Fifth Circuit: Citizen Suit Exposure for Thousands of Title 5 Deviations
On May 27, the U.S. Court of Appeals for the Fifth Circuit (the “Fifth Circuit”) vacated a lower Texas court’s ruling that imposed a $0 penalty for alleged violations under the Clean Air Act (“CAA”). This decision, styled Environment Texas Citizen Lobby, Inc. v. ExxonMobil Corp.[1] (the “Citizen Lobby Case”) reinstated a citizen’s suit alleging thousands of violations of the CAA, and seeking hundreds of millions in penalties. This decision is a significant victory for potential plaintiffs, as it makes clear that citizens groups can potentially bring suit to enforce each deviation from sources’ operating permits. However, the Fifth Circuit’s explanation of the decision does leave some room for companies to protect themselves from permanent injunctions and massive penalties.
For context, the United States District Court for the Southern District of Texas found that only 94 of the thousands of alleged violations were actionable. In addition, the court held that even if every one of the plaintiffs’ alleged violations were actionable, they would not require a penalty under the CAA.[2] The Fifth Circuit’s reversal of that opinion could have significant implications on the regulated community.
Title V Deviations are “Actionable”, and Potentially Admissions of Violations
In general, sources are required to submit reports that describe any deviations from applicable operating permit conditions (“Title V Deviations”). Regardless of the definition, sources may (as was the case here) need to report thousands of Title V Deviations throughout a five year statute of limitations period. This decision opens the door for claims involving those thousands of deviations, each of which is potentially subject to penalties of up to $37,500 per violation, per day.[3]
In addition, although the Fifth Circuit stated that ExxonMobil’s Title V Deviation reports were not “admissions” sufficient to impose liability in and of themselves, the opinion did not rule out the possibility that they would be considered admissions in other jurisdictions. In some states, like Texas, the reporting requirement is triggered for any “indication” of a violation. However, in some states, like Ohio, sources must include “any deviations” from permit requirements.[4] The Fifth Circuit’s decision not to treat ExxonMobil’s deviation reports as admissions was based primarily upon the wording of the Texas statute. It is not clear whether a similar result would be reached in Ohio, or other jurisdictions with differing regulatory language.
Next Generation Compliance and Future Enforcement Trends for “Continuous” Emissions Limits
The implication of this case is magnified when viewed in the context of two recent developments in environmental law – the removal of exemptions from emissions during startup, shutdown, and malfunction (“SSM”), and US EPA’s program of “Next Generation Compliance.” Recently, US EPA issued a rule requiring revisions to several state’s SIP provisions, including Ohio’s, which exempted emissions from limits during SSM events. However, this rule failed to account for the fact that the now “continuous” emissions limitations were never intended to be applicable during SSM periods, where sources often do not have the same capabilities as they do during normal operations. Despite that fact, EPA expects that sources will be able to comply during SSM events with the numerical emissions limits currently applicable to periods of normal operations. Several states have responded by implementing “enforcement discretion” provisions that will allow for some relief during these periods, however, these provisions have no impact on other enforcement entities such as US EPA or citizen’s groups, thus leaving sources exposed to enforcement.
Further compounding the issue, US EPA has begun rolling out its future enforcement strategy, called “Next Generation Compliance”, where electronically-submitted source emissions data (like Title V deviations) are made largely available to the public. In some cases, data could be available in near-real time online, and accessible by a cellphone app. This strategy, which is intended to enhance enforcement efforts by effectively deputizing citizens groups, is likely to lead to significant risk of citizen suits to enforce violations of the Clean Air Act and other environmental regulations.
Thus, the implication of this decision (if followed in other jurisdictions) is potentially that sources will be submitting Title V Deviation Reports with thousands of “admissions” of violations, and those reports will become increasingly available to citizens groups and other enforcement entities with the authority to bring suits to remedy those violations. As seen in the Citizen’s Lobby case, these suits can involve allegations of extensive noncompliance and hundreds of millions of dollars in fines.
At very least, this decision highlights the uncertainty sources are facing in the current regulatory climate. Sources will need to be particularly careful in how they describe “deviations” in their Title V Deviation Reports to minimize the resulting litigation risk, whether from citizen suits or environmental agencies.
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[1] Env't Tex. Citizen Lobby, Inc. v. ExxonMobil Corp., 5th Cir. No. 15-20030, 2016 U.S. App. LEXIS 9751 (May 27, 2016)
[2] Env’t Tex. Citizen Lobby Inc. v. ExxonMobil Corp.,, 66 F. Supp. 3d 875, 904 (S.D. Tex. 2014).
[3] 42 U.S.C. § 7413(b), as amended by various adjustments for inflation.
[4] OAC 3745-77-07(A)(2)(c).
