On October 21, 2005, the United States Court of Appeals for the Second Circuit issued an opinion that could have far-reaching impacts on the Title V air permit program and the enforcement of clean air laws and regulations in general. The court held that issuance of air emission Notices of Violation ("NOVs") by the New York Department of Environmental Conservation ("DEC") sufficed to demonstrate noncompliance for purposes of the Title V permitting process, and accordingly, Title V permits should not have been issued in such circumstances without compliance schedules. New York Public Interest Research Group, Inc. ("NYPIRG") v. Johnson, 427 F.3d 172 (2d Cir. 2005).
The facts of the case were simple. NYPIRG appealed the U.S. Environmental Protection Agency’s ("USEPA") refusal to object to Title V operating permits issued by the DEC to two coal-fired power plants operated by NRG Energy, Inc. ("NRG"). Among other things, NYPIRG complained that the permits did not contain compliance plans or schedules outlining how the sources were to comply with the Prevention of Significant Deterioration ("PSD") program. NYPIRG argued that such compliance plans were necessary because both plants previously had received NOVs from DEC asserting PSD non-compliance based on past physical modifications to their boilers and turbines. Both DEC and USEPA had declined to address these PSD issues in the Title V permitting process largely because the enforcement process had not run its course. In fact, the New York State Attorney General had sued the permittee on the NOV claims in federal district court. New York v. Niagara Mohawk Power Corp., 263 F. Supp. 2d 650 (W.D.N.Y. 2003). According to the Second Circuit,USEPA reasoned that "DEC had discretion under Title V not to include in the permits PSD limits not yet determined to be applicable." 427 F.3d 172 (internal pagination unavailable).
The Second Circuit took a different view than USEPA. It held that "[t]he DEC’s issuance of these NOVs and commencement of the suit is a sufficient demonstration to the Administrator of non-compliance for purposes of the Title V permit review process." Id. The Court further concluded that because the NOVs demonstrated noncompliance, a compliance schedule should have been included with the permits. In reaching its holdings, the Court rejected arguments that incorporating PSD limits and compliance schedules into NRG’s Title V permits, based on the NOVs and complaint,would be premature.
This case raises a number of significant questions:
- Does a federal NOV have the same effect as a state NOV when the state, not USEPA, is the permitting authority?
- In each state, what is an "NOV" or a "finding of violation?" Is it truly an administrative determination of noncompliance, or is it a type of invitation to exchange information and commence discussions with the agency about what appear to be potential violations?
- What happens to cases in which the state environmental agency or USEPA elects to use its enforcement discretion to refrain from pursuing an NOV because the circumstances do not justify enforcement? Are the agencies now obligated to formally withdraw the NOV or to comply with an obligation to impose conditions in the Title V permit at initial issuance or upon renewal?
- Are the state and federal governments equipped and staffed to handle all the permit appeals that will result from having to impose a compliance schedule for all nonresolved NOVs?
- What is the standard of review on appeal? Arbitrary and capricious or de novo? And, will that decision be based on the administrative record? Which agency’s record?
- How can the administrative record accurately reflect all of the information a regulated entity would use in defense of the NOV? How much of the defense can be submitted during the comment process on a Title V permit? Is this method of adjudication constitutionally sound given that the typical discovery process is circumvented?
- Is a stay of the compliance schedule available and under what circumstances? Must a bond or other financial assurance be posted?
- Would a better solution be to make the compliance schedule contingent upon the outcome of a formal enforcement proceeding?
For emission sources in Connecticut, New York, and Vermont, which together constitute the Second Circuit, and possibly for other states, this case will add to the complexity of the Title V process for sources that have received NOVs. As of the date of this Advisory, no party to the NYPIRG proceeding has sought a rehearing.
This article has been prepared by Sidley Austin Brown & Wood LLP for informational purposes only and does not constitute legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Readers should not act upon this without seeking professional counsel.
