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Luminant Generation Co., L.L.C. v. United States Environmental Protection Agency

United States Court of Appeals, Fifth Circuit

July 3, 2014

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY; GINA MCCARTHY, Administrator, United States Environmental Protection Agency, Respondents

Petitions for Review of Notices of the Environmental Protection Agency.

For Luminant Generation Company, L.L.C., Energy Future Holdings Corporation, Petitioners (12-60694): Philip Stephen Gidiere III, Esq., Thomas Lee Casey III, Attorney, Carl Grady Moore III, Balch & Bingham, L.L.P., Birmingham, AL; Clinton Frederick Beckner III, Peter D. Keisler, Esq., Sidley Austin, L.L.P., Washington, DC.

For United States Environmental Protection Agency, GINA MCCARTHY, Administrator, United States Environmental Protection Agency, (12-60694, 13-60538), Respondents: Andrew J. Doyle, Trial Attorney, U.S. Department of Justice, Environment & Natural Resources Division, Washington, DC; Brenda Mallory, Environmental Protection Agency, Washington, DC.

For State of Texas, (12-60694, 13-60538), Amicus Curiae: Linda B. Secord, Assistant Attorney General, Office of the Attorney General, Environmental Protection & Administrative Law Division, Austin, TX.

For Sierra Club, (12-60694, 13-60538), Amicus Curiae: Elena Kathryn Saxonhouse, National Headquarters, San Francisco, CA.

For Luminant Generation Company, L.L.C., Big Brown Power Company, L.L.C., Petitioners (13-60538): Philip Stephen Gidiere III, Esq., Thomas Lee Casey III, Attorney, Balch & Bingham, L.L.P., Carl Grady Moore III, Birmingham, AL; Clinton Frederick Beckner III, Lisa Elizabeth Jones, Peter D. Keisler, Esq., Sidley Austin, L.L.P., Washington, DC; Stephanie Zapata Moore, Luminant, Dallas, TX.

For GINA MCCARTHY, Administrator, United States Environmental Protection Agency, Respondent (13-60538): Andrew J. Doyle, Trial Attorney, U.S. Department of Justice, Environment & Natural Resources Division, Washington, DC.

Before SMITH, WIENER, and PRADO, Circuit Judges.


Page 440

JERRY E. SMITH, Circuit Judge:

The operators of two power plants filed petitions challenging the legal sufficiency of the notice of violation issued by the Environmental Protection Agency (" EPA" ) under Section 7413(a) of the Clean Air Act. The EPA filed a second, amended notice of violation and moved to dismiss the petitions for want of jurisdiction. The operators challenged the sufficiency of the second notice. Because the notices were not " final actions" of the EPA, we dismiss the petitions for lack of subject-matter jurisdiction.


Luminant Generation Company, L.L.C. (" Luminant" ), owns and operates the Martin Lake Power Plant and operates the Big Brown Power Plant owned by Big Brown Power Company LLC (" Big Brown" ). Energy Future Holdings Company (" EFH" ) is the ultimate corporate parent of Luminant and Big Brown. Both plants have multiple coal-fired units, each connected to turbine generators. Each plant operates pursuant to a Title V permit issued by the State of Texas and approved by the EPA.

In June 2008, the EPA began sending Luminant requests under 42 U.S.C. § 7414(a) to determine compliance with the Clean Air Act and its implementing regulations. In July 2012, the EPA issued a section 7413(a) notice of violation (" 2012 NOV" ) to Luminant and EFH claiming that (a) during scheduled outages from 2005 to 2010, Luminant completed substantial capital projects at the Martin Lake and Big Brown Power Plants; (b) the projects involved physical or operational changes to certain emission units; and (c) the changes increased emissions of sulfur dioxide and nitrogen dioxide. The EPA asserted that, as a result of that activity, Luminant and EFH violated (1) the Act's Prevention of Significant Deterioration (" PSD" ) provisions, (2) Texas's State Implementation Plan (" SIP" ), (3) Texas's PSD provisions, (4) Title V of the Act, and (5) Texas's Title V program.

Page 441

Luminant petitions for review of the 2012 NOV, maintaining that it did not sufficiently comply with 42 U.S.C. § 7413(a)(1) because it (1) contained only boilerplate legal conclusions, (2) found violations of the Act's Title V program, and (3) was issued to EFH in spite of making no finding that EFH had directed the emissions-related activities at the plants. The EPA has moved to dismiss on the ground that a notice of violation is not " final action" as required by 42 U.S.C. § 7607(b)(1).

Luminant filed its opening brief in June 2013; instead of filing a brief, the EPA, in July, issued a second notice of violation (the " 2013 NOV" ) to Luminant and Big Brown. In August, the United States filed a federal complaint against Luminant Generation and Big Brown in the Northern District of Texas.[1] The 2013 NOV purports to " amend" the 2012 NOV[2] and alleges only violations of the Act's PSD provisions and Texas's PSD provisions. Luminant petitioned for review of the 2013 NOV, again challenging the legal sufficiency of the notice. The EPA again moved to dismiss, suggesting that this court lacks subject-matter jurisdiction. In the alternative, the EPA maintains that the notices satisfy 42 U.S.C. § 7413(a)(1). We consolidated the two cases for hearing and determination.


For this court to have subject-matter jurisdiction, the challenged agency action must have been a " final action." [3] That is, if the EPA did not undertake final action when it issued the two section 7413(a) notices, we have no jurisdiction over the petitions.

" Final action" under section 7607(b)(1) has the same meaning as " final agency action" under the Administrative Procedure Act (" APA" ). See Whitman v. Am. Trucking Ass'ns, 531 U.S. 457, 478, 121 S.Ct. 903, 149 L.Ed.2d 1 (2001). Therefore, just as under the APA, two conditions must be met: " First, the action must mark the 'consummation' of the agency's decisionmaking process--it must not be of a merely tentative or interlocutory nature. And second, the action must be one by which rights or obligations have been determined, or from which legal consequences will flow." [4]

The EPA has consistently maintained that the notices lack finality under either prong.[5] First, the EPA urges that " [t]he Notices here--which had to precede initiation

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of administrative or judicial enforcement action--similarly reflect a threshold allegation that violations of the Texas SIP have occurred." Second, EPA asserts that " Luminant did not become any more or less compliant with the [Act] or the Texas SIP simply because EPA served notice of its violation findings in advance of an enforcement action. . . . [O]nly continued prosecution of the enforcement action and the District Court's final judgment may have legal consequences for Luminant." Accordingly, the EPA contends that " like the Third, Sixth, Eighth, Ninth, Tenth, and Eleventh Circuits, this Court should, in assessing finality, recognize that CAA notices of violation are advisory, preliminary, and non-binding."

As to the first prong, Luminant[6] highlights two facts: (1) The EPA issued the notice only after investigating the claims for more than a decade; and (2) the EPA does not offer " any avenue of further agency review" for Luminant to challenge its decision. As to the second prong, to demonstrate that legal consequences flow from the notice itself, Luminant asserts that " separate penalties can and [according to the EPA] should be imposed as a result of a [NOV]." Luminant concedes that its position would create a circuit split but believes Harrison v. PPG Industries, Inc., 446 U.S. 578, 100 S.Ct. 1889, 64 L.Ed.2d 525 (1980), and Sackett v. EPA, 132 S.Ct. 1367, 182 L.Ed.2d 367 (2012), require us to recognize jurisdiction.

We disagree and conclude that the EPA does not undertake final action when it issues a section 7413(a) notice of violation. First, issuing a notice does not commit the EPA to any particular course of action. The statute makes clear the intermediate, inconclusive nature of issuing a notice. After giving notice and waiting thirty days, the EPA may " issue an order," " issue an administrative penalty" after a formal administrative hearing, or " bring a civil action." 42 U.S.C. § 7413(a)(1) (2012). Alternatively, the EPA could choose to withdraw or amend the notice or take no further action. Issuing notice, therefore, does not end the EPA's decisionmaking: It still must make further significant decisions even if it does not confer on Luminant the ability to influence those decisions. It similarly does not matter that it took the EPA twelve years to file notice. " [The agency's] initial 'finding' marks only the beginning of a process designed to test the accuracy of the agency's initial conclusions." Sierra Club v. EPA, 557 F.3d 401, 408 (6th Cir. 2009).

Second, a notice does not itself determine Luminant's rights or obligations, and no legal consequences flow from the issuance of the notice. The Clean Air Act and the Texas SIP, not the notices, set forth Luminant's rights and obligations.[7] As to this litigation, adverse legal consequences will flow only if the district court determines that Luminant violated the Act or the SIP. In other words, if the EPA issued notice and then took no further action, Luminant would have no new legal obligation imposed on it and would have lost no right it otherwise enjoyed.

Page 443

Third, although Luminant contends notices should be treated the same as orders, section 7413 treats these as distinct types of agency action. One, an agency must give notice before issuing an order, demonstrating the interlocutory nature of notices. Even if an agency gives a notice, however, it need not seek an order. Two, although the agency must allow the subject of the order " an opportunity to confer with the Administrator concerning the alleged violation," § 7413(a)(4), the EPA does not need to confer with the party before issuing notice. Three, although orders must be " compl[ied] with . . . as expeditiously as practicable," id., nothing in the Clean Air Act requires a regulated entity to " comply" with a notice. In fact, it makes no sense to say that an entity must comply with a notice or that it has violated a notice. Finally, though violating a compliance order may result in double penalties (for violating the Act and for violating the order), no authority suggests that a court may assess double penalties for " violating" a notice.[8] Therefore, despite the fact that orders may be final action, notices of violations do not share the finality of orders.

Fourth, contrary to Luminant's suggestion, neither PPG Industries nor Sackett compels a contrary result. In PPG Industries, a chemical manufacturing company wished to construct a new power generating facility that would be equipped with " two gas turbine generators, two 'waste-heat' boilers, and a turbogenerator." PPG Indus., 446 U.S. at 582. The EPA requested the company submit information on whether the waste-heat boilers should be consider " new sources." Once it did, the EPA responded with a letter " conclud[ing] that the waste-heat boilers were, indeed, subject to the 'new source' standards." The parties agreed that the decision was final action but disagreed as to whether it was " any other" final action.[9] The Court addressed only the scope of " any other," construing those terms broadly.[10] PPG Industries, therefore, does not provide any guidance as to whether a notice of violation constitutes " final action." [11]

Sackett similarly does not help Luminant. There, the EPA issued a compliance order under § 309 of the Clean Water Act. See Sackett, 132 S.Ct. at 1371-72. Applying Bennett, the Court determined

Page 444

the order to be final action: (1) " By reason of the order, the Sacketts have the legal obligation to restore their property . . . . Also, legal consequences . . . flow from issuance of the order. . . . [T]he order exposes the Sacketts to double penalties in a future enforcement proceeding." Id. (citations and internal quotation marks omitted); and (2) " The issuance of the compliance order also marks the consummation of the agency's decisionmaking process. As the Sacketts learned when they unsuccessfully sought a hearing, the Findings and Conclusions that the compliance order contained were not subject to further agency review." Id. at 1372 (citations and internal quotation marks omitted). A notice of violation does not have the finality of the order in Sackett . Issuing a notice of violation does not create any legal obligation, alter any rights, or result in any legal consequences and does not mark the end of the EPA's decisionmaking process.

Fifth, if we were to accept Luminant's position, we would be the first circuit to treat such notices as final actions. The Third and Ninth Circuits expressly do not consider a notice of violation to be a " final action." [12] Several other courts of appeals have also recognized the advisory, preliminary, and non-binding nature of such notices.[13] Luminant has not offered any convincing reason for us to create a circuit split.

Finally, Luminant may challenge the adequacy of the notices before the district court as a defense to the enforcement action. Regulated entities have a full opportunity to challenge the adequacy or sufficiency of such notices once the EPA takes final action.[14] In fact, Luminant has already raised, in the district court, the same arguments it presses here.

The petitions are DISMISSED for want of subject-matter jurisdiction.

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