United States v. EME Homer City Generation L.P.

823 F.Supp.2d 274

UNITED STATES of America, Plaintiff,

v.EME HOMER CITY GENERATION L.P., Homer City OL1 LLC, Homer City OL2 LLC, Homer City OL3 OLC, Homer City OL4 LLC, Homer City OL5 LLC, Homer City OL6 LLC, Homer City OL7, Homer City OL8, New York State Electric and Gas Corporation and Pennsylvania Electric Company, Defendants.Commonwealth of Pennsylvania, Department of Environmental Protection and State of New York, Intervenor–Plaintiffs,

v.EME Homer City Generation L.P., et al., Defendants.State of New Jersey, Intervenor–Plaintiff,

v.EME Homer City Generation L.P., et al., Defendants.

No. 2:11–cv–19.

United States District Court, W.D. Pennsylvania.

Oct. 12, 2011.

Cara M. Mroczek, John W. Sither, Katherine L. Vanderhook, United States Department of Justice, Washington, DC, Paul E. Skirtich, United States Attorney's Office, Pittsburgh, PA, for Plaintiff.

James M. Jones, Rebekah B. Kcehowski, Jones Day, Peter T. Stinson, W. Alan Torrance, Jr., Dickie, McCamey & Chilcote, Pittsburgh, PA, Andrew N. Sawula, Stephen J. Bonebrake, Schiff Hardin LLP, Brian J. Murray, Daniel E. Reidy, Jones Day, Chicago, IL, Kevin P. Holewinski, Jones Day, Chet B. Thompson, Jeffrey Poston, Crowell & Moring LLP, Washington, DC, for Defendants.

MEMORANDUM OPINION AND ORDER OF COURT

TERRENCE F. McVERRY, District Judge.

Pending before the Court are the following motions to dismiss: EME HOMER CITY GENERATION L.P.'S MOTION TO DISMISS (Doc. No. 85); DEFENDANTS HOMER CITY OWNER–LESSORS' MOTION TO DISMISS (Doc. No. 87); NEW YORK STATE ELECTRIC & GAS CORPORATION'S MOTION TO DISMISS (Doc. No. 88); and PENNSYLVANIA ELECTRIC COMPANY'S MOTION TO DISMISS (Doc. No. 91), each with a brief in support. Plaintiff United States of America and three intervenor Plaintiffs, Commonwealth of Pennsylvania Department of Environmental Protection (“PADEP”), State of New York and State of New Jersey (collectively the “Intervenors”), filed briefs in opposition. All Defendants filed reply briefs. The issues have been fully briefed and are ripe for disposition.

Factual Background

This case involves alleged violations of the federal Clean Air Act, 42 U.S.C. § 7470 et seq., at the Homer City coal-fired power plant in Indiana County, Pennsylvania (the “Plant”). Although the legal issues raised in this case are complex, the facts pled in the three separate Complaints filed by the United States and the Intervenor state Plaintiffs are relatively straight-forward.

Defendant New York State Electric and Gas Corporation (“NYSEC”) was an owner of the Plant from January 1968 until June 1998. Defendant Pennsylvania Electric Company (“PENELEC”) was an owner of the Plant from January 1968 until March 1999 and also operated the Plant during this same timeframe.¹ Defendant EME Homer City Generation, L.P. (“EME”) owned the Plant from March 1999 until December 7, 2001 and has operated the Plant from March 1999 through the present. In 2001, EME and the eight Homer City Owner–Lessor Limited Liability Companies (the “OLs”) completed a sale-leaseback transaction, by which the OLs acquired ownership of the Plant. For clarity and convenience, NYSEC and PENELEC will be referred to as the “Former Owners” and EME and the OLs will be referred to as the “Current Owners.”

The Plant has three coal-fired generating units. Units 1 and 2 began operating in 1969, prior to the enactment of the provisions of the Clean Air Act at issue, and neither unit has been retrofitted with a wet flue gas desulfurization scrubber to control S02 emissions which adversely impact human health and the environment, including asthma and acid rain. In 2009, Units 1 and 2 emitted approximately 96,000 tons of S02, amongst the highest in the nation.² All three boiler units are currently equipped with electro-static precipitators for particulate control and selective catalytic reduction for control of nitrogen oxides (“NOx”).

In August 1991, the Former Owners commenced a multi-million dollar project to replace the economizer on Unit 2, which included modification of the backpass gas ductwork and installation of new reheat temperature control dampers and internal boiler supports and related work. In March 1994, the Former Owners commenced a similar project to replace the economizer on Unit 1. In 1995 and 1996, the Former Owners replaced the vertical reheater pendants on Units 1 and 2.³ The Former Owners did not apply for or obtain a permit under the Prevention of Significant Deterioration (“PSD”) program of the Clean Air Act before performing any of these projects.

On August 3, 1995, PENELEC submitted an application for an operating permit for the Plant pursuant to the requirements of Title V of the Clean Air Act. On January 30, 2004, PADEP issued a final Title V permit for the Plant. The effective date of the permit was December 1, 2004. United States Complaint ¶ 61. The Intervenors allege that PADEP issued several operating permits for the emission sources at the Plant, the most recent of which is Title V permit No. 32–00055, issued on January 2004, with an amendment effective on December 1, 2004. PADEP/New York Complaint ¶ 23; New Jersey Complaint ¶ 22. The actual Title V permit was not attached to the Complaints or otherwise provided to the Court. It is unclear whether concerns regarding the projects at issue were raised during the ten year period when the Title V permit application was under review by regulators.

For many years, environmental regulators took no action to challenge the 1991, 1994, 1995 or 1996 projects as improper. On June 12, 2008, the United States Environmental Protection Agency (“EPA”) issued a Notice and Finding of Violation (“NOV”) to the Current Owners. On May 6, 2010 and November 1, 2010, the EPA issued subsequent NOVs to all of the named Defendants. Plaintiffs allege that Defendants undertook the 1991, 1994, 1995 and 1996 projects without having obtained the requisite PSD permits. In addition, Plaintiffs allege that because the projects should have triggered a requirement to install the Best Available Control Technology (“BACT”) to control emissions of sulfur dioxide (“S02”) and/or particulate matter, Defendants failed to submit a complete application for a Title V operating permit, and thus failed to obtain a proper or valid Title V operating permit.

The United States initiated this action on January 6, 2011, with the filing of a four-count civil complaint against all of the named Defendants. Counts 1 and 3 allege violations by all Defendants of the PSD provisions of the Clean Air Act, 42 U.S.C. §§ 7470–7492, and the federally-approved Pennsylvania State Implementation Plan (“SIP”), for the projects at Units 1 and 2, respectively. Counts 2 and 4 allege violations by all Defendants of the Title V provisions of the Clean Air Act, 42 U.S.C. §§ 7661–7661f, and the Pennsylvania Title V program, for the subsequent operation of Units 1 and 2, respectively. The United States seeks injunctive relief and the assessment of civil penalties since March 15, 2004.

On January 13, 2011, PADEP and New York intervened in the action and filed a five-count Complaint which provides more factual details, asserts similar violations of the PSD and Title V provisions of the federal Clean Air Act, asserts corresponding violations of the Pennsylvania Air Pollution Control Act (“APCA”), 35 P.S. § 4001, et seq., and its implementing regulations, and adds a common law public nuisance claim. Additionally, New Jersey filed a separate three-count Intervenor Complaint which asserts essentially the same federal Clean Air Act claims set forth by the United States. The Intervenors assert standing under the Clean Air Act citizen suit provision, 42 U.S.C. § 7604(a)(1), and seek injunctive relief and civil penalties relating back to the dates of the original projects.

Standard of Review

A motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) challenges the legal sufficiency of a complaint. The Court must accept as true all well-pleaded facts and allegations, and must draw all reasonable inferences therefrom in favor of the plaintiff. However, as the Supreme Court made clear in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), the “factual allegations must be enough to raise a right to relief above the speculative level.” Id. The Supreme Court has subsequently broadened the scope of this requirement, “stating that only a complaint that states a plausible claim for relief survives a motion to dismiss.” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1950, 173 L.Ed.2d 868 (2009) (emphasis added). A district court must conduct a two-part analysis when presented with a motion to dismiss for failure to state a claim. First, the Court must separate the factual and legal elements of the claim. Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir.2009). Although the Court “must accept all of the complaint's well-pleaded facts as true, [it] may disregard any legal conclusions.” Id. at 210–211. Second, the Court “must then determine whether the facts alleged in the complaint are sufficient to show that the plaintiff has a ‘plausible claim for relief In other words, a complaint must do more than allege the plaintiff's entitlement to relief.’ A complaint has to ‘show’ such an entitlement with its facts.” Id. at 211 (citing Iqbal, 129 S.Ct. at 1949). The determination of “plausibility” will be ‘ “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.’ ” Id. at 211 (quoting Iqbal, 129 S.Ct. at 1950).

Legislative Overview

This case primarily involves statutory interpretation of the Clean Air Act. In Alston v. Countrywide Financial Corp., 585 F.3d 753 (3d Cir.2009), the Court of Appeals for the Third Circuit described the task as follows:

The role of the courts in interpreting a statute is to give effect to Congress's intent.... Because it is presumed that Congress expresses its intent through the ordinary meaning of its language, every...