B) of CERCLA against other potentially responsible parties.  It is nevertheless good practice to include, in consent orders and other agreements resolving state law liability, provisions that reserve all rights to pursue all claims against other third parties.  The Third Circuit acknowledged the presence of such provisions in the underlying consent order in the Trinity case.

PSD program does not prohibit operating a facility with historical violations of PSD requirements

In United States, et al. v. EME Homer City Generation, L.P., et al., Nos. 11-4406, 11-4407, and 11-4408 (3d Cir. Op. filed Aug. 21, 2013), EPA and several states brought civil enforcement actions against the current and former owners of the Homer City Generating Station, a coal-fired power plant in Indiana County, Pennsylvania, and one of the largest emitters of sulfur dioxide in the country.  The case is part of a major enforcement initiative that EPA announced in 1999 targeting alleged historic violations of the Clean Air Act’s New Source Review (NSR) program.

Among other things, the NSR program requires operators to obtain permits and install certain pollution-control technologies before constructing or modifying major stationary sources of air emissions.  One of the two permitting programs that the NSR program encompasses is the Prevention of Significant Deterioration (PSD) program.  In areas of the country currently attaining national ambient air quality standards (NAAQS), the PSD program, in order to ensure that new emissions will not significantly degrade existing air quality, requires operators to obtain a PSD permit and install best available control technology (BACT) before constructing or modifying a major air emission source.

In EME Homer City, EPA and the states alleged that the former owners of the Homer City Generating Station made various changes to the plant’s boilers in 1991, 1994, 1995 and 1996 that qualified as major modifications triggering the requirements of the PSD program.  In January 2011, fifteen years after the last of these changes occurred and twelve years after the former owners sold the plant to one of the current owners, EPA filed a lawsuit in the Western District of Pennsylvania against the current and former owners of the plant.

Among other things, EPA alleged that the former owners had violated the PSD program by modifying the plant without first obtaining a preconstruction permit and installing BACT-based emissions controls and that the current owners had violated the PSD program by operating the plant after it had been modified without satisfying these requirements.  EPA sought injunctive relief against the current and former owners and civil penalties against the current owners for their past five years of operation.  The states intervened in the suit on the side of EPA.

The current and former owners moved to dismiss the complaint for failure to state a claim, which the district court granted in its entirety.  Last Wednesday, the Third Circuit affirmed the dismissal.  Adopting the unanimous view of other courts of appeals that have considered the question, including most recently the Seventh Circuit, which issued a decision last month in United States v. Midwest Generation, LLC, the court held that the PSD program does not prohibit the operation of a facility that failed to comply with PSD requirements.

In reaching this result, the court relied principally on the plain language of the statute.  Section 165 of the Clean Air Act provides that “[n]o major emitting facility . . . may be constructed” without meeting the requirements of the PSD permitting program.  Although “construction” is defined by the Act to include “modifications,” it does not include “operation.”  Because other parts of the Clean Air Act expressly establish operational conditions, the court found this omission in Section 165 (as well as in the PSD program’s enforcement provisions) to be significant.

As the current owners neither constructed nor modified a facility without meeting PSD requirements, but merely operated a facility that had not met those requirements, the Third Circuit concluded that the district court had correctly dismissed the civil-penalty and injunctive relief sought against those defendants.  As to the former owners, the Third Circuit concluded that the plain language of the Clean Air Act “does not authorize an injunction against former owners and operators for a wholly past PSD violation, even if that violation causes ongoing harm.”  The court noted (without citation to any of the chapters in the Back to the Future trilogy) that “with time travel yet to be discovered, it is impossible to ‘restrain’ a violation that occurred twenty years ago.”  The Third Circuit noted further that “courts cannot ‘require compliance’ from defendants who are not currently violating the Clean Air Act and who cannot violate the Act in the future because they no longer own or operate the source.”  On that basis, the Third Circuit concluded that the district court also had correctly dismissed the injunctive relief sought against the former owners.

One final note:  In the context of addressing the “parade of horribles” that EPA suggested would result if the agency were unable to pursue historic violations of the PSD program, the Third Circuit observed that Section 114(a) of the Clean Air Act, which grants EPA broad authority to issue information requests, provides EPA with the means to ascertain when sources are being modified or constructed.  With its enforcement options limited by cases like EME Homer City, and with a shrinking budget for conducting inspections, EPA may well pursue this course.  Industry should anticipate increased Section 114 requests designed to smoke out violations of the PSD program, and proceed with caution.

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