Last week, EPA filed a petition for rehearing in United States v. Midwest Generation, LLC, 720 F.3d 644 (7th Cir. July 8, 2013) (filed September 3).  This petition, which argues that the government is not barred by the five-year statute of limitations applicable to Clean Air Act civil enforcement claims for alleged violations of the Clean Air Act’s Prevention of Significant Deterioration (“PSD”) program, is important for the regulated community’s assessment of their legal obligations.

The PSD program is a growth management program that imposes preconstruction permitting requirements on the construction or modification of many major industrial facilities.  Among other things, PSD permits may require the installation of the “best available control technology” (“BACT”) for each pollutant regulated under the Act.  42 U.S.C. § 7475.

In Midwest Generation, EPA alleged that Commonwealth Edison modified five of its Illinois coal-powered plants (which it later sold to Midwest Generation) between 1994 and 1999, without obtaining PSD permits or installing BACT.  EPA and the State of Illinois did not file suit until 2009, a decade after Commonwealth Edison’s unauthorized modifications.  The district court dismissed the government’s claims based on those modifications (while retaining one based on a subsequent modification performed by Midwest Generation).  In a unanimous panel opinion earlier this summer authored by Chief Judge Easterbrook, the Seventh Circuit affirmed the dismissal, rejecting the government’s “continuing-violation” theory that a plant violates the Act anew every day it operates without a PSD permit.  Instead, the Court held that the default five-year limitation on enforcement actions applies, see 28 U.S.C. § 2462.

The Seventh Circuit’s ruling is part of a trend throughout the country.  On August 21, the Third Circuit cited Midwest Generation in its opinion in United States v. EME Homer City Generation, L.P., ___ F.3d ___, 2013 WL 4437219, at *5–6, affirming a district court’s holding that “failure to comply with the PSD program is a one-time violation that occurs only at the time of construction or modification.”  The Seventh Circuit (in Midwest Generation) and the Third Circuit (in EME Homer City) each cited two earlier circuit decisions: Sierra Club v. Otter Tail Power Co., 615 F.3d 1008 (8th Cir. 2010), and National Parks Conservation Association v. TVA, 502 F.3d 1316 (11th Cir. 2007).

But in its rehearing petition, EPA argues that these decisions all conflict with the Sixth Circuit’s in National Parks Conservation Association v. TVA, 480 F.3d 410, 418–19 (6th Cir. 2007), which held that PSD regulations “create[] an ongoing obligation to apply BACT,” and failing to meet this obligation creates a “cause of action [that] manifests itself anew each day a plant operates without BACT limits on emissions.”  (The Seventh Circuit distinguished this case as considering requirements under state law to use BACT, rather than a claim under the Act for failure to install BACT.)

Application of the five-year statute of limitations would be a significant obstacle to the claims brought in many of EPA’s highest-profile and widest-ranging enforcement agenda items, such as its coal-fired power plant initiative.  Thus, this issue bears watching for companies as they assess their potential retrospective legal obligations under the Act.