Case Information
*1 Before BENAVIDES, DENNIS, and SOUTHWICK, Circuit Judges.
FORTUNATO P. BENAVIDES, Circuit Judge:
This appeal concerns a Clean Air Act (“CAA”) citizen suit brought by Plaintiffs-Appellants Environment Texas Citizen Lobby Incorporated and Sierra Club (“Plaintiffs”) against ExxonMobil Corporation, ExxonMobil Chemical Company, and ExxonMobil Refining & Supply Company (collectively, “Exxon”). Exxon owns and operates an industrial complex (which includes a refinery and two petrochemical plants) in Baytown, Texas, and Plaintiffs allege that Exxon violated the federal permits governing operations at the complex thousands of times over a nearly eight year period. Specifically, and as relevant to this appeal, Plaintiffs allege that Exxon (1) repeatedly violated a permit condition “stating that emissions from ‘upset’ events are not authorized under any circumstances,” (2) repeatedly emitted pollutants at rates in excess of the hourly emission limits set forth in permit emission rate tables, (3) repeatedly emitted highly reactive volatile organic compounds (“HRVOCs”) at rates in excess of a 1,200 lbs./hr. emission limit, (4) repeatedly violated a prohibition on visible emissions from flares lasting more than five minutes during any two consecutive hours, and (5) repeatedly violated a number of other permit requirements, some emissions-related and some non- emissions-related, as reflected in “deviation reports” filed with the Texas Commission on Environmental Quality.
Plaintiffs sued Exxon for these and other alleged violations in the United States District Court for the Southern District of Texas. The district court conducted a thirteen-day bench trial and issued findings of fact and conclusions of law denying most of Plaintiffs’ claims and declining to order any relief. On appeal, Plaintiffs contend generally that (1) the district court erred in finding a total of only 94 actionable violations of Exxon’s permits, and (2) the district court abused its discretion in declining to impose any penalties, issue a declaratory judgment, or grant injunctive relief in remediation of the violations at issue. We now VACATE the district court’s judgment and REMAND for further proceedings.
I. BACKGROUND Exxon’s Baytown industrial complex—the subject of the instant lawsuit—is comprised of a refinery, an olefins plant, and a chemical plant. Overall, the complex is governed by five federal operating permits issued pursuant to Title V of the CAA. See 42 U.S.C. §§ 7661a–7661d. These federal permits (“Title V Permits”) incorporate various federal and state regulatory requirements and also incorporate by reference state permits issued pursuant to State Implementation Plan (“SIP”) programs. Each permit at issue in this suit contains a Maximum Allowable Emission Rate Table (“MAERT”), which sets the maximum rates at which specific pollutants may be emitted from specific sources (or, in the case of “flexible” permits, groups of sources). It is also undisputed on appeal that (1) “[t]he permits for all three plants incorporate the Texas ‘HRVOC Rule,’ which limits facility-wide emissions of highly reactive volatile organic compounds to no more than 1,200 pounds per hour,” and (2) “[t]he permits for all three plants incorporate federal regulations prohibiting visible” plant flare emissions “for periods exceeding five minutes during any two-hour period.” Finally, each incorporated permit involved in this case contains a series of additional “special conditions.” For example, and as relevant to the present appeal, a permit governing operations at the Baytown refinery provides under special conditions 38 and 39 that “[t]his permit does not authorize upset emissions, emissions from maintenance activities that occur as a result of upsets, or any unscheduled/unplanned emissions associated with an upset. Upset emissions are not authorized, including situations where that upset is within the flexible permit emission cap or an individual emission limit.”
The state regulatory agency charged with enforcing these permit provisions in conjunction with the EPA is the Texas Commission on Environmental Quality (“TCEQ”). In order to facilitate TCEQ oversight and enforcement, state regulations require regulated entities to document “noncompliance and indications of noncompliance” with their permits in certain ways. Env’t Tex. Citizen Lobby, Inc. v. ExxonMobil Corp. , 66 F. Supp. 3d 875, 882 (S.D. Tex. 2014). First, regulated entities must submit State of Texas Environmental Electronic Reporting System (“STEERS”) reports to the TCEQ documenting “emissions events” [1] that result in the release of pollutants at or above a threshold quantity. See 30 T EX . A DMIN . C ODE § 101.201(a); id. § 101.1(88)–(89). Second, regulated entities must maintain on-site records of “emissions events” that result in the release of pollutants below the relevant threshold quantity. Id. § 101.201(b). Third, regulated entities must submit semi-annual reports to the TCEQ documenting any “deviations” [2] from Title V permit requirements. Id. § 122.145(2). The TCEQ investigates each “reportable” event reflected in a STEERS report, reviews the on-site records of all “recordable” events, and has the authority to take enforcement action on any event should it deem such action necessary. In the present case, the record reflects that the TCEQ pursued enforcement and ultimately assessed over $1 million in penalties against Exxon based on a number of the “events” set out in its reports and records for the period relevant to this appeal. Furthermore, in 2012, the TCEQ and Exxon entered an “agreed enforcement order” which, among other things, requires Exxon to implement four “environmental improvement projects” in order to “reduce emissions at the Baytown Complex, including emissions from emissions events . . . .”
As a supplement to the enforcement authority vested in the EPA and state regulatory agencies like the TCEQ, the CAA also authorizes “any person [to] commence a civil action on his own behalf” against “any person . . . who is alleged to have violated (if there is evidence that the alleged violation has been repeated) or to be in violation of . . . an emission standard or limitation under [the CAA].” 42 U.S.C. § 7604(a)(1). The definition of “emission standard or limitation” includes any “standard,” “limitation,” “schedule,” “term,” or “condition” in a Title V permit. Id. § 7604(f)(4). Thus, any person may bring a so-called “citizen suit” under the CAA against a regulated entity that has violated a provision of its Title V permit, so long as the violation has been “repeated” or is “ongoing.” See id. § 7604(a)(1).
In December of 2010, Plaintiffs in the present case sued Exxon under the CAA’s citizen suit provision, alleging thousands of violations of Exxon’s permits over a period spanning from October of 2005 through the date of suit. Plaintiffs raised seven counts in their complaint, five of which are at issue in this appeal. Specifically, Plaintiffs alleged (among other things) that Exxon (1) committed thousands of violations of the refinery permit condition providing that “upset emissions” are “not authorize[d]” (Count I); (2) committed thousands of violations of the MAERT emission limits for various pollutants in the complex’s permits (Count II); (3) committed 18 days of violations of the incorporated 1,200 pounds per hour permit limits on emissions of HRVOCs (Count III); (4) committed 44 days of violations of the incorporated permit prohibitions on visible emissions from flares for periods exceeding five minutes during any two-hour period (Count IV); and (5) committed over 4,000 days of additional violations of sundry regulatory requirements reflected in “deviation reports” that Exxon submitted to the TCEQ (Count VII). Plaintiffs sought the maximum statutory penalties for each of the violations, a declaratory judgment that Exxon violated its permits (and thus the CAA), a permanent injunction barring Exxon from further permit violations, attorneys’ fees and costs, and appointment of a “special master” to monitor implementation of relief.
As evidentiary support for the alleged violations, Plaintiffs relied
exclusively on “Exxon’s STEERS reports of reportable emissions events,
records of recordable emissions events, and Title V deviation reports covering
the time period at issue.”
Env’t Tex.
,
II. DISCUSSION As noted above, the district court in this case found that 94 of the thousands of alleged permit violations were “actionable” under the citizen suit provision of the CAA, and the court declined to order any of Plaintiffs’ requested relief. Notably, the district court’s judgment on penalties went beyond merely concluding that no penalty was warranted for the violations it found actionable. Rather, the district court determined that even if every alleged violation were actionable, it would not impose a penalty . Env’t Tex ., 66 F. Supp. 3d at 904. We conclude that (1) the district court erred in finding 94 “actionable” permit violations; (2) the district court abused its discretion when it weighed less lengthy/less serious violations against more lengthy/more serious violations in its assessment of the CAA penalty factors; and (3) the district court erred in failing to consider certain evidence of Exxon’s economic benefit from noncompliance. We therefore VACATE the district court’s judgment and REMAND for assessment of penalties based on the correct number of actionable violations.
A. Liability The liability claims at issue in this appeal largely hinge on the legal significance of undisputed facts. As noted above, the parties stipulated to the accuracy of Plaintiffs’ evidence, which consisted of spreadsheets detailing Exxon’s reports and records of “emissions events” and Title V “deviation reports.” However, the parties dispute nearly every legal conclusion to be drawn from the spreadsheets, including whether the spreadsheets—because they reflect Exxon’s legally required reports and records of “emissions events”—constitute admissions of permit violations. We will address each liability count in turn after briefly discussing the standard of review.
1. Standard of Review
“The standard of review for a bench trial is well established: findings of
fact are reviewed for clear error and legal issues are reviewed de novo.”
Preston
Exploration Co., L.P. v. GSF, L.L.C.
,
“A finding is ‘clearly erroneous’ when there is no evidence to support it,
or if the reviewing court, after assessing all of the evidence, is left with the
definite and firm conviction that a mistake has been committed.”
U.S. Bank
Nat’l Ass’n v. Verizon Commc’ns, Inc.
, 761 F.3d 409, 431 (5th Cir. 2014)
(quoting
Baldwin v. Taishan Gypsum Co., Ltd. (In re Chinese-Manufactured
Drywall Prods. Liab. Litig.)
, 742 F.3d 576, 584 (5th Cir. 2014)). When “the
district court’s account of the evidence is plausible in light of the record viewed
in its entirety,” this court “may not reverse it even though convinced that had
it been sitting as the trier of fact, it would have weighed the evidence
differently.”
Id.
(quoting
Anderson v. City of Bessemer City
,
2. Count I: The “No Upset Emissions” Condition
In Count I of their complaint, Plaintiffs alleged that Exxon violated
incorporated provisions of the Title V Baytown refinery permit providing “that
upset emissions, emissions from maintenance activities that occur as a result
of upsets, or any unscheduled/unplanned emissions associated with an upset,
are not authorized in any amount.” Likewise, in the proposed findings of fact
and conclusions of law that Plaintiffs submitted to the district court, they
alleged under Count I that “Exxon violated the provisions of the Refinery’s
Title V permit that prohibit upset emissions,” and Plaintiffs specifically cited
special conditions 38 and 39 of incorporated refinery permit 18287 in support
of this allegation. However, Plaintiffs also submitted a summary exhibit of
Count I violations in which violations of “MAERT limits” were referenced. For
this reason, the district court concluded that Plaintiffs’ allegations with respect
to Count I had been “inconsistent,” and because the Count I summary chart
listed violations “contaminant-by-contaminant,” the district court treated
Count I as alleging violations “of conditions that apply to separate air
contaminants,” i.e., MAERT emission limits.
Env’t Tex.
,
The aforementioned special conditions 38 and 39 state that “[t]his permit does not authorize upset emissions, emissions from maintenance activities that occur as a result of upsets, or any unscheduled/unplanned emissions associated with an upset. Upset emissions are not authorized, including situations where that upset is within the flexible permit emission cap or an individual emission limit.” An “upset event” (the emissions from which would be “upset emissions”) is defined under Texas law as an “unplanned and unavoidable breakdown or excursion of a process or operation that results in unauthorized emissions.” 30 T EX . A DMIN . C ODE § 101.1(110). Thus, because every “emissions event” recorded or reported by Exxon in this case also by definition involved “unauthorized emissions” as a result of “upset event[s]” or “unscheduled maintenance, startup, or shutdown activity,” id. § 101.1(28), Plaintiffs were clearly alleging under Count I that every emission of a pollutant during each recorded “emissions event” at the refinery was a violation of special conditions 38 and 39 (and, by extension, one of Exxon’s Title V permits).
The district court, however, believed it was “unclear exactly which standards or limitations Plaintiffs contend were violated under Count I,” largely because one of Plaintiffs’ summary exhibits setting forth Count I violations listed the violations under a heading for violations of “MAERT limits” rather than special conditions 38 and 39. Env’t Tex. , 66 F. Supp. 3d at 896. The court thus suggested in a footnote that Plaintiffs were “combining a condition incorporated into a flexible permit that does not authorize upset emissions with conditions incorporated into the same flexible permit that limit separate air contaminants,” and because Plaintiffs’ Count I allegations were listed “contaminant-by-contaminant,” the court treated Count I as alleging solely violations of MAERT limits. Id. at 896 & n.163.
On appeal, Exxon claims that the district court’s Count I analysis stemmed from its “reject[ion]” of “Plaintiffs’ theory that all upset emissions are actionable violations” and its “recogni[tion] that these emissions were actionable, if at all, only if they exceeded the maximum hourly emission rates.” But this contention is inaccurate—the district court in fact expressly declined to “address whether the sole fact that there are allegedly multiple upset events makes those upset events actionable under the CAA or whether the condition referencing upset emissions constitutes a standard or limitation under the CAA.” Id. at 896. Indeed, in the district court’s view, Plaintiffs did “not contend every upset event is actionable because the condition that does not authorize upset emissions was repeatedly violated.” Id. As should be clear from the foregoing discussion, however, this is precisely what Plaintiffs contended, and we do not think the district court’s decision to ignore special conditions 38 and 39 follows from “Plaintiffs’ approach to proving repeated violations under Count I contaminant-by-contaminant.” Id. at 896 n.167. Rather, because Plaintiffs alleged that each emission of each pollutant during refinery emissions events was a violation of the special conditions (regardless of MAERT limits), it is unsurprising under Plaintiffs’ actual Count I theory that they would list violations in such a manner.
Nevertheless, Exxon further argues that Plaintiffs’ allegations of permit
violations in general are based on the fallacious theory that “unauthorized
emissions” during emissions events violate state permits. Exxon claims, on the
contrary, that emissions events are simply not
governed
by permits and are
instead subject to other regulations. In support of this contention, Exxon cites
a portion of its 2012 agreed enforcement order with the TCEQ, which provides
that “[e]missions events and [unplanned] MSS activities . . . are not subject to
permitting under 30 T EX . A DMIN . C ODE Chapters 106 or 116, and are regulated
under 30 T EX . A DMIN . C ODE Chapter 101 and T EX . H EALTH AND S AFETY C ODE §§ 382.0215, 382.0216 and 382.085.”
Exxon Mobil Corp.
, Docket No. 2011-2336-
AIR-E,
We see at least two problems with Exxon’s argument: first,
“unauthorized emissions,” by definition, include “[e]missions of any air
contaminant . . . that exceed any air emission limitation in a permit . . . .” 30
T EX . A DMIN . C ODE § 101.1(108). Second, the language from the TCEQ agreed
enforcement order, read in conjunction with the regulatory framework it
references, appears to indicate simply that Exxon cannot be issued a permit by
rule (under Chapter 106) or a permit for new construction or modification
(under Chapter 116) that allows for emissions events.
See id.
§§ 106.4, 116.10–
20. But this does nothing to suggest that emissions from such events are
incapable of violating a permit, as evidenced by the fact that the TCEQ found
violations of Exxon’s permits— including state-issued permit 18287 and the
corresponding Title V permit—stemming from Exxon’s “fail[ure] to prevent
unauthorized emissions” during several discrete emissions events at the
Baytown complex.
Exxon Mobil Corp.
,
We accordingly conclude that the district court erred as a matter of law in treating Count I as alleging violations of MAERT limits rather than special conditions 38 and 39. Furthermore, we note (as did the district court) that the alleged “violations under Count I overlap to an extent with hourly emission limit violations under Count II,” but we do not agree that this is a reason to collapse the MAERT limits with special conditions 38 and 39. Rather, as Plaintiffs made clear in the court below, Count I sets forth the alternative theory that every “emissions event” at the refinery constitutes a violation of the “no upset emissions” provisions incorporated into the refinery’s Title V permit. As such, we believe that the district court’s judgment on Count I should be vacated and the case remanded for reconsideration of Count I together with Count II, which we will now address.
3. Count II: MAERT Limits
In Count II, Plaintiffs alleged that the “emissions events” set forth in
Exxon’s reports and records encompassed over 13,000 days of violations of the
hourly numerical emission limits for specific pollutants contained in the
Maximum Allowable Emission Rate Tables (MAERTs) of incorporated permits
governing the Baytown refinery, olefins plant, and chemical plant. The district
court found that Plaintiffs had not proven any “actionable” MAERT violations
under the relevant permits for the refinery and olefins plants and had proven
a total of only 25 actionable violations under the relevant chemical plant
permits. The court premised its findings on the determination that because the
CAA citizen suit provision authorizes suits for “repeated or ongoing” violations
of “
an
emission standard or limitation . . .
in
” a Title V permit, Plaintiffs had
to prove repeated violations of the “
same
,
specific
” permit limitations.
Env’t
Tex.
,
As noted previously, the CAA allows a person to bring a civil action “against any person . . . who is alleged to have violated (if there is evidence that the alleged violation has been repeated) or to be in violation of . . . an emission standard or limitation under [the Act].” 42 U.S.C. § 7604(a)(1). Based on this provision, the district court in this case concluded (and neither party disputes on appeal) that for a CAA violation [5] to be “actionable” in a citizen suit, “the plaintiff must prove by the preponderance of the evidence one of the following”: either “repeated violation of the same emission standard or limitation before the complaint was filed” or “violation of the same emission standard or limitation both before and after the complaint was filed.” [6] Env’t Tex. , 66 F. Supp. 3d at 894; see also Glazer v. American Ecology Envtl. Servs. Corp. , 894 F. Supp. 1029, 1037–38 (E.D. Tex. 1995). Accordingly, because an “emission standard or limitation” includes any “standard,” “limitation,” “schedule,” “term,” or “condition” in a Title V permit, 42 U.S.C. § 7604(f)(4), Plaintiffs concede that they had to prove by the preponderance of the evidence that violations of the same , specific conditions or limitations in Exxon’s permits were “repeated” in the past or occurred at least once before Plaintiffs filed suit and at least once after.
Despite this concession, Plaintiffs take issue with the district court’s finding that because violations were categorized in the spreadsheets and summaries by pollutant, with often-differing numerical limits listed, Plaintiffs failed to prove that most violations of specific MAERT limits were repeated or ongoing. Plaintiffs devote a significant portion of their brief on this point to the question of whether a MAERT limit for a particular pollutant from a particular source should be considered a single standard or limitation despite changes to the actual number of the limit over time. In short, Plaintiffs believe that multiple exceedances of MAERT limits on specific pollutants from specific emission points (or groups of emission points) should be considered “repeated” even if the numbers of the limits vary due to intermittent permit amendments or renewals. Yet as Exxon points out, variations in the limits listed in Plaintiffs’ spreadsheets may, in at least some instances, be attributable to the presence of distinct numerical limits for ordinary conditions and maintenance, startup, and shutdown (“MSS”) activity within a single version of a permit. E.g. , P ERMIT N O . 36476 (setting ordinary and MSS limits on chemical plant emissions). Nevertheless, the district court in this case did not distinguish between different emission limits in the same version of a permit and corresponding emission limits in different versions of a permit. Instead, the court simply determined that any time the listed “emission limit” in Plaintiffs’ tables varied numerically, a new permit “standard or limitation” was at issue. We conclude that this was error.
At least with respect to specific limits on particular pollutants from
particular sources that change numerically due to amendments or renewals,
we believe that such limits constitute the same “standard[s] or limitation[s]”
for purposes of determining whether violations are “repeated” or “ongoing”
under the CAA citizen suit provision. 42 U.S.C. §§ 7604(a)(1) & (f)(4). This view
is consistent with the approach taken by courts in assessing “ongoing”
violations of Clean Water Act (“CWA”) permits.
See Allen Cty. Citizens for the
Env’t, Inc. v. BP Oil Co.
,
In light of our holding, we must vacate the district court’s judgment on Count II. On remand, the district court is instructed to determine the correct number of actionable Count II violations when treating corresponding limits on the same pollutants from different versions of the relevant permits as the same “standard[s] or limitation[s]” under the CAA.
4. Counts III and IV: HRVOCs and Smoking Flares
Under Counts III and IV, Plaintiffs alleged 13 violations (for a total of 18
days) of the incorporated “HRVOC rule” prohibiting emissions of highly
reactive volatile organic compounds at a rate exceeding 1,200 lbs./hr. (Count
III) and 42 violations (for a total of 44 days) of the incorporated “smoking flare
rule” prohibiting visible emissions from flares for periods exceeding five
minutes during any two-hour period (Count IV). The district court counted 9
of the 13 HRVOC rule entries in Plaintiffs’ spreadsheets and 28 of the 42
smoking flare rule entries as “violations,” finding that the remaining entries
were not “corroborated” as violations of the rules because they either did not
explicitly state limits had been exceeded or did not list opacity percentages and
start/end times to allow for verification.
Env’t Tex
.,
In an early portion of its order, the district court stated the following:
“Exxon does not dispute that the alleged violations under Counts II, III, IV,
and V of Plaintiffs’ complaint constitute violations of an emission standard or
limitation.”
Env’t Tex.
,
On the basis of this exchange, the district court clearly assumed each
Count II event counted by Plaintiffs was undisputed as a violation, because it
limited its focus in its findings of fact and conclusions of law to whether
identical numerical permit limits were present in Plaintiffs’ tables such that
repeated or ongoing violations of the
same
limits were “corroborated.”
See id.
at 899–900. In other words, the district court appears to have treated the
statements by counsel for Exxon as judicial admissions that “with[drew]” the
question of whether specific events were violations “from contention,” and it
thus assumed the entries at issue under Count II were, factually, MAERT limit
exceedances.
See Martinez v. Bally’s La., Inc.
,
5. Count VII: Additional Violations in Deviation Reports
Under Count VII, Plaintiffs alleged over 4,000 days of additional Title V
permit violations based on “Title V deviation reports” that Exxon submitted to
the TCEQ during the relevant time period. These reports contained entries
reflecting the “emissions events” that were at issue in the other counts, as well
as various non-emissions-related incidents (involving, for instance, reporting
requirements). Plaintiffs asserted at trial that each incident contained in a
deviation report constituted an actionable permit violation, and Exxon argued
that none of the entries evinced “violations” at all under the definition of
“deviation” set forth in the Texas Administrative Code. The district court
agreed with Exxon, reasoning that (1) Texas law defines a deviation as merely
“[a]n
indication
of noncompliance with a term or condition of [a] permit,” 30
T EX . A DMIN . C ODE § 122.10(6); (2) Federal regulations confirm that “[a]
deviation is not always a violation,” 40 C.F.R. § 71.6(a)(3)(iii)(C); and (3) given
Plaintiffs’ decision to rely solely on the deviation reports themselves as
evidence of underlying actionable violations, Plaintiffs had failed “to show how,
in light of [the aforementioned] provisions, the Deviations at issue . . . [were]
actual violations.”
Env’t Tex.
,
Plaintiffs contend on appeal that the district court misapplied the applicable “standard of proof” in its ruling on Count VII, as the deviation reports contained “all of the prima facie evidence needed to establish that a permit violation occurred.” They accordingly argue that because Exxon failed to rebut the evidence of violations contained in the reports, the district court should have ruled that every incident in a deviation report was an actionable violation. More specifically, Plaintiffs note that federal regulations allow regulated entities to submit “other information” indicating that a “reported deviation was not a violation,” and Exxon in this case “submitted no such information as part of any of the Deviation Reports at issue, nor did it submit any such information at trial.”
We find Plaintiffs’ argument unpersuasive. While their briefing of Count
VII is devoid of authority in support of their contentions regarding the “burden
of proof,” Plaintiffs appear to be referring to their earlier reliance on cases
reflecting that “a permittee’s own records of violations are sufficient to
establish liability.” However, the cases Plaintiffs cite do not support the
proposition that
deviation
reports specifically are sufficient to establish
violations (as opposed to merely constituting “indications” of noncompliance).
For example, the one CAA case Plaintiffs rely on involved Louisiana’s
permitting and reporting system, which requires the filing of written reports
“each time the refinery has an ‘unauthorized discharge.’”
St. Bernard Citizens
for Envtl. Quality, Inc. v. Chalmette Ref., L.L.C.
,
Furthermore, to the extent Plaintiffs point to a lack of “other
information” showing that deviations were not violations, testimony regarding
the significance of stand-alone deviations and their relationship to compliance
certification is precisely the type of evidence that could have aided the district
court in resolving Count VII.
See
Compliance Assurance Monitoring, 62 Fed.
Reg. 54,900, 54,937 (Oct. 22, 1997) (providing that a regulated entity “may include information in the certification to document that compliance was
achieved”). In the absence of such evidence, however, we see no error in the
district court’s conclusion that the Count VII deviation reports alone were
insufficient to meet Plaintiffs’ ultimate burden of proving actionable
violations.
See Carr v. Alta Verde Indust., Inc.
,
B. Remedies Under the CAA, district courts have jurisdiction in citizen suits “to enforce” emission standards or limitations and “to apply any appropriate civil penalties.” 42 U.S.C. § 7604(a). For the thousands of days of permit violations alleged in this lawsuit, Plaintiffs sought (1) a declaratory judgment that Exxon had violated its permits (and thus the CAA); (2) a statutory penalty of over $600 million (to be deposited in a special fund for use by the EPA pursuant to 42 U.S.C. § 7604(g)(1)); and (3) a permanent injunction prohibiting further permit violations. The district court declined to order any of Plaintiffs’ requested relief. Plaintiffs now argue that (1) the district court abused its discretion in declining to issue a declaratory judgment, (2) the district court committed numerous errors (and thus abused its discretion) in declining to impose any penalties, and (3) the district court abused its discretion in declining to grant a permanent injunction. We will address each form of relief in turn.
1. Declaratory Judgment
The district court in this case refused to issue a declaratory judgment
that Exxon had violated its permits and the CAA, because while it recognized
that it was “undisputed Exxon violated some emission standards or
limitations,” it viewed the more important issue as “whether any such
violations are actionable under the CAA as a citizen suit”—and the court had
“already made these findings.”
Env’t Tex.
,
A determination of whether to grant declaratory relief is within the
district court’s discretion, and a decision to deny declaratory relief is thus
reviewed only for abuse of that discretion.
United Teacher Assoc. Ins. Co. v.
Union Labor Life Ins. Co.
, 414 F.3d 558, 569 (5th Cir. 2005). As we have
previously explained, “[t]he two principal criteria guiding” the decision of
whether to render a declaratory judgment “are (1) when the judgment will
serve a useful purpose in clarifying and settling the legal relations in issue,
and (2) when it will terminate and afford relief from the uncertainty,
insecurity, and controversy giving rise to the proceeding.”
Concise Oil & Gas
P’ship v. La. Intrastate Gas Corp.
,
In this regard, we have recognized that a declaratory judgment may not
serve a “useful purpose” when a fact-finder has already “settl[ed] the legal
relations in issue.”
Id.
;
see also Am. Equip. Co., Inc. v. Turner Bros. Crane and
Rigging, LLC
, No. 4:13-CV-2011,
2. Penalties As noted previously, the district court in this case went beyond merely concluding that no statutory penalties under the CAA were warranted for the few violations it found actionable—rather, the district court broadly concluded that “even if the Court had found every Event and Deviation in this case is actionable, the Court would still find Exxon should not be penalized,” and it proceeded to analyze each penalty factor from that perspective. Env’t Tex ., 66 F. Supp. 3d at 904. Plaintiffs argue on appeal that the district court erred in its assessment of four of the statutory penalty factors, and thus its ultimate refusal to assess a penalty was an abuse of discretion. We will begin by discussing penalties under the CAA generally and will then address Plaintiffs’ arguments with respect to each penalty factor as the district court applied it in this case.
i. CAA Penalties Generally
The CAA provides that in a citizen suit, “[a] penalty may be assessed for
each day of violation.” 42 U.S.C. § 7413(e)(2). The parties agree on appeal that
imposition of a civil penalty is not mandatory under the CAA; rather, the
decision whether to impose a penalty rests in the discretion of the court.
See,
e.g.
,
Pound v. Airosol Co., Inc.
,
(1) the size of the business;
(2) the economic impact of the penalty on the business; (3) the violator’s full compliance history and good faith efforts to comply; (4) the duration of the violation as established by any credible evidence; (5) payment by the violator of penalties previously assessed for the same violation;
(6) the economic benefit of noncompliance; and
(7) the seriousness of the violation.
42 U.S.C. § 7413(e)(1).
In the present case, the district court concluded that the “size of the
business” and “economic impact of the penalty” factors weighed in favor of
assessing a penalty, as “Exxon [would] only be impacted by a large penalty and
has the ability to pay the alleged maximum penalty.”
Env’t Tex.
, 66 F. Supp.
3d at 904. Plaintiffs do not contest this conclusion on appeal, for obvious
reasons. The district court also concluded that because Exxon had previously
paid $1,423,632 in penalties for some of the violations at issue (as a result of
TCEQ enforcement actions), that amount should be “deducted from any
penalty otherwise warranted.”
Id.
at 907. Plaintiffs likewise do not contest the
district court’s resolution of this factor. With respect to the remaining factors,
however, the district court concluded that each one either weighed against
assessing a penalty or, at most, weighed neither for nor against assessing a
penalty, and Plaintiffs vigorously contest the district court’s resolution and
weighing of these remaining factors. We will accordingly address each penalty
factor in roughly the same order as the district court, keeping in mind that
(1) a district court’s analysis of the penalty factors is subject to review only for
abuse of discretion, and (2) underlying factual findings are reviewed only for
clear error.
Sierra Club v. Cedar Point Oil Co. Inc.
,
ii. Compliance History and Good Faith Efforts to Comply The district court in this case determined that Exxon’s compliance history and good faith efforts to comply with its permits weighed against assessment of a penalty. At the outset, the court noted that “the number of [events] at issue in this case [was] high” and might suggest that Exxon’s compliance history was “arguably inadequate.” Env’t Tex. , 66 F. Supp. 3d at 904–05. However, the court found that based on the extremely large size of the facility, it would not be “possible to” eliminate all emissions events, and thus “the number of Events and Deviations alone is not the best evidence of compliance history” or “good faith effort to comply.” Id. at 905. Rather, the district court concluded that Exxon “made substantial efforts to improve environmental performance and compliance” based on (1) the “significant reduction” in overall unauthorized emissions at the complex “over the years at issue in this case”; (2) Exxon’s agreement to undertake environmental improvement projects at the complex in an enforcement order with the TCEQ; (3) the lack of “credible evidence” that any of the alleged violations “resulted from a recurring pattern”; and (4) the “persuasive and credible” testimony from a chemical engineer and a former TCEQ official that Exxon’s “concerted effort[s] to comply” had contributed to the Baytown facility’s reputation as a “leader[] in maintenance and operation practices.” Id. at 905–06.
On appeal, Plaintiffs raise several challenges to the district court’s
analysis of this factor. First, Plaintiffs contend that the district court
essentially “invok[ed] presumed impossibility of compliance ‘as a reason to not
impose penalties’” despite clear precedent and regulatory language indicating
that “‘impossibility is not a defense’” to compliance with one’s permits. In this
regard, Plaintiffs correctly identify that under Texas law, it is not “a defense
in an enforcement action that it would have been necessary to halt or reduce
the permitted activity in order to comply with the permit terms and conditions
of the permit.” 30 T EX . A DMIN . C ODE § 122.143(4). In other words, if a regulated
entity is incapable of operating in compliance with its permits, the “one simple
and straightforward way . . . to avoid paying civil penalties” is to “cease[]
operations until it [is] able to” do so.
Atl. States Legal Found., Inc. v. Tyson
Foods, Inc.
,
Plaintiffs next claim that the district court clearly erred in finding that
Exxon’s agreement to undertake four environmental improvement projects
constituted a “substantial effort[]” at achieving compliance that demonstrated
“good faith.” Plaintiffs argue that the agreement merely imposed toothless and
overdue requirements in an attempt by Exxon and complicit TCEQ officials to
“undercut more stringent citizen enforcement,” as evidenced by the fact that
the agreement “was negotiated, at Exxon’s instigation, only after” Plaintiffs
gave notice of their intent to file suit. On this point, we think it is possible that
the agreement between Exxon and the TCEQ is a sterling example of
regulatory capture at its worst; however, it is also entirely possible that
Exxon’s explanation for pursuing the agreement—that it wanted more
“certainty” in enforcement—is valid and that the company did want to take
good-faith steps towards reducing future compliance issues. Thus, given that
there are “two permissible views of the evidence,” the district court was
entitled to take the view it did, and we cannot second-guess that view now.
U.S. Bank Nat’l Ass’n
,
Finally, Plaintiffs argue that the district court “did not consider several
other factors relevant to Exxon’s compliance history,” including “the number
of similar violations in the past” and “the prior enforcement lawsuit brought
by the United States.” We were unable to discern, however, in what way
Plaintiffs believe the district court’s failure to consider these “factors” was
erroneous—the authority cited in Plaintiffs’ briefing, a CWA order from the
Southern District of Mississippi applying that statute’s “history of violations”
penalty factor, merely recognizes that “courts consider . . . the duration and
nature of” past and present violations under the Act.
United States v. Gulf Park
Water Co., Inc.
,
iii. Economic Benefit of Noncompliance
The “economic benefit of noncompliance” factor directs courts to
“consider the financial benefit to the offender of delaying capital expenditures
and maintenance costs on pollution-control equipment.”
CITGO
, 723 F.3d at
552. We have recognized in the Clean Water Act context that “a district court
generally must make a ‘reasonable approximation’ of economic benefit when
calculating a penalty under [the Act],” as a finding on the amount of economic
benefit is “central to the ability of a district court to assess the statutory factors
and for an appellate court to review that assessment.”
Id.
at 552, 554 (quoting
Cedar Point Oil
,
Caselaw makes clear that “economic benefit” in the penalty context can
be calculated as the “benefit realized by a violator from
delayed
expenditures
to comply with the [Act].”
Allegheny Ludlum Corp.
,
Turning to the present case, the district court rejected Mr. Bowers’
expert testimony regarding specific measures that could have been taken to
achieve compliance as not “credible,” and because we are extremely deferential
to a district court’s assessment of witness credibility, we conclude that this was
not clearly erroneous.
See Canal Barge Co., Inc. v. Torco Oil Co.
,
benefit calculated by Mr. Shefftz with respect to the TCEQ projects should not be added on to the overall estimate of economic benefit. But this does nothing to suggest that the district court’s rejection of Mr. Bowers’ testimony also somehow precludes consideration of the TCEQ projects as evidence of economic benefit. Indeed, Mr. Shefftz explained that “[c]onceptually, it’s a subset of [the overall estimate], but . . . it’s also independent of [Bowers’] expert opinion.” Two arguments raised by Exxon warrant mention here: first, Exxon insisted at oral argument that the TCEQ order represents a regulatory decision to “forgo” maximum penalties in favor of other “corrective action,” and allowing a citizen suit to “capitalize” on the economic costs in the order by using them as economic benefits would be unfair—but this argument about compliance efforts “negating” economic benefit is precisely the argument that various courts have rejected under the economic benefit factor. As one district court recently stated, economic benefit is not “now negated by the fact that [the defendant] is working to remedy the issues . . . ,” because “the fact that [the defendant] must pay to bring his facility into compliance . . . does not excuse his history of noncompliance.” Magar , 2015 WL 632367, at *5. Relatedly, in its response to Plaintiffs’ 28(j) letter, Exxon quoted the Supreme Court’s opinion in Gwaltney for the proposition that allowing citizens to “file suit . . . in order to seek the civil penalties that [a regulatory agency] chose to forgo” would “curtail[]
We acknowledge that both of the approaches to calculating economic
benefit identified in our caselaw require some showing that delayed
expenditures would be “necessary to correct” the violations at issue in the suit.
See CITGO
,
characterization of flaring events” (Count IV), and the order estimates that the
projects will specifically achieve reductions in HRVOC emissions (Count III).
Id.
at *7–*8. Finally, the district court itself recognized in its order that the
projects reflect “an effort to reduce emissions and unauthorized emissions
events” at the Baytown complex.
Env’t Tex.
,
iv. Duration of the Violation
Under the CAA, courts must consider “the duration of
the violation
as
established by any credible evidence” in determining whether and to what
extent a penalty should be assessed. 42 U.S.C. § 7413(e)(1) (emphasis added).
The district court in this case determined that the “duration of the violation”
factor weighed neither for nor against imposition of a penalty, because “the
duration of each of the [violations] differ[ed] tremendously,” and Plaintiffs
sought maximum penalties for each emissions event regardless of length.
Env’t
Tex.
,
As Plaintiffs note, there is some authority in support of the proposition
that, when multiple “intermittent” violations over a span of time are at issue,
a court may consider the overall length of the period during which the
violations occurred (rather than assessing each violation individually).
See,
e.g.
,
United States v. Midwest Suspension and Brake
,
An example serves to effectively illustrate the nature of the district
court’s error: had Plaintiffs cherry-picked from Exxon’s reports only the
violations that the district court found to be “long,” the court would have been
unable to use “variability in duration” as a reason to conclude that this factor
was neutral. Thus, given that Plaintiffs included with these long violations a
host of other short violations, it would make little sense to say that the
“duration of the violation” factor somehow applies differently to the lengthy
violations in light of the inclusion of the short ones. Exxon claims that because
it was actually the Plaintiffs who “fail[ed] to differentiate events based on
duration . . . at trial,” the district court “was free to reject Plaintiffs’ all-or-
nothing approach.” However, the fact that Plaintiffs sought maximum
penalties for each violation, regardless of length, has no bearing on whether
the district court appropriately considered “the duration of the violation” under
the CAA.
See Pound
,
v. Seriousness of the Violation
In assessing the “seriousness of the violation” penalty factor, courts
outside of this circuit have looked to the “risk or potential risk of environmental
harm” posed by emissions/discharges and have found violations to be serious
“even absent proof of actual deleterious effect.”
Pound
, 498 F.3d at 1099.
Furthermore, courts have recognized that the overall number and quantitative
severity of emissions or discharges may properly be relied upon as evidence of
seriousness.
See Pub. Interest Research Grp. of N.J., Inc. v. Powell Duffryn
Terminals Inc.
,
The CAA instructs a court considering penalties to assess “the
seriousness of the violation.” 42 U.S.C. § 7413(3)(1). When multiple violations
are at issue, balancing “more serious” violations against “less serious” ones
clearly runs contrary to this instruction, with the result being that serious
violations become less so if accompanied by a sufficient number of insignificant
violations. In other words, given the district court’s recognition that some of
the emissions in this case were large enough to be considered “more serious,”
we think it was an erroneous application of the “seriousness of the violation”
factor to conclude that the existence of thousands of additional, smaller
violations somehow tipped the scale against assessment of a penalty. If
anything, the inclusion of many
more
violations with the most serious ones
would only increase the overall degree of seriousness, rather than lessening it.
See Powell Duffryn
,
3. Permanent Injunction
The final point of error asserted by Plaintiffs concerns the district court’s
refusal to grant a permanent injunction prohibiting Exxon from committing
further permit violations. “We review a district court’s grant or denial of
injunctive relief for abuse of discretion.”
Aransas Project v. Shaw
,
On appeal, and although their argument is rather cursory, Plaintiffs
appear to contend that the district court abused its discretion by “rel[ying] on
[the] clearly erroneous factual finding[]” that imposition of an injunction would
significantly burden Exxon.
See Aransas
,
III. CONCLUSION In sum, we conclude that the district court erred in its analysis of Exxon’s liability under Counts I through IV and abused its discretion in assessing three of the CAA’s mandatory penalty factors. We accordingly VACATE the district court’s judgment and REMAND for assessment of penalties based on the violations that are properly considered “actionable” in light of this opinion.
Notes
[1] An “emissions event” is defined under Texas law as “[a]ny upset event or unscheduled maintenance, startup, or shutdown activity, from a common cause that results in unauthorized emissions of air contaminants from one or more emissions points at a regulated entity.” 30 T EX . A DMIN . C ODE § 101.1(28). “Unauthorized emissions” are in turn defined as “[e]missions of any air contaminant except water, nitrogen, ethane, noble gases, hydrogen, and oxygen that exceed any air emission limitation in a permit, rule, or order of the commission . . . .” Id. § 101.1(108).
[2] A “deviation” is defined under Texas law as “[a]ny indication of noncompliance with a term or condition of the permit as found using compliance method data from monitoring, recordkeeping, reporting, or testing required by the permit and any other credible evidence or information.” 30 T EX . A DMIN . C ODE § 122.10(6).
[3] Because Plaintiffs claimed many of the violations were “ongoing,” the period of alleged violations ultimately extended through September of 2013.
[4] While Plaintiffs do not offer an explanation for this variance, a simple review of the record provides an obvious one: human error. The summary tables for Plaintiffs’ Count II violations are identical to the summary tables for the Count I violations, with only the numbers and headings changed. Thus, when the Count II tables were used to make the Count I tables, it is likely that the “violations” heading was mistakenly left unaltered.
[5] Exxon “[did] not dispute” in the court below that “the alleged violations under
Count[] II . . . constitute violations of an emission standard or limitation.”
Env’t Tex.
, 66 F.
Supp. 3d at 893 n.153. Exxon attempts to argue on appeal that it “never admitted” any entries
under Count II were violations, “and the district court plainly understood that position since
it did not find liability on all of the allegations in” that count. However, Exxon’s argument—
at least with respect to alleged violations under Count II—clearly runs contrary to its
clarification at trial that “if Exxon Mobil files a reportable STEERS event, for example, in
essence, it is making a report of releases that exceed, for example, an hourly limit with
respect to a particular release.” Furthermore, the fact that STEERS reports and on-site
records of “emissions events” reflect violations of emission standards or limitations does
not
mean that a defendant is per se liable under the citizen suit provision of the CAA.
See
42
U.S.C. § 7604(a)(1) (providing that violations must be “repeated” or ongoing). Thus, the fact
that the district court “did not find liability on all of the” events under Count II is not proof
that the district court believed many of the events counted as violations by Plaintiffs were
not, in fact, violations. Finally, with respect to Exxon’s argument that specific entries in
which the emission quantity—standing alone—would appear to fall below the applicable
listed threshold were not shown to be violative of MAERT limits, we note that we were unable
to locate in the record any point at which Exxon contested these entries before the district
court. Rather, Exxon’s proposed findings of fact and conclusions of law focused on whether
Count II violations were “repeated” or “ongoing,” and when asked directly by the district court
“which events from the stipulated tables” it “claim[ed] [did] not constitute a violation,” Exxon
did not mention Count II. Thus, to the extent Exxon asks us to conclude that most of the
Count II violations, including a number of the violations that the district court found
actionable, were not violations at all based on an argument it never raised below, we decline
to do so.
See, e.g.
,
Violette v. Smith & Nephew Dyonics, Inc.
,
[6] The district court also noted a third alternative: namely, showing a “continuing
likelihood of recurrence.” However, as the district court recognized, “Plaintiffs do not claim
satisfaction of the third method of proving actionability.”
Env’t Tex.
,
[7] We acknowledge, as the district court in this case did, that “[t]he ‘to be in violation’
provision in the CAA is identical to the ‘to be in violation’ provision in the CWA,” and
“[i]nterpretations of the CWA provision are instructive when analyzing the CAA provision.”
Env’t Tex.
,
[8] We also note, once again, that on remand, the district court should consider the overlap between Plaintiffs’ Count I and Count II claims with respect to refinery emissions.
[9] Indeed, it is for this very reason that we declined to address Exxon’s argument regarding whether specific emissions under Count II exceeded MAERT limits—Exxon never contested those emissions as violations below, and the district court rightly understood there to be no dispute on the point.
[10] We do not hold that deviation reports will always be insufficient to prove actual permit violations. Indeed, we note that some of the Count IV violations stem from information contained in deviation reports. We only conclude that, based on the record before us in this case, there was no error in the district court’s refusal to find an actionable violation in every Count VII deviation. Because Plaintiffs chose to rely exclusively on the existence of the deviation reports, with little attempt to clarify their significance , as proof of hundreds of violations of different regulatory requirements, we see no basis (and Plaintiffs have not provided one on appeal) to disagree with the district court’s resolution of Count VII.
[11] Plaintiffs also sought attorneys’ fees and costs and appointment of a “special master” to monitor implementation of relief, but these are not at issue in the present appeal.
[12] Exxon expends considerable brief space rebutting what it views as “Plaintiffs’ theory that civil penalties are mandatory.” However, it is fairly obvious from Plaintiffs’ briefing that they concede the point and do not argue that the district court was required to impose penalties as a matter of law.
[13] Plaintiffs raise two additional arguments in their briefing: first, they argue that
Exxon’s own calculations regarding the potential for implementation of additional emissions-
reducing technologies at the complex demonstrate that at least some of the violations were
preventable, cutting against Exxon’s “good faith efforts to comply.” However, what Plaintiffs
fail to mention is that Exxon’s witness merely
used
calculations done by Plaintiffs as to the
amount of emissions that could have been prevented by implementation of the relevant
technology in order to show that even “giving every benefit of the doubt” to “Plaintiffs’ theory,”
implementation of the technology would not have been economically reasonable. As such,
Plaintiffs have not shown clear error on this basis.
Second, Plaintiffs note the inconsistency between the district court’s conclusion that
no “improvements could have been made to prevent recurrence” and the court’s finding that
the four TCEQ-mandated environmental improvement projects “will reduce unlawful
emissions.” For reasons we discuss in connection with the “economic benefit of
noncompliance” factor, we do perceive a tension between the district court’s finding that the
projects reflect “substantial efforts to improve . . . compliance” and its finding that no
improvements could have “prevented” any emissions events involved in this case.
Env’t Tex.
,
[14] We have also recognized multiple approaches to the related question of how to “set
the amount of the penalty” overall: “some courts use the ‘top down’ approach in which the
maximum penalty is set . . . and reduced as appropriate considering the . . . enumerated
[penalty factors] as mitigating factors, while other courts employ the ‘bottom up’ approach,
in which economic benefit is established, and the remaining . . . elements . . . are used to
adjust the figure upward or downward.”
Id.
In the present case, the district court appears to
have simply weighed the factors independently without adopting either approach—as it felt
it had discretion to do—and the court noted that the result would be the same under any
approach.
Env’t Tex.
,
[15] The four improvement projects are (1) plant automation venture—installing
computer programs to monitor, identify, diagnose, and guide operations, which will help
identify potential events so they can be addressed proactively; (2) fuels north flare system
monitoring/minimization: additional monitoring probes and “on-line analyzers” that improve
sensing and characterizing flaring events; (3) BOP/BOPX recovery unit simulators:
developing and using “high-fidelity process training simulators” to improve operator training
and reduce emissions events; (4) enhanced fugitive emissions monitoring: using infrared
technology to locate leaks.
Exxon Mobil Corp.
,
[16] Plaintiffs’ argument about Exxon’s “admissions” regarding implementation of emissions-reducing technologies is the same argument that we addressed, and rejected, in footnote 13, supra.
[17] Mr. Shefftz did testify that the improvement projects should be considered a “subset of the total amounts” drawn from Mr. Bowers’ testimony, but this does not undercut the validity of the TCEQ projects as independent evidence of economic benefit. Mr. Shefftz’s point was simply that because Mr. Bowers’ suggested improvements would ostensibly encompass every measure needed to bring Exxon’s facility to 0 permit violations, the $11.7 million
[19] In making its findings on remand, the court should be mindful that the economic benefit estimate must “‘encompass every benefit that defendants received from violation of the law’” regardless of the inherently speculative nature of the inquiry. Gulf Park , 14 F. Supp. 2d at 864 (quoting Mac’s Muffler Shop , 1986 WL 15443 at *8). We thus believe that compliance expenditures or projects need not be tied specifically to prevention of each violation in order to establish that they are “necessary to correct” the violations overall, particularly in a case such as this where the violations are extensive and varied. Rather, we believe the inquiry should center on whether the projects will ameliorate the kinds of general problems that have resulted in at least some of the permit violations upon which Plaintiffs have sued.
[20] Because the district court acknowledged that for at least some of the emissions events, the sheer quantity of pollutants emitted made the violations “more serious,” we do not find it necessary to address the other asserted errors raised by Plaintiffs with respect to this factor.
[21] We note that the district court declined to address the applicability of any affirmative defenses, as it was unnecessary given the decision not to award penalties. Because we vacate that decision, however, we recognize that the district court may well be called upon to rule on Exxon’s claimed affirmative defenses on remand. See, e.g. , 30 T EX . A DMIN . C ODE § 101.222(b) (setting forth an affirmative defense for “[n]on-excessive upset events”).