UPDATE ON THE POULTRY LITIGATION IN OKLAHOMA Poultry litter is not a solid waste under RCRA

Posted on February 26, 2010 by Linda C. Martin

The Oklahoma State Attorney General sued several poultry companies for polluting the Illinois River and its watershed in Eastern Oklahoma as a result of the application and disposal of poultry litter in the watershed. State of Oklahoma v. Tyson Foods, Inc. et. al. Case No. 05-CV-329-GFK(PJC). The suit alleged claims under CERCLA, RCRA, and nuisance among other things. You are referred to the articles posted March 9, 2009 an September 3, 2009 for particulars regarding the claims. 

 

Two weeks before trial, the Cherokee Nation moved to intervene in the case as a necessary party, but the Judge wouldn’t allow it. The Court decided that the damages claims would not be tried, but that the injunctive claims as well as the state penalty claims could be tried with the absence of the Cherokee Nation in the suit. The reasoning was, among other things, that the Cherokee Nation would be potentially prejudiced if the remaining damage claims went forward without it, but that would not be the case if the remaining injunctive claims and state law penalty claims were tried. Although the Cherokee Nation filed an immediate appeal with the Tenth Circuit, it did not ask that the case be stayed pending the outcome of the appeal.

 

The case has now been tried to the Court. It began on September 24, 2009 and only this month concluded with closing arguments. However, during the trial the Court ruled, in response to a Rule 52(c) motion, among other things, that:

  • Poultry litter is an agricultural commodity for which there is both a market and a market value in the watershed.
  • Poultry litter has market value because it can be beneficially used as a fertilizer and soil amendment.
  • The State did not produce sufficient evidence to convince the Court that farmers, ranchers or other applicators of poultry litter in the Illinois River Watershed land-applied poultry litter within the watershed solely to discard it.
  • Under the applicable law and the evidence produced at trial, poultry litter is not a “solid waste” under RCRA, and therefore the State’s RCRA claim was dismissed. 

This ruling is very important because of the focus on nutrient issues under the Clean Water Act Nonpoint Source Pollution. EPA states on its website that “States report that nonpoint source pollution is the leading remaining cause of water quality problems.”  Indeed, EPA has a “National Nutrient Strategy” and is focusing more on these issues than ever before. 

UPDATE ON THE POULTRY LITIGATION IN OKLAHOMA Poultry litter is not a solid waste under RCRA

Posted on February 26, 2010 by Linda C. Martin

The Oklahoma State Attorney General sued several poultry companies for polluting the Illinois River and its watershed in Eastern Oklahoma as a result of the application and disposal of poultry litter in the watershed. State of Oklahoma v. Tyson Foods, Inc. et. al. Case No. 05-CV-329-GFK(PJC). The suit alleged claims under CERCLA, RCRA, and nuisance among other things. You are referred to the articles posted March 9, 2009 an September 3, 2009 for particulars regarding the claims. 

 

Two weeks before trial, the Cherokee Nation moved to intervene in the case as a necessary party, but the Judge wouldn’t allow it. The Court decided that the damages claims would not be tried, but that the injunctive claims as well as the state penalty claims could be tried with the absence of the Cherokee Nation in the suit. The reasoning was, among other things, that the Cherokee Nation would be potentially prejudiced if the remaining damage claims went forward without it, but that would not be the case if the remaining injunctive claims and state law penalty claims were tried. Although the Cherokee Nation filed an immediate appeal with the Tenth Circuit, it did not ask that the case be stayed pending the outcome of the appeal.

 

The case has now been tried to the Court. It began on September 24, 2009 and only this month concluded with closing arguments. However, during the trial the Court ruled, in response to a Rule 52(c) motion, among other things, that:

  • Poultry litter is an agricultural commodity for which there is both a market and a market value in the watershed.
  • Poultry litter has market value because it can be beneficially used as a fertilizer and soil amendment.
  • The State did not produce sufficient evidence to convince the Court that farmers, ranchers or other applicators of poultry litter in the Illinois River Watershed land-applied poultry litter within the watershed solely to discard it.
  • Under the applicable law and the evidence produced at trial, poultry litter is not a “solid waste” under RCRA, and therefore the State’s RCRA claim was dismissed. 

This ruling is very important because of the focus on nutrient issues under the Clean Water Act Nonpoint Source Pollution. EPA states on its website that “States report that nonpoint source pollution is the leading remaining cause of water quality problems.”  Indeed, EPA has a “National Nutrient Strategy” and is focusing more on these issues than ever before. 

Everything is Connected to Everything Else

Posted on February 25, 2010 by Mary Nichols

In his 1971 book, The Closing Circle, ecologist Barry Commoner outlined an informal set of "laws of ecology” governing life on Earth. I have found the “First Law” especially helpful in governing the California Air Resources Board. It says, “Everything is connected to everything else.”

 

Commoner wrote this brilliantly simple principle in the context of ecosystems. But I find this law of nature reliably guides my thinking on how best to develop policies and regulations to mitigate and adapt to climate change.

 

 The brain trusts that the Air Resources Board has assembled for these climate change solutions are a kaleidoscope of experts in energy, public health, urban planning, economics, venture capital, automotive and building design, forestry and dairy management – to name just some of the disciplines.

 

This holistic approach to problem solving is a relatively recent development at the ARB. In my first stint as board chairman, 1978 – 1983, engineers pretty much ran the air pollution control shop. Chemical engineers reformulated gasoline to be lead-free. Mechanical engineers redesigned exhaust systems to remove ozone-forming emissions. A big part of my job then was to phase out leaded gasoline and phase in catalytic converters.

 

The ARB, where I’m once again chairman, continues to rely on engineers for ever-cleaner fuels and engines. But our expanded mission of fighting global warming (Assembly Bill 32) has vastly diversified the expertise we require, the audiences we reach and the interests we regulate.

 

We recently expanded our venue from vehicles to entire transportation systems. We’re now at the forefront on streamlining freight operations across the board, from ships to ports to freeways and rail yards.

 

We entered the field of energy regulation last fall when Governor Schwarzenegger directed the ARB to implement an accelerated Renewable Portfolio Standard – by 2020 utilities must generate at least 33 percent of their electricity from sources such as solar and wind power that do not rely on fossil fuels.

 

At the same time, we’ve proposed the nation’s first plan for a broad-based cap-and-trade system to use market forces to reduce global warming emissions.

 

And, in what is perhaps our most eye-opening move afield, the ARB is venturing in land use – as yet another way to reduce climate-altering vehicle emissions. Under a new state “sustainable communities” law (Senate Bill 375), the board this year will be setting emission reduction targets for passenger cars and trucks in 18 urban areas in the state. But – significantly – we’re leaving it to local government to decide how best to achieve those goals. Regional transportation planning authorities will be working with counties and cities to develop planning measures such as compact and mixed-use housing that will lower the average household’s vehicle miles traveled.

 

The growing diversity and collaboration reflects a broader shift toward more integrated environmental problem solving, not just at the ARB or in California, but across continents. It’s a more holistic approach driven by the urgency of global warming and the lure of profit in the transition to a low-carbon economy. It reflects the interconnectivity of climate change itself.

Everything is Connected to Everything Else

Posted on February 25, 2010 by Mary Nichols

In his 1971 book, The Closing Circle, ecologist Barry Commoner outlined an informal set of "laws of ecology” governing life on Earth. I have found the “First Law” especially helpful in governing the California Air Resources Board. It says, “Everything is connected to everything else.”

 

Commoner wrote this brilliantly simple principle in the context of ecosystems. But I find this law of nature reliably guides my thinking on how best to develop policies and regulations to mitigate and adapt to climate change.

 

 The brain trusts that the Air Resources Board has assembled for these climate change solutions are a kaleidoscope of experts in energy, public health, urban planning, economics, venture capital, automotive and building design, forestry and dairy management – to name just some of the disciplines.

 

This holistic approach to problem solving is a relatively recent development at the ARB. In my first stint as board chairman, 1978 – 1983, engineers pretty much ran the air pollution control shop. Chemical engineers reformulated gasoline to be lead-free. Mechanical engineers redesigned exhaust systems to remove ozone-forming emissions. A big part of my job then was to phase out leaded gasoline and phase in catalytic converters.

 

The ARB, where I’m once again chairman, continues to rely on engineers for ever-cleaner fuels and engines. But our expanded mission of fighting global warming (Assembly Bill 32) has vastly diversified the expertise we require, the audiences we reach and the interests we regulate.

 

We recently expanded our venue from vehicles to entire transportation systems. We’re now at the forefront on streamlining freight operations across the board, from ships to ports to freeways and rail yards.

 

We entered the field of energy regulation last fall when Governor Schwarzenegger directed the ARB to implement an accelerated Renewable Portfolio Standard – by 2020 utilities must generate at least 33 percent of their electricity from sources such as solar and wind power that do not rely on fossil fuels.

 

At the same time, we’ve proposed the nation’s first plan for a broad-based cap-and-trade system to use market forces to reduce global warming emissions.

 

And, in what is perhaps our most eye-opening move afield, the ARB is venturing in land use – as yet another way to reduce climate-altering vehicle emissions. Under a new state “sustainable communities” law (Senate Bill 375), the board this year will be setting emission reduction targets for passenger cars and trucks in 18 urban areas in the state. But – significantly – we’re leaving it to local government to decide how best to achieve those goals. Regional transportation planning authorities will be working with counties and cities to develop planning measures such as compact and mixed-use housing that will lower the average household’s vehicle miles traveled.

 

The growing diversity and collaboration reflects a broader shift toward more integrated environmental problem solving, not just at the ARB or in California, but across continents. It’s a more holistic approach driven by the urgency of global warming and the lure of profit in the transition to a low-carbon economy. It reflects the interconnectivity of climate change itself.

Everything is Connected to Everything Else

Posted on February 25, 2010 by Mary Nichols

In his 1971 book, The Closing Circle, ecologist Barry Commoner outlined an informal set of "laws of ecology” governing life on Earth. I have found the “First Law” especially helpful in governing the California Air Resources Board. It says, “Everything is connected to everything else.”

 

Commoner wrote this brilliantly simple principle in the context of ecosystems. But I find this law of nature reliably guides my thinking on how best to develop policies and regulations to mitigate and adapt to climate change.

 

 The brain trusts that the Air Resources Board has assembled for these climate change solutions are a kaleidoscope of experts in energy, public health, urban planning, economics, venture capital, automotive and building design, forestry and dairy management – to name just some of the disciplines.

 

This holistic approach to problem solving is a relatively recent development at the ARB. In my first stint as board chairman, 1978 – 1983, engineers pretty much ran the air pollution control shop. Chemical engineers reformulated gasoline to be lead-free. Mechanical engineers redesigned exhaust systems to remove ozone-forming emissions. A big part of my job then was to phase out leaded gasoline and phase in catalytic converters.

 

The ARB, where I’m once again chairman, continues to rely on engineers for ever-cleaner fuels and engines. But our expanded mission of fighting global warming (Assembly Bill 32) has vastly diversified the expertise we require, the audiences we reach and the interests we regulate.

 

We recently expanded our venue from vehicles to entire transportation systems. We’re now at the forefront on streamlining freight operations across the board, from ships to ports to freeways and rail yards.

 

We entered the field of energy regulation last fall when Governor Schwarzenegger directed the ARB to implement an accelerated Renewable Portfolio Standard – by 2020 utilities must generate at least 33 percent of their electricity from sources such as solar and wind power that do not rely on fossil fuels.

 

At the same time, we’ve proposed the nation’s first plan for a broad-based cap-and-trade system to use market forces to reduce global warming emissions.

 

And, in what is perhaps our most eye-opening move afield, the ARB is venturing in land use – as yet another way to reduce climate-altering vehicle emissions. Under a new state “sustainable communities” law (Senate Bill 375), the board this year will be setting emission reduction targets for passenger cars and trucks in 18 urban areas in the state. But – significantly – we’re leaving it to local government to decide how best to achieve those goals. Regional transportation planning authorities will be working with counties and cities to develop planning measures such as compact and mixed-use housing that will lower the average household’s vehicle miles traveled.

 

The growing diversity and collaboration reflects a broader shift toward more integrated environmental problem solving, not just at the ARB or in California, but across continents. It’s a more holistic approach driven by the urgency of global warming and the lure of profit in the transition to a low-carbon economy. It reflects the interconnectivity of climate change itself.

Is There a New Era of Environmental "Veto" Legislation?

Posted on February 24, 2010 by Charles Nestrud

Will environmental issues play a prominent role in the upcoming elections? It appears so, particularly if your state’s Senior Democratic Senator is up for re-election, and is also Chairman of the Agriculture Committee and a member of the Committee on Energy and Natural Resources. Senator Blanche Lincoln (D. Ark.) cast the deciding vote in the Senate for health care reform, and received the typical “big government, liberal” moniker. Seven Republicans have lined up to run against her, and her $5 million (and growing) campaign war chest. But how will the competing campaigns deal with environmental issues? Senator Lincoln has a lifetime score of 49% on environmental issues from the League of Conservation Voters, an environmental activist group she has proudly referred to as “extremists.” Of the Democratic Senators up for re-election, Sen. Lincoln ranks the lowest. Labels are easy to assign,  but are rarely very accurate.   

The school of thought at the end of 2009 was that either Congress would enact climate change legislation prior to March of 2010, or EPA would enact its own climate change rules to implement the impending endangerment rulemaking. Not so fast. Not only is there no climate change legislation, Congress is now debating S.J. Resolution 26: “Congress disapproves the rule submitted by the Environmental Protection Agency relating to the endangerment finding and the cause or contribute to findings for greenhouse gases under Section 202(a) of the Clean Air Act (published at 74 Fed. Reg. 66496 (December 15, 2009), and such rule shall have no force or effect.”

 

Is SJ-26 a purely partisan move, with no chance of passage? Perhaps. Just note that Senator Lincoln is a prominent co-sponsor, one of 40 senators who have signed on, one of three Democratic co-sponsors, all of whom are up for re-election (Ben Nelson, D. Neb. and Mary Landrieu, D. La.  being the others). Not all Republicans signed on—Scott Brown, newly elected from Massachusetts, passed on this one.   

Environmental groups have already started running radio attack ads in Arkansas. Even though the ads give Senator Lincoln a “dirty air” label, Senator Lincoln is likely hoping the voters are listening—hoping that she gains notoriety for opposing what she labels “job killing” climate change regulations—notoriety that may improve her standing with Arkansas voters come election time. (Again with the labels)   

SJ-26 is not Senator Lincoln’s first foray into the climate change debate. At the end of October, 2009 Senator Lincoln attached a little known rider as a last minute addition to the current budget—a rider that now prohibits EPA from spending any money to require livestock producers to report GHG emissions under the new GHG reporting rules. As Chairman of the Agricultural Committee, she could pull this one off. Cattle and pigs may be flagellant, accounting for 1.7% of all GHG emissions (more by some estimates). But for now EPA cannot make anyone count up the farts, at least not for this fiscal year (ending September 30, 2010). Whether EPA should, or should not have included livestock producers in the GHG reporting rule is a judgment call, and one that we can all disagree upon. The importance of the farm vote in Arkansas, however, cannot be over estimated. And for those who believe this is just a matter of Southern politics (or “pork”), the same budget bill included a last minute exemption for 13 Great Lakes cargo steamships from a proposed EPA rule to require lower sulfur fuel.

Is this form of Congressional veto legislation a new era of environmental regulation? Some have referred to these efforts as borrowing from the Newt Gingrich playbook. Those who have followed these issues more closely than me will have to answer that one. For now, it’s just the beginning of what will prove to be a very interesting political season. Sen. Lincoln trails the leading contenders in recent polling. 

"The Increasing Role of Constitutionalism in Environmental Law: It's Less Boring Than That Suggests!"

Posted on February 17, 2010 by James R. May

On February 26, 2010, Dan Farber, Doug Kysar, Rob Glicksman and I will be on a panel at Georgetown about emerging issues at the intersection of Constitutional and Environmental Law. We'll puzzle over recent developments and the constitutional shape of environmental law to come. There is much to discuss. We have the limitations on judicial involvement, say, the political question doctrine and the treaty clause in the context of climate litigation. Summer suggests that Scalian standing is alive and well, and that procedural standing is hardly, er, left standing. And then there are 1:1 ratio limits to awards of punitive damages in cases involving environmental harm with which to contend under substantive due process.

Federalism could experience resurgence. Oneida and Kelo give the states an opening to do more (and do worse). Yet preemption still looms large (as with cap & trade), and sovereign immunity jurisprudence has diminished state accountability.

And of course, there is an enfeebled Congress, which behaves as if its powers are as a majority of the Supreme Court imagined them to be in 1935. While non-delegation is still in desuetude, and Raich revived rational basis review of Commerce Clause authority for the time being, it's any wonder that Congress delivers so little about national environmental challenges these days. Or anything else, for that matter. But if we're really at war, then how about Congress using its war powers to address environmental challenges that impinge upon national security, like climate change? And does Missouri v. Holland give Congress authority unbridled by the 10th Amendment to address international environmental issues, say, water pollution? Climate change?

Which brings us back to Article II separation of powers, and Chevron. For the next 2 1/2 years, all may learn to love Justice Alito's interpretive approach in last term's Kensington.

What does the future hold? Who knows, except for ineffective congressional responses and a Supreme Court that seems at least skeptical about national environmental programs. So maybe a constitutional devolution of sorts. Opportunities abound for constitutional innovation under the General Welfare and Due Process Clauses, or invocation of state (here and elsewhere) provisions that putatively provide a right to a healthy environment.

And if judicial takings are constitutionally cognizable (this term's Beach Renourishment), then why not sustainable development under the Privileges & Immunities or Equal Protection Clauses, or the 9th Amendment?

Or maybe not. It is, after all, a constitution we are expounding.

EPA's Roll-Back of Bush-Era Rules Appears to Begin in Earnest

Posted on February 13, 2010 by Seth Jaffe

While a lot of attention has been paid to whether EPA would reverse the Bush EPA decision denying California’s petition to regulate greenhouse gas emissions from mobile sources,  it is now clear even outside the climate change arena that life at EPA is going to be substantially different under the current administration.  As if evidence were really needed for that proposition, EPA announced this week that it was putting on hold the NSR aggregation rule that EPA had promulgated on January 15, 2009.

The rule, which had been long sought by industry, would have provided that nominally separate projects would only have to be combined – aggregated for NSR/PSD purposes – if  they are “substantially related.” It also would have created a rebuttable presumption that projects more than three years apart are not substantially related. Responding to a request from NRDC and the OMB memo asking agencies to look closely at rules promulgated before the transition but not yet effective, EPA concluded that the rule raises “substantial questions of law and policy.” Therefore, EPA postponed the effective date of the rule until May 18, 2009 and also announced that it was formally reconsidering the rule in response to the NRDC petition.

To those in industry, the aggregation rule was not a radical anti-environmental roll-back of environmental protection standards.  Rather, it was more of a common-sense approach towards making the NSR program simpler and clearer.  It is one of my pet peeves with the prior administration, however, that it gave regulatory reform a bad name.  

In any case, I feel as though I should open a pool regarding what will be the next Bush-era rule to be tossed overboard.  We surely won’t have to wait long for it to happen.

Opposition to Wind Farm Siting Based on Adverse Health Effect from Infrasound?

Posted on February 9, 2010 by Roger Ferland
One of the big hurdles for further development of wind power in the U.S. is landowner objections to placement of turbines near their homes.  The rationale du jour for such objections is that the sound produced by turbines causes a broad range of health effects.  In particular, objectors point to infrasound, which is sound generally below the level of human perception.  A recent case in Wisconsin was one of the first in the country to test the objectors' theories.  When a Wisconsin utility applied for permission to build 90-turbine development north of Madison, objectors argued for extremely low limits for wind turbine sound and a mile-and-a-quarter setback, limits which would have made the project impossible. 
 
The principal proponent of the theory that wind turbine sound causes physiological harm is a New York pediatrician, Nina Pierpont.  Dr. Pierpont has written and self-published a book, entitled "Wind Turbine Syndrome: A Report on a Natural Experiment," which chronicles complaints by 10 families around the world who have lived near wind turbines.  As presented by Dr. Pierpont, the symptoms include everything from headaches to nausea,  tachycardia, irritability and panic episodes associated with sensations of movement or quivering inside the body.  Dr. Pierpont argues that infrasound works in two principal ways to cause these symptoms:  first by exciting the human vestibular (balance) system; and second vibrating the diaphragm and organs, thereby passing on confusing messages to the body. 
 
Dr. Pierpont draws upon and supports the work of noise control engineers George Kamperman and Richard James, who, in various proceedings in the U.S. and abroad, advocate very low thresholds for sound from turbines (35 dBA, which is approximately the level of a quiet bedroom).  In the Wisconsin case, objectors hired Mr. James to provide expert testimony, which he did, relying heavily on Dr. Pierpont's theories.
 
Quarles & Brady retained two experts to address sound issues on behalf of the utility.  Dr. Geoff Leventhall is an acoustician, consultant and professor from the U.K. who has been involved in studying infrasound for nearly 50 years.  Dr. Leventhall testified that neither of Dr. Pierpont's theories make sense.  In fact, he testified, the author of the study Dr. Pierpont relies upon for her vestibular disturbance theory specifically disclaimed that his work supported her conclusions.  As for Dr. Pierpont's theory that infrasound vibrates the diaphragm and organs, Dr. Leventhall testified that simple math dooms her argument.  Sound from turbines results in movement of the diaphragm of less than 10 microns (one tenth the thickness of a human hair), while during normal breathing, the diaphragm moves several centimeters.  Dr. Leventhall also pointed out that Dr. Pierpont's analysis completely ignores another, much stronger, source of internal infrasound--the heart.
 
Quarles & Brady also retained Dr. Mark Roberts, a Chicago-based epidemiologist, biostatistician and physician.  Dr. Roberts testified that "wind turbine syndrome" is not a medical diagnosis supported by peer reviewed, published, scientific literature.  He completed a review of the literature, and found no support for the claim that wind turbine sound causes physiological harm. Dr. Roberts also identified several flaws in Dr. Pierpont's methodology, limiting the usefulness of her research, including selection bias and a failure to adhere to accepted epidemiological principles in developing her theories.  Summarizing Dr. Pierpont's work, Dr. Roberts concluded that it consisted of  "opinions that are unsubstantiated," and as he pointed out, "everyone has opinions."  Dr. Roberts warned against allowing such "science" to shape public policy.
 
Both Dr. Leventhall and Dr. Roberts agreed that sound from wind turbines may annoy neighbors or disturb their sleep.  Dr. Roberts summarized such concerns as follows:  "The underlying complaint of annoyance is, in and of itself, not a disease or a specific manifestation of a specific exposure, but instead a universal human response to a condition or situation that is not positively appreciated by the human receptor."
 
Ultimately, while the Wisconsin Public Service Commission recognized that no development is without cost to those who live nearby, it adopted the utility's suggestion of a 50 dBA sound threshold, with a lower 45 dBA threshold during summer nighttime hours, when neighbors are likely to have their windows open.  These thresholds allow the utility to move forward with the project, while, in the Commission's view, striking an appropriate balance between neighbors' interests and those of the utility.

DON'T DIG A WATERY GRAVE: STAY CURRENT ON THE LATEST WATER REGULATIONS AND AVAILABLE FUNDING

Posted on February 8, 2010 by Joseph Manko

originally posted for the Association of Corporate Counsel's Green-House Counsel ©2009

 

The construction and rehabilitation of our nation’s infrastructure has come to the fore with the advent of both climate change and the transformation of our energy production.  As water shortages continue to move eastward from the western states and new water quality standards are promulgated to address previously unregulated pollutants, the handling of water will ultimately require as much, if not more, attention from corporate counsel than the current focus on fossil fuel.  To anticipate this potential sea change, counsel should be aware of the evolution of governmental regulation of the use and handling of water, as well as monetary incentives to achieve compliance with the emerging laws.

To provide a brief history, in 1972, the Clean Water Act was amended to regulate direct discharges from industrial facilities and publicly owned treatment works (POTW), and later expanded to cover indirect discharges (e.g., runoff of stormwater) from agriculture and land development.  Although the 1972 laws created a discharge permit system (NPDES) and initial funding for POTW construction, it wasn’t until the enactment of the Water Quality Act of 1987 that EPA received annual funding to award to states who set up revolving grant and loan funds to address problems with wastewater, drinking water and stormwater systems within each of their states. 

Although the amounts varied with the changes in the executive office and congressional makeup, these funds were normally matched by the states through general obligation and/or revenue bonds and derived from the loan repayments and interest earnings to ensure that the funds would continue to be available to achieve their mission year after year.  One such example is the Pennsylvania Infrastructure Investment Authority (PENNVEST), which awards grants and loans for wastewater, drinking water and stormwater projects, including brownfields, acid mine drainage and nutrient trading.  Similar programs exist in each of the 50 states.

The enactment of the American Recovery and Reinvestment Act of 2009 (ARRA) provided additional stimulus funds, designed to create jobs, and required that 20 percent of the funds be disbursed for “green infrastructure” projects.  EPA received $4 billion of stimulus money, to encourage the full recycling of wastewater and stormwater to reduce energy costs, augment future water supplies and minimize adverse impacts on water quality.  Since there are financial federal incentives from both the U.S. Environmental Protection Agency (“EPA”) and the Department of Housing and Urban Development (“HUD”), you should proceed with due diligence to determine if funding opportunities are available for your organization.  If an appropriate match is identified, assist in the requisite applications for these funds.

·               Water Quality Standards;

·               Clean Water Act;

·               Publicly Owned Treatment Works;

·               POTW;

·               Wastewater;

·               Drinking water;

·               Stormwater;

·               American Recovery and Reinvestment Act of 2009;

·               ARRA;

·               “Green infrastructure”;

·               Stimulus money;

·               Financial federal incentives; and

·               Funding opportunities.

Has the BNSF Case Changed the Superfund Practice?

Posted on February 5, 2010 by Bradley Marten

It has been nearly nine months since the U.S. Supreme Court decided Burlington Northern and Santa Fe Railway Company v. United States (BNSF),[1] a case some called a landmark decision that would change the Superfund practice.[2] In some respects that has turned out to be the case, in others it has not. There have been several reported cases citing BNSF, and all of them confirm that the decision requires both the EPA and potentially responsible parties (“PRPs”) to engage in a more fact-intensive inquiry into “arranger” liability. Less clear, however, is how the apportionment of liability among liable parties in private contribution cases will be affected, given the relatively small number of reported decisions.

Readers will recall that the BNSF decision had two elements: (1) it addressed the scope of arranger liability under CERCLA, and (2) it affirmed the view of several circuit courts that PRPs can avoid joint and several liability if a “reasonable basis” to apportion liability exists. This article reviews how lower court decisions issued subsequent to BNSF have applied those two components.

 

A Review of the BNSF Facts

BNSF was issued on May 4, 2009. The 8-1 decision written by Justice Stevens arose out of a fairly common fact pattern for CERCLA cases: a small chemical distributor Brown & Bryant, Inc. (“B&B”) owned and operated a facility that repackaged agricultural chemicals. B&B’s operation was on a 3.8-acre parcel, a portion of which was leased from predecessors to BNSF and the Union Pacific Railroad. Neither railroad played any part in B&B’s operations. The other PRP, Shell Oil, sold a soil fumigant to B&B which was shipped via commercial carrier FOB destination, meaning that the buyer was responsible for the product once it arrived at the facility.

After the State of California ordered B&B to clean up soil and groundwater contamination, B&B went out of business and then EPA listed the site on the National Priorities List. Both railroads and Shell were named as PRPs. The railroads were ordered to clean up the entire site, even though the portion of the site that they owned did not require remediation. Shell was named a PRP for having delivered chemicals to the site which it knew or should have foreseen would be spilled by B&B. In 1996, the United States and the State of California filed a cost recovery action against the railroads and Shell, seeking to recover over $8 million in response costs.

The Supreme Court’s Opinion
1. Arranger Liability

In affirming that “arranger liability” under CERCLA must be determined on a case-by-case basis, the Court set up a continuum. At one end are cases where an entity entered into a transaction “for the sole purpose of discarding a used and no longer useful hazardous substance.”[3] In such cases, there is a clear intent to discard the product, and therefore liability under section 107(a)(3). On the other end are situations where a company sells a useful product and “the purchaser of that product later, and unbeknownst the seller, disposed of the product in a way that led to contamination.”[4] The Court acknowledged that there were “many permutations of ‘arrangements’ that fall between these two extremes.” In these cases, based on a “plain reading” of the CERCLA statute, the Court held that “an entity may qualify as an arranger when it takes intentional steps to dispose of a hazardous substance.[5] Applying this statement of the law to the facts, the Court held that Shell’s mere knowledge of the spills did not amount to an “intent” that they be spilled or otherwise disposed of and that Shell was therefore not liable as an arranger.

2. Apportionment

BNSF highlighted that the CERCLA statute does not contain joint and several liability language. Instead, the notion that PRPs should be held jointly and severally liable is a judicial doctrine grounded in Section 433A of the Restatement (Second) of Torts. Applying the Restatement, the Court held – as had several circuit courts previously– that “apportionment is proper when there is a reasonable basis for determining the contribution of each cause to a single harm.”[6]

Where multiple parties cause a single harm, “CERCLA defendants seeking to avoid joint and several liability bear the burden of proving that a reasonable basis for apportionment exists.”[7] In BNSF, while both the district court and the Ninth Circuit had found that apportionment of the harm was possible, they disagreed on how to allocate responsibility. The district court came up with a nine percent allocation to the railroads. The Ninth Circuit criticized the evidence on which the district court had relied, finding that it was insufficient to establish the “precise proportion” of the Railroads’ responsibility. The Supreme Court affirmed the district court’s approach, holding that the evidence supporting apportionment need not be precise. There must simply be “facts contained in the record reasonably support[ing] the apportionment of liability.”[8]

Lower Court Decisions Applying BNSF
Cases Applying the Court’s Arranger Liability Ruling

Of the four published cases that have substantively applied BNSF in the context of arranger liability, all suggest that lower courts are taking seriously the Supreme Court’s instruction to conduct a factually-intensive review of the parties’ intent. Prior to BNSF, the view prevalent among at least some government attorneys, and even some private party attorneys, was that every party who somehow came into contact with a hazardous substance was liable as having “arranged for disposal.” That view has been shattered.

Two cases, in particular, illustrate this point. The first is Appleton Papers Inc. v. George A. Whiting Paper Co.[9] Plaintiffs in that case were companies who had manufactured and sold carbonless paper. The emulsion used in the paper contained microscopic capsules that burst when pressure was applied, releasing a dye, and allowing the words on a page to be transferred from one sheet to another. The microcapsules were dissolved in a solvent which contained PCBs. The PCBs were released into the Fox River from manufacturing plants which produced the paper. An even greater proportion of PCBs were released by companies that recycled carbonless paper and by municipal wastewater utilities that discharged PCB-contaminated wastewater.

Plaintiff manufacturers filed a contribution action under CERCLA §113 against the recyclers and municipalities (their §107 claim was previously dismissed by the court). The court bifurcated the case into a liability and apportionment phase. In the liability phase, on cross-motions for summary judgment, the court considered whether the defendants knew they were disposing of hazardous chemicals, and concluded that they did not. The analysis – while not explicitly using the word “intent” – focused on what the defendants knew when they recycled the carbonless paper or discharged wastewater from the plants that did. After reviewing a record that included roughly 900 exhibits – including expert reports, government reports, corporate records, laboratory records and deposition transcripts – the court sided with the defendants, finding that they had little or no knowledge that they were disposing of PCBs into the river.[10]

Defendants are recyclers of paper and municipal sewerage entities who simply processed paper and water, and they would have had little reason or ability to inspect or investigate the chemical makeup of anything that came in the door…[t]he recyclers were the ‘innocent victims’ of the circumstances [citation to record omitted]. This is even more true for Defendants who merely received and released wastewater containing invisible PCBs in it.[11]

Similarly, in a case in Washington state, the district court made clear that the issue of arranger liability after BNSF turns squarely on the facts. United States v. Wash. State Department of Transp.[12] In that case, EPA sued the Washington State Department of Transportation (“WSDOT”) to recover cleanup costs at a contaminated site that the state had acquired to build a bridge. During construction of the bridge, a contractor discovered three open-bottom tanks containing tar, which appeared to have been placed there by a coal gasification plant. The State counterclaimed, arguing that the United States was also liable, because the US Army Corps of Engineers (“USACE”) had dredged a portion of the waterway that the coal gassification plant was located on, thereby moving hazardous substances released by others and causing additional releases to the environment. The United States moved for summary judgment. Judge Bryan denied the motion, holding that the United States’ liability, if any, turned on a fact-intensive inquiry that the parties had yet to conduct.

At this point, the facts are insufficiently developed to determine what level of control USACE exerted over the dredging process and what responsibility it may have had regarding disposal of the dredged materials.… As the Supreme Court stated in Burlington Northern, “the determination whether an entity is an arranger requires a fact-intensive inquiry that looks beyond the parties’ characterization of the transaction as a ‘disposal’ or ‘sale’ and seeks to discern whether the arrangement was one Congress intended to fall within the scope of CERCLA’s strict-liability provisions.” 129 S. Ct. at 1879. Considering the USACE’s involvement with dredging the contaminated waterways in light of CERCLA’s strict liability standard, the court cannot say as a matter of law that upon further discovery, the facts will fail to show that the USACE “qualif[ies] as an arranger under [§107(a)(3) when taking] intentional steps to dispose of a hazardous substance” through the granting of permits to dredge the waterway.[13]

Meanwhile, across the country in Maine, a district court applied BNSF in the context of a cleanup of the Penobscot River.See Frontier Communications Corp. v. Barrett Paving Materials.[14] We previously reported on this case. See District Court in Maine Applies Supreme Court’s BNSF Decision on “Arranger” Liability, Marten Law Environmental News (July 22, 2009). The court in the Maine case reiterated that the question of arranger liability is “fact-intensive,” but it found that the record contained sufficient facts to conclude that the defendant had intended to dispose of wastes through a sewer into the river.[15]

Finally, in New Hampshire, General Electric asked a judge to reverse a prior ruling holding GE liable as having “arranged for disposal” of PCB-containing “scrap Pyranol” when it sold the material to a paint manufacturing company. GE relied on BNSF to argue that the phrase “arranged for disposal” required “an intentional action toward achieving the purpose: disposal.”[16] The court did not dispute GE’s reading of the law, but held that there was sufficient evidence of intent to hold GE liable as an arranger.

Cases Applying BNSF’s Apportionment Ruling

We have located two reported decisions expressly dealing with the “apportionment” arm of the BNSF decision. In the first case, the court essentially punted, holding that the best way to apportion liability was to let the case go to trial. See Evansville Greenway and Remediation Trust v. Southern IN Gas and Elec. Co., Inc.[17]

In Evansville, the BNSF decision was handed down while cross-motions for summary judgment were being briefed. The defendants claimed that BNSF “effected a dramatic change that will make it easier for PRPs to avoid the burden of joint and several liability,” while the plaintiffs argued that “BNSF amounts to nothing new.”[18] Noting that “the Supreme Court’s new decision has presented what might be called genuine questions of material law,”[19] the court declined to commit to a particular interpretation of the BNSF decision, based on the fact that the timing of the decision meant that the record before the court was sparse. Instead, the court granted the motion as to liability under 107(a), but reserved the question of apportionment for trial, so that “each side [can] present evidence relevant to its own and its opponents’ different interpretations of BNSF.”[20]

More interesting is the court’s decision in Appleton Papers, discussed above. In that case, the court engaged in an extended discussion of whether BNSF was applicable to a §113 contribution action (having previously dismissed the plaintiff’s §107 claims). The court concluded that, while “Burlington Northern changed the applicable standards for ‘arranger liability’ … there is nothing within Burlington Northern that requires courts to make some sort of threshold determination regarding joint and several liability or allow plaintiffs in a contribution action to make an apportionment argument.”[21]

One question not answered by BNSF is the quantum of proof necessary to establish a reasonable basis for apportionment. Judge Shira A. Scheindlin addressed that question in a non-CERCLA case involving environmental torts, holding that: (1) a fact finder may rely on the “available evidence” in apportioning liability among joint tortfeasors; and (2) the burden of production necessary to support a showing of divisibility is “low.” In re MTBE, S.D.N.Y. Case No. 00 MDL 1898, Docket No. 352 (July 14, 2009). See Applying BNSF, District Court in New York Finds “Best Available Evidence” Is Sufficient to Apportion Liability, Marten Law Environmental News (July 22, 2009). It remains to be seen whether this approach will be extended in a CERCLA context.

Conclusion

It is still too early to get a good sense of whether BNSF will be the watershed case some had predicted. The first few cases have reinforced the Supreme Court’s holding that the inquiry into arranger liability is “fact-intensive.” Only two reported cases have addressed the apportionment arm of the decision, and neither reached the question of how apportionment is to be conducted.

[1] 129 S. Ct. 1870 (2009).

[2] See, e.g., J. Barkett, The Burlington Northern Decision, American College of Environmental Lawyers Blog (May 19, 2009).

[3] 129 S. Ct. at 1878.

[4] Id.

[5] Id. at 1879.

[6] Id. at 1881.

[7] Id.

[8] Id. at 1882.

[9] Slip Op., 2009 WL 5064049 (E.D. Wis., December 16, 2009).

[10] Id. at *15.

[11] Id. at *17.

[12] , ___ F. Supp.2d ___, 2009 WL 2985474 (W.D. Wa., September 15, 2009).

[13] Id. at *8.

[14] District of Maine, Case No. 07-00133.

[15] 2009 WL 1941920, *3

[16] General Electric Company’s Supplemental Memorandum on the Evidence of Intent or Knowledge Required to Prove that a CERCLA Defendant has “Arranged for” Disposal or Treatment of Hazardous Waste at 2, United States v. General Electric Co., 06-354, Doc. No. 89 (D.N.H. Nov. 5, 2008).

[17] ___ F.Supp.2d ___, 2009 WL 3163180 (S.D. Ind., September 29, 2009),

[18] Id. at * 21.

[19] Id.

[20] Id.

[21] Appleton Papers, Inc. v. George A. Whiting Paper Co., Slip Op., 2009 WL 3921036 (E.D. Wis. 2009), **4, 5.

South Carolina Supreme Court Allows Enforcement of Unpromulgated Rule

Posted on February 3, 2010 by Thomas Lavender, Jr.

In a unanimous decision, the S.C. Supreme Court upheld the implementation of South Carolina’s Coastal Zone Management Plan (CZMP) and finally decided the question landowners have argued for years – how could the South Carolina Department of Health and Environmental Control (SCDHEC) enforce an unpromulgated rule?[1] 

 

The developer in the Spectre case had sought a land-disturbance permit under the SCDHEC stormwater program. The agency denied the permit contending that the proposed filling of 31.76 acres of isolated freshwater wetlands on a 62.93 acre site was inconsistent with the CZMP. An appeal of the denial was taken to the State Administrative Law Court, which held that the CZMP was not enforceable because it was not a regulation promulgated pursuant to the State’s Administrative Procedures Act (APA).[2] 

 

Following the United State Supreme Court’s decision in SWANCC[3], isolated wetlands in South Carolina have been largely without protection. South Carolina has seen the introduction of several bills aimed to fill the void by expressly authorizing the regulation of impacts to isolated wetlands; however, none are pending in the current session of the General Assembly. Nonetheless, in those areas covered by the CZMP, South Carolina relied upon its authority to determine consistency with the CZMP in connection with the consideration of state permits. Isolated wetlands beyond the reach of the CZMP remain unregulated. However, numerous attacks on the validity of the CZMP have been made, but none reaching the Supreme Court until Spectre.

 

SCDHEC was charged in 1976 with developing a comprehensive coastal management program that it was to enforce “in accordance with this chapter and any rules and regulations promulgated under this chapter.”[4] The statute provided that statewide hearings and public review of the CZMP would occur and the CZMP would become the “final management plan for the State’s coastal zone” upon review and approval by the Governor and General Assembly. 

 

The Court went to great lengths to distinguish the Spectre decision from its previous holdings relating to the imposition of requirements by means other than properly promulgated regulations.[5] In spite of numerous references to the necessity of SCDHEC to adopt regulations to implement its coastal program[6], the Court concluded that the “General Assembly did not believe it was meant to be an unenforceable document.” Despite the fact that the statute specifically mandated SCDHEC to adopt interim and final rules it would follow in evaluating permits, and expressly provided that such final rules must be promulgated pursuant to the APA[7], the Court concluded that the General Assembly had created a “separate and more rigorous procedure for promulgation of the CZMP.” Moreover, since SCDHEC had developed the CZMP in accordance with those specified procedures, “the plan is valid.” 

It remains unclear where the Court will stop in crafting exclusions to the APA, but it now appears that the Court is prepared to conclude that a separate process by which a policy document is developed can be deemed functionally equivalent to the APA and afford an unpromulgated rule the force and effect of law.



[1] Spectre, LLC v. South Carolina Department of Health and Environmental Control, et al., (Opinion No. 26764, February 1, 2010).

[2] S.C. Code Ann. §§ 1-23-10, et seq. (2009).

[3] Solid Waste Agency of Northern Cook County v. U.S. Army Corps of Engineers, 12 S.Ct. 675, 531 U.S. 159, 148 L.Ed.2d 576 (2001).

[4] SC Code Ann. § 48-39-80 (2009).

[5] Captain’s Quarters Motor Inn, Inc. v. South Carolina Coastal Council, 306 S.C. 488, 413 S.E.2d 13 (1992).

[6] S.C. Code Ann. §§ 48-39-50(E), (F), (I), and (R), -70(A), -80(A), and -130(B).

[7] S.C. Code Ann. § 48-39-130(B) also provided that the interim rules and regulations were not subject to the APA.

South Carolina Supreme Court Allows Enforcement of Unpromulgated Rule

Posted on February 3, 2010 by Thomas Lavender, Jr.

In a unanimous decision, the S.C. Supreme Court upheld the implementation of South Carolina’s Coastal Zone Management Plan (CZMP) and finally decided the question landowners have argued for years – how could the South Carolina Department of Health and Environmental Control (SCDHEC) enforce an unpromulgated rule?[1] 

 

The developer in the Spectre case had sought a land-disturbance permit under the SCDHEC stormwater program. The agency denied the permit contending that the proposed filling of 31.76 acres of isolated freshwater wetlands on a 62.93 acre site was inconsistent with the CZMP. An appeal of the denial was taken to the State Administrative Law Court, which held that the CZMP was not enforceable because it was not a regulation promulgated pursuant to the State’s Administrative Procedures Act (APA).[2] 

 

Following the United State Supreme Court’s decision in SWANCC[3], isolated wetlands in South Carolina have been largely without protection. South Carolina has seen the introduction of several bills aimed to fill the void by expressly authorizing the regulation of impacts to isolated wetlands; however, none are pending in the current session of the General Assembly. Nonetheless, in those areas covered by the CZMP, South Carolina relied upon its authority to determine consistency with the CZMP in connection with the consideration of state permits. Isolated wetlands beyond the reach of the CZMP remain unregulated. However, numerous attacks on the validity of the CZMP have been made, but none reaching the Supreme Court until Spectre.

 

SCDHEC was charged in 1976 with developing a comprehensive coastal management program that it was to enforce “in accordance with this chapter and any rules and regulations promulgated under this chapter.”[4] The statute provided that statewide hearings and public review of the CZMP would occur and the CZMP would become the “final management plan for the State’s coastal zone” upon review and approval by the Governor and General Assembly. 

 

The Court went to great lengths to distinguish the Spectre decision from its previous holdings relating to the imposition of requirements by means other than properly promulgated regulations.[5] In spite of numerous references to the necessity of SCDHEC to adopt regulations to implement its coastal program[6], the Court concluded that the “General Assembly did not believe it was meant to be an unenforceable document.” Despite the fact that the statute specifically mandated SCDHEC to adopt interim and final rules it would follow in evaluating permits, and expressly provided that such final rules must be promulgated pursuant to the APA[7], the Court concluded that the General Assembly had created a “separate and more rigorous procedure for promulgation of the CZMP.” Moreover, since SCDHEC had developed the CZMP in accordance with those specified procedures, “the plan is valid.” 

It remains unclear where the Court will stop in crafting exclusions to the APA, but it now appears that the Court is prepared to conclude that a separate process by which a policy document is developed can be deemed functionally equivalent to the APA and afford an unpromulgated rule the force and effect of law.



[1] Spectre, LLC v. South Carolina Department of Health and Environmental Control, et al., (Opinion No. 26764, February 1, 2010).

[2] S.C. Code Ann. §§ 1-23-10, et seq. (2009).

[3] Solid Waste Agency of Northern Cook County v. U.S. Army Corps of Engineers, 12 S.Ct. 675, 531 U.S. 159, 148 L.Ed.2d 576 (2001).

[4] SC Code Ann. § 48-39-80 (2009).

[5] Captain’s Quarters Motor Inn, Inc. v. South Carolina Coastal Council, 306 S.C. 488, 413 S.E.2d 13 (1992).

[6] S.C. Code Ann. §§ 48-39-50(E), (F), (I), and (R), -70(A), -80(A), and -130(B).

[7] S.C. Code Ann. § 48-39-130(B) also provided that the interim rules and regulations were not subject to the APA.

South Carolina Supreme Court Allows Enforcement of Unpromulgated Rule

Posted on February 3, 2010 by Thomas Lavender, Jr.

In a unanimous decision, the S.C. Supreme Court upheld the implementation of South Carolina’s Coastal Zone Management Plan (CZMP) and finally decided the question landowners have argued for years – how could the South Carolina Department of Health and Environmental Control (SCDHEC) enforce an unpromulgated rule?[1] 

 

The developer in the Spectre case had sought a land-disturbance permit under the SCDHEC stormwater program. The agency denied the permit contending that the proposed filling of 31.76 acres of isolated freshwater wetlands on a 62.93 acre site was inconsistent with the CZMP. An appeal of the denial was taken to the State Administrative Law Court, which held that the CZMP was not enforceable because it was not a regulation promulgated pursuant to the State’s Administrative Procedures Act (APA).[2] 

 

Following the United State Supreme Court’s decision in SWANCC[3], isolated wetlands in South Carolina have been largely without protection. South Carolina has seen the introduction of several bills aimed to fill the void by expressly authorizing the regulation of impacts to isolated wetlands; however, none are pending in the current session of the General Assembly. Nonetheless, in those areas covered by the CZMP, South Carolina relied upon its authority to determine consistency with the CZMP in connection with the consideration of state permits. Isolated wetlands beyond the reach of the CZMP remain unregulated. However, numerous attacks on the validity of the CZMP have been made, but none reaching the Supreme Court until Spectre.

 

SCDHEC was charged in 1976 with developing a comprehensive coastal management program that it was to enforce “in accordance with this chapter and any rules and regulations promulgated under this chapter.”[4] The statute provided that statewide hearings and public review of the CZMP would occur and the CZMP would become the “final management plan for the State’s coastal zone” upon review and approval by the Governor and General Assembly. 

 

The Court went to great lengths to distinguish the Spectre decision from its previous holdings relating to the imposition of requirements by means other than properly promulgated regulations.[5] In spite of numerous references to the necessity of SCDHEC to adopt regulations to implement its coastal program[6], the Court concluded that the “General Assembly did not believe it was meant to be an unenforceable document.” Despite the fact that the statute specifically mandated SCDHEC to adopt interim and final rules it would follow in evaluating permits, and expressly provided that such final rules must be promulgated pursuant to the APA[7], the Court concluded that the General Assembly had created a “separate and more rigorous procedure for promulgation of the CZMP.” Moreover, since SCDHEC had developed the CZMP in accordance with those specified procedures, “the plan is valid.” 

It remains unclear where the Court will stop in crafting exclusions to the APA, but it now appears that the Court is prepared to conclude that a separate process by which a policy document is developed can be deemed functionally equivalent to the APA and afford an unpromulgated rule the force and effect of law.



[1] Spectre, LLC v. South Carolina Department of Health and Environmental Control, et al., (Opinion No. 26764, February 1, 2010).

[2] S.C. Code Ann. §§ 1-23-10, et seq. (2009).

[3] Solid Waste Agency of Northern Cook County v. U.S. Army Corps of Engineers, 12 S.Ct. 675, 531 U.S. 159, 148 L.Ed.2d 576 (2001).

[4] SC Code Ann. § 48-39-80 (2009).

[5] Captain’s Quarters Motor Inn, Inc. v. South Carolina Coastal Council, 306 S.C. 488, 413 S.E.2d 13 (1992).

[6] S.C. Code Ann. §§ 48-39-50(E), (F), (I), and (R), -70(A), -80(A), and -130(B).

[7] S.C. Code Ann. § 48-39-130(B) also provided that the interim rules and regulations were not subject to the APA.

Regional Climate Programs in Line for Shakeup, Voluntary Markets To Remain

Posted on February 2, 2010 by Deborah Jennings

By Deborah Jennings and Andrew Schatz, DLA Piper US LLP[1]

 

As comprehensive climate legislation stalls in Congress, increased attention is being paid to alternative climate regimes, particularly the prospect of Environmental Protection Agency (EPA) regulation and regional and voluntary climate initiatives. Regional initiatives have faced their share of challenges during their infancy and, to varying degrees, may incur more with the development of a federal cap-and-trade program or EPA regulation of greenhouse gas (GHG) emissions under the Clean Air Act (CAA).

 

The Regional Greenhouse Gas Initiative (RGGI) and the California Global Warming Solutions Act (AB 32) are the most advanced climate initiatives in the U.S. California’s AB 32 requires measures to reduce California’s GHG emissions by 174 million metric tons of CO2 equivalent, or 29%, by 2020. California recently issued a draft cap and trade regulation covering 600 of the state’s largest industrial and electric generating stationary sources. The RGGI program is more mature with a cap-and-trade program that commenced in 2009. It “stabilizes” CO2 levels during 2009-2014 and reduces emissions 10% by 2019.

 

In its first year, RGGI has generated several concerns. Unlike other cap-and-trade programs, such as the NOx Budget Trading Program, which distributed allowances to regulated entities, but incentivized them to invest in emission controls, RGGI states decided to sell emissions allowances. Under RGGI, a utility must both purchase allowances and pay for emission controls. The sale of allowances makes RGGI look more like a tax on energy and inevitably will lead to higher energy costs. 

 

RGGI’s offset program is also restrictive, thereby narrowing compliance options. Although the model rule provides for use of offsets for reduction of emissions in certain categories such as landfill methane capture and afforestation, this opportunity is undercut by the requirement to demonstrate economic “additionality.” To be useable, these offsets must have been generated by projects that are not “economically attractive absent the revenue stream provided by an emissions offset.” This subjective test does not recognize the reality that many of these projects are economically marginal and need more than one source of revenue. This economic additionality requirement undercuts the creation of offsets. 

 

Noticeably absent from RGGI is Pennsylvania, one of the largest coal-fueled utility states in the Northeast.  Because    Pennsylvania and other big coal states are included in larger electricity dispatch regions, CO2 regulation and increased cost on RGGI utilities will result in increased demand for electricity from the unregulated utilities in the same power region. A clear example of this is PJM, which oversees electric supply in the coal states of Ohio, Pennsylvania, Virginia, and West Virginia, as well as the RGGI states of Delaware, Maryland, and New Jersey. Untaxed electricity with   high carbon-content from non-RGGI generators will be preferred and sold in larger quantities than more expensive power, thereby undercutting the objective of reducing emissions. This is the “leakage” phenomenon.

 

RGGI and other state and regional regulatory climate programs may be eliminated under proposed federal climate legislation. The House bill specifically pre-empts state and regional cap-and-trade programs between 2012 and 2017. Pre-emption concerns may already be impacting the RGGI market, where prices for 2012 allowances are barely above the Reserve Price. 

 

In the meantime, EPA is forging ahead with its own GHG regulations. Last Fall, it made a GHG  “endangerment” finding and required quantification and reporting of GHG emissions. EPA will soon finalize the regulation of GHGs from light-duty vehicles, setting in motion a statutorily required process to regulate GHGs from major stationary sources that are modified or constructed. Among the class of stationary sources that will be affected are municipal solid waste landfills, which are the source of approximately one fourth of methane emissions in the US. Once regulated by EPA, construction or modification of these sources would require GHG control and would no longer generate “offset” allowances because controls would be now required by law.

 

Notwithstanding potential federal climate policy, the voluntary carbon markets should continue to flourish based on experience to date. Global voluntary carbon markets nearly doubled in 2008 and are expected to increase. Europeans purchased half of these offsets for noncompliance purposes.  This continued interest in voluntary markets is partly motivated by individuals and corporations choosing to reduce their carbon footprint. Our law firm, for example, has purchased carbon credits since 2008 to offset air travel emissions as part of a Sustainability Initiative. As national awareness of climate issues continues to grow, voluntary carbon markets are likely to expand and thrive.



[1] The views presented in this article are the authors’ alone and not DLA Piper US LLP or its clients.

More on a New Ozone NAAQS: EPA's Clean Air Science Advisory Committee Endorses EPA's Proposed Range

Posted on February 1, 2010 by Seth Jaffe

EPA has proposed lowering the NAAQS to a range of from 0.060 ppm – 0.070 ppm. Earlier this week, EPA’s Clean Air Science Advisory Committee, or CASAC, met and endorsed EPA’s proposed range. Some CASAC members did express concern about EPA’s proposed secondary seasonal standard, intended to protect crops and forests. However, overall, the CASAC seal of approval is pretty much the end of this argument.

It is important to recall how we got here. CASAC already endorsed the 0.060 ppm – 0.070 range several years ago, before EPA’s last ozone standard was issued. It was EPA’s refusal to follow the CASAC recommendations, and instead propose a 0.075 ppm standard, which led to litigation challenging the standard and the current controversy. 

It is difficult to overstate the weight given the CASAC’s views. Indeed, EPA’s fine particulate standard was vacated in significant part because EPA failed to follow CASAC’s recommendations.

Thus, a standard that does not comport with CASAC’s recommendations would likely be rejected by the courts as arbitrary and capricious. However, I suspect that CASAC’s influence also runs the other way. Assuming that EPA does indeed promulgate a revised NAAQS in the 0.060 ppm – 0.070 ppm range, and assuming that industrial interests challenge the new standard, it will be very difficult to establish that the new standard is arbitrary and capricious if it has been endorsed by CASAC. 

As I noted in connection with the fine particulate standard, it’s not obvious to me that this is a good thing. Depending on whose ox is being gored, anyone can get up on a soapbox and say that they want science to be free of politics. However, these are really policy decisions. It’s one thing to acknowledge that these are complicated issues and we thus have to allow Congress to delegate its authority to the EPA administrator. It’s another effectively to delegate the decision further to the CASAC, which is about as obscure an acronym body as we have. Do we really want standards which will result in compliance costs in at least the tens of billions of dollars being made by groups which truly are not accountable in any meaningful way?