The opinion of the court was delivered by: Judge J. Phil Gilbert United States District Judge
This matter comes before the Court on plaintiff Sierra Club's Motion for the Imposition of a Fine and for an Award of Attorneys' Fees and Costs (Doc. 148). Defendants Franklin County Power of Illinois, LLC ("FCP"), EnviroPower, LLC ("EnviroPower") and Khanjee Holding (US) Inc. ("Khanjee") have responded to the motion (Doc. 149), and the plaintiff has replied to that response (Doc. 155).
The Sierra Club asks for the imposition of a fine pursuant to § 304(a) and (d) of the Clean Air Act ("CAA"), 42 U.S.C. § 7604(a) and (g), after the Court granted summary judgment in its favor on its claim that the defendants had violated the CAA, 42 U.S.C. § 7475(a), by proposing to construct a power plant ("Plant") in Benton, Illinois, without the required permit ("PSD Permit"). Specifically, the Court found that the PSD Permit obtained in July 2001 had automatically expired because the defendants had not begun a continuous program of actual on-site construction of the Plant or entered into a binding agreement to undertake a program of actual construction of the Plant within 18 months of receipt of the PSD Permit. The Court further found that, alternatively, the PSD Permit automatically expired because there was more than an 18-month hiatus in construction activity. Detailed facts regarding this dispute are contained in the Court's October 17, 2006, order granting summary judgment for the Sierra Club (Doc. 128), and the Court need not repeat those details in this order.
Where a party prevails in a CAA suit, the Court is authorized in its discretion to "apply appropriate civil penalties." 42 U.S.C. § 7604(a). That penalty can take the form of a fine to be deposited in the United States Treasury to finance clean air compliance and enforcement activities.
42 U.S.C. § 7604(g)(1). Alternatively, the Court has the discretion to order a civil penalty of up to $100,000 to be used for beneficial mitigation projects that are consistent with the CAA and that enhance the public health or the environment. 42 U.S.C. § 7604(g)(2). The Court may assess a penalty for each day of a violation, 42 U.S.C. § 7413(e)(2), which is limited by regulation. For days prior to March 15, 2004, the maximum daily fine is $27,500 and for days from March 16, 2004, to and including January 12, 2009, the maximum daily fine is $32,500. 40 C.F.R. § 19.4.
The Court must consider in determining the appropriate penalty: (in addition to such other factors as justice may require) the size of the business, the economic impact of the penalty on the business, the violator's full compliance history and good faith efforts to comply, the duration of the violation as established by any credible evidence . . ., payment by the violator of penalties previously assessed for the same violation, the economic benefit of noncompliance, and the seriousness of the violation.
42 U.S.C. § 7413(e)(1). "In considering fines under the [CAA], courts generally presume that the maximum penalty should be imposed," United States v. B&W Inv. Props., 38 F.3d 362, 368 (7th Cir. 1994), and leaves to the Court's discretion how to apply any mitigating factors.
The Sierra Club asserts that a multi-million dollar fine payable to the United States Treasury would be appropriate but instead asks the Court to exercise its discretion to order a penalty of $100,000 to be paid to the Jackson-Union County chapter of Habitat for Humanity for use in its Better Built Program. The Better Built Program uses energy efficient and environmentally friendly home-building practices to construct affordable homes for families.
The Sierra Club is correct that the maximum penalty the Court could impose under 42 U.S.C. § 7604(g)(1) is substantial. In its summary judgment order, the Court found the defendants' PSD permit automatically expired on either January 3 or February 10, 2003, depending on whether several extensions of the 18-month period for commencement of construction applied. While the Court expressed doubts that they did, it did not decide the question because it was not material to the outcome of the motion. Here, the question is material to the maximum fine available. However, the Sierra Club does not object to using the later expiration date. Giving the defendants the benefit of their alleged extensions, the Court finds -- for the purpose of imposing a penalty only -- that the PSD permit expired February 10, 2003. Further, the Court finds that, from the date the permit expired to the Court's October 17, 2006, injunction prohibiting the defendants from actually constructing the Plant in the absence of a valid PSD permit, the defendants have proposed to construct the Plant and have actively worked toward that goal, although not by commencing actual on-site construction. Those dates yield the following maximum fine:
February 10, 2003, to March 15, 2004 400 $27,500 $11,000,000 March 16, 2004, to October 17, 2006 945 $32,500 $30,712,500 Grand Total $41,712,500 The defendants do not object to this calculation of the maximum potential fine and have therefore waived any objection to the method of calculation. Thus, the Court begins with the presumption that it should impose a penalty of $41,712,500 and examines the relevant circumstances, including the factors listed in 42 U.S.C. § 7413(e)(1), to determine if a lower penalty is warranted.
The defendants argue they acted in good faith when they proceeded with the Plant construction after the PSD Permit expired in early 2003. The Court does not agree. A December 6, 2002, memorandum to Frank Rotondi, President and CEO of EnviroPower at the time, belies the defendants' assertion (Doc. 53-7 at 4-6). That memorandum clearly recognized the PSD Permit would expire on January 3, 2003, absent commencement of actual construction. It further acknowledged that the Construction Memorandum in existence at that time was inadequate to prevent the PSD Permit from automatically expiring and that construction activities that would avert permit expiration must have involved more than merely digging a hole in the ground. This memorandum is evidence of the defendants' lack of good faith in proceeding with Plant construction after January 3, 2003, and the defendants have presented no convincing evidence to the contrary. The defendants are sophisticated parties who were well able to recognize the time limits of their PSD Permit as well as the activities that would have averted its automatic expiration. Furthermore, an Illinois Environmental Protection Agency representative's finding in September 2004 that actual construction had commenced at that time should not and would not have misled the defendants into thinking their belated construction efforts were proper in light of the earlier automatic expiration of the permit in January 2003 (or February 2003, as the Court assumes for the purposes of this motion ), a phenomenon of which they were clearly aware.
The defendants also argue that they have no financial gain as a result of their violation. In fact, they assert they have spent large sums of money to prepare to construct the plant and may be liable to Black & Veach for additional and larger sums because they failed to consummate an EPC contract and move forward with the project. The defendants claim they have lost or will lose $100 million as a result of the failure to complete the project.
Additionally, the defendants note that FCP has no history of CAA violations and has maintained a good working relationship with governmental agencies charged with environmental protection. The defendants do not ...