United States v. La. Generating, LLC
| Decision Date | 01 December 2011 |
| Docket Number | Civil Action No. 09–100–JJB–CN. |
| Citation | 938 F.Supp.2d 615 |
| Parties | UNITED STATES of America, Plaintiff, Louisiana Department of Environmental Quality, Plaintiff–Intervenor, v. LOUISIANA GENERATING, LLC, Defendant. |
| Court | U.S. District Court — Middle District of Louisiana |
OPINION TEXT STARTS HERE
Andrew C. Hanson, Bradford McLane, Elias L. Quinn, Jeffrey M. Prieto, U.S. Department of Justice, Washington, DC, John Joseph Gaupp, United States Attorney's Office, Baton Rouge, LA, for Plaintiff.
Dwana Christy King, Christopher Alan Ratcliff, Kathy M. Wright, Louisiana Dept. of Environmental Quality, Baton Rouge, LA, for Plaintiff–Intervenor.
R. Patrick Vance, Jones, Walker, New Orleans, LA, A. Kent Mayo, Megan H. Berge, Michael B. Heister, William M. Bumpers, Baker Botts LLP, Washington, DC, Ryan Estes Johnson, Jones, Walker, Baton Rouge, LA, for Defendant.
Richard M. Gladstein, U.S. Department of Justice, Washington, DC, for Plaintiff/Defendant.
RULING ON MOTIONS FOR SUMMARY JUDGMENT
This matter is before the Court on three Motions for Partial Summary Judgment under Rule 56 of the Federal Rules of Civil Procedure. There are numerous motions pending. Parties have advised that resolving these three will potentially resolve a number of them. Plaintiffs have filed one Motion (doc. 136) while Defendant has filed two (docs. 138, 139). Parties have filed briefs the on the motions. Oral argument was heard. This Court's jurisdiction exists pursuant to 28 U.S.C. § 1332. For the reasons stated herein, Plaintiffs' motion is GRANTED in part and DENIED in part; Defendant's motions are DENIED.
This case revolves around the Big Cajun II (“BCII”) power plant, a coal-fired electric utility steam generating plant in New Roads, Louisiana. This plant began operation in 1981 and consists of three units, conveniently named Unit 1, Unit 2, and Unit 3. It is certain work done at Units 1 and 2 in 1998 and 1999 that forms the basis of the present lawsuit by the federal and state government. In 1994, Cajun Electric, BCII's then-owner, filed for Chapter 11 Bankruptcy protection. As part of its reorganization plan, substantially all of Cajun Electric's assets, including BCII, were put up for sale through auction. NRG Energy (“NRG”) was involved in the auction process from the beginning in 1994. During the six-year process, there were various asset purchase agreements entered between NRG and the Chapter 11 Trustee. The Fifth Asset Purchase Agreement (“Fifth APA”), signed in September, 1999, was the last and the one whose terms embody the parties' agreement. Part of the Fifth APA called for the Defendant to assume any environmental liabilities that attached to the owner of the acquired assets by operation of law. (Doc. 136–3 at 28.) The sale was completed on April 1, 2000, by which time NRG had formed the Defendant, Louisiana Generating, LLC (“LaGen”) as a subsidiary. LaGen is the full owner of BCII.
Before the sale to LaGen, the Court notes at this time that two sets of significant repairs were made to Units 1 and 2. They are outlined below.
In 1994 and 1995, Cajun Electric performed work on Units 1 and 2, upgrading the turbines (“the 1994/95 work”). It did not seek any permits before performing the work, which would violate the Clean Air Act (“CAA”) only if emissions were increased as a result of the work. As part of its due diligence, NRG's investigator alerted his company of his suspicions that this work triggered liability under the CAA. Specifics of the CAA will be discussed below. It is important to note that this turbine work did not actually lead to such liability and is not the subject of this lawsuit—however, it may be relevant to the discussion of what NRG knew or reasonably suspected about the next set of repairs Cajun Electric made to Units 1 and 2.
In 1998 and 1999, Cajun Electric again performed repairs on Units 1 and 2, this time replacing portions of the primary boiler reheaters—Unit 1 in 1998 and Unit 2 the next year (“the 1998/99 work”). Again, this work was done without a permit. The cost of each project was estimated at $5 million. The Trustee notified all of the bidders, including NRG, about this project. NRG did not perform any due diligence on potential CAA liability for this work. The question of whether this work constituted a modification, thereby triggering the PSD program requirements, is not before the Court at this time. What is before the Court is what effects would potentially ensue should the 1998/99 work later be determined to have been a modification.
In September of 2001, LaGen submitted a revised Title V permit application for BCII. In February of 2005, while the application was still pending, EPA issued a notice of violation (“NOV”) regarding the 1998/99 work. This NOV was forwarded to LDEQ. LDEQ issued the permit in August of 2005. LDEQ renewed this permit in 2011. Despite the NOV, the EPA did not formally object to the issuance of the permit or its renewal.
For the purposes of these motions, a basic overview of the Clean Air Act will suffice. Under the Act, the Environmental Protection Agency (“EPA”) Administrator is charged with promulgating national ambient air quality standards (“NAAQS”). Each state is to submit its own implementation plan (SIP) that provides for attainment and maintenance of the NAAQS.
Two sections of the Act are relevant to this case. First is the Prevention of Significant Deterioration of Air Quality (“PSD”) program, found in Title 42 of the United States Code, Sections 7470–7492. The program is designed to assure economic growth will occur in such a way as to protect clean air resources. This is accomplished by requiring certain things to be done by a facility before a permit to construct a facility may be issued. Certain modifications to existing facilities are included in the definition of “construction.” 42 U.S.C. § 7479(2)(c). The term modification means any change to a stationary source that “increases the amount of any air pollutant emitted by such source” or leads to the emission of any new pollutant. 42 U.S.C. § 7411(a)(4).
The PSD provisions mandate that, before construction on a major emitting facility (of which BCII is one) is commenced, eight things must take place: (1) a permit setting forth emission limitations must be issued; (2) the proposed permit has been analyzed and a public hearing has been held; (3) the owner must demonstrate that emissions will not increase emissions (using several parameters); (4) ensure that the proposed facility is subject to the best available control technology (“BACT”) for pollutants; (5) comply with those BACT provisions; (6) study projected impacts that may result from the growth of the facility; (7) the owner/operator must agree to monitor to determine the effect of emissions from the facility; and (8) certain approval that is not relevant to this case. 42 U.S.C. § 7475(a)(1–8).
It is up to the facility to determine up-front whether it should request a preconstruction permit. As mentioned above, because Cajun Electric did not deem either the 1994/95 work or the 1998/99 work to be modifications, it did not apply for PSD permits. Because it was later determined by regulators that the 1994/95 work was indeed not a modification, Cajun Electric faced no liability for not seeking a permit. The determination regarding the 1998/99 work has yet to be made. The requirements under § 7475(a)(4) and (5), the BACT requirements, are of particular importance to this case as they call for implementation of potentially costly control technologies.
While the PSD program relates to preconstruction permits, Title V of the CAA deals with operating permits. 42 U.S.C. §§ 7661–7661f. As with the PSD program, Louisiana has a corresponding Title V operating permit program. LAC 33:III Chapter 5. Title V does not set forth any new requirements for source operators; it is designed to have all emissions limitations and applicable PSD provisions (such as BACT) in one easily accessible location. It is unlawful to operate without a Title V operating permit or to operate except in compliance with an operating permit issued under Title V.
The EPA Administer may bring civil actions against any person who violates either the PSD program, the Title V program, or the Louisiana SIP program. 42 U.S.C. § 7413(a)(1) and (3). The Administrator also seek civil injunctive relief and/or fines for such violations. 42 U.S.C. § 7413(b). The Administrator may also bring an action for an injunction to stop construction of or modification of a major emitting facility that does not conform with the PSD program requirements. 42 U.S.C. § 7477.
In their Motion, Plaintiffs seek summary judgment on the issue of successor liability, arguing that LaGen expressly assumed Cajun Electric's CAA liability. In making this argument, they essentially argue two points: (1) that the law does not prohibit successor liability in this situation; and (2) that LaGen actually did assume Cajun Electric's liabilities under the CAA. (Doc. 146). As to the first point, Plaintiffs claim that New York law, which the parties agreed would govern the purchase, allows for such successor liability where there is an express or implied agreement to do so. Plaintiffs also point to case law from several circuits allowing successor liability when the assumption was made under the terms of an asset purchase agreement. They also point to case law where courts have applied successor liability under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) and also under the CAA.
As to the second point, Plaintiffs point to the terms of the Fifth APA and the assumption language found in paragraph 2.4. They argue LaGen meets the criteria set forth in the paragraph in that it knew or...
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