Environment Texas Citizen Lobby, Inc. v. ExxonMobil Corp.

Case: 15-20030 Document: 00513525463 Page: 1 Date Filed: 05/27/2016
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
May 27, 2016
No. 15-20030
Lyle W. Cayce
Clerk
ENVIRONMENT TEXAS CITIZEN LOBBY, INCORPORATED; SIERRA
CLUB,
Plaintiffs - Appellants
v.
EXXONMOBIL CORPORATION; EXXONMOBIL CHEMICAL COMPANY;
EXXONMOBIL REFINING & SUPPLY COMPANY,
Defendants - Appellees
Appeal from the United States District Court
for the Southern District of Texas
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
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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
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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
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TCEQ documenting “emissions events” 1 that result in the release of pollutants
at or above a threshold quantity. See 30 TEX. ADMIN. CODE § 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
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 TEX. ADMIN. CODE § 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 TEX. ADMIN. CODE § 122.10(6).
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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. 3
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
3 Because Plaintiffs claimed many of the violations were “ongoing,” the period of
alleged violations ultimately extended through September of 2013.
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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., 66 F. Supp. 3d at 882. At the direction of
the district court, the parties compiled the various reports and records into
spreadsheets and “stipulated to [their] contents.” Id. The district court
subsequently conducted a thirteen-day bench trial and issued findings of fact
and conclusions of law in late 2014. Broadly, the district court concluded that
only 94 of the thousands of alleged permit violations were “actionable,” and the
court declined to order any of Plaintiffs’ requested relief. More specifically,
(1) the district court treated Count I as alleging violations of MAERT hourly
emission limits (essentially conflating Count I and Count II) and found no
“actionable” Count I violations; (2) the district court found only 25 “actionable”
Count II violations based on Plaintiffs’ ostensible failure to show that most of
the violations were repeated violations of the same hourly MAERT limits;
(3) the district court found only a handful of Count III and Count IV violations,
as the rest of the alleged violations were not “corroborated”; (4) the district
court found no additional Count VII violations, as Plaintiffs had failed to meet
their burden of showing that the “indications” of noncompliance in the
deviation reports were actual violations; (5) the district court declined to grant
declaratory relief, because the court had “already made” findings on Exxon’s
liability; (6) the district court declined to impose a penalty based, in part, on
the finding that Exxon received no economic benefit from its failure to comply
with its permits and the view that lengthy/serious violations could be offset by
less lengthy/less serious violations; and (7) the district court declined to grant
injunctive relief, finding that the injury to the public from denial of an
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injunction would not outweigh the damage the injunction would cause Exxon.
Plaintiffs now appeal.
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.
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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., 669 F.3d 518, 522 (5th Cir. 2012) (quoting
Kona Tech. Corp. v. S. Pac. Transp. Co., 225 F.3d 595, 601 (5th Cir. 2000)).
However, “[t]he clearly erroneous standard of review does not apply to [those]
factual findings made under an erroneous view of controlling legal principles.”
Maritrend, Inc. v. Serac & Co. (Shipping) Ltd., 348 F.3d 469, 470 (5th Cir.
2003) (quoting Lake Charles Stevedores, Inc. v. PROFESSOR VLADIMIR
POPOV M/V, 199 F.3d 220, 223 (5th Cir. 1999)).
“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, 470 U.S. 564, 573–
74 (1985)). Furthermore, if this court “determine[s] that ‘there are two
permissible views of the evidence,’ then [it] may not conclude that the [district]
court’s choice between them was clearly erroneous.” Id.
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,
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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., 66 F. Supp. 3d at 895–
96. In other words, the district court conflated Plaintiffs’ Count I allegations
with their Count II allegations (addressed infra) and concluded there were no
actionable violations under Count I for the same reason there were very few
actionable violations under Count II. On appeal, Plaintiffs argue that the
district court simply applied the wrong permit provisions to Count I; put
another way, Plaintiffs claim that the court erred by applying the wrong law
to the events set forth in Plaintiffs’ spreadsheets—a decision to which de novo
review applies. See Maritrend, 348 F.3d at 470. We agree.
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
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TEX. ADMIN. CODE § 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. 4 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
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.
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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 TEX. ADMIN. CODE Chapters 106 or 116, and are regulated
under 30 TEX. ADMIN. CODE Chapter 101 and TEX. HEALTH AND SAFETY CODE
§§ 382.0215, 382.0216 and 382.085.” Exxon Mobil Corp., Docket No. 2011-2336-
AIR-E, 2012 WL 780783, at *1 (Tex. Comm’n on Envtl. Quality Feb. 29, 2012).
Based on this language, Exxon claims that “unauthorized” emissions from
emissions events cannot violate a permit, because such emissions were never
subject to permits in the first instance.
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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
TEX. ADMIN. CODE § 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., 2012 WL 780783, at *4.
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.
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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., 66 F. Supp. 3d at 895, 898. In the district court’s view, this meant that
Plaintiffs had to show repeated violations of identical numerical emission
limits from the MAERTs. And because Plaintiffs had categorized the violations
in their spreadsheets by pollutant, with the applicable numerical limits in the
spreadsheets often varying wildly for the same pollutants from one entry to
the next, the district court concluded that Plaintiffs had not shown repeated
violations of most MAERT limits. On appeal, Plaintiffs contend that the
district court erred in viewing different numerical limits on emissions of the
same pollutants from the same sources as distinct “permit limitations” for
purposes of assessing whether MAERT limit violations were repeated or
ongoing.
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
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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
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., 62 F.3d 8, 11 (1st Cir. 1995) (a
defendant may not “evade the scrutiny of the district court” by raising a new defense on
appeal “in order to create essentially a new trial”).
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., 66 F. Supp. 3d at 894.
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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., PERMIT NO. 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,
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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., 762 F. Supp. 733, 740–41 (N.D. Ohio 1991), aff’d, 966
F.2d 1451 (6th Cir. 1992) (unpublished table decision). 7 In the CWA context,
courts have focused on pollutants and whether those pollutants have been
discharged at higher rates than authorized by a permit, not simply on whether
the same numerical thresholds are at issue. See id. at 740–41. We think this
approach makes good sense given that, as the Fourth Circuit explained in a
CWA case, “[t]he entire structure of [The Act] and regulations involves
identifying specific pollutants and setting a permit limit for each pollutant of
concern.” Chesapeake Bay Found. v. Gwaltney, 890 F.2d 690, 698 (4th Cir.
1989). We accordingly hold that limits on emissions of specific pollutants from
specific emission points (or groups of emission points in flexible permits)
should constitute permit “emission standard[s] or limitation[s]” that may be
violated repeatedly under the CAA citizen suit provision, regardless of whether
the numerical values of the limits have been changed through amendments or
renewals.
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
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., 66 F. Supp. 3d at 894 n.154; see also United States v. Anthony Dell’Aquilla, Enters.
& Subsidiaries, 150 F.3d 329, 338 n.9 (3d Cir. 1998).
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on the same pollutants from different versions of the relevant permits as the
same “standard[s] or limitation[s]” under the CAA. 8
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., 66 F. Supp. 3d at 901–02.
On appeal, Plaintiffs claim that the district court erred in requiring
“corroboration” of these entries, as “Exxon conceded at trial that all of the
alleged violations under Counts III and IV constituted ‘violations of an
emission standard or limitation.’”
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., 66 F. Supp. 3d at 893 n.153. Exxon argues on appeal
that this statement referred only to “the actionability of various legal theories
in general,” but we cannot agree. Far from merely acknowledging Exxon’s
failure to dispute that Counts II, III, IV, and V involved “emission standards
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.
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or limitations” that might hypothetically be violated, the district court
expressly found it undisputed that “Exxon violated” standards and limitations
under those counts. See id. at 893. In making this finding, the court was
undoubtedly relying on an exchange at trial during which the court directly
asked counsel for Exxon “which events from the stipulated tables” it claimed
“do not constitute a violation.” In response, counsel pointed only to events
under Counts I, VI, and VII. Indeed, even after the court clarified that it was
“not talking about repeated or ongoing[,] [j]ust talking about the definition of
violations,” counsel for Exxon replied that “those are the three areas I’ll point
the court to.”
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.” 9 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., 244 F.3d 474, 476–77 (5th Cir.
2001). With respect to Counts III and IV, however, the district court concluded
that a number of specific entries were not actionable because the entries
themselves were not “corroborated” as violations. We find this differential
treatment of Counts II, III, and IV irreconcilably inconsistent. If the district
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.
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court believed there was a question as to whether particular events under the
three counts constituted violations in the first instance, it should have
analyzed each entry to determine whether, as a factual matter, the relevant
limits were exceeded. If it believed the events under those counts were
undisputed as violations, it should have analyzed simply whether the
violations were “repeated” or “ongoing.” What the court did, however, was
(1) analyze only whether violations, which it believed to be undisputed, were
“repeated” or “ongoing” under Count II; and (2) analyze only whether specific
entries corroborated violations of the relevant permit requirements under
Counts III and IV. In light of the court’s analysis of Count II and its express
finding that violations under Counts II, III, IV, and V were undisputed, we do
not see how the district court’s treatment of entries counted by Plaintiffs as
violations under Counts III and IV can be justified. We accordingly conclude
that the district court erred in requiring “corroboration” for violations that, in
a different portion of the same order, it explicitly found to be undisputed. On
remand, the district court is instructed to include in its tally of Count III and
Count IV violations the entries it rejected as “uncorroborated.”
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
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“[a]n indication of noncompliance with a term or condition of [a] permit,” 30
TEX. ADMIN. CODE § 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., 66 F. Supp. 3d at 903.
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
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for Envtl. Quality, Inc. v. Chalmette Ref., L.L.C., 354 F. Supp. 2d 697, 706 (E.D.
La. 2005). These reports would be akin to the STEERS reports mandated by
the TCEQ, not the deviation reports at issue under Count VII. See also
Concerned Citizens Around Murphy v. Murphy Oil USA, Inc., 686 F. Supp. 2d
663, 680 (E.D. La. 2010) (recognizing that “unauthorized discharge reports
demonstrate that [the defendant] violated emission standards or limitations”).
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. 10 See Carr v. Alta Verde Indust., Inc., 931 F.2d 1055, 1064 n.7 (5th
Cir. 1991) (noting that “the burden [is] on the plaintiff to prove at trial his
allegations of a continuing or intermittent violation”).
B. Remedies
Under the CAA, district courts have jurisdiction in citizen suits “to
enforce” emission standards or limitations and “to apply any appropriate civil
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.
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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. 11 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., 66 F. Supp. 3d at 903. Plaintiffs now
argue that the district court should have issued a declaratory judgment in
order to “defin[e] and clarif[y] the nature of Exxon’s liability under the CAA.”
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
11Plaintiffs 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.
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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., 986 F.2d 1463, 1471 (5th Cir. 1993) (quoting
10A CHARLES ALAN WRIGHT, ARTHUR R. MILLER & MARY K. KANE, FEDERAL
PRACTICE AND PROCEDURE § 2759 (2d ed. 1987)).
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, 2014 WL 3543720, at *3 (S.D. Tex. July 14,
2014) (“Courts in the Fifth Circuit regularly reject declaratory judgment claims
seeking the resolution of issues that will be resolved as part of the claims in
the lawsuit.”). In Concise Oil, for instance, Plaintiffs brought an action for
breach of contract and sought a declaratory judgment that the contract was
valid; however, we declined to reverse the district court’s determination that
such declaratory relief was unwarranted, because “the jury’s verdict and our
affirmance . . . on breach conclusively refute[d]” the contention that the
contract had been terminated (as the defendants maintained). 986 F.2d at
1471. In the present case, the district court, sitting as fact-finder, found that
Exxon had committed over 90 actionable violations of its permits (thus also
violating the CAA). And while we vacate the district court’s judgment, our
“affirmance” of the broad conclusion that Exxon committed actionable
violations of its permits diminishes any “useful purpose” that a declaratory
judgment on that point might otherwise serve. As such, we find no abuse of
discretion in the district court’s decision not to grant declaratory relief.
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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. 12 See,
e.g., Pound v. Airosol Co., Inc., 498 F.3d 1089, 1094 (10th Cir. 2007) (referring
to “the penalty, if any, to be assessed for a violation of the Act”). In deciding
whether to impose a penalty, however, a court must “take into consideration”
seven statutory factors, “in addition to such other factors as justice may
require.” See 42 U.S.C. § 7413(e)(1) (providing that the court “shall take [the
factors] into consideration”); Pound, 498 F.3d at 1097–98 (recognizing that the
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.
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statutory factors “must be considered in a CAA penalty analysis”). These
factors are:
(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
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(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., 73 F.3d 546, 573 (5th Cir.
1996); see also United States ex rel. Adm’r of EPA v. CITGO Petroleum Corp.,
723 F.3d 547, 551 (5th Cir. 2013) (quoting Tull v. United States, 481 U.S. 412,
427 (1987)) (acknowledging that “the process of weighing” similar CWA
penalty factors is “highly discretionary,” and thus “[a] court’s determination of
the amount of a penalty to be assessed is reviewed under the highly deferential
abuse-of-discretion standard”).
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
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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 TEX. ADMIN. CODE § 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., 897 F.2d 1128, 1141–42 (11th Cir. 1990). However, as the district
court in this case plainly noted, its invocation of Exxon’s size and the
infeasibility of achieving full compliance was not an attempt to raise
impossibility as a bar to imposing penalties; rather, the district court’s
discussion on this point was simply a recognition that compliance history and
good faith efforts to comply should be viewed in the context of the size and
complexity of the emitting facility at issue, and thus “the number of [emissions
events] does not alone mean Exxon did not make a good faith effort comply”
with its operating permits for this particular complex. Env’t Tex., 66 F. Supp.
3d at 905 n.221. We accordingly reject Plaintiff’s first argument.
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
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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, 761 F.3d at 431.
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., 14 F. Supp. 2d 854, 864 (S.D. Miss. 1998). Nowhere does the
Gulf Park court state that specific consideration of the factors listed by
Plaintiffs is required (or even appropriate) in all cases, and we have no reason
to believe it would be. We accordingly conclude that the district court in this
case did not abuse its discretion in determining that the “compliance history
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and good faith efforts to comply” penalty factor weighed against imposition of
a penalty. 13
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, 73 F.3d at 576). We have also identified at least two general
approaches to calculating economic benefit: “‘(1) the cost of capital, i.e., what it
would cost the polluter to obtain the funds necessary to install the equipment
necessary to correct the violation; and (2) the actual return on capital, i.e., what
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.,
66 F. Supp. 3d at 905. Nevertheless, in light of the district court’s other reasons for weighing
this factor as it did, we cannot conclude that this tension alone renders the court’s overall
resolution of the “compliance history and good faith efforts to comply” factor an abuse of
discretion. See CITGO, 723 F.3d at 551 (referring to our review of penalty factors as “highly
deferential”).
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the polluter earned on the capital that it declined to divert for installation of
the equipment.’” Id. at 552 (quoting United States v. Allegheny Ludlum Corp.,
366 F.3d 164, 169 (3d Cir. 2004)). 14 In the present case, the district court
determined that “the most reasonable estimate of Exxon’s economic benefit of
noncompliance is $0.” Env’t Tex., 66 F. Supp. 3d at 908. In making this
determination, the district court appears to have concluded that Plaintiffs
failed to provide credible evidence of any “pollution-control equipment” that
would have “correct[ed]” any of the alleged violations under either of the
approaches to calculating economic benefit previously identified. Indeed, the
district court rejected testimony from Plaintiffs’ expert on pollution-control
technology, Mr. Bowers, as “vague and undetailed” and found that “neither
Bowers nor any other evidence credibly demonstrated that any of Bowers’s
suggested capital improvements would have prevented any of the [violations].”
Id. at 907–08. Notably, the court also alluded to the four environmental
improvement projects from the TCEQ agreed enforcement order 15 as “an effort
to reduce emissions and unauthorized emissions events” and appeared to treat
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., 66 F. Supp. 3d at 912 n.267. Regardless, Plaintiffs do not challenge the
district court’s overall approach to “set[ting] the amount of the penalty.”
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., 2012 WL 780783, at *8–*9.
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these projects as an indication that Exxon did not receive any economic benefit.
Id. at 908. On appeal, Plaintiffs contend that the district court erred in ignoring
evidence of economic benefit stemming from Exxon’s own admissions and the
TCEQ’s agreed enforcement order. We agree that the district court erred in
failing to enter findings on whether the four environmental improvement
projects from the TCEQ order constitute evidence of economic benefit from
noncompliance. 16
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., 366 F.3d at 178 (emphasis
added) (analyzing the “economic benefit” penalty factor under the Clean Water
Act). Courts applying this factor thus often “start[] with the ‘costs spent’ or that
should have been spent to achieve compliance,” then “apply an interest rate to
determine the present value of the avoided or delayed costs.” Id. (quoting
United States v. Smithfield Foods, Inc., 191 F.3d 516, 530 (4th Cir. 1999)). In
other words, the effect of spending money to achieve compliance is often not
mitigation of economic benefit—rather, plaintiffs may point to such
expenditures as evidence of the regulated entity’s economic benefit to the
extent the delay in making those expenditures allowed the regulated entity to
use the money it saved productively. See United States v. Gulf Park Water Co.,
Inc., 14 F. Supp. 2d 854, 863–64 (S.D. Miss. 1998). For instance, the defendants
in Gulf Park were alleged to have violated the CWA by discharging pollutants
into United States waters without a required NPDES permit, and in an earlier
proceeding, the district court ordered them to pay a deposit necessary to
connect to a regional wastewater system. Id. at 857. The defendants complied
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.
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and connected to the system in 1997—subsequently, in assessing the penalty
factors under the CWA, the district court concluded there was “no doubt that
the defendants . . . enjoyed an economic benefit in not having expended the
funds necessary to connect to the Regional system in 1985, in 1989 or in 1991.”
Id. at 864. The court also noted that while the plaintiffs had the burden of
establishing economic benefit, “[t]he determination of economic benefit does
not require an elaborate evidentiary showing,” as it is incumbent upon the
court to “endeavor to reach” an estimate that “‘encompass[es] every benefit that
defendants received from violation of the law’” regardless of the inherently
“imprecise” or “somewhat speculative” nature of the inquiry. Id. at 863–64
(quoting United States v. Mac's Muffler Shop, Inc., 25 ERC 1369, 1986 WL
15443, at *8 (N.D. Ga. Nov. 4, 1986)).
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., 220 F.3d 370,
375 (5th Cir. 2000) (“We cannot second guess the district court’s decision to . .
. discount a witness’ testimony.”). However, Plaintiffs also elicited detailed
testimony from their economic benefit expert, Mr. Shefftz, about the benefit
stemming specifically from the four environmental improvement projects
contained in the TCEQ agreed enforcement order, and Mr. Shefftz made clear
in his testimony that the calculation of benefit with respect to these projects
did not rely on Mr. Bowers’ inputs at all 17—rather, Mr. Shefftz took
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
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implementation dates from the order itself and cost estimates from one of
Exxon’s environmental coordinators and used those figures to calculate the
overall benefit from delaying implementation of the TCEQ projects between
2005 and 2012. Mr. Shefftz calculated that this amount was approximately
11.7 million dollars. Based on Mr. Shefftz’s testimony, Plaintiffs argued in
their proposed findings of fact and conclusions of law that Exxon gained an
economic benefit of at least this amount by not implementing the TCEQ
projects earlier—which, according to testimony from Exxon’s own employees
in the environmental department at the Baytown facility, it could have done.
Nevertheless, while the district court expressly found that Mr. Shefftz’s
methodology for calculating economic benefit was reliable, it did not treat the
TCEQ projects as potentially indicative of Exxon’s economic benefit from
noncompliance. Rather, it treated the projects as an indication that Exxon did
not receive an economic benefit. In light of the evidence adduced by Plaintiffs,
we believe the court should have made findings on the critical question of
whether Exxon received a benefit from failing to implement the TCEQ projects
earlier. 18
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.”
18 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[]
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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, 723 F.3d at 552. In the present case, the district court found no
credible evidence to indicate that “any of Bowers’s suggested capital
improvements would have prevented any of the Events or Deviations,” with
the necessary implication being that none of those improvements would
“correct” the violations. Env’t Tex., 66 F. Supp. 3d at 908 (emphasis added).
However, because the district court failed to address Plaintiffs’ evidence that
Exxon received an economic benefit from delayed implementation of the TCEQ
projects, it did not consider whether those projects were necessary to correct
the violations. Looking to the order in which the projects are described, the
TCEQ has specified that they “will reduce emissions at the Baytown Complex,
including emissions from emissions events.” Exxon Mobil Corp., Docket No.
2011-2336-AIR-E, 2012 WL 780783, at *8 (Tex. Comm’n on Envtl. Quality Feb.
29, 2012). Furthermore, some of the projects appear to be correlated in at least
a general way with at least some of the violations upon which Plaintiffs have
sued. For example, one project aims to “more effectively monitor and
troubleshoot” a refinery flare system in order to “improve the identification and
considerably” the regulator’s “discretion to enforce the Act.” Gwaltney of Smithfield, Ltd. v.
Chesapeake Bay Found., Inc., 484 U.S. 49, 61 (1987). Exxon’s reference to Gwaltney is
unhelpful, however, because the Supreme Court’s discussion on this point was in the context
of interpreting the Clean Water Act’s “to be in violation” language as barring citizen suits
based on “wholly past violations of the Act.” Id. at 60. Yet as both parties acknowledge, the
Clean Air Act was amended in 1990 to authorize citizen suits against any person “who is
alleged to have violated” the Act. 42 U.S.C. § 7604(a)(1) (emphasis added). This amendment
has been viewed as a direct response to Gwaltney, and indeed, neither party in this case
disputes that the “to have violated” language authorizes citizen suits based on wholly past
violations of the CAA. See Atl. States Legal Found., Inc. v. United Musical Instruments,
U.S.A., Inc., 61 F.3d 473, 477 (6th Cir. 1995) (recognizing that “after Gwaltney, Congress
amended the Clean Air Act . . . explicitly to allow citizen suits for purely historical violations
. . . .”). Thus, the proposition to which Exxon’s Gwaltney quotation lends support appears to
no longer apply in CAA citizen suits.
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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., 66 F. Supp. 3d at 908. Thus, given
that Plaintiffs adduced evidence regarding the benefit that Exxon received
from foregoing earlier implementation of these projects, we conclude that the
district court erred in failing to consider that evidence and enter specific
findings as to whether the projects demonstrate that Exxon received an
economic benefit from noncompliance. On remand, the district court is
instructed to enter such findings, which will entail consideration of whether
the projects are “necessary to correct” the violations at issue in this suit. 19
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., 66 F. Supp. 3d at 906–07. Significantly, the court found that some of the
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.
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violations were of “long” duration, but because other violations were “short,”
the court concluded that the factor was neutral overall. On appeal, Plaintiffs
argue that the district court abused its discretion in concluding that this factor
did not weigh in favor of imposing a penalty, because the court essentially
viewed shorter violations as “offset[ting]” the violations of longer duration.
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, 824 F. Supp. 713, 736–
37 (E.D. Mich. 1993); United States v. A.A. Mactal Construction Co., Inc., No.
89-2372-V, 1992 WL 245690, at *3 (D. Kan. Apr. 10, 1992). In the present case,
however, the district court appears to have read the statutory language as
literally mandating that the duration of each “violation” within a series of
violations over time be considered. Env’t Tex., 66 F. Supp. 3d at 907 (discussing
the durations of individual events). We need not resolve whether the “duration
of the violation” factor requires scrutiny of the length of each individual
violation or allows for assessment of an overall violation period, as even
assuming the former approach is a proper one, the district court abused its
discretion in this case by viewing violations as effectively offsetting each other.
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
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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, 498 F.3d at 1097–98 (noting that the court must consider
each statutory factor in a CAA penalty analysis). Indeed, it is undisputed that
Plaintiffs’ spreadsheets set forth the individual durations of the events at
issue, and Plaintiffs’ repeatedly made clear the overall time period within
which violations were alleged to have occurred. Thus, because the district court
opted to consider the durations of violations individually, it should have
considered whether any violation, standing alone, was sufficiently long to
justify imposition of a penalty. Its failure to do so, and its decision to instead
view the factor as neutral based on overall duration variability, was an abuse
of discretion.
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., 913 F.2d 64, 79 (3d Cir. 1990) (holding that the district court
properly relied upon “the large number of gross exceedances in concluding that
[the defendant’s] violations were serious”). In the present case, the district
court began its assessment of this factor by noting that “each of the Events and
Deviations differ tremendously,” with some of the events being “more serious
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because they emitted higher quantities of emissions” and “many more” of the
events being “less serious.” Env’t Tex., 66 F. Supp. 3d at 908–09. Thus, in
“considering the amount of emissions,” the district court determined there
were many more violations that were “not serious or less serious than were
more serious.” Id. at 909. The court then went on to examine whether Exxon’s
violations “adversely affect[ed] human health or the environment” and
concluded there was no “credible evidence” that any of the events “even
potentially” did so. Id. As with its analysis of the “duration of the violation”
factor, we conclude that the district court abused its discretion in using “less
serious” violations to essentially offset violations of a concededly “more serious”
nature based on emission quantity alone.
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, 913 F.2d at 79. Thus, in light of the district court’s explicit
recognition that some of the violations were more serious based on the amount
of emissions alone, we conclude that it was an abuse of discretion to view this
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factor as weighing against imposition of a penalty due to the existence of
thousands of additional, “less serious” violations. 20
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, 775 F.3d 641,
663 (5th Cir. 2014). “The party seeking a permanent injunction must . . .
establish (1) success on the merits; (2) that a failure to grant the injunction
will result in irreparable injury; (3) that said injury outweighs any damage
that the injunction will cause the opposing party; and (4) that the injunction
will not disserve the public interest.” VRC LLC v. City of Dallas, 460 F.3d 607,
611 (5th Cir. 2006) (citing Dresser-Rand, Co. v. Virtual Automation, Inc., 361
F.3d 831, 847–48 (5th Cir. 2004)). The district court in this case denied the
request for an injunction based on its finding that any injury to the public
would not outweigh the damage an injunction would cause Exxon. Env’t Tex.,
66 F. Supp. 3d at 913. Regarding the injury to the public, the district court
found that any future unauthorized emissions would not be any “more harmful
to the public or the environment than past [emissions] were.” Id. With respect
to the damage to Exxon, the district court found that granting a permanent
injunction would be “excessively intrusive” because it would “entail continuing
superintendence of the permit holder’s activities by a federal court.” Id.
(quoting Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528
U.S. 167, 193 (2000)).
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.
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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, 775 F.3d at 663 (noting that it is an
abuse of discretion to “rel[y] on clearly erroneous factual findings when
deciding to grant or deny the permanent injunction”). Plaintiffs argue that
Exxon “already tracks and reports compliance with its Title V permits” and
“has immense financial resources which could be devoted to improving
compliance,” and thus the district court erred in concluding that “even an
injunction that did no more than require Exxon to prove it is complying with
its permits” would be excessively burdensome. However, although it may be
true that Exxon has the resources to comply with any injunction, we do not
believe that fact alone establishes clear error in the district court’s finding that
forcing Exxon to continuously prove its compliance with the CAA would be
“excessively intrusive.” Thus, we conclude that the district court did not abuse
its discretion in declining to grant a permanent injunction in this case.
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. 21
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 TEX.
ADMIN. CODE § 101.222(b) (setting forth an affirmative defense for “[n]on-excessive upset
events”).
40