A federal district court recently answered a common question in PSD/NSR enforcement litigation: When is it too late to sue for civil penalties related to a major modification?

In United States v. Midwest Generation, LLC, the United States and citizen group plaintiffs alleged that a utility violated PSD regulations by failing to obtain a PSD permit for alleged major modifications at a power plant. The plaintiffs asserted that the PSD violation is an ongoing violation that continues until the source obtains a PSD permit and installs and operates required pollution controls. The utility moved to dismiss the PSD claims for civil penalties because the claims were time-barred.

The district court considered the plain meaning of the Clean Air Act and determined that rules governing the construction of a facility do not prohibit operation of a facility without a permit. The court followed Seventh Circuit precedent in ruling that a violation of the construction rules occurs at the time of construction and no later. Thus, a PSD violation occurs at the time the alleged construction or modification begins, and all claims for civil penalties must be brought within five years thereafter. Because the modifications at issue occurred more than nine years before the complaint was filed, the court dismissed the PSD claims.

While the project timing issue is common in NSR/PSD litigation, this case also presented an unusual fact pattern related to plant ownership liability. The court found it significant that the ownership of the power plant changed after the modifications were completed. One company modified the plant, while a successor company operated the plant after the modification. The plaintiffs sued the successor company that operated the plant—not the company that previously modified the plant. 

The court held that the successor company operating the plant was not liable for civil penalties or injunctive relief on claims for modifications that occurred on the prior owner’s watch.