Texas Federal Court Discusses Regulatory Affirmative Defenses To CAA Claims


In a very complex, hard-fought case, U.S. District Judge David Hittner discusses how the Texas Commission on Environmental Quality’s (TCEQ) regulatory affirmative defenses to alleged Clean Air Act (CAA) violations will be viewed by the courts, if not the regulatory agencies. Environment Texas Citizen Lobby, Inc., et al., v. ExxonMobil Corp., et alinvolves the complex regulatory regime that any large industrial facility must follow—whether it is a chemical plant, a refinery, steel mill, automotive assembly plant— if they have air emissions that must be regulated. In addition, these facilities must adhere to strict reporting rules, where evidence of non-compliance can often be found by litigants without a lot of hard work. A defense to some of these complaints lies in the fact that regulatory authorities will exercise prosecutorial discretion—by rule—when no one can control emissions during an unplanned upset (i.e., accident, natural disaster, etc.) or a planned shutdown for plant maintenance. ExxonMobil’s “Act of God” defense might have worked, it seems, if Texas had properly incorporated that state requirement in its federal State Implementation Plan (SIP). It should be noted that large scale construction projects necessitate many state and federal permits, and now there are federal laws and regulations to expedite the federal review—and new Executive Orders to reinforce that policy.

In Environment Texas Citizen Lobby, Inc., on December 17, 2014, the District Court issued a ruling (part I and part II) rejecting all of the claims for relief requested by the Environment Texas Citizen Lobby and the Sierra Club against ExxonMobil Corporation. District Court conducted a 13-day non-jury trial, in which the plaintiffs requested a declaratory judgment, penalties of $643,000,000 and the appointment of a Special Master to oversee ExxonMobil’s compliance with the injunction that was requested with respect to the huge petrochemical complex operated by ExxonMobil in Baytown, Texas.

The District Court described the complex case as having a vast array of equipment, including roughly 10 thousand miles of pipe, 1 million valves, 2500 pumps, 146 compressors and 26 flares. It employs over 5000 people including a large environmental staff. The complex operates under CAA permits issued by the TCEQ, and “taking all permit conditions together, the complex is regulated by over 120,000 permit conditions related to air quality, each of which is tracked… for compliance purposes.” Consequently, the emissions emitted by the complex have been sharply reduced over time, and the TCEQ generally seems to view ExxonMobil as making good faith efforts to comply with the requirements of the law. The District Court noted that ExxonMobil had earlier settled allegations of violations with the TCEQ and Harris County, amounting to $1.7 million. The District Court reviewed the allegations and proof made by the plaintiffs in exhausting detail, and concluded that there were very few “actionable” violations established by the Sierra Club, and any penalties assessable under the CAA as a result of this lawsuit were more than offset by the penalties already paid by ExxonMobil to the TCEQ and Harris County.

The District Court found that the allegations made were not supported by the evidence (mostly compiled in spreadsheets submitted to the court), their expert witnesses, and the testimonial evidence of a few residents living or who visit the area. He then evaluated his findings against the penalty factors provided in the CAA, and concluded that ”the most reasonable estimate of ExxonMobil ’s economic benefit of noncompliance is $0.” The plaintiffs in this case sued a number of refineries in the Houston area, but ExxonMobil chose not to settle, and mounted a very strong defense in this case. Because of these findings, Judge Hittner declined to address the affirmative defenses mounted by ExxonMobil.

On May 27, 2016, the U.S. Court of Appeals for the Fifth Circuit vacated the judgment and remanded the case to the District Court. The Court of Appeals held that the District Court had erred in its analysis of ExxonMobil’s liability under Counts I though IV and abused its discretion in assessing three of the CAA’s mandatory penalty factors. The Court of Appeals also noted that the District Court could, on remand, consider ExxonMobil ’s affirmative defenses which it did not believe to be necessary in its initial decision to review since it awarded no penalties.

On April 26, 2017, the District Court, on remand, issued “Revised Findings of Fact and Conclusions of Law.” Briefly, the District Court denied the plaintiffs’ request for a Declaratory Judgment, injunctive relief, and the appointment of a Special Master, but granted the plaintiffs’ requests for penalties in the amount of $19,951,278, and the their request for attorney’s fees and costs. A major issue was how to treat 241 “reportable emission events,” 3735 “recordable emission events”, and 901 “Title V Deviations”—many of which were not emission events. In any case, under Count I, the District Court found that, by a preponderance of the evidence, the plaintiffs proved that ExxonMobil violated the Special Conditions of a TCEQ permit on 10,583 days; 13,023 days of violations under Count II; 13 days of violations under Count III, 44 days of violation under Count IV; a few violations under Count V; and no violations under Count VI; and no violations under Count VII.

On remand, ExxonMobil argued that it was entitled to an act of God affirmative statutory defense during the time covered by the Governor’s Hurricane Ike proclamation and the regulatory affirmative defenses that are provided in the rules of the TCEQ which cover certain unanticipated emissions that take place during unforeseen accidents or upsets. The District Court rejected these defenses, holding that the “Act of God” defense was not incorporated in the Texas SIP and that the invocation of the regulatory affirmative defense, while satisfactory to the TCEQ, did not satisfy ExxonMobil ’s burden of proof in this proceeding. ExxonMobil was obliged to prove that it had met all eleven regulatory criteria to trigger the application of this defense, which it was not able to do.

The District Court notes that the plaintiffs originally requested over $1 billion in penalties, which was later reduced to $643,000,000, and then lowered again to $41,000,000 on remand. Injunctive relief was denied, with the District Court observing that there was no credible evidence that any of these “Events or Deviations” were harmful to the public or the environment.”