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July 14, 1981

REALTY INVESTMENTS ASSOCIATES, L.P.; Robert V. Tishman; Jerry I. Speyer, d/b/a Tishman Speyer 42nd Street Associates; Larry I. Silverstein and Bernard H. Mendik, all doing business as Tishman Speyer Silverstein Partnership, Defendants

The opinion of the court was delivered by: CONNER


Plaintiff Consolidated Edison Company of New York, Inc. ("Con Ed") brought this suit against Tishman-Speyer-Silverstein, Partnership, and the partners therein (collectively "TSS"), under Section 304 of the Clean Air Act, 42 U.S.C. § 7604. Following dismissal of the action on consent of the parties, TSS has moved for an award of its attorneys' fees, pursuant to 42 U.S.C. § 7604(d). That section, in relevant part, provides that the Court "may award costs of litigation (including reasonable attorney and expert witness fees) to any party, whenever the court determines such award is appropriate."


 On January 1, 1978, TSS acquired title to the land and building located at Eleven West 42nd Street in Manhattan ("Eleven West"). For many years Con Ed had been the sole supplier of electric power and steam heat to Eleven West. However, on November 10, 1979, TSS began to produce electric power for Eleven West tenants from diesel generators and related equipment purchased and installed by TSS in the Eleven West basement, a system hereafter referred to as cogeneration.

 It is not disputed that Con Ed has utilized its considerable muscle in opposing the use of cogeneration, both generally and at Eleven West, on several fronts. One aspect of Con Ed's efforts was the commencement of this action in February 1979, seeking to enjoin TSS from continuing the construction of its cogeneration equipment because of TSS's alleged failure to apply for a preconstruction permit from the United States Environmental Protection Agency ("EPA"). Con Ed contended that TSS was required to obtain such a permit because the Eleven West cogeneration equipment had the potential to emit more than 250 tons annually of nitrogen oxide pollutants ("NOx"). See 40 C.F.R. § 52.21.

 In fact, on January 10, 1979, and again on January 23, 1979, TSS received letters from an EPA employee advising TSS that no such permit was required because potential annual emissions from Eleven West were less than 250 tons of each pollutant regulated under the Clean Air Act. That conclusion was premised upon the enforceability of a New York City permit, obtained by TSS in October 1978, which limited the amount of fuel to be utilized by the Eleven West cogeneration equipment.

 On March 13, 1979, TSS moved for summary judgment, contending that they had in fact been exempted from the permit requirement by the January 10 and 23 letters. Con Ed responded by arguing (1) that the January letters did not constitute an authorized EPA exemption from the permit requirement, and (2) that the Eleven West cogeneration equipment did have the potential to emit in excess of 250 tons per year of NOx.

 On September 24, 1979, the Court invited the EPA to express its views on the action. On May 13, 1980, the EPA issued a "preliminary determination," concluding (1) that the January letters did not constitute "final action" within the meaning of Section 307(b)(1) of the Clean Air Act because the author of the January 10 letter did not have authority to bind the agency, (2) that the limitations on fuel consumption contained in the City permit are not enforceable by the EPA, and consequently are not to be considered in determining the potential emissions at Eleven West, (3) that it appeared that Eleven West's potential emissions of NOx far exceeded the 250 annual tons threshold, and (4) that a final determination of the potential emissions would be issued after the parties had had the opportunity to submit relevant data to the EPA.

 On May 16, 1980, a pretrial conference was held before the Court, attended by Con Ed, TSS and the EPA. The subject of estoppel against the EPA because of TSS's reliance upon the January 1979 letters was discussed, but no ruling was made. The EPA took the position that it had primary jurisdiction over the dispute, and the possibility of placing the matter on the Suspense Calendar pending a final determination by the EPA was also discussed. That day the EPA and TSS also discussed the possibility that TSS might be exempt from the permit requirement on the alternative ground of qualifying under the "grandfather clause," 40 C.F.R. § 52.21(i)(3), which provides:

"The requirements of paragraphs (j) through (r) of this section shall not apply to a major stationary source or major modification that was not subject to 40 C.F.R. 52.21 as in effect before March 1, 1978, if the owner or operator-
"(i) Obtained all final Federal, State and local preconstruction permits necessary under the applicable State implementation plan before March 1, 1978;
"(ii) Commenced construction before March 19, 1979; and
"(iii) Did not discontinue construction for a period of 18 months or more and completed construction ...

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