Environmental Enforcement: Sometimes Bankruptcy Provides A Respite, And Sometimes It Doesn’t

In re Edison Mission Energy, 502 B.R. 830 (Bankr. N.D. Ill. 2013) -

Pre-bankruptcy the Sierra Club filed a citizen suit complaint with the Illinois Pollution Control Board (IPCB) against a power company requesting penalties and an order requiring it to cease violating state environmental regulations by reducing sulphur dioxide emissions from its coal plants. After the power company and a number of its affiliates filed bankruptcy, the Sierra Club asked the bankruptcy court to either confirm that the automatic stay was not applicable on the basis that the IPCB proceeding was as an action to enforce police or regulatory powers, or alternatively to grant relief from the stay for cause to permit the action to go forward.

The debtor in question, Midwest Generation, LLC (MWG) was described as "a leading independent power producing enterprise specializing in developing, operating, and selling energy and capacity from approximately 40 generating facilities in 12 states and the Republic of Turkey." Among other things, MWG operated coal plants located in Illinois.

Section 9 of the Illinois Environmental Protection Act (IEP Act) provides:

No person shall: (a) cause or threaten or allow the discharge or emission of any contaminant into the environment in any State so as to cause or tend to cause air pollution in Illinois, either alone or in combination with contaminants from other sources, or so as to violate regulations or standards adopted by the Board under this Act.

Similarly, there is an IPCB regulation prohibiting emission of contaminants that would "cause or tend to cause air pollution in Illinois, ... or so as to prevent the attainment or maintenance of any applicable ambient air quality standard." The Illinois Pollution Control Board determined that Section 9 is violated if predicted sulphur dioxide emission levels exceed EPA standards.

The Sierra Club contended that its investigations showed that MWG coal plants emitted significant amounts of sulphur dioxide, which posed a threat to human health and the environment. Accordingly, it filed a complaint against MWG with the IPCB alleging that its coal plant sulphur dioxide emissions violated Illinois law because emissions were at levels that would cause violations of EPA limits, thus causing "air pollution" in violation of Illinois law. It sought entry of an order requiring MWG to comply by reducing sulphur dioxide emissions from its coal plants.

After MWG filed bankruptcy, the Sierra Club sough a...