FORTUNATO P. BENAVIDES, Circuit Judge:
This appeal concerns a Clean Air Act ("CAA") citizen suit brought by Plaintiffs-Appellants Environment Texas Citizen Lobby Incorporated and Sierra Club ("Plaintiffs") against ExxonMobil Corporation, ExxonMobil Chemical Company, and ExxonMobil Refining & Supply Company (collectively, "Exxon"). Exxon owns and operates an industrial complex (which includes a refinery and two petrochemical plants) in Baytown, Texas, and Plaintiffs allege that Exxon violated the federal permits governing operations at the complex thousands of times over a nearly eight year period. Specifically, and as relevant to this appeal, Plaintiffs allege that Exxon (1) repeatedly violated a permit condition "stating that emissions from `upset' events are not authorized under any circumstances," (2) repeatedly emitted pollutants at rates in excess of the hourly emission limits set forth in permit emission rate tables, (3) repeatedly emitted highly reactive volatile organic compounds ("HRVOCs") at rates in excess of a 1,200 lbs./hr. emission limit, (4) repeatedly violated a prohibition on visible emissions from flares lasting more than five minutes during any two consecutive hours, and (5) repeatedly violated a number of other permit requirements, some emissions-related and some non-emissions-related, as reflected in "deviation reports" filed with the Texas Commission on Environmental Quality.
Plaintiffs sued Exxon for these and other alleged violations in the United States District Court for the Southern District of Texas. The district court conducted a thirteen-day bench trial and issued findings of
Exxon's Baytown industrial complex — the subject of the instant lawsuit — is comprised of a refinery, an olefins plant, and a chemical plant. Overall, the complex is governed by five federal operating permits issued pursuant to Title V of the CAA. See 42 U.S.C. §§ 7661a-7661d. These federal permits ("Title V Permits") incorporate various federal and state regulatory requirements and also incorporate by reference state permits issued pursuant to State Implementation Plan ("SIP") programs. Each permit at issue in this suit contains a Maximum Allowable Emission Rate Table ("MAERT"), which sets the maximum rates at which specific pollutants may be emitted from specific sources (or, in the case of "flexible" permits, groups of sources). It is also undisputed on appeal that (1) "[t]he permits for all three plants incorporate the Texas `HRVOC Rule,' which limits facility-wide emissions of highly reactive volatile organic compounds to no more than 1,200 pounds per hour," and (2) "[t]he permits for all three plants incorporate federal regulations prohibiting visible" plant flare emissions "for periods exceeding five minutes during any two-hour period." Finally, each incorporated permit involved in this case contains a series of additional "special conditions." For example, and as relevant to the present appeal, a permit governing operations at the Baytown refinery provides under special conditions 38 and 39 that "[t]his permit does not authorize upset emissions, emissions from maintenance activities that occur as a result of upsets, or any unscheduled/unplanned emissions associated with an upset. Upset emissions are not authorized, including situations where that upset is within the flexible permit emission cap or an individual emission limit."
The state regulatory agency charged with enforcing these permit provisions in conjunction with the EPA is the Texas Commission on Environmental Quality ("TCEQ"). In order to facilitate TCEQ oversight and enforcement, state regulations require regulated entities to document "noncompliance and indications of noncompliance" with their permits in certain ways. Env't Tex. Citizen Lobby, Inc. v. ExxonMobil Corp., 66 F.Supp.3d 875, 882 (S.D.Tex.2014). First, regulated entities must submit State of Texas Environmental Electronic Reporting System ("STEERS") reports to the TCEQ documenting "emissions events"
As a supplement to the enforcement authority vested in the EPA and state regulatory agencies like the TCEQ, the CAA also authorizes "any person [to] commence a civil action on his own behalf" against "any person ... who is alleged to have violated (if there is evidence that the alleged violation has been repeated) or to be in violation of ... an emission standard or limitation under [the CAA]." 42 U.S.C. § 7604(a)(1). The definition of "emission standard or limitation" includes any "standard," "limitation," "schedule," "term," or "condition" in a Title V permit. Id. § 7604(f)(4). Thus, any person may bring a so-called "citizen suit" under the CAA against a regulated entity that has violated a provision of its Title V permit, so long as the violation has been "repeated" or is "ongoing." See id. § 7604(a)(1).
In December of 2010, Plaintiffs in the present case sued Exxon under the CAA's citizen suit provision, alleging thousands of violations of Exxon's permits over a period spanning from October of 2005 through the date of suit.
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 injunction would not outweigh the damage the injunction would cause Exxon. Plaintiffs now appeal.
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.
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
"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, 105 S.Ct. 1504, 84 L.Ed.2d 518 (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.
In Count I of their complaint, Plaintiffs alleged that Exxon violated incorporated provisions of the Title V Baytown refinery permit providing "that upset emissions, emissions from maintenance activities that occur as a result of upsets, or any unscheduled/unplanned emissions associated with an upset, are not authorized in any amount." Likewise, in the proposed findings of fact and conclusions of law that Plaintiffs submitted to the district court, they alleged under Count I that "Exxon violated the provisions of the Refinery's Title V permit that prohibit upset emissions," and Plaintiffs specifically cited special conditions 38 and 39 of incorporated refinery permit 18287 in support of this allegation. However, Plaintiffs also submitted a summary exhibit of Count I violations in which violations of "MAERT limits" were referenced. For this reason, the district court concluded that Plaintiffs' allegations with respect to Count I had been "inconsistent," and because the Count I summary chart listed violations "contaminant-by-contaminant," the district court treated Count I as alleging violations "of conditions that apply to separate air contaminants," i.e., MAERT emission limits. Env't Tex., 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
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 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.
On appeal, Exxon claims that the district court's Count I analysis stemmed from its "reject[ion]" of "Plaintiffs' theory that all upset emissions are actionable violations" and its "recogni[tion] that these emissions were actionable, if at all, only if they exceeded the maximum hourly emission rates." But this contention is inaccurate — the district court in fact expressly declined to "address whether the sole fact that there are allegedly multiple upset events makes those upset events actionable under the CAA or whether the condition referencing upset emissions constitutes a standard or limitation under the CAA." Id. at 896. Indeed, in the district court's view, Plaintiffs did "not contend every upset event is actionable because the condition that does not authorize upset emissions was repeatedly violated." Id. As should be clear from the foregoing discussion, however, this is precisely what Plaintiffs contended, and we do not think the district court's decision to ignore special conditions 38 and 39 follows from "Plaintiffs' approach to proving repeated
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.
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.
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
As noted previously, the CAA allows a person to bring a civil action "against any person ... who is alleged to have violated (if there is evidence that the alleged violation has been repeated) or to be in violation of ... an emission standard or limitation under [the Act]." 42 U.S.C. § 7604(a)(1). Based on this provision, the district court in this case concluded (and neither party disputes on appeal) that for a CAA violation
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, 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).
In light of our holding, we must vacate the district court's judgment on Count II. On remand, the district court is instructed to determine the correct number of actionable Count II violations when treating corresponding limits on the same pollutants from different versions of the relevant permits as the same "standard[s] or limitation[s]" under the CAA.
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 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
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."
Under Count VII, Plaintiffs alleged over 4,000 days of additional Title V permit violations based on "Title V deviation reports" that Exxon submitted to the TCEQ during the relevant time period. These reports contained entries reflecting the "emissions events" that were at issue in the other counts, as well as various non-emissions-related incidents (involving, for instance, reporting requirements). Plaintiffs asserted at trial that each incident contained in a deviation report constituted an actionable permit violation, and Exxon argued that none of the entries evinced "violations" at all under the definition of "deviation" set forth in the Texas Administrative Code. The district court agreed with Exxon, reasoning that (1) Texas law defines a deviation as merely "[a]n indication of noncompliance with a term or condition
Plaintiffs contend on appeal that the district court misapplied the applicable "standard of proof" in its ruling on Count VII, as the deviation reports contained "all of the prima facie evidence needed to establish that a permit violation occurred." They accordingly argue that because Exxon failed to rebut the evidence of violations contained in the reports, the district court should have ruled that every incident in a deviation report was an actionable violation. More specifically, Plaintiffs note that federal regulations allow regulated entities to submit "other information" indicating that a "reported deviation was not a violation," and Exxon in this case "submitted no such information as part of any of the Deviation Reports at issue, nor did it submit any such information at trial."
We find Plaintiffs' argument unpersuasive. While their briefing of Count VII is devoid of authority in support of their contentions regarding the "burden of proof," Plaintiffs appear to be referring to their earlier reliance on cases reflecting that "a permittee's own records of violations are sufficient to establish liability." However, the cases Plaintiffs cite do not support the proposition that deviation reports specifically are sufficient to establish violations (as opposed to merely constituting "indications" of noncompliance). For example, the one CAA case Plaintiffs rely on involved Louisiana's permitting and reporting system, which requires the filing of written reports "each time the refinery has an `unauthorized discharge.'" St. Bernard Citizens for Envtl. Quality, Inc. v. Chalmette Ref., L.L.C., 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.
Under the CAA, district courts have jurisdiction in citizen suits "to enforce" emission standards or limitations and "to apply any appropriate civil penalties." 42 U.S.C. § 7604(a). For the thousands of days of permit violations alleged in this lawsuit, Plaintiffs sought (1) a declaratory judgment that Exxon had violated its permits (and thus the CAA); (2) a statutory penalty of over $600 million (to be deposited in a special fund for use by the EPA pursuant to 42 U.S.C. § 7604(g)(1)); and (3) a permanent injunction prohibiting further permit violations.
The district court 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 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
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.
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.
42 U.S.C. § 7413(e)(1).
In the present case, the district court concluded that the "size of the business"
The district court in this case determined that Exxon's compliance history and good faith efforts to comply with its permits weighed against assessment of a penalty. At the outset, the court noted that "the number of [events] at issue in this case [was] high" and might suggest that Exxon's compliance history was "arguably inadequate." Env't Tex., 66 F.Supp.3d at 904-05. However, the court found that based on the extremely large size of the facility, it would not be "possible to" eliminate all emissions events, and thus "the number of Events and Deviations alone is not the best evidence of compliance history" or "good faith effort to comply." Id. at 905. Rather, the district court concluded that Exxon "made substantial efforts to improve environmental performance and compliance" based on (1) the "significant reduction" in overall unauthorized emissions at the complex "over the years at issue in this case"; (2) Exxon's agreement to undertake environmental improvement projects at the complex in an enforcement order with the TCEQ; (3) the lack of "credible evidence" that any of the alleged violations "resulted from a recurring pattern"; and (4) the "persuasive and credible" testimony from a chemical engineer and a former TCEQ official that Exxon's "concerted effort[s] to comply" had contributed to the Baytown facility's reputation as a "leader[ ] in maintenance and operation practices." Id. at 905-06.
On appeal, Plaintiffs raise several challenges to the district court's analysis of this factor. First, Plaintiffs contend that the district court essentially "invok[ed] presumed impossibility of compliance `as a reason to not impose penalties'" despite clear precedent and regulatory language indicating that "`impossibility is not a defense'" to compliance with one's permits. In this regard, Plaintiffs correctly identify that under Texas law, it is not "a defense in an enforcement action that it would
Plaintiffs next claim that the district court clearly erred in finding that Exxon's agreement to undertake four environmental improvement projects constituted a "substantial effort[ ]" at achieving compliance that demonstrated "good faith." Plaintiffs argue that the agreement merely imposed toothless and overdue requirements in an attempt by Exxon and complicit TCEQ officials to "undercut more stringent citizen enforcement," as evidenced by the fact that the agreement "was negotiated, at Exxon's instigation, only after" Plaintiffs gave notice of their intent to file suit. On this point, we think it is possible that the agreement between Exxon and the TCEQ is a sterling example of regulatory capture at its worst; however, it is also entirely possible that Exxon's explanation for pursuing the agreement — that it wanted more "certainty" in enforcement — is valid and that the company did want to take good-faith steps towards reducing future compliance issues. Thus, given that there are "two permissible views of the evidence," the district court was entitled to take the view it did, and we cannot second-guess that view now. U.S. Bank Nat'l Ass'n, 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 and good faith efforts to comply" penalty factor weighed against imposition of a penalty.
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 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)).
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 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
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
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 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 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
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 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 factor as weighing against imposition of a penalty due to the existence of thousands of additional, "less serious"
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, 120 S.Ct. 693, 145 L.Ed.2d 610 (2000)).
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.
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
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").