Sierra Club v. Otter Tail Power Co.

• Decision Date: 12 August 2010
• Docket Number: No. 09-2862.,09-2862.
• Citation: 615 F.3d 1008
• Parties: SIERRA CLUB, Appellant, v. OTTER TAIL POWER COMPANY; MDU Resources Group, Inc.; Northwestern Corporation, d/b/a Northwestern Energy, Appellees. State of South Dakota, Amicus on Behalf of Appellees, United States Environmental Protection Agency, Amicus Curiae.
• Court: U.S. Court of Appeals — Eighth Circuit

615 F.3d 1008

SIERRA CLUB, Appellant,

v.OTTER TAIL POWER COMPANY; MDU Resources Group, Inc.; Northwestern Corporation, d/b/a Northwestern Energy, Appellees.State of South Dakota, Amicus on Behalf of Appellees,United States Environmental Protection Agency, Amicus Curiae.

No. 09-2862.

United States Court of Appeals,Eighth Circuit.

Submitted: May 11, 2010.

Filed: Aug. 12, 2010.

COPYRIGHT MATERIAL OMITTED.

George E. Hays, argued, San Francisco, CA, Aaron J. Emerson, on the brief, Sioux Falls, SD, for appellant.

Harry M. Johnson, III, argued, Washington, DC, Thomas J. Welk, Christopher W. Madsen, Sioux Falls, SD, Makram B. Jaber, Brent Alan Rosser, Washington, DC, on the brief, for appellee.

Before RILEY, Chief Judge, JOHN R. GIBSON and MURPHY, Circuit Judges.

MURPHY, Circuit Judge.

Sierra Club brought this Clean Air Act(CAA) citizen suit against Otter Tail Power Company, MDU Resources Group, and Northwestern Energy, who own and operate the Big Stone Generating Station, a coal fired power plant near the border between South Dakota and Minnesota.Sierra Club alleged that Otter Tail violated the CAA by failing to obtain permits for a series of modifications to the plant and by exceeding applicable emission limits.The district court¹ granted Otter Tail's motion to dismiss, and Sierra Club timely appealed.We affirm.

I.

Since the factual allegations underlying this controversy are tied into the CAA and its related regulations, we begin with an examination of the applicable statutory and regulatory framework.Then we will turn to the factual and procedural background of the case.

A.

Congress enacted the Clean Air ActAmendments of 1970 seeking “ ‘to guarantee the prompt attainment and maintenance of specified air quality standards.’ ”Alaska Dep't of Envtl. Conservation v. EPA,540 U.S. 461, 469, 124 S.Ct. 983, 157 L.Ed.2d 967(2004)( quoting Union Elec. Co. v. EPA,427 U.S. 246, 249, 96 S.Ct. 2518, 49 L.Ed.2d 474(1976)).To that end, it “directed EPA to devise National Ambient Air Quality Standards (NAAQS) limiting various pollutants, which the States were obliged to implement and enforce.”Envtl. Defense v. Duke Energy Corp.,549 U.S. 561, 566, 127 S.Ct. 1423, 167 L.Ed.2d 295(2007)( citing42 U.S.C. §§ 7409,7410).

A central part of the CAA's regulatory scheme was the New Source Performance Standards (NSPS) program, which required EPA to develop “technology-based performance standards” designed to limit emissions from major new sources of pollution.Chevron U.S.A., Inc. v. Natural Res. Defense Council, Inc.,467 U.S. 837, 846, 104 S.Ct. 2778, 81 L.Ed.2d 694(1984);see42 U.S.C. § 7411(b)(2006).“New sources” include both newly constructed facilities and those that have been modified such that their emissions increase.Duke Energy,549 U.S. at 566-67, 127 S.Ct. 1423( citing42 U.S.C. § 7411(a)(2)).It is “unlawful for any owner or operator of any new source to operate such source in violation of” applicable performance standards.42 U.S.C. § 7411(e).

The Supreme Court has pointed out that the NSPS program “did too little to ‘achieve the ambitious goals of the 1970amendments.’ ”Duke Energy,549 U.S. at 567, 127 S.Ct. 1423( quotingR. Belden, Clean Air Act 7 (2001))(alteration omitted).Merely setting emissions limits failed to improve air quality in those areas that had already attained the minimum standards of the NAAQS because polluters had no incentive to diminish emissions below the established limits.Congress therefore amended the CAA again in 1977 to add the “Prevention of Significant Deterioration”(PSD) program, which seeks to ensure that the “air quality floor” established by the NAAQS does not “in effect become a ceiling.”Sierra Club v. Thomas,828 F.2d 783, 785(D.C.Cir.1987).

Under the PSD program, “[n]o major emitting facility ... may be constructed” or modified unless it meets certain preconditions.42 U.S.C. §§ 7475(a);7479(2)(C)(“The term ‘construction’ ... includes ... modification.”).Among the preconditions relevant here are that the facility must obtain a permit setting forth applicable emission limitations, § 7475(a)(1), and that it must be subject to “best available control technology”(BACT), § 7475(a)(4).BACT, despite what the term implies, is not a particular type of technology.Rather, it is an “emission limitation based on the maximum degree of reduction of each pollutant subject to regulation ... which the permitting authority, on a case-by-case basis, taking into account energy, environmental, and economic impacts and other costs, determines is achievable” for the facility in question.Id.§ 7479(3).

The PSD program is primarily implemented by the states through “state implementation plans”(SIPs).Id.§ 7471.States have broad discretion in designing their SIPs, but the plans must include certain federal standards and are subject to EPA review and approval.SeeAlaska Dep't of Envtl. Conservation,540 U.S. at 470, 124 S.Ct. 983.At all times relevant to this case, South Dakota had not yet incorporated approved PSD provisions into its SIP and the federal PSD regulations set forth at 40 C.F.R. § 52.21 therefore govern this case.Seeid.§ 52.21(a)(1).²

In 1990Congress again amended the CAA to require each covered facility to obtain a comprehensive operating permit setting forth all CAA standards applicable to that facility.See42 U.S.C. § 7661a(a).These “Title V” permits do not generally impose any new emission limits, but are simply intended to incorporate into a single document all of the CAA requirements governing a facility.SeeRomoland Sch. Dist. v. Inland Empire Energy Ctr., LLC,548 F.3d 738, 742(9th Cir.2008).Similar to other CAA programs, Title V is implemented primarily by the states under EPA oversight.Seeid.In states with EPA approved programs, Title V permits are issued by the state permitting authority, but are subject to EPA review and veto.Seeid. at 742-43;42 U.S.C. § 7661d.

B.

The Big Stone Generating Station is a 450 megawatt coal fired power plant located in Big Stone City, South Dakota.³Otter Tail Power Company operates the plant, which it jointly owns with MDU Resources Group and Northwestern Energy (the three appellees will be collectively referred to as Otter Tail).Big Stone has undergone various physical and operational modifications since it began operating in 1975.Sierra Club alleges that three of those modifications triggered PSD and NSPS obligations which Otter Tail has violated.

The first modification at issue was a change in the primary fuel used at Big Stone.The plant was originally designed to burn lignite coal, but in 1995 it switched to subbituminous coal.Sierra Club claims that this significantly increased Big Stone's emissions of nitrogen oxides and particulate matter, meaning that Otter Tail was required to obtain a PSD permit before making the change.Otter Tail did not seek one.

In 1998 Big Stone's boiler was modified to increase the surface area of its primary superheater.Sierra Club claims that this modification increased the plant's emission of sulfur dioxide and nitrogen oxides and that Otter Tail was accordingly obligated to obtain a PSD permit for it.Otter Tail did not apply for such a permit.

Finally, in 2001 Big Stone underwent physical and operational modifications to allow it to supply steam to a nearby ethanol plant.Otter Tail applied to the South Dakota Department of Environment and Natural Resources(DENR)-the agency responsible for administering South Dakota's Title V program-for an amendment to its Title V permit to allow the ethanol plant project.DENR invited public comment on the permit application, but Sierra Club did not participate in the permitting process.After evaluating the proposed project and concluding that it did not involve modifications that triggered NSPS or PSD requirements, DENR approved the amended permit.Sierra Club now alleges that the ethanol plant project did trigger NSPS and PSD obligations.

Sierra Club commenced this suit in June 2008 under the CAA's “citizen suit” provision, 42 U.S.C. § 7604(a), seeking assessment of civil penalties against Otter Tail as well as declaratory and injunctive relief.It alleged that Otter Tail had violated the CAA by failing to obtain PSD permits before commencing the three modifications described above.It also claimed that Otter Tail continued to violate the CAA by operating without permits and without abiding by the BACT emission limits which would have been imposed as part of the PSD permitting process.Finally, Sierra Club alleged that Big Stone was operating in violation of NSPS limits triggered by the 2001 ethanol plant project.

Otter Tail moved to dismiss, arguing that Sierra Club's PSD claims were untimely and that the NSPS claim was an impermissible collateral attack on Otter Tail's operating permit.The district court granted the motion.It interpreted the CAA's PSD provisions as imposing upon operators only a one time obligation to obtain a permit before construction or modification of a facility, as opposed to imposing ongoing conditions on its operation.It reasoned that any violation of these provisions would have thus occurred when modifications were commenced.Since the last modification was begun in 2001, Sierra Club's PSD civil penalty claims were barred by the five year statute of limitations in 28 U.S.C. § 2462.Although § 2462 does not apply to equitable relief, the district court decided that Sierra Club's claims for equitable relief were foreclosed under the concurrent remedy doctrine because its civil penalty claims were time barred.

The district court dismissed the NSPS claim for lack of subject matter jurisdiction.Because that claim essentially attacks the terms of Otter Tail's amended Title V permit rather than Otter Tail's compliance with the permit, the district court concluded that Sierra Club should have raised the NSPS issue in administrative proceedings during the permitting...