Seventh Circuit Court of Appeals Commentary : In Their Opinion : Lawyer & Attorney Michael E. Rigney : Kelley Drye & Warren Law Firm

SIERRA CLUB v. KHANJEE HOLDING (US) (August 24, 2011)

Franklin County Power wanted to build a coal power plant in southern Illinois. It applied to the Illinois Environmental Protection Agency for a permit in 2000. The EPA issued the permit. By its terms, the permit would become invalid if construction was not commenced within 18 months. Khanjee Holding became lead developer for the project in 2002. The project was delayed due to collateral disputes. In late 2004, the EPA determined, at least on a preliminary basis, that the permit had expired. Sierra Club filed suit to prevent construction of the power plant. The district court granted the motion for summary judgment and enjoined construction. The Seventh Circuit affirmed (opinion and intheiropinion), concluding that Sierra Club had standing to sue, that the defendants failed to commence construction within the required 18 months, and that the permit had expired. Sierra Club sought penalties and fees in the district court. Judge Gilbert (S.D. Ill.) imposed a $100,000 statutory penalty and awarded attorneys fees and costs. Khanjee appeals.

In their opinion, Seventh Circuit Judges Bauer, Ripple, and Williams affirmed. The Court first addressed Khanjee's challenge to subject matter jurisdiction under the Clean Air Act. It noted that it had decided the jurisdictional issue in the first appeal and that it had become the law of the case. It rejected Khanjee's argument that the doctrine did not appy to subject matter jurisdiction, although it recognized some earlier precedents that suggested as much. On the merits, the Court concluded that Khanjee had waived its constitutional violation claims and was left only with its claim that its relationship with the other original defendants was insufficient to support a penalty. The Court rejected that argument both on the law of the case doctrine and, alternatively, on the merits. Even if, as Khanjee argues, the Claim Air Act citizen suit provision allows an action only against an owner or operator, Khanjee exercised enough control over the project that it can be considered an owner or operator. With respect to the size of the penalty, the Court concluded that the district court considered all the appropriate factors and imposed a reasonable penalty. Finally, the Court found that the district court did not abuse its discretion in awarding fees and costs. It rejected Khanjee’s argument that a court should not award fees to "well-funded" parties.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

UNITED STATES v. CINERGY CORP. (October 12, 2010)

Cinergy Corp. (and its affiliates) owns several electric power plants in the Midwest. Years ago, the U.S. EPA charged Cinergy with violations of the Clean Air Act at several of its facilities. Specifically, the agency alleged that the company made "major" modifications that resulted in increased nitrogen oxide and sulfur dioxide emissions without obtaining a permit. In an earlier appeal, the Seventh Circuit held that the federal regulation at issue required emissions to be measured on an annual, rather than an hourly, basis. On remand to Judge McKinney (S.D. Ind.), the case was tried. A jury found that four of the alleged modifications were likely to have increased the sulfur dioxide and nitrogen oxide annual emissions and should have been permitted. Cinergy appeals.

In their opinion, Chief Judge Easterbrook and Judges Posner and Rovner reversed. The Court addressed the verdict with respect to the two pollutants separately. With respect to sulfur dioxide, Indiana's implementation plan in effect at the time of the modifications did use hourly capacity rather than annual emissions to determine the necessity of a permit. This was true even though: the federal statute and regulation defined it otherwise, Indiana had agreed to revise its plan, and Indiana had actually adopted appropriate amendments to its plan -- but it failed to submit the plan for approval for several years. The Court concluded that Cinergy could not be held liable when it complied with the approved Indiana plan. With respect to nitrogen oxide, the parties agree that the annual emissions standard governs. Here, Cinergy attacks the agency's experts and the formula they used to predict those annual emissions. In effect, the expert witnesses testified that an increase in capacity would result in an equal increase in generation and pollutant emissions. The Court concluded that that formula was only appropriate in the case of a baseload generating plant, which is in almost continuous operation. It did not take into consideration the operational differences between baseload, cycling, and peaking plants. The plant at issue is a cycling plant and operated on a regular, although not continuous, schedule. Although there are methods for predicting annual emissions from a cycling plant, the Court concluded that a remand was not necessary. The agency conceded that it could not prove its case if the expert testimony was disallowed.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

MCEVOY v. IEI BARGE SERVICES (September 7, 2010)

IEI Barge Services (Services) is a bulk material handler with a facility on the banks of the Mississippi River in East Dubuque, Illinois. Among other materials, Services handles coal, receiving it from train cars and loading it onto river barges. Several of Services' neighbors, including Charles McEvoy, complained that the coal-handling activity releases coal dust which, in turn, is blown onto their properties. McEvoy filed suit in early 2006 under the citizen-suit provisions of the Clean Air Act. Other neighbors filed similar suits in early 2007. The theory of recovery in both suits is that Services' violation of two Illinois environmental regulations provided plaintiffs with a remedy under the Act. Judge Kapala (N.D. Ill.) granted summary judgment to Services in both cases. The plaintiffs appealed -- the appeals were consolidated.

In their opinion, Chief Judge Easterbrook and Judges Bauer and Wood affirmed. The Court turned its attention to the Act. The citizen-suit provision of the Act permits a private action against a person who is alleged to have violated "an emission standard or limitation under this chapter." Under the definition of that phrase, the enforceable standards and limitations are (as is relevant to the appeal): a) an "emission limitation, standard of performance or emission standard," and b) "any other standard, limitation, or schedule established under any permit issued pursuant to [another section of the Act] or under any applicable State implementation plan." In order to be enforceable under the Act, therefore, the Illinois regulations at issue must qualify under one of those two definitions. Before proceeding to an application of the Act to the regulations, the Court expressed its disagreement with the district court's interpretation of the second prong. The district court found that the phrase was ambiguous and concluded that the better reading was that it allowed enforcement only of a standard contained in a permit -- as opposed to a standard contained in a permit or a State implementation plan. The Court found that the statute was not ambiguous and that the natural reading allowed for enforcement of a standard contained in a permit or a State implementation plan. The first regulation the plaintiffs seek to enforce is entitled "Prohibition of Air Pollution" and, in the Court's words, says little more than "thou shall not pollute." The Court concluded that this "broad, hortatory statement" does not qualify as a standard or limitation enforceable under the Act. The second regulation, the "Fugitive Particulate Matter" regulation, presented a closer question. The regulation contained more specifics than the general prohibition, but fell far short of other highly specific standards contained in Illinois' regulations. The Court referred to some of the undefined words in the regulation: "visible," "an observer," "looking generally," "at a point beyond," etc. The Court noted that other Illinois regulations contain more specific metrics subject to objective measurement. The Fugitive Particulate Matter regulation does not. Finding no additional guidance or definitions to guide its interpretation, he Court concluded that the regulation could not be enforced through the Act.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

SIERRA CLUB V. FRANKLIN COUNTY POWER (October 27, 2008)

In August of 2000, Franklin County Power of Illinois (“FCPI”) applied to the Illinois EPA (“IEPA”) for a Prevention of Significant Deterioration permit in order to construct a power plant. The IEPA issued the permit on July 3, 2001. The permit provided that it would become invalid if FCPI: a) did not begin construction of the plant’s boilers within eighteen months, or b) discontinued construction for eighteen months, or c) failed to complete construction within a reasonable time. On December 2, 2002, FCPI contracted with an engineering and construction company to work with it exclusively to negotiate a construction contract. On December 18, FCPI arranged for excavation to begin. Excavation equipment was delivered to the site on January 3, 2003. Although the contractor began the excavation on January 8, it terminated its work in February because of a dispute. The landlord filled in the excavation in July. FCPI began the excavation anew in September of 2004. Shortly afterward, the IEPA determined that construction had commenced. In November, the IEPA made a preliminary determination that the permit had expired. The determination was appealed and the appeal is still pending. In May of 2005, the Sierra Club filed suit under the citizen suit provision of the Clean Air Act (“CAA”). FCPI moved to dismiss and for summary judgment on the grounds that the permit was valid and that Sierra Club lacked standing. The district court denied the motion. Instead, it entered summary judgment for Sierra Club and permanently enjoined FCPI from building the power plant until it obtained a permit.

In their opinion, Judges Bauer, Ripple, and Williams affirmed. The Court first addressed Sierra Club’s standing. An organization has standing only if: a) one of its members has standing, b) the interests at stake in the litigation are germane to the organization’s purpose, and c) an individual’s participation is not required. FCPI challenged only the first prong. Sierra Club relied on its member Barbara McKasson. In order to prevail on summary judgment, Sierra Club had to submit evidence to establish that: a) she suffered an actual or imminent, concrete injury, b) the injury is traceable to the actions complained of, and c) a favorable decision would likely redress the injury. McKasson stated that she and her family have regularly traveled to within three miles of the proposed plant site and there engaged in such activities as camping, fishing, and kayaking. The Court found that Sierra Club satisfied the individual standing test: a) McKasson will either be exposed to pollutants if she continues her trips or will have to forego the trips, either of which is sufficient injury, b) the injury is actual even though the plant is not yet built, c) the injury is traceable to the plant, even if the plant reduces its emissions, and d) an injunction will redress the harm for some period of time, even if FCPI eventually obtains a new permit.

The Court next addressed FCPI’s claim that Sierra Club’s action is not ripe until IEPA issues a decision on the permit appeal. The Court said that the plain language of the CAA allows a citizen suit against a person who is alleged to be in violation of a permit or who proposes to construct without a permit. The Court found that FCPI was either in violation of the permit because it failed to commence construction in time or, if the expired permit is akin to no permit, it is proposing to build one without one. Either way, the Court found that the suit was proper under the CAA.

On the issue of whether FCPI “commenced” construction, the Court stated that FCPI could commence construction in either of two ways.  It could begin “ a continuous program of physical on-site construction” or it could enter into binding contracts to complete construction within a reasonable tim.  To qualify, the contracts could not be canceled without a substantial penalty.  FCPI argued that there were genuine issues of fact regarding this test, precluding summary judgment. The Court had little trouble concluding that FCPI could not meet the continuous construction test. The only work it did was to excavate a hole. Even that was not permanent, since it was later filled in. The Court also found that FCPI lapsed in its construction activities for over eighteen months, even if it did begin on time. The Court also rejected FCPI’s argument that it’s binding contract meant that it had “commenced construction.” The contract was merely an agreement to negotiate in good faith in an attempt to reach an agreement on a construction contract. The fact that it contained a penalty clause was not enough to make it a qualifying contract.

Finally, FCPI argued that the district court had no authority to enter an injunction or, in the alternative, that it erred in not applying the traditional four-part analysis for injunctive relief. The Court relied on the plain language of the CAA to reject FCPI’s lack of authority argument. Although the Court was a little more troubled by the second argument, it also resolved it in Sierra Club’s favor. It first found that the lower court’s merits decision that FCPI did not have a valid permit accomplished essentially the same thing as an injunction - it required FCPI to get a permit. The Court’s also conducted its own analysis of the four factors and found that they favored Sierra Club. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link